Thursday, February 23, 2012

SLT net profit grows 21% despite huge Rs. 18bn capex

* Investment for the future,  says Chairman

* Costs seen improving

* Subsidiary Mobitel profits up 6%

Sri Lanka Telecom PLC (SLT) reported impressive results for the financial year ending December 31, 2011 despite a huge capital expenditure of Rs. 18 billion.

The group recorded a profit before tax of Rs. 6.53 billion, up 10 percent, and a net profit of Rs. 4.78 billion, up 21 percent from a year earlier on revenue amounting to Rs. 50.95 billion, up 1 percent.

At company level, SLT posted a profit-before-tax of Rs. 4.8 billion, up 21 percent from the previous year while net profits recorded an impressive 44 percent growth rate, reaching Rs. 3.56 billion.

"We have transformed ourselves to be the axis upon which the country’s very ambitious development agenda is founded, and have built the necessary trusses to take Sri Lanka forward. This is demonstrated through our exemplary and consistent financial results, which, while buoying our bottom line has built a sustainable foundation for growth and profit," SLT Group Chairman Nimal Welgama said.

Commenting on the Rs. 18 billion capital expenditure during the year, which was up 176 percent from the previous year, Welgama said this significant increase in investment was consistent with building a solid future for the group and to support national development.

SLT saw its wire fixed line revenue stabilise, arresting the declining trend that emerged about five years ago. There was also significant growth contribution from non-traditional revenue streams, mainly fixed broadband, wholesale and enterprise sales, while mobile revenue also displayed a growth of 7 percent to stand at Rs. 21 billion. "Local revenue at company level increased by 3 percent, which validates our strategies to turn around the earlier negative growth," the company said in a statement announcing the financial results.

"With revenue growth driven by broadband, data and enterprise services, Sri Lanka Telecom is very focused on creating the optimum balance of revenue stemming from the right product mix. In 2011, there was an aggressive pursuance of business opportunities, while gaps that contributed to leakage or wastage, resulting in unnecessary expenditure, were identified.

Loss making or low margin product lines were rationalised, while the portfolio was consolidated. In tandem, increasing efficiencies became a key strategy of the overall Business Plan, which, supported through IT and process change, contributed to delivering a very positive impact on the Group’s bottom line, as is seen in the strong financial performance for the year," the telco said.

"The strong focus on instilling operational efficiencies and prudent cost management strategies from the pragmatic restructuring process saw operational costs managed at optimal levels. Company operating costs declined 5 percent primarily due to the reduction in volume-driven-expenses and a significant reduction in bad debts. At group level, the increase in operational costs was a marginal 1 percent.

It was these strategies that contributed to the improvement in EBITDA margins (earnings before interest, taxation, depreciation and amortization) at both company and group level, seen at 31 percent and 34 percent respectively. Group net cash generated from operating activities also increased from Rs. 15.2 billion in 2010 to Rs 20.5 billion, while at company level, net cash generated from operating activities increased to Rs 13.3 billion from Rs 10.6 billion.

Group EPS (earnings per share) increased from Rs. 2.18 in 2010 to Rs. 2.65 in 2011, an increase of 21 percent, which reflects the underlying consistent financial performance and increased shareholder value.

"Given that penetration of broadband services remain lower in Sri Lanka than other comparable countries, the demand is increasing rapidly, which led the group to invest in the infrastructure necessary for this envisaged demand, including fibre optic cables and the enabling of mobile broadband through mobile 3.5G/4G technologies. This demand for high speed uninterrupted broadband fueled the delivery of Double Play (Voice + Broadband) and Triple Play (Voice+Broadband+PEOTV) services through the fixed Megaline and Mobile Broadband Products, which has contributed to ongoing growth in our customer base and revenues," SLT said.

The group’s flagship subsidiary, Sri Lanka Telecom Mobitel, continued to grow its market share, while reporting a growth in all profitability indicators for 2011, such as EBITDA growth by 3 percent, EBIT (earnings before interest and taxes) by 16 percent and profit after tax by 6 percent compared to the previous year.

Mobitel posted a profit before tax of Rs. 2.06 billion, an increase of 6 percent from last year’s Rs.1.94 billion.

"Being a pioneer in the region Mobitel was the first in South Asia to demonstrate 4G LTE technology in 2011, with data speeds of up to 96Mbps and transmitted the latest 3Tesla MRI imagery over its mHealth platform for the first time in Sri Lanka," SLT said.

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