Safaricom Plc · NSEKE:SCOM
Safaricom — H1 FY2014 Earnings Presentation
35 slides from Safaricom's earnings presentation, Nov 5, 2013
Slide 1: Safaricom Ltd H1 FY14 Presentation
Safaricom Ltd H1 FY14 Presentation 5th November 2013
Slide 2: Disclaimer
2 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 no
Slide 3: Contents
3 Contents H1 FY14 Highlights H1 FY14 Financial Review Strategic Focus and Guidance
Slide 4: H1 FY14 Highlights
4 H1 FY14 Highlights • Strong commercial and financial performance across all segments and metrics • Continued investment and innovation in network and services • Significant improvements in voice and data service quality • Phase 1of nationwide metro fibre build completed, accelerated phase 2 • Lipa
Slide 5: Delivering on key financial metrics
5 Delivering on key financial metrics TOTAL REVENUE +17% to Kshs 69.2bn VOICE REVENUE +12% to Kshs 41.9bn NON-VOICE REVENUE +30% to Kshs 24.3bn (SMS, DATA and M-PESA) EBITDA +29% to Kshs 28.9bn NET INCOME +45% to Kshs 11.3bn FREE CASH FLOW +167% to Kshs 13.7bn
Slide 6: Contents
6 Contents H1 FY14 Highlights H1 FY14 Financial Review Strategic Focus and Guidance
Slide 7: Delivering on strategy: Strong financial results
7 Delivering on strategy: Strong financial results Total Revenue EBITDA Net Income Free Cash Flow Kshs. Billion Kshs. Billion Kshs. Billion Kshs. Billion +17.1% +29.4% +44.9% +167.3% 69.20 11.26 13.74 28.85 59.12 22.29 7.77 5.14 H1 FY13 H1 FY14 H1 FY13 H1 FY14 H1 FY13 H1 FY14 H1 FY13 H1 FY14 More cu
Slide 8: Strong revenue growth in the period
8 Strong revenue growth in the period H1 FY14 Revenue Kshs. Billion • 17% growth in total revenue 17.1% 69.20 • 8% growth in customer base to 20.8m 59.12 customers (19.2m in H1 FY13) 47.11 49.63 • Voice revenue growing at 12% and non- voice revenue growing at 30% Revenue Breakdown H1 FY11 H1 FY12 H1
Slide 9: Service revenues: Growth across all products
9 Service revenues: Growth across all products 70 1.22 4.25 60 1.01 12.50 2.97 50 0.63 0.65 10.43 6.35 Fixed data revenue 1.61 2.45 40 5.28 7.88 4.27 Mobile data revenue 3.67 M-PESA revenue 3.65 30 SMS revenue 41.92 Voice revenue 20 37.42 31.49 33.30 10 0 H1 FY11 H1 FY12 H1 FY13 H1 FY14
Slide 10: Lowest retail prices & MTR rate in sub-Saharan Africa
10 Lowest retail prices & MTR rate in sub-Saharan Africa Country Prepay Retail MTR Country Prepay Retail MTR Price per Minute Price per Minute Kenya $0.04 $0.013 Burkina Faso $0.16 $0.099 Angola $0.04 Cote D'ivoire $0.17 $0.060 Ghana $0.06 $0.025 Malawi $0.17 $0.083 Rwanda $0.08 $0.049 Botswana $0.1
Slide 11: Voice: Sustained growth momentum
11 Voice: Sustained growth momentum Voice Revenue Kshs. Billion • 12% growth in voice revenue 12.0% 41.92 • Improved distribution 37.42 33.30 31.49 o Airtime distribution across over 250,000 retail outlets o 34% of airtime top-ups directly through M-PESA H1 FY11 H1 FY12 H1 FY13 H1 FY14 • Our program
Slide 12: Strong growth in Non-Voice service revenues
12 Strong growth in Non-Voice service revenues Non-Voice Revenue • Non-Voice revenue grew 30% - now 35% of Kshs. Billion total revenue 30.2% 24.32 • Driven by increased customers and usage. Revenue growth of: 18.68 14.61 • SMS +49% 11.21 • Mobile data +43% • Fixed service +21% • M-PESA +20% H1 FY11
Slide 13: M-PESA: Major Non-Voice revenue driver
