Oman Telecommunications Company S.A.O.G (Omantel. MSM: OTEL), revealed today the Company’s financial results for the 4th Quarter ended on 31st December 2015. Group revenue recorded a growth of 6.9% to RO 514.5 million compared with RO 481.2 million in the corresponding period of 2014, an increase of RO 33 Mn. Group operational performance has been impressive as Earnings before Interest, Tax and Depreciation (EBITDA) has been increased to 254 Mn from RO 243.2 Mn, an increase of 4.5%.
The Group net profit stands at RO 50.3 Mn compared to RO 122.4 Mn for the corresponding period. The profit has been impacted due to impairment of investment in one of the subsidiary and Voluntary End of Service (VEoS) program. If these exceptional items are excluded, the Group Net Profit would have been RO 118.2 Mn.
Parent company (domestic) Performance:
Revenues recorded a growth of 7.3% and now reached RO 503.7 million compared to RO 469.2 million for the corresponding period of year 2014. EBITDA is RO 256.8 Mn, an increase of 4.2% and Net Profit excluding the impact of WTL impairment and VEoS is RO 127 Mn. EBITDA and Net Profit margin are 51% and 25.2% respectively.
The revenue growth was mainly driven by Parent company revenues, which has recorded a growth of 7.3% and now reached RO 503.7 million compared to RO 469.2 million for the corresponding period of year 2014. Parent company contributes 98% of the group revenues. The Fixed and Mobile Business retail revenues grown by 8.3% and 6.9% respectively. The growth is mainly driven by Broadband revenues, which witnessed an overall increase of around 24%. All major segments – Consumer, Corporate and Wholesale revenues have recorded a growth over last year. International call revenue during July-Dec’15 recorded a growth of 20% compared to the 1st half of Year 2015 mainly due to introduction of segmented bundle offers.
Group Total expenses increased by 10.4% to RO 387.3 million compared to RO 350.8 million for the corresponding period of year 2014. Cost of Sales increased by 11.3% mainly on account of mobile and other customer devices impacting marginally the gross margin. Gross margin for the Year is 80.8% compared to 81.5% for the corresponding period. Most of the increase in admin costs are of non-recurrent nature, which includes payment to TRA and consultancy costs on new Corporate Strategy and Spend optimization initiatives. Depreciation Increased by RO 12 Mn is due to increased investment in network expansion and modernization of both mobile and fixed networks to meet the growing demand of broadband services.
Net Profit & Liquidity:
As stated above, the Group Net Profit has been impacted due to impairment of investment in WTL and VEOS program. Notwithstanding the above, Omantel’s overall financial results shows a steadily increasing revenue base from its domestic operations and the Wholesale business. Excluding the impact of Impairment and VOES program, net profits for the operations remained robust at a net margin of 23%, EBITDA margin of 49.4% and a Free Cash Flow of RO 84 Mn, an increase of 10% over corresponding period.
VOLUNTARY END OF SERVICE (VEOS) PROGRAM
As part of the cost optimization strategy, the group has initiated the implementation of the 4th phase of the Voluntary End of Service (VEoS) program covering 266 employees of its parent company. The total cost of the program is estimated at RO 12.578 million, which has been provided in Year 2015 accounts in line with International Financial Reporting Standards. The program implementation will be spread over 7 quarters starting from Q1’2016. The program is expected to have an annual saving on employee cost amounting to RO 6.4 Mn, when it is fully implemented.
The total domestic subscriber base as of December 2015 (including mobile and fixed businesses) has reached 3.384 million (excluding Mobile Resellers) compared to 3.341 million of the corresponding period of the previous year, recording a growth rate of 1.3% over the last year. Broadband segment both Mobile and Fixed Broadband services have been the key driver for the growth. Fixed and Mobile Broadband subscribers grew by 33% and 10%.
Board has recommended a final dividend of 60 bz per share which will be subject to the approval of AGM. This is in addition to the interim dividend of 55 bz per share paid in Aug 2015. This is bringing the total dividend of 115 bz per share for the financial year 2015 which is same as Year 2014 dividend. Based on average share price of RO 1.480 in Jan’2016, the dividend yield works out to be 7.8%.
Commenting on the results, Omantel Chief Executive Officer, Talal bin Said Al Mamari said: “Despite this challenging situation in domestic market, Omantel continue to show commendable performance, which clearly visible in parent company performance mainly driven by strong growth in mobile and fixed broadband services. We expect that this trend will continue to drive our growth in the coming few years. However, the net profit has been impacted by exceptional items as stated above. Our evaluation of our investment in WTL has indicated that given the financial situation of WTL, coupled with market challenges, it is not likely that turnaround can materialize without significant capital injection. Having taken all possible measures, it has been decided to provide full exposure in Year 2015 accounts as prudent measures”.
Omantel CEO confirmed that the decline in net profit will not have an impact on Omantel liquidity as well as the dividend distributed as the Company's Board of Directors proposed to the Annual General Meeting of Omantel a dividend distribution of 60 bzs per share in addition to the interim dividend paid to shareholders on August 2015.
“I would like to thank our loyal customers, visionary Board, committed employees and supportive shareholders who have always been part and in support of Omantel’s journey to excellence” Talal Al Mamari concluded.