Vodafone Group Plc (VOD) - Half Yearly Report RNS Number : 9472Q Vodafone Group Plc 13 November 2012 Vodafone announces results for the six months ended 30 September 2012 13 November 2012 · H1 Group organic service revenue growth -0.4%*; N. Europe +1.5%*, S. Europe -9.8%*, AMAP +5.2%* · Q2 Group organic service revenue growth -1.4%*; N. Europe +0.7%*, S. Europe -11.3%*, AMAP +4.1%* · H1 EBITDA down -2.9%* to £6.6 billion; EBITDA margin down 1.0* percentage point · Adjusted operating profit £6.2 billion, up 8.5%*; expected to be in the upper half of the guidance range for the full year · Impairments totalling £5.9 billion for Spain and Italy as a result of challenging market conditions and changes to discount rates · Free cash flow £2.2 billion; expected to be in the lower half of the guidance range for the full year · Interim dividend per share of 3.27 pence, up 7.2% · £2.4 billion dividend due from Verizon Wireless by the end of 2012; £1.5 billion buyback to commence after receipt Financial highlights(1) Six months ended Change year-on-year 30 September 2012 Reported Organic £m % % Group revenue 21,780 (7.4) +0.2 Group service revenue 20,157 (7.9) (0.4) Northern and Central Europe ('N. Europe') 9,051 (2.0) +1.5 Southern Europe ('S. Europe') 4,978 (18.1) (9.8) Africa, Middle East and Asia Pacific ('AMAP') 6,053 (5.1) +5.2 Loss for the financial period (1,886) Adjusted operating profit 6,170 +2.2 +8.5 Free cash flow 2,178 (16.7) Loss per share (4.01p) Adjusted earnings per share 7.86p +1.4 · Continued strong growth in data +13.7%* and emerging markets(2) (India +11.0%*, Vodacom +4.6%*, Turkey +18.0%*) in Q2 · Smartphone penetration in Europe now 30.7%, with 45.5% of European mobile service revenue now in-bundle; new tariff plans launched across major European markets since September · Enterprise revenue declined -0.4%*; continued strong growth in Vodafone Global Enterprise, M2M and Vodafone One Net offset by macroeconomic challenges in country-level enterprise units · Continued execution of efficiency programme, with £300 million absolute reduction in European opex targeted in the 2014 financial year Vittorio Colao, Group Chief Executive, commented: "We have continued to make progress on our strategic priorities over the last six months, with good growth in data and emerging markets in particular. In the short-term, however, our results reflect tougher market conditions, mainly in Southern Europe. "We remain very positive about the longer-term opportunities, and our Vodafone 2015 strategy reflects our confidence in the future. This is based on a new strategic approach to our consumer offer and pricing in Europe now being rolled out, an increasing focus on unified communications in enterprise, and an attractive and growing exposure to emerging markets. Fundamental to the success of this strategy will be an ongoing enhancement of the consumer and enterprise customer experience through continuous investment in high speed data networks, and an increased drive towards standardisation and simplification across the Group to maximise cost efficiency and accelerate execution." Notes: * All amounts in this document marked with an "*" represent organic growth which presents performance on a comparable basis, both in terms of merger and acquisition activity and movements in foreign exchange rates. From 1 October 2011 the Group revised its intra-group roaming charges. Whilst neutral to Group revenue and profitability, these changes have had an impact on reported service revenue by country and regionally since 1 October 2011. Whilst prior period reported revenue has not been restated, to ensure comparability in organic growth rates, country and regional revenue in the prior financial period have been recalculated based on the new pricing structure to form the basis for our organic calculations. 1 More information on non-GAAP measures can be found on page 41. 