REG - Vodafone Group Plc - Half-year Report
14/11/2023 07:15
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RNS Number : 3086T Vodafone Group Plc 14 November 2023
Vodafone Group Plc ⫶ H1 FY24 results
14 November 2023
Initial strategic progress & improved revenue trends
Margherita Della Valle, Group Chief Executive, commented:
"During the first half of the year, we have delivered improved revenue growth
in nearly all of our markets and have returned to growth in Germany in the
second quarter.
Vodafone's transformation is progressing. Our focus on customers and
simplifying our business is beginning to bear fruit, although much more needs
to be done. We have also announced transactions to strengthen our position in
the UK and exit the challenging Spanish market in order to right-size our
portfolio for growth."
Financial results H1 FY24 H1 FY23 Change
Page €m €m %
Group revenue 4 21,937 22,930 (4.3)
Group service revenue 4 18,618 19,207 4.2*
Operating profit(1) 4 1,655 2,968 (44.2)
Adjusted EBITDAaL(2) 4 6,378 7,244 0.3*
(Loss)/profit for the financial period(1) 4 (155) 1,202
Basic (loss)/earnings per share(1) 15 (1.28)c 3.37c
Adjusted basic earnings per share(1,2) 15 3.43c 5.90c
Interim dividend per share 18 4.50c 4.50c
Cash inflow from operating activities 15 5,544 6,280 (11.7)
Adjusted free cash flow(2) 16 (1,474) (513)
Net debt(2) 17 (36,240) (45,523) 20.4
* represents organic growth. See page 2. ǀ 1. H1 FY23 re-presented for
the reclassification of Indus Towers. See page 33. ǀ 2. Non-GAAP measure.
See page 40.
· Group service revenue growth of 4.2%* in H1 FY24, or 2.3%* excluding
Turkey, with both Europe (Q1: 0.4%*, Q2: 1.5%*) and Africa (Q1: 9.0%*, Q2:
9.0%*) growing
· Good improvement in Germany (Q1: -1.3%*, Q2: 1.1%*) and continued
acceleration in Vodafone Business with 4.4%* growth in H1 FY24
· Group revenue decline of 4.3% to €21.9 billion due to adverse foreign
exchange rate movements and the disposal of Vantage Towers, Vodafone Hungary
and Vodafone Ghana in the prior financial year
· Operating profit decrease of 44.2% to €1.7 billion reflecting
business disposals in the prior financial year, adverse foreign exchange rate
movements and lower share of results of associates and joint ventures
· Adjusted EBITDAaL growth of 0.3%* despite a significant increase in
energy costs
· Adjusted free cash outflow of €1.5 billion in the period, reflecting
lower Adjusted EBITDAaL and lower dividends from associates and joint ventures
· Announced merger in the UK and sale of Vodafone Spain as we right-size
Vodafone for growth
· FY24 guidance reiterated with Adjusted EBITDAaL expected to be 'broadly
flat' at around €13.3 billion and Adjusted free cash flow to be 'around'
€3.3 billion
· Interim dividend per share of 4.5 eurocents, record date 24 November
2023
For more information, please contact:
Investor
Relations
Media Relations
Investors.vodafone.com
Vodafone.com/media/contact
ir@vodafone.co.uk
GroupMedia@vodafone.com
Registered Office: Vodafone House, The Connection, Newbury, Berkshire RG14
2FN, England. Registered in England No. 1833679
A webcast Q&A session will be held at 10:00 GMT on 14 November 2023. The
webcast and supporting information can be accessed at investors.vodafone.com
Financial summary
All amounts marked with an '*' in this document represent organic growth which
presents performance on a comparable basis, excluding the impact of foreign
exchange rates, mergers and acquisitions, the hyperinflation adjustment in
Turkey and other adjustments to improve the comparability of results between
periods. Organic growth figures are non-GAAP measures. See non-GAAP measures
on page 40 for more information.
Segmental reporting
From 1 April 2023, the Group revised its segmental reporting by moving
Vodafone Egypt from the Other Markets segment to the Vodacom segment. This is
the effective date on which the Group's reporting structure changed to reflect
the transfer of Vodafone Egypt to the Vodacom Group. All comparatives for
these two segments have been re-presented on the new basis of segmental
reporting. There is no impact on previously reported Group metrics.
Financial performance
Total revenue declined by 4.3% to €21.9 billion (FY23 H1: €22.9 billion)
driven by adverse foreign exchange rate movements and the disposal of Vantage
Towers, Vodafone Hungary and Vodafone Ghana in the prior financial year.
On a reported basis, Adjusted EBITDAaL decreased to €6.4 billion (FY23 H1:
€7.2 billion), with organic growth of 0.3%* despite a significant increase
in energy costs. Adjusted EBITDAaL margin was 0.8* percentage points lower
year-on-year at 29.1%.
Operating profit decreased by 44.2% to €1.7 billion and the Group made a
loss for the period of €0.2 billion (FY23 H1: €1.2 billion profit)
reflecting the disposal of Vantage Towers, Vodafone Hungary and Vodafone Ghana
in the prior financial year, adverse foreign exchange rate movements, and
lower share of results of equity accounted associates and joint ventures in
the current year.
Basic loss per share was 1.28 eurocents, compared to basic earnings per share
of 3.37 eurocents(1) in the prior year period.
Cash flow, funding & capital allocation
Cash inflow from operating activities decreased to €5.5 billion (FY23 H1:
€6.3 billion), reflecting lower operating profit and adverse working capital
movements, which offset lower taxation payments.
Adjusted free cash flow decreased by €1.0 billion to an outflow of €1.5
billion in the period. This reflects a decrease in Adjusted EBITDAaL in the
period, together with lower dividends from associates and joint ventures,
which outweighed lower taxation, lower interest received and paid, and lower
dividends paid to non-controlling shareholders in subsidiaries.
Net debt increased by €2.9 billion to €36.2 billion (€33.4 billion as at
31 March 2023). This was primarily driven by the free cash outflow of €2.0
billion and equity dividends of €1.2 billion.
Current liquidity, which includes cash and equivalents and short-term
investments, is €11.2 billion (€16.0 billion as at 31 March 2023). This
includes €3.8 billion of net collateral which has been posted to Vodafone
from counterparties as a result of positive mark-to-market movements on
derivative instruments (€4.6 billion as at 31 March 2023).
The interim dividend per share is 4.5 eurocents (FY23 H1: 4.5 eurocents). The
ex-dividend date for the interim dividend is 23 November 2023 for ordinary
shareholders, the record date is 24 November 2023 and the dividend is payable
on 2 February 2024.
1. The results for the six months ended 30 September 2022 have been
re-presented to reflect that Indus Towers Limited is no longer reported as
held for sale. There is no impact on previously reported Revenue and Adjusted
EBITDAaL. However, Operating profit has increased by €33 million whilst
Profit before taxation and Profit for the financial period both decreased by
€41 million compared to amounts previously reported. Consequently, Basic
earnings per share decreased by 0.15c and Adjusted basic earnings per share
decreased by 0.12c compared to amounts previously reported. See note 4 'Assets
held for sale' in the unaudited condensed consolidated financial statements
for more information.
Strategic progress
In May 2023, we set out a new roadmap for Vodafone, based on our need to
change and focus on three priorities: Customers, Simplicity and Growth. An
outline of this plan is contained in a video presentation available here:
investors.vodafone.com/results (https://investors.vodafone.com/results) .
During the first half of FY24, we have made early progress in executing this
plan. Highlights include:
Customers
· We introduced a series of new initiatives to improve customer
service, supported by re-allocating €150 million of investment to this area.
Each of our markets is now executing a detailed action plan to eliminate
customer pain points, and we have aligned our incentives to this objective.
· As a result we have seen some early progress in customer
satisfaction, with stable or improving promoter scores in most markets despite
the inflationary environment.
Simplicity
· In H1 we have completed c.2,700 role reductions out of the 11,000
planned over 3 years.
· We have concluded a thorough review of our shared operations, and
are preparing to introduce new MSA structures between markets and shared
operations on a price x quantity x quality model. Our commercialisation of
shared operations will be supported by a new partnership with Accenture.
Growth
· Germany returned to growth, with service revenue in Q2 FY24 of
1.1%*.
· Vodafone Business service revenue continued to accelerate at
4.4%* in H1 FY24, with growth across all customer segments and markets, except
Spain.
· We have taken two significant steps to right-size our portfolio
for growth:
- in June 2023, we announced our merger of Vodafone UK and Three UK; and
- in October 2023, we announced our exit from the Spanish market through
the sale of Vodafone Spain.
A more detailed summary of our progress is contained within an accompanying
presentation and video Q&A available here: investors.vodafone.com/results
(https://investors.vodafone.com/results) .
Outlook
In May 2023, we set out guidance for FY24 for our expectations of Adjusted
EBITDAaL and Adjusted free cash flow, which we still expect to meet.
FY24 guidance
Adjusted EBITDAaL(1,3) 'Broadly flat' at around €13.3 billion
Adjusted free cash flow(1,2,3) 'Around' €3.3 billion
The guidance above reflects the following:
· Foreign exchange rates used when setting guidance were as
follows: EUR 1 : GBP 0.88; EUR 1 : ZAR 19.30; EUR 1 : TRY 21.10; and
EUR 1 : EGP 33.38.
· Our guidance assumes no material change to the structure of the
Group(3).
1. Adjusted EBITDAaL and Adjusted free cash flow are non-GAAP measures. See
page 40 for more information.
2. Adjusted free cash flow is Free cash flow before licences and spectrum,
restructuring costs arising from discrete restructuring plans, integration
capital additions and working capital related items, and M&A.
3. Guidance for FY24 includes Adjusted EBITDAaL and Adjusted free cash flow
for Vodafone Spain for the 12 months ending 31 March 2024. Following the
announcement that Vodafone has entered into a binding sale agreement, in
accordance with IFRS, Vodafone Spain will be reported as a discontinued
operation, with its net result reported as a single line in the Group's income
statement until the completion of the transaction.
Financial performance ⫶ Service revenue growth in both Europe & Africa
· Group service revenue growth of 4.2%* in the first half of FY24, with
both Europe and Africa growing
· Service revenue growth in Turkey of 79.3%* driven by higher
inflation. Group service revenue growth excluding Turkey was 2.3%*
· Group revenue decline of 4.3% to €21.9 billion due to adverse
foreign exchange rate movements and the disposal of Vantage Towers, Vodafone
Hungary and Vodafone Ghana in the prior financial year
· Organic Adjusted EBITDAaL increase of 0.3%* despite a significant
increase in energy costs
· Lower share of results of equity accounted associates and joint
ventures of -€51 million (FY23 H1: €376 million), primarily due to
VodafoneZiggo, reflecting lower adjusted EBITDA, lower gains on derivative
instruments and higher interest expense, and Vantage Towers, due to
amortisation of intangible assets following the completion of the joint
venture
· Operating profit decrease of 44.2% to €1.7 billion reflecting
business disposals in the prior financial year, adverse foreign exchange rate
movements and lower share of results of associates and joint ventures in the
current year
Group financial performance
Re-presented(2)
H1 FY24(1) H1 FY23 Reported
€m €m change %
Revenue 21,937 22,930 (4.3)
- Service revenue 18,618 19,207 (3.1)
- Other revenue 3,319 3,723
Adjusted EBITDAaL(3,4) 6,378 7,244 (12.0)
Restructuring costs (212) (142)
Interest on lease liabilities(5) 281 204
Loss on disposal of property, plant and equipment and intangible assets (22) (11)
Depreciation and amortisation of owned assets (4,626) (4,807)
Share of results of equity accounted associates and joint ventures (51) 376
Impairment reversal 64 -
Other (expense)/income (157) 104
Operating profit 1,655 2,968 (44.2)
Investment income 368 137
Financing costs (1,473) (1,418)
Profit before taxation 550 1,687
Income tax expense (705) (485)
(Loss)/profit for the financial period (155) 1,202
Attributable to:
- Owners of the parent (346) 945
- Non-controlling interests 191 257
(Loss)/profit for the financial period (155) 1,202
Basic (loss)/earnings per share (1.28)c 3.37c
Adjusted basic earnings per share(3) 3.43c 5.90c
Further information is available in a spreadsheet at
investors.vodafone.com/results
Notes:
1. The H1 FY24 results reflect average foreign exchange rates of
€1:£0.86, €1:INR 89.71, €1:ZAR 20.29, €1:TRY 25.99 and €1:EGP
33.64.
2. The results for the six months ended 30 September 2022 have been
re-presented to reflect that Indus Towers Limited is no longer reported as
held for sale. There is no impact on previously reported Revenue and Adjusted
EBITDAaL. However, Operating profit has increased by €33 million whilst
Profit before taxation and Profit for the financial period both decreased by
€41 million compared to amounts previously reported. Consequently, Basic
earnings per share decreased by 0.15c and Adjusted basic earnings per share
decreased by 0.12c compared to amounts previously reported. See note 4 'Assets
held for sale' in the unaudited condensed consolidated financial statements
for more information.
3. Adjusted EBITDAaL and Adjusted basic earnings per share are non-GAAP
measures. See page 40 for more information.
4. Includes depreciation on leased assets of €2,157 million (H1 FY23:
€2,046 million).
