Safaricom Plc · NSEKE:SCOM
Safaricom — H1 FY16 Earnings Presentation
41 slides from Safaricom's earnings presentation, 2015
Slide 1: Safaricom Limited H1 FY16 Presentation
1 Safaricom Limited H1 FY16 Presentation
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 FY16 Highlights H1 FY16 Financial Review Strategic Focus and Guidance
Slide 4: H1 FY16 Highlights
4 H1 FY16 Highlights • 15% growth in total customer base to 25.1m • Continued strong growth of non-voice service revenue • Regionalization of the sales and operations functions in line with our customer first strategy • Continued investment and innovation • Significant improvements in voice and data
Slide 5: What we have achieved
5 What we have achieved We continue to execute our strategy driven by: • Putting our customers first, • Delivering relevant products, and • Ensuring excellence in operations
Slide 6: What we have achieved…Cont’d
6 What we have achieved…Cont’d • Rolled out 833 3G sites and 236 2G sites • 3G now covers 73% of the population • 4G - Rolled out 379 sites to date in major cities and towns in 14 counties Best Network for • Rolled out 2,328Km of fiber to date reaching 10 towns You • Connected 1,002 buildings and 6,
Slide 7: What we have achieved…Cont’d
7 What we have achieved…Cont’d • Grew 30 day active data users to 13.1m up 25% Growing mobile • Mobile data penetration at 76% of 30 day active base data • Usage up 78% • Smartphone users grew to 4.1m up 33%. Recruiting, • Continued customer growth, now at 25.1m up 15% Retaining, and • Customer loya
Slide 8: What we have achieved…Cont’d
8 What we have achieved…Cont’d • M-PESA penetration at 88% of total customer base • Continued growth with 30 day active users at 15.7m, up 23% • Introduced real-time settlements for Lipa na M-PESA Deepening merchants financial inclusion • Lipa na M-PESA merchants now at 36k. Payments in Sept 2015 Ks
Slide 9: What we have achieved…Cont’d
9 What we have achieved…Cont’d Revised SME operating model aligned to regions SME customers at 64k up 72% Corporate o Corporate customers now at 3,846 Partner of choice o Increased product penetration with YoY growth of 20% to Kshs 6bn for business o Grown our business with the Public sector,
Slide 10: What we have achieved…Cont’d
10 What we have achieved…Cont’d • M-AKIBA to enable customers invest in GoK bonds via M-PESA • Building Capacity within the external ecosystem – provided a testing portal for developers • Safaricom US$1m Spark Venture Fund operationalized Supporting • Startup partnerships and alliances Innovation
Slide 11: Strong financial performance
11 Strong financial performance SERVICE REVENUE +12% to Kshs 84.9bn NON-VOICE SERVICE REVENUE +24% to Kshs 39.7bn EBITDA +16% to Kshs 38.8bn NET INCOME +23% to Kshs 18.1bn FREE CASH FLOW -38% to Kshs 9.5bn
Slide 12: Contents
12 Contents H1 FY15 Highlights H1 FY15 Financial Review Strategic Focus and Guidance
Slide 13: Delivering on strategy: Strong financial results
13 Delivering on strategy: Strong financial results Service revenue EBITDA Net income Free cash flow Kshs. Billion Kshs. Billion Kshs. Billion Kshs. Billion +12.3% +15.8% +22.9% -38.5% More subscribers 12% growth in Driven by More payments for using our products service revenue favourable accelerate
Slide 14: Strong service revenue growth
14 Strong service revenue growth H1 FY16 Service revenue • 12% growth in service revenue Kshs. Billion 12.3% • 15% growth in customer base to 25.10m customers (21.85m in H1 FY15) • Voice service revenue growth of 4% and non-voice service revenue growth of 24% Service revenue breakdown Kshs. Billion
Slide 15: Service revenue: Growth across all segments
15 Service revenue: Growth across all segments +14.8% CAGR
Slide 16: Voice: Sustained growth
