Vodafone Group Plc FY20 results 12 May 2020 - #StayConnected - Vodafone IR
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Vodafone Group Plc
FY20 results
12 May 2020
#StayConnected
Agenda & contents
Highlights Nick Read p3
Chief Executive
Financial Margherita Della Valle p8
performance Chief Financial Officer
We connect for a better future
Strategy Nick Read p21 A leading technology communications
update Chief Executive
company keeping society connected and
building a digital future for everyone
Appendices p33
FY20 Results Briefing 2
Highlights ⫶ Rapid, comprehensive & coordinated external response
5 point plan to deliver critical national digital infrastructure to keep families connected, to enable business to
operate, students to learn, health care to be delivered and governments to provide critical services
Provide public Lead on data
1 Maintain quality
networks 2 Support critical
services 3 information 4 Support community
& business 5 insight
• Invested to • Donating • Free data access • Supporting the • Mobility insight
increase equipment to to critical info. most vulnerable dashboard to
network hospitals & support
capacity foundations • Vodafone • Extra mobile government
created info data allowance lockdown
• Traffic increased • Connecting new sites & TV content
by up to 70% field hospitals • Contact tracing
• Supporting • Supporting to support
• >95% customer • Hospital bed governments SMEs with faster government
care team remote with dedicated supplier solutions
working monitoring mobile payments
remotely applications
• Virtual health
consultations
Supporting response & recovery with total donations* of ~€100 million reaching 78 million customers
*Direct contributions and services-in-kind
FY20 Results Briefing 3
Highlights ⫶ Transformative COVID-19 response from the Vodafone team
100k people working from home… … working longer hours…
20.0
98% 20.0
1,0 00,000
Post-COVID
(minutes per hour)
Virtual meetings
900,00 0
82% 800,00 0
Pre-COVID
15.0 15.0
90% 73%
700,00 0
600,00 0
10.0
97% 10.0
500,00 0
94% 400,00 0
5.0
99% 5.0
300,00 0
94%
14k 6k 9k 20k 18k 21k 10k
200,00 0
100,00 0
- -
-
Germany Italy UK Spain EU Vodacom VOIS Common 5am 7am 9am 11am 1pm 3pm 5pm 7pm 9pm 11pm
Functions
# people % at home
… with 2x the volume of email… … and living the Spirit of Vodafone!
20,000,000 Daily # email Rolling average
20m
15,000,000
15m
10m
10,000,000
5,000,000
5m
-
Feb 20 Mar 20 Apr 20
FY20 Results Briefing 4
Highlights ⫶ Consistent execution supporting return to growth
Service revenue growth Adjusted EBITDA Free cash flow
17
1.7%
FCF Pre-spectrum & restructuring
16
6
1.6% 15
5.5
1.2%
14
€14.9bn €5.7bn
€5.4bn
5
€13.9bn
€4.9bn
13
4.5
12
0.8% €4.4bn
0.7%
0.7%
4
11
3.5
10
0.2%
3
9
(0.2)% 8
2.5
-0 .3%
2
7
Q1 Q2 Q3 Q4
FY20 FY20 FY20 FY20 FY19 FY20 FY19 FY20
• Commercial momentum
in Europe • 5th consecutive year of • Strong cash generation
EBITDA margin growth
• Liberty integration • Funding investment in
progressing well with • Strong delivery of net opex critical network & digital
rebranding complete savings programme infrastructure
• Fixed market share growth • Significant H2 EBITDA • Total dividends of €9.00c
with 1.4m NGN net adds growth in UK & Spain per share
FY20 Results Briefing 5
Highlights ⫶ Strong delivery of our strategic priorities
Deepening Accelerating Improving Optimising
customer digital asset the
engagement transformation utilisation portfolio
• 5G launched in 97 • >€400m FY20 net opex • Network sharing deals • Simplified portfolio
cities in 8 markets savings in Europe completed in all major
markets • Focused on two
• Established effective • Liberty synergies on regional footprints in
second brands in major track in Germany and • Italian passive tower Europe & Africa
markets Central Europe infrastructure merger
completed • Transactions
• Converged offers • 9% reduction in completed in Italy, NZ,
available in all frequency of customer • 32m on-net Gigabit Albania, Malta
European markets contact in Q4 capable connections
• Egypt MoU agreed
• 6th consecutive quarter • 22% sales generated • European TowerCo now
of customer retention from direct digital operational • Australia merger on-
improvement channels in Q4 track to complete
FY20 Results Briefing 6
Highlights ⫶ Social Contract to support economic recovery
Phase 1 ⫶ Crisis Phase 2 ⫶ Recovery New Normal
Government Strengthening business to support
& society focus Saving lives
economic recovery
