TIDMVOD
RNS Number : 3485F
Vodafone Group Plc
16 November 2020
Vodafone Group Plc H1 FY21 results
16 November 2020
Delivering our strategic priorities at pace to reshape
Vodafone
-- Resilient financial performance during the first half of FY21, in line with our expectations
-- Deepening customer engagement, with mobile contract customer
loyalty improved year-on-year for an 8(th) successive quarter
-- Launched 5G in 127 cities across 9 of our European markets;
52 million marketable homes passed with Gigabit speeds
-- Reaffirming FY21 free cash flow guidance of at least EUR5
billion (pre-spectrum and restructuring) and adjusted EBITDA
expected to be between EUR14.4 - EUR14.6 billion
H1 FY21 H1 FY20
Financial results Page EURm EURm Change (%)
------------------------------------------ ---- -------- -------- ----------
Group revenue 33 21,427 21,939 (2.3)
Operating profit 33 3,472 577 n/m
Profit/(loss) for the financial period 33 1,555 (1,891) n/m
Basic earnings/(loss) per share 33 4.45c (7.24c) n/m
Interim dividend per share 44 4.50c 4.50c n/m
Alternative performance measures (1)
Group service revenue 13 18,418 18,544 (0.8)*
Adjusted EBITDA 13 7,023 7,105 (1.9)*
Adjusted earnings per share 24 4.11c 0.85c +383.5
Free cash flow (pre-spectrum and
restructuring) 25 451 394 +14.5
Free cash flow 25 (101) 34 n/m
Net debt** 25 (43,983) (48,107) +8.6
Net debt to adjusted EBITDA** 27 3.0x n/m n/m
Pre-tax ROCE (controlled) 28 5.1% n/a n/a
Post-tax ROCE 28 4.0% n/a n/a
------------------------------------------ ---- -------- -------- ----------
1. See page 56 for the reconciliation to the closest
equivalent GAAP measure.
-- Group revenue declined by 2.3% to EUR21.4 billion, as good
underlying momentum was offset by the effects of COVID-19 on
roaming and visitor revenue, as well as lower handset sales
-- Adjusted EBITDA declined by 1.9%* to EUR7.0 billion as the
decline in revenue was partially offset by good cost control with
net Europe opex savings of EUR0.3 billion realised during H1
-- Interim dividend per share of 4.50 eurocents, record date 18 December 2020
Nick Read, Group Chief Executive, commented:
"Today's results underline increased confidence in our full year
outlook. We are reporting a resilient first half performance and we
continue to see good commercial momentum across the Group. The
results demonstrate the success of our strategic priorities to
date, namely increasing customer loyalty, growing our fixed
broadband base, driving digitisation to simplify the company and
capture significant cost savings, and deliver 5G efficiently
through network sharing.
COVID-19 and the reduction in roaming revenues, through the
significant reduction in international travel, is currently
obscuring our underlying commercial progress, with Q2 service
revenue growing by 1.5% excluding roaming. We are now two years
into our longer-term strategy to transform Vodafone into a business
that enables a digital society, generating both sustainable growth
and attractive returns. We are executing at pace, but there remains
more to be done to achieve our goals.
Now, more than ever, the connectivity services we provide are
critical for society and the demand is growing for our services. I
am proud of how our dedicated employees have worked tirelessly
around the clock to keep everyone connected."
For more information, please contact:
Investor Relations Media Relations
Investors.vodafone.com Vodafone.com/media/contact
ir@vodafone.co.uk GroupMedia@vodafone.com
Registered Office: Vodafone House, The Connection, Newbury,
Berkshire RG14 2FN, England. Registered in England No. 1833679
A webcast Q&A session will be held at 9.30 am on 16 November
2020. The webcast and supporting information can be accessed at
investors.vodafone.com
Summary Resilient performance
Basis of presentation
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 and movements in
foreign exchange rates. Organic growth is an alternative
performance measure. See "Alternative performance measures" on page
54 for further details and page 56 for the location of the
reconciliation to the respective closest equivalent GAAP
measure.
Net debt at 30 September 2020 marked with a "**" has been
adjusted to exclude derivative gains in cash flow hedge reserves,
the corresponding losses for which are not recognised on the bonds
within net debt and which have significantly increased due to
COVID-19 related market conditions. The ratio of net debt to
adjusted EBITDA is calculated using adjusted EBITDA for a rolling
12 month period, normalised for acquisitions and disposals within
the period.
Financial performance
Group revenue declined by 2.3% to EUR21.4 billion (FY20 H1:
EUR21.9 billion), as good underlying momentum and the benefit from
the acquisition of Liberty Global's assets in Germany and CEE was
offset by lower revenue from roaming, visitors and handset sales,
foreign exchange headwinds and the disposal of Vodafone New
Zealand.
The Group made a profit for the period of EUR1.6 billion
reflecting our resilient financial performance during the first
half of FY21. Basic earnings per share was 4.45 eurocents, compared
to a loss per share of 7.24 eurocents in the six months ended 30
September 2019. Losses were recognised in the comparative period
relating to Vodafone Idea Limited, which outweighed a EUR1.1
billion profit recorded on the disposal of Vodafone New Zealand.
The current period includes a gain of EUR1.0 billion arising on the
merger of Vodafone Hutchison Australia into TPG Telecom
Limited.
Group service revenue decreased by 0.8%* (Q1: -1.3%*, Q2:
-0.4%*) to EUR18.4 billion (FY20 H1: EUR18.5 billion) as good
underlying momentum was offset by lower revenue from roaming and
visitors. Adjusted EBITDA decreased by 1.9%* to EUR7.0 billion
(FY20 H1: EUR7.1 billion) as a decline in revenue was partially
offset by good cost control, with a net reduction in our Europe and
Common Functions operating expenditure of EUR300 million during H1.
The adjusted EBITDA margin was 0.1* percentage points lower
year-on-year at 32.8%.
Cash flow, funding & capital allocation
Free cash flow (pre-spectrum and restructuring) increased by
14.5% to EUR0.5 billion (FY20 H1: EUR0.4 billion) supported by the
resilient adjusted EBITDA performance and higher dividends received
from associates and investments, partially offset by higher cash
interest and tax. Licence and spectrum payments for the period
totalled EUR0.3 billion (FY20 H1: EUR0.1 billion) and restructuring
and other payments totalled EUR0.3 billion (FY20 H1: EUR0.3
billion). Free cash flow was -EUR101 million (FY20 H1: EUR34
million).
Net debt adjusted for mark-to-market gains deferred in hedging
reserves at 30 September 2020 was EUR44.0** billion compared to
EUR42.2** billion as at 31 March 2020. This increase in net debt
reflects the FY20 final dividend payment of EUR1.2 billion,
mark-to-market movements on derivatives, and foreign exchange
losses, partially offset by proceeds of EUR0.4 billion following
the subsequent sale of our 4.3% stake in INWIT in April 2020.
We aim to maintain our financial leverage within a range of
2.5-3.0x net debt to adjusted EBITDA. As at 30 September 2020,
financial leverage was 3.0x**. The interim dividend per share is
4.5 eurocents (FY20 H1: 4.5 eurocents). The ex-dividend date for
the interim dividend is 17 December 2020 for ordinary shareholders,
the record date is 18 December 2020 and the dividend is payable on
5 February 2021.
Strategic review Delivering our strategic priorities
In November 2018, we set out a long-term ambition to reshape
Vodafone and establish a foundation from which the Group can grow
in the converged connectivity markets in Europe, and mobile data
and payments in Africa. This ambition was to be delivered through
three strategic priorities: to deepen engagement with our
customers; to accelerate our transformation to a digital first
organisation; and improve the utilisation of our assets. Given the
ambition to reshape Vodafone, we added a fourth strategic priority
to optimise the portfolio of our operations.
During the first half of FY21, we have executed at pace across
all four priorities. Highlights of activity during the period
include:
-- Deepening customer engagement, with mobile contract customer
loyalty improved year-on-year for an 8(th) successive quarter
-- we have 52 million homes passed with a 1 Gigabit capable fixed-line network;
-- we have launched 5G in 127 cities across 9 of our European markets;
-- in response to the trading conditions related to the
pandemic, we accelerated a series of cost saving activities,
resulting in a EUR300 million net reduction in our Europe and
Common Functions operating expenditure;
-- we have secured mobile wholesale agreements with PostePay in
Italy with more than four million connections, Asda Mobile in the
UK, and Forthnet in Greece;
-- we completed the merger of Vodafone Hutchison Australia with
TPG Telecom to establish a fully integrated telecommunications
operator in Australia. We now hold an economic interest of 25.05%
in the Australian Stock Exchange listed entity; and
-- we are on track for the IPO of Vantage Towers in early 2021.
The table below summarises the progress against our strategic
priorities in H1 FY21.
Strategic progress summary Units H1 FY21 H1 FY20
============================================= ======= ======= =======
1. Deepening customer engagement
Europe mobile contract
customers(1) million 65.0 63.8
Europe broadband customers(1) million 25.4 24.5
Europe on-net Gigabit capable connections(1) million 38.9 23.5
Europe Consumer converged
customers(1) million 7.5 6.8
Europe mobile contract
customer churn % 12.9 14.6
Africa data users(2) million 84.5 81.2
M-Pesa transaction volume(2) billion 6.8 6.0
Business fixed-line service
revenue growth % 4.2 2.9
IoT SIM connections million 112 94
2. Accelerating digital
transformation
Europe net opex savings(3) billion 0.3 0.2
Europe digital channel
sales mix(4) % 22 20
Europe frequency of customer
contacts p.a # 1.4 1.6
Europe MyVodafone app penetration % 62 63
3. Improving asset utilisation
Average Europe monthly mobile data usage
per customer GB 6.2 4.2
Europe on-net NGN broadband
penetration(1) % 30 29
=============================================== ======= ======= =======
Notes:
1. Including VodafoneZiggo | 2. Africa including Safaricom,
Ghana and Egypt | 3. Europe and common function operating costs. |
4. Figure presented in H1 FY21 column reflects Europe digital
channel sales mix in Q2 FY21 as the mix in Q1 FY21 was impacted by
retail restrictions due to COVID-19.
It is two years since we set out our strategic priorities to
focus the Group on the converged connectivity market in Europe, and
mobile data and payments in Africa. This first phase of our
strategic transformation has progressed well and in this strategic
review section we illustrate that:
A. We are delivering our strategic priorities at pace to reshape Vodafone; and
B. We are well-positioned for our next phase to create sustainable stakeholder value.
A Delivering our strategic priorities at pace to reshape
Vodafone
The actions we have taken in the last two years and their
results are summarised in the sub-sections below. Our actions have
delivered a more consistent revenue growth profile, with our
service revenue trends remaining resilient despite the direct
impacts of the COVID-19 pandemic on revenue from roaming and
visitors.
We are firmly on track to deliver our original three-year target
of at least EUR1.2 billion of net savings from operating expenses
in Europe and Group common functions, having reached EUR1.1 billion
of savings between FY19 and H1 FY21. We have extended our ambition
to at least another EUR1 billion of savings over the next three
years. This focus on efficiency, delivered through standardisation
and integration of our technology support operations, has enabled
our adjusted EBITDA margin to be resilient during the pandemic and
remain broadly stable at 32.8%.
Through improved asset utilisation and a disciplined approach to
balancing our capital allocation priorities, we have delivered
EUR10.7 billion of free cash flow (before spectrum payment and
restructuring costs) over the last two years. Despite the strong
delivery of our strategic priorities at pace, our post-tax return
on capital employed ('ROCE') of 4.0% remains below our cost of
capital. On page 10, we have set out our growth model and capital
allocation framework, and explained how we will drive shareholder
returns through efficiency and growth.
Deepening customer engagement Delivering more consistent commercial performance
In 2018, we set out our plans to deliver consistent commercial
performance in each of our markets, following a period of more
mixed results. The major actions we have undertaken include:
-- Launching speed-tiered, unlimited data mobile plans in 9
markets. This has enabled us to stabilise and grow our higher value
customer base and increase average revenue per user ('ARPU'). In
Italy, the UK and Spain, the ARPU uplift was approximately by
EUR2-5 per month. We now have over six million active unlimited
data customers across our markets.
-- Launching and embedding 'second' brands such as, ho. in
Italy, VOXI in the UK, Lowi in Spain and Otelo in Germany to
compete more effectively and efficiently in the value segment.
Alongside our speed-tiered, unlimited data plans, we are now
competing effectively across all segments of the markets in which
we operate. We now have 4.5 million active users across these four
brands.
-- We have maintained strong commercial momentum in our fixed
business and over the past 24 months we have added 3.1 million NGN
fixed-line customers in Europe. We also have converged customer
plans available in all major markets. These include a combination
of mobile connectivity, fixed-line connectivity and a range of
additional products and services, such as TV and IoT
connections.
-- We have invested centrally to develop a unified digital
customer experience through shared online platforms and the
MyVodafone mobile app. This investment has supported an approximate
10% reduction in the frequency of customer contacts per year to 1.4
and the app is used by 62% of our mobile customers in Europe.
Accelerating digital transformation Best-in-class operational efficiency through standardisation
Through standardisation, digitalisation and sharing of processes
we recognised an opportunity to significantly improve our
operational efficiency. We set an ambitious goal to generate at
least EUR1.2 billion of net savings from our Europe operating
expenses over 3 years. In just over two years, we have already
delivered EUR1.1 billion of this original target and have clear
line-of-sight to the EUR1 billion targeted over the FY21-FY23
period. Key activities that have contributed to this performance
include:
-- Whenever possible our back office activities are delivered
though our three Shared Service Centres ('_VOIS') in Egypt, India
and Eastern Europe. Over a third of the targeted EUR1.2 billion net
opex savings in Europe and Common Functions are being generated by
integrating activities into _VOIS and driving digitisation at
speed.
-- We have invested in customer support technology. Using a
combination of artificial intelligence and machine-learning tools,
we have developed 'TOBi', a fully automated customer support
assistant available online and via the MyVodafone app. Our
investments in this area have resulted in 64% of customer support
interactions with TOBi being resolved with no human
interaction.
-- We are investing in shared cross-market digital sales
platforms. These enable best-in-class customer journeys enabling
full sales activities without manual intervention. This has led to
over 22% of our contract mobile and fixed sales in Q2 being
completed through a fully digital customer journey in Germany,
Italy, the UK and Spain. This in turn has enabled us to reduce our
retail footprint by 728 stores over the last two years.
Improving asset utilisation Facilitating e fficient use of capital through network sharing
Over the last decade, the level of ROCE achieved by the
telecommunications sector has significantly reduced to below its
weighted average cost of capital. This has been driven by a number
of factors, including market structures, capital expenditure
requirements for advancements in network infrastructure, mobile
spectrum licenses and a challenging regulatory environment. As a
result, two years ago we began a series of activities to improve
our asset utilisation to support a recovery in ROCE. These actions
have included:
-- Reaching network sharing agreements with leading mobile
network operators in each of our European markets. This includes
Deutsche Telekom in Germany, Telecom Italia in Italy, Telefonica in
the UK and Orange in Spain. We estimate the combined effect of
network sharing arrangements in Europe reduces our future
investment requirement to deploy 5G by c. EUR2.5 billion over 10
years.
-- Established Vantage Towers as a separate vehicle to
consolidate the ownership and operations of our passive mobile
network infrastructure, enabling a greater focus on delivering
operational efficiencies through dedicated, commercially-oriented
and specialised teams.
-- We have signed significant wholesale agreements in both our
fixed and mobile networks, on terms that maintain the
differentiation of our retail offers. In 2019, we began a wholesale
agreement with Telefonica Deutschland for access to our fixed-line
infrastructure in Germany and during H1 FY21 we signed mobile
wholesale agreements with PostePay in Italy (more than four million
connections), with Asda Mobile in the UK and Forthnet in
Greece.
Whilst significant progress has been made, much more work is
required to both improve our own asset utilisation and to work
collaboratively with policy makers and regulators to ensure that we
can continue to invest in our Europe and Africa communications
infrastructure, whilst also earning a fair return on the capital we
deploy.
Vantage Towers
The IPO of Vantage Towers is on track for early calendar 2021.
Vantage Towers is one of Europe's largest and most geographically
diverse infrastructure operators, with significant growth
opportunities alongside long-term, inflation-linked contracts. The
three important aspects relating to Vodafone's ongoing relationship
with Vantage Towers are:
1. Vodafone is committed to ensuring that Vantage Towers is
operationally independent. This is demonstrated through the
long-term Master Services Agreement ('MSA'), clear management
incentive structures, and a two-tier governance structure led by an
independent Chairman;
2. Vodafone will strive to ensure that the capital structure for
Vantage Towers enables it to take full advantage of its organic and
inorganic growth opportunities; and
3. Vodafone is committed to supporting Vantage Towers' growth
ambition and will ensure shareholder value is being optimised.
Optimising the portfolio Significant & fast execution to enable strategic priorities
In order to achieve our strategic objectives to focus on
converged connectivity markets in Europe, and mobile data and
payments in Africa, we began a large programme to rationalise our
portfolio in 2019. Our portfolio optimisation programme had three
overriding objectives as set out below.
Objective Total value Transactions
============================ ================ ===================================
1. Focus on Europe & Africa EUR4.4 billion Disposal in New Zealand, Malta
EUR5.1 billion and Egypt(1)
Mergers in Australia, Africa
and India (Vodafone Idea and
Indus Towers(1) )
2. Achieved convergence EUR18.6 Acquisitions in Germany, Greece
with local scale billion & Eastern Europe
3. Enable structural shift EUR6.5 billion Tower mergers in Italy & Greece(1)
in asset utilisation TBA Ongoing IPO of Vantage Towers(1)
1 Transaction announced but not yet closed
Liberty acquisition Transformation into Europe's leading
connectivity provider
The defining corporate transaction of our recent history was the
acquisition of Liberty Global's assets in Germany and Central
Eastern Europe, which completed in July 2019. This transaction has
enabled Vodafone to become the clear converged Gigabit challenger
in Germany with 55.2 million SIM connections, 10.9 million
fixed-line connections and 13.5 million TV subscribers. Following
completion of the transaction, we have worked at pace to upgrade
the cable network to Gigabit speeds and deliver the targeted cost
and capex synergies. Over the past year, we have increased the
number of homes in the Gigabit capable footprint from 9.7 million
to 21.8 million, representing over half of the country and over 90%
of our cable footprint. Our acquisition plans targeted EUR535
million of cost and capex synergies over five years. We have
already executed actions that will deliver over EUR250 million of
these synergies, which is around six months ahead of schedule.
B Focused on growth with unique capabilities to create
sustainable value
Following our strategic activity to reshape the Group, we are
focused on growing our converged connectivity markets in Europe,
and mobile data and payments in Africa. We have five principle
growth levers available to create shareholder value through
building our ROCE to a sustainable level above our weighted-average
cost of capital:
1. We will develop the best connectivity products and the best connectivity platforms;
2. We will invest in and operate the co-best Gigabit
connectivity infrastructure to support our connectivity products
and platforms;
3. We will integrate and operate leading digital technology
architecture to support our digital connectivity
infrastructure;
4. We will drive further simplification in our scaled Group
operating model in order to support our investments; and
5. We will use our Social Contract to build partnerships with
governments and regulators, shape a healthier industry structure,
and improve returns for all stakeholders.
1 Best connectivity products & platforms
In Europe, we are the leading converged connectivity provider
with 7.5 million converged customers, 114 million mobile
connections, 139 million marketable NGN broadband homes, cover 98%
of the population in the markets we operate in with 4G, and have
launched 5G in 127 cities in 9 markets in Europe. We have achieved
this leading position by focusing on our core fixed and mobile
connectivity. We are enhancing our core connectivity products
through capacity and speed upgrades, unlimited mobile plans,
distinct branding across customer segments and convergence bundles.
Alongside optimising our core, we have also developed platforms
that leverage our connectivity base further by providing 'best on
Vodafone' experiences. For example, our TV proposition now has over
22 million subscribers in 11 markets. Our consumer IoT offering has
now connected over 500,000 devices such as the Apple Watch
OneNumber service and our 'Curve' mobile tracking device. In
addition, our new smart kids watch, developed with The Walt Disney
Company, will launch before Christmas.
In Africa, we are the leading provider of mobile data and mobile
payment services. We have 171 million customers in 8 markets and
these countries represent 40% of Africa's total Gross Domestic
Product. We are the leading mobile connectivity provider by revenue
market share in 7 markets. Excluding Kenya, we cover 70% of the
population in the markets in which we operate with 3G mobile
services and 60% with 4G. Our M-Pesa financial services platform
processed almost 13 billion transactions over the last 12 months.
M-Pesa offers a unique opportunity to extend our reach further into
financial services. Through a strategic technology partnership with
Alipay, we are developing a new 'super app' that will offer
customers a unified suite of financial services, entertainment,
shopping, merchant services and direct marketing.
Vodafone Business accounts for 27% of Group service revenue, has
customers in 200 markets, and provides services to SMEs, large
national corporates, and 1,240 multinational customers. In each of
our four largest European markets, we have a unique position and
focus on digital segments that are growing. Our incumbent
competitors have greater exposure to declining legacy fixed and
managed services businesses, whilst we are able to accelerate our
position in digital connectivity services such as SD-WAN, IoT and
cloud. As the largest business-to-business connectivity provider in
Europe and as a growth business, we are the strategic partner of
choice for large global technology companies such as Microsoft,
Accenture, Amazon, and IBM. Over the last two years, we have signed
agreements with each of these firms in areas such as managed
security services, mobile edge computing, managed cloud services
and unified connectivity. These strategic alliances provide us with
an unrivalled position to provide SME, large and multi-national
business customers with a full suite of next-generation
connectivity services.
2 Co-best Gigabit connectivity infrastructure
In order to provide our customers with the best connectivity
products and 'best on Vodafone' connectivity platforms, we need to
have co-best Gigabit network infrastructure in each of our markets.