16 Voice: Sustained growth Voice Revenue • 3.5% growth in voice service revenue Kshs. Billion 3.5% • 15% growth in total customers • Improved prepay airtime distribution o Top-up cards distributed in over 284,000 retail outlets and 44 own retail shops o 41.0% of airtime top-ups directly through M-PE
Slide 17: Strong growth in non-voice service revenue
17 Strong growth in non-voice service revenue Non - Voice Revenue • Non-voice service revenue grew 24%, now 47% Kshs. Billion 24.4% of service revenue • Revenue growth of: o M-PESA +24% o Mobile data +41% o SMS +11% o Fixed service +25% o Other service revenue +16% (Okoa Jahazi)
Slide 18: M-PESA: Driving financial inclusion
18 M-PESA: Driving financial inclusion M-PESA Revenue Kshs. Billion • 24% growth in M-PESA revenue, driven by: 24.1% o 23% increase in 30 day active users to 15.7m o 6.72 chargeable transactions per month per 30 day active users (13% growth) • Kshs 160.2bn of real time payments per month* o Person t
Slide 19: M-PESA: Value transacted in 6 months (Kshs bn)
19 M-PESA: Value transacted in 6 months (Kshs bn) +27% CAGR •CAGR H1 FY ’12-’H1 FY16’ 2,475 1,972 +78% 1,555 +23% 1,237 940 +20% +25% 19
Slide 20: SMS: Active users, attractive bundles driving growth
20 SMS: Active users, attractive bundles driving growth SMS Revenue Kshs. Billion 11.3% • 11% growth in SMS revenue, driven by; o 19% growth in 30 day active SMS users to 14.7m o 36% increase in active SMS bundle users to 4.73m SMS Customers Million 18.8%
Slide 21: Data: Customers, usage & devices driving growth
21 Data: Customers, usage & devices driving growth Mobile Data & Fixed Service Revenue Kshs. Billion 37.9% • Mobile data revenue growth of 41% driven by: o 25% growth in 30 day active mobile data users to 13.1m – now 52% of our customer base o 78% increase in mobile data usage per customer while ave
Slide 22: Growth: Driven by MPESA and Data
22 Growth: Driven by MPESA and Data Voice SMS M-PESA Mobile Data Service ARPU Kshs. Kshs. Kshs. Kshs. Kshs. -9.1% +0.4% +4.7% +15.5% +1.3% Outgoing ARPU SMS ARPU flat 12% growth in 78% increase in Driven by decline of 8%, due chargeable mobile data usage increased to large growth in transactions per
Slide 23: Direct costs control improves contribution margin
23 Direct costs control improves contribution margin H1 FY16 Direct costs H1 FY16 Direct costs breakdown Kshs. Billion Kshs. Billion +3.8% • 3.8% growth in direct costs compared to 12% growth in service revenue • Contribution margin increased to 66.3% up 2.3ppt
Slide 24: Cost control through operational excellence
24 Cost control through operational excellence H1 FY16 OPEX Kshs. Billion 25.00 23.5% 25.0% • Slight increase in opex as a % of revenue 22.4% 22.0% despite 18% depreciation of the Kenya shilling 22.5% 20.00 20.0% • We recognized a fx loss in the year of Kshs 780m in operating expenses. Our opex cost
Slide 25: Strong growth in EBITDA
25 Strong growth in EBITDA EBITDA +15.8% YoY Kshs. Billion Growth • 16% growth in H1 FY16 EBITDA to Kshs 38.8bn • H1 FY16 underlying EBITDA margin improvement of 1.8 ppt to 43.7%* * EBITDA margin is based on total revenue less construction revenue
Slide 26: Largest & Fastest Network in Kenya
26 Largest & Fastest Network in Kenya H1 FY16 CAPEX Base Stations Kshs. Billion 25.00 22.5% 25.0% 20.00 20.0% 15.0% 15.5% 15.0% 15.00 15.0% 10.00 20.00 10.0% 12.37 5.00 10.52 5.0% 8.55 0.00 0.0% H1 FY13 H1 FY14 H1 FY15 H1 FY16 CAPEX CAPEX Intensity Accelerated capital expenditure of Kshs 20bn Larges
Slide 27: Improved cash generation
27 Improved cash generation H1 FY16 Free Cash Flow H1 FY16 Net Cash Position Kshs. Billion Kshs. Billion • Kshs 4.5bn corporate bond at 7.75%, matures • 38.5% decrease in Free cash flow attributed to; Dec 2015 Payments for accelerated network roll out • Kshs 1.2bn two year term loan facility at 91
Slide 28: Key financials
