Vodacom Group Ltd Ord

Good morning, everyone, and a very warm welcome to Vodacom Group's annual results. In a moment, Shamil and Rasevi will provide a strategy update and financial review for the year 2023. Shortly thereafter, we will host some Q&A, taking any questions from the room and also questions from online. Thank you very much for your support of Vodacom Group.

Welcome to our strategy and annual results highlights for the period ended 31st of March 2023. Vodacom is a purpose-led company. We connect for a better future with our population reach exceeding 500 million people. Our core connectivity business provides us with the foundation to deliver on our three purpose pillars, being digital society, inclusion for all and planet. Guided by our social contract, we aim to build relationships of trust, and this year stepped up our efforts with our Tech for Good platforms. We made great strides in our gender and financial inclusion targets and our response to the ongoing energy crisis. Our Tech for Good platforms help diversify our revenues and drive societal benefit. We actively contributed to creating a digital society by developing solutions across critical verticals, including education, healthcare, and agriculture. In South Africa, we provided stock solutions to more than 4,000 health facilities and training to 120,000 healthcare workers across Kenya and Tanzania. Our farming solution spans across the value chain from small-scale farmers in Africa to precision commercial farms in the US. In Tanzania, our M-Kulima service provides farmers with the benefits of digital agricultural services, including cashless electronic payments, market information, and weather forecasts. Through this mobile-first solution, we continue to digitize farming communities, and with the support of the ministry responsible for agriculture, we accelerated farmers' registrations to over 3.1 million. Of the many purpose-led initiatives that we supported over the past year, I'm particularly proud of our Code Like a Girl and mMama programs. Code Like a Girl tackles low representation of girls in science, technology, engineering, and mathematics to get more girls into careers that require coding skills. Introduced in 2017, we have ramped up our efforts this year, training more than 4,000 girls across our markets. This is an investment that contributes to building a more digital, inclusive, sustainable future on the continent. EMAMA is a mobile health service that provides emergency transport for pregnant and postpartum women in Tanzania, which is one of the world's highest maternal mortality rates. EMAMA is expected to save the lives of around 17,000 mothers and babies over the next five years. Beyond Tanzania, we are working with the Vodafone Foundation and bringing on substantial partners like USAID to expand EMAMA to more markets in Africa, having already launched it in the DRC and the SUTU. One of our most powerful, impactful purpose and initiatives has been in education. We continue to make a difference in various aspects of education across our operating companies. In South Africa, we have registered over 1.4 million students on our eSchool program. We continue to maintain and enhance our 15 early childhood development centers, our 92 teacher training centers, 13 schools of excellence, and more than 3,000 connected schools. In the financial year, the global energy outlook was put into sharp focus with the war in Ukraine, while South Africa faced heightened power availability challenges. This operating context reaffirmed our focus on the planet and we initiated the implementation of the ISO 50001 energy management systems. In Kenya, we already have over 1,400 solar-powered base stations, setting the benchmark for our other markets to replicate. We also acted in a partnership role at COP27 UN Climate Change Conference hosted in Egypt in November 2022. At COP27, Vodafone Egypt signed a landmark MOU with the government to support our strategy of using 100% renewable energy, which should be implemented in the near term. We continue our quest to reduce our greenhouse gas emissions and have recently embarked on a massive project installing a new solar plant at our Midland campus in South Africa. This plant will generate over 10.8 gigawatts of our own clean energy. Vodacom has a clear and powerful strategy that sets us apart from the competition and is expected to deliver superior returns to you as shareholders. We call our strategy the system of advantage and it has 10 drivers of success. The first two drivers relate to our core connectivity offering. We have strengthened our footprint with a greenfield rollout in Ethiopia through Safaricom and the Vodafone Egypt acquisition. We're extending our connectivity leadership through smartphone adoption, rural access and scaling fibre. Where the customers want to connect via mobile, land or even space, we want to be their connectivity partner of choice. With our Egypt acquisition, our population reach exceeds 500 million people across Africa as connectivity remains a clear growth path for Vodacom. Our leading market share positions in connectivity, except for Ethiopia, which is new, provide us with the platform to scale our digital ecosystem. The ecosystem spans across big data, IoT, financial, and digital services. Leveraging our big data capabilities, we can improve customer offerings and incentivize the next best activity. Today, we know about over 10,000 big data attributes about each of our customers. These insights support our world-class CVM and personalized pricing, but also underpins our behavioral loyalty programs and financial service products. In the enterprise space, we are partnering with business to accelerate their growth. We are transforming their operations through digital technology in high growth areas like cloud, hosting, managed security, managed services, and IoT. These solutions are enabled and enhanced by our subsidiaries, IoT.Next, XLink, Nexio, Mezzanine, and our associate, Efriges. These solutions are ready to help digitize governments, and our recent IoT deal with Eskom is an example of this. A key focus area for us in enterprise is the SME segment, which is prevalent across all our markets. We are tailoring connectivity, financial services, cloud hosting and security services for them. In the financial services space, we have built a formidable business across our existing markets with products that cut across both consumers and merchants. Vodacom's success in this segment is a function of strategic focus. This focus has seen us continuously scale the breadth and value of our financial service products, as we leverage world-class tech such as Alipay. A good proof point here is that 50% of our international and base revenue growth comes from new services, but more on that a bit later. As we pull our connectivity, digital and financial services capabilities together, we create a ring around the customer. This is critical to our growth stories. As we expand our addressable market, we are also making the customer proposition into so much more than just a decision based on price. As we implement our system of advantage, we put an equal focus on considerations to improve our overall customer proposition, return on capital employed, and value creation. A key part of optimizing returns and powering our growth is leveraging scale and partnerships. This is particularly relevant as we accelerate our deep rural and fiber aspirations. We are hard at work at creating scalable partnership models for both. Of all the elements on the slide, the most important is number 10. Our purpose-led model shapes our outlook and our business strategy. We have made major strides in accelerating our system of advantage this financial year. This progress is dependent on us