vodafone group plc q1 fy21 trading update · •driving arpu accretion across our customer base...
TRANSCRIPT
#StayConnected
Vodafone Group PlcQ1 FY21 Trading Update24 July 2020
2Q1 FY21
Trading Update
Agenda & contents
HighlightsNick ReadChief Executive
p3
Trading
performanceMargherita Della ValleChief Financial Officer
p7
Appendices p13 We connect for a better future
A leading technology communications
company building an inclusive, sustainable
digital society
3Q1 FY21
Trading Update
Highlights ⫶ Trading in-line with expectations, Tower IPO early 2021
Social
contract
Commercial
performance
• Supporting society
through our essential
infrastructure
• Donated >€100m in
direct contributions &
services in-kind
• Actively looking to
support the ‘recovery’
phase
• Engaging with policy
makers to accelerate the
digital agenda
• Good commercial
performance during
lockdown
• Q1 service revenue
-1.3% (Q4: 1.6%)
• Resilient trading in
Germany, SR growth flat
• 1.6ppt roaming & visitor
impact from COVID-19
• Reconfirming FY21 free
cash flow guidance
• Europe’s leading tower
infrastructure company
• 68k macro sites across
9 markets
• Facilitating network
sharing across Europe
• Driving operational
synergies through
enhanced focus
• On track for Frankfurt
IPO in early 2021
Strategic
progress
• Deepening customer
engagement – stronger
customer loyalty
• Accelerating digital
transformation – digital
sales +50% YoY
• Improving asset
utilisation
• Optimising the portfolio- VHA/TPG merger
- Egypt MoU extended
- Vantage Towers
4Q1 FY21
Trading Update
Trading update ⫶ Good commercial performance during lockdown
7th consecutive quarter of improved loyalty1 Broadband net additions stable2
Commercial focus
(1.4ppt)
(0.6ppt) (0.5ppt)
(1.6ppt)
(0.8ppt)(1.1ppt)
(3.2ppt)
Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21
54
142
205 214 230237
370417 421 429
115 132 142 141105
Q1 20 Q2 20 Q3 20 Q4 20 Q1 21
Broadband NGN Converged
• Winning ‘fair share’ across all market segments
• Driving ARPU accretion across our customer base
• Greater demand for u/l mobile & high-speed broadband
• Launched customer ‘delight’ initiatives
• New offers – thermal cameras, smart tracker (Curve)
1. European mobile contract churn – excludes inactive data only SIM losses in Italy during Q3 to Q4 FY20
2. European fixed broadband additions - includes acquired Unitymedia and UPC assets from Q2 20 onwards
Commercial actions
• Competing effectively in high/mid/low tiers
• Reducing ATL reliance – digital CRM, in-house marketing
• Selling ‘one more product’ to customers
• Increasing loyalty programme penetration
• Supporting Businesses – developing new propositions
YoY churn
reduction
5Q1 FY21
Trading Update
Digital access & skills
Restarting economy &
supporting jobs
Roll-out of next-generation,
resilient networks
Policy
objectives
Governments’ digital
priorities
Defined framework for network sharing
Supportive deployment regulation
Pro-investment and pro-innovation
regulatory approach
Healthy, sustainable market structure
End of extractive spectrum auctions
Vendor supply chain diversity
Vodafone’s
5-point response plan
Social contract ⫶ Supporting Governments’ digital agenda…
Expand & future-proof our
network infrastructure
Accelerate support to
Governments (eHealth, eEducation)
Enhance digital accessibility &
literacy for the most vulnerable
Promote widespread digital
adoption for business
Support exit strategies through
targeted digital adoption
…promoting a healthier, sustainable industry & enabling a fair return on capital employed
6Q1 FY21
Trading Update
Vantage Towers ⫶ Europe’s leading tower infrastructure companyT
he
bra
nd
Th
e t
ea
mK
ey
fa
cts
68k macro sites
9 markets
across Europe
#1 or #2 in most markets
90% revenues
from anchor tenant
Further information available at investors.vodafone.com
Vivek
Badrinath
CEO
Thomas
Reisten
CFO
Christian
Sommer
General
Counsel
Sonia
Hernandez
CCO
Jose
Rivera
CTO
Nikolaus
Rama
HR Director
Mis
sio
n &
va
lue
s
Trading performanceMargherita Della ValleChief Financial Officer
8Q1 FY21
Trading Update
Flat(20bps)
(40bps)
(70bps) (80bps)
20bps
60bps
-1 2000 .0 %
-7 000.0%
-2 000.0%
30 00.0%
80 00.0%
Germany UK Other
Europe
Spain Italy Vodacom Other
markets
Q1 trading ⫶ Performance in-line with expectations
• COVID-19 impact largely driving QoQ movement
• Germany performance resilient
• Rest of Europe
- Good underlying commercial momentum
- Significant roaming & visitor impacts
- B2B project delays
• Vodacom
- South Africa: strong data & voice usage
- International: macro-economic pressure
