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Vodafone Group Plc Half year results
10 November 2015
For the six months ended 30 September 2015
Information in the following communication relating to the price at which relevant investments have been bought or sold in the past,
or the yield on such investments, cannot be relied upon as a guide to the future performance of such investments. This presentation
does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite,
subscribe for or otherwise acquire or dispose of securities in any company within the Group.
The presentation contains forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995
which are subject to risks and uncertainties because they relate to future events. These forward-looking statements include, without
limitation, statements in relation to the Group’s financial outlook and future performance. Some of the factors which may cause
actual results to differ from these forward-looking statements are discussed on the final slide of the presentation.
The presentation also contains non-GAAP financial information which the Group’s management believes is valuable in understanding
the performance of the Group or the Group’s businesses. However, non-GAAP information is not uniformly defined by all companies
and it may not be comparable with similarly titled measures disclosed by other companies, including those in the Group’s industry.
Although these measures are important in the assessment and management of the business, they should not be viewed in isolation
or as replacements for, but rather as complementary to, the comparable GAAP measures.
Vodafone, the Vodafone Portrait, the Vodafone Speechmark, Vodacom and M-Pesa, are trade marks of the Vodafone Group. The
Vodafone Rhombus is a registered design of the Vodafone Group. Other product and company names mentioned herein may be the
trade marks of their respective owners.
Disclaimer
2
Half year highlights
All growth rates shown are organic unless otherwise stated 3
All growth rates shown are organic unless otherwise stated
1. Targeted urban areas
Financial
performance
• Q2 Group service revenue +1.2%; fifth consecutive quarter of improvement
• Q2 continued momentum in AMAP +6.7%; further recovery in Europe -1.0%
• H1 EBITDA return to growth, +1.9% to £5.8bn; full year EBITDA guidance now £11.7bn - £12.0bn
• Free cash outflow £0.5bn reflecting Project Spring phasing; net debt £28.9bn
• Interim dividend per share 3.68 pence, +2.2%
Strategic and
commercial
progress
• Project Spring: 80% through mobile build; 4G coverage now 80% in Europe
• Marketing high speed broadband to 66m homes across Europe; 42% on own infrastructure,
new converged offers launched
• 30m 4G customers (+10m in H1) in 19 markets. 12.5m fixed broadband customers (+0.5m)
• AMAP: 125m data users, India 3G coverage 94%1
• Strong commercial progress in mobile: H1 contract net adds 2.7m, churn improving, data volume +75%
• Enterprise revenue +1.9% in Q2; continued growth in VGE and M2M
• Vodafone India IPO preparations underway
Half year 15/16
Financial review
Nick Read Group Chief Financial Officer
Return to EBITDA growth
5
H1 15/16
(£m)
Reported
growth (%)
Organic
growth (%)
Q2 15/16
organic
growth (%)
Group revenue 20,226 (2.3) 2.8 2.3
Group service revenue 18,430 (3.7) 1.0 1.2
Group EBITDA1 5,786 (1.7) 1.9
EBITDA margin (%) 28.6 0.2ppt (0.3)ppt
D&A2 (4,142) 1.2 5.9
Adjusted operating profit1, 2 1,641 (6.5) (5.9)
All growth rates shown are organic unless otherwise stated
1. Reported excluding the impact of restructuring costs and significant one-off items. Restructuring costs were £114m in H1 15/16 and £84m in H1 14/15
2. Reported excluding the impact of restructuring costs and significant one-off items and amortisation of acquired intangible customer bases and brand intangible assets
Lower financing costs; full year tax rate to include UK one-off
6
• Weighted average cost of debt 4.4% (H1 14/15: 5.4%)
• Adjusted effective tax rate 30.5% in H1; full year similar to H1 excluding UK one-off (medium term high 20s)
• Move to Euro reporting from 2017 financial year
1. Reported excluding the impact of restructuring costs, significant one-off items and amortisation of acquired intangible customer bases and brand intangible assets
H1 15/16
(£m)
H1 14/15
(£m)
Reported
growth (%)
Adjusted operating profit1 1,641 1,756 (6.5)
Net financing costs (552) (682)
Taxation (299) (288)
Non controlling interests (123) (89)
Adjusted earnings1 667 697
Adjusted earnings per share1 2.51p 2.63p (4.6)
Interim dividend per share 3.68p 3.60p 2.2
