Board of Directors Report
The Board of Directors would like to welcome you to the annual meeting of the esteemed General Assembly, in which we share the results and operations of the Group and its subsidiaries for the financial year ended 31 December, 2019.
The company’s impressive performance for 2019 is a testament to the successful implementation of the strategic and sustainability-conscious roadmap set by the Board and management. We will maintain our resolve to rollout high quality telecommunications services across our markets in a responsible manner, empowering and improving the socio-economic well-being of the communities we serve. We are proud of our pioneering role in Kuwait and across the region and we look forward to 2020 and beyond with enthusiasm, as we take further steps in our aspirations to be a leading ICT and digital lifestyle provider.
Financial Indicators
Despite continuing competitive and socio-political challenges, Zain Group’s performance during 2019 witnessed strong growth in all its financial indicators. This growth was underpinned by the successful rollout of numerous new digital services in both the consumer and enterprise space, coupled with solid performances in Kuwait, Saudi Arabia, Iraq and Sudan, as well as the strategic consolidation of Zain Saudi Arabia into Zain Group.
By the end of 2019, Zain served 49.5 million customers, reflecting a 1% increase year-on-year (Y-o-Y).
For the full-year 2019, Zain Group generated consolidated revenue of KD 1.66 billion (USD 5.5 billion), an impressive 26% Y-o-Y increase, while consolidated EBITDA for the period rose by 40% Y-o-Y to reach KD 728 million (USD 2.4 billion), reflecting an EBITDA margin of 44%. Consolidated net income reached KD 217 million (USD 715 million), up 10% and reflecting Earnings Per Share of 50 fils (USD 0.17).
For the full-year, foreign currency translation impact, predominantly due to the 30% currency devaluation in Sudan from an average of 31.9 to 45.8 (SDG / USD), reduced the Group’s financials by USD 140 million in revenue, USD 61 million in EBITDA and USD 20 million in net income.
At its meeting held on 12 February, 2020 the Board of Directors of Zain Group recommended a cash dividend of 33 fils per share, reflecting a total distribution of KD 142.8 million. Furthermore, the Board recommended the distribution of directors’ remuneration for the total of KD 510,000 for the financial year ended December 31, 2019. Both recommendations are subject to the Annual General Assembly and regulatory approvals.
Furthermore, this reduction and operating performance in 2019, as well as the massive investments in network upgrades based on a clear strategic vision, saw confidence in Zain from international and regional financial institutions rise, as the company successfully refinanced major loans on more favorable terms.
Growth and Digital Innovation
Zain’s sustainable growth strategy includes initiatives that have positive socio-economic impacts, also aimed at increasing value for shareholders by developing the company’s core telecom business as well as selectively investing in lucrative sectors beyond traditional telecommunications services. This bold approach in turn allows for diversification of revenue sources, positively contributing to the bottom line.
The company is committed to investing in its networks and taking advantage of the ever-increasing demand for broadband internet services. Zain continued to invest and upgrade its 3G and 4G networks during 2019, and introduced 5G services, making it the first operator to launch the technology in Kuwait and the region. Zain went on to launch the largest 5G network in the MENA and Europe region in Saudi Arabia and announced plans of an imminent 5G launch by Zain Bahrain.
Zain has high expectations of this technology and continues to build partnerships with leading regional and global entities. The company has implemented initiatives aimed at enriching its applications and digital service offerings, developing comprehensive solutions for individual customers as well as for government entities and private institutions
The year 2019 was marked by significant achievements in the digital sector, with the Group offering the latest IoT, cloud services and smart city solutions as well as investing in data centers. Furthermore, Zain established the framework to offer Fintech and e-health services across several markets with the aim of enhancing services to the existing customer base and attracting new customers.
The Group recognizes that consistently improving financial performance for its operations, accelerating innovation projects, and improving capital expenditures are the main challenges of its business strategy. In order to overcome this, Zain recognizes the need to fully develop its resources and capabilities so that it takes full advantage of the lucrative opportunities offered by the Fourth Industrial Revolution.
Corporate Governance & Compliance
Zain Group actively fulfills its corporate governance obligations by applying a conservative approach to risk management and complying with the regulations issued by Kuwait’s Capital Markets Authority and other local regulators across its footprint. The company is committed to the rules of transparency and responsible management, improving the supervisory role of the Board of Directors on executive management, and on material transactions to ensure the protection of shareholders’ rights.
Every employee across Zain entities is committed to the Group’s Code of Conduct, all operating in a transparent manner and championing the principles of good corporate governance. Through these values and principles, the Group looks to have a positive impact on the telecommunications sector, and across the communities it serves.
Human Talent & Gender Diversity
The Board of Directors is actively promoting gender diversity and inclusion in the workplace as it firmly believes it creates a highly competitive differentiation in boosting productivity. The Group has achieved outstanding success in its program on gender diversity and inclusivity, raising women’s representation in leadership positions and adopting new Human Resources policies to support working mothers. Furthermore, the launch of an internal initiative to make Zain Disability inclusive by 2022 as well as becoming a signatory to the International Labor Organization (ILO) Global Business and Disability Network Charter is something Zain is very proud of.
Sustainability & Social Innovation
The Board of Directors is steadfast in its conviction that growth and development is the result of collective action that is guided by a forward-looking strategy. Over the course of 2019, the company witnessed organic growth across the organization that was results-oriented and inclusive. The growth of vertical segments is a demonstration of the company’s progress towards becoming a digital player.
Through Zain’s commitment to addressing the UN’s Sustainable Development Goals (SDGs), the company made greater efforts in addressing its supply chain by revising the Supplier Code of Conduct to ensure that it is in line with international best practices. The revision of the code exemplifies the company’s commitment to human rights and labor principles.
In addition to its supply chain management, Zain also identified risks related to climate change and child labor, recognizing that focus is needed in this area as some of the company’s operating companies are surrounded by geo-political instability that has resulted in mass displacement. Unfortunately, children have become more vulnerable and susceptible to harm and exploitation. As an organization established on a strong set of ethics, it is upon Zain to ensure that all stakeholders are not exposed to harm and instead can thrive and lead meaningful lives.
Regarding comprehensive and sustainable growth, Zain Group has adapted programs across all facets of the business and has led a series of meaningful change programs, implementing innovative initiatives geared to participate actively in the Fourth Industrial Revolution and promote social innovation.
Appreciation
We would like to take this opportunity to express our sincere appreciation for the confidence shown to us by our valued customers and shareholders, as well as all the government ministries and regulatory authorities across our markets for their understanding of the emerging industry dynamics. We would also like to extend our deep gratitude to the executive management team at Zain Group and all employees for their outstanding efforts, which have contributed to the impressive performance in 2019.
On behalf of all members of the Board of Directors, executive management and all employees of the Zain Group, we would like to offer our deepest gratitude and appreciation to His Highness the Amir of Kuwait, Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah; His Highness the Crown Prince, Sheikh Nawaf Al-Ahmad Al-Jaber Al- Sabah; His Highness the Prime Minister Sheikh Jaber Al-Mubarak Al-Sabah; and to the esteemed members of our government for their continued support of Kuwait’s national organizations and institutions.