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Telkom SA Limited - Vodacom annual results for the year ended March 31, 2003
Telkom SA Limited
(Registration Number 1991/005476/06)
ISIN ZAE000044897
JSE and NYSE Share Code TKG
("Telkom")
Vodacom annual results for the year ended March 31, 2003
Vodacom Group (Proprietary) Limited ("Vodacom") (not listed) in which Telkom has
a 50.0% holding, has today issued its annual results for the year ended 31 March
2003.
Vodacom announced consolidated operating revenues of R19,779 million (US$
2,504 million) for the year ended March 31, 2003, an increase of 22.5% over the
year ended March 31, 2002. Operating profit increased 19.6% to R4,330 million
(US$ 548 million) for the year ended March 31, 2003. Vodacom delivered strong
operational performance, maintained its leadership position in the South African
market and further grew its other African businesses.
Highlights
* Total customers increased 26.0% to 8.6 million
* Record number of South African gross connections of 3.5 million
* South African contract annual churn reduced to 11.9%, compared to 14.5% in
2002
* South African ARPU"s beginning to stabilise at R183 (US$23) compared to
R182 in 2002
* Launch of Vodacom Congo in May 2002
* SMS growth of 64.7% to 1.5 billion SMSs compared to 911 million in 2002
* Introduction of "MyLife", Vodacom"s GPRS and MMS service offering in
October 2002.
Financial performance
Vodacom again posted record results in the 2003 financial year. Despite
changing local conditions and the rapid growth of start-up operations in
Tanzania and the Democratic Republic of Congo (DRC), profit margins only
decreased marginally as Vodacom increased efficiencies.
Revenue
Revenue increased 22.5% (2002: 21.7%) to R19,779 million (2002: R16,151
million). The increase in revenue was primarily driven by customer growth and to
a lesser extent by standard tariff increases and an increase in equipment sales
into the DRC and Tanzania, as well as an uptake of 2.5G handsets in South
Africa. Vodacom"s revenue from other African operations increased 66.7% (2002:
302.7%) to R1,235 million (2002: R741 million).
Operating profit
Profit from operations increased 19.6% (2002: 41.8%) to R4,330 million (2002:
R3,621 million) and operating profit margin decreased marginally to 21.9% (2002:
22.4%). Operating profit margins decreased largely as a result of the increase
in marketing and incentive costs and the change in the traffic mix and the
resultant increase in interconnect costs. Operating profit was also impacted by
the increased interconnection tariffs under amended interconnection agreements.
EBITDA
EBITDA increased 17.8% (2002: 35.9%) to R6,704 million (2002: R5,691
million). EBITDA margin decreased to 33.9% (2002: 35.3%). Excluding the impact
of low margin cellular phone and equipment sales, the EBITDA margin was 38.3% in
2003, down from 39.2% in 2002.
Net income
The past three years" net income has been significantly distorted by two main
factors. Firstly, the disposal of non-core businesses and integration costs,
principally relating to the consolidation of previously independent service
providers, resulted in an abnormal profit of R56 million in 2002 and an abnormal
loss of R213 million in 2001. Secondly, the adoption of IAS 39, "Financial
Instruments: Recognition and Measurement", resulted in a before tax loss of R486
million in the year ended March 31, 2003 and profit before tax of R352 million
in the year ended March 31, 2002. Although it is Vodacom"s policy to hedge all
foreign denominated commitments from South Africa, it does not qualify for hedge
accounting in terms of IAS 39 and the impact of fluctuations in exchange rates
on the market value of the financial instruments are required to be reflected
through the income statement.
Capital expenditure
Despite African expansion, Cell C roaming, GPRS launch and the installation
of 1800 MHz equipment, capital expenditure decreased 20.6% to R3,399 million, or
17.2% of revenue in 2003 (2002: R4,279 million; 26.5% of revenue). Capital
expenditure decreased 24.4% and 7.8% to R2,488 million (2002: R3,291 million)
and R911 million (2002: R988 million) in South Africa and other African
countries respectively.
Financial structure and funding
Vodacom"s balance sheet continued to strengthen, with a net debt/EBITDA ratio
of 34.2%, almost half of the prior year ratio of 62.9% and well within terms of
borrowing covenants. Total interest and non-interest bearing debt decreased
18.5% to R3,501 million (2002: R4,297 million) as a result of the 37.2% decrease
in South Africa"s total debt to R2,327 million (2002: R3,706 million). The
increase in other African total debt of 98.6% to R1,174 million (2002: R591
million) was primarily as a result of R336 million utilisation of an extended
credit facility for Vodacom Congo, R502 million draw down of a project financing
facility in Tanzania and the repayment of R400 million of funding loans in
Vodacom Group.
Shareholder distributions
Distributions to shareholders increased 3.2% to R768 million in 2003,
comprising of interest of R168 million (2002: R144 million) and dividends of
R600 million (2002: R600 million). The low growth in shareholder distributions
despite strong cash flow growth is due to Vodacom"s intention to repay
shareholder loans of R920 million on 30 June 2003.
Accounting policies
The consolidated annual financial statements have been prepared in accordance
with International Financial Reporting Standards and South African Statements of
Generally Accepted Accounting Practice and have been prepared on the historical
cost basis, unless otherwise indicated. The consolidated annual financial
statements have been presented in South African Rands, as this is the currency
in which the majority of the Group"s transactions are denominated. Accounting
policies have remained consistent, in all material respects, with those of the
prior year.
