Final Results - Part 2
Vodafone Group Plc
29 May 2007
Vodafone Group Plc
Preliminary Results for the year ended 31 March 2007
PART 2
CONSOLIDATED INCOME STATEMENT
2007 2006
£m £m
Revenue 31,104 29,350
Cost of sales (18,725) (17,070)
---------- ----------
Gross profit 12,379 12,280
Selling and distribution expenses (2,136) (1,876)
Administrative expenses (3,437) (3,416)
Share of result in associated undertakings 2,728 2,428
Impairment losses (11,600) (23,515)
Other income and expense 502 15
---------- ----------
Operating loss (1,564) (14,084)
Non-operating income and expense 4 (2)
Investment income 789 353
Financing costs (1,612) (1,120)
---------- ----------
Loss before taxation (2,383) (14,853)
Income tax expense (2,423) (2,380)
---------- ----------
Loss for the financial year from
continuing operations (4,806) (17,233)
Loss from discontinued operations (491) (4,588)
---------- ----------
Loss for the financial year (5,297) (21,821)
========== ==========
Attributable to:
- Equity shareholders (5,426) (21,916)
- Minority interests 129 95
========== ==========
Basic and diluted loss per share
Loss from continuing operations (8.94)p (27.66)p
Loss from discontinued operations (0.90)p (7.35)p
---------- ----------
Loss for the financial year (9.84)p (35.01)p
========== ==========
Weighted average number of shares for basic and
diluted earnings per share (millions) 55,144 62,607
========== ==========
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
2007 2006
£m £m
Gains on revaluation of
available-for-sale
investments 2,108 705
Exchange differences on translation of
foreign operations (3,804) 1,494
Actuarial gains / (losses) on defined benefit
pension schemes 50 (30)
Revaluation gain - 112
Transfer to the income statement on disposal
of foreign operations 838 36
---------- ----------
Net (expense)/income recognised directly in equity (808) 2,317
Loss for the financial year (5,297) (21,821)
---------- ----------
Total recognised income and expense
relating to the financial year (6,105) (19,504)
========== ==========
Attributable to:
- Equity shareholders (6,210) (19,607)
- Minority interests 105 103
========== ==========
CONSOLIDATED BALANCE SHEET
2007 2006
£m £m
Non-current assets
Goodwill 40,567 52,606
Other intangible assets 15,705 16,512
Property, plant and equipment 13,444 13,660
Investments in associated undertakings 20,227 23,197
Other investments 5,875 2,119
Deferred tax assets 410 140
Post employment benefits 82 19
Trade and other receivables 494 361
--------- ---------
96,804 108,614
--------- ---------
Current assets
Inventory 288 297
Taxation recoverable 21 8
Trade and other receivables 5,023 4,438
Cash and cash equivalents 7,481 2,789
--------- ---------
12,813 7,532
--------- ---------
Assets included in disposal group
held for resale - 10,592
--------- ---------
Total assets 109,617 126,738
========= =========
Equity
Called up share capital 4,172 4,165
Share premium account 43,572 52,444
Own shares held (8,047) (8,198)
Additional paid-in capital 100,185 100,152
Capital redemption reserve 9,132 128
Accumulated other recognised income
and expense 3,306 4,090
Retained losses (85,253) (67,356)
--------- ---------
Total equity shareholders' funds 67,067 85,425
Minority interests 226 (113)
--------- ---------
Total equity 67,293 85,312
--------- ---------
Non-current liabilities
Long-term borrowings 17,798 16,750
Deferred tax liabilities 4,626 5,670
Post employment benefits 123 120
Provisions 296 265
Other payables 535 566
--------- ---------
23,378 23,371
--------- ---------
Current liabilities
Short-term borrowings 4,817 3,448
Current taxation liabilities 5,088 4,448
Trade payables and other payables 8,774 7,477
Provisions 267 139
--------- ---------
18,946 15,512
--------- ---------
Liabilities included in disposal group
held for resale - 2,543
--------- ---------
Total equity and liabilities 109,617 126,738
========= =========
CONSOLIDATED CASH FLOW STATEMENT
2007 2006
£m £m
Net cash flows from operating activities 10,328 11,841
Cash flows from investing activities
Purchase of interests in subsidiary