5. 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 Common Elimi-
Germany Italy UK Spain Europe Vodacom Markets Functions nations Group
H1 FY24 €m €m €m €m €m €m €m €m €m €m
Total revenue 6,405 2,320 3,377 1,929 2,679 3,590 1,128 721 (212) 21,937
Service revenue 5,722 2,098 2,822 1,731 2,366 2,924 828 282 (155) 18,618
Adjusted EBITDAaL(1) 2,527 645 640 394 766 1,241 254 (89) - 6,378
Adjusted EBITDAaL margin (%)(1) 39.5% 27.8% 19.0% 20.4% 28.6% 34.6% 22.5% 29.1%
Downloadable performance information is available at:
investors.vodafone.com/results
FY23 FY24
Organic service revenue growth %*(1) Q1 Q2 H1 Q3 Q4 H2 Total Q1 Q2 H1
Germany (0.5) (1.1) (0.8) (1.8) (2.8) (2.3) (1.6) (1.3) 1.1 (0.1)
Italy (2.3) (3.4) (2.8) (3.3) (2.7) (3.0) (2.9) (1.6) (1.0) (1.3)
UK 6.5 6.9 6.7 5.3 3.8 4.6 5.6 5.7 5.5 5.6
Spain (3.0) (6.0) (4.5) (8.7) (3.7) (6.2) (5.4) (3.0) (2.7) (2.8)
Other Europe 2.5 2.9 2.7 2.1 3.6 2.8 2.8 4.1 3.8 3.9
Vodacom(2) 6.9 8.3 7.6 8.0 7.0 7.5 7.5 9.0 9.0 9.0
Other Markets(2) 32.3 39.7 36.0 48.8 54.9 51.7 43.5 74.1 85.0 79.3
Group 2.5 2.5 2.5 1.8 1.9 1.8 2.2 3.7 4.7 4.2
Notes:
1. Organic service revenue growth, Group Adjusted EBITDAaL and Group
Adjusted EBITDAaL margin are non-GAAP measures. See page 40 for more
information.
2. Organic service revenue growth metrics for FY23 have been re-presented
for the Other Markets and Vodacom segments to reflect the move of Vodafone
Egypt from the Other Markets segment to the Vodacom segment. This is no impact
on previously reported Group metrics.
Germany ⫶ 31% of Group service revenue
H1 FY24 H1 FY23 Reported Organic
€m €m change % change %*
Total revenue 6,405 6,592 (2.8)
- Service revenue 5,722 5,730 (0.1) (0.1)
- Other revenue 683 862
Adjusted EBITDAaL 2,527 2,677 (5.6) (5.6)
Adjusted EBITDAaL margin 39.5% 40.6%
Total revenue decreased by 2.8% to €6.4 billion, driven by lower equipment
revenue.
On an organic basis, service revenue was broadly stable at -0.1%* (Q1: -1.3%*,
Q2: 1.1%*) as the contribution from higher broadband and mobile ARPU was
offset by the cumulative impact of customer losses, and a reduction in mobile
termination rates. In Q2, both fixed and mobile service revenue returned to
growth, benefiting from our broadband price increases and higher mobile ARPU.
Fixed service revenue increased by 0.3%* (Q1: -0.9%*, Q2: 1.4%*), as broadband
ARPU growth offset the impact of a lower broadband and TV customer base. Q2
service revenue returned to growth, supported by our broadband base price
increases, which started to take effect in May. This impacted our commercial
performance, as expected, and we lost 157,000 cable broadband customers and
97,000 DSL customers in H1, reflecting anticipated price increase driven
disconnections. The performance of our hybrid fibre cable gigabit network
continued to improve. We achieved strong results in all four major independent
network tests from Connect, CHIP, Computer BILD and nPerf. Gigabit speeds are
now available to over 24 million households across our hybrid fibre cable
network.
Our TV customer base declined by 213,000 and our converged customer base
increased by 36,000 to 2.3 million Consumer converged accounts. Ahead of
changes to German TV laws, which take effect from July 2024 and end the
practise of bulk TV contracting in Multi Dwelling Units ('MDUs'), we continue
to progress preparations to manage this transition. We have performed three
trials to re-contract customers, with a success rate of 35-65%. In total, we
have 8.5 million MDU TV customers, and they generate around €800 million in
basic-TV revenue.
Mobile service revenue declined by 0.6%* (Q1: -1.9%*, Q2: 0.7%*) reflecting a
lower customer base and a reduction in mobile termination rates, partially
offset by higher ARPU. Q2 service revenue returned to growth, supported by
higher non-recurring payments from service providers and higher roaming and
visitor revenue. We added 93,000 contract customers in the period driven by an
improved Vodafone branded performance. As part of our ongoing commercial
repositioning, we launched refreshed, fully flexible 'FamilyCard' plans.
Vodafone Business service revenue increased by 0.5%* (Q1: 0.0%*, Q2: 1.0%*)
during the period, largely due to growth in the 'SoHo' customer segment, which
was supported by higher fixed line ARPU, and good demand for our Cloud and
Security services. We added 4.3 million IoT connections in the period, driven
by strong demand from the automotive sector. In August, we launched 'Vodafone
Zscaler Security Service', a secure access gateway solution which utilises the
Cloud platform to deliver a safe and productive environment, specifically
designed for small and medium enterprise customers. In November, we announced
a new agreement with BASF, a leading global chemical manufacturing company. We
will become a key partner for the operations and maintenance of their
industrial private 5G networks globally, with the first being their production
site in Germany.
Adjusted EBITDAaL declined by 5.6%*, reflecting a 4.3 percentage points impact
from higher energy costs, as well as higher wage and inflation-indexed lease
costs. The Adjusted EBITDAaL margin was 1.2* percentage points lower
year-on-year at 39.5%.
In September 2023, our fibre-to-the-home ('FTTH') joint venture started its
network rollout in the city of Neuss. This partnership, which will deploy FTTH
to up to seven million homes over a six-year period, is complementary to our
upgrade plans for our existing hybrid fibre cable network.
UK ⫶ 15% of Group service revenue
H1 FY24 H1 FY23 Reported Organic
€m €m change % change %*
Total revenue 3,377 3,392 (0.4)
- Service revenue 2,822 2,712 4.1 5.6
- Other revenue 555 680
Adjusted EBITDAaL 640 685 (6.6) (5.3)
Adjusted EBITDAaL margin 19.0% 20.2%
Total revenue declined by 0.4% to €3.4 billion, as service revenue growth
was largely offset by a decline in equipment revenue and the depreciation of
the pound sterling against the euro.
On an organic basis, service revenue increased by 5.6%* (Q1: 5.7%*, Q2:
5.5%*). This was driven by continued strong growth in Consumer, and an
acceleration in Business growth, partially offset by lower wholesale MVNO
revenue.
Mobile service revenue grew by 6.2%* (Q1: 6.4%*, Q2: 6.1%*), driven by a
higher average customer base and annual price increases in Consumer, good
growth in Business and higher roaming revenue. Our contract customer base was
impacted by the one-off disconnections of 179,000 zero-ARPU legacy SIMs during
the period. Excluding these, our contract customer base declined by 49,000
(Q1: -66,000, Q2: 17,000) due to retail price increases implemented in a
competitive environment, particularly from MVNOs. Consumer contract churn
improved by 0.4 percentage points year-on-year to 12.1%, despite implementing
annual contractual price increase during the period. Our digital prepaid
sub-brand 'VOXI' continued to grow, with 72,000 customers added during the
period.
Fixed service revenue grew by 3.8%* (Q1: 3.7%*, Q2: 3.9%*) with strong growth
in Consumer. Our broadband customer base increased by 69,000 during the period
and we now have 1.3 million customers. Through our partnerships with CityFibre
and Openreach we can now reach 13.2 million households with full fibre
broadband, more than any other provider in the UK.
Vodafone Business service revenue increased by 3.8%* (Q1: 4.4%*, Q2: 3.2%*) in
the first half, supported by strong growth in mobile driven by 'SME' and
Corporate customer segments. This was partially offset by a stable fixed line
performance due to customer and product lifecycle churn. In August, we
announced our partnership with Data Communications Company, providing
connectivity for Britain's smart meter network. Through our 4G managed IoT
connectivity, we will help customers reduce their energy consumption.
Adjusted EBITDAaL declined by 5.3%*, of which 3.3 percentage points was due to
higher energy costs. Excluding this impact, Adjusted EBITDAaL declined, as
good underlying service revenue growth was offset by the complete migration of
the Virgin Media MVNO off our network. The Adjusted EBITDAaL margin declined
1.2* percentage points year-on-year at 19.0%.
In June 2023, we announced a binding agreement to combine our UK business with
Three UK to create a sustainable, and competitive third scaled network
operator in the UK. Following the merger, which we expect to close before the
end of calendar 2024, Vodafone will own 51% of the combined business and CK
Hutchison 49%. This combination will provide customers with greater choice and
more value, drive greater competition, and enable increased investment with a
clear £11 billion plan to create one of Europe's most advanced standalone 5G
networks. Full details of the transaction can be found here:
investors.vodafone.com/merger-of-vodafone-uk-and-three-uk
(https://investors.vodafone.com/merger-of-vodafone-uk-and-three-uk)
Italy ⫶ 11% of Group service revenue
H1 FY24 H1 FY23 Reported Organic
€m €m change % change %*
Total revenue 2,320 2,377 (2.4)
- Service revenue 2,098 2,125 (1.3) (1.3)
- Other revenue 222 252
Adjusted EBITDAaL 645 759 (15.0) (15.0)
Adjusted EBITDAaL margin 27.8% 31.9%
Total revenue declined 2.4% to €2.3 billion due to lower service revenue and
equipment revenue.
Service revenue declined by 1.3%* (Q1 -1.6%*, Q2: -1.0%*), as a result of
continued price pressure in the value segment, partly offset by strong
Business demand for fixed line connectivity and digital services. The
improvement in quarterly trends was supported by seasonally higher mobile
roaming and visitor revenue.
Mobile service revenue declined by 5.1%* (Q1: -5.8%*, Q2: -4.4%*). Price
competition in the mobile value segment remained intense during the period.
The quarter-on-quarter improvement reflected roaming and visitor revenue
growth during the summer period, as well as our pricing actions. Our second
brand 'ho.' continued to grow, with 117,000 net additions, and now has 3.1
million customers. In October, we agreed an extension to our wholesale MVNO
agreement with PostePay until the end of 2028.
Fixed service revenue increased by 8.0%* (Q1: 8.7%*, Q2: 7.3%*) driven by good
Business demand for connectivity and digital services, including strong take
up in the Business voucher programme, an initiative related to the EU Recovery
and Resilience Facility ('ERF') that subsidises high-speed broadband
connectivity. Our broadband customer base declined by 46,000 during the
period, reflecting the impact of new market entrants, but we added 26,000
fixed-wireless access ('FWA') customers, which are reported in our mobile
customer base.
Our next generation network ('NGN') broadband services are now available to
23.6 million households, including 9.0 million through our own network and our
partnership with Open Fiber. This is complemented by our fixed-wireless access
services which now cover 3.9 million households via 5G FWA and 1.5 million
households via 4G FWA.
Vodafone Business grew by 8.4%* (Q1: 9.4%*, Q2: 7.5%*) during the period,
driven by further acceleration in fixed service revenue, supported by good
demand for both our connectivity and digital services. We recently announced
that Vodafone will provide hybrid 5G Mobile Private Network infrastructure to
SNAM, one of Europe's largest natural gas transportation companies, with
dedicated coverage enabling innovative solutions for the energy transition in
Italy.
Adjusted EBITDAaL declined by 15.0%* including a 10.1 percentage point impact
due to higher energy costs. Adjusted EBITDAaL growth was also impacted by
lower mobile service revenue and other inflationary costs, partially offset by
our continued strong focus on cost control. The Adjusted EBITDAaL margin was
4.1* percentage points lower year-on-year at 27.8%.
Spain ⫶ 9% of Group service revenue
H1 FY24 H1 FY23 Reported Organic
€m €m change % change %*
Total revenue 1,929 1,965 (1.8)
- Service revenue 1,731 1,782 (2.9) (2.8)
- Other revenue 198 183
Adjusted EBITDAaL 394 445 (11.5) (11.6)
Adjusted EBITDAaL margin 20.4% 22.6%
Total revenue declined by 1.8% to €1.9 billion due to lower service revenue.
On an organic basis, service revenue declined by 2.8%* (Q1: -3.0%*, Q2:
-2.7%*) driven by a lower customer base, continued price competition in the
Consumer value segment and a reduction in mobile termination rates. This was
partially offset by the positive contribution from inflation-linked price
increases and good demand for our Business digital services. The acceleration
in quarterly trends was further supported by the improvement in our commercial
performance.
In mobile, our contract customer base declined by 9,000 during the period,
reflecting higher disconnections in Q1, following our implementation of
inflation-linked price increases in January. Our net additions improved in Q2,
supported by strong growth in the reseller segment due to non-recurring
customer acquisitions, our commercial actions to strengthen the Vodafone brand
and lower churn following the completion of our price actions. Contract churn
improved by 1.7 percentage points year-on-year during the period to 18.2%.
Our broadband customer base declined by 85,000 and our TV customer base
decreased by 49,000 due to intense price competition in the value segment. Our
converged customer base remained broadly stable at 2.1 million. At the
beginning of Q1, we closed 15% of our retail stores and chose not to renew
several dealership channel contracts in order to increase our distribution
efficiency.
Vodafone Business service revenue declined by 2.0%* (Q1: -2.8%*, Q2: -1.2%*)
during the period, as good growth in digital services and public sector
contract wins were offset by declining mobile connectivity revenue, due to
price competition in the 'SoHo' customer segment.
Adjusted EBITDAaL declined by 11.6%*, which reflects a 4.1 percentage point
impact from one-off tax benefits in the prior year and a 2.9 percentage point
impact from higher energy costs.
On 31 October 2023, we announced that Vodafone has entered into binding
agreements with Zegona Communications plc in relation to the sale of 100% of
Vodafone Spain. On completion, which is expected to take place in the first
half of 2024, Vodafone's consideration will comprise at least €4.1 billion
in cash and up to €0.9 billion in the form of Redeemable Preference Shares,
which redeem no later than six years after closing. The enterprise value of
€5.0 billion is equivalent to a multiple of 5.3x Adjusted EBITDAaL and 12.7x
OpFCF for the 12-month period ended 31 March 2023. Full details of the
transaction can be found here: investors.vodafone.com/sale-of-vodafone-spain
(https://investors.vodafone.com/sale-of-vodafone-spain) .
Other Europe ⫶ 13% of Group service revenue
H1 FY24 H1 FY23(1) Reported Organic
€m €m change % change %*
Total revenue 2,679 2,894 (7.4)
- Service revenue 2,366 2,552 (7.3) 3.9
- Other revenue 313 342
Adjusted EBITDAaL 766 843 (9.1) 0.7
Adjusted EBITDAaL margin 28.6% 29.1%
Note:
1. Comparatives include the results of Vodafone Hungary. As previously
reported, Vodafone Hungary was sold in January 2023.
