Vodafone Group Plc reports Improved Financial Performance & Transformation Gaining Momentum

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Vodafone Group Plc (LON:VOD) has anounced its FY24 Preliminary Results.

Improving financial performance & transformation gaining momentum

“A year ago, I set out my plans to transform Vodafone, including the need to right-size Europe for growth. Since then, we have announced a series of transactions and we are now delivering growth in all of our markets across Europe and Africa.We performed slightly ahead of expectations in the financial year, with good organic service revenue growth of 6.3% and organic EBITDAaL growth of 2.2%. Our Business division – a key growth driver – achieved 5.4% revenue growth in the fourth quarter.Much more still needs to be done in the year ahead. We will step-up investment in our customer experience, improve our underlying performance in Germany and accelerate our momentum in Business, whilst also continuing to simplify our operations throughout the group. We are fundamentally transforming Vodafone for growth.” Margherita Della Valle, Group Chief Executive

Financial summary		FY24	FY23	Reported	Organic
Financial summary	Page	€m	€m	change %	change %¹
Group revenue	3	36,717	37,672	(2.5)
Group service revenue	3	29,912	30,318	(1.3)	6.3
Operating profit	3	3,665	14,451	(74.6)
Adjusted EBITDAaL¹	3	11,019	12,424	(11.3)	2.2
Profit for the financial year (continuing operations)	3	1,570	12,582
Basic earnings per share (continuing operations)	15	4.45c	43.66c
Adjusted basic earnings per share¹	15	7.47c	11.28c
Cash inflow from operating activities	15	16,557	18,054	(8.3)
Adjusted free cash flow¹	16	2,600	4,139
Net debt (excl. Spain and Italy)¹	17	(33,242)	(33,250)	–
Total dividends per share	18	9.00c	9.00c

1. Non-GAAP measure. See page 36.

– Following the announcements of the sale of Vodafone Spain and Vodafone Italy, both are now treated as discontinued operations and FY23 is re-presented accordingly. See page 27

– Group revenue decreased by 2.5% to €36.7 billion due to the disposals of Vantage Towers, Vodafone Hungary and Vodafone Ghana in the prior financial year and adverse exchange rate movements

– Operating profit decrease of 74.6% to €3.7 billion primarily reflects business disposals in the prior financial year, in particular the €8.6 billion gain on disposal of Vantage Towers

Organic & Adjusted measures

– Group service revenue increased by 6.3%, with Europe, Africa and Business all growing

– Germany returned to growth with service revenue increasing by 0.2% for the full year and 0.6% for Q4, however adjusted EBITDAaL remained under pressure, declining by 5.8% due to higher energy and other inflationary costs

– Continued acceleration in B2B revenue throughout the year (FY24: 5.0% growth), supported by strong demand for digital services

– Adjusted EBITDAaL increased by 2.2% as good service revenue progress was partially offset by higher energy costs and other inflationary impacts

– Achieved FY24 guidance for adjusted EBITDAaL and adjusted free cash flow

– In FY25, we expect adjusted EBITDAaL to be c.€11 billion and adjusted free cash flow to be at least €2.4 billion

Strategic Review ⫶ Transformation gaining momentum

In May 2023, we set out a new roadmap to transform Vodafone along three strategic priorities: Customers; Simplicity; and Growth. We measure our operational progress in these areas through a consistent scorecard summarised below. During FY24, we have reshaped our European footprint to focus on growing markets, with strong positions and good local scale. Alongside the progress to right-size our portfolio for growth, we have made good early progress with our operational transformation, which aims to improve the experience provided to our customers, remove complexity from our operations and accelerate growth in revenue, profit, cash flow and return on capital.

