TIDMVOD
RNS Number : 4542S
Vodafone Group Plc
16 November 2021
Vodafone Group Plc H1 FY22 results
16 November 2021
Demonstrating sustainable growth in both Europe and Africa
-- Group service revenue growth of 2.8%* in the first half of FY22
-- Adjusted EBITDAaL growth of 6.5%* and margin expansion of
0.7* percentage points year-on-year to 33.6%
-- Good performance in Germany with 1.2%* service revenue growth
and 7.7%* Adjusted EBITDAaL growth
-- Pre-tax return on capital employed increased by 0.8 percentage points to 6.3%
-- Committed to improving returns through growth and portfolio action
Financial results H1 FY22 H1 FY21 Change (1)
--------------------------------------------
Page EURm EURm %
------------------------------------------- ----- --------- -------- ----------
Group revenue 12 22,489 21,427 5.0
Group service revenue 12 19,010 18,418 2.8*
Operating profit(2) 12 2,620 3,354 (21.9)
Adjusted EBITDAaL(2,3) 12 7,565 7,011 6.5*
Profit for the financial period(2) 12 1,277 1,468
Basic earnings per share(2) 23 3.40c 4.30c
Adjusted basic earnings per share(2,3) 23 4.90c 3.96c
Interim dividend per share 39 4.50c 4.50c
Cash inflow from operating activities 23 6,455 6,009 7.4
Adjusted free cash flow(3) 24 23 451
Net debt(2,3) 25 (44,298) (43,886) (0.9)
============================================ ===== ========= ======== ==========
1. "*" represents organic growth. See page 2. 2. Prior period re-presented
for Vodafone Egypt which is no longer held for sale. See pages 24
and 30.
3. Non-GAAP measure. See page 46.
-- Group revenue increased by 5.0% to EUR22.5 billion, mainly
driven by service revenue growth in Europe and Africa
-- FY22 Adjusted EBITDAaL guidance narrowed to top end of range
EUR15.2 - EUR15.4 billion (from EUR15.0 - EUR15.4 billion), and
Adjusted free cash flow upgraded to at least EUR5.3 billion (from
at least EUR5.2 billion)
-- Interim dividend per share of 4.5 eurocents, record date 26 November 2021
Nick Read, Group Chief Executive, commented:
"The results show we have demonstrated good sustainable growth
and solid commercial momentum. Our strengthened performance in
Africa and Europe puts us on track to be at the top end of our
guidance for this year, as well as firmly within our medium-term
financial ambitions.
We know there is more to do and our focus remains on driving
growth. We are structured for value creation, with operational
priorities and portfolio actions which are designed to improve
returns at pace."
For more information, please contact:
Investor Relations Media Relations
Investors.vodafone.com Vodafone.com/media/contact
ir@vodafone.co.uk GroupMedia@vodafone.com
Registered Office: Vodafone House, The Connection, Newbury,
Berkshire RG14 2FN, England. Registered in England No. 1833679
A webcast Q&A session will be held at 10am on 16 November
2021. The webcast and supporting information can be accessed at
investors.vodafone.com
Summary Good financial performance
Organic growth
All amounts marked with an "*" in the commentary represent
organic growth which presents performance on a comparable basis,
excluding the impact of foreign exchange rates, mergers and
acquisitions and other adjustments to improve the comparability of
results between periods. When calculating organic growth, the FY21
results for Vantage Towers have been adjusted to reflect a full
year of operation on a proforma basis in order to be comparable to
FY22. Organic growth figures are non-GAAP measures. See non-GAAP
measures on page 46 for more information.
Adjusted EBITDAaL
Adjusted EBITDA is now referred to as Adjusted EBITDAaL for
FY22, with no change in the underlying definition. Adjusted
EBITDAaL is a non-GAAP measure. See page 46 for more
information.
Adjusted free cash flow
Adjusted free cash flow was previously referred to as free cash
flow (pre spectrum, restructuring and integration costs). For the
year ending 31 March 2022, the metric excludes Vantage Towers
growth capital expenditure. Adjusted free cash flow is a non-GAAP
measure. See page 46 for more information.
Financial performance
Total revenue increased by 5.0% to EUR22.5 billion (FY21 H1:
EUR21.4 billion), driven by service revenue growth in Europe and
Africa and a recovery in handset sales following COVID-19
disruption in the prior year, as well as favourable foreign
exchange movements.
Adjusted EBITDAaL increased by 6.5%* to EUR7.6 billion (FY21 H1:
EUR7.0 billion) due to revenue growth and a legal settlement in
Italy. The Adjusted EBITDAaL margin was 0.7* percentage points
higher year-on-year at 33.6%.
Operating profit decreased by 21.9% to EUR2.6 billion (FY21 H1:
EUR3.4 billion), reflecting a prior year gain of EUR1.0 billion
arising on the merger of Vodafone Hutchison Australia into TPG
Telecom Limited. Excluding this, operating profit increased,
reflecting higher Adjusted EBITDAaL and lower depreciation and
amortisation, partly offset by a lower share of profits from
associates and joint ventures.
The Group made a profit for the period of EUR1.3 billion (FY21
H1: EUR1.5 billion). The profit decrease was primarily driven by
lower operating profit more than offsetting lower financing costs
and a net income tax credit. The tax credit was attributable to
one-off deferred tax credits in the UK and Italy reflecting the
increase in the future statutory tax rate in the UK and the
revaluation of assets in Italy.
Basic earnings per share was 3.40 eurocents, compared to basic
earnings per share of 4.30 eurocents in the prior year.
Cash flow, funding & capital allocation
Cash inflow from operating activities increased by 7.4% to
EUR6.5 billion (FY21 H1: EUR6.0 billion).
Free cash flow was an outflow of EUR1.0 billion (FY21 H1:
outflow of EUR0.1 billion). Higher Adjusted EBITDAaL was offset by
higher working capital attributed to seasonal phasing, higher
dividends paid to non-controlling shareholders in subsidiaries, and
higher licence and spectrum payments during the period. Adjusted
free cash flow was an inflow of EUR23 million (FY21 H1: inflow of
EUR0.5 billion) and is now expected to be higher than initially
guided and at least EUR5.3 billion in FY22. See page 11 for further
information.
Net debt at 30 September 2021 was EUR44.3 billion, compared to
EUR40.5 billion as at 31 March 2021. Net debt increased by EUR3.8
billion due to the free cash outflow of EUR1.0 billion, equity
dividends of EUR1.3 billion, share buybacks used to offset share
dilution linked to mandatory convertible bonds of EUR1.1 billion,
and other movements relating to mark-to-market losses recognised in
the income statement of EUR0.4 billion.
The interim dividend per share is 4.5 eurocents (FY21 H1: 4.5
eurocents). The ex-dividend date for the interim dividend is 25
November 2021 for ordinary shareholders, the record date is 26
November 2021 and the dividend is payable on 4 February 2022.
Strategy Focused on growth
We believe that Vodafone has a significant role to play in
contributing to the societies in which we operate and we want to
enable an inclusive and sustainable digital society. We continue to
make progress against our purpose strategy and provided a full
update in our FY21 Annual Report and supplementary materials
(available on investors.vodafone.com ). We have also made further
progress with respect to our purpose strategy during the first half
of FY22.
In November 2018, we set out our ambition to reshape Vodafone
and establish a foundation from which the Group can grow in the
converged connectivity markets in Europe, and mobile data and
financial services markets in Africa. As we begin the second phase
of this transformation to become a new generation connectivity and
digital services provider, in this section we outline that:
1. our strategy is focused on growth and improving shareholder returns;
2. we have clear near-term operational priorities; and
3. we have further strategic opportunities through portfolio optimisation.
1 Strategy focused on growth & improving shareholder
returns
We have now substantially delivered the first phase of our
strategic ambition to reshape Vodafone into a stronger connectivity
provider. This has been delivered through four key strategic
priorities: (i) deepening customer engagement; (ii) accelerating
our transformation to a digital first organisation; (iii) improving
the utilisation of our assets; and (iv) optimising our portfolio.
We executed at pace across all four priorities between FY19 and
FY21 and by the end of March 2021, the three year highlights
included:
-- mobile contract customer loyalty in Europe improved by 2.3 percentage points;
-- we added 4.3 million NGN broadband customers in Europe;
-- we increased the number of homes passed with our 1 gigabit
capable fixed-line network in Europe to 43.7 million;
-- we launched 5G in 240 cities across 10 of our European markets;
-- we delivered a EUR1.3 billion net reduction in operating
expenditure in Europe and Common Functions;
-- we agreed 8 strategic network sharing partnerships with 9
mobile network operators in 7 markets; and
-- we executed 19 significant corporate transactions to optimise our portfolio.
The systematic execution of our strategy translated into more
consistent commercial performance and stronger financial
performance, which can be summarised as:
-- a significant improvement in service revenue performance;
-- ongoing improvements in Adjusted EBITDAaL margins, growing
from 31.6% in FY18 to 33.6% in H1 FY22;
-- consistent free cash flow generation, resulting in a
sustainable dividend policy of at least 9 eurocents per annum;
and
-- a continued focus on return on capital employed, with a 0.4
percentage point improvement in pre-tax ROCE to 6.3% between FY19
and H1 FY22.
The next phase of our strategy focuses on driving shareholder
returns through growth. This will be delivered through three
customer commitments and three enabling strategies, all of which
work together towards realising our vision to become a new
generation connectivity and digital services provider for Europe
and Africa, enabling an inclusive and sustainable digital
society.
A Strategic Progress Summary
Customer commitments Enabling strategies
================================================= =====================================================
* Best connectivity products and services * Simplified and most efficient operator
* Leading innovation in digital services * Social contract shaping the digital society
* Leading gigabit networks
* Outstanding digital experiences
Customer commitments Units H1 FY22 H1 FY21
========================================= ======= ======= ================
Best connectivity products & services
Europe mobile contract customers(1) million 66.0 65.0
Europe broadband customers(1) million 25.6 25.4
Europe Consumer converged customers(1) million 8.3 7.6
Europe mobile contract customer churn % 13.1 12.9
Africa mobile customers(2) million 186.0 170.9
Africa data users(2) million 87.6 84.5
Business service revenue growth* % 1.2 (1.5)
Leading innovation in digital services
Europe TV subscribers(1) million 22.2 22.3
IoT SIM connections million 136 112
Africa M-Pesa customers(2) million 49.0 45.3
Africa M-Pesa transaction volume(2) billion 9.3 6.8
Outstanding digital experiences
Digital channel sales mix(3 4) % 24 22
End-to-end TOBi completion rate(5 6) % 41 33
========================================== ======= ======= ================
1. Including VodafoneZiggo | 2. Africa including Safaricom | 3.
Based on Germany, Italy, UK, Spain only | 4. Figure presented in H1
FY21 column reflects Europe digital channel sales mix in Q2 FY21 as
the mix in Q1 was impacted by retail restrictions due do COVID-19 |
5. Group excluding Egypt | 6. Defined as percentage of total
customer contacts resolved without human interaction through
TOBi
Enabling strategies Units H1 FY22 H1 FY21
=============================================== ======= ======= =======
Leading gigabit networks
5G available in European cities(1) # 244 127
Europe on-net gigabit capable connections(1) million 46.5 39.4
Europe on-net NGN broadband penetration(1) % 30 30
Simplified & most efficient operator H1 FY22 FY21
Pre-tax return on capital employed(2 3) % 6.3 5.5
Post-tax return on capital employed(2 4) % 4.3 3.9
Europe markets where 3G switched off(1) # 4 1
================================================ ======= ======= =======
1. Including VodafoneZiggo | 2. These line items are non-GAAP
measures. See page 46 for more information. The half-year ROCE
calculation is based on returns for the 12 months ended 30
September 2021. | 3. Controlled | 4. Controlled and
associates/joint ventures
Further information on our strategy can be found through the
following links:
Resource Link
============================== =======================================
Second phase of strategy vodafone.com/ar2021
Digital services & outstanding investors.vodafone.com/digital-services
experience
Leading gigabit networks investors.vodafone.com/vtbriefing
Vodafone Business investors.vodafone.com/vbbriefing
Vantage Towers vantagetowers.com
2 Clear near-term operational priorities
In addition to the ongoing systematic execution of the second
phase of our strategy, we have three operational areas that are
currently being prioritised:
A. strengthen commercial momentum in Germany;
B. accelerate operational transformation in Spain; and
C. position Vodafone Business to maximise EU recovery funding opportunities.
A Strengthen commercial momentum in Germany
Germany is both the largest connectivity market in Europe and
Vodafone's biggest market, representing 38.2% of Group Adjusted
EBITDAaL in the first half of FY22. Germany has benefited from a
more rational competitive environment compared to many other
markets in Europe and is the only top five European market to have
experienced ARPU growth for both mobile and fixed connectivity
since 2017. Alongside the scale and rational market structure,
Germany also presents the most significant converged connectivity
opportunity of our larger markets, with only 18% of our mobile
customers taking a fixed connectivity product, compared with 54% in
Spain. Similarly, only 14% of our fixed connectivity customers in
Germany take a mobile connectivity product, compared with 90% in
Spain.
We are focused on taking advantage of this significant
opportunity through the structural advantage we have created with
our fixed connectivity services. Following the acquisition and
commercial integration of the former Unitymedia assets, we can now
reach over 23 million homes in Germany with 1 gigabit per second
fixed line connectivity. Gigabit availability will also be rolled
out to a further 1 million homes by the end of the financial year.
Beyond this, we have clear upgrade plans for our hybrid fibre cable
network that include a mix of demand-driven node-splitting -
bringing fibre closer to our customers - and options for upgrading
the last stretch of cable into customers' homes.
Compared with other markets, we have a more traditional sales
mix with respect to retail, online and call centres in Germany.
This has contributed to a lower rate of winning new customers as
our traditional retail channels have been significantly impacted by
COVID-19, with lockdowns and lower footfall. As retail footfall
recovers, we are focused on strengthening our commercial momentum
through stronger marketing campaigns, enhanced targeting of
existing customers with attractive cross-selling and up-selling
products, and further leveraging of the shared Group capabilities
we have created for effective digital marketing.
B Accelerate operational transformation in Spain
Over the last four years, the competitive environment in Spain
has intensified as the number of customer-facing brands has
increased from around 60 in 2017 to almost 80 in 2021. This has
resulted in significant price deflation, with mobile contract ARPU
across the market declining by 16% since 2017. Given the relatively
high operating leverage within the sector, this price deflation has
had a significant impact on our financial performance in Spain.
Following a series of measures conducted between FY19 and FY21,
we have stabilised our financial performance and are working to
further support returns. We have recently concluded a restructuring
plan, mainly affecting owned retail stores, as a part of our
operational transformation and announced a reorganisation of the
local executive committee, with new operational units focused on
competitiveness and digitalisation in the Consumer segment.
Given the market backdrop, we have also conducted extensive
interaction with policy makers and regulators at both the national
and European level. We are pleased that a series of spectrum and
taxation reforms are being pursued, including:
-- a well-structured spectrum auction, with an outcome below European benchmark levels;
-- longer duration for new licences with an extension of 20
years after the initial 20-year term;
-- the consideration of the reduction of spectrum licence fees; and
-- the consideration of the cessation of television taxation for network operators.
In addition to these improvements, we are also actively pursuing
further market structure opportunities including enhancing
strategic network partnerships and in-market consolidation. We are
also working to maximise the opportunities available for Vodafone
Business from EU recovery funding programmes, which will be
particularly significant in Spain.
C Position Vodafone Business to maximise EU funding opportunities
The European Commission has launched a series of funding
programmes with EUR750 billion available under the banner
"NextGenerationEU". These include the Recovery & Resilience
facility, which combines EUR360 billion of loans and EUR312.5
billion of grants available to European Union Member States. Of
these grants, approximately 70% will be allocated to European Union
Member States in which Vodafone has an operating presence. These
grants are planned to be 70% committed by the end of 2022. The
range of funding presents a direct and indirect opportunity given
that at least 20% of the total funding is planned to support the
European Commission's digital transformation agenda. We are
tracking the progress of funding applications and approvals at the
project level. The table below summarises the current funding
status by country.
Country Total funds Digital allocation Green allocation Released so far
=========== ===================== ================== ================ =================
Germany EUR25.6bn grants 52% 42% EUR2bn
----------- --------------------- ------------------ ---------------- -----------------
EUR68.9bn grants +
Italy EUR122.6bn loans 25% 37% EUR25bn
----------- --------------------- ------------------ ---------------- -----------------
Spain EUR69.5bn grants 28% 40% EUR9bn
----------- --------------------- ------------------ ---------------- -----------------
EUR17.8bn grants +
Greece EUR12.7bn loans 23% 38% EUR4bn
----------- --------------------- ------------------ ---------------- -----------------
EUR13.9bn grants +
Portugal EUR2.7bn loans 22% 38% EUR2bn
----------- --------------------- ------------------ ---------------- -----------------
Czechia EUR7bn 22% 42% EUR1bn
----------- --------------------- ------------------ ---------------- -----------------
Ireland EUR1bn 32% 42% None
----------- --------------------- ------------------ ---------------- -----------------
EUR14.2bn grants +
Romania EUR14.9bn loans 21% 41% None
=========== ===================== ================== ================ =================
In order to maximise our access to these opportunities, we have
mobilised a dedicated cross-functional team comprising product
specialists, business development executives and experienced
regulatory affairs professionals. Our plans are focused on five
core cross-market opportunities: digitalisation of SMEs; eHealth
investments; smart cities; digital initiatives for a greener
Europe; and connected education. We have an attractive and relevant
suite of products and services designed to access funding
opportunities available and further detailed information on the
opportunity and our progress will be outlined in a dedicated
virtual investor briefing in 2022.
3 Strategic opportunities through portfolio optimisation
Following the launch of the second phase of our strategy to be
the new generation connectivity and digital services provider for
Europe and Africa, we conducted an extensive portfolio review to
assess the optimal structure to deliver our strategy.
Historically, our Group has been managed as a combination of
geographically focused operating companies, which draw from a range
of shared services. Over the last three years, we have been
evolving our business model and organisational structures to
operate in a more streamlined and agile matrix. We continue to
recognise the importance of local, in-market scale and
capabilities, but also strive to generate further value from the
scale and breadth of our footprint.
Increasingly, we are managing our Group through four group-wide
operational layers:
A. infrastructure assets;
B. shared operations;
C. growth platforms; and
D. retail & customer service.
A Infrastructure assets
Our converged connectivity infrastructure is largely managed
through three components: passive mobile, active mobile and
fixed.
Our passive mobile infrastructure is now primarily held and
operated through Vantage Towers' network of 82,000 towers across
ten European markets. The Vantage Towers IPO was completed
successfully in March 2021 and the company has a current market
capitalisation of EUR15 billion. Further information on Vantage
Towers is available at vantagetowers.com . We continue to own and
operate our active mobile infrastructure in Europe directly, which
includes 135,000 radios. In addition, our African operations
operate a further 41,000 radios and 22,000 towers. We reached
network sharing partnerships in 7 markets between FY19 and FY21 and
are committed to enhancing asset utilisation through network
sharing.
Our fixed connectivity infrastructure comprises consumer
connectivity networks, mobile backhaul, and international
terrestrial and submarine connections. Across the Group, our fixed
connectivity networks include over 1.1 million kilometres of fibre
infrastructure and more than 0.5 million kilometres of coaxial
cable. Our approach to operating our connectivity infrastructure
was discussed at a recent investor briefing (
investors.vodafone.com/vtbriefing ), where we outlined our unified
pan-European technology organisational structure. We are actively
exploring further opportunities for our fixed network assets to
improve asset utilisation.
B Shared operations
The connectivity value chain involves a high degree of
repeatable processes across all our markets, such as procurement,
network deployment, network operations, sales activities, customer
support operations, and billing and transaction processing. As one
of the largest global connectivity providers, we have a significant
opportunity to standardise processes across markets, relocate
operations to lower cost centres of excellence and apply automation
at scale, delivering best-in-class efficiency levels.
We have consolidated our supplier management function into a
single, centralised procurement company. The Vodafone Procurement
Company manages global tenders and allows us to generate over
EUR600 million in annual savings compared to standalone
operators.
We manage our IT operations, network operating centres and
back-office activities through three Shared Service Centres
('_VOIS') in Egypt, India and Eastern Europe. Over a third of the
cumulative EUR1.3 billion net opex savings made between FY19 and
FY21 in Europe and Common Functions were generated through
integrating activities into _VOIS and driving digitisation at
speed. Approximately 30% of the Group's headcount works in _VOIS
and other shared operations, and over the last three years we have
automated over 5,500 roles.
Vodafone Roaming Services manages our global roaming
relationships with other operators and our Partner Markets team
works with 30 local operators in building strategic alliances and
extending our reach into different markets. These functions
generate over EUR250 million revenue and cost savings annually.
Last year, we simplified our operating model and initiated one
of our largest ever organisational changes to accelerate our
transformation into a new generation connectivity and digital
services provider for Europe and Africa. As part of this, we have
moved to a unified technology operating model with one integrated
European network and IT/digital team to drive efficiency, increase
speed of execution, standardise key processes, and codify the best
solutions for implementation across all of our markets.
We have made good progress over the last three years, however
there is still scope for further efficiencies, particularly with
respect to network operations and digital services platforms.
C Growth platforms
Over the last few years, we have invested in digital
capabilities and scalable technology to build three digital growth
platforms, which were discussed at a recent investor briefing (
investors.vodafone.com/digital-services ).
