Vodafone Group Public Limited Company · LSE:VOD
Vodafone Group Public — Vodafone Group — H1 2017/18 Earnings Presentation
60 slides from Vodafone Group Public's earnings presentation, Nov 14, 2017
Slide 1: Vodafone Group Plc Results
Vodafone Group Plc Results For the half year ended 30 September 2017 14 November 2017
Slide 2: Disclaimer
Disclaimer By watching this webcast you agree to be bound by the following forward-looking statements are discussed on the final slide of conditions. You may not disseminate these slides or this this presentation. recording, in whole or in part, without the prior consent of This presentation also co
Slide 3: Overview of the half year
Overview of the half year Vittorio Colao Group Chief Executive 3
Slide 4: Half year highlights
Half year highlights Organic growth Service revenue (€bn) Adjusted EBITDA (€bn) Free Cash Flow (pre-spectrum) (€bn) Dividend (€c per share) +1.7% +13.0% +1.41 +2.1% 21.8 29.5% 32.0% 20.6 margin margin 4.84 4.74 7.1 7.4 1.3 (0.1) H1 16/17 H1 17/18 H1 16/17 H1 17/18 H1 16/17 H1 17/18 H1 16/17 H1 17/18
Slide 5: Strategy delivering growth
Strategy delivering growth Our differentiators... Customer Capital-smart fixed Leading mobile network experience excellence infrastructure strategy 19/21 14/21 99m markets as consumer markets co/best for data EU homes passed with NGN NPS co/leader (18/21 for voice) New partnerships in Germany, UK an
Slide 6: Sustained commercial momentum
Sustained commercial momentum Europe AMAP Customer net adds (000s) Customer net adds (m) Mobile contract Mobile contract Fixed broadband Mobile prepaid 0.3 0.4 278 275 0.6 329 313 0.4 138 3.5 3.5 3.1 339 340 2.7 0.5 251 237 262 0.9 Q2 16/17 Q3 16/17 Q4 16/17 Q1 17/18 Q2 17/18 Q2 16/17 Q3 16/17 Q4 16
Slide 7: Key markets: Europe
Key markets: Europe Germany Italy UK Spain Consumer NPS rank #1 #1 #2 (network NPS) #1 Competitive Environment Stable Intense Stable Low-end intense Q2 service revenue growth (%) +1.6 +1.5 +0.61 +3.9 Strong customer growth Lapping prior year Back to underlying M4M actions, handset price increases gr
Slide 8: Key markets: AMAP
Key markets: AMAP Vodacom South Africa Turkey Egypt International Consumer NPS rank #1 #1 (#1 in 3 markets) #2 #1 Environment Macro pressures Stable Stable Moving to 4G in DRC Q2 service revenue growth (%) +3.9 +4.1 +14.7 +21.0 Tougher comparator, Tanzania improving Customer growth Customer growth l
Slide 9: India: competition intense, positive developments
India: competition intense, positive developments Service revenue remains under pressure (INR bn) Service revenue growth (%) Service revenue (Rs bn) Performance 5.4 (1.9) (11.5) (13.9) (17.8) • Service revenue impacted by pricing competition, seasonality and sales tax 111.7 105.5 98.3 98.2 91.8 • Re
Slide 10: Financial review
Financial review Nick Read Group Chief Financial Officer 10
Slide 11: Operational leverage driving EBIT inflection
Operational leverage driving EBIT inflection Financial highlights (H1 17/18) EBIT margin inflection EBITDA % of revenue D&A % of revenue 35% Service revenue €20.6bn 30% YoY change +1.7% EBIT margin 10.6% / 9.7%1 25% EBIT margin 8.8% Adjusted EBITDA Adjusted EBIT 20% €7.4bn €2.5bn +13.0% +9.3%1 +51.9
Slide 12: Bridge from adjusted to reported earnings
Bridge from adjusted to reported earnings H1 17/18 H1 16/17 Growth (%) (€m) (€m) Adjusted EBIT 2,457 2,050 19.9 [XXXX] Associates 171 73 [XXXX] Restructuring (33) (37) [XXXX] Amortisation of brand assets / other (543) (515) Other income and expense (44) (56) Operating profit 2,008 1,515 Financing co
