Interim Results - Part 2

Vodafone Group Plc 15 November 2005 VODAFONE GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2005 ******* PART II ******* CONSOLIDATED INCOME STATEMENT Six months to Six months to Year ended 30 September 30 September 31 March 2005 2004 2005 £m £m £m Revenue 18,251 16,742 34,073 Cost of sales (11,408) (10,410) (21,464) ---------- ---------- ---------- Gross profit 6,843 6,332 12,609 Selling and distribution expenses (1,167) (1,013) (2,046) Administrative expenses (1,871) (1,638) (3,526) Share of result in associated undertakings 1,187 1,078 1,980 Other income and expense (515) - (475) ---------- ---------- ---------- Operating profit 4,477 4,759 8,542 Non-operating income and expense 1 16 6 Investment income 259 321 581 Financing costs (630) (556) (1,178) ---------- ---------- ---------- Profit before taxation 4,107 4,540 7,951 Tax on profit (1,289) (857) (1,433) ---------- ---------- ---------- Profit for the period 2,818 3,683 6,518 ========== ========== ========== Attributable to: - Equity shareholders 2,775 3,615 6,410 - Minority interests 43 68 108 Earnings per share: - Basic 4.36p 5.40p 9.68p - Diluted 4.35p 5.39p 9.65p CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Six months to Six months to Year ended 30 September 30 September 31 March 2005 2004 2005 £m £m £m Gains on revaluation of available-for-sale investments 572 28 106 Exchange differences on translation of foreign operations 448 2,067 1,488 Actuarial losses on defined benefit pension schemes - (38) (79) ---------- ---------- ---------- Net income recognised directly in equity 1,020 2,057 1,515 Profit for the period 2,818 3,683 6,518 ---------- ---------- ---------- Total recognised income and expense relating to the period 3,838 5,740 8,033 ========== ========== ========== Attributable to: - Equity shareholders 3,784 5,706 7,958 - Minority interests 54 34 75 CONSOLIDATED BALANCE SHEET 30 September 30 September 31 March 2005 2004 2005 £m £m £m Non-current assets Intangible assets 97,792 97,958 97,139 Property, plant and equipment 17,844 17,230 17,451 Investments in associated undertakings 22,063 20,921 20,234 Other investments 1,859 1,157 1,181 Deferred tax assets 973 1,195 1,184 Trade and other receivables 236 267 221 ---------- ---------- ---------- 140,767 138,728 137,410 ---------- ---------- ---------- Current assets Inventory 536 424 440 Taxation recoverable 68 - 38 Trade and other receivables 6,068 5,680 5,449 Cash and cash equivalents 1,400 4,704 3,769 ---------- ---------- ---------- 8,072 10,808 9,696 ---------- ---------- ---------- Total assets 148,839 149,536 147,106 ========== ========== ========== Equity Called up share capital 4,292 4,283 4,286 Share premium account 52,401 52,202 52,284 Own shares held (7,608) (2,873) (5,121) Additional paid in capital 100,100 100,020 100,081 Accumulated other recognised income and expense 2,790 2,324 1,781 Retained losses (38,204) (41,043) (39,511) ---------- ---------- ---------- Total equity shareholders' funds 113,771 114,913 113,800 Minority interests (115) 185 (152) ---------- ---------- ---------- Total equity 113,656 115,098 113,648 ---------- ---------- ---------- Non-current liabilities Long-term borrowings 13,945 13,519 13,190 Deferred tax liabilities 5,241 5,336 4,849 Post employment benefits 128 210 124 Provisions for other liabilities and charges 340 358 319 Other payables 469 281 390 ---------- ---------- ---------- 20,123 19,704 18,872 ---------- ---------- ---------- Current liabilities Short-term borrowings 2,026 2,670 2,003 Current taxation liabilities 4,639 4,522 4,353 Trade payables and other payables 8,212 7,387 8,002 Provisions for other liabilities and charges 183 155 228 ---------- ---------- ---------- 15,060 14,734 14,586 ---------- ---------- ---------- Total equity and liabilities 148,839 149,536 147,106 ========== ========== ========== CONSOLIDATED CASH FLOW STATEMENT Six months Six months Year to to ended 30 September 30 September 31 March 2005 2004 2005 £m £m £m Net cash flows from operating activities 6,084 5,827 10,979 ---------- ---------- ---------- Cash flows from investing activities Purchase of interests in subsidiary undertakings and jointly controlled entities, net of cash acquired (1,887) (2,391) (2,461) Disposal of interests in subsidiary undertakings, net of cash disposed - 226 444 Purchase of intangible fixed assets (252) (329) (699) Purchase of property, plant and equipment (2,328) (2,204) (4,279) Purchase of investments (1) (10) (19) Disposal of property, plant and equipment 10 18 68 Disposal of investments 1 4 22 Loans to businesses sold or acquired businesses held for sale - - 110 Dividends received from associated undertakings 375 947 1,896 Dividends received from investments 41 18 19 Interest received 135 194 339 ---------- ---------- ---------- Net cash flows from investing activities (3,906) (3,527) (4,560) ---------- ---------- ---------- Cash flows from financing activities Issue of ordinary share capital and re-issue of treasury shares 274 40 115 Proceeds from issue of borrowings 765 - - Repayment of borrowings (1,121) (683) (1,824) Loans repaid to associated undertakings (47) (2) (2) Purchase of treasury shares (2,750) (1,757) (4,053) Equity dividends paid (1,382) (728) (1,991) Dividends paid to minority shareholders in subsidiary undertakings (21) (18) (32) Interest paid (345) (430) (736) Interest element of finance leases (4) (4) (8) ---------- ---------- ---------- Net cash flows from financing activities (4,631) (3,582) (8,531) ---------- ---------- ---------- Net decrease in cash and cash equivalents (2,453) (1,282) (2,112) Cash and cash equivalents at beginning of the period 3,726 5,809 5,809 Exchange gain on cash and cash equivalents 90 55 29 ---------- ---------- ---------- Cash and cash equivalents at end of the period 1,363 4,582 3,726 ========== ========== ========== NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2005 1 Basis of preparation The unaudited Interim Consolidated Financial Statements for the six months ended 30 September 2005, which were approved by the Board of Directors on 15 November 2005, do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. Financial information for the year ended 31 March 2005 and for the six months ended 30 September 2004, presented as comparative figures in this report, has been restated from UK GAAP in accordance with the Group's best knowledge of 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 on the