Our Ensure everyone Delivering the digital society & investing to
focus stays connected strengthen economic resilience
1. Expand & future-proof our network infrastructure
• Business continuity 2. Accelerate support to Governments (eHealth & eEducation)
Extending execution
‘Social 3. Enhance digital accessibility & literacy for most vulnerable
Contract’ • 5-point response plan
across our footprint 4. Promote widespread digital adoption for business
5. Support exit strategies through targeted digital adoption
FY20 Results Briefing 7
Financial performance Margherita Della Valle Chief Financial Officer
Financial summary ⫶ Performance in line with expectations
FY19 FY20 Organic
€m €m growth
• Service revenue growth driven by improving
Group service revenue 36,458 37,871 0.8%
commercial momentum throughout FY20
Adjusted EBITDA 13,918 14,881 2.6%
• Cost programme delivering margin growth
Adjusted EBIT 4,253 4,796 5.3%
• Europe EBITDA back to growth
Adjusted earnings per share (c) 6.27 5.60
• EPS reduction due to financing cost & share
Free cash flow (pre-spectrum) 5,443 5,700 count increase
Free cash flow 4,411 4,949 • Strong free cash flow & disciplined capital
management
Net debt to adjusted EBITDA 2.9x1 2.8x
• Stable leverage position, with €12.1 billion in
Controlled ROCE pre-tax2 5.3% 6.1%
cash & equivalents
ROCE post-tax2 3.5% 4.0%
12.9x pro-forma leverage for post-Liberty acquisition. 1.9x reported leverage
• Improvement in ROCE from EBIT growth
2Definition of ROCE includedin Appendix V
Statutory results summary included in Appendix IV
FY20 Results Briefing 9Trading performance ⫶ Organic service revenue momentum
Four consecutive quarters of growth improvement
1.3%
Europe Group 1.6%
• Service revenue growth accelerating
0.8%
0.7% 0.8%
0.3%
-0 .2%
(0.2)%
(0.4)%
throughout the year
• Significant progress in Europe
-0 .7%
-1 .2%
(1.4)% (1.4)%
(1.7)%
-1 .7%
Q1
FY20
Q2
FY20
Q3
FY20
Q4
FY20 • Improving trends in all major markets
- Germany ⫶ record cable net adds in H2
Q4-on-Q3 improvement in Europe - Italy ⫶ strong fixed line growth
- UK ⫶ all segments growing in Q4
18 500.0%
- Spain ⫶ 380bps Q4-on-Q3 improvement
13 500.0%
380bps
- Vodacom ⫶ strong data volume growth
85 00.0%
130bps
60bps
35 00.0%
40bps
(10)bps
-1 500.0%
Germany Italy UK Spain Other Europe
FY20 Results Briefing 10Germany ⫶ Gigabit acceleration
Net customer additions (‘000)
34% of Group EBITDA 190
H2 FY20
19 0
H2 FY20 DSL 160
Q4 €m growth €m growth
Cable 14 0
118
Service revenue (0.1)% 5,735 0.0% 10,696 0.0%
Cable (pro-forma)
12
Adjusted EBITDA 2,725 1.5% 5,077 2.5% Mobile contract
90
74
153
35 118
40
75
35
(11)
• Record net cable additions of >250k in H2
-10
(46) (60) (48)
-60
• ‘GigaCable Max’ customer base more than Q1 Q2 Q3 Q4
doubled in 1 month Pro-forma service revenue growth
2.0% 2.0%
• 1.7% retail growth (ex regulation impact) Retail 1.5%
2.0%
1.8%
1.7%
1.5%
1.6%
• 1/5 Liberty synergies delivered & cross-selling 1.0%
1.4% 1.3%
1.2% 1.0%
0.9%
ahead of expectations Retail
ex int'l calling & 0.5% 0.5%
MTRs
0.4%
• Greater resilience to COVID-19 impacts
0.0% 0.0%
Reported organic
service revenue 0.0%
(0.1%)
growth
-0 .5%
(0.2%) -0 .5%
Q1 Q2 Q3 Q4
FY20 Results Briefing 11Italy ⫶ Customer trends stabilising UK ⫶ Commercial strength
14% of Group EBITDA 10% of Group EBITDA
H2 H2 FY20 FY20 H2 H2 FY20 FY20
Q4 €m growth €m growth Q4 €m growth €m growth
Service revenue (3.7)% 2,409 (4.4)% 4,833 (3.9)% Service revenue 1.2% 2,569 0.9% 5,020 0.5%
Adjusted EBITDA 1,062 (9.5)% 2,068 (6.6)% Adjusted EBITDA 842 21.4% 1,500 10.5%
Vodafone MNP (‘000) Net customer additions (‘000) 208
1.0%
1.0%
10.0
200
190 200
10.0
-1 .0%
(4) Mobile contract +
(22)
-1 .0%
(40.0)
(40.0)
(86) 126
150 150
(60) (90.0)
VOXI
100
(90.0)
-3 .0%
-3 .0%
(169)
100 100
(140 .0 )
(140 .0 )
Fixed broadband 61 64
-5 .0%
-5 .0%
(190 .0 )
(190 .0 )
50
31 50
20
-7 .0%
-7 .0%
(281)
(240 .0 )
(240 .0 )
(289)
-9 .0% (290 .0 )
-9 .0% (290 .0 ) - -
Q1 Q2 Q3 Q4 Jan Feb Mar Q1 Q2 Q3 Q4
• Over 800k net customer additions*
• MNP out continuing to improve post price rises
• Record Q4 consumer broadband net additions
• Lowest churn in market during lockdown
• 10% reduction in opex
• Underlying EBITDA growth -3.9% ex. Antitrust fine
• Underlying EBITDA growth 8.5% excluding one-offs
* Total FY20 net customer additions for mobile contract + VOXI + fixed broadband
FY20 Results Briefing 12Spain ⫶ Performance improving Other Europe ⫶ Growth engine
