13th Nov 2007 07:01
Vodafone Group Plc13 November 2007 Vodafone Group PlcHalf-Yearly Financial ReportPART 2 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENT Six months Six months Year ended to 30 to 30 31 Note September September March 2007 2006 2007 £m £m £m Revenue 2 16,994 15,594 31,104Cost of sales (10,212) (9,022) (18,725) --------- -------- ---------Gross profit 6,782 6,572 12,379Selling and distribution expenses (1,152) (1,038) (2,136)Administrative expenses (1,850) (1,800) (3,437)Share of result in associated undertakings 1,443 1,413 2,728Impairment losses - (8,100) (11,600)Other income and expense (15) 1 502 --------- -------- ---------Operating profit/(loss) 2 5,208 (2,952) (1,564)Non-operating income and expense 250 10 4Investment income 382 425 789Financing costs (1,280) (813) (1,612) --------- -------- ---------Profit/(loss) before taxation 4,560 (3,330) (2,383)Income tax expense 3 (1,233) (1,218) (2,423) --------- -------- ---------Profit/(loss) for the period fromcontinuing operations 3,327 (4,548) (4,806)Loss from discontinued operations - (491) (491) --------- -------- ---------Profit/(loss) for the period 3,327 (5,039) (5,297) ========= ======== =========Attributable to: - Equity shareholders 3,290 (5,105) (5,426)- Minority interests 37 66 129 Basic earnings/(loss) per share Profit/(loss) from continuing operations 4 6.22p (8.02)p (8.94)p Loss from discontinued operations 4 - (0.86)p (0.90)p --------- -------- --------- Profit/(loss) for the period 4 6.22p (8.88)p (9.84)p ========= ======== ========= Diluted earnings/(loss) per share Profit/(loss) from continuing operations 4 6.19p (8.02)p (8.94)p Loss from discontinued operations 4 - (0.86)p (0.90)p --------- -------- --------- Profit/(loss) for the period 4 6.19p (8.88)p (9.84)p ========= ======== ========= CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Six months Six months Year ended to 30 to 30 31 September September March 2007 2006 2007 £m £m £m Gains on revaluation of available-for-sale investments 2,568 641 2,108Exchange differences on translation of foreign operations 705 (3,293) (3,804)Net actuarial gains on defined benefit pension schemes 53 18 50Foreign exchange gains transferred to the income statement (7) 794 838Fair value gains transferred to the income statement (570) - - --------- -------- ---------Net gain/(loss) recognised directly in equity 2,749 (1,840) (808)Profit/(loss) for the period 3,327 (5,039) (5,297) --------- -------- ---------Total recognised income and expense relating to the period 6,076 (6,879) (6,105) ========= ======== =========Attributable to: - Equity shareholders 6,096 (6,931) (6,210)- Minority interests (20) 52 105 The accompanying notes are an integral part of these Condensed ConsolidatedFinancial Statements. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET 30 30 31 September September March 2007 2006 2007 Note £m £m £m Non-current assets Goodwill 45,661 44,330 40,567Other intangible assets 18,382 16,203 15,705Property, plant and equipment 14,832 13,248 13,444Investments in associated undertakings 20,615 21,879 20,227Other investments 7,492 3,762 5,875Deferred tax assets 482 450 410Post employment benefits 158 33 82Trade and other receivables 516 466 494 --------- --------- --------- 108,138 100,371 96,804 --------- --------- ---------Current assets Inventory 405 356 288Taxation recoverable 27 2 21Trade and other receivables 5,739 4,963 5,023Cash and cash equivalents 2,901 789 7,481 --------- --------- --------- 9,072 6,110 12,813 --------- --------- ---------Assets included in disposal group held for resale - 914 - --------- --------- ---------Total assets 117,210 107,395 109,617 ========= ========= =========Equity Called up share capital 7 4,180 4,166 4,172Share premium account 7 43,782 43,443 43,572Own shares held 7 (7,937) (8,153) (8,047)Additional paid-in capital 7 100,131 100,191 100,185Capital redemption reserve 7 9,136 9,121 9,132Accumulated other recognised income 8 6,112 2,264 3,306and expense Retained losses 9 (83,999) (83,656) (85,253) --------- --------- ---------Total equity shareholders' funds 71,405 67,376 67,067 --------- --------- --------- Minority interests 1,148 197 226Written put options over minority interests (2,425) - - --------- --------- ---------Total minority interests (1,277) 197 226 --------- --------- ---------Total equity 70,128 67,573 67,293 --------- --------- --------- Non-current liabilities Long term borrowings 20,307 17,014 17,798Deferred tax liabilities 5,003 4,901 4,626Post employment benefits 114 107 123Provisions 253 273 296Trade and other payables 615 567 535 --------- --------- --------- 26,292 22,862 23,378 --------- --------- ---------Current liabilities Short term borrowings: Third parties 4,652 3,539 3,975 Related parties 1,021 575 842Current taxation liabilities 4,997 4,911 5,088Provisions 253 167 267Trade and other payables 9,867 7,768 8,774 --------- --------- --------- 20,790 16,960 18,946 --------- --------- --------- --------- --------- ---------Total equity and liabilities 117,210 107,395 109,617 ========= ========= ========= The accompanying notes are an integral part of these Condensed ConsolidatedFinancial Statements. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED CASH FLOW STATEMENT Six months Six months Year ended to 30 to 30 31 Note September September March 2007 2006 2007 £m £m £m Net cash flows from operating activities 6 4,860 4,975 10,328 --------- --------- ---------Cash flows from investing activities Purchase of interests in subsidiary undertakings and joint ventures, net of cash acquired 10 (5,475) (2,585) (2,805)Disposal of interests in subsidiary undertakings, net of cash disposed 11 - 6,799 6,767Disposal of interests in associated undertakings - - 3,119Purchase of intangible assets (320) (298) (899)Purchase of property, plant and equipment (1,902) (1,892) (3,633)Purchase of investments (30) (154) (172)Disposal of property, plant and equipment 13 11 34Disposal of investments 11 781 - 80Dividends received from associated undertakings 476 371 791Dividends received from investments 72 57 57Interest received 240 256 526 --------- --------- ---------Net cash flows from investing activities (6,145) 2,565 3,865 --------- --------- ---------Cash flows from financing activities Issue of ordinary share capital and reissue of treasury shares 170 39 193Net movement in short term borrowings (104) 426 953Proceeds from issue of long term borrowings 1,119 2,451 5,150Repayment of borrowings (1,271) (453) (1,961)Purchase of treasury shares - (43) (43)B share capital redemption (4) (5,707) (5,713)B share preference dividends paid - (3,286) (3,291)Equity dividends paid (2,334) (2,315) (3,555)Dividends paid to minority shareholders in subsidiary undertakings (66) (34) (34)Interest paid (712) (499) (1,051) --------- --------- ---------Net cash flows from financing activities (3,202) (9,421) (9,352) --------- --------- --------- Net cash flows (4,487) (1,881) 4,841 Cash and cash equivalents at beginning of the period 7,458 2,932 2,932Exchange losses on cash and cash equivalents (98) (275) (315) --------- --------- ---------Cash and cash equivalents at end of the period 2,873 776 7,458 ========= ========= ========= The accompanying notes are an integral part of these Condensed ConsolidatedFinancial Statements. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007 1 Basis of preparation The unaudited Condensed Consolidated Financial Statements for the six monthsended 30 September 2007: * were prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" ("IAS 34") and thereby International Financial Reporting Standards ("IFRS"), both as issued by the International Accounting Standards Board ("IASB") and as adopted by the European Union ("EU"); * are presented on a condensed basis as permitted by IAS 34 and therefore do not include all disclosures that would otherwise be required in a full set of financial statements and should be read in conjunction with the 2007 Annual Report; * include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the periods presented; * do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985 and were approved by the Board of directors on 13 November 2007. Both IFRS as issued by the IASB and as adopted by the EU differ in certainmaterial respects from US generally accepted accounting principles ("US GAAP") -see note 14. The information relating to the year ended 31 March 2007 is an extract from thepublished Annual Report for that year, which has been delivered to the Registrarof Companies, and on which the Auditors' Report was unqualified and did notcontain statements under section 237(2) or 237(3) of the UK Companies Act 1985. The preparation of the Condensed Consolidated Financial Statements requiresmanagement to make estimates and assumptions that affect the reported amounts ofassets and liabilities and disclosure of contingent assets and liabilities atthe balance sheet date, and the reported amounts of revenue and expenses duringthe reporting period. Actual results could vary from these estimates. Theestimates and underlying assumptions are reviewed on an ongoing basis. Revisionsto accounting estimates are recognised in the period in which the estimate isrevised if the revision affects only that period or in the period of therevision and future periods if the revision affects both current and futureperiods. 2 Segmental and other analyses The Group has one business segment, being the supply of communications servicesand products. The Group's analysis of revenue and operating profit fordiscontinued operations are shown in note 11. During the six months ended 30September 2007, the Group changed its organisation structure and the Group'sassociated undertaking in France, SFR, is now managed within the Europe regionand reported within Other Europe. The results for all periods are presented inaccordance with the new structure. Revenue Six months to Intra- Inter- 30 September 2007 Segment Common region Regional region Group revenue functions revenue Revenue revenue revenue (1) £m £m £m £m £m £mGermany 2,650 (63) 2,587 (5) 2,582Italy 2,097 (21) 2,076 (3) 2,073Spain 2,439 (62) 2,377 (3) 2,374UK 2,717 (25) 2,692 (5) 2,687Arcor 768 (32) 736 - 736Other Europe 2,243 (42) 2,201 (3) 2,198 -------------------------------------------------------------Europe 12,914 (245) 12,669 (19) 12,650 -------------------------------------------------------------Eastern Europe 1,524 - 1,524 (21) 1,503Middle East, Africa and Asia 2,019 - 2,019 (6) 2,013Pacific 758 - 758 (5) 753 -------------------------------------------------------------EMAPA 4,301 - 4,301 (32) 4,269 -------------------------------------------------------------Common functions(1) - 80 - 80 (5) 75 ------------------------------------------------------------- 17,215 80 (245) 17,050 (56) 16,994 ============================================================= Six months to Intra- Inter- 30 September 2006 Segment Common region Regional region Group revenue functions revenue revenue revenue revenue (1) £m £m £m £m £m £mGermany 2,827 (67) 2,760 (4) 2,756Italy 2,174 (27) 2,147 (3) 2,144Spain 2,268 (65) 2,203 (2) 2,201UK 2,549 (29) 2,520 (5) 2,515Arcor 706 (14) 692 - 692Other Europe 2,216 (54) 2,162 (2) 2,160 -------------------------------------------------------------Europe 12,740 (256) 12,484 (16) 12,468 -------------------------------------------------------------Eastern Europe 1,162 - 1,162 (16) 1,146Middle East, Africa and Asia 1,247 - 1,247 (5) 1,242Pacific 666 - 666 (4) 662 -------------------------------------------------------------EMAPA 3,075 - 3,075 (25) 3,050 -------------------------------------------------------------Common functions(1) - 86 - 86 (10) 76 ------------------------------------------------------------- 15,815 86 (256) 15,645 (51) 15,594 ============================================================= Year ended Intra- Inter- 31 March 2007 Segment Common region Regional region Group revenue functions revenue revenue revenue revenue (1) £m £m £m £m £m £mGermany 5,443 (123) 5,320 (9) 5,311Italy 4,245 (44) 4,201 (5) 4,196Spain 4,500 (106) 4,394 (3) 4,391UK 5,124 (54) 5,070 (9) 5,061Arcor 1,441 (27) 1,414 - 1,414Other Europe 4,275 (82) 4,193 (4) 4,189 -------------------------------------------------------------Europe 25,028 (436) 24,592 (30) 24,562 -------------------------------------------------------------Eastern Europe 2,477 - 2,477 (31) 2,446Middle East, Africa and Asia 2,565 - 2,565 (9) 2,556Pacific 1,399 - 1,399 (11) 1,388 -------------------------------------------------------------EMAPA 6,441 - 6,441 (51) 6,390 -------------------------------------------------------------Common functions(1) - 168 - 168 (16) 152 ------------------------------------------------------------- 31,469 168 (436) 31,201 (97) 31,104 ============================================================= Note: (1) Common functions represents results from Partner Markets and unallocated central Group income and expenses. Segment result Six months to Adjusted30 September 2007 Operating Impairment Other operating profit losses adjustments profit £m £m £m £mGermany 644 - - 644Italy 776 - - 776Spain 715 - - 715UK 243 - - 243Arcor 92 - - 92Other Europe 799 - - 799 ----------------------------------------------------------Europe 3,269 - - 3,269 ----------------------------------------------------------Eastern Europe 156 - 15 171Middle East, Africa and Asia 330 - - 330Pacific 63 - - 63Associates - US 1,180 - - 1,180 ----------------------------------------------------------EMAPA 1,729 - 15 1,744 ----------------------------------------------------------Common functions 210 - - 210 ---------------------------------------------------------- 5,208 - 15 5,223 ========================================================== Six months to Adjusted30 September 2006 Operating Impairment Other operating (loss)/profit losses adjustments profit £m £m £m £mGermany (5,976) 6,700 - 724Italy (561) 1,400 - 839Spain 585 - - 585UK 318 - - 318Arcor 83 - - 83Other Europe 812 - - 812 ----------------------------------------------------------Europe (4,739) 8,100 - 3,361 ----------------------------------------------------------Eastern Europe 118 - - 118Middle East, Africa and Asia 339 - - 339Pacific 66 - - 66Associates - US 1,021 - (6) 1,015Associates - Other 106 - - 106 ----------------------------------------------------------EMAPA 1,650 - (6) 1,644 ----------------------------------------------------------Common functions 137 - (1) 136 ---------------------------------------------------------- (2,952) 8,100 (7) 5,141 ========================================================== Year ended Adjusted31 March 2007 Operating Impairment Other operating (loss)/profit losses adjustments profit £m £m £m £mGermany (5,345) 6,700 (1) 1,354Italy (3,325) 4,900 - 1,575Spain 1,100 - - 1,100UK 511 - - 511Arcor 171 - - 171Other Europe 1,448 - - 1,448 ----------------------------------------------------------Europe (5,440) 11,600 (1) 6,159 ----------------------------------------------------------Eastern Europe 184 - - 184Middle East, Africa and Asia 694 - - 694Pacific 159 - - 159Associates - US 2,080 - (3) 2,077Associates - Other 638 - (508) 130 ----------------------------------------------------------EMAPA 3,755 - (511) 3,244 ----------------------------------------------------------Common functions 121 - 7 128 ---------------------------------------------------------- (1,564) 11,600 (505) 9,531 ========================================================== 3 Taxation Six months Six months Year ended to 30 