Vodafone (LON:VOD) has announced its results for the six months ended 30 September 2019.
Financial highlights
- H1 organic service revenue up 0.3%* as Q2 returned to growth (Q1: -0.2%, Q2: +0.7%), supported by improvements in South Africa, Spain and Italy, with solid retail performance in Germany and strong commercial acceleration in the UK.
- Organic adjusted EBITDA up 1.4%*, reflecting €0.2 billion operating expense savings in Europe and common functions.
- Reported revenue increased by 0.4% to €21.9 billion, benefiting from the acquisition of Liberty Global’s assets in Germany and Central & Eastern Europe.
- Loss for the financial period of €1.9 billion primarily reflects losses in relation to Vodafone Idea post an adverse judgement against the industry by the Supreme Court in India.
- Interim dividend per share of 4.50 eurocents, equivalent to 50% of the FY19 total dividend payout.
- FY20 financial guidance updated:
- Adjusted EBITDA of €14.8-€15.0 billion (previously €13.8-14.2 billion), implying c.2-3%* organic growth. This includes a €0.8 billion net benefit from the Liberty Global acquisitions and the sale of New Zealand (completed on 31 July). Excluding this benefit, we are on track to achieve the upper half of our original guidance range.
- Free cash flow of around €5.4 billion (previously ‘at least €5.4 billion’) as lower cashflows from India and the sale of New Zealand offset the initial accretion from the Liberty Global acquisitions.
- Pro-forma financial leverage expected to be c.3.0x at year-end, excluding the INWIT transaction; intention to reduce leverage towards the lower end of our 2.5x-3.0x range within the next few years.
Strategic highlights
- Deepening customer engagement: another record low for mobile contract churn in Q2, 5G launched in seven markets and 1.8 million customers on new speed-tiered unlimited data plans, supporting 1.43 million mobile contract net additions in H1. Over 0.6 million NGN broadband net additions in Europe in H1.
- Accelerating digital transformation: in Europe c.20% of customers were acquired through digital channels in Q2, with TOBi handling c.20% of customer contacts. Reiterating €1.2 billion net operating expense reduction target by FY21.
- Improving asset utilisation: industrial synergies through network sharing secured in five European markets, including finalising our agreement with Telecom Italia, with active discussions ongoing in Germany. New long-term reciprocal wholesale partnership with Virgin Media in the UK. Rapid early progress in integrating the Liberty Global assets.
- Tower monetisation: agreed to combine Vodafone Italy Towers with INWIT, releasing potential net proceeds of over €2.1 billion. On track to operationalise our European TowerCo by May 2020; intention to monetise a substantial part of our European Tower infrastructure over the next 15 months, depending on market conditions.
Nick Read, Vodafone Group Chief Executive, commented:
“I am pleased by the speed at which we are executing on the strategic priorities that we announced this time last year. This is reflected in our return to top-line growth in the second quarter, which we expect to build upon in the second half of the year in both Europe and Africa.
The consistency of our commercial performance has improved in both regions, and we have made a fast start on integrating the acquired Liberty Global businesses, where we see significant long-term opportunity. Our digital transformation is already creating a better experience for our customers, improving our differentiation, supporting growth and at the same time reducing our structural costs.
We have now secured network sharing agreements across most of our major European markets, and we recently announced a major long-term wholesale partnership with Virgin Media in the UK, in order to improve the utilisation of our network assets. And we expect our European TowerCo to be operational by May next year, enabling us to continue to unlock the significant value embedded in our tower infrastructure.”
