| Mon 7 Nov 2011, 7:10 | | 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 2011
Vodacom Group Limited
(Incorporated in the Republic of South Africa)
Registration number: 1993/005461/06
(ISIN: ZAE000132577 Share Code: VOD)
(ISIN: ZAG000088659 JSE Code: VOD001)
(`Vodacom`)
Interim results for the six months ended 30 September 2011
Salient features
Strong financial performance
* Group service revenue up 6.0% (6.9%*)
* Group EBITDA up 7.6% (9.8%*)
* Group operating free cash flow up 5.6% to R6 930 million
* Headline earnings per share up 6.9% to 324 cents
* 44.4% increase in interim dividend per share to 260 cents
Mobile data is the key growth driver
* Group data revenue growth of 31.1%
* Group data revenue represents 14.1% of service revenue
* 38.1% increase in Group active data customers to 12.4 million
Investing for data growth
* Group capital expenditure of R3 462 million
* Expansion of 3G and fibre networks
* Focus on network stability and improved customer experience
Value focus boosts South African performance
* Effective price per minute reduced by 23.9%
* Customers up 21.1% to 28.9 million
* Outgoing voice traffic up 34.1%
Building momentum in International operations
* Customers up 22.5% to 19.0 million
* Service revenue up 13.3% (20.0%*)
* M-Pesa gains traction; 2.2 million active customers in Tanzania
"I`m really pleased with what we`ve achieved in the first six months of trading
as the new red Vodacom. Starting with the simple premise that to succeed over
the long-term we need to make every customer smile, we`ve focused on the
customer experience by improving our value proposition, network and customer
service.
In South Africa, increased promotional activity and reduced data prices were
well received, driving significant gains in both usage and customer numbers. Our
average effective price per minute fell 24% and we also implemented a 22%
reduction in average data prices. We`ve invested just under R3.5 billion on our
networks, making tangible improvements to both coverage and stability. We`ve
also laid the groundwork for a focused programme to ramp up our customer
service.
The impact of these changes is visible in our results. Group customers increased
22% to 48 million, with active data customers growing 38%. This more than offset
continued price reductions, and overall service revenue increased 6%. The
positive momentum in the International mobile network operations continued, with
service revenue in local currency increasing 20%. The turnaround in the
International mobile operators helped contribute to the 6% increase in Group
operating free cash flow to R6.9 billion.
In the second half of the year we aim to capitalise on all the steps taken to
improve the customer experience, and prove to our customers that the change in
colour really is just the beginning."
- Pieter Uys, Vodacom Group CEO
Operating review
South Africa
South Africa delivered a strong performance with service revenue growing 4.7% to
R23 505 million (7.0% excluding the impact of cuts in mobile termination rates).
Equipment sales were particularly strong, growing 20.3%, contributing to overall
revenue growth of 6.7%.
Gross connections increased sharply to approximately 8.0 million, with the brand
refresh and numerous promotions and handset deals the primary drivers of the
56.5% change. Customers increased 21.1% year on year to 28.9 million, a net
increase of 2.4 million in the six month period. This was achieved despite the
accelerated disconnection of approximately 537 000 SIMs that were locked at the
RICA deadline. Churn also increased in the second quarter as a result of these
RICA disconnections. Total ARPU was down 9.0% to R141, largely due to lower
interconnect rates and the higher prevalence of lower usage customers in the
mix.
Data revenue growth was again an important feature of the results, increasing
29.4% to R3 720 million. Data revenue now represents 15.8% of service revenue.
Active data customers grew 32.3% to 10.5 million, representing 36.2% of
customers. Customers regularly purchasing data bundles grew by 89.7% to 3.5
million. While mobile broadband devices still accounts for the majority of data
traffic on our network, the growth rate of smartphone data traffic is ten times
higher than that of dongles and other modems. The appetite for smartphones
amongst our customer base is very strong, with active smartphones on the network
increasing by approximately 870 000 in the six months to 4.1 million. We
reduced our data prices in order to maintain our competitive position and drive
greater adoption and usage.
EBITDA for South Africa increased 6.6%, with the EBITDA margin maintained at
35.9%. Excluding the impact of foreign exchange, EBITDA increased 8.7% and the
EBITDA margin expanded to 36.5%, reflecting an improved contribution margin from
lower average customer acquisition and retention costs. While we realised
savings from our various cost efficiency initiatives, these were partially
offset by increased investment in network performance, call centres and our new
on-line store.
Capital expenditure increased 83.4% to R3 015 million (11.0% of revenue) as we
made substantial investments to increase capacity and enhance quality. A large
portion of capital spend was for transmission, where we made steady progress
against our plan of self-providing transmission to our high data traffic sites.
