Q2 2021 results: Operating cash flow doubles on strong fundamentals

H1 2021 key highlights

• Consolidated revenue landed at EGP 17.4bn, growing 16% YoY on a 31% YoY hike in data followed by voice and other enterprise revenues.

• Customer base continued to grow YoY across the board with fixed voice customers increasing 6% YoY, fixed data 18% YoY, and mobile customers 21% YoY.

• EBITDA came in at EGP 6.7bn, growing 33% YoY and recording a strong margin of 39% on a higher margin revenue mix and cost containment efforts.

• Net profit reached EGP 3.9bn (+88% YoY) thanks to a strong operational performance, growth in investment income from Vodafone, and FX gains. Normalizing non-operational items including a one-off deferred tax and Vodafone provision reversals in Q1 2020 in addition to FX, provisions, and impairments, net profit would reach EGP 3.5bn, growing 54% YoY.

• In-service CapEx came in at EGP 2.4bn, 14% of sales, while cash CapEx stood at EGP 6.0bn, excluding spectrum fees, representing 35% of top line.

• Net debt amounted to 19bn, representing 1.4x of annualized EBITDA compared to 1.6x in FY 2020, while the effective interest rate declined to 5.7% compared to 6.9% in H1 2020.

Adel Hamed, Managing Director and Chief Executive Officer, commented:

'I am very proud of our performance during the first half of the year, as we continue to deliver on our growth targets; both operationally and financially. Top line grew 16% YoY mainly owed to significant data growth of 31% YoY, which, in parallel to the continued cost containment efforts, sustained the improve profitability. EBITDA margin came in at 39% and operating profit grew almost 60% YoY, trickling down to an organic net profit growth of 54% YoY.

Our focus on cash flow is also evident in this quarter's results and in the recent announcement of a modified shareholders' agreement with Vodafone Group. In the first half of the year, we have doubled our net operating cash flow and reached a positive free cash flow both including and excluding Vodafone Egypt's dividends of EGP 1bn and EGP 0.2bn, respectively, the latter being a first in five years, which is a substantial milestone especially considering the EGP 2.4bn spectrum payment in Q1.

We have provided guidance to the market before that our aim is to translate the impressive top line growth to our bottom line and subsequently to cash flows. That, combined with Capex rationalization and sustainable dividends from Vodafone Egypt, would yield sustainable positive cash flows in the future. We were aiming for this outcome while negotiating the amended shareholders' agreement with Vodafone Group and we will continue to work on several other work streams to ensure Telecom Egypt's leadership in the market across all fronts. We are also happy to inform you that we have received the second tranche of Vodafone Egypt's exceptional distribution of EGP 3.6bn in July.'