Vodafone Group Public Limited Company · LSE:VOD
Vodafone Group Public — Vodafone Group — H1 FY22 Earnings Presentation
43 slides from Vodafone Group Public's earnings presentation, Nov 16, 2021
Slide 1: H1 FY22 Results
H1 FY22 Results 16 November 2021
Slide 2: Agenda & contents
Agenda & contents Highlights Nick Read p3 Chief Executive Financial Margherita Della Valle p8 performance Chief Financial Officer Strategy, We connect for a better future operations Nick Read p20 Chief Executive The new generation connectivity & digital & portfolio services provider for Europe & Afr
Slide 3: Conclusions Highlights
Conclusions Highlights Good performance inline with expectations & regaining commercial momentum Our strategy is focused on sustainable growth to drive returns Near-term operational & portfolio optimisation priorities Committed to improving returns through growth & portfolio action H1 FY22 Results N
Slide 4: Highlights: Demonstrating growth in both Europe & Africa
Highlights ⫶ Demonstrating growth in both Europe & Africa Service revenue growth Adjusted EBITDAaL growth ROCE inflecting +6.5% Ex-roaming & visitor revenue Pre-tax ROCE (LTM) €7.6bn +120bps 3.3% €7.1bn 6.3% 6.3% 2.4% €6.9bn €7.0bn 5.5% 1.8% 5.1% 1.5% 1.7% 33.6% 32.4% 32.7% 0.6% 0.8% 0.4% 31.7% (0.4
Slide 5: Highlights: Our growth strategy to organically improve returns
Highlights ⫶ Our growth strategy to organically improve returns Vision The new generation connectivity & digital services provider for Europe & Africa, enabling an inclusive & sustainable digital society Deep & Best connectivity Leading 24hr Outstanding trusted customer products & innovation in digi
Slide 6: Highlights: Structured for value creation
Highlights ⫶ Structured for value creation Infrastructure assets Shared operations Growth platforms Retail & service Passive mobile Supplier management Digital services Europe Consumer €15b market cap.1 >€600m savings p.a. €1b revenue2 €3.5b revenue €20b revenue Active mobile Network & digital opera
Slide 7: Highlights: Creating & realising value for shareholders
Highlights ⫶ Creating & realising value for shareholders Operational priorities Portfolio action 1 Active pursuit of value creating bolt-on A Strengthen commercial momentum in Germany Passive mobile M&A & industrial merger, likely deconsolidation + monetisation over time B Accelerate operational & s
Slide 8: Financial performance
Financial performance Margherita Della Valle Chief Financial Officer H1 FY22 Results November 2021 8
Slide 9: Financial summary: Good performance in line with expectations
Financial summary ⫶ Good performance in line with expectations H1 FY21 H1 FY22 Organic €m €m change2 Group service revenue 18,418 19,010 2.8% • Good service revenue trend – growth in both Adjusted EBITDAaL 7,011 7,565 6.5% Europe & Africa Adjusted EBITDAaL margin 32.7% 33.6% +0.7pt Capital additions
Slide 10: Trading performance: Strong service revenue trend
Trading performance ⫶ Strong service revenue trend Group YoY quarterly service revenue growth Consumer sales moving towards pre-pandemic levels 3.3% European Consumer - Gross customer additions 2.4% (mobile contract + broadband) >90% c.1.0pt of pre-COVID 0.8% levels 0.4% Prior year COVID one-offs (0
Slide 11: Germany: Improving commercial momentum
Germany ⫶ Improving commercial momentum Service revenue growth 38% of Group EBITDAaL1 Q2 H1 22 H1 22 growth €m growth 1.8% 1.9% Service revenue 1.0% 5,777 1.2% Retail 1.5% 1.5% Adjusted EBITDAaL 2,892 7.7% Reported 1.2% 1.4% organic 1.0% 1.0% 0.6% • Mobile contract net adds higher than last year 0.4
Slide 12: Italy: Performance stabilising; UK: Good commercial momentum
Italy ⫶ Performance stabilising UK ⫶ Good commercial momentum 12% of Group EBITDAaL1 8% of Group EBITDAaL1 Q2 H1 22 H1 22 Q2 H1 22 H1 22 growth €m growth growth €m growth Service revenue (1.4%) 2,187 (2.5%) Service revenue 0.6% 2,521 1.2% Adjusted EBITDAaL 917 14.7% Adjusted EBITDAaL 638 1.8% Servic
Slide 13: Spain and Other Europe
Spain ⫶ Low-end highly competitive Other Europe ⫶ All markets growing 6% of Group EBITDAaL1 11% of Group EBITDAaL1 Q2 H1 22 H1 22 Q2 H1 22 H1 22 growth €m growth growth €m growth Service revenue (1.9%) 1,866 (0.6%) Service revenue 2.4% 2,502 3.3% Adjusted EBITDAaL 445 (0.6%) Adjusted EBITDAaL 836 4.
