Vodafone Group reported revenues for the year to March up 3.0 percent to EUR 45.0 billion, helped by its takeover of Liberty Global's cable assets and underlying service revenue growth of 0.8 percent to EUR 37.9 billion. Adjusted EBITDA rose 2.6 percent on an organic basis to EUR 14.9 billion, in line with its outlook, and Vodafone said the result is likely to be flat to slightly lower in the new year.
The company's bottom line was a loss of EUR 455 million, compared to a loss of EUR 7.6 billion a year earlier. This included a profit on the sales of Vodafone New Zealand and Vodafone Malta (EUR 1.2 billion) and a gain on the formation of the Inwit towers venture in Italy, offset by losses at Vodafone Idea (EUR 2.5 billion), which has been written down to a value of zero. Further, impairments totalling EUR 1.7 billion in Spain, Ireland, Romania and Automotive and mark-to-market losses of EUR 1.1 billion were recognised.
The ongoing cost reductions helped the company deliver a fifth consecutive year of adjusted EBITDA margin expansion, increasing to 33.1 percent from 28.3 percent five years ago. After EUR 0.8 million in cost savings in achieved in FY19, Vodafone plans to complete the latest programme this year with another EUR 0.4 billion. In addition, the company announced a new plan to save EUR 1 billion in net operating costs in FY21-23, as well as reduce the EUR 2.5 billion in commissions paid to third-party sellers each year through a greater focus on digital sales. In the past year, it reduced the store footprint already by 7 percent.
Outlook: lower EBITDA, cash flow
Given the uncertain economic outlook, the company said it would not provide adjusted EBITDA guidance for the new year. Based on the current prevailing assessments of the global macroeconomic outlook, the result may be flat to slightly down, compared to a rebased FY20 baseline of EUR 14.5 billion, Vodafone said.
The company expects free cash flow, excluding spectrum, to remain relatively resilient and reach at least EUR 5 billion this year. In the past year, the figure rose 4.7 percent to EUR 5.7 billion, while net debt was up 56 percent to EUR 42.2 billion, or 2.8x adjusted EBITDA. Vodafone maintained its annual dividend at 9 cents a share.
The company said it was on track to complete the full legal separation of its European towers business this year. Vodafone expects to seek opportunities to monetise the business in early calendar 2021.
Quarterly service revenue: -0.4% in Europe, +7.9% in RoW
In the last quarter of the fiscal year, Vodafone reported organic revenue growth of 0.8 percent, including 1.6 percent growth in service revenue. The operator managed to slow the decline in organic service revenue in Europe to 0.4 percent, compared to a fall of 1.4 percent in the previous quarter, thanks to an improved performance in most markets. In the rest of the world, service revenue was up 7.9 percent on an organic basis in Q4, slowing from 9.1 percent in the previous quarter.
The operator said the Covid-19 pandemic had a limited impact on results, with countries such as Germany proving more resilient while Spain showed a weaker performance. In April, roaming in Europe fell by 65-75 percent, mobile data increased by 15 percent and fixed line usage was up by as much as 70 percent in some of markets. Customer churn is down by 4-5 percentage points, and the rates of new gross consumer additions are around 40 percent lower. In addition, some SMEs are requesting deferrals for payments and certain enterprise customers are seeking to delay projects.
