| Mon 9 Nov 2009, 8:00 | | VOD - Vodacom Group Limited - Interim results for the six months ended 30 |
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VOD
VOD
VOD - Vodacom Group Limited - Interim results for the six months ended 30
September 2009
Vodacom Group Limited
(Incorporated in the Republic of South Africa)
Registration number: 1993/005461/06
(ISIN: ZAE000132577 Share Code: VOD)
("Vodacom")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2009
Salient features
* Became a subsidiary of the Vodafone Group and listed on the JSE
* Various integration projects underway
* Benefits realised under Vodafone global deals
* Continued strong growth
* 16.5% growth in the group mobile customer base to 41.6 million
* 8.0% growth in group EBITDA to R9.3 billion
* Robust performance in South Africa
* 11.7% increase in customers to 28.2 million
* Increased market share
* EBITDA margin expanded to 35.3%
* Strong growth in mobile broadband
* 53.5% growth in broadband customers in South Africa
* 30.1% growth in group mobile data revenue
* Effectively managing difficult international trading conditions
* Earnings impacted by non-cash items
* Headline earnings per share declined 12.4% to 219 cents
* Reversal of deferred taxation asset in the DRC of R551 million
* Net impairment charges of R3.2 billion
* Strong cash flow from cost and capital efficiencies
* 26.2% growth in group operating free cash flow to R5.2 billion
* Financial position strengthened with net debt to EBITDA at 0.8 times
* Interim dividend of 110 cents per share
Operating review
Vodacom continued to grow the core mobile and broadband businesses, which
together with the management of costs and capital expenditure, underpinned the
Group`s results. Although competitive, economic and regulatory pressures
intensified in most of the Group`s markets, revenue rose 9.9% to R28.7 billion,
supported by a 16.5% increase in group mobile customers and a 30.1% increase in
group mobile data revenue (excluding messaging revenue). Normalised revenue
growth was 4.7%.
While the South African operations expanded EBITDA1 margins and lifted EBITDA by
11.1%, the group EBITDA margin declined from 33.2% to 32.6% as a result of the
difficulties in the international operations and the inclusion of the lower
margin Gateway2 operation.
Since becoming a subsidiary of Vodafone Group Plc ("Vodafone") in May 2009,
Vodacom has implemented projects to extract value from the relationship in many
areas, including human resources, products and services, international roaming,
technology, billing and finance. Efficiency benefits are already being realised
in areas such as procurement.
Cash generation remained strong, with operating free cash flow up 26.2% to R5.2
billion. The Group invested R2.9 billion, including R1.0 billion in its
international operations.
The Group incurred net impairment charges of R3.2 billion in the six month
period, largely relating to Gateway. This resulted in a 98.4% decline in
earnings per share to 4 cents. Headline earnings per share, which exclude the
net impairment charges, decreased 12.4% to 219 cents, due to losses on the
remeasurement of loans granted of R232 million and the reversal of a deferred
taxation asset of R551 million arising from the reduced profitability of Vodacom
DRC. Excluding the impact of these two items of 52 cents per share, headline
earnings per share increased 8.4% to 271 cents per share.
Vodacom declared an interim dividend of 110 cents per share, supported by the
strong cash performance of the Group.
South Africa
Vodacom SA3 delivered a robust performance, adding just over 579 000 new mobile
customers in the six month period and growing the base 11.7% to 28.2 million
customers from a year ago. Gross connections remained strong at 5.6 million but
were impacted by the customer registration requirement of the Regulation of
Interception of Communications and Provision of Communication-Related
Information Act ("RICA"), which took effect on 1 July 2009. This resulted in
significantly lower gross connections in August and September 2009. Churn
reduced from 42.3% to 34.9%, primarily due to ongoing retention campaigns and
loyalty programmes. Vodacom SA retained its market leadership with an estimated
55% share of mobile customers and was rated the second most popular brand in
South Africa by the Markinor Sunday Times 2009 survey, behind global brand Coca-
Cola. Vodacom SA extended its leading position in broadband with 53.5% growth in
customers to just over 964 000.
Although revenue and ARPUs were negatively affected by the economic slowdown,
focused price promotions reduced the average effective revenue per minute of
mobile calls by 14.6% and supported a 15.7% growth in traffic. ARPU in the
prepaid and contract market declined 3.0% and 6.0% to R64 and R452,
respectively. Revenue increased 6.8% to R24 371 million with service revenue4
increasing 7.7% driven largely by data revenue growth of 30.8%. EBITDA rose
11.1% to R8 609 million and EBITDA margins expanded to 35.3% from 34.0%.
