Vodafone Group Public Limited Company · LSE:VOD
Vodafone Group Public — Vodafone Group — FY2019 Earnings Presentation
45 slides from Vodafone Group Public's earnings presentation, May 14, 2019
Slide 1: Vodafone Group Results: for the year ended 31 March 2019
Vodafone Group Results: for the year ended 31 March 2019 14 May 2019
Slide 2: Disclaimer
Disclaimer By watching this webcast, you agree to be bound by the following conditions. You This presentation also contains non-GAAP financial information which Vodafone’s may not disseminate these slides or this recording, in whole or in part, without the management believes is valuable in understa
Slide 3: Overview
Overview • Good growth in most markets, competition in Spain/Italy & headwinds in South Africa • FY 19 guidance achieved • Reduced financial headroom given weaker revenue growth and higher spectrum costs in the year • Rebasing the dividend to 9 eurocents per share in order to: – Rebuild headroom, su
Slide 4: FY 19: executing at pace on our strategic priorities
FY 19: executing at pace on our strategic priorities Accelerating Deepening Improving digital Portfolio customer asset & radical management engagement utilisation simplification 1m 50% 5G active India Broadband net adds of the €1.2bn net EU opex target already network sharing VIL JV completed Succes
Slide 5: Driving consistent commercial performance, record low mobile churn
Driving consistent commercial performance, record low mobile churn Group mobile contract churn (%) Group fixed broadband customers1 (m) 18.0 17.4 16.1 16.6 14.7 16.0 16.0 13.4 12.0 14.8 FY 15 FY 16 FY 17 FY 18 FY 19 FY 15 FY 16 FY 17 FY 18 FY 19 H1: 384k H2: 655k • Consumer NPS lead/co-lead in 16 ou
Slide 6: Good EBITDA growth in most markets, Italy stabilising in H2
Good EBITDA growth in most markets, Italy stabilising in H2 FY 19 EBITDA growth (%) 11.3 11.0 7.6 4.3 1.9 (5.8) (23.5) UK¹ Other AMAP Other Europe Germany² Vodacom Italy Spain Service revenue growth (%) 0.6 5.2 2.1 1.5 3.8 (5.9) (6.4) 1. Adjusted for handset financing and one-off settlement in the p
Slide 7: Spain: commercial performance stabilising, launched unlimited
Spain: commercial performance stabilising, launched unlimited -8.9% Q4 service revenue growth (Q3 -7.4%) Vodafone contract net ports (000s) Movistar + Orange + other MasMovil Competing effectively in premium segments Q1 18/19 Q2 18/19 Q3 18/19 Q4 18/19 Contract port positive against Tef and Orange M
Slide 8: Italy: mobile pressure moderating, strong fixed customer growth
Italy: mobile pressure moderating, strong fixed customer growth -6.1% Q4 service revenue growth (Q3 -4.6%) Market net ports (m) Reduced by c.50% MNP activity now below ‘pre-new entrant’ levels 5.5 3.9 3.8 Churn reducing to Q4 levels of last year 2.9 Spin down pressure Q1 18/19 Q2 18/19 Q3 18/19 Q4 1
Slide 9: Financial review
Financial review Margherita Della Valle Group Chief Financial Officer
Slide 10: Full year financial highlights (IAS 18 basis)
Full year financial highlights (IAS 18 basis) Underlying growth Service revenue Adjusted EBITDA Adjusted EBIT Free cash flow Underlying Underlying (€bn) (€bn) (€bn) (€bn) Pre-spectrum Post-spectrum & restructuring +0.3%1 +3.1%1 +9.4%1 41.1 14.7 14.1 39.2 4.8 4.5 5.4 5.4 13.4 13.8 3.8 4.2 4.0 4.4 FY
Slide 11: Adjusted and reported earnings
Adjusted and reported earnings FY 18 FY 19 (€m) IAS 18 IFRS 15 Adjusted EBIT 4,827 4,253 Impairment loss - (3,525) Includes Spain (€2.9bn) Associates 389 (348) Includes 7 months of Vodafone Idea Restructuring (156) (486) Amortisation of brand assets/other (974) (583) Other income and expense 213 (26
Slide 12: Service revenue growth
