TIDMVOD
RNS Number : 0432T
Vodafone Group Plc
12 November 2019
Vodafone announces results for the six months ended 30 September
2019
12 November 2019
Financial highlights
-- H1 organic service revenue up 0.3%* as Q2 returned to growth
(Q1: -0.2%*, Q2: +0.7%*), supported by improvements in South
Africa, Spain and Italy, with solid retail performance in Germany
and strong commercial acceleration in the UK.
-- Organic adjusted EBITDA up 1.4%*, reflecting EUR0.2 billion
operating expense savings in Europe and common functions.
-- Reported revenue increased by 0.4% to EUR21.9 billion, benefiting
from the acquisition of Liberty Global's assets in Germany
and Central & Eastern Europe.
-- Loss for the financial period of EUR1.9 billion primarily reflects
losses in relation to Vodafone Idea post an adverse judgement
against the industry by the Supreme Court in India.
-- Interim dividend per share of 4.50 eurocents, equivalent to
50% of the FY19 total dividend payout.
-- FY20 financial guidance updated:
-- Adjusted EBITDA of EUR14.8-EUR15.0 billion (previously
EUR13.8-14.2 billion), implying c.2-3%* organic growth.
This includes a EUR0.8 billion net benefit from the Liberty
Global acquisitions and the sale of New Zealand (completed
on 31 July). Excluding this benefit, we are on track to
achieve the upper half of our original guidance range.
-- Free cash flow of around EUR5.4 billion (previously 'at
least EUR5.4 billion') as lower cashflows from India and
the sale of New Zealand offset the initial accretion from
the Liberty Global acquisitions.
-- Pro-forma financial leverage expected to be c.3.0x at year-end,
excluding the INWIT transaction; intention to reduce leverage
towards the lower end of our 2.5x-3.0x range within the
next few years.
Strategic highlights
-- Deepening customer engagement: another record low for mobile
contract churn in Q2, 5G launched in seven markets and 1.8
million customers on new speed-tiered unlimited data plans,
supporting 1.43 million mobile contract net additions in H1.
Over 0.6 million NGN broadband net additions in Europe in H1.
-- Accelerating digital transformation: in Europe c.20% of customers
were acquired through digital channels in Q2, with TOBi handling
c.20% of customer contacts. Reiterating EUR1.2 billion net
operating expense reduction target by FY21.
-- Improving asset utilisation: industrial synergies through network
sharing secured in five European markets, including finalising
our agreement with Telecom Italia, with active discussions
ongoing in Germany. New long-term reciprocal wholesale partnership
with Virgin Media in the UK. Rapid early progress in integrating
the Liberty Global assets.
-- Tower monetisation: agreed to combine Vodafone Italy Towers
with INWIT, releasing potential net proceeds of over EUR2.1
billion. On track to operationalise our European TowerCo by
May 2020; intention to monetise a substantial part of our European
Tower infrastructure over the next 15 months, depending on
market conditions.
Six months ended 30 September(1)
-------------------------------------------
2019 2018
Reported
(restated)(2) growth
Page EURm EURm %
--------------------------------- ---- -------- ------------- -------- --------
Group revenue 24 21,939 21,848 +0.4
Operating profit/(loss) 24 577 (2,029) N/M
Loss for the financial period(3) 24 (1,891) (7,802) N/M
Basic loss per share(3) 24 (7.24c) (28.89c) N/M
Interim dividend per share 38 4.50c 4.84c (7.0)%
---------------------------------- ---- -------- ------------- -------- --------
Growth
------------------
2019 2018 Reported Organic*
Alternative performance
measures(4) Page EURm EURm %%
---------------------------------- ---- -------- ------------- -------- -------
Group service revenue 10 18,544 18,268 +1.5 +0.3
Adjusted EBITDA 10 7,105 6,915 +2.7 +1.4
Adjusted EBIT 10 2,231 2,142 +4.2-
Adjusted earnings per share 19 0.85c 4.28c (80.1)
Free cash flow pre-spectrum 20 394 894 (55.9)
Free cash flow 20 34 566 (94.0)
Net debt 20 (48,107) (32,110) +49.8
---------------------------------- ---- -------- ------------- -------- --------
Nick Read, Group Chief Executive, commented:
"I am pleased by the speed at which we are executing on the
strategic priorities that we announced this time last year. This is
reflected in our return to top-line growth in the second quarter,
which we expect to build upon in the second half of the year in
both Europe and Africa.
The consistency of our commercial performance has improved in
both regions, and we have made a fast start on integrating the
acquired Liberty Global businesses, where we see significant
long-term opportunity. Our digital transformation is already
creating a better experience for our customers, improving our
differentiation, supporting growth and at the same time reducing
our structural costs.
We have now secured network sharing agreements across most of
our major European markets, and we recently announced a major
long-term wholesale partnership with Virgin Media in the UK, in
order to improve the utilisation of our network assets. And we
expect our European TowerCo to be operational by May next year,
enabling us to continue to unlock the significant value embedded in
our tower infrastructure."
CHIEF EXECUTIVE'S STATEMENT
Financial review of the half year
On 31 July 2019, we announced the completion of the acquisition
of Liberty Global's assets in Germany and Central and Eastern
Europe ('CEE') and the disposal of Vodafone New Zealand. As a
result, our H1 20 results include Vodafone New Zealand for four
months, and the acquired Liberty Global assets for two months. For
the purposes of comparison, all organic figures exclude Vodafone
New Zealand and the acquired Liberty Global assets.
Financial results: Statutory performance measures
On 1 April 2019 a new accounting standard, IFRS 16 'Leases', was
adopted for our statutory reporting, without restating prior year
figures. As a result, the Group's statutory results for the six
months ended 30 September 2019 are on an IFRS 16 basis, whereas the
comparative period for the six months ended 30 September 2018 are
on the former basis of accounting. Note 1 of the condensed
consolidated financial statements explains the impact of the
adoption of IFRS 16 on the consolidated financial position as at 1
April 2019.
Group revenue increased by 0.4% to EUR21.9 billion, primarily
reflecting a return to growth in our underlying business and the
contribution from the acquired Liberty Global assets for two
months, partly offset by the disposal of Vodafone New Zealand.
The Group made a loss for the period of EUR1.9 billion,
primarily reflecting a loss at Vodafone Idea following an adverse
legal judgement against the industry by the Supreme Court,
partially offset by a profit on the disposal of Vodafone New
Zealand. Basic loss per share was (7.24) eurocents, compared to a
loss per share of (28.89) eurocents in the prior year. The decrease
in the loss per share is primarily due to lower impairment
charges.
Financial results: Alternative performance measures
For the period ended 30 September 2019, the implementation of
IFRS 16 means that a revised definition for adjusted EBITDA has
been applied. This restricts the period-on-period comparability of
certain of the Group's alternative performance measures. However,
organic growth calculations do include a pro-forma view of H1 19 on
an IFRS 16 basis.
Group organic service revenue increased 0.3%*, and returned to
growth in Q2 (Q1: -0.2%*, Q2: 0.7%*). This was driven by market
share gains in Europe Consumer fixed, continued growth in Vodafone
Business, and strong mobile data demand and customer base growth in
Emerging Consumer, partly offset by declines in Europe Consumer
mobile. European service revenue declined 1.6%* year-on-year (Q1:
-1.7%*, Q2: -1.4%*), including a 0.4 percentage point drag from
international call rate capping and other regulation. Underlying
trends improved principally driven by Italy and Spain. Rest of
World service revenue growth accelerated to 7.7%* (Q1: 5.3%*, Q2:
8.9%*) driven by strong growth in Turkey and Egypt, and a
reacceleration in South Africa. In Euro terms, and excluding the
sale of New Zealand, Rest of World service revenues grew by
5.8%.
Group organic adjusted EBITDA grew 1.4%* and the Group organic
adjusted EBITDA margin improved by 0.6* percentage points. This was
supported by a further EUR0.2 billion year-on-year reduction in net
operating costs in Europe and common functions, which was only
partially offset by Rest of World, where costs increased albeit at
a slower pace than local inflation. As a result, we remain on track
to deliver a fifth consecutive year of EBITDA margin expansion.
Organic adjusted EBIT was flat year-on-year, with EBITDA growth
offset by higher depreciation and amortisation expenses, partly
reflecting the first time amortisation of 5G spectrum licenses.
On a reported basis, Group adjusted EBITDA increased by EUR0.2
billion to EUR7.1 billion and our adjusted EBITDA margin was 32.4%.
Adjusted EBIT also increased by EUR0.1 billion to EUR2.2
billion.
The Group's adjusted effective tax rate in H1 was 27.5% compared
to 23.7% last year. The higher rate in the current year is
primarily due to the change in the Group's mix of profits following
the acquisition of the Liberty Global assets, as well as the
effects of de-recognising a deferred tax asset in Spain in the
prior period.
Adjusted earnings per share, which excludes impairment losses,
was 0.85 eurocents compared to 4.28 eurocents in the prior year, a
decrease of 80% year-on-year. This primarily reflects higher losses
from associates and joint ventures, with the results of Vodafone
Idea included for the whole of H1 20 compared to one month in H1 19
following the completion of the merger in August 2018. Financing
costs were also higher, largely as a result of pre-funding the
Liberty Global transaction. Additionally, the weighted average
number of shares in H1 20 increased by 7%, driven by the issuance
of EUR4 billion of mandatory convertible bonds ('MCBs') in FY19.
Excluding the MCBs and shares held in Treasury, the Group's
weighted average number of ordinary shares outstanding was 26,816
million for the period.
Liquidity and capital resources
Free cash flow pre-spectrum was EUR0.4 billion, compared to
EUR0.9 billion in the prior year. The difference was primarily
driven by working capital movements, with cash outflows EUR0.6
billion higher year-on-year as a result of timing differences on
handset purchases and other items, together with the collection of
a legal settlement in the prior year. Dividends received from
associates were EUR0.2 billion lower, primarily as we did not
receive a dividend from Indus Towers. Capital expenditure was
broadly stable year-on-year at EUR3.0 billion (H1 19: EUR3.1
billion), representing 13.7% of revenues.
Free cash flow post spectrum and restructuring payments was
EUR34 million, compared to EUR566 million in the prior year. This
reflects lower free cash flow pre-spectrum and higher cash
restructuring costs following the announced reorganisations in both
Italy and Spain.
Net debt as at 30 September 2019 was EUR48.1 billion compared to
EUR27.0 billion as at 31 March 2019. This increase in net debt
reflects cash outflows and debt assumed of EUR18.5 billion relating
to the acquisition of the Liberty Global assets in Germany and
Central and Eastern Europe, spectrum accruals and cash payments of
EUR1.6 billion primarily relating to 5G spectrum purchases in
Germany, the FY19 final dividend payment of EUR1.1 billion, and the
completion of the buyback for the mandatory convertible bonds
issued in 2016 of EUR1.1 billion. This was partially offset by
proceeds of EUR2.0 billion relating to the disposal of Vodafone New
Zealand.
Strategic review of the half year
During H1 the Group made good progress on its key strategic
priorities. We are aiming to build differentiation by investing in
leading Gigabit network assets and accelerating digital
transformation, supporting our efforts to deepen customer
engagement. We also remain highly focused on driving better
utilisation of our assets and optimising our portfolio. At the same
time, we have developed a fresh approach to regulatory and
political engagement, which we call a new 'social contract' for the
industry. By operating responsibly and working together as an
industry to enable the Digital Society, we aim to improve the
industry's reputation and ensure a fair return on infrastructure
investments.
Best Gigabit network: Europe's largest NGN and 5G network
We are Europe's largest owner of Gigabit-capable next generation
network ('NGN') infrastructure. The closing of the Liberty Global
acquisitions during H1 added 17 million cable homes in Germany and
CEE to our footprint, increasing the number of homes connected by
our NGN network in Europe to 54 million. In total we now reach 127
million NGN homes in Europe through a combination of owned
infrastructure, strategic partnerships and wholesale. We are
rapidly upgrading our cable infrastructure using DOCSIS 3.1
technology, and aim to market Gigabit broadband speeds to around 50
million households in our cable and FTTH footprint by the end of
FY23, compared to 24 million today.
We have launched 5G in seven European markets, with services
available in 58 cities with observed speeds of up to 1Gbps. Spain,
Italy and Romania launched in June, the UK and Germany in July,
Ireland in August and Hungary in October. 5G roaming is live for
Vodafone 5G customers roaming on Vodafone networks in Germany,
Italy, the UK and Spain. Our 5G network will be available in nine
European markets by the end of the current financial year.
Digital first: a systematic transformation of our operating
model
We have a clear ambition to strengthen our differentiation and
to lead the industry in capturing the benefits of digital. We are
systematically transforming our customer-facing operations,
supported by leading automation, artificial intelligence and IT
capabilities, in order to fundamentally improve the customer
experience and to structurally reduce our cost base over a
multi-year period. Our strategy is focused on six key pillars:
1) Acquisition and (2) Base Management: Our new digital approach
to customer acquisition is already contributing to our improved
commercial performance, as we deliver targeted and personalised
one-to-one marketing messages using Vodafone's innovative approach
to best in class digital platforms. These platforms also provide
relevant and personalised offers to our existing customers in 11
markets, with 16 markets expected to be using the new platforms by
FY21. We aim to generate more than 40% of our sales through digital
channels by the end of FY21 compared to around 20% at present,
reducing the EUR2.5 billion in commissions that we paid in FY19 to
third party distributors and resellers.
3) Channels: This ambition is further supported by our new
MyVodafone app, which we intend to become our customers' primary
channel for sales, self-service, rewards, and help. We are
developing a range of loyalty programmes in order to drive
increased frequency of usage on MyVodafone. For example, our
'VeryMe' rewards programme in the UK has 2.5 million customers
signed up and 12 million rewards claimed to date. We have launched
the new MyVodafone app in 4 markets, with 16 markets targeted by
the end of FY20.
Additionally, we are transforming our retail footprint to
support our digital strategy, targeting an 11 minute transaction
time for new customers. We plan to increase our footprint of
Express and Flagship stores but significantly reduce Standard
format stores. By FY23 we aim to transform 40% of our stores while
reducing our store footprint by 15%, allowing us to reduce the
EUR0.8 billion annual cost of our retail activities.
4) Customer Operations: We are also automating and digitising
our customer services operations to improve the customer experience
and to reduce the EUR1.2 billion annual cost of these operations.
We have deployed our TOBi chatbots in 14 markets, and TOBi handled
14 million conversations across the Group in September,
representing 19% of customer contacts. We aim to achieve a 40%
reduction in customer contact frequency by the end of FY21.
5) Technology and (6) Automation/AI everywhere: We see multiple
opportunities to leverage the Group's scale in order to generate
best in class cost structures in a digital environment. We already
have [23,000] employees in Vodafone Shared Service (VSS) centres in
India, Egypt and Eastern Europe, where we are now deploying Robotic
Process Automation (RPA) to automate manual and repetitive
processes. We are expanding the scope of VSS to include network
operations, IT testing and maintenance activities, unlocking
further savings.
In Technology we are using advanced analytics and machine
learning tools to improve network performance and prioritise
capital expenditure, with the goal of saving EUR1 billion by FY21
to support reinvestment in new technologies. We are also automating
network monitoring and diagnosis functions, and are well on the way
to achieving our goal of moving 65% of our IT applications to the
cloud by FY21.
In total, our operating expenses for technology and support
operations (including Shared Services) were EUR2.9 billion in FY19,
and we are reducing these costs at a high single digit rate
annually.
Given the rapid implementation of our digital strategy we are
making good progress in reducing our operating costs, and we
continue to target a net reduction in operating expenses in Europe
and Common Functions of at least EUR1.2 billion by FY21 compared to
FY18 on an absolute organic basis. We delivered EUR0.2 billion of
net opex reductions in H1, half of our full year target of EUR0.4
billion, supporting our goal to expand organic adjusted EBITDA
margins for the fifth year in a row.
Deepening customer engagement: selling 'one more product',
lowering churn
We aim to deepen engagement in all of our customer segments by
selling additional products, particularly fixed and converged
products in Europe and financial services in Africa, contributing
to revenue growth and a reduction in churn. We are making progress,
with a strong 1.6 percentage point year-on-year reduction in mobile
contract churn in Europe during Q2, reaching a record low level of
14.5%. This is the fourth quarter in a row in which Europe mobile
contract churn has declined year-on-year.
Europe Consumer
We continue to see a significant opportunity to increase sales
of multi-product bundles, especially in fixed line where we have
Europe's largest NGN footprint and relatively low customer
penetration. For example, in Germany we enjoy a significant speed
advantage compared to the incumbent's copper network, but only 32%
of homes passed currently subscribe to our broadband products,
compared to 45% at VodafoneZiggo in the Netherlands. This is a
substantial opportunity for future growth, at attractive
incremental margins.
Including VodafoneZiggo we had 24.4 million fixed broadband
customers, 20.4 million NGN customers, 6.9 million converged
customers and 21.9 million TV customers in Europe at the end of the
period. Excluding VodafoneZiggo, we added 197,000 broadband
customers, 608,000 NGN customers and 238,000 consumer converged
customers during H1. Our customer growth accelerated in Q2,
supported by a stabilisation in commercial performance in
Spain.
In mobile we launched new simplified commercial propositions
across multiple markets in H1, including speed-tiered unlimited
mobile data plans in seven markets (Spain, UK, Italy, Portugal,
Romania, Czech Republic and Malta) and new simplified mobile price
plans in Germany. Our speed-differentiated unlimited data plans are
primarily targeted at our existing customer base, meeting customer
demand for 'worry-free' data usage and creating opportunities for
ARPU growth. Customer adoption of the plans has been rapid, and we
reached an unlimited customer base of over 1.8 million SIMs at the
end of the period. Average data usage by unlimited customers has
more than doubled, ARPU has typically increased and customer
satisfaction is significantly higher. Reflecting the success of our
unlimited plans, data volumes on our mobile networks continued to
grow strongly in Europe in H1, rising by 45%. Average smartphone
usage for our overall customer base increased to 4.2 GB/month (+1.0
GB year-on-year).
Vodafone Business
Our strategy in the Business segment is to drive growth and
deepen our existing mobile customer relationships by cross-selling
additional total communications products including next generation
fixed, IoT and Cloud services. We aim to cross-sell services and
increase revenue per account and reduce churn, while also improving
productivity through our salesforce transformation initiative and
the rapid digitalisation of our operations. Vodafone Business
revenues grew by 0.8%* in H1 (Q1: 0.4%*, Q2: 0.9%*), as strong
growth in Cloud & Hosting revenues and continued growth in
fixed offset a stable mobile performance.
In particular, we see a significant window of opportunity to
gain market share as the Wide Area Networking (WAN) market
transitions to Software Defined Networking (SDN), which offers
large enterprise customers both greater flexibility and significant
cost savings compared to legacy products. We have been recognised
as a leader for Network Services in Gartner's annual 'Magic
Quadrant' and we have a strong pipeline of potential new contracts,
supporting our ambition to grow our existing EUR0.9 billion in
annual WAN revenues.
Our global IoT platform added 9 million SIMs in H1 to reach a
total base of 94 million, up 22% year-on-year, with total IoT
revenues reaching EUR0.8 billion on an annualised basis. We are
expanding our IoT solutions for specific industry verticals from
our current focus on automotive and insurance to digital buildings,
healthcare, manufacturing and logistics. In October we announced a
partnership with America Movil which will enable Vodafone Business
customers to connect IoT devices across Latin America. This
complements our existing agreements with AT&T and China Mobile
and further strengthens our leading global footprint.
In the important SoHo and SME segment, which represents c.50% of
Business revenues, we are focused on upselling customers to
dedicated Business mobile plans with value-added service features
and materially higher ARPUs. We also aim to position Vodafone as an
integrator of value added digital and IoT services, offsetting the
pressure on mobile prices.
Emerging Consumer
We continue to enjoy significant growth in our African and
Middle Eastern markets as we benefit from rising data and
smartphone penetration. Data penetration is currently still low,
with only 28% of our mobile customer base using 4G services, and
with smartphone penetration still well below developed market
levels. As 4G smartphone costs continue to fall, driving ongoing
adoption, we aim to grow ARPU. Data volume growth on our Rest of
World networks remained strong at 44% in H1, reflecting both
customer and usage growth, with average smartphone usage increasing
to 2.9 GB/month (+0.5 GB year-on-year).
We also see significant opportunities to grow in digital and
financial services, including potential partnerships with local
banks. M-Pesa, Africa's largest payments platform, has moved beyond
its origins as a money transfer service, and now provides
enterprise payments, financial services and merchant payment
services for mobile commerce. We now have 39 million M-Pesa
customers, with 5.8 billion transactions processed in H1 across the
seven African markets where M-Pesa services are active. M-Pesa grew
revenues by 21%* to EUR0.5 billion in H1. Additionally, in South
Africa we are gaining traction in financial services through
products such as 'Airtime advance', which now has 9.9 million
active customers. Together with the success of our insurance
products, this supported 37% financial services revenue growth
during H1.
Improving asset utilisation
We aim to improve the utilisation of all of the Group's assets
as part of our focus on improving returns on capital.
We have made a fast start on integrating the acquired Liberty
Global assets in Germany and CEE and are confident that we will
deliver the EUR535 million of targeted annual cost and capex
savings by the fifth full year post completion. In Germany we
combined senior management one day after closing, integrated supply
chain platforms on day five, and launched combined commercial
offers in September, just five weeks after closing. In Germany we
are ahead of our internal targets for DSL customer migrations to
the cable platform and for cross-selling mobile products to
Unitymedia customers.
We have now secured industrial synergies through network sharing
partnerships with Telecom Italia in Italy, Orange in Spain and
Romania, Telefonica in the UK, and Wind in Greece. We are in active
discussions currently with potential partners in Germany and
several other European markets. These network sharing agreements
support improved mobile coverage and a faster rollout of 5G
services, reduce environmental impact and are expected to generate
significant industrial efficiencies.
