Final Results - Part 5

Vodafone Group Plc 25 May 2004 Vodafone Group Plc Preliminary Results for the year ended 31 March 2004 PART 5 NOTES TO THE PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2004 1 Basis of preparation Statutory financial information The preliminary results for the year ended 31 March 2004 are an abridged statement of the full Annual Report, which was approved by the Board of Directors on 25 May 2004. The Auditors' Report on these accounts was unqualified. The preliminary results do not comprise statutory accounts within the meaning of section 240 of the Companies Act 1985. The information relating to the year ended 31 March 2003 is an extract from the published accounts for that year, which have been delivered to the Registrar of Companies, and on which the Auditors' Report was unqualified. The accounts for the year ended 31 March 2004 will be delivered to the Registrar of Companies following the Company's Annual General Meeting, to be held on 27 July 2004. Change in accounting policy During the financial year, the Accounting Standards Board issued Urgent Issues Task Force ('UITF') Abstract 38 'Accounting for ESOP Trusts' which supersedes UITF Abstract 13 and requires presentation of an entity's own shares held in an ESOP trust to be deducted in arriving at shareholders' funds as opposed to being recognised as assets. The Group has adopted this Abstract in the preparation of its Consolidated Financial Statements for the year ended 31 March 2004, and has restated its balance sheet at 31 March 2003 and statement of cash flows for the year ended 31 March 2003. The impact of adopting UITF 38 was to reduce investments and shareholders' funds by £41 million as at 31 March 2003. 2 Segmental and other analyses The Group's principal business is the supply of mobile telecommunications services and products. Other operations primarily comprise fixed line telecommunications businesses and, until 29 August 2002, the Vizzavi joint venture. In June 2003, the Group announced changes in the regional structure of its operations. The former Northern Europe and Central Europe regions were combined into a new Northern Europe region, with the exception of the United Kingdom and Ireland that now form their own region. The segmental analyses below are presented in accordance with the new regional structure. The results of the Japan Telecom fixed line business, which has been disposed of, are analysed as discontinued operations. Analyses of turnover and total Group operating profit/(loss) by geographical region and class of business are as follows: Year ended Year ended 31 March 31 March 2004 2003 £m £m Turnover(1) Mobile telecommunications: United Kingdom and Ireland 5,504 4,655 Northern Europe 7,353 6,177 Southern Europe 9,776 8,051 Americas - 5 Asia Pacific 8,785 8,364 Middle East and Africa 297 290 ------- ------- 31,715 27,542 Other operations: Europe 947 854 Asia Pacific(2) 897 1,979 ------- ------- 33,559 30,375 ======= ======= (1) The analysis of Group turnover represents turnover of the Company and its subsidiary undertakings and is stated net of inter-company turnover. (2) Includes the following amounts in relation to discontinued operations: year ended 31 March 2004: £818 million; year ended 31 March 2003: £1,828 million. Total Group operating profit / (loss) Year ended Year ended (before goodwill amortisation and 31 March 31 March exceptional items) 2004 2003 £m £m Mobile telecommunications: United Kingdom and Ireland 1,360 1,326 Northern Europe 3,192 2,512 Southern Europe 3,299 2,495 Americas 1,393 1,219 Asia Pacific 1,212 1,421 Middle East and Africa 273 197 ------- ------- 10,729 9,170 Other operations: Europe (59) (138) Asia Pacific(1) 79 149 ------- ------- 10,749 9,181 - Subsidiary undertakings 8,091 7,076 - Share of joint ventures and associated undertakings 2,658 2,105 Goodwill amortisation (15,207) (14,056) Exceptional operating items (Note 3) (2) 228 (576) ------- ------- Total Group operating loss (4,230) (5,451) ======= ======= (1) Includes the following amounts in relation to discontinued operations: year ended 31 March 2004: £66 million; year ended 31 March 2003: £162 million. (2) Includes the following amounts in relation to discontinued operations: year ended 31 March 2004: £nil; year ended 31 March 2003: £(405) million. 3 Exceptional operating items Year ended Year ended 31 March 31 March 2004 2003 £m £m Contribution tax 351 - Reorganisation costs (123) (91) Impairment of intangible and tangible fixed assets - (485) ------- ------- 228 (576) ======= ======= The net exceptional operating income for 2004 of £228 million comprises £351 million of expected recoveries and provision releases in relation to a contribution tax levy on Vodafone Italy that is no longer payable and reorganisation costs of £123 million primarily relating to the Group's operations in the UK. 4 Exceptional non-operating items Year ended Year ended 31 March 31 March 2004 2003 £m £m (Loss)/profit on disposal of businesses (127) 22 Amounts written off fixed asset investments (6) (340) Profit on disposal of fixed asset investments 12 255 Profit on disposal of tangible fixed assets 19 3 Share of associate (loss)/profit on disposal of investment (1) 55 ------- ------- (103) (5) ======= ======= 5 Tax on loss on ordinary activities Year ended Year ended 31 March 31 March 2004 2003 £m £m United Kingdom corporation tax charge at 30% (2003: 30%) 209 195 ------- ------- Overseas corporation tax Current tax: Current year 2,264 1,971 Prior year (159) 9 ------- ------- 2,105 1,980 ------- ------- Total current tax 2,314 2,175 Deferred tax - origination of and reversal of timing differences 736 818 ------- ------- Tax on loss on ordinary activities 3,050 2,993 Tax on exceptional items 104 (37) ------- ------- Total tax charge 3,154 2,956 ======= ======= Parent and subsidiary undertakings 2,866 2,624 Share of associated undertakings and joint 288 332 ventures ------- ------- 3,154 2,956 ======= ======= 6 (Loss)/earnings per share Year ended Year ended 31 March 31 March 2004 2003 £m £m Loss for basic and diluted loss per share (9,015) (9,819) Goodwill amortisation 15,207 14,056 Exceptional operating items (228) 576 Exceptional non-operating items 103 5 Tax on exceptional items 104 (37) Share of exceptional items attributable to minority interests 27 (139) ------- ------- Earnings for adjusted earnings per share 6,198 4,642 ======= ======= Weighted average number of shares (millions) 68,096 68,155 Basic and diluted loss per share (13.24)p (14.41)p Adjusted basic earnings per share 9.10p 6.81p Diluted loss per share is the same as basic loss per share as it is considered that there are no dilutive potential ordinary shares. 7 Reconciliation of operating loss to net cash inflow from operating activities Year ended Year ended 31 March 31 March 2004 2003 £m £m Operating loss (4,776) (5,295) Exceptional items (228) 496 Depreciation 4,362 3,979 Goodwill amortisation 13,095 11,875 Amortisation of other intangible fixed assets 98 53 Loss on disposal of tangible fixed assets 89 109 ------- ------- Group EBITDA(1) 12,640 11,217 Working capital movements (238) (52) Payments in respect of exceptional items (85) (23) ------- ------- Net cash inflow from operating activities 12,317 11,142 ======= ======= (1) Group EBITDA is not a measure recognised under UK GAAP but is presented in order to highlight operational performance of the Group. 8 Analysis of net debt Other non-cash At 1 changes and At 31 April exchange March 2003 Cash flow movements 2004 £m £m £m £m Liquid resources 291 4,286 (196) 4,381 ------- ------- ------- ------- Cash at bank and in hand 475 1,112 (178) 1,409 Bank overdrafts - (43) 1 (42) ------- ------- ------- ------- 475 1,069 (177) 1,367 Debt due within one year (other than bank overdrafts) (1,323) 1,791 (2,468) (2,000) Debt due after one year (12,994) (2,186) 3,080 (12,100) Finance leases (288) 115 37 (136) ------- ------- ------- ------- (14,605) (280) 649 (14,236) ------- ------- ------- ------- Net debt (13,839) 5,075 276 (8,488) ======= ======= ======= ======= Included within net debt at 31 March 2004 are bond issues maturing as follows: £m One year or less 1,832 More than one year but not more than two years 303 More than two years but not more than five years 3,108 More than five years but not more than ten years 4,231 More than ten years but not more than twenty years 1,598 More than twenty years 1,356 ------- 12,428 ======= 9 Summary of differences between UK and US GAAP The preliminary results have been prepared in accordance with UK Generally Accepted Accounting Principles ('UK GAAP'), which differ in certain significant respects from US Generally Accepted Accounting Principles ('US GAAP'). A description of the relevant accounting principles which differ materially will be provided within Vodafone Group Plc's Annual Report for the year ended 31 March 2004. The effects of these differing accounting principles are as follows: Year ended Year ended 31 March 31 March 2004 2003 £m £m Revenues from continuing operations in accordance with UK GAAP 32,741 28,547 Items (decreasing)/increasing revenues: Non-consolidated entity (5,276) (4,371) Deferral of connection revenues 188 (1,760) ------- ------- Revenues from continuing operations in accordance with US GAAP 27,653 22,416 ======= ======= Net loss in accordance with UK GAAP (9,015) (9,819) Items decreasing/(increasing) net loss: Investments accounted for under the equity method 1,354 289 Connection revenues and costs 29 16 Goodwill and other intangibles (6,520) (5,487) Licence fee amortisation (76) (6) Exceptional items (351) 270 Capitalised interest 406 408 Income taxes 6,183 5,320 Other (137) (46) ------- ------- Net loss in accordance with US GAAP (8,127) (9,055) ======= ======= US GAAP basic and diluted loss per ordinary share (11.93)p (13.29)p ======= ======= Shareholders' equity in accordance with UK GAAP 111,924 128,630 Items increasing/(decreasing) shareholders' equity: Investments accounted for under the equity method method 5,566 4,630 Connection revenues and costs (55) (84) Goodwill and other intangibles 45,320 51,144 Licence fee amortisation (109) (43) Exceptional items - 270 Capitalised interest 1,615 1,073 Income taxes (40,074) (45,446) Proposed dividends 728 612 Other 114 (350) ------- ------- Shareholders' equity in accordance with US GAAP 125,029 140,436 ======= ======= The reconciliations of shareholders' equity as at 31 March 2003 and of net loss for the year then ended include reclassifications to provide comparability with the presentation as at 31 March 2004 and the year then ended. The Group now shows amounts previously reported as 'other' related to licence fee amortisation as a separate line item in the reconciliation. In addition, the Group now reflects only the Group's interest in each adjustment. These reclassifications had no impact on the Group's previously reported net income or shareholders' equity under US GAAP. This information is provided by RNS The company news service from the London Stock Exchange

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