Customers

– Wide-reaching customer experience transformation underway, supported by reallocated investment of €140 million in FY24, as well as new incentives and talent development plans

– Customer insights processed through real-time AI models, feeding into detailed action plans on a weekly basis in all markets

– Frontline tools and processes enhancements benefitting 70,000 team members

– Significant improvement in Germany fixed network reliability, recognised in four independent network quality tests

– Despite material price inflation, customer detractors have reduced across all segments, and we now have leading or co-leading net promotor scores in 5 out of 9 European markets

Simplicity

– New organisational structure and executive management team in place

– Completed first phase of commercialising shared operations, enabling greater transparency, productivity and flexibility

– Actioned c.5,000 role reductions and announced a further 2,000 in first year of 3-year 11,000 plan and continued to deliver opex efficiencies

Growth

– Reshaped European footprint focused on growing telco markets, with strong positions and good local scale

– Vodafone now growing in all segments and accelerating throughout the year

– Accelerated organic service revenue growth of Vodafone Business to 5.4% in Q4; B2B focus step-up with new organisation, sales transformation plan, investment in products and capabilities and strategic partnership with Microsoft

Customers				Simplicity
			FY24			FY24
Consumer NPS
Germany	YoY		Stable	Europe opex savings (FY23-FY24)	€ billion	0.4
UK	YoY		Increased	Productivity (role reductions)	‘000	c.5
Other Europe	YoY		Stable	Shared operations NPS (May’24)	%	85
South Africa	YoY		Stable	Employee engagement index (Oct’23)	%	77
Detractors
Germany	YoY		Improved
UK	YoY		Improved
Other Europe	YoY		Improved
South Africa	YoY		Improved	Growth¹
Revenue market share						FY24
Germany	YoY		Stable	Organic Service revenue growth	%	6.3
UK	YoY		Increased	B2B organic service revenue growth	%	5.0
Other Europe	YoY		Increased	Organic Adjusted EBITDAaL growth	%	2.2
South Africa	YoY		Stable	Adjusted free cash flow	€ billion	2.6
Network quality		Very good reliability in all European markets		Pre-tax return on capital employed	%	7.5

1. Non-GAAP measure. See page 36.

More remains to be done across all these areas in FY25. Our priorities for the year ahead include: stepping-up our operational performance in Germany; further strengthening our capabilities in Vodafone Business; completing the commercialisation of our shared operations; and completing our in-flight portfolio transformation. A more detailed summary of our transformation progress and focus areas for FY25 is contained within an accompanying presentation and video Q&A available here: investors.vodafone.com/results.

Financial Review ⫶ Improved service revenue trends

Financial results

– Total revenue: Declined by 2.5% to €36.7 billion due to the disposals of Vantage Towers, Vodafone Hungary and Vodafone Ghana in the prior financial year and adverse exchange rate movements.

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– Service revenue: Decreased by 1.3%, however on an organic basis, increased by 6.3%, with Europe, Africa and Business all growing. Excluding Turkey, the Group had good service revenue growth of +3.7% on an organic basis.

– Operating profit: Decreased by 74.6% to €3.7 billion primarily reflects business disposals in the prior financial year, in particular the €8.6 billion gain on disposal of Vantage Towers.

– Adjusted EBITDAaL: Increased by 2.2% on an organic basis as good service revenue progress was partially offset by higher energy costs and other inflationary impacts. Excluding Turkey, adjusted EBITDAaL declined by 0.6% on an organic basis.

– Earnings per share: Basic earnings per share from continuing operations was 4.45 eurocents, compared to basic earnings per share of 43.66 eurocents in the prior year, primarily due to lower operating profit. Adjusted basic earnings per share was 7.47 eurocents, compared to 11.28 eurocents in the prior year, primarily due to lower adjusted EBITDAaL.

– Discontinued operations: Following the announcement that we entered into binding sale agreements with respect to the sales of Vodafone Spain and Vodafone Italy, both businesses are now reported separately as discontinued operations in the consolidated financial statements. See Note 3 ‘Discontinued operations and assets held for sale’ in the condensed consolidated financial statements for more information.

		Re-presented²
	FY24¹	FY23	Reported
	€m	€m	change %
Revenue	36,717	37,672	(2.5)
– Service revenue	29,912	30,318	(1.3)
– Other revenue	6,805	7,354
Adjusted EBITDAaL^3,4	11,019	12,424	(11.3)
Restructuring costs	(703)	(538)
Interest on lease liabilities⁵	440	355
Loss on disposal of property, plant and equipment and intangible assets	(34)	(41)
Depreciation and amortisation of owned assets	(7,397)	(7,520)
Share of results of equity accounted associates and joint ventures	(96)	433
Impairment reversal/(loss)	64	(64)
Other income	372	9,402
Operating profit	3,665	14,451	(74.6)
Investment income	581	232
Financing costs	(2,626)	(1,609)
Profit before taxation	1,620	13,074
Income tax expense	(50)	(492)
Profit for the financial year – Continuing operations	1,570	12,582
Loss for the financial year – Discontinued operations	(65)	(247)
Profit for the financial year	1,505	12,335

