TIDMVOD

RNS Number : 0432T

Vodafone Group Plc

12 November 2019

Vodafone announces results for the six months ended 30 September 2019

12 November 2019

Financial highlights

 
  --         H1 organic service revenue up 0.3%* as Q2 returned to growth 
              (Q1: -0.2%*, Q2: +0.7%*), supported by improvements in South 
              Africa, Spain and Italy, with solid retail performance in Germany 
              and strong commercial acceleration in the UK. 
  --         Organic adjusted EBITDA up 1.4%*, reflecting EUR0.2 billion 
              operating expense savings in Europe and common functions. 
  --         Reported revenue increased by 0.4% to EUR21.9 billion, benefiting 
              from the acquisition of Liberty Global's assets in Germany 
              and Central & Eastern Europe. 
  --         Loss for the financial period of EUR1.9 billion primarily reflects 
              losses in relation to Vodafone Idea post an adverse judgement 
              against the industry by the Supreme Court in India. 
  --         Interim dividend per share of 4.50 eurocents, equivalent to 
              50% of the FY19 total dividend payout. 
  --         FY20 financial guidance updated: 
          --      Adjusted EBITDA of EUR14.8-EUR15.0 billion (previously 
                   EUR13.8-14.2 billion), implying c.2-3%* organic growth. 
                   This includes a EUR0.8 billion net benefit from the Liberty 
                   Global acquisitions and the sale of New Zealand (completed 
                   on 31 July). Excluding this benefit, we are on track to 
                   achieve the upper half of our original guidance range. 
          --      Free cash flow of around EUR5.4 billion (previously 'at 
                   least EUR5.4 billion') as lower cashflows from India and 
                   the sale of New Zealand offset the initial accretion from 
                   the Liberty Global acquisitions. 
          --      Pro-forma financial leverage expected to be c.3.0x at year-end, 
                   excluding the INWIT transaction; intention to reduce leverage 
                   towards the lower end of our 2.5x-3.0x range within the 
                   next few years. 
 
 

Strategic highlights

 
 --   Deepening customer engagement: another record low for mobile 
       contract churn in Q2, 5G launched in seven markets and 1.8 
       million customers on new speed-tiered unlimited data plans, 
       supporting 1.43 million mobile contract net additions in H1. 
       Over 0.6 million NGN broadband net additions in Europe in H1. 
 --   Accelerating digital transformation: in Europe c.20% of customers 
       were acquired through digital channels in Q2, with TOBi handling 
       c.20% of customer contacts. Reiterating EUR1.2 billion net 
       operating expense reduction target by FY21. 
 --   Improving asset utilisation: industrial synergies through network 
       sharing secured in five European markets, including finalising 
       our agreement with Telecom Italia, with active discussions 
       ongoing in Germany. New long-term reciprocal wholesale partnership 
       with Virgin Media in the UK. Rapid early progress in integrating 
       the Liberty Global assets. 
 --   Tower monetisation: agreed to combine Vodafone Italy Towers 
       with INWIT, releasing potential net proceeds of over EUR2.1 
       billion. On track to operationalise our European TowerCo by 
       May 2020; intention to monetise a substantial part of our European 
       Tower infrastructure over the next 15 months, depending on 
       market conditions. 
 
 
                                               Six months ended 30 September(1) 
                                          ------------------------------------------- 
                                              2019           2018 
                                                                   Reported 
                                                    (restated)(2)    growth 
                                    Page      EURm           EURm         % 
 ---------------------------------  ----  --------  -------------  --------  -------- 
Group revenue                        24     21,939         21,848      +0.4 
Operating profit/(loss)              24        577        (2,029)       N/M 
Loss for the financial period(3)     24    (1,891)        (7,802)       N/M 
Basic loss per share(3)              24    (7.24c)       (28.89c)       N/M 
Interim dividend per share           38      4.50c          4.84c    (7.0)% 
----------------------------------  ----  --------  -------------  --------  -------- 
 
                                                                         Growth 
                                                                   ------------------ 
                                              2019           2018  Reported  Organic* 
Alternative performance 
 measures(4)                        Page      EURm           EURm         %% 
----------------------------------  ----  --------  -------------  -------- ------- 
Group service revenue                10     18,544         18,268      +1.5      +0.3 
Adjusted EBITDA                      10      7,105          6,915      +2.7      +1.4 
Adjusted EBIT                        10      2,231          2,142      +4.2- 
Adjusted earnings per share          19      0.85c          4.28c    (80.1) 
Free cash flow pre-spectrum          20        394            894    (55.9) 
Free cash flow                       20         34            566    (94.0) 
Net debt                             20   (48,107)       (32,110)     +49.8 
----------------------------------  ----  --------  -------------  --------  -------- 
 

Nick Read, Group Chief Executive, commented:

"I am pleased by the speed at which we are executing on the strategic priorities that we announced this time last year. This is reflected in our return to top-line growth in the second quarter, which we expect to build upon in the second half of the year in both Europe and Africa.

The consistency of our commercial performance has improved in both regions, and we have made a fast start on integrating the acquired Liberty Global businesses, where we see significant long-term opportunity. Our digital transformation is already creating a better experience for our customers, improving our differentiation, supporting growth and at the same time reducing our structural costs.

We have now secured network sharing agreements across most of our major European markets, and we recently announced a major long-term wholesale partnership with Virgin Media in the UK, in order to improve the utilisation of our network assets. And we expect our European TowerCo to be operational by May next year, enabling us to continue to unlock the significant value embedded in our tower infrastructure."

CHIEF EXECUTIVE'S STATEMENT

Financial review of the half year

On 31 July 2019, we announced the completion of the acquisition of Liberty Global's assets in Germany and Central and Eastern Europe ('CEE') and the disposal of Vodafone New Zealand. As a result, our H1 20 results include Vodafone New Zealand for four months, and the acquired Liberty Global assets for two months. For the purposes of comparison, all organic figures exclude Vodafone New Zealand and the acquired Liberty Global assets.

Financial results: Statutory performance measures

On 1 April 2019 a new accounting standard, IFRS 16 'Leases', was adopted for our statutory reporting, without restating prior year figures. As a result, the Group's statutory results for the six months ended 30 September 2019 are on an IFRS 16 basis, whereas the comparative period for the six months ended 30 September 2018 are on the former basis of accounting. Note 1 of the condensed consolidated financial statements explains the impact of the adoption of IFRS 16 on the consolidated financial position as at 1 April 2019.

Group revenue increased by 0.4% to EUR21.9 billion, primarily reflecting a return to growth in our underlying business and the contribution from the acquired Liberty Global assets for two months, partly offset by the disposal of Vodafone New Zealand.

The Group made a loss for the period of EUR1.9 billion, primarily reflecting a loss at Vodafone Idea following an adverse legal judgement against the industry by the Supreme Court, partially offset by a profit on the disposal of Vodafone New Zealand. Basic loss per share was (7.24) eurocents, compared to a loss per share of (28.89) eurocents in the prior year. The decrease in the loss per share is primarily due to lower impairment charges.

Financial results: Alternative performance measures

For the period ended 30 September 2019, the implementation of IFRS 16 means that a revised definition for adjusted EBITDA has been applied. This restricts the period-on-period comparability of certain of the Group's alternative performance measures. However, organic growth calculations do include a pro-forma view of H1 19 on an IFRS 16 basis.

Group organic service revenue increased 0.3%*, and returned to growth in Q2 (Q1: -0.2%*, Q2: 0.7%*). This was driven by market share gains in Europe Consumer fixed, continued growth in Vodafone Business, and strong mobile data demand and customer base growth in Emerging Consumer, partly offset by declines in Europe Consumer mobile. European service revenue declined 1.6%* year-on-year (Q1: -1.7%*, Q2: -1.4%*), including a 0.4 percentage point drag from international call rate capping and other regulation. Underlying trends improved principally driven by Italy and Spain. Rest of World service revenue growth accelerated to 7.7%* (Q1: 5.3%*, Q2: 8.9%*) driven by strong growth in Turkey and Egypt, and a reacceleration in South Africa. In Euro terms, and excluding the sale of New Zealand, Rest of World service revenues grew by 5.8%.

Group organic adjusted EBITDA grew 1.4%* and the Group organic adjusted EBITDA margin improved by 0.6* percentage points. This was supported by a further EUR0.2 billion year-on-year reduction in net operating costs in Europe and common functions, which was only partially offset by Rest of World, where costs increased albeit at a slower pace than local inflation. As a result, we remain on track to deliver a fifth consecutive year of EBITDA margin expansion. Organic adjusted EBIT was flat year-on-year, with EBITDA growth offset by higher depreciation and amortisation expenses, partly reflecting the first time amortisation of 5G spectrum licenses.

On a reported basis, Group adjusted EBITDA increased by EUR0.2 billion to EUR7.1 billion and our adjusted EBITDA margin was 32.4%. Adjusted EBIT also increased by EUR0.1 billion to EUR2.2 billion.

The Group's adjusted effective tax rate in H1 was 27.5% compared to 23.7% last year. The higher rate in the current year is primarily due to the change in the Group's mix of profits following the acquisition of the Liberty Global assets, as well as the effects of de-recognising a deferred tax asset in Spain in the prior period.

Adjusted earnings per share, which excludes impairment losses, was 0.85 eurocents compared to 4.28 eurocents in the prior year, a decrease of 80% year-on-year. This primarily reflects higher losses from associates and joint ventures, with the results of Vodafone Idea included for the whole of H1 20 compared to one month in H1 19 following the completion of the merger in August 2018. Financing costs were also higher, largely as a result of pre-funding the Liberty Global transaction. Additionally, the weighted average number of shares in H1 20 increased by 7%, driven by the issuance of EUR4 billion of mandatory convertible bonds ('MCBs') in FY19. Excluding the MCBs and shares held in Treasury, the Group's weighted average number of ordinary shares outstanding was 26,816 million for the period.

Liquidity and capital resources

Free cash flow pre-spectrum was EUR0.4 billion, compared to EUR0.9 billion in the prior year. The difference was primarily driven by working capital movements, with cash outflows EUR0.6 billion higher year-on-year as a result of timing differences on handset purchases and other items, together with the collection of a legal settlement in the prior year. Dividends received from associates were EUR0.2 billion lower, primarily as we did not receive a dividend from Indus Towers. Capital expenditure was broadly stable year-on-year at EUR3.0 billion (H1 19: EUR3.1 billion), representing 13.7% of revenues.

Free cash flow post spectrum and restructuring payments was EUR34 million, compared to EUR566 million in the prior year. This reflects lower free cash flow pre-spectrum and higher cash restructuring costs following the announced reorganisations in both Italy and Spain.

Net debt as at 30 September 2019 was EUR48.1 billion compared to EUR27.0 billion as at 31 March 2019. This increase in net debt reflects cash outflows and debt assumed of EUR18.5 billion relating to the acquisition of the Liberty Global assets in Germany and Central and Eastern Europe, spectrum accruals and cash payments of EUR1.6 billion primarily relating to 5G spectrum purchases in Germany, the FY19 final dividend payment of EUR1.1 billion, and the completion of the buyback for the mandatory convertible bonds issued in 2016 of EUR1.1 billion. This was partially offset by proceeds of EUR2.0 billion relating to the disposal of Vodafone New Zealand.

Strategic review of the half year

During H1 the Group made good progress on its key strategic priorities. We are aiming to build differentiation by investing in leading Gigabit network assets and accelerating digital transformation, supporting our efforts to deepen customer engagement. We also remain highly focused on driving better utilisation of our assets and optimising our portfolio. At the same time, we have developed a fresh approach to regulatory and political engagement, which we call a new 'social contract' for the industry. By operating responsibly and working together as an industry to enable the Digital Society, we aim to improve the industry's reputation and ensure a fair return on infrastructure investments.

Best Gigabit network: Europe's largest NGN and 5G network

We are Europe's largest owner of Gigabit-capable next generation network ('NGN') infrastructure. The closing of the Liberty Global acquisitions during H1 added 17 million cable homes in Germany and CEE to our footprint, increasing the number of homes connected by our NGN network in Europe to 54 million. In total we now reach 127 million NGN homes in Europe through a combination of owned infrastructure, strategic partnerships and wholesale. We are rapidly upgrading our cable infrastructure using DOCSIS 3.1 technology, and aim to market Gigabit broadband speeds to around 50 million households in our cable and FTTH footprint by the end of FY23, compared to 24 million today.

We have launched 5G in seven European markets, with services available in 58 cities with observed speeds of up to 1Gbps. Spain, Italy and Romania launched in June, the UK and Germany in July, Ireland in August and Hungary in October. 5G roaming is live for Vodafone 5G customers roaming on Vodafone networks in Germany, Italy, the UK and Spain. Our 5G network will be available in nine European markets by the end of the current financial year.

Digital first: a systematic transformation of our operating model

We have a clear ambition to strengthen our differentiation and to lead the industry in capturing the benefits of digital. We are systematically transforming our customer-facing operations, supported by leading automation, artificial intelligence and IT capabilities, in order to fundamentally improve the customer experience and to structurally reduce our cost base over a multi-year period. Our strategy is focused on six key pillars:

1) Acquisition and (2) Base Management: Our new digital approach to customer acquisition is already contributing to our improved commercial performance, as we deliver targeted and personalised one-to-one marketing messages using Vodafone's innovative approach to best in class digital platforms. These platforms also provide relevant and personalised offers to our existing customers in 11 markets, with 16 markets expected to be using the new platforms by FY21. We aim to generate more than 40% of our sales through digital channels by the end of FY21 compared to around 20% at present, reducing the EUR2.5 billion in commissions that we paid in FY19 to third party distributors and resellers.

3) Channels: This ambition is further supported by our new MyVodafone app, which we intend to become our customers' primary channel for sales, self-service, rewards, and help. We are developing a range of loyalty programmes in order to drive increased frequency of usage on MyVodafone. For example, our 'VeryMe' rewards programme in the UK has 2.5 million customers signed up and 12 million rewards claimed to date. We have launched the new MyVodafone app in 4 markets, with 16 markets targeted by the end of FY20.

Additionally, we are transforming our retail footprint to support our digital strategy, targeting an 11 minute transaction time for new customers. We plan to increase our footprint of Express and Flagship stores but significantly reduce Standard format stores. By FY23 we aim to transform 40% of our stores while reducing our store footprint by 15%, allowing us to reduce the EUR0.8 billion annual cost of our retail activities.

4) Customer Operations: We are also automating and digitising our customer services operations to improve the customer experience and to reduce the EUR1.2 billion annual cost of these operations. We have deployed our TOBi chatbots in 14 markets, and TOBi handled 14 million conversations across the Group in September, representing 19% of customer contacts. We aim to achieve a 40% reduction in customer contact frequency by the end of FY21.

5) Technology and (6) Automation/AI everywhere: We see multiple opportunities to leverage the Group's scale in order to generate best in class cost structures in a digital environment. We already have [23,000] employees in Vodafone Shared Service (VSS) centres in India, Egypt and Eastern Europe, where we are now deploying Robotic Process Automation (RPA) to automate manual and repetitive processes. We are expanding the scope of VSS to include network operations, IT testing and maintenance activities, unlocking further savings.

In Technology we are using advanced analytics and machine learning tools to improve network performance and prioritise capital expenditure, with the goal of saving EUR1 billion by FY21 to support reinvestment in new technologies. We are also automating network monitoring and diagnosis functions, and are well on the way to achieving our goal of moving 65% of our IT applications to the cloud by FY21.

In total, our operating expenses for technology and support operations (including Shared Services) were EUR2.9 billion in FY19, and we are reducing these costs at a high single digit rate annually.

Given the rapid implementation of our digital strategy we are making good progress in reducing our operating costs, and we continue to target a net reduction in operating expenses in Europe and Common Functions of at least EUR1.2 billion by FY21 compared to FY18 on an absolute organic basis. We delivered EUR0.2 billion of net opex reductions in H1, half of our full year target of EUR0.4 billion, supporting our goal to expand organic adjusted EBITDA margins for the fifth year in a row.

Deepening customer engagement: selling 'one more product', lowering churn

We aim to deepen engagement in all of our customer segments by selling additional products, particularly fixed and converged products in Europe and financial services in Africa, contributing to revenue growth and a reduction in churn. We are making progress, with a strong 1.6 percentage point year-on-year reduction in mobile contract churn in Europe during Q2, reaching a record low level of 14.5%. This is the fourth quarter in a row in which Europe mobile contract churn has declined year-on-year.

Europe Consumer

We continue to see a significant opportunity to increase sales of multi-product bundles, especially in fixed line where we have Europe's largest NGN footprint and relatively low customer penetration. For example, in Germany we enjoy a significant speed advantage compared to the incumbent's copper network, but only 32% of homes passed currently subscribe to our broadband products, compared to 45% at VodafoneZiggo in the Netherlands. This is a substantial opportunity for future growth, at attractive incremental margins.

Including VodafoneZiggo we had 24.4 million fixed broadband customers, 20.4 million NGN customers, 6.9 million converged customers and 21.9 million TV customers in Europe at the end of the period. Excluding VodafoneZiggo, we added 197,000 broadband customers, 608,000 NGN customers and 238,000 consumer converged customers during H1. Our customer growth accelerated in Q2, supported by a stabilisation in commercial performance in Spain.

In mobile we launched new simplified commercial propositions across multiple markets in H1, including speed-tiered unlimited mobile data plans in seven markets (Spain, UK, Italy, Portugal, Romania, Czech Republic and Malta) and new simplified mobile price plans in Germany. Our speed-differentiated unlimited data plans are primarily targeted at our existing customer base, meeting customer demand for 'worry-free' data usage and creating opportunities for ARPU growth. Customer adoption of the plans has been rapid, and we reached an unlimited customer base of over 1.8 million SIMs at the end of the period. Average data usage by unlimited customers has more than doubled, ARPU has typically increased and customer satisfaction is significantly higher. Reflecting the success of our unlimited plans, data volumes on our mobile networks continued to grow strongly in Europe in H1, rising by 45%. Average smartphone usage for our overall customer base increased to 4.2 GB/month (+1.0 GB year-on-year).

Vodafone Business

Our strategy in the Business segment is to drive growth and deepen our existing mobile customer relationships by cross-selling additional total communications products including next generation fixed, IoT and Cloud services. We aim to cross-sell services and increase revenue per account and reduce churn, while also improving productivity through our salesforce transformation initiative and the rapid digitalisation of our operations. Vodafone Business revenues grew by 0.8%* in H1 (Q1: 0.4%*, Q2: 0.9%*), as strong growth in Cloud & Hosting revenues and continued growth in fixed offset a stable mobile performance.

In particular, we see a significant window of opportunity to gain market share as the Wide Area Networking (WAN) market transitions to Software Defined Networking (SDN), which offers large enterprise customers both greater flexibility and significant cost savings compared to legacy products. We have been recognised as a leader for Network Services in Gartner's annual 'Magic Quadrant' and we have a strong pipeline of potential new contracts, supporting our ambition to grow our existing EUR0.9 billion in annual WAN revenues.

Our global IoT platform added 9 million SIMs in H1 to reach a total base of 94 million, up 22% year-on-year, with total IoT revenues reaching EUR0.8 billion on an annualised basis. We are expanding our IoT solutions for specific industry verticals from our current focus on automotive and insurance to digital buildings, healthcare, manufacturing and logistics. In October we announced a partnership with America Movil which will enable Vodafone Business customers to connect IoT devices across Latin America. This complements our existing agreements with AT&T and China Mobile and further strengthens our leading global footprint.

In the important SoHo and SME segment, which represents c.50% of Business revenues, we are focused on upselling customers to dedicated Business mobile plans with value-added service features and materially higher ARPUs. We also aim to position Vodafone as an integrator of value added digital and IoT services, offsetting the pressure on mobile prices.

Emerging Consumer

We continue to enjoy significant growth in our African and Middle Eastern markets as we benefit from rising data and smartphone penetration. Data penetration is currently still low, with only 28% of our mobile customer base using 4G services, and with smartphone penetration still well below developed market levels. As 4G smartphone costs continue to fall, driving ongoing adoption, we aim to grow ARPU. Data volume growth on our Rest of World networks remained strong at 44% in H1, reflecting both customer and usage growth, with average smartphone usage increasing to 2.9 GB/month (+0.5 GB year-on-year).

We also see significant opportunities to grow in digital and financial services, including potential partnerships with local banks. M-Pesa, Africa's largest payments platform, has moved beyond its origins as a money transfer service, and now provides enterprise payments, financial services and merchant payment services for mobile commerce. We now have 39 million M-Pesa customers, with 5.8 billion transactions processed in H1 across the seven African markets where M-Pesa services are active. M-Pesa grew revenues by 21%* to EUR0.5 billion in H1. Additionally, in South Africa we are gaining traction in financial services through products such as 'Airtime advance', which now has 9.9 million active customers. Together with the success of our insurance products, this supported 37% financial services revenue growth during H1.

Improving asset utilisation

We aim to improve the utilisation of all of the Group's assets as part of our focus on improving returns on capital.

We have made a fast start on integrating the acquired Liberty Global assets in Germany and CEE and are confident that we will deliver the EUR535 million of targeted annual cost and capex savings by the fifth full year post completion. In Germany we combined senior management one day after closing, integrated supply chain platforms on day five, and launched combined commercial offers in September, just five weeks after closing. In Germany we are ahead of our internal targets for DSL customer migrations to the cable platform and for cross-selling mobile products to Unitymedia customers.

We have now secured industrial synergies through network sharing partnerships with Telecom Italia in Italy, Orange in Spain and Romania, Telefonica in the UK, and Wind in Greece. We are in active discussions currently with potential partners in Germany and several other European markets. These network sharing agreements support improved mobile coverage and a faster rollout of 5G services, reduce environmental impact and are expected to generate significant industrial efficiencies.

In November we announced a reciprocal wholesale partnership with Virgin Media in the UK. The five year agreement provides Virgin Mobile and Virgin Media Business customers with access to Vodafone UK's mobile network until 2026. Virgin Media's current MVNO agreement will end in late 2021, at which point its mobile offerings will transition to Vodafone. Virgin Mobile 5G services are set to launch on Vodafone's network before the transition takes place. A complementary and extensive wholesale agreement has also been struck in which Virgin Media Business will provide Vodafone with mobile base station backhaul and business customer connectivity services.

Developing a new 'social contract' for the industry

In September we published a White Paper, 'Connecting Europe for a Better Future', proposing policy recommendations which we believe will ensure that Europe is positioned to be a global leader in the next phase of the digital revolution. The paper argues that the quality and availability of Gigabit networks are integral to the successful digitalisation of the European economy. However, all countries struggle with infrastructure and investment gaps, particularly in rural and remote areas, and so the industry and governments must now work together to create a fair and inclusive digital society. Vodafone aims to play a leading role in helping the industry to develop collaborative solutions which address societal needs, while allowing a fair return on infrastructure investments.

The first example of the success of this strategy is the announcement in October of a shared rural network agreement with other operators in the UK to improve mobile coverage and signal strength. The agreement will improve geographic 4G coverage in the UK from 67% now to 92% by 2026, enabling digital inclusion with reduced environmental impact. Following this agreement, Ofcom has proposed to remove coverage obligations from certain lots in the upcoming 5G spectrum auction, enabling spectrum resources to be allocated efficiently and without potential distortions.

European Towers

We remain on track to legally separate our European Tower infrastructure into a new organisation, which will be operational by May 2020. We recently appointed Vivek Badrinath as the CEO of our European TowerCo, who will be able to draw on his extensive telecoms and technology leadership experience from his role at Vodafone, where he is currently the Chief Executive of Vodafone's Rest of World operations, and from his experience at Orange as Deputy Chief Executive and, prior to that, as the leader of Orange's global networks and operations division.

We intend to monetise a substantial proportion of our European TowerCo over the next 15 months, depending on market conditions. We believe that there is significant scope to generate operational efficiencies and increase tenancy ratios across our Tower portfolio, and that it will be possible to monetise towers while preserving network differentiation and long-term strategic flexibility.

On 26 July 2019 we announced an agreement to merge our passive tower infrastructure in Italy with INWIT Spa, creating the leading tower company in Italy with 22,100 towers, and the second largest listed tower operator in Europe. As part of the combination, Vodafone will receive a cash consideration of EUR2,140 million and a 37.5% shareholding in the combined entity. The combination is subject to regulatory approval as well as the approval of INWIT's minority shareholders, and completion is expected in the first half of calendar year 2020.

Portfolio management

We continue to actively manage our portfolio in order to strengthen our market positions, simplify the Group and reduce our financial leverage.

On 8 May 2019, the Australian Competition and Consumer Commission (ACCC) opposed the proposed merger of Vodafone Hutchison Australia ("VHA") and TPG Telecom ("TPG"). We remain firmly committed to the merger and have challenged the ACCC's decision in Federal Court. The hearing commenced on 10 September 2019 and concluded on 1 October 2019. We expect a final judgement by the end of FY20.

On 28 October 2019 we announced the acquisition of AbCom, the largest cable operator in Albania. AbCom's network passes 460,000 homes and the company provides broadband and pay-TV services to more than 100,000 homes.

We have extended the long stop date on our agreement to merge Indus Towers and Bharti Infratel, which is still awaiting regulatory approval from the Department of Telecommunications, having received all other required approvals.

Notes:

 
 1.   IFRS 16 'Leases' was adopted on 1 April 2019 for our statutory 
       reporting, without restating prior period figures. As a result, 
       the Group's statutory results for the six months ended 30 September 
       2019 are on an IFRS 16 basis, whereas the comparative period 
       for the six months ended 30 September 2018 are on an IAS 17 basis. 
       Note 1 of the condensed consolidated financial statements explains 
       the impact of the adoption of IFRS 16 on the consolidated financial 
       position at 1 April 2019. 
 2.   Revenue for the comparative period has been revised for the allocation 
       of, and timing of recognition for, equipment and service revenue 
       compared to amounts previously disclosed in the condensed consolidated 
       financial statements for the six months ended 30 September 2018. 
       Group service revenue decreased by EUR172 million and other revenue 
       increased by EUR224 million, resulting in a net increase in revenue 
       of EUR52 million. The loss for the financial period decreased 
       by EUR31 million. 
 3.   The six months ended 30 September 2018 includes impairment charges 
       of EUR3.5 billion in respect of the Group's investments in Spain, 
       Vodafone Idea and Romania. 
 4.   Alternative performance measures are non-GAAP measures that are 
       presented to provide readers with additional financial information 
       that is regularly reviewed by management and should not be viewed 
       in isolation or as an alternative to the equivalent GAAP measure. 
       For the six months ended 30 September 2019, a revised definition 
       for adjusted EBITDA has been applied. This restricts the period-on-period 
       comparability of certain of the Group's alternative performance 
       measures. See "Alternative performance measures" on page 46 for 
       reconciliations to the closest respective equivalent GAAP measure 
       and "Definition of terms" on page 56 for further details. All 
       comparative period alternative performance measures have been 
       re-presented on an IFRS 15 basis. 
 

