Vodacom Group Limited · JSE:VOD
Vodacom — FY2019 Earnings Presentation
46 slides from Vodacom's earnings presentation, 2019
Slide 1: Vodacom annual results
Vodacom annual results For the year ended 31 March 2019 The future is exciting Ready? C2 General
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: Purpose-led Vodacom | Connecting for a better future
Purpose-led Vodacom | Connecting for a better future >R350m invested to enhance and 3 100 schools equipped with improve education in SA computer labs $1m donated to Mozambique 92 ICT teacher training cyclone aid efforts centres established R3m donated to KZN and Eastern 10 youth academies Cape disas
Slide 4: Highlights
Highlights +1.1% +4.3% +6.0% +2.4% +7.4% excl BEE costs1 Revenue Data revenue EBITDA Operating profit R90.1 billion R27.3 billion R33.7 billion R24.5 billion 110m R13.0bn 862cps 795cps Customers2 Capex HEPS Total DPS +5.8% +11.8% +2.6% (excl BEE and -2.5% Safaricom transactions) 1. Relates to one of
Slide 5: Diversified Group | Increasing contribution from International and Safaricom
Diversified Group | Increasing contribution from International and Safaricom // Group service revenue // Group EBITDA // Group customers +R8.6 billion +R3.4 billion +3.7% +6.8% 8.4% 9.0% +13.1%* 13.3% +7.0%* 14.3% 13.5% 38.9% 21.6% 15.8% +21.0%* 22.4% +10.3%* 48.5% 12.5% +2.1% -1.3% +7.7% 70.0% 64.3
Slide 6: Operation review
Operation review C2 General Annual results | 31 March 2019 6
Slide 7: South Africa | Strong customer net adds, proactive pricing transformation
South Africa | Strong customer net adds, proactive pricing transformation Key indicators FY19 % change Service revenue (Rm) 55 749 2.1 • Growth ahead of GDP growth Data revenue (Rm) 24 276 3.9 • Proactive price transformation EBITDA (Rm) 27 717 (1.3) • New data usage regulations • Financial services
Slide 8: International | Double digit growth
International | Double digit growth Key indicators FY19 % change Normalised* Service revenue (Rm) 19 452 15.6 10.3 Data revenue (Rm) 3 056 25.8 19.6 • Economies stabilising • Some challenges remain M-Pesa revenue (Rm) 3 077 32.2 26.5 • Good progress on data growth EBITDA (Rm) 6 251 26.8 21.0 • M-Pes
Slide 9: Safaricom | Continued strong performance
Safaricom | Continued strong performance FY19 FY19 Key indicators % change* KES’bn Rm Service revenue 240 32 768 7.0 • Price transformation Data revenue 39 5 255 6.4 • Customer growth recovery M-Pesa revenue 75 10 225 19.2 • Continued M-Pesa growth EBITDA 125 16 996 10.7 • Boost from proposed specia
Slide 10: Strategy | Towards Vision 2020 – Digital first
Strategy | Towards Vision 2020 – Digital first Best customer experience Our brand and reputation Seamless, frictionless, personalised, Connecting for a better future by digital experience to our customers enabling a digital society, inclusive for all and the least environmental impact Segmented prop
Slide 11: Beyond a Telco | Accelerating growth through partnerships, acquisitions and build
Beyond a Telco | Accelerating growth through partnerships, acquisitions and build IoT Platforms to scale Accelerate through acquisition of Video Play, My Muze and PlayInc system integrator “IoT.nxt” Innovate Partnering to reduce cost of base stations and drive rural connectivity Partnerships Financi
Slide 12: Strategic collaboration between Vodacom and AWS
Strategic collaboration between……… Expanding across Africa and • At launch customer of AWS Cape Town Region • Vodacom certified as AWS Premier Consulting Partner in 2020 • Establishing an AWS Cloud Centre of Excellence (cal.) • Offering of over 165 AWS Services to Vodacom customers • Vodacom certifi