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
Q1 14/15 Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
Group Europe AMAP
5th quarter of improved organic service revenue trends
• 7 out of 13 European markets are now back to growth in H1
• Maintained good momentum in AMAP
7
5.4ppt
7.2ppt
2.2ppt
Engines of growth
8
Mobile contract base (m)
Europe 4G & India 3G customer base (m) Enterprise service revenue growth (%)
NGN fixed customers (m)
(2.0)
(1.1)
1.4 1.8 1.9
Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
21 27
35 41
48
+5m
YoY
+1.2m
YoY
+10m
YoY
+17m
YoY
4.4 4.7
5.1 5.3
5.6
Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
86
87
88
90 91
Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
Europe 4G India 3G
6.3 6.0
5.6 5.4 5.5 5.6
4.0
4.5
5.0
5.5
6.0
6.5
7.0
H2 12/13 H1 13/14 H2 13/14 H1 14/15 H2 14/15 H1 15/16
EBITDA (£bn) Reported EBITDA margin (%)
EBITDA growth with margin stabilising
9 1. Constant currency, 100% Italy excl. KDG, Ono, HOL and Cobra
1
30.2
29.3
28.6 28.4
28.1
28.6
-250 -200 -150 -100 -50 0 50 100
EBITDA growth across our top markets
10 * Adjusted for intercompany phasing
(£m)
*
H1 14/15
-10% YoY
-c.£600m
H1 15/16
+1.9% YoY
+c.£100m
Absolute organic EBITDA growth YoY
11
£4.3bn
Pre-Spring1 Post-Spring
expected run rate
£4.8bn
Targeting margin expansion
Technology opex Expanded & modernised (Mar-16)
Mobile:
• c.90% EU 4G coverage
• Single RAN >90% in EU
• 90% high capacity backhaul in EU
• HD voice in all EU markets
• 84% 3G/4G AMAP coverage (excl. India)
• India 95% 3G coverage in targeted areas
Fixed:
• Converged services in all key EU markets
Enterprise:
• Increased global scale and footprint
Network expansion (by year
end):
• c.45k additional mobile sites
• 7.5m new households covered
by NGN
• 65 countries on IP-VPN
Spring is an exceptional investment programme
1. FY 13/14
12
Direct costs
£6.6bn
Customer costs
£8.8bn
Technology
costs
£4.4bn
Support costs
£6.7bn
Targeting margin expansion
Fit for growth – an opportunity to constrain costs below revenue growth
Components of our cost base:
FY 14/15
cost base (excl. interconnect)
2. Commercial efficiency 3. IT transformation
1. Regulatory incumbent
management
4. Shared services penetration
5. Centralised
procurement/logistics
6. ZBB/productivity
targeting
13
Targeting margin expansion
Fit for growth
Commission optimisation Digital sales & services
Commercial efficiency
H1 14/15 H1 15/16
Channel mix
% contract customer additions via Vodafone
branded channels
30% 35%
52% 63%
81% 87%
Improving returns on commission spend by:
Moving from volume to value
based commissions
Rewarding for good customer
experience • My Vodafone app 26%
penetration
• Target 70%
• Currently 5% of inflow revenue
• Target >10%
Sales
Service
14
Targeting margin expansion
Fit for growth
Organisational efficiency
Capex & opex efficiency Zero based budgeting Standardisation and scaled
footprint optimisation Shared services employees Procurement spend in VPC
250
300
350
H1 14/15 FY 14/15 H1 15/16
Finance TechnologyCustomer Ops OtherSavings (£m)
15k 17k
18.5k 17%*
* Targeting 25% of Vodafone employees by 2018
52% 57%
70%
H1 13/14 H1 14/15 H1 15/16
Targeting 80% of global spend
Scope:
Group functions - absolute cost targets
Group operations - multi-year productivity targets
Countries/P&L units - multi-year margin targets
15
Targeting margin expansion
M&A synergies secured
Organisational integration
Procurement centralised
Migration of DSL and mobile
customer base
Network: integrating national
backbone and mobile base stations
Converged propositions
launched
Complete
Complete
On target
157k DSL customers migrated
Mobile migration complete
Complete
Fully complete by the year end
On target
121k DSL customers migrated
On target to secure 100% of €240m/pa FY 15/16 exit run-rate: On target to secure 75% of €300m/pa
Composition of H1 EBITDA growth
H1 15/16 H1 14/15 Improvement
EU mobile contract net adds (000s) 1,075 349 +208%
Fixed broadband net adds (000s) 494 399 +24%
Consumer contract churn 17.6% 19.2% +1.6ppt
Enterprise churn 15.6% 16.4% +0.8ppt
16
Organic H1 14/15
EBITDA
Gross margin
5,583
161
Commercial costs
1. Commercial costs include A&R, and sales, distribution & advertising/promotion costs
1
117
Technology opex Other opex Organic H1 15/16
EBITDA
55
(229)
5,687
(£m)
Free cash outflow, reflecting phasing of Project Spring
17
H1 15/16
(£m)
H1 14/15
(£m)
EBITDA 5,786 5,884
Capital expenditure (3,708) (3,901)
Capital creditors (579) (6)
Working capital (1,203) (1,072)
Net interest (364) (580)
Taxation (430) (418)
Dividends received1 - 127
Dividends to non-controlling interests (131) (140)
