vodafone group plc half year results · pdf filevodafone group plc half year results ... india...

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