Vodafone Group Plc — FY2023 Form 20-F
Period and context. This is an annual report, not a standalone 2022 Q4 filing. It covers the fiscal year ended 31 March 2023, compares primarily with the year ended 31 March 2022, and reports under IFRS in euros. Vodafone is a telecommunications group operating in Europe and Africa.
Financial performance
| Metric | FY2023 | FY2022 | Change or context |
|---|---|---|---|
| Revenue | €45.706bn | €45.580bn | +0.3% reported |
| Service revenue | €37.969bn | €38.203bn | -0.6% reported; +2.2% organic |
| Operating profit | €14.296bn | €5.813bn | Increase largely reflects disposal gains |
| Profit for the year | €12.335bn | €2.773bn | Includes material disposal gains |
| Basic EPS | €0.4277 | €0.0771 | Up year on year, mainly due to disposals |
| Adjusted EBITDAaL | €14.665bn | €15.208bn | Down about 3.6% reported |
| Cash from operating activities | €18.054bn | €18.081bn | Broadly flat |
| Net debt, borrowings less cash | €54.685bn | €62.596bn | Reduced by €7.911bn |
FY2023 operating profit includes an €8.607bn gain on the Vantage Towers transaction and a €689m gain on Vodafone Ghana, partly offset by a €69m loss on Vodafone Hungary. These items materially boost reported profit and EPS and should not be treated as recurring operating performance. Adjusted net financing costs rose to €1.879bn from €1.682bn. The effective tax rate was 3.8%, affected by largely tax-exempt disposal gains and a Turkish hyperinflation-related tax credit.
Cash and cash equivalents were €11.705bn at year-end; short-term investments brought cash and investments to about €16.0bn. The Group reported undrawn revolving facilities of approximately €7.7bn equivalent. Total borrowings were €66.390bn. Cash operating flow was steady, while investing outflow fell sharply to €379m from €6.868bn, principally because disposal proceeds offset investment spending. Cash purchases included €6.250bn of property, plant and equipment and €2.963bn of intangible assets.
Material changes and operating trends
- Organic service revenue grew 2.2%, but growth excluding Turkey was 1.0%. Turkey’s 47.6% service-revenue growth reflected inflation and repricing; currency depreciation meant reported revenue did not reflect that growth.
- Performance was uneven across major markets. Organic service revenue declined 1.6% in Germany, 2.9% in Italy and 5.4% in Spain; it grew 5.6% in the UK, 2.8% in Other Europe and 3.5% at Vodacom.
- Management cited higher energy and other inflationary costs and German commercial underperformance. European cost-efficiency actions delivered a further €0.2bn of savings, but Group adjusted EBITDAaL declined.
- Vodafone completed the sale of Hungary, the sale of its Ghana interest and a co-control transaction for Vantage Towers. It retained a 64.2% interest in Oak Holdings, the partnership owning 89.3% of Vantage Towers. Vodafone also transferred Vodafone Egypt to Vodacom.
Outlook, risks and unusual items
Management said performance was below Vodafone’s potential and announced a roadmap focused on customers, simplicity and growth. Plans include reallocating investment toward customer experience, reducing 11,000 roles over three years, a Germany turnaround, continued pricing actions and a strategic review in Spain. The filing text does not provide a clear quantified Group financial forecast for FY2024; management described the macroeconomic outlook as uncertain. The annual dividend was maintained at 9.0 eurocents per share, including a proposed 4.5-eurocent final dividend.
- Market and execution: Competitive pressure, customer losses, inflation, energy prices and weaker German performance could affect revenue and margins. Vodafone identifies technology resilience, cyber threats, privacy, supply-chain disruption and execution of organisational simplification as principal risks.
- Accounting and currency: IAS 29 hyperinflation accounting was applied to Turkish operations and Safaricom’s Ethiopian operations. Turkey’s inflation and currency movements complicate comparisons and reported results.
- Disposals and subsequent developments: After year-end, Vodafone agreed to combine Vodafone UK and Three UK, subject to regulatory and other approvals. The transaction was not completed at the report date. Vodafone also disclosed a proposed strategic relationship with e&.
- Contingencies: Vodafone Idea’s liquidity and ability to meet obligations remain uncertain; Vodafone’s potential exposure under the agreed payment mechanism is capped at INR64bn (€719m), and management considered further cash payments not probable at year-end. Other disclosed matters include Indian tax claims, a €267m Netherlands tax assessment under appeal, and Phones 4U litigation for which Vodafone said a possible loss could not be estimated.
- Other significant judgement: A €64m impairment was recorded on the Indus Towers investment. The Group also recognised a €16.269bn deferred tax asset for Luxembourg losses, which management expects to use over 35–39 years; recovery depends on future taxable profits.
The auditor issued an unqualified opinion on the IFRS financial statements and internal control over financial reporting. Management and the auditor reported effective financial reporting controls at 31 March 2023.
Important facts for investors to verify
- Separate recurring trading performance from the €9.227bn net disposal gains; assess whether adjusted EBITDAaL and operating cash flow support the reported profit uplift.
- Track Germany’s customer trends and turnaround, and the sustainability of growth in the UK, Africa and Turkey after excluding inflation and currency effects.
- Review debt maturities, lease obligations, liquidity facilities and the effect of continued investment and dividends on deleveraging.
- Check progress, costs and timing of the 11,000-role reduction plan, customer-experience investment and Spain portfolio review.
- Monitor approvals and terms for the proposed UK merger, the e& relationship, and Vodafone’s future ownership and governance of Vantage Towers.
- Assess the recoverability assumptions for Luxembourg deferred tax assets and the financial exposure to Vodafone Idea, Indus Towers and outstanding legal and tax matters.