Safaricom Plc · NSEKE:SCOM
Safaricom — H1 FY2018 Earnings Presentation
34 slides from Safaricom's earnings presentation, Nov 3, 2017
Slide 1: Safaricom Limited HY2018 Results Presentation
Safaricom Limited HY2018 Results Presentation Friday 3rd November 2017 01 Twaweza
Slide 2: Disclaimer
DISCLAIMER The following presentation is being made only to, and is only directed at, persons to whom such presentations may lawfully be communicated (“relevant persons”). Any person who is not a relevant person should not act or rely on this presentation or its contents. This presentation does not
Slide 3: A Purpose Driven Company
A PURPOSE DRIVEN COMPANY BUILDING A MORE SUSTAINABLE SAFARICOM Purpose, Reputation People before and Profit Revenue A purposeful business is a successful business 03 Twaweza
Slide 4: A New Dream for Kenya: Twaweza
A NEW DREAM FOR KENYA: TWAWEZA WHEN WE COME TOGETHER, GREAT THINGS HAPPEN Twaweza Kenya is bubbling is the belief that with possibilities when we come where hustle is in our together, great soul, and optimism is things happen. in our heart 04 Twaweza
Slide 5: A New Dream for Kenya: Twaweza
A NEW DREAM FOR KENYA: TWAWEZA WHEN WE COME TOGETHER, WE CONNECT KENYA Connecting One base Bura to a station world of transforming possibility lives 05 Twaweza
Slide 6: A New Dream for Kenya: Twaweza
A NEW DREAM FOR KENYA: TWAWEZA WHEN WE COME TOGETHER, WE EMPOWER KENYA Connected Small holder Farmers: farms account 80,000 gaining for 75% of access to new Kenya’s output markets. 06 Twaweza
Slide 7: A New Dream for Kenya: Twaweza
A NEW DREAM FOR KENYA: TWAWEZA WHEN WE COME TOGETHER, WE DIGITIZE KENYA Mobile Money has increased access to Enhancing essential government services from 20% to 90% (GSMA Study 2017) speed and convenience of government services 07 Twaweza
Slide 8: Economic Headwinds
ECONOMIC HEADWINDS ROBUST PERFORMANCE DESPITE UNPRECEDENTED OPERATIONAL PRESSURES Elections & Re-election Regulatory Impact Conditions Drought Service Revenue +12% YoY GDP down to 5% Reduced High access to Inflation credit 08 Twaweza
Slide 9: Delivering the Strategy
DELIVERING THE STRATEGY Customer First Relevant Products Operational Excellence 09 Twaweza
Slide 10: Delivering the Strategy: Customer First, Relevant Products
DELIVERING THE STRATEGY Customer Relevant First Products 35 TUNUKIWA 29.5 MILLION MILLION 30% SUBSCRIBERS SUBSCRIBERS IN AVERAGE BONGA HAVE TAKEN REDEMPTIONS PERSONALIZED OFFERS MY DATA SAFARICOM EXPANDED MANAGER MTAANI CUSTOMER 42% 120 1.8 CARE BY 300 M-PESA KADOGO 11% OF DATA MARKETS MILLION CUSTO
Slide 11: Delivering the Strategy: Operational Excellence
DELIVERING THE STRATEGY OPERATIONAL EXCELLENCE: CONSISTENT FOCUS ON OUR CORE NETWORK 4G Sites DOWNLOAD UPLOAD SPEED SCORE TRIMEAN TRIMEAN Safaricom 20.97 9.29 19.80 177 344 467 635 1,103 1,454 Telco 2 15.93 7.83 15.12 Telco 3 9.29 2.55 8.62 MAR 2015 SEP 2015 MAR 2016 SEP 2016 MAR 2017 SEP 2017 Sourc
Slide 12: The Numbers
THE NUMBERS HY 18 - 1ST APRIL 2017 TO 30TH SEPT 2017 12 Twaweza
Slide 13: Financial Performance: Strong growth across all key financials
Financial Performance | Strong growth across all key financials Service Revenue EBIT* * Net Income* * Free Cash Flow +12.0% YoY +20.6%YoY +21.4% YoY +60.8% YoY 109.7bn 37.5bn 26.2bn 32.4bn HY 18 HY 18 HY 18 HY 18 98.0bn 31.1bn 21.6bn 20.2bn HY 17 HY 17 HY 17 HY 17 *Excludes one off adjustment in HY 1
Slide 14: Higher investment and affordable prices
