Dialog dials top line growth in 2Q; forex losses cut profit

Dialog Axiata Plc yesterday announced consolidated financial results for the six months ended 30 June 2012.

The Group demonstrated robust revenue growth across mobile, international, digital pay television, tele-infrastructure and fixed line businesses during the second quarter to record consolidated revenue of Rs. 14.1 b for the quarter and Rs. 27 b for the first half of 2012, translating to QoQ and YoY growth of 10% and 23% respectively.

Group EBITDA for Q2 2012 was recorded at Rs 4.7Bn up 4% QoQ. Group EBITDA for the first half of 2012 was recorded at Rs. 9.2 b, a significant increase of 25% relative to the corresponding period in 2011. Group EBITDA Margin for 1H 2012 remained stable on YoY basis at 34%.



Performance below EBITDA continued to be negatively impacted by the devaluation of the rupee, which depreciated by 4.6% during the course of Q2 resulting in a non-cash translational foreign exchange loss of Rs. 865 million in the quarter.

Compounded by a 12.4% devaluation of the SLR in the first quarter, total non-cash translational foreign exchange loss for the first half of 2012 was recorded at Rs. 2.9 b.

Notwithstanding the negative impacts arising from the devaluation of the rupee, strong EBITDA performance bolstered Group NPAT to a healthy level of Rs. 879 m in Q2, reversing the negative NPAT of Rs. 531 m in the first quarter. Group NPAT for the first half was accordingly recorded at Rs. 349 m, an 85% decrease compared to the corresponding period in 2011.

Group NPAT post normalisation for exceptional charges (consisting of the non-cash foreign exchange loss of Rs. 2.9 b, and costs related to the Suntel acquisition amounting to Rs. 343 m), is recorded at Rs. 3.6 b, demonstrating a significant enhancement in normalised NPAT performance of 59% YoY.

Dialog Axiata Group comprises subsidiaries Dialog Broadband Networks (Pvt) Ltd. (DBN), and Dialog Television (Pvt) Ltd. (DTV). Suntel Limited was amalgamated with DBN, in accordance with the provisions of the Companies Act No. 07 of 2007 with effect from 15 May 2012. Accordingly, operational performance of Suntel Ltd. (which ceased to exist as an entity with effect from 15 May) has been fully subsumed and consolidated within the financial statements of DBN.

Dialog Axiata PLC featuring the mobile, international and tele-infrastructure segments of the Group portfolio continued to contribute a major share (88%) of Group revenue and (89%) of Group EBITDA.

On the strength of a 7.4 million strong mobile subscriber base, Company revenue grew by 3% QoQ to reach Rs. 12.2 b with revenue for 1H 2012 being recorded at Rs. 24 b, up 19% relative to the corresponding period in 2011.

Notwithstanding aggressive revenue performance, Company EBITDA contracted by 3% in the second quarter relative to the previous quarter due to the expansion of the Company’s operating cost base due in the main to inflation in energy and energy driven costs.

Company EBITDA for the first half of 2012 grew by 20% relative to the corresponding period in 2011 to be recorded at Rs. 8.2 b, featuring a 1H EBITDA margin of 34%.

Notwithstanding healthy performance in revenue and EBITDA, Company NPAT (as reflected in Group performance) was severely impacted by non-cash translational foreign exchange losses amounting to Rs. 2.9 b. Accordingly, NPAT for the first half of 2012 contracted by 83% YoY to be recorded at Rs. 451 m. Company NPAT however improved significantly on QoQ basis to be recorded at Rs. 857 m in contrast with the net loss of Rs. 407 m recorded in Q1 2012.

Company NPAT for 1H, normalised for non-cash translational foreign exchange losses however, grew 36% relative to the corresponding period in 2011 to be recorded at Rs. 3.7 b.

DTV consolidated the growth momentum of previous quarters recording a revenue growth of 28% YoY and 11% QoQ respectively. DTV revenue for the first half of 2012 was recorded at Rs. 1.4 b. On the backdrop of aggressive revenue performance, DTV EBITDA was recorded at Rs. 388 m, demonstrating growth of 50% YoY and 14% QoQ.

Growth in EBITDA translated to the consolidation of DTV’s positive performance trajectory in terms of bottom line profitability resulting in NPAT for 1H 2012 being recorded at Rs. 109 m relative to a net loss of Rs. 14 m posted in the corresponding period in 2011.

DBN, featuring the Group’s fixed telecommunications and broadband businesses, witnessed a significant expansion in scale as well as in consolidated operating performance following the merger and amalgamation of Suntel Limited.

DBN revenue for 1H 2012 was recorded at Rs. 2.2 b, demonstrating growth of 90% YoY and 162% QoQ. DBN’s EBITDA remained positive for the ninth consecutive quarter with 1H 2012 EBITDA being recorded at Rs. 641 m, an increase of over 100% on YoY as well as QoQ basis.

On the backdrop of strong revenue and EBITDA, DBN demonstrated a decrease in net loss of 54% compared to 1H 2011, with NPAT being recorded at negative Rs. 186 m for the first half of 2012 relative to negative Rs. 402 m in 1H 2011. NPAT performance also improved significantly on QoQ basis, with Q2 NPAT being recorded at negative Rs. 39 m relative to negative Rs. 147 m in Q1 2012.

Group capital expenditure during 1H 2012 amounted to Rs. 5 b. Capital expenditure was directed in the main towards strategic investments in high speed mobile broadband and Optical Fibre Network (OFN) expansion projects, which will further strengthen the Group’s coverage and quality leadership position through the upgrade of its high speed broadband infrastructure.

The Group continued to record positive Free Cash Flows (FCF) for the 10th consecutive quarter, with Q2 2012 FCF being recorded at Rs. 1.4 b. In line with the generation of healthy free cash flows, Dialog Group continued to maintain a structurally robust balance sheet with the Group’s net debt to EBITDA ratio improving from 1.05x in Q2 2011 to 0.90x as at end of Q2 2012.