Half-Yearly Report - Part 2

Vodafone Group Plc 13 November 2007 Vodafone Group Plc Half-Yearly Financial Report PART 2 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENT Six months Six months Year ended to 30 to 30 31 Note September September March 2007 2006 2007 Â£m Â£m Â£m Revenue 2 16,994 15,594 31,104 Cost of sales (10,212) (9,022) (18,725) --------- -------- --------- Gross profit 6,782 6,572 12,379 Selling and distribution expenses (1,152) (1,038) (2,136) Administrative expenses (1,850) (1,800) (3,437) Share of result in associated undertakings 1,443 1,413 2,728 Impairment losses - (8,100) (11,600) Other income and expense (15) 1 502 --------- -------- --------- Operating profit/(loss) 2 5,208 (2,952) (1,564) Non-operating income and expense 250 10 4 Investment income 382 425 789 Financing costs (1,280) (813) (1,612) --------- -------- --------- Profit/(loss) before taxation 4,560 (3,330) (2,383) Income tax expense 3 (1,233) (1,218) (2,423) --------- -------- --------- Profit/(loss) for the period from continuing operations 3,327 (4,548) (4,806) Loss from discontinued operations - (491) (491) --------- -------- --------- Profit/(loss) for the period 3,327 (5,039) (5,297) ========= ======== ========= Attributable to: - Equity shareholders 3,290 (5,105) (5,426) - Minority interests 37 66 129 Basic earnings/(loss) per share Profit/(loss) from continuing operations 4 6.22p (8.02)p (8.94)p Loss from discontinued operations 4 - (0.86)p (0.90)p --------- -------- --------- Profit/(loss) for the period 4 6.22p (8.88)p (9.84)p ========= ======== ========= Diluted earnings/(loss) per share Profit/(loss) from continuing operations 4 6.19p (8.02)p (8.94)p Loss from discontinued operations 4 - (0.86)p (0.90)p --------- -------- --------- Profit/(loss) for the period 4 6.19p (8.88)p (9.84)p ========= ======== ========= CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Six months Six months Year ended to 30 to 30 31 September September March 2007 2006 2007 Â£m Â£m Â£m Gains on revaluation of available-for-sale investments 2,568 641 2,108 Exchange differences on translation of foreign operations 705 (3,293) (3,804) Net actuarial gains on defined benefit pension schemes 53 18 50 Foreign exchange gains transferred to the income statement (7) 794 838 Fair value gains transferred to the income statement (570) - - --------- -------- --------- Net gain/(loss) recognised directly in equity 2,749 (1,840) (808) Profit/(loss) for the period 3,327 (5,039) (5,297) --------- -------- --------- Total recognised income and expense relating to the period 6,076 (6,879) (6,105) ========= ======== ========= Attributable to: - Equity shareholders 6,096 (6,931) (6,210) - Minority interests (20) 52 105 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET 30 30 31 September September March 2007 2006 2007 Note Â£m Â£m Â£m Non-current assets Goodwill 45,661 44,330 40,567 Other intangible assets 18,382 16,203 15,705 Property, plant and equipment 14,832 13,248 13,444 Investments in associated undertakings 20,615 21,879 20,227 Other investments 7,492 3,762 5,875 Deferred tax assets 482 450 410 Post employment benefits 158 33 82 Trade and other receivables 516 466 494 --------- --------- --------- 108,138 100,371 96,804 --------- --------- --------- Current assets Inventory 405 356 288 Taxation recoverable 27 2 21 Trade and other receivables 5,739 4,963 5,023 Cash and cash equivalents 2,901 789 7,481 --------- --------- --------- 9,072 6,110 12,813 --------- --------- --------- Assets included in disposal group held for resale - 914 - --------- --------- --------- Total assets 117,210 107,395 109,617 ========= ========= ========= Equity Called up share capital 7 4,180 4,166 4,172 Share premium account 7 43,782 43,443 43,572 Own shares held 7 (7,937) (8,153) (8,047) Additional paid-in capital 7 100,131 100,191 100,185 Capital redemption reserve 7 9,136 9,121 9,132 Accumulated other recognised income 8 6,112 2,264 3,306 and expense Retained losses 9 (83,999) (83,656) (85,253) --------- --------- --------- Total equity shareholders' funds 71,405 67,376 67,067 --------- --------- --------- Minority interests 1,148 197 226 Written put options over minority interests (2,425) - - --------- --------- --------- Total minority interests (1,277) 197 226 --------- --------- --------- Total equity 70,128 67,573 67,293 --------- --------- --------- Non-current liabilities Long term borrowings 20,307 17,014 17,798 Deferred tax liabilities 5,003 4,901 4,626 Post employment benefits 114 107 123 Provisions 253 273 296 Trade and other payables 615 567 535 --------- --------- --------- 26,292 22,862 23,378 --------- --------- --------- Current liabilities Short term borrowings: Third parties 4,652 3,539 3,975 Related parties 1,021 575 842 Current taxation liabilities 4,997 4,911 5,088 Provisions 253 167 267 Trade and other payables 9,867 7,768 8,774 --------- --------- --------- 20,790 16,960 18,946 --------- --------- --------- --------- --------- --------- Total equity and liabilities 117,210 107,395 109,617 ========= ========= ========= The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED CASH FLOW STATEMENT Six months Six months Year ended to 30 to 30 31 Note September September March 2007 2006 2007 Â£m Â£m Â£m Net cash flows from operating activities 6 4,860 4,975 10,328 --------- --------- --------- Cash flows from investing activities Purchase of interests in subsidiary undertakings and joint ventures, net of cash acquired 10 (5,475) (2,585) (2,805) Disposal of interests in subsidiary undertakings, net of cash disposed 11 - 6,799 6,767 Disposal of interests in associated undertakings - - 3,119 Purchase of intangible assets (320) (298) (899) Purchase of property, plant and equipment (1,902) (1,892) (3,633) Purchase of investments (30) (154) (172) Disposal of property, plant and equipment 13 11 34 Disposal of investments 11 781 - 80 Dividends received from associated undertakings 476 371 791 Dividends received from investments 72 57 57 Interest received 240 256 526 --------- --------- --------- Net cash flows from investing activities (6,145) 2,565 3,865 --------- --------- --------- Cash flows from financing activities Issue of ordinary share capital and reissue of treasury shares 170 39 193 Net movement in short term borrowings (104) 426 953 Proceeds from issue of long term borrowings 1,119 2,451 5,150 Repayment of borrowings (1,271) (453) (1,961) Purchase of treasury shares - (43) (43) B share capital redemption (4) (5,707) (5,713) B share preference dividends paid - (3,286) (3,291) Equity dividends paid (2,334) (2,315) (3,555) Dividends paid to minority shareholders in subsidiary undertakings (66) (34) (34) Interest paid (712) (499) (1,051) --------- --------- --------- Net cash flows from financing activities (3,202) (9,421) (9,352) --------- --------- --------- Net cash flows (4,487) (1,881) 4,841 Cash and cash equivalents at beginning of the period 7,458 2,932 2,932 Exchange losses on cash and cash equivalents (98) (275) (315) --------- --------- --------- Cash and cash equivalents at end of the period 2,873 776 7,458 ========= ========= ========= The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007 1 Basis of preparation The unaudited Condensed Consolidated Financial Statements for the six months ended 30 September 2007: * were prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' ('IAS 34') and thereby International Financial Reporting Standards ('IFRS'), both as issued by the International Accounting Standards Board ('IASB') and as adopted by the European Union ('EU'); * are presented on a