Total revenue declined by 7.4% to €2.7 billion, reflecting the disposal of
Vodafone Hungary in the prior year.
On an organic basis, service revenue increased by 3.9%* (Q1: 4.1%*, Q2:
3.8%*), with all six markets growing during the period, supported by our price
actions in most markets.
In Portugal, both the Consumer and Business segments continued to perform
well, with a further acceleration in service revenue growth, supported by
inflation-linked contractual price increases implemented in March 2023. We
added 80,000 mobile contract customers and 21,000 fixed broadband customer
during the period. In 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.
In Ireland, service revenue increased, driven by good commercial momentum and
a higher average customer base, and supported by our annual contractual price
increases. We added 10,000 mobile contract customers during the period.
Through our fixed wholesale network access partnerships, we now cover over 1
million households with FTTH.
Service revenue in Greece grew, reflecting good growth in our Business fixed
segment, supported by public sector demand. During the period we added 78,000
mobile contract customers, and our broadband customer base declined by 6,000.
Vodafone Business service revenue increased by 5.8%* (Q1: 6.4%*, Q2: 5.2%*)
during the period, with growth in both connectivity and digital services,
including IoT and SD-WAN solutions. Growth in connectivity was supported by a
higher customer base, price increases in the 'SoHo' and 'SME' customer
segments across markets, and public sector contract wins in Greece and
Romania.
Adjusted EBITDAaL grew by 0.7%*, as service revenue growth and ongoing cost
efficiencies offset the impact from higher energy costs. The Adjusted EBITDAaL
margin decreased by 1.0* percentage points year-on-year at 28.6%.
Vodacom ⫶ 16% of Group service revenue
Re-presented(1)
H1 FY24 H1 FY23 Reported Organic
€m €m change % change %*
Total revenue 3,590 4,179 (14.1)
- Service revenue 2,924 3,422 (14.6) 9.0
- Other revenue 666 757
Adjusted EBITDAaL 1,241 1,527 (18.7) 4.9
Adjusted EBITDAaL margin 34.6% 36.5%
Note:
1. Comparative metrics for H1 FY23 have been re-presented to reflect the
move of Vodafone Egypt from the Other Markets segment to the Vodacom segment
from 1 April 2023.
Total revenue declined by 14.1% to €3.6 billion due to the depreciation of
local currencies versus the euro.
On an organic basis, Vodacom's service revenue grew by 9.0%* (Q1: 9.0%*, Q2:
9.0%*) with growth in South Africa, Egypt and Vodacom's international markets.
The stable quarterly trend reflected an acceleration in South Africa, from
strong prepaid revenue growth, offset by a slowdown in the international
markets due to macroeconomic pressures.
In South Africa, service revenue growth was driven by the Consumer mobile
segment, which benefited from price increases, a higher prepaid customer base,
and good fixed line growth. We added 2.2 million mobile prepaid customers in
the period, supported by our Big Data led customer value management
capabilities which offer personalised bundles to customers. Across our active
customer base, 74.2% of our mobile customers now use data services, an
increase of 2.0 million year-on-year. Financial Services revenue grew by
10.8%* to €77 million, supported by growth in our insurance services. Our
'VodaPay' super-app has continued to gain traction with 4.1 million registered
users.
Service revenue in Egypt continued to grow strongly, reflecting increased data
usage, good commercial momentum with our financial services product, 'Vodafone
Cash', which now has 6.7 million active users, and our refreshed 'Vodafone
Flex' proposition offering customers flexible in-bundle content options.
During the period, we added 184,000 contract customers and 1.3 million prepaid
mobile customers.
In Vodacom's international markets, service revenue growth was supported by an
increase in data revenue, a higher customer base, and M-Pesa growth. Growth
slowed in Q2, due to price competition in Mozambique, and macroeconomic
pressures in the DRC. M-Pesa revenue grew by 13.8%* and now represents 26.3%
of service revenue. We now have 53.7 million mobile customers, with 62.5% of
active customers using data services.
Vodacom's Adjusted EBITDAaL increased by 4.9%*, supported by service revenue
growth and cost initiatives, partially offset by an increase in payroll and
technology operating expenses as we continued to improve the resilience of our
network in South Africa. The Adjusted EBITDAaL margin decreased by 1.2*
percentage points to 34.6%.
Further information on our operations in Africa can be accessed here:
vodacom.com (https://vodacom.com) .
Other Markets(1) ⫶ 4% of Group service revenue
Re-presented(2)
H1 FY24 H1 FY23 Reported Organic
€m €m change % change %*
Total revenue 1,128 976 15.6
- Service revenue 828 771 7.4 79.3
- Other revenue 300 205
Adjusted EBITDAaL 254 228 11.4 89.1
Adjusted EBITDAaL margin 22.5% 23.4%
Notes:
1. The Other Markets segment only includes Vodafone Turkey in FY24. The
comparatives include the results of Vodafone Ghana which, as previously
reported, was sold in February 2023.
2. The comparatives for H1 FY23 have been re-presented to reflect the move
of Vodafone Egypt from the Other Markets segment to the Vodacom segment from 1
April 2023.
Total revenue increased by 15.6% to €1.1 billion, with strong service
revenue growth offset by significant currency devaluation.
On an organic basis, service revenue in Turkey grew by 79.3%* (Q1: 74.1%*, Q2:
85.0%), and despite material currency devaluation, also increased in euro
terms in H1. This was driven by continued customer base growth and ongoing
repricing actions to reflect the high inflationary environment. We maintained
our good commercial momentum, adding 688,000 mobile contract customers during
the period, including migrations of prepaid customers.
Adjusted EBITDAaL in Turkey increased by 89.1%* despite significant
inflationary pressure on our cost base, and grew in euro terms during the
period. The Adjusted EBITDAaL margin increased by 0.1* percentage points
year-on-year at 22.5%.
Hyperinflationary accounting in Turkey
Turkey was designated as a hyperinflationary economy on 1 April 2022 in line
with IAS 29 'Financial Reporting in Hyperinflationary Economies'. See note 1
'Basis of preparation' in the condensed consolidated financial statements for
further information.
Organic growth metrics exclude the impact of the hyperinflation adjustment in
the period in Turkey. Group service revenue growth excluding Turkey was 2.3%*
(Q1: 1.8%*, Q2: 2.8%*) and Adjusted EBITDAaL excluding Turkey declined by
2.0%*.
Associates and joint ventures
Re-presented(1)
H1 FY24 H1 FY23
€m €m
Vantage Towers (Oak Holdings 1 GmbH) (78) -
VodafoneZiggo Group Holding B.V. (78) 162
Safaricom Limited 89 110
Indus Towers Limited 62 33
Other(2) (including TPG Telecom Limited) (46) 71
Share of results of equity accounted associates and joint ventures (51) 376
Notes:
1. The results for the six months ended 30 September 2022 have been
re-presented to reflect that Indus Towers Limited is no longer reported as
held for sale. The share of results from Indus Towers Limited has increased to
€33 million compared to €nil as previously reported. See note 4 'Assets
held for sale' in the unaudited condensed consolidated financial statements
for more information.
2. The Group's investment in Vodafone Idea Limited ('VIL') was reduced to
€nil in the year ended 31 March 2020 and the Group has not recorded any
profit or loss in respect of its share of VIL's results since that date.
Vantage Towers (Oak Holdings 1 GmbH Joint Venture)
On 23 March 2023, we announced the completion of Oak Holdings GmbH, our
co-control partnership for Vantage Towers with a consortium of long-term
infrastructure investors led by Global Infrastructure Partners and KKR. We
received initial net proceeds of €4.9 billion in March 2023, and a further
€500 million in July 2023, taking total net proceeds to €5.4 billion and
the Consortium's ownership in Oak Holdings GmbH to 40%. We agreed a further
six-month window for the Consortium to acquire additional shares in Oak
Holdings at the same price, up to a maximum of 50% ownership, by the end of
2023.
Total revenue increased 7.2% to €561 million in H1 FY24, driven by 920 new
tenancies and new macro sites. As a result, the tenancy ratio increased to
1.48x. Adjusted EBITDAaL increased by 3.7%* to €283 million, driven by
revenue growth, partly offset by increased operating expenses and higher
ground lease expenses.
Vodafone's share of results in H1 FY24 reflects the amortisation of intangible
assets arising from the completion of the co-control partnership for Vantage
Towers.
See note 2 'Segmental analysis' in the condensed consolidated financial
statements for more information.
VodafoneZiggo Joint Venture (Netherlands)
The results of VodafoneZiggo, in which Vodafone owns a 50% stake, are prepared
under US GAAP, which is broadly consistent with Vodafone's IFRS basis of
reporting.
Total revenue remained broadly stable at €2.0 billion, as contractual price
increases and mobile contract customer growth were offset by a decline in the
fixed customer base and lower handset sales.
During the period, VodafoneZiggo added 67,000 mobile contract customers,
supported by best-in-class net promoter score. VodafoneZiggo's broadband
customer base declined by 65,000 customers to 3.2 million due to price
increases, and continued competitive environment. The number of converged
households remained stable with 47.5% of broadband customers now converged,
delivering significant NPS and customer loyalty benefits. VodafoneZiggo now
offers gigabit speeds to 7.5 million homes, providing nationwide coverage.
Vodafone's lower share of results in H1 FY24 was largely due to lower adjusted
EBITDA, lower gains on derivative financial instruments and higher third-party
interest expenses.
During the period, Vodafone received €26 million in interest payments from
the joint venture.
Safaricom Associate (Kenya)
Safaricom service revenue declined to €1.0 billion, as the benefits of
strong mobile data growth and higher customer base were offset by the
devaluation of local currency.
Vodafone's lower share of results was due to the depreciation of the Kenyan
shilling versus the euro.
During the period, Vodafone received €63 million in dividends from
Safaricom.
Net financing costs
Re-presented(1)
H1 FY24 H1 FY23 Reported
€m €m change %
Investment income 368 137
Financing costs (1,473) (1,418)
Net financing costs (1,105) (1,281) 13.7
Adjustments for:
Mark-to-market losses 141 41
Foreign exchange losses 90 299
Adjusted net financing costs(2) (874) (941) 7.1
Notes:
1. The results for the six months ended 30 September 2022 have been
re-presented to reflect that Indus Towers Limited is no longer reported as
held for sale. Consequently, Investment income decreased by €74 million
compared to €211 million as previously reported. See note 4 'Assets held for
sale' in the unaudited condensed consolidated financial statements for more
information.
2. Adjusted net financing costs is a non-GAAP measure. See page 40 for more
information.
Net financing costs decreased by €176 million, primarily due to
non-recurring foreign exchange losses in the prior period on intercompany
funding arrangements with Vodafone Ghana and Vodafone Hungary partially offset
by a mark-to-market loss recognised in the current period on the revaluation
of the embedded derivative option linked to the Group's bank borrowings
secured against Indian assets.
Adjusted net financing costs decreased by €67 million, reflecting both a
decrease in average net debt balances and higher returns on cash and
short-term investments.
Taxation
Re-presented(1)
H1 FY24 H1 FY23 Change
% % pps
Effective tax rate 128.2% 28.7% 99.5
Adjusted effective tax rate(2) 30.3% 27.2% 3.1
Notes:
1. The results for the six months ended 30 September 2022 have been
re-presented to reflect that Indus Towers is no longer reported as held for
sale. Consequently, the Effective tax rate increased by 0.6pps compared to
28.1% as previously reported. Similarly, the Adjusted effective tax rate
increased by 1.0pps compared to 26.2% as previously reported. See note 4
'Assets held for sale' in the unaudited condensed consolidated financial
statements for more information.
2. Adjusted effective tax rate is a non-GAAP measure. See page 40 for more
information.
The Group's Effective tax rate for H1 FY24 was 128.2%.
The Group's Adjusted effective tax rate for H1 FY24 was 30.3% (H1 FY23:
27.2%). This is higher than our expectations for the full year tax rate, which
we continue to expect to be in the high 20%s and is mainly due to a €78
million tax charge arising on proceeds received as part of the Vantage Towers
transaction carried out in H1 FY24.
The Effective tax rate for H1 FY24 includes €250 million relating to the use
of prior year losses in Luxembourg, an increase in deferred tax assets in
Turkey of €28 million following the rise in the corporate tax rate to 25%
(previously 20%) as well as the Vantage Towers transaction mentioned above.
The Effective tax rate for H1 FY23 did not include these amounts. H1 FY24 also
includes a €121 million charge as an effect of hyper-inflation accounting
policies in Turkey (H1 FY23: €55 million).
Earnings per share
Re-presented(1) Reported
H1 FY24 H1 FY23 change
eurocents eurocents eurocents
Basic (loss)/earnings per share (1.28)c 3.37c (4.65)c
Adjusted basic earnings per share(2) 3.43c 5.90c (2.47)c
Notes:
1. The results for the six months ended 30 September 2022 have been
re-presented to reflect that Indus Towers Limited is no longer reported as
held for sale. Consequently, basic earnings per share decreased by 0.15c
compared to 3.52c as previously reported. Adjusted basic earnings per share
decreased by 0.12c compared to 6.02c as previously reported. See note 4
'Assets held for sale' in the unaudited condensed consolidated financial
statements for more information.
2. Adjusted basic earnings per share is a non-GAAP measure. See page 40 for
more information.
Basic loss per share was 1.28 eurocents, compared to basic earnings per share
of 3.37 eurocents for H1 FY23, principally due to lower Operating profit.
Adjusted basic earnings per share was 3.43 eurocents, compared to 5.90
eurocents for H1 FY23, principally due to lower Adjusted EBITDAaL.
Cash flow, capital allocation and funding
Analysis of cash flow
H1 FY24 H1 FY23 Reported
€m €m change %
Inflow from operating activities 5,544 6,280 (11.7)
Outflow from investing activities (3,808) (4,089) 6.9
Outflow from financing activities (6,378) (2,993) (113.1)
Net cash outflow (4,642) (802) (478.8)
Cash and cash equivalents at beginning of the financial period 11,628 7,371
Exchange gain on cash and cash equivalents 45 282
Cash and cash equivalents at end of the financial period 7,031 6,851
Cash inflow from operating activities decreased to €5,544 million reflecting
lower operating profit and adverse working capital movements, which offset
lower taxation payments.
