Currency depreciation, high interest rates hurt bottom line
Sri Lanka Telecom (SLT), the pioneer telecommunication services provider in Sri Lanka, released its group and company financial results for the six months ended June 30, 2012, recording a Rs.3.36 billion group operating profit, a growth of 15% year-on-year (YoY). Group revenue has increased to Rs.27.50 billion, an increase of 11% YoY. Depreciation of the Sri Lankan rupee continued to have a significant adverse impact on group profit before tax (PBT) and PAT due to US$ exposure in the group’s mobile subsidiary Mobitel. With the inclusion of the translation impact of the exchange loss, PBT at group level declined by 37% to Rs.2.05 billion, while profit after tax (PAT) declined by 56% to Rs.1.06 billion. However, once normalized (without exchange loss on translation) the group has reported an impressive PBT of Rs.3.95 billion, an increase of 24% and PAT of Rs.2.97 billion, a growth of 26% YoY.
During the 1st half 2012, the SLT group has invested Rs.7.9 billion in strategically important areas including fixed and mobile broadband, IPTV, mobile network expansion and in particular the i-Sri Lanka programme to ensure high speed broadband connectivity for Mega Line fixed customers. These investments enhance the group footprint and capabilities in the telecommunication market both locally and internationally.
Nimal Welgama, Chairman of Sri Lanka Telecom (SLT) commenting on 1 H 2012 results said, “As the country’s national telecommunications service provider with an unmatched service portfolio, SLT continues to take the lead role in advancing the telecommunication industry in Sri Lanka to the next level. SLT has powered the economy by boosting the telecommunication sector over the last few decades and is poised to do so in the future with the group’s vision aligned with the national vision for an IT enabled country. At operating level, the SLT group has delivered solid financial performance for the 1st half 2012 and I am confident that the group will deliver strong operating results for the financial year 2012.”
Parent company SLT has recorded a revenue growth of 7.3 % to reach Rs.17.15 billion, the highest 1H revenue growth since 2006. This revenue growth has been driven by non-traditional revenue streams such as Fixed Broadband, PEOTV, Wholesale, Enterprise and International. PBT of SLT company increased by 16% to Rs.2.73 billion while PAT increased by 16% to Rs.2.04 billion.
Company EBITDA margin has reduced to 32% from 35% in the corresponding period in 2011, mainly driven by increases in international telecommunication levy, energy costs, forex impact on direct and operating costs and domestic expense increases.
Mobitel, the group’s flagship subsidiary, saw its 1H revenue grow by 12% to Rs.11.75 billion. EBITDA margin increased to 33% from 31% in the corresponding period in 2011, driven by the revenue growth and cost optimization initiatives. Operating profits increased to Rs.1.42 billion, an impressive growth of 27%. However, exchange loss of Rs.1.99 billion on translation triggered a loss after tax of Rs.987 million for 1H 2012. Normalized to exclude exchange loss, Mobitel profit before tax of Rs.1.27 billion and profit after tax of Rs.1 billion increased by 45% and 55% respectively YoY.