Wrap Text
VOD005 - Interim resultd for the six months ended 30 September 2012
Vodacom Group Limited
(Incorporated in the Republic of South Africa)
Registration number: 1993/005461/06
(ISIN: ZAE000132577 Share Code: VOD)
(ISIN: ZAG000099318 JSE Code: VOD005)
(Vodacom)
12 November 2012
Interim results for the six months ended 30 September 2012
Shameel Joosub
Vodacom Group CEO commented
This was a great set of results with improvements in the traditional voice business and strong performances in the data and International
segments lifting overall revenue growth.
We also controlled costs well, with the end result that despite aggressive competition and an inflationary cost environment, we actually managed to
increase margins.
Thanks to our proactive added value approach, particularly the use of voice and data promotions, traffic growth in South Africa more than offset
the impact of lower prices. Our strategy of driving smartphone penetration and data usage is working well, with the number of active smartphones
in South Africa growing 36% and the average amount of data used by each of those handsets up 46%. Across the Group, only 35% of our active
customer base is actively using data so were still very much at the beginning of this growth trend.
The International operations performed extremely well with strong commercial propositions and the benefits of scale resulting in significantly higher
margins.
Very importantly, underpinning the growth in all areas of the business was an increase in investment. Network leadership is a crucial part of
Vodacoms strategy and a key differentiator. We increased the number of 3G base stations in the Group by more than 22% and thanks to the
foundations laid over the past few years we were the first to launch LTE services in South Africa.
Highlights
Improved revenue and margins drive strong HEPS growth
- Group service revenue up 6.9% (5.5%*)
- Group EBITDA up 14.5% (13.0%*)
- SA EBITDA margin increased 2.0ppts to 37.9%
- Headline earnings per share (HEPS) up 22.2% (12.5%1) to 396 cents
- 36.5% increase in interim dividend per share to 355 cents
Compelling value propositions support voice business
- Group active customers increased 20.8% to 50.1 million
- Group voice revenue up 7.3% (5.2%*) to R17.6 billion
- Outgoing Group voice traffic up 16.1%
Strong demand for data services
- Group data revenue up 20.2%, now 15.9% of service revenue
- 42.3% increase in Group active data customers to 17.6 million
- 35.5% increase in active smartphones in South Africa
Excellent International performance
- Service revenue up 36.5% (32.4%*), contributed 20.2% (16.9%*) to Group service revenue
- EBITDA up 92.3% (76.7%*), contributed 10.5% to Group EBITDA
- EBITDA margin increased to 20.6% (25.6%*) from 14.6% (19.0%*)
- 47.1% of Tanzania active customers now using M-Pesa
Network leadership remains a key priority
- Group capex increased 36.1% to R4 713 million
- 22.7% increase in number of Group 3G base stations
- First to launch LTE in SA and 3G services in DRC
* Represents normalised growth excluding foreign exchange gains/losses and at a constant currency (using current year as base) from on-going
operations. Refer to below for a reconciliation of normalised growth.
1. Excluding effect of the removal of secondary tax on companies from the tax expense in the income statement.
Operating review
South Africa
South Africas service revenue grew 1.3% to R23 800 million (4.0% excluding the impact of regulated cuts in mobile termination rates (MTRs)).
Given the challenging economic and competitive environment the underlying growth in service revenue was a positive reflection of the steps taken
during the period to incentivise higher usage and to drive take up of data services through value promotions. Revenue growth was 3.7%, mainly
due to increased sales of high-end smartphones, as we continue to penetrate the mobile internet market.
Voice revenue growth remained stable at 1.5% through the period. During the period we detected an increase in prepaid customers with once off
low usage. We have taken commercial steps in the distribution channel to improve the quality of customers. Approximately a quarter of our
monthly gross connections have displayed this type of behaviour and will likely lead to a decline in prepaid customers as we take corrective action.
Contract customers increased 5.8% year on year to 5.8 million, attracted by our new integrated price plans and data plans. The higher prevalence
of lower usage customers, reduction in MTRs and lower out of bundle spend from contract customers, lead to 21.1% reduction in blended ARPU
to R127.
Data revenue increased 13.5% to R4 224 million, contributing 17.7% to service revenue compared to 15.8% a year ago. Data traffic grew 42.5%
which more than offset a 24.2% reduction in our average effective price per megabyte. Data demand is being driven by increased penetration of
data services into our customer base and higher usage amongst existing data customers. Active data customers increased 26.8% to 13.3 million
and an additional 1.4 million smartphones over the year are now active on our network bringing the total to 5.3 million. With respect to higher
usage, customers purchasing data bundles increased 35.2% to 4.8 million and smartphone average monthly usage increased 46.1% to 123MB,
from 84MB in the prior year period.
As a result of our continued focus on cost efficiencies across our business, EBITDA growth of 9.7% far outpaced revenue growth and the EBITDA
margin increased 2.0ppts to 37.9%. Despite inflationary pressures, we were able to keep operating expenses flat year on year through increased
efficiencies in our network, call centre and terminal logistics areas.
