Higher royalty chips away at du profits; announces first dividend

Dubai’s Emirates Integrated Telecommunications Company PJSC (du) today announced its financial results for the full year and the fourth quarter of 2011, with net profits remaining almost flat year-on-year due to an increase in royalty payable to the government.

In a statement posted on the Dubai Financial Market (DFM) website, the listed telecom operator said its revenues increased 25.2 per cent year-on-year to Dh8.9 billion in 2011 while net profits before royalty grew by 47.8 per cent year-on-year to Dh1.8 billion versus 2010 (Dh1.2 billion).

However, du said in the statement that net profits after royalty rose just 10 per cent, from Dh1bn in 2010 to Dh1.1bn, reflecting the increased royalty payable to the UAE Federal Government for the year-ended December 31, 2011, comprising of 15 per cent of net profit and 5 per cent of total company revenues. “This resulted in a royalty payment of Dh715 million, compared to Dh184 million for 2010, equating to 15 per cent of net profit,” the firm said.

“I am pleased to say that we progressed significantly in 2011, net profit before royalty increased by 47.8 per cent to Dh1.8 billion from Dh1.2 billion in 2010. We also received the determination from the Federal Government on the royalty charge for 2011 bringing the net profit after royalty to Dh1.1 billion,” said Ahmad Bin Byat, Chairman of du.

Meanwhile, the company also announced that it is proposing its first dividend payment of Dh0.15 per share to shareholders, reflecting continued growth and further customer additions.

According to its statement on the DFM bourse website, du’s free cash flow reached Dh1.4 billion in 2011, up from Dh36 million in 2010.

“As we celebrate our fifth year of operation, I am pleased to report very strong financial performance and the continuation of our company’s strong growth trajectory,” said Bin Byat.

“Our strong financial performance during 2011 has led to the recommendation by the Board of Directors to propose our first cash dividend to shareholders of 15 fils per share. The proposed dividend has been carefully considered, ensuring we can continue to invest in our people, network, systems, products and services to deliver consistent value to our customers and shareholders. We believe this dividend proposal is an important step forward in shareholder value creation and sets the right basis for future dividend growth.

“The decision to pay dividends celebrates the position that we have built in the market. By the end of 2011 we served more than 46 per cent of the UAE mobile market according to the Telecommunications Regulatory Authority, an enviable achievement in just five years. Today, more than five million people across the Emirates actively use our services.

“Despite continued global economic uncertainty throughout the last three years, we have benefited from the stability and economic momentum of the UAE, which combined with the capabilities we have built in offering innovative and attractive customer propositions, and doing so with operational efficiency, has resulted in an even greater number of customers placing their trust in us, which has in turn led to very strong financial performance.

Osman Sultan, du’s Chief Executive Officer, commented: “In 2011, we maintained one of the highest growth rates for the past three years in the entire region, and we have continued to gain market share. We believe this continued growth can be partially attributed to the successes we have had in improving the customer experience, which has been a significant focus in 2011 and will continue to remain so.

“Growth in data revenue has also become a significant contributor. We expect this to become even more prominent, based on rapid growth in the penetration of smartphones.

“Our home services business, including fixed telephony, high-speed broadband, and IPTV, today limited to the geographical areas where we have deployed our own world-class fibre infrastructure, continues to grow alongside the on-going development of the UAE economy and is well-positioned to benefit from the infrastructure sharing agreement announced by the TRA. We look forward with optimism and determination to expanding and offering our state-of-the-art value proposition nationwide as a result of this development.

“Throughout the year we worked hard to continue streamlining processes and reinforcing operational and financial controls. This enabled us to better manage our overheads and capital expenditure, leading to healthy levels of profitability and cash generation in 2011. We continued to invest in our capabilities in 2011, adding more than 1,275 new base station sites, further improving our network coverage. Our data network has also been greatly improved, particularly in our 3G coverage, as we see this as a major stream of future revenue growth.

“While we continue to deliver strong results, as we mature, the pace of growth will become more measured. However, I firmly believe we are well positioned to further capitalise on market opportunities through our proven strategy that is fully focused on bringing innovation to the customer experience and driving operational efficiencies. Through these efforts we believe we can create further value for our shareholders and indeed all of our stakeholders, by making du a best-in-class telecommunications operator.”

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