basis set out in the accounting policies below. This restated IFRS information was first published in press releases issued on 20 January 2005, 18 March 2005 and 12 July 2005. The IFRS information for the year ended 31 March 2005 was derived by restatement of information extracted from the statutory financial statements prepared under UK GAAP on the historical cost basis. Those statutory financial statements were filed with the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain statements under section 237(2) or 237(3) of the UK Companies Act 1985. The restated IFRS financial information provided for the year ended 31 March 2005 does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. However, they are anticipated to form the comparative period for the statutory accounts for the year ending 31 March 2006, the Group's first Annual Report to be prepared in accordance with IFRS. The unaudited interim results for the six months ended 30 September 2005, and for the six months ended 30 September 2004, have been prepared by the Group in accordance with IAS 34 'Interim Financial Reporting', using its best knowledge of the expected International Financial Reporting Standards and accounting policies that will be applied when the Group prepares its first set of IFRS financial statements as at and for the year ending 31 March 2006. There is, however, a possibility that some changes to these policies will be necessary when preparing the full annual financial statements as the Interim Consolidated Financial Statements have been prepared using expected IFRS that is anticipated to be applicable and adopted for use in the EU at 31 March 2006, which is not known with certainty at the time of preparing these Interim Consolidated Financial Statements. Therefore, until such time, the possibility that the opening balance sheet and the interim IFRS financial information presented may require amendment cannot be excluded. The significant accounting policies used in preparing this information are set out in note 2. The Interim Consolidated Financial Statements have been prepared in accordance with IFRS, which differs in certain material respects from US GAAP (see note 15), and on a historical cost basis except for certain financial and equity instruments that have been measured at fair value. The preparation of the Interim Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the balance sheet date, and the reported amounts of revenue and expenses during the reporting period. Actual results could vary from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Amounts in the Interim Consolidated Financial Statements are stated in pounds sterling (£), unless otherwise stated. 2 Significant accounting policies Basis of consolidation The interim results incorporate the financial statements of the Company and entities controlled, both unilaterally and jointly, by the Company. Accounting for subsidiaries A subsidiary is an entity controlled by the Company. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Minority interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minority's share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority's share of changes in equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses. Business combinations The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree's identifiable assets and liabilities are recognised at their fair values at the acquisition date. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. The interest of minority shareholders in the acquiree is initially measured at the minority's proportion of the net fair value of the assets, liabilities and contingent liabilities recognised. Interests in joint ventures A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control, that is when the strategic financial and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control. The Group reports its interests in jointly controlled entities using proportionate consolidation. The Group's share of the assets, liabilities, income, expenses and cash flows of jointly controlled entities are combined with the equivalent items in the interim results on a line-by-line basis. Any goodwill arising on the acquisition of the Group's interest in a jointly controlled entity is accounted for in accordance with the Group's accounting policy for goodwill arising on the acquisition of a subsidiary. Investments in associates An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. The results and assets and liabilities of associates are incorporated in the interim results using the equity method of accounting. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group's share of the net assets of the associate, less any impairment in the value of the investment. Losses of an associate in excess of the Group's interest in that associate are not recognised. Additional losses are provided for, and a liability is recognised, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment. Intangible assets Goodwill Goodwill arising on the acquisition of an entity represents the excess of the cost of acquisition over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the entity recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is not subject to amortisation but is tested annually for impairment. Negative goodwill arising on an acquisition is recognised directly in the income statement. On disposal of a subsidiary or a jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss recognised in the income statement on disposal. Goodwill arising before the date of transition to IFRS, on 1 April 2004, has been retained at the previous UK GAAP amounts subject to being tested for impairment at that date. Licence and spectrum fees Licence and spectrum fees are stated at cost less accumulated amortisation. The amortisation periods range from 3 to 25 years and are determined primarily by reference to the unexpired licence period, the conditions for licence renewal and whether licences are dependent on specific technologies. Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives from the commencement of service of the network. The licences of the Group's associated undertaking, Verizon Wireless, are indefinite lived assets as they are subject to perfunctory renewal. Accordingly they are not subject to amortisation but are tested annually for impairment, or when indicators exist that the carrying value is not recoverable. Computer software Computer software licences are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. These costs are amortised over their estimated useful lives, being 3 to 5 years. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that are expected to generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include software development employee costs and directly attributable overheads. Software integral to a related item of hardware equipment is accounted for as property, plant and equipment. Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Research and development expenditure Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-generated intangible asset arising from the Group's development activity is recognised only if all of the following conditions are met: - an asset is created that can be separately identified; - it is probable that the asset created will generate future economic benefits; and - the development cost of the asset can be measured reliably. Internally-generated intangible assets are amortised on a straight-line basis over their estimated useful lives. Where no internally-generated intangible asset can be recognised, development expenditure is charged to the income statement in the period in which it is incurred. Other intangible assets Other intangible assets with finite lives are stated at cost less accumulated amortisation and impairment losses. Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets from the date they are available for use. The estimated useful lives are as follows: Brands 1 - 10 years Customer bases 3 - 8 years Property, plant and equipment Land and buildings held for use are stated in the balance sheet at their cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Assets in the course of construction are carried at cost, less any recognised impairment loss. Depreciation of these assets commences when the assets are ready for their intended use. Fixtures and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is charged so as to write off the cost or valuation of assets, other than land and properties under construction using the straight-line method, over their estimated useful lives as follows: Freehold buildings 25 - 50 years Leasehold premises the term of the lease Equipment, fixtures and fittings 3 - 10 years Depreciation is not provided on freehold land. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter the term of the relevant lease. The gain or loss arising on the disposal or retirement of an item property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement. Impairment of assets Indefinite lived assets Goodwill and other assets that have an indefinite useful life are not subject to amortisation but are tested for impairment annually or whenever there is an indication that the asset may be impaired. For the purpose of impairment testing, assets are grouped at the lowest levels for which there are separately identifiable cash flows, known as cash-generating units. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. Property, plant and equipment and finite lived intangible assets At each balance sheet date, the Group reviews the carrying amounts of its property, plant and equipment and finite lived intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the income statement. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the income statement. Inventory Inventory is stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Revenue Group revenue comprises revenue of the Company and its subsidiary undertakings plus the Group's share of the revenue of its joint ventures and excludes sales taxes and discounts. Revenue from mobile telecommunications comprises amounts charged to customers in respect of monthly access charges, airtime usage, messaging, the provision of other mobile telecommunications services, including data services and information provision, fees for connecting users of other fixed line and mobile networks to the Group's network, revenue from the sale of equipment, including handsets and revenue arising from agreements entered into with partner networks. Access charges and airtime used by contract customers are invoiced and recorded as part of a periodic billing cycle and recognised as revenue over the related access period, with unbilled revenue resulting from services already provided from the billing cycle date to the end of each period accrued and unearned revenue from services provided in periods after each accounting period deferred. Revenue from the sale of prepaid credit is deferred until such time as the customer uses the airtime, or the credit expires. Other revenue from mobile telecommunications primarily comprises equipment sales, which are recognised upon delivery to customers, and customer connection revenue. Customer connection revenue is recognised together with the related equipment revenue to the extent that the aggregate equipment and connection revenue does not exceed the fair value of the equipment delivered to the customer. Any customer connection revenue not recognised together with related equipment revenue is deferred and recognised over the period in which services are expected to be provided to the customer. Revenue from data services and information provision is recognised when the Group has performed the related service and, depending on the nature of the service, is recognised either at the gross amount billed to the customer or the amount receivable by the Group as commission for facilitating the service. Revenue from other businesses primarily comprises amounts charged to customers of the Group's fixed line businesses, mainly in respect of access charges and line usage, invoiced and recorded as part of a periodic billing cycle. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the asset to the lessee. All other leases are classified as operating leases. Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments as determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in the income statement. Rentals payable under operating leases are charged to the income statement on a straight line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight line basis over the lease term. Foreign currencies In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rate prevailing on the date when fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the income statement for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the income statement for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity. For the purpose of presenting Consolidated Financial Statements, the assets and liabilities of entities with a functional currency other than sterling are expressed in sterling using exchange rates prevailing on the balance sheet date. Income and expense items and cash flows are translated at the average exchange rates for the period and exchange differences arising are recognised directly in equity. Such translation differences are recognised in the income statement in the period in which a foreign operation is disposed of. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated accordingly. In respect of all foreign operations, any exchange differences that have arisen before 1 April 2004, the date of transition to IFRS, are deemed to be nil and will be excluded from the determination of any subsequent profit or loss on disposal. Borrowing costs All borrowing costs are recognised in the income statement in the period in which they are incurred. Retirement benefits For defined benefit retirement plans, the difference between the fair value of the plan assets and the present value of the plan liabilities is recognised as an asset or liability on the balance sheet. Actuarial gains and losses arising in the year are taken to the Statement of Recognised Income and Expense. For this purpose, actuarial gains and losses comprise both the effects of changes in actuarial assumptions and experience adjustments arising because of differences between the previous actuarial assumptions and what has actually occurred. Other movements in the net surplus or deficit are recognised in the income statement, including the current service cost, any past service cost and the effect of any curtailment or settlements. The interest cost less the expected return on assets is also charged to the income statement. The amount charged to the income statement in respect of these plans is included within operating costs or in the Group's share of the results of equity accounted operations as appropriate. The values attributed to plan liabilities are assessed in accordance with the advice of independent qualified actuaries. The Group's contributions to defined contribution pension plans are charged to the income statement as they fall due. Cumulative actuarial gains and losses as at 1 April 2004, the date of transition to IFRS, have been recognised in the balance sheet. Taxation Income tax expense represents the sum of the current tax payable and deferred tax. The current tax payable or recoverable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because some items of income or expense are taxable or deductible in different years or may never be taxable or deductible. The Group's liability for current tax is calculated using UK and foreign tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable in the future arising from temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. It is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised, based on tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they either relate to income taxes levied by the same taxation authority on either the same taxable entity or on different taxable entities which intend to settle the current tax assets and liabilities on a net basis. Tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the tax is also recognised directly in equity. Financial instruments Financial assets and financial liabilities, in respect of financial instruments, are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. The Group has applied the requirements of IFRS to financial instruments for all periods presented and has not taken advantage of any exemptions available to first time adopters of IFRS in this respect. Trade receivables Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. Investments Investments are recognised and derecognised on a trade date where a purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at cost, including transaction costs. Investments are classified as either held for trading or available for-sale, and are measured at subsequent reporting dates at fair value. Where securities are held for trading purposes, gains and losses arising from changes in fair value are included in net profit or loss for the period. For available for-sale investments, gains and losses arising from changes in fair value are recognised directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in the net profit or loss for the period. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and call deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Trade payables Trade payables are not interest bearing and are stated at their nominal value. Financial liabilities and equity instruments Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below. Capital market and bank borrowings Interest-bearing loans and overdrafts are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds net of transaction costs and the settlement or redemption of borrowings is recognised over the term of the borrowing. Equity instruments Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. Derivative financial instruments and hedge accounting The Group's activities expose it to the financial risks of changes in foreign exchange rates and interest rates. The use of financial derivatives is governed by the Group's policies approved by the board of directors, which provide written principles on the use of financial derivatives consistent with the Group's risk management strategy. The Group does not use derivative financial instruments for speculative purposes. Derivative financial instruments are initially measured at fair value on the contract date, and are subsequently re-measured to fair value at each reporting date. The Group designates certain derivatives as either: i. hedges of the change of fair value of recognised assets and liabilities ('fair value hedges'); or ii. hedges of highly probable forecast transactions ('cash flow hedges'); or iii. hedges of net investments in foreign operations. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Fair value hedges The Group's policy is to use derivative instruments (primarily interest rate swaps) to convert a proportion of its fixed rate debt to floating rates in order to hedge the interest rate risk arising, principally, from capital market borrowings. The Group designates these as fair value hedges of interest rate risk with changes in fair value of the hedging instrument recognised in the income statement for the period together with the changes in the fair value of the hedged item due to the hedged risk, to the extent the hedge is effective. The ineffective portion is recognised immediately in the income statement. Cash flow hedges Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly in equity and the ineffective portion is recognised immediately in the income statement. The Group's policy with respect to hedging the foreign currency risk of a firm commitment is to designate it as a cash flow hedge. If the cash flow hedge of a firm commitment or forecasted transaction results in the recognition of an asset or a liability, then at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognised in the income statement in the same period in which the hedged item affects the income statement. Net investment hedges Exchange differences arising from the translation of the net investment in foreign operations are recognised directly in equity. Gains and losses on those hedging instruments designated as hedges of the net investments in foreign operations are recognised in equity to the extent that the hedging relationship is effective. Any ineffectiveness is recognised immediately in the income statement for the period. Gains and losses accumulated in the translation reserve are included in the income statement when the foreign operation is disposed of. Provisions Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the directors' best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material. Share-based payments The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the shares that will eventually vest and adjusted for the effect of non market-based vesting conditions. Fair value is measured using a binomial pricing model which is calibrated using a Black-Scholes framework. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The Group has applied the provisions of IFRS 2: Share-based Payments to all equity instruments granted but not fully vested at 1 April 2004, the date of transition to IFRS. Advertising costs Expenditure on advertising is written off in the year in which it is incurred. 3 Segmental and other analyses The Group's principal business is the supply of mobile telecommunications services and products. Other operations primarily comprise fixed line telecommunications businesses. Analyses of revenue and operating profit by geographical region and class of business are as follows: Six months ended 30 September 2005 Revenue Less: between Intra- (2) Inter- mobile Segment Joint segment Common segment Net re- and other Group revenue Subsidiaries ventures revenue functions revenue venue operations revenue £m £m £m £m £m £m £m £m £m Mobile telecommunications: Germany(1) 2,913 2,913 - - (29) 2,884 (52) 2,832 Italy(1) 2,240 - 2,240 - (25) 2,215 - 2,215 Japan(1) 3,704 3,704 - - (1) 3,703 - 3,703 Spain(1) 1,968 1,968 - - (59) 1,909 - 1,909 UK(1) 2,568 2,568 - - (29) 2,539 - 2,539 Americas(1) - - - - - - - - Other mobile (1) 4,441 3,826 632 (17) (53) 4,388 - 4,388 Common functions 70 (8) 62 - 62 ------- ------- ------- ------- ------- ------- ------- ------- -------- Total 17,834 14,979 2,872 (17) 70 (204) 17,700 (52) 17,648 Other operations: Germany(1) 622 622 - - - 622 (19) 603 Other(1) - - - - - - - - ------- ------- ------- ------- ------- ------- ------- ------- -------- Total 622 622 - - - 622 (19) 603 ------- ------- ------- ------- ------- ------- ------- ------- -------- 18,456 15,601 2,872 (17) 70 (204) 18,322 (71) 18,251 ======= ======= ======= ======= ======= ======= ======= ======= ======== (3) Items not reflecting (2) underlying Adjusted Segment Joint Common Operating business operating result Subsidiaries ventures functions Associates profit performance profit £m £m £m £m £m £m £m £m Mobile telecommunications: Germany(1) 775 775 - - 775 - 775 Italy(1) 923 - 923 - 923 - 923 Japan(1) 191 191 - - 191 - 191 Spain(1) 529 529 - - 529 - 529 UK(1) 320 320 - - 320 - 320 Americas(1) - - - 772 772 - 772 Other mobile (1) 361 191 170 432 793 496 1,289 Common functions 153 153 - 153 ------ ------ ------ ------ ------ ------ ------ ------ Total 3,099 2,006 1,093 153 1,204 4,456 496 4,952 Other operations: Germany(1) 38 38 - - 38 - 38 Other(1) - - - (17) (17) - (17) ------ ------ ------ ------ ------ ------ ------ ------ Total 38 38 - (17) 21 - 21 ------ ------ ------ ------ ------ ------ ------ ------ 3,137 2,044 1,093 153 1,187 4,477 496 4,973 ====== ====== ====== ====== ====== ====== ====== ====== (1) Reportable segments (2) Common functions represents revenue from Partner Markets and unallocated central Group income and expenses (3) Comprises £515 million in respect of the impairment to the carrying value of goodwill relating to Vodafone Sweden offset by £19 million of non-operating income in relation to the Group's associated undertakings Six months ended 30 September 2004 Revenue Less: between Intra- (2) Inter- mobile Segment Joint segment Common segment Net re- and other Group revenue Subsidiaries ventures revenue functions revenue venue operations revenue £m £m £m £m £m £m £m £m £m Mobile telecommunications: Germany(1) 2,808 2,808 - - (25) 2,783 (51) 2,732 Italy(1) 2,091 - 2,091 - (19) 2,072 - 2,072 Japan(1) 3,689 3,689 - - - 3,689 - 3,689 Spain(1) 1,554 1,554 - - (47) 1,507 - 1,507 UK(1) 2,563 2,563 - - (24) 2,539 - 2,539 Americas(1) - - - - - - - - Other mobile (1) 3,712 3,176 548 (12) (45) 3,667 - 3,667 Common functions 58 58 58 ------- ------- ------- ------- ------- ------- ------- ------- -------- Total 16,417 13,790 2,639 (12) 58 (160) 16,315 (51) 16,264 Other operations: Germany(1) 505 505 - - - 505 (27) 478 Other(1) - - - - - - - - ------- ------- ------- ------- ------- ------- ------- ------- -------- Total 505 505 - - - 505 (27) 478 ------- ------- ------- ------- ------- ------- ------- ------- -------- 16,922 14,295 2,639 (12) 58 (160) 16,820 (78) 16,742 ======= ======= ======= ======= ======= ======= ======= ======= ======== Items not reflecting (2) underlying Adjusted Segment Joint Common Operating business operating result Subsidiaries ventures functions Associates profit performance profit £m £m £m £m £m £m £m £m Mobile telecommunications: Germany(1) 779 779 - - 779 - 779 Italy(1) 844 - 844 - 844 - 844 Japan(1) 423 423 - - 423 - 423 Spain(1) 397 397 - - 397 - 397 UK(1) 396 396 - - 396 - 396 Americas(1) - - - 738 738 - 738 Other mobile (1) 850 717 133 346 1,196 - 1,196 Common functions (25) (25) - (25) ------ ------ ------ ------ ------ ------ ------ ------ Total 3,689 2,712 