Attributable to:
– Owners of the parent	1,140	11,838
– Non-controlling interests	365	497
Profit for the financial year	1,505	12,335

Basic earnings per share – Continuing operations	4.45c	43.66c
Basic earnings per share – Total Group	4.21c	42.77c
Adjusted basic earnings per share³	7.47c	11.28c

Further information is available in a spreadsheet at investors.vodafone.com/results

Notes:

1. The FY24 results reflect average foreign exchange rates of €1:£0.86, €1:INR 89.80, €1:ZAR 20.31, €1:TRY 29.08 and €1:EGP 34.83.

2. The results for the year ended 31 March 2023 have been re-presented to reflect that the results of Vodafone Spain and Vodafone Italy are now reported as discontinued operations. See note 3 ‘Discontinued operations and assets held for sale’ in the condensed consolidated financial statements for more information.

3. Adjusted EBITDAaL and Adjusted basic earnings per share are non-GAAP measures. See page 36 for more information.

4. Includes depreciation on leased assets of €3,003 million (FY23: €2,682 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.

Cash flow, funding & capital allocation

– Cash from operating activities: Decreased 8.3% to €16.6 billion (FY23: €18.1 billion) reflecting lower operating profit, excluding a lower share of results in equity accounted associates and joint ventures and a net gain in the prior year resulting from the sale of Vantage Towers, Vodafone Ghana and Vodafone Hungary, and adverse working capital movements, which offset lower taxation payments.

– Adjusted free cash flow: Decreased by 37.2% to €2.6 billion (FY23: inflow of €4.1 billion), reflecting lower adjusted EBITDAaL. Adjusted free cash flow from Spain and Italy was €0.7 billion.

– Net debt: Remained stable at €33.2 billion, with free cash inflow of €1.8 billion and other movements of €1.1 billion, offset by acquisition and disposals of €0.3 billion and equity dividends of €2.4 billion.

– Current liquidity: Cash and cash equivalents and short-term investments totalled €9.4 billion (€16.0 billion as at 31 March 2023). This includes €1.9 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).

– Shareholder returns: Total dividends per share are 9.0 eurocents (FY23: 9.0 eurocents) including a final dividend per share of 4.5 cents. The ex-dividend date for the final dividend is 6 June 2024 for ordinary shareholders and 7 June 2024 for ADR holders, the record date is 7 June 2024 and the dividend is payable on 2 August 2024.

	FY24	FY23	Reported
Cash flow and funding	€m	€m	change %
Inflow from operating activities	16,557	18,054	(8.3)
Outflow from investing activities	(6,122)	(379)	(1,515.3)
Outflow from financing activities	(15,855)	(13,430)	(18.1)
Net cash (outflow)/inflow	(5,420)	4,245	(227.7)
Cash and cash equivalents at the beginning of the financial year	11,628	7,371
Exchange (loss)/gain on cash and cash equivalents	(94)	12
Cash and cash equivalents at the end of the financial year	6,114	11,628

Closing borrowings less cash and cash equivalents (excl. Spain and Italy)	(50,804)	(51,165)	0.7
Closing borrowings less cash and cash equivalents (incl. Spain and Italy)	(54,168)	(54,685)	0.9

		Re-presented¹
	FY24	FY23	Reported
	€m	€m	change %
Adjusted free cash flow^2,3	2,600	4,139	(37.2)
Licences and spectrum	(454)	(773)
Restructuring costs including working capital movements	(254)	(249)
Integration capital additions	(81)	(200)
Vantage Towers growth capital expenditure	–	(497)
Other adjustments	(28)	163
Free cash flow²	1,783	2,583	(31.0)

Closing net debt (excl. Spain and Italy)²	(33,242)	(33,250)	–
Closing net debt (incl. Spain and Italy)²	(33,349)	(33,375)	0.1

Notes:

1. The results for the year ended 31 March 2023 have been re-presented to reflect that the results of Vodafone Spain and Vodafone Italy are now reported as discontinued operations. See note 3 ‘Discontinued operations and assets held for sale’ in the condensed consolidated financial statements for more information.

