Vodafone 2009 Annual Report Download - page 27

Performance
Vodafone Group Plc Annual Report 2009 25
This section presents the Group’s operating performance, providing commentary on how the revenue and the
EBITDA performance of the Group and its operating segments within Europe, Africa and Central Europe, Asia Pacic
and Middle East and Verizon Wireless have developed in the last three years.
2009 nancial year compared to the 2008 nancial year
Group(1)
Africa Asia
and Central Pacific and Verizon Common
Europe Europe Middle East Wireless Functions(2) Eliminations 2009 2008 % change
£m £m £m £m £m £m £m £m £ Organic
Revenue 29,634 5,501 5,819 − 216 (153) 41,017 35,478 15.6 (0.4)
Service revenue 27,886 5,113 5,434 − − (139) 38,294 33,042 15.9 (0.3)
EBITDA(3) 10,422 1,690 1,739 − 639 − 14,490 13,178 10.0 (3.5)
Adjusted operating profit(3) 6,631 652 525 3,542 407 − 11,757 10,075 16.7 2.0
Adjustments for:
Impairment losses (5,900) −
Other income and expense − (28)
Operating profit 5,857 10,047
Non-operating income and expense (44) 254
Net financing costs (1,624) (1,300)
Profit before taxation 4,189 9,001
Income tax expense (1,109) (2,245)
Profit for the financial year 3,080 6,756
Notes:
(1) The Group revised its segment structure during the year. See note 3 to the consolidated financial statements.
(2) Common Functions represents the results of the partner markets and the net result of unallocated central Group costs and recharges to the Group’s operations, including royalty fees for use of the
Vodafone brand.
(3) See “Non-GAAP information” on page 138.
Revenue
Revenue increased by 15.6%, with favourable exchange rates contributing
13.0 percentage points and the impact of merger and acquisition activity contributing
3.0 percentage points to revenue growth. Pro forma revenue growth, including the
acquisition in India and the acquisition of Tele2 in Italy and Spain, was 1.3%.
Revenue in Europe declined by 2.1% on an organic basis, as benefits from new tariffs
and promotions and a strong performance in data revenue were more than offset by
the impact of the deteriorating European economy on voice and messaging revenue,
including from roaming, usage growth, ongoing competitive pricing pressures and
lower termination rates.
In Africa and Central Europe, revenue grew by 3.9% on an organic basis, with double
digit revenue growth in Vodacom being offset by weakening trends in Turkey and
Romania. Benefits from the increase in the average customer base were partially
offset by both weaker economic conditions in the more mature markets in Central
Europe and the impact of termination rate cuts.
In Asia Pacific and Middle East, revenue grew by 19% on a pro forma basis including
India, a result of the rise in the average customer base, although revenue growth has
slowed, primarily as a result of stronger competition coupled with maturing market
conditions.
Operating profit
EBITDA increased by 10.0% to £14,490 million, with favourable exchange rates
contributing 13.4 percentage points and the impact of merger and acquisition
activity contributing 0.1 percentage points to EBITDA growth. Including India and
Tele2 in Italy and Spain, pro forma EBITDA declined by 3%.
In Europe, EBITDA decreased by 7.0% on an organic basis, with a decline in the EBITDA
margin, primarily driven by the downward revenue trend, the growth of lower margin
fixed line operations, a brand royalty provision release included in the prior year in
Italy and restructuring charges in a number of markets, which more than offset
customer and operating cost savings. The European EBITDA margin, including
Common Functions, which substantially support our European operations, declined
by 1.1 percentage points, driven by an increasing contribution from lower margin
fixed broadband.
Africa and Central Europe’s EBITDA decreased by 2.4% on an organic basis, with the
EBITDA margin decreasing in the majority of markets due to continued network
expansion, investment in the turnaround plan in Turkey and increased competition
in Romania.
In Asia Pacific and Middle East, EBITDA increased by 6% on a pro forma basis including
India, with a decline in the EBITDA margin as licensing costs increased and network
expansion continued, primarily in India, but also through the build out in Qatar.
The increase in Common Functions EBITDA in the current year resulted primarily
from the inclusion of a brand royalty payment charge in the prior year and increased
brand revenue in the current year following agreement of revised terms with
Vodafone Italy.
Operating profit decreased due to the growth in adjusted operating profit being more
than offset by impairment losses in relation to operations in Spain (£3,400 million),
Turkey (£2,250 million) and Ghana (£250 million). Adverse changes in macro
economic assumptions generated the £550 million charge recorded in the second
half of the financial year in relation to Turkey and all of the charge in relation to Ghana.
Adjusted operating profit increased by 16.7%, or 2.0% on an organic basis, with a
16.5 percentage point contribution from favourable exchange rates, whilst the
impact of merger and acquisition activity reduced adjusted operating profit growth
by 1.8 percentage points.
The share of results in Verizon Wireless, the Group’s associated undertaking in the US,
increased by 21.6% on an organic basis, primarily due to a focus on the high value
contract segment and low customer churn. On 9 January 2009, Verizon Wireless
completed its acquisition of Alltel Corp. (‘Alltel’), adding 13.2 million customers before
required divestitures.
Operating results