24th May 2005 07:02
Vodafone Group Plc24 May 2005 PART 4 VODAFONE GROUP PLCPRELIMINARY RESULTS FINANCIAL UPDATE Profit and loss account Exceptional items The exceptional operating cost of £315 million in the year ended 31 March 2005is due to an impairment of the carrying value of goodwill relating to VodafoneSweden. The impairment results from recent fierce price competition in theSwedish market combined with onerous 3G licence obligations. Net exceptionaloperating income for the previous financial year of £228 million comprised £351million of expected recoveries and provision releases in relation to acontribution tax levy on Vodafone Italy, net of £123 million of restructuringcosts, principally in the UK. The net exceptional non-operating credit for the year ended 31 March 2005 of £13million (2004: charge of £103 million) principally relates to profits ondisposal of fixed asset investments. The prior year charge principally relatedto a loss on disposal of the Japan Telecom fixed line operations. Interest Year ended 31 March 2005 2004 £m £m % change Group net interest payable beforedividends from investments 151 310 (51)Dividends from investments (19) (26) (27)Potential interest charges arising onsettlement of outstanding tax issues 261 215 21 -------- --------Group net interest payable 393 499 (21)Share of associated undertakings 211 215 (2) -------- --------Total Group net interest payable 604 714 (15) ======== ======== Group net interest payable before dividends from investments has fallen by 51%to £151 million, primarily reflecting a reduction in average net debt. Group netinterest payable was covered 37 times by operating cash flow plus dividendsreceived from associated undertakings. Taxation The effective tax rate on profit on ordinary activities, before goodwill andexceptional items, was 27.5% compared with 30.4% for the year ended 31 March2004. The rate has fallen due to the finalisation in the year of thereorganisation of the Group's German operations, the benefits of which haveoutweighed the impact of reduced tax incentives in Italy, and the absence of theprevious year's one-off benefit from the restructuring of the Group's associatedundertakings in France. The Group's tax charge has also benefited fromexceptional current and deferred tax credits totalling £599 million, whichrelate to tax losses in Vodafone Holdings K.K. becoming eligible for offsetagainst the profits of Vodafone K.K. following the merger of the two entities on1 October 2004. Earnings and loss per share Earnings per share, before goodwill amortisation and exceptional items,increased by 14% from 9.10 pence to 10.41 pence for the year ended 31 March2005. Basic loss per share, after goodwill amortisation and exceptional items,improved from a loss per share of 13.24 pence to a loss per share of 11.39 pencefor the year ended 31 March 2005. The loss per share includes a charge of 22.21pence per share (2004: 22.33 pence per share) in relation to the amortisation ofgoodwill and a credit of 0.41 pence per share (2004: charge of 0.01 pence pershare) in relation to exceptional items. Total shareholder returns The Company provides returns to shareholders through a combination of dividendsand share purchases. Dividends The Company has historically paid dividends semi-annually, with a regularinterim dividend in respect of the first six months of the financial yearpayable in February and a final dividend payable in August. The directors expectthat the Company will continue to pay dividends semi-annually. In considering the level of dividends, the Board takes account of the outlookfor earnings growth, operating cash flow generation, capital expenditurerequirements, acquisitions and divestments, together with the amount of debt andshare purchases. In November 2004, the directors declared an interim dividend of1.91 pence per share, representing an approximate 100% increase over last year'sinterim dividend, with the expectation that the final dividend would also beincreased by 100%. Consistent with this, the directors have recommended a finaldividend of 2.16 pence per share, representing an approximate 100% increase overlast year's final dividend, and bringing the total dividend per share to 4.07pence, a doubling of last year's total. Following this rebasing of the dividend,the Board expects future increases in dividends per share to reflect underlyinggrowth in earnings. The ex-dividend date is 1 June 2005 for ordinary shareholders, the record datefor the final dividend is 3 June 2005 and the dividend is payable on 5 August2005. Share purchases When considering how increased returns to shareholders can be provided in theform of share purchases, the Board reviews the free cash flow, anticipated cashrequirements, dividends, credit profile and gearing of the Group. The Boardintends to continue to consider share purchase programmes, subject to themaintenance of credit ratings. On 25 May 