REG - Vodafone Group Plc - Half-year Report
15/11/2022 07:00
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RNS Number : 3722G Vodafone Group Plc 15 November 2022
Vodafone Group Plc ⫶ H1 FY23 results
15 November 2022
Resilient performance in Europe & Africa, good progress on operational
& portfolio priorities
· Group service revenue growth of 2.5%* in the first half of FY23
· Adjusted EBITDAaL declined by 2.6%* driven by a material prior year
legal settlement, and commercial underperformance in Germany
· Pre-tax return on capital employed increased by 0.6 percentage points
year-on-year to 6.9%
· Significant progress with portfolio strategy to create industrial
scale, enable accelerated growth and unlock value
Financial results H1 FY23 H1 FY22 Change
Page €m €m %
Group revenue 6 22,930 22,489 2.0
Group service revenue 6 19,207 19,010 2.5*
Operating profit 6 2,935 2,620 12.0
Adjusted EBITDAaL(1) 6 7,244 7,565 (2.6)*
Profit for the financial period 6 1,243 1,277
Basic earnings per share 17 3.52c 3.40c
Adjusted basic earnings per share(1) 17 6.02c 4.90c
Interim dividend per share 35 4.50c 4.50c
Cash inflow from operating activities 17 6,280 6,455 (2.7)
Adjusted free cash flow(1) 18 (513) 23
Net debt(1) 19 (45,523) (44,298) (2.8)
* represents organic growth. See page 2. ǀ 1. Non-GAAP measure. See
page 41.
· Group revenue growth of 2.0% to €22.9 billion, driven by service
revenue growth and higher equipment sales
· Operating profit increased by 12.0% to €2.9 billion, reflecting a
higher share of income from associates and joint ventures and lower
depreciation and amortisation
· FY23 Adjusted EBITDAaL is expected to be €15.0 - 15.2 billion at the
lower end of original guidance
· Interim dividend per share of 4.5 eurocents, record date 25 November
2022
Nick Read, Group Chief Executive, commented:
"In the context of a challenging macroeconomic environment, we are delivering
a resilient performance this year, alongside making good progress with our
operational and portfolio priorities.
We are pleased the Vantage Towers transaction accomplished our three key
objectives - monetisation, deconsolidation and retaining co-control of these
strategically important assets - and we continue to deliver portfolio actions
to strengthen our businesses and accelerate growth. In addition, our recently
announced fibre-to-the-home JV in Germany will further enhance our leading
gigabit fixed network position in Europe's largest market.
We are taking a number of steps to mitigate the economic backdrop of high
energy costs and rising inflation. These include taking pricing action across
Europe, whilst at the same time supporting our most vulnerable customers and
driving energy efficiency measures across the business. We are also announcing
today a new cost savings target of €1+ billion focused on streamlining and
further simplifying the Group.
We are confident that the ongoing delivery of our organic strategy and
portfolio actions will underpin long-term growth and create value for
shareholders."
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 15 November 2022. The
webcast and supporting information can be accessed at investors.vodafone.com
Summary ⫶ Resilient financial performance
Organic growth
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 adjustments 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 41 for more information.
Financial performance
Total revenue increased by 2.0% to €22.9 billion (FY22 H1: €22.5 billion),
as service revenue growth and higher equipment sales was partly offset by
unfavourable foreign exchange movements.
Adjusted EBITDAaL declined by 2.6%* to €7.2 billion(1) (FY22 H1: €7.6
billion), with revenue growth offset by a prior year one-off legal settlement
in Italy (1.4 percentage point drag year-on-year) and commercial
underperformance in Germany. The Adjusted EBITDAaL margin was 2.0* percentage
points lower year-on-year at 31.6%.
Operating profit increased by 12.0% to €2.9 billion, reflecting a higher
share of income from associates and joint ventures and lower depreciation and
amortisation. The Group made a profit for the period of €1.2 billion (FY22
H1: €1.3 billion) as an increase in operating profit and investment income
was offset by a higher income tax charge, attributable to one-off deferred tax
credits recognised in the prior period.
Basic earnings per share was 3.52 eurocents, compared to basic earnings per
share of 3.40 eurocents in the prior year.
Cash flow, funding & capital allocation
Cash inflow from operating activities decreased by 2.7% to €6.3 billion
(FY22 H1: €6.5 billion), with higher operating profit being more than offset
by working capital movements and higher tax payments.
Free cash flow was an outflow of €3.2 billion (FY22 H1: outflow of €1.0
billion) reflecting lower Adjusted EBITDAaL and higher licence and spectrum
payments in the period. Adjusted free cash flow was an outflow of €0.5
billion (FY22 H1: inflow of €23 million).
Net debt increased by €3.9 billion to €45.5 billion (€41.6 billion as at
31 March 2022). This was driven by the free cash outflow of €3.2 billion,
equity dividends of €1.3 billion, and share buybacks of €1.0 billion used
to offset dilution linked to mandatory convertible bonds. These factors were
partly offset by other movements of €1.7 billion, relating to the settlement
of 5G spectrum in Italy previously included in net debt. Settlement of the
liability during the period had no impact on net debt, but the resulting cash
payment was included in free cash flow. As at 30 September 2022, the weighted
average of cost of debt was around 2.5% and average bond maturity was 11
years, with all bonds held at fixed interest rates.
Current liquidity, which includes cash and equivalents and short-term
investments, is €11.5 billion (€12.3 billion as at 31 March 2022). This
includes €7.6 billion of net collateral which has been posted to Vodafone
from counterparties as a result of positive mark-to-market movements on
derivative instruments (€2.2 billion as at 31 March 2022).
The interim dividend per share is 4.5 eurocents (FY22 H1: 4.5 eurocents). The
ex-dividend date for the interim dividend is 24 November 2022 for ordinary
shareholders, the record date is 25 November 2022 and the dividend is payable
on 3 February 2023.
Hyperinflationary accounting in Turkey
As anticipated and explained in the Group's reporting for the year ended 31
March 2022, Turkey now meets the requirements to be designated as a
hyperinflationary economy under IAS 29 'Financial Reporting in
Hyperinflationary Economies'. The Group has therefore applied
hyperinflationary accounting, as specified in IAS 29, for amounts reported by
Vodafone Turkey for the period commencing 1 April 2022. See note 1 of the
unaudited condensed consolidated financial statements for further information.
Our guidance for FY23 excludes any impact from this change in accounting.
Note:
1. Includes a reduction of €26 million resulting from hyperinflationary
accounting in Turkey.
Strategy ⫶ Committed to improving returns through growth & portfolio
action
Our strategy focuses on driving shareholder returns through growth, and is
delivered through our customer commitments and enabling strategies. These work
together towards our vision to become a new generation connectivity and
digital services provider for Europe and Africa, enabling an inclusive and
sustainable digital society.
We continued to make progress with our strategy during the first half of FY23
and highlights include: further deepening our customer relationships with
lower customer churn; good results from our increased capital investment with
improvements in network quality; increasing penetration of financial services
in Africa; and another successful year of digital enabled efficiencies. The
table below includes a selection of KPIs that illustrates progress in our key
areas of focus.
Units H1 FY23 H1 FY22
Customer commitments
Best connectivity products & services
Europe mobile contract customers(1) million 66.7 66.0
Europe broadband customers(1) million 25.5 25.6
Europe Consumer converged customers(1) million 9.3 8.3
Europe mobile contract customer churn % 13.4 13.1
Africa mobile customers(2) million 188.0 186.0
Africa data users(2) million 90.2 88.6
Business service revenue growth* % 2.6 1.2
Leading innovation in digital services
Europe TV subscribers(1) million 21.7 22.2
IoT SIM connections(3) million 152 136
Africa M-Pesa customers(2) million 55.6 49.0
Africa M-Pesa transaction volume(2) billion 11.9 9.3
Outstanding digital experiences
Digital channel sales mix(4) % 26 24
End-to-end TOBi completion rate(5 6) % 51 41
Enabling strategies
Leading gigabit networks
5G available in European cities(1) # 344 244
Europe on-net gigabit capable connections(1) million 50.1 46.5
Europe on-net NGN broadband penetration(1) % 29 30
Simplified & most efficient operator
Pre-tax ROCE (controlled)(7) % 6.9 6.3
Post-tax ROCE (controlled and associates/joint ventures)(7) % 5.1 4.3
Europe markets where 3G switched off(1) # 4 4
1. Including VodafoneZiggo | 2. Africa including Safaricom | 3. H1 FY23
includes an adjustment to our customer base to remove inactive SIMs | 4. Based
on Germany, Italy, UK, Spain only | 5. Group excluding Egypt | 6. Defined as
percentage of total customer contacts resolved without human interaction
through TOBi | 7. These line items are non-GAAP measures. See page 41 for more
information. The half-year ROCE calculation is based on returns for the 12
months ended 30 September.
A more detailed review of our strategic progress is contained within an
accompanying video presentation available here:
investors.vodafone.com/reports-information/results-reports-presentations
(https://investors.vodafone.com/reports-information/results-reports-presentations)
. In this presentation we outline: we are systematically executing our organic
growth strategy and making significant progress with our proactive portfolio
management plans; we have significant action plans under way to mitigate the
challenging macroeconomic backdrop; and we are committed to improving
shareholder returns through our long-term organic strategy.
Our action plan to mitigate the current macroeconomic challenges includes
price initiatives and an extension of our ongoing efficiency programme. Price
initiatives have been implemented in 12 out of 13 European markets and include
contractual price increases, reduced promotional discounts and new ARPU
accretive product portfolios. We now have 7 European markets with
inflation-linked pricing structures. The extension of our efficiency programme
will generate over €1 billion of additional cost savings by FY26 through
streamlining and simplifying our group-wide structure and further accelerating
the digitalisation of our operations.
Our purpose ⫶ We connect for a better future
We believe that Vodafone has a significant role to play in contributing to the
societies in which we operate and we want to enable an inclusive and
sustainable digital society. We continue to make progress against our purpose
strategy and provided a full update in our FY22 Annual Report and
supplementary materials (available on investors.vodafone.com
(https://investors.vodafone.com/reports-information/results-reports-presentations?tab=fy21)
). Highlights and achievements from the first half of FY23 are summarised
below.
Energy efficiency initiatives
The expansion of our networks and the significant increase in data traffic
volumes means we now carry 7 times more mobile data compared to just five
years ago, yet our total energy consumption has remained roughly consistent
over the same period. We are committed to continually improving our energy
efficiency, particularly the efficiency of our base station sites and our
technology centres, which accounted for 96% of our total energy consumption in
FY22.
Our strategy to optimise energy usage and improve energy efficiency includes
modernising our networks. Between FY17 and FY22, the share of 4G and 5G
traffic doubled on our network - and now accounts for over 90% of our mobile
data traffic - as we shut down 3G networks in favour of more efficient 4G and
5G networks. In addition, we already put mobile radio capacity layers
throughout Europe into low power modes during low traffic periods. We are now
extending this functionality so that it operates 24 hours a day, 7 days a
week, and we will continue to enhance this capability to maximise energy
efficiency.
With respect to our passive infrastructure, we have been investing in power
and cooling upgrades, IoT and smart metering. For example, we use AI-based
algorithms to optimise cooling in 70 technology centres across Europe and
Africa and we will increase our investment in passive infrastructure upgrades
going forward. All these programmes are underpinned by our extensive energy
data management and analytics system, which collects and stores data feeds
from our electricity suppliers and from smart meters. This system is now live
across 13 markets in Europe, with smart meters installed at 53,000 sites.
Sourcing renewable electricity
Following our energy purchasing hierarchy approach, we prioritise energy
efficient practices, before moving on to on-site generation of renewable
energy, renewable power purchase agreements ('PPAs') and Renewable Electricity
Certificates ('RECs'). Whilst on-site generation of renewable electricity
accounted for less than 1% of our overall renewable energy consumption in FY22
due to technical and space constraints, we continue to drive innovation in
this area. For example, our recent Renewable Power Challenge
(https://www.vodafone.com/news/planet/renewable-power-challenge-trials)
encouraged organisations to submit innovative solutions to the challenge of
generating renewable power directly at our mobile base stations. We have
shortlisted partners who develop microgrids in Africa and manufacturer micro
wind turbines and will be supporting them as they develop proof of concepts to
help us assess the feasibility and scalability of their solutions.
In Europe, we are expanding our PPA strategy and have now signed PPAs in
Germany, Italy, UK, Spain and Greece, which address 15% of our FY23
electricity supply in Europe. These PPAs trade at a discount to current
wholesale electricity prices and provide us with more economic certainty
against potentially volatile wholesale electricity prices, as well as helping
to create new renewable capacity. In Africa, Vodacom is pursuing numerous
climate-related initiatives, including renewable energy powered rural sites
and a pilot renewable energy solution in South Africa with the state-owned
utility, Eskom.
Supporting customers in financial hardship
We are conscious of the cost-of-living pressures our customers are facing
during this challenging macroeconomic period. We have implemented a
cost-of-living plan, consisting of three elements: social or low-cost tariffs
in all markets; extra measures to ensure our consumers and small businesses
are supported, including our free V-Hub service for SMEs; and leveraging our
technology & digital services to help customers reduce their energy usage.
The Spirit of Vodafone
Our employee survey measures progress on how our people experience our
culture, engagement, and connection to our purpose. The results from the
latest survey conducted in September show that our employee engagement index
remained high at 76 (May 2022: 72) and 88% of employees feel that their daily
work contributes to our purpose.
Outlook
Outlook for FY23
In May 2022, we set out guidance for FY23 for our expectations of Adjusted
EBITDAaL and Adjusted free cash flow. Since this guidance was set in May 2022,
the global macroeconomic climate has worsened, with energy costs and broader
inflation in particular, impacting our financial performance. A comprehensive
action plan is underway to mitigate the effects of the challenging
macroeconomic environment. Our updated guidance for FY23 financial performance
is set out in the table below.
FY23 Guidance
Original guidance Updated guidance
Adjusted EBITDAaL(1) €15.0 - €15.5 billion €15.0-15.2 billion
Adjusted free cash flow(1,2) c. €5.3 billion c.€5.1 billion
In addition to the updated guidance for FY23, we have set out considerations
of factors likely to affect our financial performance in FY24 within an
accompanying video presentation available here:
investors.vodafone.com/reports-information/results-reports-presentations
(https://investors.vodafone.com/reports-information/results-reports-presentations)
.
Assumptions
The guidance above reflects the following:
· Foreign exchange rates used when setting guidance were as
follows:
- EUR 1 : GBP 0.84;
- EUR 1 : ZAR 17.32;
- EUR 1 : TRY 16.75; and
- EUR 1 : EGP 19.28.
· As anticipated and explained in the Group's reporting for the
year ended 31 March 2022, Turkey now meets the requirements to be designated
as a hyperinflationary economy under IAS 29 'Financial Reporting in
Hyperinflationary Economies'. The Group has therefore applied
hyperinflationary accounting, as specified in IAS 29, for amounts reported by
Vodafone Turkey for the period commencing 1 April 2022. See note 1 of the
unaudited condensed consolidated financial statements for further information.
Our guidance as presented above excludes any impact from this change in
accounting.
· Our guidance assumes no material change to the structure of the
Group.
( )
1. Adjusted EBITDAaL and Adjusted free cash flow are non-GAAP measures. See
page 41 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, M&A, and Vantage
Towers growth capital expenditure. Growth capital expenditure is total capital
expenditure excluding maintenance-type expenditure.
