Final Results - Part 4

Vodafone Group Plc 25 May 2004 Vodafone Group Plc Preliminary Results for the year ended 31 March 2004 PART 4 CASH FLOWS AND FUNDING Operating cash flows increased by 11% over the prior year to £12,317 million, primarily due to the growth in operating profit before goodwill amortisation and exceptional items. During the year ended 31 March 2004, the Group increased its operating free cash flow by 36% to £7,946 million and generated £8,521 million of free cash flow, as analysed below: Year ended 31 March 2004 2003 % change £m £m Net cash inflow from operating activities (Note 7) 12,317 11,142 11 Purchase of intangible fixed assets (21) (99) (79) Purchase of tangible fixed assets (4,508) (5,289) (15) Disposal of tangible fixed assets 158 109 45 ------- ------- Net capital expenditure on intangible and tangible fixed assets (4,371) (5,279) (17) ------- ------- Operating free cash flow 7,946 5,863 36 Dividends received from joint ventures and associated undertakings(1) 1,801 742 143 Taxation (1,182) (883) 34 Interest on group debt(2) 31 (475) - Dividends from investments 25 15 67 Dividends paid to minority interests (100) (91) 10 ------- ------- Net cash outflow for returns on investments and servicing of finance (44) (551) (92) ------- ------- Free cash flow 8,521 5,171 65 ======= ======= (1) Year ended 31 March 2004 includes £802 million (2003: £nil) from the Group's interest in SFR and £671 million (2003: £564 million) from Verizon Wireless. (2) Year ended 31 March 2004 includes £572 million (2003: £97 million) of cash receipts from the closure of financial instruments related to interest rate management activities, including those in connection with bond repurchases in subsidiaries. The Group's net cash outflow for acquisitions and disposals in the year is shown below: £ million Acquisitions: Vodafone Portugal - stake increased from 94.4%(1) to 100% including £336 million to settle consideration payable in relation to the public offer in the previous financial year (410) Vodafone Netherlands - stake increased from 97.2% to 99.9% (144) Vodafone Greece - stake increased from 64.0% to 99.4% (815) Singlepoint (417) Other acquisitions (278) Net cash acquired with subsidiary undertakings 10 Disposals: Disposal of Japan Telecom 966 Disposal of subsidiary and associated undertakings and trade investments 34 Net cash disposed of with subsidiary undertakings (258) ------- (1,312) ======= (1) Includes interests which the Group was irrevocably committed to purchase at 31 March 2003 As a result of the cash flow items discussed above and £144 million of foreign exchange movements, the Group's consolidated net debt position at 31 March 2004 improved to £8,488 million, from £13,839 million at 31 March 2003. This represented approximately 10% of the Group's market capitalisation at 31 March 2004, compared with 18% at 31 March 2003. The Group remains committed to maintaining a solid credit profile, as currently demonstrated by its stable credit ratings of P-1/F1/A-1 short-term and A2/A/A long term from Moody's, Fitch Ratings and Standard and Poor's, respectively. Credit ratings are not a recommendation to purchase, hold or sell securities, in as much as ratings do not comment on market price or suitability for a particular investor and are subject to revision or withdrawal at any time by the assigning rating organisation. Each rating should be evaluated independently. The Group's credit ratings enable it to have access to a wide range of debt finance, including commercial paper, bonds and committed bank facilities. The Group currently has US and euro commercial paper programmes of US$15 billion and £5 billion, respectively, which are available to be used to meet short-term liquidity requirements and which were undrawn at 31 March 2004 and 31 March 2003. The commercial paper facilities are supported by US$10.4 billion (£5.7 billion) of committed bank facilities, comprised of a US$5.5 billion Revolving Credit Facility that matures in June 2004 but which can be extended for one year, and a US$4.9 billion Revolving Credit Facility that matures in June 2006. As at 31 March 2004, no amounts had been drawn under either facility. The Group also has a JPY225 billion (£1,177 million) fully drawn committed bank facility and other fully drawn bilateral facilities of JPY12.1 billion (£63 million), expiring at various dates until January 2007. Furthermore, Vodafone Egypt, Vodafone Hungary and Vodafone Albania have committed facilities that may only be used to fund their operations totalling £467 million, of which £333 million were drawn. At 31 March 2004, the Group had approximately £12.4 billion (pounds sterling equivalent) of capital market debt in issue, with maturity dates from September 2004 to November 2032 and £1.6 billion (pounds sterling equivalent) of term funding, including drawings under the above bank facilities. The Group holds its cash and liquid investments in accordance with the counterparty and settlement risk limits of the Board approved treasury policy. The main forms of investments at 31 March 2004 were collateralised deposits, money market funds and euro commercial paper. Pension scheme funding As at 31 March 2004, the net deficit in the Group's defined benefit pension schemes, calculated under FRS 17, amounted to £103 million (2003: £257 million), comprising a net liability of £165 million (2003: £406 million) offset by a deferred tax asset of £62 million (2003: £149 million). This amount represents less than 0.2% (2003: less than 0.5%) of both the Group's market capitalisation and net assets at that date. SIGNIFICANT TRANSACTIONS The Group undertook the following significant transactions in the year ended 31 March 2004: Acquisitions The Group increased its interests in a number of subsidiary companies in the year. These were: % interest at % interest at 31 March 2003 31 March 2004 Vodafone Albania 82.4 99.7 Vodafone Egypt 60.0 67.0 Vodafone Greece 64.0 99.4 Vodafone Hungary 83.8 87.9 Vodafone Malta 80.0 100.0 Vodafone Netherlands 97.2 99.9 Vodafone Portugal 94.4 100.0 Vodafone Sweden 99.1 100.0 In September 2003, the Group acquired two UK service providers, Project Telecom plc and Singlepoint, for cash consideration of £164 million and £417m, respectively. Disposals The Group completed the disposals of its interests in its Indian and Mexican associates, RPG Cellular and Grupo Iusacell. On 14 November 2003, Vodafone Holdings K.K. (formerly Japan Telecom Holdings Co., Ltd.) completed the disposal of its fixed line business. Cegetel-SFR Group restructuring On 14 October 2003, the Group and Vivendi Universal completed a number of agreements designed to further improve the performance of Cegetel and optimise the cash flows between Cegetel and its shareholders. These agreements cover: • increased co-operation in relation to the development and roll out of new products and services, including Vodafone live!TM, and operational synergies, including procurement; • the simplification of the legal structure of Cegetel; • the payment of quarterly dividends; and, • the merger of Cegetel's fixed line business with Telecom Developpement. SUBSEQUENT EVENT On 25 May 2004, the Group announced potential additional investments in Japan which could result in cash outflows of up to £2.6 billion. The investments are consistent with the Group's overall strategy. FINANCIAL STATEMENTS CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2004 Year ended Year ended 31 March 31 March 2004 2003 £m £m Turnover: Group and share of joint ventures and associated undertakings - Continuing operations 42,920 37,324 - Discontinued operations 818 1,828 ------- ------- 43,738 39,152 Less: Share of joint ventures and associated undertakings (10,179) (8,777) ------- ------- 33,559 30,375 ======= ======= Turnover (Note 2) - Continuing operations 32,741 28,547 - Discontinued operations 818 1,828 ------- ------- 33,559 30,375 ======= ======= Operating (loss)/profit - Continuing operations (4,842) (5,052) - Discontinued operations 66 (243) ------- ------- (4,776) (5,295) Share of operating profit/(loss) in joint ventures and associated undertakings - Continuing operations 546 (156) ------- ------- Total Group operating loss (Note 2) (4,230) (5,451) Exceptional non-operating items (Note 4) (103) (5) ------- ------- Loss on ordinary activities before interest (4,333) (5,456) Net interest payable and similar items (714) (752) - Group (499) (457) - Share of joint ventures and associated undertakings (215) (295) ------- ------- Loss on ordinary activities before taxation (5,047) (6,208) Tax on loss on ordinary activities (Note 5) (3,154) (2,956) ------- ------- Loss on ordinary activities after taxation (8,201) (9,164) Minority interests (including non-equity minority interests) (814) (655) ------- ------- Loss for the financial year (9,015) (9,819) Equity dividends (1,378) (1,154) ------- ------- Retained loss for the Group and its share of joint ventures and associated undertakings (10,393) (10,973) ======= ======= Basic and diluted loss per share (Note 6) (13.24)p (14.41)p Adjusted basic earnings per share (Note 6) 9.10p 6.81p Dividends per share 2.0315p 1.6929p CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2004 31 March 31 March 2004 2003 as restated £m £m Fixed assets Intangible assets 93,622 108,085 Tangible assets 18,083 19,574 Investments 22,275 26,989 - Investments in associated undertakings 21,226 25,825 - Other investments 1,049 1,164 -------- -------- 133,980 154,648 -------- -------- Current assets Stocks 458 365 Debtors 6,901 7,460 