Slide 13: Accelerating IoT
Value chain | IoT 4.5m IoT connections +24.4% Accelerating IoT • Expected R46bn market by 2026 • 10 year CAGR of 13% opportunity • Rapid time-to-value • Bridging legacy technology The IoT.nxt technology-agnostic edge capability (Raptor), with class-leading platform • Unifying disparate systems orche
Slide 14: Growth drivers
Growth drivers C2 General Annual results | 31 March 2019 14
Slide 15: South Africa data | Pricing transformation key to future growth
South Africa data | Pricing transformation key to future growth // Data contribution // Pricing transformation +3.9% Postpaid Mobile broadband Prepaid and ad hoc bundles R24.3bn More for More Rate cuts Highly discounted offers 43.5% >100% value 40% rate cut 80% of South Africa service of bundle sale
Slide 16: Content | Reasons to consume
Content | Reasons to consume Video Music Advertising vLive • 869k video play users • Launched My Muze in • 2 billion impressions per • 6.1 million users Q4 month • Ringtones • Branded partners - VIU, Showmax and Netflix • Video, music and radio • Consolidated multi- • Welcome tones • Streaming on we
Slide 17: International | Data gaining momentum
International | Data gaining momentum // Data contribution // Data users Million +6.8% +25.8% R3.1bn +6.6% +20.5% 15.7% of International service 32.4 34.6 16.6 17.7 8.1 9.8 revenue Customers Data customers Active smartphone users FY18 FY19 // Expanding data coverage Number of sites • R3.4bn capital
Slide 18: Financial services | Expanding into new business, increased sophistication
Financial services | Expanding into new business, increased sophistication 45.8 million Financial Services customers // Financial services in // M-Pesa in International // M-Pesa in Safaricom South Africa +102.8% +32.2% +19.2% R3.1bn KES75.0bn 15.8% 31.2% R1bn PBT of International of Safaricom (R10.
Slide 19: Best Technology | Network leadership
Best Technology | Network leadership // SA network performance // International 4G population coverage (%) 5G 4G 4G first in Lesotho launched in the launched in and Africa DRC Mozambique 95 62 98 80 FY18 FY19 Urban coverage Rural coverage IT contribution to capex FTTx IT Performance R2.0bn • 86 proc
Slide 20: Enterprise | Good progress on all segments
Enterprise | Good progress on all segments // SA Enterprise service // SA Enterprise mobile revenue // SA fixed-line revenue per category revenue contribution R million R million +4.2% +4.8% 409 -15.6% R14.7bn 323 +11.5% 26.4% of South Africa >200% 840 service revenue 7 863 8 193 FY18 FY19 781 +15.9
Slide 21: Regulatory context
Regulatory context South Africa ECA bill withdrawn in February Spectrum Competition Commission ICASA priority market review Secured spectrum in all countries Working with Regulators to implement regulatory changes International C2 General Annual results | 31 March 2019 21
Slide 22: Financial review
Financial review C2 General Annual results | 31 March 2019 22
Slide 23: Group income statement
Group income statement R million FY19 (IFRS 15) FY19 (IAS 18) FY18 (IAS 18) % change (IAS 18) % Normalised* Revenue 86 627 90 066 86 370 4.3 3.2 Service revenue 69 867 74 150 70 632 5.0 3.8 EBITDA 33 714 33 689 32 898 2.4 2.3 Depreciation and amortisation (10 642) (10 642) (9 959) 6.9 EBIT 23 413 23
Slide 24: Group service revenue | Driven by data, fixed-line and M-Pesa
Group service revenue | Driven by data, fixed-line and M-Pesa // Group service revenue by category R million +5.0% +5.5%* +26.5%* +17.6%* 16 809 [+3.8%*] 1 420 644 629 70 632 74 150 FY18 Mobile data* M-Pesa* Fixed-line Other* Translation FX FY19 service revenue service revenue * service revenue IAS