Vodacom SA continued to invest in its network, with a further 122 new base
stations, 195 3G enabled base stations and 9 of the 11 metro fibre rings
completed in the six month period. The building of the national fibre optic
network began with trenching work on the Durban to Germiston route. Some 540
base stations were upgraded as part of the radio access network ("RAN") renewal
programme with more than 1 000 planned for the remainder of the year. The
upgraded base stations are more cost effective, delivering improved spectrum
efficiencies at a lower operational cost.
South African mobile operators have come under considerable pressure to reduce
mobile tariffs, specifically mobile termination rates. Vodacom Group is
cooperating with the authorities to ensure that the termination rate reduction
is dealt with in a responsible way.
International
The international operations continued to record strong customer growth of 28.2%
to 13.4 million at 30 September 2009. However, revenue declined 11.0% to R2 965
million, as Tanzania and the Democratic Republic of Congo ("DRC") felt the
impact of weak economic conditions, intense competition and higher excise
duties. Revenue (excluding the impact of excise duties, foreign exchange and
IFRIC 13: Customer Loyalty Programmes ("IFRIC 13")) was 4.9% lower than a year
ago. Mozambique and Lesotho posted strong revenue growth of 31.9% and 28.0%, in
SA rand respectively.
Vodacom has responded with significant price reductions to stimulate traffic and
regain lost market share in both Tanzania and the DRC. In Mozambique, Vodacom
successfully reduced churn and grew its market share to an estimated 45%.
In Tanzania, ARPU was 28.7% lower in Tanzanian shillings and in the DRC, 42.9%
lower in US dollars compared to a year ago. This decline was as a result of
constrained disposable income, tariff reductions and lower interconnection
revenue in both markets. The period to date average Tanzanian shilling and the
Congolese franc depreciated by 11.7% and 44.6% respectively against the US
dollar, which reduced consumer spending power and drove US dollar and Euro
denominated operating costs higher.
Despite the economic pressure, Vodacom continued to implement its strategy to
offer total communications solutions. In Tanzania, Vodafone M-Pesa continued to
gain momentum. In September 2009, Vodacom Business was launched in Tanzania.
The EBITDA margin in the international operations declined from 25.3% to 20.2%
due to reduced profits from Tanzania and the DRC. Various programmes are in
place in the international operations to adjust business structures to support
lower tariffs, including the renegotiation of supplier maintenance contracts.
Capital expenditure of R1 019 million was largely allocated to Tanzania and
Mozambique.
Gateway
The acquisition of Gateway was concluded on 30 December 2008, therefore Gateway
is not included in the comparative numbers. Gateway has been fully included in
the six month period. In the six months ended 30 September 2009, Gateway
contributed revenue of R1 532 million and EBITDA of R144 million.
The carrier services division was negatively impacted by reduced mobile traffic
on the continent and pricing pressure from operators. Given the poor trading
performance in carrier services, the adverse changes in macroeconomic
environment and business plan assumptions, an impairment charge of R3 039
million was raised in the period. Vodacom is currently transferring its
international traffic to Gateway.
The business services division continued to post good growth particularly in the
Nigerian market, although some corporate spending was delayed due to the
economic slowdown. On 1 October 2009, Gateway Business was placed under common
management with Vodacom Business, which will be responsible for converged
enterprise solutions across Africa.
Financial review
Revenue
Other operating income has been incorporated into revenue to align accounting
practices with the Group`s parent. This resulted in a reclassification of R74
million for the prior period. Vodacom adopted IFRIC 13 from 1 April 2009, and
now accounts for customer loyalty credits as a separate component of the sales
transaction in which they are granted. Included in other service revenue is an
expense of R140 million of which R119 million relates to the prior year.
Revenue rose 9.9% to R28 675 million, largely due to the inclusion of Gateway
(which contributed 5.3% to group revenue), the 16.5% growth in mobile customers
to 41.6 million and the 30.1% increase in mobile data revenue to R2 031 million.
Revenue from the South African operations of R24 371 million was 6.8% higher,
contributing 85.0% (2008: 87.4%) to group revenue. Revenue from the
international operations declined 11.0% to R2 965 million, contributing 10.3%
(2008: 12.8%) to group revenue. Since March 2009, excise duty has been deducted
from revenue as opposed to previously being included in direct network expenses.
In the prior period, excise duty of R89 million incurred by the international
operations was included in direct network expenses, but the comparative figures
have not been restated. Group normalised revenue growth was 4.7%.