1. Leading digital consumer services Complementary digital
services play a crucial role in deepening relationships with
consumers, in addition to having attractive economic models. We now
have over 50 million customers subscribing to a digital service,
which leads to higher ARPU, improved distribution efficiency,
higher NPS and lower churn. We are focused on further developing
our strong positions in Consumer IoT, Vodafone TV, home services,
device lifecycle services and loyalty applications.
2. The global IoT connectivity leader Our IoT service was
established in 2008 and has grown to be the largest IoT
connectivity provider globally, with 136 million devices connected.
Vodafone IoT has been recognised as a leader in managed
connectivity by Gartner every year since 2014. Vodafone IoT
currently generates EUR0.9 billion annual revenue with double-digit
revenue growth and a strong double-digit ROCE. The total
addressable market is EUR10 billion and expected to grow 16% p.a.,
with further stimulus from the NextGenerationEU recovery plan
funding, supporting Vodafone's further expansion into end-to-end
IoT services.
3. The leading FinTech in Africa Since formation in 2007 as a
money transfer service, our financial services businesses in Africa
- encompassing Vodacom Group, Safaricom and Vodafone Egypt - have
collectively grown to be the leading FinTech in Africa. Vodacom
Group and Safaricom together have 57 million customers, with M-Pesa
transaction value of US$26.8 billion per month in the first six
months of FY22. Our African FinTech business has significant growth
opportunities through penetration growth in existing markets,
expanding into new markets and scaling new products, including the
recent launch of the VodaPay 'super-app' in South Africa. The
Vodacom Group has clear financial ambitions to grow its new
services, which include financial services, at or above 20%
CAGR.
We will continue to incubate our three digital growth platforms
and ensure we capture the opportunities available. We will also
regularly assess ownership structures and our own financial
reporting to maximise visibility and optionality.
D Retail & customer service
Our retail and customer service operations are currently
organised in three segments summarised in the table below.
Europe Consumer Africa Consumer Business
Annualised Vodafone Vodacom Vodafone Business
H1 FY22
======================= ============================= ============================== ==============================
Service Revenue EUR20 billion EUR 6 billion EUR10 billion
Market capitalisation - EUR 15 billion -
----------------------- ----------------------------- ------------------------------ ------------------------------
Further information investors.vodafone.com/about vodacom.com/investor-relation investors.vodafone.com/vbbrie
-us/what-we-do s fing
======================= ============================= ============================== ==============================
1. Europe Consumer In Europe, we are a leading converged
connectivity provider with 8.3 million converged customers, 114
million mobile connections, 143 million marketable NGN broadband
homes, and we have launched 5G in 244 cities in 10 markets in
Europe.
2. Africa Consumer In Africa, we are the leading provider of
mobile data and mobile payment services. We have 186 million mobile
customers in 8 markets and we are the leading mobile connectivity
provider by revenue market share in 7 markets. Our M-Pesa financial
services platform processed over 9 billion transactions during the
first six months of FY22 and has 49 million customers.
3. Vodafone Business Vodafone Business is a key growth driver
for the Group, representing 27% of service revenue in the period.
We operate in attractive markets with a compelling structural
opportunity, with expected addressable market growth of c.8% per
annum. Our strategy is grounded in our purpose to connect for a
better future and is focused on three core elements. Firstly, to be
the trusted partner for small and medium-sized enterprises.
Secondly, to be the gigabit connectivity provider of choice to
large enterprises. Thirdly, to be the leading end-to-end provider
of IoT solutions for every organisation.
Alongside the active optimisation of our portfolio over the
medium-term, we have three initial priority areas to enable our
strategy and realise value for our shareholders:
I. actively pursue opportunities for Vantage Towers;
II. actively pursue in-market consolidation opportunities in
major European markets; and
III. integrate Vodafone Egypt into Vodacom to create a
pan-African powerhouse.
I Vantage Towers
By separating and listing Vantage Towers at pace, it is now in a
prime position to drive consolidation within the European sector.
We are actively pursuing accretive bolt-on transactions and
industrial merger opportunities. We expect to deconsolidate Vantage
Towers from the Group and monetise part of our holding over time,
reserving strategic flexibility for our mobile business.
II European in-market consolidation
Over the last decade, the performance of the European
telecommunications industry has been weaker than other regions,
which market commentators largely attribute to its regulatory
environment. European regulation has been driving increasingly
fragmented market structures compared with North America or Asia.
Sustained price deflation and the inability to derive cost
synergies from scale have impacted sector returns, which in turn
limits the sustainability of capital investment in critical
national infrastructure. As noted above, Germany has benefited from
a more sustainable competitive environment compared to many other
markets in Europe and those markets would benefit from in-market
consolidation. We are pragmatically pursuing value accretive
in-market consolidation to deliver sustainable market structures in
our major European markets.
III Vodafone Egypt
On 10 November, we announced that we have agreed to transfer our
55% shareholding in Vodafone Egypt to Vodacom Group, our African
subsidiary, for EUR2,722 million on a debt free, cash free basis.
Based on Vodafone's 55% share of net debt in Vodafone Egypt as at
30 September 2021, the total purchase consideration is EUR2,365
million. Approximately 80% of the consideration (EUR1,892 million)
will be settled by the issuance of 242 million new ordinary Vodacom
Group shares to Vodafone Group. As a result, Vodafone Group's
ownership in Vodacom Group will increase from 60.5% to 65.1%. The
remaining 20% of the consideration (EUR473 million) will be settled
in cash. The transaction is subject to a number of conditions but
is expected to close before 31 March 2022.
The integration of Vodafone Egypt into Vodacom follows a series
of other portfolio simplification transactions which have helped
Vodacom become a pan-African connectivity and financial services
powerhouse. Including Ethiopia, Vodacom will operate in markets
with combined populations over more than 500 million people and
including Egypt, Vodacom currently has number 1 market positions in
seven countries. We will move at pace with the imminent integration
of Vodafone Egypt, which will benefit from closer cooperation with
Vodacom, enabling it to accelerate growth in financial services and
IoT. Further information on the proposed transaction and the
Vodacom Group is available here: vodacom.com/investor-relations
.
Our purpose We connect for a better future
We believe that Vodafone has a significant role to play in
contributing to the societies in which we operate and we want to
enable an inclusive and sustainable digital society. We continue to
make progress against our purpose strategy and provided a full
update in our FY21 Annual Report and supplementary materials
(available on investors.vodafone.com ). We have also made further
progress with respect to our purpose strategy during the first half
of FY22.
Europe's largest network, powered by 100% renewable
electricity
From July 2021, our entire European operations - including
mobile and fixed networks, data centres, retail and offices - are
100% powered by electricity from renewable sources. This marks a
key step towards our goal of reducing our own carbon emissions to
'net zero' by 2030 and across our entire value chain by 2040.
Eco Rating
We have announced that the pan-industry Eco Rating labelling
scheme we launched with four other major European operators in May
is set to roll out globally. The announcement paves the way for Eco
Rating to become a global harmonised labelling system, giving
consumers everywhere consistent and transparent insight on the
environmental impact of new smartphones. The Eco Rating scheme was
initially launched in 24 European countries and has since been
rolled out in Brazil and by Vodacom in South Africa. Eco Rating is
now expected to launch in other countries including Argentina,
Chile, Colombia, Ecuador, Mexico, Peru and Uruguay. More than 150
mobile phones from 15 manufacturers are now assessed by the Eco
Rating initiative, nearly doubling the range of devices rated at
launch.
Eco-SIM cards
We have recently announced that we are launching Eco-SIM cards
made from recycled plastic as part of our commitment to reduce our
impact on the environment. Starting from October 2021, we are
providing customers with new Eco-SIMs in the half-sized format made
from recycled plastic, progressively replacing SIM cards that are
currently made from new plastic. Eco-SIM will be rolled out across
all of our European markets, as well as in Egypt, Turkey and South
Africa. The introduction of Eco-SIM - in the same
material-efficient, half-sized card format - further eliminates the
need for 320 tonnes of virgin plastic to be manufactured each year.
This has the potential to save an additional 1,280 tonnes of CO(2)
e per year from not manufacturing new plastic to be used for the
cards.
Vodafone Spirit
Spirit Beat is our bi-annual employee survey that measures
progress on how people experience our culture (Vodafone Spirit),
engagement, and connection to our purpose. It also includes a nudge
engine which provides personalised coaching tips to employees based
on results.
The results from the latest survey conducted in September show
stability against the backdrop of a challenging environment and
unprecedented change. Our employee engagement index remained high
at 73 (January 2021: 74) and 93% of employees feel that their daily
work contributes significantly to Vodafone's purpose ("We connect
for a better future"). As we reported in our FY21 Annual report,
managers who demonstrate Vodafone Spirit continue to create a
higher Spirit Index and employee engagement scores, compared to
managers who do not.
As part of our future ready framework, we have introduced
further flexibility to our working practices and set global
standards for new hybrid ways of working. Results from the latest
survey show that those who are hybrid-working feel more connected
to Spirit and purpose and are also more engaged. Our first
quarterly Global Spirit day also took place in October and was
designed to provide dedicated space for personal growth, wellbeing,
and connection.
Outlook Operating model supporting guidance
Outlook for FY22
Our good financial performance during the first six months of
the year has demonstrated the strong execution of our strategy.
FY22 Guidance
As a result of our good performance in H1 FY22 and based on the
current prevailing assessments of the global macroeconomic outlook,
we are on track to achieve the upper half of our original Adjusted
EBITDAaL guidance range, implying 4.5 - 5.9 %* Adjusted EBITDAaL
growth for the financial year. We are also increasing our
expectation for Adjusted free cash flow to at least EUR5.3 billion
in FY22 .
Original guidance Updated guidance
=================== ========================== ==========================
Adjusted EBITDAaL EUR15.0 - EUR15.4 billion EUR15.2 - EUR15.4 billion
(1)
Adjusted free cash At least EUR5.2 billion At least EUR5.3 billion
flow (1)
=================== ========================== ==========================
Financial modelling considerations & assumptions
The guidance above reflects the following:
-- Foreign exchange rates used when setting guidance were as follows:
- EUR 1 : GBP 0.86 ;
- EUR 1 : ZAR 17.15 ;
- EUR 1 : TRY 9.74 ; and
- EUR 1 : EGP 18.89 .
-- In May 2020, we set out our medium-term financial ambition,
alongside our financial guidance for FY22. More detail can be found
on investors.vodafone.com ;
-- Guidance and our medium-term financial ambition assume no
material change to the structure of the Group.
(1) Adjusted free cash flow is Free cash flow before licence and
spectrum payments, restructuring costs arising from discrete
restructuring plans, integration costs and Vantage Towers growth
capital expenditure. Growth capital expenditure is on a cash basis
and includes expenditure on new sites, ground lease optimisation
and other adjacency opportunities as defined by Vantage Towers.
Adjusted EBITDAaL and Adjusted free cash flow are non-GAAP
measures. See page 46 for more information.
Financial performance Sustainable growth in both Europe and Africa
-- Group revenue increased by 5.0% to EUR22.5 billion, driven by
a return to growth of service revenue, strong recovery in handset
sales following COVID disruption in the previous year and
favourable foreign exchange movements during the period
-- Adjusted EBITDAaL growth of 6.5%* and margin expansion of
0.7* percentage points year-on-year to 33.6%
-- Operating profit decreased by 21.9% as the prior year
included a gain on disposal of EUR1.0 billion
-- Returns improving and pre-tax return on capital employed
increased by 0.8 percentage points to 6.3%
Group financial performance
H1 FY22 H1 FY21
(1) (2) Reported
EURm EURm change %
======================================== ======= ======= ========
Revenue 22,489 21,427 5.0
- Service revenue 19,010 18,418 3.2
- Other revenue 3,479 3,009
Adjusted EBITDAaL (3,4) 7,565 7,011 7.9
Restructuring costs (172) (86)
Interest on lease liabilities(5) 199 189
Loss on disposal of property, plant &
equipment and intangible assets (26) (13)
Depreciation and amortisation on owned
assets (4,949) (5,062)
Share of results of equity accounted
associates and joint ventures 111 260
Other (expense)/income (108) 1,055
------- ------- --------
Operating profit 2,620 3,354 (21.9)
Investment income 129 183
Financing costs (1,473) (1,610)
------- ------- --------
Profit before taxation 1,276 1,927
Income tax credit/(expense) 1 (459)
------- ------- --------
Profit for the financial period 1,277 1,468
Attributable to:
- Owners of the parent 996 1,269
- Non-controlled interests 281 199
------- ------- --------
Profit for the financial period 1,277 1,468
Basic earnings per share 3.40c 4.30c
Adjusted basic earnings per share(3) 4.90c 3.96c
======================================== ======= ======= ========
Further information is available in a spreadsheet at
https://investors.vodafone.com/reports-information/results-reports-presentations
Notes:
1. The H1 FY22 results reflect average foreign exchange rates of
EUR1:GBP0.86, EUR1:INR 88.11, EUR1:ZAR 17.13, EUR1:TRY 10.09 and
EUR1: EGP 18.70.
2. In the previously published results for the six months ended
30 September 2020, the Group's 55% interest in Vodafone Egypt was
held for sale. In December 2020, we announced that discussions with
the potential purchaser had terminated. Consequently, the held for
sale classification was reversed resulting in the following changes
to the previously published results for the six months ended 30
September 2020: Adjusted EBITDAaL has declined by EUR12 million,
Operating profit has declined by EUR118 million, Profit before tax
has declined by EUR118 million, Profit for the financial period has
declined by EUR87 million, Basic earnings per share declined by
0.15 eurocents and Adjusted basic earnings per share declined by
0.15 eurocents.
3. Adjusted EBITDAaL and adjusted basic earnings per share are
non-GAAP measures. See page 46 for more information.
4. Includes depreciation on Right-of-use assets of EUR2,003 million (H1 FY21: EUR1,925 million).
5. Reversal of interest on lease liabilities included within
Adjusted EBITDAaL under the Group's definition of that metric, for
re-presentation in financing costs.
Organic growth
All amounts marked with an "*" in the commentary represent
organic growth which presents performance on a comparable basis,
excluding the impact of foreign exchange rates, mergers and
acquisitions and other adjustments to improve the comparability of
results between periods. When calculating organic growth, the FY21
results for Vantage Towers have been adjusted to reflect a full
year of operation on a proforma basis in order to be comparable to
FY22. Organic growth figures are non-GAAP measures. See non-GAAP
measures on page 46 for more information.
Segmental reporting
Following the IPO of Vantage Towers A.G. in March 2021, the
business is a new reporting segment for the year ending 31 March
2022 ('FY22'). Comparative information for the year ended 31 March
2021 has not been re-presented. Total revenue is unaffected because
charges from Vantage Towers A.G. to operating companies are
eliminated on consolidation. The segmental results of Vantage
Towers A.G. include the contribution from Cornerstone Technologies
Infrastructure Limited as a joint operation with Telefonica in the
UK.
Adjusted EBITDAaL
Adjusted EBITDA is now referred to as Adjusted EBITDAaL for
FY22, with no change in the underlying definition. Adjusted
EBITDAaL is a non-GAAP measure. See page 46 for more
information.
Adjusted free cash flow
Adjusted free cash flow was previously referred to as Free cash
flow (pre spectrum, restructuring and integration costs). For the
year ending 31 March 2022, the metric excludes Vantage Towers
growth capital expenditure. Adjusted free cash flow is a non-GAAP
measure. See page 46 for more information.
Geographic performance summary
Other Other Vantage Common Elimi-
Functions
H1 FY22 Germany Italy UK Spain Europe Vodacom Markets Towers (1) nations Group
============== ======= ===== ====== ====== ====== ======= ======= ======= ========= ============ ========
Total revenue
(EURm) 6,447 2,507 3,161 2,090 2,810 2,928 1,958 611 707 (730) 22,489
Service
revenue
(EURm) 5,777 2,187 2,521 1,866 2,502 2,271 1,752 - 252 (118) 19,010
Adjusted
EBITDAaL
(EURm)(2) 2,892 917 638 445 836 1,062 683 305 (213) - 7,565
Adjusted
EBITDAaL
margin (%)(2) 44.9% 36.6% 20.2% 21.3% 29.8% 36.3% 34.9% 49.9% 33.6%
============== ======= ===== ====== ====== ====== ======= ======= ======= ========= ============ ========
Downloadable performance information is available at:
https://investors.vodafone.com/reports-information/results-reports-presentations
FY21 FY22
------------------------------------------------------------ --------------------
Service revenue growth
% Q1 Q2 H1 Q3 Q4 H2 Total Q1 Q2 H1
============================== ====== ====== ====== ======= ======= ======= ========= ===== ===== ======
Germany 25.4 6.9 15.4 1.0 1.2 1.1 7.7 1.1 0.8 0.9
Italy (6.5) (7.9) (7.2) (7.8) (8.8) (8.3) (7.8) (3.9) (1.6) (2.8)
UK (3.2) (0.8) (2.0) (5.1) (4.4) (4.7) (3.4) 5.3 4.7 5.0
Spain (6.9) (1.8) (4.4) (0.9) (2.2) (1.5) (3.0) 0.5 (2.0) (0.7)
Other Europe 3.8 (1.9) 0.8 (4.0) - (2.0) (0.6) 4.9 2.7 3.8
Vodacom (11.9) (12.3) (12.1) (9.1) (1.2) (5.3) (8.7) 18.5 14.6 16.5
Other Markets (18.9) (15.1) (17.0) (9.5) (6.1) (7.8) (12.8) (1.3) 10.0 4.3
Vantage Towers - - - - - - - - - -
Group 1.3 (2.5) (0.7) (3.9) (2.4) (3.1) (1.9) 3.1 3.4 3.2
============== ============== ====== ====== ====== ======= ======= ======= ========= ===== ===== ======
FY21 FY22
------------------------------------------------------------ --------------------
Organic service revenue
growth % *(2) Q1 Q2 H1 Q3 Q4 H2 Total Q1 Q2 H1
============================== ====== ====== ====== ======= ======= ======= ========= ===== ===== ======
Germany - (0.1) (0.1) 1.0 1.2 1.1 0.5 1.4 1.0 1.2
Italy (6.5) (8.0) (7.2) (7.8) (7.8) (7.8) (7.5) (3.6) (1.4) (2.5)
UK (1.9) (0.5) (1.2) (0.4) (0.6) (0.5) (0.8) 2.5 0.6 1.2
Spain (6.9) (1.8) (4.4) (1.1) (1.3) (1.2) (2.8) 0.8 (1.9) (0.6)
Other Europe (3.1) (1.8) (2.4) (0.7) (0.2) (0.4) (1.4) 4.2 2.4 3.3
Vodacom 1.5 3.2 2.3 3.3 7.3 5.3 3.9 7.9 3.1 5.4
Other Markets 9.1 9.0 9.0 12.3 13.1 12.7 10.8 18.4 19.7 19.1
Vantage Towers - - - - - - - - - -
Group (1.3) (0.4) (0.8) 0.4 0.8 0.6 (0.1) 3.3 2.4 2.8
============== ============== ====== ====== ====== ======= ======= ======= ========= ===== ===== ======
Notes:
1. Common Functions Adjusted EBITDAaL includes a non-recurring
charge in relation to the impairment of prior year receivables.
2. Adjusted EBITDAaL, Adjusted EBITDAaL margin and organic
service revenue growth are non-GAAP measures. See page 46 for more
information.
Germany 30% of Group service
revenue
H1 FY22 H1 FY21 Reported Organic
EURm EURm change % change %*
============================== ======= ======= ======== =========
Total revenue 6,447 6,371 1.2
- Service revenue 5,777 5,723 0.9 1.2
- Other revenue 670 648
Adjusted EBITDAaL 2,892 2,844 1.7 7.7
Adjusted EBITDAaL margin 44.9% 44.6%
============================== ======= ======= ======== =========
Reported total revenue increased by 1.2% to EUR6.4 billion,
supported by service revenue growth.
On an organic basis, service revenue grew by 1.2%* (Q1: 1.4%*,
Q2: 1.0%*), reflecting a higher customer base, broadband ARPU
growth, and higher roaming and visitor revenue, which was partially
offset by lower variable call usage revenue. Retail service revenue
grew by 1.7%* (Q1: 1.9%*, Q2: 1.5%*).
Fixed service revenue grew by 0.9%* (Q1: 0.6%*, Q2: 1.2%*)
supported by ARPU and customer base growth. The sequential
improvement in trends was primarily driven by the lapping of the
variable usage revenue peak in Q1 in the prior year. Our commercial
momentum started to improve during the second quarter, reflecting a
gradual recovery in retail footfall, however it is still below
pre-pandemic levels. We added 86,000 cable customers during the
period, including 38,000 migrations from legacy DSL broadband. Half
of our cable broadband customers now subscribe to speeds of at
least 250Mbps, and gigabit speeds are available to 23.1 million
households across our hybrid fibre cable network.
Our TV customer base declined by 101,000, as reduced retail
activity during the COVID-19 pandemic led to fewer gross customer
additions. Our converged propositions, led by 'GigaKombi', allow
customers to combine their mobile, landline, broadband and TV
subscriptions for one monthly fee. During the period, we
accelerated convergence penetration following a successful campaign
and our converged customer base increased by 330,000 to almost 2
million Consumer converged accounts.
