Dialog 3Q hindered by forex losses, subdued top line

Dialog Axiata PLC saw its September quarter (3Q19) earnings hit by forex losses and subdued top line growth as Sri Lanka recovers from the April 21 Easter Sunday attacks.

The earnings of the celco for the period under review fell 14 percent year-on-year (YoY) to Rs.1.5 billion on revenue of Rs.29.1 billion, up 4 percent YoY.

“Group revenue remained flat on a Quarter-on-Quarter (QoQ) basis to reach Rs.29.1 billion for 3Q19 mainly due to intense competition and gradual recovery in core revenues following the Easter Sunday incident,” Dialog Axiata said in an earnings release. 

Earnings per share for quarter weakened to 18 cents from 21 cents a year ago.

Dialog Axiata said the earnings were negatively impacted by non-cash translational forex losses resulting from the 3 percent depreciation of the Sri Lankan rupee against the US dollar for the quarter.“Normalised for the said non-cash translational forex losses NPAT was up 19 percent QoQ albeit declining 29 percent YoY,” the earnings release said.
The operating profit for the quarter under review fell to Rs.3.7 billion from Rs.4.6 billion a year ago amid rising operating costs.

Meanwhile, for the nine months ended September 30, 2019, Dialog Axiata group recorded earnings of Rs.1.03 per share or Rs.8.3 billion, an increase of 13 percent YoY.
The revenue for the period was Rs.87.1 billion, up from Rs.80.6 billion a year ago. 

The mobile telephony operations of the group recorded revenue of Rs.63.9 billion for the nine months, compared to Rs.65.9 billion reported for the same period last year. The operating profit of the segment also fell to Rs.11.3 billion from Rs.11.9 billion a year ago.

The fixed line telephony and broadband operations of the group generated revenue of Rs.20.6 billion for the nine months under review compared Rs.11.7 billion a year ago. The segment’s operating profit however was Rs.624.8 million compared to Rs.1.5 billion a year ago.
The pay TV operations of the group narrowed its losses to Rs.252 million from Rs.275 million a year ago on revenue of Rs.6.5 billion, up from Rs.5.5 billion a year ago. 
The group’s capital investment for the first nine months was recorded at Rs.13.9 billion representing a capex to revenue ratio of 16 percent. 
“Capital investment was directed towards revenue generating capacity enhancements in high-speed broadband infrastructure to further strengthen the group’s position in Sri Lanka’s broadband sector,” the earnings release said.

The group operating free cash flow (OFCF) was recorded at Rs.16.6 billion for the first nine months of 2019 up from Rs.8.1 billion recorded during the corresponding period in 2018. 
As a result, cash balance improved by Rs.3.1 billion as compared to 2018 year end. 

Dialog group continued to exhibit a low-geared balance sheet as the net debt to EBITDA ratio remained healthy at 0.79 times as at end of September 2019.
Dialog group also continued to be a significant contributor to State revenues, remitting a total of Rs.25.5 billion to the Government of Sri Lanka during the nine months ended September 30, 2019. 

Total public remittances included direct taxes and levies amounting to Rs.7.9 billion and Rs.17.6 billion in consumption taxes collected on behalf of 
the government. 

As at September 30, 2019, Dialog’s Malaysian parent, Axiata Investments (Labuan) Limited held 83.32 percent stake in Dialog Axiata while the State-controlled Employees’ Provident Fund held 2.92 percent stake being the second largest shareholder.