Hello everyone and welcome to Vodafone Conference Call. Please note that this call is being recorded. I'd now like to hand over to our moderator for today, Bobby Sarkar. Thank you. You may now go ahead, please.
Thank you, Operator. Hi, hello everyone. This is Bobby Sarkar, Head of Research at QNB Financial Services. I wanted to welcome everyone to Vodafone Qatar's first quarter 2024 results conference call. On this call from Vodafone Qatar management, we have Masroor Anjum, who's the CFO at Vodafone Qatar, and Pauline Saab, who's the Head of Investor Relations. As usual, we will conduct this conference with management first reviewing the company's results, followed by a Q&A. I would now like to turn the call over to Pauline Saab, Head of Investor Relations. Pauline, please go ahead.
Thank you, Bobby. Good afternoon everyone and welcome to Vodafone Qatar Financial Results Call. Before we begin, I would like to apologize on behalf of Sheikh Hamad Abdulla Jassim Al-Thani, our Chief Executive Officer, who is unable to join us today. Masroor Anjum, our Chief Financial Officer, will be presenting the financial and operational performance highlight on his behalf. Today's presentation is accessible on our website at vodafone.qa with the usual disclaimer on slide number two. To begin, I now hand over to Masroor.
Okay. Thank you, Pauline. Thank you, Bobby. And thank you, QNB, for organizing this conference. It's my pleasure to welcome you all to our quarterly analyst call. Today, we are excited to share with you the progress we have made in the first quarter of 2024 fiscal year, marked by continued growth in both our top line and profitability amid challenging market environment. If you go to slide number four, it's the key messages. We have started the year with a solid revenue growth of 3.9% year-on-year, reaching QAR 806 million in Q1. This was driven by resiliency in mobility and strong contribution from an increasingly diversified portfolio of products and services, as well as our customer-centric approach and innovative offerings. We also improved our profitability with a net profit of QAR 150 million, up by 12.5% year-on-year.
This reflects our operational efficiency and cost optimization efforts driven by both customer-facing and internal digitalization initiatives. Second point I want to mention is that we continue to gain market share across all segments, reaching 29.9% revenue market share for the full year FY 2023 and 44.6% mobility customer market share. Thirdly, I want to touch upon the major drivers that give us this competitive edge. Obviously, one of the key things is our relentless focus on enhancing network coverage and capacity. We further improved our 5G network with upgradation of the majority of the sites with second carrier, while also strengthening our 5G presence. And all of this happens with consistently smart deployment of CapEx. Another key driver supporting us is establishing our position as a provider of enterprise solutions, with a diversified range of ICT and managed services that cater to the needs of different sectors and industries.
Despite the pressure on enterprise mobility, service revenue from our managed services, wholesale, and fixed segments grew 8.1% year-on-year in Q1. To add further color, as you would note, even while both are increasing, our CMS to RMS differential is nearly 15 percentage points. This provides a good indication of the upside that is still available for future tapping, especially in enterprise and ICT, in addition to high-value consumer segments. I also want to highlight that while we were producing these significant results, telecom markets saw more than 5% decline in FY 2023 in post-World Cup year. We are well aware of the challenges of the market, and we are confident that we have the right capabilities, resources, and partnerships to overcome the challenges and seize the opportunities in the market.
As we begin our detailed financial review, please turn your attention to slide number 6, where we will highlight some key aspects of our financial performance for this quarter. Our commitment to customer experience and value drove a strong financial performance this quarter, with total revenue increasing by 3.9%. This growth was driven by a 2.5% jump in service revenue, demonstrating the increasing demand of our offerings. Further, stronger handset sales also played a pivotal role in propelling us forward. At the same time, we have been focused on keeping our costs clean, and it is paying off. By implementing smart cost-saving initiatives, we have been able to unlock resources and fuel growth across different areas. Despite boosting revenue, expanding our subscriber base, and robust network growth, our operational expenses remain flat year-on-year.
