PROJECTION

Safaricom eyes Sh110bn full year profit as Fuliza reigns supreme

It is the first firm in East and Central Africa to break Sh100 billion profit mark in 2019/2020

In Summary
  • Fuliza is the only credit product that recorded growth in H1
  • It has projected Capex of between Sh70 billion to Sh73 billion in the financial year on Ethiopian investment
Safaricom Chief Executive Officer, Peter Ndegwa at a past event.
Safaricom Chief Executive Officer, Peter Ndegwa at a past event.
Image: FILE

Safaricom is banking on the increased uptake of its loan facilities led by Fuliza to break the Sh110 billion gross profit ceiling in 2022.

Releasing the telco's financial results for the first six months of the year yesterday, chief executive Peter Ndegwa hailed the overdraft facility introduced in 2019 for propping up M-Pesa's earnings that accounts for 38 per cent of the firm's total revenue. 

M-Pesa’s overall transactions grew 51.5 per cent to Sh13.71 trillion while the total volume of transactions grew 42 per cent to Sh7.27 billion.

"In the first six months of the year, the value of Fuliza disbursements grew by 62.4 per cent to Sh242.6 billion compared to  Sh149.4 billion same period last year,'' Ndegwa said.

This means, at least Sh40 billion is borrowed via Fuliza every month, translating to Sh1.34 billion per day.  

Fuliza continued to be Safaricom's cash cow, being the only digital financial service by the telco that recorded a growth in revenue in the first half of the year.

The overdraft facility recorded a 32.2 per cent growth in revenue to Sh 2.8 billion from Sh2.1 billion in the first half of 2021.

Other credit products of the listed mobile telephone provider recorded a drop, with KCB M-Pesa and M-Shwari both recording significant declines in revenue as more Kenyans opted for the overdraft facility.

Yesterday, the telco reported a 12.1 per cent growth in net earnings in the first six months of the year to hit Sh37.1 billion compared to Sh33 billion same period last year.

Safaricom Plc aims at becoming the first company in East Africa to hit more than Sh110 billion in earnings this financial year.

"We are targeting Earnings Before Interest and Taxes (EBIT) of between Sh107 to Sh110 excluding Ethiopian operations. If included, we are looking at Sh97 billion to Sh100 billion,’’ Ndegwa said.

The firm has projected a high capital expenditure cost for Ethiopian operations, which are still shaky following ongoing political instability in the landlocked country.

Safaricom has projected capital expenditure of Sh70 billion to Sh73 billion in the financial year on Ethiopian investment and Sh40 billion to Sh43 billion if it holds plans to enter the country.

Late last month, US government agency, Development Finance Corporation (DFC) which had pledged $500 million (Sh54 billion) in Safaricom’s Ethiopia operations said it weighing the escalation of armed conflict before it could release the loan.

In July, the Safaricom-led consortium received a telecommunication operator license in Ethiopia after incorporating a local company, setting the stage for Kenya's largest telco to start operations in the market of over 100 million people.

The Nairobi Securities Exchange (NSE) listed mobile phone network provider as the first company in East and Central Africa to hit gross profit that crosses the Sh100 billion mark in the 2019/2020 financial year.

Last year, earnings dropped for the first time in 12 years due to Covid-19 related shocks.

 

 

 

 

KCB-Mpesa on the other hand recorded a 30.7 per cent drop in revenue from Sh0.5billion in the first half of 2021 to Sh0.3 billion.

M-Shwari recorded a 10 .4 per cent dip in revenue to Sh0.9billion compared to Sh1billion in the same period last year.

 

KCB-Mpesa and M-Shwari recorded a 15.9 per cent and 8.6 per cent dip respectively in disbursements.

KCB-Mpesa disbursed Sh22.9billion from Sh27.3billion while M-Shwari disbursed Sh43.4billion from Sh47.5billion.

Fuliza was launched in 2019 but its low-interest rates seem to have propelled its growth.

The overdraft facility allows customers to complete M-Pesa transactions when they have insufficient funds.