Good afternoon, everyone, and welcome to Vodafone Qatar Financial Year 2023 Investor Call. Please let me introduce myself. I'm Pauline Abisaab from the Investor Relations team. On this session, we have Sheikh Hamad Abdulla Jassim Al-Thani, our Chief Executive Officer, and Masroor Anjum, our Chief Financial Officer. The call will start with a presentation from our CEO on the performance highlights, followed by an update on the financial performance for the year ended 31 December 2023 by our CFO. As usual, the presentation will be followed by a Q&A, Q&A session. We'll be taking your questions by raising hands virtually. Today's presentation is available on this webinar and on Vodafone Qatar website under the Investor Relations section. Please note that this session is recorded, and also note the updated disclaimer on slide number two. To begin, I now hand over to Sheikh Hamad.
Good afternoon, and thank you for joining us today. Last year was a special year, and it marked the end, as it marked the end of the World Cup project momentum that we have been having for the last 10 years, which led, thanks to God, to the country's successful hosting of the World Cup 2022. There were many uncertainties at the beginning of 2023. However, we believe that the legacy of the World Cup is going to last for a much longer time. That is in addition to the big projects and the plans that the country is planning to do in the next few years, such as North Field Expansion and many and many other areas, such as the focus on tourism. Also, the population has been relatively stable, and the inflation is under control from what we see.
On page number four, from an operational performance perspective, we continued our profitable growth, where our total revenue grew by more than 6% year-on-year, and net profit by approximately 14% year-on-year, and that is excluding the direct impact of World Cup. Due to the strong performance last year, despite all the market challenges, the board of directors is recommending an 11% per share dividend to the shareholders for approval in the next AGA in February. To confirm our previous commitment to diversify beyond mobility, it's also worth mentioning that approximately 29% of service revenue is coming from non-mobile business as of last year, as can be seen in the slide.
Also, from a market share perspective, and based on Q3 TTM, our revenue market share grew by 1.7%, as mentioned on the slides, and our mobility subscriber grew by 2.54% on year-to-year basis. From an infrastructure perspective, our outdoor and indoor sites has grown by almost 9% year-on-year, taking our sites, total number of sites to be more than 2,400 sites for both indoor and outdoor. And with that said, we believe we have now bridged most of the gaps that we used to have in our network, making us a better, in a better position, the place to address high-value customers' need. Also, as a result of that, we believe or expecting to have less investments in site expansions going forward as compared to previous years.
I believe, if you recall in H1 analyst call, we have mentioned the pressure on Prepaid ARPU. Fortunately, we started noticing early signs of market repair, which would lead to a higher ARPU and margins going forward if this continues. This is a very clear diagram on the right, where you can see the improvement in ARPU from an index perspective. Lastly, as Vodafone is committed to sustainability, and it's embedded within our own operational value, we have published to the public the last three years' reports on our website. We are inviting you to read them and noticing the year-on-year improvement on many initiatives that we have launched. Some metrics is shown on the slides to the right, just to give you a taste of some of the achievements.
With that said, I'm going to now hand over to Masroor Anjum, our CFO, to go over the financials. Thank you.
Thank you, Hamad, and good afternoon, everyone. I'm delighted to welcome you all to our analyst call and share the remarkable achievements of yet another successful year. As we delve into the financial review for the year 2023, let's start by highlighting some key aspects on slide 12. The momentum we experienced throughout the year extended seamlessly into Q4, resulting in an impressive 6.1% year-on-year increase in underlying total turnover.... Notably, our underlying service revenue saw a remarkable surge of 8.9%. We take pride in outperforming across various segments, notably fixed, managed services, and wholesale segments. Our commitment to cost optimization has been unwavering, and is evident from our ability to boost revenue, expand our subscriber base, and foster robust network growth, all while ensuring that growth in our expenses remain below service revenue growth.
As a result, we have achieved a historic low OpEx intensity of 24.1% in financial year 2023. This relentless pursuit of efficiency has translated into outstanding profitability outcomes. Our EBITDA stands at an impressive QAR 1.3 billion, showcasing an underlying growth of 7% year-on-year. Furthermore, our margin has expanded to 41.3%, a remarkable 1.1 percentage points increase compared to the previous year. Reporting a net profit of QAR 540 million reflects a robust growth of 13.8%, making our highest profitability level to date. In terms of liquidity and financial strength, our operating cash flow reached QAR 697 million this year, and this is an outstanding increase of 159% compared to last year.