Capital investment during the six month period was R3 214 million (11.3% of revenue). The majority of the capital expenditure was concentrated
on transmission, the radio access network (RAN) renewal project and adding new base stations to the network. We have provided high speed
transmission to 5 000 sites. We added 275 new 3G base stations and 163 new 2G base stations in the six months, bringing the total number of
3G base stations to 5 538 and 2G base stations to 9 044. These initiatives supported the commercial launch of LTE in Johannesburg, with Pretoria
and Durban to follow before the end of the year as we activate 500 LTE sites.
International
The International operations delivered a very strong operational performance with service revenue increasing 36.5% (32.4%*) to R5 992 million,
supported by 19.2% growth in active customers and an outgoing traffic increase of 41.6%, reflecting the continued successful commercial
execution.
Data revenue grew 140.7% supported by 128.0% growth in active data customers to 4.3 million. 3G services have been launched in DRC and
daily data bundles have been introduced in all our operations, to stimulate demand further. Mobile financial services also continue to grow, with
active M-Pesa customers almost doubling compared to the previous period to 4.2 million customers. With 47.1% of Tanzanias customer base
actively using M-Pesa, the service now contributes 12.6% to Tanzanias service revenue, up considerably from 6.9 % a year ago. Building on this
success, similar money transfer services will be rolled out in the DRC, Mozambique and Lesotho in the next nine months.
The International operations have reached a critical turning point in terms of profitability, EBITDA increased 92.3% (76.7%*) to R1 269 million and
the EBITDA margin grew by 6.0ppts to 20.6% (25.6%*) as we started to realise scale benefits from significant revenue growth.
Capital investment increased substantially, up 130.4% to R1 023 million (16.6% of revenue) due to continued expansion of voice and data network
coverage and capacity. RAN renewal projects are underway across all our operations.
The Group sold its investments, supplier agreements and assets in Gateway Carrier Services, which formed part of the Groups International
reportable segment, for US$35 million. The sale became effective on 31 August following the fulfilment of certain closing conditions. These results
include service revenue of US$155 million (2011: US$185 million) and EBITDA loss of US$3 million (2011: US$178 000) relating to these
operations.
Strategic update
Governments and regulators are placing increasing emphasis on delivering ICT services for all to unlock growth potential. In order to achieve long-
term sustainable growth we need to align the broader visions of our business to the vision of the countries that we operate in, while keeping the
customer at the heart of it all. Our strategy focuses on these sustainability challenges but also on the key growth drivers of data services,
International operations, enterprise services and new financial and digital lifestyle services.
An unmatched customer experience
Delivering an unmatched customer experience is all about value, service and the brand that we stand for. Delivering a much-more-for-more
strategy to our customers goes deeper than purely making our services more affordable. It is also about serving our customers much better and
protecting them more. One of the steps we have taken towards this initiative is introducing integrated price plans which include a package of voice,
messaging and data. We have increased the ways in which to resolve customer problems and added more self-service channels and improved on
our interactive voice response systems. Customers are able to communicate with each other via e-forums and social media sites. Soon we will be
embarking on enhancing our in-store experience, by expanding on initiatives such as tech zones and ensuring that our customers leave our stores
connected and well informed.
Grow our people
Our annual People Survey, our primary engagement measure with all our employees, is currently underway. We have continued to ensure that our
employees are customer obsessed ambassadors by empowering them with an internal portal of information, training and support on our products
and services. Our Womens Network is in keeping with our aspirations to build an inclusive work environment and as part of this initiative, we held
our first ever Celebrating Vodacom Women event. Our Vodacom Discover Graduate Programme is contributing significantly towards building the
talent pipeline in the Vodacom and Vodafone operations.
Best network to accelerate mobile data opportunity
We aim to have the best mobile network in all of the markets in which we operate, supported by leading IT systems. This means giving our
customers far-reaching coverage, a very reliable connection and increasing speeds and data capacity. We were the first network in South Africa to
launch LTE commercially which has the potential to operate at significantly faster data speeds than 2G and 3G connections. In August we
launched 3G services in DRC making us the first and currently only network in the country delivering the service. All our operating companies have
commenced with RAN renewal programmes to future proof our networks, thereby enhancing quality and expanding capacity. In keeping with
improving our networks, 88.7% of our 3G base stations in South Africa are 21.6Mbps and 77.7% are 43.2Mbps enabled. We do not only offer
quality networks, but strive to make connectivity more accessible for all. We have already seen significant growth in the number of customers
using smartphones, and this is expected to grow rapidly in the next few years as we introduce more affordable devices and price plans. To this end
we have internet daily bundles which offer low priced prepaid once-off data bundles making data more accessible in all our operations.
Process and cost efficiency focus
In everything we do, we need to ensure that we do it as efficiently as possible. As part of this strategy we are increasing our investment in
information services to ensure that we assist our customers efficiently and consistently, improve flexibility in deploying new products and
standardise processes. In our network the most substantial operating efficiencies come from replacing our network with new equipment and
providing our own transmission. The installation of our own transmission has more than tripled since 30 September 2011. Through our network
and operational cost efficiency programmes we have been able to lower our other operating expenses (mainly network and terminal logistics
related costs) as a percentage of service revenue to 24.3% from 24.7% last year.
