Vodafone Group Public Limited Company · LSE:VOD
Vodafone Group Public — Vodafone Group — H1 FY23 Earnings Presentation
45 slides from Vodafone Group Public's earnings presentation, Nov 15, 2022
Slide 1: H1 FY23 Results
Vodafone Group Plc H1 FY23 Results 15 November 2022
Slide 2: Agenda & contents
Agenda & contents Nick Read Highlights p3 Chief Executive Margherita Della Valle Financial performance p7 Chief Financial Officer Strategic progress p19 1. Delivering on operational & portfolio priorities p20 Nick Read 2. Clear action to mitigate macroeconomic challenges p26 Chief Executive 3. Organ
Slide 3: Highlights: Conclusions
Highlights Conclusions Resilient financial performance in FY23 Good progress on operational & portfolio priorities Clear action to mitigate macroeconomic challenges Organic strategy underpinning long-term growth H1 FY23 Results 15 November 2022 3
Slide 4: Highlights: Resilient financial performance
Highlights ⫶ Resilient financial performance Conclusions Service revenue growth Adjusted EBITDAaL growth Improving ROCE Pre-tax ROCE (LTM) +60bps €7.6bn 3.3% 6.9% €7.2bn 6.3% €7.1bn 6.1% 2.7% €7.0bn 2.4% 2.5% 2.5% 5.1% 33.6% 2.0% 32.7% 32.4% 31.6% Q1 Q2 Q3 Q4 Q1 Q2 H1 H1 H1 H1 H2 H1 H1 H1 FY22 FY22
Slide 5: Highlights: Executing action plan to navigate macro challenges
Conclusions Highlights ⫶ Executing action plan to navigate macro challenges Strengthened Extended Robust Investing commercial productivity financial for growth positioning programme position Long-term strategy Cost of debt fixed Proactive price action enabled by investment in at 2.5% across all mark
Slide 6: Highlights: Organic growth driven by commercial priorities
Highlights ⫶ Organic growth driven by commercial priorities Vodafone Business growth Europe consumer Provider of choice for next-gen Converged European consumer growth integrated connectivity connectivity challenger 10.0 • Unique connectivity Digital services €1.5bn €20bn Converged €4bn • 5G & gigab
Slide 7: Financial performance
Financial performance Margherita Della Valle Chief Financial Officer H1 FY23 Results 15 November 2022 7
Slide 8: Financial summary: Resilient financial performance
Financial summary ⫶ Resilient financial performance H1 FY22 H1 FY23 €m €m Organic change2 • Service revenue growth in H1 in both Europe & Group service revenue 19,010 19,207 2.5% Africa Adjusted EBITDAaL 7,565 7,244 (2.6%) • Adjusted EBITDAaL -1.2% excl. one-off settlement Adjusted EBITDAaL margin (
Slide 9: Trading performance: Service revenue growth maintained
Trading performance ⫶ Service revenue growth maintained Group Service Revenue YoY growth Group Group excl. Turkey • Service revenue growth maintained, with Europe 3.3% 2.7% 2.4% 2.5% 2.5% 2.0% flat and growing in Africa 2.7% 2.0% 1.7% 1.4% 1.6% 1.4% • Germany service revenue decline of 1.1%, largely
Slide 10: Germany: Impacted by commercial underperformance
Germany ⫶ Impacted by commercial underperformance Service revenue growth (%) Retail Reported organic 37% of Group EBITDAaL1 Q2 H1 23 H1 23 1.7% 1.5% growth €m growth 1.7% 1.2% 1.2% Service revenue (1.1%) 5,730 (0.8%) 0.7% 1.0% 1.1% Adjusted EBITDAaL 2,677 (7.4%) 0.2% 0.8% (0.1%) (0 .3%) (0.9%) • Ser
Slide 11: Italy and UK
Italy ⫶ Market remains challenging UK ⫶ Sustained strong growth 11% of Group EBITDAaL1 9% of Group EBITDAaL1 Q2 H1 23 H1 23 Q2 H1 23 H1 23 growth €m growth growth €m growth Service revenue (3.4%) 2,125 (2.8%) Service revenue +6.9% 2,712 +6.7% Adjusted EBITDAaL2 759 (17.3%) Adjusted EBITDAaL 685 +6.6
Slide 12: Spain and Other Europe
Spain ⫶ Regaining commercial momentum Other Europe ⫶ Good growth maintained 6% of Group EBITDAaL1 12% of Group EBITDAaL1 Q2 H1 23 H1 23 Q2 H1 23 H1 23 growth €m growth growth €m growth Service revenue (6.0%) 1,782 (4.5%) Service revenue +2.9% 2,552 +2.7% Adjusted EBITDAaL 445 +0.2% Adjusted EBITDAaL