Key financials: Voice revenue 45.19 43.67 3.5% M-Pesa revenue 19.35 15.59 24.1% SMS revenue 7.98 7.17 11.3% Mobile data revenue 9.16 6.50 40.9% Fixed service revenue 1.86 1.49 24.8% Other Service Revenue 1.37 1.18 16.1% Se rvi ce re ve n u e 8 4 .9 1 7 5 .6 0 1 2 .3 % Handset and other revenue 3.87
Slide 29: Contents
29 Contents H1 FY15 Highlights H1 FY15 Financial Review Strategic Focus and Guidance
Slide 30: Strategic priorities
30 Strategic priorities We continue to execute our strategy driven by: • Putting our customers first, • Delivering relevant products, and • Ensuring excellence in operations
Slide 31: Priorities going forward
31 Priorities going forward • Increase 3G population coverage from 73% to 80% • Complete the 4G deployment in 16 counties • Complete fibre in 10 additional towns Best Network for You • Fibre to the building(FTTB): reach1018 commercial buildings • Fibre to the homes(FTTH): reach14,237 homes • Complet
Slide 32: Priorities going forward…cont’d
32 Priorities going forward…cont’d o Increase 3G and 4G Smartphone to 6m o Commercialize 4G in all the counties that have coverage Growing mobile o Launch 4G Home Broadband Solution data o Continue pushing down the price of devices through partnerships
Slide 33: Priorities going forward…cont’d
33 Priorities going forward…cont’d Recruiting, • Strengthen our regional operations Retaining, and • Continue offering relevant products to our customers Rewarding • Launch a home entertainment proposition Customers • Continue with robust acquisition of subscribers • Reduce calls to the call center
Slide 34: Priorities going forward…cont’d
34 Priorities going forward…cont’d SME • Increase product penetration for customers • Focus sales efforts at a regional level Partner of choice Corporate for business • Offer end to end solutions for key segments FTTB and managed services • Revamp FTTB proposition to drive accelerate growth
Slide 35: Priorities going forward…cont’d
35 Priorities going forward…cont’d • Engage and support internal and external innovators • Testing environment for developers to connect and use SMS & USSD • Partnerships with the external innovation ecosystem to support life Supporting transforming innovations Innovation
Slide 36: FY16 Guidance
36 FY16 Guidance Net Income upgrade for FY16 Expected to be in the range of Kshs 35.5 - 36.5bn (from Kshs 32 - 34bn) Free Cash Flow upgrade for FY16* Expected to be in the range of Kshs 27.5 - 28.5bn (from Kshs 25 - 26bn). The FY 16 outcome is expected to be similar to FY15 due to payments for the c
Slide 37: H1 FY16 Highlights
37 H1 FY16 Highlights • 15% growth in total customer base to 25.1m • Continued strong growth of non-voice service revenue • Regionalization of the sales and operations functions in line with our customer first strategy • Continued investment and innovation • Significant improvements in voice and dat
Slide 38: Appendices
n ) a 12) Cc © oy oy < Safaricom
Slide 39: Summary - Industry Performance: Jun‘2014 vs Jun’ 2015
Summary - Industry Performance: Jun‘2014 vs Jun’ 2015 Safaricom Airtel and YU Orange Finserve Jun'2014 Jun'2015 % Jun'2014 Jun'2015 % Jun'2014 Jun'2015 % Jun'2015 Market Share by Subscribers (%) 68.0 67.0 -1ppt 23.70 19.40 -4.3ppt 8.3 11.2 2.9ppt 2.1 Mobile Subscribers (Millions) 21.93 24.2 10.4% 7.
Slide 40: Update on accounting for the Police Network Project
40 Update on accounting for the Police Network Project STATEMENT OF INCOME & FREE CASH FLOW Statement of Income FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Fixed data revenue 554 665 665 665 775 Service Revenue 554 665 665 665 775 Construction revenue 11,583 Total revenue 12,136 665 665 665 775
Slide 41: Our Forex Spend
Our Forex Spend 12 MONTHS AVERAGE TOTAL FOREX SPEND PER CURRRENCY Expenditure type EUR GBP USD Capex 45,349,418 625,138 | 184,374,285 Direct Costs 33,322,086 68,640,058 Handsets 50,493 55,353,096 Nopex 10,338,954 5,267,359 Opex 2,971,053 | _ 1,122,298 6,847,886