7% of Group EBITDA 12% of Group EBITDA
H2 H2 FY20 FY20 H2 H2 FY20 FY20
Q4 €m growth €m growth Q4 €m growth €m growth
Service revenue (2.7)% 1,938 (4.6)% 3,904 (6.7)% Service revenue 3.4% 2,498 3.2% 4,890 3.0%
Adjusted EBITDA 549 8.2% 1,009 (1.7)% Adjusted EBITDA 866 6.4% 1,737 4.7%
Net customer additions (‘000) Organic service revenue growth
51 3.5%
19
40 40
7 3.0%
+9 -
Mobile contract (10)
(5)
(10)
2.5%
2.0%
(49) 3.3% 3.4%
(60) (60)
1.5%
3.0%
Fixed broadband
(110 ) (110 )
1.0%
2.1%
(158) 0.5%
(160 ) (160 )
0.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
• Competitive environment remains challenging • All major markets growing except Ireland
• Q4 service revenue growth (2.7)%, +380bps on Q3 • Single-digit mobile contract churn in 4 markets
• H2 EBITDA growth +8% (now ex. football) • All markets now converged & good progress with
• Higher COVID-19 impact due to roaming and SME Liberty integration
FY20 Results Briefing 13Vodacom ⫶ Strong data growth VodafoneZiggo ⫶ Performing well
14% of Group EBITDA 50% joint-venture
H2 H2 FY20 FY20
4.0%
Q4 €m growth €m growth Total revenue growth*
3.5%
Service revenue 3.2% 2,253 4.2% 4,470 3.3% 3.0%
Adjusted EBITDA 1,069 2.2% 2,088 1.1% 2.5%
2.0%
3.3%
80 %
70% 15.5
1.5%
2.9%
1.0%
70 %
15.0
1.5%
Total 4G 50%
47%
60 %
45% 0.8%
0.5%
14.5
customers (m) 50 %
14.0
0.0%
15.3
40 %
13.5
Q1 Q2 Q3 Q4
Data volume 30 %
14.5
growth (%)
• Good commercial momentum with strong H2 FY20
13.0
13.6
20 %
10 %
13.2 12.5
0% 12.0
revenue growth
Q1 Q2 Q3 Q4
• 1.4m converged households
• Improving performance, despite economic pressures
• Successful appeal against wholesale fixed access
• Good international service revenue growth (+7.5%), regulation
with 4 million new customers
• Cash flow guidance maintained
• New data pricing agreed with Competition Commission *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.
FY20 Results Briefing 14Costs ⫶ Industry-leading cost programme driving EBITDA growth
Sustainable savings in Europe & Common Functions net opex
• Structural cost reduction enabled by
digital transformation
Original New FY21-3
>€1.2 billion >€1 billion • 9% Europe net opex reduction in 2 years,
target target with Europe EBITDA back to growth
FY2O
€0.4bn
≥€0.6bn
FY22-23 • Now targeting 20% Europe net opex
reduction in 5 years to FY23
5th consecutive year of EBITDA margin expansion -50% customer care costs
35 % 18
33.1%
33 %
31.9%
16
14
-40% distribution operations
30.6%
+40% shared services productivity
12
29.7%
31 %
10
28.3% 28.4% 8
• In addition significant opportunity in
29 %
6
4
distribution costs (A&R)
27 %
IAS 18 IFRS 15 2
25 % 0
FY15 FY16 FY17 FY18 FY19 FY20
Reported EBITDA (€bn) Reported EBITDA margin (%)
FY20 Results Briefing 15Free cash flow ⫶ Strong cash flow funding investment & dividend
0.0 2.0 4.0 6.0 8.0 10 .0 12 .0 14 .0
EBITDA
EBITDA €14.9bn
Interest
& tax
€2.1bn • EBITDA growth driving free cash flow
Working capital
& other
€0.2bn • Contribution from handset receivables
sales of €0.3 billion in line with prior year
Dividends
€0.1bn
(assoc. & JV)
• Spectrum payments below normalised
Cash flow before
investment
€13.1bn average of ~€1.2 billion
Capital additions €7.4bn • Free cash flow used to fund dividends paid
Free
of €2.3 billion
Free cash flow
cash flow
(pre-spectrum) €5.7bn
(pre-spectrum)
Spectrum &
• Total completed disposals generated
restructuring
€0.8bn >€4 billion cash
Free cash
Free cash flow
flow €4.9bn
FY20 Results Briefing 16Capital allocation ⫶ 3 key priorities
FCF (pre-spectrum) EBITDA : FCF conversion
• Resilient cash flows from EBITDA margin
6 60 .0 %
5.5
€5.7bn
55 .0 %
5
€5.4bn €5.4bn
expansion & good cash conversion
50 .0 %
4.5
45 .0 %
4
3.5 €4.1bn 39.1%
40 .0 %
36.8% 38.3%
• Allows us to balance capital investment, de-
3
35 .0 %
2.5
28.7%
30 .0 %
2
leveraging & shareholder distribution
25 .0 %
1.5
1 20 .0 %
FY17 FY18 FY19 FY20
1 Invest in critical infrastructure 2 Maintain robust balance sheet 3 Shareholder distribution
Other New coverage, products & services
10
Network maintenance & capacity Net debt Net debt : EBITDA
45 7.0x
Dividends per share
40
€7.3bn €7.2bn €7.4bn €42.2bn
6.0x
8
35
6
€1.2bn €1.4bn €1.2bn 30
5.0x
€29.3bn €29.6bn
4.0x
€9.00c
25
€3.0bn €2.8bn €3.1bn €27.0bn
2.8x
20
3.0x
4
2.1x
15
2.0x 1.9x 2.0x
€3.1bn €3.0bn €3.1bn
€2.4 billion
10
2
1.0x
5
0 0 0.0x
FY18 FY19 FY20 FY17 FY18 FY19 FY20
FY20 Results Briefing 17Leverage ⫶ Low-cost & stable funding with long maturity