In November we announced a reciprocal wholesale partnership with
Virgin Media in the UK. The five year agreement provides Virgin
Mobile and Virgin Media Business customers with access to Vodafone
UK's mobile network until 2026. Virgin Media's current MVNO
agreement will end in late 2021, at which point its mobile
offerings will transition to Vodafone. Virgin Mobile 5G services
are set to launch on Vodafone's network before the transition takes
place. A complementary and extensive wholesale agreement has also
been struck in which Virgin Media Business will provide Vodafone
with mobile base station backhaul and business customer
connectivity services.
Developing a new 'social contract' for the industry
In September we published a White Paper, 'Connecting Europe for
a Better Future', proposing policy recommendations which we believe
will ensure that Europe is positioned to be a global leader in the
next phase of the digital revolution. The paper argues that the
quality and availability of Gigabit networks are integral to the
successful digitalisation of the European economy. However, all
countries struggle with infrastructure and investment gaps,
particularly in rural and remote areas, and so the industry and
governments must now work together to create a fair and inclusive
digital society. Vodafone aims to play a leading role in helping
the industry to develop collaborative solutions which address
societal needs, while allowing a fair return on infrastructure
investments.
The first example of the success of this strategy is the
announcement in October of a shared rural network agreement with
other operators in the UK to improve mobile coverage and signal
strength. The agreement will improve geographic 4G coverage in the
UK from 67% now to 92% by 2026, enabling digital inclusion with
reduced environmental impact. Following this agreement, Ofcom has
proposed to remove coverage obligations from certain lots in the
upcoming 5G spectrum auction, enabling spectrum resources to be
allocated efficiently and without potential distortions.
European Towers
We remain on track to legally separate our European Tower
infrastructure into a new organisation, which will be operational
by May 2020. We recently appointed Vivek Badrinath as the CEO of
our European TowerCo, who will be able to draw on his extensive
telecoms and technology leadership experience from his role at
Vodafone, where he is currently the Chief Executive of Vodafone's
Rest of World operations, and from his experience at Orange as
Deputy Chief Executive and, prior to that, as the leader of
Orange's global networks and operations division.
We intend to monetise a substantial proportion of our European
TowerCo over the next 15 months, depending on market conditions. We
believe that there is significant scope to generate operational
efficiencies and increase tenancy ratios across our Tower
portfolio, and that it will be possible to monetise towers while
preserving network differentiation and long-term strategic
flexibility.
On 26 July 2019 we announced an agreement to merge our passive
tower infrastructure in Italy with INWIT Spa, creating the leading
tower company in Italy with 22,100 towers, and the second largest
listed tower operator in Europe. As part of the combination,
Vodafone will receive a cash consideration of EUR2,140 million and
a 37.5% shareholding in the combined entity. The combination is
subject to regulatory approval as well as the approval of INWIT's
minority shareholders, and completion is expected in the first half
of calendar year 2020.
Portfolio management
We continue to actively manage our portfolio in order to
strengthen our market positions, simplify the Group and reduce our
financial leverage.
On 8 May 2019, the Australian Competition and Consumer
Commission (ACCC) opposed the proposed merger of Vodafone Hutchison
Australia ("VHA") and TPG Telecom ("TPG"). We remain firmly
committed to the merger and have challenged the ACCC's decision in
Federal Court. The hearing commenced on 10 September 2019 and
concluded on 1 October 2019. We expect a final judgement by the end
of FY20.
On 28 October 2019 we announced the acquisition of AbCom, the
largest cable operator in Albania. AbCom's network passes 460,000
homes and the company provides broadband and pay-TV services to
more than 100,000 homes.
We have extended the long stop date on our agreement to merge
Indus Towers and Bharti Infratel, which is still awaiting
regulatory approval from the Department of Telecommunications,
having received all other required approvals.
Notes:
1. IFRS 16 'Leases' was adopted on 1 April 2019 for our statutory
reporting, without restating prior period figures. As a result,
the Group's statutory results for the six months ended 30 September
2019 are on an IFRS 16 basis, whereas the comparative period
for the six months ended 30 September 2018 are on an IAS 17 basis.
Note 1 of the condensed consolidated financial statements explains
the impact of the adoption of IFRS 16 on the consolidated financial
position at 1 April 2019.
2. Revenue for the comparative period has been revised for the allocation
of, and timing of recognition for, equipment and service revenue
compared to amounts previously disclosed in the condensed consolidated
financial statements for the six months ended 30 September 2018.
Group service revenue decreased by EUR172 million and other revenue
increased by EUR224 million, resulting in a net increase in revenue
of EUR52 million. The loss for the financial period decreased
by EUR31 million.
3. The six months ended 30 September 2018 includes impairment charges
of EUR3.5 billion in respect of the Group's investments in Spain,
Vodafone Idea and Romania.
4. Alternative performance measures 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.
For the six months ended 30 September 2019, a revised definition
for adjusted EBITDA has been applied. This restricts the period-on-period
comparability of certain of the Group's alternative performance
measures. See "Alternative performance measures" on page 46 for
reconciliations to the closest respective equivalent GAAP measure
and "Definition of terms" on page 56 for further details. All
comparative period alternative performance measures have been
re-presented on an IFRS 15 basis.
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 (notably by
excluding the disposal of Vodafone New Zealand and the acquired
European Liberty Global assets), movements in foreign exchange
rates and the impact from the implementation of IFRS 16 'Leases'.
Organic growth is an alternative performance measure. See
"Alternative performance measures" on page 46 for further details
and reconciliations to the respective closest equivalent GAAP
measure.
GUIDANCE
2020 financial year guidance(1)
Free cash flow
Adjusted EBITDA (pre-spectrum)
-------------------------- ---------------------------- ----------------------
Prior 2020 financial year EUR13.8 - EUR14.2 billion At least EUR5.4
guidance billion
Updated 2020 financial EUR14.8 - EUR15.0 billion Around EUR5.4 billion
year guidance
We have updated our financial guidance for FY20 to reflect the
acquisition of Liberty Global's assets in Germany and Central &
Eastern Europe and the sale of New Zealand. As both of these
transactions completed on 31 July, our new financial guidance range
therefore includes the contribution from the Liberty Global assets
and excludes New Zealand for the last eight months of the financial
year. The net impact of these transactions on our adjusted EBITDA
guidance is an increase of approximately EUR0.8 billion. The net
impact of these transactions on our free cash flow guidance is an
increase of approximately EUR0.1 billion.
Our commercial and financial performance during the first half
of the year has been slightly ahead of our expectations, with
Europe in-line with our plans and Rest of World ahead. As a result
we are on track to achieve the upper half of our original adjusted
EBITDA guidance range, excluding the net benefit from M&A,
implying around 2-3%* organic adjusted EBITDA growth for the
year.
However, in October the Supreme Court in India ruled against the
industry in a dispute over the calculation of license and other
regulatory fees, and Vodafone Idea is now liable for very
substantial demands made by the Department of Telecommunications in
relation to these fees (see notes 9 and 13 in the unaudited
condensed consolidated financial statements for further information
on this case). We are actively engaging with the government to seek
financial relief for Vodafone Idea. Given the ruling our guidance
now excludes recharges from India (a drag of c.EUR0.1 billion on
our free cash flow) and Indus Towers dividends (a drag of c.EUR0.15
billion on our free cash flow).
We have also updated our guidance on capital intensity following
the Liberty Global acquisitions, and now expect our capital
expenditure as a percentage of our total revenues to be around 17%
for the three year period ending in FY22, excluding integration
costs. This is higher than our prior medium term capital intensity
guidance of 'mid-teens', reflecting the fact that the Liberty
Global cable assets have materially higher capital intensity than
our existing business. Additionally, the adoption of IFRS 15
reporting standards has reduced our total revenues due to the
netting of certain commissions in indirect channels. Excluding
these effects, our underlying outlook for capital intensity is
similar to the level of the past two financial years.
On a pro-forma basis, our financial leverage is expected to be
around 3.0x net debt / adjusted EBITDA at the end of FY20,
excluding the INWIT transaction. We intend to reduce financial
leverage towards the lower end of our targeted 2.5-3.0x range
within the next few years through a combination of organic growth,
non-core asset sales and working capital initiatives.
Dividend policy
The Board intends to have a progressive dividend policy, and the
decision on the level of dividend growth will be assessed annually
at year-end. Going forwards, the interim dividend is expected to be
50% of the prior full year dividend. Consistent with this approach,
the interim dividend for H1 FY20 has therefore been set at 4.50
eurocents.
Assumptions
We have based guidance for the financial year ending 31 March
2020 on our current assessment of the global macroeconomic outlook
and assume foreign exchange rates of EUR1:GBP0.87, EUR1:ZAR 16.4,
EUR1:TRY 6.4 and EUR1:EGP 19.7. Guidance excludes the impact of
licence and spectrum payments, material one-off tax-related
payments, restructuring payments, and any fundamental structural
change to the Eurozone. It also assumes no material change to the
current structure of the Group. Actual foreign exchange rates may
vary from the foreign exchange rate assumptions used.
_______________________________
Note:
1. Adjusted EBITDA and free cash flow (pre-spectrum) are alternative
performance measures. Alternative performance measures are non-GAAP
measures that are presented to provide readers with additional
financial information that is regularly reviewed by management
and the Board and should not be viewed in isolation or as an
alternative to the equivalent GAAP measure. The adjusted EBITDA
and free cash flow (pre-spectrum) measures are forward-looking
alternative performance measures which at this time cannot be
quantitatively reconciled to comparative GAAP financial information.
See "Alternative performance measures" on page 46 for more information.
CONTENTS Page
---------------------------------------------- -----
Financial results 10
Liquidity and capital
resources 20
Risk factors 22
Responsibility statement 23
Unaudited condensed consolidated financial
statements 24
Alternative performance
measures 46
Additional information 53
Other information (including forward-looking
statements) 56
----------------------------------------------- -----
FINANCIAL RESULTS
Group(1, 2)
Following the adoption of IFRS 15 "Revenue from Contracts with
Customers" on 1 April 2018, revenue is presented on an IFRS 15
basis.
Six months ended 30 September
------------------------------------------
Growth
------------------
2019 2018 Reported Organic*
(restated)(3)
EURm EURm % %
----------------------------------------- ------- ------------- -------- --------
Continuing operations
Mobile customer revenue 11,412 11,554
Mobile incoming revenue 875 916
Other service revenue 978 982
----------------------------------------- ------- -------------
Mobile service revenue 13,265 13,452
Fixed service revenue 5,279 4,816
----------------------------------------- ------- ------------- -------- --------
Service revenue 18,544 18,268 1.5 0.3
Other revenue 3,395 3,580
----------------------------------------- ------- ------------- -------- --------
Revenue 21,939 21,848 0.4 (0.7)
Direct costs (5,292) (5,230)
Customer costs (3,987) (4,274)
Operating expenses (5,555) (5,429)
----------------------------------------- ------- ------------- -------- --------
Adjusted EBITDA 7,105 6,915 2.7 1.4
Depreciation and amortisation:
Acquired intangibles (113) (116)
Purchased licences (781) (731)
Other (3,980) (3,926)
---------------------------------------- ------- ------------- -------- --------
Adjusted EBIT 2,231 2,142 4.2 -
Share of adjusted results in associates
and joint ventures(4) (550) (8)
----------------------------------------- ------- ------------- -------- --------
Adjusted operating profit 1,681 2,134 (21.2) 2.8
Impairment loss - (3,495)
Restructuring costs (163) (95)
Amortisation of acquired customer
base and brand intangible assets(4) (232) (317)
Adjusted other income and expense (872) (256)
Interest on lease liabilities(5) 163 -
----------------------------------------- ------- -------------
Operating profit/(loss) 577 (2,029)
Non-operating income and expense - (3)
Net (financing costs)/investment
income (1,088) (815)
Income tax expense(6) (1,380) (1,420)
----------------------------------------- ------- -------------
Loss for the financial period
from continuing operations (1,891) (4,267)
Loss for the financial period
from discontinued operations - (3,535)
----------------------------------------- ------- -------------
Loss for the financial period (1,891) (7,802)
----------------------------------------- ------- -------------
Attributable to:
- Owners of the parent (2,128) (7,934)
- Non-controlling interests 237 132
----------------------------------------- ------- -------------
Notes:
1. 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. For the six months ended 30 September
2019, a revised definition for adjusted EBITDA has been applied.
This restricts the period-on-period comparability of certain
of the Group's alternative performance measures. See "Alternative
performance measures" on page 46 for more information and reconciliations
to the closest respective equivalent GAAP measure and "Definition
of terms" on page 56 for further details.
2. Current period reflects average foreign exchange rates of EUR1:GBP0.89,
EUR1:ZAR 16.24, EUR1:TKL 6.45, EUR1: EGP 18.74 and EUR1:INR 78.22.
3. Revenue for the comparative period has been revised for the allocation
of, and timing of recognition for, equipment and service revenue
compared to amounts previously disclosed in the condensed consolidated
financial statements for the six months ended 30 September 2018.
Service revenue decreased by EUR172 million and other revenue
increased by EUR224 million, resulting in a net increase in revenue
of EUR52 million. The loss for the financial period decreased
by EUR31 million.
4. Share of adjusted results in equity accounted associates and
joint ventures excludes amortisation of acquired customer bases
and brand intangible assets, restructuring costs and other costs
of EUR2.1 billion (2018: EUR0.4 billion) which are included in
amortisation of acquired customer base and brand intangible assets,
restructuring costs and adjusted other income and expense respectively.
5. 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.
6. Refer to page 18 for further details.
Europe(1)
Other Growth
------------------
Germany Italy UK Spain Europe Eliminations Europe Reported Organic*
EURm EURm EURm EURm EURm EURm EURm % %
------------------------ ------- ------ ----- ------ ------ ------------ ------- -------- --------
30 September 2019
Mobile customer
revenue 2,230 1,567 1,526 1,138 1,582 - 8,043
Mobile incoming
revenue 97 146 130 60 182 (7) 608
Other service revenue 222 126 129 97 141 (66) 649
------------------------ ------- ------ ----- ------ ------ ------------ -------
Mobile service
revenue 2,549 1,839 1,785 1,295 1,905 (73) 9,300
Fixed service revenue 2,412 585 666 671 487 (1) 4,820
------------------------ ------- ------ ----- ------ ------ ------------ ------- -------- --------
Service revenue 4,961 2,424 2,451 1,966 2,392 (74) 14,120 1.7 (1.6)
Other revenue 629 285 700 195 298 (2) 2,105
------------------------ ------- ------ ----- ------ ------ ------------ ------- -------- --------
Revenue 5,590 2,709 3,151 2,161 2,690 (76) 16,225 0.8 (2.2)
Direct costs (1,005) (612) (809) (664) (721) 76 (3,735)
Customer costs (884) (539) (814) (471) (418) - (3,126)
Operating expenses (1,349) (552) (870) (566) (679) - (4,016)
------------------------ ------- ------ ----- ------ ------ ------------ ------- -------- --------
Adjusted EBITDA 2,352 1,006 658 460 872 - 5,348 3.3 (0.1)
Depreciation and
amortisation:
Acquired intangibles - (61) - - (1) - (62)
Purchased licences (364) (61) (227) (35) (56) - (743)
Other (1,224) (501) (593) (586) (512) - (3,416)
----------------------- ------- ------ ----- ------ ------ ------------ ------- -------- --------
Adjusted EBIT 764 383 (162) (161) 303 - 1,127 4.2 (3.4)
Share of adjusted
results in associates
and joint ventures - - - - 39 - 39
------------------------ ------- ------ ----- ------ ------ ------------ ------- -------- --------
Adjusted operating
profit 764 383 (162) (161) 342 - 1,166 4.7 (2.6)
------------------------ ------- ------ ----- ------ ------ ------------ ------- -------- --------
Adjusted EBITDA
margin 42.1% 37.1% 20.9% 21.3% 32.4% 33.0%
------------------------ ------- ------ ----- ------ ------ ------------ -------
30 September 2018
(restated)(1)
------------------------ ------- ------ ----- ------ ------ ------------ -------
Mobile customer
revenue 2,230 1,689 1,533 1,275 1,535 - 8,262
Mobile incoming
revenue 101 170 141 63 190 (9) 656
Other service revenue 258 117 126 90 138 (52) 677
------------------------ ------- ------ ----- ------ ------ ------------ -------
Mobile service
revenue 2,589 1,976 1,800 1,428 1,863 (61) 9,595
Fixed service revenue 1,988 536 660 734 375 (1) 4,292
------------------------ ------- ------ ----- ------ ------ ------------ -------
Service revenue 4,577 2,512 2,460 2,162 2,238 (62) 13,887
Other revenue 603 386 671 247 302 (3) 2,206
------------------------ ------- ------ ----- ------ ------ ------------ -------
Revenue 5,180 2,898 3,131 2,409 2,540 (65) 16,093
Direct costs (987) (587) (805) (717) (668) 65 (3,699)
Customer costs (849) (666) (739) (569) (409) - (3,232)
Operating expenses (1,262) (587) (912) (594) (630) - (3,985)
------------------------ ------- ------ ----- ------ ------ ------------ -------
Adjusted EBITDA 2,082 1,058 675 529 833 - 5,177
Depreciation and
amortisation:
Acquired intangibles - (61) - - (2) - (63)
Purchased licences (353) (36) (218) (33) (54) - (694)
Other (1,110) (544) (598) (597) (489) - (3,338)
----------------------- ------- ------ ----- ------ ------ ------------ -------
Adjusted EBIT 619 417 (141) (101) 288 - 1,082
Share of adjusted
results in associates
and joint ventures - - - - 32 - 32
------------------------ ------- ------ ----- ------ ------ ------------ -------
Adjusted operating
profit 619 417 (141) (101) 320 - 1,114
------------------------ ------- ------ ----- ------ ------ ------------ -------
Adjusted EBITDA
margin 40.2% 36.5% 21.6% 22.0% 32.8% 32.2%
------------------------ ------- ------ ----- ------ ------ ------------ -------
Change at constant exchange rates (%)
----------------------------------------------------------------
Mobile customer
revenue - (7.2) - (10.7) 3.1
Mobile incoming
revenue (3.8) (14.2) (7.1) (4.2) (4.8)
Other service revenue (14.0) 7.7 2.2 7.3 3.7
------------------------ ------- ------ ----- ------ ------
Mobile service
revenue (1.5) (6.9) (0.4) (9.3) 2.3
Fixed service revenue 21.3 9.2 1.3 (8.6) 30.2
------------------------ ------- ------ ----- ------ ------
Service revenue 8.4 (3.5) 0.1 (9.1) 7.0
Other revenue 4.2 (26.3) 4.7 (21.2) (1.1)
------------------------ ------- ------ ----- ------ ------
Revenue 7.9 (6.5) 1.1 (10.3) 6.0
Direct costs 1.7 4.2 1.0 (7.6) 8.5
Customer costs 4.1 (19.1) 10.6 (17.3) 2.5
Operating expenses 6.9 (5.9) (4.3) (4.6) 7.5
------------------------ ------- ------ ----- ------ ------
Adjusted EBITDA 13.0 (4.9) (2.1) (13.0) 4.6
Depreciation and
amortisation:
Acquired intangibles - - - - (44.1)
Purchased licences 3.0 69.0 4.7 8.9 3.1
Other 10.3 (7.8) (0.6) (1.9) 4.7
----------------------- ------- ------ ----- ------ ------
Adjusted EBIT 23.4 (8.3) 14.8 59.2 5.2
Share of adjusted
results in associates
and joint ventures - - - - 21.5
------------------------ ------- ------ ----- ------ ------
Adjusted operating
profit 23.4 (8.1) 14.8 59.2 6.8
------------------------ ------- ------ ----- ------ ------
Adjusted EBITDA
margin (pps) 1.9 0.6 (0.6) (0.7) (0.4)
------------------------ ------- ------ ----- ------ ------
Other activity
Reported (including Foreign Organic*
change M&A) exchange change
% pps pps %
--------------------------------- -------- -------------- -------- --------
Europe revenue 0.8 (3.1) 0.1 (2.2)
--------------------------------- -------- -------------- -------- --------
Service revenue
Germany 8.4 (8.3) - 0.1
Italy (3.5) - - (3.5)
UK (0.4) - 0.5 0.1
Spain (9.1) 0.4 - (8.7)
Other Europe 6.9 (4.3) 0.1 2.7
Europe service revenue 1.7 (3.4) 0.1 (1.6)
--------------------------------- -------- -------------- -------- --------
Adjusted EBITDA
Germany 13.0 (9.5) - 3.5
Italy (4.9) 1.4 - (3.5)
UK (2.5) 1.3 0.4 (0.8)
Spain (13.0) 1.7 - (11.3)
Other Europe 4.7 (1.5) (0.1) 3.1
Europe adjusted EBITDA 3.3 (3.5) 0.1 (0.1)
--------------------------------- -------- -------------- -------- --------
Europe adjusted EBIT 4.2 (7.5) (0.1) (3.4)
--------------------------------- -------- -------------- -------- --------
Europe adjusted operating profit 4.7 (7.3) - (2.6)
--------------------------------- -------- -------------- -------- --------
Notes:
1. The Group's results for the six months ended 30 September 2018
have been re-presented on an IFRS 15 basis. 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. For the six months ended 30 September 2019, a revised
definition for adjusted EBITDA has been applied. This restricts
the period-on-period comparability of certain of the Group's
alternative performance measures. See "Alternative performance
measures" on page 46 for more information and reconciliations
to the closest respective equivalent GAAP measure and "Definition
of terms" on page 56 for further details.
Germany
Service revenue grew 0.1%* (Q1: 0.4%*, Q2: -0.2%*) as solid
retail growth was offset by declining wholesale revenues. Retail
revenues grew by 1.3%* (Q1: 1.8%*, Q2: 0.7%*) with continued
customer growth being partially offset by the impact of
international call rate regulation. Growth slowed in Q2 due to a
greater impact from international calling regulation, and lower
mobile visitor, roaming and reseller revenues.
Fixed service revenue increased 2.3%* (Q1: 1.5%*, Q2: 3.0%*) as
good retail growth was partially offset by wholesale declines.