Financial performance ⫶ Resilient performance in Europe & Africa
· Group revenue increased by 2.0% to €22.9 billion, driven by service
revenue growth and higher equipment sales
· Group service revenue trend impacted by decline in Germany, Italy and
Spain, offset by acceleration in the UK and continued good growth in Other
Europe and Africa
· Service revenue growth in Turkey increased to 39.9%* (Q1: 35.8%*, Q2:
43.9%*), driven by higher inflation. Group service revenue growth excluding
Turkey was 1.5%*
· Adjusted EBITDAaL declined by 2.6%* driven by a material prior year
legal settlement, and commercial underperformance in Germany
Group financial performance
H1 FY23(1) H1 FY22 Reported
€m €m change %
Revenue 22,930 22,489 2.0
- Service revenue 19,207 19,010 1.0
- Other revenue 3,723 3,479
Adjusted EBITDAaL(2,3) 7,244 7,565 (4.2)
Restructuring costs (142) (172)
Interest on lease liabilities(4) 204 199
Loss on disposal of property, plant and equipment and intangible assets (11) (26)
Depreciation and amortisation of owned assets (4,807) (4,949)
Share of results of equity accounted associates and joint ventures 343 111
Other income/(expense) 104 (108)
Operating profit 2,935 2,620 12.0
Investment income 211 129
Financing costs (1,418) (1,473)
Profit before taxation 1,728 1,276
Income tax (expense)/credit (485) 1
Profit for the financial period 1,243 1,277
Attributable to:
- Owners of the parent 986 996
- Non-controlled interests 257 281
Profit for the financial period 1,243 1,277
Basic earnings per share 3.52c 3.40c
Adjusted basic earnings per share(2) 6.02c 4.90c
Further information is available in a spreadsheet at
https://investors.vodafone.com/reports-information/results-reports-presentations
Notes:
1. The H1 FY23 results reflect average foreign exchange rates of
€1:£0.85, €1:INR 81.27, €1:ZAR 16.88, €1:TRY 17.43 and €1:EGP
19.51.
2. Adjusted EBITDAaL and Adjusted basic earnings per share are non-GAAP
measures. See page 41 for more information.
3. Includes depreciation on leased assets of €2,046 million (H1 FY22:
€2,003 million).
4. Reversal of interest on lease liabilities included within Adjusted
EBITDAaL under the Group's definition of that metric, for re-presentation in
financing costs.
Geographic performance summary
Other Other Vantage Common Elimi-
Germany Italy UK Spain Europe Vodacom Markets Towers Functions nations Group
H1 FY23 €m €m €m €m €m €m €m €m €m €m €m
Total revenue 6,592 2,377 3,392 1,965 2,894 3,202 1,953 657 696 (798) 22,930
Service revenue 5,730 2,125 2,712 1,782 2,552 2,472 1,721 - 268 (155) 19,207
Adjusted EBITDAaL(1) 2,677 759 685 445 843 1,084 671 330 (250) - 7,244
Adjusted EBITDAaL margin (%)(1) 40.6% 31.9% 20.2% 22.6% 29.1% 33.9% 34.4% 50.2% 31.6%
Downloadable performance information is available at:
https://investors.vodafone.com/reports-information/results-reports-presentations
FY22 FY23
Organic service revenue growth %*(1) Q1 Q2 H1 Q3 Q4 H2 Total Q1 Q2 H1
Germany 1.4 1.0 1.2 1.1 0.8 1.0 1.1 (0.5) (1.1) (0.8)
Italy (3.6) (1.4) (2.5) (1.3) (0.8) (1.0) (1.8) (2.3) (3.4) (2.8)
UK 2.5 0.6 1.2 0.9 2.0 1.4 1.3 6.5 6.9 6.7
Spain 0.8 (1.9) (0.6) (1.6) (5.1) (3.4) (2.0) (3.0) (6.0) (4.5)
Other Europe 4.2 2.4 3.3 2.9 2.7 2.8 3.0 2.5 2.9 2.7
Vodacom 7.9 3.1 5.4 4.4 3.1 3.7 4.6 2.9 4.8 3.9
Other Markets 18.4 19.7 19.1 19.8 19.8 19.8 19.4 24.7 26.7 25.7
Vantage Towers - - - - - - - - - -
Group 3.3 2.4 2.8 2.7 2.0 2.3 2.6 2.5 2.5 2.5
Note:
1. Organic service revenue growth, Group Adjusted EBITDAaL and Group
Adjusted EBITDAaL margin are non-GAAP measures. See page 41 for more
information.
Germany ⫶ 30% of Group service revenue
H1 FY23 H1 FY22 Reported Organic
€m €m change % change %*
Total revenue 6,592 6,447 2.2
- Service revenue 5,730 5,777 (0.8) (0.8)
- Other revenue 862 670
Adjusted EBITDAaL 2,677 2,892 (7.4) (7.4)
Adjusted EBITDAaL margin 40.6% 44.9%
Total revenue increased by 2.2% to €6.6 billion, driven by equipment sales.
On an organic basis, service revenue declined by 0.8%* (Q1: -0.5%*, Q2:
-1.1%*), primarily reflecting broadband losses since H2 FY22, related to the
implementation of new sector legislation.
Fixed service revenue declined by 1.6%* (Q1: -1.6%*, Q2: -1.7%*), driven by
the lower broadband customer base, as a result of specific operational
challenges related to the implementation of policies to comply with the new
Telecommunications Act, which came into effect in December 2021. Our cable
broadband customer base declined by 45,000 and we lost 38,000 DSL broadband
customers during H1. Following improvements to both our IT systems and
customer journeys, and the gradual unwind of churn related to the
Telecommunications Act, the scale of customer losses continued to slow during
Q2. In October, we announced an enhanced product portfolio, with customers now
benefiting from up to five times higher upload speeds, flat rate phone calls,
and no upfront connection fees, in return for a higher monthly fee. Gigabit
speeds are available to 24 million households across our network.
Our TV customer base declined by 165,000 and our converged customer base
decreased by 67,000 to 2.3 million Consumer converged accounts. These declines
reflected the challenges related to compliance with the new sector legislation
and fewer cross-selling opportunities.
Mobile service revenue increased by 0.2%* (Q1: 0.8%*, Q2: -0.4%*). Growth in
the Business segment and an increase in roaming and visitor revenue was partly
offset by lower MVNO revenues and a lower ARPU, reflecting mobile termination
rate cuts and a change in the sales channel mix towards indirect and service
providers. Towards the end of Q2 we reduced mobile promotions, supporting
inflow ARPU. We added 71,000 contract customers during the period, and in Q2
our commercial momentum improved, supported by customer growth in Business and
Consumer. We added a further 4.6 million IoT connections, driven by continued
strong demand from the automotive sector.
Adjusted EBITDAaL declined by 7.4%*, reflecting the decline in service
revenue, one-off settlements in the prior year period, and higher customer
acquisition costs. The Adjusted EBITDAaL margin was 4.3* percentage points
lower year-on-year at 40.6%.
We achieved our €425 million cost and capital expenditure synergy target for
the integration of the Unitymedia assets acquisition in FY22, over two years
ahead of plan.
On 17 October 2022, we announced we are creating a joint venture with Altice
to deploy fibre-to-the-home ('FTTH') to up to 7 million homes over a six-year
period. This partnership with Altice is complementary to our upgrade plans for
our existing hybrid fibre cable network, which include bringing fibre closer
to all connected homes through 'node splitting', DOCSIS 3.1 'high split', and
next generation technology advances, such as DOCSIS 4.0, which provide a path
to 10Gbps speeds across our hybrid fibre cable network over time. The
transaction is subject to customary conditions, including regulatory approval
and is expected to close in the first half of 2023.
Italy ⫶ 11% of Group service revenue
H1 FY23 H1 FY22 Reported Organic
€m €m change % change %*
Total revenue 2,377 2,507 (5.2)
- Service revenue 2,125 2,187 (2.8) (2.8)
- Other revenue 252 320
Adjusted EBITDAaL 759 917 (17.2) (17.3)
Adjusted EBITDAaL margin 31.9% 36.6%
Total revenue declined 5.2% to €2.4 billion due to lower service revenue and
equipment sales.
Service revenue declined by 2.8%* (Q1: -2.3%*, Q2: -3.4%*), as a result of
continued price pressure in the mobile value segment. The slowdown in
quarterly trends was due to the migration of PostePay MVNO customers onto our
network in the prior year, partly offset by good Business demand.
Mobile service revenue declined by 5.2%* (Q1: -4.7%*, Q2: -5.6%*) as a result
of promotional intensity in the mobile value segment and a lower active
prepaid customer base. The quarter-on-quarter slowdown was due to the
migration of PostePay MVNO customers onto our network in the prior year,
partly offset by improving ARPU following our targeted pricing actions. Our
second brand 'ho.' continued to grow and now has 2.9 million customers.
Fixed service revenue increased by 3.4%* (Q1: 4.2%*, Q2: 2.6%*), supported by
good Business demand for digital services. We added 23,000 fixed-wireless
access customers in the period, which are included in our mobile customer
base. Our Consumer converged customer base now stands at 1.3 million, an
increase of 31,000 during the period, and 55% of our broadband customers are
converged.
Our next generation network ('NGN') broadband services are now available to
25.9 million households, including 9.3 million through our own network and our
partnership with Open Fiber. In October, we launched 5G fixed-wireless
services and cover around 2 million households, which will increase to over 3
million by the end of the financial year. This complements our 4G
fixed-wireless access products, which covers over 2 million additional
households.
Adjusted EBITDAaL declined by 17.3%* including a 10.7 percentage point decline
relating to a €105 million legal settlement received in the prior year
period. Excluding the impact of the prior year legal settlement, Adjusted
EBITDAaL declined as a result of lower mobile service revenue, partly offset
by continued cost reductions. The Adjusted EBITDAaL margin was 4.7* percentage
points lower year-on-year at 31.9%.
UK ⫶ 14% of Group service revenue
H1 FY23 H1 FY22 Reported Organic
€m €m change % change %*
Total revenue 3,392 3,161 7.3
- Service revenue 2,712 2,521 7.6 6.7
- Other revenue 680 640
Adjusted EBITDAaL 685 638 7.4 6.6
Adjusted EBITDAaL margin 20.2% 20.2%
Total revenue increased by 7.3% to €3.4 billion driven by service revenue
growth and an appreciation of the pound sterling against the euro.
On an organic basis, service revenue increased by 6.7%* (Q1: 6.5%*, Q2:
6.9%*). A strong Consumer performance was supported by customer base growth
and contractual annual price increases, as well as higher MVNO, roaming and
visitor revenue. The improvement in quarterly trends was supported by the
return to growth of our Business segment, partly offset by lower wholesale
revenue.
Mobile service revenue grew by 10.5%* (Q1: 10.3%*, Q2: 10.8%*), driven by
strong commercial momentum and annual price increases in Consumer, as well as
higher roaming and visitor revenue. We continued to grow our customer base,
supported by our flexible proposition Vodafone 'Evo' and despite implementing
price actions, adding 76,000 contract customers during the period. Contract
churn remained broadly stable year-on-year at 12.7%. Our digital prepaid
sub-brand 'VOXI' continued to grow, and had its best ever sales month in
September following a successful seasonal campaign, adding 72,000 new
customers during H1. Our digital sales mix improved by 4 percentage points
year-on-year to 37% of total sales in the period.
Fixed service revenue declined by 2.8%* (Q1: -2.7%*, Q2: -2.9%*) as strong
growth in our Consumer segment was offset by a decline in Business service
revenue due to lower project activity. Consumer growth was supported by price
actions, good demand for our Vodafone 'Pro Broadband' product and continued
penetration of our fibre-to-the-premises product. Our broadband customer base
increased by 61,000 during the period and we now have over 1.1 million
broadband customers, of which 54% are converged. Through our partnerships with
CityFibre and Openreach we are able to reach over 9 million households with
full fibre broadband, more than any other provider in the UK.
Adjusted EBITDAaL grew by 6.6%*, reflecting growth in service revenue,
slightly offset by an increase in our operating expenses due to inflationary
pressures, including energy. Our Adjusted EBITDAaL margin was stable
year-on-year at 20.2%.
On 3 October 2022, we confirmed that we are in discussions with CK Hutchison
Holdings Limited ('CK Hutchison') in relation to a possible combination of
Vodafone UK and Three UK. The envisaged transaction would entail us combining
our UK business with Three UK, with Vodafone owning 51% and CK Hutchison
owning 49% of the combined business. There can be no certainty that any
transaction will ultimately be agreed.
Spain ⫶ 9% of Group service revenue
H1 FY23 H1 FY22 Reported Organic
€m €m change % change %*
Total revenue 1,965 2,090 (6.0)
- Service revenue 1,782 1,866 (4.5) (4.5)
- Other revenue 183 224
Adjusted EBITDAaL 445 445 - 0.2
Adjusted EBITDAaL margin 22.6% 21.3%
Total revenue declined by 6.0% to €2.0 billion due to lower service revenue
and equipment sales.
On an organic basis, service revenue declined by 4.5%* (Q1: -3.0%*, Q2:
-6.0%*) driven by continued growth in the value segment, a lower customer
base, and a reduction in mobile termination rates, partly offset by higher
visitor revenue. The slowdown in quarterly service revenue trends was largely
due to price increases implemented in Q2 last year, as well as the phasing of
Business revenue and lower wholesale revenue.
The market remained highly competitive in the value segment. In mobile, our
contract customer base was impacted by one-off disconnections of 123,000
relating to temporary business SIMs provided to schools and higher education
providers during the pandemic. Excluding these, our mobile contract customer
base would have grown by 97,000 in H1.
In June 2022, we launched a new product portfolio, focusing on simplified and
more transparent tariff plans to further improve customer loyalty. This has
had a positive impact on both our commercial momentum and ARPU. Mobile
contract churn in our Consumer segment has also improved by 3.6 percentage
points year-on-year. In September 2022, we announced that tariffs will be
increased in line with inflation for Consumer, SME and SOHO customers on the
main Vodafone brand in Q4 and on an annual basis thereafter.
Our broadband customer base declined by 40,000 and our TV customer base
decreased by 10,000 as a result of continued competitive intensity in the low
value segment. However, our converged customer base increased by 7,000 to over
2.2 million.
We continue to see good demand for our Business products, including a
significant number of registration requests to the digital toolkit platform
launched by the Spanish government in March 2022 as part of the EU recovery
and resilience funding initiatives. This scheme enables businesses to access
fully subsidised digital services on a single platform, with Vodafone being
the orchestrator of their access to these digital services. Due to delays
with the approval process, the first phase of the digital toolkit has been
extended. The second and third phases, aimed at smaller businesses, were
subsequently launched in September and October 2022.
Adjusted EBITDAaL grew by 0.2%*, as tax benefits (including refunds) and
ongoing cost efficiencies offset lower service revenue. The Adjusted EBITDAaL
margin was 1.4* percentage points higher year-on-year at 22.6%.
Other Europe ⫶ 13% of Group service revenue
H1 FY23 H1 FY22 Reported Organic
€m €m change % change %*
Total revenue 2,894 2,810 3.0
- Service revenue 2,552 2,502 2.0 2.7
- Other revenue 342 308
Adjusted EBITDAaL 843 836 0.8 1.5
Adjusted EBITDAaL margin 29.1% 29.8%
Total revenue increased by 3.0% to €2.9 billion largely driven by service
revenue growth.
On an organic basis, service revenue increased by 2.7%* (Q1: 2.5%*, Q2:
2.9%*), with good growth in all markets other than Romania, which was impacted
by a mobile termination rate reduction.
In Portugal, service revenue grew due to strong commercial momentum and we
added 97,000 mobile contract customers and 27,000 fixed broadband customers
during the period. On 30 September 2022, we announced that we had entered into
an agreement to buy Portugal's fourth largest converged operator, Nowo
Communications, from Llorca JVCO Limited, the owner of Masmovil Ibercom S.A..
The transaction is conditional on regulatory approval, with completion
expected in the first half of the 2023 calendar year.
In Ireland, service revenue increased due to customer base growth, higher
roaming and visitor revenue, and contractual price increases. During the
period, our mobile contract customer base increased by 28,000 and mobile
contract loyalty remained strong, with churn at 9.6%. Our broadband customer
base grew by 10,000 and broadband churn decreased by 2.0 percentage points
year-on-year to 16.0%. In October 2022, we announced that we had agreed a
wholesale network access agreement with Virgin Media Ireland. Vodafone is
already the largest fibre-to-the-home provider in Ireland, covering over 1
million households, and this agreement will further extend our footprint and
provide customers with even more choice.
Service revenue in Greece increased, reflecting higher roaming and visitor
revenue and good growth in Business fixed. During the period, we added 49,000
mobile contract customers and broadband customer loyalty improved, with churn
decreasing by 0.7 percentage points year-on-year to 11.2%.
Adjusted EBITDAaL increased by 1.5%* as revenue growth was partially offset by
higher taxes in Hungary, and higher customer acquisition and energy costs. The
Adjusted EBITDAaL margin decreased by 0.7* percentage points year-on-year at
29.1%.