977 (25) 1,084 4,748 - 4,748 Other operations: Germany(1) 17 17 - - 17 - 17 Other(1) - - - (6) (6) - (6) ------ ------ ------ ------ ------ ------ ------ ------ Total 17 17 - (6) 11 - 11 ------ ------ ------ ------ ------ ------ ------ ------ 3,706 2,729 977 (25) 1,078 4,759 - 4,759 ====== ====== ====== ====== ====== ====== ====== ====== (1) Reportable segments (2) Common functions represents revenue from Partner Markets and unallocated central Group income and expenses Year ended 31 March 2005 Revenue Less: between Intra- (2) Inter- mobile Segment Joint segment Common segment Net re- and other Group revenue Subsidiaries ventures revenue functions revenue venue operations revenue £m £m £m £m £m £m £m £m £m Mobile telecommunications: Germany(1) 5,684 5,684 - - (51) 5,633 (110) 5,523 Italy(1) 4,273 - 4,273 - (36) 4,237 - 4,237 Japan(1) 7,396 7,396 - - (1) 7,395 - 7,395 Spain(1) 3,261 3,261 - - (80) 3,181 - 3,181 UK(1) 5,065 5,065 - - (47) 5,018 - 5,018 Americas(1) - - - - - - - - Other mobile (1) 7,637 6,474 1,184 (21) (84) 7,553 - 7,553 Common functions 123 (5) 118 (1) 117 ------- ------- ------- ------- ------- ------- ------- ------- -------- Total 33,316 27,880 5,457 (21) 123 (304) 33,135 (111) 33,024 Other operations: Germany(1) 1,095 1,095 - - - 1,095 (46) 1,049 Other(1) - - - - - - - - ------- ------- ------- ------- ------- ------- ------- ------- -------- Total 1,095 1,095 - - - 1,095 (46) 1,049 ------- ------- ------- ------- ------- ------- ------- ------- -------- 34,411 28,975 5,457 (21) 123 (304) 34,230 (157) 34,073 ======= ======= ======= ======= ======= ======= ======= ======= ======== (3) Items not reflecting (2) underlying Adjusted Segment Joint Common Operating business operating result Subsidiaries ventures functions Associates profit performance profit £m £m £m £m £m £m £m £m Mobile telecommunications: Germany(1) 1,473 1,473 - - 1,473 - 1,473 Italy(1) 1,694 - 1,694 - 1,694 - 1,694 Japan(1) 664 664 - - 664 - 664 Spain(1) 775 775 - - 775 - 775 UK(1) 779 779 - - 779 - 779 Americas(1) - - - 1,354 1,354 - 1,354 Other mobile (1) 1,198 893 305 671 1,869 475 2,344 Common functions (85) (85) - (85) ------ ------ ------ ------ ------ ------ ------ ------ Total 6,583 4,584 1,999 (85) 2,025 8,523 475 8,998 Other operations: Germany(1) 64 64 - - 64 - 64 Other(1) - - - (45) (45) - (45) ------ ------ ------ ------ ------ ------ ------ ------ Total 64 64 - (45) 19 - 19 ------ ------ ------ ------ ------ ------ ------ ------ 6,647 4,648 1,999 (85) 1,980 8,542 475 9,017 ====== ====== ====== ====== ====== ====== ====== ====== (1) Reportable segments (2) Common functions represents revenue from Partner Markets and unallocated central Group income and expenses (3) Impairment to the carrying value of goodwill relating to Vodafone Sweden 4 Other income and expense Six months Six months Year to to ended 30 September 30 September 31 March 2005 2004 2005 £m £m £m Impairment of carrying value of goodwill of Vodafone Sweden 515 - 475 ======= ======= ======= The impairment of the carrying value of goodwill of Vodafone Sweden in the six months to 30 September 2005 results from the recent fierce competition in the Swedish market combined with onerous 3G licence obligations. Vodafone Sweden represents the Group's entire business operation in Sweden and forms part of the Group's Other Mobile Operations, which is a reportable segment. The recoverable amount of Vodafone Sweden is the fair value less costs to sell, reflecting the announcement on 31 October 2005 that the Group's 100% interest in Vodafone Sweden is to be sold for €1,035 million (£704 million). The sale is expected to be completed by 31 December 2005, subject to EU regulatory approval. 5 Taxation Six months Six months Year to to ended 30 September 30 September 31 March 2005 2004 2005 £m £m £m United Kingdom corporation tax charge at 30% (2004: 30%) Current year 41 67 339 Adjustments in respect of prior years - (26) (79) Overseas corporation tax Current year 1,019 1,086 1,949 Adjustments in respect of prior years (182) - (196) ------- ------- ------- Total current tax charge 878 1,127 2,013 ------- ------- ------- Deferred tax: United Kingdom deferred tax 41 165 168 Overseas deferred tax (1) 370 (435) (748) ------- ------- ------- Deferred tax charge/(credit) 411 (270) (580) ------- ------- ------- Total tax charge 1,289 857 1,433 ======= ======= ======= (1) Deferred tax for the year ended 31 March 2005 includes a £599 million credit (£303 million for the 6 months ended 30 September 2004) in respect of losses in Vodafone Holdings K.K. which became eligible for offset against the profits of Vodafone K.K. following the merger of the two entities on 1 October 2004. 6 Earnings per share Six months Six months Year to to ended 30 September 30 September 31 March 2005 2004 2005 Weighted average number of shares for basic EPS (millions) 63,694 66,915 66,196 Weighted average number of shares for diluted EPS (millions) 63,842 67,102 66,427 Basic earnings per share 4.36p 5.40p 9.68p Diluted basic earnings per share 4.35p 5.39p 9.65p Adjusted basic earnings per share 5.37p 4.95p 9.62p Adjusted diluted basic earnings per share 5.36p 4.93p 9.59p Six months Six months Year to to ended 30 September 30 September 31 March 2005 2004 2005 £m £m £m Earnings for basic and diluted earnings per share 2,775 3,615 6,410 Items not related to underlying business performance: - Other income and expense(1) 515 - 475 - Share of associated undertakings' non-operating income (19) - - - Non-operating income and expense (1) (16) (6) - Net financing costs in relation to the put option held by Telecom Egypt(2) 151 - 67 - Deferred tax asset recognised on shareholder and regulatory approval of the merger of Vodafone K.K. and Vodafone Holdings K.K.(3) - (303) (599) - Tax on items not related to underlying business performance - - 3 - Items not related to underlying business performance attributable to minority interests - 13 21 ------- ------- ------- Earnings for adjusted earnings per share 3,421 3,309 6,371 ======= ======= ======= The following are the principal items not related to underlying business performance: (1) Other income and expense comprises an impairment to the carrying value of goodwill relating to Vodafone Sweden of £515 million (year ended 31 March 2005: £475 million). (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. 