Wrap Text
VOD/VOD003 - Vodacom Group Limited - Preliminary results for the year ended 31
March 2012
Vodacom Group Limited
(Incorporated in the Republic of South Africa)
Registration number: 1993/005461/06
(ISIN: ZAE000132577 Share Code: VOD)
(ISIN: ZAG000093097 JSE Code: VOD003)
(`Vodacom`)
Preliminary results for the year ended 31 March 2012
Pieter Uys, Vodacom GroupCEO commented:
"Our first year of trading as the new red Vodacom has been a big success. Our
customer base has expanded 30% to 48 million, we`ve invested R8.7 billion in our
networks and we`ve achieved the number one net promoter score in South Africa
and in two out of our three measured International markets. From a financial
perspective, thanks to building the top line and also managing costs, EBITDA is
up 11% and HEPS is up 8%.
Perhaps more importantly, we`ve seen strong delivery in the areas driving growth
into the future - data and the International businesses. Combined, these
accounted for 87% of the growth in Group service revenue. We added 5 million
active data customers, taking the total to 15 million and supporting data
revenue growth of 27%. The International customer base has now reached 19
million, an increase of 36%, and this segment has passed the important milestone
of generating positive free cash flow.
Overall, the team delivered a very solid performance and the platforms for
growth are well established. The 24% growth in Group free cash flow supported a
higher dividend of 710 cents and helped us deliver a 45% total shareholder
return."
Highlights
Strong financial performance
- Group service revenue up 7.8% (7.1%*)
- Group EBITDA up 10.5% (11.4%*)
- Group operating free cash flow up 14.1% to R16 934 million
- Headline earnings per share (`HEPS`) up 8.1% to 709 cents
- 54.3% increase in total dividend per share to 710 cents
Targeted activity underpins commercial success
- Customers1 increased 29.9% to 47.8 million adding 11.0 million
- 48.6% increase in Group active data customers to 15.1 million
- Number one in net promoter score (`NPS`) in South Africa
Investment sustains network leadership advantage
- Group capex increased 37.3% to R8 662 million
- 22.0% increase in number of 3G base stations
- Radio equipment renewals underway in all operations
Demand for data services remains high in South Africa
- Active data customers increased 35.4% to 12.2 million
- 55.4% increase in active smartphones on the network to
5.1 million
- Data revenue growth of 23.6% to R7 639 million
International growth momentum continues
- Service revenue up 27.5% (22.4%*)
- EBITDA up 73.9% (71.7%*)
- Active M-Pesa customers up 1.8 million to 3.1 million
in Tanzania
- Positive contribution to free cash flow
* Represents normalised growth excluding foreign exchange
gains/losses and at a constant currency.
1. The reporting of customers, ARPU and MOU has been changed
from total to three month active.
Operating review
South Africa
South Africa delivered a strong performance with service revenue growing 4.4% to
R48 427 million (6.8% excluding the impact of cuts in mobile termination rates
(`MTRs`)). Equipment sales were particularly strong, growing 23.2%, contributing
to overall revenue growth of 6.7%.
Customers increased 26.5% year on year to 28.9 million, a net increase of 6.1
million, mainly due to a 31.3% increase in prepaid customers driven by low cost
handset deals in the retail channels and refocusing of our distribution channel
to better reach under serviced areas. We also saw encouraging growth of 9.8% in
our contract customer base. By offering Vodacom4Less, Night Shift products and
more value promotions, we have reduced our effective price per minute by 13.6%
compared to prior year. The higher prevalence of low end usage customers,
coupled with a reduction in MTRs, saw blended ARPU decrease 14.2% to R157.
Data revenue increased 23.6% to R7 639 million supported by 35.4% increase in
active data customers to 12.2 million. Active data customers purchasing data
bundles increased 60.4% to 4.2 million. Smartphones remain the key driver of
data revenue growth, with active smartphones on the network increasing by 55.4%
adding over 1.8 million smartphones in the year to 5.1 million. Smartphone
average monthly usage more than doubled to 92MB as we increased the number of
smartphones with attached data bundles to 40.8% from 25.9% a year ago.
Competitive pressures in the data market resulted in an 18.2% reduction in the
effective price per megabyte.
We continue to focus on cost saving initiatives as we operate in an environment
of rising energy prices, expanding site numbers and foreign exchange volatility.
In addition we benefitted from the capitalisation of employee costs for those
involved in capital projects and lower publicity spend this year as the brand
refresh is now complete. EBITDA for South Africa increased 8.1% to R21 254
million, with the EBITDA margin expanding from 36.8% to 37.3%.
Capital expenditure increased 36.8% to R6 976 million (12.3% of revenue). A
large portion of capital spend was for the radio access network (`RAN`) renewal
project, transmission and new base station sites. Our RAN renewal project in
South Africa achieved 60% completion in the year. The rest of our sites should
be completed over the next 24 months. More than 1 700 base stations were self-
provided with fibre and microwave during the year, bringing the total self-
provisioned sites to just over 4 300. We expanded our network adding 973 3G base
stations bringing the total 3G base stations to 5 263. We continued to invest in
building 2G coverage and capacity, particularly in under serviced areas and
added 519 new sites during the year.
International
International operations delivered a strong operational performance with service
revenue increasing 27.5% (22.4%*) to R10 143 million due to customer growth,
increased take up of data services and improved pricing environments.
Customers increased 35.5% year on year to 18.9 million, adding 4.9 million in
the year driven by competitive pricing, improved distribution and extra site
coverage. The demand for mobile financial services remains strong with active M-
Pesa customer additions in Tanzania accelerating by 1.8 million to 3.1 million,
representing 32.2% of its customer base. Tanzania M-Pesa now contributes 8.5% to
their service revenue compared to 2.8% a year ago.
