Form 6-K VODAFONE GROUP PUBLIC For: May 17

May 17, 2022 12:04 PM EDT

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UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

Form 6-K

 

Report of Foreign Private Issuer

 

Pursuant to Rules 13a-16 or 15d-16 under 

the Securities Exchange Act of 1934

 

Dated May 17, 2022

 

Commission File Number: 001-10086

 

VODAFONE GROUP 

PUBLIC LIMITED COMPANY 

(Translation of registrant’s name into English)

 

VODAFONE HOUSE, THE CONNECTION, NEWBURY, BERKSHIRE, RG14 2FN, ENGLAND 

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

 

Form 20-F þ Form 40-F ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes ¨ No þ

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-____.

 

 

This Report on Form 6-K contains a Stock Exchange Announcement dated 17 May 2022 entitled ‘Vodafone Group Plc ⫶ FY22 Preliminary results’.

 

RNS Number : 6953L 

Vodafone Group Plc 

17 May 2022

 

Vodafone Group Plc FY22 Preliminary results 

17 May 2022

 

Good financial performance with growth in revenues, profits and cash flows

 

·Good service revenue growth in FY22 with continued growth in both Europe and Africa throughout the year

 

·Good financial performance in Germany with 1.1%* service revenue growth and 6.5%* Adjusted EBITDAaL growth

 

·Strong step up in pre-tax ROCE of 1.7 percentage points to 7.2%, supported by operating profit growth of 11.1%

 

      FY22   FY21   Change1 
Financial results  Page  €m   €m   % 
Group revenue  6   45,580    43,809    4.0 
Group service revenue  6   38,203    37,141    2.6*
                   
Operating profit  6   5,664    5,097    11.1 
Adjusted EBITDAaL2  6   15,208    14,386    5.0*
Profit for the financial year  6   2,624    536      
                   
Basic earnings per share  17   7.20c   0.38c     
Adjusted basic earnings per share2  17   11.03c   8.08c     
                   
Total dividends per share  27   9.00c   9.00c     
                   
Cash inflow from operating activities  17   18,081    17,215    5.0 
Adjusted free cash flow2  18   5,437    5,019      
                   
Net debt2  19   (41,578)   (40,543)   (2.6)

 

1. '*' represents organic growth. See page 2.   ǀ   2. Non-GAAP measure. See page 31.

 

·Group revenue increased by 4.0% to €45.6 billion driven by service revenue growth in Europe and Africa

 

·Adjusted EBITDAaL growth of 5.0%* to €15.2 billion driven by good revenue growth and continued cost transformation programme savings

 

·Adjusted free cash flow of €5.4 billion, with growth enabled by an increase in Adjusted EBITDAaL

 

·Total dividends per share are 9.0 eurocents, including a final dividend per share of 4.5 eurocents

 

Nick Read, Group Chief Executive, commented:

“We delivered a good financial performance in the year with growth in revenues, profits and cash flows, in line with our medium-term financial ambitions. Our organic growth underpinned a step-change in our return on capital, which improved by 170bps to 7.2%. Whilst we are not immune to the macroeconomic challenges in Europe and Africa, we are positioned well to manage them and we expect to deliver a resilient financial performance in the year ahead. 

Our near-term operational and portfolio priorities remain unchanged from those communicated 6 months ago. We are focused on improving the commercial performance in Germany, actively pursuing opportunities with Vantage Towers and strengthening our market positions in Europe. These actions, together with the simplification of our portfolio and the ongoing delivery of our organic growth strategy, will create further value for our shareholders.”

 

For more information, please contact:

 

Investor Relations Media Relations

Investors.vodafone.com Vodafone.com/media/contact

[email protected] [email protected]

 

Registered Office: Vodafone House, The Connection, Newbury, Berkshire RG14 2FN, England. Registered in England No. 1833679 

A webcast Q&A session will be held at 10:00 BST on 17 May 2022. The webcast and supporting information can be accessed at investors.vodafone.com

 

Summary Good financial performance

 

Organic growth

 

All amounts marked with an ‘*’ in the commentary represent organic growth which presents performance on a comparable basis, excluding the impact of foreign exchange rates, mergers and acquisitions and other adjustments to improve the comparability of results between periods. When calculating organic growth, the FY21 results for Vantage Towers and relevant operating entities have been adjusted to reflect a full year of operation on a pro forma basis in order to be comparable to FY22. Organic growth figures are non-GAAP measures. See non-GAAP measures on page 31 for more information.

 

Financial performance

 

Total revenue increased by 4.0% to €45.6 billion (FY21: €43.8 billion), driven by service revenue growth in Europe and Africa, and higher equipment revenue, as well as favourable foreign exchange movements.

 

Adjusted EBITDAaL increased by 5.0%* to €15.2 billion (FY21: €14.4 billion) due to revenue growth, and strong cost control, supported by a legal settlement in Italy. The Adjusted EBITDAaL margin was 0.5* percentage points higher year-on-year at 33.4%.

 

Operating profit increased by 11.1% to €5.7 billion (FY21: €5.1 billion), reflecting higher Adjusted EBITDAaL, and lower depreciation and amortisation on owned assets, partly offset by lower other income.

 

The Group made a profit for the financial year of €2.6 billion (FY21: €0.5 billion). The profit increase was primarily driven by higher Adjusted EBITDAaL, and lower income tax expense.

 

Basic earnings per share was 7.20 eurocents, compared to basic earnings per share of 0.38 eurocents in the prior year.

 

Cash flow, funding & capital allocation

 

Cash inflow from operating activities increased by 5.0% to €18.1 billion (FY21: €17.2 billion).

 

Free cash flow was an inflow of €3.3 billion (FY21: inflow of €3.1 billion). Higher Adjusted EBITDAaL, and lower licence and spectrum payments were partially offset by lower working capital, lower interest received and paid, and higher restructuring and integration cash expenditure during the year. Adjusted free cash flow was an inflow of €5.4 billion (FY21: inflow of €5.0 billion).

 

Net debt at 31 March 2022 was €41.6 billion, compared to €40.5 billion as at 31 March 2021. Net debt increased by €1.1 billion due to share buybacks of €2.0 billion (1,441 million shares) used to offset dilution linked to mandatory convertible bonds, partially offset by Free cash flow of €3.3 billion less equity dividends paid of €2.5 billion.

 

Total dividends per share are 9.0 eurocents (FY21: 9.0 eurocents), including a final dividend per share of 4.5 eurocents. The ex-dividend date for the final dividend is 1 June 2022 for ordinary shareholders, the record date is 6 June 2022 and the dividend is payable on 5 August 2022.

 

Strategy Committed to improving returns through growth

 

Our strategy focuses on driving shareholder returns through growth, and is delivered through three customer commitments and three enabling strategies. These work together towards our vision to become a new generation connectivity and digital services provider for Europe and Africa, enabling an inclusive and sustainable digital society.

 

We have made good progress with our strategy during FY22 and highlights include: further deepening our customer relationships with lower customer churn; good results from our increased capital investment with improvements in network quality; increasing penetration of financial services in Africa; and another successful year of digital enabled efficiencies, driving the highest Adjusted EBITDAaL margin over the last decade. Our strategic progress has enabled us to deliver well against our medium-term financial ambitions with growth in pre-tax ROCE to 7.2%. The table below includes a selection of KPIs that illustrates progress in our key areas of focus.

 

   Units   FY22   FY21 
Customer commitments               
Best connectivity products & services               
Europe mobile contract customers1   million    66.4    65.4 
Europe broadband customers1   million    25.6    25.6 
Europe Consumer converged customers1   million    9.0    7.9 
Europe mobile contract customer churn   %    13.6    13.7 
Africa mobile customers2   million    184.5    178.0 
Africa data users2   million    89.9    84.9 
Business service revenue growth*   %    0.8    (0.6)
Leading innovation in digital services               
Europe TV subscribers1   million    21.9    22.2 
IoT SIM connections   million    150.1    123.3 
Africa M-Pesa customers2   million    52.4    48.3 
Africa M-Pesa transaction volume2   billion    19.9    15.2 
Outstanding digital experiences               
Digital channel sales mix3    %    25    26 
End-to-end TOBi completion rate4 5   %    42.9    34.6 
Enabling strategies               
Leading gigabit networks               
5G available in European cities1   #    294    240 
Europe on-net gigabit capable connections1   million    48.5    43.7 
Europe on-net NGN broadband penetration1   %    30    30 
Simplified & most efficient operator               
Pre-tax return on capital employed6 7   %    7.2    5.5 
Post-tax return on capital employed6 8   %    5.0    3.9 
Europe markets where 3G switched off1   #    4    3 
                

1. Including VodafoneZiggo | 2. Africa including Safaricom | 3. Based on Germany, Italy, UK, Spain only | 4. Group excluding Egypt | 5. Defined as percentage of total customer contacts resolved without human interaction through TOBi | 6. These line items are non-GAAP measures. See page 31 for more information. | 7. Controlled operations | 8. Controlled operations and associates/joint ventures

 

A more detailed review of our strategic progress is contained within an accompanying video presentation available here: investors.vodafone.com/reports-information/results-reports-presentations. In this presentation we outline: we are systematically executing our organic growth strategy and have clear operational priorities; we are well-placed and have actions underway to manage current macro-economic challenges; and we are committed to improving shareholder returns through growth and clear portfolio priorities. Further information on our strategy is also available through the following links.

 

Resource Link
Second phase of strategy vodafone.com/ar2021
Digital services & outstanding experience investors.vodafone.com/digital-services
Leading gigabit networks investors.vodafone.com/vtbriefing
Vodafone Business investors.vodafone.com/vbbriefing
Vantage Towers vantagetowers.com

 

Our purpose ⫶ We connect for a better future

 

We believe that Vodafone has a significant role to play in contributing to the societies in which we operate and we want to enable an inclusive and sustainable digital society. We continue to make progress against our purpose strategy and will provide a full update in our FY22 Annual Report and supplementary materials (available on investors.vodafone.com). Highlights and achievements from FY22 are summarised below.

 

Europe’s largest network, powered by 100% renewable electricity

 

From July 2021, our entire European operations – including mobile and fixed networks, data centres, retail and offices – are 100% powered by electricity from renewable sources. This marks a key step towards our goal of reducing our own carbon emissions to ‘net zero’ by 2030 and across our entire value chain by 2040.

 

Eco Rating

 

In May 2021, we launched a new Eco Rating labelling scheme jointly with other major European operators. This is a pan-industry initiative to help consumers identify and compare the most sustainable mobile phones on the market, whilst also encouraging suppliers to reduce the environmental impact of devices. Eco rating evaluates the environmental impact of the entire production process, transportation, use and disposal of a handset, resulting in an overall score. The Eco Rating scheme was initially launched in 24 European countries and has since been rolled out in several countries in Latin America and by Vodacom in South Africa. More than 150 mobile phones from 15 manufacturers are now assessed by the Eco Rating initiative, nearly doubling the range of devices rated at launch.

 

M-Pesa

 

As of March 2022, over 52 million customers were using our mobile money platform, M-Pesa, to manage business transactions and to pay salaries, pensions, agricultural subsidies and government grants. M-Pesa provides financial services to millions of people who have a mobile phone but limited access to a bank account and also helps reduce the associated risks of robbery and corruption in a cash-based society. As we have now reached a milestone 52 million customers, we have exceeded our goal to connect 50 million people and their families to mobile financial services three years ahead of our original target date.