Net debt progression (€ billion) 14
Bond maturity profile (€ billion)
50 .0
Cash & equivalents 2.3
45 .0
4.4 3.4
4.9 2.8x 12
Senior
40 .0
~2.9x 2.6
pro-forma Hybrid
18.5
10
35 .0
post-Liberty1
30 .0
1.9x 8
25 .0
13.3
12.1 11.5
42.2 2.0
6
20 .0
0.6
27.0
15 .0 4
4.6
10 .0
2
3.0 3.7
2.0 2.2
5.0
1.1
0.0 0
FY19
FY19 Liberty Portfolio Dividends DE Free cash FY20
FY20 Current FY21 FY22 FY23 FY24 FY25 FY26 FY27-35 FY35+
acquisition activity & MCB spectrum & flow liquidity
buybacks other
• Strong liquidity position • No short-term refinancing requirements
– Net cash position = €12.1 billion
– Unused facilities = €7.7 billion
• Increased average debt tenure to 12 years
• Maintain target of 2.5-3.0x leverage • Mandatory convertible bonds maturing in March
2021 and 2022
1Pro-forma for the acquired Liberty Global assets
FY20 Results Briefing 18COVID-19 impacts
Affected areas Evidence in Europe so far* Prospects
Roaming • Significant impact in H1 FY21
-65% to -75%
(inbound + outbound) • Margin impact mitigated for visitors
Traffic volumes & Incoming +20% • Early lockdown reactions to subside
out-of-bundle revenues Mobile data +15% • May be offset by recession pressures
Churn dropped by 4-5ppt
Customer retention • Focus on quality & speed upgrades
Enterprise tenders delayed
• Digital engagement key
Consumer gross adds c.-40%
New customer additions • Self-installation for fixed
Q4 best ever for Business
SMEs requesting payment deferral • Gradual deterioration
SME revenue &
Enterprise projects • Technologies supporting productivity
Enterprise customers delaying projects (e.g. SD-WAN, IoT)
*Data for April
FY20 Results Briefing 19Current outlook ⫶ FY21 EBITDA to be flat to slightly down
15 .5
Based on prevailing assessments of
€0.5bn €0.5bn global macro-economic outlook
15 .0
€0.4bn
14 .5
Liberty 0.5
(full-year impact)Strategy update Nick Read Chief Executive
Vodafone ⫶ A purpose driven company
Our purpose:
We connect for a Digital Inclusion
Planet
Society for All
better future
Our strategy: Focused on two attractive regions with scale advantage Deepening customer engagement
A technology Europe: a converged leader Africa: data & payments leader
communications
Strategic priorities
Accelerating digital transformation
leader, enabling
the digital society
Improving asset utilisation
Supported by our leading gigabit networks & scaled support platforms Optimising the portfolio
FY20 Results Briefing 22Our purpose ⫶ We connect for a better future
Digital Society Inclusion for All Planet
Connecting an additional 20 million Reducing our greenhouse gas
Connecting over 250 million emissions by 50% by 2025 against
people to our next-generation women in Africa & Turkey to mobile
by 2025 a 2017 baseline
networks by 2025
Supporting 10 million young
Connecting over 150 million people to access digital skills, Purchasing 100% of our electricity
vehicles to IoT by 2025 learning and employment from renewable sources by 2025
opportunities by 2022
Connecting over 50 million people Improving the lives of 400 million Reusing, reselling or recycling
and their families to mobile money people through our Foundation 100% of our redundant network
services by 2025 programmes by 2025 equipment
Our role in society is even more critical in a COVID-19 world
FY20 Results Briefing 23Our strategy ⫶ Emerging stronger through clear prioritisation
Deepening • Supporting customers & wider stakeholders through critical period of crisis & recovery
customer
engagement
• Quality networks, clear pricing plan hierarchy, enhanced customer segmentation
Accelerating • Step-change in pace of channel mix evolution towards digital & direct
digital
transformation
• Operating model resilience supported by extension of cost saving programme
Improving • Embedding & leveraging network sharing arrangements in major markets
asset
utilisation
• Disciplined capital investment to drive improved return on capital over medium term
Optimising • Significant execution over last 12 months, providing greater focus & cash realisation
the
portfolio
• Portfolio simplification substantially completed, primary focus now on European TowerCo monetisation
FY20 Results Briefing 24Deepening customer engagement Europe consumer ⫶ Maintaining commercial momentum
Strong progress to date Accelerated areas of focus
• Strong network performance with 4G • Network differentiation through reliability, speed,
networks
Quality
& coverage
now >90% of mobile data
