Sýn hf. : 61% revenue growth but high operating costs and capital investment related to integration - increased synergies and stronger operations in 2H

"The second quarter was characterized by very large synergy projects.  Important milestones were reached, such as a successful transfer of all 365 mobile customers to Sýn's mobile telecom infrastructure which required sim card change for all those customers. Other projects include a merger of numerous departments as well as integration of number of systems. A significant part of the integration of the businesses relates to physical movement of operations from Skaftahlíð to Suðurlandsbraut. By end of the quarter, 69% of the employees of the acquired units have now moved to our HQ at Suðurlandsbraut. This means that important synergy projects have been finalized which will deliver fast decrease in costs from the third quarter. We therefore are expecting much stronger quarters in 2H, both because of lower costs as well as seasonally stronger income quarters, where income of telecommunications are historically strong 3Q and Media a strong 4Q. 

 

EBITDA of the quarter is below our expectations, especially due to higher cost following the merger projects. Total costs are not only higher due to one off costs but also due to costs related to extensive merger related projects that require substantive extra employee work load, double systems in operations, double housing as well as limited opportunity of the company to adapt to the quarters general wage increases in the middle of the merger process. The higher merger costs than expected is the main reason for the EBITDA being lower than anticipated. The execution of merger projects is however on plan which will start to deliver better operations in 2H of 2018. More costs in 1H than anticipated means that the company is currently by the lower end of its EBITDA outlook range for the year. The outlook range for EBITDA of 2019 and 2020 are unchanged.  

 

Total revenues and number of clients are in accordance with original plans of the acquisitions which is an important milestone considering complex client transfers between systems that have been executed in the integration. The company has as well streamlined its product portfolio after the merger, for example strengthened its TV proposition with lower price points as well as renewed and new content rights such as UEFA and the Italian League recently. 

 

We are pleased that the largest and most challenging period of the merger, regarding risk, is now completed and look forward towards bright times with lower costs and positive EBITDA development for the next quarters in line with the overall aim of the merger. We wish to thank Sýn's employees for outstanding and relentless work to build the foundation of a leading integrated media and telecommunications company "