Safaricom KSh74.7Bn Net Profit Up on M-Pesa, Data Growth

Safaricom, Kenya’s biggest telecoms operator, on Wednesday said its Earnings Before Interest and Taxes (EBIT) grew 13.5% up from KSh 89.0 Billion to KSh 101.0 Billion for the period for the full year. 

Profit after tax was 19.5%  up translating to Ksh 73.66 billion attributed to a 4.9% increase in revenue and lower costs.

“The business has delivered exceptionally well, outperforming the guidance, in the process generating considerably solid returns to our shareholders,” said Michael Joseph, the outgoing Safaricom Chief Executive. “A testament of our renewed commitment to be Simple, Transparent and Honest in how we deal with our customers and our stakeholders.”

“I am proud of what the team has been able to deliver despite such a tough business year. We have stayed the course, given customers more value, and put the consumer first by delivering relevant products and services.”

Revenue from M-Pesa, grew 33.6% to 84.4 billion shillings driven by savings and lending and P2P which make up two thirds of the total growth. However, M-Pesa’s revenue contracted by 32.8% for the year owing to the reduced betting activity.

“M-Pesa ecosystem continues to expand beyond a payment platform. The recently announced partnership with Visa
will eliminate barriers to global commerce merchants and give M-Pesa customers more opportunities. This partnership will benefit more than 22 million M-Pesa customers to make transactions at more than 61 million merchant locations throughout Visa global network,” Joseph said.

Revenue from the mobile data business rose 12.1% to 40.7 billion shillings driven by increased smartphone penetration and usage and a 28.3% reduction in effective rate per MB.

“It is worth calling out that on an underlying basis, that is excluding the impact of the contraction in the betting industry and the M-PESA transactions we made free in response to Covid, we actually grew 5.9% for the full year,” Chief Financial Officer Sateesh Kamath said.

Safaricom’s service revenue in the year grew 4.8% to KSh 251.22 billion as at 31 March 2020 from KShs 239.77 billion driven by sustained customer growth, mobile data growth returning to double-digit along with sustained M-PESA and fixed data growth.

Chief Financial Officer Sateesh Kamath said the telco continued to post solid returns to their shareholders, despite challenges on the top line in the period.

He disclosed that they have switched to headline earnings, a measurement of a company’s earnings based solely on operational and capital investment activities after acquiring the M-PESA brand, ‘and this acquisition gave us a one-off gain’.

“As a result,  profit and total comprehensive income for the year grew 19.5% YoY but normalized for this exceptional item, it grew 14.3% YoY.”

FUTURE OUTLOOK

Safaricom CEO Peter Ndegwa says going forward, they will continue focusing on M-Pesa, data business and expansion into other markets like Ethiopia.

“We will focus on developing a range of digital products and services that will provide sustainable solutions to challenges in sectors like: agriculture, health, education and essential services. Whilst FY21 is going to be a  challenging one, I feel as a business we are well placed to navigate our way through the uncertainty that lies ahead.  

We will leverage the strength of our balance sheet and our resilient business model to ensure we continue to innovate and generate efficiencies for our customers and shareholders alike thus safeguarding our performance for the future,” said Peter Ndegwa, Chief Executive.

The Board of Directors has proposed dividend for the year at KShs 56.09 billion. The proposed dividend per share (DPS) of KSh 1.40.

The dividends will be paid on or about 1 November 2020.

****

AIB Capital Ltd, a Stock brokerage, Bond Trading, and Corporate Finance advisory company said Safaricom’s total revenue growth of 5% was below their forecasted growth mainly due to a slower than expected growth of MPESA revenues.

“The growth in EBIT has been credited to a solid commercial performance and aided by a stronger focus on digitization and improvement in operating efficiencies with Operating expenditures in the financial year declining 4.9% Year-on-Year. We are currently reviewing our current target price of 32.8,” the firm said in its commentary.