TIDMVOD
RNS Number : 5636M
Vodafone Group Plc
12 May 2020
Vodafone Group Plc | FY20 Preliminary results
12 May 2020
Connecting society, businesses and government delivers Vodafone
a good financial performance
-- Supporting society with rapid, comprehensive and coordinated
COVID-19 response
-- Good financial performance with growth in revenue, adjusted
EBITDA and free cash flow
-- Delivering against our strategic priorities and focusing activity
to create value for stakeholders
-- Accelerating digital transformation with new 3-year ambition
of over EUR1 billion net cost savings
-- European TowerCo now operational, on-track for early 2021 monetisation
Financial results (unaudited) FY20 FY19
------------------------------------------
Page EURm EURm Change(%)
----------------------------------------- ----- -------- -------- ---------
Group revenue 33 44,974 43,666 +3.0
Operating profit / (loss) 33 4,099 (951) n/m
Loss for the financial year 33 (455) (7,644) n/m
Basic loss per share 33 (3.13c) (29.05c) n/m
Total dividends per share 47 9.00c 9.00c n/m
Alternative performance measures (1)
Group service revenue 13 37,871 36,458 +0.8*
Adjusted EBITDA 13 14,881 13,918 +2.6*
Adjusted earnings per share 24 5.60c 6.27c (10.7)
Free cash flow (pre-spectrum) 25 5,700 5,443 +4.7
Free cash flow 25 4,949 4,411 +12.2
Net debt** 25 (42,168) (27,033) (56.0)
Net debt to adjusted EBITDA** 27 2.8x 1.9x n/m
Pre-tax return on capital employed
(controlled) 28 6.1% 5.3% n/m
------------------------------------------ ----- -------- -------- ---------
1. See page 56 for the location of the reconciliation
to the closest equivalent GAAP measure.
-- Group revenue grew by 3.0% to EUR45.0 billion, supported by
improving commercial momentum in Europe
-- Adjusted EBITDA grew by 2.6%* to EUR14.9 billion, reflecting
revenue progression and cost programme success
-- Free cash flow grew by 12.2% to EUR4.9 billion, supported by
disciplined capital management
-- Dividends per share of 9.00 eurocents
-- Resilient business model with expected free cash flow (pre-spectrum)
of at least EUR5 billion in FY21
Nick Read, Group Chief Executive, commented:
"Vodafone has delivered a good financial performance - growing
revenue, adjusted EBITDA and free cash flow - whilst building
strong commercial momentum through the year and executing at pace
on our strategic priorities. We have also continued to invest in
our fixed and mobile Gigabit network infrastructure and digital
services, to provide faster speeds for our customers, as well as
successfully managing the recent surges in demand. The services
Vodafone provides are more important than ever and we are committed
to playing a key role in society's recovery to the 'new
normal'.
I am pleased with the rapid, comprehensive and coordinated way
we responded to the COVID-19 crisis. I want to give my personal
thanks to the entire Vodafone team, who through their dedication,
expertise and professionalism, have kept families, friends and
communities connected, enabled students to continue their
education, helped businesses operate and proactively supported
governments to deliver critical services."
Summary Good performance with improved commercial momentum
Basis of preparation
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 FY20 results include Vodafone New Zealand for four
months, and the acquired Liberty Global assets for eight months.
For the purposes of comparison, all organic figures exclude
Vodafone New Zealand and the acquired Liberty Global assets.
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
year ended 31 March 2020 are on an IFRS 16 basis, whereas the
comparative period results for the year ended 31 March 2019 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.
For FY20, the implementation of IFRS 16 means that a revised
definition for adjusted EBITDA has been applied. This restricts
period-on-period comparability of certain of the Group's
alternative performance measures.
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
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 54 for further details and page 56 for the
location of the reconciliation to the respective closest equivalent
GAAP measure.
Net debt marked with a "**" represents net debt adjusted in FY20
to exclude derivative gains in cash flow hedge reserves, the
corresponding losses for which are not recognised on the bonds
within net debt and which are significantly increased due to
COVID-19 related market conditions.
Financial performance
Group revenue increased by 3.0% to EUR45.0 billion (FY19:
EUR43.7 billion), reflecting the underlying improvement in
commercial performance and the contribution from the acquired
Liberty Global assets, which were consolidated from August 2019,
partially offset by the disposal of Vodafone New Zealand.
The Group made a loss for the year of EUR0.5 billion (FY19:
EUR7.6 billion), of which EUR0.9 billion was attributable to owners
of the parent. The loss included profit from operations together
with a profit on the disposals of Vodafone New Zealand and Vodafone
Malta (EUR1.2 billion) and a gain on the formation of the INWIT
joint venture (EUR3.4 billion). Vodafone's share of losses related
to Vodafone Idea (EUR2.5 billion) is principally due to adverse
legal judgements by the Supreme Court in India and the Group
carrying value of Vodafone Idea has been reduced to EURnil.
Further, impairments totalling EUR1.7 billion in Spain, Ireland,
Romania and Automotive and mark-to-market losses of EUR1.1 billion
were recognised. As a result, the basic loss per share for the year
was EUR3.13 eurocents.
Group organic service revenue increased by 0.8%* to EUR37.9
billion (FY19: EUR36.5 billion), with improved commercial
performance across all major markets. Adjusted EBITDA increased by
2.6%* to EUR14.9 billion (FY19: EUR13.9 billion). This growth was
the result of the success of our cost transformation agenda,
alongside improving commercial momentum and organic service revenue
growth. This enabled us to deliver a fifth consecutive year of
adjusted EBITDA margin expansion, increasing to 33.1% in FY20, from
28.3% in FY15.
Cash flow, funding & capital allocation
Free cash flow (pre-spectrum) increased by 4.7% to EUR5.7
billion (FY19: EUR5.4 billion). Organic adjusted EBITDA growth and
the adjusted EBITDA contribution from the acquired Liberty Global
assets was partially offset by higher cash interest and higher
capital additions for the acquired Liberty Global assets. Spectrum
payments for the year totalled EUR0.2 billion (FY19: EUR0.8
billion) and restructuring and integration costs totalled EUR0.6
billion (FY19: EUR0.2 billion). Free cash flow (post-spectrum and
restructuring/integration costs) was EUR4.9 billion (FY19: EUR4.4
billion).
Net debt as at 31 March 2020 was EUR42.2 billion** compared to
EUR27.0 billion as at 31 March 2019. This increase in net debt
reflects cash outflows and debt 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 EUR1.7
billion primarily relating to 5G spectrum purchases in Germany,
dividend payments of EUR2.3 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 EUR4.4
billion primarily relating to the disposals of Vodafone New
Zealand, Vodafone Malta and the INWIT combination in Italy.
We aim to maintain our financial leverage within a range of
2.5-3.0x net debt to adjusted EBITDA. At the end of the financial
year financial leverage was 2.8x**. Total dividends per share for
the year are 9.0 eurocents (FY19: 9.0 eurocents), implying a final
dividend per share of 4.5 eurocents, which will be paid on 7 August
2020.
COVID-19 | Supporting the digital society through critical
connectivity
We are committed to doing our utmost to support society during
this period of uncertainty and change. As a provider of critical
connectivity and communications services enabling our digital
society, we announced a five-point plan to help the communities in
which we operate in Europe. Our plan is to:
-- maintain network service quality;
-- provide network capacity and services for critical government
functions;
-- improve dissemination of information to the public;
-- facilitate working from home and help small and micro businesses
within our supply chain; and
-- improve governments' insights in affected areas.
Teams throughout our markets have worked tirelessly to deliver
our five-point plan and to support all the communities in which we
operate. So far, the actions we have taken have totalled donations
of goods and services of approximately EUR100 million, reaching 78
million customers. Some of the actions and initiatives include the
following:
-- In Italy, we have donated more than 1,200 smartphones and tablets
to hospitals, foundations and non-profit organisations to enable
patients to remain in touch with relatives.
-- In Spain, we have provided over 30,000 SIM cards with 60GB
of data to hospitals and care centres.
-- Vodafone Germany and Corevas have provided EmergencyEye technology
to allow doctors to assess COVID-19 symptoms remotely. We are
ensuring that the video chat technology always operates swiftly
in an emergency.
-- In the UK, we have provided vital connectivity for new hospital
facilities in London, Cardiff, Manchester and Glasgow.
-- In Portugal, we have established remote monitoring cameras
to allow doctors and nurses to monitor patients in over 100
hospital rooms.
-- In Greece, Vodafone is working to donate equipment and hands-free
accessories to healthcare personnel in COVID-19 clinics across
the country's key hospitals.
-- In the Czech Republic and Hungary, we are working with health
ministries to provide official COVID-19 information in real-time
through additional features on their Life-Saving app. The app
has already reached 1.3 million Czech users and more than 500,000
users in Hungary.
-- Vodafone Romania has installed new mobile sites for temporary
hospitals in Bucharest and Constanta.
-- Vodafone Turkey has purchased and donated 10 ventilators to
a public hospital and provided public healthcare workers with
150 tablets with 30GB of free data.
-- In South Africa, Vodacom has partnered with Discovery Health
to offer easy access to online COVID-19 screening and consultations
for all South Africans.
Further information regarding our response to COVID-19 is
detailed at vodafone.com/covid19 .
Strategic review Strong progress against our priorities
At the start of the financial year, we set out four strategic
priorities that would guide our actions and ambitions:
1. deepening customer engagement;
2. accelerating digital transformation;
3. improving asset utilisation; and
4. optimising the portfolio.
We have executed at pace across all four priorities and
delivered a significant step-change in progress against our
transformation agenda over the course of the year. In light of the
current conditions across our markets, we are accelerating in
focused areas of our strategic priorities to support societies in
their economic recovery and return to a state of economic
resilience.
The table and discussion below summarise the progress against
our strategic priorities.
Strategic progress summary FY20 FY19
--------------------------------------------- -------- ------------------
1. Deepening customer engagement
Europe mobile contract customers(1) 64.4m 63.2m
Europe broadband customers(1) 25.0m 18.8m
Europe on-net Gigabit capable connections(1) 31.9m 21.9m
Europe Consumer converged
customers(1) 7.2m 6.6m
Europe mobile contract customer
churn(4) 14.6% 15.5%
Africa data users(2) 82.6m 75.6m
M-Pesa transaction volume(2) 12.2bn 11.0bn
Business fixed-line service
revenue growth 3.3% 3.8%
IoT SIM connections 102.9m 84.9m
2. Accelerating digital transformation
Europe net opex savings(3) EUR0.4bn EUR0.4bn
Europe digital channel sales
mix 21% 17%
Frequency of customer contacts
per year 1.4 1.5
MyVodafone app penetration 65% 62%
3. Improving asset utilisation
Average Europe monthly mobile data usage per
customer 5.7GB 3.7GB
European Tower sites (proportionate) 60k -
Europe on-net NGN broadband
penetration(1) 30% 28%
----------------------------------------------- -------- ------------------
Notes:
1. Including VodafoneZiggo.
2. Africa including Safaricom.
3. Europe and common function operating costs.
4. Excluding the impact of data only SIM losses in Italy during Q3 and Q4 FY20.
1 | Deepening customer engagement
Our ambition
Consumer
We aim to deepen the relationship we have with our customers by
selling additional products and services, particularly fixed and
converged products in Europe and mobile data and financial services
in Africa. This will drive revenue growth and improve customer
loyalty.
Business
Our strategy in the Business segment is to drive growth and
deepen engagement with our existing mobile customers by
cross-selling additional total communications products including
next generation ("NGN") fixed, IoT and cloud services.
Our progress
Consumer
We have made strong progress on our strategy and delivered a
more consistent commercial performance across both Europe and
Africa this year. This has driven six consecutive quarters of
improved customer loyalty, with mobile contract churn in Europe
down 1.0 percentage point year-on-year. Based on Consumer net
promoter scores, at the end of the period the Group was a leader or
co-leader in 12 out of 18 markets. We also maintained our good
momentum in mobile and NGN net additions.
We are the largest mobile and fixed operator in Europe,
supported by:
-- Our NGN fixed-line network which is the largest in Europe and
covers 136 million households. This provides us with a significant
opportunity to capture market share gains and increase average
revenue as customers move from legacy Digital Subscriber Line
("DSL") to Gigabit capable technologies. By FY23, we will be
able to deliver Gigabit speeds to approximately 50 million
homes across Europe on our own network.
-- Driving convergence across our customer base. We believe there
is a strong opportunity to increase the number of customers
who subscribe to converged or multi-product services. This
also helps improve customer loyalty.
-- Our subscription-based television distribution business in
Europe, which now has over 22 million active customer subscriptions.
During the year we launched a number of specific commercial
initiatives, these included:
-- Launching new speed-tiered unlimited mobile data plans across
6 markets, meeting customers' demand for 'worry-free' data
usage and creating opportunities for revenue growth. Our unlimited
data customer base totalled 4 million consumer SIMs by the
end of FY20. We also launched 5G services in 97 cities across
8 European markets.
-- In Germany, following the acquisition of Unitymedia, we are
the leading provider of Gigabit services with a significant
speed advantage over the incumbent operator. The percentage
of homes passed on our network that subscribe to our NGN broadband
service was 33% in FY20, reflecting the significant opportunity
we still have to increase our market share and upsell customers
to higher speed packages. In Q4, we launched a new "GigaCable
Max" campaign as part of the re-branding of Unitymedia to Vodafone
which highlighted our network advantage. This campaign has
been highly successful and helped drive record cable net additions
of more than 250,000 in H2.
-- In the UK, we began a new campaign, the "Great British Broadband
Switch", to coincide with new regulation relating to out-of-contract
broadband customer notifications. This campaign contributed
to a record number of new Consumer fixed customers added in
the fourth quarter. Fixed-line broadband connections now total
751,000.
In Africa, demand for mobile data remains significant given the
lack of fixed line infrastructure. There is also a substantial
opportunity to grow M-Pesa (our mobile payments platform) and
expand it into new financial and digital services.
During the year, we saw continued growth in the demand for
mobile data. Monthly average data usage increased to 2.0GB (FY19:
1.4GB) and the total number of data users grew by 7.0 million to
82.6 million.
Business
Vodafone Business has increased its pace of strategic execution
following the appointment, in September 2019, of Vinod Kumar to
lead our cross-geography activities. Business customers, ranging
from entrepreneurial sole traders through to large global
organisations, contribute 28% to our total service revenue.
-- We continue to see a significant opportunity to win market
share in the evolving wide area networking ("WAN") market.
With businesses more reliant on remote working and multi-site
operations than ever before, we are seeing larger enterprise
customers investing in more reliable software defined networking
("SDN") and moving away from legacy solutions which are both
less reliable and more expensive to maintain.
-- Our leading global Internet of Things ("IoT") platform continues
to resonate with Business customers and we added 19.5 million
new SIM connections during the year. Our IoT connections support
a range of industries including car manufacturers, logistics,
energy and healthcare.
-- In December, we were the first telecommunications operator
in Europe to announce an agreement with Amazon Web Services
("AWS") to support ultra-low latency mobile edge computing
services by deploying AWS Wavelength solutions at the edge
of Vodafone's 5G networks, as part of our multi-cloud strategy.
With low latency, the new services will help support artificial
intelligence, augmented and virtual reality, video analytics,
autonomous vehicles, robotics and drone control, and will generate
incremental revenues for the Group.
-- Our Business customer activities continue to gain traction
in South Africa, with revenue from Business customers now contributing
20% of total service revenue.
2 | Accelerating digital transformation
Our ambition
We have a clear ambition to strengthen our differentiation and
lead the industry in capturing the benefits of digital. As a
result, we are systematically transforming our operating model by
being 'Digital First' - delivering a fundamentally improved
customer experience whilst also structurally lowering our cost
base. We shared our ambitions at an investor event in September
2019, where we discussed three primary areas of focus: digital
customer management, digital technology management and digital
operations.
Our progress
In FY19, we began our multi-year programme to generate at least
EUR1.2 billion of net savings from operating expenses in Europe and
Group common functions. At the end of the financial year we had
successfully achieved EUR0.8 billion of our original target and we
remain on track to achieve the remaining EUR0.4 billion in the
financial year ahead. Highlights of activity in the financial year
include the following:
-- We have also increased the use of technology to communicate
with existing customers. We are migrating from less efficient
manual models and call centres, to 'always-on' digital marketing.
At the end of the financial year, 11 of our 13 European markets
were using these new systems.
-- Assisting our customers with routine queries is a central part
of our operations. In FY19, we conducted over 42 million assisted
conversations through our contact centres every month. This
incurred an annual cost of over EUR1.2 billion. Through a targeted
programme of technology deployment, including our Artificial
Intelligence ("AI") assistant 'TOBi', we reduced the number
of customer calls by 20% over the last two years.
-- In FY19, we had almost 7,700 retail stores across the Group,
which drove EUR800 million of annual operating expenses. We
still see a central role for retail stores in our future channel
mix, but we are evolving to a more integrated and holistic
approach to channel management. By the end of the financial
year we had reduced our store footprint by 7%.
-- Across the Group, we have over 20,000 team members within our
shared services, under the banner '_VOIS'. This is a digital
operations centre of excellence. Over the last two years, we
have created 3,500 FTE role efficiencies through robotics,
artificial intelligence and process optimisation.
Our teams have continued to identify further cost saving and
efficiency opportunities in addition to this initial target in a
number of areas. As a result, we are extending our cost
transformation programme. We are now targeting to deliver at least
EUR1 billion of net operating expense savings during FY21-23, in
addition to the EUR0.8 billion delivered in FY19-20.
Moreover, we expect to deliver a net reduction in commissions
paid to distribution channels. Every year, we spend approximately
EUR2.5 billion in commissions to third parties. As we move our
sales towards digital direct channels we expect these costs to
reduce over time and contribute to our margin expansion.
3 | Improving asset utilisation
Our ambition
We aim to improve the utilisation of all of the Group's assets
as part of our focus on improving the Group's return on
capital.
Our progress
We employ significant capital resources across both our fixed
line and mobile communications infrastructure. The quality of our
network is of paramount importance in delivering an overall
compelling experience for our customers. Over the past year we have
explored a number of routes to improve both the capacity and
coverage of our networks, whilst also improving the utilisation of
these valuable assets. These initiatives include:
-- 'Passive' sharing: reciprocal access with other communications
providers to the physical mobile sites (i.e. towers and rooftops)
to install radio equipment;
-- 'Deep passive' infrastructure sharing: as above, but also including
reciprocal access with other communications providers to the
high-speed fixed infrastructure connecting mobile sites;
-- 'Active' infrastructure sharing: reciprocal access with other
communications providers to both the physical mobile sites
and radio equipment, outside of major urban areas; and
-- Asset 'monetisation' : monetising our infrastructure assets,
highlighting the valuation gaps between infrastructure assets
and listed telecommunications providers.
During the year, we made strong progress in each of these areas,
with the following highlights:
-- We have now secured a range of network sharing partnerships
across Europe including: Deutsche Telekom in Germany, Telecom
Italia in Italy, Orange in Spain and Romania, Telefonica in
the UK and Wind in Greece. These network sharing agreements
support improved mobile coverage in rural areas, reduce our
environmental impact, increase the pace of 5G network deployment
and generate significant cost savings.
-- In March 2020, we completed the merger of our passive tower
infrastructure in Italy with INWIT. This merger has created
Italy's leading tower company with over 22,000 towers. Vodafone
received EUR2.1 billion in cash and a 37.5% shareholding in
the combined entity. In April 2020, we received special dividends
of EUR0.2 billion following the INWIT recapitalisation and
subsequently sold down 4.3% of our shareholding realising a
further EUR0.4 billion of proceeds. Our current shareholding
in INWIT is 33.2% and we intend to retain joint control alongside
Telecom Italia.
-- In July 2019, we announced our intention to separate our European
tower infrastructure and to explore a variety of monetisation
alternatives. We have now completed the operational separation,
with the full management team in place. We are preparing for
a potential IPO in early calendar 2021, and we are targeting
to provide financial information at our interim results in
November 2020.
-- We have made a fast start on integrating the recently acquired
Liberty Global assets in Germany and CEE and remain confident
that we will deliver the EUR535 million of targeted annual
cost and capex savings by the fifth full year post-completion.
We have launched convergent offers in all four markets, and
are encouraged by the uptake.
4 | Optimising the portfolio
Our ambition
Our aim has been to actively manage our portfolio in order to
strengthen our market positions, simplify the Group and reduce our
financial leverage.
Our progress
Over the last two years, we have executed a significant amount
of portfolio activity, in order to reposition the Group as a
converged communications technology provider across our two scaled
geographic platforms in Europe and Africa. The optimisation of our
portfolio is now substantially complete. The table below summarises
our activity.
