Profit down for Vodafone in FY12, despite emerging markets helping to boost revenue

22 May 2012

Britain’s Vodafone Group has released its financial results for the twelve months ended 31 March 2012, revealing a 1.2% increase in group revenue, as operations in emerging markets helped offset lower turnover at a number of its European units. For the period under review, Vodafone Group generated total turnover of GBP46.417 billion (USD74.09 billion), up from GBP45.884 billion in the previous financial year, with group service revenues totalling GBP42.885 billion, up just 0.3% from GBP42.738 billion a year earlier. The company noted that the small growth in service revenues was, in part, a result of its focus on data services, with turnover from such services rising by 22.2% on an organic basis to reach GBP6.233 billion. Moreover, Vodafone highlighted significant revenue increases at a number of its subsidiaries in emerging markets, with Turkey, India and South Africa recording organic turnover increases of 25.1%, 19.5% and 7.1% respectively. Those regions where the group saw declines in turnover, meanwhile, included Italy, Greece, Portugal and Spain, with the latter reporting a 7.2% dip in sales compared to FY2011.

Group earnings before interest, tax, depreciation and amortisation (EBITDA) for the twelve-month period stood at GBP14.475 billion, down from GBP14.670 billion, while the group’s EBITDA margin fell by 0.8 percentage points, which Vodafone said was the ‘result of continuing high levels of commercial costs associated with the migration to smartphones, and the difficult trading environment in Spain in particular’. Group adjusted operating profit for FY2012 was GBP11.532 billion, representing a 2.4% year-on-year decline, with the drop attributed to the sale of the British company’s interest in SFR in June 2011. Vodafone noted that it had recognised net gains totalling GBP3.5 billion on the disposal of its interests in both SFR and Polkomtel (it sold its 24.4% holding in the latter in November 2011), while the company also said that in FY2012 it had recorded impairment charges of GBP4.0 billion relating to its Italian, Spanish, Portuguese and Greek units, primarily due to ‘lower projected cash flows within business plans and an increase in discount rates, resulting from adverse changes in the economic environment’.

Looking ahead, for the 2013 financial year Vodafone Group has confirmed that it expects to see growth on an underlying basis in adjusted operating profit and stability in free cash flow, with the former forecast at between GBP11.1 billion and GBP11.9 billion for the year. Free cash flow, meanwhile, is expected to be in the range of GBP5.3 billion to GBP5.8 billion.

In operational terms, at the end of March 2012 Vodafone Group’s total subscriber base stood at 404.69 million, up from 347.71 million a year earlier.

Commenting on the results, Vodafone Group CEO Vittorio Colao said: ‘Our focus on the key growth areas of data, emerging markets and enterprise is positioning us well in a difficult macroeconomic environment. Our commercial performance and our ability to leverage scale continue to be strong, enabling us to gain or hold market share in most of our key markets, and reduce the rate of margin decline.’

United Kingdom, Vodafone Group