Operating costs5
Group operating costs increased by 11.1% to R19 387 million largely due to
Gateway. Excluding Gateway, operating costs increased by 3.2%.
EBITDA
EBITDA of R9 347 million was up 8.0% from a year ago, mainly as a result of
revenue growth and the expansion of the South African EBITDA margin from 34.0%
to 35.3%. EBITDA of R8 609 million from the South African operations was 11.1%
higher, contributing 92.1% (2008: 89.5%) to group EBITDA for the period. EBITDA
from the international operations declined 29.0% to R598 million, contributing
6.4% (2008: 9.7%) to group EBITDA for the period. Gateway contributed R144
million to group EBITDA. The group EBITDA margin decreased from 33.2% in
September 2008 to 32.6% in September 2009.
Operating profit
Operating profit decreased 45.0% to R3 535 million mainly due to the net
impairment charges of R3 189 million and a 16.8% increase in depreciation and
amortisation.
Net finance charges
Net finance charges rose significantly from R659 million to R1 111 million for
the six months ended 30 September 2009. Finance costs for the period were R810
million compared to R734 million a year ago, mainly due to higher average debt.
The average cost of debt reduced from 12.3% to 9.3% as a result of lower
interest rates and the benefit of floating rate debt. Net finance charges were
negatively affected by the remeasurement of loans granted of R232 million and
the loss of R259 million mainly relating to forward exchange contracts.
Taxation
The taxation expense of R2 351 million for the period was 17.8% higher than in
September 2008. The effective tax rate rose from 34.6% at 30 September 2008 to
97.6% at 30 September 2009, mainly due to the reversal of the DRC deferred tax
asset and the Gateway impairment.
Earnings
Earnings per share for the period declined 98.4% from 248 cents per share to 4
cents per share, primarily due to the reversal of the DRC deferred taxation
asset of R551 million and the net impairment charges of R3 189 million. Headline
earnings per share, which exclude net impairment charges, decreased 12.4% to 219
cents per share.
Cash flow
Cash generated from operations grew 12.8% to R8 770 million. Net cash outflows
used in investing activities increased from R3 708 million to R3 795 million. As
a result of higher bank borrowings classified as financing activities, cash
outflows from financing activities rose from R2 056 million to R3 103 million.
Dividends were previously classified in cash flow from operating activities and
are now included in cash flow from financing activities. Interest income was
reclassified to investing activities and finance costs were reclassified to
financing activities.
Operating free cash flow was up 26.2% at R5 152 million. Taxation paid decreased
by 8.6% to R2 058 million.
Capital expenditure
Vodacom`s capital expenditure for the period was R2 934 million, 1.4% less than
a year ago. Lower capital expenditure of R1 839 million (7.5% of revenue) in
South Africa was largely related to the RAN renewal project, where recovered
equipment was redeployed, resulting in lower purchases of equipment. Capital
expenditure of R1 019 million (34.4% of revenue) in the international operations
was 6.1% higher mainly due to investment in Tanzania and Mozambique.
Statement of financial position
Property, plant and equipment and intangible assets were negatively impacted by
foreign currency adjustments of R1 667 million and R1 396 million, respectively
due to the rand strengthening against functional reporting currencies of the
international markets since 31 March 2009.
Net debt before dividends and secondary taxation on companies ("STC") rose to
R14 840 million, compared to R6 062 million a year ago. The statement of
financial position remains strong with the net debt to EBITDA ratio at 0.8 times
at 30 September 2009, well within the target range. During the period, Vodacom
refinanced the USD180 million loan in the DRC in the South African debt markets,
with 93.4% of the debt now denominated in rand. R3 480 million of the debt
matures in the next 12 months and 95.1% of total debt is at floating rates.
1 Earnings before interest, taxation, depreciation, amortisation, net impairment
charges, BBBEE charges, profit/loss on disposal of investments and on disposal
of property, plant and equipment, investment properties and intangible assets.
2 100% of the shares in each of Gateway Telecommunications Plc, Gateway
Communications (Proprietary) Limited, Gateway Communications Mozambique LDA,
Gateway Communications Tanzania (Limited) and GS Telecom (Proprietary) Limited
and their respective subsidiaries.
3 Vodacom (Proprietary) Limited (registration number 1993/003367/07), a private
limited liability company duly incorporated in accordance with the laws of South
Africa and its subsidiaries and joint ventures.
