B Communications' (BCOM) CEO Doron Turgeman on Q2 2016 Results - Earnings Call Transcript

| About: B Communications (BCOM)

B Communications Ltd. (NASDAQ:BCOM)

Q2 2016 Results Earnings Conference Call

August 04, 2016 09:00 AM ET

Executives

Doron Turgeman - CEO

Itzik Tadmor - Finance Manager

Analysts

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the B Communications Second Quarter 2016 Results Conference Call. All participants are present in listen-only mode. Following managements’ formal presentation, instructions will be given for the question-and-answer session. [Operator Instructions]. As a reminder, this conference is being recorded August 04, 2016. With us on line today are Mr. Doron Turgeman, CEO; and Mr. Itzik Tadmor, Finance Manager.

I would like to remind everyone that forward-looking statements for the respected Company’s business, financial condition and results of its operations are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated.

Such forward-looking statements include but are not limited to product demand, pricing, market acceptance, changing economic conditions, risks and product and technology development and the effect of the Company’s accounting policies, as well as certain other risk factors which are detailed from time-to-time in the Company’s filings with the various securities authorities. Mr. Turgeman, would you like to begin?

Doron Turgeman

Sure. Thank you all. Good morning everyone. Thank you for joining us. It’s great pleasure for us to take again the quarterly call and provide you more information and highlights about our quarterly results and the recent news about B Communications.

We are very pleased with the results of the second quarter in which we generated a net profit of NIS 40 million. During the second quarter, we also received NIS 204 million dividends from our Bezeq subsidiary. The tender offer that we launched on May 26 expired on June 27 with the clearing price of $1.07 per Mote. The aggregate par value of the Notes that were tendered and purchased by us was approximately $18.6 million. From January 2015 and until today, we have repurchased approximately $83 million par value of our Notes.

We also provided our shareholder with the cash dividend of NIS 11.88 per share on June 29, providing an 11% dividend yield. As we mentioned few times before, we believe the 2016 will be a good year for us and for our shareholders from a dividend perspective. And we hope to create more value for our shareholder in the future.

We’re also very pleased with the announcement from Standard & Poor’s rating services on July 28, 2016, in which they revised our Company outlook to positive from stable, while affirming our long term rating of BB minus international rating. The Israeli local rating grows from A to A plus, while maintaining stable outlook.

Here are few highlights about our cash and debt positions as of June 30. Our liquidity balance which consists of cash and cash equivalents and short-term investments totaled approximately NIS 1.35 billion, which is about $350 million. Our current financial debt consists of NIS 2.5 billion of senior secure notes, NIS 700 million of unsecured Series B Debentures, and a NIS71 million of tax liability. Our net financial debt is currently only NIS 1.9 billion, which is approximately $500 million.

In regards to our equity position during the last 13 months, our stock price increased by more than 100% including dividend adjustment and our current market cap is about $750 million. I personally continue to believe that despite the recent increase in our stock price our shares are undervalued based on our current net asset value and dividend yield forecast. Overall, during the first half of this year and until today, we continue to make progress consistent with our business plan, leveraging Bezeq’s stable platform and unique strength to achieve our goals. Our financial position is stronger than ever based on stable asset that continues to perform in line with our expectations.

With full confidence in Bezeq long term cash generating power, we will continue our effort to strength our Company financial stability in order to improve our debt and equity positions and to continue to create value to our shareholders in the future.

With that, I’d like to turn the call over to Itzik Tadmor, our financial manager to discuss the financials. Itzik, please.

Itzik Tadmor

Thanks, Doron and hello everyone. Please let me walk you through some highlights from our second quarter results and our balance sheet items as of June 30, 2016. As of June 30, 2016, the equity attributable to our shareholders totaled NIS 1.4 billion compared with only NIS 1 billion as of December 31, 2015. Our interest in Bezeq’s net income for the second quarter was NIS 99 million compared with NIS 148 million in the second quarter of 2015. During the second quarter of 2016, our net amortization expense related to our Bezeq purchase price allocation totaled NIS 19 million compared with NIS 40 million in the corresponding quarter of 2015. The decline reflects the decrease in our ownership interest in Bezeq after our sale of 115.5 million Bezeq shares in February 2016. The sale of these shares will also reduce our future net amortization expense. Since the Bezeq acquisition and until June 30, 2016, we have amortized approximately 73% of the total purchase price allocation.

During the second quarter of 2016, we recorded net financial expenses of NIS 38 million compared with net financial expenses of NIS 85 million in the second quarter of 2015. Net financial expenses during the second quarter included financial expenses of NIS 53 million related to our publicly traded Notes and Series B Debentures which was partially offset by financial income of NIS 15 million generated by short term investments.

So, as Doron said, we are now in a much stronger financial position and believe that we are well-positioned for the future. Back to you, Doron.

Doron Turgeman

Thank you, Itzik. To recap, during the second quarter of 2016 and the first half of this year, we continued to execute our business plan by improving our debt structure and providing a per share dividend of almost NIS 12 to our shareholders. We hope to continue providing significant value for you all in the coming quarters. Thank you for your continued support and for participating in this conference call.

With that we would be happy to take your questions. Operator, please.

Question-and-Answer Session

Operator

Doron Turgeman

Yes, sure. I would like to thank everyone for their participation and support. I promise we will keep focused on improving your investment and hope to see you all again at our next quarter conference call. Thank you, everyone.

Operator

Thank you. This concludes the B Communications second quarter 2016 results conference call. Thank you for your participation. You may go ahead and disconnect.

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