Dialog NPAT Dips 11% Due to Forex Loss, Despite Robust Revenue Growth

Dialog Axiata PLC announced, Wednesday 11th November 2015, its consolidated financial results for the nine months ended 30th September 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 strong growth momentum across Mobile, Digital Pay Television, Tele-infrastructure and Fixed Line businesses to record a consolidated revenue of Rs18.8Bn for Q3 2015 and Rs53.9Bn for the nine months ended 30th September 2015 respectively, demonstrating a robust growth of 6% Quarter on Quarter (“QoQ”) and 8% Year to Date (“YTD”). On the backdrop of strong revenue growth, Group EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) grew by 7% QoQ to be recorded at Rs6.3Bn for Q3 2015. Group EBITDA for the first nine months of 2015 was recorded at Rs18.2Bn, a significant increase of 18% relative to the corresponding period in 2014 translating to an EBITDA margin of 34%. Notwithstanding robust growth in all operational performance metrics, the Group was significantly impacted by non-cash, translational foreign exchange losses to the value of Rs1.4Bn during the quarter, accruing from the depreciation of the LKR relative to the USD by 5.5% QoQ. Inclusive of the recognition of the said non-cash translational foreign exchange losses, Group NPAT was posted at Rs679Mn for Q3 2015 and Rs4.6Bn for the first nine months of the year, exhibiting a contraction of 64% QoQ and 1% YTD. Group NPAT post normalisation for the non-cash translational foreign exchange losses was recorded at Rs2.1Bn for Q3 2015 and Rs6.3Bn for the nine months ended 30th September 2015 respectively, representing an increase of 11% QoQ and 40% YTD.

The Group remitted a total of Rs18.5Bn to the Government of Sri Lanka (GoSL) during the nine months ended 30th September 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 Group totalled to Rs7.6Bn inclusive of income tax. The Group additionally collected consumption taxes, totalling to Rs10.9Bn on behalf of the GoSL for the first nine months of 2015, comprising in the main of Telecom Levy collections amounting to Rs8.6Bn.

On 21st October 2015, the Dialog Group entered into agreements with the Board of Investment of Sri Lanka (BOI) for the investment of an additional sum of USD175Mn (Rs24.6Bn) in Sri Lanka’s ICT Infrastructure. The investment agreements span a broad scope of ICT infrastructure development by the Dialog Group, encompassing the expansion of 3rd Generation and 4th Generation High Speed Broadband Services alongside further development of the Group’s Fibre Optic Transmission network, International Telecommunications network, and Digital Satellite Television infrastructure. The Dialog Group will also direct targeted investments towards the expansion of its Digital Services portfolio spanning ventures and initiatives in Digital Payment, Commerce, Education and Health. The additional investment pledged through the agreements entered in to with the BOI will take the total investment of the Dialog Group to USD1.96Bn (Rs206.0Bn), the highest among all Foreign Direct Investments (FDI) operating under the aegis of the BOI.

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 (84%) and Group EBITDA (85%). On the back of its Mobile subscriber base of over 10.3Mn, Company revenue for Q3 2015 grew by 6% QoQ to be recorded at Rs16.1Bn. Revenue for the nine months ended 30th September 2015 was recorded at Rs45.9Bn, up 6% relative to the corresponding period in 2014. Underpinned by strong revenue performance Company EBITDA recorded a strong growth of 14% QoQ to reach Rs5.6Bn for Q3 2015. Company EBITDA for the nine months ended 30th September 2015 grew by 13% YTD to be recorded at Rs15.5Bn, translating to an EBITDA margin of 35%. Notwithstanding healthy performance in Revenue and EBITDA, Company NPAT was impacted by non-cash translational foreign exchange losses accruing from the 5.5% depreciation of the LKR amounting to Rs1.2Bn, as alluded to earlier in the context of Group performance. Accordingly Company NPAT contracted by 43% QoQ and 11% YTD to be recorded at Rs1.1Bn for Q3 2015 and Rs4.8Bn for the first nine months of the year. On normalising for the exceptional foreign exchange losses, Company NPAT was recorded at Rs2.3Bn for Q3 2015 and Rs6.4Bn for the nine months ended 30th September 2015 respectively, representing an increase of 24% QoQ and 20% YTD.

Dialog Television (DTV), the Digital Pay Television business of the Group continued its positive growth momentum, recording a revenue growth of 25% YTD to reach Rs4.3Bn for the nine months ended 30th September 2015. DTV’s Pay TV subscriber base grew by over 189,000 subscribers YoY to record a base of 600,000 as at end Q3 2015. DTV engaged in an aggressive service and product enhancement programme during 2015 featuring the expansion of channel genres and the launch of new prepaid product offerings. Cost expansion arising from aggressive customer acquisition alongside service and product expansion activities, resulted in a medium term contraction in DTV’s EBITDA by 15% on a YTD basis. DTV EBITDA for the nine months ended 30th September 2015 was recorded at Rs586Mn. The contraction of DTV EBITDA translated to an equivalent negative impact on NPAT leading to a Net Loss of Rs130Mn for the first nine months of the year compared to a Net Profit of Rs252Mn in the corresponding period in 2014.

Dialog Broadband Networks (DBN) featuring the Group’s Fixed Telecommunications and Broadband Business recorded revenue of Rs5.3Bn for the first nine months of the year, representing an increase of 19% YTD. On the backdrop of strong revenue growth and operating cost improvements, DBN EBITDA increased significantly by 126% to be recorded at Rs2.1Bn for the nine months ended 30th September 2015. Accordingly, Net Loss for the first nine months of the year reduced to Rs53Mn compared to a Net Loss of Rs924Mn recorded in the corresponding period in 2014.

Group capital expenditure for the nine months ended 30th September 2015 was recorded at Rs9.7Bn. Capital expenditure was directed in the main towards investments in high speed broadband infrastructure alongside the extension of the Group’s Optical Fibre Network to further strengthen the Group’s leadership in Sri Lanka’s ICT sector. Group Operating Free Cash Flow (OFCF) was recorded at Rs7.2Bn for the first nine months of 2015 on the back of strong EBITDA performance and calibrated capital expenditure. The Group continued to exhibit a structurally robust balance sheet with the Net Debt to EBITDA ratio being maintained at 0.74x as at end of September 2015.