4 Revenue excluding equipment and non-service revenue.
5 Excluding depreciation, amortisation and net impairment charges.
Outlook
While the macroeconomic outlook remains uncertain, South Africa is showing early
signs of recovery based on some indicators of customer behaviour. However, it is
too soon to be confident in a sustained recovery across all customer segments.
The South African business is likely to continue to feel the impact of the
implementation of RICA, but as distributors and customers grow more familiar
with customer registration requirements, gross connections are expected to trend
upward. Lower mobile termination rates are a likely consequence of the
regulatory process currently underway, and Vodacom will work with government and
the regulator to implement the reductions in a way that will minimise
instability in the sector.
In the international operations, traffic volumes have picked up slightly in both
Tanzania and DRC in response to significant price reductions. Management will
prioritise reducing costs and increasing capital efficiencies to support lower
tariffs over the longer term.
Notwithstanding its economic and competitive challenges, Gateway remains core to
Vodacom`s expansion strategy in Africa, both in delivering business services and
in broadband infrastructure. Progress is being made in restructuring the carrier
services business to ensure it can be sustainably profitable in an environment
of reduced mobile tariffs on the continent, but in the short-term Gateway`s
profitability is expected to remain under pressure.
Vodacom will continue to implement projects to extract efficiencies and ensure
cost leadership across the business. Vodacom`s group capital expenditure is
expected to be R7.0 billion for the year ending 31 March 2010.
Vodacom is focused on broadening access to voice and data communications, and
extending the socioeconomic development benefits of affordable world-class
communications. This will remain a priority in the markets in which Vodacom
operates as the global economy continues its recovery.
For and on behalf of the Board
Peter Moyo Pieter Uys Rob Shuter
Non-executive Chief Executive Chief Financial
Chairman Officer Officer
9 November 2009
Midrand
Condensed consolidated income statement
for the six months ended 30 September 2009
Six months Year
ended ended
30 September 31 March
2009 2008 2009
Rm Rm Rm
Notes Reviewed Reviewed Audited
Revenue 3 28 675 26 090 55 442
Direct network operating (15 588) (14 167) (30 422)
cost
Depreciation (2 100) (1 880) (3 948)
Staff expenses (2 092) (1 707) (3 619)
Marketing and (757) (771) (1 523)
advertising expenses
Broad-based black (51) - (1 382)
economic empowerment
charge
Other operating expenses (899) (798) (1 696)
Amortisation of (464) (316) (735)
intangible assets
Impairment of assets 4 (3 189) (21) (112)
Operating profit 3 535 6 430 12 005
Finance income 48 34 108
Finance costs (810) (734) (1 459)
(Losses)/Gains on (349) 41 (398)
remeasurement and
disposal of financial
instruments
Loss from associate (14) - (19)
Profit before taxation 2 410 5 771 10 237
Taxation (2 351) (1 995) (4 045)
Net profit 59 3 776 6 192
Attributable to:
Equity shareholders 61 3 693 6 089
Non-controlling (2) 83 103
interests
59 3 776 6 192
Cents Cents Cents
Reviewed Reviewed Audited
Basic and diluted 5 4 248 409
earnings per share
Condensed consolidated statement of comprehensive income
for the six months ended 30 September 2009
Six months Year
ended ended
30 September 31 March
2009 2008 2009
Rm Rm Rm
Reviewed Reviewed Audited
Net profit 59 3 776 6 192
Other comprehensive income:
Foreign exchange translation (2 530) 120 405
differences, net of taxation
Fair value adjustments on available- - (1) (17)
for-sale financial assets, net of
taxation
Other - - (9)
Total comprehensive income (2 471) 3 895 6 571
Attributable to:
Equity shareholders (2 367) 3 774 6 437
Non-controlling interests (104) 121 134
(2 471) 3 895 6 571
Condensed consolidated statement of financial position
as at 30 September 2009
As at As at
30 September 31 March
2009 2008 2009
Rm Rm Rm
Notes Reviewed Reviewed Audited
ASSETS
Non-current assets 28 547 25 859 35 224
Property, plant and 20 686 20 229 21 844
equipment
Intangible assets 6 749 4 328 11 794
Financial assets 330 262 239
Investment in associate - - 64
Deferred taxation 244 550 783
Trade and other receivables 169 284 187
Lease assets 369 206 313
Current assets 12 146 10 360 12 135
Financial assets 140 173 228
Inventory 804 878 653
Trade and other receivables 9 951 8 160 9 815
