Dialog consolidates performance with a Net Profit of Rs2.5Bn in 1H 2013

Dialog Axiata PLC announced, Friday 2nd August 2013, its consolidated financial results for the six months ended 30th June 2013. 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 recorded strong growth in revenue across all segments to reach Rs15.6Bn in Q2 2013 and Rs30.9Bn for 1H 2013 respectively, representing an increase of 3% Quarter On Quarter (“QoQ”) and 15% Year to Date (“YTD”). Group EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) increased by 1% QoQ to be recorded at Rs5.05Bn in Q2 2013. The performance of Q1 2013 is inclusive of the positive impact of a TDC (Telecommunications Development Charge) refund of Rs429Mn. Group EBITDA for 1H 2013 was posted at Rs10.0Bn up 9% YTD, yielding an EBITDA margin of 33%.

Non-Operational performance below EBITDA was characterised by non-cash translational foreign exchange losses amounting to Rs856Mn for Q2 2013 following the depreciation of the SLR relative to the USD by 2.8% QoQ. Inclusive of the said non-cash translational foreign exchange loss, Group Net profit for Q2 2013 was posted at Rs950Mn exhibiting a contraction by 40% QoQ. Group Net Profit for 1H 2013 was recorded at Rs2.5Bn, compared to a net profit of Rs349Mn in the corresponding period in 2012 which was similarly impacted by an exceptional non-cash translational foreign exchange loss of Rs2.9Bn. Group NPAT post normalisation for the non-cash foreign exchange loss was recorded at Rs1.8Bn and Rs3.4Bn for Q2 2013 and 1H 2013 respectively.

Dialog Axiata PLC (“the Company”) featuring the Mobile, International and Tele-Infrastructure segments of the Group portfolio continued to contribute a major share (87%) of Group Revenue and (88%) of Group EBITDA. Underpinned by the contribution from its 8 Million strong Mobile subscriber base, Company Revenue grew by 3% QoQ to reach Rs13.7Bn, with revenue for 1H 2013 being recorded at Rs27.1Bn, up 13% relative to 1H 2012. During Q2 2013, the company earned the distinction of becoming the first operator in South Asia to launch 4G FD-LTE High Speed Mobile broadband services.

Company EBITDA for Q2 2013 reached Rs4.4Bn representing stable performance in accounting terms and substantial growth on normalised basis relative to the previous quarter during which a TDC (Telecommunications Development Charge) refund of Rs404Mn was recognised. Accordingly Company EBITDA increased by 8% YTD to record at Rs8.8Bn for 1H 2013. Company NPAT was impacted by non-cash translational Foreign Exchange Losses as alluded to previously in the context of Group performance. Company NPAT for the Quarter decreased by 42% QoQ to reach Rs985Mn. Company NPAT for 1H 2013, was recorded at Rs2.7Bn compared to a NPAT of Rs451Mn in the corresponding period in 2012. Following the expiry of its 15 year tax holiday at the end of FY 2012, the Company provided for Income Tax based on 2% of revenue amounting to Rs275Mn in Q2 2013 and Rs552Mn in 1H 2013 respectively.

Dialog Television (DTV) the Digital Pay Television business of the Dialog Group continued its positive performance trajectory to reach a revenue figure of Rs1.7Bn for 1H 2013, exhibiting growth of 21% on a YTD basis. EBITDA for the same period was recorded at Rs298Mn exhibiting a contraction of 23% YTD. EBITDA contraction resulted in the main from cost expansion associated with enhancements effected to the company’s service offering including but not limited to the launch of HD services, expansion of channel genres and the launch of prepaid services. Performance for 1H 2013 was also impacted by a one-off provision of Rs33Mn made on account of unrecoverable input VAT. Accordingly DTV Net Profit for 1H 2013 contracted by 91% on an YTD basis to be recorded at Rs10Mn. The company’s Pay TV subscriber base grew by over 49,000 subscribers YoY to be recorded at 288,000 as at end Q2 2013.

Dialog Broadband Networks (DBN) encompassing the Group’s Fixed Telecommunications Business recorded a significant revenue increase of 38% YTD driven by strong growth in organic revenues as well as from the consolidation of Suntel Ltd. Revenue was recorded at Rs2.9Bn for 1H 2013. Aided by the healthy revenue growth and synergies achieved through the DBN-Suntel amalgamation, EBITDA for 1H 2013 reached Rs866Mn, an improvement of 35% YTD. DBN NPAT for 1H 2013 was recorded at negative Rs97Mn representing a significant improvement of 48% compared to the figure of negative Rs186Mn posted for the corresponding period in 2012.

DBN secured the distinction of launching the country’s first 4G LTE service for Home and Enterprise Customers in December 2012. DBN’s Fixed TD-LTE 4G high speed broadband services operates in the 2.3 GHz frequency band. In May 2013 DBN, entered in to a Share Purchase Agreement with the shareholders of Sky Television and Radio Network (Private) Limited (“Sky”) for the acquisition of 100% of the ordinary shares in issue of Sky at a consideration of Rs800Mn. Sky is a licensed Pay Television Operator in possession of spectrum resources in the 2.3GHz spectrum band. The acquisition of the additional spectrum resource will enable DBN to enhance its Fixed 4G-LTE services in terms of capacity, burst speeds and bandwidth delivered to Sri Lankan homes and enterprises. Following the completion of the acquisition, the amalgamation of Sky with DBN has been completed with effect from 03 July 2013 and the assets, liabilities and operations of Sky in their entirety have been since subsumed by DBN.

In line with the Group continuing to make aggressive strategic investments in High Speed Mobile and Fixed Broadband infrastructure and spectrum, capital expenditure for 1H 2013 increased by over 2 fold on a YTD basis, to reach Rs14.3Bn. Group capital expenditure for Q2 2013 included strategic investments in spectrum assets featuring the acquisition of Spectrum for Mobile 4G-LTE services from the TRCSL and the payment of spectrum re-farming fees to enable the conversion of Spectrum amalgamated through the acquisition of Sky TV for the purpose of providing fixed 4G-LTE services. Spectrum related investments totaled to Rs5.2Bn. On the back of significantly higher Capital expenditure, the Group recorded a negative Free Cash Flow (FCF) of Rs4.3Bn for 1H 2013. Notwithstanding the expansion of capital investments, the Group’s Net debt to EBITDA ratio remained at a modest level of 0.99x as at end of June 2013, demonstrating the strength and robustness of the Group’s balance sheet to meet the ambitious expansion programmes centered on the development of next generation high speed broadband infrastructures.