On 22 August 2022, we announced that we had entered into heads of terms with
4iG Public Limited Company and Corvinus Zrt in relation to the potential sale
of 100% of Vodafone Hungary for a total cash consideration equivalent to an
enterprise value of €1.8 billion. The transaction is subject to completion
of confirmatory due diligence, the agreement of binding transaction
documentation and regulatory approval.
Vodacom ⫶ 13% of Group service revenue
H1 FY23 H1 FY22 Reported Organic
€m €m change % change %*
Total revenue 3,202 2,928 9.4
- Service revenue 2,472 2,271 8.9 3.9
- Other revenue 730 657
Adjusted EBITDAaL 1,084 1,062 2.1 (1.6)
Adjusted EBITDAaL margin 33.9% 36.3%
Total revenue increased by 9.4% to €3.2 billion and Adjusted EBITDAaL
increased by 2.1%, primarily due to the strengthening of the local currencies
versus the euro.
On an organic basis, Vodacom's service revenue grew by 3.9%* (Q1: 2.9%*, Q2:
4.8%*) with growth in both South Africa and Vodacom's international markets.
Growth accelerated in Q2 due to a strong performance in Vodacom's
international markets.
In South Africa, service revenue growth was supported by contract price
increases, partially offset by lower wholesale revenue and disruptions to the
payment of social grants which impacted consumer discretionary spending. We
added 113,000 mobile contract customers during the period, supported by
consistent growth in both the Consumer and Business segments. Across the
overall active customer base, 72% of our mobile customers now use data
services. Financial Services revenue in South Africa grew by 8.1%* to €82
million, supported by good demand for our insurance services. Our VodaPay
'super-app' has now reached 2.2 million registered users one year after its
launch.
In Vodacom's international markets, service revenue growth was supported by
higher M-Pesa transaction volumes, notably in Tanzania in Q2, following
reductions in levies on mobile money transactions introduced in the prior
year. Growth was also supported by a higher customer base and continued growth
in data revenue. M-Pesa revenue as a share of service revenue is now at 24.1%,
which is 1.3 percentage points higher compared to the prior year. M-Pesa
transaction volume increased by 28.5% over the same period. Our mobile
customer base now stands at 43.9 million with 60.9% of our active customer
base using data services.
Vodacom's Adjusted EBITDAaL declined by 1.6%* as service revenue growth was
offset by an increase in technology operating expenses as we continued to
improve the resilience of our network, higher investment in customer growth,
and inflationary cost increases. The Adjusted EBITDAaL margin decreased by
2.2* percentage points to 33.9%.
In November 2021, Vodacom Group announced it had entered into an agreement to
acquire Vodafone's 55.0% shareholding in Vodafone Egypt for a total
consideration of €2.4 billion. Following the transaction, Vodafone Group's
ownership in Vodacom Group will increase from 60.5% to 65.1%. The transaction
has received regulatory approval from the National Telecom Regulatory
Authority of Egypt, and the required exemptions from Egypt's Financial
Regulatory Authority. It is anticipated that the remaining conditions will be
fulfilled soon, following which the transaction can complete.
Last year, Vodacom announced that it had agreed to acquire a co-controlling
30% interest in the fibre assets currently owned by Community Investment
Ventures Holdings (Pty) Limited ('CIVH'). CIVH owns Vumatel and Dark Fibre
Africa, which are South Africa's largest open access fibre operators.
Vodacom's investment and strategic support will further accelerate the growth
trajectory of fibre roll-out in South Africa helping close the digital divide.
The transaction recently received approval to proceed from South Africa's
Independent Communications Authority and remains subject to regulatory
approval from the country's Competition Commission.
Further information on our operations in Africa can be accessed here:
vodacom.com (https://vodacom.com) .
Other Markets ⫶ 9% of Group service revenue
H1 FY23 H1 FY22 Reported Organic
€m €m change % change %*
Total revenue 1,953 1,958 (0.3)
- Service revenue 1,721 1,752 (1.8) 25.7
- Other revenue 232 206
Adjusted EBITDAaL 671 683 (1.8) 28.2
Adjusted EBITDAaL margin 34.4% 34.9%
Total revenue decreased by 0.3% to €2.0 billion due to the depreciation of
local currencies versus the euro, notably with respect to the Turkish lira.
On an organic basis, service revenue continued to grow at 25.7%* (Q1: 24.7%*,
Q2: 26.7%) reflecting a higher contribution from Turkey, impacted by
accelerating inflation, as well as strong customer base and ARPU growth.
Service revenue growth in Turkey was driven by continued customer base growth,
higher visitor revenue, and ongoing repricing actions to reflect increasing
inflation in a challenging macroeconomic environment. We maintained our
commercial momentum, with 768,000 mobile contract net additions in the period,
including migrations from prepaid customers. Customer loyalty rates continued
to improve, with mobile contract churn down by 3.3 percentage points
year-on-year to 12.4%.
Service revenue in Egypt continued to grow strongly, reflecting strong
customer base growth and increased data usage. During the period, we added 1.8
million prepaid mobile customers.
Adjusted EBITDAaL increased by 28.2%* despite the inflationary pressure on our
cost base due to worsening macroeconomic conditions. The Adjusted EBITDAaL
margin decreased by 0.6* percentage points year-on-year to 34.4%.
Hyperinflationary accounting in Turkey
Turkey now meets the requirements to be designated as a hyperinflationary
economy under IAS 29 'Financial Reporting in Hyperinflationary Economies'. The
Group has therefore applied hyperinflationary accounting, as specified in IAS
29, for the period commencing 1 April 2022. See note 1 'Basis of preparation'
in the unaudited condensed consolidated financial statements for more
information.
During the period, service revenue in Turkey increased by 39.9%* and Adjusted
EBITDAaL grew by 47.7%* due to ongoing repricing actions to reflect increasing
inflation. Organic growth metrics exclude the impact of the hyperinflation
adjustment in the period in Turkey. Group service revenue growth excluding
Turkey was 1.5%* (Q1: 1.6%*, Q2: 1.4%*) and Adjusted EBITDAaL excluding Turkey
declined 3.8%*.
Vantage Towers
H1 FY23 H1 FY22 Reported Organic
€m €m change % change %*
Total revenue 657 611 7.5
- Service revenue - - - -
- Other revenue 657 611
Adjusted EBITDAaL 330 305 8.2 8.6
Adjusted EBITDAaL margin 50.2% 49.9%
Total revenue increased to €657 million, with 710 new tenancies added during
the period, bringing the tenancy ratio to 1.45x. Vantage Towers reached a
number of new partnership agreements with customers during the first half of
FY23. Vantage Towers reported its results on 14 November 2022. Further
information on Vantage Towers can be accessed at: vantagetowers.com
(https://www.vantagetowers.com/) .
On 9 November 2022, we announced that we had entered into a strategic
co-control partnership with GIP and KKR for Vantage Towers. A new JV will hold
our 81.7% stake in Vantage Towers and will make a voluntary takeover offer
for the outstanding Vantage Towers shares held by minority shareholders.
Further detail on the transaction is available here:
investors.vodafone.com/reports-information/results-reports-presentations
(https://investors.vodafone.com/reports-information/results-reports-presentations)
.
Associates and joint ventures
H1 FY23 H1 FY22
€m €m
VodafoneZiggo Group Holding B.V. 162 (14)
Safaricom Limited 110 115
Indus Towers Limited - -
Other 71 10
Share of results of equity accounted associates and joint ventures 343 111
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 remained stable at €2.0 billion, as mobile contract customer
base growth, higher roaming revenue and contractual price increases were
offset by a decline in the fixed Consumer customer base.
During the period, VodafoneZiggo added 117,000 mobile contract customers,
supported by our best-in-class net promoter score and higher Consumer demand.
VodafoneZiggo's broadband customer base declined by 12,000 customers to 3.3
million due to increased price competition. The number of converged households
increased by 11,000, with 38% of broadband customers now converged, delivering
significant NPS and customer loyalty benefits. VodafoneZiggo now offers 1
gigabit speeds to 6.8 million homes and is on track to provide nationwide
coverage by the end of 2022.
During the period, Vodafone received €90 million in dividends from the joint
venture, as well as €26 million in interest payments.
Safaricom Associate (Kenya)
Safaricom service revenue grew to €1.2 billion due to a higher customer base
and continued growth in M-Pesa revenue. During H1, Vodafone received €183
million in dividends from Safaricom.
Indus Towers Limited Associate (India)
Following the sale of shares in Indus Towers Limited ('Indus Towers') in
February and March 2022, the Group holds 567.2 million shares in, equivalent
to a 21.0% shareholding.
The Group's interest in Indus Towers has been provided as security against
certain bank borrowings secured against Indian assets and ranking behind this
security, as a pledge provided to Indus Towers under the terms of the merger
between Indus Towers and Bharti Infratel. Indus Towers has been classified as
held for sale in the condensed consolidated statement of financial position
since 31 March 2021 and the Group's share of Indus Towers' results is not
reflected in the Group's condensed consolidated income statement for H1 2023.
Vodafone Idea Limited Joint Venture (India)
On 31 March 2022, Vodafone Idea completed an equity capital raise, with the
Group contributing INR33.75 billion using the proceeds realised from the sale
of shares in Indus in February and March 2022. Following the capital raise,
the Group's holding in Vodafone Idea is equivalent to a 47.6% shareholding. On
25 July 2022, the residual proceeds from the sale of such shares in Indus of
INR4.36 billion were contributed to Vodafone Idea in exchange for warrants
convertible to equity within 18 months.
See Note 12 'Contingent liabilities and legal proceedings' in the unaudited
condensed consolidated financial statements for more information'
TPG Telecom Limited Joint Venture (Australia)
Vodafone Group owns an economic interest of 25.05% in TPG Telecom Limited, a
fully integrated telecommunications operator in Australia. Hutchison
Telecommunications (Australia) Limited owns an equivalent economic interest of
25.05%, with the remaining 49.9% listed as free float on the Australian stock
exchange. The Vodafone Group also holds a 50% share of a US$3.5 billion loan
facility held within the structure that holds the Group's equity stake in TPG
Telecom.
Net financing costs
H1 FY23 H1 FY22 Reported
€m €m change %
Investment income 211 129
Financing costs (1,418) (1,473)
Net financing costs (1,207) (1,344) 10.2
Adjustments for:
Mark-to-market losses 41 397
Foreign exchange losses 299 56
Adjusted net financing costs(1) (867) (891) 2.7
Note:
1. Adjusted net financing costs is a non-GAAP measure. See page 41 for more
information.
Net financing costs decreased by €137 million, primarily due to lower
mark-to-market losses on options held relating to the Group's mandatory
convertible bonds partially offset by increased foreign exchange losses.
Adjusted net financing costs remained broadly stable year-on-year, reflecting
consistent average net debt balances and weighted average borrowing costs for
both periods.
Taxation
H1 FY23 H1 FY22 Change
% % pps
Effective tax rate 28.1% (0.1)% 28.2
Adjusted effective tax rate(1) 26.2% 31.5% (5.3)
Note:
1. Adjusted effective tax rate is a non-GAAP measure. See page 41 for more
information.
The Group's effective tax rate for H1 FY23 was 28.1%.
The Group's adjusted effective tax rate for H1 FY23 was 26.2% (H1 FY22:
31.5%). This is in line with our expectations for the full year tax rate for
which we continue to expect a high 20%'s tax rate. The adjusted effective tax
rate is lower than the prior year primarily due to changes in the mix of the
Group's profits.
The effective tax rate for H1 FY22 included an increase in our deferred tax
assets in the UK of €498 million following the increase in the corporate tax
rate to 25% and €274 million following the revaluation of assets for tax
purposes in Italy. It also included €155 million relating to the use of
losses in Luxembourg. The adjusted effective tax rate for H1 FY22 excluded
these amounts.
Earnings per share
Reported
H1 FY23 H1 FY22 change
eurocents eurocents eurocents
Basic earnings per share 3.52c 3.40c 0.12c
Adjusted basic earnings per share(1) 6.02c 4.90c 1.12c
Note:
1. Adjusted basic earnings per share is a non-GAAP measure. See page 41 for
more information.
Basic earnings per share was 3.52 eurocents, compared to 3.40 eurocents for H1
FY22.
Adjusted basic earnings per share was 6.02 eurocents, compared to 4.90
eurocents for H1 FY22.
Cash flow, capital allocation and funding
Analysis of cash flow
H1 FY23 H1 FY22 Reported
€m €m change %
Inflow from operating activities 6,280 6,455 (2.7)
Outflow from investing activities (4,089) (2,811) (45.5)
Outflow from financing activities (2,993) (3,795) 21.1
Net cash outflow (802) (151) (431.1)
Cash and cash equivalents at beginning of the financial period 7,371 5,790
Exchange gain on cash and cash equivalents 282 11
Cash and cash equivalents at end of the financial period 6,851 5,650
Cash inflow from operating activities decreased to €6,280 million which
reflects higher operating profit, more than offset by working capital
movements and higher taxation payments.
Outflow from investing activities increased by 45.5% to €4,089 million,
primarily in relation to a lower net inflow in respect of short-term
investments, which outweighed higher spend on property, plant and equipment.
Short-term investments include highly liquid government and government-backed
securities and managed investment funds that are in highly rated and liquid
money market investments with liquidity of up to 90 days.
Outflows from financing activities decreased by 21.1% to €2,993 million.
Higher inflows from the net movement in short term borrowings arising from
collateral receipts outweighed lower proceeds from the issue of long-term
borrowings and higher repayment of borrowings, the latter largely resulting
from the repayment of debt in relation to licenses and spectrum, notably in
Italy.
Analysis of cash flow (continued)
H1 FY23 H1 FY22 Reported
€m €m change %
Adjusted EBITDAaL(1) 7,244 7,565 (4.2)
Capital additions(2) (3,541) (3,365)
Working capital (3,405) (3,296)
Disposal of property, plant and equipment and intangible assets - 8
Restructuring costs (142) (149)
Integration capital additions(3) (101) (110)
Restructuring and integration working capital (72) (141)
Licences and spectrum (2,181) (482)
Interest received and paid(4) (688) (593)
Taxation (672) (577)
Dividends received from associates and joint ventures 463 469
Dividends paid to non-controlling shareholders in subsidiaries (290) (399)
Other 140 87
Free cash flow(1) (3,245) (983) (230.1)
Acquisitions and disposals (98) 111
Equity dividends paid (1,263) (1,259)
Share buybacks(4) (1,004) (1,062)
Foreign exchange loss (65) (119)
Other movements in net debt(5) 1,730 (443)
Net debt increase(1) (3,945) (3,755)
Opening net debt(1) (41,578) (40,543)
Closing net debt(1) (45,523) (44,298) (2.8)
Free cash flow(1) (3,245) (983)
Adjustments:
- Licences and spectrum 2,181 482
- Restructuring costs 142 149
- Integration capital additions(3) 101 110
- Restructuring and integration working capital 72 141
- Vantage Towers growth capital expenditure 236 124
Adjusted free cash flow(1) (513) 23
Notes:
1. Adjusted EBITDAaL, Free cash flow, Adjusted free cash flow and Net debt are
non-GAAP measures. See page 41 for more information.
2. See page 51 for an analysis of tangible and intangible additions in the
year.
3. Integration capital additions comprises amounts for the integration of
acquired Liberty Global assets and network integration.
4. Interest received and paid excludes interest on lease liabilities of €153
million outflow (H1 FY22: €134 million) included within Adjusted EBITDAaL,
€58m of cash outflow (H1 FY22: €nil) of interest arising from the
repayment of debt in respect of licenses and spectrum and €86 million of
cash inflow (H1 FY22: €39 million) from the option structures relating to
the issue of the mandatory convertible bonds which is included within Share
buybacks. The option structures were intended to ensure that the total cash
outflow to execute the programme were broadly equivalent to the amounts raised
on issuing each tranche.
5. 'Other movements on net debt' for H1 FY23 includes mark-to-market losses
recognised in the income statement of €127 million (H1 FY22: €397 million
loss), together with €1,739 million (H1 FY22: €55 million) in relation to
the repayment of debt in relation to licenses and spectrum in Italy.