2 Emerging markets comprise India, Vodacom, Egypt, Turkey, Ghana, Qatar and Fiji. CHIEF EXECUTIVE'S STATEMENT Financial review Group Group revenue was up 0.2%* on an organic basis but down -7.4% to £21.8 billion on a reported basis. Organic service revenue declined -0.4%* in the first half of the financial year, and -1.4%* in Q2. Excluding the impact of mobile termination rate ('MTR') cuts, service revenue growth in the first half was 1.4%*. We achieved good growth in our emerging market operations and from the continued uptake of data across the Group, but this was offset by macroeconomic pressures in southern Europe. Group EBITDA was down -2.9%* on an organic basis, but down -11.7% to £6.6 billion on a reported basis, mainly due to adverse foreign exchange rate movements. EBITDA margin was down 1.0* percentage points year-on-year primarily as a consequence of the revenue decline in Italy, ongoing weakness in brand perception in Australia and restructuring costs in Germany, partly offset by margin improvements in South Africa and India. Adjusted operating profit was £6.2 billion (H1 2012: £6.0 billion). On an organic basis, adjusted operating profit was up 8.5%* year-on-year, driven by a strong performance from Verizon Wireless ('VZW'). The Group incurred a total impairment charge of £5.9 billion in relation to the carrying value of goodwill of its operations in Spain and Italy as a result of challenging market conditions and adverse movements in discount rates. Reported loss per share was -4.01 pence, impacted by the impairments outlined above. Adjusted earnings per share of 7.86 pence grew 1.4% year-on-year, reflecting the strong adjusted operating profit performance and the reduction in shares outstanding resulting from the share buyback programme, partially offset by a higher effective tax rate. Free cash flow for the first half of the 2013 financial year was £2.2 billion (H1 2012: £2.6 billion). This year-on-year decline is mainly the result of a weaker euro in the reporting period and the non-recurrence of a £0.2 billion dividend after the disposal of our 44% interest in SFR in June 2011. Capex for the period was £2.5 billion (H1 2012: £2.6 billion). Net debt at 30 September 2012 was £26.0 billion (31 March 2012: £24.4 billion). The movement in net debt since 31 March 2012 has been driven by underlying cash generation and the receipt of the £1.5 billion final tranche of the SoftBank consideration, offset by £1.1 billion of share buybacks, equity dividend payments of £3.2 billion and the £1.3 billion consideration paid for Cable & Wireless Worldwide plc ('CWW'). The Board has agreed an interim dividend per share of 3.27 pence, an increase of 7.2% year-on-year, in line with our dividend per share growth target of at least 7% per annum until March 2013. Northern and Central Europe In Northern and Central Europe, service revenue was up 1.5%* in H1, with growth of 0.7%* in Q2. The growth drivers in Q2 were Germany (+1.8%*) and Turkey (+18.0%*), while the UK and the Netherlands deteriorated by -3.2%* and -2.3%* respectively. EBITDA for the region was -3.3%* down year-on-year at £2.8 billion, with reported EBITDA margin down -2.4 percentage points year-on-year. This decline was driven by Germany and the UK, as well as the inclusion of CWW for the first time. The margin in Turkey continued to improve. Southern Europe Service revenue in Southern Europe fell -9.8%* in H1, with service revenue in Q2 down -11.3%*. Italy worsened significantly in Q2 (-12.8%*), reflecting a cut in MTRs on 1 July 2012, as well as ongoing competitive and macroeconomic pressures. Spain also continued to be weak (Q2: -12.0%*). Southern Europe EBITDA was down -15.1%* year-on-year to £1.9 billion, as a result of the weak revenue performance in all markets, and margin erosion in Italy, Greece and Portugal. Margins in Spain were stable year-on-year. Africa, Middle East and Asia Pacific ('AMAP') AMAP service revenue was up 5.2%* in H1, with year-on-year growth of 4.1%* in Q2. In India, service revenue growth slowed to 11.0%* in Q2, reflecting the impact of regulatory changes, the recognition of SMS termination revenue for the first time in the prior financial year and a less active market for new customer acquisitions. Growth at Vodacom slowed slightly to 4.6%* in Q2 primarily due to pricing pressure. In Australia, service revenue fell by -14.4%* in Q2, as the business continued to focus on network improvements and arresting weakness in brand perception. AMAP EBITDA was up 10.6%* on an organic basis, with EBITDA margin increasing by 1.4* percentage points. Margins at Vodacom and in India made excellent progress as a result of focused cost control and increasing scale benefits, although this was partially offset at the regional level by weaker margins in Australia. Verizon Wireless VZW, our US associate, achieved organic service revenue growth of 8.0%* in H1 and 7.8%* in Q2. Our share of profits from VZW was £3.2 billion, up 