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VOD
VOD
VOD - Vodacom Group Limited - Interim Results for the six months ended
30 September 2010
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 2010
Highlights
Solid Group performance
Group revenue up 5.1% in constant currency (2.9% reported growth)
South Africa service revenue up 8.4% excluding the impact of reduced MTRs1
(4.6% reported growth)
Group capital expenditure of R2 065 million
Group operating free cash flow up 21.8% to R6 560 million
Headline earnings per share up 38.4% to 303 cents
Delivery on mobile broadband strategy
41.1%2 growth in Group data revenue to R2 865 million
60.3% increase in South Africa data traffic
Accelerated investment in mobile broadband and fibre networks
Stronger customer and usage growth
Group voice traffic up 14.3%
712 000 customer additions in Q2 in South Africa
Group customers at 39.4 million
International operations returned to growth
Positive constant currency revenue growth
1.9 million customer additions in first six months
Cost programme on track
Group contribution margin expands 1.0ppt
Group EBITDA increased 5.4% in constant currency
Improving shareholder returns
R959 million share repurchase completed
63.6% increase in interim dividend per share to 180 cents
Operating review
South Africa
The South African operations posted solid revenue growth of 5.4% to R25 697
million, despite an 18.0% decline in interconnect revenue. Service revenue
growth of 8.4% (excluding the impact of MTRs) was supported by the positive
response to increased value offerings and the higher contribution from data
revenue. Data revenue increased 39.2%3 to R2 746 million as demand for data
services remained high. Data users increased by 1.2 million in the six month
period to reach 7.9 million at 30 September 2010, of which 1.9 million were
active data bundle users. Active smartphones on the network were up 65.0% to
2.5 million and mobile connect cards were up 46.1% to 916 000. During the
period greater value was added to the data bundles reducing the effective
price per megabyte by 16.1%.
The South Africa customer base has finally recovered from the effects of
implementing the Regulation of Interception of Communications and Provision of
Communication-Relation Information Act (`RICA`) with gross connections
reaching 1.0 million in the month of September 2010. As at 30 September 2010,
Vodacom had registered 73.6% of the active customer base for RICA. Although
prepaid customer growth was impacted by the almost 3.3 million call-forward
disconnections in the first quarter, 585 000 customers were added in the
second quarter. Prepaid ARPU in the first half increased 28.8% to R85 largely
as a result of the lower customer base, partially offset by a reduction in
interconnect rates.
Contract customer growth remained strong, up 15.4% to 4.8 million customers,
representing 20.1% of the South Africa customer base. Contract ARPU declined
9.1% to R411 due to reduced interconnect rates and strong growth in lower-end
contract packages.
During the period, various new value offerings were introduced such as free
contract bundle minutes and lower prepaid tariff plans. Following the success
of the Night Shift promotion in 2009, it was reintroduced during the period,
contributing to the 18.8% increase in monthly usage to 95 minutes per customer
and the reduction in the effective rate per minute of 16.9%.
Excluding the impact of trading foreign exchange movements, the South Africa
EBITDA increased 7.0% to R9 209 million (5.1% reported growth) and the EBITDA
margin expanded 0.5% from the prior period due to the improved contribution
margin as initiatives to reduce customer and distribution costs gained
traction.
International4
International service revenue of R3 876 million includes R1 508 million (2009:
R1 501 million) for Gateway. International service revenue, excluding Gateway,
returned to positive growth after five quarters, increasing 4.5% in the second
quarter in constant currency due to strong customer growth and an 88.5%
increase in traffic. This was partially offset by substantially lower voice
tariffs. Data revenue increased 101.7% to R119 million and contributed 3.1% to
service revenue. Tanzania had over 799 000 data users and 772 000 active M-
PESA users at 30 September 2010. Gateway service revenue increased year-on-
year by 10.3% in US dollars.
International continued to record strong mobile customer growth of 15.8% year-
on-year to 15.5 million, adding almost two million customers in the six month
period. Tanzania reported customer growth of 34.5% year-on-year, adding 1.2
million customers, Mozambique and Lesotho posted year-on-year growth of 25.4%
and 31.2%, respectively. The decline of 17.4% year-on-year in the DRC customer
base was due to the change in the DRC disconnection policy from 215 to 90
inactive days in December 2009; since 31 March 2010 the DRC business has added
over 285 000 customers.
