Millicom reports net loss of $559m

Millicom, the parent company of telecommunication firm Tigo Ghana, has reported a net loss in 2015 attributable to equity holders of the Millicom Group of $559 million compared to a net profit of $2,643 million in 2014.

“The change is largely due to the non-cash loss on deconsolidation of Guatemala and Honduras, currency losses and impairment of our operation in Senegal. Non-controlling interests declined from $158 million to $115 million mostly due to increased losses in Colombia,” Millicom’s Chief Financial Officer Tim Pennington reported in the firm’s 2015 financial report.

Below are some highlights of the financial results:

Gross profit

The gross margin declined by one percentage point to 72.5% mostly due to an increase in the level of bad debt arising on B2B (from UNE in particular), postpaid clients and an $18 million provision for bad debt from a large contract in Guatemala.

Operating profit

Operating expenses increased by $99 million or 3.8% compared to 2014 due to the first full year consolidation of UNE (only four and half months in 2014) as well as $69 million of one-off items ($16 million last year) including $48 million of restructuring and integration costs (UNE for $33 million, the rest from Africa). Corporate costs declined significantly to $210 million, $48 million lower than last year, reflecting tighter cost control.

Depreciation and amortisation was $1.32 billion, 14.1% higher than 2014 primarily due to UNE’s full year consolidation. Other operating expenses of $66 million are $55 million higher than 2014 after an impairment of $53 million related to a write down of the businesses in Senegal. Operating profit was consequently down by 14.4% to $791 million.

Profit (loss) before tax

Net financial expenses at $420 million were $16 million or 4.0% higher than 2014 mainly due to $17 million of one-off expenses related to the early redemption of the El Salvador bond in March 2015. Other net non-operating expenses of $624 million largely represent a non-cash loss on deconsolidation of Guatemala and Honduras for $391 million (gain on revaluation of $2,250 million in 2014) and currency losses of $304 million partially offset by positive changes in the fair value of put options of $124 million. The net gain from associates and joint ventures of $100 million resulted from a $147 million book value gain following the recent share exchange of our shareholding in Helios Towers Africa, more than offsetting the losses from our investments in AIH and LIH (e-commerce ventures). As a result of the above effects, loss before tax amounted to $153 million.

Tax

Tax charges at $291 million were up $35 million compared to 2014 but excluding a non-cash charge of $80 million (mainly from a write-down of deferred tax assets at the Group level), tax charges were down by $45 million reflecting lower tax charges in Colombia and a change in the profit mix of the operations.

Cash flow from operating activities

Net cash provided by operating activities was up by $193 million at $1,651 million in 2015, compared to $1,458 million in 2014. This is mainly due to an improvement of $85 million in EBITDA and a decrease in taxes paid of $128 million, partly offset by an increase in interests paid of $27 million.

Cash flow from investing activities

Net cash used in investing activities was $1,244 million, or $968 million higher than in 2014. 2014 was impacted by the release of a $800 million pledged deposit related to UNE acquisition and a $175 million proceeds from the disposal of Emtel Mauritius and ATC Colombia. 2015 has been affected by a decrease in property, plant and equipment spend by $109 million and cash used for the acquisition of subsidiaries, joint ventures and associates.

Cash flow from financing activities

Net cash used by financing activities was $84 million in 2015, compared to $1,368 million in 2014. In 2015, we distributed $264 million to shareholders in dividends ($2.64 per ordinary share), and repaid debt of $1,392 million while raising funds of $1,880 million. The remaining difference relates to the $860 million deposit that was used to pay liabilities of the UNE Companies as well as acquisitions of non-controlling interests for $39 million. Advances and dividends to non-controlling interests also decreased by $31 million compared to 2014.

Cash position

As a result of the cash flow movements described above, the net cash inflow in 2015 was $243 million, compared to a spend of $215 million in 2014. The Millicom Group had closing cash and cash equivalents balances of $937 million at the end of 2015 compared to $694 million at the end of 2014.

Intangible assets

Intangible assets decreased during the year as an effect of the non-cash losses on the deconsolidation of Guatemala and Honduras of $391 million, currency losses of $300 million and amortisation charge of $246 million, partly offset by the gross additions of $194 million and the change in the composition of the Group for $84 million.

Tangible assets

Tangible assets decreased during the year as an effect of the depreciation charge of $1,075 million, currency losses of $547 million, impairment charge of $39 million (Senegal mainly), partly offset by the gross additions of $1,103 million and the change in the composition of the Group for $40 million.

Investment in joint ventures and associates

Investment in joint ventures and associates increased by $89 million, mainly due to the $147 million gain recognised on the reorganization of our investment in HTA, partly offset by the losses from our investments in AIH and LIH (e-commerce ventures).

Equity and non-controlling interests

Equity attributable to the owners of the Group has increased by $946 million mainly because of the derecognition (through equity) of the put option liabilities related to Guatemala and Honduras for $2,135 million, offset by the loss for the year of $444 million, currency losses of $335 million and $264 million of dividend declared in 2015. Noncontrolling interests have decreased by $263 million mainly due to the effects of dividends declared in 2015 of $244 million and changes in the composition of the Group of $27 million.

Debt and key financing activities

At 31 December 2015, the group gross debt increased by $462 million, due to the effects of the issuance of the $500 million 6% fixed interest rate bond in March 2015, additional debt raised to fund the Zantel transaction and its finance leases and currency losses. In addition we issued debt equivalent to $200 million in Bolivia and Paraguay in local currency in 2015. This was partially offset by the early redemption of the outstanding $311 million of the $450 million bond issued by Telemóvil Finance Co. Ltd in 2010.

As of end of December, 68% of group debt was at fixed rate and 30% was in local currency (or pegged to hard currency). Approximately 47% of the gross debt in the operations was denominated in local currency. The average maturity of our debt stood at 5.9 years and the Group has around $225 million of debt maturing in the next 12 months. The average cost of debt was 6.1% (excluding finance leases).

Other (non-)current assets and (non-)current

Liabilities

Other (non-)current liabilities show a decrease of $2,158 million that is mainly due to the derecognition (through equity) of the put option liabilities related to Guatemala and Honduras for $2,135 million.