Retail revenues grew 2.9%* (Q1: 2.4%*, Q2: 3.4%*). We maintained
our good commercial momentum in cable with 110,000 net customer
additions in H1, including two months of gains at Unitymedia;
however our DSL performance was impacted by price increases for LLU
customers and migrations to Unitymedia, leading to overall
broadband customer growth of 53,000. We maintained our good
momentum in convergence supported by our GigaKombi proposition,
adding 160,000 Consumer converged customers in H1, which took our
total Consumer converged customer base to 1.4 million. Our TV
customer base declined by 111,000 (including Unitymedia) primarily
reflecting the loss of lower ARPU basic TV subscribers, however we
increased premium TV penetration, supporting revenues.
Mobile service revenue fell by -1.6%* (Q1: -0.5%*, Q2: -2.7%*)
driven by declines in wholesale and an increasing drag from
regulation. Retail revenues grew 1.0%* excluding regulatory impacts
(Q1: 2.2%*, Q2: -0.1%*), with the slowdown in quarterly trends
reflecting lower visitor and roaming revenue, and lower reseller
activity year-on-year. In total we added 264,000 contract
customers, supported in part by the success of our GigaCube
proposition as well as by our continued good momentum in branded
channels. Contract churn improved by 0.6 percentage points
year-on-year to 12.4% in H1, driven by improvements in all customer
segments.
Adjusted EBITDA grew by 3.5%* with a 1.4* percentage point
organic improvement in adjusted EBITDA margin. This was driven by
lower commercial costs and a 4.5%* reduction in net operating costs
year-on-year. The adjusted EBITDA margin was 42.1%.
On 31 July we completed the acquisition of Liberty Global's
cable asset Unitymedia, in Germany. We have made a fast start on
integration, with top management reorganised on day one, and back
office and supply chain integration already underway. Within five
weeks we had also started cross-selling Unitymedia and Vodafone
products within each other's channels, and we are actively
migrating DSL customers onto our cable footprint. As a result, we
have already exceeded our mobile cross-selling target for FY20. In
the first two months of ownership, we added 35,000 cable customers
onto the Unitymedia footprint of which 9,000 were DSL
migrations.
As of 30 September, our total customer base including Unitymedia
comprised of 18.4 million mobile contract customers, 10.6 million
broadband customers and 13.7 million TV customers.
Italy
Service revenue declined 3.5%* (Q1: -3.8%*, Q2: -3.2%*) with
trends in mobile improving and continued strong growth in fixed
line.
Mobile service revenues declined 6.9%* (Q1: -7.4%*, Q2: -6.5%*)
due to a lower active customer base and ARPU pressure. However,
promotional activity continued to moderate, with mobile market
portability ('MNP') volumes 39% lower year-on-year. Main brand
pricing increased in H1 across all players, however the low-value
segment of the prepaid market remained highly competitive. As a
result, our active customer base continued to decline, partly
mitigated by the success of our secondary brand ho., which now has
1.4 million active users. The improvement in mobile service revenue
trends in Q2 mainly reflected price rises for certain customer
segments.
Fixed service revenues increased 9.2%* (Q1: 9.2%*, Q2: 9.1%*)
driven by continued growth in our fixed broadband customer base. We
added 54,000 broadband customers in H1 as we maintained a good
share of broadband market net additions despite slower market
growth following price increases announced by most operators in the
period. Through our owned NGN footprint and strategic partnership
with Open Fiber we now cover 7.0 million households. In July, we
announced an extension to our agreement with Open Fiber which will
enable us to offer Gigabit services to c.19 million homes as they
roll out their network. We also continued to grow our converged
customer base, adding 27,000 converged customers in H1. Our total
converged Consumer customer base is now 984,000 (representing 35%
of our broadband base).
Adjusted EBITDA declined 3.5%* in H1 driven by the decline in
mobile service revenue, however the organic adjusted EBITDA margin
was 1.1* percentage points higher as net operating costs declined
by 8%*. The adjusted EBITDA margin was 37.1%.
UK
Service revenue grew 0.1%* (Q1: 0.1%*, Q2: flat*), with
quarterly trends continuing to improve excluding the impact of
international call rate regulation, which dragged on service
revenue growth by 0.4 percentage points in Q2.
Mobile service revenue declined 0.4%* (Q1: flat*, Q2: -0.7%*),
however it was broadly stable excluding the impact of international
call rate regulation, with a higher customer base and RPI-linked
price increases being offset by lower out-of-bundle revenues as a
result of spend capping, and lower wholesale revenue. In July, our
5G network went live and we launched a new range of commercial
offers including speed-differentiated 'Vodafone Unlimited' mobile
data plans and 'Vodafone Together' convergent offers. By the end of
the period, we had 1 million customers on these plans. These new
offers combined with our successful iPhone 11 launch helped to
further accelerate our commercial momentum with 182,000 contract
customers added in H1 (excluding Talkmobile). Contract churn of
14.3% was impacted by text-to-switch regulation. We also added
424,000 prepaid customers, supported by our digital sub-brand
VOXI.
Fixed service revenue grew 1.3%* (Q1: 0.3%*, Q2: 2.2%*)
supported by continued strong customer growth in Consumer
broadband. In total we added 92,000 broadband customers in H1.
Adjusted EBITDA declined 0.8%* and the organic adjusted EBITDA
margin was 0.4* percentage points lower. This reflects the impact
of higher annual licence fees and a reallocation of costs from
capex to opex following our new Cloud partnership with IBM for
Vodafone Business. On a comparable basis adjusted EBITDA growth was
around 5 percentage points higher, and the adjusted EBITDA margin
improved by 0.6 percentage points year-on-year, supported by net
operating cost savings of 5%*. The adjusted EBITDA margin was
20.9%.
Spain
Service revenues declined 8.7%* (Q1: -9.3%*, Q2: -8.0%*)
reflecting the continued impact of the commercial actions we took
over the past year in order to improve the competitiveness of our
offers, our decision not to renew unprofitable football rights and
a shift in overall market demand towards the value segment. The
improvement in quarterly trends reflects the partial lapping of our
commercial repositioning actions last year and a stabilising
customer base.
Our commercial performance recovered in H1. We returned to
positive net additions in both mobile and broadband in September
and our customer base was broadly stable in Q2. This was supported
in part by the good performance of our secondary brand Lowi, which
is now the fastest growing brand in the value-segment. Total market
portability volumes were somewhat lower year-on-year, reflecting a
less intense summer promotional period than a year ago, although
the overall pricing environment remained highly competitive.
Despite our decision last year not to renew football content
rights, football customer losses were modest in H1 and our total TV
subscriber base remained stable, supported in part by our new TV
and series offers.
In April, we announced a new simplified tariff structure which
included speed-differentiated unlimited data bundles in both
mobile-only and convergent offers for the first time in the Spanish
market. We also reduced promotions as we focused on migrating our
customers to the new offers at a similar or higher level of overall
spending. We have seen good uptake of the new plans with 1.2
million customers at the end of H1.
Adjusted EBITDA declined by 11.3%* and the organic adjusted
EBITDA margin was 0.2* percentage points lower. This was
principally driven by the reduction in ARPU and a lower customer
base, partially offset by lower football content costs and a 6%*
net reduction in operating costs. The adjusted EBITDA margin was
21.3%.
Other Europe
Other Europe, which now represents 12.9% of Group service
revenue (including the newly acquired Liberty Global assets), grew
strongly at 2.7%* (Q1: 2.1%*, Q2: 3.3%*). Portugal, Greece, the
Czech Republic and Hungry grew, while Ireland declined in H1, but
returned to growth in Q2. Adjusted EBITDA grew 3.1%* following
double digit growth in H1 19, and the organic adjusted EBITDA
margin increased by 0.3* percentage points reflecting continued
strong cost control and good revenue growth. The adjusted EBITDA
margin was 32.4%
In Portugal, service revenue grew by 4.3%* (Q1: 3.2%*, Q2:
5.3%*), supported by strong customer base growth in both mobile and
fixed line. In Ireland, service revenue declined 0.1%* (Q1: -1.1%*,
Q2: 0.9%*), with the improvement in quarterly trends reflecting
better fixed line growth. In Greece, service revenue increased by
4.1%* (Q1: 3.7%*, Q2: 4.4%*) supported by growth in prepaid ARPU
and our fixed customer base.
VodafoneZiggo Joint Venture
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 returned to growth in Q1 and increased by 1.2% in
H1 (Q1: 1.5%, Q2: 0.8%). This was driven by strong fixed line
growth, partly offset by Consumer mobile. During H1 we continued to
maintain our good commercial momentum adding a record 152,000
mobile postpaid customers and 25,000 broadband RGUs. This was
supported by the success of our convergence strategy. In Q2 we
reached the milestone of 2 million converged SIMs. 74% of all
Vodafone Consumer mobile postpaid SIMs and 39% of broadband
customers are now converged.
Adjusted EBITDA grew by 2.3% in H1 supported by growing revenues
and a stable cost base year-on-year. We continued to make good
progress on integrating the business and have now achieved over 75%
of our cost and capex synergy target of EUR210 million by 2020.
Given our good performance year to date, we have narrowed our
calendar 2020 full year guidance to the higher end of the previous
range. As a result, we now expect to grow adjusted EBITDA by 3%
(previously 2-3%) and total cash returns to shareholders are
expected to be around EUR600 million (previously EUR400-600
million).
During H1, Vodafone received EUR62.5 million in dividends from
the joint venture, as well as EUR11 million in interest
payments.
Rest of the World ('RoW')(1)
Other
Vodacom markets Eliminations RoW Reported Organic*
EURm EURm EURm EURm % %
--------------------------------- ------- -------- ------------ ------- -------- --------
30 September 2019
Mobile customer revenue 1,880 1,476 - 3,356
Mobile incoming revenue 81 211 - 292
Other service revenue 122 79 - 201
--------------------------------- ------- -------- ------------ -------
Mobile service revenue 2,083 1,766 - 3,849
Fixed service revenue 134 258 - 392
--------------------------------- ------- -------- ------------ ------- -------- --------
Service revenue 2,217 2,024 - 4,241 1.2 7.7
Other revenue 517 327 - 844
--------------------------------- ------- -------- ------------ ------- -------- --------
Revenue 2,734 2,351 - 5,085 (1.8) 4.5
Direct costs (433) (764) - (1,197)
Customer costs (570) (318) - (888)
Operating expenses (712) (514) - (1,226)
--------------------------------- ------- -------- ------------ ------- -------- --------
Adjusted EBITDA 1,019 755 - 1,774 1.8 7.8
Depreciation and amortisation:
Acquired intangibles (39) (11) - (50)
Purchased licences (5) (33) - (38)
Other (342) (228) - (570)
-------------------------------- ------- -------- ------------ ------- -------- --------
Adjusted EBIT 633 483 - 1,116 8.8 10.0
Share of adjusted results
in associates and joint
ventures 123 (713) - (590)
--------------------------------- ------- -------- ------------ ------- -------- --------
Adjusted operating profit 756 (230) - 526 (46.7) 13.8
--------------------------------- ------- -------- ------------ ------- -------- --------
Adjusted EBITDA margin 37.3% 32.1% 34.9%
--------------------------------- ------- -------- ------------ -------
30 September 2018 (restated)(1)
--------------------------------- ------- -------- ------------ -------
Mobile customer revenue 1,889 1,393 - 3,282
Mobile incoming revenue 84 205 - 289
Other service revenue 103 73 - 176
--------------------------------- ------- -------- ------------ -------
Mobile service revenue 2,076 1,671 - 3,747
Fixed service revenue 123 319 - 442
--------------------------------- ------- -------- ------------ -------
Service revenue 2,199 1,990 - 4,189
Other revenue 519 469 - 988
--------------------------------- ------- -------- ------------ -------
Revenue 2,718 2,459 - 5,177
Direct costs (389) (774) - (1,163)
Customer costs (589) (477) - (1,066)
Operating expenses (670) (535) - (1,205)
--------------------------------- ------- -------- ------------ -------
Adjusted EBITDA 1,070 673 - 1,743
Depreciation and amortisation:
Acquired intangibles (41) (12) - (53)
Purchased licences (2) (35) - (37)
Other (335) (292) - (627)
-------------------------------- ------- -------- ------------ -------
Adjusted EBIT 692 334 - 1,026
Share of adjusted results
in associates and joint
ventures 105 (145) - (40)
--------------------------------- ------- -------- ------------ -------
Adjusted operating profit 797 189 - 986
--------------------------------- ------- -------- ------------ -------
Adjusted EBITDA margin 39.4% 27.4% 33.7%
--------------------------------- ------- -------- ------------ -------
Change at constant exchange rates (%)
----------------------------------------------------
Mobile customer revenue 1.2 7.4
Mobile incoming revenue (2.5) 5.5
Other service revenue 21.3 8.6
--------------------------------- ------- --------
Mobile service revenue 2.0 7.2
Fixed service revenue 9.0 (18.2)
--------------------------------- ------- --------
Service revenue 2.4 3.1
Other revenue 2.4 (24.2)
--------------------------------- ------- --------
Revenue 2.4 (1.8)
Direct costs 12.3 1.2
Customer costs (0.3) (26.8)
Operating expenses 7.0 (2.3)
--------------------------------- ------- --------
Adjusted EBITDA (2.7) 11.4
Depreciation and amortisation:
Acquired intangibles - -
Purchased licences 176.5 (6.9)
Other 3.0 (20.6)
-------------------------------- ------- --------
Adjusted EBIT (6.2) 40.6
Share of adjusted results
in associates and joint
ventures 12.7 361.3
--------------------------------- ------- --------
Adjusted operating profit (3.6) (221.3)
--------------------------------- ------- --------
Adjusted EBITDA margin
(pps) (2.0) 3.8
--------------------------------- ------- --------
Other activity
Reported (including Foreign Organic*
change M&A) exchange change
% pps pps %
------------------------------ -------- -------------- -------- --------
RoW revenue (1.8) 4.1 2.2 4.5
------------------------------ -------- -------------- -------- --------
Service revenue
Vodacom 0.8 - 1.6 2.4
Other markets 1.7 12.3 1.4 15.4
RoW service revenue 1.2 4.9 1.6 7.7
------------------------------ -------- -------------- -------- --------
Adjusted EBITDA
Vodacom (4.8) 2.7 2.1 -
Other markets 12.2 11.3 (0.8) 22.7
RoW adjusted EBITDA 1.8 5.0 1.0 7.8
------------------------------ -------- -------------- -------- --------
RoW adjusted EBIT 8.8 0.4 0.8 10.0
------------------------------ -------- -------------- -------- --------
RoW adjusted operating profit (46.7) 59.7 0.8 13.8
------------------------------ -------- -------------- -------- --------
Notes:
1. The Group's results for the six months ended 30 September 2018
have been re-presented on an IFRS 15 basis. 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. For the six months ended 30 September 2019, a revised
definition for adjusted EBITDA has been applied. This restricts
the period-on-period comparability of certain of the Group's
alternative performance measures. See "Alternative performance
measures" on page 46 for more information and reconciliations
to the closest respective equivalent GAAP measure and "Definition
of terms" on page 56 for further details.
Vodacom
Vodacom Group service revenue grew 2.4%* (Q1: 1.1%*, Q2: 3.6%*)
with trends in South Africa accelerating in Q2 despite regulatory
and macro pressures, and continued strong growth in Vodacom's
International operations.
In South Africa, service revenue increased 0.3%* (Q1: -1.2%*,
Q2: 1.8%*) or 1.5%* (Q1: -1.2%*, Q2: 4.2%*) excluding a one-off
benefit in the prior year. This was achieved amid a weak
macroeconomic environment, in which customers are optimising their
spend. In March, new regulation was introduced affecting
out-of-bundle charges, rollover and the transfer of data. We also
commenced a pro-active data pricing transformation, which included
a 50% reduction in out-of-bundle rates. All of these factors
weighed on data revenue growth in H1. Despite these headwinds,
trends in Q2 improved with data traffic growth accelerating to 54%
year-on-year as customers benefited from improved pricing. Service
revenue returned to growth in Q2, reflecting the improvement in
data trends combined with the full transition of a new wholesale
roaming agreement onto our network. We added 1.1 million prepaid
customers and 192,000 contract customers in the period, taking our
total mobile customer base to 48.0 million.
Vodacom's International operations outside of South Africa grew
by 9.1%* (Q1: 8.6%*, Q2: 9.7%*). Growth was strong across all of
our markets, supported by the growing demand for mobile data and
M-Pesa services. In total we added 2.0 million customers in H1, up
5.4% year on year to 36.6 million, despite new customer
registration requirements in Tanzania.
Vodacom's adjusted EBITDA was flat and the organic adjusted
EBITDA margin declined by 0.9* percentage points reflecting cost
inflation, subdued revenue growth in South Africa, and the impact
of higher roaming costs. The adjusted EBITDA margin was 37.3%.
Other Markets - Turkey
Service revenues increased by 18.6%* (Q1: 17.2%*, Q2: 19.8%*)
supported by strong customer contract ARPU, increased mobile data
revenue, and fixed line customer base growth. Adjusted EBITDA grew
32.6%* and the organic adjusted EBITDA margin increased by 5.7*
percentage points driven by strong revenue growth ahead of
inflation and lower commercial costs. The adjusted EBITDA margin
was 26.7%.
Other Markets - Egypt
Egypt service revenue grew 14.7%* (Q1: 13.6%*, Q2: 15.6%*),
supported by strong customer base growth and increased data usage.
Adjusted EBITDA grew 20.7%* and the organic adjusted EBITDA margin
increased by 2.1* percentage points reflecting revenue growth ahead
of inflation and good cost control. The adjusted EBITDA margin was
47.4%.
Vodafone Idea
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. As the Group has no obligation to fund VIL losses,
the Group has recognised its share of estimated Vodafone Idea
Limited ("VIL") losses arising from both its operating activities
and those in relation to the AGR judgement to an amount that is
limited to the remaining carrying value of VIL, which is therefore
reduced to EURnil. If the carrying value had been high enough not
to have restricted the Group's share of losses, then the recognised
share of losses would have been substantially higher.
See notes 9 and 13 in the unaudited condensed consolidated
financial statements for further information on the carrying values
of VIL and Indus and the Group's exposure to the crystallisation of
certain contingent liabilities relating to Vodafone India and Idea
Cellular at the time of the merger, including those relating to the
AGR judgement.
Group results
Revenue
Group revenue increased by EUR0.1 billion from EUR21.8 billion
to EUR21.9 billion.
Group service revenue increased by EUR0.3 billion to EUR18.5
billion, representing growth of 0.3%* on an organic basis. Growth
of 7.7%* in the Rest of the World was offset by a 1.6%* decline in
Europe.
Adjusted EBITDA
Group adjusted EBITDA increased by EUR0.2 billion to EUR7.1
billion, representing growth of 1.4%* on an organic basis.
Adjusted EBIT
Adjusted EBIT excludes certain income and expenses that we have
identified separately to allow their effect on the results of the
Group to be assessed. The items that are included in statutory
operating profit but are excluded from adjusted EBIT are discussed
below.
Adjusted EBIT increased by EUR0.1 billion to EUR2.2 billion,
stable year-on-year on an organic basis.
Operating profit
The Group reported an operating profit of EUR0.6 billion for the
six months ended 30 September 2019, compared to an operating loss
of EUR2.0 billion in the six months ended 30 September 2018. The
primary reasons for the EUR2.6 billion improvement are that no
impairment losses have been incurred in the current year (2018:
EUR3.5 billion in respect of the Group's investments in Spain,
Vodafone Idea and Romania), which is partially offset by increased
losses incurred in the current year by Vodafone Idea (see notes 9
and 13 in the unaudited condensed consolidated financial statements
for further information).
The Group's share of adjusted results in associates and joint
ventures was a loss of EUR0.6 billion (30 September 2018:
EURnil).
Restructuring costs increased by EUR0.1 billion in the period
and the amortisation of intangible assets in relation to customer
bases and brands decreased by EUR0.1 billion.
Adjusted other income and expense was a EUR0.9 billion charge
(30 September 2018: EUR0.3 billion charge), primarily due to losses
incurred in Vodafone Idea Limited (see notes 9 and 13), offset by
the profit recognised on the disposal of Vodafone New Zealand of
EUR1.1 billion.
Net financing costs
Six months ended
30 September
-----------------------
2019 2018
EURm EURm
----------------------------------------------------- ------------- --------
Adjusted net financing costs (799) (415)
Adjustments for:
Mark to market gains/(losses) 21 (185)
Foreign exchange losses(1) (147) (215)
Interest on lease liabilities (163) -
----------------------------------------------------- ------------- --------
Net financing costs (1,088) (815)
----------------------------------------------------- ------------- --------
Note:
1. Primarily comprises foreign exchange rate differences reflected
in the Income Statement in relation to sterling and US dollar balances.
Adjusted net financing costs increased reflecting financing
costs related to the Liberty Global transaction as well as adverse
interest rate movements on borrowings in 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
Six months ended
30 September
----------------------
2019 2018
(restated)(1)
EURm EURm
--------------------------------------------------- ------- -------------
Income tax expense: (1,380) (1,420)
Tax on adjustments to derive adjusted profit
before tax (82) (64)
Deferred tax following revaluation of investments
in Luxembourg - (159)
Reduction in deferred tax following rate change
in Luxembourg 868 -
Deferred tax on use of Luxembourg losses in
the period 200 185
Derecognition of a deferred tax asset in Spain - 1,048
--------------------------------------------------- ------- -------------
Adjusted income tax expense for calculating
adjusted tax rate (394) (410)
--------------------------------------------------- ------- -------------
Loss before tax (511) (2,847)
Adjustments to derive adjusted profit before
tax(2) 1,393 4,566
--------------------------------------------------- ------- -------------
Adjusted profit before tax(3) 882 1,719
Share of adjusted results in associates and
joint ventures 550 8
--------------------------------------------------- ------- -------------
Adjusted profit before tax for calculating
adjusted effective tax rate 1,432 1,727
--------------------------------------------------- ------- -------------
Adjusted effective tax rate(3) 27.5% 23.7%
--------------------------------------------------- ------- -------------
Notes:
1. Revenue for the comparative period has been revised for the allocation
of, and timing of recognition for, equipment and service revenue
compared to amounts previously disclosed in the condensed consolidated
financial statements for the six months ended 30 September 2018.