condensed basis as permitted by IAS 34 and therefore do not include all disclosures that would otherwise be required in a full set of financial statements and should be read in conjunction with the 2007 Annual Report; * include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the periods presented; * do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985 and were approved by the Board of directors on 13 November 2007. Both IFRS as issued by the IASB and as adopted by the EU differ in certain material respects from US generally accepted accounting principles ('US GAAP') - see note 14. The information relating to the year ended 31 March 2007 is an extract from the published Annual Report for that year, which has been delivered to the Registrar of Companies, and on which the Auditors' Report was unqualified and did not contain statements under section 237(2) or 237(3) of the UK Companies Act 1985. The preparation of the Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet date, and the reported amounts of revenue and expenses during the reporting period. Actual results could vary from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. 2 Segmental and other analyses The Group has one business segment, being the supply of communications services and products. The Group's analysis of revenue and operating profit for discontinued operations are shown in note 11. During the six months ended 30 September 2007, the Group changed its organisation structure and the Group's associated undertaking in France, SFR, is now managed within the Europe region and reported within Other Europe. The results for all periods are presented in accordance with the new structure. Revenue Six months to Intra- Inter- 30 September 2007 Segment Common region Regional region Group revenue functions revenue Revenue revenue revenue (1) Â£m Â£m Â£m Â£m Â£m Â£m Germany 2,650 (63) 2,587 (5) 2,582 Italy 2,097 (21) 2,076 (3) 2,073 Spain 2,439 (62) 2,377 (3) 2,374 UK 2,717 (25) 2,692 (5) 2,687 Arcor 768 (32) 736 - 736 Other Europe 2,243 (42) 2,201 (3) 2,198 ------------------------------------------------------------- Europe 12,914 (245) 12,669 (19) 12,650 ------------------------------------------------------------- Eastern Europe 1,524 - 1,524 (21) 1,503 Middle East, Africa and Asia 2,019 - 2,019 (6) 2,013 Pacific 758 - 758 (5) 753 ------------------------------------------------------------- EMAPA 4,301 - 4,301 (32) 4,269 ------------------------------------------------------------- Common functions(1) - 80 - 80 (5) 75 ------------------------------------------------------------- 17,215 80 (245) 17,050 (56) 16,994 ============================================================= Six months to Intra- Inter- 30 September 2006 Segment Common region Regional region Group revenue functions revenue revenue revenue revenue (1) Â£m Â£m Â£m Â£m Â£m Â£m Germany 2,827 (67) 2,760 (4) 2,756 Italy 2,174 (27) 2,147 (3) 2,144 Spain 2,268 (65) 2,203 (2) 2,201 UK 2,549 (29) 2,520 (5) 2,515 Arcor 706 (14) 692 - 692 Other Europe 2,216 (54) 2,162 (2) 2,160 ------------------------------------------------------------- Europe 12,740 (256) 12,484 (16) 12,468 ------------------------------------------------------------- Eastern Europe 1,162 - 1,162 (16) 1,146 Middle East, Africa and Asia 1,247 - 1,247 (5) 1,242 Pacific 666 - 666 (4) 662 ------------------------------------------------------------- EMAPA 3,075 - 3,075 (25) 3,050 ------------------------------------------------------------- Common functions(1) - 86 - 86 (10) 76 ------------------------------------------------------------- 15,815 86 (256) 15,645 (51) 15,594 ============================================================= Year ended Intra- Inter- 31 March 2007 Segment Common region Regional region Group revenue functions revenue revenue revenue revenue (1) Â£m Â£m Â£m Â£m Â£m Â£m Germany 5,443 (123) 5,320 (9) 5,311 Italy 4,245 (44) 4,201 (5) 4,196 Spain 4,500 (106) 4,394 (3) 4,391 UK 5,124 (54) 5,070 (9) 5,061 Arcor 1,441 (27) 1,414 - 1,414 Other Europe 4,275 (82) 4,193 (4) 4,189 ------------------------------------------------------------- Europe 25,028 (436) 24,592 (30) 24,562 ------------------------------------------------------------- Eastern Europe 2,477 - 2,477 (31) 2,446 Middle East, Africa and Asia 2,565 - 2,565 (9) 2,556 Pacific 1,399 - 1,399 (11) 1,388 ------------------------------------------------------------- EMAPA 6,441 - 6,441 (51) 6,390 ------------------------------------------------------------- Common functions(1) - 168 - 168 (16) 152 ------------------------------------------------------------- 31,469 168 (436) 31,201 (97) 31,104 ============================================================= Note: (1) Common functions represents results from Partner Markets and unallocated central Group income and expenses. Segment result Six months to Adjusted 30 September 2007 Operating Impairment Other operating profit losses adjustments profit Â£m Â£m Â£m Â£m Germany 644 - - 644 Italy 776 - - 776 Spain 715 - - 715 UK 243 - - 243 Arcor 92 - - 92 Other Europe 799 - - 799 ---------------------------------------------------------- Europe 3,269 - - 3,269 ---------------------------------------------------------- Eastern Europe 156 - 15 171 Middle East, Africa and Asia 330 - - 330 Pacific 63 - - 63 Associates - US 1,180 - - 1,180 ---------------------------------------------------------- EMAPA 1,729 - 15 1,744 ---------------------------------------------------------- Common functions 210 - - 210 ---------------------------------------------------------- 5,208 - 15 5,223 ========================================================== Six months to Adjusted 30 September 2006 Operating Impairment Other operating (loss)/profit losses adjustments profit Â£m Â£m Â£m Â£m Germany (5,976) 6,700 - 724 Italy (561) 1,400 - 839 Spain 585 - - 585 UK 318 - - 318 Arcor 83 - - 83 Other Europe 812 - - 812 ---------------------------------------------------------- Europe (4,739) 8,100 - 3,361 ---------------------------------------------------------- Eastern Europe 118 - - 118 Middle East, Africa and Asia 339 - - 339 Pacific 66 - - 66 Associates - US 1,021 - (6) 1,015 Associates - Other 106 - - 106 ---------------------------------------------------------- EMAPA 1,650 - (6) 1,644 ---------------------------------------------------------- Common functions 137 - (1) 136 ---------------------------------------------------------- (2,952) 8,100 (7) 5,141 ========================================================== Year ended Adjusted 31 March 2007 Operating Impairment Other operating (loss)/profit losses adjustments profit Â£m Â£m Â£m Â£m Germany (5,345) 6,700 (1) 1,354 Italy (3,325) 4,900 - 1,575 Spain 1,100 - - 1,100 UK 511 - - 511 Arcor 171 - - 171 Other Europe 1,448 - - 1,448 ---------------------------------------------------------- Europe (5,440) 11,600 (1) 6,159 ---------------------------------------------------------- Eastern Europe 184 - - 184 Middle East, Africa and Asia 694 - - 694 Pacific 159 - - 159 Associates - US 2,080 - (3) 2,077 Associates - Other 638 - (508) 130 ---------------------------------------------------------- EMAPA 3,755 - (511) 3,244 ---------------------------------------------------------- Common functions 121 - 7 128 ---------------------------------------------------------- (1,564) 11,600 (505) 9,531 ========================================================== 3 Taxation Six months Six months Year ended to 30 to 30 31 September September March 2007 2006 2007 Â£m Â£m Â£m United Kingdom corporation tax benefit at 30% (2006: 30%): Current year - - - Adjustments in respect