YIELDS

New accounting standard cuts Safaricom’s 2019 profits

In Summary

• This different approach may result in a change of timing for revenue recognition for some entities

• Safaricom interim CEO Michael Joseph said he is going to focus on M-Pesa and internet business to sustain growth

Michael Joseph
Michael Joseph

Safaricom's new accounting system adopted in April saw its profits for the year ended March 2019 down by almost Sh1 billion.

The company’s audited results published in a local daily a head of the Annual General Meeting on August 30 indicates a net profit of Sh62.49 billion compared to Sh63.40 billion reported in May.

‘’The International Financial Reporting Standard (IFRS)15 was effective April 1, 2019, superseding the International Accounting Standard (IAS) 18 used to calculate end of year results. During results announcement we disclosed IAS 18 position for comparative purposes,’’ the telco said.

 

Under IAS 18, the timing of revenue recognition from the sale of goods is based on the transfer of risks and rewards while IFRS 15 focuses on when control of those goods have transferred to the customer.

This different approach may result in a change of timing for revenue recognition for some entities.

This marginally reduced earning per share from Sh1.58 to Sh1.56 but did not affect the proposed normal and special dividends .

The firm is expected to pay Sh1.25 per share up from Sh1.10 in 2018. Shareholders will also receive a special dividend of Sh0.62 per share.

Despite a change in accounting standards, the telco’s profits for the year ended March maintained a 14.7 per cent growth compared to Sh55.28 billion reported in the previous financial year.

The performance was largely driven by M-Pesa revenues which grew 19.2 per cent to Sh74.99 billion while service revenue grew by seven per cent to Sh240 billion.

Interim chief executive Michael Joseph said he will focus on M-Pesa and internet business to sustain growth.

‘’I am particularly keen to work closely with the team to take M-Pesa beyond Kenya. Data also remains a key priority for the business, which needs to find a way to balance data consumption and revenue growth,’’ Joseph said.

Chairman Nicholas Ng’ang’a said claims that Safaricom is a dominant player is a aimed at punishing the firm for its  success.

"We have noted with concerns attempts to regulate the industry through proposed legislation that seeks to forcefully to reorganise operating structure of companies such as ours, whose growth has been the result of well executed business strategy,’’ Ng’ang’a said.

Last year, a Communications Authority of Kenya (CA) sponsored report claimed that Safaricom’s dominance has limited competition in the sector, leading to higher mobile tariffs.