Interim Results - 6 Months to 30 Sept 1999 Part 1

Vodafone AirTouch PLC 16 November 1999 PART 1 VODAFONE AIRTOUCH PLC INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 1999 FINANCIAL HIGHLIGHTS Six months to Six months to Percentage 30 September 30 September increase 1999 1998 % Pro forma basis (1) (2) Proportionate customers at period end 31,481,000 19,831,000 59 Proportionate turnover £5,780m £4,253m 36 Proportionate EBITDA - before exceptional items (3) £1,887m £1,456m 30 Proportionate total Group operating profit -before goodwill and exceptional items (3) £1,303m £1,019m 28 Profit on ordinary activities before taxation (non-proportionate) (4) -before goodwill and exceptional items (3) £1,199m £924m 30 Statutory basis (1) (Details On page 11) Total Group operating profit -before goodwill and exceptional £1,015m £456m 123 items (3) Profit on ordinary activities before taxation -before goodwill and £879m £413m 113 exceptional items (3) Basic earnings/(loss) per share (5) 2.25p 1.74p 29 -before goodwill and exceptional items (3) (0.31)p 2.16p -after goodwill and exceptional items Dividend per share (5) 0.655p 0.624p 5 (1)Pro forma customer and financial information is calculated on the basis that the merger with AirTouch Communications, Inc. took place on 1 April in each period presented, which is further described in Notes 2 and 13 to the interim results. Statutory financial information is calculated on the basis required by accounting standards and includes the results of AirTouch Communications, Inc. from 30 June 1999, the date of closure of the merger. (2)Pro forma proportionate customer and financial information excludes E-Plus Mobilfunk GmbH. (3)Exceptional items comprise exceptional reorganisation costs following the merger with AirTouch Communications, Inc. and profit on disposal of fixed asset investments. (4)Pro forma profit on ordinary activities before taxation, goodwill and exceptional items calculated on a non-proportionate basis is analysed in Note 3 to the interim results. (5)Prior year earnings and dividend per share have been adjusted to give effect to the capitalisation issue on 30 September 1999. Sam Ginn, Chairman of Vodafone AirTouch Plc, stated: 'The coming together of Vodafone and AirTouch as a truly global wireless communications company was a major achievement, and this excellent first set of results from the enlarged Group bear testimony to the strength and resilience of our growing portfolio of international businesses. The Group is well positioned to take advantage of the major opportunities that will undoubtedly arise as we move into the next century.' Chris Gent, Chief Executive of Vodafone AirTouch Plc, commented: 'These results, which have exceeded our expectations, show strong growth and record improvements in operating profit, EBITDA and customer growth, reflecting the progress we wished to see following the merger of the Vodafone and AirTouch operations. All our regions have shown good progress, relative to their competition in their respective markets. During the first half-year we have dealt with the most important business issue facing the Group; namely completing the North American footprint, by achieving agreement with Bell Atlantic, on creating a joint venture which will be the number one operator in the US market and much better able to compete with the national operators that exist today. We have also stepped up our investment in the very important Japanese market and strengthened our alliance with Japan Telecom, which has now become a national operator under the J-Phone brand. Vodafone AirTouch is making outstanding progress and has huge opportunities ahead. We intend to enhance our position as the world-leading provider of mobile communication services.' Group highlights: *Worldwide customer base at a record level of over 31,481,000 proportionate customers. Net new customers of over 6,060,000 in the six month period. *Total customers of 69.0 million in ventures the Group invests in or controls, an increase of 60% on pro forma total venture customers of 43.1 million at 30 September 1998. *Operations in 23 countries with a combined population of approximately 960 million. *Pro forma proportionate EBITDA, before exceptional items, up 30% on the comparable period to £1,887m. Pro forma proportionate total Group operating profit, before goodwill and exceptional items, of £1,303m, up 28% on the comparable period. *Earnings per share growth of 29%, before goodwill and exceptional items. UK highlights: *Market leader with 6,865,000 customers. 