We expanded our 3G network with 352 new sites bringing the total to 4 642 sites.
68.4% of 3G sites have been activated with HSPA+ (21.6 mbps) software and of
these around 30% have been migrated to high capacity IP transmission backhaul.
Dual-carrier HSPA+ (43.2 mbps) is now active on 52.1% of our 3G sites.
International
The positive momentum in International continued, with service revenue
increasing by 13.3% (20.0%*) to R4 390 million due to strong growth in customers
and relatively stable macro environments. Our brand presence and approach to
smarter price offerings underpinned strong relative market performance.
Customers increased 22.5% year on year to 19.0 million, adding 2.0
million in the six months.
While still a relatively small portion of overall revenue, data revenue growth
was very strong at 71.4% as we saw more customers using data and mobile
financial services. Active data customers increased 82.4% to 1.9 million as we
expanded network coverage and introduced more affordable data offerings. Take up
of our M-Pesa service in Tanzania accelerated with active customers reaching 2.2
million, penetrating 21.0% of the customer base.
Despite the cost pressures from fuel and foreign-denominated operational costs,
International EBITDA increased by 12.4% (14.8%*) to R660 million and the EBITDA
margin remained stable at 14.6%. The International operating profit was
negatively impacted by impairment losses of R318 million, mainly for Gateway
given their weak performance.
We invested R444 million in the period (2010: R421 million) and expect to spend
substantially more in the remainder of the year as we continue to expand our
voice and data network coverage and capacity.
Strategy update
Grow passionate promoters by dramatically improving the customer experience
One of the keys to improving the customer experience is to ensure that we`re
getting things right at all touchpoints, including the crucial interactions in-
store and via our call centres. With this in mind, we have piloted a programme
of closed loop feedback at several call centres and stores. This process entails
asking customers for feedback immediately post their interaction with Vodacom.
This information is then fed back to the employee who dealt with the customer,
giving an unfiltered picture of how their service was received and useful
insights into where we need to make improvements. We have also rolled out
technical experts in many of our shops to help our customers leave fully
connected to the internet and email. We have invested in a fully fledged social
media customer support team and with the launch of our new on-line shop in
South Africa (www.vodacom.co.za/shop) it is now easy to transact with Vodacom
on-
line.
Actively create an environment for our people to excel and grow
Our brand refresh was not just a change in colour but also a renewed focus on
how we run our business. We are empowering our employees to be customer and
service obsessed. We have launched an employee hotline to enable staff to
resolve customer problems as and when they become aware of it. Employees now
have the opportunity to experience all of our services first hand; in return we
request feedback to better the services to our customers. We believe we are
making good progress, having been ranked as the best telecommunications company
to work for in South Africa by the Corporate Research Foundation Institute.
Put the power of the internet in people`s hands
The key elements to increasing mobile and internet access are affordable devices
and usage charges and relevant content. On the devices front, we introduced a
smartphone for less than R1 000 (the full touch screen Vodafone 858 Smart
running Android), the Vodafone WebBox which converts any TV into an internet
terminal, and more recently launched the Vodafone WebBook which is a netbook
running Ubuntu Linux. On the pricing front, we recently reduced data pricing in
South Africa by on average 22.0%. We also launched the Vodacom App Store,
complemented by our own app developers` programme, to give talented people the
chance to develop locally relevant apps and in so doing provide both training
and a source of income.
Together drive operational excellence across the Group
One of the key focus areas with respect to operational excellence in the last
six months has been our networks. The 67.7% increase in capital expenditure has
supported the installation of hundreds of new base stations and hundreds of
kilometres of self-provided fibre transmission. On top of this, the new
equipment we are installing in all our operations is considerably more efficient
and allowed us to reduce our carbon footprint by 12% per base station site
across the Group1. During this period we started constructing the Site Solutions
Innovation Centre (`SSIC`), which is a 100% carbon neutral building located at
our headquarters in Midrand. The aim of the SSIC is to investigate ways for the
Group to reduce both operating and capital costs by developing, testing and
applying innovative technical solutions.
Proactively partner with our stakeholders
At all of our operating companies we have stepped up our engagement on key
industry matters, particularly relating to rural coverage and broadband
inclusion for all. In South Africa we signed the ICT industry competitiveness
and job creation compact which sets out 2020 goals to have 100% broadband
population coverage and create one million new jobs. We also recently launched
the Vodacom Mobile Education programme in South Africa. This programme comprises
three elements: nine countrywide resource centres, 1 800 connected schools and
an education content portal with high quality teaching resources to support the
curriculum.
Financial review
The Group has reclassified certain numbers previously reported to align with
reporting practices of its ultimate parent. Refer to note 7 of the condensed
consolidated interim financial statements.