This notable achievement is attributed to strong collections post the World Cup and successful implementation of working capital optimization initiatives. Importantly, despite a higher dividend payout, we have managed to reduce our net debt to lowest ever level of QAR 300 million at the end of 2023. Moving on to slide number 13, let's delve into our financial performance for the full year 2023 in comparison to the previous year. For a more accurate year-on-year analysis, we have excluded the direct impact of World Cup-related revenues and costs from the growth percentages mentioned on this slide. The company achieved a notable QAR 179 million increase in revenue, representing a substantial 6.1% growth year-on-year.
This growth was primarily driven by an impressive 8.9% increase in service revenue, coupled with the impact of higher handset sales, but partially offset by the recognition of project revenue in the previous year. Despite significant network expansion and increase in subscribers, growth in expenses remained lower than revenue growth, underscoring the success of our cost optimization initiatives. Overall, increase in expenses is directly tied to the growth in revenues, specifically the managed services cost. The diligent efforts of our credit governance committee resulted in timely payments from various segments, including government, large businesses, and World Cup-related projects. This proactive approach significantly reduced our bad debts by almost half, amounting to a year-on-year reduction of QAR 19 million. This not only optimized our working capital, but also contributed to saving on finance costs. Examining OpEx, the increase is mainly attributed to network expansion and its associated costs.
With increased service revenue and optimized costs, our EBITDA grew by an impressive 7% year-on-year, translating to a robust 41.3% margin. This strong performance translated to net profit, with underlying growth reaching a healthy 13.8% year-on-year, despite the impact of higher financing rates. Net profit has reached QAR 540 million for the year as a whole. Now, moving to slide number 14, let's look at the financial performance for the year 2023 in comparison to the previous year, but this time considering the reported numbers. Despite the impact of one-off World Cup-related revenue last year, our total revenue still exhibited a resilient 1.5% growth in 2023. The strong foundation of this growth lies in the notable 5.5% increase in service revenue, driven by managed services, fixed IoT, and wholesale revenue.
This growth was, however, partially offset by the influence of one-off World Cup-related revenue and projects from the previous year. Total expenses remained largely flat despite increase in revenue, and this is the impact of our cost optimization program. Lower World Cup-related expenses, offsetting the additional costs from the growth in revenue and network expansion. EBITDA experienced a commendable 4.2% increase, and net profit demonstrated a robust growth of 7.5%. Both these metrics capitalized on the expansion in service revenue while maintaining disciplined cost structure. Before I look at the service revenue details on the next slide, I would also quickly like to highlight our Q4 year-on-year financial performance. Unfortunately, the slide is not here, but we can separately send to the analysts.
For Q4 alone, if we exclude the World Cup-related revenue, our total revenue has increased by 6.8%, supported by a strong service revenue growth of 4.6%. Our expenses are higher by 7.3%, mainly because of higher network costs. Our EBITDA has increased by another 6% in Q4 versus last year, Q4, and net profit, underlying net profit, is higher by 11.2%. Now, moving to the next slide, slide number 15, and taking a closer look at the service revenue.
Although the revenue for FY 2022 excludes the directly attributable cost impact of World Cup, it's important to recognize that beyond the direct impact, there was a secondary impact, primarily driven by a temporary scale-up in the capacity of service industry last year, creating a ripple effect that influenced all our revenue streams, specifically mobility revenue. If you look at last year's growth in numbers in these graphs, specifically the steep growth in postpaid, that impact is quite evident. However, that impact could not be ascertained reliably. So while we review the numbers stated herein as underlined, it's important to keep this factor in mind. Starting with the postpaid. Postpaid revenue remained largely flat year-on-year. In addition to what I just explained, this is due to lower level of economic activities in the market and aggressive pricing, resulting in reduction in postpaid market ARPU.
