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Dialog Axiata 2Q17 net income creeps up despite higher taxes, consumer spending slowdown

14 Aug 2017

Sri Lankan mobile, broadband and pay-TV operator Dialog Axiata reported net profit of LKR2.34 billion (USD15.7 million) for the April-June 2017 quarter, up 2.5% from LKR2.28 billion a year ago, as revenues increased 9.0% to LKR23.0 billion. Releasing its interim financial accounts, Dialog Axiata noted that the operator is feeling the effects of a slowdown in consumer spending in the country, adding that Q2 profits were ‘somewhat supported by relatively lower non-cash translational forex losses during 2Q17 compared to 1Q17’. Second-quarter earnings before interest tax depreciation and amortisation (EBITDA) rose by 13.0% quarter-on-quarter to LKR8.1 billion, it said, although 6M17 EBITDA slumped 7.0% y-o-y to LKR3.89 billion on revenue of LKR45.2 billion. The group said that in January-June 2017 it collected as much as LKR13.4 billion in consumption taxes on behalf of the state and was liable for LKR5.7 billion direct taxes and levies, all of which impacted on the bottom line. Moreover, the interim filing also confirmed that the flood seen in the country in May also brought down its performance in Q2. ‘The 2Q17 performance was impacted by externalities including the inclement weather and severe flood conditions during the month of May that dealt a significant impact on livelihood and commerce,’ the statement said.

Cellular arm Dialog Mobile has been hit by a government-imposed tax regime – imposed in 2016 – which slapped higher VAT on every one of its mobile, data or pay-television customers who now effectively pay ’49% as taxes on the monthly bill’, it argues. Although the unit’s top line increased by 5.0% y-o-y to LKR37.8 billion in H1 2017, operating profits for the semester slumped by around LKR1 billion to LKR5.9 billion. Dialog Mobile closed out June 2017 with 12.4 million subscribers. Meanwhile, the group’s fixed telephony and broadband operation recorded revenue of LKR5.9 billion, an increase of 34.0% y-o-y, as operating profits rose to LKR872.3 million from LKR23.0 million. Finally, Dialog’s pay-TV business, which has about 910,000 subscribers, expanded its operating losses to LKR353.5 million from LKR196.2 million a year ago, on flatlining revenue of LKR3.0 billion.

As of 30 June 2017 Malaysia’s Axiata Investments held an 83.32% stake in Dialog, while the state-run Employees’ Provident Fund held another 2.22%, being the second largest shareholder.

Sri Lanka, Dialog Axiata

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