Net income rises 13% to $321 million; 49.2 million customers served by 30 June 2019
KUWAIT: Zain Group, a leading mobile innovator with operations in eight markets across the Middle East and Africa, announced its consolidated financial results for the six months to 30 June 2019. Zain served 49.2 million customers at the end of the period, reflecting 4 percent increase year-on-year (Y-o-Y).
For the first six months of 2019 (H1), Zain Group generated consolidated revenue of KD 811 million ($2.7 billion), reflecting a growth of 61 percent Y-o-Y. EBITDA for H1 2019 reached KD 354 million ($1.17 billion), up 109 percent Y-o-Y, reflecting an EBITDA margin of 44 percent. Net income for H1 2019 reached KD 97.3 million ($321 million), up 13 percent Y-o-Y, reflecting Earnings Per Share of 22 Fils ($0.07).
For H1 2019, foreign currency translation impact, predominantly due to the 43 percent currency devaluation in Sudan from an average of 26.5 in H1 2018 to 46.5 in H1 2019 (SDG / USD), cost the Group USD 101 million in Revenue, $44 million in EBITDA and $15 million in net income.
In the second quarter of 2019 (Q2), Zain Group generated consolidated revenue of KD 407 million ($1.34 billion), reflecting a growth of 66 percent when compared to the same period in the previous year. EBITDA for the quarter reached KD 177 million ($582 million), up 108 percent Y-o-Y, reflecting an EBITDA margin of 43 percent. Net income for the quarter amounted to KD 50 million ($165 million), up 10 percent Y-o-Y, reflecting earnings per share of 12 fils ($0.04).
For Q2 2019, foreign currency translation impact, predominantly due to the 38 percent currency devaluation in Sudan from an average of 28.1 in Q2 2018 to 45.6 in Q2 2019 (SDG /USD), cost the company $46 million in Revenue, $19 million in EBITDA and $6 million in net income.
Key Operational Notes for H1 2019
- The consolidation of Zain Saudi Arabia (KSA) into Zain Group that started in Q3 ‘18 resulted in an additional $1.1 billion in revenue and $506 million in EBITDA during H1 2019.
- Expansion of 4G LTE networks across key markets and the launch of 5G commercial services in Kuwait, coupled with numerous data monetization initiatives saw Zain Group data revenue grow 114 percent Y-o-Y, to represent 36 percent of the Group’s consolidated revenue. The consolidation of Zain KSA was the primary contributor to the data growth.
- The adoption of new accounting standard IFRS 16 – ‘Lease’ from the beginning of 2019 resulted in a benefit to EBITDA of KD 37 million ($121 million), and an increase in net income of KD 3.2 million ($11 million)
Commenting on the results, Chairman of the Board of Directors of Zain Group, Ahmed Al-Tahous said, “The Group’s performance in the first half of the year was very pleasing given the numerous operational and competitive challenges we face in several key markets. The Board is working closely with senior management in maintaining our leadership position in many of our markets and future-proofing the business by investing heavily in our networks and seeking new opportunities in the digital space. We are committed to the region’s economic and social prosperity and are sincerely grateful for the enabling environment created by the governments and regulatory authorities across our footprint.”
Bader Nasser Al-Kharafi, Zain Vice-Chairman and Group CEO commented, “The first six months of 2019 were exceptional as we recorded impressive Net Income and EBITDA growth in all key operations, namely Kuwait, Saudi Arabia, Iraq, Jordan and Bahrain. We also continue to perform remarkably well in all key financial indicators in local SDG currency terms in Sudan, though this progress is negated by currency devaluations. Overall, these robust set of results reconfirm that our digital transformation program, efficiency drive, and growth strategy is on track in delivering the ambitious financial targets we have set in a bid to exceed all expectations from our stakeholders.”