All amounts in this document marked with an "*" represent organic growth which presents performance on a comparable basis, both in terms of merger and acquisition activity (notably by excluding the disposal of Vodafone New Zealand and the acquired European Liberty Global assets), movements in foreign exchange rates and the impact from the implementation of IFRS 16 'Leases'. Organic growth is an alternative performance measure. See "Alternative performance measures" on page 46 for further details and reconciliations to the respective closest equivalent GAAP measure.

GUIDANCE

2020 financial year guidance(1)

 
                                                                  Free cash flow 
                                         Adjusted EBITDA          (pre-spectrum) 
--------------------------  ----------------------------  ---------------------- 
 
 Prior 2020 financial year     EUR13.8 - EUR14.2 billion         At least EUR5.4 
  guidance                                                               billion 
 
 Updated 2020 financial        EUR14.8 - EUR15.0 billion   Around EUR5.4 billion 
  year guidance 
 
 
 
 

We have updated our financial guidance for FY20 to reflect the acquisition of Liberty Global's assets in Germany and Central & Eastern Europe and the sale of New Zealand. As both of these transactions completed on 31 July, our new financial guidance range therefore includes the contribution from the Liberty Global assets and excludes New Zealand for the last eight months of the financial year. The net impact of these transactions on our adjusted EBITDA guidance is an increase of approximately EUR0.8 billion. The net impact of these transactions on our free cash flow guidance is an increase of approximately EUR0.1 billion.

Our commercial and financial performance during the first half of the year has been slightly ahead of our expectations, with Europe in-line with our plans and Rest of World ahead. As a result we are on track to achieve the upper half of our original adjusted EBITDA guidance range, excluding the net benefit from M&A, implying around 2-3%* organic adjusted EBITDA growth for the year.

However, in October the Supreme Court in India ruled against the industry in a dispute over the calculation of license and other regulatory fees, and Vodafone Idea is now liable for very substantial demands made by the Department of Telecommunications in relation to these fees (see notes 9 and 13 in the unaudited condensed consolidated financial statements for further information on this case). We are actively engaging with the government to seek financial relief for Vodafone Idea. Given the ruling our guidance now excludes recharges from India (a drag of c.EUR0.1 billion on our free cash flow) and Indus Towers dividends (a drag of c.EUR0.15 billion on our free cash flow).

We have also updated our guidance on capital intensity following the Liberty Global acquisitions, and now expect our capital expenditure as a percentage of our total revenues to be around 17% for the three year period ending in FY22, excluding integration costs. This is higher than our prior medium term capital intensity guidance of 'mid-teens', reflecting the fact that the Liberty Global cable assets have materially higher capital intensity than our existing business. Additionally, the adoption of IFRS 15 reporting standards has reduced our total revenues due to the netting of certain commissions in indirect channels. Excluding these effects, our underlying outlook for capital intensity is similar to the level of the past two financial years.

On a pro-forma basis, our financial leverage is expected to be around 3.0x net debt / adjusted EBITDA at the end of FY20, excluding the INWIT transaction. We intend to reduce financial leverage towards the lower end of our targeted 2.5-3.0x range within the next few years through a combination of organic growth, non-core asset sales and working capital initiatives.

Dividend policy

The Board intends to have a progressive dividend policy, and the decision on the level of dividend growth will be assessed annually at year-end. Going forwards, the interim dividend is expected to be 50% of the prior full year dividend. Consistent with this approach, the interim dividend for H1 FY20 has therefore been set at 4.50 eurocents.

Assumptions

We have based guidance for the financial year ending 31 March 2020 on our current assessment of the global macroeconomic outlook and assume foreign exchange rates of EUR1:GBP0.87, EUR1:ZAR 16.4, EUR1:TRY 6.4 and EUR1:EGP 19.7. Guidance excludes the impact of licence and spectrum payments, material one-off tax-related payments, restructuring payments, and any fundamental structural change to the Eurozone. It also assumes no material change to the current structure of the Group. Actual foreign exchange rates may vary from the foreign exchange rate assumptions used.

_______________________________

Note:

 
 1.   Adjusted EBITDA and free cash flow (pre-spectrum) are alternative 
       performance measures. Alternative performance measures are non-GAAP 
       measures that are presented to provide readers with additional 
       financial information that is regularly reviewed by management 
       and the Board and should not be viewed in isolation or as an 
       alternative to the equivalent GAAP measure. The adjusted EBITDA 
       and free cash flow (pre-spectrum) measures are forward-looking 
       alternative performance measures which at this time cannot be 
       quantitatively reconciled to comparative GAAP financial information. 
       See "Alternative performance measures" on page 46 for more information. 
 
 
 CONTENTS                                         Page 
----------------------------------------------   ----- 
 
 Financial results                                  10 
 Liquidity and capital 
  resources                                         20 
 Risk factors                                       22 
 Responsibility statement                           23 
 Unaudited condensed consolidated financial 
  statements                                        24 
 Alternative performance 
  measures                                          46 
 Additional information                             53 
 Other information (including forward-looking 
  statements)                                       56 
-----------------------------------------------  ----- 
 

FINANCIAL RESULTS

Group(1, 2)

Following the adoption of IFRS 15 "Revenue from Contracts with Customers" on 1 April 2018, revenue is presented on an IFRS 15 basis.

 
                                                 Six months ended 30 September 
                                           ------------------------------------------ 
                                                                         Growth 
                                                                   ------------------ 
                                              2019           2018  Reported  Organic* 
                                                    (restated)(3) 
                                              EURm           EURm         %         % 
-----------------------------------------  -------  -------------  --------  -------- 
Continuing operations 
Mobile customer revenue                     11,412         11,554 
Mobile incoming revenue                        875            916 
Other service revenue                          978            982 
-----------------------------------------  -------  ------------- 
Mobile service revenue                      13,265         13,452 
Fixed service revenue                        5,279          4,816 
-----------------------------------------  -------  -------------  --------  -------- 
Service revenue                             18,544         18,268       1.5       0.3 
Other revenue                                3,395          3,580 
-----------------------------------------  -------  -------------  --------  -------- 
Revenue                                     21,939         21,848       0.4     (0.7) 
Direct costs                               (5,292)        (5,230) 
Customer costs                             (3,987)        (4,274) 
Operating expenses                         (5,555)        (5,429) 
-----------------------------------------  -------  -------------  --------  -------- 
Adjusted EBITDA                              7,105          6,915       2.7       1.4 
Depreciation and amortisation: 
 Acquired intangibles                        (113)          (116) 
 Purchased licences                          (781)          (731) 
 Other                                     (3,980)        (3,926) 
 ----------------------------------------  -------  -------------  --------  -------- 
Adjusted EBIT                                2,231          2,142       4.2         - 
Share of adjusted results in associates 
 and joint ventures(4)                       (550)            (8) 
-----------------------------------------  -------  -------------  --------  -------- 
Adjusted operating profit                    1,681          2,134    (21.2)       2.8 
Impairment loss                                  -        (3,495) 
Restructuring costs                          (163)           (95) 
Amortisation of acquired customer 
 base and brand intangible assets(4)         (232)          (317) 
Adjusted other income and expense            (872)          (256) 
Interest on lease liabilities(5)               163              - 
-----------------------------------------  -------  ------------- 
Operating profit/(loss)                        577        (2,029) 
Non-operating income and expense                 -            (3) 
Net (financing costs)/investment 
 income                                    (1,088)          (815) 
Income tax expense(6)                      (1,380)        (1,420) 
-----------------------------------------  -------  ------------- 
Loss for the financial period 
 from continuing operations                (1,891)        (4,267) 
Loss for the financial period 
 from discontinued operations                    -        (3,535) 
-----------------------------------------  -------  ------------- 
Loss for the financial period              (1,891)        (7,802) 
-----------------------------------------  -------  ------------- 
Attributable to: 
 - Owners of the parent                    (2,128)        (7,934) 
 - Non-controlling interests                   237            132 
-----------------------------------------  -------  ------------- 
 

Notes:

 
 1.   Service revenue, adjusted EBITDA, adjusted EBIT and adjusted 
       operating profit are alternative performance measures which are 
       non-GAAP measures that are presented to provide readers with 
       additional financial information that is regularly reviewed by 
       management and should not be viewed in isolation or as an alternative 
       to the equivalent GAAP measure. For the six months ended 30 September 
       2019, a revised definition for adjusted EBITDA has been applied. 
       This restricts the period-on-period comparability of certain 
       of the Group's alternative performance measures. See "Alternative 
       performance measures" on page 46 for more information and reconciliations 
       to the closest respective equivalent GAAP measure and "Definition 
       of terms" on page 56 for further details. 
 2.   Current period reflects average foreign exchange rates of EUR1:GBP0.89, 
       EUR1:ZAR 16.24, EUR1:TKL 6.45, EUR1: EGP 18.74 and EUR1:INR 78.22. 
 3.   Revenue for the comparative period has been revised for the allocation 
       of, and timing of recognition for, equipment and service revenue 
       compared to amounts previously disclosed in the condensed consolidated 
       financial statements for the six months ended 30 September 2018. 
       Service revenue decreased by EUR172 million and other revenue 
       increased by EUR224 million, resulting in a net increase in revenue 
       of EUR52 million. The loss for the financial period decreased 
       by EUR31 million. 
 4.   Share of adjusted results in equity accounted associates and 
       joint ventures excludes amortisation of acquired customer bases 
       and brand intangible assets, restructuring costs and other costs 
       of EUR2.1 billion (2018: EUR0.4 billion) which are included in 
       amortisation of acquired customer base and brand intangible assets, 
       restructuring costs and adjusted other income and expense respectively. 
 5.   Reversal of interest on lease liabilities included within adjusted 
       EBITDA under the Group's definition of that metric, for re-presentation 
       in net financing costs. 
 6.   Refer to page 18 for further details. 
 

Europe(1)

 
                                                           Other                               Growth 
                                                                                         ------------------ 
                          Germany   Italy     UK   Spain  Europe  Eliminations   Europe  Reported  Organic* 
                             EURm    EURm   EURm    EURm    EURm          EURm     EURm         %         % 
------------------------  -------  ------  -----  ------  ------  ------------  -------  --------  -------- 
30 September 2019 
Mobile customer 
 revenue                    2,230   1,567  1,526   1,138   1,582             -    8,043 
Mobile incoming 
 revenue                       97     146    130      60     182           (7)      608 
Other service revenue         222     126    129      97     141          (66)      649 
------------------------  -------  ------  -----  ------  ------  ------------  ------- 
Mobile service 
 revenue                    2,549   1,839  1,785   1,295   1,905          (73)    9,300 
Fixed service revenue       2,412     585    666     671     487           (1)    4,820 
------------------------  -------  ------  -----  ------  ------  ------------  -------  --------  -------- 
Service revenue             4,961   2,424  2,451   1,966   2,392          (74)   14,120       1.7     (1.6) 
Other revenue                 629     285    700     195     298           (2)    2,105 
------------------------  -------  ------  -----  ------  ------  ------------  -------  --------  -------- 
Revenue                     5,590   2,709  3,151   2,161   2,690          (76)   16,225       0.8     (2.2) 
Direct costs              (1,005)   (612)  (809)   (664)   (721)            76  (3,735) 
Customer costs              (884)   (539)  (814)   (471)   (418)             -  (3,126) 
Operating expenses        (1,349)   (552)  (870)   (566)   (679)             -  (4,016) 
------------------------  -------  ------  -----  ------  ------  ------------  -------  --------  -------- 
Adjusted EBITDA             2,352   1,006    658     460     872             -    5,348       3.3     (0.1) 
Depreciation and 
 amortisation: 
 Acquired intangibles           -    (61)      -       -     (1)             -     (62) 
 Purchased licences         (364)    (61)  (227)    (35)    (56)             -    (743) 
 Other                    (1,224)   (501)  (593)   (586)   (512)             -  (3,416) 
 -----------------------  -------  ------  -----  ------  ------  ------------  -------  --------  -------- 
Adjusted EBIT                 764     383  (162)   (161)     303             -    1,127       4.2     (3.4) 
Share of adjusted 
 results in associates 
 and joint ventures             -       -      -       -      39             -       39 
------------------------  -------  ------  -----  ------  ------  ------------  -------  --------  -------- 
Adjusted operating 
 profit                       764     383  (162)   (161)     342             -    1,166       4.7     (2.6) 
------------------------  -------  ------  -----  ------  ------  ------------  -------  --------  -------- 
 
Adjusted EBITDA 
 margin                     42.1%   37.1%  20.9%   21.3%   32.4%                  33.0% 
------------------------  -------  ------  -----  ------  ------  ------------  ------- 
 
30 September 2018 
 (restated)(1) 
------------------------  -------  ------  -----  ------  ------  ------------  ------- 
Mobile customer 
 revenue                    2,230   1,689  1,533   1,275   1,535             -    8,262 
Mobile incoming 
 revenue                      101     170    141      63     190           (9)      656 
Other service revenue         258     117    126      90     138          (52)      677 
------------------------  -------  ------  -----  ------  ------  ------------  ------- 
Mobile service 
 revenue                    2,589   1,976  1,800   1,428   1,863          (61)    9,595 
Fixed service revenue       1,988     536    660     734     375           (1)    4,292 
------------------------  -------  ------  -----  ------  ------  ------------  ------- 
Service revenue             4,577   2,512  2,460   2,162   2,238          (62)   13,887 
Other revenue                 603     386    671     247     302           (3)    2,206 
------------------------  -------  ------  -----  ------  ------  ------------  ------- 
Revenue                     5,180   2,898  3,131   2,409   2,540          (65)   16,093 
Direct costs                (987)   (587)  (805)   (717)   (668)            65  (3,699) 
Customer costs              (849)   (666)  (739)   (569)   (409)             -  (3,232) 
Operating expenses        (1,262)   (587)  (912)   (594)   (630)             -  (3,985) 
------------------------  -------  ------  -----  ------  ------  ------------  ------- 
Adjusted EBITDA             2,082   1,058    675     529     833             -    5,177 
Depreciation and 
 amortisation: 
 Acquired intangibles           -    (61)      -       -     (2)             -     (63) 
 Purchased licences         (353)    (36)  (218)    (33)    (54)             -    (694) 
 Other                    (1,110)   (544)  (598)   (597)   (489)             -  (3,338) 
 -----------------------  -------  ------  -----  ------  ------  ------------  ------- 
Adjusted EBIT                 619     417  (141)   (101)     288             -    1,082 
Share of adjusted 
 results in associates 
 and joint ventures             -       -      -       -      32             -       32 
------------------------  -------  ------  -----  ------  ------  ------------  ------- 
Adjusted operating 
 profit                       619     417  (141)   (101)     320             -    1,114 
------------------------  -------  ------  -----  ------  ------  ------------  ------- 
 
Adjusted EBITDA 
 margin                     40.2%   36.5%  21.6%   22.0%   32.8%                  32.2% 
------------------------  -------  ------  -----  ------  ------  ------------  ------- 
 
Change at constant exchange rates (%) 
---------------------------------------------------------------- 
Mobile customer 
 revenue                        -   (7.2)      -  (10.7)     3.1 
Mobile incoming 
 revenue                    (3.8)  (14.2)  (7.1)   (4.2)   (4.8) 
Other service revenue      (14.0)     7.7    2.2     7.3     3.7 
------------------------  -------  ------  -----  ------  ------ 
Mobile service 
 revenue                    (1.5)   (6.9)  (0.4)   (9.3)     2.3 
Fixed service revenue        21.3     9.2    1.3   (8.6)    30.2 
------------------------  -------  ------  -----  ------  ------ 
Service revenue               8.4   (3.5)    0.1   (9.1)     7.0 
Other revenue                 4.2  (26.3)    4.7  (21.2)   (1.1) 
------------------------  -------  ------  -----  ------  ------ 
Revenue                       7.9   (6.5)    1.1  (10.3)     6.0 
Direct costs                  1.7     4.2    1.0   (7.6)     8.5 
Customer costs                4.1  (19.1)   10.6  (17.3)     2.5 
Operating expenses            6.9   (5.9)  (4.3)   (4.6)     7.5 
------------------------  -------  ------  -----  ------  ------ 
Adjusted EBITDA              13.0   (4.9)  (2.1)  (13.0)     4.6 
Depreciation and 
 amortisation: 
 Acquired intangibles           -       -      -       -  (44.1) 
 Purchased licences           3.0    69.0    4.7     8.9     3.1 
 Other                       10.3   (7.8)  (0.6)   (1.9)     4.7 
 -----------------------  -------  ------  -----  ------  ------ 
Adjusted EBIT                23.4   (8.3)   14.8    59.2     5.2 
Share of adjusted 
 results in associates 
 and joint ventures             -       -      -       -    21.5 
------------------------  -------  ------  -----  ------  ------ 
Adjusted operating 
 profit                      23.4   (8.1)   14.8    59.2     6.8 
------------------------  -------  ------  -----  ------  ------ 
 
Adjusted EBITDA 
 margin (pps)                 1.9     0.6  (0.6)   (0.7)   (0.4) 
------------------------  -------  ------  -----  ------  ------ 
 
 
                                             Other activity 
                                   Reported      (including   Foreign  Organic* 
                                     change            M&A)  exchange    change 
                                          %             pps       pps         % 
---------------------------------  --------  --------------  --------  -------- 
Europe revenue                          0.8           (3.1)       0.1     (2.2) 
---------------------------------  --------  --------------  --------  -------- 
 
Service revenue 
Germany                                 8.4           (8.3)         -       0.1 
Italy                                 (3.5)               -         -     (3.5) 
UK                                    (0.4)               -       0.5       0.1 
Spain                                 (9.1)             0.4         -     (8.7) 
Other Europe                            6.9           (4.3)       0.1       2.7 
Europe service revenue                  1.7           (3.4)       0.1     (1.6) 
---------------------------------  --------  --------------  --------  -------- 
 
Adjusted EBITDA 
Germany                                13.0           (9.5)         -       3.5 
Italy                                 (4.9)             1.4         -     (3.5) 
UK                                    (2.5)             1.3       0.4     (0.8) 
Spain                                (13.0)             1.7         -    (11.3) 
Other Europe                            4.7           (1.5)     (0.1)       3.1 
Europe adjusted EBITDA                  3.3           (3.5)       0.1     (0.1) 
---------------------------------  --------  --------------  --------  -------- 
 
Europe adjusted EBIT                    4.2           (7.5)     (0.1)     (3.4) 
---------------------------------  --------  --------------  --------  -------- 
 
Europe adjusted operating profit        4.7           (7.3)         -     (2.6) 
---------------------------------  --------  --------------  --------  -------- 
 

Notes:

 
 1.   The Group's results for the six months ended 30 September 2018 
       have been re-presented on an IFRS 15 basis. Service revenue, 
       adjusted EBITDA, adjusted EBIT and adjusted operating profit 
       are alternative performance measures which are non-GAAP measures 
       that are presented to provide readers with additional financial 
       information that is regularly reviewed by management and should 
       not be viewed in isolation or as an alternative to the equivalent 
       GAAP measure. For the six months ended 30 September 2019, a revised 
       definition for adjusted EBITDA has been applied. This restricts 
       the period-on-period comparability of certain of the Group's 
       alternative performance measures. See "Alternative performance 
       measures" on page 46 for more information and reconciliations 
       to the closest respective equivalent GAAP measure and "Definition 
       of terms" on page 56 for further details. 
 

Germany

Service revenue grew 0.1%* (Q1: 0.4%*, Q2: -0.2%*) as solid retail growth was offset by declining wholesale revenues. Retail revenues grew by 1.3%* (Q1: 1.8%*, Q2: 0.7%*) with continued customer growth being partially offset by the impact of international call rate regulation. Growth slowed in Q2 due to a greater impact from international calling regulation, and lower mobile visitor, roaming and reseller revenues.

Fixed service revenue increased 2.3%* (Q1: 1.5%*, Q2: 3.0%*) as good retail growth was partially offset by wholesale declines. Retail revenues grew 2.9%* (Q1: 2.4%*, Q2: 3.4%*). We maintained our good commercial momentum in cable with 110,000 net customer additions in H1, including two months of gains at Unitymedia; however our DSL performance was impacted by price increases for LLU customers and migrations to Unitymedia, leading to overall broadband customer growth of 53,000. We maintained our good momentum in convergence supported by our GigaKombi proposition, adding 160,000 Consumer converged customers in H1, which took our total Consumer converged customer base to 1.4 million. Our TV customer base declined by 111,000 (including Unitymedia) primarily reflecting the loss of lower ARPU basic TV subscribers, however we increased premium TV penetration, supporting revenues.

Mobile service revenue fell by -1.6%* (Q1: -0.5%*, Q2: -2.7%*) driven by declines in wholesale and an increasing drag from regulation. Retail revenues grew 1.0%* excluding regulatory impacts (Q1: 2.2%*, Q2: -0.1%*), with the slowdown in quarterly trends reflecting lower visitor and roaming revenue, and lower reseller activity year-on-year. In total we added 264,000 contract customers, supported in part by the success of our GigaCube proposition as well as by our continued good momentum in branded channels. Contract churn improved by 0.6 percentage points year-on-year to 12.4% in H1, driven by improvements in all customer segments.

Adjusted EBITDA grew by 3.5%* with a 1.4* percentage point organic improvement in adjusted EBITDA margin. This was driven by lower commercial costs and a 4.5%* reduction in net operating costs year-on-year. The adjusted EBITDA margin was 42.1%.

On 31 July we completed the acquisition of Liberty Global's cable asset Unitymedia, in Germany. We have made a fast start on integration, with top management reorganised on day one, and back office and supply chain integration already underway. Within five weeks we had also started cross-selling Unitymedia and Vodafone products within each other's channels, and we are actively migrating DSL customers onto our cable footprint. As a result, we have already exceeded our mobile cross-selling target for FY20. In the first two months of ownership, we added 35,000 cable customers onto the Unitymedia footprint of which 9,000 were DSL migrations.

As of 30 September, our total customer base including Unitymedia comprised of 18.4 million mobile contract customers, 10.6 million broadband customers and 13.7 million TV customers.

Italy

Service revenue declined 3.5%* (Q1: -3.8%*, Q2: -3.2%*) with trends in mobile improving and continued strong growth in fixed line.

Mobile service revenues declined 6.9%* (Q1: -7.4%*, Q2: -6.5%*) due to a lower active customer base and ARPU pressure. However, promotional activity continued to moderate, with mobile market portability ('MNP') volumes 39% lower year-on-year. Main brand pricing increased in H1 across all players, however the low-value segment of the prepaid market remained highly competitive. As a result, our active customer base continued to decline, partly mitigated by the success of our secondary brand ho., which now has 1.4 million active users. The improvement in mobile service revenue trends in Q2 mainly reflected price rises for certain customer segments.

Fixed service revenues increased 9.2%* (Q1: 9.2%*, Q2: 9.1%*) driven by continued growth in our fixed broadband customer base. We added 54,000 broadband customers in H1 as we maintained a good share of broadband market net additions despite slower market growth following price increases announced by most operators in the period. Through our owned NGN footprint and strategic partnership with Open Fiber we now cover 7.0 million households. In July, we announced an extension to our agreement with Open Fiber which will enable us to offer Gigabit services to c.19 million homes as they roll out their network. We also continued to grow our converged customer base, adding 27,000 converged customers in H1. Our total converged Consumer customer base is now 984,000 (representing 35% of our broadband base).

Adjusted EBITDA declined 3.5%* in H1 driven by the decline in mobile service revenue, however the organic adjusted EBITDA margin was 1.1* percentage points higher as net operating costs declined by 8%*. The adjusted EBITDA margin was 37.1%.

UK

Service revenue grew 0.1%* (Q1: 0.1%*, Q2: flat*), with quarterly trends continuing to improve excluding the impact of international call rate regulation, which dragged on service revenue growth by 0.4 percentage points in Q2.

Mobile service revenue declined 0.4%* (Q1: flat*, Q2: -0.7%*), however it was broadly stable excluding the impact of international call rate regulation, with a higher customer base and RPI-linked price increases being offset by lower out-of-bundle revenues as a result of spend capping, and lower wholesale revenue. In July, our 5G network went live and we launched a new range of commercial offers including speed-differentiated 'Vodafone Unlimited' mobile data plans and 'Vodafone Together' convergent offers. By the end of the period, we had 1 million customers on these plans. These new offers combined with our successful iPhone 11 launch helped to further accelerate our commercial momentum with 182,000 contract customers added in H1 (excluding Talkmobile). Contract churn of 14.3% was impacted by text-to-switch regulation. We also added 424,000 prepaid customers, supported by our digital sub-brand VOXI.

Fixed service revenue grew 1.3%* (Q1: 0.3%*, Q2: 2.2%*) supported by continued strong customer growth in Consumer broadband. In total we added 92,000 broadband customers in H1.

Adjusted EBITDA declined 0.8%* and the organic adjusted EBITDA margin was 0.4* percentage points lower. This reflects the impact of higher annual licence fees and a reallocation of costs from capex to opex following our new Cloud partnership with IBM for Vodafone Business. On a comparable basis adjusted EBITDA growth was around 5 percentage points higher, and the adjusted EBITDA margin improved by 0.6 percentage points year-on-year, supported by net operating cost savings of 5%*. The adjusted EBITDA margin was 20.9%.

Spain

Service revenues declined 8.7%* (Q1: -9.3%*, Q2: -8.0%*) reflecting the continued impact of the commercial actions we took over the past year in order to improve the competitiveness of our offers, our decision not to renew unprofitable football rights and a shift in overall market demand towards the value segment. The improvement in quarterly trends reflects the partial lapping of our commercial repositioning actions last year and a stabilising customer base.

