IFRS Results 31-03-05
Vodafone Group Plc
12 July 2005
Vodafone Group Plc
Embargo: Not for publication
before 07:00 hours 12 July 2005
PART I
12 July 2005
IFRS RESULTS FOR THE YEAR ENDED 31 MARCH 2005
Following the announcement of results under UK GAAP for the year ended 31 March
2005 by Vodafone Group Plc ('Vodafone') on 24 May 2005, Vodafone today publishes
further information for that year under IFRS.
There are no additional significant differences arising between UK GAAP and IFRS
from those previously reported for the six months ended 30 September 2004.
Detailed reconciliations between UK GAAP and IFRS for certain of the Group's
primary financial statements, together with supplemental financial information
containing segmental analysis for the Group and trading results for the Group's
mobile business and principal mobile operations are available on the Group's
website at www.vodafone.com/investorrelations/ifrs.
Vodafone will report solely under IFRS for the six months ending 30 September
2005 and present its first Annual Report under IFRS for the year ending 31 March
2006.
For further information:
Vodafone Group
Simon Lewis, Group Corporate Affairs Director
Tel: +44 (0) 1635 673310
Investor Relations Media Relations
Charles Butterworth Bobby Leach
Darren Jones Ben Padovan
Sarah Moriarty
Tel: +44 (0) 1635 673310 Tel: +44 (0) 1635 673310
VODAFONE GROUP PLC
IFRS RESULTS FOR THE YEAR ENDED 31 MARCH 2005
CONTENTS
Page
PART II
Introduction 3
Consolidated IFRS Primary Statements
Income Statement 4
Statement of Recognised Income and Expense 5
Balance Sheet 6
Cash Flow Statement 7
Notes to IFRS Financial Information 8
Impact of IFRS on One Vodafone 13
Audit Report From Deloitte & Touche LLP on the IFRS Financial Information 14
Unaudited Proportionate Financial Information 15
Forward Looking Statements 16
PART III
Reconciliations from UK GAAP to IFRS for Key Performance Measures 17
Detailed reconciliations between UK GAAP and IFRS for certain of the
Group's primary financial statements and supplemental IFRS financial
information on segmental analyses and mobile trading results are available
on the Group's website at www.vodafone.com/investorrelations/ifrs.
PART II
INTRODUCTION
Background
Vodafone Group Plc and its subsidiaries (together, 'the Group') are preparing
for the adoption of International Financial Reporting Standards ('IFRS')(1) as
its primary accounting basis, following the adoption of Regulation No. 1606/2002
by the European Parliament on 19 July 2002.
IFRS will apply for the first time in the Group's Annual Report for the year
ending 31 March 2006. Consequently, the Group's financial results for the six
month period ending 30 September 2005 will be prepared under IFRS.
The Group provided an update of its adoption of IFRS on 20 January 2005, which
included IFRS financial information for the six months ended 30 September 2004
and for the year ended 31 March 2004 on a pro forma basis. Additional IFRS
segmental information was provided on 18 March 2005.
This press release explains how certain of the Group's previously reported UK
GAAP financial information for the year ended 31 March 2005 is reported under
IFRS. The 'IFRS Financial Information' includes:
* the Group's consolidated income statement, consolidated statement of
recognised income and expense and consolidated cash flow statement, for the
year ended 31 March 2005;
* the Group's consolidated balance sheet at 31 March 2005; and
* related notes.
Reconciliations of key performance measures between UK GAAP and IFRS are
provided in Part III of this press release. Detailed reconciliations to assist
in the understanding of the nature and quantum of differences between UK GAAP
and IFRS for certain of the Group's primary financial statements and further
supplemental IFRS financial information are available on the Group's website at
www.vodafone.com/investorrelations/ifrs.
Principal Differences
The principal differences between UK GAAP and IFRS were set out in the Group's
press release issued on 20 January 2005.
There are no additional significant reconciling differences between UK GAAP and
IFRS included in the IFRS Financial Information as a result of the issue of new
standards or pronouncements.
Basis of Preparation
Detailed guidance on the basis of preparation of this IFRS Financial
Information, and the pro forma information included for the year ended 31 March
2004 is included on pages 8 and 9.
On 14 April 2005, the SEC announced it had adopted proposed amendments to Form
20-F which will allow the Group, in the first year of IFRS adoption, to provide
two years of statements of income, changes in shareholders' equity and cash
flows prepared in accordance with IFRS, rather than the three years previously
required. The Group's financial information prepared on the basis of IFRS
provided on 20 January 2005 and 18 March 2005 had been prepared on the
assumption that this rule change would be adopted.
Audit Opinion
The consolidated balance sheet as at 31 March 2005, the consolidated income
statement, consolidated statement of recognised income and expense and
consolidated cash flow statement for the year ended 31 March 2005, as prepared
on the basis set out in 'Basis of preparation' on pages 8 and 9, have been
audited by Deloitte & Touche LLP. Their audit report to the Board of Directors
of the Company is set out on page 14.