27.4%* year-on-year. VZW's net debt declined from US$6.4 billion at 31 March 2012 to US$1.9 billion at 30 September 2012, despite spending US$3.7 billion (net) on the acquisition of spectrum in H1. On 12 November 2012 VZW declared a dividend of US$8.5 billion (£5.3 billion), of which Vodafone's share is US$3.8 billion (£2.4 billion). The dividend is due by the end of the 2012 calendar year. The Group intends to commence a £1.5 billion share buyback programme after receipt of the dividend. Strategy update A more valuable Vodafone In November 2010 we announced our strategy to build a more valuable Vodafone. The key elements were to focus on the core growth areas of data, enterprise and emerging markets; to deliver value and efficiency from scale; and to generate liquidity or free cash flow from non-controlled interests. At the same time, we reinforced our commitment to rigorous capital discipline with regard to investment decisions. In the last two financial years, the proportion of our revenue deriving from non-voice services and emerging markets has risen from 56% of service revenue in H1 of the 2011 financial year, to 65% in H1 of the current financial year, thus reducing our dependence on voice revenue in mature markets. Data revenue in the financial year ended 31 March 2012 was £6.2 billion, an increase of £2.2 billion over the financial year ended 31 March 2010. 30.7% of our European customers now use smartphones, compared to 14.5% at September 2010. In the enterprise business, we have consolidated our position as a market leader in our core national enterprise operations, whilst also broadening our reach across a wide spectrum of businesses, from SoHo up to the largest multinational corporations. Enterprise revenue growth has consistently outstripped consumer revenue growth in Europe over the last two years. Our emerging markets operations have continued to grow strongly, led by Vodacom, India and Turkey. We have sustained a significant level of investment in emerging markets, which has translated into strong market share gains and improving margins in many of these businesses. At the same time, we have made significant progress in simplifying our portfolio of assets, allowing management to focus on controlled operations and free up capital for reinvestment in the business and distribution to shareholders. Since September 2010, our disposal programme has raised £14.8 billion, of which £6.8 billion has been returned to shareholders by way of share buybacks. In addition, in January 2012 we received a £2.9 billion dividend from VZW, of which £2.0 billion was immediately distributed to Vodafone shareholders as a special dividend. Including the interim dividend declared today and the share buyback announced today, we have returned a total of £21.2 billion to shareholders since September 2010, equivalent to approximately 25% of our market capitalisation at that time. Vodafone 2015 While the macroeconomic and regulatory environment in Europe presents significant short-term challenges, we see a number of positive developments. We expect smartphone adoption to accelerate in all markets over the next three years, with mobile applications and low cost smartphone availability increasing in mature and emerging markets alike. With the broad deployment of high speed data networks, we expect customers' appetite for data to increase significantly. At the same time, the evolution of network and IT platforms should enable lower cost and more standardised approaches as commercial and technology planning are integrated. As a result, we believe that the long-term prospects for the mobile market are highly attractive for those that make scale, standardisation and the customer data experience fundamental to how they operate. Our strategy is to be: Ÿ A scale data company; Ÿ A strong player in enterprise; Ÿ A leader in emerging markets; Ÿ A selective innovator in services; and Ÿ A cost efficient organisation. Consumer 2015 We are adopting a new strategic approach to consumer pricing and bundling in Europe, in order to offer customers worry-free usage and, at the same time, stabilise ARPU. We are launching new tariffs including unlimited voice and SMS, and much larger data allowances than before. Pricing will be radically simplified as a result, giving clear visibility of the cost of ownership and, thereby, lower complexity for IT and billing. The value proposition will be progressively enhanced through