Airtel Africa impressive earning thrills analysts, ready for upside run
Analysts have expressed their excitement about Airtel Africa Plc.’s impressive earnings delivered on the back of the Telecom Company’s ability to reduce its debt position in the first half of the financial year 2020. Analysts think that the group debt position had been diluting margin.
In the recent performance, FSDH Merchant Bank analysts reckoned that they see a growing subscribers base that sustained revenue growth, though recent data from Nigerian Communication Commission shows that Airtel Nigeria slipped to third position.
There was an impressive revenue growth from Nigeria market, analysts at FSDH Merchant Bank reckoned in a review.
The parent company, Airtel Africa recorded an 8.4% year on year growth in revenue to US$1.6 billion from US$1.5 billion in first half of financial year (H1) 2020.
FSDH analysts observed that growth within the quarter remained strong, climbing higher by 6.0% quarter on quarter and 9.8% when compare against last financial year.
Revenue growth was driven by an impressive increase in the total customer base which rose 10.4% to 103.9 million from 94.1 million. Data customer base grew impressively recording upper bound double-digit growth of 17.7% to 31.9 million from 27.1 million.
Across business segments, growth was broad-based with Mobile Money leading the way surging 46.5% while data revenue was up 37.8% year on year. Voice revenue grew the slowest at 3.2% year on year. Meanwhile, across regions, growth in Nigeria was the most impressive with revenue growing by 23.2% to US$640.0 million.
Also, East Africa revenue was up 5.8% to US$578.0 million while the rest of Africa region saw revenue fall 6.5% year on year to US$426.0m.
Operational efficiency sustained on sub-inflationary operating expenses (OPEX) growth.
In the period, total business expenses grew but at a slower rate to revenue, growing at a sub-inflationary rate of 5.7% year on year to US$931 million for H1 2020 from US$881.0m in H1 2019.
Consequently, earnings before interest tax depreciation and amortization (EBITDA) grew impressively by 10.9% year on year to US$719 million in the H1 2020 from US$649 million in the comparable period in 2019.
FSDH analysts noted modest improvement in operating efficiency evidenced in EBITDA margin expansion of 0.9ppt to 43.8%. The sticking point of concern for FSDH analysts on Airtel Africa has been the high leverage of the company.
But analysts stated that the company has taken significant efforts at deleveraging its books during this financial period. As such, net debt to EBITDA was down to 2.3 times as at H1 2020 as against 5.1 times as at H1 2019.
This was evident in the 50.4% decline in net debt to US$3.2 billion as at H1 2020 from US$6.4 billion in H1 2019. Against this backdrop, net finance costs edged lower by 32.0% to US$148 million for H1 2020 from US$218.0m in H1 2019. At the bottom line, profit before tax surged 159.0% to US$228 million for H1 2020.
Airtel Africa was able to declare interim dividend to investors in line with the company policy of a dividend payout of 80.0% if net debt to EBITDA prints at 2.5 times or below.
The company declared a dividend of US$0.03 (N10.86) per share which implies a dividend yield of 3.5% based on last Friday’s closing price of N308. FSDH analysts say they are very impressed with the numbers posted by the company.
According to the analysts, key operating metrics particularly on subscriber base continue to climb; the company has sustained efficiency while revenue from growth supporting business units continues to accelerate.
“What impresses us the most is the significant decline in leverage level which is significantly healthy for profits. Going forward, we remain very optimistic of the company’s future growth which should result in better returns for investors”, analysts at FSDH Merchant Bank noted.
Airtel Africa impressive earning thrills analysts, ready for upside run