International EBITDA increased by 73.9% (71.7%*) to R1 461 million and the
EBITDA margin improved 3.8ppts to 14.0%. The strong growth in EBITDA was due to
increased revenue growth in our mobile network operations (`MNOs`) of 36.2% and
realising better group scale benefits particularly in procurement, offset by
losses in the Gateway businesses. The Group is in an advanced stage of disposing
of its Gateway carrier business.
Capital expenditure increased 39.0% to R1 679 million as we continued to expand
our voice and data network coverage and capacity.
Strategic review
Doing more to improve the customer experience
Possibly the most important factor in improving the customer experience is to be
obsessive about network quality. We started the year with a major network outage
in South Africa and have done a lot of work since then to limit the risk of this
happening again. In the past year we increased Group capital expenditure by 37%,
giving greater capacity, updated technology and an expanded footprint. The
results are clear - a recent independent test in South Africa gave Vodacom the
highest marks in both voice quality and data speed, backing up the `best
network` claim. Customer service has also been enhanced through a variety of
initiatives, including new in-store tech help centres that set up customers`
smartphones straight away. Our measure for customer satisfaction is our NPS. It
boils down to one question: "Will you recommend Vodacom'" We are rated number
one in South Africa and in two of our other markets, so we`re doing well - but
there is room for improvement.
More for our people
Employee engagement is an attempt to measure how motivated employees are to make
the extra effort. Some of the keys to engagement are ensuring that the purpose
and goals of the company are well-understood, that structural impediments to
getting jobs done are minimised, and that bureaucracy is minimised and
transparency is maximised. This year the company incentive scheme was linked
directly to the five strategies discussed here, as well as to the Vodacom Way
and key principles of speed, simplicity and trust. We`ve employed tools like
Yammer, an internal social network, to provide a platform for direct interaction
and we`ve put in place an employee customer service helpline so that employees
have a dedicated hotline to provide support for themselves and for their friends
and family. While we worked really hard, we still have a way to go to achieve
our goal of an 80% Engagement Index score. The actual score of 73% this year is
still good, but we are disappointed that it was unchanged from prior year.
The power of the internet in more people`s hands
There is a proven link between internet penetration and economic growth, which
means that one of the biggest differences Vodacom can make as a corporate
citizen is to get the internet into the hands of more people. This is a function
of both the reach of the network and the cost to connect. We invested
significantly in our networks and increased the number of 3G sites by 22% this
year, which is an addition of more than 1 000 new sites. We also introduced a
number of low cost internet devices such as the Vodafone 858 Smartphone, which
was South Africa`s first sub-R1 000 full Android touchscreen smartphone. We have
also made data more affordable through various promotional offers in all our
markets and by extending Night Owl in South Africa to our contract customers.
The end result has been a major increase in active data customers, which have
grown by 48.6% to 15.1 million. This takes us 5 million closer to our goal of 25
million by March 2014.
Operating more efficiently
Done correctly, operational excellence produces a win-win situation in terms of
both our cost base and the environment. With this in mind, we launched the Site
Solution Innovation centre this year in collaboration with Vodafone. This is
Africa`s first six star energy efficient building and it houses a team of
experts who look at ways to reduce our carbon footprint across our operations as
well as to minimise the cost of rolling out and maintaining our mobile networks.
Our efforts to reduce our energy inputs have culminated in a 12%1 reduction per
base station site across the Vodacom Group. Overall, through cost efficiency
programmes, we have been able to lower our operating expenses to service revenue
to 23.7% from 24.1% last year.
Doing more with our stakeholders
Our contribution to society and to the economies in which we operate extends
beyond efficiently providing a service. By proactively engaging with
organisations on key industry matters, particularly relating to rural coverage
and broadband inclusion for all, we have a better chance of ensuring that we are
able to use our technology to make a real difference. In South Africa we signed
the ICT industry competitiveness and job creation compact, which sets out 2020
goals to have 100% broadband population coverage and create one million new
jobs. We have also been an active partner in setting up a new industry body to
deal with all ICT related matters. We are working with industry, business
partners and governments on a number of projects to enable platforms for the
effective delivery of health, financial services and education programmes.
1. Compound annual reduction in Group`s carbon footprint (March
2009 vs March 2011).
Financial review
Summary financial information
Year ended 31 March % change
Rm 2012 2011 2010 11/12 10/11
Service revenue 58 245 54 052 52 184 7.8 3.6
Revenue 66 929 61 197 58 535 9.4 4.5
EBITDA 22 763 20 594 19 782 10.5 4.1
Operating profit 16 617 13 696 11 238 21.3 21.9
Net profit 10 203 7 979 4 200 27.9 90.0
Operating free cash flow 16 934 14 837 13 489 14.1 10.0
Free cash flow 10 971 8 829 7 212 24.3 22.4
Capital expenditure 8 662 6 311 6 636 37.3 (4.9)
Net debt 7 667 9 458 12 161 (18.9) (22.2)
Basic earnings per share 694 561 282 23.7 98.9
(cents)
Headline earnings per 709 656 510 8.1 28.6
share (cents)
Contribution margin (%) 54.8 54.9 54.3
EBITDA margin (%) 34.0 33.7 33.8
Operating profit margin 24.8 22.4 19.2
(%)
Effective tax rate (%) 36.0 36.9 53.0
Net profit margin (%) 15.2 13.0 7.2
Net debt/EBITDA (times) 0.3 0.5 0.6
Capex intensity (%) 12.9 10.3 11.3
Service revenue
Year ended 31 March % change
Rm 2012 2011 2010 11/12 10/11
South Africa 48 427 46 392 44 324 4.4 4.7
International 10 143 7 957 8 071 27.5 (1.4)
Corporate and eliminations (325) (297) (211) (9.4) (40.8)
Service revenue 58 245 54 052 52 184 7.8 3.6
Group revenue and service revenue for the year ended 31 March 2012 increased by
9.4% and 7.8% respectively (8.8%* and 7.1%*), underpinned by continued growth in
voice and data revenue. Service revenue growth in South Africa remained
relatively stable due to growth in data revenue and customers offset by a
decline in interconnect revenue resulting from further cuts in MTRs. Customer
growth and stable pricing in the International operations supported revenue
growth of 27.2% (22.1%*) and service revenue growth of 27.5% (22.4%*).