Investments 4,381 291 Cash at bank and in hand 1,409 475 -------- -------- 13,149 8,591 Creditors: amounts falling due within one year (15,026) (14,293) -------- -------- Net current liabilities (1,877) (5,702) -------- -------- Total assets less current liabilities 132,103 148,946 Creditors: amounts falling due after more than one year (12,975) (13,757) Provisions for liabilities and charges (4,197) (3,696) -------- -------- 114,931 131,493 ======== ======== Capital and reserves Called up share capital 4,280 4,275 Share premium account 52,154 52,073 Merger reserve 98,927 98,927 Own shares held (1,136) (41) Other reserve 713 843 Profit and loss account (43,014) (27,447) -------- -------- Total equity shareholders' funds 111,924 128,630 Equity minority interests 2,132 1,848 Non-equity minority interests 875 1,015 -------- -------- 114,931 131,493 ======== ======== CONSOLIDATED CASH FLOW FOR THE YEAR ENDED 31 MARCH 2004 Year ended Year ended 31 March 31 March 2004 2003 as restated £m £m Net cash inflow from operating activities (Note 7) 12,317 11,142 Dividends received from joint ventures and associated undertakings 1,801 742 Net cash outflow for returns on investments and servicing of finance (44) (551) Taxation (1,182) (883) Net cash outflow for capital expenditure and financial investment (4,267) (5,359) - Purchase of intangible fixed assets (21) (99) - Purchase of tangible fixed assets (4,508) (5,289) - Purchase of investments (43) (546) - Disposal of tangible fixed assets 158 109 - Disposal of investments 123 575 - Other 24 (109) -------- -------- Net cash outflow for acquisitions and disposals (1,312) (4,880) - Purchase of interests in subsidiary undertakings (2,064) (3,519) - Net cash acquired with subsidiary undertakings 10 11 - Purchase of interests in joint ventures and associated undertakings - (1,491) - Disposal of interests in subsidiary undertakings 995 125 - Net cash disposed of with subsidiary undertakings (258) - - Other 5 (6) -------- -------- Equity dividends paid (1,258) (1,052) -------- -------- Cash inflow/(outflow) before management of liquid resources and financing 6,055 (841) Management of liquid resources (4,286) 1,384 Net cash outflow from financing (700) (150) - Issue of ordinary share capital 69 28 - Increase/(decrease) in debt 280 (165) - Purchase of treasury shares (1,032) - - Purchase of own shares in relation to employee share schemes (17) (14) - Issue of shares to minorities - 1 -------- -------- Increase in cash in the financial year 1,069 393 ======== ======== Reconciliation of net cash flow to movement in net debt Increase in cash in the financial year 1,069 393 Cash (inflow)/outflow from (increase)/decrease in debt (280) 165 Cash outflow/(inflow) from increase/(decrease) in liquid resources 4,286 (1,384) -------- -------- Decrease/(increase) in net debt resulting from cash flows 5,075 (826) Net debt acquired on acquisition of subsidiary undertakings (7) - Net debt disposed on disposal of subsidiary undertakings 194 - Translation difference 144 (826) Premium on repayment of debt (56) (157) Other movements 1 4 -------- -------- Decrease/(increase) in net debt in the financial year 5,351 (1,805) Opening net debt (13,839) (12,034) -------- -------- Closing net debt (Note 8) (8,488) (13,839) ======== ======== CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 31 MARCH 2004 Year ended Year ended 31 March 31 March 2004 2003 £m £m Loss for the financial year - Group (8,996) (9,049) - Share of joint ventures and associated undertakings (19) (770) -------- -------- (9,015) (9,819) -------- -------- Currency translation - Group (2,462) 10,484 - Share of joint ventures and associated undertakings (2,830) (1,445) -------- -------- (5,292) 9,039 -------- -------- Total recognised gains and losses for the financial year (14,307) (780) ======== ======== MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS FOR THE YEAR ENDED 31 MARCH 2004 Year ended Year ended 31 March 31 March 2004 2003 as restated £m £m Loss for the financial year (9,015) (9,819) Equity dividends (1,378) (1,154) -------- -------- (10,393) (10,973) Currency translation (5,292) 9,039 New share capital subscribed 86 31 Purchase of treasury shares (1,088) - Purchase of own shares in relation to employee share schemes (17) (14) Own shares released on vesting of share awards 10 6 Other (12) 1 -------- -------- Net movement in equity shareholders' funds (16,706) (1,910) Opening equity shareholders' funds (originally £128,671 million before prior year adjustment of £41 million) 128,630 130,540 -------- -------- Closing equity shareholders' funds 111,924 128,630 ======== ======== This information is provided by RNS The company news service from the London Stock Exchange

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