Outflow from investing activities decreased by 6.9% to €3,808 million,
primarily in relation to lower spend on property, plant and equipment and
proceeds from the sale of 3.9% of Oak Holdings 1 GmbH in the period, which
outweighed lower dividends received from associates and joint ventures and a
higher net outflow in respect of short-term investments. 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 increased by 113.1% to €6,378 million.
Lower inflows from the net movement in short-term borrowings arising from
collateral receipts outweighed higher proceeds from the issue of long-term
borrowings and lower outflows in relation to the purchase of treasury shares.
Analysis of cash flow (continued)
H1 FY24 H1 FY23 Reported
€m €m change %
Adjusted EBITDAaL(1) 6,378 7,244 (12.0)
Capital additions(2) (3,365) (3,541)
Working capital (3,378) (3,405)
Disposal of property, plant and equipment and intangible assets 12 -
Integration capital additions (66) (101)
Restructuring costs including working capital movements(3) (238) (214)
Licences and spectrum (173) (2,181)
Interest received and paid(4) (560) (688)
Taxation (472) (672)
Dividends received from associates and joint ventures 75 463
Dividends paid to non-controlling shareholders in subsidiaries (167) (290)
Other 3 140
Free cash flow(1) (1,951) (3,245) 39.9
Acquisitions and disposals 266 (98)
Equity dividends paid (1,210) (1,263)
Share buybacks(4) - (1,004)
Foreign exchange gain/(loss) 14 (65)
Other movements in net debt(5) 16 1,730
Net debt increase(1) (2,865) (3,945)
Opening net debt(1) (33,375) (41,578)
Closing net debt(1) (36,240) (45,523) 20.4
Free cash flow(1) (1,951) (3,245)
Adjustments:
- Licences and spectrum 173 2,181
- Restructuring costs including working capital movements(3) 238 214
- Integration capital additions 66 101
- Vantage Towers growth capital expenditure - 236
Adjusted free cash flow(1) (1,474) (513)
Notes:
1. Adjusted EBITDAaL, Free cash flow, Adjusted free cash flow and Net debt
are non-GAAP measures. See page 40 for more information.
2. See page 52 for an analysis of tangible and intangible additions in the
year.
3. Includes working capital in respect of integration capital additions.
4. Interest received and paid excludes €246 million outflow (H1 FY23:
€153 million) in relation to the cash portion of interest on lease
liabilities included within Adjusted EBITDAaL, €nil million of cash outflow
(H1 FY23: €58 million) of interest arising from the repayment of debt in
respect of licenses and spectrum and €nil million of cash inflow (H1 FY23:
€86 million) from the option structures relating to the issue of the
mandatory convertible bonds which is included within Share buybacks. The share
buyback programmes completed on 15 March 2023.
5. 'Other movements on net debt' for H1 FY24 includes mark-to-market losses
recognised in the income statement of €141 million (H1 FY23: €127 million
loss), together with €nil million (H1 FY23: €1,739 million) for the
repayment of debt in relation to licenses and spectrum in Italy.
Adjusted free cash flow decreased by €961 million to an outflow of €1,474
million in the period. This reflects a decrease in Adjusted EBITDAaL in the
period, together with lower dividends from associates and joint ventures,
which outweighed lower taxation, lower interest received and paid and lower
dividends paid to non-controlling shareholders in subsidiaries.
Acquisitions and disposals includes €500 million in relation to the disposal
of 3.9% of Oak Holdings 1 GmbH in the period.
Borrowings and cash position
H1 FY24 Year-end FY23 Reported
€m €m change %
Non-current borrowings (52,717) (51,669)
Current borrowings (12,341) (14,721)
Borrowings (65,058) (66,390)
Cash and cash equivalents 7,148 11,705
Borrowings less cash and cash equivalents (57,910) (54,685) (5.9)
Borrowings principally includes bonds of €43,316 million (€44,116 million
as at 31 March 2023), lease liabilities of €13,039 million (€13,364
million as at 31 March 2023), cash collateral liabilities of €4,431 million
(€4,886 million as at 31 March 2023) and €1,597 million (€1,485 million
as at 31 March 2023) of bank borrowings that are secured against the Group's
shareholdings in Indus Towers and Vodafone Idea.
The decrease in borrowings of €1,332 million was principally driven by
repayment of bonds of €2,744 million and a decrease in collateral
liabilities of €455 million offset by the issuance of long-term bonds of
€1,314 million and adverse foreign exchange movements on bonds of €607
million.
Funding position
H1 FY24 Year-end FY23 Reported
€m €m change %
Bonds (43,316) (44,116)
Bank loans (968) (795)
Other borrowings including spectrum (1,707) (1,744)
Gross debt(1) (45,991) (46,655) 1.4
Cash and cash equivalents 7,148 11,705
Short-term investments(2) 4,094 4,305
Derivative financial instruments(3) 2,291 1,917
Net collateral liabilities(4) (3,782) (4,647)
Net debt(1) (36,240) (33,375) (8.6)
Notes:
1. Gross debt and Net debt are non-GAAP measures. See page 40 for more
information.
2. Short-term investments includes €1,911 million (€1,338 million as at
31 March 2023) of highly liquid government and government-backed securities
and managed investment funds of €2,183 million (€2,967 million as at 31
March 2023) 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 €1,190 million gain (€2,785 million gain as at 31
March 2023).
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 €2,865 million to €36,240 million. This was driven
by the free cash outflow of €1,952 million and equity dividends of €1,210
million.
Other funding considerations include:
H1 FY24 Year-end FY23
€m €m
Lease liabilities (13,039) (13,364)
Financial liabilities under put options (KDG minority interests) (493) (485)
Net pension fund liabilities (235) (258)
Guarantees over loan issued by Australia joint venture (1,653) (1,611)
Equity characteristic of 50% attributed by credit rating agencies to 'Hybrid 4,497 4,971
bonds' included in net debt of €8,993 million (€9,942 million as at 31
March 2023)(1)
Note:
1. Balance as at 30 September 2023 excludes any equity characteristic for
Hybrid bonds included in net debt of €438 million that are expected to be
repaid during H2 FY24. The Group subsequently announced on 7 November 2023
that it will repay these securities on 3 January 2024.
The Group's gross and net debt includes certain bonds which have been
designated in hedge relationships, which are carried at €1,317 million
higher value (€1,282 million higher as at 31 March 2023) than their euro
equivalent redemption value. In addition, where bonds are issued in currencies
other than the 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, the euro equivalent value of
the bonds would decrease by €1,995 million (€1,440 million as at 31 March
2023).
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. ROCE calculated using GAAP measures for the 12
months ended 30 September 2023 was 11.5% (FY23: 12.9%), arising from lower
operating profit.
The table below presents adjusted ROCE metrics.
Re-presented(1)
H1 FY24(2) H1 FY23(2) Change
% % pps
Pre-tax ROCE (controlled)(3) 6.4% 6.9% (0.5)
Post-tax ROCE (controlled and associates/joint ventures)(3) 4.1% 5.2% (1.1)
Notes:
1. The results for the 12 months ended 30 September 2022 have been
re-presented to reflect that Indus Towers Limited is no longer reported as
held for sale. Consequently, Post-tax ROCE (controlled and associates/joint
ventures) has increased by 0.1pps compared to 5.1% as previously reported.
There is no impact on Pre-tax ROCE (controlled). See note 4 'Assets held for
sale' in the unaudited condensed consolidated financial statements for more
information.
2. The half-year ROCE calculation is based on returns for the 12 months
ended 30 September. ROCE calculations for H1 FY24 include the results of
Vantage Towers until its disposal on 22 March 2023 and the results of Oak
Holdings 1 GmbH from that date.
3. 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 40 for more information.
Funding facilities
As at 30 September 2023, the Group had undrawn revolving credit facilities of
€7.8 billion comprising euro and US dollar revolving credit facilities of
€4.0 billion and US$4.0 billion (€3.8 billion) which mature in 2025 and
2028 respectively. Both committed revolving credit facilities support US and
euro commercial paper programmes of up to US$15 billion (€14.2 billion) and
€10 billion respectively.
Post employment benefits
As at 30 September 2023, the Group's net surplus of scheme assets over scheme
liabilities was €30 million (€71 million net surplus as at 31 March
2023).
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
FY23: 4.50 eurocents).
The ex-dividend date for the interim dividend is 23 November 2023 for ordinary
shareholders, the record date is 24 November 2023 and the dividend is payable
on 2 February 2024. Dividend payments on ordinary shares will be paid directly
into a nominated bank or building society account.
Other significant developments
Board changes
As previously announced, Sir Crispin Davis, Dame Clara Furse and Valerie
Gooding did not seek re-election at the 2023 Annual General Meeting and
retired from the Board at the conclusion of the meeting on 25 July 2023.
Consequently, the Senior Independent Director role has transitioned to David
Nish, the Remuneration Committee Chair role to Amparo Moraleda and both
Delphine Ernotte Cunci and Christine Ramon have been appointed Workforce
Engagement Leads.
On 24 July 2023, we announced the appointment of Luka Mucic as Group Chief
Financial Officer and as an Executive Director of Vodafone, effective from 1
September 2023.
Risk factors
Principal risks
The key factors and uncertainties that could have a significant effect on the
Group's financial performance, include the following:
Adverse changes in macroeconomic conditions
Adverse changes to economic conditions could result in reduced consumer
spending, higher interest rates, adverse inflation, currency devaluations or
movements in foreign exchange rates. Adverse conditions could also lead to
limited debt refinancing options and/or an increase in costs.
Adverse market conditions
Significant activity by competition, such as price wars, new market entrants
or business practices, may lead to reduced margins and market share, and
increased customer churn.
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.
Cyber threat
An external attack, insider threat or supplier breach could cause service
interruption or confidential data breaches.
Data management and privacy
Data breaches, misuse of data, data manipulation, inappropriate data sharing,
or data unavailability could lead to fines, reputational damage, loss of
value, loss of business opportunity, and failure to meet our customers'
expectations.
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.
Organisational simplification
Failure to effectively execute on our goal to simplify our organisation and
operating model could result in reduced speed of decision-making and delivery,
reduced clarity on accountabilities, and higher cost.
Strategic transformation
Failure to effectively execute our transformational activities, including
shaping our portfolio and delivering on product innovation, could result in
loss of business value and/or additional cost.
Supply chain disruption
Disruption in our supply chain could mean that we are unable to execute our
strategic plans, resulting in increased cost, reduced choice and lower network
quality.
Technology resilience and future readiness
Network, system, or platform outages, or ineffective execution of the
technology strategy could lead to dissatisfied customers and/or impact
revenue.
Watchlist risks
Our watchlist risk process enables us to monitor material risks to the Group
which fall outside principal risks. These include, but are not limited to:
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.
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 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.
Infrastructure competitiveness
We continue to provide the appropriate broadband technology in our fixed and
mobile networks. Our Technology 2025 Strategy incorporates our fixed and
mobile network evolution steps to enhance our coverage and network
performance.
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 ensure compliance
with the relevant regulations and legislation.
Tax
Tax risk covers our management of tax across the markets in which we operate
and how we respond to changes in tax law, which may have an impact on the
Group. We have controls in place to govern each of these areas in line with
our tax principles.
Emerging risks
We face a number of uncertainties where an emerging risk may potentially
impact us. In some cases, there may be insufficient information to understand
the likelihood, impact or velocity of the risk. Also, we 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 inputs from analysis
of the external environment and internal sources. We evaluate our risks across
different time periods, allowing us to provide the appropriate level of focus
on these emerging risks.
We work with the relevant experts across the business to assess the potential
impacts and time horizon of these risks. Our emerging risks, within preferred
risk categories, are provided to the Executive Committee and the Audit and
Risk Committee for further scrutiny.
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:
www.vodafone.com/board (http://www.vodafone.com/board)
By Order of the Board
Maaike de Bie
Group General Counsel and Company Secretary
14 November 2023
Unaudited condensed consolidated financial statements
Consolidated income statement
Six months ended 30 September
Re-presented(1)
2023 2022
Note €m €m
Revenue 2 21,937 22,930
Cost of sales (15,277) (15,580)
Gross profit 6,660 7,350
Selling and distribution expenses (1,557) (1,711)
Administrative expenses (3,009) (2,819)
Net credit losses on financial assets (295) (332)
Share of results of equity accounted associates and joint ventures (51) 376
Impairment reversal 64 -
Other (expense)/income (157) 104
Operating profit 2 1,655 2,968
Investment income 368 137
Financing costs (1,473) (1,418)
Profit before taxation 550 1,687
Income tax expense 3 (705) (485)
(Loss)/profit for the financial period (155) 1,202
Attributable to:
- Owners of the parent (346) 945
- Non-controlling interests 191 257
(Loss)/profit for the financial period (155) 1,202
(Loss)/earnings per share
Total Group:
- Basic 5 (1.28)c 3.37c
- Diluted 5 (1.28)c 3.36c
Consolidated statement of comprehensive income/expense
Six months ended 30 September
Re-presented(1)
2023 2022
€m €m
(Loss)/profit for the financial period (155) 1,202
Other comprehensive (expense)/income:
Items that may be reclassified to the income statement in subsequent periods:
Foreign exchange translation differences, net of tax (95) (421)
Foreign exchange translation differences transferred to the income statement 23 -
Other, net of tax(2) (1,150) 924
Total items that may be reclassified to the income statement in subsequent (1,222) 503
periods
Items that will not be reclassified to the income statement in subsequent
periods:
Net actuarial losses on defined benefit pension schemes, net of tax (58) (42)
Total items that will not be reclassified to the income statement in (58) (42)
subsequent periods
Other comprehensive (expense)/income (1,280) 461
Total comprehensive (expense)/income for the financial period (1,435) 1,663
Attributable to:
- Owners of the parent (1,626) 1,377
- Non-controlling interests 191 286
(1,435) 1,663
Notes:
1. The results for the six months ended 30 September 2022 have been
re-presented to reflect that Indus Towers Limited is no longer reported as
held for sale. See note 4 'Assets held for sale' for more information.
