Vodafone Group Plc — FY2021 Form 20-F
Business context and reporting period
This is Vodafone Group Plc’s annual report for the fiscal year ended March 31, 2021—not a standalone 2020 fourth-quarter filing. Results are reported under IFRS in euros. FY2021 and FY2020 figures reflect IFRS 16 lease accounting; FY2019 comparatives use IAS 17.
Vodafone provides mobile and fixed connectivity, converged services, business technology, IoT and mobile financial services across Europe and Africa. The year included the COVID-19 pandemic and the completion of the first phase of a strategy focused on customer engagement, digital transformation, asset utilisation and portfolio optimisation.
Financial and operating performance
| Metric | FY2021 | FY2020 | Change / context |
|---|---|---|---|
| Revenue | €43.809bn | €44.974bn | Down 2.6% |
| Service revenue | €37.141bn | €37.871bn | Down 1.9% reported; down 0.1% organic |
| Gross profit | €13.723bn | €14.292bn | Gross margin approximately 31.3%, calculated from reported figures |
| Operating profit | €5.097bn | €4.099bn | Up 24.3% |
| Profit/(loss) for year | €536m | (€455m) | Returned to profit |
| Basic EPS | €0.38 cents | (€3.13 cents) | Improved by €3.51 cents |
| Cash from operating activities | €17.215bn | €17.379bn | Down 0.9% |
| Investing cash flow | (€9.262bn) | (€8.088bn) | Higher outflow |
| Financing cash flow | (€15.196bn) | (€9.352bn) | Higher outflow, principally reflecting net borrowing outflows |
| Borrowings, including leases | €67.760bn | €74.925bn | Down €7.165bn |
| Cash and cash equivalents | €5.821bn | €13.557bn | Down €7.736bn |
| Borrowings less cash | €61.939bn | €61.368bn | Up 0.9% |
| Total dividend per share | 9.00 eurocents | 9.00 eurocents | Includes proposed final dividend of 4.5 eurocents |
Management reported €9.8bn of cash and short-term investments and €7.4bn of unused facilities. The financial risk note gives a different undrawn-facilities figure; see investor verification items below. Capital additions were €7.9bn.
Reported operating profit benefited from no impairment losses (versus €1.685bn in FY2020) and no further recognised share of Vodafone Idea losses after the investment was written down to nil. Adjusted net financing costs were €1.765bn, compared with €1.968bn in FY2020. The statutory tax charge was €3.864bn, including a €2.827bn non-cash charge associated with Luxembourg deferred tax assets; the effective tax rate was 87.8%.
Material changes versus the prior comparable period
- Organic service revenue returned to growth in the second half; Group organic service revenue grew 0.8% in Q4, after declining earlier in the year.
- Revenue was pressured by reduced roaming and visitor activity during COVID-19, lower handset sales, foreign-exchange movements and the disposal of Vodafone New Zealand. These effects were partly offset by underlying momentum and a full year of Liberty Global acquired assets in Germany and Central and Eastern Europe.
- Performance varied by market: Germany’s organic service revenue grew 0.5% for the year; Italy declined 7.5%, the UK 0.8%, Spain 2.8% and Other Europe 1.4%. Vodacom grew 3.9% and Other Markets grew 10.8% organically.
- Operating cash flow was broadly stable, but cash balances fell substantially; lower gross borrowings were offset by the lower cash balance, leaving net borrowings slightly higher.
- Vodafone completed the Vantage Towers IPO, raising approximately €2.0bn in the year while retaining majority ownership and control. The company reported a €13.2bn market capitalisation at IPO.
Outlook, commentary, risks and unusual items
Management said FY2021 results were in line with expectations and prior guidance, with service revenue growth accelerating toward year-end. It described medium-term ambitions to grow revenue and cash flow, improve returns on capital and continue deleveraging; the filing does not provide a clear numerical FY2022 revenue or cash-flow forecast. The next-phase strategy targets a 20% net reduction in operating expenses across European markets and Common Functions by FY2023 versus FY2018.
Management cited €1.3bn of cumulative net operating-expense savings over three years, including €0.5bn generated in FY2021. The Board maintained the annual dividend at 9.0 eurocents per share. Vodafone also announced share buybacks to offset dilution from mandatory convertible bond conversion.
- COVID-19: Travel restrictions reduced roaming and visitor revenue; customer spending, supply chains, network capacity, employee safety and cyber threats remain relevant uncertainties. Management expects roaming revenue to recover as travel restrictions ease, but timing is uncertain.
- Competition and regulation: Price pressure affected several markets. Vodafone highlighted the risk that regulatory measures, spectrum costs or fragmented market structures could constrain returns and investment.
- Vodafone Idea and India: Vodafone Idea reported a substantial Indian adjusted-gross-revenue liability. Vodafone has no obligation to fund the joint venture and recognised no further share of its losses after writing its investment down to nil. A separate conditional contractual exposure under the merger payment mechanism is capped at INR64bn (about €747m).
- Legal and compliance matters: The filing discusses material litigation and tax disputes, including claims in India and commercial disputes in Europe; outcomes and potential costs remain uncertain. Vodafone also reported €20m in combined privacy fines in Italy, Spain and Romania and a customer-data breach at its Italian ho. Mobile brand.
- Financial reporting: The Luxembourg deferred-tax-asset balance depends on forecasts of future taxable profits and is a significant estimate. The auditor identified goodwill impairment, revenue recognition and deferred-tax-asset recoverability as critical audit matters. No goodwill impairment was recorded in FY2021.
The Board concluded that the Group had adequate resources for the foreseeable future and reasonable prospects of meeting liabilities through March 2024 under its viability assessment. Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting.
Important facts investors should verify
- Confirm the comparison basis: this filing covers the full fiscal year to March 31, 2021, not calendar Q4 2020; also distinguish reported growth from management’s non-GAAP organic growth.
- Reconcile the liquidity disclosures: management cites €7.4bn of unused facilities, while the financial-risk note describes €8.0bn of undrawn revolving facilities.
- Assess the sustainability of earnings improvement, particularly the absence of impairment charges, the mark-to-market financing benefit and the €2.827bn non-cash Luxembourg tax charge.
- Review cash conversion, capital additions, lease-inclusive debt, cash balances and the effect of the Vantage Towers transaction and share buybacks on net debt and shareholder returns.
- Track the Vodafone Idea contractual exposure, Indus Towers security arrangements and the status and potential financial impact of major litigation and tax disputes.