Kcell in the first half of the year: the development of a strategy of product innovation

 

Almaty, 17 July, 2015 – Kcell Joint Stock Company ("Kcell" or the "Company") (LSE, KASE: KCEL), the leading provider of mobile telecommunications services in Kazakhstan by market share in terms of revenue and subscribers, announces its interim results for January – June 2015.

Second quarter

  • Net sales decreased by 10.5 percent to KZT 42,980 million (48,035). Service revenue down 14.5 percent to KZT 40,079 million (46,904).
  • EBITDA, excluding non-recurring items, declined by 19.4 percent to KZT 22,184 million (27,536). EBITDA margin decreased to 51.6 percent (57.3).
  • Operating income, excluding non-recurring items, decreased by 24.4 percent to KZT 16,057 million (21,238).
  • Net finance cost increased to KZT 1,405 million (219).
  • Net income 31.5 percent lower at KZT 11,319 million (16,512).
  • Free cash flow decreased to KZT 11,221 million (16,213).
  • The total number of subscriptions decreased by 82 thousand.

First half

  • Net sales 6.6 percent lower at KZT 86,064 million (92,142). Service revenue decreased by 12.3 percent to KZT 79,835 million (91,011).
  • EBITDA, excluding non-recurring items, declined by 13.5 percent to KZT 46,001 million (53,208). EBITDA margin was 53.4 percent (57.7).
  • Operating income, excluding non-recurring items, down 17.8 percent to KZT 33,759 million (41,093).
  • Net finance cost increased to KZT 1,991 million (499).
  • Net income down 23.6 percent to KZT 24,553 million (32,147).
  • Free cash flow decreased to KZT 14,410 million (34,201).
  • The number of subscriptions decreased by 653 thousand from the end of the second quarter of 2014.

Commenting on the results, Arti Ots Kcell CEO said - "Further intensification of competition, with notably aggressive pricing, has impacted our results for the second quarter of 2015. Despite this pressure, however, we generated a double-digit increase in data revenue in the reporting period and doubled our revenue from handset sales on the back of strong demand for smartphones. In June 2015 we launched a nationwide bundled offering - "Hello Kazakhstan" – which provides an attractive combination of calls to all networks and Internet services to meet rising customer demand for fast and reliable data services. In addition, our ongoing cost discipline has resulted in an EBITDA margin that remains at an industry leading level.

We achieved a further operational milestone during the quarter with the launch of two more Kcell branded stores in Almaty and Astana. Our branded store concept has proved very popular and early results are demonstrating the effectiveness of this recently introduced business model. In addition, we are further developing our products and services, alongside new revenue streams from content such as music, video and mobile financial services.

Looking ahead, our focus remains on delivering our customer-centric strategy of providing innovative products to strengthen our market leading position and to drive growth in our business-to-business operations. At the same time, we will continue to invest in enhancing the capacity and quality of our network to ensure the long-term sustainability of our business."

Financial highlights

KZT in millions, except key ratios,
per share data and changes
Apr-Jun
2015
Apr-Jun
2014
Chg
(%)
Jan-Jun
2015
Jan-Jun
2014
Chg
(%)
Net sales 42,980 48,035 -10.5 86,064 92,142 -6.6
of which service revenue 40,079 46,904 -14.5 79,835 91,011 -12.3
EBITDA excl. non-recurring items 22,184 27,536 -19.4 46,001 53,208 -13.5
Margin (%) 51.6 57.3   53.4 57.7  
Operating income 16,057 21,033 -23.7 33,432 40,888 -18.2
Operating income excl. non-recurring items 16,057 21,238 -24.4 33,759 41,093 -17.8
Net income attributable to owners of the parent 11,319 16,512 -31.5 24,553 32,147 -23.6
Earnings per share (KZT) 56.6 82.6 -31.5 122.8 160.7 -23.6
CAPEX-to-sales (%) 8.9 3.9   6.9 4.6  
Free cash flow 11,221 16,213   14,410 34,201