Slide 13: Vodacom and VodafoneZiggo
Vodacom ⫶ Financial services acceleration VodafoneZiggo ⫶ Reconfirmed guidance 15% of Group EBITDAaL1 50% joint venture Q2 H1 23 H1 23 growth €m growth Total revenue growth (%) Service revenue 4.8% 2,472 3.9% South Africa 3.0% 1,747 3.0% 1.5% Internationals 8.8% 736 5.7% 1.8% 1.0% Adjusted EBITDAaL
Slide 14: Adjusted EBITDAaL: Germany performance impacting Group result
Adjusted EBITDAaL ⫶ Germany performance impacting Group result Market impacts Operational leverage (€billion) (€billion) €7.8bn €7.5bn 0.1 (0.1) €7.5bn €7.6bn 0.1 €7.6bn (0.2) €7.3bn (0.2) €7.3bn €7.4bn (0.1) €7.4bn 0.1 0.1 €7.2bn €7.2bn €7.0bn (0.2) €7.0bn €6.8bn €6.8bn €6.6bn €6.6bn €6.4bn €6.4bn
Slide 15: Free cash flow: Seasonality & scheduled spectrum payments
Free cash flow ⫶ Seasonality & scheduled spectrum payments • H1 reflects working capital seasonality -6 .0 -4 .0 -2 .0 0.0 2.0 4.0 6.0 8.0 EBITDAaL €7.2bn − c.60% capital expenditure spend in H2 Interest & tax (€1.4bn) − Q4 handset receivables sales timing Working capital • Interest & tax: deferred
Slide 16: Net debt & liquidity: Robust financial position
Net debt & liquidity ⫶ Robust financial position + fixed financing costs Net debt progression (€billion) • H1 FY23 leverage position impacted by seasonality of cash flow 48 .0 46 .0 3.1x 44 .0 2.1 2.7x 0.5 42 .0 40 .0 1.3 • Vantage Towers transaction reducing leverage by 38 .0 45.5 0.2-0.5x 36 .0 41
Slide 17: Capital allocation
Capital allocation Capital additions Return on Capital Employed H1 22 H1 23 YoY Post-tax Pre-tax €m €m ∆ 7.2% 6.9% 7.0% Network & IT maintenance 969 969 0.0% 6.3% 5.5% 6.0% Coverage & capacity (inc. VTWR) 1,289 1,418 10.0% 5.1% 5.1% 5.0% IT transformation 308 273 (11.4%) 5.0% 4.3% 4.0% 3.9% New prod
Slide 18: FY23 guidance: Mitigating impact of macro-economic challenges
FY23 guidance ⫶ Mitigating impact of macro-economic challenges Updated FY23 Adjusted EBITDAaL guidance Updated FY23 Adjusted FCF guidance 16 .0 15 .5 €15.0- €15.2bn 15.2bn €5.4bn €5.3bn 5.5 15 .0 (0.1) €14.9bn (0.1) c.€5.1bn (0.2) 5.0 14 .5 4.5 14 .0 4.0 13 .5 3.5 13 .0 3.0 FY22 FY22 One-off FX FY22
Slide 19: Strategic progress: Delivering on operational & portfolio priorities
Strategic progress 1. Delivering on operational & portfolio priorities Nick Read Chief Executive H1 FY23 Results 15 November 2022 19
Slide 20: Strengthened operational execution in Germany
1 ⫶ Delivering on near-term priorities 2 ⫶ Navigating macroeconomic challenges 3 ⫶ Executing organic growth strategy Strengthened operational execution in Germany… Net additions (‘000) New ‘GigaZuhause’ portfolio launched + targeted base management Lockdown impact on Telco law 181 20 0 retail store
Slide 21: Investing in our long-term network infrastructure
1 ⫶ Delivering on near-term priorities 2 ⫶ Navigating macroeconomic challenges 3 ⫶ Executing organic growth strategy … and we are investing in our long-term network infrastructure Clear hybrid fibre cable network roadmap Complemented by targeted FTTH deployment Completion1 Potential down speed1 Targ
Slide 22: We have accelerated our operational transformation in Spain
1 ⫶ Delivering on near-term priorities 2 ⫶ Navigating macroeconomic challenges 3 ⫶ Executing organic growth strategy We have accelerated our operational transformation in Spain Improving commercial momentum Structural improvements to enhance returns Investment-linked pricing Digital-enabled efficien
Slide 23: Our multi-year portfolio strategy to reshape & refocus Vodafone