Our commercial performance recovered in H1. We returned to positive net additions in both mobile and broadband in September and our customer base was broadly stable in Q2. This was supported in part by the good performance of our secondary brand Lowi, which is now the fastest growing brand in the value-segment. Total market portability volumes were somewhat lower year-on-year, reflecting a less intense summer promotional period than a year ago, although the overall pricing environment remained highly competitive. Despite our decision last year not to renew football content rights, football customer losses were modest in H1 and our total TV subscriber base remained stable, supported in part by our new TV and series offers.

In April, we announced a new simplified tariff structure which included speed-differentiated unlimited data bundles in both mobile-only and convergent offers for the first time in the Spanish market. We also reduced promotions as we focused on migrating our customers to the new offers at a similar or higher level of overall spending. We have seen good uptake of the new plans with 1.2 million customers at the end of H1.

Adjusted EBITDA declined by 11.3%* and the organic adjusted EBITDA margin was 0.2* percentage points lower. This was principally driven by the reduction in ARPU and a lower customer base, partially offset by lower football content costs and a 6%* net reduction in operating costs. The adjusted EBITDA margin was 21.3%.

Other Europe

Other Europe, which now represents 12.9% of Group service revenue (including the newly acquired Liberty Global assets), grew strongly at 2.7%* (Q1: 2.1%*, Q2: 3.3%*). Portugal, Greece, the Czech Republic and Hungry grew, while Ireland declined in H1, but returned to growth in Q2. Adjusted EBITDA grew 3.1%* following double digit growth in H1 19, and the organic adjusted EBITDA margin increased by 0.3* percentage points reflecting continued strong cost control and good revenue growth. The adjusted EBITDA margin was 32.4%

In Portugal, service revenue grew by 4.3%* (Q1: 3.2%*, Q2: 5.3%*), supported by strong customer base growth in both mobile and fixed line. In Ireland, service revenue declined 0.1%* (Q1: -1.1%*, Q2: 0.9%*), with the improvement in quarterly trends reflecting better fixed line growth. In Greece, service revenue increased by 4.1%* (Q1: 3.7%*, Q2: 4.4%*) supported by growth in prepaid ARPU and our fixed customer base.

VodafoneZiggo Joint Venture

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 returned to growth in Q1 and increased by 1.2% in H1 (Q1: 1.5%, Q2: 0.8%). This was driven by strong fixed line growth, partly offset by Consumer mobile. During H1 we continued to maintain our good commercial momentum adding a record 152,000 mobile postpaid customers and 25,000 broadband RGUs. This was supported by the success of our convergence strategy. In Q2 we reached the milestone of 2 million converged SIMs. 74% of all Vodafone Consumer mobile postpaid SIMs and 39% of broadband customers are now converged.

Adjusted EBITDA grew by 2.3% in H1 supported by growing revenues and a stable cost base year-on-year. We continued to make good progress on integrating the business and have now achieved over 75% of our cost and capex synergy target of EUR210 million by 2020. Given our good performance year to date, we have narrowed our calendar 2020 full year guidance to the higher end of the previous range. As a result, we now expect to grow adjusted EBITDA by 3% (previously 2-3%) and total cash returns to shareholders are expected to be around EUR600 million (previously EUR400-600 million).

During H1, Vodafone received EUR62.5 million in dividends from the joint venture, as well as EUR11 million in interest payments.

Rest of the World ('RoW')(1)

 
 
                                               Other 
                                   Vodacom   markets  Eliminations      RoW  Reported  Organic* 
                                      EURm      EURm          EURm     EURm         %         % 
---------------------------------  -------  --------  ------------  -------  --------  -------- 
30 September 2019 
Mobile customer revenue              1,880     1,476             -    3,356 
Mobile incoming revenue                 81       211             -      292 
Other service revenue                  122        79             -      201 
---------------------------------  -------  --------  ------------  ------- 
Mobile service revenue               2,083     1,766             -    3,849 
Fixed service revenue                  134       258             -      392 
---------------------------------  -------  --------  ------------  -------  --------  -------- 
Service revenue                      2,217     2,024             -    4,241       1.2       7.7 
Other revenue                          517       327             -      844 
---------------------------------  -------  --------  ------------  -------  --------  -------- 
Revenue                              2,734     2,351             -    5,085     (1.8)       4.5 
Direct costs                         (433)     (764)             -  (1,197) 
Customer costs                       (570)     (318)             -    (888) 
Operating expenses                   (712)     (514)             -  (1,226) 
---------------------------------  -------  --------  ------------  -------  --------  -------- 
Adjusted EBITDA                      1,019       755             -    1,774       1.8       7.8 
Depreciation and amortisation: 
 Acquired intangibles                 (39)      (11)             -     (50) 
 Purchased licences                    (5)      (33)             -     (38) 
 Other                               (342)     (228)             -    (570) 
 --------------------------------  -------  --------  ------------  -------  --------  -------- 
Adjusted EBIT                          633       483             -    1,116       8.8      10.0 
Share of adjusted results 
 in associates and joint 
 ventures                              123     (713)             -    (590) 
---------------------------------  -------  --------  ------------  -------  --------  -------- 
Adjusted operating profit              756     (230)             -      526    (46.7)      13.8 
---------------------------------  -------  --------  ------------  -------  --------  -------- 
 
Adjusted EBITDA margin               37.3%     32.1%                  34.9% 
---------------------------------  -------  --------  ------------  ------- 
 
30 September 2018 (restated)(1) 
---------------------------------  -------  --------  ------------  ------- 
Mobile customer revenue              1,889     1,393             -    3,282 
Mobile incoming revenue                 84       205             -      289 
Other service revenue                  103        73             -      176 
---------------------------------  -------  --------  ------------  ------- 
Mobile service revenue               2,076     1,671             -    3,747 
Fixed service revenue                  123       319             -      442 
---------------------------------  -------  --------  ------------  ------- 
Service revenue                      2,199     1,990             -    4,189 
Other revenue                          519       469             -      988 
---------------------------------  -------  --------  ------------  ------- 
Revenue                              2,718     2,459             -    5,177 
Direct costs                         (389)     (774)             -  (1,163) 
Customer costs                       (589)     (477)             -  (1,066) 
Operating expenses                   (670)     (535)             -  (1,205) 
---------------------------------  -------  --------  ------------  ------- 
Adjusted EBITDA                      1,070       673             -    1,743 
Depreciation and amortisation: 
 Acquired intangibles                 (41)      (12)             -     (53) 
 Purchased licences                    (2)      (35)             -     (37) 
 Other                               (335)     (292)             -    (627) 
 --------------------------------  -------  --------  ------------  ------- 
Adjusted EBIT                          692       334             -    1,026 
Share of adjusted results 
 in associates and joint 
 ventures                              105     (145)             -     (40) 
---------------------------------  -------  --------  ------------  ------- 
Adjusted operating profit              797       189             -      986 
---------------------------------  -------  --------  ------------  ------- 
 
Adjusted EBITDA margin               39.4%     27.4%                  33.7% 
---------------------------------  -------  --------  ------------  ------- 
 
Change at constant exchange rates (%) 
---------------------------------------------------- 
Mobile customer revenue                1.2       7.4 
Mobile incoming revenue              (2.5)       5.5 
Other service revenue                 21.3       8.6 
---------------------------------  -------  -------- 
Mobile service revenue                 2.0       7.2 
Fixed service revenue                  9.0    (18.2) 
---------------------------------  -------  -------- 
Service revenue                        2.4       3.1 
Other revenue                          2.4    (24.2) 
---------------------------------  -------  -------- 
Revenue                                2.4     (1.8) 
Direct costs                          12.3       1.2 
Customer costs                       (0.3)    (26.8) 
Operating expenses                     7.0     (2.3) 
---------------------------------  -------  -------- 
Adjusted EBITDA                      (2.7)      11.4 
Depreciation and amortisation: 
 Acquired intangibles                    -         - 
 Purchased licences                  176.5     (6.9) 
 Other                                 3.0    (20.6) 
 --------------------------------  -------  -------- 
Adjusted EBIT                        (6.2)      40.6 
Share of adjusted results 
 in associates and joint 
 ventures                             12.7     361.3 
---------------------------------  -------  -------- 
Adjusted operating profit            (3.6)   (221.3) 
---------------------------------  -------  -------- 
 
Adjusted EBITDA margin 
 (pps)                               (2.0)       3.8 
---------------------------------  -------  -------- 
 
 
 
                                          Other activity 
                                Reported      (including   Foreign  Organic* 
                                  change            M&A)  exchange    change 
                                       %             pps       pps         % 
------------------------------  --------  --------------  --------  -------- 
RoW revenue                        (1.8)             4.1       2.2       4.5 
------------------------------  --------  --------------  --------  -------- 
 
Service revenue 
Vodacom                              0.8               -       1.6       2.4 
Other markets                        1.7            12.3       1.4      15.4 
RoW service revenue                  1.2             4.9       1.6       7.7 
------------------------------  --------  --------------  --------  -------- 
 
Adjusted EBITDA 
Vodacom                            (4.8)             2.7       2.1         - 
Other markets                       12.2            11.3     (0.8)      22.7 
RoW adjusted EBITDA                  1.8             5.0       1.0       7.8 
------------------------------  --------  --------------  --------  -------- 
 
RoW adjusted EBIT                    8.8             0.4       0.8      10.0 
------------------------------  --------  --------------  --------  -------- 
 
RoW adjusted operating profit     (46.7)            59.7       0.8      13.8 
------------------------------  --------  --------------  --------  -------- 
 

Notes:

 
 1.              The Group's results for the six months ended 30 September 2018 
                  have been re-presented on an IFRS 15 basis. Service revenue, 
                  adjusted EBITDA, adjusted EBIT and adjusted operating profit 
                  are alternative performance measures which are non-GAAP measures 
                  that are presented to provide readers with additional financial 
                  information that is regularly reviewed by management and should 
                  not be viewed in isolation or as an alternative to the equivalent 
                  GAAP measure. For the six months ended 30 September 2019, a revised 
                  definition for adjusted EBITDA has been applied. This restricts 
                  the period-on-period comparability of certain of the Group's 
                  alternative performance measures. See "Alternative performance 
                  measures" on page 46 for more information and reconciliations 
                  to the closest respective equivalent GAAP measure and "Definition 
                  of terms" on page 56 for further details. 
 

Vodacom

Vodacom Group service revenue grew 2.4%* (Q1: 1.1%*, Q2: 3.6%*) with trends in South Africa accelerating in Q2 despite regulatory and macro pressures, and continued strong growth in Vodacom's International operations.

In South Africa, service revenue increased 0.3%* (Q1: -1.2%*, Q2: 1.8%*) or 1.5%* (Q1: -1.2%*, Q2: 4.2%*) excluding a one-off benefit in the prior year. This was achieved amid a weak macroeconomic environment, in which customers are optimising their spend. In March, new regulation was introduced affecting out-of-bundle charges, rollover and the transfer of data. We also commenced a pro-active data pricing transformation, which included a 50% reduction in out-of-bundle rates. All of these factors weighed on data revenue growth in H1. Despite these headwinds, trends in Q2 improved with data traffic growth accelerating to 54% year-on-year as customers benefited from improved pricing. Service revenue returned to growth in Q2, reflecting the improvement in data trends combined with the full transition of a new wholesale roaming agreement onto our network. We added 1.1 million prepaid customers and 192,000 contract customers in the period, taking our total mobile customer base to 48.0 million.

Vodacom's International operations outside of South Africa grew by 9.1%* (Q1: 8.6%*, Q2: 9.7%*). Growth was strong across all of our markets, supported by the growing demand for mobile data and M-Pesa services. In total we added 2.0 million customers in H1, up 5.4% year on year to 36.6 million, despite new customer registration requirements in Tanzania.

Vodacom's adjusted EBITDA was flat and the organic adjusted EBITDA margin declined by 0.9* percentage points reflecting cost inflation, subdued revenue growth in South Africa, and the impact of higher roaming costs. The adjusted EBITDA margin was 37.3%.

Other Markets - Turkey

Service revenues increased by 18.6%* (Q1: 17.2%*, Q2: 19.8%*) supported by strong customer contract ARPU, increased mobile data revenue, and fixed line customer base growth. Adjusted EBITDA grew 32.6%* and the organic adjusted EBITDA margin increased by 5.7* percentage points driven by strong revenue growth ahead of inflation and lower commercial costs. The adjusted EBITDA margin was 26.7%.

Other Markets - Egypt

Egypt service revenue grew 14.7%* (Q1: 13.6%*, Q2: 15.6%*), supported by strong customer base growth and increased data usage. Adjusted EBITDA grew 20.7%* and the organic adjusted EBITDA margin increased by 2.1* percentage points reflecting revenue growth ahead of inflation and good cost control. The adjusted EBITDA margin was 47.4%.

Vodafone Idea

In October 2019, the Indian Supreme Court gave its judgement in the "Union of India v Association of Unified Telecom Service Providers of India" case regarding the interpretation of adjusted gross revenue ("AGR"), a concept used in the calculation of certain regulatory fees. As the Group has no obligation to fund VIL losses, the Group has recognised its share of estimated Vodafone Idea Limited ("VIL") losses arising from both its operating activities and those in relation to the AGR judgement to an amount that is limited to the remaining carrying value of VIL, which is therefore reduced to EURnil. If the carrying value had been high enough not to have restricted the Group's share of losses, then the recognised share of losses would have been substantially higher.

See notes 9 and 13 in the unaudited condensed consolidated financial statements for further information on the carrying values of VIL and Indus and the Group's exposure to the crystallisation of certain contingent liabilities relating to Vodafone India and Idea Cellular at the time of the merger, including those relating to the AGR judgement.

Group results

Revenue

Group revenue increased by EUR0.1 billion from EUR21.8 billion to EUR21.9 billion.

Group service revenue increased by EUR0.3 billion to EUR18.5 billion, representing growth of 0.3%* on an organic basis. Growth of 7.7%* in the Rest of the World was offset by a 1.6%* decline in Europe.

Adjusted EBITDA

Group adjusted EBITDA increased by EUR0.2 billion to EUR7.1 billion, representing growth of 1.4%* on an organic basis.

Adjusted EBIT

Adjusted EBIT excludes certain income and expenses that we have identified separately to allow their effect on the results of the Group to be assessed. The items that are included in statutory operating profit but are excluded from adjusted EBIT are discussed below.

Adjusted EBIT increased by EUR0.1 billion to EUR2.2 billion, stable year-on-year on an organic basis.

Operating profit

The Group reported an operating profit of EUR0.6 billion for the six months ended 30 September 2019, compared to an operating loss of EUR2.0 billion in the six months ended 30 September 2018. The primary reasons for the EUR2.6 billion improvement are that no impairment losses have been incurred in the current year (2018: EUR3.5 billion in respect of the Group's investments in Spain, Vodafone Idea and Romania), which is partially offset by increased losses incurred in the current year by Vodafone Idea (see notes 9 and 13 in the unaudited condensed consolidated financial statements for further information).

The Group's share of adjusted results in associates and joint ventures was a loss of EUR0.6 billion (30 September 2018: EURnil).

Restructuring costs increased by EUR0.1 billion in the period and the amortisation of intangible assets in relation to customer bases and brands decreased by EUR0.1 billion.

Adjusted other income and expense was a EUR0.9 billion charge (30 September 2018: EUR0.3 billion charge), primarily due to losses incurred in Vodafone Idea Limited (see notes 9 and 13), offset by the profit recognised on the disposal of Vodafone New Zealand of EUR1.1 billion.

Net financing costs

 
                                                           Six months ended 
                                                              30 September 
                                                        ----------------------- 
                                                                 2019      2018 
                                                                 EURm      EURm 
-----------------------------------------------------   -------------  -------- 
Adjusted net financing costs                                    (799)     (415) 
Adjustments for: 
 Mark to market gains/(losses)                                     21     (185) 
 Foreign exchange losses(1)                                     (147)     (215) 
 Interest on lease liabilities                                  (163)         - 
 -----------------------------------------------------  -------------  -------- 
Net financing costs                                           (1,088)     (815) 
-----------------------------------------------------   -------------  -------- 
 
Note: 
1. Primarily comprises foreign exchange rate differences reflected 
 in the Income Statement in relation to sterling and US dollar balances. 
 

Adjusted net financing costs increased reflecting financing costs related to the Liberty Global transaction as well as adverse interest rate movements on borrowings in foreign operations. Excluding these factors and the impact of interest on lease liabilities financing costs remained stable, reflecting consistent average net debt balances and weighted average borrowing costs for both periods.

Taxation

 
                                                         Six months ended 
                                                           30 September 
                                                      ---------------------- 
                                                         2019           2018 
                                                               (restated)(1) 
                                                         EURm           EURm 
---------------------------------------------------   -------  ------------- 
Income tax expense:                                   (1,380)        (1,420) 
Tax on adjustments to derive adjusted profit 
 before tax                                              (82)           (64) 
Deferred tax following revaluation of investments 
in Luxembourg                                               -          (159) 
Reduction in deferred tax following rate change 
 in Luxembourg                                            868              - 
Deferred tax on use of Luxembourg losses in 
 the period                                               200            185 
Derecognition of a deferred tax asset in Spain              -          1,048 
---------------------------------------------------   -------  ------------- 
Adjusted income tax expense for calculating 
 adjusted tax rate                                      (394)          (410) 
---------------------------------------------------   -------  ------------- 
 
Loss before tax                                         (511)        (2,847) 
Adjustments to derive adjusted profit before 
 tax(2)                                                 1,393          4,566 
---------------------------------------------------   -------  ------------- 
Adjusted profit before tax(3)                             882          1,719 
Share of adjusted results in associates and 
 joint ventures                                           550              8 
---------------------------------------------------   -------  ------------- 
Adjusted profit before tax for calculating 
 adjusted effective tax rate                            1,432          1,727 
---------------------------------------------------   -------  ------------- 
 
Adjusted effective tax rate(3)                          27.5%          23.7% 
---------------------------------------------------   -------  ------------- 
 

Notes:

 
 1.   Revenue for the comparative period has been revised for the allocation 
       of, and timing of recognition for, equipment and service revenue 
       compared to amounts previously disclosed in the condensed consolidated 
       financial statements for the six months ended 30 September 2018. 
       As a result, total income tax expense increased by EUR11 million. 
 2.   See "Adjusted earnings per share" on page 19. 
 3.   Adjusted profit before tax and adjusted effective tax are alternative 
       performance measures. Alternative performance measures are non-GAAP 
       measures that are presented to provide readers with additional 
       financial information that is regularly reviewed by management 
       and should not be viewed in isolation or as an alternative to 
       the equivalent GAAP measure. See "Alternative performance measures" 
       on page 46 for further details. 
 

The Group's adjusted effective tax rate for its controlled businesses for the six months ended 30 September 2019 was 27.5% compared to 23.7% for the same period during the last financial year. The higher rate in the current year is primarily due to the change in the Group's mix of profits following the acquisition of Liberty Global assets as well as the effects of de-recognising our deferred tax asset in Spain in the prior period.

We expect the Group's underlying medium term adjusted effective tax rate, including for the full year, to be in the mid-20s, as a result of the completion of the acquisition of Liberty Global assets, as well as the effects of writing off our deferred tax asset in Spain in the prior period.

The Group's adjusted effective tax rate for both years does not include the following items: a reduction in our deferred tax assets in Luxembourg of EUR868 million following a reduction in the Luxembourg corporate tax rate and deferred tax on the use of Luxembourg losses of EUR200 million (2018: EUR185 million). The last item changes the total losses we have available for future use against our profits in Luxembourg and neither item affects the amount of tax we pay in other countries.

The Group's adjusted effective tax rate for the six months ended 30 September 2018 does not include the derecognition of a deferred tax asset in Spain of EUR1,048 million or an increase in the deferred tax asset of EUR159 million arising from a revaluation of investments based upon the local GAAP financial statements and tax returns.

Adjusted earnings per share

Adjusted earnings per share, which excludes impairment losses, was 0.85 eurocents compared to 4.28 eurocents for the six months ended 30 September 2018, a decrease of 80%.

Basic loss per share was 7.24 eurocents, compared to a loss per share of 28.89 eurocents for the half year ended 30 September 2018. The decrease in the loss per share is primarily due to lower impairment charges and the profit on the disposal of Vodafone New Zealand, which have been excluded from adjusted earnings per share.

 
                                                      Six months ended 
                                                        30 September 
                                                  ------------------------ 
                                                       2019           2018 
                                                             (restated)(1) 
                                                       EURm           EURm 
-----------------------------------------------   ---------  ------------- 
Adjusted operating profit                             1,681          2,134 
-----------------------------------------------   ---------  ------------- 
Adjusted net financing costs                          (799)          (415) 
Adjusted income tax expense for calculating 
 adjusted tax rate                                    (394)          (410) 
Adjusted non-controlling interests                    (238)          (133) 
-----------------------------------------------   ---------  ------------- 
Adjusted profit attributable to owners of the 
 parent                                                 250          1,176 
-----------------------------------------------   ---------  ------------- 
Adjustments: 
 Impairment loss                                          -        (3,495) 
 Amortisation of acquired customer base and 
  brand intangible assets                             (232)          (317) 
 Restructuring costs                                  (163)           (95) 
 Adjusted other income and expense                    (872)          (256) 
 Non-operating income and expense                         -            (3) 
 Mark to market gains/(losses)(2)                        21          (185) 
 Foreign exchange losses(2)                           (147)          (215) 
 -----------------------------------------------  ---------  ------------- 
                                                    (1,393)        (4,566) 
  ----------------------------------------------  ---------  ------------- 
Taxation(3)                                           (986)        (1,010) 
India(4)                                                  -        (3,535) 
Non-controlling interests                                 1              1 
-----------------------------------------------   ---------  ------------- 
Loss attributable to owners of the parent           (2,128)        (7,934) 
-----------------------------------------------   ---------  ------------- 
 
                                                    Million        Million 
 ----------------------------------------------   ---------  ------------- 
Weighted average number of shares outstanding 
 - basic(5)                                          29,410         27,462 
-----------------------------------------------   ---------  ------------- 
 
Earnings per share                                eurocents      eurocents 
-----------------------------------------------   ---------  ------------- 
Loss per share                                      (7.24c)       (28.89c) 
Adjusted earnings per share                           0.85c          4.28c 
-----------------------------------------------   ---------  ------------- 
 

Notes:

 
 1.   Revenue for the comparative period has been revised for the allocation 
       of, and timing of recognition for, equipment and service revenue 
       compared to amounts previously disclosed in the condensed consolidated 
       financial statements for the six months ended 30 September 2018. 
       The loss attributable to owners of the parent decreased by EUR31 
       million. 
 2.   The 2018 adjusted earnings per share has been aligned to the 
       2019 presentation which excludes all mark-to-market and foreign 
       exchange (gains)/losses. The net impact of this decreased the 
       adjusted loss attributable to the owners of the parent by EUR166 
       million and increased adjusted earnings per share by 0.61 eurocents. 
 3.   See Taxation on page 18. 
 4.   Primarily relates to the loss on disposal of Vodafone India and 
       also includes the operating results, financing, tax and other 
       gains and losses of Vodafone India prior to becoming a joint 
       venture in the prior year. 
 5.   Weighted average number of shares outstanding includes a weighted 
       impact of 2,594 million shares (September 2018: 765 million shares) 
       following the issue in March 2019 of GBP1.72 billion mandatory 
       convertible bonds with a 2 year maturity date in 2021 and GBP1.72 
       billion with a 3 year maturity date in 2022 (September 2018: 
       GBP1.4 billion of mandatory convertible bonds issued in February 
       2016 and maturing in February 2019). 
 

LIQUIDITY AND CAPITAL RESOURCES

Cash flows and funding

 
                                                   Six months ended 30 September 
                                                  ------------------------------- 
                                                          2019               2018 
                                                                    (restated)(1) 
                                                          EURm               EURm 
-----------------------------------------------   ------------  ----------------- 
Adjusted EBITDA                                          7,105              6,915 
Capital additions(2)                                   (3,000)            (3,067) 
Working capital                                        (2,952)            (2,362) 
Disposal of property, plant and equipment                   21                  4 
Other                                                      221                 48 
------------------------------------------------  ------------  ----------------- 
Operating free cash flow(3)                              1,395              1,538 
Taxation paid                                            (483)              (395) 
Dividends received from associates and 
 investments                                                63                305 
Dividends paid to non-controlling shareholders 
 in subsidiaries                                         (169)              (185) 
Interest received and paid                               (412)              (369) 
------------------------------------------------  ------------  ----------------- 
Free cash flow (pre-spectrum)(3)                           394                894 
Licence and spectrum payments                             (58)              (231) 
Restructuring payments                                   (302)               (97) 
------------------------------------------------  ------------  ----------------- 
Free cash flow(3)                                           34                566 
Acquisitions and disposals                            (16,715)                168 
Equity dividends paid                                  (1,092)            (2,736) 
Share buybacks(4)                                      (1,094)                  - 
Foreign exchange                                            67                296 
Other(5)                                               (2,274)              (773) 
------------------------------------------------  ------------  ----------------- 
Net debt increase                                     (21,074)            (2,479) 
Opening net debt                                      (27,033)           (29,631) 
------------------------------------------------  ------------  ----------------- 
Closing net debt                                      (48,107)           (32,110) 
------------------------------------------------  ------------  ----------------- 
 

Notes:

 
 1.   Revenue for the comparative period has been revised for the allocation 
       of, and timing of recognition for, equipment and service revenue 
       compared to amounts previously disclosed in the condensed consolidated 
       financial statements for the six months ended 30 September 2018. 
       Adjusted EBITDA increased by EUR42 million. 
 2.   Capital additions include the purchase of property, plant and 
       equipment and intangible assets, other than licence and spectrum, 
       during the period. 
 3.   Operating free cash flow, free cash flow (pre-spectrum) and free 
       cash flow are alternative performance measures which are non-GAAP 
       measures that are presented to provide readers with additional 
       financial information that is regularly reviewed by management 
       and should not be viewed in isolation or as an alternative to 
       the equivalent GAAP measure. For the six months ended 30 September 
       2019, a revised definition of adjusted EBITDA has been applied. 
       This restricts the period-on-period comparability of certain 
       of the Group's alternative performance measures. See "Alternative 
       performance measures" on page 46 for more information and reconciliations 
       to the closest respective equivalent GAAP measure and "Definition 
       of terms" on page 56 for further details. 
 4.   Share buybacks includes EUR273 million of cash outflow from the 
       option structure relating to the issue of the mandatory convertible 
       bond in February 2016. The option structure was intended to ensure 
       that the total cash outflow to execute the programme was broadly 
       equivalent to the EUR1.44 billion raised on issuing the second 
       tranche. 
 5.   "Other" for the six months ended 30 September 2019 includes EUR1,559 
       million of debt in relation to licences and spectrum in Germany. 
       "Other" for the six months ended 30 September 2018 included EUR808 
       million of debt in relation to licences and spectrum in Italy 
       and Spain and a EUR1,377 million capital injection into Vodafone 
       Idea Limited offset by EUR2,135 million received from the repayment 
       of US$2.5 billion of loan notes issued by Verizon Communications 
       Inc. 
 