Country Actions taken
------------ ----------------------------------------------------------
Acquisitions
============ ==========================================================
Germany & Acquisition and integration of Liberty Global's assets
CEE for EUR18.5 billion in July 2019
============ ==========================================================
Greece Acquisition of CYTA Telecommunications Hellas for EUR118
million in July 2018
============ ==========================================================
Albania Acquisition of AbCom for an undisclosed amount in March
2020
============ ==========================================================
Disposals
============ ==========================================================
New Zealand Sale of 100% holding to Infratil and Brookfield for EUR2.0
billion in July 2019
============ ==========================================================
Malta Sale of 100% holding to Monaco Telecom for EUR242 million
in March 2020
============ ==========================================================
Qatar Sale of 51% holding to Qatar Foundation for EUR301 million
in March 2018
============ ==========================================================
Egypt MoU signed with Saudi Telecom in January 2020 to pursue
sale of 55% holding for EUR2.2 billion
============ ==========================================================
Mergers
============ ==========================================================
Italy Merger of Vodafone Italy's towers into INWIT for EUR2.35
billion and 37.5% holding in INWIT in March 2020
============ ==========================================================
India Merger of Vodafone India and Idea Cellular in July 2018
============ ==========================================================
India Agreement on proposed merger of Indus Towers with Bharti
Infratel in April 2018
============ ==========================================================
Australia Merger of our existing Vodafone Hutchison joint-venture
with TPG Telecom approved in March 2020
============ ==========================================================
Africa Consolidated our holdings in Safaricom and M-Pesa to
be primarily held through Vodacom in April 2020
------------ ----------------------------------------------------------
The year ahead | Heightened focus on key priorities to support
recovery
In light of the evolving economic environment, we have reviewed
our strategic plans to identify areas of opportunity to accelerate
further. We have delivered at pace in the year, but there are areas
in which we can heighten the prioritisation of our plans to support
the broader economic recovery in our markets and exit in an even
stronger position.
We will continue to ensure the quality, speed and reliability of
our networks, whilst simplifying our offers and enhancing our CRM
systems to support a faster migration to digital channels.
Meanwhile, given the economic backdrop, our transformation
programme to radically reduce our cost base through targeted
deployment of technology remains an essential lever to support our
relative financial resilience.
In order to deliver the increasing speed, coverage and capacity
our customers need, whilst improving the economic return for our
shareholders, we will leverage the network sharing arrangements we
have put in place across our markets. Whilst we have executed a
significant number of important strategic transactions over the
last 18 months, we are working at pace to complete the full legal
separation of our European Towers, to facilitate execution of
monetisation options in the early part of calendar year 2021.
Further information regarding our financial outlook is contained on
page 12.
Our purpose We connect for a better future
We work hard to build a digital future that works for everyone.
It is our ambition to improve one billion lives and halve our
environmental impact by 2025. We are driving progress towards the
delivery of our 2025 targets across three pillars: Digital Society;
Inclusion for All; and Planet. We also remain dedicated to ensuring
that Vodafone operates responsibly and ethically. This year marks
the beginning of a 'decade of delivery' to achieve the UN
Sustainable Development Goals (SDGs). The SDGs provide a clear
roadmap to contribute towards creating a better future. We are
committed to playing our role through leveraging the power of our
technology, networks and services.
Digital Society
We believe in a connected digital society, connecting people,
communities and things to the internet like never before with
super-fast data speeds. With our high-speed networks people will
access an ever-growing range of services in real-time and
businesses can develop new products and services to meet the needs
of future generations. IoT will create more efficient, safer and
smarter products and services; and mobile financial services will
reduce poverty and enable access to essential services like
healthcare and education. Our targets and FY20 progress for Digital
Society include:
2025 Target
--------------- ----------------------------------------------------------
Gigabit network Connecting over 250 million people to our next generation
networks
IoT solutions Connecting over 150 million vehicles to IoT
Mobile money Connecting over 50 million people to mobile money services
--------------- ----------------------------------------------------------
Inclusion for All
We believe that the opportunities and promise of a better
digital future should be accessible to all with no one left behind.
Our technology can help people contribute equally and fully in a
digital society. Our targets and FY20 progress for Inclusion for
All include:
2025 Target
------------------- ------------------------------------------------------
Connecting Connecting an additional 20 million women in Africa(1)
women and Turkey to mobile
Supporting Supporting 10 million young people to access digital
young people skills, learning and employment opportunities by 2022
Vodafone Foundation Improving the lives of 400 million people through our
foundation
------------------- ------------------------------------------------------
Note:
1. Excludes Egypt.
Planet
We believe that urgent and sustained action is required to
address climate change, and business success should not come at a
cost to the environment. Our focus on energy efficiency, renewable
energy supply and network waste will help us to mitigate the impact
of our business growth and our customers' increasing demand for
data. One of our most important contributions is through using our
technologies and services to enable our customers to reduce
greenhouse gas emissions. In July 2019, we committed to setting a
Science Based Target to limit global temperature rise to below
1.5degC and reaching net-zero emissions no later than 2050. Our
targets and FY20 progress for Planet include:
2025 Target
---------------- ---------------------------------------------------------
Greenhouse Reducing our greenhouse gas emissions by 50% against
gas reduction our 2017 baseline
Renewable energy Purchasing 100% of our electricity from renewable sources
Recycling Reusing, reselling, or recycling 100% of our redundant
network equipment
---------------- ---------------------------------------------------------
Outlook Operating model delivering relative resilience
Performance against FY20 guidance
In May 2019, we set out our guidance for FY20. Our guidance was
subsequently updated in November 2019, reflecting the acquisition
of Liberty Global's assets in Germany and CEE and the sale of
Vodafone New Zealand. The table below compares the guidance given
and our actual performance.
Original guidance Updated guidance FY20 outcome
------------------------------ ----------------- ----------------- ---------------
EUR13.8-14.2 EUR14.8-15.0
Adjusted EBITDA billion billion EUR14.9 billion
Capital expenditure to total
revenue ratio 'mid-teens' 17% 16.5%
Financial leverage 3.0x 3.0x 2.8x**
Free cash flow (pre-spectrum) > EUR 5.4 billion EUR 5.4 billion EUR5.7 billion
-------------------------------- ----------------- ----------------- ---------------
Outlook for FY21
The economic impact of the COVID-19 pandemic in our markets,
whilst uncertain, is likely to be significant. Whilst our business
model is more resilient than many others, we are not immune to the
challenges. We are experiencing a direct impact on our roaming
revenues from lower international travel and we also expect
economic pressures to impact our customer revenues over time.
However, we are also seeing significant increases in data volumes
and further improvements in loyalty, as our customers place greater
value on the quality, speed and reliability of our networks. Given
the uncertainties and impacts we are not able to provide Adjusted
EBITDA guidance for FY21 and guidance will be limited to free cash
flow (pre-spectrum). However, based on the current prevailing
assessments of the global macroeconomic outlook Adjusted EBITDA for
FY21 may be flat to slightly down, compared to a rebased FY20
baseline of EUR14.5 billion.
FY21 Guidance
We are confident on the relative resilience of our free cash
flow generation, supported by our strong focus on cost and capex
discipline. As a result, we expect free cash flow (pre-spectrum) in
FY21 to be at least EUR5 billion.
Financial modelling considerations & assumptions
The guidance above reflects the following:
-- The deconsolidation of Vodafone Italy Towers following its
merger with INWIT (completed in March 2020)
-- The sale of Vodafone Malta (completed in March 2020)
-- Vodafone Egypt will remain in guidance until its sale to Saudi
Telecom Company ("stc") is complete (currently planned to occur
in FY21)
-- No significant change in the Group's effective cash interest
rate or cash tax rate is assumed
-- Foreign exchange rates used when setting guidance were as follows:
- EUR 1 : GBP 0.87;
- EUR 1 : ZAR 20.59;
- EUR 1 : TRY 7.50; and
- EUR 1 : EGP 17.02.
-- Free cash flow guidance excludes the impact of license and
spectrum payments, restructuring costs, any material one-off
tax related payments.
-- Guidance assumes no material change to the structure of the
Group or any fundamental structural change to the Eurozone.
Financial performance Good results with improved commercial momentum
-- Group revenue grew by 3.0% to EUR45.0 billion, driven by improving
commercial momentum in Europe
-- Total net operating cost savings of EUR0.4 billion in the year,
facilitated by continued digital transformation
-- Adjusted EBITDA grew by 2.6%* to EUR14.9 billion, reflecting
commercial momentum and cost savings progress
-- Free cash flow (pre-spectrum) grew by 4.7% to EUR5.7 billion,
driven by revenue and adjusted EBITDA growth and capital discipline
-- Dividends per share of 9.0 eurocents
Group Good financial performance, in line with our plans (1,2)
FY20 (1,2) FY19
EURm EURm Change (%)
-------------------------------------------------- ----------- ------- ----------
Revenue 44,974 43,666 3.0
- Service revenue(3) 37,871 36,458 3.9
- Other revenue 7,103 7,208 (1.5)
Adjusted EBITDA (3) 14,881 13,918 6.9
Depreciation and amortisation (10,085) (9,665) (4.3)
----------- ------- ----------
Adjusted EBIT (3) 4,796 4,253 12.8
Share of adjusted results in associates
and joint ventures(4) (241) (348) 30.7
----------- ------- ----------
Adjusted operating profit (3) 4,555 3,905 16.6
Adjustments for:
- Impairment losses(5) (1,685) (3,525)
- Restructuring costs (720) (486)
- Amortisation of acquired customer base
and brand intangible assets (638) (583)
- Adjusted other income and expense(4) 2,257 (262)
- Interest on lease liabilities(6) 330 -
----------- -------
Operating profit / (loss) 4,099 (951)
Non-operating income and expense (3) (7)
Net financing costs (3,301) (1,655)
Income tax expense (1,250) (1,496)
----------- -------
Loss for the financial year from continuing
operations (455) (4,109)
Loss for the financial year from discontinued
operations - (3,535)
----------- -------
Loss for the financial year (455) (7,644)
Attributable to:
- Owners of the parent (920) (8,020)
- Non-controlled interests 465 376
----------- -------
Loss for the financial year (455) (7,644)
-------------------------------------------------- ----------- ------- ----------
Further detailed income statement information is available in a downloadable
spreadsheet format at investors.vodafone.com
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 year ended 31 March
2020 are on an IFRS 16 basis, whereas the comparative period for
the year ended 31 March 2019 are on an IAS 17 basis. Note 1 of the
unaudited condensed consolidated financial statements explains the
impact of the adoption of IFRS 16 on the consolidated financial
position at 1 April 2019.
2. The 2020 results reflect average foreign exchange rates of
EUR1:GBP0.87, EUR1:INR 78.78, EUR1:ZAR 16.42, EUR1:TRY 6.52 and
EUR1: EGP 18.18.
3. 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 year ended 31
March 2020, 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 54 for more
information.
4. Share of results of equity accounted associates and joint
ventures presented within the Consolidated income statement
includes -EUR241 million (2019: -EUR348 million, 2018: EUR389
million) included within Adjusted operating profit, -EUR25 million
(2019: -EUR26 million, 2018: -EUR9 million) included within
Restructuring costs, -EUR215 million (2019: -EUR420 million, 2018:
-EUR439 million) included within Amortisation of acquired customer
based and brand intangible assets and -EUR2,024 million which is
principally related to Vodafone Idea Limited (2019: -EUR114
million, 2018: EURnil) included within Other adjusted
income/(expense). .
5. Impairment losses relate to Spain (EUR840 million), Ireland
(EUR630 million), Romania (EUR110 million) and Vodafone Automotive
(EUR105 million). The prior year impairment loss relates to Spain
(EUR2.9 billion), Romania (EUR0.3 billion) and Vodafone Idea
(EUR0.3 billion).
6. 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.
Geographic performance summary | Improving commercial momentum
Other Total Other
Europe Group
FY20 Germany Italy UK Spain Europe (1) Vodacom markets (1)
------------------------ ------- ----- ----- ----- ------ ------ ------- ------- ------
Total revenue ( EUR
m) 12,076 5,529 6,484 4,296 5,541 33,793 5,531 4,386 44,974
Service revenue (EURm) 10,696 4,833 5,020 3,904 4,890 29,213 4,470 3,796 37,871
Adjusted EBITDA (EURm) 5,077 2,068 1,500 1,009 1,738 11,392 2,088 1,400 14,881
Adjusted EBITDA margin
% 42.0 37.4 23.1 23.5 31.4 33.7 37.8 31.9 33.1
Adjusted EBIT (EURm) 1,701 813 (132) (294) 501 2,589 1,321 902 4,796
Adjusted operating
profit/(loss) (EURm) 1,701 813 (132) (294) 619 2,707 1,569 297 4,555
------------------------ ------- ----- ----- ----- ------ ------ ------- ------- ------
1. For a full disaggregation of our financial results by geography,
including intersegment eliminations, see pages 57 and 58.
Further geographic performance information is available in a
downloadable spreadsheet format at investors.vodafone.com
Total Europe | 77% of Group Adjusted
EBITDA
FY20 FY19 Organic
EURm EURm Change (%)*
----------------------------------------- ------- ------- -----------
Total revenue 33,793 32,144
- Service revenue 29,213 27,680 (1.2)
- Other revenue 4,580 4,464
Adjusted EBITDA 11,392 10,289 1.6
Adjusted EBITDA margin 33.7% 32.0%
------- -------
Depreciation and amortisation (8,803) (8,239)
------- -------
Adjusted EBIT 2,589 2,050
Share of adjusted results in associates
and joint ventures 118 150
------- -------
Adjusted operating profit 2,707 2,200
----------------------------------------- ------- ------- -----------
Europe revenue increased by 5.1% and organic service revenue
decreased by 1.2%*, reflecting competitive pressure in Italy and
Spain offset by good growth in the UK and Other Europe, and retail
growth in Germany.
Europe adjusted EBITDA increased by 10.7%. On an organic basis
adjusted EBITDA increased by 1.6%* as service revenue declines were
offset by a EUR0.4 billion reduction in operating expenses.
Europe adjusted EBIT grew by 26.3%, reflecting the contribution
of the acquired Liberty Global assets.
The following table sets out the progression of organic service
revenue growth during the year.
FY20 (organic service revenue
growth % ) Q1 Q2 H1 Q3 Q4 H2 FY20
-------------------------------- ----- ----- ----- ----- ----- ----- -----
Europe (1.7) (1.4) (1.6) (1.4) (0.4) (0.9) (1.2)
Rest of World 5.3 8.9 7.7 9.1 7.9 8.5 8.1
Total Group (0.2) 0.7 0.3 0.8 1.6 1.2 0.8
--------------------------------- ----- ----- ----- ----- ----- ----- -----
Rest of World revenue decreased by 3.8% and organic service
revenue increased by 8.1%*, reflecting good growth in Turkey and
Egypt and continued growth at Vodacom. Adjusted EBITDA decreased by
2.0%. On an organic basis adjusted EBITDA increased by 6.8%*,
driven by service revenue growth ahead of inflation and good cost
control. Adjusted EBIT grew by 3.2%, reflecting operational
performance and cost control.
The COVID-19 pandemic had a relatively minor impact on FY20
performance. However, following the end of the financial year, we
have seen greater resilience of our business in Germany and a more
significant impact on performance in Spain in particular. The
immediate impacts of COVID-19 have been on international roaming,
usage levels and the rates of customer churn and additions. In
April, we have seen roaming in Europe fall by 65% to 75%. Mobile
data has increased by 15% and fixed line usage has increased by as
much as 70% in some of our markets. We have seen the rates of
customer churn reduce by 4-5 percentage points and the rates of new
gross consumer additions reduce by around 40%. With our business
customers, we have seen SMEs requesting deferrals for payments and
have been contacted by some Enterprise customers seeking to delay
projects.
Germany | 34% of Group Adjusted EBITDA
FY20 FY19 Organic
EURm EURm Change (%)*
----------------------------------------- ------- ------- -----------
Total revenue 12,076 10,390
- Service revenue 10,696 9,145 -
- Other revenue 1,380 1,245
Adjusted EBITDA 5,077 4,079 2.5
Adjusted EBITDA margin 42.0% 39.3%
------- -------
Depreciation and amortisation (3,376) (3,009)
------- -------
Adjusted EBIT 1,701 1,070
Share of adjusted results in associates
and joint ventures - -
------- -------
Adjusted operating profit 1,701 1,070
----------------------------------------- ------- ------- -----------
Service revenue excluding Unitymedia was flat* (Q3: flat*, Q4:
-0.1%*) as solid retail growth was offset by declining wholesale
revenue and the impact of international call rate regulation.
Retail revenue grew 1.1%* (Q3: 1.0%*, Q4: 0.9%*).
Fixed service revenue increased by 2.4%* (Q3: 2.8%*, Q4: 2.2%*)
as good retail growth was partially offset by wholesale declines.
DSL migrations to the Unitymedia footprint are excluded from our Q4
organic growth rate. Our commercial momentum accelerated with
381,000 net cable customer additions in the year (including
Unitymedia from August 2019), supported by 110,000 migrations from
DSL and the success of our 'GigaCable Max' campaign following the
rebranding of Unitymedia in February 2020; we added 216,000
broadband customers. We maintained our good momentum in convergence
supported by our 'GigaKombi' proposition, adding 259,000 Consumer
converged customers in the year, which took our total Consumer
converged customer base to 1.5 million. Our TV customer base
declined by 245,000 (including Unitymedia from August 2019)
reflecting the loss of primarily lower ARPU basic TV subscribers in
the Kabel Deutschland AG ("KDG") footprint and customer losses in
the Unitymedia footprint.
Mobile service revenue declined by 1.8%* (Q3: -2.2%*, Q4:
-1.9%*) driven by declines in wholesale and a drag from regulation.
Retail revenue excluding regulatory impacts grew 0.7%* (Q3: 0.4%*,
Q4: 0.4%*). We added 542,000 contract customers, supported in part
by the success of our 'GigaCube' proposition as well as by our
continued good commercial momentum in branded channels. Contract
churn improved by 0.8 percentage points year-on-year in Q4 to
12.3%, driven by improved loyalty in our branded consumer base and
Business.
Adjusted EBITDA increased by 2.5%* and the organic adjusted
EBITDA margin was 0.8* percentage points higher, driven by our
focus on more profitable direct channels and effective cost
management. The adjusted EBITDA margin was 42%.
Italy | 14% of Group Adjusted EBITDA
FY20 FY19 Organic
EURm EURm change (%)*
----------------------------------------- ------- ------- -----------
Total revenue 5,529 5,857
- Service revenue 4,833 5,030 (3.9)
- Other revenue 696 827
Adjusted EBITDA 2,068 2,202 (6.6)
Adjusted EBITDA margin 37.4% 37.6%
------- -------
Depreciation and amortisation (1,255) (1,268)
------- -------
Adjusted EBIT 813 934
Share of adjusted results in associates
and joint ventures - -
------- -------
Adjusted operating profit 813 934
----------------------------------------- ------- ------- -----------
Service revenue declined by 3.9%* (Q3: -5.0%*, Q4: -3.7%*) with
good growth in fixed offset by declines in mobile. Mobile service
revenue declined by 7.4%* (Q3: -7.7%*, Q4: -8.0%*).
Market mobile number portability ("MNP") volumes were down 23%
year-on-year in FY20 and were down 17% quarter-on-quarter in Q4.
MNP further improved in March, reducing by 37% month-on-month, as
COVID-19 impacted commercial activity market wide. Our customer
outflows also moderated during the year. However, competition in
the low-value segment of the pre-paid market remained intense, and
our second brand 'ho'. continued to grow strongly, reaching 1.8
million active customers at the end of the year.
Fixed service revenue increased by 8.2%* (Q3: 4.2%*, Q4: 10.4%*)
and we added 121,000 broadband customers in the year. Our total
Consumer converged customer base is now 1.0 million (representing
36% of our broadband base), an increase of 92,000 in the year.
Through our owned NGN footprint and strategic partnership with Open
Fiber we now pass 7.5 million households. The sequential Q4
improvement in service revenue primarily reflected higher project
revenues in Business.
Adjusted EBITDA declined by 6.6%* including a 2.7 percentage
point negative impact from a one-off regulatory provision, and the
adjusted EBITDA margin declined by 0.4* percentage points. Service
revenue declines were partially offset by tight control of
operating expenses, which fell by 7.6%* year-on-year, together with
significantly lower commercial costs. The adjusted EBITDA margin
was 37.4%.
UK | 10% of Group Adjusted EBITDA
FY20 FY19 Organic
EURm EURm change*
----------------------------------------- ------- ------- -------
Total revenue 6,484 6,272
- Service revenue 5,020 4,952 0.5
- Other revenue 1,464 1,320
Adjusted EBITDA 1,500 1,364 10.5
Adjusted EBITDA margin 23.1% 21.7%
------- -------
Depreciation and amortisation (1,632) (1,638)
------- -------
Adjusted EBIT (132) (274)
Share of adjusted results in associates
and joint ventures - -
------- -------
Adjusted operating profit (132) (274)
----------------------------------------- ------- ------- -------
Service revenue increased 0.5%* (Q3: 0.6%*, Q4: 1.2%*). Good
fixed and mobile customer base growth was partially offset by lower
wholesale revenue and a 0.4 percentage point drag from
international call rate regulation.
