Safaricom HY Results: Net Profit Drops 6% to Ksh 33 Billion

Safaricom HY Results: Net Profit Drops 6% to Ksh 33 Billion

Peter Ndegwa Chief Executive Officer (CEO) of Safaricom PLC

Safaricom on Monday posted a 6 percent decline in profit at Ksh 33 Billion for the September quarter with expectations of lower core earnings for FY21.

The company had registered a KSh35 billion in the same period a year ago.

The decline was attributed to lower M-Pesa earnings following the Central Bank of Kenya’s directive to remove fees on transactions less than KSh1000. 

M-Pesa revenue fell by Ksh6.1 billion while income from betting witnessed KSh700 million drop.

“The free cash transfers have weighed hard on our half-year results. M-Pesa revenues now account for 30 percent of total revenues in comparison to 33 percent last year,” noted Safaricom Acting Chief Finance Officer Illana Darcy.

The telco expects its core earnings to drop by at least 10 percent in the year to the end of next March, hurt by the impact of the coronavirus crisis.

Safaricom Chief Executive Officer Peter, “Our business has proved to be resilient despite tough operating conditions. There is no doubt that COVID-19 has dealt a huge blow to many people not just in Kenya, but across the globe. This has been a tough period for businesses—small and large alike—and our customers. We are committed to walk through this journey together.”

Despite a 4.8 percent drop in Service Revenue, Safaricom increased capital expenditure by  25.5 percent to Ksh22.75 Billion, signaling investment commitment to building a network infrastructure that supports the country’s economic development.

Voice service revenue dropped by 6.5 percent to Ksh 40.19 billion while M-PESA revenue dropped by 14.5 percent to Ksh 35.89 billion

“As we go into our third decade as an organization, we aim to create a technology business by developing new digital ecosystems in health, agriculture and education sectors as we aim to provide digital solutions for our customers,” added Mr. Ndegwa.

“The Board is encouraged by the positive trajectory witnessed going into the second quarter of our financial year. We remain steadfast in ensuring management continues to build on the strong company position that has been established over the last 20 years, running a purpose-driven business, that continues to transform lives and drive future growth,” said Michael Joesph, Chairman, Safaricom Board of Directors.

“Without much surprises from our 1H21 expectations, we maintain our HOLD rating on SCOM at a fair value estimate of Ksh 31.34. Though the free transaction costs will be in place to the end of the year, the protracted resolution of the pandemic increases the risks of longer than would be expected low transaction costs regime,” says Genghis Capital in its Safaricom Plc (NSE: SCOM) 1H21 Earnings Note.