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Amaysim Australia Ltd just reported its loss worsened by 128%

Amaysim Australia Ltd (ASX: AYS) has reported its result for the half-year period to 31 December 2017 .

Amaysim is a low-cost mobile provider, it also recently started selling energy and NBN deals to households.

Here are some of the highlights compared to the prior corresponding period:

  • Revenue excluding interest increased by 115.1% to $294 million
  • Earnings before interest, tax, depreciation and amortisation (EBITDA) decreased by 41% to $10.2 million
  • Net loss after tax worsened by 128.6% to $2.38 million
  • Interim dividend cancelled

The company blamed the loss on the strategic investments that it made. Amaysim said that new product launches, investment into new verticals and integration costs incurred from the acquisition of Click were all reasons for the decline. Management did say that these initiatives resulted in subscriber number growth across all verticals.

Amaysim’s mobile subscriber base grew by 10% to finish the half at 1.127 million, however mobile net revenue for the segment decreased by 7% due to a 15% reduction in mobile average revenue per user. Management said this was impacted by existing subscribers migrating towards lower price plans due to more data inclusions.

The energy segment had net revenue of $153 million, with customer numbers up by 18% since the Click acquisition. This equates for nearly all of the company’s total revenue growth of $157 million compared to last year.

Amaysim said that underlying EBITDA grew by 2.9% and grew by 37.5% if an additional $6 million receivable had been included in this half, but it will reported in the full-year result. The company also said that underlying profit after tax, after excluding significant items, was down 64.5%.

‘Underlying’ operating cash flow after capital expenditure increased by 106% to $37.7 million.

The broadband segment is new, but made a $3.3 million EBITDA loss, so it will need to boost revenue to reach breakeven. It has grown subscribers to 13,000, which is an increase of 8,000, and will look to cross-sell with energy and mobile customers.

The company has an aim of 300,000 customers with multiple products generating an average of $200 per month by 2021. Currently, 1.1% of subscribers are multi-product customers.

In October 2017 the company launched its online device store to boost sales and improve retention rates.

The Amaysim board made the decision to cancel the interim dividend and also anticipates not paying a dividend for the full-year result too and ‘expects this approach to continue for the short to medium term’. Management believe that the profits are best kept and used to grow the business.

Outlook

Amaysim said that it is positioned for top-line growth across the group and management has seen continued growth in January and February. However, competition in mobile is expected to intensify. To me, this sounds like margins could get tighter to maintain market share.

Foolish takeaway

I thought this was a pretty disappointing update from Amaysim. Its core business has gone backwards significantly with mobile EBITDA dropping from $17.27 million to $5.66 million. Economies of scale should be helping Amaysim in time, hopefully it can utilise its cross-selling strategy in time to boost margins.

After this report I don’t think it’s likely Amaysim will be a market-beating share in the near future until it can generate ongoing profit growth. The telecommunications industry is a minefield for companies and investors alike at the moment.

Instead, I think these top stocks will make better investments compared to Amaysim.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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