Safaricom Plc · NSEKE:SCOM

Safaricom — H1 FY2020 Earnings Presentation

27 slides from Safaricom's earnings presentation, Nov 1, 2019

  1. Slide 1: Safaricom PLC HY20 Results Presentation

    Safaricom PLC HY20 Results Presentation 1st November 2019

  2. Slide 2: Disclaimer

    DISCLAIMER -0.1% 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 doe

  3. Slide 3: Continued macroeconomic stability, but tough operating environment

    CONTINUED MACROECONOMIC STABILITY, BUT TOUGH OPERATING ENVIRONMENT Headwinds: • Regulatory risk • Shrinking consumer wallet • Changing competitive landscape Tail winds: • 2019 GDP forecast 5.6% and World Bank GDP forecast of 6.1% in 2020 • Stable currency, inflation and political environment • Improv

  4. Slide 4: Operational Review

    OPERATIONAL REVIEW Investment in Our Network: • 732 additional 4G sites rolled out, covering 63% Achievements of the population • Increased market share • 30-Day active customer growth at 8.9% Self Service: • Improved trust and • Chat Bot brand consideration • Voice Biometrics 04

  5. Slide 5: Investing in our community

    INVESTING IN OUR COMMUNITY The Foundations: • Maternal health: 53k mothers benefited • Education: 40k+ students benefited • Economic empowerment: Phase III launched targeting 20k beneficiaries 6.3% contribution to GDP Employment: • Employer of the Year Award • 2.3% differently-abled employees • 30% sta

  6. Slide 6: Growth drivers

    GROWTH DRIVERS M-PESA Data 23.6m 4.5Bn 20.2m 919Mbs Customers* Volume Customers* Usage per customer Up by Up by Up by Up by 12.4% from HY19 11.4% from HY19 14.8% from HY19 43.6% from HY19 *One Month Active 06

  7. Slide 7: Our digital strategy - beyond a telco enabling digital lifestyles

    OUR DIGITAL STRATEGY - BEYOND A TELCO ENABLING DIGITAL LIFESTYLES Brand of Choice Financial Partner Business Partner of Choice of Choice • Personalised and • Wealth management • Creating value through simplified products • Driving a savings culture Cloud, IoT, WiFi analytics, • Product affordability

  8. Slide 8: Delivering our promise for you

    DELIVERING OUR PROMISE Freedom to purchase at any amount 50% extra talk time Credit to households growth rate % NO EXPIRY Serve Customers in under 5 minutes Simple • Transparent • Honest FOR YOU Provide personalised experience 08

  9. Slide 9: FY20 guidance maintained on EBIT and Capex

    FY20 GUIDANCE GUIDANCE MAINTAINED ON EBIT AND CAPEX EBIT Capex FY20 Guidance FY20 Guidance Kshs 93-97Bn Kshs 36-39Bn Our financial outlook for 2020 reflects the adoption of the IFRS 15 and IFRS 16 accounting standards. 09

  10. Slide 10: The Numbers

    The Numbers Following the adoption of IFRS 16 - Leases on 1 April 2019, the Group’s results for the six months ended 30 September 2019 are on an IFRS 16 basis, whereas the results for the period to 30 September 2018 are (as previously reported) on an IFRS 15/IAS 17 basis. To ensure appropriate discl

  11. Slide 11: Strong customer growth with continued double digit growth on bottom line

    STRONG CUSTOMER GROWTH WITH CONTINUED DOUBLE DIGIT GROWTH ON KEY HIGHLIGHTS BOTTOM LINE +8.9%YoY +5.3% YoY +12.7% YoY +14.4% YoY One Month Active Service Revenue EBIT Net Income Customers 27.5Mn HY20 KShs 124.3Bn HY20 KShs 49.8Bn HY20 KShs 35.7Bn HY20 25.2Mn HY19 KShs 118.1Bn HY19 KShs 44.2Bn HY19 K

  12. Slide 12: Customer focus: strong momentum in growth supports revenue

    CUSTOMER FOCUS STRONG MOMENTUM IN GROWTH SUPPORTS REVENUE Customer Net Adds (k)** 725 Rate* per MB Rate* per SMS 36.9% 319 18.9% 123 HY18 HY19 HY20 Rate* per Min *Average effective rate **One Month Active 7.0% 12

  13. Slide 13: HY20 service revenue: diversified portfolio compared to traditional telco

    HY20 SERVICE REVENUE DIVERSIFIED PORTFOLIO COMPARED TO TRADITIONAL TELCO Evolution of Revenue Profile Contribution to Service Revenue Growth (KShs Bn) 0.7 (0.9) 0.8 (0.7) 6.5 124.3 Fixed Data Fixed Data Others 2.4% Others 3.7% 5.1% Mobile Data 5.5% Mobile Data 13.7% 15.9% Voice HY17 Voice HY20 Outgoi

  14. Slide 14: M-PESA revenue: new business continues to drive growth

    M-PESA REVENUE NEW BUSINESS CONTINUES TO DRIVE GROWTH Contribution to M-PESA Growth Contribution to New Business Growth IMT +44.6% YoY International Money Transfer, PayPal, AliPay 0.4pp Transfers 5.9ppts Payments +11.0% YoY ts +17.3% YoY 2.6ppts C2B +30.6% YoY New Business B2C +4.9% YoY +18.2% 8.7pp

  15. Slide 15: M-PESA: underlying business growth accelerating

    M-PESA UNDERLYING BUSINESS GROWTH ACCELERATING Increased penetration, usage and revenue growth despite slow-down in gaming 23.6 HY20 Y Y Y o Yo 13.0 10.9 Yo %Y .8% .4% 7.5 M-PESA ex-gaming +20.9% +7 +12 +1 21.0 12.1 9.3 -15.5% Gaming Total M-PESA +18.2% HY19 M-PESA ex-gaming +19.1% Gaming +7.6% HY19