1,290,000 net new customers connected in the six months to 30 September 1999, over 2.5 times the number achieved in the comparable period. *Total Group operating profit contribution of £343m, before goodwill, up 14% on the comparable period. *Three-fold growth in usage of Short Message Service (SMS) over the six month period and an 80% growth in the number of active customers using the Recall (voice messaging) service from 30 September 1998. *Launch of 'Vodafone Interactive' programme, using internet technology to provide a range of information and e-commerce services. Europe, Middle East & Africa highlights: *Pro forma proportionate customers increased by 31% in the period to 12,057,000. *Pro forma total Group operating profit contribution from EMEA operations, before goodwill, of £653m, up 40%. *New network licence won in Hungary, increased ownership interest in Italy and announcement of a planned increase in the Group's interest in Poland. *Agreement reached, in October 1999, for disposal of the Group's interest in E-Plus, generating proceeds of approximately £1.14 billion. US & Asia Pacific highlights: *Pro forma proportionate customers increased by 18% in the period to 12,559,000. *Pro forma total Group operating profit contribution from US & Asia Pacific operations, before goodwill and exceptional reorganisation costs of £29m, up 15% to £423m. *Agreement with Bell Atlantic Corp. to create a new US wireless business with a national footprint. The Group will have a 45% shareholding in the new venture. *Ownership increased to over 20% in each of nine regional networks operating in the fast growing Japanese market. UNITED KINGDOM The total UK mobile phone market has shown exceptionally strong growth. Net new customer connections in the six months to 30 September 1999 were 4,705,000, resulting in a total market of 19,593,000 customers compared with 10,467,000 customers at 30 September 1998. Population penetration in the UK is now 34%, up from 26% at the beginning of the period. Vodafone achieved another period of record growth connecting 1,290,000 net new customers, over 2.5 times the growth achieved in the six month period to 30 September 1998, ending the current period with 6,865,000 customers and maintaining its clear market leadership. The UK operations have been reorganised to deliver improved customer service, focus marketing activity and to maintain Vodafone's position as market leader and lowest cost operator in the UK. Turnover in the UK increased by 36% from £967m to £1,313m and total Group operating profit, before goodwill, grew by 14% from £302m to £343m, with connection costs incurred on record customer growth, and tariff cuts, being compensated for by increased usage on a larger customer base. Network business Pay As You Talk (PAYT), Vodafone's prepaid product, has dominated the rapid growth in customers. Vodafone continues to lead the prepaid market and achieved 1,345,000 net new PAYT connections in the six month period. At 30 September 1999, there were 3,190,000 PAYT customers compared to 419,000 customers at 30 September 1998. Vodafone's success with PAYT is reflected in average revenue per customer (ARPU) for the twelve months to 30 September 1999, which has increased to £175 (£198 before trade discounts) from £159 (£178 before trade discounts) at 31 March 1999. PAYT cost to connect for the six months to 30 September 1999 was controlled at £48, compared with £43 in the twelve months to 31 March 1999. Vodafone's contract customer base declined by 55,000 in the period to 3,675,000, primarily due to problems at two independent service providers and customers switching to PAYT. However, the contract customer base continues to be profitably managed with ARPU for the twelve months to 30 September 1999 increasing to £423 (£556 before trade discounts) from £421 for the corresponding period, as increased usage more than compensated for tariff cuts. Contract cost to connect for the six months to 30 September 1999 fell to £89 from £98 in the comparable period. Network churn has increased to 33.2% in the six months ended 30 September 1999, compared to 26.2% in the corresponding period last year, because of higher churn on the contract customer base. Programmes to reduce churn and restore growth on the contract base are being implemented. Vodafone continues to have the widest international roaming capability amongst UK operators with agreements in 102 countries and across 217 networks at 30 September 1999, giving over 150 million customers access to its network. Vodafone has continued to improve network quality despite the significant demands placed upon its capacity by the success of PAYT. Vodafone is committed to further network quality improvement demonstrated by forecast capital expenditure for the year to 31 March 2000 of £589m. 751 base stations were installed in the period with 5,835 in operation at 30 September 1999. Distribution business The acquisition of MC Mobile Services in April 1999, UniqueAir in September 1999 and the service provider business of Scottish Telecom in November 1999 has strengthened Vodafone's wholly owned service providers, with the result that 58% of the contract customer base at the end of the period was managed by in-house companies. An option to dispose of the Group's 20% interest in the Martin Dawes service provider business was exercised in the period, with consideration passing in the second half of the financial year. Market leadership on PAYT has