Interim Results - Part 2

Vodafone Group Plc 14 November 2006 VODAFONE GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006 PART II CONSOLIDATED INCOME STATEMENT Six months Six months Year ended to 30 to 30 31 September September March 2006 2005 2006 Notes £m £m £m Revenue 2 15,594 14,548 29,350 Cost of sales (9,022) (8,399) (17,070) ----------- ----------- ----------- Gross profit 6,572 6,149 12,280 Selling and distribution expenses (1,038) (940) (1,876) Administrative expenses (1,800) (1,595) (3,416) Share of result in associated undertakings 1,413 1,187 2,428 Impairment losses (8,100) (515) (23,515) Other income and expense 1 - 15 ----------- ----------- ----------- Operating (loss)/profit 2 (2,952) 4,286 (14,084) Non-operating income and expense 10 - (2) Investment income 425 165 353 Financing costs (813) (540) (1,120) ----------- ----------- ----------- (Loss)/profit before taxation (3,330) 3,911 (14,853) Tax on (loss)/profit 4 (1,218) (1,282) (2,380) ----------- ----------- ----------- (Loss)/profit for the period from continuing operations (4,548) 2,629 (17,233) (Loss)/profit from discontinued operations (491) 189 (4,588) ----------- ----------- ----------- (Loss)/profit for the period (5,039) 2,818 (21,821) =========== =========== =========== Attributable to: - Equity shareholders (5,105) 2,775 (21,916) - Minority interests 66 43 95 Basic (loss)/earnings per share from continuing operations 5 (8.02)p 4.07p (27.66)p Diluted (loss)/earnings per share from continuing operations 5 (8.02)p 4.06p (27.66)p Basic (loss)/earnings per share on (loss)/profit for the period 5 (8.88)p 4.36p (35.01)p Diluted (loss)/earnings per share on (loss)/profit for the period 5 (8.88)p 4.35p (35.01)p CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Six months to Six months to Year ended 30 September 30 September 31 March 2006 2005 2006 £m £m £m Gains on revaluation of available-for-sale investments 641 572 705 Exchange differences on translation of foreign operations (3,293) 448 1,494 Actuarial gains/(losses) on defined benefit pension schemes 18 - (30) Asset revaluation surplus - - 112 Transfer to the income statement on disposal of foreign operations 794 - 36 ----------- ----------- ----------- Net (loss)/gain recognised directly in equity (1,840) 1,020 2,317 (Loss)/profit for the period (5,039) 2,818 (21,821) ----------- ----------- ----------- Total recognised income and expense relating to the period (6,879) 3,838 (19,504) =========== =========== =========== Attributable to: - Equity shareholders (6,931) 3,784 (19,607) - Minority interests 52 54 103 CONSOLIDATED BALANCE SHEET 30 September 30 September 31 March 2006 2005 2006 Notes £m £m £m Non-current assets Goodwill 44,330 81,919 52,606 Other intangible assets 16,203 15,873 16,512 Property, plant and equipment 13,248 17,844 13,660 Investments in associated undertakings 21,879 22,063 23,197 Other investments 3,762 1,859 2,119 Deferred tax assets 450 973 140 Post employment benefits 33 19 19 Trade and other receivables 466 217 361 ----------- ----------- ----------- 100,371 140,767 108,614 ----------- ----------- ----------- Current assets Inventory 356 536 297 Taxation recoverable 2 68 8 Trade and other receivables 4,963 6,068 4,438 Cash and cash equivalents 789 1,400 2,789 ----------- ----------- ----------- 6,110 8,072 7,532 ----------- ----------- ----------- Assets included in disposal group held for resale 914 - 10,592 ----------- ----------- ----------- Total assets 107,395 148,839 126,738 =========== =========== =========== Equity Called up share capital 10 4,166 4,292 4,165 Share premium account 10 43,443 52,401 52,444 Own shares held 10 (8,153) (7,608) (8,198) Additional paid in capital 10 100,191 100,100 100,152 Capital redemption reserve 10 9,121 - 128 Accumulated other recognised income and expense 11 2,264 2,790 4,090 Retained losses 12 (83,656) (38,204) (67,356) ----------- ----------- ----------- Total equity shareholders' funds 67,376 113,771 85,425 Minority interests 197 (115) (113) ----------- ----------- ----------- Total equity 67,573 113,656 85,312 ----------- ----------- ----------- Non-current liabilities Long-term borrowings 17,014 13,945 16,750 Deferred tax liabilities 4,901 5,241 5,670 Post employment benefits 107 128 120 Trade and other payables 567 469 566 Provisions for other liabilities and charges 273 340 265 ----------- ----------- ----------- 22,862 20,123 23,371 ----------- ----------- ----------- Current liabilities Short-term borrowings: Third parties 3,539 1,256 3,070 Related parties 575 770 378 Current taxation liabilities 4,911 4,639 4,448 Trade and other payables 7,768 8,212 7,477 Provisions for other liabilities and charges 167 183 139 ----------- ----------- ----------- 16,960 15,060 15,512 ----------- ----------- ----------- Liabilities included in disposal group held for resale - - 2,543 ----------- ----------- ----------- Total equity and liabilities 107,395 148,839 126,738 =========== =========== =========== CONSOLIDATED CASH FLOW STATEMENT Six months Six months to 30 to 30 Year ended September September 31 March 2006 2005 2006 Note £m £m £m Net cash flows from operating activities 7 4,975 6,084 11,841 ----------- ----------- ----------- Cash flows from investing activities Purchase of interests in subsidiary undertakings and joint ventures, net of cash acquired (2,585) (1,887) (4,186) Disposal of interests in subsidiary undertakings, net of cash disposed 6,799 - 599 Purchase of intangible fixed assets (298) (252) (690) Purchase of property, plant and equipment (1,892) (2,328) (4,481) Purchase of investments (154) (1) (57) Disposal of property, plant and equipment 11 10 26 Disposal of investments - 1 1 Dividends received from associated undertakings 371 375 835 Dividends received from investments 57 41 41 Interest received 256 135 319 ----------- ----------- ----------- Net cash flows from investing activities 2,565 (3,906) (7,593) ----------- ----------- ----------- Cash flows from financing activities Issue of ordinary share capital and re-issue of treasury shares 39 274 356 Net movement in short-term borrowings 426 - 708 Proceeds from issue of long-term borrowings 2,451 765 5,256 Repayment of borrowings (453) (1,121) (1,371) Loans repaid to associated undertakings - (47) (47) Purchase of treasury shares (43) (2,750) (6,457) 'B' share capital redemption (5,707) - - 'B' share preference dividends paid (3,286) - - Equity dividends paid (2,315) (1,382) (2,749) Dividends paid to minority shareholders in subsidiary undertakings (34) (21) (51) Interest paid (499) (349) (721) ----------- ----------- ----------- Net cash flows from financing activities (9,421) (4,631) (5,076) ----------- ----------- ----------- Net decrease in cash and cash equivalents (1,881) (2,453) (828) Cash and cash equivalents at beginning of the period 2,932 3,726 3,726 Exchange (losses)/gains on cash and cash equivalents (275) 90 34 ----------- ----------- ----------- Cash and cash equivalents at end of the period 776 1,363 2,932 =========== =========== =========== NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006 1 Basis of preparation The unaudited Interim Consolidated Financial Statements ('Interim Consolidated Financial Statements') for the six months ended 30 September 2006 have been prepared on a basis consistent with the accounting policies set out in Vodafone Group Plc's Annual Report for the year ended 31 March 2006. The Interim Consolidated Financial Statements should therefore be read in conjunction with the 2006 Annual Report. The Interim Consolidated Financial Statements for the six months ended 30 September 2006, which were approved by the Board of directors on 14 November 2006, do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The information relating to the year ended 31 March 2006 is an extract from the published Annual Report for that year, which has been delivered to the Registrar of Companies, and on which the Auditors' Report was unqualified and did not contain statements under section 237(2) or 237(3) of the UK Companies Act 1985. The Interim Consolidated Financial Statements are prepared in accordance with International Financial Reporting Standards ('IFRS') (including International