leveraging the six capitals to create value. Our social contract and the relationship we have with our 186 million customers are the foundations on which we grow Vodacom. With our population reach across eight markets in Africa, our core connectivity business is enabled by significant capital expenditure and access to spectrum, while our digital capabilities are supported by investment into big data, CVM, behavioral loyalty, and our super apps. A key input across the six capitals this year is Vodafone Egypt. The contribution of this asset to our human capital should not be understated. We see Egypt as a talent powerhouse that can power the broader group with its 800 IT software engineering in-source skills. I've already talked to you about Planet as one of our purpose pillars. The mindful use of our natural capital is key to our long-term sustainability. While each capital is distinct, key to our value creation progress is how we leverage them collectively into achieving our strategic ambitions. In FY23, we made significant progress on our ambitions with some of the highlights reflected on the right-hand side of the slide and more discussed through the course of this presentation. A notable strategic outcome this year is how we have positioned Vodacom to accelerate growth over the medium term. We captured this in our upgraded guidance with the EBITDA growth outlook increasing from mid to high single digit to high single digit. The Vodafone Egypt acquisition was a key milestone in Vodacom's history and is a key enabler of our strategic ambitions. In March, we showcased Vodafone Egypt to investors and analysts in Cairo. The investor day included store visits, product showcases, and management presentations. For those that attended, it was clear why Vodafone is the market leader in Egypt. It is a clear roadmap to retain its number one status, which covers technology, consumer, business, financial services, and people. The financial services opportunity in Egypt is very exciting. Egypt has a $300 billion US dollar informal market, which provides a massive addressable market for us to penetrate. Vodafone Egypt has already created success in mobile wallets with an 85% market share and more than 5 million active wallets. This was enabled by regulatory progress, new use cases and an explosion in distribution outlets to more than 400,000. This opportunity for growth as we combine Vodafone Egypt's market position with the group's compelling fintech ecosystem is very exciting. Vodafone Egypt expects to deliver 70% compounded growth from financial services over the next three years and this is just the start of this exciting opportunity. Safaricom is a strategic partner of the group and we are fully vested in its growth potential. In February, Safaricom hosted its first investor day covering its strategy and key growth factors. In addition to exciting growth opportunities in its core consumer connectivity, including fiber, Safaricom set out its growth plans for Ethiopia and PESA and Enterprise. Ethiopia presents a unique opportunity to digitally and financially transform Africa's second most populous country. Having launched in October 2022, Safaricom Ethiopia has already surpassed 2 million customers and covered 22 cities. The growth potential of this market is further enhanced by us securing a mobile money license. We plan to commercially launch M-Pesa in the coming months, marking another exciting milestone for this early stage investment. Safaricom Kenya has also exciting growth opportunities, including M-Pesa and the enterprise segment. Safaricom management showcased new M-Pesa products which expanded beyond its demographics and product suite. M-Pesa Go is aimed at the 10 to 17 year olds, promoting financial inclusion and teaching the power of saving to young people. In the enterprise space, Safaricom has exciting addressable market opportunities in new services such as Fiber, Cloud and Hosting, Security and IoT. Importantly, for each of these products, Safaricom is able to leverage Vodacom and Vodafone Group's centers of excellence to scale rapidly. In the fiber space, Safaricom has excellent growth prospects in both enterprise and consumer fiber. Having already passed half a million homes in Kenya with fiber, there is an opportunity to substantially grow this footprint over the medium term and also to connect more homes and businesses. For more information and the presentation material from the Safaricom and Vodafone Egypt Investor Days, please reach out to our investor relations team. We are in the business of connectivity. Whether it be from space, on land or through the airwaves, we want to connect the people across our markets for a better future. Our strict capital allocation framework provides guardrails for this vision. In short, we don't have money to do everything across all our markets. As such, we are focused on scaling within our existing footprint and partnering where one plus one equals five. We see particularly exciting partnership opportunities in fibre and rural connectivity. In the fibre space, we are working on co-investment models to accelerate rollout across our international markets. To accelerate our rural penetration, we have made good inroads on innovative new financing models for rural base stations. Additionally, there is scope for our satellite partnership with AST SpaceMobile to transform this model greatly. As we optimize our operations, scaling our African Shared Operations Centers becomes increasingly important. The ASOC manages business operations across all Varucom markets to achieve customer-centricity and zero-touch operations. Importantly, the center facilitates a bold once-replicate-multiple-times model across the network, financial services, IT operations, roaming services, and even our telco. Another key call-out on this slide is our one-app strategy. From FY24, we will look to replicate the success of Vodafone Egypt's one-app strategy by merging our existing telco and financial services apps into one. This will drive benefits for both ecosystems, with more use cases creating more traction for our digital channels. To capture more of the addressable fintech market, we are building a dual-sided ecosystem that aims to deliver exceptional and personalized experiences relating to entertainment, lifestyle, e-commerce, payments, savings, investments, lending, and insurance services. Our super apps are a key driver of this strategy as they create an open platform where we can integrate our own products with thousands of external service providers. It removes the barrier of physical limitations for both consumers and merchants, which can then expand well beyond their geographical boundaries. And put simply, as the transactions compound, we take our cut, a bit like an iOS or Google Play Store. To complement our super apps, we are scaling our merchant acquiring products as well. We have launched our own Android-powered physical point-of-sale devices in South Africa, adding to the already scaled M-Pesa TIL service. This merchant ecosystem provides ordering, insurance, and lending opportunities, such as invoice financing and SME lending. We are making good progress on our dual-sided strategy. On the merchant side, our M-Pesa merchant base is fast approaching the one million mark. This growth helps expand our addressable commission pools beyond peer-to-peer payments and withdrawals into both online and offline commerce. In South Africa, our merchant acquiring business is scaling quickly and we're already processing 4 billion Rand worth of turnover. In addition to the physical point of sale devices, this business has exciting digital channels on the roadmap. Our financial services apps, is continuing to scale with more than 4 million M-Pesa users. In Kenya alone, we have almost 