(1) References to IFRS throughout this document refer to the application of
International Financial Reporting Standards ('IFRS'), including International
Accounting Standards ('IAS') and interpretations issued by the International
Accounting Standards Board ('IASB') and its committees, and as interpreted by
any regulatory bodies applicable to the Group.
CONSOLIDATED INCOME STATEMENT
For the years ended 31 March
2005 2004
(Unaudited)
---------------------------------------------------- ------------
UK GAAP IFRS IFRS
IFRS format adjustments IFRS (pro forma)
£m £m £m £m
Revenue 34,133 (60) 34,073 32,492
Cost of sales (20,753) (711) (21,464) (19,245)
-------- -------- -------- --------
Gross profit 13,380 (771) 12,609 13,247
Selling and
distribution
expenses (2,031) (15) (2,046) (2,065)
Administrative
expenses (16,338) 12,812 (3,526) (3,529)
Share of result in
associated
undertakings 404 1,576 1,980 1,915
Other income
and expense (315) (160) (475) 35
-------- -------- -------- --------
Operating
(loss)/profit (4,900) 13,442 8,542 9,603
Non-operating
income and expense 8 (2) 6 13
Investment income 602 195 797 579
Financing costs (995) (399) (1,394) (1,182)
-------- -------- -------- --------
(Loss)/profit
on ordinary
activities
before taxation (5,285) 13,236 7,951 9,013
Tax on (loss)/
profit on
ordinary
activities (1,698) 265 (1,433) (2,828)
-------- -------- -------- --------
(Loss)/profit
for the year
on continuing
operations (6,983) 13,501 6,518 6,185
Loss on
discontinued
operations - - - - (73)
-------- -------- -------- --------
(Loss)/profit
for the year (6,983) 13,501 6,518 6,112
======== ======== ======== ========
Attributable
to:
- Minority
interests 557 (449) 108 259
- Equity
shareholders (7,540) 13,950 6,410 5,853
(Loss)/
earnings per share:
From continuing
operations(1)
- Basic 9.68p 8.70p
- Diluted 9.65p 8.68p
From
continuing and
discontinued
operations
- Basic (11.39p) 9.68p 8.60p
- Diluted (11.39p) 9.65p 8.58p
(1) Not provided under UK GAAP.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the year ended 31 March 2005
UK GAAP IFRS
IFRS format adjustments IFRS
£m £m £m
Gains on revaluation of
available-for-sale
investments - 106 106
Exchange differences on translation of
foreign operations 1,451 37 1,488
Actuarial losses on defined benefit
pension schemes - (102) (102)
Tax on items taken directly to equity - 45 45
-------- ------- --------
Net income recognised directly in equity 1,451 86 1,537
(Loss)/profit for the year (6,983) 13,501 6,518
-------- ------- --------
Total recognised (losses)/gains relating
to the year (5,532) 13,587 8,055
======== ======= ========
Attributable to:
- Equity shareholders (6,073) 14,051 7,978
- Minority interests 541 (464) 77
CONSOLIDATED BALANCE SHEET
As at 31 March 2005
UK GAAP IFRS
IFRS format adjustments IFRS
£m £m £m
Non-current assets
Intangible assets 83,464 13,675 97,139
Property, plant and equipment 18,398 (947) 17,451
Investments in associated undertakings 19,398 836 20,234
Other investments 852 329 1,181
Deferred tax assets 1,541 100 1,641
Trade and other receivables 249 (28) 221
-------- -------- --------
123,902 13,965 137,867
-------- -------- --------
Current assets
Inventory 430 10 440
Taxation recoverable 268 (230) 38
Trade and other receivables 5,334 115 5,449
Cash and cash equivalents 3,666 103 3,769
-------- -------- --------
9,698 (2) 9,696
-------- -------- --------
Total assets 133,600 13,963 147,563
======== ======== ========
Equity
Called up share capital 4,286 - 4,286
Share premium account 52,284 - 52,284
Own shares held (5,121) - (5,121)
Other reserve 99,556 84 99,640
Retained losses (51,688) 14,399 (37,289)
-------- -------- --------
Total equity shareholders' funds 99,317 14,483 113,800
Minority interests 2,818 (2,970) (152)
-------- -------- --------
Total equity 102,135 11,513 113,648
-------- -------- --------
Non-current liabilities
Long-term borrowings 11,613 1,577 13,190
Deferred tax liabilities 3,938 1,368 5,306
Post employment benefits(1) (183) 307 124
Provisions for other liabilities and
charges 317 2 319
Other payables 749 (359) 390
-------- -------- --------
16,434 2,895 19,329
-------- -------- --------
Current liabilities
Short-term borrowings 392 1,611 2,003
Current taxation liabilities 4,759 (406) 4,353
Trade payables and other payables 9,686 (1,684) 8,002
Provisions for other liabilities and
charges 194 34 228
-------- -------- --------
15,031 (445) 14,586
-------- -------- --------
Total equity and liabilities 133,600 13,963 147,563
======== ======== ========
(1) UK GAAP post employment benefit prepayment and provision presented net,
consistent with the IFRS presentation.