Mobile service revenue increased by 1.5%* (Q1: 2.3%*, Q2:
0.8%*), reflecting customer base growth, and higher roaming and
visitor revenue. The slowdown in quarterly trends was attributable
to the delayed retail recovery impacting commercial performance,
and a reduction in mobile termination rates which took effect as of
July. We added 54,000 contract customers during the period and
contract churn improved by 1.1 percentage points year-on-year to
11.0%. In June, we successfully launched our digital-only second
brand, SIMon mobile. We added a further 3.4 million IoT connections
during the period, supported by strong demand from the automotive
sector.
Adjusted EBITDAaL grew by 7.7%*, supported by synergy delivery,
ongoing cost efficiencies, higher service revenue, as well as some
small one-off settlements, partially offset by higher publicity
costs. The Adjusted EBITDAaL margin was 2.7* percentage points
higher year-on-year at 44.9%.
We continue to make strong progress in integrating the acquired
Unitymedia assets and are executing faster than planned with
respect to our cost and capital expenditure synergy targets.
We switched off our 3G network on 1 July 2021, with spectrum
re-assigned to increase the capacity, speed and coverage of our 4G
networks. Our 5G network is now available to more than 35 million
people. We launched Europe's first 5G standalone network in April.
Standalone 5G enables higher speeds, enhanced reliability and
ultra-low latency, in addition to using 20% less energy on
customers' devices.
Italy 12% of Group service
revenue
H1 FY22 H1 FY21 Reported Organic
EURm EURm change % change %*
============================ ======= ======= ======== =========
Total revenue 2,507 2,506 -
- Service revenue 2,187 2,249 (2.8) (2.5)
- Other revenue 320 257
Adjusted EBITDAaL 917 800 14.6 14.7
Adjusted EBITDAaL margin 36.6% 31.9%
============================ ======= ======= ======== =========
Reported total revenue was stable at EUR2.5 billion as lower
service revenue was offset by higher equipment revenue.
On an organic basis, service revenue declined by 2.5%* (Q1:
-3.6%*, Q2: -1.4%*) as a result of continued price pressure. The
improvement in quarterly trends was supported by the migration of
PostePay MVNO customers onto our network, which completed in early
August.
Mobile service revenue declined by 3.0%* (Q1: -4.0%*, Q2:
-1.9%*) as greater competition in the value segment and a lower
active prepaid customer base year-on-year were partly offset by
targeted pricing actions. Market mobile number portability volumes
remained below prior year period levels, despite the easing of
national lockdown measures. The quarter-on-quarter improvement in
service revenue was supported by the positive contribution from
PostePay MVNO customer migrations onto our network. Our second
brand 'ho.' continued to grow, with 201,000 net additions supported
by our best-in-class net promoter score, and now has 2.7 million
customers.
Fixed service revenue declined by 1.3%* (Q1: -2.7%*, Q2: 0.1%*)
driven by a shift in consumer demand towards fixed-wireless access
connectivity, which was partially offset by higher Business
activity compared to the prior year. We added 33,000 fixed-wireless
access customers during the period, which are included in our
mobile customer base. We now have over 3 million broadband
customers, and 48% of our broadband base is converged. Our total
Consumer converged customer base is 1.2 million, an increase of
41,000 during the period. Through our own next generation network
and partnership with Open Fiber, our broadband services are now
available to 8.6 million households. We also cover over 4 million
households with fixed-wireless access, offering speeds of up to
100Mbps.
Adjusted EBITDAaL increased by 14.7%*, reflecting a 13.1
percentage point benefit from a EUR105 million legal settlement,
and also supported by lower bad debt provisions. The Adjusted
EBITDAaL margin was 4.6* percentage points higher year-on-year at
36.6%.
UK 13% of Group service revenue
H1 FY22 H1 FY21 Reported Organic
EURm EURm change % change %*
================================= ======= ======= ======== =========
Total revenue 3,161 2,983 6.0
- Service revenue 2,521 2,401 5.0 1.2
- Other revenue 640 582
Adjusted EBITDAaL 638 636 0.3 1.8
Adjusted EBITDAaL margin 20.2% 21.3%
================================= ======= ======= ======== =========
Reported total revenue increased by 6.0% to EUR3.2 billion, due
to higher service revenue and equipment revenue, as well as an
appreciation of pound sterling versus the euro.
On an organic basis, service revenue grew by 1.2%* (Q1: 2.5%*,
Q2: 0.6%*), driven by a strong performance in the Consumer segment,
and supported by higher roaming and visitor revenue, partially
offset by a reduction in mobile termination rates.
Mobile service revenue grew by 1.3%* (Q1: 2.7%*, Q2: 1.0%*)
driven by strong commercial momentum in Consumer, partially offset
by post-pandemic slowdown in Business connections, as well as ARPU
pressure on re-contracting multinational corporations. We added
149,000 mobile contract customers, supported by our new proposition
'Vodafone EVO' which offers customers a combination of flexible
contracts, trade-in options, and early upgrades. Our digital sales
now account for 33% of total sales. Contract churn remained broadly
stable year-on-year at 12.5%. Our digital sub-brand 'VOXI' also
continued to grow strongly, with 54,000 customers added in the
period. We also announced an exclusive retail partnership with the
Dixons Carphone Group, covering 300 stores and digital channels,
with improved terms compared to our previous arrangement.
Fixed service revenue grew by 0.9%* (Q1: 2.1%*, Q2: -0.3%*) and
was impacted by a tougher comparative as delayed Business fixed
project work resumed in Q2 last year. Performance in the current
period was also driven by the decision to end a large but
unprofitable multinational contract, and a reseller entering into
administration. Our commercial momentum in Consumer remained strong
with 51,000 net customer additions during the period, with good
demand for our Vodafone 'Pro Broadband' product. We now have almost
1 million broadband customers, of which 482,000 are converged.
Adjusted EBITDAaL increased by 1.8%*, as growth in service
revenue, lower bad debt provisions, and continued strong cost
control were partially offset by higher publicity costs. Our
Adjusted EBITDAaL margin was stable* year-on-year at 20.2%.
In November 2021, we announced the expansion of our long-term
strategic partnership agreement with CityFibre. The extended
wholesale agreement in conjunction with our existing partnership
with Openreach, will enable us to reach 8 million households with
full fibre broadband by Spring 2022.
Spain 10% of Group service
revenue
H1 FY22 H1 FY21 Reported Organic
EURm EURm change % change %*
============================ ======= ======= ======== =========
Total revenue 2,090 2,050 2.0
- Service revenue 1,866 1,880 (0.7) (0.6)
- Other revenue 224 170
Adjusted EBITDAaL 445 488 (8.8) (0.6)
Adjusted EBITDAaL margin 21.3% 23.8%
============================ ======= ======= ======== =========
Reported total revenue increased by 2.0% to EUR2.1 billion,
primarily due to higher equipment revenue.
On an organic basis, service revenue declined by 0.6%* (Q1:
0.8%*, Q2 -1.9%*) driven by ongoing continued price competition in
the value segment. The quarterly trend was largely driven by
stronger prior year comparatives, reflecting the impact of easing
COVID-19 restrictions in Q2 of the prior year.
The market remained highly competitive in the value segment. In
mobile, we grew our contract customer base by 67,000, supported by
strong public sector demand. In May, we announced price increases
applying to the main Vodafone brand, effective across our customer
base from 15 July 2021. Mobile contract churn increased by 3.9
percentage points year-on-year to 20.6% reflecting exceptionally
low churn in the prior Q1 period due to portability restrictions,
as well as the impact of the price increases implemented this year.
Our second brand 'Lowi' added 144,000 customers during the period
and now has a total base of 1.3 million.
Our broadband customer base decreased by 82,000 as a result of
higher competitive intensity during the period and our price
increases. Our TV customer base decreased by 38,000 as we concluded
a promotion. We have recently renewed our exclusive agreement with
HBO Max, and through our partnerships with other content providers
such as Disney, we have the most extensive library of movies and TV
series in the market.
Adjusted EBITDAaL declined by 0.6%* and the Adjusted EBITDAaL
margin was 0.6* percentage points lower year-on-year at 21.3%. The
marginal decrease in EBITDAaL reflects higher publicity and
commercial content costs, partially offset by further cost
reduction and lower bad debt provisions.
On 15 September, we announced a restructuring plan, mainly
affecting owned retail stores, as part of our operational
transformation. At the same time, we have committed to create new
jobs in digital and technology. Negotiations were concluded in
October. We have also announced a reorganisation of the local
executive committee, with new operational units focused on
competitiveness and digitalisation in the consumer business, as
well as expanding our portfolio of products and services beyond
connectivity.
Other Europe 13% of Group service revenue
H1 FY22 H1 FY21 Reported Organic
EURm EURm change % change %*
================================== ========= ======= ======== =========
Total revenue 2,810 2,720 3.3
- Service revenue 2,502 2,411 3.8 3.3
- Other revenue 308 309
Adjusted EBITDAaL 836 870 (3.9) 4.5
Adjusted EBITDAaL margin 29.8% 32.0%
================================== ========= ======= ======== =========
Total revenue increased by 3.3% to EUR2.8 billion, primarily
reflecting service revenue growth, also supported by the
appreciation of local currencies versus the euro.
On an organic basis, service revenue increased by 3.3%* (Q1:
4.2%*, Q2: 2.4%*), with all markets growing during the period. The
growth in service revenue was supported by higher roaming and
visitor revenue, partially offset by a reduction in mobile
termination rates in Ireland, Czech Republic and Romania. The
quarterly trend was due to stronger prior year comparatives,
reflecting the impact of easing COVID-19 restrictions and high
prepaid activity in Q2 in the prior year.
In Portugal, service revenue grew due to customer base growth
and higher mobile ARPU. During the period, we added 66,000 mobile
contract customers and 33,000 fixed broadband customers. In
October, we announced that Vodafone Portugal had acquired 90MHz of
3,600MHz and 2x10MHz of 700MHz spectrum, with a 20-year licence
through to 2041. The spectrum will enable us to significantly
expand network capacity to meet growing demand for reliable, high
quality voice and data services.
In Ireland, service revenue increased reflecting higher visitor
revenue, supported by good mobile contract customer growth as
competitive intensity stabilised. During the period, our mobile
contract customer base increased by 40,000 and mobile contract
churn improved 0.3 percentage point year-on-year to 8.2%.
Service revenue in Greece increased reflecting higher roaming
and visitor revenue as international tourism grew year-on-year.
During the period, we added 25,000 mobile contract customers and
82,000 prepaid customers as lockdown restrictions eased.
Adjusted EBITDAaL increased by 4.5%*, supported by good revenue
growth and strong cost control. The Adjusted EBITDAaL margin
increased by 0.4* percentage points and was 29.8%.
We have continued to make good progress on integrating the
assets acquired from Liberty Global in Central Eastern Europe and
we remain on track to deliver our targeted synergies.
Vodacom 12% of Group service
revenue
H1 FY22 H1 FY21 Reported Organic
EURm EURm change % change %*
============================== ======= ======= ======== =========
Total revenue 2,928 2,423 20.8
- Service revenue 2,271 1,949 16.5 5.4
- Other revenue 657 474
Adjusted EBITDAaL 1,062 891 19.2 5.6
Adjusted EBITDAaL margin 36.3% 36.8%
============================== ======= ======= ======== =========
Total revenue increased by 20.8% to EUR2.9 billion and reported
Adjusted EBITDAaL increased by 19.2% , primarily due to the
strengthening of the local currencies versus the euro .
On an organic basis, Vodacom's total service revenue grew by
5.4%* (Q1: 7.9%*, Q2 3.1%*). Growth across Vodacom's international
markets accelerated in the first 6 months following significant
growth in our financial services platform (M-Pesa), however slowed
in Q2 due to a strong prior year comparative in South Africa and
the introduction of mobile money levies in Tanzania.
In South Africa, service revenue grew year-on-year, supported by
sustained demand, incremental wholesale services and growth in new
services such as fixed, IoT and financial services. We added 1.1
million prepaid customers and 140,000 mobile contract customers,
with the latter supported by our new more-for-more 'Vodafone Red'
proposition introduced in June and new contract wins in Business.
Financial Services revenue in South Africa increased by 15.0 %* to
EUR 75.9 million, reflecting the expansion of our service
offerings, and 70 % of our mobile customer base now uses data
services.
In October 2021, we launched our new 'VodaPay' super-app in
South Africa, bringing consumer and business capabilities under one
platform. The application enables customers to access financial,
insurance and eCommerce services and supports businesses with
additional resource planning and 'business-to-business'
functionalities. For more detail about Vodacom Financial Services,
please watch our Digital Services & Experiences briefing at
investors.vodafone.com/digital-services .
In Vodacom's international markets, service revenue increased
during the half year. Growth was supported by an increase in M-Pesa
transaction volumes and data revenue. This benefit was partially
offset by the introduction of mobile money levies in Tanzania
during Q2. M-Pesa transaction value increased by 49.7 %, while
M-Pesa revenue as a share of total service revenue increased by 3.4
percentage points to 22.8 %, and 64.3 % of our customer base is now
using data services.
Vodacom's Adjusted EBITDAaL increased by 5.6%* supported by good
revenue growth, and positive operational leverage in Vodacom's
international operations. The Adjusted EBITDAaL margin decreased by
1.0* percentage point and was 36.3%.
On 10 November 2021, Vodacom Group announced it had entered into
an agreement to acquire Vodafone Egypt from Vodafone for total
consideration of EUR2.4 billion. See page 9 and Note 12 'Subsequent
events' in the unaudited condensed consolidated financial
statements on page 44 for more information.
At the same time, Vodacom also announced that it had agreed to
acquire a co-controlling 30% interest in the fibre assets currently
owned by Community Investment Ventures Holdings (Pty) Limited
("CIVH"). CIVH owns Vumatel and Dark Fibre Africa, which are South
Africa's largest open access fibre operators. Vodacom's investment
and strategic support will further accelerate the growth trajectory
of fibre roll-out in South Africa.
Further information on our operations in Africa can be accessed
here: vodacom.com .
Other Markets 9% of Group service revenue
H1 FY22 H1 FY21 Reported Organic
EURm EURm change % change %*
================================== ========= ======= ======== =========
Total revenue 1,958 1,898 3.2
- Service revenue 1,752 1,679 4.3 19.1
- Other revenue 206 219
Adjusted EBITDAaL 683 601 13.6 28.3
Adjusted EBITDAaL margin 34.9% 31.7%
================================== ========= ======= ======== =========
Reported total revenue increased by 3.2% to EUR2.0 billion, as
higher service revenue was partially offset by the depreciation of
local currencies versus the euro.
On an organic basis, service revenue increased by 19.1%* (Q1:
18.4%*, Q2: 19.7%*) as a result of strong customer base and ARPU
growth. The improvement in quarterly trends reflected higher
roaming and visitor revenue, as well as increased demand for data
as lockdown restrictions eased.
Service revenue in Turkey grew ahead of inflation, reflecting
strong mobile customer base and ARPU growth. Mobile contract
customer additions were 620 ,000 - the highest amongst any of our
markets - including migrations from prepaid customers. We also
added 363,000 prepaid customers as tourism to the market improved.
Mobile contract churn improved by 4.8 percentage points
year-on-year to 15.7%.
Service revenue in Egypt also grew ahead of inflation, supported
by customer base growth and increased data usage. During the
period, we added 134,000 mobile contract customers and 1.2 million
prepaid mobile customers.
Adjusted EBITDAaL increased by 28.3%* and the Adjusted EBITDAaL
margin increased by 2.7* percentage points. This reflected strong
revenue growth and operating efficiencies in all markets. The
Adjusted EBITDAaL margin was 34.9%.
Vantage Towers Delivering on our plan
H1 FY21
H1 FY22 (1) Reported Organic
EURm EURm change % change %*
=============================== ======== ======= ======== =========
Total revenue 611 - -
- Service revenue - - - -
- Other revenue 611 -
Adjusted EBITDAaL 305 - - -
Adjusted EBITDAaL margin 49.9% -
=============================== ======== ======= ======== =========
Note:
1. Vantage Towers is a new reporting segment for the year ending
31 March 2022. See page 13 for more information. A separate
announcement that presents FY21 performance on a proforma basis for
the new segmental reporting was published on 22 July 2021 and can
be found on our website: investors.vodafone.com .
Total revenue increased to EUR611 million as more than 570 new
tenancies were added during the period, bringing the tenancy ratio
to 1.42x. Vantage Towers continued to contribute to Europe's
digital transformation and reached a number of new partnership
agreements with customers during the period. Vantage Towers
reported its results on 15 November 2021. Further information on
Vantage Towers can be accessed here: vantagetowers.com .
Associates and joint ventures
H1 FY22 H1 FY21
EURm EURm
================================================= ======= =======
VodafoneZiggo Group Holding B.V. (14) (86)
Safaricom Limited 115 108
Indus Towers Limited - 233
Other 10 5
------- -------
Share of results of equity accounted associates
and joint ventures 111 260
================================================= ======= =======
VodafoneZiggo Joint Venture (Netherlands)
The results of VodafoneZiggo (in which Vodafone owns a 50%
stake) are reported here under US GAAP, which is broadly consistent
with Vodafone's IFRS basis of reporting.
Total revenue grew to EUR2.0 billion, primarily driven by mobile
contract customer base growth and fixed ARPU growth, supported by
higher roaming and visitor revenue.
During the period, VodafoneZiggo added 122 ,000 mobile contract
customers, mainly driven by higher Consumer demand. Strong Business
fixed performance was supported by an increase in the customer
base, as well as higher demand for unified communications. The
number of converged households increased by 23,000 , with 45% of
broadband customers now converged, delivering significant NPS and
churn benefits. VodafoneZiggo now offers 1 gigabit speeds to 4.6
million homes and is on track to provide nationwide coverage in
2022.
During the period, Vodafone received EUR204 million in dividends
from the joint venture, as well as EUR24 million in interest
payments. The joint venture also drew down an additional loan from
shareholders to fund an instalment arising from spectrum licences
acquired in July 2020, with Vodafone's share being EUR104
million.
Safaricom Associate (Kenya)
Safaricom service revenue grew to EUR1.1 billion due to strong
Business fixed demand, and a recovery in M-Pesa revenue as
transaction volumes increased and peer-to-peer transaction fees
normalised.
Indus Towers Associate (India)
Indus Towers is classified as held for sale at 30 September 2021
in the consolidated statement of financial position. The Group's
interest in Indus Towers has been provided as security against
certain bank borrowings secured against Indian assets and partly to
the pledges provided to the new Indus Towers entity under the terms
of the merger between erstwhile Indus Towers and Bharti
Infratel.
Vodafone Idea Limited Joint Venture (India)
See Note 11 'Contingent liabilities and legal proceedings' in
the unaudited condensed consolidated financial statements on page
42 for further information.
Vodafone Hutchison Australia / TPG Telecom Limited Joint Venture
(Australia)
In July 2020, Vodafone Hutchison Australia Pty Limited ('VHA')
and TPG Telecom Limited ('TPG') completed their merger to establish
a fully integrated telecommunications operator in Australia. The
merged entity was admitted to the Australian Securities Exchange
('ASX') on 30 June 2020 and is known as TPG Telecom Limited.
Vodafone and Hutchison Telecommunications (Australia) Limited each
own an economic interest of 25.05% in the merged unit.
Net financing costs
H1 FY22 H1 FY21 Reported
EURm EURm change %
================================= ======= ======= ========
Investment income 129 183
Financing costs (1,473) (1,610)
------- ------- --------
Net financing costs (1,344) (1,427) 5.8
Adjustments for:
Mark-to-market losses 397 368
Foreign exchange losses 56 231
------- ------- --------
Adjusted net financing costs (1) (891) (828) (7.6)
================================== ======= ======= ========
Note:
1. Adjusted net financing costs is a non-GAAP measure. See page
46 for more information. The H1 FY21 adjusted net financing costs
has been aligned to the FY21 year-end presentation which no longer
excluded lease interest. This increased adjusted net financing
costs for H1 FY21 by EUR189 million.
Net financing costs decreased by EUR83 million, primarily due to
lower foreign exchange movements on intercompany funding
arrangements. Mark-to-market losses were driven by the lower share
price, causing a mark-to-market loss on options held relating to
the Group's mandatory convertible bonds. Adjusted net financing
costs remained stable year on year, reflecting consistent average
net debt balances and weighted average borrowing costs for both
periods.
Taxation
H1 FY21
H1 FY22 (1) Change
% % pps
================================= ======= ======= ======
Effective tax rate (0.1)% 23.8% (23.9)
Adjusted effective tax rate (2) 31.5% 27.6% 3.9
Notes:
1. In the previously published results for the six months ended
30 September 2020, the Group's 55% interest in Vodafone Egypt was
held for sale. In December 2020, we announced that discussions with
the potential purchaser had been terminated. Consequently, the held
for sale classification was reversed, resulting in a decrease in
the Effective tax rate and increase in the Adjusted effective tax
rate of 0.2 pps and 0.1 pps, respectively, compared to the
previously published results.
2. Adjusted effective tax rate is a non-GAAP measure. See page
46 for more information.
The Group's Adjusted effective tax rate for the six months ended
30 September 2021 was 31.5% (2020: 27.6%). The Adjusted effective
tax rate in the current period does not include an increase in our
deferred tax assets in the UK of EUR498 million (2020: EURnil)
following the increase in the corporate tax rate to 25% and EUR274
million (2020 EURnil) following the revaluation of assets for tax
purposes in Italy. It also does not include EUR155 million (2020:
EUR188 million) relating to the use of losses in Luxembourg.
