Sri Lanka’s Dialog Group records over Rs. 80 billion revenue in 1H despite LKR depreciation
The Morning: Dialog Axiata PLC announced its consolidated financial results for the first six months of 2022 which ended on 30 June (1H 2022), with the Group recording a consolidated revenue of Rs. 81.6 billion for 1H 2022 and Rs. 43.3 billion for the second quarter (Q2) of 2022.
Sri Lanka continued to be battered by the socio-economic crisis in Q2 2022 which led to adverse movements in macro variables such as the Sri Lankan rupee (LKR) depreciating by 23% against the US dollar (USD), inflation rising to 54.6% (from 18.7% recorded by end of Q1 2022), policy rates increasing by eight percentage points, and the 12-month Treasury Bill (T-Bill) rate increasing to 21% (from 12% recorded by end of Q1 2022).
Despite the challenging environment witnessed in Q2 2022, the Group sustained its consistent performance to record strong revenue growth across all business segments, namely, mobile, fixed line, digital pay television, international, and tele-infrastructure, relative to prior periods, namely, year-to-date (YTD) and quarter-on-quarter (QoQ).
However, driven by higher network spending and escalation in the cost base, Group earnings before interest, tax, depreciation, and amortisation (EBITDA) declined to Rs. 27.5 billion for 1H 2022 – down by a moderate 1% YTD. On a QoQ basis, EBITDA declined 14% to record Rs. 12.7 billion for Q2 2022.
The Group’s net profit after tax (NPAT) was impacted by the forex losses amid the continued depreciation of the LKR against the USD. The resulting forex losses reached Rs. 14.2 billion for Q2 2022 and Rs. 34.3 billion for 1H 2022. The forex losses were predominantly contributed by market-to-market translational losses from USD-denominated borrowings.
Group NPAT recorded a loss of Rs. 28.3 billion for 1H 2022 and a loss of Rs. 12.5 billion for Q2 2022 amid forex losses. Normalised for the said forex losses, NPAT continued to decline albeit recording profits of Rs. 6.0 billion for 1H 2022 and Rs. 1.6 billion for Q2 2022.
The Dialog Group continued to be a significant contributor to State revenues, remitting a total of Rs. 16.9 billion to the Government of Sri Lanka (GoSL) during the first six months of 2022. Total remittances included direct taxes and levies amounting to Rs 9 billion and Rs. 7.7 billion in consumption taxes collected on behalf of the GoSL. The total taxes paid increased 46% YTD and 56% QoQ. The direct taxes included Rs. 3.8 billion paid during the quarter in lieu of a one-off surcharge tax of 25% applicable on PAT of FY2020.
The Group continued to support critical investments in 1H 2022 to provide seamless and consistent connectivity whilst meeting the surge in data demand. Accordingly, the capital expenditure reached Rs. 22.4 billion for 1H 2022. Capital expenditure was directed towards investments in high-speed broadband infrastructure to further expand Dialog’s leadership in Sri Lanka’s broadband sector. In line with the above capex, the Group operating free cash flow (OFCF) declined to Rs. 2.8 billion for 1H 2022.
During the quarter, the Dialog Group entered into a loan agreement of up to $ 150 million with the International Finance Corporation (IFC) that is expected to help expand and improve network capacity through the upgrading of existing sites and the deployment of new 4G sites. The IFC will also ensure that Dialog adopts an enhanced environmental and social management system (ESMS) according to IFC Performance Standards for their mobile network deployment, in line with Dialog’s endeavours of pursuing green connectivity, supporting global climate action goals and achieving net-zero CO2 emission by 2050.
The quarter also marked Dialog earning the distinction of being recognised as “Sri Lanka’s Most Valuable Brand” for the fourth consecutive year by Brand Finance with a brand value of Rs. 54.0 billion. Dialog also retained its brand rating of AAA for the third consecutive year, as well as the title of “Most Valuable Telecommunications Brand” for the 15th consecutive year reaffirming the brand’s ethos of empowering and enriching Sri Lankan lives and enterprises.
The impressive revenue posted by Sri Lanka’s Dialog Group is indicative of the strength and growth of the country’s private sector. It also shows the resilience of Sri Lankan businesses, especially in the ICT and digital infrastructure sectors. There has been a steady growth recorded by Sri Lanka’s ICT and digital infrastructure sectors with the country focused on converting Sri Lanka into an e-economy with the expansion of digital platforms. With Sri Lanka aiming at becoming a business hub in the South Asian region given the country’s geographical positioning in the Indian Ocean and the many trade agreements as well as trade concessions enjoyed by the country, there is a rapid expansion in opportunities in the ICT and digital infrastructure development sectors in the country. Foreign businesses/investors could therefore confidently explore opportunities in Sri Lanka’s ICT and digital infrastructure development sectors as it guarantees definite return on investments.
|Article Code :||VBS/AT/21092022/X_2|