The EBITDA margin in the International operations recovered from 8.8% in the
second half of the prior year to 14.7% in the six months to September 2010.
Normalised5 EBITDA from the International operations declined 9.2% (reported
decline 20.9%) to R605 million, contributing 6.2% (2009: 7.2%) to normalised5
Group EBITDA for the period. Various cost efficiency programmes, such as
efforts to reduce site operating and maintenance costs, have been put in place
to adjust business structures in these operations in order to support lower
tariffs.
Financial review
Revenue
Group revenue and service revenue for the six months ended 30 September 2010
increased in constant currency by 5.1% and 4.4% respectively, with continued
robust performance in South Africa and a 41.1% growth in Group data revenue.
The South African rand strengthened against all the other functional
currencies in the International operations, resulting in lower reported
revenue growth of 2.9% and service revenue growth of 2.2%. Revenue from the
International operations increased 3.1% in constant currency.
Operating costs6
From the 2010 financial year the Group aligned its presentation of foreign
exchange gains and losses on the revaluation of foreign denominated trading
items with that of its parent by including them in operating costs. Operating
costs for the period ended 30 September 2009 have been restated to include
foreign exchange gains and losses on economically hedged foreign denominated
trading items for South Africa. A net foreign exchange loss of R1 million
(2009: net gain of R135 million) has been included in operating costs.
Excluding the impact of the above, Group operating costs increased by 2.1% to
R19 748, below Group revenue growth of 2.9%.
EBITDA
Group EBITDA increased 2.8% to R9 788 million, negatively impacted in the
current period by the inclusion of a net foreign exchange gain of R135 million
in the prior period coupled with unfavourable foreign exchange movements on
translation. Excluding this impact, Group EBITDA grew by 5.4% and the Group
margin expanded from 33.0% to 33.2%.
Operating profit
Operating profit increased 90.5% to R7 061 million mainly due to impairment
losses of R3 189 million in the prior period offset by a 4.3% increase in
depreciation and amortisation. Normalised7 operating profit increased by 5.0%.
Net finance charges
Net finance charges declined from R1 283 million in the prior period to R558
million in the six months ended 30 September 2010, mainly due to lower net
finance costs in the current period and the negative impact the remeasurement
of loans granted of R232 million had in the prior period.
Finance costs for the period were R447 million compared to R810 million a year
ago, mainly due to approximately R3.0 billion debt repayments since September
2009 coupled with lower interest rates. The average cost of debt reduced from
9.3% to 7.9% as a result of lower interest rates and the benefit of floating
rate debt.
Taxation
The tax expense of R2 234 million for the period declined by 5.0% compared to
September 2009. The decline is largely due to the reversal of the DRC deferred
tax asset in the prior period offsetting increased taxation in South Africa of
R168 million and a secondary tax on companies (`STC`) charge of R258 million
in the current period, stemming from the change in the timing of the Group
dividend declaration compared to the prior period.
The effective tax rate declined from 97.6% to 34.4%, mainly due to non-
deductible impairment losses of R3 189 million and the unrecognised deferred
tax asset in the prior period. Excluding the impairment losses and the
derecognition of the deferred tax asset, the prior period effective rate was
32.0%.
Earnings
Earnings per share for the period increased from 4 cents per share to 300
cents per share, impacted by the impairment losses and the reversal of the DRC
deferred tax asset in the prior period. Headline earnings per share, which
excludes impairment losses, increased 38.4% to 303 cents per share.
Excluding the impact of several non-recurring charges, adjusted headline
earnings per share increased 11.1% from 271 cents to 301 cents per share.
Cash flow
Operating free cash flow increased by 21.8% to R6 560 million for the period.
The cash generated from operations grew by R569 million and was mainly due to
increased EBITDA, coupled with an improvement in working capital. Net cash
additions to property, plant and equipment and intangible assets decreased
from R3 382 million to R2 779 million.
