ECONET WIRELESS ZIMBABWE LIMITEDUNAUDITED ABRIDGED FINANCIAL RESULTS

for the half year ended 31 August 2012

Inspiring Innovations

for a wealth of investor information please visit us at www.econet.co.zw

Subscribers Network Investment Revenue EBIDTA

31AUGUST 2012 7 015 700 $63.1 million $339.5 million $152.8 million

UNAUDITED

31 AUGUST 2011 5 640 700 $38.7 million $290.9 million $131.2 million

+24%

BroadbandSubscribers

2 537 710

1 448 000

+75%

EcoCashSubscribers

1 680 523

-

- +63% +17% +16%PERCENTAGE (%)

CHANGE

Highlights

UNAUDITED

 

ECONET WIRELESS ZIMBABWE LIMITEDUNAUDITED ABRIDGED FINANCIAL RESULTS

for the half year ended 31 August 2012

Consolidated Statements of Comprehensive IncomeFor the half year ended 31 August 2012

 UNAUDITED UNAUDITED

  6 MONTHS 6 MONTHSAll figures in US$ 31 AUGUST 2012 31 AUGUST 2011

Revenue 339,469,173 290,858,470

Earnings before interest, taxation,

depreciation and amortisation 152,810,018 131,245,267

Depreciation and amortisation (32,540,761) (21,175,591)

Profit from operations 120,269,257 110,069,676

Net financi ng costs (9,685,176) (11,657,204)

(Loss)/profit on disposal of property,

plant and equipment (8,205) 30,592

Loss on disposal of investment - (724,018)

Fair value gain on financial instruments (5,139) 1,493,033

Fair value gain recognised on disposal

of interest in subsidiary -` 1,440,839

Share of profits of associate 1,707,843 1,982,529

Profit before taxation 112,278,580 102,635,447

Taxation (34,261,317) (28,636,824)

Profit after taxation 78,017,263 73,998,623

 

Fair value loss on available for

sale investments (1,114,514) (2,997,329)

Tax effects of other comprehensive income 11,145 5,747

Comprehensive income net of tax (1,103,369) (2,991,582)

Total comprehensive income 76,913,894 71,007,041 

Profit attributable to:-

EWZL sharehol ders 77,941,331 74,308,182

Non controlling interest 75,932 (309,559)

  78,017,263 73,998 ,623

Comprehensive income attributable to:- 

EWZL sharehol ders 76,837,962 71,316,600

Non controlling interest 75,932 (309,559)

Profit attributable to shareholders 76,913,894 71,007,041

 

Basic and diluted earnings per share 0.46 0.44

Basic and diluted headline earnings

per share 0.46 0.44

Number of shares in issue 168,169,820 169,437,285

Weighted average number of shares

in issue  169,104,089 169,526,904

Consolidated Statements of Changes in EquityFor the half year ended 31 August 2012

  Attributable to Non-

Share Share Equity holders controlling

All figures in US$ capital premium Reserves of the parent Interest Total 

Balance at 1 March 2012 1,715,542 31,409,388 346,820,977 379,945,907 2,847,008 382,792,915

Profit for the period - - 77,941,331 77,941,331 75,932 78,017,263

Other comprehensive income - - (1,114,513) (1,114,513) - (1,114,513)

Taxation effect of OCI - - 11,145 11,145 - 11,145

Shares cancelled (40,898) (321,154) 362,052 - - -

Share buybacks - - (19,426,468) (19,426,468) - (19,426,468)

Shares issued 7,054 1,677,439 - 1,684,493 - 1,684,493

Other - - 328,043 328,043 667,723 995,766

Balance at 31 August

2012 (Unaudi ted) 1,681,698 32,765,673 404,922,567 439,369,938 3,590,663 442,960,601

Balance at 1 March 2011 1,673,211 21,307,115 264,657,170 287,637,496 2,840,049 290,477,545

Profit for the period - - 74,308,182 74,308,182 (309,559) 73,998,623

Other comprehensive income - - (2,997,329) (2,997,329) - (2,997,329)

Taxation effect of OCI - - 5,747 5,747 - 5,747

Shares Issued 21,162 5,068,194 - 5,089,356 - 5,089,356

Dividends paid - - (26,947,783) (26,947,783) - (26,947,783)

Share buybacks - - (7,876,855) (7,876,855) - (7,876,855)