The Group's Adjusted effective tax rate for the full year is
forecast to be line with our expectations of a high 20%s tax
rate.
Earnings per share
Reported
H1 FY21
H1 FY22 (1) change
eurocents eurocents eurocents
====================================== ========= ========= =========
Basic earnings per share 3.40c 4.30c (0.90c)
Adjusted basic earnings per share (2) 4.90c 3.96c 0.94c
======================================= ========= ========= =========
Notes:
1. In the previously published results for the six months ended
30 September 2020, the Group's 55% interest in Vodafone Egypt was
held for sale. In December 2020, we announced that discussions with
the potential purchaser had been terminated. Consequently, the held
for sale classification was reversed, resulting in a decrease in
Basic earnings per share and Adjusted basic earnings per share of
0.15 eurocents compared to the previously published results.
2. Adjusted basic earnings per share is a non-GAAP measure. See
page 46 for more information.
Basic earnings per share was 3.40 eurocents, compared to 4.30
eurocents for six months ended 30 September 2020.
Adjusted basic earnings per share was 4.90 eurocents compared to
3.96 eurocents for the six months ended 30 September 2020.
Cash flow, capital allocation and funding
Analysis of cash flow
H1 FY22 H1 FY21 Reported
EURm EURm change %
================================== ======= ======= ========
Inflow from operating activities 6,455 6,009 7.4
Outflow from investing activities (2,811) (5,013) 43.9
Outflow from financing activities (3,795) (7,050) 46.2
================================== ======= ======= ========
Cash inflow from operating activities increased by 7.4% to
EUR6,455 million.
Outflow from investing activities decreased by 43.9% to EUR2,811
million, primarily due to lower outflows in relation to the
purchase of short-term investments which outweighed higher spend on
intangible assets and property, plant and equipment. Short-term
investments include highly liquid government and government-backed
securities and managed investment funds that are in highly rated
and liquid money market investments with liquidity of up to 90
days.
Outflows from financing activities decreased by 46.2% to
EUR3,795 million principally due to lower net outflow on borrowings
which outweighed cash spent on our share buyback programme.
Analysis of cash flow (continued)
H1 FY22 H1 FY21 Reported
EURm EURm change %
=============================================== ======== ======== ========
Adjusted EBITDAaL (1,2) 7,565 7,011 7.9
Capital additions(3) (3,365) (3,363)
Working capital (3,296) (2,503)
Disposal of property, plant and equipment 8 6
Restructuring costs (149) (86)
Integration capital additions(4) (110) (88)
Restructuring and integration working
capital (141) (92)
Licences and spectrum (482) (286)
Interest received and paid(5) (593) (487)
Taxation (577) (533)
Dividends received from associates and
joint ventures 469 355
Dividends paid to non-controlling shareholders
in subsidiaries (399) (166)
Other 87 131
-------- -------- --------
Free cash flow (2) (983) (101) (873.3)
Acquisitions and disposals 111 434
Equity dividends paid (1,259) (1,209)
Share buybacks(5) (1,062) -
Foreign exchange loss (119) (267)
Other movements on net debt(6) (443) (696)
-------- -------- --------
Net debt increase (2) (3,755) (1,839)
Opening net debt(2) (40,543) (42,047)
-------- -------- --------
Closing net debt (1,2) (44,298) (43,886) (0.9)
=============================================== ======== ======== ========
Free cash flow (2) (983) (101)
Adjustments:
- Licences and spectrum 482 286
- Restructuring costs 149 86
- Integration capital additions(4) 110 88
- Restructuring and integration working
capital 141 92
- Vantage Towers growth capital expenditure 124 n/a
-------- -------- --------
Adjusted free cash flow (2) 23 451
=============================================== ======== ======== ========
Notes:
1. In the previously published results for the six months ended
30 September 2020, the Group's 55% interest in Vodafone Egypt was
held for sale. In December 2020, we announced that discussions with
the potential purchaser had been terminated. Consequently, the held
for sale classification was reversed resulting in a reduction of
EUR12 million in Adjusted EBITDAaL and a reduction in Net debt of
EUR97 million compared to the previously published results for the
six months ended 30 September 2020.
2. Adjusted EBITDAaL, Adjusted free cash flow, Free cash flow
and Net debt are non-GAAP measures. See page 46 for more
information.
3. See page 56 for an analysis of tangible and intangible
additions in the period.
4. Integration capital additions comprises amounts for the
integration of acquired Liberty Global assets and network
integration.
5. Interest received and paid excludes interest on lease
liabilities of EUR134 million outflow (H1 FY21: EUR134 million
outflow) included within Adjusted EBITDAaL and EUR39 million of
cash inflow (H1 FY21: nil) from the option structures relating to
the issue of the mandatory convertible bonds which is included
within Share buybacks. The option structures were intended to
ensure that the total cash outflow to execute the programme were
broadly equivalent to the amounts raised on issuing each
tranche.
6. "Other movements on net debt" for the six months ended 30
September 2021 includes mark-to-market losses recognised in the
income statement of EUR397 million (H1 FY21: EUR368 million). The
H1 FY21 figure also included a payment to Vodafone Idea Limited of
EUR235m in respect of the contingent liability mechanism.
The increase in Adjusted EBITDAaL was more than offset by
adverse working capital movements and an increase in dividends paid
to non-controlling shareholders in subsidiaries. Consequently,
Adjusted free cash flow declined by EUR428 million to an inflow of
EUR23 million.
Borrowings and cash position
Year-end
H1 FY22 FY21 Reported
EURm EURm change %
========================================== ======== ======== ========
Non-current borrowings (58,109) (59,272)
Current borrowings (11,412) (8,488)
-------- -------- --------
Borrowings (69,521) (67,760)
Cash and cash equivalents 5,824 5,821
-------- -------- --------
Borrowings less cash and cash equivalents (63,697) (61,939) 2.8
=========================================== ======== ======== ========
Borrowings principally includes bonds of EUR48,584 million
(FY21: EUR46,885 million) and lease liabilities of EUR12,428
million (FY21: EUR13,032 million).
The increase in borrowings is principally driven by the issuance
of bonds with a nominal value of US$2,450 million (EUR2,114
million) utilising the US Shelf Programme.
Funding position
Year-end
H1 FY22 FY21 Reported
EURm EURm change %
==================================== ======== ======== ========
Bonds (48,584) (46,885)
Bank loans (1,508) (1,419)
Other borrowings including spectrum (4,166) (4,215)
-------- -------- --------
Gross debt (1) (54,258) (52,519) (3.3)
Cash and cash equivalents 5,824 5,821
Short-term investments(2) 4,043 4,007
Derivative financial instruments(3) (63) 3
Net collateral assets(4) 156 2,145
-------- -------- --------
Net debt (1) (44,298) (40,543) (9.3)
===================================== ======== ======== ========
Notes:
1. Gross debt and net debt are non-GAAP measures. See page 46
for more information.
2. Short-term investments includes EUR1,075 million (FY21:
EUR1,053 million) of highly liquid government and government-backed
securities and managed investment funds of EUR2,968 million (FY21:
EUR2,954 million) that are in highly rated and liquid money market
investments with liquidity of up to 90 days.
3. Derivative financial instruments excludes derivative
movements in cash flow hedging reserves of EUR713 million gain
(FY21: EUR862 million loss).
4. Collateral arrangements on derivative financial instruments
result in cash being paid/(held) as security. This is repayable
when derivatives are settled and is therefore deducted from
liquidity.
Net debt increased by EUR3,755 million primarily as a result of
Adjusted free cash outflow of EUR983 million, equity dividends of
EUR1,259 million, share buybacks used to offset dilution linked to
mandatory convertible bonds of EUR1,062 million (748 million
shares) and mark-to-market losses recognised in the income
statement of EUR397 million .
Other funding obligations to be considered alongside net debt
include:
- Lease liabilities of EUR12,428 million (FY21: EUR13,032 million)
- Mandatory convertible bonds recognised in equity of EUR1,904
million (FY21: EUR1,904 million)
- KDG put option liabilities of EUR502 million (FY21: EUR492 million)
- Guarantees over Australia joint venture loans of EUR1,510 million (FY21: EUR1,489 million)
- Pension liabilities of EUR329 million (FY21: EUR513 million)
The Group's gross and net debt includes certain long-term
borrowings ("Hybrid bonds") for which a 50% equity characteristic
of EUR4,971 million (FY21: EUR3,971 million) is attributed by
credit rating agencies.
The Group's gross and net debt includes certain bonds which have
been designated in hedge relationships, which are carried at
EUR1,403 million higher value (FY21: EUR1,390 million higher) than
their euro equivalent redemption value. In addition, where bonds
are issued in currencies other than euros, the Group has entered
into foreign currency swaps to fix the euro cash outflows on
redemption. The impact of these swaps is not reflected in gross
debt and if it was included would decrease the euro equivalent
value of the bonds by EUR379 million (FY21: EUR127 million).
Return on capital employed
Return on Capital Employed ('ROCE') reflects how efficiently we
are generating profit with the capital we deploy.
H1 FY22
(1) FY21 Change
% % pps
=============================================== ======= ==== ======
ROCE calculated using GAAP measures 3.7% 4.4% (0.7)
Pre-tax ROCE (controlled) (2) 6.3% 5.5% 0.8
Post-tax ROCE (controlled and associates/joint
ventures) (2) 4.3% 3.9% 0.4
=============================================== ======= ==== ======
Notes:
1. The half-year ROCE calculation is based on returns for the 12
months ended 30 September 2021. ROCE is calculated by dividing
Operating profit by the average of capital employed as reported in
the consolidated statement of financial position. See pages 53 and
54 for the detail of the calculation.
2. Pre-tax ROCE (controlled) and Post-tax ROCE (controlled and
associates/joint ventures) are non-GAAP measures. See page 46 for
more information.
ROCE decreased to 3.7% (FY21: 4.4%). The decrease reflects a
lower operating profit during the rolling 12 months ended 30
September 2021 coupled with slightly increased average capital
employed.
We calculate two further ROCE measures: i) Pre-tax ROCE for
controlled operations only and ii) Post-tax ROCE (including
associates & joint ventures).
ROCE increased to 6.3% on a pre-tax basis (FY21: 5.5%). The
increase reflects higher adjusted operating profit, slightly offset
by higher average capital employed. Similarly, ROCE on a post-tax
basis increased to 4.3% (FY21: 3.9%).
Funding facilities
The Group has undrawn revolving credit facilities of EUR7.4
billion comprising euro and US dollar revolving credit facilities
of EUR4.0 billion and US$4.0 billion (EUR3.4 billion) which mature
in 2025 and 2026 respectively. Both committed revolving credit
facilities support US and euro commercial paper programmes of up to
US$15.0 billion and EUR8.0 billion respectively.
Post employment benefits
T he EUR453 million net deficit at 31 March 2021 of scheme
assets over scheme liabilities, arising from the Group's
obligations in respect of its defined benefit schemes, decreased by
EUR332 million to a EUR121 million net deficit at 30 September
2021. The next triennial actuarial valuation of the Vodafone
Section and CWW Section of the Vodafone UK Group Pension Scheme
will be as at 31 March 2022.
Dividends
Dividends will continue to be declared in euros and paid in
euros, pounds sterling and US dollars, aligning the Group's
shareholder returns with the primary currency in which we generate
free cash flow. The foreign exchange rate at which future dividends
declared in euros will be converted into pounds sterling and US
dollars will be calculated based on the average World Markets
Company benchmark rates over the five business days during the week
prior to the payment of the dividend.
The Board has announced an interim dividend per share of 4.50
eurocents (H1 FY21: 4.50 eurocents). The ex-dividend date for the
interim dividend is 25 November 2021 for ordinary shareholders, the
record date is 26 November 2021 and the dividend is payable on 4
February 2022. Dividend payments on ordinary shares will be paid
directly into a nominated bank or building society account.
Other significant developments
Board changes
On 27 July 2021, Renée James and Sanjiv Ahuja stepped-down as
Non-Executive Directors.
Olaf Swantee was appointed as a Non-Executive Director at
Vodafone's Annual General Meeting on 27 July 2021 and subsequently
resigned with effect from 25 September 2021 in light of a
professional development which impacted his ability to serve on the
Board.
On 30 September 2021 it was announced that Deborah Kerr will be
appointed as a Non-Executive Director with effect from 1 March
2022.
Telecom services in Ethiopia
In May 2021, an international consortium named the Global
Partnership for Ethiopia was awarded a licence to operate telecom
services in Ethiopia.
The partners in the consortium are led by Safaricom Plc and will
establish a new operating company in Ethiopia which aims to start
providing telecommunications services from 2022. In addition to
Safaricom, the partnership includes: Vodacom Group; Vodafone Group;
Sumitomo Corporation and CDC Group.
Ethiopia is home to over 112 million people, making it the
second largest country in Africa by population. It is one of the
last countries in the world to introduce competition in the telecom
industry, a process started by the government in 2019 as part of
its economic reform agenda, with the support of the International
Finance Corporation. The reforms aim to increase jobs, reduce
poverty and grow the local economy in an inclusive and sustainable
manner.
The consortium is proceeding with and adapting its plans for
operational readiness, mindful of the recent declaration of a state
of emergency in Ethiopia.
Spectrum acquisition in Spain
In July 2021, Vodafone Spain acquired 2x10 MHz of spectrum in
the 700 MHz band from the Spanish Ministry of Economic Affairs and
Digital Transformation ('MINECO') for EUR350 million (reserve price
for the acquired block). The total amount was payable in a single
instalment at the end of the auction process. In addition, a
licensing fee of EUR15.5m will be payable each year.
The spectrum acquired has initial holding rights until 2041,
with an automatic renewal with no additional fees for a further 20
years (until 2061), subject to meeting the licence obligations.
Risk factors
The key factors and uncertainties that could have a significant
effect on the Group's financial performance, include the
following:
Cyber threat and information security
An external cyber-attack, insider threat or supplier breach
could cause service interruption or the loss of confidential data.
Cyber threats could lead to major customer, financial, reputational
and regulatory impacts.
Geo-political risk in supply chain
Our operation is dependent on a wide range of global suppliers.
Disruption to our supply chain could mean that we are unable to
execute our strategic plans, resulting in increased cost, reduced
choice and network quality.
Adverse political and regulatory measures
Adverse political and regulatory measures impacting our strategy
could result in increased costs, create a competitive disadvantage
or have negative impact on our return on capital employed.
Strategic transformation
Failure to execute on organisational transformation and
portfolio activity (includes integrations, mergers or separations)
could result in loss of business value and additional cost.
Global economic disruption
A global economic crisis could result in reduced
telecommunication spend from businesses and consumers, as well as
limit our access to financial markets and availability of
liquidity, increasing our cost of capital and limiting debt
financing options.
Technology failures
Network, system or platform outages resulting from internal or
external events could lead to reduced customer satisfaction,
reputational damage and/or regulatory penalties.
Market disruption
New telecoms entering the market could lead to significant price
competition and lower margins.
Disintermediation and failure to innovate
Failure in product innovation or ineffective response to threats
from emerging technology or disruptive business models could lead
to a loss of customer relevance, market share and new/existing
revenue streams.
Legal and regulatory compliance
Failure to comply with laws and regulations could lead to a loss
of trust, financial penalties and/or suspension of our licence to
operate.
IT transformation
Failure to design and execute IT transformation of our legacy
estate could lead to business loss, customer dissatisfaction or
reputational exposure.
TCFD disclosure
We recognise that climate change poses a number of physical
(i.e. caused by the increased frequency and severity of extreme
weather events) and transition-related (i.e. economic, technology
or regulatory challenges related to moving to a greener economy)
risks and opportunities for our business. As part of our commitment
to operate ethically and sustainably, we are dedicated to
understanding climate-related risks and opportunities and embedding
responses to these into our business strategy and operations. We
are aligning internal processes with the recommendations of the
Task Force on Climate-related Financial Disclosures ('TCFD')
focusing on four thematic areas that are core elements of how
organisations operate: governance, strategy, risk management,
metrics and targets.
Responsibility statement
We confirm that to the best of our knowledge:
-- The unaudited condensed consolidated financial statements
have been prepared in accordance with IAS 34, "Interim Financial
Reporting", as issued by the International Accounting Standards
Board and as contained in UK-adopted international accounting
standards; and
-- The interim management report includes a fair review of the
information required by Disclosure Guidance and Transparency Rules
sourcebook 4.2.7 and Disclosure Guidance and Transparency Rules
sourcebook 4.2.8.
Neither the Company nor the directors accept any liability to
any person in relation to the half-year financial report except to
the extent that such liability could arise under English law.
Accordingly, any liability to a person who has demonstrated
reliance on any untrue or misleading statement or omission shall be
determined in accordance with section 90A and schedule 10A of the
Financial Services and Markets Act 2000.
The names and functions of the Vodafone Group Plc board of
directors can be found at:
http://www.vodafone.com/about/board-of-directors
By Order of the Board
Rosemary Martin
Group General Counsel and Company Secretary
16 November 2021
Unaudited condensed consolidated financial statements
Consolidated income statement
Six months ended
30 September
------------------
2021 2020(1)
Note EURm EURm
------------------------------------------------------- ---- -------- --------
Revenue 2 22,489 21,427
Cost of sales (15,097) (14,754)
------------------------------------------------------- ---- -------- --------
Gross profit 7,392 6,673
Selling and distribution expenses (1,675) (1,676)
Administrative expenses (2,870) (2,580)
Net credit losses on financial assets (230) (378)
Share of results of equity accounted associates
and joint ventures 111 260
Other (expense)/income (108) 1,055
------------------------------------------------------- ---- -------- --------
Operating profit 2 2,620 3,354
Investment income 129 183
Financing costs (1,473) (1,610)
------------------------------------------------------- ---- -------- --------
Profit before taxation 1,276 1,927
Income tax credit/(expense) 3 1 (459)
------------------------------------------------------- ---- -------- --------
Profit for the financial period 1,277 1,468
------------------------------------------------------- ---- -------- --------
Attributable to:
- Owners of the parent 996 1,269
- Non-controlling interests 281 199
------------------------------------------------------- ---- -------- --------
Profit for the financial period 1,277 1,468
------------------------------------------------------- ---- -------- --------
Profit per share
Total Group:
- Basic 5 3.40c 4.30c
- Diluted 5 3.39c 4.29c
------------------------------------------------------- ---- -------- --------
Consolidated statement of comprehensive income/expense
Six months ended
30 September
------------------
2021 2020(1)
EURm EURm
------------------------------------------------------- ---- -------- --------
Profit for the financial period 1,277 1,468
Other comprehensive income/(expense):
Items that may be reclassified to the income
statement in subsequent periods:
Foreign exchange translation differences, net
of tax (117) (768)
Foreign exchange translation differences transferred
to the income statement - (77)
Other, net of tax(2) 1,286 (2,058)
------------------------------------------------------- ---- -------- --------
Total items that may be reclassified to the
income statement in subsequent periods 1,169 (2,903)
Items that will not be reclassified to the income
statement in subsequent periods:
Net actuarial gains/(losses) on defined benefit
pension schemes, net of tax 200 (383)
------------------------------------------------------- ---- -------- --------
Total items that will not be reclassified to
the income statement in subsequent periods 200 (383)
Other comprehensive income/(expense) 1,369 (3,286)
------------------------------------------------------- ---- -------- --------
Total comprehensive income/(expense) for the
financial period 2,646 (1,818)
------------------------------------------------------- ---- -------- --------
Attributable to:
- Owners of the parent 2,354 (1,950)
- Non-controlling interests 292 132
------------------------------------------------------- ---- -------- --------
2,646 (1,818)
------------------------------------------------------- ---- -------- --------
Notes:
1. In the previously published results for the six months ended
30 September 2020, the Group's 55% interest in Vodafone Egypt was
classified as held for sale. In December 2020, the Group announced
that discussions with the potential purchaser had been terminated.
Consequently, the held for sale classification was reversed
resulting in the following changes to the previously published
results for the six months ended 30 September 2020: gross profit
has declined by EUR97 million, operating profit has declined by
EUR118 million, profit before taxation has declined by EUR118
million, profit for the financial period has declined by EUR87
million, total comprehensive expense for the financial period has
increased by EUR85 million and basic profit per share and diluted
profit per share has declined by 0.15 eurocents.
2. Principally includes the impact of the Group's cash flow
hedges deferred to other comprehensive income during the
period.