Mobile service revenue was flat* (Q3: 0.6%*, Q4: 0.3%*), but
grew when 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 revenue as a result
of spend capping. We added 348,000 contract customers in the year,
compared to 264,000 last year, supported by our new range of
commercial plans, including speed-tiered 'Vodafone Unlimited'
mobile data propositions and our 5G launch in July. Contract churn
was stable year-on-year at 14.2% in Q4, despite the impact of
text-to-switch regulation. We also added 475,000 prepaid customers,
supported by our digital sub-brand 'VOXI'.
Fixed service revenue increased by 1.7%* (Q3: 0.5%*, Q4: 3.7%*).
Continued good customer growth in Consumer broadband, supported by
the launch of our 'Vodafone Together' convergent plans, and growth
in Business was partially offset by lower wholesale revenues. We
added 176,000 broadband customers in the year including 64,000 in
Q4. The sequential Q4 improvement primarily reflected a
stabilisation in wholesale revenue.
Adjusted EBITDA increased by 10.5%* and the adjusted EBITDA
margin was 1.6* percentage points higher. This improvement was
driven by service revenue growth, a 9.9%* reduction in operating
expenses and a 2.0 percentage point net benefit to growth from
one-off license fee settlements and a reallocation of costs from
capex to cost of sales following our new cloud partnership with
IBM. The adjusted EBITDA margin was 23.1%.
Spain | 7% of Group Adjusted EBITDA
FY20 FY19 Organic
EURm EURm change (%)*
----------------------------------------- ------- ------- -----------
Total revenue 4,296 4,669
- Service revenue 3,904 4,203 (6.7)
- Other revenue 392 466
Adjusted EBITDA 1,009 1,038 (1.7)
Adjusted EBITDA margin 23.5% 22.2%
------- -------
Depreciation and amortisation (1,303) (1,258)
------- -------
Adjusted EBIT (294) (220)
Share of adjusted results in associates
and joint ventures - -
------- -------
Adjusted operating profit (294) (220)
----------------------------------------- ------- ------- -----------
Service revenue declined by 6.7%* (Q3: -6.5%*, Q4: -2.7%*),
reflecting a shift in overall market demand towards the value
segment and our decision not to renew unprofitable football
distribution rights. The improvement in quarterly trends reflected
the benefit of a December price increase for legacy customers, the
stabilisation of our customer base in recent quarters and customer
migrations to speed-tiered unlimited plans.
Our commercial performance stabilised during the year, supported
in part by the good performance of our 'Lowi' second brand. We
returned to positive customer growth in mobile contract, broadband
and TV in Q3 for the first time since Q3 FY18 and maintained our
commercial momentum in Q4, adding 51,000 mobile contract customers
and keeping our broadband customer base stable. We added 41,000 TV
customers in Q4, supported by our new movies and series offers and
despite our decision last year not to renew football content
rights.
The overall pricing environment remains highly competitive, but
we continue to see good uptake of our new speed-tiered unlimited
plans with 2.4 million customers at the end of Q4. On average, the
ARPU of unlimited customers is higher post migrating to the new
plans.
Adjusted EBITDA declined by 1.7%* and the organic adjusted
EBITDA margin was 1.5* percentage points higher. This was
principally driven by the reduction in ARPU and a lower customer
base, partially offset by lower football content costs and a 3.8%*
reduction in operating expenses. The adjusted EBITDA margin was
23.5%. Adjusted EBITDA returned to growth in H2, up 8.2%*
year-on-year, supported by lower content and commercial costs.
Given the challenging current trading and economic conditions,
management has reassessed the expected future business performance
in Spain. Following this reassessment, projected cash flows are
lower and this has led to an impairment charge of EUR0.8 billion
for the year ended 31 March 2020.
Other Europe | 12% of Group Adjusted
EBITDA
FY20 FY19 Organic
EURm EURm Change (%)*
----------------------------------------- ------- ------- -----------
Total revenue 5,541 5,072
- Service revenue 4,890 4,460 3.0
- Other revenue 651 612
Adjusted EBITDA 1,738 1,606 4.7
Adjusted EBITDA margin 31.4% 31.7%
------- -------
Depreciation and amortisation (1,237) (1,066)
------- -------
Adjusted EBIT 501 540
Share of adjusted results in associates
and joint ventures 118 150
------- -------
Adjusted operating profit 619 690
----------------------------------------- ------- ------- -----------
Service revenue increased by 3.0%* (Q3: 3.0%*, Q4: 3.4%*).
Revenue grew in Portugal, Greece, the Czech Republic, Romania and
Hungary, but declined in Ireland and Albania. Adjusted EBITDA grew
by 4.7%* and the organic adjusted EBITDA margin increased by 0.6*
percentage points, driven by good revenue growth and strong cost
control. The adjusted EBITDA margin was 31.4%.
In Portugal, service revenue grew by 5.5%* (Q3: 5.9%*, Q4:
7.5%*), driven by customer growth in fixed and mobile, and ARPU
growth in fixed. In Ireland, service revenue declined by 0.9%* (Q3:
0.1%*, Q4: -3.6%*), with the slowdown in quarterly trends
reflecting increased competition in both mobile and fixed. In
Greece, service revenue grew by 3.0%* (Q3: 1.9%*, Q4: 1.9%*), with
good prepaid ARPU growth partially offset by ARPU pressure in
fixed.
Given the challenging economic conditions and increased
competition in Ireland and Romania, management has reassessed
expected future business performance. Following this reassessment,
projected cash flows are lower and this has led to impairment
charges of EUR0.6 billion and EUR0.1 billion in relation to the
Group's investment in Ireland and Romania respectively for the year
ended 31 March 2020.
VodafoneZiggo Joint Venture (Netherlands)
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 grew 2.1% (Q3: 2.9%, Q4: 3.3%). This reflected
growth in fixed line, partially offset by continued price
competition in mobile, particularly in the B2B segment. Revenue
grew 3.3% in Q4 primarily due to customer base growth, increased
fixed ARPU and increased handset sales. Over 40% of broadband
customers and 70% of all B2C mobile customers are now converged,
delivering significant NPS and churn benefits.
Adjusted EBITDA grew by 4.7% during the year supported by strong
growth in the second half of the year (Q3: 9.6%, Q4: 4.9%), driven
by top line growth and lower operating and direct costs. In
February, we finalised the 3G shutdown program, with all customers
transitioned to 4G. We continued to make good progress on
integrating the businesses and expect to reach our EUR210 million
cost and capital expenditure synergy targets by the end of the 2020
calendar year, one year ahead of the original plan.
During the year, Vodafone received EUR148 million in dividends
from the joint venture, as well as EUR44 million in interest
payments and EUR100 million in principal repayments on the
shareholder loan.
Vodacom | 14% of Group Adjusted EBITDA
FY20 FY19 Organic
change
EURm EURm (%)*
----------------------------------------- ----- ----- -------
Total revenue 5,531 5,443
- Service revenue 4,470 4,391 3.3
- Other revenue 1,061 1,052
Adjusted EBITDA 2,088 2,157 1.1
Adjusted EBITDA margin 37.8% 39.6%
----- -----
Depreciation and amortisation (767) (735)
----- -----
Adjusted EBIT 1,321 1,422
Share of adjusted results in associates
and joint ventures 248 214
----- -----
Adjusted operating profit 1,569 1,636
----------------------------------------- ----- ----- -------
Vodacom Group service revenue grew 3.3%* (Q3: 5.2%*, Q4: 3.2%*)
with trends in South Africa stabilising, despite regulatory and
macro pressures, and continued strong growth in Vodacom's
International operations.
In South Africa, service revenue increased 2.2%* (Q3: 4.6%*, Q4:
3.7%*) or 2.8%* excluding a one-off benefit in the prior year. This
growth was achieved amid a weak macroeconomic environment, in which
customers are optimising their spend, and despite new regulation
introduced in March 2019 affecting out-of-bundle charges, rollover
and the transfer of data. Despite these headwinds, data traffic
grew 66% year-on-year as customers benefited from improved pricing,
which, combined with the full transition of a new wholesale roaming
agreement onto our network, supported an acceleration in service
revenue growth during the year. We added 246,000 contract customers
in the year, but lost 1.9 million prepaid customers as we focused
on customer lifetime value, taking our total mobile customer base
to 45.1 million.
In March 2020, we reached an agreement with the Competition
Commission in relation to the Data Services Market Inquiry and on 1
April reduced monthly data bundle prices by up to 40%. This further
accelerated our pro-active efforts to transform data pricing which
already delivered a 50% reduction in out-of-bundle rates in March
2019 as well as reductions in a number of data bundle prices
throughout the year.
Vodacom's international operations outside of South Africa grew
by 7.5%* (Q3: 7.4%*, Q4: 4.4%*). Growth was strong across all of
our markets, supported by the growing demand for mobile data and
M-Pesa services. The sequential slowdown in Q4 primarily reflected
new customer registration requirements in Tanzania. We have been
required to bar services to 2.9 million customers since January
2020, out of a total customer base of 15.5 million, in line with a
government biometric registration deadline. As of 31 March 2020, an
additional 2.5 million customer SIMs remain unregistered as the
Tanzanian authorities delayed any further service barring in
response to the COVID-19 pandemic. We expect to recover a
substantial proportion of these customers over the coming
quarters.
Vodacom's adjusted EBITDA increased by 1.1%* and the organic
adjusted EBITDA margin was 0.8* percentage points lower reflecting
subdued revenue growth in South Africa and the impact of higher
roaming costs. Operating costs also increased, but grew more slowly
than revenue.
Other | 9% of Group Adjusted EBITDA
Turkey
Service revenues increased by 17.6%* (Q3: 17.3%*, Q4: 16.0%*)
supported by strong customer contract ARPU growth, increased mobile
data revenue, and fixed line customer base growth. Adjusted EBITDA
grew 27%* and the organic adjusted EBITDA margin increased by 4.1*
percentage points driven by strong revenue growth ahead of
inflation and lower commercial costs. The adjusted EBITDA margin
was 26.5%.
Egypt
Egypt service revenue grew 14.5%* (Q3: 13.9%*, Q4: 14.8%*),
supported by strong customer base growth and increased data usage.
Adjusted EBITDA grew 14.2%* and the organic adjusted EBITDA margin
decreased by 0.3* percentage points driven by revenue growth ahead
of inflation. The adjusted EBITDA margin was 45.9%.
On 29 January 2020, we announced a Memorandum of Understanding
('MoU') with Saudi Telecom Company ("stc") in relation to the sale
of Vodafone's 55% shareholding in Vodafone Egypt to stc for a cash
consideration of US$2,392 million (EUR2,180 million), implying a
September FY20 LTM multiple of 7.0x Adjusted EBITDA and 11.2x
Adjusted OpFCF. On 13 April 2020, the MoU with stc was extended by
90 days to allow additional time for the completion of due
diligence on Vodafone Egypt by stc. We intend to enter into a
definitive agreement following the completion of the due diligence
process.
Other associates and joint ventures
Vodafone Idea Limited (India)
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 Vodafone Idea Limited
("Vodafone Idea") losses, the Group has recognised its share of
estimated Vodafone Idea 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 Vodafone Idea,
which is therefore reduced to EURnil. If the carrying value had
been high enough not to restrict the Group's share of losses, then
the recognised share of losses would have been substantially
higher.
The Group has a potential exposure to certain contingent
liabilities and potential refunds relating to Vodafone India and
Idea Cellular at the time of the merger, including those relating
to the AGR judgement, whereby Vodafone Group and Vodafone Idea
would reimburse each other on set dates following any
crystallisation of these pre-merger liabilities and assets. Under
the terms of this arrangement, Vodafone Group is obliged to make
payments to Vodafone Idea where amounts paid pursuant to the
contingent liabilities of Vodafone India exceed those of Idea
Cellular. The Group's potential exposure under this mechanism is
capped at INR 84 billion (EUR1.0 billion) and any cash payments or
cash receipts relating to these contingent liabilities and
potential refunds must have been made or received by Vodafone Idea
before any amount becomes due from or owed to the Group. Having
considered the payments made and refunds received by Vodafone Idea
in relation to these matters, including those relating to the AGR
case, and the significant uncertainties in relation to VIL's
ability to settle all liabilities relating to the AGR judgement,
the Group has assessed a cash outflow of EUR235 million under the
agreement to be probable at this time and provided for this amount
at 31 March 2020. On 22 April 2020, the Group announced that it had
made an advance payment of US$200 million to Vodafone Idea for
amounts that are likely to be due in September 2020 under the terms
of this mechanism.
See "Acquisition and disposal commitments" on page 30 and notes
7 and 8 in the unaudited condensed consolidated financial
statements for further details.
Indus Towers (India)
We have extended the long stop date on our agreement to merge
Indus Towers and Bharti Infratel to 24 June 2020, subject to an
agreement on closing adjustments and other conditions precedent for
closing, with each party retaining the right to terminate and
withdraw the merger scheme on or prior to 24 June 2020.
Indus Towers did not declare, or pay, a dividend during the FY20
financial year.
Vodafone Hutchison Australia
In February 2020, the Federal Court of Australia approved the
proposed merger of Vodafone Hutchison Australia ('VHA') and TPG
Telecom Limited ('TPG'), ruling that it would not substantially
lessen competition. The Australian Competition and Consumer
Commission ('ACCC') subsequently announced it would not appeal the
Court decision. The combination is subject to the approval of TPG
shareholders, and completion is expected in the first half of
FY21.
Safaricom
Safaricom service revenue grew by 4.8% (Q3: 5.3%, Q4: 3.2%)
supported by growth in M-Pesa and in mobile and fixed data.
Adjusted EBITDA grew 7.4% supported by strong revenue growth and
cost discipline. During the financial year we received dividends of
EUR269 million from Safaricom.
Net financing costs
FY20 FY19
EURm EURm Change (%)
--------------------------------- ------- ------- ----------
Adjusted net financing costs (1) (1,638) (1,042) (57.2)
Adjustments for:
Mark to market losses (1,128) (423)
Foreign exchange losses(2) (205) (190)
Interest on lease liabilities (330) -
------- ------- ----------
Net financing costs (3,301) (1,655) (99.5)
---------------------------------- ------- ------- ----------
Notes:
1. Adjusted net financing costs is an alternative performance
measure. 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 54 for
further details.
2. Primarily comprises foreign exchange differences reflected in
the Income Statement in relation to sterling and US dollar
balances.
Net financing costs increased by EUR1.6 billion, primarily due
to the recognition of mark to market losses. These were driven by
the lower share price, causing a mark to market loss on the options
relating to the mandatory convertible bonds and lower long-term
yields, which led to mark to market losses on certain economic
hedging instruments. Adjusted net financing costs include increased
interest costs as part of the financing for the Liberty Global
transaction as well as adverse interest rate movements on
borrowings in foreign operations. Excluding these, underlying
financing costs remained stable, reflecting consistent average net
debt balances and weighted average borrowing costs for both
periods.
Taxation
FY20 FY19 (1)
EURm EURm Change (%)
-------------------------------------------- ------- -------- ----------
Income tax expense: (1,250) (1,496) 16.4
Tax on adjustments to derive adjusted
profit before tax (432) (253)
Adjustments(2) :
- Deferred tax following revaluation
of investments in Luxembourg (346) (488)
- Reduction in deferred tax following
rate change in Luxembourg 881 -
- Deferred tax on use of Luxembourg losses
in the year 348 320
- Derecognition of a deferred tax asset
in Spain - 1,166
------- -------- ----------
451 745
------- -------- ----------
Adjusted income tax expense for calculating
adjusted tax rate (799) (751) (6.4)
------- -------- ----------
Profit/(loss) before tax 795 (2,613) 130.4
Adjustments to derive adjusted profit
before tax(2) 2,122 5,476
------- -------- ----------
Adjusted profit before tax (3) 2,917 2,863 1.9
Share of adjusted results in associates
and joint ventures 241 348
------- -------- ----------
Adjusted profit before tax for calculating
adjusted effective tax rate 3,158 3,211 (1.7)
------- -------- ----------
Adjusted effective tax rate (3) 25.3% 23.4% (190.0bps)
--------------------------------------------- ------- -------- ----------
Notes:
1. The 2019 adjusted earnings per share has been aligned to the
FY20 presentation which excludes mark to market and foreign
exchange (gains)/losses. The net impact of this change reduces the
effective tax rate by 1.0% to 23.4%.
2. See "Earnings per share" on page 24.
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 54 for further details.
The Group's adjusted effective tax rate for the year ended 31
March 2020 was 25.3%. The rate increased 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 EUR881 million following a
reduction in the Luxembourg corporate tax rate, EUR348 million
relating to Luxembourg losses (2019: EUR320 million) and EUR346
million (2019: EUR488 million) arising from a revaluation of
investments based upon the local GAAP financial statements and tax
returns. These items change 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 year ended 31 March 2019 does
not include the derecognition of a deferred tax asset in Spain of
EUR1,166 million.
Earnings per share
FY20 FY19
EURm EURm Change (%)
---------------------------------------------- --------- --------- ----------
Adjusted operating profit (1) 4,555 3,905 16.6
Adjusted net financing costs (1,638) (1,042)
Adjusted income tax expense for calculating
adjusted tax rate (799) (751)
Adjusted non-controlling interests (471) (381)
--------- --------- ----------
Adjusted profit attributable to owners
of the parent (1) 1,647 1,731 (4.9)
--------- --------- ----------
Adjustments:
Impairment loss (1,685) (3,525)
Amortisation of acquired customer base
and brand intangible assets (638) (583)
Restructuring costs (720) (486)
Adjusted other income and expense 2,257 (262)
Non-operating income and expense (3) (7)
Mark to market losses(2) (1,128) (423)
Foreign exchange losses(2) (205) (190)
--------- --------- ----------
(2,122) (5,476) 61.2
Taxation(3) (451) (745)
India(4) - (3,535)
Non-controlling interests 6 5
--------- --------- ----------
Loss attributable to owners of the parent (920) (8,020) 88.5
--------- --------- ----------
Million Million
Weighted average number of shares outstanding
- basic(5) 29,422 27,607 6.6
eurocents eurocents
Basic loss per share (3.13)c (29.05c) 89.2
Adjusted earnings per share(1,2) 5.60c 6.27c (10.7)
----------------------------------------------- --------- --------- ----------
Notes:
1. Adjusted operating profit, adjusted profit attributable to
owners of the parent and adjusted earnings per share 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 measures. See "Alternative
performance measures" on page 54 for further details.
2. The 2019 adjusted earnings per share has been aligned to the
2020 presentation which excludes mark to market and foreign
exchange losses. The net impact of this decreased the adjusted loss
attributable to the owners of the parent by EUR315 million and
increased adjusted earnings per share by 1.01 eurocents.
3. See page 23.
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, recognised in the prior year.
5. Weighted average number of shares outstanding includes a
weighted impact of 2,629 million shares (2019: 836 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 and GBP1.4 billion of
mandatory convertible bonds issued in February 2016, which matured
in February 2019 .
Adjusted earnings per share, which excludes impairment losses,
was 5.60 eurocents compared to 6.27 eurocents for the year ended 31
March 2019, a decrease of 10.7%.
Basic loss per share was 3.13 eurocents, compared to a loss per
share of 29.05 eurocents for the year ended 31 March 2019. The
decrease in the loss per share is primarily due to lower impairment
charges in the year of EUR1.7 billion (2019: EUR3.5 billion), gains
associated with the disposals of Vodafone New Zealand (EUR1.1
billion) and Italian tower assets (EUR3.4 billion), together with a
EUR3.4 billion loss on the disposal of Vodafone India recognised in
FY19.
Cash flow, capital allocation and funding
Cash flow
FY20 FY19
EURm EURm Change (%)
----------------------------------------------- -------- -------- ----------
Adjusted EBITDA (1) 14,881 13,918 6.9
Capital additions(2) (7,411) (7,227)
Working capital (127) 188
Disposal of property, plant and equipment 41 45
Other 337 147
-------- -------- ----------
Operating free cash flow (1) 7,721 7,071 9.2
Taxation (930) (1,040)
Dividends received from associates and
investments 417 498
Dividends paid to non-controlling shareholders
in subsidiaries (348) (584)
Interest received and paid(3) (1,160) (502)
-------- -------- ----------
Free cash flow (pre-spectrum) (1) 5,700 5,443 4.7
Licence and spectrum payments (181) (837)
Restructuring payments (570) (195)
-------- -------- ----------
Free cash flow (1) 4,949 4,411 12.2
Acquisitions and disposals (14,454) 182
Equity dividends paid (2,296) (4,064)
Share buybacks(3) (1,094) (606)
Convertible issue(4) - 3,848
Foreign exchange 309 259
Other(5) 1,250 (1,432)
-------- -------- ----------
Net debt increase (11,336) 2,598 (536.3)
Opening net debt (27,033) (29,631)
-------- -------- ----------
Closing net debt (38,369) (27,033) (41.9)
-------- -------- ----------
Less mark to market gains in hedging
reserves(6) (3,799)
-------- -------- ----------
Net debt adjusted for mark to market
gains in hedging reserves (42,168) (27,033) (56.0)
----------------------------------------------- -------- -------- ----------
Notes:
1. Adjusted EBITDA, 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 measures. See "Alternative
performance measures" on page 54 for more information.