1 ⫶ Delivering on near-term priorities 2 ⫶ Navigating macroeconomic challenges 3 ⫶ Executing organic growth strategy Our multi-year portfolio strategy to reshape & refocus Vodafone Industrial scale & growth Regional focus Convergence & asset utilisation 2022 priorities 7 5 >€23bn 12 13 28 transactio
Slide 24: Passive mobile: Transaction delivers our objectives
1 ⫶ Delivering on near-term priorities 2 ⫶ Navigating macroeconomic challenges 3 ⫶ Executing organic growth strategy Passive mobile ⫶ Transaction delivers our objectives at attractive terms Strategic • Partnering with GIP & KKR – long-term investors with significant expertise in digital infrastructu
Slide 25: European consumer: Pragmatic pursuit of local scale
1 ⫶ Delivering on near-term priorities 2 ⫶ Navigating macroeconomic challenges 3 ⫶ Executing organic growth strategy European consumer ⫶ Pragmatic pursuit of local scale & improved returns Primary objective Structure consideration Create value from enabling sustainable market The optimal ownership s
Slide 26: Strategic progress: Clear action to mitigate macroeconomic challenges
Strategic progress 2. Clear action to mitigate macroeconomic challenges Nick Read Chief Executive H1 FY23 Results 15 November 2022 26
Slide 27: Outlook: Macroeconomic challenges impacting near-term financial performance
1 ⫶ Delivering on near-term priorities 2 ⫶ Navigating macroeconomic challenges 3 ⫶ Executing organic growth strategy Outlook ⫶ Macroeconomic challenges impacting near-term financial performance Value model FY21 medium term ambition FY22 performance FY24 considerations Consistent Europe: 0.5% Pricing
Slide 28: Action plan underway: Driving further productivity gains
1 ⫶ Delivering on near-term priorities 2 ⫶ Navigating macroeconomic challenges 3 ⫶ Executing organic growth strategy Action plan underway ⫶ We are driving further productivity gains 11 Opex in EU & Common Functions New >€1 billion target3 €1.5bn 10 >€1bn Group-wide streamlining & simplification 9 •
Slide 29: Action plan underway: Taking price action throughout Europe
1 ⫶ Delivering on near-term priorities 2 ⫶ Navigating macroeconomic challenges 3 ⫶ Executing organic growth strategy Action plan underway ⫶ We are taking price action throughout Europe Markets with CPI-linked pricing • Price increases across new fixed • CPI+ pricing model embedded contracts in Consu
Slide 30: Strategic progress: Organic strategy underpinning long-term growth
Strategic progress 3. Organic strategy underpinning long-term growth Nick Read Chief Executive H1 FY23 Results 15 November 2022 30
Slide 31: Europe Consumer: Vodafone UK – the blueprint for growth
1 ⫶ Delivering on near-term priorities 2 ⫶ Navigating macroeconomic challenges 3 ⫶ Executing organic growth strategy Europe Consumer ⫶ Vodafone UK – the blueprint for growth Flexible ‘EVO’ contracts Supporting those in financial hardship • Flexible contract lengths 3-36 months • Vodafone & VOXI soci
Slide 32: Vodafone Business: Investments have delivered accelerated growth
1 ⫶ Delivering on near-term priorities 2 ⫶ Navigating macroeconomic challenges 3 ⫶ Executing organic growth strategy Investor briefing ⫶ investors.vodafone.com/vbbriefing Vodafone Business ⫶ Our investments have delivered accelerated growth Operating in attractive €100+ billion addressable market In
Slide 33: Africa Consumer: Simplified & diversified to unlock growth
1 ⫶ Delivering on near-term priorities 2 ⫶ Navigating macroeconomic challenges 3 ⫶ Executing organic growth strategy Africa Consumer ⫶ We have simplified & diversified to unlock growth potential Continent-leading connectivity #1 position in all 145m Countries with markets1 connectivity >500m people
Slide 34: Conclusions
Conclusions Resilient financial performance in FY23 Good progress on operational & portfolio priorities Clear action to mitigate macroeconomic challenges Organic strategy underpinning long-term growth H1 FY23 Results 15 November 2022 34
