Vodafone Group Plc

Vodafone Group Plc Half-Year Results and Strategy Update Analyst and Investor Presentation Tuesday 12 November 2013 Information in the following communication relating to the price at which relevant investments have been bought or sold in the past, or the yield on such investments, cannot be relied upon as a guide to the future performance of such investments. This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire or dispose of securities in any company within the Group. The communication contains forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995 which are subject to risks and uncertainties because they relate to future events. These forward-looking statements include, without limitation, statements in relation to the Group’s financial outlook and future performance. Some of the factors which may cause actual results to differ from these forward-looking statements can be found by referring to the information contained under the headings “Other information – Forward-looking statements” in our half-year financial report for the six months ended 30 September 2013 and “Principal risk factors and uncertainties” in our annual report for the year ended 31 March 2013, both of which can be found on the Group’s website (www.vodafone.com/investor). The communication also contains non-GAAP financial information which the Group’s management believes is valuable in understanding the performance of the Group or the Group’s businesses. However, non-GAAP information is not uniformly defined by all companies and therefore it may not be comparable with similarly titled measures disclosed by other companies, including those in the Group’s industry. Although these measures are important in the assessment and management of the business, they should not be viewed in isolation or as replacements for, but rather as complementary to, the comparable GAAP measures. Although we try to accurately reflect speeches delivered, the actual speech as it was delivered may deviate from the script made available on the Group’s website. Vodafone and the Vodafone logo, Vodacom, M-Pesa, the M-Pesa logo, Power to you, Vodafone Red, Vodafone One Net and Vodafone Global Enterprise are trade marks of the Vodafone Group. Other product and company names mentioned herein may be the trade marks of their respective owners. Half-Year Results and Strategy Update Vodafone Group Plc Opening Remarks Vittorio Colao Chief Executive Officer, Vodafone Group Plc So, good afternoon and welcome. Thank you for coming today. Today the organisation is a little bit different. Given the recent changes we thought it was a good opportunity for us to go more in detail with our future plans and how we see Vodafone evolving going forward. We’ll also give you a chance to see and talk – and hopefully also talk over drinks and over coffee with some of the senior managers of Vodafone, some of whom have changed jobs, expanded their jobs. So it was a good opportunity to have a longer and broader exposure than usual. The agenda for today, therefore, is this: Andy will, as always, go through the financial results. I will then come back and cover the strategic overview of what we intend to do. Paolo and Steve Pusey will cover the technology and the commercial differentiation plans, and then we will have a break and we’ll have Q&A, if possible focused on those topics. After the break we will start with a review of the three businesses: Philipp Humm will talk about Europe, Nick Read about emerging markets and Nick Jeffery about enterprise. And then we will have a second Q&A session which I assume will be more focused on the performance in those three areas. Wrap-up at the end – two minutes – then drinks, and then chatting together. You have, for sure, gone through all the highlights of the announcement of this morning so I don’t need to go too much into the detail. Let me give you my highlevel comments, first of all, on performance. Performance I would call it okay-minus, probably with a couple of markets, especially in Europe, that should improve in the coming times, but very good performance in emerging markets; we are very pleased with the results there. Confirmed full guidance for the year, and of course approved the increase in the interim dividend by 8% and the increase – the intention to increase the full year by the same amount. On the strategic progress I will cover the progress that we made in the various areas; we are very pleased with Vodafone Red. Paolo will cover in his presentation some of the detailed KPIs and why we think that this initiative that we undertook a year ago is very good. Good progress on enterprise: we continue with integration successfully at this point of Cable & Wireless. We are about to start, once the legal process is on track, the KDG integration, and of course, thanks also to the Verizon transaction, we will have a very good dividend cover and a commitment to continue to improve dividends over time. And finally ‘Project Spring’, which is also another important topic for today, we see it – and we announced today Spring as an opportunity to really spring ahead; to really prepare for the upturn that we expect will happen in the medium term in the business in Europe, and also satisfy the demand that now we still – we really see picking up from data services, both in mature and in emerging markets. Spring has been increased to £7 billion; we will comment about that. The incremental free cash flow target is in excess of £1 billion by the fifth year of the programme. We will cover all of this in the various sections. Let me now turn to Andy for his financial review. 12 November 2013 2 Half-Year Results and Strategy Update Vodafone Group Plc Financial Review Andy Halford Chief Financial Officer, Vodafone Group Plc Thank you, Vittorio. Good afternoon everybody. So a slightly more complicated set of numbers than recently as you will have seen from the press release. Statutory, management view, discontinued operations, joint ventures, etc – I shall try to explain what is going on in the clearest way I possibly can do. The first point is that the changes to the way that we have to report under the statutory view are taking businesses particularly like Italy, and no longer do we have a line in there for their revenue and their cost; we just basically take the share of the bottom line profit. That is not the way that we are managing our business, and hence the management view that I’m going to use throughout this presentation does include 77% of the revenue for Italy: its costs, its EBITDA, etc, as we have done in the past. The other reason why we’ll stick with this is because when we do get the other 23% then in the future we will actually have the whole of its numbers right the way through. The second complication is the US deal has actually caused a few complexities which we will come onto just in a second. So, briefly then, the key numbers for the half year are the following: the service revenue at £20 billion; that is for the most recent quarter, the second quarter, 4.9% down year-on-year, with the regional split of that being AMAP a strong performance – 5.7% up; north and central Europe 4.9% down, and southern Europe 15.5% down. For the half year it’s a reduction of 4.2%, and if you take out the MTR effect, it is down 1.5%. The EBITDA at £6.6 billion before restructuring costs and before one regulatory settlement in Spain, £6.6 billion which is a 4.1% reduction year-on-year. The margin, which I’ll go through in a little bit more detail later on, at a headline level is down 0.8 percentage points; if you normalise it, it is down only 0.3 percentage points. The associate income line is the first one that has a distortion due to the US deal, so the accounting rules say that as of the date of the announcement of our intention to sell on 2 September, we no longer record the profits from the investment in Verizon Wireless, so this half year has essentially got a five month contribution in, whereas the equivalent period in the previous year had a six month contribution. That is the reason why the adjusted operating profit, down there at £5.7 billion – at a headline level it is down 8.3%, but actually if we had Verizon Wireless in on a five month basis in both periods, it is actually a 0.5% increase. So the 0.5% is the more comparable number there. So, moving then onto the lower half of the profit and loss account. The financing costs, which I will talk about in a little bit more detail later, are a little lower than in the previous year, primarily due to mark-to-market benefits. The tax is slightly lower; on the face of it, that looks fairly straightforward. We have, however, got one complexity which is the accounting rules say that we should stop booking our share of the VZW profits at the end of 2 September; the accounting rules very perversely say that we should continue to book our share of the corporate tax charge on the profits from 3 September through to the deal completing.

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