2. 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
2023 2023
Note €m €m
Non-current assets
Goodwill 27,544 27,615
Other intangible assets 18,874 19,592
Property, plant and equipment 37,363 37,992
Investments in associates and joint ventures 7 10,457 11,079
Other investments 1,078 1,093
Deferred tax assets 19,460 19,316
Post employment benefits 265 329
Trade and other receivables 7,226 7,843
122,267 124,859
Current assets
Inventory 1,009 956
Taxation recoverable 296 279
Trade and other receivables 11,459 10,705
Other investments 5,917 7,017
Cash and cash equivalents 7,148 11,705
25,829 30,662
Total assets 148,096 155,521
Equity
Called up share capital 4,797 4,797
Additional paid-in capital 149,211 149,145
Treasury shares (7,647) (7,719)
Accumulated losses (114,891) (113,086)
Accumulated other comprehensive income 28,982 30,262
Total attributable to owners of the parent 60,452 63,399
Non-controlling interests 1,110 1,084
Total equity 61,562 64,483
Non-current liabilities
Borrowings 52,717 51,669
Deferred tax liabilities 728 771
Post employment benefits 235 258
Provisions 1,481 1,572
Trade and other payables 2,375 2,184
57,536 56,454
Current liabilities
Borrowings 12,341 14,721
Financial liabilities under put option arrangements 493 485
Taxation liabilities 453 457
Provisions 732 674
Trade and other payables 14,979 18,247
28,998 34,584
Total equity and liabilities 148,096 155,521
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 2022 Re-presented(3) 4,797 149,018 (7,278) (91,189) 55,348 2,290 57,638
Issue or reissue of shares - 1 108 (100) 9 - 9
Share-based payments - 66 - - 66 5 71
Transactions with non-controlling interests in subsidiaries - - - (24) (24) (12) (36)
Comprehensive income - - - 1,377 1,377 286 1,663
Dividends - - - (1,265) (1,265) (285) (1,550)
30 September 2022 4,797 149,085 (7,170) (91,201) 55,511 2,284 57,795
Re-presented(3)
1 April 2023 4,797 149,145 (7,719) (82,824) 63,399 1,084 64,483
Issue or reissue of shares - 1 72 (72) 1 - 1
Share-based payments - 65 - - 65 4 69
Transactions with non-controlling interests in subsidiaries - - - (8) (8) (3) (11)
Share of equity-accounted entitiesʼ changes in equity - - - (164) (164) - (164)
Comprehensive (expense)/income - - - (1,626) (1,626) 191 (1,435)
Dividends - - - (1,215) (1,215) (166) (1,381)
30 September 2023 4,797 149,211 (7,647) (85,909) 60,452 1,110 61,562
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. The results for the period ended 30 September 2022 have been re-presented
to reflect that Indus Towers Limited is no longer reported as held for sale.
As at 30 September 2022, accumulated comprehensive losses decreased by €58
million, resulting in an increase of €58 million in total equity compared to
amounts previously reported. As at 1 April 2022, accumulated comprehensive
losses decreased by €96 million, resulting in an increase of €96 million
in total equity compared to amounts previously reported. See Note 4 'Assets
held for sale' 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
2023 2022
Note €m €m
Inflow from operating activities 8 5,544 6,280
Cash flows from investing activities
Purchase of interests in subsidiaries, net of cash acquired - -
Purchase of interests in associates and joint ventures (52) (61)
Purchase of intangible assets (1,536) (1,433)
Purchase of property, plant and equipment (2,888) (3,456)
Purchase of investments (1,704) (871)
Disposal of interests in subsidiaries, net of cash disposed (67) -
Disposal of interests in associates and joint ventures 500 -
Disposal of property, plant and equipment and intangible assets 12 -
Disposal of investments 1,557 1,130
Dividends received from associates and joint ventures 75 463
Interest received 295 139
Outflow from investing activities (3,808) (4,089)
Cash flows from financing activities
Proceeds from issue of long-term borrowings 1,430 187
Repayment of borrowings (5,492) (5,549)
Net movement in short-term borrowings 40 6,194
Net movement in derivatives 138 (205)
Interest paid(1) (1,101) (952)
Purchase of treasury shares - (1,090)
Issue of ordinary share capital and reissue of treasury shares 1 9
Equity dividends paid (1,210) (1,263)
Dividends paid to non-controlling shareholders in subsidiaries (167) (290)
Other transactions with non-controlling shareholders in subsidiaries (17) (34)
Outflow from financing activities (6,378) (2,993)
Net cash outflow (4,642) (802)
Cash and cash equivalents at beginning of the financial period(2) 11,628 7,371
Exchange gain on cash and cash equivalents 45 282
Cash and cash equivalents at end of the financial period(2) 7,031 6,851
Notes:
1. Interest paid includes €nil million (Six months ended 30 September
2022: €86 million inflow) in relation to derivative financial instruments
for the Share buyback related to maturing tranches of mandatory convertible
bonds.
2. Comprises cash and cash equivalents as presented in the consolidated
statement of financial position of €7,148 million (€7,072 million as at 30
September 2022), together with overdrafts of €117 million (€226 million as
at 30 September 2022) and €nil million (€5 million as at 30 September
2022) 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 2023:
· 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 2023;
· with the exception of IFRS 17 'Insurance contracts' (see below) apply
the same accounting policies, presentation and methods of calculation as those
followed in the preparation of the Group's consolidated financial statements
for the year ended 31 March 2023, 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 14 November 2023.
The information relating to the year ended 31 March 2023 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
The Group has a strong liquidity position as at 30 September 2023 with €7.1
billion of cash and cash equivalents and €4.1 billion of liquid short-term
investments available, together with undrawn revolving credit facilities of
€7.8 billion (of which €4.0 billion becomes due for renewal in February
2025), which cover all 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 renew the credit
facility in February 2025 and not being able to access the capital markets
during the assessment period. 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 March 2025 and that it is appropriate to
continue to adopt the going concern basis in preparing the unaudited condensed
consolidated financial statements.
Notes to the unaudited condensed consolidated financial statements
1 Basis of preparation (continued)
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 2023.
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 recoverable. As part
of this assessment as at 30 September 2023, the Group reviewed the key
assumptions underlying the value in use valuations used in the annual
impairment test at 31 March 2023. This included the year to-date performance
of the Group's CGUs against their budgets, 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.
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 2023.
Hyperinflation accounting
The Group continues to apply hyperinflationary accounting, as specified in IAS
29, at its Turkish operations whose functional currency is the Turkish lira
and to Safaricom's operations in Ethiopia where the Ethiopian birr is the
functional currency.
Turkish lira and Ethiopian birr results and non-monetary asset and liability
balances for the six months ended 30 September 2023 have been revalued to
their present value equivalent local currency amount as at 30 September 2023,
based on an inflation index, before translation to euros at the reporting date
exchange rate of €1 : 29.03 TRL and €1 : 58.73 ETB, respectively.
For the Group's operations in Turkey, the gain or loss on net monetary assets
resulting from IAS 29 application is recognised in the consolidated income
statement within Other income.
For Safaricom's operations in Ethiopia, the impacts of IAS 29 accounting are
reflected as an increase to Investments in associates and joint ventures and
an increase to Profit attributable to the joint ventures and associates.
The inflation index in Turkey selected to reflect the change in purchasing
power was the consumer price index ('CPI') issued by the Turkish Statistical
Institute which has risen by 30.08% during the six months ended 30 September
2023. The inflation index selected in Ethiopia is the CPI issued by the
Central Statistics Agency of Ethiopia which rose 12.09% during the six months
ended 30 September 2023.
The main impacts of these adjustments on the consolidated financial statements
are shown below.
Increase/(decrease)
Six months ended 30 September
2023 2022
€m €m
Revenue 35 21
Operating profit (5) (14)
Profit for the financial period (140) (40)
30 September 2023 31 March 2023
Non-current assets 849 814
Equity attributable to owners of the parent 811 777
Non-controlling interests 54 37
Notes to the unaudited condensed consolidated financial statements
1 Basis of preparation (continued)
New accounting pronouncements adopted
On 1 April 2023, 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, except as described below. Further details are provided in the Group's
Annual Report for the year ended 31 March 2023.
IFRS 17 'Insurance Contracts'
IFRS 17 'Insurance Contracts' was adopted by the Group on 1 April 2023. The
Standard sets out revised principles for the recognition, measurement,
presentation, and disclosure of obligations relating to insurance contracts
issued by preparers in order to provide a single accounting model for all
types of insurance.
The Group issues certain short and long-term contracts - primarily being (i)
the reinsurance of handset and other device insurance issued by a fronting
insurer to the Group's customers; and (ii) the reinsurance of a third-party
annuity policy issued to the Vodafone and Cable & Wireless ('CWW')
sections of the Vodafone UK Group Pension Scheme. The adoption of IFRS 17 did
not have a material impact on prior period equity.
The adoption of IFRS 17 will result in separate insurance and reinsurance
liability line items being presented within the Trade and other payables
disclosure notes to be included within the Group's consolidated financial
statements for the year ending 31 March 2024, with corresponding reductions in
the Other payables line item. The reclassification as at 31 March 2023 will be
€256 million and €63 million within the long and short-term Trade and
other payables notes, respectively. The long and short-term Insurance and
reinsurance liability amounts included within Trade and other payables at 30
September 2023 are €236 million and €93 million, respectively.
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.
From 1 April 2023, the Group revised its segments by moving Vodafone Egypt
from the Other Markets segment to the Vodacom segment to reflect the effective
date of changes made to the Group's internal reporting structure, following
the transfer of Vodafone Egypt to the Vodacom Group in December 2022.
Revenue is attributed to a country based on the location of the Group company
reporting the revenue. Transactions between operating segments are charged at
arm's-length prices.
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.
The operating segments for Germany, Italy, UK, Spain and Vodacom (which is a
legal entity encompassing South Africa, Vodafone Egypt and certain other
smaller African markets) are individually material for the Group and are each
reporting segments for which certain financial information is provided. In
addition, the Vantage Towers operating segment was a separately listed part of
the Group until its disposal into a joint venture on 22 March 2023.
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 (until disposal in
January 2023), Ireland, Portugal and Romania), this largely reflects
membership or a close association with the European Union, while the Other
Markets segment (comprising Turkey and Ghana (until disposal in February
2023)) 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
2023.
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 2023
Germany 5,722 503 6,225 173 7 6,405 2,527
Italy 2,098 180 2,278 37 5 2,320 645
UK 2,822 526 3,348 17 12 3,377 640
Spain 1,731 167 1,898 26 5 1,929 394
Other Europe 2,366 285 2,651 21 7 2,679 766
Vodacom 2,924 473 3,397 178 15 3,590 1,241
Other Markets 828 297 1,125 3 - 1,128 254
Vantage Towers - - - - - - -
Common Functions(2) 282 24 306 416 (1) 721 (89)
Eliminations (155) - (155) (57) - (212) -
Group 18,618 2,455 21,073 814 50 21,937 6,378
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 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) 3,422 536 3,958 207 14 4,179 1,527
Other Markets(2) 771 203 974 2 - 976 228
Vantage Towers - - - 657 - 657 330
Common Functions(3) 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. Components of revenue and Adjusted EBITDAaL metrics for the six months
ended 30 September 2022 have been re-presented for the Other Markets and
Vodacom segments to reflect the move of Vodafone Egypt from the Other Markets
segment to the Vodacom segment. There is no impact on previously reported
Group metrics.
3. 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
Re-presented(1)
2023 2022
€m €m
Adjusted EBITDAaL 6,378 7,244
Restructuring costs (212) (142)
Interest on lease liabilities 281 204
Loss on disposal of property, plant & equipment and intangible assets (22) (11)
Depreciation and amortisation on owned assets (4,626) (4,807)
Share of results of equity accounted associates and joint ventures (51) 376
Impairment reversal 64 -
Other (expense)/income (157) 104
Operating profit 1,655 2,968
Investment income 368 137
Financing costs (1,473) (1,418)
Profit before taxation 550 1,687
Note:
1. The results for the six months ended 30 September 2022 have been
re-presented to reflect that Indus Towers Limited is no longer reported as
held for sale. See note 4 'Assets for sale' for more information.
Notes to the unaudited condensed consolidated financial statements
2 Segmental analysis (continued)
The Group's non-current assets are disaggregated as follows:
30 September 31 March
2023 2023
€m €m
Non-current assets(1)
Germany 43,301 43,878
Italy 9,956 10,235
UK 6,638 6,629
Spain 5,991 6,331
Other Europe 7,586 7,815
Vodacom(2) 6,789 6,796
Other Markets(2) 1,534 1,502
Common Functions(3) 1,986 2,013
Group 83,781 85,199
Notes:
1. Comprises goodwill, other intangible assets and property, plant &
equipment.
2. Non-current assets at 31 March 2023 have been re-presented for the Other
Markets and Vodacom segments to reflect the move of Vodafone Egypt from the
Other Markets segment to the Vodacom segment. There is no impact on previously
reported Group metrics
3. Comprises central teams and business functions.
3 Taxation
Six months ended 30 September
2023 2022
€m €m
United Kingdom corporation tax (expense)/income
Current period (38) (4)
Adjustments in respect of prior periods (19) 9
Overseas current tax (expense)/income
Current period (394) (446)
Adjustments in respect of prior periods - 12
Total current tax expense (451) (429)
Deferred tax on origination and reversal of temporary differences
United Kingdom deferred tax (24) (10)
Overseas deferred tax (230) (46)
Total deferred tax expense (254) (56)
Total income tax expense (705) (485)
Deferred tax on losses in Luxembourg
The tax charge for the six months ended 30 September 2023 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 in line with the 35 to 39 years disclosed as at 31 March
2023. 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 2023.
IAS 12 amendment
The Group will make additional qualitative and quantitative disclosures
regarding its exposure to Pillar Two income taxes in the consolidated
financial statements for year ending 31 March 2024, in accordance with
amendments to IAS 12 'Income Taxes' which were endorsed by the UK Endorsement
Board in July 2023. The Group has applied the mandatory temporary exception
to the accounting for deferred taxes arising from the jurisdictional
implementation of the Pillar Two rules set out therein. The impact of the
rules is under review but is not expected to be material.
