O2 CR share price jumps as it announces dividend policy

By bne IntelliNews October 19, 2015

Gabriela Gandovska -

O2 Czech Republic reported strong third-quarter results and announced a long-awaited dividend policy on October 19. The news sent the telecom's shares to their highest since the company spun off its infrastructure assets earlier this year.

The country's biggest telecom operator reported net profit up 41% y/y for the third quarter of 2015 at CZK1.4bn (€52mn). Ebitda rose 25% despite a revenue drop of 0.3% to CZK9.33bn. Operating costs fell 20%.

Net profit and Ebitda exceeded consensus by 8.6% and 7.7%, respectively. The company set full-year net income guidance of between CZK4.85bn to CZK5.2bn for 2015. Ebitda is forecast at CZK9.9bn-CZK10.2bn.

Along with the strong third quarter results, O2 CR cheered investors by saying it plans to pay 90% - 110% of net profit in dividends. This is welcome news to minority shareholders who have endured a torrid time since Czech billionaire Petr Kellner’s PPF Group bought control of the company early last year. They were used in the years before the arrival of PPF to high dividends. PPF’s share in O2 CR now stands at 84.91%.

O2 CR shares rose nearly 3% in early trading to CZK239.5, their highest value since the June spin-off of infrastructure assets, which left O2 CR as a pure service provider. Later in the day, the stock pared some of the gains.

The telecoms company also said it will launch a share buyback programme that will start in January and last for up to five years. It will offer to buy as much as 10% of stock for up to CZK8bn.

Commenting on the capital structure and debt target, CFO Tomas Kouril said “O2 is taking advantage of favourable market conditions to refinance its existing debt and potentially increase leverage up to 1.5 times net debt to EBITDA,” which is still below the industry benchmark. Currently the company’s leverage is around 0.3 times net debt to EBITDA.

Analysts at Erste said the buy-back probably means there will be no “jumbo” dividend as speculated earlier, and that O2 CR’s free float may fall to below the 15% threshold necessary for inclusion in major regional indices in future. “We thus expect only slightly positive reaction to the results. Investors should wait for the information, whether PPF will also sell during the buy-back," they note.

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