Axiata posts stable performance in 1Q22, profit impacted by unrealized foreign exchange losses mainly in Sri Lanka

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  • Annual revenue increase of 29.2%, net loss of RM48 million, Boost Life users increase of 11%
  • Given the difficult externalities, landed the first quarter on stable bases

Axiata Group Bhd presented an improved operating performance for the first quarter ended March 31, 2022 (1Q22) thanks to the resilience of its operating companies (OpCos) and the sustained demand for data and digitization in the region.

On an underlying basis, non-device (ex-device) revenue and earnings before interest, tax, depreciation, and amortization (EBITDA) increased 7.8% and 7.4%, primarily driven by all OpCos with the exception of Ncell (Ncell Axiata Limited).

EBITDA margin was 44.8%, while EBIT increased by 44.5%. Underlying PATAMI (growth figures for OpCos are based on local currency results in the respective operating markets) climbed 70.7%, driven by a higher contribution to EBITDA across all OpCos with the exception of Ncell and the absence of accelerated depreciation of 3G assets in 2022, while being offset by a tax increase.

On a reported basis, the company delivered steady growth in revenue and EBITDA which increased 6.7% and 7.7% year-on-year (YoY) driven by contributions of all OpCos except Ncell, despite resistance to external impacts such as headwinds. in Sri Lanka and the macroeconomic uncertainties related to the slowdown in the main economies. Profit after tax (PAT) and profit after tax and minority interests (PATAMI), however, fell significantly due to unrealized foreign exchange losses mainly at Dialog (Dialog Axiata PLC) and Axiata, as well as higher tax contributions due to the single Cukai Makmur (single prosperity tax for the tax year 2022).

During the quarter, Axiata achieved cost excellence with capital expenditure (Capex) and operating expenditure (Opex) savings of RM163 million and RM78 million, or 241 million RM of total savings. The group’s balance sheet remained stable with gross debt/EBITDA within the target limit at 2.49x, net debt/EBITDA at 1.99x and a cash balance of RM5.8 billion. The capital structure was well managed in a difficult macroeconomic environment, where 45% of loans were in local currency, 60% fixed rate and 65% over two years.

Performance of digital telecommunications operators

Axiata posts stable performance in 1Q22, profit impacted by unrealized foreign exchange losses mainly in Sri Lanka

[Note: Growth numbers for OpCos are based on results in local currency in respective operating markets.]

Celcom Axiata Bhd maintained its positive momentum as non-device revenue grew 5.2% year-on-year, driven by its prepaid business and the contribution of new enterprise solutions subsidiaries – Bridgenet Solutions and Infront Malaysia. EBIT jumped more than 100% due to the accelerated depreciation of 3G in 2021, combined with lower sales and marketing costs. As a result, PATAMI increased by more than 100%, while being partially offset by higher tax from the exceptional Cukai Makmur.

Proposed Celcom-Digi merger expected to be completed in second half of 2022

Driven by higher operating expenses (opex), PT XL Axiata Tbk’s non-device revenue grew 7.9%, supported by an increase in data revenue (+10%), while EBITDA increased slightly by 1.8% due to higher sales and marketing costs due to footprint expansion, while EBIT fell by 12.3% in line with network investments. PATAMI fell 56.6%, impacted by higher net finance costs and a one-time gain in 1Q21.

Robi Axiata Limited’s performance in 1Q22 was dampened by aggressive competition, and non-device revenue grew 2.0% year-over-year on higher data revenue (+14.0%), alongside a increase in subscribers and data usage. EBITDA increased by 4.9% due to lower direct and personnel costs, while EBIT slightly decreased by 0.4%, impacted by higher amortization of new spectrum. PATAMI grew by 16.1% thanks to a reduction in taxation.

Sri Lanka’s economic and political crisis which has caused its currency to depreciate against the US dollar since mid-March 2022 has had a significant impact on most onshore businesses. At Dialog, despite the 16.6% year-on-year increase in non-device revenue, attributed to strong growth across all segments of mobile, fixed broadband and TV, PATAMI recorded a loss of 15.8 LKR billion, impacted by a non-cash foreign exchange loss resulting from USD-denominated debt. Excluding foreign exchange loss, the underlying PATAMI was LKR 4.3 billion.

Ncell’s non-device revenue fell 7.8% due to lower voice revenue due to the impact of the interconnect rate reduction, lockdown and a decline in international long distance. EBIT decreased by 20% due to lower revenues associated with increased network costs, while PATAMI’s decline of 9.7% was moderate compared to EBIT, due to a reduction in taxation.

