Vodacom Group Ltd Ord

Welcome to the Vodacom Group Limited results conference call for the year I ended, 31 March 2024. Vodacom Group CEO Shamil Jusub will host the conference call. Before I hand the call over to Shamil, I would ask that you refer to and familiarize yourself with Vodacom's forward-looking disclaimer. This is set out on slide 40 of the annual results presentation and can be located on www.vodacom.com. Alternatively, if you would like a copy of the results announcement or presentation sent to you, please email Investor Relations website, vodacomir at vodacom.co.za. Shamil, over to you, sir.

Thank you. Good afternoon, everyone, and good morning to those joining the call from the U.S. I'm joined by Group CFO Raisi Ben Morati, as well as our Head of Investor Relations, J.P. Davids. Vodacom is celebrating our 30th anniversary and as I reflect on our journey over the years, I fall with a profound sense of gratitude to have been part of the Vodacom growth journey. We now reach more than 200 million customers across eight countries through innovative digital and financial services with the power to change lives. While I reflect proudly on our milestones over the past three decades, It is our ongoing purpose to connect for a better future and drive inclusion that fuels my passion to lead this company. This year, we simplified and evolved our purpose to focus on empowering people and protecting the planet. This is underpinned by our commitment to act with integrity in everything that we do. Under each of these pillars, we have clear actions. For example, we focus on people through closing the digital divide, which means access to smart devices, our education platforms, smartphone penetration, rural coverage, our Code Like a Girl program, empowering our customers and supporting communities. We protect the planet through our net zero ambitions and driving circularity and biodiversity. We will provide details of each of these initiatives in our ESG report, which we publish in June. Out of that, I wanted to mention our initiatives that made a difference in financial year 24. With connectivity at our core and supported by innovative new rural funding partnerships, we are closing the digital divide. This year, we rolled out an additional 2,300 4G base stations across our markets. Our smartphone strategy has several elements to drive inclusion. It combines local assembly with groundbreaking new prepaid and financing model that we have piloted across several markets in the year in which we intend to scale in FY25. Our impact on financial inclusion is evidenced by the 11.8% increase in financial service customers to 78.9 million customers. as we now process more than 1.1 billion US dollars of transaction value every day. Once financially included, we provide customers with an ecosystem that deepens their access to financial services with products like international remittances, global payments, bill payments, savings, lending, and insurance. Beyond our effort to drive digital and financial inclusion, we leverage our Tech for Good platforms to develop solutions across critical verticals, including education, healthcare, and agriculture. In education, our digital solutions facilitate access to quality educational resources for more than 4 million learners in our markets. In Egypt, our partnership with government to digitize the country's healthcare system reaches more than 300 hospitals and serves more than 6 million people across Egypt. Given the importance of agriculture in Africa, our businesses, Mezzanine, M-Pesa, and IoT.Next, enhance productivity through the efficient distribution of inputs, access to insurance and funding, connecting farmers with buyers, and facilitating payments and subsidies. Mezzanine's eWUNA, MyFarmWeb, and eVouchering solutions now reaches over 6 million beneficiaries. We also continue to partner with governments to support the technology-based affordable emergency transport system known as Air Mama in partnership with the Vodafone Foundation, which is expanding beyond Tanzania. To further empower people, we aim to positively impact communities where we operate. Our Code Like a Girl program promotes women empowerment through technological inclusion and reaches almost 16,000 young women. In the DRC, our I'm Capable program helped 1,450 women living with a disability to become our M-PESA agents. For the planet, we have committed to net zero for scope one and scope two by 2035 and submitted our ambition for verification in terms of the science-based targets initiative. We will fulfill this commitment by re-imagining problems to create inclusive opportunities. Our virtual wheeling deal is a prime example of this mindset and a blueprint for other South African corporates to accelerate the country's energy transition. Pleasingly, our progress on ESG was again recognized by leading rating agencies in this financial year. We retained our ESG leader AAA rating from MSCI. We were also proud that Vodacom was recognized for leadership in addressing climate change and was awarded an A- rating in the latest CDP climate change assessment. In my presentation this morning, I also provided a look back from where we've come from and a look forward to where we are going. Our vision 2025, powered by our strategy, the system of advantage, has evolved from the acquisition of Egypt and Ethiopia to creating healthy markets. We have diversified and scaled new services, especially financial services, while also investing significantly in world-class big data technology to enable a deeper understanding for our customers. With a year left, In current strategic cycle, our group's revenue has surpassed R150 billion. Our customer base is evenly split across our geographical segments, and we now manage the business in four segments, namely South Africa, Egypt, our