2004, the directors allocated £3 billion to the share purchaseprogramme for the year to May 2005. The Board subsequently increased the sharepurchase programme to £4 billion, completing by March 2005, subject to themaintenance of credit ratings. For the period from 27 May 2004 to 31 March 2005,2,985 million shares were purchased on market on the London Stock Exchange for atotal consideration of £4 billion, including stamp duty and broker commissions.The average share price paid, excluding transaction costs, was 133.30 pence,compared with the average volume weighted price over the same period of 133.62pence. At the Company's Annual General Meeting ("AGM") in July 2004, approval wasobtained from the shareholders to purchase up to 6.6 billion ordinary shares ofthe Company. This approval will expire at the conclusion of the Company's AGM on26 July 2005. Up to 23 May 2005, 2,661 million shares had been purchased underthis approval. The Board of directors has approved a share purchase target forthe year to 31 March 2006 of £4.5 billion, including £565 million already spent.Achieving the target purchases will be subject to renewed shareholder approvalon 26 July 2005 at the AGM. Shares will be purchased on market on the LondonStock Exchange and the maximum share price payable for any share purchase willbe no greater than 105% of the average of the middle market closing price of theCompany's share price on the London Stock Exchange for the five business daysimmediately preceding the day on which any shares are contracted to be purchasedand otherwise in accordance with the rules of the Financial Services Authority.Purchases will be made only if accretive to earnings per share, excluding itemsnot reflecting underlying business performance. Prior to the close period from 1 April 2005 to 23 May 2005, the Group placedirrevocable purchase instructions which resulted in the purchase of 406 millionshares at a total consideration of £565 million, including stamp duty and brokercommissions, in the close period. Treasury shares The Companies Act 1985 permits companies to purchase their own shares out ofdistributable reserves and to hold shares with a nominal value not to exceed 10%of the nominal value of their issued share capital in treasury. If shares inexcess of this limit are purchased they must be cancelled. Whilst held intreasury no voting rights or pre-emption rights accrue and no dividends are paidin respect of treasury shares. Treasury shares may be sold for cash; transferred(in certain circumstances) for the purposes of an employee share scheme; orcancelled. If treasury shares are sold, such sales are deemed to be a new issueof shares and will accordingly count towards the 5% of share capital which theCompany is permitted to issue on a non pre-emptive basis in any one year asapproved by its shareholders at the AGM. The proceeds of any sale of treasuryshares up to the amount of the original purchase price, calculated on a weightedaverage price method, is attributed to distributable profits which would notoccur for the sale of non-treasury shares. Any excess above the originalpurchase price must be transferred to the share premium account. Share options On 1 July 2002, Vodafone awarded share options to all eligible employees in allcountries in which the Group then operated, other than Japan and Sweden, underits 1999 Long Term Stock Incentive Plan. These share options may be exercisedfrom 1 July 2005 until 30 June 2012 at a price of 90 pence per share (92.99pence per share for participants in Italy). If all share options are exercised,Vodafone would issue approximately 480 million ordinary shares. Vodafonebelieves that a substantial number of share options will be exercised on 1 July2005 and in the period immediately following. Cash flows and funding During the year ended 31 March 2005, the Group increased its net cash inflowfrom operating activities by 3% to £12,713 million and generated £7,847 millionof free cash flow. Free cash flow decreased from the prior financial year,principally due to one-off cash receipts in the prior year, including £572million received from the closure of financial instruments and £198 million fromthe fixed line business in Japan prior to its disposal. Year ended 31 March 2005 2004 % change £m £m Net cash inflow from operating activities 12,713 12,317 3 Net capital expenditure on intangibleand tangible fixed assets (4,879) (4,371) 12---------------------------------------------------------------------Purchase of intangible fixed assets (59) (21)Purchase of tangible fixed assets (4,890) (4,508)Disposal of tangible fixed assets 70 158--------------------------------------------------------------------- ------- -------Operating free cash flow 7,834 7,946 (1) Dividends received from associatedundertakings (1) 2,020 1,801 12Taxation (1,616) (1,182) 37Net cash outflow for returns on investmentsand servicing of finance (391) (44)---------------------------------------------------------------------Interest on group debt(2) (336) 31Dividends from investments 19 25Dividends paid to minority interests (74) (100)--------------------------------------------------------------------- ------- -------Free cash flow 7,847 8,521 (8) ======= ======= (1) Year ended 31 March 2005 includes £923 million (2004: £671 million) from Verizon Wireless and £616 million (2004: £802 million) from the Group's interest in SFR (2) Year ended 31 March 2005 includes £nil (2004: £572 million) of cash receipts from the closure of financial instruments related to interest rate management activities, including those in connection with bond repurchases in subsidiaries The Group invested a net £2,014 million in acquisition and disposal activities,including the purchase and disposal of investments, in the 2005 financial yearand an analysis of the significant transactions is shown below: £mAcquisitions:Japan (69.7% to 97.7%) 2,380Hungary (92.8% to 100%) 55Other acquisitions, including investments 45 Disposals:Japan Telecom withholding tax recovered (226)Japan Telecom preference shares (152)Egypt (67.0% to 50.1%) (65)Other disposals, including investments (23) ------- 2,014 ======= The Group's consolidated net debt position at 31 March 2005 was £8,339 million,reduced from £8,488 million at 31 March 2004, principally as a result of thecash flow items above, share purchases, equity dividend payments and£143 million of foreign exchange movements. The Group remains committed to maintaining a solid credit profile, as currentlydemonstrated by its stable credit ratings of P-1/F1/A-1 short term and A2/A/Along term from Moody's, Fitch Ratings and Standard & Poor's, respectively.Credit ratings are not a recommendation to purchase, hold or sell securities, inas much as ratings do not comment on market price or suitability for aparticular investor, and are subject to revision or withdrawal at any time bythe assigning rating organisation. Each rating should be evaluatedindependently. In aggregate, the Group has committed facilities of approximately £6,814million, of which £5,572 million was undrawn at 31 March 2005. The undrawnfacilities include a $4.9 billion Revolving Credit Facility that matures in June2006 and a $5.5 billion Revolving Credit Facility that matures in June 2009.Both facilities support US and Euro commercial paper programmes of up to $15billion and £5 billion respectively, both of which were undrawn at 31 March2005. Other undrawn facilities of £77 million are specific to the Group'ssubsidiaries in Egypt and Albania. Facilities of €350 million (£240 million) inVodafone Hungary were repaid and cancelled during the period. On 7 October 2004,the Group's Yen 600 billion shelf programme in Japan became effective. No bondshave been issued under this programme. On 19 April 2005, the Board of directors of Vodafone Italy approved a proposalto buy back issued and outstanding shares for approximately €7.9 billion (£5.4billion). If the proposal is approved by the shareholders of Vodafone Italy,participation will be invited on a pro rata basis. In accordance with Dutch andItalian corporate law the buy back will take place in two tranches, the first inJune 2005 and the second expected to be in October 2005. After the transactionis completed the Company and Verizon Communications Inc will continue to holdapproximately 77% and 23% respectively of Vodafone Italy indirectly throughtheir wholly owned subsidiaries. It is anticipated that the buy back will befunded from currently available and forecast available cash of Vodafone Italy.At 31 March 2005, Vodafone Italy had net cash on deposit with Group companies of€7.2 billion (£4.9 billion). SIGNIFICANT TRANSACTIONS Acquisitions The Group significantly increased its effective interest in two subsidiarycompanies in the year. These were: % interest at % interest at 31 March 2004 31 March 2005 Vodafone Japan 69.7 97.7Vodafone Hungary 87.9 100.0 In the first half of the year, the Group increased its effective shareholding inVodafone K.K. to 98.2% and its stake in Vodafone Holdings K.K. to 96.1% for atotal consideration of £2.4 billion. On 1 October 2004 the merger of VodafoneK.K. and Vodafone Holdings K.K. was completed, resulting in the Group holding a97.7% stake in the merged company, Vodafone K.K. The Group increased its effective shareholding in Vodafone Hungary to 100% inthe financial year by subscribing for additional equity of HUF89,301 million(£248 million) in the first half of the financial year and the subsequent acquisition of the remaining 7.2% shareholding from Antenna Hungaria Rt, completing on 12 January 2005 for consideration of £55 million. On 15 March 2005, the Group announced it had entered into agreements withTelesystem International Wireless Inc. ("TIW") of Canada to acquireapproximately 79% of the share capital of MobiFon S.A. ("MobiFon") in Romania,increasing the