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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