4iG : Annual Report

CONSOLIDATED

financial report 2023

2023

31 DECEMBER 2023

ANNUAL REPORT

Data in millions of HUF, unless otherwise indicated

CONTENTS

EXECUTIVE SUMMARY	6
Consolidated financial statements	9
Consolidated statement of comprehensive income	10
Consolidated statement of comprehensive income (continued)	11
Consolidated statement of financial position	12
Consolidated statement of financial position (continued)	13
Consolidated statement of changes in equity	14
Consolidated cash flow statement	15
1.	General section	16
	1.1.	About the Group	16
	1.2.	The basis of preparation of the financial statements	16
2.	Material accounting policy information and other explanatory information	17
	2.1.	The basis for consolidation	17
	2.2.	Reporting currency and foreign currency balances	20
	2.3.	Total operating income	21
	2.4.	Property, plant, equipment	22
	2.5.	Intangible assets	23
	2.6.	Business combinations	23
	2.7.	Goodwill	24
	2.8.	Badwill	24
	2.9.	Impairment of assets	24
	2.10.	Investment in associates and jointly controlled entities	24
	2.11.	Investment in equity instruments	25
	2.12.	Non-current assets held for sale	25
	2.13.	Inventories	25
	2.14.	Receivables	26
	2.15.	Cash and cash equivalents	26
	2.16.	Share capital	26
	2.17.	Financial instruments	27
	2.18.	Financial liabilities	28
	2.19.	Provisions	29
	2.20.	Taxation	29
	2.20.1.1.	Profit taxes	29
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		31 DECEMBER 2023
		ANNUAL REPORT
		Data in millions of HUF, unless otherwise indicated
2.20.1.2.	Other taxes	31
2.21.	Leasing	31
2.22.	Earnings per share (EPS)	31
2.23.	Off-balance sheet items	32
2.24.	Treasury shares	32
2.25.	Dividends	32
2.26.	Transactions with minority owners	32
2.27.	Transactions with related parties	32
2.28.	Employee benefits	33
2.29.	Share-based payments	33
2.30.	Result of financial operations	34
2.31.	Government grants	34
2.32.	Impairment of goodwill	34
2.33.	Depreciation and amortisation	35
2.34.	Segment information	35
2.35.	Events after the balance sheet day	35
2.36.	Application of new International Financial Reporting Standards and Interpretations ...	35
2.37.	Adjustment of previous year's financial data	37
3.	Net sales revenue	44
4.	Other operating income	45
5.	Capitalised value of own produced assets	46
6.	Material costs	46
7.	Staff costs	47
8.	Other expenses	47
9.	Depreciation and amortisation	48
10.	Financial income and expenses	48
11.	Income taxes	50
12.	Share in the profit or loss of associates	50
13.	Other comprehensive income	51
14.	Total comprehensive income	51
15.	Earnings per share	51
16.	Property, plant, equipment	53
17.	Customer relationship	54
18.	Other intangible assets	55
19.	Right of use of assets	57
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		31 DECEMBER 2023
		ANNUAL REPORT
		Data in millions of HUF, unless otherwise indicated
20.	Deferred tax assets and liabilities	59
21.	Goodwill	60
22.	Net investment in leasing	62
23.	Other investments	62
24.	Other non-current assets	63
25.	Cash and cash equivalents	64
26.	Trade receivables	64
27.	Other current financial assets	65
28.	Other current non-financial assets	68
29.	Income tax receivables and liabilities	68
30.	Current finance lease receivables	69
31.	Inventories	69
32.	Investment assets held for sale and liabilities related to assets held for sale	69
33.	Share capital	70
34.	Treasury shares	70
35.	Capital reserve	71
36.	Accumulated other comprehensive income	71
36.1.	Fair value measurement reserve	71
36.2.	Foreign exchange rate differences	71
37.	Non-controlling interest	71
38.	Provisions	72
39.	Non-current loans, borrowings, bonds	73
40.	Lease liabilities	80
41.	Other non-current liabilities	81
42.	Trade payables	81
43.	Current loans and borrowings	82
44.	ESOP related benefits	82
44.1.	Reserve for ESOP obligation	83
44.2.	ESOP obligation	83
45.	Dividends payable to owners	83
46.	Other current financial liabilities	84
47.	Other current non-financial liabilities	85
48.	Segment information	85
49.	Risk management	88
50.	Financial instruments	97
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31 DECEMBER 2023