As a result, total income tax expense increased by EUR11 million.
2. See "Adjusted earnings per share" on page 19.
3. Adjusted profit before tax and adjusted effective tax are alternative
performance measures. Alternative performance measures 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 46 for further details.
The Group's adjusted effective tax rate for its controlled
businesses for the six months ended 30 September 2019 was 27.5%
compared to 23.7% for the same period during the last financial
year. The higher rate in the current year is primarily due to the
change in the Group's mix of profits following the acquisition of
Liberty Global assets as well as the effects of de-recognising our
deferred tax asset in Spain in the prior period.
We expect the Group's underlying medium term adjusted effective
tax rate, including for the full year, to be in the mid-20s, as a
result of the completion of the acquisition of Liberty Global
assets, as well as the effects of writing off our deferred tax
asset in Spain in the prior period.
The Group's adjusted effective tax rate for both years does not
include the following items: a reduction in our deferred tax assets
in Luxembourg of EUR868 million following a reduction in the
Luxembourg corporate tax rate and deferred tax on the use of
Luxembourg losses of EUR200 million (2018: EUR185 million). The
last item 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.
The Group's adjusted effective tax rate for the six months ended
30 September 2018 does not include the derecognition of a deferred
tax asset in Spain of EUR1,048 million or an increase in the
deferred tax asset of EUR159 million arising from a revaluation of
investments based upon the local GAAP financial statements and tax
returns.
Adjusted earnings per share
Adjusted earnings per share, which excludes impairment losses,
was 0.85 eurocents compared to 4.28 eurocents for the six months
ended 30 September 2018, a decrease of 80%.
Basic loss per share was 7.24 eurocents, compared to a loss per
share of 28.89 eurocents for the half year ended 30 September 2018.
The decrease in the loss per share is primarily due to lower
impairment charges and the profit on the disposal of Vodafone New
Zealand, which have been excluded from adjusted earnings per
share.
Six months ended
30 September
------------------------
2019 2018
(restated)(1)
EURm EURm
----------------------------------------------- --------- -------------
Adjusted operating profit 1,681 2,134
----------------------------------------------- --------- -------------
Adjusted net financing costs (799) (415)
Adjusted income tax expense for calculating
adjusted tax rate (394) (410)
Adjusted non-controlling interests (238) (133)
----------------------------------------------- --------- -------------
Adjusted profit attributable to owners of the
parent 250 1,176
----------------------------------------------- --------- -------------
Adjustments:
Impairment loss - (3,495)
Amortisation of acquired customer base and
brand intangible assets (232) (317)
Restructuring costs (163) (95)
Adjusted other income and expense (872) (256)
Non-operating income and expense - (3)
Mark to market gains/(losses)(2) 21 (185)
Foreign exchange losses(2) (147) (215)
----------------------------------------------- --------- -------------
(1,393) (4,566)
---------------------------------------------- --------- -------------
Taxation(3) (986) (1,010)
India(4) - (3,535)
Non-controlling interests 1 1
----------------------------------------------- --------- -------------
Loss attributable to owners of the parent (2,128) (7,934)
----------------------------------------------- --------- -------------
Million Million
---------------------------------------------- --------- -------------
Weighted average number of shares outstanding
- basic(5) 29,410 27,462
----------------------------------------------- --------- -------------
Earnings per share eurocents eurocents
----------------------------------------------- --------- -------------
Loss per share (7.24c) (28.89c)
Adjusted earnings per share 0.85c 4.28c
----------------------------------------------- --------- -------------
Notes:
1. Revenue for the comparative period has been revised for the allocation
of, and timing of recognition for, equipment and service revenue
compared to amounts previously disclosed in the condensed consolidated
financial statements for the six months ended 30 September 2018.
The loss attributable to owners of the parent decreased by EUR31
million.
2. The 2018 adjusted earnings per share has been aligned to the
2019 presentation which excludes all mark-to-market and foreign
exchange (gains)/losses. The net impact of this decreased the
adjusted loss attributable to the owners of the parent by EUR166
million and increased adjusted earnings per share by 0.61 eurocents.
3. See Taxation on page 18.
4. Primarily relates to the loss on disposal of Vodafone India and
also includes the operating results, financing, tax and other
gains and losses of Vodafone India prior to becoming a joint
venture in the prior year.
5. Weighted average number of shares outstanding includes a weighted
impact of 2,594 million shares (September 2018: 765 million shares)
following the issue in March 2019 of GBP1.72 billion mandatory
convertible bonds with a 2 year maturity date in 2021 and GBP1.72
billion with a 3 year maturity date in 2022 (September 2018:
GBP1.4 billion of mandatory convertible bonds issued in February
2016 and maturing in February 2019).
LIQUIDITY AND CAPITAL RESOURCES
Cash flows and funding
Six months ended 30 September
-------------------------------
2019 2018
(restated)(1)
EURm EURm
----------------------------------------------- ------------ -----------------
Adjusted EBITDA 7,105 6,915
Capital additions(2) (3,000) (3,067)
Working capital (2,952) (2,362)
Disposal of property, plant and equipment 21 4
Other 221 48
------------------------------------------------ ------------ -----------------
Operating free cash flow(3) 1,395 1,538
Taxation paid (483) (395)
Dividends received from associates and
investments 63 305
Dividends paid to non-controlling shareholders
in subsidiaries (169) (185)
Interest received and paid (412) (369)
------------------------------------------------ ------------ -----------------
Free cash flow (pre-spectrum)(3) 394 894
Licence and spectrum payments (58) (231)
Restructuring payments (302) (97)
------------------------------------------------ ------------ -----------------
Free cash flow(3) 34 566
Acquisitions and disposals (16,715) 168
Equity dividends paid (1,092) (2,736)
Share buybacks(4) (1,094) -
Foreign exchange 67 296
Other(5) (2,274) (773)
------------------------------------------------ ------------ -----------------
Net debt increase (21,074) (2,479)
Opening net debt (27,033) (29,631)
------------------------------------------------ ------------ -----------------
Closing net debt (48,107) (32,110)
------------------------------------------------ ------------ -----------------
Notes:
1. Revenue for the comparative period has been revised for the allocation
of, and timing of recognition for, equipment and service revenue
compared to amounts previously disclosed in the condensed consolidated
financial statements for the six months ended 30 September 2018.
Adjusted EBITDA increased by EUR42 million.
2. Capital additions include the purchase of property, plant and
equipment and intangible assets, other than licence and spectrum,
during the period.
3. Operating free cash flow, free cash flow (pre-spectrum) 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. For the six months ended 30 September
2019, a revised definition of adjusted EBITDA has been applied.
This restricts the period-on-period comparability of certain
of the Group's alternative performance measures. See "Alternative
performance measures" on page 46 for more information and reconciliations
to the closest respective equivalent GAAP measure and "Definition
of terms" on page 56 for further details.
4. Share buybacks includes EUR273 million of cash outflow from the
option structure relating to the issue of the mandatory convertible
bond in February 2016. The option structure was intended to ensure
that the total cash outflow to execute the programme was broadly
equivalent to the EUR1.44 billion raised on issuing the second
tranche.
5. "Other" for the six months ended 30 September 2019 includes EUR1,559
million of debt in relation to licences and spectrum in Germany.
"Other" for the six months ended 30 September 2018 included EUR808
million of debt in relation to licences and spectrum in Italy
and Spain and a EUR1,377 million capital injection into Vodafone
Idea Limited offset by EUR2,135 million received from the repayment
of US$2.5 billion of loan notes issued by Verizon Communications
Inc.
Operating free cash flow decreased EUR0.1 billion, primarily due
to higher working capital cash outflows.
Free cash flow (pre-spectrum) was EUR0.4 billion, a decrease of
EUR0.5 billion, largely driven by the decrease in operating free
cash flow, increase in taxation and lower dividends received from
associates and investments.
Acquisitions and disposals include EUR2.0 billion received on
completion of the sale of Vodafone New Zealand on 31 July 2019. It
also includes an amount of EUR10.3 billion paid on completion of
the acquisition of the Liberty Global assets on 31 July 2019 and
acquired net debt of EUR8.2 billion.
Closing net debt at 30 September 2019 was EUR48.1 billion (31
March 2019: EUR27.0 billion) and excludes the GBP3.44 billion (31
March 2019: GBP3.44 billion) mandatory convertible bond issued in
February 2019, which will be settled in equity shares, EUR10.5
billion (31 March 2019: EURnil) of lease liabilities recognised
under IFRS 16, the EUR1.3 billion (31 March 2019: EURnil) loan
specifically secured against Indian assets and EUR0.8 billion (31
March 2019: EUR0.8 billion) of shareholder loans receivable from
VodafoneZiggo.
The Group's gross and net debt includes certain bonds which have
been designated in hedge relationships, which are carried at EUR1.7
billion higher (31 March 2019: EUR1.6 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 are not reflected in gross debt and would
decrease the euro equivalent redemption value of the bonds by
EUR1.6 billion (31 March 2019: EUR1.0 billion).
Analysis of net debt
30 September 31 March
2019 2019
EURm EURm
---------------------------------------------------- ------------ --------
Bonds (50,013) (44,492)
Commercial paper(1) (708) (873)
Bank loans (2,990) (3,000)
Cash collateral liabilities (2,699) (2,011)
Other borrowings (3,841) (2,579)
Borrowings included in net debt (60,251) (52,955)
Cash and cash equivalents 5,866 13,637
Other financial instruments:
Mark to market derivative financial instruments(2) 1,310 1,190
Short term investments(3) 4,968 11,095
---------------------------------------------------- ------------ --------
Total cash and cash equivalents and other financial
instruments 12,144 25,922
----------------------------------------------------- ------------ --------
Net debt(4) (48,107) (27,033)
----------------------------------------------------- ------------ --------
Lease liabilities (10,493) -
Bank borrowings secured against Indian assets (1,323) -
----------------------------------------------------- ------------ --------
Borrowings excluded from net debt (11,816) -
----------------------------------------------------- ------------ --------
Notes:
1. At 30 September 2019, US$498 million (31 March 2019: US$ nil)
was drawn under the US commercial paper programme and EUR251
million (31 March 2019: EUR873 million) was drawn under the euro
commercial paper programme.
2. Comprises mark-to-market adjustments on derivative financial
instruments which are included as a component of trade and other
(payables)/receivables.
3. Comprises EUR2,720 million (31 March 2019: EUR4,690 million)
of bonds and debt securities, including German government bonds
of EUR987 million (31 March 2019: EUR955 million), UK gilts and
Japanese government bonds of EURnil (31 March 2019: EUR2,056
million) and EUR1,731 million (31 March 2019: EUR1,184 million)
of other assets both paid as collateral in relation to derivative
financial instruments and EUR2,248 million (31 March 2019: EUR6,405
million) of managed investment funds.
4. Net debt 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 measures.
The following table sets out the Group's undrawn committed bank
facilities:
30 September
2019
Maturity EURm
------------------------------------------ -------------- ------------
US$4.2 billion committed revolving credit
facility(1) February 2022 3,820
EUR3.9 billion committed revolving credit
facility(1) January 2024 3,920
Other committed credit facilities Various 209
------------------------------------------ -------------- ------------
Undrawn committed facilities 7,949
---------------------------------------------------------- ------------
Note:
1. Both facilities support US and euro commercial paper programmes
of up to US$15 billion and EUR8 billion respectively.
2. EUR0.1 billion/US$0.1 billion of the facilities expire one year
ahead of maturity.
Post employment benefits
During the six months ended 30 September 2019, the net deficit
arising from the Group's obligations in respect of its defined
benefit schemes increased to EUR0.6 billion compared to EUR0.5
billion at 31 March 2019 primarily due to a EUR0.8 billion increase
in scheme obligations during the period arising from a decrease in
the discount rate in the UK and Eurozone being offset by a EUR0.7
billion actuarial gain arising from an increase in the value of
plan assets.
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: 4.84 eurocents). The ex-dividend date for the
interim dividend is 28 November 2019 for ordinary shareholders, the
record date is 29 November 2019 and the dividend is payable on 7
February 2020. Dividend payments on ordinary shares will be paid
directly into a nominated bank or building society account.
RISK FACTORS
There are a number of key factors and uncertainties that could
have a significant effect on the Group's financial performance,
including the following:
1. Cyber threat and information security
An external cyber-attack, insider threat or supplier breach
could cause service interruption or the loss of confidential data,
leading to major customer, financial, reputational and regulatory
impact across all the Group's markets.
2. Adverse political and regulatory measures
Operating across many markets and jurisdictions means the Group
deals with a variety of complex political and regulatory
landscapes. In all of these environments, the Group faces changes
in taxation, political or regulatory intervention and potential
competitive disadvantage, including when participating in spectrum
auctions.
3. Global economic disruption/adequate liquidity
As a multinational business, the Group operates in many
countries and currencies and could be impacted by changes to global
economic conditions. Any major economic disruption could result in
reduced spending power for consumers, impacting the Group's
liquidity and ability to access capital markets. A relative
strengthening or weakening of the major currencies in which the
Group transacts could also impact its profitability.
4. Geo-political risk in supply chain
The Group operates and develops a complex infrastructure across
a number of markets. The network and systems are dependent on a
wide range of suppliers internationally. The Group, as well as the
wider industry, must be able to execute its plans, or face
potential delays to crucial network improvements in addition to
increased costs.
5. Digital transformation and simplification
A major transformation plan is currently underway to evolve the
Group into a 'Digital First' company with an aim to deliver
world-class customer experience, increase speed to market and
increased operational efficiencies through automation and AI.
Failure to do this could lead to missed commercial opportunities,
increased costs and customer experience issues.
6. Market disruption
New entrants to markets, or competitors with lean models, could
create pricing pressure. An increase in unlimited bundles could
lead to price erosion, which might affect profitability in the
short to medium term.
7. Technology resilience
The loss of a technology site could result in a major impact on
the Group's customers, revenues and reputation. This covers mobile
and fixed sites, as well as data centres. The Group operates a
resilience programme that also extends to wider service platforms,
including television and payments.
8. Successful integration of new assets and management of joint ventures
The Group is currently undertaking a large-scale integration of
new assets across multiple markets. Failure to complete it in a
timely and efficient manner would prevent the realisation of the
planned benefits and synergies or result in delays bearing
additional costs. A successful integration requires the timely
migration of an important number of technology platforms/services
before the transitional services agreements expire. The Group also
has a number of joint ventures in operation and must apply the
right level of oversight to ensure these operate in a
cost-effective manner.
9. Legal compliance
The Group must comply with a multitude of local and
international laws. These include, but are not limited to, laws
relating to: privacy; anti-money laundering; competition;
anti-bribery; and economic sanctions. Failure to comply with these
laws could lead to reputational damage, financial penalties and/or
suspension of the Group's licence to operate.
10. Disintermediation
The Group faces 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. It is important to be able to keep pace
with these new developments and competitors in changing markets
while maintaining high levels of customer engagement and an
excellent customer experience.
Brexit implications
The Board continues to keep the implications of Brexit for
Vodafone's operations under review.
A cross-functional Brexit steering committee continues to
operate. This steering committee has identified the impact of
Brexit on the Group's operations and produced a comprehensive
mitigation plan. The terms of the UK's exit from the EU, and the
future relationship, remain uncertain.
Due to this current uncertainty, Vodafone is prepared for a no
deal scenario, as this was judged to have the most potential for
disruption.
Although we are a UK headquartered company, a very large
majority of our customers are in other countries, accounting for
most of our revenue and cash flow. Each of our national operating
companies is a stand-alone business, incorporated and licensed in
the jurisdiction in which it operates, and 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 Brexit. We
are not a major international trading company, and do not use
passporting for any of our major services or processes.
Depending on the arrangements agreed between the UK and the EU,
the key issue that could directly impact our operational
performance is a significant revision to macro economic performance
in our major European markets, including the UK, caused by the
uncertainty of the Brexit process. This would affect the economic
climate in which we operate, and in turn impact the performance of
the operating companies in those markets.
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/board
By Order of the Board
Rosemary Martin
Group General Counsel and Company Secretary
12 November 2019
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated income statement
Six months ended 30 September
-------------------------------
2019 2018
(restated)(1)
Note EURm EURm
------------------------------------------------ ---- ------------ -----------------
Revenue 2 21,939 21,848
Cost of sales (15,010) (15,173)
------------------------------------------------ ---- ------------ -----------------
Gross profit 6,929 6,675
Selling and distribution expenses (1,883) (1,907)
Administrative expenses (2,590) (2,425)
Net credit losses on financial assets (302) (356)
Share of results of equity accounted
associates and joint ventures (2,601) (430)
Impairment loss 3 - (3,495)
Other income and expense 1,024 (91)
------------------------------------------------ ---- ------------ -----------------
Operating profit/(loss) 2 577 (2,029)
Non-operating income and expense - (3)
Investment income 281 184
Financing costs (1,369) (999)
------------------------------------------------ ---- ------------ -----------------
Loss before taxation (511) (2,847)
Income tax expense 4 (1,380) (1,420)
------------------------------------------------ ---- ------------ -----------------
Loss for the financial period from continuing
operations (1,891) (4,267)
Loss for the financial period from discontinued
operations 5 - (3,535)
------------------------------------------------ ---- ------------ -----------------
Loss for the financial period (1,891) (7,802)
------------------------------------------------ ---- ------------ -----------------
Attributable to:
- Owners of the parent (2,128) (7,934)
- Non-controlling interests 237 132
------------------------------------------------ ---- ------------ -----------------
Loss for the financial period (1,891) (7,802)
------------------------------------------------ ---- ------------ -----------------
Loss per share
From continuing operations:
- Basic 6 (7.24c) (16.02c)
- Diluted 6 (7.24c) (16.02c)
Total Group:
- Basic 6 (7.24c) (28.89c)
- Diluted 6 (7.24c) (28.89c)
------------------------------------------------ ---- ------------ -----------------
Consolidated statement of comprehensive
income
Six months ended 30 September
-------------------------------
2019 2018
(restated)(1)
EURm EURm
------------------------------------------------ ---- ------------ -----------------
Loss for the financial period (1,891) (7,802)
Other comprehensive income:
Items that may be reclassified to the
income statement in subsequent periods
Foreign exchange translation differences,
net of tax (222) (823)
Foreign exchange (losses)/gains transferred
to the income statement (59) 2,079
Other, net of tax (302) (144)
------------------------------------------------ ---- ------------ -----------------
Total items that may be reclassified
to the income statement in subsequent
periods (583) 1,112
Items that will not be reclassified
to the income statement in subsequent
periods
Net actuarial gains/(losses) on defined
benefit pension schemes, net of tax (65) 208
------------------------------------------------ ---- ------------ -----------------
Total items that will not be reclassified
to the income statement in subsequent
periods (65) 208
Other comprehensive (expense)/income (648) 1,320
------------------------------------------------ ---- ------------ -----------------
Total comprehensive expense for the
financial period (2,539) (6,482)
------------------------------------------------ ---- ------------ -----------------
Attributable to:
- Owners of the parent (2,809) (6,613)
- Non-controlling interests 270 131
------------------------------------------------ ---- ------------ -----------------
(2,539) (6,482)
------------------------------------------------ ---- ------------ -----------------
Note:
1. Revenue for the comparative period has been revised for the allocation
of, and timing of recognition for, equipment and service revenue
compared to amounts previously disclosed in the condensed consolidated
financial statements for the six months ended 30 September 2018.
Revenue increased by EUR52 million and the loss for the financial
period decreased by EUR31 million and the total comprehensive
expense for the financial period reduced by EUR24 million. The
comparative period results have not been restated for IFRS 16,
Leases (see note 1).
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
Consolidated statement of financial
position
30 September 31 March
2019 2019(1)
Note EURm EURm
--------------------------------------- ---- ------------ ---------
Non-current assets
Goodwill 34,365 23,353
Other intangible assets 23,628 17,652
Property, plant and equipment 39,701 27,432
Investments in associates and joint
ventures 9 2,237 3,952
Other investments 872 870
Deferred tax assets 23,938 24,753
Post-employment benefits 134 94
Trade and other receivables 7,426 5,170
--------------------------------------- ---- ------------ ---------
132,301 103,276
--------------------------------------- ---- ------------ ---------
Current assets
Inventory 698 714
Taxation recoverable 182 264
Trade and other receivables 12,959 12,190
Other investments 7,113 13,012
Cash and cash equivalents 5,866 13,637
--------------------------------------- ---- ------------ ---------
26,818 39,817
--------------------------------------- ---- ------------ ---------
Assets held for sale 5 849 (231)
--------------------------------------- ---- ------------ ---------
Total assets 159,968 142,862
--------------------------------------- ---- ------------ ---------
Equity
Called up share capital 4,797 4,796
Additional paid-in capital 152,576 152,503
Treasury shares (7,809) (7,875)
Accumulated losses (120,337) (116,725)
Accumulated other comprehensive income 28,838 29,519
--------------------------------------- ---- ------------ ---------
Total attributable to owners of the
parent 58,065 62,218
--------------------------------------- ---- ------------ ---------
Non-controlling interests 1,220 1,227
--------------------------------------- ---- ------------ ---------
Total non-controlling interests 1,220 1,227
--------------------------------------- ---- ------------ ---------
Total equity 59,285 63,445
--------------------------------------- ---- ------------ ---------
Non-current liabilities
Long-term borrowings 63,319 48,685
Deferred tax liabilities 2,289 478
Post-employment benefits 687 551
Provisions 1,259 1,242
Trade and other payables 5,158 2,938
--------------------------------------- ---- ------------ ---------
72,712 53,894
--------------------------------------- ---- ------------ ---------
Current liabilities
Short-term borrowings 8,748 4,270
Financial liabilities under put option
arrangements 1,880 1,844
Taxation liabilities 651 596
Provisions 938 1,160
Trade and other payables 15,422 17,653
--------------------------------------- ---- ------------ ---------
27,639 25,523
--------------------------------------- ---- ------------ ---------
Liabilities held for sale 5 332 -
--------------------------------------- ---- ------------ ---------
Total equity and liabilities 159,968 142,862
--------------------------------------- ---- ------------ ---------
Note:
1. The comparative period results have not been restated for IFRS
16, Leases (see note 1).