Focus areas for growth
Machine-to-machine (M2M) platforms, mobile financial services, digital lifestyle services and operator billing, among other new services, all offer
potential for incremental growth. We continue to expand our mobile money transfer service, with planned launches in Mozambique, DRC and
Lesotho in the next nine months. Total active M-Pesa customers are now 4.2 million in Tanzania, 47.1% of the active customer base. In South
Africa we launched an insurance product including funeral cover as part of our broader financial services strategy. In the three months since the
launch, 21 000 customers took up our funeral policies. During the year, we launched the operator billing service on the BlackBerry platform,
allowing customers to charge application purchases to their Vodacom bill.
Financial review
Summary financial information
Six months ended 30 September % change
Rm 2012 2011 2010 11/12 10/11
Service revenue 29 675 27 752 26 184 6.9 6.0
Revenue 34 426 31 747 29 516 8.4 7.6
EBITDA 12 060 10 535 9 788 14.5 7.6
Operating profit 8 970 7 302 7 061 22.8 3.4
Net profit 6 117 4 387 4 269 39.4 2.8
Operating free cash flow 6 156 6 930 6 560 (11.2) 5.6
Free cash flow 3 432 3 892 3 765 (11.8) 3.4
Capital expenditure 4 713 3 462 2 065 36.1 67.7
Net debt 11 572 10 654 11 785 8.6 (9.6)
Basic earnings per share (cents) 410 301 300 36.2 0.3
Headline earnings per share (cents) 396 324 303 22.2 6.9
Contribution margin (%) 56.1 55.0 54.8
EBITDA margin (%) 35.0 33.2 33.2
Operating profit margin (%) 26.1 23.0 23.9
Effective tax rate (%) 30.8 37.8 34.4
Net profit margin (%) 17.8 13.8 14.5
Net debt/EBITDA (times) 0.5 0.5 0.6
Capex intensity (%) 13.7 10.9 7.0
Service revenue
Six months ended 30 September % change
Rm 2012 2011 2010 11/12 10/11
South Africa 23 800 23 505 22 454 1.3 4.7
International 5 992 4 390 3 876 36.5 13.3
Corporate and eliminations (117) (143) (146) 18.2 2.1
Service revenue 29 675 27 752 26 184 6.9 6.0
Group revenue and service revenue for the six months ended 30 September 2012 increased by 8.4% and 6.9% respectively (7.0%* and 5.5%*),
reflecting the continued strong demand for data services and further voice penetration growth in our International operations, offset by reduced
mobile termination rates and on-going competitive pressures. Service revenue growth in South Africa of 1.3% (4.0% excluding cuts in MTRs) was
supported by continued growth in voice services and 13.5% growth in data revenue offsetting the 17.6% decline in interconnect revenue. Strong
customer and usage growth in the International operations supported revenue growth of 36.4% (31.0%*) and service revenue growth of 36.5%
(32.4%*). The International operations now contribute 20.2% (16.9%*) to Group service revenue compared to 15.8% (13.5%*) a year ago.
Operating expenses1
Six months ended 30 September % change
Rm 2012 2011 2010 11/12 10/11
South Africa 17 677 17 660 16 492 0.1 7.1
International 4 887 3 859 3 414 26.6 13.0
Corporate and eliminations (162) (228) (157) 28.9 (45.2)
Operating expenses1 22 402 21 291 19 749 5.2 7.8
Group operating expenses1 increased 5.2% (3.3%*) to R22 402 million. This was well below revenue growth of 8.4% (7.0%*). These expenses
include a net foreign exchange loss on the revaluation of foreign-denominated trading items of R98 million (2011: R156 million loss). Cost
containment was achieved through scale benefits realised in the International operations and greater efficiencies achieved in network, logistics and
call centre costs in South Africa coupled with reduced interconnect costs.
EBITDA
Six months ended 30 September % change
Rm 2012 2011 2010 11/12 10/11
South Africa 10 789 9 832 9 225 9.7 6.6
International 1 269 660 587 92.3 12.4
Corporate and eliminations 2 43 (24) (95.3) > 200.0
EBITDA 12 060 10 535 9 788 14.5 7.6
Group EBITDA increased 14.5% (13.0%*) to R12 060 million, and the EBITDA margin improved to 35.0% (2011: 33.2%). The Group EBITDA
margin improved 1.9ppts* from the prior year to 36.5%*. In South Africa EBITDA grew well ahead of revenue, increasing the margin by 2.0ppts to
37.9% due to reduced interconnect costs and cost saving initiatives. International EBITDA increased by 92.3%, as our International operations
continue to realise scale benefits and manage costs. International EBITDA margins improved to 20.6% (2011: 14.6%) and total contribution to
Group EBITDA increased to 10.5% (2011: 6.3%).
