Interim Results - 6 Months to 30 Sept 1999 Part 2

Vodafone AirTouch PLC 16 November 1999 PART 2 CONSOLIDATED CASH FLOW FOR THE SIX MONTHS TO 30 SEPTEMBER 1999 Six months Six months Year to to to 31 March 30 30 September 1999 September 1998 1999 £m £m £m Net cash inflow from operating Activities 966 513 1,045 Dividends received from associated undertakings 36 3 3 Net cash outflow for returns on Investments and servicing of (116) (17) (90) finance Taxation (50) (86) (195) Net cash outflow for capital Expenditure and financial Investment (714) (293) (688) Net cash outflow for acquisitions And disposals (3,966) (82) (317) Equity dividends paid (74) (57) (118) ----- ----- ----- Cash outflow before management Of liquid resources and financing (3,918) (19) (360) Management of liquid resources (75) - - Net cash inflow from financing 4,032 10 353 ----- ----- ---- Increase/(decrease) in cash In the period 39 (9) (7) ===== ===== ===== Reconciliation of net cash Flow to movement in net debt Increase/(decrease) in cash In the period 39 (9) (7) Cash inflow from increase in debt (3,784) (18) (360) Cash outflow from increase in Liquid resources 75 - - ----- ----- ----- Increase in net debt resulting From cash flows (3,670) (27) (367) Debt acquired on acquisition Of subsidiaries (1,684) - - Accrued interest on discounted Financial instruments (11) (5) (5) Translation difference 178 (23) (19) ----- ----- ----- Increase in net debt in The period (5,187) (55) (391) Opening net debt (1,508) (1,117) (1,117) ----- ----- ----- Closing net debt (6,695) (1,172) (1,508) ===== ===== ===== CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE SIX MONTHS TO 30 SEPTEMBER 1999 Six months Six months Year to to to 30 September 30 31 March 1999 September 1999 £m 1998 £m £m (Loss)/profit for the financial (72) 333 637 period Currency translation (880) (36) 6 ----- ----- ----- Total recognised gains and Losses for the period (952) 297 643 ===== ===== ===== MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS FOR THE SIX MONTHS TO 30 SEPTEMBER 1999 (Loss)/profit for the financial (72) 333 637 period Equity dividends (203) (96) (197) ----- ----- ----- (275) 237 440 ===== ===== ===== Currency translation (880) (36) 6 New share capital subscribed 38,708 8 19 Unvested option consideration 1,165 - - Goodwill transferred to the Profit and loss account in Respect of business disposals - - 11 Scrip dividends 26 29 64 Other - - (8) ----- ----- ----- Net movement in equity Shareholders' funds 38,7444 238 532 Opening equity shareholders' funds 815 283 283 ----- ----- ----- Closing equity shareholders' funds 39,559 521 815 ===== ===== ===== NOTES TO THE INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 1999 1 Basis of preparation On 29 June 1999, Vodafone Group Plc ('Vodafone Group') was renamed Vodafone AirTouch Plc ('Vodafone AirTouch'). On 30 June 1999, the merger of Vodafone AirTouch and AirTouch Communications, Inc. ('AirTouch') was completed. Vodafone AirTouch has accounted for the merger as an acquisition under UK GAAP in accordance with Financial Reporting Standard 6, 'Acquisitions and Mergers'. The unaudited pro forma consolidated financial information has also been prepared on this basis. The interim results have been prepared on a basis consistent with the accounting policies set out on pages 36 and 37 of Vodafone AirTouch Plc's Annual Report & Accounts for the year ended 31 March 1999. The unaudited interim results should therefore be read in conjunction with the 1999 Annual Report & Accounts. The Group has adopted FRS15, 'Tangible fixed assets', in the period. This has not resulted in any restatement of prior year comparatives or adjustment to the results for the six month period. The interim results for the six months to 30 September 1999, which were approved by the Board of Directors on 16 November 1999, do not comprise statutory accounts within the meaning of section 240 of the Companies Act 1985. Full accounts for the year ended 31 March 1999, incorporating an unqualified auditors' report, have been filed with the Registrar of Companies. 