Importantly, we must also ensure that our customers recognise and
value the quality of our Gigabit network infrastructure.
In mobile, we are currently deploying mobile network
infrastructure to deliver 5G connectivity. So far, we have launched
5G services in 127 cities, in 9 markets in Europe. 5G services
provide 'real world' speeds well in excess of 100 Mbps, compared
with 4G that provides 'real world' speeds of 20-35 Mbps. In
addition to the speed advantage, 5G networks that are 'built right'
and with longer-term competitive advantage in mind, provide
significant capacity and efficiency advantages, ultimately lowering
the cost per gigabyte of mobile data provision. However, the
European mobile sector is also utilising dynamic spectrum sharing
('DSS') technology to share existing 4G spectrum to provide a more
limited 5G experience. DSS 5G does have a smaller role in a
targeted rollout, but requires RAN upgrades and leads to reduced
capacity efficiency. We have been targeted and disciplined with our
acquisition of spectrum in each of our local market operations,
with spectrum available in each of the low, mid and high bands in
our major Europe markets. This ensures that we do not need to
restrict long-term network infrastructure through DSS technology
and can invest in building 5G network the right way, to provide the
backbone for Gigabit networks for the decade ahead.
Complementing our 5G mobile network infrastructure is our NGN
fixed-line network infrastructure. We can now reach 139 million
homes across 12 markets in Europe (including VodafoneZiggo). This
marketable base is connected through a mix of owned NGN network (55
million homes, of which 39 million are Gigabit-capable), strategic
partnerships (22 million homes) and wholesale arrangements (62
million homes). This network provides us with the largest
marketable footprint of any fixed-line provider in Europe. In
Germany, our footprint of 24.1 million households is being
progressively upgraded to the latest DOCSIS 3.1 standard, which
provides us with a structural speed advantage over the incumbent.
Over the medium-term we will continue to increase the proportion of
our Europe customers that can receive Gigabit-capable connections
through our owned network and continue to work with strategic
partners to provide cable and fibre access.
3 Leading digital architecture
Enhanced digital technology is critical for efficient and
reliable converged connectivity networks. We are beginning a
multi-year journey to redefine our technology architecture
following a 'Telco as a Service' ('TaaS') model. Our TaaS model is
based on two existing layers of inter-connected digital
technology.
-- We have created a standardised suite of customer and
user-facing interfaces for an entire omni-channel journey -
OnePlatform. The OnePlatform suite includes the MyVodafone mobile
app, our browser-based portal, our TOBi AI assistant, and the
Retail Point of Sale platform that powers our physical and digital
stores.
-- The OnePlatform suite is powered by our Digital eXperience
Layer ('DXL'). DXL refers to the abstraction layer in our IT
architecture which separates customer-facing micro-services
requiring frequent and rapid adjustment, such as prepaid top-ups or
customer onboarding, from heavier back-end systems such as billing
and CRM. The platform uses common software, with open-source
components and standardised APIs to enable easy integration and
interconnection.
We have also moved more than half our core network functions to
the Cloud in Europe, supporting voice core, data core and service
platforms on over 1,300 virtual network functions. In Europe, we
now operate a single digital network architecture across all
markets, enabling the design, build, test and deployment of next
generation core network functions more securely, 40% faster and at
50% lower cost. Similarly, more than half of our IP apps are now
virtualised and running in the cloud.
This standardised approach to development and deployment of
digital architecture is enabling us to provide an industry-leading
digital experience, delivered in line with our expectation to be
the most efficient in our sector.
4 Simplified & scaled Group operating model
The connectivity value chain involves a high degree of
repeatable processes across all of our markets, such as
procurement, network deployment, network operations, sales
activities, customer support operations, and billing and
transaction processing. This has provided us with a significant
opportunity to standardise processes across markets, relocate
operations to lower cost centres of excellence and apply automation
at scale.
We have consolidated our supplier management function into a
single, centralised procurement company. The Vodafone Procurement
Company manages global tenders and establishes standard catalogues
which are made available to our local market operations through a
unified end-to-end enterprise resource planning ('ERP') system.
Leveraging the scale of our combined spend, this allows us to
generate over EUR600m in annual savings compared to standalone
operators. Once the equipment is acquired, we efficiently manage
our inventory through our Network Stock System and ensure that we
minimise time to deployment, including by moving stock across
markets as needed.
We monitor Network Operations for all our markets through
international centres of excellence that run these processes for
the entire Group. Our regional Network Operations Centres monitor
operations of our fixed and mobile networks across geographies
following standard protocols that maximise productivity and
automation. As an example, a third of new Network Operations
tickets are fully automated. Similar integrations have been
executed across our IT operations as well as Finance and HR
processes.
Whenever possible our back office activities are delivered
though our 3 Shared Service Centres ('_VOIS') in Egypt, India and
Eastern Europe. Over a third of the targeted EUR1.2 billion net
opex savings in Europe and Common Functions are being generated
through integrating activities into _VOIS and driving digitisation
at speed.
Finally, Vodafone Roaming Services manages our global roaming
relationships with other operators and our Partner Market's team
works with 30 local operators in building strategic alliances and
extending our reach into different markets. These functions
generate over EUR250m revenue and cost savings annually.
Approximately 30% of the Group's headcount works in _VOIS and
shared operations, and in the last two and a half years we have
automated over 4,600 roles. We are continuing to transform the
business and evolve the Group digital toolset - including TOBi and
Robotic Process Automation - in order to further our productivity
leadership.
5 Social Contract shaping industry structure to improve returns
Over the last decade, the performance of the European
telecommunications industry has been weaker than other regions,
which market commentators attribute to its regulatory environment.
European regulation differs in both its fragmented approach to
spectrum licensing and market structure, compared with North
America or Asia. A firm stance on pursuing four-player market
structures in certain Member States has artificially driven further
price deflation and has eroded sustainable investment incentives.
When combined with the capital-intensive nature of network
infrastructure and higher ongoing spectrum costs, this has led to
return on capital for the industry being below its weighted-average
cost of capital. This limits the ability of operators to invest
capital in improving digital connectivity network
infrastructure.
In 2019 we introduced our 'Social Contract', which represents
the partnerships we want to develop with governments, policy makers
and civil society. We believe the industry needs a pro-investment,
pro-innovation partnership approach to ensure Europe can compete in
the global digital economy and be at the forefront of technology
ecosystems. This requires an end to extractive spectrum auctions,
support for equipment vendor diversity, a defined framework for
network sharing, and regulation that enables the physical
deployment of network infrastructure, as well as rewards quality -
such as security, resilience and coverage - with fair prices.
Following our efforts and society's increasing reliance on our
connectivity infrastructure and services, notably during the
COVID-19 pandemic, we are beginning to see positive signs of a more
healthy industry structure emerge.
Recent spectrum auctions in 2020 in the Netherlands and Hungary
were conducted in a positive manner and completed with spectrum
being assigned at sustainable prices, in line with European
benchmark levels. Authorities are recognising that operators need
to be able to focus available private funds for fast deployment of
new infrastructure & services. We have also seen national
governments increase support such as state-subsidies for rural
networks in the UK and Germany, and planning permission exemptions
for tower infrastructure in Germany. A key area of focus for 2021
will be shaping Member State recovery funds and how the 20% of the
EUR750 billion EU Recovery Fund targeted for digital initiatives is
distributed. Positive progress has already been achieved through
national initiatives with 90% subsidies for infrastructure spend in
'whitespot' areas in Germany; vouchers to support new NGN
connections in Italy; funding to support the cessation of 3G
networks in Hungary; and EUR3 billion of funding for health
initiatives, including eHealth, in Germany.
Our growth model Disciplined capital allocation to drive shareholder returns
The objectives of our portfolio activities over the last two
years have been to focus on our two scaled geographic platforms in
Europe and Africa; achieve converged scale in our chosen markets;
and deliver a structural shift in asset utilisation. With these
objectives substantially achieved, we are now a matrix of country
operations and product & platforms, and will remain disciplined
in managing our portfolio. Our ongoing and rigorous assessment of
our portfolio is following three principles. Firstly, we aim to
continue to focus on the converged connectivity markets in Europe,
and mobile data and payments in Africa. Secondly, we aim to achieve
returns above the local cost of capital in all of our markets.
Thirdly, we consider whether we are the best owner (i.e. whether
the asset adds value to the Group and the Group adds value to the
asset) and whether there are any pragmatic and value-creating
alternatives.
Our growth strategy is grounded in our purpose, to 'Connect for
a better future' and create value for society and shareholders. Our
goal is to deliver a sustainable improvement in ROCE through a
combination of consistent revenue growth, ongoing margin expansion,
strong cash flow conversion, and disciplined allocation of capital.
We have five principle growth levers available to create
shareholder value:
1. Develop the best connectivity products and platforms;
2. Invest in the co-best Gigabit connectivity infrastructure;
3. Operate leading digital technology architecture;
4. Operate a simplified and scaled Group operating model; and
5. Use our Social Contract to shape a healthier industry structure.
Our capital allocation priorities are to support investment in
connectivity infrastructure; reduce leverage towards the lower end
of our target range of 2.5-3.0x net debt to adjusted EBITDA; and
deliver attractive returns to shareholders.
Looking ahead Further investor interaction to discuss key growth drivers
We plan to share further insight into our growth plans during
2021 and will be hosting a series of virtual investor briefings
comprising pre-recorded video presentations from functional and
technical specialists, together with live webcast Q&A sessions.
These events include:
-- Vinod Kumar (CEO Vodafone Business) provides a deep-dive into
Vodafone Business operations & strategy on 18 March 2021;
-- Nick Read (Group CEO) & Margherita Della Valle (Group
CFO) present full year results and further detail on the next phase
of our transformation on 18 May 2021;
-- Ahmed Essam (Chief Commercial Officer) presents our strategy
for the best connectivity products and platforms on 9 June
2021;
-- Dr Hannes Ametsreiter (CEO Germany) presents a deep-dive into
our largest market, Germany, on 7 September 2021; and
-- Johan Wibergh (Group Technology Officer) presents our 2025
technology vision on 14 December 2021.
Our purpose We connect for a better future
We believe that Vodafone has a significant role to play in
contributing to the societies in which we operate and our
sustainable business strategy helps the delivery of our 2025
targets across three pillars: Digital Society; Inclusion for All;
and Planet. We have continued to make progress against our purpose
strategy and will provide a full update on our progress at the end
of our financial year.
In July 2020, we announced that our Europe network will be
powered by 100% renewable electricity no later than July 2021. Our
Europe-wide 'Green Gigabit Net' commitment brings forward by three
years an earlier pledge to source 100% renewable electricity for
the company's fixed and mobile networks by 2025. We have made
significant progress as the share of total renewable electricity
purchased in Europe more than doubled to over 75% by September
2020. We remain on target to reach 100% renewable electricity in
our Europe network by July 2021.
Whilst we are committed to eliminating our own environmental
footprint, we are increasingly seeking to use our connectivity and
technology to support a more sustainable society, enabling others
to reduce their environmental impact. We have also introduced a new
target to enable our Business customers reduce their own carbon
emissions by a cumulative total of 350 million tonnes globally over
10 years between 2020 and 2030. This target will largely be
delivered via Vodafone's IoT services, including logistics and
fleet management, smart metering and manufacturing activities.
Other savings are expected to be made through healthcare services,
cloud hosting and home working.
In addition, we are currently finalising a Science Based Target,
which we plan to announce before the end of 2020. Our target will
be aligned to limiting global temperature rise to below 1.5degC and
reaching net-zero emissions no later than 2050. This will require a
significant reduction in our direct carbon emissions as well as
setting targets for indirect emissions (including suppliers and
joint ventures).
We have also embedded our purpose commitments in our supplier
selection criteria. From October 2020, 'purpose' accounts for 20%
of our evaluation criteria for 'Requests For Quotation' ('RFQ') to
provide Vodafone with products or services. Suppliers will be
assessed on their commitment to diversity & inclusion, the
environment, and health & safety in categories where it is a
risk. Our approach to supplier selection supports our aim of
building a digital society that enhances socio-economic progress,
embraces everyone and does not come at the cost of our planet.
COVID-19 Our five-point plan to support economic recovery
During the COVID-19 crisis, the connectivity we provided was a
lifeline, enabling people to work, allowing businesses to remain
operational, supporting the delivery of emergency services and
giving access to education. We enabled people to stay in touch with
their families and their friends. We recognise that our role in
society is more vital than ever, underpinned by our commitment to
building a resilient, inclusive and sustainable digital society
.
As we look at the challenging economic period ahead, just as we
were there for the emergency response phase, we are committed to
playing a key role in supporting Europe's economic and social
recovery. As a result, we have identified five key areas where
Vodafone can clearly prioritise activity and support governments'
digital agenda. We will:
-- expand and future-proof our network infrastructure with
next-generation fixed line and mobile technologies;
-- further support governments as they seek to integrate eHealth
and eEducation solutions into their "new normal" public service
frameworks;
-- enhance digital access for the most vulnerable and support digital literacy;
-- promote the widespread adoption of digital technologies for
all businesses, with a particular emphasis on SMEs; and
-- support governments' pandemic exit strategies through
targeted deployment of digital technology.
Vodafone is ready to do everything in its power to support the
recovery, whilst emerging a stronger business, playing an ever more
critical role in society. In our African markets, we have deployed
the same five-point plan approach, but are also prioritising
furthering financial inclusion.
Outlook Operating model delivering relative resilience
Outlook for FY21
Our financial performance during the first six months of the
year has been in line with our expectations and demonstrates the
relative resilience of our operating model. We remain focused on
the delivery of our strategic priorities and have further improved
loyalty, as our customers place greater value on the quality, speed
and reliability of our networks.
FY21 Guidance
As a result of our resilient performance in H1, and b ased on
the current prevailing assessments of the global macroeconomic
outlook:
-- Adjusted EBITDA is expected to be between EUR14.4 - 14.6 billion in FY21; and
-- We continue to expect free cash flow (pre-spectrum and
restructuring) in FY21 to be at least EUR5 billion.
Financial modelling considerations & assumptions
The guidance above reflects the following:
-- The de-consolidation of Vodafone Italy Towers following its
merger with INWIT (completed in March 2020);
-- The sale of Vodafone Malta (completed in March 2020);
-- Vodafone Egypt remains within guidance;
-- No significant change in the Group's effective cash interest
rate or cash tax rate is assumed;
-- Foreign exchange rates used when setting guidance were as follows:
- EUR 1 : GBP 0.87;
- EUR 1 : ZAR 20.59;
- EUR 1 : TRY 7.50; and
- EUR 1 : EGP 17.02.
-- Free cash flow guidance excludes the impact of license and
spectrum payments, restructuring costs, and any material one-off
receipts or tax related payments; and
-- Guidance assumes no material change to the structure of the
Group or any fundamental structural change to the Eurozone
Financial performance Resilient performance in line with expectations
-- Resilient financial performance during the first half of FY21, in line with our expectations
-- Group revenue declined by 2.3% to EUR21.4 billion, as good
underlying momentum and the benefit from the acquisition of Liberty
Global's assets in Germany and CEE was offset by lower revenue from
roaming, visitors and handset sales, foreign exchange headwinds and
the disposal of Vodafone New Zealand
-- Adjusted EBITDA declined by 1.9%* to EUR7.0 billion as a
decline in revenue was partially offset by good cost control, with
a net reduction in our Europe and Common Functions operating
expenditure of EUR300 million during H1
-- Free cash flow (pre-spectrum and restructuring) grew by 14.5%
to EUR0.5 billion, supported by the resilient EBITDA performance
and higher dividends from associates and investments, partially
offset by higher cash interest and tax
-- Interim dividend per share of 4.50 eurocents, record date 18 December 2020
Group financial performance
H1 FY21
(1) H1 FY20
EURm EURm Change (%)
================================================================== ============ =========== ================
Revenue 21,427 21,939 (2.3)
- Service revenue(2) 18,418 18,544 (0.7)
- Other revenue 3,009 3,395 (11.4)
Adjusted EBITDA (2,5) 7,023 7,105 (1.2)
Depreciation and amortisation (4,729) (4,874) 3.0
------------ ----------- ----------------
Adjusted EBIT (2) 2,294 2,231 2.8
Share of adjusted results in associates
and joint ventures(3) 255 (550) 146.4
------------ ----------- ----------------
Adjusted operating profit (2) 2,549 1,681 51.6
Adjustments for:
- Restructuring costs(3) (86) (163)
- Amortisation of acquired customer
base and brand intangible assets(3) (364) (232)
- Adjusted other income and expense(3) 1,184 (872)
- Interest on lease liabilities(4) 189 163
------------ -----------
Operating profit 3,472 577
Net financing costs (1,427) (1,088)
Income tax expense (490) (1,380)
------------ -----------
Profit/(loss) for the financial period
(6) 1,555 (1,891)
Attributable to:
- Owners of the parent 1,314 (2,128)
- Non-controlled interests 241 237
------------ -----------
Profit/(loss) for the financial period 1,555 (1,891)
================================================================== ============ =========== ================
Further detailed income statement information is available in a downloadable
spreadsheet format at https://investors.vodafone.com/reports-information/results-reports-presentations
Notes:
1. The FY21 results reflect average foreign exchange rates of
EUR1:GBP0.90, EUR1:INR 85.27, EUR1:ZAR 19.77, EUR1:TRY 8.02 and
EUR1: EGP 18.06.
2. 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. See "Alternative
performance measures" on page 54 for more information.
3. Share of results of equity accounted associates and joint
ventures presented within the Consolidated income statement
includes EUR255 million (2019: -EUR550 million) included within
Adjusted operating profit, EURnil (2019: -EUR33 million) included
within Restructuring costs, -EUR124 million (2019: -EUR122 million)
included within Amortisation of acquired customer base and brand
intangible assets and EUR129 million (2019: -EUR1,896 million)
included within Adjusted other income and expense.
4. 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.
5. Includes depreciation on Right-of-use assets of EUR1,914
million (2019: EUR1,821 million).
6. For the six months ended 30 September 2020, the Group
recorded a gain of EUR1,043 million in relation to the merger of
Vodafone Hutchison Australia Pty Limited and TPG Telecom Limited.
See Note 9 "Investment in associates and joint ventures".
Geographic performance summary
Other Total Other
Europe Group
H1 FY21 Germany Italy UK Spain Europe (1) Vodacom Markets (1)
================ ======= ===== ===== ===== ====== ====== ======= ======= ======
Total revenue (
EUR
m) 6,371 2,506 2,983 2,050 2,720 16,583 2,423 1,898 21,427
Service revenue
(EURm) 5,723 2,249 2,401 1,880 2,411 14,617 1,949 1,679 18,418
Adjusted EBITDA
(EURm) 2,844 800 636 488 870 5,638 891 613 7,023
Adjusted EBITDA
margin
% 44.6% 31.9% 21.3% 23.8% 32.0% 34.0% 36.8% 32.3% 32.8%
Adjusted EBIT
(EURm) 1,128 196 (126) (43) 269 1,424 552 482 2,294
Adjusted
operating
profit/(loss)
(EURm) 1,128 212 (126) (43) 276 1,447 662 606 2,549
================ ======= ===== ===== ===== ====== ====== ======= ======= ======
Further geographic performance information is available in a downloadable
spreadsheet format at
https://investors.vodafone.com/reports-information/results-reports-presentations
Note:
1. See pages 57 to 62 for a full disaggregation of our financial
results by geography, including intersegment eliminations.
FY20 FY21
----------------------------------------------------- ----------------------
Organic service
revenue
growth % Q1 Q2 H1 Q3 Q4 H2 Total Q1 Q2 H1
================ ======= ===== ===== ===== ====== ====== ======= ======= ====== =====
Europe (1.7) (1.4) (1.6) (1.4) (0.4) (0.9) (1.2) (2.6) (1.8) (2.2)
- of which
Germany 0.4 (0.2) 0.1 - (0.1) - - - (0.1) (0.1)
Vodacom 1.1 3.6 2.4 5.2 3.2 4.2 3.3 1.5 3.2 2.3
Other Markets 10.0 16.4 15.4 14.5 14.2 14.4 14.9 9.1 9.0 9.0
Total Group (0.2) 0.7 0.3 0.8 1.6 1.2 0.8 (1.3) (0.4) (0.8)
=============== ======= ===== ===== ===== ====== ====== ======= ======= ====== =====
Total Europe 80% of Group Adjusted EBITDA
H1 FY21 H1 FY20 Organic
EURm EURm Change (%)*
=========================================== ======= ======= ===========
Total revenue 16,583 16,225
- Service revenue 14,617 14,120 (2.2)
- Other revenue 1,966 2,105
Adjusted EBITDA 5,638 5,348 (1.2)
Adjusted EBITDA margin 34.0% 33.0%
Depreciation and amortisation (4,214) (4,221)
------- -------
Adjusted EBIT 1,424 1,127
Share of adjusted results in associates
and joint ventures 23 39
------- -------
Adjusted operating profit 1,447 1,166
=========================================== ======= ======= ===========
Europe total revenue and adjusted EBITDA increased by 2.2% and
5.4% respectively, primarily due to the consolidation of the
acquired Liberty Global assets in Germany and CEE.
Service revenue in H1 decreased by 2.2%* including lower roaming
and visitor revenue and other COVID-19 impacts. Excluding roaming
and visitor impacts, organic service revenue growth in Q2 was
broadly stable.
Adjusted EBITDA decreased by 1.2%* including a year-on-year drag
of 3.7 percentage points from roaming and visitors, as well as
higher bad debt provisions, partially offset by good cost control
during H1.
Europe adjusted EBIT grew by 26.4%, reflecting the contribution
of the acquired Liberty Global assets.