the introduction of a number of additional features, including improved access to technical support, attractive roaming packages, shared data plans, early handset upgrades, storage and back-up in the cloud, and device security, to increase the breadth of service and, over time, ARPU. In emerging markets, our goal is to build on our success to date to become a clear leader, increasing the value of these markets to the Group through market growth, improving margins, share gains and stronger cash generation. These markets offer very attractive long-term opportunities from sustained GDP growth, the scope for widespread mobile data adoption and the fulfillment of unmet needs such as basic financial services. We aim to maximise these opportunities through smart data pricing, the development of low-cost smartphones, and selective innovation in areas in which we can truly differentiate. Enterprise 2015 We plan to strengthen our leading position in enterprise, enhancing our product offering to large and medium-sized businesses and creating a dedicated enterprise operational structure, following the market success of Vodafone Global Enterprise ('VGE') and the CWW acquisition. VGE, serving the biggest multi-national accounts, will continue to expand its remit, driven by an increasing appetite among customers to consolidate telecoms procurement cross-border and bring mobility into the heart of their business strategies. In converged services, we will continue to develop Vodafone One Net for small- and medium-sized companies, and increasingly provide total communications services to our larger customers. In M2M, we will leverage our new business unit organisation, global technical platform and vertical sector competences to exploit the current wave of adoption of M2M solutions across many industry and service sectors. In addition, we will develop our product offering in high growth segments, such as cloud and hosting, thereby leveraging the expertise acquired with CWW. Network 2015 Our network strategy continues to focus on supporting higher speed data in both mature and emerging markets, and delivering a consistently excellent data experience to our customers through the widespread deployment of HSPA+, LTE and high capacity backhaul. We will continue our consistent level of investment so that Vodafone customers can be assured of a video-standard data service across our footprint in Europe and we can successfully manage the high growth in data volumes anticipated. Operations 2015 As a result of our new approach to consumer and enterprise data product catalogues and pricing, over the next three years we will further simplify our business model both across and within countries, eliminating legacy structures, reducing non customer-facing costs and moving towards more standardised offerings. This will enable us to maximise the benefits of our scale and share commercial, technical and support functions across geographies in Europe, and to speed up and co-ordinate our time to market for new propositions and services. We see a significant opportunity in unifying network and IT management across multiple markets, in further centralising and standardising procurement, and in offshoring more business functions to shared service centres of expertise. We are targeting an absolute reduction in European operating expenses from these and other programmes of £300 million in the 2014 financial year. Outlook and guidance(1) Overall performance in our controlled operations in the first half of the 2013 financial year has been slightly below our expectations, mainly as a result of a further weakening in the macroeconomic environment. However, this has been offset by a very strong performance by VZW. We expect the environment to be similar in the second half of the 2013 financial year. We now expect adjusted operating profit for the full year to be in the upper half of the range of £11.1 billion to £11.9 billion indicated in May 2012 and free cash flow to be in the lower half of the range of £5.3 billion to £5.8 billion indicated in May 2012. We expect the Group EBITDA full year margin decline to continue its improving trend year-on-year, excluding the impact of M&A and restructuring costs. Note: 1 See 'Guidance' on page 8. GROUP FINANCIAL HIGHLIGHTS Six months ended 30 September 2012 2011 % change Page £m £m Reported Organic Financial information(1) Revenue 27 21,780 23,520 (7.4) 0.2 Operating profit 27 