CONSOLIDATED CASH FLOW STATEMENT
For the years ended 31 March
2005 2004
(unaudited)
-------------------------------------------- -----------
UK GAAP IFRS IFRS
IFRS format adjustments IFRS (pro forma)
£m £m £m £m
Net cash flows
from
operating
activities 11,097 (118) 10,979 10,839
-------- -------- -------- --------
Cash flows
from investing
activities
Purchase of
interests in
subsidiary
undertakings,
net of cash
acquired (2,461) - (2,461) (2,054)
Disposal of
interests in
subsidiary
undertakings,
net of cash
disposed 444 - 444 737
Disposal of
interests in
associated
undertakings - - - 5
Purchase of
intangible
fixed assets (59) (640) (699) (679)
Purchase of
property,
plant and
equipment (4,890) 611 (4,279) (3,853)
Purchase of
investments (19) - (19) (43)
Disposal of
property,
plant and
equipment 70 (2) 68 156
Disposal of
investments 22 - 22 123
Loans repaid
by associated
undertakings (2) - (2) 24
Loans to
businesses
sold or
acquired
businesses
held for sale 110 - 110 -
Dividends
received from
associated
undertakings 2,020 (124) 1,896 1,739
Dividends
received from
investments 19 - 19 25
Interest
received 746 (11) 735 942
-------- -------- -------- --------
Net cash flows
from
investing
activities (4,000) (166) (4,166) (2,878)
-------- -------- -------- --------
Cash flows
from financing
activities
Issue of
ordinary share
capital 115 - 115 69
(Decrease)/
increase in
debt (2,170) 346 (1,824) 717
Purchase of
treasury
shares (4,053) - (4,053) (1,032)
Purchase of
own shares
in relation to
employee
share schemes - - - (17)
Equity
dividends paid (1,991) - (1,991) (1,258)
Dividends paid
to minority
shareholders in
subsidiary
undertakings (74) 42 (32) (53)
Interest paid (1,074) (58) (1,132) (988)
Interest
element of
finance leases (8) - (8) (10)
-------- -------- -------- --------
Net cash flows
from
financing
activities (9,255) 330 (8,925) (2,572)
-------- -------- -------- --------
-------- -------- -------- --------
Net cash flows
in cash and
cash
equivalents(1) (2,158) 46 (2,112) 5,389
Cash and cash
equivalents at
beginning
of the year 5,748 61 5,809 794
Exchange gain/
(loss) on
cash and cash
equivalents 29 - 29 (374)
-------- -------- -------- --------
Cash and cash
equivalents at
end of
the year 3,619 107 3,726 5,809
======== ======== ======== ========
Net cash flows
in cash and
cash
equivalents(1) (2,158) 46 (2,112) 5,389
Decrease/
(increase) in
debt 2,170 (346) 1,824 (717)
-------- -------- -------- --------
Decrease in
debt
resulting from
cash flows 12 (300) (288) 4,672
Net debt
acquired on
acquisition of
subsidiary
undertakings (2) - (2) (7)
Net debt
disposed on
disposal of
subsidiary
undertakings - (7) (7) 194
Translation
difference 143 (8) 135 317
Premium on
repayment of
debt - - - (56)
Other
movements (4) (339) (343) (335)
-------- -------- -------- --------
Movement in
net debt in
the year 149 (654) (505) 4,785
Opening net
debt (8,488) (2,102) (10,590) (15,375)
-------- -------- -------- --------
Closing net
debt (1) (8,339) (2,756) (11,095) (10,590)
======== ======== ======== ========
(1) Net debt is defined as long-term borrowings, short term borrowings and
mark to market adjustments on financing instruments less cash and cash
equivalents
NOTES TO THE IFRS FINANCIAL INFORMATION
1) Basis of Preparation
The IFRS Financial Information presented in this document has been prepared by
the Group using its best knowledge of the expected International Financial
Reporting Standards ('IFRS') (including International Accounting Standards
('IAS') and interpretations issued by the International Accounting Standards
Board ('IASB') and its committees, and as interpreted by any regulatory bodies
applicable to the Group ) and accounting policies that will be applied when the
Group prepares its first set of IFRS financial statements as at 31 March 2006.
Therefore, until such time, the possibility that the preliminary opening balance
sheet and the IFRS Financial Information presented may require amendment before
constituting the final opening balance sheet and final IFRS Financial
information cannot be excluded.
On 19 November 2004, the European Commission endorsed an amended version of IAS
39, 'Financial Instruments: Recognition and Measurement' rather than the full
version as previously published by the IASB. In accordance with guidance issued
by the UK Accounting Standards Board, the full version of IAS 39, as issued by
the IASB, has been adopted in the preparation of this financial information.
IFRS 1 exemptions
IFRS 1, 'First-time Adoption of International Financial Reporting Standards'
sets out the procedures that the Group must follow when it adopts IFRS for the
first time as the basis for preparing its consolidated financial statements. The
Group is required to establish its IFRS accounting policies as at 31 March 2006
and, in general, apply these retrospectively to determine the IFRS opening
balance sheet at its date of transition, 1 April 2004.
