Dialog Delivers Growth of 6% in First Quarter

Dialog Axiata PLC announced, Wednesday 13th May 2015, its consolidated financial results for the three months ended 31st March 2015. Financial results included those of Dialog Axiata PLC (the “Company”) and of the Dialog Axiata Group (the “Group”) post-consolidation with subsidiaries Dialog Broadband Networks (Pvt) Ltd (“DBN”), and Dialog Television (Pvt) Ltd (“DTV”).

The Group continued its growth momentum across Mobile, Digital Pay Television and Fixed Line businesses to record consolidated revenue of Rs17.3Bn for the 1st Quarter, demonstrating a growth of 6% on a Year on Year (“YoY”) basis. Group revenue was stable on a Quarter on Quarter (“QoQ”) basis.

Group EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) for Q1 2015 was recorded at Rs6.0Bn, an increase of 9% QoQ and 27% YoY. The strong QoQ increase in EBITDA was driven by operational efficiencies centred on cost management initiatives. Group EBITDA margin for Q1 2015 was registered at 34.5%.

Underpinned by the positive EBITDA growth trajectory, Group NPAT (Net Profit After Tax) for Q1 2015 grew by 34% QoQ and 56% YoY to be recorded at Rs2.0Bn. The Group recorded a non-cash, translational foreign exchange loss of Rs279Mn for the quarter following the depreciation of the SLR relative to the USD by 1.1% QoQ. Group NPAT post normalization for the said non-cash foreign exchange loss was recorded at Rs2.3Bn for Q1 2015, representing an increase of 28% QoQ and 85% YoY.

The Dialog Group remitted a total of Rs5.9Bn to the Government of Sri Lanka (GoSL) during Q1 2015. Total remittances included direct taxes and levies as well as consumption taxes collected on behalf of the GoSL. Direct taxes, fees and levies contributed by the Dialog Group totalled to Rs2.4Bn inclusive of income tax. The Group additionally collected consumption taxes, totalling to Rs3.5Bn on behalf of the GoSL in Q1 2015, comprising in the main of Telecom Levy collections amounting to Rs2.8Bn.

The Minister of Finance presented the interim budget 2015 to the Parliament on 29th January 2015. The interim budget as presented alluded to new taxes and levies potentially applicable to the operations of the Dialog Group. Pursuant to the interim budget proposals, a draft Finance Bill and Telecommunication Levy (Amendment) Bill were published by way of a gazette notification on 30th March 2015. The Draft Telecommunication Levy (Amendment) Bill if legislated will impose a levy from every operator providing telecommunication services as a prepaid service.

With respect to the one-off taxes proposed for legislation through the (draft) Finance Bill, the impact of the said taxes is estimated at Rs3.0Bn. The distributable profit for the financial year ended 31st December 2014 prior to the application of this impact was recorded at Rs6.1Bn. In line with the going forward imperative of investing in the future growth of the Company, and the dilution of profit available for distribution as a result of the impact of the said taxes, the Board of Directors of the Company has intimated to the Colombo Stock Exchange its decision to recommend for the approval of shareholders, a total dividend of Rs1.1Bn for the financial year ended 31st December 2014 which translates to a dividend to shareholders of thirteen cents (Rs0.13) per share.

The consolidated financial results for the three months ended 31st March 2015 excludes any and all impacts from the afore-referenced bills since they remain in draft form, and corresponding legislation has not been enacted as at the reporting date.

Consolidating its leadership position as a regional and global leader in innovation, Dialog secured the distinction of winning two global awards at the Mobile World Congress (MWC) held in Barcelona Spain in March 2015. Sri Lanka’s premier mobile payment network eZ Cash beat out worldwide competition to win the Global Award for the Best Mobile Money Service, whilst Dialog’s cutting edge open development platform Ideamart won the Global Award for the Best Technology Enabler. Ideamart is widely regarded as one of the most successful integrated mobile application development platforms in the world. Further endorsing Dialog’s leadership in Sri Lanka’s fiercely competitive ICT sector, Sri Lankan consumers voted Dialog as the Telecom Service Provider of the Year for the fourth year in succession at the recently held SLIM-Nielsen People’s Awards organised by the Sri Lanka Institute of Marketing (SLIM) and the Nielsen Company. Consumers also voted Dialog as the Internet Service Provider of the Year for the third year in succession.

At an entity level, Dialog Axiata PLC (“the Company”) featuring the Mobile, International and Tele-Infrastructure segments of the Group portfolio continued to contribute a major share of Group revenue (83%) and Group EBITDA (85%). On the back of its Mobile subscriber base of over 9.8Mn citizens, Company revenue for Q1 2015 grew by 4% YoY to be recorded at Rs14.7Bn. Company Revenue remained stable on a QoQ basis.

Underpinned by the afore-mentioned operating cost efficiencies, Company EBITDA recorded a growth of 8% QoQ to reach Rs5.1Bn for Q1 2015, translating to an EBITDA margin of 34.4%. Company EBITDA increased by 21% compared to the corresponding period in 2014. On the backdrop of strong performance in EBITDA, Company NPAT for Q1 2015 was recorded at Rs1.9Bn, an increase of 26% QoQ and 32% YoY.

Dialog Television (DTV), the Digital Pay Television business of the Group continued its positive growth momentum, recording a revenue growth of 36% YoY to reach Rs1.5Bn for Q1 2015. DTV EBITDA was recorded at Rs314Mn for the same period, an improvement of 21% YoY driven by strong revenue growth. Downstream of healthy EBITDA performance, Net Profit for Q1 2015 was recorded at Rs139Mn, representing an increase of 5% YoY. DTV’s Pay TV subscriber base surpassed the 500,000 milestone to reach 504,000 as at end of March 2015.

Dialog Broadband Networks (DBN) featuring the Group’s Fixed Telecommunications and Broadband Business recorded a revenue of Rs1.7Bn for Q1 2015, representing an increase of 18% YoY. On the backdrop of strong revenue growth and operating cost improvements, YoY EBITDA increased significantly by 142% to be recorded at Rs600Mn for Q1 2015. Accordingly Net Loss for the quarter reduced to Rs80Mn compared to a Net Loss of Rs311Mn recorded in the corresponding period in 2014.

Group capital expenditure for Q1 2015 amounted to Rs2.2Bn. Capital expenditure was directed in the main towards investments in the expansion and modernisation of 2G, 3G and 4G networks and on-going large scale initiatives related to the Group’s Optical Fibre Network (OFN) and Bay of Bengal Gateway (BBG) Sub-Marine Cable project.

Group Free Cash Flow (FCF) was recorded at Rs3.4Bn for Q1 2015 on the back of improved EBITDA and lower capital expenditure. The Group continued to exhibit a structurally robust balance sheet with the Net Debt to EBITDA ratio being recorded at 0.7x as at end of March 2015.