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Results: Amaysim share price down as profit plummets 144%

The Amaysim Australia Ltd (ASX: AYS) share price is down 3.73% to 64.5 cents this morning, after the Aussie telco reported a 144% drop in net profit to a $6.5 million loss.

What did amaysim announce this morning?

In a soft earnings result this morning, amaysim reported net revenue down 7.8% on the prior corresponding period (pcp) to $508.3 million for the full year ended 30 June 2019 (FY19).

Accordingly, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell 14.5% on pcp to $47.3 million as statutory net profit after tax (NPAT) plummeted 144% to a $6.5 million loss.

While gross profit and underlying EBITDA figures were at the top end of the company’s guidance range, a change in accounting standards dragged the statutory results slightly lower.

amaysim did divest its broadband and devices businesses throughout the year, which made statutory results appear worse than they were, however, negative underlying EBIT and EBITDA growth may concern investors.

The telco reported recurring mobile subscribers had dropped 4.8% on pcp to 624,000 while energy subscribers climbed 8.3% higher on pcp to 207,000.

Operationally, FY19 saw amaysim report several key highlights including a $50.6 million capital raise and its first subscription energy plans in April 2019.

Headwinds did emerge throughout the year, with amaysim saying the drop in net revenue reflects the “intense competition in the mobile market” amid a trend towards lower value mobile plans.

amaysim’s Energy segment represents the company’s net revenue and propped up this year’s result amid the broader mobile downturn, which reflects the strong diversification strategy for the group.

Underlying operating expenses surged 16.3% to $117.6 million during the year, with higher employee costs, marketing expenses and IT expenses the main culprits.

Foolish takeaway

While the fall in net profit won’t please investors, the company did come in at the higher end of its target range for FY19 in both gross profit and underlying EBITDA.

While accounting standard changes have caused results to look marginally worse than with the old GAAP standards, the underlying results were also softer for amaysim.

Positively, the diversification into the Energy market has benefitted the company amid hyper-competitive mobile market conditions but whether that can be maintained into FY20 with potential regulatory changes on the horizon.

I personally wouldn’t be buying amaysim shares at the current 64.5 cents per share valuation, particularly given they’ve fallen by nearly a third so far this year, and think Telstra Corporation Ltd (ASX: TLS) could be better value at this point.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. 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 Scott Phillips.

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