Vodafone Group Fiscal Year Pretax, Pre-Items Profit GBP10.3 Billion"
LONDON -(Dow Jones)- Vodafone Group said Tuesday that the full year pretax, pre-items profit was GBP10.3 billion (2004: GBP10.0 billion). Pretax loss was GBP4.7 billion (2004: loss GBP5.0 billion).
Net organic proportionate customer additions in the year totalled 16.3 million, representing organic growth of 12%. The closing proportionate customer base was 154.8 million in 26 markets.
Vodafone live! active devices have increased to 30.9 million.
Adoption of 3G services have increased, with 2.4 million devices at the year end.
The company has launched of Vodafone Simply, a new, easy to use service for customers who want to use voice and text services with minimum complexity, and the company has introduced Vodafone Passport, a new voice roaming price plan which provides customers with greater price clarity when using mobile voice services abroad.
Arun Sarin, Chief Executive, said: "Looking forward to current financial year, we are targeting a further buyback of GBP4.5 billion, and having rebased dividends in the year, to grow our dividend in line with underlying earnings. The Board continues to believe that the Group's balance sheet capacity provides Vodafone with the appropriate flexibility to consider selective acquisitions, whilst progressively increasing returns to shareholders.
"Shortly we expect to complete acquisitions from the TIW Group, which will add controlled businesses in both Romania and the Czech Republic. These two businesses are an excellent geographic fit and have attractive growth prospects that, we believe, are value enhancing for our shareholders.
"We have met or exceeded all of our stated targets and significantly increased returns to shareholders. Whilst competitive pressures are increasing, there is clear evidence that our global scale and scope is enabling us to deliver innovative customer propositions and to produce superior results.
"Significant opportunities exist for Vodafone to continue to deliver superior shareholder returns by executing on our strategic goals."
Organic revenue growth for the year was 6% on a statutory basis and 9% on a proportionate basis. Particularly strong markets included the U.S. and Spain, which both grew revenues at more than 20% year on year. In its core European markets, good performances were also recorded by Italy and Germany and the U.K. performed well despite a very competitive backdrop. It was disappointed with its performance in Japan, where it is working to improve further its service proposition. The company is executing a business improvement plan in the year ahead.
The platform for Vodafone to deliver a differentiated service at the lowest cost is the driving force behind the "One Vodafone" programme. It is on track to derive significant benefits from the "One Vodafone" programme and to deliver GBP2.5bn additional pre-tax operating free cash flow by the 2008 financial year.
The Group expects to deliver organic growth in proportionate mobile revenue in the 6% to 9% range. Proportionate mobile EBITDA margin is expected to be in the range of flat to 1%age point lower than that achieved in the 2005 financial year, after taking into account the effect of declines in interconnect rates and increased competition.
Capitalised fixed asset additions are anticipated to be similar to the levels for the 2005 financial year at around GBP5bn, as the Group continues the roll out of its 3G networks.
Free cash flow is expected to be in the GBP6.5bn to GBP7.0bn range. This is expected to be lower than that to be reported under IFRS for the 2005 financial year as the benefit of higher operating cash flow is more than offset by: the expectation that dividends received from Verizon Wireless will be approximately GBP0.7bn lower; and higher payments on fixed assets and tax.
Mobile Telecommunications
Turnover in the mobile business increased by 4%, or 5% on an organic basis, for the year ended Mar. 31, 2005. The increase in turnover was driven principally by organic service revenue growth, at constant exchange rates, of 5%, which improved principally as a result of a 9% increase in the Group's average controlled customer base and 10% growth in total voice usage compared to the prior year, offset by the effect of regulatory and competitive pressures on pricing and the increase in the proportion of prepaid customers across the Group.
In a highly competitive U.S. market, Verizon Wireless continued to outperform its competitors, ranking first in customer net additions for the year ended Mar. 31, 2005. The total customer base increased by 17% in the financial year to 45,452,000 at Mar. 31, 2005. At Dec. 31, 2004, U.S. market penetration reached approximately 63%, with Verizon Wireless' market share at approximately 24%.
In local currency, proportionate turnover increased by 23%, driven by the larger customer base and an increase in ARPU. ARPU growth was generated primarily by customers migrating to higher access price plans as well as growth in data products, with data revenue increasing 131% over last year and representing 5.0% of service revenue in the year.
