Zain records in­come of KD 82m for H1 2017

Rev­enues reach KD 508m with EBITDA mar­gin of 41.7%

Kuwait Times - - FRONT PAGE -

KUWAIT: Zain Group, the lead­ing mo­bile telecom­mu­ni­ca­tions pioneer with op­er­a­tions in eight mar­kets across the Mid­dle East and Africa, an­nounced its con­sol­i­dated fi­nan­cial re­sults for the six months to 30 June, 2017. The com­pany ended the pe­riod serv­ing 45.2 mil­lion cus­tomers.

For the first six months of 2017, Zain Group gen­er­ated con­sol­i­dated rev­enues of KD 508 mil­lion ($1.67 bil­lion) down 8 per­cent year-on-year (Y-o-Y) in KD terms. The Group’s con­sol­i­dated EBITDA for the pe­riod reached KD 212 mil­lion ($695 mil­lion), down 17 per­cent Y-o-Y in KD terms, re­flect­ing an EBITDA mar­gin of 41.7 per­cent. Con­sol­i­dated net in­come re­mained sta­ble at KD 82 mil­lion ($270 mil­lion). Earn­ings per share for the hal­fyear stood at 21 fils ($0.07).

For the first six months of 2017, for­eign cur­rency trans­la­tion im­pact, pre­dom­i­nantly due to the 61 per­cent cur­rency de­val­u­a­tion in Su­dan from 6.4 (SDG/USD) in H1 2016 to 16.5 cost the com­pany $305 mil­lion in rev­enue, $131 mil­lion in EBITDA and $58 mil­lion in net in­come. Ex­clud­ing this cur­rency trans­la­tion im­pact, Y-o-Y rev­enues and net in­come would have grown by 8 per­cent and 21 per­cent re­spec­tively for H1, 2017.

Com­ment­ing on the re­sults, the Chair­man of the Board of Di­rec­tors of Zain Group, Mo­han­nad Al-Kharafi said: “The com­pany’s per­for­mance in the first half has been sat­is­fac­tory given the var­i­ous op­er­a­tional and forex chal­lenges we face across our foot­print. It is our fo­cus on in­no­va­tion, cus­tomer ser­vice, and the driv­ing of ef­fi­cien­cies that al­lows us to con­sis­tently de­liver strong op­er­a­tional re­sults and main­tain our lead­er­ship po­si­tion in the ma­jor­ity of our mar­kets. The Board is work­ing closely with man­age­ment to con­tin­u­ally eval­u­ate new busi­ness and value-cre­at­ing op­por­tu­ni­ties.”

Bader Nasser Al-Kharafi, Zain ViceChair­man and Group CEO com­mented: “The first six-months of 2017 pro­duced some defin­ing pos­i­tive de­vel­op­ments such as the progress be­ing achieved through the turn­around pro­gram in Saudi Ara­bia and ro­bust growth in our data mon­e­ti­za­tion, En­ter­prise (B2B), and smart city ini­tia­tives in sev­eral key mar­kets.”

• In line with ex­pec­ta­tions, sig­nif­i­cant cur­rency de­val­u­a­tion in Su­dan im­pacts over­all re­sults. Ex­clud­ing the cur­rency trans­la­tion im­pact, rev­enues and net in­come for first six months would have been up by 8% and 21% re­spec­tively • Data rev­enues con­tinue to grow, rep­re­sent­ing 25% of to­tal Group rev­enues • Zain Saudi Ara­bia’s turn­around pro­gram cat­a­pults op­er­a­tion to prof­itabil­ity, with Su­dan

per­form­ing ex­cep­tion­ally well in lo­cal cur­rency terms

Zain Group, the lead­ing mo­bile telecom­mu­ni­ca­tions pioneer with op­er­a­tions in eight mar­kets across the Mid­dle East and Africa, an­nounced its con­sol­i­dated fi­nan­cial re­sults for the six months to 30 June, 2017. The com­pany ended the pe­riod serv­ing 45.2 mil­lion cus­tomers.

For the first six months of 2017, Zain Group gen­er­ated con­sol­i­dated rev­enues of KD 508 mil­lion ($1.67 bil­lion) down 8 per­cent year-on-year (Yo-Y) in KD terms. The Group’s con­sol­i­dated EBITDA for the pe­riod reached KD 212 mil­lion ($695 mil­lion), down 17 per­cent Y-o-Y in KD terms, re­flect­ing an EBITDA mar­gin of 41.7 per­cent. Con­sol­i­dated net in­come re­mained sta­ble at KD 82 mil­lion ($270 mil­lion). Earn­ings per share for the half-year stood at 21 dils (USD 0.07).

