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Vodacom FY earnings dip on challenges, revenue up

13th May 2024

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

     

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JSE-listed Vodacom Group on Monday posted double-digit increases in revenue, however, its earnings a share for the year ended March 31, 2024, declined.

The group reported a 11.2% decrease in earnings a share to 842c, along with a 10.8% decline in headline earnings a share to 846c during the year under review.

The decline was mostly attributed to a combination of startup losses in Ethiopia, higher finance and energy costs, the impact of absorbing inflationary pressures, and weaker exchange rates across markets, including the recent devaluation of the Egyptian pound.

However, Vodacom Group’s earnings before interest, taxes, depreciation and amortisation increased 24.3% to R56.11-billion, while group revenue increased 26.4% to R151-billion, positively impacted by the acquisition of the Egypt operations.

Further, despite the economic backdrop, Vodacom remains committed to spending 13% to 14.5% of its overall revenue on capital expenditure.

Group service revenue increased 29.1% to R120.89-billion during the year ended March 31, 2024.

“Our acquisition of Egypt contributed significantly to the 29.1% increase in group service revenue, supported by a resilient performance in our largest market, South Africa. A 6.4% increase in net profit to R19.26-billion showcased the robustness of our strategy and our execution track-record of adapting to changes in our operating environments, despite elevated global economic pressures,” said Vodacom Group CEO Shameel Joosub.

The group’s new services, including digital and financial, fixed and the Internet of Things, contributed 20% of group service revenue.

Financial services, a key driver of Vodacom’s new services, achieved a 32.2% increase in revenue to R13-billion, contributing 10.8% to group service revenue, with financial service customers increasing 11.8% to 78.9-million.

The group surpassed the 200-million customer mark and now serves a combined 203.1-million customers, including Safaricom on a 100% basis.

“Our customer base is evenly split across our segments, which include South Africa, Egypt, International business and Safaricom, showcasing the breadth of our footprint, which covers more than half-a-billion people across the continent,” Joosub commented.

In South Africa, new services, the consumer contract segment and prepaid mobile data led to a 2.6% growth in service revenue growth.

New services in South Africa increased 11.2% and contributed R10.2-billion, or 16.6%, of service revenue.

Further, a 7.9% service revenue increase from financial services to R3.2-billion was largely driven by the insurance business and payments, while Airtime Advance remained an important enabler of digital inclusion.

“The traction and transaction volume growth that our VodaPay superapp continues to attract is particularly pleasing having ended the period with 10.4-million downloads and 5.8-million registered users, reflecting an increase of 83% and 79.4%, respectively,” he added.

South Africa’s revenue growth, however, was partially offset by pressure in Vodacom Business, as a shift away from work-from-home policies saw corporate customers recalibrating their spend.

In South Africa, Vodacom spent R11.1-billion to support network resilience, leverage its new spectrum assets and enhance its IT platforms.

“Our proposed purchase of a joint venture stake in South African fibre company Maziv will enable affordable access to connectivity in some of the most vulnerable parts of the country through an ambitious fibre roll-out programme, assisting in narrowing the country’s digital divide,” Joosub commented, noting, however, that the transaction remains subject to a review by the Competition Tribunal with hearings due to start on May 20, during which Vodacom will showcase the strong public interest and pro-competitive advantages that the transaction would have on the fibre market, and the country as a whole.

Meanwhile, in Egypt, where Vodacom now services 48.3-million customers, a 10.9% increase in data customers contributed to a 41.8% rise in data traffic, while the 107.4% local currency increase in financial services revenue was supported by its one-app strategy, which resulted in customer growth of 52.1% to 8.2-million and strong growth in transaction values to over EGP1-trillion in the year under review.

“We are encouraged by the meaningful steps taken by Egypt's government to support economic growth through foreign direct investment and foreign exchange liquidity. Pleasingly, the dividend declared by Egypt to the group in the first half of the financial year was repatriated to South Africa in March 2024.”

Vodacom’s International businesses, including the Democratic Republic of Congo (DRC), Lesotho, Mozambique and Tanzania, produced a reported 13.1% increase in service revenue, supported by foreign exchange tailwinds, a 21.4% increase in M-Pesa revenue and a 30.5% rise in data revenue.

“Tanzania delivered strong double-digit growth, DRC's service revenue growth improved in the second half, while Mozambique's performance disappointed with a service revenue decline of 12.5%. We expect recent regulatory reforms in Mozambique will meaningfully improve our prospects in that market.”

Across the four markets, M-Pesa revenue increased 21.4%, contributing 26.5% of International business service revenue.

Joosub said that this was boosted by a strong performance in Tanzania, while new growth areas, such as lending and savings products, continued to gain traction across the portfolio as Vodacom facilitated loans worth R16.9-billion, more than doubling year-on-year.

“Safaricom delivered an excellent performance in Kenya with service revenue accelerating in the second half to end the year with growth of 13.4%, boosted by double-digit growth in mobile data and M-Pesa revenue,” he added, noting that M-Pesa transaction volumes increased 34.8%.

Vodacom declared a dividend of 590 c a share.

Edited by Creamer Media Reporter

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