Dialog Axiata PLC has posted a robust first quarter with consolidated after-tax profit growth of 65% to Rs. 2.43 billion.
The consolidated pre-tax profit was up 52% to Rs. 2.9 billion. Group revenue grew 12% to Rs. 32.8 billion from Rs. 29.2 billion in the first quarter of the previous financial year.
At the company level, revenue grew to Rs. 21. 8 billion from Rs. 20.4 billion. Pre-tax profit grew from Rs. 2.05 billion to Rs. 2.40 billion, and after-tax profit from Rs. 1.64 billion to Rs. 1.94 billion.
Mobile operations revenue grew from Rs. 20.17 billion to Rs. 21.96 billion; that of Fixed Telephony and Broadband grew from Rs. 6.8 billion to Rs. 8.5 billion; whilst Television operation improved marginally from Rs. 2.2 billion to Rs. 2.3 billion. Mobile business reported an operating profit of Rs. 4.5 billion as against Rs. 4.1 billion in FY20 1Q; Fixed Telephony and Broadband operation posted Rs. 0.94 billion (Rs. 0.2 billion last year); whilst Television suffered a loss of Rs. 108 million as against the Rs. 130 million loss last year.
Softlogic Stockbrokers said Dialog results remained below Q4 2020 due to the impact of rupee depreciation on its borrowings, which resulted in a net finance cost card of Rs. 2.5 billion during the quarter (Rs. 0.8 billion in Q4 2020).
This may be considered as an outlier as the dollar shot up 7.1% during the quarter the rupee depreciated 0.8% (Q4 2020). “This resulted in the impact from forex losses alone amounting to Rs. 2.1 billion as against Rs. 0.3 billion in the previous quarter. Therefore, normalised for the said foreign exchange losses, NPAT was recorded at Rs. 4.6 billion for Q1 2021, up 47% YoY and 21% QoQ,” Softlogic added.
It also said that from an overall performance perspective, all key business segments grew during the quarter to help boost revenue. The group’s EBITDA also witnessed a 12% YoY growth in line with revenue to reach Rs. 13.7 billion whilst the EBITDA margin remained flat at 41.6%.
Capex for the quarter stood at a ratio of 7% compared to revenue, at a total of Rs. 2 billion, which was invested in high-speed broadband infrastructure.
In its interim results, Dialog noted that COVID-19 pandemic resulted in a substantive shift in management’s focus towards ensuring the continued safety of people, connectivity of customers, compliance with guidelines issued by various government authorities and continuity of critical business operations.
The outbreak and the associated developments impacted the business on multiple fronts including distribution, network rollout and working capital management. The lockdown and credit extensions provided to keep customers connected, significantly impacted cash collections in 2020. The global impact of the pandemic and the repatriation of Sri Lankans have also adversely affected the Group’s international business including inbound and outbound roaming.
The Group faced an adverse impact on revenue, impairment of trade receivables and health and safety-related expenses. Despite the second wave of the outbreak in early October 2020, business activity recovered across the country and the Group continued to see a gradual recovery in revenue and collections in the first quarter ended 31 March 2021. However, with the resurgence of a third wave of outbreak and related restrictions commencing mid-April 2021, uncertainty prevails over economic revival and business activity.
Dialog said the current unprecedented situation is yet evolving and the future impact will heavily depend on the level of restrictions and time taken for the economy to rebound to pre COVID-19 levels. The overall impact on consumer spending and the recovery of the country’s enterprises will also be key determinants of future impact on our business. The Group has resorted to aggressive cost rescaling and rationalisation initiatives both in operating and capital expenditure to soften the impact on the business.
During the first quarter, Dialog Broadband Networks (DBN), a wholly owned subsidiary of the Company, acquired 100% of the shareholding in H One Ltd., Sri Lanka’s leading Microsoft solutions provider on 7 January 2021.
Pursuant to a conversion of shareholder advances, Digital Holdings Lanka Ltd., (DHL), a wholly owned subsidiary of the Company, issued and allotted 3,044,200 new ordinary shares in DHL to the Company on 30 March 2021. This share issue has not changed the composition of the Group.
Digital Health Ltd., (DH) a subsidiary of DHL, acquired 100% of the issued share capital of My Health Solutions Ltd., from its existing shareholders, Dialog Axiata Digital Innovation Fund Ltd., (DADIF) and Aartiz Technologies Ltd., on 20 February 2021, in consideration of the issuance of 30% shares in DH, in the proportion of 20.45% to DADIF and 9.55% to Aartiz.
The Dialog Axiata Digital Innovation Fund Ltd., , which is a subsidiary of DHL, redeemed 186,002 of its preference shares on 11 March 2021, out of which 170,646 shares were redeemed from preference shares held by DHL. On 30 March 2021, DADIF issued 36,593 preference shares out of which 30,027 were issued to DHL and the remaining preference shares were issued to individual shareholders.