Other2 88 107
Free cash flow (541) 1
1. Principally relating to Indus Towers
2. Other relates to cash movements on share based payments and disposal of capital assets
• Capital creditor unwind, reflecting timing of Project Spring payments
Passing peak investment for capex and spectrum
18
1.4
2.5 2.2
3.1
2.7
FY 11/12 FY 12/13 FY 13/14 FY 14/15 FY 15/16e
India EU 4G EU renewal AMAP
£2.4bn
5 year avg. Average over next 3yrs
expected to be lower
(2020: EU 700MHz)
Capex intensity
Spectrum spend (£bn)
Pre-Spring Spring Post-Spring
Mobile 13% 20% 12%
Maintenance/capacity - 10% 8%
Footprint growth - 10% 4%
Fixed - 26% 18%
Maintenance/capacity - 12% 9%
Footprint growth - 10% 5%
CPE - 4% 4%
13-14%
medium term
capital intensity
Balance sheet robust and in line with Spring plan
19 19
• H1 net debt £25.4bn including $5.25bn Verizon loan notes
– also includes £4bn of deferred licence payments
• H1 spectrum spend in India, Germany and the UK
4.1 28.9 0.5 1.0 c.30
Mar 2015 Spectrum Final 14/15
dividend
Other Sep 2015 Turkey/Italy
spectrum
H1 dividend Guidance FCF Mar 2016
22.3
0.7 +ive
(£bn)
2.0
£11.4bn
FY 14/15 EBITDA (restated) Guidance FY 15/16 EBITDA
20
• Performance in H1 15/16 in line with expectations
• Expect revenue and profitability trends to continue to improve in the second half
• Guidance for FY 15/16:
– EBITDA range narrowed to higher end of the range, £11.7-£12.0bn
– positive free cash flow after all capex
Guidance range narrowed, continued dividend growth
Now £11.7 - 12.0bn 3-5% YoY growth
Was £11.5 - 12.0bn
1. Based on FY 14/15 guidance FX, and adjusted for MVNO/regulatory (India) impacts and M&A
1
H1 15/16 summary
21
• Markets remain competitive, unsettled global economy
• A return to growth in both service revenue and EBITDA
• Strong commercial momentum
• Guidance updated: EBITDA range narrowed
– expect progress to continue in H2
– interim dividend per share of 3.68p, up 2.2%
• Robust balance sheet
Strategic &
commercial review
Vittorio Colao Group Chief Executive
25.8 25.2
24.2 24.7 24.6
29.8 29.3
28.8 29.0 29.1
22.9 22.6 21.2 21.0
20.9
24.3 23.1
21.1 20.4
21.0
Q2
14/15
Q3
14/15
Q4
14/15
Q1
15/16
Q2
15/16
Germany UK Italy Spain
272
509
351
467
608
Q2
14/15
Q3
14/15
Q4
14/15
Q1
15/16
Q2
15/16
18.6%
17.0%
18.9%
17.6%
17.1%
15.7%
22.0%
18.3%
Q2 13/14 Q2 15/16
Europe Germany UK Italy
• 4G churn and NPS better than 3G
• Improved direct channel mix
• Customer value management actions
Project Spring supporting commercial performance
23
• Improved network quality
• Base now 49% contract (46% a year ago)
• Market stabilisation
• Increasing penetration of larger data
bundles; content in all key markets
• 4G ARPU higher than 3G
Improving churn
Consumer contract (%)
Growing contract net adds
Europe (000s)
Stabilising ARPU QoQ
Consumer contract (local currency)
627 697
755 812
927
Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
Project Spring supporting data demand growth
Avg. data usage NPS
4G stimulating data take up
106 110
116
122 125
Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
24
Strong data adoption in emerging markets3
Data users (m) and share of mobile base (%)
1. 29.9m customers have a 4G device with a 4G plan (24.3m in Europe). 27.3m have a 4G smartphone with a 4G plan (22.2m in Europe)
2. iOS and Android
3. AMAP
10.5 13.7
20.2 24.1
29.9
Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
• 20% of Europe
customer base,
(41% of contract)
35% 34%
36% 37% 38%
• Avg. smartphone
usage 649MB2, 3
Growing European smartphone usage Monthly average MB2
• 56% smartphone
penetration in
Europe
• 27% of customers
use >1GB
48%
3G 4G
2x
+9ppt
• 39% of Europe data
traffic on 4G
Increasing penetration of 4G customers (m)1
17.1
22.6 25.8
H1 13/14 H1 14/15 H1 15/16
11.2
11.8 12.0
12.3 12.5
Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
39% 39% 42% 43% 45%
36 40 41
62 66
Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
Project Spring supporting progress on convergence
25
Marketing high speed broadband to 66m homes
• 44% household
coverage in Europe
• 42% on own
infrastructure
% on fibre/cable
Growing share of Europe service revenue from fixed (%)
• Europe fixed
revenue +3.1%
in Q2
• 5.6m NGN (+0.3m)
• 9.3m TV (+0.1m)
Increasing size and quality of the fixed broadband base (m)
New fixed/converged propositions
Nov 2015
Apr 2015
Sep 2015
Oct 2015
Aug 2015
FY 15/16 launches To be launched (including TV)
• 27% of Group service revenue
• Global leader in M2M:
– 29 markets, 24m connections
– Top ranking by Gartner and
Machina Research
• A leading carrier of international voice:
58bn voice minutes p.a.