been sustained by continuing to increase availability through a wide range of retailers. Over 2,000 supermarkets are now selling PAYT, in addition to key non- food and catalogue retailers. Throughout the period, Vodafone has continued to work with traditional independent service providers and dealers to balance growth through these channels with that coming from new channels on PAYT. Vodafone Retail has shown continued success with the rollout of electronic top-up at point of sale for PAYT customers being completed in July and average connections per shop increasing by 103%. Vodafone Corporate has continued the successful defence of its leading share in major corporate accounts, although competitive activity has intensified over the period. Value Added and Data Services business Vodafone Value Added and Data Services saw strong growth in both the Short Message (SMS) and Recall services and continued to lead the UK market in the commercial development of data and value added services. The number of PAYT and contract customers using SMS has continued to increase, as has the average number of messages sent by each customer. In September 1999, 48.6 million short messages were carried on the network, compared to 15 million in March 1999. Voice messaging (Recall) has also grown with over 4.6 million active customers at 30 September 1999 compared to 2.5 million at the end of September last year. Future Activities Vodafone intends to bid for a third generation mobile phone service licence (Universal Mobile Telecommunications Service (UMTS)) in the Government's forthcoming spectrum auction. As part of this process, the company has reached agreement with the DTI on a change to its licence to enable national roaming by a new entrant. Vodafone has recently announced the launch of its own Internet Service Provider as part of the 'Vodafone Interactive' programme, which takes advantage of emerging technologies and the evolution of the mobile phone market to offer new services to Vodafone customers. Vodafone Interactive uses internet technology as part of the programme to provide a range of information and e-commerce services, which will be further developed in the coming months. EUROPE, MIDDLE EAST & AFRICA Following the merger with AirTouch, the EMEA region now includes four new subsidiaries - Europolitan and Misrfone (previously associates), Primatel and Telecel, as well as five new associates - Airtel Movil, Belgacom Mobile, Mannesmann Mobilfunk, Omnitel Pronto Italia and Polkomtel. EMEA's proportionate customers increased to 12,057,000 at the end of September 1999, achieving pro forma growth of 2,887,000 customers in the six month period. Pro forma proportionate turnover increased by 43% from £1,466m for the six months ended 30 September 1998 to £2,097m, with a corresponding increase of 44% in pro forma proportionate EBITDA to £738m. Pro forma turnover for the EMEA region in the six months to 30 September 1999 increased by 29% to £1,010m, and pro forma total Group operating profit, before goodwill, increased by 40% to £653m. Belgacom Mobile, in which the Group has a 25% interest, provides service under the Proximus brand name and was the first of three cellular operators in Belgium. The company had over 1,805,000 customers at 30 September 1999, representing an increase of nearly 400,000 customers during the period. The French market continued to experience strong growth in the first half of the financial year. Societe Francaise du Radiotelephone (SFR), one of three cellular network operators in France and in which the Group has a 20% shareholding, reported a 25% increase in customer numbers, ending the period with 5,795,000. The Group has a 34.8% shareholding in Mannesmann Mobilfunk, the largest of the four cellular network operators in Germany, which operates under the brand name D2 Privat. It was the first operator to offer commercial GSM service in Germany, launching service in June 1992. The Company had 8,195,000 customers at 30 September 1999, representing a market share of approximately 42%. Market penetration in Germany has increased to approximately 24% at 30 September 1999, from under 19% at 31 March 1999. Panafon, the Group's 55% owned subsidiary in Greece, continued to lead the market and reported strong profit growth in the first half of the financial year. Its customer base grew by 25% to 1,488,000, an increase of 298,000 since 31 March 1999. At 30 September 1999, Panafon had a market capitalisation of GRD2,152 billion (approximately £4.2 billion). In August 1999, the Group exercised an option to increase its shareholding in Omnitel Pronto Italia (Omnitel) from 17.8% to 21.6%. Omnitel is one of three cellular operators in Italy. The company has traded well in the period since merger completion and its customer base stood at 8,929,000 at 30 September 1999, an increase of over 1,911,000 customers during the six month period. Libertel NV, the Group's 70% subsidiary in the Netherlands, is one of five cellular operators. It reported a market