Smart Axiata Company Limited maintained its stable performance across all metrics, recording a 6.3% year-on-year increase in non-device revenue driven by data contribution growth (+11.4%) in line with increase in subscribers and usage. EBIT growth was moderate at 2.5% due to higher direct costs and depreciation and amortization (D&A), while PATAMI increased by 33.0% due to depreciation investments in financial services activities in 1Q21.

Digital business performance

Axiata posts stable performance in 1Q22, profit impacted by unrealized foreign exchange losses mainly in Sri Lanka

Boost Holdings Sdn Bhd’s revenue increased 29.2% year-on-year, in line with improved gross transaction value driven by higher offline transactions for the payments industry coupled with an increase in disbursements of loans at Boost Credit. It recorded a net loss of RM48 million in 1Q22, down 10.6% year-on-year, mainly due to the recognition of a foreign exchange gain in Q121. Boost Life users and Malaysian merchants grew by 11% to 9.9 million and 42% to 469,000 respectively.

Axiata Digital & Analytics Sdn Bhd (ADA) revenue doubled to RM189 million year-on-year, driven by improved contribution from its customer engagement business and new contribution from its e-commerce enablement business resulting from the acquisition of Awake Asia in June 2021. PATAMI decreased by 55.6% to RM6 million due to higher operating expenses, tax and exchange losses.

Infrastructure

Axiata posts stable performance in 1Q22, profit impacted by unrealized foreign exchange losses mainly in Sri Lanka

Delivering strong operational performance in 1Q22, edotco Group Sdn Bhd revenue grew 19.1% year-over-year, driven by organic expansion of higher colocation rentals and new Build-To- Follows, notably in Bangladesh, and in an inorganic way following the finalization of the acquisition of Touchez Mindscape in Malaysia. EBIT increased by 34.5% driven by revenue stream and lower personnel costs, while PATAMI fell by 3.1%, impacted by higher net financial charges and an unrealized foreign exchange loss . Towers and managed sites increased 47.0% year-on-year to 50,251, while the rental rate improved to 1.63x in 1Q22 from 1.57x in 1Q21.

Board and CEO perspective on results

Providing a board perspective on the results, Shahril Ridza Ridzuan, Chairman of Axiata, said: “The board is encouraged to note the continued resilience and stability of operational performance across the group for the first quarter, in particular thanks to internal efficiency initiatives as part of Axiata 5.0. Vision. Important agreements have been concluded or are in the process of being concluded in line with plans to future-proof Axiata’s activities as well as to serve new areas of growth in the digitization of individuals and businesses.

“As part of its rigorous governance standards and in order to continue to effectively serve our communities, Axiata regularly assesses business, operational and financial risks. Given the significant headwinds, the Board’s attention will be focused on stabilizing the group in the face of current and future uncertainties affecting Dialog’s business in Sri Lanka as well as the negative effects of supply chain shocks. and global inflation,” he said.Axiata posts stable performance in 1Q22, profit impacted by unrealized foreign exchange losses mainly in Sri Lanka

Izzaddin Idris (Photo)who was still Chairman and Group Chief Executive of Axiata when these results were released last week, said: “Overall, given the challenging externalities, we landed the first quarter of 2022 on stable footing. .”

[Ed: Izzaddin announced last week, a few days after the quarterly call, that he would leave Axiata on Tues, 31 May.]

Supported by the strong performance of Axiata’s OpCos, which also benefited from the lack of accelerated depreciation of 3G assets, we achieved stable revenue and EBITDA growth. As a result, the underlying PATAMI jumped 70.7% thanks to a higher contribution to EBITDA from all OpCos except Ncell. »

“We are cautiously optimistic in our outlook for the remainder of 2022, while externalities may persist over the medium term. efforts to extract value from our transactions, which involve the expansion of edotco’s tower business in the Philippines, Boost’s digital banking license from Bank Negara Malaysia and Indonesia, Hipernet Indodata and proposed acquisitions of Link Net “, did he declare.

“With a well-managed capital structure and a strong balance sheet – where gross debt/EBITDA is 2.49x and cash balance stands at RM5.8 billion, coupled with our ongoing internal operational excellence initiatives , we will face the uncertainties ahead from a position of strength.”

Axiata Net-Zero Carbon roadmap

committed to achieving net zero emissions no later than 2050, with a short-term goal for 2030 of reducing operational carbon emissions by 45% compared to the 2020 baseline; its three-pronged strategy for climate action includes reducing, avoiding and eliminating carbon emissions.

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