Balance at 31 August

2011 (Unaudi ted) 1,694,373 26,375,309 301,149,132 329,218,814 2,530,490 331,749,304

Consolidated Statements of CashflowsFor the half year ended 31 August 2012

UNAUDITED UNAUDITEDAll figures in US$ 31 AUGUST 2012 31 AUGUST 2011 Cash flows from operating activities Cash generated from operations 152,243,441 139,509,360Taxation paid (28,584,059) (11,903,069)Net cash generated from operations 123,659,382 127,606,291

Cash flows from investing activities Net finance costs (9,685,176) (11,657,204)Expenditure on property, plantand equipment (63,123,114) (38,652,139)Proceeds on disposal of property, plantand equipment 48,664 2,142,343Acquisition of available-for-sale investments (584,234 ) (2,994,046)Acquisition of held-to-maturity investments (788,545 ) (2,638,525)Net cash outflow on disposal ofinterest in associate - (3,345,801)Acquisition of associate (15,000,000) -

Net cash used in investing activities (89,132,405) (57,145,372)

Cash flows from financing activities Net movement in interest-bearing debt (5,158,155) (5,755,749)Dividend paid (2,610,085) (17,433,454 )Share buyback (19,426,555 ) (7,876,855)Issue of shares - -

Net cash from financing activities (27,194,795) (31,066,058) Net increase in cash and cash equivalents 7,332,182 39,394,861Cash and cash equivalent at the beginningof the period 100,792,971 34,690,685Cash and cash equivalents at theend of period 108,125,153 74,085,546 Comprising Short term investments 9,178,119 6,020,181Bank balances and cash 98,947,034 68,065,365  108,125,153 74,085,546

Notes to the Abridged Consolidated Financial statementsFor the half year ended 31 August 2012

1. General information

  The main business of Econet Wireless Zimbabwe Limited (“the Group”) is

mobile telecommunications and related value added services. The summarised

consolidated financial statements incorporate the results of the subsidiaries and

associates.

  These financial statements are presented in United States dollars being the

currency of the primary economic environment in which the Group operates.

2. Accounting policies

The Group reports in terms of International Financial Reporting Standards

(“IFRS”). The principal accounting policies of the Group have been applied

consistently in all material respects with those of the previous year.

3. Statement of compliance

  The interim abridged group financial statements for the six months ended 31

August 2012 have been prepared in accordance with IAS 34; - Interim Financial

Reporting.

  The interim financial statements do not include all the information and

disclosures required to fully comply with IFRS and should be read in conjuction

with the Group’s annual financial statements as at 29 February 2012.

Unaudited Unaudited

  31 August 2012 31 August 2011

4. Depreciation and amortisation of property,

plant and equipment $32.5 million $21.2 million

5. Commitments for capital expenditure

  Authorised by the directors but not contracted $79.4 million $78.0 million

  The capital expenditure will be funded through internal resources and supplier

credit.

 

6. Borrowings

  The details of all borrowings were disclosed in the integrated annual report for

the year ended 29 February 2012.

 

7. Investments

  Financial investments are split into listed and unlisted investments. The carrying

amounts of the investments are equal to the market value and director’s

valuation.

8. Investment in associates

  Econet Wireless Zimbabwe Limited acquired the right to a 45% interest in TN

Bank Limited during the half year period.

This investment has been accounted for as an investment in associate.

9. Summarised Unaudited Segment Information

  31 August 2012  31 August 2011  Cellular Cellular  Network NetworkAll figures in US$ Operations Other Total Operations Other Total

Revenue 330,242,034 9,227,139 339,469,173 283,303,520 7,554,950 290,858,470

Depreciation and

Amortisation (32,136,527) (404,234) (32,540,761) (20,704,999) (470,592) (21,175,591)

Segment profit/(loss) 76,575,023 1,442,240 78,017,263 76,734,399 (2,735,775) 73,998,624

Segment assets 868,061,353 7,164,922 875,226,275 715,166,045 (48,023,481) 667,142,564

Segment Liabilities (421,835,137) (10,430,537) (432,265,674) (323,574,515) (11,818,745) (335,393,260)