This standard provides a number of optional exceptions to this general
principle. The most significant of these are set out below, together with a
description in each case of the exception adopted by the Group.
a. Business combinations that occurred before the opening IFRS balance sheet
date (IFRS 3, 'Business Combinations')
The Group has elected not to apply IFRS 3 retrospectively to business
combinations that took place before the date of transition. As a result, in the
opening balance sheet, goodwill arising from past business combinations
(£96,931m) remains as stated under UK GAAP at 31 March 2004.
b. Employee Benefits - actuarial gains and losses (IAS 19, 'Employee Benefits')
The Group has elected to recognise all cumulative actuarial gains and losses in
relation to employee benefit schemes at the date of transition. The Group has
recognised actuarial gains and losses in full in the period in which they occur
in the statement of recognised income and expense in accordance with the
amendment to IAS 19, issued on 16 December 2004.
c. Share-based Payments (IFRS 2, 'Share-based Payment')
The Group has elected to apply IFRS 2 to all relevant share based payment
transactions granted but not fully vested at 1 April 2004.
d. Financial Instruments (IAS 39, 'Financial Instruments : Recognition and
Measurement' and
IAS 32, 'Financial Instruments: Disclosure and Presentation')
The Group has applied IAS 32 and IAS 39 for all periods presented and has
therefore not taken advantage of the exemption in IFRS 1 that would enable the
Group to only apply these standards from 1 April 2005.
Pro forma financial information for the year ended 31 March 2004
The pro forma financial information for the year ended 31 March 2004 has been
prepared for illustrative purposes only. It has been prepared on the basis that
the IFRS transition date is 1 April 2003, with the exception that, other than
the reversal of goodwill amortisation reported in the UK GAAP financial
statements, the full requirements of accounting for business combinations under
IFRS 3 have not been applied.
If IFRS 3 had been adopted in full for the year ended 31 March 2004 and business
combinations occurring in the period from 1 April 2003 to 31 March 2004 had been
reported accordingly, additional intangible fixed assets and related deferred
tax liabilities would have been recognised with a corresponding reduction in
goodwill. The income statement would have included amortisation expense, in
relation to the recognised finite lived intangible assets and the related
deferred tax effects.
Furthermore, were the IFRS transition date to be 1 April 2003, then these
additional intangible fixed assets, deferred tax liabilities and related
amortisation charge and tax credits would have similarly impacted the
consolidated income statement for the year ended 31 March 2005, and the
consolidated balance sheet at 31 March 2005.
As a result of the above, the pro forma financial information for the year ended
31 March 2004 is not presented in full accordance with IFRS.
Presentation of financial information
The primary statements within the IFRS Financial Information contained in this
document have been presented in accordance with IAS 1, 'Presentation of
Financial Statements'. However, this format and presentation may require
modification when the Group presents its first set of IFRS Financial Statements
as at 31 March 2006, in the event that further guidance is issued and as
practice develops.
2) Operating Profit Analysis
Pro forma
Year ended Year ended
31 March 31 March
2005 2004
(unaudited) (4)
£m £m
Subsidiary and share of joint venture undertakings
operating profit(1) 7,139 7,507
Acquired intangible asset amortisation (2) (102) -
Share of associate undertakings operating profit 2,667 2,434
Share of associate undertakings interest, tax and
minority interest (687) (519)
------- -------
9,017 9,422
Items not reflecting underlying business
performance (3) (475) 181
------- -------
Operating profit 8,542 9,603
======= =======
(1) Stated before acquired intangible asset amortisation and items not
reflecting underlying business performance.
(2) Acquired intangible asset amortisation relates to intangible assets
recognised on acquisitions that occurred after 1 April 2004 in accordance
with IFRS 3, 'Business Combinations'. These amounts primarily relate to the
purchase of minority interests in Vodafone Japan.
(3) Under UK GAAP, for the year ended 31 March 2005, an impairment charge of
£315m was recognised in relation to the impairment of goodwill relating to
Vodafone Sweden. The impairment charge increases to £475m under IFRS,
principally due to the non amortisation of goodwill between the Group's
transition date to IFRS (1 April 2004) and 31 March 2005
(4) Please refer to the 'Basis of Preparation' section above.
3) Adjusted Group operating profit
Pro forma
Year ended Year ended
31 March 31 March
2005 2004
(unaudited)
£m £m
Operating profit 8,542 9,603
Items not related to underlying business performance:
- Other income and expense 475 (35)
- Expected recoveries and provision releases in
relation to a contribution tax levy on Vodafone Italy - (269)
- Reorganisation costs - 123
------- -------
Adjusted Group operating profit 9,017 9,422
Share of result in associated undertakings (1,980) (1,915)
Depreciation of property, plant and equipment and
amortisation of computer software assets 4,494 4,343
Amortisation of other intangible assets 1,023 191
Loss on disposal of property, plant and equipment 161 86
EBITDA in discontinued operations - 66
------- -------
Group EBITDA (1) 12,715 12,193
======= =======
(1) Group EBITDA is not a measure recognised under IFRS but is presented in
order to highlight operational performance of the Group. It is stated before
items not reflecting underlying business performance.
