Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16 (6-k)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

Report of Foreign Private Issuer

Pursuant to Rules 13a-16 or 15d-16 under

the Securities Exchange Act of 1934

Dated November 19, 2020

Commission File Number: 001-10086

VODAFONE GROUP

PUBLIC LIMITED COMPANY

(Translation of registrant’s name into English)

VODAFONE HOUSE, THE CONNECTION, NEWBURY, BERKSHIRE, RG14 2FN, ENGLAND

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F

Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN EACH OF THE REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 333-219583), THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-81825) AND THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-149634) OF VODAFONE GROUP PUBLIC LIMITED COMPANY AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.

This report on form 6-K includes the following items:

(a)

Summary;

(b)

Strategic review;

(c)

Financial performance;

(d)

Cash flow, capital allocation and funding; and

(e)

Unaudited condensed consolidated financial statements of Vodafone Group Plc for the six months ended 30 September 2020.

Certain information listed above is taken from the previously published results announcement of Vodafone Group Plc for the six months ended 30 September 2019 (the ‘half-year financial report’). This report on Form 6-K does not update or restate any of the financial information set forth in the half-year financial report.

This report on Form 6-K should be read in conjunction with the Group’s annual report on Form 20-F for the year ended 31 March 2020. In particular the following sections:

the information contained under “Key performance indicators” on pages 26 and 27;

the information contained under “Chief Financial Officer’s review” on pages 28 and 29;

the information contained under “Our financial performance” on pages 30 to 39; and

the consolidated financial statements on pages 141 to 230.

The terms “Vodafone”, the “Group”, “we”, “our” and “us” refer to Vodafone Group Plc (“the Company”), and as applicable, its subsidiaries and/or its interest in joint ventures and/or associates.

Vodafone Group Plc ⫶ H1 FY21 results

Summary ⫶ Resilient performance

Basis of presentation

All amounts in this document marked with an “*” represent organic growth, which presents performance on a comparable basis, both in terms of merger and acquisition activity and movements in foreign exchange rates. Organic growth is a non-GAAP performance measure. See “Use of non-GAAP financial information” on page 62 for further details and page 64 for the location of the reconciliation to the respective closest equivalent GAAP measure.

Net debt at 30 September 2020 marked with a “**” has been adjusted to exclude derivative gains in cash flow hedge reserves, the corresponding losses for which are not recognised on the bonds within net debt and which have significantly increased due to COVID-19 related market conditions. The ratio of net debt to adjusted EBITDA is calculated using adjusted EBITDA for a rolling 12 month period, normalised for acquisitions and disposals within the period.

Financial performance

Group revenue declined by 2.3% to €21.4 billion (FY20 H1: €21.9 billion), as good underlying momentum and the benefit from the acquisition of Liberty Global’s assets in Germany and CEE was offset by lower revenue from roaming, visitors and handset sales, foreign exchange headwinds and the disposal of Vodafone New Zealand.

The Group made a profit for the period of €1.6 billion reflecting our resilient financial performance during the first half of FY21. Basic earnings per share was 4.45 eurocents, compared to a loss per share of 7.24 eurocents in the six months ended 30 September 2019. Losses were recognised in the comparative period relating to Vodafone Idea Limited, which outweighed a €1.1 billion profit recorded on the disposal of Vodafone New Zealand. The current period includes a gain of €1.0 billion arising on the merger of Vodafone Hutchison Australia into TPG Telecom Limited.

Group service revenue decreased by 0.8%* (Q1: -1.3%*, Q2: -0.4%*) to €18.4 billion (FY20 H1: €18.5 billion) as good underlying momentum was offset by lower revenue from roaming and visitors. Adjusted EBITDA decreased by 1.9%* to €7.0 billion (FY20 H1: €7.1 billion) as a decline in revenue was partially offset by good cost control, with a net reduction in our Europe and Common Functions operating expenditure of €300 million during H1. The adjusted EBITDA margin was 0.1* percentage points lower year-on-year at 32.8%.

Cash flow, funding & capital allocation

Free cash flow (pre-spectrum and restructuring) increased by 14.5% to €0.5 billion (FY20 H1: €0.4 billion) supported by the resilient adjusted EBITDA performance and higher dividends received from associates and investments, partially offset by higher cash interest and tax. Licence and spectrum payments for the period totalled €0.3 billion (FY20 H1: €0.1 billion) and restructuring and other payments totalled €0.3 billion (FY20 H1: €0.3 billion). Free cash flow was -€101 million (FY20 H1: €34 million).

Net debt adjusted for mark-to-market gains deferred in hedging reserves at 30 September 2020 was €44.0** billion compared to €42.2** billion as at 31 March 2020. This increase in net debt reflects the FY20 final dividend payment of €1.2 billion, mark-to-market movements on derivatives, and foreign exchange losses, partially offset by proceeds of €0.4 billion following the subsequent sale of our 4.3% stake in INWIT in April 2020.

We aim to maintain our financial leverage within a range of 2.5-3.0x net debt to adjusted EBITDA. As at 30 September 2020, financial leverage was 3.0x**. The interim dividend per share is 4.5 eurocents (FY20 H1: 4.5 eurocents). The ex-dividend date for the interim dividend is 17 December 2020 for ordinary shareholders, the record date is 18 December 2020 and the dividend is payable on 5 February 2021.

Vodafone Group Plc ⫶ H1 FY21 results

Strategic review ⫶ Delivering our strategic priorities

In November 2018, we set out a long-term ambition to reshape Vodafone and establish a foundation from which the Group can grow in the converged connectivity markets in Europe, and mobile data and payments in Africa. This ambition was to be delivered through three strategic priorities: to deepen engagement with our customers; to accelerate our transformation to a digital first organisation; and improve the utilisation of our assets. Given the ambition to reshape Vodafone, we added a fourth strategic priority to optimise the portfolio of our operations.

During the first half of FY21, we have executed at pace across all four priorities. Highlights of activity during the period include:

Deepening customer engagement, with mobile contract customer loyalty improved year-on-year for an 8^th successive quarter

we have 52 million homes passed with a 1 Gigabit capable fixed-line network;

we have launched 5G in 127 cities across 9 of our European markets;

in response to the trading conditions related to the pandemic, we accelerated a series of cost saving activities, resulting in a €300 million net reduction in our Europe and Common Functions operating expenditure;

we have secured mobile wholesale agreements with PostePay in Italy with more than four million connections, Asda Mobile in the UK, and Forthnet in Greece;

we completed the merger of Vodafone Hutchison Australia with TPG Telecom to establish a fully integrated telecommunications operator in Australia. We now hold an economic interest of 25.05% in the Australian Stock Exchange listed entity; and

we are on track for the IPO of Vantage Towers in early 2021.

The table below summarises the progress against our strategic priorities in H1 FY21.

Strategic progress summary	Units	H1 FY21		H1 FY20
1. Deepening customer engagement
Europe mobile contract customers¹	million		65.0		63.8
Europe broadband customers¹	million		25.4		24.5
Europe on-net Gigabit capable connections¹	million		38.9		23.5
Europe Consumer converged customers¹	million		7.5		6.8
Europe mobile contract customer churn	%		12.9		14.6
Africa data users²	million		84.5		81.2
M-Pesa transaction volume²	billion		6.8		6.0
Business fixed-line service revenue growth	%		4.2		2.9
IoT SIM connections	million		112		94

2. Accelerating digital transformation
Europe net opex savings³	billion		0.3		0.2
Europe digital channel sales mix⁴	%		22		20
Europe frequency of customer contacts p.a	#		1.4		1.6
Europe MyVodafone app penetration	%		62		63

3. Improving asset utilisation
Average Europe monthly mobile data usage per customer	GB		6.2		4.2
Europe on-net NGN broadband penetration¹	%		30		29

Notes:

1. Including VodafoneZiggo | 2. Africa including Safaricom, Ghana and Egypt | 3. Europe and common function operating costs. | 4. Figure presented in H1 FY21 column reflects Europe digital channel sales mix in Q2 FY21 as the mix in Q1 FY21 was impacted by retail restrictions due to COVID-19.

Vodafone Group Plc ⫶ H1 FY21 results

It is two years since we set out our strategic priorities to focus the Group on the converged connectivity market in Europe, and mobile data and payments in Africa. This first phase of our strategic transformation has progressed well and in this strategic review section we illustrate that:

We are delivering our strategic priorities at pace to reshape Vodafone; and

We are well-positioned for our next phase to create sustainable stakeholder value.

A ⫶ Delivering our strategic priorities at pace to reshape Vodafone

The actions we have taken in the last two years and their results are summarised in the sub-sections below. Our actions have delivered a more consistent revenue growth profile, with our service revenue trends remaining resilient despite the direct impacts of the COVID-19 pandemic on revenue from roaming and visitors.

We are firmly on track to deliver our original three-year target of at least €1.2 billion of net savings from operating expenses in Europe and Group common functions, having reached €1.1 billion of savings between FY19 and H1 FY21. We have extended our ambition to at least another €1 billion of savings over the next three years. This focus on efficiency, delivered through standardisation and integration of our technology support operations, has enabled our adjusted EBITDA margin to be resilient during the pandemic and remain broadly stable at 32.8%.

Through improved asset utilisation and a disciplined approach to balancing our capital allocation priorities, we have delivered €10.7 billion of free cash flow (before spectrum payment and restructuring costs) over the last two years. Despite the strong delivery of our strategic priorities at pace, our post-tax return on capital employed (‘ROCE’) of 4.0% remains below our cost of capital. On page 11, we have set out our growth model and capital allocation framework, and explained how we will drive shareholder returns through efficiency and growth.

Deepening customer engagement ⫶ Delivering more consistent commercial performance

In 2018, we set out our plans to deliver consistent commercial performance in each of our markets, following a period of more mixed results. The major actions we have undertaken include:

Launching speed-tiered, unlimited data mobile plans in 9 markets. This has enabled us to stabilise and grow our higher value customer base and increase average revenue per user (‘ARPU’). In Italy, the UK and Spain, the ARPU uplift was approximately by €2-5 per month. We now have over six million active unlimited data customers across our markets.

Launching and embedding ‘second’ brands such as, ho. in Italy, VOXI in the UK, Lowi in Spain and Otelo in Germany to compete more effectively and efficiently in the value segment. Alongside our speed-tiered, unlimited data plans, we are now competing effectively across all segments of the markets in which we operate. We now have 4.5 million active users across these four brands.

We have maintained strong commercial momentum in our fixed business and over the past 24 months we have added 3.1 million NGN fixed-line customers in Europe. We also have converged customer plans available in all major markets. These include a combination of mobile connectivity, fixed-line connectivity and a range of additional products and services, such as TV and IoT connections.

We have invested centrally to develop a unified digital customer experience through shared online platforms and the MyVodafone mobile app. This investment has supported an approximate 10% reduction in the frequency of customer contacts per year to 1.4 and the app is used by 62% of our mobile customers in Europe.

Vodafone Group Plc ⫶ H1 FY21 results

Accelerating digital transformation ⫶ Best-in-class operational efficiency through standardisation

Through standardisation, digitalisation and sharing of processes we recognised an opportunity to significantly improve our operational efficiency. We set an ambitious goal to generate at least €1.2 billion of net savings from our Europe operating expenses over 3 years. In just over two years, we have already delivered €1.1 billion of this original target and have clear line-of-sight to the €1 billion targeted over the FY21-FY23 period. Key activities that have contributed to this performance include:

Whenever possible our back office activities are delivered though our three Shared Service Centres (‘_VOIS’) in Egypt, India and Eastern Europe. Over a third of the targeted €1.2 billion net opex savings in Europe and Common Functions are being generated by integrating activities into _VOIS and driving digitisation at speed.

We have invested in customer support technology. Using a combination of artificial intelligence and machine-learning tools, we have developed ‘TOBi’, a fully automated customer support assistant available online and via the MyVodafone app. Our investments in this area have resulted in 64% of customer support interactions with TOBi being resolved with no human interaction.

We are investing in shared cross-market digital sales platforms. These enable best-in-class customer journeys enabling full sales activities without manual intervention. This has led to over 22% of our contract mobile and fixed sales in Q2 being completed through a fully digital customer journey in Germany, Italy, the UK and Spain. This in turn has enabled us to reduce our retail footprint by 728 stores over the last two years.

Improving asset utilisation ⫶ Facilitating efficient use of capital through network sharing

Over the last decade, the level of ROCE achieved by the telecommunications sector has significantly reduced to below its weighted average cost of capital. This has been driven by a number of factors, including market structures, capital expenditure requirements for advancements in network infrastructure, mobile spectrum licenses and a challenging regulatory environment. As a result, two years ago we began a series of activities to improve our asset utilisation to support a recovery in ROCE. These actions have included:

Reaching network sharing agreements with leading mobile network operators in each of our European markets. This includes Deutsche Telekom in Germany, Telecom Italia in Italy, Telefonica in the UK and Orange in Spain. We estimate the combined effect of network sharing arrangements in Europe reduces our future investment requirement to deploy 5G by c. €2.5 billion over 10 years.

Established Vantage Towers as a separate vehicle to consolidate the ownership and operations of our passive mobile network infrastructure, enabling a greater focus on delivering operational efficiencies through dedicated, commercially-oriented and specialised teams.

We have signed significant wholesale agreements in both our fixed and mobile networks, on terms that maintain the differentiation of our retail offers. In 2019, we began a wholesale agreement with Telefonica Deutschland for access to our fixed-line infrastructure in Germany and during H1 FY21 we signed mobile wholesale agreements with PostePay in Italy (more than four million connections), with Asda Mobile in the UK and Forthnet in Greece.

Whilst significant progress has been made, much more work is required to both improve our own asset utilisation and to work collaboratively with policy makers and regulators to ensure that we can continue to invest in our Europe and Africa communications infrastructure, whilst also earning a fair return on the capital we deploy.

Vodafone Group Plc ⫶ H1 FY21 results

Vantage Towers

The IPO of Vantage Towers is on track for early calendar 2021. Vantage Towers is one of Europe’s largest and most geographically diverse infrastructure operators, with significant growth opportunities alongside long-term, inflation-linked contracts. The three important aspects relating to Vodafone’s ongoing relationship with Vantage Towers are:

Vodafone is committed to ensuring that Vantage Towers is operationally independent. This is demonstrated through the long-term Master Services Agreement (‘MSA’), clear management incentive structures, and a two-tier governance structure led by an independent Chairman;

Vodafone will strive to ensure that the capital structure for Vantage Towers enables it to take full advantage of its organic and inorganic growth opportunities; and

Vodafone is committed to supporting Vantage Towers’ growth ambition and will ensure shareholder value is being optimised.

Optimising the portfolio ⫶ Significant & fast execution to enable strategic priorities

In order to achieve our strategic objectives to focus on converged connectivity markets in Europe, and mobile data and payments in Africa, we began a large programme to rationalise our portfolio in 2019. Our portfolio optimisation programme had three overriding objectives as set out below.

Objective	Total value	Transactions
1. Focus on Europe & Africa	€4.4 billion €5.1 billion	Disposal in New Zealand, Malta and Egypt¹ Mergers in Australia, Africa and India (Vodafone Idea and Indus Towers¹)
2. Achieved convergence with local scale	€18.6 billion	Acquisitions in Germany, Greece & Eastern Europe
3. Enable structural shift in asset utilisation	€6.5 billion TBA	Tower mergers in Italy & Greece¹ Ongoing IPO of Vantage Towers¹

1 Transaction announced but not yet closed

Liberty acquisition ⫶ Transformation into Europe’s leading connectivity provider

The defining corporate transaction of our recent history was the acquisition of Liberty Global’s assets in Germany and Central Eastern Europe, which completed in July 2019. This transaction has enabled Vodafone to become the clear converged Gigabit challenger in Germany with 55.2 million SIM connections, 10.9 million fixed-line connections and 13.5 million TV subscribers. Following completion of the transaction, we have worked at pace to upgrade the cable network to Gigabit speeds and deliver the targeted cost and capex synergies. Over the past year, we have increased the number of homes in the Gigabit capable footprint from 9.7 million to 21.8 million, representing over half of the country and over 90% of our cable footprint. Our acquisition plans targeted €535 million of cost and capex synergies over five years. We have already executed actions that will deliver over €250 million of these synergies, which is around six months ahead of schedule.