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
Consolidated statement of financial position
30 September 31 March
2021 2021
Note EURm EURm
---------------------------------------------------- ---- ------------ ---------
Non-current assets
Goodwill 31,729 31,731
Other intangible assets 21,697 21,818
Property, plant and equipment 40,116 41,243
Investments in associates and joint ventures 7 4,397 4,670
Other investments 1,043 925
Deferred tax assets 21,800 21,569
Post employment benefits 208 60
Trade and other receivables 5,690 4,777
---------------------------------------------------- ---- ------------ ---------
126,680 126,793
---------------------------------------------------- ---- ------------ ---------
Current assets
Inventory 714 676
Taxation recoverable 515 434
Trade and other receivables 11,330 10,923
Other investments 7,778 9,159
Cash and cash equivalents 5,824 5,821
---------------------------------------------------- ---- ------------ ---------
26,161 27,013
---------------------------------------------------- ---- ------------ ---------
Assets held for sale 4 1,256 1,257
---------------------------------------------------- ---- ------------ ---------
Total assets 154,097 155,063
---------------------------------------------------- ---- ------------ ---------
Equity
Called up share capital 4,797 4,797
Additional paid-in capital 150,886 150,812
Treasury shares (7,130) (6,172)
Accumulated losses (121,973) (121,587)
Accumulated other comprehensive income 29,312 27,954
---------------------------------------------------- ---- ------------ ---------
Total attributable to owners of the parent 55,892 55,804
---------------------------------------------------- ---- ------------ ---------
Non-controlling interests 2,155 2,012
---------------------------------------------------- ---- ------------ ---------
Total equity 58,047 57,816
---------------------------------------------------- ---- ------------ ---------
Non-current liabilities
Borrowings 58,109 59,272
Deferred tax liabilities 1,985 2,095
Post employment benefits 329 513
Provisions 1,810 1,747
Trade and other payables 3,674 4,909
---------------------------------------------------- ---- ------------ ---------
65,907 68,536
---------------------------------------------------- ---- ------------ ---------
Current liabilities
Borrowings 11,412 8,488
Financial liabilities under put option arrangements 502 492
Taxation liabilities 1,079 769
Provisions 867 892
Trade and other payables 16,283 18,070
---------------------------------------------------- ---- ------------ ---------
30,143 28,711
---------------------------------------------------- ---- ------------ ---------
Total equity and liabilities 154,097 155,063
---------------------------------------------------- ---- ------------ ---------
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
Consolidated statement of changes in
equity
Equity
Additional Accumulated attributable Non-
Share paid-in Treasury comprehensive to the controlling Total
capital capital(1) shares losses(2) owners interests equity
EURm EURm EURm EURm EURm EURm EURm
------------------------------- -------- ----------- -------- -------------- ------------- ------------ -------
1 April 2020 brought
forward 4,797 152,629 (7,802) (88,214) 61,410 1,215 62,625
Issue or reissue
of shares - 1 82 (80) 3 - 3
Share-based payments - 64 - - 64 4 68
Transactions with
non-controlling
shareholders in
subsidiaries - - - (11) (11) (5) (16)
Comprehensive
(expense)/income(3) - - - (1,950) (1,950) 132 (1,818)
Dividends - - - (1,205) (1,205) (162) (1,367)
------------------------------- -------- ----------- -------- -------------- ------------- ------------ -------
30 September 2020 4,797 152,694 (7,720) (91,460) 58,311 1,184 59,495
------------------------------- -------- ----------- -------- -------------- ------------- ------------ -------
1 April 2021 brought
forward 4,797 150,812 (6,172) (93,633) 55,804 2,012 57,816
Issue or reissue
of shares - 1 90 (90) 1 - 1
Share-based payments - 73 - - 73 6 79
Transactions with
non-controlling
shareholders in
subsidiaries - - - (38) (38) 236 198
Comprehensive (expense)/income - - - 2,354 2,354 292 2,646
Dividends - - - (1,254) (1,254) (391) (1,645)
Purchase of treasury
shares - - (1,048) - (1,048) - (1,048)
------------------------------- -------- ----------- -------- -------------- ------------- ------------ -------
30 September 2021 4,797 150,886 (7,130) (92,661) 55,892 2,155 58,047
------------------------------- -------- ----------- -------- -------------- ------------- ------------ -------
Notes:
1. Includes share premium, capital reserve, capital redemption
reserve, merger reserve and share-based payment reserve. The merger
reserve was derived from acquisitions made prior to 31 March 2004
and subsequently allocated to additional paid-in capital on
adoption of IFRS.
2. Includes accumulated losses and accumulated other
comprehensive income.
3. In the previously published results for the six months ended
30 September 2020, the Group's 55% interest in Vodafone Egypt was
classified as held for sale. In December 2020, the Group announced
that discussions with the potential purchaser had been terminated.
Consequently, the held for sale classification was reversed
resulting in the following changes to the previously published
results for the six months ended 30 September 2020: Total
comprehensive expense for the financial period has increased by
EUR85 million.
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
Consolidated statement of cash flows
Six months ended
30 September
------------------
2021 2020
Note EURm EURm
----------------------------------------------------- ---- -------- --------
Inflow from operating activities 8 6,455 6,009
----------------------------------------------------- ---- -------- --------
Cash flows from investing activities
Purchase of interests in subsidiaries, net
of cash acquired (1) (136)
Purchase of interests in associates and joint
ventures (47) -
Purchase of intangible assets (1,593) (1,092)
Purchase of property, plant and equipment (3,118) (2,771)
Purchase of investments (580) (3,153)
Disposal of interests in subsidiaries, net
of cash disposed - 174
Disposal of interests in associates and joint
ventures - 420
Disposal of property, plant and equipment
and intangible assets 8 6
Disposal of investments 1,930 1,031
Dividends received from associates and joint
ventures 469 355
Interest received 121 153
----------------------------------------------------- ---- -------- --------
Outflow from investing activities (2,811) (5,013)
----------------------------------------------------- ---- -------- --------
Cash flows from financing activities (1)
Proceeds from issue of long-term borrowings 2,282 2,125
Repayment of borrowings (3,771) (4,330)
Net movement in short-term borrowings 1,173 (3,238)
Net movement in derivatives(2) (110) 521
Interest paid(3) (809) (774)
Purchase of treasury shares (1,101) -
Issue of ordinary share capital and reissue
of treasury shares 1 3
Equity dividends paid (1,259) (1,209)
Dividends paid to non-controlling shareholders
in subsidiaries (399) (166)
Other transactions with non-controlling shareholders
in subsidiaries 198 (20)
Other movements with associates and joint
ventures - 38
----------------------------------------------------- ---- -------- --------
Outflow from financing activities (3,795) (7,050)
----------------------------------------------------- ---- -------- --------
Net cash outflow (151) (6,054)
Cash and cash equivalents at beginning of
the financial period(4) 5,790 13,288
Exchange gain/(loss) on cash and cash equivalents 11 (365)
----------------------------------------------------- ---- -------- --------
Cash and cash equivalents at end of the
financial period (4) 5,650 6,869
----------------------------------------------------- ---- -------- --------
Notes:
1. See page 25 for commentary on bond issuances, loan repayments
and share buybacks in the period.
2. Amounts for the six months ended 30 September 2020 were
previously presented within net movement in short-term
borrowings.
3. Interest paid includes EUR39 million of cash inflow (H1 FY21:
EURnil) on derivative financial instruments for the share buyback
related to maturing tranches of mandatory convertible bonds.
4. Comprises cash and cash equivalents as presented in the
consolidated statement of financial position of EUR5,824 million
(H1 FY21: EUR6,612 million), after adjustment to include overdrafts
of EUR174 million (H1 FY21: EUR17 million) and, for H1 FY21, EUR274
million of cash and cash equivalents previously presented in assets
held for sale relating to the Group's 55% interest in Vodafone
Egypt.
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
Notes to the unaudited condensed consolidated financial
statements
1 Basis of preparation
The unaudited condensed consolidated financial statements for
the six months ended 30 September 2021:
-- are prepared in accordance with International Accounting
Standard 34 "Interim Financial Reporting" ('IAS 34') as issued by
the International Accounting Standards Board ('IASB') and as
adopted by the United Kingdom;
-- are presented on a condensed basis as permitted by IAS 34 and
therefore do not include all disclosures that would otherwise be
required in a full set of financial statements and should be read
in conjunction with the Group's annual report for the year ended 31
March 2021;
-- apply the same accounting policies, presentation and methods
of calculation as those followed in the preparation of the Group's
consolidated financial statements for the year ended 31 March 2021,
which were prepared in accordance with International Accounting
Standards in conformity with the requirements of the UK Companies
Act 2006, International Financial Reporting Standards ('IFRS')
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union and IFRS as issued by the IASB. Income taxes are
accrued using the tax rate that is expected to be applicable for
the full financial year, adjusted for certain discrete items which
occurred in the interim period in accordance with IAS 34;
-- include all adjustments, consisting of normal recurring
adjustments, necessary for a fair statement of the results for the
periods presented;
-- do not constitute statutory accounts within the meaning of
section 434(3) of the Companies Act 2006; and
-- were approved by the Board of directors on 16 November 2021.
The information relating to the year ended 31 March 2021 is
extracted from the Group's published annual report for that year,
which has been delivered to the Registrar of Companies, and on
which the auditors' report was unqualified and did not contain any
emphasis of matter or statements under section 498(2) or 498(3) of
the UK Companies Act 2006.
The preparation of the unaudited condensed consolidated
financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the end of the reporting period, and the reported amounts of
revenue and expenses during the period. Actual results could vary
from these estimates. These estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised if
the revision affects only that period or in the period of the
revision and future periods if the revision affects both current
and future periods.
Going concern
As outlined on pages 1 and 2, trading during the period
demonstrated a robust operating model for the Group. The Group has
a strong liquidity position with EUR5.7 billion of cash and cash
equivalents available at 30 September 2021 which, together with
undrawn revolving credit facilities of EUR7.4 billion, cover all of
the Group's reasonably expected cash requirements over the going
concern period. The Directors have reviewed trading and liquidity
forecasts for the Group, which were based on current trading
conditions, and considered a variety of scenarios including not
being able to access the capital markets during the assessment
period. In addition to the liquidity forecasts prepared, the
Directors considered the availability of the Group's revolving
credit facilities which were undrawn as at 30 September 2021. As a
result of the assessment performed, the Directors have concluded
that the Group is able to continue in operation for the period up
to and including March 2023 and that it is appropriate to continue
to adopt the going concern basis in preparing the unaudited
condensed consolidated financial statements.
Critical accounting judgements and estimates
The Group's critical accounting judgements and estimates were
disclosed in the Group's annual report for the year ended 31 March
2021; in addition, accounting judgements exercised by management as
at 30 September 2021 relating to identifying indicators of
impairment are disclosed below. The ongoing impact of COVID-19 has
been factored into our latest forecasts, including those considered
as part of management's review of potential indicators of
impairment; judgements relating to this review are discussed
below.
1 Basis of preparation (continued)
Judgements relating to potential indicators of impairment
The Group performs its annual impairment test for goodwill and
indefinite lived intangible assets at 31 March and when there is an
indicator of impairment of an asset. At each reporting period date
judgement is exercised by management in determining whether any
internal or external sources of information observed are indicative
that the carrying amount of any of the Group's cash generating
units ('CGUs') is not recoverable.
As part of this assessment, management reviews the key
assumptions underlying the valuation process performed during the
annual impairment test at 31 March 2021, as well as other market
factors. Indicators assessed include the year to date performance
of the Group's CGUs against their latest forecast, as well as
considering any valuation implications from observable movements in
share prices, market multiples, risk free rates and long-term
growth rate estimates.
Based on management's assessment, no indications of impairment
were identified for the Group's CGUs during the period to 30
September 2021 that would indicate the carrying amount of any of
the Group's CGUs is not recoverable.
New accounting pronouncements adopted
On 1 April 2021, the Group adopted certain new accounting
policies where necessary to comply with amendments to IFRS, none of
which had a material impact on the consolidated results, financial
position or cash flows of the Group. Further details are provided
in the Group's annual report for the year ended 31 March 2021.
2 Segmental analysis
Updated segmental reporting structure
Following the IPO of Vantage Towers A.G. ('Vantage Towers') in
March 2021, Vodafone has updated its segmental reporting structure
to reflect the way in which the Group now manages its operations.
Vantage Towers is now reported as a new segment within the Vodafone
Group's financial results. This change in reporting structure has
taken effect for the year ending 31 March 2022 onwards and has no
impact on service revenue. Total revenue is unaffected as charges
from Vantage Towers to operating companies are eliminated on
consolidation. There has been no change to the segmental
presentation of amounts derived from the income statement for
comparative periods, which will remain as previously disclosed.
Segmental information for the half year to 30 September 2021 is
also presented on the previous basis of segmental reporting.
Operating segments
The Group's operating segments are established on the basis of
those components of the Group that are evaluated regularly by the
chief operating decision maker in deciding how to allocate
resources and in assessing performance. The Group has determined
the chief operating decision maker to be its Chief Executive
Officer. The Group has a single group of similar services and
products, being the supply of communications services and related
products.
Revenue is attributed to a country based on the location of the
Group company reporting the revenue. Transactions between operating
segments are charged at arm's-length prices. With the exception of
Vodacom, which is a legal entity encompassing South Africa and
certain other smaller African markets, and Vantage Towers which
comprises companies providing mobile tower infrastructure in a
number of European markets, segment information is primarily
provided on the basis of geographic areas, being the basis on which
the Group manages the rest of its worldwide interests.
The operating segments for Germany, Italy, UK, Spain, Vodacom
and Vantage Towers are individually material for the Group and are
each reporting segments for which certain financial information is
provided. The aggregation of other operating segments into the
Other Europe and Other Markets reporting segments reflects, in the
opinion of management, the similar local market economic
characteristics and regulatory environments for each of those
operating segments as well as the similar products and services
sold and comparable classes of customers. In the case of the Other
Europe region (comprising Albania, Czech Republic, Greece, Hungary,
Ireland, Portugal and Romania), this largely reflects membership or
a close association with the European Union, while the Other
Markets segment (comprising Egypt, Ghana and Turkey) largely
includes developing economies with less stable economic or
regulatory environments. Common Functions is a separate reporting
segment and comprises activities which are undertaken primarily in
central Group entities that do not meet the criteria for
aggregation with other reporting segments.
Revenue disaggregation
Revenue reported for the period includes revenue from contracts
with customers, comprising service and equipment revenue, as well
as other revenue items including revenue from leases and interest
revenue arising from transactions with a significant financing
component. The tables overleaf disaggregate the Group's revenue by
reporting segment.
2 Segmental analysis (continued)
The table below presents the results for the six months ended 30
September 2021 in line with our updated segmental reporting structure.
Revenue Total
Service Equipment from contracts Other Interest segment Adjusted
revenue revenue with customers revenue(1) revenue revenue EBITDAaL
EURm EURm EURm EURm EURm EURm EURm
------------------------ --------- --------- --------------- ----------- -------- -------- ---------
Six months ended 30
September 2021
Germany 5,777 475 6,252 183 12 6,447 2,892
Italy 2,187 265 2,452 49 6 2,507 917
UK 2,521 593 3,114 30 17 3,161 638
Spain 1,866 178 2,044 33 13 2,090 445
Other Europe 2,502 248 2,750 52 8 2,810 836
Vodacom 2,271 455 2,726 190 12 2,928 1,062
Other Markets 1,752 201 1,953 5 - 1,958 683
Vantage Towers - - - 611 - 611 305
Common Functions(2) 252 31 283 424 - 707 (213)
Eliminations (118) - (118) (611) (1) (730) -
------------------------- --------- --------- --------------- ----------- -------- -------- ---------
Group 19,010 2,446 21,456 966 67 22,489 7,565
------------------------- --------- --------- --------------- ----------- -------- -------- ---------
The tables below present the results for the six months ended 30
September 2021 and 30 September 2020 under the previous basis of
segmental reporting.
Revenue Total
Service Equipment from contracts Other Interest segment Adjusted
revenue revenue with customers revenue(1) revenue revenue EBITDAaL
EURm EURm EURm EURm EURm EURm EURm
------------------------ --------- --------- --------------- ----------- -------- -------- ---------
Six months ended 30
September 2021
Germany 5,777 475 6,252 211 12 6,475 3,045
Italy 2,187 265 2,452 49 6 2,507 917
UK 2,521 593 3,114 30 17 3,161 667
Spain 1,866 178 2,044 46 13 2,103 483
Other Europe 2,502 248 2,750 92 8 2,850 921
Vodacom 2,271 455 2,726 190 12 2,928 1,062
Other Markets 1,752 201 1,953 5 - 1,958 683
Common Functions(2) 252 31 283 424 - 707 (213)
Eliminations (118) - (118) (81) (1) (200) -
------------------------- --------- --------- --------------- ----------- -------- -------- ---------
Group 19,010 2,446 21,456 966 67 22,489 7,565
------------------------- --------- --------- --------------- ----------- -------- -------- ---------
Revenue Total
Service Equipment from contracts Other Interest segment Adjusted
revenue revenue with customers revenue(1) revenue revenue EBITDAaL
EURm EURm EURm EURm EURm EURm EURm
------------------------ --------- --------- --------------- ----------- -------- -------- ---------
Six months ended 30
September 2020
Germany 5,723 466 6,189 176 6 6,371 2,844
Italy 2,249 216 2,465 36 5 2,506 800
UK 2,401 509 2,910 49 24 2,983 636
Spain 1,880 132 2,012 30 8 2,050 488
Other Europe 2,411 252 2,663 48 9 2,720 870
Vodacom 1,949 335 2,284 132 7 2,423 891
Other Markets(3) 1,679 212 1,891 7 - 1,898 601
Common Functions(2) 219 13 232 424 - 656 (119)
Eliminations (93) - (93) (87) - (180) -
------------------------- --------- --------- --------------- ----------- -------- -------- ---------
Group (3) 18,418 2,135 20,553 815 59 21,427 7,011
------------------------- --------- --------- --------------- ----------- -------- -------- ---------
Notes:
1. Other revenue includes lease revenue recognised under IFRS 16
"Leases".
2. Comprises central teams and business functions.
3. In the previously published results for the six months ended
30 September 2020, the Group's 55% interest in Vodafone Egypt was
held for sale. In December 2020, we announced that discussions with
the potential purchaser had been terminated. Consequently, the held
for sale classification was reversed resulting in Adjusted EBITDAaL
declining by EUR12 million compared to the previously published
results for the six months ended 30 September 2020.
2 Segmental analysis (continued)
A reconciliation of Adjusted EBITDAaL, the Group's measure of
segment profit, to the Group's profit before taxation for the
financial period is shown below.
Six months ended 30
September
---------------------
2021 2020(1)
EURm EURm
------------------------------------------------ ---------- ---------
Adjusted EBITDAaL 7,565 7,011
Restructuring costs (172) (86)
Interest on lease liabilities 199 189
Loss on disposal of property, plant & equipment
and intangible assets (26) (13)
Depreciation and amortisation on owned assets (4,949) (5,062)
Share of results of equity accounted associates
and joint ventures 111 260
Other (expense)/income(2) (108) 1,055
------------------------------------------------- ---------- ---------
Operating profit 2,620 3,354
Investment income 129 183
Financing costs (1,473) (1,610)
------------------------------------------------- ---------- ---------
Profit before taxation 1,276 1,927
------------------------------------------------- ---------- ---------
Notes:
1. In the previously published results for the six months ended
30 September 2020, the Group's 55% interest in Vodafone Egypt was
held for sale. In December 2020, we announced that discussions with
the potential purchaser had been terminated. Consequently, the held
for sale classification was reversed resulting in the following
changes to the previously published results for the six months
ended 30 September 2020: Adjusted EBITDAaL has declined by EUR12
million, Operating profit has declined by EUR118 million and Profit
before taxation has declined by EUR118 million.
2. For the six months ended 30 September 2020, the Group
recorded a gain of EUR1,043 million in relation to the merger of
Vodafone Hutchison Australia Pty Limited and TPG Telecom Limited
which is reported in Other (expense)/income.
The Group's non-current assets are disaggregated as follows:
30 September 31 March
2021 2021(1)
EURm EURm
----------------------- ------------ --------
Non-current assets (2)
Germany 43,052 43,755
Italy 10,593 10,707
UK 6,306 6,529
Spain 6,601 6,609
Other Europe 8,253 8,361
Vodacom 5,872 5,839
Other Markets 2,997 2,988
Vantage Towers 7,824 7,859
Common Functions(3) 2,044 2,145
------------------------ ------------ --------
Group 93,542 94,792
------------------------ ------------ --------
Notes:
1. Non-current assets at 31 March 2021 have been re-presented to
reflect the updated segmental reporting structure.
2. Comprises goodwill, other intangible assets and property,
plant & equipment.
3. Comprises central teams and business functions.
3 Taxation
Six months ended
30 September
------------------
2021 2020(1)
EURm EURm
------------------------------------------------------ ------- ---------
United Kingdom corporation tax (expense)/income(2)
Current period (6) (17)
Adjustments in respect of prior periods 15 4
Overseas current tax (expense)/income
Current period (730) (470)
Adjustments in respect of prior periods (26) 93
------------------------------------------------------ ------- ---------
Total current tax expense (747) (390)
------------------------------------------------------- ------- ---------
Deferred tax on origination and reversal of temporary
differences
United Kingdom deferred tax 544 83
Overseas deferred tax 204 (152)
------------------------------------------------------ ------- ---------
Total deferred tax credit/(expense) 748 (69)
------------------------------------------------------- ------- ---------
Total income tax credit/(expense) 1 (459)
------------------------------------------------------- ------- ---------
Notes:
1. In the previously published results for the six months ended
30 September 2020, the Group's 55% interest in Vodafone Egypt was
held for sale. In December 2020, we announced that discussions with
the potential purchaser had been terminated. Consequently, the held
for sale classification was reversed, resulting in the following
changes to the previously published results for the six months
ended 30 September 2020: Total deferred tax expense declined by
EUR31 million.
2. UK operating profits are more than offset by statutory
allowances for capital investment in the UK network and systems
plus ongoing interest costs including those arising from the
EUR10.7 billion of spectrum payments to the UK government in 2000,
2013 and 2018.