Summary audited group income statement
March 31, 2002 2003 %
Amounts in accordance with IFRS Change
(in ZAR millions)
Revenue 16,151 19,779 22.5
Operating expenses 12,530 15,449 23.3
Operating profit 3,621 4,330 19.6
Interest, dividends and other financial
income received 840 742 (11.7)
Finance charges (868) (1,546) (78.1)
Profit before tax 3,593 3,526 (1.9)
Taxation (1,190) (1,199) 0.8
Profit after tax 2,403 2,327 (3.2)
Minority interests (30) (112) 273.3
Net profit 2,373 2,215 (6.7)
Summary audited group balance sheet
March 31, 2002 2003 %
Amounts in accordance with IFRS Change
(in ZAR millions)
Total assets 15,359 16,816
Current assets 4,145 4,690
Bank and cash balances 719 1,207
Other current assets 3,426 3,483
Non-current assets 11,214 12,126
Total liabilities 9,884 9,891
Current liabilities 7,990 7,009
Short-term debt 1 3,517 1,769
Other current liabilities 4,473 5,240
Non-current liabilities 1,894 2,882
Long-term debt 2 780 1,732
Other non-current liabilities 1,114 1,150
Minority interests 11 88
Shareholders" equity 5,464 6,837
Summary audited statements of changes in equity
(IN ZAR MILLIONS)
2002 2003
Balance at 1 April 3,506 5,464
Change in accounting policy 85 -
Restated balance 3,591 5,464
Net profit for the year 2,373 2,214
Dividends declared (600) (600)
Foreign currency translation reserve 120 (262)
Foreign currency translation reserve - deferred
taxation (20) 21
Balance at 31 March 5,464 6,837
Summary audited group cash flow data
March 31, 2002 2003 %
Amounts in accordance with IFRS change
(in ZAR millions, except percentages)
Cash flow from operating activities 3,815 4,342 13.8
Cash flow used in investing activities (4,543) (3,243) (28.6)
Cash flow from financing activities 571 518 (9.3)
Summary audited segment analysis
2002 2003 %
change
(in ZAR millions, except percentages)
Revenue 16,151 19,779 22.5
South Africa 15,410 18,544 20.3
Other African countries 741 1,235 66.7
Operating profit/(loss) 3,621 4,330 19.6
South Africa 3,540 4,334 22.4
Other African countries 81 -4 -104.9
Operating profit margin (%) 22.4 21.9
Operational data
(Non-financial numbers are unaudited) %
2002 2003 change
Total customers (thousands) 6,863 8,647 26.0
South Africa
Customers (thousands) 4 6,557 7,874 20.1
Contract 1,090 1,181 8.3
Prepaid 5,439 6,664 22.5
Community services telephones 28 29 3.6
Churn (%) 27.2 30.4 11.8
Contract 14.5 11.9 (17.9)
Prepaid 30.1 34.0 13.0
Average monthly revenue per customer (ZAR) 5 182 183 0.5
Contract 5 560 629 12.3
Prepaid 93 90 (3.2)
Community services 1,719 1,861 8.3
Number of employees 6 3,859 3,904 1.2
Number of customers per employee 1,699 2,017 18.7
Other African countries
Customers (thousands) 306 773 152.6
Average monthly revenue per customer
Lesotho (ZAR) 144 104 (27.8)
Tanzania (USD) 27 22 (18.5)
Democratic Republic of the Congo (USD) n/a 20 NA
Number of employees 494 502 1.6
Number of customers per mobile employee 619 1,540 148.8
1 Includes short-term portion of finance leases, shareholder loans, non-
interesting bearing debt, short-term interest-bearing debt and utilised credit
facilities.
2 Includes long-term portion of interest-bearing debt.
3 EBITDA includes a net gain of Nil and R56 million in the 2003, and 2002
financial years, respectively, for integration costs, disposals of operations
and impairments.
4 18.2% (2002:13.9%) of Vodacom"s total reported customers, 20.5% (2002:15.9%)
of its prepaid customers and 5.3% (2002: 3.8%)% of its contract customers in
South Africa were inactive for a period of 3 months as of March 31, 2003.
5 Value added service revenue from previously partially owned service providers
is included in contract and total average monthly revenue per customer from
October 1, 2001, at which time Vodacom consolidated these previously partially
owned service providers.
6 Includes 219 and 423 total temporary employees as of March 31, 2003 and 2002
respectively.
Johannesburg
18 June 2003
Special note regarding forward-looking statements
All statements contained herein, as well as oral statements that may be made
by Telkom SA Limited or by officers, directors or employees acting on behalf of
the Telkom Group, that are not statements of historical fact constitute "forward
looking statements" within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995, specifically Section 21E of the U.S. Securities
Exchange Act of 1934, as amended. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that could cause our actual
results to be materially different from historical results or from any future
results expressed or implied by such forward-looking statements. Among the
factors that could cause our actual results or outcomes to differ materially
from our expectations are those risks identified under the caption "Risk
Factors" contained in the prospectus relating to Telkom"s initial public
offering filed with the U.S. Securities Exchange Commission and available on
Telkom"s website at www.telkom.co.za/ir, including, but not limited to,
increased competition in the South African mobile communications markets;
developments in the regulatory environment; general economic, political, social
and legal conditions in South Africa and in other countries where Vodacom
invests; fluctuations in the value of the Rand; and other matters not yet known
to us or not currently considered material by us. You should not place undue
reliance on these forward-looking statements. All written and oral forward-
looking statements attributable to us or persons acting on our behalf are
qualified in their entirety by these cautionary statements. Moreover, unless we
are required by law to update these statements, we will not necessarily update
any of these statements after the date of this press release, either to conform
them to actual results or to changes in our expectations.
Date: 18/06/2003 02:00:08 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