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 2018 4,796 150,197 (8,463) (76,630) 69,900 1,043 70,943
Issue or reissue
of shares - 1 83 (84) - - -
Share-based payments - 109 - - 109 23 132
Transactions with
non-controlling
interests in subsidiaries - - - (120) (120) (72) (192)
Comprehensive (expense)/income - - - (6,613) (6,613) 131 (6,482)
Dividends - - - (2,729) (2,729) (198) (2,927)
------------------------------- -------- ----------- -------- -------------- ------------- ------------ -------
30 September 2018
(restated)(3) 4,796 150,307 (8,380) (86,176) 60,547 927 61,474
------------------------------- -------- ----------- -------- -------------- ------------- ------------ -------
31 March 2019 as
reported 4,796 152,503 (7,875) (87,206) 62,218 1,227 63,445
Adoption of IFRS
16(4) - - - (261) (261) 4 (257)
------------------------------- -------- ----------- -------- -------------- ------------- ------------ -------
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
------------------------------- -------- ----------- -------- -------------- ------------- ------------ -------
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.
3. Revenue for the comparative period has been revised for the allocation
of, and timing of recognition for, equipment and service revenue
compared to amounts previously disclosed in the condensed consolidated
financial statements for the six months ended 30 September 2018.
As a result, accumulated comprehensive losses at 30 September
2018 decreased by EUR98 million and total equity increased by
EUR98 million.
4. See note 1.
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
Consolidated statement of cash flows
Six months ended 30
September
---------------------
2019 2018
Note EURm EURm
----------------------------------------------- ---- ----------- --------
Inflow from operating activities 10 6,139 4,826
----------------------------------------------- ---- ----------- --------
Cash flow from investing activities
Purchase of interests in subsidiaries,
net of cash acquired 8 (10,202) (62)
Purchase of interests in associates and
joint ventures (1,413) -
Purchase of intangible assets (1,002) (1,220)
Purchase of property, plant and equipment (2,769) (2,897)
Purchase of investments (239) (2,287)
Disposal of interests in subsidiaries,
net of cash disposed 8 2,049 (395)
Disposal of property, plant and equipment 21 4
Disposal of investments 6,043 2,156
Dividends received from associates and
joint ventures 63 305
Interest received 183 236
Cash flows from discontinued operations - (372)
----------------------------------------------- ---- ----------- --------
Outflow from investing activities (7,266) (4,532)
----------------------------------------------- ---- ----------- --------
Cash flows from financing activities
Issue of ordinary share capital and reissue
of treasury shares - 4
Net movement in short-term borrowings 815 318
Proceeds from issue of long term borrowings 9,107 10,118
Repayment of borrowings (13,277) (4,557)
Purchase of treasury shares (821) -
Equity dividends paid (1,092) (2,736)
Dividends paid to non-controlling shareholders
in subsidiaries (169) (185)
Other transactions with non-controlling
shareholders in subsidiaries (233) (209)
Other movements in loans with associates
and joint ventures - (9)
Interest paid(1) (1,130) (605)
Cash flows from discontinued operations - (779)
----------------------------------------------- ---- ----------- --------
(Outflow)/Inflow from financing activities (6,800) 1,360
----------------------------------------------- ---- ----------- --------
Net cash (outflow)/inflow (7,927) 1,654
Cash and cash equivalents at beginning
of the financial period(2) 13,605 5,394
Exchange gain/(loss) on cash and cash
equivalents 49 (104)
----------------------------------------------- ---- ----------- --------
Cash and cash equivalents at end of the
financial period(2) 5,727 6,944
----------------------------------------------- ---- ----------- --------
Note:
1. Interest paid includes EUR273 million (30 September 2018: EURnil)
of cash outflow on derivative financial instruments for the share
buyback relating to the second tranche of the mandatory convertible
bond issued in February 2016.
2. Includes cash and cash equivalents as presented in the statement
of financial position of EUR5,866 million (31 March 2019: EUR13,637
million), together with overdrafts of EUR139 million (31 March
2019: EUR32 million).
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
Notes to the unaudited condensed consolidated financial
statements
For the six months ended 30 September 2019
1 Basis of preparation
The unaudited condensed consolidated financial statements for
the six months ended 30 September 2019:
-- were 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 2019;
-- 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
2019, 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, with the exception
of the adoption of IFRS 16 "Leases" as set out below and revisions
to the calculation of amortisation of acquired customer base
intangible assets. From 1 April 2019, the Group has revised
the method of allocating the amortisation of acquired customer
base intangibles over their useful economic lives from a sum
of digits calculation to a straight-line basis. Customer base
assets at 1 April 2019 related to acquired joint ventures; the
revision to the allocation methodology results in a EUR82 million
reduction in losses recorded in the Group's share of results
of equity accounted associates and joint ventures for the six
months to 30 September 2019. 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. See note 8
for acquired intangible customer bases in the period;
-- 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 12 November 2019.
The information relating to the year ended 31 March 2019 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.
After reviewing the Group's budget for the remainder of the
financial year, and longer term plans, the directors are satisfied
that, at the time of approving the unaudited condensed consolidated
financial statements, it is appropriate to continue to adopt a
going concern basis of accounting.
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 reporting period. Actual results
could vary from these estimates. The 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.
New accounting pronouncements adopted
On 1 April 2019 the Group adopted new accounting policies to
comply with amendments to International Financial Reporting
Standards; the accounting pronouncement considered by the Group as
significant on adoption was IFRS 16 "Leases" as set out below.
Other IFRS changes adopted on 1 April 2019, which had also been
issued by the IASB and endorsed by the EU, have no material impact
on the consolidated results, financial position or cash flows of
the Group. Further details are provided on all changes to IFRS
impacting the Group in the Group's annual report for the year ended
31 March 2019.
IFRS 16 "Leases"
IFRS 16 "Leases" was adopted by the Group on 1 April 2019 with
the cumulative retrospective impact reflected as an adjustment to
equity on the date of adoption and therefore the comparative
information has not been restated and continues to be reported
under IAS 17 and IFRIC 4. The Group has applied the following
expedients in relation to the adoption of IFRS 16:
-- The right-of-use assets were measured at an amount based on
the lease liability at adoption, and initial direct costs incurred
when obtaining leases were excluded from this measurement.
Lease prepayments and accruals previously recognised under
IAS 17 at 31 March 2019 were added to and deducted from, respectively,
the value of the right of use assets on adoption. In determining
the cumulative retrospective impact recorded on 1 April 2019,
some of the Group's joint ventures have measured right-of-use
assets, for certain leases, as if IFRS 16 had been applied
since lease commencement; and
-- The Group impaired the right-of-use assets recognised on adoption
by the value of the provisions for onerous leases held under
IAS 37 at 31 March 2019 instead of performing a new impairment
assessment for those assets on adoption.
The key differences between the Group's IAS 17 accounting policy
(the 'previous policy' which is disclosed in the Group's Annual
Report and Accounts for the year ended 31 March 2019) and the
Group's IFRS 16 accounting policy (which is provided below), as
well as the primary impacts of applying IFRS 16 in the current
financial period are disclosed on page 32 and below.
Primary impacts of applying the IFRS 16 accounting policy
The primary impacts on the Group's financial statements, and the
key causes of the movements recorded in the consolidated statement
of financial position on 1 April 2019 (see page 32), as a result of
applying the IFRS 16 ('current') accounting policy in place of the
previous policy under IAS 17 are:
-- Under IAS 17, lessees classified leases as either operating
or finance leases. Operating lease costs were expensed on a
straight-line basis over the period of the lease. Finance leases
resulted in the recognition, in the statement of financial
position, of an asset and a corresponding liability for lease
payments, at present value. Under IFRS 16 all lease agreements give
rise to the recognition of a 'right-of-use asset' representing the
right to use the leased item and a liability for any future lease
payments (see page 32) over the 'reasonably certain' period of the
lease, which may include future lease periods for which the Group
has extension options.
-- Lessee accounting under IFRS 16 is similar to finance lease
accounting for lessees under IAS 17; lease costs are recognised in
the form of depreciation of the right-of-use asset and interest on
the lease liability which is generally discounted at the
incremental borrowing rate of the relevant Group entity, although
the interest rate implicit in the lease is used when it is more
readily determinable. Interest charges will typically be higher in
the early stages of a lease and will reduce over the term. Lease
interest costs are recorded in financing costs and associated cash
payments are classified as financing cash flows in the Group's cash
flow statement.
-- Under IFRS 16 cash inflows from operating activities and
payments classified within cash flow from financing activities both
increase, as payments made at both lease inception and subsequently
are characterised as repayments of lease liabilities and interest.
Under IAS 17 operating lease payments were treated as an operating
cash outflows. Net cash flow is not impacted by the change in
policy.
-- Lessor accounting under IFRS 16 is similar to IAS 17. The
only substantive change is that when the Group sub-leases assets it
classifies the lease out as either operating or finance leases by
reference to the terms of head lease contract whereas under IAS 17
the classification was determined by reference to the underlying
asset leased out. This has resulted in additional finance leases
out ('net investment in leases') being recognised under IFRS 16
(see page 32).
-- The expedients applied at adoption, above, have resulted in
reclassifications of lease-related prepayments, accruals and
provisions at 1 April 2019 (see page 32) to the right-of-use
assets. Where certain of the Group's joint ventures have valued
right-of-use assets as if IFRS 16 had been applied since lease
inception, this has resulted in a reduction in the value of
investments in associates and joint arrangements (see page 32).
-- During the six months ended 30 September 2018 an expense of
EUR1,714 million was charged for operating leases and depreciation
and interest of EUR25 million was charged for finance leases.
During the six months ended 30 September 2019, depreciation of
EUR1,823 million and interest of EUR163 million has been charged in
relation to leases.
IFRS 16 Accounting Policy
As a lessee
When the Group leases an asset a 'right of use asset' is
recognised for the leased item and a lease liability is recognised
for any lease payments due at the lease commencement date. The
right of use asset is initially measured at cost, being the present
value of the lease payments paid or payable, plus any initial
direct costs incurred in entering the lease and less any lease
incentives received.
Right of use assets are depreciated on a straight-line basis
from the commencement date to the earlier of the end of the asset's
useful life or the end of the lease term. The lease term is the
non-cancellable period of the lease plus any periods for which the
Group is 'reasonably certain' to exercise any extension options
(see below). The useful life of the asset is determined in a manner
consistent to that for owned property, plant and equipment (as
described in the Group's Annual Report and Accounts for the year
ended 31 March 2019). If right-of-use assets are considered to be
impaired, the carrying value is reduced accordingly.
Lease liabilities are initially measured at the value of the
lease payments that are not paid at the commencement date and are
usually discounted using the incremental borrowing rates of the
applicable Group entity (the rate implicit in the lease is used if
it is readily determinable). Lease payments included in the lease
liability include both fixed payments and in-substance fixed
payments during the term of the lease.
After initial recognition, the lease liability is recorded at
amortised cost using the effective interest method. It is
remeasured when there is a change in future lease payments arising
from a change in an index or rate (e.g. an inflation related
increase) or if the Group's assessment of the lease term changes;
any change in the lease liability as a result of these changes also
results in a corresponding change in the recorded right of use
asset.
As a lessor
Where the Group is a lessor, it determines at inception whether
the lease is a finance or an operating lease. When a lease
transfers substantially all the risks and rewards of ownership of
the underlying asset then the lease is a finance lease; otherwise,
the lease is an operating lease.
Where the Group is an intermediate lessor, the interest in the
head lease and the sub-lease is accounted for separately and the
lease classification of a sub-lease is determined by reference to
the right-of-use asset arising from the head lease.
Income from operating leases is recognised on a straight-line
basis over the lease term. Income from finance leases is recognised
in full at lease commencement.
Lease income is recognised as other revenue for transactions
that are part of the Group's ordinary activities (primarily leases
of handsets or other equipment to customers or leases of wholesale
access to the Group's fibre and cable networks). The Group uses
IFRS 15 to allocate the consideration in contracts between any
lease and non-lease components.
Critical accounting judgements and key sources of estimation
relating to IFRS 16
Lease identification
Whether an arrangement is considered a lease or a service
contract depends on the analysis by management of both the legal
form and substance of the arrangement between the Group and the
counter-party to determine if control of an identified asset has
been passed between the parties; if not, the arrangement is a
service arrangement. Control exists if the Group obtains
substantially all of the economic benefit from the use of the
asset, and has the ability to direct its use, for a period of time.
An identified asset exists where an agreement explicitly or
implicitly identifies an asset or a physically distinct portion of
an asset which the lessor has no substantive right to
substitute.
The scenarios requiring the greatest judgement include those
where the arrangement is for the use of fibre or other fixed
telecommunication lines. Generally, where the Group has exclusive
use of a physical line it is determined that the Group can also
direct the use of the line and therefore leases will be recognised.
Where the Group provides access to fibre or other fixed
telecommunication lines to another operator on a wholesale basis
the arrangement will generally be identified as a lease, whereas
when the Group provides fixed line services to an end-user,
generally control over such lines is not passed to the end-user and
a lease is not identified.
The impact of determining whether an agreement is a lease or a
service depends on whether the Group is a potential lessee or
lessor in the arrangement and, where the Group is a lessor, whether
the arrangement is classified as an operating or finance lease. The
impacts for each scenario are described below where the Group is
potentially:
-- A lessee. The judgement impacts the nature and timing of both
costs and reported assets and liabilities. A lease results
in depreciation and interest being recognised and an asset
and a liability being reported; the interest charge will decrease
over the life of the lease. A service contract results in
operating expenses being recognised evenly over the life of
the contract and no assets or liabilities being recorded (other
than trade payables, prepayments and accruals).
-- An operating lessor. The judgement impacts the nature of income
recognised. An operating lease results in lease income being
recognised whilst a service contract results in service revenue.
Both are recognised evenly over the life of the contract.
-- A finance lessor. The judgement impacts the nature and timing
of both income and reported assets. A finance lease results
in the lease income being recognised at commencement of the
lease and an asset (the net investment in the lease) being
recorded.
Lease term
Where leases include additional optional periods after an
initial lease term, significant judgement is required in
determining whether these optional periods should be included when
determining the lease term. The impact of this judgement is
significantly greater where the Group is a lessee. As a lessee,
optional periods are included in the lease term if the Group is
reasonably certain it will exercise an extension option or will not
exercise a termination option; this depends on an analysis by
management of all relevant facts and circumstances including the
leased asset's nature and purpose, the economic and practical
potential for replacing the asset and any plans that the Group has
in place for the future use of the asset. Where a leased asset is
highly customised (either when initially provided or as a result of
leasehold improvements) or it is impractical or uneconomic to
replace then the Group is more likely to judge that lease extension
options are reasonably certain to be exercised. Where extension
options are included the greater the value of the right-of-use
asset and lease liability that will be recognised. The normal
approach adopted for lease term by asset class is described
below.
The lease terms can vary significantly by type and use of asset
and geography. In addition, the exact lease term is subject to the
non-cancellable period and rights and options in each contract.
Generally, lease terms are judged to be the longer of the minimum
lease term and:
-- Between 5 and 10 years for land and buildings (excluding retail),
with terms at the top end of this range if the lease relates
to assets that are considered to be difficult to exit sooner
for economic, practical or reputational reasons;
-- To the next contractual lease break date for retail premises
(excluding breaks within the next 12 months);
-- Where leases are used to provide internal connectivity the
lease term for the connectivity is aligned to the lease term
or useful economic life of the assets connected; and
-- The customer service agreement length for leases of local
loop connections or other assets required to provide fixed
line services to individual customers.
In most instances the Group has options to renew or extend
leases for additional periods after the end of the lease term which
are assessed using the criteria above.
Transition disclosures
The weighted average incremental borrowing rate applied to the
Group's lease liabilities recognised in the balance sheet at 1
April 2019 was 3.5%.
The Group's undiscounted operating lease commitments at 31 March
2019 were EUR10.8 billion; the most significant differences between
the IAS 17 lease commitments and the lease liabilities recognised
on transition to IFRS 16 are set out below:
EURbn
------------------------------------------------------------------ ------
Operating lease commitments at 31 March 2019 10.8
Less effect of discounting on payments included in the operating
lease commitment (1.6)
Plus lease liabilities in respect of additional 'reasonably
certain' lease extensions assumed under IFRS 16 0.8
Plus finance lease liabilities already reported under IAS
17 0.3
------------------------------------------------------------------ ------
Lease liability opening balance reported at 1 April 2019 10.3
------------------------------------------------------------------ ------
The Group applied the lease identification requirements of IFRS
16 at the date of adoption and no material changes to the Group's
lease portfolio were identified.
The impact of the adoption of IFRS 16 on the consolidated statement
of financial position at 1 April 2019 is set out below.
Impact of
adoption
31 March of 1 April
Consolidated statement of financial position 2019 IFRS 16 2019
EURm EURm EURm
--------------------------------------------- --------- --------- ---------
Non-current assets
Goodwill 23,353 - 23,353
Other intangible assets 17,652 - 17,652
Property, plant and equipment 27,432 10,226 37,658
Investments in associates and joint ventures 3,952 (270) 3,682
Other investments 870 - 870
Deferred tax assets 24,753 - 24,753
Post employment benefits 94 - 94
Trade and other receivables 5,170 21 5,191
--------------------------------------------- --------- --------- ---------
Of which: Net investments in leases 3 133 136
--------------------------------------------- --------- --------- ---------
103,276 9,977 113,253
--------------------------------------------- --------- --------- ---------
Current assets
Inventory 714 - 714
Taxation recoverable 264 - 264
Trade and other receivables 12,190 (339) 11,851
--------------------------------------------- --------- --------- ---------
Of which: Net investments in leases 1 19 20
--------------------------------------------- --------- --------- ---------
Other investments 13,012 - 13,012
Cash and cash equivalents 13,637 - 13,637
--------------------------------------------- --------- --------- ---------
39,817 (339) 39,478
--------------------------------------------- --------- --------- ---------
Assets held for sale (231) - (231)
--------------------------------------------- --------- --------- ---------
Total assets 142,862 9,638 152,500
--------------------------------------------- --------- --------- ---------
Equity
Called up share capital 4,796 - 4,796
Additional paid-in capital 152,503 - 152,503
Treasury shares (7,875) - (7,875)
Accumulated losses (116,725) (261) (116,986)
Accumulated other comprehensive income 29,519 - 29,519
--------------------------------------------- --------- --------- ---------
Total attributable to owners of the parent 62,218 (261) 61,957
--------------------------------------------- --------- --------- ---------
Non-controlling interests 1,227 4 1,231
Total non-controlling interests 1,227 4 1,231
--------------------------------------------- --------- --------- ---------
Total equity 63,445 (257) 63,188
--------------------------------------------- --------- --------- ---------
Non-current liabilities
Long-term borrowings 48,685 7,394 56,079
Deferred tax liabilities 478 - 478
Post employment benefits 551 - 551
Provisions 1,242 (9) 1,233
Trade and other payables 2,938 (37) 2,901
--------------------------------------------- --------- --------- ---------
53,894 7,348 61,242
--------------------------------------------- --------- --------- ---------
Current liabilities
Short-term borrowings 4,270 2,646 6,916
Financial liabilities under put option
arrangements 1,844 - 1,844
Taxation liabilities 596 - 596
Provisions 1,160 (76) 1,084
Trade and other payables 17,653 (23) 17,630
--------------------------------------------- --------- --------- ---------
25,523 2,547 28,070
--------------------------------------------- --------- --------- ---------
Liabilities held for sale - - -
--------------------------------------------- --------- --------- ---------
Total equity and liabilities 142,862 9,638 152,500
--------------------------------------------- --------- --------- ---------
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. The segmental revenue and
profit of Vodafone India were included in discontinued operations
in the comparative period. See note 5 "Discontinued operations and
assets and liabilities held for sale" for details.
The Group's revenue and profit is disaggregated as follows:
Revenue Total
Service Equipment from contracts Interest Other segment Adjusted
revenue revenue with customers income revenue(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
Eliminations - - - - - - -
--------------------- --------- --------- --------------- -------- ----------- -------- --------
Rest of the World 4,241 715 4,956 4 125 5,085 1,774
--------------------- --------- --------- --------------- -------- ----------- -------- --------
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
--------------------- --------- --------- --------------- -------- ----------- -------- --------
Revenue Total
Service Equipment from contracts Interest Other segment Adjusted
revenue revenue with customers income revenue(1) revenue EBITDA
EURm EURm EURm EURm EURm EURm EURm
--------------------- --------- --------- --------------- -------- ----------- -------- --------
Six months ended 30 September
2018 (restated)(2)
Germany 4,577 516 5,093 14 73 5,180 2,082
Italy 2,512 351 2,863 - 35 2,898 1,058
UK 2,460 611 3,071 25 35 3,131 675
Spain 2,162 205 2,367 9 33 2,409 529
Other Europe 2,238 263 2,501 10 29 2,540 833
Eliminations (62) - (62) - (3) (65) -
--------------------- --------- --------- --------------- -------- ----------- -------- --------
Europe 13,887 1,946 15,833 58 202 16,093 5,177
--------------------- --------- --------- --------------- -------- ----------- -------- --------
Vodacom 2,199 431 2,630 6 82 2,718 1,070
Other Markets 1,990 454 2,444 3 12 2,459 673
Eliminations - - - - - - -
--------------------- --------- --------- --------------- -------- ----------- -------- --------
Rest of the World 4,189 885 5,074 9 94 5,177 1,743
--------------------- --------- --------- --------------- -------- ----------- -------- --------
Common Functions 246 15 261 2 475 738 (5)
Eliminations (54) - (54) - (106) (160) -
--------------------- --------- --------- --------------- -------- ----------- -------- --------
Group 18,268 2,846 21,114 69 665 21,848 6,915
--------------------- --------- --------- --------------- -------- ----------- -------- --------
Notes:
1. Other revenue includes lease revenue.
2. Revenue for the comparative period has been revised for the allocation
of, and timing of recognition for, equipment and service revenue
compared to amounts previously disclosed in the condensed consolidated
financial statements for the six months ended 30 September 2018.