Adjusted free cash flow decreased by €536 million to an outflow of €513
million in the period. This reflects a decrease in Adjusted EBITDAaL in the
period, coupled with higher capital additions, an adverse working capital
movement, higher interest payments and higher taxation as the timing of
Germany's taxation payments normalises.
Borrowings and cash position
Period-end FY23 Year-end FY22 Reported
€m €m change %
Non-current borrowings (59,907) (58,131)
Current borrowings (15,675) (11,961)
Borrowings (75,582) (70,092)
Cash and cash equivalents 7,072 7,496
Borrowings less cash and cash equivalents (68,510) (62,596) (9.4)
Borrowings principally includes bonds of €50,256 million (€48,031 million
as at 31 March 2022), lease liabilities of €12,022 million (€12,539
million as at 31 March 2022) and cash collateral liabilities €8,395 million
(€2,914 million as at 31 March 2022).
The increase in borrowings of €5,490 million was principally driven by an
increase in collateral liabilities of €5,481 million and adverse foreign
exchange movements on bonds of €3,109 million, which were partially offset
by a decrease in spectrum liabilities of €1,899 million.
Funding position
Period-end FY23 Year-end FY22 Reported
€m €m change %
Bonds (50,256) (48,031)
Bank loans (1,582) (1,317)
Other borrowings including spectrum (1,942) (3,909)
Gross debt(1) (53,780) (53,257) (1.0)
Cash and cash equivalents 7,072 7,496
Short-term investments(2) 4,402 4,795
Derivative financial instruments(3) 4,424 1,604
Net collateral liabilities(4) (7,641) (2,216)
Net debt(1) (45,523) (41,578) (9.5)
Notes:
1. Gross debt and Net debt are non-GAAP measures. See page 41 for more
information.
2. Short-term investments includes €998 million (€1,446 million as at 31
March 2022) of highly liquid government and government-backed securities and
managed investment funds of €3,404 million (€3,349 million as at 31 March
2022) that are in highly rated and liquid money market investments with
liquidity of up to 90 days.
3. Derivative financial instruments excludes derivative movements in cash flow
hedging reserves of €2,559 million gain (€1,350 million gain as at 31
March 2022).
4. Collateral arrangements on derivative financial instruments result in cash
being held as security. This is repayable when derivatives are settled and is
therefore deducted from liquidity.
Net debt increased by €3,945 million to €45,523 million. This was driven
by the free cash outflow of €3,245 million, equity dividends of €1,263
million and share buybacks of €1,004 million (used to offset dilution linked
to the conversion of certain mandatory convertible bonds), partially offset by
other movements in net debt of €1,730 million relating to the settlement of
5G spectrum in Italy previously included in net debt. Settlement of the
liability during the period had no impact on net debt, with the resulting cash
payment included in free cash flow.
Other funding obligations to be considered alongside net debt include:
- Lease liabilities of €12,022 million (€12,539 million as at
31 March 2022)
- KDG put option liabilities of €486 million (€494 million as
at 31 March 2022)
- Guarantee over Australia joint venture loan of €1,786 million
(€1,573 million as at 31 March 2022)
- Pension liabilities of €281 million (€281 million as at 31
March 2022)
The Group's gross and net debt includes €9,942 million (€9,942 million as
at 31 March 2022) of long-term borrowings ('Hybrid bonds') for which a 50%
equity characteristic of €4,971 million (€4,971 million as at 31 March
2022) is attributed by credit rating agencies.
The Group's gross and net debt includes certain bonds which have been
designated in hedge relationships, which are carried at €1,451 million
higher value (€1,316 million higher as at 31 March 2022) than their euro
equivalent redemption value. In addition, where bonds are issued in currencies
other than euro, the Group has entered into foreign currency swaps to fix the
euro cash outflows on redemption. The impact of these swaps is not reflected
in gross debt and if it were included would decrease the euro equivalent value
of the bonds by €4,363 million (€1,456 million as at 31 March 2022).
Return on capital employed
Return on capital employed ('ROCE') reflects how efficiently we are generating
profit with the capital we deploy. We calculate two ROCE measures: i)
Pre-tax ROCE for controlled operations only and ii) Post-tax ROCE including
associates and joint ventures.
H1 FY23(1) H1 FY22(1) Change
% % pps
Pre-tax ROCE (controlled)(2) 6.9% 6.3% 0.6
Post-tax ROCE (controlled and associates/joint ventures)(2) 5.1% 4.3% 0.8
ROCE calculated using GAAP measures(2) 5.2% 3.7% 1.5
Notes:
1. The half-year ROCE calculation is based on returns for the 12 months ended
30 September.
2. ROCE is calculated by dividing Operating profit by the average of capital
employed as reported in the consolidated statement of financial position.
Pre-tax ROCE (controlled) and Post-tax ROCE (controlled and associates/joint
ventures) are non-GAAP measures. See page 41 for more information.
The increase in pre-tax ROCE (controlled) in H1 FY23 compared to H1 FY22 was
largely driven by lower depreciation and amortisation of owned assets.
Post-tax ROCE also improved, benefitting also from a higher share of income
from associates and joint ventures.
Funding facilities
As at 30 September 2022, the Group had undrawn revolving credit facilities of
€8.1 billion comprising euro and US dollar revolving credit facilities of
€4.0 billion and US$4.0 billion (€4.1 billion) which mature in 2025 and
2027 respectively. Both committed revolving credit facilities support US and
euro commercial paper programmes of up to US$15 billion and €10 billion
respectively.
Post employment benefits
As at 30 September 2022, the Group's net surplus of scheme assets over scheme
liabilities was €212 million (€274 million net surplus as at 31 March
2022). See note 10 'Post employment benefits' in the unaudited condensed
consolidated financial statements for more information.
Dividends
Dividends will continue to be declared in euros, aligning the Group's
shareholder returns with the primary currency in which we generate free cash
flow, and paid in euros, pounds sterling and US dollars. 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 World Markets
Company benchmark rates over the five business days during the week prior to
the payment of the dividend.
The Board has announced an interim dividend per share of 4.50 eurocents (H1
FY22: 4.50 eurocents). The ex-dividend date for the interim dividend is 24
November 2022 for ordinary shareholders, the record date is 25 November 2022
and the dividend is payable on 3 February 2023. Dividend payments on ordinary
shares will be paid directly into a nominated bank or building society
account.
Other significant developments
Board changes
At the Annual General Meeting on 26 July 2022, shareholder approval was
obtained for the appointment of Stephen A. Carter, Delphine Ernotte Cunci and
Simon Segars as non-executive directors.
Executive Committee changes
On 30 June 2022, Hannes Ametsreiter stepped down from his role as CEO of
Vodafone Germany and as a member of the Group Executive Committee. On 1 July
2022, Philippe Rogge became CEO of Vodafone Germany and a member of the Group
Executive Committee.
On 29 September, the Group announced the following changes to the Executive
Committee:
- Rosemary Martin, Group General Counsel and Company Secretary, will
retire on 31 March 2023.
- Maaike de Bie, currently Group General Counsel and Company Secretary
at easyJet plc, will become Group General Counsel and Company Secretary on 1
March 2023 and will join the Executive Committee.
- Johan Wibergh, Group Chief Technology Officer, will retire on 31
December 2022.
- Scott Petty, currently Digital & IT Director, will become Group
Chief Technology Officer on 1 January 2023 and will join the Executive
Committee.
- Alberto Ripepi, Group Chief Network Officer, will join the Executive
Committee on 1 January 2023.
On 14 November 2022, the Group announced that Christine Ramon will be
appointed as a non-executive director with immediate effect.
Vodafone Hungary
On 22 August 2022, the Group announced that it had entered into heads of terms
with 4iG Public Limited Company and Corvinus Zrt (a Hungarian state holding
company) in relation to the potential sale of 100% of Vodafone Hungary for a
total cash consideration equivalent to an enterprise value of HUF 715 billion
(€1.8 billion).
The transaction is subject to completion of confirmatory due diligence, the
agreement of binding transaction documentation and regulatory approval.
Vodafone Portugal
On 30 September 2022, the Group announced that Vodafone Portugal had entered
into an agreement to purchase Cabonitel S.A., the owner of Nowo. The
transaction is conditional on regulatory approval, with completion expected in
the first half of 2023. Nowo is the 4(th) largest converged operator in
Portugal, with approximately 250,000 mobile subscribers, 140,000 fixed
customers and 1 million homes connected.
Vodafone UK
On 3 October 2022, the Group noted press speculation in relation to Vodafone
UK and Three UK. The Group confirmed that it is in discussions with CK
Hutchison in relation to a possible combination of Vodafone UK and Three UK.
The envisaged transaction would involve both companies combining their UK
businesses, with Vodafone owning 51% and CK Hutchison owning 49% of the
combined business. There can be no certainty that any transaction between the
two companies will ultimately be agreed.
Vantage Towers
On 9 November 2022, the Group announced that it had entered into a strategic
co-control partnership with GIP and KKR for Vantage Towers. A new JV will hold
our 81.7% stake in Vantage Towers and will make a voluntary takeover offer
for the outstanding Vantage Towers shares held by minority shareholders.
Further detail on the transaction is available here:
investors.vodafone.com/reports-information/results-reports-presentations
(https://investors.vodafone.com/reports-information/results-reports-presentations)
.
Risk factors
The key factors and uncertainties that could have a significant effect on the
Group's financial performance, include the following:
Cyber threat
An external cyber-attack, insider threat or supplier breach could cause
service interruption or the loss of confidential data.
Supply chain disruption
Disruption in our supply chain could mean that we are unable to execute our
strategic plans, resulting in increased cost and reduced choice as well as
service quality.
Adverse political and policy environment
An adverse political and policy environment could impact our strategy and
result in increased costs, create competitive disadvantage or have a negative
impact on our return on capital employed.
Strategic transformation
Failure to effectively execute the transformational activities to deliver on
our strategy could result in loss of business value and/or additional cost.
Disintermediation
Failure to effectively respond to threats from emerging technology or
disruptive business models could lead to a loss of customer relevance, market
share and new/existing revenue streams.
Adverse changes in macroeconomic conditions
Adverse changes to economic conditions could result in reduced consumer
spending, higher interest rates, adverse inflation, or foreign exchange rates.
Adverse conditions could also lead to limited debt refinancing options and/or
increase in costs.
Infrastructure competitiveness
Failure to meet customers' expectations with best available broadband
technology in our fixed and mobile networks could lead to loss of revenue.
Portfolio transformation
Failure to effectively execute on plans to transform and shape the portfolio
could result in failure to deliver growth in revenue and improved returns.
Adverse market conditions
Increasing competition could lead to price wars, reduced margins, loss of
market share and/or damage to market value.
Technology resilience and future readiness
Network, IT or platform outages and/or any delays delivering our IT
modernisation programme could lead to dissatisfied customers and/or impact
revenue.
Watchlist risks
Our watchlist risk process enables us to monitor material risks to Vodafone
Group which fall outside of our top principal risks list. These include, but
are not limited to:
Legal compliance
The legal compliance risk is made up of multiple sub-risks (sanctions and
trade controls, competition law, anti-bribery and anti-money laundering).
Controls are in place to monitor and manage these risks and for compliance
with the relevant regulations and legislation.
Risk factors
Data management and privacy
As data volumes continue to grow and regulatory and customer scrutiny
increases, it is important that we manage our data and privacy risks
effectively.
Electromagnetic field ('EMF')
The health and safety of our customers and the wider public has always been,
and continues to be, a priority for us. We know that some people are concerned
about whether there are risks to health from mobile phones and radio masts. We
refer to the current body of scientific evidence so that the services and
products we provide are within prescribed safety limits and adhere to all
relevant standards and national laws.
Climate change
As part of our commitment to operate ethically and sustainably, we are
dedicated to understanding climate-related risks and opportunities and
embedding responses to these into our business strategy and operations.
Emerging risks
We have a number of uncertainties where an emerging risk may potentially
impact us in the longer term. In some cases, there may be insufficient
information to understand the likelihood, impact or velocity of the risk. We
also might not be able to fully define a mitigation plan until we have a
better understanding of the threat.
We continue to identify new emerging risk trends, using the input from
analysis of the external environment. Furthermore, we have strengthened the
identification process by involving our functional experts and our global risk
community in this emerging risk scanning exercise.
Once the emerging risks are prioritised by the functional experts, scenarios
are created to assist in the analysis of each risk. These emerging risks and
scenarios are provided to the Risk and Compliance Committee and the Audit and
Risk Committee for further scrutiny. During the period, three additional
emerging risks were added to our list:
- Inflation (beyond a three-year period);
- Generation Z as customers; and
- Disintermediation (beyond a three-year period).
Macro factors affecting the risk profile
Whilst the Group does not have significant operations in either Russia
or Ukraine, Vodafone continues to monitor any potential impacts for the Group
and its business. Various countries have implemented trade restrictions,
economic measures and financial sanctions against Russia. These measures,
together with the wider effects of the war, is having a negative impact on
macroeconomic conditions, give rise to regional instability, increase costs,
and disrupt supply chains.
Responsibility statement
We confirm that to the best of our knowledge:
- The unaudited condensed consolidated financial statements have been
prepared in accordance with IAS 34, "Interim Financial Reporting", as issued
by the International Accounting Standards Board and as contained in UK-adopted
international accounting standards; and
- The interim management report includes a fair review of the
information required by Disclosure Guidance and Transparency Rules sourcebook
4.2.7 and Disclosure Guidance and Transparency Rules sourcebook 4.2.8.
Neither the Company nor the directors accept any liability to any person in
relation to the half-year financial report except to the extent that such
liability could arise under English law. Accordingly, any liability to a
person who has demonstrated reliance on any untrue or misleading statement or
omission shall be determined in accordance with section 90A and schedule 10A
of the Financial Services and Markets Act 2000.
The names and functions of the Vodafone Group Plc board of directors can be
found at:
https://www.vodafone.com/about-vodafone/who-we-are/leadership/board-of-directors
(https://www.vodafone.com/about-vodafone/who-we-are/leadership/board-of-directors)
By Order of the Board
Rosemary Martin
Group General Counsel and Company Secretary
15 November 2022
Unaudited condensed consolidated financial statements
Consolidated income statement
Six months ended 30 September
2022 2021
Note €m €m
Revenue 2 22,930 22,489
Cost of sales (15,580) (15,097)
Gross profit 7,350 7,392
Selling and distribution expenses (1,711) (1,675)
Administrative expenses (2,819) (2,870)
Net credit losses on financial assets (332) (230)
Share of results of equity accounted associates and joint ventures 343 111
Other income/(expense) 104 (108)
Operating profit 2 2,935 2,620
Investment income 211 129
Financing costs (1,418) (1,473)
Profit before taxation 1,728 1,276
Income tax (expense)/credit 3 (485) 1
Profit for the financial period 1,243 1,277
Attributable to:
- Owners of the parent 986 996
- Non-controlling interests 257 281
Profit for the financial period 1,243 1,277
Profit per share
Total Group:
- Basic 5 3.52c 3.40c
- Diluted 5 3.50c 3.39c
Consolidated statement of comprehensive income/expense
Six months ended 30 September
2022 2021
€m €m
Profit for the financial period 1,243 1,277
Other comprehensive income/(expense):
Items that may be reclassified to the income statement in subsequent periods:
Foreign exchange translation differences, net of tax (424) (117)
Other, net of tax(1) 924 1,286
Total items that may be reclassified to the income statement in subsequent 500 1,169
periods
Items that will not be reclassified to the income statement in subsequent
periods:
Net actuarial (losses)/gains on defined benefit pension schemes, net of tax (42) 200
Total items that will not be reclassified to the income statement in (42) 200
subsequent periods
Other comprehensive income 458 1,369
Total comprehensive income for the financial period 1,701 2,646
Attributable to:
- Owners of the parent 1,415 2,354
- Non-controlling interests 286 292
1,701 2,646
Note:
1. Principally includes the impact of the Group's cash flow hedges deferred to
other comprehensive income during the period.