The six months ended 30 September 2021 includes deferred tax on
the use of Luxembourg losses of EUR155 million (2020: EUR188
million). The Group expects to use its losses in Luxembourg over a
period of between 59 and 62 years and the losses in Germany over a
period of between 8 and 16 years. The actual use of these losses
and the period over which they may be used is dependent on many
factors which may change. These factors include the level of
profitability in both Luxembourg and Germany, changes in tax law
and changes to the structure of the Group. Further details about
the Group's tax losses can be found in note 6 of the Group's
consolidated financial statements for the year ended 31 March
2021.
4 Assets held for sale
Assets held for sale at 30 September 2021 and 31 March 2021
comprise the Group's 28.1% interest in Indus Towers. The Group's
interest in Indus Towers has been provided as security against both
certain bank borrowings and partly to the pledges provided to the
new Indus Towers entity under the terms of the merger between
erstwhile Indus Towers and Bharti Infratel. See note 11 "Contingent
liabilities and legal proceedings".
The relevant assets are detailed in the table below.
30 September 31 March
2021 2021
EURm EURm
--------------------------------------------- ------------ --------
Non-current assets
Investments in associates and joint ventures 1,256 1,257
---------------------------------------------- ------------ --------
Total assets held for sale 1,256 1,257
---------------------------------------------- ------------ --------
5 Earnings per share
Six months ended
30 September
--------------------
2021 2020
Millions Millions
-------------------------------------------------------- --------- ---------
Weighted average number of shares for basic earnings
per share 29,331 29,535
Effect of dilutive potential shares: restricted shares
and share options 84 75
-------------------------------------------------------- --------- ---------
Weighted average number of shares for diluted earnings
per share 29,415 29,610
-------------------------------------------------------- --------- ---------
Earnings per share attributable to owners of the parent
during the period
Six months ended
30 September
--------------------
2021 2020(1)
EURm EURm
-------------------------------------------------------- --------- ---------
Profit for basic and diluted earnings per share 996 1,269
-------------------------------------------------------- --------- ---------
eurocents eurocents
-------------------------------------------------------- --------- ---------
Basic profit per share 3.40 4.30
Diluted profit per share 3.39 4.29
-------------------------------------------------------- --------- ---------
Note:
1. In the previously published results for the six months ended
30 September 2020, the Group's 55% interest in Vodafone Egypt was
held for sale. In December 2020, we announced that discussions with
the potential purchaser had been terminated. Consequently, the held
for sale classification was reversed resulting in the following
changes to the previously published results for the six months
ended 30 September 2020: Profit for basic and diluted earnings per
share has declined by EUR45 million, Basic profit per share and
diluted profit per share have declined by 0.15 eurocents.
6 Equity dividends
Six months ended
30 September
------------------
2021 2020
EURm EURm
------------------------------------------------------ -------- --------
Declared during the financial period:
Final dividend for the year ended 31 March 2021: 4.50
eurocents per share
(2020: 4.50 eurocents per share) 1,254 1,205
------------------------------------------------------ -------- --------
Proposed after the end of the reporting period and
not recognised as a liability:
Interim dividend for the year ending 31 March 2022:
4.50 eurocents per share
(2021: 4.50 eurocents per share) 1,229 1,207
------------------------------------------------------ -------- --------
7 Investment in associates and joint ventures
30 September 31 March
2021 2021
EURm EURm
--------------------------------- ------------ --------
VodafoneZiggo Group Holding B.V. 974 1,190
INWIT S.p.A. 2,837 2,920
TPG Telecom Limited 90 104
Other 75 35
---------------------------------- ------------ --------
Investment in joint ventures 3,976 4,249
Investment in associates 421 421
---------------------------------- ------------ --------
4,397 4,670
---------------------------------- ------------ --------
8 Reconciliation of net cash flow from operating activities
Six months ended 30
September
---------------------
2021 2020(1)
EURm EURm
-------------------------------------------------- ---------- ---------
Profit for the financial period 1,277 1,468
Investment income (129) (183)
Financing costs 1,473 1,610
Income tax (credit)/expense (1) 459
-------------------------------------------------- ---------- ---------
Operating profit 2,620 3,354
Adjustments for:
Share-based payments and other non-cash charges 98 86
Depreciation and amortisation 6,952 6,987
Loss on disposal of property, plant and equipment
and intangible assets 26 14
Share of result of equity accounted associates
and joint ventures (111) (260)
Other income expense/(income) 108 (1,055)
Increase in inventory (41) (31)
Increase in trade and other receivables (1,254) (15)
Decrease in trade and other payables (1,366) (2,538)
-------------------------------------------------- ---------- ---------
Cash generated by operations 7,032 6,542
Taxation (577) (533)
--------------------------------------------------- ---------- ---------
Net cash flow from operating activities 6,455 6,009
--------------------------------------------------- ---------- ---------
Note:
1. In the previously published results for the six months ended
30 September 2020, the Group's 55% interest in Vodafone Egypt was
held for sale. In December 2020, we announced that discussions with
the potential purchaser had been terminated. Consequently, the held
for sale classification was reversed resulting in the following
changes to the previously published results for the six months
ended 30 September 2020: Operating profit has declined by EUR118
million and Profit for the financial period has declined by EUR87
million.
9 Fair value of financial instruments
The table below sets out the financial instruments held at fair
value by the Group.
30 September 31 March
2021 2021
EUR m EUR m
-------------------------------------------------- ------------ --------
Financial assets at fair value:
Money market funds (included within Cash and
cash equivalents)(1) 4,307 3,116
Debt and equity securities (included within
Other investments)(2) 5,388 5,292
Derivative financial instruments (included within
Trade and other receivables)(2) 3,666 3,151
Trade receivables at fair value through Other
comprehensive income (included within Trade
and other receivables)(2) 1,384 744
-------------------------------------------------- ------------ --------
14,745 12,303
-------------------------------------------------- ------------ --------
Financial liabilities at fair value:
Derivative financial instruments (included within
Trade and other payables)(2) 3,016 4,010
-------------------------------------------------- ------------ --------
3,016 4,010
--------------------------------------------------- ------------ --------
Notes:
1. Items are measured at fair value and the valuation basis is
Level 1 classification, which comprises financial instruments where
fair value is determined by unadjusted quoted prices in active
markets.
2. Quoted debt and equity securities of EUR2,274 million (FY21:
EUR2,210 million) are Level 1 classification which comprises items
where fair value is determined by unadjusted quoted prices in
active markets. All balances other than quoted securities are Level
2 classification which comprises items where fair value is
determined from inputs other than quoted prices that are observable
for the asset or liability, either directly or indirectly.
The fair value of the Group's financial assets and financial
liabilities held at amortised cost approximates to fair value with
the exception of non-current bonds with a carrying value of
EUR46,162 million (FY21: EUR44,634 million) and a fair value of
EUR50,777 million (FY21: EUR48,630 million). Fair value is based on
Level 1 of the fair value hierarchy using quoted market prices.
10 Related party transactions
Transactions with joint ventures and associates
Related party transactions with the Group's joint ventures and
associates primarily consists of fees for the use of products and
services including network airtime and access charges, fees for the
provision of network infrastructure and cash pooling ventures. No
related party transactions have been entered into during the year
which might reasonably affect any decisions made by the users of
these unaudited condensed consolidated financial statements except
as disclosed below.
Six months ended 30
September
----------------------
2021 2020
EUR m EUR m
--------------------------------------------------- ------------ --------
Sales of goods and services to associates 10 7
Purchase of goods and services from associates 4 3
Sales of goods and services to joint ventures 103 100
Purchase of goods and services from joint ventures 132 90
Interest income receivable from joint ventures(1) 26 29
Interest expense payable to joint ventures(2) 26 29
---------------------------------------------------- ------------ --------
30 September 31 March
2021 2021
EUR m EUR m
--------------------------------------------------- ------------ --------
Trade balances owed:
from associates 9 3
to associates 4 5
from joint ventures 99 88
to joint ventures 30 31
Other balances owed from associates - 56
Other balances owed from joint ventures(1) 997 955
Other balances owed to joint ventures(2) 1,484 1,575
---------------------------------------------------- ------------ --------
Notes:
1. Amounts arise primarily through VodafoneZiggo, TPG Telecom
Limited and INWIT S.p.A. Interest is charged in line with market
rates.
2. Amounts are primarily in relation to leases of tower space from INWIT S.p.A.
In the six months ended 30 September 2021 the Group made
contributions to defined benefit pension schemes of EUR12 million
(2020: EUR99 million).
Dividends of EUR1.1 million were paid to Board and Executive
Committee members (2020: EUR1.0 million).
Dividends received from associates and joint ventures are
disclosed in the consolidated statement of cash flows.
11 Contingent liabilities and legal proceedings
Note 29 "Contingent liabilities and legal proceedings" to the
consolidated financial statements of Vodafone Group Plc for the
year ended 31 March 2021 sets forth the Group's commitments,
contingent liabilities and legal proceedings as of 31 March 2021.
There have been no material changes to the Group's commitments,
contingent liabilities or legal proceedings during the period
covered by this report, except as disclosed below.
Vodafone Idea
As part of the agreement to merge Vodafone India and Idea
Cellular in 2017, the parties agreed a mechanism for payments
between the Group and Vodafone Idea Limited ('VIL') pursuant to the
difference between the crystallisation of certain identified
contingent liabilities in relation to legal, regulatory, tax and
other matters, and refunds relating to Vodafone India and Idea
Cellular. Cash payments or cash receipts relating to these matters
must have been made or received by VIL before any amount becomes
due from or owed to the Group. Any future payments by the Group to
VIL as a result of this agreement would only be made after
satisfaction of this and other contractual conditions.
The Group's potential exposure under this mechanism is now
capped at INR 64 billion (EUR743 million) following payments made
under this mechanism from Vodafone to VIL, in the year ended 31
March 2021, totalling INR 19 billion (EUR235 million ).
On 15 September 2021, the Government of India announced a relief
package and a series of reforms for the telecom sector including a
four-year moratorium on spectrum and AGR payments designed to
improve the liquidity and financial health of the telecom sector.
VIL also requires additional liquidity support from its lenders and
intends to raise additional equity capital.
There are significant uncertainties in relation to VIL's ability
to make payments in relation to liabilities covered by the
mechanism and no further cash payments are considered probable from
the Group as at 30 September 2021.
The carrying value of the Group's investment in VIL is EURnil
and the Group is recording no further share of losses in respect of
VIL. The Group's potential exposure to liabilities within VIL is
capped by the mechanism described above. As a consequence,
contingent liabilities arising from litigation in India concerning
operations of Vodafone India are not reported below.
Indus Towers merger
The merger of Indus and Bharti Infratel completed on 19 November
2020 and the combined entity was renamed Indus Towers Ltd ("Indus
Towers"). Under the terms of the merger a security package was
agreed for the benefit of Indus Towers which can be invoked in the
event that VIL is unable to satisfy certain payment obligations
under its Master Services Agreements with Indus Towers (the
'MSAs'). The security package includes:
- A prepayment in cash of INR 24 billion (EUR279 million) by VIL
to Indus Towers in respect of its payment obligations that are
undisputed, due and payable under the MSAs after the merger
closing. The prepayment has been fully utilised in the period;
- A primary pledge over 190.7 million shares owned by Vodafone
Group in Indus Towers having a value of INR 59 billion (EUR684
million); and
- A secondary pledge over shares owned by Vodafone Group in
Indus Towers (ranking behind Vodafone's existing lenders for the
remaining EUR1.3 billion bank borrowings secured against Indian
assets (see note 21) utilised to fund Vodafone's contribution to
the VIL rights issue in 2019) ("the Bank Borrowings") with a
maximum liability cap of INR 42.5 billion (EUR494 million).
In the event of non-payment of relevant MSA obligations by VIL,
Indus Towers will have recourse to the primary pledge shares and,
after repayment of the Bank Borrowings in full, any secondary
pledged shares, up to the value of the liability cap. VIL's ability
to make MSA payments to Indus Towers is uncertain and depends on a
number of factors including its ability to raise additional
funding.
Indian tax cases
In January 2012, the Supreme Court of India found against the
Indian tax authority and in favour of Vodafone International
Holdings BV ('VIHBV') in proceedings brought after the Indian tax
authority alleged potential liability under the Income Tax Act 1961
for the failure by VIHBV to deduct withholding tax from
consideration paid to the Hutchison Telecommunications
International Limited group ('HTIL') in connection with its 2007
disposal to VIHBV of its interests in a wholly-owned Cayman Island
incorporated subsidiary that indirectly held interests in Vodafone
India Limited ('Vodafone India').
The Finance Act 2012 of India, which amended various provisions
of the Income Tax Act 1961 with retrospective effect, contained
provisions intended to tax any gain on transfer of shares in a
non-Indian company, which derives substantial value from underlying
Indian assets, such as VIHBV's transaction with HTIL in 2007.
Further, it sought to subject a purchaser, such as VIHBV, to a
retrospective obligation to withhold tax. On 3 January 2013, VIHBV
received a letter from the Indian tax authority reminding it of the
tax demand raised prior to the Supreme Court of India's judgement
and updating the interest element of that demand to a total amount
of INR142 billion, which included principal and interest as
calculated by the Indian tax authority but did not include
penalties. On 12 February 2016, VIHBV received a notice dated 4
February 2016 of an outstanding tax demand of INR221 billion (plus
interest) along with a statement that enforcement action, including
against VIHBV's indirectly held assets in India, would be taken if
the demand was not satisfied. On 29 September 2017, VIHBV received
an electronically generated demand in respect of alleged principal,
interest and penalties in the amount of INR190.7 billion. This
demand does not appear to have included any element for alleged
accrued interest liability.
In response to the 2013 letter, VIHBV initiated arbitration
proceedings under the Netherlands-India Bilateral Investment Treaty
('Dutch BIT'). The arbitration hearing took place in February 2019.
In September 2020, the arbitration tribunal issued its award
unanimously ruling in VIHBV's favour. The Indian Government applied
in Singapore to set aside the award primarily on jurisdictional
grounds. The proceedings have been transferred to the Singapore
International Commercial Court ('SICC').
Separately, on 24 January 2017, Vodafone Group Plc and Vodafone
Consolidated Holdings Limited formally commenced arbitration with
the Indian Government under the United Kingdom-India Bilateral
Investment Treaty ('UK BIT') in respect of retrospective tax claims
under the Income Tax Act 1961 (as amended by the Finance Act 2012).
Although relating to the same underlying facts as the claim under
the Dutch BIT, the claim brought by Vodafone Group Plc and Vodafone
Consolidated Holdings Limited is a separate and distinct claim
under a different treaty. After the Delhi High Court first upheld,
and subsequently dismissed, the Indian Government's application for
an injunction preventing Vodafone from progressing the UK BIT
arbitration as an abuse of process, the Indian Government appealed
the dismissal. Hearings took place from 2018 to 2020 with frequent
adjournments. Following the award in the Dutch BIT, the Delhi High
Court dismissed the injunction appeal proceedings. Vodafone has
undertaken to proceed with the arbitration commenced under the UK
BIT only if the award already published under the Dutch BIT is set
aside. The Delhi High Court also permitted the formation of the UK
BIT tribunal.
In August 2021 the Indian Parliament passed new tax legislation
which affects the retrospective effect of the Finance Act 2012. The
impact of this legislation on the Dutch and UK BIT proceedings, in
particular whether the Indian Government will withdraw its
challenge to the arbitration award in the Dutch BIT, is unknown as
of the date of this report. The SICC granted a stay in the Dutch
BIT proceedings and agreed not to set a date for the hearing until
after 1 January 2022.
VIHBV and Vodafone Group Plc will continue to defend vigorously
any allegation that VIHBV or Vodafone India is liable to pay tax in
connection with the transaction with HTIL. Based on the facts and
circumstances of this matter, including the outcome of legal
proceedings to date, the Group considers that it is more likely
than not that no present obligation exists at 30 September
2021.
UK: IPCom v Vodafone Group Plc and Vodafone UK
On 22 February 2019, IPCom sued Vodafone Group Plc and Vodafone
Limited for alleged infringement of two patents claimed to be
essential to UMTS and LTE network standards. If IPCom could have
established that one or more of its patents was valid and
infringed, it could have sought an injunction against the UK
network if a global licence for the patents was not agreed. The
Court ordered expedited trials on the infringement and validity
issues. The trial on the first patent was in November 2019 and
removed the risk of an injunction so IPCom withdrew the second
patent trial listed for May 2020, although the court did find that
there had been limited infringement of the patent. Both IPCom and
Vodafone appealed certain aspects of the judgement from the first
trial at a hearing in January 2021 with the Court of Appeal finding
in favour of both parties on different issues. The validity of the
first patent was considered by the Board of Appeal of the European
Patent Office at a hearing in July 2021. The patent was found to be
invalid and was revoked. As a result Vodafone has no liability for
patent infringement and the case is resolved.
12 Subsequent events
Vodafone Egypt
On 10 November 2021, the Group announced that it had agreed to
transfer its 55% shareholding in Vodafone Egypt to its subsidiary,
Vodacom Group Limited ('Vodacom').
The total consideration is EUR2,365 million of which
approximately EUR1,892 million will be settled by the issue of 242
million new ordinary Vodacom shares to Vodafone at an issue price
of ZAR 135.75 per share; the remaining EUR473 million will be
settled in cash. As a result, Vodafone's ownership in Vodacom will
increase from 60.5% to 65.1%.
Under the terms of the sale and purchase agreement, the cash
element of the Purchase Consideration will be adjusted for any
movement in the net debt and agreed working capital of Vodafone
Egypt between signing and closing. Completion of the transaction is
subject to a number of regulatory approvals, but is expected to
close before 31 March 2022.
Independent review report to Vodafone Group Plc
Conclusion
We have been engaged by Vodafone Plc (the Company) to review the
unaudited condensed consolidated financial statements in the half
yearly financial report for the six months ended 30 September 2021
which comprise the consolidated income statement, the consolidated
statement of comprehensive income/expense, the consolidated
statement of financial position, the consolidated statement of
changes in equity, the consolidated statement of cash flows and the
related notes 1 to 12. We have read the other information contained
in the half yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the unaudited condensed consolidated
financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2021 is not prepared, in all material respects, in
accordance with UK adopted International Accounting Standard 34 and
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK and Ireland) "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
The annual financial statement of the group will be prepared in
accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with UK adopted
International Accounting Standard 34, "Interim Financial
Reporting".
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Auditor's Responsibilities for the review of financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion is based on procedure that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
16 November 2021
Non-GAAP measures
In the discussion of the Group's reported operating results,
non-GAAP measures are presented to provide readers with additional
financial information that is regularly reviewed by management.
However, this additional information presented is not uniformly
defined by all companies including those in the Group's industry.
Accordingly, it may not be comparable with similarly-titled
measures and disclosures by other companies. Additionally, certain
information presented is derived from amounts calculated in
accordance with IFRS but is not itself a measure defined under
GAAP. Such measures should not be viewed in isolation or as an
alternative to the equivalent GAAP measure.
The non-GAAP measures discussed in this document are listed
below, together with the location of the definition and the
reconciliation between the non-GAAP measure and the closest
equivalent GAAP measure.
Defined Closest equivalent GAAP Reconciled
Non-GAAP measure on page measure on page
-------------------------------- --------- ----------------------------- ---------------
Performance metrics
-------------------------------- --------- ----------------------------- ---------------
Adjusted EBITDAaL Page 47 Operating profit Pages 12
Previously referred to and 37
as Adjusted EBITDA. The
metrics have the same
definition.
-------------------------------- --------- ----------------------------- ---------------
Organic Adjusted EBITDAaL Page 47 Not applicable Not applicable
growth
-------------------------------- --------- ----------------------------- ---------------
Organic percentage point Page 47 Not applicable Not applicable
change in Adjusted EBITDAaL
margin
-------------------------------- --------- ----------------------------- ---------------
Organic revenue growth Page 47 Revenue Pages 48
and 49
-------------------------------- --------- ----------------------------- ---------------
Organic service revenue Page 47 Service revenue Pages 48
growth and 49
-------------------------------- --------- ----------------------------- ---------------
Organic mobile service Page 47 Service revenue Pages 48
revenue growth and 49
-------------------------------- --------- ----------------------------- ---------------
Organic fixed service Page 47 Service revenue Pages 48
revenue growth and 49
-------------------------------- --------- ----------------------------- ---------------
Organic retail service Page 47 Service revenue Pages 48
revenue growth and 49
-------------------------------- --------- ----------------------------- ---------------
Other metrics
-------------------------------- --------- ----------------------------- ---------------
Adjusted profit attributable Page 50 Profit attributable Page 50
to owners of the parent to owners of the parent
-------------------------------- --------- ----------------------------- ---------------
Adjusted basic earnings Page 50 Basic earnings per share Pages 50
per share and 51
-------------------------------- --------- ----------------------------- ---------------
Cash flow, funding and
capital allocation metrics
-------------------------------- --------- ----------------------------- ---------------
Free cash flow Page 51 Inflow from operating Page 52
activities
-------------------------------- --------- ----------------------------- ---------------
Adjusted free cash flow Page 51 Inflow from operating Pages 24
Previously referred to activities and 52
as Free cash flow (pre
spectrum, restructuring
and integration costs)
but now excludes Vantage
Towers growth capital
expenditure.