Service revenue decreased by EUR172 million (Germany: EUR(9)
million, UK: EUR(94) million, Other Europe: EUR(15) million,
Common Functions: EUR(54) million. Equipment revenue increased
by EUR170 million (Germany: EUR73 million, UK: EUR94 million,
Other Europe: EUR1 million, Common Functions: EUR2 million).
This resulted in a net reduction in revenue from contracts with
customers of EUR2 million (Germany: EUR64 million, Other Europe:
EUR(14) million, Common Functions EUR(52) million). This was
offset by an increase in other revenue of EUR54 million (Other
Europe: EUR1 million, Common Functions: EUR53 million), resulting
in an increase of EUR52 million for total segment revenue (Germany:
EUR64 million, Other Europe EUR(13) million, Common Functions:
EUR1 million). Adjusted EBITDA increased by EUR42 million.
The Group's measure of segment profit and adjusted EBITDA, 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/(loss) is shown below. For a reconciliation of
operating profit/(loss) to loss for the financial period, see the
consolidated income statement on page 24.
Six months ended 30
September
-----------------------
2018
2019 (restated)(1)
EURm EURm
-------------------------- ------------------------- ------- --------------
Adjusted EBITDA 7,105 6,915
Depreciation, amortisation and loss on disposal
of fixed assets (4,874) (4,773)
Share of adjusted results in equity accounted
associates and joint ventures(2) (550) (8)
----------------------------------------------------- ------- --------------
Adjusted operating profit 1,681 2,134
Impairment loss - (3,495)
Restructuring costs (163) (95)
Amortisation of acquired customer bases and brand
intangible assets (232) (317)
Other income and expense (872) (256)
Interest on lease liabilities 163 -
----------------------------------------------------- ------- --------------
Operating profit/(loss) 577 (2,029)
----------------------------------------------------- ------- --------------
Notes:
1. Revenue for the comparative period has been revised for the allocation
of, and timing of recognition for, equipment and service revenue
compared to amounts previously disclosed in the condensed consolidated
financial statements for the six months ended 30 September 2018.
As a result, adjusted EBITDA increased by EUR42 million.
2. Share of adjusted results in equity accounted associates and
joint ventures excludes amortisation of acquired customer bases
and brand intangible assets, restructuring costs and other costs
of EUR2.1 billion (2018: EUR0.4 billion) which are included in
amortisation of acquired customer base and brand intangible assets,
restructuring costs and other income and expense respectively.
The Group's non-current assets are disaggregated as follows:
30 September 31 March
2019 2019
(restated)(1)
EURm EURm
---------------------- ------------ -------------
Non-current assets(2)
Germany 48,777 24,529
Italy 11,059 11,031
UK 7,974 7,405
Spain 8,262 7,438
Other Europe 10,290 7,093
---------------------- ------------ -------------
Europe 86,362 57,496
---------------------- ------------ -------------
Vodacom 6,105 5,503
Other Markets 3,015 3,429
---------------------- ------------ -------------
Rest of the World 9,120 8,932
---------------------- ------------ -------------
Common Functions 2,212 2,009
---------------------- ------------ -------------
Group 97,694 68,437
---------------------- ------------ -------------
Notes:
1. Amounts have been re-presented to show segment assets on an IFRS
15 basis which were previously reported at 31 March 2019 on an
IAS 18 basis.
2. Comprises goodwill, other intangible assets and property, plant
and equipment (including right-of-use assets).
3 Impairment review
Impairment testing was performed at 30 September 2019 and 30
September 2018. The methodology adopted for impairment testing for
the six months ended 30 September 2019 was consistent with that
disclosed on page 117 and pages 130 to 135 of the Group's annual
report for the year ended 31 March 2019.
Consistent with prior periods, assets are grouped at the lowest
levels for which there are separately identifiable cash flows,
known as cash-generating units. For the purpose of impairment
testing as at 30 September 2019, European Liberty Global assets
have been excluded from existing cash-generating units.
Value in use assumptions
The table below shows key assumptions used in the value in use
calculations at 30 September 2019:
Assumptions used in value in use calculation
--------------------------------- --------------------------------------------------
Germany Italy Spain Romania
% % % %
--------------------------------- ----------- ----------- ----------- -----------
Pre-tax risk adjusted discount
rate 8.3 10.4 9.3 10.7
Long-term growth rate 0.5 1.0 0.5 1.0
Projected adjusted EBITDA(1) 2.2 (0.5) 9.8 4.8
Projected capital expenditure(2) 17.3-19.7 12.1-14.1 16.8-18.2 11.2-12.4
--------------------------------- ----------- ----------- ----------- -----------
Sensitivity analysis
The estimated recoverable amounts of the Group's operations in
Germany, Italy, Spain and Romania exceed their carrying values by
EUR7.1 billion, EUR2.7 billion, EUR0.6 billion and EUR0.3 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 2019.
Change required for carrying value to equal
recoverable amount
--------------------------------- -------------------------------------------------
Germany Italy Spain Romania
pps pps pps pps
--------------------------------- ------------- --------- --------- ------------
Pre-tax risk adjusted discount
rate 2.0 2.5 0.6 2.7
Long-term growth rate (2.1) (2.6) (0.7) (3.4)
Projected adjusted EBITDA(1) (4.9) (4.5) (1.4) (4.8)
Projected capital expenditure(2) 17.1 12.1 3.0 8.5
--------------------------------- ------------- --------- --------- ------------
Management considered the following reasonably possible changes
in the key adjusted EBITDA(1) and long-term growth rate
assumptions, leaving all other assumptions unchanged. 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 carrying value of any
cash-generating unit to materially exceed its recoverable
amount.
Recoverable amount less carrying value
----------------------------- --------------------------------------------
Germany Italy Spain Romania
EURbn EURbn EURbn EURbn
----------------------------- ------------ -------- ------- -----------
Base case as at 30 September
2019 7.1 2.7 0.6 0.3
Change in projected adjusted
EBITDA(1)
Decrease by 2pps 4.1 1.4 (0.2) 0.1
Increase by 2pps 10.5 4.0 1.4 0.4
Change in long-term growth
rate
Decrease by 1pps 3.2 1.5 (0.3) 0.2
Increase by 1pps 12.6 4.3 1.6 0.4
----------------------------- ------------ -------- ------- -----------
The carrying values for Vodafone UK, Ireland and Portugal
include goodwill arising from their acquisition by the Group and/or
the purchase of operating licences or spectrum rights. While the
recoverable amounts for these operating companies are not
materially greater than their carrying value, each has a lower risk
of giving rise to impairment that would be material to the Group
given their relative size or the composition of their carrying
value.
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 in the six months ended 30 September 2019.
Change required for carrying value to
equal the recoverable amount
--------------------------------- -----------------------------------------
UK Ireland Portugal
pps pps pps
--------------------------------- ---------- ------------- --------------
Pre-tax risk adjusted discount
rate 0.8 0.5 1.3
Long-term growth rate (0.8) (0.6) (1.3)
Projected adjusted EBITDA(1) (1.8) (1.1) (2.7)
Projected capital expenditure(2) 3.6 4.1 7.1
--------------------------------- ---------- ------------- --------------
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 testing.
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 testing.
VodafoneZiggo
The recoverable amount for VodafoneZiggo is not materially
greater than its carrying value. If adverse impacts of economic,
competitive, regulatory or other factors were to cause significant
deterioration in the operations of VodafoneZiggo and the entity's
expected future cash flows, this may lead to an impairment loss
being recognised.
4 Taxation
Six months ended 30
September
----------------------
2019 2018
(restated)(1)
EURm EURm
--------------------------------------------------- ------- -------------
United Kingdom corporation tax (expense)/income(2)
:
Current year (14) 1
Adjustments in respect of prior years (10) (6)
Overseas current tax (expense)/income:
Current year (474) (589)
Adjustments in respect of prior years 14 19
--------------------------------------------------- ------- -------------
Total current tax expense (484) (575)
---------------------------------------------------- ------- -------------
Deferred tax on origination and reversal of
temporary differences:
United Kingdom deferred tax 144 39
Overseas deferred tax (1,040) (884)
--------------------------------------------------- ------- -------------
Total deferred tax expense (896) (845)
---------------------------------------------------- ------- -------------
Total income tax expense (1,380) (1,420)
---------------------------------------------------- ------- -------------
Note:
1. Revenue for the comparative period has been revised for the allocation
of, and timing of recognition for, equipment and service revenue
compared to amounts previously disclosed in the condensed consolidated
financial statements for the six months ended 30 September 2018.
As a result, the overseas deferred tax charge has increased by
EUR11 million from EUR873 million to EUR884 million and the total
income tax expense increased by EUR11 million.
2. UK operating profits are largely offset by statutory allowances
for capital investment in the UK network and systems plus ongoing
interest costs including those arising from the EUR10.3 billion
of spectrum payments to the UK government in 2000 and 2013.
The six months ended 30 September 2019 includes a reduction in
our deferred tax assets in Luxembourg of EUR868 million (2018:
EURnil) following a reduction in the Luxembourg corporate tax rate
and deferred tax on the use of Luxembourg losses of EUR200 million
(2018: EUR185 million). The Group expects to use its losses in
Luxembourg over a period of between 50 and 55 years and the losses
in Germany over a period of between 9 and 11 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 2019.
Overseas deferred tax expense for the six months ended 30
September 2018 includes the derecognition of a deferred tax asset
of EUR1,048 million in Spain following a reassessment of expected
future business performance and consequently lower projected cash
flows. It also includes an increase in the deferred tax assets in
Luxembourg of EUR159 million resulting from the tax treatment of
the revaluation of investments following completion and approval of
the Luxembourg statutory accounts and tax returns.
5 Discontinued operations and assets and liabilities held for sale
In the comparative period, Vodafone combined its subsidiary,
Vodafone India (excluding its 42% stake in Indus Towers), with Idea
Cellular in India. Consequently, Vodafone India was accounted for
as a discontinued operation for all periods up to 31 August 2018,
the date the transaction completed, the results of which are
detailed below.
Income statement of discontinued operations
Six months Five months
ended ended
30 September 31 August
2019 2018
EURm EURm
------------------------------------------------- ------------ -----------
Revenue - 1,561
Cost of sales - (1,185)
-------------------------------------------------- ------------ -----------
Gross profit - 376
Selling and distribution expenses - (92)
Administrative expenses - (134)
Operating profit - 150
Financing costs - (321)
-------------------------------------------------- ------------ -----------
Loss before taxation - (171)
Income tax credit - 56
-------------------------------------------------- ------------ -----------
Loss after tax of discontinued operations - (115)
-------------------------------------------------- ------------ -----------
Loss on sale of disposal group - (3,420)
-------------------------------------------------- ------------ -----------
Loss for the period from discontinued operations - (3,535)
-------------------------------------------------- ------------ -----------
Loss per share from discontinued operations
eurocents eurocents
------------------------------------------------- ------------ -----------
- Basic - (12.87c)
- Diluted - (12.87c)
-------------------------------------------------- ------------ -----------
Total comprehensive expense for the period from discontinued operations
EURm EURm
------------------------------------------------- ------------ -----------
Attributable to owners of the parent - (3,535)
-------------------------------------------------- ------------ -----------
For the five months ended 31 August 2018, the Group recorded a
loss on disposal of Vodafone India of EUR3,420 million as set out
in note 8 "Acquisitions and disposals". This loss is presented
within discontinued operations.
Assets and liabilities held for sale
Assets and liabilities held for sale at 30 September 2019
comprise:
-- Certain network-related assets and liabilities in Italy,
which will be sold into a joint venture tower company following the
announcement on 26 July 2019 of a new network sharing arrangement
with Telecom Italia Group; and
-- A 12.6% interest from our 42.0% stake in Indus Towers and a
24.95% interest in Vodafone Hutchison Australia.
The relevant assets and liabilities are detailed in the table
below.
30 September 31 March
2019 2019
EURm EURm
-------------------------------- ------------ --------
Non-current assets 726 (231)
Current assets 123 -
--------------------------------- ------------ --------
Total assets held for sale 849 (231)
--------------------------------- ------------ --------
Non-current liabilities (234) -
Current liabilities (98) -
--------------------------------- ------------ --------
Total liabilities held for sale (332) -
--------------------------------- ------------ --------
6 Earnings per share
Six months ended 30
September
------------------------
2019 2018
Millions Millions
---------------------------------------------------- --------- -------------
Weighted average number of shares for basic
earnings per share 29,410 27,462
Effect of dilutive potential shares: restricted - -
shares and share options
----------------------------------------------------- --------- -------------
Weighted average number of shares for diluted
earnings per share 29,410 27,462
----------------------------------------------------- --------- -------------
Six months ended 30
September
------------------------
Earnings per share attributable to owners of 2019 2018
the parent during the period
(restated)(1)
EURm EURm
Loss for earnings per share from continuing
operations (2,128) (4,399)
Loss for earnings per share from discontinued
operations - (3,535)
----------------------------------------------------- --------- -------------
Loss for basic and diluted earnings per share (2,128) (7,934)
----------------------------------------------------- --------- -------------
eurocents eurocents
---------------------------------------------------- --------- -------------
Basic loss per share from continuing operations (7.24c) (16.02c)
Basic loss per share from discontinued operations - (12.87c)
----------------------------------------------------- --------- -------------
Basic loss per share (7.24c) (28.89c)
----------------------------------------------------- --------- -------------
Diluted loss per share from continuing operations (7.24c) (16.02c)
Diluted loss per share from discontinued operations - (12.87c)
----------------------------------------------------- --------- -------------
Diluted loss per share (7.24c) (28.89c)
----------------------------------------------------- --------- -------------
Note:
1. Revenue presented for the comparative period has been revised
for the allocation of, and timing of recognition for, equipment
and service revenue compared to amounts previously disclosed
in the condensed consolidated financial statements for the six
months ended 30 September 2018. As a result, the loss for basic
and diluted earnings per share decreased by EUR31 million and
(i) basic loss per share from continuing operations, (ii) basic
loss per share, (iii) diluted loss per share from continuing
operations and (iv) diluted loss per share each decreased by
0.11c.
7 Dividends
Six months ended 30
September
---------------------
2019 2018
EURm EURm
------------------------------------------------------ ---------- ---------
Declared during the financial period:
Final dividend for the year ended 31 March 2019:
4.16 eurocents per share (2018: 10.23 eurocents
per share) 1,112 2,729
------------------------------------------------------ ---------- ---------
Proposed after the end of the reporting period
and not recognised as a liability:
Interim dividend for the year ending 31 March
2020: 4.50 eurocents per share (2019: 4.84 eurocents
per share) 1,205 1,293
------------------------------------------------------ ---------- ---------
8 Acquisitions and disposals
Acquisitions
The aggregate cash consideration in respect of purchase of
interests in subsidiaries, net of cash acquired, is as follows:
Six months ended 30
September
2019 2018
EURm EURm
------------------------------------- ------------ -------
Cash consideration paid
European Liberty Global assets 10,295 -
Other acquisitions during the period 29 69
Net cash acquired (122) (7)
-------------------------------------- ------------ -------
10,202 62
-------------------------------------- ------------ -------
European Liberty Global assets
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 businesses 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 provisional purchase price allocation is set out in the
table below.
Fair value
EURm
-------------------------------------- ----------
Net assets acquired:
Identifiable intangible assets(1) 5,696
Property, plant and equipment 4,708
Inventory 16
Trade and other receivables 796
Other investments 2
Cash and cash equivalents 109
Current and deferred taxation (1,910)
Short and long-term borrowings (9,512)
Trade and other payables (1,059)
Post employment benefits (40)
Provisions (117)
--------------------------------------- ----------
Net identifiable liabilities acquired (1,311)
Goodwill(2) 11,620
--------------------------------------- ----------
Total consideration(3) 10,309
--------------------------------------- ----------
Notes:
1. Identifiable intangible assets of EUR5,696 million consisted
of customer relationships of EUR5,447 million, brand of EUR71
million and software of EUR178 million.
2. 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.
3. 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, the acquired entities have
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 financial period, revenue would
have been EUR22,940 million and the loss before tax would have been
EUR481 million.
Other acquisitions
During the six months ended 30 September 2019 the Group
completed certain acquisitions for an aggregate consideration of
EUR185 million, of which EUR29 million has been paid in cash. The
aggregate provisional fair values of goodwill, identifiable assets
and liabilities of the acquired operations were EUR182 million,
EUR50 million and EUR47 million, respectively.
Disposals
On 31 July 2019, the Group sold its 100% interest in 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.
The disposal in the comparative period related to the
combination of Vodafone India (excluding its 42% stake in Indus
Towers), previously a subsidiary, with Idea Cellular to create
Vodafone Idea Limited, a company jointly controlled by Vodafone and
the Aditya Birla Group.
Six months ended 30
September
---------------------
2019 2018
EURm EURm
----------------------------------------------- -------- -----------
Goodwill (243) -
Other intangible assets (155) (6,138)
Property, plant and equipment (783) (3,091)
Inventory (29) -
Trade and other receivables (244) (1,572)
Investments in associates and joint ventures (4) -
Other investments - (6)
Cash and cash equivalents - (751)
Current and deferred taxation (11) (2,790)
Short and long-term borrowings 215 7,896
Trade and other payables 261 1,669
Provisions 35 720
------------------------------------------------ -------- -----------
Net assets disposed (958) (4,063)
Fair value of investment(2) - 2,467
Net cash proceeds arising from the transaction 2,023 320
Other effects(1) 35 (2,144)
------------------------------------------------ -------- -----------
Net gain/(loss) on transaction(2) 1,100 (3,420)
------------------------------------------------ -------- -----------
Notes:
1. Includes EUR59 million (2018: EUR2,079 million) of recycled foreign
exchange losses.
2. Comparative figure includes a loss of EUR603 million related
to the re-measurement of the Group's retained interest in Vodafone
India.
9 Investment in associates and joint arrangements
The equity accounted results for Vodafone Idea Limited ('VIL')
for the period included an estimate for a material charge for
amounts due following the recent Supreme Court of India judgement
in the case Union of India v Association of Unified Telecom Service
Providers of India and others regarding the definition of adjusted
gross revenue ("AGR") used to calculate regulatory fees. Further
detail is provided in note 13.
The Group's recorded share of VIL's resulting losses has been
restricted to the amount that reduces the Group's carrying value in
VIL to EURnil at 30 September 2019. The Group's carrying value was
EUR1,392 million at 31 March 2019 and in May 2019 the Group
invested EUR1,410 million via a rights issue. See page 16 for
further information.
Significant uncertainties exist in relation to VIL's ability to
generate the cash flow that it needs to settle, or refinance its
liabilities and guarantees as they fall due, including those
relating to the AGR judgement. VIL is seeking relief from the
Indian Government, including, but not limited to, granting a waiver
of interest and penalties relating to the AGR judgement.
The value of the Group's 42% shareholding in Indus Towers
Limited ('Indus') is, in part, dependent on the income generated by
Indus from tower rentals to major customers, including VIL. Any
inability of these major customers to pay such amounts in the
future may result in an impairment in the carrying value of the
Group's investment in Indus (30 September 2019: EUR0.6
billion).
30 September 31 March
2019 2019
EURm EURm
----------------------------- ------------ --------
Investment in joint ventures 1,841 3,399
Investment in associates 396 553
------------------------------ ------------ --------
2,237 3,952
------------------------------ ------------ --------
10 Reconciliation of net cash flow from operating activities
Six months ended 30
September
----------------------
2019 2018
(restated)(1)
Note EURm EURm
----------------------------------------------- ---- ------- -------------
Loss for the financial period (1,891) (7,802)
Loss from discontinued operations - 3,535
------------------------------------------------ ---- ------- -------------
Loss from continuing operations (1,891) (4,267)
Non-operating income and expense - 3
Investment income (281) (184)
Financing costs 1,369 999
Income tax expense 4 1,380 1,420
----------------------------------------------- ---- ------- -------------
Operating profit/(loss) 577 (2,029)
Adjustments for:
Share-based payments and other non-cash
charges 78 46
Depreciation and amortisation 6,782 4,871
Loss on disposal of property, plant and
equipment and intangible assets 24 19
Share of result of equity accounted associates
and joint ventures 2,601 430
Impairment losses - 3,495
Other (income)/expense (1,024) 91
Increase in inventory (6) (202)
Increase in trade and other receivables (1,069) (1,443)
(Decrease)/increase in trade and other
payables (1,341) 47
----------------------------------------------- ---- ------- -------------
Cash generated by operations 6,622 5,325
Net tax paid (483) (428)
Cash flow from discontinued operations - (71)
------------------------------------------------ ---- ------- -------------
Net cash flow from operating activities 6,139 4,826
------------------------------------------------ ---- ------- -------------
Note:
1. Revenue for the comparative period has been revised for the allocation
of, and timing of recognition for, equipment and service revenue
compared to amounts previously disclosed in the condensed consolidated
financial statements for the six months ended 30 September 2018.
As a result, the loss for the financial period decreased by EUR31
million, income tax expense increased by EUR11 million and trade
and other receivables increased by EUR42 million. There was no
impact on the net cash flow from operating activities.
11 Related party transactions
The Group has a number of related parties including joint
arrangements and associates, pension schemes, directors and
Executive Committee members. Related party transactions with the
Group's joint arrangements and associates primarily comprise fees
for the use of products and services including network airtime and
access charges, and cash pooling arrangements. No related party
transactions have been entered into during the period 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
----------------------
2019 2018
EURm EURm
------------------------------------------------------- ------------ --------
Sales of goods and services to associates 12 9
Purchase of goods and services from associates - 1
Sales of goods and services to joint arrangements 99 106
Purchase of goods and services from joint arrangements 88 94
Net interest income receivable from joint arrangements 45 49
-------------------------------------------------------- ------------ --------
30 September 31 March
2019 2019
EURm EURm
------------------------------------------------------- ------------ --------
Trade balances owed:
by associates 7 1
to associates 2 3
by joint arrangements 130 193
to joint arrangements 27 25
Other balances owed by joint arrangements 1,018 997
Other balances owed to joint arrangements 177 169
-------------------------------------------------------- ------------ --------
In the six months ended 30 September 2019 the Group made
contributions to defined benefit pension schemes of EUR11 million
(six months ended 30 September 2018: EUR20 million). In addition,
EUR0.7 million of dividends were paid to Board members and
executive committee members (six months ended 30 September 2018:
EUR3.9 million). Dividends received from associates are disclosed
in the consolidated statement of cash flows.