Germany 41% of Group Adjusted EBITDA
H1 FY21 H1 FY20 Organic
EURm EURm Change (%)*
========================================= ======= ======= ===========
Total revenue 6,371 5,590
- Service revenue 5,723 4,961 (0.1)
- Other revenue 648 629
Adjusted EBITDA 2,844 2,352 1.3
Adjusted EBITDA margin 44.6% 42.1%
Depreciation and amortisation (1,716) (1,588)
------- -------
Adjusted EBIT 1,128 764
Share of adjusted results in associates
and joint ventures - -
------- -------
Adjusted operating profit 1,128 764
========================================= ======= ======= ===========
Service revenue was broadly stable at -0.1%* (Q1: 0.0%*, Q2:
-0.1%*), as higher variable usage revenue during the COVID-19
lockdown and the lapping of international call rate regulation was
offset by lower roaming, visitor and wholesale revenue. Retail
service revenue grew by 0.5 %* (Q1: 0.4%*, Q2: 0.6%*), despite a
1.3 percentage point drag from lower roaming and visitor
revenue.
Fixed service revenue grew by 1.5%* (Q1: 2.4%*, Q2: 0.6%*)
supported by customer base growth and ARPU accretive customer
migrations to high-speed plans. Growth slowed in Q2 reflecting
lower variable usage revenue, and greater wholesale revenue
declines as we lapped prior year LLU price increases. We added
157,000 cable customers in H1, including 77,000 migrations from
DSL. We had 1.8 million customers on speeds of at least 400Mbps at
the end of H1 and 21.8 million customers households are now able to
access Gigabit speeds on our cable network. Our broadband customer
base reached 10.9 million.
Our TV customer base declined by 85,000 reflecting lower retail
activity during the COVID-19 pandemic and a lower Premium TV
customer base. In August, we launched a harmonised portfolio across
all homes in Germany, bringing Vodafone TV to the Unitymedia
footprint, with a significant improvement in the content portfolio.
We maintained our good momentum in convergence supported by our
'GigaKombi' proposition, adding 73,000 Consumer converged customers
in H1 which took our customer base to 1.6 million.
Mobile service revenue declined by 2.0%* (Q1: -3.0%*, Q2:
-1.0%*) mainly due to the reduction in roaming, visitor and
wholesale revenue. Growth improved in Q2 reflecting a lower drag
from roaming and visitor revenue, and the lapping of regulatory
impacts. We added 238,000 contract customers in H1, supported by
the migration of 187,000 Unitymedia mobile customers onto our
network. Contract churn improved by 0.4 percentage points
year-on-year to 12.1%. We added 225,000 prepaid customers,
supported by our online-only proposition, 'CallYa Digital'.
Adjusted EBITDA increased by 1.3%* supported by synergy delivery
and our continued focus on cost discipline, partially offset by a
1.9 percentage point year-on-year drag from lower roaming and
visitors. The organic adjusted EBITDA margin was 0.7* percentage
points higher year-on-year and was 44.6%.
We continued to make good progress on integrating Unitymedia,
with the rebranding and TV portfolio harmonisation now complete,
and the organisational integration completed during H1. We are
approximately six months ahead of plan with respect to our cost and
capital expenditure synergy targets and remain on track to deliver
the remaining synergies.
Italy 11% of Group Adjusted EBITDA
H1 FY21 H1 FY20 Organic
EURm EURm change (%)*
========================================= ======= ======= ===========
Total revenue 2,506 2,709
- Service revenue 2,249 2,424 (7.2)
- Other revenue 257 285
Adjusted EBITDA 800 1,006 (11.1)
Adjusted EBITDA margin 31.9% 37.1%
Depreciation and amortisation (604) (623)
------- -------
Adjusted EBIT 196 383
Share of adjusted results in associates
and joint ventures 16 -
------- -------
Adjusted operating profit 212 383
========================================= ======= ======= ===========
Service revenue declined by 7.2%* (Q1: -6.5%*, Q2: -8.0%*),
driven by continued price competition in the low-value segment of
the mobile market, and lower roaming and visitor revenue. The Q2
slowdown primarily reflected a 2.7 percentage point sequential
impact from the lapping of prior year price increases. The
year-on-year drag from roaming and visitors in Q2 was 2.4
percentage points.
Mobile service revenue declined 11.0%* (Q1: -10.0%*, Q2: -11.9
%*) reflecting lower roaming and visitor revenue, a reduction in
the active customer base year-on-year, which subsequently
stabilised in H1, and price competition in the low-value segment.
The sequential slowdown in Q2 reflected the lapping of prior year
price increases, partially offset by a lower drag from roaming and
visitor revenue. Our net mobile number portability ('MNP') volumes
remained relatively stable despite market MNP volumes returning
towards pre-COVID levels in Q2. Our second brand 'ho.' continued to
grow strongly, with 404,000 net additions in H1, supported by our
best-in-class net promoter score, and now has 2.2 million
customers.
Fixed service revenue grew by 4.4%* (Q1: 4.1%*, Q2: 4.8%*)
supported by 52,000 broadband customer additions in H1. We now have
3.0 million broadband customers . Our total Consumer converged
customer base is now 1.1 million (representing 37% of our broadband
base), an increase of 41,000 during H1. Through our owned NGN
footprint and strategic partnership with Open Fiber we now pass 7.9
million households.
Adjusted EBITDA declined by 11.1%* reflecting lower service
revenue, a 4.7 percentage point year-on-year drag from lower
roaming and visitors, as well as an increase in bad debt
provisions, partially offset by strong control with operating
expenses declining by 5.5% year-on-year. The organic adjusted
EBITDA margin was 1.4* percentage points lower year-on-year and was
31.9%.
In a first of its kind, Vodafone Italy has recently signed a new
flexible working agreement with the local trade unions. The plan
represents a new model of agile and inclusive work, and provides
for 80% of the monthly working hours in agile work for employees
working in customer service areas and 60% for employees in the
remaining company areas. On agile working days, colleagues will be
asked to choose the place from which to work remotely. All
colleagues will be equipped with the necessary technology and
benefit from a dedicated offer for fixed connectivity from
Vodafone.
INWIT Joint Venture
The results of INWIT (in which Vodafone owns a 33.2% stake)
reported here reflect INWIT's accounting policies, definitions and
disclosures.
Total revenue in H1 was EUR371 million and grew 88% year-on-year
reflecting the first-time inclusion of Vodafone Towers from 1 April
2020. Pro forma for the Vodafone Towers merger, organic revenue
grew by 1.9% in Q2, driven by increased mobile operator demand for
new mobile sites and distributed antenna systems. Total earnings
after lease costs but before other depreciation, amortisation,
interest and tax were EUR240 million in H1; the margin on these
earnings was 65%.
In April 2020, we received a special dividend of EUR0.2 billion
as a result of the transaction in March 2020 and subsequently sold
41.7 million INWIT shares, resulting in gross proceeds of
approximately EUR400 million. As a result of the transaction,
Vodafone's ownership stake in INWIT decreased from 37.5% to
33.2%.
Vodafone received a further EUR 42 million in dividends from
INWIT during the half year.
UK 9% of Group Adjusted EBITDA
H1 FY21 H1 FY20 Organic
EURm EURm change*
========================================= ======= ======= =======
Total revenue 2,983 3,151
- Service revenue 2,401 2,451 (1.2)
- Other revenue 582 700
Adjusted EBITDA 636 658 (2.3)
Adjusted EBITDA margin 21.3% 20.9%
Depreciation and amortisation (762) (820)
------- -------
Adjusted EBIT (126) (162)
Share of adjusted results in associates
and joint ventures - -
------- -------
Adjusted operating profit (126) (162)
========================================= ======= ======= =======
Service revenue decreased by 1.2%* (Q1: -1.9%*, Q2: -0.5%*) as
good customer base growth and the lapping of international call
rate regulation was offset by lower roaming, visitor and incoming
revenue. The sequential Q2 improvement was driven by Business fixed
acceleration and the lapping of international call rate regulation.
The year-on-year drag from roaming and visitors in Q2 was 2.8
percentage points.
Mobile service revenue declined 4.0%* (Q1: -4.3%*, Q2: -3.6 %*),
as lower roaming, visitor and incoming revenue offset good customer
base growth. The sequential improvement in Q2 reflected the lapping
of international call rate regulation. We maintained our good
commercial momentum and our mobile contract customer base increased
by 142,000, driven by increased Business demand and the reopening
of our retail stores. Our digital sub-brand 'VOXI' continued to
grow, with 65,000 customer additions during H1, supported by the
launch of new propositions. Contract churn improved 1.3 percentage
point year-on-year to 12.4%.
Fixed service revenue grew by 6.3%* (Q1: 4.8%*, Q2: 7.8%*) and
our commercial momentum remained strong with 119,000 net customer
additions, supported by our 'need for speed' campaign. We now have
838,000 broadband customers - of which 437,000 are converged, with
52,000 converged customers added during H1. The sequential Q2
service revenue improvement was driven by Business, with increased
corporate demand for virtual call centres and core connectivity,
and increased SME demand for productivity and security
solutions.
Adjusted EBITDA decreased by 2.3% reflecting a year-on-year drag
from lower roaming and visitors of 5.7* percentage points, as well
as higher bad debt expense, partially offset by continued good cost
control, with operating expenses 10.3% lower year-on-year. The
organic adjusted EBITDA margin was 0.4* percentage points higher
year-on-year at 21.3%.
Spain 7% of Group Adjusted EBITDA
H1 FY21 H1 FY20 Organic
EURm EURm change (%)*
========================================= ======= ======= ===========
Total revenue 2,050 2,161
- Service revenue 1,880 1,966 (4.4)
- Other revenue 170 195
Adjusted EBITDA 488 460 6.0
Adjusted EBITDA margin 23.8% 21.3%
Depreciation and amortisation (531) (621)
------- -------
Adjusted EBIT (43) (161)
Share of adjusted results in associates
and joint ventures - -
------- -------
Adjusted operating profit (43) (161)
========================================= ======= ======= ===========
Service revenue declined by 4.4%* (Q1: -6.9%*, Q2: -1.8%*)
reflecting the impact of COVID-19 on roaming and visitor revenue
and service suspensions during lockdown, in the context of a
competitive market. The sequential improvement in Q2 was supported
by customer base growth and the unwinding of temporary suspensions
and offers. The year-on-year drag from roaming and visitors in Q2
was 3.0 percentage points.
We continue to compete effectively across all segments of the
market and grew our contract mobile, NGN broadband and TV customer
base for a fifth consecutive quarter in Q2.
After restrictions were lifted, the market remained highly
promotional and m obile number portability increased. Our mobile
contract customer base increased by 95,000 in H1, with Q2 impacted
by the disconnection of non-paying customers, who could not be
disconnected in Q1 due to the government's state of emergency
restrictions. Mobile contract churn decreased 4.9 percentage points
year-on-year to 16.7%. Our second brand 'Lowi' continued to grow
and now has 1.1 million customers.
We added 58,000 broadband customers, of which 101,000 were NGN
connections, as customers continued to transition to higher-speed
plans. Our leadership in movies and series, as well as our new
'boxless' TV proposition, supported 114,000 customer additions in
TV. We now have over 2.3 million converged consumer customers.
Adjusted EBITDA grew by 6.0%* and the adjusted EBITDA margin was
2.5* percentage points higher year-on-year. The growth in EBITDA
was primarily due to lower football content costs and a 9.9 %*
reduction in operating expenses, partially offset by an 8.1
percentage point year-on-year drag from lower roaming and visitors,
and higher bad debt and TV content costs. The adjusted EBITDA
margin was 23.8%.
Other Europe 12% of Group Adjusted EBITDA
H1 FY21 H1 FY20 Organic
EURm EURm Change (%)*
=========================================== ======= ======= ===========
Total revenue 2,720 2,690
- Service revenue 2,411 2,392 (2.4)
- Other revenue 309 298
Adjusted EBITDA 870 872 (2.2)
Adjusted EBITDA margin 32.0% 32.4%
Depreciation and amortisation (601) (569)
------- -------
Adjusted EBIT 269 303
Share of adjusted results in associates
and joint ventures 7 39
------- -------
Adjusted operating profit 276 342
=========================================== ======= ======= ===========
Service revenue declined by 2.4%* (Q1: -3.1%*, Q2: -1.8%*),
driven by lower roaming and visitor revenue, lower prepaid top-ups,
notably in Portugal and Greece, and increased competition in
Ireland and Greece. The sequential improvement in Q2 reflected a
recovery in prepaid revenue as lockdown restrictions started to
ease, and a sequential 0.7 percentage point benefit from the
first-time inclusion of ABCom in our financial results. The
year-on-year impact from roaming and visitor revenue was stable at
2.5 percentage points in Q2, as pressure in Ireland and Greece was
offset by an improvement in visitor numbers in other markets.
In Portugal, service revenue grew by 0.5%* (Q1: 0.7%*, Q2:
0.3%*) as lower roaming, visitor and prepaid revenue was more than
offset by mobile contract and fixed growth. In Ireland, service
revenue declined by 6.4%* (Q1: -6.8%*, Q2: -6.1%*) reflecting lower
roaming and visitor revenue and higher competitive intensity,
partially offset by an increase in the mobile contract customer
base following the successful launch of unlimited data tariffs .
Service revenue in Greece declined by 7.4%* (Q1: -8.8%*, Q2:
-6.1%*) reflecting lower roaming and visitor revenue and higher
promotional activity, partially offset by higher prepaid top-ups
during Q2 followed the easing of retail restrictions.
Adjusted EBITDA declined by 2.2%* including a 4.8 percentage
point drag from lower roaming and visitors, and an increase in bad
debt provisions. The organic adjusted EBITDA margin increased by
0.1 * percentage points and was 32.0 %.
VodafoneZiggo Joint Venture (Netherlands)
The results of VodafoneZiggo (in which Vodafone owns a 50%
stake) are reported here under US GAAP, which is broadly consistent
with Vodafone's IFRS basis of reporting.
Total revenue grew 2.1 % in H1 (Q1: 1.9 %, Q2: 2.3 %). This
reflected growth in fixed revenue, partly offset by lower roaming
and visitor mobile revenue.
We added 134,000 mobile contract customers, supported by the
successful 'Runners' campaign. Over 42 % of broadband customers and
71 % of all B2C mobile customers are now converged, delivering
significant NPS and churn benefits. VodafoneZiggo was the first
operator to launch a nationwide 5G network in the Netherlands. We
now offer 1 Gigabit speeds to more than 2 million homes and expect
to connect 3 million households by the end of the 2020 calendar
year.
Adjusted EBITDA grew by 8.7 % during H1, supported by top line
growth, and lower operating and direct costs, more than offsetting
a year-on-year drag from lower roaming and visitor mobile revenue.
We continued to make good progress on integration and remain on
track to deliver our EUR210 million cost and capital expenditure
synergy targets by the end of the 2020 calendar year, one year
ahead of the original plan.
During the half year, Vodafone received EUR88 million in
dividends from the joint venture, as well as EUR11 million in
interest payments. The joint venture also drew down an additional
EUR104 million shareholder loan from Vodafone.
Vodacom 13% of Group Adjusted EBITDA
H1 FY21 H1 FY20 Organic
EURm EURm change (%)*
========================================= ======= ======= ===========
Total revenue 2,423 2,734
- Service revenue 1,949 2,217 2.3
- Other revenue 474 517
Adjusted EBITDA 891 1,019 3.6
Adjusted EBITDA margin 36.8% 37.3%
Depreciation and amortisation (339) (386)
------- -------
Adjusted EBIT 552 633
Share of adjusted results in associates
and joint ventures 110 123
------- -------
Adjusted operating profit 662 756
========================================= ======= ======= ===========
Vodacom service revenue grew 2.3%* (Q1: 1.5%*, Q2: 3.2%*) as
good growth in South Africa was partially offset by revenue
declines in Vodacom's international operations. The sequential
improvement in Q2 reflected stronger growth in South Africa.
In South Africa, service revenue increased 7.1%* (Q1: 6.4%*, Q2:
7.7%*) driven by increased demand for voice, data and financial
services and price elasticity, supported by an increase in consumer
discretionary spend as a result of the ban on alcohol and tobacco
sales and special government social grants during the COVID-19
pandemic. We added 66,000 contract customers, supported by strong
growth in Business connectivity as remote working and mobile
broadband demand increased. Overall data traffic increased by 90%
and 49% of our customer base is using data services.
In Vodacom's international operations, service revenue declined
by 5.1%* (Q1: -5.2%*, Q2: -4.9%*), reflecting economic pressure and
the disruption to our commercial activities during the COVID-19
pandemic, the zero-rating of person-to-person M-Pesa transfers in
DRC, Mozambique, and Lesotho and the impact of service barring in
Tanzania due to biometric registration compliance. Digital adoption
across Vodacom's international operations accelerated with M-Pesa
revenue as a share of total service revenue increasing by 0.9
percentage points to 19.9%, and 53% of our customer base is using
data services.
Vodacom's adjusted EBITDA increased by 3.6%* as positive
operational leverage in South Africa was partially offset by
revenue pressure in Vodacom's international operations. The
adjusted EBITDA margin was 0.1* percentage points lower
year-on-year and the adjusted EBITDA margin was 36.8%. Reported
adjusted EBITDA decreased by 12.6% due to the depreciation of the
local currencies versus euro.
Safaricom Associate (Kenya)
Safaricom service revenue declined by 4.8%* (Q1: -8.4%*, Q2:
-1.2%*) due to depressed economic activity and the zero-rating of
some M-Pesa services. The sequential improvement in Q2 was driven
by an increase in M-Pesa transaction volumes and higher fixed
demand. Adjusted EBITDA decreased by 7.8% primarily driven by a
decline in revenue.
Other Markets 9% of Group Adjusted EBITDA
Turkey
Service revenue in Turkey grew by 13.8%* (Q1: 13.8%*, Q2:
13.9%*) supported by strong customer contract ARPU growth,
increased mobile data revenue and fixed customer base growth.
Adjusted EBITDA grew 14.7%* and the adjusted EBITDA margin
increased by 0.6* percentage points driven by strong revenue growth
ahead of inflation and operating expenditure efficiencies. The
adjusted EBITDA margin was 27.1%.
Egypt
Service revenue in Egypt grew by 5.4%* (Q1: 6.0%*, Q2: 4.9%*),
supported by customer base growth and increased data usage,
partially offset by lower roaming and visitor revenue, and the
impact of a government-mandated waiver of transaction fees on our
e-money platform.
Adjusted EBITDA declined by 10.4%* and the organic adjusted
EBITDA margin decreased by 7.1* percentage points. This reflected
an intra-year re-phasing of marketing spend into H1, the lapping of
a prior year settlement, and the zero -rating of e-money
transaction fees during the COVID-19 pandemic, which will end
during H2. The adjusted EBITDA margin was 41.6%.
On 29 January 2020, we announced a Memorandum of Understanding
('MoU') with Saudi Telecom Company ('stc') in relation to the sale
of Vodafone's 55% shareholding in Vodafone Egypt to stc for a cash
consideration of US$2,392 million (EUR2,180 million). On 13 April
2020, the MoU with stc was extended to allow additional time for
the completion of due diligence on Vodafone Egypt by stc, which has
now been substantively completed. On 14 September 2020 the extended
MoU expired, however we remain in discussion with stc to finalise
the transaction.
Other associates and joint ventures
Vodafone Idea Limited (India)
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.
Vodafone Idea Limited ('Vodafone Idea') recorded losses for each
of the six month periods ended 30 September 2019, 31 March 2020 and
30 September 2020, respectively. For the six months ended 30
September 2019, the Group recognised its share of estimated
Vodafone Idea losses arising from both its operating activities and
those in relation to the AGR judgement. The Group has no obligation
to fund Vodafone Idea, consequently the Group's recognised share of
losses in the six months ended 30 September 2019 was limited to the
remaining carrying value of Vodafone Idea which was therefore
reduced to EURnil at 30 September 2019; no further losses have been
recognised by the Group.
The Group has a potential exposure to certain contingent
liabilities and potential refunds relating to Vodafone India and
Idea Cellular at the time of the merger, including those relating
to the AGR judgement, whereby Vodafone Group and Vodafone Idea
would reimburse each other on set dates following any
crystallisation of these pre-merger liabilities and assets.
See 'Other significant developments and legal proceedings' on
page 29 and Note 13 in the unaudited condensed consolidated
financial statements for further information.
Indus Towers (India)
On 1 September 2020, we announced that Bharti Airtel Limited
('Bharti Airtel') and Vodafone Idea Ltd ('Vodafone Idea') had
agreed to proceed with completion of the merger of Indus Towers
Limited ('Indus Towers') and Bharti Infratel Limited ('Bharti
Infratel' and, following the completion, the 'Combined Company').
On 5 October 2020, we announced that lender consent had been
received. On 22 October 2020, the National Company Law Tribunal
('NCLT') approved the extension of time for filing of the certified
copy of the NCLT order approving the merger scheme with the
Registrar of Companies ('RoC'). The merger scheme will become
effective when the order is filed with the RoC. Following any
agreed closing adjustments, the filing with the RoC is expected to
be completed imminently.
Vodafone Hutchison Australia / TPG Telecom
On 13 July 2020, we announced that Vodafone Hutchison Australia
Pty Limited ('VHA') and TPG Telecom Limited ('TPG') had completed
their merger to establish a fully integrated telecommunications
operator in Australia. The merged entity was admitted to the
Australian Securities Exchange ('ASX') on 30 June 2020 and is known
as TPG Telecom Limited. Vodafone and Hutchison Telecommunications
(Australia) Limited each own an economic interest of 25.05% in the
merged unit, with the remaining 49.9% listed as free float on the
ASX.
Net financing costs
H1 FY21 H1 FY20
EURm EURm Change (%)
================================= ======= ======= ==========
Adjusted net financing costs (1) (639) (799) 20.0
Adjustments for:
Mark-to-market (losses)/gains (368) 21
Foreign exchange losses (231) (147)
Interest on lease liabilities (189) (163)
------- ------- ----------
Net financing costs (1,427) (1,088) (31.2)
================================== ======= ======= ==========
Notes:
1. Adjusted net financing costs 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 measure. See "Alternative
performance measures" on page 54 for more information.