70 mini apps on the M-Pesa platform, and this is rapidly evolving into a super app. In Egypt, I already mentioned that Vodafone Cash is already the go-to mobile wallet in the country. In FY24, we plan to launch the mini apps into our Anavodafone app. In South Africa, our super app Vodapay was integral to our summer campaign and reached 5.7 million downloads with over 100 mini apps launched. We have recently launched Cash In Cash Out and intend to scale this in FY24 while also adding new services such as remittances to the super app. As we diversify into new growth factors beyond peer-to-peer payments, our financial service product suite continues to broaden across lending, insurance, and savings. Tanzania is a great example of scaling new financial services quickly, with 30% of our customers already using a financial service product through M-Pesa. Supported by our M-Pesa Africa Hub, we have a clear roadmap for M-Pesa growth. Into FY24, key priorities will include scaling the mini-app capabilities of the M-Pesa app, rollout of new growth drivers such as youth accounts and insurance. Across all our markets, we will also remain focused on scaling our international money transfer hub, the onboarding of merchants and merchant services, and introducing wealth management products. We are currently trialing wealth management in Kenya, and we're excited about how this product will help foster a savings culture for our customers across all our markets. Turning to the group's financial results, in a year defined by economic headwinds and financial market uncertainty, Vodacom Group has delivered a satisfactory set of results, showcasing the resilience of our strategy and our track record in adapting quickly to changes across operating environments. Group revenue grew 16% to 119.2 billion rand, positively impacted by the acquisition of Vodafone Egypt and rand depreciation against our basket of international currencies. Excluding Vodafone Egypt, revenue growth was 8%, which was underpinned by mobile prepaid revenue in South Africa, data revenue across our international markets and group-wide growth in our new services. Group EBITDA increased 13.2% to R45.1 billion, of which Vodafone Egypt contributed R2.9 billion since the acquisition on 8 December 2022. Excluding Egypt, EBITDA growth was 6%. And removing the impact of currencies, EBITDA grew 3.6%, reflecting a clear improvement in the second half to 8.1% normalized. In South Africa, higher network and energy costs were managed through accelerated cost initiatives, including supply chain management renegotiations and an incremental focus on discretionary spend and payroll costs. We now serve 186 million customers across the group, including Safaricom. I fondly remember the moment we reached 100 million customer milestone in FY18, and now we see the 200 million mark within reach. We remain committed to spending within our capital intensity framework of 13 to 14.5% of revenue. This level of investment is directed at enhancing customer experience through sustained investments in technology and our network infrastructure. We invested R16.5 billion into capital expenditure this year as we accelerated investment into network performance. Financial services is the key contributor to our new services and our efforts to deepen financial inclusion continue. We now have 71 million customers using a financial service product and remain Africa's largest mobile money platform by transaction value with a billion dollars being transacted each and every day across our platforms. Headline earnings per share declined 6.4% to 948 cents per share. The decline was attributable to the issuance of new shares to fund the Vodafone Egypt transaction. Startup losses in Ethiopia and the higher net finance charges as interest rates increased back to pre-COVID levels. Separately, the board declared a final dividend per share of 330 cents per share, which reflects our updated and simplified dividend policy of at least 75% of headline earnings. This implied a total dividend per share of 670 cents per share. Pleasingly, we delivered revenue growth across each of our segments. Group service revenue was up 17.2% on a reported basis, or 7.2% excluding Egypt. On a normalized basis, service revenue was up 3.5%, reflecting macroeconomic headwinds. I will unpack the segment results later in the presentation, but at a headline level, South Africa grew at 2.6%. Our international operations reported service revenue growth of 18.8% and normalized service revenue growth of 5.3%. While Safaricom's service revenue was up 5.2% in Kenyan shillings. Vodafone Egypt's service revenue grew at 21.7% on a full-year basis and contributed R8 billion since consolidation on 8 December 2022. Group operating profit increased 3.6% to R29.3 billion. As expected, startup costs associated with Safaricom Ethiopia has scaled Safaricom's contribution to group operating profit to 2.8 billion rand, 9.8% lower than last year. In South Africa, operating profit declined 1.2% as the result of higher depreciation and amortization of the new spectrum. In the second half, operating profit increased 2.5% supported by the improvement of EBITDA. Operating profit growth in our international portfolio of 4.3% was impacted by higher year-on-year depreciation associated with a prior year once-off lease contract separation. When looking at our customers, the inclusion of Vodafone Egypt into the numbers really does change the composition of the group, diversifying Vodacom into four similarly sized segments. Of our 186 million customers, 76% are now from outside South Africa. Shifting to a product lens, this slide sets out the contribution of our high growth new services to each of our geographic segments. Our new services include financial and digital services, IoT and fixed. We target a new service revenue contribution of 25 to 30% of group service revenue over the medium term, including Vodafone Egypt. In South Africa, 15.3% of service revenue is now attributable to new services. Across our international portfolio, the contribution of new services is closer to 29%, while Safaricom sets the benchmark at 44.5%. Vodafone Egypt's new service revenue contribution to service revenue is 14.2%, reflecting its early-stage investments into Vodafone Cash and Fix, respectively. We intend to scale each of these new revenue streams into successful businesses. This slide sets out our matrix that highlights the scale of our financial service business. As a group, including Safaricom, we have 71 million financial service customers. While this is a very impressive number on a standalone basis, the scope for growth remains very material with penetration of our base at less than 40%. The scale of our financial service business is best reflected in the $365 billion of transactions processed through our platforms. This is up 13%. In the period, our revenue on a consolidated basis was up a reported 29.2% to 9.9 billion rand. With an additional R16.4 billion generated by Safaricom, this implies a combined fintech footprint of US$1.5 billion. In South Africa, service revenue generated from financial services grew 10.8% to R3 billion. Revenue growth was underpinned by our insurance and airtime advanced products. Insurance revenue increased by 13.3%, supported by our growth in policies, which were up 6.8% to 2.6 million policies. Our international business delivered M-Pesa revenue of R6.5 billion in the period, up 31.1%. As we show on the right-hand side of the slide, half of this growth was fueled by new services, such as business payments, international money transfers, and loans in savings products. These new growth drivers now make up more than half of international and base revenue growth, confirming that our dual-sided ecosystem is scaling. Safaricom, which