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Vodacom Group Limited (the Company) is an investment holding company. Its principal subsidiaries are engaged in the provision of a wide range of communications products and services including but not limited to voice, messaging, converged services, broadband, data connectivity, mobile financial services and other value-added services.
There have been no material changes to the nature of the Group’s business from the prior year.
Earnings attributable to equity holders of the Group for the year ended 31 March 2017 were R13 418 million (2016: R12 917 million) representing basic earnings per share of 915 cents (2016: 881 cents).
Full details on the financial position and results of the Group are set out in these consolidated annual financial statements.
An ordinary dividend of R11 829 million (2016: R11 829 million) was declared and paid during the year. Details of the final dividend in respect of the year ended 31 March 2017 are included under Events after the reporting period in this directors’ report.
| Rm | 2017 | 2016 | ||
| Declared 14 May 2015 and paid 29 June 2015 | – | 5 952 | ||
|---|---|---|---|---|
| Declared 6 November 2015 and paid 7 December 2015 | – | 5 877 | ||
| Declared 13 May 2016 and paid 27 June 2016 | 5 952 | – | ||
| Declared 11 November 2016 and paid 5 December 2016 | 5 877 | – | ||
| 11 829 | 11 829 |
The Company intends to pay as much of its after tax profits as will be available after retaining such sums and repaying such borrowings owing to third parties as shall be necessary to meet the requirements reflected in the budget and business plan, taking into account monies required for investment opportunities. However, there is no assurance that a dividend will be paid in respect of any financial period and any future dividends will be dependent upon operating results, financial condition, investment strategy, capital requirements and other factors. It is envisaged that interim dividends will be paid in December and final dividends in July of each year. There is no fixed date on which entitlement to dividends arises and the date of payment will be determined by the Board or shareholders at the time of declaration, subject to the JSE Listings Requirements.
The dividend policy for the current year, to pay out at least 90% (2016: at least 90%) of headline earnings per share, remained unchanged. The Company declared dividends of 830 cents (2016: 795 cents) per share for the year ended 31 March 2017.
Going forward, the Company intends to maintain its dividend policy of paying at least 90% of headline earnings, excluding the contribution of the attributable net profit or loss from Safaricom Limited and any associated intangible amortisation. In addition, the Company intends to distribute any dividend it receives from Safaricom Limited, up to a maximum amount of the dividend received, net of withholding tax. The aforementioned change in policy will only be applicable subsequent to the approval of the Safaricom Limited acquisition by shareholders of the Company, other than Vodafone International Holdings B.V. (VIHBV) and its associates. Further details regarding the proposed acquisition of Safaricom Limited may be found in Note 27.
Full details of the authorised and issued share capital of the Company may be found in Note 16. Events after the reporting period that may affect the issued share capital in the future are described in Note 27.
Shareholders approved a special resolution granting a general authority for the repurchase of ordinary shares by the Group, to a maximum of 5.0% (2016: 5.0%) of shares in issue, at the annual general meeting held on Tuesday 19 July 2016, subject to the JSE Listings Requirements and the provisions of the Companies Act of 2008, as amended. Any shares that may be repurchased for the time being shall be in connection with awards made in the normal course in respect of the Group’s forfeitable share plan. Approval to renew this general authority will be sought at the forthcoming annual general meeting on Tuesday 18 July 2017.
Treasury shares are held by Wheatfields Investments 276 (Pty) Limited (Wheatfields), a wholly-owned subsidiary and do not carry any voting rights.
During the year the Group allocated 1 384 016 (2016: 1 765 229) shares to eligible employees under its FSP and no restricted shares were allocated during the current and prior years. Further details may be found in the Remuneration report included in the integrated report as well as in Note 17.
