Vodacom Group Limited (VOD) Earnings Call Transcript & Summary

Good morning, everybody. Welcome to the AGM for the financial year 2024. We will now open the proceedings.

Good morning. Welcome to this -- the 29th Annual General Meeting of Vodacom Group Limited shareholders. And lesser crowd being present, the meeting is duly constituted. Your ability as shareholders to participate in this meeting is of paramount importance to the Board, and you will be able to speak and vote during today's proceedings. For your information, at this point, we have 53 shareholders holding 1,935,166,872 shares represented in person or by proxy at this meeting. This represents 93.13% of the ordinary shares. The final voting numbers will be published on SENS after this meeting. As I continue, it gives me a great pleasure to introduce the Board members to you. Shameel Joosub, the CEO, is on my left; Raisibe Morathi, the CFO, is on the screen; Khumo Shuenyane, the Lead Independent Director and Chairman of the Social and Ethics Committee is on the right; Phuthi Mahanyele-Dabengwa, well, the Chairman of the Remuneration Committee is to my left; Clive Thomson, Chairman of the Audit, Risk and Compliance Committee is on the screen; Nomkhita Nqweni is on the screen; Pierre Klotz is on the screen; John Otty is on the screen; Sateesh Kamath is on the screen; Joakim Reiter is also on the screen; Francesco Bianco, an Alternate Director, is also on the screen. We have received an apology from Leanne Wood, who has commitments. We also welcome the Chairpersons of our operating companies across our network who have joined online. Thomas Mihayo, is the Chairman of Vodacom Tanzania is on the screen; [indiscernible] Chairman of Vodacom Lesotho, is on the screen; Hany Mahmoud, Chairman of Vodafone Egypt, is on the screen; [indiscernible] Chairman of Vodacom DRC is also on the screen; Lucas Chachine, Chairman of Vodacom Mozambique is also on the screen; [indiscernible] Chairman of Vodacom Financial Services, is also on the screen. The notice of convening the meeting has been in your hands and had been published on the company's website for the prescribed period. The notice contains full details of the ordinary and special resolutions to be considered at this meeting. I will therefore take the notice of the AGM as read. In terms of meeting procedures, as this is a hybrid meeting, cognizance must be taken for both shareholders in the room and shareholders online. We will start the tabling of resolution. After the tabling of the resolutions, we will deal with any questions or comments that shareholders may have before we close the voting and announce the results. Following the results, we will move into closure of the meeting. It is my intention to conduct voting on all resolutions proposed at this meeting. By way of a poll, that would be recorded electronically both in the room and online. For shareholders that are participating online, there was a video shown on how to use a veto platform and the video can be viewed by clicking on the link found on the home screen. For those of you in the room, I would like to call upon Andrej Vladar from Lumi Technologies to please explain the use of the connected devices for voting. Andrej?