sets the benchmark for product scale, delivered 8.8% growth on a normalized basis. Encouragingly, growth accelerated in the fourth quarter. Revenue for Vodacom South Africa reached R84.7 billion, up 4.8%, and was driven by service revenue and strong equipment sales as our 36-month contracts provided customers the opportunity to upgrade handsets affordably. Service revenue grew 2.6% to R60 billion and was supported by network investment into resilience and capacity and growth in new services. Prepaid service revenue increased 3.1% as we leveraged our big data-led customer value management powered personalized offers to mitigate a soft consumer environment. In the fourth quarter, prepaid growth accelerated to 4.1%, supported by strong data revenue trends. Mobile contract customer revenue increased by 2.8% to R22.6 billion, supported by customer growth and price adjustments. Data traffic increased 36.6% in the year and accelerated to 45.4% in the fourth quarter. It was particularly pleasing to deliver this growth against the backdrop of load sharing in South Africa and was supported by our investment into our network, spectrum and energy resilience. This investment was also reflected in our network NPS score where we are leading the market. We added 2 million data customers to reach 25.5 million customers, up 8.7%. Smart devices were up 11.1% to 29.3 million. Prepaid data revenue growth accelerated to 17.4% in the fourth quarter. This improvement reflected our network availability and the success of our data-led propositions, focused on providing affordable offers to the most price-sensitive, low-income customers. New services, such as financial and digital services fixed in IoT, were up 9.7% and contributed R9.2 billion, or 15.3% of South Africa's service revenue. Boricom Business Service revenue declined by 1.7% to R17.4 billion, impacted by a decline in wholesale revenue as we lapped a strong prior year comparative, as well as the repricing pressures associated with the RT15 government contract. EBITDA grew by 2.6% for the year, but improved to 5.8% in the second half of the year. The improvement was supported by accelerated cost initiatives to mitigate the higher impact of energy costs and inflationary pressures. Vodafone Egypt contributed service revenue of R8 billion for the period of consolidation, which is from 8 December 2022 to the end of March 2023. In the fourth quarter, service revenue was up 25.8% in local currency, supported by strong growth in data revenue and an enhanced customer engagement. Growth was also supported by Vodafone Cash and fixed line services. Vodafone Egypt ended the financial year with 45.5 million customers. Data Matrix was strong supported by network investment. Data traffic was up 44% in the quarter, driven by data customer growth of 11.4% to 26.3 million. Smartphones on the network were up 37.5% to 30.9 million. As I've set out, growing financial services is a key priority for the group and for Vodafone Egypt. Financial services revenue for Vodafone Egypt was 398 million rand for the period of consolidation, accounting for 5% of service revenue. Vodafone cash customers increased 54.5% to 5.4 million. We intend to scale this business quickly over the coming years. EBITDA contributed 2.9 billion rand to Group EBITDA for the period of consolidation. Looking back at the full year in Egyptian pounds, the normalized EBITDA growth rate was 19.4% similar to service revenue. Service revenue for our international business increased 18.8% to R26.4 billion, supported by strong growth in data, a recovery in M-Pesa, and foreign exchange translation tailwinds. In the fourth quarter, growth was impacted by a humanitarian crisis in Mozambique associated with Cyclone Freddy. In response to the cyclone, Vodacom Mozambique free-rated services, donated food and essential items, and used the scale of M-Pesa to drive donations. Pleasingly, we added 8.5 million customers in the financial year, up 20.4% to 50.2 million customers, supported by price transformation and strong commercial execution. In the fourth quarter, we added 2.1 million customers, driven by our CVM initiatives. Data revenue was up 33.2% to 6.1 billion Rand on a reported basis and contributed 23.1% of international service revenue. Data services remained a key driver of growth in our commitment to connect for a better future. We added 1.3 million data customers to end the financial year at 22.5 million customers. Data traffic growth of 33.1% was supported by 16.3% smartphone user growth to reach penetration of 32.9%. we continue to drive the adoption of smartphones, leveraging our strategic partnerships, and implementing innovative financing options to provide affordable devices to our customers. Our PESA customers increased 16.4% to 19.2 million customers, and PESA revenue was up 31.1% to 6.5 billion rand, contributing 24.6% of service revenue. Growth was supported by strong performance in the DRC, with Tanzania's performance recovering as levies on mobile money were reduced during the year. The underlying momentum of M-Pesa reflects our ongoing product commitments and product enhancements in both consumer and merchant segments supported by M-Pesa Africa. In the consumer segment, we launched new insurance offerings, term loans, and group savings products. We scaled our international money transfers and enhanced our M-Pesa app during the year. To grow and diversify the M-Pesa ecosystem, we also accelerated our merchant strategy by adding more than three times the number of active merchants to close at 196,000 merchants. International EBITDA was 10.1 billion rand and grew 19.3%, reflecting foreign exchange translation tailwinds and cost containment initiatives. In the second half of the year, normalized EBITDA growth recovered into double digits as we lapped the impact of the prior year lease contract separation and despite new regulatory fees in the DRC. Safaricom delivered good results given the challenging macroeconomic backdrop and the reduction to mobile termination rates in Kenya. Service revenue increased 5.2%, supported by excellent growth in the fixed business and an improved performance of M-Pesa revenue in the second half. Safaricom continues to accelerate its digital financial inclusion agenda and focused on increasing customer service and satisfaction. Pesa revenue grew 8.8% in the year, with the fourth quarter growth accelerating into double digits. This was supported by strong platform growth and return to charging for bank to wallet and wallet to bank transactions from January 2023. M-Pesa revenue contribution to service revenue increased to 39.6% in the period. Safaricom, together with M-Pesa Africa, continued to leverage on technological innovation to enhance access to financial services for consumers and enterprise customers. Mobile data revenue grew 11%, including Ethiopia. Kenya data revenue was up 10.6%, accelerating from the prior year growth rate as price transformation supported strong usage growth. Looking at the fixed business, revenue was up 20.1%. This was supported by excellent growth in both the enterprise and consumer segments. Fiber-to-home customers were up 17.9% to 196,000, while homes passed increased 27.6% to 466,000. EBITDA for the Kenyan operations was up 4%, with margins broadly flat year-on-year at 51.9%. The cost base was impacted by foreign exchange pressures and higher energy costs. Safaricom's overall EBITDA, including Ethiopia, declined 6.2%, reflecting the startup losses associated with the Ethiopian rollout. By the end of March, Safaricom Ethiopia had already reached 2.1 million customers with mobile services across 22 cities, including Addis Ababa. Safaricom Ethiopia is targeting accelerated site rollout into FY24 and guided that FY24 will be the peak of EBIT losses.