Slide 13: Sustained service revenue growth, lower roaming headwind
Sustained service revenue growth, lower roaming headwind Group organic service revenue growth (%) European contribution1 to service revenue growth (%) Reported Ex. regulation Europe Rest of Group 2.8 2.6 2.4 2.4 2.3 2.2 2.0 2.1 70 1.5 50 1.3 42 46 38 Q2 16/17 Q3 16/17 Q4 16/17 Q1 17/18 Q2 17/18 Q2 1
Slide 14: All three growth engines contributing
All three growth engines contributing H1 17/18 organic service revenue growth contribution (pp) Data Fixed / Enterprise XX = Change in growth contribution compared to H1 16/17 Convergence - +0.4pp +0.2pp 0.7 (0.9) -0.6pp -0.6pp 0.8 (0.6) 1.7 +0.1pp 1.0 0.7 European consumer AMAP consumer Consumer En
Slide 15: Operating costs lower despite commercial momentum
Operating costs lower despite commercial momentum (€bn) Net adds H1 17/18 (000s) H1 16/17 (000s) EU contract mobile +451 +548 AMAP total mobile +7,586 +4,456 Group fixed broadband +628 +638 €0.1bn net operating cost reduction 0.2 7.4 0.1 0.0 0.0 7.2 0.5 6.6 H1 16/17 Gross margin Customer costs Techn
Slide 16: EBITDA margin expansion for three consecutive years
EBITDA margin expansion for three consecutive years Group adjusted EBITDA margin (%) 32.0 30.7 31.1 Underlying ex. EU roaming, HF, & 29.5 regulatory settlements 29.3 28.5 28.6 H1 12/13 H1 13/14 H1 14/15 H1 15/16 H1 16/17 H1 17/18 Strategic Project Spring initiatives Customer eXperience eXcellence (C
Slide 17: Broad based improvement in EBITDA margin
Broad based improvement in EBITDA margin Adjusted organic YoY EBITDA margin movement (pp) Controlled Joint ventures 3.0 2.6 2.3 2.1 1.8 1.8 0.8 0.3 0.9 (0.2)1 (1.9) (8.2) Greece Germany Spain Turkey Italy Portugal Ireland Egypt UK South Netherlands2 India3 Africa H1 17/18 organic EBITDA growth (%) 1
Slide 18: Fit for Growth programme
Fit for Growth programme Group savings achieved over 3 years EBITDA margin improvement over 3 years (pp) Procurement Shared Services Centralised spend 21.8k FTE 77% (+6.1k) 11.6 (+17pp) €500m € 4.9 4.4 4.0 3.7 Network & IT ZBB (0.1) Network design Group support standardisation functions (3.5) €340m
Slide 19: Digital opportunity to sustain cost momentum
Digital opportunity to sustain cost momentum Scope and digital actions Addressable cost base: Opportunities: €2.5bn • Increase direct distribution mix, lowering commissions Digital customer €1.0bn • Optimise retail footprint management €1.5bn • AI-enabled digital customer support Digital technology
Slide 20: Capex mix
Capex mix H1 17/18 capital allocation1 (%) Key investment areas CPE and Capacity, run and maintain: success-based Capacity, run and • +4pp, supporting significant growth in data maintain (mobile, fixed and IT) Mobile capability: 20 • -6pp, lower 4G rollout, EU coverage now 93% (PY: 90%) 45 • Evolve
Slide 21: Free cash flow growth drivers
Free cash flow growth drivers H1 17/18 H1 16/17 (€m) (€m) Adjusted EBITDA 7,385 7,090 Capital additions (3,263) (3,526) Capital creditors (576) (1,391) • Lower capital creditors: reflecting final Working capital (1,718) (1,534) payment from Project Spring in H1 16/17 Net interest (343) (231) Net int
Slide 22: Reported leverage and balance sheet position
Reported leverage and balance sheet position Net debt (€bn) Estimated year end net debt c.€31bn1 0.5 0.7 2.6 32.1 31.2 (1.0) (0.6) 8.0 (1.3) Mar 2017 H1 FCF Final 16/17 Spectrum MCB share Vodacom share FX/other Sep 2017 India (pre-spectrum) dividend buyback placing Sep-2017 • Share buyback: preventi
Slide 23: Active capital allocation