• Gigabit capable networks to support new data
• 136m NGN marketable homes consumption levels
• Growing our unlimited customer base
• Simplification of price plan hierarchy
Simple
plans
• Deploying propositions / second brands to
• 4m unlimited customers in 6 markets support ‘value’ segment
• Converged offer available in all European
Converged
customers
• Enhancing CRM & measurement for active selling
markets of ‘one more product’
• 7.2 million converged customers in Europe • Reviewing home service models
• Faster paced migration of customer care to
Automated
• TOBi live in 15 markets automated channels
care
• 44% customer contacts handled by TOBi • Exploring new models of remote working (away
from call centres)
FY20 Results Briefing 25Deepening customer engagement Africa ⫶ Data & digital payments opportunity
Strong progress to date Accelerated areas of focus
10 0
90
70 %
• Strong structural opportunity for growth
in all markets
Increasing data usage
60 %
80
70 51% 50 %
• Data consumption accelerating in current
60
40 %
50
86m 27%
30 %
environment – 2G to 3G to 4G
40
30
22% 20 %
20 45m 37m
• Further strengthen 4G capacity &
10 %
10
0 0%
2G 3G 4G coverage in all markets – selective 5G
Registered SIMs Penetration deployment
70 %
• JV in Africa formed
70 %
Leading mobile payments
60 %
60 %
60%
• Africa’s largest payment platform with
50 %
50 %
40 % 48% 40 %
30 %
34% 35%
30 %
strong growth potential
28%
• Expanding faster into broader financial
20 %
20 %
16%
10 %
10% 9% 10 %
13%
0%
7% 0%
services (lend, pay, invest, insure)
Kenya Tanzania Mozambique DRC Lesotho
FY20 revenue growth % of service revenue • Leveraging SME lending platform launch
FY20 Results Briefing 26Deepening customer engagement Business ⫶ Emerging technologies driving growth
Strong progress to date Accelerated areas of focus
39 00 5%
37 00
35 00
4%
• Increasing our share of the value chain
Fixed-line
Organic
3.8%
3%
33 00
growth 3.3%
• Extending SME propositions beyond
31 00
2.4%
2%
29 00
1%
connectivity
27 00
25 00 0%
FY18 FY19 FY20
• Scaling IoT end-to-end solutions
500
Revenue (€m) 450
454
• Launching managed security services
400
437
• Accessing 5G opportunity with mobile
Cloud
350
300 355
edge computing & mobile private
250
200
150
networks
FY18 FY19 FY20
• Supporting public sector organisations
Facilities # SIM growth (%)
18%
with reliable, high-speed & low-cost
Logistics 22%
connectivity
Healthcare 38%
IoT
Insurance 16%
• Expected recovery of roaming & project
Automotive 24%
0% 5% 10 % 15 % 20 % 25 % 30 % 35 % 40 % revenues over time
Over 100m IoT connections
FY20 Results Briefing 27Accelerating digital transformation Step-change in digital transformation
Strong progress over last 2 years Accelerated areas of focus
• Digital primary channel
20% reduction in customer calls
management
Customer
• Accelerating retail store footprint
optimisation
9% decrease in branded Europe store footprint
• Lower mix of third-party distribution
‘Zero touch’ network operation in 7 markets • Real-time network optimisation to meet
management
Technology
rising traffic demand
65% of IT applications moved to the cloud
• Decommissioning legacy services &
technology at pace
Shared services creating 3,500 FTE role • Insourcing more positions to drive
management
Operations
efficiencies efficiency
80% of payment processing now ‘touchless’ • ‘Digital Twins’ planning activities
FY20 Results Briefing 28Improving asset utilisation Mobile network sharing & scaled fixed infrastructure
97%
Vodafone 4G coverage of
population in Europe*
• Mobile network sharing agreements in
136m Marketable homes with NGN
fixed-line network in Europe
place in all major markets
• 5G in 97 cities across 8 markets
100% 7m
96%
2m
29m
100%
96%
• 136m marketable NGN homes
36m
99% 2m - 32m ⫶ on-net Gigabit capable
3m - 23m ⫶ on-net NGN
97% 84%
99% 3m
- 20m ⫶ strategic partnerships
23m - 61m ⫶ wholesale access
96%
98%
98%
1m
96%
• Targeting ~50m on-net Gigabit homes
3m 25m
3m
by FY23
*Based on Vodafone’s standard definition of 1Mbps Outdoor coverage
FY20 Results Briefing 29Optimising the portfolio Significant & successful actions delivered at pace
Italy • Sale of Italian towers completed following EC approval • Portfolio significantly
Towers
• €2.35 billion cash & 37.5% stake in INWIT (24x EBITDA) simplified
• Subsequent 4% placing for €400 million (26x EBITDA) • Focused on two attractive
Target model
geographic operating
footprints in Europe & Africa