Net financing costs increased by EUR339 million, primarily due
to mark-to-market losses in the period. These were driven by the
lower share price, causing a mark-to-market loss on the options
relating to the mandatory convertible bonds and by lower long-term
yields, which led to mark-to-market losses on certain economic
hedging instruments. Adjusted net financing costs decreased
reflecting net favourable interest movements on borrowings in
relation to 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
H1 FY21 H1 FY20
EURm EURm Change (%)
============================================ ======= ======= ==========
Income tax expense: (490) (1,380) 64.5
Tax on adjustments to derive adjusted
profit before tax (153) (82)
Adjustments(1) :
- Reduction in deferred tax following
rate change in Luxembourg - 868
- Deferred tax on use of Luxembourg
losses in the period 188 200
------- ------- ----------
Adjusted income tax expense for calculating
adjusted tax rate (455) (394) (15.5)
------- ------- ----------
Profit/(loss) before tax 2,045 (511) 500.2
Adjustments to derive adjusted profit
before tax(1) (135) 1,393
------- ------- ----------
Adjusted profit before tax (2) 1,910 882 116.6
Share of adjusted results in associates
and joint ventures (255) 550
------- ------- ----------
Adjusted profit before tax for calculating
adjusted effective tax rate 1,655 1,432 15.6
------- ------- ----------
Adjusted effective tax rate (2) 27.5% 27.5% -
============================================= ======= ======= ==========
Notes:
1. See "Earnings per share" on page 24.
2. Adjusted profit before tax and adjusted effective tax 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. See "Alternative performance measures" on page 54 for more
information.
The Group's adjusted effective tax rate for the six months ended
30 September 2020 was 27.5%, in line with the prior period.
The Group's adjusted effective tax rate for both years does not
include EUR188 million (2019: EUR200 million) relating to the use
of losses in Luxembourg.
The Group's adjusted effective tax rate for the six months ended
30 September 2019 does not include a reduction in our deferred tax
assets in Luxembourg of EUR868 million following a reduction in the
Luxembourg corporate tax rate.
This use of our losses 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.
Earnings per share
H1 FY21 H1 FY20
EURm EURm Change (%)
============================================== ========= ========= ==========
Adjusted operating profit (1) 2,549 1,681 51.6
Adjusted net financing costs (639) (799)
Adjusted income tax expense for calculating
adjusted tax rate (455) (394)
Adjusted non-controlling interests (241) (238)
--------- --------- ----------
Adjusted profit attributable to owners
of the parent (1) 1,214 250 385.6
--------- --------- ----------
Adjustments:
Amortisation of acquired customer base
and brand intangible assets (364) (232)
Restructuring costs (86) (163)
Adjusted other income and expense 1,184 (872)
Mark-to-market (losses)/gains (368) 21
Foreign exchange losses (231) (147)
--------- --------- ----------
135 (1,393) 109.7
Taxation(2) (35) (986)
Non-controlling interests - 1
--------- --------- ----------
Profit/(loss) attributable to owners
of the parent 1,314 (2,128) 161.7
--------- --------- ----------
Million Million
--------- --------- ----------
Weighted average number of shares outstanding
- basic 29,535 29,410 0.4
eurocents eurocents
--------- --------- ----------
Basic earnings/(loss) per share 4.45c (7.24c) 161.5
Adjusted earnings per share(1) 4.11c 0.85c 383.5
=============================================== ========= ========= ==========
Notes:
1. Adjusted operating profit, adjusted profit attributable to
owners of the parent and adjusted earnings per share 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
measures. See "Alternative performance measures" on page 54 for
more information.
2. See page 23.
Adjusted earnings per share was 4.11 eurocents, compared to 0.85
eurocents in the six months ended 30 September 2019.
Basic earnings per share was 4.45 eurocents, compared to a loss
per share of 7.24 eurocents in the six months ended 30 September
2019. The increase is primarily due to losses recognised in the
comparative period relating to Vodafone Idea Limited, partially
offset by a EUR1.1 billion profit recorded on the disposal of
Vodafone New Zealand.
Cash flow, capital allocation and funding
Cash flow
H1 FY21 H1 FY20
EURm EURm Change (%)
================================================ ======== ======== ==========
Adjusted EBITDA (1) 7,023 7,105 (1.2)
Capital additions(2) (3,363) (3,000)
Working capital (2,503) (2,952)
Disposal of property, plant and equipment 6 21
Other 119 221
-------- -------- ----------
Operating free cash flow (1) 1,282 1,395 (8.1)
Taxation (533) (483)
Dividends received from associates and
investments 355 63
Dividends paid to non-controlling shareholders
in subsidiaries (166) (169)
Interest received and paid(3) (487) (412)
-------- -------- ----------
Free cash flow (pre-spectrum and restructuring)
(1) 451 394 14.5
Licence and spectrum payments (286) (58)
Restructuring and other payments(4) (266) (302)
-------- -------- ----------
Free cash flow (1) (101) 34 (397.1)
Acquisitions and disposals 434 (16,715)
Equity dividends paid (1,209) (1,092)
Share buybacks(3) - (1,094)
Foreign exchange (loss)/gain (258) 67
Other(5) (681) (2,274)
-------- -------- ----------
Net debt increase (1,6) (1,815) (21,074) 91.4
Opening net debt(1,6) (42,168) (27,033)
-------- -------- ----------
Closing net debt (1,6) (43,983) (48,107) 8.6
------------------------------------------------ -------- -------- ----------
Notes:
1. Adjusted EBITDA, operating free cash flow, free cash flow
(pre-spectrum and restructuring), free cash flow and net debt 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
measures. See "Alternative performance measures" on page 54 for
more information.
2. Capital additions includes the purchase of property, plant
and equipment and intangible assets, other than licence and
spectrum payments and transformation capital expenditure.
3. Interest received and paid excludes EUR134 million (2019:
EUR87 million) of interest on lease liabilities, included within
operating free cash flow; EURnil (2019: EUR175 million) of interest
costs related to Liberty acquisition financing, included within
Other; and EURnil (2019: EUR273 million) of cash outflow from the
option structure relating to the issue of the mandatory convertible
bond in February 2016, included within Share buybacks. The option
structure was intended to ensure that the total cash outflow to
execute the programme was broadly equivalent to the GBP1,440
million raised on issuing the second tranche.
4. Includes transformation capital expenditure of EUR116
million.
5. "Other" for the six months ended 30 September 2019 included
EUR1,559 million of debt incurred in relation to licences and
spectrum acquired in Germany.
6. Net debt balances at 30 September 2020 and 31 March 2020 have
been adjusted to exclude derivative gains in cash flow hedge
reserves, the corresponding losses for which are not recognised on
the bonds within net debt and which are significant due to COVID-19
related market conditions. See page 27.
Operating free cash flow was EUR0.1 billion lower at EUR1.3
billion due to a reduction in roaming and visitor revenue, offset
by lower net operating expenses in Europe. A favourable working
capital movement of EUR0.4 billion was offset by an increase in
capital additions of EUR0.4 billion, including the impact from the
first-time inclusion of Unitymedia.
Free cash flow (pre-spectrum and restructuring) was EUR0.5
billion, an increase of EUR0.1 billion. The decrease in operating
free cash flow was outweighed by an increase of EUR0.3 billion in
dividends from associates and investments, partially offset by
higher net interest paid and taxation outflows.
Closing net debt adjusted for mark-to-market gains deferred in
hedging reserves at 30 September 2020 was EUR44.0 billion (31 March
2020: EUR42.2 billion) and excludes borrowings of EUR11.6 billion
(31 March 2020: EUR12.1 billion) of lease liabilities recognised
under IFRS 16 and a loan of EUR1.3 billion (31 March 2020: EUR1.3
billion) specifically secured against Indian assets. Additionally
it excludes GBP3.44 billion (31 March 2020: GBP3.44 billion)
mandatory convertible bond issued in February 2019 which will be
settled in equity shares, and EUR0.8 billion (31 March 2020: EUR0.7
billion) of shareholder loans receivable from VodafoneZiggo.
The Group's borrowings and net debt includes bonds, some of
which are or were previously designated in hedge relationships,
which are carried at EUR1.5 billion higher (31 March 2020: EUR1.5
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 is not
reflected in borrowings and would increase the euro equivalent
redemption value of the bonds by EUR0.2 billion (31 March 2020:
EUR1.3 billion lower).
Analysis of free cash flow
H1 FY21 H1 FY20
EURm EURm Change (%)
================================================ ======= ======= ==========
Inflow from operating activities 6,009 6,139 (2.1)
Net tax paid 533 483
------- ------- ----------
Cash generated by operations 6,542 6,622 (1.2)
Capital additions (3,363) (3,000)
Working capital movement in respect of
capital additions (222) (713)
Disposal of property, plant and equipment 6 21
Restructuring payments 150 302
Other(1) (1,831) (1,837)
------- ------- ----------
Operating free cash flow (2) 1,282 1,395 (8.1)
Taxation (533) (483)
Dividends received from associates and
investments 355 63
Dividends paid to non-controlling shareholders
in subsidiaries (166) (169)
Interest received and paid (487) (412)
------- ------- ----------
Free cash flow (pre-spectrum and restructuring)
(2) 451 394 14.5
Licence and spectrum payments (286) (58)
Restructuring and other payments(3) (266) (302)
------- ------- ----------
Free cash flow (2) (101) 34 (397.1)
================================================ ======= ======= ==========
Notes:
1. Predominantly relates to lease payments.
2. Operating free cash flow, free cash flow (pre-spectrum and
restructuring) 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. See "Alternative
performance measures" on page 54 for more information.
3. Includes transformation capital expenditure of EUR116
million.
Funding position
Year-end
H1 FY21 FY20
EURm EURm Change (%)
======================================= ======== ======== ==========
Bonds (48,901) (49,412)
Bank loans (1,277) (2,728)
Cash collateral liabilities(1) (1,982) (5,292)
Other borrowings (3,748) (3,877)
-------- -------- ----------
Borrowings included in net debt (55,908) (61,309) 8.8
Cash and cash equivalents 6,612 13,284
Other financial instruments:
Mark-to-market derivative financial
instruments(2) (630) 4,409
Short term investments(3) 7,172 5,247
-------- -------- ----------
Total cash and cash equivalents and
other financial instruments 13,154 22,940 (42.7)
-------- -------- ----------
Net debt (4) (42,754) (38,369) (11.4)
-------- -------- ----------
Less mark-to-market gains deferred in
hedging reserves(5) (1,229) (3,799)
-------- -------- ----------
Net debt adjusted for mark-to-market
gains in hedging reserves (43,983) (42,168) (4.3)
-------- -------- ----------
Net debt to adjusted EBITDA** (4,5,6) 3.0x 2.8x
Lease liabilities (11,593) (12,063)
Bank borrowings secured against Indian
assets (1,321) (1,346)
-------- -------- ----------
Borrowings excluded from net debt (12,914) (13,409)
======================================== ======== ======== ==========
The EUR5.0 billion reduction in mark-to-market derivative
financial instruments primarily relates to lower gains deferred in
hedging reserves and foreign exchange that is offset by bond
retranslation. Lower borrowings and cash and cash equivalents are
driven by EUR4.6 billion lower cash collateral assets and
liabilities (which taken all together do not impact net debt) and
bank loan repayments of EUR1.3 billion. The movements in net debt
adjusted for mark-to-market gains in hedging reserves are shown in
the table below.
Movement in funding position
Net debt**
(4,5)
============
Net debt
to adjusted
EBITDA**
EURm (4,5,6)
================================================ ========== ============
31 March 2020 42,168 2.8x
Acquisitions and disposals (434)
Equity dividends paid 1,209
Other movements 939
Free cash flow (pre-spectrum and restructuring) (451)
Licence and spectrum payments 286
Restructuring and other payments 266
---------- ------------
30 September 2020 43,983 3.0x
================================================= ========== ============
Notes:
1. Cash collateral liabilities relate to a liability to return
the cash collateral that has been paid to Vodafone under collateral
arrangements on derivative financial instruments. The corresponding
cash received from banking counterparties is reflected within Cash
and cash equivalents and Short term investments.
2. Comprises mark-to-market adjustments on derivative financial
instruments, which are included as a component of trade and other
(payables)/receivables.
3. Short term investments includes EUR2,202 million (31 March
2020: EUR1,681 million) of highly liquid government and
government-backed securities; EUR2,443 million (31 March 2020:
EUR1,115 million) of assets paid to our bank counterparties as
collateral on derivative financial instruments; and managed
investment funds of EUR2,527 million (31 March 2020: EUR2,451
million) that are in highly rated and liquid money market
investments with liquidity of up to 90 days.
4. Net debt and the ratio of net debt to adjusted EBITDA 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. See "Alternative performance measures" on page 54 for more
information.
5. Net debt balances at 30 September 2020 and 31 March 2020
marked with a "**" have been adjusted to exclude derivative gains
in cash flow hedge reserves, the corresponding losses for which are
not recognised on the bonds within net debt and which are
significant due to COVID-19 related market conditions.
6. The ratio of net debt to adjusted EBITDA is calculated using
adjusted EBITDA for a rolling 12 month period, normalised for
acquisitions and disposals within the period.
Ratio of net debt to adjusted EBITDA
On a rolling 12 month basis, H1 FY21 net debt to adjusted EBITDA
increased by 0.2x to 3.0x (compared to 2.8x as at 31 March 2020),
reflecting the intra-year phasing of cash flows.
Funding facilities
The Group has undrawn committed facilities of EUR7,739 million,
principally euro and US dollar
revolving credit facilities of EUR3.9 billion and US$4.2 billion
(EUR3.6 billion). All of the euro revolving credit facilities
mature in 2025 except for EUR80 million which mature in 2023 and
all of the US dollar revolving credit facilities mature in 2022
except for US$75 million (EUR64 million) which mature in 2021. Both
committed revolving credit facilities support US and euro
commercial paper programmes of up to US$15 billion and EUR8 billion
respectively.
Return on Capital Employed
Return on capital employed ("ROCE") measures how efficiently we
generate returns from our asset base and is a key driver of
long-term value creation. We calculate two ROCE measures: i)
Pre-tax ROCE for controlled operations only and ii) Post-tax ROCE
(including associates & joint ventures). For the purpose of our
interim results, we have provided a brief update below. We will
present both measures and the detailed calculations for the
financial year in our full year results.
The methodology adopted for the post-tax ROCE discussed below is
consistent with that disclosed on page 39 of the Group's annual
report for the year ended 31 March 2020. For the purpose of the
mid-year ROCE calculation, the returns are based on the 12 months
ended 30 September 2020 and the denominator is based on the average
of the capital employed as at 30 September 2019 and 30 September
2020.
Our ROCE decreased by 1.0 percentage points to 5.1% on a pre-tax
basis (FY20: 6.1%) and remained flat at 4.0% on a post-tax basis.
The decrease in the pre-tax controlled ROCE was primarily
attributable to the first-time inclusion of the Liberty Global
assets for the full 12 month period. Pre-tax returns from
controlled operations were broadly stable due to lower EBITDA being
offset by a reduction in depreciation and amortisation. The
post-tax ROCE remained flat due to the first-time exclusion of the
Group's interest in Vodafone Idea in both the numerator and
denominator.
Post-employment benefits
T he EUR152 million net surplus at 31 March 2020 decreased by
EUR381 million to a EUR229 million net deficit at 30 September 2020
arising from the Group's obligations in respect of its defined
benefit schemes. The next triennial actuarial valuation of the
Vodafone Section and CWW Section of the Vodafone UK Group Pension
Scheme will be as at 31 March 2022.
Dividends
Dividends will continue to be declared in euros and paid in
euros, pounds sterling and US dollars, aligning the Group's
shareholder returns with the primary currency in which we generate
free cash flow. The foreign exchange rate at which future dividends
declared in euros will be converted into pounds sterling and US
dollars will be calculated based on the average 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: 4.50 eurocents). The ex-dividend date for the
interim dividend is 17 December 2020 for ordinary shareholders, the
record date is 18 December 2020 and the dividend is payable on 5
February 2021. Dividend payments on ordinary shares will be paid
directly into a nominated bank or building society account.
Vodafone is in the process of transferring its registrar
services to Equiniti Limited. Consequently, Vodafone has set an
ex-dividend date and record date for the interim dividend later in
Vodafone's financial calendar than in prior years.
Board changes
Jean-Francois van Boxmeer was appointed as a Non-Executive
Director at the annual general meeting held on 28 July 2020.
As announced on 22 May 2020, Gerard Kleisterlee stepped down and
retired from the Board on 3 November 2020 and Jean-Francois van
Boxmeer succeeded him as Chairman on that date.
David Thodey resigned as a Non-Executive Director on 27 July
2020.
Vodafone Idea Limited ('Vodafone Idea')
In October 2019, the Supreme Court of India ruled against the
industry in a dispute over the calculation of licence and other
regulatory fees, and Vodafone Idea was liable for very substantial
demands made by the Department of Telecommunications ('DoT') in
relation to these fees. Based on submissions of the DoT in the
Supreme Court proceedings (which the Group is unable to confirm as
to their accuracy), Vodafone Idea reported a total estimated
liability of INR 654 billion (EUR7.6 billion) excluding repayments
and including interest, penalty and interest on penalty up to 30
June 2020.
On 17 February, 20 February, 16 March and 16 July 2020, Vodafone
Idea made payments totaling INR 78.5 billion (EUR0.9 billion) to
the DoT.
In September 2020, the Supreme Court of India directed that
telecom operators make payment of 10% of the total dues by 31 March
2021 and thereafter repay the balance, along with 8% interest, in
10 annual instalments.
An update in relation to Indian regulatory cases and the
contingent liability mechanism, dating back to the creation of
Vodafone Idea is set out in Note 13 to the unaudited condensed
consolidated financial statements.
Acquisition and disposal commitments
Indus Towers
Vodafone announced on 1 September 2020 that it had agreed to
proceed with the merger of Indus Towers Limited ('Indus Towers')
and Bharti Infratel Limited ('Bharti Infratel', together the
'Combined Company').
The agreement to proceed was conditional on consent for a
security package for the benefit of the Combined Company (the
'Security Package') from Vodafone's existing lenders for the EUR1.3
billion loan utilised to fund Vodafone's contribution to the
Vodafone Idea Ltd rights issue in 2019. On 5 October 2020 it was
announced that this consent has been received. On 22 October 2020,
the NCLT approved the extension of time for filing of the certified
copy of the NCLT order approving the merger scheme with the
Registrar of Companies ('RoC'). The merger scheme will become
effective when the order is filed with the RoC. Following any
agreed closing adjustments, the filing with the RoC is expected to
be completed imminently.
Vodafone Egypt
The Group signed a Memorandum of Understanding ('MoU') with
Saudi Telecom Company ('stc') in January 2020 to pursue the sale of
the Group's 55% equity holding in Vodafone Egypt Telecommunications
S.A.E. ('Vodafone Egypt') for cash consideration of US$ 2.4 billion
(EUR2.2 billion).
On 14 September 2020, the Group announced that due diligence has
been substantively completed with respect to the potential sale.
Despite the expiry of the MoU, Vodafone remains in discussion with
stc to finalise the transaction in the near future and now looks to
stc and Telecom Egypt to find a suitable agreement to enable the
transaction to close.
Risk Factors
The key factors and uncertainties that could have a significant
effect on the Group's financial performance, include the
following:
Global economic disruption
A major economic disruption could result in lower spending power
for our customers and therefore reduced demand for our services
affecting our profitability and cash flow generation. Economic
disruption can also impact financial markets including currencies,
interest rates, borrowing and availability of debt financing.
Cyber threat and information security
An external cyber-attack, insider threat or supplier breach
could cause service interruption or the loss of confidential data.
Cyber threats could lead to major customer, financial, reputational
and regulatory impact across all of our local markets.
Geo-political risk in supply chain
We operate and develop sophisticated infrastructure in the
countries in which we are present. Our network and systems are
dependent on a wide range of suppliers internationally. If there
was a disruption in the supply chain, we might be unable to execute
our plans and we, and the industry, would face potential delays to
network improvements and increased costs.
Adverse political and regulatory measures
Operating across many markets and jurisdictions means we deal
with a variety of complex political and regulatory landscapes. In
all of these environments, we can face changes in taxation,
political intervention and potential competitive disadvantage. This
also includes our participation in spectrum auctions.
Technology failure
Major incidents caused by natural disasters, deliberate attacks
or an extreme technology failure, although rare, could result in
the complete loss of key sites in either our data centres or our
mobile/fixed networks causing a major disruption to our
service.
Strategic transformation
We are undertaking a large-scale integration of recently
acquired assets across multiple markets and failing to complete it
in a timely and efficient manner, would result in not realising the
full benefits or planned synergies and lead to additional
costs.
The recent launch of Vantage Towers will also translate in
changes to the way we operate.
We also have a number of joint ventures in operation and must
ensure that these operate effectively .
Market disruption
New entrants with lean models could create pricing pressure. As
more competitors launch unlimited bundles there could be price
erosion. Our market position and revenues could be damaged by
failing to provide the services that our customers want.
Digital transformation
Failure in digital or IT transformation projects could result in
business loss, poor customer experience and reputational
damage.
Disintermediation
We face 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. We must be able to keep pace with these new
developments and competitors while maintaining high levels of
customer engagement and an excellent customer experience.
Legal and regulatory compliance
Vodafone must comply with a multitude of local and international
laws and applicable industry regulations. These include laws
relating to privacy, anti-money laundering, competition,
anti-bribery and economic sanctions. Failure to comply with these
laws and regulations could lead to reputational damage, financial
penalties and/or suspension of our licence to operate.
Brexit
The Board continues to monitor the implications for Vodafone's
operations in light of the new trading relationship between the UK
and the EU, which has yet to be negotiated.
A cross-functional steering committee has identified the impact
of the UK and EU failing to reach a free trade agreement on the
Group's operations and has produced a comprehensive mitigation
plan.