Vodafone Group Plc ⫶ H1 FY21 results

B ⫶ Focused on growth with unique capabilities to create sustainable value

Following our strategic activity to reshape the Group, we are focused on growing our converged connectivity markets in Europe, and mobile data and payments in Africa. We have five principle growth levers available to create shareholder value through building our ROCE to a sustainable level above our weighted-average cost of capital:

We will develop the best connectivity products and the best connectivity platforms;

We will invest in and operate the co-best Gigabit connectivity infrastructure to support our connectivity products and platforms;

We will integrate and operate leading digital technology architecture to support our digital connectivity infrastructure;

We will drive further simplification in our scaled Group operating model in order to support our investments; and

We will use our Social Contract to build partnerships with governments and regulators, shape a healthier industry structure, and improve returns for all stakeholders.

1 ⫶ Best connectivity products & platforms

In Europe, we are the leading converged connectivity provider with 7.5 million converged customers, 114 million mobile connections, 139 million marketable NGN broadband homes, cover 98% of the population in the markets we operate in with 4G, and have launched 5G in 127 cities in 9 markets in Europe. We have achieved this leading position by focusing on our core fixed and mobile connectivity. We are enhancing our core connectivity products through capacity and speed upgrades, unlimited mobile plans, distinct branding across customer segments and convergence bundles. Alongside optimising our core, we have also developed platforms that leverage our connectivity base further by providing ‘best on Vodafone’ experiences. For example, our TV proposition now has over 22 million subscribers in 11 markets. Our consumer IoT offering has now connected over 500,000 devices such as the Apple Watch OneNumber service and our ‘Curve’ mobile tracking device. In addition, our new smart kids watch, developed with The Walt Disney Company, will launch before Christmas.

In Africa, we are the leading provider of mobile data and mobile payment services. We have 171 million customers in 8 markets and these countries represent 40% of Africa’s total Gross Domestic Product. We are the leading mobile connectivity provider by revenue market share in 7 markets. Excluding Kenya, we cover 70% of the population in the markets in which we operate with 3G mobile services and 60% with 4G. Our M-Pesa financial services platform processed almost 13 billion transactions over the last 12 months. M-Pesa offers a unique opportunity to extend our reach further into financial services. Through a strategic technology partnership with Alipay, we are developing a new ‘super app’ that will offer customers a unified suite of financial services, entertainment, shopping, merchant services and direct marketing.

Vodafone Business accounts for 27% of Group service revenue, has customers in 200 markets, and provides services to SMEs, large national corporates, and 1,240 multinational customers. In each of our four largest European markets, we have a unique position and focus on digital segments that are growing. Our incumbent competitors have greater exposure to declining legacy fixed and managed services businesses, whilst we are able to accelerate our position in digital connectivity services such as SD-WAN, IoT and cloud. As the largest business-to-business connectivity provider in Europe and as a growth business, we are the strategic partner of choice for large global technology companies such as Microsoft, Accenture, Amazon, and IBM. Over the last two years, we have signed agreements with each of these firms in areas such as managed security services, mobile edge computing, managed cloud services and unified connectivity. These strategic alliances provide us with an unrivalled position to provide SME, large and multi-national business customers with a full suite of next-generation connectivity services.

Vodafone Group Plc ⫶ H1 FY21 results

2 ⫶ Co-best Gigabit connectivity infrastructure

In order to provide our customers with the best connectivity products and ‘best on Vodafone’ connectivity platforms, we need to have co-best Gigabit network infrastructure in each of our markets. Importantly, we must also ensure that our customers recognise and value the quality of our Gigabit network infrastructure.

In mobile, we are currently deploying mobile network infrastructure to deliver 5G connectivity. So far, we have launched 5G services in 127 cities, in 9 markets in Europe. 5G services provide ‘real world’ speeds well in excess of 100 Mbps, compared with 4G that provides ‘real world’ speeds of 20-35 Mbps. In addition to the speed advantage, 5G networks that are ‘built right’ and with longer-term competitive advantage in mind, provide significant capacity and efficiency advantages, ultimately lowering the cost per gigabyte of mobile data provision. However, the European mobile sector is also utilising dynamic spectrum sharing (‘DSS’) technology to share existing 4G spectrum to provide a more limited 5G experience. DSS 5G does have a smaller role in a targeted rollout, but requires RAN upgrades and leads to reduced capacity efficiency. We have been targeted and disciplined with our acquisition of spectrum in each of our local market operations, with spectrum available in each of the low, mid and high bands in our major Europe markets. This ensures that we do not need to restrict long-term network infrastructure through DSS technology and can invest in building 5G network the right way, to provide the backbone for Gigabit networks for the decade ahead.

Complementing our 5G mobile network infrastructure is our NGN fixed-line network infrastructure. We can now reach 139 million homes across 12 markets in Europe (including VodafoneZiggo). This marketable base is connected through a mix of owned NGN network (55 million homes, of which 39 million are Gigabit-capable), strategic partnerships (22 million homes) and wholesale arrangements (62 million homes). This network provides us with the largest marketable footprint of any fixed-line provider in Europe. In Germany, our footprint of 24.1 million households is being progressively upgraded to the latest DOCSIS 3.1 standard, which provides us with a structural speed advantage over the incumbent. Over the medium-term we will continue to increase the proportion of our Europe customers that can receive Gigabit-capable connections through our owned network and continue to work with strategic partners to provide cable and fibre access.

3 ⫶ Leading digital architecture

Enhanced digital technology is critical for efficient and reliable converged connectivity networks. We are beginning a multi-year journey to redefine our technology architecture following a ‘Telco as a Service’ (‘TaaS’) model. Our TaaS model is based on two existing layers of inter-connected digital technology.

We have created a standardised suite of customer and user-facing interfaces for an entire omni-channel journey – OnePlatform. The OnePlatform suite includes the MyVodafone mobile app, our browser-based portal, our TOBi AI assistant, and the Retail Point of Sale platform that powers our physical and digital stores.

The OnePlatform suite is powered by our Digital eXperience Layer (‘DXL’). DXL refers to the abstraction layer in our IT architecture which separates customer-facing micro-services requiring frequent and rapid adjustment, such as prepaid top-ups or customer onboarding, from heavier back-end systems such as billing and CRM. The platform uses common software, with open-source components and standardised APIs to enable easy integration and interconnection.

We have also moved more than half our core network functions to the Cloud in Europe, supporting voice core, data core and service platforms on over 1,300 virtual network functions. In Europe, we now operate a single digital network architecture across all markets, enabling the design, build, test and deployment of next generation core network functions more securely, 40% faster and at 50% lower cost. Similarly, more than half of our IP apps are now virtualised and running in the cloud.

This standardised approach to development and deployment of digital architecture is enabling us to provide an industry-leading digital experience, delivered in line with our expectation to be the most efficient in our sector.

Vodafone Group Plc ⫶ H1 FY21 results

4 ⫶ Simplified & scaled Group operating model

The connectivity value chain involves a high degree of repeatable processes across all of our markets, such as procurement, network deployment, network operations, sales activities, customer support operations, and billing and transaction processing. This has provided us with a significant opportunity to standardise processes across markets, relocate operations to lower cost centres of excellence and apply automation at scale.

We have consolidated our supplier management function into a single, centralised procurement company. The Vodafone Procurement Company manages global tenders and establishes standard catalogues which are made available to our local market operations through a unified end-to-end enterprise resource planning (‘ERP’) system. Leveraging the scale of our combined spend, this allows us to generate over €600m in annual savings compared to standalone operators. Once the equipment is acquired, we efficiently manage our inventory through our Network Stock System and ensure that we minimise time to deployment, including by moving stock across markets as needed.

We monitor Network Operations for all our markets through international centres of excellence that run these processes for the entire Group. Our regional Network Operations Centres monitor operations of our fixed and mobile networks across geographies following standard protocols that maximise productivity and automation. As an example, a third of new Network Operations tickets are fully automated. Similar integrations have been executed across our IT operations as well as Finance and HR processes.

Whenever possible our back office activities are delivered though our 3 Shared Service Centres (‘_VOIS’) in Egypt, India and Eastern Europe. Over a third of the targeted €1.2 billion net opex savings in Europe and Common Functions are being generated through integrating activities into _VOIS and driving digitisation at speed.

Finally, Vodafone Roaming Services manages our global roaming relationships with other operators and our Partner Market’s team works with 30 local operators in building strategic alliances and extending our reach into different markets. These functions generate over €250m revenue and cost savings annually.

Approximately 30% of the Group’s headcount works in _VOIS and shared operations, and in the last two and a half years we have automated over 4,600 roles. We are continuing to transform the business and evolve the Group digital toolset – including TOBi and Robotic Process Automation – in order to further our productivity leadership.

5 ⫶ Social Contract shaping industry structure to improve returns

Over the last decade, the performance of the European telecommunications industry has been weaker than other regions, which market commentators attribute to its regulatory environment. European regulation differs in both its fragmented approach to spectrum licensing and market structure, compared with North America or Asia. A firm stance on pursuing four-player market structures in certain Member States has artificially driven further price deflation and has eroded sustainable investment incentives. When combined with the capital-intensive nature of network infrastructure and higher ongoing spectrum costs, this has led to return on capital for the industry being below its weighted-average cost of capital. This limits the ability of operators to invest capital in improving digital connectivity network infrastructure.

In 2019 we introduced our ‘Social Contract’, which represents the partnerships we want to develop with governments, policy makers and civil society. We believe the industry needs a pro-investment, pro-innovation partnership approach to ensure Europe can compete in the global digital economy and be at the forefront of technology ecosystems. This requires an end to extractive spectrum auctions, support for equipment vendor diversity, a defined framework for network sharing, and regulation that enables the physical deployment of network infrastructure, as well as rewards quality – such as security, resilience and coverage – with fair prices.

Following our efforts and society’s increasing reliance on our connectivity infrastructure and services, notably during the COVID-19 pandemic, we are beginning to see positive signs of a more healthy industry structure emerge.

Vodafone Group Plc ⫶ H1 FY21 results

Recent spectrum auctions in 2020 in the Netherlands and Hungary were conducted in a positive manner and completed with spectrum being assigned at sustainable prices, in line with European benchmark levels. Authorities are recognising that operators need to be able to focus available private funds for fast deployment of new infrastructure & services. We have also seen national governments increase support such as state-subsidies for rural networks in the UK and Germany, and planning permission exemptions for tower infrastructure in Germany. A key area of focus for 2021 will be shaping Member State recovery funds and how the 20% of the €750 billion EU Recovery Fund targeted for digital initiatives is distributed. Positive progress has already been achieved through national initiatives with 90% subsidies for infrastructure spend in ‘whitespot’ areas in Germany; vouchers to support new NGN connections in Italy; funding to support the cessation of 3G networks in Hungary; and €3 billion of funding for health initiatives, including eHealth, in Germany.

Our growth model ⫶ Disciplined capital allocation to drive shareholder returns

The objectives of our portfolio activities over the last two years have been to focus on our two scaled geographic platforms in Europe and Africa; achieve converged scale in our chosen markets; and deliver a structural shift in asset utilisation. With these objectives substantially achieved, we are now a matrix of country operations and product & platforms, and will remain disciplined in managing our portfolio. Our ongoing and rigorous assessment of our portfolio is following three principles. Firstly, we aim to continue to focus on the converged connectivity markets in Europe, and mobile data and payments in Africa. Secondly, we aim to achieve returns above the local cost of capital in all of our markets. Thirdly, we consider whether we are the best owner (i.e. whether the asset adds value to the Group and the Group adds value to the asset) and whether there are any pragmatic and value-creating alternatives.

Our growth strategy is grounded in our purpose, to ‘Connect for a better future’ and create value for society and shareholders. Our goal is to deliver a sustainable improvement in ROCE through a combination of consistent revenue growth, ongoing margin expansion, strong cash flow conversion, and disciplined allocation of capital. We have five principle growth levers available to create shareholder value:

Develop the best connectivity products and platforms;

Invest in the co-best Gigabit connectivity infrastructure;

Operate leading digital technology architecture;

Operate a simplified and scaled Group operating model; and

Use our Social Contract to shape a healthier industry structure.

Our capital allocation priorities are to support investment in connectivity infrastructure; reduce leverage towards the lower end of our target range of 2.5-3.0x net debt to adjusted EBITDA; and deliver attractive returns to shareholders.

Looking ahead ⫶ Further investor interaction to discuss key growth drivers

We plan to share further insight into our growth plans during 2021 and will be hosting a series of virtual investor briefings comprising pre-recorded video presentations from functional and technical specialists, together with live webcast Q&A sessions. These events include:

Vinod Kumar (CEO Vodafone Business) provides a deep-dive into Vodafone Business operations & strategy on 18 March 2021;

Nick Read (Group CEO) & Margherita Della Valle (Group CFO) present full year results and further detail on the next phase of our transformation on 18 May 2021;

Ahmed Essam (Chief Commercial Officer) presents our strategy for the best connectivity products and platforms on 9 June 2021;

Dr Hannes Ametsreiter (CEO Germany) presents a deep-dive into our largest market, Germany, on 7 September 2021; and

Johan Wibergh (Group Technology Officer) presents our 2025 technology vision on 14 December 2021.

Vodafone Group Plc ⫶ H1 FY21 results

Our purpose ⫶ We connect for a better future

We believe that Vodafone has a significant role to play in contributing to the societies in which we operate and our sustainable business strategy helps the delivery of our 2025 targets across three pillars: Digital Society; Inclusion for All; and Planet. We have continued to make progress against our purpose strategy and will provide a full update on our progress at the end of our financial year.

In July 2020, we announced that our Europe network will be powered by 100% renewable electricity no later than July 2021. Our Europe-wide ‘Green Gigabit Net’ commitment brings forward by three years an earlier pledge to source 100% renewable electricity for the company’s fixed and mobile networks by 2025. We have made significant progress as the share of total renewable electricity purchased in Europe more than doubled to over 75% by September 2020. We remain on target to reach 100% renewable electricity in our Europe network by July 2021.

Whilst we are committed to eliminating our own environmental footprint, we are increasingly seeking to use our connectivity and technology to support a more sustainable society, enabling others to reduce their environmental impact. We have also introduced a new target to enable our Business customers reduce their own carbon emissions by a cumulative total of 350 million tonnes globally over 10 years between 2020 and 2030. This target will largely be delivered via Vodafone’s IoT services, including logistics and fleet management, smart metering and manufacturing activities. Other savings are expected to be made through healthcare services, cloud hosting and home working.

In addition, we are currently finalising a Science Based Target, which we plan to announce before the end of 2020. Our target will be aligned to limiting global temperature rise to below 1.5°C and reaching net-zero emissions no later than 2050. This will require a significant reduction in our direct carbon emissions as well as setting targets for indirect emissions (including suppliers and joint ventures).

We have also embedded our purpose commitments in our supplier selection criteria. From October 2020, ‘purpose’ accounts for 20% of our evaluation criteria for ‘Requests For Quotation’ (‘RFQ’) to provide Vodafone with products or services. Suppliers will be assessed on their commitment to diversity & inclusion, the environment, and health & safety in categories where it is a risk. Our approach to supplier selection supports our aim of building a digital society that enhances socio-economic progress, embraces everyone and does not come at the cost of our planet.

COVID-19 ⫶ Our five-point plan to support economic recovery

During the COVID-19 crisis, the connectivity we provided was a lifeline, enabling people to work, allowing businesses to remain operational, supporting the delivery of emergency services and giving access to education. We enabled people to stay in touch with their families and their friends. We recognise that our role in society is more vital than ever, underpinned by our commitment to building a resilient, inclusive and sustainable digital society .