share at 30 September 1999 of approximately 34%. Its customer base increased by 506,000 in the first half year to 1,935,000 at 30 September 1999, of which over 55% are connected to prepaid tariffs. Through an Initial Public Offering on the Amsterdam Stock Exchange in June 1999, ING Group sold down part of its minority shareholding, although the Group's shareholding has remained unchanged. At 30 September 1999, Libertel had a market capitalisation of Euro5.3 billion (approximately £3.4 billion). Telecel, the Group's 50.9% owned subsidiary in Portugal, is one of three cellular network operators. Its customer base increased to over 1,595,000 at 30 September 1999, up from 1,446,000 at 31 March 1999. Telecel is listed on the Lisbon Stock Exchange and, at 30 September 1999, it had a market capitalisation of Euro2.5 billion (approximately £1.6 billion). The Group has a 21.7% shareholding in Airtel Movil (Airtel), one of three cellular network operators in Spain. At 30 September 1999, Airtel had 3,975,000 customers, representing a 51% increase in the six month period. Europolitan, the Group's 71.1% owned subsidiary, is one of three network operators in Sweden. At 30 September 1999, it had 789,000 customers, an increase of 122,000 (18%) since 31 March 1999. At 30 September 1999, its market capitalisation on the Stockholm Stock Exchange was SEK36 billion (approximately £2.7 billion). The Group's 60% subsidiary in Egypt, Misrfone, is the country's second GSM operator. Under the Click GSM brand name, its strong performance continued in the first half of this financial year following its launch in November 1998. The customer base closed at 244,000, representing an increase of over 147,000 since 31 March 1999. 95% of the customer base is connected through prepaid tariffs, in respect of which no connection incentives are paid. Vodacom, in which the Group has a 31.5% shareholding, is one of two GSM network operators in the Republic of South Africa. Vodacom had a strong first half and customers increased by over 430,000 to close at 2,426,000, of which 61% are connected to the Vodago prepaid product. The Group has a 50.1% shareholding in Vodafone Hungary, which was awarded the licence to operate a DCS 1800 network in Hungary in June 1999. The new network, which will be the third cellular operator, is expected to launch service before the end of the year. In addition to the above network operations, at 30 September 1999 other cellular network interests included a subsidiary in Malta (Vodafone Malta - 80%) and minority shareholdings in Poland (Polkomtel - 19.25%), Uganda (Celtel - 36.8%) and Romania (Mobifon - 10%, with an option to increase to 20%). Together, these operations had over 347,000 proportionate customers at 30 September 1999. Disposal of E-Plus Mobilfunk As a condition to the European Commission's approval of the merger of Vodafone and AirTouch Communications, Inc. ('AirTouch'), the Group entered into an undertaking to dispose of its interest in E-Plus following merger completion. On 4 October 1999 an agreement was reached with France Telecom S.A. for the sale of the Group's 17.2% interest, conditional upon regulatory and other consents, for a consideration of DM3.42 billion (approximately £1.14 billion). UNITED STATES & ASIA PACIFIC Proportionate customers for the United States and Asia Pacific region increased by 18%, on a pro forma basis, during the six month period ended 30 September 1999 to 12,559,000. Pro forma proportionate turnover increased from £1,782m for the six months ended 30 September 1998 to £2,333m, an increase of 31%, and pro forma proportionate EBITDA increased by 25% to £701m. Pro forma turnover in the six months to 30 September 1999 increased by 20% to £1,885m, with pro forma total Group operating profit increasing by 15% to £423m, before goodwill and exceptional reorganisation costs of £29m incurred in the US following the merger. The Group is already seeing benefit from this expenditure, which is generating savings in line with the plan developed before merger completion. In the highly competitive US market, the Group's operations increased total proportionate customers in the six months to 30 September 1999 by 458,000 to 9,138,000, connecting a total of 2,140,000 proportionate new customers during the period, including 388,000 proportionate customers connected by the CMT and PCS PrimeCo joint ventures. The rollout of the US digital network is continuing with a corresponding strong growth in the number of digital customers. A total of 2,722,000 proportionate customers were using the digital network at 30 September 1999, which represents 30% of the customer base, compared to 22% at 31 March 1999 and 13% at 30 September 1998. Incentives, an extensive advertising campaign and a new range of tariffs have stimulated the increased migration of customers from the analogue to the digital network. On average, customers connected to the digital network generate higher revenues and a lower level of churn than those connected to the