Vodacom Group Ltd Ord

Good afternoon and good morning to those joining the call in the US. Welcome to the highlights call for our year ended 31st of March, 2026. I'm joined by our Group CFO, Raisi Bey Murati, as well as our Head of Investor Relations, JP Davids. We trust that you enjoyed our video presentation that we screened before this call. The video is available on our website and covers our purpose-led strategy, Core Vision 2030, and the performance against our strategic ambitions. Not able to watch our presentation, I'll take you through some of the key highlights while they move into a Q&A session. We had a great financial year which showcased our geographical and product diversification and growth potential. We delivered on our double-digit EBITDA growth target, setting up an excellent year for shareholder returns. Our full-year dividend totaled 735 cents per share, up 18.5%. Return on capital employed expanded 4 percentage points to 27.5% as we executed on our efficiency and sharing agenda to improve returns. We delivered hard currency net income growth of 21.3% in Euros. A strong commercial performance also helped us deliver these shareholder outcomes. Customers were up 12.3% to 237 million. This positioned us to upgrade our Vision 2030 customer target to $275 million from $260 million. Our financial service business, which is the leader on the African continent, continues to grow from strength to strength. We upgraded our Vision 2030 target to 130 million financial service customers, having reached 103 million during the year. We see financial services as a key differentiator for our customers and our investment case. Financial Services now makes up 28% of our profit before tax. In addition to our product diversification, we are also seeing clear benefits from our footprint. We operate across eight markets in Africa, but manage the business in four segments. Starting in the north with Egypt, we reported a stellar set of results in financial year 2026. Egypt contributed 15.3 billion rand to the group's operating profit, up 48.9% on the rand basis. The growth is broad-based across consumer, business, mobile, fixed and Vodafone cash. While service revenue growth returned to the 20s in Q4, we are pleased to have secured another double-digit price up in Egypt last week. This is expected to help us navigate through a period of higher energy prices and promote industry sustainability. Shifting further south to Safaricom, in December we announced a transaction to increase our shareholding in Safaricom to 55%. This would allow us to fully consolidate Safaricom. This transaction was approved by Parliament and all necessary regulatory bodies but is subject to a status quo order issued by the High Court of Kenya. We expect an update on this ruling on the 18th of May 2026. Planning this outcome, we will be able to finalize the deal very quickly. Ahead of that, and as an associate, Safaricom contributed 4.6 billion rand to operating profit, increasing 38.3%. Safaricom's result was supported by an excellent performance in Kenya, with EBITDA margins of 56.7%, up 2.7 percentage points, and lower losses in Ethiopia. In Kenya, Savaricom was awarded 25-year operating and spectrum license renewal, providing long-term regulatory certainty for the business. Our four markets that make up the international business increased operating profits 67.2% to R4.9 billion. This result reflected double-digit service revenue growth in Tanzania, DRC and Lesotho. Operating leverage of these assets was also evident in the year with EBITDA margins recovering to 34.6% of 29.3% in the prior year. We continue to work on pricing frameworks across our markets. We see scope for more of our markets to introduce price flows which will support the healthier telecom sector with the appropriate levels of investment. Finally, to South Africa, which remains the largest component of operating profit at R20.5 billion. The business demonstrated resilience despite the challenging macroeconomic environment and increased competitive noise. Growth was supported by the contract segment and beyond mobile. Pressure on prepaid moderated in the fourth quarter and we are expecting a better performance in due FY2027. Pleasingly, EBITDA grew 1.8% in the second half as we kept margins broadly flat. This reflected our cost-obtainment efforts. From a strategy perspective, we were pleased to close the South African Fiber Deal with MESIV in December 2025. With our injection of cash and assets, MESIV will re-accelerate its fiber rollout, adding another double-digit growth lever to the group. At a group level, the strong growth across three of our segments delivered a net profit to equity shareholders of R20.6 billion and with headline earnings per share of 1053 cents, up 22.9%. Shifting from performance to purpose, which is at the heart of Vodacom, our video presentation sets out the progress we are making on our three purpose pillars of empowering people, protecting the planet and maintaining trust. We have well-established Euro projects and new initiatives that drive each of these pillars. Before we move to Q&A, I will make some comments on our medium-term targets. When we complete the Safaricom deal, we will combine Vodacom's existing growth engines and free cash flow generation potential with that of Safaricom. This will position the group to accelerate growth and deliver effective returns with a portfolio of market-leading assets across Africa. As a result, we intend to provide an update on our Vision 2030 targets once the transaction closes. Ahead of then, our group service level in EBITDA targets with double-digit growth is unchanged. This year, we have also added a new target, which is operating free cash flow, to enhance shareholder visibility for management's long-term incentives related to this matrix. And finally, we narrowed the group capital expenditure target to 13.5 to 14.5. This is to provide a more accurate steer of our medium-term CapEx ambitions as we continue to benefit from sharing capital. partnerships and new low-cost funding models, including grants. That concludes my review. Manasi and I are now ready to answer any questions you may have.

Thank you, Shamil, and good afternoon to everyone. This is JP. We're going to kick off with Safaricom as the first topic of the Q&A. There are two questions for Safaricom, one coming from Tando at UBS and the other from Jono at ATSA. Tando at UBS is just asking for an update or any colour on how and when the acquisition may be closed, citing that there are some articles in the Kenyan press pointing to delays towards August. Then Jono is picking up some news flow in Kenya related to their budgeting cycle, which may drive higher taxes on things like mobile devices and banking fees. Wondering how we as Safaricom's controlling shareholder would look to mitigate these type of headwinds going forward. And I guess I would take the opportunity to just talk more broadly about the regulatory environment in Kenya. Shamil, are you okay to kick off with those?

Sure. So I think firstly from a deal closure perspective all the regulatory approvals have been given in Kenya in terms of parliament and the different regional and local regulatory bodies. So all the approvals have been given. The deal is subject to a preservation order or stay order at the moment where there's a court case challenging the transaction. The judge is to rule on the conservatory orders it's called by the 18th of May. If it's lifted it will give us a chance to complete the transaction. That's the one part. If it's not lifted it will be the court case. So the court case will continue anyway. But the court case could be a few months later if the court so decides. So we are a little bit in the court's hands. But we think the case is quite strong and there isn't a reason to delay. So we'll see what the court decides. And then in terms of the overall regulatory environment, I think very positive that Safaricorp has managed to basically obtain a 25-year operating and spectrum licenses and so on. And all the licenses and spectrum have been renewed for 25 years. That provides certainty to the business and so that's a very, very positive development in the Kenyan environment. Secondly, so very pleased with that and I think in terms of the budget increases, this is what I would call business as usual. We deal with these things every year in different countries. governments increase their taxes it's something that we have to navigate what we try and do is try and make sure you know that we can balance the impacts of that on consumers and you know we try and negotiate with governments to talk about you know not putting price increases in the wrong places like smartphone penetration I think one of the challenges on smartphones going into this next cycle is going to be memory costs. So we'll be engaging governments to say please remove duties to assist because otherwise it will slow down the number of smartphones that uptake in a particular year. But this will be a global trend and it will affect all operators alike.