Vodacom issued more than 100 million Yebo Yethu shares as part of the R16.4 billion black economic empowerment (BEE) ownership transaction last year - the biggest BEE deal in the telecommunications sector. File Photo: IOL
JOHANNESBURG – Yebo Yethu on Monday declared a surprise final dividend of 77 cents for the year ended in March, despite flagging that the refinancing cost of holding a bigger portion of Vodacom weighed heavily on earnings.

The JSE-listed Vodacom’s empowerment entity said it had swung to a basic loss per share of 2517c in 2019 from basic earnings per share of 3464c in the prior year.

The group posted an R898 million net loss, largely relating to the restructuring in which it moved from owning a portion of only Vodacom South Africa to owning a portion of total group operations, including assets in South Africa and the rest of Africa.

The company said that part of that loss was R282m it suffered from the decline of Vodacom group share price from R143 when the transaction was concluded to R111 at the end of March 2019. Vodacom issued more than 100 million shares as part of the R16.4 billion black economic empowerment (BEE) ownership transaction last year – the biggest BEE deal in the telecommunications sector.

Yebo Yethu said it recorded a basic loss a share of R25.17 (2517c) a share in 2019 from basic earnings a share of R34.64 (3464c) a share in 2018.

Peter Takaendesa, a portfolio manager at Mergence Investment Managers, said that part of the reported accounting loss had already reversed materially, as the Vodacom group share price had since recovered to R125.

“The dividend to be received for the next 12 months will benefit from the special dividend recently declared by Safaricom, which is 34.5 percent owned by Vodacom group,” said Takaendesa.

Vodacom bought a 34.94 percent stake in Safaricom, a leading communications company in Kenya in August 2017, which contributed R2bn to the group’s profit for the year to March.

Safaricom’s board recommended a 67c special dividend payout in addition to a traditional dividend of 1.25 Kenya shillings (R0.18) a share.

“The reported profitability of YeboYethu is likely to remain volatile due to higher funding costs and the movement in the Vodacom share price,” Takaendesa said.

“The key real drivers of the value of YeboYethu shares will obviously remain the dividends paid by Vodacom and the Vodacom share price over the mid-long term. Vodacom remains in a strong position to pay dividends over the mid-term supported by the growth of its rest of Africa operations and a strong balance sheet.”

However, Takaendesa said the growth rate of those dividends was likely to be much lower than what was recorded in the past decade, due to regulation, increasing competition and the maturity of its key South African operations.

Safaricom posted 14.4 percent increase in net profit for the period ending March 31, 2019, to 63.4bn Kenyan shillings.

Vodacom shares rose 1.58 percent on the JSE on Monday to close at R125.99.

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