Service revenue
Group revenue and service revenue for the six months ended 30
September 2011 increased by 7.6% and 6.0% respectively (8.4%* and 6.9%*),
underpinned by continued growth in Group data and voice revenue offset by a
decline in interconnect revenue from South Africa. Strong growth in customers in
the International operations supported revenue growth of 12.8% (19.7%*) and
service revenue growth of 13.3% (20.0%*).
Operating expenses2
Group operating expenses increased 7.8% to R21 291 million. These expenses
include a net foreign exchange loss on the revaluation of foreign-denominated
trading items of R156 million (2010: R1 million loss). Group operating expenses
increased 8.0%* below revenue growth of 8.4%*.
EBITDA
Group EBITDA increased 7.6% (9.8%*) to R10 535 million, and the EBITDA margin
remained stable at 33.2%. South Africa contributed 93.3% (2010: 94.2%) to
Group EBITDA, increasing 6.6% with a stable margin at 35.9%. Excluding the
trading foreign exchange loss of R181 million, South Africa`s EBITDA increased
8.7%. International EBITDA increased 12.4% (14.8%*) with margins relatively
stable at 14.6%. The improved profitability of the International mobile network
operators was offset by reduced profitability in Gateway.
Operating profit
Group operating profit increased 3.4% to R7 302 million. The operating profit in
South Africa increased 5.1% due to the growth in EBITDA, partially offset by the
9.0% increase in depreciation and amortisation arising from higher capital
expenditure. International operating profit was negatively impacted by
impairment losses of R318 million mainly relating to Gateway.
Net finance charges
Net finance charges reduced from R558 million in the prior period to R247
million for the six months ended 30 September 2011, mainly due to the gain on
derivatives relating to our forward exchange contracts.
Finance costs for the period reduced by R107 million compared to the prior
period as a result of a R1 487 million reduction in average debt coupled with
the benefit of lower interest rates. The average cost of debt reduced from 7.9%
to 7.3%.
Taxation
The tax expense of R2 668 million for the period increased by 19.4% compared to
September 2010 due to higher profits and the secondary tax on companies (`STC`)
paid on higher dividends paid.
The effective tax rate increased from 34.4% to 37.8% mainly due to an increase
in non-deductible interest of R78 million and an increase in STC of R159
million.
Earnings
Headline earnings per share increased 6.9% to 324 cents mainly due to growth in
operating profit before impairments and reduction in finance charges offset by
increased taxation. Basic earnings per share of 301 cents (2010: 300 cents)
was impacted by impairment losses of R318 million.
Cash flow
Operating free cash flow increased by 5.6% to R6 930 million for the period. The
cash generated from operations grew by R770 million and was mainly due to
positive trading performance. Net cash additions to property, plant and
equipment and intangible assets increased from R2 779 million to R3 179
million. The lower growth of 3.0% in Group free cash flow to R3 921 million was
due to higher tax paid partially offset by lower net finance charges.
Capital expenditure
The Group`s capital expenditure for the period was R3 462 million, 67.7% higher
than a year ago. The 83.4% growth in the South African capital expenditure is
largely due to the limited infrastructure deployment during the 2010 FIFA World
Cup South AfricaTrade Mark.
Statement of financial position
Property, plant and equipment and intangible assets were positively impacted by
foreign currency translation adjustments of R814 million and R97 million,
respectively.
Net debt decreased to R10 654 million, compared to R11 785 million a year ago.
The Group`s financial gearing reduced slightly, with the net debt to EBITDA
ratio at 0.5 times at 30 September 2011 (2010: 0.6 times). 87.0%
(2010: 89.0%) of the debt3 is denominated in rand. R5 378 million (2010: R4 115
million) of the debt3 matures in the next 12 months and 59.1% (2010: 98.0%) of
interest bearing debt (including bank overdrafts) is at floating rates.
During the period the Group diversified its sources of funding by establishing a
R10 billion domestic medium-term note programme (`DMTN`). As part of this
programme, we issued our inaugural R750 million three month commercial paper in
August 2011.
Declaration of interim dividend No. 5
Notice is hereby given that interim dividend number 5 of 260 cents per ordinary
share in respect of the financial year ending 31 March 2012 has been declared
payable on Monday 5 December 2011 to shareholders recorded in the register at
the close of business on Friday 2 December 2011:
Last day to trade shares cum dividend Friday 25 November 2011
Shares commence trading ex dividend Monday 28 November 2011
Record date Friday 2 December 2011
Payment date Monday 5 December 2011
Share certificates may not be dematerialised or rematerialised between Monday 28
November 2011 and Friday 2 December 2011, both days inclusive.
On Monday 5 December 2011, 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 or about Monday 5 December 2011.