However, it is important to note that our postpaid revenue market share still grew by 1.4 percentage points on an annualized basis, based on Q3 FY 2023 announced results. Coming to the prepaid segment, the decline in revenue is due to a combination of factors, including a decline in prepaid market, lower economic activity, specifically in the construction sector, and intense competition moves, which have resulted in overall market value reduction. We have been cautious in responding to such aggressive value reductions, but this segment is highly sensitive to price movements. Again, on an annualized basis, the overall prepaid market declined 12% in Q3, while Vodafone prepaid revenue declined by 6.6%, gaining revenue market share of 2.3 % . However, the positive thing is that during Q4, if we can shift to next slide.
So this slide basically talks about quarter-on-quarter ARPU movements in postpaid and prepaid. So the positive thing is that during Q4, we have seen a pickup in economic activities, and also there is a noticeable reduction in pricing aggression, specifically in prepaid. This has enabled a growth in prepaid ARPU quarter-on-quarter by 8.6%. Our postpaid ARPU has also increased quarter-on-quarter by 1.6%, but this is mainly because of seasonality and also because some of our customers came out of promotional packages during Q4, and that helped increase the ARPU. We continue to see pricing aggression in enterprise segment, including postpaid. However, we remain upbeat about reduction in intensity of pricing aggression, in line with the prepaid market, resulting in mobility ARPU recovery during 2024, and this is expected to stabilize overall mobility market. Previous slide.
Now, coming to the managed services, wholesale, and fixed revenues. These segments have been the primary service revenue growth drivers in FY 23, as mentioned by Hamad while explaining the diversification agenda of Vodafone. The ICT projects completed last year commenced their second phase of managed services, and we continue adding more projects into the pipeline. Wholesale business, including inbound roaming visitor revenue, recorded impressive growth, reflecting the increase in the number of visitors in the country. Lastly, we as we keep on expanding our fiber presence across the country, we keep on getting more customers. This year, Vodafone was the first in the region to offer fiber plans, starting with a speed of 1 Gbps to our consumer segment. The response from fiber segment has been very encouraging so far.
Overall, total service revenue increased 8.9% year-on-year, led by growth in managed services, wholesale, fixed, offset by prepaid revenue. Turning our attention to slide number 16, let's analyze the efficiency and profitability margin trends. The first graph illustrates OpEx intensity, a crucial measure of operational efficiency, tracking total operating expenses as a percentage of total revenue. Despite significant network expansion in both mobile and fixed segments, we have achieved an impressive reduction of 0.8 percentage points in our OpEx intensity. This underscores our unwavering commitment to achieving more with fewer resources and is a clear testament to our relentless focus on cost optimization. Moving to the middle graph, which focuses on our EBITDA margin, the red trend line represents the reported EBITDA margin, while the gray trend line depicts the EBITDA margin, excluding the equipment business and one-offs.
Higher service revenue has enabled us to maintain a 40% mark, reaching reported EBITDA margin of 41.3%, expanding by 1.1 % compared to last year. The EBITDA margin, excluding equipment business, stands at 45.1%, reflecting a marginal decline of 0.1% from last year. This shift is attributed to changes in the revenue mix, particularly in the managed services segment. Last graph on the right showcases the growth trend of our net profit margin, which has increased by another 1 percentage point this year, and reached 17.4 % for the year FY 2023. Moving on to next slide, slide number 17, let's look into our CapEx and return on capital employed. So our CapEx for the period stands at QAR 550 million at an intensity of 17.7%.
This allocation was strategically directed towards investment in capacity expansion and coverage footprint enhancement, investments to enhance digital capabilities and products, investments in maintaining the network, including QAR 105 million incurred on network software renewal for three-year period. Although it's payable over a period of three years, but based on accounting standards, it has been capitalized upfront. Our commitment to expanding fixed and mobility network persists, aiming to provide better coverage and enhance digital experience to our customers. The outcome of our focused efforts on growth and profitability is evident in the significant improvement in our Return on Capital Employed. Our Return on Capital Employed has surged by 0.9 % this year, crossing the 10% mark for the first time. This signifies remarkable growth in returns over the last four to five years.
Coming to the cash flows and net debt on slide number 18. As discussed in the previous quarters, working capital management has been a major area of focus this year. This is due to a number of factors, including higher borrowing rates, the fact that we entered the year with higher CapEx tables and World Cup-related receivables, and the increase in our dividend payout to 10% for the 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 and debt repayments. Our operating cash flow has more than doubled compared to the same period last year. This is despite the fact that we came out of a high CapEx intensive period and carried over its liabilities into this year.
