Vodafone Group Public Limited Company · LSE:VOD
Vodafone Group Public — Vodafone Group — H1 2003/04 Earnings Presentation
61 slides from Vodafone Group Public's earnings presentation, Nov 18, 2003
Slide 1: Vodafone
O vodafone"
Slide 2: Arun Sarin, Chief Executive
Arun Sarin Chief Executive Vodafone Group Plc
Slide 3: Disclaimer and forward-looking statements
This presentation is being made only to, and is directed at (a) persons who have professional experience in matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 and (b) persons to whom it may otherwise lawfully b
Slide 4: Agenda
Agenda • Overview and Highlights Arun Sarin • Results and Financial Position Ken Hydon • Operational Performance Julian Horn-Smith • Outlook and Q&A Arun Sarin
Slide 5: Industry Leading Results
Industry Leading Results • Solid performance in challenging competitive and regulatory environment – Over 125m customers – Strong double digit turnover & EBITDA growth – Significant cash flow growth – Continued improvement in capital efficiency • Increasing returns to shareholders – 20% increase in
Slide 6: Statutory Highlights
Statutory Highlights Turnover Operating Profit* £16.9bn £14.9bn 13% £5.7bn 23% £4.6bn H1 02/03 H1 03/04 H1 02/03 H1 03/04 Earnings per Share* 4.78p 46% 3.28p H1 02/03 H1 03/04 * Before goodwill, amortisation and exceptional items
Slide 7: Proportionate Highlights
Proportionate Highlights Turnover EBITDA* £19.7bn £7.8bn 19% 26% £16.5bn £6.2bn H1 02/03 H1 03/04 H1 02/03 H1 03/04 Group EBITDA Margin* Customers 2pp 39.6% 16% 125.3 37.6% 107.5 H1 02/03 H1 03/04 Sep-02 Sep-03 * Before exceptional items
Slide 8: Outstanding Cash Flow Growth
Outstanding Cash Flow Growth Free Cash Flow £4.6bn • Capital expenditure of £2.2bn 61% • Improved mobile capital efficiency £2.9bn to 12.7% • Reduction in net debt to £10.9bn H1 02/03 H1 03/04
Slide 9: Strong Growth in Mobile Revenues
Strong Growth in Mobile Revenues £15.6bn 16% £13.4bn 10% Organic Mobile Growth H1 02/03 H1 03/04 H1 02/03 Total Mobile Revenue Organic Mobile Growth Exchange Rate Effect
Slide 10: Mobile Customers (Millions)
Better Churn Leads to Strong Net Additions 6 Month Annualised Customer Churn* Customer Growth* 120 27% 11% 100 Mobile Customers (Millions) 25% 80 23% 60 21% 40 19% 20 17% 15% 0 H1 02/03 H2 02/03 H1 03/04 Sept-02 Sept-03 UK & Ireland Northern Europe Total Contract Prepaid Southern Europe & MEA Asia P
Slide 11: Underlying ARPU
Underlying ARPU ARPU on a Constant Currency Basis* £274 £273 H1 02/03 H1 03/04 • MOU increased to 126 min / customer • Termination rate cuts in UK, Italy, Ireland and Portugal * Annualised 6 months rolling ARPU. All subsidiaries
Slide 12: Strong Data Growth
Strong Data Growth Total Data Revenue* 12 Month Rolling Data % of Service Revenue* £2.2bn 29% £1.7bn 15.5% 14.6% 13.2% H1 02/03 H1 03/04 Sep-02 Mar-03 Sep-03 * All subsidiaries
Slide 13: Vodafone live! Gaining Momentum
Vodafone live! Gaining Momentum Over 3 million customers Incremental ARPU* 7+% Pre Vodafone live! Post Vodafone live! Germany UK Italy Spain Others *Based on a European sample
Slide 14: Increasing Controlled Mobile EBITDA and Margin