  16. Slide 16: Mobile data revenue: sequential half year growth of 14.6%

    MOBILE DATA REVENUE SEQUENTIAL HALF YEAR GROWTH OF 14.6% Mobile Data Revenue (KShs Bn) Unlocking the latent potential is key for growth 19.8 HY1 20 +14.6% on HY2 19 19.0 Growth 17.3 27.5 Data Customers using >100MBs 26.7 25.2 +10.8% 39.3% +4.0% 20.2 +2.3% 18.8 17.6 7.4 7.9 HY1 FY19 HY2 FY19 HY1 FY20

  17. Slide 17: Fixed service revenue: continued double digit growth

    FIXED SERVICE REVENUE CONTINUED DOUBLE DIGIT GROWTH FTTH YoY 2.3 Contribution to Fixed + 4 302.9k Revenue Growth Y Y o 212.8k % . 5 4 +4 114.7k 79.4k Homes Passed Homes Connected 5.6ppts HY 19 HY 20 +18.4% FTTB % Yo Y YoY +1 5 . 9 21.6k 1.7 18.6k pp 11.1ppts ts o Y Y . 6 % 5 2.6k +2 2.1k Ready Build

  18. Slide 18: EBIT +2.4ppts driven by revenue growth and operating efficiencies

    EBIT +2.4PPTS DRIVEN BY REVENUE GROWTH AND OPERATING EFFICIENCIES HY20 EBIT (KShs Bn) Service Revenue & EBIT (KShs Bn) 0.9 49.8 0.2 124.3 4.5 118.1 38.5% 36.1% 44.2 49.8 44.2 HY19 Contribution Opex Depreciation HY20 HY19 HY20 Margin Revenues EBIT EBIT Margin • Opex Intensity improves 1.3ppt YoY 18

  19. Slide 19: Capex: continuous investment and 4G acceleration

    CAPEX CONTINUOUS INVESTMENT AND 4G ACCELERATION Capex (KShs Bn) Capex Split 37.3 36-39* 36.3 35.3 Other Core Capex Network 2.8% 3.2% 18.9 18.1 17.4 17.0 Fixed Network FY16/17 FY17/18 FY18/19 FY19/20 9.1% HY Capex FY Capex *Range based on FY20 CAPEX guidance Radio Access Operations 39.9% Capex Intens

  20. Slide 20: Free cashflow: impact from accelerated 4G rollout expected to unwind in H2

    FREE CASHFLOW IMPACT FROM ACCELERATED 4G ROLLOUT EXPECTED TO UNWIND IN H2 30 Sep 2019 30 Sep 2018 YoY Variance % Change KShs Bn EBITDA 66.49 61.79 4.71 7.6% Net Working Capital Movements 2.94 5.99 (3.06) (51.0%) Other Movements (0.01) (0.08) 0.07 (86.5%) Operating cash flow 69.42 67.70 1.72 2.5% Capi

  21. Slide 21: Q&A

    Q&A 21

  22. Slide 22: Appendices

    Appendices 22

  23. Slide 23: Statement of Income | Key Highlights

    Statement of Income I Key Highlights HY20 HY20 HY19 % Change IFRS 16 KShs. Bn IFRS15/16 IFRS15/IAS17 IFRS15/IAS17 IFRS 15/IAS17 Impact Voice revenue (Outgoing & Incoming) 46.87 46.87 47.53 (1.4%) 0.00 Messaging revenue 8.60 8.60 9.67 (11.0%) 0.00 Mobile data revenue 19.78 19.78 19.01 4.0% 0.00 Fixed

  24. Slide 24: Statement of Income | Key Highlights

    Statement of Income I Key Highlights HY20 HY20 HY19 % Change IFRS 16 KShs Bn IFRS15/16 IFRS 15/IAS17 IFRS 15/IAS17 IFRS 15/IAS17 Impact Service Revenue 124.32 124.32 118.05 5.3% 0.00 Handset and other revenue 5.16 5.16 4.31 19.7% 0.00 Construction revenue 0.35 0.35 0.30 15.2% 0.00 Other Income 0.10

  25. Slide 25: Statement of Income | Contribution Margin to Net Income

    Statement of Income I Contribution Margin to Net Income HY20 HY20 HY19 % Change IFRS KShs Bn IFRS15/16 IFRS 15/IAS17 IFRS 15/IAS17 IFRS 15/IAS17 16 Impact Contribution margin 92.10 92.07 87.57 5.1% 0.03 Operating costs (23.75) (25.59) (25.82) (0.9%) 1.85 Forex Loss on trading activities 0.02 0.02 0.

  26. Slide 26: Free Cashflow | Key Movements

    Free Cashflow I Key Movements 30 Sep 2019 30 Sep 2019 30 Sep 2018 % Change IFRS 16 KShs Bn Impact IFRS 15/16 IFRS 15/IAS17 IFRS 15/IAS17 IFRS15/IAS17 EBITDA 68.37 66.49 61.79 7.6% 1.87 Net Working Capital Changes 3.70 2.94 5.99 (51.0%) 0.77 Movement in: ROU assets and lease liabilities (2.61) 0.00 0.

  27. Slide 27: Movement in cash (KShs Bn)

    MOVEMENT IN CASH (KShs Bn) 66.5 (4.2) (18.8) (18.1) (15.8) (11.2) 2.6 2.1 23.3 20.0 FY19 EBITDA Debt Normal Capex Tax Paid Short term Working Net Interest HY20 Payment Dividends Investments Capital 27

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