to 30 31 September September March 2007 2006 2007 £m £m £mUnited Kingdom corporation tax benefit at 30% (2006: 30%): Current year - - - Adjustments in respect of prior years (65) (39) (30) Overseas corporation tax: Current year 1,393 2,084 2,928 Adjustments in respect of prior years (3) (162) 215 --------- --------- ---------Total current tax expense 1,325 1,883 3,113 --------- --------- ---------Deferred tax: United Kingdom deferred tax (66) (50) (49) Overseas deferred tax (26) (615) (641) --------- --------- ---------Deferred tax benefit (92) (665) (690) --------- --------- ---------Total income tax expense 1,233 1,218 2,423 ========= ========= ========= 4 Earnings/(loss) per share Six months Six months Year ended to 30 to 30 31 September September March 2007 2006 2007 million million million Weighted average number of shares for basic earnings/(loss) per share 52,935 57,515 55,144Dilutive potential shares: restricted shares and share options(1) 181 - - --------- --------- ---------Weighted average number of shares for diluted earnings/(loss) per share 53,116 57,515 55,144 ========= ========= ========= £m £m £mEarnings/(loss) for basic and diluted earnings per share: Continuing operations 3,290 (4,611) (4,932) Discontinued operations - (494) (494) --------- --------- ---------Total 3,290 (5,105) (5,426) ========= ========= ========= Note: (1) In the six months ended 30 September 2006 and the year ended 31 March 2007, 140 million shares and 215 million shares, respectively, have been excluded from the calculation of the weighted average number of shares as they are not dilutive. 5 Dividends Six months Six months Year ended to 30 to 30 31 September September March 2007 2006 2007 £m £m £mEquity dividends on ordinary shares: Declared during the period: Final dividend for the year ended 31 March 2007: 4.41 pence per share (2006: 3.87 pence per share) 2,331 2,328 2,328Interim dividend for the year ended 31 March 2007: 2.35 pence per share - - 1,238 --------- --------- --------- 2,331 2,328 3,566 ========= ========= ========= Proposed after the balance sheet date and not recognised as a liability: Final dividend for the year ended 31 March 2007: 4.41 pence per share - - 2,331 ========= ========= =========Interim dividend for the year ending 31 March 2008: 2.49 pence per share (2007: 2.35 pence per share) 1,322 1,238 - ========= ========= ========= 6 Cash flow information Reconciliation of net cash flows from operating activities: Six months to Six months to Year ended 30 September 30 September 31 March 2007 2006 2007 £m £m £mProfit/(loss) for the period from continuing operations 3,327 (4,548) (4,806)Loss for the period from discontinued operations - (491) (491) Adjustments(1): Share-based payment 54 49 93 Depreciation and amortisation 2,755 2,488 5,111 Loss on disposal of property, plant and equipment 30 19 44 Share of result in associated undertakings (1,443) (1,413) (2,728) Impairment losses - 8,100 11,600 Other income and expense 15 (1) (502) Non-operating income and expense (250) (10) (4) Investment income (382) (425) (789) Financing costs 1,280 805 1,604 Income tax expense 1,233 1,088 2,293 Loss on disposal of discontinued operations - 747 747 Increase in inventory (106) (92) (23) Increase in trade and other receivables (288) (868) (753) Increase in trade and other payables 122 744 1,175 --------- --------- ---------Cash generated by operations 6,347 6,192 12,571Tax paid (1,487) (1,217) (2,243) --------- --------- ---------Net cash flows from operating activities 4,860 4,975 10,328 ========= ========= =========Note: (1) In the six months to 30 September 2006 and the year ended 31 March 2007, adjustments include amounts relating to continuing and discontinued operations. 7 Transactions with equity shareholders Called up Share Own Additional Capital share premium shares paid-in redemption capital account held capital reserve £m £m £m £m £m1 April 2006 4,165 52,444 (8,198) 100,152 128Issue of new shares 1 25 - (7) -Own shares released on vesting of share awards - - 45 - -Share consolidation - (9,026) - - -B share capital redemption - - - - 5,707B share preference dividend - - - - 3,286Share-based payment charge, inclusive of tax charge of £3 million - - - 46 - ------- ------- ------- --------- --------30 September 2006 4,166 43,443 (8,153) 100,191 9,121 Issue of new shares 6 129 - (37) -Own shares released on vesting of share awards - - 106 - -B share capital redemption - - - - 6B share preference dividend - - - - 5Share-based payment charge, inclusive of tax charge of £13 million - - - 31 - ------- ------- ------- --------- --------31 March 2007 4,172 43,572 (8,047) 100,185 9,132 Issue of new shares 8 206 - (114) -Own shares released on vesting of share awards - 4 110 (4) -B share capital redemption - - - - 4Share-based payment charge, inclusive of tax credit of £10 million - - - 64 - ------- ------- ------- --------- --------30 September 2007 4,180 43,782 (7,937) 100,131 9,136 ======= ======= ======= ========= ======== 8 Movements in accumulated other recognised income and expense Available-for- sale Asset Translation Pensions investments revaluation reserve reserve reserve surplus Total £m £m £m £m £m1 April 2006 3,043 (109) 1,044 112 4,090(Losses)/gains arising in the period (3,279) 26 641 - (2,612)Transfer to the income statement on disposal 794 - - - 794Tax effect - (8) - - (8) ------- ------- ------- -------- -------30 September 2006 558 (91) 1,685 112 2,264(Losses)/gains arising in the period (523) 39 1,467 - 983Transfer to the income statement on disposal 44 - - - 44Tax effect 22 (7) - - 15 ------- ------- ------- -------- -------31 March 2007 101 (59) 3,152 112 3,306Gains arising in the period 779 75 2,568 - 3,422Transfer to the income statement on disposal (7) - (570) - (577)Tax effect (17) (22) - - (39) ------- ------- ------- -------- -------30 September 2007 856 (6) 5,150 112 6,112 ======= ======= ======= ======== ======= 9 Movements in retained losses Six months to Six months to Year ended 30 September 30 September 31 March 2007 2006 2007 £m £m £m1 April (85,253) (67,356) (67,356)Profit/(loss) for the period 3,290 (5,105) (5,426)Dividends (2,331) (2,328) (3,566)Expiration of equity put right - 142 142Loss on issue of treasury shares (52) (16) (43)B share capital redemption (4) (5,707) (5,713)B share preference dividend - (3,286) (3,291)Grant of equity put right 333 - -Other movements 18 - - -------- -------- ---------30 September / 31 March (83,999) (83,656) (85,253) ======== ======== ========= 10 Acquisitions Hutchison Essar Limited (since renamed Vodafone Essar Limited) On 8 May 2007, the Group completed the acquisition of 100% of CGP Investments(Holdings) Limited ("CGP"), a company with interests in Vodafone Essar Limited("Vodafone Essar"), from Hutchison Telecommunications International Limited forcash consideration of US$10.9 billion (£5.5bn). Following this transaction, theGroup has a controlling financial interest in Vodafone Essar. The initialpurchase price allocation has been determined to be provisional pending thecompletion of the final valuation of the fair value of assets acquired. Thetransaction has been accounted for using the purchase method of accounting. Fair value Book value adjustments Fair value £m £m £mNet assets acquired: Identifiable intangible assets 121 3,068 3,189(1)Property, plant and equipment 1,215 (145) 1,070Other investments 199 - 199Deferred tax assets 33 60 93Inventory 5 (2) 3Trade and other receivables 285 15 300Cash and cash equivalents 51 - 51Deferred tax liabilities - (547) (547)Short and long term borrowings(2) (1,466) - (1,466)Trade and other payables (546) (19) (565) -------- -------- -------- (103) 2,430 2,327 ======== ========Minority interests (958)Written put options over minority