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
Unaudited condensed consolidated financial statements
Consolidated statement of financial position
30 September 31 March
2022 2022
Note €m €m
Non-current assets
Goodwill 31,225 31,884
Other intangible assets 20,470 21,360
Property, plant and equipment 39,843 40,804
Investments in associates and joint ventures 7 4,381 4,268
Other investments 1,128 1,073
Deferred tax assets 18,699 19,089
Post employment benefits 10 493 555
Trade and other receivables 10,869 6,383
127,108 125,416
Current assets
Inventory 991 836
Taxation recoverable 393 296
Trade and other receivables 11,506 11,019
Other investments 7,824 7,931
Cash and cash equivalents 7,072 7,496
27,786 27,578
Assets held for sale 4 2,546 959
Total assets 157,440 153,953
Equity
Called up share capital 4,797 4,797
Additional paid-in capital 149,085 149,018
Treasury shares (7,170) (7,278)
Accumulated losses (122,521) (122,118)
Accumulated other comprehensive income 31,262 30,268
Total attributable to owners of the parent 55,453 54,687
Non-controlling interests 2,284 2,290
Total equity 57,737 56,977
Non-current liabilities
Borrowings 59,907 58,131
Deferred tax liabilities 681 520
Post employment benefits 10 281 281
Provisions 1,924 1,881
Trade and other payables 2,447 2,516
65,240 63,329
Current liabilities
Borrowings 15,675 11,961
Financial liabilities under put option arrangements 486 494
Taxation liabilities 722 864
Provisions 722 667
Trade and other payables 16,614 19,661
34,219 33,647
Liabilities held for sale 4 244 -
Total equity and liabilities 157,440 153,953
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
Unaudited condensed consolidated financial statements
Consolidated statement of changes in equity
Share Additional Treasury Accumulated Equity attributable to the owners Non- Total equity
capital paid-in shares comprehensive controlling
capital(1) losses(2) interests
€m €m €m €m €m €m €m
1 April 2021 brought forward 4,797 150,812 (6,172) (93,633) 55,804 2,012 57,816
Issue or reissue of shares - 1 90 (90) 1 - 1
Share-based payments - 73 - - 73 6 79
Transactions with non-controlling shareholders in subsidiaries - - - (38) (38) 236 198
Comprehensive income - - - 2,354 2,354 292 2,646
Dividends - - - (1,254) (1,254) (391) (1,645)
Purchase of treasury shares - - (1,048) - (1,048) - (1,048)
30 September 2021 4,797 150,886 (7,130) (92,661) 55,892 2,155 58,047
31 March 2022 as reported 4,797 149,018 (7,278) (91,850) 54,687 2,290 56,977
Adoption of IAS 29(3) - - - 565 565 - 565
1 April 2022 brought forward 4,797 149,018 (7,278) (91,285) 55,252 2,290 57,542
Issue or reissue of shares - 1 108 (100) 9 - 9
Share-based payments - 66 - - 66 5 71
Transactions with non-controlling shareholders in subsidiaries - - - (24) (24) (12) (36)
Comprehensive income - - - 1,415 1,415 286 1,701
Dividends - - - (1,265) (1,265) (285) (1,550)
30 September 2022 4,797 149,085 (7,170) (91,259) 55,453 2,284 57,737
Notes:
1. Includes share premium, capital reserve, 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. This opening balance adjustment relates to the adoption of
hyperinflationary accounting in Turkey. See Note 1 'Basis of preparation' for
more information.
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
Unaudited condensed consolidated financial statements
Consolidated statement of cash flows
Six months ended 30 September
2022 2021
Note €m €m
Inflow from operating activities 8 6,280 6,455
Cash flows from investing activities
Purchase of interests in subsidiaries, net of cash acquired - (1)
Purchase of interests in associates and joint ventures (61) (47)
Purchase of intangible assets (1,433) (1,593)
Purchase of property, plant and equipment (3,456) (3,118)
Purchase of investments (871) (580)
Disposal of property, plant and equipment and intangible assets - 8
Disposal of investments 1,130 1,930
Dividends received from associates and joint ventures 463 469
Interest received 139 121
Outflow from investing activities (4,089) (2,811)
Cash flows from financing activities(1)
Proceeds from issue of long-term borrowings 187 2,282
Repayment of borrowings (5,549) (3,771)
Net movement in short-term borrowings 6,194 1,173
Net movement in derivatives (205) (110)
Interest paid(2) (952) (809)
Purchase of treasury shares (1,090) (1,101)
Issue of ordinary share capital and reissue of treasury shares 9 1
Equity dividends paid (1,263) (1,259)
Dividends paid to non-controlling shareholders in subsidiaries (290) (399)
Other transactions with non-controlling shareholders in subsidiaries (34) 198
Outflow from financing activities (2,993) (3,795)
Net cash outflow (802) (151)
Cash and cash equivalents at beginning of the financial period(3) 7,371 5,790
Exchange gain on cash and cash equivalents 282 11
Cash and cash equivalents at end of the financial period(3) 6,851 5,650
Notes:
1. Includes the issuance of €nil and repayment of €885 million in relation
to debt securities (Six months ended 30 September 2021: Issuance of €2,000
million and repayment of €657 million).
2. Interest paid includes €86 million of cash inflow (Six months ended 30
September 2021: €39 million inflow) on derivative financial instruments for
the share buyback related to maturing tranches of mandatory convertible
bonds.
3. Comprises cash and cash equivalents as presented in the consolidated
statement of financial position of €7,072 million (€5,824 million as at 30
September 2021), together with overdrafts of €226 million (€174 million as
at 30 September 2021) and €5 million (€nil as at 30 September 2021) of
cash and cash equivalents included within assets held for sale.
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
Notes to the unaudited condensed consolidated financial statements
1 Basis of preparation
The unaudited condensed consolidated financial statements for the six months
ended 30 September 2022:
· are prepared in accordance with International Accounting Standard 34
'Interim Financial Reporting' ('IAS 34') as issued by the International
Accounting Standards Board ('IASB') and as adopted by the United Kingdom;
· are presented on a condensed basis as permitted by IAS 34 and
therefore do not include all disclosures that would otherwise be required in a
full set of financial statements and should be read in conjunction with the
Group's Annual Report for the year ended 31 March 2022;
· apply, with the exception of the application of IAS 29 'Financial
Reporting in Hyperinflationary Economies' for the Group's entities reporting
in Turkish lira (see below), 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 2022, which were
prepared in accordance with UK-adopted International Accounting Standards
('IAS'), with International Financial Reporting Standards ('IFRS') as issued
by the IASB and with the requirements of the UK Companies Act 2006. Income
taxes are accrued using the tax rate that is expected to be applicable for the
full financial year, adjusted for certain discrete items which occurred in the
interim period in accordance with IAS 34;
· include all adjustments, consisting of normal recurring adjustments,
necessary for a fair statement of the results for the periods presented;
· do not constitute statutory accounts within the meaning of section
434(3) of the UK Companies Act 2006; and
· were approved by the Board of directors on 15 November 2022.
The information relating to the year ended 31 March 2022 is extracted from the
Group's published Annual Report for that year, which has been delivered to the
Registrar of Companies, and on which the auditors' report was unqualified and
did not contain any emphasis of matter or statements under section 498(2) or
498(3) of the UK Companies Act 2006.
The preparation of the unaudited condensed consolidated financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the end of the reporting period, and the reported amounts of
revenue and expenses during the period. Actual results could vary from these
estimates. These estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised if the revision affects only that period or
in the period of the revision and future periods if the revision affects both
current and future periods.
Going concern
Trading during the period demonstrated a robust operating model for the Group.
The Group has a strong liquidity position with €6.9 billion of cash and cash
equivalents available as at 30 September 2022 which, together with undrawn
revolving credit facilities of €8.1 billion, cover all of the Group's
reasonably expected cash requirements over the going concern period. The
Directors have reviewed trading and liquidity forecasts for the Group, which
were based on current trading conditions, and considered a variety of
scenarios including not being able to access the capital markets during the
assessment period. In addition to the liquidity forecasts prepared, the
Directors considered the availability of the Group's revolving credit
facilities which were undrawn as at 30 September 2022. As a result of the
assessment performed, the Directors have concluded that the Group is able to
continue in operation for the period up to and including December 2023 and
that it is appropriate to continue to adopt the going concern basis in
preparing the unaudited condensed consolidated financial statements.
War in Ukraine
Whilst the Group does not have any significant operations in either Russia or
Ukraine, a review was undertaken by management to assess any consequences on
the financial statements arising from the conflict or from the resulting
sanctions imposed on Russia and Belarus. It was concluded there are no
material impacts on the consolidated financial statements for the period ended
30 September 2022.
Critical accounting judgements and estimates
The Group's critical accounting judgements and estimates are disclosed in the
Group's Annual Report for the year ended 31 March 2022.
Notes to the unaudited condensed consolidated financial statements
1 Basis of preparation (continued)
Judgements relating to potential indicators of impairment
The Group performs its annual impairment test for goodwill and indefinite
lived intangible assets as at 31 March.
At interim reporting periods the Group performs a review to identify any
indicator of impairment that may indicate that the carrying amount of any of
the Group's cash generating units ('CGUs') may not be not recoverable. As
part of this assessment as at 30 September 2022, the Group reviewed the key
assumptions underlying the value in use valuations used in the annual
impairment test at 31 March 2022. This included the year to date performance
of the Group's CGUs against their budgets, trends in energy and other costs
and inflation rates, as well as considering the valuation implications of
changes in other factors such as risk free discount rates and the assessment
of long term growth rates.
Value in use assessments were performed for Vodafone Italy and Vodafone Spain
as at 30 September 2022 reflecting assumptions materially similar to those
disclosed in note 4 'Impairment losses' of the consolidated financial
statements in the Annual Report for the year ended 31 March 2022.
The Group's review of the potential impact of indicators of impairment and
recoverable amounts did not indicate that the carrying amount of any of the
Group's CGUs was not recoverable as at 30 September 2022.
New accounting pronouncements adopted
On 1 April 2022, the Group adopted certain new accounting policies where
necessary to comply with amendments to IFRS, none of which had a material
impact on the consolidated results, financial position or cash flows of the
Group. Further details are provided in the Group's Annual Report for the year
ended 31 March 2022.
Basis of preparation changes adopted on 1 April 2022 - Hyperinflation in
Turkey
As anticipated in the Annual Report for the year ended 31 March 2022 and
communicated in the Q1 trading update, Turkey met the requirements to be
designated as a hyperinflationary economy under IAS 29 'Financial Reporting in
Hyperinflationary Economies' in the quarter ended 30 June 2022. The Group has
therefore applied hyperinflationary accounting, as specified in IAS 29, at its
Turkish operations whose functional currency is the Turkish lira for the
reporting period commencing 1 April 2022. This resulted in an opening balance
adjustment of €565 million to consolidated equity.
In accordance with IAS 21 'The Effects of Changes in Foreign Exchange Rates',
comparative amounts are not restated.
Turkish lira results and non-monetary asset and liability balances for the six
months ended 30 September 2022 have been revalued to their present value
equivalent local currency amount as at 30 September 2022, based on an
inflation index, before translation to euros at the reporting date exchange
rate of €1:18.16 TRL. The gain or loss on net monetary assets resulting from
IAS 29 application is recognised in the income statement within Other
income.
The Group also presents the gain or loss on cash and cash equivalents as
monetary items together with the effect of inflation on operating, investing
and financing cash flows as one number in the consolidated statement of cash
flows.
The Group has presented the IAS 29 opening balance adjustment to net assets
within currency reserves in equity. Subsequent IAS 29 equity restatement
effects and the impact of currency movements are presented within other
comprehensive income because such amounts are judged to meet the definition of
'exchange differences'.
The inflation index selected to reflect the change in purchasing power was the
consumer price index (CPI) issued by the Turkish Statistical Institute which
has risen by 24% in the six months to 30 September 2022.
The main impacts on the consolidated financial statements for the six months
ended 30 September 2022 of the aforementioned adjustments are shown below.
Six months ended
30 September 2022
€m
Revenue 21
Operating profit (14)
Profit for the financial period (40)
Non-current assets 780
Equity 659
Notes to the unaudited condensed consolidated financial statements
2 Segmental analysis
Operating segments
The Group's operating segments are established on the basis of those
components of the Group that are evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. The Group has determined the chief operating decision maker to be
its Chief Executive Officer. The Group has a single group of similar services
and products, being the supply of communications services and related
products.
Revenue is attributed to a country based on the location of the Group company
reporting the revenue. With the exception of Vodacom, which is a legal entity
encompassing South Africa and certain other smaller African markets, and
Vantage Towers which comprises companies providing mobile tower infrastructure
in a number of European markets, segment information is primarily provided on
the basis of geographic areas, being the basis on which the Group manages the
rest of its worldwide interests. Transactions between operating segments are
charged at arm's-length prices.
The operating segments for Germany, Italy, UK, Spain, Vodacom and Vantage
Towers are individually material for the Group and are each reporting segments
for which certain financial information is provided. The aggregation of other
operating segments into the Other Europe and Other Markets reporting segments
reflects, in the opinion of management, the similar local market economic
characteristics and regulatory environments for each of those operating
segments as well as the similar products and services sold and comparable
classes of customers. In the case of the Other Europe region (comprising
Albania, Czech Republic, Greece, Hungary, Ireland, Portugal and Romania), this
largely reflects membership or a close association with the European Union,
while the Other Markets segment (comprising Egypt, Ghana and Turkey) largely
includes developing economies with less stable economic or regulatory
environments. Common Functions is a separate reporting segment and comprises
activities which are undertaken primarily in central Group entities that do
not meet the criteria for aggregation with other reporting segments.
Revenue disaggregation
Revenue reported for the period includes revenue from contracts with
customers, comprising service and equipment revenue, as well as other revenue
items including revenue from leases and interest revenue arising from
transactions with a significant financing component. The tables below and
overleaf disaggregate the Group's revenue by reporting segment.
The table below presents the results for the six months ended 30 September
2022.
Service revenue Equipment revenue Revenue from contracts with customers Other revenue(1) Interest revenue Total segment revenue Adjusted EBITDAaL
€m €m €m €m €m €m €m
Six months ended 30 September 2022
Germany 5,730 675 6,405 178 9 6,592 2,677
Italy 2,125 198 2,323 49 5 2,377 759
UK 2,712 630 3,342 34 16 3,392 685
Spain 1,782 142 1,924 31 10 1,965 445
Other Europe 2,552 281 2,833 53 8 2,894 843
Vodacom 2,472 509 2,981 207 14 3,202 1,084
Other Markets 1,721 230 1,951 2 - 1,953 671
Vantage Towers - - - 657 - 657 330
Common Functions(2) 268 23 291 405 - 696 (250)
Eliminations (155) - (155) (643) - (798) -
Group 19,207 2,688 21,895 973 62 22,930 7,244
Notes:
1. Other revenue includes lease revenue recognised under IFRS 16 'Leases'.
2. Comprises central teams and business functions.
Notes to the unaudited condensed consolidated financial statements
2 Segmental analysis (continued)
The table below presents the comparative information for the six months ended
30 September 2021.
Service revenue Equipment revenue Revenue from contracts with customers Other revenue(1) Interest revenue Total segment revenue Adjusted EBITDAaL
€m €m €m €m €m €m €m
Six months ended 30 September 2021
Germany 5,777 475 6,252 183 12 6,447 2,892
Italy 2,187 265 2,452 49 6 2,507 917
UK 2,521 593 3,114 30 17 3,161 638
Spain 1,866 178 2,044 33 13 2,090 445
Other Europe 2,502 248 2,750 52 8 2,810 836
Vodacom 2,271 455 2,726 190 12 2,928 1,062
Other Markets 1,752 201 1,953 5 - 1,958 683
Vantage Towers - - - 611 - 611 305
Common Functions(2) 252 31 283 424 - 707 (213)
Eliminations (118) - (118) (611) (1) (730) -
Group 19,010 2,446 21,456 966 67 22,489 7,565
Notes:
1. Other revenue includes lease revenue recognised under IFRS 16 'Leases'.
2. Comprises central teams and business functions.
A reconciliation of Adjusted EBITDAaL, the Group's measure of segment profit,
to the Group's profit before taxation for the financial period is shown below.
