If you needed further proof that the Zimbabwean economy is harsh, well, here it is.
Not only is Econet announcing their lowest profits in 5 years, those revenues and profits have been falling for three years running. The last time there was growth in revenue and profits was in 2014.
In an economy where most companies are struggling to the point of posting losses and failing to pay employees, Econet is doing quite well. Considering the challenging operating and economic environment the fall in revenues is not too alarming and the decline was not too excessive.
What challenges? This year was particularly difficult with the cash crisis impacting all businesses across sectors. The Zimbabwean government faced with fewer businesses to collect taxes from has been introducing new taxes to the telcos, especially the ridiculous health tax. The Econet chairman revealed that for every $1 they collect, 28.8 cents goes to the government.
The group is still to recover fully from decline in voice revenues for the mobile network operations because that remains the biggest contributor to revenues. However EcoCash and Data revenues have been contributing more to group revenues, now at 32% up from 13% in 2014. Of course we would have to account for the decline in voice revenue as that leads to EcoCash and Data revenues contributing a larger portion of revenues.
Group revenues fell 3% from $640.99m in 2016 to $621.1m in 2017. Earnings before interest, tax, depreciation and amortization fell 6% from $238.4m in 2016 to $223.95 in 2017.
During the year there was a rights issue which sought to raise capital with the aim of reducing foreign debt. This was done and debt decreased from $223.08m to $127.76 from 2016 to 2017. This saw finance charges fall from $36.23m in 2016 to $26.73m in 2017. In the next period there should be further reduction in finance charges leading to higher profits and higher earnings per share for investors.
One look at the figures for cashflows form operating activities reveals the effect of the cash crisis. Cashflows fell from $244.68m to $173.4m. The cashflow position was further compounded by the perennial challenges that are faced in collecting from their interconnect partners, think NetOne and Telecel. They are owed over $26m.
The chairman of the Econet group remains upbeat that the company is in position to deal with the challenges in the operating and economic environment in the coming year.
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