 

Ethnicity targets

 

In December 2021, we announced new ethnic diversity targets for our global leadership team, as well as our senior leadership and management teams in the UK and South Africa. These new targets reflect our ambition to be a company with a global workforce that reflects the customers, communities and businesses we serve, as well as the wider societies in which we operate. The data supporting our new targets has been informed by an internal campaign called ‘#CountMeIn’, which encourages employees to voluntarily self-declare their diversity demographics in line with local privacy and legal requirements.

 

Reporting

 

We report against a number of voluntary reporting frameworks to help stakeholders understand our sustainable business performance. We will shortly be publishing our second standalone report that summarises our progress towards meeting the recommendations of the Task Force on Climate-related Financial Disclosures (‘TCFD’), as well as a comprehensive spreadsheet that includes data on environmental, social and governance (‘ESG’) topics. We also report against a number of voluntary reporting frameworks to help our stakeholders understand our sustainable business performance, including guidance provided by the Global Reporting Initiative (‘GRI’) and Sustainability Accounting Standards Board (‘SASB’).

 

Outlook ⫶ FY22 guidance delivered

 

Performance against FY22 guidance

 

In May 2021, we set out guidance for FY22 with respect to Adjusted EBITDAaL and Adjusted free cash flow. As a result of our good performance in H1 FY22 and based on the prevailing assessments of the global macroeconomic outlook, we updated our guidance range in November 2021. The table below compares the guidance given and our actual performance.

 

   Original guidance  Updated guidance  FY22 outcome on
guidance basis1
   FY22 outcome as
reported
 
Adjusted EBITDAaL2  €15.0 – €15.4 billion  €15.2 – €15.4 billion  €15.3 billion   €15.2 billion 
Adjusted free cash flow2 3  At least €5.2 billion  At least €5.3 billion  €5.5 billion   €5.4 billion 
               

1 The FY22 outcome on guidance basis is derived by applying FY22 guidance foreign exchange rates. The FY22 guidance foreign exchange rates were €1: GBP 0.86; €1: ZAR 17.15; €1: TRY 9.74; €1: EGP 18.89.

 

FY23 Guidance

 

The current macroeconomic climate presents specific challenges, particularly inflation, and is likely to impact our financial performance in the year ahead. Based on the current prevailing assessments of the of the global macroeconomic outlook:

 

Adjusted EBITDAaL2 is expected to be between €15.0 – €15.5 billion in FY23; and

 

Adjusted free cash flow2 3 is expected to be c.€5.3 billion in FY23.

 

The guidance above reflects the following:

 

Foreign exchange rates used when setting guidance were as follows:

 

EUR 1 : GBP 0.84;

 

EUR 1 : ZAR 17.32;

 

EUR 1 : TRY 16.75; and

 

EUR 1 : EGP 19.28.

 

We expect Turkey to be designated as a hyper-inflationary economy under IFRS during the first quarter of FY23, in which case Vodafone Turkey’s results will be presented on a revised basis.  See note 1 of the condensed consolidated financial statements for further information. Our guidance as presented above excludes any impact from this change in accounting.

 

Guidance and our medium-term financial ambition assume no material change to the structure of the Group.

 

2 Adjusted EBITDAaL and Adjusted free cash flow are non-GAAP measures. See page 31 for more information.

3 Adjusted free cash flow is Free cash flow before licences and spectrum, restructuring costs arising from discrete restructuring plans, integration capital additions and working capital related items, M&A, and Vantage Towers growth capital expenditure. Growth capital expenditure is total capital expenditure excluding maintenance-type expenditure.

 

Financial performance ⫶ Continued growth in both Europe and Africa

 

Group revenue increased by 4.0% to €45.6 billion mainly driven by service revenue growth in Europe and Africa

 

Adjusted EBITDAaL growth of 5.0%* to €15.2 billion and margin expansion of 0.5* percentage points year-on-year to 33.4%

 

Ongoing delivery of our efficiency programme leading to a net €1.5 billion of savings during FY19-22

 

Operating profit increased by 11.1% to €5.7 billion, reflecting the growth in Adjusted EBITDAaL and reduction in depreciation and amortisation on owned assets

 

Significant increase in profit for the financial year and basic earnings per share, due to higher Adjusted EBITDAaL, and lower income tax expense

 

Returns continued to improve and pre-tax ROCE increased by 1.7 percentage points to 7.2%

 

Group financial performance

 

   FY221   FY21   Reported 
   €m   €m   change % 
Revenue   45,580    43,809    4.0 
- Service revenue   38,203    37,141    2.9 
- Other revenue   7,377    6,668      
Adjusted EBITDAaL2,3   15,208    14,386    5.7 
Restructuring costs   (346)   (356)     
Interest on lease liabilities4   398    374      
Loss on disposal of property, plant and equipment and intangible assets   (28)   (30)     
Depreciation and amortisation of owned assets   (9,858)   (10,187)     
Share of results of equity accounted associates and joint ventures   211    342      
Other income   79    568      
Operating profit   5,664    5,097    11.1 
Investment income   254    330      
Financing costs   (1,964)   (1,027)     
Profit before taxation   3,954    4,400      
Income tax expense   (1,330)   (3,864)     
Profit for the financial year   2,624    536      
                
Attributable to:               
- Owners of the parent   2,088    112      
- Non-controlled interests   536    424      
Profit for the financial year   2,624    536      
                
Basic earnings per share   7.20c   0.38c     
Adjusted basic earnings per share2   11.03c   8.08c     

 

Further information is available in a spreadsheet at https://investors.vodafone.com/reports-information/results-reports-presentations

 

Notes:

1.The FY22 results reflect average foreign exchange rates of €1:£0.85, €1:INR 86.59, €1:ZAR 17.25, €1:TRY 12.16 and €1: EGP 18.35.
2.Adjusted EBITDAaL and Adjusted basic earnings per share are non-GAAP measures. See page 31 for more information.
3.Includes depreciation on leased assets of €3,908 million (FY21: €3,914 million).
4.Reversal of interest on lease liabilities included within Adjusted EBITDAaL under the Group’s definition of that metric, for re-presentation in financing costs.

 

Organic growth

  

All amounts marked with an ‘*’ in the commentary represent organic growth which presents performance on a comparable basis, excluding the impact of foreign exchange rates, mergers and acquisitions, and other adjustments to improve the comparability of results between periods. When calculating organic growth, the FY21 results for Vantage Towers and relevant operating entities have been adjusted to reflect a full year of operation on a pro forma basis in order to be comparable to FY22. Organic growth figures are non-GAAP measures. See non-GAAP measures on page 31 for more information.

 

Segmental reporting

 

Following the IPO of Vantage Towers A.G. in March 2021, the business is a new reporting segment for the year ended 31 March 2022 (‘FY22’). Comparative information for the year ended 31 March 2021 has not been re-presented. Total revenue is unaffected because charges from Vantage Towers A.G. to operating companies are eliminated on consolidation. Adjusted EBITDAaL and Adjusted EBITDAaL margin are both impacted by this change which does affect year-on-year comparisons. The segmental results of Vantage Towers A.G. include the contribution from Cornerstone Technologies Infrastructure Limited as a joint operation with Telefonica in the UK.

 

The Group issued a press release in July 2021 which provided a pro forma view of our FY20 and FY21 financial results under this new segmentation. This press release can be accessed at: change-in-segmental-reporting_VT_RNS.pdf (vodafone.com)

 

Geographic performance summary                
                   Other       Other   Vantage   Common   Elimi-     
FY22  Germany   Italy   UK   Spain   Europe   Vodacom   Markets   Towers   Functions1   nations   Group 
Total revenue (€m)   13,128    5,022    6,589    4,180    5,653    5,993    3,830    1,252    1,414    (1,481)   45,580 
Service revenue (€m)   11,616    4,379    5,154    3,714    5,001    4,635    3,420        522    (238)   38,203 
Adjusted EBITDAaL (€m)2   5,669    1,699    1,395    957    1,606    2,125    1,335    619    (197)       15,208 
Adjusted EBITDAaL margin (%)2  43.2%  33.8%  21.2%  22.9%  28.4%  35.5%  34.9%  49.4%            33.4%

 

Downloadable performance information is available at: https://investors.vodafone.com/reports-information/results-reports-presentations

 

   FY22 
Organic service revenue growth %*2   Q1    Q2    H1    Q3    Q4    H2    Total 
Germany   1.4    1.0    1.2    1.1    0.8    1.0    1.1 
Italy   (3.6)   (1.4)   (2.5)   (1.3)   (0.8)   (1.0)   (1.8)
UK   2.5    0.6    1.2    0.9    2.0    1.4    1.3 
Spain   0.8    (1.9)   (0.6)   (1.6)   (5.1)   (3.4)   (2.0)
Other Europe   4.2    2.4    3.3    2.9    2.7    2.8    3.0 
Vodacom   7.9    3.1    5.4    4.4    3.1    3.7    4.6 
Other Markets   18.4    19.7    19.1    19.8    19.8    19.8    19.4 
Vantage Towers                            
Group   3.3    2.4    2.8    2.7    2.0    2.3    2.6 
                                    

Notes:

1.Common Functions Adjusted EBITDAaL includes a non-recurring charge in relation to the impairment of prior year receivables.
2.Adjusted EBITDAaL, Adjusted EBITDAaL margin and organic service revenue growth are non-GAAP measures. See page 31 for more information.

 

Germany ⫶ 30% of Group service revenue                
   FY22   FY21   Reported   Organic 
   €m   €m   change %   change %* 
Total revenue   13,128    12,984    1.1      
 - Service revenue   11,616    11,520    0.8    1.1 
 - Other revenue   1,512    1,464           
Adjusted EBITDAaL1   5,669    5,634    0.6    6.5 
Adjusted EBITDAaL margin  43.2%  43.4%          

  

Note:

1.When calculating organic growth for Adjusted EBITDAaL, the FY21 results are adjusted for Vantage Towers A.G. on a pro forma basis to be comparable to FY22.

 

Total revenue increased by 1.1% to €13.1 billion, driven by service revenue and equipment revenue growth.

 

On an organic basis, service revenue grew by 1.1%* (Q3: 1.1%*, Q4: 0.8%*), driven by broadband ARPU growth, good growth in Business, and higher roaming and visitor revenue. This was partially offset by a reduction in mobile termination rates, and lower variable call usage revenue. Retail service revenue grew by 1.6%* (Q3: 1.7%*, Q4: 1.2%*).

 

Fixed service revenue grew by 0.5%* (Q3: 0.7%*, Q4: -0.4%*), as continued broadband ARPU growth was partially offset by lower variable call usage revenue compared to the prior year, as usage began to normalise post-pandemic, and a lower TV customer base. The decline in fixed service revenue in Q4 FY22 was primarily driven by a lower customer base, partly impacted by specific operational challenges related to the implementation of policies to comply with a new telecommunications law, which came into effect in December 2021. We added 20,000 cable customers during the year, including 66,000 migrations from legacy DSL broadband. Half of our cable broadband customers now subscribe to speeds of at least 250Mbps, and gigabit speeds are available to 23.8 million households across our hybrid fibre cable network.

 

Our TV customer base declined by 309,000, as reduced retail activity during the COVID-19 pandemic led to fewer gross customer additions, and was also impacted by broadband customer losses due to challenges related to compliance with the new telecommunications law. During the year, we accelerated convergence penetration as a result of successful campaigns and our converged customer base increased by 718,000 to 2.4 million Consumer converged accounts. Our converged propositions, led by the ‘GigaKombi’ products, allow customers to combine their mobile, landline, broadband and TV subscriptions for one monthly fee.