For the first six months of 2017, for­eign cur­rency trans­la­tion im­pact, pre­dom­i­nantly due to the 61 per­cent cur­rency de­val­u­a­tion in Su­dan from 6.4 (SDG /USD), in H1 2016 to 16.5 cost the com­pany $305 mil­lion in rev­enue, $131 mil­lion in EBITDA and $58 mil­lion in net in­come.

Ex­clud­ing this cur­rency trans­la­tion im­pact, Y-oY rev­enues and net in­come would have grown by 8 per­cent and 21 per­cent re­spec­tively for H1, 2017.

Group Key Per­for­mance In­di­ca­tors (KD and USD) for the sec­ond quar­ter of 2017. In Q2 2017, Zain Group recorded con­sol­i­dated rev­enues of KD 261 mil­lion ($860 mil­lion), down 5 per­cent com­pared to the same pe­riod in the pre­vi­ous year. EBITDA for the quar­ter reached KD 104 mil­lion ($344 mil­lion), down 21 per­cent Y-o-Y in KD terms, re­flect­ing an EBITDA mar­gin of 40 per­cent. Net in­come for the quar­ter amounted to KD 44 mil­lion ($145 mil­lion), down 2 per­cent Y-o-Y in KD terms re­flect­ing earn­ings per share of 11 fils ($0.04).

For the sec­ond quar­ter of 2017, for­eign cur­rency trans­la­tion im­pact, pre­dom­i­nantly due to the 61 per­cent cur­rency de­val­u­a­tion in Su­dan cost the com­pany $157 mil­lion in rev­enue, $62 mil­lion in EBITDA and $25 mil­lion in net in­come.

Ex­clud­ing the above-men­tioned cur­rency trans­la­tion im­pact, Y-o-Y rev­enues and net in­come would have grown by 12 per­cent and 15 per­cent re­spec­tively for Q2, 2017.

Key Op­er­a­tional Notes for H1 2017:

1. Launch and ex­pan­sion of high-speed 4.5G LTE net­works across key mar­kets saw Zain Group data rev­enues (ex­clud­ing SMS and VAS) in­crease 4 per­cent Y-o-Y, rep­re­sent­ing 25 per­cent of the Group’s con­sol­i­dated rev­enues

2. Zain Saudi Ara­bia’s turn­around and cost op­ti­miza­tion pro­gram, com­bined with net­work up­grades and new data mon­e­ti­za­tion ini­tia­tives bol­stered key fi­nan­cial in­di­ca­tors

3. The sig­nif­i­cant cur­rency de­val­u­a­tion im­pact in Su­dan at the be­gin­ning of Novem­ber 2016 neg­a­tively af­fected Zain Group’s H1 and Q2 2017 fi­nan­cial re­sults. Nev­er­the­less, Zain Su­dan con­tin­ues to per­form ex­cep­tion­ally well in lo­cal cur­rency terms

4. In­tense price com­pe­ti­tion in Kuwait cou­pled with ad­di­tional op­er­a­tional costs in net­work ex­pan­sion and up­grades ham­pered the op­er­a­tion and con­se­quently Zain Group’s over­all fi­nan­cial metrics

5. The con­tin­ued so­cial un­rest in Iraq, cou­pled with in­tense price com­pe­ti­tion af­fected all key fi­nan­cial in­di­ca­tors from the op­er­a­tion. Sim­i­larly, so­cial un­rest and cur­rency de­val­u­a­tion im­pacted Zain South Su­dan re­sults

6. Zain launched iflix, the lead­ing Stream­ing Video on De­mand (SVoD) ser­vice for emerg­ing mar­kets, across sev­eral mar­kets. This fol­lows the an­nounce­ment ear­lier in the year that Zain and iflix had formed a joint ven­ture en­tity named ‘iflix Ara­bia’

Com­ment­ing on the re­sults, the Chair­man of the Board of Di­rec­tors of Zain Group, Mo­han­nad Al-Kharafi said, “The com­pany’s per­for­mance in the first half has been sat­is­fac­tory given the var­i­ous op­er­a­tional and forex chal­lenges we face across our foot­print. It is our fo­cus on in­no­va­tion, cus­tomer ser­vice, and the driv­ing of ef­fi­cien­cies that al­lows us to con­sis­tently de­liver strong op­er­a­tional re­sults and main­tain our lead­er­ship po­si­tion in the ma­jor­ity of our mar­kets. The Board is work­ing closely with man­age­ment to con­tin­u­ally eval­u­ate new busi­ness and value-cre­at­ing op­por­tu­ni­ties.”

