Vodafone Group Public Limited Company · LSE:VOD
Vodafone Group Public — Vodafone Group — FY2018 Earnings Presentation
55 slides from Vodafone Group Public's earnings presentation, May 15, 2018
Slide 1: Vodafone Group Results for the year ended 31 March 2018
Vodafone Group Results: for the year ended 31 March 2018 15 May 2018
Slide 2: Disclaimer
Disclaimer By watching this webcast, you agree to be bound by the following This presentation also contains non-GAAP financial information which conditions. You may not disseminate these slides or this recording, in the Vodafone Group’s management believes is valuable in whole or in part, without th
Slide 3: Overview of the year
Overview of the year Vittorio Colao Group Chief Executive 3
Slide 4: An exceptional year of progress and transformation
An exceptional year of progress and transformation Strategic Operating Market Progress momentum outlook • Acquisition of leading cable • Record NGN and converged • Positive momentum in assets in Germany & CEE customer additions Germany, UK, EU cluster and • Strategic fixed broadband • Third consecut
Slide 5: Operating highlights of the year
Operating highlights of the year Maintaining Leading Strong data Fastest growing Leveraging scale Clear NPS growth network growth fixed broadband and reach in leadership momentum provider Enterprise 1.6%1 94% 63% 1.3m 2.1% 17/20 Group service 4G coverage2 growth in mobile fixed broadband Enterprise
Slide 6: Ongoing commercial momentum
Ongoing commercial momentum Europe - Customer net adds (000s) AMAP - Customer net adds (m) Mobile contract1 Fixed broadband Mobile contract Mobile prepaid3 0.3 0.6 0.5 0.4 275 0.5 342 234 224 173 3.5 3.1 3.1 3.2 2.4 340 316 237 262 255 Q4 16/17 Q1 17/18 Q2 17/18 Q3 17/18 Q4 17/18 Q4 16/17 Q1 17/18 Q
Slide 7: Key markets: Europe
Key markets: Europe Germany Italy UK Spain Consumer NPS rank #1 #1 #1 (Enterprise) #1 Competitive environment Stable Intense Stable Low-mid end intense Q4 service revenue +1.81 +0.7 +1.41 +1.0 growth (%) Strong customer growth Broadband growth offsetting Consumer growth aided by Competitive pressure
Slide 8: Key markets: AMAP and India
Key markets: AMAP and India South Africa Turkey Egypt India Consumer NPS rank #1 #2 #1 #1 Environment Stable Stable Stable Intense Q4 service revenue +5.2 +14.3 +18.7 (21.2) growth (%) Driving bundles with Big Data Customer growth, beating Customer growth, beating Retaining customers at and personal
Slide 9: Key markets: Europe cluster
Key markets: Europe cluster FY 17/18 service revenue mix (%)1 Q4 17/18 service revenue growth (%) FY 17/18 EBITDA growth (%) Ireland Romania Other Portugal Czech Republic Greece Hungary Hungary² 8 Hungary² 16 3 Czech Republic 5 Czech Republic 8 10 21 Ireland 4 Ireland 7 11 Greece 3 Greece 11 21 Port
Slide 10: Financial review
Financial review Nick Read Group Chief Financial Officer 10
Slide 11: Full year financial highlights
Full year financial highlights Organic growth Service revenue (€bn) Adjusted EBITDA (€bn) Adjusted EBIT (€bn) Free cash flow (pre-spectrum) (€bn) +1.6%1 +11.8% +47.2% +33.6%2 43.0 5.4 29.7% 31.6% margin margin 4.8 41.1 4.1 14.1 14.7 4.0 FY 16/17 FY 17/18 FY 16/17 FY 17/18 FY 16/17 FY 17/18 FY 16/17
Slide 12: Bridge from adjusted to reported earnings
