South Africa’s Vodacom reported a 6.6% drop in earnings, here’s why

PUBLISHED: Mon, 13 May 2019 11:37:34 GMT

JOHANNESBURG (Reuters) – South Africa’s mobile phone operator Vodacom reported a 6.6% drop in full-year earnings due to one-off costs related to a share scheme offered to black investors.

Headline earnings per share (EPS) for the full-year ended March fell to 862 cents from 923 cents a year earlier.

Headline EPS is the main profit measure in South Africa and strips out certain one-off items.

Vodacom, which is majority owned by Vodafone, concluded a broad-based black economic empowerment (BEE) ownership deal in September, which saw Vodacom issue additional shares.

Under black economic empowerment rules, South African companies are encouraged to meet quotas on black ownership, employment and procurement as part of a drive to reverse decades of exclusion under apartheid.

It also updated its medium-term capital expenditure target to reflect the IFRS 15 accounting standard and also changed its profitability target to operating profit from earnings before interest and taxes to include the benefits of the Kenyan Safaricom acquisition.

Medium-term group capex is now expected to be in the range of 13%-14.5% from 12%-14%, while the operating profit target is expected to be in the mid-high single digit growth rate.

Vodacom, which competes with MTN group and Telkom, said group service revenue jumped 5 percent, led by a strong performance overseas.

“It was a stellar year for our International portfolio where economic and political environments have improved,” group Chief Executive Officer Shameel Joosub said in a statement.

Vodacom grew service revenue there by 15.6 percent and expanded margins, while in South Africa service revenue inched up by 2.1 percent due to price cuts and a stagnant economy.

South Africa has been considering regulating the price of internet data as well as out-of-bundle charges as part of efforts to bring costs down.

Reporting by Nqobile Dludla; Editing by Himani Sarkar and Louise Heavens

Sign Up for Our Newsletter Daily Update
Get the best of CNBC Africa sent straight to your inbox with breaking business news, insights and updates from experts across the continent.
Get this delivered to your inbox, and more info about about our products and services. By signing up for newsletters, you are agreeing to our Terms of Use and Privacy Policy.