Vodacom Group Limited · JSE:VOD
Vodacom — H1 FY2023 Earnings Presentation
41 slides from Vodacom's earnings presentation, November 2022
Slide 1: For the six months ended 30 September 2022
For the six months ended 30 September 2022 Further together
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 any of its contents. Information in the f
Slide 3: Vodacom Group | Executing on our purpose
Vodacom Group | Executing on our purpose Purpose-led model Strategy in action Financial outcomes Digital society Commercial launch in Ethiopia, mobile money license to be awarded Strong revenue Digitising government growth, 2Q +10.3% acceleration Regulatory progress with 1H23: +7.7% Solutions across
Slide 4: Our Purpose | Further together
Our Purpose | Further together Purpose We connect for a better future Digital society Inclusion of all Planet • Digitising critical sectors • Access for all • Managing carbon emissions Digital • Digitising society government Inclusion • Propositions for all for equality Planet • Reducing waste, circ
Slide 5: Our Strategy | Leading African TechCo with clear System of Advantage
Our Strategy | Leading African TechCo with clear System of Advantage Africa’s leading communications company Footprint Secure leadership 1 2 strengthened in mobile and fixed Diversify and differentiate with our digital ecosystem Scale financial Digital partner of Personalisation World class loyalty
Slide 6: Strategy in action | We are accelerating our System of Advantage
Strategy in action | We are accelerating our System of Advantage Strategic ambitions: Acceleration: Strategic outcomes: Ethiopia launch, Vodafone • Improved growth • Larger addressable market Egypt regulatory progress prospects as key in connectivity and digital Africa’s leading projects accelerate
Slide 7: Strategy in action | Footprint strengthened
Strategy in action | Footprint strengthened Structural growth opportunities in new geographies Vodafone Egypt delivering best-in-class growth We connect people • Market leader, with attractive asset portfolio (e.g. towers, spectrum) Population Population 120.8m 106.2m • Mobile customer market share3
Slide 8: Strategy in action | Secure leadership in mobile and fixed
Strategy in action | Secure leadership in mobile and fixed Rural coverage Fibre in Africa • Strategic objective: Increase connectivity for New Sites • Strategic objective: Accelerate fixed business under-serviced rural areas across all markets to attain leadership position in all our markets • Proof
Slide 9: Strategy in action | Scaling our dual-sided financial services ecosystem
Strategy in action | Scaling our dual-sided financial services ecosystem Lifestyle super-app Consumer proposition powered by Merchant proposition Trusted platform and brand, Large footprint, low set-up personalised offers, access to costs, personal targeting, affordable financial services Financial
Slide 10: Strategy in action | Strong M-Pesa platform transaction
Strategy in action | Strong M-Pesa platform transaction Consumer proposition Merchant proposition B2C Payments Bank Credit transfer $2.1 billion IMT Bill pay Savings 676 thousand remittance value merchants, up 63% P2P & B2B >500 CICO Tanzania 54 thousand 3.2 million thousand passed active app virtua
Slide 11: Strategy in action | South Africa fintech supported by world-class technology
Strategy in action | South Africa fintech supported by world-class technology Consumer proposition Merchant proposition Airtime Insurance Advance IMT Payments 3.5 million Mini- R2 billion in Wealth apps merchant payments VodaPay downloads processed PoS Savings 2.2 million R6.3bn vodacom R4 billion >
Slide 12: Highlights | Results reflect growth of new services
Highlights | Results reflect growth of new services 7.7% 7.2% 0.6% R7.6bn 5.0%* 3.9%* -1.8%* Revenue Service revenue Capital expenditure EBITDA R53.7 billion R41.7 billion 14.1% intensity R20.2 billion 133m 63m 457cps 340cps Customers1 Financial services customers1 HEPS, impacted by DPS 2.1% growth
Slide 13: Geographic lens | Broad-based service revenue growth
Geographic lens | Broad-based service revenue growth Group service revenue Group operating profit Group customers R billion R billion Millions / growth Normalised Normalised growth* growth* 2.9% 4.6% 14.11 13.31 Group -5.1% 18.4 20.0 1.7 43.2 1.5 4.9% 2.1 2.1 -5.5% 41.71 Group 3.9% 132.6 38.91 5.6%
Slide 14: Product lens | We are diversifying into new revenue streams beyond mobile
Product lens | We are diversifying into new revenue streams beyond mobile South Africa International Safaricom Product life cycle New Innovate services 14.5% 29.0% 44.2% Financial services R4.3bn R3.7bn R8.9bn Digital services IoT Integrate into SoA Fixed Invest to scale Core 85.5% 71.0% 55.8% R25.2
Slide 15: Financial services | New services adding to scale of our fintech platform
Financial services | New services adding to scale of our fintech platform 100% basis (including Safaricom) Contribution to International M-Pesa growth Strong 63 million $355.2 billion underlying growth financial services M-Pesa in financial customers transaction value services revenue R3.0 billion S
Slide 16: South Africa highlights | Delivering despite strong comparative period
South Africa highlights | Delivering despite strong comparative period Key indicator 1H23 Reported % change Key milestones Resilient service revenue Revenue (Rm) 41 188 4.9 • Mobile contract revenue 5.7% • Mobile prepaid revenue 2.2% Service revenue (Rm) 29 485 3.0 • Vodacom Business mobile revenue
Slide 17: International highlights | Growth underpinned by data and M-Pesa
International highlights | Growth underpinned by data and M-Pesa Normalised* Reported Key indicator 1H23 % change Key milestones % change Service revenue (Rm) 12 630 5.6 17.9 Strong data growth • Usage growth 34.7% Data revenue (Rm) 2 849 18.6 32.0 • Smartphone penetration up 1.8pp to 34.2% M-Pesa r
Slide 18: Safaricom highlights | Strong growth supported by M-Pesa and fixed
Safaricom highlights | Strong growth supported by M-Pesa and fixed 1H23 1H23 KES % ZAR % Key milestones Key indicator1 (KES’bn) (Rm) change change Service revenue 144 825 20 030 4.6 9.1 M-Pesa contribution increases • Increased to 39.3% of service revenue Data revenue 23 297 3 640 11.3 16.2 from 37.
