ECONET WIRELESS ZIMBABWE LIMITED
Reviewed abridged financial results
for the half year ended
31 August 2022
ECONET WIRELESS ZIMBABWE LIMITED
(Incorporated in Zimbabwe on 4 August 1998
under Company registration number 7548/98)
ZSE alpha code: ECO ISIN: ZW 000 901 212 2
Registered office
Econet Park, 2 Old Mutare Road,
Msasa, Harare, Zimbabwe
Telephone: +263 242 486124-5, +263 772 793 700, Fax:+263 242 486183
E-mail: info@econet.co.zw,
Website: www.econet.co.zw
Content
Financial highlights | 1 |
Chairman's statement | 2 |
Abridged consolidated interim statement of profit or loss | |
and other comprehensive income | 6 |
Abridged consolidated interim statement of | |
financial position | 8 |
Abridged consolidated interim statement of | |
changes in equity | 10 |
Abridged consolidated interim statement of cash flows | 12 |
Notes to the abridged consolidated financial statements | 13 |
TIP-OFFS ANONYMOUS
Deloitte & Touche
Telephone: | 0808 5500 |
Address: | The Call Centre |
Freepost: | P.O. Box HG 883, Highlands, Harare, Zimbabwe |
E-mail: | econetzw@tip-offs.com |
1
Financial highlights
Reviewed Inflation adjusted
Revenue
Decreased by 1% from ZW$ 114.0 billion (2021) to
ZW$112.4 billion
Subscribers
Increased by 20% from 13.4 million (2021) to
16.1 million
EBITDA
Decreased by 17% from ZW$ 62.6 billion (2021) to
ZW$ 52.2 billion
2 | ECONET WIRELESS ZIMBABWE LIMITED Reviewed Abridged Consolidated Financial Results | 3 |
Chairman's statement
-
Having launched the first 5G network in the country, in the first half of the year, expanding the breadth and depth of our 5G footprint will be pivotal in delivering additional digital growth services to both
our retail consumers and enterprise customers. "
Overview
We remain committed to the fulfilment of our vision of ensuring a digitally connected future that leaves no Zimbabwean behind, despite the macroeconomic challenges that characterize the operating environment. Our focus on customer experience and delivering value enabled the business to maintain strong key operating metrics during the first half of the current fiscal year. Even with these strong operating metrics, these half year results reflect the impact of fiscal challenges that are beyond the business' control.
Environment and regulatory review
Zimbabwe's telecommunications sector players continue to engage the Regulator for regular and adequate tariff reviews which track inflation and exchange rate trends to ensure the viability of the sector. The tariffs, however, continue to be set below both inflation and exchange rate trends.
The telecommunication traffic monitoring system (TTMS) system became fully operational
on 1 May 2022. This has placed an additional tax burden of US 6 cents per minute on the business on international incoming traffic, thereby increasing the cost of delivering our services. It is anticipated that these increased taxes will result in customers opting to use alternative calling platforms that do not have similar obligations, such as WhatsApp, Telegram and other similar applications. As previously stated, these taxes are additional revenue taxes to those already paid by the Company prior to any allocation of revenue to cost of operations, and unwittingly create unequal regulation and disadvantages licensed operators.
Foreign currency scarcity continued to negatively impact the Group's various network expansion and routine maintenance plans.
Operations review
Our goal remains that of meeting and addressing our customers' communication and connectivity needs using the latest technologies. With the limited foreign currency resources at our disposal,
we further invested in our radio access network to reduce congestion and improve call completion rates and quality. Having launched the first 5G network in the country, in the first half of the year, expanding the breadth and depth of our 5G footprint will be pivotal in delivering additional digital growth services to both our retail consumers and enterprise customers.
As part of our digital service provider (DSP) thrust, the business migrated and upgraded the call centre platform to a more reliable and scalable cloud platform. The new system handles more customers efficiently, thereby reducing customer waiting and query handling times. This resulted in an improvement in our query resolution time and customer experience. The business experienced an increase in the uptake of self-care platforms. The self-care platforms include subscriber registration verification self-service, PUK retrieval, international roaming activation and airtime transfer among other services.
We also launched the electronic recharging system (ERS) for our mobile channel partners and have signed up more than 200 channel partners as we seek to serve even the most remote areas of the country. Our focus on customer empowerment saw an increase in self-service adoption on both the traditional USSD and our more recent web platforms.
Financial review
Inflation adjusted revenue for the period under review was ZW$112.4 billion, representing a decline of 1% compared to the same period last year. Whilst voice and data volumes increased by 27% and 40%, respectively, these increases were
negated by tariffs which remained unaligned to the cost base of the business. The subdued revenue performance is indicative of frequent tariff reviews that are lagging behind inflation and changes in the consumer price index (CPI). For the period under review, year-on-year inflation was 285% and the tariff increase of 61% was not adequate to cover the loss in value.