In this video, I will unpack our results for the year ended 31st March, 2023. We are pleased to have delivered improved profitability in the second half, despite ongoing economic headwinds, including power availability challenges in South Africa. From a shareholder perspective, we have declared dividend of 330 cents, which is a final dividend, bringing our full year dividend to 670 cents per share. This dividend reflects our new policy, which positions Vodacom to accelerate growth going forward. Moving to our financial performance, our income statement sets out reported and normalized growth. I will primarily draw attention to the normalized growth numbers, which provide better insights adjusted for Forex fluctuations and M&A activity. Our revenue increased by 16% or 4.9% on a normalized basis, supported by service revenue growth, which was up 17.2% on a reported basis and 3.5% on a normalized basis. EBITDA grew 3.6% on a normalized basis at a margin of 38.1%. This represents a strong recovery in the second half of the year, something we had guided to in our interim results. The net profit from associate and joint ventures of 2.6 billion rand was impacted by startup losses associated with our rollout in Ethiopia. On a normalized basis and excluding the impact of Ethiopia, Safaricom's contribution to our operating profit increased 11%. This growth reflects a good performance in Kenya in the second half, particularly from non-mobile products, including M-Pesa. Headline earnings per share decreased 6.4% to 948 cents and was impacted by higher finance costs and startup costs in Ethiopia. At a later slide, I will unpack our earnings profile for the year and show that our underlying operational momentum clearly improved in the second half, which is an encouraging development in these challenging times. As set out on the previous slide, reported service revenue growth for the group was 17.2% for this financial year, and this growth was supported by Vodafone Egypt, which was consolidated from December 2022. Vodafone Egypt contributed 8 billion rands of service revenue in the four months with the split between the third and the fourth quarter set out on the slide. On a normalized basis, service revenue of 2.6% in the fourth quarter decelerated modestly from 3.5% in the third quarter. And this was as a result of South Africa which reported muted growth of 1.3% in the quarter and impacted by a tough recession comparison as a result of some of the one-off service revenue in our Vodacom business in 2022. We do not see fourth quarter performance in South Africa as a trend line going forward and expect a clear improvement in the coming financial year. Pleasingly, our international business delivered an improvement in the fourth quarter. Normalized growth accelerated to 5.4% from 4.5% in the third quarter, driven by M-Pesa and data revenue. And this was despite the impact of devastating flooding in Mozambique in both February and March. South Africa's energy crisis has proven an important factor in shaping the financial year. Load shedding is a term that has become top of mind with us as management team and is a reference to the way available electricity is rotated in South Africa. As you can see from the chart on the right, the number of load shed hours has increased materially through the course of the year. In the fourth quarter, load shed hours exceeded 2,000, which implies that somewhere in the country there was no power almost every hour during the quarter. The impact of this energy crisis on our business is set out on this slide. Starting with the demand for our product, we have seen that as the power goes out, there is incremental demand for data. This is evident in our data traffic metrics, with growth accelerating to 45% in the fourth quarter. This demand is however associated with more costs. We have spent an incremental 300 million rands on operating costs in the year, mostly on diesel. Were it not for our bulk fuel purchasing strategy implemented in the second half, the number would have been higher. In addition to OPEX, we have spent 4 billion rands on energy resilient CAPEX over the last four years. And interestingly, our peak spend was in financial year 21 rather than 23, reflecting advanced planning. Unfortunately, this 4 billion rand investment was a clear trade-off with new capacity that could have accelerated network expansion and the 5G in South Africa. The upshot of our investment into energy resilience is that we have maintained network availability at above 90% throughout the year. This facilitated the data traffic acceleration, as I noted earlier. And if this is a silver lining to load shedding, then I hope that as South Africa invests into energy resilience, our green energy transition will be accelerated. In this slide, we provide more context around our group EBITDA performance. For the full year, our EBITDA grew 13.2% to 45.1 billion rands, and as you can see on this slide, all this growth came in the second half. The second half EBITDA performance was supported by Vodafone Egypt, but also a clear improvement in the underlying business. Whilst in the first half net cost growth was a headwind, our accelerated cost containment efforts into the second half resulted in net cost savings. Our cost initiatives including supply chain management renegotiations and an incremental focus on discretionary spend and payroll costs. On a normalized basis, EBITDA growth was 8.1% in the second half, with EBITDA margins expanding 0.4 percentage points, providing a good exit rate into the next financial year. While Group EBITDA grew by 13.2%, net profit growth was only 2.1%, and in this slide, we provide a bridge of the key drivers between EBITDA and the net profit. Higher depreciation and amortization and startup costs related to Ethiopia offset the underlying growth in associates. The higher depreciation and amortization is as a result of capital expenditure growth over the recent years, the amortization of the new spectrum in South Africa and Tanzania, as well as depreciation of batteries. The Ethiopia startup losses were in line with our expectations, with Safaricom Ethiopia already launching in 22 cities and building out almost 1,300 sites. Safaricom's core operations in Kenya delivered a good set of results, with EBITDA up 4%. It was particularly encouraging to see Safaricom's service revenue growth accelerate into the second half, supported by M-Pesa. Below the operating profit line, finance costs increased as a result of higher interest rates and new debt utilized to fund the Vodafone Egypt and the Spectrum acquisitions. This was partly offset by a gain on Forex at year end, with taxes broadly flat year on year, and the result of higher finance costs was net profit of 2.1%. Still focused on the bottom line, our HEBs decreased 6.4% to $0.948 per share. As I already mentioned, earnings were impacted by a few notable factors. In this chart, we show the after-tax, after non-controlling shareholder impact of these factors on earnings per share. The most significant of this related to the startup losses in Ethiopia and higher finance costs. The Ethiopia losses weighted on the contribution from Safaricom in the period and impacted our HAPs by 40 cents per share. Higher group finance had a 43 cents per share impact, although this was offset by the FX revaluation gain. Other notable earnings factors included M&A costs offset by the recognition of the DFED tax asset in Tanzania. Significantly, this bridge shows an improved performance in the underlying business between the first half and the second half. We know that bottom-line growth is key to the investment case of any listed company, and this is a key focus area for me on the forward-looking basis. Shifting focus to cash flow, operating free cash flow was 25 billion rands, which grew by 10.7% year on year. The growth was supported by an expected second half recovery in working capital, something we called out during our interim results. This was offset by higher capex, which was up 12.6% in the year. Least liability payments, which is also captured in operating free cash flow, amounted to 4.9 billion rands. We generated free cash flow of 18.5 billion rands up 18.3% year on year. This growth was helped by the timing of Safarcom's interim dividend receipt. The receipt of FY22 interim dividend in April 2022 and subsequently the FY23 interim of one billion rands was received in March 2023. This was repatriated to South Africa in rands. Our cash tax payments of 7.4 billion rand was slightly higher than the P&L charge, and this reflects the timing of tax payments and should normalize in due course. We communicated a change in dividend policy with our Vodafone Egypt and South Africa's fiber transactions. Given the progress of the Vodafone Egypt acquisition at our interim results, the board implemented the policy from the first half. Our simplified policy is to pay out at least 75% of group headline earnings per share, which remains one of the highest payout ratios on the Johannesburg Stock Exchange. Aligned to this policy, for this period the Board has declared an interim dividend of 330 cents per share, bringing the annual dividend to 670 cents per share. Our dividend payment equates to around 13 billion rands in cash paid, once again, one of the highest on the JSE. Our reported net debt to EBITDA ratio remained unchanged from the first half, which was 1.1 times. This was a good outcome given we took an almost 11 billion rands of new debt to fund 20% of the purchase price for the Vodafone Egypt transaction. Our leverage was supported by strong free cash flow generation in the second half of the year, something we also committed to at our interim results. Looking at the composition of our borrowings, we have refinanced a significant portion of our debt in the financial year. This was balanced between fixed and floating debt with maturities ranging from three to five years. From an interest rate perspective, our debt structure is split 54% fixed and 46% floating rates. If we exclude leases and focus on financial debt, the fixed component is 31% while floating rate is 69%. This mix suggests in the current interest rate cycle, our average cost of debt could increase in the short term. However, we should also benefit from the interest rate cycle changes in the medium term. Looking forward, the Vodafone Egypt transaction has provided us with an opportunity to accelerate groups' growth profile. This is reflected in our upgraded medium term targets. We now expect group service revenue of mid to high single digit from mid single digit previously. We also upgraded EBITDA growth to high single digit and our capital intensity ratio remains unchanged. These targets are not without challenges. Notably, the macro outlook remains uncertain with both global growth concerns and local factors such as load shedding in South Africa. These challenges mean we will need to execute on our system of advantage, our new growth areas of service revenue, and remain laser focused on cost control. In this slide, I set out capital allocation priorities. Our first priority is investment into organic growth, which includes our core connectivity business and new growth areas. This investment is supported by our big data capabilities, which help us generate the best return for each rent invested. Our dividend policy means that we do not need to compromise on our organic investment. With a payout of 75% of headline earnings, we are left with room to fund our capital intensity framework and also deliver our balance sheet in due course. In my concluding slide, I would like to reconcile our medium-term growth target with the shape of our business in the coming years, and in particular, our ambitions around new services. These new services encompass digital and financial services, fixed and IoT, and are key to our diversifying our revenue portfolio and improving our customer proposition. On a consolidated basis and including Vodafone Egypt into scope, we see our new services revenue contribution increasing from the current 19% to around 25 to 30% in the medium term. This will mean growth in the region of 20% per annum for new services, an ambitious but achievable outcome. On that exciting note, I will conclude and thank you for your attention.

