Vodacom Group Limited · JSE:VOD
Vodacom — H1 2004 Earnings Presentation
38 slides from Vodacom's earnings presentation, November 2003
Slide 1: Group interim results presentation for six months ended September 30, 2003
Vodacom Group (Pty) Limited Group interim results presentation for the six months ended September 30, 2003 www.vodacom.co.za
Slide 2: Disclaimer
Disclaimer •This presentation has been prepared and published by Vodacom Group (Proprietary) Limited. •Vodacom Group (Proprietary) Limited is a private company and as such is not required by the Companies Act of 61 of 1973, as amended, to publish its results. •Vodacom Group (Proprietary) Limited mak
Slide 3: Content
Content • Alan Knott-Craig, Group CEO ¾Operational highlights • Leon Crouse, Group Finance Director ¾Financial review • Questions 3
Slide 4: Operational highlights
Operational highlights Alan Knott-Craig Group CEO
Slide 5: Strategy
Strategy “Sustained profit growth through customer growth and improved margins, while continuing to pay dividends to our shareholders” 5
Slide 6: Highlights
Highlights • Total customers 9.6 m 25.1% • Revenue growth 19.6% • EBITDA growth 22.2% • Customers per employee 2,137 18.2% • Net profit R1,374 million 49.7% • Office Anywhere • Capital expenditure R1,129 34.3% • Vodacom Mozambique • Capex as % of revenue 10.0% 8.2%pts 6
Slide 7: South African market growth
South African market growth 18.0 15.6 16.0 13.9 14.0 Customers ('mil) 12.0 10.8 10.0 8.5 8.3 7.9 8.0 6.6 7.1 6.0 6.0 5.1 4.2 4.0 3.2 2.0 0.0 Mar 2001 Mar 2002 Mar 2003 Sep 2003 Other operators Vodacom Total 7
Slide 8: South Africa – Market overview
South Africa – Market overview • Estimated penetration 34.9% SA market share • Strong competition 55% • Continued growth • Rand strength, spot increasing 32.7% in last year to $=R7.09 • Fixed-mobile substitution • 1800 MHz priced and issued 45% • 3G price fixed Vodacom Other operators 8
Slide 9: Vodacom South Africa
Vodacom South Africa • Customers of 8.5 million 19.5% Customers ('000) and ARPU (ZAR) • Gross connections 38.3% 2.2 million 8,522 181 183 • ARPU R179 per month 1.1% 179 7,874 • Contract churn at 10.8% • Data revenue increasing 7,130 ¾Active GPRS users 35,642 ¾Active MMS users 19,592 Sep 2002 Mar 200
Slide 10: Vodacom South Africa
Vodacom South Africa • Profitability higher Productivity measures • Increasing productivity • Significant cash generation 2,217 • Margin improvement through 2,017 reduction in distribution 1,980 1,933 1,876 costs 1,854 • Capital expenditure slowing Sep 2002 Mar 2003 Sep 2003 Customers per employee C
Slide 11: Other African operations
Other African operations • Strong customer growth 98.1% Other African customers ('000) • Steady ARPU’s 1,070 • Strong Rand reduces profits and debt 773 • Increasing competition 540 • Significant opportunities ¾Mozambique ¾Nigeria Sep 2002 Mar 2003 Sep 2003 11
Slide 12: Vodacom Tanzania
Vodacom Tanzania • Estimated mobile penetration 2.7% Customers ('000) and ARPU (USD) • Estimated market share 56% 541 23 447 22 • Customers of 541,285 76.9% 306 18 • ARPU of $18 per month 21.7% Sep 2002 Mar 2003 Sep 2003 • Cumulative capex $152 million Customers ARPU 12
Slide 13: Vodacom Congo
Vodacom Congo • Estimated mobile penetration 1.8% Customers ('000) and ARPU (USD) • Estimated market share 45% 458 24 • Customers of 457,707 221.2% 22 248 142 20 • ARPU of $24 per month 9.1% Sep 2002 Mar 2003 Sep 2003 • Cumulative capex $157 million Customers ARPU 13
Slide 14: Vodacom Lesotho