Service revenue growth Quarterly trends (%)1 Impact of IFRS 15 in FY 19 (%)1 IAS 18 basis (ex. UK handset financing) IFRS 15 basis2 IAS 18 basis (ex. UK handset financing) IFRS 15 basis 1.1 0.9 1.5 Germany 0.8 0.5 0.3 Italy (5.9) 0.1 (6.2) 0.0 0.6 UK 0.3 (6.4) Spain (5.8) (0.6) (0.7) 3.8 Vodacom Q1
Slide 13: Service revenue growth drivers
Service revenue growth drivers FY 19 organic service revenue growth contribution (ex. HF & MTRs) (pp) 1.1 0.2 1.0 (1.3) 0.3 (0.7) Europe Vodafone Emerging Italy/Spain Wholesale FY 19 Consumer Business Consumer Consumer & MTRs¹ (ex. HF & settlement) (ex. IT/ES) % of service revenue 33% 30% 16% 16% 5%
Slide 14: Over 50% of €1.2bn EU opex target actioned
Over 50% of €1.2bn EU opex target actioned EBITDA growth (€bn) Progress against EU opex target 0.4 13.8 0.1 Still to be €0.4bn2 delivered 0.1 (0.2) 13.4 delivered in FY 19 >€1.2bn of which: • >50% digital Organic opex grew net reduction • 30% leveraging scale 5% vs. inflation of target 9% FY 18 Dire
Slide 15: Digital case study: rolling out chatbots (TOBi) in Italy
Digital case study: rolling out chatbots (TOBi) in Italy Automated voice End-to-end Human contacts TOBi handover response contacts TOBi contacts (no TOBi) to human contacts TOBi CHAT TOBi VOICE WHATSAPP TOBi VOICE >90% of contacts (for fixed) (for mobile) via TOBi Benefits: 12 10 66% Contacts now au
Slide 16: A fourth consecutive year of EBITDA margin expansion
A fourth consecutive year of EBITDA margin expansion Group adjusted EBITDA margin (%) IAS 18 basis (ex. HF & settlements) 30.6% 31.1% 29.7% 30.6% 29.0% 28.3% 28.4% FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 Reported EBITDA margin 31.6% 31.4% 16
Slide 17: Mid-teens capital intensity guidance re-iterated
Mid-teens capital intensity guidance re-iterated Evolving capex mix (%) Success based Mid-term (CPE) Maintenance (Network & IT) 16% Investing in 28% 5G roll-out FY 19 16% capital 16% IT capabilities Stable capacity >50% of IT estate investments intensity transformed 7% Coverage Limited fixed build 1
Slide 18: Network sharing opportunities
Network sharing opportunities Unlocking large industrial synergies Passive Deep passive Active Number of sharing (incl. backhaul) sharing sites1 (Towers) (ex. major cities) • Existing UK partnership expanded to 5G, unwinding active sharing UK (CTIL) 14,000 in major cities Spain 10,300 •
Slide 19: Free cash flow
Free cash flow FY 18 FY 19 (€m) IAS 18 IAS 18 Adjusted EBITDA 14,737 14,139 Capital additions (7,321) (7,227) Working capital (584) (33) Handset financing reversal offset by sale of handset receivables Net interest (753) (502) VHA guarantee fees of €288m in FY 19 Taxation (1,010) (1,040) Dividends r
Slide 20: Pro-forma leverage 2.9x post Liberty
Pro-forma leverage 2.9x post Liberty Net debt (€bn) ~2.9x pro-forma leverage post LBTY 31.5 1.2 0.6 27.0 (1.8) 2.8 (2.1) (0.1) 4.1 (5.4) (3.8) March KDG put VZ loan FY 19 Mandatory Dividends Spectrum M&A¹ Partial MCB FX/ March 2018 option note FCF Convertible (including buyback restructuring 2019 re
Slide 21: Outlook
Outlook FY 20 EBITDA guidance1 (€bn) Low single 13.8-14.2 14.1 digit organic EBITDA growth (0.2) 13.7 (0.2) FY 19 UK handset Impact from FY 19 FY 20 EBITDA financing IFRS 15/16 (rebased) EBITDA guidance Non-cash Adjusted EBITDA of €13.8-14.2bn, implying low single digit organic growth Free cash flow
Slide 22: Free cash flow ambition
Free cash flow ambition Long-term incentive plan (LTIP) targets New LTIP target & implied dividend cover1 Cumulative 3 year FCF pre-spectrum (€bn) (€bn) Achieved Above 100% target On-target 19.6 17.71 17.7 17.0 15.9 15.1 15.2 3x new dividend 1.8x3 dividend + historic average cover spectrum2 FY 16 FY
