Vodafone 2024 Annual Report

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Vodafone Group Plc Annual Report 2024

Strategic report

Governance

Financials

Other information

Reshaping Vodafone for growth Chair’s message

This has been a year of significant change as we aim to deliver our purpose to connect for a better future. We have taken all the steps needed to transform our portfolio and good progress has been made with our strategic priorities of Customers, Simplicity and Growth. Portfolio transformed, good initial strategic progress As I said last year, the Company has underperformed and further change is needed to drive sustainable value creation for our shareholders. The Board and I have been pleased with Margherita’s pace and decisiveness over the last year and we have seen the first impacts of our focus on our new strategic priorities of Customers, Simplicity and Growth. Whilst there is much more to do, we are making faster and more decisive commercial decisions, customer satisfaction has seen broad-based improvements, and we have moved towards a commercial model for our shared operations. Vodafone Business growth is accelerating as we are strengthening our position as the leading platform for businesses, supported by unique strategic partnerships. We are also forging partnerships that leverage our existing strengths, unlock value and accelerate growth. The shape of the Group has also changed as we focus on markets where we can grow and earn returns on our investments in excess of our cost of capital; this was not possible organically in UK, Spain or Italy. With our reshaped footprint, Vodafone will have strong positions with good local scale in each of our markets, and this will ensure we can deliver sustainable and predictable growth and a step-up in returns. Board composition Following an extensive and rigorous search, I was delighted to welcome Luka Mucic as Chief Financial Officer and an Executive Director of the Board in September 2023. Luka brings substantial experience in finance, international leadership and enterprise & technology solutions. Luka has been very supportive of the transformation of Vodafone and I am confident that his track record and expertise will aid the delivery of our strategic priorities. We have also welcomed Hatem Dowidar, Group Chief Executive Officer of e&, to our Board as a Non-Executive Director from 19 February 2024. Hatem represents our largest shareholder and brings extensive telecommunications experience. He also knows us well after holding various Vodafone leadership positions prior to joining e&. Hatem’s appointment to the Board marks the next phase of our strategic relationship with e&. Last year, the Board approved the creation of a Technology Committee as a Committee of the Board. I have been pleased to see the Committee and its expert membership bring additional insight to the Board and Vodafone, in its first year overseeing the Group’s technology strategy and considering how it supports the overall Company strategy today, and in the future. FY24 financial performance & new capital allocation framework Our financial results for FY24 were ahead of expectations and we achieved our financial guidance for the year. Total revenue declined 2.5% to €36.7 billion, with Group organic service revenue growing by 6.3% 1 this year. This was driven by growth in Europe, Africa and Business. Our reported financials were also impacted by adverse currency movements during the year. Adjusted EBITDAaL increased by 2.2% 1 on an organic basis as good service revenue progress was partially offset by higher energy costs and inflationary impacts. Adjusted free cash flow was €2.6 billion 1 , reflecting lower adjusted EBITDAaL. Group return on capital employed

increased as a result of the right-sizing of our portfolio, however decreased year-on-year to 7.5% on a pre-tax basis due to lower operating profit 1 . Group operating profit decreased by 74.6% to €3.7 billion, primarily reflecting business disposals in the prior financial year and adverse foreign exchange rate movements, and as a result basic earnings per share decreased to 7.47 eurocents. Our balance sheet position remains robust, with Group leverage now at 2.5x 2 .The Board has declared a total dividend per share of 9.0 eurocents with respect to FY24, implying a final dividend per share of 4.5 eurocents, which will be paid on 2 August 2024 following shareholder approval at our AGM. In March 2024, we announced a new capital allocation framework as the execution of our portfolio right-sizing has provided the necessary clarity over the future shape of the Group. Under our new capital allocation framework, we will continue our disciplined investment approach, supporting our network, strategy and growth levers; adopt a new lower target leverage range with built-in flexibility; re-base the FY25 dividend to 4.5 eurocents per share to reflect the reshaped Group, with an ambition to grow over time; and return surplus capital to shareholders through share buybacks. Connectivity drives competitiveness As the economies and societies in Vodafone’s markets continue to evolve, our role in providing digital connectivity and solutions grows in importance, not only for our customers but for policymakers too. Our digital services help to improve lives, transform industrial productivity, drive growth and secure infrastructure. We remain firmly committed to supporting Europe’s and Africa’s digital ambitions for the benefit of their citizens and businesses. In Africa, connectivity that enables our customers to access the internet and make mobile money transfers is fundamental to the economic development of the six countries in which we operate. As more customers wish to move to more advanced technologies, Vodafone is working with international partners and multilateral institutions to tackle the challenge of smartphone affordability. In Europe, a ‘connectivity chasm’ is opening with regions like North America and Asia. There is a risk that in the future Europeans will have inferior access to the latest digital innovations simply because of outdated public policies. As a result, Europe will lack the advanced connectivity that is essential to its global competitiveness. Though European policymakers have made some progress, the telecommunications market in Europe remains highly fragmented and more needs to be done to create the right environment for investing in next-generation connectivity. With structurally low returns on capital in European markets and its wider importance to competitiveness, connectivity must be a priority for European politicians as they seek to reverse the continent’s declining productivity and share of global output. This is an important year for Europe. European Parliament elections and a new European Commission give political leaders the rare chance to change course and return the continent to its position as a global economic leader. They must take it. The year ahead On behalf of the Board, I would like to thank all our colleagues across the Group who have continued to work tirelessly to support our transformation as we focus on our customers, become a simpler business, and accelerate growth. As we enter FY25, I am confident that Margherita and her management team will continue to make progress on our strategic priorities. The ‘reshaped Vodafone’ will be a best-in-class telco in Europe & Africa and the leading platform for businesses, ultimately delivering value for all our stakeholders. Jean-François van Boxmeer Chair

Notes: 1. This is a non-GAAP measure. See page 235 for more information. 2. Proforma ratio after adjusting for foreign exchange and M&A.

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