13 M-PESA: Major Non-Voice revenue driver • 20% growth in M-PESA revenue, driven by: M-PESA Revenue • 19% increase in 30 day active users to 11.6m Kshs. Billion 19.8% • 19% increase in registered customers to 18.2 m 12.50 • 2% increase in average number of transactions per customer 10.43 7.88 • Kshs
Slide 14: SMS: Impressive growth
14 SMS: Impressive growth SMS Revenue • 49% growth in SMS revenue, driven by 8% Kshs. Billion 48.7% increase in 30 day active users to 11.7m 6.35 • Increased usage driven by SMS based 4.27 promotions such as ‘Bonyeza Ushinde’ 3.67 3.65 • Affordable pricing driven by SMS bundles H1 FY11 H1 FY12 H1 FY
Slide 15: Data: Customers and usage driving growth
15 Data: Customers and usage driving growth Mobile Data & Fixed Service Revenue Kshs. Billion • Mobile data revenue growth of 43% driven by: 37.4% 5.47 • 52% growth in 30 day active mobile data users to 8.5m – now 41% of our customer 3.98 base • 18% increase in mobile data usage per 3.08 customer wh
Slide 16: Sustained ARPU growth
16 Sustained ARPU growth Voice SMS M-PESA Mobile Data Service ARPU Kshs. Kshs. Kshs. Kshs. Kshs. +8.4% +35.9% +2.6% -5.4% +11.6% 548 347 53 92 320 115 118 491 87 39 H1 FY13 H1 FY14 H1 FY13 H1 FY14 H1 FY13 H1 FY14 H1 FY13 H1 FY14 H1 FY13 H1 FY14 Loyal customer Bonyeza 19% growth in 52% growth in 12%
Slide 17: Direct cost control improves contribution margin
17 Direct cost control improves contribution margin HY Direct Costs HY Direct Costs Breakdown Kshs. Billion 69.20 Kshs. Billion (3.09) (4.65) (5.08) (2.51) 24.9 22.7 23.0 (2.47) 17.7 (3.77) (3.28) 44.35 H1 FY11 H1 FY12 H1 FY13 H1 FY14 • 8% increase in direct costs , compared to a 17% increase in tot
Slide 18: Continued focus on cost control initiatives
18 Continued focus on cost control initiatives HY OPEX- Revised Kshs. Billion • Operating costs as a % of total revenue 18 25% 24% 26% declined to 22% 23% 22% 16 • 12% increase in operating costs versus a 17% 14 21% increase in total revenue 12 • Operating cost saving initiatives still focus on: 16%
Slide 19: Strong growth in EBITDA
19 Strong growth in EBITDA H1/H2 EBITDA Kshs. Billion 30 28.9 26.9 25 22.7 22.3 20 18.8 16.9 14.8 15 10 5 0 H1 FY11 H2 FY11 H1 FY12 H2 FY12 H1 FY13 H2 FY13 H1 FY14 • 29% growth in H1 FY14 EBITDA to Kshs 28.9bn • H1 FY14 EBITDA margin improves 4ppt to 41.7%
Slide 20: Largest & Fastest Network in Kenya
20 Largest & Fastest Network in Kenya HY CAPEX Base Stations Kshs. Billion 2984 2815 18 31% 35% 2604 2690 16 30% 14 21% 25% 12 1545 1650 10 20% 1439 15% 15% 1343 8 15.51 15% 6 10.01 10.52 10% 4 8.55 2 5% 195 187 190 187 0 0% H1 FY11 H1 FY12 H1 FY13 H1 FY14 H1 FY11 H1 FY12 H1 FY13 H1 FY14 CAPEX CAPEX
Slide 21: Improved cash generation
21 Improved cash generation HY Free Cash Flow HY Net Cash Kshs. Billion 28.85 Kshs. Billion (0.38) 19.81 (6.27) (12.00) 7.81 (10.52) 13.74 2.06 EBITDA Interest Tax paid Capex Working Free cash paid capital flow • 167% growth in Free Cash Flow to Kshs 13.7bn • Kshs 7.5bn corporate bond at 12.25%, exp
Slide 22: Key Financials
22 Key Financials: H1 FY14 H1 FY13 VARIANCE Voice revenue 41.92 37.42 12.0% Messaging revenue 6.35 4.27 48.7% Mobile broadband revenue 4.25 2.97 43.1% Fixed service revenue 1.22 1.01 20.8% M-Pesa revenue 12.50 10.43 19.8% Service Revenue 66.24 56.10 18.1% Handset revenue 2.22 2.43 -8.6% Acquisition
Slide 23: Contents
23 Contents H1 FY14 Highlights H1 FY14 Financial Review Strategic Focus and Guidance
Slide 24: Strategy Overview