Operating free cash flow decreased EUR0.1 billion, primarily due to higher working capital cash outflows.

Free cash flow (pre-spectrum) was EUR0.4 billion, a decrease of EUR0.5 billion, largely driven by the decrease in operating free cash flow, increase in taxation and lower dividends received from associates and investments.

Acquisitions and disposals include EUR2.0 billion received on completion of the sale of Vodafone New Zealand on 31 July 2019. It also includes an amount of EUR10.3 billion paid on completion of the acquisition of the Liberty Global assets on 31 July 2019 and acquired net debt of EUR8.2 billion.

Closing net debt at 30 September 2019 was EUR48.1 billion (31 March 2019: EUR27.0 billion) and excludes the GBP3.44 billion (31 March 2019: GBP3.44 billion) mandatory convertible bond issued in February 2019, which will be settled in equity shares, EUR10.5 billion (31 March 2019: EURnil) of lease liabilities recognised under IFRS 16, the EUR1.3 billion (31 March 2019: EURnil) loan specifically secured against Indian assets and EUR0.8 billion (31 March 2019: EUR0.8 billion) of shareholder loans receivable from VodafoneZiggo.

The Group's gross and net debt includes certain bonds which have been designated in hedge relationships, which are carried at EUR1.7 billion higher (31 March 2019: EUR1.6 billion 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 are not reflected in gross debt and would decrease the euro equivalent redemption value of the bonds by EUR1.6 billion (31 March 2019: EUR1.0 billion).

Analysis of net debt

 
 
                                                       30 September  31 March 
                                                               2019      2019 
                                                               EURm      EURm 
 ----------------------------------------------------  ------------  -------- 
Bonds                                                      (50,013)  (44,492) 
Commercial paper(1)                                           (708)     (873) 
Bank loans                                                  (2,990)   (3,000) 
Cash collateral liabilities                                 (2,699)   (2,011) 
Other borrowings                                            (3,841)   (2,579) 
Borrowings included in net debt                            (60,251)  (52,955) 
Cash and cash equivalents                                     5,866    13,637 
Other financial instruments: 
 Mark to market derivative financial instruments(2)           1,310     1,190 
 Short term investments(3)                                    4,968    11,095 
 ----------------------------------------------------  ------------  -------- 
Total cash and cash equivalents and other financial 
 instruments                                                 12,144    25,922 
-----------------------------------------------------  ------------  -------- 
Net debt(4)                                                (48,107)  (27,033) 
-----------------------------------------------------  ------------  -------- 
 
Lease liabilities                                          (10,493)         - 
Bank borrowings secured against Indian assets               (1,323)         - 
-----------------------------------------------------  ------------  -------- 
Borrowings excluded from net debt                          (11,816)         - 
-----------------------------------------------------  ------------  -------- 
 
 

Notes:

 
 1.   At 30 September 2019, US$498 million (31 March 2019: US$ nil) 
       was drawn under the US commercial paper programme and EUR251 
       million (31 March 2019: EUR873 million) was drawn under the euro 
       commercial paper programme. 
 2.   Comprises mark-to-market adjustments on derivative financial 
       instruments which are included as a component of trade and other 
       (payables)/receivables. 
 3.   Comprises EUR2,720 million (31 March 2019: EUR4,690 million) 
       of bonds and debt securities, including German government bonds 
       of EUR987 million (31 March 2019: EUR955 million), UK gilts and 
       Japanese government bonds of EURnil (31 March 2019: EUR2,056 
       million) and EUR1,731 million (31 March 2019: EUR1,184 million) 
       of other assets both paid as collateral in relation to derivative 
       financial instruments and EUR2,248 million (31 March 2019: EUR6,405 
       million) of managed investment funds. 
 4.   Net debt is an alternative performance measure which is a non-GAAP 
       measure that is presented to provide readers with additional 
       financial information that is regularly reviewed by management 
       and should not be viewed in isolation or as an alternative to 
       the equivalent GAAP measures. 
 

The following table sets out the Group's undrawn committed bank facilities:

 
                                                            30 September 
                                                                    2019 
                                                  Maturity          EURm 
------------------------------------------  --------------  ------------ 
US$4.2 billion committed revolving credit 
 facility(1)                                 February 2022         3,820 
EUR3.9 billion committed revolving credit 
 facility(1)                                  January 2024         3,920 
Other committed credit facilities                  Various           209 
------------------------------------------  --------------  ------------ 
Undrawn committed facilities                                       7,949 
----------------------------------------------------------  ------------ 
 

Note:

 
 1.   Both facilities support US and euro commercial paper programmes 
       of up to US$15 billion and EUR8 billion respectively. 
 2.   EUR0.1 billion/US$0.1 billion of the facilities expire one year 
       ahead of maturity. 
 

Post employment benefits

During the six months ended 30 September 2019, the net deficit arising from the Group's obligations in respect of its defined benefit schemes increased to EUR0.6 billion compared to EUR0.5 billion at 31 March 2019 primarily due to a EUR0.8 billion increase in scheme obligations during the period arising from a decrease in the discount rate in the UK and Eurozone being offset by a EUR0.7 billion actuarial gain arising from an increase in the value of plan assets.

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 exchange rate 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 (2019: 4.84 eurocents). The ex-dividend date for the interim dividend is 28 November 2019 for ordinary shareholders, the record date is 29 November 2019 and the dividend is payable on 7 February 2020. Dividend payments on ordinary shares will be paid directly into a nominated bank or building society account.

RISK FACTORS

There are a number of key factors and uncertainties that could have a significant effect on the Group's financial performance, including the following:

   1.    Cyber threat and information security 

An external cyber-attack, insider threat or supplier breach could cause service interruption or the loss of confidential data, leading to major customer, financial, reputational and regulatory impact across all the Group's markets.

   2.    Adverse political and regulatory measures 

Operating across many markets and jurisdictions means the Group deals with a variety of complex political and regulatory landscapes. In all of these environments, the Group faces changes in taxation, political or regulatory intervention and potential competitive disadvantage, including when participating in spectrum auctions.

   3.    Global economic disruption/adequate liquidity 

As a multinational business, the Group operates in many countries and currencies and could be impacted by changes to global economic conditions. Any major economic disruption could result in reduced spending power for consumers, impacting the Group's liquidity and ability to access capital markets. A relative strengthening or weakening of the major currencies in which the Group transacts could also impact its profitability.

   4.    Geo-political risk in supply chain 

The Group operates and develops a complex infrastructure across a number of markets. The network and systems are dependent on a wide range of suppliers internationally. The Group, as well as the wider industry, must be able to execute its plans, or face potential delays to crucial network improvements in addition to increased costs.

   5.    Digital transformation and simplification 

A major transformation plan is currently underway to evolve the Group into a 'Digital First' company with an aim to deliver world-class customer experience, increase speed to market and increased operational efficiencies through automation and AI. Failure to do this could lead to missed commercial opportunities, increased costs and customer experience issues.

   6.    Market disruption 

New entrants to markets, or competitors with lean models, could create pricing pressure. An increase in unlimited bundles could lead to price erosion, which might affect profitability in the short to medium term.

   7.    Technology resilience 

The loss of a technology site could result in a major impact on the Group's customers, revenues and reputation. This covers mobile and fixed sites, as well as data centres. The Group operates a resilience programme that also extends to wider service platforms, including television and payments.

   8.    Successful integration of new assets and management of joint ventures 

The Group is currently undertaking a large-scale integration of new assets across multiple markets. Failure to complete it in a timely and efficient manner would prevent the realisation of the planned benefits and synergies or result in delays bearing additional costs. A successful integration requires the timely migration of an important number of technology platforms/services before the transitional services agreements expire. The Group also has a number of joint ventures in operation and must apply the right level of oversight to ensure these operate in a cost-effective manner.

   9.    Legal compliance 

The Group must comply with a multitude of local and international laws. These include, but are not limited to, laws relating to: privacy; anti-money laundering; competition; anti-bribery; and economic sanctions. Failure to comply with these laws could lead to reputational damage, financial penalties and/or suspension of the Group's licence to operate.

   10.   Disintermediation 

The Group faces increased competition from a variety of new technology platforms, which aim to build alternative communication services or different touch points, which could potentially affect our customer relationships. It is important to be able to keep pace with these new developments and competitors in changing markets while maintaining high levels of customer engagement and an excellent customer experience.

Brexit implications

The Board continues to keep the implications of Brexit for Vodafone's operations under review.

A cross-functional Brexit steering committee continues to operate. This steering committee has identified the impact of Brexit on the Group's operations and produced a comprehensive mitigation plan. The terms of the UK's exit from the EU, and the future relationship, remain uncertain.

Due to this current uncertainty, Vodafone is prepared for a no deal scenario, as this was judged to have the most potential for disruption.

Although we are a UK headquartered company, a very large majority of our customers are in other countries, accounting for most of our revenue and cash flow. Each of our national operating companies is a stand-alone business, incorporated and licensed in the jurisdiction in which it operates, and able to adapt to a wide range of local developments. As such, our ability to provide services to our customers in the countries in which we operate, inside or outside the EU, is unlikely to be affected by Brexit. We are not a major international trading company, and do not use passporting for any of our major services or processes.

Depending on the arrangements agreed between the UK and the EU, the key issue that could directly impact our operational performance is a significant revision to macro economic performance in our major European markets, including the UK, caused by the uncertainty of the Brexit process. This would affect the economic climate in which we operate, and in turn impact the performance of the operating companies in those markets.

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 adopted by the European Union; 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/board

By Order of the Board

Rosemary Martin

Group General Counsel and Company Secretary

12 November 2019

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
Consolidated income statement 
                                                         Six months ended 30 September 
                                                        ------------------------------- 
                                                                2019               2018 
                                                                          (restated)(1) 
                                                  Note          EURm               EURm 
------------------------------------------------  ----  ------------  ----------------- 
Revenue                                              2        21,939             21,848 
Cost of sales                                               (15,010)           (15,173) 
------------------------------------------------  ----  ------------  ----------------- 
Gross profit                                                   6,929              6,675 
Selling and distribution expenses                            (1,883)            (1,907) 
Administrative expenses                                      (2,590)            (2,425) 
Net credit losses on financial assets                          (302)              (356) 
Share of results of equity accounted 
 associates and joint ventures                               (2,601)              (430) 
Impairment loss                                      3             -            (3,495) 
Other income and expense                                       1,024               (91) 
------------------------------------------------  ----  ------------  ----------------- 
Operating profit/(loss)                              2           577            (2,029) 
Non-operating income and expense                                   -                (3) 
Investment income                                                281                184 
Financing costs                                              (1,369)              (999) 
------------------------------------------------  ----  ------------  ----------------- 
Loss before taxation                                           (511)            (2,847) 
Income tax expense                                   4       (1,380)            (1,420) 
------------------------------------------------  ----  ------------  ----------------- 
Loss for the financial period from continuing 
 operations                                                  (1,891)            (4,267) 
Loss for the financial period from discontinued 
 operations                                          5             -            (3,535) 
------------------------------------------------  ----  ------------  ----------------- 
Loss for the financial period                                (1,891)            (7,802) 
------------------------------------------------  ----  ------------  ----------------- 
 
Attributable to: 
- Owners of the parent                                       (2,128)            (7,934) 
- Non-controlling interests                                      237                132 
------------------------------------------------  ----  ------------  ----------------- 
Loss for the financial period                                (1,891)            (7,802) 
------------------------------------------------  ----  ------------  ----------------- 
 
Loss per share 
From continuing operations: 
- Basic                                              6       (7.24c)           (16.02c) 
- Diluted                                            6       (7.24c)           (16.02c) 
Total Group: 
- Basic                                              6       (7.24c)           (28.89c) 
- Diluted                                            6       (7.24c)           (28.89c) 
------------------------------------------------  ----  ------------  ----------------- 
 
Consolidated statement of comprehensive 
 income 
                                                         Six months ended 30 September 
                                                        ------------------------------- 
                                                                2019               2018 
                                                                          (restated)(1) 
                                                                EURm               EURm 
------------------------------------------------  ----  ------------  ----------------- 
Loss for the financial period                                (1,891)            (7,802) 
Other comprehensive income: 
Items that may be reclassified to the 
 income statement in subsequent periods 
Foreign exchange translation differences, 
 net of tax                                                    (222)              (823) 
Foreign exchange (losses)/gains transferred 
 to the income statement                                        (59)              2,079 
Other, net of tax                                              (302)              (144) 
------------------------------------------------  ----  ------------  ----------------- 
Total items that may be reclassified 
 to the income statement in subsequent 
 periods                                                       (583)              1,112 
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                            (65)                208 
------------------------------------------------  ----  ------------  ----------------- 
Total items that will not be reclassified 
 to the income statement in subsequent 
 periods                                                        (65)                208 
Other comprehensive (expense)/income                           (648)              1,320 
------------------------------------------------  ----  ------------  ----------------- 
Total comprehensive expense for the 
 financial period                                            (2,539)            (6,482) 
------------------------------------------------  ----  ------------  ----------------- 
 
Attributable to: 
- Owners of the parent                                       (2,809)            (6,613) 
- Non-controlling interests                                      270                131 
------------------------------------------------  ----  ------------  ----------------- 
                                                             (2,539)            (6,482) 
------------------------------------------------  ----  ------------  ----------------- 
 

Note:

 
 1.   Revenue for the comparative period has been revised for the allocation 
       of, and timing of recognition for, equipment and service revenue 
       compared to amounts previously disclosed in the condensed consolidated 
       financial statements for the six months ended 30 September 2018. 
       Revenue increased by EUR52 million and the loss for the financial 
       period decreased by EUR31 million and the total comprehensive 
       expense for the financial period reduced by EUR24 million. The 
       comparative period results have not been restated for IFRS 16, 
       Leases (see note 1). 
 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 
Consolidated statement of financial 
 position 
 
                                               30 September   31 March 
                                                       2019    2019(1) 
                                         Note          EURm       EURm 
---------------------------------------  ----  ------------  --------- 
Non-current assets 
Goodwill                                             34,365     23,353 
Other intangible assets                              23,628     17,652 
Property, plant and equipment                        39,701     27,432 
Investments in associates and joint 
 ventures                                   9         2,237      3,952 
Other investments                                       872        870 
Deferred tax assets                                  23,938     24,753 
Post-employment benefits                                134         94 
Trade and other receivables                           7,426      5,170 
---------------------------------------  ----  ------------  --------- 
                                                    132,301    103,276 
---------------------------------------  ----  ------------  --------- 
Current assets 
Inventory                                               698        714 
Taxation recoverable                                    182        264 
Trade and other receivables                          12,959     12,190 
Other investments                                     7,113     13,012 
Cash and cash equivalents                             5,866     13,637 
---------------------------------------  ----  ------------  --------- 
                                                     26,818     39,817 
---------------------------------------  ----  ------------  --------- 
Assets held for sale                        5           849      (231) 
---------------------------------------  ----  ------------  --------- 
Total assets                                        159,968    142,862 
---------------------------------------  ----  ------------  --------- 
 
Equity 
Called up share capital                               4,797      4,796 
Additional paid-in capital                          152,576    152,503 
Treasury shares                                     (7,809)    (7,875) 
Accumulated losses                                (120,337)  (116,725) 
Accumulated other comprehensive income               28,838     29,519 
---------------------------------------  ----  ------------  --------- 
Total attributable to owners of the 
 parent                                              58,065     62,218 
---------------------------------------  ----  ------------  --------- 
Non-controlling interests                             1,220      1,227 
---------------------------------------  ----  ------------  --------- 
Total non-controlling interests                       1,220      1,227 
---------------------------------------  ----  ------------  --------- 
 
Total equity                                         59,285     63,445 
---------------------------------------  ----  ------------  --------- 
 
Non-current liabilities 
Long-term borrowings                                 63,319     48,685 
Deferred tax liabilities                              2,289        478 
Post-employment benefits                                687        551 
Provisions                                            1,259      1,242 
Trade and other payables                              5,158      2,938 
---------------------------------------  ----  ------------  --------- 
                                                     72,712     53,894 
---------------------------------------  ----  ------------  --------- 
Current liabilities 
Short-term borrowings                                 8,748      4,270 
Financial liabilities under put option 
 arrangements                                         1,880      1,844 
Taxation liabilities                                    651        596 
Provisions                                              938      1,160 
Trade and other payables                             15,422     17,653 
---------------------------------------  ----  ------------  --------- 
                                                     27,639     25,523 
---------------------------------------  ----  ------------  --------- 
Liabilities held for sale                   5           332          - 
---------------------------------------  ----  ------------  --------- 
Total equity and liabilities                        159,968    142,862 
---------------------------------------  ----  ------------  --------- 
 
 

Note:

 
 1.   The comparative period results have not been restated for IFRS 
       16, Leases (see note 1). 
 

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 2018                        4,796      150,197   (8,463)        (76,630)         69,900         1,043   70,943 
Issue or reissue 
 of shares                              -            1        83            (84)              -             -        - 
Share-based payments                    -          109         -               -            109            23      132 
Transactions with 
 non-controlling 
 interests in subsidiaries              -            -         -           (120)          (120)          (72)    (192) 
Comprehensive (expense)/income          -            -         -         (6,613)        (6,613)           131  (6,482) 
Dividends                               -            -         -         (2,729)        (2,729)         (198)  (2,927) 
-------------------------------  --------  -----------  --------  --------------  -------------  ------------  ------- 
30 September 2018 
 (restated)(3)                      4,796      150,307   (8,380)        (86,176)         60,547           927   61,474 
-------------------------------  --------  -----------  --------  --------------  -------------  ------------  ------- 
 
31 March 2019 as 
 reported                           4,796      152,503   (7,875)        (87,206)         62,218         1,227   63,445 
Adoption of IFRS 
 16(4)                                  -            -         -           (261)          (261)             4    (257) 
-------------------------------  --------  -----------  --------  --------------  -------------  ------------  ------- 
1 April 2019 brought 
 forward                            4,796      152,503   (7,875)        (87,467)         61,957         1,231   63,188 
Issue or reissue 
 of shares                              1            1        66            (63)              5             -        5 
Share-based payments                    -           72         -               -             72             -       72 
Transactions with 
 non-controlling 
 interests in subsidiaries              -            -         -            (48)           (48)          (94)    (142) 
Comprehensive (expense)/income          -            -         -         (2,809)        (2,809)           270  (2,539) 
Dividends                               -            -         -         (1,112)        (1,112)         (187)  (1,299) 
-------------------------------  --------  -----------  --------  --------------  -------------  ------------  ------- 
30 September 2019                   4,797      152,576   (7,809)        (91,499)         58,065         1,220   59,285 
-------------------------------  --------  -----------  --------  --------------  -------------  ------------  ------- 
 

Notes:

 
 1.   Includes share premium, 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.   Revenue for the comparative period has been revised for the allocation 
       of, and timing of recognition for, equipment and service revenue 
       compared to amounts previously disclosed in the condensed consolidated 
       financial statements for the six months ended 30 September 2018. 
       As a result, accumulated comprehensive losses at 30 September 
       2018 decreased by EUR98 million and total equity increased by 
       EUR98 million. 
 4.   See note 1. 
 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 
Consolidated statement of cash flows 
 
                                                        Six months ended 30 
                                                             September 
                                                       --------------------- 
                                                              2019      2018 
                                                 Note         EURm      EURm 
-----------------------------------------------  ----  -----------  -------- 
Inflow from operating activities                   10        6,139     4,826 
-----------------------------------------------  ----  -----------  -------- 
Cash flow from investing activities 
Purchase of interests in subsidiaries, 
 net of cash acquired                               8     (10,202)      (62) 
Purchase of interests in associates and 
 joint ventures                                            (1,413)         - 
Purchase of intangible assets                              (1,002)   (1,220) 
Purchase of property, plant and equipment                  (2,769)   (2,897) 
Purchase of investments                                      (239)   (2,287) 
Disposal of interests in subsidiaries, 
 net of cash disposed                               8        2,049     (395) 
Disposal of property, plant and equipment                       21         4 
Disposal of investments                                      6,043     2,156 
Dividends received from associates and 
 joint ventures                                                 63       305 
Interest received                                              183       236 
Cash flows from discontinued operations                          -     (372) 
-----------------------------------------------  ----  -----------  -------- 
Outflow from investing activities                          (7,266)   (4,532) 
-----------------------------------------------  ----  -----------  -------- 
Cash flows from financing activities 
Issue of ordinary share capital and reissue 
 of treasury shares                                              -         4 
Net movement in short-term borrowings                          815       318 
Proceeds from issue of long term borrowings                  9,107    10,118 
Repayment of borrowings                                   (13,277)   (4,557) 
Purchase of treasury shares                                  (821)         - 
Equity dividends paid                                      (1,092)   (2,736) 
Dividends paid to non-controlling shareholders 
 in subsidiaries                                             (169)     (185) 
Other transactions with non-controlling 
 shareholders in subsidiaries                                (233)     (209) 
Other movements in loans with associates 
 and joint ventures                                              -       (9) 
Interest paid(1)                                           (1,130)     (605) 
Cash flows from discontinued operations                          -     (779) 
-----------------------------------------------  ----  -----------  -------- 
(Outflow)/Inflow from financing activities                 (6,800)     1,360 
-----------------------------------------------  ----  -----------  -------- 
Net cash (outflow)/inflow                                  (7,927)     1,654 
Cash and cash equivalents at beginning 
 of the financial period(2)                                 13,605     5,394 
Exchange gain/(loss) on cash and cash 
 equivalents                                                    49     (104) 
-----------------------------------------------  ----  -----------  -------- 
Cash and cash equivalents at end of the 
 financial period(2)                                         5,727     6,944 
-----------------------------------------------  ----  -----------  -------- 
 

Note:

 
 1.   Interest paid includes EUR273 million (30 September 2018: EURnil) 
       of cash outflow on derivative financial instruments for the share 
       buyback relating to the second tranche of the mandatory convertible 
       bond issued in February 2016. 
 2.   Includes cash and cash equivalents as presented in the statement 
       of financial position of EUR5,866 million (31 March 2019: EUR13,637 
       million), together with overdrafts of EUR139 million (31 March 
       2019: EUR32 million). 
 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

Notes to the unaudited condensed consolidated financial statements

For the six months ended 30 September 2019

   1    Basis of preparation 

The unaudited condensed consolidated financial statements for the six months ended 30 September 2019:

 
 --   were prepared in accordance with International Accounting Standard 
       34 "Interim Financial Reporting" ('IAS 34') as issued by the 
       International Accounting Standards Board and as adopted by the 
       European Union; 
 --   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 2019; 
 --   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 
       2019, which were prepared in accordance with International Financial 
       Reporting Standards ('IFRS') as issued by the International 
       Accounting Standards Board and were also prepared in accordance 
       with IFRS adopted by the European Union ('EU'), the Companies 
       Act 2006 and Article 4 of the EU IAS Regulations, with the exception 
       of the adoption of IFRS 16 "Leases" as set out below and revisions 
       to the calculation of amortisation of acquired customer base 
       intangible assets. From 1 April 2019, the Group has revised 
       the method of allocating the amortisation of acquired customer 
       base intangibles over their useful economic lives from a sum 
       of digits calculation to a straight-line basis. Customer base 
       assets at 1 April 2019 related to acquired joint ventures; the 
       revision to the allocation methodology results in a EUR82 million 
       reduction in losses recorded in the Group's share of results 
       of equity accounted associates and joint ventures for the six 
       months to 30 September 2019. 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. See note 8 
       for acquired intangible customer bases in the period; 
 --   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 12 November 2019. 
 

The information relating to the year ended 31 March 2019 is an extract 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.

After reviewing the Group's budget for the remainder of the financial year, and longer term plans, the directors are satisfied that, at the time of approving the unaudited condensed consolidated financial statements, it is appropriate to continue to adopt a going concern basis of accounting.

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 reporting period. Actual results could vary from these estimates. The 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.

New accounting pronouncements adopted

On 1 April 2019 the Group adopted new accounting policies to comply with amendments to International Financial Reporting Standards; the accounting pronouncement considered by the Group as significant on adoption was IFRS 16 "Leases" as set out below.

Other IFRS changes adopted on 1 April 2019, which had also been issued by the IASB and endorsed by the EU, have no material impact on the consolidated results, financial position or cash flows of the Group. Further details are provided on all changes to IFRS impacting the Group in the Group's annual report for the year ended 31 March 2019.

IFRS 16 "Leases"

IFRS 16 "Leases" was adopted by the Group on 1 April 2019 with the cumulative retrospective impact reflected as an adjustment to equity on the date of adoption and therefore the comparative information has not been restated and continues to be reported under IAS 17 and IFRIC 4. The Group has applied the following expedients in relation to the adoption of IFRS 16:

 
 --   The right-of-use assets were measured at an amount based on 
       the lease liability at adoption, and initial direct costs incurred 
       when obtaining leases were excluded from this measurement. 
       Lease prepayments and accruals previously recognised under 
       IAS 17 at 31 March 2019 were added to and deducted from, respectively, 
       the value of the right of use assets on adoption. In determining 
       the cumulative retrospective impact recorded on 1 April 2019, 
       some of the Group's joint ventures have measured right-of-use 
       assets, for certain leases, as if IFRS 16 had been applied 
       since lease commencement; and 
 --   The Group impaired the right-of-use assets recognised on adoption 
       by the value of the provisions for onerous leases held under 
       IAS 37 at 31 March 2019 instead of performing a new impairment 
       assessment for those assets on adoption. 
 