2 Basis of pro forma financial information The unaudited pro forma consolidated profit and loss accounts and accompanying notes of Vodafone AirTouch for the six months ended 30 September 1998, and the year ended 31 March 1999, respectively, are derived from the unaudited and audited consolidated financial statements of Vodafone Group and AirTouch prepared for the relevant periods. The financial statements of AirTouch, which were previously prepared under US GAAP, have been adjusted to conform materially to Vodafone AirTouch's accounting policies under UK GAAP following the merger. The unaudited pro forma consolidated profit and loss account and accompanying notes of Vodafone AirTouch for the six months ended 30 September 1999 has been derived from its consolidated financial results for that period, and the unaudited financial results of AirTouch for the three month period ended 30 June 1999. The pro forma consolidation adjustments for the six months ended 30 September 1998 and the year ended 31 March 1999 have been determined as if the merger took place on 1 April 1998, the first day of the financial accounting period presented in the unaudited pro forma consolidated profit and loss accounts for those periods. Similarly, the pro forma consolidated adjustments for the six month period ended 30 September 1999 have been determined as if the merger took place on 1 April 1999. The pro forma merger adjustments reflected in the unaudited pro forma consolidated profit and loss accounts include assumptions made by Vodafone AirTouch's management that it believes to be reasonable. The unaudited pro forma consolidated profit and loss accounts do not take into account any synergies, including cost savings, or any severance and restructuring costs, which may or are expected to occur as a result of the merger, except in so far as such costs and savings have been included in the financial statements of Vodafone AirTouch for the six month period ended 30 September 1999. Additionally, the pro forma consolidated profit and loss accounts do not include any adjustments that may be necessary as a consequence of the proposed joint venture arrangements with Bell Atlantic. 3 Segmental analysis The Group operates substantially in one class of business, the supply of mobile telecommunications services and products. Analysis of total Group operating profit, net assets, pro forma turnover and pro forma total Group operating profit by geographical region is set out below. Statutory basis Six months Six months to Year to to 30 September 31 March 30 1998 1999 September 1999 £m £m £m Total Group operating profit (before Goodwill and exceptional items) United Kingdom 343 302 644 Europe, Middle East & Africa 435 157 314 United States & Asia Pacific 237 (3) 14 ----- ----- ----- 1,015 456 972 Amortisation of goodwill (574) (1) (9) Exceptional reorganisation costs (29) - - ----- ----- ----- 412 455 963 ===== ===== ===== At At At 30 30 September 31 March September 1998 1999 1999 £m £m £m Net assets United Kingdom 734 597 779 Europe, Middle East & Africa 19,296 785 900 United States & Asia Pacific 27,659 396 753 Net borrowings (6,695) (1,172) (1,508) ----- ----- ----- 40,994 606 924 ===== ===== ===== Exceptional reorganisation costs are in respect of the merger with AirTouch and have been incurred in the United States. NOTES TO THE INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 1999 3 Segmental analysis (continued) Pro forma basis* Six months Six months Year to to to 31 March 30 30 1999 September September 1999 1998 £m £m £m Turnover United Kingdom 1,313 967 2,088 Europe, Middle East & Africa 1,010 783 1,617 United States & Asia Pacific 1,885 1,572 3,313 ----- ----- ----- 4,208 3,322 7,018 ===== ===== ===== Total Group operating profit (before goodwill and exceptional items) United Kingdom 343 302 644 Europe, Middle East & Africa 653 468 983 United States & Asia Pacific 423 369 633 ----- ----- ----- 1,419 1,139 2,260 Amortisation of goodwill (1,137) (1,130) (2,258) Exceptional reorganisation costs (29) - - ----- ----- ----- 253 9 2 ===== ===== ===== Profit on ordinary activities before taxation, goodwill and exceptional items Total Group operating profit (before goodwill and exceptional items) 1,419 