interests(2) 217Goodwill 3,893 --------Total consideration (including £24 million of directly attributable costs)(3) 5,479 ======== Notes: (1) Identifiable intangible assets of £3,189 million consist of licences and spectrum fees of £3,045 million and other intangible assets of £144 million. (2) Included within short term and long term borrowings are liabilities of £217 million related to written put options over minority interests. (3) After deducting cash and cash equivalents acquired of £51 million, the net cash outflow on the acquisition was £5,428 million. The goodwill is attributable to the expected profitability of the acquiredbusiness and the synergies expected to arise after the Group's acquisition ofCGP. The results of CGP have been consolidated in the income statement from theacquisition date, 8 May 2007. The weighted average life of licence and spectrumfees was 10 years, the weighted average life of other intangible assets was twoyears and the weighted average life of total intangible assets was nine years. The following unaudited pro forma summary presents the Group as if CGP had beenacquired on 1 April 2007 or 1 April 2006, respectively. The pro forma amountsinclude the results of CGP, amortisation of the acquired intangible assetsrecognised on acquisition and the interest expenses on debt issued as a resultof the acquisition. The pro forma amounts do not include any possible synergiesfrom mergers and acquisitions. The pro forma information is provided forcomparative purposes only and does not necessarily reflect the actual resultsthat would have occurred, nor is it necessarily indicative of future results ofoperations of the combined companies. Six months to Six months to Year ended 30 September 30 September 31 March 2007 2006 2007 £m £m £mRevenue 17,115 16,126 32,274Profit/(loss) for the period 3,289 (5,202) (5,628)Profit/(loss) attributable to equity shareholders 3,259 (5,240) (5,700)Basic earnings/(loss) per share 6.16p (9.11)p (10.34)pDiluted earnings/(loss) per share 6.14p (9.11)p (10.34)p Other The Group completed a number of smaller acquisitions resulting in a cash outflow,net of cash acquired, of £47 million. 11 Disposals Japan - Vodafone K.K. On 17 March 2006, the Group announced an agreement to sell its 97.7% holding inVodafone K.K. to SoftBank. The transaction completed on 27 April 2006 with theGroup receiving cash of approximately JPY1.42 trillion (£6.9 billion) includingthe repayment of intercompany debt of JPY0.16 trillion (£0.8 billion). Inaddition, the Group received non-cash consideration with a fair value ofapproximately JPY0.23 trillion (£1.1 billion), comprised of preferred equity and a subordinated loan. SoftBank also assumed debt of approximately JPY0.13 trillion (£0.6 billion). Vodafone K.K. represented a separate geographical area of operation and, on this basis, Vodafone K.K. was treated as a discontinuedoperation in Vodafone Group Plc's Annual Reports for the years ended 31 March2007 and 2006. A loss of £0.7 billion arose on the disposal, being the proceeds less thecarrying amount of Vodafone K.K.'s net assets and attributable goodwill togetherwith cumulative exchange differences transferred to the income statement ondisposal. Segment information for discontinued operations Six months to Six months to Year ended 30 September 30 September 31 March 2007 2006 2007 £m £m £m Segment revenue - 520 520 ======= ======= ======= Operating profit - 118 118 ======= ======= ======= Cash flows from discontinued operations Six months to Six months to Year ended 30 September 30 September 31 March 2007 2006 2007 £m £m £mNet cash flows from operating activities - 135 135Net cash flows from investing activities - (266) (266)Net cash flows from financing activities - (29) (29) ------- ------- -------Net cash flows - (160) (160)Cash and cash equivalents at the beginning of the period - 161 161Exchange loss on cash and cash equivalents - (1) (1) ------- ------- -------Cash and cash equivalents at the end of the period - - - ======= ======= ======= India - Bharti Airtel Limited In conjunction with the acquisition of Vodafone Essar, the Group entered into ashare sale and purchase agreement with a Bharti group company regarding theGroup's 5.60% direct shareholding in Bharti Airtel Limited. On 9 May 2007, aBharti group company irrevocably agreed to purchase this shareholding. Duringthe six months ended 30 September 2007, the Group received £654 million in cashconsideration for 4.99% of such shareholding, with the Group's remaining 0.61%direct shareholding to be transferred by November 2008. The gain on disposalamounted to £250 million. 12 Related party transactions Transactions between the Company and its subsidiaries, joint ventures andassociates represent related party transactions. Transactions with subsidiarieshave been eliminated on consolidation. Transactions between the Company and itsjoint ventures are not material to the extent that they have not been eliminatedthrough proportionate consolidation. Except as disclosed below, no materialrelated party transactions have been entered into, during the period, whichmight reasonably affect any decisions made by users of these CondensedConsolidated Financial Statements. Six months to Six months to Year ended 30 September 30 September 31 March 2007 2006 2007 £m £m £mTransactions with associated undertakings: - Sales of goods and services 113 160 245 ======= ======= =======- Purchase of goods and services 130 163 295 ======= ======= =======Amounts owed to joint ventures included within short term borrowings 1,021 575 842 ======= ======= ======= In the six months ended 30 September 2007, the Group made contributions todefined benefit pension schemes of £31 million (six months ended 30 September2006: £30 million, year ended 31 March 2007: £55 million). Compensation paid to the Company's Board of directors and members of theExecutive Committee will be disclosed in the Group's Annual Report for the yearending 31 March 2008. 13 Other matters Contingent liabilities There have been no material changes to the Group's contingent liabilitiesrelating to performance bonds and credit guarantees in the six months ended 30September 2007. There have been no changes to any legal or arbitrationproceedings involving the Group in the six months ended 30 September 2007 whichare expected to have, or have had, a material effect on the financial positionor profitability of the Group. Companies in the Group have received notices from the Indian tax authoritiesalleging possible liability for failure to deduct withholding tax fromconsideration paid to Hutchison Telecommunications International Limited("HTIL") in respect of HTIL's gain on its disposal to Vodafone of companies withinterests in Vodafone Essar. Initial hearings have been held before the Indian Courts. At this stage no accurate quantification of any cost which may arise canbe made but Vodafone believes that neither it nor any other member of the Groupis liable for such withholding tax and intends to defend this position vigorously. Secured borrowings The Group has assumed £773 million of secured debt as a result of theacquisition of Vodafone Essar. There are no other material changes to liens orencumbrances on the Group's assets to those disclosed on page 123 of the Group'sAnnual Report for the year ended 31 March 2007. Capital commitments The Group's capital commitments have increased to £1,672 million at 30 September2007 (31 March 2007: £1,149 million) primarily due to network infrastructurepurchase commitments in India. Purchase commitments The Group's purchase commitments have increased to £2,332 million at 30September 2007 (31 March 2007: £1,281 million). Seasonality or cyclicality of interim operations The Group's financial results have