4) Adjusted earnings per share
Pro forma
Year ended Year ended
31 March 31 March
2005 2004
(unaudited)
£m £m
Weighted average number of shares for
basic EPS (millions) 66,196 68,096
Weighted average number of shares for
diluted EPS (millions) 66,427 68,249
Basic earnings per share 9.68p 8.60p
Diluted basic earnings per share 9.65p 8.58p
Basic earnings per share from continuing operations 9.68p 8.70p
Diluted basic earnings per share from continuing
operations 9.65p 8.68p
Adjusted basic earnings per share from continuing
operations 9.62p 8.52p
Adjusted diluted basic earnings per share from
continuing operations 9.59p 8.51p
NOTES TO THE IFRS FINANCIAL INFORMATION (continued)
4) Adjusted earnings per share (continued)
Pro forma
Year ended Year ended
31 March 31 March
2005 2004
(unaudited)
£m £m
Earnings for basic and diluted earnings per share 6,410 5,853
Less: result in respect of discontinued operations - 73
------- -------
Earnings for basic and diluted earnings per share
from continuing operations 6,410 5,926
Items not related to underlying business performance:
- Other income and expense (1) 475 (35)
- Non-operating income and expense (6) (13)
- Expected recoveries and provision releases in
relation to a contribution tax levy on Vodafone Italy - (269)
- Reorganisation costs - 123
- Net financing costs in relation to the put option held
by Telecom Egypt (2) 67 -
- Deferred tax asset recognised on shareholder and
regulatory approval of the merger of Vodafone K.K. and
Vodafone Holdings K.K. (599) -
- Tax on items not related to underlying business
performance 3 72
- Items not related to underlying business performance
attributable to minority interests 21 1
------- -------
Earnings for adjusted earnings per share 6,371 5,805
======= =======
(1) The amount recognised for the year ended 31 March 2004 relates to the
recognition of negative goodwill in the income statement, which is held on
the balance sheet under UK GAAP. See Note 2, footnote 3 for explanation
of other income and expense for the year ended 31 March 2005.
(2) During the 2005 financial year, the Group sold 16.9% of Vodafone Egypt to
Telecom Egypt, reducing the Group's effective interest to 50.1%. It was also
agreed that the Group and Telecom Egypt would each contribute a 25.5%
interest in Vodafone Egypt shares to a newly formed 50:50 joint venture.
This joint venture is expected to be formed in the first half of the 2006
financial year. As part of the transaction, Telecom Egypt was granted an
option over its 25.5% indirect interest in Vodafone Egypt, giving Telecom
Egypt the right to put its shares back to the Group at fair market value.
This right remains for as long as the Group owns in excess of 20% of
Vodafone Egypt.
Under IAS 32, 'Financial Instruments: Disclosure and Presentation' and
IAS 39, 'Financial Instruments: Recognition and Measurement' the put option
held by Telecom Egypt is classified as a financial liability held at fair
value on the Group's consolidated balance sheet, with movements recognised
in the consolidated income statement. Fair value movements are determined
by the reference to the quoted share price of Vodafone Egypt.
For the year ended 31 March 2005, a liability of £356m was established at
the inception of the option which has been classified as forming part of
net debt and a further charge of £67m has been recognised within financing
costs in the income statement.
The valuation of this option is inherently unpredictable and changes in
the fair value of this financial liability could have a significant impact
on the future results and financial position of Vodafone. As the item does
not reflect the underlying business performance of the Group it is excluded
from the adjusted EPS calculation.
5) Free cash flow(1)
Pro forma
Year ended Year ended
31 March 31 March
2005 2004
(unaudited)
£m £m
Net cash flow from operating activities(2) 10,979 10,839
Add: Taxation 1,578 1,180
Net capital expenditure on intangible
assets and property, plant and equipment (4,910) (4,376)
--------------------------------------------------------------------------------
Purchase of intangible assets (699) (679)
Purchase of property, plant and equipment (4,279) (3,853)
Disposal of property, plant and equipment 68 156
--------------------------------------------------------------------------------
Operating free cash flow 7,647 7,643
Dividends received from associated
undertakings 1,896 1,739
Taxation (1,578) (1,180)
Net cash outflow for returns on investment (418) (84)
--------------------------------------------------------------------------------
Net interest on group net debt (405) (56)
Dividends received from investments 19 25
Dividends paid to minority interests (32) (53)
--------------------------------------------------------------------------------
Free cash flow 7,547 8,118
======= =======
(1) Free cash flow is defined as net cash from operating activities less net
cash flow arising from the purchase and sale of tangible and intangible
fixed assets, plus dividends received from associated undertakings, less
taxation cash flows and net cash outflows for returns on investments and
servicing of finance.
(2) Net cash flow from operating activities is presented after net taxation paid
in accordance with IAS 7, 'Cash Flow Statements'.
IMPACT OF IFRS ON ONE VODAFONE
The Group has previously provided expectations for its One Vodafone programme in
accordance with UK GAAP. These expectations were in respect of benefits to be
delivered from the Group's subsidiary undertakings under UK GAAP (the 'One
Vodafone companies').