Although our headquarters are in the UK, a large majority of our
customers are in other countries, accounting for most of our
revenue and cash flow. Each of our operating companies operates as
a standalone business, incorporated and licensed in the
jurisdiction in which it operates, and are 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 the lack of
a free trade deal. We are not a major international trading
company, and do not use passporting for any of our major services
or processes.
The lack of an agreed free trade deal between the UK and EU
could lead to a fall in consumer and business confidence. Such a
fall in confidence could, in turn, reduce consumer and business
spend on our products and services.
COVID-19
We continue to conduct thorough assessments of the potential
impacts of COVID-19 across our business, including but not limited
to our principal risks. During the initial stage of the crisis, we
reported in the Group's annual report for the year ended 31 March
2020 (page 70) on the following topics: health, safety and
wellbeing of our employees, disruption in our supply chain as well
as an increase in cyber-attacks. These topics remain relevant,
however other significant risks have been identified as detailed
below:
-- Consumption of our products and services has changed due to
societal shifts (e.g. working environment, connectivity needs and
travel patterns) and these are likely to continue to evolve in the
foreseeable future. By understanding the needs of our different
customer groups, we are in a better position to provide support and
adjust our product offering to retain loyalty while generating new
revenue streams.
-- Requirement for ongoing access to capital markets in order to
refinance debt. In addition, our emerging markets are exposed to
currency movements. Turmoil in the financial markets can restrict
access to capital markets and cause significant fluctuations in
exchange rates. We maintain a conservative approach to liquidity by
holding large volumes of cash and committed credit facilities, as
well as limiting our refinancing exposure by maintaining a long
average life of debt.
-- Governments will look to rebalance their finances over the
coming years and our industry could be targeted as a funding
opportunity with additional taxes and new adverse regulations. We
continue to work closely with our stakeholders and government
through our 'Social Contract' initiatives to ensure the
sustainability and wellbeing of our society.
-- Pressures brought on by the effects of lockdown, social
distancing and COVID-19 related restrictions impacts on our ability
to physically service our customers. Therefore, we have accelerated
and increased our digital transformation projects to provide a
better customer experience.
Our response to the COVID-19 pandemic has prioritised the safety
and wellbeing of our people first from the outset, through a
variety of initiatives deployed across markets and tightly
coordinated by the Business Continuity Plan programme management.
The move to working from home for almost 100,000 of our people
across all markets (approximately 95%) has been a tremendous
organisational effort, enabled by our technology and network
infrastructure, collaboration tools deployed at scale, HR policies
and digital training.
We have also run a number of short-term 'pulse' surveys to gauge
employee sentiment during the COVID-19 crisis. Our pulse survey
responses have directly contributed to shaping our direction on our
'Future Ready' strategy around new digital ways of working and the
future of work at Vodafone. They influenced our decisions on remote
working, our digital tools and our response to wellbeing of our
employees.
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/about/board-of-directors
By Order of the Board
Rosemary Martin
Group General Counsel and Company Secretary
16 November 2020
Unaudited condensed consolidated financial statements
Consolidated income statement
Six months ended
30 September
------------------
2020 2019
Note EURm EURm
------------------------------------------------------- ---- -------- --------
Revenue 2 21,427 21,939
Cost of sales (14,657) (15,010)
------------------------------------------------------- ---- -------- --------
Gross profit 6,770 6,929
Selling and distribution expenses (1,675) (1,883)
Administrative expenses (2,560) (2,590)
Net credit losses on financial assets (378) (302)
Share of results of equity accounted associates
and joint ventures 260 (2,601)
Other income 8,9 1,055 1,024
------------------------------------------------------- ---- -------- --------
Operating profit 2 3,472 577
Investment income 183 281
Financing costs (1,610) (1,369)
------------------------------------------------------- ---- -------- --------
Profit/(loss) before taxation 2,045 (511)
Income tax expense 4 (490) (1,380)
------------------------------------------------------- ---- -------- --------
Profit/(loss) for the financial period 1,555 (1,891)
------------------------------------------------------- ---- -------- --------
Attributable to:
- Owners of the parent 1,314 (2,128)
- Non-controlling interests 241 237
------------------------------------------------------- ---- -------- --------
Profit/(loss) for the financial period 1,555 (1,891)
------------------------------------------------------- ---- -------- --------
Profit/(loss) per share
Total Group:
- Basic 6 4.45c (7.24)c
- Diluted 6 4.44c (7.24)c
------------------------------------------------------- ---- -------- --------
Consolidated statement of comprehensive income/expense
Six months ended
30 September
------------------
2020 2019
EURm EURm
------------------------------------------------------- ---- -------- --------
Profit/(loss) for the financial period 1,555 (1,891)
Other comprehensive income/(expense):
Items that may be reclassified to the income
statement in subsequent periods:
Foreign exchange translation differences, net
of tax (770) (222)
Foreign exchange translation differences transferred
to the income statement (77) (59)
Other, net of tax(1) (2,058) (302)
------------------------------------------------------- ---- -------- --------
Total items that may be reclassified to the
income statement in subsequent periods (2,905) (583)
Items that will not be reclassified to the income
statement in subsequent periods:
Net actuarial losses on defined benefit pension
schemes, net of tax (383) (65)
------------------------------------------------------- ---- -------- --------
Total items that will not be reclassified to
the income statement in subsequent periods (383) (65)
Other comprehensive expense (3,288) (648)
------------------------------------------------------- ---- -------- --------
Total comprehensive expense for the financial
period (1,733) (2,539)
------------------------------------------------------- ---- -------- --------
Attributable to:
- Owners of the parent (1,905) (2,809)
- Non-controlling interests 172 270
------------------------------------------------------- ---- -------- --------
(1,733) (2,539)
------------------------------------------------------- ---- -------- --------
Note:
1. Principally includes the impact of the Group's cash flow
hedges deferred to other comprehensive income during the
period.
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
Consolidated statement of financial position
30 September 31 March
2020 2020
Note EURm EURm
---------------------------------------------------- ---- ------------ ---------
Non-current assets
Goodwill 31,251 31,271
Other intangible assets 20,996 22,252
Property, plant and equipment 38,059 39,197
Investments in associates and joint ventures 9 5,428 5,831
Other investments 899 792
Deferred tax assets 23,990 23,606
Post employment benefits 198 590
Trade and other receivables 6,574 10,378
---------------------------------------------------- ---- ------------ ---------
127,395 133,917
---------------------------------------------------- ---- ------------ ---------
Current assets
Inventory 606 585
Taxation recoverable 300 275
Trade and other receivables 10,457 11,411
Other investments 9,180 7,089
Cash and cash equivalents 6,612 13,284
---------------------------------------------------- ---- ------------ ---------
27,155 32,644
---------------------------------------------------- ---- ------------ ---------
Assets held for sale 5 2,312 1,607
---------------------------------------------------- ---- ------------ ---------
Total assets 156,862 168,168
---------------------------------------------------- ---- ------------ ---------
Equity
Called up share capital 4,797 4,797
Additional paid-in capital 152,694 152,629
Treasury shares (7,720) (7,802)
Accumulated losses (120,331) (120,349)
Accumulated other comprehensive income 28,916 32,135
---------------------------------------------------- ---- ------------ ---------
Total attributable to owners of the parent 58,356 61,410
---------------------------------------------------- ---- ------------ ---------
Non-controlling interests 1,224 1,215
---------------------------------------------------- ---- ------------ ---------
Total equity 59,580 62,625
---------------------------------------------------- ---- ------------ ---------
Non-current liabilities
Long-term borrowings 61,292 62,892
Deferred tax liabilities 1,986 2,043
Post employment benefits 427 438
Provisions 1,550 1,474
Trade and other payables 5,734 5,189
---------------------------------------------------- ---- ------------ ---------
70,989 72,036
---------------------------------------------------- ---- ------------ ---------
Current liabilities
Short-term borrowings 7,530 11,826
Financial liabilities under put option arrangements 1,886 1,850
Taxation liabilities 578 671
Provisions 951 1,024
Trade and other payables 14,380 17,085
---------------------------------------------------- ---- ------------ ---------
25,325 32,456
---------------------------------------------------- ---- ------------ ---------
Liabilities held for sale 5 968 1,051
---------------------------------------------------- ---- ------------ ---------
Total equity and liabilities 156,862 168,168
---------------------------------------------------- ---- ------------ ---------
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 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
------------------------------- -------- ----------- -------- -------------- ------------- ------------ -------
1 April 2020 brought
forward 4,797 152,629 (7,802) (88,214) 61,410 1,215 62,625
Issue or reissue
of shares - 1 82 (80) 3 - 3
Share-based payments - 64 - - 64 4 68
Transactions with
non-controlling
interests in subsidiaries - - - (11) (11) (5) (16)
Comprehensive (expense)/income - - - (1,905) (1,905) 172 (1,733)
Dividends - - - (1,205) (1,205) (162) (1,367)
------------------------------- -------- ----------- -------- -------------- ------------- ------------ -------
30 September 2020 4,797 152,694 (7,720) (91,415) 58,356 1,224 59,580
------------------------------- -------- ----------- -------- -------------- ------------- ------------ -------
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.
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
Consolidated statement of cash flows
Six months ended
30 September
------------------
2020 2019
Note EURm EURm
----------------------------------------------------- ---- -------- --------
Inflow from operating activities 10 6,009 6,139
----------------------------------------------------- ---- -------- --------
Cash flows from investing activities
Purchase of interests in subsidiaries, net
of cash acquired 8 (136) (10,202)
Purchase of interests in associates and joint
ventures - (1,413)
Purchase of intangible assets (1,092) (1,002)
Purchase of property, plant and equipment (2,771) (2,769)
Purchase of investments (3,153) (239)
Disposal of interests in subsidiaries, net
of cash disposed 8 174 2,049
Disposal of interests in associates and joint
ventures 9 420 -
Disposal of property, plant and equipment
and intangible assets 6 21
Disposal of investments 1,031 6,043
Dividends received from associates and joint
ventures 355 63
Interest received 153 183
----------------------------------------------------- ---- -------- --------
Outflow from investing activities (5,013) (7,266)
----------------------------------------------------- ---- -------- --------
Cash flows from financing activities
Issue of ordinary share capital and reissue
of treasury shares 3 -
Net movement in short term borrowings (2,717) 815
Proceeds from issue of long term borrowings 2,125 9,107
Repayment of borrowings (4,330) (13,277)
Purchase of treasury shares - (821)
Equity dividends paid (1,209) (1,092)
Dividends paid to non-controlling shareholders
in subsidiaries (166) (169)
Other transactions with non-controlling shareholders
in subsidiaries (20) (233)
Other movements in loans with associates
and joint ventures 38 -
Interest paid(1) (774) (1,130)
----------------------------------------------------- ---- -------- --------
Outflow from financing activities (7,050) (6,800)
----------------------------------------------------- ---- -------- --------
Net cash outflow (6,054) (7,927)
Cash and cash equivalents at beginning of
the financial period(2) 13,288 13,605
Exchange (loss)/gain on cash and cash equivalents (365) 49
----------------------------------------------------- ---- -------- --------
Cash and cash equivalents at end of the
financial period (2) 6,869 5,727
----------------------------------------------------- ---- -------- --------
Notes:
1. Interest paid includes EURnil million (30 September 2019:
EUR273 million) of cash outflow on derivative financial instruments
for the share buyback related to the second tranche of the
mandatory convertible bond that matured during the year ended 31
March 2020.
2. Includes cash and cash equivalents as presented in the
Consolidated statement of financial position of EUR6,612 million
(31 March 2020: EUR13,284 million) and cash and cash equivalents
presented in assets held for sale of EUR274 million (31 March 2020:
EUR273 million), together with overdrafts of EUR17 million (31
March 2020: EUR269 million).
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
Notes to the unaudited condensed consolidated financial
statements
1 Basis of preparation
The unaudited condensed consolidated financial statements for
the six months ended 30 September 2020:
-- are 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 2020;
-- 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 2020,
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. Income taxes are
accrued using the tax rate that is expected to be applicable for
the full financial year, adjusted for certain discrete items which
occurred in the interim period in accordance with IAS 34.
-- include all adjustments, consisting of normal recurring
adjustments, necessary for a fair statement of the results for the
periods presented;
-- do not constitute statutory accounts within the meaning of
section 434(3) of the Companies Act 2006; and
-- were approved by the Board of directors on 16 November 2020.
The information relating to the year ended 31 March 2020 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.
The preparation of the unaudited condensed consolidated
financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the end of the reporting period, and the reported amounts of
revenue and expenses during the period. Actual results could vary
from these estimates. These estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised if
the revision affects only that period or in the period of the
revision and future periods if the revision affects both current
and future periods.
Considerations in respect of COVID-19
Going concern
As outlined on pages 1 and 2, trading in the first half of the
year demonstrates the relative resilience of the Group's operating
model and the Group has a strong liquidity position with EUR6.6
billion of cash and cash equivalents available at 30 September 2020
and the Group has access to committed facilities that cover all of
the Group's reasonably expected cash requirements over the going
concern period. The Directors have reviewed trading and liquidity
forecasts for the Group which have been updated for the expected
impact of COVID-19. The forecasts considered a variety of scenarios
including not being able to access the capital markets during the
assessment period. In addition to the liquidity forecasts prepared,
the Directors considered the availability of the Group's revolving
credit facilities which were undrawn as at 30 September 2020. As a
result of the assessment performed, the Directors have concluded
that the Group is able to continue in operation for the period up
to and including March 2022 and that it is appropriate to continue
to adopt a going concern basis in preparing the unaudited condensed
consolidated financial statements.
Critical accounting judgements and estimates
The Group's critical accounting judgements and estimates were
disclosed in the Group's annual report for the year ended 31 March
2020. The forecast impact of COVID-19 was factored into certain of
our judgements, primarily impairment testing. These judgements and
estimates were reassessed during the six months ended 30 September
2020 and the Group's latest outlook and best estimate of the
COVID-19 impact are considered in our impairment review.
New accounting pronouncements adopted
On 1 April 2020, the Group adopted certain new accounting
policies where necessary to comply with amendments to IFRS, none of
which had a material impact on the consolidated results, financial
position or cash flows of the Group. Further details are provided
in the Group's annual report for the year ended 31 March 2020.
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.
In the prior financial period, the Group reported the financial
results of Vodacom and Other Markets under the Rest of the World
('RoW') region. To reflect changes in internal responsibilities,
the RoW reporting segment no longer applies and Vodacom and Other
Markets are separate reporting segments.
The Group's revenue and profit is disaggregated as follows:
Revenue
from
contracts Total
Service Equipment with Interest segment Adjusted
revenue revenue customers revenue Other(1) revenue EBITDA
EURm EURm EURm EURm EURm EURm EURm
------------------------------ -------- --------- ---------- -------- -------- -------- --------
Six months ended 30 September
2020
Germany 5,723 466 6,189 6 176 6,371 2,844
Italy 2,249 216 2,465 5 36 2,506 800
UK 2,401 509 2,910 24 49 2,983 636
Spain 1,880 132 2,012 8 30 2,050 488
Other Europe 2,411 252 2,663 9 48 2,720 870
Eliminations (47) - (47) - - (47) -
------------------------------- -------- --------- ---------- -------- -------- -------- --------
Europe 14,617 1,575 16,192 52 339 16,583 5,638
------------------------------- -------- --------- ---------- -------- -------- -------- --------
Vodacom 1,949 335 2,284 7 132 2,423 891
Other Markets 1,679 212 1,891 - 7 1,898 613
Common Functions 219 13 232 - 424 656 (119)
Eliminations (46) - (46) - (87) (133) -
------------------------------- -------- --------- ---------- -------- -------- -------- --------
Group 18,418 2,135 20,553 59 815 21,427 7,023
------------------------------- -------- --------- ---------- -------- -------- -------- --------
Revenue
from
contracts Total
Service Equipment with Interest segment Adjusted
revenue revenue customers revenue Other(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
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
------------------------------- -------- --------- ---------- -------- -------- -------- --------
Note:
1. Other includes lease revenue.
2 Segmental analysis
The Group's measure of segment profit is adjusted EBITDA which
is reported 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 is shown below. For a reconciliation of
operating profit to profit for the financial period, see the
consolidated income statement on page 33.
Six months ended 30
September
---------------------
2020 2019
EURm EURm
-------------------------------------------------- ---------- ---------
Adjusted EBITDA 7,023 7,105
Depreciation and amortisation (4,729) (4,874)
Share of adjusted results in equity accounted
associates and joint ventures(1) 255 (550)
--------------------------------------------------- ---------- ---------
Adjusted operating profit 2,549 1,681
Restructuring costs (86) (163)
Amortisation of acquired customer bases and brand
intangible assets (364) (232)
Other income and expense(2) 1,184 (872)
Interest on lease liabilities 189 163
--------------------------------------------------- ---------- ---------
Operating profit 3,472 577
--------------------------------------------------- ---------- ---------
Notes:
1. Share of results of equity accounted associates and joint
ventures presented within the Consolidated income statement
includes EUR255 million (2019: -EUR550 million) included within
Adjusted operating profit, EURnil (2019: -EUR33 million) included
within Restructuring costs, -EUR124 million (2019: -EUR122 million)
included within Amortisation of acquired customer base and brand
intangible assets and EUR129 million (2019: -EUR1,896 million;
principally related to Vodafone Idea Limited) included within other
income and expense.
2. For the six months ended 30 September 2020, the Group
recorded a gain of EUR1,043 million in relation to the merger of
Vodafone Hutchison Australia Pty Limited and TPG Telecom Limited
which is reported in Other income and expense. See Note 9
'Investment in associates and joint ventures'. For the six months
ended 30 September 2019, the Group recorded a gain of EUR1,078
million in relation to the disposal of Vodafone New Zealand, offset
by losses incurred in Vodafone Idea Limited
The Group's non-current assets are disaggregated as follows:
30 September 31 March
2020 2020
EURm EURm
---------------------- ------------ --------
Non-current assets(1)
Germany 47,504 48,266
Italy 10,787 11,119
UK 7,215 7,790
Spain 7,051 7,229
Other Europe 9,060 9,138
----------------------- ------------ --------
Europe 81,617 83,542
----------------------- ------------ --------
Vodacom 5,270 5,400
Other Markets 1,309 1,561
Common Functions 2,110 2,217
----------------------- ------------ --------
Group 90,306 92,720
----------------------- ------------ --------
Note:
1. Includes goodwill, other intangible assets and property,
plant and equipment (including right-of-use assets).
3 Impairment review
A review for indicators of potential impairment was performed at
30 September 2020 and 30 September 2019. The methodology adopted
for impairment reviews was consistent with that disclosed on page
149 and pages 159 to 165 of the Group's annual report for the year
ended 31 March 2020.
Management continues to review the impact of COVID-19. Following
analysis of recent business performance and certain changes in
expectations on future impacts, management has made additional
adjustments to the five-year business plans used in the Group's
impairment testing. The impairment review is based on expected cash
flows after applying these adjustments.
Impairment testing requires the assessment of the recoverable
amount being the higher of an asset's or cash-generating unit's
fair value less costs of disposal and its value in use. A lack of
observable market data on fair values for equivalent assets means
that the Group's valuation approach for impairment testing focuses
primarily on value in use. For a number of reasons, transaction
values agreed as part of any business acquisition or disposal may
be higher than the assessed value in use.
Consistent with prior periods, assets are grouped at the lowest
levels for which there are separately identifiable cash flows,
known as cash-generating units. Following the merger of Vodafone's
passive tower infrastructure in Italy with INWIT, management
considers Vodafone Italy and Vodafone's stake in INWIT to represent
two cash-generating units for the purpose of the impairment review
as at 30 September 2020. The key assumptions and sensitivity
analysis for Vodafone Italy presented below are prepared on a
post-merger basis.
Value in use assumptions
The table below shows key assumptions used in the value in use
calculations at 30 September 2020:
Assumptions used in value in use calculation
---------------------------------------------------------------
Germany Italy Spain Ireland Romania
% % % % %
---------------------- ----------- ----------- ----------- ----------- -----------
Pre-tax risk adjusted
discount rate 7.3 10.8 9.3 7.7 10.1
Long-term growth
rate 0.5 0.5 0.5 0.5 1.0
Projected adjusted
EBITDA(1) 3.8 2.5 8.2 0.9 8.0
Projected capital
expenditure(2) 20.0 - 20.7 12.2 - 14.9 16.2 - 18.7 13.2 - 15.7 13.7 - 16.6
----------------------- ----------- ----------- ----------- ----------- -----------
Sensitivity analysis
The estimated recoverable amounts of the Group's operations in
Germany, Italy, Spain, Ireland and Romania exceed their carrying
values by EUR7.1 billion, EUR1.0 billion, EUR0.2 billion, EUR0.1
billion and EUR0.1 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 2020.
Change required for carrying value to equal recoverable
amount
---------------------------------------------------------------
Germany Italy Spain Ireland Romania
pps pps pps pps pps
---------------------- ------------- --------- --------- ------------ ------------
Pre-tax risk adjusted
discount rate 1.1 1.2 0.3 0.3 0.4
Long-term growth
rate (1.1) (1.2) (0.3) (0.3) (0.6)
Projected adjusted
EBITDA(1) (3.3) (1.9) (0.7) (0.6) (1.1)
Projected capital
expenditure(2) 13.5 4.9 1.4 1.7 1.5
----------------------- ------------- --------- --------- ------------ ------------
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 review.
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 review.
Management considered the following reasonably possible changes
in the key adjusted EBITDA(1) and long-term growth rate
assumptions, leaving all other assumptions unchanged. Due to
increased uncertainty following the COVID-19 outbreak, management's
range of reasonably possible changes in the key adjusted EBITDA
growth rate assumption is plus or minus 5 percentage points. 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 difference between the carrying
value and recoverable amount for any cash-generating unit to be
materially different to the base case disclosed below.