Global Services
The One Vodafone initiatives are targeted at achieving GBP2.5bn of annual pre-tax operating free cash flow improvements in the Group's controlled mobile businesses by the year ending Mar. 31, 2008 ("2008 financial year"). The Group also expects mobile capital expenditure in the 2008 financial year to be 10% of mobile revenue as a result of the initiatives. These targets have been prepared on the basis of U.K. GAAP.
Cost initiatives are anticipated to generate improvements of GBP1.4bn, with a further GBP1.1bn from revenue initiatives. Of the GBP1.4bn of cost savings, GBP1.1bn relates to savings in operating expenses, being payroll and other operating expenses, and tangible fixed asset additions. The remaining cost saving, of GBP0.3bn, relates to handset procurement activities. The Group expects that, in the 2008 financial year, the aggregate of mobile operating expenses and tangible fixed asset additions will be broadly similar to those for the year ended Mar. 31, 2004, assuming no significant changes in exchange rates and after adjusting for acquisitions and disposals.
Revenue enhancement initiatives are expected to deliver benefits equivalent to at least 1% additional revenue market share for the Group's controlled mobile businesses in the 2008 financial year compared with the 2005 financial year. The Group will measure the revenue benefits in its five principal controlled markets compared to its established competitors. Incremental pre-tax operating free cash flow of GBP1.1bn per annum is anticipated from these benefits, with the majority expected to be derived from enhanced handset offerings in addition to improved customer management and roaming.
The One Vodafone programme continues to make progress in delivering the benefits of global scale and scope to the Group. Activity in the 2005 financial year has been to establish the internal structure, organisation and detailed plans for each area to deliver the One Vodafone targets.
Vodafone live!, the Group's integrated communications and multimedia proposition, initially launched in October 2002, has continued to grow strongly. The proposition, targeted primarily at the young adult ("young active fun") segment, has been launched in six new markets since Mar. 31, 2004, bringing the total number of countries now offering Vodafone live! to 22, comprising 15 controlled networks, 4 of the Group's associated companies and 3 Partner Networks. New markets added in the 2005 financial year include Malta, Austria, Belgium, Croatia and Slovenia. There were 30.9 million Vodafone live! active devices, including 12.8 million in Japan, on controlled networks at Mar. 31, 2005, with an additional 3.2 million devices connected in the Group's associated companies.
In November 2004, the Group launched Vodafone live! with 3G across 13 markets with an initial portfolio of 10 devices. At Mar. 31, 2005, there were 2.1 million devices on controlled networks capable of accessing the Vodafone live! with 3G portal.
Business services
At Mar. 31, 2005, there were 0.5 million registered Vodafone Mobile Connect data cards on the Group's controlled networks, including 0.3 million 3G/GPRS data cards.
Exceptional items The exceptional operating cost of GBP315 million in the year ended Mar. 31, 2005 is due to an impairment of the carrying value of goodwill relating to Vodafone Sweden. The impairment results from recent fierce price competition in the Swedish market combined with onerous 3G licence obligations. Net exceptional operating income for the previous financial year of GBP228 million comprised GBP351 million of expected recoveries and provision releases in relation to a contribution tax levy on Vodafone Italy, net of GBP123 million of restructuring costs, principally in the U.K. The net exceptional non-operating credit for the year ended Mar. 31, 2005 of GBP13 million (2004: charge of GBP103 million) principally relates to profits on disposal of fixed asset investments. The prior year charge principally related to a loss on disposal of the Japan Telecom fixed line operations.
During the year ended Mar. 31, 2005, the Group increased its net cash inflow from operating activities by 3% to GBP12,713 million and generated GBP7,847 million of free cash flow. Free cash flow decreased from the prior financial year, principally due to one-off cash receipts in the prior year, including GBP572 million received from the closure of financial instruments and GBP198 million from the fixed line business in Japan prior to its disposal.
The Group's consolidated net debt position at Mar. 31, 2005 was GBP8,339 million, reduced from GBP8,488 million at Mar. 31, 2004, principally as a result of the cash flow items above, share purchases, equity dividend payments and GBP143 million of foreign exchange movements.
(END) Dow Jones Newswires"
Posted to the site on 24th May 2005