1,139 2,260 Net interest payable (220) (215) (460) ----- ----- ----- 1,199 924 1,800 ===== ===== ===== * See basis of pro forma financial information described in Note 2. NOTES TO THE INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 1999 4 Taxation Six months to Six months Year to 30 September to 31 March 1999 30 September 1999 £m 1998 £m £m United Kingdom taxation 76 87 169 International taxation: Subsidiary undertakings 125 32 73 Associated undertakings 75 5 10 ----- ----- ----- 200 37 83 ----- ----- ----- 276 124 252 ===== ===== ===== 5 Equity dividends An interim dividend of 0.655p (1998 - 0.624p) per share will be paid on 11 February 2000 to shareholders on the register of members on 26 November 1999. Shareholders may take a scrip dividend alternative to the cash dividend in accordance with the rules of Vodafone AirTouch Plc's Scrip Dividend Scheme. The ex-dividend date is 22 November 1999 and the last date for elections or variations to mandates under the Scrip Dividend Scheme is 11 January 2000. 6 Earnings per share Six months Six months to Year to to 30 September 31 March 30 1998 1999 September £m £m 1999 £m Statutory basis (Loss)/earnings for basic and diluted (loss)/earnings per share (72) 333 637 Amortisation of goodwill 574 1 9 Exceptional reorganisation costs, net of attributable taxation 18 - - Disposals of fixed asset investments, net of attributable (1) (65) (64) taxation ----- ----- ----- Earnings for adjusted earnings 519 269 582 per share ===== ===== ===== Weighted average number of shares (millions): Basic and adjusted 23,096 15,430 15,445 Earnings per share has been restated for prior periods to give effect to the capitalisation issue on 30 September 1999. NOTES TO THE INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 1999 6 Earnings per share (continued) Six Six months Year to months to to 31 March 30 30 1999 September September 1999 1998 £m £m £m Pro forma basis* Loss for the financial period for basic loss (455) (536) (1,106) per share Amortisation of goodwill 1,137 1,130 2,258 Exceptional reorganisation costs, net of attributable taxation 18 - - Disposals of fixed asset investments, net of attributable (14) (65) (98) taxation ----- ----- ----- Earnings for adjusted 686 529 1,054 earnings per share ===== ===== ===== Weighted average number of shares (millions): Basic and adjusted 30,564 30,364 30,381 * See basis of pro forma financial information described in Note 2. 7 Reconciliation of operating profit to net cash inflow from operating activities Six Six months Year to months to to 31 March 30 30 1999 September September £m 1999 1998 £m £m Operating profit 434 398 847 Depreciation and amortisation 541 133 297 Increase in stocks (5) (6) (15) Increase in debtors (201) (107) (213) Increase in creditors 197 95 129 ----- ----- ----- 966 513 1,045 ===== ===== ===== 8 Net cash outflow for capital expenditure and financial investment Six months Six months to Year to to 30 September 31 March 30 1998 1999 September £m £m 1999 £m Purchase of intangible fixed assets (62) (16) (18) Purchase of tangible fixed assets (644) (315) (737) Purchase of trade investments (16) (1) (4) Disposal of tangible fixed assets 3 - 54 Disposal of trade investments 4 36 14 Loans repaid by associated undertakings 1 3 3 ----- ----- ----- (714) (293) (688) ===== ===== ===== NOTES TO THE INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 1999 9 Net cash outflow for acquisitions and disposals Six months Six months Year to to to 31 March 30 September 30 1999 1999 September £m £m 1998 £m Purchase of subsidiary undertakings (3,493) (11) (255) Net overdrafts acquired with Subsidiary undertakings (1) (10) - Disposal of interest in subsidiary undertaking - - 19 Purchase of interests in associated undertakings (479) (63) (75) Purchase of customer bases (2) (1) (10) Disposal of interests in Associated undertakings 9 3 4 ----- ----- ----- (3,966) (82) (317) ===== ===== ===== 10 Analysis of net debt At 1 Cash Acquisitions Other At 30 April flow non-cash September 1999 (excluding changes 1999 cash & & overdrafts) exchange £m £m movements £m £m £m Liquid investments - 75 - (2) 73 ----- ----- ----- ----- ----- Cash