Dialog consolidates performance with net profit of Rs 2.5 b in 1H 2013

Monday, 5 August 2013 00:30 - - {{hitsCtrl.values.hits}}

The Dialog Axiata Group has recorded strong growth in revenue across all segments to reach Rs. 15.6 b in Q2 2013 and Rs. 30.9 b for 1H 2013 respectively, representing an increase of 3% Quarter-On-Quarter (QoQ) and 15% year-to-date (YTD). Group EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) increased by 1% QoQ to be recorded at Rs. 5.05 b in Q2 2013. The performance of Q1 2013 is inclusive of the positive impact of a TDC (Telecommunications Development Charge) refund of Rs. 429 m. Group EBITDA for 1H 2013 was posted at Rs. 10 b up 9% YTD, yielding an EBITDA margin of 33%. Non-operational performance below EBITDA was characterised by non-cash translational foreign exchange losses amo-unting to Rs. 856 m for Q2 2013 following the depreciation of the SLR relative to the USD by 2.8% QoQ. Inclusive of the said non-cash translational foreign exchange loss, Group Net profit for Q2 2013 was posted at Rs. 950 m exhibiting a contraction by 40% QoQ. Group Net Profit for 1H 2013 was recorded at Rs. 2.5 b, compared to a net profit of Rs. 349 m in the corresponding period in 2012 which was similarly impacted by an exceptional non-cash translational foreign exchange loss of Rs. 2.9 b. Group NPAT post normalisation for the non-cash foreign exchange loss was recorded at Rs. 1.8 b and Rs. 3.4 b for Q2 2013 and 1H 2013 respectively. Dialog Axiata PLC, featuring the mobile, international and tele-infrastructure segments of the Group portfolio, continued to contribute a major share (87%) of Group revenue and (88%) of Group EBITDA. Underpinned by the contribution from its eight million strong mobile subscriber base, Company revenue grew by 3% QoQ to reach Rs. 13.7 b, with revenue for 1H 2013 being recorded at Rs. 27.1 b, up 13% relative to 1H 2012. During Q2 2013, the company earned the distinction of becoming the first operator in South Asia to launch 4G FD-LTE high speed mobile broadband services. Company EBITDA for Q2 2013 reached Rs. 4.4 b representing stable performance in accounting terms and substantial growth on normalised basis relative to the previous quarter during which a TDC (Telecommunications Development Charge) refund of Rs. 404 m was recognised. Accordingly Company EBITDA increased by 8% YTD to record at Rs. 8.8 b for 1H 2013. Company NPAT was impacted by non-cash translational foreign exchange losses as alluded to previously in the context of Group performance. Company NPAT for the quarter decreased by 42% QoQ to reach Rs. 985 m. Company NPAT for 1H 2013, was recorded at Rs. 2.7 b compared to a NPAT of Rs. 451 m in the corresponding period in 2012. Following the expiry of its 15-year tax holiday at the end of FY 2012, the Company provided for income tax based on 2% of revenue amounting to Rs. 275 m in Q2 2013 and Rs. 552 m in 1H 2013 respectively. Dialog Television (DTV), the digital pay television business of the Dialog Group, continued its positive performance trajectory to reach a revenue figure of Rs. 1.7 b for 1H 2013, exhibiting growth of 21% on YTD basis. EBITDA for the same period was recorded at Rs. 298 m, exhibiting a contraction of 23% YTD. EBITDA contraction resulted in the main from cost expansion associated with enhancements effected to the company’s service offering including but not limited to the launch of HD services, expansion of channel genres and the launch of prepaid services. Performance for 1H 2013 was also impacted by a one-off provision of Rs. 33 m made on account of unrecoverable input VAT. Accordingly DTV net profit for 1H 2013 contracted by 91% on an YTD basis to be recorded at Rs. 10 m. The company’s pay TV subscriber base grew by over 49,000 subscribers YoY to be recorded at 288,000 as at end Q2 2013. Dialog Broadband Networks (DBN), encompassing the Group’s fixed telecommunications business, recorded a significant revenue increase of 38% YTD driven by strong growth in organic revenues as well as from the consolidation of Suntel Ltd. Revenue was recorded at Rs. 2.9 b for 1H 2013. Aided by the healthy revenue growth and synergies achieved through the DBN-Suntel amalgamation, EBITDA for 1H 2013 reached Rs. 866 m, an improvement of 35% YTD. DBN NPAT for 1H 2013 was recorded at negative Rs. 97 m, representing a significant improvement of 48% compared to the figure of negative Rs. 186 m posted for the corresponding period in 2012. DBN secured the distinction of launching the country’s first 4G LTE service for home and enterprise customers in December 2012. DBN’s fixed TD-LTE 4G high speed broadband services operate in the 2.3 GHz frequency band. In May 2013 DBN, entered into a share purchase agreement with the shareholders of Sky Television and Radio Network Ltd. (Sky) for the acquisition of 100% of the ordinary shares in issue of Sky at a consideration of Rs. 800 m. Sky is a licensed pay television operator in possession of spectrum resources in the 2.3GHz spectrum band. The acquisition of the additional spectrum resource will enable DBN to enhance its Fixed 4G-LTE services in terms of capacity, burst speeds and bandwidth delivered to Sri Lankan homes and enterprises. Following the completion of the acquisition, the amalgamation of Sky with DBN has been completed with effect from 3 July 2013 and the assets, liabilities and operations of Sky in their entirety have been since subsumed by DBN. In line with the Group continuing to make aggressive strategic investments in high speed mobile and fixed broadband infrastructure and spectrum, capital expenditure for 1H 2013 increased by over twofold on a YTD basis, to reach Rs. 14.3 b. Group capital expenditure for Q2 2013 included strategic investments in spectrum assets featuring the acquisition of spectrum for mobile 4G-LTE services from the TRCSL and the payment of spectrum re-farming fees to enable the conversion of spectrum amalgamated through the acquisition of Sky TV for the purpose of providing fixed 4G-LTE services. Spectrum-related investments totalled Rs. 5.2 b. On the back of significantly higher capital expenditure, the Group recorded a negative Free Cash Flow (FCF) of Rs. 4.3 b for 1H 2013. Notwithstanding the expansion of capital investments, the Group’s net debt to EBITDA ratio remained at a modest level of 0.99x as at end of June 2013, demonstrating the strength and robustness of the Group’s balance sheet to meet the ambitious expansion programs centred on the development of next generation high speed broadband infrastructures.

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