Project Spring supporting Enterprise momentum and scale
Investment
Spring investments on track
• IP-VPN in 65 countries; 254 PoPs2,
+34/83 since Sep 2013
• One Net in 12 countries for SMEs
• US MVNO for multinationals Oct 2015
• Growth from data and customers,
despite ARPU pressure
• Q2 VGE revenue +7.3%1, M2M +29%,
Cloud & Hosting +13%
• Key customer wins and strong pipeline
Momentum Organic service revenue growth (%)
(2.0)
(1.1)
1.4 1.8 1.9
Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
Scale
1. Underlying growth
2. Points of Presence 26
(3.9)
(1.8)
(3.5)
(1.2)
Incl. KDG (1.8)
Incl. KDG
Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
121
235
137 104
245
Q2 14/15 Q3 14/15 Q4 14 /15 Q1 15/16 Q2 15/16
Service revenue growth (%) • Service revenue: underlying growth similar excluding one-offs
• Mobile revenue -2.8% (Q1: -2.1%); increased competition in
enterprise and consumer base re-pricing, offset customer growth
and improved direct channel mix
• Fixed: customer growth offsets ARPU pressure – KDG: +7.0% (Q1: +6.6%); +98k net adds1
– DSL: stabilising base but lower ARPU (promotional discounting)2
• Project Spring: 4G coverage 81%, dropped call rate -28% to 0.55%3
• EBITDA +1.0% in H1, margin 32.7%, +0.5ppt supported by
lower A&R
Germany: good contract base growth, some price pressure
27
Contract net adds (000s)
1. Including migrations
2. Prior to migrations
3. End of September
New converged
offer launched in November
Q2
14/15
Q3
14/15
Q4
14/15
Q1
15/16
Q2
15/16
Base Inflow
Repricing customer base
• Secured more 1,800 MHz spectrum to
boost 4G speed
• 89% high capacity backhaul (Sep 13: 76%)
• Ranked ‘Best Voice Network in Germany’
by ComputerBILD
Germany: key turnaround actions
28
30 32
35
H1 14/15 H2 14/15 H1 15/16
• Promotional focus on direct channels.
1,400 branded stores1
• Reduced commissions in indirect
channels
• Consumer contract ARPU stable QoQ
• Value upsell initiatives, e.g. data add-ons
1. Includes KDG stores
2. Excludes multi-SIM and instalments
2
71
77
81
H1 14/15 H2 14/15 H1 15/16
Improved network quality Better channel mix 4G coverage (%) Direct channel share of consumer
contract gross adds (%)
Consumer contract ARPU
Italy: mobile market remains stable, further recovery in trends
29
EBITDA growth and margin (%)
Service revenue growth (%) • Mobile service revenue -3.0% (Q1: -3.2%): – lapping prepaid price rises
– consumer prepaid ARPU +6.8%, lower churn and stabilising
customer base
– 4.0m 4G customers, up 3m YoY
• Fixed: sustained momentum; +67k broadband users in H1
• Project Spring: delivering 4G leadership (coverage 91%),
fibre footprint up to 2m households
• EBITDA returned to growth as top line pressure offset by
commercial and operating cost efficiencies
(10.2)
(8.0)
(4.1)
(2.0) (2.0)
Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
(25.4) (24.0) (21.7)
(7.2)
2.3
H1 13/14 H2 13/14 H1 14/15 H2 14/15 H1 15/16
37.1% 34.5% 33.7% 33.2% 34.1% Margin
Satisfied or
reimbursed!