To conclude our presentation, I would like to say that how we plan to create value for our shareholders. Firstly, we will continue to execute on our multi-product approach, our system of advantage. We are hopeful that we can conclude the massive transaction this year as it will accelerate fibre reach in South Africa and foster economic development. The regulatory approval process is proceeding with only the Competition Commission Authority's approvals now outstanding. We will also focus on accelerating the penetration of our existing connectivity services with new spectrum unlocking fixed wireless access opportunities. We also have exciting plans around new device financing models in the pipeline. Across our digital ecosystem, we have growth opportunities ahead of us from new products and scaling of our existing platforms. I'm particularly excited about the structural growth opportunity from launching M-Pesa in Ethiopia in the coming months. We are very excited for the scaling of our super apps, Vodupay and M-Pesa, considering the exceptional growth we have witnessed so far this financial year. Transforming to a techco will include the optimising of our assets through sharing, and to this end, we aim to unlock benefits through partnerships in both rural coverage and fibre across our footprint. As we pull together the levers of our strategy, we are now positioned to accelerate our growth profile and reflect this in our updated targets. Mindful that this growth must be profitable, we remain focused on our return on capital employed. Finally, we will always prioritize our contribution to societies in which we operate and our purpose-led ambitions. We will focus on increasing our female representation at management levels, reducing our greenhouse gas emissions across the footprint, and driving financial inclusion. These targets are included in management's long-term incentives. We look forward to engaging with you over the coming weeks on our Investor Roadshow. This concludes my presentation. Thank you for your attention.

