Vodafone 2012 Annual Report Download - page 17

Business review Performance Governance Financials Additional information
15
Vodafone Group Plc
Annual Report 2012
Group adjusted operating prot was
£11.5billion, down 2.4% year-on-year but at
the top of our guidance range of £11.0 billion
– £11.8 billion based on guidance exchange
rates. The decline in adjusted operating prot
was due to the sale of our interest in SFR at the
start of the year; on an organic basis, adjusted
operating prot was up 2.5%*, as a result of the
good performance at VZW.
We recognised £3.5 billion of net gains on the
disposals of our interests in SFR and Polkomtel,
and we recorded impairment charges of
£4.0billion relating to our businesses in Italy,
Spain, Portugal and Greece primarily driven
bylower projected cash ows within business
plans and an increase in discount rates,
resulting from adverse changes in the
economic environment.
Free cash ow was £6.1 billion and within our
guidance range of £6.0 billion – £6.5 billion for
the year. The year-on-year decline reected
the loss of dividends from China Mobile
Limited, the reduction in dividends from SFR,
and the conclusion of our prior year working
capital programme. Capex was up 2.3% at
£6.4billion, as we continued to maintain our
signicant level of investment to support our
network strategy. In addition to our reported
free cash ow we received an income dividend
of US$4.5 billion (£2.9 billion) from VZW.
Adjusted earnings per share was 14.91 pence,
down 11.0% on last year. The decline was driven
by the loss of our share of SFR and Polkomtel
prots, the loss of income from our interests in
China Mobile Limited and SoftBank, and higher
nance charges as the result of our decision to
take advantage of low prevailing interest rates to
x a higher proportion of our debt.
The Board is recommending a nal dividend
per share of 6.47 pence, to give total ordinary
dividends per share of 9.52 pence, up 7.0%
year-on-year. During the year we also paid a
special dividend of 4.0 pence per share, paid
out of the income dividend we received from
VZW. Total dividends per share were therefore
up 51.9%.
Europe
Organic service revenue in Europe was down
1.1%* year-on-year. Excluding the impact of
regulated cuts to mobile termination rates
(‘MTRs’), service revenue grew by 1.4%*. As in
the prior year, we saw a broad divide between
the more stable major markets of northern
Europe, with Germany, the UK and the
Netherlands all growing; and the much weaker
markets of southern Europe, with Italy and
Spain suffering from strong competition and a
very poor macroeconomic environment.
Data revenue growth was strong at 20.2%*,
with smartphone penetration on contract
customers of 44.9%, up 11.5 percentage points
during the year. We have continued our major
commercial push towards integrated voice,
SMS and data tariffs, so that in the nal quarter,
43.2% of consumer contract service revenue
in our major European markets came from
customers on integrated tariffs.
Organic EBITDA was down 4.5%*, and the
EBITDA margin fell 1.5* percentage points.
Thedecline in EBITDA margin was almost
entirely driven by margin erosion in Spain,
where we put through signicant price cuts
during the year. Elsewhere, we beneted from
increased cost efciency.
AMAP
Organic service revenue growth in AMAP was
8.0%*. Our two major businesses, India and
Vodacom, reported growth of 19.5%* and 7.1%*
respectively. In India, pricing showed clear
signs of stabilisation after a prolonged price
war. In South Africa, growth continued to be
strong, despite signicant price cuts on data
tariffs. In Australia, revenue declined sharply
asour network perception continued to suffer
after service issues experienced more than a
year ago.
Organic EBITDA was up 7.8%* with EBITDA
margin down 0.1* percentage points. EBITDA
margins in our two biggest AMAP businesses,
Vodacom and India, increased, but this positive
impact was offset by a signicant decline in the
EBITDA margin in Australia.
Verizon Wireless
Our share of the net income of VZW
represented 42.2% of our Group adjusted
operating prot. VZW enjoyed another very
strong year, with organic service revenue
up7.3%* and EBITDA up 7.9%*. Our share of
protsfrom VZW amounted to £4.9 billion,
up9.3%* year-on-year. In December 2011
VZWannounced the proposed acquisition
of122Advanced Wireless Services spectrum
licenses, covering a population of 259 million,
from SpectrumCo for US$3.6 billion
(£2.3billion).
For a detailed analysis of our nancial
performance for the year, please turn to
page40.
+1.5Group
Data
Emerging markets
+22.2
+13.2
Enterprise +2.2
Service revenue growth 2012* %
Service revenue by type 2012
Fixed: 8% Other: 5%
Messaging:
12%
Data: 15% Voice: 60%