JSE-listed Vodacom Group on Monday posted a 2.7% decline in earnings before interest, taxes, depreciation and amortisation (Ebitda) to R26.56-billion; however, on a normalised basis, Ebitda increased 8.5% during the six months ended September 30.

The group’s reported headline earnings a share declined 19.4% to 353c, largely attributable to a currency depreciation in Ethiopia and one-off costs in Vodacom’s International business, while earnings a share decreased 18.4% to 354c apiece.

According to Vodacom Group CEO Shameel Joosub, the first half of the current financial year was characterised by significant currency headwinds that were met with a resilient operational response.

“While our bottom line was impacted by various one-offs, I am confident that we are poised for a stronger second-half performance,” he said.

During the first six months under review, group revenue increased 1% to R73.54-billion – an increase of 10.4% on a normalised basis – despite significant foreign exchange headwinds.

Currency headwinds led to a 1.2% decline in group service revenue to R58.64-billion on a reported basis. On a normalised basis, group service revenue increased 9.9%, the higher end of Vodacom’s medium-term target.

Financial services revenue increased 7.8%, or 17.6% on a normalised basis, to R6.7-billion, contributing 11.4% to group service revenue.

Beyond Mobile, which includes digital and financial services, fixed and Internet of Things, contributed 21.1% to group service revenue, underpinned by mobile financial services such as payments, savings, loans and merchant offerings.

“Our mobile money platforms, including Safaricom, processed $421.3-billion of transaction value over the last 12 months, cementing our leadership as an African fintech company,” Joosub commented.

“From a financial performance perspective, I am particularly pleased with the manner in which our Egyptian business navigated its way through a material currency devaluation to produce R13-billion in service revenue, underpinned by a stellar 44.1% growth in local currency,” he continued, adding that this was supported by strong customer engagement in connectivity and excellent growth in Vodafone Cash, and contributed to a 5.9% increase in customers to 48.3-million in Egypt.

In South Africa, the number of customers increased 4.2% to 49.2-million and, driven primarily by Beyond Mobile services, the consumer segment and prepaid mobile data, service revenue in South Africa grew 1.3% to R31.1-billion, despite pressure in the wholesale segment.

Beyond Mobile services increased 8.1%, contributing R5.5-billion, or 17.7%, of service revenue.

“By containing costs below inflation and delivering revenue growth, South Africa grew Ebitda by 2.3%, while operating profit increased 2.4% on the back of a moderated investment into energy resilience given the recent stability of the national electricity grid,” Joosub said.

Further, the company reported that 19.1% service revenue growth in Tanzania and 9% growth in Democratic Republic of Congo (DRC) were the drivers of its commercial performance in our International business.

“On a normalised basis our International business grew service revenue at 6.2%, with the customer base up 4.5% to 56.1-million. While this helped offset one-off costs in DRC and the impact of repricing in Mozambique, Ebitda from this portfolio declined 20%.

“This was disappointing given the commercial momentum in the segment, however, we do expect an improved Ebitda performance from this segment in the second half.”

Meanwhile, Safaricom delivered an excellent result in Kenya, while Vodacom’s Ethiopian greenfield operation faced a material currency impact in the period.

In Kenya, service revenue increased 12.9%, supported by strong adoption of 4G services and sustained M-Pesa growth, which increased 16.6% in revenue, supported by business payments.

In Ethiopia, the group reported a 47.1% increase in customers to 6.1-million customers.

However, Safaricom’s contribution of R1.3-billion to operating profit was impacted by the currency reforms in Ethiopia. In contrast, Safaricom’s underlying net profit result demonstrated strong growth.

“Given the expected phasing impact of the currency deprecation in Ethiopia on headline earnings for the full financial year, the board declared an interim dividend of 285c, equating to an 86% pay-out,” Joosub noted.

“It is pleasing that our markets continue to deliver strong operational momentum, despite the material currency devaluations in Egypt and Ethiopia.”

Despite the pressures associated with this economic cycle, Vodacom will continue to invest in and execute on its strategy.

While capital expenditure (capex) decreased 7.7% to R8.81-billion in the six months to September 30, the company remains on track to invest 13% to 14.5% of revenue into capex, in line with its medium-term targets.

Over the past five years, Vodacom has invested almost R80-billion across its markets, with a concerted effort to accelerate rural coverage.

“While we remain mindful of an evolving macroeconomic environment across our footprint, including foreign exchange rate risk, I believe that the group is well positioned to capitalise on opportunities once the global economy shifts from its current cautious optimism to sustainable growth. This means that we will relentlessly continue to pursue our purpose of connecting people for a better future,” Joosub concluded.