Vodacom Group Limited annual results for the year ended 31 March 2020

Highlights

• Group revenue up 4.8% (3.5 %*) supported by Group service revenue growth of 5.0% (3.5%*).
• Added 5.9 million customers, to serve a combined 116 million customers across the Group.
• Total financial services customers up 12.8%, to 53.2 million, adding 6 million customers in the year.
• South Africa service revenue grew 2.3%, with data usage elasticity supporting recovery to growth in the second half
• International operations delivered strong service revenue growth of 12.5% (7.1%*), with foreign currency translations boosting reported Group growth.
• Earnings per share were up 7.7% and headline earnings per share up 8.9%, boosted by the one-off BEE costs of R1.5 billion (including transaction costs) included in the prior period.
• Declared a final dividend of 405cps.

Alternative performance measures

Note with regard to the adoption of IFRS 16

IFRS 16 was adopted by the Group on 01 April 2019 with the cumulative retrospective impact reflected as an adjustment to equity on the date of adoption. As a result, information presented for the year ended 31 March 2019 is presented under the previous statement IAS 17, while the year ended 31 March 2020 is presented in accordance with IFRS 16. The reported change reflected in this document is done on this basis while normalised growth adjusts for differences in reporting of the current year and the prior year, to give the reader a like-for-like comparison of underlying performance.

Notes

Certain financial information presented in this results announcement constitutes pro-forma financial information in terms of the JSE Listings Requirements. The applicable criteria on the basis of which this pro-forma financial information has been prepared is set out in the supplementary information on pages 27 to 31. The pro-forma financial information includes:

Amounts marked with an * in this document, represent normalised growth as defined above.
All growth rates quoted are year-on-year and refer to the year ended 31 March 2020 compared to the year ended 31 March 2019, unless stated otherwise.

Shameel Joosub, Vodacom Group CEO commented:

&An improved second half performance in South Africa and the sustained growth of our International businesses contributed to the Group’s 8.9% increase in headline earnings per share to 945cps and a dividend return of 845cps to shareholders. This follows last year’s substantial investment in South Africa’s largest ever Broad-Based Black Economic Empowerment transaction in the telecommunication sector. Group service revenue rose 5.0%.

The past year has been characterised by strong customer growth - we now connect 116 million customers across the Group, including Safaricom – and the benefits of prudent portfolio diversification.

In South Africa, sharp data price reductions, specifically out-of-bundle data rates, announced in the first quarter led to a steady increase in data traffic as the year progressed with 1.9 million more data customers connecting to the Vodacom network, a 9.7% increase to 21.9 million.

While it is still early days, the trend of increased data usage has continued into the current financial year following reductions in 30-day data bundle tariffs of up to 40% from 1 April 2020 and the launch of our ConnectU platform, which provides easy access to numerous zero-rated essential service websites. These initiatives will provide savings of R2.7 billion to customers at a time when economies around the world are suffering from the COVID-19 pandemic.

Despite deteriorating economic pressures and the proactive price cuts to our out-of-bundle rates, service revenue rose 2.3% in our biggest market, where initiatives to deliver greater value to customers through pricing transformation and sustained investment in network infrastructure and IT systems are being rewarded.

As part of our strategy to build diverse and sustainable revenue streams, our efforts to introduce “one more service” to customers continue to gain momentum. For instance, revenue from our Financial Services business in South Africa jumped by 21.5% to R2.0 billion, on the back of our popular Airtime Advance, insurance and VodaPay services. Our digital services business has also produced solid growth, contributing R1.5 billion in revenues on the back of increasing purchases of our video-on-demand offering and our music, sports, gaming and other video services.

It has been another stellar year for our International portfolio, where we recorded margin expansion for a second year, and further diversifies our currency exposure from the South African rand. An additional 4.0 million customers and increased demand for data and M-Pesa services in each of our operations contributed to a 12.5% increase in service revenue across our International operations.

Our investment in Safaricom, Africa’s second biggest Telco by market capitalisation after Vodacom, delivered a 30.4% boost in profits from this associate, with growth bolstered by currency factors and inclusion of the new M-Pesa joint venture. Significant investments in network and infrastructure, an acceleration in pricing transformation and a 17.2% underlying increase in revenue from M-Pesa, all contributed to Safaricom’s success.

M-Pesa continues to deliver on its promise of delivering financial inclusion, while at the same time positively contributing to economic growth in markets where it is ubiquitous. Having expanded the M-Pesa ecosystem, customers in our International markets, including Safaricom, now process more than US$14.7 billion a month in transactions through the platform.

We currently have 40 million customers transacting on M-Pesa across all our operations, generating total revenue of R16.2 billion and growing at 22% a year. Our focus, with our newly created joint venture, is to ensure that we align all product roadmaps across our operations and continue to expand the M-Pesa ecosystem across all countries. This will include the roll-out of nano lending platforms and getting the system ready for a smartphone world, where we can on-board more partners in this space. Our nano lending platform is already being used by 17 million customers in Kenya and Tanzania where it is driving our commitment to promote financial inclusion.

Over the past 12 months, the Group has made significant progress on a number of regulatory matters, including finality on the Competition Commission’s data services market inquiry in South Africa. The assignment of available high-demand spectrum seems imminent, with ICASA indicating that this process will be concluded by the end of this year. Looking ahead, our immediate collective emphasis is to assist in addressing pressing societal challenges in each of the markets where we operate, particularly as the world strives to halt the spread of COVID-19 and recovers from the economic impacts of the pandemic. We remain committed to supporting governments where we operate in whatever way we can. Through numerous public and private sector partnerships across our footprint, Vodacom’s teams are working hard in difficult conditions to keep communities, businesses and governments connected. The assignment of temporary spectrum in South Africa and elsewhere is welcomed and will assist in alleviating network congestion as more people work and are entertained at home. At the same time, we are executing on our robust, scalable operational continuity plans by anticipating and reacting to the current extraordinary environment to ensure our long-term sustainability.

We believe that collaborative efforts will be instrumental in defeating the pandemic, which is why we have partnered, for example, with Discovery Health to launch a simple but powerful online healthcare platform to help citizens understand their personal risk for COVID-19 and to immediately schedule free healthcare professional consultations where necessary. We have also partnered with the National Department of Health a to deploy 20 000 smartphones with free voice call minutes and data, to be used by frontline health workers to collect and transmit data in real time for resource planning purposes, as government accelerates its COVID-19 testing campaign.

We have consolidated all our existing zero-rated data services with new essential services aimed at social upliftment into our single ConnectU platform. This social platform provides Vodacom customers with access to a wide range of zero-rated content that will assist customers during the lockdown and recovery period. The platform includes free access to job portals, where youth can search for employment and upload their CVs as well as access to our e-School platform that provides CAPS curriculum aligned content from Grades R – 12. In addition to launching special tariffs for virtual classrooms, we have expanded our zero-rated offering to all public schools, universities and T-Vet colleges across the country to ensure that students enrolled into these institutions will be able to access relevant information for free via these portals. In our International operations, we have zero-rated M-Pesa and greatly reduced fees below certain thresholds for person to person transfers, to minimise the use of cash for payments.

&These are just some of the numerous activities that we have implemented across our markets to assist governments in their response to COVID-19. We continue to prioritise network quality so that we deliver on our purpose of connecting people to a better tomorrow.

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