Thank you, Chair, and good morning to you, to the Board and to everybody present here in the room. For those of you that are present and entitled to vote and have chosen to vote at this AGM, you would have received a handset as well as a smart card. If we could first just make sure that the smart card is inserted correctly, that would be with the gold chip facing you slotted into the top of the handset, and you should see your name or the name of the company or person that you're representing in the top bar. You'll also see that voting on test resolutions are open. So please do follow along with me. Please note that these devices aren't like your smartphones. They are a little bit more robust. They do require a harder press of the buttons or a little bit more love than your smart device would require. So to follow along with me, the first thing you'll see on your screen are two test resolutions that we've set up. For those of you that remember an old Blackberry, this should seem quite familiar. For those of you that are a bit young, you might not recognize that. You can use the blue trackball in the middle to scroll up and down between the resolutions. And if you can, please go to TST 1 and then you press the green button, which is the select button to enter it. You'll see that TST 1 then reads Vodacom turned 50 in 2024. That is the resolution heading. And then if you click on vote, which is the green button as well, you'll see that your options are then presented to you. So it's 1 to vote in favor, 2 if you wish to vote against and 3 if you wish to abstain. You'll see it will then send you a response. And then on your screen, you will see a for vote received or against vote received or abstain vote received. What you'll do then is you'll hit the green button to go next, which will move you on to the next resolution, which you'll see is TST 2, which says Vodacom did not turn 50 in 2024. And again, you just repeat the process by clicking on Vote and then making your selection. So if I could ask everybody to do that before we close, just to make sure that everybody is comfortable. If you are struggling, please raise your hand so that we can come and assist you. For those of you online, it's quite simple, a voting screen would have appeared in your platform, and you would have been presented with what looks like an electronic ballot form, and you'll just click on the option that you wish to choose. There's no submit button for those online. Our system automatically takes the last vote that you've entered upon closure. Just another thing to note is this is a hybrid meeting. So for those of you in the room, if you wish to speak, please raise your hand, wait for a microphone to come to you, and please speak clearly into the microphones that those that are online are able to hear you clearly. It would also be nice if you could stand perhaps so that it's easier for the room to view who's currently speaking. So with regards to voting, has everybody managed? Anybody struggling? Right, [indiscernible] do we look like we can close? So let's just close the voting, and then we'll display the results. And there you go. So Test Resolution 1 has passed with 100% and Test Resolution 2 has passed with nothing, which is correct. So this is how the process will work for the actual resolutions as well as the display of the results as well. That's how they'll come up on screen. If you do struggle, please raise your hand, and we'll come and assist. And for those of you online, there are support lines available to you. So if you do struggle online, you can use those as well. And I'll hand back to you, Chair.

Thank you, Andrej. The memorandum of incorporation requires that voting on resolutions put before meetings of the company shall be by way if at all only. On upon shareholders present here today in person or online or represented by their proxies are entitled to one vote in respect of each share they hold or represent at this meeting. For your information, I, as Chairman of the meeting, presently hold proxies and letters of representation in respect of 1,930,197,421 shares at this Annual General Meeting. Voting on all resolutions is now open and you can complete your voting at any time while the voting is open until I close the voting after the completion of the Q&A section. To expedite proceedings of the meeting, I would ask that you complete your voting timeously as to avoid a delay in the closure of the voting process. The voting platform contains all the resolutions to be put to shareholders today. We will not be voting on each resolution separately as we would have done at a purely physical meeting. Instead, I will read out the key elements of the resolutions, and you can then vote. The outcome of the votes will be seen at the end of the meeting. This saves time and data costs for you. Questions will be taken after I have read out all the key elements of each resolution, and such questions must be confined to the resolution and the business of the meeting only. I'm happy to take a few questions that may be topical, but these must be put to the meeting after the voting is concluded. I propose that all resolutions be approved as set out in the notice of the Annual General Meeting. To start with the Ordinary Resolution #1. This resolution deals with the adoption of the audited consolidated annual financial statements for the year ended 31, March 2024. Voting on this resolution is open. I'm not going to pause in between resolutions because you have the time from now until the closure to exercise your vote. So I will proceed to Ordinary Resolutions #2 to #5. This deal with the election or reelection of directors in accordance with the company's memorandum of incorporation. The election of Mr. JH Reiter and GS Kamath, who are appointed during the year and in accordance with the company's MOI, had to retire at this meeting. The reelection of Ms. RK Morathi and myself, SJ Macozoma, who is in accordance with the MOI retired by rotation. The profiles of the directors are contained in the notice of the Annual General Meeting. Voting on Resolutions #2 to #5 is now open. We proceed to Ordinary Resolution #6. This resolution deals with the appointment of Ernst & Young as the company's auditor until the conclusion of the next annual general meeting of the company. Voting on this resolution is open. We'll proceed to Ordinary Resolution #7. This resolution deals with the approval of the company's advisory vote on the remuneration committee. Voting on this resolution is open. Ordinary Resolution #8. This resolution deals with the approval of the implementation of the company's remuneration policy. Voting on this resolution is open. We proceed to Ordinary Resolutions #9 to #11. These resolutions deal with the appointment of Mr. CB Thomson, KL Shuenyane, and Mrs. NC Nqweni as members of the company's Audit and Risk and Compliance Committee. Voting on resolutions #9 to #11 is open. We then proceed to Special Resolution #1. Special Resolution #1 deals with the general authority to repurchase shares in the company. These general authority facilities accompanies for fittable share plan and conditional share plan. Voting on this resolution is open. Proceeding to Special Resolution #2. Special Resolution #2 deals with an increase in directors' fees, which increase will come into effect from the 1st of August 2024. Voting on this resolution is open. Special Resolution #3, financial assistance in respect of securities. The company where necessary, may seek to optimize its funding costs by providing guarantees, security, support undertakings or other financial assistance for the benefit of members of the group and in favor of third-party financials as part of the entry into financing agreements by the company or such other members of the group with such third-parties financiers. Special Resolution #4, deals with a general authority to the Board to provide intergroup loans and other financial assistance for the purpose of funding the activities of the group. Voting on this resolution is open. And voting on Special Resolution #3 is open, I didn't say that. Now that all Ordinary and Special Resolutions have been presented, these may now be voted on. Those shareholders who have not yet cast their votes may proceed to do so now. While we wait for their shareholders to conclude voting, we will proceed to Q&A, and voting will close after the end of Q&A.