Shareholders who hold dematerialised shares will have their accounts at their
CSDP or broker credited on Monday 5 December 2011.
Outlook
Our medium-term guidance remains unchanged. Although our service revenue growth
for the first half was ahead of our "low single digit" guidance we expect growth
to slow in the second half as a result of further pressure in both voice and
data prices. Our continued focus on cost efficiency is delivering results, with
notable successes in managing acquisition and retention costs in the first six
months. The EBITDA margin, excluding foreign exchange movements, for the year
ending March 2012 is expected to improve from 2011 4. While capital expenditure
is expected to accelerate in the second half and our full year forecast of R7.7
billion5 remains unchanged.
For and on behalf of the Board
Peter Moyo
Non-executive Chairman
Pieter Uys
Chief Executive Officer
Rob Shuter
Chief Financial Officer
4 November 2011
Midrand
* Represents normalised growth excluding foreign exchange gains/losses and at a
constant currency.
1. Compound annual reduction in Group`s carbon footprint (March 2009 vs. March
2011).
2. Excluding depreciation, amortisation and impairment losses.
3. Debt includes interest bearing debt, non-interest bearing debt and bank
overdrafts.
4. This general profit forecast has not been reviewed or reported on by the
Group`s auditors.
5. Excluding the accounting for RAN swaps.
Condensed consolidated income statement
for the six months ended 30 September 2011
Six months ended30 Year
September ended
31 March
2011 2010 2011
Rm Notes Reviewed Reviewed Audited
Revenue 3 31 747 29 516 61 197
Direct expenses 7 (14 (13 (27
275) 344) 600)
Staff expenses 7 (2 (2 (4
060) 047) 024)
Publicity expenses 7 (1 (982) (2
056) 086)
Other operating 7 (3 (3 (6
expenses 900) 376) 928)
Depreciation and (2 (2 (5
amortisation 836) 673) 355)
Impairment losses 4 (318) (33) (1
508)
Operating profit 7 302 7 061 13 696
Finance income 90 83 109
Finance costs (340) (447) (864)
Net gain/(loss) on 3 (194) (303)
remeasurement and
disposal of
financial
instruments
Profit before tax 7 055 6 503 12 638
Taxation (2 (2 (4
668) 234) 659)
Net profit 4 387 4 269 7 979
Attributable to:
Equity shareholders 4 403 4 416 8 245
Non-controlling (16) (147) (266)
interests
4 387 4 269 7 979
Six months ended Year
30 September ended
31 March
2011 2010 2011
Cents Notes Reviewed Reviewed Audited
Basic earnings per 5 301.0 300.0 561.5
share
Diluted earnings 5 299.9 299.7 560.4
per share
Condensed consolidated statement of comprehensive income
for the six months ended 30 September 2011
Six months ended Year ended
30 September 31 March
2011 2010 2011
Rm Reviewed Reviewed Audited
Net profit 4 387 4 269 7 979
Other comprehensive income 598 (497) (449)
Foreign currency 679 (497) (502)
translation differences,
net of tax
(Loss)/Gain on hedging (81) - 53
instruments in cash flow
hedges, net of tax
Total comprehensive income 4 985 3 772 7 530
Attributable to:
Equity shareholders 5 155 3 891 7 739
Non-controlling interests (170) (119) (209)
4 985 3 772 7 530
Condensed consolidated statement of financial position
as at 30 September 2011
As at As at
30 September 31 March
2011 2010 2011
Rm Notes Reviewed Reviewed Audited
Assets
Non-current assets 28 820 27 769 27 982
Property, plant and 9 22 885 20 233 21 577
equipment
Intangible assets 9 4 942 6 376 5 215
Financial assets 213 184 189
Trade and other 212 205 264
receivables
Finance lease 333 450 307
receivables
Deferred tax 235 321 430
Current assets 15 389 13 330 13 453
Financial assets 458 196 273
Inventory 994 890 799
Trade and other 11 978 10 681 10 773
receivables
Finance lease 499 294 462
receivables
Tax receivable 388 318 276
Non-current assets held - 13 -
for sale
Cash and cash 1 072 938 870
equivalents
Total assets 44 209 41 099 41 435
Equity and liabilities
Fully paid share capital
* * *
Treasury shares (1 (1 (1
533) 384) 384)
Retained earnings 18 170 16 672 17 864
Other reserves 168 (1 (858)
056)
Equity attributable to 16 805 14 232 15 622
owners of the parent
Non-controlling 191 763 558
interests
Total equity 16 996 14 995 16 180
Non-current liabilities 7 807 10 262 8 743
Borrowings 11 6 290 8 604 7 280
Trade and other payables 333 282 258
Provisions 526 433 510
Deferred tax 658 943 695
Current liabilities 19 406 15 842 16 512
Borrowings 11 5 378 4 115 2 783
Trade and other payables 13 524 11 260 13 005
Provisions 309 242 298
Tax payable 116 220 87
Dividends payable 6 3 8
Bank overdrafts 73 2 331
Total equity and 44 209 41 099 41 435
liabilities
* Fully paid share capital of R100.