As we look at the challenging economic period ahead, just as we were there for the emergency response phase, we are committed to playing a key role in supporting Europe’s economic and social recovery. As a result, we have identified five key areas where Vodafone can clearly prioritise activity and support governments’ digital agenda. We will:

expand and future-proof our network infrastructure with next-generation fixed line and mobile technologies;

further support governments as they seek to integrate eHealth and eEducation solutions into their “new normal” public service frameworks;

enhance digital access for the most vulnerable and support digital literacy;

promote the widespread adoption of digital technologies for all businesses, with a particular emphasis on SMEs; and

support governments’ pandemic exit strategies through targeted deployment of digital technology.

Vodafone is ready to do everything in its power to support the recovery, whilst emerging a stronger business, playing an ever more critical role in society. In our African markets, we have deployed the same five-point plan approach, but are also prioritising furthering financial inclusion.

Vodafone Group Plc ⫶ H1 FY21 results

Outlook ⫶ Operating model delivering relative resilience

Outlook for FY21

Our financial performance during the first six months of the year has been in line with our expectations and demonstrates the relative resilience of our operating model. We remain focused on the delivery of our strategic priorities and have further improved loyalty, as our customers place greater value on the quality, speed and reliability of our networks.

FY21 Guidance

As a result of our resilient performance in H1, and based on the current prevailing assessments of the global macroeconomic outlook:

Adjusted EBITDA is expected to be between €14.4 – 14.6 billion in FY21; and

We continue to expect free cash flow (pre-spectrum and restructuring) in FY21 to be at least €5 billion.

Financial modelling considerations & assumptions

The guidance above reflects the following:

The de-consolidation of Vodafone Italy Towers following its merger with INWIT (completed in March 2020);

The sale of Vodafone Malta (completed in March 2020);

Vodafone Egypt remains within guidance;

No significant change in the Group’s effective cash interest rate or cash tax rate is assumed;

Foreign exchange rates used when setting guidance were as follows:

EUR 1 : GBP 0.87;

EUR 1 : ZAR 20.59;

EUR 1 : TRY 7.50; and

EUR 1 : EGP 17.02.

Free cash flow guidance excludes the impact of license and spectrum payments, restructuring costs, and any material one-off receipts or tax related payments; and

Guidance assumes no material change to the structure of the Group or any fundamental structural change to the Eurozone

Vodafone Group Plc ⫶ H1 FY21 results

Financial performance ⫶ Resilient performance in line with expectations

Resilient financial performance during the first half of FY21, in line with our expectations

Group revenue declined by 2.3% to €21.4 billion, as good underlying momentum and the benefit from the acquisition of Liberty Global’s assets in Germany and CEE was offset by lower revenue from roaming, visitors and handset sales, foreign exchange headwinds and the disposal of Vodafone New Zealand

Adjusted EBITDA declined by 1.9%* to €7.0 billion as a decline in revenue was partially offset by good cost control, with a net reduction in our Europe and Common Functions operating expenditure of €300 million during H1

Free cash flow (pre-spectrum and restructuring) grew by 14.5% to €0.5 billion, supported by the resilient EBITDA performance and higher dividends from associates and investments, partially offset by higher cash interest and tax

Interim dividend per share of 4.50 eurocents, record date 18 December 2020

Group financial performance

	H1 FY21¹			H1 FY20
	€m			€m			Change (%)
Revenue		21,427			21,939			(2.3	)
- Service revenue²		18,418			18,544			(0.7	)
- Other revenue		3,009			3,395			(11.4	)
Adjusted EBITDA^2,5		7,023			7,105			(1.2	)
Depreciation and amortisation		(4,729	)		(4,874	)		3.0
Adjusted EBIT²		2,294			2,231			2.8
Share of adjusted results in associates and joint ventures³		255			(550	)		146.4
Adjusted operating profit²		2,549			1,681			51.6
Adjustments for:
- Restructuring costs³		(86	)		(163	)
- Amortisation of acquired customer base and brand intangible assets³		(364	)		(232	)
- Adjusted other income and expense³		1,184			(872	)
- Interest on lease liabilities⁴		189			163
Operating profit		3,472			577
Net financing costs		(1,427	)		(1,088	)
Income tax expense		(490	)		(1,380	)
Profit/(loss) for the financial period⁶		1,555			(1,891	)

Attributable to:
- Owners of the parent		1,314			(2,128	)
- Non-controlled interests		241			237
Profit/(loss) for the financial period		1,555			(1,891	)

Further detailed income statement information is available in a downloadable spreadsheet format at https://investors.vodafone.com/reports-information/results-reports-presentations

Notes:

The FY21 results reflect average foreign exchange rates of €1:£0.90, €1:INR 85.27, €1:ZAR 19.77, €1:TRY 8.02 and €1: EGP 18.06.

Service revenue, adjusted EBITDA, adjusted EBIT and adjusted operating profit are non-GAAP performance measures that are presented to provide readers with additional financial information that is regularly reviewed by management and should not be viewed in isolation or as an alternative to the equivalent GAAP measure. See “Use of non-GAAP financial information” on page 62 for more information.

Share of results of equity accounted associates and joint ventures presented within the Consolidated income statement includes €255 million (2019: -€550 million) included within Adjusted operating profit, €nil (2019: -€33 million) included within Restructuring costs, -€124 million (2019: -€122 million) included within Amortisation of acquired customer base and brand intangible assets and €129 million (2019: -€1,896 million) included within Adjusted other income and expense.

Reversal of interest on lease liabilities included within adjusted EBITDA under the Group’s definition of that metric, for re-presentation in net financing costs.

Includes depreciation on Right-of-use assets of €1,914 million (2019: €1,821 million).

For the six months ended 30 September 2020, the Group recorded a gain of €1,043 million in relation to the merger of Vodafone Hutchison Australia Pty Limited and TPG Telecom Limited. See Note 9 “Investment in associates and joint ventures”.

Vodafone Group Plc ⫶ H1 FY21 results

Geographic performance summary

													Other			Total						Other
H1 FY21	Germany			Italy			UK			Spain			Europe			Europe¹			Vodacom			Markets			Group¹
Total revenue (€m)		6,371			2,506			2,983			2,050			2,720			16,583			2,423			1,898			21,427
Service revenue (€m)		5,723			2,249			2,401			1,880			2,411			14,617			1,949			1,679			18,418
Adjusted EBITDA (€m)		2,844			800			636			488			870			5,638			891			613			7,023
Adjusted EBITDA margin %		44.6	%		31.9	%		21.3	%		23.8	%		32.0	%		34.0	%		36.8	%		32.3	%		32.8	%
Adjusted EBIT (€m)																										2,294
Adjusted operating profit/(loss) (€m)																										2,549

Further geographic performance information is available in a downloadable spreadsheet format at https://investors.vodafone.com/reports-information/results-reports-presentations

Note:

See pages 65 to 70 for a full disaggregation of our financial results by geography, including intersegment eliminations.

	FY20														FY21
Organic service revenue growth %	Q1		Q2		H1		Q3		Q4		H2		Total		Q1		Q2		H1
Europe	(1.7	)	(1.4	)	(1.6	)	(1.4	)	(0.4	)	(0.9	)	(1.2	)	(2.6	)	(1.8	)	(2.2	)
- of which Germany	0.4		(0.2	)	0.1		–		(0.1	)	–		–		–		(0.1	)	(0.1	)
Vodacom	1.1		3.6		2.4		5.2		3.2		4.2		3.3		1.5		3.2		2.3
Other Markets	10.0		16.4		15.4		14.5		14.2		14.4		14.9		9.1		9.0		9.0
Total Group	(0.2	)	0.7		0.3		0.8		1.6		1.2		0.8		(1.3	)	(0.4	)	(0.8	)

Total Europe ⫶ 80% of Group Adjusted EBITDA

	H1 FY21			H1 FY20			Organic
	€m			€m			Change (%)*
Total revenue		16,583			16,225
- Service revenue		14,617			14,120			(2.2	)
- Other revenue		1,966			2,105
Adjusted EBITDA		5,638			5,348			(1.2	)
Adjusted EBITDA margin		34.0	%		33.0	%

Europe total revenue and adjusted EBITDA increased by 2.2% and 5.4% respectively, primarily due to the consolidation of the acquired Liberty Global assets in Germany and CEE.

Service revenue in H1 decreased by 2.2%* including lower roaming and visitor revenue and other COVID-19 impacts. Excluding roaming and visitor impacts, organic service revenue growth in Q2 was broadly stable.

Adjusted EBITDA decreased by 1.2%* including a year-on-year drag of 3.7 percentage points from roaming and visitors, as well as higher bad debt provisions, partially offset by good cost control during H1.

Vodafone Group Plc ⫶ H1 FY21 results

Germany ⫶ 41% of Group Adjusted EBITDA

	H1 FY21			H1 FY20			Organic
	€m			€m			Change (%)*
Total revenue		6,371			5,590
- Service revenue		5,723			4,961			(0.1	)
- Other revenue		648			629
Adjusted EBITDA		2,844			2,352			1.3
Adjusted EBITDA margin		44.6	%		42.1	%

Service revenue was broadly stable at -0.1%* (Q1: 0.0%*, Q2: -0.1%*), as higher variable usage revenue during the COVID-19 lockdown and the lapping of international call rate regulation was offset by lower roaming, visitor and wholesale revenue. Retail service revenue grew by 0.5%* (Q1: 0.4%*, Q2: 0.6%*), despite a 1.3 percentage point drag from lower roaming and visitor revenue.

Fixed service revenue grew by 1.5%* (Q1: 2.4%*, Q2: 0.6%*) supported by customer base growth and ARPU accretive customer migrations to high-speed plans. Growth slowed in Q2 reflecting lower variable usage revenue, and greater wholesale revenue declines as we lapped prior year LLU price increases. We added 157,000 cable customers in H1, including 77,000 migrations from DSL. We had 1.8 million customers on speeds of at least 400Mbps at the end of H1 and 21.8 million customers households are now able to access Gigabit speeds on our cable network. Our broadband customer base reached 10.9 million.

Our TV customer base declined by 85,000 reflecting lower retail activity during the COVID-19 pandemic and a lower Premium TV customer base. In August, we launched a harmonised portfolio across all homes in Germany, bringing Vodafone TV to the Unitymedia footprint, with a significant improvement in the content portfolio. We maintained our good momentum in convergence supported by our ‘GigaKombi’ proposition, adding 73,000 Consumer converged customers in H1 which took our customer base to 1.6 million.

Mobile service revenue declined by 2.0%* (Q1: -3.0%*, Q2: -1.0%*) mainly due to the reduction in roaming, visitor and wholesale revenue. Growth improved in Q2 reflecting a lower drag from roaming and visitor revenue, and the lapping of regulatory impacts. We added 238,000 contract customers in H1, supported by the migration of 187,000 Unitymedia mobile customers onto our network. Contract churn improved by 0.4 percentage points year-on-year to 12.1%. We added 225,000 prepaid customers, supported by our online-only proposition, ‘CallYa Digital’.

Adjusted EBITDA increased by 1.3%* supported by synergy delivery and our continued focus on cost discipline, partially offset by a 1.9 percentage point year-on-year drag from lower roaming and visitors. The organic adjusted EBITDA margin was 0.7* percentage points higher year-on-year and was 44.6%.

We continued to make good progress on integrating Unitymedia, with the rebranding and TV portfolio harmonisation now complete, and the organisational integration completed during H1. We are approximately six months ahead of plan with respect to our cost and capital expenditure synergy targets and remain on track to deliver the remaining synergies.

Vodafone Group Plc ⫶ H1 FY21 results

Italy ⫶ 11% of Group Adjusted EBITDA

	H1 FY21			H1 FY20			Organic
	€m			€m			change (%)*
Total revenue		2,506			2,709
- Service revenue		2,249			2,424			(7.2	)
- Other revenue		257			285
Adjusted EBITDA		800			1,006			(11.1	)
Adjusted EBITDA margin		31.9	%		37.1	%

Service revenue declined by 7.2%* (Q1: -6.5%*, Q2: -8.0%*), driven by continued price competition in the low-value segment of the mobile market, and lower roaming and visitor revenue. The Q2 slowdown primarily reflected a 2.7 percentage point sequential impact from the lapping of prior year price increases. The year-on-year drag from roaming and visitors in Q2 was 2.4 percentage points.

Mobile service revenue declined 11.0%* (Q1: -10.0%*, Q2: -11.9 %*) reflecting lower roaming and visitor revenue, a reduction in the active customer base year-on-year, which subsequently stabilised in H1, and price competition in the low-value segment. The sequential slowdown in Q2 reflected the lapping of prior year price increases, partially offset by a lower drag from roaming and visitor revenue. Our net mobile number portability (‘MNP’) volumes remained relatively stable despite market MNP volumes returning towards pre-COVID levels in Q2. Our second brand ‘ho.’ continued to grow strongly, with 404,000 net additions in H1, supported by our best-in-class net promoter score, and now has 2.2 million customers.

Fixed service revenue grew by 4.4%* (Q1: 4.1%*, Q2: 4.8%*) supported by 52,000 broadband customer additions in H1. We now have 3.0 million broadband customers. Our total Consumer converged customer base is now 1.1 million (representing 37% of our broadband base), an increase of 41,000 during H1. Through our owned NGN footprint and strategic partnership with Open Fiber we now pass 7.9 million households.

Adjusted EBITDA declined by 11.1%* reflecting lower service revenue, a 4.7 percentage point year-on-year drag from lower roaming and visitors, as well as an increase in bad debt provisions, partially offset by strong control with operating expenses declining by 5.5% year-on-year. The organic adjusted EBITDA margin was 1.4* percentage points lower year-on-year and was 31.9%.

In a first of its kind, Vodafone Italy has recently signed a new flexible working agreement with the local trade unions. The plan represents a new model of agile and inclusive work, and provides for 80% of the monthly working hours in agile work for employees working in customer service areas and 60% for employees in the remaining company areas. On agile working days, colleagues will be asked to choose the place from which to work remotely. All colleagues will be equipped with the necessary technology and benefit from a dedicated offer for fixed connectivity from Vodafone.

INWIT Joint Venture

The results of INWIT (in which Vodafone owns a 33.2% stake) reported here reflect INWIT’s accounting policies, definitions and disclosures.

Total revenue in H1 was €371 million and grew 88% year-on-year reflecting the first-time inclusion of Vodafone Towers from 1 April 2020. Pro forma for the Vodafone Towers merger, organic revenue grew by 1.9% in Q2, driven by increased mobile operator demand for new mobile sites and distributed antenna systems. Total earnings after lease costs but before other depreciation, amortisation, interest and tax were €240 million in H1; the margin on these earnings was 65%.

In April 2020, we received a special dividend of €0.2 billion as a result of the transaction in March 2020 and subsequently sold 41.7 million INWIT shares, resulting in gross proceeds of approximately €400 million. As a result of the transaction, Vodafone's ownership stake in INWIT decreased from 37.5% to 33.2%.

Vodafone received a further €42 million in dividends from INWIT during the half year.

Vodafone Group Plc ⫶ H1 FY21 results

UK ⫶ 9% of Group Adjusted EBITDA

	H1 FY21			H1 FY20			Organic
	€m			€m			change*
Total revenue		2,983			3,151
- Service revenue		2,401			2,451			(1.2	)
- Other revenue		582			700
Adjusted EBITDA		636			658			(2.3	)
Adjusted EBITDA margin		21.3	%		20.9	%

Service revenue decreased by 1.2%* (Q1: -1.9%*, Q2: -0.5%*) as good customer base growth and the lapping of international call rate regulation was offset by lower roaming, visitor and incoming revenue. The sequential Q2 improvement was driven by Business fixed acceleration and the lapping of international call rate regulation. The year-on-year drag from roaming and visitors in Q2 was 2.8 percentage points.

Mobile service revenue declined 4.0%* (Q1: -4.3%*, Q2: -3.6 %*), as lower roaming, visitor and incoming revenue offset good customer base growth. The sequential improvement in Q2 reflected the lapping of international call rate regulation. We maintained our good commercial momentum and our mobile contract customer base increased by 142,000, driven by increased Business demand and the reopening of our retail stores. Our digital sub-brand ‘VOXI’ continued to grow, with 65,000 customer additions during H1, supported by the launch of new propositions. Contract churn improved 1.3 percentage point year-on-year to 12.4%.

