Highlights
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Group revenue of €21.8 billion and loss for the financial period of €7.8 billion, primarily due to a loss on the disposal of Vodafone India (following the completion of the merger with Idea Cellular) and impairments |
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Organic service revenue (excluding handset financing, IAS 18 basis) up 0.8%** and Q2 up 0.5%** with good commercial and financial performance in most markets offset by increased competition in Italy and Spain |
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Growth drivers: good momentum in fixed broadband (384,000 net adds) and convergence (616,000 net adds); Vodafone Business grew 1.0%*, led by strong growth in IoT; Emerging Consumer up 7.4%* driven by data growth |
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Organic adjusted EBITDA up 2.9%** (excluding handset financing and settlements, IAS 18 basis), supported by a third consecutive year of net reduction in operating expenses |
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Updating full year guidance: underlying organic adjusted EBITDA growth narrowed to c.3% (previously 1-5%); Free cash flow (pre-spectrum) raised to c.€5.4 billion (previously 'at least €5.2 billion') |
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Stable interim dividend per share of 4.84 eurocents; full year dividend per share expected to be in-line with FY18 |
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Six months ended 30 September |
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2018 |
2017 |
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Reported |
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IFRS 15 |
IAS 181 |
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Growth |
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Page |
€m |
€m |
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% |
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Group revenue |
22 |
21,796 |
23,075 |
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(5.5) |
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Operating (loss)/profit |
22 |
(2,071) |
2,008 |
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N/M |
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(Loss)/profit for the financial period2 |
22 |
(7,833) |
1,235 |
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N/M |
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Basic (loss)/earnings per share2 |
22 |
(29.00c) |
4.03c |
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N/M |
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Interim dividend per share |
40 |
4.84c |
4.84c |
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– |
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Net debt |
19 |
(32,110) |
(30,188) |
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+6.4 |
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Growth |
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2018 |
2017 |
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Reported |
Organic** |
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Alternative performance measures3 |
Page |
€m |
€m |
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% |
% |
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Group service revenue (IAS 18 basis) |
7 |
19,711 |
20,592 |
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(4.3) |
+0.8 |
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Adjusted EBITDA (IAS 18 basis) |
7 |
7,078 |
7,385 |
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(4.2) |
+2.9 |
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Adjusted EBIT (IAS 18 basis) |
7 |
2,305 |
2,457 |
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(6.2) |
+8.6 |
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Adjusted earnings per share |
17 |
3.56c |
6.32c |
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(43.7) |
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Free cash flow pre-spectrum |
18 |
894 |
1,289 |
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(30.6) |
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Free cash flow |
18 |
566 |
415 |
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+36.4 |
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Nick Read, Group Chief Executive, commented:
“Our performance in the majority of our markets has been good during the first half of the year, and we have taken decisive commercial and operational actions to respond to challenging competitive conditions in Italy and Spain. We are on track to reduce net operating expenses for the third year running, and we are confirming the mid-point of our EBITDA guidance range, with an increased outlook for free cash flow generation.
Looking ahead, my new strategic priorities focus on driving greater consistency of commercial execution, accelerating digital transformation, radically simplifying our operating model and generating better returns from our infrastructure assets. Our goal is to deepen customer engagement through a broader offering of products and services, and to deliver the best digital customer experience, supported by consistent investment in our leading Gigabit networks. We expect that this will drive revenue growth, reduce churn and lower our European net operating expenses by at least €1.2 billion by FY2021.
As part of our effort to improve returns, we are creating a virtual internal tower company across our European operations, and we are reviewing the best strategic and financial direction for these assets.
Our focus on organic growth along with the strategic and financial benefits of the proposed acquisition of Liberty Global's assets give confidence in the Group's ability to grow free cash flow, which underpins our dividend.”
Brexit implications
The Board continues to keep the possible implications of Brexit for Vodafone's operations under review. A cross-functional team has identified ways in which Brexit might affect the Group's operations. There remains insufficient information about the likely terms of the post-Brexit arrangements between the UK and the EU, as well as about any possible transitional arrangements, to draw any conclusions about the probable impact.
Although we are a UK headquartered company and have put in place necessary contingency planning, a very large majority of our customers are in other countries, accounting for most of our revenue and cash flow. Each of our national operating companies is a stand-alone business, incorporated and licensed in the jurisdiction in which it operates, and able to adapt to a wide range of local developments. As such, our ability to provide services to our customers in the countries in which we operate, inside or outside the EU, is unlikely to be affected by Brexit. We are not a major international trading company, and do not use passporting for any of our major services or processes.
Depending on the arrangements agreed between the UK and the EU, there are two primary issues that could directly affect our operations, in both cases potentially causing us to incur additional cost:
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Creation of a data frontier between the UK and the EU: the inability to move data freely between the UK and EU countries might cause us to have to move some technical facilities, and affect future network design; and |
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Inability to access the talent we need to run a multinational Group operation from the UK: increased controls over or restrictions to our ability to employ leading talent from non UK markets could cause us to have to adjust our operating model to ensure that we attract and retain the best people for the roles we have. |
As far as our UK operations are concerned, we are reviewing the impact of a no deal scenario. One potential impact may be on our processes for the procurement of handsets and technical equipment, which may result in a greater investment in working capital at 31 March 2019 and consequently lower cash flow, although this would be unlikely to have a material impact at a Group level.
A further, indirect, issue that could affect our future performance would be if the Brexit process caused downward revisions to macro-economic performance in our major markets including the UK, impacting the performance of the operating companies in those markets.
Further information in relation to these risk factors and uncertainties can be found on pages 38 to 45 of the Group's annual report for the financial year ended 31 March 2018, which is available at http://www.vodafone.com/investor.