South Africa's Vodacom reinstates medium-term targets after "solid" H1

JOHANNESBURG (Reuters) - South African mobile operator Vodacom Group reinstated its medium-term targets on Monday on expectations of an improving economic outlook but nudged its operating profit forecast lower with customer finances likely to remain strained.

The firm, which is majority owned by Britain's Vodafone, postponed issuing medium-term forecasts in May due to the uncertain outlook as the effects of the coronavirus pandemic unfolded.

Echoing comments from its parent company, it said demand for its services had been relatively resilient in the first half of its financial year.

Vodacom benefited from strong demand for voice, data and financial services during the coronavirus lockdown as people were forced to work, school and entertain themselves from home.

It forecast a mid-single digit operating profit growth, anticipating the work-from-home trend would normalise and the economic fallout from the pandemic would continue to cap disposable income.

"Our medium-term target for operating profit is lower than the mid-high single digit growth that we set at our interim results last year," group chief financial officer Raisibe Morathi told analysts.

In constant currency, the operator expects operating profit growth for the 2021 financial year to trend below its medium-term target level. However, it expects ongoing rand weakness to provide an uplift.

Chief Executive Shameel Joosub said considering the magnitude of challenges arising from the pandemic in the past six months, it was particularly pleasing that the company recorded a "solid financial performance".

Service revenue for the six months ended Sept.30 grew by 7%, pushing overall group revenue up 7.8% to 47.8 billion rand ($3.09 billion).

The company also declared an interim dividend of 415 cents per share, up 9.2%, supported by headline earnings per share growth of 15.7% and the Safaricom dividend. Vodacom partly owns the Kenyan mobile operator.

Joosub said the group was monitoring the conflict in Ethiopia, where a consortium led by Safaricom has bid for a telecom licence.

"We're not sure whether some of the developments will cause delays or not," he said, adding that the auction is expected to happen in February or March next year.

($1 = 15.4586 rand)

(Reporting by Nqobile Dludla; Editing by Jacqueline Wong and Kirsten Donovan)

By Nqobile Dludla