 

Mobile service revenue increased by 1.8%* (Q3: 1.7%*, Q4: 2.4%*), reflecting a higher customer base in both the Consumer and Business segments, as well as higher roaming and visitor revenue, which more than offset the impact of a reduction in mobile termination rates. The increased rate of service revenue growth in Q4 FY22 also benefited from some small non-recurring year-end adjustments. We added 19,000 contract customers during the year and contract churn remained broadly stable year-on-year at 12.3%, despite the impact of operational challenges related to compliance with the new telecommunications law. In June, we successfully launched our digital-only second brand, SIMon mobile. We added a further 6.4 million IoT connections during the year, supported by strong demand from the automotive sector.

 

Adjusted EBITDAaL grew by 6.5%*, supported by higher service revenue, cost synergy delivery, and some one-off settlements. The Adjusted EBITDAaL margin was 2.1* percentage points higher year-on-year at 43.2%.

 

We have now achieved our €425 million cost and capital expenditure synergy target for the integration of the Unitymedia assets acquisition, over two years ahead of plan. We see further opportunities for cost reduction including through the planned termination of our Transitional Service Agreements (TSAs) with Liberty Global.

 

We switched off our 3G network on 1 July 2021, with spectrum re-assigned to increase the capacity, speed and coverage of our 4G networks. Our 5G network is now available to more than 45 million people. We launched Europe’s first 5G standalone network in April 2021. Standalone 5G enables higher speeds, enhanced reliability and ultra-low latency, in addition to using 20% less energy on customers’ devices.

 

Italy ⫶ 11% of Group service revenue                
   FY22   FY21   Reported   Organic 
   €m   €m   change %   change %* 
Total revenue   5,022    5,014    0.2      
 - Service revenue   4,379    4,458    (1.8)   (1.8)
 - Other revenue   643    556           
Adjusted EBITDAaL   1,699    1,597    6.4    6.4 
Adjusted EBITDAaL margin   33.8%   31.9%          

 

Total revenue was stable at €5.0 billion as lower service revenue was offset by higher equipment revenue.

 

On an organic basis, service revenue declined by 1.8%* (Q3: -1.3%*, Q4: -0.8%*) as good growth in Business digital services revenue, higher MVNO revenues, and higher roaming and visitor revenue was offset by continued price pressure, and a reduction in mobile termination rates.

 

Mobile service revenue declined by 3.2%* (Q3: -2.9%*, Q4: -3.1%*) reflecting greater competition in the value segment and a lower active prepaid customer base. This was partly offset by targeted pricing actions and the positive contribution from PostePay MVNO customer migrations onto our network, which completed in early August. The decline in mobile service revenue in Q4 FY22 was impacted by a reduction in mobile termination rates. Market mobile number portability volumes continued to improve versus prior year levels. Our second brand ‘ho.’ continued to grow, with 342,000 net additions, supported by our best-in-class net promoter score, and now has 2.8 million customers.

 

Fixed service revenue increased by 2.0%* (Q3: 3.1%*, Q4: 5.3%*) driven by broadband customer base growth in Consumer, as well as good demand for our Business digital services, such as cloud & security. The acceleration in fixed service revenue growth in Q4 FY22 was driven by new Business customer additions, supported by a strong share of EU recovery funding voucher customers, as well as our pricing actions. We added 73,000 fixed-wireless access customers during the period, which are included in our mobile customer base. We now have 3.1 million broadband customers, and 52.6% of our broadband base is converged. Our total Consumer converged customer base is 1.3 million, an increase of 163,000 during the period. Through our own next generation network and partnership with Open Fiber, our broadband services are now available to 9.0 million households. We also cover 3 million households with fixed-wireless access, offering speeds of up to 100Mbps.

 

Adjusted EBITDAaL increased by 6.4%*, reflecting a 6.6 percentage point benefit from a €105 million legal settlement, partially offset by lower service revenue. Excluding the impact of the one-off legal settlement, Adjusted EBITDAaL was stable* year-on-year. The Adjusted EBITDAaL margin was 1.9* percentage points higher year-on-year at 33.8%.

 

UK ⫶ 13% of Group service revenue                
   FY22   FY21   Reported   Organic 
   €m   €m   change %   change %* 
Total revenue   6,589    6,151    7.1      
 - Service revenue   5,154    4,848    6.3    1.3 
 - Other revenue   1,435    1,303           
Adjusted EBITDAaL1   1,395    1,367    2.0    3.3 
Adjusted EBITDAaL margin   21.2%   22.2%          

 

Note:

1.When calculating organic growth for Adjusted EBITDAaL, the FY21 results are adjusted for Vantage Towers A.G. on a pro forma basis to be comparable to FY22.

 

Total revenue increased by 7.1% to €6.6 billion, due to higher service revenue and equipment revenue, and an appreciation of the pound sterling versus the euro.

 

On an organic basis, service revenue grew by 1.3%* (Q3: 0.9%*, Q4: 2.0%*), driven by strong Consumer segment growth, and supported by higher MVNO, roaming and visitor revenue. This was partially offset by a slowdown in Business, and a reduction in mobile termination rates.

 

Mobile service revenue grew by 2.8%* (Q3: 2.6%*, Q4: 5.9%*) driven by strong commercial momentum in Consumer, partially offset by the post-pandemic normalisation of Business connections. The increase in mobile service revenue growth rate in Q4 FY22 was partially due to higher wholesale MVNO revenue. During the year, we added 338,000 mobile contract customers, supported by our ‘Vodafone EVO’ proposition, which offers customers a combination of flexible contracts, trade-in options, and early upgrades. We also benefited from good iPhone demand and improved customer loyalty. Contract churn improved by 0.5 percentage points year-on-year to 12.5%. Our digital sub-brand ‘VOXI’ also continued to grow, with 104,000 customers added in the year. Our digital sales remained strong during the year, and now account for 33% of total sales. We also announced an exclusive retail partnership with the Dixons Carphone Group, covering 300 stores and digital channels, with improved terms compared to our previous arrangement.

 

Fixed service revenue declined by 2.3%* (Q3: -3.3%*, Q4: -7.0%*), impacted by lower Business revenue, with a further slowdown in the segment in Q4 FY22. Our performance was also driven by the decision to end a large but unprofitable multinational contract, and a reseller entering into administration in the first half of the year. Our commercial momentum in Consumer remained strong, with good demand for our Vodafone ‘Pro Broadband’ product. With 139,000 broadband net additions during the year, we now have over one million customers, of which 527,000 are converged. In November 2021, we announced the expansion of our long-term strategic partnership agreement with CityFibre. In conjunction with our existing partnership with Openreach, our NGN broadband services are now available to 29.3 million households.

 

Adjusted EBITDAaL increased by 3.3%*, driven by growth in service revenue, and continued strong cost control. Our Adjusted EBITDAaL margin was 0.3* higher year-on-year at 21.2%.

 

Spain 10% of Group service revenue                
   FY22   FY21   Reported   Organic 
   €m   €m   change %   change %* 
Total revenue   4,180    4,166    0.3      
 - Service revenue   3,714    3,788    (2.0)   (2.0)
 - Other revenue   466    378           
Adjusted EBITDAaL1   957    1,044    (8.3)   (1.1)
Adjusted EBITDAaL margin   22.9%   25.1%          

 

Note:

1.When calculating organic growth for Adjusted EBITDAaL, the FY21 results are adjusted for Vantage Towers A.G. on a pro forma basis to be comparable to FY22.

 

Total revenue was stable at €4.2 billion, as higher equipment revenue was offset by lower service revenue.

 

On an organic basis, service revenue declined by 2.0%* (Q3: -1.6%*, Q4 -5.1%*) as the impact of continued price competition in the value segment, and a reduction in mobile termination rates, were partially offset by higher roaming and visitor revenue. The quarterly slowdown in service revenue in Q4 was largely driven by a tougher prior year comparative, due to the full quarter impact of our more-for-more pricing actions in the prior year, and a reduction in mobile termination rates in FY22.

 

The market remained highly competitive in the Consumer value segment. In mobile, our contract customer base remained stable in the year, supported by strong public sector demand, and a gradual improvement in our commercial performance towards the end of the year, reflecting our continued focus on improving customer loyalty. Mobile contract churn increased by 0.5 percentage points year-on-year to 20.7% due to an exceptionally low churn in the prior year as a result of portability restrictions. Our second brand ‘Lowi’ added 310,000 customers during the period and now has a total customer base of 1.5 million.

 

Our broadband customer base declined by 164,000 as a result of higher competitive intensity in the Consumer value segment, and the temporary impact of our retail channel optimisation. Our TV customer base decreased by 88,000, impacted by continued competitive intensity. We have renewed our exclusive agreement with HBO Max, and through our partnerships with other content providers such as Disney, we have the most extensive library of movies and TV series in the market.

 

During the year, a digital toolkit platform for small and medium sized enterprises was launched by the Spanish government as part of the EU recovery funding initiatives. This scheme enables businesses to access fully subsidised digital services on a single platform. We have already received a significant number of registration requests from customers and will achieve an attractive Adjusted EBITDAaL margin on this incremental revenue. A second phase of this scheme is expected to launch in June 2022.

 

Adjusted EBITDAaL declined by 1.1%* and the Adjusted EBITDAaL margin was 0.3* percentage points lower year-on-year at 22.9%. The marginal decrease in Adjusted EBITDAaL reflects lower service revenue, largely offset by further efficiency savings.

 

During the year we announced a restructuring plan, mainly affecting owned retail stores, as part of our operational transformation. In November, we completed the optimisation of our retail footprint, with all branded stores now operating under a franchise model.

 

Other Europe 13% of Group service revenue            
   FY22   FY21   Reported   Organic 
   €m   €m   change %   change %* 
Total revenue   5,653    5,549    1.9      
 - Service revenue   5,001    4,859    2.9    3.0 
 - Other revenue   652    690           
Adjusted EBITDAaL1   1,606    1,760    (8.8)   1.4 
Adjusted EBITDAaL margin   28.4%   31.7%          

 

Note:

1.When calculating organic growth for Adjusted EBITDAaL, the FY21 results are adjusted for Vantage Towers A.G. on a pro forma basis to be comparable to FY22.

 

Total revenue increased by 1.9% to €5.7 billion, primarily reflecting service revenue growth, also supported by the appreciation of local currencies versus the euro.

 

On an organic basis, service revenue increased by 3.0%* (Q3: 2.9%*, Q4: 2.7%*), with all markets other than Romania growing during the year. The growth in service revenue was supported by customer base growth, higher roaming and visitor revenue, partially offset by a reduction in mobile termination rates.

 

In Portugal, service revenue grew due to strong fixed line revenue growth, higher mobile ARPU, and roaming and visitor revenue growth. During the period, we added 161,000 mobile contract customers and 64,000 fixed broadband customers. In October, we announced that Vodafone Portugal had acquired 90MHz of 3,600MHz and 2x10MHz of 700MHz spectrum, with a 20-year licence through to 2041. The spectrum will enable us to significantly expand network capacity to meet growing demand for reliable, high-quality voice and data services.

 

In Ireland, service revenue increased, reflecting good mobile contract customer growth, and higher roaming and visitor revenue, partially offset by a reduction in mobile termination rates. During the period, our mobile contract customer base increased by 77,000 and mobile contract customer loyalty rates improved, with churn reducing 1.5 percentage points year-on-year to 8.4%.