Six months ended 30 September
2022 2021
€m €m
Adjusted EBITDAaL 7,244 7,565
Restructuring costs (142) (172)
Interest on lease liabilities 204 199
Loss on disposal of property, plant & equipment and intangible assets (11) (26)
Depreciation and amortisation on owned assets (4,807) (4,949)
Share of results of equity accounted associates and joint ventures 343 111
Other income/(expense) 104 (108)
Operating profit 2,935 2,620
Investment income 211 129
Financing costs (1,418) (1,473)
Profit before taxation 1,728 1,276
The Group's non-current assets are disaggregated as follows:
30 September 31 March
2022 2022
€m €m
Non-current assets(1)
Germany 42,709 43,190
Italy 10,129 10,519
UK 5,847 6,226
Spain 6,129 6,433
Other Europe 6,855 8,548
Vodacom 6,319 6,383
Other Markets 3,349 2,467
Vantage Towers 8,190 8,179
Common Functions(2) 2,011 2,103
Group 91,538 94,048
Notes:
1. Comprises goodwill, other intangible assets and property, plant &
equipment.
2. Comprises central teams and business functions.
Notes to the unaudited condensed consolidated financial statements
3 Taxation
Six months ended 30 September
2022 2021
€m €m
United Kingdom corporation tax (expense)/income
Current period (4) (6)
Adjustments in respect of prior periods 9 15
Overseas current tax (expense)/income
Current period (446) (730)
Adjustments in respect of prior periods 12 (26)
Total current tax expense (429) (747)
Deferred tax on origination and reversal of temporary differences
United Kingdom deferred tax (10) 544
Overseas deferred tax (46) 204
Total deferred tax (expense)/credit (56) 748
Total income tax (expense)/credit (485) 1
Deferred tax on losses in Luxembourg
The tax charge for the six months ended 30 September 2022 includes deferred
tax on the use of losses in Luxembourg. The Group would not recognise losses
in Luxembourg which would be forecast to be used beyond 60 years. Current
volatility in interest rates means that the period over which we expect to
recover the losses is shorter than the 45 to 48 years disclosed as at 31 March
2022. The actual use of these losses and the period over which they may be
used is dependent on many factors including the level of profitability in
Luxembourg, changes in tax law and any changes to the structure of the Group.
Further details about the Group's tax losses can be found in Note 6 'Taxation'
to the consolidated financial statements of Vodafone Group Plc for the year
ended 31 March 2022.
Notes to the unaudited condensed consolidated financial statements
4 Assets and liabilities held for sale
Assets and liabilities held for sale as at 30 September 2022 comprised (i)
Vodafone Hungary and (ii) the Group's 21.0% interest in Indus Towers. Assets
held for sale as at 31 March 2022 comprised the Group's 21.0% interest in
Indus Towers.
On 22 August 2022, the Group announced that it had entered into heads of terms
with 4iG Public Limited Company and Corvinus Zrt (a Hungarian state holding
company) in relation to the potential sale of 100% of Vodafone Magyarország
Távközlési Zrt ('Vodafone Hungary') for a total cash consideration
equivalent to an enterprise value of HUF 715 billion (€1.8 billion).
The Group's interest in Indus Towers has been provided as security against
certain bank borrowings.
The relevant assets and liabilities are detailed in the table below.
30 September 31 March
2022 2022
€m €m
Non-current assets
Goodwill 412 -
Other intangible assets 474 -
Property, plant and equipment 440 -
Investments in associates and joint ventures 1,014 959
Trade and other receivables 18 -
2,358 959
Current assets
Inventory 12 -
Trade and other receivables 171 -
Cash and cash equivalents 5 -
188 -
Total assets 2,546 959
Non-current liabilities
Borrowings 47 -
Deferred tax liabilities 16 -
Provisions 23 -
Trade and other payables 1 -
87 -
Current liabilities
Borrowings 15 -
Provisions 6 -
Trade and other payables 136 -
157 -
Total liabilities 244 -
Net assets and liabilities held for sale 2,302 959
As part of the disposal of Vodafone Hungary, the Group will realise a loss
comprising the cumulative foreign exchange losses arising from the
retranslation of the consolidated net assets of Vodafone Hungary (which has a
functional currency of Hungarian Forint) to the Group's presentation currency
in the period from acquisition of the Group's interest to the date of
disposal. This foreign exchange is required to be recycled to the income
statement from the translation reserve. Based on the 30 September 2022
exchange rate of €:HUF: 423.0, a loss of approximately €0.3 billion would
arise. The actual loss from the recycling of foreign exchange previously
recognised in equity that would be recognised on disposal, will depend on the
€:HUF exchange rate at the date of completion.
Notes to the unaudited condensed consolidated financial statements
5 Earnings per share
Six months ended 30 September
2022 2021
Millions Millions
Weighted average number of shares for basic earnings per share 28,037 29,331
Effect of dilutive potential shares: restricted shares and share options 104 84
Weighted average number of shares for diluted earnings per share 28,141 29,415
Earnings per share attributable to owners of the parent during the period
Six months ended 30 September
2022 2021
€m €m
Profit for basic and diluted earnings per share 986 996
eurocents eurocents
Basic profit per share 3.52 3.40
Diluted profit per share 3.50 3.39
6 Equity dividends
Six months ended 30 September
2022 2021
€m €m
Declared during the financial period:
Final dividend for the year ended 31 March 2022: 4.50 eurocents per share
(2021: 4.50 eurocents per share) 1,265 1,254
Proposed after the end of the reporting period and not recognised as a
liability:
Interim dividend for the year ending 31 March 2023: 4.50 eurocents per share
(2022: 4.50 eurocents per share) 1,237 1,229
7 Investment in associates and joint ventures
30 September 31 March
2022 2022
€m €m
INWIT S.p.A.(1) - 2,851
VodafoneZiggo Group Holding B.V. 893 822
TPG Telecom Limited 123 84
Other 49 24
Investment in joint ventures 1,065 3,781
INWIT S.p.A.(1) 2,778 -
Safaricom PLC 478 428
Other 60 59
Investment in associates 3,316 487
4,381 4,268
Note:
1. The shareholders' agreement between the Group and Telecom Italia was
terminated on 3 August 2022 due to a change in Telecom Italia's shareholding
in INWIT S.p.A. As a result, INWIT S.p.A. ceased to be a joint venture of the
Group and is now classified as an associate.
Notes to the unaudited condensed consolidated financial statements
8 Reconciliation of net cash flow from operating activities
Six months ended 30 September
2022 2021
€m €m
Profit for the financial period 1,243 1,277
Investment income (211) (129)
Financing costs 1,418 1,473
Income tax expense/(credit) 485 (1)
Operating profit 2,935 2,620
Adjustments for:
Share-based payments and other non-cash charges 46 98
Depreciation and amortisation 6,853 6,952
Loss on disposal of property, plant & equipment and intangible 9 26
assets
Share of results of equity accounted associates and joint ventures (343) (111)
Other (income)/expense (104) 108
Increase in inventory (175) (41)
Increase in trade and other receivables (1,381) (1,254)
Decrease in trade and other payables (888) (1,366)
Cash generated by operations 6,952 7,032
Taxation (672) (577)
Net cash flow from operating activities 6,280 6,455
9 Fair value of financial instruments
The table below sets out the financial instruments held at fair value by the
Group.
30 September 31 March
2022 2022
€m €m
Financial assets at fair value:
Money market funds (included within Cash and cash equivalents)(1) 4,521 5,276
Debt and equity securities (included within Other investments)(2) 5,992 6,398
Derivative financial instruments (included within Trade and other 8,769 4,626
receivables)(2,3)
Trade receivables at fair value through Other comprehensive income 1,967 1,408
(included within Trade and
other receivables)(2)
21,249 17,708
Financial liabilities at fair value:
Derivative financial instruments (included within Trade and other 1,786 1,672
payables)(2,3)
1,786 1,672
Notes:
1. Items are measured at fair value and the valuation basis is Level 1
classification, which comprises financial instruments where fair value is
determined by unadjusted quoted prices in active markets.
2. Quoted debt and equity securities of €2,537 million (€2,997 million as
at 31 March 2022) are Level 1 classification which comprises items where fair
value is determined by unadjusted quoted prices in active markets. The
remaining items are measured at fair value and the basis is Level 2
classification which comprises items where fair value is determined from
inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly.
3. €8,524 million (€4,216 million as at 31 March 2022) of derivative
financial assets and €1,596 million (€1,506 million as at 31 March 2022)
of derivative financial liabilities are classified as non-current.
The fair value of the Group's financial liabilities held at amortised cost
approximates to fair value with the exception of non-current bonds with a
carrying value of €48,299 million (€46,156 million as at 31 March 2022)
and a fair value of €40,722 million (€46,348 million as at 31 March 2022).
Fair value is based on Level 1 of the fair value hierarchy using quoted market
prices.
The fair value of the Group's financial assets held at amortised cost
approximate to fair value with the exception of non-current debt securities
with a carrying value of €1,003 million (€930 million as at 31 March 2022)
and a fair value of €735 million (€830 million as at 31 March 2022). Fair
value is based on Level 2 of the fair value hierarchy which comprises items
where fair value is determined from inputs other than quoted prices that are
observable for the asset or liability, either directly or indirectly.
Notes to the unaudited condensed consolidated financial statements
10 Post employments benefits
Significant movements have been recorded in respect of the gross assets held
by and liabilities of the Group's pension schemes in the period. The Group has
obtained valuations for its most material schemes in the UK, Germany and
Ireland. Key financial information is presented below.
The Group's plan liabilities are measured using the projected unit credit
method using the principal actuarial assumptions set out below.
30 September 31 March
2022 2022
% %
Weighted average actuarial assumptions used(1):
Rate of inflation(2) 3.2% 3.3%
Discount rate 4.7% 2.4%
Notes:
1. Figures shown represent a weighted average assumption of the Group's plans
in the UK, Germany and Ireland.
2. This rate of increase in pensions in payment and deferred revaluation are
dependent on the rate of inflation.
Assumptions relating to life expectancy are unchanged from 31 March 2022.
Charges made to the consolidated income statement and consolidated statement
of comprehensive income ('SOCI') on the basis of the assumptions stated above
are:
Six months ended 30 September
2022 2021
€m €m
Total net cost/(credit) included within staff costs 6 (58)
Actuarial (losses)/gains recognised in the SOCI (63) 246
The Group's overall net surplus is analysed as follows:
30 September 31 March
2022 2022
€m €m
Assets 493 555
Liabilities (281) (281)
Net surplus 212 274
An analysis of the net surplus is provided below for the Vodafone UK Group
Pension Scheme, comprising the Vodafone Section and the Cable & Wireless
Section ('CWW Section').
Vodafone Section CWW Section
30 September 31 March 30 September 31 March
2022 2022 2022 2022
€m €m €m €m
Analysis of net surplus:
Total fair value of plan assets 2,026 3,399 1,886 2,850
Present value of plan liabilities (1,856) (3,166) (1,648) (2,565)
Net surplus 170 233 238 285
Net surplus are analysed as:
Assets 170 233 238 285
On 18 October 2022, the Group entered into short term liquidity facilities
with both sections of the Vodafone UK Pension Scheme ('the UK scheme') for an
aggregate amount of £450 million. These facilities can be used for
short-term liquidity purposes in connection with potential future collateral
calls, with the intention of reducing the risk the UK Scheme would be required
to dispose of assets at short notice in the event of significant increases in
interest rates. Drawings can be made from the facility until 27 January 2023,
with all amounts borrowed required to be repaid by 28 February 2023. No
amounts were drawn under these facilities at the date of this report.
Notes to the unaudited condensed consolidated financial statements
11 Related party transactions
Transactions with joint ventures and associates
Related party transactions with the Group's joint ventures and associates
primarily consists of fees for the use of products and services including
network airtime and access charges, fees for the provision of network
infrastructure and cash pooling ventures. No related party transactions have
been entered into during the period which might reasonably affect any
decisions made by the users of these unaudited condensed consolidated
financial statements except as disclosed below.
Six months ended 30 September
2022 2021
€m €m
Sales of goods and services to associates 11 10
Purchase of goods and services from associates 65 4
Sales of goods and services to joint arrangements 110 103
Purchase of goods and services from joint arrangements 69 132
Interest expense payable to associates(1) 25 -
Interest income receivable from joint arrangements(1) 22 26
Interest expense payable to joint arrangements(1) - 26
30 September 31 March
2022 2022
€m €m
Trade balances owed:
by associates 16 8
to associates 8 6
by joint arrangements 122 139
to joint arrangements 59 34
Other balances owed by associates - 80
Other balances owed to associates(2) 1,449 -
Other balances owed by joint arrangements(1) 986 1,080
Other balances owed to joint arrangements(2) 189 1,561
Notes:
1. Amounts arise primarily through VodafoneZiggo Group Holding B.V., TPG
Telecom Limited and INWIT S.p.A. Interest is charged in line with market
rates.
2. Amounts are primarily in relation to leases of tower space from INWIT
S.p.A. which was classified as a joint venture in the comparative period but
is now classified as an associate. See note 7 'Investment in associates and
joint ventures' for more information.
In the six months ended 30 September 2022, the Group made contributions to
defined benefit pension schemes of €11 million (Six months ended 30
September 2021: €12 million).
In the six months ended 30 September 2022, dividends of €1.2 million were
paid to Board and Executive Committee members (Six months ended 30 September
2021: €1.1 million).
Dividends received from associates and joint ventures are disclosed in the
consolidated statement of cash flows.
12 Contingent liabilities and legal proceedings
Note 28 'Commitments' and Note 29 'Contingent liabilities and legal
proceedings' to the consolidated financial statements of Vodafone Group Plc
for the year ended 31 March 2022 set forth the Group's commitments, contingent
liabilities and legal proceedings as at 31 March 2022. There have been no
material changes during the period covered by this report.
Notes to the unaudited condensed consolidated financial statements
13 Subsequent events
On 9 November 2022, the Group announced that it had entered into a strategic
co-control partnership with a consortium of long-term infrastructure investors
led by Global Infrastructure Partners and KKR (together the 'Consortium') for
Vodafone's 81.7% stake in Vantage Towers A.G. ('Vantage Towers'). Vodafone and
the Consortium have created a joint venture ('JV') which will hold Vodafone's
81.7% stake in Vantage Towers. The JV will make a voluntary takeover offer
('VTO') for the remaining 18.3% of shares in Vantage Towers at €32 per
share.
The Consortium will acquire JV shares from Vodafone for cash consideration of
€32 per share. The Consortium has fully committed equity in place to obtain
a shareholding in the JV of between 32% and 40%, depending on the level of
take-up in the VTO by minority shareholders. The Consortium intends to raise
additional equity before completion to reach a shareholding of 50%. The
Group's minimum net cash proceeds will be €3.2bn based on 100% take up in
the VTO. The maximum total net cash proceeds to Vodafone based on a 50%
shareholding for the Consortium and 100% take up in the VTO will be €5.8
billion. The transaction is conditional on regulatory clearance and is
expected to close in the first half of 2023.
On 9 November 2022, RRJ Capital entered into an irrevocable undertaking to
accept the VTO in respect of its 2.4% shareholding in Vantage Towers. On 13
November 2022, the Group entered into an agreement to purchase Digital
Bridge's 4.1% shareholding in Vantage Towers at the offer price of €32 per
share and committed to tender these shares into the VTO. This means that the
JV will hold a minimum shareholding of 88.3% in Vantage Towers following
completion of the VTO.
Independent review report to Vodafone Group Plc
Conclusion
We have been engaged by Vodafone Group Plc (the Company) to review the
unaudited condensed consolidated financial statements in the half yearly
financial report for the six months ended 30 September 2022 which comprise the
consolidated income statement, the consolidated statement of comprehensive
income/expense, the consolidated statement of financial position, the
consolidated statement of changes in equity, the consolidated statement of
cash flows and the related notes 1 to 13. We have read the other information
contained in the half yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies with the
information in the unaudited condensed consolidated financial statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half yearly
financial report for the six months ended 30 September 2022 is not prepared,
in all material respects, in accordance with UK adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements 2410 (UK) "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not enable us
to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 1, the annual financial statements of the Group will be
prepared in accordance with UK adopted international accounting standards and
International Financial Reporting Standards as issued by the IASB. The
condensed set of financial statements included in this half yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE, however future events or conditions may cause the entity to cease
to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's Responsibilities for the review of financial information
In reviewing the half yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the Company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK) "Review of
Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the Company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
15 November 2022
Non-GAAP measures
In the discussion of the Group's reported operating results, non-GAAP measures
are presented to provide readers with additional financial information that is
regularly reviewed by management. 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 a
measure defined under GAAP. Such measures should not be viewed in isolation or
as an alternative to the equivalent GAAP measure. The non-GAAP measures
discussed in this document are listed below.