FY21 EBITDA outlook: flat to slightly down2
FY21 guidance: FCF (pre-spectrum) at least €5bn2
(1.7)%(1.4)% (1.4)%
(0.4)%
(2.6)%1
(0.2)%
0.7% 0.8%
1.6%
(1.3)%1
-2 .9%
-2 .4%
-1 .9%
-1 .4%
-0 .9%
-0 .4%
0.1%
0.6%
1.1%
1.6%
Q1
FY20
Q2
FY20
Q3
FY20
Q4
FY20
Q1
FY21
Europe Group
Contribution to Q1 SR growth
YoY quarterly service revenue growth
1. Includes Unitymedia and UPC assets as of Q1 FY21
2. Based on prevailing assessments of global macro-economic outlook
9Q1 FY21
Trading Update
1.6%
(1.3%)
(1.6%)1
(0.5%)
(0.8%)
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
Q4 FY20
SR growth
Roaming
/ visitors
Business Other Q1 FY21
SR growth
COVID-19 ⫶ Driving service revenue slowdown
Q4 FY20 to Q1 FY21 service revenue growth movement
Other
Roaming & visitors
- c.70% reduction across Europe
- Non-EU related roaming down c.85%
– no near-term recovery expected
- Prepaid top-up access challenges
- Macro economic pressure & M-Pesa free P2P
transfers in Vodacom Internationals
- Competitive pressures in Greece & Ireland
+ Partially offset by out-of-bundle traffic elasticity
Business
- Deferral in project work
- Automotive – lower activity
+ Increased working from home
1. The reduction in roaming and visitor revenue & prepaid SIM sales to tourists and migrant workers
COVID-19 impact Non-COVID-19 related
10Q1 FY21
Trading Update
3575
153118
74
35
1274
190
160
118
573
-60
-10
40
90
14 0
19 0
Q1
FY20
Q2
FY20
Q3
FY20
Q4
FY20
Q1
FY21
DSL
Cable
Cable (pro-forma)
Mobile contract
Germany ⫶ Resilient performance with good underlying momentum
34% of Group EBITDA1
• Roaming & visitor drag (-1ppt)
- partially offset by increased usage
• Stable fixed SR growth +2.4%
(44)
(11)
(46) (60)(48)
1.6%
0.9%
1.3%1.2%
0.4%0.4%
(0.2%)
0.0%(0.1%)
0.0%-0 .5%
0.0%
0.5%
1.0%
1.5%
2.0%
-0 .5%
0.0%
0.5%
1.0%
1.5%
2.0%
Q1
FY20
Q2
FY20
Q3
FY20
Q4
FY20
Q1
FY21
Retail
Reported organic
service revenue
growth
Service revenue growth Net customer additions (‘000)
• Good cable growth despite lockdown
• 1.8m broadband customers on plans 400+Mbps
• New harmonised TV offer from August
• Integration on track
Unitymedia in
organic SR
from FY21
1. Based on FY20 EBITDA contribution
2. Pro-forma for Unitymedia in FY20
3. Includes Unitymedia migrations of 63,000
2
11Q1 FY21
Trading Update
-6.5% (Q4: -3.7%)
-1.9% (Q4: +1.2%)
-6.9% (Q4: -2.7%)
-3.1% (Q4: +3.4%)
+1.5% (Q4: +3.2%)
Other markets ⫶ Solid commercial performance, impacted by COVID-19
14% of Group
EBITDA1
10% of Group
EBITDA1
7% of Group
EBITDA1
12% of Group
EBITDA1
14% of Group
EBITDA1
• Net neutral on mobile number portability
• +45k broadband customer additions
• Mobile contract net adds +61k
• Record broadband net additions, +74k2
• Revenue impacted by extensive lockdown
measures
• Good commercial momentum maintained
• SA: Data volume growth +101%
• M-Pesa: zero rating P2P transfers
• Resilient consumer fixed performance
• UPC & AbCom integrations on track
Performance
• Competition remains challenging
• Lapping price increases in Q2
• Inflationary price increases implemented
• Delay in large corporate activity
• Mobile and fixed ports back to pre-COVID
levels in June
• Increase in price & promotional intensity
• SA: lockdown driving increased usage
• Internationals: lower economic activity
• Increased competition in Ireland &
Greece
• Prepaid top-up challenges
MarketService revenue
growth (%)
1. Based on FY20 EBITDA contribution
2. Excludes a customer base restatement of 32k
South Africa: +6.4%
International: -5.2%
Other Europe
12Q1 FY21
Trading Update
Strategic priorities ⫶ momentum maintained during lockdown
Social contract ⫶ strong engagement with Governments
Summary ⫶ Creating sustainable value for all stakeholders
Vantage Towers ⫶ on track for early 2021 IPO
Resilient trading ⫶ in-line with our expectations
Deepening
customer
engagement
Accelerating
digital
transformation
Optimising
the
portfolio
Improving
asset
utilisation
13Q1 FY21
Trading Update
Appendices
I Definitions p14
II Supporting information p15
III Importance notice p16
13Q1 FY21
Trading Update
14Q1 FY21
Trading Update
Appendix I ⫶ Definitions
Term Definition
Adds Customer additions within a defined period
AI Artificial intelligence / machine learning
Churn Total gross customer disconnections in the period divided by
the average total customers in the period
Converged A customer who receives both fixed and mobile services (also
known as unified communications) on a single
bill or who receives a discount across both bills
EBIT Earnings before interest & tax
EBITDA Earnings before interest, tax, depreciation & amortisation
