Vodacom’s earnings down on BEE deal

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Vodacom’s earnings down on BEE deal

Published Date: 2019-05-14 | Source: Stephen Gunnion | Author: Stephen Gunnion | Comments

Vodacom’s earnings down on BEE deal

Stripping out the costs of the R16.4 billion scheme, full-year profit would have been 4.2% higher.

Vodacom's R16.4 billion empowerment deal last year was a worthy sequel to the previous YebuYethu scheme, which unlocked R7.5 billion in value for black investors. However, the costs of the deal have eaten into the network operator's full-year earnings, while the additional 114.5 million shares in issue have also been dilutionary.

The group says a reduction in its out-of-bundle tariffs contributed to a 37% decline in effective data prices over the past year, but also affected earnings.

CEO Shamble Joosub said these factors masked an otherwise solid operational performance from the group, with service revenue rising by 5%, boosted by a 15.6% rise in its international operations.

With voice revenue under pressure, Vodacom managed to grow SA data revenue by 3.9% to R24.3 billion, contributing 43.5% to service revenue. Internationally, data revenue jumped 25.8% as it rolled out 4G services to all its operations.

Group revenue rose 3.2% to R90.1 billion on a comparable basis as a 10% rise in revenue at its global operations compensated for subdued growth of 2.1% in its home market. Operating profit rose 1.1% to R24.5 billion but was up by 7.4% excluding the R124 million in transactions costs for last year's BEE scheme and non-cash accounting charges.

Earnings per share (EPS) declined 8.4% to of 867c and headline EPS fell by 6.6% to 862c. Excluding the one-off BEE costs, HEPS rose 4.2%. It's lowered its dividend by 2.5% to 795c per share, also impacted by the additional shares in issue.

Vodacom said its 2017 acquisition of Keyna's Safaricom had helped extend its mobile money business in Africa, making financial services a significant contributor to group revenue. In SA, pre-tax profit from financial services doubled to R1 billion, while M-Pesa grew revenue by 32% to R3.1 billion. It said it was in the process of concluding the acquisition of the M-Pesa brand and platform-related assets from Vodafone through a joint agreement with Safaricom.

Due to the benefits it's derived from the Safaricom acquisition, it's updated its medium-term targets to mid-high single-digit growth in operating profit on average for the next three years.

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