Fixed service revenue grew by 6.3%* (Q1: 4.8%*, Q2: 7.8%*) and our commercial momentum remained strong with 119,000 net customer additions, supported by our ‘need for speed’ campaign. We now have 838,000 broadband customers - of which 437,000 are converged, with 52,000 converged customers added during H1. The sequential Q2 service revenue improvement was driven by Business, with increased corporate demand for virtual call centres and core connectivity, and increased SME demand for productivity and security solutions.

Adjusted EBITDA decreased by 2.3% reflecting a year-on-year drag from lower roaming and visitors of 5.7* percentage points, as well as higher bad debt expense, partially offset by continued good cost control, with operating expenses 10.3% lower year-on-year. The organic adjusted EBITDA margin was 0.4* percentage points higher year-on-year at 21.3%.

Vodafone Group Plc ⫶ H1 FY21 results

Spain ⫶ 7% of Group Adjusted EBITDA

	H1 FY21			H1 FY20			Organic
	€m			€m			change (%)*
Total revenue		2,050			2,161
- Service revenue		1,880			1,966			(4.4	)
- Other revenue		170			195
Adjusted EBITDA		488			460			6.0
Adjusted EBITDA margin		23.8	%		21.3	%

Service revenue declined by 4.4%* (Q1: -6.9%*, Q2: -1.8%*) reflecting the impact of COVID-19 on roaming and visitor revenue and service suspensions during lockdown, in the context of a competitive market. The sequential improvement in Q2 was supported by customer base growth and the unwinding of temporary suspensions and offers. The year-on-year drag from roaming and visitors in Q2 was 3.0 percentage points.

We continue to compete effectively across all segments of the market and grew our contract mobile, NGN broadband and TV customer base for a fifth consecutive quarter in Q2.

After restrictions were lifted, the market remained highly promotional and mobile number portability increased. Our mobile contract customer base increased by 95,000 in H1, with Q2 impacted by the disconnection of non-paying customers, who could not be disconnected in Q1 due to the government’s state of emergency restrictions. Mobile contract churn decreased 4.9 percentage points year-on-year to 16.7%. Our second brand ‘Lowi’ continued to grow and now has 1.1 million customers.

We added 58,000 broadband customers, of which 101,000 were NGN connections, as customers continued to transition to higher-speed plans. Our leadership in movies and series, as well as our new ‘boxless’ TV proposition, supported 114,000 customer additions in TV. We now have over 2.3 million converged consumer customers.

Adjusted EBITDA grew by 6.0%* and the adjusted EBITDA margin was 2.5* percentage points higher year-on-year. The growth in EBITDA was primarily due to lower football content costs and a 9.9%* reduction in operating expenses, partially offset by an 8.1 percentage point year-on-year drag from lower roaming and visitors, and higher bad debt and TV content costs. The adjusted EBITDA margin was 23.8%.

Vodafone Group Plc ⫶ H1 FY21 results

Other Europe ⫶ 12% of Group Adjusted EBITDA

	H1 FY21			H1 FY20			Organic
	€m			€m			Change (%)*
Total revenue		2,720			2,690
- Service revenue		2,411			2,392			(2.4	)
- Other revenue		309			298
Adjusted EBITDA		870			872			(2.2	)
Adjusted EBITDA margin		32.0	%		32.4	%

Service revenue declined by 2.4%* (Q1: -3.1%*, Q2: -1.8%*), driven by lower roaming and visitor revenue, lower prepaid top-ups, notably in Portugal and Greece, and increased competition in Ireland and Greece. The sequential improvement in Q2 reflected a recovery in prepaid revenue as lockdown restrictions started to ease, and a sequential 0.7 percentage point benefit from the first-time inclusion of ABCom in our financial results. The year-on-year impact from roaming and visitor revenue was stable at 2.5 percentage points in Q2, as pressure in Ireland and Greece was offset by an improvement in visitor numbers in other markets.

In Portugal, service revenue grew by 0.5%* (Q1: 0.7%*, Q2: 0.3%*) as lower roaming, visitor and prepaid revenue was more than offset by mobile contract and fixed growth. In Ireland, service revenue declined by 6.4%* (Q1: -6.8%*, Q2: -6.1%*) reflecting lower roaming and visitor revenue and higher competitive intensity, partially offset by an increase in the mobile contract customer base following the successful launch of unlimited data tariffs. Service revenue in Greece declined by 7.4%* (Q1: -8.8%*, Q2: -6.1%*) reflecting lower roaming and visitor revenue and higher promotional activity, partially offset by higher prepaid top-ups during Q2 followed the easing of retail restrictions.

Adjusted EBITDA declined by 2.2%* including a 4.8 percentage point drag from lower roaming and visitors, and an increase in bad debt provisions. The organic adjusted EBITDA margin increased by 0.1* percentage points and was 32.0%.

VodafoneZiggo Joint Venture (Netherlands)

The results of VodafoneZiggo (in which Vodafone owns a 50% stake) are reported here under US GAAP, which is broadly consistent with Vodafone’s IFRS basis of reporting.

Total revenue grew 2.1% in H1 (Q1: 1.9%, Q2: 2.3%). This reflected growth in fixed revenue, partly offset by lower roaming and visitor mobile revenue.

We added 134,000 mobile contract customers, supported by the successful ‘Runners’ campaign. Over 42% of broadband customers and 71% of all B2C mobile customers are now converged, delivering significant NPS and churn benefits. VodafoneZiggo was the first operator to launch a nationwide 5G network in the Netherlands. We now offer 1 Gigabit speeds to more than 2 million homes and expect to connect 3 million households by the end of the 2020 calendar year.

Adjusted EBITDA grew by 8.7% during H1, supported by top line growth, and lower operating and direct costs, more than offsetting a year-on-year drag from lower roaming and visitor mobile revenue. We continued to make good progress on integration and remain on track to deliver our €210 million cost and capital expenditure synergy targets by the end of the 2020 calendar year, one year ahead of the original plan.

During the half year, Vodafone received €88 million in dividends from the joint venture, as well as €11 million in interest payments. The joint venture also drew down an additional €104 million shareholder loan from Vodafone.

Vodafone Group Plc ⫶ H1 FY21 results

Vodacom ⫶ 13% of Group Adjusted EBITDA

	H1 FY21			H1 FY20			Organic
	€m			€m			change (%)*
Total revenue		2,423			2,734
- Service revenue		1,949			2,217			2.3
- Other revenue		474			517
Adjusted EBITDA		891			1,019			3.6
Adjusted EBITDA margin		36.8	%		37.3	%

Vodacom service revenue grew 2.3%* (Q1: 1.5%*, Q2: 3.2%*) as good growth in South Africa was partially offset by revenue declines in Vodacom’s international operations. The sequential improvement in Q2 reflected stronger growth in South Africa.

In South Africa, service revenue increased 7.1%* (Q1: 6.4%*, Q2: 7.7%*) driven by increased demand for voice, data and financial services and price elasticity, supported by an increase in consumer discretionary spend as a result of the ban on alcohol and tobacco sales and special government social grants during the COVID-19 pandemic. We added 66,000 contract customers, supported by strong growth in Business connectivity as remote working and mobile broadband demand increased. Overall data traffic increased by 90% and 49% of our customer base is using data services.

In Vodacom’s international operations, service revenue declined by 5.1%* (Q1: -5.2%*, Q2: -4.9%*), reflecting economic pressure and the disruption to our commercial activities during the COVID-19 pandemic, the zero-rating of person-to-person M-Pesa transfers in DRC, Mozambique, and Lesotho and the impact of service barring in Tanzania due to biometric registration compliance. Digital adoption across Vodacom’s international operations accelerated with M-Pesa revenue as a share of total service revenue increasing by 0.9 percentage points to 19.9%, and 53% of our customer base is using data services.

Vodacom’s adjusted EBITDA increased by 3.6%* as positive operational leverage in South Africa was partially offset by revenue pressure in Vodacom’s international operations. The adjusted EBITDA margin was 0.1* percentage points lower year-on-year and the adjusted EBITDA margin was 36.8%. Reported adjusted EBITDA decreased by 12.6% due to the depreciation of the local currencies versus euro.

Safaricom Associate (Kenya)

Safaricom service revenue declined by 4.8%* (Q1: -8.4%*, Q2: -1.2%*) due to depressed economic activity and the zero-rating of some M-Pesa services. The sequential improvement in Q2 was driven by an increase in M-Pesa transaction volumes and higher fixed demand. Adjusted EBITDA decreased by 7.8% primarily driven by a decline in revenue.

Vodafone Group Plc ⫶ H1 FY21 results

Other Markets ⫶ 9% of Group Adjusted EBITDA

Turkey

Service revenue in Turkey grew by 13.8%* (Q1: 13.8%*, Q2: 13.9%*) supported by strong customer contract ARPU growth, increased mobile data revenue and fixed customer base growth.

Adjusted EBITDA grew 14.7%* and the adjusted EBITDA margin increased by 0.6* percentage points driven by strong revenue growth ahead of inflation and operating expenditure efficiencies. The adjusted EBITDA margin was 27.1%.

Egypt

Service revenue in Egypt grew by 5.4%* (Q1: 6.0%*, Q2: 4.9%*), supported by customer base growth and increased data usage, partially offset by lower roaming and visitor revenue, and the impact of a government-mandated waiver of transaction fees on our e-money platform.

Adjusted EBITDA declined by 10.4%* and the organic adjusted EBITDA margin decreased by 7.1* percentage points. This reflected an intra-year re-phasing of marketing spend into H1, the lapping of a prior year settlement, and the zero-rating of e-money transaction fees during the COVID-19 pandemic, which will end during H2. The adjusted EBITDA margin was 41.6%.

On 29 January 2020, we announced a Memorandum of Understanding (‘MoU’) with Saudi Telecom Company (‘stc’) in relation to the sale of Vodafone’s 55% shareholding in Vodafone Egypt to stc for a cash consideration of US$2,392 million (€2,180 million). On 13 April 2020, the MoU with stc was extended to allow additional time for the completion of due diligence on Vodafone Egypt by stc, which has now been substantively completed. On 14 September 2020 the extended MoU expired, however we remain in discussion with stc to finalise the transaction.

Other associates and joint ventures

Vodafone Idea Limited (India)

In October 2019, the Indian Supreme Court gave its judgement in the “Union of India v Association of Unified Telecom Service Providers of India” case regarding the interpretation of adjusted gross revenue (‘AGR’), a concept used in the calculation of certain regulatory fees.

Vodafone Idea Limited (‘Vodafone Idea’) recorded losses for each of the six month periods ended 30 September 2019, 31 March 2020 and 30 September 2020, respectively. For the six months ended 30 September 2019, the Group recognised its share of estimated Vodafone Idea losses arising from both its operating activities and those in relation to the AGR judgement. The Group has no obligation to fund Vodafone Idea, consequently the Group’s recognised share of losses in the six months ended 30 September 2019 was limited to the remaining carrying value of Vodafone Idea which was therefore reduced to €nil at 30 September 2019; no further losses have been recognised by the Group.

The Group has a potential exposure to certain contingent liabilities and potential refunds relating to Vodafone India and Idea Cellular at the time of the merger, including those relating to the AGR judgement, whereby Vodafone Group and Vodafone Idea would reimburse each other on set dates following any crystallisation of these pre-merger liabilities and assets.

See ‘Other significant developments and legal proceedings’ on page 31 and Note 13 in the unaudited condensed consolidated financial statements for further information.

Vodafone Group Plc ⫶ H1 FY21 results

Indus Towers (India)

On 1 September 2020, we announced that Bharti Airtel Limited (‘Bharti Airtel’) and Vodafone Idea Ltd (‘Vodafone Idea’) had agreed to proceed with completion of the merger of Indus Towers Limited (‘Indus Towers’) and Bharti Infratel Limited (‘Bharti Infratel’ and, following the completion, the ‘Combined Company’). On 5 October 2020, we announced that lender consent had been received. On 22 October 2020, the National Company Law Tribunal (‘NCLT’) approved the extension of time for filing of the certified copy of the NCLT order approving the merger scheme with the Registrar of Companies (‘RoC’). The merger scheme will become effective when the order is filed with the RoC. Following any agreed closing adjustments, the filing with the RoC is expected to be completed imminently.

Vodafone Hutchison Australia / TPG Telecom

On 13 July 2020, we announced that Vodafone Hutchison Australia Pty Limited (‘VHA’) and TPG Telecom Limited (‘TPG’) had completed their merger to establish a fully integrated telecommunications operator in Australia. The merged entity was admitted to the Australian Securities Exchange (‘ASX’) on 30 June 2020 and is known as TPG Telecom Limited. Vodafone and Hutchison Telecommunications (Australia) Limited each own an economic interest of 25.05% in the merged unit, with the remaining 49.9% listed as free float on the ASX.

Vodafone Group Plc ⫶ H1 FY21 results

Net financing costs

	H1 FY21			H1 FY20
	€m			€m			Change (%)
Adjusted net financing costs¹		(639	)		(799	)		20.0
Adjustments for:
Mark-to-market (losses)/gains		(368	)		21
Foreign exchange losses		(231	)		(147	)
Interest on lease liabilities		(189	)		(163	)
Net financing costs		(1,427	)		(1,088	)		(31.2	)

Notes:

Adjusted net financing costs is a non-GAAP performance measure that is presented to provide readers with additional financial information that is regularly reviewed by management and should not be viewed in isolation or as an alternative to the equivalent GAAP measure. See “Use of non-GAAP financial information” on page 62 for more information.

Net financing costs increased by €339 million, primarily due to mark-to-market losses in the period. These were driven by the lower share price, causing a mark-to-market loss on the options relating to the mandatory convertible bonds and by lower long-term yields, which led to mark-to-market losses on certain economic hedging instruments. Adjusted net financing costs decreased reflecting net favourable interest movements on borrowings in relation to foreign operations. Excluding these factors and the impact of interest on lease liabilities, financing costs remained stable, reflecting consistent average net debt balances and weighted average borrowing costs for both periods.

Taxation

The Group’s effective tax rate for the six months ended 30 September 2020 was 24.0% compared to -270.1% for the same period during the last financial year. The effective tax rate in the prior period was due to the reduction in the corporate tax rate in Luxembourg.

The Group’s effective tax rate for both years include €188 million (2019: €200 million) relating to the use of losses in Luxembourg.

The Group’s effective tax rate for the six months ended 30 September 2019 includes a reduction in our deferred tax assets in Luxembourg of €868 million following a reduction in the Luxembourg corporate tax rate.

Vodafone Group Plc ⫶ H1 FY21 results

Earnings per share

	H1 FY21			H1 FY20
	€m			€m			Change (%)
Adjusted operating profit¹		2,549			1,681			51.6
Adjusted net financing costs		(639	)		(799	)
Adjusted income tax expense for calculating adjusted tax rate		(455	)		(394	)
Adjusted non-controlling interests		(241	)		(238	)
Adjusted profit attributable to owners of the parent¹		1,214			250			385.6
Adjustments:
Amortisation of acquired customer base and brand intangible assets		(364	)		(232	)
Restructuring costs		(86	)		(163	)
Adjusted other income and expense		1,184			(872	)
Mark-to-market (losses)/gains		(368	)		21
Foreign exchange losses		(231	)		(147	)
		135			(1,393	)		109.7
Taxation²		(35	)		(986	)
Non-controlling interests		–			1
Profit/(loss) attributable to owners of the parent		1,314			(2,128	)		161.7

		Million			Million
Weighted average number of shares outstanding - basic		29,535			29,410			0.4

		eurocents			eurocents
Basic earnings/(loss) per share		4.45	c		(7.24	c)		161.5
Adjusted earnings per share¹		4.11	c		0.85	c		383.5

Notes:

Adjusted operating profit, adjusted profit attributable to owners of the parent and adjusted earnings per share are non-GAAP performance measures that are presented to provide readers with additional financial information that is regularly reviewed by management and should not be viewed in isolation or as an alternative to the equivalent GAAP measures. See “Use of non-GAAP financial information” on page 62 for more information.