Under IFRS, taking into account the proportionate consolidation of Vodafone
Italy, the One Vodafone initiatives are targeted at achieving £2.4 billion of
annual pre-tax operating free cash flow improvements in the Group's mobile
businesses on a statutory basis by the year ending 31 March 2008 ('2008
financial year'). Cost initiatives are anticipated to generate improvements of
£1.3 billion, with a further £1.1 billion from revenue based improvements.
Under UK GAAP, the Group expected that for the One Vodafone companies, in the
2008 financial year, the aggregate of mobile operating expenses and capitalised
fixed asset additions would be £11.7 billion, broadly similar to those for the
2004 financial year, assuming no significant changes in exchange rates and after
adjusting for acquisitions and disposals. For these companies, under IFRS, the
aggregate costs are expected to be approximately £0.3 billion lower than under
UK GAAP in the 2008 financial year at £11.4 billion, primarily as a result of
the proportionate consolidation of Vodafone Italy.
On an IFRS statutory basis, mobile operating expenses and capitalised fixed
asset additions include such costs for subsidiary undertakings and the
appropriate share of costs for joint ventures. Vodafone Italy is the only joint
venture within the One Vodafone programme and therefore the costs for the other
joint ventures will be excluded when presenting progress against the One
Vodafone expectations.
Revenue based initiatives are expected to deliver benefits equivalent to at
least 1% additional revenue market share for the One Vodafone companies in the
2008 financial year compared with the 2005 financial year. The Group will
measure the revenue benefits in its five principal mobile markets compared to
its established competitors.
The Group continues to expect mobile capitalised fixed asset additions in the
2008 financial year to be no more than 10% of mobile revenue for the One
Vodafone companies.
INDEPENDENT AUDITORS' REPORT TO THE BOARD OF DIRECTORS OF VODAFONE GROUP PLC ON
THE PRELIMINARY IFRS FINANCIAL INFORMATION
We have audited the accompanying preliminary International Financial Reporting
Standards consolidated financial information of Vodafone Group Plc ('the
Company') and its subsidiaries (together 'the Group') for the year ended
31 March 2005 which comprises the consolidated balance sheet, consolidated
income statement, consolidated cash flow statement, consolidated statement of
recognised income and expense and the related Notes 1 to 5 (hereinafter referred
to as 'the IFRS Financial Information').
This report is made solely to the Board of Directors, in accordance with our
engagement letter and solely for the purpose of assisting with the transition to
IFRS. Our audit work will be undertaken so that we might state to the Company's
board of directors those matters we are required to state to them in an
auditors' report and for no other purpose. To the fullest extent permitted by
law, we will not accept or assume responsibility to anyone other than the
Company for our audit work, for our report, or for the opinions we have formed
The Company's directors are responsible for ensuring that the Company and the
Group maintains proper accounting records and for the preparation of the IFRS
Financial Information on the basis set out in Note 1, which describes how IFRS
will be applied under IFRS 1, including the assumptions the directors have made
about the standards and interpretations expected to be effective, and the
policies expected to be adopted, when the Company prepares its first complete
set of IFRS financial statements as at 31 March 2006. Our responsibility is to
audit the IFRS Financial Information in accordance with relevant United Kingdom
legal and regulatory requirements and auditing standards and report to you our
opinion as to whether the IFRS Financial Information is prepared, in all
material respects, on the basis set out in Note 1.
Basis of audit opinion
We conducted our audit in accordance with United Kingdom auditing standards
issued by the Auditing Practices Board. An audit includes examination, on a test
basis, of evidence relevant to the amounts and disclosures in the IFRS Financial
Information. It also includes an assessment of the significant estimates and
judgements made by the directors in the preparation of the IFRS Financial
Information and of whether the accounting policies are appropriate to the
circumstances of the Group, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the IFRS Financial
Information is free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion, we also evaluated the overall
adequacy of the presentation of information in the IFRS Financial Information.
Emphasis of matter
Without qualifying our opinion, we draw attention to the fact that Note 1
explains why there is a possibility that the accompanying IFRS
Financial Information may require adjustment before constituting the final
comparative IFRS financial information. Moreover, we draw attention to the fact
that, under IFRS, only a complete set of financial statements comprising a
balance sheet, income statement, statement of recognised income and expense,
cash flow statement, together with comparative financial information and
explanatory notes, can provide a fair presentation of the company's financial
position, results of operations and cash flows in accordance with IFRS.
Opinion
In our opinion the IFRS Financial Information is prepared, in all material
respects, in accordance with the basis set out in Note 1, which describes how
IFRS will be applied under IFRS 1, including the assumptions the directors have
made about the standards and interpretations expected to be effective, and the
policies expected to be adopted when the company prepares its first complete set
of IFRS financial statements as at 31 March 2006.
Deloitte & Touche LLP
Chartered Accountants
London
12 July 2005
UNAUDITED PROPORTIONATE FINANCIAL INFORMATION
Basis of preparation
The tables of financial information below are presented on a proportionate
basis. Proportionate presentation is not a measure recognised under UK GAAP or
IFRS and is not intended to replace the consolidated financial statements
prepared in accordance with UK GAAP or IFRS. However, since significant entities
in which the Group has an interest are not consolidated, proportionate
information is provided as supplemental data to facilitate a more detailed
understanding and assessment of the consolidated financial statements prepared
in accordance with UK GAAP and IFRS.