Group's ownership of MobiFon to approximately 99%, and 100% ofthe issued share capital of Oskar Mobil a.s. in the Czech Republic for a cashconsideration of approximately $3.5 billion (£1.9 billion) to be satisfied fromthe Group's cash resources. In addition, Vodafone will be assuming approximately$0.9 billion (£0.5 billion) of net debt. The acquisition is conditional on TIWshareholder approval, the receipt of all necessary unconditional regulatory andCanadian Court approvals and certain customary conditions and is expected tocomplete shortly. Disposals In January 2005, Telecom Egypt acquired a 16.9% stake in Vodafone Egypt from theGroup, for cash consideration of $123 million (£65 million), reducing theGroup's controlling stake to 50.1%. In October 2004, preference shares held by Vodafone K.K. in Sora Holdings Japan,Inc. were re-purchased by Sora Holdings Japan, Inc. for Yen 33.9 billion (£152million), further to the subsequent sale of Japan Telecom. UPDATE ON IFRS IMPLEMENTATION The Group provided an update of its adoption of IFRS on 20 January 2005 whichincluded IFRS financial information for the six months ended 30 September 2004and the year ended 31 March 2004 on a pro forma basis. Additional IFRS segmentalinformation was provided on 18 March 2005. The Group currently intends topublish financial information for the year ended 31 March 2005 prepared inaccordance with IFRS in July 2005. On 14 April 2005, the SEC announced it had adopted proposed amendments to Form20-F which will allow the Group, in the first year of IFRS adoption, to providetwo years of statements of income, changes in shareholders' equity and cashflows prepared in accordance with IFRS, rather than the three years previouslyrequired. The Group's financial information prepared on the basis of IFRSprovided on 20 January 2005 and 18 March 2005 had been prepared on theassumption that this rule change would be adopted. The Group is not currently aware of any developments to IFRS accountingstandards or related interpretations which would result in significant changesto the reconciling differences, as previously reported, between UK GAAP and IFRSfinancial information for the year ending 31 March 2006. FINANCIAL STATEMENTS CONSOLIDATED PROFIT AND LOSS ACCOUNT Year ended Year ended 31 March 31 March 2005 2004 £m £m--------------------------------------------------------------------------------Turnover: Group and share of associated undertakings - Continuing operations 45,781 42,920 - Discontinued operations - 818 -------- -------- 45,781 43,738 Less: Share of associated undertakings (11,648) (10,179) -------- -------- 34,133 33,559 ======== ========-------------------------------------------------------------------------------- Turnover (Note 2) - Continuing operations 34,133 32,741 - Discontinued operations - 818 -------- -------- 34,133 33,559 ======== ======== Operating (loss)/profit - Continuing operations (5,304) (4,842) - Discontinued operations - 66 -------- -------- (5,304) (4,776) Share of operating profit in associatedundertakings - Continuing operations 1,193 546 -------- --------Total Group operating loss (Note 2) (4,111) (4,230) Exceptional non-operating items (Note 4) 13 (103) -------- --------Loss on ordinary activities before interest (4,098) (4,333) Net interest payable and similar items (604) (714)-------------------------------------------------------------------------------- - Group (393) (499) - Share of associated undertakings (211) (215)-------------------------------------------------------------------------------- -------- --------Loss on ordinary activities before taxation (4,702) (5,047) Tax on loss on ordinary activities (Note 5) (2,236) (3,154)-------------------------------------------------------------------------------- - Tax on loss on ordinary activities before exceptional tax (2,835) (3,154) - Exceptional tax credit 599 --------------------------------------------------------------------------------- -------- --------Loss on ordinary activities after taxation (6,938) (8,201) Minority interests (including non-equityminority interests) (602) (814) -------- --------Loss for the financial year (7,540) (9,015) Equity dividends (2,658) (1,378) -------- --------Retained loss for the Group and its shareof associated undertakings (10,198) (10,393) ======== ======== Basic and diluted loss per share (Note 6) (11.39)p (13.24)pAdjusted basic earnings per share (Note 6) 10.41p 9.10p Dividends per share 4.07p 2.0315p CONSOLIDATED BALANCE SHEET 31 March 31 March 2005 2004 £m £mFixed assetsIntangible assets 83,464 93,622Tangible assets 18,398 18,083Investments 20,250 22,275 -------------------------------------------------------------------------------- - Investments in associated undertakings 19,398 21,226 - Other investments 852 1,049-------------------------------------------------------------------------------- -------- -------- 122,112 133,980 -------- --------Current