The key differences between the Group's IAS 17 accounting policy (the 'previous policy' which is disclosed in the Group's Annual Report and Accounts for the year ended 31 March 2019) and the Group's IFRS 16 accounting policy (which is provided below), as well as the primary impacts of applying IFRS 16 in the current financial period are disclosed on page 32 and below.

Primary impacts of applying the IFRS 16 accounting policy

The primary impacts on the Group's financial statements, and the key causes of the movements recorded in the consolidated statement of financial position on 1 April 2019 (see page 32), as a result of applying the IFRS 16 ('current') accounting policy in place of the previous policy under IAS 17 are:

-- Under IAS 17, lessees classified leases as either operating or finance leases. Operating lease costs were expensed on a straight-line basis over the period of the lease. Finance leases resulted in the recognition, in the statement of financial position, of an asset and a corresponding liability for lease payments, at present value. Under IFRS 16 all lease agreements give rise to the recognition of a 'right-of-use asset' representing the right to use the leased item and a liability for any future lease payments (see page 32) over the 'reasonably certain' period of the lease, which may include future lease periods for which the Group has extension options.

-- Lessee accounting under IFRS 16 is similar to finance lease accounting for lessees under IAS 17; lease costs are recognised in the form of depreciation of the right-of-use asset and interest on the lease liability which is generally discounted at the incremental borrowing rate of the relevant Group entity, although the interest rate implicit in the lease is used when it is more readily determinable. Interest charges will typically be higher in the early stages of a lease and will reduce over the term. Lease interest costs are recorded in financing costs and associated cash payments are classified as financing cash flows in the Group's cash flow statement.

-- Under IFRS 16 cash inflows from operating activities and payments classified within cash flow from financing activities both increase, as payments made at both lease inception and subsequently are characterised as repayments of lease liabilities and interest. Under IAS 17 operating lease payments were treated as an operating cash outflows. Net cash flow is not impacted by the change in policy.

-- Lessor accounting under IFRS 16 is similar to IAS 17. The only substantive change is that when the Group sub-leases assets it classifies the lease out as either operating or finance leases by reference to the terms of head lease contract whereas under IAS 17 the classification was determined by reference to the underlying asset leased out. This has resulted in additional finance leases out ('net investment in leases') being recognised under IFRS 16 (see page 32).

-- The expedients applied at adoption, above, have resulted in reclassifications of lease-related prepayments, accruals and provisions at 1 April 2019 (see page 32) to the right-of-use assets. Where certain of the Group's joint ventures have valued right-of-use assets as if IFRS 16 had been applied since lease inception, this has resulted in a reduction in the value of investments in associates and joint arrangements (see page 32).

-- During the six months ended 30 September 2018 an expense of EUR1,714 million was charged for operating leases and depreciation and interest of EUR25 million was charged for finance leases. During the six months ended 30 September 2019, depreciation of EUR1,823 million and interest of EUR163 million has been charged in relation to leases.

IFRS 16 Accounting Policy

As a lessee

When the Group leases an asset a 'right of use asset' is recognised for the leased item and a lease liability is recognised for any lease payments due at the lease commencement date. The right of use asset is initially measured at cost, being the present value of the lease payments paid or payable, plus any initial direct costs incurred in entering the lease and less any lease incentives received.

Right of use assets are depreciated on a straight-line basis from the commencement date to the earlier of the end of the asset's useful life or the end of the lease term. The lease term is the non-cancellable period of the lease plus any periods for which the Group is 'reasonably certain' to exercise any extension options (see below). The useful life of the asset is determined in a manner consistent to that for owned property, plant and equipment (as described in the Group's Annual Report and Accounts for the year ended 31 March 2019). If right-of-use assets are considered to be impaired, the carrying value is reduced accordingly.

Lease liabilities are initially measured at the value of the lease payments that are not paid at the commencement date and are usually discounted using the incremental borrowing rates of the applicable Group entity (the rate implicit in the lease is used if it is readily determinable). Lease payments included in the lease liability include both fixed payments and in-substance fixed payments during the term of the lease.

After initial recognition, the lease liability is recorded at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate (e.g. an inflation related increase) or if the Group's assessment of the lease term changes; any change in the lease liability as a result of these changes also results in a corresponding change in the recorded right of use asset.

As a lessor

Where the Group is a lessor, it determines at inception whether the lease is a finance or an operating lease. When a lease transfers substantially all the risks and rewards of ownership of the underlying asset then the lease is a finance lease; otherwise, the lease is an operating lease.

Where the Group is an intermediate lessor, the interest in the head lease and the sub-lease is accounted for separately and the lease classification of a sub-lease is determined by reference to the right-of-use asset arising from the head lease.

Income from operating leases is recognised on a straight-line basis over the lease term. Income from finance leases is recognised in full at lease commencement.

Lease income is recognised as other revenue for transactions that are part of the Group's ordinary activities (primarily leases of handsets or other equipment to customers or leases of wholesale access to the Group's fibre and cable networks). The Group uses IFRS 15 to allocate the consideration in contracts between any lease and non-lease components.

Critical accounting judgements and key sources of estimation relating to IFRS 16

Lease identification

Whether an arrangement is considered a lease or a service contract depends on the analysis by management of both the legal form and substance of the arrangement between the Group and the counter-party to determine if control of an identified asset has been passed between the parties; if not, the arrangement is a service arrangement. Control exists if the Group obtains substantially all of the economic benefit from the use of the asset, and has the ability to direct its use, for a period of time. An identified asset exists where an agreement explicitly or implicitly identifies an asset or a physically distinct portion of an asset which the lessor has no substantive right to substitute.

The scenarios requiring the greatest judgement include those where the arrangement is for the use of fibre or other fixed telecommunication lines. Generally, where the Group has exclusive use of a physical line it is determined that the Group can also direct the use of the line and therefore leases will be recognised. Where the Group provides access to fibre or other fixed telecommunication lines to another operator on a wholesale basis the arrangement will generally be identified as a lease, whereas when the Group provides fixed line services to an end-user, generally control over such lines is not passed to the end-user and a lease is not identified.

The impact of determining whether an agreement is a lease or a service depends on whether the Group is a potential lessee or lessor in the arrangement and, where the Group is a lessor, whether the arrangement is classified as an operating or finance lease. The impacts for each scenario are described below where the Group is potentially:

 
 --   A lessee. The judgement impacts the nature and timing of both 
       costs and reported assets and liabilities. A lease results 
       in depreciation and interest being recognised and an asset 
       and a liability being reported; the interest charge will decrease 
       over the life of the lease. A service contract results in 
       operating expenses being recognised evenly over the life of 
       the contract and no assets or liabilities being recorded (other 
       than trade payables, prepayments and accruals). 
 --   An operating lessor. The judgement impacts the nature of income 
       recognised. An operating lease results in lease income being 
       recognised whilst a service contract results in service revenue. 
       Both are recognised evenly over the life of the contract. 
 --   A finance lessor. The judgement impacts the nature and timing 
       of both income and reported assets. A finance lease results 
       in the lease income being recognised at commencement of the 
       lease and an asset (the net investment in the lease) being 
       recorded. 
 

Lease term

Where leases include additional optional periods after an initial lease term, significant judgement is required in determining whether these optional periods should be included when determining the lease term. The impact of this judgement is significantly greater where the Group is a lessee. As a lessee, optional periods are included in the lease term if the Group is reasonably certain it will exercise an extension option or will not exercise a termination option; this depends on an analysis by management of all relevant facts and circumstances including the leased asset's nature and purpose, the economic and practical potential for replacing the asset and any plans that the Group has in place for the future use of the asset. Where a leased asset is highly customised (either when initially provided or as a result of leasehold improvements) or it is impractical or uneconomic to replace then the Group is more likely to judge that lease extension options are reasonably certain to be exercised. Where extension options are included the greater the value of the right-of-use asset and lease liability that will be recognised. The normal approach adopted for lease term by asset class is described below.

The lease terms can vary significantly by type and use of asset and geography. In addition, the exact lease term is subject to the non-cancellable period and rights and options in each contract. Generally, lease terms are judged to be the longer of the minimum lease term and:

 
 --   Between 5 and 10 years for land and buildings (excluding retail), 
       with terms at the top end of this range if the lease relates 
       to assets that are considered to be difficult to exit sooner 
       for economic, practical or reputational reasons; 
 --   To the next contractual lease break date for retail premises 
       (excluding breaks within the next 12 months); 
 --   Where leases are used to provide internal connectivity the 
       lease term for the connectivity is aligned to the lease term 
       or useful economic life of the assets connected; and 
 --   The customer service agreement length for leases of local 
       loop connections or other assets required to provide fixed 
       line services to individual customers. 
 

In most instances the Group has options to renew or extend leases for additional periods after the end of the lease term which are assessed using the criteria above.

Transition disclosures

The weighted average incremental borrowing rate applied to the Group's lease liabilities recognised in the balance sheet at 1 April 2019 was 3.5%.

The Group's undiscounted operating lease commitments at 31 March 2019 were EUR10.8 billion; the most significant differences between the IAS 17 lease commitments and the lease liabilities recognised on transition to IFRS 16 are set out below:

 
 
                                                                     EURbn 
------------------------------------------------------------------  ------ 
 Operating lease commitments at 31 March 2019                         10.8 
 Less effect of discounting on payments included in the operating 
  lease commitment                                                   (1.6) 
 Plus lease liabilities in respect of additional 'reasonably 
  certain' lease extensions assumed under IFRS 16                      0.8 
 Plus finance lease liabilities already reported under IAS 
  17                                                                   0.3 
------------------------------------------------------------------  ------ 
 Lease liability opening balance reported at 1 April 2019             10.3 
------------------------------------------------------------------  ------ 
 

The Group applied the lease identification requirements of IFRS 16 at the date of adoption and no material changes to the Group's lease portfolio were identified.

 
The impact of the adoption of IFRS 16 on the consolidated statement 
 of financial position at 1 April 2019 is set out below. 
                                                          Impact of 
                                                           adoption 
                                                31 March         of    1 April 
Consolidated statement of financial position        2019    IFRS 16       2019 
                                                    EURm       EURm       EURm 
---------------------------------------------  ---------  ---------  --------- 
Non-current assets 
Goodwill                                          23,353          -     23,353 
Other intangible assets                           17,652          -     17,652 
Property, plant and equipment                     27,432     10,226     37,658 
Investments in associates and joint ventures       3,952      (270)      3,682 
Other investments                                    870          -        870 
Deferred tax assets                               24,753          -     24,753 
Post employment benefits                              94          -         94 
Trade and other receivables                        5,170         21      5,191 
---------------------------------------------  ---------  ---------  --------- 
Of which: Net investments in leases                    3        133        136 
---------------------------------------------  ---------  ---------  --------- 
                                                 103,276      9,977    113,253 
---------------------------------------------  ---------  ---------  --------- 
Current assets 
Inventory                                            714          -        714 
Taxation recoverable                                 264          -        264 
Trade and other receivables                       12,190      (339)     11,851 
---------------------------------------------  ---------  ---------  --------- 
Of which: Net investments in leases                    1         19         20 
---------------------------------------------  ---------  ---------  --------- 
Other investments                                 13,012          -     13,012 
Cash and cash equivalents                         13,637          -     13,637 
---------------------------------------------  ---------  ---------  --------- 
                                                  39,817      (339)     39,478 
---------------------------------------------  ---------  ---------  --------- 
Assets held for sale                               (231)          -      (231) 
---------------------------------------------  ---------  ---------  --------- 
Total assets                                     142,862      9,638    152,500 
---------------------------------------------  ---------  ---------  --------- 
 
Equity 
Called up share capital                            4,796          -      4,796 
Additional paid-in capital                       152,503          -    152,503 
Treasury shares                                  (7,875)          -    (7,875) 
Accumulated losses                             (116,725)      (261)  (116,986) 
Accumulated other comprehensive income            29,519          -     29,519 
---------------------------------------------  ---------  ---------  --------- 
Total attributable to owners of the parent        62,218      (261)     61,957 
---------------------------------------------  ---------  ---------  --------- 
 
Non-controlling interests                          1,227          4      1,231 
Total non-controlling interests                    1,227          4      1,231 
---------------------------------------------  ---------  ---------  --------- 
 
Total equity                                      63,445      (257)     63,188 
---------------------------------------------  ---------  ---------  --------- 
 
Non-current liabilities 
Long-term borrowings                              48,685      7,394     56,079 
Deferred tax liabilities                             478          -        478 
Post employment benefits                             551          -        551 
Provisions                                         1,242        (9)      1,233 
Trade and other payables                           2,938       (37)      2,901 
---------------------------------------------  ---------  ---------  --------- 
                                                  53,894      7,348     61,242 
---------------------------------------------  ---------  ---------  --------- 
Current liabilities 
Short-term borrowings                              4,270      2,646      6,916 
Financial liabilities under put option 
 arrangements                                      1,844          -      1,844 
Taxation liabilities                                 596          -        596 
Provisions                                         1,160       (76)      1,084 
Trade and other payables                          17,653       (23)     17,630 
---------------------------------------------  ---------  ---------  --------- 
                                                  25,523      2,547     28,070 
---------------------------------------------  ---------  ---------  --------- 
Liabilities held for sale                              -          -          - 
---------------------------------------------  ---------  ---------  --------- 
Total equity and liabilities                     142,862      9,638    152,500 
---------------------------------------------  ---------  ---------  --------- 
 
 
   2    Segmental analysis 

The Group has a single group of related services and products being the supply of communications services and products. Revenue is attributed to a country or region based on the location of the Group company reporting the revenue. The segmental revenue and profit of Vodafone India were included in discontinued operations in the comparative period. See note 5 "Discontinued operations and assets and liabilities held for sale" for details.

The Group's revenue and profit is disaggregated as follows:

 
 
                                                     Revenue                            Total 
                         Service  Equipment   from contracts  Interest        Other   segment  Adjusted 
                         revenue    revenue   with customers    income   revenue(1)   revenue    EBITDA 
                            EURm       EURm             EURm      EURm         EURm      EURm      EURm 
---------------------  ---------  ---------  ---------------  --------  -----------  --------  -------- 
Six months ended 30 September 
 2019 
Germany                    4,961        495            5,456        14          120     5,590     2,352 
Italy                      2,424        256            2,680         4           25     2,709     1,006 
UK                         2,451        598            3,049        34           68     3,151       658 
Spain                      1,966        157            2,123        13           25     2,161       460 
Other Europe               2,392        253            2,645         9           36     2,690       872 
Eliminations                (74)          -             (74)         -          (2)      (76)         - 
---------------------  ---------  ---------  ---------------  --------  -----------  --------  -------- 
Europe                    14,120      1,759           15,879        74          272    16,225     5,348 
---------------------  ---------  ---------  ---------------  --------  -----------  --------  -------- 
Vodacom                    2,217        416            2,633         2           99     2,734     1,019 
Other Markets              2,024        299            2,323         2           26     2,351       755 
Eliminations                   -          -                -         -            -         -         - 
---------------------  ---------  ---------  ---------------  --------  -----------  --------  -------- 
Rest of the World          4,241        715            4,956         4          125     5,085     1,774 
---------------------  ---------  ---------  ---------------  --------  -----------  --------  -------- 
Common Functions             240         24              264         -          523       787      (17) 
Eliminations                (57)          -             (57)         -        (101)     (158)         - 
---------------------  ---------  ---------  ---------------  --------  -----------  --------  -------- 
Group                     18,544      2,498           21,042        78          819    21,939     7,105 
---------------------  ---------  ---------  ---------------  --------  -----------  --------  -------- 
 
 
 
                                                     Revenue                            Total 
                         Service  Equipment   from contracts  Interest        Other   segment  Adjusted 
                         revenue    revenue   with customers    income   revenue(1)   revenue    EBITDA 
                            EURm       EURm             EURm      EURm         EURm      EURm      EURm 
---------------------  ---------  ---------  ---------------  --------  -----------  --------  -------- 
Six months ended 30 September 
 2018 (restated)(2) 
Germany                    4,577        516            5,093        14           73     5,180     2,082 
Italy                      2,512        351            2,863         -           35     2,898     1,058 
UK                         2,460        611            3,071        25           35     3,131       675 
Spain                      2,162        205            2,367         9           33     2,409       529 
Other Europe               2,238        263            2,501        10           29     2,540       833 
Eliminations                (62)          -             (62)         -          (3)      (65)         - 
---------------------  ---------  ---------  ---------------  --------  -----------  --------  -------- 
Europe                    13,887      1,946           15,833        58          202    16,093     5,177 
---------------------  ---------  ---------  ---------------  --------  -----------  --------  -------- 
Vodacom                    2,199        431            2,630         6           82     2,718     1,070 
Other Markets              1,990        454            2,444         3           12     2,459       673 
Eliminations                   -          -                -         -            -         -         - 
---------------------  ---------  ---------  ---------------  --------  -----------  --------  -------- 
Rest of the World          4,189        885            5,074         9           94     5,177     1,743 
---------------------  ---------  ---------  ---------------  --------  -----------  --------  -------- 
Common Functions             246         15              261         2          475       738       (5) 
Eliminations                (54)          -             (54)         -        (106)     (160)         - 
---------------------  ---------  ---------  ---------------  --------  -----------  --------  -------- 
Group                     18,268      2,846           21,114        69          665    21,848     6,915 
---------------------  ---------  ---------  ---------------  --------  -----------  --------  -------- 
 

Notes:

 
 1.   Other revenue includes lease revenue. 
 2.   Revenue for the comparative period has been revised for the allocation 
       of, and timing of recognition for, equipment and service revenue 
       compared to amounts previously disclosed in the condensed consolidated 
       financial statements for the six months ended 30 September 2018. 
       Service revenue decreased by EUR172 million (Germany: EUR(9) 
       million, UK: EUR(94) million, Other Europe: EUR(15) million, 
       Common Functions: EUR(54) million. Equipment revenue increased 
       by EUR170 million (Germany: EUR73 million, UK: EUR94 million, 
       Other Europe: EUR1 million, Common Functions: EUR2 million). 
       This resulted in a net reduction in revenue from contracts with 
       customers of EUR2 million (Germany: EUR64 million, Other Europe: 
       EUR(14) million, Common Functions EUR(52) million). This was 
       offset by an increase in other revenue of EUR54 million (Other 
       Europe: EUR1 million, Common Functions: EUR53 million), resulting 
       in an increase of EUR52 million for total segment revenue (Germany: 
       EUR64 million, Other Europe EUR(13) million, Common Functions: 
       EUR1 million). Adjusted EBITDA increased by EUR42 million. 
 

The Group's measure of segment profit and adjusted EBITDA, after depreciation on lease-related right of use assets and interest on leases but excluding depreciation and amortisation, gains/losses on disposal for owned fixed assets, impairment losses, restructuring costs arising from discrete restructuring plans, the Group's share of adjusted results in associates and joint ventures and other income and expense. A reconciliation of adjusted EBITDA to operating profit/(loss) is shown below. For a reconciliation of operating profit/(loss) to loss for the financial period, see the consolidated income statement on page 24.

 
                                                         Six months ended 30 
                                                              September 
                                                       ----------------------- 
                                                                          2018 
                                                          2019   (restated)(1) 
                                                          EURm            EURm 
--------------------------  -------------------------  -------  -------------- 
Adjusted EBITDA                                          7,105           6,915 
Depreciation, amortisation and loss on disposal 
 of fixed assets                                       (4,874)         (4,773) 
Share of adjusted results in equity accounted 
 associates and joint ventures(2)                        (550)             (8) 
-----------------------------------------------------  -------  -------------- 
Adjusted operating profit                                1,681           2,134 
Impairment loss                                              -         (3,495) 
Restructuring costs                                      (163)            (95) 
Amortisation of acquired customer bases and brand 
 intangible assets                                       (232)           (317) 
Other income and expense                                 (872)           (256) 
Interest on lease liabilities                              163               - 
-----------------------------------------------------  -------  -------------- 
Operating profit/(loss)                                    577         (2,029) 
-----------------------------------------------------  -------  -------------- 
 

Notes:

 
 1.   Revenue for the comparative period has been revised for the allocation 
       of, and timing of recognition for, equipment and service revenue 
       compared to amounts previously disclosed in the condensed consolidated 
       financial statements for the six months ended 30 September 2018. 
       As a result, adjusted EBITDA increased by EUR42 million. 
 2.   Share of adjusted results in equity accounted associates and 
       joint ventures excludes amortisation of acquired customer bases 
       and brand intangible assets, restructuring costs and other costs 
       of EUR2.1 billion (2018: EUR0.4 billion) which are included in 
       amortisation of acquired customer base and brand intangible assets, 
       restructuring costs and other income and expense respectively. 
 

The Group's non-current assets are disaggregated as follows:

 
                        30 September       31 March 
                                2019           2019 
                                      (restated)(1) 
                                EURm           EURm 
----------------------  ------------  ------------- 
Non-current assets(2) 
Germany                       48,777         24,529 
Italy                         11,059         11,031 
UK                             7,974          7,405 
Spain                          8,262          7,438 
Other Europe                  10,290          7,093 
----------------------  ------------  ------------- 
Europe                        86,362         57,496 
----------------------  ------------  ------------- 
Vodacom                        6,105          5,503 
Other Markets                  3,015          3,429 
----------------------  ------------  ------------- 
Rest of the World              9,120          8,932 
----------------------  ------------  ------------- 
Common Functions               2,212          2,009 
----------------------  ------------  ------------- 
Group                         97,694         68,437 
----------------------  ------------  ------------- 
 

Notes:

 
 1.   Amounts have been re-presented to show segment assets on an IFRS 
       15 basis which were previously reported at 31 March 2019 on an 
       IAS 18 basis. 
 2.   Comprises goodwill, other intangible assets and property, plant 
       and equipment (including right-of-use assets). 
 
   3    Impairment review 

Impairment testing was performed at 30 September 2019 and 30 September 2018. The methodology adopted for impairment testing for the six months ended 30 September 2019 was consistent with that disclosed on page 117 and pages 130 to 135 of the Group's annual report for the year ended 31 March 2019.

Consistent with prior periods, assets are grouped at the lowest levels for which there are separately identifiable cash flows, known as cash-generating units. For the purpose of impairment testing as at 30 September 2019, European Liberty Global assets have been excluded from existing cash-generating units.

Value in use assumptions

The table below shows key assumptions used in the value in use calculations at 30 September 2019:

 
                                      Assumptions used in value in use calculation 
---------------------------------  -------------------------------------------------- 
                                       Germany        Italy        Spain      Romania 
                                             %            %            %            % 
---------------------------------  -----------  -----------  -----------  ----------- 
Pre-tax risk adjusted discount 
 rate                                      8.3         10.4          9.3         10.7 
Long-term growth rate                      0.5          1.0          0.5          1.0 
Projected adjusted EBITDA(1)               2.2        (0.5)          9.8          4.8 
Projected capital expenditure(2)     17.3-19.7    12.1-14.1    16.8-18.2    11.2-12.4 
---------------------------------  -----------  -----------  -----------  ----------- 
 

Sensitivity analysis

The estimated recoverable amounts of the Group's operations in Germany, Italy, Spain and Romania exceed their carrying values by EUR7.1 billion, EUR2.7 billion, EUR0.6 billion and EUR0.3 billion respectively. If the assumptions used in the impairment review were changed to a greater extent than as presented in the following table, the changes would, in isolation, lead to an impairment loss being recognised for the six months ended 30 September 2019.

 
                                      Change required for carrying value to equal 
                                                   recoverable amount 
---------------------------------  ------------------------------------------------- 
                                         Germany      Italy      Spain       Romania 
                                             pps        pps        pps           pps 
---------------------------------  -------------  ---------  ---------  ------------ 
Pre-tax risk adjusted discount 
 rate                                        2.0        2.5        0.6           2.7 
Long-term growth rate                      (2.1)      (2.6)      (0.7)         (3.4) 
Projected adjusted EBITDA(1)               (4.9)      (4.5)      (1.4)         (4.8) 
Projected capital expenditure(2)            17.1       12.1        3.0           8.5 
---------------------------------  -------------  ---------  ---------  ------------ 
 

Management considered the following reasonably possible changes in the key adjusted EBITDA(1) and long-term growth rate assumptions, leaving all other assumptions unchanged. The sensitivity analysis presented is prepared on the basis that the reasonably possible change in each key assumption would not have a consequential impact on other assumptions used in the impairment review. The associated impact on the impairment assessment is presented in the table below.

Management believes that no reasonably possible or foreseeable change in the pre-tax adjusted discount rate or projected capital expenditure(2) would cause the carrying value of any cash-generating unit to materially exceed its recoverable amount.

 
                                  Recoverable amount less carrying value 
-----------------------------  -------------------------------------------- 
                                    Germany     Italy    Spain      Romania 
                                      EURbn     EURbn    EURbn        EURbn 
-----------------------------  ------------  --------  -------  ----------- 
Base case as at 30 September 
 2019                                   7.1       2.7      0.6          0.3 
Change in projected adjusted 
 EBITDA(1) 
Decrease by 2pps                        4.1       1.4    (0.2)          0.1 
Increase by 2pps                       10.5       4.0      1.4          0.4 
Change in long-term growth 
 rate 
Decrease by 1pps                        3.2       1.5    (0.3)          0.2 
Increase by 1pps                       12.6       4.3      1.6          0.4 
-----------------------------  ------------  --------  -------  ----------- 
 

The carrying values for Vodafone UK, Ireland and Portugal include goodwill arising from their acquisition by the Group and/or the purchase of operating licences or spectrum rights. While the recoverable amounts for these operating companies are not materially greater than their carrying value, each has a lower risk of giving rise to impairment that would be material to the Group given their relative size or the composition of their carrying value.

If the assumptions used in the impairment review were changed to a greater extent than as presented in the following table, the changes would, in isolation, lead to an impairment loss being recognised in the six months ended 30 September 2019.