of prior years (65) (39) (30) Overseas corporation tax: Current year 1,393 2,084 2,928 Adjustments in respect of prior years (3) (162) 215 --------- --------- --------- Total current tax expense 1,325 1,883 3,113 --------- --------- --------- Deferred tax: United Kingdom deferred tax (66) (50) (49) Overseas deferred tax (26) (615) (641) --------- --------- --------- Deferred tax benefit (92) (665) (690) --------- --------- --------- Total income tax expense 1,233 1,218 2,423 ========= ========= ========= 4 Earnings/(loss) per share Six months Six months Year ended to 30 to 30 31 September September March 2007 2006 2007 million million million Weighted average number of shares for basic earnings/(loss) per share 52,935 57,515 55,144 Dilutive potential shares: restricted shares and share options(1) 181 - - --------- --------- --------- Weighted average number of shares for diluted earnings/(loss) per share 53,116 57,515 55,144 ========= ========= ========= Â£m Â£m Â£m Earnings/(loss) for basic and diluted earnings per share: Continuing operations 3,290 (4,611) (4,932) Discontinued operations - (494) (494) --------- --------- --------- Total 3,290 (5,105) (5,426) ========= ========= ========= Note: (1) In the six months ended 30 September 2006 and the year ended 31 March 2007, 140 million shares and 215 million shares, respectively, have been excluded from the calculation of the weighted average number of shares as they are not dilutive. 5 Dividends Six months Six months Year ended to 30 to 30 31 September September March 2007 2006 2007 Â£m Â£m Â£m Equity dividends on ordinary shares: Declared during the period: Final dividend for the year ended 31 March 2007: 4.41 pence per share (2006: 3.87 pence per share) 2,331 2,328 2,328 Interim dividend for the year ended 31 March 2007: 2.35 pence per share - - 1,238 --------- --------- --------- 2,331 2,328 3,566 ========= ========= ========= Proposed after the balance sheet date and not recognised as a liability: Final dividend for the year ended 31 March 2007: 4.41 pence per share - - 2,331 ========= ========= ========= Interim dividend for the year ending 31 March 2008: 2.49 pence per share (2007: 2.35 pence per share) 1,322 1,238 - ========= ========= ========= 6 Cash flow information Reconciliation of net cash flows from operating activities: Six months to Six months to Year ended 30 September 30 September 31 March 2007 2006 2007 Â£m Â£m Â£m Profit/(loss) for the period from continuing operations 3,327 (4,548) (4,806) Loss for the period from discontinued operations - (491) (491) Adjustments(1): Share-based payment 54 49 93 Depreciation and amortisation 2,755 2,488 5,111 Loss on disposal of property, plant and equipment 30 19 44 Share of result in associated undertakings (1,443) (1,413) (2,728) Impairment losses - 8,100 11,600 Other income and expense 15 (1) (502) Non-operating income and expense (250) (10) (4) Investment income (382) (425) (789) Financing costs 1,280 805 1,604 Income tax expense 1,233 1,088 2,293 Loss on disposal of discontinued operations - 747 747 Increase in inventory (106) (92) (23) Increase in trade and other receivables (288) (868) (753) Increase in trade and other payables 122 744 1,175 --------- --------- --------- Cash generated by operations 6,347 6,192 12,571 Tax paid (1,487) (1,217) (2,243) --------- --------- --------- Net cash flows from operating activities 4,860 4,975 10,328 ========= ========= ========= Note: (1) In the six months to 30 September 2006 and the year ended 31 March 2007, adjustments include amounts relating to continuing and discontinued operations. 7 Transactions with equity shareholders Called up Share Own Additional Capital share premium shares paid-in redemption capital account held capital reserve Â£m Â£m Â£m Â£m Â£m 1 April 2006 4,165 52,444 (8,198) 100,152 128 Issue of new shares 1 25 - (7) - Own shares released on vesting of share awards - - 45 - - Share consolidation - (9,026) - - - B share capital redemption - - - - 5,707 B share preference dividend - - - - 3,286 Share-based payment charge, inclusive of tax charge of Â£3 million - - - 46 - ------- ------- ------- --------- -------- 30 September 2006 4,166 43,443 (8,153) 100,191 9,121 Issue of new shares 6 129 - (37) - Own shares released on vesting of share awards - - 106 - - B share capital redemption - - - - 6 B share preference dividend - - - - 5 Share-based payment charge, inclusive of tax charge of Â£13 million - - - 31 - ------- ------- ------- --------- -------- 31 March 2007 4,172 43,572 (8,047) 100,185 9,132 Issue of new shares 8 206 - (114) - Own shares released on vesting of share awards - 4 110 (4) - B share capital redemption - - - - 4 Share-based payment charge, inclusive of tax credit of Â£10 million - - - 64 - ------- ------- ------- --------- -------- 30 September 2007 4,180 43,782 (7,937) 100,131 9,136 ======= ======= ======= ========= ======== 8 Movements in accumulated other recognised income and expense Available-for- sale Asset Translation Pensions investments revaluation reserve reserve reserve surplus Total Â£m Â£m Â£m Â£m Â£m 1 April 2006 3,043 (109) 1,044 112 4,090 (Losses)/gains arising in the period (3,279) 26 641 - (2,612) Transfer to the income statement on disposal 794 - - - 794 Tax effect - (8) - - (8) ------- ------- ------- -------- ------- 30 September 2006 558 (91) 1,685 112 2,264 (Losses)/gains arising in the period (523) 39 1,467 - 983 Transfer to the income statement on disposal 44 - - - 44 Tax effect 22 (7) - - 15 ------- ------- ------- -------- ------- 31 March 2007 101 (59) 3,152 112 3,306 Gains arising in the period 779 75 2,568 - 3,422 Transfer to the income statement on disposal (7) - (570) - (577) Tax effect (17) (22) - - (39) ------- ------- ------- -------- ------- 30 September 2007 856 (6) 5,150 112 6,112 ======= ======= ======= ======== ======= 9 Movements in retained losses Six months to Six months to Year ended 30 September 30 September 31 March 2007 2006 2007 Â£m Â£m Â£m 1 April (85,253) (67,356) (67,356) Profit/(loss) for the period 3,290 (5,105) (5,426) Dividends (2,331) (2,328) (3,566) Expiration of equity put right - 142 142 Loss on issue of treasury shares (52) (16) (43) B share capital redemption (4) (5,707) (5,713) B share preference dividend - (3,286) (3,291) Grant of equity put right 333 - - Other movements 18 - - -------- -------- --------- 30 September / 31 March (83,999) (83,656) (85,253) ======== ======== ========= 10 Acquisitions Hutchison Essar Limited (since renamed Vodafone Essar Limited) On 8 May 2007, the Group completed the acquisition of 100% of CGP Investments (Holdings) Limited ('CGP'), a company with interests in Vodafone Essar Limited ('Vodafone Essar'), from Hutchison Telecommunications International Limited for cash consideration of US$10.9 billion (Â£5.5bn). Following this transaction, the Group has a controlling financial interest in Vodafone Essar. The initial purchase price allocation has been determined to be provisional pending the completion of the final valuation of the fair value of assets acquired. The transaction has been accounted for using the purchase method of accounting. Fair value Book value adjustments Fair value Â£m Â£m Â£m Net assets acquired: Identifiable intangible assets 121 3,068 3,189(1) Property, plant and equipment 1,215 (145) 1,070 Other investments 199 - 199 Deferred tax assets 33 60 93 Inventory 5 (2) 3 Trade and other receivables 285 15 300 Cash and cash equivalents 51 - 51 Deferred tax liabilities - (547) (547) Short and long term borrowings(2) (1,466) - (1,466) Trade and other payables (546) (19) (565) -------- -------- -------- (103) 2,430 2,327 ======== ======== Minority interests (958) Written put options over minority interests(2) 217 Goodwill 3,893 -------- Total consideration (including Â£24 million of directly attributable costs)(3) 5,479 ======== Notes: (1) Identifiable intangible assets of Â£3,189 million consist of licences and spectrum fees of Â£3,045 million and other intangible assets of Â£144 million. (2) Included within short term and long term borrowings are liabilities of Â£217 million related to written put options over minority interests. (3) After deducting cash and cash equivalents acquired of Â£51 million, the net cash outflow on the acquisition was Â£5,428 million. The goodwill is attributable to the expected profitability of the acquired business and the synergies expected to arise after the Group's acquisition of CGP. The results of CGP have been consolidated in the income statement from the acquisition date, 8 May 2007. The weighted average life of licence and spectrum fees was 10 years, the weighted average life of other intangible assets was two years and the weighted average life of total intangible assets was nine years. The following unaudited pro forma summary presents the Group as if CGP had been acquired on 1 April 2007 or 1 April 2006, respectively. The pro forma amounts include the results of CGP, amortisation of the acquired intangible assets recognised on acquisition and the interest expenses on debt issued as a result of the acquisition. The pro forma amounts do not include any possible synergies from mergers and acquisitions. The pro forma information is provided for comparative purposes only and does not necessarily reflect the actual results that would have occurred, nor is it necessarily indicative of future results of operations of the combined companies. Six months to Six months to Year ended 30 September 30 September 31 March 2007 2006 2007 Â£m Â£m Â£m Revenue 17,115 16,126 32,274 Profit/(loss) for the period 3,289 (5,202) (5,628) Profit/(loss) attributable to equity shareholders 3,259 (5,240) (5,700) Basic earnings/(loss) per share 6.16p (9.11)p (10.34)p Diluted earnings/(loss) per share 6.14p (9.11)p (10.34)p Other The Group completed a number of smaller acquisitions resulting in a cash outflow, net of cash acquired, of Â£47 million. 11 Disposals Japan - Vodafone K.K. On 17 March 2006, the Group announced an agreement to sell its 97.7% holding in Vodafone K.K. to SoftBank. The transaction completed on 27 April 2006 with the Group receiving cash of approximately JPY1.42 trillion (Â£6.9 billion) including the repayment of intercompany debt of JPY0.16 trillion (Â£0.8 billion). In addition, the Group received non-cash consideration with a fair value of approximately JPY0.23 trillion (Â£1.1 billion), comprised of preferred equity and a subordinated loan. SoftBank also assumed debt of approximately JPY0.13 trillion (Â£0.6 billion). Vodafone K.K. represented a separate geographical area of operation and, on this basis, Vodafone K.K. was treated as a discontinued operation in Vodafone Group Plc's Annual Reports for the years ended 31 March 2007 and 2006. A loss of Â£0.7 billion arose on the disposal, being the proceeds less the carrying amount of Vodafone K.K.'s net assets and attributable goodwill together with cumulative exchange differences transferred to the income statement on disposal. Segment information for discontinued operations Six months to Six months to Year ended 30 September 30 September 31 March 2007 2006 2007 Â£m Â£m Â£m Segment revenue - 520 520 ======= ======= ======= Operating profit - 118 118 ======= ======= ======= Cash flows from discontinued operations Six months to Six months to Year ended 30 September 30 September 31 March 2007 2006 2007 Â£m Â£m Â£m Net cash flows from operating activities - 135 135 Net cash flows from investing activities - (266) (266) Net cash flows from financing activities - (29) (29) ------- ------- ------- Net cash flows - (160) (160) Cash and cash equivalents at the beginning of the period - 161 161 Exchange loss on cash and cash equivalents - (1) (1) ------- ------- ------- Cash and cash equivalents at the end of the period - - - ======= ======= ======= India - Bharti Airtel Limited In conjunction with the acquisition of Vodafone Essar, the Group entered into a share sale and purchase agreement with a Bharti group company regarding the Group's 5.60% direct shareholding in Bharti Airtel Limited. On 9 May 2007, a Bharti group company irrevocably agreed to purchase this shareholding. During the six months ended 30 September 2007, the Group received Â£654 million in cash consideration for 4.99% of such shareholding, with the Group's remaining 0.61% direct shareholding to be transferred by November 2008. The gain on disposal amounted to Â£250 million. 12 Related party transactions Transactions between the Company and its subsidiaries, joint ventures and associates represent related party transactions. Transactions with subsidiaries have been eliminated on consolidation. Transactions between the Company and its joint ventures are not material to the extent that they have not been eliminated through proportionate consolidation. Except as disclosed below, no material related party transactions have been entered into, during the period, which might reasonably affect any decisions made by users of these Condensed Consolidated Financial Statements. Six months to Six months to Year ended 30 September 30 September 31 March 2007 2006 2007 Â£m Â£m Â£m Transactions with associated undertakings: - Sales of goods and services 113 160 245 ======= ======= ======= - Purchase of goods and services 130 163 295 ======= ======= ======= Amounts owed to joint ventures included within short term borrowings 1,021 575 842 ======= ======= ======= In the six months ended 30 September 2007, the Group made contributions to defined benefit pension schemes of Â£31 million (six months ended 30 September 2006: Â£30 million, year ended 31 March 2007: Â£55 million). Compensation paid to the Company's Board of directors and members of the Executive Committee will be disclosed in the Group's Annual Report for the year ending 31 March 2008. 13 Other matters Contingent liabilities There have been no material changes to the Group's contingent liabilities relating to performance bonds and credit guarantees in the six months ended 30 September 2007. There have been no changes to any legal or arbitration proceedings involving the Group in the six months ended 30 September 2007 which are expected to have, or have had, a material effect on the financial position or profitability of the Group. Companies in the Group have received notices from the Indian tax authorities alleging possible liability for failure to deduct withholding tax from consideration paid to Hutchison Telecommunications International Limited ('HTIL') in respect of HTIL's gain on its disposal to Vodafone of companies with interests in Vodafone Essar. Initial hearings have been held before the Indian Courts. At this stage no accurate quantification of any cost which may arise can be made but Vodafone believes that neither it nor any other member of the Group is liable for such withholding tax and intends to defend this position vigorously. Secured borrowings The Group has assumed Â£773 million of secured debt as a result of the acquisition of Vodafone Essar. There are no other material changes to liens or encumbrances on the Group's assets to those disclosed on page 123 of the Group's Annual Report for the year ended 31 March 2007. Capital commitments The Group's capital