Airtel Zambia earnings slump by 75% for 2019 FY
Airtel Networks Plc, Telecom

AIRTEL Zambia Plc has reported a drop-in earnings by 75.73% for its 2019 financial year, according to published financial statements from the company.

The company sent the first signal to the market through a SENS announcement that was published on 5th March 2020.  “In accordance with the Lusaka Securities Exchange (“LuSE”) Listings Requirements, the Board of Directors of Airtel Networks Zambia Plc (“Airtel” or “the Company”) hereby advises the Shareholders of the Company that the Earnings per Share for the year ended 31 December 2019 is expected to be approximately 75% lower than the year ended 31 December 2018”, read the statement issued by Company Secretary Sonia Shamwana-Chinganya on behalf of the board.

The company, which boasts of having one the most expansive smartphone networks in Zambia, currently has a customer base stands at 5.836 million out of a total of 15.5 million, according to SENS announcement published on 6th March 2020.

The company attributes the drop in the earnings is primarily to currency depreciation across the financial year which has had a significant impact on the Company’s income statement. However, a closer look at the published profit and loss statement shows that despite gross profit increasing by 11.52%, the company’s tax bill rose by 21.39% in addition to finance and exchange costs rising by 29.72%.

With an asset growth (specifically that expansive smartphone infrastructure) of 14.5%, these can be frustrating times for the management that only achieved 10.02% topline growth. In addition, the boards finance committee will be looking closely that the increase in non-current assets. If a company has a high proportion of noncurrent to current assets, this can be an indicator of poor liquidity, since a large amount of cash may be needed to support ongoing investments in noncash assets. At present, Airtel’s non-current assets increased by 16% and currently stand at 6.35 times that of current assets. The finance committee of the board knows that cash is king and will be wary of the reduction in net cash generated from operations in the cash flow statement.

Telecommunications companies are synonymous with high cash burn due to technological investments. Non-current assets (debt) increased by 195% raising the company’s gearing ratio. Conversely, its appetite for short term financing was reigned in as current liabilities reduced from K1.631 billion to K1.277 billion.

The company has signed that it will not be paying a dividend. This is prudent for the management team as they grapple with a run-away exchange rate, accelerating inflation and capital costs for technological investments that are dollar-based.

 

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