 
                                     Change required for carrying value to 
                                          equal the recoverable amount 
---------------------------------  ----------------------------------------- 
                                           UK        Ireland        Portugal 
                                          pps            pps             pps 
---------------------------------  ----------  -------------  -------------- 
Pre-tax risk adjusted discount 
 rate                                     0.8            0.5             1.3 
Long-term growth rate                   (0.8)          (0.6)           (1.3) 
Projected adjusted EBITDA(1)            (1.8)          (1.1)           (2.7) 
Projected capital expenditure(2)          3.6            4.1             7.1 
---------------------------------  ----------  -------------  -------------- 
 

Notes:

 
 1.   Projected adjusted EBITDA is expressed as the compound annual 
       growth rates in the initial five years for all cash-generating 
       units of the plans used for impairment testing. 
 2.   Projected capital expenditure, which excludes licences and spectrum, 
       is expressed as the range of capital expenditure as a percentage 
       of revenue in the initial five years for all cash-generating 
       units of the plans used for impairment testing. 
 

VodafoneZiggo

The recoverable amount for VodafoneZiggo is not materially greater than its carrying value. If adverse impacts of economic, competitive, regulatory or other factors were to cause significant deterioration in the operations of VodafoneZiggo and the entity's expected future cash flows, this may lead to an impairment loss being recognised.

   4    Taxation 
 
                                                       Six months ended 30 
                                                             September 
                                                      ---------------------- 
                                                         2019           2018 
                                                               (restated)(1) 
                                                         EURm           EURm 
 ---------------------------------------------------  -------  ------------- 
United Kingdom corporation tax (expense)/income(2) 
 : 
 Current year                                            (14)              1 
 Adjustments in respect of prior years                   (10)            (6) 
Overseas current tax (expense)/income: 
 Current year                                           (474)          (589) 
 Adjustments in respect of prior years                     14             19 
 ---------------------------------------------------  -------  ------------- 
Total current tax expense                               (484)          (575) 
----------------------------------------------------  -------  ------------- 
 
Deferred tax on origination and reversal of 
 temporary differences: 
 United Kingdom deferred tax                              144             39 
 Overseas deferred tax                                (1,040)          (884) 
 ---------------------------------------------------  -------  ------------- 
Total deferred tax expense                              (896)          (845) 
----------------------------------------------------  -------  ------------- 
Total income tax expense                              (1,380)        (1,420) 
----------------------------------------------------  -------  ------------- 
 

Note:

 
 1.   Revenue for the comparative period has been revised for the allocation 
       of, and timing of recognition for, equipment and service revenue 
       compared to amounts previously disclosed in the condensed consolidated 
       financial statements for the six months ended 30 September 2018. 
       As a result, the overseas deferred tax charge has increased by 
       EUR11 million from EUR873 million to EUR884 million and the total 
       income tax expense increased by EUR11 million. 
 2.   UK operating profits are largely offset by statutory allowances 
       for capital investment in the UK network and systems plus ongoing 
       interest costs including those arising from the EUR10.3 billion 
       of spectrum payments to the UK government in 2000 and 2013. 
 

The six months ended 30 September 2019 includes a reduction in our deferred tax assets in Luxembourg of EUR868 million (2018: EURnil) following a reduction in the Luxembourg corporate tax rate and deferred tax on the use of Luxembourg losses of EUR200 million (2018: EUR185 million). The Group expects to use its losses in Luxembourg over a period of between 50 and 55 years and the losses in Germany over a period of between 9 and 11 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 2019.

Overseas deferred tax expense for the six months ended 30 September 2018 includes the derecognition of a deferred tax asset of EUR1,048 million in Spain following a reassessment of expected future business performance and consequently lower projected cash flows. It also includes an increase in the deferred tax assets in Luxembourg of EUR159 million resulting from the tax treatment of the revaluation of investments following completion and approval of the Luxembourg statutory accounts and tax returns.

   5    Discontinued operations and assets and liabilities held for sale 

In the comparative period, Vodafone combined its subsidiary, Vodafone India (excluding its 42% stake in Indus Towers), with Idea Cellular in India. Consequently, Vodafone India was accounted for as a discontinued operation for all periods up to 31 August 2018, the date the transaction completed, the results of which are detailed below.

 
Income statement of discontinued operations 
                                                      Six months  Five months 
                                                           ended        ended 
                                                    30 September    31 August 
                                                            2019         2018 
                                                            EURm         EURm 
 -------------------------------------------------  ------------  ----------- 
Revenue                                                        -        1,561 
Cost of sales                                                  -      (1,185) 
--------------------------------------------------  ------------  ----------- 
Gross profit                                                   -          376 
Selling and distribution expenses                              -         (92) 
Administrative expenses                                        -        (134) 
Operating profit                                               -          150 
Financing costs                                                -        (321) 
--------------------------------------------------  ------------  ----------- 
Loss before taxation                                           -        (171) 
Income tax credit                                              -           56 
--------------------------------------------------  ------------  ----------- 
Loss after tax of discontinued operations                      -        (115) 
--------------------------------------------------  ------------  ----------- 
 
Loss on sale of disposal group                                 -      (3,420) 
--------------------------------------------------  ------------  ----------- 
 
Loss for the period from discontinued operations               -      (3,535) 
--------------------------------------------------  ------------  ----------- 
 
Loss per share from discontinued operations 
                                                       eurocents    eurocents 
 -------------------------------------------------  ------------  ----------- 
 - Basic                                                       -     (12.87c) 
 - Diluted                                                     -     (12.87c) 
--------------------------------------------------  ------------  ----------- 
 
Total comprehensive expense for the period from discontinued operations 
                                                            EURm         EURm 
 -------------------------------------------------  ------------  ----------- 
Attributable to owners of the parent                           -      (3,535) 
--------------------------------------------------  ------------  ----------- 
 

For the five months ended 31 August 2018, the Group recorded a loss on disposal of Vodafone India of EUR3,420 million as set out in note 8 "Acquisitions and disposals". This loss is presented within discontinued operations.

Assets and liabilities held for sale

Assets and liabilities held for sale at 30 September 2019 comprise:

-- Certain network-related assets and liabilities in Italy, which will be sold into a joint venture tower company following the announcement on 26 July 2019 of a new network sharing arrangement with Telecom Italia Group; and

-- A 12.6% interest from our 42.0% stake in Indus Towers and a 24.95% interest in Vodafone Hutchison Australia.

The relevant assets and liabilities are detailed in the table below.

 
                                   30 September  31 March 
                                           2019      2019 
                                           EURm      EURm 
 --------------------------------  ------------  -------- 
Non-current assets                          726     (231) 
Current assets                              123         - 
---------------------------------  ------------  -------- 
Total assets held for sale                  849     (231) 
---------------------------------  ------------  -------- 
 
Non-current liabilities                   (234)         - 
Current liabilities                        (98)         - 
---------------------------------  ------------  -------- 
Total liabilities held for sale           (332)         - 
---------------------------------  ------------  -------- 
 
 
   6    Earnings per share 
 
                                                         Six months ended 30 
                                                               September 
                                                       ------------------------ 
                                                            2019           2018 
                                                        Millions       Millions 
 ----------------------------------------------------  ---------  ------------- 
Weighted average number of shares for basic 
 earnings per share                                       29,410         27,462 
Effect of dilutive potential shares: restricted                -              - 
 shares and share options 
-----------------------------------------------------  ---------  ------------- 
Weighted average number of shares for diluted 
 earnings per share                                       29,410         27,462 
-----------------------------------------------------  ---------  ------------- 
 
                                                         Six months ended 30 
                                                               September 
                                                       ------------------------ 
Earnings per share attributable to owners of                2019           2018 
 the parent during the period 
                                                                  (restated)(1) 
                                                            EURm           EURm 
Loss for earnings per share from continuing 
 operations                                              (2,128)        (4,399) 
Loss for earnings per share from discontinued 
 operations                                                    -        (3,535) 
-----------------------------------------------------  ---------  ------------- 
Loss for basic and diluted earnings per share            (2,128)        (7,934) 
-----------------------------------------------------  ---------  ------------- 
 
                                                       eurocents      eurocents 
 ----------------------------------------------------  ---------  ------------- 
Basic loss per share from continuing operations          (7.24c)       (16.02c) 
Basic loss per share from discontinued operations              -       (12.87c) 
-----------------------------------------------------  ---------  ------------- 
Basic loss per share                                     (7.24c)       (28.89c) 
-----------------------------------------------------  ---------  ------------- 
 
Diluted loss per share from continuing operations        (7.24c)       (16.02c) 
Diluted loss per share from discontinued operations            -       (12.87c) 
-----------------------------------------------------  ---------  ------------- 
Diluted loss per share                                   (7.24c)       (28.89c) 
-----------------------------------------------------  ---------  ------------- 
 

Note:

 
 1.   Revenue presented for the comparative period has been revised 
       for the allocation of, and timing of recognition for, equipment 
       and service revenue compared to amounts previously disclosed 
       in the condensed consolidated financial statements for the six 
       months ended 30 September 2018. As a result, the loss for basic 
       and diluted earnings per share decreased by EUR31 million and 
       (i) basic loss per share from continuing operations, (ii) basic 
       loss per share, (iii) diluted loss per share from continuing 
       operations and (iv) diluted loss per share each decreased by 
       0.11c. 
 
   7    Dividends 
 
                                                         Six months ended 30 
                                                              September 
                                                        --------------------- 
                                                              2019       2018 
                                                              EURm       EURm 
------------------------------------------------------  ----------  --------- 
Declared during the financial period: 
Final dividend for the year ended 31 March 2019: 
 4.16 eurocents per share (2018: 10.23 eurocents 
 per share)                                                  1,112      2,729 
------------------------------------------------------  ----------  --------- 
 
Proposed after the end of the reporting period 
 and not recognised as a liability: 
Interim dividend for the year ending 31 March 
 2020: 4.50 eurocents per share (2019: 4.84 eurocents 
 per share)                                                  1,205      1,293 
------------------------------------------------------  ----------  --------- 
 
   8    Acquisitions and disposals 

Acquisitions

The aggregate cash consideration in respect of purchase of interests in subsidiaries, net of cash acquired, is as follows:

 
                                         Six months ended 30 
                                              September 
                                                2019     2018 
                                                EURm     EURm 
 -------------------------------------  ------------  ------- 
Cash consideration paid 
European Liberty Global assets                10,295        - 
Other acquisitions during the period              29       69 
Net cash acquired                              (122)      (7) 
--------------------------------------  ------------  ------- 
                                              10,202       62 
--------------------------------------  ------------  ------- 
 
 

European Liberty Global assets

On 31 July 2019, the Group completed the acquisition of a 100% interest in Unitymedia GmbH ('Unitymedia') and Liberty Global's operations (excluding its "Direct Home" business) in the Czech Republic ('UPC Czech'), Hungary ('UPC Hungary') and Romania ('UPC Romania') for an aggregate net cash consideration of EUR10,295 million. The primary reason for acquiring the businesses was to create a converged national provider of digital infrastructure in Germany, together with creating converged communications operators in the Czech Republic, Hungary and Romania.

The provisional purchase price allocation is set out in the table below.

 
                                          Fair value 
                                                EURm 
 --------------------------------------   ---------- 
Net assets acquired: 
Identifiable intangible assets(1)              5,696 
Property, plant and equipment                  4,708 
Inventory                                         16 
Trade and other receivables                      796 
Other investments                                  2 
Cash and cash equivalents                        109 
Current and deferred taxation                (1,910) 
Short and long-term borrowings               (9,512) 
Trade and other payables                     (1,059) 
Post employment benefits                        (40) 
Provisions                                     (117) 
---------------------------------------   ---------- 
Net identifiable liabilities acquired        (1,311) 
Goodwill(2)                                   11,620 
---------------------------------------   ---------- 
Total consideration(3)                        10,309 
---------------------------------------   ---------- 
 
 

Notes:

 
 1.   Identifiable intangible assets of EUR5,696 million consisted 
       of customer relationships of EUR5,447 million, brand of EUR71 
       million and software of EUR178 million. 
 2.   The goodwill is attributable to future profits expected to be 
       generated from new customers and the synergies expected to arise 
       after the Group's acquisition of the businesses. 
 3.   Transaction costs of EUR58 million were charged in the Group's 
       consolidated income statement in the six months ended 30 September 
       2019. 
 

From the date of acquisition, the acquired entities have contributed EUR491 million of revenue and a loss of EUR11 million towards the loss before tax of the Group. If the acquisition had taken place at the beginning of the financial period, revenue would have been EUR22,940 million and the loss before tax would have been EUR481 million.

Other acquisitions

During the six months ended 30 September 2019 the Group completed certain acquisitions for an aggregate consideration of EUR185 million, of which EUR29 million has been paid in cash. The aggregate provisional fair values of goodwill, identifiable assets and liabilities of the acquired operations were EUR182 million, EUR50 million and EUR47 million, respectively.

Disposals

On 31 July 2019, the Group sold its 100% interest in Vodafone New Zealand for consideration of NZD $3.4 billion (EUR2.0 billion). The table below summarises the net assets disposed and the resulting net gain on disposal of EUR1.1 billion.

The disposal in the comparative period related to the combination of Vodafone India (excluding its 42% stake in Indus Towers), previously a subsidiary, with Idea Cellular to create Vodafone Idea Limited, a company jointly controlled by Vodafone and the Aditya Birla Group.

 
                                                   Six months ended 30 
                                                        September 
                                                  --------------------- 
                                                      2019         2018 
                                                      EURm         EURm 
 -----------------------------------------------  --------  ----------- 
Goodwill                                             (243)            - 
Other intangible assets                              (155)      (6,138) 
Property, plant and equipment                        (783)      (3,091) 
Inventory                                             (29)            - 
Trade and other receivables                          (244)      (1,572) 
Investments in associates and joint ventures           (4)            - 
Other investments                                        -          (6) 
Cash and cash equivalents                                -        (751) 
Current and deferred taxation                         (11)      (2,790) 
Short and long-term borrowings                         215        7,896 
Trade and other payables                               261        1,669 
Provisions                                              35          720 
------------------------------------------------  --------  ----------- 
Net assets disposed                                  (958)      (4,063) 
Fair value of investment(2)                              -        2,467 
Net cash proceeds arising from the transaction       2,023          320 
Other effects(1)                                        35      (2,144) 
------------------------------------------------  --------  ----------- 
Net gain/(loss) on transaction(2)                    1,100      (3,420) 
------------------------------------------------  --------  ----------- 
 
 

Notes:

 
 1.   Includes EUR59 million (2018: EUR2,079 million) of recycled foreign 
       exchange losses. 
 2.   Comparative figure includes a loss of EUR603 million related 
       to the re-measurement of the Group's retained interest in Vodafone 
       India. 
 
   9    Investment in associates and joint arrangements 

The equity accounted results for Vodafone Idea Limited ('VIL') for the period included an estimate for a material charge for amounts due following the recent Supreme Court of India judgement in the case Union of India v Association of Unified Telecom Service Providers of India and others regarding the definition of adjusted gross revenue ("AGR") used to calculate regulatory fees. Further detail is provided in note 13.

The Group's recorded share of VIL's resulting losses has been restricted to the amount that reduces the Group's carrying value in VIL to EURnil at 30 September 2019. The Group's carrying value was EUR1,392 million at 31 March 2019 and in May 2019 the Group invested EUR1,410 million via a rights issue. See page 16 for further information.

Significant uncertainties exist in relation to VIL's ability to generate the cash flow that it needs to settle, or refinance its liabilities and guarantees as they fall due, including those relating to the AGR judgement. VIL is seeking relief from the Indian Government, including, but not limited to, granting a waiver of interest and penalties relating to the AGR judgement.

The value of the Group's 42% shareholding in Indus Towers Limited ('Indus') is, in part, dependent on the income generated by Indus from tower rentals to major customers, including VIL. Any inability of these major customers to pay such amounts in the future may result in an impairment in the carrying value of the Group's investment in Indus (30 September 2019: EUR0.6 billion).

 
                                30 September  31 March 
                                        2019      2019 
                                        EURm      EURm 
 -----------------------------  ------------  -------- 
Investment in joint ventures           1,841     3,399 
Investment in associates                 396       553 
------------------------------  ------------  -------- 
                                       2,237     3,952 
------------------------------  ------------  -------- 
 
 
   10   Reconciliation of net cash flow from operating activities 
 
                                                         Six months ended 30 
                                                               September 
                                                        ---------------------- 
                                                           2019           2018 
                                                                 (restated)(1) 
                                                  Note     EURm           EURm 
 -----------------------------------------------  ----  -------  ------------- 
Loss for the financial period                           (1,891)        (7,802) 
Loss from discontinued operations                             -          3,535 
------------------------------------------------  ----  -------  ------------- 
Loss from continuing operations                         (1,891)        (4,267) 
 Non-operating income and expense                             -              3 
 Investment income                                        (281)          (184) 
 Financing costs                                          1,369            999 
 Income tax expense                                  4    1,380          1,420 
 -----------------------------------------------  ----  -------  ------------- 
Operating profit/(loss)                                     577        (2,029) 
Adjustments for: 
 Share-based payments and other non-cash 
  charges                                                    78             46 
 Depreciation and amortisation                            6,782          4,871 
 Loss on disposal of property, plant and 
  equipment and intangible assets                            24             19 
 Share of result of equity accounted associates 
  and joint ventures                                      2,601            430 
 Impairment losses                                            -          3,495 
 Other (income)/expense                                 (1,024)             91 
 Increase in inventory                                      (6)          (202) 
 Increase in trade and other receivables                (1,069)        (1,443) 
 (Decrease)/increase in trade and other 
  payables                                              (1,341)             47 
 -----------------------------------------------  ----  -------  ------------- 
Cash generated by operations                              6,622          5,325 
Net tax paid                                              (483)          (428) 
Cash flow from discontinued operations                        -           (71) 
------------------------------------------------  ----  -------  ------------- 
Net cash flow from operating activities                   6,139          4,826 
------------------------------------------------  ----  -------  ------------- 
 

Note:

 
 1.   Revenue for the comparative period has been revised for the allocation 
       of, and timing of recognition for, equipment and service revenue 
       compared to amounts previously disclosed in the condensed consolidated 
       financial statements for the six months ended 30 September 2018. 
       As a result, the loss for the financial period decreased by EUR31 
       million, income tax expense increased by EUR11 million and trade 
       and other receivables increased by EUR42 million. There was no 
       impact on the net cash flow from operating activities. 
 
   11   Related party transactions 

The Group has a number of related parties including joint arrangements and associates, pension schemes, directors and Executive Committee members. Related party transactions with the Group's joint arrangements and associates primarily comprise fees for the use of products and services including network airtime and access charges, and cash pooling arrangements. No related party transactions have been entered into during the period 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 
                                                          ---------------------- 
                                                                  2019      2018 
                                                                  EURm      EURm 
 -------------------------------------------------------  ------------  -------- 
Sales of goods and services to associates                           12         9 
Purchase of goods and services from associates                       -         1 
Sales of goods and services to joint arrangements                   99       106 
Purchase of goods and services from joint arrangements              88        94 
Net interest income receivable from joint arrangements              45        49 
--------------------------------------------------------  ------------  -------- 
 
                                                          30 September  31 March 
                                                                  2019      2019 
                                                                  EURm      EURm 
 -------------------------------------------------------  ------------  -------- 
Trade balances owed: 
 by associates                                                       7         1 
 to associates                                                       2         3 
 by joint arrangements                                             130       193 
 to joint arrangements                                              27        25 
Other balances owed by joint arrangements                        1,018       997 
Other balances owed to joint arrangements                          177       169 
--------------------------------------------------------  ------------  -------- 
 

In the six months ended 30 September 2019 the Group made contributions to defined benefit pension schemes of EUR11 million (six months ended 30 September 2018: EUR20 million). In addition, EUR0.7 million of dividends were paid to Board members and executive committee members (six months ended 30 September 2018: EUR3.9 million). Dividends received from associates are disclosed in the consolidated statement of cash flows.

   12   Fair value of financial instruments 

The table below sets out the valuation basis(1,2) of the financial instruments held at fair value by the Group:

 
                                                 30 September  31 March 
                                                         2019      2019 
                                                         EURm      EURm 
 ---------------------------------------------   ------------  -------- 
Financial assets at fair value: 
 Money market funds (included within Cash 
  and cash equivalents) (1)                             3,452     9,007 
 Debt and equity securities (included within 
  Other investments)(2)                                 4,425    11,056 
 Derivative financial instruments (included 
  within Trade and other receivables)                   5,709     3,634 
 Trade receivables at fair value through 
  Other comprehensive income (included within 
  Trade and other receivables)                          1,022       792 
 ----------------------------------------------  ------------  -------- 
                                                       14,608    24,489 
----------------------------------------------   ------------  -------- 
Financial liabilities at fair value: 
 Derivative financial instruments (included 
  within Trade and other payables)                      4,399     2,444 
 ----------------------------------------------  ------------  -------- 
                                                        4,399     2,444 
----------------------------------------------   ------------  -------- 
 

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 EUR2,128 million (31 March 
       2019: EUR4,108 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 approximate to fair value with the exception of long-term bonds with a carrying value of EUR48,852 million (31 March 2019: EUR44,439 million) and a fair value of EUR51,804 million (31 March 2019: EUR43,616 million). Fair value is based on Level 1 of the fair value hierarchy using quoted market prices.

   13   Commitments, contingent liabilities and legal proceedings 

There have been no material changes to the Group's commitments, contingent liabilities or legal proceedings during the period, except as disclosed below.

Vodafone Idea

As part of the agreement to merge Vodafone India and Idea Cellular, the parties agreed a mechanism for payments between the Group and Vodafone Idea Limited ('VIL') pursuant to the crystallisation of certain identified contingent liabilities in relation to legal, regulatory, tax and other matters, including the AGR case, and refunds relating to Vodafone India and Idea Cellular.

Any future payments by the Group to VIL as a result of this agreement, would only be made after satisfaction of contractual conditions. Having considered the possible future developments for VIL, the Group has concluded that there are significant uncertainties in relation to VIL's ability to settle the liabilities relating to the AGR judgement and has not assessed a cash outflow under the agreement to be probable at this time. The Group's potential exposure under this mechanism is capped at INR 84 billion (EUR1.1 billion).

See note 9 and page 16 for further information.

Indian regulatory cases

Adjusted Gross Revenue ('AGR') dispute before the Supreme Court of India: Union of India v Association of Unified Telecom Service Providers of India

The Department of Telecommunications ('DoT') has been in dispute with telecom service providers in India for over a decade concerning the correct interpretation of licence provisions for fees based on AGR, a concept that is used in the calculation of licence and other fees payable by telecom service providers. On an appeal to the Supreme Court from a decision of the Telecommunications Dispute Settlement Appellate Tribunal ('TDSAT') substantially upholding the telecom service providers' interpretation of AGR, the Supreme Court on 24 October 2019 held against the telecom service providers, including VIL. The Supreme Court's ruling in favour of the DoT renders the telecom service providers, including VIL, liable for principal, interest, penalties and interest on penalties on demands of the DoT in relation to licence fees. The DoT demands become due and payable within three months of the Supreme Court judgement. Based on submissions of the DoT in the Supreme Court proceedings (which the Group is unable to confirm as to their accuracy), VIL's liability appears to be at least INR 283.1 billion (EUR3.7 billion) but could be substantially higher. Application may be made to seek review of the Supreme Court's decision.

Litigation remains pending in the TDSAT, High Courts and the Supreme Court of India in relation to a number of significant regulatory issues including mobile termination rates, spectrum and licence fees, licence extension and 3G intracircle roaming.

The Indian Government has sought to impose one-time spectrum charges of approximately EUR525 million on certain operating subsidiaries of VIL. VIL filed a petition before the TDSAT challenging the one-time spectrum charges on the basis that they are illegal, violate VIL's licence terms and are arbitrary, unreasonable and discriminatory. The tribunal stayed enforcement of the Government's spectrum demand pending resolution of the dispute. In July 2019, the tribunal set aside the DoT's demand for spectrum up to 6.2MHz but upheld, in part, the demand above 6.2 MHz and gave the DoT three months to issue a new demand accordingly. We await the revised demand.

Other cases in the Group

Patent litigation - Germany

The telecoms industry is currently involved in significant levels of patent litigation brought by non-practising entities ('NPEs') which have acquired patent portfolios from current and former industry companies. Vodafone is currently a party to patent litigation cases in Germany brought against Vodafone Germany by Marthon, IPCom and Intellectual Ventures. Vodafone has contractual indemnities from suppliers which have been invoked in relation to the alleged patent infringement liability.

Patent litigation - UK

On 22 February 2019, IPCom sued Vodafone Group Plc and Vodafone Limited for alleged patent infringement of two patents claimed to be essential to UMTS and LTE network standards. If IPCom can establish that one or more of its patents are valid and infringed, it could seek an injunction against the UK network if a global licence for the patents is not agreed. The Court ordered expedited trials of the infringement and validity issues. The first is in November 2019 and the second is in May 2020. A hearing to determine any damages and licence amounts is scheduled for mid-2020.

Italy: Telecom Italia v Vodafone Italy ('TeleTu')

Telecom Italia brought civil claims against Vodafone Italy in relation to TeleTu's alleged anti-competitive retention of customers. Telecom Italia seeks damages in the amount of EUR101 million. The Court decided on 9 June 2015 to appoint an expert to verify whether TeleTu has put in place anti-competitive retention activities. The expert prepared a draft report with a range of damages from EURnil to EUR9 million. The final hearing took place In June 2019 with a decision expected in February 2020.

Italy: Iliad v Vodafone Italy

In August 2019, Iliad filed a claim for EUR500 million against Vodafone Italy in the Civil Court of Milan. The claim alleges anti-competitive behaviour in relation to portability and certain advertising campaigns by Vodafone Italy.

Italian competition regulator

On 15 February 2018, the Italian competition regulator (AGCM) started proceedings against TIM, Fastweb, Wind/3 and the national telecom industry association (Asstel) as well as Vodafone Italy (VF IT), alleging that the Italian telecoms operators shared competitively sensitive information and coordinated their initiatives in relation to their responses to a legislative change requiring them to switch from 28-day to monthly billing cycles. The telecom operators submitted their written responses to the AGCM's Statement of Objections, denying all allegations. The final decision is due by the end of January 2020. If a fine is imposed, appeals are likely to follow.