2. Capital additions includes the purchase of property, plant
and equipment and intangible assets, other than licence and
spectrum.
3. Interest paid and received excludes EUR305 million (31 March
2019: EURnil) of interest on lease liabilities, included within
adjusted EBITDA; EUR175 million (31 March 2019: EUR41 million) of
interest costs related to Liberty acquisition financing, included
within Other; and EUR273 million (31 March 2019: EUR131 million) of
cash outflow from the option structure relating to the issue of the
mandatory convertible bond in February 2016, included within Share
buybacks. 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.
4. Mandatory convertible bonds of GBP3.44 billion issued in
March 2019.
5. "Other" for the year ended 31 March 2020 primarily includes
EUR3,799 million in relation to derivative gains in cash flow
hedging reserves, offset by EUR1,510 million of debt in relation to
licences and spectrum in Germany. "Other" for the year ended 31
March 2019 included EUR1,934 million of debt in relation to
licences and spectrum in Italy and Spain and a EUR1,377 million
capital injection into Vodafone Idea, offset by EUR2,135 million
received from the repayment of US$2.5 billion of loan notes issued
by Verizon Communications Inc.
6. FY20 has been adjusted to exclude derivative gains in cash
flow hedge reserves, the corresponding losses for which are not
recognised on the bonds within net debt and which are significantly
increased due to COVID-19 related market conditions.
Operating free cash flow increased by EUR0.7 billion, primarily
due to the contribution from the Liberty Global assets acquired
during the year. Working capital movements include EUR0.3 billion
in relation to handset purchases and the associated sale of
customer receivables. Receivables are sold to mitigate the adverse
working capital impact from handset sales to customers, where cash
outflows are paid upfront to suppliers but inflows are received
from customers over the length of the contract.
Free cash flow (pre-spectrum) was EUR5.7 billion, an increase of
EUR0.3 billion, as the increase in operating free cash flow and
reduced dividend payments to minorities outweighed higher interest
payments.
Acquisitions and disposals include EUR2.0 billion received on
completion of the sale of Vodafone New Zealand on 31 July 2019,
together with EUR2.1 billion received on completion of the sale of
Italian tower assets on 31 March. 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 adjusted for mark to market gains deferred in
hedging reserves at 31 March 2020 was EUR42.2 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, EUR12.1
billion (31 March 2019: EURnil) of lease liabilities recognised
under IFRS 16, a EUR1.3 billion (31 March 2019: EURnil) loan
specifically secured against Indian assets and EUR0.7 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 EUR1.5
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
EUR1.3 billion (31 March 2019: EUR1.0 billion).
Analysis of free cash flow
FY20 FY19
EURm EURm Change (%)
----------------------------------------------- ------- ------- ----------
Inflow from operating activities 17,379 12,980 33.9
Net tax paid 930 1,131
Cash flow from discontinued operations - 71
------- ------- ----------
Cash generated by operations 18,309 14,182 29.1
Capital additions (7,411) (7,227)
Working capital movement in respect of
capital additions (11) (89)
Disposal of property, plant and equipment 41 45
Restructuring payments 570 195
Other(1) (3,777) (35)
------- ------- ----------
Operating free cash flow (2) 7,721 7,071 9.2
Taxation (930) (1,040)
Dividends received from associates and
investments 417 498
Dividends paid to non-controlling shareholders
in subsidiaries (348) (584)
Interest received and paid (1,160) (502)
------- ------- ----------
Free cash flow (pre-spectrum) (2) 5,700 5,443 4.7
Licence and spectrum payments (181) (837)
Restructuring payments (570) (195)
------- ------- ----------
Free cash flow (2) 4,949 4,411 12.2
----------------------------------------------- ------- ------- ----------
Notes:
1. Predominantly relates to lease payments for the year ended 31
March 2020, after the adoption of IFRS 16. Lease payments for the
year ended 31 March 2019 are included within cash inflow from
operating activities.
2. Operating free cash flow, free cash flow (pre-spectrum) and
free cash flow 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 54 for further
details.
Funding position
FY20 FY19
EURm EURm Change (%)
------------------------------------------ -------- -------- ----------
Bonds (49,412) (44,492)
Commercial paper(1) - (873)
Bank loans (2,728) (3,000)
Cash collateral liabilities(2) (5,292) (2,011)
Other borrowings (3,877) (2,579)
-------- -------- ----------
Borrowings included in net debt (61,309) (52,955) (15.8)
Cash and cash equivalents 13,284 13,637
Other financial instruments:
Mark to market derivative financial
instruments(3) 4,409 1,190
Short term investments(4) 5,247 11,095
-------- -------- ----------
Total cash and cash equivalents and other
financial instruments 22,940 25,922 (11.5)
-------- -------- ----------
Net debt (38,369) (27,033) (41.9)
-------- -------- ----------
Less mark to market gains deferred in
hedging reserves(5) (3,799)
-------- -------- ----------
Net debt adjusted for mark to market
gains in hedging reserves (42,168) (27,033) (56.0)
------------------------------------------- -------- -------- ----------
Lease liabilities (12,063) -
Bank borrowings secured against Indian
assets (1,346) -
-------- -------- ----------
Borrowings excluded from net debt (13,409) -
Adjusted EBITDA 14,881 13,918 6.9
-------- -------- ----------
Net debt to adjusted EBITDA (5) 2.8x 1.9x n/m
------------------------------------------- -------- -------- ----------
Movement in net debt
Net debt
Net debt to
adjusted
EURm EBITDA
----------------------------------------------------- -------- --------
31 March 2019 27,033 1.9x
Acquisition of Liberty assets in Germany and Central
Eastern Europe 18,506
Divestures (4,427)
Dividend payments and share buybacks 3,390
German spectrum purchase 1,510
Other movements 1,105
Free cash flow (4,949)
-------- --------
31 March 2020 (5) 42,168 2.8x**
------------------------------------------------------ -------- --------
Notes:
1. At 31 March 2020 EURnil (2019: EUR873 million) was drawn
under the euro commercial paper programme.
2. Cash collateral liabilities EUR5,292 million (2019: EUR2,011
million) relates to a liability to return the cash collateral that
has been paid to Vodafone under collateral arrangements on
derivative financial instruments. The corresponding cash received
from banking counterparties is reflected within Cash and cash
equivalents and Short term investments.
3. Comprises mark to market adjustments on derivative financial
instruments, which are included as a component of trade and other
(payables)/receivables.
4. Short term investments includes EUR1,681 million (2019:
EUR3,011 million) of highly liquid German, UK and Japanese
government/government-backed securities; EUR1,115 million (2019:
EUR1,184 million) of assets paid to our bank counterparties as
collateral on derivative financial instruments; and managed
investment funds of EUR2,451 million (2019: EUR5,513 million) that
are in highly rated and liquid money market investments with
liquidity of up to 90 days.
5. FY20 has been adjusted to exclude derivative gains in cash
flow hedge reserves, the corresponding losses for which are not
recognised on the bonds within net debt and which are significantly
increased due to COVID-19 related market conditions.
Return on capital
FY20 FY19
EURm EURm Change (%)
--------------------------------------------------- ------- ------- ----------
Adjusted EBIT (1) 4,796 4,253 12.8%
Acquired brand and customer relationships
amortisation (638) (583) 9.4%
------- ------- ----------
Net operating profit (controlled operations) 4,158 3,670 13.3%
Share of adjusted results in equity accounted
associates & joint ventures (241) (348) (30.7)%
------- ------- ----------
Net operating profit (controlled & associates/JVs) 3,917 3,322 17.9%
Notional tax at adjusted effective tax
rate (991) (777) 27.5%
------- ------- ----------
Net operating profit after tax 2,926 2,545 15.0%
Property, plant and equipment (incl.
Right-of-Use lease assets and lease liabilities) 27,134 27,432 (1.1)%
Intangible assets (including goodwill) 53,523 41,005 30.5%
Operating working capital and Held-for-Sale
assets (excl. derivatives) (3,342) (3,705) (9.8)%
Provisions and other items (2,498) (2,402) 4.0%
------- ------- ----------
Net operating assets (controlled) 74,817 62,330 20.0%
Averaging adjustment (6,245) 6,692
------- ------- ----------
Average net operating assets (controlled) 68,572 69,022 (0.7)%
------- ------- ----------
Associates and joint ventures (incl.
Held-for-Sale) 5,419 3,721 45.6%
Net operating assets (controlled and
associates/JVs) 80,236 66,051 21.5%
Averaging adjustment (7,094) 6,213
------- ------- ----------
Average net operating assets (controlled
and associates/JVs) 73,142 72,264 1.2%
------- ------- ----------
Pre-tax Return on Capital Employed (controlled)
(1) 6.1% 5.3% 80 bps
Post-tax Return on Capital Employed
(controlled and associates/JVs) (1) 4.0% 3.5% 50 bps
--------------------------------------------------- ------- ------- ----------
Note:
1. Adjusted EBITDA, adjusted EBIT and Return of Capital Employed
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
measures. See "Alternative performance measures" on page 54 for
more information.
Return on capital employed (ROCE) measures how efficiently we
generate returns from our asset base and is a key driver of
long-term value creation. The four pillars of our strategy are
focused on ensuring that our ROCE meets or exceeds our weighted
average cost of capital (WACC) over the long-term. In particular,
we will meet this objective by efficiently allocating capital,
improving asset utilisation and accelerating our digital
transformation.
We calculate two ROCE measures: i) Pre-tax ROCE for controlled
operations only and ii) Post-tax ROCE (including Associates &
Joint Ventures). Both measures are based on Adjusted EBIT less
amortisation of acquired customer-base and brand intangible assets.
The post-tax measure also includes our share of adjusted results in
equity accounted associates and joint ventures, and taxes the net
operating profit by the adjusted effective tax rate to estimate an
imputed tax expense. Capital employed includes all net operating
assets and is calculated as the average of opening and closing
balances of: property, plant and equipment (including Right-of-Use
assets and liabilities), intangible assets (including goodwill),
operating working capital (including Held-for-Sale assets and
excluding derivative balances), provisions, and under the post-tax
measure, investments in associates and joint ventures. Other assets
that do not directly contribute to returns are excluded: other
investments, current and deferred tax balances and post-employment
benefits.
ROCE grew 80 basis points to 6.1% on a pre-tax basis and 50
basis points to 4.0% on a post-tax basis. Our improvement in ROCE
is primarily attributable to growth in adjusted EBITDA as a result
of our improved service revenue performance, digital transformation
and improving asset utilisation. The net improvement in ROCE is
reduced because of higher depreciation and amortisation following
capital investment, the recently acquired Liberty Global assets and
in the post-tax measure, the higher adjusted effective tax rate in
FY20.
Post-employment benefits
During FY20, the net deficit arising from the Group's
obligations in respect of its defined benefit schemes decreased by
EUR609 million to EUR152 million net surplus. The next triennial
actuarial valuation of the Vodafone Section and CWW Section of the
Vodafone UK Group Pension Scheme will be as at 31 March 2019 and is
due to be finalised during 2020.
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 is recommending total dividends per share of 9.0
eurocents for the year, the same as the prior year. This implies a
final dividend of 4.5 eurocents compared to 4.16 eurocents in the
prior year.
The ex-dividend date for the final dividend is 11 June 2020 for
ordinary shareholders, the record date is 12 June 2020 and the
dividend is payable on 7 August 2020. Dividend payments on ordinary
shares will be paid directly into a nominated bank or building
society account.
Other significant developments and legal proceedings
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.
Vodafone Idea Limited ('Vodafone Idea')
In October 2019, the Supreme Court of India ruled against the
industry in a dispute over the calculation of licence and other
regulatory fees, and Vodafone Idea was liable for very substantial
demands made by the Department of Telecommunications in relation to
these fees.
An update in relation to the contingent liability mechanism,
dating back to the creation of Vodafone Idea is set out in note 8
to the unaudited condensed consolidated financial statements.
Acquisition and disposal commitments
Indus Towers
On 25 April 2018, Vodafone, Bharti Airtel Limited and Vodafone
Idea (previously Idea Cellular Limited) announced the merger of
Indus Towers Limited ('Indus Towers') into Bharti Infratel Limited
('Bharti Infratel'), creating a combined company that will own the
respective businesses of Bharti Infratel and Indus Towers. Indus
Towers is currently jointly owned by Bharti Infratel (42%),
Vodafone (42%), Vodafone Idea (11.15%) and Providence (4.85%).
Bharti group and Vodafone will jointly control the combined
company, in accordance with the terms of a new shareholders'
agreement.
Vodafone Idea has the option to either sell its 11.15%
shareholding in Indus Towers for cash or receive new shares in the
combined company. Providence has the option to elect to receive
cash or shares in the combined company for 3.35% of its 4.85%
shareholding in Indus Towers, with the balance exchanged for
shares.
Vodafone will be issued with 783.1 million new shares in the
combined company, in exchange for its 42% shareholding in Indus
Towers. On the basis that (a) Providence decides to sell 3.35% of
its 4.85% shareholding in Indus Towers for cash and (b) Vodafone
Idea decides to sell its full 11.15% shareholding in Indus Towers
for cash, these shares would be equivalent to a 29.4% shareholding
in the combined company. Bharti group's shareholding will be
diluted from 53.5% in Bharti Infratel today to 37.2% in the
combined company. The final number of shares issued to Vodafone and
the cash paid or shares issued to Vodafone Idea and Providence,
will be subject to closing adjustments, including but not limited
to movements in net debt and working capital for Bharti Infratel
and Indus Towers.
The Group has extended the long stop date on the merger
agreement to 24 June 2020.
Vodafone Hutchison Australia
On 30 August 2018, Vodafone announced that Vodafone Hutchison
Australia Pty Limited ('VHA') and TPG Telecom Limited ('TPG') had
agreed to merge. Vodafone and Hutchison Telecommunications
(Australia) Limited ('HTAL') will each own an economic interest of
25.05% in the new combined company, with TPG shareholders owning
the remaining 49.9%.
Of the net debt held by VHA prior to completion of the merger,
Vodafone will provide a guarantee on approximately US$ 1.75
billion, which is lower than the guarantees of approximately US$
1.75 billion and AUD 0.85 billion currently provided.
On 8 May 2019, the Australian Competition and Consumer
Commission ('ACCC') opposed the proposed merger. The Group
challenged the ACCC's decision in Federal Court. On 13 February
2020, the Federal Court allowed the proposed merger to proceed.
Vodafone Egypt
The Group signed a memorandum of understanding with Saudi
Telecom Company in January 2020 to pursue the sale of the Group's
55% equity holding in Vodafone Egypt Telecommunications S.A.E.
('Vodafone Egypt') for cash consideration of US$ 2.4 billion
(EUR2.2 billion).
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. Global economic disruption
Any major economic disruption could result in reduced demand for
our services and lower spending power for our consumers, affecting
our profitability and cash flow generation. Economic disruption can
also impact financial markets, including currencies, interest
rates, borrowing costs and the availability of debt financing.
2. Cyber threat and information security
An external cyber-attack, insider threat or supplier breach
could cause service interruption or the loss of confidential data.
Cyber threats could lead to major customer, financial, reputational
and regulatory impact across all of our local markets.
3. Geo-political risk in supply chain
We operate and develop sophisticated infrastructure in the
countries in which we are present. Our network and systems are
dependent on a wide range of suppliers internationally. If we were
unable to execute our plans, we, and the industry, would face
potential delays to network improvements and increased costs.
4. Adverse political and regulatory measures
Operating across many markets and jurisdictions means we deal
with a variety of complex political and regulatory landscapes. In
all of these environments, we can face changes in taxation,
political intervention and potential competitive disadvantage. This
also includes our participation in spectrum auctions.
5. Technology failure
Major incidents caused by natural disasters, deliberate attacks
or an extreme technology failure, although rare, often result in
the complete loss of key sites in either our data centres or our
mobile or fixed networks causing major unavailability of
service.
6. Strategic transformation
We are undertaking a large-scale integration of new assets
across multiple markets. If we do not complete this in a timely and
efficient manner, we would not see the full benefit of planned
synergies and could face additional costs or delays to completion.
The successful integration also requires that an important number
of technology platforms/services are migrated on time before the
termination of the transitional services agreements.
We also have a number of joint ventures in operation and must
ensure that these operate effectively.
7. Market disruption
New entrants with lean models could create pricing pressure. As
more competitors push unlimited bundles there could be price
erosion. Our market position and revenues could be damaged by
failing to provide the services that our customers want at a fair
price.
8. Digital transformation
Failure in digital or IT transformation projects could result in
business loss, degraded customer experience and reputation damage.
Efficient execution of these projects ultimately prevents the
delivery of a better future.
9. Disintermediation
We face 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. We must be able to keep pace with these new
developments and competitors while maintaining high levels of
customer engagement and an excellent customer experience.
10. Legal and regulatory compliance
Vodafone must comply with a multitude of local and international
laws and applicable industry regulations. These include laws
relating to: privacy; anti-money laundering; competition;
anti-bribery; and economic sanctions. Failure to comply with these
laws and regulations could lead to reputational damage, financial
penalties and/or suspension of our licence to operate.
COVID-19
Many changes could have an impact on our business and
stakeholders. It is crucial that the Board maintain oversight as
they evolve, in order that we can plan ahead and take appropriate
action. We identified the following areas, where COVID-19 could
have an impact on our principal risks:
-- Any major economic disruption could result in reduced demand
for our services and lower spending power for our consumers,
affecting our profitability and cash flow generation. Economic
disruption can also impact financial markets, including currencies,
interest rates, borrowing costs and the availability of debt
financing.
-- The health, safety and wellbeing of our employees is vital
for us, therefore we reacted quickly to take relevant actions
such as implementing a global restriction for travel, restricting
attendance/organisation of large events, and increasing smart-working
at scale. To support our employees better in these unprecedented
times and to enable remote working, we also introduced various
digital content and online learning materials to support our
line managers and employees, initiated a pulse survey to monitor
closely employee wellbeing and engagement, and virtualised
most of our recruitment and onboarding processes.
-- Delays across the supply chain are caused by the disruptions
in availability of people, goods, services and equipment. This
is expected to persist and be further compounded by the global
economic disruption which may negatively affect the financial
stability of critical suppliers. We reviewed the risks associated
with our critical suppliers and service providers and ensured
that we have sufficient stock levels in our warehouses to address
scheduled replacement and maintenance of our equipment.
-- We anticipate a continued increase in volume and scale of financially
motivated cyber attacks using phishing, malware and denial
of service. Criminals and other sophisticated threat actors
are using the crisis as cover to expand or continue their actions
against all sectors, including Vodafone and our customers.
We have heightened our security monitoring and response. We
track external threats working with governments, law enforcement
and industry specialists.
Unaudited condensed consolidated financial statements
Consolidated income statement
Year ended 31 March
---------------------
2020 2019(1)
Note EURm EURm
-------------------------------------------------- ---- ---------- ---------
Revenue 44,974 43,666
Cost of sales (30,682) (30,160)
-------------------------------------------------- ---- ---------- ---------
Gross profit 14,292 13,506
Selling and distribution expenses (3,814) (3,891)
Administrative expenses (5,810) (5,410)
Net credit losses on financial assets (660) (575)
Share of results of equity accounted associates
and joint ventures (2,505) (908)
Impairment loss 2 (1,685) (3,525)
Other income/(expense) 4,281 (148)
-------------------------------------------------- ---- ---------- ---------
Operating profit/(loss) 4,099 (951)
Non-operating expense (3) (7)
Investment income 248 433
Financing costs (3,549) (2,088)
-------------------------------------------------- ---- ---------- ---------
Profit/(loss) before taxation 795 (2,613)
Income tax expense 3 (1,250) (1,496)
-------------------------------------------------- ---- ---------- ---------
Loss for the financial year from continuing
operations (455) (4,109)
Loss for the financial year from discontinued
operations - (3,535)
-------------------------------------------------- ---- ---------- ---------
Loss for the financial year (455) (7,644)
-------------------------------------------------- ---- ---------- ---------
Attributable to:
- Owners of the parent (920) (8,020)
- Non-controlling interests 465 376
-------------------------------------------------- ---- ---------- ---------
Loss for the financial year (455) (7,644)
-------------------------------------------------- ---- ---------- ---------
Loss per share
From continuing operations:
- Basic (3.13)c (16.25)c
- Diluted (3.13)c (16.25)c
Total Group:
- Basic (3.13)c (29.05)c
- Diluted (3.13)c (29.05)c
-------------------------------------------------- ---- ---------- ---------
Consolidated statement of comprehensive income
Year ended 31 March
---------------------
2020 2019(1)
EURm EURm
-------------------------------------------------- ---- ---------- ---------
Loss for the financial year (455) (7,644)
Other comprehensive income/(expense):
Items that may be reclassified to the income
statement in subsequent years:
Foreign exchange translation differences, net
of tax (982) (533)
Foreign exchange (losses)/gains transferred
to the income statement(2) (36) 2,079
Other, net of tax(3) 3,066 243
-------------------------------------------------- ---- ---------- ---------
Total items that may be reclassified to the
income statement in subsequent years 2,048 1,789
Items that will not be reclassified to the income
statement in subsequent years:
Net actuarial gains/(losses) on defined benefit
pension schemes, net of tax 526 (33)
-------------------------------------------------- ---- ---------- ---------
Total items that will not be reclassified to
the income statement in subsequent years 526 (33)
Other comprehensive income 2,574 1,756
-------------------------------------------------- ---- ---------- ---------
Total comprehensive income/(expense) for the
financial year 2,119 (5,888)
-------------------------------------------------- ---- ---------- ---------
Attributable to:
- Owners of the parent 1,696 (6,333)
- Non-controlling interests 423 445
-------------------------------------------------- ---- ---------- ---------
2,119 (5,888)
-------------------------------------------------- ---- ---------- ---------
Notes:
1. The comparative period results have not been restated for IFRS 16 "Leases". See note 1.
2. For further information on the amount for the year ended 31
March 2019 see note 4 "Acquisitions and disposals".