Recoverable amount less carrying value
----------------------------------------------
Germany Italy Spain Ireland Romania
EUR bn EUR bn EUR bn EUR bn EUR bn
----------------------------- --------- ------- ------ -------- --------
Base case as at 30 September
2020 7.1 1.0 0.2 0.1 0.1
Change in projected
adjusted EBITDA (1)
Decrease by 5pps (3.3) (1.5) (1.3) (0.4) (0.2)
Increase by 5pps 19.4 4.0 2.0 0.7 0.3
Change in long-term growth
rate
Decrease by 1pps 0.4 0.2 (0.4) (0.1) -
Increase by 1pps 16.8 2.1 1.1 0.3 0.2
------------------------------ --------- ------- ------ -------- --------
Note:
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 review.
The carrying values for Vodafone UK, Portugal, Czech Republic
and Hungary include goodwill arising from acquisitions and/or the
purchase of operating licences or spectrum rights. The recoverable
amounts for these operating companies are also not materially
greater than their carrying values and accordingly are disclosed
below.
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
recognized in the period ended 30 September 2020.
Change required for carrying value to equal recoverable
amount
-------------------------------------------------------------
UK Portugal Czech Republic Hungary
pps pps pps pps
--------------------------------- --------- ------------- ---------------------- -----------
Pre-tax risk adjusted
discount rate 0.5 1.3 1.6 1.2
Long-term growth rate (0.5) (1.3) (1.6) (1.4)
Projected adjusted
EBITDA(1) (1.0) (2.8) (3.6) (2.5)
Projected capital expenditure(2) 2.2 6.1 12.7 6.8
---------------------------------- --------- ------------- ---------------------- -----------
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 review.
2. Projected capital expenditure, which excludes licences and
spectrum, is expressed as capital expenditure as a percentage of
revenue in the initial five years for all cash-generating units of
the plans used for impairment review.
4 Taxation
Six months ended
30 September
------------------
2020 2019
EURm EURm
------------------------------------------------------ ------- ---------
United Kingdom corporation tax (expense)/income(1)
Current period (17) (14)
Adjustments in respect of prior periods 4 (10)
Overseas current tax (expense)/income
Current period (470) (474)
Adjustments in respect of prior periods 93 14
------------------------------------------------------ ------- ---------
Total current tax expense (390) (484)
------------------------------------------------------- ------- ---------
Deferred tax on origination and reversal of temporary
differences
United Kingdom deferred tax 83 144
Overseas deferred tax (183) (1,040)
------------------------------------------------------ ------- ---------
Total deferred tax expense (100) (896)
------------------------------------------------------- ------- ---------
Total income tax expense (490) (1,380)
------------------------------------------------------- ------- ---------
Note:
1. UK operating profits are more than offset by statutory
allowances for capital investment in the UK network and systems
plus ongoing interest costs including those arising from the
EUR10.7 billion of spectrum payments to the UK government in 2000,
2013 and 2018.
The six months ended 30 September 2020 includes deferred tax on
the use of Luxembourg losses of EUR188 million (2019: EUR200
million). The Group expects to use its losses in Luxembourg over a
period of between 40 and 45 years and the losses in Germany over a
period of between 9 and 16 years. The actual use of these losses
and the period over which they may be used is dependent on many
factors which may change. These factors include the level of
profitability in both Luxembourg and Germany, changes in tax law
and changes to the structure of the Group. Further details about
the Group's tax losses can be found in note 6 of the Group's
consolidated financial statements for the year ended 31 March
2020.
Overseas deferred tax expense for the six months ended 30
September 2019 includes a reduction in our deferred tax assets in
Luxembourg of EUR868 million following a reduction in the
Luxembourg corporate tax rate.
5 Assets and liabilities held for sale
Assets and liabilities held for sale at 30 September 2020
comprise:
-- The Group's 55% interest in Vodafone Egypt. On 29 January
2020, the Group signed a Memorandum of Understanding ('MoU') with
Saudi Telecom Company ('stc') for the potential sale of Vodafone
Egypt. Despite the expiry of the MoU, Vodafone expects to finalise
the transaction in the near future; and
-- A 13.8% interest from our 42.0% stake in Indus Towers.
Further details are provided in Note 13.
Assets and liabilities held for sale at 31 March 2020 comprised:
(i) a 24.95% interest in Vodafone Hutchison Australia; and (ii) the
Group's 55% interest in Vodafone Egypt.
The relevant assets and liabilities are detailed in the table
below.
30 September 31 March
2020 2020
EURm EURm
--------------------------------------------- ------------ --------
Non-current assets
Goodwill 100 107
Other intangible assets 367 379
Property, plant and equipment 969 916
Investments in associates and joint ventures 299 (412)
Trade and other receivables 12 15
---------------------------------------------- ------------ --------
1,747 1,005
--------------------------------------------- ------------ --------
Current assets
Inventory 14 13
Taxation recoverable 3 3
Trade and other receivables 274 313
Cash and cash equivalents 274 273
---------------------------------------------- ------------ --------
565 602
--------------------------------------------- ------------ --------
Total assets held for sale 2,312 1,607
---------------------------------------------- ------------ --------
Non-current liabilities
Long-term borrowings 52 57
Deferred tax liabilities 83 60
Provisions 3 5
---------------------------------------------- ------------ --------
138 122
--------------------------------------------- ------------ --------
Current liabilities
Short-term borrowings 175 150
Taxation liabilities 52 116
Provisions 36 29
Trade and other payables 567 634
---------------------------------------------- ------------ --------
830 929
--------------------------------------------- ------------ --------
Total liabilities held for sale 968 1,051
---------------------------------------------- ------------ --------
6 Earnings per share
Six months ended
30 September
--------------------
2020 2019
Millions Millions
-------------------------------------------------------- --------- ---------
Weighted average number of shares for basic earnings
per share 29,535 29,410
Effect of dilutive potential shares: restricted shares
and share options 75 -
-------------------------------------------------------- --------- ---------
Weighted average number of shares for diluted earnings
per share 29,610 29,410
-------------------------------------------------------- --------- ---------
Earnings per share attributable to owners of the parent
during the period
Six months ended
30 September
--------------------
2020 2019
EURm EURm
-------------------------------------------------------- --------- ---------
Profit/(loss) for basic and diluted earnings per share 1,314 (2,128)
-------------------------------------------------------- --------- ---------
eurocents eurocents
-------------------------------------------------------- --------- ---------
Basic profit/(loss) per share 4.45 (7.24)
Diluted profit/(loss) per share 4.44 (7.24)
-------------------------------------------------------- --------- ---------
7 Equity dividends
Six months ended
30 September
------------------
2020 2019
EURm EURm
------------------------------------------------------ -------- --------
Declared during the financial period:
Final dividend for the year ended 31 March 2020: 4.50
eurocents per share
(2019: 4.16 eurocents per share) 1,205 1,112
------------------------------------------------------ -------- --------
Proposed after the end of the reporting period and
not recognised as a liability:
Interim dividend for the year ending 31 March 2021:
4.50 eurocents per share
(2020: 4.50 eurocents per share) 1,207 1,205
------------------------------------------------------ -------- --------
8 Investment in subsidiaries
This note provides details of the acquisitions and disposals
during the period as well as those in the prior period.
Acquisitions
The aggregate cash consideration in respect of purchases in
subsidiaries, net of cash acquired, is as follows:
Six months ended
30 September
------------------
2020 2019
EURm EURm
------------------------------- ------- ---------
Cash consideration paid
Other acquisitions 136 29
European Liberty Global assets - 10,295
Net cash acquired - (122)
-------------------------------- ------- ---------
136 10,202
-------------------------------- ------- ---------
Other acquisitions
In the current period, the Group paid EUR136 million in respect
of acquisitions completed in prior periods.
During the six months ended 30 September 2019, the Group
completed certain acquisitions for an aggregate consideration of
EUR185 million, of which EUR29 million was paid in cash in that
period. The aggregate fair values of goodwill, identifiable assets
and liabilities of the acquired operations were EUR182 million,
EUR50 million and EUR47 million, respectively.
Acquisition of European Liberty Global assets
In the comparative period, 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 business 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 purchase price allocation is set out in the table below.
31 March
2020
Fair value
EURm
-------------------------------------- ----------
Net assets acquired
Identifiable intangible assets(1) 5,818
Property, plant and equipment(2) 4,737
Inventory 2
Trade and other receivables 856
Other investments 2
Cash and cash equivalents 109
Current and deferred taxation (1,904)
Short and long-term borrowings (9,527)
Trade and other payables (1,066)
Post employment benefits (40)
Provisions (178)
--------------------------------------- ----------
Net identifiable liabilities acquired (1,191)
Goodwill(3) 11,504
Total consideration (4) 10,313
--------------------------------------- ----------
Notes:
1. Identifiable intangible assets of EUR5,818 million consisted
of customer relationships of EUR5,569 million, brand of EUR71
million and software of EUR178 million.
2. Includes Right-of-use assets.
3. 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.
4. 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 to 30 September 2019, the acquired
entities 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 prior financial
period, revenue would have been EUR22,940 million and the loss
before tax would have been EUR481 million in the comparative
period.
Disposals
The difference between the carrying value of the net assets
disposed of and the fair value of consideration received is
recorded as a gain or loss on disposal. Foreign exchange
translation gains or losses relating to subsidiaries that the Group
has disposed of, and that have previously been recorded in other
comprehensive income or expense, are also recognised as part of the
gain or loss on disposal.
Vodafone New Zealand
In the comparative period, on 31 July 2019, the Group sold its
100% interest in Vodafone New Zealand Limited ('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.
31 March
2020
EURm
----------------------------------------------- --------
Goodwill (243)
Other intangible assets (155)
Property, plant and equipment(1) (783)
Inventory (29)
Trade and other receivables (244)
Investments in associates and joint ventures (4)
Current and deferred taxation (11)
Short and long-term borrowings 215
Trade and other payables 261
Provisions 35
------------------------------------------------ --------
Net assets disposed (958)
Net cash proceeds arising from the transaction 2,023
Other effects(2) 13
Net gain on transaction (3) 1,078
------------------------------------------------ --------
Notes:
1. Includes Right-of-use assets.
2. Includes EUR59 million of recycled foreign exchange losses.
3. Recorded within Other income in the Consolidated income statement.
9 Investment in associates and joint ventures
30 September 31 March
2020 2020
EURm EURm
--------------------------------------------------- ------------ --------
VodafoneZiggo Group Holding B.V. 1,457 1,630
INWIT S.p.A. 2,914 3,345
Indus Towers Limited 620 766
TPG Telecom Limited / Vodafone Hutchison Australia
Pty Limited 22 (466)
Other 40 48
---------------------------------------------------- ------------ --------
Investment in joint ventures(1,2) 5,053 5,323
Investment in associates 375 508
---------------------------------------------------- ------------ --------
5,428 5,831
---------------------------------------------------- ------------ --------
Notes:
1. Includes the financing structure agreed at the time of the merger.
2. In the year ended 31 March 2020, the Group's interest in
Vodafone Idea Limited was reduced to EURnil.
TPG Telecom Limited / Vodafone Hutchison Australia Pty
Limited
On 13 July 2020, Vodafone announced that Vodafone Hutchison
Australia Pty Limited ('VHA') and TPG Telecom Limited ('TPG')
completed their merger to establish a fully integrated
telecommunications operator in Australia. The merged entity was
admitted to the Australian Securities Exchange ('ASX') on 30 June
2020 and is known as TPG Telecom Limited. Vodafone and Hutchison
Telecommunications (Australia) Limited each own an economic
interest of 25.05% in the merged unit, with the remaining 49.9%
listed as free float on the ASX.
The Group recorded a gain of EUR1,043 million in relation to the
merger, which is reported in Other income within the Consolidated
income statement.
INWIT S.p.A.
On 23 April 2020, the Group completed the sale of 41.7 million
shares of Infrastrutture Wireless Italiane S.p.A. ('INWIT'), equal
to approximately 4.3% of INWIT's share capital, for EUR400 million.
A gain of EUR13 million in relation to the disposal has been
recorded within Other income and expense in the Consolidated Income
Statement. The Group continues to hold 33.2% of INWIT's equity
shares and INWIT continues to be a joint venture of the Group.
Indus Towers Limited
On 1 September 2020, the Group announced that it had agreed to
proceed with the merger of Indus Towers Limited ('Indus') and
Bharti Infratel Limited ('Bharti Infratel', together the 'Combined
Company'). As a result of the merger, subject to any agreed closing
adjustments, the Group expects to receive a 28.2% interest in the
Combined Company, which will be accounted for using the equity
method. Further details are provided in Note 13.
10 Reconciliation of net cash flow from operating activities
Six months ended 30
September
---------------------
2020 2019
EURm EURm
-------------------------------------------------- ---------- ---------
Profit/(loss) for the financial period 1,555 (1,891)
Investment income (183) (281)
Financing costs 1,610 1,369
Income tax expense 490 1,380
-------------------------------------------------- ---------- ---------
Operating profit 3,472 577
Adjustments for:
Share-based payments and other non-cash charges 86 78
Depreciation and amortisation 6,869 6,782
Loss on disposal of property, plant and equipment
and intangible assets 14 24
Share of result of equity accounted associates
and joint ventures (260) 2,601
Other income (1,055) (1,024)
Increase in inventory (31) (6)
Increase in trade and other receivables (15) (1,069)
Decrease in trade and other payables (2,538) (1,341)
-------------------------------------------------- ---------- ---------
Cash generated by operations 6,542 6,622
Taxation (533) (483)
--------------------------------------------------- ---------- ---------
Net cash flow from operating activities 6,009 6,139
--------------------------------------------------- ---------- ---------
11 Related party transactions
Transactions with joint arrangements and associates
Related party transactions with the Group's joint arrangements
and associates primarily consists of fees for the use of products
and services including network airtime and access charges, fees for
the provision of network infrastructure and cash pooling
arrangements. No related party transactions have been entered into
during the year which might reasonably affect any decisions made by
the users of these unaudited condensed consolidated financial
statements except as disclosed below.
Six months ended 30
September
----------------------
2020 2019
EUR m EUR m
------------------------------------------------------- ------------ --------
Sales of goods and services to associates 7 12
Purchase of goods and services from associates 3 -
Sales of goods and services to joint arrangements 100 99
Purchase of goods and services from joint arrangements 90 88
Interest income receivable from joint arrangements(1) 29 45
Interest expense payable to joint arrangements(2) 29 -
-------------------------------------------------------- ------------ --------
30 September 31 March
2020 2020
EUR m EUR m
------------------------------------------------------- ------------ --------
Trade balances owed:
by associates 3 4
to associates 3 4
by joint arrangements 94 157
to joint arrangements 23 37
Other balances owed by joint arrangements(1) 894 1,083
Other balances owed to joint arrangements(2) 1,673 2,017
-------------------------------------------------------- ------------ --------
Notes:
1. Amounts arise primarily through VodafoneZiggo, TPG Telecom
Limited and INWIT S.p.A. Interest is charged in line with market
rates.
2. Amounts for the period ended 30 September 2020 and the year
ended 31 March 2020 are primarily in relation to leases of tower
space from INWIT S.p.A.
In the six months ended 30 September 2020 the Group made
contributions to defined benefit pension schemes of EUR99 million
(2019: EUR11 million). In addition, EUR1.0 million of dividends
were paid to Board and Executive Committee members (2019: EUR0.7
million). Dividends received from associates and joint ventures are
disclosed in the consolidated statement of cash flows.
12 Fair value of financial instruments
The table below sets out the financial instruments held at fair
value by the Group.
30 September 31 March
2020 2020
EUR m EUR m
-------------------------------------------------- ------------ --------
Financial assets at fair value:
Money market funds (included within Cash and
cash equivalents)(1) 4,735 9,135
Debt and equity securities (included within
Other investments)(2) 6,009 5,226
Derivative financial instruments (included within
Trade and other receivables)(2) 4,815 9,176
Trade receivables at fair value through Other
comprehensive income (included within Trade
and other receivables)(2) 1,030 817
-------------------------------------------------- ------------ --------
16,589 24,354
-------------------------------------------------- ------------ --------
Financial liabilities at fair value:
Derivative financial instruments (included within
Trade and other payables)(2) 5,444 4,767
-------------------------------------------------- ------------ --------
5,444 4,767
--------------------------------------------------- ------------ --------
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 EUR3,411 million (31
March 2020: EUR2,698 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 EUR47,204
million (31 March 2020: EUR47,500 million) and a fair value of
EUR51,865 million (31 March 2020: EUR48,216 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.
Cash payments or cash receipts relating to the aforementioned
matters must have been made or received by VIL before any amount
becomes due from or owed to the Group. Any future payments by the
Group to VIL as a result of this agreement would only be made after
satisfaction of this and other contractual conditions. The Group's
potential exposure under this mechanism is capped at INR 84 billion
(EUR973 million).
Having considered the payments made and refunds received by VIL
in relation to certain contingent liabilities relating to Vodafone
India and Idea Cellular, including those relating to the AGR case,
and the significant uncertainties in relation to VIL's ability to
settle all liabilities relating to the AGR judgement, the Group
assessed a cash outflow of EUR235 million under the agreement to be
probable at 31 March 2020. This amount was cash settled in the six
months ended 30 September 2020. No further case payments are
considered probable at 30 September 2020.
Indus Towers merger
Under the terms of the agreement to merge Indus and Bharti
Infratel into a 'Combined Company', and, save for the prepayment
below, subject to the initial dividend of INR 48 billion being paid
by the Combined Company to its shareholders within 3 months of
completion, a security package will be provided for the benefit of
the Combined Company which can be invoked in the event that
Vodafone Idea Limited ('VIL') is unable to s atisfy certain payment
obligations under its Master Services Agreements with the Combined
Company (the 'MSAs'). The security package includes:
-- A prepayment in cash of INR 24 billion (EUR277 million) to be
made at completion of the transaction by Vodafone Idea to the
Combined Company in respect of its payment obligations that are
undisputed, due and payable under the MSAs after the merger
closing;
-- A primary pledge over 190.7m shares owned by Vodafone in the
Combined Company with a value of INR 33 billion[1] (EUR386
million); and
-- A secondary pledge over shares owned by Vodafone in the
Combined Company (ranking behind Vodafone's existing lenders for
the EUR1.3 billion loan ('the Loan') utilised to fund Vodafone's
contribution to the Vodafone Idea rights issue in 2019) with a
maximum liability cap of INR 42.5 billion (EUR491 million).
In the event of non-payment of relevant MSA obligations by VIL
and once the prepayment amount is exhausted in full, the Combined
Company will have recourse to the primary pledge shares and, after
repayment of the Loan, any secondary pledged shares, up to the
value of the liability cap. VIL's ability to make ongoing MSA
payments to the Combined Company depends on a number of factors
including its ability to raise additional funding.
[1] As valued at 30 September 2020.
Indian tax cases
In August 2007 and September 2007, Vodafone India Limited
('Vodafone India') and Vodafone International Holdings BV ('VIHBV')
respectively received notices from the Indian tax authority
alleging potential liability in connection with an alleged failure
by VIHBV to deduct withholding tax from consideration paid to the
Hutchison Telecommunications International Limited group ('HTIL')
in respect of HTIL's gain on its disposal to VIHBV of its interests
in a wholly-owned Cayman Island incorporated subsidiary that
indirectly held interests in Vodafone India. Following
approximately five years of litigation in the Indian courts in
which VIHBV sought to set aside the tax demand issued by the Indian
tax authority, in January 2012 the Supreme Court of India handed
down its judgement, holding that VIHBV's interpretation of the
Income Tax Act 1961 was correct, that the HTIL transaction in 2007
was not taxable in India, and that consequently, VIHBV had no
obligation to withhold tax from consideration paid to HTIL in
respect of the transaction. The Supreme Court of India quashed the
relevant notices and demands issued to VIHBV in respect of
withholding tax and interest.
On 28 May 2012 the Finance Act 2012 became law. The Finance Act
2012, which amended various provisions of the Income Tax Act 1961
with retrospective effect, contained provisions intended to tax any
gain on transfer of shares in a non-Indian company, which derives
substantial value from underlying Indian assets, such as VIHBV's
transaction with HTIL in 2007. Further, it sought to subject a
purchaser, such as VIHBV, to a retrospective obligation to withhold
tax. VIHBV received a letter on 3 January 2013 from the Indian tax
authority reminding it of the tax demand raised prior to the
Supreme Court of India's judgement and purporting to update the
interest element of that demand to a total amount of INR142
billion, which included principal and interest as calculated by the
Indian tax authority but did not include penalties.
On 10 January 2014, VIHBV served an amended trigger notice on
the Indian Government under the Netherlands-India Bilateral
Investment Treaty ('Dutch BIT'), supplementing a trigger notice
filed on 17 April 2012, immediately prior to the Finance Act 2012
becoming effective, to add claims relating to an attempt by the
Indian Government to tax aspects of the transaction with HTIL under
transfer pricing rules. A trigger notice announces a party's
intention to submit a claim to arbitration and triggers a cooling
off period during which both parties may seek to resolve the
dispute amicably. Notwithstanding their attempts, the parties were
unable to amicably resolve the dispute within the cooling off
period stipulated in the Dutch BIT. On 17 April 2014, VIHBV served
its notice of arbitration under the Dutch BIT, formally commencing
the Dutch BIT arbitration proceedings. In June 2016, the tribunal
was fully constituted with Sir Franklin Berman KCMG QC appointed as
presiding arbitrator. The Indian Government raised objections to
the application of the treaty to VIHBV's claims and to the
jurisdiction of the tribunal under the Dutch BIT. On 19 June 2017,
the tribunal decided to try both these jurisdictional objections
along with the merits of VIHBV's claim in February 2019. Further
attempts by the Indian Government to have the jurisdiction
arguments heard separately also failed. VIHBV filed its response to
India's defence in July 2018 and India responded in December 2018.
