FSDH Initial Reaction: Airtel Africa Plc 1Q24 results 
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July 27, 2023/FSDH

Key Performance Highlights:

• Airtel Africa reported robust 1Q24 numbers on 27 July 2023. The Company recorded a 9.6% YoY revenue growth in reported currency to US$1,377 million in 1Q24 (+20.4% in constant currency terms). The top-line growth was driven mainly by an 8.7% YoY growth in the customer base to 143.1 million. Looking at segmental revenue growth, the Company maintained the growth trajectory for the segments, with the data (+16.3% YoY, +29.8% in constant currency) and Mobile money (+26.2% YoY, +31.2% in constant currency) driving the revenue growth, supported by Voice (+1.9%, +11.9% in constant currency) and Other (+7.4%, +19.2% in constant currency) Segment. Francophone Africa (+15% YoY, +14% in constant currency) led the revenue growth by region, followed by East Africa (+14% YoY, +23% in constant currency) and Nigeria, with the revenues growing 2% YoY (+23% in constant currency).
   
• The network operating expenses climbed 16.5% YoY to US$268 million, and Sales & Marketing expenses increased 3.3% YoY to US$63 million in 1Q24, while the License fee grew 14.3% YoY to US$64 million and employee benefits expenses increased 9.0% YoY to US$73 million. Access Charges decreased by 5.6% YoY, while the other expenses grew 10.2% YoY in 1Q24 to US$130 million.
   
• The Company’s operating profit jumped 8.7% YoY (+20.3% in constant currency terms) to US$462 million in 1Q24 due to solid revenue growth and continued improvements in operating efficiency in East Africa and Francophone Africa. However, in 1Q24, the net finance costs escalated 39.9% YoY to US$212 million (including loss on foreign exchange and derivatives and non-operating exceptional loss due to the Nigerian naira devaluation in June 2023). Consequently, the Company announced a loss before tax of US$220 million in 1Q23 versus a profit before tax in 1Q23 due to the devaluation of the naira in June 2023 (from N465 to N752 NGN/USD), which resulted in a foreign exchange loss of US$471m before tax and US$317m after tax. The impact of the Nigerian naira devaluation has been classified as a non-operating exceptional item. The effective tax rate was 39.2%, compared to 39.9% in the prior period, largely due to profit mix changes amongst the OpCos and the lower impact of withholding taxes on dividends. The Company’s loss after tax was US$151 million in 1Q24, as the solid operating performance was dampened by higher foreign exchange and derivative losses. The Company reported a loss attributable to the company shareholders of US$170 million. Resultantly, the Company’s loss per share came in at 4.5 cents per share versus 4.4 cents earnings per share in the prior year period. During the period, the Company benefitted from a US$30 million one-off gain arising from the reversal of deferred tax liability on account of the reduction of undistributed retained earnings of Nigeria. This reduction is an indirect consequence of the impact of the naira devaluation.
   
• The Company recorded an 11.1% YoY growth in underlying EBITDA in reported currency (+22.5% in constant currency terms) to US$682 million in 1Q24, driven by solid revenue growth. Moreover, the underlying EBITDA margin increased to 49.5%, a 69 bps YoY increase in reported currency and 83 bps in constant currency. The leverage ratio remained stable at 1.3x in 1Q24. Net cash generated from operating activities increased 49.3% YoY to US$580 million, largely driven by higher operating profits, while the Return on Capital Employed was 23.7% in 1Q24, a 71 bps YoY improvement.
   
• Looking at the key operating metrics, the Customer base grew by 8.8% YoY to 143.1 million, with increased penetration across mobile data (customer base up 22%) and mobile money services (customer base up 24.3%). Moreover, Airtel Africa recorded an ARPU growth of 1.1% YoY in reported currency (+11.1% in constant currency) to US$3.2 in 1Q24.

Market Reaction: Investor reaction to the 1Q24 results was muted as the stock closed unchanged at N1,319.90, versus a 0.31% fall for the All-Share Index (27/7).

Airtel Africa Earnings Highlight 1Q24

Source: Company Financials, FSDH

Notes:
1 Revenue includes inter-segment eliminations of $45m for the quarter ended 30 June 2023 and $36m for the prior period.
2 Mobile money revenue post inter-segment eliminations with mobile services was $156m for the quarter ended 30 June 2023, and $123m for the prior period.
3 EBITDA includes other income of $7m for the quarter ended 30 June 2023 and $2m for the prior period.