Net cash flows utilised in financing activities increased from R3 339 million
to R4 444 million. The increase over the period includes the partial repayment
of a facility utilised to fund the DRC, R959 million spent on the share
repurchase programme in the current period, an increase in bank borrowings
utilised for financing activities and reduced interest payments due to lower
interest rates and average debt.
The gain/loss arising from foreign exchange forward contracts entered into
specifically for capital expenditure and inventory has been reclassified from
cash flows from investing activities and cash generated from operations to
cash flows from financing activities in the prior period to align with
accounting practices of the Group`s parent.
Capital expenditure
The Group`s capital expenditure for the period was R2 065 million, 29.6% less
than a year ago. South Africa capital expenditure was low at R1 644 million
(6.4% of revenue) in line with our commitment to limit infrastructure
deployment during the 2010 FIFA World Cup South AfricaTM. Capital expenditure
of R421 million (10.5% of revenue) in the International operations was 61.5%
lower (53.1% lower excluding the impact of foreign exchange translation)
mainly due to a significant reduction in capital expenditure in Tanzania and
the DRC compared to the prior year.
Statement of financial position
Property, plant and equipment and intangible assets were negatively impacted
by foreign currency translation adjustments of R685 million and R136 million,
respectively due to the rand strengthening against functional reporting
currencies of the International markets since 31 March 2010.
Net debt decreased to R11 785 million, compared to R14 840 million a year ago.
The Group`s financial gearing reduced, with the net debt to EBITDA ratio at
0.6 times at 30 September 2010. 89.0% (2009: 93.4%) of the debt is denominated
in rand. R4 115 million (2009: R4 217 million) of the debt matures in the next
12 months and 98.0% (2009: 95.1%) of total debt is at floating rates.
1. Mobile termination rates.
2. 37.4% excluding the impact of introducing a 60-day carry over rule in May
2009 for data packages.
3. Data revenue growth was impacted by the change in the data carry over
rule in the prior year; excluding this impact data revenue growth was
35.6%.
4. The International segment has been restated to include Gateway.
5. Normalised to exclude trading foreign exchange and at a constant
currency.
6. Excluding depreciation, amortisation and impairment losses.
7. Normalised to exclude trading foreign exchange, impairment losses and at
a constant currency.
Declaration of interim dividend No. 3
Notice is hereby given that interim dividend No. 3 of 180 cents per ordinary
share in respect of the financial year ending 31 March 2011 has been declared
payable on Monday 6 December 2010 to shareholders recorded in the register at
the close of business on Friday 3 December 2010:
Last day to trade shares cum dividend Friday 26 November 2010
Shares commence trading ex dividend Monday 29 November 2010
Record date Friday 3 December 2010
Payment date Monday 6 December 2010
Share certificates may not be dematerialised or rematerialised between Monday
29 November 2010 and Friday 3 December 2010, both days inclusive.
On Monday 6 December 2010, the interim dividend will be electronically
transferred to the bank accounts of all certificated shareholders where this
facility is available. Where electronic funds transfer is not required,
cheques will be dated and posted on Monday 6 December 2010.
Shareholders who hold dematerialised shares will have their accounts at their
CSDP or broker credited on Monday 6 December 2010.
Outlook
While the macro economic climate is stable and there are positive signs in
most of the countries in which Vodacom operates, markets are expected to
remain challenging primarily due to ongoing competitive and regulatory
pressures. In October 2010, the fourth mobile operator launched service in
South Africa and the regulator announced further cuts in MTRs effective from 1
March 2011.
Increased voice usage and continued growth in data demand are expected to
largely offset these pressures. The cost reduction programme is progressing
well, with notable successes in managing customer acquisition and distribution
costs in the past six months.
While capital expenditure is expected to accelerate in the second half, full
year forecast capital expenditure is expected to be lower at R6.8 billion due
to efficiencies on budgeted spend and the favourable foreign exchange rates
compared to budget.
