14 November 2023
Initial strategic progress & improved revenue trends
Margherita Della Valle, Group Chief Executive, commented:
“During the first half of the year, we have delivered improved revenue growth in nearly all of our markets and have returned to growth in Germany in the second quarter.
Vodafone’s transformation is progressing. Our focus on customers and simplifying our business is beginning to bear fruit, although much more needs to be done. We have also announced transactions to strengthen our position in the UK and exit the challenging Spanish market in order to right-size our portfolio for growth.”
| Financial results | H1 FY24 | H1 FY23 | Change | ||
| Page | €m | €m | % | ||
| Group revenue | 4 | 21,937 | 22,930 | (4.3) | |
| Group service revenue | 4 | 18,618 | 19,207 | 4.2* | |
| Operating profit1 | 4 | 1,655 | 2,968 | (44.2) | |
| Adjusted EBITDAaL2 | 4 | 6,378 | 7,244 | 0.3* | |
| (Loss)/profit for the financial period1 | 4 | (155) | 1,202 | ||
| Basic (loss)/earnings per share1 | 15 | (1.28)c | 3.37c | ||
| Adjusted basic earnings per share1,2 | 15 | 3.43c | 5.90c | ||
| Interim dividend per share | 18 | 4.50c | 4.50c | ||
| Cash inflow from operating activities | 15 | 5,544 | 6,280 | (11.7) | |
| Adjusted free cash flow2 | 16 | (1,474) | (513) | ||
| Net debt2 | 17 | (36,240) | (45,523) | 20.4 | |
| * represents organic growth. See page 2. ǀ 1. H1 FY23 re-presented for the reclassification of Indus Towers. See page 33. ǀ 2. Non-GAAP measure. See page 40. | |||||
· Group service revenue growth of 4.2%* in H1 FY24, or 2.3%* excluding Turkey, with both Europe (Q1: 0.4%*, Q2: 1.5%*) and Africa (Q1: 9.0%*, Q2: 9.0%*) growing
· Good improvement in Germany (Q1: -1.3%*, Q2: 1.1%*) and continued acceleration in Vodafone Business with 4.4%* growth in H1 FY24
· Group revenue decline of 4.3% to €21.9 billion due to adverse foreign exchange rate movements and the disposal of Vantage Towers, Vodafone Hungary and Vodafone Ghana in the prior financial year
· Operating profit decrease of 44.2% to €1.7 billion reflecting business disposals in the prior financial year, adverse foreign exchange rate movements and lower share of results of associates and joint ventures
· Adjusted EBITDAaL growth of 0.3%* despite a significant increase in energy costs
· Adjusted free cash outflow of €1.5 billion in the period, reflecting lower Adjusted EBITDAaL and lower dividends from associates and joint ventures
· Announced merger in the UK and sale of Vodafone Spain as we right-size Vodafone for growth
· FY24 guidance reiterated with Adjusted EBITDAaL expected to be ‘broadly flat’ at around €13.3 billion and Adjusted free cash flow to be ‘around’ €3.3 billion
· Interim dividend per share of 4.5 eurocents, record date 24 November 2023
For more information, please contact:
Investor Relations Media Relations
Investors.vodafone.com Vodafone.com/media/contact
ir@vodafone.co.uk GroupMedia@vodafone.com
Registered Office: Vodafone House, The Connection, Newbury, Berkshire RG14 2FN, England. Registered in England No. 1833679
A webcast Q&A session will be held at 10:00 GMT on 14 November 2023. The webcast and supporting information can be accessed at investors.vodafone.com
Financial summary
All amounts marked with an ‘*’ in this document represent organic growth which presents performance on a comparable basis, excluding the impact of foreign exchange rates, mergers and acquisitions, the hyperinflation adjustment in Turkey and other adjustments to improve the comparability of results between periods. Organic growth figures are non-GAAP measures. See non-GAAP measures on page 40 for more information.
Segmental reporting
From 1 April 2023, the Group revised its segmental reporting by moving Vodafone Egypt from the Other Markets segment to the Vodacom segment. This is the effective date on which the Group’s reporting structure changed to reflect the transfer of Vodafone Egypt to the Vodacom Group. All comparatives for these two segments have been re-presented on the new basis of segmental reporting. There is no impact on previously reported Group metrics.
Financial performance
Total revenue declined by 4.3% to €21.9 billion (FY23 H1: €22.9 billion) driven by adverse foreign exchange rate movements and the disposal of Vantage Towers, Vodafone Hungary and Vodafone Ghana in the prior financial year.
On a reported basis, Adjusted EBITDAaL decreased to €6.4 billion (FY23 H1: €7.2 billion), with organic growth of 0.3%* despite a significant increase in energy costs. Adjusted EBITDAaL margin was 0.8* percentage points lower year-on-year at 29.1%.
Operating profit decreased by 44.2% to €1.7 billion and the Group made a loss for the period of €0.2 billion (FY23 H1: €1.2 billion profit) reflecting the disposal of Vantage Towers, Vodafone Hungary and Vodafone Ghana in the prior financial year, adverse foreign exchange rate movements, and lower share of results of equity accounted associates and joint ventures in the current year.