The arbitration hearing took place in February 2019. The tribunal
issued the award on 25 September 2020 and unanimously ruled in
Vodafone's favour. The Indian Government has three months to decide
whether to apply to the Singapore court to set aside the award.
Separately, on 15 June 2015, Vodafone Group Plc and Vodafone
Consolidated Holdings Limited served a trigger notice on the Indian
Government under the United Kingdom-India Bilateral Investment
Treaty ('UK BIT') in respect of retrospective tax claims under the
Income Tax Act 1961 (as amended by the Finance Act 2012). Although
relating to the same underlying facts as the claim under the Dutch
BIT, the claim brought by Vodafone Group Plc and Vodafone
Consolidated Holdings Limited is a separate and distinct claim
under a different treaty. On 24 January 2017, Vodafone Group Plc
and Vodafone Consolidated Holdings Limited served a Notice of
Arbitration on the Indian Government formally commencing the
arbitration.
The Indian Government considers the arbitration under the UK BIT
to be an abuse of process but this is strongly denied by Vodafone.
On 22 August 2017, the Indian Government obtained an injunction
from the Delhi High Court preventing Vodafone from progressing the
UK BIT arbitration. Vodafone applied to dismiss it. On 26 October
2017, the Delhi High Court varied its order to permit Vodafone to
participate in the formation of the UK BIT tribunal. The UK BIT
tribunal now consists of Marcelo Kohen, an Argentinian national and
professor of international law in Geneva (appointed by India), Neil
Kaplan, a British national (appointed by Vodafone Group Plc) and
Professor Campbell McLachlan QC, a New Zealand national (appointed
by the parties as presiding arbitrator). On 7 May 2018, the Delhi
High Court dismissed the injunction. The Indian Government appealed
the decision and hearings took place from 2018 to 2020, with
frequent adjournments. In the meantime, Vodafone has undertaken to
take no steps advancing the UK BIT pending resolution of the Indian
Government's appeal. The Delhi High Court will decide how to deal
with these proceedings in light of the Government's intentions
concerning any application to set aside the Dutch BIT in Singapore.
Vodafone will seek to maintain the UK BIT pending expiry of the
three month period for the India Government to make that
application.
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 rendered 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 became due and payable within three
months of the Supreme Court judgement.
In November 2019, the DoT issued an order for the AGR judgement
debt to be determined through self-assessment and paid on or before
23 January 2020. VIL and other operators filed review petitions
against the judgement, which were heard and dismissed on 16 January
2020. On 23 January 2020, the DoT announced that it would not take
coercive action against telecom service providers which have not
repaid their respective AGR judgement debts. Consequently, VIL and
others did not pay any amount to the DoT. On 14 February 2020,
after hearing applications from VIL and other operators, the
Supreme Court ordered the DoT to withdraw its non-coercive order as
well as requiring all Directors of VIL and other relevant operators
to show cause as to why contempt proceedings should not be brought
against them. On 17 February, 20 February, 16 March and 16 July
2020, VIL made payments totalling INR 78.5 billion (EUR0.9 billion)
to the DoT. In September 2020, the Supreme Court directed that
telecom operators make payment of 10% of the total dues by 31 March
2021 and thereafter repay the balance, along with 8% interest, in
10 annual instalments commencing from 1 April 2021 to 31 March
2031, payable by 31 March of every succeeding financial year.
Based on submissions of the DoT in the Supreme Court proceedings
(which the Group is unable to confirm as to their accuracy),
Vodafone Idea reported a total estimated liability of INR 654
billion (EUR7.6 billion) excluding repayments and including
interest, penalty and interest on penalty up to 30 June 2020.
One time spectrum charges: Vodafone India v Union of India
The Indian Government sought to impose one-time spectrum charges
of approximately EUR400 million on certain operating subsidiaries
of Vodafone India. Vodafone India filed a petition before the TDSAT
challenging the one-time spectrum charges on the basis that they
are illegal, violate Vodafone India'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 TDSAT upheld the demand, in part,
and in October 2019 VIL filed an appeal which was heard in the
Supreme Court in March 2020. The Court rejected VIL's appeal,
upholding the TDSAT order. The Government has also filed an appeal
along with an application to stay the TDSAT order. The hearing took
place in early November 2020 in which the Supreme Court, while
issuing notice to Vodafone India on Government's appeal and stay
application, has granted it two weeks time to submit its reply. The
next hearing is expected to take place in the end of November
2020.
Other Indian regulatory cases
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.
Other cases in the Group
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 could have
established that one or more of its patents were valid and
infringed, it could have sought an injunction against the UK
network if a global licence for the patents was not agreed. The
Court ordered expedited trials of the infringement and validity
issues. The trial on the first patent was in November 2019 and
removed the risk of injunction so IPCom gave up the trial on the
second patent listed for May 2020. Both IPCom and Vodafone are
appealing certain aspects of the judgement from the first trial.
The appeal hearing is listed for January 2021.
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. Preliminary hearings have
taken place, including one at which the Court rejected Iliad's
application for a cease and desist order against alleged misleading
advertising by Vodafone. The main hearing on the merits of the
claim is scheduled for 15 December 2020.
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. Vodafone filed a counter claim and
all claims were heard in February 2020. Mr Papistas' claims have
been rejected by the Court as Mr Papistas did not make the stamp
duty payments required to have the case considered. Vodafone
Greece's counter claim was also rejected. Mr Papistas and Vodafone
Greece have each respectively filed appeals and the hearing on
these appeals will take place in October 2021.
Netherlands: Consumer credit/handset case
In February 2016, the Dutch Supreme Court ruled on the Dutch
implementation of the EU Consumer Credit Directive and "instalment
sales agreements" (a Dutch law concept), holding that bundled
"all-in" mobile subscription agreements (i.e. device along with
mobile services) are considered consumer credit agreements. As a
result, Vodafone Ziggo, together with the industry, has been
working with the Ministry of Finance and the Competition Authority
on compliance requirements going forward for such offers. The
ruling also has retrospective effect. A number of small claims were
submitted by individual customers in the small claims courts. On 15
February 2018, Consumentenbond (a claims agency) initiated
collective claim proceedings against VodafoneZiggo, Tele2, T-Mobile
and now KPN. A settlement agreement was signed with the claims
agency and the Dutch Consumer Federation in October 2020. As a
result, the collective claim proceedings against VodafoneZiggo have
been withdrawn.
UK: Phones 4U in Administration v Vodafone Limited and Vodafone
Group Plc and Others
In December 2018 the administrators of former UK indirect seller
Phones 4U sued the three main UK mobile network operators (MNOs),
including Vodafone, and their parent companies. The administrators
allege a conspiracy between the MNOs to pull their business from
Phones 4U thereby causing its collapse. The value of the claim is
not pleaded but we understand it to be the total value of the
business, possibly around GBP1 billion. Vodafone's alleged share of
the liability is also not pleaded. Vodafone filed its defence on 18
April 2019, along with several other defendants, and the
Administrators filed their Replies in October 2019. Case management
hearings took place in March and July 2020. Vodafone and others are
appealing one aspect of the judge's Order regarding the scope of
disclosure. The Court of Appeal hearing is in January 2021. The
judge has also ordered that there should be a split trial between
liability and damages. The first trial will start in May 2022.
14 Subsequent events
On 4 November 2020, Vodafone Egypt, which is classified as held
for sale by the Group, acquired 40 MHz of 2.6 GHz TDD spectrum from
the National Telecommunications Regulatory Authority. The acquired
spectrum has a 10 year licence term through to 2030. Payments will
be phased over 3 years, with an initial payment of $270 million
(EUR230 million) upon receipt of the spectrum and two further
payments of $135 million (EUR115 million) due in 2021 and 2022
respectively.
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 2020 which
comprise the consolidated income statement, the consolidated
statement of comprehensive income/expense, the consolidated
statement of financial position, the consolidated statement of
changes in equity, the consolidated statement of cash flows and the
related notes 1 to 14. We have read the other information contained
in the half yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the unaudited condensed consolidated
financial statements.
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 unaudited condensed consolidated financial statements included
in this half yearly financial 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 unaudited condensed consolidated financial statements in the
half yearly financial 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 unaudited condensed consolidated
financial statements in the half yearly financial report for the
six months ended 30 September 2020 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
16 November 2020
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.
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 community.
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.
Adjusted 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.
Group adjusted EBIT, adjusted operating profit, adjusted net
financing costs 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 net financing
costs exclude mark to market and foreign exchange gains/losses and
interest on lease liabilities. Adjusted earnings per share reflects
the exclusions of adjusted EBIT and adjusted net financing costs,
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 community and debt rating agencies.
Cash flow measures
In presenting and discussing our reported results, free cash
flow (pre-spectrum and restructuring), free cash flow 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 these measures to investors and
other interested parties, for the following reasons:
-- Free cash flow (pre-spectrum and restructuring) 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 restructuring) 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 community and debt rating agencies.
Other
Certain of the statements within the Strategic review 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
"Outlook" on page 12 contain forward-looking non-GAAP financial
information which at this time cannot be quantitatively reconciled
to comparable GAAP financial information.
Organic growth
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 and movements in foreign
exchange rates.
Whilst this measure is not intended to be a substitute for
reported growth, nor is it superior to reported growth, we believe
that the measure provides useful and necessary information to
investors and other interested parties for the following
reasons:
-- It provides additional information on underlying growth of
the business without the effect of certain factors unrelated to its
operating performance;
-- It is used for internal performance analysis; and
-- It facilitates comparability of underlying growth with other
companies (although the term "organic" is not a defined term under
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 overleaf.
Reconciliation between alternative performance measures and
closest equivalent GAAP measure
The location of the reconciliation between the alternative
performance measures in this document and the nearest closest
equivalent GAAP measure is shown below.
Alternative
performance Closest equivalent GAAP Reconciled onpage
measure measure
----------------- ------------------------------------------- -----------------------------------
Group service
revenue Revenue 58
----------------- ------------------------------------------- -----------------------------------
Organic Group
service revenue
growth Revenue 58
----------------- ------------------------------------------- -----------------------------------
Adjusted EBITDA Operating profit 13
----------------- ------------------------------------------- -----------------------------------
Organic adjusted
EBITDA
growth Operating profit 57
----------------- ------------------------------------------- -----------------------------------
Adjusted EBIT Operating profit 13
----------------- ------------------------------------------- -----------------------------------
Adjusted
operating
profit Operating profit 13
----------------- ------------------------------------------- -----------------------------------
Adjusted net
financing costs Net financing costs 23
----------------- ------------------------------------------- -----------------------------------
Adjusted income
tax expense Income tax expense 23
----------------- ------------------------------------------- -----------------------------------
Adjusted profit
before tax Profit before tax 23
----------------- ------------------------------------------- -----------------------------------
Adjusted
effective tax
rate Effective tax rate 23
----------------- ------------------------------------------- -----------------------------------
Adjusted profit
attributable
to owners of Profit attributable to owners
the parent of the parent 13
----------------- ------------------------------------------- -----------------------------------
Adjusted
earnings per
share Basic earnings per share 24
----------------- ------------------------------------------- -----------------------------------
Operating free Cash inflow from operating
cash flow activities 26
----------------- ------------------------------------------- -----------------------------------
Free cash flow
(pre-spectrum
and Cash inflow from operating
restructuring) activities 26
----------------- ------------------------------------------- -----------------------------------
Cash inflow from operating
Free cash flow activities 26
----------------- ------------------------------------------- -----------------------------------
Net debt Borrowings 27
----------------- ------------------------------------------- -----------------------------------
Ratio of net
debt to
adjusted
EBITDA - 27
----------------- ------------------------------------------- -----------------------------------
Return on
Capital
Employed
('ROCE') - 28
----------------- ------------------------------------------- -----------------------------------
Six months ended
30 September
Other
activity
Reported (incl. Foreign Organic
H1 FY21 H1 FY20 growth M&A) exchange growth*
EURm EURm % pps pps %
----------------- ------- ------- -------- -------------- --------- --------
Revenue
Germany 6,371 5,590 14.0 (14.4) - (0.4)
Italy 2,506 2,709 (7.5) 0.3 - (7.2)
UK 2,983 3,151 (5.3) - 0.8 (4.5)
Spain 2,050 2,161 (5.1) - - (5.1)
Other Europe 2,720 2,690 1.1 (4.9) 1.5 (2.3)
Eliminations (47) (76)
------------------ ------- ------- -------- -------------- --------- --------
Europe 16,583 16,225 2.2 (5.6) 0.4 (3.0)
------------------ ------- ------- -------- -------------- --------- --------
Vodacom 2,423 2,734 (11.4) - 15.3 3.9
Other Markets 1,898 2,351 (19.3) 19.2 8.6 8.5
------- ------- -------- -------------- --------- --------
Of which: Turkey 1,043 1,156 (9.8) - 21.8 12.0
Of which: Egypt 760 694 9.5 - (3.8) 5.7
----------------- ------- ------- -------- -------------- --------- --------
Other 656 787 (16.5) - 0.1 (16.4)
Eliminations (133) (158)
------------------ ------- ------- -------- -------------- --------- --------
Group 21,427 21,939 (2.3) (2.7) 3.2 (1.8)
------------------ ------- ------- -------- -------------- --------- --------
Adjusted EBITDA
Germany 2,844 2,352 20.9 (19.6) - 1.3
Italy 800 1,006 (20.5) 9.4 - (11.1)
UK 636 658 (3.3) - 1.0 (2.3)
Spain 488 460 6.1 (0.1) - 6.0
Other Europe 870 872 (0.2) (3.6) 1.6 (2.2)
------------------ ------- ------- -------- -------------- --------- --------
Europe 5,638 5,348 5.4 (7.0) 0.4 (1.2)
------------------ ------- ------- -------- -------------- --------- --------
Vodacom 891 1,019 (12.6) - 16.2 3.6
Other Markets 613 755 (18.8) 12.5 6.8 0.5
------- ------- -------- -------------- --------- --------
Of which: Turkey 283 309 (8.4) - 23.1 14.7
Of which: Egypt 316 329 (4.0) (3.7) (2.7) (10.4)
----------------- ------- ------- -------- -------------- --------- --------
Other (119) (17) 600.0 (0.2) (40.4) 559.4
------------------ ------- ------- -------- -------------- --------- --------
Group 7,023 7,105 (1.2) (4.2) 3.5 (1.9)
------------------ ------- ------- -------- -------------- --------- --------
Percentage point
change in adjusted
EBITDA margin
Germany 44.6% 42.1% 2.5 (1.8) - 0.7
Italy 31.9% 37.1% (5.2) 3.8 - (1.4)
UK 21.3% 20.9% 0.4 - - 0.4
Spain 23.8% 21.3% 2.5 - - 2.5
Other Europe 32.0% 32.4% (0.4) 0.5 - 0.1
------------------ ------- ------- -------- -------------- --------- --------
Europe 34.0% 33.0% 1.0 (0.4) - 0.6
------------------ ------- ------- -------- -------------- --------- --------
Vodacom 36.8% 37.3% (0.5) - 0.4 (0.1)
Other Markets 32.3% 32.1% 0.2 (2.0) (0.7) (2.5)
------- ------- -------- -------------- --------- --------
Of which: Turkey 27.1% 26.7% 0.4 - 0.2 0.6
Of which: Egypt 41.6% 47.4% (5.8) (1.6) 0.3 (7.1)
----------------- ------- ------- -------- -------------- --------- --------
Group 32.8% 32.4% 0.4 (0.6) 0.1 (0.1)
------------------ ------- ------- -------- -------------- --------- --------
Adjusted EBIT
Europe 1,424 1,127 26.4 (15.4) 0.6 11.6
Vodacom 552 633 (12.8) - 17.2 4.4
Other Markets 482 483 (0.2) (11.1) 7.4 (3.9)
Other (164) (12) 1,266.7 (0.4) (35.5) 1,230.8
------------------ ------- ------- -------- -------------- --------- --------
Group 2,294 2,231 2.8 (9.7) 7.1 0.2
------------------ ------- ------- -------- -------------- --------- --------
Adjusted operating
profit
Europe 1,447 1,166 24.1 (15.9) 0.4 8.6
Vodacom 662 756 (12.4) - 15.1 2.7
Other Markets 606 (230) (363.5) 131.3 (32.9) (265.1)
Other (166) (11) 1,409.1 (0.5) (261.7) 1,146.9
------------------ ------- ------- -------- -------------- --------- --------
Group 2,549 1,681 51.6 (18.0) 8.9 42.5
------------------ ------- ------- -------- -------------- --------- --------
Six months ended
30 September
Other
activity
Reported (incl. Foreign Organic
H1 FY21 H1 FY20 growth M&A) exchange growth*
EURm EURm % pps pps %
----------------- ------- ------- -------- -------------- --------- --------
Service revenue
Germany 5,723 4,961 15.4 (15.5) - (0.1)
------- ------- -------- -------------- --------- --------
Mobile service
revenue 2,503 2,549 (1.8) (0.2) - (2.0)
Fixed service
revenue 3,220 2,412 33.5 (32.0) - 1.5
----------------- ------- ------- -------- -------------- --------- --------
Italy 2,249 2,424 (7.2) - - (7.2)
------- ------- -------- -------------- --------- --------
Mobile service
revenue 1,638 1,839 (10.9) (0.1) - (11.0)
Fixed service
revenue 611 585 4.4 - - 4.4
----------------- ------- ------- -------- -------------- --------- --------
UK 2,401 2,451 (2.0) - 0.8 (1.2)
------- ------- -------- -------------- --------- --------
Mobile service
revenue 1,700 1,785 (4.8) - 0.8 (4.0)
Fixed service
revenue 701 666 5.3 - 1.0 6.3
----------------- ------- ------- -------- -------------- --------- --------
Spain 1,880 1,966 (4.4) - - (4.4)
Other Europe 2,411 2,392 0.8 (4.6) 1.4 (2.4)
------- ------- -------- -------------- --------- --------
Of which: Ireland 396 424 (6.6) 0.2 - (6.4)
Of which:
Portugal 495 492 0.6 (0.1) - 0.5
Of which: Greece 421 455 (7.5) 0.1 - (7.4)
----------------- ------- ------- -------- -------------- --------- --------
Eliminations (47) (74)
------------------ ------- ------- -------- -------------- --------- --------
Europe 14,617 14,120 3.5 (6.1) 0.4 (2.2)
------------------ ------- ------- -------- -------------- --------- --------
Vodacom 1,949 2,217 (12.1) - 14.4 2.3
------- ------- -------- -------------- --------- --------
Of which: South
Africa 1,398 1,589 (12.0) - 19.1 7.1
Of which:
International
operations 563 628 (10.4) - 5.3 (5.1)
----------------- ------- ------- -------- -------------- --------- --------
Other Markets 1,679 2,024 (17.0) 17.9 8.1 9.0
------- ------- -------- -------------- --------- --------
Of which: Turkey 855 933 (8.4) - 22.2 13.8
Of which: Egypt 730 669 9.1 - (3.7) 5.4
----------------- ------- ------- -------- -------------- --------- --------
Other 219 240 (8.8) - 0.4 (8.4)
Eliminations (46) (57)
------------------ ------- ------- -------- -------------- --------- --------
Total service
revenue 18,418 18,544 (0.7) (3.1) 3.0 (0.8)
Other revenue 3,009 3,395 (11.4) 0.4 4.0 (7.0)
------------------ ------- ------- -------- -------------- --------- --------
Revenue 21,427 21,939 (2.3) (2.7) 3.2 (1.8)
------------------ ------- ------- -------- -------------- --------- --------
Other growth
metrics
Germany - Retail
revenue 5,557 4,762 16.7 (16.2) - 0.5
Italy - Operating
expenses (627) (552) 13.6 (19.1) - (5.5)
Spain - Operating
expenses (510) (566) (9.9) - - (9.9)
UK - Operating
expenses (774) (870) (11.0) - 0.7 (10.3)
------------------ ------- ------- -------- -------------- --------- --------
Quarter ended 30
September
Other
activity
Reported (incl. Foreign Organic
Q2 FY21 Q2 FY20 growth M&A) exchange growth*
EURm EURm % pps pps %
----------------- ------- ------- -------- -------------- --------- --------
Service revenue
Germany 2,883 2,696 6.9 (7.0) - (0.1)
------- ------- -------- -------------- --------- --------
Mobile service
revenue 1,277 1,289 (0.9) (0.1) - (1.0)
Fixed service
revenue 1,606 1,407 14.1 (13.5) - 0.6
----------------- ------- ------- -------- -------------- --------- --------
Italy 1,129 1,226 (7.9) (0.1) - (8.0)
------- ------- -------- -------------- --------- --------
Mobile service
revenue 823 934 (11.9) - - (11.9)
Fixed service
revenue 306 292 4.8 - - 4.8
----------------- ------- ------- -------- -------------- --------- --------
UK 1,208 1,218 (0.8) - 0.3 (0.5)
------- ------- -------- -------------- --------- --------
Mobile service
revenue 854 888 (3.8) - 0.2 (3.6)
Fixed service
revenue 354 330 7.3 - 0.5 7.8
----------------- ------- ------- -------- -------------- --------- --------
Spain 960 978 (1.8) - - (1.8)
Other Europe 1,240 1,264 (1.9) (1.0) 1.1 (1.8)
------- ------- -------- -------------- --------- --------
Of which: Ireland 201 215 (6.5) 0.4 - (6.1)
Of which:
Portugal 255 254 0.4 (0.1) - 0.3
Of which: Greece 222 237 (6.3) 0.2 - (6.1)
----------------- ------- ------- -------- -------------- --------- --------
Eliminations (30) (44)
------------------ ------- ------- -------- -------------- --------- --------
Europe 7,390 7,338 0.7 (2.8) 0.3 (1.8)
------------------ ------- ------- -------- -------------- --------- --------
Vodacom 999 1,139 (12.3) - 15.5 3.2
------- ------- -------- -------------- --------- --------
Of which: South
Africa 720 811 (11.2) - 18.9 7.7
Of which:
International
operations 284 329 (13.7) - 8.8 (4.9)
----------------- ------- ------- -------- -------------- --------- --------
Other Markets 839 988 (15.1) 10.1 14.0 9.0
------- ------- -------- -------------- --------- --------
Of which: Turkey 425 499 (14.8) - 28.7 13.9
Of which: Egypt 369 356 3.7 - 1.2 4.9
----------------- ------- ------- -------- -------------- --------- --------
Other 110 117 (6.0) - 0.7 (5.3)
Eliminations (30) (32)
------------------ ------- ------- -------- -------------- --------- --------
Total service
revenue 9,308 9,550 (2.5) (1.3) 3.4 (0.4)
Other revenue 1,613 1,736 (7.1) 0.3 4.5 (2.3)
------------------ ------- ------- -------- -------------- --------- --------
Revenue 10,921 11,286 (3.2) (1.1) 3.6 (0.7)
------------------ ------- ------- -------- -------------- --------- --------
Other growth
metrics
Germany - Retail
revenue 2,802 2,594 8.0 (7.4) - 0.6
------------------ ------- ------- -------- -------------- --------- --------
Quarter ended 30
