Dialog Axiata PLC announced, Friday 11th February 2011, its financial results for the year ended 31 December 2010. 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 delivered strong performance in terms of profitability, recording NPAT of Rs. 5.05Bn for FY 2010 a 141% increase year on year (YoY). The Group NPAT was driven by strong performance at the Company level, with Dialog Axiata PLC featuring the Group’s mobile business, posted a profit of Rs. 1.56Bn for Q4 and taking the full year profit to Rs. 6.55Bn, an increase of 171% relative to 2009. Performance during 2010 was underpinned by a healthy momentum in revenue growth, positive outcomes of strategic cost rescaling, balance sheet restructuring initiatives and consistent financial discipline across all aspects of the business.
Subsidiaries DTV and DBN registered gains YoY at both EBITDA and NPAT levels, demonstrating traction in terms of the Group’s Fixed Line, Broadband and Television businesses. Relative to 2009, EBITDA (positive) and NPAT (negative) improved by 243% and 80% for DTV and 169% and 50% for DBN respectively.
Dialog Group revenues were recorded at Rs. 41.42Bn for the year 2010, up 14% YoY and 2% Quarter on Quarter (QoQ). The Group EBITDA was recorded at Rs. 15.08Bn, up 55% YoY, and down by a marginal 2% on QoQ basis. The Group EBITDA margin improved by 9 percentage points YoY, to reach 36%. Underpinned by the positive EBITDA growth trajectory, the Group NPAT recorded a strong growth of 141% YoY. The Group NPAT for the 4th Quarter however displayed a 25% reduction when compared to Q3 2010, driven largely by higher depreciation and lower foreign exchange gain in Q4 2010.
Strong Growth in Mobile Business
The Company continued to leverage its market leading position within Sri Lanka’s mobile market to deliver strong growth in revenue and profitability. The Company recorded revenues of Rs. 9.89Bn and Rs. 37.95Bn for Q4 and FY 2010 respectively. The Company revenue grew by 14% compared to 2009 and 2% relative to the previous quarter. The Company’s revenue trajectory was driven by the growth in Mobile Voice/VAS, mobile broadband, Global and Tele-Infrastructure businesses.
The Company continued to extract positive outcomes from strategic cost rescaling initiatives. Operating costs (excluding depreciation and non-recurring charges for 2009) reduced by 8% in FY 2010, while remaining flat on QoQ basis. Operating cost improvements YoY were driven primarily by reductions in operational overheads and manpower related expenses.
Direct cost (excluding depreciation) grew by 9% YoY (6% when normalised for interconnect costs introduced in 2010) and 11% QoQ. Increase in direct cost was driven in the main by international origination costs and outbound roaming costs in tandem with revenue growth accruing from the corresponding lines of business.
On the backdrop of strong revenue growth and cost improvements, the Company EBITDA for 2010 grew by 43% YoY to reach Rs. 14.46Bn. The EBITDA margin expanded from 30% in 2009 to 38% in 2010 – an increase of 8 percentage points compared to 2009. EBITDA for Q4 2010 however reduced by 4% to Rs. 3.60Bn, in line with the increase in direct costs alluded to above. The Company NPAT for 2010 was recorded at Rs. 6.55Bn a 306% improvement relative to the normalised (excluding one-off network modernisation charge in 2009) NPAT of negative Rs. 3.2Bn in 2009. In addition to strong EBITDA performance, the improvement in NPAT was underpinned by a 65% YoY decrease in finance costs following the deployment of surplus operating cash for the repayment of borrowings. The year 2010 also posted foreign exchange gains of Rs. 686Mn against an exchange gain of Rs. 8Mn in 2009. The Company NPAT however displayed negative growth of 18% on a QoQ basis, in line with the reduction in EBITDA, higher depreciation and lower foreign exchange gain during the same period.
DBN and DTV Consolidate Performance Improvements
DBN featuring the Fixed Telephony, Fixed Broadband and Data Transmission businesses of the Dialog Group continued to consolidate its positive performance trend recording its third successive quarter of positive EBITDA. DBN EBITDA was recorded at Rs. 285Mn, for 2010 a significant 169% improvement compared to 2009. EBITDA improvement was driven in the main by substantial reductions in operating and direct costs accruing from cost rescaling programmes implemented over the past quarters. DBN EBITDA in Q4 2010 show a reduction of 32% on a QoQ basis, due to an exceptional provision of Rs. 100Mn with respect to VAT recovery in the context of the emergent VAT exempt environment in the Telecommunications sector. On the backdrop of lower EBITDA and the ongoing acceleration of depreciation pertaining to DBN’s CDMA and Wimax networks, NPAT was recorded at negative Rs. 348Mn and negative Rs. 1.3Bn in Q4 2010 and FY 2010 respectively. Accordingly, NPAT for FY 2010 recorded an improvement of 50% compared to 2009.
DTV demonstrated similar consolidation of Performance improvements, recording an EBITDA of Rs. 343Mn for 2010, an improvement of 159% and 243% on QoQ and YoY basis respectively. EBITDA growth YoY was underpinned by a strong increase in usage revenues on the backdrop of reductions in operating and direct costs accruing from a continued focus on strategic cost rescaling initiatives. Accordingly, DTV reported a NPAT for FY 2010 of negative Rs. 154Mn a strong improvement in profitability of 80% relative to 2009.
Healthy Free Cash Flows Bolster Group Balance Sheet
Group Operating cash flows totalled Rs. 14.28Bn for the year of 2010, up 32% relative to 2009. Strong operating cash flows combined with a prudent and strategic approach to capital expenditure, have underpinned the generation of free cash flow of Rs. 8.2Bn for the year of 2010 relative to the negative free cash flow of Rs. 133Mn in the previous year. Positive free cash flows were directed towards de-leveraging the Company’s balance sheet, resulting in a reduction of the Group’s total debt outstanding by 17% YoY. Accordingly, the Dialog Group continued to maintain a structurally strong balance sheet with the Gross Debt to EBITDA ratio improving from 2.6x in 2009 to 1.8x in 2010.
On the back drop of a strong balance sheet, free cash position and improved profitability Dialog Axiata effected a repayment of USD 10Mn against advances due to principal shareholder Axiata Group BhD. Subsequent to the aforesaid repayment, the USD and SLR advances outstanding to Axiata Group amount to USD 37.5Mn and Rs. 3,724Mn respectively.
Proposed Dividend FY2010
In the light of the Company’s strong turnaround in performance, the Board of Directors of Dialog Axiata, resolved, to propose for consideration by the Shareholders of the Company, a cash dividend to ordinary shareholders of twenty cents (Rs. 0.20) per share totalling to Rs. 1.6Bn. The said dividend would be exempt from tax in the hands of the shareholders. The dividend so proposed is subject to the approval of the shareholders at the Annual General Meeting (AGM) of the Company, the date pertaining to which would be notified in due course.