12 Fair value of financial instruments
The table below sets out the valuation basis(1,2) of the
financial instruments held at fair value by the Group:
30 September 31 March
2019 2019
EURm EURm
--------------------------------------------- ------------ --------
Financial assets at fair value:
Money market funds (included within Cash
and cash equivalents) (1) 3,452 9,007
Debt and equity securities (included within
Other investments)(2) 4,425 11,056
Derivative financial instruments (included
within Trade and other receivables) 5,709 3,634
Trade receivables at fair value through
Other comprehensive income (included within
Trade and other receivables) 1,022 792
---------------------------------------------- ------------ --------
14,608 24,489
---------------------------------------------- ------------ --------
Financial liabilities at fair value:
Derivative financial instruments (included
within Trade and other payables) 4,399 2,444
---------------------------------------------- ------------ --------
4,399 2,444
---------------------------------------------- ------------ --------
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 EUR2,128 million (31 March
2019: EUR4,108 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 EUR48,852
million (31 March 2019: EUR44,439 million) and a fair value of
EUR51,804 million (31 March 2019: EUR43,616 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.
Any future payments by the Group to VIL as a result of this
agreement, would only be made after satisfaction of contractual
conditions. Having considered the possible future developments for
VIL, the Group has concluded that there are significant
uncertainties in relation to VIL's ability to settle the
liabilities relating to the AGR judgement and has not assessed a
cash outflow under the agreement to be probable at this time. The
Group's potential exposure under this mechanism is capped at INR 84
billion (EUR1.1 billion).
See note 9 and page 16 for further information.
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 renders 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 become due and payable within three
months of the Supreme Court judgement. Based on submissions of the
DoT in the Supreme Court proceedings (which the Group is unable to
confirm as to their accuracy), VIL's liability appears to be at
least INR 283.1 billion (EUR3.7 billion) but could be substantially
higher. Application may be made to seek review of the Supreme
Court's decision.
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.
The Indian Government has sought to impose one-time spectrum
charges of approximately EUR525 million on certain operating
subsidiaries of VIL. VIL filed a petition before the TDSAT
challenging the one-time spectrum charges on the basis that they
are illegal, violate VIL'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 tribunal set aside the DoT's demand for spectrum
up to 6.2MHz but upheld, in part, the demand above 6.2 MHz and gave
the DoT three months to issue a new demand accordingly. We await
the revised demand.
Other cases in the Group
Patent litigation - Germany
The telecoms industry is currently involved in significant
levels of patent litigation brought by non-practising entities
('NPEs') which have acquired patent portfolios from current and
former industry companies. Vodafone is currently a party to patent
litigation cases in Germany brought against Vodafone Germany by
Marthon, IPCom and Intellectual Ventures. Vodafone has contractual
indemnities from suppliers which have been invoked in relation to
the alleged patent infringement liability.
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 can
establish that one or more of its patents are valid and infringed,
it could seek an injunction against the UK network if a global
licence for the patents is not agreed. The Court ordered expedited
trials of the infringement and validity issues. The first is in
November 2019 and the second is in May 2020. A hearing to determine
any damages and licence amounts is scheduled for mid-2020.
Italy: Telecom Italia v Vodafone Italy ('TeleTu')
Telecom Italia brought civil claims against Vodafone Italy in
relation to TeleTu's alleged anti-competitive retention of
customers. Telecom Italia seeks damages in the amount of EUR101
million. The Court decided on 9 June 2015 to appoint an expert to
verify whether TeleTu has put in place anti-competitive retention
activities. The expert prepared a draft report with a range of
damages from EURnil to EUR9 million. The final hearing took place
In June 2019 with a decision expected in February 2020.
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.
Italian competition regulator
On 15 February 2018, the Italian competition regulator (AGCM)
started proceedings against TIM, Fastweb, Wind/3 and the national
telecom industry association (Asstel) as well as Vodafone Italy (VF
IT), alleging that the Italian telecoms operators shared
competitively sensitive information and coordinated their
initiatives in relation to their responses to a legislative change
requiring them to switch from 28-day to monthly billing cycles. The
telecom operators submitted their written responses to the AGCM's
Statement of Objections, denying all allegations. The final
decision is due by the end of January 2020. If a fine is imposed,
appeals are likely to follow.
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.
14 Other matters
Vodafone Spain
On 25 April 2019, Vodafone Spain and Orange signed a new mobile
and fixed network sharing agreement in Spain, which will strengthen
their existing partnership and enable the faster deployment of 5G
over a wider geographic area. The agreement establishes a more
economically efficient investment model for future network
deployment, is more environmentally sensitive and will bring the
benefit of more rapid 5G adoption to the Spanish economy.
Vodafone Germany
On 12 June 2019, Vodafone Germany acquired radio spectrum for
next-generation 5G mobile networks at the Federal Network Agency
auction for a total cost of EUR1.88 billion. It secured 90 MHz in
the 3.6 GHz band and 40 MHz of 2100 MHz spectrum.
Vodafone UK
On 24 July 2019, Vodafone UK and O2 Telefónica UK Limited ("O2")
announced an agreement to share 5G active equipment, such as radio
antennas, on joint network sites across the UK. This means more
people will get 5G sooner, helping to build a competitive digital
economy and encouraging innovative new services that use 5G's speed
and greater reliability.
In addition, Vodafone UK and O2 are proceeding to explore
potential monetisation options for the parties' 50:50 jointly owned
passive tower infrastructure.
Vodafone Italy
On 26 July 2019, Vodafone Italy and Telecom Italia Group ("TIM")
announced the creation of an active network sharing partnership for
4G and 5G and the expansion of their existing passive sharing
agreement.
Vodafone also agreed to merge its passive tower infrastructure
in Italy ("Vodafone Italy Towers") into INWIT SpA ("INWIT") (the
"Combination"). As part of the Combination, Vodafone will receive a
cash consideration of EUR2,140 million and a 37.5% shareholding in
the combined entity, which will remain listed on the Milan Stock
Exchange. Vodafone and TIM intend to retain joint control of INWIT,
but over time will consider jointly reducing their respective
ownership levels from 37.5% to a minimum of 25.0%. The combination
is subject to regulatory approval.
European tower infrastructure
On 26 July 2019, Vodafone announced that its' European tower
infrastructure will be legally separated into a new organisation
with a dedicated management team. Preparations are underway for a
variety of monetisation alternatives, to be executed during the
next 15 months (depending on market conditions), including a
potential IPO.
Vodafone New Zealand
On 31 July 2019, Vodafone completed the sale of 100% of Vodafone
New Zealand Limited to a consortium comprising Infratil Limited and
Brookfield Asset Management Inc. for a cash consideration
equivalent to an Enterprise Value of NZ$3.4 billion (EUR2.0
billion).
Vodafone and Vodafone New Zealand have now entered into a
Partner Market agreement, which includes use of the Vodafone brand,
preferential roaming arrangements, access to Vodafone's global IoT
platform and central procurement function, and a range of services
for the business and consumer markets.
Board changes
David Thodey was appointed as a Non-Executive Director with
effect from 1 September 2019.
Samuel Jonah KBE did not seek re-election as a Non-Executive
Director at the annual general meeting held on 23 July 2019 and
therefore ceased to be a Director on that date.
15 Subsequent events
Vodafone UK and Virgin Media
On 6 November 2019, Vodafone UK and Virgin Media agreed a five
year deal to bring innovative new services, including 5G, to more
than three million mobile customers and to provide further
flexibility for Virgin Media to grow its mobile operation.
The new Mobile Virtual Network Operator (MVNO) agreement, which
runs until 2026, will see Vodafone supply wholesale mobile network
services, including both voice and data, to Virgin Mobile and
Virgin Media Business. Virgin Media will have full access to all of
Vodafone's current services and future technologies, such as
Vodafone's expanding 5G network, enabling new product advancements
and benefits for its customers.
INDEPENT REVIEW REPORT TO VODAFONE GROUP PLC
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 2019 which
comprise the consolidated income statement, the consolidated
statement of comprehensive income, 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 15. 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 condensed set of 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 condensed consolidated financial statements included in this
half yearly results 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 condensed consolidated financial statements in the half yearly
results 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 condensed consolidated financial
statements in the half yearly results report for the six months
ended 30 September 2019 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
12 November 2019
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.
For the six months ended 30 September 2019, a revised definition
for adjusted EBITDA has been applied. This restricts the
period-on-period comparability of certain of the Group's
alternative performance measures.
Further information on the use of alternative performance
measures is outlined on pages 231 to 233 of the Group's annual
report for the financial year ended 31 March 2019.
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 analyst community.
A reconciliation of reported service revenue to the respective
closest equivalent GAAP measure, revenue, is provided in the
section "Financial results" beginning on page 10.
Revised definition of adjusted EBITDA
For the six months ended 30 September 2019, a revised definition
for adjusted EBITDA has been applied, as follows: 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.
For the six months ended 30 September 2018, adjusted EBITDA is
operating profit excluding share of results in associates and joint
ventures, depreciation and amortisation, gains/losses on the
disposal of fixed assets, impairment losses, restructuring costs
arising from discrete restructuring plans, other operating income
and expense and significant items that are not considered by
management to the reflective of the underlying performance of the
Group.
Use of 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.
A reconciliation of adjusted EBITDA to the closest equivalent
GAAP measure, operating profit, is provided in the section
"Financial results" beginning on page 10.
Group adjusted EBIT, adjusted operating profit 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 earnings per
share also excludes certain foreign exchange rate differences,
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 analyst community and debt rating agencies.
Reconciliations of adjusted EBIT, adjusted operating profit and
adjusted earnings per share to the respective closest equivalent
GAAP measures, operating profit and basic earnings per share,
respectively, are provided in the section "Financial results"
beginning on page 10.
Cash flow measures and capital additions
In presenting and discussing our reported results, free cash
flow (pre-spectrum), free cash flow, capital additions 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 free cash flow to
investors and other interested parties, for the following
reasons:
-- Free cash flow (pre-spectrum) 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
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 analyst community and debt rating agencies.
A reconciliation of cash generated by operations, the closest
equivalent GAAP measure, to operating free cash flow, free cash
flow (pre-spectrum) and free cash flow, is provided below.
Six months ended 30
September
---------------------
2019 2018
EURm EURm
------------------------------------------ ---------- ---------
Net cash flow from operating activities 6,139 4,826
Net tax paid 483 428
Cash flow from discontinued operations - 71
-------------------------------------------- ---------- ---------
Cash generated by operations (refer
to note 10) 6,622 5,325
Capital additions (3,000) (3,067)
Working capital movement in respect
of capital additions (713) (821)
Disposal of property, plant and equipment 21 4
Restructuring payments 302 97
Payments in respect of lease liabilities (1,841) -
Fees paid in respect of acquisitions
of subsidiaries 4 -
-------------------------------------------- ---------- ---------
Operating free cash flow 1,395 1,538
Taxation (483) (395)
Dividends received from associates
and investments 63 305
Dividends paid to non-controlling
shareholders in subsidiaries (169) (185)
Interest received and paid (412) (369)
-------------------------------------------- ---------- ---------
Free cash flow (pre-spectrum) 394 894
Licence and spectrum payments (58) (231)
Restructuring payments (302) (97)
-------------------------------------------- ---------- ---------
Free cash flow 34 566
-------------------------------------------- ---------- ---------
Other
A summary of certain other alternative performance measures
included in this results announcement, together with details of
where additional information and reconciliation to the nearest
equivalent GAAP measure can be found, is shown below.
Location in this results
Alternative performance Closest equivalent announcement of reconciliation
measure GAAP measure and further information
------------------------ ------------------------ --------------------------------
Adjusted profit Profit before taxation Taxation on page 18
before tax
------------------------ ------------------------ --------------------------------
Adjusted effective Income tax expense Taxation on page 18
tax rate as a percentage of
profit before taxation
------------------------ ------------------------ --------------------------------
Adjusted income Income tax expense Taxation on page 18
tax expense
------------------------ ------------------------ --------------------------------
Adjusted profit Loss attributable to Adjusted earnings per share
attributable to owners of the parent on page 19
owners of the parent
------------------------ ------------------------ --------------------------------
Certain of the statements within the section titled "Chief
Executive's Statement" on pages 3 to 7 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 "Guidance" on
page 8 contain forward-looking alternative performance measures
which at this time cannot be quantitatively reconciled to
comparable GAAP financial information.
Organic growth and change at constant exchange rates
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 (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'.
"Change at constant exchange rates" presents performance on a
comparable basis in terms of foreign exchange rates only.
Whilst neither of these measures are intended to be a substitute
for reported growth, nor are they superior to reported growth, we
believe that these measures provide useful and necessary
information to investors and other interested parties for the
following reasons:
-- They provide additional information on underlying growth of
the business without the effect of certain factors unrelated to its
operating performance;
-- They are used for internal performance analysis; and
-- They facilitate 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 below.
2019 2018
Other
activity
Reported (including Foreign Organic
(restated)(1) growth M&A) exchange growth*
EURm EURm % pps pps %
------------------------------ ------ ------------- -------- ----------- --------- --------
Six months ended 30 September
Revenue
Germany 5,590 5,180 7.9 (7.8) - 0.1
Italy 2,709 2,898 (6.5) - - (6.5)
UK 3,151 3,131 0.6 - 0.5 1.1
Spain 2,161 2,409 (10.3) - - (10.3)
Other Europe 2,690 2,540 5.9 (3.9) 0.1 2.1
Eliminations (76) (65)
------------------------------- ------ ------------- -------- ----------- --------- --------
Europe 16,225 16,093 0.8 (3.1) 0.1 (2.2)
------------------------------- ------ ------------- -------- ----------- --------- --------
Vodacom 2,734 2,718 0.6 - 1.8 2.4
Other markets 2,351 2,459 (4.4) 9.4 2.6 7.6
------------------------------- ------ ------------- -------- ----------- --------- --------
Rest of the World 5,085 5,177 (1.8) 4.1 2.2 4.5
------------------------------- ------ ------------- -------- ----------- --------- --------
Other 787 738
Eliminations (158) (160)
------------------------------- ------ ------------- -------- ----------- --------- --------
Group 21,939 21,848 0.4 (1.7) 0.6 (0.7)
------------------------------- ------ ------------- -------- ----------- --------- --------
Adjusted EBITDA
Germany 2,352 2,082 13.0 (9.5) - 3.5
Italy 1,006 1,058 (4.9) 1.4 - (3.5)
UK 658 675 (2.5) 1.3 0.4 (0.8)
Spain 460 529 (13.0) 1.7 - (11.3)
Other Europe 872 833 4.7 (1.5) (0.1) 3.1
------------------------------- ------ ------------- -------- ----------- --------- --------
Europe 5,348 5,177 3.3 (3.5) 0.1 (0.1)
------------------------------- ------ ------------- -------- ----------- --------- --------
Vodacom 1,019 1,070 (4.8) 2.7 2.1 -
Other markets 755 673 12.2 11.3 (0.8) 22.7
------------------------------- ------ ------------- -------- ----------- --------- --------
Rest of the World 1,774 1,743 1.8 5.0 1.0 7.8
------------------------------- ------ ------------- -------- ----------- --------- --------
Other (17) (5)
------------------------------- ------ ------------- -------- ----------- --------- --------
Group 7,105 6,915 2.7 (1.6) 0.3 1.4
------------------------------- ------ ------------- -------- ----------- --------- --------
Percentage point change in adjusted
EBITDA margin
Germany 42.1% 40.2% 1.9 (0.5) - 1.4
Italy 37.1% 36.5% 0.6 0.5 - 1.1
UK 20.9% 21.6% (0.7) 0.2 0.1 (0.4)
Spain 21.3% 22.0% (0.7) 0.5 - (0.2)
Other Europe 32.4% 32.8% (0.4) 0.7 - 0.3
------------------------------- ------ ------------- -------- ----------- --------- --------
Europe 33.0% 32.2% 0.8 (0.1) - 0.7
------------------------------- ------ ------------- -------- ----------- --------- --------
Vodacom 37.3% 39.4% (2.1) 1.1 0.1 (0.9)
Other markets 32.1% 27.4% 4.7 0.3 (0.9) 4.1
------------------------------- ------ ------------- -------- ----------- --------- --------
Rest of the World 34.9% 33.7% 1.2 0.3 (0.4) 1.1
------------------------------- ------ ------------- -------- ----------- --------- --------
Other -2.2% -0.7% (1.5) (1.8) (0.2) (3.5)
------------------------------- ------ ------------- -------- ----------- --------- --------
Group 32.4% 31.7% 0.7 - (0.1) 0.6
------------------------------- ------ ------------- -------- ----------- --------- --------
Adjusted EBIT
Europe 1,127 1,082 4.2 (7.5) (0.1) (3.4)
Rest of the World 1,116 1,026 8.8 0.4 0.8 10.0
Other (12) 34
------------------------------- ------ ------------- -------- ----------- --------- --------
Group 2,231 2,142 4.2 (4.4) 0.2 -
------------------------------- ------ ------------- -------- ----------- --------- --------
Adjusted operating profit
Europe 1,166 1,114 4.7 (7.3) - (2.6)
Rest of the World 526 986 (46.7) 59.7 0.8 13.8
Other (11) 34
------------------------------- ------ ------------- -------- ----------- --------- --------
Group 1,681 2,134 (21.2) 23.7 0.3 2.8
------------------------------- ------ ------------- -------- ----------- --------- --------
Note:
1. The Group's results for the six months ended 30 September
2018 have been re-presented on an IFRS 15 basis.
2019 2018
Other
activity
Reported (including Foreign Organic
(restated)(1) growth M&A) exchange growth*
EURm EURm % pps pps %
------------------------------ ------ ------------- -------- ----------- --------- --------
Six months ended 30 September
Service revenue
Germany 4,961 4,577 8.4 (8.3) - 0.1
------ ------------- -------- ----------- --------- --------
Mobile service revenue 2,549 2,589 (1.5) (0.1) - (1.6)
Fixed service revenue 2,412 1,988 21.3 (19.0) - 2.3
------------------------------ ------ ------------- -------- ----------- --------- --------
Italy 2,424 2,512 (3.5) - - (3.5)
------ ------------- -------- ----------- --------- --------
Mobile service revenue 1,839 1,976 (6.9) - - (6.9)
Fixed service revenue 585 536 9.1 0.1 - 9.2
------------------------------ ------ ------------- -------- ----------- --------- --------
UK 2,451 2,460 (0.4) - 0.5 0.1
------ ------------- -------- ----------- --------- --------
Mobile service revenue 1,785 1,800 (0.8) - 0.4 (0.4)
Fixed service revenue 666 660 0.9 - 0.4 1.3
------------------------------ ------ ------------- -------- ----------- --------- --------
Spain 1,966 2,162 (9.1) 0.4 - (8.7)
Other Europe 2,392 2,238 6.9 (4.3) 0.1 2.7
------ ------------- -------- ----------- --------- --------
Of which: Ireland 424 419 1.2 (1.3) - (0.1)
Of which: Portugal 492 472 4.2 0.1 - 4.3
Of which: Greece 455 426 6.8 (2.7) - 4.1
------------------------------ ------ ------------- -------- ----------- --------- --------
Eliminations (74) (62) 19.4 - (0.3) 19.1
------------------------------- ------ ------------- -------- ----------- --------- --------
Europe 14,120 13,887 1.7 (3.4) 0.1 (1.6)
------------------------------- ------ ------------- -------- ----------- --------- --------
Vodacom 2,217 2,199 0.8 - 1.6 2.4
------ ------------- -------- ----------- --------- --------
Of which: South Africa 1,589 1,639 (3.1) - 3.4 0.3
Of which: International
operations 628 558 12.5 - (3.4) 9.1
------------------------------ ------ ------------- -------- ----------- --------- --------
Other markets 2,024 1,990 1.7 12.3 1.4 15.4
------ ------------- -------- ----------- --------- --------
Of which: Turkey 933 871 7.1 - 11.5 18.6
Of which: Egypt 669 520 28.7 - (14.0) 14.7
------------------------------ ------ ------------- -------- ----------- --------- --------
Eliminations - - - - 44.4 44.4
------------------------------- ------ ------------- -------- ----------- --------- --------
Rest of the World 4,241 4,189 1.2 4.9 1.6 7.7
------------------------------- ------ ------------- -------- ----------- --------- --------
Other 240 246 (2.4) 2.0 (0.3) (0.7)
Eliminations (57) (54) 5.6 0.8 1.2 7.6
------------------------------- ------ ------------- -------- ----------- --------- --------
Total service revenue 18,544 18,268 1.5 (1.6) 0.4 0.3
Other revenue 3,395 3,580 (5.2) (2.1) 1.6 (5.7)
------------------------------- ------ ------------- -------- ----------- --------- --------
Revenue 21,939 21,848 0.4 (1.7) 0.6 (0.7)
------------------------------- ------ ------------- -------- ----------- --------- --------
Six months ended 30 September
Other growth metrics
Vodafone Business Revenue 5,252 5,251 - 0.5 0.3 0.8
Germany - Mobile retail
revenue excl. regulatory
impact 2,475 2,447 1.1 (0.1) - 1.0
Germany - Fixed retail
revenue 2,312 1,879 23.0 (20.1) - 2.9
Germany - Retail revenue 4,762 4,326 10.1 (8.8) - 1.3
Germany - Net operating
costs (1,349) (1,262) 6.9 (11.4) - (4.5)
Italy - Net operating
costs (552) (587) (6.0) (1.9) - (7.9)
Spain - Net operating
costs (566) (594) (4.7) (1.4) - (6.1)
UK - Net operating costs (870) (912) (4.6) (0.8) 0.3 (5.1)
UK - Adjusted EBITDA
margin excl. Cloud partnership
and licence fee drag 21.4% 21.1% 0.3 - 0.3 0.6
South Africa - Service
revenue excl. one-off
benefit in the prior
year 1,589 1,621 (2.0) - 3.5 1.5
Turkey - Adjusted EBITDA 309 265 16.6 4.6 11.4 32.6
Egypt - Adjusted EBITDA 329 245 34.3 1.2 (14.8) 20.7
----------------------------------- ------- ------- ------- ------- ------- -------
Note:
1. The Group's results for the six months ended 30 September 2018
have been re-presented on an IFRS 15 basis.