UK GAAP requires consolidation of entities controlled by the Group and the
equity method of accounting for entities in which the Group has significant
influence but not a controlling interest. IFRS requires consolidation of
entities in relation to which the Group has the power to control and allows
either proportionate consolidation or equity accounting for joint ventures. IFRS
also requires equity accounting for interests in which the Group has significant
influence but not a controlling interest.
Proportionate presentation is a pro rata consolidation, which reflects the
Group's share of turnover and expenses in entities, both consolidated and
unconsolidated, in which the Group has an ownership interest. Proportionate
results are calculated by multiplying the Group's ownership interest in each
entity by each entity's results.
Proportionate presentation of financial information differs in material respects
to the proportionate consolidation adopted by the Group under IFRS for its joint
ventures, as detailed within the Group's update on the adoption of IFRS provided
on 20 January 2005.
Proportionate information includes results from the Group's joint ventures,
equity accounted investments and other investments. The Group may not have
control over the turnover, expenses or cash flows of these investments and may
only be entitled to cash from dividends received from these entities.
Proportionate turnover is stated net of intercompany turnover. Proportionate
EBITDA represents the Group's ownership interests in the respective entities'
EBITDA. As such, proportionate EBITDA does not represent EBITDA available to the
Group.
Year ended Year ended
31 March 2005 31 March 2004 (Pro forma)
------------------------------------ ---------------------------------
IFRS IFRS
Adjust- Adjust-
UK GAAP ments IFRS UK GAAP ments IFRS
£m £m £m £m £m £m
Revenue
Mobile 42,762 - 42,762 37,969 - 37,969
Other 840 - 840 1,477 - 1,477
------- ------- ------- ------- ------- -------
Group 43,602 - 43,602 39,446 - 39,446
======= ======= ======= ======= ======= =======
EBITDA(1)
Mobile 16,483 (82) 16,401 14,826 (149) 14,677
Other 158 1 159 288 (3) 285
------- ------- ------- ------- ------- -------
Group 16,641 (81) 16,560 15,114 (152) 14,962
======= ======= ======= ======= ======= =======
Mobile
EBITDA(1)
margin 38.5% (0.1%) 38.4% 39.0% (0.3%) 38.7%
(1) Proportionate EBITDA and proportionate EBITDA margin is stated before
exceptional items under UK GAAP and before items not reflecting underlying
business performance under IFRS.
FORWARD LOOKING STATEMENTS
This press release 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 the statements under 'Impact of IFRS on One Vodafone'
regarding Vodafone's expectations for pre-tax operating free cash flow
improvements in the Group's mobile operations by the year ending 31 March 2008
based on improvements from cost initiatives and revenue based improvements,
mobile operating expense and capitalised fixed asset additions in the 2008
financial year, and benefits from revenue based initiatives and expectations for
mobile capitalised fixed asset additions as a percentage of mobile revenues.
These forward-looking statements are made on the basis of certain assumptions
which Vodafone believes to be reasonable in light of Vodafone's operating
experience in recent years. The principal assumptions on which these statements
are based relate to exchange rates, customer numbers, usage and pricing, take-up
of new services, termination and interconnect rates, customer acquisition and
retention costs, network opening and operating costs and the availability of
handsets.
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 requiring changes in pricing models and/or
new product offerings or resulting in higher costs of acquiring new customers or
providing new services; the impact on capital spending from investment in
network capacity and the deployment of new technologies, or the rapid
obsolescence of existing technology; slower customer growth or reduced customer
retention; the possibility that technologies, including mobile internet
platforms, and services, including 3G services, will not perform according to
expectations or that vendors' performance will not meet the Group's
requirements; changes in the projected growth rates of the mobile
telecommunications industry; the Group's ability to realise expected synergies
and benefits associated with 3G technologies and the integration of our
operations and those of acquired companies; future revenue contributions of both
voice and non-voice services offered by the Group; lower than expected impact of
GPRS, 3G and Vodafone live! and the Group's business offerings on the Group's
future revenue, cost structure and capital expenditure outlays; the ability of
the Group to harmonise mobile platforms and any delays, impediments or other
problems associated with the roll-out and scope of 3G technology and services
and Vodafone live! and the Group's business or service offerings 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; greater than anticipated prices of new mobile handsets;
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 one or more of the measurements of
our financial performance or the level of dividends; any unfavourable
conditions, regulatory or otherwise, imposed in connection with pending or
future acquisitions or dispositions; 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 European Commission regulating rates the
Group is permitted to charge; the Group's ability to develop competitive data
content and services which will attract new customers and increase average
usage; the impact of legal or other proceedings against the Group or other
companies in the mobile telecommunications industry; the possibility that new
marketing campaigns or efforts are not an effective expenditure; the possibility
that the Group's integration efforts do not increase the speed-to-market of new
products or improve the Group's cost position; changes in exchange rates,
including particularly the exchange rate of pound sterling to the euro, US
dollar and the Japanese yen; 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 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; final resolution of open issues
which might impact the effective tax rate; timing of any tax payments relating
to the resolution of open issues; and loss of suppliers or disruption of supply
chains.