undertakings and joint ventures,
net of cash acquired (2,805) (4,186)
Disposal of interests in subsidiary
undertakings, net of cash disposed 6,767 599
Disposals of interests in associated
undertakings 3,119 -
Purchase of intangible fixed assets (899) (690)
Purchase of property, plant and equipment (3,633) (4,481)
Disposal of property, plant and equipment 34 26
Purchase of investments (172) (57)
Disposal of investments 80 1
Dividends received from associated
undertakings 791 835
Dividends received from investments 57 41
Interest received 526 319
--------- ----------
Net cash flows from investing activities 3,865 (7,593)
--------- ----------
Cash flows from financing activities
Issue of ordinary share capital and reissue
of treasury shares 193 356
Net movement in short-term borrowings 953 708
Proceeds from issue of long-term borrowings 5,150 5,256
Repayment of borrowings (1,961) (1,371)
Loans repaid to associated undertakings - (47)
Purchase of treasury shares (43) (6,457)
'B' share capital redemption (5,713) -
'B' share preference dividends paid (3,291) -
Equity dividends paid (3,555) (2,749)
Dividends paid to minority shareholders
in subsidiary undertakings (34) (51)
Interest paid (1,051) (721)
--------- ----------
Net cash flows from financing activities (9,352) (5,076)
--------- ----------
Net cash flows 4,841 (828)
Cash and cash equivalents at the beginning
of the financial year 2,932 3,726
Exchange (loss)/gain on cash and
cash equivalents (315) 34
--------- ----------
Cash and cash equivalents at the end
of the financial year 7,458 2,932
========= ==========
NOTES TO THE PRELIMINARY RESULTS
FOR THE YEAR ENDED 31 MARCH 2007
1 Basis of preparation
The preliminary results for the year ended 31 March 2007 are an abridged
statement of the full Annual Report, which was approved by the Board of
Directors on 29 May 2007. The Auditors' Report on these accounts was unqualified
and did not contain statements under section 237(2) or 237(3) of the Companies
Act 1985. The preliminary results do not comprise statutory accounts within the
meaning of section 240 of the Companies Act 1985. The Annual Report for the year
ended 31 March 2007 will be delivered to the Registrar of Companies following
the Company's Annual General Meeting, to be held on 24 July 2007.
The preliminary results are prepared in accordance with International Financial
Reporting Standards ('IFRS') as issued by the International Accounting Standards
Board ('IASB'). The preliminary results are also prepared in accordance with
IFRS adopted by the European Union ('EU'), the Companies Act 1985 and Article 4
of the EU IAS Regulations, and on a historical basis, except for certain
financial and equity instruments that have been measured at fair value. However,
the financial information included in this preliminary announcement does not
itself contain sufficient information to comply with IFRS. The company will
publish full financial statements that comply with IFRS in June 2007.
The preparation of the preliminary results 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 Dividends
2007 2006
£m £m
Equity dividends on ordinary shares:
Declared during the financial year:
Final dividend for the year ended 31 March
2006: 3.87 pence per share (2005: 2.16 pence per share) 2,328 1,386
Interim dividend for the year ended 31 March
2007: 2.35 pence per share (2006: 2.20 pence per share) 1,238 1,367
------ ------
3,566 2,753
====== ======
Proposed but not recognised as a liability:
Final dividend for the year ended 31 March
2007: 4.41 pence per share (2006: 3.87 pence per share) 2,331 2,328
====== ======
UNAUDITED PROPORTIONATE FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 MARCH 2007
Basis of preparation
The tables of financial information below are presented on a proportionate basis
from continuing operations. Proportionate presentation is not a measure
recognised under IFRS and is not intended to replace the full year results
prepared in accordance with 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 full year results prepared in accordance with IFRS.