ANNUAL REPORT

Data in millions of HUF, unless otherwise indicated

51.	Transactions with related parties	100
52.	Remuneration of the Management Board and Supervisory Board	100
53.	Off-balance sheet items	101
53.1.	Contingent liabilities	101
53.2.	Contingent commitments	101
54.	Events after the balance sheet date	101
55.	Remuneration of the auditor	102
56.	Going concern	103
executive report	104
1.	General information about the issuer	104
2.	Share information	104
3.	Ownership structure	106
4.	Officials	106
4.1.		Company management	106
4.2.		Remuneration of officials	107
4.3.		Executive officers' holdings of 4iG shareholdings as of 31 December 2023	107
4.4.		Authorised signatories of the report	107
4.5.		Election and removal of officers	107
4.6.		Powers of officials	107
5.	Responsible corporate governance report and declaration	108
6.	Amendment of the Articles of Association	108
7.	Subsidiaries	108
8.	Recovery of financial instruments	108
9.	Risk management policy	108
10.	Research and development	109
NON-FINANCIAL REPORT FOR THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2023	110
1.	Our mission and approach	110
2.	Our competences	110
3.	Commercial approach	111
4.	Market presence	112
5.	Knowledge- and people-centredness	112
6.	Ethics and anticorruption compliance	112
7.	Quality management	114
8.	Environment and energy management	114
9.	Sustainability	115
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		31 DECEMBER 2023
		ANNUAL REPORT
		Data in millions of HUF, unless otherwise indicated
10.	Information Security Principles of 4iG Plc	.........................................................................115
11.	Information and stakeholder system	115
12.	Policy results	116
STATEMENT	118

The Consolidated Financial Statements were approved by the Board of Directors of the Company by written decision on the 26 April 2024 by Board Resolution No. 4/2024 (IV.26.).

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31 DECEMBER 2023

ANNUAL REPORT

Data in millions of HUF, unless otherwise indicated

EXECUTIVE SUMMARY

The 4iG Group (hereinafter referred to as "4iG", the "Group", the "Company", the "Group of Companies", the "4iG Plc") has reached another milestone in the implementation of its expansion strategy, strengthening itself into a converged regional info-communications group with the completion of the acquisition of Vodafone Magyarország Távközlési Zrt. The Group has a dominant presence in Hungary and the Western Balkans.

4iG's 2023 strategy focused on the exploitation of synergies and the integration and transformation of its subsidiaries, and the Group launched a comprehensive transformation programme to ensure its effective implementation. The Group's transformation will improve its profitability, operational efficiency, and competitiveness. 4iG is implementing a structural separation programme, transforming its telecoms subsidiaries into business-to-business and infrastructure companies, and integrating functions. Through this transformation, 4iG will reorganise its IT systems integration activities into a stand-alone company and consolidate its space and technology interests into a stand-alone company that will better capitalise on the global growth opportunities in the industry. According to preliminary estimates, the structural separation could lead to an increase in the value of the Group by more than HUF 400 billion.

The implementation of the transformation programme will lead to more streamlined operations, which will increase efficiency and enable the exploitation of new network, business and operational synergies. The transformation programme will enable the monetisation of domestic and international network and mobile infrastructure and the full exploitation of business and operational synergies. The creation of an efficient and transparent corporate structure will also increase the Group's ability to generate results, operational efficiency and competitiveness.

In January 2023, Scope Ratings upgraded 4iG Plc's debt rating from B+ to BB- with a stable outlook, recognising the Group's improving market position and financial ratios. In December, Scope Ratings upgraded the outlook on the Group's credit rating from BB- stable to BB- positive and affirmed the unsecured debt rating at BB-. The rating agency attributed the upgrade to the Group's market penetration in Hungary and the Western Balkans and the positive impact of integration. 4iG Plc also won the 2023 Awards of the Budapest Stock Exchange for long-term share price increase and private placement.

Hungary

4iG Group completed the acquisition of a majority stake in Vodafone Magyarország Távközlési Zrt. on 31 January 2023. Subsequently, the Group increased its stake in Vodafone Magyarország Távközlési Zrt. from 51% to 70.5% in March. In a share swap transaction with Corvinus Zrt., the Group exchanged all of its shares in Yettel-CETIN for a 19.5% stake in Vodafone Magyarország Távközlési Zrt.

In the agreement with the Hungarian government, the Group committed to invest HUF 150 billion in mobile and fixed infrastructure in Hungary by 2028. In line with Hungary's digitalisation goals, the Group will provide gigabit fixed internet access to an additional 1.1 million households and build and deploy a high capacity 5G mobile network.

