Airtel Africa reports customer growth, naira devaluation bites

(Sharecast News) - Airtel Africa reported robust first-half growth in both operating key performance indicators (KPIs) on Monday, as its total customer base jumped 9.7% to 147.7 million customers, although its financial figures were hit by the Nigerian central bank's currency devaluation in the summer. The FTSE 100 company put the increase down to the growing popularity of mobile data and mobile money services, resulting in a 23% surge in data customers to 59.8 million and a 23.1% rise in mobile money customers to 36.5 million for the six months ended 30 September.

Its average revenue per user (ARPU) showed solid growth of 9.8% in constant currency, driven by increased usage across voice, data, and mobile money services.

Mobile money transactions experienced a substantial growth of 45.3% at constant exchange rates, with a second-quarter annualised transaction value of $116bn in reported currency.

Regarding financial performance, Airtel Africa reported a 19.7% growth in revenue at constant currency, with reported currency revenues reaching $2.62bn.

Notably, reported currency revenues declined 4.7% in the second quarter due to the impact of the Nigerian naira devaluation in June, although second-quarter constant currency revenues increased 19%.

Despite the currency devaluation, all segments delivered double-digit constant currency revenue growth.

Mobile services revenue grew 18.3% in constant currency, driven by voice revenue growth of 11.5% and data revenue growth of 28.1%.

At the same time, mobile money revenue saw substantial growth of 30.9% at constant currency.

Airtel Africa's EBITDA increased 21.2% at constant exchange rates, reaching $1.3bn with an EBITDA margin of 49.6%, reflecting a 70 basis point margin improvement over the prior period.

However, reported currency EBITDA declined 3.3% in the second quarter due to the full impact of the Nigerian naira devaluation.

The firm reported a loss after tax of $13m, mainly attributed to a foreign exchange loss of $471m recorded in finance cost before tax and $317m after tax due to the naira devaluation.

That impact was classified as an exceptional item.

Airtel Africa said capital expenditure totalled $312m, slightly higher than the previous period, as it maintained its capex guidance for the entire year in the range of $800m to $825m.

The remaining debt at HoldCo stood at $550m, due in May 2024.

With cash reserves of $495m at the HoldCo, Airtel said it was well-positioned to fully repay the debt when due.

Its leverage ratio remained stable at 1.3x in September despite the foreign exchange impact on EBITDA from the naira devaluation.

The Airtel board declared an interim dividend of 2.38 cents per share, making for a 9% increase and aligning with the company's progressive dividend policy.

"I am pleased to report a strong operating performance for the group despite foreign exchange headwinds in many of our markets and specifically in Nigeria," said group chief executive officer Olusegun Ogunsanya.

"The resilient growth in voice, data and mobile money usage levels reflects the inherent demand for these essential services across our footprint, and our six-pillar 'win-with' strategy continues to ensure we capture this growth opportunity by expanding our customer base and providing the platform to enable increased usage across the network.

"This strong momentum is supported by continued cost efficiencies which enabled further EBITDA margin expansion."

Ogunsanya said that as the firm reported in July, its results for the first quarter were significantly impacted by the changes to the foreign exchange market introduced by the central bank in Nigeria.

"Whilst the changes are required for the long-term benefit of the Nigerian economy, the immediate impact of the naira devaluation continues to weigh on our reported financial performance in the period.

"Our focus remains to enhance long-term value by continuing to drive sustained and efficient growth.

"Over the last five years we have delivered constant currency revenue and EBITDA compound annual growth rate of 17.1% and 20.7% respectively, allowing us to further de-risk the balance sheet and improve profitability across the group."

Looking ahead, Olusegun Ogunsanya said delivering affordable and reliable telecom and mobile money services across Airtel's markets remained a key focus.

"Our strong operating performance continues to make us a stronger and bigger company, which is well positioned to deliver against the growth opportunities these markets offer.

"Despite the challenges of rising diesel prices in Nigeria, we aim to limit the impact with continued operational leverage and further cost efficiencies to deliver an improved EBITDA margin in the 2024 financial year versus 2023."

Reporting by Josh White for Sharecast.com.