Vodafone Group reports 3.4% year-on-year drop in organic revenues in FY 2014

20 May 2014

UK-based Vodafone Group recorded a 1.9% year-on-year decline in group revenues on a reported basis for the twelve months ended 31 March 2014, while turnover for the year fell 3.5% on an organic basis to GBP43.616 billion (USD72.5 billion). Group organic service revenue meanwhile fell by 4.3% against FY 2013 (down 2.4% on a reported basis) to GBP39.529 billion, with growth in the Africa, Middle East and Pacific (AMAP) region failing to offset decline in Europe. Indeed, service revenues in AMAP rose by 6.1% in FY 2014 on an organic basis to GBP13.087 billion, with Vodafone highlighting the performance of units in emerging markets such as India (revenues up 13.0% y-o-y) and Turkey (up 7.9% y-o-y). By contrast, European service revenues tumbled by 9.1% against the previous year on an organic basis to GBP25.977 billion, while excluding the impact of regulated mobile termination rate (MTR) cuts the company said service revenues was down 6.5%.

Group earnings before interest, tax, depreciation and amortisation (EBITDA) stood at GBP12.831 billion in the period under review, representing a 7.4% drop against the previous fiscal year, while the group EBITDA margin fell 1.3 percentage points on an organic basis, with Vodafone noting that ‘steep revenue declines in Europe [had] offset improving margins in AMAP, notably in India and Australia’. Group adjusted operating profit also declined, by 9.4% year-on-year, to GBP7.874 billion, largely reflecting the lower EBITDA, and while profit for the financial year actually stood at GBP59.420 billion, Vodafone noted that this included a GBP45.0 billion profit arising on the disposal of its US group, whose principal asset was its 45% stake in Verizon Wireless, GBP1.7 billion of dividends received since the disposal and the post-tax profits of the Group’s share of Verizon Wireless and entities in the US group sold to Verizon.

Capital expenditures in FY 2014 meanwhile totalled GBP7.102 billion, up 13.3% from the GBP6.266 billion invested in the previous year, with the increase driven by the inclusion of CWW for twelve months, the inclusion of KDG from October 2013, the commencement of a fibre network roll-out in Spain, and initial Project Spring investments in Germany and India. Further, Vodafone confirmed that over the twelve-month period it had acquired and renewed spectrum for GBP2.2 billion in India, Romania, New Zealand and the Czech Republic, with a cash cost of GBP0.9 billion during the year.

In operational terms, having launched LTE in all of its ‘major European markets’, as well as South Africa, Australia and New Zealand, Vodafone Group revealed that it has so far signed up more than 4.7 million 4G customers across 14 markets. Moreover, the company said it was seeing ‘very healthy data usage’ from these subscribers, claiming that early experience had recorded customers using roughly twice as much data compared to 3G data usage, driven principally by video streaming. Notably, by the last quarter of 2013 18% of data traffic carried in Europe was 4G, Vodafone noted. Total wireless subscriber numbers for the group meanwhile stood at 433.681 million, up from 403.875 million a year earlier. Group-wide fixed broadband customers numbered 9.333 million, meanwhile, representing a more than 40% year-on-year increase.

With regards to the company’s prospects, meanwhile, Vodafone Group Vittorio Colao was cited as saying: ‘I am confident about the future of the business given the growth prospects in data, emerging markets, enterprise and unified communications. We have commenced our Project Spring two-year investment programme which will accelerate our plans to establish stronger network and service differentiation for our customers. I expect the first signs of this to become evident later this year, with wider 4G coverage in Europe and 3G coverage in emerging markets, improved network performance and increased customer advocacy. While cash flow will be depressed during this investment phase, our intention to continue to grow dividends per share annually demonstrates our confidence in strong future cash flow generation.’

United Kingdom, Vodafone Group