3. Principally includes the impact of the Group's cash flow
hedges deferred to other comprehensive income during the year.
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
Consolidated statement of financial position
As at 31 March
--------------------
2020 2019(1)
Note EURm EURm
---------------------------------------------------- ---- --------- ---------
Non-current assets
Goodwill 31,271 23,353
Other intangible assets 22,252 17,652
Property, plant and equipment 39,197 27,432
Investments in associates and joint ventures 7 5,831 3,952
Other investments 792 870
Deferred tax assets 23,606 24,753
Post employment benefits 590 94
Trade and other receivables 10,378 5,170
---------------------------------------------------- ---- --------- ---------
133,917 103,276
---------------------------------------------------- ---- --------- ---------
Current assets
Inventory 585 714
Taxation recoverable 275 264
Trade and other receivables 11,411 12,190
Other investments 7,089 13,012
Cash and cash equivalents 13,284 13,637
---------------------------------------------------- ---- --------- ---------
32,644 39,817
---------------------------------------------------- ---- --------- ---------
Assets held for sale 1,607 (231)
---------------------------------------------------- ---- --------- ---------
Total assets 168,168 142,862
---------------------------------------------------- ---- --------- ---------
Equity
Called up share capital 4,797 4,796
Additional paid-in capital 152,629 152,503
Treasury shares (7,802) (7,875)
Accumulated losses (120,349) (116,725)
Accumulated other comprehensive income 32,135 29,519
---------------------------------------------------- ---- --------- ---------
Total attributable to owners of the parent 61,410 62,218
---------------------------------------------------- ---- --------- ---------
Non-controlling interests 1,215 1,227
---------------------------------------------------- ---- --------- ---------
Total equity 62,625 63,445
---------------------------------------------------- ---- --------- ---------
Non-current liabilities
Long-term borrowings 62,892 48,685
Deferred tax liabilities 2,043 478
Post employment benefits 438 551
Provisions 1,474 1,242
Trade and other payables 5,189 2,938
---------------------------------------------------- ---- --------- ---------
72,036 53,894
---------------------------------------------------- ---- --------- ---------
Current liabilities
Short-term borrowings 11,826 4,270
Financial liabilities under put option arrangements 1,850 1,844
Taxation liabilities 671 596
Provisions 1,024 1,160
Trade and other payables 17,085 17,653
---------------------------------------------------- ---- --------- ---------
32,456 25,523
---------------------------------------------------- ---- --------- ---------
Liabilities held for sale 1,051 -
---------------------------------------------------- ---- --------- ---------
Total equity and liabilities 168,168 142,862
---------------------------------------------------- ---- --------- ---------
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
------------------------------- -------- ----------- -------- -------------- ------------- ------------ -------
31 March 2018 as
reported 4,796 150,197 (8,463) (78,890) 67,640 967 68,607
Adoption of IFRS
9 - - - (197) (197) (5) (202)
Adoption of IFRS
15 - - - 2,457 2,457 81 2,538
------------------------------- -------- ----------- -------- -------------- ------------- ------------ -------
1 April 2018 brought
forward 4,796 150,197 (8,463) (76,630) 69,900 1,043 70,943
Issue or reissue
of shares(3) - (1,741) 1,834 (92) 1 - 1
Share-based payments - 199 - - 199 34 233
Issue of mandatory
convertible bonds - 3,848 - - 3,848 - 3,848
Transactions with
non-controlling
interests in subsidiaries - - - (129) (129) 307 178
Comprehensive (expense)/income - - - (6,333) (6,333) 445 (5,888)
Dividends - - - (4,022) (4,022) (602) (4,624)
Purchase of treasury
shares(4) - - (1,246) - (1,246) - (1,246)
------------------------------- -------- ----------- -------- -------------- ------------- ------------ -------
31 March 2019 4,796 152,503 (7,875) (87,206) 62,218 1,227 63,445
------------------------------- -------- ----------- -------- -------------- ------------- ------------ -------
31 March 2019 as
reported 4,796 152,503 (7,875) (87,206) 62,218 1,227 63,445
Adoption of IFRS
16(5) - - - (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 73 (68) 7 - 7
Share-based payments - 125 - - 125 11 136
Transactions with
non-controlling
interests in subsidiaries - - - (58) (58) (102) (160)
Comprehensive expense - - - 1,696 1,696 423 2,119
Dividends - - - (2,317) (2,317) (348) (2,665)
------------------------------- -------- ----------- -------- -------------- ------------- ------------ -------
31 March 2020 4,797 152,629 (7,802) (88,214) 61,410 1,215 62,625
------------------------------- -------- ----------- -------- -------------- ------------- ------------ -------
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. Movements include the re-issue of 729.1 million shares
(EUR1,742 million) in August 2017 and 799.1 million shares
(EUR1,742 million) in February 2019 in order to satisfy the two
tranches of the Mandatory Convertible Bond issued in February
2016.
4. This represents the irrevocable and non-discretionary share
buyback programme announced on 28 January 2019.
5. See note 1 for the impact of the adoption of IFRS 16. The
comparative period results have not been restated for IFRS 16
"Leases".
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
Consolidated statement of cash flows
Year ended 31 March
---------------------
2020 2019
Note EURm EURm
----------------------------------------------------- ---- ----------- --------
Inflow from operating activities 6 17,379 12,980
----------------------------------------------------- ---- ----------- --------
Cash flows from investing activities
Purchase of interests in subsidiaries, net
of cash acquired 4 (10,295) (87)
Purchase of interests in associates and joint
ventures (1,424) -
Purchase of intangible assets (2,423) (3,098)
Purchase of property, plant and equipment (5,182) (5,053)
Purchase of investments (1,832) (3,629)
Disposal of interests in subsidiaries, net
of cash disposed 4 4,427 (412)
Disposal of property, plant and equipment
and intangible assets 61 45
Disposal of investments 7,792 2,269
Dividends received from associates and joint
ventures 417 498
Interest received 371 622
Cash flows from discontinued operations - (372)
----------------------------------------------------- ---- ----------- --------
Outflow from investing activities (8,088) (9,217)
----------------------------------------------------- ---- ----------- --------
Cash flows from financing activities
Issue of ordinary share capital and reissue
of treasury shares 7 7
Net movement in short term borrowings 2,586 (541)
Proceeds from issue of long term borrowings 9,933 14,681
Repayment of borrowings (16,028) (6,180)
Purchase of treasury shares (821) (475)
Equity dividends paid (2,296) (4,064)
Issue of subordinated mandatory convertible
bonds - 3,848
Dividends paid to non-controlling shareholders
in subsidiaries (348) (584)
Other transactions with non-controlling shareholders
in subsidiaries (160) (221)
Other movements in loans with associates
and joint ventures 59 42
Interest paid(1) (2,284) (1,297)
Cash flow from discontinued operations - (779)
----------------------------------------------------- ---- ----------- --------
(Outflow)/inflow from financing activities (9,352) 4,437
----------------------------------------------------- ---- ----------- --------
Net cash (outflow)/inflow (61) 8,200
Cash and cash equivalents at beginning of
the financial year(2) 13,605 5,394
Exchange (loss)/gain on cash and cash equivalents (256) 11
----------------------------------------------------- ---- ----------- --------
Cash and cash equivalents at end of the
financial year (2) 13,288 13,605
----------------------------------------------------- ---- ----------- --------
Notes:
1. Amount for 2020 includes EUR273 million (2019: EUR131
million) of cash outflow on derivative financial instruments for
the share buyback related to the second tranche of the mandatory
convertible bond that matured during the year.
2. Includes cash and cash equivalents as presented in the
statement of financial position of EUR13,284 million (31 March
2019: EUR13,637 million) and cash and cash equivalents presented in
assets held for sale of EUR273 million (31 March 2019: EURnil),
together with overdrafts of EUR269 million (31 March 2019: EUR32
million).
Notes to the unaudited condensed consolidated financial
statements
1 Basis of preparation
These unaudited Condensed Consolidated Financial Statements of
Vodafone Group Plc and its subsidiaries 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 EUR152 million
reduction in losses recorded in the Group's share of results of
equity accounted associates and joint ventures for the year ended
31 March 2020. See note 4 for acquired intangible customer bases in
the period.
Ernst & Young LLP has consented to the release of this
Preliminary Announcement. The financial information presented in
the unaudited Condensed Consolidated Financial Statements does not
constitute statutory accounts within the meaning of section 434(3)
of the Companies Act 2006 ("the Act"). Statutory accounts for the
year ended 31 March 2019 were published in Vodafone's Annual Report
and a copy was delivered to the Registrar of Companies for England
and Wales. The auditor's report on those accounts was unqualified,
did not include a reference to any matters to which the auditor
drew attention by way of emphasis without qualifying the report and
did not contain a statement under sections 498(2) or 498(3) of the
Act. A separate announcement will be made in accordance with
Disclosure and Transparency Rules (DTR) 6.3 when the annual report
and audited financial statements for the year ended 31 March 2020
are made available on the Company's website, which is expected to
be in June 2020.
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; 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 but using their incremental borrowing
rate at adoption; 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 Group's right-of-use assets are recorded together with
property, plant and equipment assets and lease liabilities are
recognised in borrowings.
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 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, 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 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 the 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.
-- The expedients applied at adoption, above, have resulted in
reclassifications of lease-related prepayments, accruals and
provisions at 1 April 2019 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.
-- During the year ended 31 March 2019, an expense of EUR3,826
million was charged for operating leases and depreciation and
interest of EUR71 million was charged for finance leases. During
the year ended 31 March 2020, depreciation of EUR3,720 million
and interest of EUR330 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 to be paid over the lease term 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 over the lease term 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 interests in the
head lease and the sub-lease are 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
at lease commencement with interest income recognised over the
lease term.
Lease income is recognised as 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 an asset and a liability being reported and depreciation
and interest being recognised; 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. The value of the
right-of-use asset and lease liability will be greater when
extension options are included in the lease term. 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 EUR10.8bn; the most significant differences between the
IAS 17 operating 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 IFRS 1 April
2019 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
--------------------------------------------- --------- --------- ---------
Total equity and liabilities 142,862 9,638 152,500
--------------------------------------------- --------- --------- ---------
2 Impairment review
Impairment testing was performed at 31 March 2020 and 31 March
2019. The methodology adopted for impairment testing for the year
ended 31 March 2020 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.
For the year ended 31 March 2020, the Group recorded impairment
charges of EUR840 million, EUR630 million, EUR110 million and
EUR105 million with respect to the Group's investments in Spain,
Ireland, Romania and Vodafone Automotive respectively. The
impairment charges relate solely to goodwill and are recognised in
the consolidated income statement within operating profit/(loss).
The recoverable amounts for Spain, Ireland, Romania and Vodafone
Automotive are EUR5.6 billion, EUR1.2 billion, EUR0.9 billion and
EUR0.0 billion respectively, and based on value in use
calculations.
The COVID-19 outbreak has developed rapidly in early 2020. Many
countries have required businesses to limit or suspend operations
and implemented travel restrictions and quarantine measures. The
measures taken to contain the virus have adversely affected
economic activity and disrupted many businesses. As the outbreak
continues to progress and evolve, it is extremely challenging to
predict the full extent and duration of its impact on Vodafone's
businesses and the countries where Vodafone operates. Based on
information available as at 31 March 2020, management has made
additional adjustments to the five-year business plans used in the
Group's impairment testing in order to reflect the estimated
impact. The impairment charges recognised and discussed immediately
below, are based on expected cash flows after applying these
adjustments.
Challenging trading and economic conditions in Spain
materialised in the prior financial year and management recognised
an impairment charge following a reduction in projected cash flows.
During the year ended 31 March 2020 there has been an observable
repositioning towards low-cost brands and competitive intensity
within the multi-branded market is expected to remain elevated in
the medium term. These factors have led to management projecting
lower cash flows and recognising an impairment charge with respect
to the Group's investment in Spain.
The impairment charge recognised with respect to Ireland is
attributable to increased competition and the aforementioned
increased economic uncertainty. As a consequence, growth and ARPUs
are expected to be lower. Management has reflected these
assumptions in expected cash flows.
The impairment charges recognised with respect to Romania and
Vodafone Automotive reflect management's latest assessment of
likely trading and economic conditions in the five-year business
plan. Management's view of the long-term potential in these markets
remains unchanged.
The Liberty Global assets acquired in July 2019 have been
subsumed within existing cash-generating units in Germany, Czech
Republic, Hungary and Romania. 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. Following the integration of the acquired businesses,
management considers the cash flows within these cash-generating
units to be largely interdependent and monitors performance on a
country-level basis.
On 31 March 2020, the Group merged its passive tower
infrastructure in Italy with INWIT. On the date of the merger,
management monitored performance of its operations in Italy on a
country-wide basis and considered Vodafone Italy, including its
passive tower infrastructure, to be one cash-generating unit for
the purpose of impairment testing as at 31 March 2020. No
impairment in relation to Vodafone Italy would be necessary if
impairment testing was performed on a post-merger basis at 31 March
2020.
Value in use assumptions
The table below shows key assumptions used in the value in use
calculations at 31 March 2020:
Assumptions used in value in use calculation
------------------------------------------------------------------
Vodafone
Germany Italy Spain Ireland Romania Automotive
% % % % % %
---------------------- --------- --------- --------- --------- --------- -----------
Pre-tax risk adjusted
discount rate 7.5 10.3 9.2 7.6 10.2 9.1
Long-term growth
rate 0.5 0.5 0.5 0.5 1.0 1.9
Projected adjusted
EBITDA(1) 3.8 0.2 8.2 3.0 8.0 31.3
Projected capital
expenditure(2) 20.1-20.7 12.5-13.4 16.2-18.1 10.7-15.2 13.7-18.5 14.1-23.4
----------------------- --------- --------- --------- --------- --------- -----------
Sensitivity analysis
The estimated recoverable amount of the Group's operations in
Germany and Italy exceed their carrying values by EUR6.6 billion
and EUR1.8 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 year ended 31
March 2020.
Change required for carrying value
to equal recoverable amount
------------------------------------
Germany Italy
pps pps
--------------------------------- -------------------- --------------
Pre-tax risk adjusted discount
rate 1.1 1.7
Long-term growth rate (1.0) (2.0)
Projected adjusted EBITDA(1) (3.2) (3.1)
Projected capital expenditure(2) 11.4 7.9
---------------------------------- -------------------- --------------
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.
Management considered the following reasonably possible changes
in the key adjusted EBITDA(1) and long-term growth rate
assumptions, leaving all other assumptions unchanged. Due to
increased uncertainty following the COVID-19 outbreak, management
has widened the range of reasonably possible changes in the key
adjusted EBITDA growth rate assumption to plus or minus 5
percentage points (2019: 2 percentage points). 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, with the exception of Vodafone
Automotive, where no reasonably possible change in the key
assumptions would materially change the impairment charge
recognised.
Management believes that no reasonably possible or foreseeable
change in the pre-tax adjusted discount rate or projected capital
expenditure(2) would cause the difference between the carrying
value and recoverable amount for any cash-generating unit to be
materially different to the base case disclosed below.
Recoverable amount less carrying value (prior
to recognition of impairment charges)
-----------------------------------------------------
Germany Italy Spain Ireland Romania
EUR bn EUR bn EUR bn EUR bn EUR bn
----------------------------- ---------- --------- -------- --------- ---------
Base case as at 31 March
2020 6.6 1.8 (0.8) (0.6) (0.1)
Change in projected adjusted
EBITDA (1)
Decrease by 5pps (3.3) (1.0) (2.3) (1.1) (0.3)
Increase by 5pps 18.4 5.1 0.9 - 0.1
Change in long-term growth
rate
Decrease by 1pps 0.2 0.8 (1.5) (0.8) (0.2)
Increase by 1pps 15.8 3.0 - (0.4) -
------------------------------ ---------- --------- -------- --------- ---------
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.
The carrying values for Vodafone UK, Portugal, Czech Republic
and Hungary include goodwill arising from acquisitions 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 an 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 year ended 31 March 2020.
Change required for carrying value to equal recoverable
amount
-------------------------------------------------------------
UK Portugal Czech Republic Hungary
pps pps pps pps
--------------------------------- --------- ------------- ---------------------- -----------
Pre-tax risk adjusted
discount rate 1.1 1.5 1.7 1.9
Long-term growth rate (1.3) (1.6) (1.8) (2.2)
Projected adjusted
EBITDA(1) (2.3) (3.4) (4.0) (3.9)
Projected capital expenditure(2) 4.5 7.1 12.5 9.1
---------------------------------- --------- ------------- ---------------------- -----------
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 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.
3 Taxation
2020 2019
EURm EURm
------------------------------------------------------ ----- -----
United Kingdom corporation tax expense/(income)(1)
Current year 42 21
Adjustments in respect of prior years (6) (9)
Overseas current tax expense/(income)
Current year 900 1,098
Adjustments in respect of prior years 80 (48)
------------------------------------------------------ ----- -----
Total current tax expense 1,016 1,062
------------------------------------------------------- ----- -----
Deferred tax on origination and reversal of temporary
differences
United Kingdom deferred tax (318) (232)
Overseas deferred tax 552 666
------------------------------------------------------ ----- -----
Total deferred tax expense 234 434
------------------------------------------------------- ----- -----
Total income tax expense 1,250 1,496
------------------------------------------------------- ----- -----
Note:
1. UK operating profits are more than offset by statutory
allowances for capital investment in the UK network and systems
plus ongoing interest costs including those arising from the
EUR10.7 billion of spectrum payments to the UK government in 2000,
2013 and 2018.
The year ended 31 March 2020 includes a reduction in our
deferred tax assets in Luxembourg of EUR881 million (2019: EURnil)
following a reduction in the Luxembourg corporate tax rate. The
Group expects to use its losses in Luxembourg over a period of
between 40 and 45 years and the losses in Germany over a period of
between 9 and 14 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 year ended 31 March 2019
includes the derecognition of a deferred tax asset of EUR1,166
million in Spain following a reassessment of expected future
business performance and consequently lower projected cash
flows.
4 Acquisitions and disposals
In transactions with non-controlling parties that do not result
in a change in control, the difference between the fair value of
the consideration paid or received and the amount which the
non-controlling interest is adjusted is recognised in equity.
The aggregate cash consideration in respect of purchases in
subsidiaries, net of cash acquired, is as follows:
2020 2019
EURm EURm
--- ------------------------------------------------ -------- --------
Cash consideration paid
European Liberty Global assets 10,313 -
Other acquisitions during the period 108 61
Net cash acquired (126) 26
----------------------------------------------------- -------- --------
10,295 87
----------------------------------------------------- -------- --------
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 EUR10,313
million. The primary reason for acquiring the business 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 purchase price allocation is set out in the table below.
Fair value
EURm
--- -------------------------------------------------------- ----------
Net assets acquired
Identifiable intangible assets(1) 5,818
Property, plant and equipment 4,737
Inventory 2
Trade and other receivables 856
Other investments 2
Cash and cash equivalents 109
Current and deferred taxation (1,904)
Short and long-term borrowings (9,527)
Trade and other payables (1,066)
Post employment benefits (40)
Provisions (178)
------------------------------------------------------------- ----------
Net identifiable liabilities acquired (1,191)
Goodwill(2) 11,504
Total consideration (3) 10,313
------------------------------------------------------------- ----------
Notes:
1. Identifiable intangible assets of EUR5,818 million consisted
of customer relationships of EUR5,569 million, brand of EUR71
million and software of EUR178 million.
2. The goodwill is attributable to future profits to be
generated from new customers and the synergies expected to arise
after the Group's acquisition of the business.
3. Transaction costs of EUR46 million were charged in the
Group's consolidated income statement in the year ended 31 March
2020.
From the date of acquisition, the acquired entities have
contributed EUR1,993 million of revenue and a loss of EUR247
million towards the profit before tax of the Group. If the
acquisition had taken place at the beginning of the financial year,
revenue would have been EUR45,975 million and the profit before tax
would have been EUR822 million.