at bank and in hand 6 36 - - 42 Bank overdrafts (6) 3 - - (3) ----- ----- ----- ----- ----- - 39 - - 39 ===== ===== ===== ===== ===== Debt due within one Year (other than Bank overdrafts) (371) (4,664) - 104 (4,931) Debt due after one year (1,137) 879 (1,679) 65 (1,872) Finance leases - 1 (5) - (4) ----- ----- ----- ----- ----- (1,508) (3,784) (1,684) 169 (6,807) ----- ----- ----- ----- ----- (1,508) (3,670) (1,684) 167 (6,695) ===== ===== ===== ===== ===== A substantial proportion of the debt maturing within one year is commercial paper, issued under the Group's $5 billion US commercial paper programme and its £2 billion Euro commercial paper programme. Drawings under both programmes are fully supported by committed bank facilities and the average maturity period of the committed facilities covering the debt is 2.8 years. NOTES TO THE INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 1999 11 Merger with AirTouch Communications, Inc. The merger with AirTouch Communications, Inc. was completed on 30 June 1999. Acquisition accounting has been used to account for the merger and the table below sets out certain details of the assets acquired, purchase consideration and the calculation of the goodwill arising thereon. Due to the proximity of the merger to the period end, the accounting policy alignment and the fair value adjustments are provisional. Balance sheet Accounting Fair value at policy and balance acquisition fair value sheet £bn adjustments £bn £bn Intangible fixed assets 5.3 (5.3) - Tangible fixed assets 2.6 0.3 2.9 Investments 2.5 (0.2) 2.3 Net borrowings (1.5) - (1.5) Other net liabilities (1.2) 0.6 (0.6) ----- ----- ----- 7.7 (4.6) 3.1 ===== ===== Minority interests (1.3) Goodwill 40.9 ----- Purchase consideration 42.7 ===== Satisfied by: Cash consideration 3.5 Share consideration 38.5 Unvested option consideration 0.7 ----- 42.7 ===== NOTES TO THE INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 1999 12 Summary of differences between UK and US GAAP The interim results have been prepared in accordance with UK generally accepted accounting principles ('UK GAAP'), which differ in certain significant respects from US GAAP. A description of the relevant accounting principles which differ materially is given on page 59 of Vodafone AirTouch Plc's Annual Report & Accounts for the year ended 31 March 1999 (prepared under its former name, Vodafone Group Plc). The effects of these differing accounting principles are as follows: Statutory basis Six Six months Year to months to to 31 March 30 30 1999 September September £m 1999 1998 £m £m UK GAAP net (loss)/income (72) 333 637 Items (increasing)/decreasing net loss: Goodwill amortisation (158) (50) (99) Reorganisation costs 25 - - Profit on disposal of fixed asset investments - - 4 Income taxes 173 (8) (28) Minority interests 11 - - Other (3) 1 (4) ----- ----- ----- Net (loss)/income in accordance with US GAAP (24) 276 510 ===== ===== ===== US GAAP basic (loss)/earnings per ordinary share (0.10)p 1.79p 3.30p Pro forma basis * Six months to Six months Year to 30 September to 31 March 1999 30 September 1999 £m 1998 £m £m UK GAAP pro forma net loss (455) (536) (1,106) Items (increasing)/decreasing net loss: Goodwill amortisation (267) (268) (535) Reorganisation costs 25 - - Profit on disposal of fixed - - 4 asset investments Income taxes 359 331 637 Minority interests 22 22 45 Other (3) 5 4 ----- ----- ----- Pro forma net loss in accordance with US GAAP (319) (446) (951) ===== ===== ===== US GAAP pro forma basic loss per ordinary share (1.04)p (1.47)p (3.13)p * See basis of pro forma financial information described in Note 2. NOTES TO THE INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 1999 13 Pro forma proportionate information The following tables of pro forma customer and financial information are presented on a proportionate basis. Proportionate presentation is not required by UK GAAP and is not intended to replace the consolidated interim financial statements prepared in accordance with UK GAAP. However, since significant entities in which the Group has an interest are not consolidated, proportionate information is