For and on behalf of the Board
Peter Moyo Pieter Uys Rob Shuter
Non-executive Chairman Chief Executive Officer Chief Financial
Officer
5 November 2010
Midrand
Condensed consolidated income statement
for the six months ended 30 September 2010
Six months Year
ended ended
30 September 31 March
2010 2009 2010
Rm Rm Rm
Notes Reviewed Reviewed Audited
Revenue 3 29 516 28 675 58 535
Direct costs 7 (13 495) (13 384) (26 774)
Staff expenses 7 (2 242) (2 143) (4 291)
Marketing and 7 (929) (893) (1 728)
advertising expenses
Other operating 7 (3 083) (2 795) (5 977)
expenses
Depreciation and (2 673) (2 564) (5 157)
amortisation
Impairment losses 4 (33) (3 189) (3 370)
Operating profit 7 061 3 707 11 238
Finance income 83 48 124
Finance costs (447) (810) (1 602)
Loss on remeasurement 7 (194) (521) (794)
and disposal of
financial instruments
Loss from associate - (14) (21)
Profit before tax 6 503 2 410 8 945
Taxation (2 234) (2 351) (4 745)
Net profit 4 269 59 4 200
Attributable to:
Equity shareholders 4 416 61 4 196
Non-controlling (147) (2) 4
interests
4 269 59 4 200
Six months Year
ended ended
30 September 31 March
2010 2009 2010
Cents Cents Cents
Notes Reviewed Reviewed Audited
Basic earnings per 5 300.0 4.1 282.3
share
Diluted earnings per 5 299.7 4.1 282.0
share
Condensed consolidated statement of comprehensive income
for the six months ended 30 September 2010
Six months Year
ended ended
30 September 31 March
2010 2009 2010
Rm Rm Rm
Reviewed Reviewed Audited
Net profit 4 269 59 4 200
Other comprehensive income:
Foreign currency translation (497) (2 530) (2 665)
differences, net of tax
Total comprehensive income 3 772 (2 471) 1 535
Attributable to:
Equity shareholders 3 891 (2 367) 1 645
Non-controlling interests (119) (104) (110)
3 772 (2 471) 1 535
Condensed consolidated statement of financial position
as at 30 September 2010
As at As at
30 September 31 March
2010 2009 2010
Rm Rm Rm
Notes Reviewed Reviewed Audited
Assets
Non-current assets 27 769 28 547 29 131
Property, plant and 20 233 20 686 21 383
equipment
Intangible assets 6 376 6 749 6 673
Financial assets 184 330 181
Trade and other receivables 7 205 259 231
Finance lease receivables 7 450 279 408
Deferred tax 321 244 255
Current assets 13 330 12 146 12 560
Financial assets 7 196 128 153
Inventory 890 804 707
Trade and other receivables 7 10 681 9 978 10 024
Finance lease receivables 7 294 331 262
Tax receivable 318 176 353
Non-current assets held for 13 - -
sale
Cash and cash equivalents 938 729 1 061
Total assets 41 099 40 693 41 691
Equity and liabilities
Fully paid share capital * * *
Treasury shares (1 384) - (422)
Retained earnings 16 672 12 328 14 832
Other reserves (1 056) (627) (672)
Equity attributable to 14 232 11 701 13 738
owners of the parent
Non-controlling interests 763 928 898
Total equity 14 995 12 629 14 636
Non-current liabilities 10 262 13 146 11 590
Borrowings 11 8 604 11 343 9 786
Trade and other payables 282 385 317
Provisions 433 365 436
Deferred tax 943 1 053 1 051
Current liabilities 15 842 14 918 15 465
Borrowings 7, 11 4 115 4 217 3 239
Trade and other payables 7 11 260 10 097 11 714
Provisions 242 223 193
Tax payable 220 372 203
Dividends payable 3 - 6
Bank overdrafts 7 2 9 110
Total equity and 41 099 40 693 41 691
liabilities
* Fully paid share capital of R100.