 

Service revenue in Greece increased, reflecting higher roaming and visitor revenue as international tourism grew year-on-year, partially offset by a reduction in mobile termination rates. During the year, we added 38,000 mobile contract customers and 145,000 prepaid customers.

 

Adjusted EBITDAaL increased by 1.4%*, supported by good revenue growth and further efficiency savings, partially offset by a one-off provision in Greece, and higher direct cost. The Adjusted EBITDAaL margin decreased by 0.2* percentage points and was 28.4%.

 

We continued to make good progress on integrating the assets acquired from Liberty Global in Central and Eastern Europe and we have now delivered 60% of our cost and capital expenditure synergy target.

 

Vodacom 12% of Group service revenue                
   FY22   FY21   Reported   Organic 
   €m   €m   change %   change %* 
Total revenue   5,993    5,181    15.7      
 - Service revenue   4,635    4,083    13.5    4.6 
 - Other revenue   1,358    1,098           
Adjusted EBITDAaL   2,125    1,873    13.5    3.4 
Adjusted EBITDAaL margin   35.5%   36.2%          

 

Total revenue increased by 15.7% to €6.0 billion and Adjusted EBITDAaL increased by 13.5%, primarily due to the strengthening of the local currencies versus the euro.

 

On an organic basis, Vodacom’s total service revenue grew by 4.6%* (Q3: 4.4%*, Q4 3.1%*) with growth in both South Africa and Vodacom’s international markets.

 

In South Africa, service revenue grew year-on-year, supported by sustained demand, incremental wholesale services, good Business demand and financial services growth. We added 1.8 million mobile prepaid customers and 272,000 mobile contract customers, with the latter supported by our new more-for-more ‘Vodafone Red’ proposition introduced in June. Financial services revenue in South Africa increased by 12.4%* to €155 million, reflecting the expansion of our service offerings, and 69.4% of our mobile customer base now uses data services.

 

In October 2021, we launched our new ‘VodaPay’ super-app in South Africa, bringing consumer and business capabilities under one platform. The application enables customers to access financial, insurance and eCommerce services and supports businesses with additional resource planning and ‘business-to-business’ functionalities. We now have 1.6 million registered users on the platform, and over 2.2 million downloads of the application. For more detail about Vodacom Financial Services, please watch our Digital Ecosystem briefing at vodacom.com/presentations.php

 

In March, we announced that Vodacom South Africa had acquired 2x10MHz of 700MHz, 1x80MHz of 2600MHz and 1x10MHz of 3500MHz spectrum, with a 20-year licence through to 2042. The spectrum will enable us to significantly expand network capacity and coverage, and help accelerate post-pandemic economic recovery and digital inclusion.

 

In Vodacom’s international markets, service revenue increased during the year. Growth was supported by an increase in M-Pesa transaction volumes and data revenue. This benefit was partially offset by the introduction of mobile money levies in Tanzania, and a stronger prior year comparative in Mozambique and the DRC, reflecting the reinstatement of fees on person-to-person M-Pesa transfers in the prior year. M-Pesa transaction value increased by 10.9%, while M-Pesa revenue as a share of total service revenue increased by 2.0 percentage points to 22.7%, and 65.1% of our customer base is now using data services.

 

Vodacom’s Adjusted EBITDAaL increased by 3.4%* supported by good revenue growth, and positive operational leverage in Vodacom’s international operations. This was partially offset by an increase in technology operating expenses in South Africa, as we invested in further improving the resilience of our network. The Adjusted EBITDAaL margin decreased by 1.0* percentage point and was 35.5%.

 

On 10 November 2021, Vodacom Group announced it had entered into an agreement to acquire Vodafone Egypt from Vodafone for a total consideration of €2.4 billion. The proposed acquisition presents a unique opportunity to advance Vodacom Group’s strategic connectivity and financial services ambitions in one of Africa’s premier telecom operators. Vodafone Egypt is a clear market leader that will diversify and accelerate Vodacom Group’s growth profile. The transaction is expected to receive Egyptian regulatory approval in the near term.

 

Vodacom also announced that it had agreed to acquire a co-controlling 30% interest in the fibre assets currently owned by Community Investment Ventures Holdings (Pty) Limited (‘CIVH’). CIVH owns Vumatel and Dark Fibre Africa, which are South Africa’s largest open access fibre operators. Vodacom’s investment and strategic support will further accelerate the growth trajectory of fibre roll-out in South Africa helping close the digital divide. The transaction is subject to regulatory approvals in South Africa.

 

Further information on our operations in Africa can be accessed here: vodacom.com.

 

Other Markets 9% of Group service revenue            
   FY22   FY21   Reported   Organic 
   €m   €m   change %   change %* 
Total revenue   3,830    3,765    1.7      
 - Service revenue   3,420    3,312    3.3    19.4 
 - Other revenue   410    453           
Adjusted EBITDAaL   1,335    1,228    8.7    23.0 
Adjusted EBITDAaL margin   34.9%   32.6%          

 

Total revenue increased by 1.7% to €3.8 billion, as higher service revenue was partially offset by the depreciation of local currencies versus the euro.

 

On an organic basis, service revenue increased by 19.4%* (Q3: 19.8%*, Q4: 19.8%*) as a result of higher customer base and ARPU growth across our markets.

 

Service revenue in Turkey accelerated as a result of strong mobile customer base and ARPU growth, with ongoing repricing actions to reflect increasing inflation in a difficult macroeconomic environment. Mobile contract customer additions were 1.3 million including migrations from prepaid customers. We also added 120,000 broadband customers during the year. Mobile contract churn improved by 3.9 percentage points year-on-year to 15.4%.

 

We expect Turkey to be designated as a hyper-inflationary economy under IFRS during the first quarter of FY23, in which case Vodafone Turkey’s results will be presented on a revised basis.  See note 1 of the condensed consolidated financial statements for further information.

 

Service revenue in Egypt grew ahead of inflation, supported by customer base growth and increased data usage. During the year, we added 237,000 mobile contract customers and 877,000 prepaid mobile customers.

 

Adjusted EBITDAaL increased by 23.0%* and the Adjusted EBITDAaL margin increased by 1.1* percentage points, despite the inflationary pressure on our cost base due to worsening macroeconomic conditions. The Adjusted EBITDAaL margin was 34.9%.

 

Vantage Towers Delivering on our plan                    
    FY22    FY211    Reported    Organic 
    €m    €m    change %    change %* 
Total revenue   1,252              
 - Service revenue                
 - Other revenue   1,252               
Adjusted EBITDAaL   619             
Adjusted EBITDAaL margin   49.4%              

 

Note:

1.Vantage Towers is a new reporting segment for the year ended 31 March 2022 and hence no comparative information is presented. See page 7 for more information.

 

Total revenue increased to €1.3 billion, with 1,700 new tenancies added during the year, bringing the tenancy ratio to 1.44x. Vantage Towers concluded a number of new partnership agreements during the year, including an agreement with 1&1 in December 2021 for the provision of passive tower infrastructure access to at least 3,800 sites throughout Germany by the end of 2025, and potentially up to 5,000 sites, for the next 20 years, with an option to extend until 2060.

 

Vantage Towers reported its results on 16 May 2022. Further information on Vantage Towers can be accessed at: vantagetowers.com.

 

Associates and joint ventures        
   FY22   FY21 
   €m   €m 
VodafoneZiggo Group Holding B.V.   (19)   (232)
Safaricom Limited   217    217 
Indus Towers Limited       274 
Other   13    83 
Share of results of equity accounted associates and joint ventures   211    342 

 

VodafoneZiggo Joint Venture (Netherlands)

 

The results of VodafoneZiggo, in which Vodafone owns a 50% stake, are reported here under US GAAP, which is broadly consistent with Vodafone’s IFRS basis of reporting.

 

Total revenue grew by 1.4% to €4.1 billion, primarily driven by mobile contract customer base and ARPU growth, supported by higher roaming and visitor revenue. This was partially offset by a slowdown in Consumer fixed revenue growth in the second half of FY22.

 

During the year, VodafoneZiggo added 196,000 mobile contract customers, supported by our best-in-class net promoter score, mainly driven by higher Consumer demand. Strong Business fixed performance was due to an increase in the customer base, as well as higher demand for unified communications. The number of converged households increased by 25,000, with 45% of broadband customers now converged, delivering significant NPS and customer loyalty benefits. VodafoneZiggo now offers 1 gigabit speeds to 5.8 million homes and is on track to provide nationwide coverage in 2022.

 

During the year, Vodafone received €350 million in dividends from the joint venture, as well as €49 million in interest payments. The joint venture also drew down an additional loan from shareholders to fund an instalment arising from spectrum licences acquired in July 2020, with Vodafone’s share being €104 million.

 

Safaricom Associate (Kenya)

 

Safaricom service revenue grew to €2.2 billion due to strong Business fixed demand, and a recovery in M-Pesa revenue as transaction volumes increased and peer-to-peer transaction fees normalised.

 

Indus Towers Associate (India)

 

The Group’s interest in Indus Towers has been provided as security against certain bank borrowings secured against Indian assets and partly to the pledges provided to the new Indus Towers entity (‘Indus’) under the terms of the merger between erstwhile Indus Towers and Bharti Infratel. Indus has been classified as held for sale in the condensed consolidated statement of financial position since 31 March 2021 and the Group’s share of Indus’ results is not reflected in the Group’s consolidated income statement for the year ended 31 March 2022.

 

Vodafone Idea Limited Joint Venture (India)

 

See note 3 ‘Contingent liabilities and legal proceedings’ in the condensed consolidated financial statements on page 27 for further information.

 

TPG Telecom Limited Joint Venture (Australia)

 

In July 2020, Vodafone Hutchison Australia Pty Limited (‘VHA’) and TPG Telecom Limited (‘TPG’) completed their merger to establish a fully integrated telecommunications operator in Australia. The merged entity was admitted to the Australian Securities Exchange (‘ASX’) on 30 June 2020 and is known as TPG Telecom Limited. Vodafone and Hutchison Telecommunications (Australia) Limited each own an economic interest of 25.05% in the merged unit.

 

Net financing costs               
    FY22    FY21    Reported 
    €m    €m    change % 
Investment income   254    330      
Financing costs   (1,964)   (1,027)     
Net financing costs   (1,710)   (697)   (145.3)
Adjustments for:               
Mark-to-market gains   (256)   (1,091)     
Foreign exchange losses   284    23      
Adjusted net financing costs1   (1,682)   (1,765)   4.7 

 

Note: 

1. Adjusted net financing costs is a non-GAAP measure. See page 31 for more information.

 

Net financing costs increased by €1,013 million, primarily due to lower mark-to-market gains on options held relating to the Group’s mandatory convertible bonds and increased foreign exchange losses on intercompany funding arrangements. Adjusted net financing costs remained broadly stable year-on-year, reflecting consistent average net debt balances and weighted average borrowing costs for both periods.