not, historically, been subject tosignificant seasonal trends. Events after the balance sheet date On 6 October 2007, the Group announced that it had agreed to acquire Tele2Italia SpA ("Tele2 Italy") and Tele2 Telecommunication Services SLU ("Tele2Spain") from Tele2 AB Group for cash consideration of €775 million (£537million) on a debt free basis. Tele2 Italy and Tele2 Spain provide nationwide fixed line telecommunications andbroadband services. This transaction will enable the Group to benefit from thehigh growth broadband markets in two of Vodafone's key European markets. The transaction is expected to be completed by the end of the calendar year,following the receipt of relevant regulatory approval. Issuances and repayment of debt See "Cash flows and funding" on pages 17 to 18 for details of issuances andrepayment of debt. 14 Summary of differences between IFRS and US GAAP Change in accounting principle - income taxes On 1 April 2007, the Group adopted FASB Interpretation No. 48, "Accounting forUncertainty in Income Taxes, an interpretation of SFAS 109"("FIN 48"). FIN 48 hasno impact on the IFRS accounting for tax uncertainties, nor on the Group's expectations for eventual cash settlements, as the latter are not based on accounting principles. FIN 48 provides guidance on the amounts to be reported in financial statementsin respect of uncertain tax positions, which may be different from the amountsincluded in tax returns. Measurement of uncertain tax positions under FIN 48 isbased on a cumulative probability that takes into consideration all possibleresolutions. Under IFRS, the Group measures its liability for tax uncertaintiesbased on management's best estimate of the most likely resolution. Upon adoption of FIN 48, the Group recognised a decrease of £324 million in itsUS Generally Accepted Accounting Principles ("US GAAP") provisions for uncertaintax positions, including an increase of £4 million in respect of entitiesaccounted for using the equity method and a decrease of £99 million in theassociated interest accrual. These have been accounted as adjustments to US GAAPretained earnings. At 1 April 2007, the Group's US GAAP unrecognised tax benefits amounted to£6,291 million in respect of a number of uncertain tax positions, including theongoing Controlled Foreign Company ("CFC") enquiry in the UK. Additionally,£13,592 million was unrecognised for the uncertain tax effect of losses inrespect of a write down in the value of investments in Germany. Theseuncertainties are described further on pages 105 to 106 of the Group's AnnualReport for the year ended 31 March 2007. If these benefits were recognised,£4,779 million (plus £13,592 million for the German write down) would have afavourable effect on the US GAAP effective tax rate, while the remaining amountswould impact US GAAP equity or goodwill or are related to temporary differencesfor which offsetting deductions are available. The Group is subject to ongoing examination by the tax authorities of thevarious jurisdictions in which it operates and it is difficult to predict theultimate outcome or the timing of resolution for uncertain tax positions. At 1April 2007, it was considered reasonably possible that the Group's US GAAPbalance for uncertain tax positions could decrease by £400 million to £625million within the current financial year as a result of the potentialresolution of historic issues with the relevant tax authorities or expiry ofstatutes of limitations. Other factors that could be reasonably expected to affect the amount of provisions this year and in future years are the emergenceof new uncertain tax positions and new information regarding existing tax positions. Since the date of adoption, the German tax rate has decreased, causing theunrecognised tax benefit of £13,592 million at 1 April 2007 in respect of theGerman write down to decrease by approximately £3 billion. The following tax years remain open pursuant to the statute of limitations inVodafone's major jurisdictions. It is not possible to conclude when settlementwill be reached on these open years, nor the likely settlement amount: UK 2000 onwards Germany 1999 onwards Italy 2002 onwards Spain 2004 onwards USA (federal) 2003 onwards It is the Group's policy to recognise interest accrued in respect ofunrecognised tax benefits within interest expense and any accrued penaltieswithin the tax expense. As at the date of adoption of FIN 48 the Group held USGAAP accruals for interest of £1,098 million. Reconciliations to US GAAP The Condensed Consolidated Financial Statements have been prepared in accordancewith IFRS, which differ in certain significant respects from US GAAP. Thefollowing table summarises the effects of the adjustments from IFRS to US GAAP.Further details on the nature of the adjustments can be found on pages 138 to142 in the Group's Annual Report for the year ended 31 March 2007. 30 30 31 September September March 2007 2006 2007 £m £m £mRevenue (IFRS) 16,994 15,594 31,104Adjustments to derive US GAAP revenue: Discontinued operations - (31) (31) Basis of consolidation (3,041) (3,139) (6,232) Connection revenue - 170 518 -------- -------- --------Revenue (US GAAP) 13,953 12,594 25,359 ======== ======== ======== Profit/(loss) for the period (IFRS) 3,327 (5,039) (5,297) Adjustments to derive US GAAP net loss: Investments accounted for under the equity method (1,980) (733) 680 Connection revenue and costs - 2 5 Goodwill and other intangible assets (6,543) (6,681) (13,352) Impairment losses - 6,700 6,700 Amortisation of capitalised interest (56) (54) (107) Interest capitalised during the period 28 23 52 Other 30 670 1,261 Income taxes 4,756 2,650 5,862 Minority interests (37) (66) (129) -------- -------- --------Net loss (US GAAP) (475) (2,528) (4,325) ======== ======== ========Total equity (IFRS) 70,128 67,573 67,293Adjustments to derive US GAAP shareholders' equity: Investments accounted for under the equity (3,184) (2,883) (1,070) method Connection revenue and costs - (3) - Goodwill and other intangible assets 19,492 32,232 25,515 Capitalised interest 1,334 1,382 1,342 Other (1,615) 60 86 Income taxes (16,920) (25,382) (21,859) Minority interests 1,277 (197) (226) -------- -------- --------Shareholders' equity (US GAAP) 70,512 72,782 71,081 ======== ======== ======== INDEPENDENT REVIEW REPORT BY DELOITTE & TOUCHE LLP TO VODAFONE GROUP PLC Introduction We have been engaged by the Company to review the Condensed ConsolidatedFinancial Statements in the half-yearly financial report for the six monthsended 30 September 2007 which comprise the consolidated income statement, theconsolidated balance sheet, the consolidated statement of recognised income andexpense, the consolidated cash flow statement and related notes 1 to 14. We haveread the other information contained in the half-yearly financial report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the information in the Condensed Consolidated FinancialStatements. This report is made solely to the Company in accordance with InternationalStandard on Review Engagements 2410 issued by the Auditing Practices Board. Ourwork has been undertaken so that we might state to the Company those matters weare required to state to them in an independent review report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the Company, for our review work, for thisreport, or for the conclusions we have formed. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approvedby, the directors. The directors are responsible for preparing the half-yearlyfinancial report in accordance with the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. The annual financial statements of the Group are prepared in accordance withIFRS as adopted by the European Union. As disclosed in note 1, the CondensedConsolidated Financial Statements included in this half-yearly financial reporthave been prepared in accordance with International Accounting Standard 34,"Interim Financial Reporting" ("IAS 34") as adopted by the European Union and asissued by the International Accounting Standards Board. Our responsibility Our responsibility is to express to the Company a conclusion on the CondensedConsolidated Financial Statements in the half-yearly financial report based onour review. Scope of review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, "Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity" issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making inquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion. IFRS conclusions Based on our review, nothing has come to our attention that causes us to believethat the accompanying Condensed Consolidated Financial Statements are notprepared, in all material respects, in accordance with IAS 34, as adopted by the European Union and as issued by the International Accounting Standards Board, and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. US GAAP IFRS, both as adopted by the European Union and as issued by the InternationalAccounting Standards Board, vary in significant respects from the accountingprinciples generally accepted in the United States of America. Informationrelating to the nature and effect of such differences is presented in note 14 tothe Condensed Consolidated Financial Statements. Deloitte & Touche LLPChartered AccountantsLondon, United Kingdom13 November 2007 OTHER INFORMATION 1) Copies of this document are available from the Company's registered office: Vodafone HouseThe ConnectionNewburyBerkshireRG14 2FN 2) This half-yearly financial report will be available on the Vodafone Group Plc website, www.vodafone.com, from 13 November 2007. For further information: Vodafone Group Plc Investor Relations Media RelationsTelephone: +44 (0) 1635 664447 Telephone: +44 (0) 1635 664444 High resolution photographs are available to the media free of charge atwww.fovea.tv. Vodafone, Vodafone Mobile Connect, Vodafone Mobile Connect USB Modem, VodafoneMobile Connect Card with 3G broadband, Vodafone Mobile Connect 3G/GPRS datacard, Vodacom, ihug, Vodafone at Home, Vodafone Office, Vodafone live! andVodafone Passport are trademarks of the Vodafone Group. Other product andcompany names mentioned herein may be the trademarks of their respective owners. DEFINITION OF TERMS Term Definition Change at Change calculated by restating the prior period's resultsconstant exchange as if they had been generated at the current period's rates exchange rates. For definitions of other terms please refer to page 159 of the Group's AnnualReport for the year ended 31 March 2007. Copyright (c) Vodafone Group 2007 FORWARD-LOOKING STATEMENTS This document contains "forward-looking statements" within the meaning of the USPrivate Securities Litigation Reform Act of 1995 with respect to the Group'sfinancial condition, results of operations and businesses and certain of theGroup's plans and objectives. In particular, such forward-looking statements include statements with respectto Vodafone's expectations as to launch and roll out dates for products,services or technologies offered by Vodafone; intentions regarding thedevelopment of products and services introduced by Vodafone or by Vodafone inconjunction with initiatives with third parties; the ability to integrate alloperations throughout the Group; the development and impact of new mobiletechnology; anticipated benefits to the Group from core cost reductionprogrammes, outsourcing, supply chain management and IT operations initiatives;growth in customers and usage, including improvements in customer mix; theGroup's expectations for revenue, operating profit, depreciation andamortisation charges, capitalised fixed asset additions, free cash flow, cashpayments for tax and associated interest and effective tax rate contained withinthe outlook statement on page 5 of this document and under improved outlook onpage 1 of this document, and expectations for the Group's future performancegenerally, including average revenue per user, costs, capital expenditures,operating expenditures and margins and the contribution to the Group's revenueof data services, broadband services, fixed location pricing and mobileadvertising; the rate of dividend growth by the Group or its existinginvestments; expectations regarding the Group's access to adequate funding forits working capital requirements; expected effective tax rates and expected taxpayments; the ability to realise synergies through cost savings, revenuegenerating services, benchmarking and operational experience; futureacquisitions, including increases in ownership in existing investments, thetimely completion of pending acquisition transactions and pending offers forinvestments; future disposals; the management of the Group's portfolio; mobilepenetration and coverage rates; the impact of regulatory and legal proceedingsinvolving Vodafone and of scheduled or potential regulatory changes;expectations with respect to long term shareholder value growth; Vodafone'sability to be the mobile market leader, overall market trends and other trendprojections. Forward-looking statements are sometimes, but not always, identified by theiruse of a date in the future or such words as "anticipates", "aims", "could","may", "should", "expects", "believes", "intends", "plans" or "targets". Bytheir nature, forward-looking statements are inherently predictive, speculativeand involve risk and uncertainty because they relate to events and depend oncircumstances that will occur in the future. There are a number of factors thatcould cause actual results and developments to differ materially from thoseexpressed or implied by these forward-looking statements. These factors include,but are not limited to, the following: changes in economic or politicalconditions in markets served by operations of the Group that would adverselyaffect the level of demand for mobile services; greater than anticipatedcompetitive activity, from both existing competitors and new market entrants,including Mobile Virtual Network Operators, which could require changes to theGroup's pricing models, lead to customer churn and make it more difficult toacquire new customers, and reduce profitability; the impact of investment innetwork capacity and the deployment of new technologies, or the rapidobsolescence of existing technology; slower than expected customer growth andreduced customer retention; changes in the spending patterns of new and existingcustomers; the possibility that new products and services will not becommercially accepted or perform according to expectations or that vendors'performance in marketing these technologies will not meet the Group'srequirements; the Group's ability to win 3G licence allocations; the Group'sability to realise expected synergies and benefits associated with 3Gtechnologies; a lower than expected impact of new or existing products, servicesor technologies on the Group's future revenue, cost structure and capitalexpenditure outlays; the ability of the Group to harmonise mobile platforms anddelays, impediments or other problems associated with the roll out and scope ofand other new or existing products, services or technologies in new markets; theability of the Group to offer new services and secure the timely delivery ofhigh quality, reliable GPRS and 3G handsets, network equipment and other keyproducts from suppliers; the Group's ability to develop competitive data contentand services that will attract new customers and increase average usage; futurerevenue contributions of both voice and non-voice services; greater thananticipated prices