Condensed consolidated statement of changes in equity
for the six months ended 30 September 2010
Equity Non- Total
attributable controlling equity
to owners interests
of the
parent
Rm Rm Rm
1 April 2010 13 738 898 14 636
Total comprehensive income 3 891 (119) 3 772
Dividends declared (2 576) (38) (2 614)
Repurchase of shares (962) - (962)
Share-based payment expense 73 - 73
Sale of shares in 68 22 90
subsidiary
30 September 2010 - 14 232 763 14 995
Reviewed
1 April 2009 14 017 1 081 15 098
Total comprehensive income (2 367) (104) (2 471)
Dividends declared - (49) (49)
Share-based payment expense 51 - 51
30 September 2009 - 11 701 928 12 629
Reviewed
1 April 2009 14 017 1 081 15 098
Total comprehensive income 1 645 (110) 1 535
Dividends declared (1 631) (73) (1 704)
Repurchase of shares (422) - (422)
Share-based payment expense 129 - 129
31 March 2010 - Audited 13 738 898 14 636
Condensed consolidated statement of cash flows
for the six months ended 30 September 2010
Six months Year
ended ended
30 September 31 March
2010 2009 2010
Rm Rm Rm
Notes Reviewed Reviewed Audited
Cash flows from operating
activities
Cash generated from 9 339 8 770 19 711
operations
Tax paid (2 154) (2 058) (4 764)
Net cash flows from 7 185 6 712 14 947
operating activities
Cash flows from investing
activities
Net additions to
property, plant and
equipment
and intangible assets 7 (2 779) (3 382) (6 222)
Business combinations net
of cash acquired
and sale of shares in 64 - -
subsidiary
Other investing 37 (177) (107)
activities
Net cash flows utilised (2 678) (3 559) (6 329)
in investing activities
Cash flows from financing
activities
Movement in borrowings, 7 (843) (1 079) (4 255)
including finance costs
paid
Dividends paid (2 617) (2 260) (3 908)
Repurchase of shares (984) - (385)
Net cash flows utilised (4 444) (3 339) (8 548)
in financing activities
Net increase/(decrease) 63 (186) 70
in cash and cash
equivalents
Cash and cash equivalents 951 1 084 1 084
at the beginning of the
period/year
Effect of foreign (78) (178) (203)
exchange rate changes
Cash and cash equivalents 936 720 951
at the end of the
period/year
Notes to the condensed consolidated financial statements
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 (`IAS 34`), the AC 500 standards as issued
by the Accounting Practices Board, the JSE Listings Requirements and
the Companies Act of 1973, as amended. They have been prepared on the
historical cost basis, except for certain financial instruments which
are measured at fair value or at amortised cost, and are presented in
South African rand, the currency in which the majority of the Group`s
transactions are denominated.
The significant accounting policies and methods of computation are
consistent in all material respects with those applied in the previous
period, except as disclosed in Note 2. The accounting policies are
available for inspection at the Group`s registered office.
There have been no material changes in judgements or estimates of
amounts reported in prior reporting periods.
Certain items pertaining to the six months ended 30 September 2009 have
been reclassified as disclosed in Note 7.
The financial information has been reviewed by Deloitte & Touche whose
unmodified review report is available for inspection at the Group`s
registered office.
2. Change in 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 2010. The adopted accounting pronouncements, which had an
impact on the Group, are discussed below.
IFRS 3: Business Combinations (Revised) (`IFRS 3`)
The Group now accounts for business combinations in terms of the
revised IFRS 3, which introduced the following changes:
Acquisition-related costs are now expensed as incurred; and
Entities now have two measurement bases to choose from when measuring
the non-controlling interest on acquisition date.
The above changes will impact the amount of goodwill recognised, the
reported results in the period that a business combination occurs and
future reported results.
The change in accounting policy did not have a significant impact on
the Group`s financial report for the period.
IAS 27: Consolidated and Separate Financial Statements (Amended) (`IAS
27`)
The Group has adopted the amendment to IAS 27 which requires that when
accounting for transactions with non-controlling parties in Group
entities that do not result in a change in control, the difference
between the consideration paid or received and the recorded non-
controlling interest should be recognised in equity. In cases where
control is lost, any interest retained by the Group is remeasured to
fair value, with the difference between fair value and the previous
carrying amount being recognised immediately in profit or loss.