274 8,999 (97.0) (Loss)/profit before taxation 27 (492) 8,011 (Loss)/profit for the financial period 27 (1,886) 6,644 Basic (loss)/earnings per share (pence) 27 (4.01p) 13.06p Capital expenditure 21, 42 2,516 2,618 (3.9) Cash generated by operations 21 6,192 7,069 (12.4) Performance reporting(1), (2) EBITDA 9 6,647 7,532 (11.7) (2.9) EBITDA margin 30.5% 32.0% (1.5pp) (1.0pp) Adjusted operating profit 9, 44 6,170 6,035 2.2 8.5 Adjusted profit before tax 11, 44 5,341 5,142 3.9 Adjusted effective tax rate 11 26.6% 25.2% Adjusted profit attributable to equity shareholders 11, 44 3,877 3,962 (2.1) Adjusted earnings per share (pence) 11, 44 7.86p 7.75p 1.4 Free cash flow 21 2,178 2,616 (16.7) Net debt 21, 22 25,964 26,247 (1.1) Notes: 1 Amounts presented at 30 September or for the six month period then ended. 2 See page 41 for "Use of non-GAAP financial information" and page 46 for "Definitions of terms". GUIDANCE Please see page 41for "Use of non-GAAP financial information", page 46 for "Definition of terms" and page 47 for "Forward-looking statements". 2013 financial year guidance Original guidance Updated guidance 2013 financial year 2013 financial year £bn £bn Adjusted operating profit 11.1 - 11.9 Upper half of the range Free cash flow 5.3 - 5.8 Lower half of the range Assumptions Guidance for the 2013 financial year is based on our current assessment of the global macroeconomic outlook and assumes foreign exchange rates of £1:€1.23 and £1:US$1.62. It excludes the impact of licence and spectrum purchases, income dividends received from VZW, material one-off tax related payments and restructuring costs, and assumes no material change to the current structure of the Group. Actual foreign exchange rates may vary from the foreign exchange rate assumptions used. A 1% change in the euro to sterling exchange rate would impact adjusted operating profit by approximately £40 million and free cash flow by approximately £30 million, and a 1% change in the dollar to sterling exchange rate would impact adjusted operating profit by approximately £50 million. CONTENTS Page Financial results 9 Liquidity and capital resources 21 Other significant developments 24 Risk factors 25 Responsibility statement 26 Unaudited condensed consolidated financial statements 27 Use of non-GAAP financial information 41 Additional information 42 Other information (including forward-looking statements) 46 FINANCIAL RESULTS Group(1), (2) Africa, Non- Middle Controlled Northern East Interests Six months and and and ended Central Southern Asia Common Elimi- 30 September Europe Europe Pacific Functions(3) nations 2012 2011 % change £m £m £m £m £m £m £m £ Organic Voice revenue 4,248 2,943 4,291 - - 11,482 13,360 Messaging revenue 1,440 531 416 - - 2,387 2,672 Data revenue 1,656 800 780 1 - 3,237 3,062 Fixed line revenue 1,316 466 199 1 - 1,982 1,802 Other service revenue 391 238 367 146 (73) 1,069 998 Service revenue 9,051 4,978 6,053 148 (73) 20,157 21,894 (7.9) (0.4) Other revenue 606 400 537 80 - 1,623 1,626 Revenue 9,657 5,378 6,590 228 (73) 21,780 23,520 (7.4) 0.2 Direct costs (2,477) (1,191) (1,713) (108) 73 (5,416) (5,700) Customer costs (2,189) (1,086) (1,045) 3 - (4,317) (4,627) Operating expenses (2,201) (1,198) (1,836) (165) - (5,400) (5,661) EBITDA 2,790 1,903 1,996 (42) - 6,647 7,532 (11.7) (2.9) Depreciation and amortisation: Acquired intangibles (46) - (288) - - (334) (464) Purchased licences (456) (66) (97) - - (619) (674) Other (1,184) (733) (842) 14 - (2,745) (2,880) Share of result in associates - 1 23 3,197 - 3,221 2,521 Adjusted operating profit 1,104 1,105 792 3,169 - 6,170 6,035 2.2 8.5 Impairment loss (5,900) (450) Other income and expense(4) 4 3,414 Operating profit 274 8,999 Non-operating income and expense 1 (161) Net financing costs (767) (827) Income tax expense (1,394) (1,367) (Loss)/profit for the financial period (1,886) 6,644 Notes: 1 The Group revised its segment structure on 1 August 2012. See "Group structure" on page 38. 2 Current period results reflect average foreign exchange rates of £1:€1.25 and £1:US$1.58. 3 Common Functions primarily represent the results of the partner markets and the net result of unallocated central Group costs. 