Dialog Reports Stable Q1 Marred by Forex Losses

• Q1 20 Revenue and EBITDA Stable YoY; PAT Impacted by Non-Cash Translational Forex Losses
• Direct and Indirect Taxes, Fees and Levies to GoSL - Rs4.5Bn
• Capex Investments managed at Rs2.0Bn during the Quarter with Prioritisations. Accordingly, OFCF Improved to Rs9Bn for Q1 2020
• Support Extended in Dealing with Covid-19 to Our Customers, Government and Community

Dialog Axiata PLC announced, Wednesday 13th May 2020, its consolidated financial results for the three months ended 31st March 2020. Financial results included those of Dialog Axiata PLC (the “Company”) and of the Dialog Axiata Group (the “Group”).

The Dialog Group’s all key business segments, viz. Mobile, International, Tele-infrastructure, Digital Pay Television and Fixed Line contributed to record a consolidated revenue of Rs29.2Bn for Q1 2020, demonstrating a marginal decline of 1% Quarter-on-Quarter (“QoQ”), resulting from challenges to core revenue growth, albeit growing 1% Year-on-Year (“YoY”). Underpinned by strong cost optimisation initiatives, Group Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) grew 4% QoQ and 1% YoY to record at Rs12.2Bn for Q1 2020. The EBITDA margin was accordingly recorded at 41.6%, a 2.3pp QoQ improvement for Q1 2020.

The Group NPAT declined 39% QoQ and 69% YoY to reach Rs1.5Bn for Q1 2020, mainly resulting from the non-cash translational forex losses. The Sri Lankan Rupee (“LKR”) depreciated against the United States Dollar (“USD”) by 4.6% in Q1 2020 versus an appreciation of 3.6% and 0.1% in Q1 2019 and Q4 2019 respectively. Normalised for the non-cash translational forex losses/gains NPAT was recorded at Rs3.1Bn, up 31% QoQ albeit declining 13% YoY due to increase in depreciation and transactional forex impact.

Dialog Group continued to be a significant contributor to state revenues, remitting a total of Rs4.5Bn to the Government of Sri Lanka (“GoSL”) during Q1 2020. Total remittances included Direct Taxes and Levies amounting to Rs1.4Bn as well as Rs3.1Bn in Consumption Taxes collected on behalf of the GoSL.

The Group capital expenditure was prioritised in Q1 2020, amid Covid-19 outbreak and associated challenges, which recorded at Rs2.0Bn representing a capex to revenue ratio of 7%. 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 Rs9.0Bn in Q1 2020. The Group continued to exhibit a low geared balance sheet with the Net Debt to EBITDA ratio being maintained at 0.81x as at end of March 2020.

At an entity level, Dialog Axiata PLC (“the Company”) continued to contribute a major share of Group Revenue (70%) and Group EBITDA (75%). The Company further consolidated its market leadership position in the Sri Lankan mobile space to reach 15.0Mn subscribers during the quarter. Company Revenue was impacted by slowdown in core revenues and reached Rs20.5Bn for Q1 2020. The revenue remained stable QoQ and declined 2% YoY due to ongoing shift in consumption behaviour from Voice to Data. Underpinned by cost optimisations, Company EBITDA for Q1 2020 was recorded at Rs9.2Bn, an increase of 4% QoQ and a decline of 2% YoY amid drop in revenue and increased bad debt provisioning. Company NPAT was recorded at Rs1.6Bn for Q1 2020 declining 45% QoQ and 65% YoY due to the impact from non-cash translational forex losses. Normalised for same, Company NPAT recorded growth of 19% QoQ albeit declining 4% YoY.

Dialog Television (“DTV”), continued to consolidate its leadership position in the Digital Pay Television space with a subscriber growth of 25% YoY to reach 1.5Mn as at end of March 2020. DTV Revenue remained stable QoQ and was up 8% YoY, amid growing subscription revenue, to reach Rs2.2Bn. DTV EBITDA was recorded at Rs676Mn for Q1 2020 increasing 43% YoY due to strong cost focus. However, DTV’s reported Net Loss increased to Rs227Mn for Q1 2020 relative to a Net Loss of Rs166Mn for Q1 2019 resulting from the forex losses.

Dialog Broadband Networks (“DBN”) featuring the Group’s Fixed Telecommunications and Broadband Business recorded revenue of Rs7.4Bn for Q1 2020, down 2% QoQ and up 10% YoY. The top line movement was mainly resulting from the movement in wholesale revenue. The EBITDA for DBN grew 4% YoY to record Rs2.5Bn in Q1 2020. DBN NPAT however declined 43% YoY to reach Rs273Mn due to increased depreciation and finance cost.

The outbreak of COVID-19 in Sri Lanka resulted in the country being placed under mandatory lockdown/curfew from 20th March 2020. The COVID-19 outbreak and the associated developments impacted the business on multiple fronts including distribution, network rollout, collections and working capital management. The company transitioned to Work from Home (“WFH”) seamlessly and enabled all staff to continue operations using digital tools and platforms through the ongoing digital transformation program initiated in 2017. The lockdown and shift to WFH resulted in a significant surge in the traffic carried on the network. Despite the challenges, the Company was able to manage the additional load on the network with minimal impact on user experience. The continued lockdown and credit extensions to keep our subscribers connected, significantly impacted cash collections during the lockdown period, on both retail and enterprise fronts, leading to pressure on working capital. To mitigate the impact of lower collections during this period, Dialog Group has undertaken many initiatives to maintain liquidity and business operations uninterrupted. In addition, the Group has resorted to aggressive cost rescaling and rationalisation initiatives both in operating and capital expenditure to soften the impact on the business.

Please refer below link for further details on the impact and response of Dialog on Covid19 pandemic:
https://cdn.cse.lk/cmt/announcement_portal_prod/CSE-07-2020_Disclosure%20on%20COVID 19%20Impact_2511862106092116.pdf

More details are available at the following links:
Dialog Axiata PLC direct weblink:
https://www.dialog.lk/quarterly-reports

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