The change in accounting policy did not have a significant impact on
the Group`s financial results for the period.
Six months Year
ended ended
30 September 31 March
2010 2009 2010
Rm Rm Rm
Reviewed Reviewed Audited
3. Segment analysis
External customers segment revenue 29 516 28 675 58 535
South Africa 25 612 24 314 50 290
International1 3 895 4 351 8 226
Corporate 9 10 19
EBITDA 9 788 9 519 19 782
South Africa 9 225 8 781 18 578
International1 587 742 1 090
Corporate and eliminations (24) (4) 114
Six months Year
ended ended
30 September 31 March
2010 2009 2010
Rm Rm Rm
Reviewed Reviewed Audited
3. Segment analysis (continued)
Reconciliation of segment results
EBITDA 9 788 9 519 19 782
Depreciation, amortisation and impairment (2 706) (5 753) (8 527)
losses
Other (21) (59) (17)
Operating profit 7 061 3 707 11 238
Net finance charges (558) (1 283) (2 272)
Finance income 83 48 124
Finance costs (447) (810) (1 602)
Loss on remeasurement and disposal of (194) (521) (794)
financial instruments
Loss from associate - (14) (21)
Profit before tax 6 503 2 410 8 945
Taxation (2 234) (2 351) (4 745)
Net profit 4 269 59 4 200
Total assets 41 099 40 693 41 691
South Africa 28 873 27 765 28 464
International1 10 847 12 181 11 958
Corporate and eliminations 1 379 747 1 269
1. In the current period, the Gateway reportable segment has been
incorporated into the International reportable segment in order to align
with the change in operational structure within the Group. Comparative
amounts have been restated.
Six months Year
ended ended
30 September 31 March
2010 2009 2010
Rm Rm Rm
Reviewed Reviewed Audited
4. Impairment losses
Impairment losses recognised are as
follows:
Intangible assets (1) (3 134) (3 285)
Property, plant and equipment (32) (5) (34)
Available-for-sale financial assets - - (8)
carried at cost
Investment in associate - (50) (43)
(33) (3 189) (3 370)
Six months Year
ended ended
30 September 31 March
2010 2009 2010
Cents Cents Cents
Reviewed Reviewed Audited
5. Per share calculations
5.1 Earnings, dividends and net asset value
per share
Basic earnings per share 300.0 4.1 282.3
Diluted earnings per share 299.7 4.1 282.0
Headline earnings per share 303.2 218.7 509.9
Diluted headline earnings per share 303.0 218.7 509.4
Dividends per share 175.0 - 110.0
Net asset value per share 1 018.4 848.8 985.3
Million Million Million
Reviewed Reviewed Audited
5.2 Weighted average number of ordinary
shares outstanding
Basic and headline earnings per share 1 472 1 488 1 486
Diluted earnings and diluted headline 1 473 1 488 1 488
earnings per share
Dividends per share 1 480 - 1 488
Net asset value per share 1 472 1 488 1 485
Wheatfields Investments 276 (Pty) Limited, the Group`s wholly owned
subsidiary, acquired 15 880 043 shares in the market during the period
at an average price of R60.14 per share, representing approximately 1%
of Vodacom Group Limited`s issued share capital.
Six months Year
ended ended
30 September 31 March
2010 2009 2010
Rm Rm Rm
Reviewed Reviewed Audited
5.3 Headline earnings1 reconciliation
Earnings attributable to equity 4 416 61 4 196
shareholders for basic and diluted
earnings per share
Adjusted for:
Net loss on disposal of property, plant 20 8 17
and equipment and intangible assets
Impairment losses (Note 4) 33 3 189 3 370
Other - - 1
4 469 3 258 7 584
Tax impact of adjustments (6) (2) (5)
Headline earnings for headline and 4 463 3 256 7 579
diluted headline earnings per share
1. This disclosure is a requirement of the JSE Limited and is not a
recognised measure under IFRS. It has been calculated in accordance
with Circular 3/2009: Headline Earnings as issued by the South African
Institute of Chartered Accountants.