Operating expenses1
Year ended 31 March % change
Rm 2012 2011 2010 11/12 10/11
South Africa 35 737 33 758 31 850 5.9 6.0
International 8 970 7 348 7 243 22.1 1.4
Corporate and eliminations (476) (468) (323) (1.7) (44.9)
Operating expenses1 44 231 40 638 38 770 8.8 4.8
Group operating expenses1 increased 8.8% (7.5%*) to R44 231 million,
below revenue growth of 9.4% (8.8%*). These expenses include a net foreign
exchange loss on the revaluation of foreign-denominated trading items of R146
million (2011: R11 million gain). The increase in Group expenses resulted
mainly from an increase in device sales volume, carrier expenditure from
increased volumes of minutes carried in International and interconnect
expenditure in both segments, offset by publicity savings due to the brand
refresh related costs in the prior year. Staff expenses increased by 7.3% during
the year. Excluding the impact of capitalisation of staff costs, staff expenses
increased 13.3% due to salary increases and a higher long-term incentives
provision linked to the share price appreciation.
1. Excluding depreciation, amortization and impairment losses.
EBITDA
Year ended 31 March % change
Rm 2012 2011 2010 11/12 10/11
South Africa 21 254 19 653 18 578 8.1 5.8
International 1 461 840 1 176 73.9 (28.6)
Corporate and eliminations 48 101 28 (52.5) >
200.0
EBITDA 22 763 20 594 19 782 10.5 4.1
Group EBITDA increased 10.5% (11.4%*) to R22 763 million, and the EBITDA margin
improved to 34.0% (2011: 33.7%). In constant currency the Group EBITDA margin
improved 0.8ppts from the prior year to 34.2%. South Africa contributed 93.4%
(2011: 95.4%) to Group EBITDA, increasing 8.1% (9.1%*) with an improved margin
of 37.3% (37.6%*). International EBITDA increased 73.9% (71.7%*) with margins
improving to 14.0% (2011: 10.2%). The substantial improvement in the
profitability of the International MNOs was partially offset by EBITDA losses in
Gateway.
Operating profit
Year ended 31 March % change
Rm 2012 2011 2010 11/12 10/11
South Africa 16 671 15 522 14 763 7.4 5.1
International (75) (1 (3 96.1 43.4
902) 358)
Corporate and eliminations 21 76 (167) (72.4) 145.5
Operating profit 16 617 13 696 11 238 21.3 21.9
Group operating profit increased 21.3% to R16 617 million. The operating profit
in South Africa increased 7.4% due to the growth in EBITDA, partially offset by
the 10.6% increase in depreciation and amortisation arising from higher capital
expenditure. International operating loss decreased 96.1% mainly as a result of
a reduction in net impairment losses from R1 506 million in the prior period to
R199 million this year coupled with improved profitability of the MNOs.
Net finance charges
Year ended 31 March % change
Rm 2012 2011 2010 11/12 10/11
Finance income 109 109 124 - (12.1)
Finance costs (748) (864) (1 602) (13.4) (46.1)
Remeasurement of loans (51) 28 (375) < 107.5
(200.0)
Net loss on translation (16) (131) (23) (87.8) > 200.0
of foreign -
denominated assets and
liabilities
Net gain/(loss) on 20 (164) (396) 112.2 (58.6)
derivatives
Other 2 (36) - 105.6 n/a
Net finance charges (684) (1 058) (2 272) (35.3) (53.4)
Net finance charges reduced from R1 058 million in the prior period to R684
million for the year ended 31 March 2012, mainly due to the gain on derivatives
relating to our forward exchange contracts and reduced finance costs.
Finance costs for the period reduced by R116 million compared to the prior
period as a result of a lower average debt coupled with the benefit of lower
interest rates. The average cost of debt reduced from 7.7% to 7.3%.
Taxation
The tax expense of R5 730 million for the period increased by 23.0% compared to
the prior year. The increase is mainly due to increased profitability, higher
secondary tax on companies (`STC`) and the net derecognition of certain deferred
tax assets. The Group`s effective tax rate decreased from 36.9% to 36.0% mainly
due to a decrease in net impairment losses partially offset by an increase in
STC.
Earnings
HEPS increased 8.1% to 709 cents mainly due to growth in operating profit before
impairments and a reduction in finance charges offset by increased taxation.
Basic earnings per share of 694 cents (2011: 561 cents) was impacted by
net impairment losses of R199 million (2011: R1 508 million).
Capital expenditure
Year ended 31 March % change
Rm 2012 2011 2010 11/12 10/11
South Africa 6 976 5 100 4 573 36.8 11.5
International 1 679 1 208 2 067 39.0 (41.6)
Corporate and eliminations 7 3 (4) 133.3 175.0
Capital expenditure 8 662 6 311 6 636 37.3 (4.9)
Capex intensity (%) 12.9 10.3 11.3
The Group`s capital expenditure for the period was R8 662 million, 37.3% higher
than a year ago. The 36.8% growth in the South African capital expenditure is
largely due to an increase in the RAN renewal project, self-provisioning of our
transmission network, and investment in our information technology and billing
systems. New coverage and capacity sites as well as RAN renewals contributed to
the 39.0% (24.3%*) increase in the International business capital expenditure.