Condensed consolidated statement of changes in equity
for the six months ended 30 September 2011
Rm Equity Non- Total
attributable controlling equity
to owners interests
of the
parent
1 April 2011 15 622 558 16 180
Total comprehensive income 5 155 (170) 4 985
Dividends (4 096) (25) (4 121)
Partial disposal of 191 (172) 19
interests in subsidiaries
Repurchase and sale of (145) - (145)
shares
Share-based payment 78 - 78
expense
30 September 2011 - 16 805 191 16 996
Reviewed
1 April 2010 13 738 898 14 636
Total comprehensive income 3 891 (119) 3 772
Dividends (2 576) (38) (2 614)
Partial disposal of 68 22 90
interests in subsidiaries
Repurchase of shares (962) - (962)
Share-based payment 73 - 73
expense
30 September 2010 - 14 232 763 14 995
Reviewed
1 April 2010 13 738 898 14 636
Total comprehensive income 7 739 (209) 7 530
Dividends (5 212) (71) (5 283)
Partial disposal of 156 (60) 96
interests in subsidiaries
Repurchase of shares (962) - (962)
Share-based payment 163 - 163
expense
31 March 2011 - Audited 15 622 558 16 180
Condensed consolidated statement of cash flows
for the six months ended 30 September 2011
Six months ended Year
30 September ended
31 March
2011 2010 2011
Rm Notes Reviewed Reviewed Audited
Cash flows from operating
activities
Cash generated from 10 109 9 339 21 385
operations
Tax paid (2 (2 (4 982)
713) 154)
Net cash flows from 7 396 7 185 16 403
operating activities
Cash flows from investing
activities
Net additions to (3 (2 (6 548)
property, plant and 179) 779)
equipment and intangible
assets
Business combinations, 7 - (24) (24)
net of cash acquired
Other investing 7 (105) 35 (9)
activities
Net cash flows utilised 7 (3 (2 (6 581)
in investing activities 284) 768)
Cash flows from financing
activities
Movement in borrowings, 485 (843) (3 949)
including finance costs
paid
Dividends paid (4 (2 (5 283)
123) 617)
Repurchase of shares (145) (984) (984)
Partial disposal of 7 19 90 98
interests in
subsidiaries, net of cash
disposed
Non-controlling interests - - (1)
Net cash flows utilised 7 (3 (4 (10
in financing activities 764) 354) 119)
Net increase/(decrease) 348 63 (297)
in cash and cash equivalents
Cash and cash equivalents at the 539 951 951
beginning of the period/year
Effect of changes in 112 (78) (115)
foreign exchange
rates
Cash and cash equivalents at 999 936 539
the end of the period/year
Notes to the condensed consolidated interim financial statements
1. Basis of preparation
These condensed consolidated interim financial statements have been prepared in
accordance with the framework concepts, the recognition and measurement criteria
of International Financial Reporting Standards (`IFRS`) and the International
Accounting Standard 34: Interim Financial Reporting as issued by the
International Accounting Standards Board (`IASB`), the AC 500 standards as
issued by the Accounting Practices Board, the JSE Listings Requirements and the
requirements of the Companies Act No 71 of 2008, 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, which is the parent Company`s functional and presentation
currency.
The significant accounting policies and methods of computation are consistent in
all material respects with those applied in the previous financial year, except
as disclosed in Note 2. The significant 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 2010, have been
reclassified as disclosed in Note 7.
The preparation of these condensed consolidated interim financial statements was
supervised by the Chief Financial Officer RA Shuter CA(SA).
The financial information has been reviewed by the independent auditors,
Deloitte & Touche, whose unmodified review report is available for inspection at
the Group`s registered office.
2. Changes in accounting policies
The Group adopted the new, revised or amended accounting pronouncements as
issued by the IASB, which were effective and applicable to the Group from 1
April 2011. The adoption of IFRS 3: Business Combinations (Amended), impacted
the Group`s accounting policies by introducing changes to the measurement bases
for different components of non-controlling interests at the acquisition date in
a business combination. The change in accounting policy, however, had no impact
on the Group`s financial results for the period.
Full details on changes in accounting policies will be disclosed in the Group`s
integrated report for the year ending 31 March 2012.