Slide 19: Financial Review
Financial Review Further together
Slide 20: Group income statement | Revenue growth diluted by specific cost pressures
Group income statement | Revenue growth diluted by specific cost pressures Reported Normalised* R million 1H23 1H22 % change % change Revenue 53 713 49 856 7.7 5.0 Service revenue 41 729 38 915 7.2 3.9 EBITDA 20 200 20 076 0.6 (1.8) Depreciation and amortisation (8 261) (7 657) 7.9 Net profit from a
Slide 21: Service revenue | Growth accelerates in second quarter
Service revenue | Growth accelerates in second quarter Group South Africa International R million / % R million / % R million / % 9.2% 25.2% 10.4% 4.8% 5.2% 7.6% 8.7% 4.9% 3.3% 3.0% 3.1% 1.7% 2.4% 3.2% 2.9% 20 358 20 154 21 575 14 961 14 496 14 989 5 586 5 854 6 778 4Q22 1Q23 2Q23 4Q22 1Q23 2Q23 4Q2
Slide 22: South Africa | Accelerating cost initiatives
South Africa | Accelerating cost initiatives South Africa operating expenses Outlook R million • Network & back-to-office opex headwinds ease into the second half • Energy pressures likely to persist • Incremental actions around supply-chain management, discretional spend and payroll costs into seco
Slide 23: Group EBITDA | Lapping headwinds into second half
Group EBITDA | Lapping headwinds into second half Group EBITDA 1H22 vs 1H23 Group EBITDA: 1H22 vs 2H22 R billion -0.5 -0.1 -0.1 -0.6 -0.1 -0.6 1.4 -0.2 0.8 20.1 20.2 20.1 19.8 1H22 Lease SA network, Service Net cost 1H23 1H22 Lease TZ M-Pesa SA network & Service Net cost 2H22 contract back-to-office
Slide 24: Net profit | Ethiopia & finance costs weigh on net profit
Net profit | Ethiopia & finance costs weigh on net profit Net profit bridge Net profit reconciliation, YoY R million R million 0.6% 1H22 8 873 EBITDA 124 R94m D&A (604) better yoy R533m Associates ex Ethiopia 94 458 137 -5.6% better yoy Ethiopia (346) -8 261 1 924 -2 192 Finance costs (544) -R346m -
Slide 25: HEPS | Underlying performance flat despite inflationary pressures
HEPS | Underlying performance flat despite inflationary pressures Factors impacting reported growth Headline earnings per share (after tax and non-controlling interests) cents 0 • Start-up losses in Ethiopia of R458 million -20 (PY: R97 million) -23 0 -7 0 • Higher finance costs of -10 13 R391 milli
Slide 26: Cash flow | Seasonal investment into working capital
Cash flow | Seasonal investment into working capital Group free cash flow R million 0.6% Seasonal working capital outflow, expected to unwind into second half -5 723 -7,599 -2 359 287 -25.6% 2 531 -3 645 -1 664 -54.5% 20 200 4 806 2 028 EBITDA Working Capital Lease liability Other Operating Net divi
Slide 27: Free cash flow | FCF generation skewed to second half
Free cash flow | FCF generation skewed to second half Group FCF: 1H22 vs 1H23 Group FCF: material seasonal variance R billion -0.3 -1.0 -0.6 -0.6 9.7 Timing factors 11.2 12.4 13.5 12.2 4.5 2.0 2.0 2.5 2.7 5.3 4.5 2.0 1H22 FCF Tax Capital Capital Finance 1H23 FCF FY18 FY19 FY20 FY21 FY22 FY23 credito
Slide 28: Shareholder returns | One of the JSE’s highest payout ratios
Shareholder returns | One of the JSE’s highest payout ratios Total dividend declared New simplified policy implemented R million 15 146 15 605 Old policy 7 527 7 894 Since FY13, we have maintained dividend policy of paying at least 90% of headline earnings, excluding the contribution of Safaricom. I
Slide 29: Net debt | Higher net debt due to spectrum and seasonal FCF pressure
Net debt | Higher net debt due to spectrum and seasonal FCF pressure Group net debt FY2H23 outlook R billion • Spectrum payments of 3.2 R2.2 billion for SA and 7.4 R0.6 billion for Tanzania 7.0 -2.0 -4.5 -11.2 7.2 • Seasonally strong cash inflow in 2H • Lower cash dividend payment 34.2 38.0 26.8 35.