commitments have increased to Â£1,672 million at 30 September 2007 (31 March 2007: Â£1,149 million) primarily due to network infrastructure purchase commitments in India. Purchase commitments The Group's purchase commitments have increased to Â£2,332 million at 30 September 2007 (31 March 2007: Â£1,281 million). Seasonality or cyclicality of interim operations The Group's financial results have not, historically, been subject to significant seasonal trends. Events after the balance sheet date On 6 October 2007, the Group announced that it had agreed to acquire Tele2 Italia SpA ('Tele2 Italy') and Tele2 Telecommunication Services SLU ('Tele2 Spain') from Tele2 AB Group for cash consideration of â‚¬775 million (Â£537 million) on a debt free basis. Tele2 Italy and Tele2 Spain provide nationwide fixed line telecommunications and broadband services. This transaction will enable the Group to benefit from the high growth broadband markets in two of Vodafone's key European markets. The transaction is expected to be completed by the end of the calendar year, following the receipt of relevant regulatory approval. Issuances and repayment of debt See 'Cash flows and funding' on pages 17 to 18 for details of issuances and repayment of debt. 14 Summary of differences between IFRS and US GAAP Change in accounting principle - income taxes On 1 April 2007, the Group adopted FASB Interpretation No. 48, 'Accounting for Uncertainty in Income Taxes, an interpretation of SFAS 109'('FIN 48'). FIN 48 has no impact on the IFRS accounting for tax uncertainties, nor on the Group's expectations for eventual cash settlements, as the latter are not based on accounting principles. FIN 48 provides guidance on the amounts to be reported in financial statements in respect of uncertain tax positions, which may be different from the amounts included in tax returns. Measurement of uncertain tax positions under FIN 48 is based on a cumulative probability that takes into consideration all possible resolutions. Under IFRS, the Group measures its liability for tax uncertainties based on management's best estimate of the most likely resolution. Upon adoption of FIN 48, the Group recognised a decrease of Â£324 million in its US Generally Accepted Accounting Principles ('US GAAP') provisions for uncertain tax positions, including an increase of Â£4 million in respect of entities accounted for using the equity method and a decrease of Â£99 million in the associated interest accrual. These have been accounted as adjustments to US GAAP retained earnings. At 1 April 2007, the Group's US GAAP unrecognised tax benefits amounted to Â£6,291 million in respect of a number of uncertain tax positions, including the ongoing Controlled Foreign Company ('CFC') enquiry in the UK. Additionally, Â£13,592 million was unrecognised for the uncertain tax effect of losses in respect of a write down in the value of investments in Germany. These uncertainties are described further on pages 105 to 106 of the Group's Annual Report for the year ended 31 March 2007. If these benefits were recognised, Â£4,779 million (plus Â£13,592 million for the German write down) would have a favourable effect on the US GAAP effective tax rate, while the remaining amounts would impact US GAAP equity or goodwill or are related to temporary differences for which offsetting deductions are available. The Group is subject to ongoing examination by the tax authorities of the various jurisdictions in which it operates and it is difficult to predict the ultimate outcome or the timing of resolution for uncertain tax positions. At 1 April 2007, it was considered reasonably possible that the Group's US GAAP balance for uncertain tax positions could decrease by Â£400 million to Â£625 million within the current financial year as a result of the potential resolution of historic issues with the relevant tax authorities or expiry of statutes of limitations. Other factors that could be reasonably expected to affect the amount of provisions this year and in future years are the emergence of new uncertain tax positions and new information regarding existing tax positions. Since the date of adoption, the German tax rate has decreased, causing the unrecognised tax benefit of Â£13,592 million at 1 April 2007 in respect of the German write down to decrease by approximately Â£3 billion. The following tax years remain open pursuant to the statute of limitations in Vodafone's major jurisdictions. It is not possible to conclude when settlement will be reached on these open years, nor the likely settlement amount: UK 2000 onwards Germany 1999 onwards Italy 2002 onwards Spain 2004 onwards USA (federal) 2003 onwards It is the Group's policy to recognise interest accrued in respect of unrecognised tax benefits within interest expense and any accrued penalties within the tax expense. As at the date of adoption of FIN 48 the Group held US GAAP accruals for interest of Â£1,098 million. Reconciliations to US GAAP The Condensed Consolidated Financial Statements have been prepared in accordance with IFRS, which differ in certain significant respects from US GAAP. The following table summarises the effects of the adjustments from IFRS to US GAAP. Further details on the nature of the adjustments can be found on pages 138 to 142 in the Group's Annual Report for the year ended 31 March 2007. 30 30 31 September September March 2007 2006 2007 Â£m Â£m Â£m Revenue (IFRS) 16,994 15,594 31,104 Adjustments to derive US GAAP revenue: Discontinued operations - (31) (31) Basis of consolidation (3,041) (3,139) (6,232) Connection revenue - 170 518 -------- -------- -------- Revenue (US GAAP) 13,953 12,594 25,359 ======== ======== ======== Profit/(loss) for the period (IFRS) 3,327 (5,039) (5,297) Adjustments to derive US GAAP net loss: Investments accounted for under the equity method (1,980) (733) 680 Connection revenue and costs - 2 5 Goodwill and other intangible assets (6,543) (6,681) (13,352) Impairment losses - 6,700 6,700 Amortisation of capitalised interest (56) (54) (107) Interest capitalised during the period 28 23 52 Other 30 670 1,261 Income taxes 4,756 2,650 5,862 Minority interests (37) (66) (129) -------- -------- -------- Net loss (US GAAP) (475) (2,528) (4,325) ======== ======== ======== Total equity (IFRS) 70,128 67,573 67,293 Adjustments to derive US GAAP shareholders' equity: Investments accounted for under the equity (3,184) (2,883) (1,070) method Connection revenue and costs - (3) - Goodwill and other intangible assets 19,492 32,232 25,515 Capitalised interest 1,334 1,382 1,342 Other (1,615) 60 86 Income taxes (16,920) (25,382) (21,859) Minority interests 1,277 (197) (226) -------- -------- -------- Shareholders' equity (US GAAP) 70,512 72,782 71,081 ======== ======== ======== INDEPENDENT REVIEW REPORT BY DELOITTE & TOUCHE LLP TO VODAFONE GROUP PLC Introduction We have been engaged by the Company to review the Condensed Consolidated Financial Statements in the half-yearly financial report for the six months ended 30 September 2007 which comprise the consolidated income statement, the consolidated balance sheet, the consolidated statement of recognised income and expense, the consolidated cash flow statement and related notes 1 to 14. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the Condensed Consolidated Financial Statements. This report is made solely to the Company in accordance with International Standard on Review Engagements 2410 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. The annual financial statements of the Group are prepared in accordance with IFRS as adopted by the European Union. As disclosed in note 1, the Condensed Consolidated Financial Statements included in this half-yearly financial report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting' ('IAS 34') as adopted by the European Union and as issued by the International Accounting Standards Board. Our responsibility Our responsibility is to express to the Company a conclusion on the Condensed Consolidated Financial Statements in the half-yearly financial report based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. IFRS conclusions Based on our review, nothing has come to our attention that causes us to believe that the accompanying Condensed Consolidated Financial Statements are not prepared, in all material respects, in accordance with IAS 34, as adopted by the European Union and as issued by the International Accounting Standards Board, and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. US GAAP IFRS, both as adopted by the European Union and as issued by the International Accounting Standards Board, vary in significant respects from the accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in note 14 to the Condensed Consolidated Financial Statements. Deloitte & Touche LLP Chartered Accountants London, United Kingdom 13 November 2007 OTHER INFORMATION 1) Copies of this document are available from the Company's registered office: Vodafone House The Connection Newbury Berkshire RG14 2FN 2) This half-yearly financial report will be available on the Vodafone Group Plc website, www.vodafone.com, from 13 November 2007. For further information: Vodafone Group Plc Investor Relations Media Relations Telephone: +44 (0) 1635 664447 Telephone: +44 (0) 1635 664444 High resolution photographs are available to the media free of charge at www.fovea.tv. Vodafone, Vodafone Mobile Connect, Vodafone Mobile Connect USB Modem, Vodafone Mobile Connect Card with 3G broadband, Vodafone Mobile Connect 3G/GPRS data card, Vodacom, ihug, Vodafone at Home, Vodafone Office, Vodafone live! and Vodafone Passport are trademarks of the Vodafone Group. Other product and company names mentioned herein may be the trademarks of their respective owners. DEFINITION OF TERMS Term Definition Change at Change calculated by restating the prior period's results constant exchange as if they had been generated at the current period's rates exchange rates. For definitions of other terms please refer to page 159 of the Group's Annual Report for the year ended 31 March 2007. Copyright (c) Vodafone Group 2007 FORWARD-LOOKING STATEMENTS This document contains 'forward-looking statements' within the meaning of the US Private Securities Litigation Reform Act of 1995 with respect to the Group's financial condition, results of operations and businesses and certain of the Group's plans and objectives. In particular, such forward-looking statements include statements with respect to Vodafone's expectations as to launch and roll out dates for products, services or technologies offered by Vodafone; intentions regarding the development of products and services introduced by Vodafone or by Vodafone in conjunction with initiatives with third parties; the ability to integrate all operations throughout the Group; the development and impact of new mobile technology; anticipated benefits to the Group from core cost reduction programmes, outsourcing, supply chain management and IT operations initiatives; growth in customers and usage, including improvements in customer mix; the Group's expectations for revenue, operating profit, depreciation and amortisation charges, capitalised fixed asset additions, free cash flow, cash payments for tax and associated interest and effective tax rate contained within the outlook statement on page 5 of this document and under improved outlook on page 1 of this document, and expectations for the Group's future performance generally, including average revenue per user, costs, capital expenditures, operating expenditures and margins and the contribution to the Group's revenue of data services, broadband services, fixed location pricing and mobile advertising; the rate of dividend growth by the Group or its existing investments; expectations regarding the Group's access to adequate funding for its working capital requirements; expected effective tax rates and expected tax payments; the ability to realise synergies through cost savings, revenue generating services, benchmarking and operational experience; future acquisitions, including increases in ownership in existing investments, the timely completion of pending acquisition transactions and pending offers for investments; future disposals; the management of the Group's portfolio; mobile penetration and coverage rates; the impact of regulatory and legal proceedings involving Vodafone and of scheduled or potential regulatory changes; expectations with respect to long term shareholder value growth; Vodafone's ability to be the mobile market leader, overall market trends and other trend projections. Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as 'anticipates', 'aims', 'could', 'may', 'should', 'expects', 'believes', 'intends', 'plans' or 'targets'. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, the following: changes in economic or political conditions in markets served by operations of the Group that would adversely affect the level of demand for mobile services; greater than anticipated competitive activity, from both existing competitors and new market entrants, including Mobile Virtual Network Operators, which could require changes to the Group's pricing models, lead to customer churn and make it more difficult to acquire new customers, and reduce profitability; the impact of investment in network capacity and the deployment of new technologies, or the rapid obsolescence of existing technology; slower than expected customer growth and reduced customer retention; changes in the spending patterns of new and existing customers; the possibility that new products and services will not be commercially accepted or perform according to expectations or that vendors' performance in marketing these technologies will not meet the Group's requirements; the Group's ability to win 3G licence allocations; the Group's ability to realise expected synergies and benefits associated with 3G technologies; a lower than expected impact of new or existing products, services or technologies on the Group's future revenue, cost structure and capital expenditure outlays; the ability of the Group to harmonise mobile platforms and delays, impediments or other problems associated with the roll out and scope of and other new or existing products, services or technologies in new markets; the ability of the Group to offer new services and secure the timely delivery of high quality, reliable GPRS and 3G handsets, network equipment and other key products from suppliers; the Group's ability to develop competitive data content and services that will attract new customers and increase average usage; future revenue contributions of both voice and non-voice services; greater than anticipated prices of new mobile handsets; changes in the costs to the Group of or the rates the Group may charge for terminations and roaming minutes; the Group's ability to achieve meaningful cost savings and revenue improvements as a result of its cost reduction programmes and outsourcing initiatives; the ability to realise benefits from entering into partnerships for developing data and internet services and entering into service franchising and brand licensing; the possibility that the pursuit