Axiata’s FY18 results clouded by accounting adjustments

PETALING JAYA: Axiata Group Bhd suffered a net loss of RM1.66 billion in the fourth quarter ended Dec 31, 2018 compared with a net profit of RM24.73 million a year ago due to one-off asset written-off/accelerated depreciation of obsolete assets and equipment decommissioned from network modernisation projects.

In a filing with Bursa Malaysia, the group said revenue for the quarter rose marginally to RM6.27 billion from RM6.26 billion a year ago. At constant currency of Q4 2017, revenue grew 5.6% attributed to operating companies in Malaysia, Sri Lanka and Cambodia.

In Malaysia, revenue grew 11.7% to RM1.92 billion underpinned by higher device revenue from one-off “100,000 free smartphone” special campaign for selected long-term loyal customers during the quarter.

Consequently, earnings before interest, taxation, depreciation and amortisation (Ebitda) fell 21.7% to RM466.2 million. The lower Ebitda combined with one-off assets written off/accelerated depreciation amounting to RM358.4 million resulted in a net loss of RM216.7 million compared with a net profit of RM264.5 million a year ago.

Excluding the one-off adjustment, the Malaysian operations recorded a net profit of RM141.7 million during the quarter.

In Sri Lanka, total revenue was stable at RM678.3 million. At constant currency of Q4 2017, revenue grew 15% on the back of strong data revenue underpinned by higher 3G data usage while Ebitda grew 10.2% to RM273.4 million.

At constant currency of Q4 2017, Ebitda grew 25.8% but higher depreciation and foreign exchange translation loss resulted in a net loss of RM900,000 compared with a net profit of RM86.3 million a year ago.

In Cambodia, revenue and Ebitda grew 16.3% and 15.8% respectively due to strong growth of data revenue despite the price war and adverse regulatory impact. At constant currency, revenue and Ebitda grew 15.9% and 15% respectively. Net profit stood at a record RM75.3 million.

For the financial year ended Dec 31, 2018 (FY18), the group reported a net loss of RM5.03 billion compared with a net profit of RM909.48 million a year ago while revenue fell 2.12% to RM23.89 billion from RM24.40 billion a year ago.

The group declared a tax exempt dividend under single tier system of 4.5 sen per share in respect of FY18. Full year dividend declared for FY18 is 9.5 sen.

The Dividend Reinvestment Scheme will apply to the dividend, whereby shareholders will have the option to elect to reinvest the whole or part of the dividend into new Axiata shares.

Axiata president and group CEO Tan Sri Jamaludin Ibrahim said its results at a glance can be alarming and misconstrued as it is almost all due to non-cash items that are purely accounting treatments as opposed to some fundamental performance but the underlying performance is very strong.

“To be specific, due to the massive accounting adjustments especially the reclassification of our Indian asset into the balance sheet, Idea performance will no longer drag our profitability. In fact, there are now more upsides given our belief in the long-term future of the merged company,” he said in a statement.

“Additionally, the 2G and other legacy network write-offs are expected to result in D&A savings of around RM150 million per year, hence, correspondingly improve our profitability,” he added.

He said the group is confident of a promising 2019 given the huge tail wind from the momentum from the operational successes across the group and the strong balance sheet from the M1 sale of RM1.65 billion as well as its RM5.1 billion cash balance.

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