Vodafone shrugs Virgin move as it posts steady financial year

UK operator claims to have defied the odds and bucked the market in last financial year but warns of impact of Covid-19 on business

Despite unprecedented strain on its fixed and mobile networks towards the end of the year, UK-based European communications provider Vodafone has reported what it says is “strong financial performance” with growth in revenue, adjusted earnings before interest, tax, depreciation and amortization (EBITDA) and free cash flow.

For the year ended 31 March 2020, Vodafone posted group revenue €44.974bn, up 3% year on year (YoY), driving a €4.099bn operating profit, comparing well with the €951m loss at the same time a year earlier. Adjusted EBITDA was up 2.6% to €14.881bn.

The group revenue increases were said to reflect the underlying improvement in the company’s commercial performance and the contribution from acquired Liberty Global assets, which were consolidated from August 2019, partially offset by the disposal of Vodafone New Zealand.

The Group made a loss for the year of €0.5bn, €7.6bn in fiscal 2019, of which €0.9bn was attributable to owners of the parent. The loss included profit from operations together with a profit on the disposals of Vodafone New Zealand and Vodafone Malta (€1.2bn) and a gain on the formation of the INWIT joint venture (€3.4bn).

Vodafone’s share of losses related to Vodafone Idea (€2.5bn) was said to be principally due to adverse legal judgements by the Supreme Court in India and the Group carrying value of Vodafone Idea has been reduced to a zero sum.

Adjusted EBITDA growth was said to be the result of the success of a transformation agenda, alongside improving commercial momentum and organic service revenue growth.

Reflecting on what he said was a successful year for Vodafone UK, CEO Nick Jeffery noted that the fiscal year was the third year of a three-year turn-around journey to put the company “back where it belongs” and that its work was continuing to pay off.

He pointed out that Vodafone had “consistently” out-performed the market in consumer and business, mobile and fixed; that the business had delivered revenue growth for the first time since Vodafone’s Cable & Wireless acquisition back in 2012; and that profit and cash flow have grown strongly.

“By investing in our network, focusing on providing better service to our customers, rigorously reducing costs, and simplifying and automating many of our processes, we’ve made our company fit for the future,” he said.

“This was why we were robust enough to cope with the current coronavirus pandemic – and why will be able to cope with any other crises that may come our way. Despite internet traffic increasing 30% during the lockdown period and voice calls rising 50%, our network has coped brilliantly. We’ve been able to keep the UK connected at a time when the country needed us the most.”

Given that, in his opinion, the company’s three-year turnaround strategy has worked, Jeffrey added that for the next three years he wanted to focus on acceleration. Specifically, that meant accelerating improvement in customer experience; accelerating digital transformation; accelerating operational speed and the simplification of its processes.

That said, Jeffrey added the caveat that Vodafone could not shy away from the fact that the coronavirus pandemic – and the social isolation measures the government took to combat it – could have an impact on the UK economy and affect the company’s plans.

On the analysts’ call for the yearly results, Vodafone Group CEO Nick Read ruled out any prospect of the company gate-crashing rival mobile operator O2’s proposed merger with Virgin Media in the UK. Read remarked that the company would instead focus on organic growth in the UK.

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