Interim Results - Part 2

Vodafone Group PLC 14 November 2000 PART 2 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE SIX MONTHS TO 30 SEPTEMBER 2000 Six months Six months Year to to to 30 30 September 31 March September 1999 2000 2000 £m £m £m Turnover - Continuing operations* 3,208 3,194 7,873 - Acquisitions 3,811 - - ------- ------- ------- 7,019 3,194 7,873 ====== ====== ====== Operating profit/(loss) - Continuing operations* 517 434 981 - Acquisitions (3,647) - - ------- ------- ------- (3,130) 434 981 Share of operating profit/(loss) in joint ventures and associated undertakings - Continuing operations 56 (22) (185) - Acquisitions (236) - - ------- ------- ------- Total Group operating (loss)/profit (Note 2) (3,310) 412 796 Disposal of fixed asset investments 5 1 954 ------- ------- ------- (Loss)/profit on ordinary activities before interest (3,305) 413 1,750 Net interest payable - Group (456) (119) (350) - Joint ventures and associated undertakings (141) (17) (51) ------- ------- ------- (Loss)/profit on ordinary activities before taxation (3,902) 277 1,349 Tax on (loss)/profit on ordinary (581) (276) (685) activities ------- ------- ------- (Loss)/profit on ordinary activities after taxation (4,483) 1 664 Equity minority interests (150) (60) (137) Non-equity minority interests (29) (13) (40) ------- ------- ------- (Loss)/profit for the financial (4,662) (72) 487 period Equity dividends (423) (203) (620) ------- ------- ------- Retained loss for the Group and its share of joint ventures and associated undertakings (5,085) (275) (133) ====== ====== ====== Basic (loss)/earnings per share (7.85)p (0.31)p 1.80p Diluted (loss)/earnings per share (7.85)p (0.31)p 1.78p Adjusted basic earnings per share 1.70p 2.25p 4.71p * The AirTouch US Cellular business is included within continuing subsidiary operations in prior year comparatives, but not in the current year. See Note 1 - Basis of Preparation. CONSOLIDATED BALANCE SHEET 30 SEPTEMBER 2000 30 September 30 September 31 March 2000 1999 2000 £m £m £m Fixed assets Intangible assets 96,490 21,804 22,206 Tangible assets 7,767 5,267 6,307 Investments 32,494 21,412 122,338 Investments in joint ventures: - Share of gross assets - 2,893 2,912 - Share of gross liabilities - (237) (241) ------- ------- ------- - 2,656 2,671 Investments in associated 31,416 18,470 17,979 undertakings Other investments 1,078 286 101,688 ------- ------- ------- 136,751 48,483 150,851 ------- ------- ------- Current assets Stocks 378 125 190 Debtors 5,115 2,007 2,138 Investments 17,436 73 30 Cash at bank and in hand 1,133 42 159 ------- ------- ------- 24,062 2,247 2,517 Creditors: amounts falling due within one year 8,466 7,700 4,441 ------- ------- ------- Net current assets/(liabilities) 15,596 (5,453) (1,924) ------- ------- ------- Total assets less current liabilities 152,347 43,030 148,927 Creditors: amounts falling due after more than one year 13,092 1,963 6,374 Provisions for liabilities and charges 571 73 193 ------- ------- ------- 138,684 40,994 142,360 ====== ====== ====== Capital and reserves Called up share capital 3,804 1,901 3,797 Share premium account 39,772 37,058 39,577 Merger reserve 96,914 - 96,914 Other reserve 1,082 1,149 1,120 Profit and loss account (5,013) (549) (575) ------- ------- ------- Total equity shareholders' funds 136,559 39,559 140,833 Equity minority interests 1,043 475 523 Non-equity minority interests 1,082 960 1,004 ------- ------- ------- 138,684 40,994 142,360 ====== ====== ====== CONSOLIDATED CASH FLOW FOR THE SIX MONTHS TO 30 SEPTEMBER 2000 Six months Six months Year to to to 30 September 30 September 31 March 2000 1999 2000 £m £m £m Net cash inflow from operating activities 1,888 966 2,510 Dividends received from associated undertakings 138 36 236 Net cash outflow for returns on investments and servicing of finance (646) (116) (406) Taxation (829) (50) (325) Net cash outflow for capital expenditure and financial investment (12,915) (714) (756) Net cash inflow/(outflow) for acquisitions and disposals 19,395 (3,966) (4,756) Equity dividends paid (391) (74) (221) ------- ------- ------- Cash inflow/(outflow) before management of liquid resources and financing 6,640 (3,918) (3,718) Management of liquid resources 24 (75) (33) Net cash (outflow)/inflow from financing (5,697) 4,032 3,867 ------- ------- ------- Increase in cash in the period 967 39 116 ====== ====== ====== Reconciliation of net cash flow to movement in net debt Increase in cash in the period 967 39 116 Cash outflow/(inflow) from debt 5,757 (3,784) (3,468) Cash (inflow)/outflow from liquid resources (24) 75 33 ------- ------- ------- Decrease/(increase) in net debt resulting from cash