Increasing Controlled Mobile EBITDA and Margin 40.7% 39.0% £6.3bn £5.2bn 1H 02/03 1H 03/04 UK Germany Italy Japan Other • Small improvement in acquisition and retention costs • Efficiency in network operating costs
Slide 15: Committed Investment in 3G
Committed Investment in 3G Cumulative 3G Spend- Approx £4bn • Over £800m in first half • Major 3G push planned for middle of next fiscal year Germany UK Italy Japan Other
Slide 16: Power of 3G: Drive more mobile minutes
Power of 3G Drive more mobile minutes
Slide 17: Power of 3G: Improved high quality content
Power of 3G Improved high quality content
Slide 18: Power of 3G: Greater productivity and mobilising applications
Power of 3G Greater productivity and mobilising applications
Slide 19: Great Opportunity
Great Opportunity Telecommunications IT / Wireless Proc and Entertainment
Slide 20: The Journey has Begun
The Journey has Begun… • Disposal of non core fixed business • Acquisition of service providers • Extended Partner Network reach to 10 countries
Slide 21: Ken Hydon, Group Financial Director
Ken Hydon Group Financial Director Vodafone Group Plc
Slide 22: Statutory Results: Turnover
Statutory Results Turnover Analysis of Turnover Growth 2.5 • £16.9bn 0.8 ( 0.1 ) • Up 13% (£2.0bn) 2.0 • Mobile organic growth Change (£bn) 1.5 0.1 0.4 – Total: +10% 1.0 0.8 – Data: +23% – Voice: +8% 0.5 - Mobile Mobile Other Foreign Disposals voice data growth currency growth growth (organic) (orga
Slide 23: Statutory Results: Operating Profit
Statutory Results Group Operating Profit* Analysis of Operating Profit* Growth • £5.7bn 1% • 23% increase 6% • Depreciation M&A FX Organic growth – £2.2bn – £0.2bn in Japan Telecom 16% *Before amortisation of goodwill and exceptional items as detailed in notes 3 & 4 of the Interim Announcement dated
Slide 24: Statutory Results
Statutory Results 6 months to 30 September Adjusted EPS* (pence) 2003 2002 Increase 4.78 £m £m % Turnover 16,899 14,898 13 Group operating profit* 5,722 4,640 23 Net interest payable (356) (390) (9) 3.53 3.28 Profit before tax* 5,366 4,250 26 Tax (1,792) (1,602) 2.64 2.51 Goodwill amortisation (7,65
Slide 25: Shareholder Returns
Shareholder Returns Dividend Growth and Yield (2000-4) • Interim dividend Dividend Yield (based on 30/9/03 closing share price of £1.20 1.8% – Up 20% on 2002/3 1.6% – 0.9535p per share 20% 1.4% – £650m 1.2% 15% • Share buyback programme 1.0% – Allocation of £2.5bn 0.8% 0.6% 5% 5% 5% 0.4% 0.2% 0.0% 2
Slide 26: Cash Flow
Cash Flow 6 months to 30 September Analysis of Operating Cash Flow 2003 2002 Increase £m £m % Other Other Operating cash flow 6,081 5,676 7 Mobile 5% Germany Capital expenditure (2,202) (2,670) (18) 3% 20% Licences (2) (59) (97) Other Europe Operating free cash flow 3,877 2,947 32 20% Tax paid (283)
Slide 27: Tangible Fixed Assets
Tangible Fixed Assets September 2003 March 2004 • £2.1bn additions • Around £5bn Other Other Operations Operations 5% Germany 3% Germany 17% 17% Other Other Mobile Mobile 26% 27% Italy Italy 11% 14% United Kingdom United 11% Japan Kingdom Japan 11% 28% 30% • 40% on 3G • 40% on 3G • Mobile capital ef