Accounting Standards ('IAS') and interpretations issued by the International Accounting Standards Board ('IASB') and its committees, and as interpreted by any regulatory bodies applicable to the Group as adopted for use in the European Union ('EU'), the Companies Act 1985 and Article 4 of the IAS Regulations, and on a historical cost basis except for certain financial and equity instruments that have been measured at fair value. The Interim Consolidated Financial Statements for the six months ended 30 September 2006, and for the six months ended 30 September 2005, have been prepared by the Group in accordance with IAS 34 'Interim Financial Reporting'. IFRS differs in certain material respects from US GAAP (see note 15). The preparation of the Interim Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the balance sheet date, and the reported amounts of revenue and expenses during the reporting period. Actual results could vary from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. In May 2006, the Group announced changes to the organisational structure of its operations, effective from 1 May 2006. The segmental analysis in note 2 is presented in accordance with the new organisation structure. Amounts in the Interim Consolidated Financial Statements are stated in pounds sterling (£), unless otherwise stated. 2 Segmental and other analyses The Group's principal business is the supply of telecommunications services and products. The Group's analyses of revenue and operating profit for discontinued operations are shown in note 9. Analyses of revenue and operating profit by geographical region for the Group's continuing operations are as follows: Six months ended 30 September 2006 (1) Intra- Inter- Segment Joint Common region Regional region Net revenue Subsidiaries ventures Eliminations functions revenue revenue revenue revenue £m £m £m £m £m £m £m £m £m Revenue Germany 2,827 (29) 2,798 (42) 2,756 Italy 2,174 (27) 2,147 (3) 2,144 Spain 2,268 (65) 2,203 (2) 2,201 UK 2,549 (29) 2,520 (5) 2,515 Other Europe 2,216 (54) 2,162 (2) 2,160 -------------------------------------------------------------------------------------- Europe 12,034 9,865 2,174 (5) (204) 11,830 (54) 11,776 -------------------------------------------------------------------------------------- Eastern Europe 1,162 - 1,162 (16) 1,146 Middle East, Africa and Asia 1,247 - 1,247 (5) 1,242 Pacific 666 - 666 (4) 662 -------------------------------------------------------------------------------------- EMAPA 3,075 2,051 1,030 (6) - 3,075 (25) 3,050 -------------------------------------------------------------------------------------- Other 706 706 - - 86 - 792 (24) 768 -------------------------------------------------------------------------------------- 15,815 12,622 3,204 (11) 86 (204) 15,697 (103) 15,594 ====================================================================================== (1) (2) Adjusted Segment Joint Common Operating Other operating result Subsidiaries ventures Associates functions (loss) adjustments profit /profit £m £m £m £m £m £m £m £m Adjusted operating profit Germany (5,976) (5,976) 6,700 724 Italy (561) (561) 1,400 839 Spain 585 585 - 585 UK 318 318 - 318 Other Europe 528 528 - 528 ---------------------------------------------------------------------------------------- Europe (5,106) (4,547) (561) 2 (5,106) 8,100 2,994 ---------------------------------------------------------------------------------------- Eastern Europe 118 118 - 118 Middle East, Africa and Asia 339 339 - 339 Pacific 66 66 - 66 Associates - US 1,021 1,021 (6) 1,015 Associates - Other 390 390 - 390 ---------------------------------------------------------------------------------------- EMAPA 1,934 308 215 1,411 1,934 (6) 1,928 ---------------------------------------------------------------------------------------- Other 83 83 - - 137 220 (1) 219 ---------------------------------------------------------------------------------------- (3,089) (4,156) (346) 1,413 137 (2,952) 8,093 5,141 ======================================================================================== Notes: (1) Common