Dialog ends 2011 ringing Rs. 5.4 b net profit

Dialog Axiata Plc has ended the 2011 financial year ringing a Rs. 5.4 billion profit, up by 6% over the previous year.

The full year results were supported by a Group net profit of Rs. 1.4 billion in the fourth quarter, up by 2% from a year earlier.

The Group recorded strong revenue growth across all segments to reach Rs. 11.9 billion for the fourth quarter, a QoQ growth of 3%. Group revenue grew 10% YoY, reaching Rs. 45.6 billion for FY 2011.

Revenue growth in combine with continued operational improvements led to the Group posting a healthy 9% QoQ growth in EBITDA with Q4 2011 EBITDA being recorded at Rs. 4.7 billion, inclusive of Rs. 311 million accruing from the recognition of Telecommunication Development Fund reimbursement from the TRCSL.

The Group EBITDA margin grew by two percentage points on a QoQ comparison to reach 40% for the fourth quarter. Group EBITDA for the FY 2011 was recorded at Rs. 16.4 billion up 9% compared to the corresponding period in 2010 and featured an EBITDA margin of 36%.

Growth in Group profitability was achieved on the backdrop of substantial foreign exchange (translational/non-cash) losses totalling to Rs. 638 million, resulting from the devaluation of the Sri Lanka Rupee in the fourth quarter.

Financial outcomes at group level were driven by strong operational performance across the Company and its subsidiaries.

The Company, featuring mobile, international and tele-infrastructure businesses, continued to leverage its market leading position to deliver strong growth in revenue and profitability.

The Company recorded revenues of Rs. 10.9 billion and Rs. 41.8 billion for Q4 and FY 2011 respectively. Company revenue grew by 2% QoQ and 10% YoY. Costs at company level grew by 13% YoY.

Cost expansion is attributable in the main to revenue linked costs associated with International origination, roaming, domestic interconnection charges and escalation in network operating costs in line with the aggressive expansion of the Company’s 2G and 3G infrastructure footprint.

Cost escalation was further influenced by the impact of non-recoverable VAT expenditure, in light of changes in the VAT environment applicable to the telecom industry since January 2011.

Notwithstanding revenue linked cost expansion, EBITDA at company level increased by 6% QoQ (inclusive of the recognition of TDF reimbursement) to reach Rs. 4.3 billion in Q4 2011. The Company’s EBITDA margin improved by two percentage points QoQ to reach 40%.

Company EBITDA was recorded at Rs 15.2 billion for the FY 2011 featuring an EBITDA margin of 36% for the full year. On the backdrop of robust EBITDA performance, Company PAT was recorded at Rs. 1.7 billion in Q4 2011.

Notwithstanding the growth in EBITDA performance, Company PAT (recorded at Rs. 6.3 billion) contracted by 4% relative to the corresponding period in 2010. PAT contraction on an YoY basis was due in the main to a Foreign Exchange (translational/noncash) loss of Rs. 502 million in contrast with the foreign exchange gain of Rs. 686 million recorded in the previous year, reflecting an adverse change of Rs. 1.19 billion YoY with respect to foreign exchange translation recognition.

Dialog Television (DTV) continued its growth momentum, recording YoY revenue growth of 18% to reach Rs. 2.4 billion for FY 2011. EBITDA for Q4 2011 was posted at Rs. 197 million and Rs. 574 million for FY 2011, an improvement of 67% QoQ and 68% YoY respectively. DTV PAT crossed over in to positive terrain for the first time in Q4 2011, recoding a bottom line of Rs. 49 million for Q4 2011 and Rs. 26 million for FY 2011. PAT turnaround at DTV was underpinned by an aggressive increase in subscriber base and revenues.

Dialog Broadband Networks, featuring Dialog’s fixed telecommunications business, continued to consolidate its performance with revenue for the FY 2011 recorded at Rs. 2.4 billion a 1% growth YoY. DBN EBITDA was recorded at Rs. 209 million in Q4 2011 and Rs. 665 million for the FY 2011, a significant improvement of 36% QoQ and 133% YoY respectively.

Despite healthy EBITDA growth, PAT was recorded at negative Rs. 287 million in Q4 2011 down 12% QoQ, due in the main to the application of exceptional depreciation charges with respect to capital inventory applicable to the company’s WiMAX network. The said charges are in line with the WiMAX network being rendered fully depreciated by the end of FY 2011.

Notwithstanding the exception based contraction of net profitability position in the fourth quarter, PAT for the full year improved by 27% YoY albeit remaining dilutive to the Group at negative Rs. 945 million.

The Group continued to make aggressive investments towards expanding its nationwide ICT infrastructure footprint and the application of cutting edge technology across its mobile, fixed and broadband businesses. Group capital expenditure for the FY 2011 amounted to Rs. 8.7 billion.

Capital expenditure was directed in the main towards strategic investments in high speed mobile broadband and Optical Fibre Network (OFN) expansion projects, in addition to the aggressive expansion of its mobile telephony services to meet growth in subscriber demand across all provinces of the country.

On the backdrop of robust EBITDA performance, the Group continued to record positive free cash flows for the eighth consecutive quarter, with Q4 2011 FCF being recorded at Rs. 2.7 billion. 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 1.41x in 2010 to 0.78x as at end of 2011.

Taking into account the healthy cash position of the Group and investment requirements stemming from growth opportunities going forward, the Board of Directors of Dialog Axiata resolved to propose for consideration by the shareholders of the Company, a cash dividend to ordinary shareholders amounting to 25 cents (Rs. 0.25) per share totalling Rs. 2.0 billion.

The dividend, if approved by shareholders would translate to a payout of 39% of consolidated group profits after preference dividend for the FY 2011. The dividend so proposed will be considered for approval by the shareholders at the Annual General Meeting of the Company, the date pertaining to which would be notified in due course.