Dialog grows 16% in Q1, forex flips NPAT to negative Rs. 15.8 b

• Q1 2022 Revenue and EBITDA record YoY growth of 16% and 8% respectively
• YTD Q1 2022 NPAT negative at Rs. 15.8 b impacted by forex loss of Rs. 20.2 b; normalised NPAT at Rs. 4.3 b
• Total taxes paid to Govt. Rs.6 b including Rs. 2 b in direct and Rs. 3.8 b in indirect taxes
• Capex Investments of 
• Rs. 7.5 b during quarter; OFCF reaches Rs. 6.2 b for Q1 2022

Despite the challenging environment, all business segments, namely, Mobile, Fixed Line, Digital Pay Television, International and Tele-infrastructure businesses have positively contributed to Dialog Axiata PLC, recording a consolidated revenue of Rs. 38.3 billion for Q1 2022, demonstrating a strong growth of 16% Year-on-Year (YoY) and 3% Quarter-on-Quarter (QoQ).

It said underpinned by Revenue growth, Group Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) grew 8% YoY albeit declining 4% QoQ to record at Rs. 14.7 billion for Q1 2022. The QoQ decline in EBITDA was driven by higher spend on network and direct costs due to escalation of dollar denominated expenses and increase in energy costs due to power cuts.

“Sri Lanka is engulfed in an economic and political crisis resulting from the impacts of COVID-19, significant tax cuts and large sovereign debt repayments collectively depleting the limited foreign reserves of the country. As a result, the Sri Lankan Rupee (rupee) depreciated by 46% against the dollar during Q1 2022,” Dialog said.

The Group Net Profit After Tax (NPAT) was negative for Q1 2022 at Rs. 15.8 billion, impacted by the steep depreciation of the rupee against the dollar by 46% for Q1 2022 versus a depreciation of 7.1% for Q1 2021 and a stable movement in Q4 2021.

The forex loss of Rs. 20.2 billion recorded by Dialog Group was due to outstanding dollar denominated debt obligations and foreign vendor liabilities. The dollar debt obligation for the Group totalled $ 145 million by end Q1 2022. Normalised for the said foreign exchanges loss Group NPAT was recorded at Rs. 4.3 billion for Q1 2022 declining 4% YoY and 11% QoQ.

Dialog Group continued to be a significant contributor to state Revenues, remitting a total of Rs. 5.9 billion to the Government of Sri Lanka (GoSL) during Q1 2022. Total remittances included Direct Taxes and Levies amounting to Rs. 2.1 billion as well as Rs. 3.8 billion in Consumption Taxes collected on behalf of the GoSL.

The Group remains committed to provide seamless and consistent connectivity to all Sri Lankans during these unprecedented times and accordingly spent Rs. 7.5 billion in capital expenditure for the quarter ended 31st March 2022, resulting in a Capex to Revenue ratio of 20% for Q1 2022. Capital expenditure was directed towards investments in High-Speed Broadband infrastructure to further expand Dialog’s leadership in Sri Lanka’s Broadband sector.

The Group recorded Operating Free Cash Flow (OFCF) of Rs. 6.2 billion for Q1 2022. The Group balance sheet continued to be low geared, despite new dollar borrowings during the quarter, to record the Net Debt to EBITDA ratio at 0.49x by end Q1 2022.

The Return on Invested Capital (ROIC) remained at healthy levels to record at 16.5% for Q1 2022 albeit declining 0.6pp YoY and 1.4pp QoQ.

At an entity level, Dialog Axiata PLC (the Company) continued to contribute a major share of Group Revenue (63%) and Group EBITDA (68%). Company recorded a 10% YoY growth in Revenue to reach Rs. 24.0 billion for Q1 2022 amid increased contribution from Data revenue. On a QoQ basis Revenue recorded a growth of 3%. EBITDA for Q1 2022 was recorded at Rs. 10.1 billion representing a moderate growth of 1% YoY on the back of escalations in Sales and Marketing, Network and Staff costs. 

On a QoQ basis EBITDA recorded a growth of 4%. The depreciation of the rupee against the dollar impacted company NPAT resulting in a loss of Rs. 15.2 billion as the foreign exchange loss amounted to Rs. 18.3 billion for Q1 2022. Normalised for the same, company NPAT was recorded at Rs. 3.1 billion for Q1 2022, declining 21% YoY albeit increasing 16% QoQ.

Dialog Television (DTV), continued to consolidate its leadership position in the Digital Pay Television space with a subscriber growth of 9% YoY, recording a total subscriber base of 1.7 million as at end of March 2022. 

DTV Revenue reached Rs. 2.8 billion for Q1 2022, recording a growth of 18% YoY driven by subscription revenue albeit declining 7% QoQ due to decline in advertising revenue. DTV EBITDA recorded a growth of 37% YoY to reach Rs. 969 million for Q1 2022 underpinned by Revenue performance. However, DTV’s Net Loss increased to Rs. 1 billion for Q1 2022 relative to a Net Loss of Rs. 286 million for Q1 2021 resulting mainly from the forex losses.

Dialog Broadband Networks (DBN) featuring the Group’s Fixed Telecommunications, Broadband and International Businesses recorded Revenue of Rs. 12.6 billion for Q1 2022, up 36% YoY and 1% QoQ. The top line growth was mainly driven by favourable movement in international wholesale Revenue. The EBITDA for DBN grew 22% YoY to record at Rs. 3.8 billion in Q1 2022. Accordingly, DBN NPAT reached Rs. 911 million for Q1 2022 declining by a marginal 1% YoY.

In a mission to provide emergency relief to the worst impacted families and communities in the country due to the ongoing economic crisis, Dialog Group joined hands with like-minded corporates and partners including its execution partner Sarvodhaya and accountability partner PwC Sri Lanka to launch the ‘Manudam Mehewara’ relief initiative. 

Emergency relief will be provided to more than 200,000 affected families across all 25 districts and this relief effort will continue for 60-90 days, until a sustainable benefit transfer system is established in the country through an effective economic recovery plan.