Statement of financial position
Property, plant and equipment increased by 12.9% to R24 367 million
due to net additions of R7 230 million and was positively impacted by foreign
currency translation adjustments of R562 million.
Net debt decreased to R7 667 million, compared to R9 458 million a year ago. The
Group`s financial gearing reduced, with the net debt to EBITDA ratio at 0.3
times at 31 March 2012 (2011: 0.5 times). 87.8% (2011: 86.7%) of the debt1 is
denominated in rand. R2 413 million (2011: R3 114 million) of the debt1
matures in the next 12 months and 55.9% (2011: 66.2%) of interest bearing debt
(including bank overdrafts) is at floating rates.
Net debt
As at 31 March Movement
Rm 2012 2011 2010 11/12 10/11
Bank and cash balances 3 781 870 1 061 2 911 (191)
Bank overdrafts (409) (331) (110) 78 221
Borrowings and (11 (9 997) (13 1 042 (3 115)
derivative financial 039) 112)
instruments
Net debt (7 667) (9 458) (12 (1 791) (2 703)
161)
Net debt/EBITDA 0.3 0.5 0.6
(times)
During the year the Group diversified its sources of funding by establishing a
R10 billion domestic medium-term note programme (`DMTN`). As part of this
programme, we issued our inaugural R750 million three month commercial paper
in August 2011 and rolled the commercial paper in November 2011 and February
2012.
A three-year loan with a nominal value of R3 billion was raised from Vodafone to
refinance existing short-term borrowings as well as finance capital expenditure
and working capital requirements.
1. Debt includes interest bearing debt, bank overdrafts and
commercial papers.
Cash flow
Free cash flow
Year ended 31 March % change
Rm 2012 2011 2010 11/12 10/11
Cash generated from 24 502 21 385 19 711 14.6 8.5
operations
Net additions to property, (7 (6 (6 15.6 5.2
plant and equipment and 568) 548) 222)
intangible assets
Operating free cash flow 16 934 14 837 13 489 14.1 10.0
Tax paid (5 (4 (4 4.2 4.6
192) 982) 764)
Finance income received 29 85 108 (65.9) (21.3)
Finance costs paid (800) (1 (1 (28.0) (31.5)
111) 621)
Free cash flow 10 971 8 829 7 212 24.3 22.4
Operating free cash flow increased by 14.1% to R16 934 million for the period.
The cash generated from operations grew by R3 117 million and was
mainly due to positive trading performance. Net cash additions to property,
plant and equipment and intangible assets increased from R6 548 million to R7
568 million. The growth of 24.3% in Group free cash flow to R10 971 million was
due to positive free cash flow from the International MNOs resulting from lower
funding requirements from the Group.
Declaration of final dividend No. 6 - payable from income reserves
Notice is hereby given that a gross final dividend number 6 of 450 cents per
ordinary share in respect of the financial year ended 31 March 2012 has been
declared payable on Monday 25 June 2012 to shareholders recorded in the register
at the close of business on Friday 22 June 2012. There are no STC credits
available for utilisation. The number of ordinary shares in issue at date of
this declaration is 1 487 954 000. The dividend will be subject to a local
dividend withholding tax rate of 15%, which will result in a net final dividend
to those shareholders not exempt from paying dividend withholding tax of 382.5
cents per ordinary share.
Last day to trade shares cum Friday 15 June 2012
dividend
Shares commence trading ex Monday 18 June 2012
dividend
Record date Friday 22 June 2012
Payment date Monday 25 June 2012
Share certificates may not be dematerialised or rematerialised between Monday 18
June 2012 and Friday 22 June 2012, both days inclusive.
On Monday 25 June 2012, the final dividend will be electronically transferred
into the bank accounts of all certificated shareholders where this facility is
available. Shareholders who hold dematerialised shares will have their accounts
at their CSDP or broker credited on Monday 25 June 2012.
Vodacom Group Limited tax reference number is 9316/041/71/5.
Outlook
Our first year of trading as the new red Vodacom has been a big success. We made
good progress on the Group`s five strategic focus areas and thanks to strong
customer additions and significantly higher data usage, we delivered service
revenue growth ahead of our "low single digit" guidance.
Looking to the year ahead we expect competition to intensify, particularly in
the data business, and consumers to remain under pressure from rising food and
fuel prices. Despite these pressures, we believe that continued improvements in
our customer proposition, data demand, and continued momentum in our
International operations will support growth. We also expect to deliver further
operational efficiencies.
Over the medium-term, we are targeting low single digit service revenue growth
and steady incremental EBITDA margin improvement (excluding foreign exchange
movements).
We expect to maintain our Group capital expenditure between 11% and 13% of
revenue for the year ending 31 March 2013. Our capital expenditure programme
will support our continued customer demand for data services. We will focus on
transmission, radio access renewal and accelerating the rollout of mobile
broadband coverage.