Other acquisitions
During the year ended 31 March 2020, the Group completed certain
acquisitions for an aggregate consideration of EUR276 million, of
which EUR108 million has been paid in cash. The aggregate
provisional fair values of goodwill, identifiable assets and
liabilities of the acquired operations were EUR248 million, EUR113
million and EUR85 million, respectively.
Disposals
The difference between the carrying value of the net assets
disposed of and the fair value of consideration received is
recorded as a gain or loss on disposal. Foreign exchange
translation gains or losses relating to subsidiaries that the Group
has disposed of, and that have previously recorded in other
comprehensive income or expense, are also recognised as part of the
gain or loss on disposal.
Vodafone New Zealand
On 31 July 2019, the Group sold its 100% interest in Vodafone
New Zealand Limited ('Vodafone New Zealand') for consideration of
NZD $3.4 billion (EUR2.0 billion). The table below summarises the
net assets disposed and the resulting gain on disposal of EUR1.1
billion.
EURm
----------------------------------------------- -----
Goodwill (243)
Other intangible assets (155)
Property, plant and equipment (783)
Inventory (29)
Trade and other receivables (244)
Investments in associates and joint ventures (4)
Current and deferred taxation (11)
Short and long-term borrowings 215
Trade and other payables 261
Provisions 35
------------------------------------------------ -----
Net assets disposed (958)
Net cash proceeds arising from the transaction 2,023
Other effects(1) 13
Net gain on transaction (2) 1,078
------------------------------------------------ -----
Note:
1. Includes EUR59 million of recycled foreign exchange losses.
2. Recorded within Other income and expense in the Consolidated income statement.
Tower infrastructure in Italy
On 31 March 2020, the Group merged its passive tower
infrastructure in Italy with Infrastrutture Wireless Italiane
S.p.A. ('INWIT'), creating the leading tower company in Italy (the
"combination"). As part of the combination, Vodafone received
proceeds of EUR2,140 million and a 37.5% shareholding in the
combined entity. As a result of the transaction, we no longer
consolidate the tower assets and account for our interest as a
joint venture using the equity method. We have also entered into an
agreement to lease space on the mobile base stations to locate
network equipment (see note 20 "Leases"). The Group recognised a
net gain on the combination of EUR3,356 million.
EURm
----------------------------------------------- -------
Goodwill (1,320)
Property, plant and equipment (548)
Trade and other receivables (164)
Current and deferred taxation 44
Short and long-term borrowings 270
Trade and other payables 79
Provisions 40
------------------------------------------------ -------
Net assets contributed into INWIT (1,599)
Fair value of investment in INWIT(1) 3,559
Net cash proceeds arising from the transaction 2,140
Restriction of gain (Note 20) (744)
Net gain on formation (2) 3,356
------------------------------------------------ -------
Notes:
1. The fair value of EUR3,559 million comprises an investment of
EUR3,345 million recorded within Investments in associates and
joint ventures and a dividend receivable of EUR214 million,
recorded within Trade and other receivables.
2. Recorded within Other income and expense in the Consolidated income statement.
Vodafone Malta
On 31 March 2020, the Group sold its 100% interest in Vodafone
Malta Limited ('Vodafone Malta') for consideration of EUR242
million. A net gain on disposal of EUR170 million has been recorded
in the Consolidated Income Statement.
Vodafone Idea Limited ('Vodafone Idea')
On 31 August 2018, the Group combined the operations of its
subsidiary, Vodafone India (excluding its 42% stake in Indus
Towers), with Idea Cellular Limited ('Idea'), to create Vodafone
Idea, a company jointly controlled by Vodafone and the Aditya Birla
Group ('ABG').
As a result, the Group no longer consolidates its previous
interest in Vodafone India which was presented within discontinued
operations in the comparative period and now accounts for its 45.2%
interest in Vodafone Idea as a joint venture using the equity
method.
On disposal, Vodafone India was valued based on the number of
shares the Group held in the merged entity post completion and the
Idea share price on 31 August 2018 (INR 51.50). The value was also
adjusted for the proceeds from the sale of the 4.8% stake in
Vodafone Idea from the Vodafone Group to ABG. As the price per
share and proceeds from the sale to ABG are readily observable and
no further adjustments were made, the valuation is considered to be
a "level 1" valuation as per IFRS 13. As a result of the
transaction, the Group recognised a net loss of EUR3,420 million,
including a loss on disposal of EUR1,276 million and a foreign
exchange loss of EUR2,079 million.
2019
EURm
-------------------------------------------------- -------
Other intangible assets (6,138)
Property, plant and equipment (3,091)
Trade and other receivables (1,572)
Other investments (6)
Cash and cash equivalents(1) (751)
Current and deferred taxation (2,790)
Short and long-term borrowings 7,896
Trade and other payables 1,669
Provisions 720
--------------------------------------------------- -------
Net assets contributed into Vodafone Idea (4,063)
Fair value of investment in Vodafone Idea(2) 2,467
Net cash proceeds arising from the transaction(1) 320
Other effects(3) (2,144)
Net loss on formation of Vodafone Idea (2) (3,420)
--------------------------------------------------- -------
Notes:
1. Included in Disposal of interests in subsidiaries, net of
cash disposed within the consolidated statement of cash flows.
2. Includes a loss of EUR603 million related to the
re-measurement of our retained interest in Vodafone Idea.
3. Includes EUR2,079 million of recycled foreign exchange losses.
5 Equity dividends
2020 2019
EURm EURm
--------------------------------------------------- ----- -----
Declared and paid during the year
Final dividend for the year ended 31 March 2019 of
4.16 eurocents per share
(2018: 10.23 eurocents per share) 1,112 2,729
--------------------------------------------------- ----- -----
Interim dividend for the year ended 31 March 2020
of 4.50 eurocents per share
(2019: 4.84 eurocents per share) 1,205 1,293
--------------------------------------------------- ----- -----
2,317 4,022
--------------------------------------------------- ----- -----
Proposed after the end of the reporting period and
not recognised as a liability:
Final dividend for the year ended 31 March 2020 of
4.50 eurocents per share
(2019: 4.16 eurocents per share) 1,205 1,112
--------------------------------------------------- ----- -----
6 Reconciliation of net cash flow from operating activities
2020 2019
EURm EURm
--------------------------------------------------------- ------- -------
Loss for the financial year (455) (7,644)
Loss for the financial year from discontinued operations - 3,535
---------------------------------------------------------- ------- -------
Loss for the financial year from continuing operations (455) (4,109)
Non-operating expense 3 7
Investment income (248) (433)
Financing costs 3,549 2,088
Income tax expense 1,250 1,496
--------------------------------------------------------- ------- -------
Operating profit/(loss) 4,099 (951)
Adjustments for:
Share-based payments and other non-cash charges 146 147
Depreciation and amortisation 14,174 9,795
Loss on disposal of property, plant and equipment
and intangible assets 51 33
Share of result of equity accounted associates
and joint ventures 2,505 908
Impairment losses 1,685 3,525
Other (income)/expense (4,281) 148
Decrease/(increase) in inventory 68 (131)
(Increase)/decrease in trade and other receivables (38) (31)
Increase/(decrease) in trade and other payables (100) 739
--------------------------------------------------------- ------- -------
Cash generated by operations 18,309 14,182
Net tax paid (930) (1,131)
Cash flow from discontinued operations - (71)
---------------------------------------------------------- ------- -------
Net cash flow from operating activities 17,379 12,980
---------------------------------------------------------- ------- -------
7 Investment in associates and joint ventures
The investment in joint ventures at 31 March 2020 includes
EUR3,345 million in respect of the Group's interest in INWIT (see
note 4).
The equity accounted results for Vodafone Idea Limited
('Vodafone Idea') 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 8.
The Group's recorded share of Vodafone Idea's resulting losses
has been restricted to the amount that reduced the Group's carrying
value in Vodafone Idea 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.
Significant uncertainties exist in relation to Vodafone Idea'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.
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 Vodafone
Idea. 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 (31 March 2020: EUR766 million).
2020 2019
EURm EURm
--- ------------------------------------------------- -------- --------
Investment in joint ventures 5,323 3,399
Investment in associates 508 553
------------------------------------------------------ -------- --------
31 March 5,831 3,952
------------------------------------------------------ -------- --------
8 Commitments, contingent liabilities and legal proceedings
The Company and its subsidiaries are currently, and may from
time to time become, involved in a number of legal proceedings,
including inquiries from, or discussions with, governmental
authorities that are incidental to their operations. However, save
as disclosed below, the Company does not believe that it or its
subsidiaries are currently involved in (i) any legal or arbitration
proceedings (including any governmental proceedings which are
pending or known to be contemplated) which may have, or have had in
the 12 months preceding the date of this report, a material adverse
effect on the financial position or profitability of the Group; or
(ii) any material proceedings in which any of the Company's
Directors, members of senior management or affiliates are either a
party adverse to the Company or its subsidiaries or have a material
interest adverse to the Company or its subsidiaries. Due to
inherent uncertainties, the Company cannot make any accurate
quantification of any cost, or timing of such cost, which may arise
from any of the legal proceedings referred to in this Annual
Report, however costs in complex litigation can be substantial.
Indian tax cases
In August 2007 and September 2007, Vodafone India Limited
('Vodafone India') and Vodafone International Holdings BV ('VIHBV')
respectively received notices from the Indian tax authority
alleging potential liability in connection with an alleged failure
by VIHBV to deduct withholding tax from consideration paid to the
Hutchison Telecommunications International Limited group ('HTIL')
in respect of HTIL's gain on its disposal to VIHBV of its interests
in a wholly-owned Cayman Island incorporated subsidiary that
indirectly holds interests in Vodafone India. Following
approximately five years of litigation in the Indian courts in
which VIHBV sought to set aside the tax demand issued by the Indian
tax authority, in January 2012 the Supreme Court of India handed
down its judgement, holding that VIHBV's interpretation of the
Income Tax Act 1961 was correct, that the HTIL transaction in 2007
was not taxable in India, and that consequently, VIHBV had no
obligation to withhold tax from consideration paid to HTIL in
respect of the transaction. The Supreme Court of India quashed the
relevant notices and demands issued to VIHBV in respect of
withholding tax and interest.
On 28 May 2012 the Finance Act 2012 became law. The Finance Act
2012, which amended various provisions of the Income Tax Act 1961
with retrospective effect, contained provisions intended to tax any
gain on transfer of shares in a non-Indian company, which derives
substantial value from underlying Indian assets, such as VIHBV's
transaction with HTIL in 2007. Further, it sought to subject a
purchaser, such as VIHBV, to a retrospective obligation to withhold
tax. VIHBV received a letter on 3 January 2013 from the Indian tax
authority reminding it of the tax demand raised prior to the
Supreme Court of India's judgement and purporting to update the
interest element of that demand to a total amount of INR142
billion, which included principal and interest as calculated by the
Indian tax authority but did not include penalties.
On 10 January 2014, VIHBV served an amended trigger notice on
the Indian Government under the Netherlands-India Bilateral
Investment Treaty ('Dutch BIT'), supplementing a trigger notice
filed on 17 April 2012, immediately prior to the Finance Act 2012
becoming effective, to add claims relating to an attempt by the
Indian Government to tax aspects of the transaction with HTIL under
transfer pricing rules. A trigger notice announces a party's
intention to submit a claim to arbitration and triggers a cooling
off period during which both parties may seek to resolve the
dispute amicably. Notwithstanding their attempts, the parties were
unable to amicably resolve the dispute within the cooling off
period stipulated in the Dutch BIT. On 17 April 2014, VIHBV served
its notice of arbitration under the Dutch BIT, formally commencing
the Dutch BIT arbitration proceedings.
In June 2016, the tribunal was fully constituted with Sir
Franklin Berman KCMG QC appointed as presiding arbitrator. The
Indian Government raised objections to the application of the
treaty to VIHBV's claims and to the jurisdiction of the tribunal
under the Dutch BIT. On 19 June 2017, the tribunal decided to try
both these jurisdictional objections along with the merits of
VIHBV's claim in February 2019. Further attempts by the Indian
Government to have the jurisdiction arguments heard separately also
failed. VIHBV filed its response to India's defence in July 2018
and India responded in December 2018. The arbitration hearing took
place in February 2019, and a decision is expected mid to late
2020.
Separately, on 15 June 2015, Vodafone Group Plc and Vodafone
Consolidated Holdings Limited served a trigger notice on the Indian
Government under the United Kingdom-India Bilateral Investment
Treaty ('UK BIT') in respect of retrospective tax claims under the
Income Tax Act 1961 (as amended by the Finance Act 2012). Although
relating to the same underlying facts as the claim under the Dutch
BIT, the claim brought by Vodafone Group Plc and Vodafone
Consolidated Holdings Limited is a separate and distinct claim
under a different treaty. On 24 January 2017, Vodafone Group Plc
and Vodafone Consolidated Holdings Limited served a Notice of
Arbitration on the Indian Government formally commencing the
arbitration.
The Indian Government has indicated that it considers the
arbitration under the UK BIT to be an abuse of process but this is
strongly denied by Vodafone. On 22 August 2017, the Indian
Government obtained an injunction from the Delhi High Court
preventing Vodafone from progressing the UK BIT arbitration.
Vodafone was not present when India obtained this injunction and
applied to dismiss it. On 26 October 2017, the Delhi High Court
varied its order to permit Vodafone to participate in the formation
of the UK BIT tribunal. The UK BIT tribunal now consists of Marcelo
Kohen, an Argentinian national and professor of international law
in Geneva (appointed by India), Neil Kaplan, a British national
(appointed by Vodafone Group Plc) and Professor Campbell McLachlan
QC, a New Zealand national (appointed by the parties as presiding
arbitrator). On 7 May 2018, the Delhi High Court dismissed the
injunction. The Indian Government appealed the decision and
hearings took place in 2018 and 2019, with frequent adjournments.
The case will be heard once the courts reopen after the COVID-19
lockdown has passed. In the meantime, Vodafone has undertaken to
take no steps advancing the UK BIT pending resolution of the Indian
Government's appeal.
On 12 February 2016, VIHBV received a notice dated 4 February
2016 of an outstanding tax demand of INR221 billion (which included
interest accruing since the date of the original demand) along with
a statement that enforcement action, including against VIHBV's
indirectly held assets in India, would be taken if the demand was
not satisfied. On 29 September 2017, VIHBV received an
electronically generated demand in respect of alleged principal,
interest and penalties in the amount of INR190.7 billion. This
demand does not appear to have included any element for alleged
accrued interest liability.
Separate proceedings in the Bombay High Court taken against
VIHBV to seek to treat it as an agent of HTIL in respect of its
alleged tax on the same transaction, as well as penalties of up to
100% of the assessed withholding tax for the alleged failure to
have withheld such taxes, were listed for hearing at the request of
the Indian Government on 21 April 2016 despite the issue having
been ruled upon by the Supreme Court of India. The hearing has
since been periodically listed and then adjourned or not reached
hearing. VIHBV and Vodafone Group Plc will continue to defend
vigorously any allegation that VIHBV or Vodafone India is liable to
pay tax in connection with the transaction with HTIL and will
continue to exercise all rights to seek redress including pursuant
to the Dutch BIT and the UK BIT. We have not recorded a provision
in respect of the retrospective provisions of the Income Tax Act
1961 (as amended by the Finance Act 2012) and any tax demands based
upon such provisions.
Other Indian tax cases
Vodafone India Services Private Limited ('VISPL') (formerly
3GSPL) is involved in a number of tax cases with total claims
exceeding EUR450 million plus interest, and penalties of up to 300%
of the principal.
VISPL tax claims
VISPL has been assessed as owing tax of approximately EUR258
million (plus interest of EUR521 million) in respect of (i) a
transfer pricing margin charged for the international call centre
of HTIL prior to the 2007 transaction with Vodafone for HTIL assets
in India; (ii) the sale of the international call centre by VISPL
to HTIL; and (iii) the acquisition of and/or the alleged transfer
of options held by VISPL for Vodafone India. The first two of the
three heads of tax are subject to an indemnity by HTIL. The larger
part of the potential claim is not subject to any indemnity. VISPL
unsuccessfully challenged the merits of the tax demand in the
statutory tax tribunal and the jurisdiction of the tax office to
make the demand in the High Court. The Tax Appeal Tribunal heard
the appeal and ruled in the Tax Office's favour. VISPL lodged an
appeal (and stay application) in the Bombay High Court which was
concluded in early May 2015. On 13 July 2015 the tax authorities
issued a revised tax assessment reducing the tax VISPL had
previously been assessed as owing in respect of (i) and (ii) above.
In the meantime, (i) a stay of the tax demand on a deposit of GBP20
million and (ii) a corporate guarantee by VIHBV for the balance of
tax assessed remain in place. On 8 October 2015, the Bombay High
Court ruled in favour of Vodafone in relation to the options and
the call centre sale. The Tax Office has appealed to the Supreme
Court of India. A hearing has been adjourned with no specified
date.
Indian regulatory cases
Litigation remains pending in the Telecommunications Dispute
Settlement Appellate Tribunal ('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.
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.
Cash payments or cash receipts relating to the aforementioned
matters must have been made or received by VIL before any amount
becomes due from or owed to the Group. Any future payments by the
Group to VIL as a result of this agreement would only be made after
satisfaction of this and other contractual conditions. The Group's
potential exposure under this mechanism is capped at INR 84 billion
(approximately EUR1 billion).
Having considered the payments made and refunds received by VIL
in relation to certain contingent liabilities relating to Vodafone
India and Idea Cellular, including those relating to the AGR case,
and the significant uncertainties in relation to VIL's ability to
settle all liabilities relating to the AGR judgement, the Group has
assessed a cash outflow of EUR235 million under the agreement to be
probable at this time. On 22 April 2020, the Group announced that
it has made an advance payment of US $200 million to VIL for
amounts likely to be due under the terms of this mechanism.
3G Intra Circle Roaming: Vodafone India and others v Union of
India
In April 2013, the Indian Department of Telecommunications
('DoT') issued a stoppage notice to Vodafone India's operating
subsidiaries and other mobile operators requiring the immediate
stoppage of the provision of 3G services on other operators' mobile
networks in an alleged breach of licence claim. The DoT also
imposed a fine of approximately EUR5.5 million. Vodafone India
applied to the Delhi High Court for an order quashing the DoT's
notice.
Interim relief from the notice was granted (but limited to
existing customers at the time with the effect that Vodafone India
was not able to provide 3G services to new customers on other
operators' 3G networks pending a decision on the issue). The
dispute was referred to the TDSAT for decision, which ruled on 28
April 2014 that Vodafone India and the other operators were
permitted to provide 3G services to their customers (current and
future) on other operators' networks. The DoT has appealed the
judgement and sought a stay of the tribunal's judgement. The DoT's
stay application was rejected by the Supreme Court of India. The
matter is pending before the Supreme Court of India.
Other public interest litigation
Three public interest litigations have been initiated in the
Supreme Court of India against the Indian Government and private
operators on the grounds that the grant of additional spectrum
beyond 4.4/6.2MHz was illegal. The cases seek appropriate
investigation and compensation for the loss to the exchequer.
One time spectrum charges: Vodafone India v Union of India
The Indian Government has sought to impose one time spectrum
charges of approximately EUR400 million on certain operating
subsidiaries of Vodafone India. Vodafone India filed a petition
before the TDSAT challenging the one time spectrum charges on the
basis that they are illegal, violate Vodafone India'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 TDSAT upheld the
demand, in part, and in October VIL filed an appeal which was heard
in the Supreme Court in March 2020. The Court rejected VIL's
appeal, upholding the TDSAT order. The DoT may now seek payment in
accordance with that order.
Adjusted Gross Revenue ('AGR') dispute before the Supreme Court
of India: VIL and others v Union of India
The 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 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 rendered 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 became due and payable
within three months of the Supreme Court judgement.
In November 2019, the DoT issued an order for the AGR judgement
debt to be determined through self-assessment and paid on or before
23 January 2020. VIL and other operators filed review petitions
against the judgment, which were heard and dismissed on 16 January
2020. On 23 January 2020, the DoT announced that it would not take
coercive action against telecom service providers which have not
repaid their respective AGR judgement debts. Consequently, VIL and
others did not pay any amount to the DoT. On 14 February 2020,
after hearing applications from VIL and other operators, the
Supreme Court ordered the DoT to withdraw its non-coercive order as
well as requiring all Directors of VIL and other relevant operators
to show cause as to why contempt proceedings should not be brought
against them. VIL filed its response on 6 March 2020. In another
hearing on 18 March 2020, the Supreme Court ordered that no
exercise of self-assessment/re-assessment should be performed and
that the dues, as calculated by the DoT, should apply as per their
original ruling in October 2019.
Based on submissions of the DoT in the Supreme Court proceedings
(which the Group is unable to confirm as to their accuracy), VIL's
current liability appears to be INR 514 billion (EUR6.2 billion).
The next hearing, where the Supreme Court is expected to consider
the DoT's request to give a reasonable time for payment to be made,
has been delayed as a result of the COVID-19 related
restrictions.