Notes to the unaudited condensed consolidated financial statements
4 Assets held for sale
Reclassification of Indus Towers Limited
In the condensed consolidated financial statements for the six months ended 30
September 2022, the Group's 21% interest in Indus Towers Limited was reported
within Assets held for sale. Whilst the Group remains focused on achieving a
sale, the investment was not assessed as meeting the requirements of held for
sale at 31 March 2023 and this remained the position at 30 September 2023.
Impact on the consolidated income statement
Comparative amounts for the six months ended 30 September 2022 have been
re-presented to reflect that Indus Towers Limited is no longer reported as
held for sale. The reclassification has no impact on revenue and gross profit
reported in the consolidated income statement for the six months ended 30
September 2022, but the following line items have been impacted:
- Share of results of equity accounted associates and joint ventures
increased by €33 million.
- Investment income decreased by €74 million.
Consequently, operating profit increased by €33 million. Profit before
taxation and Profit for the financial period both decreased by €41 million
and Total comprehensive income decreased by €38 million compared to the
amounts previously reported.
5 Earnings per share
Six months ended 30 September
2023 2022
Millions Millions
Weighted average number of shares for basic earnings per share 27,033 28,037
Effect of dilutive potential shares: restricted shares and share options - 104
Weighted average number of shares for diluted earnings per share 27,033 28,141
Earnings per share attributable to owners of the parent during the period
Six months ended 30 September
Re-presented(1)
2023 2022
€m €m
(Loss)/profit for basic and diluted earnings per share (346) 945
Re-presented(1)
eurocents eurocents
Basic (loss)/earnings per share (1.28) 3.37
Diluted (loss)/earnings per share (1.28) 3.36
Note:
1. The results for the six months ended 30 September 2022 have been
re-presented to reflect that Indus Towers Limited is no longer reported as
held for sale. Profit for basic and diluted earnings per share has decreased
by €41 million compared to the amount previously reported. Consequently,
basic earnings per share decreased by 0.15 eurocents and diluted earnings per
share decreased by 0.14 eurocents compared to amounts previously reported. See
note 4 'Assets held for sale' for more information.
Notes to the unaudited condensed consolidated financial statements
6 Equity dividends
Six months ended 30 September
2023 2022
€m €m
Declared during the financial period:
Final dividend for the year ended 31 March 2023: 4.50 eurocents per share
(2022: 4.50 eurocents per share) 1,215 1,265
Proposed after the end of the reporting period and not recognised as a
liability:
Interim dividend for the year ending 31 March 2024: 4.50 eurocents per share
(2023: 4.50 eurocents per share) 1,218 1,237
7 Investments in associates and joint ventures
30 September 31 March
2023 2023
€m €m
Oak Holdings 1 GmbH 7,883 8,634
VodafoneZiggo Group Holding B.V. 715 793
TPG Telecom Limited 57 108
Other 77 43
Investment in joint ventures 8,732 9,578
Safaricom PLC 554 509
Indus Towers Limited 1,051 908
Other 120 84
Investment in associates 1,725 1,501
10,457 11,079
On 18 July 2023, the Group completed the sale of 3.9% of Oak Holdings 1 GmbH
for cash consideration of €500 million. Vodafone retains an interest of
60.3% in Oak Holdings 1 GmbH.
8 Reconciliation of net cash flow from operating activities
Six months ended 30 September
Re-presented(1)
2023 2022
€m €m
(Loss)/profit for the financial period (155) 1,202
Investment income (368) (137)
Financing costs 1,473 1,418
Income tax expense 705 485
Operating profit 1,655 2,968
Adjustments for:
Share-based payments and other non-cash charges 63 46
Depreciation and amortisation 6,802 6,853
Loss on disposal of property, plant & equipment and intangible 20 9
assets
Share of results of equity accounted associates and joint ventures 51 (376)
Impairment reversal (64) -
Other expense/(income) 157 (104)
Increase in inventory (57) (175)
Increase in trade and other receivables (1,145) (1,381)
Decrease in trade and other payables (1,466) (888)
Cash generated by operations 6,016 6,952
Taxation (472) (672)
Net cash flow from operating activities 5,544 6,280
Note:
1. The results for the six months ended 30 September 2022 have been
re-presented to reflect that Indus Towers Limited is no longer reported as
held for sale. Profit for the financial period decreased by €41 million and
Operating profit decreased by €33 million compared to amounts previously
reported. The Share of results of equity accounted associates and joint
ventures increased by €33 million compared to the amount previously
reported. Consequently, there was no impact on Cash generated by operations or
Net cash flow from operating activities.
Notes to the unaudited condensed consolidated financial statements
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
2023 2023
€m €m
Financial assets at fair value:
Money market funds (included within Cash and cash equivalents)(1) 2,780 7,781
Debt and equity securities (included within Other investments)(2) 4,671 5,808
Derivative financial instruments (included within Trade and other 5,273 6,124
receivables)(3,4)
Trade receivables at fair value through Other comprehensive income 1,329 903
(included within Trade and
other receivables)(2)
14,053 20,616
Financial liabilities at fair value:
Derivative financial instruments (included within Trade and other 1,792 1,422
payables)(3,4)
1,792 1,422
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 €2,446 million (€2,794 million
as at 31 March 2023) 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. Derivative financial assets include €31 million (€198 million as at
31 March 2023) of embedded derivative option for which the valuation basis is
Level 3 classification where fair value is determined from inputs that are not
based on observable market data (i.e unobservable inputs). The remaining items
are also measured at fair value and the basis is Level 2 classification.
4. €4,904 million (€5,642 million as at 31 March 2023) of derivative
financial assets and €1,362 million (€1,116 million as at 31 March 2023)
of derivative financial liabilities are classified as non-current.
The fair value of the Group's financial assets held at amortised cost
approximates to fair value with the exception of non-current debt securities
with a carrying value of €1,000 million (€999 million as at 31 March 2023)
and a fair value of €769 million (€803 million as at 31 March 2023). 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.
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 €41,128 million (€39,512 million as at 31 March 2023)
and a fair value of €34,913 million (€35,044 million as at 31 March 2023).
Fair value is based on Level 1 of the fair value hierarchy using quoted market
prices.
Level 3 financial instruments
The Group's borrowings include €1,597 million (€1,485 million as at 31
March 2023) of bank borrowings that are secured against the Group's
shareholdings in Indus Towers and Vodafone Idea and will be repaid through the
realisation of proceeds from those assets. This arrangement contains an
embedded derivative option which has been separately fair valued. The 30
September 2023 valuation of the embedded derivative asset of €31 million
(€198 million as at 31 March 2023) is presented within derivative assets
within trade and other receivables in current assets in the consolidated
statement of financial position.
The loss in the period of €167 million (€6 million gain in the six months
ended 30 September 2022) on the revaluation of the embedded derivative option
is recognised within financing costs in the consolidated income statement.
A Black Scholes model for European put options has been used as a valuation
model and primarily uses market inputs (quoted share prices and volatilities
for Indus Towers and Vodafone Idea) along with a strike price equal to the
amount payable under the loan. The valuation includes an unobservable
adjustment to reflect the potential timeframe to settle the loan and has been
modelled using a range of potential durations up to 31 March 2025. As a result
of this unobservable adjustment, the option is classified as a level 3
instrument under the fair value hierarchy. An increase/(decrease) in durations
of six months to settle the loan would increase/(decrease) the derivative
asset by €77 million/(€22 million).
Notes to the unaudited condensed consolidated financial statements
10 Related party transactions
Transactions with associates and joint ventures
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
2023 2022
€m €m
Sales of goods and services to associates 15 11
Purchase of goods and services from associates 3 65
Sales of goods and services to joint arrangements 133 110
Purchase of goods and services from joint arrangements 392 69
Interest expense payable to associates(1) - 25
Interest income receivable from joint arrangements(1) 26 22
Interest expense payable to joint arrangements(2) 109 -
30 September 31 March
2023 2023
€m €m
Trade balances owed:
by associates 8 7
to associates 1 1
by joint arrangements 143 170
to joint arrangements 287 329
Other balances owed by joint arrangements(1) 1,178 980
Other balances owed to joint arrangements(2) 5,323 5,628
Notes:
1. Amounts arise primarily through VodafoneZiggo Group Holding B.V..
Interest is paid/received in line with market rates.
2. Amounts are primarily in relation to leases of tower space from Oak
Holdings 1 GmbH.
On 28 September 2023 the Group sold M-Pesa Holding Company Limited ('MPHCL'),
which holds funds on trust for M-Pesa customers, to Safaricom Plc for US$1.
Balances included in the Group's consolidated statement of financial position
at the date of disposal included short-term investments of €1,195 million
and €1,156 million due to M-Pesa customers recorded within Other investments
and Trade and other payables, respectively.
In the six months ended 30 September 2023, the Group made contributions to
defined benefit pension schemes of €26 million (Six months ended 30
September 2022: €11 million).
In the six months ended 30 September 2023, dividends of €1.0 million were
paid to Board and Executive Committee members (Six months ended 30 September
2022: €1.2 million).
Dividends received from associates and joint ventures are disclosed in the
consolidated statement of cash flows.
Notes to the unaudited condensed consolidated financial statements
11 Contingent liabilities and legal proceedings
Note 29 'Contingent liabilities and legal proceedings' to the consolidated
financial statements of Vodafone Group Plc for the year ended 31 March 2023
sets forth the Group's contingent liabilities and legal proceedings as of 31
March 2023. There have been no material changes to the Group's contingent
liabilities or legal proceedings during the period covered by this report,
except as disclosed below.
Legal proceedings
Netherlands tax case
Vodafone Europe BV (VEBV) received assessments totalling €267 million of tax
and interest from the Dutch Tax Authorities, who challenged the application of
the arm's length principle in relation to various intra-group financing
transactions. The Group entered into a guarantee for the full value of the
assessments issued. VEBV appealed against these assessments to the District
Court of the Hague where a hearing was held in March 2023. The District Court
issued its judgement in July 2023, upholding VEBV's appeal in relation to the
majority of issues and requiring the Dutch Tax Authorities to significantly
reduce its assessments. VEBV and the Dutch Tax Authorities have since appealed
the judgement.
The Group continues to believe it has robust defences but has recorded a
provision of €24 million for tax and interest, reflecting its current view
of the probable financial outflow required to fully resolve the issue and has
reduced the guarantee to the same value.
Greece: Papistas Holdings SA, Mobile Trade Stores (formerly Papistas SA) and
Athanasios and Loukia Papistas v Vodafone Greece
In October 2019, Mr. and Mrs. Papistas, and companies owned or controlled by
them, filed several claims against Vodafone Greece with a total value of
approximately €330 million for purported damage caused by the alleged abuse
of dominance and wrongful termination of a franchise arrangement with a
Papistas company. Lawsuits which the Papistas claimants had previously brought
against Vodafone Group Plc and certain directors and officers of Vodafone were
withdrawn. Vodafone Greece filed a counter-claim and all claims were heard in
February 2020. All of the Papistas claims were rejected by the Athens Court of
First Instance because the stamp duty payments required to have the merits of
the case considered had not been made. Vodafone Greece's counter claim was
also rejected. The Papistas claimants and Vodafone Greece each filed appeals.
The appeal hearings took place on 23 February and 11 May 2023. Judgement has
been received in respect of the May appeal hearing for two of the claims and
the Court dismissed the appeals because the stamp duty payments had again not
been made. Whether the Papistas claimants will appeal the judgement is unknown
as of the date of this report. We are waiting to receive the judgement
relating to the February appeal hearing for the remaining claim.
We are continuing vigorously to defend the claims and, based on the progress
of the litigation so far, the Group believes that it is highly unlikely that
there will be an adverse ruling for the Group. On this basis, the Group does
not expect the outcome of these claims to have a material financial impact.
UK: Phones 4U in Administration v Vodafone Limited and Vodafone Group Plc and
Others
In December 2018, the administrators of former UK indirect seller, Phones 4U,
sued the three main UK mobile network operators ('MNOs'), including Vodafone,
and their parent companies in the English High Court. The administrators
alleged collusion between the MNOs to pull their business from Phones 4U,
thereby causing its collapse. The judge ordered that there should be a split
trial between liability and damages. The first trial on liability took place
from May to July 2022. On 10 November 2023, the High Court issued a
judgement in Vodafone's favour and rejected Phones 4U's allegations that the
defendants were in breach of competition law, confirming our previously stated
position that a present obligation does not exist. It is not known whether
Phones 4U will seek to appeal the judgement as of the date of this report.
Notes to the unaudited condensed consolidated financial statements
12 Subsequent events
Disposal of Vodafone Spain
On 31 October 2023, the Group announced that it had entered into binding
agreements with Zegona Communications plc ('Zegona') in relation to the sale
of 100% of Vodafone Holdings Europe, S.L.U. ('Vodafone Spain') (the
'Transaction').
On completion, Vodafone's consideration will comprise at least €4.1 billion
in cash (subject to customary completion adjustments) and up to €0.9 billion
in the form of Redeemable Preference Shares ('RPS') which redeem, for an
amount comprising the subscription price and accrued preferential dividend, no
later than 6 years after closing.
Completion of the Transaction is conditional on certain approvals being
obtained from current Zegona shareholders as well as regulatory clearances and
is expected to take place in the first half of 2024.
Minority shareholders in Kabel Deutschland Holding A.G.
The Group's obligations to the minority shareholders in Kabel Deutschland
Holding A.G., reflected as a financial liability under put option arrangements
in the Group's consolidated statement of financial position, were settled by a
final payment of €494 million on 20 October 2023.
Hybrid bonds
On 7 November 2023, the Group announced that on 3 January 2024 it will
exercise its call option to repurchase and cancel outstanding capital
securities of €438 million due on 3 January 2079. This follows a previous
bond buyback exercise completed in June 2023 for €1,562 million of the
original €2,000 million securities issued.