Flows 6,700 (3,670) (3,319) Debt acquired on acquisition of subsidiaries (13,106) (1,684) (2,133) Translation difference (131) 178 316 Other movements 2 (11) 1 ------- ------- ------- Increase in net debt in the period (6,535) (5,187) (5,135) Opening net debt (6,643) (1,508) (1,508) Closing net debt (13,178) (6,695) (6,643) CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE SIX MONTHS TO 30 SEPTEMBER 2000 Six months Six months to Year to to 30 September 31 March 30 September 1999 2000 2000 £m £m £m (Loss)/profit for the financial (4,662) (72) 487 period Currency translation 582 (880) (1,130) ------- ------- ------- Total recognised gains and losses for the period (4,080) (952) (643) ====== ====== ====== MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS FOR THE SIX MONTHS TO 30 SEPTEMBER 2000 (Loss)/profit for the financial period (4,662) (72) 487 Equity dividends (423) (203) (620) ------- ------- ------- (5,085) (275) (133) Currency translation 582 (880) (1,130) New share capital subscribed 202 38,708 140,037 Scrip dividends 26 26 81 Goodwill transferred to the profit and loss account in respect of business disposals 1 - 18 Unvested option consideration - 1,165 1,165 Other - - (20) ------- ------- ------- Net movement in equity shareholders' funds (4,274) 38,744 140,018 Opening equity shareholders' funds 140,833 815 815 ------- ------- ------- Closing equity shareholders' funds 136,559 39,559 140,833 ====== ====== ====== NOTES TO THE INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2000 1 Basis of preparation The unaudited interim results have been prepared on a basis consistent with the accounting policies set out on pages 32 and 33 of Vodafone Group Plc's Annual Report & Accounts for the year ended 31 March 2000. The interim results should therefore be read in conjunction with the 2000 Annual Report & Accounts. The interim results for the six months to 30 September 2000, which were approved by the Board of Directors on 14 November 2000, do not comprise statutory accounts within the meaning of section 240 of the Companies Act 1985. Full accounts for the year ended 31 March 2000, incorporating an unqualified auditors' report, have been filed with the Registrar of Companies. On 3 April 2000 Vodafone contributed its US wireless and paging assets into a new joint venture company, Verizon Wireless, in which Vodafone had a 65.1% ownership interest. Following completion of the Bell Atlantic/GTE merger to form Verizon Communications, GTE's US wireless assets were contributed to Verizon Wireless on 10 July 2000 and Vodafone Group's ownership interest reduced to 45%. Prior to the formation of Verizon Wireless, the turnover and operating results of Vodafone Group's US wireless and paging operations were consolidated within Group operating profit from continuing operations. From 3 April 2000, Vodafone Group has equity accounted for its interest in the operating results of Verizon Wireless, which is included in the Group's share of the operating profit of joint ventures and associated undertakings from continuing operations. The turnover and operating loss (after goodwill amortisation) of Vodafone Group's US businesses for the six month period to 30 September 1999 were £822m and £34m, respectively, and for the year ended 31 March 2000 were £2,585m and £100m, respectively. The assets of the US businesses contributed to the Verizon Wireless joint venture have been treated as having been disposed, and Vodafone Group's interest in the new venture is included within fixed asset investments. On 12 April 2000, Vodafone Group received clearance from the European Commission for the acquisition of Mannesmann AG. Vodafone Group has accounted for the transaction as an acquisition under UK GAAP in accordance with Financial Reporting Standard 6, 'Acquisitions and Mergers'. Turnover and operating loss from acquisitions excludes the results of the acquired Mannesmann operations that have been sold during the period, or are held for resale at 30 September 2000. These excluded operations include Atecs Mannesmann, Mannesmann's watches and tubes businesses, Orange, Infostrada, tele.ring and Ipulsys. Businesses held for resale at 30 September 2000 are included in the balance sheet within current asset investments. On 27 July 2000, Vodafone AirTouch Plc was renamed Vodafone Group Plc. 2 Segmental analysis The Group's business is principally the supply of mobile telecommunications services and products. Other operations are primarily fixed line telecommunications businesses acquired as part of the acquisition of Mannesmann AG. Analysis of turnover and total Group operating profit by geographical region and class of business is set