See page 24.

Adjusted earnings per share was 4.11 eurocents, compared to 0.85 eurocents in the six months ended 30 September 2019.

Basic earnings per share was 4.45 eurocents, compared to a loss per share of 7.24 eurocents in the six months ended 30 September 2019. The increase is primarily due to losses recognised in the comparative period relating to Vodafone Idea Limited, partially offset by a €1.1 billion profit recorded on the disposal of Vodafone New Zealand.

Vodafone Group Plc ⫶ H1 FY21 results

Statement of financial position

Assets

Goodwill and other intangible assets

Goodwill and other intangible assets decreased by €1.3 billion between 31 March 2020 and 30 September 2020 to €52.2 billion. This primarily reflects the amortisation of computer software, partially offset by purchases of software and spectrum licences in the period.

Property, plant and equipment

Property, plant and equipment decreased by €1.1 billion between 31 March 2020 and 30 September 2020 to €38.1 billion. This reflects the depreciation charge, partially offset by additions in the period.

Other non-current assets

Other non-current assets decreased by €4.1 billion between 31 March 2020 and 30 September 2020 to €37.1 billion, primarily due to a €3.8 billion reduction in derivative assets included in trade and other receivables.

Current assets

Current assets decreased by €5.5 billion between 31 March 2020 and 30 September 2020 to €27.2 billion, primarily due to a €6.7 billion decrease in cash and cash equivalents and a €1.0 billion reduction in trade and other receivables, partially offset by an increase of €2.1 billion in other investments.

Assets held for sale

Assets held for sale increased by €0.7 billion between 31 March 2020 and 30 September 2020 to €2.3 billion. Assets held for sale at 30 September 2020 relate to the Group’s 55% interest in Vodafone Egypt and a 13.8% interest from the Group’s 42.0% stake in Indus Towers.

Total equity and liabilities

Total equity

Total equity decreased by €3.0 billion between 31 March 2020 and 30 September 2020 to €59.6 billion, largely due to €1.4 billion of dividends and total comprehensive expense for the period of €1.7 billion.

Non-current liabilities

Non-current liabilities decreased by €1.0 billion between 31 March 2020 and 30 September 2020 to €71.0 billion, primarily due to a €1.6 billion decrease in long-term borrowings offset by a €0.5 billion increase in trade and other payables.

Current liabilities

Current liabilities decreased by €7.1 billion between 31 March 2020 and 30 September 2020 to €25.3 billion, mainly due to a €4.3 billion decrease in short term borrowings and a reduction of €2.7 billion in trade and other payables.

Liabilities held for sale

Liabilities held for sale decreased by €0.1 billion between 31 March 2020 and 30 September 2020 to €1.0 billion. Liabilities held for sale at 30 September 2020 relate to the Group’s 55% interest in Vodafone Egypt and a 13.8% interest from the Group’s 42.0% stake in Indus Towers.

Inflation

Inflation has not had a significant effect on the Group’s consolidated results of operations and financial condition during the six months ended 30 September 2020.

Vodafone Group Plc ⫶ H1 FY21 results

Cash flow, capital allocation and funding

Cash flow

	H1 FY21			H1 FY20
	€m			€m			Change (%)
Adjusted EBITDA¹		7,023			7,105			(1.2	)
Capital additions²		(3,363	)		(3,000	)
Working capital		(2,503	)		(2,952	)
Disposal of property, plant and equipment		6			21
Other		119			221
Operating free cash flow¹		1,282			1,395			(8.1	)
Taxation		(533	)		(483	)
Dividends received from associates and investments		355			63
Dividends paid to non-controlling shareholders in subsidiaries		(166	)		(169	)
Interest received and paid³		(487	)		(412	)
Free cash flow (pre-spectrum and restructuring)¹		451			394			14.5
Licence and spectrum payments		(286	)		(58	)
Restructuring and other payments⁴		(266	)		(302	)
Free cash flow¹		(101	)		34			(397.1	)
Acquisitions and disposals		434			(16,715	)
Equity dividends paid		(1,209	)		(1,092	)
Share buybacks³		–			(1,094	)
Foreign exchange (loss)/gain		(258	)		67
Other⁵		(681	)		(2,274	)
Net debt increase^1,6		(1,815	)		(21,074	)		91.4
Opening net debt^1,6		(42,168	)		(27,033	)
Closing net debt^1,6		(43,983	)		(48,107	)		8.6

Notes:

1.	Adjusted EBITDA, operating free cash flow, free cash flow (pre-spectrum and restructuring), free cash flow and net debt are non-GAAP performance measures that are presented to provide readers with additional financial information that is regularly reviewed by management and should not be viewed in isolation or as an alternative to the equivalent GAAP measures. See “Use of non-GAAP financial information” on page 62 for more information.
2.	Capital additions includes the purchase of property, plant and equipment and intangible assets, other than licence and spectrum payments and transformation capital expenditure.
3.	Interest received and paid excludes €134 million (2019: €87 million) of interest on lease liabilities, included within operating free cash flow; €nil (2019: €175 million) of interest costs related to Liberty acquisition financing, included within Other; and €nil (2019: €273 million) of cash outflow from the option structure relating to the issue of the mandatory convertible bond in February 2016, included within Share buybacks. The option structure was intended to ensure that the total cash outflow to execute the programme was broadly equivalent to the £1,440 million raised on issuing the second tranche.
4.	Includes transformation capital expenditure of €116 million.
5.	“Other” for the six months ended 30 September 2019 included €1,559 million of debt incurred in relation to licences and spectrum acquired in Germany.
6.	Net debt balances at 30 September 2020 and 31 March 2020 have been adjusted to exclude derivative gains in cash flow hedge reserves, the corresponding losses for which are not recognised on the bonds within net debt and which are significant due to COVID-19 related market conditions. See page 29.

Operating free cash flow was €0.1 billion lower at €1.3 billion due to a reduction in roaming and visitor revenue, offset by lower net operating expenses in Europe. A favourable working capital movement of €0.4 billion was offset by an increase in capital additions of €0.4 billion, including the impact from the first-time inclusion of Unitymedia.

Free cash flow (pre-spectrum and restructuring) was €0.5 billion, an increase of €0.1 billion. The decrease in operating free cash flow was outweighed by an increase of €0.3 billion in dividends from associates and investments, partially offset by higher net interest paid and taxation outflows.

Vodafone Group Plc ⫶ H1 FY21 results

Closing net debt adjusted for mark-to-market gains deferred in hedging reserves at 30 September 2020 was €44.0 billion (31 March 2020: €42.2 billion) and excludes borrowings of €11.6 billion (31 March 2020: €12.1 billion) of lease liabilities recognised under IFRS 16 and a loan of €1.3 billion (31 March 2020: €1.3 billion) specifically secured against Indian assets. Additionally it excludes £3.44 billion (31 March 2020: £3.44 billion) mandatory convertible bond issued in February 2019 which will be settled in equity shares, and €0.8 billion (31 March 2020: €0.7 billion) of shareholder loans receivable from VodafoneZiggo.

The Group’s borrowings and net debt includes bonds, some of which are or were previously designated in hedge relationships, which are carried at €1.5 billion higher (31 March 2020: €1.5 billion higher) than their euro equivalent redemption value. In addition, where bonds are issued in currencies other than euros, the Group has entered into foreign currency swaps to fix the euro cash outflows on redemption. The impact of these swaps is not reflected in borrowings and would increase the euro equivalent redemption value of the bonds by €0.2 billion (31 March 2020: €1.3 billion lower).

Analysis of free cash flow

	H1 FY21			H1 FY20
	€m			€m			Change (%)
Inflow from operating activities		6,009			6,139			(2.1	)
Net tax paid		533			483
Cash generated by operations		6,542			6,622			(1.2	)
Capital additions		(3,363	)		(3,000	)
Working capital movement in respect of capital additions		(222	)		(713	)
Disposal of property, plant and equipment		6			21
Restructuring payments		150			302
Other¹		(1,831	)		(1,837	)
Operating free cash flow²		1,282			1,395			(8.1	)
Taxation		(533	)		(483	)
Dividends received from associates and investments		355			63
Dividends paid to non-controlling shareholders in subsidiaries		(166	)		(169	)
Interest received and paid		(487	)		(412	)
Free cash flow (pre-spectrum and restructuring)²		451			394			14.5
Licence and spectrum payments		(286	)		(58	)
Restructuring and other payments³		(266	)		(302	)
Free cash flow²		(101	)		34			(397.1	)

Notes:

1.	Predominantly relates to lease payments.
2.	Operating free cash flow, free cash flow (pre-spectrum and restructuring) and free cash flow are non-GAAP performance measures that are presented to provide readers with additional financial information that is regularly reviewed by management and should not be viewed in isolation or as an alternative to the equivalent GAAP measure. See “Use of non-GAAP financial information” on page 62 for more information.
3.	Includes transformation capital expenditure of €116 million.

Vodafone Group Plc ⫶ H1 FY21 results

Funding position

	H1 FY21			Year-end FY20
	€m			€m			Change (%)
Bonds		(48,901	)		(49,412	)
Bank loans		(1,277	)		(2,728	)
Cash collateral liabilities¹		(1,982	)		(5,292	)
Other borrowings		(3,748	)		(3,877	)
Borrowings included in net debt		(55,908	)		(61,309	)		8.8
Cash and cash equivalents		6,612			13,284
Other financial instruments:
Mark-to-market derivative financial instruments²		(630	)		4,409
Short term investments³		7,172			5,247
Total cash and cash equivalents and other financial instruments		13,154			22,940			(42.7	)
Net debt⁴		(42,754	)		(38,369	)		(11.4	)
Less mark-to-market gains deferred in hedging reserves⁵		(1,229	)		(3,799	)
Net debt adjusted for mark-to-market gains in hedging reserves		(43,983	)		(42,168	)		(4.3	)

Net debt to adjusted EBITDA^4,5,6**		3.0	x		2.8	x

Lease liabilities		(11,593	)		(12,063	)
Bank borrowings secured against Indian assets		(1,321	)		(1,346	)
Borrowings excluded from net debt		(12,914	)		(13,409	)

The €5.0 billion reduction in mark-to-market derivative financial instruments primarily relates to lower gains deferred in hedging reserves and foreign exchange that is offset by bond retranslation. Lower borrowings and cash and cash equivalents are driven by €4.6 billion lower cash collateral assets and liabilities (which taken all together do not impact net debt) and bank loan repayments of €1.3 billion. The movements in net debt adjusted for mark-to-market gains in hedging reserves are shown in the table below.

Movement in funding position

	Net debt**^4,5 €m			Net debt to adjusted EBITDA**^4,5,6
31 March 2020		42,168			2.8	x
Acquisitions and disposals		(434	)
Equity dividends paid		1,209
Other movements		939
Free cash flow (pre-spectrum and restructuring)		(451	)
Licence and spectrum payments		286
Restructuring and other payments		266
30 September 2020		43,983			3.0	x

Notes:

1.	Cash collateral liabilities relate to a liability to return the cash collateral that has been paid to Vodafone under collateral arrangements on derivative financial instruments. The corresponding cash received from banking counterparties is reflected within Cash and cash equivalents and Short term investments.
2.	Comprises mark-to-market adjustments on derivative financial instruments, which are included as a component of trade and other (payables)/receivables.
3.	Short term investments includes €2,202 million (31 March 2020: €1,681 million) of highly liquid government and government-backed securities; €2,443 million (31 March 2020: €1,115 million) of assets paid to our bank counterparties as collateral on derivative financial instruments; and managed investment funds of €2,527 million (31 March 2020: €2,451 million) that are in highly rated and liquid money market investments with liquidity of up to 90 days.
4.	Net debt and the ratio of net debt to adjusted EBITDA are non-GAAP performance measures that are presented to provide readers with additional financial information that is regularly reviewed by management and should not be viewed in isolation or as an alternative to the equivalent GAAP measure. See “Use of non-GAAP financial information” on page 62 for more information.
5.	Net debt balances at 30 September 2020 and 31 March 2020 marked with a “**” have been adjusted to exclude derivative gains in cash flow hedge reserves, the corresponding losses for which are not recognised on the bonds within net debt and which are significant due to COVID-19 related market conditions.
6.	The ratio of net debt to adjusted EBITDA is calculated using adjusted EBITDA for a rolling 12 month period, normalised for acquisitions and disposals within the period.

Vodafone Group Plc ⫶ H1 FY21 results

Ratio of net debt to adjusted EBITDA

On a rolling 12 month basis, H1 FY21 net debt to adjusted EBITDA increased by 0.2x to 3.0x (compared to 2.8x as at 31 March 2020), reflecting the intra-year phasing of cash flows.

Funding facilities

The Group has undrawn committed facilities of €7,739 million, principally euro and US dollar revolving credit facilities of €3.9 billion and US$4.2 billion (€3.6 billion). All of the euro revolving credit facilities mature in 2025 except for €80 million which mature in 2023 and all of the US dollar revolving credit facilities mature in 2022 except for US$75 million (€64 million) which mature in 2021. Both committed revolving credit facilities support US and euro commercial paper programmes of up to US$15 billion and €8 billion respectively.

Return on Capital Employed

Return on capital employed (“ROCE”) measures how efficiently we generate returns from our asset base and is a key driver of long-term value creation. We calculate two ROCE measures: i) Pre-tax ROCE for controlled operations only and ii) Post-tax ROCE (including associates & joint ventures). For the purpose of our interim results, we have provided a brief update below. We will present both measures and the detailed calculations for the financial year in our full year results.

The methodology adopted for the post-tax ROCE discussed below is consistent with that disclosed on page 39 of the Group’s annual report for the year ended 31 March 2020. For the purpose of the mid-year ROCE calculation, the returns are based on the 12 months ended 30 September 2020 and the denominator is based on the average of the capital employed as at 30 September 2019 and 30 September 2020.

Our ROCE decreased by 1.0 percentage points to 5.1% on a pre-tax basis (FY20: 6.1%) and remained flat at 4.0% on a post-tax basis. The decrease in the pre-tax controlled ROCE was primarily attributable to the first-time inclusion of the Liberty Global assets for the full 12 month period. Pre-tax returns from controlled operations were broadly stable due to lower EBITDA being offset by a reduction in depreciation and amortisation. The post-tax ROCE remained flat due to the first-time exclusion of the Group’s interest in Vodafone Idea in both the numerator and denominator.

Post-employment benefits

The €152 million net surplus at 31 March 2020 decreased by €381 million to a €229 million net deficit at 30 September 2020 arising from the Group’s obligations in respect of its defined benefit schemes. The next triennial actuarial valuation of the Vodafone Section and CWW Section of the Vodafone UK Group Pension Scheme will be as at 31 March 2022.

Dividends

Dividends will continue to be declared in euros and paid in euros, pounds sterling and US dollars, aligning the Group’s shareholder returns with the primary currency in which we generate free cash flow. The foreign exchange rate at which future dividends declared in euros will be converted into pounds sterling and US dollars will be calculated based on the average exchange rate over the five business days during the week prior to the payment of the dividend.

The Board has announced an interim dividend per share of 4.50 eurocents (2019: 4.50 eurocents). The ex-dividend date for the interim dividend is 17 December 2020 for ordinary shareholders, the record date is 18 December 2020 and the dividend is payable on 5 February 2021. Dividend payments on ordinary shares will be paid directly into a nominated bank or building society account.

Vodafone is in the process of transferring its registrar services to Equiniti Limited. Consequently, Vodafone has set an ex-dividend date and record date for the interim dividend later in Vodafone’s financial calendar than in prior years.

Vodafone Group Plc ⫶ H1 FY21 results

Other significant developments and legal proceedings

Board changes

Jean-Francois van Boxmeer was appointed as a Non-Executive Director at the annual general meeting held on 28 July 2020.

As announced on 22 May 2020, Gerard Kleisterlee stepped down and retired from the Board on 3 November 2020 and Jean-Francois van Boxmeer succeeded him as Chairman on that date.

David Thodey resigned as a Non-Executive Director on 27 July 2020.