Slide 23: Prioritising deleveraging to rebuild headroom
Prioritising deleveraging to rebuild headroom Deleveraging drivers (€bn) 2.9x Lower end FY 19 of 2.5-3.0x EBITDA range 3.0x Spectrum leverage range + 0.8x Restructuring (old dividend) EM FX volatility 2.5x 0.2x - EBITDA growth Asset sales 0.5x (1.1x) FY 19 pro-forma New 3yr New Potential MCB leverag
Slide 24: Strategy update
Strategy update Nick Read Group Chief Executive
Slide 25: We connect for a better future
Our purpose We connect for a better future Deeper customer engagement Our strategy Europe Vodafone Emerging Consumer Business Consumer Scaled platforms & partner of choice Europe’s leading Loyalty and customer TV and content engagement Leading global M-Pesa Africa’s largest distribution platform MyV
Slide 26: Best gigabit network: Liberty transaction enhances NGN footprint
Best gigabit network: Liberty transaction enhances NGN footprint European marketable homes (m) Strengthening our reach and economics Owned NGN Strategic wholesale NGN ADSL network partnerships1 wholesale Germany/CEE acquisition • Constructive discussions with EC continue • 300Mbps wholesale broadban
Slide 27: Best gigabit network: launching Europe's largest 5G network
Best gigabit network: launching Europe’s largest 5G network 10x faster Game of Thrones season download in 2 minutes Real time Multiplayer e-gaming on the go, 5G smart glasses 1/10th cost Enabling affordable speed tiered unlimited data Digital Society Remote healthcare, smart cities, driverless cars
Slide 28: Best gigabit network: network sharing benefits
Best gigabit network: network sharing benefits Unlocking tower monetisation options (% of towers) Customers • Broader network coverage outside major cities • Faster 5G deployment enabling Germany 26 ES, IT & UK new experiences No discussions Active/passive sharing, during spectrum exploring tower au
Slide 29: Europe Consumer: simplification, selling 'one more product'
Europe Consumer: simplification, selling ‘one more product’ 49% of group service revenue Principles: Spain mobile plans Unlimited Super Unlimited Total Unlimited 3GB 6GB Improve customer 2Mbps 10Mbps Full speed €19.99 €29.99 and sales experience €40.99 €45.99 €49.99 Migrate customer base Deeper cust
Slide 30: Europe Consumer: scaled platforms
Europe Consumer: scaled platforms 49% of group service revenue MyVodafone Vodafone TV • 22m1 TV customers across Europe • Moving to a single platform post Liberty Instant Simple Personal Expert acquisitions, VTV launched in 4 markets2 • Content distribution / aggregation, partner of choice • MyVodaf
Slide 31: Vodafone Business: fixed and digital services offset mobile pressure
Vodafone Business: fixed and digital services offset mobile pressure 30% of group service revenue FY service revenue growth (%) Total 0.3 Key drivers: • SOHO/SME impacted by lower consumer prices Mobile¹ (2.2) • Pressure on large corporate renewals • Gaining market share Fixed² 1.6 • SD-WAN3 launche
Slide 32: Vodafone Business: growth drivers
Vodafone Business: growth drivers 30% of group service revenue Fixed market disruptor: SD-WAN Building a global IoT platform Vodafone addressable market (€bn)1 Legacy IP VPN SD-WAN (incl. services) 8.3 7.4 • Harmonised IoT products and services 7.0 6.3 6.5 6.7 roadmap for Auto sector • Enables SoC-l
Slide 33: Emerging Consumer: data services and M-Pesa supporting growth
Emerging Consumer: data services and M-Pesa supporting growth 16% of group service revenue Key value drivers M-Pesa: Largest payment platform in Africa2 Customers (m) Customers Number of transactions per annum M-Pesa M-Pesa +4% YoY African card payments PayPal No.1 African (Global) bank 37m 11bn +62