We'll now move to the question-and-answer section of this meeting. Please note that online participants have the ability to ask either written or verbal questions. For those joining online, wishing to ask a verbal question, kindly follow the instructions shown on the home screen. You will need to select the request speak button, which can be found on the broadcast screen. Your broadcasts will change to a dial-in facility where you will call into an operator. Please request to be put in the queue for the Vodacom AGM. Once in the queue, you will still be able to hear the proceedings of the meeting. And when I going to point you to speak to the meeting, the operator will unmute you. For those who are present in the room, please raise your hand and wait for someone to bring you a microphone. When called upon by me to speak, please be sure to speak into the microphone so that the virtual participants can also hear your question. We will begin with any questions in the room, followed by questions online. As this is a hybrid meeting, please be patient as we will take questions from the room and questions from the virtual shareholders. We will repeat this process until all questions have been dealt with. Are there any questions in the room?

Thank you very much. I've got a problem in terms of -- I don't know, maybe particularly, I'm going to abstain or at least the resolution, but I think there is inconsistency which what you are saying and what they actually say in terms of Section 44. I think maybe you can just think about it because I think it is an inconsistency concerning that. And what you are saying on the resolution, on what you are saying on the...

Can you please be specific as to which resolution you are referring to?

Section 44.

Which adds?

Special Resolution #3. Section 44, financial assistance in seeking respect of securities. But if you can go to your Memorandum of Incorporation and Companies Act, I think there's a lot of inconsistencies because you are saying to any third-party person -- to any third-party group. We'll be seeing a result that the port is hereby authorized, in terms of Section 44 the Company's Act as a general approval, which approval will be in place for a period of 2 years from the date of the adoption of Special Resolution #3, subject to compliance with the requirements of the company's Memorandum of Incorporation of JSE Requirements to authorize any -- provide that indirect or financial loan guarantee to any third-party financiers. This is what I'm struggling with. Because the Act is not saying that. The Act is just saying clearly to any person not to any that third-party -- any third-party financiers? I don't know maybe if I misunderstood you on that one. [indiscernible] just clarify because I don't understand what you're saying on your -- when you're saying to any party financiers, to any third-party financiers, because the Act does, just simply say to any person. Please, can you help us on that one.

I'd request the company secretary to respond to your question, but my understanding is, is that the formulation to any third-party means, any person who's a financier. So, but the company certainly will respond to.

Thank you for your question, Mr. [indiscernible] The wording of the resolution is quite correct in terms of the Companies Act and the Memorandum of Incorporation. The company is entitled to limit the scope of Section 44 as it deems fit, and that is why it is limited to third-party financiers and not to anyone. It relates to the guarantee of shares that are issued. It doesn't relate to general financing questions.