For and on behalf of the Board
Peter Moyo Pieter Uys
Non-executive Chairman Chief Executive Officer
18 May 2012
Midrand
Condensed consolidated income statement
for the year ended 31 March
2012 2011 2010
Rm Notes Reviewed Audited Audited
Revenue 3 66 929 61 197 58 535
Direct expenses (30 265) (27 600) (26 764)
Staff expenses (4 318) (4 024) (3 878)
Publicity expenses (1 804) (2 086) (1 848)
Other operating expenses (7 844) (6 928) (6 280)
Depreciation and (5 882) (5 355) (5 157)
amortisation
Impairment losses 4 (199) (1 508) (3 370)
Operating profit 16 617 13 696 11 238
Finance income 109 109 124
Finance costs (748) (864) (1 602)
Net loss on remeasurement and (45) (303) (794)
disposal of financial instruments
Loss from associate - - (21)
Profit before tax 15 933 12 638 8 945
Taxation (5 730) (4 659) (4 745)
Net profit 10 203 7 979 4 200
Attributable to:
Equity shareholders 10 156 8 245 4 196
Non-controlling 47 (266) 4
interests
10 203 7 979 4 200
2012 2011 2010
Cents Notes Reviewed Audited Audited
Basic earnings per share 5 694.0 561.5 282.3
Diluted earnings per 5 691.2 560.4 282.0
share
Condensed consolidated statement of comprehensive income
for the year ended 31 March
2012 2011 2010
Rm Audited Audited
Reviewed
Net profit 10 203 7 979 4 200
Other comprehensive income 315 (449) (2 665)
Foreign currency translation 389 (502) (2 665)
differences, net of tax
(Loss)/Gain on hedging (74) 53 -
instruments in cash flow hedges,
net of tax
Total comprehensive income 10 518 7 530 1 535
Attributable to:
Equity shareholders 10 583 7 739 1 645
Non-controlling interests (65) (209) (110)
10 518 7 530 1 535
Condensed consolidated statement of financial position
as at 31 March
2012 2011 2010
Rm Notes Audited Audited
Reviewed
Assets
Non-current assets 30 678 27 982 29 131
Property, plant and 24 367 21 577 21 383
equipment
Intangible assets 5 123 5 215 6 673
Financial assets 201 189 181
Trade and other 227 264 231
receivables
Finance lease 447 307 408
receivables
Deferred tax 313 430 255
Current assets 17 552 13 453 12 560
Financial assets 695 273 153
Inventory 832 799 707
Trade and other 11 379 10 773 10 024
receivables
Finance lease 691 462 262
receivables
Tax receivable 174 276 353
Cash and cash 3 781 870 1 061
equivalents
Total assets 48 230 41 435 41 691
Equity and liabilities
Fully paid share capital * * *
Treasury shares (1 530) (1 384) (422)
Retained earnings 20 121 17 864 14 832
Other reserves (61) (858) (672)
Equity attributable to 18 530 15 622 13 738
owners of the parent
Non-controlling 400 558 898
interests
Total equity 18 930 16 180 14 636
Non-current liabilities 10 932 8 743 11 590
Borrowings 10 9 012 7 280 9 786
Trade and other payables 352 258 317
Provisions 551 510 436
Deferred tax 1 017 695 1 051
Current liabilities 18 368 16 512 15 465
Borrowings 10 2 004 2 783 3 239
Trade and other payables 15 406 13 005 11 714
Provisions 355 298 193
Tax payable 172 87 203
Dividends payable 22 8 6
Bank overdrafts 409 331 110
Total equity and 48 230 41 435 41 691
liabilities
* Fully paid share capital of R100.
Condensed consolidated statement of changes in equity
for the year ended 31 March
Equity Non- Total
Attri- Con- equity
butable trolling
to interest
owners s
Rm of the
parent
1 April 2009 14 017 1 081 15 098
Total comprehensive income 1 645 (110) 1 535
Dividends (1 631) (73) (1 704)
Repurchase of shares (422) - (422)
Share-based payment expense 129 - 129
31 March 2010 13 738 898 14 636
Total comprehensive income 7 739 (209) 7 530
Dividends (5 212) (71) (5 283)
Partial disposal of interests in 156 (60) 96
subsidiaries
Repurchase of shares (962) - (962)
Share-based payment expense 163 - 163
31 March 2011 15 622 558 16 180
Total comprehensive income 10 583 (65) 10 518
Dividends (7 900) (61) (7 961)
Partial disposal of interests in 191 (172) 19
subsidiaries
Shareholder loan conversion to - 140 140
equity
Repurchase and sale of shares (139) - (139)
Share-based payment expense 173 - 173
31 March 2012 18 530 400 18 930
Condensed consolidated statement of cash flows
for the year ended 31 March
2012 2011 2010
Rm Audited Audited
Reviewed
Cash flows from operating
activities
Cash generated from operations 24 502 21 385 19 711
Tax paid (5 192) (4 982) (4 764)
Net cash flows from operating 19 310 16 403 14 947
activities
Cash flows from investing
activities
Net additions to property, plant (7 568) (6 548) (6 222)
and equipment and intangible
assets
Business combinations, net of (23) (24) -
cash acquired
Other investing activities (411) (9) (107)
Net cash flows utilised in (8 002) (6 581) (6 329)
investing activities
Cash flows from financing
activities
Movement in borrowings, including (480) (3 949) (4 255)
finance costs paid
Dividends paid (7 947) (5 283) (3 908)
Repurchase and sale of shares (148) (984) (385)
Partial disposal of interests in 19 98 -
subsidiaries, net of cash
disposed
Non-controlling interests - (1) -
Net cash flows utilised in (8 556) (10 (8 548)
financing activities 119)
Net increase/(decrease) in cash 2 752 (297) 70
and cash equivalents
Cash and cash equivalents at the 539 951 1 084
beginning of the year
Effect of foreign exchange rate 81 (115) (203)
changes
Cash and cash equivalents at the 3 372 539 951
end of the year
Notes to the preliminary condensed consolidated annual financial statements
1. Basis of preparation
These preliminary condensed consolidated annual financial
statements have been prepared in accordance with the
framework concepts, the recognition and measurement criteria
of International Financial Reporting Standards (`IFRS`) and
the information required by International Accounting
Standard 34: Interim Financial Reporting as issued by the
International Accounting Standards Board (`IASB`), the AC
500 standards as issued by the Accounting Practices Board,
the JSE Listings Requirements and the requirements of the
Companies Act No 71 of 2008, as amended. They have been
prepared on the historical cost basis, except for certain
financial instruments which are measured at fair value or at
amortised cost, and are presented in South African rand,
which is the parent Company`s functional and presentation
currency.