Higher investment and affordable prices | Putting the customer first Shs. 17Bn Investment Prices* Customers 4,841 1,454 4,700km Customer 1% 29% 21% 27% 10.8% sites sites fibre analytics Voice Data SMS P2P *Effective average rate per unit 14 Twaweza
Slide 15: Business Model: Resilience in telco revenue streams
Business Model | Resilience in telco revenue streams, growth in data and M-PESA Voice* & SMS (Shs Bn, % SR) Mobile Data (Shs Bn, % SR) M-PESA (Shs Bn, % SR) 16% 27% 71% 14% 26% 67% 23% 30.0 61% 11% 17.6 25.9 52% 19% 21% 48% 9% 53.2 13.4 19.4 45.2 50.9 7% 15.6 41.0 43.7 9.2 12.5 6.5 4.3 HY 14 HY 15 H
Slide 16: HY18 Service Revenue
HY18 Service Revenue | M-PESA and Mobile Data continue to be the engines of growth Outgoing Voice +12.0% YoY · +1.9ppts (+4.6% YoY) · 40.3% of SR (-2.8ppts YoY) M-PESA +4.3ppts Mobile Data +4.3ppts Fixed Data · +0.9ppts (34.7% YoY) · +16.2% (YoY) · +31.0% (YoY) · Total Data 18.9% of SR (+2.8ppts YoY
Slide 17: M-PESA Revenue: Focus on long term sustainability
M-PESA Revenue | Focus on long term sustainability Growing the Eco-system +4.3 ppts • 19.3m 30 day active M-PESA subs +9.5% (YoY) • 140k+ M-PESA Agents +29.6% (YoY) • 11 transactions per customer per month +13.6% (YoY) Bread & Butter +2.8 ppts New Business +1.5 ppts • 74% of M-PESA Revenue • 25.8% o
Slide 18: M-PESA: Evolution of the eco-system
M-PESA | Evolution of the eco-system M-PESA Revenue Contribution HY 18 YoY Growth 51% 49% 70% 44% 42% 39% 60% 35% 32% 32% 50% 24% 26% 40% 30% 16% 10% 20% 10% Withdrawals Transfers LNM B2C Other New HY 15 HY 16 HY 17 HY 18 Withdrawals Transfers New Business Volume Value Revenue • Future opportunity l
Slide 19: Mobile Data Revenue: Increased usage supporting growth
Mobile Data Revenue | Increased usage supporting growth Driving the digital revolution 4.3ppts • Mobile Data ARPU* Shs170 +18.1% (YoY) • Data subs now at 16.9m +13.5% (YoY) • Usage per customer per month at 382MBs +65.9% (YoY) Active customers +2.6ppts ARPU +1.7ppts Mobile Data Revenue (Shs Bn) 30-d
Slide 20: EBIT: Supported by revenue growth and cost management
EBIT* | Supported by revenue growth and cost management +20.6% Performance on reported basis • EBIT 8.9% (YoY) +13.7% 11.9% • Contribution margin 10.2% (YoY) Contribution Margin* OpEx* • Opex 17.9% (YoY) EBIT* YoY (Shs Bn) EBIT* (Shs Bn) 37.5 9.5 (0.2) (0.8) 31.1 (1.7) (0.4) 37.5 25.3 31.1 20.9 16.2
Slide 21: Capex: Sustained investment to stay ahead of the curve
Capex | Sustained investment to stay ahead of the curve Capex (Shs Bn) HY 18 Capex Allocation Other Capex, 4% IT Systems, 14% 35.3 36.2 33.7 33.3 Fixed Network, 9% 27.8 20.0 Radio Access, 45% 18.9 17.4 Operations, 5% 12.4 10.5 Core Network, 10% 2014 2015 2016 2017 2018 Transmission, 13% FY Capex HY
Slide 22: Cashflow: Growth supported by operating performance
Cashflow | Growth supported by operating performance Net Cash & Usage (Shs Bn) Healthy Debt Position 54.3 (10.3) • Debt / Equity Ratio: 0.07x • Debt / EBITDA Ratio: 0.12x (17.4) (13.7) 8.9 0.3 28.1 6.0 FY ng A x re t id pi ng Y g en t te Ne 17 18 pe ym eb e sin D t l st pa ta i Ca rki IT nc en Ca Pa
Slide 23: Statement of Income: Key highlights
Statement of Income | Key highlights HY 17 HY 17 YoY% YoY% Shs Bn HY 18 Reported Normalized** Reported Normalized Voice revenue (Outgoing & Incoming) 47.35 45.70 45.70 3.6% 3.6% Messaging revenue 8.92 8.63 8.63 3.4% 3.4% Mobile data revenue 17.55 13.40 13.40 31.0% 31.0% Fixed service revenue 3.23 2.