Basic loss per share was 1.28 eurocents, compared to basic earnings per share of 3.37 eurocents1 in the prior year period.
Cash flow, funding & capital allocation
Cash inflow from operating activities decreased to €5.5 billion (FY23 H1: €6.3 billion), reflecting lower operating profit and adverse working capital movements, which offset lower taxation payments.
Adjusted free cash flow decreased by €1.0 billion to an outflow of €1.5 billion in the period. This reflects a decrease in Adjusted EBITDAaL in the period, together with lower dividends from associates and joint ventures, which outweighed lower taxation, lower interest received and paid, and lower dividends paid to non-controlling shareholders in subsidiaries.
Net debt increased by €2.9 billion to €36.2 billion (€33.4 billion as at 31 March 2023). This was primarily driven by the free cash outflow of €2.0 billion and equity dividends of €1.2 billion.
Current liquidity, which includes cash and equivalents and short-term investments, is €11.2 billion (€16.0 billion as at 31 March 2023). This includes €3.8 billion of net collateral which has been posted to Vodafone from counterparties as a result of positive mark-to-market movements on derivative instruments (€4.6 billion as at 31 March 2023).
The interim dividend per share is 4.5 eurocents (FY23 H1: 4.5 eurocents). The ex-dividend date for the interim dividend is 23 November 2023 for ordinary shareholders, the record date is 24 November 2023 and the dividend is payable on 2 February 2024.
1. The results for the six months ended 30 September 2022 have been re-presented to reflect that Indus Towers Limited is no longer reported as held for sale. There is no impact on previously reported Revenue and Adjusted EBITDAaL. However, Operating profit has increased by €33 million whilst Profit before taxation and Profit for the financial period both decreased by €41 million compared to amounts previously reported. Consequently, Basic earnings per share decreased by 0.15c and Adjusted basic earnings per share decreased by 0.12c compared to amounts previously reported. See note 4 ‘Assets held for sale’ in the unaudited condensed consolidated financial statements for more information.
Strategic progress
In May 2023, we set out a new roadmap for Vodafone, based on our need to change and focus on three priorities: Customers, Simplicity and Growth. An outline of this plan is contained in a video presentation available here: investors.vodafone.com/results.
During the first half of FY24, we have made early progress in executing this plan. Highlights include:
Customers
· We introduced a series of new initiatives to improve customer service, supported by re-allocating €150 million of investment to this area. Each of our markets is now executing a detailed action plan to eliminate customer pain points, and we have aligned our incentives to this objective.
· As a result we have seen some early progress in customer satisfaction, with stable or improving promoter scores in most markets despite the inflationary environment.
Simplicity
· In H1 we have completed c.2,700 role reductions out of the 11,000 planned over 3 years.
· We have concluded a thorough review of our shared operations, and are preparing to introduce new MSA structures between markets and shared operations on a price x quantity x quality model. Our commercialisation of shared operations will be supported by a new partnership with Accenture.
Growth
· Germany returned to growth, with service revenue in Q2 FY24 of 1.1%*.
· Vodafone Business service revenue continued to accelerate at 4.4%* in H1 FY24, with growth across all customer segments and markets, except Spain.
· We have taken two significant steps to right-size our portfolio for growth:
– in June 2023, we announced our merger of Vodafone UK and Three UK; and
– in October 2023, we announced our exit from the Spanish market through the sale of Vodafone Spain.
A more detailed summary of our progress is contained within an accompanying presentation and video Q&A available here: investors.vodafone.com/results.
Outlook
In May 2023, we set out guidance for FY24 for our expectations of Adjusted EBITDAaL and Adjusted free cash flow, which we still expect to meet.
| FY24 guidance | ||
| Adjusted EBITDAaL1,3 | ‘Broadly flat’ at around €13.3 billion | |
| Adjusted free cash flow1,2,3 | ‘Around’ €3.3 billion |
The guidance above reflects the following:
· Foreign exchange rates used when setting guidance were as follows: EUR 1 : GBP 0.88; EUR 1 : ZAR 19.30; EUR 1 : TRY 21.10; and EUR 1 : EGP 33.38.
· Our guidance assumes no material change to the structure of the Group3.
1. Adjusted EBITDAaL and Adjusted free cash flow are non-GAAP measures. See page 40 for more information.
2. Adjusted free cash flow is Free cash flow before licences and spectrum, restructuring costs arising from discrete restructuring plans, integration capital additions and working capital related items, and M&A.
3. Guidance for FY24 includes Adjusted EBITDAaL and Adjusted free cash flow for Vodafone Spain for the 12 months ending 31 March 2024. Following the announcement that Vodafone has entered into a binding sale agreement, in accordance with IFRS, Vodafone Spain will be reported as a discontinued operation, with its net result reported as a single line in the Group’s income statement until the completion of the transaction.