4 Other income and expense for the six months ended 30 September 2011 included a £3,419 million gain on disposal of the Group's 44% interest in SFR. FINANCIAL RESULTS Revenue Group revenue was down -7.4% to £21.8 billion, with service revenue of £20.2 billion, a decrease of -0.4%* on an organic basis. Our performance reflects continued strong demand for data services and further growth in emerging markets, offset primarily by challenging macroeconomic conditions in a number of our southern European markets. AMAP service revenue was up by 5.2%*, with a robust performance in India, Vodacom, Qatar, Ghana and Egypt, offset by declines in Australia and New Zealand. In Northern and Central Europe service revenue was up by 1.5%*, reflecting growth in Germany and Turkey, partially offset by declines in the majority of other markets. In Southern Europe service revenue was down by -9.8%* driven by the challenging macroeconomic conditions which continue to have a significant impact on the majority of the region's markets, particularly Italy and Spain. EBITDA and profit Group EBITDA was down -11.7% to £6.6 billion, including an 8.1 percentage point adverse impact from foreign exchange rate movements. On an organic basis EBITDA was down -2.9%*, driven by a combination of service revenue decline and higher customer investment due to increased smartphone penetration. Adjusted operating profit was up 2.2% to £6.2 billion, driven by an increase in our share of profits from associates and lower depreciation and amortisation charges, partially offset by the reduction in EBITDA. Our share of profits of VZW grew by 27.4%* to £3.2 billion. Operating profit was down -97.0% to £0.3 billion, driven by an impairment loss of £5.9 billion (2011: £0.5 billion) and a £3.4 billion gain on disposal of the Group's 44% interest in SFR in the six months ended 30 September 2011. An impairment loss of £5.9 billion was recorded in relation to Vodafone Spain and Vodafone Italy, driven by a combination of lower projected cash flows within business plans and an increase in discount rates, resulting from adverse changes in the macroeconomic environment since March 2012. Net financing costs Six months ended 30 September 2012 2011 £m £m Investment income 187 226 Financing costs (954) (1,053) Net financing costs (767) (827) Analysed as: Net financing costs before income from investments (863) (867) Interest income/(charges) arising on settlement of outstanding tax issues 32 (36) Income from investments 2 10 (829) (893) Foreign exchange(1) 62 66 (767) (827) Note: 1 Comprises foreign exchange rate differences reflected in the income statement in relation to certain intercompany balances. Net financing costs before income from investments reduced due to lower mark-to-market losses associated with interest rate fixing and the impact of the Group's lower average net debt. Taxation Six months ended 30 September 2012 2011 £m £m Income tax expense 1,394 1,367 Tax on adjustments to derive adjusted profit before tax (14) (170) Adjusted income tax expense 1,380 1,197 Share of associates' tax 73 145 Adjusted income tax expense for purposes of calculating adjusted tax rate 1,453 1,342 (Loss)/profit before tax (492) 8,011 Adjustments to derive adjusted profit before tax(1) 5,833 (2,869) Adjusted profit before tax 5,341 5,142 Add: Share of associates' tax and non-controlling interest 120 185 Adjusted profit before tax for the purpose of calculating adjusted effective tax rate 5,461 5,327 Adjusted effective tax rate 26.6% 25.2% Note: 1 See "(Loss)/earnings per share" below. The adjusted effective tax rate for the financial year ending 31 March 2013 is expected to be in the mid 20's. This is in line with the adjusted effective tax rate for the financial year ended 31 March 2012. (Loss)/earnings per share Adjusted earnings per share was 7.86 pence, an increase of 1.4% year-on-year, reflecting a reduction in shares arising from the Group's share buyback programme partially offset by a higher tax charge. Basic loss per share was -4.01 pence (30 September 2011: earnings per share 13.06 pence), due to the £5.9 billion impairment charge recorded in the current financial period, with the prior financial period also benefiting from the profit on disposal of our 44% interest in SFR, both of which are excluded from adjusted earnings per share. Six months ended 30 September 2012 2011 £m £m (Loss)/profit attributable to equity shareholders (1,977) 6,679 Pre-tax adjustments: Impairment loss(1) 5,900 450 Other income and expense(2) (4) (3,414) Non-operating income and expense (1) 161 Investment income and financing costs(3) (62) (66) 5,833 (2,869) Taxation 14 170 Non-controlling interests 7 (18) Adjusted profit attributable to equity shareholders 3,877 3,962 Million Million Weighted average number of shares outstanding - basic 49,310 51,132 Weighted average number of shares outstanding - diluted 49,310 51,427 Notes: 1 The impairment charges of £5,900 million and £450 million in the six months ended 30 September 2012 and 2011 respectively did not result in any tax consequences. 