Active capital allocation Europe Africa India €2bn Gigabit Streamlined >US$10bn Merger: >20% IRR investment plan Safaricom holding Synergies On-track €1bn Vodacom stake sale (5.2%) 5m HH1 FTTH wholesale Standalone Exclusivity agreement US$1.2bn2 towers sold period Tanzania IPO +1.3m HH FTTH reciproc
Slide 24: Raising guidance
Raising guidance FY 17/18 EBITDA guidance at Nov 2017 (€bn) 0.95 – 1.15 14.75 – 14.95 0.4 0.1 13.5 (0.2) FY 16/17 EU roaming/ UK handset UK regulatory Underlying FY 17/18 (rebased)¹ visitor financing settlements growth Guidance at Nov 2017² Previously: (0.3) 0.3 - 0.5 – 1.0 14.0 – 14.5 Organic EBITD
Slide 25: Strategy & Progress
Strategy & Progress 25
Slide 26: Net promoter score: leading position
Net promoter score: leading position Market leading NPS… … due to best customer experience2 Consumer (points)1 Enterprise (points) Gap to next best Gap to third Gap to next best 91% 1Gbps mobile data sessions Fixed broadband >3Mbps launched3 14 14 9 12 8 8 Customer Customer experience experience 3 4
Slide 27: Mobile Data monetisation: more-for-more, Vodafone Pass
Mobile Data monetisation: more-for-more, Vodafone Pass Actions – major markets Vodafone Pass: driving usage… … and ARPU Italy cohort analysis for early adopters (GB) Germany: launched end of October More-for-more Vodafone Pass RED S RED M RED L Q1 17/18 Pick Your Vodafone Pass2 1 to 2 Chat Social Mu
Slide 28: Mobile Data monetisation: underlying ARPU growing
Mobile Data monetisation: underlying ARPU growing Consumer contract ARPU (% change Q2 17/18, local currency) Increasing share of SIM-only (% of consumer contract base)3 Germany Italy1 UK Spain Germany UK 4.3 4.0 31 30 2.1 27 1.7 1.6 26 26 1.1 23 21 22 19 20 (0.6) (3.0) Reported Underlying² Q2 16/17
Slide 29: Mobile Data monetisation: unit cost efficiencies
Mobile Data monetisation: unit cost efficiencies Europe Mobile data usage is growing rapidly1 Stable European network costs4 (Index) YoY growth (%) YoY growth (PB) Monthly usage (GB)2 €s €/GB 61 59 56 62 2.1 1.7 1.4 1.1 100 102 102 389 235 269 182 H2 15/16 H1 16/17 H2 16/17 H1 17/18 FY 15/16 FY 16/1
Slide 30: Mobile Data monetisation: Consumer IoT
Mobile Data monetisation: Consumer IoT Consumer IoT market opportunity Initial products2 Differentiators V-Auto V-Camera 1 IoT expertise in Enterprise: ~€730 p.a. revenue, 62m SIMs 370m addressable mobile SIM market by 20201 Car tracking, rapid emergency response 4G Mobile security camera 2 Unique p
Slide 31: Fixed & Convergence: leading scale and growth momentum
Fixed & Convergence: leading scale and growth momentum European homes marketable (Q2 17/18)1 (m) European broadband net adds (LTM)3 (m) Total homes Vodafone 1.2 163 Total incl’ ADSL and NGN Orange 136 0.8 NGN wholesale 99 Liberty Global 0.7 42 Strategic wholesale partnerships2 Deutsche Telecom 0.5 O
Slide 32: Fixed & Convergence: enhancing footprint
Fixed & Convergence: enhancing footprint Agreement Opportunity Return Capital-smart Germany • Fibre to 2k business parks • Business parks under- • Incremental revenue infrastructure Gigabit • FTTH to 1m rural homes served • Attractive IRR >20% strategy Investment • 12.6m cable homes • Payback <4 yea
Slide 33: Enterprise: outperforming
Enterprise: outperforming Service revenue growth (%) Competitive assets Outperforming peers2 (%) Q2 17/18 Reported Ex. regulation1 Q2 17/18 revenue growth • Largest geographic reach 0.5 0.2 3.8 2.5 • Greater exposure to fast growing 2.5 markets, AMAP +5% (17% of (0.6) revenue) (2.0) 1.5 0.5 • Lower
Slide 34: Vodafone strategic programmes