-------------------------------- --------- ----------------------------- ---------------
Gross debt Page 51 Borrowings Page 52
-------------------------------- --------- ----------------------------- ---------------
Net debt Page 51 Borrowings less cash Page 52
and cash equivalents
-------------------------------- --------- ----------------------------- ---------------
Pre-tax ROCE (controlled) Page 53 ROCE calculated using Pages 53
GAAP measures and 54
-------------------------------- --------- ----------------------------- ---------------
Post-tax ROCE (controlled Page 53 ROCE calculated using Pages 53
and associates/joint ventures) GAAP measures and 54
-------------------------------- --------- ----------------------------- ---------------
Financing and Taxation
metrics
-------------------------------- --------- ----------------------------- ---------------
Adjusted net financing Page 55 Net financing costs Page 22
costs
-------------------------------- --------- ----------------------------- ---------------
Adjusted profit before Page 55 Profit before taxation Page 55
taxation
-------------------------------- --------- ----------------------------- ---------------
Adjusted income tax expense Page 55 Income tax expense Page 55
-------------------------------- --------- ----------------------------- ---------------
Adjusted effective tax Page 55 Income tax expense Page 55
rate
-------------------------------- --------- ----------------------------- ---------------
Share of adjusted results Page 55 Share of results in Page 56
in equity accounted associates equity accounted associates
and joint ventures and joint ventures
-------------------------------- --------- ----------------------------- ---------------
Share of adjusted results Page 55 Share of results in Page 56
in equity accounted associates equity accounted associates
and joint ventures used and joint ventures
in post-tax ROCE
-------------------------------- --------- ----------------------------- ---------------
Performance metrics
Non-GAAP measure Purpose Definition
------------------ -------------------------------- ------------------------------------
Adjusted EBITDAaL Adjusted EBITDAal is used Adjusted EBITDAaL is operating
in conjunction with financial profit after depreciation on
measures such as operating lease-related right of use
profit to assess our operating assets and interest on leases
performance and profitability. but excluding depreciation,
It is a key external metric amortisation and gains/losses
used by the investor community on disposal of owned fixed
to assess performance of assets and excluding share
our operations. of results in equity accounted
It is our segment performance associates and joint ventures,
measure in accordance with impairment losses, restructuring
IFRS 8 (Operating Segments). costs arising from discrete
restructuring plans, other
income and expense and significant
items that are not considered
by management to be reflective
of the underlying performance
of the Group.
------------------ -------------------------------- ------------------------------------
Adjusted EBITDAaL margin is Adjusted EBITDAaL divided by
Revenue.
Organic growth
All amounts marked with an "*" in this document represent
organic growth which presents performance on a comparable basis,
excluding the impact of foreign exchange rates, mergers and
acquisitions and other adjustments to improve the comparability of
results between periods. When calculating organic growth, the FY21
results for Vantage Towers have been adjusted to reflect a full
year of operation on a proforma basis in order to be comparable to
FY22.
Organic growth is calculated for revenue and profitability
metrics, as follows:
- Adjusted EBITDAaL;
- Percentage point change in Adjusted EBITDAaL margin;
- Revenue
- Service revenue;
- Mobile service revenue;
- Fixed service revenue; and
- Retail service revenue.
Whilst organic growth is not intended to be a substitute for
reported growth, nor is it superior to reported growth, we believe
that the measure provides useful and necessary information to
investors and other interested parties for the following
reasons:
- It provides additional information on underlying growth of the
business without the effect of certain factors unrelated to its
operating performance;
- It is used for internal performance analysis; and
- It facilitates comparability of underlying growth with other
companies (although the term "organic" is not a defined term under
GAAP and may not, therefore, be comparable with similarly titled
measures reported by other companies).
We have not provided a comparative in respect of organic growth
rates as the current rates describe the change between the
beginning and end of the current period, with such changes being
explained by the commentary in this document. If comparatives were
provided, significant sections of the commentary for prior periods
would also need to be included, reducing the usefulness and
transparency of this document.
Six months ended 30 September
2021
Reported M&A and Foreign Organic
H1 FY22 H1 FY21 growth Other exchange growth*
EURm EURm % pps pps %
------------------------------------ ------- ------- -------- ------- --------- --------
Service revenue
Germany 5,777 5,723 0.9 0.3 - 1.2
------- ------- -------- ------- --------- --------
Mobile service revenue 2,541 2,503 1.5 - - 1.5
Fixed service revenue 3,236 3,220 0.5 0.4 - 0.9
------------------------------------ ------- ------- -------- ------- --------- --------
Italy 2,187 2,249 (2.8) 0.3 - (2.5)
------- ------- -------- ------- --------- --------
Mobile service revenue 1,589 1,638 (3.0) - - (3.0)
Fixed service revenue 598 611 (2.1) 0.8 - (1.3)
------------------------------------ ------- ------- -------- ------- --------- --------
UK 2,521 2,401 5.0 0.6 (4.4) 1.2
------- ------- -------- ------- --------- --------
Mobile service revenue 1,797 1,700 5.7 - (4.4) 1.3
Fixed service revenue 724 701 3.3 2.0 (4.4) 0.9
------------------------------------ ------- ------- -------- ------- --------- --------
Spain 1,866 1,880 (0.7) 0.1 - (0.6)
Other Europe 2,502 2,411 3.8 0.1 (0.6) 3.3
Vodacom 2,271 1,949 16.5 - (11.1) 5.4
Other Markets 1,752 1,679 4.3 - 14.8 19.1
Vantage Towers - - - - - -
Common Functions 252 219
Eliminations (118) (93)
------------------------------------- ------- ------- -------- ------- --------- --------
Total service revenue 19,010 18,418 3.2 0.2 (0.6) 2.8
Other revenue 3,479 3,009
------------------------------------- ------- ------- -------- ------- --------- --------
Revenue 22,489 21,427 5.0 0.1 (0.9) 4.2
------------------------------------- ------- ------- -------- ------- --------- --------
Other growth metrics
Vodafone Business - Service revenue 5,086 4,984 2.0 0.5 (1.3) 1.2
Germany - Retail service revenue 5,636 5,557 1.4 0.3 - 1.7
------------------------------------- ------- ------- -------- ------- --------- --------
Adjusted EBITDAaL (1,2)
Germany 2,892 2,844 1.7 6.0 - 7.7
Italy 917 800 14.6 0.1 - 14.7
UK 638 636 0.3 5.8 (4.3) 1.8
Spain 445 488 (8.8) 8.2 - (0.6)
Other Europe 836 870 (3.9) 9.2 (0.8) 4.5
Vodacom 1,062 891 19.2 - (13.6) 5.6
Other Markets 683 601 13.6 - 14.7 28.3
Vantage Towers 305 -
Common Functions(3) (213) (119)
------------------------------------- ------- ------- -------- ------- --------- --------
Group 7,565 7,011 7.9 (0.2) (1.2) 6.5
------------------------------------- ------- ------- -------- ------- --------- --------
Percentage point change in Adjusted
EBITDAaL margin (1,2)
Germany 44.9% 44.6% 0.3 2.4 - 2.7
Italy 36.6% 31.9% 4.7 (0.1) - 4.6
UK 20.2% 21.3% (1.1) 1.2 (0.1) -
Spain 21.3% 23.8% (2.5) 1.9 - (0.6)
Other Europe 29.8% 32.0% (2.2) 2.7 (0.1) 0.4
Vodacom 36.3% 36.8% (0.5) - (0.5) (1.0)
Other Markets 34.9% 31.7% 3.2 - (0.5) 2.7
Vantage Towers 49.9% -
------------------------------------- ------- ------- -------- ------- --------- --------
Group 33.6% 32.7% 0.9 (0.1) (0.1) 0.7
------------------------------------- ------- ------- -------- ------- --------- --------
Notes:
1. In the previously published results for the six months ended
30 September 2020, the Group's 55% interest in Vodafone Egypt was
held for sale. In December 2020, we announced that discussions with
the potential purchaser had been terminated. Consequently, the held
for sale classification was reversed resulting in the following
changes to the previously published results for the six months
ended 30 September 2020: Adjusted EBITDAaL for Other Markets and
therefore the Group declined by EUR12 million. As a result, the
Adjusted EBITDAaL margin for Other Markets and the Group declined
by 0.6 pps and 0.1 pps, respectively.
2. In respect of Adjusted EBITDAaL and Adjusted EBITDAaL margin
information presented in the tables above, the 'M&A and Other'
column includes adjustments for Vantage Towers to reflect a full
year of operation on a proforma basis so that organic metrics are
calculated on a comparable basis.
3. Common Functions Adjusted EBITDAaL includes a non-recurring
charge in relation to the impairment of prior year receivables.
Quarter ended 30 September 2021
Reported M&A and Foreign Organic
Q2 FY22 Q2 FY21 growth Other exchange growth*
EURm EURm % pps pps %
--------------------------------- ------- ------- -------- ------- --------- --------
Service revenue
Germany 2,905 2,883 0.8 0.2 - 1.0
------- ------- -------- ------- --------- --------
Mobile service revenue 1,287 1,277 0.8 - - 0.8
Fixed service revenue 1,618 1,606 0.7 0.5 - 1.2
--------------------------------- ------- ------- -------- ------- --------- --------
Italy 1,111 1,129 (1.6) 0.2 - (1.4)
------- ------- -------- ------- --------- --------
Mobile service revenue 807 823 (1.9) - - (1.9)
Fixed service revenue 304 306 (0.7) 0.8 - 0.1
--------------------------------- ------- ------- -------- ------- --------- --------
UK 1,265 1,208 4.7 1.6 (5.7) 0.6
------- ------- -------- ------- --------- --------
Mobile service revenue 902 854 5.6 1.0 (5.6) 1.0
Fixed service revenue 363 354 2.5 3.0 (5.8) (0.3)
--------------------------------- ------- ------- -------- ------- --------- --------
Spain 941 960 (2.0) 0.1 - (1.9)
Other Europe 1,274 1,240 2.7 0.1 (0.4) 2.4
Vodacom 1,145 999 14.6 - (11.5) 3.1
Other Markets 923 839 10.0 - 9.7 19.7
Vantage Towers - - - - --
Common Functions 127 110
Eliminations (71) (60)
---------------------------------- ------- ------- -------- ------- --------- --------
Total service revenue 9,620 9,308 3.4 0.4 (1.4) 2.4
Other revenue 1,768 1,613
---------------------------------- ------- ------- -------- ------- --------- --------
Revenue 11,388 10,921 4.3 0.1 (1.5) 2.9
---------------------------------- ------- ------- -------- ------- --------- --------
Other growth metrics
Vodafone Business - Service
revenue 2,544 2,520 1.0 1.0 (1.9) 0.1
Germany - Retail service revenue 2,836 2,802 1.2 0.3 - 1.5
---------------------------------- ------- ------- -------- ------- --------- --------
Quarter ended 30 June 2021
Reported M&A and Foreign Organic
Q1 FY22 Q1 FY21 growth Other exchange growth*
EURm EURm % pps pps%
--------------------------------- ------- ------- -------- ------- --------- -------
Service revenue
Germany 2,872 2,840 1.1 0.3 - 1.4
------- ------- -------- ------- --------- --------
Mobile service revenue 1,254 1,226 2.3 - - 2.3
Fixed service revenue 1,618 1,614 0.2 0.4 - 0.6
--------------------------------- ------- ------- -------- ------- --------- --------
Italy 1,076 1,120 (3.9) 0.3 - (3.6)
------- ------- -------- ------- --------- --------
Mobile service revenue 782 815 (4.0) - - (4.0)
Fixed service revenue 294 305 (3.6) 0.9 - (2.7)
--------------------------------- ------- ------- -------- ------- --------- --------
UK 1,256 1,193 5.3 0.2 (3.0) 2.5
------- ------- -------- ------- --------- --------
Mobile service revenue 895 846 5.8 - (3.1) 2.7
Fixed service revenue 361 347 4.0 0.9 (2.8) 2.1
--------------------------------- ------- ------- -------- ------- --------- --------
Spain 925 920 0.5 0.3 - 0.8
Other Europe 1,228 1,171 4.9 0.1 (0.8) 4.2
Vodacom 1,126 950 18.5 - (10.6) 7.9
Other Markets 829 840 (1.3) - 19.7 18.4
Vantage Towers - - - - --
Common Functions 125 109
Eliminations (47) (33)
---------------------------------- ------- ------- -------- ------- --------- --------
Total service revenue 9,390 9,110 3.1 0.2 - 3.3
Other revenue 1,711 1,396
---------------------------------- ------- ------- -------- ------- --------- --------
Revenue 11,101 10,506 5.7 0.1 (0.2) 5.6
---------------------------------- ------- ------- -------- ------- --------- --------
Other growth metrics
Vodafone Business - Service
revenue 2,542 2,464 3.2 0.3 (0.8) 2.7
Germany - Retail service revenue 2,800 2,755 1.6 0.3 - 1.9
---------------------------------- ------- ------- -------- ------- --------- --------
Other metrics
Non-GAAP measure Purpose Definition
------------------ ------------------------------ ---------------------------------------
Adjusted profit This metric is used in Adjusted profit attributable
attributable the calculation of adjusted to owners of the parent excludes
to owners of basic earnings per share. restructuring costs arising
the parent from discrete restructuring
plans, amortisation of customer
bases and brand intangible assets,
impairment losses, other income
and expense and mark-to-market
and foreign exchange movements,
together with related tax effects.
------------------ ------------------------------ ---------------------------------------
Adjusted basic This performance measure Adjusted basic earnings per
earnings per is used in discussions share is Adjusted profit attributable
share with the investor community. to owners of the parent divided
by the weighted average number
of shares outstanding. This
is the same denominator used
when calculating basic earnings
/ (loss) per share.
------------------ ------------------------------ ---------------------------------------
Adjusted profit attributable to owners of the parent
The reconciliation of adjusted profit attributable to owners of
the parent to the closest equivalent GAAP measure, profit
attributable to owners of the parent, is provided below.
H1 FY22 H1 FY21 (1)
------------------------------- -------------------------------
Reported Adjustments Adjusted Reported Adjustments Adjusted
EURm EURm EURm EURm EURm EURm
---------------------------------- -------- ----------- -------- -------- ----------- --------
Adjusted EBITDAaL 7,565 - 7,565 7,011 - 7,011
Restructuring costs (172) 172 - (86) 86 -
Interest on lease liabilities 199 - 199 189 - 189
Loss on disposal of property,
plant & equipment and intangible
assets (26) - (26) (13) - (13)
Depreciation and amortisation
on owned assets(2) (4,949) 253 (4,696) (5,062) 240 (4,822)
Share of results of equity
accounted associates and
joint ventures(3) 111 137 248 260 (5) 255
Other (expense)/income (108) 108 - 1,055 (1,055) -
---------------------------------- -------- ----------- -------- -------- ----------- --------
Operating profit 2,620 670 3,290 3,354 (734) 2,620
Investment income 129 - 129 183 - 183
Financing costs (1,473) 453 (1,020) (1,610) 599 (1,011)
---------------------------------- -------- ----------- -------- -------- ----------- --------
Profit before taxation 1,276 1,123 2,399 1,927 (135) 1,792
Income tax expense 1 (679) (678) (459) 35 (424)
---------------------------------- -------- ----------- -------- -------- ----------- --------
Profit for the financial
period 1,277 444 1,721 1,468 (100) 1,368
---------------------------------- -------- ----------- -------- -------- ----------- --------
Profit attributable to:
- Owners of the parent 996 442 1,438 1,269 (100) 1,169
- Non-controlled interests 281 2 283 199 - 199
---------------------------------- -------- ----------- -------- -------- ----------- --------
Profit for the financial
period 1,277 444 1,721 1,468 (100) 1,368
---------------------------------- -------- ----------- -------- -------- ----------- --------
Notes:
1. In the previously published results for the six months ended
30 September 2020, the Group's 55% interest in Vodafone Egypt was
held for sale. In December 2020, we announced that discussions with
the potential purchaser had been terminated. Consequently, the held
for sale classification was reversed resulting in the following
changes to the previously published results for the six months
ended 30 September 2020: Adjusted EBITDAaL has declined by EUR12
million, Operating profit has declined by EUR118 million, Profit
before tax has declined by EUR118 million and Profit for the
financial period has declined by EUR87 million.
2. Reported depreciation and amortisation excludes depreciation
on leased assets and loss on disposal of Right-of-use assets
included within Adjusted EBITDAaL. Refer to Additional Information
on page 56 for an analysis of depreciation and amortisation. The
adjustments of EUR253 million (H1 FY21: EUR240 million) relate to
amortisation of customer bases and brand intangible assets.
3. Refer to page 56 for a breakdown of the adjustments to Share
of results of equity accounted associates and joint ventures to
derive Adjusted share of results of equity accounted associates and
joint ventures.
Adjusted basic earnings per share
The reconciliation of adjusted basic earnings per share to the
closest equivalent GAAP measure, basic earnings per share, is
provided below.
H1 FY21
H1 FY22 (1)
EURm EURm
------------------------------------------------------ --------- ---------
Profit attributable to owners of the parent 996 1,269
Adjusted profit attributable to owners of the parent 1,438 1,169
Million Million
--------- ---------
Weighted average number of shares outstanding - Basic 29,331 29,535
eurocents eurocents
--------- ---------
Basic earnings per share 3.40c 4.30c
Adjusted basic earnings per share 4.90c 3.96c
------------------------------------------------------ --------- ---------
Note:
1. In the previously published results for the six months ended
30 September 2020, the Group's 55% interest in Vodafone Egypt was
held for sale. In December 2020, we announced that discussions with
the potential purchaser had been terminated. Consequently, the held
for sale classification was reversed resulting in the following
changes to the previously published results for the six months
ended 30 September 2020: Profit attributable to owners of the
parent has declined by EUR45 million, Adjusted profit attributable
to owners of the parent has declined by EUR45 million, Basic
earnings per share and Adjusted basic earnings per share have
declined by 0.15 eurocents.
Cash flow, funding and capital allocation metrics
Cash flow and funding
Non-GAAP measure Purpose Definition
----------------- --------------------------------- --------------------------------------
Free cash flow Internal performance reporting. Free cash flow is Adjusted
External metric used by EBITDAaL after cash flows in
investor community. relation to capital additions,
Assists comparability with working capital, disposal of
other companies, although property, plant and equipment,
our metric may not be directly restructuring costs arising
comparable to similarly from discrete restructuring
titled measures used by plans, integration capital
other companies. additions and working capital
related items, licences and
spectrum, interest received
and paid, taxation, dividends
received from associates and
investments, dividends paid
to non-controlling shareholders
in subsidiaries and payments
in respect of lease liabilities.
----------------- --------------------------------- --------------------------------------
Adjusted free Internal performance reporting. Adjusted free cash flow is
cash flow External metric used by Free cash flow before licences
investor community. and spectrum, restructuring
Setting director and management costs arising from discrete
remuneration restructuring plans, integration
Key external metric used capital additions and working
to evaluate liquidity and capital related items and Vantage
the cash generated by our Towers growth capital expenditure.
operations. The definition of this non-GAAP
measure has changed for the
year ending 31 March 2022.
Adjusted free cash flow now
excludes Vantage Towers growth
capital expenditure. This change
was made so the measure aligns
to the basis on which Outlook
guidance is provided and so
is a more useful metric for
the investor community.
Growth capital expenditure
is total capital expenditure
excluding maintenance-type
expenditure.
----------------- --------------------------------- --------------------------------------
Gross debt Prominent metric used by Non-current borrowings and
debt rating agencies and current borrowings, excluding
the investor community. lease liabilities, collateral
liabilities and borrowings
specifically secured against
Indian assets.
----------------- --------------------------------- --------------------------------------
Net debt Prominent metric used by Gross debt less cash and cash
debt rating agencies and equivalents, short-term investments,
the investor community. derivative financial instruments
excluding mark-to-market adjustments
and net collateral assets.
----------------- --------------------------------- --------------------------------------
Cash flow and funding (continued)
The tables below present: (i) the reconciliation between Inflow
from operating activities and Free cash flow and (ii) the
reconciliation between Borrowings, Gross debt and Net debt.
H1 FY22 H1 FY21
EURm EURm
---------------------------------------------------- -------- ----------
Inflow from operating activities 6,455 6,009
Net tax paid 577 533
---------------------------------------------------- -------- ----------
Cash generated by operations 7,032 6,542
Capital additions (3,365) (3,363)
Working capital movement in respect of capital
additions (739) (222)
Disposal of property, plant and equipment and
intangible assets 8 6
Integration capital additions (110) (88)
Working capital movement in respect of integration
capital additions (76) (28)
Licences and spectrum (482) (286)
Interest received and paid (727) (621)
Taxation (577) (533)
Dividends received from associates and joint
ventures 469 355
Dividends paid to non-controlling shareholders
in subsidiaries (399) (166)
Payments in respect of lease liabilities (2,056) (1,936)
Other 39 239
---------------------------------------------------- -------- ----------
Free cash flow (983) (101)
---------------------------------------------------- -------- ----------
Year-end
H1 FY22 FY21
EURm EURm
--------------------------------------------------- -------- --------
Borrowings (69,521) (67,760)
Adjustments:
Lease liabilities 12,428 13,032
Bank borrowings secured against Indian assets 1,337 1,247
Collateral liabilities 1,498 962
--------------------------------------------------- -------- --------
Gross debt (54,258) (52,519)
Collateral liabilities (1,498) (962)
Cash and cash equivalents 5,824 5,821
Short-term investments 4,043 4,007
Collateral assets 1,654 3,107
Derivative financial instruments 650 (859)
Less mark-to-market (gains)/losses deferred
in hedge reserves (713) 862
--------------------------------------------------- -------- --------
Net debt (44,298) (40,543)
---------------------------------------------------- -------- --------
Return on Capital Employed
Non-GAAP measure Purpose Definition
---------------------- ------------------------------ -------------------------------------------
Return on Capital ROCE is a metric used We calculate ROCE by dividing Operating
Employed ('ROCE') by the investor community profit by the average of capital
and reflects how efficiently employed as reported in the consolidated
we are generating statement of financial position.
profit with the capital Capital employed includes Borrowings,
we deploy. cash and cash equivalents, derivative
financial instruments included in
trade and other receivables/payables,
short-term investments, collateral
assets, financial liabilities under
put option arrangements and equity.