1 day free browsing if you’re not satisfied
with 4G
Network guarantee
UK: improving in Enterprise, stable overall
Service revenue growth (%) • Mobile service revenue -0.5% (Q1: +0.7%) – customers given control of out-of-bundle spend, 08XX regulation
– customer growth; lower churn, direct channels (retail sales +48%)
– 5.3m 4G users, up 4.2m YoY
• Fixed: improving in fixed Enterprise (-0.7%, Q1: -2.1%) due
to VGE
• Project Spring: delivering network improvement – 4G coverage 82%1, London 99%
– P3 ranked #1 network in London for combined voice and data
• EBITDA: H1 margin 21.7%; 19.7% excl. network settlements;
-1.1ppt YoY due to phasing of central costs
30
(3.3)
(0.5) (0.6)
0.2
(0.5)
Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
1. Ofcom basis 82%; Vodafone basis 75%
56
98
49
83 90
Q2 14/15 Q3 14/15 Q4 14 /15 Q1 15/16 Q2 15/16
Contract net adds (000s)
17.4% 19.0% 17.7% 15.8% 15.6% Churn
Marketing to 22m
premises. TV by end FY 15/16
14
78
14
54
92
Q2 14/15 Q3 14/15 Q4 14 /15 Q1 15/16 Q2 15/16
Spain: positive trends, good commercial momentum
31
(9.8) (9.3)
(7.8)
(5.5)
Incl. Ono
(2.0)
Incl. Ono
Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
• Mobile revenue -6.8% (Q1: -9.5%) in more stable market – QoQ ARPU growth, data bundle adoption, contract net adds +92k
• Fixed revenue +10.7% (Q1: +4.2%) – +28k broadband net adds; strong take up of TV/football
– Ono integration proceeding well, fully migrated mobile customers
• Project Spring: 80% 4G coverage, 8m NGN premises reached1
• EBITDA +16.3% in H1, margin +3.7ppt2; handset financing and
Ono integration benefits more than offsetting TV costs
Service revenue growth (%)
Contract net adds (000s)
#1
for Consumer
NPS
1. Including joint fibre build
2. Organic
784k converged customers since April
launch
Vodacom: strong performance and network leadership
32
0.3
(3.9)
(0.2)
4.5 3.9
Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
South Africa Vodacom service revenue growth (%)
• Service revenue +3.0%; more rational market, voice decline
eases, contract churn still low 7.3%, ARPU stable
• Data growth driven by sale of affordable devices and data bundles – total usage +50%, revenue +32%
• Project Spring: marketing our network leadership; 4G coverage
47%, 3G at 98%; 85% high speed transmission
• EBITDA +13.5%, driven by significant cost actions in H2 14/15
International
• Service revenue +8.3%; data users +14%, and M-Pesa growth
• Capex up 29.7%, driving differentiation
in Tanzania and DRC
#1
Vodacom EBITDA margin (%)
36.4 36.4
35.0 35.4
37.1
H1 13/14 H2 13/14 H1 14/15 H2 14/15 H1 15/16
82m
data bundles sold in Q2, +91% YoY
24%
of Vodacom revenue
India: strong data demand, expanding 3G and 4G capability
33
13.6 16.6
19.4 22.1 23.8
Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
3G data users (m)
13.1 14.7
11.7
6.9 5.6
13.1 14.7
13.2
10.6 9.2
Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16
1. MTRs, roaming price caps and service tax
2. Targeted urban areas
8% 9% 11% 12% 13%
Service revenue growth (%)
Reported Excluding MTRs
750 MB
Avg. usage
• Service revenue underlying +10.9% excl. all regulatory impacts1
– strong customer growth (2.8m net adds) partly offset by ongoing
competition on voice business
– data growth driven by 3G; total usage +69%, revenue +48%; 19% of
service revenue
• M-Pesa: 97k agents, 665k active users
• Project Spring 94% 3G coverage2, +3.7k 3G sites, retail store
expansion on track
– launching own 3G in seven new circles and 4G in five by end FY 15/16
• EBITDA +6.7% in H1, margin stable at 29.7%
3G penetration
India: strong track record of achievement
34
Strong platform
• Leading assets:
