Covid lockdowns dent Vodafone fiscal year

Revenues fall for fixed and wireless operator as mobile users obey stay-at-home orders but overall yearly service takings are described as stable, returning to growth in the second half

Most companies reporting financial results for April 2020 to March 2021 have reflected the challenges of unparalleled times and in its yearly fiscal statement, operator Vodafone has been no exception, showing the clear effects of Covid headwinds.

For the year ended 31 March 2021, the global telecoms firm saw its total revenue decline by 2.6% on an annual basis to €43.8bn. The company said this showed “good underlying momentum” and the benefit from its acquisition of Liberty Global’s assets in Germany and Central and Eastern Europe offset by lower revenue from roaming, visitors and handset sales, adverse foreign exchange movements and the disposal of Vodafone New Zealand.

Compared with the previous financial year, Vodafone recorded lower gains on disposals, no impairment losses, nor its share of losses related to Vodafone Idea, and as a result saw operating profit increase by 24.3% on an annual basis to €5.1bn from €4.1bn in FY20. On an underlying basis, performance was broadly stable as lower adjusted EBITDA, €14.4bn, slipping 1.2% year on year, was partially offset by lower restructuring costs, depreciation and amortisation, and a higher share of profits from associates and joint ventures to €14.386bn.

The group’s net profit for the financial year was €500m, exactly the same amount that it lost a year earlier. The profit increase was partly driven by higher operating profit and the recognition of mark-to-market gains. These factors were partially offset by higher income tax expense in the current year, primarily due to a non-cash charge of €2.8bn following a decrease in the carrying value of deferred tax assets.

Vodafone said it has delivered the first phase of its strategic ambition to reshape business activities and become a stronger connectivity provider. This, it said, has been delivered through four key strategic priorities: deepening customer engagement; accelerating transformation to a digital-first organisation; improving the utilisation of assets; and optimising the company’s portfolio.

Vodafone stressed that during the 2021 financial year, it had continued to execute across all four priorities with particular highlights including: mobile contract customer loyalty improving by 0.9 percentage points year on year; adding 1.4 million next-generation network (NGN)  broadband customers; and 44 million homes passed with its 1 gigabit-capable fixed-line network in Europe.

Over the past three years, Vodafone has added 4.3 million NGN broadband customers in Europe and has converged customer plans available in all major markets. It also launched 5G in 240 cities across 10 of its European markets.

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In response to the trading conditions related to the Covid-19 pandemic, Vodafone accelerated a series of cost-saving activities, resulting in a €500m net reduction in operating expenditure in Europe and common functions.

Commenting on the results, Vodafone group chief executive Nick Read said: “I am pleased that we achieved full-year results in line with our guidance and we exited the year with accelerating service revenue growth across the business, with a particularly good performance in our largest market, Germany.

“The world has changed. The pandemic has shown how critical connectivity and digital services are to society. Vodafone is strongly positioned and through increased investment, we are taking action now to ensure we play a leadership role and capture the opportunities that these changes create.

“The increased demand for our services supports our ambition to grow revenues and cash flow over the medium term. We remain fully focused on driving shareholder returns through deleveraging, improving our return on capital, and a firm commitment to our dividend.”

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