IC Market Espresso 12 May 2023

Telekom Slovenije Publishes Q1 2023 Results

During Q1 2023, Telekom Slovenije’s revenue increased by 8%, EBITDA decreased by 4.5%, while the net profit decreased by 31.7% YoY and amounted to EUR 8.2m.

In Q1 2023, the sales revenue of Telekom Slovenije amounted to EUR 163.2m, which is an increase of 8% YoY. Breaking the revenue by segment, revenues were up in the mobile segment of the end-user market mainly due to an increased number of subscribers and prepaid users at IPKO in Kosovo. Better results at IPKO resulted from intensive marketing activities to attract new customers. Telekom Slovenije is recording growth in revenues from financial, eHealth, and insurance services. Revenues from the wholesale market were also up, further amplified by a higher top line achieved by subsidiaries. On the other hand, Fixed-line telephone service revenues were down primarily due to the declining number of traditional telephony connections

In terms of the operating expenses, they amounted to EUR 150.2m, an increase of 10% YoY. The growth in OPEX was driven by basically each of its components. Cost of services, which make up c. one-third of total OPEX, increased by 9.1% and amounted to EUR 48.7m, COGS increased by 11.7% and amounted to EUR 22.3m, while Labour costs noted an increase of 6.2% YoY.

Overall, the growth in the top line was not enough to compensate for higher costs during Q1 2023. This resulted in a slightly lower EBITDA margin of 33.2% (down 4.3 p.p. YoY). Finally, the net income amounted to EUR 8.2m, a decrease of 31.7% compared to Q1 2022 (EUR 12m).

Telekom Slovenije key financials (Q1 2023 vs. Q1 2022, EURm)

Source: Telekom Slovenije, InterCapital Research

Also, Telekom Slovenije published its key (financial) objectives for 2023: Operating revenues of EUR 860m, EBITDA of EUR 206m, Net profit of EUR 20m and Investments of EUR 205.

Telekom Slovenije key financials (2023 expected vs. FY 2022, EURm)

Source: Telekom Slovenije, InterCapital Research

Telekom Slovenije Proposes No Dividend Payment; Receives EUR 6 DPS Dividend Counterproposal

At the share price before the announcement, the EUR 6 DPS from the dividend counter-proposal would amount to a dividend yield is 11.7%. The ex-date is set for 2 January 2024 and 4 January 2024 as the payment date.

Telekom Slovenije’s Management Board in cooperation with the Supervisory Board issued a proposal for the distribution of profit from 2022. The Group proposed profit for 2022 in the amount of EUR 40.3m to remain undistributed as retained earnings. In other words, the Group proposed no dividend payment.

However, just a few hours later, Group received a dividend counterproposal. Small Shareholders’ Association of Slovenia (Društvo MDS) proposed a dividend payment of EUR 6, which would amount to a dividend yield of 11.7% at the price when the dividend was proposed.

The explanation of a counterproposal is based on the public promise of the management and the supervisory board of Telekom Slovenije to distribute dividends in 2024 for the year 2022. The counterproposal sets the pre-determined date and the date of payment in 2025 in accordance with the previously cited public promise. It is emphasized that with this dividend proposal, the business of Telekom Slovenije is not endangered in any way, because with this dividend proposal, the Group would not cause the obligation to return state aid received for energy producers. The base for this counterproposal is highlighted in the following sentence: “Shareholder participation in profits is one of the basic corporate rights. the right to participate in the profit is a fundamental property right that a shareholder has and also the most important reason for a shareholder to be a shareholder in the first place.”

The counterproposal also suggests 2 January 2024 as the ex-date and 4 January 2024 as the payment date.

The proposal is subject to approval by the General Meeting of Shareholders, which will be held on 16 June 2023. Below we provide you with the historical dividends per share and dividend yield of the Company. We note that the counterproposal was approved in the previous year, and was submitted by the same shareholder.

Telekom Slovenije Dividend per Share (EUR) and Dividend Yield (%) (2010 – 2023)

Source: LJSE, InterCapital Research

Banca Transilvania Publishes Q1 2023 Results

In Q1 2023, Banca Transilvania recorded a net interest income growth of 28% YoY, net fee and commission income increase of 11%, op. income growth of 34.3%, and a net income to majority of RON 804.5m, up 109.8% YoY.

In total, Banca Transilvania’s net interest income amounted to RON 1.24bn, an increase of 28.1% YoY. The growth in the NII was supported by the increase in the number of loans issued. On a YTD basis, this would amount to a slight decrease (-0.3%), while on a YoY basis, the number of loans issued increased by 13.9%. In fact, in Q1 2023, 59k new loans were issued, out of which 55k went to retail customers. Besides the loan volume growth, the net interest income was also supported by the increase in interest rates, mainly relating to the increase in the ROBOR index, but also the growth of interest on deposits.

The 2nd main driver of banking income growth, net fee, and commission income increased by 11.1% YoY and amounted to RON 287.9m. This increase was supported by the increase in the number of card transactions, as well as the increasing degree of customer digitalization. On the other hand, net trading income decreased by 19% YoY, and amounted to RON 135m, due to an increase in net expenses from derivatives, which was partially offset by net income from FX transactions. All of these categories taken together have led to a net banking/operating income increase of 34.3% YoY, amounting to RON 1.74bn in total.

Moving on to op. expenses, they amounted to RON 772.2m, representing a decrease of 6.2% YoY. This decline was mainly driven by a net income from impairment adjustments, expected losses for assets, provisions for other risks, and credit commitments in the amount of RON 40m, against a net expense of RON 101m in Q1 2022. Personnel expenses amounted to RON 476.3m, a 20% increase YoY, driven by the expansion in the Group’s employee base, with the number of employees increasing by 3.9% YoY on the Group level.

Finally, all of these positive developments led to a net income to majority of RON 804.5m, an increase of 109.8% YoY.

Banca Transilvania key financials (Q1 2023 vs. Q1 2022, RONm)

Source: Banca Transilvania, InterCapital Research

Taking a look at the balance sheet, the total assets of Banca Transilvania amounted to RON 147.9bn, an increase of 5.3% YTD, or RON 7.42bn. The two main drivers of this increase were the growth in financial assets measured at fair value through other items of comprehensive income, and the increase in cash and cash accounts with Central Banks. The first category increased by 8% (or RON 3.68bn) YTD and amounted to RON 47.2bn. This category is mainly related to treasury financial instruments, which recorded growth due to the increase in value of the managed portfolio of govt. bonds. The 2nd category, cash and current accounts with Central Bank increased by RON 3.3bn (or 22.8%) YTD and amounted to RON 17.9bn. This was mainly driven by the minimum compulsory reserve held with the National Bank of Romania (73% of this category) increasing.

On the other hand, placements with banks and public institutions decreased by 22% YTD (or RON 1.22bn) to RON 4.35bn, mainly under the influence of the change in volume of sight, collateral and term deposits at credit institutions, but also by the volume of reverse repo operations and loans granted to credit institutions.

On the flip side, total liabilities increased by 4.6% (or RON 6.1bn) YTD and amounted to RON 137.1bn, driven primarily by the increase in deposits from customers. In fact, these deposits increased by 5.9% (or RON 7.05bn) and amounted to RON 127.8bn. Meanwhile, the equity of the Group amounted to RON 10.9bn, an increase of 14.9% (or RON 1.4bn) YTD, mainly driven by higher retained earnings, which increased by 18.9% (or RON 843.7m), and amounted to RON 5.3bn.