international portfolio, and Safarico, each comprising around 50 million customers. That showcases the breadth of our footprint, which covers more than half a billion people across the continent. Our Beyond Mobile or new services, which includes digital and financial services, fixed and IoT, contributes 20% of group service revenue, as we also advanced our product diversification. As Africa's leading fintech operator, we process more than $100 billion in the quarter, so annualizing at a rate of $400 billion. Our transaction volume of $33.7 billion means that we do almost 100 million transactions a day. These outcomes were delivered through a period characterized by economic volatility. This year, we faced heightened geopolitical tensions, supply chain disruptions, high inflation in interstates, energy uncertainty, and foreign exchange repressions, including a 40% devaluation in the Egyptian pound in March. These factors have taken a toll on our bottom line in the current year, but not on our strategic ambitions. As we look past 2025 into the next phase of our strategy, we will focus on the sustained growth by amplifying our commitment to purpose and customers, strengthening the fundamentals, innovating for growth as we continue to scale our new services beyond mobile. And embracing digital transformation. Core to this outlook will be accelerating mobile and fixed connectivity, scaling and financing and deepening digital and financial inclusion in all our markets. We also intend to expand our partnerships to power our growth, increase the rural and fiber connectivity, and expand the reach of our Tech for Good platforms. As we execute in the next phase of our strategy, we see continued growth of our connectivity and financial service customers. We expect to exceed 230 million customers and 100 million financial service customers by FY2027. This customer growth provides the foundation for our upgraded high single-digit service revenue growth target. In addition to our progress on purpose and strategy, I'm also pleased to provide an update on our financial results. This was a year characterized by strong commercial momentum, despite facing several precarious economic headwinds, including a 20% higher effective interest rate and foreign exchange rate pressures. At a group level, our financial highlights included Revenue of 151 billion rand, up 26.4%. On a pro forma basis, including Egypt in both years, revenue growth was up 10.1%. This is the highest rate of constant currency growth for the group in many years. Group service revenue growth was up 29.1% or 9.2% on a pro forma basis and pro forma and target comparable basis. This was at the high end of our medium term target range. Our key growth drivers were data revenue and new services, including financial services. Data customers, including Safaricom, reached 106.4 million, while data traffic growth accelerated to 38.5%. Group EBITDA increased 24.3% to 56.1 billion rand, impacted by material foreign exchange trading loss of 1.6 billion. On a group-performer basis, EBITDA growth was 7.8% in line with our medium-term expectations. Our headline earnings per share decreased 10.8% to 846 cents per share. Disappointingly, this result did not reflect our strong commercial momentum. Headline earnings was impacted by foreign exchange rate losses To put into perspective, we had a $1.6 billion loss on Egypt and $400 million on the repatriation of dividends, so $2 billion in impact hitting headline earnings per share. Startup losses in Ethiopia, higher interest rates, and a prior year deferred tax asset recognized in Tanzania. Together, higher interest rates and bond exchange losses resulted in a headwind of almost $0.150 per share. The board declared a total dividend of 590 cents per share, consistent with our pay operation approach and reflective of the pressure on headline earnings. At a product level, new services contributed 20% of group service revenue, moving closer to our target of 25% to 30% in the medium term. Financial services delivered growth of 32.2% or 19.9% on a pro forma basis, including Egypt, as we continue to scale user adoption, new products and services. Our super apps are scaling nicely across the group with almost 5 million Ebesa users adopting this channel. In South Africa, our super app, Vodapay, reached over 10 million downloads. During the year, we merged our telecom app MyVodacom into Vodapay. This is supporting good growth in transacting users in Vodapay. In Egypt, Vodacash is integrated into our NRVodafone app, and the go-to mobile wallet in the country put customers up an impressive 52% to 8.2 million. Focused to South Africa, service revenue grew 2.6% to $61.6 billion, supported by consumer contract, prepaid data, and new services. While the contract was up 3.9%, supported by a more-for-more pricing increase in 125,000 new customers. For business, excluding wholesale revenue, it was up 3.4%. The modest growth reflects that corporate customers were recalibrating spend as employees returned to their offices. Our prepaid segment grew 1.7%, subdued by the challenging macro backdrop. Recently, prepaid data grew by 11.6%, supported by our network investment. Data matrix remained strong, with data traffic up 36.2%. New services were up 11.2% and contributed 16.6%, or $10.2 billion of South Africa's service revenue. Financial services revenue increased 7.9%, underpinned by insurance revenue growth of 13.8%. Managed alongside financial services, our digital service portfolio had a strong year, up 13.6% to 1.6 billion rand. EVRA grew by 0.7%, impacted by pressure on wholesale revenue and higher network operating costs associated with increased electricity prices, credit availability challenges, and security costs. Egypt had an excellent deal.

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