Six months ended Year ended
30 September 31 March
2011 2010 2011
Rm Reviewed Reviewed Audited
3. Segment analysis
External customers segment 31 747 29 516 61 197
revenue
South Africa 27 305 25 612 53 193
International 4 421 3 895 7 984
Corporate 21 9 20
EBITDA 10 535 9 788 20 594
South Africa 9 832 9 225 19 653
International 660 587 840
Corporate and eliminations 43 (24) 101
Reconciliation of segment
results
EBITDA 10 535 9 788 20 594
Depreciation, amortisation (3 (2 (6 863)
and impairment losses 154) 706)
Other (79) (21) (35)
Operating profit 7 302 7 061 13 696
Net finance charges (247) (558) (1 058)
Finance income 90 83 109
Finance costs (340) (447) (864)
Net gain/(loss) on 3 (194) (303)
remeasurement and disposal
of financial instruments
Profit before tax 7 055 6 503 12 638
Taxation (2 (2 (4 659)
668) 234)
Net profit 4 387 4 269 7 979
Total assets 44 209 41 099 41 435
South Africa 32 673 28 873 31 076
International 11 246 10 847 9 743
Corporate and eliminations 290 1 379 616
Six months ended Year
30 September ended
31 March
2011 2010 2011
Rm Reviewed Reviewed Audited
4. Impairment losses
Impairment losses recognised
are as follows:
Intangible assets (298) (1) (1 500)
Property, plant and (20) (32) (8)
equipment
(318) (33) (1 508)
Included in the impairment losses for the current period is a goodwill
impairment of R131 million and customer base impairments of R166 million,
relating to the Group`s International reportable segment, which is as a result
of increased price competition in increasingly competitive markets and poorer
trading conditions.
Six months ended Year
30 September ended
31 March
2011 2010 2011
Cents Reviewed Reviewed Audited
5. Per share information
5.1 Earnings and dividends per
share
Basic earnings per share 301.0 300.0 561.5
Diluted earnings per share 299.9 299.7 560.4
Headline earnings per share 323.5 303.2 655.5
Diluted headline earnings per 322.3 303.0 654.3
share
Dividends per share 280.0 175.0 355.0
2011 2010 2011
Million Reviewed Reviewed Audited
5.2 Weighted average number of
ordinary shares outstanding
for the purpose of
calculating:
Basic and headline earnings 1 463 1 472 1 468
per share
Diluted earnings and diluted 1 469 1 473 1 471
headline earnings per share
5.3 Ordinary shares for the
purpose of calculating:
Dividends per share 1 488 1 488 1 488
Vodacom Group Limited acquired 1 898 271 shares in the market
during the period at an average price of R85.07 per share. Share
repurchases did not exceed 1% of Vodacom Group Limited`s issued
share capital. The current period dividend per share calculation
is based on a final dividend declared during May 2011 for the
year ended 31 March 2011 of R4 166 million of which R25 million
was offset against the forfeitable share plan reserve, R2 million
expensed as staff expenses and R43 million paid to Wheatfields
Investments 276 (Pty) Limited, a wholly-owned subsidiary holding
treasury shares on behalf of the Group.
Six months ended Year
30 September ended
31 March
2011 2010 2011
Rm Reviewed Reviewed Audited
5.4 Headline earnings reconciliation
Earnings, attributable to equity 4 403 4 416 8 245
shareholders, for basic and
diluted earnings per share
Adjusted for:
Net loss on disposal of 79 20 35
property, plant and equipment
and intangible assets
Impairment losses (Note 4) 318 33 1 508
4 800 4 469 9 788
Tax impact of adjustments (65) (6) (165)
Non-controlling interests in (2) - 3
adjustments
Headline earnings for headline 4 733 4 463 9 626
and diluted headline earnings
per share
6. Forfeitable share plan (`FSP`)
During the current period the Group allocated 1 896 351 shares to eligible
employees under its FSP, an equity-settled share-based payment scheme in terms
of IFRS 2: Share-based Payment. During the current period, the Group amended the
rules of the FSP, whereby Vodacom Group Limited is now responsible to procure
the settlement of the benefits in terms of the FSP to the participants employed
by the employer companies on award date. Previously each employer company was
responsible to procure the settlement of the benefits of its participating
employees. The amendment resulted in future awards no longer being fair valued
in the individual employee companies. The amendment did not have an impact on
the consolidated financial results of the Group.
7. Reclassifications
Certain items for the six months ended 30 September 2010 were retrospectively
reclassified. In the income statement the Vodafone global alliance fee has been
reclassified from direct expenses to other operating expenses, franchise fees
have been reclassified from other operating expenses to publicity expenses,
expenses not relating to payroll have been reclassified from staff expenses to
other operating expenses and certain operating lease expenses have been
reclassified from other operating expenses to direct expenses, so as to align
with practices of the Group`s ultimate parent Vodafone Group Plc and to be
consistent with the consolidated income statement for the year ended 31 March
2011. In the cash flow statement the cash flow resulting from the partial
disposal of interests in subsidiaries has been reclassified from investing to
financing activities, so as to be consistent with the consolidated statement of
cash flows for the year ended 31 March 2011.