Slide 14: Vodacom and VodafoneZiggo
Vodacom ⫶ Lapping prior year highs VodafoneZiggo ⫶ Performing well 14% of Group EBITDAaL1 50% joint venture Q2 H1 22 H1 22 growth €m growth Total revenue growth Service revenue 3.1% 2,271 5.4% South Africa 2.2% 1,670 3.7% Internationals 5.7% 615 9.9% Adjusted EBITDAaL 1,062 5.6% Financial Services –
Slide 15: Adjusted EBITDAaL: Strong margin progression
Adjusted EBITDAaL ⫶ Strong margin progression 0.1 €7.6bn Group EBITDAaL margin 0.0 €7.1bn 0.5 (0.1) +6.5% YoY 33.6% 33.1% 32.8% 31.9% 31.6%3 Organic Direct Roaming European Rest of world Net A&R Organic FY18 FY19 FY20 FY21 H1 H1 21 margin & vis itor net opex opex H1 22 FY22 EBITDAaL savings1 EBITDAa
Slide 16: Efficiency benchmarking: Top quartile, with further opportunities
Efficiency benchmarking ⫶ Top quartile, with further opportunities New benchmarking study1 shows strong cost efficiency… … with further opportunities ahead European telecommunications operator Efficiency score3 by area Theoretical Vodafone EU42 maximum potential Top quartile Technology 78% DE Sales
Slide 17: Free cash flow: Progressing in line with expectations
Free cash flow ⫶ Progressing in line with expectations EBITDAaL €7.6bn Interest (€1.2bn) & tax Working capital (€3.2bn) • H1 reflects working capital seasonality & other Dividends - c.60% capex spend in H2 (assoc. & JV) €0.1bn - Q4 handset receivable sales timing Capital additions €0.0bn (€3.3bn)1 •
Slide 18: Capital allocation: Returns improving
Capital allocation ⫶ Returns improving Capital additions Return on Capital Employed improving H1 21 H1 22 YoY €m €m ∆ +0.2% +0.7% 7% (0.1%) Network & IT maintenance 1,024 1,094 6.3% Network coverage & capacity 1,085 1,165 7% 5.5% Digital transformation 370 308 (17%) New products & digital services 4
Slide 19: FY22 guidance updated
FY22 guidance updated⫶ On-track to deliver upper half of EBITDAaL range FY22 Adjusted EBITDAaL FY22 Adjusted FCF €15.0-15.4bn €15.2-15.4bn >€5.3bn >€5.2bn €5.1bn €14.6bn FY21 Original Upda ted FY21 Original Upda ted re-based FY22 FY22 re-based FY22 FY22 guidance guidance guidance guidance Currency G
Slide 20: Strategy, operations & portfolio
Strategy, operations & portfolio Nick Read Chief Executive H1 FY22 Results November 2021 20
Slide 21: A new generation connectivity & digital services provider
A new generation connectivity & digital services provider 1 Our strategy is focused on growth & improving shareholder returns 2 We have clear near-term operational priorities… 3 … and further strategic opportunities through portfolio optimisation H1 FY22 Results November 2021 21
Slide 22: We delivered strong operational & strategic progress over the last 3 years
1 ⫶ Strategy focused on growth & returns 2 ⫶ Near-term operational priorities 3 ⫶ Portfolio optimisation priorities We delivered strong operational & strategic progress over the last 3 years… Deepening Improving customer asset engagement European mobile contract churn (LTM) Avg. monthly terabytes tr
Slide 23: Enabling consistent revenue performance
1 ⫶ Strategy focused on growth & returns 2 ⫶ Near-term operational priorities 3 ⫶ Portfolio optimisation priorities … enabling consistent revenue performance Vod vs. Incumbent A Vod vs. Incumbent C Vod vs. Incumbent B Vod vs. Incumbent D Our actions have delivered material improvements in relative p