The significant accounting policies and methods of
computation are consistent in all material respects with
those applied in the previous period, except as disclosed in
Note 2. The significant accounting policies are available
for inspection at the Group`s registered office.
There have been no material changes in judgements or
estimates of amounts reported in prior reporting periods.
The financial information has been reviewed by Deloitte &
Touche whose unmodified review report is available for
inspection at the Group`s registered office.
2. Changes in accounting policies
The Group adopted the new, revised or amended accounting
pronouncements as issued by the IASB, which were effective
and applicable to the Group from 1 April 2011. The adoption
of IFRS 3: Business Combinations (Amended), impacted the
Group`s accounting policies by introducing changes to the
measurement bases for different components of non-
controlling interests at the acquisition date in a business
combination. The change in accounting policy, however, had
no impact on the Group`s financial results for the year.
Full details on changes in accounting policies will be
disclosed in the Group`s annual financial statements for the
year ended 31 March 2012, which will be available on-line.
2012 2011 2010
Rm Reviewed Audited Audited
3. Segment analysis
External customers segment 66 929 61 197 58 535
revenue
South Africa 56 716 53 193 50 290
International 10 187 7 984 8 226
Corporate 26 20 19
EBITDA 22 763 20 594 19 782
South Africa 21 254 19 653 18 578
International 1 461 840 1 176
Corporate and eliminations 48 101 28
2012 2011 2010
Rm Reviewed Audited Audited
3. Segment analysis (continued)
Reconciliation of segment
results
EBITDA 22 763 20 594 19 782
Depreciation, amortisation (6 081) (6 863) (8 527)
and impairment losses
Other (65) (35) (17)
Operating profit 16 617 13 696 11 238
Net finance charges (684) (1 058) (2 272)
Finance income 109 109 124
Finance costs (748) (864) (1 602)
Net loss on remeasurement and (45) (303) (794)
disposal of financial
instruments
Loss from associate - - (21)
Profit before tax 15 933 12 638 8 945
Taxation (5 730) (4 659) (4 745)
Net profit 10 203 7 979 4 200
Total assets 48 230 41 435 41 691
South Africa 33 960 31 076 28 464
International 11 818 9 743 11 958
Corporate and eliminations 2 452 616 1 269
4. Impairment losses
Net impairment recognised is
as follows:
Intangible assets (250) (1 500) (3 285)
Property, plant and equipment 51 (8) (34)
Available-for-sale financial - - (8)
assets carried at cost
Investment in associate - - (43)
(199) (1 508) (3 370)
Included in intangible assets` net impairment in the current
year is an amount of R297 million (2011: R1 500 million)
relating to impairment of goodwill and customer bases of the
International reportable segment. In the 2010 year a
goodwill impairment loss of R3 039 million was recognised in
respect of the combined Gateway cash-generating unit. The
impairment losses are the result of increased price
competition and poorer trading conditions. Due to improved
operating performance and economic growth in Mozambique, the
value in use of the Group`s cash-generating unit there
increased significantly in the current year, resulting in
the reversal of prior year impairment losses of R70 million
for property, plant and equipment and R47 million for
intangible assets.
2012 2011 2010
Cents Reviewed Audited Audited
5. Per share calculations
5.1 Earnings, dividends and net
asset value per share
Basic earnings per share 694.0 561.5 282.3
Diluted earnings per share 691.2 560.4 282.0
Headline earnings per share 708.9 655.5 509.9
Diluted headline earnings per 706.0 654.3 509.4
share
Dividends per share 540.0 355.0 110.0
Net asset value per share 1 285.5 1 098.8 985.3
Million Reviewed Audited Audited
5.2 Weighted average number of
ordinary shares outstanding
for the purpose of
calculating:
Basic and headline earnings 1 463 1 468 1 486
per share
Diluted earnings and diluted 1 469 1 471 1 488
headline earnings per share
5.3 Ordinary shares for the
purpose of calculating:
Dividends per share 1 488 1 488 1 488
Net asset value per share 1 473 1 473 1 485
Vodacom Group Limited acquired 2 033 655 shares in the
market during the period at an average price of R85.55 per
share. Share repurchases did not exceed 1% of Vodacom Group
Limited`s issued share capital. The current period dividend
per share calculation is based on a declared dividend of
R8 035 million (2011: R5 282 million; 2010: R1 637 million)
of which R50 million (2011: R25 million; 2010: R6 million)
was offset against the forfeitable share plan reserve,
R2 million (2011: R2 million) expensed as staff expenses and
R83 million (2011: R43 million) paid to Wheatfields
Investments 276 (Pty) Limited, a wholly-owned subsidiary
holding treasury shares on behalf of the Group.
