Telecom Egypt Net Income jumped on 112% in 2015 while EBITDA Margin decreased on 3.6 pp from 29.3% to 25.7%
07 Mar 2016 • About Telecom Egypt (
$TEEG) • By InTwits
Telecom Egypt reported 2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is declining: 25.7% in 2015 vs. 29.3% in 2014 vs. 48.6% in 2011
- Telecom Egypt has high CAPEX intensity: 5 year average CAPEX/Revenue was 10.7%. At the same time it's in pair with industry average of 13.0%.
- CAPEX is quite volatile: 2,609 in 2015, 1,584 in 2014, 756 in 2013, 516 in 2012, 689 in 2011
- The company has potentially unprofitable business model: ROIC is at 4.9%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Telecom Egypt ($TEEG) key annual financial indicators
| mln. EGP | 2011 | 2012 | 2013 | 2014 | 2015 | 2015/2014 |
|---|
P&L
|
|---|
| Revenue | 9,870 | 10,032 | 11,138 | 12,158 | 12,184 | 0.2% |
| Gross Profit | 4,444 | 4,152 | 4,671 | 5,371 | 5,064 | -5.7% |
| SG&A | | | 2,682 | 167 | 1,956 | 1,068.8% |
| EBITDA | 4,796 | 3,842 | 3,684 | 3,560 | 3,126 | -12.2% |
| Net Income | 2,993 | 2,620 | 2,958 | 1,417 | 2,997 | 111.6% |
Balance Sheet
|
|---|
| Cash | 5,605 | 6,342 | 5,662 | 2,716 | 2,413 | -11.1% |
| Short Term Debt | 169 | 127 | 107 | 84 | 62 | -25.2% |
| Long Term Debt | 583 | 509 | 475 | 383 | 327 | -14.5% |
Cash flow
|
|---|
| Capex | 689 | 516 | 756 | 1,584 | 2,609 | 64.7% |
Ratios
|
|---|
| Revenue growth | -3.4% | 1.6% | 11.0% | 9.2% | 0.2% | |
| EBITDA growth | -2.5% | -19.9% | -4.1% | -3.3% | -12.2% | |
| Gross Margin | 45.0% | 41.4% | 41.9% | 44.2% | 41.6% | -2.6% |
| EBITDA Margin | 48.6% | 38.3% | 33.1% | 29.3% | 25.7% | -3.6% |
| Net Income Margin | 30.3% | 26.1% | 26.6% | 11.7% | 24.6% | 12.9% |
| SG&A, % of revenue | | | 24.1% | 1.4% | 16.1% | 14.7% |
| CAPEX, % of revenue | 7.0% | 5.1% | 6.8% | 13.0% | 21.4% | 8.4% |
| ROIC | 9.1% | 6.7% | 6.7% | 6.6% | 4.9% | -1.7% |
| ROE | 10.7% | 9.3% | 10.5% | 5.1% | 10.8% | 5.6% |
| Net Debt/EBITDA | -1.0x | -1.5x | -1.4x | -0.6x | -0.6x | -0.0x |
Revenue and profitability
The company's Revenue showed almost no change in 2015. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased on 3.6 pp from 29.3% to 25.7% in 2015.
Gross Margin decreased on 2.6 pp from 44.2% to 41.6% in 2015. SG&A as a % of Revenue surged on 14.7 pp from 1.4% to 16.1% in 2015.
Net Income marign surged on 12.9 pp from 11.7% to 24.6% in 2015.
Capital expenditures (CAPEX) and working capital investments
In 2015 Telecom Egypt had CAPEX/Revenue of 21.4%. The company's CAPEX/Revenue surged on 16.3 pp from 5.1% in 2012 to 21.4% in 2015. It's average level of CAPEX/Revenue for the last three years was 13.7%.The company invested a large share of EBITDA (83.5%) to CAPEX.
Return on investment
The company operates at low ROIC (4.95%) and ROE (10.76%). ROIC decreased slightly on 1.7 pp from 6.6% to 4.9% in 2015. ROE increased on 5.6 pp from 5.1% to 10.8% in 2015.
Leverage (Debt)
Debt level is -0.6x Net Debt / EBITDA and 0.1x Debt / EBITDA. Net Debt / EBITDA decreased slightly on 0.016x from -0.6x to -0.6x in 2015. Debt dropped on 16.5% in 2015 while cash dropped on 11.1% in 2015.