We have taken a number of initiatives across the company to optimize our cash position and the working capital. As a result of strong cash flow, we were able to decrease the net debt to its lowest level of QAR 300 million, despite 67% increase in dividend payout, and this has greatly helped us keep our financing costs lower. Further, this also resulted in improvement of net debt to EBITDA ratio from 0.4x to 0.2 x, well below financing covenant of 2.5 x of EBITDA. Finally, in this presentation, we have incorporated a bridge illustrating the year-on-year cash movement. Cash flow from operations amounted to QAR 1.37 billion. After allocating funds for CapEx payments of QAR 482 million and a dividend payout of QAR 420 million, the remaining balance was strategically directed towards debt repayment, totaling QAR 331 million.
This deliberate approach resulted in a substantial 44% reduction in net debt, demonstrating our commitment to prudent financial management and deleveraging initiatives during prevailing high market interest rates. Now, assessing our financial performance against the guidance that we have provided in the previous quarters, I am extremely pleased to report that we have successfully met all the targets that we had set for ourselves. Furthermore, we've also seen the guidance and the financial performance outlook published by analysts in recent weeks, and are pleased to see that our actual performance has exceeded those expectations as well. Regarding the guidance for FY 2024, we anticipate sustained top-line growth, propelled by the ARPU recovery in mobility segment and ongoing expansion in the fixed and managed services segments. Our strategic commitment to a robust cost optimization program is expected to contribute to further expansion of EBITDA margins in 2024.
Last, in terms of CapEx, CapEx intensity, as mentioned by Hamad earlier, our expectation is a reduction of at least 1 % in FY 2024. And these are still early days in the new year, we will come up with a more firmed up guidance as we move along the year. Turning to the full income statement on slide number 20, I think we have already covered the major year-on-year movements. Decrease in consumer revenue is mainly because of prepaid segment. Increase in financing costs represent the increase in effective borrowing rates from 3.5% to 5.6%. And lastly, EPS has also increased in line with the net profit. Next slide. So I will conclude my presentation looking at the five-year trend view of our key financial performance indicators.
I'm not going to take a lot of time on this, but our top-line growth momentum continues. That's the strong message. Despite expected slowdown post-World Cup, FY 2023 maintained a resilient top-line growth momentum. This has led to an outstanding compound annual growth rate of 10% since FY 2019, 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 our top line. This strategic balance has resulted in substantial profitability growth. EBITDA has seen an impressive CAGR of 16%, and net profit has soared with an extraordinary CAGR of 39%. 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.
Thank you for your time. As usual, the balance sheet, detailed statement of income, subscribers, and ARPU details are available in the appendix. This concludes my review. Thank you, and back to Pauline.
Thank you, Masroor. Now we can start with the Q&A session. Please raise your hands virtually to open the microphone to you. I'll take the first question from Ziad Itani. Ziad, the microphone is open for you.
Thank you, Pauline. Congratulations on the strong results. So just looking at your balance sheet, it seems that the leverage is quite low. So can you give us some guidance on what's your target capital structure? And, what are you looking for when it comes to M&A specifically? Do you consider other markets than Qatar, or you know, other sub-sectors? And what's your view on data centers specifically? Thank you.
Okay. Regarding capital structure, as you are aware, and I tried to explain that in my presentation as well, our debt-to-equity ratio is well below 10% right now, and frankly, we are very comfortable with that, given the prevailing, very high market interest rates. But, we remain open to, investment opportunities which can give us returns more than the existing business. Sheikh Ahmed would like to, I mean, talk about any M&A and data center opportunities.
Okay, I understand the question and the objective of that, what you mean. We are now exploring different ways of how and where we can diversify. We are currently focusing on the market of Qatar. We believe that there are so many opportunities in Qatar. However, whenever there is an opportunity that we can share with you, we will be sharing it. For the data centers, we don't limit ourselves. Whatever makes sense for the company, it will be definitely evaluated. This is what I can share at this point of time. Thank you.
Thank you. That's clear.
We have another question from Mark Krombas. Mark, the microphone is open for you. Mark, please unmute yourself.
Okay. Thank you, gentlemen. Congratulations on achieving your targets for 2023 so well.
We cannot hear well.
Can you hear me now?
Better. Yes, thank you.
