The CEO of Vodafone Group calls the telco’s 2023 financial performance “not good enough” and makes changes suggested

Vodafone Group plc’s revenue increased by 0.3% to €45.7 billion driven by growth in Africa and higher equipment sales.

It was, however, offset by lower European service revenue and adverse exchange rate movements.

Group chief executive Margherita della Valle has described the performance as “not good enough” and hinted at making some changes to make the telco competitive.

“Today, I am announcing my plans for Vodafone. Our performance has not been good enough. To consistently deliver, Vodafone must change”, she said.

“My priorities are customers, simplicity and growth”, della Vale noted, adding: “We will simplify our organisation, cutting out complexity to regain our competitiveness”.

Also, she said: “We will reallocate resources to deliver the quality service our customers expect and drive further growth from the unique position of Vodafone Business.”

Vodafone Group plc’s full-year 2023 performance higlights:

FY23 performance slowdown in line with expectations

· Germany remains under pressure with -1.6% service revenue growth and -6.1% adjusted EBITDAaL growth

· Good performance in Vodafone Business with 2.6% service revenue growth

· Group revenue increased by 0.3% to €45.7 billion driven by growth in Africa and higher equipment sales, offset by lower European service revenue and adverse exchange rate movements

· Adjusted EBITDAaL declined by 1.3% to €14.7 billion due to higher energy costs, and commercial underperformance in Germany

· Gain on disposal of Vantage Towers supporting significant increase in operating profit and basic EPS

· Adjusted free cash flow of €4.8 billion, reflecting lower adjusted EBITDAaL and tax phasing

· Significant reduction in net debt to €33.4 billion, proforma net debt to adjusted EBITDAaL improved to 2.5x

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

Financial performance

Total revenue increased by 0.3% to €45.7 billion (FY22: €45.6 billion) driven by growth in Africa and higher equipment sales, offset by lower European service revenue and adverse exchange rate movements.

Adjusted EBITDAaL declined by 1.3% to €14.7 billion (FY22: €15.2 billion), with revenue growth offset by higher energy costs and commercial underperformance in Germany. The adjusted EBITDAaL margin was 1.4 percentage points lower year-on-year at 32.1%.

Operating profit increased to €14.3 billion and the Group made a profit for the period of €12.3 billion (FY22: €2.8 billion), largely reflecting a gain on disposal of Vantage Towers.

Basic earnings per share was 42.77 eurocents, compared to basic earnings per share of 7.71 eurocents in the prior year.

Cash flow, funding & capital allocation

Cash inflow from operating activities were broadly stable year-on-year at €18.1 billion.

Free cash flow was an inflow of €1.4 billion (FY22: inflow of €3.3 billion) partly reflecting a lower adjusted EBITDAaL, higher licence and spectrum payments and tax phasing. Adjusted free cash flow was €4.8 billion (FY22: €5.4 billion).

Net debt decreased by €8.2 billion to €33.4 billion (€41.6 billion as at 31 March 2022). This was driven by free cash inflow of €1.4 billion, acquisitions and disposals of €8.7 billion, partially offset by equity dividends of €2.5 billion, and share buybacks of €1.9 billion (used to offset dilution linked to the conversion of certain mandatory convertible bonds).

Other movements in net debt includes €1.7 billion relating to the settlement of 5G spectrum in Italy previously included in net debt.

Current liquidity, which includes cash and equivalents and short-term investments, is €16.0 billion (€12.3 billion as at 31 March 2022). This includes €4.6 billion of net collateral which has been posted to Vodafone from counterparties as a result of positive mark-to-market movements on derivative instruments (€2.2 billion as at 31 March 2022).

Total dividends per share are 9.0 eurocents (FY22: 9.0 eurocents) including a final dividend per share of 4.5 cents. The ex-dividend date for the final dividend is 8 June 2023 for ordinary shareholders, the record date is 9 June 2023 and the dividend is payable on 4 August 2023.

Outlook

Performance against FY23 guidance

In May 2022, we set out guidance for FY23 for Group adjusted EBITDAaL and adjusted free cash flow. In November 2022, this was updated to reflect the worsening global macroeconomic climate, with higher energy costs and broader inflation in particular.

For FY23 we reported adjusted EBITDAaL and adjusted free cash flow of €14.7 billion and €4.8 billion. This included adverse foreign exchange rate movements versus those used for the basis of guidance and other items which in aggregate impacted adjusted EBITDAaL by €0.2 billion and adjusted free cash flow by €0.5 billion.