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' contained in our
Annual Report on Form 20-F with respect to the financial year ended 31 March
2005. 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 assurance can be given that the forward-looking statements in this document
will be realised. Neither Vodafone Group nor any of its affiliates intends to
update these forward-looking statements.
PART III - RECONCILIATIONS BETWEEN UK GAAP AND IFRS (UNAUDITED)
a) Revenue
Pro forma
Year ended Year ended
31 March 2005 31 March 2004
£m £m
UK GAAP 34,133 33,559
Presentational adjustments:
Proportionate consolidation of joint ventures:
- Italy (1,291) (1,233)
- Others 1,202 934
Discontinued operations - (818)
Other 29 50
----------- ----------
IFRS 34,073 32,492
=========== ==========
b) Group EBITDA (1)
Pro forma
Year ended Year ended
31 March 2005 31 March 2004
£m £m
UK GAAP 13,041 12,640
Presentational adjustments:
Proportionate consolidation of joint ventures:
- Italy (690) (644)
- Others 442 343
Accounting adjustments:
Share based payments (95) (142)
Other 17 (4)
----------- ----------
IFRS 12,715 12,193
=========== ==========
(1) Group EBITDA is not a measure recognised under IFRS but is presented in
order to highlight operational performance of the Group. It is stated before
items not reflecting underlying business performance.
c) Operating (loss)/profit
Pro forma
Year ended Year ended
31 March 2005 31 March 2004
£m £m
UK GAAP (4,111) (4,230)
Goodwill amortisation 14,700 15,207
Exceptional operating items 315 (228)
----------- ----------
UK GAAP adjusted operating profit 10,904 10,749
Presentational adjustments:
Accounting for associates (789) (565)
Proportionate consolidation of joint ventures (418) (428)
Discontinued operations - (66)
Accounting adjustments:
Licence amortisation (503) (88)
Acquired intangibles amortisation (102) -
Share based payments (95) (142)
Other 20 (38)
----------- ----------
IFRS adjusted operating profit 9,017 9,422
=========== ==========
d) Tax on (loss)/profit on ordinary activities
Pro forma
Year ended Year ended
31 March 2005 31 March 2004
£m £m
UK GAAP Tax charge (2,236) (3,154)
Presentational adjustments:
Associate accounting 538 288
Proportionate consolidation of joint ventures 60 64
Discontinued operations - 26
Accounting adjustments:
Italian substitute tax (132) (46)
Unremitted earnings 66 40
Other 92 (118)
Tax on IFRS accounting adjustments:
Licence amortisation 168 29
Share based payments 4 37
Other 7 6
----------- ----------
IFRS Tax charge for subsidiaries and
joint (1,433) (2,828)
=========== ==========
Subsidiary and joint venture undertakings
taxation (2,029) (2,756)
Share of associated undertakings taxation (447) (245)
----------- ----------
(2,476) (3,001)
=========== ==========
Tax on items not reflecting underlying
business performance 596 (72)
Adjusted effective tax rate 27.6% 32.9%
e) Earnings per share
Pro forma
Year ended Year ended
31 March 2005 31 March 2004
Earnings EPS pence Earnings EPS
£m £m pence
UK GAAP basic earnings/ EPS (7,540) (11.39p) (9,015) (13.24p)
Goodwill amortisation 14,700 15,207
Exceptional operating items 315 (228)
Exceptional non-operating items (13) 103
Exceptional tax credit (599) -
Tax on exceptional items 3 104
Share of exceptional items
attributable to minorities 26 27
------- ------- ------- -------
UK GAAP adjusted earnings/ EPS 6,892 10.41p 6,198 9.10p
Licence amortisation (503) (88)
Acquired intangibles
amortisation (102) -
Share based payments (95) (142)
Taxation 189 (105)
Financial instrument fair
value adjustments (66) (42)
Minority interests 19 (19)
Other 37 3
------- ------- ------- -------
IFRS adjusted earnings/ EPS 6,371 9.62p 5,805 8.52p
======= ======= ======= =======
RECONCILIATIONS BETWEEN UK GAAP AND IFRS (continued)
f) Net debt
Pro forma
Year ended Year ended
31 March 2005 31 March 2004
£m £m
UK GAAP (8,339) (8,488)
Presentational adjustments:
Proportionate consolidation of joint ventures
- Italy (1,148) (748)
- Others (11) (71)
Reclassification of preference shares (845) (866)
Accounting adjustments:
Financial instrument fair value adjustments (309) (406)
Put option liability (423) -
Other (20) (11)
----------- ----------
IFRS (11,095) (10,590)
=========== ==========
g) Free Cash Flow
Pro forma
Year ended Year ended
31 March 2005 31 March 2004
£m £m
UK GAAP 7,847 8,521
Proportionate consolidation of joint ventures
- Italy (375) (477)
- Others 67 76
Other 8 (2)
----------- ----------
IFRS 7,547 8,118
=========== ==========
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