Vodacom Lesotho • Estimated mobile penetration 4.9% Customers ('000) and ARPU (ZAR) • Estimated market share 78% 92 119 77 • Customers of 70,524 23.3% 71 104 87 • ARPU of R119 per month 36.8% • Cumulative capex R198 million Sep 2002 Mar 2003 Sep 2003 Customers ARPU • Cleaning up of inactive customer
Slide 15: Vodacom Mozambique
Vodacom Mozambique • Obstacles overcome ¾Interconnect agreements ¾Legal separation of fixed incumbent and mobile subsidiary • 15-Year licence, commenced August 23, 2003 ¾License fee of $15 million paid in August 2003 • Aiming to launch commercial operations December 2003 • Promising market ¾Estimate
Slide 16: Financial review
Financial review Leon Crouse Group Finance Director
Slide 17: Financial highlights
Financial highlights R million Sep 2002 Sep 2003 Revenue growth 25.5% 19.6% EBITDA margin 32.1% 32.7% Profit from operations margin 19.5% 21.7% Net debt to equity 66.8% 34.7% Capital expenditure as a % of revenue 18.2% 10.0% • Interim dividend of R600 million 17
Slide 18: Group revenue
Group revenue 19.6% 19.8% 25.5% 12,000 11,296 10,338 10,000 9,441 8,629 8,000 7,522 R millions 6,000 4,000 2,000 0 2002 2003 2004 1st six months 2nd six months Revenue seasonality 18
Slide 19: Group revenue
Group revenue Revenue analysis - Sep 2002 Revenue analysis - Sep 2003 53.6% 56.0% 1.9% 1.5% 3.6% 4.2% 13.8% 13.4% 27.1% 24.9% Airtime and access Interconnect revenue Equipment sales International airtime Other Marginal change in mix 19
Slide 20: Group revenue analysis
Group revenue analysis R million Sep 2002 Sep 2003 % change South Africa 8,892 10,605 19.3 Tanzania 408 431 5.6 Congo 95 205 115.8 Lesotho 46 55 19.6 Vodacom Group 9,441 11,296 19.6 Other African operations contribution: 6.1% 20
Slide 21: SA gross connections analysis
SA gross connections analysis Six-monthly gross connections 2,500 2,248 2,000 1,870 2,135 1,653 1,625 Connections ('000) 1,782 1,500 1,385 1,563 1,513 1,273 1,000 500 110 89 110 87 110 0 H1 2002 H2 2002 H1 2003 H2 2003 H1 2004 Contract Prepaid SA overall (incl. community services) Exceptional gross
Slide 22: SA churn analysis
SA churn analysis YTD churn trends 50% 44.1% 45% 40% 34.0% 39.1% 35% 30.1% 30% 24.8% 30.4% 25% 27.2% 20% 23.3% 15% 18.7% 14.5% 10% 11.9% 10.8% 5% 0% 2001 2002 2003 Sep 03 Contract Prepaid SA overall (incl. community services) Contained contract churn 22
Slide 23: SA ARPU analysis
SA ARPU analysis YTD ARPU trends 700 663 629 600 560 493 500 400 300 208 182 183 179 200 98 93 90 87 100 0 2001 2002 2003 Sep 03 Contract Prepaid SA overall (incl. community services) Increased contract ARPU 23
Slide 24: Increasing profits
Increasing profits • Strong EBITDA performance Six-monthly profitability ¾Increasing by 22.2% from the 22.2% 4,000 19.1% prior year 3,698 3,500 3,027 • Very good operating profit 3,000 33.3% 2,542 16.7% 2,451 performance 2,500 R millions 1,838 ¾Increasing by 33.3% from the 2,000 1,575 49.7% prior ye
Slide 25: Profit from operations analysis
Profit from operations analysis R million Sep 2002 Sep 2003 % change South Africa 1,965 2,502 27.3 Tanzania 60 54 (10.0) Congo (84) (6) 92.9 Lesotho 1 - - Holding Companies (104) (99) 4.8 Vodacom Group 1,838 2,451 33.4 Profit from operations margin 19.5% 21.7% Other African operations contribution:
Slide 26: EBITDA analysis
EBITDA analysis R million Sep 2002 Sep 2003 % change South Africa 2,949 3,540 20.0 Tanzania 130 122 (6.2) Congo (56) 33 158.9 Lesotho 14 12 (14.3) Holding Companies (10) (9) 10.0 Vodacom Group 3,027 3,698 22.2 EBITDA margin 32.1% 32.7% Other African operations contribution: 4.3% 26
