|Year ended 31 March||% change|
|IAS 18||IAS 18 Normalised*|
|Revenue||86 627||90 066||86 370||4.3||3.2|
|Service revenue||69 867||74 150||70 632||5.0||3.8|
|EBITDA||33 714||33 689||32 898||2.4||2.3|
|EBIT||23 413||23 388||23 109||1.2||1.8|
|Net profit from associate and joint venture △||2 774||2 824||1 507||87.4|
|Operating profit||24 490||24 515||24 252||1.1||2.1|
|Net profit||15 532||15 442||15 562||(0.8)|
|Capital expenditure||12 957||12 957||11 594||11.8|
|Operating free cash flow||21 643||21 643||21 117||2.5|
|Free cash flow||14 865||14 865||14 195||4.7|
|Earnings per share (EPS) (cents)||872||867||947||(8.4)|
|Headline earnings per share (HEPS) (cents)||868||862||923||(6.6)|
|Dividend per share (cents)||795||795||815||(2.5)|
Following the cumulative retrospective adoption of IFRS 15: Revenue from Contracts with Customers on 1 April 2018, the Group’s results for the year ended 31 March 2019 are on an IFRS 15 basis, whereas the results for the year ended 31 March 2018 are (as previously reported) on an IAS 18 basis. Comparisons between the two bases of reporting are not meaningful and to ensure appropriate disclosure during the period of transition to IFRS 15, results for the year ended 31 March 2019 has been disclosed on both an IFRS 15 and IAS 18 basis. Our commentary describing our operating performance in the Operating Review has been provided solely on an IAS 18 basis. The accounting standard applied is clearly marked in the heading of relevant columns in this results announcement. To aid in the understanding of the transition from IAS 18 to IFRS 15, we have provided commentary on the main differences between the two standards on pages 8 and 9. Further disclosure is also included in Note 2: Changes in accounting policies and in Note 3: Segment analysis of the condensed consolidated financial statements for the year ended 31 March 2019.
Shameel Joosub, Vodacom Group CEO commented:
This year we have given back significant value to stakeholders. We unlocked R7.5 billion in value for YeboYethu shareholders, and in September 2018 concluded the largest ever broad-based BEE transaction in the South African telecommunications sector.
A sharp reduction in our out-of-bundle tariffs, contributed to the 37% decline in effective data prices since the end of March last year. In addition to enabling customers to manage their spend and utilise their data, virtually worry-free. This translates into a further R2 billion in savings enjoyed by customers as part of our ongoing pricing transformation strategy. Over a three-year period, data prices have fallen by 57%; despite not having access to further available spectrum.
The financial impacts of delivering on our promise of further reducing the cost-to-communicate in South Africa, combined with costs associated with concluding our new R16.4 billion BEE deal, is evident in the subdued increase in our operating profit. This masks an otherwise solid operational performance for the Group, where service revenue grew by 5.0%, led by strong performance in our International portfolio. Excluding one off BEE costs, Group headline earnings per share (HEPS) rose by 4.2%µ.
In August last year, through Vodacom Lesotho, we laid claim to being first in Africa to connect customers to a commercial 5G network. Vodacom South Africa remains ready to follow Lesotho’s lead as soon as the requisite 5G spectrum is secured, a crucial step in ensuring that the country doesn’t get left behind from participating in the Fourth Industrial Revolution.
We connected an additional 6 million customers to the Vodacom and Safaricom networks, a 5.8% increase to 110 million in total. At the same time, we invested close on R13 billion in network and IT infrastructure to ensure all customers benefit from superior service and network experience across our footprint. Despite the low economic growth environment in South Africa and our deliberate actions to reduce prices for all segments, service revenue in South Africa rose by 2.1%. We are particularly encouraged by the noticeable rise in new contract customers in the fourth quarter in both the Consumer and Enterprise segments.
It was a stellar year for our International portfolio where economic and political environments have improved, although it remains challenging in various aspects. We grew service revenue by 15.6% and expanded margins. Other significant achievements include the 25.8% growth in data revenue, and another year in which M-Pesa helped to empower inclusive growth by supporting economic development in Mozambique, Lesotho, DRC and Tanzania.
Our strategic investment in Safaricom contributed R2.8 billion to Vodacom Group’s operating profit, with Safaricom reporting a 7.0% increase in service revenue and a 13.1% improvement in EBIT, underpinned by strong customer growth and M-Pesa revenues. The Safaricom acquisition has proven to be a catalyst for extending our mobile money leadership position on the African continent and in ensuring that Financial Services have become a significant contributor to the Group’s revenues. In the past year, we effected 11 billion transactions worth R2 trillion to 36.1 million customers across our Financial Services network, including Safaricom. In South Africa, our profit before tax from Financial Services doubled to R1.0 billion, while M-Pesa revenue grew by 32.2% to R3.1 billion in our International operations and now makes up one-sixth (15.8%) of that portfolio’s entire service revenues.
Looking ahead, we continue to make good progress on our key strategic pillars. We expect the solid momentum from our digital services platforms to continue. Further, the strategic partnerships being formed by our Enterprise business will strengthen our IoT offers and Enterprise propositions, ultimately to the benefit of consumers. We are in the process of concluding the acquisition of the M-Pesa brand and platform related assets from Vodafone through a joint agreement with Safaricom , we expect this will further accelerate our mobile money growth plans in Africa. The commercialisation of our recently-launched payment gateway and digital wallet will assist in sustaining Financial Services growth in South Africa.
We have updated our medium-term targets to reflect these opportunities and the benefits of our Safaricom acquisition, and now expect a mid-high single digit growth rate in operating profit on average for the next three years. As this target is based on operating profit instead of EBIT, we also capture Vodacom’s share of the growing associate profits generated by Safaricom.