Slide 24: Our growth strategy to meet sector challenges & improve returns
1 ⫶ Strategy focused on growth & returns 2 ⫶ Near-term operational priorities 3 ⫶ Portfolio optimisation priorities Our growth strategy to meet sector challenges & improve returns European sector challenges Our strategy Our ambition Best connectivity • Revenue growth Revenue Growth in both Historica
Slide 25: We continue to make good progress
1 ⫶ Strategy focused on growth & returns 2 ⫶ Near-term operational priorities 3 ⫶ Portfolio optimisation priorities We continue to make good progress… • Benchmarking study shows top quartile efficiency in sector with further opportunity Best Simplified • 3G decommissioned in 4 markets connectivity F
Slide 26: We are structured for value creation & realisation
1 ⫶ Strategy focused on growth & returns 2 ⫶ Near-term operational priorities 3 ⫶ Portfolio optimisation priorities … and we are structured for value creation & realisation Infrastructure assets Shared operations Growth platforms Retail & service Passive mobile Supplier management Digital services E
Slide 27: Near-term operational priorities
1 ⫶ Strategy focused on growth & returns 2 ⫶ Near-term operational priorities 3 ⫶ Portfolio optimisation priorities Near-term operational priorities ⫶ Areas of enhanced focus for in-year delivery Position Vodafone A Strengthen commercial momentum in Germany B Accelerate operational transformation in
Slide 28: A: Strengthen commercial momentum in Germany
1 ⫶ Strategy focused on growth & returns 2 ⫶ Near-term operational priorities 3 ⫶ Portfolio optimisation priorities A ⫶ Strengthen commercial momentum in Germany The leading converged challenger… … in Europe’s most attractive market Q1 9.4m 3.4m 18.3m 9.2m 19.2% 19.4% The largest FY2 0 18.7% 18.9% 1
Slide 29: Further opportunities
1 ⫶ Strategy focused on growth & returns 2 ⫶ Near-term operational priorities 3 ⫶ Portfolio optimisation priorities A ⫶ Strengthen commercial momentum in Germany Strengthening our position Clear network roadmap beyond 1 Gbps • Primary focus on existing customers DOCSIS 3.1 enables 1.8Gbps & converge
Slide 30: B: Accelerate operational transformation in Spain
1 ⫶ Strategy focused on growth & returns 2 ⫶ Near-term operational priorities 3 ⫶ Portfolio optimisation priorities B ⫶ Accelerate operational transformation in Spain Market dynamics have been challenging We rapidly restructured to stabilise financial performance Evolving competition over time Inten
Slide 31: C: Position Vodafone Business to capture EU funding opportunities
1 ⫶ Strategy focused on growth & returns 2 ⫶ Near-term operational priorities 3 ⫶ Portfolio optimisation priorities C ⫶ Position Vodafone Business to capture EU funding opportunities We have a more detailed understanding of the opportunity... … and clear priorities to maximise Country Total funds Re
Slide 32: Strategic opportunities: Value creation actions
1 ⫶ Strategy focused on growth & returns 2 ⫶ Near-term operational priorities 3 ⫶ Portfolio optimisation priorities Strategic opportunities ⫶ Value creation actions to improve shareholder returns Infrastructure assets Shared operations Growth platforms Retail & service Passive mobile Supplier manage