Operating profit
Six months ended 30 September % change
Rm 2012 2011 2010 11/12 10/11
South Africa 8 456 7 539 7 170 12.2 5.1
International 525 (267) (67) > 200.0 < (200.0)
Corporate and eliminations (11) 30 (42) (136.7) 171.4
Operating profit 8 970 7 302 7 061 22.8 3.4
Group operating profit increased 22.8% to R8 970 million. Operating profit in South Africa increased 12.2% due to the growth in EBITDA and lower
growth of 3.7% in depreciation and amortisation. The International operations delivered an operating profit of R525 million for the six months
ended 30 September 2012 compared to the operating loss of R267 million in the prior period, which included an impairment loss attributable to the
Gateway companies of R318 million.
1. Excluding depreciation, amortisation and impairment losses.
Net finance charges
Six months ended 30 September % change
Rm 2012 2011 2010 11/12 10/11
Finance income 67 90 83 (25.6) 8.4
Finance costs (476) (340) (447) 40.0 (23.9)
Remeasurement of loans (10) (18) 32 44.4 (156.3)
Gain/(loss) on remeasurement 21 (61) (121) 134.4 (49.6)
Gain/(loss) on derivatives 43 82 (105) (47.6) 178.1
Net finance charges (355) (247) (558) 43.7 (55.7)
Net finance charges increased from R247 million in the prior period to R355 million for the six months ended 30 September 2012, mainly from
higher net debt and lower gains on the revaluation of financial assets and liabilities.
Taxation
The tax expense of R2 722 million for the six months ended 30 September 2012 increased by 2.0% compared to prior year. The increase is mainly
due to increased profitability in South Africa and Tanzania and higher withholding tax in Nigeria, offset by the removal of secondary tax on
companies (STC) from the tax expense.
The Groups effective tax rate decreased from 37.8% to 30.8% mainly due to the replacement of STC with dividend withholding tax.
Earnings
HEPS increased 22.2% to 396 cents. The increase in basic earnings per share to 410 cents (2011: 301 cents) was impacted both by the profit on
disposal of Gateway Carrier Services of R224 million and the prior year impairment losses of R318 million. Both HEPS and EPS were favourably
impacted by the change from STC to dividend withholding tax which is not included in the income statement expense.
Capital expenditure
Six months ended 30 September % change
Rm 2012 2011 2010 11/12 10/11
South Africa 3 214 3 015 1 644 6.6 83.4
International 1 023 444 421 130.4 5.5
Corporate and eliminations 476 3 - > 200.0 n/a
Capital expenditure 4 713 3 462 2 065 36.1 67.7
Capex intensity1 (%) 13.7 10.9 7.0
The Groups capital expenditure for the period was R4 713 million, 36.1% higher than a year ago. Capital expenditure in South Africa of R3 214
million mainly related to increasing our 3G coverage, data network speeds, transmission investment, the RAN renewal programme and information
services investment to improve customer experience and efficiency. In our International operations we continue to spend on both capacity and
coverage to support the growth in customers and the take up of data services, increasing capital expenditure by 130.4% to R1 023 million.
1. Capital expenditure as a percentage of revenue.
Statement of financial position
Property, plant and equipment increased by 14.1% to R26 115 million due to net additions of R3 869 million and foreign currency translation
adjustments totalling R528 million.
The Groups financial gearing increased in line with EBITDA growth, with the net debt to EBITDA remaining constant at 0.5 times compared to the
same period last year. Investment in working capital and capital expenditure accounts for the increase in net debt since 31 March 2012. 89.8%
(2011: 87.0%) of the debt1 is denominated in rand. R3 843 million (2011: R5 451 million) of the debt1 matures in the next 12 months and 58.4%
(2011: 55.9%) of interest bearing debt (including bank overdrafts) is at floating rates.
As part of our R10 billion domestic medium-term note programme, the Group rolled its R750 million three-month commercial paper in May 2012
and August 2012.
Net debt
As at As at Movement As at
30 September 31 March Mar/Sep 30 September
Rm 2012 2012 2012 2011
Bank and cash balances 1 533 3 781 (2 248) 1 072
Bank overdrafts (1 788) (409) 1 379 (73)
Borrowings and derivative financial
instruments (11 317) (11 039) 278 (11 653)
Net debt (11 572) (7 667) 3 905 (10 654)
Net debt/EBITDA (times) 0.5 0.3 0.5
Cash flow
Free cash flow
Six months ended 30 September % change
Rm 2012 2011 2010 11/12 10/11
Cash generated from operations 9 865 10 109 9 339 (2.4) 8.2
Cash capital expenditure2 (3 709) (3 179) (2 779) 16.7 14.4
Operating free cash flow 6 156 6 930 6 560 (11.2) 5.6
Tax paid (2 413) (2 713) (2 154) (11.1) 26.0
Net finance costs paid (299) (296) (599) 1.0 (50.6)
Net dividends received/dividends paid
to minority shareholders (12) (29) (42) (58.6) (31.0)
Free cash flow3 3 432 3 892 3 765 (11.8) 3.4
We continued to generate a strong level of operating free cash flow of R6 156 million in the period supported by good EBITDA growth of 14.5%.
