Vodafone 2016 Annual Report Download - page 16

Chief Financial Ofcer’s review
Meeting our objectives
This has been a strong year of execution for the Group,
meeting our strategic goals and delivering returns
to shareholders.
My priorities
When I became CFO I highlighted three
clear priorities which I believe will have
a signicant impact on our future nancial
performance: the execution of Project Spring
according to the nancial plan; the integration
of acquisitions, most notably Kabel
Deutschland (‘KDG’) and Ono; and a continued
focus on cost efciency. I believe that we have
made good progress in all three areas and
in the coming nancial year it will be important
to build on the improving execution seen
during the 2016 nancial year as we continue
to monetise our Project Spring investments.
Additionally, we intend to continue to pursue
incremental operating efciencies across
all of our operating companies. During the
year we initiated an ambitious cost efciency
project called “Fit for Growth” which
we anticipate will deliver signicant long-term
benets in terms of both cost savings and
enhanced strategic exibility. Executing these
programmes with minimal disruption
to customers is a priority.
Our results are reviewed in more detail
later in this report, but overall I am satised
that we have made important progress
in improving the nancial performance
of the business.
More on our performance:
Pages 30 to 37
KDG and Ono acquisition integration
A key strategic focus for the Group
is to gain competitive xed networks
to meet the growing demand for
converged services. Part of the execution
of this strategy is to acquire companies
where we can see a clear return on that
investment. KDG and Ono, two leading
cable companies, were acquired
in 2013 and 2014 respectively. In total
we expected to generate combined
annual cost and capex acquisition
synergies of approximately €540 million
by the 2018 nancial year, mainly from
migrating xed and mobile customers
onto our own infrastructure and
combining backhaul and core networks
and rationalisation of back ofce functions
and procurement. I am pleased to say that
progress on integration has been better
than expected and we now aim to deliver
annual synergies totalling €600 million.
Project Spring execution
Our £19 billion, two-year programme
of accelerated investment was
designed to deliver tangible differences
in the quality of our services compared
to competitors. As Vittorio highlighted
on page 10, the mobile build phase was
completed and we now have a modernised
network, delivering a much improved
customer experience.
In terms of progress against our operational
plan we are ahead overall, achieving 108%
of the build targets. In our AMAP region
we delivered our mobile build targets three
months ahead of plan. In Europe we are
slightly behind. In particular our 4G build
was impacted by rollout delays in the
UK and Germany.
I am pleased to say that all of our Project
Spring customer experience targets have
been met. In Europe, targets for both
data sessions above three megabits per
second (the threshold for high-denition
quality video) and dropped call rates were
achieved:above 90% and less than 0.5%
respectively. In AMAP, our dropped call
rate target has alsobeen achieved at less
than0.9%.
On the nancial front, capital investment
was broadly, as planned, £19 billion taking
into account foreign exchange movements
and timing differences. Consequently this
has, as expected, depressed our cash ows
over the last two years. Looking forward,
we continue to expect that the level of capital
spending will return to a more normalised
level of capital intensity and we will generate
the expected £1 billion of incremental cash
ow by the 2019 nancial year.
€600m
Combined annual cost and capex
synergiesby 2018 (previously €540m)
€6.3bn
Net Present Value of synergies (was €5.0bn)
242,000
Vodafone DSL customers migrated
2.9m
converged services customers
(mostly KDG and Ono)
Vodafone Group Plc
Annual Report 2016
14
Project
Spring
execution
Acquisition
integration
Cost
efciency