Energy powering Amaysim as company reports AU$4.8m first-half loss

Australian budget mobile operator Amaysim has reported a AU$4.8 million after-tax loss for the first half of the 2019 financial year -- its first results since shuttering its broadband play.

For the half year ending December 31, 2018, Amaysim reported underlying earnings before interest, taxation, depreciation, and amortisation (EBITDA) of AU$29.2 million, on net revenue of AU$263.0 million, which was down 5.6 percent when compared to the same period a year prior.

Of the AU$29.2 million EBITDA, mobile accounted for AU$10.6 million, down 4.6 percent; and energy contributed AU$18.7 million, an increase of 69.2 percent year on year.

Amaysim told shareholders on Tuesday its net loss was driven by an impairment charge related to energy "customer contract and distributor relationship intangible assets".

Despite the impairment, energy revenue for the six months was AU$155 million.

Energy subscribers grew by 5.4 percent to approximately 194,500 as at December 31, 2018.

Energy average revenue per user (ARPU), however, declined 8.8 percent to AU$133.54, with Amaysim saying the drop reflected lower customer consumption and product mix changes after it expanded its NSW gas customer base.

Energy gross profit increased 25.8 percent to AU$43.3 million.

"The retail energy market has all of the hallmarks of mobile from 10 years ago with opaque pricing constructs, no clear and ubiquitous access to usage data, bill shock, excessively long switching times, and low satisfaction," managing director and CEO Peter O'Connell said. "We're excited at the prospect of launching our new energy product suite in the coming months. It will fit perfectly with our position as a customer champion. The new products will be transparent, simple, and fair."

Amaysim said it plans to release a new energy product to the market in the second half of the 2019 financial year.

Meanwhile, mobile revenue for the first half dropped from AU$125.7 to AU$108 million.

According to the company, mobile revenue was impacted by the continued shift of its subscriber base towards Amaysim's lower value plans and an increase in data inclusions, which it said had resulted in lower excess usage revenue. As a result, mobile ARPU declined by 19.3 percent to AU$15.34 per month.

However, mobile subscribers grew by 3.9 percent to approximately 1.2 million.

Amaysim said it experienced increased churn due to the natural expiry of approximately 124,600 pay-as-you-go plans expiring. As of February 15, 2019, the company said its mobile subscriber base was approximately 1.06 million.

"The loss of these subscribers does not negatively impact the group's revenue or earnings for the year as these naturally expiring subscribers have not added credit to their account for over 12 months. This exceptional churn is expected to have a slight positive effect on ARPU," the company said in a statement.

O'Connell said the company will work hard to be the "customer champion in mobile".

"It appears that history is repeating, with the mobile market experiencing intense competition in the run up to a generational technology change to 5G," he said.

"With existing products having exhausted the features and advantages of 4G handsets and networks, price and inclusions are left as the key battleground. Whilst the industry conditions are likely to remain challenging in the near term, Amaysim will work hard to maintain its position as the customer champion in mobile".

The company discontinued selling devices on August 27, 2018, and divested its fixed line broadband customer base on October 26, 2018.

This followed Amaysim in August saying that in comparison to mobile and energy, broadband is capital intensive and competitive.

"The board has determined that it is in the interests of shareholders to review the broadband business and to discontinue selling devices in the first half of the 2019 financial year," the carrier said at the time.

"These decisions are expected to enable the company to redirect capital to the mobile and energy businesses that have higher growth and returns."

In releasing its results, Amaysim also announced it was seeking to raise approximately AU$50.6 million.

The company said net proceeds from the entitlement offer would be used to reduce debt -- which includes AU$30 million of its bank debt -- and around AU$17.6 million for investment into new growth initiatives, such as an increase in mobile marketing spend to grow its mobile subscriber base; complete the development and launch of a new energy product suite; and upgrade the company's technology stack.

Internal IT investment will include the consolidation and simplification of operational systems and processes; the investment in new software as a service (SaaS) platforms to support operational processes, including product management, sales, billing, and customer service; the development and deployment of new mobile product features, new subscription-based energy products, and the capability to have a "single view" of its customers; and improvements to all platforms.

For the 2018 financial year, Amaysim recorded net profit of AU$2.7 million, down 76 percent from FY17's AU$11.5 million, despite net revenue rising by 76.8 percent to AU$577.6 million.

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