IFRS requires consolidation of entities 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.
The proportionate presentation, below, is a pro rata consolidation, which
reflects the Group's share of revenue 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 percentage
equity 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.
Proportionate information includes results from the Group's equity accounted
investments and other investments. The Group may not have control over the
revenue, expenses or cash flows of these investments and may only be entitled to
cash from dividends received from these entities.
Group proportionate revenue is stated net of intercompany revenue. 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.
In order to simplify its financial reporting and improve understanding of its
results, the Group will be moving to a single basis of statutory reporting and
will no longer provide proportionate financial information with effect from the
2008 financial year.
Reconciliation of proportionate revenue to statutory revenue
2007 2006
£m £m
Proportionate revenue 43,613 41,355
Minority share of revenue in subsidiary undertakings 829 666
Group share of revenue in associated
undertakings and trade investments (13,338) (12,671)
--------- ---------
Revenue 31,104 29,350
========= =========
Reconciliation of proportionate EBITDA to operating loss for the financial year
2007 2006
£m £m
Proportionate EBITDA 16,882 16,380
Minority share of EBITDA in subsidiary undertakings 279 224
Group's share of EBITDA in associated undertakings
and other investments (5,201) (4,838)
--------- ---------
Group EBITDA 11,960 11,766
Charges for depreciation and amortisation (5,111) (4,709)
Loss on disposal of property, plant and equipment (43) (69)
Share of results in associated undertakings 2,728 2,428
Impairment losses (11,600) (23,515)
Other income and expense 502 15
--------- ---------
Operating loss (1,564) (14,084)
========= =========
OTHER INFORMATION
1) Copies of this document are available from the Company's registered office:
Vodafone House
The Connection
Newbury
Berkshire
RG14 2FN
2) These preliminary results will be available on the Vodafone Group Plc
website, www.vodafone.com, from 29 May 2007.
For further information:
Vodafone Group
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.newscast.co.uk.
Video interviews with Arun Sarin, Chief Executive, and Andy Halford, Chief
Financial Officer, are available from midday on www.vodafone.com and
www.cantos.com. Also available in audio and transcript.
Vodafone, Vodafone At Home, Vodafone Office, Vodafone live!, Vodafone Mobile
Connect, Vodafone Passport and the Vodafone logos are trademarks of
the Vodafone Group. Other product and company names mentioned herein may be the
trademarks of their respective owners.
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, including Yahoo! and Microsoft;
the ability to integrate all operations throughout the Group; the development
and impact of new mobile technology; expected savings resulting from cost
reduction initiatives, including the IT AD&M programme, supply chain
centralisation, data centre consolidation, network sharing and enterprise
resource planning initiatives; growth in customers and usage, including
growth in emerging markets; the Group's expectations for revenue, adjusted
operating profit, capitalised fixed asset additions and free cash flow for the
2008 financial year contained within the outlook statement on page 6 of this
document, and expectations for the Group's future performance generally,
including, average revenue per user ('ARPU'), costs, capital expenditure,
operating expenditure and margins; 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; stimulation initiatives in Europe; future acquisitions and
future disposals; the benefits of acquisitions, including the Hutch Essar
acquisition; contractual obligations; mobile penetration and coverage rates;
the impact of regulatory and legal proceedings involving Vodafone; expectations
with respect to long-term shareholder value growth; Vodafone's ability to be a
market leader in providing voice and data communications; 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 ('MVNOs'), 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; 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
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 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 saving
initiatives and revenue stimulation activities in Europe; 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, Trends and Outlook
- Risk Factors' in Vodafone Group Plc's Annual Report for the year ended 31
March 2006. 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.
