BATELCO REPORTS STRONG REVENUE OF BD379.4M FOR THE FULL YEAR 2017
- Revenue grew 3% year-on-year to BD379.4M (US$1,006.4M), first organic revenue growth since 2009
- Operating profit up 2% year-on-year excluding voluntary employee retirement costs
- Dividend consistent with prior years at 25 fils per share
- Intention to acquire up to 10% treasury shares, subject to required approvals
Batelco (Ticker: BATELCO), the regional telecommunications group with operations across 14 countries, today announced a 3% increase in gross revenues, reaching BD379.4M (US$1,006.4M) for the full year 2017, as compared to BD367.1M (US$973.7M) in 2016.
Organic gross revenue, which grew for the first time since 2009, was boosted by double-digit growth in broadband and digital services, reporting 16% and 13% growth respectively. Quarter on quarter gross revenues also reported an 8% increase compared to 2016 of BD101.9M (US$270.3M) in Q4 2017 compared to BD94.1M (US$249.6M) in Q4 2016.
Group operating profit grew by 2% notwithstanding voluntary employee retirement costs of BD8.1M (US$21.5M) incurred in Batelco Bahrain. Adjusted net profit, excluding impairments and one-off gain on land, was more than BD40.0M (US$106.1M). The Group’s balance sheet remains robust, with cash in hand of BD158.7M (US$421.0M).
The Board of Directors has recommended a full year cash dividend of BD41.6M (US$110.3M), at a value of 25 fils per share to be agreed at the Group’s Annual General Meeting, of which 10 fils per share was already paid during the third quarter of 2017 with the remaining 15 fils to be paid following the AGM in March 2018. The dividend is consistent with previous years and is an example of Batelco’s commitment to its shareholders.
Batelco’s Chairman Shaikh Mohamed bin Khalifa Al Khalifa, said: “We continue to progress well in order to execute our strategic plan. The business is in great shape, with strong fundamentals, a solid subscriber base and a local market that is outperforming. However, some of our international businesses continue to feel the impact of the political and economic instability across the region and we are providing them with all the support necessary to get them through this difficult period.
“Overall, I am pleased to see that our hard work is paying off. We have maintained a robust cash position and we will pay our shareholders a dividend this year consistent with prior year payouts. I am highly optimistic for the future of Batelco Group as we continue into 2018. We have a sound strategy, an accomplished executive team and a pipeline of products and services to support us in our path forward. As we look ahead, our goal is to build on this recent success and continue to be a national champion for Bahrain.”
Financial and Operational Highlights
|Consolidated net profit||3.5||9.3||37.6||99.7||-91|
|Alternative performance measures:|
|Subscriber base||9.4 million||9.4 million||–|
|Contribution to revenues by international operations||59%||59%||–|
|Contribution to EBITDA by international operations||56%||53%||+6|
Group Financial Review
EBITDA for the year was BD124.7M (US$330.8M), a decline of 8% YoY from BD135.2M (US$358.6M) in 2016. The decline in EBITDA is mainly attributable to BD8.1M (US$21.5M) voluntary employee retirement costs incurred in Batelco Bahrain. Despite the annual decline in EBITDA, there was a QoQ increase of 12% in Q4 2017 compared to Q4 2016. The Group continues to concentrate on its cost containment programmes and sustained a robust EBITDA margin of 33%.
The Group ended the year with net profit of BD3.5M (US$9.3M) compared to BD37.6M (US$99.7M) reported in 2016, a 91% year over year decline. The Group reported a Q4 2017 net loss of BD21.7M (US$57.6M) compared to a net profit of BD5.2M (US$13.8M) in Q4 2016, a 518% decline. The reduced net profits for the period are mainly impacted by impairment losses related to the Group’s investments in Yemen and Jordan which were acquired in 2007 and 2006 respectively, and reflect the prudent and conservative strategy of the Group and the Board of Directors since 2013 and in line with International Financial Reporting Standards (IFRS) requirements. The normalised net profit, excluding these impairments was more than BD40.0M (US$106.1M).
The Group’s net profits have previously been impacted by the reduction in the carrying value of its international investments and goodwill; whereas management and the Board of Directors prudently and promptly took the necessary impairments to reflect the fair value of these investments.
Sabafon, in which the Group has a 26.94% shareholding and acquired in 2007, faced unique operating challenges as a result of the ongoing conflict in Yemen and currency decline. These factors have increased the economic impact on the company and as a result Batelco has impaired the carrying value of its investment by BD30.0M (US$79.6M). However, Batelco continues to believe that Sabafon has solid business fundamentals. The business is still generating positive EBITDA and the market, once it stabilizes, has significant growth potential. The impairment was isolated to Yemen and represents a prudent decision in line with IFRS due to geopolitical/ macroeconomic events and is not reflective of the Group’s financial health.
