Annual report 2012

Financial management and performance

The current and long-term solvency of Telekom Slovenije Group companies is ensured through uniform financial management provided by the parent company for all Group companies. Key financial performance indicators improved, indicating the financial stability of the Group. 

Highlights in 2012


  • The ratio of equity to total liabilities improved to 1.1.
  • Total financial liabilities were down 7.5 % compared to 2011.
  • With a net financial debt to EBITDA ratio of 1.37 (compared to 1.52 at the end of 2011), Telekom Slovenije is one of the least indebted telecommunications operators in Europe. 

Financial management includes:

  • balancing the level of debt of all Group companies;
  • effective cash management;
  • the regular planning and monitoring of cash flows;
  • financing within the Group; and
  • control and management of key financial risks.

Short-term and long-term credit lines at domestic banks facilitate a high level of financial flexibility to bridge unforeseen cash shortfalls.


Structure of equity and net debt

The ratio of equity to total liabilities of the Telekom Slovenije Group stood at 1.1 at the end of 2012, compared with 1.07 at the end of 2011. This gives the Group a greater level of financial stability.


Structure of equity and liabilities

Total financial liabilities at the end of the year stood at EUR 451.9 million, a decrease of 7.5 % on 2011. Non-current financial liabilities account for 90.2 % of total financial liabilities, while current financial liabilities account for 9.8 %, while there was no significant change in the ratio of non-current to current liabilities relative to the previous year. The Group’s net financial debt on the last day of 2012 amounted to EUR 330.3 million, a decrease of EUR 58.3 million or 15 % relative to 2011. The balance of loans within the Group was down EUR 37.2 million or 8.0 %, while the balance of cash, deposits and current investments in securities was up EUR 21.1 million or 27 %.

As a result, the ratio of net financial debt to EBITDA stood at 1.37 at the end of the year (compared to 1.52 at the end of 2011), placing the Group among the least indebted telecommunications operators in Europe.

 

Net financial debt in EUR million

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Sources of financing within the Group and related costs

The parent company has enhanced its role in the financing of Group companies in recent years. Subsidiaries generally do not borrow externally from banks, but use open credit lines in the form of revolving loans provided by the parent company. In this manner, all Group companies achieve reasonably favourable financing terms, which apply to the entire Telekom Slovenije Group. In addition to mitigating external credit exposure, the use of available resources within the Group also ensures greater flexibility in managing liquidity and optimisation in terms of interest. Thus, the Group did not require additional external borrowing in 2012.


Breakdown of external sources of financing

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The weighted mark-up on the variable portion of the interest rate on all loans within the Group stood at 38 basis points at the end of the year, a decrease of 8 basis points relative to the previous year, primarily as the result of a significant decrease in loans with higher mark-ups. The interest rate on bonds issued was 4.875 %.


Ratio of variable to fixed or hedged financial liabilities 

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The Group used derivatives to hedge its interest-rate exposure for 30.7 % of all loans.


Credit rating review

The downgrading of Slovenia and the resulting assessment of a declining level of support for Telekom Slovenije as a company under majority state ownership resulted in the Company's downgrading in 2012. In August the international rating agency Moody’s Investors Service Ltd. downgraded the company one notch to “Baa3”, while placing the rating on review for further assessment. Moody’s published a new credit rating report in November in which in confirmed the aforementioned rating.

According to the ratings agency, confirmation of the previous credit rating was primarily a reflection of improved and sufficient liquidity in the current environment, while negative outlooks derive from the difficult macroeconomic conditions in Slovenia and uncertainty regarding the Company's future ownership structure.


Risk management

The primary focus of the Group’s financial risk management was on liquidity and solvency risk, and on interest-rate and credit risk. A more detailed description of the financial risk management process is found in the Risk management section and in the Financial Report.