Slide 28: Net Debt
Net Debt Debt Maturity at 30 September 2003 (£bn) • September 2003 Total = £15.5bn 4 £bn – Gross debt (15.5) 3 – Cash & investments 4.6 – Net debt (10.9) 2 • Solid credit profile 1 0 <1 1-2 2-3 3-4 4-5 5-6 6-7 >7 Years
Slide 29: Summary
Summary • Growth – Turnover – Operating profit* – Adjusted earnings per share* – Free cash flow • Increasing returns to shareholders • Healthy financial position *Before amortisation of goodwill and exceptional items as detailed in notes 3 & 4 of the Interim Announcement dated 18 November 2003
Slide 30: Julian Horn-Smith, Group Chief Operating Officer
Julian Horn-Smith Group Chief Operating Officer Vodafone Group Plc
Slide 31: Delivering on our objectives
Delivering on our objectives Vodafone live! • Today in 15 markets • Over 3m customers • Attracting new customers • Increasing usage • Higher customer satisfaction • Higher ARPU Better investment in customers
Slide 32: Vodafone Japan
Vodafone Japan • The Group’s largest business by revenue • Rebranded to Vodafone Japan (1st October) • Seamless services - GSM roaming
Slide 33: Vodafone Japan
Vodafone Japan Net Additions 17.9% 18.0% 18.1% 18.5% 18.7% 18.6% 14,540 14,389 13,912 Customers Market Share 13,269 12,949 12,618 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 2002/03 2003/04 2002/03 2003/04 • Competitive market • Stable market share over 18%
Slide 34: Vodafone Japan: Customer Base Costs and EBITDA
Vodafone Japan Customer Base Costs EBITDA 180 1,000 32.4% 32.0% 30.6% 160 28.0% 23.7% 800 24.3% 140 Customer Base Cost (¥ billions) 20.0% 120 18.1% EBITDA (£ millions) 600 100 80 400 60 40 200 20 0 0 H2 01/02 H1 02/03 H2 02/03 H1 03/04 H2 01/02 H1 02/03 H2 02/03 H1 03/04 EBITDA EBITDA Margin SRC SAC
Slide 35: Vodafone Japan: ARPU & Data
Vodafone Japan ARPU & Data* Year on Year Growth 100,000 15.1% 25% 18.1% 21.3% 20.3% Service Revenue Average Customers 20% 75,000 20% Total Minutes 12 month rolling ARPU (¥) Year on Year growth 15% 15% 14% 13% 13% 50,000 10% 9% 10% 8% 25,000 6% 5% 0 0% Mar 02 Sep 02 Mar 03 Sep 03 H1 02/03 H2 02/03 H1
Slide 36: Vodafone Japan – Strategy for Growth
Vodafone Japan – Strategy for Growth • New pricing plans – Packet Discount – 2 year Contract Discount – Vodafone Happy Time • New commercial pricing – Rebalance retention and acquisition costs • Improve services and handsets
Slide 37: Vodafone Germany
Vodafone Germany 1,200 46.6% 47.1% 47.6% • Strong customer growth (‘000s) 45.8% 1,000 44.5% 45.3% • Contract % increasing 800 • Maintaining market share 600 38.3% 38.3% 38.4% 38.2% 38.0% 38.0% 23,780 400 23,261 Customers 22,732 22,940 200 Market Share 21,810 21,399 0 (200) Prepaid Net Additions Cont
Slide 38: Vodafone Germany: Churn & Upgrade
Vodafone Germany Churn & Upgrade % Vodafone Stars 30% 2,500 11.4% 11.1% 25% 2,000 22% Vodafone Stars Members ('000s) Annualised Half year Churn % 8.0% 20% 19% 7.2% 1,500 15% 1,000 10% 500 5% 0% 0 H2 01/02 H1 02/03 H2 02/03 H1 03/04 H1 02/03 H2 02/03 H1 03/04 Churn % Upgrade % • Higher volume of upgr
Slide 39: Vodafone Germany: ARPU & Data