out below. Six months to Six months to Year to 30 September 30 September 31 March 2000 1999 2000 £m £m £m Turnover Mobile telecommunications: Continental Europe 4,423 766 1,705 United Kingdom 1,655 1,313 2,901 United States 3 822 2,585 Asia Pacific 341 257 565 Middle East and Africa 147 36 117 ------- ------- ------- 6,569 3,194 7,873 Other operations: Continental Europe 450 - - ------- ------- ------- 7,019 3,194 7,873 ====== ====== ====== Total Group operating profit/(loss) (before goodwill and exceptional items) Mobile telecommunications: Continental Europe 1,362 382 955 United Kingdom 361 343 706 United States 584 196 541 Asia Pacific 122 41 188 Middle East and Africa 99 53 148 ------- ------- ------- 2,528 1,015 2,538 Other operations: Continental Europe (108) - - ------- ------- ------- 2,420 1,015 2,538 Subsidiary undertakings 1,466 718 1,685 Share of joint ventures and associated undertakings 954 297 853 Amortisation of goodwill (5,593) (574) (1,712) Exceptional reorganisation costs (137) (29) (30) ------- ------- ------- Total Group operating (loss)/profit (3,310) 412 796 ====== ====== ====== 3 Taxation Six months to Six months to Year to 30 September 30 September 31 March 2000 1999 2000 £m £m £m United Kingdom taxation 62 76 128 ------- ------- ------- International taxation: Subsidiary undertakings 352 125 366 Share of joint ventures and associated undertakings 167 75 191 ------- ------- ------- 519 200 557 ------- ------- ------- 581 276 685 ====== ====== ===== 4 Equity dividends An interim dividend of 0.688p (1999 - 0.655p) per share will be paid on 9 February 2001 to shareholders on the register of members on 24 November 2000. Shareholders may take a scrip dividend alternative to the cash dividend in accordance with the rules of Vodafone Group Plc's Scrip Dividend Scheme. The ex-dividend date is 20 November 2000 and the last date for elections or variations to mandates under the Scrip Dividend Scheme is 9 January 2001. 5 Earnings per share Six months Six months to Year to to 30 September 31 March 30 September 1999 2000 2000 £m £m £m (Loss)/earnings for basic (loss)/earnings per share (4,662) (72) 487 Amortisation of goodwill 5,593 574 1,712 Exceptional reorganisation costs, net of attributable taxation 82 18 19 Disposals of fixed asset investments, net of attributable taxation (5) (1) (954) Exceptional finance costs, net of attributable taxation - - 12 ------- ------- ------- Earnings for adjusted earnings per share 1,008 519 1,276 ====== ====== ====== Weighted average number of shares (millions): Basic and adjusted 59,362 23,096 27,100 6 Reconciliation of operating (loss)/profit to net cash inflow from operating activities Six months Six months to Year to to 30 September 31 March 30 September 1999 2000 2000 £m £m £m Operating (loss)/profit (3,130) 434 981 Depreciation and amortisation 5,242 541 1,432 Increase in stocks (110) (5) (65) Increase in debtors (371) (201) (271) Increase in creditors 257 197 433 ------- ------- ------- 1,888 966 2,510 ====== ====== ====== 7 Net cash outflow for capital expenditure and financial investment Six months Six months to Year to to 30 September 31 March 30 September 1999 2000 2000 £m £m £m Purchase of intangible fixed assets (11,470) (62) (185) Purchase of tangible fixed assets (1,348) (644) (1,848) Purchase of investments (189) (16) (17) Disposal of interests in tangible fixed assets 179 3 294 Disposal of investments 485 4 991 Loans to acquired businesses (909) - - Loans repaid by acquired businesses 337 - - Loans repaid by associated undertakings - 1 9 ------- ------- ------- (12,915) (714) (756) ====== ====== ====== 8 Net cash inflow/(outflow) for acquisitions and disposals Six months Six months to Year to to 30 September 31 March 30 September 1999 2000 2000 £m £m £m Purchase of subsidiary (86) (3,493) (4,062) undertakings Net cash/(overdrafts) acquired with subsidiary undertakings 580 (1) 4 Proceeds on formation of joint 2,544 - - venture Purchase of interests in associated undertakings (35) (479) (717) Purchase of customer bases (15) (2) (9) Disposal of interests in joint ventures and associated 1,483 9 28 undertakings Disposal of interests in acquired businesses 14,924 - - ------- ------- ------- 19,395 (3,966) (4,756) ====== ====== ====== 9 Analysis of net debt Other Acquisi- non-cash At 1 tions changes & At 30 April Cash (excluding exchange September 2000 flow cash & movements 2000 £m £m overdrafts) £m £m £m Liquid resources 30 (24) - 6 12 ------- ------ ------- ------ ------ Cash at bank and in hand 159 970 - 4 1,133 Bank overdrafts (43) (3) - (4) (50) ------- ------ ------- ------ ------ 116 967 - - 1,083 ------- ------ ------- ------ ------ Debt due within