2 Other income and expense for the six months ended 30 September 2011 included a £3,419 million gain on disposal of the Group's 44% interest in SFR. 3 See note 1 in "Net financing costs" on page 10. Northern and Central Europe(1) Other Northern Northern and and Central Central Germany UK Europe Eliminations Europe % change £m £m £m £m £m £ Organic 30 September 2012 Voice revenue 1,412 1,122 1,714 - 4,248 Messaging revenue 417 638 385 - 1,440 Data revenue 796 454 406 - 1,656 Fixed line revenue 848 24 451 (7) 1,316 Other service revenue 155 173 94 (31) 391 Service revenue 3,628 2,411 3,050 (38) 9,051 (2.0) 1.5 Other revenue 263 181 162 - 606 Revenue 3,891 2,592 3,212 (38) 9,657 (1.5) 2.0 Direct costs (837) (635) (1,043) 38 (2,477) Customer costs (880) (812) (497) - (2,189) Operating expenses (804) (556) (841) - (2,201) EBITDA 1,370 589 831 - 2,790 (9.0) (3.3) Depreciation and amortisation: Acquired intangibles - (3) (43) - (46) Purchased licences (241) (166) (49) - (456) Other (429) (288) (467) - (1,184) Adjusted operating profit 700 132 272 - 1,104 (19.7) (9.9) EBITDA margin 35.2% 22.7% 25.9% 28.9% 30 September 2011 Voice revenue 1,633 1,201 1,938 - 4,772 Messaging revenue 440 609 435 - 1,484 Data revenue 748 432 330 - 1,510 Fixed line revenue 932 22 114 - 1,068 Other service revenue 126 212 133 (65) 406 Service revenue 3,879 2,476 2,950 (65) 9,240 Other revenue 223 188 154 - 565 Revenue 4,102 2,664 3,104 (65) 9,805 Direct costs (894) (753) (924) 65 (2,506) Customer costs (839) (760) (537) - (2,136) Operating expenses (817) (518) (761) - (2,096) EBITDA 1,552 633 882 - 3,067 Depreciation and amortisation: Acquired intangibles - - (55) - (55) Purchased licences (274) (166) (56) - (496) Other (447) (282) (414) - (1,143) Share of result in associates - - 1 - 1 Adjusted operating profit 831 185 358 - 1,374 EBITDA margin 37.8% 23.8% 28.4% 31.3% Change at constant exchange rates % % % Voice revenue (5.0) (6.6) (2.9) Messaging revenue 4.2 4.8 (2.9) Data revenue 16.9 5.1 35.1 Fixed line revenue (0.1) 9.1 331.4 Other service revenue 35.0 (18.4) (23.3) Service revenue 2.7 (2.6) 13.4 Other revenue 29.2 (3.7) 16.3 Revenue 4.2 (2.7) 13.6 Direct costs (2.8) (15.7) (23.6) Customer costs (15.2) 6.8 (1.7) Operating expenses (8.1) 7.3 (21.3) EBITDA (3.1) (7.0) 3.6 Depreciation and amortisation: Acquired intangibles - - 15.1 Purchased licences 3.2 - 5.6 Other (5.2) 2.1 (24.6) Share of result in associates - - (54.7) Adjusted operating profit (7.5) (28.6) (16.5) EBITDA margin movement (pps) (2.6) (1.1) (2.5) Note: 1 The Group revised its segment structure on 1 August 2012. See "Group structure" on page 38. Revenue decreased by -1.5% including a 6.9 percentage point impact from adverse foreign exchange rate movements. On an organic basis service revenue increased by 1.5%*, with the growth rate for Q2 being 1.7* percentage points lower than in Q1 primarily due to macroeconomic weakness in some markets and competitive pricing pressures, partially offset by growth in data revenue. Growth in Germany and Turkey was partially offset by declines in most other markets, in particular, the UK and the Netherlands. EBITDA declined by -9.0%, including a 7.0percentage point impact from adverse foreign exchange rate movements. On an organic basis EBITDA decreased by -3.3%*, resulting from a reduction in service revenue in most markets and higher customer investment due to the increased penetration of smartphones. Organic Other Foreign Reported change Activity exchange change % pps pps % Revenue - Northern and Central Europe 2.0 3.4 (6.9) (1.5) Service revenue Germany 3.0 (0.3) (9.2) (6.5) UK (2.1) (0.5) - (2.6) Other Northern and Central Europe 3.0 10.4 (10.0) 3.4 Northern and Central Europe 1.5 3.3 (6.8) (2.0) EBITDA Germany (3.4) 0.3 (8.6) (11.7) UK (7.5) 0.5 - (7.0) Other Northern and Central Europe 0.4 3.2 (9.4) (5.8) Northern and Central Europe (3.3) 1.3 (7.0) (9.0) Adjusted operating profit Germany (8.1) 0.6 (8.3) (15.8) UK (30.5) 1.9 - (28.6) Other Northern and Central Europe (1.6) (14.9) (7.5) (24.0) Northern and