Vodafone strategic programmes DIGITAL VODAFONE A leading digital customer experience, data driven decisions, simpler & automated operations 2017/18 CUSTOMER EXPERIENCE EXCELLENCE Leading consumer and enterprise NPS 2015/16 PROJECT SPRING FIT FOR GROWTH Leading mobile data Grow EBITDA network faster
Slide 35: Digital Vodafone: leading digital experience and operations
Digital Vodafone: leading digital experience and operations The most engaging digital customer experience: blending the best of digital and human interaction in a personal, instant and easy way Customer Technology Operations Differentiating the Using advanced data Smart capex, simplification and cus
Slide 36: Digital Vodafone: differentiating customer experience
Digital Vodafone: differentiating customer experience 1 Marketing Big Data analytics/ Digital media 2 Sales Focus on Digital channels 3 Care Artificial Intelligence/Chatbots x10 data options 1-20GB x9 minute options 100- unlimited Launched understands 719m 4th Oct. users >90% of bundles sold 100- Ac
Slide 37: Digital Vodafone: technology and operations
Digital Vodafone: technology and operations Smart Capex Germany: Assessing IT Transformation & DXL UK: integrated profitability into billing per site systems in “Alexa, how much is my two days Vodafone bill this month?” Increase capex efficiency Improve speed to market Advanced analytics for network
Slide 38: Digital Vodafone: ambition
Digital Vodafone: ambition Significant progress already • My Vodafone App penetration, 58% in Europe • Chatbots: 500-600k interactions per month in Italy • 100+ bots in operation, >200 by Mar ‘18 • Digital accelerator teams in main markets Today Future Big Data share of CVM campaigns 15% 100% Better
Slide 39: The future is exciting. Ready?
The future is exciting. Ready? A brand that inspires optimism in everyone to benefit from new, exciting technologies 39
Slide 40: Summary H1 17/18
Summary H1 17/18 • Leading customer experience and network quality supporting differentiation • Capital-smart NGN strategy – progressing market by market • Continued momentum in ‘growth engines’ of mobile data, fixed/convergence and Enterprise • ‘Fit for Growth’ programme lowering absolute operating
Slide 41: Q&A
Q&A 41
Slide 42: Slide 42
Slide 43: Appendix
Appendix 43
Slide 44: Germany: strong customer growth offsetting regulatory headwinds
Germany: strong customer growth offsetting regulatory headwinds Customer experience KPIs Financial results Consumer NPS (points) Customer net adds (000s) Service revenue growth (%) Gap to next best Mobile contract Reported Gap to third Fixed broadband Growth ex. regulation impact 3.5 21 217 3.0 14 3
Slide 45: Italy: pricing environment remains highly competitive
Italy: pricing environment remains highly competitive Customer experience KPIs Financials Consumer NPS (points) Customer net adds (000s) Service revenue growth (%) Gap to next best Mobile Prepaid Gap to third Fixed broadband 3.2 3.0 7 2.8 70 75 58 54 5 33 2.2 2 1.5 (156) (139) (218) (4) (281) (346)
Slide 46: UK: operational improvements driving recovery
UK: operational improvements driving recovery Customer experience KPIs Financials NPS (points) Customer net adds (000s) Service revenue growth (%) Consumer Mobile contract Reported Enterprise 11 Fixed broadband Ex. Handset Financing and regulation 9 8 991 7 92 0.6 4 (0.7) (1.2) 0 0 30 33 332 29 33 (
Slide 47: Spain: sustained growth
Spain: sustained growth Customer experience KPIs Financials Consumer NPS (points) Customer net adds (000s) Service revenue growth (%) Gap to next best Mobile contract Reported Gap to third Fixed broadband Ex. Handset Financing 12 97 93 96 4.1 91 3.8 3.5 75 3.0 3.9 8 7 55 4 40 39 42 15 1.6 1.3 0.0 0.