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 2023, 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 12. 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 unaudited condensed consolidated financial statements in the
half yearly financial report for the six months ended 30 September 2023 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' (IRSE) 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 'Basis of preparation', the annual financial statements
of the Group are prepared in accordance with UK adopted international
accounting standards, with International Financial Reporting Standards as
issued by the IASB, and with the requirements of the UK Companies Act 2006.
The unaudited condensed consolidated 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 unaudited condensed consolidated 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
14 November 2023
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 41 Operating profit Page 4
Organic Adjusted EBITDAaL growth Page 41 Not applicable -
Organic revenue growth Page 41 Revenue Pages 42 to 44
Organic Group service revenue growth excluding Turkey Page 41 Service revenue Pages 42 to 44
Organic Group Adjusted EBITDAaL growth excluding Turkey Page 41 Not applicable -
Organic service revenue growth Page 41 Service revenue Pages 42 to 44
Organic mobile service revenue growth Page 41 Service revenue Pages 42 to 44
Organic fixed service revenue growth Page 41 Service revenue Pages 42 to 44
Organic Vodafone Business service revenue growth Page 41 Service revenue Pages 42 to 44
Organic financial services revenue growth in South Africa Page 41 Service revenue Pages 42 to 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 16 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 14
Adjusted profit before taxation Page 50 Profit before taxation Page 51
Adjusted income tax expense Page 50 Income tax expense Page 51
Adjusted effective tax rate Page 50 Income tax expense 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
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 lease liabilities but excluding
depreciation, amortisation and gains/losses on disposal of owned assets and
It is a key external metric used by the investor community to assess excluding share of results of equity accounted associates and joint ventures,
performance of our operations. impairment losses/reversals, restructuring costs arising from discrete
restructuring plans, other income and expense and significant items that are
It is our segment performance measure in accordance with IFRS 8 (Operating not considered by management to be reflective of the underlying performance of
Segments). the Group.
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;
- Group Adjusted EBITDAaL excluding Turkey;
- 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.
Non-GAAP measures
Reported growth M&A and Other Foreign exchange Organic growth*
Six months ended 30 September 2023 H1 FY24 H1 FY23
€m €m % pps pps %
Service revenue(1)
Germany 5,722 5,730 (0.1) - - (0.1)
Mobile service revenue 2,530 2,546 (0.6) - - (0.6)
Fixed service revenue 3,192 3,184 0.3 - - 0.3
Italy 2,098 2,125 (1.3) - - (1.3)
Mobile service revenue 1,431 1,507 (5.0) (0.1) - (5.1)
Fixed service revenue 667 618 7.9 0.1 - 8.0
UK 2,822 2,712 4.1 - 1.5 5.6
Mobile service revenue 2,096 2,003 4.6 - 1.6 6.2
Fixed service revenue 726 709 2.4 - 1.4 3.8
Spain 1,731 1,782 (2.9) 0.1 - (2.8)
Other Europe(2) 2,366 2,552 (7.3) 12.4 (1.2) 3.9
Vodacom(3) 2,924 3,422 (14.6) - 23.6 9.0
Other Markets(2,3) 828 771 7.4 18.3 53.6 79.3
Common Functions 282 268 - - - -
Eliminations (155) (155)
Total service revenue 18,618 19,207 (3.1) 2.0 5.3 4.2
Other revenue 3,319 3,723
Revenue 21,937 22,930 (4.3) 2.2 5.3 3.2
Other growth metrics
Group service revenue excluding Turkey 17,809 18,549 (4.0) 2.1 4.2 2.3
Group Adjusted EBITDAaL excluding Turkey 6,124 7,029 (12.9) 6.4 4.5 (2.0)
Turkey - Service revenue 828 676 22.5 (5.4) 62.2 79.3
Turkey - Adjusted EBITDAaL 254 215 18.1 145.9 (74.9) 89.1
Vodafone Business - Service revenue 5,124 5,149 (0.5) 1.4 3.5 4.4
Germany - Vodafone Business service revenue 1,205 1,193 1.0 (0.5) - 0.5
Italy - Vodafone Business service revenue 754 695 8.5 (0.1) - 8.4
UK - Vodafone Business service revenue 1,059 1,036 2.2 - 1.6 3.8
Spain - Vodafone Business service revenue 557 569 (2.1) 0.1 - (2.0)
Other Europe - Vodafone Business service revenue 728 747 (2.5) 9.4 (1.1) 5.8
South Africa - Financial services revenue 77 82 (6.1) - 16.9 10.8
Adjusted EBITDAaL
Germany 2,527 2,677 (5.6) - - (5.6)
Italy 645 759 (15.0) - - (15.0)
UK 640 685 (6.6) - 1.3 (5.3)
Spain 394 445 (11.5) (0.1) - (11.6)
Other Europe(2) 766 843 (9.1) 11.1 (1.3) 0.7
Vodacom(3) 1,241 1,527 (18.7) - 23.6 4.9
Other Markets(2,3) 254 228 11.4 21.7 56.0 89.1
Vantage Towers - 330 (100.0) 100.0 - -
Common Functions (89) (250)
Eliminations - -
Group 6,378 7,244 (12.0) 6.9 5.4 0.3
Percentage point change in Adjusted EBITDAaL margin
Germany 39.5% 40.6% (1.1) (0.1) - (1.2)
Italy 27.8% 31.9% (4.1) - - (4.1)
UK 19.0% 20.2% (1.2) - - (1.2)
Spain 20.4% 22.6% (2.2) (0.1) - (2.3)
Other Europe(2) 28.6% 29.1% (0.5) (0.4) (0.1) (1.0)
Vodacom(3) 34.6% 36.5% (1.9) - 0.7 (1.2)
Other Markets(2,3) 22.5% 23.4% (0.9) 0.9 0.1 0.1
Group 29.1% 31.6% (2.5) 1.5 0.2 (0.8)
Notes:
1. Prior to disposal, Vantage Towers revenue was reported by the Group as
other revenue, not service revenue.
2. Comparatives include the results of Vodafone Hungary and Vodafone Ghana
which were included in the Other Europe and Other Markets segments,
respectively, until their disposal. As previously reported, Vodafone Hungary
was sold in January 2023 and Vodafone Ghana was sold in February 2023.
3. From 1 April 2023, the Group revised its segmental reporting by moving
Vodafone Egypt from the Other Markets segment to the Vodacom segment. This is
the effective date on which the Group's reporting structure changed to reflect
the transfer of Vodafone Egypt to the Vodacom Group. All comparatives for
these two segments have been re-presented on the new basis of segmental
reporting. There is no impact on previously reported Group metrics.
Non-GAAP measures
Reported growth M&A and Other Foreign exchange Organic growth*
Quarter ended 30 September 2023 Q2 FY24 Q2 FY23
€m €m % pps pps %
Service revenue
Germany 2,903 2,873 1.0 0.1 - 1.1
Mobile service revenue 1,290 1,282 0.6 0.1 - 0.7
Fixed service revenue 1,613 1,591 1.4 - - 1.4
Italy 1,063 1,073 (0.9) (0.1) - (1.0)
Mobile service revenue 729 762 (4.3) (0.1) - (4.4)
Fixed service revenue 334 311 7.4 (0.1) - 7.3
UK 1,421 1,352 5.1 - 0.4 5.5
Mobile service revenue 1,057 1,000 5.7 - 0.4 6.1
Fixed service revenue 364 352 3.4 - 0.5 3.9
Spain 860 884 (2.7) - - (2.7)
Other Europe(1) 1,205 1,298 (7.2) 12.1 (1.1) 3.8
Vodacom(2) 1,498 1,758 (14.8) - 23.8 9.0
Other Markets(1,2) 495 407 21.6 (11.3) 74.7 85.0
Common Functions 151 140
Eliminations (88) (92)
Total service revenue 9,508 9,693 (1.9) 1.0 5.6 4.7
Other revenue 1,689 1,959
Revenue 11,197 11,652 (3.9) 1.2 5.5 2.8
Other growth metrics
Group service revenue excluding Turkey 9,023 9,344 (3.4) 2.1 4.1 2.8
Turkey - Service revenue 495 360 37.5 (41.8) 89.3 85.0
Vodafone Business - Service revenue 2,589 2,591 (0.1) 1.0 3.4 4.3
Germany - Vodafone Business service revenue 609 600 1.5 (0.5) - 1.0
Italy - Vodafone Business service revenue 379 352 7.7 (0.2) - 7.5
UK - Vodafone Business service revenue 531 517 2.7 - 0.5 3.2
Spain - Vodafone Business service revenue 276 280 (1.4) 0.2 - (1.2)
Other Europe - Vodafone Business service revenue 365 376 (2.9) 9.2 (1.1) 5.2
Notes:
1. Comparatives include the results of Vodafone Hungary and Vodafone Ghana
which were included in the Other Europe and Other Markets segments,
respectively, until their disposal. As previously reported, Vodafone Hungary
was sold in January 2023 and Vodafone Ghana was sold in February 2023.
2. From 1 April 2023, the Group revised its segmental reporting by moving
Vodafone Egypt from the Other Markets segment to the Vodacom segment. This is
the effective date on which the Group's reporting structure changed to reflect
the transfer of Vodafone Egypt to the Vodacom Group. All comparatives for
these two segments have been re-presented on the new basis of segmental
reporting. There is no impact on previously reported Group metrics.
Non-GAAP measures
Reported growth M&A and Other Foreign exchange Organic growth*
Quarter ended 30 June 2023 Q1 FY24 Q1 FY23
€m €m % pps pps %
Service revenue
Germany 2,819 2,857 (1.3) - - (1.3)
Mobile service revenue 1,240 1,264 (1.9) - - (1.9)
Fixed service revenue 1,579 1,593 (0.9) - - (0.9)
Italy 1,035 1,052 (1.6) - - (1.6)
Mobile service revenue 702 745 (5.8) - - (5.8)
Fixed service revenue 333 307 8.5 0.2 - 8.7
UK 1,401 1,360 3.0 - 2.7 5.7
Mobile service revenue 1,039 1,003 3.6 - 2.8 6.4
Fixed service revenue 362 357 1.4 - 2.3 3.7
Spain 871 898 (3.0) - - (3.0)
Other Europe(1) 1,161 1,254 (7.4) 12.8 (1.3) 4.1
Vodacom(2) 1,426 1,664 (14.3) - 23.3 9.0
Other Markets(1,2) 333 364 (8.5) 48.7 33.9 74.1
Common Functions 131 128
Eliminations (67) (63)
Total service revenue 9,110 9,514 (4.2) 3.0 4.9 3.7
Other revenue 1,630 1,764
Revenue 10,740 11,278 (4.8) 3.4 5.1 3.7
Other growth metrics
Group service revenue excluding Turkey 8,786 9,205 (4.6) 2.1 4.3 1.8
Turkey - Service revenue 333 316 5.4 31.4 37.3 74.1
Vodafone Business - Service revenue 2,535 2,558 (0.9) 1.9 3.5 4.5
Germany - Vodafone Business service revenue 596 593 0.5 (0.5) - -
Italy - Vodafone Business service revenue 375 343 9.3 0.1 - 9.4
UK - Vodafone Business service revenue 528 519 1.7 - 2.7 4.4
Spain - Vodafone Business service revenue 281 289 (2.8) - - (2.8)
Other Europe - Vodafone Business service revenue 363 371 (2.2) 9.7 (1.1) 6.4
Notes:
1. Comparatives include the results of Vodafone Hungary and Vodafone Ghana
which were included in the Other Europe and Other Markets segments,
respectively, until their disposal. As previously reported, Vodafone Hungary
was sold in January 2023 and Vodafone Ghana was sold in February 2023.
2. From 1 April 2023, the Group revised its segmental reporting by moving
Vodafone Egypt from the Other Markets segment to the Vodacom segment. This is
the effective date on which the Group's reporting structure changed to reflect
the transfer of Vodafone Egypt to the Vodacom Group. All comparatives for
these two segments have been re-presented on the new basis of segmental
reporting. There is no impact on previously reported Group metrics.
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/reversals, 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.
Re-presented(1)
H1 FY24 H1 FY23
Reported Adjustments Adjusted Reported Adjustments Adjusted
€m €m €m €m €m €m
Adjusted EBITDAaL 6,378 - 6,378 7,244 - 7,244
Restructuring costs (212) 212 - (142) 142 -
Interest on lease liabilities 281 - 281 204 - 204
Loss on disposal of property, plant & equipment and intangible assets (22) - (22) (11) - (11)
Depreciation and amortisation on owned assets(2) (4,626) 303 (4,323) (4,807) 250 (4,557)
Share of results of equity accounted associates and joint ventures(3) (51) 164 113 376 127 503
Impairment reversal 64 (64) - - - -
Other (expense)/income (157) 157 - 104 (104) -
Operating profit 1,655 772 2,427 2,968 415 3,383
Investment income 368 - 368 137 - 137
Financing costs(4) (1,473) 231 (1,242) (1,418) 340 (1,078)
Profit before taxation 550 1,003 1,553 1,687 755 2,442
Income tax expense(5) (705) 269 (436) (485) (42) (527)
(Loss)/profit for the financial period (155) 1,272 1,117 1,202 713 1,915
Attributable to:
- Owners of the parent (346) 1,272 926 945 710 1,655
- Non-controlling interests 191 - 191 257 3 260
(Loss)/profit for the financial period (155) 1,272 1,117 1,202 713 1,915
Notes:
1. The results for the six months ended
30 September 2023 have been re-presented to reflect that Indus Towers Limited
is no longer reported as held for sale. There is no impact on Adjusted
EBITDAaL. However, Profit attributable to owners of the parent has decreased
by €34 million compared to the amount previously reported. See note 4
'Assets held for sale' in the unaudited condensed consolidated financial
statements for more information.
2. Depreciation and amortisation on
owned assets excludes depreciation on leased assets and loss on disposal of
leased assets included within Adjusted EBITDAaL. See page 52 for an analysis
of depreciation and amortisation. The adjustment of €303 million (H1 FY23:
€250 million) relates to amortisation of customer bases and brand intangible
assets.
3. See 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.
4. See 'Net financing costs' on page 14
for further analysis.
5. See 'Adjusted tax metrics' on page 51
for further analysis.
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.