Non-GAAP measure Equivalent GAAP measure Location in this results
announcement of
reconciliation and further
information
Group EBITDA Operating loss Unaudited proportionate
financial information on
page 27
Adjusted operating profit Operating loss Group results on page 7
Adjusted profit before tax Loss before tax Group results on page 9
Adjusted profit from Loss for the financial year Group results on page 9
continuing operations
Adjusted earnings per share Loss per share Group results on page 9
Operating free cash flow Net cash flows from Cash flows and funding on
operating activities page 20
Free cash flow Net cash flows from Cash flows and funding on
operating activities page 20
Net debt Borrowings Cash flows and funding on
page 20
Proportionate revenue Revenue Unaudited proportionate
financial information on
page 27
Proportionate EBITDA Operating loss Unaudited proportionate
financial information on
page 27
Adjusted effective tax rate Tax on profit as a Group results on page 9
percentage of profit before
taxation
DEFINITION OF TERMS
For definition of terms please refer to page 41 of the Interim Results
announcement for the six months ended 30 September 2006.
REGIONAL ANALYSIS
FOR THE YEAR ENDED 31 MARCH
Capitalised
Adjusted operating fixed asset Free
Revenue EBITDA profit additions cash flow(1)
----------------- ------------------ -------------------- ---------------- -------------------
2007 2006 2007 2006 2007 2006 2007 2006 2007 2006
£m £m £m £m £m £m £m £m £m £m
EUROPE
Germany 5,443 5,754 2,429 2,703 1,354 1,496 425 592 1,971 2,167
Italy(2) 4,245 4,363 2,149 2,270 1,575 1,672 421 541 1,823 1,808
Spain 4,500 3,995 1,567 1,373 1,100 968 547 502 1,091 958
UK 5,124 5,048 1,459 1,623 511 698 661 665 794 942
Arcor 1,441 1,320 267 228 171 139 189 129 71 56
Greece 1,202 1,233 416 470 243 317 110 108 269 336
Netherlands 1,137 1,174 357 369 208 219 163 124 254 224
Portugal 926 899 323 286 195 163 120 115 225 153
Other 1,020 1,400 434 510 290 279 96 164 329 310
Intra-region
revenue (446) (453) - - - - - - - -
----------------- ------------------ -------------------- ---------------- -------------------
Total
Europe 24,592 24,733 9,401 9,832 5,647 5,951 2,732 2,940 6,827 6,954
EMAPA
Romania(3) 722 533 340 254 129 88 134 104 250 159
Turkey(4) 698 - 151 - (68) - 143 - 102 -
Egypt 741 555 391 307 295 212 192 167 (2) 190
South
Africa(2) 1,478 1,070 532 388 327 271 221 202 324 178
Pacific 1,399 1,335 361 362 159 140 251 247 167 112
Other
subsidiaries 802 675 242 195 72 42 120 132 116 61
Other joint
ventures(2) 601 387 234 153 123 86 199 101 66 60
United
States - - - - 2,077 1,732 - - - -
Other
Associates - - - - 642 666 - - - -
Intra-region
revenue - (1) - - - - - - - -
----------------- ------------------ -------------------- ---------------- -------------------
Total EMAPA 6,441 4,554 2,251 1,659 3,756 3,237 1,260 953 1,023 760
Common
functions 168 145 308 275 128 211 216 112 231 (19)
Inter-region
revenue (97) (82) - - - - - - - -
----------------- ------------------ -------------------- ---------------- -------------------
Total
Group 31,104 29,350 11,960 11,766 9,531 9,399 4,208 4,005 8,081 7,695
=================== ================== ==================== ================
Net interest paid (468) (349)
Tax paid (2,243) (1,712)
Dividends
received
and other 757 784
------- -------
Free cash flow
- Continuing operations 6,127 6,418
- Discontinued operations(5) (8) 701
------- -------
6,119 7,119
======= =======
Notes:
(1) For the Group's operating companies and common functions, the cash flows
presented reflect operating free cash flow.
(2) The results of joint ventures have been included using proportionate
consolidation.
(3) Includes periods in the 2006 financial year where accounted for as a
joint venture.
(4) Presents the results from 24 May 2006, being the date of acquisition.
(5) Discontinued operations represent Vodafone Japan.
See page 30 for use of non-GAAP financial information and for definition of
terms.
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