6. Forfeitable share plan (`FSP`)
During the period the Group allocated 3 135 332 shares out of treasury
shares to eligible employees under its FSP, an equity-settled share-
based payment transaction in terms of IFRS 2: Share-based Payment.
7. Reclassifications
Certain items in the condensed consolidated financial statements for
the six months ended 30 September 2009 were reclassified so as to
align with practices of the Group`s parent, Vodafone Group Plc, and to
be consistent with the consolidated annual financial statements for
the year ended 31 March 2010. A reconciliation of these
reclassifications is presented below.
Balance as Re- Balance as
previously classification Re-
reported (Notes 7.1 - classified
7.3)
Rm Rm Rm
Reconciliation 30
September 2009
Income statement
Direct costs (15 588) 2 204 (13 384)
Staff expenses (2 092) (51) (2 143)
Marketing and (757) (136) (893)
advertising expenses
Broad-based black (51) 51 -
economic empowerment
charge
Other operating expenses (899) (1 896) (2 795)
Loss on remeasurement
and disposal
of financial instruments (349) (172) (521)
Statement of financial
position
Non-current assets
Trade and other 169 90 259
receivables
Finance lease - 279 279
receivables
Lease assets 369 (369) -
Current assets
Financial assets 140 (12) 128
Trade and other 9 951 27 9 978
receivables
Finance lease - 331 331
receivables
Lease assets 346 (346) -
Current liabilities
Borrowings 3 542 675 4 217
Trade and other payables 10 034 63 10 097
Bank overdrafts 747 (738) 9
Statement of cash flows
Cash flows from
investing activities
Net additions to (3 618) 236 (3 382)
property, plant and
equipment and intangible
assets
Cash flows from
financing activities
Movement in borrowings, (843) (236) (1 079)
including finance costs
paid
7.1 Income statement
Network operational overhead expenses has been reclassified from
direct costs to other operating expenses. Fixed advertising support
costs has been reclassified from direct costs to marketing and
advertising expenses. The share-based payment expense relating to the
employee share ownership plan has been reclassified from broad-based
black economic empowerment charge to staff expenses. Foreign exchange
gains and losses on the revaluation of foreign denominated trading
items has been reclassified by including it in operating expenses.
7.2 Statement of financial position
Operating lease receivables has been reclassified from lease assets to
trade and other receivables. Bank overdrafts classified as financing
activities in the statement of cash flows has been reclassified from
bank overdrafts to borrowings. Derivative financial assets and
liabilities have been reclassified from financial assets and
derivative financial liabilities to trade and other receivables and
trade and other payables respectively.
7.3 Statement of cash flows
The gain/loss arising from foreign exchange forward contracts entered
into specifically for capital expenditure and inventory has been
reclassified from cash flows from investing activities and cash
generated from operations to cash flows from financing activities.
7.4 Combination of line items
After a review of its consolidated financial statements the Group
combined certain line items on the face of the income statement and
statement of financial position.
8. Related parties
The Group`s related parties are its parent, joint venture, associate
and key management including directors. In prior years Telkom SA
Limited and its subsidiaries were included in related parties since
Telkom SA Limited had joint control over the Group.
Six months Year
ended ended
30 September 31 March
2010 2009 2010
Rm Rm Rm
Reviewed Reviewed Audited
8.1 Balances with related parties
Accounts receivable 228 168 197
Accounts payable (313) (216) (154)
8.2 Transactions with related parties
Revenue 112 395 994
Expenses (348) (462) (573)
Dividends declared (1 693) - (1 064)
8.3 Directors` and key management
personnel remuneration
Compensation paid to the Group`s
Board and key management personnel
will be disclosed in the Group`s
annual report for the year ending 31
March 2011.
9. Capital expenditure incurred
Capital expenditure additions 2 065 2 934 6 636
including software
10. Capital commitments
Capital expenditure contracted for 3 223 2 981 2 213
but not yet incurred
Capital expenditure approved but not 3 390 5 673 6 364
yet contracted for
11. Borrowings
11.1 Citibank syndicated loans
The Group increased its Citibank syndicated loans by an amount of
TZS22 000 million on 24 June 2010 and US$20 million on 2 July 2010.