– 1 of 3 nationwide providers
– 1.7m distribution points, 9,900 branded retail
stores
– 42% of Indus, world’s largest tower company
• Strong brand recognition
• High quality customer base
Profitable growth
17
22
Q4
08/09
Q4
09/10
Q4
10/11
Q4
11/12
Q4
12/13
Q4
13/14
Q4
14/15
Q2
15/16
Revenue market share (%)
#1
for Consumer
NPS
Continuing opportunity
(Rs bn)
218
53 13
422
126 32
Service revenue EBITDA Op FCF
FY 09/10 FY 14/15
78% mobile
penetration
smartphone penetration
3%
4G penetration
• Strong growth; 5 year CAGR to FY 14/15:
– Service revenue +14.1%
– EBITDA +18.8%
– Operating FCF: +20.7%
• Economy recovering; 2015e GDP +7.5%
• Improving demographics
• Strategic growth areas: data, enterprise,
M-Pesa
23%
1.2bn Population
Q2 YoY service revenue growth
(vs. Q1)
Increased revenue market
share to 35.9%. NPS leader
Other key markets driving revenue / EBITDA growth
Improved revenue market
share leadership to 40.6%. NPS
leader
Ongoing convergence pressure
but signs of market recovery
4th consecutive quarter of
growth in a competitive market
Commercial execution and Project Spring driving data usage, customer growth and ARPU
35
+20.2% +5.2ppt
+1.1% +0.1ppt
+10.7% +4.6ppt
-0.2% +2.4ppt
• Revenue growth driven by
data, customer base (+814k
H1), ARPU (Q2 +14%), and
enterprise
• Revenue growth fuelled by
data and voice usage, ARPU
Q2 +15%
• Fixed broadband customers
H1 +56k, improving mobile
revenue
• Growth in enterprise and
consumer fixed revenue driven
by higher customer base
Leveraging Project Spring: leadership in customer experience
36
#1 NPS rank in seven of our top ten markets
Germany –
network
when it
matters
7.3
10.8
16.8
Q2
13/14
Q2
14/15
Q2
15/16
My Vodafone app users (m)
300
1,150
3,240
4,200
FY
12/13
FY
13/14
FY
14/15
H1
15/16
Project Spring: transforming our
stores
Marketing our network quality
Enhancing digital and retail experience NPS leadership
Turkey & NZ
money back
network
guarantee
ki
CARE: bringing Project Spring to life for our customers
37
C Connectivity A R E Always in
control Reward loyalty Easy access
• One day free browsing if
you’re not satisfied with 4G
Italy: satisfied or
reimbursed
• 30% upgrade to right
price plan
India: full credit for first
time bill shock
South Africa: Just 4 you UK Enterprise: Prime
Contact
• For SMEs & SOHO
• Dedicated contact owns
customer issues
• Personalised offers for
customer profile
• 24m bundles in first
month
Group-wide programmes to deliver “CARE”
Summary
H1 progress Priorities: H2 and beyond
• Complete Spring mobile build
• Increase network and service differentiation
• Launch TV in further markets, continue
to grow NGN footprint and enterprise
• Engage regulators on incumbent
monopolistic behaviour
• Focus on efficiency and margin
• 80% through Spring mobile build; material
enhancements to coverage and quality
• Step change in customer experience
underway
• Leading in data: 30m 4G customers, 5.6m
NGN
• Fully converged in Germany and Spain
• Strengthened capabilities in Enterprise
• EBITDA returned to growth, +1.9%
• Dividend per share up 2.2%
38
Q&A
39
41
Appendix
Project Spring KPIs
42
UK Germany
Deployment and experience
Q3
14/15
Q4
14/15
Q1
15/16
Q2
15/16
4G % outdoor population
coverage 73% 77% 78% 81%
% of data sessions >3Mbps 82% 82% 82% 82%
% of dropped calls 0.66% 0.57% 0.54% 0.58%
% homes reached by owned
NGN 35% 35% 35% 35%
% of targeted stores refitted 16% 18% 28% 39%
Commercial impact
4G customers (m) 3.4 5.0 5.5 6.5
Contract churn (%) 15.0% 14.2% 13.8% 15.5%
Contract mobile ARPU (EUR) 27.1 26.0 25.9 25.7
Average smartphone data
usage (MB) 550 620 593 632
Deployment and experience
Q3
14/15