assets Stocks 430 458Debtors: amounts falling due after more than one year 2,096 1,380Debtors: amounts falling due within one year 5,602 5,521Investments 816 4,381Cash at bank and in hand 2,850 1,409 -------- -------- 11,794 13,149 Creditors: amounts falling due within one year (14,837) (15,026) -------- --------Net current liabilities (3,043) (1,877) -------- -------- Total assets less current liabilities 119,069 132,103 Creditors: amounts falling due after morethan one year (12,382) (12,975) Provisions for liabilities and charges (4,552) (4,197) -------- -------- 102,135 114,931 ======== ========Capital and reservesCalled up share capital 4,286 4,280Share premium account 52,284 52,154Merger reserve 98,927 98,927Own shares held (5,121) (1,136)Other reserve 629 713Profit and loss account (51,688) (43,014) -------- --------Total equity shareholders' funds 99,317 111,924 Equity minority interests 1,965 2,132Non-equity minority interests 853 875 -------- -------- 102,135 114,931 ======== ======== CONSOLIDATED CASH FLOW Year ended Year ended 31 March 31 March 2005 2004 £m £mNet cash inflow from operating activities(Note 7) 12,713 12,317 Dividends received from associatedundertakings 2,020 1,801Net cash outflow for returns on investmentsand servicing of finance (391) (44) Taxation (1,616) (1,182) Net cash outflow for capital expenditure andfinancial investment (4,768) (4,267)-------------------------------------------------------------------------------- - Purchase of intangible fixed assets (59) (21) - Purchase of tangible fixed assets (4,890) (4,508) - Purchase of investments (19) (43) - Disposal of tangible fixed assets 70 158 - Disposal of investments 22 123 - Other 108 24-------------------------------------------------------------------------------- Net cash outflow for acquisitions anddisposals (2,017) (1,312)-------------------------------------------------------------------------------- - Purchase of interests in subsidiary undertakings (2,461) (2,064) - Net cash acquired with subsidiary undertakings - 10 - Disposal of interests in subsidiary undertakings 444 995 - Net cash disposed of with subsidiary undertakings - (258) - Other - 5-------------------------------------------------------------------------------- Equity dividends paid (1,991) (1,258) -------- -------- Cash inflow before management of liquidresources and financing 3,950 6,055 Management of liquid resources 3,563 (4,286) Net cash outflow from financing (6,108) (700)-------------------------------------------------------------------------------- - Issue of ordinary share capital 115 69 - (Decrease)/increase in debt (2,170) 280 - Purchase of treasury shares (4,053) (1,032) - Purchase of own shares in relation to employee share schemes - (17)-------------------------------------------------------------------------------- -------- --------Increase in cash in the financial year 1,405 1,069 ======== ======== Reconciliation of net cash flow to movement in net debtIncrease in cash in the financial year 1,405 1,069Cash outflow/(inflow) from decrease/(increase)in debt 2,170 (280)Cash (inflow)/outflow from (decrease)/increasein liquid resources (3,563) 4,286 -------- --------Decrease in net debt resulting from cash flows 12 5,075 Translation difference 143 144Premium on repayment of debt - (56) Net debt acquired on acquisition of subsidiaryundertakings (2) (7)Net debt disposed on disposal of subsidiaryundertakings - 194Other movements (4) 1 -------- --------Decrease in net debt in the financial year 149 5,351 Opening net debt (8,488) (13,839) -------- --------Closing net debt (Note 8) (8,339) (8,488) ======== ======== CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Year ended Year ended 31 March 31 March 2005 2004 £m £m Loss for the financial year - Group (7,944) (8,996) - Share of associated undertakings 404 (19) -------- -------- (7,540) (9,015) -------- -------- Currency translation - Group 1,681 (2,462) - Share of associated undertakings (214) (2,830) -------- -------- 1,467 (5,292) -------- -------- Total recognised gains and losses for thefinancial year (6,073) (14,307) ======== ======== MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS Year ended Year ended 31 March 31 March 2005 2004 £m £m Loss for the financial year (7,540) (9,015)Equity dividends (2,658) (1,378) -------- -------- (10,198) (10,393) Currency translation 1,467 (5,292)New share capital subscribed 136 86Purchase of treasury shares (3,997) (1,088)Purchase of own shares in relation to employeeshare schemes - (17)Own shares released on vesting of share awards 12 10Other (27) (12) -------- --------Net movement in equity shareholders' funds (12,607) (16,706) Opening equity shareholders' funds 111,924 128,630 ------- -------Closing equity shareholders' funds 99,317 111,924 ======== ======== This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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