Dialog NPAT dips 3% YTD Due to Forex Loss Despite Strong Revenue Growth

Dialog Axiata PLC announced its consolidated financial results for the nine months ended 30th September 2018. 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”), Dialog Television (Pvt) Ltd (“DTV”), Digital Holdings Lanka (Pvt) Ltd (“DHL”) and Dialog Finance PLC (“DFP”).

The Group continued its growth momentum across Mobile, Fixed Line, Digital Pay Television and Tele-infrastructure businesses to record a consolidated revenue of Rs80.6Bn for the nine months ended 30th September 2018, demonstrating strong growth of 16% Year-to-Date (“YTD”). The Group revenue grew 5% Quarter-on-Quarter (“QoQ”) and 15% Year-on-Year (“YoY”) to reach Rs28.0Bn for Q3 2018. On the backdrop of revenue growth and cost rescaling initiatives, Group Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) grew 26% YTD to reach Rs31.2Bn for the first nine months of 2018. The EBITDA was recorded at Rs10.8Bn for Q3 2018, up 5% QoQ and 15% YoY. The Group EBITDA Margin was accordingly recorded at 38.6% on YTD basis.

Notwithstanding robust growth in all operational performance metrics, the Group was significantly impacted by non-cash, translational foreign exchange losses to the value of Rs1.8Bn during the quarter, accruing from the depreciation of the LKR relative to the USD by 6.8% QoQ. Inclusive of the recognition of the said non-cash translational foreign exchange losses, Group NPAT was posted at Rs7.4Bn for the first nine months of the year and Rs1.7Bn for Q3 2018, exhibiting a contraction of 3% YTD and 40% QoQ. Group NPAT post normalisation for the non-cash translational foreign exchange losses was recorded at Rs9.9Bn for the nine months ended 30th September 2018 and Rs3.5Bn for Q3 2018, representing an increase of 9% QoQ and 23% YTD respectively.

Dialog Group continued to be a significant contributor to state revenues, remitting a total of Rs25.9Bn to the Government of Sri Lanka (GoSL) during the nine months ended 30th September 2018. Total remittances included Direct Taxes and Levies amounting to Rs6.3Bn and Rs19.6Bn in Consumption Taxes collected on behalf of the GoSL.

Group capital expenditure for the nine months ended 30th September 2018 was recorded at Rs18.3Bn representing a capex to revenue ratio of 23%. Capital expenditure was directed in the main towards Public investments in High-Speed Broadband infrastructure to further strengthen the Group’s position in Sri Lanka’s Broadband sector. Group generated Rs.1.9Bn in operating free Cash Flow (“OFCF”) in Q3 2018 and the OFCF was recorded at Rs7.1Bn for the first nine months of 2018. Group Net Debt to EBITDA ratio remained healthy at 0.90 times as at end of September 2018.

At an entity level, Dialog Axiata PLC (the “Company”) continued to contribute a major share of Group Revenue (78%) and Group EBITDA (79%). On the back of its Mobile customer base of over 13.4Mn subscribers, Company Revenue grew by 10% YTD to reach Rs63.2Bn for the nine months ended 30th September 2018 while Revenue remained flat on QoQ basis to be recorded at Rs21.2Bn for Q3 2018, contributed by 3% QoQ growth in core mobile revenues and 22% QoQ contraction in international revenues. Underpinned by strong focus on cost rescaling initiatives, Company EBITDA was recorded at Rs24.6Bn for the first nine months of 2018 and Rs8.7Bn for Q3 2018, representing an increase of 26% YTD and 6% QoQ respectively.

During the quarter ended 30th September 2018, the Telecommunications Regulatory Commission of Sri Lanka (“TRCSL”) announced the abolition of floor rate (Rs.1.50 per minute) applicable on mobile voice services. However, all tariff plans require the approval of the TRCSL and such tariff approval shall be based on a cost-based approach, similar to that followed for data pricing.

The Company NPAT was impacted by non-cash transitional foreign exchange losses as alluded to earlier, demonstrating a contraction of 6% YTD and 33% QoQ to be recorded at Rs7.0Bn for the nine months ended 30th September 2018 and Rs1.8Bn for Q3 2018. Normalised for the non-cash translational foreign exchange losses, Company NPAT recorded Rs9.3Bn for the first nine months of 2018 and Rs3.4Bn for Q3 2018 to record a growth of 20% YTD and 13% QoQ.

Dialog Television (“DTV”), continued to consolidate its leadership position in the Digital Pay Television space with a subscriber growth of 15% YoY by end Q3 2018. Post normalization for SLFRS 15 impact, DTV Revenue grew by 8% YTD to be recorded at Rs4.9Bn for the nine months ended 30th September 2018. Normalised DTV EBITDA declined 4% YTD to reach Rs360Mn for the first nine months of 2018 as a result of expansion in foreign currency denominated input costs. DTV Net Loss declined to Rs570Mn for the nine months ended 30th September 2018 relative to a Net Loss of Rs633Mn for the corresponding period in 2017.

Dialog Broadband Networks (“DBN”) featuring the Group’s Fixed Telecommunications and Broadband Business recorded revenue of Rs11.7bn for the nine months ended 30th September 2018, representing an increase of 28% YTD. Downstream of revenue performance, DBN EBITDA recorded a growth of 25% YTD to reach Rs6.3Bn for the nine months ended 30th September 2018. In line with performance dynamics at EBITDA level, DBN NPAT grew 11% YTD to record at Rs1.3Bn for the nine months ended 30th September 2018.

More details are available at the following links:

Dialog Axiata PLC direct weblink: www.dialog.lk/quarterly-reports

CSE direct weblink: https://www.cse.lk/home/company-info/DIAL.N0000/financial