The Group’s shareholder analysis as at 31 March 2017 was as follows:
| Shareholder spread | Number of shareholdings |
% | Number of shares |
% | |
| 1 – 100 shares | 12 768 | 23.85 | 553 097 | 0.04 | |
| 101 – 1 000 shares | 32 149 | 60.06 | 11 522 446 | 0.77 | |
| 1 001 – 10 000 shares | 7 370 | 13.77 | 21 067 464 | 1.41 | |
| 10 001 – 50 000 shares | 850 | 1.59 | 18 305 968 | 1.23 | |
| 50 001 – 100 000 shares | 149 | 0.28 | 10 513 561 | 0.71 | |
| 100 001 – 1 000 000 shares | 195 | 0.36 | 66 650 365 | 4.48 | |
| 1 000 001 shares and above | 48 | 0.09 | 1 359 341 099 | 91.36 | |
| 53 529 | 100.00 | 1 487 954 000 | 100.00 | ||
| Distribution of shareholders | |||||
| Holding companies | 1 | 0.00 | 967 170 100 | 65.00 | |
| Organs of state | 12 | 0.02 | 4 534 948 | 0.31 | |
| Custodians | 284 | 0.53 | 193 274 997 | 12.99 | |
| Retirement benefit funds | 315 | 0.59 | 202 443 331 | 13.61 | |
| Collective investment schemes | 308 | 0.58 | 33 103 011 | 2.22 | |
| Individuals | 46 808 | 87.45 | 32 644 436 | 2.19 | |
| Private companies | 685 | 1.28 | 4 353 975 | 0.29 | |
| Trusts | 4 193 | 7.83 | 9 320 633 | 0.63 | |
| Insurance companies | 97 | 0.18 | 6 839 193 | 0.46 | |
| Wholly owned subsidiary | 2 | 0.00 | 15 421 231 | 1.04 | |
| Public companies | 17 | 0.03 | 9 542 299 | 0.64 | |
| Stockbrokers and nominees | 19 | 0.04 | 2 425 607 | 0.16 | |
| Scrip lending | 22 | 0.04 | 3 697 586 | 0.25 | |
| Foundations and charitable funds | 169 | 0.32 | 946 082 | 0.06 | |
| Close corporations | 239 | 0.45 | 461 106 | 0.03 | |
| Other corporations | 103 | 0.19 | 1 112 980 | 0.07 | |
| Medical aid funds | 32 | 0.06 | 373 917 | 0.03 | |
| Hedge funds | 8 | 0.01 | 132 301 | 0.01 | |
| Investment partnerships | 203 | 0.38 | 141 627 | 0.01 | |
| Treasury | 1 | 0.00 | 12 869 | 0.00 | |
| Unclaimed assets | 11 | 0.02 | 1 771 | 0.00 | |
| 53 529 | 100.00 | 1 487 954 000 | 100.00 | ||
| Non-public and public shareholders | Number of shareholdings |
% | Number of shares |
% | |
| Non-public shareholders | 33 | 0.06 | 1 175 305 573 | 78.99 | |
| Directors, prescribed officers and associates | 18 | 0.03 | 1 023 849 | 0.07 | |
| Treasury | 1 | 0.00 | 12 869 | 0.00 | |
| Wholly-owned subsidiary | 2 | 0.01 | 15 421 231 | 1.04 | |
| Strategic holdings (more than 10.0%) | 11 | 0.02 | 191 677 524 | 12.88 | |
| Holding company | 1 | 0.00 | 967 170 100 | 65.00 | |
| Public shareholders | 53 496 | 99.94 | 312 648 427 | 21.01 | |
| 53 529 | 100.00 | 1 487 954 000 | 100.00 | ||
| Geographical holdings by owner | |||||
| United Kingdom | 149 | 0.28 | 52 705 921 | 3.54 | |
| South Africa1 | 52 984 | 98.98 | 1 277 716 073 | 85.87 | |
| United States | 117 | 0.22 | 100 460 139 | 6.75 | |
| Europe | 96 | 0.18 | 47 865 385 | 3.22 | |
| Other | 183 | 0.34 | 9 206 482 | 0.62 | |
| 53 529 | 100.00 | 1 487 954 000 | 100.00 |
| Beneficial shareholders holding 5% or more of the issued capital | Total shareholding |
% of shares in issue |
||
| Vodafone Investments SA (Pty) Limited | 967 170 100 | 65.00 | ||
| Government Employees Pension Fund | 191 677 524 | 12.88 | ||
| 1 158 847 624 | 77.88 |
| Share price performance | 2017 | 2016 | ||
| Opening price 1 April | R160.53 | R131.61 | ||
|---|---|---|---|---|
| Closing price 31 March | R152.00 | R160.53 | ||
| Closing high for the year | R171.10 | R160.53 | ||
| Closing low for the year | R140.00 | R127.23 | ||
| Number of shares in issue | 1 487 954 000 | 1 487 954 000 | ||
| Volume traded during the year | 458 311 450 | 739 664 289 | ||
| Ratio of volume traded to shares issued (%) | 30.80 | 49.71 |
Note:
1. Direct shareholding held by Vodafone Investments SA (Pty) Limited, a South African entity, with the ultimate shareholder being Vodafone Group Plc, registered in the
United Kingdom.
During the current year the Group drew on a facility from Vodafone Investments Luxembourg s.a.r.l. with a nominal value of R4 000 million, used primarily for capital expenditure. The loan bears interest payable quarterly at three-month JIBAR plus 1.57%, is unsecured and repayable on 29 July 2021. The Group repaid R1 470 million on a 3 year, R3 000 million Vodafone Investments Luxembourg s.a.r.l loan on 31 March 2017, reducing the capital balance to R1 530 million. The loan bears interest at three-month JIBAR plus 1.15% and is repayable on 24 November 2017.