Can you -- do you want to follow-up?

Those [indiscernible] allows you to amend Memorandum -- the Companies Act, because if the Memorandum of Incorporation is inconsistent with the Act, we are not supposed to do anything. Just follow up the Companies Act, to say. I'm just concerned about amending, are you allowed to amend the Companies Act or MOI.

So that, if I can just confirm that's not what's happened here. We haven't been inconsistent with the Companies Act or MOI. I'm quite happy to take you through the wording. The wording is consistent with the Act. The company is entitled to limit the scope it provides the guarantees, not expand the scope.

There's another question online.

Yes. There's quite a few questions from [indiscernible] from ESG inside South Africa on behalf of various pension funds. [Technical Difficulty] So there are seven questions in total, so I'll break them up into two tranches. The first one regarding Board independence and composition. The company's governance report indicates that a majority of the board is not independent, and there is a significant representation of Vodafone appointees. How does the Board plan to address this lack of independence to ensure more objective and effective governance? Are there any immediate plans to increase the number of independent directors? Second question is on diversity and inclusion. Female representation on the Board has declined from 42% to 33%, and the Nomination Committee is still deliberating on the inclusion of targets in the board diversity policy. What specific actions and time lines are being considered to address this decline and improve gender diversity on the Board? How will the Board ensure meaningful and actionable targets are set and achieved? And then question three for this tranche on the CEO succession planning. The CEO succession remains a material matter for the Board, as indicated by the Board evaluation. Can the Board provide a detailed update on the progress of the CEO succession planning, what measures are being taken to ensure a smooth transition and continuity in leadership. And I'll pause there for responses on that and then go to the second tranche from the same shareholder.

All right. If we take the first question about board independents and the question as to whether the board is considering to increase Vodafone, the majority shareholder has a grandfathered right to have 50% of the members of the Board. And that quantify that rights. They have exercised and they continue to exercise and they intend to continue to exercise it. It is allowed and the grandfathered part comes in relation to the JSE Listing Requirements. Vodafone is allowed to have this particular dispensation. Now the question about the numbers. So there is a 50-50 split between independent and non-independents. But that means, therefore, that we have to take particular measures on particular issues to ensure that there is a balance on the board on specific issues. For instance, there are aspects of the Board governance in which the Vodafone directors are excluded. For instance, for services that Vodafone provides to Vodacom at a price, the approval of that relationship is done by the independents only without the Vodafone Directors being involved. So that's a measure that's in place. That's -- there's assurance given on that, that we kind of -- we comply with that provision that we've set for ourselves. And also in acquisitions, for instance, say, for instance, the Egypt acquisition by Vodacom Group, where Vodafone was selling Egypt to Vodacom, the Vodafone directors are not involved in that kind of transaction, we're not involved up for obvious reasons. And so where there are very clear issues of conflicts, they are managed deliberately through various process and policies that are actually audited by the company auditors. On the issue of the balance, we are of the view and the review that we've just done this year, external review has given us the results that the Board is balanced in the sense that there is no -- what is sometimes called the law of the meds and the patients, immutable decisions that come from Vodafone. The Vodafone directors in their capacity as Vodacom directors act in the interest of the Vodacom, which as required by the law. In any case, in my estimation, if Vodafone were to try to steer Vodacom in the wrong direction, effectively that we're shooting themselves in the foot. They own 70 -- more than 70% of the company. And that also is therefore another added measure, in my view, that they're not likely to act in a responsible manner. So we are happy as a board that there's sufficient balance and that the sufficient contribution made by the Vodafone Directors and that balance continues. Obvious, this is something that we review as I've just said, every year internally and every 2 years externally. We've just done one external one now. And our view, based on those reviews, is that there is sufficient balance and that the interest of minority shareholders are not jeopardized in any way. And I can assure you that the independents on the board are very engaged with a matter of making sure that the board is balanced and that everybody acts in the interest of the company. On the decline on female representation, I think this is something that we will to and fro from time to time, because there are changes on the board that happened. Some of those changes are driven by the kind of expertise that we need at any point in time, which is something that we look at as to whether the expertise on the Board is balanced as well. We are committed without remainder and without doubt to increasing female representation. That is something that is discussed and looked at by the Nominations Committee. And I would like to assure shareholders that this is something that we will continue to pursue. But from time to time, there will be a surge and then as has been said, and there will be times when that will seem to be moving backwards. But this is a leading organization and a living organism. And therefore, there's nothing that is static as it were. Obviously, we would be careful not to allow the numbers to drift too far away from the objectives that we have set ourselves. So be assured that we are committed to that. On the CEO succession, yes, this is a matter also that we get asked by shareholders. I've just done a roadshow for the top 10 shareholders. And this question gets us. It is a concern. But I did say that it is a happy position to be in when you have a successful CEO even though you do have to think about the proverbial issue of what happens if it follows and the password is ready to work. We look at that even. We look at who is in the frame in terms of succession. We look at each individual and say, this one is maybe based on clear objectives. This one is maybe 6 months to being able to fulfill the role, that one is 36 months. And if we need to move the 36 months person to a 12-month situation, these are the actions that we need to do. We go into that kind of detail. We go into even further detail in terms of looking at the Vodafone group as to whether there are any potential successes in an emergency situation or in a planned situation. We also look even further than that, we look at the entire market to see if we needed a CEO either urgently or planned, who are the people that we should be keeping interest in and understanding their trajectory in their careers in the companies they are in, that in case if we needed to recruit them, we know. So we look at the entire landscape, 360 degrees.