Al-Kharafi continued, “Zain Group’s financial growth during the period in many key indicators was underpinned primarily by the strategic consolidation of Zain KSA, combined with the Saudi operator’s impressive performance, which has driven it to profitability for four consecutive quarters. Zain KSA’s market capitalization has more than doubled in the last 12 months, offering further testament of investor confidence in the successful implementation of the company’s turnaround strategy and future roadmap.”
The Vice-Chairman and Group CEO concluded, “The recent launch of 5G networks in Kuwait was a major milestone, as it allows us to offer more innovative and compelling services to our customers in government, business, IoT, and smart city sectors, bolstering the digital economy in these areas. 5G technology will create vast opportunities in the value chain proposition in numerous industries and will push the telecom sector to a new and exciting phase of growth. Zain is mobilizing all its resources to capitalize on this enormous opportunity in creating shareholder value.”
Operational review of key markets for the six months ended 30 June 2019
Kuwait: Maintaining its market leadership, the flagship operation of Zain Group saw its customer base serve 2.8 million in a very challenging period that witnessed improving Net Income for the quarter. The Group’s most profitable operation saw its H1 2019 Revenue reach KD 165 million ($544 million), and net income increase by 10 percent to reach KD 44 million ($144 million). Zain Kuwait’s EBITDA amounted to KD 65 million ($213 million), an 18 percent increase Y-o-Y, reflecting an EBITDA margin of 39 percent. Data revenue grew by 9 percent Y-o-Y, representing 37 percent of total revenue.
Saudi Arabia: The operator continues to grow all its key financial metrics, recording net income for the last four consecutive quarters. For H1 2019, Zain KSA generated revenue of SAR 4.2 billion ($1.1 billion), a 17 percent increase compared to the same period in 2018. EBITDA for H1 2019 amounted to SAR 1.9 billion ($506 million), up 60 percent Y-o-Y, reflecting an EBITDA margin of 46 percent. Net income for the period soared to reach an unprecedented SAR 260 million ($69.2 million), reflecting a significant turnaround on the H1 2018 net loss of SAR 115 million ($30.6 million). Data revenue represents 44 percent of total revenue and customers served reached 8.3 million.
Iraq: Zain Iraq performed exceptionally well in H1 2019 when compared to H1 2018 with revenue reaching $522 million and EBITDA reached $220 million, up 14 percent reflecting an EBITDA margin of 42 percent. The operation reported a net income of $25 million for H1 2019, up 39 percent on the $18 million profit recorded for H1 2018. The operator added 600,000 customers (up 4 percent Y-o-Y) to reach 15.3 million and witnessed significant growth in data Revenue, as well as profitable progress in the enterprise (B2B) segment.
Sudan: Despite the ongoing social and economic issues in the country, the operator continues to perform well in local currency (SDG) terms, as Revenue grew by 45 percent Y-o-Y to reach SDG 6.4 billion ($138 million, down 18 percent in USD terms) for H1 2019. EBITDA increased by 36 percent to reach SDG 2.4 billion ($52 million, down 23 percent in USD terms), reflecting an EBITDA margin of 37 percent, while net income increased by 31 percent to reach SDG 900 million ($19 million, down 30 percent in USD terms). Data revenue formed 16 percent of total Revenue, with an impressive growth of 31 percent (Y-o-Y) in SDG terms. Zain Sudan saw its customer base expand 9 percent to reach 15.1 million customers.
Jordan: Zain Jordan serves a customer base of 3.7 million at the end of June 2019, maintaining its market leading position. Y-o-Y revenue was stable at $240 million, with EBITDA up 17 percent to reach $113 million, reflecting a 47 percent EBITDA margin. Net Income increased 9 percent to $39 million in H1 2019. With the continual expansion of 4G services across the country, data revenue grew by 4 percent, representing 40 percent of total revenue.
Bahrain: Zain Bahrain generated revenue of $81 million for the first six months of 2019. EBITDA for H1 2019 increased by 41 percent to reach $28 million, reflecting an EBITDA margin of 35 percent. Net Income amounted to $6.7 million, reflecting a 9 percent increase Y-o-Y. Data revenue represents 48 percent of overall revenue.