Lease assets 346 144 271
Taxation receivable 176 183 64
Cash and cash equivalents 729 822 1 104
Total assets 40 693 36 219 47 359
EQUITY AND LIABILITIES
Ordinary share capital * * *
Retained earnings 12 328 12 086 12 265
Other reserves (627) 90 1 752
Equity attributable to 11 701 12 176 14 017
equity holders of the
parent
Non-controlling interests 928 525 1 081
Total equity 12 629 12 701 15 098
Non-current liabilities 13 146 3 265 10 430
Financial liabilities 11 343 1 535 8 316
Deferred taxation 1 053 891 1 361
Provisions 7 365 327 365
Trade and other payables 7 385 512 388
Current liabilities 14 918 20 253 21 831
Trade and other payables 7 10 034 11 118 10 885
Taxation payable 372 523 549
Financial liabilities 3 542 2 023 5 745
Provisions 7 223 225 238
Dividends payable - 3 000 2 211
Bank borrowings 747 3 364 2 203
Total equity and 40 693 36 219 47 359
liabilities
* Share capital R100
Condensed consolidated statement of changes in equity
for the six months ended 30 September 2009
Equity Non- Total
share- controlling equity
holders interests
Rm Rm Rm
Balance as at 31 March 2009 14 017 1 081 15 098
Total comprehensive income for (2 367) (104) (2 471)
the period
Dividends declared - (49) (49)
Broad-based black economic 51 - 51
empowerment transaction
Balance as at 30 September 2009 11 701 928 12 629
- Reviewed
Balance as at 31 March 2008 11 402 404 11 806
Total comprehensive income for 3 774 121 3 895
the period
Dividends declared (3 000) - (3 000)
Balance as at 30 September 2008 12 176 525 12 701
- Reviewed
Balance as at 31 March 2008 11 402 404 11 806
Total comprehensive income for 6 437 134 6 571
the year
Dividends declared (5 200) (13) (5 213)
Business combinations and other (4) 34 30
acquisitions
Broad-based black economic 1 382 522 1 904
empowerment transaction
Balance as at 31 March 2009 - 14 017 1 081 15 098
Audited
Condensed consolidated statement of cash flows
for the six months ended 30 September 2009
Six months Year
ended ended
30 September 31 March
2009 2008 2009
Rm Rm Rm
Notes Reviewed Reviewed Audited
Cash generated from 7 8 770 7 778 16 021
operations
Taxation paid (2 058) (2 249) (4 123)
Net cash flows from 6 712 5 529 11 898
operating activities
Net additions to property, 7 (3 618) (3 696) (7 030)
plant and equipment and
intangible assets
Business combinations and - - (5 348)
other acquisitions
Other investing activities 7 (177) (12) (87)
Net cash flows utilised in (3 795) (3 708) (12 465)
investing activities
Movement in debt including 7 (843) 170 6 555
interest paid
Non-controlling interests - 964 522
Dividends paid 7 (2 260) (3 190) (6 203)
Net cash flows (utilised (3 103) (2 056) 874
in)/from financing
activities
NET CASH (OUTFLOW)/INFLOW (186) (235) 307
Cash and cash equivalents 1 084 837 837
at the beginning of the
period/year
Effect of foreign exchange (178) 11 (60)
rate changes
CASH AND CASH EQUIVALENTS 720 613 1 084
AT THE END OF THE
PERIOD/YEAR
Notes
1. Basis of preparation
These condensed consolidated financial statements have been prepared in
accordance with the recognition and measurement criteria of International
Financial Reporting Standards ("IFRS") as issued by the International Accounting
Standards Board ("IASB") and comply with the disclosure requirements of
International Accounting Standard 34: Interim Financial Reporting. They have
been prepared on the historical cost basis, except for financial instruments
recorded at fair value or at amortised cost, and have been presented in South
African rand, the currency in which the majority of the Group`s transactions are
denominated.
The principal 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 accounting policies are available for inspection at the
Group`s registered office.
There have been no material changes in judgments or estimates of amounts
reported in prior reporting periods except for the prospective classification of
certain foreign denominated loans to subsidiaries as part of the net investments
in these foreign operations, which led to the recognition of additional exchange
losses of R944 million net of taxation in other comprehensive income.
Certain amounts have been reclassified as disclosed in Note 7.
The financial information has been reviewed by Deloitte & Touche whose
unmodified review opinion is available for inspection at the Group`s registered
office.
2. Accounting policies
The Group adopted all the new, revised or amended accounting pronouncements as
issued by the IASB which were effective for the Group from 1 April 2009.