The Group’s balance sheet and financial position remain resilient despite the difficult operating environment. As of 31 December 2017, net assets were BD502.5M (US$1,332.9M) with substantial cash and bank balances of BD158.7M (US$421.0M) and a Net Debt to EBITDA ratio of 0.64, considerably lower than the regional and international industry average. Earnings per share for the full year in 2017 stood at 2.1 fils, compared with 22.6 fils reported in 2016.
Batelco Group CEO Ihab Hinnawi commented: “2017 saw Batelco Group perform well despite a challenging regional operating environment, as demonstrated through our strong financial performance and transformational programmes, which saw a 3% increase in revenues from the previous year. The growth from the past year was mainly driven by our operations in Bahrain, Jordan and the Maldives, and through our diversified revenue streams – primarily digital and broadband services.”
“While we reported a decline in net profit, this was primarily due to the prudent and conservative strategy of our management team to impair certain assets in Yemen and Jordan, and is not a reflection of the overall health of Batelco. We believe the Group is fundamentally in great shape and we expect net profits in the range of BD40 – 45M in 2018.”
Group Operational Review
Batelco Bahrain Highlights
Commenting on the group’s domestic performance, Batelco Bahrain CEO Mohamed Bubashait said, Bahrain remains one of Batelco’s most robust markets, reporting a 3% year-on-year increase in revenue for 2017, boosted by the growing success of fixed broadband and digital services. Batelco’s domestic growth in broadband services was driven by heavy investment in its Fibre Rollout Programme to accommodate the demand for faster internet services, which contributed to a 32% YoY increase in broadband subscribers.
“Looking ahead, we will continue to invest in Bahrain’s digital future and to contribute to the Kingdom’s social and economic growth, specifically through investing in world class datacenter services, fintech solutions and new technologies. All of this supports the Kingdom’s transition to a digital and diversified economy,” Bubashait added.
Overall performance across the Group was supported by sustained customer numbers in the majority of the Group’s operations.
- Jordan (Umniah): While Umniah, which was acquired in 2006, still tops Batelco’s revenue from its overseas operations and reported 8% YoY growth in revenues and 40% YoY increase in broadband subscribers, high telecom taxes and increased electricity costs on telecom companies contributed to an impairment of goodwill of BD20.0M (US$53.1M). This impairment was isolated to our investment in Jordan and represents a prudent decision in line with IFRS, not reflective of the Group’s financial health and reflects the prudent and conservative strategy of the Group and the Board of Directors since 2013.
- Kuwait (Quality Net): Qualitynet remains market leader in the Fixed Data Communication and Internet Services and ICT industry in the State of Kuwait. The company continues to evolve into a total solutions provider for reliable, scalable, secure and cost effective state of the art internet, data and ICT solutions.
- Maldives (Dhiraagu): Dhiraagu ended the year with strong financial results with 5% YoY revenue increase due to growth across mobile data, Fibre-to-the-home (FTTH), enterprise and adjacent services. Mobile subscribers grew by 9%, while fixed broadband customers grew by 31% driven by the roll out of FTTH. Overall broadband subscriber base grow by 53% and the Maldives remains one of the Group’s best performing markets.
- Channel Islands, Isle of Man, South Atlantic & Diego Garcia (Sure Group): The significant investments made to its mobile and fixed networks enabled Sure to resist competitive pressures and to boost mobile subscriptions by 6% and broadband subscriptions by 4%. Customers were attracted to Sure’s network speeds which, in the Channel Islands, were independently measured as being the fastest and to its innovative tariffs.
Guidance and outlook for 2018
For the full year 2018, the Group is anticipating profit in the range of BD40 to 45 million and expects to pay cash dividends of approximately 25 fils per share over the next three years.
The Group has also stated its intent to seek the necessary approvals to acquire up to 10% of its paid-up capital as treasury shares as the Group believes the shares are undervalued and trading at a discount
Additionally, the Group remains focused on executing Batelco’s growth strategy, which includes:
- Transforming all operators to increase group profitability results;
- Developing new partnerships to boost short-term earning;
- Continuing to invest in its digital technology;
- Expanding and improving the quality and speed of its LTE networks across all markets; and
- Enhancing its cybersecurity capabilities and its risk assessments.
Commenting on the strategy and outlook for the upcoming period, Batelco’s Chairman Shaikh Mohamed said: “Looking ahead, we are planning to expand our business scope, scale and performance to enhance customer value as much as we can. Our core focus areas are digital services, fixed and mobile data, and multi-play offerings.”
“We are confident in our future guidance, and believe we have a solid strategy in place to help achieve our target revenue and net profit for the full year 2018,” he concluded.