  This is a summarised segment report showing the Group's major segment,

Cellular Network Operations and Other segments. Included in "Other" segments

are the following segments: Transaction Processing Systems, Beverages,

Investments and Adminstration

10. Earnings per share

  Reconciliation of basic earnings to headline earnings

  Unaudited Unaudited

  31 August 2012 31 August 2011

  Profit for the year attributable to

ordinary shareholders 77,941,331 74,308,182

  Headline earnings attributable to

ordinary shareholders 77,954,675 74,308,182

 

Number of shares

  Weighted number of ordinary shares for

the purposes of basic and diluted earnings

per share 169,104,089 169,526,904

 

Basic and diluted earnings per share (dollars) 0.46 0.44

  Basic and diluted headline earnings per

share (dollars) 0.46 0.44

 

11. Contingent Liabilities

  There were no new developments on contingent liabilities in the period under

review. Details of contingent liabilities are as disclosed in the Integrated Annual

Report for year ended 29 February 2012.

12. Events after reporting date

There have been no significant events after reporting date at the time of issuing

this press release.

13. Going concern

  Having reviewed the Group’s forecasts, projections and other relevant evidence,

the Directors have a reasonable expectation that the Group will continue in

operational existence for the foreseeable future. Accordingly, the results for the

half year ended 31 August 2012 have been prepared on a going concern basis.

Tip-offs AnonymousDeloitte & ToucheTelephone: 0800 4105 Fax: + 263 91 8240 921Address: The Call CentreFreepost:  P.O. Box HG 883, Highla nds, Harare, ZimbabweE-mail: econetzw@tip-offs.com

 

Econet Wireless Zimbabwe Limited: Incorporated in the Republic of Zimbabwe. Company registration number 7548/98 |   Directors: Mr. T. Nyambirai (Chai rman)*, Dr. S.T. Masiyiwa, Mr. K.V. Chirai ro, Mr. C. Fitzgerald*, Mr. D. Mboweni , Mrs. T.P. Mpofu*, Mrs. B. Mtetwa*,Dr. J. Myers* and Mr. J.G.B. Pattison. *Non Executive | Group Company Secretary: C.A. Banda | Registered Office: Econet Park, 2 Old Mutare Road, Msasa, Harare, Zimbabwe. E-mail:info@econet.co.zw. Website: www.econet.co.zw. | Registrars and Transfer Secretaries: First Transfer Secretaries (Private) Limited, 1 Armagh Avenue, Eastlea, Harare, Zimbabwe | Auditors: Ernst & Young, Chartered Accountants (Zimbabwe), Registered Public Auditors, Angwa City, Cnr Julius Nyerere Way/ Kwame Nkrumah Avenue, Harare, Zimbabwe.

Chairman’s Statement to Shareholders

IntroductionIn the period under review, the business sustained its market leadership through afocus on network capacity and coverage enhancements, accelerated penetration offibre broadband infrastructure and a continued rollout of new features for thebusiness’ innovative products and services. The drive to build superior networkinfrastructure is motivated by the objective to give our subscribers an unparalleledcustomer experience and create sustainable long term growth prospects for thebusiness.

Investment ReviewThe Company invested US$677 million in the last three and a half years. Thisinvestment has positively impacted economic development and resulted inemployment creation. The additional investment made in the last six months hasresulted in network capacity being upgraded from 6.4 million to 7.1 million subscribers.Over 50% of the new sites commissioned in the last three years were in newcoverage areas, further enhancing the accessibility of mobile telecommunications toall people in Zimbabwe. Expansion of the 3G network resulted in 116 new 3G basestations being commissioned and this greatly supported the massive uptake in data,resulting in an increase of over 50% in data revenues. Due to the incessant poweroutages being experienced, the Company stepped up deployment of generators andhybrid power systems in order to support network availability.

Operations HighlightEcoCash, our Mobile Money Transfer (MMT) service, which was launched in 2011,achieved unprecedented success. In the past six months the number of subscribersregistered on EcoCash increased to over 1.7 million an increase of 70% from a base of1.0 million in February 2012. EcoCash moves millions of dollars every day from urbanto rural areas helping to revitalise rural businesses and increase the economic activitythroughout the country. EcoCash is a life line particularly for rural people who not onlyuse it to get money from relatives in urban areas, but also use it as an alternative tocash in an economy where the currency of exchange is imported at a significant cost.Going forward, the current upgrade on the EcoCash platform will see EcoCashcustomers enjoying more ancillary services such as bill payments, salarydisbursements and grocery payments.