IAS 1: Presentation of Financial Statements (Amended)
The Group previously classified all financial instruments held for trading as
current. These are now classified as current if they are expected to be settled
within twelve months of the reporting date. The change in accounting policy had
no material impact on the Group`s classification of these financial instruments
in the current and prior periods.
A separate condensed consolidated statement of comprehensive income is now
included as part of the primary financial statements which resulted in changes
to the condensed consolidated statement of changes in equity. The Group changed
the naming of the primary financial statements and adopted new terminology as
per the amendments.
IAS 23: Borrowing Costs (Revised)
The Group previously expensed all borrowing costs as incurred. The Group now
capitalises borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets. In accordance with the
transitional provisions, the Group adopted the standard prospectively.
Therefore, borrowing costs are capitalised on qualifying assets with a
commencement date on or after 1 April 2009.
The change in accounting policy had no impact on the Group`s financial results
for the period.
IFRIC 13: Customer Loyalty Programmes
The Group now accounts for customer loyalty credits as a separate component of
the sales transaction in which they are granted. A portion of the fair value of
the consideration received is allocated to the award credits, deferred and
recognised as revenue over the period the award credits are redeemed. The Group
previously recorded a liability at the time of sale based on the costs expected
to be incurred to supply the products in future. The change in accounting policy
was not applied retrospectively, since the prior period financial impact is
immaterial.
Six months Year
ended ended
30 September 31 March
2009 2008 2009
Rm Rm Rm
Reviewed Reviewed Audited
3. Segmental information
External customers segment revenue1 28 675 26 090 55 442
South Africa 24 314 22 782 47 592
International 2 875 3 303 7 030
Gateway 1 476 - 805
Corporate 10 5 15
EBITDA2 9 347 8 654 18 195
South Africa 8 609 7 749 16 222
International 598 842 1 835
Gateway 144 - 100
Corporate and eliminations (4) 63 38
Reconciliation of segment results
EBITDA 9 347 8 654 18 195
Depreciation, amortisation and (5 753) (2 217) (4 795)
impairment
Broad-based black economic (51) - (1 382)
empowerment charge
Net loss on disposal of property, (8) (7) (13)
plant and equipment and intangible
assets
Operating profit 3 535 6 430 12 005
Net profit 59 3 776 6 192
South Africa 4 481 3 923 6 969
International (1 252) 209 75
Gateway (3 047) - (36)
Corporate and eliminations (123) (356) (816)
Assets 40 693 36 219 47 359
South Africa 27 765 25 916 26 692
International 8 890 9 104 11 182
Gateway 3 291 - 8 014
Corporate and eliminations 747 1 199 1 471
1 Other operating income has been incorporated into revenue on the face of the
condensed consolidated income statement.
2 The measure of segment profit changed from management operating profit to
EBITDA. All segment information is presented on the revised basis, with prior
years amended to conform to the current period presentation.
Six months Year
ended ended
30 September 31 March
2009 2008 2009
Rm Rm Rm
Reviewed Reviewed Audited
4. Impairment of assets
Intangible assets (3 134) - (1)
Property, plant and equipment (5) (21) (105)
Available-for-sale financial assets - - (6)
carried at cost
Investment in associate (50) - -
Impairment recognised (3 189) (21) (112)
The carrying value of goodwill for the Gateway cash-generating unit has been
impaired by R3.0 billion following a test for impairment triggered by adverse
economic conditions as a result of the global recession and an increased
competitive environment leading to adverse performance against previous plans.
The carrier services operation was negatively impacted by reduced mobile traffic
on the continent and pricing pressure from operators. The impairment loss was
based on a value in use calculation using a post taxation risk adjusted discount
rate which ranged between 13% and 15% in US dollar terms. The recoverable amount
of the Gateway cash-generating unit equals its reported carrying value at 30
September 2009 and consequently, any adverse change in a key assumption
underpinning the value in use calculation may cause a further impairment loss to
be recognised.
Included in the impairment recognised is R8 million (30 September 2008: R21
million; 31 March 2009: R106 million) relating to a net write down of VM, SA
assets to fair value less cost to sell.
Six months Year
ended ended
30 September 31 March
2009 2008 2009
Cents Cents Cents
Reviewed Reviewed Audited
5. Per share calculations
5.1 Earnings, dividend and net asset
value per share
Basic and diluted earnings per share 4 248 409
Headline and diluted headline 219 250 417
earnings per share
Dividend per share (Note 12) - 202 350
Net asset value per share 849 854 1 015
Per share calculations are based on a weighted average number of ordinary shares
of 1 487 954 000 outstanding during the reporting period 30 September 2009, 30
September 2008 and 31 March 2009. No dilutive factors are present.
