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Vodafone Group Plc Half year results
10 November 2015
For the six months ended 30 September 2015
Information in the following communication relating to the price at which relevant investments have been bought or sold in the past,
or the yield on such investments, cannot be relied upon as a guide to the future performance of such investments. This presentation
does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite,
subscribe for or otherwise acquire or dispose of securities in any company within the Group.
The presentation contains forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995
which are subject to risks and uncertainties because they relate to future events. These forward-looking statements include, without
limitation, statements in relation to the Groups financial outlook and future performance. Some of the factors which may cause
actual results to differ from these forward-looking statements are discussed on the final slide of the presentation.
The presentation also contains non-GAAP financial information which the Groups management believes is valuable in understanding
the performance of the Group or the Groups businesses. However, non-GAAP information is not uniformly defined by all companies
and it may not be comparable with similarly titled measures disclosed by other companies, including those in the Groups industry.
Although these measures are important in the assessment and management of the business, they should not be viewed in isolation
or as replacements for, but rather as complementary to, the comparable GAAP measures.
Vodafone, the Vodafone Portrait, the Vodafone Speechmark, Vodacom and M-Pesa, are trade marks of the Vodafone Group. The
Vodafone Rhombus is a registered design of the Vodafone Group. Other product and company names mentioned herein may be the
trade marks of their respective owners.
Disclaimer
2
Half year highlights
All growth rates shown are organic unless otherwise stated 3
All growth rates shown are organic unless otherwise stated
1. Targeted urban areas
Financial
performance
Q2 Group service revenue +1.2%; fifth consecutive quarter of improvement
Q2 continued momentum in AMAP +6.7%; further recovery in Europe -1.0%
H1 EBITDA return to growth, +1.9% to 5.8bn; full year EBITDA guidance now 11.7bn - 12.0bn
Free cash outflow 0.5bn reflecting Project Spring phasing; net debt 28.9bn
Interim dividend per share 3.68 pence, +2.2%
Strategic and
commercial
progress
Project Spring: 80% through mobile build; 4G coverage now 80% in Europe
Marketing high speed broadband to 66m homes across Europe; 42% on own infrastructure,
new converged offers launched
30m 4G customers (+10m in H1) in 19 markets. 12.5m fixed broadband customers (+0.5m)
AMAP: 125m data users, India 3G coverage 94%1
Strong commercial progress in mobile: H1 contract net adds 2.7m, churn improving, data volume +75%
Enterprise revenue +1.9% in Q2; continued growth in VGE and M2M
Vodafone India IPO preparations underway
Half year 15/16
Financial review
Nick Read Group Chief Financial Officer
Return to EBITDA growth
5
H1 15/16
(m)
Reported
growth (%)
Organic
growth (%)
Q2 15/16
organic
growth (%)
Group revenue 20,226 (2.3) 2.8 2.3
Group service revenue 18,430 (3.7) 1.0 1.2
Group EBITDA1 5,786 (1.7) 1.9
EBITDA margin (%) 28.6 0.2ppt (0.3)ppt
D&A2 (4,142) 1.2 5.9
Adjusted operating profit1, 2 1,641 (6.5) (5.9)
All growth rates shown are organic unless otherwise stated
1. Reported excluding the impact of restructuring costs and significant one-off items. Restructuring costs were 114m in H1 15/16 and 84m in H1 14/15
2. Reported excluding the impact of restructuring costs and significant one-off items and amortisation of acquired intangible customer bases and brand intangible assets
Lower financing costs; full year tax rate to include UK one-off
6
Weighted average cost of debt 4.4% (H1 14/15: 5.4%)