Good morning again. We are going to take some Q&A now, starting in the room. Jonathan, you're up first.

Good morning, Jonathan, from JP Morgan. A couple of questions. Just some clarity on South Africa, where you talk about a clear improvement for service revenue growth in the coming quarters. Can you give us a sense of what's driving that? I presume there's some postpaid price increases and potentially prepaid market share growth. I'm just trying to understand if you've seen some kind of macro improvement as well that supports that view. And then on your revised guidance, does that include your proportional share of Safaricom or is that excluded? And then finally, if I look at capital allocation, would it be untrue to say that you would look at potentially upping your stake in Safaricom in the medium term, given what has happened to valuation levels there? Is there anything that stops you from increasing your stake there? Okay, perhaps take one and three and maybe two on the guidance.

Sure.

Okay, so let me start off with South Africa. I think the, so firstly, I mean, we've seen a better improvement in the performance in Q4. And also for the second half of the year, you saw 5.4% growth in EBITDA. So a much stronger performance in the second half. I think that came through strongly from and improvement in prepaid. And that's partially linked to, of course, having better availability than competition, but also a very focused execution by the SA team in terms of increasing active days. And then, of course, our strong summer campaign as well, I think, has played out quite nicely into our growth into the fourth quarter. We see that continuing into the new year. Of course, the pressure points are there, but we're trying to, in terms of the economy, but we're also trying to make sure that our offerings talk to the customer pressures and so that we can get more of the active days than competition. I think that's clear. In terms of pricing, there is a price up that has happened, but there's also been an allocation of more value to the customer. That's a 5% to 7% increase that's been announced. The first one is 1st of April, and then the second part of the base will happen from 1 June. So I think you'll see an increase coming through. And then, of course, you will have a lot of the RT15 impacts in the base as well. So that should lead to a better improvement in the RT15 repricing as well for enterprise going forward. So, you know, stronger growth in prepaid, stronger growth in contract, and I would say recovering growth in enterprise. And then, of course, the new services, financial services, digital services in IoT should continue to grow strongly.

Then on Safaricom, perhaps, I don't know if you want to just nail that one, and then we take the guidance questions. Would we consider taking more of a stake in Safaricom?

On Safaricom, in terms of taking a stake or further stake, I mean, it's an attractive asset. We remain committed to the asset. The 5% is worth Vodafone. I think with the current share prices, you know, I'm not sure Vodafone would want to sell just yet. So nothing at this point in terms of acquisition of the 5%.

In terms of guidance, the guidance does not include the proportion of Safaricom, given that we're guiding on service revenue and on EBIT and the CAPEX, whereas Safaricom comes in at an operating profit level. And Safaricom has provided its own guidance in terms of, you know, the Safaricom Kenya and Ethiopia, and obviously pointing out to the investment cycle that would come with Ethiopia and pointing out that 2024 is the year that the losses will peak and then obviously start seeing some improvement to get Ethiopia to break even in year four, which is FY26.

And there's been detailed guidance on Safaricom, so you can do the read-through yourselves.

That's right.

Prashendra?

Hi, everyone. It's Prashendra from Nedbank. I've got three sets of questions. Just talking again on your South African service revenue, your growth was around 1.3%, which is the same as your competitor on 14th Avenue. But they attributed about 3.2 or 3.3% of growth to load shedding. It seems like your investment hasn't had much impact. Is that a fair assessment to say? And then coupled with that, what is your network uptime? I know it was 94% for the quarter, but you used to give us like an uptime on stage four and stage six, if you could share that. And then still on service revenue for South Africa, enterprise, it seems to have improved in the last quarter because it was down 3.5% in the last quarter. And for the whole year, it was only down 1.7%. So I just wanted to clarify that. Was it better or worse than that last quarter? And then the final question is more, I mean, it's a more Vodafone question, but I'll try it with you, Shamil. I know the Egypt transaction barred Vodafone selling any Vodacom shares, I think, until the end of this year. But does that preclude them from selling all of Vodacom to, you know, privately as opposed to, you know, placing it in the JSC? That's it. Thanks.

Do you want to get going? Yes. In terms of the underlying performance, firstly, in South Africa, yes, we have performed better. I think from a load shedding perspective, we're anywhere between 94 and 97, sometimes higher. Honestly, it depends on the day of the week and the number and the amount of load shedding. I think the investment we've made has helped us to weather the storm much better than some of our competitors. So, of course, that has played out into the numbers. I think you've seen a very strong performance in prepaid and postpaid during the quarter. and that's borne out by, of course, some of the other competitors disclosing the numbers. What has played out is, of course, the one softs that we had from the previous year that is coming to the numbers. That's the one side. I think on your second question in terms of Vodafone, I think there's a lock-in period, but outside of the lock-in period, I think what's clear is Vodafone's commitment to Vodacom and not wanting to sell. We recently had a visit from the whole Vodafone board, and the messaging was very clear that Vodacom is not for sale, so that's the first part. And then, of course, in terms of Etisalat, there's a partnership agreement that is entered to, which also now governs that relationship and so on. And I think that has been disclosed, so Vodafone can provide more or has provided more color on that and will provide more color also, I guess, in the results presentations tomorrow.