Slide 34: Summary
Summary • Moving at pace on the implementation of our strategy • More consistent commercial performance to support gradual revenue recovery • Digital transformation accelerating, confident of delivering €1.2bn opex reduction target by FY 21 • Improving asset utilisation through network sharing deals
Slide 35: Appendix
Appendix 35
Slide 36: Germany: continued operational momentum and EBITDA growth
Germany: continued operational momentum and EBITDA growth Actions Outcomes Mobile contract and broadband net adds (000s) Investing for network leadership Mobile contract Fixed broadband DOCSIS 3.1 upgrade in 66% of footprint 258 Growing in higher value channels 212 208 Direct >48% of gross adds (+4%
Slide 37: UK: strong commercial momentum, margin improvement
UK: strong commercial momentum, margin improvement Actions Outcomes Mobile contract and broadband net adds (000s) Consumer focus on fixed and youth segment Mobile contract3 Fixed broadband Broadband net add leadership 109 104 Business growing in fixed, mobile pressure continues Fixed +2.4% in H2 77
Slide 38: Vodacom: SA pressure offset by strong international performance
Vodacom: SA pressure offset by strong international performance Actions Outcomes Service revenue growth (%) OOB regulation from 1 March 2019 South Africa Internationals Partially offset by price increase in postpaid 15.0 Continue to migrate customers to more in-bundle usage 11.1 11.1 9.4 9.5 866m da
Slide 39: Other markets
Other markets Europe Cluster VodafoneZiggo VodafoneIdea (12% of Group service revenue) Q4 service revenue +1.1 -1.0 +0.1 1 2 growth (%) 498 168 172 • Added 5.4m 4G customers; total FY customer net 4G base now 80.7m, 4G adds (000s) coverage up to 65% 103 • Higher customer losses; low ARPU customer di
Slide 40: Pro-forma European NGN footprint
Pro-forma European NGN footprint1 Household coverage (m)2 Owned Strategic partnership3 Acquired assets Wholesale % Household coverage 75% 70% 78% 88% 63% 93% 38% 6.9 11.0 12.0 13.6 28.2 12.8 10.3 0.3 3.4 7.2 6.4 3.1 2.9 Germany Italy Spain UK Portugal VodafoneZiggo NLJV CEE¹ 122m Households passed w
Slide 41: Taxation
Taxation (€m) FY 18 FY 19 Taxation 879 (1,496) Deferred tax assets - Luxembourg (330) (488) Deferred tax following revaluation of investments in Luxembourg Write off of a deferred tax asset in Spain following revised outlook for De-recognition of deferred tax assets in Spain - 1,166 the business Amo
Slide 42: Financing costs
Financing costs (€m) FY 18 FY 19 Net financing costs (389) (1,655) Mark to market – mandatory convertible bonds (134) 233 Foreign exchange1 (322) 190 Adjusted net financing costs (845) (1,232) Other mark to market of derivative positions 107 190 Interest expense arising on settlement of outstanding
Slide 43: Bond maturity profile
Bond maturity profile1 Average life of bonds: 10.5yrs (including hybrids to call date) (€bn) Senior Hybrid 12 10 8 6 4 2 0 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35 FY36 FY37 FY38 FY39 FY40+ 1. As at 31 March 2019 43
Slide 44: Forward-looking statement
Forward-looking statement This presentation, along with any oral statements made in connection therewith, contains “forward-looking the Vodafone Group of, or the rates the Vodafone Group may charge for, terminations and roaming minutes; the statements” including within the meaning of the US Private
Slide 45: More information
More information Visit our website for more information 2019 upcoming dates AGM Q1 Q2 23 July 26 July 12 Nov Contact us ir@vodafone.co.uk +44 (0) 7919 990 230 www.vodafone.com/investor For definitions of terms please see www.vodafone.com/content/index/investors/glossary 45