The table below helps to illustrate the misalignment of tariff adjustments to changes in macro indicators:
Consumer Price Index - Tariff Analysis
Closing | Tariffs | ||||
Interbank | |||||
Period | CPI | rate | Voice | Data | |
August 2021 | 3,191 | 86 | 9.7 | 1.6 | |
August 2022 | 2.6 | ||||
12,286 | 547 | 15.6 | |||
% Change | 61% | ||||
285% | 537% | 61% | |||
Earnings before interest, taxation, depreciation and amortization was 17% lower than the same period last year. The reduction in our profit margin was partly attributable to low revenues due to sub-optimal tariffs coupled with cost pressures experienced under the hyperinflationary environment. As a result of the exchange rate movements over the last six months, the business recorded foreign exchange losses of ZW$ 43.7 billion representing 39% of revenue against a prior year comparative of 2% virtually eroding any possibility of achieving an accounting profit. The foreign debt carried by the business represents the debt that was on the balance sheet at the time of the change of the currency in 2018 and the business continues to engage the monetary authorities for a settlement of this debt at 1:1 in light of a provision in existing government policy.
4 | ECONET WIRELESS ZIMBABWE LIMITED Reviewed Abridged Consolidated Financial Results | 5 |
Chairman's statement (continued)
The business continued to pursue cost containment measures in order to maintain viability and conserve cash to avoid disruption of operations. Capital expenditure for the six months was less than 5% of revenue compared to a regional average of 15% for other telecommunication operators. Accessing foreign currency remained a challenge due to acute shortages of foreign currency in the country. Lack of adequate capital investment adversely impacted our network coverage and, in turn, customer satisfaction.
Corporate social investment
Despite the challenges faced, the Group continues to invest in the communities in which it does business. During the period under review, our team's accelerated community outreach activities through initiatives under three strategic pillars: Education, Global Health, and Rural Transformation and Sustainable Livelihoods.
Our efforts through our implementing partner, Higherlife Foundation, positively contributed towards human capital development through its flagship scholarship programs, where more than 8 500 learners were supported with scholarships. 36 000 students were awarded technological scholarships to access the Akello platform in a bid to catalyse access to quality education.
Under the Rural Transformation and Sustainable Livelihoods theme, we focused on continuous
technical advisory services and harvesting for rural farmers that had been trained and supported with farming inputs at the start of the farming season.
Our initiatives under the Health pillar continued to complement the activities of the Ministry of Health and Childcare. Our activities chiefly focused on improving health outcomes in maternal and neonatal health in referral hospitals; preventing the further transmission of neglected tropical diseases by 2025; elimination of cholera by 2028; and catalysing Zimbabwe's ability to prepare and respond to public health threats, emergencies, and disasters.
Outlook
The Group continues to seek value creating opportunities. We have a strong platform to anchor our transition to a fully-fledged digital services provider. Going forward, exploiting 5G network enabled opportunities will be key to keep abreast with global trends and improve service delivery. To enable all of this, we continue to seek opportunities to access foreign currency for which all our initiatives are dependent.
Dividend declaration
The Directors have decided not to declare a dividend for the period under review as they continue to assess the economic environment.
Appreciation
On behalf of the Board, I would like to extend my gratitude to our valued customers, business partners and stakeholders who continue to support our business during these challenging times. Our staff have made exceptional contributions towards the growth and success of the business, their passion and commitment to the business is appreciated. The continued unity of purpose and wise counsel from the Board members remains invaluable and is sincerely appreciated. On behalf of the Board, I would like to recognize the significant contributions made by our professional and competent management team. Without their
personal commitments, we would be unable to achieve the value we create for all our stakeholders.
I am grateful to Ministry of ICT, Ministry of Finance, the Reserve Bank of Zimbabwe and our regulator, POTRAZ, for the opportunity to engage on industry specific issues of regulation, policy formulation and implementation.
