Vodafone treading water in half year financial statement

Group revenue was up 0.2% on an organic basis but down -7.4% to £21.8 billion on a reported basis. Organic service revenue declined -0.4% in the first half of the financial year, and -1.4% in Q2. Excluding the impact of mobile termination rate (‘MTR’) cuts, service revenue growth in the first half was 1.4%. We achieved good growth in our emerging market operations and from the continued uptake of data across the Group, but this was offset by macroeconomic pressures in Southern Europe.

Group EBITDA was down -2.9% on an organic basis, but down -11.7% to £6.6 billion on a reported basis, mainly due to adverse foreign exchange rate movements. EBITDA margin was down 1.0 percentage points year-on-year primarily as a consequence of the revenue decline in Italy, ongoing weakness in brand perception in Australia and restructuring costs in Germany, partly offset by margin improvements in South Africa and India.

In Northern and Central Europe, service revenue was up 1.5% in H1, with growth of 0.7% in Q2. The growth drivers in Q2 were Germany (+1.8%) and Turkey (+18.0%), while the UK and the Netherlands deteriorated by -3.2% and -2.3% respectively.

EBITDA for the region was -3.3%* down year-on-year at £2.8 billion, with reported EBITDA margin down -2.4 percentage points year-on-year. This decline was driven by Germany and the UK, as well as the inclusion of CWW for the first time. The margin in Turkey continued to improve.

Vittorio Colao, Group Chief Executive, commented “We have continued to make progress on our strategic priorities over the last six months, with good growth in data and emerging markets in particular. In the short-term, however, our results reflect tougher market conditions, mainly in Southern Europe.

“We remain very positive about the longer-term opportunities, and our Vodafone 2015 strategy reflects our confidence in the future. This is based on a new strategic approach to our consumer offer and pricing in Europe now being rolled out, an increasing focus on unified communications in enterprise, and an attractive and growing exposure to emerging markets. Fundamental to the success of this strategy will be an ongoing enhancement of the consumer and enterprise customer experience through continuous investment in high speed data networks, and an increased drive towards standardisation and simplification across the Group to maximise cost efficiency and accelerate execution.”

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