Bridge from adjusted to reported earnings FY 17/18 (€m) FY 16/17 (€m) Growth (%) Adjusted EBIT 4,827 3,970 21.6 Associates 389 164 Restructuring (156) (415) Amortisation of brand assets/other (974) (1,046) Other income and expense 213 1,052 Operating profit 4,299 3,725 • €1.9bn Luxembourg deferred t
Slide 13: Sustained service revenue growth
Sustained service revenue growth Group organic service revenue growth (%) Growth by region (%) Reported Underlying1 Europe Europe underlying1 AMAP 2.9 7.9 7.8 2.4 2.5 2.4 6.8 2.3 6.8 6.2 2.4 1.9 2.2 1.4 1.8 1.7 1.5 1.3 1.42 1.1 0.8 0.8 0.3 0.42 0.1 Q4 16/17 Q1 17/18 Q2 17/18 Q3 17/18 Q4 17/18 Q4 16/
Slide 14: All three growth engines contributing
All three growth engines contributing FY 17/18 organic service revenue growth contribution (pp) Data Fixed / Enterprise Convergence 0.6 (0.7) 0.8 (0.4) Handset Financing (0.6) 1.62 1.2 0.7 European AMAP consumer Consumer Enterprise¹ EU regulation UK handset Carrier, wholesale FY 17/18 consumer mobil
Slide 15: EBITDA growth supported by Fit for Growth
EBITDA growth supported by Fit for Growth (€bn) (0.3 (0.1) 0.2 0.5 14.7 0.9 0.1 (0.2) 13.2 Organic Direct margin Net operating cost UK handset UK/German EU regulation Organic FY 16/17 EBITDA reduction financing settlements FY 17/18 EBITDA (incl. Qatar) (incl. Qatar) Expect to reduce net operating co
Slide 16: Third consecutive year of EBITDA margin expansion
Third consecutive year of EBITDA margin expansion Group adjusted EBITDA margin (%) 31.6% 30.6% 30.8% Underlying 29.7% ex. EU roaming, HF & settlements 29.0% 28.3% 28.4% FY 12/13 FY 13/14 FY 14/15 FY 15/16 FY 16/17 FY 17/18 Markets growing EBITDA faster than service revenue: 3yr plan: 12 15 15 17 20
Slide 17: Digital opportunity to sustain cost momentum
Digital opportunity to sustain cost momentum Digital customer Digital technology Digital management management operations €2.5bn1 €1.0bn1 €1.5bn1 Efficiency Commissions Retail Customer gains/capex €3.0bn1 optimisation Operations footprint operations Differentiating the customer experience Real time
Slide 18: Capital mix – efficiencies driving increased investment in growth
Capital mix – efficiencies driving increased investment in growth Capital allocation (%)1 YoY FY 18/19e Growth: Success based (CPE) 16% +3pp • CPE: reflecting strong commercial momentum in fixed Fixed 7% flat • Fixed: cable network upgrade to increase speed + Gigabit Plan IT/product transformation 1
Slide 19: Spectrum costs – upcoming 5G auctions in FY19 & FY20
01 Spectrum costs – upcoming 5G auctions in FY19 & FY20 Historical cash spectrum spend ex. India and NL (€bn) 3.4 • FY 17/18: Italy (€0.6bn), UK (€0.3bn), Germany (€0.1bn) • 5G auctions across Europe during FY19 & FY20 – 700MHz and 3.4-3.7GHz bands • Greater choice than in the past, opportunities to
Slide 20: Free cash flow covering the dividend
Free cash flow covering the dividend FY 17/18 (€m) FY 16/17 (€m) Adjusted EBITDA 14,737 14,149 Capital additions (7,321) (7,675) Lower capital creditors: reflecting final payments Capital creditors 171 (822) for Project Spring in FY 16/17 Working capital (755) (162) Includes reversal of €0.5bn UK ha
Slide 21: Delivering FCF growth targets
Delivering FCF growth targets Long Term Incentive Plan goals1 New LTIP target Cumulative 3yr FCF pre-spectrum (€bn) Cumulative 3yr FCF pre-spectrum (€bn) Reported targets Adjusted for Project Spring 18.85 Achieved Achieved On On 113% 105% target target 17.00 16.6 3x dividend + historic average spect
