Vodafone Group reported underlying EBITDA up 3.1 percent to EUR 14.14 billion in its fiscal year to March, in line with its guidance. The company said low single-digit growth should continue in the new year, supported by a continued focus on costs. The company reduced its dividend to 9 cents a share from 15.07 cents the previous year, saying it plans to focus more on debt reduction.
The bottom line was a loss of EUR 7.64 billion for the year versus a profit of EUR 2.79 billion a year earlier, due to the loss booked on Vodafone India earlier in the year due to its merger with Idea Cellular as well as impairment charges in Spain and Romania. Group revenue fell 6.2 percent to EUR 43.67 billion, while organic service revenue rose 0.3 percent, excluding currency effects and changes in scope.
Q4 organic service revenue down 0.6%
Vodafone said revenues suffered from increased competitive pressure in Spain and Italy as well as headwinds in South Africa. This was offset by growth in the fixed market and mobile data demand in emerging markets. Organic service revenue turned negative in the fourth quarter to March, down 0.6 percent compared to 0.1 percent growth in the previous quarter.
The weaker revenue was offset by EUR 400 million in cost reductions, and the company targets another EUR 200 million in annual savings in the medium term. In addition, it continues to work on tower sales in the Netherlands, UK, Spain and Italy.
Free cash flow excluding spectrum costs was little changed year-on-year at GBP 5.44 billion, which Vodafone said was in line with its guidance. It expects cash flow of at least EUR 5.4 billion in the new year, supported by a stronger second half of the year and the Liberty Global takeover closing in July. Excluding the takeover, adjusted EBITDA is estimated at EUR 13.8- 14.2 billion for the year, including a negative impact of EUR 400 million from the change in accounting standards.
Digital transformation
CEO Nick Read said the decision to "rebase" the dividend was due to a need to focus on the company's transformation, and it pay a "progressive" dividend going forward. "The Group is at a key point of transformation – deepening customer engagement, accelerating digital transformation, radically simplifying our operations, generating better returns from our infrastructure assets and continuing to optimise our portfolio," he said.
The lower dividend will help it reduce debt and move to the lower end of its leverage target range of 2.5-3.0x in the next few years. Net debt totaled EUR 27.0 billion at the end of March, down from EUR 29.6 billion a year earlier. The company also announced separately an agreement to sell Vodafone New Zealand for EUR 2.1 billion to a group of investors.
The transformation includes an acceleration of the 'digital first' strategy in the past year, in order to simplify customer acquisition, service and propositions. Vodafone said its low-cost brands ‘Vodafone Bit’ in Spain, Ho in Italy and Voxi in the UK were helping it compete more effectively as well as reduce costs.
Along with more tailored offerings for specific markets and its growing number of fixed-mobile offers, the focus is on reducing churn and increasing revenue per customer. Vodafone said this strategy was successful in the past year, with consumer mobile churn down 1.0 percent point in the second half of the year as well another 1 million fixed broadband customers added. Europe Consumer service revenues were still down 1.1 percent on an organic basis over the year, as fixed growth of 2.6 percent offset a mobile decline on 2.4 percent.