Innovations UpdateThe second generation of solar lanterns with inbuilt chargers was well received by themarket. During the period under review, solar lights and solar chargers wereintroduced as part of the solar products catalogue. Econet launched the Green KioskInitiative, a mini version of the Econet shops. This is part of our low cost high impactdistribution strategy. In an economy where the informal sector drives a lot ofeconomic activity, this is a relevant and easily accessible distribution channel that webelieve will increase our brand visibilty and enhance the ease of access to ourproducts. Available in the these kiosks and other retail outlets are solar poweredcharging stations for the benefit of subscribers who are now able to charge theirphones for free.

Our achievements continued to be recognized. Econet was named in the Top 10 ofAfrica’s Most Innovative Companies by Forbes Magazine.

Financial PerformanceFor the six months ended 31 August 2012 Econet’s operating revenue achievedfavourable growth, reaching $339.5 million, an i ncrease of 17% over the same periodlast year. Earnings Before Interest, Taxation, Depreciation and Amortisation (EBITDA)was maintained at 45%. Depreciation and amortisation increased by 53.7% toUS$32.5 million in the period under review. The increase in depreciation is a reflectionof the significant investment made in network expansion. Total assets were US$875.2million showing a growth of 7.7% in the last six months. Econet concluded facilities ofUS$307 million. US$255 million was utilised to refinance existing facilities and US$52million was utilised in further network expansion. This successful capital raising wasthe most significant capital raising project ever undertaken by a Zimbabweancompany. The debt to equity ratio improved to 55%, from 65% as at 29 February 2012as a result of the earnings retained in the business.

The Group acquired the right to a 45% interest in TN Bank Limited. This investmenthas been treated as an associate. The investment in TN Bank Limited is part of theGroup’s broader strategy to drive the EcoCash business.

Corporate Social InvestmentMore than 50,000 disadvantaged children have benefited through educationalsponsorships from Capernaum Trust. In recognition of those students who excelacademically, the Joshua Nkomo Scholarship Fund has supported over 500 studentswith exceptional talent. The National Healthcare Trust Zimbabwe continues to providehealth related services to under-serviced communities and to respond to variouscrises.

OutlookHaving been the first to pioneer a comprehensive Mobile Money Transfer system inthe country, the Group will continue to consolidate its foothold in the paymentsindustry. The investment in infrastructure will continue until all market demand hasbeen satisfied.

AppreciationI would like to express my heartfelt appreciation to my fellow Board members,management and staff for their commitment towards our shared values and vision ofour business. I would also like to thank our shareholders, strategic partners,customers and other stakeholders for their continued support.

T. NYAMBIRAICHAIRMAN OF THE BOARD 22 OCTOBER 2012

Treasury Shares and Dividend NoticeDuring the period under review, the Company purchased 4 563 021 shares at a cost ofUS$19.4 million. This brings the balance of shares held in treasury stock to 10 826 752shares. The shares held in treasury stock represents 6% of issued share capital of theCompany as at 31 August 2012.

In view of the fact that the Company has already invested US$19.4 million in itstreasury share repurchase programme for the half year ended 31 August 2012, theBoard of Directors has not recommended an interim dividend to shareholders.

By order of the Board

C. A. BANDAGROUP COMPANY SECRETARY

Consolidated Statements of Financial Positionas at 31 August 2012 

UNAUDITED AUDITEDAll figures in US$ 31 AUGUST 2012 29 FEBRUARY 2012 ASSETS 

Property, plant and equipment 593,075,747 561,656,046Investment property 411,000 411,000Intangible assets 7,096,788 7,991,004Deferred taxation 3,016,471 2,686,315Investment in associate 25,682,232 8,974,389Financi al instruments 19,111,970 18,853,704Current assets 226,832,067 211,854,359Total assets 875,226,275 812,426,817 EQUITY AND LIABILITIES

EQUITY  Share capital 1,681,698 1,715,542Share premium 32,765,673 31,409,388Reserves 404,922,567 346,820,977Attributable to equity holdersof the parent 439,369,938 379,945,907

Non-controlling interest 3,590,663 2,847,008Total shareholders' equity 442,960,601 382,792,915 LIABILITIES 

Deferred taxati on 74,394,077 70,667,055Interest-bearing debt 197,180,805 103,338,155Current liabilities 160,690,792 255,628,692Total liabilities 432,265,674 429,633,902

Total equity and liabilities 875,226,275 812,426,817