FSDH Initial Reaction: Airtel Africa Plc 2Q24 results 
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November 1, 2023/FSDH Research

Key Performance Highlights:

• Airtel Africa reported subdued 2Q24 numbers on 30 October 2023. The Company recorded a 4.7% YoY fall in revenue in reported currency to US$1,246 million in 2Q24, reflecting a full quarter’s impact of the Nigerian naira devaluation in June 2023. However, the Company recorded a 19.0% YoY growth in constant currency terms in 2Q24. Although the reported currency revenue growth was impacted by currency devaluation, all segments delivered double-digit constant currency revenue growth. Across the Group, mobile services revenue grew by 17.5% in constant currency, driven by voice revenue growth of 11.2% and data revenue growth of 26.6%. Mobile money revenue grew by 30.5% in constant currency. In 2Q, East Africa (+14.2% YoY, +24.2% in constant currency) led the revenue growth by region, followed by Francophone (+13.5% YoY, +9.5% in constant currency), offset by Nigeria, with the revenues declining 33.1% YoY (+20.5% in constant currency).
   
• The network operating expenses declined 13.9% YoY to US$223 million, and Sales and marketing expenses climbed 12.3% YoY to US$64 million in 2Q24, while the License fee grew 3.4% YoY to US$60 million and employee benefits expenses jumped 12.9% YoY to US$79 million. Access Charges decreased by 22.0% YoY, while the other expenses grew 2.4% YoY in 2Q24 to US$130 million.
   
• The Company’s operating profit fell 5.2% YoY (+16.9% in constant currency terms) to US$423 million in 2Q24. The reported currency EBITDA declined by 3.3% YoY (+20.2% in constant currency) in 2Q24 as the full impact of the Nigerian naira devaluation in June 2023 was incorporated. The growth in constant currency EBITDA was led by revenue growth and supported by continued improvement in operating efficiencies, which more than offset inflationary cost pressures. Moreover, EBITDA margins benefited from a 15% reduction in Nigerian diesel prices in 2Q24 compared to the prior period. However, in 2Q24, the net finance costs declined 6.1% YoY to US$199 million, primarily due to a 26.3% lower net loss on foreign exchange and derivative financial instruments of US$ 84 million in 2Q23.
   
• Consequently, the Company announced a profit before tax of US$233 million in 2Q23, down 2.9% YoY. The effective tax rate was 40.8%, compared to 36.7% in the prior year period, largely due to profit mix changes amongst the OpCos and the lower impact of withholding taxes on dividends. The Company’s profit after tax was marginally down (-0.6% YoY) to US$138 million in 2Q24, while the profit attributable to the company shareholders came in at US$115 million, down 13.5% YoY. Resultantly, the Company’s earnings per share came in at 3.1 cents per share versus 3.5 cents per share in the prior year period.
   
• The Company recorded a US$172 million capex in 2Q23, marginally higher than the prior year period (US$169 million) and maintained the full-year guidance between $800m and $825m. The remaining debt at HoldCo is $550m, falling due in May 2024. Cash at the HoldCo was $495m at the end of the period, and the Group is well positioned to repay the HoldCo debt when due fully. The Company reported leverage of 1.3x in September 2023, broadly stable despite the foreign exchange impact on EBITDA due to the Nigerian naira devaluation in June 2023. Furthermore, the Board has declared an interim dividend of 2.38 cents per share (+9%) for the period ended 30 September 2023, payable on 15 December 2023 to shareholders recorded in the register at the close of business on 10 November 2023.
   
• Looking at the key operating metrics, the Customer base grew by 9.7% YoY to 147.7 million, with increased penetration across mobile data (customer base up 23%) and mobile money services (customer base up 23.1%). Moreover, Airtel Africa recorded a 13.% YoY decline in ARPU to 2.9. However, constant currency ARPU growth was 8.6%, driven by increased usage across voice, data and mobile money.
   
• On 29 August 2023, Airtel Uganda Limited issued a prospectus concerning the offer to sell 8,000,000,000 ordinary shares, representing 20% of Airtel Uganda Limited. The listing of Airtel Uganda Limited will be on the Main Investment Market Segment of the Uganda Securities Exchange. The offer closed on 27 October 2023, with the announcement of allocation on 6 November 2023 and the admission to listing on 7 November 2023.

Market Reaction: Investor reaction to the strong 2Q24 results was muted as the stock closed unchanged at N1,400.10 versus a 1.45% gain for the All-Share Index on 30/10. However, the stock jumped 10% today to trade at N1,540.10.

Airtel Africa Earnings Highlight 2Q24

Source: Company Financials, FSDH