analogue network. Average cost to connect in the US market for the six month period to 30 September 1999 was $238, compared with $250 for the same period in 1998. The growth in the digital customer base, where handset prices are considerably higher than for analogue customers, has reduced the rate of decline in the average cost to connect for the six month period. This, together with costs incurred in the migration of customers from analogue to digital, has impacted the level of profitability. ARPU for the twelve month period ended 30 September 1999 on wholly owned US networks was $486, compared to $533 for the comparable period. However, average monthly revenue per customer remained constant between the first and second quarters of the current financial year as the effects of tariff declines were off-set by increased usage and the benefits of customer migration to the digital network. Average monthly usage per customer increased during the six month period to 137 minutes, compared with 120 minutes for 1998. Churn on wholly owned US networks during the six months to 30 September 1999 was 28.5%, compared to 23.4% in the corresponding period. New retention initiatives are being introduced which, together with the increased number of customers on the digital network, are anticipated to reduce the level of churn in US operations. Improvements in the distribution of cellular services are continuing in the US with the opening of new retail shops, thereby reducing reliance on independent retailers to support customer growth. Customers connected through wholly owned retail operations are less expensive to connect and, at the present time, churn is at a significantly lower rate. At 30 September 1999 the total number of retail outlets was 190 compared to 145 at 30 September 1998. The US paging business had in excess of 3.5 million customers at 30 September 1999 and continued to trade profitably during the period. The Group is considering an Initial Public Offering in the first half of 2000 of Vodafone Pacific, which comprises its Australian and New Zealand businesses together with the Group's 49% shareholding in Vodafone Fiji. A controlling shareholding will be maintained after any such offering. During the six months to 30 September 1999 the Group's Australian network increased its customer base by 22% to 1,189,000 customers. The network has operated profitably throughout the period. The Group has a 100% interest in Vodafone New Zealand, the only GSM network in New Zealand. Since acquiring this operation on 30 October 1998 the customer base has more than doubled and, at 30 September 1999, there were 293,000 customers. A prepaid service has been successfully launched in this market and 158,000 customers were connected to this service at the end of the period. Vodafone New Zealand is expected to pass through break-even in the second half of the financial year. The Group entered into a series of transactions which, on completion, gave it an equity interest of more than 20% in each of Japan's nine regional mobile telecommunications companies and total pro forma proportionate customers at completion of 1,721,000, based on the number of venture customers at 30 September 1999. The total consideration paid for the increased ownership interest in the three Digital Phone and six Digital Tu-Ka companies was approximately $550m and the Group has become the second largest shareholder, behind Japan Telecom, in each venture. The nationwide roll-out of the Digital Phone Group's 'J-Phone' brand to each of the six former Digital Tu- Ka companies has commenced and will increase the ability of the renamed 'J-Phone' companies to compete in the fast-growing Japanese mobile telecommunications market. Overall customer growth in ventures in which the Group has an interest was 18% in the period, with total customers of over 7,300,000 at 30 September 1999. The Group is pursuing new opportunities for delivering third generation ('3G') wireless services in Japan through a partnership with Japan Telecom and British Telecommunications Plc. The Group also has an 11.68% shareholding in Shinsegi Mobile Telecommunications Company Inc., a digital network in South Korea. At 30 September 1999, this network had 3,172,000 customers and a 24.5% market share. Following the merger, the Group's ownership interest in the Globalstar partnership increased to 8.2%. The Globalstar telecommunications system is based on a constellation of 48 low-earth orbit satellites which, through dual mode handsets, will provide Globalstar service when customers are outside terrestrial network coverage. There are currently 44 satellites in orbit, with the final 4 satellites to be launched by the end of 1999. Globalstar plans to launch full commercial service during the first half of 2000. On 21 September 1999, the Group announced that it had reached a definitive agreement with Bell Atlantic Corp. to create a new wireless business with a national footprint composed of Bell Atlantic's and the Group's US wireless