During the prior year, the Board approved a plan to exit its investment in Helios Towers Tanzania LTD (Helios) through a sale of shares which was expected to be completed within the current financial year. Due to circumstances beyond the Group’s control, the sale has been delayed beyond the initial expected closing period. The Board as well as the purchaser, HTA Holdings Limited (HTA) remain committed to the transaction and are currently in the process of obtaining the necessary regulatory approvals in order to effect the sale. It is highly probable that the sale will be completed in the 2018 financial year, and the investment therefore continues to be classified as a non-current asset held for sale. US$30 million of the associated shareholder’s loan, comprising the nominal value of US$22 million and accrued interest thereon, has been purchased by HTA. The Group has not recognised any impairment losses in respect of its investment, since the proceeds are expected to exceed the carrying value of the investment.
Details of the Group’s capital expenditure are set out in Notes 9 and 10, and commitments are set out in Note 24.
The Group is ultimately controlled by Vodafone Group Plc which owns 65.0% of the issued shares through Vodafone Investments SA (Pty) Limited.
Vodafone Group Plc is incorporated and domiciled in the United Kingdom.
Movements in the directorate during the year under review:
| Appointments | |
| 8 December 2016 | V Badrinath |
| Resignations | |
| 8 December 2016 | S Timuray |
Mr MP Moyo, independent chairman of the Company, will retire and step down from the Board at the forthcoming annual general meeting to be held on Tuesday, 18 July 2017. The Board is in the process of identifying a new independent chairman and a further announcement will be made in due course.
In terms of the Company’s memorandum of incorporation, Mr V Badrinath, having been appointed since the last annual general meeting of the Company, will retire at the forthcoming annual general meeting to be held on Tuesday 18 July 2017. In terms of the memorandum of incorporation, Ms TM Mokgosi-Mwantembe and Messrs MP Moyo and RAW Schellekens retire by rotation. Ms S TM Mokgosi-Mwantembe and Mr RAW Schelleken are eligible and available for re-election. Mr Moyo has indicated that he is not available for re-election and therefore will retire as chairman and director at the conclusion of the annual general meeting. Their profiles appear in the ‘Notice of annual general meeting’ included in the integrated report.
As at the date of this report, the directors of the Company were as follows:
MP Moyo (Chairman), DH Brown, BP Mabelane, TM Mokgosi-Mwantembe, PJ Moleketi.
M Joseph*, JWL Otty^ , M Pieters•, RAW Schellekens•, V Badrinath~.
MS Aziz Joosub (Chief Executive Officer), T Streichert (Chief Financial Officer)@.
The Company Secretary is SF Linford and her business and postal addresses appear on the Corporate information sheet included in the integrated report.
* American, ^ British, •Dutch, @German, ~ French.
| 2017 | 2016 | ||||||
| Direct | Indirect | Direct | Indirect | ||||
| Executive directors | |||||||
| MS Aziz Joosub | 875 361 | – | 873 319 | – | |||
| Independent non-executive directors | |||||||
| MP Moyo | 250 | 3 645 | 250 | 3 645 | |||
| PJ Moleketi | 643 | 15 480 | 643 | 15 480 | |||
| Prescribed officers | |||||||
| V Jarana | 128 470 | – | 122 630 | – | |||
| 1 004 724 | 19 125 | 996 842 | 19 125 | ||||
The following change in beneficial interests occurred between the end of the reporting period and the date of this report: Mr V Jarana
sold 4 880 shares at a price of R164.32 per share on 25 May 2017.
On 30 September 2016 the Pretoria High Court granted an application by the Ministry of Telecommunications and Postal Services (the Ministry) interdicting ICASA from implementing the spectrum licencing process contemplated in the Invitation to Apply (ITA) for the licensing of spectrum in the 700MHz, 800MHz and 2600MHz bands, pending the outcome of a judicial review on the lawfulness of the ICASA ITA.
During October 2013 Cell C lodged a complaint with the Competition Commission of South Africa. It was alleged that the Group’s South African business had abused its market dominance in contravention of Section 8 of the Competition Act. The Competition Commission investigated this complaint and on 18 April 2017 the Competition Commission announced its decision not to refer the matter to the Competition Tribunal due to insufficient evidence required to successfully prosecute.
In each country where the Group is subject to customer registration requirements, the Group continues to register customers to achieve compliance, and also continues to participate in government and industry co-ordinated meetings overseeing the implementation and improved efficiency of the registration processes. This includes introducing electronic registration and verification processes common to all operators, working with government to extend national identification document databases for verification, and information and education to both customers and dealers about the importance of complying with registration requirements. Further details may be found in the Group’s regulatory report which is available online at www.vodacom.com.