one year (other than bank (751) 6,489 (6,947) (38) (1,247) overdrafts) Debt due after one year (6,038) (732) (6,159) (97) (13,026) ------- ------ ------- ------ ------ (6,789) 5,757 (13,106) (135) (14,273) ------- ------ ------- ------ ------ (6,643) 6,700 (13,106) (129) (13,178) ====== ===== ====== ====== ====== Included within net debt are bond issues with a maturity profile as follows: £m Maturing in: One year or less 1,177 More than one year but not more than two 3,252 years More than two years but not more than five 3,505 years More than five years 5,784 -------- 13,718 ======== 10 Summary of differences between UK and US GAAP The interim results have been prepared in accordance with UK generally accepted accounting principles ('UK GAAP'), which differ in certain significant respects from US GAAP. A description of the relevant accounting principles which differ materially is given on page 59 of Vodafone Group Plc's Annual Report & Accounts for the year ended 31 March 2000. The effects of these differing accounting principles are as follows: Six months Six months to Year to to 30 September 31 March 30 September 1999 2000 2000 £m £m £m UK GAAP net (loss)/income (4,662) (72) 487 Items (increasing)/decreasing net loss: Goodwill amortisation (2,334) (158) (425) Reorganisation costs 17 25 25 Profit on disposal of fixed asset investments - - 1 Income taxes 2,203 173 439 Minority interests 22 11 35 Other (3) (3) (9) ------- ------- ------ Net (loss)/income in accordance with US GAAP (4,757) (24) 553 ====== ======= ======= US GAAP basic (loss)/earnings per ordinary share (8.01)p (0.10)p 2.04p 11 Pro forma proportionate information The tables of unaudited pro forma customer and financial information on pages 27 and 28 are presented on a proportionate basis. The basis of preparation of pro forma information is given below. Proportionate presentation is not required by UK GAAP and is not intended to replace the consolidated financial statements prepared in accordance with UK GAAP. 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. Proportionate customer information is presented for the Group's mobile telecommunications businesses only. 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. Proportionate presentation is a pro rata consolidation, which reflects the Group's share of turnover and expenses in both its consolidated and unconsolidated entities. Proportionate results are calculated by multiplying the Group's ownership interest in each entity by each entity's results. 11 Pro forma proportionate information (continued) Proportionate information includes results from the Group's equity accounted investments and investments held at cost. The Group does not have control over the turnover, expenses or cash flow of these investments and is only entitled to cash from dividends received from these entities. The Group does not own the underlying assets of these investments. Basis of preparation of unaudited pro forma information Pro forma financial information for the six months ended 30 September 1999 and the year ended 31 March 2000 has been derived from the unaudited and audited consolidated financial statements of the Group for the relevant periods, the unaudited financial results of AirTouch Communications, Inc., for the three month period ended 30 June 1999 and the unaudited financial results of Mannesmann AG for the year ended 31 March 2000. The financial results of Mannesmann for the relevant periods have been adjusted to exclude the results of businesses sold or held for resale at 30 September 2000. The financial statements of AirTouch and Mannesmann, previously prepared under US GAAP and German GAAP, respectively, have been adjusted to conform materially with Vodafone Group's accounting policies under UK GAAP. The pro forma adjustments for the six month period ended 30 September 1999 and the year ended 31 March 2000 have been determined as if the merger with AirTouch Communications, Inc., and the acquisition of Mannesmann AG took place on 1 April 1999. Pro forma financial information for the six months ended 30 September 2000 has been derived from the Group's unaudited consolidated financial results for that period and the unaudited financial results of Mannesmann AG, excluding the results of businesses sold or held for resale at 30 September 2000, for the period from 1 April 2000 to 12 April 2000. Pro forma adjustments include assumptions made by Vodafone Group's management that it believes to be reasonable. The unaudited pro forma financial information does not take into account any synergies, including cost savings, or any severance and restructuring costs, which may or are expected to occur as a result of