of new mobile handsets; changes in the costs to the Group ofor the rates the Group may charge for terminations and roaming minutes; theGroup's ability to achieve meaningful cost savings and revenue improvements as aresult of its cost reduction programmes and outsourcing initiatives; the abilityto realise benefits from entering into partnerships for developing data andinternet services and entering into service franchising and brand licensing; thepossibility that the pursuit of new, unexpected strategic opportunities may havea negative impact on the Group's financial performance; developments in theGroup's financial condition, earnings and distributable funds and other factorsthat the Board of Directors takes into account in determining the level ofdividends; any unfavourable conditions, regulatory or otherwise, imposed inconnection with pending or future acquisitions or dispositions and theintegration of acquired companies in the Group's existing operations; the riskthat, upon obtaining control of certain investments, the Group discoversadditional information relating to the businesses of that investment leading torestructuring charges or write-offs or with other negative implications; changesin the regulatory framework in which the Group operates, including possibleaction by regulators in markets in which the Group operates or by the EUregulating rates the Group is permitted to charge; the impact of legal or otherproceedings against the Group or other companies in the mobiletelecommunications industry; the possibility that new marketing or usagestimulation campaigns or efforts and customer retention schemes are not aneffective expenditure; the possibility that the Group's integration efforts donot reduce the time to market for new products or improve the Group's costposition; loss of suppliers or disruption of supply chains; the Group's abilityto satisfy working capital requirements through borrowing in capital markets,bank facilities and operations; changes in exchange rates, includingparticularly the exchange rate of pounds sterling to the euro and the US dollar;changes in statutory tax rates and profit mix which would impact the weightedaverage tax rate; changes in tax legislation in the jurisdictions in which theGroup operates; and final resolution of open issues which might impact theeffective tax rate; timing of tax payments relating to the resolution of openissues. Furthermore, a review of the reasons why actual results and developments maydiffer materially from the expectations disclosed or implied withinforward-looking statements can be found under "Risk Factors, Seasonality andOutlook - Risk Factors" in Vodafone Group Plc's Annual Report for the year ended31 March 2007. All subsequent written or oral forward-looking statementsattributable to the Company or any member of the Group or any persons acting ontheir behalf are expressly qualified in their entirety by the factors referredto above. No assurances can be given that the forward-looking statements in thisdocument will be realised. Neither Vodafone nor any of its affiliates intends toupdate these forward-looking statements. USE OF NON-GAAP FINANCIAL INFORMATION In presenting and discussing the Group's reported financial position, operatingresults and cash flows, certain information is derived from amounts calculatedin accordance with IFRS but this information is not itself an expresslypermitted GAAP measure. Such non-GAAP measures should not be viewed in isolationas alternatives to the equivalent GAAP measure. A summary of certain non-GAAP measures included in this results announcement,together with details where additional information and reconciliation to thenearest equivalent GAAP measure can be found, is shown below. Location in this results announcement of reconciliation Non-GAAP measure Equivalent GAAP measure and further information ------------------------- ------------------------ ------------------------ EBITDA Operating profit/(loss) Group Results on page 6 Adjusted operating profit Operating profit/(loss) Group Results on page 6 Adjusted profit before tax Profit/(loss) before tax Taxation on page 8 Adjusted profit from Profit/(loss) from Earnings/(loss) per share continuing continuing on operations attributable operations attributable page 8 to equity shareholders to equity shareholders Adjusted earnings per share Basic earnings/(loss) per Earnings/(loss) per share share on page 8 Operating free cash flow Net cash flows from Cash flows and funding operating beginning activities on page 17 Free cash flow Net cash flows from Cash flows and funding operating beginning activities on page 17 Net debt Borrowings Cash flows and funding beginning on page 17 Adjusted effective tax rate Income tax expense as a Taxation on page 8 percentage of profit/(loss) before taxation ADDITIONAL INVESTOR INFORMATION AND KEY PERFORMANCE INDICATORS REGIONAL ANALYSIS FOR THE SIX MONTHS ENDED 30 SEPTEMBER Adjusted Capitalised fixed Operating free Revenue EBITDA operating asset additions cash flow profit/(loss) ------------- ---------------- ---------------- ------------------ ----------------- 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £m £m £m £m £mEUROPE Germany 2,650 2,827 1,150 1,263 644 724 167 198 1,100 990Italy 2,097 2,174 1,036 1,128 776 839 145 184 837 878Spain 2,439 2,268 949 813 715 585 194 213 595 432UK 2,717 2,549 734 785 243 318 216 305 430 393Arcor 768 706 138 126 92 83 94 76 1 (16) Other Europe Greece 599 636 210 250 130 167 66 74 159 160 Netherlands 628 600 214 176 141 102 41 50 139 136 Portugal 502 466 186 168 122 107 42 44 87 101 Other(1) 514 514 217 225 406 436 30 55 159 146 ------------- ---------------- ---------------- ------------------ ----------------- 2,243 2,216 827 819 799 812 179 223 544 543 Intra-region revenue (245) (256) - - - - - - - - ------------- ---------------- ---------------- ------------------ -----------------Total Europe 12,669 12,484 4,834 4,934 3,269 3,361 995 1,199 3,507 3,220 EMAPA Eastern Europe Romania 405 355 195 175 86 68 57 82 149 121 Turkey(2) 558 283 102 65 18 (18) 97 36 (73) 134 Other 561 524 181 164 67 68 70 95 140 84 ------------- ---------------- ---------------- ------------------ ----------------- 1,524 1,162 478 404 171 118 224 213 216 339Middle East, Africa and Asia Egypt 443 355 223 198 158 155 114 66 146 137 India(3) 723 - 246 - (18) - 389 - 20 - Vodacom 768 727 269 261 164 152 62 92 125 139 Other(4) 85 165 38 72 26 32 37 83 9 15 ------------- ---------------- ---------------- ------------------ ----------------- 2,019 1,247 776 531 330 339 602 241 300 291Pacific 758 666 174 165 63 66 91 104 29 61Associates - US - - - - 1,180 1,015 - - - -Associates - other - - - - - 106 - - - - ------------- ---------------- ---------------- ------------------ -----------------Total EMAPA 4,301 3,075 1,428 1,100 1,744 1,644 917 558 545 691 Common functions 80 86 303 208 210 136 70 67 86 110Inter-region revenue (56) (51) - - - - - - - - ------------- ---------------- ---------------- ------------------ -----------------Total Group 16,994 15,594 6,565 6,242 5,223 5,141 1,982 1,824 4,138 4,021 ============= ================ ================ ================== ================= Notes: (1) Includes elimination of £5 million (2006: £5 million) of intercompany revenue between operating companies within the Other Europe segment. (2) Presents the results from 24 May 2006, being the acquisition date. (3) Presents the results of Vodafone Essar from 8 May 2007, being the acquisition date. (4) Includes the results of Bharti Airtel. See page 35 for definition of terms and page 37 for use of non-GAAP financialinformation. REGIONAL RESULTSFOR THE SIX MONTHS ENDED 30 SEPTEMBER Group Quarter Quarter Quarter Quarter ended ended ended ended ---------------- ---------------- ------------ ------------ 30 June 30 Sept 30 June 30 Sept 30 June 30 Sept 2007 2007 2006 2006 % change % change £m £m £m £m £ Organic £ Organic Total revenue 8,253 8,741 7,679 7,915 7.5 4.0 10.4 4.8 ================ ================Voice revenue(1) 5,904 6,256 5,574 5,743 5.9 1.1 8.9 1.1Messaging revenue 950 998 851 935 11.6 9.5 6.7 7.5Data revenue 452 515 334 316 35.3 32.2 63.0 58.5Fixed line revenue(1) 402 400 383 387 5.0 11.5 3.4 8.3Other service revenue 5 5 - - ---------------- ---------------- Service revenue 7,713 8,174 7,142 7,381 8.0 4.2 10.7 4.9 ================ ================ Europe Quarter Quarter Quarter Quarter ended ended ended ended ---------------- ---------------- ------------ ------------ 30 June 30 Sept 30 June 30 Sept 30 June 30 Sept 2007 2007 2006 2006 % change % change £m £m £m £m £ Organic £ Organic Total revenue 6,219 6,450 6,220 6,264 - 1.1 3.0 3.0 ================ ================Voice revenue(1) 4,292 4,412 4,445 4,475 (3.4) (2.4) (1.4) (1.4)Messaging revenue 764 811 711 747 7.5 8.5 8.6 8.7Data revenue 398 445 312 291 27.6 28.9 52.9 53.0Fixed line revenue(1) 391 389 364 367 7.4 8.7 6.0 6.4Other service revenue 5 6 - - ---------------- ---------------- Service revenue 5,850 6,063 5,832 5,880 0.3 1.4 3.1 3.1 ================ ================ Quarter Quarter Quarter Quarter ended ended ended ended ---------------- ---------------- ------------ ------------ 30 June 30 Sept 30 June 30 Sept 30 June 30 Sept 2007 2007 2006 2006 % change % change £m £m £m £m £ Organic £ OrganicService revenue Germany 1,238 1,277 1,339 1,351 (7.5) (6.3) (5.5) (5.5)Italy 1,005 1,020 1,051 1,045 (4.4) (3.1) (2.4) (2.3)Spain 1,110 1,141 1,001 1,049 10.9 12.5 8.8 8.9UK 1,209 1,294 1,153 1,192 4.9 4.9 8.6 8.5Arcor 375 383 346 351 8.4 9.9 9.1 9.3Other 1,028 1,076 1,036 1,054 (0.8) 0.6 2.1 2.1Eliminations (115) (128) (94) (162) ---------------- ---------------- 5,850 6,063 5,832 5,880 0.3 1.4 3.1 3.1 ================ ================ EMAPA Quarter Quarter Quarter Quarter ended ended ended ended ---------------- ---------------- ------------ ------------ 30 June 30 Sept 30 June 30 Sept 30 June 30 Sept 2007 2007 2006 2006 % change % change £m £m £m £m £ Organic £ Organic Total revenue 2,021 2,280 1,436 1,639 40.7 18.7 39.1 13.5 ================ ================Voice revenue(1) 1,631 1,868 1,143 1,288 42.7 16.4 45.0 11.7Messaging revenue 189 188 142 189 33.1 15.6 (0.5) 1.3Data revenue 55 72 25 31 120.0 64.5 132.3 101.7Fixed line revenue(1) 11 11 19 20 (42.1) 740.7 (45.0) 232.3 ---------------- ----------------Service revenue 1,886 2,139 1,329 1,528 41.9 18.2 40.0 13.2 ================ ================ Quarter Quarter Quarter Quarter ended ended ended ended ---------------- ---------------- ------------ ------------ 30 June 30 Sept 30 June 30 Sept 30 June 30 Sept 2007 2007 2006 2006 % change % change £m £m £m £m £ Organic £ Organic Service revenue Eastern Europe 714 759 477 646 49.7 12.9 17.5 9.2Middle East, Africa & Asia 837 1,044 559 579 49.7 28.9 80.3 21.6Pacific 335 336 293 303 14.3 9.5 10.9 5.5 ---------------- ---------------- 1,886 2,139 1,329 1,528 41.9 18.2 40.0 13.2 ================ ================ Note: (1) Revenue relating to fixed line activities provided by mobile operators, previously classified within voice revenue, is now presented as fixed line revenue, together with revenue from fixed line operators and DSL. All prior periods have been adjusted accordingly. RECONCILIATION OF ADJUSTED EARNINGSFOR THE SIX MONTHS ENDED 30 SEPTEMBER Reported Adjustments Adjusted £m £m £m30 September 2007 Operating profit 5,208 15 (1) 5,223Non-operating income and expense 250 (250)(2) -Investment income and financing costs (898) 376 (3) (522) ---------------------------------- Profit before taxation 4,560 141 4,701Income tax expense (1,233) (34)(4) (1,267) ---------------------------------- Profit for the period 3,327 107 3,434 ==================================Attributable to: - Equity shareholders 3,290 107 3,397- Minority interests 37 - 37 Basic earnings per share from continuing operations 6.22p 6.42p Notes: (1) Consists of a £15 million adjustment relating to other income and expense. (2) Adjustment relates to the profit on disposal of a stake in Bharti Airtel. (3) Includes a £286 million adjustment in relation to the change in fair value of equity put rights and similar arrangements (see note 2 in investment income and financing costs on page 7), and a £90 million adjustment in relation to foreign exchange on certain intercompany balances, and on financial instruments received as consideration in the disposal of Vodafone Japan to SoftBank, which completed in April 2006. (4) Represents a £15 million adjustment relating to the recognition of a pre-acquisition deferred tax asset and a £19 million adjustment relating to tax on the adjustments used to derive adjusted profit before tax. Reported Adjustments Adjusted £m £m £m30 September 2006 Operating (loss)/profit (2,952) 8,093 (1) 5,141Non-operating income and expense 10 (10) -Investment income and financing costs (388) (29)(2) (417) ----------------------------------(Loss)/profit before taxation (3,330) 8,054 4,724 Income tax expense (1,218) (2)(3) (1,220) ----------------------------------(Loss)/profit for the period from continuing operations (4,548) 8,052 3,504Loss for the period from discontinued operations (491) 491 (4) - ----------------------------------(Loss)/profit for the period (5,039) 8,543 3,504 ==================================Attributable to: - Equity shareholders (5,105) 8,546 3,441- Minority interests 66 (3) 63Basic (loss)/earnings per share from continuing operations (8.02)p 5.98p Notes: (1) Adjustments relate to impairment losses of £8,100 million (Germany: £6,700 million and Italy £1,400 million), less a £6 million adjustment related to the share of associated undertakings' non-operating income and less a £1 million adjustment relating to other income and expense. (2) Includes a £21 million adjustment in relation to the change in fair value of equity put rights and similar arrangements as well as an £8 million adjustment in relation to foreign exchange on certain intercompany balances and on financial instruments received as consideration in the disposal of Vodafone Japan to SoftBank, which completed in April 2006. (3) Represents tax on the adjustments used to derive adjusted profit before tax. (4) Adjustment relates to the loss for the period attributable to Vodafone Japan which was disposed of in April 2006. SUPPLEMENTARY CASH FLOW INFORMATIONFOR THE SIX MONTHS ENDED 30 SEPTEMBER Operating free cash flow to net debt reconciliation Six months to Six months to 30 September 30 September 2007 2006 £m £mOperating free cash flow from continuing operations 4,138 4,021Operating free cash flow from discontinued operations - (8)Taxation (1,487) (1,217)Dividends received from associated undertakings 476 371Dividends paid to minority shareholders in subsidiary undertakings (66) (34)Dividends received from investments 72 57Interest received 240 256Interest paid (712) (499) ---------------------Free cash flow 2,661 2,947Acquisitions and disposals(1) (5,973) 4,734Written put options over minority interests (2,431) 523Equity dividends paid (2,334) (2,315)Purchase of treasury shares - (43)B share scheme - (9,027)Foreign exchange and other (127) 785 ---------------------Net debt increase (8,204) (2,396)Opening net debt (15,049) (17,833) ---------------------Closing net debt (23,253) (20,229) =====================Note: (1) Includes net cash and cash equivalents paid of £4,724 million and assumed debt of £1,249 million, but excludes liabilities related to written put options over minority interests, which are shown separately. 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