EPS Earnings per share
FCF Free cash flow
Gbps / Mbps Gigabits (billions) / megabits (millions) of bits per second
IoT Network of physical objects embedded with electronics,
software, sensors & network connectivity, including built-in
mobile SIM cards, that enables collection of data & exchange
communications with one another or a database
MNP Mobile number portability
Term Definition
MTM Mark-to-market or fair value accounting refers to accounting for
the value of an asset or liability based on the current market price
of the asset or liability
NGN Fibre or cable networks typically providing high-speed broadband
over 30Mbps
On-net Direct connections to Vodafone owned or operated fixed-line
infrastructure
Organic
growth
An alternative performance measure which presents performance
on a comparable basis, in terms of M&A activity, movements in
foreign exchange rates and the impact of the implementation of
IFRS 16 ‘Leases’
Roaming Allows customers to make calls, send and receive texts and data
on other operators’ mobile networks, usually
while travelling abroad
ROCE Return on capital employed
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
15Q1 FY21
Trading Update
Appendix II ⫶ Supporting information
1. Quarterly revenue
2. Adjusted income statement
3. Segmental information
4. Income statement information
5. Cash flow
6. Mobile customers
7. Fixed-line broadband customers
8. Marketable homes passed
9. TV & fixed-line voice customers
10. Converged customers
11. Mobile customer churn
12. Mobile ARPU
13. Average foreign exchange rates
14. Average FX rates
The information opposite is available in spreadsheet format
via investors.Vodafone.com
16Q1 FY21
Trading Update
Appendix III ⫶ Important notice
By accessing these slides, you agree to be bound by the following conditions. You may not
disseminate these slides or any related recording, in whole or in part, without the prior
consent of Vodafone. Information in this presentation 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 Vodafone Group.
This presentation also contains non-GAAP financial information which Vodafone’s
management believes is valuable in understanding the performance of the Vodafone Group.
However, non-GAAP information is not uniformly defined by all companies and therefore it
may not be comparable with similarly titled measures disclosed by other companies,
including those in the Vodafone Group’s industry. Although these measures are important in
the assessment and management of the Vodafone Group’s business, they should not be
viewed in isolation or as replacements for, but rather as complementary to, the comparable
GAAP measures.
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
Speech Mark Devices, Vodacom and The future is exciting. Ready? are trade marks owned by
Vodafone. Vantage Towers is a trademark owned by Vantage Towers. Other product and
company names mentioned herein may be the trade marks of their respective owners.
This presentation, along with any oral statements made in connection therewith, contains
“forward- looking statements” including within the meaning of the US Private Securities
Litigation Reform Act of 1995 with respect to the Vodafone Group’s financial condition, results
of operations and businesses, the Vodafone Group’s FY21 EBITDA outlook and FCF
(pre-spectrum) guidance and certain of the Vodafone Group’s plans and objectives.
Forward-looking statements are sometimes, but not always, identified by their use of a date in
the future or such words as “plans”, “targets” “gain”, “grow”, or “accelerate” (including in their
negative form). 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.
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 “Risk management” in the Vodafone Group Plc Annual
Report for the year ended 31 March 2020. The Annual Report can be found at
investors.vodafone.com.
All subsequent written or oral forward-looking statements attributable to Vodafone, to any
member of the Vodafone Group or to 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 or made in connection with this presentation will be realised.
Any forward-looking statements are made as 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.
Annual General Meeting
Q3 Trading Update
H1 FY21 Results
Group
Investor
Relations
www.vodafone.com/investors
1 Kingdom Street, London, W2 6BY
28
July
17
Nov
3
Feb
Upcoming events
Daniel Morris
Deputy Director
Group IR
Matthew Johnson
Director
Group IR
Roy Teal
Deputy Executive
Group IR
Victoria Garnham
Access Manager
Group IR