In October 2016 the Minister of Telecommunications and Postal Services published the cabinet-approved White Paper. The White Paper sets out a framework on how the government wants to provide access to modern communications infrastructure and services to facilitate the entry of new players and the meaningful participation of all citizens, including those in rural areas. Its adoption will require various amendments to existing laws and regulations flowing from the Electronic Communications Act.
During May 2017, a high level agreement was reached between the Ministry and industry stakeholders, providing for:The ICT Sector BEE Code (the new Code), as amended, was gazetted in November 2016, with the effective date being 1 April 2016. One of the most noticeable changes in the new Code is that the scorecard BBBEE level recognition has changed materially and, if applied without remedy, would have resulted in the Vodacom BBBEE status dropping from Level 2 to Level 8. The consolidated South African operations have introduced new initiatives, resulting in the Group achieving an overall level 4 BBBEE status for the 2017 financial year of assessment.
The ARC Committee discharged all of those functions delegated to it in terms of its mandate, section 94(7) of the Companies Act of 2008, as amended and the JSE Listings Requirements. Further details on the role and function of the ARC Committee may be found in the Risk management report included in the integrated report.
The auditors’ business and postal address appear on the Corporate information sheet included in the integrated report.
In compliance with JSE Listings Requirements, the Board has considered and is satisfied that Ms Sandi Linford, the company secretary, is competent, has the relevant qualifications and experience and maintains an arm’s length relationship with the Board. In evaluating these qualities, the Board has considered the prescribed duties and responsibilities of a company secretary which includes the Companies Act of 2008, as amended, JSE Listings Requirements and governance requirements as set out in King IV.
During the current year, Vodacom (Pty) Limited concluded facilities leasing, services and roaming agreements with WBS. MTN and Cell C have raised complaints with both the sector regulator, the Independent Communications Authority of South Africa (ICASA) and the Competition Commission. The Competition Commission is determining whether the roaming arrangement between Vodacom (Pty) Limited and WBS is a notifiable merger under the Competition Act, Act 89 of 1998. ICASA, on the other hand, is conducting an enquiry to determine whether this transaction contravenes the requirements of the Electronic Communications Act 2005, Act 36 of 2005, as amended.
In June 2016, the Parliament of Tanzania passed the Finance Act, 2016 which amends listing requirements under the Electronic and Postal Communication Act, 2010 (EPOCA), to introduce mandatory listing requirements and require licensed telecommunications operators to list 25% of their authorised share capital through an initial public offering (IPO) on the Dar Es Salaam Stock Exchange (DSE).
On 16 November 2016, Vodacom Tanzania Limited was converted from a private company to a public company, Vodacom Tanzania Public Limited Company (Vodacom Tanzania). On 25 November 2016, Vodacom Tanzania submitted its applications for an IPO and listing to the Capital Markets and Securities Authority (CMSA) and DSE, respectively. The DSE and CMSA approved the applications on 17 February 2017 and 28 February 2017, respectively. The IPO opened on 9 March 2017 and closed on 11 May 2017. The listing of shares is expected to take place in June 2017, subject to the approval of the CMSA and DSE.
Vodacom Congo is not in compliance with the equity requirements of the Organisation for the Harmonisation of Business Law in Africa (OHADA). Vodacom Congo would need to increase its share capital to meet the minimum OHADA requirement. This matter is currently being discussed by the Board and shareholders of Vodacom Congo. No agreement has yet been reached between the parties.
A final dividend of R6 473 million (435 cents per ordinary share) for the year ended 31 March 2017, was declared on Friday 12 May 2017, payable on Monday 26 June 2017 to shareholders recorded in the register at the close of business on Friday 23 June 2017. The net dividend after taking into account dividend withholding tax for those shareholders not exempt from dividend withholding tax is 348.00000 cents per share.
On 14 May 2017 the Group entered into an agreement with VIHBV to acquire 87.5% of Vodafone Kenya Limited, which in turn holds 39.93% in Safaricom Limited. Further details may be found in Note 27.2.
The Board is not aware of any matter or circumstance arising since the end of the reporting period, not otherwise dealt with in the consolidated annual financial statements, which significantly affects the financial position of the Group as at 31 March 2017 or the results of its operations or cash flows for the year then ended.
During the current year, PricewaterhouseCoopers Inc. (PwC) were appointed as the Group’s auditors. At the annual general meeting on Tuesday 18 July 2017, shareholders will be requested to appoint PwC as the Group’s auditors for the 2018 financial year and it will be noted that Mr DB von Hoesslin will be the individual registered auditor who will undertake the audit.