2012 2011 2010
Rm Reviewed Audited Audited
5.4 Headline earnings
reconciliation
Earnings attributable to 10 156 8 245 4 196
equity shareholders for basic
and diluted earnings per share
Adjusted for:
Net loss on disposal of 65 35 17
property, plant and equipment
and intangible assets
Impairment losses (Note 4) 199 1 508 3 370
Other - - 1
10 420 9 788 7 584
Tax impact of adjustments (62) (165) (5)
Non-controlling interests in 16 3 -
adjustments
Headline earnings for headline 10 374 9 626 7 579
and diluted headline earnings
per share
6. Forfeitable share plan (`FSP`)
During the current year the Group allocated 2 033 655 (2011:
3 242 476; 2010: 4 722 504) shares to eligible employees
under its FSP, an equity-settled share-based payment scheme
in terms of IFRS 2: Share-based Payment.
7. Related parties
The amounts disclosed in Notes 7.1 and 7.2 include balances
and transactions with the Group`s joint venture, associate
and parent, including entities in its group.
2012 2011 2010
Rm Reviewed Audited Audited
7.1 Balances with related parties
Accounts receivable 257 278 197
Accounts payable (285) (264) (154)
Borrowings (3 022) - -
7.2 Transactions with related
parties
Revenue 190 167 994
Expenses (569) (472) (587)
Dividends declared (5 223) (3 433) (1 064)
7.3 Directors` and key management
personnel remuneration
Compensation paid to the
Group`s Board, prescribed
officers and key management
personnel will be disclosed in
the Group`s annual financial
statements for the year ended
31 March 2012, which will be
available on-line.
8. Capital commitments
Capital expenditure contracted 2 043 2 547 2 213
for but not yet incurred
Capital expenditure approved 9 184 8 471 6 364
but not yet contracted for
9. Capital expenditure incurred
Capital expenditure additions 8 662 6 311 6 636
including software
Effective 1 April 2011 the Group commenced with the
capitalisation of staff expenses relating to capital
expenditure, so as to align with practices of the Group`s
ultimate parent Vodafone Group Plc. Staff expenses were not
retrospectively capitalised as data was not collected in
prior periods in a way that allows retrospective
application. For the year ended 31 March 2012 staff expenses
of R240 million were capitalised.
10. Borrowings
10. Domestic medium-term note programme
1
During the year the Group established and registered a
domestic medium-term note programme on the interest rate
market of the JSE Limited under which notes, including
commercial paper, may be issued by the Group from time to
time. The maximum aggregate nominal amount of all notes
outstanding may not exceed R10 000 million. As at 31 March
2012, unsecured three month commercial paper with a nominal
value of R750 million, bearing interest at three-month JIBAR
plus 0.1% was in issue. The commercial paper was issued at
full value and has a final redemption date of 28 May 2012.
The funds were used to repay short-term bank borrowings
classified as financing activities.
10. ABSA Bank Limited
2
The loan with a nominal value of R1 250 million was repaid
on 30 September 2011 using short-term bank borrowings
classified as financing activities.
10. Vodafone Investments Luxembourg s.a.r.l.
3
A loan with a nominal value of R3 000 million was raised to
refinance existing short-term borrowings, and finance
capital expenditure and working capital requirements. It has
a three-year term, bears interest payable quarterly at three-
month JIBAR plus 1.45%, is unsecured and repayable on 24
November 2014.
10. The Standard Bank of South Africa Limited/Rand Merchant Bank
4
The loan with a nominal value of R1 341 million was repaid
on 21 February 2012 using short-term bank borrowings
classified as financing activities.
10. Dark Fibre Africa (Pty) Limited
5
The Group increased its finance lease liability relating to
access transmission links by R503 million, to R529 million.
11. Contingent liabilities
11. Guarantees
1
The Group issued various guarantees relating to the
financial obligations of its subsidiaries, which amounted to
R57 million (2011: R53 million; 2010: R48 million).
Vodacom (Pty) Limited provides an unlimited guarantee for
borrowings entered into by Vodacom Group Limited. There were
no related outstanding borrowings on the statement of
financial position at the end of the year (2011:
R1 655 million; 2010: R3 593 million).
11. Tax matters
2
The Group is regularly subject to an evaluation by tax
authorities of its direct and indirect tax filings. The
consequence of such reviews is that disputes can arise with
tax authorities over the interpretation or application of
certain tax rules applicable to the Group`s business. These
disputes may not necessarily be resolved in a manner that is
favourable to the Group. Additionally, the resolution of the
disputes could result in an obligation to the Group.
12. Regulatory matters
12. Consumer Protection Act (`CP Act`)
1
During the year, the National Consumer Commission (`NCC`)
undertook an investigation into the terms and conditions of
the Group`s customer airtime agreements in South Africa. In
order to comply with the CP Act, Vodacom has amended its
customer airtime agreements and has distributed the amended
agreements to customers. The NCC nevertheless issued a
compliance notice against the Group. The National Consumer
Tribunal is considering the validity of the NCC`s compliance
notice and will make a ruling on the matter in due course.
13 Other significant matters
13. Vodacom Congo (RDC) s.p.r.l. (`Vodacom Congo`)
1
The Group continues to participate in the International
Chamber of Commerce arbitration with Congolese Wireless
Network s.p.r.l. (`CWN`), relating to various funding and
operational agreements and co-operation in the manner in
which the Vodacom Congo business is run. Notwithstanding the
arbitration, the Group continues to pursue a constructive
resolution with CWN.
13. Vodacom International Limited (`VIL`)
2
The claim brought by Namemco Energy (Pty) Limited
(`Namemco`) against VIL for approximately US$41 million,
relating to alleged consulting fees due and the ancillary
action for the annulment of the ex parte order relating to
the attachment of VIL`s shares in Vodacom Congo to satisfy
the claim, was heard before the Congolese Commercial
Tribunal, who found in favour of Namemco on the fees and in
favour of VIL on the release of the provisional attachment.