Slide 24: 24
24
Slide 25: Way Forward: Fibre to the Home
WAY FORWARD FIBRE TO THE HOME Rollout vs Connections (000) 27% 24% 25% 25% 24% 24% 22% 21% 92.6 94.2 86.5 69.9 Rich content 52.8 61.3 partnerships 37.0 47.4 with Showmax and Iflix 23.4 25.2 17.8 20.7 15.0 Over 90k 8.0 10.2 12.5 Homes Passed Over 28k Customers Homes Passed Homes Connected Penetration
Slide 26: Introducing Masoko
INTRODUCING MASOKO The lifestyle e-commerce brand made in kenya for the world. Brought to you by kenya’s most innovative and trusted brand, Safaricom. 26 Twaweza
Slide 27: Introducing Masoko: Untapped Potential
INTRODUCING MASOKO UNTAPPED POTENTIAL Mobile is the future Most trusted Largest Digital brand in Kenya eco-system Today’s discerning shopper is online C2C B2C Trust is still a major barrier to online C2B B2B shopping in Kenya 27 Twaweza
Slide 28: Way Forward: Guidance Maintained on EBIT and Capex for FY18
WAY FORWARD GUIDANCE MAINTAINED ON EBIT AND CAPEX FOR FY18 EBIT CAPEX To To Shs 71-75Bn Shs 35-38Bn From Shs 67Bn From FY17 (normalized) Shs 35Bn FY17 28 Twaweza
Slide 29: Q&A
When we come together, great things happen. Q&A 29 Twaweza
Slide 30: Appendices
APPENDICES Jes 30 -Safaricom Twaweza
Slide 31: Statement of Income: Service Revenue to Contribution Margin
Statement of Income | Service Revenue to Contribution Margin HY 17 HY 17 YoY% YoY% Shs Bn HY 18 Reported Normalized* Reported Normalized Service Revenue 109.73 98.01 98.01 12.0% 12.0% Handset and other revenue 4.49 4.01 4.01 11.9% 11.9% Construction revenue 0.20 0.08 0.08 165.0% 165.0% Total Revenue
Slide 32: Statement of Income: Contribution Margin to Net Income
Statement of Income | Contribution Margin to Net Income HY 17 HY 17 YoY% YoY% Shs Bn HY 18 Reported Normalized* Reported Normalized Contribution margin 79.11 71.80 69.57 10.2% 13.7% Operating costs (24.76) (21.00) (22.12) 17.9% 11.9% Forex Loss on trading activities (0.08) 0.01 0.01 (900.0%) (900.0%
Slide 33: Free Cashflow: Key Movements
Free Cashflow | Key Movements Shs Bn HY 18 HY 17 YoY Cashflow Trading cash flow (EBITDA) 54.27 50.81 6.8% Movement in inventory (1.69) (0.72) 135.0% Movement in receivables 1.35 (4.26) (131.8%) Movement in payables H 9.24 4.86 90.1% Net Working capital changes 8.90 (0.11) (7,890.6%) Operating cash flow
Slide 34: M-PESA Transaction Values: Growth continues in Bread and Butter
M-PESA Transaction Values | Growth continues in Bread and Butter, acceleration from New Business Shs ‘Bn’ 5 YR CAGR +25% 7,000 3,833 6,000 HY 18 CAGR 3,226 YoY% 5 Years 1,147 5,000 813 41% 66% 2,475 4,000 441 828 1,972 768 8% 17% 242 3,000 1,555 644 150 544 896 436 755 19% 18% 2,000 644 557 464 1,00