Vodafone Germany ARPU & Data* Year on Year Growth 330 17.0% 16.4% 15.4% 10% 320 14.4% 9% 310 8% 7% 8% 12 month rolling ARPU (€) 300 6% Year on Year growth 6% 5% 290 4% 280 4% 4% 3% 270 2% 260 (1%) 250 0% Mar-02 Sep-02 Mar-03 Sep-03 H1 02/03 H2 02/03 H1 03/04 ARPU Data % of Service Revenue* (2%) Serv
Slide 40: Vodafone Germany: Customer Base Costs and EBITDA
Vodafone Germany Customer Base Costs EBITDA 600 1,400 46.7% 14.8% 46.2% 44.3% 1,200 40.8% 500 12.4% Customer Base Cost (€ millions) 10.3% 1,000 400 10.0% EBITDA (£ millions) 800 300 600 200 400 100 200 0 0 H2 01/02 H1 02/03 H2 02/03 H1 03/04 H2 01/02 H1 02/03 H2 02/03 H1 03/04 SRC SAC % Service Reve
Slide 41: Vodafone Italy
Vodafone Italy 19.8% 17.4% 17.4% 19,982 16.7% 19,412 18,316 (‘000s) 17,711 H2 01/02 H1 02/03 H2 02/03 H1 03/04 Closing Customers Annualised Prepaid Churn • Penetration almost 100% • Declining Churn
Slide 42: Vodafone Italy: ARPU & Data
Vodafone Italy ARPU & Data* Year on Year Growth 12.2% 16% 360 14% 11.3% 14% 10.1% 350 8.7% 12% 11% 11% 11% 11% 12 month rolling ARPU (€) Year on Year growth 10% 340 10% 9% 8% 8% 7% 330 6% 320 4% 310 2% 300 0% Mar-02 Sep-02 Mar-03 Sep-03 H1 02/03 H2 02/03 H1 03/04 ARPU Data % of Service Revenue* Serv
Slide 43: Vodafone Italy: Customer Base Costs and EBITDA
Vodafone Italy Customer Base Costs EBITDA 160 1,200 54.8% 4.8% 140 49.4% 49.3% 3.5% 1,000 3.3% 42.4% Customer Base Cost (€ millions) 120 2.6% 800 EBITDA (£ millions) 100 80 600 60 400 40 200 20 0 0 H2 01/02 H1 02/03 H2 02/03 H1 03/04 H2 01/02 H1 02/03 H2 02/03 H1 03/04 SRC SAC % Service Revenue EBIT
Slide 44: Vodafone UK – Market Leader
Vodafone UK – Market Leader Customer Share (September 03) 1 T-Mobile Vodafone T-Mobile 23.9% 19.4% Vodafone 26.0% 32.5% Orange Orange O2 25.7% 25.8% 24.3% O2 22.4% 1 Company Data 2 OFTEL figures Vodafone O2 Orange T-Mobile
Slide 45: Vodafone UK
Vodafone UK (‘000s) 300 40.7% 41.3% 41.3% 41.3% Total Customer Base (000) 40.6% 13,483 200 39.5% 13,313 13,300 13,224 100 13,009 0 12,957 (100) Prepaid Net Additions Contract Net Additions (200) Contract % of Total base Q1 Q2 Q3 Q4 Q1 Q2 2002/03 2003/04 (300) (400) Q1 Q2 Q3 Q4 Q1 Q2 2002/03 2003/04
Slide 46: Vodafone UK: ARPU & Data
Vodafone UK ARPU & Data* Year on Year Growth 320 15.0% 14.4% 13.2% 300 11.8% 12% 11% 280 12 month rolling ARPU 10% 8% Year on Year growth 8% 260 8% 7% 6% 6% 6% 240 4% 220 2% 200 0% Mar-02 Sep-02 Mar-03 Sep-03 H1 02/03 H2 02/03 H1 03/04 ARPU Data % Service Revenue * Service revenue Customer revenue •
Slide 47: Vodafone UK: Customer Base Costs and EBITDA
Vodafone UK Customer Base Costs EBITDA 300 820 13.1% 12.5% 39.6% 11.8% 12.0% 37.2% 800 37.0% 36.7% 250 Customer Base Cost (£ millions) 780 200 EBITDA (£ millions) 760 150 740 100 720 50 700 0 680 H2 01/02 H1 02/03 H2 02/03 H1 03/04 H2 01/02 H1 02/03 H2 02/03 H1 03/04 SRC SAC % Service Revenue EBITDA
Slide 48: Verizon Wireless
Verizon Wireless (‘000s) Total Customer Base (m) Net Adds Penetration 1,600 49.3% 1,400 47.6% 46.0% 46.2% 43.3% 44.6% 1,200 36.0 1,000 800 23.4 21.9 600 September’03 15.6 400 12.3 12.1 200 0 Q1 Q2 Q3 Q4 Q1 Q2 Verizon Cingular AT&T Sprint Nextel T-Mobile Wireless 2002/03 2003/04 • Positive net additi
