Vodafone Group Plc H1 FY25 Results Summary
Business Context and Reporting Period
This Form 6-K reports the unaudited condensed consolidated financial results for Vodafone Group Plc for the six months ended 30 September 2024 (H1 FY25). The results exclude Vodafone Spain and Vodafone Italy, which are classified as discontinued operations following the completion of the Spain disposal on 31 May 2024 and the agreement to sell Italy to Swisscom. The Group continues to execute its strategic roadmap focused on Customers, Simplicity, and Growth, with significant portfolio actions including the sale of stakes in Vantage Towers and Indus Towers.
Key Financial Metrics
| Metric | H1 FY25 | H1 FY24 (Re-presented) | Change |
|---|---|---|---|
| Total Revenue | €18.3 billion | €18.0 billion | +1.6% |
| Service Revenue | €15.1 billion | €14.9 billion | +1.7% (Reported) / +4.8% (Organic) |
| Operating Profit | €2.4 billion | €1.9 billion | +28.3% |
| Profit for the Period | €1.2 billion | (€0.2 billion) Loss | Turnaround to profit |
| Basic EPS (Continuing Ops) | 3.92 eurocents | (0.40) eurocents | +4.32 eurocents |
| Operating Cash Flow | €5.6 billion | €5.5 billion | +1.8% |
| Net Debt | €48.7 billion | €50.8 billion | -€2.1 billion |
| Interim Dividend | 2.25 eurocents | 4.50 eurocents | -50% |
Material Changes vs. Prior Period
- Profitability Surge: Operating profit increased by 28.3% to €2.4 billion, primarily driven by a €0.7 billion gain on the disposal of an 18% stake in Indus Towers. Excluding this gain, underlying operating performance improved due to cost efficiencies and revenue growth in key markets.
- Germany Headwinds: Service revenue in Germany declined by 3.9% (H1) and 6.2% (Q2) due to the full impact of the Multi Dwelling Unit (MDU) TV law change, which ended bulk TV contracting. Excluding this impact, service revenue declined by 2.4% in Q2 due to a lower customer base following prior year price increases.
- Strong Growth in Africa & Turkey: Organic service revenue growth was 9.9% in Africa and 90.3% in Turkey. Turkey's reported growth was significantly boosted by hyperinflationary accounting adjustments and price actions.
- Portfolio Divestments: The Group generated €5.4 billion in cash proceeds from disposals, including the sale of Vodafone Spain (€4.1 billion), a further 10% stake in Vantage Towers (€1.3 billion), and the 18% stake in Indus Towers (€1.7 billion).
- Dividend Reduction: The interim dividend was reduced by 50% to 2.25 eurocents per share, aligning with the Group's capital allocation strategy to prioritize debt reduction and share buybacks.
Guidance, Outlook, and Risks
- Strategic Execution: Management highlighted progress in customer experience transformation, with detractors reducing across all segments. The commercial shared operations business is now operational with Accenture.
- UK Merger: The merger with Three UK remains on track for completion in early 2025, pending the final decision from the UK Competition and Markets Authority (CMA) expected by 7 December 2024.
- Italy Disposal: The sale of Vodafone Italy to Swisscom is expected to complete in early 2025, subject to regulatory approval.
- Share Buybacks: A third tranche of €500 million in share buybacks was announced on 14 November 2024, following the completion of the second tranche.
- Risks: Key risks include the outcome of the UK merger review, regulatory changes in Germany (MDU law), macroeconomic pressures, and the potential for Egypt to be designated as a hyperinflationary economy, which would impact financial reporting.
Investor Verification Checklist
- Germany MDU Impact: Verify the sustainability of the 4.0 million households retained under the new TV law and the trajectory of broadband customer churn.
- UK Merger Timeline: Monitor the CMA's final decision on the Three UK merger and any potential remedies that could impact the deal structure or timeline.
- Debt Reduction: Confirm the utilization of disposal proceeds (€5.4 billion) for debt repayment versus other capital allocation uses.
- Hyperinflation Accounting: Assess the potential impact of Egypt being designated as a hyperinflationary economy on future financial statements.
- Dividend Policy: Evaluate the rationale for the 50% dividend cut and the long-term sustainability of the new payout level relative to free cash flow.