Slide 33: Initial priorities: Active portfolio simplification & value realisation
1 ⫶ Strategy focused on growth & returns 2 ⫶ Near-term operational priorities 3 ⫶ Portfolio optimisation priorities Initial priorities ⫶ Active portfolio simplification & value realisation Portfolio 1 Passive mobile Vantage Towers 2 Europe Consumer Major markets 3 AfricaEgypt Consumer Actively pursu
Slide 34: Conclusions
Conclusions Good performance inline with expectations & regaining commercial momentum Our strategy is focused on sustainable growth to drive returns Near-term operational & portfolio optimisation priorities Committed to improving returns through growth & portfolio action H1 FY22 Results November 202
Slide 35: Appendices
Appendices I More information p36 II Our regional footprint p37 III Definitions p38 Provide investor feedback here ⫶ IV Supporting information p39 quantifire.co.uk/vodafone-68743521/ V Statutory results summary p40 Net debt, liquidity & total VI p41 funding obligations VII Importance notice p42 H1 F
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 43m 5m 3m 17m 2m 1m 31m 10m 0.3m 11m 4m 1m 42m 17m 3m 9m 1m 1m 15m 18m 3m 1m 0.1m 13m 5m 9m 3m 1m 25m 4m 1m 1m 2m 49m
Slide 38: Appendix III: Definitions
Appendix III ⫶ Definitions Term Definition Term Definition Adds Number of new customers within a defined period LTM Last twelve months Adjusted EBITDA Operating profit after depreciation on lease-related right of use assets and Mbps Megabits (millions) of bits per second interest on leases but exclu
Slide 39: Appendix IV: Supporting information
Appendix IV ⫶ Supporting information 1. Quarterly revenue The information opposite is available in spreadsheet format 2. Adjusted income statement via investors.vodafone.com 3. Segmental information 4. Income statement information 5. Cash flow 6. Mobile customers 7. Fixed-line broadband customers 8.
Slide 40: Appendix V: Statutory results summary
Appendix V ⫶ Statutory results summary Consolidated income statement Six months ended 30 September 2021 20201 €m €m Revenue 22,489 21,427 Cost of sales (15,097) (14,754) Gross profit 7,392 6,673 Selling and distribution expenses (1,675) (1,676) Administrative expenses (2,870) (2,580) Net credit loss
Slide 41: Appendix VI: Net debt, liquidity & total funding obligations
Appendix VI ⫶ Net debt, liquidity & total funding obligations Net debt progression (€ billion) Total funding obligations 3.0x H1 1.1 0.5 FY22 FY21 1.3 44.3 €m €m 0.5 0.4 Bonds (48,584) (46,885) 2.8x Bank loans (1,508) (1,419) 40.5 Other borrowings including spectrum (4,166) (4,215) Gross debt (54,25
Slide 42: Appendix VII: Important notice
Appendix VII ⫶ Important notice You have been provided access to this presentation on the basis that you are an investment This presentation, along with any oral statements made in connection therewith, contains professional for the purposes of Article 19 or a member of the press for the purposes of
Slide 43: Investor Relations contacts and upcoming events
Group investors.vodafone.com Upcoming events Investor Relations ir@vodafone.co.uk 1 Kingdom Street, London, W2 6BY Feb’ Q3 FY22 trading update 2022 Matthew Johnson Director matthew.johnson@vodafone.com Group IR Daniel Morris daniel.morris@vodafone.com Deputy Director Group IR May FY22 results 2022 R