Slide 22: Reported leverage and balance sheet position
Reported leverage and balance sheet position Net debt (€bn) 1.6 0.3 31.2 1.1 31.5 3.9 (1.2) (5.4) 7.7 Mar 2017 FY FCF Dividends paid Spectrum MCB share Qatar sale / FX/other Mar 2018 India (pre-spectrum) buyback Vodacom share Mar 2018 placing Liberty Global transaction: • Increasing target leverage
Slide 23: Vodafone-Idea: leverage and priorities post-completion
Vodafone-Idea: leverage and priorities post-completion Vodafone-Idea pro forma net debt (€bn) Key priorities • Equivalent to IDEA net debt + INR25bn • New management team appointed • Implies a capital injection into VIL of ≤€1bn, net • Integration planning well advanced of the sale of a c.4.8% stake
Slide 24: Guidance for FY 18/19
Guidance1 for FY 18/19 FY 18/19 adjusted EBITDA drivers (€bn) 14.75 14.15 – 14.65 Underlying 0.6 EBITDA growth (0.5) 13.75 0.2 1% –5 % (0.2) (0.2) (0.1) FY 17/18 UK handset UK/German Qatar sale/India FX FY 17/18 UK handset Underlying FY 18/19 Reported financing settlements recharges (rebased) financ
Slide 25: Strategy & Progress
Strategy & Progress Vittorio Colao Group Chief Executive 25
Slide 26: Transforming Vodafone: strategic capital allocation
Transforming Vodafone: strategic capital allocation A converged leader in Europe Data leader in Africa Scaled leader in India +11.0m Streamlined Safaricom Merger on-track Germany holding acquisition HH Vodacom 5.2% stake sale Romania +3.1m (for €1bn) Sale of standalone towers €1bn1 acquisition HH Ta
Slide 27: Transforming Vodafone
Transforming Vodafone Europe service revenue mix (%) Europe NGN homes coverage mix (%)1 EBITDA mix (%)2 Europe Mobile Europe Fixed On-net Strategic partnership Wholesale Europe AMAP Wholesale ADSL 31 25 23 47 71 65 60 85 100 6 6 69 75 77 35 47 29 34 15 FY 12/13 FY 17/18 FY 17/18 FY 12/13 FY 17/18 FY
Slide 28: Fixed & Convergence: Unitymedia/UPC CEE acquisition supercharges our fixed strategy
Fixed & Convergence: Unitymedia/UPC CEE acquisition supercharges our fixed strategy European homes marketable (proforma)1 (m) NGN infrastructure in Europe (m)3 Total homes +17m 165 Total incl’ ADSL and NGN 144 54 NGN wholesale 114 41 60 Strategic wholesale partnerships2 36 36 35 28 Owned NGN network
Slide 29: Fixed & Convergence: significant organic progress
Fixed & Convergence: significant organic progress Europe NGN footprint expansion continues1 Co/self build Capital-smart First 7 cities announced, 1 million premises targeted Rent infrastructure Buy 1Gbps Germany: Gigabit plan strategy 1Gbps Building in 29 business parks; JV with Siro progressing DOC
Slide 30: Fixed & Convergence: delivering growth
Fixed & Convergence: delivering growth European broadband net adds LTM (m)1 Europe broadband net adds (%) Broadband NGN Consumer Converged Penetration: 35% converged2 Vodafone 1.1 66% NGN Deutsche Telekom 0.7 514 496 442 Liberty Global 0.5 384 316 BT 0.1 262 255 265 237 190 174 Orange (0.0) 119 Tele
Slide 31: Mobile data: leading data networks
Mobile data: leading data networks Quality and experience leadership Leading network infrastructure Driving data usage and cost efficiency Network NPS (points) Europe data traffic (PB) Gap to next best Gap to third +61% Avg. monthly data 15 15 15 92% data sessions >3mbps1 usage +56% in Q4 2,309 0.34