Rm Balance as Reclassification Balance as
previously reclassified
reported
Reconciliation
30 September 2010 -
Reviewed
Income statement
Direct expenses (13 495) 151 (13 344)
Staff expenses (2 242) 195 (2 047)
Publicity expenses (929) (53) (982)
Other operating expenses (3 083) (293) (3 376)
Statement of cash flows
Cash flows from investing
activities
Business combinations, 64 (88) (24)
net of cash acquired
Other investing 37 (2) 35
activities
Net cash flows utilised (2 678) (90) (2 768)
in investing activities
Cash flows from financing
activities
Partial disposal of - 90 90
interests in
subsidiaries, net of cash
disposed
Net cash flows utilised (4 444) 90 (4 354)
in financing activities
8. Related parties
The amounts disclosed in Notes 8.1 and 8.2 include balances and transactions
with the Group`s parent and entities in its group, joint venture and associate.
Six months ended Year ended
30 September 31 March
2011 2010 2011
Rm Reviewed Reviewed Audited
8.1 Balances with related parties
Accounts receivable 219 228 278
Accounts payable (337) (313) (265)
8.2 Transactions with related
parties
Revenue 114 112 167
Expenses (457) (291) (478)
Dividends declared (2 (1 (3 433)
708) 693)
8.3 Post-employment benefits
Current contributions to (89) (89) (179)
defined contribution plans
8.4 Directors and key management personnel
Compensation paid to the Group`s Board and other key management
personnel will be disclosed in the Group`s integrated report for
the year ending 31 March 2012. SN Maseko was appointed as
managing director of Vodacom (Pty) Limited and as an executive
director of the Group`s Board on 1 September 2011.
Six months ended Year ended
30 September 31 March
2011 2010 2011
Rm Reviewed Reviewed Audited
9. Capital expenditure incurred
Capital expenditure additions, 3 462 2 065 6 311
including software
Effective 1 April 2011 the Group
commenced with the
capitalisation of staff expenses
relating to capital expenditure,
so as to align with practices of
the Group`s ultimate parent
Vodafone Group Plc. Staff
expenses were not
retrospectively capitalised as
data was not collected in prior
periods in a way that allows
retrospective application.
During the period staff expenses
of R96 million were capitalised.
10. Capital commitments
Commitments for the purchase of 7 315 6 613 11 018
property, plant and equipment,
including software
11. Borrowings
11.1 Domestic medium-term note programme
During the period the Group established and registered a domestic medium-term
note programme on the interest rate market of the JSE Limited, under which notes
including commercial paper, may be issued by the Group from time to time. The
maximum aggregate nominal amount of all notes outstanding may not exceed R10
billion. During the period unsecured three month commercial paper with a nominal
value of R750 million, bearing interest at three month JIBAR plus 10 basis
points, with a final redemption date of 28 November 2011 was issued at full
value, and the funds were used to repay short-term bank borrowings classified as
financing activities.
11.2 Dark Fibre Africa (Pty) Limited
The Group increased its finance lease liability relating to access transmission
links by R395 million.
11.3 ABSA Bank Limited
The loan with a nominal value of R1 250 million was repaid on 30
September 2011 using short-term bank borrowings classified as financing
activities.
11.4 Short-term bank borrowings classified as financing activities
In addition to the movements disclosed in Notes 11.1 and 11.3, the Group further
increased its short-term bank borrowings classified as financing activities with
R1 021 million mainly to fund capital expenditure.
12. Contingent liabilities
12.1 Guarantees
The Group issued various guarantees relating to the financial obligations of its
subsidiaries, which amounted to R59 million (30 September 2010: R10
million; 31 March 2011: R53 million).
Vodacom (Pty) Limited provides an unlimited guarantee for borrowings entered
into by Vodacom Group Limited. The related outstanding borrowings on the
statement of financial position are R3 283 million (30 September 2010: R3 212
million; 31 March 2011: R1 655 million).
12.2 Tax matters
The Group is regularly subject to an evaluation, by tax authorities, of its
direct and indirect tax filings. The consequence of such reviews is that
disputes can arise with tax authorities over the interpretation or application
of certain tax rules applicable to the Group`s business. These disputes may not
necessarily be resolved in a manner that is favourable to the Group.
Additionally, the resolution of the disputes could result in an obligation to
the Group.
