Airtel Africa records double-digit revenue growth.  

Article Summary  

  • In constant currency, Airtel Africa’s revenue experienced robust growth, with a 17.6% increase. In reported currency, revenues grew by 11.5% to reach $5.255 billion. 
  • The company’s underlying EBITDA showed a strong performance, increasing by 17.3% in constant currency and 11.4% in reported currency, reaching $2.575 billion. 
  • Despite these positive results, a significant increase of 79% in net finance costs contributed to a decline in profit after tax from $5 million to $750 million. 

Airtel Africa’s financial results for the year ended March 31, 2023, showed strong revenue growth of 11.5% to $5.255 billion, driven by growth in all regions and key services. Nigeria experienced a 20.3% revenue increase, East Africa saw a 13.4% increase, and Francophone Africa recorded an 11.9% increase.

Mobile services revenue, which contributes over 80% of total revenue, grew by 9.9% to $4,721 million, driven by a 9% growth in customer base. Mobile money services also performed well, with revenue growing by 25.2% to $692 million. 

Indeed, the revenue growth of Airtel Africa fell short of both Analysts’ consensus forecast of 11.91% and the company’s expected growth of 21% in constant currency. Several factors attributed to this, including currency devaluation, loss of tower-sharing revenues from tower sales in certain regions, and the impact of NIN-related barring of voice services in Nigeria. 

Although the company’s EBITDA growth remained strong at 11.41% year-on-year, it missed Analysts’ forecast by 0.29%. Profit before tax and profit after tax in reported currency declined by 15.52% and 0.63% respectively. The earnings per share (EPS) before exceptional items also decreased by 15% to 13.6%. 

Despite facing inflationary pressure, Airtel Africa demonstrated resilience in its underlying EBITDA growth, which remained at 11.41%. The EBITDA margin, representing the proportion of revenue converted into EBITDA, also remained strong at 49%. 

The decline in profit before tax and profit after tax can be primarily attributed to higher net finance costs, which increased by $320 million to $723 million. This increase was mainly due to higher foreign exchange and derivative losses amounting to $245 million. These factors collectively impacted profitability despite the company’s robust EBITDA performance and increased operating expenses. 

Investment Perspective  

Airtel’s sustained growth across voice, data, and mobile money services, as well as its customer base and average revenue per user (ARPU), indicates the company’s success in multiple areas of its business.  

In 2023, the customer base increased by 9.0% to 140 million, while ARPU increased to $3.3, up 7.4% in constant currency.  

In addition to the impressive growth in customer base and ARPU, it’s worth noting that voice and data usage in Sub-Saharan Africa, although growing, remains relatively low compared to the global average. This indicates an opportunity for further expansion and increased usage of these services in the region. 

In 2023, Airtel’s mobile money solution experienced significant growth, surpassing the growth of its voice and data solutions. This trend is in line with the shift in consumer behavior towards digital platforms. Given this shift, it is likely that the trajectory of growth for Airtel’s mobile money services will continue to be sustained in the future.  

Airtel has prioritized investment in future growth opportunities, with 87% of its capital expenditure focused on initiatives to enhance network capacity, expand coverage, and ensure reliable connectivity. Despite these investments, the company has managed to generate positive operating free cash flow. The operating free cash flow increased from $1.66 billion in 2022 to $1.83 billion in 2023, indicating the company’s ability to generate sufficient cash flow to fund capital expenditures and meet its financial obligations, including dividends. 

Speaking of dividends, Airtel is profitable and regularly compensates investors. In 2023, the company increased its dividend pay-out by 9% to 5.45 $cent compared to 5 $cent in 2022. 

However, it’s worth noting that Airtel’s share price has experienced a decline of 23.6% year-to-date, resulting in its ranking of 153rd on the NGX in terms of year-to-date performance. This loss in share price may reflect market volatility. It’s important to consider that the share price returned around 64% year-to-date in the previous year, highlighting the fluctuating nature of the stock’s performance. 

Airtel Africa’s share price appears to be reasonable and potentially undervalued compared to its peers and industry. Its price-to-earnings ratio of 8.34x is lower than that of MTN Nigeria (12.85x) and industry peers (13.37x), suggesting that the stock may be trading at a relatively attractive price. 

Considering Airtel Africa’s strategic focus on sustaining profitable growth in underpenetrated markets, its diverse portfolio of mobile voice, data, and mobile money services, cost efficiencies, strong management, efforts to de-risk its balance sheet, and investments in network coverage enhancement, the company remains highly attractive. 

Based on these factors, there is an expectation that Airtel Africa will exceed analysts’ consensus revenue forecast of $5.589 billion in the 2024 fiscal year. 

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