Slide 35: Appendices
Appendices I More information p36 II Our regional footprint p37 III ESG reporting & performance p38 IV Network quality achievements p39 Provide investor feedback here ⫶ V Definitions p40 investors.vodafone.com/feedback VI Supporting information p41 VII Statutory results summary p42 Net debt, liquidi
Slide 36: Appendix I: More information
Appendix I ⫶ More information • 5-part video presentation Vodafone Business ⫶ Investor briefing • 8 video case studies investors.vodafone.com/vbbriefing • 64-page documents • Analyst Q&A video replay • 5-part video presentation Technology ⫶ Investor briefing • 5 video case studies investors.vodafone
Slide 37: Appendix II: Our regional footprint
2 ⫶ We are the Appendix II ⫶ Our leading regional connectivity footprintprovider in Europe & Africa. Europe ⫶ converged connectivity leader Africa ⫶ leading data & payments provider 44.6m 5.5m 3.3m 17.5m 2.1m 31.3m 1.1m 7.4m 0.3m 10.8m 4.1m 0.6m 43.2m 16.1m 3.0m 10m 0.7m 0.7m 16.0m 17.9m 3.0m 1.7m 0
Slide 38: Appendix III: ESG reporting & performance
Appendix III ⫶ ESG reporting & performance Extensive suite of ESG disclosures Strong ESG performance Annual Report ⫶ vodafone.com/ar2022 ESG Addendum ⫶ investors.vodafone.com/esgaddendum MSCI ESG Rating1 2 • Integrated reporting • >1,000 datapoints in “AA” covering ESG strategy spreadsheet format To
Slide 39: Appendix IV: Network quality achievements
2 ⫶ We are the Appendix IV ⫶leading Networkconnectivity quality achievements provider in Europe & Africa. Awards Publications 4G Mobile Experience Mobile networks 5G Mobile Experience Fixed networks H1 FY23 Results 15 November 2022 39
Slide 40: Appendix V: Definitions
Appendix V ⫶ Definitions Term Definition Term Definition Adds Number of new customers within a defined period LTM Last twelve months Renaming of Adjusted EBITDA. Equivalent in definition & calculation of Adjusted Adjusted EBITDAaL Mbps Megabits (millions) of bits per second EBITDA prior to FY22 Adju
Slide 41: Appendix VI: Supporting information
Appendix VI ⫶ Supporting information 1. Quarterly revenue The information opposite is available in spreadsheet format 2. Group financial performance via investors.vodafone.com 3. Segmental results 4. Segmental analysis 5. Cash flow 6. Mobile customers 7. Fixed broadband customers 8. Marketable homes
Slide 42: Appendix VII: Statutory results summary
Appendix VII ⫶ Statutory results summary Six months ended 30 September Consolidated income statement 2022 2021 €m €m Revenue 22,930 22,489 Cost of sales (15,580) (15,097) Gross profit 7,350 7,392 Selling and distribution expenses (1,711) (1,675) Administrative expenses (2,819) (2,870) Net credit los
Slide 43: Appendix VIII: Net debt, liquidity & total funding obligations
Appendix VIII ⫶ Net debt, liquidity & total funding obligations H1 FY23 FY22 Net debt progression (€billion) Total funding obligations €m €m 48 .0 3.1x Bonds (50,256) (48,031) Bank loans (1,582) (1,317) 46 .0 2.1 Other borrowings including spectrum (1,942) (3,909) 44 .0 2.7x 0.5 1.3 42 .0 Gross debt
Slide 44: Appendix IX: Important notice
Appendix IX ⫶ Important notice You have been provided access to this presentation on the basis that you are an investment professional for the purposes of Article Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as “plan”, 19 or
Slide 45: Investor Relations contacts and upcoming events
Group investors.vodafone.com Upcoming events Investor Relations ir@vodafone.co.uk 1 Kingdom Street, London, W2 6BY Jan Social Contract 2023 investor briefing Matthew Johnson Director matthew.johnson@vodafone.com Group IR Feb Q3 FY23 trading update Daniel Morris 2023 Deputy Director daniel.morris@vod