Vodafone Idea Limited (‘Vodafone Idea’)

In October 2019, the Supreme Court of India ruled against the industry in a dispute over the calculation of licence and other regulatory fees, and Vodafone Idea was liable for very substantial demands made by the Department of Telecommunications (‘DoT’) in relation to these fees. Based on submissions of the DoT in the Supreme Court proceedings (which the Group is unable to confirm as to their accuracy), Vodafone Idea reported a total estimated liability of INR 654 billion (€7.6 billion) excluding repayments and including interest, penalty and interest on penalty up to 30 June 2020.

On 17 February, 20 February, 16 March and 16 July 2020, Vodafone Idea made payments totaling INR 78.5 billion (€0.9 billion) to the DoT.

In September 2020, the Supreme Court of India directed that telecom operators make payment of 10% of the total dues by 31 March 2021 and thereafter repay the balance, along with 8% interest, in 10 annual instalments.

An update in relation to Indian regulatory cases and the contingent liability mechanism, dating back to the creation of Vodafone Idea is set out in Note 13 to the unaudited condensed consolidated financial statements.

Acquisition and disposal commitments

Indus Towers

Vodafone announced on 1 September 2020 that it had agreed to proceed with the merger of Indus Towers Limited (‘Indus Towers’) and Bharti Infratel Limited (‘Bharti Infratel’, together the ‘Combined Company’).

The agreement to proceed was conditional on consent for a security package for the benefit of the Combined Company (the ‘Security Package’) from Vodafone’s existing lenders for the €1.3 billion loan utilised to fund Vodafone’s contribution to the Vodafone Idea Ltd rights issue in 2019. On 5 October 2020 it was announced that this consent has been received. On 22 October 2020, the NCLT approved the extension of time for filing of the certified copy of the NCLT order approving the merger scheme with the Registrar of Companies (‘RoC’). The merger scheme will become effective when the order is filed with the RoC. Following any agreed closing adjustments, the filing with the RoC is expected to be completed imminently.

Vodafone Egypt

The Group signed a Memorandum of Understanding (‘MoU’) with Saudi Telecom Company (‘stc’) in January 2020 to pursue the sale of the Group’s 55% equity holding in Vodafone Egypt Telecommunications S.A.E. (‘Vodafone Egypt’) for cash consideration of US$ 2.4 billion (€2.2 billion).

On 14 September 2020, the Group announced that due diligence has been substantively completed with respect to the potential sale. Despite the expiry of the MoU, Vodafone remains in discussion with stc to finalise the transaction in the near future and now looks to stc and Telecom Egypt to find a suitable agreement to enable the transaction to close.

Vodafone Group Plc ⫶ H1 FY21 results

Regulation

Introduction

Our operating companies are generally subject to regulation governing the operation of their business activities as well as to the specific obligations in their licences. Such regulation typically takes the form of industry specific law and regulation covering telecommunications services and general competition (antitrust) law applicable to all activities. The following section describes the key regulatory developments at the supranational and global levels, as well as in selected countries in which we had significant interests during the six months ended 30 September 2020. This section should be read in conjunction with the information contained under “Regulation” on pages 256 to 264 of the Group’s annual report on Form 20-F for the year ended 31 March 2020. Many of the regulatory developments reported in the following section involve ongoing proceedings or consideration of potential proceedings that have not reached a conclusion. Accordingly, we are unable to attach a specific level of financial risk to our performance from such matters.

European Union (‘EU’)

In June 2020, Body of European Regulators for Electronic Communications (‘BEREC’) published a report on how to calculate regulated Weighted Average Cost of Capital (WACC) for legacy regulated products. The report sets out WACC parameters following the non-binding European Commission’s WACC Notice on the calculation of the cost of capital for legacy infrastructure in the context of the Commission’s review of national notifications in the EU electronic communications sector of November 2019. The cost of capital is the core element of any regulatory pricing decision national regulatory authorities take.

In February 2020, the President of the European Commission, Ursula von der Leyen, presented the EU Digital Package under the banner, A Europe Fit for the Digital Age. The package is one of the flagship policy initiatives of the new European Commission, alongside the Green Deal and Industrial Strategy. The Commission ran a number of public consultations on files included in the Digital Strategy, including the EU Data Strategy, AI White Paper and Digital Services Act. The latter includes proposals to update the EU’s rules governing intermediary liability enshrined in the eCommerce Directive, plans to introduce a new ex ante regulatory framework for digital gatekeepers as well as the possible creation of a New Competition Tool. The Commission has set itself a provisional deadline of tabling a legislative proposal for the Digital Services Act by December 2020. Also expected in the latter half of this year is a regulation on data governance and common EU data spaces, while the long awaited AI regulation is expected for publication by March 2021.

Addressing the challenges posed by the COVID-19 pandemic, the Next Generation EU package is the European Union’s means to support the recovery processes in EU Member States. The bulk of the proposed recovery measures will be powered by a new temporary recovery instrument worth €750 billion. A significant amount will be allocated towards digital and green initiatives, with a proposed minimum of 20% of the Recovery and Resilience Facility to be allocated to digital initiatives and 37% to green initiatives.

It is now likely that the transposition of the European Electronic Communications Code will be delayed across most countries in our EU footprint. This includes Germany, Italy, Portugal, Spain and Czech Republic where delays are now probable. In Hungary and Romania, even if the Directive is transposed the Member State is delaying the application of Title III (End User Rights). In Greece the European Electronic Communications Code has been transposed and is already in force.

Vodafone Group Plc ⫶ H1 FY21 results

Regulation

Germany

The German government is still in the process of implementing the European Electronic Communications Code and transposing the latter into national telecoms law. As part of this process, the Federal Ministry of Economics is also seeking to amend the utility bill regulation which currently allows lessors to charge broadband services (including TV services) through the utility bill. Other ministries appear to oppose the proposed amendment, and to date no agreement has been found.

In May 2017, the national regulatory authority (‘BNetzA’) initiated the market review process for wholesale access at fixed locations currently covering both unbundled local loop (‘ULL’) and virtual unbundled local access (‘VULA’) as well as bitstream wholesale products. Meanwhile, BNetzA has started market-wide discussions on possible remedies and the future of fibre access regulation in advance of the draft regulatory order, expected in Q4 2020.

Italy

In March 2017, the national regulatory authority (‘AGCOM’) imposed a minimum billing period of one-month for fixed and convergent offers, effective by the end of June 2017. The operators appealed AGCOM’s resolution before the Administrative Court and the appeal was rejected in February 2018. Vodafone Italy has filed an appeal before the Council of State and the proceeding is pending. After the public hearing held in July 2020, the Council of State issued a preliminary referral to the Court of Justice in order to assess if under EU law the AGCOM has the power to impose minimum and binding billing periods.

In January 2020, the national competition authority (‘AGCM’) ruled that Vodafone, TIM, Fastweb and WindTre coordinated their commercial strategies relating to the transition from four-week billing (28 days) to monthly billing, with the maintenance of the 8.6% increase being in violation of art.101 of TFEU. Vodafone appeal of AGCM’s decision is pending before the Administrative Tribunal.

United Kingdom

The national regulatory authority (‘Ofcom’) is consulting on the Fixed Wholesale Telecoms Market Review covering consumer and business connectivity services, the new regime is intended to commence in FY2021/22 and will run for five years. Ofcom are keen to encourage wider investment in fibre, with wholesale pricing expected to rise to fund this.

Ofcom is progressing with their plans to auction the 700MHz and 3.6GHz spectrum, which is anticipated to commence in early 2021.

Spain

In May 2019, the Ministry of Economy and Enterprise (‘Ministry’) launched a 5G public consultation on 700MHz, 1.5GHz and 26GHz spectrum bands. The 26GHz auction may be delayed and detached from the 700MHz auction. The Ministry has approved the final cap that will apply for the 700 MHz band that is expected to be auctioned at the beginning of 2021. The approved ministerial order establishes a double condition of having a maximum of 2X15MHz in the 700 MHz band, and a maximum of 2X35 MHz combined cap for the three lower bands (700, 800 and 900 MHz).

The Spanish Government approved a strategic digitalisation plan ’España Digital 2025’. The plan contains 10 strategic pillars, each of them including several initiatives. It is estimated that the plan will require €140 billion in the next 5 years.

The Ministry of Consumer Affairs is preparing a law to prohibit 902 numbers in customer service offered by companies in order to prevent companies from applying to this type of call prices that exceed standard geographic pricing, details are pending.

Vodafone Spain’s 2100 MHz license was extended for the next 10 years, and now expires in April 2030.

Vodafone Group Plc ⫶ H1 FY21 results

Regulation

Netherlands

In July 2020, VodafoneZiggo acquired 2x10 MHz of 700MHz spectrum, 1X15 MHz of 1400 MHz and 2x20 MHz of 2.1GHz spectrum in the recent auction for €415.8 million. The spectrum acquired has a 20-year duration to the end of 2040.

Ireland

The national regulatory authority (‘ComReg’) and the Irish government have extended the Temporary Spectrum Measures for two three-month periods running up to April 2021. As a result, Vodafone currently has a temporary 2X10 MHz licence in 700 MHz running up to January 2021, which could be extended to April 2021 depending on the assessment of the situation at the time. As part of these measures, the 2.1 GHz 3G licences have been liberalised and there is a facility to apply for 2.6 GHz spectrum for specific hotspots as required.

In May 2019, Comreg initiated a review of the regulated WACC. In its draft decision notified to the European Commission in June 2020, ComReg proposed the regulated fixed WACC should fall from 8.18% to 5.61%. In line with the decrease of the WACC, the European Commission urged ComReg to update relevant pricing decisions as soon as possible to ensure that prices in the Irish wholesale markets reflect current market conditions, as the WACC is a significant and central determinant of prices. The final decision is expected by the end of 2020.

Portugal

In July 2019, Vodafone Portugal launched a court action against the national regulatory authority (‘ANACOM’) seeking the revocation of Dense Air’s spectrum license. Vodafone Portugal submitted that Dense Air has breached the conditions attached to its spectrum license by failing to use its allocation. In March 2020, Vodafone Portugal launched a new court action against an ANACOM decision, dated December 2019, which amends – instead of revoking – Dense Air´s spectrum licence. Legal proceedings are ongoing.

In February 2020, the Portuguese Government put forward a Resolution setting out its 5G Strategy. Following this, ANACOM launched a public consultation on the 5G Auction Regulation, which was suspended until June 2020 due to the COVID-19 pandemic. The adoption of the 5G Auction Regulation is pending.

In July 2020, the national competition authority (‘AdC’) sent Vodafone Portugal and three other national operators a statement of objections alleging that operators may have formed a cartel to limit competition in telecoms services advertising via the Google search engine. Proceedings are ongoing.

Romania

In August 2020, the Government initiated the 5G Security Draft Law with a short public consultation period; however, the parliamentary process for approval has not yet been initiated. The 5G spectrum auction is delayed until March 2021.

Fixed termination rates will decrease by 30% in November 2020 to 0.098 Eurocents/min.

Vodafone Group Plc ⫶ H1 FY21 results

Regulation

Greece

Forthnet has filed a complaint with the Administrative Court requesting the annulment of the Vectoring/FTTH allocation decisions. The hearing date has been postponed to April 2021.

The national regulatory authority (‘EETT’) has published the Tender Document for granting of rights of use for radio frequencies in the 700 MHz, 2.1 GHz, 3400 - 3800 MHz and 26 GHz frequency bands. The deadline for the application submission is October 2020 while the auction is scheduled for December 2020.

The Council of State issued a decision based on which the mobile arm of the incumbent’s group of companies (a separate legal entity named COSMOTE) shall be treated as an independent third party when bundling mobile with fixed services. COSMOTE is allowed to offer discounts on mobile products when bundled with fixed services without any ex ante obligations. The decision allows for the use of ex post regulatory tools in case these bundles distort competition.

Czech Republic

In August 2020 and September 2020, Vodafone appealed against the terms of the 5G spectrum auction to both the CTU Council and the administrative court, respectively. Although the appeals were dismissed, Vodafone continues in our effort to receive judicial acknowledgement from higher Czech courts that the auction terms are excessive, unjustified, and constitute illegal state aid.

In January 2019, the national regulatory authority (‘CTU’) updated its 5G framework position for the 700MHz spectrum. The auction will now include 3.4-3.6GHz spectrum. In June 2019, the CTU consulted on the draft conditions of the 5G spectrum auction. In March 2020 and June 2020, the CTU consulted on the revised conditions, with the 5G spectrum auction expected to take place in the second half of 2020.

Hungary

In September 2020, the national regulatory authority released the draft rules for the auction of 900MHz and 1800MHz spectrum expiring in 2022. The auction is expected to occur in January 2021.

Albania

In July 2020, Vodafone Albania implemented the new regulated roaming tariffs for Western Balkan six countries (Serbia, Montenegro, North Macedonia, Bosnia & Herzegovina, Albania & Kosovo). The new tariffs decline as per the glide path defined by the national regulatory authority (‘AKEP’), following the April 2019 agreement between the governments of Western Balkans six countries for abolishing roaming charges among these countries. The regulated tariffs include: wholesale roaming tariffs, retail roaming tariffs and international termination rate of roaming traffic. Only roaming traffic exchanged between the Western Balkan six countries is subject to regulated international MTR.

In June 2020, AKEP issued its final decision on the national and international mobile termination rates (‘MTRs’). The national MTRs will remain unchanged at 1.11 ALL/min. AKEP will continue to monitor the market and initiate a study in the future for international MTRs.

In April 2020, AKEP issued its final decision on the market analysis of the wholesale mobile market for access and origination, whereby it stated that the three criteria test is not met and therefore no operator has significant market power and no regulatory obligations are imposed.

Vodafone Group Plc ⫶ H1 FY21 results

Regulation

India

In December 2019, the national regulatory authority (‘TRAI’) issued the regulation for Domestic Call Termination Charges. For wireless-to-wireless domestic calls, the termination charge would continue to remain at INR 0.06 per minute up to December 2020. From January 2021 onwards, the termination charge for wireless-to-wireless domestic calls will be zero.

In February 2020, the Department of Telecommunications (‘DoT’) issued an amendment to the Unified License on deferment of the auction payment instalments for FY 2020-21 and 2021-22.

In April 2020, TRAI issued the Telecommunication Interconnection Usage Charges (Sixteenth Amendment) Regulations, which revised the regime for fixed International Termination Charges (‘ITC’). Effective May 2020, ITC will not be less than INR 0.35 per minute and not more than INR 0.65 per minute in a non-discriminatory manner.

In September 2020, the Supreme Court pronounced judgment in the AGR case providing a time schedule of 10 years to make the payment of AGR dues in equal yearly instalments. 10% payment of total dues to be made by March 2021.

The Telecommunications Dispute Settlement and Appellate Tribunal’s (‘TDSAT’) hearing for VIL’s challenge against the financial demands made by the DoT for approving the transfer of Vodafone India’s licences in 2015 to be listed in due course.

Vodacom: South Africa

In November 2018, the Independent Communications Authority of South Africa (‘ICASA’) commenced a market inquiry into mobile broadband services to assess the state of competition and determine whether there are markets or market segments within the mobile broadband services value chain that may require regulatory intervention. Draft regulations are due to be published for consultation in November 2020.

In September 2020, ICASA announced that invitations to apply for licensing of spectrum (700 MHz, 800 MHz, 2.6 GHz, and 3.5 GHz) and the Wholesale Open Access Network (‘WOAN’) would be published in October 2020. ICASA announced that spectrum will be assigned to both the WOAN and in an auction to be completed by March 2021.

As part of the COVID-19 response measures, Vodacom received a temporary assignment of 160MHz spectrum until March 2021.

Vodacom: Democratic Republic of Congo

In August 2018, the customs authority issued a draft infringement report assessing that unpaid duties for alleged smuggled devices bought by Vodacom DRC amounting to USD 44 million, to which Vodacom DRC objected. In May 2019, Vodacom DRC filed an administrative appeal at the Council of State, which is yet to be heard. The Public Prosecutor also re-opened the investigation against the supplier of the alleged smuggled devices, ZFJ and prosecuted its employees for smuggling of devices. The Criminal Court acquitted ZFJ employees of the offense of smuggling. Concurrently, the Federation of Businesses of Congo has filed a claim against the Customs Authority on behalf of the industry, which is pending.

