The Amaysim Australia Ltd (ASX: AYS) share price has come under pressure on Monday due to general market weakness and the release of its half year results.
At the time of writing the telco and energy company's shares are down 2.5% to 32.7 cents.
How did Amaysim perform in the first half?
For the six months ended December 31, Amaysim reported a 7.1% decline in net revenue to $244.4 million. This was driven by lower average revenue per user (ARPU) across the mobile and energy business units.
Underlying EBITDA came in at $24 million, down 17.9% on the prior corresponding period. Management blamed this decline on a significant increase in its marketing investment which drove lower mobile underlying EBITDA.
Mobile underlying EBITDA fell 49.7% to $5.3 million, whereas Energy underlying EBITDA remained stable at $18.7 million.
Net profit after tax from continuing operations was $3.7 million, up $8.5 million or 177.5% from the same period last year. Last year's profit result was impacted by impairments.
Subscriber growth.
During the half the company's Mobile subscriber growth accelerated thanks to its marketing initiatives and the acquisition of Jeenee Mobile.
At the end of December the company had 706,000 recurring mobile subscribers and 1.05 million total mobile subscribers. This represents organic growth of 41,000 mobile subscribers since June 30 and a further 41,000 additions through the acquisition of Jeenee Mobile. This brought the total additions during the half to 82,000.
Pleasingly, its subscriber numbers have continued to grow since the end of the half. As of February 20, recurring mobile subscribers stood at 727,000, up 3% since the end of December.
Management notes that its average monthly churn remained stable across the total base at 2.4%, but it continues to focus on improving this metric.
Management commentary.
I spoke with chief strategy officer Alex Feldman and chief financial officer Gareth Turner following the release of the results.
They advised that they were very happy with the company's performance during the half. This was particularly the case with Amaysim's operating expenditures which, excluding market investments and non-cash charges, would have been flat on the prior corresponding period.
Another positive which was highlighted by management was its cost per acquisition (CPA) in the mobile business, which now stands at $51.00. Based on its current average gross profit per subscriber per month of $6.14, this means that it takes approximately 8 months for its CPA to be paid back. Every month after this period is profit for the company.
I asked about Amaysim's view on the proposed merger with TPG Telecom Ltd (ASX: TPM). They see this as a rational merger of two businesses that belong together and believe it will create a true competitor for Telstra Corporation Ltd (ASX: TLS) and Optus.
The good news for shareholders is that management believes the three telco giants could all have an interest in providing it with wholesale services when Amaysim's current deal with Optus expires in June 2022. This could lead to better terms for Amaysim and ultimately stronger margins.
In respect to its energy business, management notes that regulatory action has been favourable for the big energy retailers and has helped them reduce their churn levels. The company appears hopeful that further action will be taken for the benefit of both consumers and its energy business.
In the long term the company expects the energy retailing industry to move towards subscription energy plans. This is expected to provide more transparency and value for consumers.
Outlook.
Amaysim remains on track to achieve its FY 2020 guidance of underlying EBITDA in the range of $33 million to $39 million. This is on a 'New GAAP' basis that takes into account the impact of AASB9, AASB15 and AASB16.
Whilst this guidance implies a lower half on half EBITDA result, there are good reasons for this. The first is the seasonality of energy consumption. Traditionally consumption is softer during January to June compared with July to December. In addition to this, the company notes that it experience a full half impact from recent regulatory actions.