Central Europe (9.9) (3.0) (6.8) (19.7) Germany Service revenue increased by 3.0%* with strong growth in data, wholesale and enterprise revenue more than offsetting the competitive pressures in the market, particularly in consumer prepaid and fixed line. Data revenue grew by 16.9%* driven by higher smartphone penetration and an increase in smartphones sold with a data bundle. Significant customer wins contributed to enterprise revenue growth of 5.7%*. Wholesale revenue grew significantly driven by customer acquisitions supported by the launch of new services by our partners during Q1. New consumer prepaid tariffs were introduced in April 2012 in reaction to continued competitive pressures. The roll out of LTE has continued and we now have 232,000 fixed line substitution customers and 28,000 LTE enabled mobile devices using the service in both rural and urban areas. Approximately 3,700 base stations had been upgraded to LTE at 30 September 2012, providing around 46% household coverage. EBITDA declined by -3.4%*, with a -2.9*percentage point decline in EBITDA margin, as the higher revenue and a one-off benefit from a legal settlement during the second quarter were offset by restructuring costs, and investment in customer acquisition and retention. UK Service revenue decreased by -2.1%* driven by macroeconomic weakness and competitive pressures partially offset by an increase in data revenue and the success of integrated tariffs. Macroeconomic pressures continue to impact consumer confidence adversely and, in turn, reduce out-of-bundle revenue. In addition, there has been significant pressure resulting from competitors introducing a number of new unlimited tariffs during Q4 of the 2012 financial year. In response, new 'Vodafone Red' integrated tariffs were launched during the period. Data revenue grew by 5.0%* due to higher smartphone penetration and growth in smartphones sold with a data bundle. EBITDA decreased by -7.5%*, with a -1.4*percentage point decline in the EBITDA margin, due to higher retention costs associated with smartphones, partially offset by interconnect cost reductions driven by lower MTRs. Other Northern and Central Europe Service revenue increased by 3.0%* as growth in Turkey more than offset declines in the rest of Other Northern and Central Europe. Service revenue in Turkey increased by 18.3%* resulting from continuing expansion of the contract customer base, strong growth in data revenue driven by mobile internet and higher smartphone penetration, strong growth in incoming traffic and an increase in enterprise revenue.In the Netherlands, service revenue declined by -1.9%*, mainly due to the impact of a network outage in April 2012 following a fire in Rotterdam as well as the impact of MTR cuts. CWW contributed £307 million of fixed line revenue since it was acquired on 27 July 20121. We have aligned the accounting policies of CWW to Vodafone policies which has resulted in certain revenue and costs in relation to some CWW contracts, which were accounted for gross, being reported on a net basis. The impact in the period of this policy alignment was a reduction in revenue of approximately £15 million. EBITDA grew by 0.4%*, with strong growth in Turkey being offset by declines in other markets. The growth in Turkey was driven by the increase in scale and cost management. Note: 1 The results of CWW are included within the reported results from the date of acquisition, however, they are excluded from the organic results. See note 4 on page 46 for further information. Southern Europe(1) Other Southern Southern Italy Spain Europe Eliminations Europe % change £m £m £m £m £m £ Organic 30 September 2012 Voice revenue 1,214 1,132 597 - 2,943 Messaging revenue 357 99 75 - 531 Data revenue 349 341 110 - 800 Fixed line revenue 272 160 34 - 466 Other service revenue 78 126 45 (11) 238 Service revenue 2,270 1,858 861 (11) 4,978 (18.1) (9.8) Other revenue 158 109 134 (1) 400 Revenue 2,428 1,967 995 (12) 5,378 (17.5) (9.1) Direct costs (542) (429) (231) 11 (1,191) Customer costs (366) (555) (166) 1 (1,086) Operating expenses (487) (448) (263) - (1,198) EBITDA 1,033 535 335 - 1,903 (23.0) (15.1) Depreciation and amortisation: Purchased licences (50) (5) (11) - (66) Other (293) (283) (157) - (733) Share of result in associates - - 1 - 1 The story has been truncated, [TRUNCATED]
Vodafone Group Plc VOD Half Yearly Report
Press spacebar to pause and continue. Press esc to stop.