of new, unexpected strategic opportunities may have a negative impact on the Group's financial performance; developments in the Group's financial condition, earnings and distributable funds and other factors that the Board of Directors takes into account in determining the level of dividends; any unfavourable conditions, regulatory or otherwise, imposed in connection with pending or future acquisitions or dispositions and the integration of acquired companies in the Group's existing operations; the risk that, upon obtaining control of certain investments, the Group discovers additional information relating to the businesses of that investment leading to restructuring charges or write-offs or with other negative implications; changes in the regulatory framework in which the Group operates, including possible action by regulators in markets in which the Group operates or by the EU regulating rates the Group is permitted to charge; the impact of legal or other proceedings against the Group or other companies in the mobile telecommunications industry; the possibility that new marketing or usage stimulation campaigns or efforts and customer retention schemes are not an effective expenditure; the possibility that the Group's integration efforts do not reduce the time to market for new products or improve the Group's cost position; loss of suppliers or disruption of supply chains; the Group's ability to satisfy working capital requirements through borrowing in capital markets, bank facilities and operations; changes in exchange rates, including particularly the exchange rate of pounds sterling to the euro and the US dollar; changes in statutory tax rates and profit mix which would impact the weighted average tax rate; changes in tax legislation in the jurisdictions in which the Group operates; and final resolution of open issues which might impact the effective tax rate; timing of tax payments relating to the resolution of open issues. Furthermore, a review of the reasons why actual results and developments may differ materially from the expectations disclosed or implied within forward-looking statements can be found under 'Risk Factors, Seasonality and Outlook - Risk Factors' in Vodafone Group Plc's Annual Report for the year ended 31 March 2007. All subsequent written or oral forward-looking statements attributable to the Company or any member of the Group or any persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. No assurances can be given that the forward-looking statements in this document will be realised. Neither Vodafone nor any of its affiliates intends to update these forward-looking statements. USE OF NON-GAAP FINANCIAL INFORMATION In presenting and discussing the Group's reported financial position, operating results and cash flows, certain information is derived from amounts calculated in accordance with IFRS but this information is not itself an expressly permitted GAAP measure. Such non-GAAP measures should not be viewed in isolation as alternatives to the equivalent GAAP measure. A summary of certain non-GAAP measures included in this results announcement, together with details where additional information and reconciliation to the nearest equivalent GAAP measure can be found, is shown below. Location in this results announcement of reconciliation Non-GAAP measure Equivalent GAAP measure and further information ------------------------- ------------------------ ------------------------ EBITDA Operating profit/(loss) Group Results on page 6 Adjusted operating profit Operating profit/(loss) Group Results on page 6 Adjusted profit before tax Profit/(loss) before tax Taxation on page 8 Adjusted profit from Profit/(loss) from Earnings/(loss) per share continuing continuing on operations attributable operations attributable page 8 to equity shareholders to equity shareholders Adjusted earnings per share Basic earnings/(loss) per Earnings/(loss) per share share on page 8 Operating free cash flow Net cash flows from Cash flows and funding operating beginning activities on page 17 Free cash flow Net cash flows from Cash flows and funding operating beginning activities on page 17 Net debt Borrowings Cash flows and funding beginning on page 17 Adjusted effective tax rate Income tax expense as a Taxation on page 8 percentage of profit/(loss) before taxation ADDITIONAL INVESTOR INFORMATION AND KEY PERFORMANCE INDICATORS REGIONAL ANALYSIS FOR THE SIX MONTHS ENDED 30 SEPTEMBER Adjusted Capitalised fixed Operating free Revenue EBITDA operating asset additions cash flow profit/(loss) ------------- ---------------- ---------------- ------------------ ----------------- 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m EUROPE Germany 2,650 2,827 1,150 1,263 644 724 167 198 1,100 990 Italy 2,097 2,174 1,036 1,128 776 839 145 184 837 878 Spain 2,439 2,268 949 813 715 585 194 213 595 432 UK 2,717 2,549 734 785 243 318 216 305 430 393 Arcor 768 706 138 126 92 83 94 76 1 (16) Other Europe Greece 599 636 210 250 130 167 66 74 159 160 Netherlands 628 600 214 176 141 102 41 50 139 136 Portugal 502 466 186 168 122 107 42 44 87 101 Other(1) 514 514 217 225 406 436 30 55 159 146 ------------- ---------------- ---------------- ------------------ ----------------- 2,243 2,216 827 819 799 812 179 223 544 543 Intra-region revenue (245) (256) - - - - - - - - ------------- ---------------- ---------------- ------------------ ----------------- Total Europe 12,669 12,484 4,834 4,934 3,269 3,361 995 1,199 3,507 3,220 EMAPA Eastern Europe Romania 405 355 195 175 86 68 57 82 149 121 Turkey(2) 558 283 102 65 18 (18) 97 36 (73) 134 Other 561 524 181 164 67 68 70 95 140 84 ------------- ---------------- ---------------- ------------------ ----------------- 1,524 1,162 478 404 171 118 224 213 216 339 Middle East, Africa and Asia Egypt 443 355 223 198 158 155 114 66 146 137 India(3) 723 - 246 - (18) - 389 - 20 - Vodacom 768 727 269 261 164 152 62 92 125 139 Other(4) 85 165 38 72 26 32 37 83 9 15 ------------- ---------------- ---------------- ------------------ ----------------- 2,019 1,247 776 531 330 339 602 241 300 291 Pacific 758 666 174 165 63 66 91 104 29 61 Associates - US - - - - 1,180 1,015 - - - - Associates - other - - - - - 106 - - - - ------------- ---------------- ---------------- ------------------ ----------------- Total EMAPA 4,301 3,075 1,428 1,100 1,744 1,644 917 558 545 691 Common functions 80 86 303 208 210 136 70 67 86 110 Inter-region revenue (56) (51) - - - - - - - - ------------- ---------------- ---------------- ------------------ ----------------- Total Group 16,994 15,594 6,565 6,242 5,223 5,141 1,982 1,824 4,138 4,021 ============= ================ ================ ================== ================= Notes: (1) Includes elimination of Â£5 million (2006: Â£5 million) of intercompany revenue between operating companies within the Other Europe segment. (2) Presents the results from 24 May 2006, being the acquisition date. (3) Presents the results of Vodafone Essar from 8 May 2007, being the acquisition date. (4) Includes the results of Bharti Airtel. See page 35 for definition of terms and page 37 for use of non-GAAP financial information. REGIONAL RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER Group Quarter Quarter Quarter Quarter ended ended ended ended ---------------- ---------------- ------------ ------------ 30 June 30 Sept 30 June 30 Sept 30 June 30 Sept 2007 2007 2006 2006 % change % change Â£m Â£m Â£m Â£m Â£ Organic Â£ Organic Total revenue 8,253 8,741 7,679 7,915 7.5 4.0 10.4 4.8 ================ ================ Voice revenue(1) 5,904 6,256 5,574 5,743 