Network Active sharing
sharing
Passive (Active sharing National active Full sharing • Sale of Malta & NZ
sharing only sharing
models outside biggest cities
+ national passive)
(inc. spectrum) completed
• Australian merger on-track
to complete in H1 FY21
Addressed
• European Commission expressed support for network sharing generally & our
European balanced approach • Ongoing engagement with
Commission • Vodafone & Telecom Italia addressed concerns about access to space on towers
concerns authorities in India
from other telecommunications operators
• Egypt sale due diligence
progressing
• Reduced environmental footprint from fewer cross-market sites
Target
model
• Maximises coverage in a cost effective manner, particularly in rural areas • European TowerCo
benefits • Faster deployment of new capacity in a cost effective manner operational, preparing for
• Critical for Europe to maintain broader competitiveness monetisation
FY20 Results Briefing 30Optimising the portfolio Creating Europe’s largest tower company
2 July Separation programme announced
14
2019
1
Feb Management team appointed
2020
3
8
11
May TowerCo operational
12 7 2020
9
10
• Management team in place
6
13 • Legal separation in Germany & Spain
4
5 • Focus now on financials & operations
Asset Owner Asset Owner
11 Active radio transmission equipment Vodafone 88 Surveillance systems TowerCo
22 Antennae & cables (fibre / feeders) Vodafone 99 Access facilities TowerCo Nov Publishing financial information
33 Physical tower, masts & pole TowerCo 10 Outdoor cabinet Vodafone 2020
44 Foundation & fencing TowerCo 11 Shelter / service rooms TowerCo
55 Contractual right to occupy site area TowerCo 12 Emergency equipment TowerCo
66 Power equipment TowerCo 13 Cable routing (duct) TowerCo Early Targeted window for monetisation
77 Cooling system TowerCo 14 Mounting equipment TowerCo 2021
FY20 Results Briefing 31Summary ⫶ Creating sustainable value for all stakeholders
Social Contract to support economic recovery
Consistent execution & good financial performance
Deepening Accelerating
customer digital
engagement transformation
Improving Optimising
Strong delivery against our strategic priorities
asset the
utilisation portfolio
Emerging stronger through clear prioritisation of strategy
FY20 Results Briefing 32I Definitions p34
II Supporting information p35
III Additional outlook information p36
IV Statutory results summary p37 Appendices
V Return on capital employed p38
VI Importance notice p39
FY20 Results Briefing 33Appendix I ⫶ Definitions
Term Definition Term Definition
Adds Customer additions within a defined period MTM Mark-to-market or fair value accounting refers to accounting for
the value of an asset or liability based on the current market price
AI Artificial intelligence / machine learning of the asset or liability
Churn Total gross customer disconnections in the period divided by NGN Fibre or cable networks typically providing high-speed broadband
the average total customers in the period over 30Mbps
Converged A customer who receives both fixed and mobile services (also On-net Direct connections to Vodafone owned or operated fixed-line
known as unified communications) on a single infrastructure
bill or who receives a discount across both bills
Organic An alternative performance measure which presents performance
EBIT Earnings before interest & tax growth on a comparable basis, in terms of M&A activity (notably by
excluding Vodafone New Zealand and the acquired European
EBITDA Earnings before interest, tax, depreciation & amortisation Liberty Global assets), movements in foreign exchange rates and
the impact of the implementation of IFRS 16 ‘Leases’
EPS Earnings per share
Roaming Allows customers to make calls, send and receive texts and data
FCF Free cash flow on other operators’ mobile networks, usually
while travelling abroad
Gbps / Mbps Gigabits (billions) / megabits (millions) of bits per second
ROCE Return on capital employed. Full definition in Appendix IV
IoT Network of physical objects embedded with electronics,
software, sensors & network connectivity, including built-in Service Service revenue comprises all revenue related to the provision of
mobile SIM cards, that enables collection of data & exchange revenue ongoing services including, but not limited to, monthly access
communications with one another or a database charges, airtime usage, roaming, incoming and outgoing network