 

Taxation            
   FY22   FY21   Change 
   %   %   pps 
Effective tax rate   33.6%   87.8%   (54.2)
Adjusted effective tax rate1   27.9%   26.9%   1.0 

 

Note: 

1. Adjusted effective tax rate is a non-GAAP measure. See page 31 for more information.

 

The Group’s effective tax rate for the year ended 31 March 2022 was 33.6%. The effective tax rate includes a €1,468 million charge (2021: €2,128 million*) for the utilisation of losses in Luxembourg which arises from an increase in the valuation of investments based upon local GAAP financial statements and tax returns. The current year charge was principally driven by increases in the value of our listed investments. The effective tax rate also includes €327 million (2021: €320 million) relating to the use of losses in Luxembourg and a credit of €699 million relating to the recognition of a deferred tax asset in Luxembourg because of higher interest rates increasing our forecasts of future profits. The year ended 31 March 2021 included a charge of €699 million* relating to the de-recognition of a deferred tax asset in Luxembourg. These items change the total losses we have available for future use against our profits in Luxembourg and neither item affects the amount of tax we pay in other countries.

 

The effective tax rate also includes an increase in our deferred tax assets in the UK of €593 million (2021: €nil) following the increase in the corporate tax rate to 25% and €273 million (2021: €nil) following the revaluation of assets for tax purposes in Italy.

 

The Group’s Adjusted effective tax rate for the year ended 31 March 2022 was 27.9% (2021: 26.9%). This is in line with our expectations for the year.

 

The adjusted effective tax rate excludes the amounts relating to Luxembourg, the impact of the UK tax rate change and revaluation of assets in Italy which are set out above.

 

 

* During the year ended 31 March 2022, we revised the calculation of certain impairment reversals recognised by our Luxembourg holding companies for the year ended 31 March 2021; this had no impact on the amount of deferred tax assets recognised at that date but has changed the amount of our unrecognised deferred tax assets by €0.7 billion (unrecognised losses of €2.8 billion).

 

Earnings per share            
           Reported 
   FY22   FY21   change 
   eurocents   eurocents   eurocents 
Basic earnings per share   7.20c   0.38c   6.82c
Adjusted basic earnings per share1   11.03c   8.08c   2.95c

 

Note: 

1. Adjusted basic earnings per share is a non-GAAP measure. See page 31 for more information.

 

Basic earnings per share was 7.20 eurocents, compared to 0.38 eurocents for the year ended 31 March 2021.

 

Adjusted basic earnings per share was 11.03 eurocents compared to 8.08 eurocents for the year ended 31 March 2021.

 

Cash flow, capital allocation and funding

 

Analysis of cash flow        
   FY22   FY21   Reported 
   €m   €m   change % 
Inflow from operating activities   18,081    17,215    5.0 
Outflow from investing activities   (6,868)   (9,262)   25.8 
Outflow from financing activities   (9,706)   (15,196)   36.1 
Net cash inflow/(outflow)   1,507    (7,243)   120.8 
Cash and cash equivalents at beginning of the financial year   5,790    13,288      
Exchange gain/(loss) on cash and cash equivalents   74    (255)     
Cash and cash equivalents at end of the financial year   7,371    5,790      

 

Cash inflow from operating activities increased by 5.0% to €18,081 million, primarily due to higher operating profit.

 

Outflow from investing activities decreased by 25.8% to €6,868 million, primarily due to a decrease of €2,409 million (2021: €1,993 million increase) in collateral assets held against derivative liabilities, partially offset by purchases of other short-term investments and property, plant and equipment.

 

Outflows from financing activities decreased by 36.1% to €9,706 million, driven by an increase of €1,952 million (2021: €4,330 million decrease) in collateral liabilities held against derivative assets and lower borrowing repayments compared to the previous year, partially offset by the purchase of treasury shares of €2,087 million in the current year.

 

Analysis of cash flow (continued)            
   FY22   FY21   Reported 
   €m   €m   change % 
Adjusted EBITDAaL1   15,208    14,386    5.7 
Capital additions2   (8,306)   (7,854)     
Working capital   (31)   564      
Disposal of property, plant and equipment and intangible assets   27    42      
Restructuring costs   (267)   (356)     
Integration capital additions3   (314)   (329)     
Restructuring and integration working capital   (213)   (3)     
Licences and spectrum   (896)   (1,221)     
Interest received and paid4   (1,254)   (1,553)     
Taxation   (925)   (1,020)     
Dividends received from associates and joint ventures   638    628      
Dividends paid to non-controlling shareholders in subsidiaries   (539)   (391)     
Other   181    217      
Free cash flow1   3,309    3,110    6.4 
Acquisitions and disposals   138    447      
Equity dividends paid   (2,474)   (2,427)     
Share buybacks4   (2,029)   (53)     
Foreign exchange loss   (378)   (219)     
Other movements on net debt5   399    646      
Net debt (increase)/decrease1   (1,035)   1,504      
Opening net debt1   (40,543)   (42,047)     
Closing net debt1   (41,578)   (40,543)   (2.6)
                
Free cash flow1   3,309    3,110      
Adjustments:               
 - Licences and spectrum   896    1,221      
 - Restructuring costs   267    356      
 - Integration capital additions3   314    329      
 - Restructuring and integration working capital   213    3      
 - Vantage Towers growth capital expenditure   244          
- Special dividend in Egypt   194          
Adjusted free cash flow1   5,437    5,019      

 

Notes:

1.Adjusted EBITDAaL, Free cash flow, Adjusted free cash flow and Net debt are non-GAAP measures. See page 31 for more information.
2.See page 41 for an analysis of tangible and intangible additions in the year.
3.Integration capital additions comprises amounts for the integration of acquired Liberty Global assets and network integration.
4.Interest received and paid excludes interest on lease liabilities of €361 million outflow (FY21: €307 million) included within Adjusted EBITDAaL and €58 million of cash inflow (FY21: €9 million) from the option structures relating to the issue of the mandatory convertible bonds which is included within Share buybacks. The option structures were intended to ensure that the total cash outflow to execute the programme were broadly equivalent to the amounts raised on issuing each tranche.
5.‘Other movements on net debt’ for the year ended 31 March 2022 includes mark-to-market gains recognised in the income statement of €256 million (FY21: €1,091 million gain). The year ended 31 March 2021 also included payments in respect of bank borrowings secured against Indian assets of €83 million and payments to Vodafone Idea Limited of €235 million in respect of the contingent liability mechanism.

 

Adjusted free cash flow increased by €418 million to an inflow of €5,437 million, resulting from an increase in Adjusted EBITDAaL and lower interest received and paid, partially offset by an increase in capital additions and neutral working capital movements for the year.

 

Borrowings and cash position            
   FY22   FY21   Reported 
   €m   €m   change % 
Non-current borrowings   (58,131)   (59,272)     
Current borrowings   (11,961)   (8,488)     
Borrowings   (70,092)   (67,760)     
Cash and cash equivalents   7,496    5,821      
Borrowings less cash and cash equivalents   (62,596)   (61,939)   (1.1)

 

Borrowings principally includes bonds of €48,031 million (FY21: €46,885 million) and lease liabilities of €12,539 million (FY21: €13,032 million).

 

The increase in borrowings of €2,332 million is principally driven by an increase of €1,952 million on derivative collateral positions, which impacts both cash and short-term borrowings.

 

Funding position            
   FY22   FY21   Reported 
   €m   €m   change % 
Bonds   (48,031)   (46,885)     
Bank loans   (1,317)   (1,419)     
Other borrowings including spectrum   (3,909)   (4,215)     
Gross debt1   (53,257)   (52,519)   (1.4)
Cash and cash equivalents   7,496    5,821      
Short-term investments2   4,795    4,007      
Derivative financial instruments3   1,604    3      
Net collateral (liabilities)/assets4   (2,216)   2,145      
Net debt1   (41,578)   (40,543)   (2.6)

 

Notes: 

1.Gross debt and Net debt are non-GAAP measures. See page 31 for more information.
2.Short-term investments includes €1,446 million (FY21: €1,053 million) of highly liquid government and government-backed securities and managed investment funds of €3,349 million (FY21: €2,954 million) that are in highly rated and liquid money market investments with liquidity of up to 90 days.
3.Derivative financial instruments excludes derivative movements in cash flow hedging reserves of €1,350 million gain (FY21: €862 million loss).
4.Net collateral (liabilities)/assets on derivative financial instruments result in cash being (held)/paid as security. This is repayable or receivable when derivatives are settled and is therefore deducted from liquidity.

 

Net debt increased by €1,035 million primarily as a result of Free cash flow of €3,309 million, offset by equity dividends paid of €2,474 million and share buybacks of €2,029 million (1,441 million shares) used to offset dilution linked to mandatory convertible bonds.

 

Other funding obligations to be considered alongside net debt include:

 

-Lease liabilities of €12,539 million (FY21: €13,032 million)

 

-Mandatory convertible bonds recognised in equity of €nil (FY21: €1,904 million)

 

-KDG put option liabilities of €494 million (FY21: €492 million)

 

-Guarantees over Australia joint venture loans of €1,573 million (FY21: €1,489 million)

 

-Pension liabilities of €281 million (FY21: €513 million)

 

The Group’s gross and net debt includes €9,942 million (FY21: €7,942 million) of long-term borrowings (‘Hybrid bonds’) for which a 50% equity characteristic of €4,971 million (FY21: €3,971 million) is attributed by credit rating agencies.

 

The Group’s gross and net debt includes certain bonds which have been designated in hedge relationships, which are carried at €1,316 million higher value (FY21: €1,390 million higher) than their euro equivalent redemption value. In addition, where bonds are issued in currencies other than euros, the Group has entered into foreign currency swaps to fix the euro cash outflows on redemption. The impact of these swaps is not reflected in gross debt and if it was included would decrease the euro equivalent value of the bonds by €1,456 million (FY21: €127 million).

Return on capital employed

 

Return on capital employed (‘ROCE’) reflects how efficiently we are generating profit with the capital we deploy.

 

   FY22   FY21   Change 
   %   %   pps 
Pre-tax ROCE (controlled)1    7.2%   5.5%   1.7 
Post-tax ROCE (controlled and associates/joint ventures)1    5.0%   3.9%   1.1 
                
ROCE calculated using GAAP measures2    5.0%   4.4%   0.6 

 

Notes: 

1.Pre-tax ROCE (controlled) and Post-tax ROCE (controlled and associates/joint ventures) are non-GAAP measures. See page 31 for more information.
2.ROCE is calculated by dividing Operating profit by the average of capital employed as reported in the consolidated statement of financial position. See pages 38 and 39 for the detail of the calculation.

 

We calculate two ROCE measures: i) Pre-tax ROCE for controlled operations only and ii) Post-tax ROCE including associates and joint ventures.

 

Pre-tax ROCE increased to 7.2% % (FY21: 5.5%). The increase reflects a strong increase in adjusted operating profit, lower amortisation on licences and spectrum fees and a small decrease in average capital employed. Similarly, post-tax ROCE increased to 5.0% (FY21: 3.9%).

 

ROCE using GAAP measures increased to 5.0% (FY21: 4.4%). The increase reflects a higher operating profit during the year-ended 31 March 2022 coupled with a slight decrease in average capital employed.

 

Funding facilities

 

The Group has undrawn revolving credit facilities of €7.6 billion comprising euro and US dollar revolving credit facilities of €4.0 billion and US$4.0 billion (€3.6 billion) which mature in 2025 and 2027 respectively. Both committed revolving credit facilities support US and euro commercial paper programmes of up to US$15 billion and €10 billion respectively.

 

Post employment benefits

 

At 31 March 2022, the Group’s net surplus of scheme assets over scheme liabilities was €274 million (2021: €453 million net deficit). The next triennial actuarial valuation of the Vodafone Section and CWW Section of the Vodafone UK Group Pension Scheme will be as at 31 March 2022.

