Vodafone 2009 Annual Report Download - page 29

Performance
Vodafone Group Plc Annual Report 2009 27
Europe(1)
Germany Italy Spain UK Other Eliminations Europe % change
£m £m £m £m £m £m £m £ Organic
Year ended 31 March 2009
Revenue 7,847 5,547 5,812 5,392 5,329 (293) 29,634 13.6 (2.1)
Service revenue 7,535 5,347 5,356 4,912 5,029 (293) 27,886 14 .1 (1.7)
EBITDA 3,058 2,424 1,897 1,219 1,824 − 10,422 7.6 ( 7.0)
Adjusted operating profit 1,728 1,734 1,323 235 1,611 − 6,631 6.8 (8.2)
EBITDA margin 39.0% 43.7% 32.6% 22.6% 34.2% 35.2%
Year ended 31 March 2008
Revenue 6,866 4,435 5,063 5,424 4,583 (290) 26,081
Service revenue 6,551 4,273 4,646 4,952 4,295 (287) 24,430
EBITDA 2,667 2,158 1,806 1,431 1,628 − 9,690
Adjusted operating profit 1,490 1,573 1,282 431 1,430 – 6,206
EBITDA margin 38.8% 48.7% 35.7% 26.4% 35.5% 37.2%
Note:
(1) The Group revised its segment structure during the year. See note 3 to the consolidated financial statements.
Revenue increased by 13.6%, with favourable euro exchange rate movements
contributing 14.3 percentage points of growth and mergers and acquisitions activity,
primarily Tele2, contributing a further 1.4 percentage point benefit. The organic
decline in revenue of 2.1% was a result of a 1.7% decrease in service revenue and a
decline in equipment revenue, reflecting lower volumes.
The impact of merger and acquisition activity and foreign exchange movements on
revenue, service revenue, EBITDA and adjusted operating profit are shown below:
Organic M&A Foreign Reported
growth activity exchange growth
% pps pps %
Revenue – Europe (2.1) 1.4 14.3 13.6
Service revenue
Germany (2.5) (0.1) 17.6 15.0
Italy 1.2 4.7 19.2 25.1
Spain (4.9) 2.5 17.7 15.3
UK (1.1) 0.3 − (0.8)
Other (1.2) 0.4 17.9 17.1
Europe (1.7) 1.4 14.4 14.1
EBITDA
Germany (2.7) (0.2) 17.6 14.7
Italy (6.4) 1.2 17.5 12.3
Spain (10.5) (0.5) 16.0 5.0
UK (15.3) 0.5 − (14.8)
Other (4.9) (0.1) 17.0 12.0
Europe (7.0) 0.2 14.4 7.6
Adjusted operating profit
Germany (1.2) (0.4) 17.6 16.0
Italy (6.5) (0.5) 17.2 10.2
Spain (10.6) (1.9) 15.7 3.2
UK (47.1) 1.6 − (45.5)
Other (5.3) 1.1 16.9 12.7
Europe (8.2) (0.3) 15.3 6.8
Service revenue declined by 1.7% on an organic basis, reflecting a gradual
deterioration over the year and a 3.3% decrease in the fourth quarter, with favourable
trends in Italy more than offset by deteriorating trends in other markets, in particular
Spain and Greece. The impact of the economic slowdown in Europe on voice and
messaging revenue, including from roaming, ongoing competitive pricing pressures
and lower termination rates were not fully compensated by increased usage arising
from new tariffs and promotions and strong growth in data revenue.
EBITDA increased by 7.6%, with favourable euro exchange rate movements
contributing 14.4 percentage points of growth and a 0.2 percentage point benefit
from business acquisitions. The EBITDA margin declined 2.0 percentage points year
on year, 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.
Germany
The 2.5% organic decline in service revenue was consistent with the prior year,
benefiting from higher penetration of the new SuperFlat tariff portfolio. Data revenue
growth remained strong, reflecting increased penetration of PC connectivity services
in the customer base. Fixed line revenue declined during the year, but grew 2.1% at
constant exchange rates in the fourth quarter, as the customer base has now largely
migrated to new, lower priced tariffs. The fixed broadband customer base increased
by 15.9% during the year to 3.1 million at 31 March 2009, with an additional 154,000
wholesale fixed broadband customers. On 19 May 2008, the Group acquired a 26.4%
interest in Arcor, following which the Group owns 100% of Arcor. The integration of
the mobile business and the fixed line operations has progressed, with cost savings
being realised according to plan.
EBITDA margin remained broadly stable at 39.0%, reflecting an improvement in the
mobile margin which was offset by a decline in the fixed line margin, with the former
due to a reduction in prepaid subsidies and an increase in the number of SIM only
contracts. Operating expenses were also broadly stable with the prior year as a
current year restructuring charge of €35 million (£32 million) was more than offset
by non-recurring adjustments, including favourable legal settlements.
Italy
Organic service revenue growth was 1.2%, reflecting targeted demand stimulation
initiatives, ARPU enhancing initiatives and strong growth in data revenue due to
increased penetration of mobile PC connectivity devices, email enabled devices and
mobile internet services. Organic fixed line revenue growth was 3.7%, supported by
278,000 fixed broadband customer net additions during the year as well as the
benefit from the launch of Vodafone Station during the summer of 2008 and the
continued good performance of Tele2.