During the period we made a substantial investment in working capital in South Africa by increasing the level of handset financing. This investment
relates to higher end devices purchased, which had an adverse impact on overall working capital levels. This, coupled with the substantial
increase in the International operations capital expenditure in the first half of the financial year resulted in a reduction in operating free cash flow.
1. Debt includes interest bearing debt, non-interest bearing debt, bank overdrafts and commercial paper.
2. Cash capital expenditure comprises the purchase of property, plant and equipment and intangible assets, other than license and spectrum payments, during the year.
3. Free cash flow definition has been aligned to our parent to include net dividends received/paid to minority shareholders.
Declaration of interim dividend No. 7 - payable from income reserves
Notice is hereby given that a gross interim dividend number 7 of 355 cents per ordinary share in respect of financial year ending 31 March 2013
has been declared payable in cash on Monday 3 December 2012 to shareholders recorded in the register at the close of business on Friday 30
November 2012. There is no secondary tax on company (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 interim
dividend to those shareholders not exempt from paying dividend withholding tax of 301.75000 cents per ordinary share.
Last day to trade shares cum dividend Friday 23 November 2012
Shares commence trading ex dividend Monday 26 November 2012
Record date Friday 30 November 2012
Payment date Monday 3 December 2012
Share certificates may not be dematerialised or rematerialised between Monday 26 November 2012 and Friday 30 November 2012, both days
inclusive.
On Monday 3 December 2012, the interim 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 3
December 2012.
Vodacom Group Limited tax reference number is 9316/041/71/5.
Outlook
The past six months have been characterised by strong competitive pressure in South Africa. However, through the introduction of targeted
promotions and by building on our network advantage weve been able to counter this pressure, drive increased usage and deliver overall revenue
growth in line with guidance.
The data and International operations have both continued to perform well and are an increasingly important component of Group revenue
generation.
Our guidance that we gave in May 2012 was low single digit service revenue growth, incremental EBITDA margin expansion through operational
efficiencies and capital expenditure between 11% and 13% of Group revenue. Based on our solid performance in the first half we are on track to
deliver accordingly.
For and on behalf of the Board
Peter Moyo
Chairman
Shameel Joosub
Chief Executive Officer
Ivan Dittrich
Chief Financial Officer
9 November 2012
Midrand
Condensed consolidated income statement
for the six months ended 30 September 2012
Six months ended Year ended
30 September 31 March
2012 2011 2012
Rm Notes Reviewed Reviewed Audited
Revenue 3 34 426 31 747 66 929
Direct expenses (15 102) (14 275) (30 265)
Staff expenses (2 260) (2 060) (4 318)
Publicity expenses (923) (1 056) (1 804)
Other operating expenses (4 117) (3 900) (7 844)
Depreciation and amortisation (3 054) (2 836) (5 882)
Impairment losses 4 - (318) (199)
Operating profit 8 970 7 302 16 617
Profit on sale of subsidiary 224 - -
Finance income 67 90 109
Finance costs (476) (340) (748)
Net profit/(loss) on remeasurement
and disposal of financial
instruments 54 3 (45)
Profit before tax 8 839 7 055 15 933
Taxation (2 722) (2 668) (5 730)
Net profit 6 117 4 387 10 203
Attributable to:
Equity shareholders 5 996 4 403 10 156
Non-controlling interests 121 (16) 47
6 117 4 387 10 203
Six months ended Year ended
30 September 31 March
2012 2011 2012
Cents Note Reviewed Reviewed Audited
Basic earnings per share 5 410.0 301.0 694.0
Diluted earnings per share 5 408.1 299.9 691.2
Condensed consolidated statement of comprehensive income
for the six months ended 30 September 2012
Six months ended Year ended
30 September 31 March
2012 2011 2012
Rm Reviewed Reviewed Audited
Net profit 6 117 4 387 10 203
Other comprehensive income 424 598 315
Foreign currency translation differences, net of
tax 496 679 389
Loss on hedging instruments in cash flow
hedges, net of tax (72) (81) (74)
Total comprehensive income 6 541 4 985 10 518
Attributable to:
Equity shareholders 6 482 5 155 10 583
Non-controlling interests 59 (170) (65)
6 541 4 985 10 518
Condensed consolidated statement of financial position
as at 30 September 2012
As at As at
30 September 31 March
2012 2011 2012
Rm Note Reviewed Reviewed Audited
Assets
Non-current assets 32 456 28 820 30 678
Property, plant and equipment 26 115 22 885 24 367
Intangible assets 5 245 4 942 5 123
Financial assets 220 213 201
Trade and other receivables 119 212 227
Finance lease receivables 588 333 447
Deferred tax 169 235 313
Current assets 16 874 15 389 17 552
Financial assets 1 070 458 695
Inventory 905 994 832
Trade and other receivables 12 087 11 978 11 379
Finance lease receivables 1 028 499 691
Tax receivable 251 388 174
Cash and cash equivalents 1 533 1 072 3 781
Total assets 49 330 44 209 48 230
Equity and liabilities
Fully paid share capital * * *
Treasury shares (1 614) (1 533) (1 530)
Retained earnings 19 885 18 170 20 121
Other reserves 105 168 (61)
Equity attributable to owners of the parent 18 376 16 805 18 530
Non-controlling interests 443 191 400
Total equity 18 819 16 996 18 930
Non-current liabilities 11 249 7 807 10 932
Borrowings 10 9 151 6 290 9 012
Trade and other payables 327 333 352
Provisions 569 526 551
Deferred tax 1 202 658 1 017
Current liabilities 19 262 19 406 18 368
Borrowings 10 2 055 5 378 2 004
Trade and other payables 15 093 13 524 15 406
Provisions 244 309 355
Tax payable 69 116 172
Dividends payable 13 6 22
Bank overdrafts 1 788 73 409
Total equity and liabilities 49 330 44 209 48 230
* Fully paid share capital of R100.