This resulted in a record low OpEx intensity of 23.4% this quarter, a remarkable decline of 0.7 percentage points year-on-year. This achievement strengthens our financial position and allows us to invest more in areas of growth and to improve EBITDA. Our unwavering focus on efficiency has shown remarkable profitability this quarter. Our EBITDA is QAR 338 million, a growth of 5.4 percentage points year-on-year. Furthermore, our margin has reached 41.9%, an increase of 0.6 percentage points compared to the same period of last year. Lastly, reported net profit for the quarter reaching QAR 150 million, reflecting a healthy growth of 12.5% year-on-year. Our liquidity and cash flow generation also remains robust, as evidenced by operating cash flow reaching QAR 233 million for Q1. That's a 26% year-on-year underlying increase. This achievement stems from our effective collection strategies and successful working capital optimization initiatives.
Notably, we maintained a net debt level below last year's, despite an increase in the dividend payout for the last year. Now, let's turn to slide number 7. This slide showcases our key financial performance metrics for the quarter in comparison to quarter one of last year. Total revenue grew by QAR 30 million, representing a solid 3.9% growth year-on-year. This growth was primarily driven by an impressive 2.5% increase in service revenue, coupled with the impact of higher handset sales. Mobility revenue remained stable, while most of the growth came from fixed, managed services, IoT, wholesale, and other revenues. Despite significant network expansion and increase in subscribers, growth in expenses remained lower than the revenue growth, featuring the success of our cost optimization initiatives.
Overall, the increase in expenses is directly tied to the growth in revenues, specifically the managed services cost and the impact of higher handset sales. OpEx largely remained flat, and the business continues to benefit from our company-wide cost optimization program, evidenced by declining OpEx intensity. With increased service revenue and optimized costs, our EBITDA grew by an impressive 5.4 percentage points year-on-year, translating to a margin expansion of 0.6 percentage points. This strong performance translated into a very healthy net profit growth of 12.5% year-on-year, reaching QAR 150 million for the quarter. Now, taking a closer look at the service revenue on slide 8. Postpaid revenue continues to show growth quarter-on-quarter, with growing subscribers and slightly improved ARPU. However, on a year-on-year basis, the revenue remains flat, owing to the fact that Q1 last year still had the impact of World Cup-related contracts.
Similarly, prepaid revenue has stabilized after declining last year. We have highlighted in the last quarter that the mobility market has been impacted by a lower level of economic activity post-World Cup, particularly the slowdown in the construction sector. In addition to that, aggressive market pricing across mobility segments impacted ARPUs as well. As a result, the mobility market declined by roughly 7% in FY 2023. It is important to note that Vodafone Qatar mobility revenue market share continued to grow by more than 1 percentage point last year. However, starting Q4 2023, we can see a noticeable reduction in market pricing aggression, particularly in the prepaid segment, by customers having received good value but at a reasonable price. As a result, mobility ARPU has stabilized, resulting in stabilization of mobility revenue.
Managed services, wholesale, and fixed revenues are the primary service revenue growth driver, showing a growth of 8.1% year-on-year. Wholesale business, including inbound roaming visitors revenue, recorded an impressive growth, reflecting the increase in tourist activities in the country. Our commitment to expanding our fiber network is paying off. We are adding new customers nationwide, which has led to a steady increase on a year-on-year basis. Quarter-on-quarter reduction here is primarily due to seasonally high wholesale revenue during Q4 last year. That was low-margin revenue. Overall, total service revenue increased 2.5% year-on-year, led by growth in managed services, wholesale, IoT, and fixed. Turning our attention to slide number nine, let's analyze the efficiency and profitability margin trends. The first graph showcases OpEx intensity, our key metric that tracks operating expenses as a percentage of total revenue.
