TM net profit falls 28% due to lower forex gains

  • TM expects revenue to grow by 3.5%-4%; to maintain earnings before interest and tax (Ebit) at RM1.15 billion​
  • 1Q saw TM's four main customer segments grow, with wholesale business up the most at 6.5% to RM457 million

TM net profit falls 28% due to lower forex gains

FIXED-LINE giant Telekom Malaysia Bhd (TM) remained optimistic that it will achieve its 2017 financial targets, even though it suffered a 28.5% fall in its first quarter net profit at RM230.4 million (US$989 million).

The decline is mainly driven by the lower foreign exchange (forex) gains during the quarter. During the quarter, TM reported a forex gain of RM22.7 million, lower than the RM104.5 million forex gain in the same quarter a year ago.

On a normalised basis (without factoring forex gains/ losses, and other one-off gains/ losses)the company would have registered a 13% jump in net profit.

"We are very much on track to achieve our targets this year," said chief financial officer Nor Fadhilah Mohd Ali during a media briefing in Kuala Lumpur yesterday.

For the financial year ending December 31, 2017, TM expects revenue to grow by 3.5%-4%. The company also expects to maintain its earnings before interest and tax (Ebit) at RM1.15 billion (US$270 million) level. It did not have a net profit target.

From the first quarter numbers, it appears that the company remains on track to achieve both targets. During the first quarter ended March 31, 2017, revenue rose 3.8% to RM2.96 billion (US$690 million), while Ebit rose 8.5% to RM303.8 million (US$70.6 million) 

It also spent 11.9% of revenue, or about RM352 million (US$82 million), on capital expenditure during the first quarter.

Financial highlights

During the quarter, the company's broadband business remained as the group's single-largest revenue contributor at RM970 million as it rose 8.5% year-on-year. At the same time, its voice business - once a dominant revenue contributor - is on a declining trend and ended the quarter with RM654 million (-4.6%).

The first quarter saw TM's four main customer segments grow, with its wholesale business rising the most at 6.5% to RM457 million. 

The mass market business, as a whole, grew 4.1% to RM1.31 billion. The managed accounts segment jumped 2.3% to RM1.07 billion. Its "other" businesses (which includes revenue from property development, TM Research and Development, Multimedia University, and others) grew 3.1% to RM133 million. 

Overall, there were no major changes to the company's operational costs - when measured as a percentage of total revenue. TM's direct costs and manpower costs held steady at the 19% and 21% level. Marketing expenses were also maintained at the 3% level. 

Interestingly, the company managed to reduce its bad and doubtful debts from 1% of total revenue (RM30.1 million) to just 0.1% of total revenue (RM4.4 million). 

Its free cash-flow expanded to RM598.1 million during the first quarter, 26% more than the RM474.1 million in fourth quarter 2016. However, it is still significantly lower than the over RM1 billion free cash-flow recorded in end 2015. 

It was also the first TM financial results media briefing by newly-appointed group chief executive officer Shazalli Ramly. 

During the briefing, he said that he hoped quarterly revenue would surpass the RM3 billion mark in the first quarter next year. 

He also added that he and his team will continue the business plan that was crafted, and help support TM's aspiration of becoming a convergence champion. 


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