Six months Year
ended ended
30 September 31 March
2009 2008 2009
Rm Rm Rm
Reviewed Reviewed Audited
5.2 Headline earnings reconciliation
Basic earnings attributable to 61 3 693 6 089
equity shareholders per the income
statement
Adjusted for:
Net loss on disposal of property, 8 7 13
plant and equipment and intangible
assets
Impairment recognised (Note 4) 3 189 21 112
3 258 3 721 6 214
Taxation impact of adjustments (2) (2) (4)
Non-controlling interests in - - -
adjustments
Headline earnings3 3 256 3 719 6 210
3 This disclosure is a requirement of the JSE Limited and is not a recognised
measure under IFRS. It has been calculated in accordance with the applicable
South African Institute of Chartered Accountants` circular.
6. Forfeitable share plan
A share incentive plan for the Group`s employees in the form of a forfeitable
share plan ("FSP"), was approved by shareholders at the annual general meeting
held on 31 July 2009 by ordinary resolution. The FSP will be treated in terms of
IFRS 2: Share-based Payment.
The Group expects to purchase Vodacom Group Limited shares in the market during
November 2009 to facilitate making the first award under the FSP.
Balance as Bonus and Statement Balance as
previously leave pay of reclassified
reported liabilities cash flows
(Note 7.1) (Note 7.2)
Rm Rm Rm Rm
Reviewed/
Audited Reviewed Reviewed Reviewed
7. Reclassifications
Reconciliation 30
September 2008
Statement of
financial
position
Non-current
liabilities
Provisions 365 (38) - 327
Trade and other 474 38 - 512
payables
Current
liabilities
Provisions 568 (343) - 225
Trade and other 10 775 343 - 11 118
payables
Statement of cash
flows
Cash generated 7 952 - (174) 7 778
from operations
Finance costs (463) - 463 -
paid
Finance income 27 - (27) -
received
Realised net (21) - 21 -
losses on
remeasurement
and disposal of
financial
instruments
Net additions to (3 848) - 152 (3 696)
property, plant
and equipment
and intangible
assets
Other investing (39) - 27 (12)
activities
Movement in debt 632 - (462) 170
including
interest paid
Reconciliation
31 March 2009
Statement of
financial
position
Non-current
liabilities
Provisions 397 (32) - 365
Trade and other 356 32 - 388
payables
Current
liabilities
Provisions 800 (562) - 238
Trade and other 10 323 562 - 10 885
payables
Statement of
cash flows
Cash generated 16 351 - (330) 16 021
from operations
Finance costs (1 388) - 1 388 -
paid
Finance income 104 - (104) -
received
Realised net (557) - 557 -
losses on
remeasurement
and disposal of
financial
instruments
Net additions to (7 211) - 181 (7 030)
property, plant
and equipment
and intangible
assets
Other investing (190) - 103 (87)
activities
Movement in debt 8 350 - (1 795) 6 555
including
interest paid
7.1 Bonus and leave pay liabilities
Bonus and leave pay liabilities have retrospectively been reclassified from
provisions to accruals within trade and other payables as to align with
practices of the Group`s parent.
7.2 Statement of cash flows
Dividends paid, realised net losses on remeasurement and disposal of financial
instruments, finance costs paid and finance income received have retrospectively
been reclassified in the statement of cash flows from operating activities to
the activity from where it originates as to align with practices of the Group`s
parent.
8. Related party transactions
The Group`s related parties are its parent (entities with joint control over the
Group for prior years), joint venture, associate, pension schemes and key
management.
Six months Year
ended ended
30 September 31 March
2009 2008 2009
Rm Rm Rm
Reviewed Reviewed Audited
8.1 Balances with related parties
Accounts receivable 168 781 948
Accounts payable (216) (169) (325)
Dividends payable - (3 000) (2 200)
8.2 Transactions with related
parties
Revenue 395 1 611 3 390
Operating costs (462) (1 115) (2 602)
Dividends paid - (3 000) (5 200)
8.3 Key management personnel
remuneration
Key management personnel (6) (43) (85)
remuneration
8.4 Directors` remuneration
Compensation paid to the Group`s
board of directors will be
disclosed in the Group`s annual
report for the year ending 31 March
2010.