Slide 48: Vodacom: segmentation and value offers attracting users
Vodacom: segmentation and value offers attracting users Customer experience KPIs Financials South Africa consumer NPS (points) South Africa data bundles sold (m) Vodacom service revenue growth (%) Gap to next best South Africa Gap to third Internationals Group 16 16 4.1 4.0 3.8 5.6 3.4 166 181 7.9 1
Slide 49: India: H1 17/18 circle-by-circle investment strategy
India: H1 17/18 circle-by-circle investment strategy Service revenue €2.6bn Adjusted EBITDA €0.6bn Capital additions €0.4bn Other (%) Other (%) (5 circles) (%) Challenger 0 Other Challenger Challenger 9 5 (5 circles) 71 11 80 95 92 Leadership Leadership Leadership (12 circles) Spectrum acquired1 2G
Slide 50: Customer experience and commercial KPIs
Customer experience and commercial KPIs Europe AMAP Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 16/17 16/17 16/17 17/18 17/18 16/17 16/17 16/17 17/18 17/18 4G customers (m) 1 39.3 43.3 47.0 50.6 53.3 4G customers (m) 2 20.0 23.3 27.8 33.4 40.1 Broadband customers (m) 1 12.9 16.2 16.6 16.8 17.1 Broadband customers
Slide 51: European homes reached with NGN
European homes reached with NGN1 Wholesale Open Fiber2 (millions) Owned Household coverage 65% 49% 68% 90% 54% 94% 13.6 9.3 26.1 8.8 12.6 10.3 0.2 1.8 7.1 3.4 2.5 Germany Italy Spain UK Portugal VodafoneZiggo NL JV 99m households passed with NGN (incl. wholesale) 36m households passed with own NGN 6
Slide 52: Service revenue bridge
Service revenue bridge (€ millions) 21,811 Mobile 187 20,592 (731) 246 15 (81) (13) (842) H1 16/17 FX One-off items¹ Mobile Incoming Voice MTR Fixed line and Other H1 17/18 reported customer carrier reported service revenue service revenue revenue 52 1. Excludes NL results
Slide 53: Voice MTR impact
Voice MTR impact H1 17/18 H1 16/17 €m pp €m pp Europe Service revenue (72) (0.5) (29) (0.2) H1 17/18: Germany €54m, Ireland €14m Adjusted EBITDA (19) (7) AMAP Service revenue (9) (0.2) (12) (0.3) H1 17/18: South Africa €9m Adjusted EBITDA - (5) Group Service revenue (81) (0.4) (41) (0.2) Adjusted EB
Slide 54: Profit
Profit H1 17/18 Restated H1 16/17 (€m) (€m) Adjusted EBIT 2,457 2,050 Share of result in associates and joint ventures 171 73 Adjusted operating profit 2,628 2,123 Net financing costs 152 (123) Taxation (579) (1,114) Customer & brand amortisation (543) (515) Restructuring costs (33) (37) Other (45)
Slide 55: Adjusted EPS reconciliation
Adjusted EPS reconciliation H1 17/18 Restated H1 16/17 Reported (€m) (€m) growth (%) (Loss)/Profit attributable to owners of parent 1,131 (5,129) Taxation 1 90 714 2 India 345 5,281 Net financing costs (407) (328) Customer & brand amortisation 543 515 Non-controlling interests (7) (8) Restructuring
Slide 56: Taxation
Taxation H1 17/18 H1 16/17 (€m) (€m) Taxation (579) (1,114) Deferred tax following revaluation of Deferred tax assets - Luxembourg - 588 investments in Luxembourg and impact of lower interest rates. Additional deferred tax assets Tax assets in Luxembourg to be utilised (159) - recognised within 60 y
Slide 57: Financing costs
Financing costs H1 17/18 H1 16/17 (€m) (€m) Net financing costs 152 (123) Mark to market - Mandatory convertible bonds (175) (89) FX1 (302) (239) Adjusted net financing costs (325) (451) Other mark to market of derivative positions (20) 65 Interest expense arising on settlement of outstanding tax is
Slide 58: Currency mix of net debt and EBITDA
Currency mix of net debt and EBITDA Currency H1 17/18 closing Currency H1 17/18 closing net debt (€bn) adjusted EBITDA (€bn) EUR 31.2 EUR 4.4 ZAR 1.5 ZAR 0.9 GBP (3.0) GBP 0.9 Other 2.4 Other 1.2 Net debt excl. India 32.1 Total 7.4 Net debt incl. India 40.1 58
Slide 59: Forward-looking statements
Forward-looking statements This presentation, along with any oral statements made in connection therewith, contains “forward- IT systems or data protection systems; changes in foreign exchange rates, as well as changes in looking statements” including within the meaning of the US Private Securities
Slide 60: More information
More information Visit our website for more information Upcoming 2018 dates Q3 17/18 Prelim 17/18 Q1 18/19 results results results 1 February 15 May 20 July www.vodafone.com/investor Contact us ir@vodafone.co.uk +44 (0) 7919 990 230 For definitions of terms please see www.vodafone.com/content/index/