Bader Nasser Al-Kharafi, Zain Vice-Chair­man and Group CEO com­mented, “The first six-months of 2017 pro­duced some defin­ing pos­i­tive de­vel­op­ments such as the progress be­ing achieved through the turn­around pro­gram in Saudi Ara­bia and ro­bust growth in our data mon­e­ti­za­tion, En­ter­prise (B2B), and smart city ini­tia­tives in sev­eral key mar­kets.”

The Group CEO added, “Our rev­enues reached KD 508 mil­lion with an EBITDA mar­gin of 41.7 per­cent, and data rev­enues con­tinue to grow which now rep­re­sents 25 per­cent of our to­tal rev­enues. It is un­for­tu­nate that one main fac­tor out­side of our con­trol, namely the Su­dan cur­rency de­val­u­a­tion is­sue, has im­pacted over­all per­for­mance con­sid­er­ing the sound op­er­a­tional progress and transformation we have un­der­taken across all our mar­kets. At the same time, the var­i­ous op­er­a­tional man­age­ment teams are fo­cused on deal­ing with such costly and un­avoid­able so­cio-eco­nomic chal­lenges across sev­eral key mar­kets and are lay­ing the foun­da­tions to take full ad­van­tage of im­prov­ing con­di­tions, once they oc­cur.”

Bader Al-Kharafi con­cluded, “We also en­tered into sev­eral key strate­gic part­ner­ships and ramped up our in­vest­ment in dig­i­tal tech­nolo­gies to fur­ther max­i­mize the out­put of our mod­ern net­works with the aim of im­prov­ing the cus­tomer ex­pe­ri­ence and fu­ture-proof­ing the com­pany’s growth. The Board and ex­ec­u­tive man­age­ment strongly believe in our strate­gic di­rec­tion to un­lock the many lu­cra­tive op­por­tu­ni­ties in the con­nected so­ci­ety space and look for­ward to the sec­ond half of the year with op­ti­mism as we de­liver fur­ther on our transformation ob­jec­tives in be­com­ing a dig­i­tal life­style op­er­a­tor.” Op­er­a­tional re­view of key mar­kets for the six months ended 30 June, 2017.

Kuwait: Main­tain­ing its mar­ket lead­er­ship, Zain Kuwait saw its cus­tomer base serve 2.6 mil­lion cus­tomers. The first half of the year was char­ac­ter­ized by in­tense price com­pe­ti­tion cou­pled with ad­di­tional op­er­a­tional costs in net­work ex­pan­sion and up­grades, which im­pacted the op­er­a­tion’s fi­nan­cial per­for­mance for the pe­riod. Nev­er­the­less, Zain Kuwait re­mains the Group’s most prof­itable op­er­a­tion with rev­enues reach­ing KD 167 mil­lion ($549 mil­lion), EBITDA amount­ing to KD 66 mil­lion ($215 mil­lion) and net in­come came in at KD 39 mil­lion ($128 mil­lion). Zain Kuwait’s EBITDA mar­gin stood at 39 per­cent at the end of the six-month pe­riod, with data rev­enues (ex­clud­ing SMS & VAS) ac­count­ing for 32 per­cent of to­tal rev­enues. No­tably, dur­ing the sec­ond quar­ter of 2017, Zain Kuwait’s fi­nan­cial per­for­mance was bet­ter than the first quar­ter of the year due to di­ver­si­fi­ca­tion of in­no­va­tive broad­band of­fer­ings and in­creased rev­enues from new busi­ness streams. Zain Kuwait was awarded and is cur­rently im­ple­ment­ing a smart me­ter project, in one of the sec­tor’s largest ICT projects for the coun­try’s Min­istry of Elec­tric­ity and Wa­ter. This Smart Me­ter project is a key step of the com­pany’s strate­gic plans to de­ploy smart city so­lu­tions in Kuwait and be­yond.

Iraq: De­spite the ex­cep­tional so­cio-eco­nomic cir­cum­stances cou­pled with the con­tin­u­a­tion of in­tense price com­pe­ti­tion, Zain Iraq achieved $523 mil­lion rev­enues due to the im­pres­sive growth in data us­age and nu­mer­ous cus­tomer ac­qui­si­tion ini­tia­tives in the north­ern re­gions of the coun­try. The op­er­a­tion’s ef­fi­ciency drive saw EBITDA reach $179 mil­lion, re­flect­ing a 34 per­cent EBITDA mar­gin. Net in­come amounted to $11 mil­lion for the pe­riod. Zain Iraq leads the mar­ket serv­ing 12.9 mil­lion cus­tomers, which rep­re­sented an im­pres­sive 15 per­cent Y-o-Y in­crease.