9. Capital expenditure incurred
Capital expenditure additions 2 934 2 976 6 906
including software
10. Capital commitments
Contracted for but not yet incurred 2 981 2 655 2 214
Approved but not yet contracted for 5 673 5 320 9 712
11. Other commitments and contingencies
There have been no material changes to the Group`s other commitments or
contingent liabilities during the period.
12. 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:
12.1 Dividend declared after the reporting date and not recognised as a
liability
An interim dividend of R1 637 million (110 cents per share) for the year ending
31 March 2010 was declared on 5 November 2009, payable to shareholders on 7
December 2009 with the last date of registration being 4 December 2009.
12.2 Fixed and mobile termination review
The mobile industry decided to voluntarily embark on a process to reduce mobile
termination rates with Independent Communications Authority of South Africa
("ICASA") exercising an oversight responsibility. Bi-lateral negotiations were
initiated between mobile operators, but have still not yielded an outcome that
is acceptable to all role-players. The Minister of Communications published a
draft policy directive for public comment with regard to mobile termination
rates. In addition, ICASA has recently communicated its intention to complete
the regulatory market review process by June 2010. A decline in mobile
termination rates may result in a decrease in revenue and operating profit.
Declaration of interim dividend No. 1
Notice is given that interim dividend No. 1 of 110 cents per ordinary share in
respect of the financial year ending 31 March 2010 has been declared, payable to
shareholders recorded in the register at the close of business on Friday 4
December 2009.
Salient dates for interim dividend No. 1:
Last day to trade shares cum dividend Friday 27 November 2009
Shares commence trading ex dividend Monday 30 November 2009
Record date Friday 4 December 2009
Payment date Monday 7 December 2009
Share certificates may not be dematerialised or rematerialised between Monday 30
November 2009 and Friday 4 December 2009, both days inclusive.
On Monday 7 December 2009, the interim dividend will be electronically
transferred into the bank accounts of all certificated shareholders where this
facility is available. Where electronic funds transfer is not available, cheques
will be dated and posted on Monday 7 December 2009.
Shareholders who hold dematerialised shares will have their accounts at their
CSDP or broker credited on Monday 7 December 2009.
Corporate Information
Directors
MP Moyo (Chairman), PJ Uys (CEO), MS Aziz Joosub,
TA Boardman, M Joseph1, M Lundal2, JCG Maclaurin3,
P Malabie, PJ Moleketi, TM Mokgosi-Mwantembe,
RAW Schellekens4, RA Shuter, RC Snow3
Alternate directors
TJ Harrabin3, HM Mahmoud5
Company secretary: Sandi Linford
Registered office
Vodacom Corporate Park,
082 Vodacom Boulevard, Vodavalley,
Midrand 1685
(Private Bag X9904, Sandton 2146)
Transfer secretary
Computershare Investor Services (Proprietary) Limited
(Registration number: 2004/003647/07)
70 Marshall Street, Johannesburg 2001
(PO Box 61051, Marshalltown 2107)
1 American 2 Norwegian 3 British 4 Dutch 5 Egyptian
www.vodacom.com
Sponsor: UBS South Africa (Pty) Ltd
Forward-looking statements
This announcement which sets out the interim results for Vodacom for the six
months ended 30 September 2009 contains "forward-looking statements" with
respect to the Group`s financial condition, results of operations and businesses
and certain of the Group`s plans and objectives. In particular, such forward-
looking statements include statements relating to: the Group`s future
performance; future capital expenditures, acquisitions, divestitures, expenses,
revenues, financial conditions, dividend policy, and future prospects; business
and management strategies relating to the expansion and growth of the Group; the
effects of regulation of the Group`s businesses by governments in the countries
in which it operates; the Group`s expectations as to the launch and roll out
dates for products, services or technologies; expectations regarding the
operating environment and market conditions; growth in customers and usage; and
the rate of dividend growth by the Group.
Forward-looking statements are sometimes, but not always, identified by their
use of a date in the future or such words as "will", "anticipates", "aims",
"could", "may", "should", "expects", "believes", "intends", "plans" or
"targets". By their nature, forward-looking statements are inherently
predictive, speculative and involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future, involve known
and unknown risks, uncertainties and other facts or factors which may cause the
actual results, performance or achievements of the Group, or its industry to be
materially different from any results, performance or achievement expressed or
implied by such forward-looking statements. Forward-looking statements are not
guarantees of future performance and are based on assumptions regarding the
Group`s present and future business strategies and the environments in which it
operates now and in the future.
Date: 09/11/2009 08:00:05 Produced by the JSE SENS Department.
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