Dialog posts strong Q2 amidst external challenges; tax remittances up 13%

Dialog Axiata Plc yesterday announced that the group has concluded the first half of 2017 on a strong note, continuing its growth momentum across the Mobile, Fixed Line and Tele-infrastructure businesses.

It reported consolidated revenue of Rs. 23 billion for Q2 2017 and Rs. 45.2 billion for 1H 2017, demonstrating a growth of 4% Quarter on Quarter (QoQ) and 7% Year to Date (YTD).



Downstream of Revenue, Group EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) recorded a growth of 13% QoQ and 9% YTD to reach Rs. 8.1 billion for Q2 2017 and Rs. 15.4 billion for 1H 2017 respectively. The growth was achieved on the back of concerted efforts to drive revenue growth and aggressive cost rescaling initiatives. The Group EBITDA margin accordingly improved to 34% in 1H 2017.

Second quarter performance was impacted by externalities including the inclement weather and severe flood conditions during May which had a significant impact on livelihood and commerce. Similar to the relief efforts made during the flood situation in 2016, the Dialog Group promptly came to the fore to assist the general public as well as employees affected by landslides and floods. Dialog’s intervention encompassed flood relief donations, the provision of consumption credits and the extension of free services which amounted to Rs. 80 million. Further, consumer spending continued to be impacted by increased consumption taxes on communication services which moderated revenue growth across the Mobile, Fixed, Broadband and Pay Television businesses.

Group NPAT (Net Profit After Tax) declined 21% YTD to Rs. 3.9 billion for the 1H of 2017, impacted by an increase in depreciation, net finance cost and non-cash translational forex losses. However, NPAT demonstrated a growth of 52% QoQ to record Rs. 2.3 billion for Q2 2017 driven by higher EBITDA and lower non-cash translational forex losses. The Sri Lankan rupee depreciated against the US dollar by a 0.9% in Q2 2017 compared to 1.5% during Q1 of 2017.

The Dialog Group continued to be a significant contributor to state revenues, remitting a total of Rs. 19.1 billion to the Government of Sri Lanka (GoSL) during 1H 2017, representing an increase of 13% YTD. Total remittances included direct taxes and levies (Rs. 5.7 billion) as well as consumption taxes collected on behalf of the GoSL (Rs. 13.4 billion).

Sri Lanka achieved yet another milestone on the region’s broadband technology landscape during the quarter, as Dialog Broadband announced the launch of its commercial 4.5G TDD LTE network. The rollout of South Asia’s first commercial 4.5G TDD LTE network with Dialog’s Home Broadband services will serve as a springboard for the rapid accession towards 5G services, and demonstrates Dialog’s readiness to deliver the most advanced suite of connectivity services to consumers. 

Dialog also announced the first successful trial of next-generation Massive MIMO (Multiple-Input Multiple-Output) Technology. In the race to 5G with unprecedented improvements in network throughput and capacity, MIMO is considered the most compelling technology with superior energy and spectral efficiency.

Group capital expenditure for 1H 2017 was recorded at Rs. 9.5 billion, representing a capex to revenue ratio of 21%. Capital expenditure was directed in the main towards investments in High-Speed Broadband infrastructure to further strengthen the group’s position in Sri Lanka’s Broadband sector. Group Operating Free Cash Flow (OFCF) was recorded at Rs. 1.7 billion for 1H 2017. The group continued to exhibit a structurally strong balance sheet with the Net Debt to EBITDA ratio being maintained below 1.0x as at end of June 2017.

At an entity level, Dialog Axiata Plc (the Company) continued to contribute a major share of Group Revenue (83%) and Group EBITDA (79%). On the back of its mobile customer base of over 12.4 million subscribers, Company Revenue grew by 4% QoQ to reach Rs. 19.0 billion for Q2 2017 with revenue for 1H 2017 being reordered at Rs. 37.4 billion, up 5% YTD. Company EBITDA grew 13% QoQ to reach Rs. 6.5 billion for Q2 2017 on the back of revenue growth combined with cost improvements as alluded to earlier.

Company NPAT declined 24% YTD to Rs. 4.1 billion for 1H 2017, impacted by an increase in depreciation while NPAT demonstrated a strong growth of 35% QoQ to record Rs. 2.3 billion for Q2 2017 driven by higher EBITDA and lower non-cash translational forex losses.

Dialog Television (DTV) continued to consolidate its leadership position in the Digital Pay Television space with the subscriber base surpassing 910,000 as at end June 2017. DTV revenue grew 1% QoQ to reach Rs. 1.5 billion for Q2 2017 while declining 4% YTD to record Rs. 3.0 billion for 1H 2017. Subscription revenue grew by 4% and 3% on a QoQ and YTD basis respectively. Driven by revenue performance and aggressive cost rescaling initiatives, DTV EBITDA grew by 70% QoQ to reach Rs. 110 million for Q2 2017 while EBITDA declined by 18% YTD to record Rs. 174 million for 1H 2017 impacted by expansion in foreign currency denominated input costs. DTV Net Loss decreased 30% QoQ while the Net Loss for 1H 2017 increased to Rs. 528 million relative to a Net Loss of Rs. 228 million recorded in the corresponding period of 2016.

Dialog Broadband Networks (DBN) recorded revenue of Rs. 3.0 billion for Q2 2017 and Rs. 5.9 billion for 1H 2017, representing an increase of 4% QoQ and 36% YTD. Downstream of the strong revenue performance, DBN EBITDA grew 10% QoQ and 77% YTD recording Rs. 1.7 billion for Q2 2017 and Rs. 3.2 billion for 1H 2017 respectively. On the back of a healthy EBITDA performance, DBN recorded its second consecutive quarter of Net Profit of Rs. 331 million for Q2 2017, up 40% QoQ and Rs. 568 million for 1H 2017 relative to a Net Loss of Rs. 40 million in the corresponding period of 2016.