Q4
14/15
Q1
15/16
Q2
15/16
4G % outdoor population coverage 57% 63% 68% 75%
% of data sessions >3Mbps 84% 84% 86% 87%
% of dropped calls 0.86% 0.78% 0.75% 0.77%
% homes reached by owned NGN - - - -
% of targeted stores refitted 29% 40% 55% 70%
Commercial impact
4G customers (m) 1.7 2.5 4.0 5.3
Contract churn (%) 19.0% 17.7% 15.8% 15.6%
Contract mobile ARPU (GBP) 27.4 26.7 26.6 26.4
Average smartphone data usage
(MB) 704 790 1,014 1,183
Project Spring KPIs
43
Spain Italy
Deployment and experience
Q3
14/15
Q4
14/15
Q1
15/16
Q2
15/16
4G % outdoor population
coverage 76% 84% 88% 91%
% of data sessions >3Mbps 90% 92% 94% 92%
% of dropped calls 0.63% 0.59% 0.60% 0.62%
% homes reached by owned NGN 2% 4% 5% 7%
% of targeted stores refitted 85% 90% 94% 96%
Commercial impact
4G customers (m) 1.2 2.8 2.7 4.0
Prepaid churn (%) 38.4% 37.5% 32.4% 32.1%
Prepaid mobile ARPU (EUR) 10.9 10.8 11.4 12.2
Average smartphone data usage
(MB) 922 1,000 981 1,254
Deployment and experience
Q3
14/15
Q4
14/15
Q1
15/16
Q2
15/16
4G % outdoor population coverage 69% 75% 78% 80%
% of data sessions >3Mbps 81% 83% 83% 81%
% of dropped calls 0.66% 0.60% 0.58% 0.60%
% homes reached by owned NGN 44% 45% 46% 46%
% of targeted stores refitted 20% 26% 30% 34%
Commercial impact
4G customers (m) 2.2 2.9 3.3 4.3
Contract churn (%) 20.2% 21.6% 18.1% 20.1%
Contract mobile ARPU (EUR) 22.01 20.91 20.11 20.51
Average smartphone data usage
(MB) 966 977 1,097 1,063
1. Spain ARPU includes Ono from Q3 14/15
Project Spring KPIs
44
Vodacom (South Africa) India
Deployment and experience
Q3
14/15
Q4
14/15
Q1
15/16
Q2
15/16
3G % outdoor population
coverage
(targeted urban areas)
90% 90% 91% 94%
% of data sessions (>400kbps) 70% 73% 74% 75%
% of dropped calls 1.14% 1.06% 1.02% 1.08%
% of targeted stores refitted 23% 38% 45% 55%
Commercial impact
3G customers (m) 16.6 19.4 22.1 23.8
Prepaid mobile ARPU (INR) 154 150 149 144
Average data usage (MB) 310 331 357 393
Deployment and experience
Q3
14/15
Q4
14/15
Q1
15/16
Q2
15/16
4G % outdoor population coverage 34% 35% 41% 47%
% of data sessions >3Mbps 84% 85% 85% 86%
% of dropped calls 0.80% 0.78% 0.67% 0.49%
% of targeted stores refitted 64% 70% 76% 80%
Commercial impact
4G customers (m) 1.2 1.3 1.8 1.8
Contract mobile ARPU (ZAR) 383 374 381 393
Average smartphone data usage (MB) 445 410 501 541
Service revenue bridge
• M&A and one off items relates primarily to £0.3bn of service revenue from Ono and the UK ladder
settlement (£0.1bn)
45
(£m)
19,139
(1,326)
439 429
(380)
14
(102)
122 95 18,430
H1 14/15
reported
service
revenue
FX M&A & one off
items
In-bundle Out of bundle Incoming MTR Fixed line and
carrier
Other H1 15/16
reported
service
revenue
H1 15/16 H1 14/15
£m % £m %
Europe
Service revenue (26) (0.2) (107) (0.8)
EBITDA - (23)
AMAP
Service revenue (76) (1.4) (71) (1.3)
EBITDA (21) (42)
Group
Service revenue (102) (0.6) (178) (1.0)
EBITDA (21) (65)
Voice MTR impact
46
Profit
H1 15/16
(£m)
H1 14/15
(£m)
Adjusted operating profit1 1,641 1,756
Net financing costs (700) (485)
Taxation (340) (373)
Deferred taxation (1,476) 5,468
Customer & brand amortisation2 (521) (637)
Restructuring costs (114) (84)
Other (74) (144)
Profit for the year (1,584) 5,501
Non controlling interests (114) (79)
(Loss)/Profit attributable to owners of parent (1,698) 5,422
47 1. Now reported excluding the impact of restructuring costs, significant one-off items and amortisation of acquired intangible customer bases and brand intangible assets
2. Customer amortisation relate primarily to Italy (H1 15/16 £169m, H1 14/15 £240m), KDG (H1 15/16 £174m, H1 14/15 £253m) and Ono (H1 15/16 £108m, H1 14/15 £55m).