As part of the COVID-19 response measures, the communications regulator assigned temporary spectrum (2x2 MHz of 900 MHz and 2x5 MHz 2.1 GHz) until August 2020 and the central bank issued temporary measures on free person to person (“P2P”) mobile money transaction fees until December 2020.

Vodafone Group Plc ⫶ H1 FY21 results

Regulation

Vodacom: Tanzania

The Tanzania Revenue Authority (‘TRA’) has issued Tax Agency Notices against Vodacom Tanzania totalling TZS 19.9 billion, which has been paid by the relevant banks to the TRA.

In February 2020, the Communications Regulator in Tanzania (‘TCRA’) issued new SIM Card Registration Regulations to formalize the ‘biometric only’ SIM registration requirement and restrict ownership of the number SIMs by customer. The TCRA has implemented an automated approval process for the ownership of multiple SIMs effective August 2020, in terms of which subscribers are able to request approval directly from the TCRA. Vodacom Tanzania is participating in the TCRA process on intended barring of non-compliant SIMs, whereby the TCRA had extended the deadline to the end of August 2020. However, the TCRA has not given an official notice for barring to date. Vodacom Tanzania, together with the industry association, has also put in place a collaborative framework to mitigate fraudulent SIM registrations.

In August 2020, the TCRA issued a non-compliance letter to Vodacom Tanzania stating that during May and June 2020, Vodacom Tanzania charged international voice termination rate below the minimum regulated rate of USD 0.25 contrary to Electronic and Postal Communications (Tele - Traffic) Regulations of 2018. Vodacom Tanzania has submitted its response ahead of the TCRA determination.

The Tanzania Minister of Communications has re-issued EAC Roaming Regulations unchanged from 2014, but TCRA has not yet issued final regulations to this effect. In March 2019, Vodacom Tanzania provided comments on the Regulations and implementation thereof.

Vodacom: Mozambique

As part of its COVID-19 response measures, the communications regulator assigned temporary spectrum (2x5 MHz of 800 band) whilst the “State of Calamity” continues, and the central bank issued temporary measures on P2P mobile money transaction fees for 3 months from July 2020.

Vodacom: Lesotho

In December 2019, the communications regulator issued a notice of enforcement proceedings in which the NRA alleges that Vodacom Lesotho breached its licensing obligation to submit to the NRA its financial statements that are certified with an independent auditor, on the ground that Vodacom Lesotho’s auditing firm is not independent as required under Company Law, to which Vodacom Lesotho made representations. In September 2020, the NRA issued a letter in response to Vodacom Lesotho’s several representations, in which the NRA issued an enforcement action decision not to revoke Vodacom Lesotho’s license, and instead issued a penalty of M 134 million against Vodacom Lesotho. 30% of the penalty (M40.2 million) payable immediately and 70% of the penalty (M 93.8 million) suspended for five years, provided that Vodacom does not commit any further regulatory contraventions.

In October 2020, Vodacom Lesotho responded giving notice of its decision to apply for review of the NRA’s decision to impose these penalties in the High Court within 14 days in accordance with the applicable Administrative Rules. Subsequently, Vodacom Lesotho received a notice from the NRA revoking Vodacom Lesotho’s Unified Telecommunications License on the grounds that Vodacom Lesotho failed to comply with the NRA’s directive to pay 30% of the penalty. Vodacom Lesotho then filed an application in the High Court to review and set aside the NRA’s decisions to determine previous auditors of Vodacom Lesotho were not independent, impose a penalty of M134 million, and to revoke Vodacom Lesotho’s license. The High Court granted an interim order, which requires the NRA to show cause on the matters raised by 23 October 2020 and sets aside the NRA’s decisions until a final determination has been made.

Southern African Development Community (SADC) Roaming In June 2019, the draft results of the cost modelling exercise were shared, prescribing formulae that will ultimately inform roaming rates. In October 2019, the TCRA issued a letter to comply with the SADC recommendations by December 2019; however, no implementation measures have been issued to date.

Vodafone Group Plc ⫶ H1 FY21 results

Regulation

Turkey

N/A

Australia

In July 2020, Vodafone Hutchison Australia Limited merged with TPG Corporation Limited to create a new merged company renamed TPG Telecom Limited, which is also listed on the Australian Securities Exchange. Vodafone retains a 25.05% ownership interest in TPG Telecom Limited.

Egypt

In September 2020, Vodafone submitted its proposal to acquire 40 MHz in response to the National Telecommunications Regulatory Authority’s (‘NTRA’) issuance of a bid for 2600 MHZ spectrum with TDD technology. Vodafone’s technical and financial proposal has been accepted, and the final award is pending the next NTRA board meeting.

On 4 November 2020, Vodafone Egypt, which is classified as held for sale by the Group, acquired 40 MHz of 2.6 GHz TDD spectrum from the National Telecommunications Regulatory Authority. The acquired spectrum has a 10 year licence term through to 2030. Payments will be phased over 3 years, with an initial payment of $270 million (€230 million) upon receipt of the spectrum and two further payments of $135 million (€115 million) due in 2021 and 2022 respectively.

Ghana

The Minister of Communications issued a policy directive to the Communications Regulator in Ghana (‘NRA’) to address disparities in market and revenue share with immediate effect, which included declaring MTN Ghana a significant market player (‘SMP’) and imposing relevant corrective measures. The NRA commenced national roaming in light of MTN’s SMP. MTN Ghana’s application for judicial review against the SMP declaration was denied by the High Court. MTN Ghana has further filed an application to quash this decision before the Supreme Court. The NRA announced Asymmetric MTR Pricing as SMP intervention, which commenced in October 2020 for 2 years.

In August 2020, the NRA extended the deadline for renewal of Vodafone Ghana’s 2G license to 24 December 2020.

In accordance with the COVID-19 emergency order, the NRA has assigned 2x5MHz 800 band to Vodafone Ghana on a temporary basis until February 2021, and the central bank issued a directive to implement free P2P mobile money transactions. The NRA has also requested customer information from licensees as part of the Government’s tracking and tracing programme, which following an application was found by the high court in June 2020 to be compliant with the emergency order.

Safaricom: Kenya

In February 2019, Telkom Kenya Ltd and Airtel Networks Kenya Limited announced their intention to merge their respective mobile, enterprise and carrier businesses in Kenya. In December 2019, the transaction received conditional approval from the Kenyan Competition Authority. In August 2020, Airtel and Telkom Kenya announced that they had called off the intended merger and cited prolonged regulatory delays. The two companies will continue operating their various businesses as separate entities.

In June 2020, Safaricom acquired an additional 2x15 MHz spectrum in the 1800 MHz band for a period of ten years at a cost of USD 15 million.

In accordance with the COVID-19 response measures, in April 2020, the Central Bank directed payment services to remove P2P transaction fees for amounts up to KSH 1,000, which has been extended to end of December 2020.

Vodafone Group Plc ⫶ H1 FY21 results

Legal proceedings

The following section describes developments in legal proceedings which may have, or have had, during the six months ended 30 September 2020, a significant effect on the financial position or profitability of the Company and its subsidiaries. This section should be read in conjunction with the information contained under “Legal proceedings” on pages 215 to 219 of the Group’s annual report on Form 20-F for the year ended 31 March 2020.

Indian tax cases

Refer to “Commitments, contingent liabilities and legal proceedings” on page 59.

Indian regulatory cases

Refer to “Commitments, contingent liabilities and legal proceedings” on page 60.

Patent litigation - UK

Refer to “Commitments, contingent liabilities and legal proceedings” on page 60.

Italy: Iliad v Vodafone Italy

Refer to “Commitments, contingent liabilities and legal proceedings” on page 61.

Greece: Papistas Holdings SA, Mobile Trade Stores (formerly Papistas SA) and Athanasios and Loukia Papistas v Vodafone Greece, Vodafone Group Plc and certain Directors and Officers of Vodafone

Refer to “Commitments, contingent liabilities and legal proceedings” on page 61.

Netherlands: Consumer credit / handset case

Refer to “Commitments, contingent liabilities and legal proceedings” on page 61.

UK: Phones 4U in Administration v Vodafone Limited and Vodafone Group Plc and Others

Refer to “Commitments, contingent liabilities and legal proceedings” on page 61.

Vodafone Group Plc ⫶ H1 FY21 results

Risk factors

The key factors and uncertainties that could have a significant effect on the Group’s financial performance, include the following:

Global economic disruption

A major economic disruption could result in lower spending power for our customers and therefore reduced demand for our services affecting our profitability and cash flow generation. Economic disruption can also impact financial markets including currencies, interest rates, borrowing and availability of debt financing.

Cyber threat and information security

An external cyber-attack, insider threat or supplier breach could cause service interruption or the loss of confidential data. Cyber threats could lead to major customer, financial, reputational and regulatory impact across all of our local markets.

Geo-political risk in supply chain

We operate and develop sophisticated infrastructure in the countries in which we are present. Our network and systems are dependent on a wide range of suppliers internationally. If there was a disruption in the supply chain, we might be unable to execute our plans and we, and the industry, would face potential delays to network improvements and increased costs.

Adverse political and regulatory measures

Operating across many markets and jurisdictions means we deal with a variety of complex political and regulatory landscapes. In all of these environments, we can face changes in taxation, political intervention and potential competitive disadvantage. This also includes our participation in spectrum auctions.

Technology failure

Major incidents caused by natural disasters, deliberate attacks or an extreme technology failure, although rare, could result in the complete loss of key sites in either our data centres or our mobile/fixed networks causing a major disruption to our service.

Strategic transformation

We are undertaking a large-scale integration of recently acquired assets across multiple markets and failing to complete it in a timely and efficient manner, would result in not realising the full benefits or planned synergies and lead to additional costs.

The recent launch of Vantage Towers will also translate in changes to the way we operate.

We also have a number of joint ventures in operation and must ensure that these operate effectively.

Market disruption

New entrants with lean models could create pricing pressure. As more competitors launch unlimited bundles there could be price erosion. Our market position and revenues could be damaged by failing to provide the services that our customers want.

Digital transformation

Failure in digital or IT transformation projects could result in business loss, poor customer experience and reputational damage.

Disintermediation

We face increased competition from a variety of new technology platforms, which aim to build alternative communication services or different touch points, which could potentially affect our customer relationships. We must be able to keep pace with these new developments and competitors while maintaining high levels of customer engagement and an excellent customer experience.

Legal and regulatory compliance

Vodafone must comply with a multitude of local and international laws and applicable industry regulations. These include laws relating to privacy, anti-money laundering, competition, anti-bribery and economic sanctions. Failure to comply with these laws and regulations could lead to reputational damage, financial penalties and/or suspension of our licence to operate.

Vodafone Group Plc ⫶ H1 FY21 results

Risk factors

Brexit

The Board continues to monitor the implications for Vodafone’s operations in light of the new trading relationship between the UK and the EU, which has yet to be negotiated.

A cross-functional steering committee has identified the impact of the UK and EU failing to reach a free trade agreement on the Group’s operations and has produced a comprehensive mitigation plan.

Although our headquarters are in the UK, a large majority of our customers are in other countries, accounting for most of our revenue and cash flow. Each of our operating companies operates as a standalone business, incorporated and licensed in the jurisdiction in which it operates, and are able to adapt to a wide range of local developments. As such, our ability to provide services to our customers in the countries in which we operate, inside or outside the EU, is unlikely to be affected by the lack of a free trade deal. We are not a major international trading company, and do not use passporting for any of our major services or processes.

The lack of an agreed free trade deal between the UK and EU could lead to a fall in consumer and business confidence. Such a fall in confidence could, in turn, reduce consumer and business spend on our products and services.

COVID-19

We continue to conduct thorough assessments of the potential impacts of COVID-19 across our business, including but not limited to our principal risks. During the initial stage of the crisis, we reported in the Group’s annual report for the year ended 31 March 2020 (page 70) on the following topics: health, safety and wellbeing of our employees, disruption in our supply chain as well as an increase in cyber-attacks. These topics remain relevant, however other significant risks have been identified as detailed below:

•

Consumption of our products and services has changed due to societal shifts (e.g. working environment, connectivity needs and travel patterns) and these are likely to continue to evolve in the foreseeable future. By understanding the needs of our different customer groups, we are in a better position to provide support and adjust our product offering to retain loyalty while generating new revenue streams.

•

Requirement for ongoing access to capital markets in order to refinance debt. In addition, our emerging markets are exposed to currency movements. Turmoil in the financial markets can restrict access to capital markets and cause significant fluctuations in exchange rates. We maintain a conservative approach to liquidity by holding large volumes of cash and committed credit facilities, as well as limiting our refinancing exposure by maintaining a long average life of debt.

•

Governments will look to rebalance their finances over the coming years and our industry could be targeted as a funding opportunity with additional taxes and new adverse regulations. We continue to work closely with our stakeholders and government through our ‘Social Contract’ initiatives to ensure the sustainability and wellbeing of our society.

•

Pressures brought on by the effects of lockdown, social distancing and COVID-19 related restrictions impacts on our ability to physically service our customers. Therefore, we have accelerated and increased our digital transformation projects to provide a better customer experience.

Our response to the COVID-19 pandemic has prioritised the safety and wellbeing of our people first from the outset, through a variety of initiatives deployed across markets and tightly coordinated by the Business Continuity Plan programme management. The move to working from home for almost 100,000 of our people across all markets (approximately 95%) has been a tremendous organisational effort, enabled by our technology and network infrastructure, collaboration tools deployed at scale, HR policies and digital training.

We have also run a number of short-term ‘pulse’ surveys to gauge employee sentiment during the COVID-19 crisis. Our pulse survey responses have directly contributed to shaping our direction on our 'Future Ready' strategy around new digital ways of working and the future of work at Vodafone. They influenced our decisions on remote working, our digital tools and our response to wellbeing of our employees.

Vodafone Group Plc ⫶ H1 FY21 results

Unaudited condensed consolidated financial statements

Consolidated income statement

			Six months ended 30 September
			2020			2019
	Note		€m			€m
Revenue		2		21,427			21,939
Cost of sales				(14,657	)		(15,010	)
Gross profit				6,770			6,929
Selling and distribution expenses				(1,675	)		(1,883	)
Administrative expenses				(2,560	)		(2,590	)
Net credit losses on financial assets				(378	)		(302	)
Share of results of equity accounted associates and joint ventures				260			(2,601	)
Other income		8,9		1,055			1,024
Operating profit		2		3,472			577
Investment income				183			281
Financing costs				(1,610	)		(1,369	)
Profit/(loss) before taxation				2,045			(511	)
Income tax expense		4		(490	)		(1,380	)
Profit/(loss) for the financial period				1,555			(1,891	)

Attributable to:
– Owners of the parent				1,314			(2,128	)
– Non-controlling interests				241			237
Profit/(loss) for the financial period				1,555			(1,891	)

Profit/(loss) per share
Total Group:
– Basic		6		4.45	c		(7.24	)c
– Diluted		6		4.44	c		(7.24	)c

Consolidated statement of comprehensive income/expense

	Six months ended 30 September
	2020			2019
	€m			€m
Profit/(loss) for the financial period		1,555			(1,891	)
Other comprehensive income/(expense):
Items that may be reclassified to the income statement in subsequent periods:
Foreign exchange translation differences, net of tax		(770	)		(222	)
Foreign exchange translation differences transferred to the income statement		(77	)		(59	)
Other, net of tax¹		(2,058	)		(302	)
Total items that may be reclassified to the income statement in subsequent periods		(2,905	)		(583	)
Items that will not be reclassified to the income statement in subsequent periods:
Net actuarial losses on defined benefit pension schemes, net of tax		(383	)		(65	)
Total items that will not be reclassified to the income statement in subsequent periods		(383	)		(65	)
Other comprehensive expense		(3,288	)		(648	)
Total comprehensive expense for the financial period		(1,733	)		(2,539	)

Attributable to:
– Owners of the parent		(1,905	)		(2,809	)
– Non-controlling interests		172			270
		(1,733	)		(2,539	)

Note:

Principally includes the impact of the Group’s cash flow hedges deferred to other comprehensive income during the period.