assets. This will enable the new enterprise, serving approximately 20 million customers, to operate a national footprint and offer flat rate coast-to-coast pricing plans. On 19 July 1999, an agreement was reached with Blackstone Group to acquire the outstanding share capital of CommNet, which operates wireless services in the mid-west of the United States. CommNet had approximately 360,000 customers and the acquisition will fill a gap in the US footprint, which is planned to lead to savings in roaming charges and provide a wider service. OTHER FINANCIAL MATTERS Merger with AirTouch Communications, Inc. The merger with AirTouch was completed during the period and acquisition accounting has been used to account for the transaction. The goodwill arising has been provisionally calculated as £40.9 billion and is being amortised primarily by reference to the unexpired licence period and the conditions for licence renewal of the underlying acquired network businesses. The amortisation periods determined range between 8 and 40 years. The merger with AirTouch is expected to generate after tax net cash flow savings of approximately £200m per year by the year ending 31 March 2002. Good progress has been made towards this target in the three months since closure of the merger and a number of initiatives are being implemented. Exchange rates Movements in exchange rates had a net favourable effect of £17m on pro forma total Group operating profit for the six months ended 30 September 1999. Interest The net interest charge of £136m was up from £43m for the comparable period, mainly due to the additional debt arising from the merger with AirTouch. Total Group interest is covered 7.5 times by total Group operating profit before goodwill and exceptional reorganisation costs. Taxation The effective rate of taxation for the period, before goodwill and disposals, increased to 32.5% from 28.7% in the year ended 31 March 1999, primarily due to the higher rates of taxation attributable to the former AirTouch operations, whose results are included for the three month period following merger completion. Dividend The interim dividend is increased by 5% from 0.624p (after adjustment for the capitalisation issue) to 0.655p, reflecting the Group's continuing strong trading performance and cash generation. Balance sheet Total equity shareholders' funds at 30 September 1999 were £39,559m compared with £815m at 31 March 1999. The increase included the issue of new share capital of £38,708m, primarily in relation to the merger with AirTouch, offset by a loss for the period of £72m (after goodwill amortisation of £574m), a declared dividend of £203m and currency translation adjustments of £880m. Net debt increased by £5,187m to £6,695m, compared to £1,508m at 31 March 1999, primarily as a result of cash outflows in relation to the merger with AirTouch. Net debt represented 7% of the Group's market capitalisation at 30 September 1999 (31 March 1999 - 4%). On 30 September 1999, the Company implemented a 4 for 1 capitalisation (bonus) issue payable in the form of four shares for every one share held at that date. Cash flow Cash generated from operating activities increased by £453m to £966m due to the growth in the Group's operations and the inclusion of the operating cash flows of the former AirTouch businesses following the merger. The principal cash outflows during the period related to cash consideration for the purchase of subsidiary undertakings of £3,493m, primarily in relation to the AirTouch merger, equity investments in Italy and Japan totalling £452m, capital expenditure of £644m and net interest and other finance charges of £116m, including dividends paid to minority interests of £22m. As a result of these cash flows, and acquired net debt of £1,684m, net debt at 30 September 1999 had increased by £5,187m compared to 31 March 1999. The Group launched a Euro1.5 billion eurobond issue in October 1999, the proceeds from which have been used to refinance short term borrowings. Year 2000 Readiness Disclosure The Group is continuing to give high priority to the Year 2000 issue, which relates to the impact of the millennium on date sensitive calculations. The Vodafone Group and AirTouch had begun comprehensive millennium programmes to address the issue before the merger and these have continued as implemented. Both programmes have involved identification of critical systems, whose failure would pose a risk of disruption to the Group's ability to maintain its networks and to continue to provide services to customers, and the implementation of modifications, systems testing procedures and contingency plans across the Group's operations. The implementation of these programmes is being monitored by the Executive Committee of the Board and, based on the existing stage of completion and the assumption that third parties will meet their commitments, the Group believes that it can avoid serious disruption to the critical systems of its consolidated markets. The Group monitors, through