Non-GAAP measure Defined on page Closest equivalent GAAP measure Reconciled on page
Performance metrics
Adjusted EBITDAaL Page 42 Operating profit Page 6
Organic Adjusted EBITDAaL growth Page 42 Not applicable Page 43
Organic revenue growth Page 42 Revenue Pages 43 and 44
Organic Group service revenue growth excluding Turkey Page 42 Service revenue Pages 43 and 44
Organic Group Adjusted EBITDAaL growth excluding Turkey Page 42 Not applicable Page 43
Organic service revenue growth Page 42 Service revenue Pages 43 and 44
Organic mobile service revenue growth Page 42 Service revenue Pages 43 and 44
Organic fixed service revenue growth Page 42 Service revenue Pages 43 and 44
Organic Vodafone Business service revenue growth Page 42 Service revenue Pages 43 and 44
Organic financial services revenue growth in South Africa Page 42 Service revenue Pages 43 and 44
Other metrics
Adjusted profit attributable to owners of the parent Page 45 Profit attributable to owners of the parent Page 45
Adjusted basic earnings per share Page 45 Basic earnings per share Page 46
Cash flow, funding and capital allocation metrics
Free cash flow Page 46 Inflow from operating activities Page 47
Adjusted free cash flow Page 46 Inflow from operating activities Pages 18 and 47
Gross debt Page 46 Borrowings Page 47
Net debt Page 46 Borrowings less cash and cash equivalents Page 47
Pre-tax ROCE (controlled) Page 48 ROCE calculated using GAAP measures Pages 48 and 49
Post-tax ROCE (controlled and associates/joint ventures) Page 48 ROCE calculated using GAAP measures Pages 48 and 49
Financing and Taxation metrics
Adjusted net financing costs Page 50 Net financing costs Page 16
Adjusted profit before taxation Page 50 Profit before taxation Page 50
Adjusted income tax expense Page 50 Income tax expense Page 50
Adjusted effective tax rate Page 50 Income tax expense Page 50
Adjusted share of results of equity accounted associates and joint ventures Page 50 Share of results of equity accounted associates and joint ventures Page 51
Adjusted share of results of equity accounted associates and joint ventures Page 50 Share of results of equity accounted associates and joint ventures Page 51
used in post-tax ROCE
Non-GAAP measures
Performance metrics
Non-GAAP measure Purpose Definition
Adjusted EBITDAaL Adjusted EBITDAaL is used in conjunction with financial measures such as Adjusted EBITDAaL is operating profit after depreciation on lease-related
operating profit to assess our operating performance and profitability. right of use assets and interest on leases but excluding depreciation,
amortisation and gains/losses on disposal of owned assets and excluding share
It is a key external metric used by the investor community to assess of results of equity accounted associates and joint ventures, impairment
performance of our operations. losses, restructuring costs arising from discrete restructuring plans, other
income and expense and significant items that are not considered by management
It is our segment performance measure in accordance with IFRS 8 (Operating to be reflective of the underlying performance of the Group.
Segments).
Adjusted EBITDAaL margin is Adjusted EBITDAaL divided by Revenue.
Organic growth
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 adjustments in
Turkey and other adjustments to improve the comparability of results between
periods.
Organic growth is calculated for revenue and profitability metrics, as
follows:
- Adjusted EBITDAaL;
- Revenue;
- Group service revenue excluding Turkey(1);
- Group Adjusted EBITDAaL excluding Turkey(1);
- Service revenue;
- Mobile service revenue;
- Fixed service revenue;
- Vodafone Business service revenue; and
- Financial services revenue in South Africa.
Whilst organic growth 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 GAAP 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 document.
If comparatives were provided, significant sections of the commentary for
prior periods would also need to be included, reducing the usefulness and
transparency of this document.
Note:
1. This is a new non-GAAP measure for FY23 and has been included because of
the hyperinflationary environment in Turkey.
Non-GAAP measures
Six months ended 30 September 2022 Reported growth M&A and Other Foreign exchange Organic growth*
H1 FY23 H1 FY22
€m €m % pps pps %
Service revenue
Germany 5,730 5,777 (0.8) - - (0.8)
Mobile service revenue 2,546 2,541 0.2 - - 0.2
Fixed service revenue 3,184 3,236 (1.6) - - (1.6)
Italy 2,125 2,187 (2.8) - - (2.8)
Mobile service revenue 1,507 1,589 (5.2) - - (5.2)
Fixed service revenue 618 598 3.3 0.1 - 3.4
UK 2,712 2,521 7.6 - (0.9) 6.7
Mobile service revenue 2,003 1,797 11.5 - (1.0) 10.5
Fixed service revenue 709 724 (2.1) - (0.7) (2.8)
Spain 1,782 1,866 (4.5) - - (4.5)
Other Europe 2,552 2,502 2.0 - 0.7 2.7
Vodacom 2,472 2,271 8.9 - (5.0) 3.9
Other Markets 1,721 1,752 (1.8) (1.2) 28.7 25.7
Of which: Turkey 676 815 (17.1) (3.5) 60.5 39.9
Vantage Towers - - - - - -
Common Functions 268 252
Eliminations (155) (118)
Total service revenue 19,207 19,010 1.0 - 1.5 2.5
Other revenue 3,723 3,479
Revenue 22,930 22,489 2.0 (0.1) 1.5 3.4
Other growth metrics
Group service revenue excluding Turkey 18,549 18,212 1.9 - (0.4) 1.5
Group adjusted EBITDAaL excluding Turkey 7,029 7,283 (3.5) - (0.3) (3.8)
Vodafone Business - Service revenue 5,149 5,086 1.2 0.6 0.8 2.6
South Africa - Financial services revenue 82 66 24.2 - (16.1) 8.1
Adjusted EBITDAaL
Germany 2,677 2,892 (7.4) - - (7.4)
Italy 759 917 (17.2) (0.1) - (17.3)
UK 685 638 7.4 - (0.8) 6.6
Spain 445 445 - 0.2 - 0.2
Other Europe 843 836 0.8 - 0.7 1.5
Vodacom 1,084 1,062 2.1 - (3.7) (1.6)
Other Markets 671 683 (1.8) 4.8 25.2 28.2
Of which: Turkey 215 282 (23.8) 16.1 55.4 47.7
Vantage Towers 330 305 8.2 - 0.4 8.6
Common Functions (250) (213)
Eliminations - -
Group 7,244 7,565 (4.2) 0.4 1.2 (2.6)
Percentage point change in Adjusted EBITDAaL margin
Germany 40.6% 44.9% (4.3) - - (4.3)
Italy 31.9% 36.6% (4.7) - - (4.7)
UK 20.2% 20.2% - - - -
Spain 22.6% 21.3% 1.3 0.1 - 1.4
Other Europe 29.1% 29.8% (0.7) - - (0.7)
Vodacom 33.9% 36.3% (2.4) - 0.2 (2.2)
Other Markets 34.4% 34.9% (0.5) 1.7 (1.8) (0.6)
Vantage Towers 50.2% 49.9% 0.3 - 0.2 0.5
Group 31.6% 33.6% (2.0) 0.1 (0.1) (2.0)
Non-GAAP measures
Quarter ended 30 September 2022 M&A and Other Foreign exchange
Reported growth Organic growth*
Q2 FY23 Q2 FY22
€m €m % pps pps %
Service revenue
Germany 2,873 2,905 (1.1) - - (1.1)
Mobile service revenue 1,282 1,287 (0.4) - - (0.4)
Fixed service revenue 1,591 1,618 (1.7) - - (1.7)
Italy 1,073 1,111 (3.4) - - (3.4)
Mobile service revenue 762 807 (5.6) - - (5.6)
Fixed service revenue 311 304 2.3 0.3 - 2.6
UK 1,352 1,265 6.9 - - 6.9
Mobile service revenue 1,000 902 10.9 - (0.1) 10.8
Fixed service revenue 352 363 (3.0) - 0.1 (2.9)
Spain 884 941 (6.1) 0.1 - (6.0)
Other Europe 1,298 1,274 1.9 - 1.0 2.9
Vodacom 1,258 1,145 9.9 - (5.1) 4.8
Other Markets 907 923 (1.7) (2.2) 30.6 26.7
Vantage Towers - - - - - -
Common Functions 140 127
Eliminations (92) (71)
Total service revenue 9,693 9,620 0.8 (0.1) 1.8 2.5
Other revenue 1,959 1,768
Revenue 11,652 11,388 2.3 (0.2) 2.0 4.1
Other growth metrics
Group service revenue excluding Turkey 9,344 9,201 1.6 - (0.2) 1.4
Vodafone Business - Service revenue 2,591 2,544 1.8 0.5 1.1 3.4
South Africa - Financial services revenue 42 33 27.3 - (15.7) 11.6
Quarter ended 30 June 2022 M&A and Other Foreign exchange
Reported growth Organic growth*
Q1 FY23 Q1 FY22
€m €m % pps pps %
Service revenue
Germany 2,857 2,872 (0.5) - - (0.5)
Mobile service revenue 1,264 1,254 0.8 - - 0.8
Fixed service revenue 1,593 1,618 (1.5) (0.1) - (1.6)
Italy 1,052 1,076 (2.2) (0.1) - (2.3)
Mobile service revenue 745 782 (4.7) - - (4.7)
Fixed service revenue 307 294 4.4 (0.2) - 4.2
UK 1,360 1,256 8.3 - (1.8) 6.5
Mobile service revenue 1,003 895 12.1 - (1.8) 10.3
Fixed service revenue 357 361 (1.1) - (1.6) (2.7)
Spain 898 925 (2.9) (0.1) - (3.0)
Other Europe 1,254 1,228 2.1 - 0.4 2.5
Vodacom 1,214 1,126 7.8 - (4.9) 2.9
Other Markets 814 829 (1.8) (0.1) 26.6 24.7
Vantage Towers - - - - - -
Common Functions 128 125
Eliminations (63) (47)
Total service revenue 9,514 9,390 1.3 - 1.2 2.5
Other revenue 1,764 1,711
Revenue 11,278 11,101 1.6 - 1.1 2.7
Other growth metrics
Group service revenue excluding Turkey 9,205 9,011 2.2 - (0.6) 1.6
Vodafone Business - Service revenue 2,558 2,542 0.6 0.7 0.4 1.7
South Africa - Financial services revenue 40 33 21.2 - (16.6) 4.6
Non-GAAP measures
Other metrics
Non-GAAP measure Purpose Definition
Adjusted profit attributable to owners of the parent This metric is used in the calculation of adjusted basic earnings per share. Adjusted profit attributable to owners of the parent excludes restructuring
costs arising from discrete restructuring plans, amortisation of customer
bases and brand intangible assets, impairment losses, other income and expense
and mark-to-market and foreign exchange movements, together with related tax
effects.
Adjusted basic earnings per share This performance measure is used in discussions with the investor community. Adjusted basic earnings per share is Adjusted profit attributable to owners of
the parent divided by the weighted average number of shares outstanding. This
is the same denominator used when calculating basic earnings per share.
Adjusted EBITDAaL and Adjusted profit attributable to owners of the parent
The table below reconciles Adjusted EBITDAaL and Adjusted profit attributable
to owners of the parent to their closest equivalent GAAP measures, being
Operating profit and Profit attributable to owners of the parent,
respectively.
H1 FY23 H1 FY22
Reported Adjustments Adjusted Reported Adjustments Adjusted
€m €m €m €m €m €m
Adjusted EBITDAaL 7,244 - 7,244 7,565 - 7,565
Restructuring costs (142) 142 - (172) 172 -
Interest on lease liabilities 204 - 204 199 - 199
Loss on disposal of property, plant & equipment and intangible assets (11) - (11) (26) - (26)
Depreciation and amortisation on owned assets(1) (4,807) 250 (4,557) (4,949) 253 (4,696)
Share of results of equity accounted associates and joint ventures(2) 343 120 463 111 137 248
Other income/(expense) 104 (104) - (108) 108 -
Operating profit 2,935 408 3,343 2,620 670 3,290
Investment income 211 - 211 129 - 129
Financing costs (1,418) 340 (1,078) (1,473) 453 (1,020)
Profit before taxation 1,728 748 2,476 1,276 1,123 2,399
Income tax (expense)/credit (485) (42) (527) 1 (679) (678)
Profit for the financial period 1,243 706 1,949 1,277 444 1,721
Profit attributable to:
- Owners of the parent 986 703 1,689 996 442 1,438
- Non-controlled interests 257 3 260 281 2 283
Profit for the financial period 1,243 706 1,949 1,277 444 1,721
Notes:
1. Reported depreciation and amortisation excludes
depreciation on leased assets and loss on disposal of leased assets included
within Adjusted EBITDAaL. Refer to Additional Information on page 51 for an
analysis of depreciation and amortisation. The adjustments of €250 million
(H1 FY22: €253 million) relate to amortisation of customer bases and brand
intangible assets.
2. Refer to page 51 for a breakdown of the adjustments
to Share of results of equity accounted associates and joint ventures to
derive Adjusted share of results of equity accounted associates and joint
ventures.
Non-GAAP measures
Adjusted basic earnings per share
The reconciliation of adjusted basic earnings per share to the closest
equivalent GAAP measure, basic earnings per share, is provided below.
H1 FY23 H1 FY22
€m €m
Profit attributable to owners of the parent 986 996
Adjusted profit attributable to owners of the parent 1,689 1,438
Million Million
Weighted average number of shares outstanding - Basic 28,037 29,331
eurocents eurocents
Basic earnings per share 3.52c 3.40c
Adjusted basic earnings per share 6.02c 4.90c
Cash flow, funding and capital allocation metrics
Cash flow and funding
Non-GAAP measure Purpose Definition
Free cash flow Internal performance reporting. Free cash flow is Adjusted EBITDAaL after cash flows in relation to capital
additions, working capital, disposal of property, plant and equipment,
External metric used by investor community. restructuring costs arising from discrete restructuring plans, integration
capital additions and working capital related items, licences and spectrum,
Assists comparability with other companies, although our metric may not be interest received and paid, taxation, dividends received from associates and
directly comparable to similarly titled measures used by other companies. investments, dividends paid to non-controlling shareholders in subsidiaries
and payments in respect of lease liabilities.
Adjusted free cash flow Internal performance reporting. Adjusted free cash flow is Free cash flow before licences and spectrum,
restructuring costs arising from discrete restructuring plans, integration
External metric used by investor community. capital additions and working capital related items, M&A and Vantage
Towers growth capital expenditure.
Setting director and management remuneration.
Growth capital expenditure is total capital expenditure excluding
Key external metric used to evaluate liquidity and the cash generated by our maintenance-type expenditure.
operations.
Gross debt Prominent metric used by debt rating agencies and the investor community. Non-current borrowings and current borrowings, excluding lease liabilities,
collateral liabilities and borrowings specifically secured against Indian
assets.
Net debt Prominent metric used by debt rating agencies and the investor community. Gross debt less cash and cash equivalents, short-term investments, derivative
financial instruments excluding mark-to-market adjustments and net collateral
assets.
Non-GAAP measures
Cash flow and funding (continued)
The table below presents the reconciliation between Inflow from operating
activities and Free cash flow.
H1 FY23 H1 FY22
€m €m
Inflow from operating activities 6,280 6,455
Net tax paid 672 577
Cash generated by operations 6,952 7,032
Capital additions (3,541) (3,365)
Working capital movement in respect of capital additions (966) (739)
Disposal of property, plant and equipment and intangible assets - 8
Integration capital additions (101) (110)
Working capital movement in respect of integration capital additions (69) (76)
Licences and spectrum (2,181) (482)
Interest received and paid (841) (727)
Taxation (672) (577)
Dividends received from associates and joint ventures 463 469
Dividends paid to non-controlling shareholders in subsidiaries (290) (399)
Payments in respect of lease liabilities (2,003) (2,056)
Other 4 39
Free cash flow (3,245) (983)
The table below presents the reconciliation between Borrowings, Gross debt and
Net debt.