5.9 1.1 8.9 1.1 Messaging revenue 950 998 851 935 11.6 9.5 6.7 7.5 Data revenue 452 515 334 316 35.3 32.2 63.0 58.5 Fixed line revenue(1) 402 400 383 387 5.0 11.5 3.4 8.3 Other service revenue 5 5 - - ---------------- ---------------- Service revenue 7,713 8,174 7,142 7,381 8.0 4.2 10.7 4.9 ================ ================ Europe Quarter Quarter Quarter Quarter ended ended ended ended ---------------- ---------------- ------------ ------------ 30 June 30 Sept 30 June 30 Sept 30 June 30 Sept 2007 2007 2006 2006 % change % change Â£m Â£m Â£m Â£m Â£ Organic Â£ Organic Total revenue 6,219 6,450 6,220 6,264 - 1.1 3.0 3.0 ================ ================ Voice revenue(1) 4,292 4,412 4,445 4,475 (3.4) (2.4) (1.4) (1.4) Messaging revenue 764 811 711 747 7.5 8.5 8.6 8.7 Data revenue 398 445 312 291 27.6 28.9 52.9 53.0 Fixed line revenue(1) 391 389 364 367 7.4 8.7 6.0 6.4 Other service revenue 5 6 - - ---------------- ---------------- Service revenue 5,850 6,063 5,832 5,880 0.3 1.4 3.1 3.1 ================ ================ Quarter Quarter Quarter Quarter ended ended ended ended ---------------- ---------------- ------------ ------------ 30 June 30 Sept 30 June 30 Sept 30 June 30 Sept 2007 2007 2006 2006 % change % change Â£m Â£m Â£m Â£m Â£ Organic Â£ Organic Service revenue Germany 1,238 1,277 1,339 1,351 (7.5) (6.3) (5.5) (5.5) Italy 1,005 1,020 1,051 1,045 (4.4) (3.1) (2.4) (2.3) Spain 1,110 1,141 1,001 1,049 10.9 12.5 8.8 8.9 UK 1,209 1,294 1,153 1,192 4.9 4.9 8.6 8.5 Arcor 375 383 346 351 8.4 9.9 9.1 9.3 Other 1,028 1,076 1,036 1,054 (0.8) 0.6 2.1 2.1 Eliminations (115) (128) (94) (162) ---------------- ---------------- 5,850 6,063 5,832 5,880 0.3 1.4 3.1 3.1 ================ ================ EMAPA Quarter Quarter Quarter Quarter ended ended ended ended ---------------- ---------------- ------------ ------------ 30 June 30 Sept 30 June 30 Sept 30 June 30 Sept 2007 2007 2006 2006 % change % change Â£m Â£m Â£m Â£m Â£ Organic Â£ Organic Total revenue 2,021 2,280 1,436 1,639 40.7 18.7 39.1 13.5 ================ ================ Voice revenue(1) 1,631 1,868 1,143 1,288 42.7 16.4 45.0 11.7 Messaging revenue 189 188 142 189 33.1 15.6 (0.5) 1.3 Data revenue 55 72 25 31 120.0 64.5 132.3 101.7 Fixed line revenue(1) 11 11 19 20 (42.1) 740.7 (45.0) 232.3 ---------------- ---------------- Service revenue 1,886 2,139 1,329 1,528 41.9 18.2 40.0 13.2 ================ ================ Quarter Quarter Quarter Quarter ended ended ended ended ---------------- ---------------- ------------ ------------ 30 June 30 Sept 30 June 30 Sept 30 June 30 Sept 2007 2007 2006 2006 % change % change Â£m Â£m Â£m Â£m Â£ Organic Â£ Organic Service revenue Eastern Europe 714 759 477 646 49.7 12.9 17.5 9.2 Middle East, Africa & Asia 837 1,044 559 579 49.7 28.9 80.3 21.6 Pacific 335 336 293 303 14.3 9.5 10.9 5.5 ---------------- ---------------- 1,886 2,139 1,329 1,528 41.9 18.2 40.0 13.2 ================ ================ Note: (1) Revenue relating to fixed line activities provided by mobile operators, previously classified within voice revenue, is now presented as fixed line revenue, together with revenue from fixed line operators and DSL. All prior periods have been adjusted accordingly. RECONCILIATION OF ADJUSTED EARNINGS FOR THE SIX MONTHS ENDED 30 SEPTEMBER Reported Adjustments Adjusted Â£m Â£m Â£m 30 September 2007 Operating profit 5,208 15 (1) 5,223 Non-operating income and expense 250 (250)(2) - Investment income and financing costs (898) 376 (3) (522) ---------------------------------- Profit before taxation 4,560 141 4,701 Income tax expense (1,233) (34)(4) (1,267) ---------------------------------- Profit for the period 3,327 107 3,434 ================================== Attributable to: - Equity shareholders 3,290 107 3,397 - Minority interests 37 - 37 Basic earnings per share from continuing operations 6.22p 6.42p Notes: (1) Consists of a Â£15 million adjustment relating to other income and expense. (2) Adjustment relates to the profit on disposal of a stake in Bharti Airtel. (3) Includes a Â£286 million adjustment in relation to the change in fair value of equity put rights and similar arrangements (see note 2 in investment income and financing costs on page 7), and a Â£90 million adjustment in relation to foreign exchange on certain intercompany balances, and on financial instruments received as consideration in the disposal of Vodafone Japan to SoftBank, which completed in April 2006. (4) Represents a Â£15 million adjustment relating to the recognition of a pre-acquisition deferred tax asset and a Â£19 million adjustment relating to tax on the adjustments used to derive adjusted profit before tax. Reported Adjustments Adjusted Â£m Â£m Â£m 30 September 2006 Operating (loss)/profit (2,952) 8,093 (1) 5,141 Non-operating income and expense 10 (10) - Investment income and financing costs (388) (29)(2) (417) ---------------------------------- (Loss)/profit before taxation (3,330) 8,054 4,724 Income tax expense (1,218) (2)(3) (1,220) ---------------------------------- (Loss)/profit for the period from continuing operations (4,548) 8,052 3,504 Loss for the period from discontinued operations (491) 491 (4) - ---------------------------------- (Loss)/profit for the period (5,039) 8,543 3,504 ================================== Attributable to: - Equity shareholders (5,105) 8,546 3,441 - Minority interests 66 (3) 63 Basic (loss)/earnings per share from continuing operations (8.02)p 5.98p Notes: (1) Adjustments relate to impairment losses of Â£8,100 million (Germany: Â£6,700 million and Italy Â£1,400 million), less a Â£6 million adjustment related to the share of associated undertakings' non-operating income and less a Â£1 million adjustment relating to other income and expense. (2) Includes a Â£21 million adjustment in relation to the change in fair value of equity put rights and similar arrangements as well as an Â£8 million adjustment in relation to foreign exchange on certain intercompany balances and on financial instruments received as consideration in the disposal of Vodafone Japan to SoftBank, which completed in April 2006. (3) Represents tax on the adjustments used to derive adjusted profit before tax. (4) Adjustment relates to the loss for the period attributable to Vodafone Japan which was disposed of in April 2006. SUPPLEMENTARY CASH FLOW INFORMATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER Operating free cash flow to net debt reconciliation Six months to Six months to 30 September 30 September 2007 2006 Â£m Â£m Operating free cash flow from continuing operations 4,138 4,021 Operating free cash flow from discontinued operations - (8) Taxation (1,487) (1,217) Dividends received from associated undertakings 476 371 Dividends paid to minority shareholders in subsidiary undertakings (66) (34) Dividends received from investments 72 57 Interest received 240 256 Interest paid (712) (499) --------------------- Free cash flow 2,661 2,947 Acquisitions and disposals(1) (5,973) 4,734 Written put options over minority interests (2,431) 523 Equity dividends paid (2,334) (2,315) Purchase of treasury shares - (43) B share scheme - (9,027) Foreign exchange and other (127) 785 --------------------- Net debt increase (8,204) (2,396) Opening net debt (15,049) (17,833) --------------------- Closing net debt (23,253) (20,229) ===================== Note: (1) Includes net cash and cash equivalents paid of Â£4,724 million and assumed debt of Â£1,249 million, but excludes liabilities related to written put options over minority interests, which are shown separately. 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