usage by non-Vodafone customers and interconnect charges for
MNP Mobile number portability incoming calls
FY20 Results Briefing 34Appendix II ⫶ Supporting information
1. Quarterly revenue The information opposite is available in spreadsheet format
2. Adjusted income statement via https://investors.vodafone.com/investor-relations.
3. Segmental information
4. Income statement information
5. Cash flow
6. Mobile customers
7. Fixed-line broadband customers
8. Marketable homes passed
9. TV & fixed-line voice customers
10. Converged customers
11. Mobile customer churn
12. Mobile ARPU
13. Average foreign exchange rates
14. Average FX rates
FY20 Results Briefing 35Appendix III ⫶ Additional outlook information
6.0
Cash flow considerations Modelling assumptions
5.8
• Portfolio:
5.6
€0.3bn €0.2bn - Full-year impact of
Liberty assets
5.4
€0.2bn
- Italian tower sale
€0.1bn
- No change for Egypt
5.2
5.0 included until binding sale
4.8
- No change for TowerCo
€5.4bn - Malta sale
4.6
€5.2bn >€5bn
- New Zealand sale
4.4
4.2
• Foreign exchange:
- EUR 1 : GBP 0.87
4.0
FY20A
FY20 Guidance Outperformance Reversal of Net portfolio FX impact Re-based COVID-19 Underlying FY21
FY21 FCF
Guidance - EUR 1 : ZAR 20.59
Guidance timing change FY20 impacts growth (pre-spectrum)
differences & cost saving - EUR 1 : TRY 7.50
- EUR 1 : EGP 17.02
• Excludes any impact from
any spectrum
FY20 Results Briefing 36Appendix IV ⫶ Statutory results summary
FY19 FY20 FY19 FY20
Income statement €m €m Cash flow €m €m
Revenue 43,666 44,974 Adjusted EBITDA 13,918 14,881
- Service revenue 36,458 37,871
- Other revenue 7,208 7,103 Capital additions (7,227) (7,411)
Adjusted EBITDA 13,918 14,881 Working capital 188 (127)
Depreciation and amortisation: (9,665) (10,085)
Adjusted EBIT 4,253 4,796 Disposal of property, plant and equipment 45 41
Share of adjusted results in associates and joint ventures4 (348) (241)
Other 147 337
Adjusted operating profit 3,905 4,555
Adjustments for: Operating free cash flow 7,071 7,721
- Impairment losses (3,525) (1,685)
Taxation (1,040) (930)
- Restructuring costs (486) (720)
- Amortisation of acquired customer base and brand intangible assets (583) (638) Dividends received from associates and investments 498 417
- Adjusted other income and expense (262) 2,257
Dividends paid to non-controlling shareholders in subsidiaries (584) (348)
- Interest on lease liabilities – 330
Operating profit / (loss) (951) 4,099 Interest received and paid (502) (1,160)
Non-operating income and expense (7) (3)
Net financing costs (1,655) (3,301) Free cash flow (pre-spectrum) 5,443 5,700
Income tax expense (1,496) (1,250) Licence and spectrum payments (837) (181)
Loss for the financial year from continuing operations (4,109) (455)
Loss for the financial year from discontinued operations (3,535) – Restructuring payments (195) (570)
Loss for the financial year (7,644) (455) Free cash flow 4,411 4,949
Attributable to owners of the parent (8,020) (920)
Attributable to non-controlled interests 376 465
• Impairments recognised for Spain, Ireland & Romania • Timing differences on working capital movements
• Financing costs included MTM impact of financial derivatives,
Liberty pre-financing costs & IFRS 16 costs
• Timing differences leading to lower than expected taxation
payments
• Other income includes gains on disposals of New Zealand &
Italian tower assets • Restructuring includes Liberty assets integration
FY20 Results Briefing 37Appendix V ⫶ Return on capital employed
FY19 FY20
€m €m
Adjusted EBIT 4,253 4,796
Acquired brand & customer relationships amortisation (583) (638)
Net operating profit (controlled operations) 3,670 4,158
Share of adjusted results in equity accounted associates & JVs (348) (241)
Net operating profit 3,322 3,917
Tax at Effective Tax Rate (777) (991)
Net operating profit after tax (NOPAT) 2,545 2,926
Property, plant and equipment (inc. ROU assets & liabilities) 27,432 27,134
Intangible assets (inc. goodwill) 41,005 53,523
Operating working capital & HFS assets (ex. derivatives) (3,705) (3,342)
Provisions & other items (2,402) (2,498)
Net operating assets (controlled) 62,330 74,817
Averaging adjustment 6,692 (6,245)
Average net operating assets (controlled) 69,022 68,572
Associates and Joint Ventures 3,721 5,419
Net operating assets (controlled, associates & JVs) 66,051 80,236
Averaging adjustment 6,213 (7,094)
Average net operating assets (controlled, associates & JVs) 72,264 73,142
Controlled ROCE pre-tax 5.3% 6.1%
ROCE post-tax 3.5% 4.0%
FY20 Results Briefing 38Appendix VI ⫶ Important notice
By accessing these slides, you agree to be bound by the following conditions. You may not disseminate these slides or These factors include, but are not limited to, the following: the direct and indirect impact of COVID-19, external cyber-
any related recording, in whole or in part, without the prior consent of Vodafone. Information in this presentation relating attacks, insider threats or supplier breaches; general economic and political conditions of the jurisdictions in which the
to the price at which relevant investments have been bought or sold in the past or the yield on such investments cannot Group operates, including as a result of Brexit, and changes to the associated legal, regulatory and tax environments;
be relied upon as a guide to the future performance of such investments. 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
This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any
products and services to perform in accordance with expectations; the ability of the Group to integrate new technologies,
person to underwrite, subscribe for or otherwise acquire or dispose of securities in any company within the Vodafone
products and services with existing networks, technologies, products and services; the Group’s ability to generate and
Group.
