Vodacom

  • Group   revenue was up 4.8% (3.5% Normalized) supported by Group service revenue   growth of 5.0%.

  • The company added 5.9 million customers in the   period, reaching a total of 116 million customers across the group.

  • Earnings per share were up 7.7% and headline   earnings per share were up 8.9%, boosted by the once-off BEE costs of R1.5   billion (including transaction costs) being included in the prior period. An   improved second half contribution from the Vodacom SA operations and growth   in its International businesses in Africa contributed to an 8.9% increase in   group headline earnings to 945 cents per share. EBITDA had a robust increase   of 11.6% (2.3% normalized).

  • Vodacom declared a final dividend of 405cps.

  • A strong increase in Safaricom (which includes   the M- Pesa financial services money transfer product in East Africa) is   likely to be the next growth area for telecoms players. Total financial   services customers was up 12.8%, to 53.2 million, adding 6 million customers   in the year. The potential for additional growth in this area such as   insurance and VodaPay, video, music, sports and gaming is a good prospect.

  • South Africa service revenue grew 2.3%, with data   usage elasticity supporting recovery to growth in the second half.   International operations delivered service revenue growth of 12.5% (7.1%   normalized), with foreign currency translations boosting reported group   growth.

  • Two major themes stood out: firstly, the sharp   surge in data traffic subsequent to the reduction in data prices in South   Africa last year. This resulted in an additional 1.9m SA customers. This   resulted in an increase of 9.7% to 21.9m users in the country, with the lower   out-of-bundle rates a major plus factor.

  • Work from home is likely to be a theme even after   the pandemic has peaked, with fewer employees needing to work (or only   needing to partially work) from their offices. This is positive for data   service growth.

  • The second piece of positive news was the final   dividend of 405 cents, resulting in the total dividend for the year coming to   845 cents, an increase of 6.3%. This is in an era when many companies have   either cut their dividend payments or bypassed them altogether.

  • The dividend yield is an attractive 6.5%, in a   time when money market rates are at around 5%. These money market rates are   likely to decline when the MPC meets to announce an additional cut in   interest rates. The sector is likely to remain resilient with Vodacom   generating free cash flow increased by 9.5%.

  • Management have shown the ability to deliver results, despite a tough regulatory environment in SA, in a competitive marketplace, backed by big Brother, Vodaphone UK, a significant shareholder.

Vodacom