Condensed consolidated statement of changes in equity
for the six months ended 30 September 2012
Equity
attributable
to owners Non-
of the controlling Total
Rm parent interests equity
1 April 2012 18 530 400 18 930
Total comprehensive income 6 482 59 6 541
Dividends declared (6 580) (16) (6 596)
Repurchase and sale of shares (92) - (92)
Share-based payments 36 - 36
30 September 2012 - Reviewed 18 376 443 18 819
1 April 2011 15 622 558 16 180
Total comprehensive income 5 155 (170) 4 985
Dividends declared (4 096) (25) (4 121)
Partial disposal of interest in subsidiaries 191 (172) 19
Repurchase and sale of shares (145) - (145)
Share-based payments 78 - 78
30 September 2011 - Reviewed 16 805 191 16 996
1 April 2011 15 622 558 16 180
Total comprehensive income 10 583 (65) 10 518
Dividends declared (7 900) (61) (7 961)
Partial disposal of interest in subsidiaries 191 (172) 19
Shareholder loan convertion to equity - 140 140
Repurchase and sale of shares (139) - (139)
Share-based payments 173 - 173
31 March 2012 - Audited 18 530 400 18 930
Condensed consolidated statement of cash flows
for the six months ended 30 September 2012
Six months ended Year ended
30 September 31 March
2012 2011 2012
Rm Reviewed Reviewed Audited
Cash flows from operating activities
Cash generated from operations 9 865 10 109 24 502
Tax paid (2 413) (2 713) (5 192)
Net cash flows from operating activities 7 452 7 396 19 310
Cash flows from investing activities
Net additions to property, plant and equipment
and intangible assets (3 833) (3 179) (7 568)
Disposal of subsidiaries and business
combinations 273 - (23)
Other investing activities (234) (105) (411)
Net cash flows utilised in investing activities (3 794) (3 284) (8 002)
Cash flows from financing activities
Movement in borrowings, including finance
costs paid (618) 485 (480)
Dividends paid (6 603) (4 123) (7 947)
Repurchase and sale of shares (112) (145) (148)
Partial disposal of interests in subsidiaries, net
of cash disposed - 19 19
Net cash flows utilised in financing activities (7 333) (3 764) (8 556)
Net (decrease)/increase in cash and cash
equivalents (3 675) 348 2 752
Cash and cash equivalents at the beginning of
the period/year 3 372 539 539
Effect of foreign exchange rate changes 48 112 81
Cash and cash equivalents at the end of the
period/year (255) 999 3 372
Notes to the condensed consolidated interim financial statements
for the six months ended 30 September 2012
1. Basis of preparation
These condensed consolidated interim financial statements have been prepared in accordance with the framework concepts, the recognition
and measurement criteria of International Financial Reporting Standards (IFRS) and the 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 Companys 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 Groups 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 Groups
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 2012, none of which had any impact on the Groups financial results for the period.
Full details on changes in accounting policies will be disclosed in the Groups annual financial statements for the year ending 31 March 2013,
which will be available on-line.