Greece: Papistas Holdings SA, Mobile Trade Stores (formerly Papistas SA) and Athanasios and Loukia Papistas v Vodafone Greece, Vodafone Group Plc and certain Directors and Officers of Vodafone

In December 2013, Mr. and Mrs. Papistas, and companies owned or controlled by them, brought three claims in the Greek court in Athens against Vodafone Greece, Vodafone Group Plc and certain Directors and officers of Vodafone Greece and Vodafone Group Plc for purported damage caused by the alleged abuse of dominance and wrongful termination of a franchise arrangement with a Papistas company. Approximately EUR1.0 billion of the claim was directed exclusively at two former Directors of Vodafone. The balance of the claim (approximately EUR285.5 million) was sought from Vodafone Greece and Vodafone Group Plc on a joint and several basis. Both cases were adjourned to a hearing in September 2018, at which the plaintiffs withdrew all of their claims against Vodafone and its Directors. On 31 December 2018, the plaintiff filed a new, much lower value claim against Vodafone Greece, removing the individual Directors and Vodafone Group Plc as defendants. On 5 April 2019, Mr Papistas withdrew this latest lawsuit, but in October 2019 filed several new cases against Vodafone Greece with a total value of approximately EUR330 million.

   14   Other matters 

Vodafone Spain

On 25 April 2019, Vodafone Spain and Orange signed a new mobile and fixed network sharing agreement in Spain, which will strengthen their existing partnership and enable the faster deployment of 5G over a wider geographic area. The agreement establishes a more economically efficient investment model for future network deployment, is more environmentally sensitive and will bring the benefit of more rapid 5G adoption to the Spanish economy.

Vodafone Germany

On 12 June 2019, Vodafone Germany acquired radio spectrum for next-generation 5G mobile networks at the Federal Network Agency auction for a total cost of EUR1.88 billion. It secured 90 MHz in the 3.6 GHz band and 40 MHz of 2100 MHz spectrum.

Vodafone UK

On 24 July 2019, Vodafone UK and O2 Telefónica UK Limited ("O2") announced an agreement to share 5G active equipment, such as radio antennas, on joint network sites across the UK. This means more people will get 5G sooner, helping to build a competitive digital economy and encouraging innovative new services that use 5G's speed and greater reliability.

In addition, Vodafone UK and O2 are proceeding to explore potential monetisation options for the parties' 50:50 jointly owned passive tower infrastructure.

Vodafone Italy

On 26 July 2019, Vodafone Italy and Telecom Italia Group ("TIM") announced the creation of an active network sharing partnership for 4G and 5G and the expansion of their existing passive sharing agreement.

Vodafone also agreed to merge its passive tower infrastructure in Italy ("Vodafone Italy Towers") into INWIT SpA ("INWIT") (the "Combination"). As part of the Combination, Vodafone will receive a cash consideration of EUR2,140 million and a 37.5% shareholding in the combined entity, which will remain listed on the Milan Stock Exchange. Vodafone and TIM intend to retain joint control of INWIT, but over time will consider jointly reducing their respective ownership levels from 37.5% to a minimum of 25.0%. The combination is subject to regulatory approval.

European tower infrastructure

On 26 July 2019, Vodafone announced that its' European tower infrastructure will be legally separated into a new organisation with a dedicated management team. Preparations are underway for a variety of monetisation alternatives, to be executed during the next 15 months (depending on market conditions), including a potential IPO.

Vodafone New Zealand

On 31 July 2019, Vodafone completed the sale of 100% of Vodafone New Zealand Limited to a consortium comprising Infratil Limited and Brookfield Asset Management Inc. for a cash consideration equivalent to an Enterprise Value of NZ$3.4 billion (EUR2.0 billion).

Vodafone and Vodafone New Zealand have now entered into a Partner Market agreement, which includes use of the Vodafone brand, preferential roaming arrangements, access to Vodafone's global IoT platform and central procurement function, and a range of services for the business and consumer markets.

Board changes

David Thodey was appointed as a Non-Executive Director with effect from 1 September 2019.

Samuel Jonah KBE did not seek re-election as a Non-Executive Director at the annual general meeting held on 23 July 2019 and therefore ceased to be a Director on that date.

   15   Subsequent events 

Vodafone UK and Virgin Media

On 6 November 2019, Vodafone UK and Virgin Media agreed a five year deal to bring innovative new services, including 5G, to more than three million mobile customers and to provide further flexibility for Virgin Media to grow its mobile operation.

The new Mobile Virtual Network Operator (MVNO) agreement, which runs until 2026, will see Vodafone supply wholesale mobile network services, including both voice and data, to Virgin Mobile and Virgin Media Business. Virgin Media will have full access to all of Vodafone's current services and future technologies, such as Vodafone's expanding 5G network, enabling new product advancements and benefits for its customers.

INDEPENT REVIEW REPORT TO VODAFONE GROUP PLC

Introduction

We have been engaged by the Company to review the unaudited condensed consolidated financial statements in the half yearly financial report for the six months ended 30 September 2019 which comprise the consolidated income statement, the consolidated statement of comprehensive income, 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 15. 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 condensed set of financial statements.

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.

Directors' Responsibilities

The half yearly financial report is the responsibility of, and has been approved by, 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.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board and as adopted by the European Union. The condensed consolidated financial statements included in this half yearly results report have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed consolidated financial statements in the half yearly results report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. 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.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements in the half yearly results report for the six months ended 30 September 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as issued by the International Accounting Standards Board and as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Ernst & Young LLP

London

12 November 2019

Notes:

1. The maintenance and integrity of the Vodafone Group Plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial information since it was initially presented on the website.

2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

ALTERNATIVE PERFORMANCE MEASURES

In the discussion of the Group's reported operating results, alternative performance 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 an expressly permitted GAAP measure. Such measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure.

For the six months ended 30 September 2019, a revised definition for adjusted EBITDA has been applied. This restricts the period-on-period comparability of certain of the Group's alternative performance measures.

Further information on the use of alternative performance measures is outlined on pages 231 to 233 of the Group's annual report for the financial year ended 31 March 2019.

Service revenue

Service revenue comprises all revenue related to the provision of ongoing services including, but not limited to, monthly access charges, airtime usage, roaming, incoming and outgoing network usage by non-Vodafone customers and interconnect charges for incoming calls. We believe that it is both useful and necessary to report this measure for the following reasons:

   --    It is used for internal performance reporting; 
   --    It is used in setting director and management remuneration; and 
   --    It is useful in connection with discussion with the investment analyst community. 

A reconciliation of reported service revenue to the respective closest equivalent GAAP measure, revenue, is provided in the section "Financial results" beginning on page 10.

Revised definition of adjusted EBITDA

For the six months ended 30 September 2019, a revised definition for adjusted EBITDA has been applied, as follows: operating profit after depreciation on lease-related right of use assets and interest on leases but excluding depreciation, amortisation and gains/losses on disposal for owned fixed assets and excluding share of results in associates and joint ventures, impairment losses, restructuring costs arising from discrete restructuring plans, other operating income and expense and significant items that are not considered by management to be reflective of the underlying performance of the Group.

For the six months ended 30 September 2018, adjusted EBITDA is operating profit excluding share of results in associates and joint ventures, depreciation and amortisation, gains/losses on the disposal of fixed assets, impairment losses, restructuring costs arising from discrete restructuring plans, other operating income and expense and significant items that are not considered by management to the reflective of the underlying performance of the Group.

Use of adjusted EBITDA

We use adjusted EBITDA, in conjunction with other GAAP and non-GAAP financial measures such as adjusted EBIT, adjusted operating profit, operating profit and net profit, to assess our operating performance. We believe that adjusted EBITDA is an operating performance measure, not a liquidity measure, as it includes non-cash changes in working capital and is reviewed by the Chief Executive to assess internal performance in conjunction with adjusted EBITDA margin, which is an alternative sales margin figure. We believe it is both useful and necessary to report adjusted EBITDA as a performance measure as it enhances the comparability of profit across segments.

Because adjusted EBITDA does not take into account certain items that affect operations and performance, adjusted EBITDA has inherent limitations as a performance measure. To compensate for these limitations, we analyse adjusted EBITDA in conjunction with other GAAP and non-GAAP operating performance measures. Adjusted EBITDA should not be considered in isolation or as a substitute for a GAAP measure of operating performance.

A reconciliation of adjusted EBITDA to the closest equivalent GAAP measure, operating profit, is provided in the section "Financial results" beginning on page 10.

Group adjusted EBIT, adjusted operating profit and adjusted earnings per share

Group adjusted EBIT and adjusted operating profit exclude impairment losses, restructuring costs arising from discrete restructuring plans, amortisation of customer bases and brand intangible assets, other operating income and expense and other significant one-off items. Adjusted EBIT also excludes the share of results in associates and joint ventures. Adjusted earnings per share also excludes certain foreign exchange rate differences, together with related tax effects.

We believe that it is both useful and necessary to report these measures for the following reasons:

   --    These measures are used for internal performance reporting; 
   --    These measures are used in setting director and management remuneration; and 

-- They are useful in connection with discussion with the investment analyst community and debt rating agencies.

Reconciliations of adjusted EBIT, adjusted operating profit and adjusted earnings per share to the respective closest equivalent GAAP measures, operating profit and basic earnings per share, respectively, are provided in the section "Financial results" beginning on page 10.

Cash flow measures and capital additions

In presenting and discussing our reported results, free cash flow (pre-spectrum), free cash flow, capital additions and operating free cash flow are calculated and presented even though these measures are not recognised within IFRS. We believe that it is both useful and necessary to communicate free cash flow to investors and other interested parties, for the following reasons:

-- Free cash flow (pre-spectrum) and free cash flow allows us and external parties to evaluate our liquidity and the cash generated by our operations. Free cash flow (pre-spectrum) and capital additions do not include payments for licences and spectrum included within intangible assets, items determined independently of the ongoing business, such as the level of dividends, and items which are deemed discretionary, such as cash flows relating to acquisitions and disposals or financing activities. In addition, it does not necessarily reflect the amounts which we have an obligation to incur. However, it does reflect the cash available for such discretionary activities, to strengthen the consolidated statement of financial position or to provide returns to shareholders in the form of dividends or share purchases;

-- Free cash flow facilitates comparability of results with other companies, although our measure of free cash flow may not be directly comparable to similarly titled measures used by other companies;

   --    These measures are used by management for planning, reporting and incentive purposes; and 

-- These measures are useful in connection with discussion with the investment analyst community and debt rating agencies.

A reconciliation of cash generated by operations, the closest equivalent GAAP measure, to operating free cash flow, free cash flow (pre-spectrum) and free cash flow, is provided below.

 
 
                                               Six months ended 30 
                                                    September 
                                              --------------------- 
                                                    2019       2018 
                                                    EURm       EURm 
------------------------------------------    ----------  --------- 
Net cash flow from operating activities            6,139      4,826 
Net tax paid                                         483        428 
Cash flow from discontinued operations                 -         71 
--------------------------------------------  ----------  --------- 
Cash generated by operations (refer 
 to note 10)                                       6,622      5,325 
Capital additions                                (3,000)    (3,067) 
Working capital movement in respect 
 of capital additions                              (713)      (821) 
Disposal of property, plant and equipment             21          4 
Restructuring payments                               302         97 
Payments in respect of lease liabilities         (1,841)          - 
Fees paid in respect of acquisitions 
 of subsidiaries                                       4          - 
--------------------------------------------  ----------  --------- 
Operating free cash flow                           1,395      1,538 
Taxation                                           (483)      (395) 
Dividends received from associates 
 and investments                                      63        305 
Dividends paid to non-controlling 
 shareholders in subsidiaries                      (169)      (185) 
Interest received and paid                         (412)      (369) 
--------------------------------------------  ----------  --------- 
Free cash flow (pre-spectrum)                        394        894 
Licence and spectrum payments                       (58)      (231) 
Restructuring payments                             (302)       (97) 
--------------------------------------------  ----------  --------- 
Free cash flow                                        34        566 
--------------------------------------------  ----------  --------- 
 

Other

A summary of certain other alternative performance measures included in this results announcement, together with details of where additional information and reconciliation to the nearest equivalent GAAP measure can be found, is shown below.

 
                                                     Location in this results 
 Alternative performance   Closest equivalent         announcement of reconciliation 
  measure                   GAAP measure              and further information 
------------------------  ------------------------  -------------------------------- 
 Adjusted profit           Profit before taxation    Taxation on page 18 
  before tax 
------------------------  ------------------------  -------------------------------- 
 Adjusted effective        Income tax expense        Taxation on page 18 
  tax rate                  as a percentage of 
                            profit before taxation 
------------------------  ------------------------  -------------------------------- 
 Adjusted income           Income tax expense        Taxation on page 18 
  tax expense 
------------------------  ------------------------  -------------------------------- 
 Adjusted profit           Loss attributable to      Adjusted earnings per share 
  attributable to           owners of the parent      on page 19 
  owners of the parent 
------------------------  ------------------------  -------------------------------- 
 

Certain of the statements within the section titled "Chief Executive's Statement" on pages 3 to 7 contain forward-looking alternative performance measures for which at this time there is no comparable GAAP measure and which at this time cannot be quantitatively reconciled to comparable GAAP financial information. Certain of the statements within the section titled "Guidance" on page 8 contain forward-looking alternative performance measures which at this time cannot be quantitatively reconciled to comparable GAAP financial information.

Organic growth and change at constant exchange rates

All amounts in this document marked with an "*" represent "organic growth", which presents performance on a comparable basis in terms of merger and acquisition activity (notably by excluding Vodafone New Zealand and the acquired European Liberty Global assets), movements in foreign exchange rates and the impact of the implementation of IFRS 16 'Leases'.

"Change at constant exchange rates" presents performance on a comparable basis in terms of foreign exchange rates only.

Whilst neither of these measures are intended to be a substitute for reported growth, nor are they superior to reported growth, we believe that these measures provide useful and necessary information to investors and other interested parties for the following reasons:

-- They provide additional information on underlying growth of the business without the effect of certain factors unrelated to its operating performance;

   --    They are used for internal performance analysis; and 

-- They facilitate comparability of underlying growth with other companies (although the term "organic" is not a defined term under IFRS 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 news release. If comparatives were provided, significant sections of the commentary from the news release for prior periods would also need to be included, reducing the usefulness and transparency of this document.

Reconciliations of organic growth to reported growth are shown where used or in the tables below.

 
 
                                   2019           2018 
                                                                        Other 
                                                                     activity 
                                                        Reported   (including    Foreign   Organic 
                                         (restated)(1)    growth         M&A)   exchange   growth* 
                                   EURm           EURm         %          pps        pps         % 
 ------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Six months ended 30 September 
Revenue 
Germany                           5,590          5,180       7.9        (7.8)          -       0.1 
Italy                             2,709          2,898     (6.5)            -          -     (6.5) 
UK                                3,151          3,131       0.6            -        0.5       1.1 
Spain                             2,161          2,409    (10.3)            -          -    (10.3) 
Other Europe                      2,690          2,540       5.9        (3.9)        0.1       2.1 
Eliminations                       (76)           (65) 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Europe                           16,225         16,093       0.8        (3.1)        0.1     (2.2) 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Vodacom                           2,734          2,718       0.6            -        1.8       2.4 
Other markets                     2,351          2,459     (4.4)          9.4        2.6       7.6 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Rest of the World                 5,085          5,177     (1.8)          4.1        2.2       4.5 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Other                               787            738 
Eliminations                      (158)          (160) 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Group                            21,939         21,848       0.4        (1.7)        0.6     (0.7) 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
 
Adjusted EBITDA 
Germany                           2,352          2,082      13.0        (9.5)          -       3.5 
Italy                             1,006          1,058     (4.9)          1.4          -     (3.5) 
UK                                  658            675     (2.5)          1.3        0.4     (0.8) 
Spain                               460            529    (13.0)          1.7          -    (11.3) 
Other Europe                        872            833       4.7        (1.5)      (0.1)       3.1 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Europe                            5,348          5,177       3.3        (3.5)        0.1     (0.1) 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Vodacom                           1,019          1,070     (4.8)          2.7        2.1         - 
Other markets                       755            673      12.2         11.3      (0.8)      22.7 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Rest of the World                 1,774          1,743       1.8          5.0        1.0       7.8 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Other                              (17)            (5) 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Group                             7,105          6,915       2.7        (1.6)        0.3       1.4 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
 
Percentage point change in adjusted 
 EBITDA margin 
Germany                           42.1%          40.2%       1.9        (0.5)          -       1.4 
Italy                             37.1%          36.5%       0.6          0.5          -       1.1 
UK                                20.9%          21.6%     (0.7)          0.2        0.1     (0.4) 
Spain                             21.3%          22.0%     (0.7)          0.5          -     (0.2) 
Other Europe                      32.4%          32.8%     (0.4)          0.7          -       0.3 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Europe                            33.0%          32.2%       0.8        (0.1)          -       0.7 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Vodacom                           37.3%          39.4%     (2.1)          1.1        0.1     (0.9) 
Other markets                     32.1%          27.4%       4.7          0.3      (0.9)       4.1 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Rest of the World                 34.9%          33.7%       1.2          0.3      (0.4)       1.1 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Other                             -2.2%          -0.7%     (1.5)        (1.8)      (0.2)     (3.5) 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Group                             32.4%          31.7%       0.7            -      (0.1)       0.6 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
 
Adjusted EBIT 
Europe                            1,127          1,082       4.2        (7.5)      (0.1)     (3.4) 
Rest of the World                 1,116          1,026       8.8          0.4        0.8      10.0 
Other                              (12)             34 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Group                             2,231          2,142       4.2        (4.4)        0.2         - 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
 
Adjusted operating profit 
Europe                            1,166          1,114       4.7        (7.3)          -     (2.6) 
Rest of the World                   526            986    (46.7)         59.7        0.8      13.8 
Other                              (11)             34 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Group                             1,681          2,134    (21.2)         23.7        0.3       2.8 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
 
Note: 
1. The Group's results for the six months ended 30 September 
 2018 have been re-presented on an IFRS 15 basis. 
 
 
 
                                   2019           2018 
                                                                        Other 
                                                                     activity 
                                                        Reported   (including    Foreign   Organic 
                                         (restated)(1)    growth         M&A)   exchange   growth* 
                                   EURm           EURm         %          pps        pps         % 
 ------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Six months ended 30 September 
Service revenue 
Germany                           4,961          4,577       8.4        (8.3)          -       0.1 
                                 ------  -------------  --------  -----------  ---------  -------- 
 Mobile service revenue           2,549          2,589     (1.5)        (0.1)          -     (1.6) 
 Fixed service revenue            2,412          1,988      21.3       (19.0)          -       2.3 
 ------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Italy                             2,424          2,512     (3.5)            -          -     (3.5) 
                                 ------  -------------  --------  -----------  ---------  -------- 
 Mobile service revenue           1,839          1,976     (6.9)            -          -     (6.9) 
 Fixed service revenue              585            536       9.1          0.1          -       9.2 
 ------------------------------  ------  -------------  --------  -----------  ---------  -------- 
UK                                2,451          2,460     (0.4)            -        0.5       0.1 
                                 ------  -------------  --------  -----------  ---------  -------- 
 Mobile service revenue           1,785          1,800     (0.8)            -        0.4     (0.4) 
 Fixed service revenue              666            660       0.9            -        0.4       1.3 
 ------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Spain                             1,966          2,162     (9.1)          0.4          -     (8.7) 
Other Europe                      2,392          2,238       6.9        (4.3)        0.1       2.7 
                                 ------  -------------  --------  -----------  ---------  -------- 
 Of which: Ireland                  424            419       1.2        (1.3)          -     (0.1) 
 Of which: Portugal                 492            472       4.2          0.1          -       4.3 
 Of which: Greece                   455            426       6.8        (2.7)          -       4.1 
 ------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Eliminations                       (74)           (62)      19.4            -      (0.3)      19.1 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Europe                           14,120         13,887       1.7        (3.4)        0.1     (1.6) 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Vodacom                           2,217          2,199       0.8            -        1.6       2.4 
                                 ------  -------------  --------  -----------  ---------  -------- 
 Of which: South Africa           1,589          1,639     (3.1)            -        3.4       0.3 
 Of which: International 
  operations                        628            558      12.5            -      (3.4)       9.1 
 ------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Other markets                     2,024          1,990       1.7         12.3        1.4      15.4 
                                 ------  -------------  --------  -----------  ---------  -------- 
 Of which: Turkey                   933            871       7.1            -       11.5      18.6 
 Of which: Egypt                    669            520      28.7            -     (14.0)      14.7 
 ------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Eliminations                          -              -         -            -       44.4      44.4 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Rest of the World                 4,241          4,189       1.2          4.9        1.6       7.7 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Other                               240            246     (2.4)          2.0      (0.3)     (0.7) 
Eliminations                       (57)           (54)       5.6          0.8        1.2       7.6 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Total service revenue            18,544         18,268       1.5        (1.6)        0.4       0.3 
Other revenue                     3,395          3,580     (5.2)        (2.1)        1.6     (5.7) 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
Revenue                          21,939         21,848       0.4        (1.7)        0.6     (0.7) 
-------------------------------  ------  -------------  --------  -----------  ---------  -------- 
 
 
Six months ended 30 September 
Other growth metrics 
Vodafone Business Revenue              5,252    5,251        -      0.5      0.3      0.8 
Germany - Mobile retail 
 revenue excl. regulatory 
 impact                                2,475    2,447      1.1    (0.1)        -      1.0 
Germany - Fixed retail 
 revenue                               2,312    1,879     23.0   (20.1)        -      2.9 
Germany - Retail revenue               4,762    4,326     10.1    (8.8)        -      1.3 
Germany - Net operating 
 costs                               (1,349)  (1,262)      6.9   (11.4)        -    (4.5) 
Italy - Net operating 
 costs                                 (552)    (587)    (6.0)    (1.9)        -    (7.9) 
Spain - Net operating 
 costs                                 (566)    (594)    (4.7)    (1.4)        -    (6.1) 
UK - Net operating costs               (870)    (912)    (4.6)    (0.8)      0.3    (5.1) 
UK - Adjusted EBITDA 
 margin excl. Cloud partnership 
 and licence fee drag                  21.4%    21.1%      0.3        -      0.3      0.6 
South Africa - Service 
 revenue excl. one-off 
 benefit in the prior 
 year                                  1,589    1,621    (2.0)        -      3.5      1.5 
Turkey - Adjusted EBITDA                 309      265     16.6      4.6     11.4     32.6 
Egypt - Adjusted EBITDA                  329      245     34.3      1.2   (14.8)     20.7 
-----------------------------------  -------  -------  -------  -------  -------  ------- 
 
Note: 
1. The Group's results for the six months ended 30 September 2018 
 have been re-presented on an IFRS 15 basis. 
 
 
 
 
                                2019           2018 
                                                                     Other 
                                                                  activity 
                                                     Reported   (including    Foreign   Organic 
                                      (restated)(1)    growth         M&A)   exchange   growth* 
                                EURm           EURm         %          pps        pps         % 
 ---------------------------  ------  -------------  --------  -----------  ---------  -------- 
Quarter ended 30 September 
Service revenue 
Germany                        2,696          2,320      16.2       (16.4)          -     (0.2) 
                              ------  -------------  --------  -----------  ---------  -------- 
 Mobile service revenue        1,289          1,321     (2.4)        (0.3)          -     (2.7) 
 Fixed service revenue         1,407            999      40.8       (37.8)          -       3.0 
 ---------------------------  ------  -------------  --------  -----------  ---------  -------- 
Italy                          1,226          1,267     (3.2)            -          -     (3.2) 
                              ------  -------------  --------  -----------  ---------  -------- 
 Mobile service revenue          934            999     (6.5)            -          -     (6.5) 
 Fixed service revenue           292            268       9.0          0.1          -       9.1 
 ---------------------------  ------  -------------  --------  -----------  ---------  -------- 
UK                             1,218          1,231     (1.1)            -        1.1         - 
                              ------  -------------  --------  -----------  ---------  -------- 
 Mobile service revenue          888            905     (1.9)            -        1.2     (0.7) 
 Fixed service revenue           330            326       1.2            -        1.0       2.2 
 ---------------------------  ------  -------------  --------  -----------  ---------  -------- 
Spain                            978          1,068     (8.4)          0.4          -     (8.0) 
Other Europe                   1,264          1,141      10.8        (7.6)        0.1       3.3 
                              ------  -------------  --------  -----------  ---------  -------- 
 Of which: Ireland               215            208       3.4        (2.5)          -       0.9 
 Of which: Portugal              254            241       5.4        (0.1)          -       5.3 
 Of which: Greece                237            224       5.8        (1.4)          -       4.4 
 ---------------------------  ------  -------------  --------  -----------  ---------  -------- 
Eliminations                    (44)           (36)      22.2            -      (0.6)      21.6 
----------------------------  ------  -------------  --------  -----------  ---------  -------- 
Europe                         7,338          6,991       5.0        (6.6)        0.2     (1.4) 
----------------------------  ------  -------------  --------  -----------  ---------  -------- 
Vodacom                        1,139          1,086       4.9            -      (1.3)       3.6 
                              ------  -------------  --------  -----------  ---------  -------- 
 Of which: South Africa          811            794       2.1            -      (0.3)       1.8 
 Of which: International 
  operations                     329            292      12.7            -      (3.0)       9.7 
 ---------------------------  ------  -------------  --------  -----------  ---------  -------- 
Other markets                    988            971       1.8         19.5      (4.9)      16.4 
                              ------  -------------  --------  -----------  ---------  -------- 
 Of which: Turkey                499            402      24.1            -      (4.3)      19.8 
 Of which: Egypt                 356            272      30.9            -     (15.3)      15.6 
 ---------------------------  ------  -------------  --------  -----------  ---------  -------- 
Eliminations                       -              -         -         23.3       16.7      40.0 
----------------------------  ------  -------------  --------  -----------  ---------  -------- 
Rest of the World              2,127          2,057       3.4          8.5      (3.0)       8.9 
----------------------------  ------  -------------  --------  -----------  ---------  -------- 
Other                            117            115       1.7          1.8      (0.8)       2.7 
Eliminations                    (32)           (25)      28.0          0.7        5.0      33.7 
----------------------------  ------  -------------  --------  -----------  ---------  -------- 
Total service revenue          9,550          9,138       4.5        (3.2)      (0.6)       0.7 
Other revenue                  1,736          1,808     (4.0)        (1.7)      (0.1)     (5.8) 
----------------------------  ------  -------------  --------  -----------  ---------  -------- 
Revenue                       11,286         10,946       3.1        (3.0)      (0.5)     (0.4) 
----------------------------  ------  -------------  --------  -----------  ---------  -------- 
 
 
Quarter ended 30 September 
Other growth metrics 
Vodafone Business Revenue         2,596    2,593      0.1      0.9    (0.1)      0.9 
Germany - Mobile retail 
 revenue excl. regulatory 
 impact                           1,254    1,252      0.2    (0.3)        -    (0.1) 
Germany - Fixed retail 
 revenue                          1,355      945     43.4   (40.0)        -      3.4 
Germany - Retail revenue          2,594    2,197     18.1   (17.4)        -      0.7 
South Africa - Service 
 revenue excl. one-off 
 benefit in the prior 
 year                               811      776      4.5        -    (0.3)      4.2 
------------------------------  -------  -------  -------  -------  -------  ------- 
 
Note: 
1. The Group's results for the quarter ended 30 September 2018 
 have been re-presented on an IFRS 15 basis. 
 