Period-end FY23 Year-end FY22
€m €m
Borrowings (75,582) (70,092)
Lease liabilities 12,022 12,539
Bank borrowings secured against Indian assets 1,385 1,382
Collateral liabilities 8,395 2,914
Gross debt (53,780) (53,257)
Collateral liabilities (8,395) (2,914)
Cash and cash equivalents 7,072 7,496
Short-term investments 4,402 4,795
Collateral assets 754 698
Derivative financial instruments 6,983 2,954
Less mark-to-market gains deferred in hedge reserves (2,559) (1,350)
Net debt (45,523) (41,578)
Non-GAAP measures
Return on Capital Employed
Non-GAAP measure Purpose Definition
Return on Capital Employed ('ROCE') ROCE is a metric used by the investor community and reflects how efficiently We calculate ROCE by dividing Operating profit by the average of capital
we are generating profit with the capital we deploy. employed as reported in the consolidated statement of financial position.
Capital employed includes borrowings, cash and cash equivalents, derivative
financial instruments included in trade and other receivables/payables,
short-term investments, collateral assets, financial liabilities under put
option arrangements and equity.
Pre-tax ROCE (controlled) As above We calculate pre-tax ROCE (controlled) by dividing Operating profit excluding
interest on lease liabilities, restructuring costs arising from discrete
restructuring plans, impairment losses, other income and expense, the impact
of hyper-inflationary adjustments in Turkey and the share of results of equity
Post-tax ROCE (controlled and associates/joint ventures) accounted associates and joint ventures. On a post-tax basis, the measure
includes our adjusted share of results from associates and joint ventures and
a notional tax charge. Capital is equivalent to net operating assets and is
calculated as the average of opening and closing balances of: property, plant
and equipment (including leased assets and lease liabilities), intangible
assets (including goodwill), operating working capital (including held for
sale assets and excluding derivative balances) and provisions, excluding the
impact of hyper-inflationary adjustments in Turkey. Other assets that do not
directly contribute to returns are excluded from this measure and include
other investments, current and deferred tax balances and post employment
benefits. On a post-tax basis, ROCE also includes our investments in
associates and joint ventures.
ROCE using GAAP measures
The table below presents the calculation of ROCE using GAAP measures as
reported in the consolidated income statement and consolidated statement of
financial position.
For the purpose of the half-year ROCE calculation, the returns are based on
the 12 months ended 30 September and the denominator is based on the average
of the capital employed as at 30 September 2022 and 30 September 2021.
H1 FY23 H1 FY22
€m €m
Operating profit(1) 5,979 4,363
Borrowings(2) 75,644 69,521
Cash and cash equivalents(2) (7,077) (5,824)
Derivative financial instruments included in trade and other receivables (8,769) (3,666)
Derivative financial instruments included in trade and other payables 1,786 3,016
Short-term investments (4,402) (4,043)
Collateral assets (754) (1,654)
Financial liabilities under put option arrangements 486 502
Equity 57,737 58,047
Capital employed at end of the year 114,651 115,899
Average capital employed for the year 115,275 116,450
ROCE using GAAP measures 5.2% 3.7%
Notes:
1. Operating profit includes Other income/(expense), which includes merger and
acquisition activity that is non-recurring in nature.
2. Includes Borrowings (€62m) and Cash and cash equivalents (€5m)
classified as held for sale. See note 4 for details.
Non-GAAP measures
Return on Capital Employed ('ROCE') : Non-GAAP basis
The table below presents the calculation of ROCE using non-GAAP measures and
reconciliations to the closest equivalent GAAP measure.
For the purpose of the half-year ROCE calculation, the returns are based on
the 12 months ended 30 September and the denominator is based on the average
of the capital employed as at 30 September 2022 and 30 September 2021.
H1 FY23 H1 FY22
€m €m
Operating profit 5,979 4,363
Interest on lease liabilities (403) (384)
Restructuring costs 315 442
Other income (290) 595
Share of results of equity accounted associates and joint ventures (443) (193)
Other adjustments to Adjusted operating profit arising from hyperinflationary 128 -
accounting in Turkey
Adjusted operating profit for calculating pre-tax ROCE (controlled) 5,286 4,823
Adjusted share of results of equity accounted associates and joint ventures 447 194
used in post-tax ROCE(1)
Notional tax at adjusted effective tax rate(2) (1,550) (1,463)
Adjusted operating profit for calculating post-tax ROCE (controlled and 4,183 3,554
associates/joint ventures)
Capital employed for calculating ROCE on a GAAP basis 114,651 115,899
Adjustments to exclude:
- Leases(3) (12,084) (12,428)
- Deferred tax assets (18,699) (21,800)
- Deferred tax liabilities(3) 697 1,985
- Taxation recoverable (393) (515)
- Taxation liabilities 722 1,079
- Other investments (1,783) (1,609)
- Associates, joint ventures and assets held for sale (5,395) (5,653)
- Pension assets and liabilities (212) 121
- Other adjustments to Adjusted capital employed arising from (854) -
hyperinflationary accounting in Turkey
Adjusted capital employed for calculating pre-tax ROCE (controlled) 76,650 77,079
Associates, joint ventures and assets held for sale 5,395 5,653
Adjusted capital employed for calculating post-tax ROCE (controlled and 82,045 82,732
associates/joint ventures)
Average capital employed for calculating pre-tax ROCE (controlled) 76,865 76,895
Average capital employed for calculating post-tax ROCE (controlled and 82,389 82,585
associates/joint ventures)
Pre-tax ROCE (controlled) 6.9% 6.3%
Post-tax ROCE (controlled and associates/joint ventures) 5.1% 4.3%
Notes:
1. Adjusted share of results of equity accounted associates and joint ventures
used in post-tax ROCE is a non-GAAP measure and excludes restructuring
costs.
2. Includes tax for H1 FY23 at the Adjusted effective tax rate of 26.2%,
together with tax for H2 FY22 at the adjusted effective tax rate of 27.9%.
3. Includes Leases (€62m) and Deferred tax liabilities (€16m) classified
as held for sale. See note 4 for details.
Non-GAAP measures
Financing and Taxation metrics
Non-GAAP measure Purpose Definition
Adjusted net financing costs This metric is used by both management and the investor community. Adjusted net financing costs exclude mark-to-market and foreign exchange
gains/losses.
This metric is used in the calculation of adjusted basic earnings per share.
Adjusted profit before taxation This metric is used in the calculation of the adjusted effective tax rate (see Adjusted profit before taxation excludes the tax effects of items excluded
below). from adjusted basic earnings per share, including: impairment losses,
amortisation of customer bases and brand intangible assets, restructuring
costs arising from discrete restructuring plans, other income and expense and
mark-to-market and foreign exchange movements.
Adjusted income tax expense This metric is used in the calculation of the adjusted effective tax rate (see Adjusted income tax expense excludes the tax effects of items excluded from
below). adjusted basic earnings per share, including: impairment losses, amortisation
of customer bases and brand intangible assets, restructuring costs arising
from discrete restructuring plans, other income and expense and mark-to-market
and foreign exchange movements. It also excludes deferred tax movements
relating to tax losses in Luxembourg as well as other significant one-off
items.
Adjusted effective tax rate This metric is used by both management and the investor community. Adjusted income tax expense (see above) divided by Adjusted profit before
taxation (see above).
Adjusted share of results of equity accounted associates and joint ventures This metric is used in the calculation of adjusted effective tax rate. Share of results of equity accounted associates and joint ventures excluding
restructuring costs, amortisation of acquired customer base and brand
intangible assets and other income and expense.
Adjusted share of results of equity accounted associates and joint ventures This metric is used in the calculation of post-tax ROCE (controlled and Share of results of equity accounted associates and joint ventures excluding
used in post-tax ROCE associates/joint ventures). restructuring costs and other income and expense.
Adjusted tax metrics
The table below reconciles profit before taxation and income tax expense to
adjusted profit before taxation, adjusted income tax expense and adjusted
effective tax rate.
H1 FY23 H1 FY22
€m €m
Profit before taxation 1,728 1,276
Adjustments to derive adjusted profit before tax 748 1,123
Adjusted profit before taxation 2,476 2,399
Adjusted share of results of equity accounted associates and joint ventures (463) (248)
Adjusted profit before tax for calculating adjusted effective tax rate 2,013 2,151
Income tax (expense)/credit (485) 1
Tax on adjustments to derive adjusted profit before tax (132) (62)
Adjustments:
- UK corporate interest restriction 35 -
- Tax relating to hyperinflation accounting 55 -
- Deferred tax on use of Luxembourg losses in the year - 155
- Increase in deferred tax assets in the UK as a result of a change in the - (498)
corporate tax rate
- Revaluation of assets for tax purposes in Italy - (274)
Adjusted income tax expense for calculating adjusted tax rate (527) (678)
Adjusted effective tax rate 26.2% 31.5%
Non-GAAP measures
Adjusted share of results of equity accounted associates and joint ventures
The table below reconciles adjusted share of results of equity accounted
associates and joint ventures to the closest GAAP equivalent, share of results
of equity accounted associates and joint ventures.
H1 FY23 H1 FY22
€m €m
Share of results of equity accounted associates and joint ventures 343 111
Restructuring costs 3 11
Adjusted share of results of equity accounted associates and joint ventures 346 122
used in post-tax ROCE
Amortisation of acquired customer base and brand intangible assets 117 126
Adjusted share of results of equity accounted associates and joint ventures 463 248
Additional information
Analysis of depreciation and amortisation
The table below presents an analysis of the different components of
depreciation and amortisation discussed in the document, reconciled to the
GAAP amounts in the consolidated income statement.
H1 FY23 H1 FY22
€m €m
Depreciation on leased assets - included in Adjusted EBITDAaL 2,046 2,003
Depreciation on owned assets 2,869 2,905
Amortisation of owned intangible assets 1,938 2,044
Depreciation and amortisation on owned assets 4,807 4,949
Total depreciation and amortisation on owned and leased assets 6,853 6,952
Loss on disposal of owned fixed assets 11 26
Loss on disposal of leased assets (2) -
Depreciation and amortisation - as recognised in the consolidated income 6,862 6,978
statement
Analysis of tangible and intangible additions
The table below presents an analysis of the different components of tangible
and intangible additions discussed in the document.
H1 FY23 H1 FY22
€m €m
Capital additions 3,541 3,365
Integration related capital additions 101 110
Licence and spectrum additions 193 829
Additions 3,835 4,304
Intangible assets additions 1,316 1,878
Property, plant and equipment owned additions 2,519 2,426
Total additions 3,835 4,304
Definitions
Key terms are defined below. See page 41 for the location of definitions for
non-GAAP measures.
Term Definition
Africa Comprises the Vodacom Group and businesses in Egypt and Ghana.
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 and integration capital expenditure.
Churn Total gross customer disconnections in the period divided by the average total
customers in the period.
Common Functions Comprises central teams and business functions.
Converged customer A customer who receives fixed and mobile services (also known as unified
communications) on a single bill or who receives a discount across both bills.
Depreciation and amortisation The accounting charge that allocates the cost of tangible or intangible
assets, whether owned or leased, to the income statement over its useful life.
The measure includes the profit or loss on disposal of property, plant and
equipment, software and leased assets.
Eliminations Refers to the removal of intercompany transactions to derive the consolidated
financial statements.
Europe Comprises the Group's European businesses and the UK.
Financial services revenue Financial services revenue includes fees generated from the provision of
advanced airtime, overdraft, financing and lending facilities, as well as
merchant payments and the sale of insurance products (e.g. device insurance,
life insurance and funeral cover).
Fixed service revenue Service revenue (see below) relating to the provision of fixed line and
carrier services.
GAAP Generally Accepted Accounting Principles.
IFRS International Financial Reporting Standards.
Incoming revenue Comprises revenue from termination rates for voice and messaging to Vodafone
customers.
Integration capital expenditure Capital expenditure incurred in relation to significant changes in the
operating model, such as the integration of recently acquired subsidiaries.
Internet of Things ('IoT') The network of physical objects embedded with electronics, software, sensors,
and network connectivity, including built-in mobile SIM cards, that enable
these objects to collect data and exchange communications with one another or
a database.
Mobile service revenue Service revenue (see below) relating to the provision of mobile services.
MVNO Mobile Virtual Network Operator: companies that provide mobile phone services
under wholesale contracts with a mobile network operator, but do not have
their own licence or spectrum or the infrastructure required to operate a
network.
Next generation networks ('NGN') Fibre or cable networks typically providing high-speed broadband.
Operating expenses Comprise primarily sales and distribution costs, network and IT related
expenditure and business support costs.
Other Europe Other Europe markets include Portugal, Ireland, Greece, Romania, Czech
Republic, Hungary and Albania.
Other Markets Other Markets comprise Turkey, Egypt and Ghana.
Other revenue Other revenue principally includes equipment revenue, interest income, income
from partner market arrangements and lease revenue, including in respect of
the lease out of passive tower infrastructure.
Reported growth Reported growth is based on amounts reported in euros and determined under
IFRS.
Revenue The total of Service revenue (defined below) and Other revenue (defined
above).
Roaming and Visitor Roaming: allows customers to make calls, send and receive texts and data on
our and other operators' mobile networks, usually while travelling abroad.
Visitor: revenue received from other operators or markets when their customers
roam on one of our markets' networks.
Service revenue Service revenue is all revenue related to the provision of ongoing services to
the Group's consumer and enterprise customers, together with roaming revenue,
revenue from incoming and outgoing network usage by non-Vodafone customers and
interconnect charges for incoming calls.
SME Small and medium sized enterprises.
Vodafone Business Vodafone Business is part of the Group and partners with businesses of every
size to provide a range of business-related services.
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 Speech Mark Devices, Vodacom and Together we
can are trade marks owned by Vodafone. Vantage Towers is a trade mark owned by
Vantage Towers A.G. 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 quarter ended 30 September
2021 unless otherwise stated.
3. References to "Q1", "Q2", "Q3" and "Q4" are to the three months ended
30 June, 30 September, 31 December and 31 March. References to "H1" and "H2"
are to the six month periods ended 30 September and 31 March, respectively.
References to the "year", "financial year" or "FY23" are to the financial year
ending 31 March 2023. References to the "last year", "last financial year" or
"FY22" are to the financial year ended 31 March 2022. References to "H1 FY23"
are to the six month period ended 30 September 2022. References to "H1 FY22"
are to the six month period ended 30 September 2021.
4. Vodacom refers to the Group's interest in Vodacom Group Limited
('Vodacom') as well as its operations, including subsidiaries in South Africa,
DRC, Tanzania, Mozambique and Lesotho.
5. Quarterly historical information is provided in a spreadsheet available
at
https://investors.vodafone.com/reports-information/results-reports-presentations
6. This document contains references to our and our affiliates' websites.
Information on any website is not incorporated into this update and should not
be considered part of this update.
Forward-looking statements and other matters
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 Adjusted EBITDAaL and
Adjusted free cash flow for the financial year ending 31 March 2023; the
Group's sustainable business strategy; the sale of Vodafone Egypt, the
combination of Vodafone UK and Three UK, the purchase of Cabonitel S.A. and
the sale of Vodafone Hungary; expectations for the Group's future performance
generally; expectations regarding the operating environment and market
conditions and trends, including customer usage, competitive position and
macroeconomic pressures, 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; expectations regarding the Group's environmental targets,
expectations regarding the integration or performance of current and future
investments, associates, joint ventures, non-controlled interests and newly
acquired businesses.
Forward-looking statements are sometimes, but not always, identified by their
use of a date in the future or such words as "will", "anticipates", "could",
"may", "should", "expects", "believes", "intends", "plans" 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 and ongoing war
in Ukraine as well as in jurisdictions in which the Group operates, including
as a result of Brexit, and changes to the associated legal, regulatory and tax
environments; inflation; increased competition; increased disintermediation;
levels of investment in network capacity and the Group's ability to deploy new
technologies, products and services; infrastructure competitiveness; 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 extend and expand its spectrum
position to support ongoing growth in customer demand for mobile data
services; 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 or portfolio transformation;
acquisitions and divestment 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; 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 2022. The Annual Report can be found on the
Group's website (https://investors.vodafone.com/reports-information). 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 as 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 © Vodafone Group 2022
-End-
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