Slide 27: Factors affecting the trends
Factors affecting the trends Six-monthly equipment sales • Fluctuating low margin 1,600 1,305 1,514 equipment sales 1,200 959 R million 876 751 800 400 • Change in traffic mix continuing 0 2002 2003 2004 • Net interconnect revenue Six-monthly net interconnect revenue continuing to decline 1,600 1,57
Slide 28: Group operating expenses
Group operating expenses Six-monthly operating expenditure 16.3% 19.2% 10,000 27.8% 8,845 7,603 7,846 8,000 6,583 5,947 R million 6,000 4,000 2,000 0 2002 2003 2004 1st six months 2nd six months Seasonal cycle less pronounced 28
Slide 29: Group operating expenses
Group operating expenses Operating expenses - Sep 2002 Operating expenses - Sep 2003 12.9% 15.6% 15.6% 14.1% 3.1% 3.4% 3.9% 4.8% 6.6% 7.1% 57.0% 55.9% Depreciation and amortization Payments to other network operators Other direct network operating costs Staff expenses Marketing and advertising expen
Slide 30: Margin analysis
Margin analysis Six-monthly margins 40% 36.5% 35.6% 33.8% 35% 32.1% 32.7% 30% 23.7% 24.1% 25% 21.7% 20.9% 19.5% 20% 16.2% 13.4% 13.6% 15% 12.2% 9.7% 10% 5% 0% H1 2002 H2 2002 H1 2003 H2 2003 H1 2004 EBITDA margin Operating profit margin Net profit margin 30
Slide 31: Impact of Rand strength
Impact of Rand strength • Capex purchases ¾ Slowing and benefiting from Rand strength • FEC book ¾ Reduced to R801 million from R2.0 billion at September 2002 • IAS 39 effect smaller due to smaller FEC book and slowing capex • Tanzania ¾ Revenue up 45.2% in USD but only up 5.6% in Rand ¾ Profit from
Slide 32: Improving efficiencies
Improving efficiencies SA Customers per employee • Again improved SA 2,500 2,017 2,217 2,000 customers per employee 1,699 R million 1,500 1,245 • Other African operations 1,000 making good progress 500 0 • SA cumulative network 2001 2002 2003 Sep-03 Other African customers per employee capex per cus
Slide 33: Net debt composition and maturity
Net debt composition and maturity R million 2004 2005 2006 2007 2008 >2009 Total South African finance leases 20.2 37.1 62.3 93.4 129.0 550.2 892.2 Vodacom Tanzania 66.8 88.8 113.3 104.9 48.4 83.3 505.5 Vodacom Congo 580.7 72.0 - - - - 652.7 Net bank and cash 569.3 569.3 Net debt 1237.0 197.9 175.6
Slide 34: Net debt profile
Net debt profile Net debt profile • In the process of procuring 13.0% non-recourse project finance 18.0% for Vodacom Mozambique and Vodacom Congo • All shareholder loans repaid 34.0% • 49% of Vodacom Congo debt is off balance sheet 35.0% Foreign denominated, ring-fenced Foreign denominated, not ring
Slide 35: Slowing capital expenditure
Slowing capital expenditure Capital expenditure (excl. intangibles) as a % of revenue 30.0% 25.3% 25.0% 24.0% 20.0% 17.2% 15.0% 10.0% 10.0% 5.0% 0.0% 2001 2002 2003 Sep 03 Strong cash generation 35
Slide 36: Shareholder distributions
Shareholder distributions Shareholder distributions • Paid out R600 million 2003 final 1,800 dividend June 30, 2003 1,600 • Repaid R920 million 1,400 shareholders loan June 30, 2003 1,200 R million 920 1,000 • Paid out R600 million 2004 800 interim dividend September 30, 144 168 47 600 158 2003 400
Slide 37: Strong balance sheet
Strong balance sheet 99% 100% 90% 80% 75% 77% 70% 66% 63% 63% 60% 50% 40% 36% 37% 34% 34% 35% 30% 26% 20% 10% 0% 2001 2002 2003 Sep 03 Net debt to EBITDA % Net debt to net tangible assets % Net debt to equity % Position after payments made to shareholders 37 of R2.2 billion in last six months
Slide 38: Questions?
Questions?