For the year ended 30 June 2023, Paratus Namibia has invested N$450 million in infrastructure which is nearly double its spend of N$282 million in the previous financial year.
This is contained in Paratus’ financial results for the year ended 30 June 2023 which further highlight that this infrastructure spend includes N$185 million from the Equiano Submarine Branch, which was acquired in lieu of services on existing infrastructure.
“At 30 June 2023 an amount of N$37.65 million reflected under current liabilities, pertain to a portion of the Equiano Submarine Branch acquisition price, which was not converted to services yet. Once the fiber route running between Buitepos and Lobatse in Botswana is completed, the remaining liability of N$37.65 million will be converted to a service on this route and the liability will be settled over time.
“It is expected that the construction of this route will be completed by 30 November 2023 at a total cost of approximately N$45 million. This route from Johannesburg running through Botswana and Namibia to the Equiano Submarine Cable in Swakopmund and onwards toward Europe will provide the shortest route with the lowest latency to Europe and is therefore of strategic importance to Paratus for future revenue growth,” results further note.
Other highlights for the year include the remaining construction cost of N$26 million to complete the Data Center, which brings the total construction cost to N$135 million. A total amount of N$60 million was invested in the LTE network to expand the Paratus coverage in the larger towns throughout Namibia.
Results also note that the construction of a 200km long-haul fiber between Karibib and Otjiwarongo was completed during February 2023 at a total cost of N$11 million.
“The fiber is constructed to serve the growing demand for bandwidth in the North. The project will result in a cost saving, as the capacity is currently sourced from a third-party supplier. Furthermore, this will enable Paratus to improve the service quality of our customers along the route. Paratus has also embarked with the roll-out of fiber and LTE in Lüderitz to cater for the increased activity emanating from the oil exploration activities in the area.”
For the financial year, Paratus delivered continued revenue growth of 17% (2022:15%) against a backdrop of a continued weak local economy due to high interest rates and inflationary pressure.
“The double-digit revenue growth is mainly driven from the expansion of our fiber and LTE network across Namibia and the occupation of the new Data Center, which was inaugurated during the current financial year. Paratus remains well placed to grow revenues due to extensive infrastructure investment during the financial year, which is driven by the continued demand for reliable internet. The anticipated growth for the 2024 financial year is to be driven mostly by the ongoing occupancy of the Data Center and the utilization of the Equiano Submarine Cable Landing Station, which will provide the lowest latency connection between SA and Europe via the Paratus terrestrial fiber. There will also be a renewed focus to monetize the existing last mile fiber infrastructure to enhance the return on the infrastructure investments to date,” explained Paratus.
Paratus Namibia also realised recurring revenue of N$428.2 million (30 June 2022: N$351.7 million) which represents a growth of 22%. Non-recurring revenue, which represents Local Area Network installations in the commercial office space and the sale of Telecommunication Equipment, amounts to N$35.4 million (30 June 2022: N$43.5 million). This represents a decline of 19%.
“The decline is mainly attributable to management’s focus to grow recurring revenue as opposed to lower margin non-recurring revenue.”
The net profit before taxation, for the operating entity, for the year ended 30 June 2023 amounts to N$33 million (30 June 2022: N$43.8 million) and earnings before interest, taxation, depreciation and amortisation (EBITDA) amounts to N$163.6 million (30 June 2022: N$122.5 million). This represents decline of 24.7% and a growth of 33.5%, respectively.
“The main contributor to the decline in profitability is the increase in non-cash depreciation charges emanating from new infrastructure completed during the year, and include the Data Center, Cable Landing Station, and the Equiano Submarine Cable Branch,” said the firm.
The combined cost of this new infrastructure is N$358 million.
The increase in interest rates combined with the new N$130 million bond issued during September 2022 have resulted in additional finance cost of N$18.4 million when compared with the 2022 financial year.
Over the same period the operating expenses increased by 8.6% due to the growth of the national network and the increase in distributions centres across Namibia.
“The recently completed Data Center which is not fully occupied also results in additional operating expenses. Management considers EBITDA as an important operational performance measure, as it mirrors Paratus Namibia’s ability to generate cash flows from operations. The disparity between profit after taxation and EBITDA stems mainly from the large depreciation charges recorded on infrastructure deployed.
“The decline in the gross profit margin from 52.1% for the year ended 30 June 2022 to 51.4% for the year ended 30 June 2023 stems from the large depreciation charge emanating from the newly constructed Data Center, Equiano Submarine Branch and the Cable Landing Station which was Ready-For-Service on 12 January 2023. The depreciation charge on these assets amounts to N$6.9 million, whilst the occupancy of the Data Center and utilisation of the Equiano Submarine Branch and Cable Landing Station were low at year-end. The directors are of the opinion that the continued aggressive investment in infrastructure assets bodes well for both revenue growth and improved operating margins.”