Vodafone Group reports 113% EBITDA growth in 2020 and 23.9 pp EBITDA Margin growth from 22.3% to 46.2%

12 May 2020 • About Vodafone Group ($VOD) • By InTwits

Vodafone Group reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:

Vodafone Group has high CAPEX intensity: 5 year average CAPEX/Revenue was 12.7%. At the same time it's a lot of higher than industry average of 9.6%.
CAPEX is quite volatile: £0m in FY2020, £1m in FY2019, £0m in FY2018, £0m in FY2017, £0m in FY2016
The company has potentially unprofitable business model: ROIC is 6.2%
It operates with high leverage: Net Debt/EBITDA is 3.0x while industry average is 0.2x

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

The company's Revenue increased on 3.0%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin jumped on 13.0 pp from -25.2% to -12.2% in FY2020.

Gross Margin increased slightly on 0.85 pp from 30.9% to 31.8% in FY2020. Gross Margin followed a growing trend at 1.4 pp per annum in FY2016-FY2020. SG&A as a % of Revenue showed almost no change in FY2020. During the last 5 years SG&A as a % of Revenue bottomed in FY2018 at 20.7% and was growing since that time.

Net Income margin surged on 16.3 pp from -18.4% to -2.0% in FY2020.

Investments (CAPEX, working capital and M&A)

The company's CAPEX/Revenue was 11.5% in FY2020. Vodafone Group showed small CAPEX/Revenue decline of 1.7 pp from 13.2% in FY2017 to 11.5% in FY2020. It's average CAPEX/Revenue for the last three years was 11.2%.

Return on investment

The company operates at low but positive ROIC (6.2%) and negative ROE (-1.5%). ROIC increased on 6.3 pp from -0.047% to 6.2% in FY2020. ROE jumped on 10.9 pp from -12.4% to -1.5% in FY2020.

Leverage (Debt)

Debt level is 3.0x Net Debt / EBITDA and 3.6x Debt / EBITDA. Net Debt / EBITDA dropped on 1.1x from 4.0x to 3.0x in FY2020. Debt jumped on 41.1% while cash decreased on 2.6%.

Vodafone Group has no short term refinancing risk: cash is higher than short term debt (112.3%).

Management team

Nicholas Jonathan Read "Nick" is a the company's CEO. Nicholas Jonathan Read "Nick" has spent 2 years with the company. Margherita Della Valle is a the company's CFO. Margherita Della Valle has spent 2 years at the company.

Financial and operational results

FY ended 31 Mar 2020

Vodafone Group ($VOD) key annual financial indicators

mln. €	2016	2017	2018	2019	2020	2020/2019
P&L
Revenue	49,810	47,631	46,571	43,666	44,974	3.0%
Gross Profit	13,097	13,055	13,800	13,506	14,292	5.8%
SG&A	10,982	10,429	9,655	9,301	9,624	3.5%
EBITDA	12,933	14,897	14,702	9,753	20,778	113.0%
Net Income	-5,405	-6,297	2,439	-8,020	-920
Balance Sheet
Cash	12,922	8,835	4,674	13,637	13,284	-2.6%
Short Term Debt	14,786	7,419	7,348	4,270	11,826	177.0%
Long Term Debt	36,792	34,218	32,630	48,685	62,892	29.2%
Cash flow
Capex	8,265	6,285	4,917	5,053	5,182	2.6%
Ratios
Revenue growth	-7.5%	-4.4%	-2.2%	-6.2%	3.0%
EBITDA growth	-12.6%	15.2%	-1.3%	-33.7%	113.0%

Gross Margin	26.3%	27.4%	29.6%	30.9%	31.8%	0.8%
EBITDA Margin	26.0%	31.3%	31.6%	22.3%	46.2%	23.9%
SG&A, % of revenue	22.0%	21.9%	20.7%	21.3%	21.4%	0.1%
Net Income Margin	-10.9%	-13.2%	5.2%	-18.4%	-2.0%	16.3%
CAPEX, % of revenue	16.6%	13.2%	10.6%	11.6%	11.5%	-0.0%

ROIC	1.1%	3.7%	4.8%	-0.0%	6.2%	6.3%
ROE	-6.2%	-8.1%	3.5%	-12.4%	-1.5%	10.9%
Net Debt/EBITDA	3.0x	2.2x	2.4x	4.0x	3.0x	-1.1x

Peers in Mobile Telecommunications

Below we provide Vodafone Group benchmarking against other companies in Mobile Telecommunications industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %


Top	FY2016	FY2017	FY2018	FY2019	FY2020
Sk Telecom ($SKMD)	-0.3%	2.5%	-3.7%	5.2%	-
Median (1 company)	-0.3%	2.0%	-25.1%	5.2%	-
Vodafone Group ($VOD)	-	-4.4%	-2.2%	-6.2%	3.0%

Top companies by ROIC, %


Top	FY2016	FY2017	FY2018	FY2019	FY2020
Sk Telecom ($SKMD)	6.3%	5.9%	3.9%	-	-
Median (1 company)	6.3%	8.4%	-56.9%	-	-
Vodafone Group ($VOD)	1.1%	3.7%	4.8%	-0.0%	6.2%

Vodafone Group stock price chart

Vodafone Group financials

mln.	FY2015	FY2016	FY2017

Revenue	53,826	49,810	47,631
EBITDA	14,790	12,933	14,897
Net income	7,343	-5,405.000	-6,297.000
CAPEX	8,372	8,265	6,285
Debt	48,505	51,578	41,637
Cash	9,522	12,922	8,835

About Vodafone Group

Vodafone Group Plc operates as a telecommunications company worldwide. It offers voice, messaging, data, and fixed broadband services; unified communication solutions; Vodafone One Net, a converged service, which combines fixed and mobile services for various businesses; carrier voice and data products; machine-to-machine connection services; and cloud and hosting services, such as co-location, managed hosting, private and public cloud services, messaging services, and software-as-a-service applications. The company also provides M-PESA, a money transfer service that enables customers with limited access to bank accounts to send and receive money, top-up airtime, and make bill payments; smartphones and tablets; and mHealth solutions for healthcare providers. In addition, it offers hosting and cloud services, including managed hosting solutions, as well as cloud computing, co-location, server and Website hosting, storage, and security. The company serves approximately 434 million mobile and 9 million fixed broadband customers. It sells and distributes its products through approximately 14,500 branded stores comprising franchises and a network of distribution partners, as well as third party retailers. Vodafone Group Plc was founded in 1984 and is headquartered in Newbury, the United Kingdom.