Vodafone 2011 Annual Report Download - page 41

Vodafone Group Plc Annual Report 2011 39
Performance
2010 nancial year compared to the 2009 nancial year
Group(1)
Non-
Africa, Controlled
Middle East Interests and
and Asia Common
Europe Pacific Functions(2) Eliminations 2010 2009 % change
£m £m £m £m £m £m £ Organic(3)
Revenue 32,833 11,089 667 (117) 44,472 41,017 8.4 (2.3)
Service revenue 31,159 10,246 397 (83) 41,719 38,294 8.9 (1.6)
EBITDA 11,644 3,312 (221) – 14,735 14,490 1.7 (7.4)
Adjusted operating profit 6,351 818 4,297 – 11,466 11,757 (2.5) (7.0)
Adjustments for:
Impairment losses (2,100) (5,900)
Other income and expense 114 −
Operating profit 9,480 5,857
Non-operating income and expense (10) (44)
Net financing costs (796) (1,624)
Profit before taxation 8,674 4,189
Income tax expense (56) (1,109)
Profit for the financial year 8,618 3,080
Notes:
(1) 2010 results reflect average exchange rates of £1:€1.13 and £1:US$1.60.
(2) Common Functions primarily represents the results of the partner markets and the net result of unallocated central Group costs and excludes income from intercompany royalty fees.
(3) Organic growth includes India and Vodacom (except the results of Gateway) at the current level of ownership but excludes Australia following the merger with Hutchison 3G Australia on 9 June 2009.
Revenue
Group revenue increased by 8.4% to £44,472 million, with favourable
exchange rates contributing 5.7 percentage points of growth and merger
and acquisition activity contributing 5.0 percentage points. During the
year the Group acquired an additional 15% stake in Vodacom and fully
consolidated its results from 18 May 2009.
Group service revenue increased by 8.9% to £41,719 million, while organic
service revenue declined by 1.6%(*). Service revenue was impacted by
challenging economic conditions in Europe offset by growth in Africa,
Middle East and Asia Pacific.
In Europe service revenue fell 3.8%(*), a 2.1 percentage point decline on the
previous year reflecting challenging economic conditions in most markets,
regulatory pressures on pricing, offset by growth in Italy, Turkey and the
Netherlands. The decline was primarily driven by reduced voice revenue
resulting from continued market and regulatory pressure on pricing and
slower usage growth partially offset by growth in data and fixed line. Turkey
returned to growth in the second half of the financial year with service
revenue growing 31.3%(*) in the fourth quarter. Romania experienced
intense competition throughout the year with service revenue declining
19.9%(*). Mobile termination rate cuts in the region which became effective
during the year, contributed 2.4 percentage points to the decline in service
revenue. Data revenue grew by 17.7%(*) due to an increase in data plans sold
with smartphones and good PC connectivity revenue across the region.
Fixed line revenue increased by 7.5%(*) with the number of fixed broadband
customers reaching 5.4 million at 31 March 2010, a net increase of 960,000
customers during the financial year.
In Africa, Middle East and Asia Pacific service revenue rose by 7.5%(*) due to
strong growth in Vodacom and India. India’s service revenue increased by
14.7%(*), 4.7 percentage points of which was delivered by the network
sharing joint venture Indus Towers with the remainder being driven by a
46.7% increase in the mobile customer base offset in part by a decline in
mobile voice pricing. In Egypt service revenue grew by 1.3%(*) and Qatar
increased its mobile customer base to 465,000, following the launch of
services in July.
Operating profit
EBITDA increased by 1.7% to £14,735 million, with favourable exchange
rates contributing 5.8 percentage points and the impact of merger and
acquisition activity, primarily the full consolidation of Vodacom, contributing
3.3 percentage points to EBITDA growth.
In Europe, EBITDA decreased by 8.9%(*), with a decline in the EBITDA margin
of 1.5 percentage points, primarily driven by the downward revenue trend,
reduced EBITDA margins across the majority of Europe, investment in
Turkey to drive growth in the second half of the financial year and the
growth of lower margin fixed line operations partially offset by operating and
direct cost savings.
In Africa, Middle East and Asia Pacific EBITDA increased by 5.5%(*) due to
strong revenue growth in Vodacom and India, combined with direct and
customer cost savings partially offset by declines in other markets due to
pricing and recessionary pressure and the start-up in Qatar.
Operating profit increased primarily due to changes in impairment losses.
In the 2010 financial year, the Group recorded net impairment losses of
£2,100 million. Vodafone India was impaired by £2,300 million primarily due
to intense price competition following the entry of a number of new operators
into the market. This was partially offset by a £200 million reversal in relation
to Vodafone Turkey resulting primarily from movements in discount rates.
In the prior year impairment losses of £5,900 million were recorded.
Adjusted operating profit decreased by 2.5%, or 7.0%(*) on an organic basis,
with a 6.0 percentage point contribution from favourable exchange rates,
whilst the impact of merger and acquisition activity reduced adjusted
operating profit growth by 1.5 percentage points.
The share of results in Verizon Wireless, the Group’s associate in the US,
increased by 8.0%(*) primarily due to the expanding customer base, robust
data revenue and operating expenses efficiencies partially offset by higher
customer acquisition and retention costs.