provided as supplemental data to facilitate a more detailed understanding and assessment of the consolidated financial statements prepared in accordance with UK GAAP. UK GAAP requires consolidation of entities controlled by the Group and the equity method of accounting for entities in which the Group has significant influence but not a controlling interest. Proportionate presentation is a pro rata consolidation, which reflects the Group's share of turnover and expenses in both its consolidated and unconsolidated entities. Proportionate results are calculated by multiplying the Group's ownership interest in each entity by each entity's results. Proportionate information includes results from the Group's equity accounted investments and investments held at cost. The Group does not have control over the turnover, expenses or cash flow of these investments and is only entitled to cash from dividends received from these entities. The Group does not own the underlying assets of these investments. As a condition to the European Commission's approval of the merger with AirTouch Communications, Inc. the Group entered into an undertaking to dispose of its interest in E-Plus Mobilfunk GmbH following merger completion. As a result, pro forma proportionate customer and financial information excludes E-Plus for all of the periods presented. Pro forma basis At 30 At 30 At 31 September September March 1999 1998 1999 Proportionate customer information (thousands) United Kingdom 6,865 3,940 5,575 Europe, Middle East & Africa 12,057 6,666 9,170 United States & Asia Pacific 12,559 9,225 10,676 ----- ----- ----- Proportionate number of customers 31,481 19,831 25,421 ===== ===== ===== NOTES TO THE INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 1999 13 Pro forma proportionate information (continued) Pro forma basis* Six months to Six Year to 30 September months to 31 March 1999 30 1999 September 1998 £m £m £m Proportionate financial information United Kingdom 1,350 1,005 2,170 Europe, Middle East & Africa 2,097 1,466 3,208 United States & Asia Pacific 2,333 1,782 3,807 ----- ----- ----- Proportionate turnover 5,780 4,253 9,185 ===== ===== ===== United Kingdom 448 383 816 Europe, Middle East & Africa 738 513 1,127 United States & Asia Pacific 701 560 1,103 ----- ----- ----- Proportionate EBITDA ** 1,887 1,456 3,046 Less: depreciation and amortisation, excluding goodwill (584) (437) (991) ----- ----- ----- Proportionate total Group operating profit before goodwill and exceptional costs 1,303 1,019 2,055 ===== ===== ===== * See basis of pro forma financial information described in Note 2. ** Proportionate EBITDA (earnings before interest, tax, depreciation and amortisation) is defined as operating profit before exceptional reorganisation costs plus depreciation and amortisation of subsidiary undertakings, associated undertakings and investments, proportionate to equity stakes. Proportionate EBITDA represents the Group's ownership interests in the respective entities EBITDA. As such, proportionate EBITDA does not represent EBITDA available to the Group. 14 Rates of dividend Six months Six months to 30 to 30 September 1998 September 1999 Interim proposed (% of nominal value) 10.8% 9.9% Amount absorbed (to shareholders on the Register at close of business on 26 November 1999) £203m £96m The rate of the interim dividend for the six months ended 30 September 1998 has been restated. NOTES TO THE INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 1999 15 Other information The Interim Report will be sent to shareholders and copies will be available to the public, on request, from the Company's Registered Office at The Courtyard, 2-4 London Road, Newbury, Berkshire, RG14 1JX. The Group currently anticipates announcing its preliminary results for the year ending 31 March 2000 in May 2000. For further information contact:- Terry Barwick, Director of Corporate Affairs Tim Brown, Director of Investor Relations Melissa Stimpson, Senior Investor Relations Manager Tel: +44 (0) 1635 33251 Lulu Bridges / Peter Willetts Tavistock Communications Tel: +44 (0) 171 600 2288

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