24 Strategy Overview Our focus for the next 6 months is to: • Further expand the Best Network in Kenya program • Grow Mobile and Fixed Data • Deepen financial inclusion • Retain and reward our loyal customer base • Grow youth appeal • Encourage further innovation
Slide 25: Deliver the Best Network in Kenya
25 Deliver the Best Network in Kenya We started our Best Network in Kenya program 1 year ago, and we promised to achieve great results within 1 year. Some of the activities we have undertaken are : • Modernized 85% of our radio network, that’s 2,650 sites • Increased capacity on 1,200 sites, expandi
Slide 26: Great improvement in our network
26 Great improvement in our network • Over the last year we have commissioned 4 independent drive tests. • Most recent drive test covered: • 5,500 kms, • 20,000 voice calls • 5,000 data sessions. • The conclusion was: • “Safaricom has visibly improved to a strong market position in data services and
Slide 27: Grow Mobile Data
27 Grow Mobile Data What we have achieved: • Increased data customers by 52% to 8.5m • Increased the number of 3G devices on the network to 2.6m, of which 1.5m are smartphones • Introduced Chattitude - Daily internet bundle • Introduced Vuma Online - Free WiFi service in public transport vehicles wi
Slide 28: Grow Fixed Data
28 Grow Fixed Data What we have achieved: • Grown number of corporate customers with a dedicated internet connection by 14% • Launched a fixed calling service over fibre • Re-launched our Software as a Service “Cloud” for SMEs, with the following applications: • Hosted Payroll Solution • Hosted Acco
Slide 29: Deepen financial inclusion using M-PESA
29 Deepen financial inclusion using M-PESA What we have achieved: • Increased M-PESA outlets by 33,316 in the year, now at 78,856 • Launched Lipa na M-PESA: 36,749 merchants acquired • Signed up142 distributors for cashless payments • M-Shwari: 2.4m active customers, Kshs 1.8bn on deposit, Kshs 0.8b
Slide 30: Retain market leadership
30 Retain market leadership Subscriber market share-Jun 2013 Voice traffic market share-Jun 2013 1.4% 8.0% 10.0% 7.0% 10.4% 17.1% 65.9% 80.2% Safaricom Airtel Orange Yu Essar Safaricom Airtel Orange Yu Essar Mobile Data market share-Jun 2013 SMS market share-Jun 2013 6.4% 5.0% 0.3% 0.6% 3.4% 95.7% 1
Slide 31: Grow youth appeal
31 Grow youth appeal What we have achieved: Youthfulness Attribute – By Segment • Increase in youth appeal with overall brand 72% 77% 83% youthfulness growing to 84% from 69% since 70% 79% 82% 85% March 2013. 70% 84% 88% 89% 67% 83% 84% • Engagement with youth through activities and 67% 83% 69% 81%
Slide 32: Encourage further innovation
32 Encourage further innovation What we have launched in the last 6 months: • Lipa na M-PESA (merchant pays the txn fee) • Cashless FMCG distribution using M-PESA • Lipa Kodi (rental payments to landlords) • Chattitude and 10+10 for 10 • Vuma Online • The Safaricom Appstore • The Safaricom Appstar c
Slide 33: FY 2014 Guidance
33 FY 2014 Guidance Free Cash Flow: Expected to be in the range of Kshs 20bn to Kshs 21bn
Slide 34: H1 FY14 Highlights
34 H1 FY14 Highlights • Strong commercial and financial performance across all segments and metrics • Continued investment and innovation in network and services • Significant improvements in voice and data service quality • Phase 1of nationwide metro fibre build completed, accelerated phase 2 • Lip
Slide 35: Lipa na M-PESA
_ LIPA NA TIGPEspe SAFE . CONVENIENT . NO CUSTOMER CHARGES [z]215l41516]