Six months ended Year ended
30 September 31 March
2012 2011 2012
Rm Reviewed Reviewed Audited
3. Segment analysis
External customers segment revenue 34 426 31 747 66 929
South Africa 28 350 27 305 56 716
International 6 060 4 421 10 187
Corporate 16 21 26
EBITDA 12 060 10 535 22 763
South Africa 10 789 9 832 21 254
International 1 269 660 1 461
Corporate and eliminations 2 43 48
Reconciliation of segment results
EBITDA 12 060 10 535 22 763
Depreciation, amortisation and
impairment losses (3 054) (3 154) (6 081)
Other (36) (79) (65)
Operating profit 8 970 7 302 16 617
Profit on sale of subsidiary 224 - -
Net finance charges (355) (247) (684)
Finance income 67 90 109
Finance costs (476) (340) (748)
Net profit/(loss) on remeasurement and
disposal of financial instruments 54 3 (45)
Profit before tax 8 839 7 055 15 933
Taxation (2 722) (2 668) (5 730)
Net profit 6 117 4 387 10 203
Total assets 49 330 44 209 48 230
South Africa 35 337 32 673 33 960
International 13 283 11 246 11 818
Corporate and eliminations 710 290 2 452
4. Impairment losses
Net impairment recognised is as
follows:
Intangible assets - (298) (250)
Property, plant and equipment - (20) 51
- (318) (199)
Six months ended Year ended
30 September 31 March
2012 2011 2012
Cents Reviewed Reviewed Audited
5. Per share calculations
5.1 Earnings, dividends and net asset
value per share
Basic earnings per share 410.0 301.0 694.0
Diluted earnings per share 408.1 299.9 691.2
Headline earnings per share 396.4 323.5 708.9
Diluted headline earnings per share 394.6 322.3 706.0
Dividends per share 450.0 280.0 540.0
Million Reviewed Reviewed Audited
5.2 Weighted average number of ordinary
shares outstanding for the purpose of
calculating:
Basic and headline earnings per share 1 462 1 463 1 463
Diluted earnings and diluted headline
earnings per share 1 469 1 469 1 469
5.3 Ordinary shares for the purpose of
calculating:
Dividends per share 1 488 1 488 1 488
Vodacom Group Limited acquired 1 613 993 shares in the market during the period at
an average price of R102.13 per share. Share repurchases did not exceed 1% of
Vodacom Group Limiteds issued share capital. Dividend per share calculations are
based on a dividend declared of R6 696 million (30 September 2011: R4 166 million;
31 March 2012: R8 035 million) of which R45 million (30 September 2011: R25 million;
31 March 2012: R50 million) was offset against the forfeitable share plan reserve, R4
million (30 September 2011: R2 million; 31 March 2012: R2 million) expensed as staff
expenses and R69 million (30 September 2011: R43 million; 31 March 2012: R83
million) paid to Wheatfields Investments 276 (Pty) Limited, a wholly-owned subsidiary
holding treasury shares on behalf of the Group.
Six months ended Year ended
30 September 31 March
2012 2011 2012
Rm Reviewed Reviewed Audited
5. Per share calculations continued
5.4 Headline earnings reconciliation
Earnings attributable to equity
shareholders for basic and diluted
earnings per share 5 996 4 403 10 156
Adjusted for:
Profit on sale of subsidiary (224) - -
Net loss on disposal of property, plant
and equipment and intangible assets 34 79 65
Impairment losses (Note 4) - 318 199
5 806 4 800 10 420
Tax impact of adjustments (9) (65) (62)
Non-controlling interests in adjustments - (2) 16
Headline earnings for headline and
diluted headline earnings per share 5 797 4 733 10 374
6. Forfeitable share plan (FSP)
During the current period the Group allocated 1 613 152 (30 September 2011: 1 896
351;31 March 2012: 2 033 655) 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 significant balances and
transactions with the Groups joint venture, associate and parent, including entities in
its group.
Six months ended Year ended
30 September 31 March
2012 2011 2012
Rm Reviewed Reviewed Audited
7.1 Balances with related parties
Borrowings (3 021) - (3 022)
7.2 Transactions with related parties
Dividends declared (4 352) (2 708) (5 223)
Finance costs (104) - (75)
7.3 Directors and key management personnel remuneration
Compensation paid to the Groups Board, prescribed officers and key management
personnel will be disclosed in the Groups annual financial statements for the year
ending 31 March 2013, which will be available on-line. Mr IP Dittrich was appointed as
the Chief Financial Officer on 15 June 2012 and Mr MS Aziz Joosub was appointed as
the Chief Executive Officer on 6 September 2012. Mr SN Maseko resigned on 14 June
2012, while Messrs PJ Uys and P Bertoluzzo and Ms K Witts resigned on 6 September
2012.
Six months ended Year ended
30 September 31 March
2012 2011 2012
Rm Reviewed Reviewed Audited
8. Capital commitments
Capital expenditure contracted for but
not yet incurred 4 307 4 273 2 043
9. Capital expenditure incurred
Capital expenditure additions including
software 4 713 3 462 8 662
Staff expenses of R148 million (30 September 2011: R96 million; 31 March 2012: R240
million) were capitalised for the period.
10. Borrowings
There were no material movements in borrowings for the six months ended 30
September 2012.
11. Contingent liabilities
11.1 Guarantees
The Group issued various guarantees, relating to the financial obligations of its
subsidiaries, which amounted to R65 million (30 September 2011: R59 million; 31
March 2012: R57 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 for the six months ended 30 September 2012 (30
September 2011: R3 283 million; 31 March 2012: Rnil).
11.2 Tax matters
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
Groups 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. Other significant matters
12.1 Vodacom Congo (RDC) s.p.r.l. (Vodacom Congo)
The final hearing with regards to the the International Chamber of Commerce
arbitration with Congolese Wireless Network s.p.r.l. (CWN), the other shareholder in
Vodacom Congo, was held during October 2012. The Group is awaiting the final
outcome.
12.2 Vodacom International Limited (VIL)
The Group is awaiting the outcome of legal challenges to the enforcement process
relating to the claim brought by Namemco Energy (Pty) Limited (Namemco) against
VIL for US$21 million, plus interest thereon, as well as an appeal on the merits lodged
by VIL.