Adjusted EPS reconciliation
H1 15/16
(£m)
H1 14/15
(£m)
Reported
growth (%)
(Loss)/Profit attributable to owners of parent (1,698) 5,422
Taxation 1,517 (5,383)
Net financing costs 148 (197)
Customer & brand amortisation 521 637
Non controlling interests (9) (10)
Restructuring costs 114 84
Other 74 144
Adjusted profit for the year 667 697
Weighted average shares (m) 26,529 26,470
Adjusted EPS (p) 2.51 2.63 (4.6)
48
Taxation
H1 15/16
(£m)
H1 14/15
(£m)
Taxation 1,816 (5,095)
Deferred tax assets (1,476) 2,127 Deferred tax following revaluation of
investments in Luxembourg
Recognition of deferred tax assets - 3,341 Recognition of deferred tax asset for
losses in Luxembourg
Amortisation of deferred tax assets (258) (272)
Other 217 187
Adjusted tax expense 299 288
Effective tax rate 30.5% 30.6%
49
Financing costs
H1 15/16
(£m)
H1 14/15
(£m)
Underlying net financing costs (451) (578) • Primarily favourable FX movements YoY
Mark to market gains/(losses) (86) (80)
Potential interest on tax (15) (24)
Non-EPS FX revaluation (148) 197
Net financing costs (552) (682)
Average cost of net debt 4.4% 5.4%
50
Cost of debt
51
Currency Percentage of
net debt
Forecast interest rate
for FY 15/16
EUR 78 2.1%
USD 11 1.0%
GBP (24) 0.5%
INR 21 10%
ZAR 4 7.0%
Other 10 4.0%
More information
www.vodafone.com/investor
2016 upcoming dates Visit our website for more information
For definitions of terms please see www.vodafone.com/content/index/investors/glossary 52
Prelim results
17 May
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Q3 results
4 February
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29 July
Forward-looking statements
53
This presentation, along with any oral statements made in connection therewith, contains or may contain “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, including the Group
Chief Executive’s statement on the outlook for the 2015 financial year; expectations for the Group’s future performance generally, including revenue and EBITDA growth measures to improve margin growth
and free cash flow; statements relating to the Group’s Project Spring investment programme, including opex, launches of 4G and 3G, targeted mobile, fixed and enterprise coverage expectations regarding
the operating environment and market conditions and trends, including future sales, customer usage, competitive and macroeconomic pressures, price trends and opportunities in specific geographic
markets; intentions and expectations regarding the development, launch penetration and expansion of products, services and technologies, either introduced by Vodafone or by Vodafone in conjunction
with third parties or by third parties independently, including the Vodafone app, NGN, M-Pesa, consumer TV and converged services and the launch of a number of additional features; growth in customers
and usage; expectations regarding spectrum licence acquisitions, including cost anticipated new 3G and 4G availability and the customer uptake associated therewith; expectations regarding adjusted
operating profit, EBITDA margins, capital expenditure, net debt and foreign exchange rate movements; expectations regarding the integration or performance of current and future investments, associates,
joint ventures, non-controlled interests and newly acquired businesses, including KDG and Ono; and the outcome and impact of regulatory and legal proceedings involving Vodafone and of scheduled or
potential regulatory changes.
Forward-looking statements are sometimes not always identified by their use of a date in the future or such words as “will”, “anticipates”, “aims”, “could”, “may”, “should”, “expects”, “believes”, “intends”,
“plans” or “targets” (including in their singular or negative form). By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to
events and depend on circumstances that may or may not occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or
implied by these forward-looking statements. These factors include, but are not limited to, the following: changes in economic or political conditions in markets served by operations of the Group that would
adversely affect the level of demand for its mobile services; greater than anticipated competitive activity, from both existing competitors and new market entrants, which could require changes to the
Group’s pricing models, lead to customer churn, affect the relative appeal of the Group’s products and services as compared to those of its competitors or make it more difficult for the Group to acquire new
customers; the impact of investment in network capacity and the deployment of new technologies, or the rapid obsolescence of existing technology; higher than expected costs or capital expenditures;
slower than expected customer growth and reduced customer retention; changes in the spending patterns of new and existing customers and the possibility that new products and services offered by the
Group will not be commercially accepted or do not perform according to expectations; the Group’s ability to expand its spectrum position or renew or obtain necessary licences, including for spectrum; the
Group’s ability to achieve cost savings; the Group’s ability to execute its strategy in fibre deployment, network expansion, new product and service roll-outs, mobile data, enterprise and broadband and in
emerging markets; changes in foreign exchange rates, including, in particular, changes in the exchange rate of pounds sterling, the currency in which the Group prepares its financial statements, to the euro,
the US dollar and other currencies in which the Group generates its revenue, as well as changes in interest rates; the Group’s ability to realise benefits from entering into partnerships or joint ventures and
entering into service franchising and brand licensing; unfavourable consequences to the Group of making and integrating acquisitions or disposals; changes to the regulatory framework in which the Group
operates, including possible action by regulators in markets in which the Group operates or by the EU to regulate rates the Group is permitted to charge; the impact of legal or other proceedings against the
Group or other companies in the mobile telecommunications industry; loss of suppliers; or disruption of supply chains or unfavourable developments in the availability or prices of commodities and raw
materials; developments in the Group’s financial condition, earnings and distributable funds and other factors that the Board takes into account when determining levels of dividends; the Group’s ability to
satisfy working capital and other requirements through access to bank facilities, funding in the capital markets and its operations; changes in statutory tax rates or profit mix which might impact the Group’s
weighted average tax rate; and/or changes in tax legislation or final resolution of open tax issues which might impact the Group’s tax payments or effective tax rate.
Furthermore, a review of the reasons why actual results and developments may differ materially from the expectations disclosed or implied within forward-looking statements can be found under the
headings “Risk Factors” and “Other Information – Forward-looking statements” in our half year financial report for the six months ended 30 September 2015 which can be found on the Group’s website
(vodafone.com/ content/index/investors). All subsequent written or oral forward-looking statements attributable to the Company, to any member of the Group or to 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 or made in connection with this presentation 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.
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