 
 
 
                             2019           2018 
                                                                  Other 
                                                               activity 
                                                  Reported   (including    Foreign   Organic 
                                   (restated)(1)    growth         M&A)   exchange   growth* 
                             EURm           EURm         %          pps        pps         % 
 ------------------------  ------  -------------  --------  -----------  ---------  -------- 
Quarter ended 30 June 
Service revenue 
Germany                     2,265          2,257       0.4            -          -       0.4 
                           ------  -------------  --------  -----------  ---------  -------- 
 Mobile service revenue     1,260          1,268     (0.6)          0.1          -     (0.5) 
 Fixed service revenue      1,005            989       1.6        (0.1)          -       1.5 
 ------------------------  ------  -------------  --------  -----------  ---------  -------- 
Italy                       1,198          1,245     (3.8)            -          -     (3.8) 
                           ------  -------------  --------  -----------  ---------  -------- 
 Mobile service revenue       905            977     (7.4)            -          -     (7.4) 
 Fixed service revenue        293            268       9.3        (0.1)          -       9.2 
 ------------------------  ------  -------------  --------  -----------  ---------  -------- 
UK                          1,233          1,229       0.3            -      (0.2)       0.1 
                           ------  -------------  --------  -----------  ---------  -------- 
 Mobile service revenue       897            895       0.2            -      (0.2)         - 
 Fixed service revenue        336            334       0.6            -      (0.3)       0.3 
 ------------------------  ------  -------------  --------  -----------  ---------  -------- 
Spain                         988          1,094     (9.7)          0.4          -     (9.3) 
Other Europe                1,128          1,097       2.8        (0.8)        0.1       2.1 
                           ------  -------------  --------  -----------  ---------  -------- 
 Of which: Ireland            209            211     (0.9)        (0.2)          -     (1.1) 
 Of which: Portugal           238            231       3.0          0.2          -       3.2 
 Of which: Greece             218            202       7.9        (4.2)          -       3.7 
 ------------------------  ------  -------------  --------  -----------  ---------  -------- 
Eliminations                 (30)           (26) 
-------------------------  ------  -------------  --------  -----------  ---------  -------- 
Europe                      6,782          6,896     (1.7)            -          -     (1.7) 
-------------------------  ------  -------------  --------  -----------  ---------  -------- 
Vodacom                     1,078          1,113     (3.1)            -        4.2       1.1 
                           ------  -------------  --------  -----------  ---------  -------- 
 Of which: South Africa       778            845     (7.9)            -        6.7     (1.2) 
 Of which: International 
  operations                  299            266      12.4            -      (3.8)       8.6 
 ------------------------  ------  -------------  --------  -----------  ---------  -------- 
Other markets               1,036          1,019       1.7            -        8.3      10.0 
                           ------  -------------  --------  -----------  ---------  -------- 
 Of which: Turkey             434            469     (7.5)            -       24.7      17.2 
 Of which: Egypt              313            248      26.2            -     (12.6)      13.6 
 ------------------------  ------  -------------  --------               ---------  -------- 
Rest of the World           2,114          2,132     (0.8)            -        6.1       5.3 
-------------------------  ------  -------------  --------  -----------  ---------  -------- 
Other                         123            131 
Eliminations                 (25)           (29) 
-------------------------  ------  -------------  --------  -----------  ---------  -------- 
Total service revenue       8,994          9,130     (1.5)        (0.1)        1.4     (0.2) 
Other revenue               1,659          1,772     (6.4)        (2.0)        3.3     (5.1) 
-------------------------  ------  -------------  --------  -----------  ---------  -------- 
Revenue                    10,653         10,902     (2.3)        (0.3)        1.7     (0.9) 
-------------------------  ------  -------------  --------  -----------  ---------  -------- 
 
 
Quarter ended 30 June 
Other growth metrics 
Vodafone Business revenue        2,655    2,658    (0.1)    (0.3)      0.8      0.4 
Germany - Mobile retail 
 revenue                         1,212    1,195      1.4        -        -      1.4 
Germany - Mobile retail 
 revenue excl. regulatory 
 impact                          1,222    1,195      2.3    (0.1)        -      2.2 
Germany - Fixed retail 
 revenue                           956      934      2.4        -        -      2.4 
Germany - Retail revenue         2,168    2,129      1.8        -        -      1.8 
South Africa - Service 
 revenue excl. one-off 
 benefit in the prior 
 year                              778      845    (7.9)        -      6.7    (1.2) 
-----------------------------  -------  -------  -------  -------  -------  ------- 
 
Note: 
1. The Group's results for the quarter ended 30 September 2018 
 have been re-presented on an IFRS 15 basis. 
 
 

ADDITIONAL INFORMATION

 
Regional results for the six months ended 30 September 
 
                         Revenue           Adjusted EBITDA      Adjusted operating       Capital       Operating 
                                                                      profit            additions       free cash 
                                                                                                          flow 
                  ---------------------  --------------------  --------------------  ---------------  ------------ 
                    2019           2018   2019           2018   2019           2018   2019      2018   2019   2018 
                          (restated)(1)         (restated)(1)         (restated)(1) 
                    EURm           EURm   EURm           EURm   EURm           EURm   EURm      EURm   EURm   EURm 
----------------  ------  -------------  -----  -------------  -----  -------------  -----  --------  -----  ----- 
Europe 
Germany            5,590          5,180  2,352          2,082    764            619    836       786    950    943 
Italy              2,709          2,898  1,006          1,058    383            417    229       282    332    640 
UK                 3,151          3,131    658            675  (162)          (141)    329       330     24    106 
Spain              2,161          2,409    460            529  (161)          (101)    309       363     41    (3) 
----------------  ------  -------------  -----  -------------  -----  -------------  -----            ----- 
Other Europe 
 Netherlands(2)        -              -      -              -     44             36      -         -      -      - 
 Portugal            541            519    207            206     66             62     84        95    119    134 
 Greece              488            459    155            147     64             59     51        59     15     10 
 Other             1,668          1,568    510            480    168            163    209       193    114    110 
 Eliminations        (7)            (6)      -              -      -              -      -         -      -      - 
                  ------  -------------  -----  -------------  -----  -------------  -----            ----- 
Other Europe       2,690          2,540    872            833    342            320    344       347    248    254 
Eliminations        (76)           (65)      -              -      -              -      -         -      -      - 
----------------  ------  -------------  -----  -------------  -----  -------------  -----            ----- 
Europe            16,225         16,093  5,348          5,177  1,166          1,114  2,047     2,108  1,595  1,940 
----------------  ------  -------------  -----  -------------  -----  -------------  -----            ----- 
 
Rest of 
 the World 
Vodacom            2,734          2,718  1,019          1,070    756            797    390       338    484    457 
----------------  ------  -------------  -----  -------------  -----  -------------  -----            ----- 
Other Markets 
 Turkey            1,156          1,225    309            265    180            124    114       116  (120)  (253) 
 Egypt               694            536    329            245    233            165    106        87    244    198 
 India(2)              -              -      -              -  (692)          (133)      -         -      -      - 
 Other               501            698    117            163     49             33     54        84     35     32 
 Eliminations     -       -              -      -              -      -              -      -         -      - 
                  ------  -------------  -----  -------------  -----  -------------  -----            ----- 
Other Markets      2,351          2,459    755            673  (230)            189    274       287    159   (23) 
Eliminations           -              -      -              -      -              -      -         -      -      - 
----------------  ------  -------------  -----  -------------  -----  -------------  -----            ----- 
Rest of 
 the World         5,085          5,177  1,774          1,743    526            986    664       625    643    434 
----------------  ------  -------------  -----  -------------  -----  -------------  -----            ----- 
 
Other                787            738   (17)            (5)   (11)             34    289       334  (843)  (836) 
Eliminations       (158)          (160)      -              -      -              -      -         -      -      - 
----------------  ------  -------------  -----  -------------  -----  -------------  -----            ----- 
Group             21,939         21,848  7,105          6,915  1,681          2,134  3,000     3,067  1,395  1,538 
----------------  ------  -------------  -----  -------------  -----  -------------  -----            ----- 
 

Notes:

 
 1.   The Group's results for the six months ended 30 September 2018 
       have been re-presented on an IFRS 15 basis. 
 2.   Includes the Group's share of the joint venture in this market. 
 
 
Revenue for the quarter ended 30 September 
 
Group and Regions              Group                   Europe              Rest of the World 
                          2019           2018      2019           2018      2019           2018 
                                (restated)(1)            (restated)(1)            (restated)(1) 
                          EURm           EURm      EURm           EURm      EURm           EURm 
Mobile customer 
 revenue                 5,757          5,784     4,049          4,167     1,701          1,613 
Mobile incoming 
 revenue                   437            451       301            322       150            139 
Other service 
 revenue                   520            508       348            358       109             86 
Mobile service 
 revenue                 6,714          6,743     4,698          4,847     1,960          1,838 
Fixed service 
 revenue                 2,836          2,395     2,640          2,144       167            219 
Service revenue          9,550          9,138     7,338          6,991     2,127          2,057 
Other revenue            1,736          1,808     1,095          1,145       411            468 
Revenue                 11,286         10,946     8,433          8,136     2,538          2,525 
 
                                                       Growth 
                      Reported       Organic*  Reported       Organic*  Reported       Organic* 
                             %           EURm         %           EURm         %           EURm 
Revenue                   3.1%         (0.4)%      3.7%         (2.2)%      0.5%           5.7% 
Service revenue           4.5%           0.7%      5.0%         (1.4)%      3.4%           8.9% 
 
Operating Companies           Germany                   Italy                     UK 
                          2019           2018      2019           2018      2019           2018 
                                (restated)(1)            (restated)(1)            (restated)(1) 
                          EURm           EURm      EURm           EURm      EURm           EURm 
Mobile customer 
 revenue                 1,127          1,138       794            854       755            773 
Mobile incoming 
 revenue                    49             50        71             81        65             71 
Other service 
 revenue                   113            133        69             64        68             61 
Mobile service 
 revenue                 1,289          1,321       934            999       888            905 
Fixed service 
 revenue                 1,407            999       292            268       330            326 
Service revenue          2,696          2,320     1,226          1,267     1,218          1,231 
Other revenue              322            301       153            206       364            350 
Revenue                  3,018          2,621     1,379          1,473     1,582          1,581 
 
                                                       Growth 
                      Reported       Organic*  Reported       Organic*  Reported       Organic* 
                             %           EURm         %           EURm         %           EURm 
Revenue                  15.1%         (0.2)%    (6.4)%         (6.4)%      0.1%           1.1% 
Service revenue          16.2%         (0.2)%    (3.2)%         (3.2)%    (1.1)%              - 
 
                               Spain                   Vodacom 
                          2019           2018      2019           2018 
                                (restated)(1)            (restated)(1) 
                          EURm           EURm      EURm           EURm 
Mobile customer 
 revenue                   563            629       957            931 
Mobile incoming 
 revenue                    29             31        41             42 
Other service 
 revenue                    59             52        71             48 
Mobile service 
 revenue                   651            712     1,069          1,021 
Fixed service 
 revenue                   327            356        70             65 
Service revenue            978          1,068     1,139          1,086 
Other revenue              101            135       263            261 
Revenue                  1,079          1,203     1,402          1,347 
 
                                           Growth 
                      Reported       Organic*  Reported       Organic* 
                             %           EURm         %           EURm 
Revenue                (10.3)%        (10.4)%      4.1%           2.9% 
Service revenue         (8.4)%         (8.0)%      4.9%           3.6% 
 

Notes:

 
 1.   The Group's results for the six months ended 30 September 2018 
       have been re-presented on an IFRS 15 basis. 
 
 
Reconciliation of adjusted earnings 
 
                                                Discontinued 
                                      Reported    operations  Adjustments(1)  Adjusted 
Six months ended 30 September 2019        EURm          EURm            EURm      EURm 
Operating profit                           577             -             872     1,449 
Amortisation of acquired customer 
 base and brand intangible assets            -             -             232       232 
Net financing costs                    (1,088)             -             289     (799) 
(Loss)/ profit before taxation           (511)             -           1,393       882 
Income tax expense                     (1,380)             -             986     (394) 
(Loss)/ profit for the financial 
 period continuing operations          (1,891)             -           2,379       488 
Loss for the financial period from           -             -               -         - 
 discontinued operations 
(Loss)/ profit for the financial 
 period                                (1,891)             -           2,379       488 
 
Attributable to: 
- Owners of the parent                 (2,128)             -           2,378       250 
- Non-controlling interests                237             -               1       238 
 
Basic (loss)/earnings per share        (7.24c)                                   0.85c 
 
 
 
                                                   Discontinued 
                                         Reported    operations  Adjustments(1)  Adjusted 
Six months ended 30 September 2018           EURm          EURm            EURm      EURm 
 (restated)(2) 
Operating (loss)/profit                   (2,029)             -           3,846     1,817 
Amortisation of acquired customer 
 base and brand intangible assets               -             -             317       317 
Non-operating income and expense              (3)             -               3         - 
Net financing costs                         (815)             -             400     (415) 
(Loss)/profit before taxation             (2,847)             -           4,566     1,719 
Income tax expense                        (1,420)             -           1,010     (410) 
(Loss)/profit for the financial period 
 continuing operations                    (4,267)             -           5,576     1,309 
Loss for the financial period from 
 discontinued operations                  (3,535)         3,535               -         - 
(Loss)/profit for the financial period    (7,802)         3,535           5,576     1,309 
 
Attributable to: 
- Owners of the parent                    (7,934)         3,535           5,575     1,176 
- Non-controlling interests                   132             -               1       133 
 
Basic (loss)/earnings per share          (28.89c)                                   4.28c 
 
 

Notes:

 
 1.   See page 19 for further details. 
 2.   Revenue for the comparative period has been revised for the allocation 
       of, and timing of recognition for, equipment and service revenue 
       compared to amounts previously disclosed in the condensed consolidated 
       financial statements for the six months ended 30 September 2018. 
       This resulted in a net increase in revenue of EUR52 million and 
       the loss for the financial period decreased by EUR31 million. 
 

OTHER INFORMATION

Definition of terms

 
Term                  Definition 
Adjusted              Operating profit excluding share of results in associates 
 EBIT                  and joint ventures, impairment losses, amortisation 
                       of customer bases and brand intangible assets restructuring 
                       costs arising from discrete restructuring plans, lease-related 
                       interest and other income and expense. The Group's 
                       definition of adjusted EBIT may not be comparable with 
                       similarly titled measures and disclosures by other 
                       companies. 
Adjusted              For the six months ended 30 September 2019, adjusted 
 EBITDA                EBITDA is operating profit after depreciation on lease-related 
                       right of use assets and interest on leases but excluding 
                       depreciation, amortisation and gains/losses on disposal 
                       for owned fixed assets and excluding share of results 
                       in associates and joint ventures, impairment losses, 
                       restructuring costs arising from discrete restructuring 
                       plans, other operating income and expense and significant 
                       items that are not considered by management to be reflective 
                       of the underlying performance of the Group. 
 
                       For the six months ended 30 September 2018, adjusted 
                       EBITDA is operating profit excluding share of results 
                       in associates and joint ventures, depreciation and 
                       amortisation, gains/losses on the disposal of fixed 
                       assets, impairment losses, restructuring costs arising 
                       from discrete restructuring plans, other operating 
                       income and expense and significant items that are not 
                       considered by management to the reflective of the underlying 
                       performance of the Group. 
Adjusted              Adjusted income tax expense excludes the tax effects 
 income tax            of items excluded from adjusted earnings per share, 
 expense               including: impairment losses, amortisation of customer 
                       bases and brand intangible assets restructuring costs 
                       arising from discrete restructuring plans, lease-related 
                       interest, other income and expense and mark to market 
                       and foreign exchange movements. It also excludes deferred 
                       tax movements relating to losses in Luxembourg as well 
                       as other significant one off items. The Group's definition 
                       of adjusted income tax expense may not be comparable 
                       with similarly titled measures and disclosures by other 
                       companies. 
Adjusted              Group adjusted operating profit excludes impairment 
 operating             losses, restructuring costs arising from discrete restructuring 
 profit                plans, amortisation of customer bases and brand intangible 
                       assets and other income and expense. 
ARPU                  Average revenue per user, defined as customer revenue 
                       and incoming revenue divided by average customers. 
Capital additions     Comprises the purchase of property, plant and equipment 
                       and intangible assets, other than licence and spectrum 
                       payments. 
Churn                 Total gross customer disconnections in the period divided 
                       by the average total customers in the period. 
Converged             A customer who receives both fixed and mobile services 
 customer              (also known as unified communications) on a single 
                       bill or who receives a discount across both bills. 
Customer              Includes acquisition costs, retention costs and expenses 
 costs                 related to ongoing commissions. 
Depreciation          The accounting charge that allocates the cost of a 
 and other             tangible or intangible asset to the income statement 
 amortisation          over its useful life. This measure includes the profit 
                       or loss on disposal of property, plant and equipment 
                       and computer software. 
Direct costs          Direct costs include interconnect costs and other direct 
                       costs of providing services. 
Emerging              Consumers in our Emerging Markets. 
 consumer 
 customers 
Emerging              Emerging Markets include Turkey, South Africa, Tanzania, 
 Markets               the DRC, Mozambique, Lesotho, Egypt and China. 
Enterprise            The Group's customer segment for businesses. 
Europe Region         The Group's region, Europe, which comprises the European 
                       operating segments. 
Fixed service         Service revenue relating to provision of fixed line 
 revenue               ('fixed') and carrier services. 
Free cash             Operating free cash flow after cash flows in relation 
 flow ('FCF')          to taxation, interest, dividends received from associates 
                       and investments, dividends paid to non-controlling 
                       shareholders in subsidiaries, restructuring costs arising 
                       from discrete restructuring plans and licence and spectrum 
                       payments. 
Free cash             Operating free cash flow after cash flows in relation 
 flow (pre-spectrum)   to taxation, interest, dividends received from associates 
                       and investments, dividends paid to non-controlling 
                       shareholders in subsidiaries, but before restructuring 
                       costs arising from discrete restructuring plans and 
                       licence and spectrum payments. 
IFRS 15               International Financial Reporting Standard 15 "Revenue". 
                       The accounting policy adopted by the Group on 1 April 
                       2018. 
IFRS 16               International Financial Reporting Standard 16 "Leases". 
                       The accounting policy adopted by the Group on 1 April 
                       2019. 
Incoming              Comprises revenue from termination rates for voice 
 revenue               and messaging to Vodafone customers. 
Internet              The network of physical objects embedded with electronics, 
 of Things             software, sensors, and network connectivity, including 
 ('IoT')               built-in 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 
 revenue               that 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 relating to the provision of mobile 
 revenue               services. 
Net debt              Long-term borrowings, short-term borrowings, short-term 
                       investments, mark-to-market adjustments and cash collateral 
                       on derivative financial instruments less cash and cash 
                       equivalents and excluding lease liabilities and borrowings 
                       specifically secured against Indian assets. 
Next generation       Fibre or cable networks typically providing high-speed 
 networks              broadband over 30Mbps. 
 ('NGN') 
Operating             Operating expenses comprise primarily sales and distribution 
 expenses              costs, network and IT related expenditure and business 
                       support costs. 
Operating             Cash generated from operations after cash payments 
 free cash             for capital additions and lease payments (excludes 
 flow                  capital licence and spectrum payments) and cash receipts 
                       from the disposal of intangible assets and property, 
                       plant and equipment, but before restructuring costs 
                       from discrete restructuring plans. 
Organic growth        An alternative performance measure which presents performance 
                       on a comparable basis in terms of merger and acquisition 
                       activity (notably by excluding Vodafone New Zealand 
                       and the acquired European Liberty Global assets), movements 
                       in foreign exchange rates and the impact of the implementation 
                       of IFRS 16 'Leases'. 
Other Europe          Other Europe markets include Portugal, Ireland, Greece, 
                       Romania, Czech Republic, Hungary, Albania and Malta. 
Other Markets         Other Rest of the World markets include Turkey, Egypt 
                       and Ghana. 
Other revenue         Other revenue includes connection fees, equipment revenue, 
                       interest income and lease revenue. 
Regulation            Impact of industry specific law and regulations covering 
                       telecommunication services. The impact of regulation 
                       on service revenue in European markets comprises the 
                       effect of changes in European mobile termination rates 
                       and changes in out-of-bundle roaming revenues less 
                       the increase in visitor revenues. 
Reported              Reported growth is based on amounts reported in euros 
 growth                as determined under IFRS. 
Rest of the           The Group's region, Rest of the World, which comprises 
 World ('RoW')         Vodacom, Turkey and Other Markets operating segments. 
 Region 
Restructuring         Costs incurred by the Group following the implementation 
 costs                 of discrete restructuring plans to improve overall 
                       efficiency. 
RGUs                  Revenue Generating Units describes the average number 
                       of fixed line services taken by subscribers. 
Roaming               Impact of European roaming, defined as the increase 
                       in visitor revenues less the increase in roaming costs 
                       and the decline in out-of-bundle roaming revenues. 
Service revenue       Service revenue comprises all revenue related to the 
                       provision of ongoing services including, but not limited 
                       to, monthly access charges, airtime usage, roaming, 
                       incoming and outgoing network usage by non-Vodafone 
                       customers and interconnect charges for incoming calls. 
                       See "Alternative performance measures" on page 46 for 
                       further details. 
SME                   Small and medium sized enterprises 
SoHo                  Small-office-Home-office customers. 
Vodafone              Vodafone Business is part of the Group and partners 
 Business              with businesses of every size to provide a range of 
                       business-related services. 
 

For other definitions, refer to pages 250 to 252 of the Group's annual report for the financial year ended 31 March 2019.

Notes

1. Copies of this document are available from the Company's registered office at Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN. The half-year results will be available on the Vodafone Group Plc website, vodafone.com/investor, from 12 November 2019.

2. 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 Portrait, the Vodafone Speech Mark, Vodafone Broken Speech Mark Outline, Vodacom, Vodafone One, The future is exciting. Ready? and M-Pesa, are trademarks owned by Vodafone. Other product and company names mentioned herein may be the trademarks of their respective owners.

3. All growth rates reflect a comparison to the six months ended 30 September 2018 unless otherwise stated.

4. References to "Q1" and "Q2" are to the quarters ended 30 June 2019 and 30 September 2019, respectively, unless otherwise stated. References to "half year", "first half" or "H1" are to the six months ended 30 September 2019 unless otherwise stated. References to the "year", "financial year" or "2020 financial year" are to the financial year ending 31 March 2020 and references to the "last year" or "last financial year" are to the financial year ended 31 March 2019 unless otherwise stated.

5. Vodacom refers to the Group's interest in Vodacom Group Limited ('Vodacom') in South Africa as well as its subsidiaries, including its operations in the DRC, Lesotho, Mozambique and Tanzania.

6. Quarterly historical information, including information for service revenue, mobile customers, mobile churn, mobile data usage, mobile ARPU and certain fixed line and convergence metrics, is provided in a spreadsheet available at vodafone.com/investor.

7. This trading update contains references to our website. Information on our website is not incorporated into this update and should not be considered part of this update. We have included any website as an inactive textual reference only.

Forward-looking statements

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 organic adjusted EBITDA, free cash flow pre-spectrum, operating expenses and financial leverage for the financial year ending 31 March 2020; prospects for the 2020 financial year; operating expenses for the financial year ending 31 March 2021; expectations for the Group's future performance generally, including growth and capital expenditure; expectations regarding the operating environment and market conditions and trends, including customer usage, competitive position and macroeconomic pressures, spectrum auctions and awards, 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 5G networks, the Group's partnership with IBM, sharing infrastructure and its benefits, such as the cumulative cash benefit from the agreement with Orange in Spain, and the expansion of NGN broadband within Vodafone's European footprint; expectations regarding free cash flow, foreign exchange rate movements and tax rates; expectations regarding the integration or performance of current and future investments, associates, joint ventures, non-controlled interests and newly acquired businesses including in respect of the acquisition of Liberty Global's cable assets, the merger of Vodafone India and Idea Cellular and the VodafoneZiggo joint venture and the expected synergies, cost and capex savings, run-rate savings and NPV from each; the outcome and impact of regulatory and legal proceedings involving Vodafone and of scheduled or potential legislative and regulatory changes, including approvals, reviews and consultations.

Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as "will", "anticipates", "aims", "could", "may", "should", "expects", "believes", "intends", "plans" ,"prepares" 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 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 expand its spectrum position, win 3G, 4G and 5G allocations and realise expected synergies and benefits associated with 3G, 4G and 5G; 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 divestments 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 2019. The annual report can be found on the Group's website (vodafone.com/investor). 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.

For further information:

Vodafone Group Plc

 
Investor Relations  Media Relations 
ir@vodafone.co.uk   www.vodafone.com/media/contact 
 

Copyright (c) Vodafone Group 2019

- ends -

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END

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