Su­dan: A sig­nif­i­cant 61 per­cent cur­rency de­val­u­a­tion in Su­dan from 6.4 (SDG /USD) to 16.5 (rate change started at the be­gin­ning of Novem­ber 2016) af­fected this op­er­a­tion’s fi­nan­cial re­sults in USD terms for the first six months of 2017. Nev­er­the­less, in lo­cal cur­rency (SDG) terms, the op­er­a­tor con­tin­ues to per­form re­mark­ably well as rev­enues grew by 38 per­cent Y-o-Y to reach SDG 3.4 bil­lion ($213 mil­lion, down 44 per­cent in USD terms) for the first six months of 2017. EBITDA in­creased by 22 per­cent to reach SDG 1.3 bil­lion ($81 mil­lion, down 50 per­cent in USD terms), and net in­come in­creased by 14 per­cent to SDG 545 mil­lion ($34 mil­lion, down 54 per­cent in USD terms). Data rev­enues (ex­clud­ing SMS and VAS) ac­counted for 15 per­cent of to­tal rev­enues, with an im­pres­sive an­nual growth rate of 69 per­cent. The op­er­a­tion saw its cus­tomer base ex­pand 3 per­cent to reach 12.9 mil­lion.

Saudi Ara­bia: The turn­around and cost op­ti­miza­tion pro­gram in place at the op­er­a­tion, com­bined with in­vest­ment in net­work up­grades and the in­tro­duc­tion of ap­peal­ing data mon­e­ti­za­tion ini­tia­tives bol­stered all key fi­nan­cial in­di­ca­tors in H1, 2017. The op­er­a­tor recorded its first-ever half yearly net profit of $14 mil­lion, com­pared to net losses $154 mil­lion in H1 2016. Rev­enues for the pe­riod were up by 9 per­cent, reach­ing $1.04 bil­lion. The com­pany recorded a sig­nif­i­cant 59 per­cent in­crease in EBITDA to reach $346 mil­lion in H1 2017. The com­pany’s EBITDA mar­gin rose to 33 per­cent, up from 23 per­cent in H1 2016. The in­tro­duc­tion of the bio­met­ric iden­ti­fi­ca­tion re­quire­ment dur­ing the year and the im­pact of sea­son­al­ity saw the op­er­a­tor’s to­tal cus­tomer base shrink by 15 per­cent, to stand at 9 mil­lion cus­tomers at the end of June 2017. Im­pres­sively, the op­er­a­tor wit­nessed a 42 per­cent rise in data rev­enues (ex­clud­ing SMS and VAS) Y-o-Y, rep­re­sent­ing 50 per­cent of to­tal rev­enues.

Jor­dan: Zain Jor­dan grew its cus­tomer base by 3 per­cent Y-o-Y, serv­ing 4.2 mil­lion cus­tomers at the end of June, and main­tain­ing its mar­ket lead­ing po­si­tion de­spite in­tense price com­pe­ti­tion. Yo-Y rev­enues in­creased 2 per­cent to reach $241 mil­lion, with EBITDA up 1 per­cent to reach $116 mil­lion, re­flect­ing an im­pres­sive 48 per­cent EBITDA mar­gin. Net in­come de­creased 5 per­cent to $48 mil­lion for the six-month pe­riod. With the con­tin­ual ex­pan­sion of 4G ser­vices across the coun­try, data rev­enues (ex­clud­ing SMS & VAS) rep­re­sented 37 per­cent of to­tal rev­enues, up by 15 per­cent Y-o-Y.

Bahrain: Zain Bahrain gen­er­ated rev­enues of $100 mil­lion for the first six months of 2017, up 17 per­cent Y-o-Y. EBITDA for the pe­riod amounted to $30 mil­lion, down 8 per­cent, re­flect­ing an EBITDA mar­gin of 30 per­cent. Net in­come amounted to $4 mil­lion, re­flect­ing a 21 per­cent de­crease. Data rev­enues (ex­clud­ing SMS & VAS) in­creased 36 per­cent Y-o-Y, rep­re­sent­ing 43 per­cent of over­all rev­enues.

Zain Vice-Chair­man & Group CEO Bader Al-Kharafi

Zain Group Chair­man Mo­han­nad Al- Kharafi

Zain Vice-Chair­man & Group CEO Bader Al-Kharafi

Zain Group Chair­man Mo­han­nad Al-Kharafi

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