June
Other
activity
Reported (incl. Foreign Organic
Q1 FY21 Q1 FY20 growth M&A) exchange growth*
EURm EURm % pps pps %
----------------- ------- ------- -------- -------------- --------- --------
Service revenue
Germany 2,840 2,265 25.4 (25.4) - -
------- ------- -------- -------------- --------- --------
Mobile service
revenue 1,226 1,260 (2.7) (0.3) - (3.0)
Fixed service
revenue 1,614 1,005 60.6 (58.2) - 2.4
----------------- ------- ------- -------- -------------- --------- --------
Italy 1,120 1,198 (6.5) - - (6.5)
------- ------- -------- -------------- --------- --------
Mobile service
revenue 815 905 (9.9) (0.1) - (10.0)
Fixed service
revenue 305 293 4.1 - - 4.1
----------------- ------- ------- -------- -------------- --------- --------
UK 1,193 1,233 (3.2) - 1.3 (1.9)
------- ------- -------- -------------- --------- --------
Mobile service
revenue 846 897 (5.7) - 1.4 (4.3)
Fixed service
revenue 347 336 3.3 - 1.5 4.8
----------------- ------- ------- -------- -------------- --------- --------
Spain 920 988 (6.9) - - (6.9)
Other Europe 1,171 1,128 3.8 (8.6) 1.7 (3.1)
------- ------- -------- -------------- --------- --------
Of which: Ireland 195 209 (6.7) (0.1) - (6.8)
Of which:
Portugal 240 238 0.8 (0.1) - 0.7
Of which: Greece 199 218 (8.7) (0.1) - (8.8)
----------------- ------- ------- -------- -------------- --------- --------
Eliminations (17) (30)
------------------ ------- ------- -------- -------------- --------- --------
Europe 7,227 6,782 6.6 (9.7) 0.5 (2.6)
------------------ ------- ------- -------- -------------- --------- --------
Vodacom 950 1,078 (11.9) - 13.4 1.5
------- ------- -------- -------------- --------- --------
Of which: South
Africa 678 778 (12.9) - 19.3 6.4
Of which:
International
operations 279 299 (6.7) - 1.5 (5.2)
----------------- ------- ------- -------- -------------- --------- --------
Other Markets 840 1,036 (18.9) 24.6 3.4 9.1
------- ------- -------- -------------- --------- --------
Of which: Turkey 430 434 (0.9) - 14.7 13.8
Of which: Egypt 361 313 15.3 - (9.3) 6.0
----------------- ------- ------- -------- -------------- --------- --------
Other 109 123 (11.4) - 0.1 (11.3)
Eliminations (16) (25)
------------------ ------- ------- -------- -------------- --------- --------
Total service
revenue 9,110 8,994 1.3 (5.1) 2.5 (1.3)
Other revenue 1,396 1,659 (15.9) 0.4 3.6 (11.9)
------------------ ------- ------- -------- -------------- --------- --------
Revenue 10,506 10,653 (1.4) (4.1) 2.7 (2.8)
------------------ ------- ------- -------- -------------- --------- --------
Other growth
metrics
Germany - Retail
revenue 2,755 2,168 27.1 (26.7) - 0.4
------------------ ------- ------- -------- -------------- --------- --------
Regional results for the six months ended
30 September 2020
Operating
Adjusted operating free cash
Revenue Adjusted EBITDA profit Capital additions flow
---------------- ----------------- -------------------- ------------------- ----------------
H1 FY21 H1 FY20 H1 FY21 H1 FY20 H1 FY21 H1 FY20 H1 FY21 H1 FY20 H1 FY21 H1 FY20
EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm
--------------- ------- ------- -------- ------- --------- --------- --------- -------- ------- -------
Europe
Germany 6,371 5,590 2,844 2,352 1,128 764 1,161 836 1,309 950
Italy 2,506 2,709 800 1,006 212 383 297 229 266 332
UK 2,983 3,151 636 658 (126) (162) 313 329 (302) 24
Spain 2,050 2,161 488 460 (43) (161) 297 309 (17) 41
Other Europe 2,720 2,690 870 872 276 342 359 344 196 248
------- ------- -------- ------- --------- --------- --------- -------- ------- -------
Netherlands(1) - - - - 12 44 - - - -
Portugal 537 541 213 207 80 66 83 84 113 119
Greece 452 488 138 155 66 64 54 51 (37) 15
Other 1,735 1,668 519 510 118 168 222 209 120 114
Eliminations (4) (7)
--------------- ------- ------- -------- ------- --------- --------- --------- -------- ------- -------
Eliminations (47) (76)
---------------- ------- ------- -------- ------- --------- --------- --------- -------- ------- -------
Europe 16,583 16,225 5,638 5,348 1,447 1,166 2,427 2,047 1,452 1,595
---------------- ------- ------- -------- ------- --------- --------- --------- -------- ------- -------
Vodacom 2,423 2,734 891 1,019 662 756 333 390 375 484
Other Markets 1,898 2,351 613 755 606 (230) 245 274 192 159
------- ------- -------- ------- --------- --------- --------- -------- ------- -------
Turkey 1,043 1,156 283 309 169 180 112 114 1 (120)
Egypt 760 694 316 329 313 233 118 106 188 244
India(1) - - - - 104 (692) - - - -
Other 95 501 14 117 20 49 15 54 3 35
--------------- ------- ------- -------- ------- --------- --------- --------- -------- ------- -------
Other 656 787 (119) (17) (166) (11) 358 289 (737) (843)
Eliminations (133) (158)
---------------- ------- ------- -------- ------- --------- --------- --------- -------- ------- -------
Group 21,427 21,939 7,023 7,105 2,549 1,681 3,363 3,000 1,282 1,395
---------------- ------- ------- -------- ------- --------- --------- --------- -------- ------- -------
Note:
1. Includes the Group's share of the joint venture in this
market.
Revenue - Quarter ended 30 September
Group and Regions Group Europe
------------------- ------------------------
Q2 FY21 Q2 FY20 Q2 FY21 Q2 FY20
EURm EURm EURm EURm
--------- -------- -------- --------------
Mobile customer revenue 5,375 5,757 3,874 4,049
Mobile incoming revenue 407 437 287 301
Other service revenue 451 520 309 348
--------- -------- -------- --------------
Mobile service revenue 6,233 6,714 4,470 4,698
Fixed service revenue 3,075 2,836 2,920 2,640
--------- -------- -------- --------------
Service revenue 9,308 9,550 7,390 7,338
Other revenue 1,613 1,736 1,038 1,095
--------- -------- -------- --------------
Revenue 10,921 11,286 8,428 8,433
--------- -------- -------- --------------
Growth
---------------------------------------------
Reported Organic* Reported Organic*
%% % %
--------- ------- -------- --------------
Revenue (3.2) (0.7) (0.1) (2.3)
Service revenue (2.5) (0.4) 0.7 (1.8)
--------- -------- -------- --------------
Operating Companies Germany Italy UK
------------------- ------------------------ ------------------
Q2 FY21 Q2 FY20 Q2 FY21 Q2 FY20 Q2 FY21 Q2 FY20
EURm EURm EURm EURm EURm EURm
--------- -------- -------- -------------- -------- --------
Mobile customer revenue 1,119 1,127 690 794 739 755
Mobile incoming revenue 54 49 65 71 57 65
Other service revenue 104 113 68 69 58 68
--------- -------- -------- -------------- -------- --------
Mobile service revenue 1,277 1,289 823 934 854 888
Fixed service revenue 1,606 1,407 306 292 354 330
--------- -------- -------- -------------- -------- --------
Service revenue 2,883 2,696 1,129 1,226 1,208 1,218
Other revenue 321 322 147 153 312 364
--------- -------- -------- -------------- -------- --------
Revenue 3,204 3,018 1,276 1,379 1,520 1,582
--------- -------- -------- -------------- -------- --------
Growth
-----------------------------------------------------------------
Reported Organic* Reported Organic* Reported Organic*
%% % % % %
--------- ------- -------- -------------- -------- --------
Revenue 6.2 (0.4) (7.5) (7.1) (3.9) (3.6)
Service revenue 6.9 (0.1) (7.9) (8.0) (0.8) (0.5)
--------- -------- -------- -------------- -------- --------
Spain Vodacom
------------------- ------------------------
Q2 FY21 Q2 FY20 Q2 FY21 Q2 FY20
EURm EURm EURm EURm
--------- -------- -------- --------------
Mobile customer revenue 565 563 845 957
Mobile incoming revenue 35 29 34 41
Other service revenue 38 59 64 71
--------- -------- -------- --------------
Mobile service revenue 638 651 943 1,069
Fixed service revenue 322 327 56 70
--------- -------- -------- --------------
Service revenue 960 978 999 1,139
Other revenue 96 101 271 263
--------- -------- -------- --------------
Revenue 1,056 1,079 1,270 1,402
--------- -------- -------- --------------
Growth
---------------------------------------------
Reported Organic* Reported Organic*
%% % %
--------- ------- -------- --------------
Revenue (2.1) (2.1) (9.4) 7.1
Service revenue (1.8) (1.8) (12.3) 3.2
--------- -------- -------- --------------
Reconciliation of adjusted earnings
Reported Adjustments(1) Adjusted
Six months ended 30 September 2020 EURm EURm EURm
----------------------------------------------- -------- -------------- --------
Operating profit 3,472 (1,287) 2,185
Amortisation of acquired customer base and
brand intangible assets - 364 364
Non-operating income and expense - - -
Net financing costs (1,427) 788 (639)
----------------------------------------------- -------- -------------- --------
Profit before taxation 2,045 (135) 1,910
Income tax (expense)/credit (490) 35 (455)
----------------------------------------------- -------- -------------- --------
Profit for the financial period 1,555 (100) 1,455
----------------------------------------------- -------- -------------- --------
Attributable to:
- Owners of the parent 1,314 (100) 1,214
- Non-controlling interests 241 - 241
----------------------------------------------- -------- -------------- --------
Basic earnings per share 4.45c 4.11c
----------------------------------------------- -------- -------------- --------
Note:
1. Adjustments to operating profit of EUR1,287 million, further
details of which are included on page 24, comprise a credit of
EUR86 million of restructuring costs, offset by charges of EUR1,184
million of adjusted other income and expense and EUR189 million of
lease interest.
Reported Adjustments(1) Adjusted
Six months ended 30 September 2019 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)/credit (1,380) 986 (394)
------------------------------------------- -------- -------------- --------
(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 (7.24)c 0.85c
------------------------------------------- -------- -------------- --------
Note:
1. Adjustments to operating profit of EUR872 million, further
details of which are included on page 24, comprise credits of
EUR163 million of restructuring costs and EUR872 million of
adjusted other income and expense, offset by charges of EUR163
million of lease interest.
Term Definition
Adjusted Adjusted earnings per share reflects the exclusions of adjusted
earnings EBIT and adjusted financing costs, together with related
per share tax effects.
--------------------------------------------------------------------
Adjusted Operating profit after depreciation on lease-related right
EBIT of use assets and interest on leases but excluding share
of results in associates and joint ventures, impairment
losses, amortisation of customer bases and brand intangible
assets restructuring costs arising from discrete restructuring
plans 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 Operating profit after depreciation on lease-related right
EBITDA of use assets and interest on leases but excluding depreciation
and 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 income
and expense and significant items that are not considered
by management to be reflective of the underlying performance
of the Group. The Group's definition of adjusted EBITDA
may not be comparable with similarly titled measures and
disclosures by other companies.
--------------------------------------------------------------------
Adjusted Adjusted income tax expense (see definition below) divided
effective by the adjusted profit before tax (see definition below).
tax rate
--------------------------------------------------------------------
Adjusted Adjusted income tax expense excludes the tax effects of
income tax items excluded from adjusted earnings per share, including:
expense 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 Adjusted net financing costs exclude mark to market and
net financing foreign exchange gains/losses and interest on lease liabilities.
costs
--------------------------------------------------------------------
Adjusted Adjusted non-controlling interests exclude the impact of
non-controlling items adjusted in calculating Adjusted operating profit,
interests Adjusted net financing costs and Adjusted income tax expense.
--------------------------------------------------------------------
Adjusted Group adjusted operating profit excludes impairment losses,
operating 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
and transformation capital expenditure.
--------------------------------------------------------------------
CEE Central and eastern Europe.
--------------------------------------------------------------------
Churn Total gross customer disconnections in the period divided
by the average total customers in the period.
--------------------------------------------------------------------
Converged A customer who receives fixed and mobile services (also
customer known as unified communications) on a single bill or who
receives a discount across both bills.
--------------------------------------------------------------------
Customer Includes acquisition costs, retention costs and other direct
costs costs of providing services.
--------------------------------------------------------------------
Depreciation The accounting charge that allocates the cost of a tangible
and other or intangible asset to the income statement over its useful
amortisation 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 and Egypt.
--------------------------------------------------------------------
Europe Region The Group's region, Europe, which comprises the European
operating segments.
--------------------------------------------------------------------
Fixed service Service revenue relating to provision of fixed line ('fixed')
revenue and carrier services.
--------------------------------------------------------------------
Free cash Operating free cash flow after cash flows in relation to
flow ('FCF') taxation, interest, dividends received from associates and
investments, dividends paid to non-controlling shareholders
in subsidiaries, restructuring costs arising from discrete
restructuring plans, transformation capital expenditure
and licence and spectrum payments.
--------------------------------------------------------------------
Free cash Operating free cash flow after cash flows in relation to
flow (pre-spectrum taxation, interest, dividends received from associates and
and restructuring) investments, dividends paid to non-controlling shareholders
in subsidiaries, but before restructuring costs arising
from discrete restructuring plans, transformation capital
expenditure and licence and spectrum payments.
--------------------------------------------------------------------
IFRS 15 International Financial Reporting Standard 15 "Revenue from
contracts with customers". 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 and messaging
revenue to Vodafone customers.
--------------------------------------------------------------------
Internet The network of physical objects embedded with electronics,
of Things software, sensors, and network connectivity, including built-in
('IoT') mobile SIM cards, that enables these objects to collect
data and exchange communications with one another or a database.
--------------------------------------------------------------------
Mobile customer Represents revenue from mobile customers from bundles that
revenue include a specified number of minutes, messages or megabytes
of data that can be used for no additional charge ('in-bundle')
and revenues from minutes, messages or megabytes of data
which are in excess of the amount included in customer bundles
('out-of-bundle'). Mobile in-bundle and out-of-bundle revenues
are combined to simplify presentation.
--------------------------------------------------------------------
Mobile service Service revenue relating to the provision of mobile services.
revenue
--------------------------------------------------------------------
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 broadband
networks over 30Mbps.
('NGN')
--------------------------------------------------------------------
Operating Comprise primarily sales and distribution costs, network
expenses and IT related expenditure and business support costs.
--------------------------------------------------------------------
Operating Cash generated from operations after cash payments for capital
free cash additions (excludes capital licence and spectrum payments)
flow and cash receipts from the disposal of intangible fixed
assets and property, plant and equipment, but before restructuring
costs arising 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 and Albania.
--------------------------------------------------------------------
Other Markets Other Markets include Turkey, Egypt and Ghana.
Other revenue Other revenue includes connection fees, equipment revenue,
interest income and lease revenue.
------------------------------------------------------------------
Ratio of The ratio of net debt to adjusted EBITDA is calculated using
net debt adjusted EBITDA for a rolling 12 month period, normalised
to adjusted for acquisitions and disposals within the period.
EBITDA
------------------------------------------------------------------
Regulation Impact of industry 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 Based on amounts reported in euros as determined under IFRS.
growth
------------------------------------------------------------------
Restructuring Costs incurred by the Group following the implementation
costs of discrete restructuring plans to improve overall efficiency.
------------------------------------------------------------------
Return on See page 28 for a summary of the basis of calculation.
Capital Employed
('ROCE')
------------------------------------------------------------------
RGUs Revenue Generating Units describes the average number of
fixed line services taken by subscribers.
------------------------------------------------------------------
Roaming Allows customers to make calls, send and receive texts and
data on other operators' mobile networks, usually while
travelling abroad.
------------------------------------------------------------------
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.
------------------------------------------------------------------
SME Small and medium sized enterprises.
------------------------------------------------------------------
SoHo Small-office-Home-office customers.
------------------------------------------------------------------
Transformation Capital expenditure incurred in relation to significant
capital expenditure changes in the operating model, such as the integration
of recently acquired subsidiaries.
------------------------------------------------------------------
Vodafone Vodafone Business is part of the Group and partners with
Business businesses of every size to provide a range of business-related
services.
------------------------------------------------------------------
Notes
1. 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,
https://investors.vodafone.com/reports-information/results-reports-presentations
, from 16 November 2020.
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 trade marks owned by Vodafone. Other product and
company names mentioned may be the trade marks of their respective
owners.
3. All growth rates reflect a comparison to the six months ended
30 September 2019 unless otherwise stated.
4. References to "Q1" and "Q2" are to the three months ended 30
June 2020 and 30 September 2020, respectively, unless otherwise
stated. References to the "half year", "first half" or "H1" are to
the six months ended 30 September 2020 unless otherwise stated.
References to the "year" or "2021 financial year" are to the
financial year ending 31 March 2021 and references to the "last
year" or "last financial year" are to the financial year ended 31
March 2020 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
https://investors.vodafone.com/reports-information/results-reports-presentations
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.
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 and free cash flow
(pre-spectrum and restructuring) for the financial year ending 31
March 2021; the IPO and listing of Vantage Towers; prospects for
the 2021 financial year, including the response to the COVID-19
crisis and Vodafone's support for national governments' digital
agendas; expectations for the Group's future performance generally;
expectations regarding the operating environment and market
conditions and trends, including customer usage, competitive
position and macroeconomic pressures, price trends and
opportunities in specific geographic markets; intentions and
expectations regarding the development, launch and expansion of
products, services and technologies, either introduced by Vodafone
or by Vodafone in conjunction with third parties or by third
parties independently including 5G networks, sharing infrastructure
and its benefits and sharing mobile networks in Europe;
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
Vodafone Business' partnership with Accenture.
Forward-looking statements are sometimes, but not always,
identified by their use of a date in the future or such words as
"will", "anticipates", "could", "may", "should", "expects",
"believes", "intends", "plans" or "targets" (including in their
negative form or other variations). By their nature,
forward-looking statements are inherently predictive, speculative
and involve risk and uncertainty because they relate to events and
depend on circumstances that may or may not occur in the future.
There are a number of factors that could cause actual results and
developments to differ materially from those expressed or implied
by these forward-looking statements. These factors include, but are
not limited to, the following: external cyber-attacks, insider
threats or supplier breaches; general economic and political
conditions including as a consequence of the COVID-19 pandemic, of
the jurisdictions in which the Group operates, including as a
result of Brexit, and changes to the associated legal, regulatory
and tax environments; increased competition; increased
disintermediation; levels of investment in network capacity and the
Group's ability to deploy new technologies, products and services;
rapid changes to existing products and services and the inability
of new products and services to perform in accordance with
expectations; the ability of the Group to integrate new
technologies, products and services with existing networks,
technologies, products and services; the Group's ability to
generate and grow revenue; a lower than expected impact of new or
existing products, services or technologies on the Group's future
revenue, cost structure and capital expenditure outlays; slower
than expected customer growth, reduced customer retention,
reductions or changes in customer spending and increased pricing
pressure; the Group's ability to extend and expand its spectrum
position to support ongoing growth in customer demand for mobile
data services; the Group's ability to secure the timely delivery of
high-quality products from suppliers; loss of suppliers, disruption
of supply chains and greater than anticipated prices of new mobile
handsets; changes in the costs to the Group of, or the rates the
Group my charge for, terminations and roaming minutes; the impact
of a failure or significant interruption to the Group's
telecommunications, networks, IT systems or data protection
systems; the Group's ability to realise expected benefits from
acquisitions, partnerships, joint ventures, franchises, brand
licences, platform sharing or other arrangements with third
parties; acquisitions and 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 2020. The annual report can be found on the Group's
website
(https://investors.vodafone.com/reports-information/latest-annual-results).
All subsequent written or oral forward-looking statements
attributable to the Company or any member of the Group or any
persons acting on their behalf are expressly qualified in their
entirety by the factors referred to above. No assurances can be
given that the forward-looking statements in this document will be
realised. Any forward-looking statements are made of the date of
this presentation. Subject to compliance with applicable law and
regulations, Vodafone does not intend to update these
forward-looking statements and does not undertake any obligation to
do so.
Any securities issued in connection with an IPO of Vantage
Towers will not be registered under the US Securities Act of 1933
(the "Securities Act"), and may not be offered or sold in the
United States absent registration under the Securities Act or
pursuant to an exemption from registration.
Copyright (c) Vodafone Group 2020 -ends-
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END
IR FLFIRLSLELII
(END) Dow Jones Newswires
November 16, 2020 02:00 ET (07:00 GMT)
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