Even with growth in our mobile and fixed networks, we have made impressive strides, achieving a further reduction of 0.7 percentage points in OpEx intensity. This accomplishment highlights our unwavering commitment to doing more with less and our laser focus on cost optimization. The middle graph shows EBITDA margin. The grey line represents the margin excluding equipment business, which is a true reflection of our core telecom business, while the red line reflects the reported EBITDA margin. Growth in service revenue, coupled with focus on cost optimization, continued to drive margin expansion. We achieved a reported EBITDA margin of 41.9%, a 0.5 percentage point improvement over FY 2023. Notably, EBITDA margin excluding equipment business shows a significant increase of 1.7 percentage points compared to last year. This positive shift is attributed to changes in the revenue mix, particularly a stronger performance in the managed services segment.
The final graph showcases a stellar performance in our net profit margin. It has climbed a further 1.3 percentage points year-on-year, reaching a new high of 18.6%. Now, turning our attention to slide number 10, let's take a closer look at CapEx and return on capital employed. Our CapEx for the period stands at QAR 26 million, representing an intensity of 3.3%. It is usual for us in the industry to have a slow start to the year, but we will ramp up as we progress through the year. We maintain a steadfast commitment to expand both our fixed and mobile network infrastructure. This ongoing pursuit aims to deliver comprehensive coverage and incorporate cutting-edge digital capabilities, enhancing the overall customer experience. Our relentless focus on growth and profitability has yielded impressive results, as evidenced by increasing improvement in our return on capital employed.
Compared to FY 2023, our return on capital employed increased by 0.8 percentage points and has reached 11.5% on an annualized basis, reflecting a significant enhancement in returns over the last few years. Now, coming to cash flow and net debt on slide number 11. As discussed in previous quarters, working capital management has been a major area of focus even for this year, and this is due to a number of factors, including continuing higher borrowing cost, the fact that we entered the year with higher CapEx payables, and the increase in our dividend payout to 11% for last year. The first chart represents cash generated from operations, net of CapEx, taxes, and lease payments. It reflects the true cash available for dividends, debt repayments, and strategic investments.
Our operating cash flow has experienced impressive year-on-year growth of 26%, excluding the impact of World Cup and one-off payments received last year in Q1. This achievement is testament to our company-wide focus on optimizing cash flows and working capital management. The resulting strong cash flow has empowered us to achieve two significant feats: reduce net debt year-on-year, even with an increase in dividend payouts; improve our net debt-to-EBITDA ratio from 0.46 times to a commendable 0.42 times, well below the financing covenant of 2.5 times of EBITDA. Turning to statutory income statement on slide number 12. We have already covered the major year-on-year movements. Both consumer and enterprise and other revenue increased year-on-year. The increase in direct cost is attributed to an increase in related revenue. Decrease in finance costs reflects the impact of optimized borrowing despite the impact of higher interest rates.
Lastly, EPS has also increased in line with the net profit. Now, to sum up my presentation today on Q1 financial results, let's look at the five-year trend view of our key financial performance indicators. I'm not going to take a lot of time here. Our top-line growth continues despite the market slowdown and the pricing aggression we talked about earlier. Over the last five years, our top-line has registered a very impressive compound annual growth rate of 8.5% in service revenue and 10.5% in total revenue, underscoring our ability to navigate challenges and sustain robust growth in our revenue. Importantly, while expenses have increased, they have consistently remained lower than the growth in top-line. This strategic balance has resulted in substantial profitability growth. EBITDA has seen an impressive CAGR of 14%, and the net profit has soared with an extraordinary CAGR of 33%.
These results underscore our strategic focus on sustainable growth, operational efficiency, and prudent financial management. As we continue to navigate challenges and capitalize on opportunities, we remain committed to delivering value to our shareholders. Lastly, on slide number 14, there is a full-year guidance. Starting with the revenue, management anticipates sustained top-line growth for FY 2024. We have registered a 3.9% year-on-year growth during Q1, and we are confident to continue the positive trajectory for the full year as well. Higher revenue, along with cost optimization initiatives, is anticipated to enable a further expansion of 0.5-1 percentage points in reported EBITDA margin. With the growth in top-line and largely stable operating costs, EPS is forecasted to grow between 8%-12%. The growth for Q1 was 12.5%. Furthermore, we will continue to invest in capital expenditure, focusing on profitable growth segments.