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
IPCom and Intellectual Ventures. Vodafone has contractual
indemnities from suppliers which have been invoked in relation to
the alleged patent infringement liability.
Spain
Vodafone Group Plc has been sued in Spain by TOT Power Control
('TOT'), an affiliate of Top Optimized Technologies. The claim
makes a number of allegations including patent infringement, with
TOT initially seeking over EUR500 million from Vodafone Group Plc
as well as an injunction against using the technology in question.
Vodafone's initial challenge of the appropriateness of Spain as a
venue for this dispute was denied. Vodafone Group Plc appealed the
denial and was partially successful. In a decision dated 30 October
2017, the court ruled that while it did have jurisdiction to hear
the infringement case relating to the Spanish patent, it was not
competent to hear TOT's contractual and competition law claims.
This decision is subject to appeal. TOT's application for an
injunction was unsuccessful and TOT is appealing. The trial took
place in September 2018 and in January 2020 judgment was handed
down in Vodafone's favour. TOT has appealed but is no longer
seeking EUR500 million from Vodafone Group Plc.
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 could have
established that one or more of its patents were valid and
infringed, it could have sought an injunction against the UK
network if a global licence for the patents was not agreed. The
Court ordered expedited trials of the infringement and validity
issues. The first was in November 2019 and the second in May 2020.
However, after the trial in November 2019 the risk of injunction
was removed, and IPCom has given up the second trial listed for May
2020. TOT, who had previously sued Vodafone in Spain, in December
2019 brought a similar claim in the English High Court. Vodafone is
challenging jurisdiction.
Germany: Kabel Deutschland takeover - class actions
The German courts have been determining the adequacy of the
mandatory cash offer made to minority shareholders in Vodafone's
takeover of Kabel Deutschland. Hearings took place in May 2019 and
a decision was delivered in November 2019 in Vodafone's favour,
rejecting all claims by minority shareholders. A number of
shareholders have appealed.
Italy: British Telecom (Italy) v Vodafone Italy
The Italian Competition Authority concluded an investigation in
2007 when Vodafone Italy gave certain undertakings in relation to
allegations that it had abused its dominant position in the
wholesale market for mobile termination. In 2010, British Telecom
(Italy) brought a civil damages claim against Vodafone Italy on the
basis of the Competition Authority's investigation and Vodafone
Italy's undertakings. British Telecom (Italy) sought damages in the
amount of EUR280 million for abuse of dominant position by Vodafone
Italy in the wholesale fixed to mobile termination market for the
period from 1999 to 2007. A court appointed expert delivered an
opinion to the Court that the range of damages in the case should
be in the region of EUR10 million to EUR25 million which was
reduced in a further supplementary report published in September
2014 to a range of EUR8 million to EUR11 million. Judgment was
handed down by the court in August 2015, awarding EUR12 million
(including interest) to British Telecom (Italy).
British Telecom (Italy) appealed the amount of the damages to
the Court of Appeal of Milan. In addition, British Telecom (Italy)
has asked again for a reference to the European Court of Justice
for an interpretation of the European community law on antitrust
damages. Vodafone Italy also filed an appeal which was successful.
British Telecom (Italy) was ordered to repay to Vodafone Italy the
EUR12 million with interest and legal costs. British Telecom
(Italy) filed an appeal to the Supreme Court in September 2018. A
decision is not expected for several years.
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 anticompetitive retention
activities. The expert prepared a draft report with a range of
damages from EURnil-9 million. Vodafone filed its defences in
December 2019 and a decision is expected during 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. Two preliminary hearings
have taken place, with two more scheduled for April but now
postponed to May 2020.
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,
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. On 31 January 2020 the AGCM
issued its decision, imposing fines totaling EUR229 million against
the operators, including EUR60 million against Vodafone. Vodafone
Italy is appealing this decision.
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, dropping 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. Vodafone filed a counter claim and
all claims were heard in February 2020, although Mr Papistas did
not make the stamp duty payments required by the Court to have his
case considered.
Netherlands: Consumer credit/handset case
In February 2016, the Dutch Supreme Court ruled on the Dutch
implementation of the EU Consumer Credit Directive and "instalment
sales agreements" (a Dutch law concept), holding that bundled
"all-in" mobile subscription agreements (i.e. device along with
mobile services) are considered consumer credit agreements. As a
result, VodafoneZiggo, together with the industry, has been working
with the Ministry of Finance and the Competition Authority on
compliance requirements going forward for such offers. The ruling
also has retrospective effect.
A number of small claims were submitted by individual customers
in the small claims courts. On 15 February 2018, Consumentenbond (a
claims agency) initiated collective claim proceedings against
VodafoneZiggo, Tele2, T-Mobile and now KPN. A preliminary
understanding has been reached with the claims agency and the Dutch
Consumer Federation, to be finalised during 2020. As a result, the
collective claim proceedings against VodafoneZiggo have been
withdrawn.
UK: Phones 4U in Administration v Vodafone Limited and Vodafone
Group Plc and Others
In December 2018 the administrators of former UK indirect seller
Phones 4U sued the three main UK mobile network operators (MNOs),
including Vodafone, and their parent companies. The administrators
allege a conspiracy between the MNOs to pull their business from
Phones 4U thereby causing its collapse. The value of the claim is
not pleaded but we understand it to be the total value of the
business, possibly around GBP1 billion. Vodafone's alleged share of
the liability is also not pleaded. Vodafone filed its defence on 18
April 2019, along with several other defendants, and the
Administrators filed their Replies in October 2019. A case
management hearing took place in March 2020, with another one
scheduled for June 2020.
9 Subsequent events
Accelerated payment to Vodafone Idea
On 22 April 2020, the Group announced that it had accelerated a
payment of US $200 million to Vodafone Idea, which was due in
September 2020 under the terms of the contingent liability
mechanism ('CLM') with Vodafone Idea.
See note 8 "Commitments, contingent liabilities and legal
proceedings" for further details.
INWIT - Sale of shares
On 27 April 2020, the Group completed the sale of equity shares
in Infrastrutture Wireless Italiane S.p.A. ('INWIT'), equivalent to
4.3% of INWIT's share capital, for EUR400 million. The Group
continues to hold 33.2% of INWIT's equity shares and INWIT
continues to be a joint venture of the Group.
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.
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
community.
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.
Revised definition of adjusted EBITDA
For the year ended 31 March 2020, 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 year ended 31 March 2019, 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.
Group adjusted EBIT, adjusted operating profit, adjusted net
financing costs 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 net financing
costs exclude mark-to-market and foreign exchange gains/losses and
interest on lease liabilities. Adjusted earnings per share reflects
the exclusions of adjusted EBIT and adjusted net financing costs,
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
community and debt rating agencies.
Cash flow measures
In presenting and discussing our reported results, free cash
flow (pre-spectrum), free cash flow 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 these measures 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 community and debt rating agencies.
Other
Certain of the statements within the Strategic review contains
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
"Outlook" on page 12 contain forward-looking non-GAAP financial
information which at this time cannot be quantitatively reconciled
to comparable GAAP financial information.
Organic growth
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 the
disposal of Vodafone New Zealand and the acquired Liberty Global
assets), movements in foreign exchange rates and the impact from
the implementation of IFRS 16 'Leases'.
Whilst this measure is not intended to be a substitute for
reported growth, nor is it superior to reported growth, we believe
that the measure provides useful and necessary information to
investors and other interested parties for the following
reasons:
-- It provides additional information on underlying growth of
the business without the effect of certain factors unrelated
to its operating performance;
-- It is used for internal performance analysis; and
-- It facilitates 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 overleaf.
Reconciliation between alternative performance measures and
closest equivalent GAAP measure
The location of the reconciliation between the alternative
performance measures in this document and the nearest closest
equivalent GAAP measure is shown below.
Alternative performance Closest equivalent GAAP
measure measure Reconciled on page
------------------------------- ---------------------------- -------------------
Group service revenue Revenue 13
------------------------------- ---------------------------- -------------------
Organic Group service
revenue growth Revenue 58
------------------------------- ---------------------------- -------------------
Adjusted EBITDA Operating profit 13
------------------------------- ---------------------------- -------------------
Organic adjusted EBITDA
growth Operating profit 57
------------------------------- ---------------------------- -------------------
Adjusted EBIT Operating profit 13
------------------------------- ---------------------------- -------------------
Adjusted operating profit Operating profit 13
------------------------------- ---------------------------- -------------------
Adjusted net financing
costs Net financing costs 23
------------------------------- ---------------------------- -------------------
Adjusted income tax
expense Income tax expense 23
------------------------------- ---------------------------- -------------------
Adjusted profit before
tax Profit before tax 23
------------------------------- ---------------------------- -------------------
Adjusted profit attributable Profit attributable
to owners of the parent to owners of the parent 24
------------------------------- ---------------------------- -------------------
Adjusted earnings per
share Basic earnings per share 24
------------------------------- ---------------------------- -------------------
Adjusted effective tax
rate Profit before tax 23
------------------------------- ---------------------------- -------------------
Operating free cash Cash inflow from operating
flow activities 26
------------------------------- ---------------------------- -------------------
Cash inflow from operating
Free cash flow (pre-spectrum) activities 26
------------------------------- ---------------------------- -------------------
Cash inflow from operating
Free cash flow activities 26
------------------------------- ---------------------------- -------------------
Net debt Borrowings 27
------------------------------- ---------------------------- -------------------
Return on Capital Employed
('ROCE') - 28
------------------------------- ---------------------------- -------------------
Other
activity
2019 Reported (incl. Foreign Organic
2020 (1) growth M&A) exchange growth*
EURm EURm % pps pps %
---- --------------------------------- ------ ------ -------- --------- --------- ----------
Year ended 31 March
Revenue
Germany 12,076 10,390 16.2 (15.7) - 0.5
Italy 5,529 5,857 (5.6) 0.1 - (5.5)
UK 6,484 6,272 3.4 - (0.9) 2.5
Spain 4,296 4,669 (8.0) - - (8.0)
Other Europe 5,541 5,072 9.2 (6.9) 0.4 2.7
Eliminations (133) (116)
--------------------------------------- ------ ------ -------- --------- --------- ----------
Europe 33,793 32,144 5.1 (6.1) (0.1) (1.1)
--------------------------------------- ------ ------ -------- --------- --------- ----------
Vodacom 5,531 5,443 1.6 - 1.8 3.4
Other Markets 4,386 4,864 (9.8) 17.9 1.3 9.4
------ ------ -------- --------- --------- ----------
Turkey 2,325 2,349 (1.0) (0.4) 8.9 7.5
Egypt 1,452 1,114 30.3 - (15.4) 14.9
-------------------------------------- ------ ------ -------- --------- --------- ----------
Eliminations - -
--------------------------------------- ------ ------ -------- --------- --------- ----------
Rest of the World 9,917 10,307 (3.8) 8.0 1.6 5.8
--------------------------------------- ------ ------ -------- --------- --------- ----------
Other 1,567 1,517 3.3 0.3 0.1 3.7
Eliminations (303) (302)
--------------------------------------- ------ ------ -------- --------- --------- ----------
Group 44,974 43,666 3.0 (2.8) 0.3 0.5
--------------------------------------- ------ ------ -------- --------- --------- ----------
Adjusted EBITDA
Germany 5,077 4,079 24.5 (22.0) - 2.5
Italy 2,068 2,202 (6.1) (0.5) - (6.6)
UK 1,500 1,364 10.0 1.3 (0.8) 10.5
Spain 1,009 1,038 (2.8) 1.1 - (1.7)
Other Europe 1,738 1,606 8.2 (3.6) 0.1 4.7
--------------------------------------- ------ ------ -------- --------- --------- --------
Europe 11,392 10,289 10.7 (9.0) (0.1) 1.6
--------------------------------------- ------ ------ -------- --------- --------- --------
Vodacom 2,088 2,157 (3.2) 2.3 2.0 1.1
Other Markets 1,400 1,404 (0.3) 19.5 (1.7) 17.5
------ ------ -------- --------- --------- --------
Turkey 616 550 12.0 6.3 8.7 27.0
Egypt 666 516 29.1 0.3 (15.2) 14.2
-------------------------------------- ------ ------ -------- --------- --------- --------
Rest of the World 3,488 3,561 (2.0) 8.3 0.5 6.8
--------------------------------------- ------ ------ -------- --------- --------- --------
Other 1 68
--------------------------------------- ------ ------ -------- --------- --------- --------
Group 14,881 13,918 6.9 (4.4) 0.1 2.6
--------------------------------------- ------ ------ -------- --------- --------- --------
Percentage point change in adjusted
EBITDA margin
Germany 42.0% 39.3% 2.7 (1.9) - 0.8
Italy 37.4% 37.6% (0.2) (0.2) - (0.4)
UK 23.1% 21.7% 1.4 0.2 - 1.6
Spain 23.5% 22.2% 1.3 0.2 - 1.5
Other Europe 31.4% 31.7% (0.3) 1.0 (0.1) 0.6
--------------------------------------- ------ ------ -------- --------- --------- --------
Europe 33.7% 32.0% 1.7 (0.9) - 0.8
--------------------------------------- ------ ------ -------- --------- --------- --------
Vodacom 37.8% 39.6% (1.8) 0.9 0.1 (0.8)
Other Markets 31.9% 28.9% 3.0 0.2 (0.9) 2.3
------ ------ -------- --------- --------- --------
Turkey 26.5% 23.4% 3.1 1.3 (0.3) 4.1
Egypt 45.9% 46.3% (0.4) 0.1 - (0.3)
-------------------------------------- ------ ------ -------- --------- --------- --------
Rest of the World 35.2% 34.5% 0.7 - (0.4) 0.3
Group 33.1% 31.9% 1.2 (0.4) (0.1) 0.7
--------------------------------------- ------ ------ -------- --------- --------- --------
Adjusted EBIT
Europe 2,589 2,050 26.3 (21.1) 0.4 5.6
Rest of the World 2,223 2,151 3.3 3.2 0.3 6.8
Other (16) 52
--------------------------------------- ------ ------ -------- --------- --------- --------
Group 4,796 4,253 12.8 (7.7) 0.2 5.3
--------------------------------------- ------ ------ -------- --------- --------- --------
Adjusted operating profit
Europe 2,707 2,200 23.0 (19.8) 0.4 3.6
Rest of the World 1,866 1,653 12.9 (3.7) 1.1 10.3
Other (18) 52
--------------------------------------- ------ ------ -------- --------- --------- --------
Group 4,555 3,905 16.6 (10.9) 0.6 6.3
--------------------------------------- ------ ------ -------- --------- --------- --------
Note:
1. The comparative results were previously disclosed on an IAS
18 basis in the preliminary announcement for the year ended 31
March 2019. These comparative results have been re-presented in the
table above on an IFRS 15 basis.
Other
activity
2019 Reported (incl. Foreign Organic
2020 (1) growth M&A) exchange growth*
EURm EURm % pps pps %
----------------------------------- ------ ------ -------- --------- --------- --------
Year ended 31 March - Service
revenue
Germany 10,696 9,145 17.0 (17.0) - -
------ ------ -------- --------- --------- --------
Mobile service revenue 5,084 5,150 (1.3) (0.5) - (1.8)
Fixed service revenue 5,612 3,995 40.5 (38.1) - 2.4
----------------------------------- ------ ------ -------- --------- --------- --------
Italy 4,833 5,030 (3.9) - - (3.9)
------ ------ -------- --------- --------- --------
Mobile service revenue 3,625 3,914 (7.4) - - (7.4)
Fixed service revenue 1,208 1,116 8.2 - - 8.2
----------------------------------- ------ ------ -------- --------- --------- --------
UK 5,020 4,952 1.4 - (0.9) 0.5
------ ------ -------- --------- --------- --------
Mobile service revenue 3,618 3,585 0.9 - (0.9) -
Fixed service revenue 1,402 1,367 2.6 - (0.9) 1.7
----------------------------------- ------ ------ -------- --------- --------- --------
Spain 3,904 4,203 (7.1) 0.4 - (6.7)
Other Europe 4,890 4,460 9.6 (6.9) 0.3 3.0
------ ------ -------- --------- --------- --------
Of which: Ireland 838 846 (0.9) - - (0.9)
Of which: Portugal 985 933 5.6 (0.1) - 5.5
Of which: Greece 884 860 2.8 0.2 - 3.0
----------------------------------- ------ ------ -------- --------- --------- --------
Eliminations (130) (110)
------------------------------------ ------ ------ -------- --------- --------- --------
Europe 29,213 27,680 5.5 (6.6) (0.1) (1.2)
------------------------------------ ------ ------ -------- --------- --------- --------
Vodacom 4,470 4,391 1.8 - 1.5 3.3
------ ------ -------- --------- --------- --------
Of which: South Africa 3,212 3,241 (0.9) - 3.1 2.2
Of which: International operations 1,263 1,146 10.2 - (2.7) 7.5
----------------------------------- ------ ------ -------- --------- --------- --------
Other Markets 3,796 4,011 (5.4) 19.9 0.4 14.9
------ ------ -------- --------- --------- --------
Of which: Turkey 1,874 1,736 7.9 0.5 9.2 17.6
Of which: Egypt 1,394 1,073 29.9 - (15.4) 14.5
----------------------------------- ------ ------ -------- --------- --------- --------
Eliminations - -
------------------------------------ ------ ------ -------- --------- --------- --------
Rest of the World 8,266 8,402 (1.6) 8.8 0.9 8.1
------------------------------------ ------ ------ -------- --------- --------- --------
Other 494 477 3.6 1.1 - 4.7
Eliminations (102) (101) - - - -
------------------------------------ ------ ------ -------- --------- --------- --------
Total service revenue 37,871 36,458 3.9 (3.2) 0.1 0.8
Other revenue 7,103 7,208 (1.5) (0.5) 1.1 (0.9)
------------------------------------ ------ ------ -------- --------- --------- --------
Revenue 44,974 43,666 3.0 (2.8) 0.3 0.5
------------------------------------ ------ ------ -------- --------- --------- --------
Other growth metrics
Germany - Retail revenue 10,315 8,671 19.0 (17.9) - 1.1
Germany - Mobile retail revenue 4,949 4,886 1.3 (0.6) - 0.7
excluding regulatory impact
Italy - Operating expenses 1,047 1,140 8.2 (0.6) - 7.6
UK - Operating expenses 1,671 1,824 8.4 0.7 0.8 9.9
Spain - Operating expenses 1,094 1,127 2.9 0.9 - 3.8
Spain - H2 adjusted EBITDA 549 509 7.9 0.3 - 8.2
South Africa - Service revenue 3,212 3,223 (0.3) - 3.1 2.8
excluding one-off benefit in
the prior year
Vodafone Business - Fixed line
service revenue 3,588 3,452 3.9 (0.5) (0.1) 3.3
------------------------------------ ------ ------ -------- --------- --------- --------
Note:
1. The comparative results were previously disclosed on an IAS
18 basis in the preliminary announcement for the year ended 31
March 2019. These comparative results have been re-presented in the
table above on an IFRS 15 basis.
Other
activity
2019 Reported (incl. Foreign Organic
2020 (1) growth M&A) exchange growth*
EURm EURm % pps pps %
----------------------------------- ------ ------ -------- --------- --------- --------
Quarter ended 31 March - Service
revenue
Germany 2,852 2,267 25.8 (25.9) - (0.1)
------ ------ -------- --------- --------- --------
Mobile service revenue 1,262 1,262 - (1.9) - (1.9)
Fixed service revenue 1,590 1,005 58.2 (56.0) - 2.2
----------------------------------- ------ ------ -------- --------- --------- --------
Italy 1,189 1,234 (3.6) (0.1) - (3.7)
------ ------ -------- --------- --------- --------
Mobile service revenue 870 945 (7.9) (0.1) - (8.0)
Fixed service revenue 319 289 10.4 - - 10.4
----------------------------------- ------ ------ -------- --------- --------- --------
UK 1,287 1,257 2.4 - (1.2) 1.2
------ ------ -------- --------- --------- --------
Mobile service revenue 909 895 1.6 - (1.3) 0.3
Fixed service revenue 378 362 4.4 - (0.7) 3.7
----------------------------------- ------ ------ -------- --------- --------- --------
Spain 972 1,002 (3.0) 0.3 - (2.7)
Other Europe 1,233 1,103 11.8 (9.3) 0.9 3.4
------ ------ -------- --------- --------- --------
Of which: Ireland 205 218 (6.0) 2.4 - (3.6)
Of which: Portugal 245 227 7.9 (0.4) - 7.5
Of which: Greece 210 214 (1.9) 3.8 - 1.9
----------------------------------- ------ ------ -------- --------- --------- --------
Eliminations (26) (23)
------------------------------------ ------ ------ -------- --------- --------- --------
Europe 7,507 6,840 9.8 (10.0) (0.2) (0.4)
------------------------------------ ------ ------ -------- --------- --------- --------
Vodacom 1,091 1,096 (0.5) - 3.7 3.2
------ ------ -------- --------- --------- --------
Of which: South Africa 789 807 (2.2) - 5.9 3.7
Of which: International operations 305 287 6.3 - (1.9) 4.4
----------------------------------- ------ ------ -------- --------- --------- --------
Other Markets 881 1,012 (12.9) 26.3 0.8 14.2
------ ------ -------- --------- --------- --------
Of which: Turkey 460 432 6.5 (1.2) 10.7 16.0
Of which: Egypt 369 279 32.3 - (17.5) 14.8
----------------------------------- ------ ------ -------- --------- --------- --------
Eliminations - -
------------------------------------ ------ ------ -------- --------- --------- --------
Rest of the World 1,972 2,108 (6.5) 12.1 2.3 7.9
------------------------------------ ------ ------ -------- --------- --------- --------
Other 137 123 11.4 - (0.1) 11.3
Eliminations (22) (34) - - - -
------------------------------------ ------ ------ -------- --------- --------- --------
Total service revenue 9,594 9,037 6.2 (5.0) 0.4 1.6
Other revenue 1,691 1,783 (5.2) (0.1) 1.6 (3.7)
------------------------------------ ------ ------ -------- --------- --------- --------
Revenue 11,285 10,820 4.3 (4.2) 0.7 0.8
------------------------------------ ------ ------ -------- --------- --------- --------
Other growth metrics
Germany - Retail revenue 2,762 2,158 28.0 (27.1) - 0.9
Germany - Mobile retail revenue 1,231 1,203 2.3 (1.9) - 0.4
excluding regulatory impact
------------------------------------ ------ ------ -------- --------- --------- --------
Note:
1. The comparative results were previously disclosed on an IAS
18 basis in the preliminary announcement for the year ended 31
March 2019. These comparative results have been re-presented in the
table above on an IFRS 15 basis.