 

Dividends

 

Dividends will continue to be declared in euros, aligning the Group’s shareholder returns with the primary currency in which we generate free cash flow, and paid in euros, pounds sterling and US dollars. The foreign exchange rate at which future dividends declared in euros will be converted into pounds sterling and US dollars will be calculated based on the average World Markets Company benchmark rates over the five business days during the week prior to the payment of the dividend.

 

The Board is recommending total dividends per share of 9.0 eurocents for the year. This includes a final dividend of 4.5 eurocents compared to 4.5 eurocents in the prior year.

 

The ex-dividend date for the final dividend is 1 June 2022 for ordinary shareholders, the record date is 6 June 2022 and the dividend is payable on 5 August 2022. Dividend payments on ordinary shares will be paid directly into a nominated bank or building society account.

 

Other significant developments

 

Board changes

 

Deborah Kerr was appointed as a non-executive director on 1 March 2022.

 

On 6 May 2022, Vodafone announced that Delphine Ernotte Cunci and Simon Segars will be appointed as non-executive directors following the Annual General Meeting on 26 July 2022, subject to shareholder approval.

 

On 12 May, Vodafone announced that Stephen A. Carter will be appointed as non-executive director following the Annual General Meeting on 26 July 2022, subject to shareholder approval.

 

Executive Committee changes

 

On 19 April 2022, Vodafone announced that Hannes Ametsreiter will step down from his role as CEO of Vodafone Germany, and as a member of the Group Executive Committee, effective 30 June 2022. Philippe Rogge will become CEO of Vodafone Germany and a member of the Group Executive Committee on 1 July 2022.

 

Indus Towers

 

On 24 February 2022, Vodafone confirmed the sale of 63.6 million shares in Indus Towers Limited (“Indus”) through an accelerated book build offering (the “Placing”), generating net proceeds of approximately INR 14.2 billion (€169 million). The Group sold a further 127.1 million shares in Indus Bharti Airtel Limited (“Bharti”) on 29 March 2022, generating additional net proceeds of approximately INR 29.9 billion (€283 million). The Indus shares related to the Placings and the agreement with Bharti were all subject to the security arrangements entered into between Vodafone and Indus.

 

Following completion of the sale of shares to Bharti, Vodafone retains 567.1 million shares in Indus, equivalent to a 21.0% shareholding (the “Residual Shareholding”). Vodafone continues to be in discussions with several interested parties in relation to a proposed sale of the Residual Shareholding.

 

Major shareholder announcement

 

On 14 May 2022, Vodafone was informed by Emirates Telecommunications Group Company (‘Etisalat’) that they have become the Group’s largest shareholder with a 9.8% stake.

 

Condensed consolidated financial statements

 

Consolidated income statement 

 

   Year ended 31 March 
   2022   2021 
   €m   €m 
Revenue   45,580    43,809 
Cost of sales   (30,574)   (30,086)
Gross profit   15,006    13,723 
Selling and distribution expenses   (3,358)   (3,522)
Administrative expenses   (5,713)   (5,350)
Net credit losses on financial assets   (561)   (664)
Share of results of equity accounted associates and joint ventures   211    342 
Other income   79    568 
Operating profit   5,664    5,097 
Investment income   254    330 
Financing costs   (1,964)   (1,027)
Profit before taxation   3,954    4,400 
Income tax expense   (1,330)   (3,864)
Profit for the financial year   2,624    536 
           
Attributable to:          
– Owners of the parent   2,088    112 
– Non-controlling interests   536    424 
Profit for the financial year   2,624    536 
           
Profit per share          
Total Group:          
– Basic   7.20c   0.38c
– Diluted   7.17c   0.38c

 

Consolidated statement of comprehensive income/expense

 

      Year ended 31 March  
      2022       2021  
      €m        €m   
Profit for the financial year     2,624       536  
Other comprehensive income/(expense):                
Items that may be reclassified to the income statement in subsequent periods:                
Foreign exchange translation differences, net of tax     (25 )     133  
Foreign exchange translation differences transferred to the income statement     19       (17 )
Other, net of tax1      1,863       (3,743 )
Total items that may be reclassified to the income statement in subsequent years     1,857       (3,627 )
Items that will not be reclassified to the income statement in subsequent years:                
Net actuarial gains/(losses) on defined benefit pension schemes, net of tax     483       (555 )
Total items that will not be reclassified to the income statement in subsequent years     483       (555 )
Other comprehensive income/(expense)     2,340       (4,182 )
Total comprehensive income/(expense) for the financial year     4,964       (3,646 )
                 
Attributable to:                
– Owners of the parent     4,402       (4,069 )
– Non-controlling interests     562       423  
      4,964       (3,646 )

 

Note: 

1.Principally includes the impact of the Group’s cash flow hedges deferred to other comprehensive income during the year.

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

Condensed consolidated financial statements

 

Consolidated statement of financial position  

 

   31 March   31 March 
   2022   2021 
   €m   €m 
Non-current assets          
Goodwill   31,884    31,731 
Other intangible assets   21,360    21,818 
Property, plant and equipment   40,804    41,243 
Investments in associates and joint ventures   4,268    4,670 
Other investments   1,073    925 
Deferred tax assets   19,089    21,569 
Post employment benefits   555    60 
Trade and other receivables   6,383    4,777 
    125,416    126,793 
Current assets          
Inventory   836    676 
Taxation recoverable   296    434 
Trade and other receivables   11,019    10,923 
Other investments   7,931    9,159 
Cash and cash equivalents   7,496    5,821 
    27,578    27,013 
Assets held for sale   959    1,257 
Total assets   153,953    155,063 
           
Equity          
Called up share capital   4,797    4,797 
Additional paid-in capital   149,018    150,812 
Treasury shares   (7,278)   (6,172)
Accumulated losses   (122,118)   (121,587)
Accumulated other comprehensive income   30,268    27,954 
Total attributable to owners of the parent   54,687    55,804 
Non-controlling interests   2,290    2,012 
Total equity   56,977    57,816 
           
Non-current liabilities          
Borrowings   58,131    59,272 
Deferred tax liabilities   520    2,095 
Post employment benefits   281    513 
Provisions   1,881    1,747 
Trade and other payables   2,516    4,909 
    63,329    68,536 
Current liabilities          
Borrowings   11,961    8,488 
Financial liabilities under put option arrangements   494    492 
Taxation liabilities   864    769 
Provisions   667    892 
Trade and other payables   19,661    18,070 
    33,647    28,711 
Total equity and liabilities   153,953    155,063 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

Condensed consolidated financial statements

 

Consolidated statement of changes in equity

 

   Share
capital
  

Additional
paid-in
capital1

   Treasury
shares
  

Accumulated
comprehensive
losses2

   Equity
attributable to
the
owners
   Non-
controlling
interests
   Total equity 
   €m   €m   €m   €m   €m   €m   €m 
1 April 2020 brought forward   4,797    152,629    (7,802)   (88,214)   61,410    1,215    62,625 
Issue or reissue of shares       (1,943)   2,033    (87)   3        3 
Share-based payments       126            126    10    136 
Transactions with non-controlling shareholders in subsidiaries               1,149    1,149    748    1,897 
Comprehensive (expense)/income               (4,069)   (4,069)   423    (3,646)
Dividends               (2,412)   (2,412)   (384)   (2,796)
Purchase of treasury shares           (403)       (403)       (403)
31 March 2021   4,797    150,812    (6,172)   (93,633)   55,804    2,012    57,816 
                                    
1 April 2021 brought forward   4,797    150,812    (6,172)   (93,633)   55,804    2,012    57,816 
Issue or reissue of shares       (1,902)   2,000    (98)            
Share-based payments       108            108    11    119 
Transactions with non-controlling shareholders in subsidiaries               (38)   (38)   237    199 
Comprehensive (expense)/income               4,402    4,402    562    4,964 
Dividends               (2,483)   (2,483)   (532)   (3,015)
Purchase of treasury shares           (3,106)       (3,106)       (3,106)
31 March 2022   4,797    149,018    (7,278)   (91,850)   54,687    2,290    56,977 

 

Notes: 

1.Includes share premium, capital reserve, capital redemption reserve, merger reserve and share-based payment reserve. The merger reserve was derived from acquisitions made prior to 31 March 2004 and subsequently allocated to additional paid-in capital on adoption of IFRS.
2.Includes accumulated losses and accumulated other comprehensive income.

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

Condensed consolidated financial statements

  

Consolidated statement of cash flows        
   Year ended 31 March 
   2022   2021 
   €m   €m 
Inflow from operating activities   18,081    17,215 
           
Cash flows from investing activities          
Purchase of interests in subsidiaries, net of cash acquired       (136)
Purchase of interests in associates and joint ventures   (445)   (13)
Purchase of intangible assets   (3,262)   (3,227)
Purchase of property, plant and equipment   (5,798)   (5,413)
Purchase of investments   (2,009)   (3,726)
Disposal of interests in subsidiaries, net of cash disposed       157 
Disposal of interests in associates and joint ventures   446    420 
Disposal of property, plant and equipment and intangible assets   33    43 
Disposal of investments   3,282    1,704 
Dividends received from associates and joint ventures   638    628 
Interest received   247    301 
Outflow from investing activities   (6,868)   (9,262)
           
Cash flows from financing activities          
Proceeds from issue of long-term borrowings   2,548    4,359 
Repayment of borrowings   (8,248)   (12,237)
Net movement in short-term borrowings   3,002    (2,791)
Net movement in derivatives   (293)   279 
Interest paid1   (1,804)   (2,152)
Payments for settlement of written put options       (1,482)
Purchase of treasury shares   (2,087)   (62)
Issue of ordinary share capital and reissue of treasury shares       5 
Equity dividends paid   (2,474)   (2,427)
Dividends paid to non-controlling shareholders in subsidiaries   (539)   (391)
Other transactions with non-controlling shareholders in subsidiaries   189    1,663 
Other movements with associates and joint ventures       40 
Outflow from financing activities   (9,706)   (15,196)
           
Net cash inflow/(outflow)   1,507    (7,243)
           
Cash and cash equivalents at beginning of the financial year2   5,790    13,288 
Exchange gain/(loss) on cash and cash equivalents   74    (255)
Cash and cash equivalents at end of the financial year2   7,371    5,790 

 

Notes:

1.Interest paid includes €58 million of cash inflow (FY21: €9 million inflow) on derivative financial instruments for the share buyback related to maturing tranches of mandatory convertible bonds.
2.Comprises cash and cash equivalents as presented in the consolidated statement of financial position of €7,496 million (FY21: €5,821 million), together with overdrafts of €125 million (FY21: €31 million).

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

Notes to condensed consolidated financial statements

 

1Basis of preparation

 

The preliminary results for the year ended 31 March 2022 are an abridged statement of the full Annual Report which was approved by the Board of Directors on 17 May 2022. The consolidated financial statements in the full Annual Report are prepared in accordance with UK-adopted International Financial Reporting Standards (‘IFRS’), with IFRS as issued by the International Accounting Standards Board (‘IASB’) and with the requirements of the Companies Act 2006.

 

The auditor’s report on those consolidated financial statements was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006. The preliminary results do not comprise statutory accounts within the meaning of section 434(3) of the Companies Act 2006. The Annual Report for the year ended 31 March 2022 will be delivered to the Registrar of Companies following the Company’s Annual General Meeting on 26 July 2022.

 

The financial information included in this preliminary announcement does not itself contain sufficient information to comply with IFRS. A separate announcement will be made in accordance with Disclosure and Transparency Rules (DTR) 6.3 when the annual report and audited financial statements for the year ended 31 March 2022 are made available on the Company’s website in June 2022.