These investments are planned to be maintained within a range of 12%-14% for the financial year 2024, and it will be a significant reduction versus the last few years. That's all from my side. Thank you for your attention. As always, more detailed financial documents, including balance sheet, comprehensive income statements, subscriber numbers, and ARPU, are provided in the appendix for your information. This concludes my review. Thank you. Now, back to Pauline.
Thank you very much, Masroor. We will now move to the Q&A session. Operator , kindly extend to the participants how to ask questions.
We are now opening the floor for question and answer. If you'd like to ask a question, please press star and number one on your telephone keypad. Our first question comes from Mark Krombas from TFI.
The floor is now open.
Congratulations on the results. I only have one question. Could you talk a little bit more about the managed services, wholesale, and fixed growth that you experienced of 8.1% in Q1, and what the visibility is for that segment for the coming year, for the rest of the year?
Okay. So if you've noticed, in the last few quarters, this segment has been one of the major growth drivers for us. And as I have explained in my speaker notes as well, this includes the managed services, which, as part of our diversification strategy, we have been investing in this area and have been getting customers and growing our revenue. This also includes fixed and wholesale revenue. Like in the past few years, this segment is expected to continue to contribute our top-line growth going forward, and one of our strategic priorities going forward. I cannot comment on the exact percentage forecast, but yes, this is one of the focus areas going forward as well.
All right. It looks like we can move to the next question now. Our next question comes from Zohaib Pervez from Al Rayan Investments. Your line is now open.
Hello? Thank you for the presentation, Masroor. So equipment sales have, again, are on a growth trajectory after last year being flattish to lower. Is this because of new contracts, or is it because of the phone sales you were, I think, mentioning during the call? Could you give us some color on that? I mean, earlier, we saw significant growth in this segment of equipment sales. It was because of new government and corporate contracts that you received. Is that the way? Is that rational? That's the first question.
The other question is regarding the prepaid and postpaid. Now, during the quarter, we have had good population. Population has remained high compared to last quarter. Even because of the Cups, we had a number of tourists. But it doesn't seem to be reflected in your mobility customer base. Could you tell us if could you give us some idea why? Is it because of a high base, or why do you think that is the rationale, or probably your competitors taking more market share? Thank you.
Okay. Regarding your first question, so the growth in equipment revenue this year is primarily driven by higher handset sales. So our equipment team is gaining market share there and is driving the equipment revenue growth this year. Regarding your second question, so we have been getting customers, a fair share of the increased population.
As you have mentioned rightly, a lot of this is visitor-led growth in population. If you look at the prepaid base of Vodafone in Q4, it was very high, and we have seen the wind-down of that in Q1 as well. So we don't see any negative market share taking from visitors' perspective. Plus, one very important thing is that I've mentioned during the call that we have seen the market pricing aggression going down. When that happens, there is a consolidation which happens, and some of the ultra-low-value customers consolidate their spend. This impacts the subscriber base, but overall, it doesn't impact the revenue significantly.
Thank you. Just to follow up on the comment that you just made earlier also that you know the pricing environment has become less challenging. Has this been one of the reasons and an important and probably an important reason for your margin expansion, or it's only the cost initiatives? Thank you.
So margin expansion is driven both by our cost optimization initiatives and definitely the less aggressive market pricing that is happening. So both are contributing to margin expansion.
Thank you.
As of right now, we don't have any raised questions. I'd now like to hand back over to the management for their final remarks.
Hi. This is Bobby. Okay. Thanks. If there are no further questions, I would like to turn the call over to Pauline, who has some important closing remarks. Pauline, can you please go ahead?
Thank you, Bobby. Thank you all for joining today's call. We'll be sure to keep you updated on all our upcoming investors' calls. Please be aware that we have plans to attend the QSE and HSBC roadshow in the UK in June, so we hope to see you all there. Feel free to reach out to the investor relations team if you need any further information or visit our IR section on the Vodafone Qatar website. Thank you.
Thank you for attending today's call. We hope you have a wonderful day. Stay safe.