its Board representation, the steps taken by its principal associated undertakings and principal investments in relation to Year 2000 compliance. The Group has incurred costs of approximately £5.1m in the current period in relation to Year 2000 compliance and is satisfied that the total future amount will not be material to the future profitability or liquidity of the Group. However, an element of the cost of Year 2000 compliance is not separately identifiable, as millennium modifications are often embodied in software purchased and developed in the normal course of business. CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE SIX MONTHS TO 30 SEPTEMBER 1999 Six months to Six months Year to 30 September to 31 March 1999 30 September 1999 £m 1998 £m £m Turnover - Continuing operations 2,101 1,563 3,360 - Acquisitions 1,093 - - ----- ----- ----- 3,194 1,563 3,360 ==== ==== ==== Operating profit/(loss) - Continuing operations 467 398 847 - Acquisitions (33) - - ----- ----- ----- 434 398 847 Share of operating profit/(loss) in joint ventures and associated undertakings - Continuing operations 69 57 116 - Acquisitions (91) - - ----- ----- ----- Total Group operating profit 412 455 963 Disposal of fixed asset investments 1 65 66 ----- ----- ----- Profit on ordinary activities before interest 413 520 1,029 Net interest payable - Group (119) (36) (76) -Joint ventures and Associated undertakings (17) (7) (18) ----- ----- ----- Profit on ordinary 277 477 935 activities before taxation Tax on profit on ordinary Activities (276) (124) (252) ----- ----- ----- Profit on ordinary activities after taxation 1 353 683 Equity minority interests (60) (20) (46) Non-equity minority (13) - - interests ----- ----- ----- (Loss)/profit for the financial period (72) 333 637 Equity dividends (203) (96) (197) ----- ----- ----- (Loss)/retained profit for Group and its share of Joint ventures and Associated undertakings (275) 237 440 ===== ===== ===== Basic (loss)/earnings Per share (0.31)p 2.16p 4.12p Diluted (loss)/earnings Per share (0.31)p 2.14p 4.11p Adjusted basic earnings Per share 2.25p 1.74p 3.77p PRO FORMA* CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE SIX MONTHS TO 30 SEPTEMBER 1999 Six months to Six months to Year to 30 September 30 September 31 March 1999 1998 1999 £m £m £m Turnover 4,208 3,322 7,018 ===== ===== ===== Operating profit 466 446 762 Share of operating loss In joint ventures and Associated undertakings (213) (437) (760) ----- ----- ----- Total Group operating Profit 253 9 2 Total Group operating Profit before goodwill And exceptional items: - Subsidiary undertakings 928 878 1,624 - Joint ventures and associated undertakings 491 261 636 ----- ----- ----- 1,419 1,139 2,260 Amortisation of goodwill (1,137) (1,130) (2,258) Exceptional reorganisation Costs (29) - - ----- ----- ----- Total Group operating Profit 253 9 2 ----- ----- ----- Disposal of fixed asset Investments 22 65 116 ----- ----- ----- Profit on ordinary activities 275 74 118 Before interest Net interest payable (220) (215) (460) ----- ----- ----- Profit/(loss) on ordinary activities before taxation 55 (141) (342) Tax on profit/(loss) On ordinary activities (401) (301) (584) ----- ----- ----- Loss on ordinary activities After taxation (346) (442) (926) Equity minority interests (85) (68) (129) Non-equity minority Interests (24) (26) (51) ----- ----- ----- Loss for the financial Period (455) (536) (1,106) ===== ===== ===== Basic loss per share (1.49)p (1.77)p (3.64)p Adjusted basic earnings Per share 2.24p 1.74p 3.47p * See basis of pro forma financial information described in Note 2 CONSOLIDATED BALANCE SHEET 30 SEPTEMBER 1999 30 September 30 September 31 March 1999 1998 1999 £m £m £m Fixed assets Intangible assets 21,804 170 329 Tangible assets 5,267 1,724 2,150 Investments 21,412 331 372 Investments in joint ventures: - Share of gross assets 2,893 - - - Share of gross liabilities (237) - - ----- ----- ----- 2,656 - - Investments in associated 18,470 236 275 undertakings Other investments 286 95 97 ------ ----- ----- 48,483 2,225 2,851 Current assets Stocks 125 36 45 Debtors 2,007 670 741 Liquid investments 73 - - Cash at bank and in hand 42 6 6 ----- ----- ----- 2,247 712 792 Creditors: amounts falling Due within one year 7,700 1,550 1,530 ----- ----- ----- Net current liabilities (5,453) (838) (738) ----- ----- ----- Total assets less current Liabilities 43,030 1,387 2,113 Creditors: amounts falling Due after more than one 1,963 765 1,179 year Provisions for liabilities And charges 73 16 10 ----- ----- ----- 40,994 606 924 ===== ===== ===== Capital and reserves Called up share capital 1,901 155 155 Share premium account 37,058 86 96 Other reserves 1,149 - - Profit and loss account (549) 280 564 ----- ----- ----- Total equity shareholders' Funds 39,559 521 815 Equity minority interests 475 81 105 Non-equity minority interests 960 4 4 ----- ----- ----- 40,994 606 924 ===== ===== ===== MORE TO FOLLOW IR NFFFSFAENFAN

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