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 deemed 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. The right to receive the indirect interest in Vodafone Egypt in the event of exercise of the put option is accounted for separately from the financial liability. 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 was recognised in the income statement. For the six months ended 30 September 2005, a further charge of £151m was recognised. The valuation of this option is inherently unpredictable and changes in the fair value of this financial liability could have a material impact on the future results and financial position of Vodafone. (3) In the year ended 31 March 2005, tax losses in Vodafone Holdings K.K. became eligible for offset against the profits of Vodafone K.K. following the merger of the two entities on 1 October 2004. The tax credit was recognised following shareholder and regulatory approval of the transaction. 7 Dividends Six months Six months Year to to ended 30 September 30 September 31 March 2005 2004 2005 £m £m £m Equity dividends on ordinary shares: Declared and paid during the period: Final dividend for the year ended 31 March 2005: 2.16 pence per share (2004: 1.0780 pence per share) 1,395 728 728 Interim dividend for the year ended 31 March 2005: 1.91 pence per share - - 1,263 ------- ------- ------- 1,395 728 1,991 ======= ======= ======= Proposed or declared but not recognised as a liability: Final dividend for the year ended 31 March 2005: 2.16 pence per share - - 1,395 Interim dividend for the year ending 31 March 2006: 2.20 pence per share (2005: 1.91 pence per share) 1,376 1,263 - ------- ------- ------- 1,376 1,263 1,395 ======= ======= ======= 8 Reconciliation of net cash flows to operating activities Six months Six months Year to to ended 30 September 30 September 31 March 2005 2004 2005 £m £m £m Profit for the period 2,818 3,683 6,518 Adjustments for Tax on profit 1,289 857 1,433 Depreciation and amortisation 2,871 2,607 5,517 Loss on disposal of property, plant and equipment 35 32 162 Non operating income and expense (1) (16) (6) Investment income (259) (321) (581) Financing costs 630 556 1,178 Other income and expense 515 - 475 Share of result in associated undertakings (1,187) (1,078) (1,980) ------- ------- ------- Operating cash flows before movements in working capital 6,711 6,320 12,716 (Increase)/decrease in inventory (85) 39 17 Increase in trade and other receivables (207) (205) (321) Increase in payables 332 90 145 ------- ------- ------- Cash generated by operations 6,751 6,244 12,557 Tax paid (667) (417) (1,578) ------- ------- ------- Net cash flows from operating activities 6,084 5,827 10,979 ======= ======= ======= 9 Acquisition of subsidiary On 31 May 2005, the Group acquired 99.99% of the issued share capital of ClearWave N.V. for cash consideration of £1,905 million. ClearWave N.V. is the parent company of a group of companies involved in the provision of mobile telecommunications in the Czech Republic and Romania. This transaction has been accounted for by the purchase method of accounting. Fair value Fair value Book value adjustments £m £m £m Net assets acquired: Intangible assets 87 619 706 Property, plant and equipment 562 - 562 Inventory 7 - 7 Trade and other receivables 106 (12) 94 Cash and cash equivalents 65 - 65 Deferred tax liabilities - (108) (108) Short and long term borrowings (550) (64) (614) Current tax liabilities (11) - (11) Trade and other payables (153) - (153) --------- --------- -------- 113 435 548 ========= ========= Minority Interests (2) Goodwill 1,359 -------- Total cash consideration (including £9 million of directly attributable costs) 1,905 ======== Net cash outflow arising on acquisition: Cash consideration 1,905 Cash and cash equivalents acquired (65) -------- 1,840 ======== The goodwill is attributable to the profitability of the acquired business and the synergies expected to arise after the Group's acquisition of ClearWave. The acquired entities and percentage of voting rights acquired was as follows % MobiFon S.A. 78.99 Oskar Mobil a.s. 99.87 ClearWave N.V. 99.99 MobiFon Holdings B.V. 99.99 Oskar Holdings N.V. (renamed Vodafone Oskar Holdings N.V.) 99.99 Oskar Finance B.V. (renamed Vodafone Oskar Finance B.V.) 99.99 ClearWave Services (Mauritius) Ltd. 99.99 Results of the acquired entities have been consolidated in the income statement from the date of acquisition, 31 May 2005. If the acquisition had been completed on 1 April 2005, the Group's revenue for the six months ended 30 September 2005 would have increased by an additional £129 million and profit for the period would have increased by an additional £22 million. Subsequent to the completion of the acquisition on 31 May 2005, a further 0.9% of MobiFon S.A. was acquired for consideration of £16 million. 10 Transactions with equity shareholders Share Additional Called up premium Own shares paid in share capital account held capital £m £m £m £m At 1 April 2004 4,280 52,154 (1,136) 99,950 Issue of new shares 3 48 - (13) Purchase of treasury shares - - (1,748) - Own shares released on vesting of share awards - - 11 - Share-based payment charge, inclusive of tax credit of £12 million - - - 80 Other movements - - - 3 ------- ------- ------- ------- At 30 September 2004 4,283 52,202 (2,873) 100,020 Issue of new shares 3 82 - (15) Purchase of treasury shares - - (2,249) - Own shares released on vesting of share awards - - 1 - Share-based payment charge, inclusive of tax credit of £10 million - - - 79 Other movements - - - (3) ------- ------- ------- ------- At 31 March 2005 4,286 52,284 (5,121) 100,081 Issue of new shares 6 110 - (37) Purchase of treasury shares - - (2,802) - Own shares released on vesting of share awards - 7 315 (7) Share-based payment charge, inclusive of tax credit of £4 million - - - 63 ------- ------- ------- ------- At 30 September 2005 4,292 52,401 (7,608) 100,100 ======= ======= ======= ======= In the six months ended 30 September 2005, the Company issued 96 million ordinary shares of $0.10 each and re-issued 235 million ordinary shares from treasury. 