Vodafone announces results for the six months ended 30 September 2013

Q2 Group organic service revenue on a management basis1 declined 4.9%*; N. & C. Europe down 4.9%*; S. Europe down 15.5%*; AMAP up 5.7%*

H1 EBITDA² on a management basis1 down 4.1%* to £6.6 billion, now reported excluding restructuring and significant one-off items of £228 million in H1

Adjusted operating profit² on a management basis1 £5.7 billion, free cash flow on a management basis1 £2.0 billion

Full year guidance³ confirmed: adjusted operating profit2 around £5.0 billion; free cash flow £4.5 – £5.0 billion

Interim dividend per share of 3.53 pence, up 8.0%; intention to pay full year dividends per share of 11 pence

US$130 billion sale of US Group announced, US$84 billion expected return to shareholders

Completion of Kabel Deutschland acquisition in October 2013 advances unified communications strategy

Additional deferred tax assets of £17.7 billion recognised in relation to the Group’s historical tax losses; £3.0 billion tax charge recognised in relation to the sale of the US Group

Financial highlights4

Project Spring

Project Spring organic investment programme to accelerate and extend Vodafone 2015 strategy: continued focus on data, enterprise and emerging markets

Additional investment increased to around £7 billion by March 2016, to establish stronger network and service differentiation in major markets

Peak impact on EBITDA from higher operating expenses of up to £0.6 billion in the 2015 financial year; neutral to EBITDA by the 2017 financial year

Incremental free cash flow of over £1 billion expected in the 2019 financial year

Commitment to annual growth in dividends per share

Vittorio Colao, Group Chief Executive, commented:

“Whilst trading conditions in Europe remain very tough at present, we are encouraged by the forecast return to economic growth over the next two years and the potential for a shift in regulatory focus to support greater industry investment and consolidation.

“We have continued to make good progress in delivering our long-term strategy. Our emerging markets businesses are performing very well, driven by rapidly increasing smartphone penetration and data usage. In mature markets, our performance reflects more challenging conditions, which we continue to mitigate through ongoing actions to improve our operating model and cost efficiency. This rigorous approach, plus our substantial investments in Vodafone Red, 4G and unified communications services – including our recent acquisition of Kabel Deutschland – are laying strong foundations for the future. Our Project Spring organic investment programme – now increased to £7 billion – will accelerate further our plans to establish stronger network and service differentiation for our customers.

“The pending US$130 billion US transaction will reward our shareholders for their long-term support of our strategy and will provide us with a strong balance sheet, improved dividend cover and the financial and strategic flexibility to make further investments in the business or returns to shareholders in the future.”

Notes:

* 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. There have been two one-off items impacting organic growth rates in the six month period. For details see note 4 on page 47.

1. Management basis includes the results of Vodafone Italy, Vodafone Hutchison Australia, Vodafone Fiji and Indus Towers, the Group’s joint ventures, on a proportionate consolidation basis. It also includes five months profit contribution from Verizon Wireless (‘VZW’).

2. EBITDA and adjusted operating profit have been redefined to exclude restructuring costs and the write-off of an asset in relation to a regulatory case in Spain in the six months ended 30 September 2013 of £121 million (2012: £63 million) and £107 million respectively.

3. Pro forma guidance, see page 8 for more information on guidance.

4. See page 42 for more information on non-GAAP measures.

5. Statutory reporting includes the Group’s joint ventures, Vodafone Italy, Vodafone Hutchison Australia, Vodafone Fiji and Indus Towers, using the equity accounting basis rather than on a proportionate consolidation basis. The profit contribution from VZW is included for five months, until the date of the announcement of the disposal, and is treated as discontinued operations. Total profit for the financial period includes continuing and discontinued operations.

6. Includes the recognition of a deferred tax asset in respect of tax losses in Germany (£1,838 million) and Luxembourg (£15,831 million) and the estimated tax liability related to the rationalisation and reorganisation of our non-US assets prior to the disposal of our stake in VZW (£3,016 million).

7. Now reported excluding amortisation of acquired intangibles for brand and customer base. Adjustments also include the restatement of tax on VZW earnings in the current period to align with the five months of earnings recognised in the income statement.