Cool. And then Prashendra, just on your specific question on VB for the quarter, VB was a little bit slower in the quarter than in the third quarter. So it was down mid-single digits in the fourth quarter. And just coming back to Shamil's comments, that's the lapping of those one-off contracts in the prior year this time. Lou, over to you.

Hi everyone, it's Louise from Investec. I think maybe staying with SA here, two questions, one on load shedding. How is your network expected to handle a load shedding stages above six and a total grid failure? And how is elevated load shedding changing your capex replacement cycles? That would be helpful in modeling medium to long-term CapEx expectations for South Africa. And then the second question is on expense growth. It seems you are managing costs well below inflation, which is quite commendable. What specific cost initiatives are you targeting, though, over the next few months, especially in SA? Thank you.

So on load shedding, the investment planning, which we point out that we spent four billion over the last four years. So our trajectory will continue on continuous investment where currently all our sites have four hour capacity and some strategic sites are eight hour capacity. And we continue to support the batteries with the generators. And that trajectory, we expect that the additional spend will not disrupt the overall CAPEX planning. And we'll continue to apply other measures. you know, alternative strategies, i.e. sharing of the network and working with others because the cost is on supporting the network in terms of maintenance and security, etc. And those are the areas that we will continue to share with the MTN, where there's opportunities to do so. And for that reason, we do believe that we'll be able to manage within the CAPEX intensity that we have advised on, which is 13% to 14.5%. From an expense perspective, some of the areas is... renegotiating some contracts with the different suppliers. We have 8,000 suppliers overall. So issuing RFPs so that you can refresh the pricing for different products has been quite helpful. Where possible and practical, also moving some of the FX-denominated spending to local currency, which really protects us from the exchange rates that have become quite harsh. We are digitizing a lot of processes. So RPA is one of the key focus areas where we, as we bring in data scientists, some of the activities are to do with digitizing a lot of our processes. And overall, just a continuous improvement. The Feed for Growth program that has been running for many years still continues. Even as we go into 2024, we have a specific cost savings targets in all the different markets just to make sure that we remain quite efficient.

okay good okay um i think we're okay in the room then just switching to some of the the questions online uh both maddie and uh nadim uh from hsbc and sbg uh separately uh respectively have asked questions around uh south africa and and that change in uh in in the growth trend which i think we've discussed but perhaps just one final question from maddie just asking for an update on the civh transaction please shamil and then once you're done with that a question from cesar bank of america to to yurasebi around ethiopia just asking you know what further capital commitments will be required for that business over the medium term given the the guidance that safaricom has given the market And what does the break-even target of four years mean? When does that actually, when is four years? When does the clock start ticking? So perhaps I'll just start with you, Shamil, on CIBH.

Yeah, so to be honest, a bit frustrating because we've, you know, it's been 18 months in terms of waiting for approvals. So that has been a bit frustrating, but I think we've made good progress. We've, of course, we've got the ICASA approval. We've engaged with the DTIC. We've made certain commitments in terms of public interest, both to the ComCom and to the TTC. We've answered all the RFIs. So essentially where we are now is we await a decision, and hopefully that will be forthcoming in the near term.

With respect to funding Ethiopia, when we started the process with the license, we had a fully funded transaction with the equity participants having committed sufficient funding. But in addition to that, we have continued to look for opportunities for leveraging, and for that we have secured some funding from the local banks, and we potentially could still secure funding from the DFIs. So we're quite comfortable that at peak, where the CAPEX requirements will be somewhere between $1.5 billion to $2 billion, of which we have already spent 440, that there's sufficient capacity to be able to invest in Ethiopia. Of course, as the business is now operational, the ongoing funding of the working capital, et cetera, will also be funded by the cash generated from the business itself. So in terms of the break-even, the fourth financial year will be FY26, and that is when we expect it to break even from an EBITDA perspective.

Great. And then a quick question from Peter Crombridge from Merger Market to Eurosebi, which is, as Vodacom accelerates its transition into the green space and green economy, to what extent can it increase exposure to green funding structures?

So we are actually quite excited about the opportunities that come with the green funding. We had an inaugural funding that was done around about 2020 and we are now refreshing our framework for ESG so that we can build the key metrics or the KPIs for ESG and be able to attract even bigger pools of funding. We do see that as a great opportunity, both from the overall investment market, asset managers, et cetera, but also that is the space that the DFIs are particularly interested in. That is something that we're working on. The key projects ranging from rural coverage, financing, handsets, etc. So there's a healthy demand and supply opportunity in that.

Great. Last two questions. First one to you, Shamil, and then back to you, Rosebi. We've got Vikyat from R&B Morgan Sandley. He just picked up a point you were noting in the presentation around device financing across the market. So is this specifically for South Africa or for the overall portfolio? And to the extent to which this could impact EBITDA margins going forward, i.e., is this going to be done in a profitable way? And then, Cesar, I just wanted to come back to you on Ethiopia and just to confirm whether Vodacom will or will not be putting any more equity into the structure going forward. So are we going to sign any more checks over to Ethiopia, to that consortium? Shamil, on device financing?

I think the opportunities around both device financing, the way to think about it, only 40% of our base today has access to a smartphone. So we've got 60% of the customers who don't have a smartphone. So the opportunity around device financing is to finance the device using third party funding. Let me stress using third party funding so it doesn't affect our balance sheet. And there's innovative ways in which it can be done, including daily utilization of the product that includes minutes, megs, and the phone repayment, and making it affordable for customers. That then opens up the ecosystem because, of course, your data growth can accelerate, but so too can your financial services play, which is sitting at about 38% of the base. So between the two, the smartphone opens up that super app capability. It opens up your data penetration. So we think it's a very strategic lever that we want to exercise this coming year to try and further accelerate smartphone penetration.

So in terms of additional funding, no, we don't anticipate that outside of what has already been committed, there would be a need to put more money into Ethiopia.

Good. Okay. Thank you to everyone online and in the room for joining us. We look forward to catching up with the investors and analysts at 4 p.m. with a call. But otherwise, have a good day. Thank you.