SAFARICOM'S LITTLE DROPS OF PAIN

Kenya's flagship telecommunications company Safaricom Ltd by half year to September, had little drops of pain that eased its profit margin a little to 32.7% from 32.8% previously.

According to unaudited figures for the period released today, all of its many income streams recorded growth but the more outstanding were fixed revenue up 34.7%; Mobile revenue up 34% and service revenue which ended 12.09% up.

In the end growth in total direct revenue rose by 12.1% to Kes 114.43bn from Kes 102.1bn.

The first little pain was the fact that income from other sources did not growth at this rate. In fact, Other income dropped by 86% to Kes 0.32bn; finance income increased by 9.64% to Kes 0.91bn and share of associated companies profit more or less closed firm.

Hence Safaricom's total income for the six months grew by 9.93% to Kes115.67bn in spite of the double digit growth in direct revenue.

Then the next little pain was that direct cost rose by 9.02% to Kes 35.43m. Not that bad really but mount 18.3% increase in Other expenses to Kes 24.84bn on top of that, and begins to threaten bottom line.

And it did because in spite of 22.2% drop in finance cost to Kes 0.63bn, Safaricom settled for Kes 37.82bn, up only 9.65%.

Thus, with total income growth slightly higher at 9.93%, the company's profit margin slowed to 32.7% from 32.8% previously.

Part of the reason is that because of the nature of modern day telecommunications, Safaricom has no option but dedicate good money to capital expenditure constantly to upgrade and service its 2G, 3G and 4G networks even while immediate past upgrades were yet to contribute to full capacity to earnings.

Net result is that Safaricom by half year was under more working capital pressure as its deficit widened to Kes 43.74bn compared to Kes 29.04bn previously.

SAFARICOM: KES bn Half year.
                                    2017.           2016
Total income.           115.67.      105.22
Service revenue.      109.73.        98.01
Handset revenue.        4.49.          4.01
Construction income  0.20.          0.08
Other income.              0.32.          2.28
Direct cost.                 35.43.       32.50
Construction cost      0.20.          0.08
Other expenses.        24.84.        20.99
Impairment etc          16.74.       16.35
Finance income           0.91.         0.83
Finance cost.               0.63          0.81
Associated profit.       0.01.         0.01
Profit before tax        37.82.       34.49
Profit margin %.         32.7.         32.8
Working capital.      (43.74).    (29.04)

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