Dialog hit by more forex losses in Q2, suffers Rs. 28 b 1H loss

• Forex losses continue to impact profitability as LKR depreciated against USD by 80% and 23% during 1H 2022 and Q2 2022 respectively 
• Forex normalized NPAT at 
• Rs. 6 b for 1H and Rs. 1.6 b for Q2 
• Total taxes paid to GovSL Rs. 16.9 b for 1H which included Rs. 9.2b in direct and Rs. 7.7 b in indirect taxes; the total taxes paid increased 46% YTD and 56% QoQ 
• Capex investments of Rs. 22.4 b in 1H; OFCF reached Rs. 2.8 b

Dialog Axiata PLC yesterday announced a loss of Rs. 28 billion in the first half of this year as it reported further impact due to the depreciation of the rupee though top line performance remained robust. Dialog said despite the challenging environment witnessed in Q2 2022, the Group sustained its consistent performance to record strong revenue growth across all business segments, namely, Mobile, Fixed Line, Digital Pay Television, International and Tele-infrastructure, relative to prior periods, namely, Year-to-Date (YTD) and Quarter-on-Quarter (QoQ). Accordingly, the Group recorded consolidated revenue of Rs. 81.6 billion for 1H 2022 and Rs. 43.3 billion for Q2 2022. 

However, driven by higher network spend and escalation in the cost base, Group Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) declined to Rs. 27.5 billion for 1H 2022 down by a moderate 1% YTD. On a QoQ basis EBITDA declined 14% to record Rs. 12.7 billion for Q2 2022.

The Group Net Profit After Tax (NPAT) was impacted by the forex losses amid continued depreciation of the LKR against the USD. The resulting forex losses reached Rs. 14.2 billion for Q2 2022 and Rs. 34.3 billion for 1H 2022. The forex losses were predominantly contributed by market-to-market translational losses from USD denominated borrowings. 

Public Group NPAT recorded a loss of Rs. 28.3 billion for 1H 2022 and a loss of Rs. 12.5 billion for Q2 2022 amid forex losses. Normalised for the said forex losses, NPAT continued to decline albeit recording profits of Rs. 6 billion for 1H 2022 and Rs. 1.6 billion for Q2 2022. 

Dialog Group continued to be a significant contributor to state revenues, remitting a total of Rs. 16.9 billion to the Government of Sri Lanka (GovSL) during the first six months of 2022. Total remittances included direct taxes and levies amounting to Rs. 9.2 billion and Rs. 7.7 billion in Consumption Taxes collected on behalf of the GovSL. The total taxes paid increased 46% YTD and 56% QoQ. The Direct Taxes included Rs. 3.8 billion paid during the quarter in lieu of one-off Surcharge Tax of 25% applicable on PAT of FY2020. 

The Group continued to support critical investments in 1H 2022 to provide seamless and consistent connectivity whilst meeting the surge in data demand. Accordingly, the Capital expenditure reached Rs. 22.4 billion for 1H 2022. Capital expenditure was directed towards investments in High-Speed Broadband infrastructure to further expand Dialog’s leadership in Sri Lanka’s Broadband sector. In line with the above Capex, the Group Operating Free Cash Flow (“OFCF”) declined to Rs. 2.8 billion for 1H 2022. 

During the quarter the Dialog Group entered into loan agreement of up to $ 150 million with the International Finance Corporation (“IFC”) that is expected to help expand and improve the network capacity through the upgrading of existing sites and the deployment of new 4G sites. 

IFC will also ensure that Dialog adopts an enhanced environmental and social management system (ESMS) according to IFC Performance Standards for their mobile network deployment, in line with Dialog’s endeavours of pursuing green connectivity, supporting global climate action goals and achieving net-zero CO2 emission by 2050. 

At an entity level, Dialog Axiata PLC (the “Company”) continued to contribute a major share of Group Revenue (60%) and Group EBITDA (69%). Company revenue was recorded at Rs. 49.1 billion for 1H 2022 up 11% YTD and Rs. 25.1 billion for Q2 2022 up 4% QoQ, resulting from growth in Data segment. Profitability continued to be impacted due to higher network spend and rise in operating expenses resulting from LKR depreciation against the USD as alluded to earlier. 

Accordingly, Company EBITDA was recorded at Rs. 19 billion for 1H 2022 down 5% and Rs. 9 billion for Q2 2022 down 11%. Downstream of EBITDA performance, Company NPAT recorded a loss of Rs. 25.9 billion for 1H 2022 and Rs. 10.7 billion for Q2 2022. Normalised for forex losses NPAT was recorded at Rs. 4.6 billion for 1H 2022 and Rs. 1.5 billion for Q2 2022. 

Dialog Television (DTV), continued to consolidate its leadership position in the Digital Pay Television space with a subscriber growth of 6% YoY to exceed 1.7 million homes by end June 2022. Driven by strong uptake in prepaid segment, DTV revenue was recorded at Rs. 5.6 billion for 1H 2022 albeit on a QoQ basis revenue declined 2% to reach Rs. 2.8 billion for Q2 2022. DTV EBITDA declined 24% to reach Rs. 1.1 billion for 1H 2022 due to escalation in cost base stemming from unfavourable forex movement. Consequently, DTV Net Loss increased to Rs. 2.9 billion in 1H 2022. 

Dialog Broadband Networks (DBN) featuring the Group’s Fixed Telecommunications, Broadband and International Businesses recorded strong revenue growth of 42% YTD to reach Rs. 28.8 billion for 1H 2022 and Rs. 16.2 billion for Q2 2022, due to growth in wholesale revenue coupled with Fixed Broadband revenue. Following the revenue performance, DBN EBITDA increased to reach Rs. 7.4 billion for 1H 2022 while Net Profit reached Rs. 1.3 billion for 1H 2022.