Other
activity
2018 Reported (incl. Foreign Organic
2019 (1) growth M&A) exchange growth*
EURm EURm % pps pps %
----------------------------------- ------ ------ -------- --------- --------- --------
Quarter ended 31 December -
Service revenue
Germany 2,883 2,301 25.3 (25.3) - -
------ ------ -------- --------- --------- --------
Mobile service revenue 1,273 1,299 (2.0) (0.2) - (2.2)
Fixed service revenue 1,610 1,002 60.7 (57.9) - 2.8
----------------------------------- ------ ------ -------- --------- --------- --------
Italy 1,220 1,284 (5.0) - - (5.0)
------ ------ -------- --------- --------- --------
Mobile service revenue 916 993 (7.8) 0.1 - (7.7)
Fixed service revenue 304 291 4.5 (0.3) - 4.2
----------------------------------- ------ ------ -------- --------- --------- --------
UK 1,282 1,235 3.8 - (3.2) 0.6
------ ------ -------- --------- --------- --------
Mobile service revenue 924 890 3.8 - (3.2) 0.6
Fixed service revenue 358 345 3.8 - (3.3) 0.5
----------------------------------- ------ ------ -------- --------- --------- --------
Spain 966 1,039 (7.0) 0.5 - (6.5)
Other Europe 1,265 1,119 13.0 (10.0) - 3.0
------ ------ -------- --------- --------- --------
Of which: Ireland 209 209 - 0.1 - 0.1
Of which: Portugal 248 234 6.0 (0.1) - 5.9
Of which: Greece 219 220 (0.5) 2.4 - 1.9
----------------------------------- ------ ------ -------- --------- --------- --------
Eliminations (30) (25)
------------------------------------ ------ ------ -------- --------- --------- --------
Europe 7,586 6,953 9.1 (9.9) (0.6) (1.4)
------------------------------------ ------ ------ -------- --------- --------- --------
Vodacom 1,162 1,096 6.0 - (0.8) 5.2
------ ------ -------- --------- --------- --------
Of which: South Africa 834 795 4.9 - (0.3) 4.6
Of which: International operations 330 301 9.6 - (2.2) 7.4
----------------------------------- ------ ------ -------- --------- --------- --------
Other Markets 891 1,009 (11.7) 28.0 (1.8) 14.5
------ ------ -------- --------- --------- --------
Of which: Turkey 481 432 11.3 3.1 2.9 17.3
Of which: Egypt 356 274 29.9 - (16.0) 13.9
----------------------------------- ------ ------ -------- --------- --------- --------
Eliminations - -
------------------------------------ ------ ------ -------- --------- --------- --------
Rest of the World 2,053 2,105 (2.5) 12.9 (1.3) 9.1
------------------------------------ ------ ------ -------- --------- --------- --------
Other 117 109
Eliminations (23) (14)
------------------------------------ ------ ------ -------- --------- --------- --------
Total service revenue 9,733 9,153 6.3 (4.8) (0.7) 0.8
Other revenue 2,017 1,845 9.3 1.3 (0.4) 10.2
------------------------------------ ------ ------ -------- --------- --------- --------
Revenue 11,750 10,998 6.8 (3.7) (0.7) 2.4
------------------------------------ ------ ------ -------- --------- --------- --------
Other growth metrics
Germany - Mobile retail revenue
excluding 1,244 1,236 0.6 (0.2) - 0.4
regulatory impact
Germany - Fixed retail revenue 1,560 951 64.0 (60.9) - 3.1
Germany - Retail revenue 2,791 2,187 27.6 (26.6) - 1.0
------------------------------------ ------ ------ -------- --------- --------- --------
Note:
1. The comparative results were previously disclosed on an IAS
18 basis in the preliminary announcement for the year ended 31
March 2019. These comparative results have been re-presented in the
table above on an IFRS 15 basis.
Additional information
Regional results for the year ended 31 March (1)
Adjusted operating Operating free
Revenue Adjusted EBITDA profit Capital additions cash flow
-------------- ----------------- -------------------- ------------------- ----------------
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm
---------------- ------ ------ -------- ------- --------- --------- --------- -------- ------- -------
Europe
Germany 12,076 10,390 5,077 4,079 1,701 1,070 2,203 1,816 2,987 2,425
Italy 5,529 5,857 2,068 2,202 813 934 697 784 1,355 1,552
UK 6,484 6,272 1,500 1,364 (132) (274) 753 804 930 689
Spain 4,296 4,669 1,009 1,038 (294) (220) 761 813 324 443
---------------- ------ ------ -------- ------- --------- --------- --------- -------- ------- -------
Other Europe
Netherlands(2) - - - - 130 162 - - - -
Portugal 1,082 1,028 394 389 106 104 182 222 224 165
Greece 958 939 304 302 124 127 110 123 228 177
Other 3,513 3,116 1,040 915 259 297 495 430 627 519
Eliminations (12) (11) - - - - - - - -
---------------- ------ ------ -------- ------- --------- --------- --------- -------- ------- -------
Other Europe 5,541 5,072 1,738 1,606 619 690 787 775 1,079 861
Eliminations (133) (116) - - - - - - - -
---------------- ------ ------ -------- ------- --------- --------- --------- -------- ------- -------
Europe 33,793 32,144 11,392 10,289 2,707 2,200 5,201 4,992 6,675 5,970
Rest of the
World
Vodacom 5,531 5,443 2,088 2,157 1,569 1,636 802 810 1,341 1,379
---------------- ------ ------ -------- ------- --------- --------- --------- -------- ------- -------
Other Markets
Turkey 2,325 2,349 616 550 351 281 260 249 339 308
Egypt 1,452 1,114 666 516 498 346 246 192 431 329
India(2) - - - - (570) (689) - - - -
Other 609 1,401 118 338 18 79 81 185 42 132
Eliminations - - - - - - - - - -
---------------- ------ ------ -------- ------- --------- --------- --------- -------- ------- -------
Other Markets 4,386 4,864 1,400 1,404 297 17 587 626 812 769
Eliminations - - - - - - - - - -
---------------- ------ ------ -------- ------- --------- --------- --------- -------- ------- -------
Rest of the
World 9,917 10,307 3,488 3,561 1,866 1,653 1,389 1,436 2,153 2,148
Other 1,567 1,517 1 68 (18) 52 821 799 (1,107) (1,047)
Eliminations (303) (302) - - - - - - - -
---------------- ------ ------ -------- ------- --------- --------- --------- -------- ------- -------
Group 44,974 43,666 14,881 13,918 4,555 3,905 7,411 7,227 7,721 7,071
---------------- ------ ------ -------- ------- --------- --------- --------- -------- ------- -------
Notes:
1. The comparative results were previously disclosed on an IAS
18 basis in the Preliminary Announcement for the year ended 31
March 2019. These comparative results have been re-presented in the
table above on an IFRS 15 basis.
2. Includes the Group's share of the joint venture in this market.
Revenue - Quarter ended 31 March (1)
Group and Regions Group Europe Rest of the World
------------------ ------------------ -------------------
2020 2019 2020 2019 2020 2019
EURm EURm EURm EURm EURm EURm
-------- -------- -------- -------- --------- --------
Mobile customer revenue 5,575 5,661 3,960 4,013 1,604 1,646
Mobile incoming revenue 427 424 305 303 132 138
Other service revenue 479 475 302 306 105 89
-------- -------- -------- -------- --------- --------
Mobile service revenue 6,481 6,560 4,567 4,622 1,841 1,873
Fixed service revenue 3,113 2,477 2,940 2,218 131 235
-------- -------- -------- -------- --------- --------
Service revenue 9,594 9,037 7,507 6,840 1,972 2,108
Other revenue 1,691 1,783 1,091 1,063 381 474
-------- -------- -------- -------- --------- --------
Revenue 11,285 10,820 8,598 7,903 2,353 2,582
-------- -------- -------- -------- --------- --------
Growth
-----------------------------------------------------------
Reported Organic* Reported Organic* Reported Organic*
%% %% %%
-------- ------- ------- ------- -------- -------
Revenue 4.3 0.8 8.8 (0.7) (8.9) 5.3
Service revenue 6.2 1.6 9.8 (0.4) (6.5) 7.9
-------- -------- -------- -------- --------- --------
Operating Companies Germany Italy UK
------------------ ------------------ -------------------
2020 2019 2020 2019 2020 2019
EURm EURm EURm EURm EURm EURm
-------- -------- -------- -------- --------- --------
Mobile customer revenue 1,103 1,099 740 812 776 762
Mobile incoming revenue 55 48 70 74 66 66
Other service revenue 104 115 60 59 67 67
-------- -------- -------- -------- --------- --------
Mobile service revenue 1,262 1,262 870 945 909 895
Fixed service revenue 1,590 1,005 319 289 378 362
-------- -------- -------- -------- --------- --------
Service revenue 2,852 2,267 1,189 1,234 1,287 1,257
Other revenue 335 287 202 212 321 340
-------- -------- -------- -------- --------- --------
Revenue 3,187 2,554 1,391 1,446 1,608 1,597
-------- -------- -------- -------- --------- --------
Growth
-----------------------------------------------------------
Reported Organic* Reported Organic* Reported Organic*
%% %% %%
-------- ------- ------- ------- -------- -------
Revenue 24.8 0.6 (3.8) (3.7) 0.7 (0.5)
Service revenue 25.8 (0.1) (3.6) (3.7) 2.4 1.2
-------- -------- -------- -------- --------- --------
Spain Vodacom
------------------ ------------------
2020 2019 2020 2019
EURm EURm EURm EURm
-------- -------- -------- --------
Mobile customer revenue 574 584 914 931
Mobile incoming revenue 33 30 36 41
Other service revenue 40 33 75 55
-------- -------- -------- --------
Mobile service revenue 647 647 1,025 1,027
Fixed service revenue 325 355 66 69
-------- -------- -------- --------
Service revenue 972 1,002 1,091 1,096
Other revenue 85 99 254 270
-------- -------- -------- --------
Revenue 1,057 1,101 1,345 1,366
-------- -------- -------- --------
Growth
--------------------------------------
Reported Organic* Reported Organic*
%% %%
-------- ------- ------- -------
Revenue (4.0) (4.0) (1.5) 2.7
Service revenue (3.0) (2.7) (0.5) 3.2
-------- -------- -------- --------
Notes:
1. The comparative results were previously disclosed on an IAS
18 basis in the Preliminary Announcement for the year ended 31
March 2019. These comparative results have been re-presented in the
table above on an IFRS 15 basis.
Reconciliation of adjusted earnings
Discontinued
Reported operations Adjustments(1) Adjusted
Year ended 31 March 2020 EURm EURm EURm EURm
------------------------------------- -------- ------------ -------------- --------
Operating profit 4,099 - (182) 3,917
Amortisation of acquired customer
base and brand intangible assets - - 638 638
Non-operating income and expense (3) - 3 -
Net financing costs (3,301) - 1,663 (1,638)
------------------------------------- -------- ------------ -------------- --------
Profit before taxation 795 - 2,122 2,917
Income tax credit/(expense) (1,250) - 451 (799)
------------------------------------- -------- ------------ -------------- --------
(Loss)/profit for the financial year
from continuing operations (455) - 2,573 2,118
Loss for the financial year from
discontinued operations - - - -
------------------------------------- -------- ------------ -------------- --------
(Loss)/profit for the financial year (455) - 2,573 2,118
------------------------------------- -------- ------------ -------------- --------
Attributable to:
- Owners of the parent (920) - 2,567 1,647
- Non-controlling interests 465 - 6 471
------------------------------------- -------- ------------ -------------- --------
Basic (loss)/earnings per share (3.13c) 5.60c
------------------------------------- -------- ------------ -------------- --------
Note:
1. Adjustments to operating profit of EUR182 million, further
details of which are included on page 24, comprise credits of
EUR1,685 million for impairment charges and EUR720 million of
restructuring costs, offset by charges of EUR330 million lease
interest and EUR2,257 million of adjusted other income and
expense.
Discontinued
Reported operations Adjustments(1) Adjusted
Year ended 31 March 2019 EURm EURm EURm EURm
------------------------------------- -------- ------------ -------------- --------
Operating (loss)/profit (951) - 4,273 3,322
Amortisation of acquired customer
base and brand intangible assets - - 583 583
Non-operating income and expense (7) - 7 -
Net financing costs (1,655) - 286 (1,369)
------------------------------------- -------- ------------ -------------- --------
(Loss)/profit before taxation (2,613) - 5,149 2,536
Income tax (expense)/credit (1,496) - 792 (704)
------------------------------------- -------- ------------ -------------- --------
(Loss)/profit for the financial year
from continuing operations (4,109) - 5,941 1,832
Loss for the financial year from
discontinued operations (3,535) 3,535 - -
------------------------------------- -------- ------------ -------------- --------
(Loss)/profit for the financial year (7,644) 3,535 5,941 1,832
------------------------------------- -------- ------------ -------------- --------
Attributable to:
- Owners of the parent (8,020) 3,535 5,936 1,451
- Non-controlling interests 376 - 5 381
------------------------------------- -------- ------------ -------------- --------
Basic (loss)/earnings per share (29.05)c 5.26c
------------------------------------- -------- ------------ -------------- --------
Note:
1. Adjustments to operating loss of EUR4,273 million, further
details of which are included on page 24, comprise EUR3,525 million
of impairment charges, EUR486 million of restructuring costs and
EUR262 million of other income and expense.
Definitions
Term Definition
Adjusted Adjusted earnings per share reflects the exclusions of adjusted
earnings EBIT and adjusted financing costs, together with related
per share tax effects.
--------------------------------------------------------------------
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 year ended 31 March 2020, adjusted EBITDA is operating
EBITDA 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 year ended 31 March 2019, 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 be the reflective of the underlying performance
of the Group.
--------------------------------------------------------------------
Adjusted Adjusted income tax expense (see definition below) divided
effective by the adjusted profit before tax (see definition below).
tax rate
--------------------------------------------------------------------
Adjusted Adjusted income tax expense excludes the tax effects of
income tax items excluded from adjusted earnings per share, including:
expense 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 Adjusted net financing costs exclude mark to market and
net financing foreign exchange gains/losses and interest on lease liabilities.
costs
--------------------------------------------------------------------
Adjusted Adjusted non-controlling interests exclude the impact of
non-controlling items adjusted in calculating Adjusted operating profit,
interests Adjusted net financing costs and Adjusted income tax expense.
--------------------------------------------------------------------
Adjusted Group adjusted operating profit excludes impairment losses,
operating 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.
--------------------------------------------------------------------
CEE Central and eastern Europe.
--------------------------------------------------------------------
Churn Total gross customer disconnections in the period divided
by the average total customers in the period.
--------------------------------------------------------------------
Converged A customer who receives fixed and mobile services (also
customer known as unified communications) on a single bill or who
receives a discount across both bills.
--------------------------------------------------------------------
Customer Includes acquisition costs, retention costs and other direct
costs costs of providing services.
--------------------------------------------------------------------
Depreciation The accounting charge that allocates the cost of a tangible
and other or intangible asset to the income statement over its useful
amortisation 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 and Egypt.
--------------------------------------------------------------------
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 ('fixed')
revenue and carrier services.
--------------------------------------------------------------------
Free cash Operating free cash flow after cash flows in relation to
flow ('FCF') 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 to
flow (pre-spectrum) 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.
--------------------------------------------------------------------
IAS 18 International Accounting Standard 18 "Revenue". The previous
revenue accounting standard that applied to the Group's
statutory results before IFRS 15.
--------------------------------------------------------------------
IFRS 15 International Financial Reporting Standard 15 "Revenue from
contracts with customers". 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 and messaging
revenue to Vodafone customers.
--------------------------------------------------------------------
Internet The network of physical objects embedded with electronics,
of Things software, sensors, and network connectivity, including built-in
('IoT') 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 that
revenue 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 services.
revenue
--------------------------------------------------------------------
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 broadband
networks over 30Mbps.
('NGN')
--------------------------------------------------------------------
Operating Comprise primarily sales and distribution costs, network
expenses and IT related expenditure and business support costs.
--------------------------------------------------------------------
Operating Cash generated from operations after cash payments for capital
free cash additions (excludes capital licence and spectrum payments)
flow and cash receipts from the disposal of intangible fixed
assets and property, plant and equipment, but before restructuring
costs arising 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 Markets include Turkey, Egypt and Ghana.
--------------------------------------------------------------------
Other revenue Other revenue includes connection fees, equipment revenue,
interest income and lease revenue.
--------------------------------------------------------------------
Regulation Impact of industry 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 Based on amounts reported in euros as determined under IFRS.
growth
--------------------------------------------------------------------
Rest of the The Group's region, Rest of the World, which comprises Vodacom,
World ('RoW') 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.
--------------------------------------------------------------------
Return on See page 28 for a summary of the basis of calculation.
Capital Employed
('ROCE')
--------------------------------------------------------------------
RGUs Revenue Generating Units describes the average number of
fixed line services taken by subscribers.
--------------------------------------------------------------------
Roaming Allows customers to make calls, send and receive texts and
data on other operators' mobile networks, usually while
travelling abroad.
--------------------------------------------------------------------
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.
--------------------------------------------------------------------
SME Small and medium sized enterprises.
--------------------------------------------------------------------
SoHo Small-office-Home-office customers.
--------------------------------------------------------------------
Vodafone Vodafone Business is part of the Group and partners with
Business businesses of every size to provide a range of business-related
services.
--------------------------------------------------------------------
Copies of this document are available from the Company's
registered office at Vodafone House, The Connection, Newbury,
Berkshire, RG14 2FN. The preliminary results will be available on
the Vodafone Group Plc website, vodafone.com/investor, from 12 May
2020.
This announcement contains inside information for the purposes
of Article 7 of EU regulation 596/2014. The person responsible for
arranging the release of this announcement on behalf of Vodafone is
Rosemary Martin, Group General Counsel and Company Secretary (Tel:
+44 (0)1635 33251).
Notes:
1. 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 trade marks owned by Vodafone. Other product and company
names mentioned herein may be the trade marks of their respective
owners.
2. All growth rates reflect a comparison to the year ended 31
March 2019 unless otherwise stated.
3. References to "Q3" and "Q4" are to the three months ended 31
December 2019 and 31 March 2020, respectively, unless otherwise
stated. References to the "second half of the year", or "H2"
are to the six months ended 31 March 2020 unless otherwise
stated. References to the "year" or "2020 financial year" are
to the financial year ended 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.
4. 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.
5. 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.
6. 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.
Other information
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 2021; prospects for the 2021 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, sharing infrastructure
and its benefits, sharing mobile networks in Europe 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 Group's sale of its 55% shareholding in
Vodafone Egypt and the sale of Vodafone Malta, and the LTM adjusted
EBITDA and Adjusted OpFCF multiples therefrom, the
operationalisation of European TowerCo and the INWIT merger, and
the integration of the acquired Liberty Global assets; 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 including as a consequence of the COVID-19 pandemic, 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.
Copyright (c) Vodafone Group 2020
- 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
FR KKDBPBBKBBPD
(END) Dow Jones Newswires
May 12, 2020 02:00 ET (06:00 GMT)
Vodafone (LSE:VOD)
Historical Stock Chart
From Mar 2024 to Apr 2024
Vodafone (LSE:VOD)
Historical Stock Chart
From Apr 2023 to Apr 2024