Slide 25: Service revenue | SA impacted by regulation and macro; International mid-teen growth
Service revenue | SA impacted by regulation and macro; International achieves mid-teen growth // South Africa // International R million / % R million / % 15.6% 5.6% 4.9% 10.3% 2.1% 7.4% 2.2% 0.3% (5.6%) 52 071 54 622 55 749 16 775 16 828 19 451 FY17 FY18 FY19 FY17 FY18 FY19 Service revenue (IAS 18)
Slide 26: Group expenses | Impacted by roaming charges
Group expenses | Impacted by roaming charges // Group expenses // Group total expenses reconciliation R million FY19 FY18 R million % change +5.2% (2.0ppts) IAS 18 IAS 18 Direct expenses 34 931 33 669 3.7 (0.2ppts) +3.0% Operating expenses 21 368 19 863 7.6 56 299 54 245 Staff expenses 5 986 5 509 8
Slide 27: Digital | Future savings opportunities
Digital | Future savings opportunities // Track record of delivery // Optimising the value chain // Digital ambitions Fit for growth Digital sales (% online sales) Operate • > R2 billion in savings FY19 Market 8% 25% • Over the past 4 years technology over R3 billion in savings • Leased lines reduct
Slide 28: RPA | Efficiencies created
RPA | Efficiencies created Increased Reduce cost Capital Customer revenue efficiency satisfaction • Churn reduction • Customer contract fraud • Best place to build fibre • Network NPS prediction • Abnormal usage fraud • Traffic prediction for new • Deal recommendation • Call deflection sites (price
Slide 29: Group EBIT | Improved International performance
Group EBIT | Improved International performance // Group // International // International margin R million / % R million / % % +56.1%* +1.8%* FY19 37.5% 17.2% 27.0% 26.8% 26.0% 11.7% 12.0% 13.4% +1.8 +10.5 +3.4 -0.3 ppts ppts ppts ppts 23 109 23 388 2 096 3 430 FY18 9.9% 2.9% 23.6% 37.8% FY18 FY19
Slide 30: Net finance charges | Steps taken to reduce volatility
Net finance charges | Steps taken to reduce volatility // Group net finance charges // Group net debt R million FY19 FY18 % change R million FY19 FY18 Finance income 630 703 (10.4) Bank and cash balances 11 066 12 538 Finance cost (3 008) (2 811) 7.0 Current borrowings (10 603) (8 220) Net finance c
Slide 31: Group tax | ETR impacted by non-deductible BEE expenses
Group tax | ETR impacted by non-deductible BEE expenses // Group effective tax // Reconciliation to effective rate R million % % FY19 Statutory tax rate 28.0% Net profit from associate (3.6ppts) Irrecoverable foreign taxes 2.2ppts Net unrecognised tax asset 0.2ppts 29.6% 30.2% Non-deductible finance
Slide 32: Cash flow | Strong OFCF generation
Cash flow | Strong OFCF generation // Group free cash flow R million +133.1% +2.4% 185 +11.8% +24.0% +5.5% (12 957) 467 259 +2.5% 2 466 (6 535) (3.7%) (2 236) (473) +4.7% 33 689 21 643 14 865 EBITDA Working capital Capital Disposal of property, Other Operating Dividend received Tax paid Net finance
Slide 33: Headline earnings and HEPS | Affected by BEE; boosted by Safaricom
Headline earnings and HEPS | Affected by BEE; boosted by Safaricom // Headline earnings // Headline earnings per share R million cents HEPS IAS 18 862 1 044 (1 698) 356 (2.0%) 96 BEE BEE transaction 100 HEPS excl. BEE 962 +4.2% YoY 14 946 14 648 14 744 Net contribution from Safaricom (132) FY18 Shar
Slide 34: Shareholder returns | Dividend growth despite share dilution