Adjusted effective tax rate 30.5% in H1; full year similar to H1 excluding UK one-off (medium term high 20s)
Move to Euro reporting from 2017 financial year
1. Reported excluding the impact of restructuring costs, significant one-off items and amortisation of acquired intangible customer bases and brand intangible assets
H1 15/16
(m)
H1 14/15
(m)
Reported
growth (%)
Adjusted operating profit1 1,641 1,756 (6.5)
Net financing costs (552) (682)
Taxation (299) (288)
Non controlling interests (123) (89)
Adjusted earnings1 667 697
Adjusted earnings per share1 2.51p 2.63p (4.6)
Interim dividend per share 3.68p 3.60p 2.2
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
Q1 14/15 Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
Group Europe AMAP
5th quarter of improved organic service revenue trends
7 out of 13 European markets are now back to growth in H1
Maintained good momentum in AMAP
7
5.4ppt
7.2ppt
2.2ppt
Engines of growth
8
Mobile contract base (m)
Europe 4G & India 3G customer base (m) Enterprise service revenue growth (%)
NGN fixed customers (m)
(2.0)
(1.1)
1.4 1.8 1.9
Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
21 27
35 41
48
+5m
YoY
+1.2m
YoY
+10m
YoY
+17m
YoY
4.4 4.7
5.1 5.3
5.6
Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
86
87
88
90 91
Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
Europe 4G India 3G
6.3 6.0
5.6 5.4 5.5
5.6
4.0
4.5
5.0
5.5
6.0
6.5
7.0
H2 12/13 H1 13/14 H2 13/14 H1 14/15 H2 14/15 H1 15/16
EBITDA (bn) Reported EBITDA margin (%)
EBITDA growth with margin stabilising
9 1. Constant currency, 100% Italy excl. KDG, Ono, HOL and Cobra
1
30.2
29.3
28.6 28.4
28.1
28.6
-250 -200 -150 -100 -50 0 50 100
EBITDA growth across our top markets
10 * Adjusted for intercompany phasing
(m)
*
H1 14/15
-10% YoY
-c.600m
H1 15/16
+1.9% YoY
+c.100m
Absolute organic EBITDA growth YoY
11
4.3bn
Pre-Spring1 Post-Spring
expected run rate
4.8bn
Targeting margin expansion
Technology opex Expanded & modernised (Mar-16)
Mobile:
c.90% EU 4G coverage
Single RAN >90% in EU
90% high capacity backhaul in EU
HD voice in all EU markets
84% 3G/4G AMAP coverage (excl. India)
India 95% 3G coverage in targeted areas
Fixed:
Converged services in all key EU markets
Enterprise:
Increased global scale and footprint
Network expansion (by year
end):
c.45k additional mobile sites
7.5m new households covered
by NGN
65 countries on IP-VPN
Spring is an exceptional investment programme
1. FY 13/14
12
Direct costs
6.6bn
Customer costs
8.8bn
Technology
costs
4.4bn
Support costs
6.7bn
Targeting margin expansion
Fit for growth an opportunity to constrain costs below revenue growth
Components of our cost base:
FY 14/15
cost base (excl. interconnect)
2. Commercial efficiency 3. IT transformation
1. Regulatory incumbent
management
4. Shared services penetration
5. Centralised
procurement/logistics
6. ZBB/productivity
targeting
13
Targeting margin expansion
Fit for growth
Commission optimisation Digital sales & services
Commercial efficiency
H1 14/15 H1 15/16
Channel mix
% contract customer additions via Vodafone
branded channels
30% 35%
52% 63%
81% 87%
Improving returns on commission spend by:
Moving from volume to value
based commissions
Rewarding for good customer
experience My Vodafone app 26% penetration
Target 70%
Currently 5% of inflow revenue Target >10%
Sales
Service
14
Targeting margin expansion
Fit for growth
Organisational efficiency
Capex & opex efficiency Zero based budgeting Standardisation and scaled
footprint optimisation Shared services employees Procurement spend in VPC
250
300
350
H1 14/15 FY 14/15 H1 15/16
Finance TechnologyCustomer Ops OtherSavings (m)
15k 17k
18.5k 17%*
* Targeting 25% of Vodafone employees by 2018
52% 57%
70%
H1 13/14 H1 14/15 H1 15/16
Targeting 80% of global spend
Scope:
Group functions - absolute cost targets
Group operations - multi-year productivity targets
Countries/P&L units - multi-year margin targets
15
Targeting ma