 

The preparation of the preliminary results requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the end of the reporting period and the reported amounts of revenue and expenses during the reporting period. Actual results could vary from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

 

Going concern

 

The Group has a strong liquidity position with €7.4 billion of cash and cash equivalents available at 31 March 2022 which, together with undrawn revolving credit facilities of €7.6 billion, cover all of the Group’s reasonably expected cash requirements over the going concern period. The Directors have reviewed trading and liquidity forecasts for the Group, which were based on current trading conditions, and considered a variety of scenarios including not being able to access the capital markets during the assessment period.  In addition to the liquidity forecasts prepared, the Directors considered the availability of the Group’s revolving credit facilities which were undrawn as at 31 March 2022. As a result of the assessment performed, the Directors have concluded that the Group is able to continue in operation for a period of at least 12 months from the date of approving the consolidated financial statements and that it is appropriate to continue to adopt the going concern basis in preparing the consolidated financial statements.

 

Critical accounting judgements and estimates

 

The Group’s critical accounting judgements and estimates are disclosed in the Group’s Annual Report for the year ended 31 March 2022. The impact of recent energy price inflation, exacerbated by the war in Ukraine, has been factored into our latest forecasts and considered in our impairment review.

 

New accounting pronouncements adopted

 

On 1 April 2021, the Group adopted certain new accounting policies where necessary to comply with amendments to IFRS, none of which had a material impact on the consolidated results, financial position or cash flows of the Group. Further details are provided in the Group’s annual report for the year ended 31 March 2021.

 

Basis of preparation changes to be adopted on or after 1 April 2022

 

It is expected that Turkey will meet the requirements to be designated as a hyper-inflationary economy under IAS 29 ‘Financial Reporting in Hyper-Inflationary Economies’ in the quarter ended 30 June 2022 and that the Group’s financial reporting relating to Turkey during the year ending 31 March 2023 will be in accordance with IAS 29. Under IAS 29, Turkish Lira results and non-monetary asset and liability balances are revalued to present value equivalent local currency amounts (adjusted based on an inflation index) before translation to euros at reporting-date exchange rates.

 

Notes to the condensed consolidated financial statements

  

2Equity dividends

 

   2022   2021 
   €m   €m 
Declared and paid during the financial year:          
Final dividend for the year ended 31 March 2021: 4.5 eurocents per share (2020: 4.5 eurocents per share)   1,254    1,205 
Interim dividend for the year ended 31 March 2022: 4.5 eurocents per share (2021: 4.5 eurocents per share)   1,229    1,207 
    2,483    2,412 
Proposed after the end of the year and not recognised as a liability:          
Final dividend for the year ended 31 March 2022: 4.5 eurocents per share (2021: 4.5 eurocents per share)   1,265    1,260 

 

3Contingent liabilities and legal proceedings

 

Vodafone Idea

 

As part of the agreement to merge Vodafone India and Idea Cellular in 2017, the parties agreed a mechanism for payments between the Group and Vodafone Idea Limited (‘VIL’) pursuant to the difference between the crystallisation of certain identified contingent liabilities in relation to legal, regulatory, tax and other matters, and refunds relating to Vodafone India and Idea Cellular. Cash payments or cash receipts relating to these matters must have been made or received by VIL before any amount becomes due from or owed to the Group. Any future payments by the Group to VIL as a result of this agreement would only be made after satisfaction of this and other contractual conditions.

 

The Group’s potential exposure under this mechanism is capped at INR 64 billion (€743 million) following payments made under this mechanism from Vodafone to VIL, in the year ended 31 March 2021, totalling INR 19 billion (€235 million). On 15 September 2021, the Government of India announced a relief package and a series of reforms designed to improve the liquidity and financial health of the telecom sector. The reforms include a four-year moratorium on spectrum and AGR payments and the option to convert payments due on spectrum and AGR payments to equity at the end of the moratorium period, with interest on due amounts being convertible during the moratorium period; VIL elected to accept the options in October and November 2021, respectively.

 

VIL raised INR 45 billion (€524 million) via the issue of new equity in March 2022, most of which was used to settle amounts due to Indus. VIL remains in need of additional liquidity support from its lenders and intends to raise additional equity capital. There are significant uncertainties in relation to VIL’s ability to make payments in relation to any remaining liabilities covered by the mechanism and no further cash payments are considered probable from the Group as at 31 March 2022. The carrying value of the Group’s investment in VIL is €nil and the Group is recording no further share of losses in respect of VIL. The Group’s potential exposure to liabilities within VIL is capped by the mechanism described above; consequently, contingent liabilities arising from litigation in India concerning operations of Vodafone India are not reported.

 

Notes to the condensed consolidated financial statements

  

Indus Towers

 

VIL’s ability to satisfy certain payment obligations under its Master Services Agreements with Indus Towers (the ‘MSAs’) is uncertain and depends on a number of factors including its ability to raise additional funding. Under the terms of the Indus and Bharti Infratel merger in November 2020, a security package was agreed for the benefit of the newly created merged entity, Indus Towers, which could be invoked in the event that VIL was unable to make MSA payments. The security package included the following elements:

 

-A prepayment in cash of INR 24 billion (€279 million) by VIL to Indus Towers in respect of its payment obligations that are undisputed, due and payable under the MSAs after the merger closing. The prepayment was fully utilised during the year to 31 March 2022;

 

-A primary pledge over 190.7 million shares owned by Vodafone Group in Indus Towers having a value of INR 47 billion (€544 million) as at 31 March 2021; and

 

-A secondary pledge over shares owned by Vodafone Group in Indus Towers (ranking behind Vodafone’s existing lenders for the outstanding bank borrowings of €1.4 billion as at 31 March 2022 secured against Indian assets utilised to fund Vodafone’s contribution to the VIL rights issue in 2019) (‘the Bank Borrowings’) with a maximum liability cap of INR 42.5 billion (€504 million).

 

In the event of non-payment of relevant MSA obligations by VIL, Indus Towers would have recourse to the primary pledge shares and, after repayment of the Bank Borrowings in full, any secondary pledged shares, up to the value of the liability cap.

 

During February and March 2022, the Group announced the disposal of the 190.7 million shares that were subject to the primary pledge in two transactions for a combined INR 38.1 billion (€452 million). The Group invested INR 33.7 billion (€393 million) of the proceeds by subscribing to newly issued VIL equity, which VIL immediately used to partially settle outstanding MSA obligations to Indus Towers. This transaction resulted in an equivalent partial release of the primary pledge, with the remaining INR 4.4 billion (€52 million) proceeds of the share disposal remaining secured for further utilisation by Indus Towers.

 

Indus Towers has recourse against the secondary pledge to the maximum liability cap, from any proceeds remaining after the settlement of the Bank Borrowings.

 

Legal proceedings

 

The Group is currently involved in a number of legal proceedings, including inquiries from, or discussions with, government authorities that are incidental to its operations.

 

Legal proceedings where the Group considers that the likelihood of material future outflows of cash or other resources is more than remote are disclosed below. Where the Group assesses that it is probable that the outcome of legal proceedings will result in a financial outflow, and a reliable estimate can be made of the amount of that obligation, a provision is recognised for these amounts.

 

In all cases, determining the probability of successfully defending a claim against the Group involves the application of judgement as the outcome is inherently uncertain. The determination of the value of any future outflows of cash or other resources, and the timing of such outflows, involves the use of estimates. The costs incurred in complex legal proceedings, regardless of outcome, can be significant.

 

The Group is not involved in any material proceedings in which any of the Group’s Directors, members of senior management or affiliates are either a party adverse to the Group or have a material interest adverse to the Group.

 

Indian tax cases

 

In January 2012, the Supreme Court of India found against the Indian tax authority and in favour of Vodafone International Holdings BV (‘VIHBV’) in proceedings brought after the Indian tax authority alleged potential liability under the Income Tax Act 1961 for the failure by VIHBV to deduct withholding tax from consideration paid to the Hutchison Telecommunications International Limited group (‘HTIL’) in connection with its 2007 disposal to VIHBV of its interests in a wholly-owned Cayman Island incorporated subsidiary that indirectly held interests in Vodafone India Limited (‘Vodafone India’).

 

Notes to the condensed consolidated financial statements

 

The Finance Act 2012 of India, which amended various provisions of the Income Tax Act 1961 with retrospective effect, contained provisions intended to tax any gain on transfer of shares in a non-Indian company, which derives substantial value from underlying Indian assets, such as VIHBV’s transaction with HTIL in 2007. Further, it sought to subject a purchaser, such as VIHBV, to a retrospective obligation to withhold tax. On 3 January 2013, VIHBV received a letter from the Indian tax authority reminding it of the tax demand raised prior to the Supreme Court of India’s judgement and updating the interest element of that demand to a total amount of INR142 billion, which included principal and interest as calculated by the Indian tax authority but did not include penalties. On 12 February 2016, VIHBV received a notice dated 4 February 2016 of an outstanding tax demand of INR221 billion (plus interest). On 29 September 2017, VIHBV received an electronically generated demand in respect of alleged principal, interest and penalties in the amount of INR190.7 billion.

 

VIHBV initiated arbitration proceedings under the Netherlands-India Bilateral Investment Treaty (‘Dutch BIT’) on 17 April 2014. In September 2020, the arbitration tribunal issued its award unanimously ruling in Vodafone’s favour. The Indian Government applied to set aside the award primarily on jurisdictional grounds. The proceedings have been transferred to the Singapore International Commercial Court (‘SICC’).

 

Separately, on 24 January 2017, Vodafone Group Plc and Vodafone Consolidated Holdings Limited formally commenced arbitration with the Indian Government under the United Kingdom-India Bilateral Investment Treaty (‘UK BIT’). Although relating to the same underlying facts as the claim under the Dutch BIT, the UK BIT claim is a separate and distinct claim under a different treaty and includes independent claims relating to disputes between the Indian tax authority and Vodafone India Services Private Limited (‘VISPL’) (see below). In 2020, following attempts by the Indian Government to obtain a court injunction preventing Vodafone from progressing the UK BIT arbitration, the Delhi High Court ordered that Vodafone shall proceed with the UK BIT arbitration only if the award already published under the Dutch BIT is set aside.

 

In August 2021 the Indian Parliament passed new legislation which affects the retrospective effect of the Finance Act 2012. The impact of this legislation on the Dutch and UK BIT proceedings, in particular whether the Indian Government will withdraw its challenge to the arbitration award in the Dutch BIT, is unknown as of the date of this report. The SICC granted a stay in the Dutch BIT proceedings to 15 June 2022.

 

VIHBV and Vodafone Group Plc will continue to defend vigorously any allegation that VIHBV or Vodafone India is liable to pay tax in connection with the transaction with HTIL. Based on the facts and circumstances of this matter, including the outcome of legal proceedings to date, the Group considers that it is more likely that not that no present obligation exists at 31 March 2022.

 

VISPL tax claims

 

VISPL is involved in a number of tax cases. The total value of the claims is approximately €500 million plus interest, and penalties of up to 300% of the principal.