13. Acquisitions and disposals of businesses
The Group sold its investments, supplier agreements and assets in Gateway Carrier
Services1, which formed part of the Groups International reportable segment, for
US$35 million. The profit on sale is disclosed as profit on sale of subsidiaries.
14. 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:
14.1 Dividend declared after the reporting date and not recognised as a liability
A interim dividend of R5 282 million (355 cents per ordinary share) for the year ending
31 March 2013, was declared on Wednesday 7 November 2012, payable on Monday 3
December 2012 to shareholders recorded in the register at the close of business on
Friday 30 November 2012.
Note:
1. Gateway Communications (Pty) Limited, Gateway Communications SA (Belgium), Gateway Communications UK Limited, Gateway
Communications Mozambique Limitada and Gateway Communications SAS (France), as well as the customer contracts of Gateway
Communications Africa (UK) Limited.
Reconciliation of normalised growth
Reported1 Trading Translation Gateway Normalised
foreign foreign Carrier
exchange2 exchange3 Services4
% change ppt ppt ppt % change
11/12 11/12
Service revenue
Group 6.9 - (2.7) 1.3 5.5
International 36.5 - (19.5) 15.4 32.4
Revenue
Group 8.4 - (2.5) 1.1 7.0
International 36.4 - (19.9) 14.5 31.0
Operating expenses
Group 5.2 0.3 (3.3) 1.1 3.3
South Africa 0.1 0.4 - - 0.5
International 26.7 (0.4) (19.0) 9.1 16.4
EBITDA
Group 14.5 (0.8) (0.9) 0.2 13.0
South Africa 9.7 (0.8) - - 8.9
International 92.3 4.7 (23.5) 3.2 76.7
The reconciliation represents normalised growth excluding foreign exchange gains/losses
and at a constant currency (using current year as base) from on-going operations.
The presentation of the pro-forma constant currency information from on-going operations is
the responsibility of the directors of Vodacom Group Limited. The purpose to presenting this
information is to assist the user in understanding the underlying growth trends in these
segments. It has been prepared for illustrative purposes only and may not fairly present the
financial position, changes in equity, results of operations or cash flows of Vodacom Group
Limited. This information has not been reviewed and reported on by the Groups auditors.
Notes:
1. The reported percentage change relates to the year on year percentage growth from 30
September 2011 to 30 September 2012. The Groups presentation currency is the South
African rand. Our International operations include functional currencies in United States
dollar, Tanzanian shilling and Mozambican metical. The prevailing exchange for the current
and comparative periods are disclosed above.
2. Trading foreign exchange are foreign exchange gains/losses on foreign denominated
monetary assets and liabilities resulting from trading activities of entities within the Group.
3. Translation foreign exchange arises from the translation of the results and financial
position of subsidiaries functional currencies to Vodacoms presentation currency, being
rand. The exchange variances are eliminated by applying the current periods average rate
(which is derived by dividing the individual subsidiarys translated rand value with the
functional currency for the six months period) to prior year numbers, thereby giving a user a
view of the performance which excludes exchange variances. The prevailing exchange for
the current and comparative periods are disclosed above.
4. The Group disposed of its subsidiary, Gateway Carrier Services, during the current
reporting period, effective 31 August 2012. We have excluded Gateway Carrier Services
from the above calculation to give the user insight into the underlying performance of our
on-going operations.
Corporate information
Directors
MP Moyo (Chairman), MS Aziz Joosub (CEO), DH Brown, IP Dittrich, M Joseph1, A Kekana, TM Mokgosi-Mwantembe, PJ Moleketi, JWL Otty2,
NJ Read2, RAW Schellekens3, S Timuray4
1. American 2. British 3. Dutch 4. Turkish
Company secretary
SF Linford
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
The auditors report does not necessarily cover all of the information contained in this announcement. Shareholders are therefore advised that in
order to obtain a full understanding of the nature of the auditors work they should obtain a copy of that report together with the accompanying
financial information from the registered office of the company. This announcement contains certain non-GAAP financial information which has not
been reviewed or reported on by the Groups auditors. The Groups management believes these measures provide valuable additional information
in understanding the performance of the Group or the Groups 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 Groups 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 16 for detail relating to EBITDA and headline earnings per share.
Trademarks
Vodafone, the Vodafone logo, Vodafone Mobile Broadband, Vodafone WebBox, 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 RIM®, BlackBerry®, are owned by Research in Motion Limited and are registered in the US and may be
pending or registered in other countries. Java® 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 interim results for Vodacom Group Limited for the six months ended 30 September 2012 contains forward-
looking statements, which have not been reviewed or reported on by the Groups auditors, with respect to the Groups financial condition, results
of operations and businesses and certain of the Groups plans and objectives. In particular, such forward-looking statements include statements
relating to: the Groups 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 Groups businesses by governments in the countries in which it operates; the Groups 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 Groups present
and future business strategies and the environments in which it operates now and in the future.
Date: 12/11/2012 07:11:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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