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.
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