FSDH Initial Reaction: Airtel Africa Plc FY23 results 
Kindly click here to download the report.

May 12, 2023/FSDH

Key Performance Highlights:

• Airtel Africa reported robust FY23 numbers on 11 May 2023. The company recorded an 11.5% YoY revenue growth in reported currency to US$5,255 million in FY23 (+17.6% in constant currency terms). It is worth noting that the slowdown in revenue growth from FY22 (+20.6% YoY on a reported basis) was due to a loss of tower-sharing revenues following the sale of towers in Madagascar, Malawi, and Tanzania in 2H23 and NIN-related barring of voice services in Nigeria. The top-line growth was driven mainly by a 9.0% YoY growth in the customer base to 140.0 million. Looking at segmental revenue growth, the company maintained the growth trajectory for the segments, with the data (+17.2% YoY, +23.8% in constant currency) and Mobile money (+25.1% YoY, +29.6% in constant currency) driving the revenue growth, supported by Voice (+5.6%, +11.8% in constant currency) and Other (+7.5%, +13.2% in constant currency) Segment. Nigeria led the revenue growth by region, with the revenues growing 13.3% YoY (+20.3% in constant currency), followed by East Africa (+8.1% YoY, +13.4% in constant currency) and Francophone Africa (+5.5% YoY, +11.9% in constant currency).
   
• The network operating expenses climbed 25.7% YoY to US$1,027 million, and Sales & Marketing expenses increased 8.5% YoY to US$243 million in FY23, while the License fee edged 1.2% lower YoY to US$241 million and employee benefits expenses declined 3.4% YoY to US$287 million. Access Charges marginally increased by 0.7% YoY, while the other expenses grew 4.4% YoY in FY23 to US$471 million.
   
• The company’s operating profit jumped 14.5% YoY (+20.1% in constant currency terms) to US$1,757 million in FY23 due to solid revenue growth and continued improvements in operating efficiency in East Africa and Francophone Africa. However, in FY23, the net finance costs escalated 79.3% YoY to US$723 million due to higher foreign exchange losses of US$178m and higher derivative losses of US$67m as a result of adverse foreign exchange movements. Consequently, the profit before tax declined by 15.5% YoY to $1,034 million in FY23. The company recorded an effective tax rate of 27.5% in FY23 compared to 38.3% in FY22 due to the initial recognition of a deferred tax credit in Kenya, DRC, and Tanzania. The company’s profit after tax was marginally down 0.6% YoY to US$750 million in FY23, as growth in operating profit was offset by higher foreign exchange and derivative losses. The company reported a profit attributable to the company shareholders of US$663 million, up 5.1% YoY. Accordingly, the company’s earnings per share came in at 17.7 cents, up 5.2% YoY due to higher operating profits and exceptional items, gain on deferred tax credit recognition in Kenya, the DRC and Tanzania partially offset by higher foreign exchange and derivative losses.
   
• The company recorded an 11.4% growth in underlying EBITDA in reported currency (+17.3% in constant currency terms) to US$2,575 million in FY23, driven by solid revenue growth. However, the underlying EBITDA margin was largely flat at 49.0%, a drop of 3 bps YoY in reported currency and 14 bps in constant currency, despite inflationary cost pressures. The leverage ratio remained stable at 1.4x in FY23, despite US$500 million of spectrum investment during the year. Net cash generated from operating activities increased 9.8% YoY to US$2,208 million, largely driven by higher operating profits, while the Return on Capital Employed was 23.3% in FY23, a 101 bps YoY improvement.
   
• Looking at the key operating metrics, the Customer base grew by 9.0% YoY to 140.0 million, with increased penetration across mobile data (customer base up 16.9%) and mobile money services (customer base up 20.4%). Moreover, Airtel Africa recorded an ARPU growth of 1.8% YoY in reported currency (+7.4% in constant currency) to US$3.3 in FY23.
   
• The board has recommended a final dividend of 3.27 cents per share for the financial year ended 31 March 2023 (bringing total dividend to 5.45 cents per share in FY23), payable on 26 July 2023 to shareholders recorded in the register at the close of business on 23 June 2023.
   
• On 9 May 2023, the company announced that Airtel Networks Limited (Airtel Nigeria) had paid N58.7 billion (US$127.4 million), payable to the Nigerian Communications Commission (NCC), to renew its 2x10MHz 2100 MHz spectrum licence. Once renewed, the licence will be valid for 15 years following the expiry of the previous licence (30 April 2022).

Market Reaction: Investor reaction to the FY23 results was muted as the stock closed unchanged at N1,250.00, versus a 0.09% fall for the All-Share Index (11/5).

Airtel Africa Earnings Highlight FY23

Source: Company Financials, FSDH