Zain announces 2009 financial results
2009 nine month key performance indicators
- Total Managed Active Customers - 71.8 million - up 28%
- Consolidated Revenues - KWD 1.78 billion (US$6.169b) - up 24%
- EBITDA - KWD 757.3 million (US$2.624b) - up 37%
- EBITDA Margin - 43% - up 5 pp
- EBIT - KWD 454.9 million (US$1.576b) - up 33%
- Net Income - KWD 195.7 million (US$677.1m) - down 17%
- EPS - KWD 0.051 (US$0.18)
For the first nine months of 2009, the Zain Group recorded consolidated revenues of KWD 1.78 billion (US$6.169 billion), an increase of 24% compared to the first nine months of 2008. The company's consolidated EBITDA increased by 37% for the same period to reach KWD 757.3 million (US$2.624 billion) with EBIT rising 33% to reach KWD 454.9 million (US$1.576 billion). Consolidated Net Income reached KWD 195.7 million (US$677.1 million), a decrease of 17%. The earnings per share for the nine months period stood at KWD 0.051 fils (US$0.18).
Year-on-year customer growth on the two continents across which Zain operates was 28%, whereby the company is serving 71.8 million managed active customers as of 30 September 2009. Zain has added over 15 million new active customers relative to the same time last year while the group undertook a companywide exercise to increase its focus on the acquisition and retention of high value customers and build on the delivery of a brand experience of a 'Wonderful World' to align customers' lifetime value with better customer service and experience.
Chief executive officer of Zain, Dr Saad Al Barrak commenting on the nine months results, said: “The company continues to post impressive growth in several key operational and financial indicators as is evident by the increases of our customer numbers, consolidated revenues, EBITDA, EBITDA margin and EBIT. This is a result of our vast and capital intensive network expansion and marketing programs that are attracting new customers and further enhancing our young award-winning Zain brand.”
Dr Al Barrak was keen to comment on the “exceptional EBITDA and EBIT performance that soared by 37% and 33% respectively while revenues increased 24% over the last 12 months, an indication of the effectiveness of the company's focus on customer value and cost optimization,” he said.
Earlier in the year, the company introduced ‘Drive11', an initiative that sees Zain focusing on customer-facing services and commercial activities to enhance customer experience, while centralising and outsourcing certain back office/non-core functions to strategic partners. The program aims to maximise economies of scale and scope and realise significant efficiencies, allowing Zain to provide communication services within an optimum cost structure thereby enhancing all stakeholder value.
“‘Drive11' was designed to improve Zain's operating margin and provide the company with the necessary thrust to capture the future growth potential of the markets in which we operate. Already we have seen the EBITDA margin increase by 5 percentage points to reach 43%, a very appealing and healthy figure that puts Zain among the top companies in its sector,” said Dr Al Barrak.
Dr Al Barrak also noted however, that, “the global economic crisis, unfavourable foreign currency fluctuations, particularly in many of our African operations coupled with reduced interest income and investment income plus higher financing costs, have had a significant impact on the company's overall profit. Adding to these challenges are the associated ‘start-up' capital and operational expenditures in two large and promising operations that were launched in the last 12 months, namely the Kingdom of Saudi Arabia and Ghana, as well increased fixed costs charges as a result of network expansion in many of our markets.”
During the nine-month period, foreign currency fluctuations have negatively impacted net profit by US$130 million, a 125% increase relative to the same period for 2008. “With improving currency stability in many of our African operations, we expect to attain better results in 2010 and beyond,” added Dr Al Barrak. “Compared to the same period last year, interest income from investments as well as investment income for the period dropped 80% to reach only US$19 million.”
Furthermore, the vast and capital intensive expansion of Zain's network in key growth driving several operations, namely Nigeria, Zambia, Sudan, and Iraq, has resulted in increases in fixed costs from depreciation and amortisation, with the company being further burdened by increases in financing costs.
Dr Al Barrak further added, “The nature of the nine months 2009 net income result is all the more impressive when one takes into account that during this period in 2008 we had an extraordinary gain of KWD26.6 million (US$99 million) from the successful Zambia IPO. This is an indication that operational net income growth is better than indicated for this period.”
In recent years, Zain has invested heavily in network expansion and service offerings such as ‘One Network” on both continents, resulting in year-on-year robust customer acquisition of 28%, a strategy on which Dr Al Barrak was keen to stress. “We have seen impressive customer growth in several of our key revenue generating operations, and these huge network investments will reap more financial rewards in the very near future,” he concluded.