Appendix 1: Peers in Fixed Line Telecommunications
Below we provide Telecom Egypt benchmarking against other companies in Fixed Line Telecommunications industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Telefonica Sa ($TDE) | | -0.8% | -8.5% | -23.8% | 26.4% |
| Alternative Networks ($AN.) | | -2.1% | -0.4% | 17.5% | 9.2% |
| Adept Telecom ($ADT) | | -7.7% | -4.1% | -0.8% | 5.8% |
| Verizon Communications Inc ($VZC) | | 4.5% | 4.1% | 5.4% | 3.6% |
| O2 Czech Republic As ($O2CZ) | | -3.5% | -5.2% | -22.0% | 0.0% |
| |
|---|
| Median (11 companies) | 99.0% | -2.1% | -4.1% | -1.6% | -0.4% |
|---|
| Telecom Egypt ($TEEG) | | 1.6% | 11.0% | 9.2% | 0.2% |
Top companies by Gross margin, %
| Top | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Kt Corp ($KTCD) | 81.6% | 75.5% | 76.0% | 77.9% | 77.9% |
| Verizon Communications Inc ($VZC) | 58.6% | 60.1% | 62.8% | 60.7% | 60.1% |
| Alternative Networks ($AN.) | 38.1% | 39.0% | 39.2% | 41.2% | 41.3% |
| Adept Telecom ($ADT) | 35.9% | 32.2% | 34.5% | 36.4% | 37.6% |
| |
|---|
| Median (4 companies) | 58.6% | 57.3% | 59.9% | 43.6% | 50.7% |
|---|
| Telecom Egypt ($TEEG) | 45.0% | 41.4% | 41.9% | 44.2% | 41.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Ooredoo Qsc ($ORDS) | 45.9% | 46.0% | 42.4% | 37.6% | 39.2% |
| Verizon Communications Inc ($VZC) | 26.5% | 25.6% | 40.3% | 28.4% | 37.3% |
| BT Group ($BT.A) | 27.6% | 31.2% | 32.0% | 31.9% | 33.5% |
| Koninklijke Kpn Nv ($0O8F) | 39.5% | 35.9% | 34.1% | 39.1% | 33.2% |
| Hellenic Telecom.Organization S.A. ($OTES) | 33.0% | 32.0% | 28.8% | 35.4% | 31.3% |
| |
|---|
| Median (11 companies) | 32.2% | 32.0% | 32.0% | 31.9% | 29.9% |
|---|
| Telecom Egypt ($TEEG) | 48.6% | 38.3% | 33.1% | 29.3% | 25.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Ooredoo Qsc ($ORDS) | 20.7% | 21.9% | 27.5% | 25.3% | 26.5% |
| Telefonica Sa ($TDE) | 14.5% | 15.2% | 17.0% | 19.1% | 18.7% |
| Orange Polska Sa ($OPLD) | 17.5% | 16.6% | 16.9% | 17.6% | 16.9% |
| Hellenic Telecom.Organization S.A. ($OTES) | 14.2% | 11.7% | 14.8% | 15.4% | 16.9% |
| Koninklijke Kpn Nv ($0O8F) | 12.2% | 13.5% | 15.5% | 12.2% | 14.4% |
| |
|---|
| Median (11 companies) | 14.2% | 13.6% | 13.8% | 12.9% | 14.0% |
|---|
| Telecom Egypt ($TEEG) | 7.0% | 5.1% | 6.8% | 13.0% | 21.4% |
Top companies by ROIC, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| BT Group ($BT.A) | 23.3% | 23.6% | 27.0% | 34.7% | 37.5% |
| Alternative Networks ($AN.) | 36.7% | 35.2% | 33.7% | 28.5% | 20.2% |
| Verizon Communications Inc ($VZC) | 7.8% | 8.0% | 16.7% | 10.1% | 19.3% |
| O2 Czech Republic As ($O2CZ) | 13.1% | 11.8% | 11.7% | 7.2% | 14.5% |
| Adept Telecom ($ADT) | 11.9% | 11.6% | 15.5% | 13.2% | 14.3% |
| |
|---|
| Median (11 companies) | 11.9% | 11.2% | 9.7% | 8.7% | 7.1% |
|---|
| Telecom Egypt ($TEEG) | 9.1% | 6.7% | 6.7% | 6.6% | 4.9% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Telefonica Sa ($TDE) | 3.0x | 2.5x | 2.5x | 3.6x | 4.2x |
| Koninklijke Kpn Nv ($0O8F) | 2.4x | 3.8x | 3.4x | 3.0x | 3.6x |
| Verizon Communications Inc ($VZC) | 1.4x | 1.7x | 0.8x | 2.8x | 2.1x |
| Ooredoo Qsc ($ORDS) | 1.7x | 1.6x | 1.7x | 2.0x | 2.0x |
| BT Group ($BT.A) | 1.7x | 1.7x | 1.6x | 1.6x | 1.6x |
| |
|---|
| Median (11 companies) | 1.7x | 1.7x | 1.3x | 1.6x | 1.3x |
|---|
| Telecom Egypt ($TEEG) | -1.0x | -1.5x | -1.4x | -0.6x | -0.6x |