2. Adjusted free cash flow, Free cash flow and Net debt are non-GAAP measures. See page 36 for more information.

3. Discontinued operations generated €722 million in adjusted free cash flow for the year ended 31 March 2024 (FY23: €703 million), in addition to the reported total from continuing operations.

Outlook & capital allocation ⫶ A year of transition

Performance against FY24 guidance and FY25 guidance

In May 2023, we set out guidance for FY24 for Group adjusted EBITDAaL and adjusted free cash flow. For FY24, we reported adjusted EBITDAaL and adjusted free cash flow of €11.0 billion and €2.6 billion, excluding the financial results from Vodafone Spain and Vodafone Italy. The FY24 outcome, as reported, reflects adverse foreign exchange rate movements versus those used for the basis of guidance, discontinued operations, and other items, which in aggregate, impacted adjusted EBITDAaL by €2.4 billion and adjusted free cash flow by €0.9 billion. The table below compares the guidance given and our actual performance.

As Vodafone Italy and Vodafone Spain are now recognised as discontinued operations, any financial contribution in FY25 has been excluded from our FY25 guidance. However, for FY25 we expect a net cash inflow from discontinued operations of c.€0.4 billion, which is excluded from FY25 guidance. For further information please refer to appendix VII in the accompanying presentation available here: investors.vodafone.com/results.

€bn	Adjusted EBITDAaL¹	Adjusted FCF^1,2
FY24 guidance	c.13.3	c.3.3
FY24 outcome – guidance basis^3,4	13.4	3.5
Impact of exchange rates	(0.3)	(0.2)
FY24 actual – constant portfolio	13.1	3.3
Impact of discontinued operations	(2.1)	(0.8)
Impact of exchange rates	(0.3)	(0.1)
FY24 re-based^4,5,6	10.7	2.4
FY25 guidance^4,5,7	c.11.0	at least 2.4

Notes:

1. Adjusted EBITDAaL and Adjusted free cash flow are non-GAAP measures. See page 36 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. The FY24 outcome on guidance basis is derived by applying FY24 guidance foreign exchange rates and includes Vodafone Spain and Vodafone Italy. The FY24 guidance foreign exchange rates were €1: GBP 0.88; €1: ZAR 19.30; €1: TRY 21.10; €1: EGP 33.38.

4. Excluding the impact of hyperinflationary accounting in Turkey.

5. Following the announcement that Vodafone has entered into binding sale agreements with respect to the sale of Vodafone Spain and Vodafone Italy, both businesses have been reported as discontinued operations in accordance with IFRS. The financial results of Vodafone Spain and Vodafone Italy continue to be reflected in Vodafone Group’s consolidated financial statements, however the financial results from discontinued operations are reported separately from our continuing operations, and therefore, they are excluded from the FY24 re-based outcome and FY25 guidance.

6. The FY24 re-based outcome is derived by applying FY25 guidance foreign exchange rates.

7. The FY25 guidance reflect the following foreign exchange rates: €1: GBP 0.86; €1: ZAR 20.58; €1: TRY 34.98; €1: EGP 51.75. The guidance assumes no material change to the structure of the Group.

Capital allocation

In March 2024, we conducted a broad capital allocation review, considering the Group’s strategy within its reshaped footprint. Following an extensive review of our capital investment requirements, the current capital intensity will be broadly maintained by market, which we believe allows for appropriate investment in networks and growth opportunities. A new leverage policy of 2.25x – 2.75x Net Debt to Adjusted EBITDAaL will be adopted and we will target to operate within the bottom half of this range. The new leverage policy supports a solid investment grade credit rating and positions Vodafone to continue to invest for growth over the long-term.

Following the right-sizing of the portfolio as a result of the sale of Vodafone Spain and Vodafone Italy, the Board has determined to adopt a new rebased dividend from FY25 onwards. The Board is targeting a dividend of 4.5c per share for FY25, with an ambition to grow it over time. The new dividend has been set at a sustainable level, which ensures appropriate cash flow cover and sufficient flexibility to invest in the business for growth. The Board has also approved a capital return through share buybacks of up to €2.0 billion of proceeds from the sale of Vodafone Spain. The Board anticipates the opportunity for further share buybacks of up to €2.0 billion following the completion of the sale of Vodafone Italy, which is expected in the first half of 2025.