 

Of the individual tax claims, the most significant is in the amount of approximately €254 million (plus interest of €614 million), which VISPL has been assessed as owing in respect of (i) a transfer pricing margin charged for the international call centre of HTIL prior to the 2007 transaction with Vodafone for HTIL assets in India; (ii) the sale of the international call centre by VISPL to HTIL; and (iii) the acquisition of and/or the alleged transfer of options held by VISPL in Vodafone India. A stay of the tax demand on a deposit of £20 million and a corporate guarantee by VIHBV for the balance of tax assessed are in place. On 8 October 2015, the Bombay High Court ruled in favour of Vodafone in relation to the options and the call centre sale. The Indian Tax Authority has appealed to the Supreme Court of India. The appeal hearing has been adjourned indefinitely.

 

While there is some uncertainty as to the outcome of the tax cases involving VISPL, the Group believes it has valid defences and does not consider it probable that a financial outflow will be required to settle these cases.

 

Other cases in the Group

 

Spain and UK: TOT v Vodafone Group Plc, VGSL, and Vodafone UK

 

The Group has been defending cases brought against it in Spain and the UK by TOT Power Control and Top Optimized Technologies (jointly ‘TOT’) alleging breach of confidentiality and patent infringement. In November 2021 TOT withdrew all of its claims against the Group in Spain and the UK as part of an agreed settlement.

 

Further background relating to these claims is provided in the Group’s Annual Report for the financial year ended 31 March 2021.

 

Notes to the condensed consolidated financial statements

 

Germany: Kabel Deutschland takeover - class actions

 

The German courts have been determining the adequacy of the mandatory cash offer made to minority shareholders in Vodafone’s takeover of Kabel Deutschland. Hearings took place in May 2019 and a decision was delivered in November 2019 in Vodafone’s favour, rejecting all claims by minority shareholders. A number of shareholders appealed which was rejected by the court in December 2021. Several minority shareholders have filed a further appeal before the Federal Court of Justice. The appeal process is ongoing. While the outcome is uncertain, the Group believes it has valid defences and that the outcome of the appeal will be favourable to Vodafone.

 

Italy: Iliad v Vodafone Italy

 

In July 2019, Iliad filed a claim for €500 million against Vodafone Italy in the Civil Court of Milan. The claim alleges anti-competitive behaviour in relation to portability and certain advertising campaigns by Vodafone Italy. Preliminary hearings have taken place, including one at which the Court rejected Iliad’s application for a cease and desist order against alleged misleading advertising by Vodafone. The main hearing on the merits of the claim took place on 8 June 2021 and we are waiting to receive the judgement.

 

The Group is currently unable to estimate any possible loss in this claim in the event of an adverse judgement but while the outcome is uncertain, the Group believes it has valid defences and that it is probable that no present obligation exists.

 

Greece: Papistas Holdings SA, Mobile Trade Stores (formerly Papistas SA) and Athanasios and Loukia Papistas v Vodafone Greece

 

In October 2019, Mr. and Mrs. Papistas, and companies owned or controlled by them, filed several new claims against Vodafone Greece with a total value of approximately €330 million for purported damage caused by the alleged abuse of dominance and wrongful termination of a franchise arrangement with a Papistas company. Lawsuits which the Papistas claimants had previously brought against Vodafone Group Plc and certain Directors and officers of Vodafone were withdrawn. Vodafone Greece filed a counter claim and all claims were heard in February 2020. All of the Papistas claims were rejected by the Greek Court because the stamp duty payments required to have the merits of the case considered had not been made. Vodafone Greece’s counter claim was also rejected. The Papistas claimants and Vodafone Greece have each filed appeals and, subject to the Papistas claimants paying the requisite stamp duty, the hearing on the merits of these appeals will take place in early 2023.

 

The amount claimed in these lawsuits is substantial and, if the claimants are successful, the total potential liability could be material. However, we are continuing vigorously to defend the claims and based on the progress of the litigation so far the Group believes that it is highly unlikely that there will be an adverse ruling for the Group. On this basis, the Group does not expect the outcome of these claims to have a material financial impact.

 

UK: Phones 4U in Administration v Vodafone Limited and Vodafone Group Plc and Others

 

In December 2018, the administrators of former UK indirect seller, Phones 4U, sued the three main UK mobile network operators (‘MNOs’), including Vodafone, and their parent companies. The administrators allege collusion between the MNOs to pull their business from Phones 4U thereby causing its collapse. Vodafone and the other defendants filed their defences in April 2019 and the Administrators filed their replies in October 2019. Disclosure has taken place and witness statements were filed in December 2021. The judge has also ordered that there should be a split trial between liability and damages. The first trial started in May 2022.

 

Taking into account all available evidence, the Group assesses it to be more likely than not that a present obligation does not exist and that the allegations of collusion are completely without merit; the Group is vigorously defending the claim. The value of the claim is not pleaded but we understand it to be the total value of the business, allegedly equivalent to approximately £1 billion with the addition of alleged exemplary damages. Vodafone’s alleged share of the liability is also not pleaded. The Group is not able to estimate any possible loss in the event of an adverse judgment.

 

Non-GAAP measures

 

In the discussion of the Group’s reported operating results, non-GAAP measures are presented to provide readers with additional financial information that is regularly reviewed by management. This additional information presented is not uniformly defined by all companies including those in the Group’s industry. Accordingly, it may not be comparable with similarly-titled measures and disclosures by other companies. Additionally, certain information presented is derived from amounts calculated in accordance with IFRS but is not itself a measure defined under GAAP. Such measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure.

 

The non-GAAP measures discussed in this document are listed below.

 

Non-GAAP measure  Defined on
page
  Closest equivalent GAAP measure  Reconciled on page
Performance metrics         
Adjusted EBITDAaL  Page 32  Operating profit  Page 35
Organic Adjusted EBITDAaL growth  Page 32  Not applicable  Not applicable
Organic percentage point change in Adjusted EBITDAaL margin  Page 32  Not applicable  Not applicable
Organic revenue growth  Page 32  Revenue  Pages 33 and 34
Organic service revenue growth  Page 32  Service revenue  Pages 33 and 34
Organic mobile service revenue growth  Page 32  Service revenue  Pages 33 and 34
Organic fixed service revenue growth  Page 32  Service revenue  Pages 33 and 34
Organic Vodafone Business service revenue growth  Page 32  Service revenue  Pages 33 and 34
Organic financial services revenue growth in South Africa  Page 32  Service revenue  Pages 33 and 34
Organic retail service revenue growth in Germany  Page 32  Service revenue  Pages 33 and 34
Other metrics         
Adjusted profit attributable to owners of the parent  Page 35  Profit attributable to owners of the parent  Page 35
Adjusted basic earnings per share  Page 35  Basic earnings per share  Page 36
Cash flow, funding and capital allocation metrics         
Free cash flow  Page 36  Inflow from operating activities  Page 37
Adjusted free cash flow  Page 36  Inflow from operating activities  Pages 18 and 37
Gross debt  Page 36  Borrowings  Page 37
Net debt  Page 36  Borrowings less cash and cash equivalents  Page 37
Pre-tax ROCE (controlled)  Page 38  ROCE calculated using GAAP measures  Pages 38 and 39
Post-tax ROCE (controlled and associates/joint ventures)  Page 38  ROCE calculated using GAAP measures  Pages 38 and 39
Financing and Taxation metrics         
Adjusted net financing costs  Page 40  Net financing costs  Page 16
Adjusted profit before taxation  Page 40  Profit before taxation  Page 40
Adjusted income tax expense  Page 40  Income tax expense  Page 40
Adjusted effective tax rate  Page 40  Income tax expense  Page 40
Adjusted share of results of equity accounted associates and joint ventures  Page 40  Share of results of equity accounted associates and joint ventures  Page 41
Adjusted share of results of equity accounted associates and joint ventures used in post-tax ROCE  Page 40  Share of results of equity accounted associates and joint ventures  Page 41

 

Non-GAAP measures

 

Performance metrics

 

Non-GAAP measure Purpose Definition

Adjusted EBITDAaL

Adjusted EBITDAaL is used in conjunction with financial measures such as operating profit to assess our operating performance and profitability.

It is a key external metric used by the investor community to assess performance of our operations.

It is our segment performance measure in accordance with IFRS 8 (Operating Segments).

 

Adjusted EBITDAaL is operating profit after depreciation on lease-related right of use assets and interest on leases but excluding depreciation, amortisation and gains/losses on disposal of owned assets and excluding share of results of equity accounted associates and joint ventures, impairment losses, restructuring costs arising from discrete restructuring plans, other income and expense and significant items that are not considered by management to be reflective of the underlying performance of the Group.

 

Adjusted EBITDAaL margin is Adjusted EBITDAaL divided by Revenue.

 

Organic growth

 

All amounts marked with an ’*’ in this document represent organic growth which presents performance on a comparable basis, excluding the impact of foreign exchange rates, mergers and acquisitions and other adjustments to improve the comparability of results between periods. When calculating organic growth, the FY21 results for Vantage Towers and relevant operating entities have been adjusted to reflect a full year of operation on a pro forma basis in order to be comparable to FY22.

 

Organic growth is calculated for revenue and profitability metrics, as follows:

 

-Adjusted EBITDAaL;

-Percentage point change in Adjusted EBITDAaL margin;

-Revenue

-Service revenue;

-Mobile service revenue;

-Fixed service revenue;

-Vodafone Business service revenue;

-Financial services revenue in South Africa; and

-Retail service revenue in Germany.

 

Whilst organic growth is not intended to be a substitute for reported growth, nor is it superior to reported growth, we believe that the measure provides useful and necessary information to investors and other interested parties for the following reasons:

 

-It provides additional information on underlying growth of the business without the effect of certain factors unrelated to its operating performance;

-It is used for internal performance analysis; and

-It facilitates comparability of underlying growth with other companies (although the term ‘organic’ is not a defined term under GAAP and may not, therefore, be comparable with similarly-titled measures reported by other companies).

 

We have not provided a comparative in respect of organic growth rates as the current rates describe the change between the beginning and end of the current period, with such changes being explained by the commentary in this document. If comparatives were provided, significant sections of the commentary for prior periods would also need to be included, reducing the usefulness and transparency of this document.

 

Non-GAAP measures

 

Year ended 31 March 2022

 

  FY22   FY21   Reported
growth
   M&A and
Other
   Foreign
exchange
   Organic
growth*
 
   €m   €m   %   pps   pps   % 
Service revenue                              
Germany   11,616    11,520    0.8    0.3        1.1 
Mobile service revenue   5,124    5,056    1.3    0.5        1.8 
Fixed service revenue   6,492    6,464    0.4    0.1        0.5 
Italy   4,379    4,458    (1.8)   -        (1.8)
Mobile service revenue   3,141    3,244    (3.2)           (3.2)
Fixed service revenue   1,238    1,214    2.0            2.0 
UK   5,154    4,848    6.3        (5.0)   1.3 
Mobile service revenue   3,697    3,428    7.8        (5.0)   2.8 
Fixed service revenue   1,457    1,420    2.6        (4.9)   (2.3)
Spain   3,714    3,788    (2.0)           (2.0)
Other Europe   5,001    4,859    2.9    0.7    (0.6)   3.0 
Vodacom   4,635    4,083    13.5        (8.9)   4.6 
Other Markets   3,420    3,312    3.3        16.1    19.4 
Vantage Towers                        
Common Functions   522    470                     
Eliminations   (238)   (197)                    
Total service revenue   38,203    37,141    2.9    0.2    (0.5)   2.6 
Other revenue   7,377    6,668                     
Revenue   45,580    43,809    4.0    -    (0.5)   3.5 
                               
Other growth metrics                              
Vodafone Business - Service revenue   10,316    10,076    2.4    (0.4)   (1.2)