Slide 49: Verizon Wireless: Proportionate EBITDA
Verizon Wireless 620 1,200 35.3% 35.1% 35.7% 33.0% 600 1,000 Proportionate EBITDA (£ millions) 12 month rolling ARPU ($) 580 800 560 600 540 400 520 200 500 0 H2 01/02 H1 02/03 H2 02/03 H1 03/04 H2 01/02 H1 02/03 H2 02/03 H1 03/04 ARPU Proportionate EBITDA EBITDA Margin • Increasing MOU and ARPU • I
Slide 50: Collaboration with Verizon Wireless
Collaboration with Verizon Wireless • Multinational accounts • Integrated data card for PC’s • Roaming • SMS service interoperability • Content purchasing
Slide 51: The power of 3G
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Slide 52: 3G-Powered Services Timeline
3G-Powered Services Timeline 2003 2004 Dec Apr Middle Internal Friendly 3G-powered services Enhanced 3G-powered services user trials user trials available on and handsets available limited basis in volume • Vodafone developing attractive portfolio with manufacturers to underpin service offering • In
Slide 53: Partner Networks
Partner Networks The offering • Vodafone offers – Global product portfolio – Vodafone Brand – Global service footprint – International Account Management – Economies of scale • Partner offers – Additional footprint – Additional roaming customers – Increased Vodafone Brand value – Royalty fee
Slide 54: Enriching our proposition
Enriching our proposition Connect Card Content
Slide 55: Organisational Structure
Organisational Structure Group Marketing Group Technology and Business Integration • Provide leadership and • Lead the implementation of a co-ordination across the full range standardised architecture for of marketing and commercial business processes, information activities technology and network s
Slide 56: Conclusion
Conclusion • Excellent operating performance • Best propositions and the right platforms for the year ahead • Focus on delighting our customers 56
Slide 57: Outlook for FY 03/04
Outlook for FY 03/04 May 2003 November 2003 Average Customer Growth* > 10% > 10% on organic basis Revenue Growth* > 10% > 10% on organic mobile basis EBITDA Margin* Slightly higher Mobile margin slightly higher Capex Around £5bn Around £5bn Free Cash Flow > £5.2bn > £7bn * Proportionate Basis
Slide 58: Outlook for FY 04/05
Outlook for FY 04/05 FY 2004/2005 Average Organic Customer Growth* High single digit Organic Mobile Revenue Growth* High single digit Organic Mobile EBITDA Margin* Flat to modestly ahead Organic Mobile EBITDA Growth* Approaching 10% Capex Around £5bn * Proportionate Basis
Slide 59: Key Strategic Goals
Key Strategic Goals Delight our customers Be a responsible Leverage global scale corporate citizenship and scope Deliver superior returns Build the Extend our best workforce core business 60,000 people globally focused on delivering
Slide 60: Forward-Looking Statements
Forward-Looking Statements This presentation contains “forward-looking statements” within the meaning of the US Private Securities Litigation Reform Act of 1995 with respect to the Group’s financial condition, results of operations and businesses and certain of the Group’s plans and objectives. In p
Slide 61: Vodafone
O vodafone"