Congratulations on achieving your targets for 2023. Could you highlight any targets for 2024 that you might have set yourself? And you just give a brief outlook for 2024?
I guess you're asking about financial targets. During my presentation, I actually briefly touched base on that. I'll again repeat that. Regarding the guidance from top-line perspective, we anticipate sustained top-line growth propelled by ARPU recovery next year. How much? It's very early to talk about that. Regarding EBITDA margins, we are targeting further expansion in EBITDA margin because of our continued focus on cost optimization program. And lastly, in terms of CapEx intensity, as I mentioned, we are expecting a reduction of at least 1 percentage points next year.
I have a question from Nishit Lakhotia. Nishit, the microphone is open for you. Nishit, please unmute yourself.
Yeah. Hello, can you hear me?
Yes, we can hear you. Please proceed.
Yeah. Hi. My question again is, following from what Mark was asking. I mean, I generally get a sense that the growth rate of Vodafone Qatar is now going to be reducing given the high base. So from here, and, given the competitive intensity, it feels like your competitor is increasing the competitive intensity because they've been losing market in general to Vodafone Qatar. So how do you see the competitive environment and your high base affecting your overall performance in terms of the growth rate that you are currently sustaining? How do you see this going forward?
The second question is on the dividend outlook, given that you are, your debt is now way less, your CapEx intensity is falling, would you be further increasing the payout than what you're already doing? That's the two questions. Thank you.
It's a good question, what you have asked. First of all, when we started about five years ago with our plan, we didn't have enough, let's say, or the right, infrastructure that can address the needs of the high value. As of today, we are still under-indexed when it comes to high-value customers. And when I opened the presentation and mentioned about the growth in infrastructure, and we believe that we have bridged most of the gaps, and we are also, in addition to this, we are rolling out fiber, a state-of-the-art, actually, infrastructure, fixed infrastructure.
We believe now we will be able to get, increase our ARPU by both by, by, by adding more value to our tariffs or, or, services or even by getting, the high-value customers to use our network. And I believe this will both increase our revenue and also will increase and improve our margins. If you see today, our market share, sub-mobile market share is about 40, 45 or so, from subscriber perspective. However, our revenue is still much less. Our revenue share is still much less than this. So I believe there is an opportunity for ARPU lift, as mentioned by Masroor, but mainly not only from the existing customers, but also by getting into the high-value customers, which we believe that we are significantly under-indexed.
Now, we believe we are suited to grow into this segment and getting our healthy market share, especially in a market that has only two operators. The other thing where we believe we can add value is the managed service. We believe the country is focusing now on digital transformation across all segments, from financial segments, from sectors, from government, and I believe they need trusted partners to be able to help them to execute their own strategies and achieve their objectives. So we believe we, as Vodafone, and with our capabilities that we have built across the years, we'll be able to help them and support. The plans is already there. We have, as you can see, 29% of the revenue is coming from fixed and others.
There are many of such projects like this. We are now in the phase of productizing it and trying to focus on the areas where we can add value. Fintech is a big thing for us. We were the first wallet to be licensed to non-banking entity in the country. We are not yet disclosing any information about it for competitive reasons, but we believe we have our own strategy that is different than many fintech in the region and wallets. We have a different view of it, and we believe we will be able to use it as a diversification platform for Vodafone to grow the region in Qatar or even perhaps outside in the fintech area. When it comes to the dividend that you have talked about, we have...
The policy that has been approved by the board was giving a guidance between QAR 8-QAR 9%, or 8%-10% of the nominal value of shares. But there was a clause saying that whatever the board member is recommending, if they think that the performance is actually better than what was expected in the long-range plan that we have developed before, which we have continuously overachieving it for the last five years, they can recommend more, but again, it's subject to the shareholders and the AGA. A good example of that is that this year, the recommendation was 11%, which is more the guidance and the policy that has been set. I hope I have answered all of your questions.
Okay, yeah. Thank you so much.
I would like to remind you that if you would like to ask questions, please raise your hands. I don't see any more raised hands, so if there are no further questions, I would like to thank you all for joining today's call. We'll keep you updated on all our upcoming investors calls, as well as roadshows that we'll be attending this year. Please feel free to contact the investor relations team if you need any further information, or visit our investor relations section on Vodafone Qatar website. Thank you.