Shareholder returns | Dividend growth despite share dilution // Total dividend declared // Dividend policy and final dividend calculation R million +4.0% 14 030 14 595 90% of pre- Flow through of Total Vodacom Safaricom headline Safaricom cash dividend earnings (excluding dividend BEE one-off charge
Slide 35: IFRS 16: Leases adoption
IFRS 16 : Leases adoption IAS 17 IFRS 16 Effect • Recognise right of use asset • R8.8bn – R9.3bn Balance sheet • Lease smoothing receivable/payable • Recognise lease liability • R9.0bn – R9.6bn • 1 April 2019 • Depreciation on right of use asset • Operating lease on straight line basis Income statem
Slide 36: Targets | Updated to include Safaricom interest and new accounting standards
Targets | Updated to include Safaricom interest and new accounting standards Group service revenue Mid-single digit Group operating profit* (Previously EBIT) Mid-to-high Group single digit service revenue Group capital intensity Group capital intensity 13.0% to 14.5% of Group revenue These targets a
Slide 37: Key priorities
Key priorities Spectrum Digital Vodacom Data growth Financial Services growth New platforms Partnerships C2 General Annual results | 31 March 2019 37
Slide 38: Q&A
Q&A C2 General Annual results | 31 March 2019 38
Slide 39: Appendix
Appendix C2 General Annual results | 31 March 2019 39
Slide 40: Bridge | IAS 18 – IFRS 15 Revenue of contracts with customers
Bridge | IAS 18 – IFRS 15 Revenue of contracts with customers // Revenue // Service revenue R million R3.4bn R million R4.3bn (29) (3 536) (634) (3 536) 130 (4) (113) 90 066 86 627 74 150 69 867 FY19 Revenue Move from service Netting of Interest and bad Other FY19 Revenue FY19 Service revenue Move f
Slide 41: Key transformational milestone | BEE
Key transformational milestone | BEE // Why YeboYethu is consolidated // Additional costs • YeboYethu separate legal entity Non-recurring costs Non-deductible, non-recurring R1 404 million • No direct ownership by Vodacom Group IFRS 2 charge • New deal created to manage Vodacom Group’s BEE Transacti
Slide 42: Country data
Country data South Africa Tanzania DRC Mozambique Lesotho Safaricom PopulationŦ (million) 58 61 87 31 2 52 GDP per capitaŦ (USD) 91 471 1 028 586 464 1 133 1 836 GDP growth estimateŦ 2019 (%) 1.3 6.5 4.5 3.7 1.0 5.2 Ownership (%) 100 61.61§ 51 85 80 34.94¢ 2028/2032/2026/ Licence expiry period 2029
Slide 43: Impact of foreign exchange
Impact of foreign exchange // Revenue // Average YTD exchange rates YoY % growth FY19 Reported Normalised* FY19 FY18 % change South Africa 1.9 1.9 USD/ZAR 13.76 12.99 5.9 ZAR/MZN 4.42 4.73 (6.6) International 14.4 9.1 ZAR/TZS 166.81 172.92 (3.5) Group 4.3 3.2 EUR/ZAR 15.92 15.19 4.8 ZAR/KES 7.36 7.9
Slide 44: Definitions
Definitions Customers Customers are based on the total number of mobile customers using any service during the last three months. This includes customers paying a monthly fee that entitles them to use the service even if they do not actually use the service and those customers who are active whilst
Slide 45: Forward-looking statements
Forward-looking statements This presentation which sets out the annual results for Vodacom Group Limited for the year ended 31 March 2019 contains 'forward-looking statements‘, which have not been reviewed or reported on by the Group’s auditors, with respect to the Group’s financial condition, resul
Slide 46: More information
More information Visit our website for more information http://www.vodacom.com FY20 upcoming dates Integrated report live 14 June 2019 AGM 23 July 2019 Q1 results 25 July 2019 Contact us VodacomIR@vodacom.co.za Interim results Follow us on social media 11 November 2019 @Vodacom Facebook.com/vodacom