EUR 249.13 For Business Accounts Only

H1 2018, A solid bottom line

H1 2018, A solid bottom line

EARNINGS/SALES RELEASES

Paltel recorded mixed H1 2018 results with lower revenues and healthy bottom line growth. H1 2018 revenues decreased by 3.7%, yoy, to JOD159.3m, due to the increasing competition in the mobile sector in addition to the persistent unpleasant economic conditions in the country. H1 2018 net profit witnessed a healthy increase by 10.8%, yoy, to JOD36.6m, thanks to the decrease in the operating expenses and income tax in addition to the improvement in the investment portfolio return.

FACT

Paltel recorded a decrease by 3.7%, yoy, in its H1 2018 revenues at JOD159.3m, with a drop in Mobile revenues offsetting the increase in, both, Fixed and Data services revenues. Indeed, in the face of a mature Palestinian market and increased pressure from Wataniya Mobile, which started operating in the Gaza Strip in October 2017, Paltel’s Mobile revenues decreased by 9.5% in H1 2018, to JOD96m (contributing by 60.3% to the group’s H1 2018 revenues vs. 64.1% in H1 2017). The Fixed Line segment recorded a slight increase by 1.3% at JOD20.2m with an almost stable contribution of 12.7% compared to 12.1% in H1 2017. By contrast, the Data segment performed well during this period, with a revenue growth rate of 9.5% at JOD43.1m, contributing 27.1% to the group’s H1 2018 revenues (vs. 23.8% in H1 2017). Paltel’s H1 2018 customer base was up by 0.9% compared to the end of 2017 at 3.843 million subscribers, with an increase across all business segments. The Mobile segment remains the first contributor to the group’s customer base with 78.2% in H1 2018, followed by the Fixed Line and Data segments contributing by 12.4% and 9.4%, respectively.


ANALYSIS

Despite a healthy bottom line growth rate, Paltel’s H1 2018 results were clearly affected by the Q2 2018 achievements. Indeed, the group’s declining revenue is directly attributable to the slowdown witnessed during the Q2 2018 (-7.4%, at JOD78m) offsetting the flat Q1 2018 revenue growth (vs. a slight increase by 0.89% expected by our model for the whole year). Similarly, after the strong Q1 2018 net profit growth (+17.8%), Paltel recorded an increase by only 2.3% in Q2 2018 net profit at JOD15.3m, pulling down the group’s H1 2018 bottom line to JOD36.6m, i.e. an increase by 10.8%, in line with our projections (+8.9% expected by our model for the whole year). However, this bottom line growth remains solid and was driven mainly by the decrease in the operating expenses and income tax, in addition to the improvement in investment portfolio return. Thus, given the serious challenges that faced the group, this performance deserves to be saluted!


IMPACT

Paltel’s H1 2018 global trend was foreseeable by our model. We maintain our estimates for the moment.