grow revenue; a lower than expected impact of new or existing products, services or technologies on the Group’s future
This presentation contains forward-looking statements, including within the meaning of the US Private Securities revenue, cost structure and capital expenditure outlays; slower than expected customer growth, reduced customer
Litigation Reform Act of 1995, which are subject to risks and uncertainties because they relate to future events. These retention, reductions or changes in customer spending and increased pricing pressure; the Group’s ability to expand its
forward-looking statements include, without limitation, statements in relation to Vodafone Group’s financial outlook and spectrum position, win 3G, 4G and 5G allocations and realise expected synergies and benefits associated with 3G, 4G and
future performance. Some of the factors which may cause actual results to differ from these forward-looking statements 5G; the Group’s ability to secure the timely delivery of high-quality products from suppliers; loss of suppliers, disruption
are discussed on the final slide of this presentation. 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
This presentation also contains non-GAAP financial information which Vodafone’s management believes is valuable in
the Group’s telecommunications, networks, IT systems or data protection systems; the Group’s ability to realise expected
understanding the performance of the Vodafone Group. However, non-GAAP information is not uniformly defined by all
benefits from acquisitions, partnerships, joint ventures, franchises, brand licences, platform sharing or other
companies and therefore it may not be comparable with similarly titled measures disclosed by other companies,
arrangements with third parties; acquisitions and divestments of Group businesses and assets and the pursuit of new,
including those in the Vodafone Group’s industry. Although these measures are important in the assessment and
unexpected strategic opportunities; the Group’s ability to integrate acquired business or assets; the extent of any future
management of the Vodafone Group’s business, they should not be viewed in isolation or as replacements for, but rather
write-downs or impairment charges on the Group’s assets, or restructuring charges incurred as a result of an acquisition
as complementary to, the comparable GAAP measures.
or disposition; a developments in the Group’s financial condition, earnings and distributable funds and other factors that
References to Vodafone are to Vodafone Group Plc and references to Vodafone Group are to Vodafone Group Plc and its the Board takes into account in determining the level of dividends; the Group’s ability to satisfy working capital
subsidiaries unless otherwise stated. Vodafone, the Vodafone Speech Mark Devices, Vodacom and The future is exciting. requirements; changes in foreign exchange rates; changes in the regulatory framework in which the Group operates; the
Ready? are trade marks owned by Vodafone. Other product and company names mentioned herein may be the trade impact of legal or other proceedings against the Group or other companies in the communications industry and changes
marks of their respective owners. in statutory tax rates and profit mix.
This presentation, along with any oral statements made in connection therewith, contains “forward- looking statements” Furthermore, a review of the reasons why actual results and developments may differ materially from the expectations
including within the meaning of the US Private Securities Litigation Reform Act of 1995 with respect to the Vodafone disclosed or implied within forward-looking statements can be found under “Forward-looking statements” and “Risk
Group’s financial condition, results of operations and businesses and certain of the Vodafone Group’s plans and management” in the Vodafone Group PLC Annual Report for the year ended 31 March 2020 and under “Risk factors” and
objectives. “Other information (including forward-looking statements)” in the Vodafone Group Plc Half-Year Financial Report for the
In particular, such forward-looking statements include, but are not limited to, statements with respect to: expectations six months ended 30 September 2019. The Annual Report and Half-Year Financial Report can be found at
regarding the Vodafone Group’s intentions and expectations regarding the development, launch and expansion of investors.vodafone.com.
products, services and technologies, and expectations regarding service revenue. All subsequent written or oral forward-looking statements attributable to Vodafone, to any member of the Vodafone
Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words Group or to any persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. No
as “plans”, “targets” “gain”, “grow”, “continue”, “retain” or “accelerate” (including in their negative form). By their nature, assurances can be given that the forward-looking statements in or made in connection with this presentation will be
forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to realised. Any forward-looking statements are made as of the date of this presentation. Subject to compliance with
events and depend on circumstances that may or may not occur in the future. There are a number of factors that could applicable law and regulations, Vodafone does not intend to update these forward-looking statements and does not
cause actual results and developments to differ materially from those expressed or implied by these forward-looking undertake any obligation to do so.
statements.
FY20 Results Briefing 39Group
Investor
www.vodafone.com/investors Upcoming events
Relations
ir@vodafone.co.uk
1 Kingdom Street, London, W2 6BY
24 Q1 Trading Update
July
Matthew Johnson
Director matthew.johnson@vodafone.com
Group IR
Daniel Morris
Deputy Director
Group IR
daniel.morris@vodafone.com 28 Annual General Meeting
July
Roy Teal
Deputy Executive roy.teal@vodafone.com
Group IR
Victoria Garnham 17 H1 FY21 Results
Access Manager victoria.garnham@vodafone.com
Group IR NovYou can also read