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

Vodafone Group Plc ⫶ H1 FY21 results

Unaudited condensed consolidated financial statements

Consolidated statement of financial position

			30 September			31 March
			2020			2020
	Note		€m			€m
Non-current assets
Goodwill				31,251			31,271
Other intangible assets				20,996			22,252
Property, plant and equipment				38,059			39,197
Investments in associates and joint ventures		9		5,428			5,831
Other investments				899			792
Deferred tax assets				23,990			23,606
Post employment benefits				198			590
Trade and other receivables				6,574			10,378
				127,395			133,917
Current assets
Inventory				606			585
Taxation recoverable				300			275
Trade and other receivables				10,457			11,411
Other investments				9,180			7,089
Cash and cash equivalents				6,612			13,284
				27,155			32,644
Assets held for sale		5		2,312			1,607
Total assets				156,862			168,168

Equity
Called up share capital				4,797			4,797
Additional paid-in capital				152,694			152,629
Treasury shares				(7,720	)		(7,802	)
Accumulated losses				(120,331	)		(120,349	)
Accumulated other comprehensive income				28,916			32,135
Total attributable to owners of the parent				58,356			61,410
Non-controlling interests				1,224			1,215
Total equity				59,580			62,625

Non-current liabilities
Long-term borrowings				61,292			62,892
Deferred tax liabilities				1,986			2,043
Post employment benefits				427			438
Provisions				1,550			1,474
Trade and other payables				5,734			5,189
				70,989			72,036
Current liabilities
Short-term borrowings				7,530			11,826
Financial liabilities under put option arrangements				1,886			1,850
Taxation liabilities				578			671
Provisions				951			1,024
Trade and other payables				14,380			17,085
				25,325			32,456
Liabilities held for sale		5		968			1,051
Total equity and liabilities				156,862			168,168

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

Vodafone Group Plc ⫶ H1 FY21 results

Unaudited condensed consolidated financial statements

Consolidated statement of changes in equity

	Share capital		Additional paid-in capital¹		Treasury shares			Accumulated comprehensive losses²			Equity attributable to the owners			Non- controlling interests			Total equity
	€m		€m		€m			€m			€m			€m			€m
1 April 2019 brought forward		4,796		152,503		(7,875	)		(87,467	)		61,957			1,231			63,188
Issue or reissue of shares		1		1		66			(63	)		5			–			5
Share-based payments		–		72		–			–			72			–			72
Transactions with non-controlling interests in subsidiaries		–		–		–			(48	)		(48	)		(94	)		(142	)
Comprehensive (expense)/income		–		–		–			(2,809	)		(2,809	)		270			(2,539	)
Dividends		–		–		–			(1,112	)		(1,112	)		(187	)		(1,299	)
30 September 2019		4,797		152,576		(7,809	)		(91,499	)		58,065			1,220			59,285

1 April 2020 brought forward		4,797		152,629		(7,802	)		(88,214	)		61,410			1,215			62,625
Issue or reissue of shares		–		1		82			(80	)		3			–			3
Share-based payments		–		64		–			–			64			4			68
Transactions with non-controlling interests in subsidiaries		–		–		–			(11	)		(11	)		(5	)		(16	)
Comprehensive (expense)/income		–		–		–			(1,905	)		(1,905	)		172			(1,733	)
Dividends		–		–		–			(1,205	)		(1,205	)		(162	)		(1,367	)
30 September 2020		4,797		152,694		(7,720	)		(91,415	)		58,356			1,224			59,580

Notes:

	1.	Includes share premium, capital redemption reserve, merger reserve and share-based payment reserve. The merger reserve was derived from acquisitions made prior to 31 March 2004 and subsequently allocated to additional paid-in capital on adoption of IFRS.
	2.	Includes accumulated losses and accumulated other comprehensive income.

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

Vodafone Group Plc ⫶ H1 FY21 results

Unaudited condensed consolidated financial statements

Consolidated statement of cash flows

			Six months ended 30 September
			2020			2019
	Note		€m			€m
Inflow from operating activities		10		6,009			6,139

Cash flows from investing activities
Purchase of interests in subsidiaries, net of cash acquired		8		(136	)		(10,202	)
Purchase of interests in associates and joint ventures				–			(1,413	)
Purchase of intangible assets				(1,092	)		(1,002	)
Purchase of property, plant and equipment				(2,771	)		(2,769	)
Purchase of investments				(3,153	)		(239	)
Disposal of interests in subsidiaries, net of cash disposed		8		174			2,049
Disposal of interests in associates and joint ventures		9		420			–
Disposal of property, plant and equipment and intangible assets				6			21
Disposal of investments				1,031			6,043
Dividends received from associates and joint ventures				355			63
Interest received				153			183
Outflow from investing activities				(5,013	)		(7,266	)

Cash flows from financing activities
Issue of ordinary share capital and reissue of treasury shares				3			–
Net movement in short term borrowings				(2,717	)		815
Proceeds from issue of long term borrowings				2,125			9,107
Repayment of borrowings				(4,330	)		(13,277	)
Purchase of treasury shares				–			(821	)
Equity dividends paid				(1,209	)		(1,092	)
Dividends paid to non-controlling shareholders in subsidiaries				(166	)		(169	)
Other transactions with non-controlling shareholders in subsidiaries				(20	)		(233	)
Other movements in loans with associates and joint ventures				38			–
Interest paid¹				(774	)		(1,130	)
Outflow from financing activities				(7,050	)		(6,800	)

Net cash outflow				(6,054	)		(7,927	)

Cash and cash equivalents at beginning of the financial period²				13,288			13,605
Exchange (loss)/gain on cash and cash equivalents				(365	)		49
Cash and cash equivalents at end of the financial period²				6,869			5,727

Notes:

	1.	Interest paid includes €nil million (30 September 2019: €273 million) of cash outflow on derivative financial instruments for the share buyback related to the second tranche of the mandatory convertible bond that matured during the year ended 31 March 2020.
	2.	Includes cash and cash equivalents as presented in the Consolidated statement of financial position of €6,612 million (31 March 2020: €13,284 million) and cash and cash equivalents presented in assets held for sale of €274 million (31 March 2020: €273 million), together with overdrafts of €17 million (31 March 2020: €269 million).

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

Vodafone Group Plc ⫶ H1 FY21 results

Notes to the unaudited condensed consolidated financial statements

Basis of preparation

The unaudited condensed consolidated financial statements for the six months ended 30 September 2020:

are prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” (‘IAS 34’) as issued by the International Accounting Standards Board and as adopted by the European Union;

are presented on a condensed basis as permitted by IAS 34 and therefore do not include all disclosures that would otherwise be required in a full set of financial statements and should be read in conjunction with the Group’s annual report for the year ended 31 March 2020;

apply the same accounting policies, presentation and methods of calculation as those followed in the preparation of the Group’s consolidated financial statements for the year ended 31 March 2020, which were prepared in accordance with International Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board and were also prepared in accordance with IFRS adopted by the European Union (‘EU’), the Companies Act 2006 and Article 4 of the EU IAS Regulations. Income taxes are accrued using the tax rate that is expected to be applicable for the full financial year, adjusted for certain discrete items which occurred in the interim period in accordance with IAS 34.

include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the periods presented;

do not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006; and

were approved by the Board of directors on 16 November 2020.

The information relating to the year ended 31 March 2020 is an extract from the Group’s published annual report for that year, which has been delivered to the Registrar of Companies, and on which the auditors’ report was unqualified and did not contain any emphasis of matter or statements under section 498(2) or 498(3) of the UK Companies Act 2006.

The preparation of the unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the end of the reporting period, and the reported amounts of revenue and expenses during the period. Actual results could vary from these estimates. These estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Considerations in respect of COVID-19

Going concern

As outlined on page 3, trading in the first half of the year demonstrates the relative resilience of the Group’s operating model and the Group has a strong liquidity position with €6.6 billion of cash and cash equivalents available at 30 September 2020 and the Group has access to committed facilities that cover all of the Group’s reasonably expected cash requirements over the going concern period. The Directors have reviewed trading and liquidity forecasts for the Group which have been updated for the expected impact of COVID-19. The forecasts considered a variety of scenarios including not being able to access the capital markets during the assessment period. In addition to the liquidity forecasts prepared, the Directors considered the availability of the Group’s revolving credit facilities which were undrawn as at 30 September 2020. As a result of the assessment performed, the Directors have concluded that the Group is able to continue in operation for the period up to and including March 2022 and that it is appropriate to continue to adopt a going concern basis in preparing the unaudited condensed consolidated financial statements.

Critical accounting judgements and estimates

The Group’s critical accounting judgements and estimates were disclosed in the Group’s annual report for the year ended 31 March 2020. The forecast impact of COVID-19 was factored into certain of our judgements, primarily impairment testing. These judgements and estimates were reassessed during the six months ended 30 September 2020 and the Group’s latest outlook and best estimate of the COVID-19 impact are considered in our impairment review.

New accounting pronouncements adopted

On 1 April 2020, the Group adopted certain new accounting policies where necessary to comply with amendments to IFRS, none of which had a material impact on the consolidated results, financial position or cash flows of the Group. Further details are provided in the Group’s annual report for the year ended 31 March 2020.

Vodafone Group Plc ⫶ H1 FY21 results

Notes to the unaudited condensed consolidated financial statements

Segmental analysis

The Group has a single group of related services and products being the supply of communications services and products. Revenue is attributed to a country or region based on the location of the Group company reporting the revenue.

In the prior financial period, the Group reported the financial results of Vodacom and Other Markets under the Rest of the World (‘RoW’) region. To reflect changes in internal responsibilities, the RoW reporting segment no longer applies and Vodacom and Other Markets are separate reporting segments.

The Group’s revenue and profit is disaggregated as follows:

	Service revenue			Equipment revenue		Revenue from contracts with customers			Interest revenue		Other¹			Total segment revenue			Adjusted EBITDA
	€m			€m		€m			€m		€m			€m			€m
Six months ended 30 September 2020
Germany		5,723			466		6,189			6		176			6,371			2,844
Italy		2,249			216		2,465			5		36			2,506			800
UK		2,401			509		2,910			24		49			2,983			636
Spain		1,880			132		2,012			8		30			2,050			488
Other Europe		2,411			252		2,663			9		48			2,720			870
Eliminations		(47	)		-		(47	)		-		-			(47	)		-
Europe		14,617			1,575		16,192			52		339			16,583			5,638
Vodacom		1,949			335		2,284			7		132			2,423			891
Other Markets		1,679			212		1,891			-		7			1,898			613
Common Functions		219			13		232			-		424			656			(119	)
Eliminations		(46	)		-		(46	)		-		(87	)		(133	)		-
Group		18,418			2,135		20,553			59		815			21,427			7,023

	Service revenue			Equipment revenue		Revenue from contracts with customers			Interest revenue		Other¹			Total segment revenue			Adjusted EBITDA
	€m			€m		€m			€m		€m			€m			€m
Six months ended 30 September 2019
Germany		4,961			495		5,456			14		120			5,590			2,352
Italy		2,424			256		2,680			4		25			2,709			1,006
UK		2,451			598		3,049			34		68			3,151			658
Spain		1,966			157		2,123			13		25			2,161			460
Other Europe		2,392			253		2,645			9		36			2,690			872
Eliminations		(74	)		-		(74	)		-		(2	)		(76	)		-
Europe		14,120			1,759		15,879			74		272			16,225			5,348
Vodacom		2,217			416		2,633			2		99			2,734			1,019
Other Markets		2,024			299		2,323			2		26			2,351			755
Common Functions		240			24		264			-		523			787			(17	)
Eliminations		(57	)		-		(57	)		-		(101	)		(158	)		-
Group		18,544			2,498		21,042			78		819			21,939			7,105

Note:

Other includes lease revenue.

Vodafone Group Plc ⫶ H1 FY21 results

Notes to the unaudited condensed consolidated financial statements

Segmental analysis

The Group’s measure of segment profit is adjusted EBITDA which is reported after depreciation on lease-related right of use assets and interest on leases but excluding depreciation and amortisation, gains/losses on disposal for owned fixed assets, impairment losses, restructuring costs arising from discrete restructuring plans, the Group’s share of adjusted results in associates and joint ventures and other income and expense. A reconciliation of adjusted EBITDA to operating profit is shown below. For a reconciliation of operating profit to profit for the financial period, see the consolidated income statement on page 42.

	Six months ended 30 September
	2020			2019
	€m			€m
Adjusted EBITDA		7,023			7,105
Depreciation and amortisation		(4,729	)		(4,874	)
Share of adjusted results in equity accounted associates and joint ventures¹		255			(550	)
Adjusted operating profit		2,549			1,681
Restructuring costs		(86	)		(163	)
Amortisation of acquired customer bases and brand intangible assets		(364	)		(232	)
Other income and expense²		1,184			(872	)
Interest on lease liabilities		189			163
Operating profit		3,472			577

Notes:

	1.	Share of results of equity accounted associates and joint ventures presented within the Consolidated income statement includes €255 million (2019: -€550 million) included within Adjusted operating profit, €nil (2019: -€33 million) included within Restructuring costs, -€124 million (2019: -€122 million) included within Amortisation of acquired customer base and brand intangible assets and €129 million (2019: -€1,896 million; principally related to Vodafone Idea Limited) included within other income and expense.
	2.	For the six months ended 30 September 2020, the Group recorded a gain of €1,043 million in relation to the merger of Vodafone Hutchison Australia Pty Limited and TPG Telecom Limited which is reported in Other income and expense. See Note 9 ‘Investment in associates and joint ventures’. For the six months ended 30 September 2019, the Group recorded a gain of €1,078 million in relation to the disposal of Vodafone New Zealand, offset by losses incurred in Vodafone Idea Limited

The Group’s non-current assets are disaggregated as follows:

	30 September		31 March
	2020		2020
	€m		€m
Non-current assets¹
Germany		47,504		48,266
Italy		10,787		11,119
UK		7,215		7,790
Spain		7,051		7,229
Other Europe		9,060		9,138
Europe		81,617		83,542
Vodacom		5,270		5,400
Other Markets		1,309		1,561
Common Functions		2,110		2,217
Group		90,306		92,720

Note:

Includes goodwill, other intangible assets and property, plant and equipment (including right-of-use assets).

Vodafone Group Plc ⫶ H1 FY21 results

Notes to the unaudited condensed consolidated financial statements

Impairment review

A review for indicators of potential impairment was performed at 30 September 2020 and 30 September 2019. The methodology adopted for impairment reviews was consistent with that disclosed on page 149 and pages 159 to 165 of the Group’s annual report for the year ended 31 March 2020.

Management continues to review the impact of COVID-19. Following analysis of recent business performance and certain changes in expectations on future impacts, management has made additional adjustments to the five-year business plans used in the Group’s impairment testing. The impairment review is based on expected cash flows after applying these adjustments.

Impairment testing requires the assessment of the recoverable amount being the higher of an asset's or cash-generating unit's fair value less costs of disposal and its value in use. A lack of observable market data on fair values for equivalent assets means that the Group’s valuation approach for impairment testing focuses primarily on value in use. For a number of reasons, transaction values agreed as part of any business acquisition or disposal may be higher than the assessed value in use.

Consistent with prior periods, assets are grouped at the lowest levels for which there are separately identifiable cash flows, known as cash-generating units. Following the merger of Vodafone’s passive tower infrastructure in Italy with INWIT, management considers Vodafone Italy and Vodafone’s stake in INWIT to represent two cash-generating units for the purpose of the impairment review as at 30 September 2020. The key assumptions and sensitivity analysis for Vodafone Italy presented below are prepared on a post-merger basis.

Value in use assumptions

The table below shows key assumptions used in the value in use calculations at 30 September 2020:

	Assumptions used in value in use calculation
	Germany		Italy		Spain		Ireland	Romania
	%		%		%		%	%
Pre-tax risk adjusted discount rate		7.3		10.8		9.3	&nbs

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