2019 2018
Other
activity
Reported (including Foreign Organic
(restated)(1) growth M&A) exchange growth*
EURm EURm % pps pps %
--------------------------- ------ ------------- -------- ----------- --------- --------
Quarter ended 30 September
Service revenue
Germany 2,696 2,320 16.2 (16.4) - (0.2)
------ ------------- -------- ----------- --------- --------
Mobile service revenue 1,289 1,321 (2.4) (0.3) - (2.7)
Fixed service revenue 1,407 999 40.8 (37.8) - 3.0
--------------------------- ------ ------------- -------- ----------- --------- --------
Italy 1,226 1,267 (3.2) - - (3.2)
------ ------------- -------- ----------- --------- --------
Mobile service revenue 934 999 (6.5) - - (6.5)
Fixed service revenue 292 268 9.0 0.1 - 9.1
--------------------------- ------ ------------- -------- ----------- --------- --------
UK 1,218 1,231 (1.1) - 1.1 -
------ ------------- -------- ----------- --------- --------
Mobile service revenue 888 905 (1.9) - 1.2 (0.7)
Fixed service revenue 330 326 1.2 - 1.0 2.2
--------------------------- ------ ------------- -------- ----------- --------- --------
Spain 978 1,068 (8.4) 0.4 - (8.0)
Other Europe 1,264 1,141 10.8 (7.6) 0.1 3.3
------ ------------- -------- ----------- --------- --------
Of which: Ireland 215 208 3.4 (2.5) - 0.9
Of which: Portugal 254 241 5.4 (0.1) - 5.3
Of which: Greece 237 224 5.8 (1.4) - 4.4
--------------------------- ------ ------------- -------- ----------- --------- --------
Eliminations (44) (36) 22.2 - (0.6) 21.6
---------------------------- ------ ------------- -------- ----------- --------- --------
Europe 7,338 6,991 5.0 (6.6) 0.2 (1.4)
---------------------------- ------ ------------- -------- ----------- --------- --------
Vodacom 1,139 1,086 4.9 - (1.3) 3.6
------ ------------- -------- ----------- --------- --------
Of which: South Africa 811 794 2.1 - (0.3) 1.8
Of which: International
operations 329 292 12.7 - (3.0) 9.7
--------------------------- ------ ------------- -------- ----------- --------- --------
Other markets 988 971 1.8 19.5 (4.9) 16.4
------ ------------- -------- ----------- --------- --------
Of which: Turkey 499 402 24.1 - (4.3) 19.8
Of which: Egypt 356 272 30.9 - (15.3) 15.6
--------------------------- ------ ------------- -------- ----------- --------- --------
Eliminations - - - 23.3 16.7 40.0
---------------------------- ------ ------------- -------- ----------- --------- --------
Rest of the World 2,127 2,057 3.4 8.5 (3.0) 8.9
---------------------------- ------ ------------- -------- ----------- --------- --------
Other 117 115 1.7 1.8 (0.8) 2.7
Eliminations (32) (25) 28.0 0.7 5.0 33.7
---------------------------- ------ ------------- -------- ----------- --------- --------
Total service revenue 9,550 9,138 4.5 (3.2) (0.6) 0.7
Other revenue 1,736 1,808 (4.0) (1.7) (0.1) (5.8)
---------------------------- ------ ------------- -------- ----------- --------- --------
Revenue 11,286 10,946 3.1 (3.0) (0.5) (0.4)
---------------------------- ------ ------------- -------- ----------- --------- --------
Quarter ended 30 September
Other growth metrics
Vodafone Business Revenue 2,596 2,593 0.1 0.9 (0.1) 0.9
Germany - Mobile retail
revenue excl. regulatory
impact 1,254 1,252 0.2 (0.3) - (0.1)
Germany - Fixed retail
revenue 1,355 945 43.4 (40.0) - 3.4
Germany - Retail revenue 2,594 2,197 18.1 (17.4) - 0.7
South Africa - Service
revenue excl. one-off
benefit in the prior
year 811 776 4.5 - (0.3) 4.2
------------------------------ ------- ------- ------- ------- ------- -------
Note:
1. The Group's results for the quarter ended 30 September 2018
have been re-presented on an IFRS 15 basis.
2019 2018
Other
activity
Reported (including Foreign Organic
(restated)(1) growth M&A) exchange growth*
EURm EURm % pps pps %
------------------------ ------ ------------- -------- ----------- --------- --------
Quarter ended 30 June
Service revenue
Germany 2,265 2,257 0.4 - - 0.4
------ ------------- -------- ----------- --------- --------
Mobile service revenue 1,260 1,268 (0.6) 0.1 - (0.5)
Fixed service revenue 1,005 989 1.6 (0.1) - 1.5
------------------------ ------ ------------- -------- ----------- --------- --------
Italy 1,198 1,245 (3.8) - - (3.8)
------ ------------- -------- ----------- --------- --------
Mobile service revenue 905 977 (7.4) - - (7.4)
Fixed service revenue 293 268 9.3 (0.1) - 9.2
------------------------ ------ ------------- -------- ----------- --------- --------
UK 1,233 1,229 0.3 - (0.2) 0.1
------ ------------- -------- ----------- --------- --------
Mobile service revenue 897 895 0.2 - (0.2) -
Fixed service revenue 336 334 0.6 - (0.3) 0.3
------------------------ ------ ------------- -------- ----------- --------- --------
Spain 988 1,094 (9.7) 0.4 - (9.3)
Other Europe 1,128 1,097 2.8 (0.8) 0.1 2.1
------ ------------- -------- ----------- --------- --------
Of which: Ireland 209 211 (0.9) (0.2) - (1.1)
Of which: Portugal 238 231 3.0 0.2 - 3.2
Of which: Greece 218 202 7.9 (4.2) - 3.7
------------------------ ------ ------------- -------- ----------- --------- --------
Eliminations (30) (26)
------------------------- ------ ------------- -------- ----------- --------- --------
Europe 6,782 6,896 (1.7) - - (1.7)
------------------------- ------ ------------- -------- ----------- --------- --------
Vodacom 1,078 1,113 (3.1) - 4.2 1.1
------ ------------- -------- ----------- --------- --------
Of which: South Africa 778 845 (7.9) - 6.7 (1.2)
Of which: International
operations 299 266 12.4 - (3.8) 8.6
------------------------ ------ ------------- -------- ----------- --------- --------
Other markets 1,036 1,019 1.7 - 8.3 10.0
------ ------------- -------- ----------- --------- --------
Of which: Turkey 434 469 (7.5) - 24.7 17.2
Of which: Egypt 313 248 26.2 - (12.6) 13.6
------------------------ ------ ------------- -------- --------- --------
Rest of the World 2,114 2,132 (0.8) - 6.1 5.3
------------------------- ------ ------------- -------- ----------- --------- --------
Other 123 131
Eliminations (25) (29)
------------------------- ------ ------------- -------- ----------- --------- --------
Total service revenue 8,994 9,130 (1.5) (0.1) 1.4 (0.2)
Other revenue 1,659 1,772 (6.4) (2.0) 3.3 (5.1)
------------------------- ------ ------------- -------- ----------- --------- --------
Revenue 10,653 10,902 (2.3) (0.3) 1.7 (0.9)
------------------------- ------ ------------- -------- ----------- --------- --------
Quarter ended 30 June
Other growth metrics
Vodafone Business revenue 2,655 2,658 (0.1) (0.3) 0.8 0.4
Germany - Mobile retail
revenue 1,212 1,195 1.4 - - 1.4
Germany - Mobile retail
revenue excl. regulatory
impact 1,222 1,195 2.3 (0.1) - 2.2
Germany - Fixed retail
revenue 956 934 2.4 - - 2.4
Germany - Retail revenue 2,168 2,129 1.8 - - 1.8
South Africa - Service
revenue excl. one-off
benefit in the prior
year 778 845 (7.9) - 6.7 (1.2)
----------------------------- ------- ------- ------- ------- ------- -------
Note:
1. The Group's results for the quarter ended 30 September 2018
have been re-presented on an IFRS 15 basis.
ADDITIONAL INFORMATION
Regional results for the six months ended 30 September
Revenue Adjusted EBITDA Adjusted operating Capital Operating
profit additions free cash
flow
--------------------- -------------------- -------------------- --------------- ------------
2019 2018 2019 2018 2019 2018 2019 2018 2019 2018
(restated)(1) (restated)(1) (restated)(1)
EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm
---------------- ------ ------------- ----- ------------- ----- ------------- ----- -------- ----- -----
Europe
Germany 5,590 5,180 2,352 2,082 764 619 836 786 950 943
Italy 2,709 2,898 1,006 1,058 383 417 229 282 332 640
UK 3,151 3,131 658 675 (162) (141) 329 330 24 106
Spain 2,161 2,409 460 529 (161) (101) 309 363 41 (3)
---------------- ------ ------------- ----- ------------- ----- ------------- ----- -----
Other Europe
Netherlands(2) - - - - 44 36 - - - -
Portugal 541 519 207 206 66 62 84 95 119 134
Greece 488 459 155 147 64 59 51 59 15 10
Other 1,668 1,568 510 480 168 163 209 193 114 110
Eliminations (7) (6) - - - - - - - -
------ ------------- ----- ------------- ----- ------------- ----- -----
Other Europe 2,690 2,540 872 833 342 320 344 347 248 254
Eliminations (76) (65) - - - - - - - -
---------------- ------ ------------- ----- ------------- ----- ------------- ----- -----
Europe 16,225 16,093 5,348 5,177 1,166 1,114 2,047 2,108 1,595 1,940
---------------- ------ ------------- ----- ------------- ----- ------------- ----- -----
Rest of
the World
Vodacom 2,734 2,718 1,019 1,070 756 797 390 338 484 457
---------------- ------ ------------- ----- ------------- ----- ------------- ----- -----
Other Markets
Turkey 1,156 1,225 309 265 180 124 114 116 (120) (253)
Egypt 694 536 329 245 233 165 106 87 244 198
India(2) - - - - (692) (133) - - - -
Other 501 698 117 163 49 33 54 84 35 32
Eliminations - - - - - - - - - -
------ ------------- ----- ------------- ----- ------------- ----- -----
Other Markets 2,351 2,459 755 673 (230) 189 274 287 159 (23)
Eliminations - - - - - - - - - -
---------------- ------ ------------- ----- ------------- ----- ------------- ----- -----
Rest of
the World 5,085 5,177 1,774 1,743 526 986 664 625 643 434
---------------- ------ ------------- ----- ------------- ----- ------------- ----- -----
Other 787 738 (17) (5) (11) 34 289 334 (843) (836)
Eliminations (158) (160) - - - - - - - -
---------------- ------ ------------- ----- ------------- ----- ------------- ----- -----
Group 21,939 21,848 7,105 6,915 1,681 2,134 3,000 3,067 1,395 1,538
---------------- ------ ------------- ----- ------------- ----- ------------- ----- -----
Notes:
1. The Group's results for the six months ended 30 September 2018
have been re-presented on an IFRS 15 basis.
2. Includes the Group's share of the joint venture in this market.
Revenue for the quarter ended 30 September
Group and Regions Group Europe Rest of the World
2019 2018 2019 2018 2019 2018
(restated)(1) (restated)(1) (restated)(1)
EURm EURm EURm EURm EURm EURm
Mobile customer
revenue 5,757 5,784 4,049 4,167 1,701 1,613
Mobile incoming
revenue 437 451 301 322 150 139
Other service
revenue 520 508 348 358 109 86
Mobile service
revenue 6,714 6,743 4,698 4,847 1,960 1,838
Fixed service
revenue 2,836 2,395 2,640 2,144 167 219
Service revenue 9,550 9,138 7,338 6,991 2,127 2,057
Other revenue 1,736 1,808 1,095 1,145 411 468
Revenue 11,286 10,946 8,433 8,136 2,538 2,525
Growth
Reported Organic* Reported Organic* Reported Organic*
% EURm % EURm % EURm
Revenue 3.1% (0.4)% 3.7% (2.2)% 0.5% 5.7%
Service revenue 4.5% 0.7% 5.0% (1.4)% 3.4% 8.9%
Operating Companies Germany Italy UK
2019 2018 2019 2018 2019 2018
(restated)(1) (restated)(1) (restated)(1)
EURm EURm EURm EURm EURm EURm
Mobile customer
revenue 1,127 1,138 794 854 755 773
Mobile incoming
revenue 49 50 71 81 65 71
Other service
revenue 113 133 69 64 68 61
Mobile service
revenue 1,289 1,321 934 999 888 905
Fixed service
revenue 1,407 999 292 268 330 326
Service revenue 2,696 2,320 1,226 1,267 1,218 1,231
Other revenue 322 301 153 206 364 350
Revenue 3,018 2,621 1,379 1,473 1,582 1,581
Growth
Reported Organic* Reported Organic* Reported Organic*
% EURm % EURm % EURm
Revenue 15.1% (0.2)% (6.4)% (6.4)% 0.1% 1.1%
Service revenue 16.2% (0.2)% (3.2)% (3.2)% (1.1)% -
Spain Vodacom
2019 2018 2019 2018
(restated)(1) (restated)(1)
EURm EURm EURm EURm
Mobile customer
revenue 563 629 957 931
Mobile incoming
revenue 29 31 41 42
Other service
revenue 59 52 71 48
Mobile service
revenue 651 712 1,069 1,021
Fixed service
revenue 327 356 70 65
Service revenue 978 1,068 1,139 1,086
Other revenue 101 135 263 261
Revenue 1,079 1,203 1,402 1,347
Growth
Reported Organic* Reported Organic*
% EURm % EURm
Revenue (10.3)% (10.4)% 4.1% 2.9%
Service revenue (8.4)% (8.0)% 4.9% 3.6%
Notes:
1. The Group's results for the six months ended 30 September 2018
have been re-presented on an IFRS 15 basis.
Reconciliation of adjusted earnings
Discontinued
Reported operations Adjustments(1) Adjusted
Six months ended 30 September 2019 EURm 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 (1,380) - 986 (394)
(Loss)/ profit for the financial
period continuing operations (1,891) - 2,379 488
Loss for the financial period from - - - -
discontinued operations
(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 (7.24c) 0.85c
Discontinued
Reported operations Adjustments(1) Adjusted
Six months ended 30 September 2018 EURm EURm EURm EURm
(restated)(2)
Operating (loss)/profit (2,029) - 3,846 1,817
Amortisation of acquired customer
base and brand intangible assets - - 317 317
Non-operating income and expense (3) - 3 -
Net financing costs (815) - 400 (415)
(Loss)/profit before taxation (2,847) - 4,566 1,719
Income tax expense (1,420) - 1,010 (410)
(Loss)/profit for the financial period
continuing operations (4,267) - 5,576 1,309
Loss for the financial period from
discontinued operations (3,535) 3,535 - -
(Loss)/profit for the financial period (7,802) 3,535 5,576 1,309
Attributable to:
- Owners of the parent (7,934) 3,535 5,575 1,176
- Non-controlling interests 132 - 1 133
Basic (loss)/earnings per share (28.89c) 4.28c
Notes:
1. See page 19 for further details.
2. Revenue for the comparative period has been revised for the allocation
of, and timing of recognition for, equipment and service revenue
compared to amounts previously disclosed in the condensed consolidated
financial statements for the six months ended 30 September 2018.
This resulted in a net increase in revenue of EUR52 million and
the loss for the financial period decreased by EUR31 million.
OTHER INFORMATION
Definition of terms
Term Definition
Adjusted Operating profit excluding share of results in associates
EBIT and joint ventures, impairment losses, amortisation
of customer bases and brand intangible assets restructuring
costs arising from discrete restructuring plans, lease-related
interest 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 For the six months ended 30 September 2019, adjusted
EBITDA 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.
For the six months ended 30 September 2018, adjusted
EBITDA is operating profit excluding share of results
in associates and joint ventures, depreciation and
amortisation, gains/losses on the disposal of fixed
assets, impairment losses, restructuring costs arising
from discrete restructuring plans, other operating
income and expense and significant items that are not
considered by management to the reflective of the underlying
performance of the Group.
Adjusted Adjusted income tax expense excludes the tax effects
income tax of items excluded from adjusted earnings per share,
expense including: 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 Group adjusted operating profit excludes impairment
operating losses, 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.
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
customer (also known as unified communications) on a single
bill or who receives a discount across both bills.
Customer Includes acquisition costs, retention costs and expenses
costs related to ongoing commissions.
Depreciation The accounting charge that allocates the cost of a
and other tangible or intangible asset to the income statement
amortisation over its useful 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, Egypt and China.
Enterprise The Group's customer segment for businesses.
Europe Region The Group's region, Europe, which comprises the European
operating segments.
Fixed service Service revenue relating to provision of fixed line
revenue ('fixed') and carrier services.
Free cash Operating free cash flow after cash flows in relation
flow ('FCF') to taxation, interest, dividends received from associates
and investments, dividends paid to non-controlling
shareholders in subsidiaries, restructuring costs arising
from discrete restructuring plans and licence and spectrum
payments.
Free cash Operating free cash flow after cash flows in relation
flow (pre-spectrum) to taxation, interest, dividends received from associates
and investments, dividends paid to non-controlling
shareholders in subsidiaries, but before restructuring
costs arising from discrete restructuring plans and
licence and spectrum payments.
IFRS 15 International Financial Reporting Standard 15 "Revenue".
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
revenue and messaging to Vodafone customers.
Internet The network of physical objects embedded with electronics,
of Things software, sensors, and network connectivity, including
('IoT') built-in 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
revenue that 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
revenue services.
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
networks broadband over 30Mbps.
('NGN')
Operating Operating expenses comprise primarily sales and distribution
expenses costs, network and IT related expenditure and business
support costs.
Operating Cash generated from operations after cash payments
free cash for capital additions and lease payments (excludes
flow capital licence and spectrum payments) and cash receipts
from the disposal of intangible assets and property,
plant and equipment, but before restructuring costs
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, Albania and Malta.
Other Markets Other Rest of the World markets include Turkey, Egypt
and Ghana.
Other revenue Other revenue includes connection fees, equipment revenue,
interest income and lease revenue.
Regulation Impact of industry specific 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 Reported growth is based on amounts reported in euros
growth as determined under IFRS.
Rest of the The Group's region, Rest of the World, which comprises
World ('RoW') Vodacom, Turkey and Other Markets operating segments.
Region
Restructuring Costs incurred by the Group following the implementation
costs of discrete restructuring plans to improve overall
efficiency.
RGUs Revenue Generating Units describes the average number
of fixed line services taken by subscribers.
Roaming Impact of European roaming, defined as the increase
in visitor revenues less the increase in roaming costs
and the decline in out-of-bundle roaming revenues.
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.
See "Alternative performance measures" on page 46 for
further details.
SME Small and medium sized enterprises
SoHo Small-office-Home-office customers.
Vodafone Vodafone Business is part of the Group and partners
Business with businesses of every size to provide a range of
business-related services.
For other definitions, refer to pages 250 to 252 of the Group's
annual report for the financial year ended 31 March 2019.
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, vodafone.com/investor, from 12 November
2019.
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 trademarks owned by Vodafone. Other product and company
names mentioned herein may be the trademarks of their respective
owners.
3. All growth rates reflect a comparison to the six months ended
30 September 2018 unless otherwise stated.
4. References to "Q1" and "Q2" are to the quarters ended 30 June
2019 and 30 September 2019, respectively, unless otherwise stated.
References to "half year", "first half" or "H1" are to the six
months ended 30 September 2019 unless otherwise stated. References
to the "year", "financial year" or "2020 financial year" are to the
financial year ending 31 March 2020 and references to the "last
year" or "last financial year" are to the financial year ended 31
March 2019 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 vodafone.com/investor.
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.
Forward-looking statements
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, free cash flow pre-spectrum,
operating expenses and financial leverage for the financial year
ending 31 March 2020; prospects for the 2020 financial year;
operating expenses for the financial year ending 31 March 2021;
expectations for the Group's future performance generally,
including growth and capital expenditure; expectations regarding
the operating environment and market conditions and trends,
including customer usage, competitive position and macroeconomic
pressures, spectrum auctions and awards, 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, the Group's
partnership with IBM, sharing infrastructure and its benefits, such
as the cumulative cash benefit from the agreement with Orange in
Spain, and the expansion of NGN broadband within Vodafone's
European footprint; expectations regarding free cash flow, foreign
exchange rate movements and tax rates; 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 the acquisition of
Liberty Global's cable assets, the merger of Vodafone India and
Idea Cellular and the VodafoneZiggo joint venture and the expected
synergies, cost and capex savings, run-rate savings and NPV from
each; the outcome and impact of regulatory and legal proceedings
involving Vodafone and of scheduled or potential legislative and
regulatory changes, including approvals, reviews and
consultations.
Forward-looking statements are sometimes, but not always,
identified by their use of a date in the future or such words as
"will", "anticipates", "aims", "could", "may", "should", "expects",
"believes", "intends", "plans" ,"prepares" 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 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 expand its spectrum position, win
3G, 4G and 5G allocations and realise expected synergies and
benefits associated with 3G, 4G and 5G; 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 2019. The annual report can be found on the Group's
website (vodafone.com/investor). 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.
For further information:
Vodafone Group Plc
Investor Relations Media Relations
ir@vodafone.co.uk www.vodafone.com/media/contact
Copyright (c) Vodafone Group 2019
- ends -
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LIFLLLDLFLIA
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