Thank you, Chair. Four more themes, just a reminder that these are from [indiscernible] from ESG, inside South Africa. The next theme, remuneration and performance targets. The remuneration report indicates that dividends are awarded on unvested awards, and there is insufficient detail on the performance targets for the LTI ESG metric. How does the board justify the practice of awarding dividends on unvested shares and what steps have been taken to provide greater transparency and detail on the LTI ESG performance targets. The next theme is governance and risk management and subsidiaries. The company's report highlights that Vodacom Congo is not in compliance with the minimum capital requirements and the matter is ongoing. And additionally, the Maziv joint venture is under review by the Competition Tribunal. What specific governance measures are being implemented to address compliance issues in subsidiaries? How is the Board ensuring that the strategic investments like Maziv aligned with Vodacom's governance and compliance standards? Then moving on to employee misconduct and fraud. Recent reports indicated that 15 Vodacom workers were arrested and over 630 employees were axed due to fraud and irregularities, what specific measures are being implemented to prevent such occurrences in the future and ensure stronger internal controls? And then the final question from this batch is on impact of currency volatility with heightened currency pressures in Egypt, Ethiopia, Kenya and South Africa are significantly improving -- impacting earnings per share. What strategies is Vodacom employing to mitigate the effects of currency volatility on its financial performance?

Thank you very much for those questions, and thanks to the authors of the questions. A lot of the information that is asked for in these questions is in the -- all the detailed reports that have been published. However, we welcome questions to clarify that. So I request the Chairman of RemCo to deal with the remuneration questions.

Thank you very much for the question. I think as the Chairman said, the remuneration document, and you now will see that we have a separate document that deals with remuneration issues. However, on the question that you asked with respect to the dividends, which are paid, they are paid on the stretch portion of the awards. And the company practice is that the company uses shares purchased at the market to settle awards. And the issue is new shares and use of treasury shares, which is no longer permitted. And so from that perspective, our view is that we are ensuring that the executives are being remunerated accordingly in terms of the LTI. LTI also being a significant portion of the executive's remuneration, as you know, but it is also very much driven by the performance of the company. And so you'll see from the report that when the company is not able to achieve certain measurements, executives are also affected by that, as you will have seen the movements from last year, for instance, to this year. And so I think -- I hope that, that addresses the question.