Slide 32: Mobile data: 5G vision and phasing
Mobile data: 5G vision and phasing Industry adoption likely to be similar to 4G Lower costs Initial focus on high density areas 4G 5G 3G refarmed for 4G • Spectral efficiency up to 4x 50% device Mid 2020s 2017 penetration today’s 4G Emergency layer 2G Nationwide • Radio latency up to 10x less 4G 1st
Slide 33: Mobile data: IoT
Mobile data: IoT Market opportunity Vodafone IoT IoT market €bn1 232 • Leading platform, footprint in +11% 180 countries ENTERPRISE CAGR 143 Services • 68m SIMs; €747m revenues (+14% YoY) 97 • 14m connected cars 54 34 Connectivity 13 • Narrowband IoT in 9 markets 55 Hardware 30 2017 2025 Europe Cons
Slide 34: Enterprise: growing revenues and margins
Enterprise: growing revenues and margins Service revenue growth (%) Improving margin Outperforming peers2 (%) FY 17/18 Contribution margin improvement Q4 17/18 revenue growth Reported Ex. regulation1 1.5 2.4 1.9 2.1 +170 (1.3) (1.6) (2.3) 1.2 bps YoY (5.3) (5.7) 1.7 0.9 0.2 (12.7) Mobile Fixed Total
Slide 35: Customer experience excellence: NPS improvement
Customer experience excellence: NPS improvement Quality and experience leadership NPS improvement over the last 3 years Consumer NPS (points) Gap to next best Gap to third 15 17 16 NPS score improved out of 14 20 markets 11 17 Gap to next best improved out of 6 4 20 markets 2 Average score improveme
Slide 36: Digital Vodafone: transforming our commercial model
Digital Vodafone: transforming our commercial model Marketing Sales From traditional ATL/BTL… to applied Digital Marketing: From silos… to seamlessly connected channels real-time, contextual and personal Mobile acquisition digital My Vodafone App mix 25% (from 6% 3 years ago) penetration, 87% 10 vis
Slide 37: Digital Vodafone: measuring commercial progress
Digital Vodafone: measuring commercial progress Digital Customer management Digital Technology Digital Operations March ‘17 March ‘18 March ‘21 CVM campaigns enabled by Big Data 15% 35% 100% • Better targeting of the base1 Digital channels share of sales mix1 • Reduce reliance on indirect channels 9
Slide 38: Summary
Summary An exceptional year of progress and transformation • Vodafone to become the leading next generation infrastructure owner in Europe by acquiring Liberty Global’s cable assets in Germany and Central Europe • Merger with Idea in India remains on track. Indus/Infratel merger agreed Robust operat
Slide 39: Q&A
Q&A 39
Slide 40: Appendix
Appendix 40
Slide 41: Germany: strong customer growth offsetting wholesale headwinds
Germany: strong customer growth offsetting wholesale 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 26 217 212 3.4 3.0 2
Slide 42: Italy: price competition in prepaid continues, record fixed net adds
Italy: price competition in prepaid continues, record fixed net adds 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 13 2.8 95 100 75 58 54 9 1.5 6 (33) 0.7 6 (43) (139) (15
Slide 43: UK: improving trends, strong momentum in consumer fixed
UK: improving trends, strong momentum in consumer fixed Customer experience KPIs Financials NPS (points) Customer net adds (000s) Service revenue growth (%) Consumer Mobile contract Reported Enterprise Fixed broadband Ex. Handset Financing and regulation 20 66 16 1.4 0.6 0.4 9 7 411 38 11 33 331 29
Slide 44: Spain: increased competitive pressure in value segment