---------------------- ------------------------------ -------------------------------------------
Pre-tax ROCE As above We calculate pre-tax ROCE (controlled
(controlled) operations) by dividing Operating
profit excluding interest on lease
Post-tax ROCE liabilities, restructuring costs
(controlled arising from discrete restructuring
and associates/joint plans, impairment losses, other
ventures) income and expense and the share
of results in equity accounted associates
and joint ventures. On a post-tax
basis, the measure includes our
share of adjusted results from associates
and joint ventures and a notional
tax charge. Capital is equivalent
to net operating assets and is calculated
as the average of opening and closing
balances of: property, plant and
equipment (including Right-of-Use
assets and liabilities), intangible
assets (including goodwill), operating
working capital (including held
for sale assets and excluding derivative
balances) and provisions. Other
assets that do not directly contribute
to returns are excluded from this
measure and include other investments,
current and deferred tax balances
and post employment benefits. On
a post-tax basis, ROCE also includes
our investments in associates and
joint ventures.
---------------------- ------------------------------ -------------------------------------------
Return on Capital Employed ('ROCE') using GAAP measures
The table below presents the calculation of ROCE using GAAP
measures as reported in the consolidated income statement and
consolidated statement of financial position.
For the purpose of the half-year ROCE calculation the returns
are based on the 12 months ended 30 September 2021 and the
denominator is based on the average of the capital employed as at
30 September 2021 and 30 September 2020.
H1 FY22 FY21
EURm EURm
---------------------------------------------------- ------- -------
Operating profit (1) 4,363 5,097
Borrowings 69,521 67,760
Cash and cash equivalents (5,824) (5,821)
Derivative financial instruments included in trade
and other receivables (3,666) (3,151)
Derivative financial instruments included in trade
and other payables 3,016 4,010
Short-term investments (4,043) (4,007)
Collateral assets (1,654) (3,107)
Financial liabilities under put option arrangements 502 492
Equity 58,047 57,816
---------------------------------------------------- ------- -------
Capital employed at end of the period 115,899 113,992
Average capital employed for the period 116,450 115,090
ROCE using GAAP measures 3.7% 4.4%
---------------------------------------------------- ------- -------
Note:
1. FY21 Operating profit included a gain of EUR1.0 billion
arising on the merger of Vodafone Hutchison Australia into TPG
Telecom Limited.
Return on Capital Employed ('ROCE') : Non-GAAP basis
The table below presents the calculation of ROCE using non-GAAP
measures and reconciling to the closest equivalent GAAP
measure.
For the purpose of the half-year ROCE calculation the returns
are based on the 12 months ended 30 September 2021 and the
denominator is based on the average of the capital employed as at
30 September 2021 and 30 September 2020.
H1 FY22 FY21
EURm EURm
--------------------------------------------------- -------- --------
Operating profit 4,363 5,097
Interest on lease liabilities (384) (374)
Restructuring costs 442 356
Impairment loss - -
Other income 595 (568)
Share of results in equity accounted associates
and joint ventures (193) (342)
--------------------------------------------------- -------- --------
Adjusted operating profit for calculating pre-tax
ROCE (controlled) 4,823 4,169
Share of adjusted results in equity accounted
associates and joint ventures used in post-tax
ROCE(1) 194 203
Notional tax at adjusted effective tax rate(2) (1,463) (1,176)
--------------------------------------------------- -------- --------
Adjusted operating profit for calculating post-tax
ROCE (controlled and associates/joint ventures) 3,554 3,196
Capital employed for calculating ROCE on a GAAP
basis 115,899 113,992
Adjustments to exclude:
- Leases (12,428) (13,032)
- Deferred tax assets (21,800) (21,569)
- Deferred tax liabilities 1,985 2,095
- Taxation recoverable (515) (434)
- Taxation payable 1,079 769
- Other investments (1,609) (1,514)
- Associates and joint ventures (5,653) (5,927)
- Pension assets and liabilities 121 453
--------------------------------------------------- -------- --------
Adjusted capital employed for calculating pre-tax
ROCE (controlled) 77,079 74,833
Associates and joint ventures 5,653 5,927
--------------------------------------------------- -------- --------
Adjusted capital employed for calculating post-tax
ROCE (controlled and associates/joint ventures) 82,732 80,760
Average capital employed for calculating pre-tax
ROCE (controlled) 76,895 75,470
Average capital employed for calculating post-tax
ROCE (controlled and associates/joint ventures) 82,585 81,143
Pre-tax ROCE (controlled) 6.3% 5.5%
Post-tax ROCE (controlled and associates/joint
ventures) 4.3% 3.9%
--------------------------------------------------- -------- --------
Notes:
1. Share of Adjusted results in equity accounted associates and
joint ventures used in post-tax ROCE is a non-GAAP measure.
2. Includes tax for H1 FY22 at the Adjusted effective tax rate
of 31.5%, together with tax for H2 FY21 at the adjusted effective
tax rate of 26.4%.
Financing and Taxation metrics
Non-GAAP measure Purpose Definition
---------------------- ------------------------------ --------------------------------------------
Adjusted net This metric is used Adjusted net financing costs exclude
financing costs by both management mark-to-market and foreign exchange
and the investor community. gains/losses.
This metric is used
in the calculation
of adjusted basic
earnings per share.
---------------------- ------------------------------ --------------------------------------------
Adjusted profit This metric is used Adjusted profit before taxation
before taxation in the calculation excludes the tax effects of items
of the adjusted effective excluded from adjusted basic earnings
tax rate (see below). per share, including: impairment
losses, amortisation of customer
bases and brand intangible assets,
restructuring costs arising from
discrete restructuring plans, other
income and expense and mark-to-market
and foreign exchange movements.
---------------------- ------------------------------ --------------------------------------------
Adjusted income This metric is used Adjusted income tax expense excludes
tax expense in the calculation the tax effects of items excluded
of the adjusted effective from adjusted basic earnings per
tax rate (see below). share, including: impairment losses,
amortisation of customer bases and
brand intangible assets, restructuring
costs arising from discrete restructuring
plans, other income and expense
and mark-to-market and foreign exchange
movements. It also excludes deferred
tax movements relating to tax losses
in Luxembourg as well as other significant
one-off items.
---------------------- ------------------------------ --------------------------------------------
Adjusted effective This metric is used Adjusted income tax expense (see
tax rate by both management above) divided by Adjusted profit
and the investor community. before taxation (see above).
---------------------- ------------------------------ --------------------------------------------
Share of adjusted This metric is used Share of results in equity accounted
results in equity in the calculation associates and joint ventures excluding
accounted associates of adjusted effective restructuring costs, amortisation
and joint ventures tax rate. of acquired customer base and brand
intangible assets and other income
and expense.
---------------------- ------------------------------ --------------------------------------------
Share of adjusted This metric is used Share of results in equity accounted
results in equity in the calculation associates and joint ventures excluding
accounted associates of post-tax ROCE (controlled restructuring costs and other income
and joint ventures and associates/joint and expense.
used in post-tax ventures).
ROCE
---------------------- ------------------------------ --------------------------------------------
Adjusted tax metrics
The table below reconciles profit before taxation and income tax
expense to adjusted profit before taxation, adjusted income tax
expense and adjusted effective tax rate.
H1 FY21
H1 FY22 (1)
EURm EURm
------------------------------------------------------ ------- -------
Profit before taxation 1,276 1,927
Adjustments to derive adjusted profit before tax 1,123 (135)
------------------------------------------------------ ------- -------
Adjusted profit before taxation 2,399 1,792
Share of adjusted results in equity accounted
associates and joint ventures (248) (255)
------------------------------------------------------ ------- -------
Adjusted profit before tax for calculating adjusted
effective tax rate 2,151 1,537
------------------------------------------------------ ------- -------
Income tax credit/(expense) 1 (459)
Tax on adjustments to derive adjusted profit before
tax (62) (153)
Adjustments:
- Deferred tax on use of Luxembourg losses in
the year 155 188
- Increase in deferred tax assets in the UK as
a result of a change in the corporate tax rate (498) -
- Revaluation of assets for tax purposes in Italy (274) -
------------------------------------------------------ ------- -------
Adjusted income tax expense for calculating adjusted
tax rate (678) (424)
------------------------------------------------------ ------- -------
Adjusted effective tax rate 31.5% 27.6%
------------------------------------------------------ ------- -------
Note:
1. In the previously published results for the six months ended
30 September 2020, the Group's 55% interest in Vodafone Egypt was
held for sale. In December 2020, we announced that discussions with
the potential purchaser had been terminated. Consequently, the held
for sale classification was reversed resulting in an increase in
the Adjusted effective tax rate of 0.1 pps compared to the
previously published results.
Share of adjusted results in equity accounted associates and
joint ventures
The table below reconciles share of adjusted results in equity
accounted associates and joint ventures to the closest GAAP
equivalent, share of results in equity accounted associates and
joint ventures.
H1 FY22 H1 FY21
EURm EURm
--------------------------------------------------------- ------- -------
Share of results in equity accounted associates and
joint ventures 111 260
Amortisation of acquired customer base and brand
intangible assets 126 124
--------------------------------------------------------- ------- -------
Share of adjusted results in equity accounted associates
and joint ventures used in post-tax ROCE 237 384
Restructuring costs 11 -
Other expense/(income) - (129)
--------------------------------------------------------- ------- -------
Share of adjusted results in equity accounted associates
and joint ventures 248 255
--------------------------------------------------------- ------- -------
Additional information
Analysis of depreciation and amortisation
The table below presents an analysis of the different components
of depreciation and amortisation discussed in the document,
reconciled to the GAAP amounts in the consolidated income
statement.
H1 FY22 H1 FY21
EURm EURm
------------------------------------------------------- ------- -------
Depreciation on leased assets 2,003 1,925
Depreciation on owned assets 2,905 2,834
Amortisation of intangible assets 2,044 2,228
------------------------------------------------------- ------- -------
Depreciation and amortisation 6,952 6,987
Loss on disposal of owned assets 26 13
Loss on disposal of Right-of-Use
assets - 1
------------------------------------------------------- ------- -------
Depreciation, amortisation and loss on disposal
of assets - as recognised in the consolidated income
statement 6,978 7,001
--------------------------------------------------------- ------- -------
Analysis of tangible and intangible additions
The table below presents an analysis of the different components
of tangible and intangible additions discussed in the document.
H1 FY22 H1 FY21
EURm EURm
--------------------------------------- ------- -------
Capital additions 3,365 3,363
Integration related capital additions 110 88
Licence and spectrum additions 829 126
Additions to customer bases - 1
--------------------------------------- ------- -------
Additions 4,304 3,578
Intangible assets additions 1,878 1,104
Property, plant and equipment
owned additions 2,426 2,474
--------------------------------------- ------- -------
Total additions 4,304 3,578
--------------------------------------- ------- -------
Definitions
Key terms are defined below. See page 46 for the location of
non-GAAP measure definitions.
Term Definition
Africa Comprises the Vodacom Group and businesses in Egypt and
Ghana.
------------------------------------------------------------------
ARPU Average revenue per user, defined as customer revenue and
incoming revenue divided by average customers.
------------------------------------------------------------------
B2C Business-to-Consumer refers to the process of selling products
and services directly between a business and consumers who
are the end-users.
------------------------------------------------------------------
Capital additions Comprises the purchase of property, plant and equipment
and intangible assets, other than licence and spectrum payments
and integration capital expenditure.
------------------------------------------------------------------
Churn Total gross customer disconnections in the period divided
by the average total customers in the period.
------------------------------------------------------------------
Common Functions Comprises central teams and business functions.
------------------------------------------------------------------
Converged A customer who receives fixed and mobile services (also
customer known as unified communications) on a single bill or who
receives a discount across both bills.
------------------------------------------------------------------
Depreciation The accounting charge that allocates the cost of a tangible
and amortisation or intangible asset to the income statement over its useful
life. This measure includes the profit or loss on disposal
of property, plant and equipment and computer software.
Includes Right-of-use assets.
------------------------------------------------------------------
Direct costs Direct costs include interconnect costs and other direct
costs of providing services.
------------------------------------------------------------------
Eliminations Refers to the removal of intercompany transactions to derive
the consolidated financial statements.
------------------------------------------------------------------
Europe Comprises the Group's European businesses and the UK.
------------------------------------------------------------------
Fixed service Service revenue (see below) relating to the provision of
revenue fixed line and carrier services.
------------------------------------------------------------------
GAAP Generally Accepted Accounting Principles.
------------------------------------------------------------------
IFRS International Financial Reporting Standard.
------------------------------------------------------------------
Incoming Comprises revenue from termination rates for voice and messaging
revenue to Vodafone customers.
------------------------------------------------------------------
Integration Capital expenditure incurred in relation to significant
capital expenditure changes in the operating model, such as the integration
of recently acquired subsidiaries.
------------------------------------------------------------------
Internet The network of physical objects embedded with electronics,
of Things software, sensors, and network connectivity, including built-in
('IoT') mobile SIM cards, that enables these objects to collect
data and exchange communications with one another or a database.
------------------------------------------------------------------
Mobile customer Represents revenue from mobile customers from bundles that
revenue include a specified number of minutes, messages or megabytes
of data that can be used for no additional charge ('in-bundle')
and revenues from minutes, messages or megabytes of data
which are in excess of the amount included in customer bundles
('out-of-bundle'). Mobile in-bundle and out-of-bundle revenues
are combined to simplify presentation.
------------------------------------------------------------------
Mobile service Service revenue (see below) relating to the provision of
revenue mobile services.
------------------------------------------------------------------
MVNO Mobile Virtual Network Operator.
------------------------------------------------------------------
Next generation Fibre or cable networks typically providing high-speed broadband
networks over 30Mbps.
('NGN')
------------------------------------------------------------------
Operating Comprise primarily sales and distribution costs, network
expenses and IT related expenditure and business support costs.
------------------------------------------------------------------
Other Europe Other Europe markets include Portugal, Ireland, Greece,
Romania, Czech Republic, Hungary and Albania.
------------------------------------------------------------------
Other Markets Other Markets comprise Turkey, Egypt and Ghana.
------------------------------------------------------------------
Other revenue Other revenue includes connection fees, equipment revenue,
interest income and lease revenue.
------------------------------------------------------------------
Reported Reported growth is based on amounts reported in euros and
growth determined under IFRS.
------------------------------------------------------------------
Retail revenue Retail revenue comprises service revenue (see below) excluding
Mobile Virtual Network Operator ('MVNO') and Fixed Virtual
Network Operator ('FVNO') wholesale revenue.
------------------------------------------------------------------
Roaming and Roaming: allows customers to make calls, send and receive
Visitor texts and data on our and other operators' mobile networks,
usually while travelling abroad. Visitors: revenue received
from other operators or markets when their customers roam
on one of our markets' networks.
------------------------------------------------------------------
Service revenue Service revenue is all revenue related to the provision
of or ongoing services including but not limited to, monthly
access changes, airtime usage, roaming, incoming and outgoing
network usage by non-Vodafone customers and interconnect
charges for incoming calls.
------------------------------------------------------------------
SME Small and medium sized enterprises.
------------------------------------------------------------------
Vodafone Vodafone Business is part of the Group and partners with
Business businesses of every size to provide a range of business-related
services.
------------------------------------------------------------------
Notes
1. References to Vodafone are to Vodafone Group Plc and
references to Vodafone Group are to Vodafone Group Plc and its
subsidiaries unless otherwise stated. Vodafone, the Vodafone Speech
Mark Devices, Vodacom and Together we can are trade marks owned by
Vodafone. Vantage Towers is a trade mark owned by Vantage Towers
AG. Other product and company names mentioned herein may be the
trade marks of their respective owners.
2. All growth rates reflect a comparison to the quarter ended 30
September 2020 unless otherwise stated.
3. References to "Q1" and "Q2" are to the three months ended 30
June 2021 and 30 September 2021, respectively, unless otherwise
stated. References to the "year", "financial year" or "FY22" are to
the financial year ending 31 March 2022. References to the "last
year", "last financial year" or "FY21" are to the financial year
ended 31 March 2021 unless otherwise stated.
4. Vodacom refers to the Group's interest in Vodacom Group
Limited ('Vodacom') as well as its operations, including
subsidiaries in South Africa, DRC, Tanzania, Mozambique and
Lesotho.
5. Quarterly historical information is provided in a spreadsheet available at https://investors.vodafone.com/reports-information/results-reports-presentations
6. This trading update contains references to our and our
affiliates' websites. Information on any website is not
incorporated into this update and should not be considered part of
this update.
Forward-looking statements and other matters
This report contains "forward-looking statements" within the
meaning of the US Private Securities Litigation Reform Act of 1995
with respect to the Group's financial condition, results of
operations and businesses and certain of the Group's plans and
objectives.
In particular, such forward-looking statements include, but are
not limited to, statements with respect to: expectations regarding
the Group's financial condition or results of operations and the
guidance for Adjusted EBITDAaL and Adjusted free cash flow for the
financial year ending 31 March 2022; the Group's sustainable
business strategy and 2025 targets; expectations for the Group's
future performance generally; expectations regarding the operating
environment and market conditions and trends, including customer
usage, competitive position and macroeconomic pressures, price
trends and opportunities in specific geographic markets; intentions
and expectations regarding the development, launch and expansion of
products, services and technologies, either introduced by Vodafone
or by Vodafone in conjunction with third parties or by third
parties independently, including the launch of VodaPay;
expectations regarding the Group's environmental targets,
expectations regarding the integration or performance of current
and future investments, associates, joint ventures, non-controlled
interests and newly acquired businesses.
Forward-looking statements are sometimes, but not always,
identified by their use of a date in the future or such words as
"will", "anticipates", "could", "may", "should", "expects",
"believes", "intends", "plans" or "targets" (including in their
negative form or other variations). By their nature,
forward-looking statements are inherently predictive, speculative
and involve risk and uncertainty because they relate to events and
depend on circumstances that may or may not occur in the future.
There are a number of factors that could cause actual results and
developments to differ materially from those expressed or implied
by these forward-looking statements. These factors include, but are
not limited to, the following: external cyber-attacks, insider
threats or supplier breaches; general economic and political
conditions including as a consequence of the COVID-19 pandemic, of
the jurisdictions in which the Group operates, including as a
result of Brexit, and changes to the associated legal, regulatory
and tax environments; increased competition; increased
disintermediation; levels of investment in network capacity and the
Group's ability to deploy new technologies, products and services;
rapid changes to existing products and services and the inability
of new products and services to perform in accordance with
expectations; the ability of the Group to integrate new
technologies, products and services with existing networks,
technologies, products and services; the Group's ability to
generate and grow revenue; a lower than expected impact of new or
existing products, services or technologies on the Group's future
revenue, cost structure and capital expenditure outlays; slower
than expected customer growth, reduced customer retention,
reductions or changes in customer spending and increased pricing
pressure; the Group's ability to extend and expand its spectrum
position to support ongoing growth in customer demand for mobile
data services; the Group's ability to secure the timely delivery of
high-quality products from suppliers; loss of suppliers, disruption
of supply chains and greater than anticipated prices of new mobile
handsets; changes in the costs to the Group of, or the rates the
Group my charge for, terminations and roaming minutes; the impact
of a failure or significant interruption to the Group's
telecommunications, networks, IT systems or data protection
systems; the Group's ability to realise expected benefits from
acquisitions, partnerships, joint ventures, franchises, brand
licences, platform sharing or other arrangements with third
parties; acquisitions and divestment of Group businesses and assets
and the pursuit of new, unexpected strategic opportunities; the
Group's ability to integrate acquired business or assets; the
extent of any future write-downs or impairment charges on the
Group's assets, or restructuring charges incurred as a result of an
acquisition or disposition; a developments in the Group's financial
condition, earnings and distributable funds and other factors that
the Board takes into account in determining the level of dividends;
the Group's ability to satisfy working capital requirements;
changes in foreign exchange rates; changes in the regulatory
framework in which the Group operates; the impact of legal or other
proceedings against the Group or other companies in the
communications industry and changes in statutory tax rates and
profit mix.
Furthermore, a review of the reasons why actual results and
developments may differ materially from the expectations disclosed
or implied within forward-looking statements can be found under
"Forward-looking statements" and "Principal risk factors and
uncertainties" in the Group's annual report for the financial year
ended 31 March 2021. The annual report can be found on the Group's
website
(https://investors.vodafone.com/reports-information/latest-annual-results).
All subsequent written or oral forward-looking statements
attributable to the Company or any member of the Group or any
persons acting on their behalf are expressly qualified in their
entirety by the factors referred to above. No assurances can be
given that the forward-looking statements in this document will be
realised. Any forward-looking statements are made of the date of
this presentation. Subject to compliance with applicable law and
regulations, Vodafone does not intend to update these
forward-looking statements and does not undertake any obligation to
do so.
Copyright (c) Vodafone Group 2021
-End-
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END
IR FFFIILELELIL
(END) Dow Jones Newswires
November 16, 2021 02:00 ET (07:00 GMT)
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