In line with 4iG's telecoms integration and monetisation objectives, on 31 May the Group outsourced the active and passive radio equipment, spectrum usage rights and 1800 MHz frequency band licences of DIGI Szolgáltató és Távközlési Kft's mobile network to MIS Omega Mobilhálózat Kft. The Group sold the outsourced infrastructure to Pro-M Zrt. on 30 June.

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31 DECEMBER 2023

ANNUAL REPORT

Data in millions of HUF, unless otherwise indicated

In June, the world's first jet-powered ProTAR drone was unveiled by Rotors &Cams Zrt., a member of the 4iG Group. The fixed-wing,jet-powered unmanned aerial target system is designed to enhance the military's air defence capabilities. Capable of cruising at speeds of up to 500 km/h, the drone can simulate attack aircraft in realistic conditions. The 4iG Group has also entered the counter-drone market through its subsidiary RAC Antidrone Zrt. The new company offers solutions for airspace surveillance and airspace protection - primarily against autonomous flying devices.

International expansion

4iG Group completed the legal merger of its Albanian subsidiaries One Telecommunications sh.a. and ALBtelecom sh.a. on 1 January 2023, creating one of the country's leading converged mobile-wireline telecommunications operators. The Group launched the name ONE Albania sh.a. on 14 March. The successful merger and rebranding programme have significantly improved the operational efficiency and profitability of the Albanian subsidiary.

On 27 July 2023, 4iG Group signed a Memorandum of Understanding with the Montenegrin government to accelerate the digitalisation of Montenegro. Under the agreement, which establishes long-term cooperation, the Group will play a key role in the digitalisation of Montenegro, supported by ONE Crna Gora d.o.o.'s 5G developments.

In October 2023, 4iG Group signed a preliminary agreement with Telecom Egypt for the deployment of a high-capacityfibre-optic cable between Albania and Egypt. The submarine link, which will be implemented under an open access model, could provide a transit route alternative to the existing Mediterranean routes to major Western European hubs such as Frankfurt and a number of Eastern European access points. Following the MoU, the partners have also agreed the commercial terms of the data cable investment and the formation of a joint venture company in which 4iG will hold a 70% share. The commitment of the Hungarian, Egyptian and Albanian governments to the development is a sign of the high priority given to the project.

Financial performance

The Group's 2023 consolidated financial statements, prepared in accordance with International Financial Reporting Standards (IFRS) was significantly impacted by the acquisition of Vodafone Magyarország Távközlési Zrt. and the domestic and international acquisitions completed in 2022. As a result, 4iG Group achieved a net sales revenue of HUF 594.5 billion and EBITDA (earnings before interest, tax, depreciation and amortisation) of HUF 200.6 billion in 2023. The EBITDA margin was above 33% typical for the telecommunications segment.

The profit after tax normalized with the non-cash purchase price allocation impact amounted to HUF 5.7 billion, that was HUF 33.1 billion higher than the loss after tax presented in the statement of total comprehensive income (HUF -27.4 billion). In 2023 the telecommunications division accounted for 86% of the Group's net sales revenue and the IT division for 14%, making the Group the leader in the domestic IT and system integration market segment.

The successful implementation of the transformation and the resulting increase in the value of the Company by more than HUF 400 billion, the high cash position (HUF 53.2 billion) and the excellent operating cash flow (HUF 187.8 billion) presented in the consolidated statement of financial position will ensure the Group's continuing successful operation in the future.

The Company's scope adjusted debt as of 31 December 2023 is HUF 920.5 billion.

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31 DECEMBER 2023

ANNUAL REPORT

Data in millions of HUF, unless otherwise indicated

Capital market performance

2023

2022

Change +/- %

Modified*

Net sales revenue		594 510			277 421
Earnings before interest, taxes,		200 564			74 074
depreciation and amortisation (EBITDA)
Operating result (EBIT)		29 895			-771
Profit or loss after tax (PAT)		-27 382			-18 818
Total comprehensive income		-26 175			-8 747
Data per share (in HUF)
EBITDA		687.87			265.65
Net profit (EPS)		-93.91			-67.49
Highest EPS indicator		-92.52			-67.49
Equity		1 240.52			1 067.11

114.30%

170.67%

n/a

41.91%

191.48%

158.94%

39.15%

37.09%

16.25%

• The comparative figures of the consolidated statement of comprehensive income are restated figures. The restatements have been made in accordance with Section 2.37. 'Restatement of previous year financial information'.

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31 DECEMBER 2023

ANNUAL REPORT

Data in millions of HUF, unless otherwise indicated

4iG PLC

CONSOLIDATED FINANCIAL STATEMENTS

ACCORDING TO INTERNATIONAL FINANCIAL REPORTING STANDARDS 31 DECEMBER 2023

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