Vodafone 2006 Annual Report Download - page 10

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8Vodafone Group Plc Annual Report 2006
Chief Executive’s Review
We delivered another set
of robust financial and
operational results amidst a
more competitive landscape
and announced returns to
shareholders over the year
of £19.2 billion.
Review of the year
We have delivered another year of robust financial performance against a backdrop of
increasing competition and regulation, meeting our expectations for revenue, EBITDA
margin and free cash flow.
Proportionate customer growth was strong with nearly 22 million organic net additions
in the year taking the closing proportionate customer base to over 170 million across
26 countries. Our unrivalled presence provides the platform for the next stage of
our strategy.
These results have enabled us to significantly increase returns to shareholders.
We have increased dividends per share by 49% to 6.07 pence, purchased £6.5 billion
of our shares and announced a special distribution of £9.0 billion.
Financial review
Statutory revenue increased by 10% to £29.4 billion, with over 9% growth in our mobile
operations. Excluding the net benefit from acquisitions, disposals and exchange rate
movements, we achieved organic revenue growth of 7% in mobile and 8% for the
Group as a whole. Strong performances in Spain and several of our emerging markets,
including South Africa, Egypt and Romania, helped offset lower growth this year
in several of our more established markets. Notwithstanding this lower growth, we
outperformed substantially all of our principal competitors in our major markets
on revenue and EBITDA growth.
Our focus on profitability delivered an 11% organic increase in adjusted operating profit,
with 13% growth in total. The competitive environment led to a necessary increase in
net customer acquisition and retention costs but this was mitigated by our ongoing
success in delivering operating efficiencies. A key part of this growth has been the
strong overall performance from our associates, increasing by over 20% this year, and
in particular from Verizon Wireless in the US, growing by nearly 28% as it consolidated
its market leadership.
Capital expenditure on fixed assets was £4.0 billion as we continue to invest in
broadening our 3G presence. Free cash flow of £6.4 billion was slightly lower than last
year as expected, with increases in capital expenditure and lower dividends from Verizon
Wireless offsetting an increase of £1.0 billion in net cash flow from operating activities.
Operational highlights
We have been focused on six strategic goals, including delighting our customers and
leveraging scale and scope.
A core part of delighting our customers is our 3G offering. When we launched 3G late
in 2004, we targeted 10 million consumers by the end of March 2006, including Japan.
We reached this during March, shortly before we agreed to sell our Japanese operation.
Arun Sarin