Slide 30: Capital structure | Debt lens ahead of M&A
Capital structure | Debt lens ahead of M&A Maturity profile Debt type Net debt/EBITDA R billion R billion R billion / times 35.6 43.4 37.4 36.1 1.1 22.2 14.4 0.9 11.2 12.5 1H22 1H23 1H22 1H23 Current Non-current Leases Financial Currency mix Debt mix % % Incl leases Excl leases Incl leases Excl leas
Slide 31: Targets | Medium-term targets unchanged
Targets | Medium-term targets unchanged Targets Considerations Group service revenue growth • The macro-outlook has worsened as a result of Mid-single digit the war in Ukraine, rampant global inflation and an ongoing energy crisis Group EBITDA growth • Our strategy is resilient, but we have also Mid
Slide 32: Outlook | We have a clear ambition to grow new services
Outlook | We have a clear ambition to grow new services 1H22 1H23 Medium term (3-5 years) 3yr CAGR: c20% New 17.6% 18.9% 25% - 30% services Financial services IoT Digital services Fixed Modest CAGR growth Core 82.4% 81.1% 70% - 75% mobile Smartphone penetration 5G leadership New services revenue as
Slide 33: Priorities | Enhancing shareholder value as we shift from telco to techco
Priorities | Enhancing shareholder value as we shift from telco to techco Execute on our Disciplined Accelerate Enhance System of Advantage capital structure & allocation and diversify returns societal value Leadership in Utilise debt capacity Earnings & FCF Inclusion for all fixed and mobile comple
Slide 34: Appendix
Appendix Further together 34
Slide 35: Finance charges and debt | Average cost of debt up marginally
Finance charges and debt | Average cost of debt up marginally Group net finance charges Group net debt R million 1H23 1H22 % change R million 1H23 1H22 Finance income 334 314 6.4 Cash balances including overdraft 11 900 9 621 Finance cost (2 373) (2 006) 18.3 Current borrowings (21 143) (10 166) Net
Slide 36: Group tax | ETR impacted by Safaricom and deferred tax recognition
Group tax | ETR impacted by Safaricom and deferred tax recognition Group tax charge and effective tax Reconciliation of SA tax rate to effective tax rate R million / % % 1H23 Statutory tax rate 27.0% Net profit from -3.5ppt associate and JVs Irrecoverable foreign +3.3ppt taxes Deferred tax asset -2.
Slide 37: Country data
Country data Safaricom Safaricom South Africa Tanzania DRC Mozambique Lesotho Kenya Ethiopia PopulationŦ (million) 60.8 63.3 95.2 33.1 2.2 56.2 120.8 GDP per capitaŦ (USD) 106 873 1 310 695 590 1 345 2 020 907 GDP growth estimateŦ (%) 2.0 5.4 5.4 5.3 1.7 5.2 5.3 Ownership (%) 100 75 51 85 80 34.49¢
Slide 38: Impact of the exchange rate
Impact of the exchange rate Revenue Average YTD exchange rates YoY% growth YoY% growth 1H23 Reported Normalised* 1H23 1H22 % changed South Africa 4.9 4.9 USD/ZAR 16.31 14.38 13.4 International 17.8 5.5 ZAR/MZN 3.93 4.31 (8.8) Group 7.7 5.0 ZAR/TZS 143.12 161.35 (11.3) EUR/ZAR 16.88 17.13 (1.5) ZAR/K
Slide 39: Definitions
Definitions Customers Data customers M-Pesa customers ARPU Data customers are based on the number of Customers are based on the total unique users generating billable data traffic number of mobile customers using during the month. Also included are users on any service during the last three Total AR
Slide 40: More information | upcoming dates
More information 2023 upcoming dates 3Q23 results 31 January 2023 FY23 results 15 May 2023 AGM 20 July 2023 Contact us VodacomIR@vodacom.co.za 1Q24 results 21 July 2023 Follow us on social media @Vodacom Facebook.com/vodacom Visit our website for more information http://www.vodacom.com Further toget
Slide 41: Forward-looking statement
Forward-looking These factors include, but are not limited to, the following: changes in economic or political conditions in markets served by operations of the Group; greater than anticipated competitive activity; higher than expected costs or capital statement expenditures; slower than expected cu