Covid-19 Concessions Impact Dialog Revenues, Cost Control Sustains Profitability in Q2 2020

04 August 2020         Colombo


  • Top Line Impact of ~LKR 2.9Bn Estimated for 1H 2020 Stemming from Covid-19
  • Direct and Indirect Taxes, Fees and Levies to GoSL – Rs9.0Bn
  • Capex Investments at Rs6.4Bn during 1H 2020 and OFCF Improved to Rs14.0Bn in 1H 2020
  • Support Extended to Our Customers, Government and Community in Dealing with Covid-19

Dialog Axiata PLC announced, Tuesday 04th August 2020, its consolidated financial results for the six months ended 30th June 2020. Financial results included those of Dialog Axiata PLC (the “Company”) and of the Dialog Axiata Group (the “Group”).

The concluded quarter faced the brunt of the Covid-19 outbreak which began unfolding from mid-March 2020. The estimated revenue impact stemming from concessions offered to customers and other Covid19 associated challenges is approx. Rs2.9Bn for 1H 2020. While the overall performance in the month of June 2020 has improved to Pre-Covid levels, the full and sustained recovery of performance will depend on the overall recovery of the Sri Lankan economy, in particular Manufacturing, Tourism, Export sectors and easing of wallet pressure for the consumers.

Driven by the unprecedented Covid-19 crisis and the impact in Q2, Group revenue for 1 st Half of 2020 recorded de-growth Year-to-Date (“YTD”), Quarter-on-Quarter (“QoQ”) and Year-on-Year (“YoY”) basis. The Group recorded consolidated revenue of Rs57.4Bn for 1H 2020, demonstrating a marginal decline of 1% YTD while Group Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) also declined by 1% YTD to reach Rs22.9Bn for 1H 2020. The consolidated Group revenue for Q2 2020 was recorded at Rs28.2Bn declining 4% QoQ and 3% YoY due to the slowdown in core revenue during the quarter. The Group EBITDA was recorded at Rs10.7Bn for Q2 2020 down 12% QoQ and 3% YoY. The Group EBITDA Margin was recorded at 39.8% for 1H 2020.

The Group Net Profit After Tax (“NPAT”) demonstrated a decline of 45% YTD to record at Rs3.8Bn for 1H 2020 underpinned by the dip in topline and increased provision for bad debts. On a QoQ and YoY basis NPAT recorded growth of 55% and 16% respectively to reach Rs2.3Bn for Q2 2020. The Sri Lankan Rupee (“LKR”) appreciated by 2.0% against the United States Dollar (“USD”) during the quarter resulting in an upliftment to NPAT. Normalised for forex1 NPAT was recorded at Rs4.5Bn for 1H 2020 down 18% YTD while on a QoQ and YoY basis, Q2 2020 NPAT declined 55% and 34% respectively to record at Rs1.4Bn.

Dialog Group continued to be a significant contributor to state revenues, remitting a total of Rs9.0Bn to the Government of Sri Lanka (GoSL) during the first six months of 2020. Total remittances included Direct Taxes and Levies amounting to Rs2.6Bn and Rs6.4Bn in Consumption Taxes collected on behalf of the GoSL.

The Group capital expenditure was prioritised in 1H 2020 to accommodate urgent network upgrades while the restrictions on importation and deployment of capex in Q2 2020 resulted in lower capex for 1H 2020 which was recorded at Rs6.4Bn representing a capex to revenue ratio of 11%. Capital expenditure was directed in the main towards transforming Dialog into a digital telco, by digitising all spheres of the organisation and to further strengthen the Group's leadership in Sri Lanka's Broadband sector. The slowdown in capex supported Group Operating Free Cash Flow (“OFCF”) to improve to Rs14.0Bn for 1H 2020. The Group continued to exhibit a low geared balance sheet with the Net Debt to EBITDA ratio being maintained at 0.75x as at end of June 2020.

During the quarter Dialog had the distinction of being awarded the title ‘Sri Lanka’s Most Valuable Brand’ for the second consecutive year by Brand Finance, the world’s leading independent brand valuation consultancy, at the 17th edition of its annual review. Dialog also retained its brand rating of AAA for the sixth consecutive year and the title of ‘Most Valuable Telecommunications Brand’ for the 13th consecutive year, reaffirming the brand’s ethos of empowering and enriching Sri Lankan lives and enterprises. Furthermore, Fitch Ratings re-affirmed the National Long-Term Rating of ‘AAA (lka)’ for the Group during the quarter. This rating of ‘AAA (lka)’ with a stable outlook, denotes the highest rating assigned by the agency in its National Rating scale for Sri Lanka.

At an entity level, Dialog Axiata PLC (the “Company”) continued to contribute a major share of Group Revenue (69%) and Group EBITDA (75%). Company revenue was record at Rs39.6Bn for 1H 2020 and Rs19.1Bn for Q2 2020 declining 5% YTD, 7% QoQ and 8% YoY respectively, mainly due to the externalities alluded to earlier and the corresponding slowdown in core revenues. Downstream of the revenue performance Company EBITDA was recorded at Rs17.1Bn for 1H 2020 and Rs7.9Bn for Q2 2020 representing a decrease of 3% YTD, 14% QoQ and 4% YoY respectively. Company NPAT declined by 34% YTD to record at Rs4.5Bn for 1H 2020 albeit growing 72% QoQ and 43% YoY to reach Rs2.8Bn owing to the favourable forex movement during the quarter. Normalised for forex2 , Company NPAT recorded a decline of 3% YTD, 42% QoQ and 7% YoY.

Dialog Television (“DTV”), continued to consolidate its leadership position in the Digital Pay Television space with a subscriber growth of 17% YoY to surpass the milestone of reaching 1.5Mn homes by end June 2020. DTV revenue was significantly impacted in Q2 2020 due to provision of access to all channels during the lock down period. Accordingly, DTV revenue declined 10% QoQ and 8% YoY to reach Rs2.0Bn, albeit on YTD basis revenue remained flat at Rs4.3Bn for 1H 2020. On the back of muted revenue performance and increased provision for bad debts, DTV EBITDA declined by 1% YTD to reach Rs1.1Bn for 1H 2020. Consequently, DTV Net Loss increased to Rs625Mn in 1H 2020 relative to a Net Loss of Rs269Mn for the corresponding period in 2019.

Dialog Broadband Networks (“DBN”) featuring the Group’s Fixed Telecommunications, Broadband and International Businesses recorded revenue of Rs15.3Bn for 1H 2020 and Rs7.9Bn for Q2 2020 up 14% YTD, 7% QoQ and 18% YoY respectively, due to growth in Fixed Broadband and wholesale revenues. Despite the strong revenue performance, DBN EBITDA declined 3% YTD to reach Rs4.6Bn for 1H 2020 owing to increased provision for bad debts. Accordingly, DBN recorded a Net Loss of Rs45Mn for 1H 2020 relative to a Net Profit of Rs0.8Bn for the corresponding period in 2019.

More details are available at the following links:
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