the merger with AirTouch or the acquisition of Mannesmann, except insofar as such costs and savings have been included in the financial statements of the Vodafone Group for each of the periods presented. Pro forma proportionate customer At At At information (thousands)* 30 September 30 September 31 March 2000 1999 2000 Continental Europe 37,426 21,958 28,632 United Kingdom 10,240 6,865 8,791 United States 11,212 9,138 10,553 Asia Pacific 4,904 3,421 4,133 Middle East and Africa 1,711 916 1,218 ------- ------- ------- 65,493 42,298 53,327 ======= ======= ======= * Proportionate customer information is presented for the Group's mobile telecommunications businesses only, excluding paging customers. Pro forma proportionate financial Six months Six months to Year to information to 30 September 31 March 30 September 1999 2000 2000 £m £m £m Pro forma proportionate turnover Mobile telecommunications: Continental Europe 4,647 3,819 8,063 United Kingdom 1,662 1,350 2,945 United States 2,414 1,751 3,650 Asia Pacific 1,234 582 1,537 Middle East and Africa 213 178 395 ------- ------- ------- 10,170 7,680 16,590 Other operations: Continental Europe 372 407 825 ------- ------ ------- 10,542 8,087 17,415 ====== ====== ====== Pro forma proportionate EBITDA** Mobile telecommunications: Continental Europe 1,587 1,445 2,906 United Kingdom 495 448 934 United States 815 576 1,145 Asia Pacific 285 125 377 Middle East and Africa 100 63 142 ------- ------- ------- 3,282 2,657 5,504 Other operations: Continental Europe 6 6 17 ------- ------- ------- Pro forma proportionate EBITDA** 3,288 2,663 5,521 Less: depreciation and amortisation, (1,078) (831) (1,715) excluding goodwill ------- ------- ------ Mobile telecommunications 2,302 1,928 3,977 Other operations (92) (96) (171) Pro forma proportionate total Group operating profit before goodwill and exceptional items 2,210 1,832 3,806 ======= ======= ======= ** Proportionate EBITDA (earnings before interest, tax, depreciation and amortisation) is defined as operating profit before exceptional reorganisation costs plus depreciation and amortisation of subsidiary undertakings, joint ventures, associated undertakings and investments, proportionate to equity stakes. 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. 12 Other information The Interim Report will be sent to shareholders and copies will be available to the public, on request, from the Company's Registered Office at The Courtyard, 2-4 London Road, Newbury, Berkshire, RG14 1JX. The Group currently anticipates announcing its preliminary results for the year ending 31 March 2001 in May 2001. For further information contact:- Terry Barwick, Director of Corporate Affairs Tim Brown, Director of Investor Relations Melissa Stimpson, Senior Investor Relations Manager Mike Caldwell, Director of Corporate Communications Tel: +44 (0) 1635 33251 Lulu Bridges/Peter Willetts Tavistock Communications Tel: +44 (0) 207 600 2288 Statements in this document relating to future status or circumstances, including statements regarding future performance, costs, revenues, cash flows, earnings, acquisitions, divestments, growth, market share, wireless penetration rates, growth in internet use and other trend projections and the synergistic benefits of the merger with AirTouch, the acquisition of Mannesmann and the creation of Verizon Wireless, are forward-looking statements. These statements may generally, but not always, be identified by the use of words such as 'anticipates', 'may', 'should', 'expects', 'estimates', 'believes' or similar expressions. 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 can be no assurance that actual results will not differ materially from those expressed or implied by these forward-looking statements due to many factors, many of which are outside Vodafone Group's control, including the ability to obtain regulatory approvals (including the award of new licences and in connection with pending acquisitions and dispositions) without onerous conditions, the risk of negative impacts on Vodafone Group's credit ratings, the ability to achieve anticipated cost savings or revenue enhancements in connection with the merger with AirTouch, the acquisition of Mannesmann and the creation of Verizon Wireless, general economic conditions, changes in exchange rates, competition, technical difficulties and the need for increased capital expenditure (such as that resulting from increased demand for usage, new business opportunities, new licences and deployment of new technologies) and the ability to realise benefits from entering into partnerships for developing data and internet services. 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