11 Movements in accumulated other recognised income and expense Available- for-sale Translation Pensions investments reserve reserve reserve Total £m £m £m £m At 1 April 2004 - - 233 233 Gains/(losses) arising in the period 2,101 (54) 28 2,075 Tax effect - 16 - 16 ------- ------- ------- ------- At 30 September 2004 2,101 (38) 261 2,324 (Losses)/gains arising in the period (580) (48) 78 (550) Tax effect - 7 - 7 ------- ------- ------- ------- At 31 March 2005 1,521 (79) 339 1,781 Gains arising in the period 437 - 574 1,011 Tax effect - - (2) (2) ------- ------- ------- ------- At 30 September 2005 1,958 (79) 911 2,790 ======= ======= ======= ======= 12 Movements in retained losses Six months Six months Year to to ended 30 September 30 September 31 March 2005 2004 2005 £m £m £m At 1 April (39,511) (43,930) (43,930) Profit for the period 2,775 3,615 6,410 Dividends (1,395) (728) (1,991) Loss on reissue of treasury shares (73) - - ------- ------- ------- At 30 September / 31 March (38,204) (41,043) (39,511) ======= ======= ======= 13 Related party transactions Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Company and its joint ventures have been disclosed to the extent that they have not been eliminated through proportionate consolidation. Six months Six months Year to to ended 30 September 30 September 31 March 2005 2004 2005 £m £m £m Transactions with associated undertakings: - Sales of goods and services 153 139 194 ======= ======= ======= - Purchase of goods and services 186 155 243 ======= ======= ======= Transactions with joint ventures: - Sales of goods and services(1) 15 11 22 ======= ======= ======= - Purchase of goods and services 17 14 28 ======= ======= ======= (1) In addition, Vodafone Italy was recharged certain expenses by Group entities in the period of which £16 million (six months ended September 2004: £11 million; year ended 31 March 2005: £19 million) is included in the consolidated income statement. As at As at As at 30 September 30 September 31 March 2005 2004 2005 £m £m £m Amounts owed by associated undertakings 33 24 22 ======= ======= ======= Amounts owed to associated undertakings 28 16 12 ======= ======= ======= Amounts owed by joint ventures included within receivables 31 19 17 ======= ======= ======= Amounts owed to joint ventures included within payables 3 1 3 ======= ======= ======= Amounts owed to joint ventures included within short-term borrowings 770 1,024 1,136 ======= ======= ======= In the six months ended 30 September 2005, the Group made contributions to defined benefit pension schemes of £24 million (six months ended 30 September 2004: £59 million, year ended 31 March 2005: £209 million). Compensation paid to the Company's Board of directors and members of the Executive Committee will be disclosed in the Group's Annual Report for the year ending 31 March 2006. 14 Other matters Contingent liabilities There have been no material changes to the Group's contingent liabilities relating to performance bonds and credit guarantees in the six months ended 30 September 2005. There have been no changes to any legal or arbitration proceedings involving the Group in the six months ended 30 September 2005 which are expected to have, or have had, a material effect on the financial position or profitability of the Group. Seasonality or cyclicality of interim operations The Group's financial results and cash flows have, historically, been subject to seasonal trends between the first and second half of the financial year. Traditionally, the Christmas period sees a higher volume of customer connections, contributing to higher equipment and connection revenue in the second half of the financial year and increased acquisition costs. Ongoing airtime revenue also demonstrate signs of seasonality, with revenue generally lower during February, which is a shorter than average month, and revenue from roaming charges higher during the summer months as a result of increased travel by customers. There is no assurance that these trends will continue in the future. Events after the balance sheet date On 28 October 2005, it was announced that Vodafone had agreed to acquire, through wholly owned subsidiaries, a 5.61% direct interest in Bharti Tele-Ventures Limited ('BTVL'), a national mobile operator in India which also provides fixed-line services, and a 4.39% indirect interest in BTVL through Bharti Enterprises Private Limited for total cash consideration of Rs.66.56 billion (£820 million). As such, Vodafone has agreed to acquire, through wholly owned subsidiaries, an economic interest of 10% in BTVL. The acquisition of shares in BTVL is expected to be completed by 18 November 2005, whilst the acquisition of shares in Bharti Enterprises Private Limited is conditional on receipt of all necessary unconditional regulatory approvals and certain customary conditions and is expected to be completed by the end of the current financial year. These acquisitions will deliver the Group material rights in BTVL, including the right to appoint two directors to the BTVL Board and, consequently, the Group expects to proportionately consolidate BTVL. On 31 October 2005, it was announced that the Group's 100% interest in Vodafone Sweden is to be sold for €1,035 million (£704 million) to Telenor, a pan-Nordic telecommunications operator. Net cash proceeds, after assumption of net debt by the purchaser, will be approximately €970 million (£660 million). The sale is expected to be completed by 31 December 2005, subject to EU regulatory approval. Vodafone and Telenor have agreed the terms of a Partner Network Agreement in Sweden, allowing Vodafone Sweden and Vodafone customers to continue to benefit from Vodafone's global brand, products and services in Sweden. On 4 November, Vodafone announced its intention to increase its effective shareholding in Vodacom, its joint venture in South Africa, to 50% through the acquisition of shares in VenFin Limited ('VenFin'), a South African company which currently holds 15% of the shares of Vodacom. Vodafone has since that date entered into an agreement for the acquisition of the 'B' shares in VenFin, which is currently conditional upon, inter alia, regulatory approvals and the successful acquisition of a specified proportion of the ordinary shares of VenFin. Between 1 October 2005 and 14 November 2005, the Company repurchased 439,500,000 of its own shares, to be held in treasury, under irrevocable purchase orders placed prior to 30 September 2005 for total consideration of £648 million. Changes in estimates There has been no material changes in estimates of amounts reported in the six months ended 30 September 2005 or in the prior financial year. Issuances and repayment of debt See 'Cash Flows and Funding' on pages 23 to 24 for details of issuances and repayment of debt. This information is provided by RNS The company news service from the London Stock Exchange

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