The loans will be utilised for capital expenditure and general
corporate requirements in Tanzania, and are repayable in six bi-
annual instalments commencing on 16 June 2011.
11.2 The Standard Bank of South Africa Limited/Rand Merchant Bank
The loan with a nominal value of R2 500 million was partially repaid
on 26 April 2010 using short-term borrowings amounting to R1 159
million.
12. Contingencies
There have been no material changes to the Group`s contingencies
during the period.
13. Customer registration
The Group`s operations in South Africa, Lesotho, Mozambique, Tanzania
and the Democratic Republic of Congo are subject to mobile customer
registration legislation in their respective countries of operation.
Significant progress has been made to register customers and to
minimise disruptions to customer acquisitions as a result of
registration.
14. Acquisitions and disposals of businesses
14.1 Acquisition of AfriConnect Zambia Limited (`AfriConnect`)
Effective 30 June 2010, the Group acquired 100% of the issued share
capital in AfriConnect, an internet service provider, for a
consideration of US$7 million. The acquired entity forms part of the
Group`s International reportable segment.
14.2 Disposals
Effective 28 June 2010, the Group sold 8.28% of its stake in Vodacom
Lesotho (Pty) Limited (`Vodacom Lesotho`) to the non-controlling
party for a consideration of R90 million. The Group now owns 80% of
the issued share capital in Vodacom Lesotho.
Effective 6 August 2010, the Group sold its 24.9% equity interest in
its associate WBS Holdings (Pty) Limited for a consideration of R30
million.
15. 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:
15.1 Dividend declared after the reporting date and not recognised as a
liability
An interim dividend of R2 650 million (180.0 cents per ordinary
share) for the year ending 31 March 2011, was declared on 5 November
2010, payable on 6 December 2010 to shareholders recorded in the
register at the close of business on 3 December 2010. The secondary
tax on companies payable on this dividend amounts to R265 million.
www.vodacom.com
Directors
MP Moyo (Chairman), PJ Uys (CEO), MS Aziz Joosub, P Bertoluzzo1, TA Boardman,
M Joseph2, M Lundal3, T Mokgosi-Mwantembe,
PJ Moleketi, NJ Read4, RAW Schellekens5, RA Shuter
Alternate directors
TJ Harrabin4, HM Mahmoud6
Company secretary
SF Linford
Registered office
Vodacom Corporate Park,
082 Vodacom Boulevard, Vodavalley,
Midrand 1685
(Private Bag X9904, Sandton 2146)
Transfer secretary
Computershare Investor Services (Pty) Limited
(Registration number: 2004/003647/07)
70 Marshall Street, Johannesburg 2001
(PO Box 61051, Marshalltown 2107)
Media relations
Richard Boorman
Investor relations
Belinda Williams
1. Italian 2. American 3. Norwegian 4. British 5. Dutch 6. Egyptian
Sponsor: UBS South Africa (Pty) Ltd
Non-GAAP information
The announcement contains certain non-GAAP financial information. The Group`s
management believes these measures provide valuable additional information in
understanding the performance of the Group or the Group`s businesses because
they provide measures used by the Group to assess performance. However, this
additional information presented is not uniformly defined by all companies,
including those in the Group`s industry. Accordingly, it may not be comparable
with similarly titled measures and disclosures by other companies.
Additionally, although these measures are important in the management of the
business, they should not be viewed in isolation or as replacements for or
alternatives to, but rather as complementary to, the comparable GAAP measures.
Trademarks
Vodacom, the Vodacom logo, Vodafone, the Vodafone logo and M-PESA are
trademarks of the Vodafone Group. The RIM(R) and BlackBerry(R) families of
trademarks, images and symbols are the exclusive properties and trademarks of
Research in Motion Limited, used by permission. RIM and BlackBerry are
registered with the US Patent and Trademark Office and may be pending or
registered in other countries. Other product and company names mentioned
herein may be the trademarks of their respective owners.
Forward-looking statements
This announcement which sets out the interim results for Vodacom Group Limited
for the six months ended 30 September 2010 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: 08/11/2010 07:15:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
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