Dr. J. Myers
CHAIRMAN OF THE BOARD
21 October 2022
6 | ECONET WIRELESS ZIMBABWE LIMITED Reviewed Abridged Consolidated Financial Results | 7 |
Abridged consolidated interim statement of profit or loss and other comprehensive income
For the half year ended 31 August 2022
Inflation adjusted | Historical cost | ||||
(All figures in ZW$ 000) | Note | August 2022 | August 2021 | August 2022 | August 2021 |
Revenue | 6 | 112 381 243 | 113 996 291 | 73 712 710 | 27 390 560 |
Other income | 1 315 699 | 303 400 | 1 272 413 | 81 870 | |
Share of (loss) / profit of associates | (215 505) | (73 521) | 168 405 | 214 529 | |
Direct network and technology operating costs | (24 453 608) | (28 105 331) | (16 951 450) | (6 764 241) | |
Other network costs | (7 222 738) | (6 324 006) | (5 076 693) | (1 540 269) | |
Costs of handsets and other accessories | (3 184 554) | (3 108 851) | (1 763 263) | (760 529) | |
Marketing and sales expenses | (4 703 580) | (621 561) | (3 184 978) | (139 345) | |
Impairment of trade receivables | (1 261 167) | (451 373) | (805 890) | (107 344) | |
Staff costs | (13 349 710) | (8 575 283) | (9 127 801) | (2 075 140) | |
Other expenses | (7 085 346) | (4 488 557) | (4 924 827) | (1 086 869) | |
Profit before interest, taxation, depreciation, | |||||
amortisation, impairment, exchange losses | |||||
and monetary adjustment | 52 220 734 | 62 551 208 | 33 318 626 | 15 213 222 | |
Depreciation, amortisation and impairment of | |||||
property, plant and equipment and intangibles | 8 | (19 473 271) | (20 663 166) | (5 293 608) | (4 532 190) |
Other impairments | (418) | (1 783 442) | (393) | (463 225) | |
Exchange losses | (43 729 296) | (1 852 166) | (28 404 891) | (335 410) | |
Net monetary adjustment | 17 238 693 | (2 311 959) | - | - | |
Finance income | 498 372 | 688 690 | 255 860 | 164 849 | |
Finance costs | (1 436 727) | (1 251 726) | (1 129 295) | (307 537) | |
Profit / (loss) before tax from continuing | |||||
operations | 5 453 167 | 35 377 439 | (1 253 701) | 9 739 709 | |
Income tax expense | (11 237 838) | (9 723 516) | (4 039 071) | (1 937 277) | |
(Loss) / profit for the period from continuing | |||||
operations | (5 784 671) | 25 653 923 | (5 292 772) | 7 802 432 | |
(Loss) / profit after tax from discontinued | |||||
operations | 7 | - | (291 823) | - | 48 363 |
(Loss) / profit for the period | (5 784 671) | 25 362 100 | (5 292 772) | 7 850 795 | |
(Loss) / profit for the period attributable to | |||||
Equity holders of the parent | (5 531 953) | 25 475 411 | (5 443 939) | 7 836 284 | |
Non-controlling interest | (252 718) | (113 311) | 151 167 | 14 511 | |
(5 784 671) | 25 362 100 | (5 292 772) | 7 850 795 | ||
Other comprehensive income / (loss) | |||||
Items that will not be reclassified subsequently to | |||||
profit or loss | |||||
Fair value (loss) / gain on investments at FVTOCI, | |||||
net of tax | (125 103) | (5 889 434) | 58 624 436 | 842 529 | |
Property revaluation adjustment, net of tax | 54 957 411 | (302 915) | 86 745 137 | (78 678) | |
Share of other comprehensive income of | |||||
associate | 1 597 022 | - | 3 392 975 | - | |
56 429 330 | (6 192 349) | 148 762 548 | 763 851 |
Inflation adjusted | Historical cost | |||||
(All figures in ZW$ 000) | Note August 2022 | August 2021 | August 2022 | August 2021 | ||
Other comprehensive income / (loss) | ||||||
attributable to | ||||||
Equity holders of the parent | 56 429 330 | (6 192 349) | 148 762 548 | 763 851 | ||
Non-controlling interest | - | - | - | - | ||
56 429 330 | (6 192 349) | 148 762 548 | 763 851 | |||
Total profit or loss and other comprehensive | ||||||
income attributable to | ||||||
Equity holders of the parent | 50 897 377 | 19 283 062 | 143 318 609 | 8 600 135 | ||
Non-controlling interest | (252 718) | (113 311) | 151 167 | 14 511 | ||
50 644 659 | 19 169 751 | 143 469 776 | 8 614 646 | |||
Basic and diluted (loss) / earnings per share | ||||||
(ZW dollars) | 10 | |||||
From continuing operations | (2.31) | 10.61 | (2.27) | 321 | ||
From continuing and discontinued operations | (2.31) | 10.49 | (2.27) | 323 |
IAS 29 discourages the publication of historical results as the inflation adjusted results are the primary financial results. However, the historical cost results are included as supplementary information to meet other user requirements. As a result, the auditors have not expressed a review conclusion on this historical information.
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Econet Wireless Zimbabwe Limited published this content on 18 November 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 November 2022 11:58:10 UTC.