Spain: increased competitive pressure in value segment 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 and regulation 17 96 3.8 13 75 68 55 3.0 3
Slide 45: Vodacom: strong momentum across the Group
Vodacom: strong momentum across the Group 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 20 213 19 206 3.8 5.6 3.4 5.3 5.8 17 181 10.4 11.1 16
Slide 46: India: intense price competition, growing data usage
India: intense price competition, growing data usage Customer experience KPIs Financials Consumer NPS (points) Data users (m) Service revenue growth (%) Gap to next best 3G/4G Reported Gap to third 2G Ex. MTRs1 76 67 69 68 70 10 9 (11.5) (13.9) 38 41 60 46 52 (9.4) 5 4 (17.8) (14.2) (21.2) 29 28 (23
Slide 47: Customer experience and commercial KPIs
Customer experience and commercial KPIs Europe AMAP Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 16/17 17/18 17/18 17/18 17/18 16/17 17/18 17/18 17/18 17/18 4G customers (m) 1 47.0 50.6 53.3 56.8 58.9 4G customers (m) 2 27.8 33.4 40.1 53.4 62.8 Broadband customers (m) 1 16.6 16.8 17.1 17.5 17.8 Broadband customers
Slide 48: Vodafone pro forma NGN footprint by country
Vodafone pro forma NGN footprint by country1 Households coverage (m)2 72% 58% 71% 93% 55% 93% 39% 5.0 11.0 10.2 28.0 11.4 6.4 12.7 10.3 0.2 2.1 2.5 7.1 6.4 3.2 Germany Italy Spain UK Portugal VodafoneZiggo NLJV CEE¹ Owned Open Fiber³ Acquired assets Wholesale 114m Households passed with NGN (incl. w
Slide 49: Service revenue bridge
Service revenue bridge (€ millions) 42,987 Mobile 387 17 450 41,066 (1,377) (9) (118) (1,271) FY 16/17 FX One-off items¹ Mobile Incoming Voice MTR Fixed line and Other FY 17/18 reported service customer carrier reported service revenue revenue revenue 49 1. Excludes the results of Vodafone Netherlan
Slide 50: Voice MTR impact
Voice MTR impact FY 17/18 FY 16/17 €m pp €m pp Europe Service revenue (106) (0.3) (92) (0.3) FY 17/18: Germany €75m, Ireland €14m, Spain €9m Adjusted EBITDA (22) (22) AMAP Service revenue (12) (0.2) (21) (0.2) FY 17/18: South Africa €9m, Tanzania €3m Adjusted EBITDA - (11) Group Service revenue (118
Slide 51: Taxation
Taxation 17/18 16/17 (€m) (€m) Taxation 879 (4,764) Deferred tax following revaluation of Deferred tax assets - Luxembourg (330) (328) investments in Luxembourg and impact of lower interest rates Additional deferred tax assets Recognition of tax assets in Luxembourg to (1,603) 1,603 recognised be ut
Slide 52: Financing costs
Financing costs FY 17/18 FY 16/17 (€m) (€m) Net financing costs (389) (932) Mark to market - Mandatory convertible bonds (134) 40 FX1 (322) (28) Adjusted net financing costs (845) (920) Other mark to market of derivative positions 107 (106) Interest expense arising on settlement of outstanding tax i
Slide 53: Currency mix of net debt and EBITDA
Currency mix of net debt and EBITDA Currency FY 17/18 closing Currency FY 17/18 closing net debt (€bn) adjusted EBITDA (€bn) EUR 28.7 EUR 8.8 ZAR 2.1 ZAR 1.9 GBP (2.9) GBP 1.8 Other 3.6 Other 2.2 Net debt excl. India 31.5 Total 14.7 Net debt incl. India 39.2 53
Slide 54: 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 55: More information
More information Visit our website for more information Upcoming 2018 dates Q1 18/19 AGM H1 18/19 results interim results 25 July 27 July 13 Nov 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/investors/gl