13. Regulatory matters
13.1 Consumer Protection Act (`CP Act`)
During the period, the National Consumer Commission (`NCC`) undertook an
investigation into the terms and conditions of the Group`s customer airtime
agreements in South Africa. The NCC subsequently requested the Group to accept a
consent order prior to the date that the Group had given as the date on which it
would align its customer airtime agreements to the CP Act. The Group did not
accept the consent order as it did not agree with its terms and conditions.
Subsequent thereto, the NCC served the Group with a compliance notice requesting
the amendment of certain clauses in the customer airtime agreements and the
distribution of amended agreements to customers. The Group has applied to the
National Consumer Tribunal to vary the notice or to set it aside.
14. Other significant matters
14.1 Vodacom Congo (RDC) s.p.r.l. (`Vodacom Congo`)
The Group continues to participate in the International Chamber of Commerce
arbitration with Congolese Wireless Network s.p.r.l. (`CWN`), relating to
various funding and operational agreements and co-operation in the manner in
which the Vodacom Congo business is run. Notwithstanding the arbitration, the
Group continues to pursue an amicable and constructive resolution with CWN. A
possible resolution may include an exit from this investment. During the period
CWN applied for a court order against a possible sale of this investment by the
Group to third parties.
14.2 Vodacom International Limited (`VIL`)
The claim brought by Namemco against VIL for approximately US$41
million, relating to alleged consulting fees due and the ancillary action for
the annulment of the ex parte order relating to the attachment of VIL`s shares
in Vodacom Congo to satisfy the claim, was heard before the Congolese commercial
court and judgement is still pending. Namemco`s claim was initially brought in
South African courts, where it is also being challenged.
15. Partial disposal of interest in subsidiary
During the period the Group recognised the effect of the sale, originally
entered into during March 2007 and May 2008, of 9% of its stake in VM, SA to the
non-controlling parties for a consideration of US$2.7 million. As at the
reporting date the Group owned 85% of the issued share capital in VM, SA.
16. 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:
16.1 Dividend declared after the reporting date and not recognised as a
liability
An interim dividend of R3 869 million (260 cents per ordinary share) for the
year ending 31 March 2012, was declared on 3 November 2011, payable on Monday 5
December 2011 to shareholders recorded in the register at the close of business
on Friday 2 December 2011. The secondary tax on companies payable on this
dividend amounts to R387 million.
16.2 Acquisitions of businesses
Details on acquisitions of businesses, none of which were material, will be
disclosed in the Group`s integrated report for the year ending 31 March
2012.
16.3 Changes to the Group`s Board
TA Boardman and M Lundal resigned from the Group`s Board on 30
October 2011 and 3 November 2011 respectively. K Witts was appointed as a non-
executive director on 4 November 2011 replacing M Lundal.
In March 2012 RA Shuter will be seconded to Vodafone Netherlands as Chief
Executive Officer and will then step down from the Group`s Board.
Directors
MP Moyo (Chairman), PJ Uys (CEO), P Bertoluzzo1, M Joseph2, A Kekana, SN
Maseko, T Mokgosi-Mwantembe, PJ Moleketi, NJ Read3, RAW Schellekens4, RA Shuter,
K Witts3
Alternate director
TJ Harrabin3
Company secretary
SF Linford
Registered office
Vodacom Corporate Park, 082 Vodacom Boulevard, 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. Italian
2. American
3. British
4. Dutch
7 November 2011
JSE sponsor: UBS South Africa (Pty) Ltd
Debt Sponsor: Absa Capital(the investment banking division of Absa Bank Limited,
affiliated with Barclays Capital)
Non-GAAP information
This announcement contains certain non-GAAP financial information which has not
been reviewed or reported on by the Group`s auditors. 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
Vodafone, the Vodafone logo, Vodafone Mobile Broadband, Vodafone WebBox,
Vodafone Passport, Vodafone live!, Power to You, Vodacom, Vodacom M-Pesa,
Vodacom Millionaires, Vodacom 4 Less and Vodacom Change the World are trademarks
of Vodafone Group Plc (or have applications pending). The trademarks
RIMRegistered, BlackBerryRegistered, are owned by Research in Motion Limited and
are registered in the US and may be pending or registered in other countries.
JavaRegistered is a registered trademark of Oracle and/or its affiliates.
Microsoft, Windows Mobile and ActiveSync are either registered trademarks or
trademarks of Microsoft Corporation in the US and/or other countries. Google,
Google Maps and Android are trademarks of Google Inc. Apple, iPhone and iPad are
trademarks of Apple Inc., registered in the US and other countries. Other
product and company names mentioned herein may be 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 2011 contains `forward-looking
statements`, which have not been reviewed or reported on by the Group`s
auditors, 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.
www.vodacom.com
Date: 07/11/2011 07:10:01 Produced by the JSE SENS Department.
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