Re-presented(1)
H1 FY24 H1 FY23
€m €m
(Loss)/profit attributable to owners of the parent (346) 945
Adjusted profit attributable to owners of the parent 926 1,655
Million Million
Weighted average number of shares outstanding - Basic 27,033 28,037
eurocents eurocents
Basic (loss)/earnings per share (1.28)c 3.37c
Adjusted basic earnings per share 3.43c 5.90c
Note:
1. The results for the six months ended
30 September 2023 have been re-presented to reflect that Indus Towers Limited
is no longer reported as held for sale. This has resulted in a decrease in
Profit attributable to owners of the parent and Adjusted profit attributable
to owners of the parent of €41 million and €34 million, respectively.
Consequently, Basic earnings per share decreased by 0.15c compared to 3.52c as
previously reported. Adjusted basic earnings per share decreased by 0.12c
compared to 6.02c as previously reported. See note 4 'Assets held for sale' in
the unaudited condensed consolidated financial statements for more
information.
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 movements including in respect of capital
External metric used by investor community. additions, disposal of property, plant and equipment and intangible assets,
integration capital additions and restructuring costs, together with related
Assists comparability with other companies, although our metric may not be working capital, licences and spectrum, interest received and paid, taxation,
directly comparable to similarly titled measures used by other companies. dividends received from associates and joint ventures, dividends paid to
non-controlling shareholders in subsidiaries, payments in respect of lease
liabilities and other.
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 (prior to
disposal) 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 FY24 H1 FY23
€m €m
Inflow from operating activities 5,544 6,280
Net tax paid 472 672
Cash generated by operations 6,016 6,952
Capital additions (3,365) (3,541)
Working capital movement in respect of capital additions (804) (966)
Disposal of property, plant and equipment and intangible assets 12 -
Integration capital additions (66) (101)
Working capital movement in respect of integration capital additions (42) (69)
Licences and spectrum (173) (2,181)
Interest received and paid(1) (806) (841)
Taxation (472) (672)
Dividends received from associates and joint ventures 75 463
Dividends paid to non-controlling shareholders in subsidiaries (167) (290)
Payments in respect of lease liabilities (2,252) (2,003)
Other 93 4
Free cash flow (1,951) (3,245)
Note:
1. Includes interest on lease
liabilities of €246 million (H1 FY23: €153 million).
The table below presents the reconciliation between Borrowing, Gross debt and
Net debt.
H1 FY24 Year-end FY23
€m €m
Borrowings (65,058) (66,390)
Lease liabilities 13,039 13,364
Bank borrowings secured against Indian assets 1,597 1,485
Collateral liabilities 4,431 4,886
Gross debt (45,991) (46,655)
Collateral liabilities (4,431) (4,886)
Cash and cash equivalents 7,148 11,705
Short-term investments 4,094 4,305
Collateral assets 649 239
Derivative financial instruments 3,481 4,702
Less mark-to-market gains deferred in hedge reserves (1,190) (2,785)
Net debt (36,240) (33,375)
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 using 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 2023 and 30 September 2022.
Re-presented(1)
H1 FY24 H1 FY23
€m €m
Operating profit(2) 12,983 6,078
Borrowings 65,058 75,644
Cash and cash equivalents (7,148) (7,077)
Derivative financial instruments included in trade and other receivables (5,273) (8,769)
Derivative financial instruments included in trade and other payables 1,792 1,786
Short-term investments (4,094) (4,402)
Collateral assets (649) (754)
Financial liabilities under put option arrangements 493 486
Equity 61,562 57,795
Capital employed at end of the year 111,741 114,709
Average capital employed for the year 113,225 115,322
ROCE using GAAP measures 11.5% 5.3%
Notes:
1. The results for the 12 months ended 30 September 2022 have been
re-presented to reflect that Indus Towers Limited is no longer reported as
held for sale. Consequently, ROCE using GAAP measures has increased by 0.1pps
compared to 5.2% as previously reported. See note 4 'Assets held for sale' in
the unaudited condensed consolidated financial statements for more
information.
2. Operating profit includes Other income/(expense), which includes merger
and acquisition activity that is non-recurring in nature.
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 2023 and 30 September 2022.
Re-presented(2)
H1 FY24(1) H1 FY23
€m €m
Operating profit 12,983 6,078
Interest on lease liabilities (513) (403)
Restructuring costs 657 315
Other income (8,837) (261)
Share of results of equity accounted associates and joint ventures (6) (571)
Other adjustments(3) 283 128
Adjusted operating profit for calculating pre-tax ROCE (controlled) 4,567 5,286
Adjusted share of results of equity accounted associates and joint ventures (9) 575
used in post-tax ROCE(4)
Notional tax at Adjusted effective tax rate(5) (1,268) (1,615)
Adjusted operating profit for calculating post-tax ROCE (controlled and 3,290 4,246
associates/joint ventures)
Capital employed for calculating ROCE on a GAAP basis 111,741 114,709
Adjustments to exclude:
- Leases (13,039) (12,084)
- Deferred tax assets (19,460) (18,699)
- Deferred tax liabilities 728 697
- Taxation recoverable (296) (393)
- Taxation liabilities 453 722
- Other investments (1,630) (1,783)
- Investments in associates and joint ventures (10,457) (5,453)
- Pension assets and liabilities (30) (212)
- Other adjustments(3) (914) (854)
Adjusted capital employed for calculating pre-tax ROCE (controlled) 67,096 76,650
Investments in associates and joint ventures 10,457 5,453
Adjusted capital employed for calculating post-tax ROCE (controlled and 77,553 82,103
associates/joint ventures)
Average capital employed for calculating pre-tax ROCE (controlled) 71,873 76,865
Average capital employed for calculating post-tax ROCE (controlled and 79,828 82,436
associates/joint ventures)
Pre-tax ROCE (controlled) 6.4% 6.9%
Post-tax ROCE (controlled and associates/joint ventures) 4.1% 5.2%
Notes:
1. ROCE calculations for H1 FY24 include the results of Vantage Towers until
its disposal on 22 March 2023 and the results of Oak Holdings 1 GmbH from that
date.
2. The results for the 12 months ended 30 September 2022 have been
re-presented to reflect that Indus Towers Limited is no longer reported as
held for sale. Consequently, Post-tax ROCE (controlled and associates/joint
ventures) has increased by 0.1pps compared to 5.1% as previously reported.
There is no impact on Pre-tax ROCE (controlled). See note 4 'Assets held for
sale' in the unaudited condensed consolidated financial statements for more
information.
3. Comprises adjustments to exclude hyperinflationary accounting in Turkey.
4. 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 and other income.
5. Includes tax for H1 FY24 at the Adjusted effective tax rate of 30.3% and
tax for H2 FY23 at the Adjusted effective tax rate of 26.2%.
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.
Non-GAAP measures
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.
Re-presented(1)
H1 FY24 H1 FY23
€m €m
Profit before taxation 550 1,687
Adjustments to derive Adjusted profit before tax 1,003 755
Adjusted profit before taxation 1,553 2,442
Adjusted share of results of equity accounted associates and joint ventures (113) (503)
Adjusted profit before tax for calculating Adjusted effective tax rate 1,440 1,939
Income tax expense (705) (485)
Tax on adjustments to derive Adjusted profit before tax (150) (132)
Adjustments:
- UK corporate interest restriction 48 35
- Tax relating to hyperinflation accounting 121 55
- Deferred tax on use of Luxembourg losses in the year 250 -
Adjusted income tax expense for calculating Adjusted tax rate (436) (527)
Adjusted effective tax rate 30.3% 27.2%
Note:
1. The results for the six months ended 30 September 2022 have been
re-presented to reflect that Indus Towers Limited is no longer reported as
held for sale. This has resulted in a decrease in Adjusted profit before
taxation of €34 million and an increase of €40 million in the Adjusted
share of results of equity accounted associates and joint ventures, resulting
in a total decrease of €74 million in Adjusted profit before tax for
calculating Adjusted effective tax rate. Consequently, the Adjusted effective
tax rate increased by 1.0pps compared to 26.2% as previously reported. See
note 4 'Assets held for sale' in the unaudited condensed consolidated
financial statements for more information.
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.
Re-presented(1)
H1 FY24 H1 FY23
€m €m
Share of results of equity accounted associates and joint ventures (51) 376
Restructuring costs 7 3
Other income (16) -
Adjusted share of results of equity accounted associates and joint ventures (60) 379
used in post-tax ROCE
Amortisation of acquired customer base and brand intangible assets 173 124
Adjusted share of results of equity accounted associates and joint ventures 113 503
Note:
1. The results for the six months ended 30 September 2022 have been
re-presented to reflect that Indus Towers Limited is no longer reported as
held for sale. This has resulted in an increase of €33 million in the
Adjusted share of results of equity accounted associates and joint ventures
used in post-tax ROCE and an increase of €7 million in the Amortisation of
acquired customer base and brand intangible assets, resulting in a total
increase of €40 million in the Adjusted share of results of equity accounted
associates and joint ventures. See note 4 'Assets held for sale' in the
unaudited condensed consolidated financial statements for more information.
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 FY24 H1 FY23
€m €m
Depreciation on leased assets - included in Adjusted EBITDAaL 2,157 2,046
Depreciation on leased assets - included in Restructuring costs 19 -
Depreciation on leased assets 2,176 2,046
Depreciation on owned assets 2,586 2,869
Amortisation of owned intangible assets 2,040 1,938
Depreciation and amortisation on owned assets 4,626 4,807
Total depreciation and amortisation on owned and leased assets 6,802 6,853
Loss on disposal of owned fixed assets 22 11
Loss on disposal of leased assets (2) (2)
Depreciation and amortisation - as recognised in the consolidated income 6,822 6,862
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 FY24 H1 FY23
€m €m
Capital additions 3,365 3,541
Integration related capital additions 66 101
Licence and spectrum additions 250 193
Additions 3,681 3,835
Intangible assets additions 1,396 1,316
Property, plant and equipment owned additions 2,285 2,519
Total additions 3,681 3,835
Definitions
Key terms are defined below. See page 40 for the location of definitions for
non-GAAP measures.
Term Definition
Africa Comprises the Vodacom Group.
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.
FTTH Fibre to the home.
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 additions Capital additions 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 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 and Albania. The prior period comparative results include Vodafone
Hungary which was disposed of in January 2023.
Other Markets Other Markets comprise Turkey. From 1 April 2023, the Group revised its
segmental reporting by moving Vodafone Egypt from the Other Markets segment to
the Vodacom segment. This is the effective date on which the Group's reporting
structure changed to reflect the transfer of Vodafone Egypt to the Vodacom
Group. The prior period comparative results include Vodafone Ghana which was
disposed of in February 2023.
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 (see below) and Other revenue (see above).
Roaming Roaming allows customers to make calls, send and receive texts and data on our
and other operators' mobile networks, usually while travelling abroad.
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 supports organisations in a digital world. With Vodafone's
expertise in connectivity, our leading IoT platform and our global scale, we
deliver the results that organisations need to progress and thrive. We support
businesses of all sizes and sectors.
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. 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
2022 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 "FY24" are to the financial year
ending 31 March 2024. References to "last year", "last financial year" or
"FY23" are to the financial year ended 31 March 2023. References to "H1 FY24"
are to the six month period ended 30 September 2023. References to "H1 FY23"
are to the six month period ended 30 September 2022.
4. Vodacom refers to the Group's interest in Vodacom Group Limited
('Vodacom') as well as its operations, including subsidiaries in South Africa,
Egypt, DRC, Tanzania, Mozambique and Lesotho. On 13 December 2022, Vodafone
completed the transfer of its 55% shareholding in Vodafone Egypt to Vodacom.
Vodafone Egypt has been included within the Vodacom reporting segment from 1
April 2023.
5. 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 document 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 EBITDaL and Adjusted free cash flow
for the financial year ending 31 March 2024; the announced agreement to
combine Vodafone UK and Three UK; the announced agreement to dispose of
Vodafone Spain; the Group's FTTH joint venture's network rollout; changes to
German TV laws; expectations for the Group's future performance generally; the
transaction to purchase Nowo Communicatons; 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
integration or performance of current and future investments, associates,
joint ventures, non-controlled interests and newly acquired businesses;
certain of the Group's plans and objectives, including the Group's strategy
and its emissions targets and other ESG goals, commitments, targets and
ambitions, climate-related scenarios or pathways and methodologies it uses to
assess its progress in relation to those.
Forward-looking statements are sometimes but not always identified by their
use of a date in the future or such words as 'will', 'may', 'expects',
'believes', 'plans', 'continues', 'progress', 'further', or 'ongoing'. 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 will 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: general economic and
political conditions in the jurisdictions in which the Group operates and
changes to the associated legal, regulatory and tax environments; increased
competition; levels of investment in network capacity and the Group's ability
to deploy view technologies, products and services; evolving cyber threats to
the Group's services and confidential data; the Group's ability to embed
responses to climate-related risks into business strategy and operations;
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; slower 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 resources, 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 may 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, associates, franchises, brand licences, platform
sharing or other arrangements with third parties, including the signed
agreement to combine Vodafone's UK business with Three UK; acquisitions and
divestments of Group businesses and assets and the pursuit of new, unexpected
strategic opportunities; the Group's ability to integrate acquired business or
assets; the extent of any future write-downs or impairment charges on the
Group's assets, or restructuring charges incurred as a result of an
acquisition or disposition; 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; changes in statutory tax rates and profit mix; climate change
projection risk including, for example, the evolution of climate change and
its impacts, changes in the scientific assessment of climate change impacts,
transition pathways and future risk exposure and limitations of climate
scenario forecasts; amendments to or new ESG reporting standards, models or
methodologies; changes in ESG data availability and quality which could result
in revisions to reported data going forward; and climate scenarios and the
models that analyse them have limitations that are sensitive to key
assumptions and parameters, which are themselves subject to some uncertainty.
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 in the summary of our principal risks in the Group's
Annual Report for the year ended 31 March 2023. The Annual Report can be found
on the Vodafone Group's website (vodafone.com/ar2023). All subsequent written
or oral forward-looking statements attributable to Vodafone or any member of
the Vodafone 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. 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 2023
-End-
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