Earnings before interest, taxes, depreciation and amortisation rose 4.7 percent to R16.5 billion ($1.5 billion), while the interim dividend was increased to R3.95 a share from R3.90.
Key insights
- A 6 percent increase in headline earnings per share excluded the impact of a R16.4 billion empowerment deal agreed to earlier this year. That helped Johannesburg-based Vodacom better comply with government initiatives to increase non-white participation in the economy.
- The unit of the UK's Vodafone Group Plc experienced tough conditions in its home market, with weak economic growth hurting consumer spending.
- The carrier has used investment in data to offset the weak environment, helping to boost revenue and customer numbers in its biggest market.
- Vodacom's international portfolio more than held its own, helped by the recent acquisition of a stake in Nairobi-based Safaricom Plc from its parent.
- Services such as money-transfer service M-Pesa have helped drive growth, and the 2.3 million new customers in the period almost matched the South African figure of 2.5 million.
Market Reaction
Vodacom shares fell 7.8 percent to R120.22 as of 12:35 p.m. in Johannesburg, extending the decline for the year to 17 percent. Crosstown rival MTN Group Ltd. dropped 5 percent and landline specialist Telkom SA SOC Ltd. slipped 4.3 percent. "Vodacom's dividend was good, and its international relations are improving, but South Africa's data revenue grrowth was a bit disappointing," said Peter Takaendesa, a money manager at Mergence Investment Managers.
Vodacom media statement
Highlights
- Group service revenue up 6.1% (5.8%*) to R36.8 billion#; and Group revenue increased 5.6% (5.4%*) to R44.4 billion#.
- We added 4.8 million customers in the six months, up 10.7%, comprising 2.5 million in South Africa and 2.3 million in our International operations. Safaricom added 373 000 customers. In combination, we now serve over 109 million customers across the Group.
- South Africa service revenue increased 4.6% to R27.9 billion#, supported by strong customer growth.
- International operations service revenue growth accelerated to 12.8% (11.4%*), boosted by strong growth in data and M-Pesa.
- Group EBIT improved 3.4% (2.8%*) to R11.2 billion#, with strong improvement in our International operations.
- Significant capital investment of R5.3 billion to expand our coverage and improve the quality of our networks.
- Vodacom Lesotho, the first operator to launch a commercial 5G network in Africa.
- Concluded our new Broad-based black economic empowerment (BEE) ownership deal, the largest deal of its kind in the ICT sector.
- Safaricom contributed R1.4 billion# profit, after deducting the amortisation of fair valued assets and before minority interest.
- Interim dividend per share of 395 cents, improved, despite issue of 114.5 million new shares for new BEE structure.
Six months ended 30 September | % change | |||||
Rm | 2018 IFRS 15 | 2018 IAS 18# | 2017 IAS 18 | IAS 18 | IAS 18 Normalised* | |
Revenue | 42 707 | 44 364 | 41 995 | 5.6 | 5.4 | |
Service revenue | 34 552 | 36 765 | 34 654 | 6.1 | 5.8 | |
EBITDA | 16 534 | 16 468 | 15 731 | 4.7 | 4.1 | |
EBIT | 11 263 | 11 197 | 10 830 | 3.4 | 2.8 | |
Net profit from associate and joint ventureD | 1 345 | 1 361 | 349 | >200.0 | ||
Net profit | 6 789 | 6 756 | 6 712 | 0.7 | ||
Capital expenditure | 5 334 | 5 334 | 5 378 | (0.8) | ||
Operating free cash flow | 7 074 | 7 074 | 6 311 | 12.1 | ||
Interim dividend per share (cents)[1] | 395 | n/a | 390 | 1.3 | ||
Following the prospective adoption of IFRS 15: Revenue from Contracts with Customers on 1 April 2018, the Group's results for the six months ended 30 September 2018 are on an IFRS 15 basis, whereas the results for the six months ended 30 September 2017 are (as previously reported) on an IAS 18 basis. Comparisons between the two bases of reporting are not meaningful and to ensure appropriate disclosure during the period of transition onto IFRS 15, results for the six months ended 30 September 2018 has been disclosed on both an IFRS 15 and IAS 18 basis. Our commentary describing our operating performance in the Operating Review has been provided solely on an IAS 18 basis. The accounting standard applied is clearly marked in the heading of relevant columns in the news release. To aid in the understanding of the transition from IAS 18 to IFRS 15, we have provided commentary on the main differences between the two standards on page 9 and 10. Further disclosure is also included in Note 2: Change in accounting policies and in Note 3: Segment analysis of the condensed consolidated interim financial statements for the six months ended 30 September 2018.
Shameel Joosub, Vodacom Group CEO commented:
Following on from last year's extraordinary year for Vodacom, we delivered two strategic milestones during the first half of this year. In September, we concluded our second BEE transaction under the YeboYethu umbrella to replace the highly successful R7.5 billion deal launched in 2008. Valued at R16.4 billion, the new scheme is the biggest ever in the Telecommunications industry in South Africa and makes YeboYethu our third largest shareholder. As expected, the costs associated with this transaction had a once-off impact on headline earnings per share. Excluding the charges relating to the BEE transaction and contribution from Safaricom, HEPS rose 6.0%¥. To facilitate the new BEE structure, we issued an additional 114.5 million shares yet increased our interim dividend to 395cps.