Vodacom hikes dividend but sets out policy change

Vodacom Group on Monday declared a full-year dividend of R4.30/share after reporting a solid performance from South Africa, its biggest market.

This means Vodacom will return a final dividend of R7.9-billion before withholding tax to its shareholders. This is in addition to the interim dividend paid at the half-year reporting period, taking the total dividend for the year to R8.50/share, up 3% from 2021 for a total disbursement to shareholders of R15.6-billion.

However, the group signalled it will change its dividend policy for the first time in a decade as it nears the completion of its deal to buy Vodafone Egypt from Vodafone Group, as well as its agreement to acquire up to 40% of Community Investment Ventures Holdings (CIVH), the parent of South African fibre operators Vumatel and Dark Fibre Africa.

Since 2013, Vodacom has maintained a policy of paying at least 90% of adjusted headline earnings, excluding the contribution of the attributable net profit from Kenya’s Safaricom, in which it now holds a 35% stake. In addition, the group distributed any dividend it received from Safaricom, up to a maximum amount of the dividend received, net of withholding tax.

“Looking ahead, the acquisition of Vodafone Egypt and an up to 40% stake in CIVH’s fibre assets, provides a compelling opportunity to accelerate our ‘system of advantage’ and the group’s growth profile. Mindful that these deals will utilise debt capacity and while also wanting to retain headroom to invest into growth areas, the board considered it appropriate to review the current dividend policy,” said group CEO Shameel Joosub.

Policy change

“Accordingly, on completion of the Vodafone Egypt acquisition, the group intends to amend and simplify its dividend policy and institute a policy of paying dividends of at least 75% of Vodacom Group headline earnings. The simplified policy and proposed acquisitions combine to provide a high payout on enhanced growth prospects. Notwithstanding the change in dividend policy, Vodacom Group will still have one of the highest dividend payout policies on the JSE.”

Vodacom said the policy change “provides scope for the group to invest within its 13% to 14.5% capital intensity target (the percentage of revenue it spends on its capex), de-lever the balance sheet, and accommodate the upstreaming and dividend payout profiles of Safaricom and Vodafone Egypt”.

Highlights of Vodacom’s 2022 full-year results include:

• Group revenue of R102.7-billion, up 4.5%, as normalised growth of 5.8% was partially offset by rand appreciation.
• Normalised group service revenue and group operating profit growth of 4.6% and 5.4% respectively, in line with medium-term targets.
• Subscriber growth of 5.9 million, to serve a combined 129.6 million customers, including Safaricom on a 100% basis.
• Free cash flow up 4.6%.  — (c) 2022 NewsCentral Media