It reduced Namemco`s claim to US$21 million, plus interest
thereon. VIL`s petition to the Congolese Court of Appeal to
stay execution pending appeal was dismissed. Whilst the
judgement debt is enforceable, legal challenges to the
enforcement process are being pursued, and VIL has lodged an
appeal on the merits. The Congolese Commercial Tribunal has
served notice on VIL that, in the event of non-payment, the
public sale and auction of VIL`s shares in Vodacom Congo
will take place on 3 June 2012. Namemco`s claim was
initially brought in South African courts, where it is also
being challenged.
14. Acquisitions and disposals of businesses
Details on acquisitions and disposals of businesses, none of
which were material, will be disclosed in the Group`s annual
financial statements for the year ended 31 March 2012, which
will be available on-line.
15. Events after the reporting period
The Board is not aware of any matter or circumstance arising
since the end of the reporting period, not otherwise dealt
with herein, which significantly affects the financial
position of the Group or the results of its operations or
cash flows for the period, other than the following:
15. Dividend declared after the reporting date and not
1 recognised as a liability
A final dividend of R6 696 million (450 cents per ordinary
share) for the year ended 31 March 2012, was declared on
Wednesday 16 May 2012, payable on Monday 25 June 2012 to
shareholders recorded in the register at the close of
business on Friday 22 June 2012.
Corporate information
Directors
MP Moyo (Chairman), PJ Uys (CEO), P Bertoluzzo1, DH Brown,
M Joseph2, A Kekana, SN Maseko, TM Mokgosi-Mwantembe, PJ Moleketi, NJ Read3, RAW
Schellekens4, K Witts3
Alternate director
TJ Harrabin3
Company secretary
SF Linford
1. Italian 2. American 3. British 4. Dutch
Registered office
Vodacom Corporate Park,
082 Vodacom Boulevard,
Midrand 1685
(Private Bag X9904,
Sandton 2146)
Sponsor
UBS South Africa (Pty) Limited
Debt sponsor
Absa Capital (the investment banking division of Absa Bank Limited, affiliated
with Barclays Bank Plc)
Transfer secretary
Computershare Investor Services (Proprietary) Limited
(Registration number: 2004/003647/07)
70 Marshall Street, Johannesburg 2001
(PO Box 61051, Marshalltown 2107)
Media relations
Richard Boorman
Investor relations
Belinda Williams
Non-GAAP information
This announcement contains certain non-GAAP financial information which has not
been reviewed or reported on by the Group`s auditors. The Group`s management
believes these measures provide valuable additional information in understanding
the performance of the Group or the Group`s businesses because they provide
measures used by the Group to assess performance. However, this additional
information presented is not uniformly defined by all companies, including those
in the Group`s industry. Accordingly, it may not be comparable with similarly
titled measures and disclosures by other companies. Additionally, although these
measures are important in the management of the business, they should not be
viewed in isolation or as replacements for or alternatives to, but rather as
complementary to, the comparable GAAP measures. Refer to page 15 and page 17 for
detail relating to EBITDA and headline earnings per share.
Trademarks
Vodafone, the Vodafone logo, Vodafone Mobile Broadband, Vodafone WebBox,
Vodafone WebBook, Vodafone Smart tab, Vodafone 858 Smartphone, Vodafone
Passport, Vodafone live!, Power to You, Vodacom, Vodacom M-Pesa, Vodacom
Millionaires, Vodacom 4 Less and Vodacom Change the World are trademarks of
Vodafone Group Plc (or have applications pending). The trademarks RIMRegistered,
BlackBerryRegistered, are owned by Research in Motion Limited and are registered
in the US and may be pending or registered in other countries. JavaRegistered is
a registered trademark of Oracle and/or its affiliates. Microsoft, Windows
Mobile and ActiveSync are either registered trademarks or trademarks of
Microsoft Corporation in the US and/or other countries. Google, Google Maps and
Android are trademarks of Google Inc. Apple, iPhone and iPad are trademarks of
Apple Inc., registered in the US and other countries. Other product and company
names mentioned herein may be trademarks of their respective owners.
Forward-looking statements
This announcement, which sets out the annual results for Vodacom Group Limited
for the year ended 31 March 2012, contains `forward-looking statements`, which
have not been reviewed or reported on by the Group`s auditors, with respect to
the Group`s financial condition, results of operations and businesses and
certain of the Group`s plans and objectives. In particular, such forward-looking
statements include statements relating to: the Group`s future performance;
future capital expenditures, acquisitions, divestitures, expenses, revenues,
financial conditions, dividend policy, and future prospects; business and
management strategies relating to the expansion and growth of the Group; the
effects of regulation of the Group`s businesses by governments in the countries
in which it operates; the Group`s expectations as to the launch and roll out
dates for products, services or technologies; expectations regarding the
operating environment and market conditions; growth in customers and usage; and
the rate of dividend growth by the Group.
Forward-looking statements are sometimes, but not always, identified by their
use of a date in the future or such words as `will`, `anticipates`, `aims`,
`could`, `may`, `should`, `expects`, `believes`, `intends`, `plans` or
`targets`. By their nature, forward-looking statements are inherently
predictive, speculative and involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future, involve known
and unknown risks, uncertainties and other facts or factors which may cause the
actual results, performance or achievements of the Group, or its industry to be
materially different from any results, performance or achievement expressed or
implied by such forward-looking statements. Forward-looking statements are not
guarantees of future performance and are based on assumptions regarding the
Group`s present and future business strategies and the environments in which it
operates now and in the future.
vodacom.com
Date: 21/05/2012 07:05:01 Supplied by www.sharenet.co.za
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