functions represents results from Partner Markets and unallocated central Group income and expenses (2) Comprises impairments to the carrying value of goodwill relating to the mobile operations in Germany and Italy amounting to £8,100 million offset by £6 million of non-operating income in relation to the Group's associated undertakings and £1 million of other items Six months ended 30 September 2005 (1) Intra- Inter- Segment Joint Common region Regional region Net revenue Subsidiaries ventures Eliminations functions revenue revenue revenue revenue £m £m £m £m £m £m £m £m £m Revenue Germany 2,913 (25) 2,888 (56) 2,832 Italy 2,240 (22) 2,218 (3) 2,215 Spain 1,968 (58) 1,910 (1) 1,909 UK 2,568 (25) 2,543 (4) 2,539 Other Europe 2,437 (47) 2,390 (1) 2,389 ----------------------------------------------------------------------------------------- Europe 12,126 9,892 2,240 (6) (177) 11,949 (65) 11,884 ----------------------------------------------------------------------------------------- Eastern Europe 618 - 618 (4) 614 Middle East, Africa and Asia 755 - 755 (5) 750 Pacific 636 - 636 (5) 631 ----------------------------------------------------------------------------------------- EMAPA 2,009 1,383 632 (6) - 2,009 (14) 1,995 ----------------------------------------------------------------------------------------- Other 622 622 - - 70 - 692 (23) 669 ----------------------------------------------------------------------------------------- 14,757 11,897 2,872 (12) 70 (177) 14,650 (102) 14,548 ========================================================================================= (1) (2) Adjusted Segment Joint Common Operating Other operating result Subsidiaries ventures Associates functions profit adjustments profit /(loss) £m £m £m £m £m £m £m £m Adjusted operating profit Germany 775 775 - 775 Italy 923 923 - 923 Spain 529 529 - 529 UK 320 320 - 320 Other Europe (23) (23) 515 492 ---------------------------------------------------------------------------------------- Europe 2,524 1,598 923 3 2,524 515 3,039 ---------------------------------------------------------------------------------------- Eastern Europe 90 90 - 90 Middle East, Africa and Asia 236 236 - 236 Pacific 58 58 - 58 Associates - US 772 772 - 772 Associates - Other 415 415 (19) 396 ---------------------------------------------------------------------------------------- EMAPA 1,571 214 170 1,187 1,571 (19) 1,552 ---------------------------------------------------------------------------------------- Other 38 38 - - 153 191 - 191 ---------------------------------------------------------------------------------------- 4,133 1,850 1,093 1,190 153 4,286 496 4,782 ======================================================================================== Notes: (1) Common functions represents results from Partner Markets and unallocated central Group income and expenses (2) Comprises impairment to the carrying value of goodwill relating to the mobile operations in Sweden amounting to £515 million offset by £19 million of non-operating income in relation to the Group's associated undertakings Year ended 31 March 2006 (1) Intra- Inter- Segment Joint Common region Regional region Net revenue Subsidiaries ventures Eliminations functions revenue revenue revenue revenue £m £m £m £m £m £m £m £m £m Revenue Germany 5,754 (52) 5,702 (100) 5,602 Italy 4,363 (39) 4,324 (4) 4,320 Spain 3,995 (100) 3,895 (2) 3,893 UK 5,048 (50) 4,998 (10) 4,988 Other Europe 4,697 (78) 4,619 (3) 4,616 ----------------------------------------------------------------------------------------- Europe 23,857 19,503 4,363 (9) (319) 23,538 (119) 23,419 ----------------------------------------------------------------------------------------- Eastern Europe 1,435 - 1,435 (14) 1,421 Middle East, Africa and Asia 1,784 - 1,784 (15) 1,769 Pacific 1,335 - 1,335 (14) 1,321 ----------------------------------------------------------------------------------------- EMAPA 4,554 3,077 1,489 (12) - 4,554 (43) 4,511 ----------------------------------------------------------------------------------------- Other 1,320 1,320 - - 145 1,465 (45) 1,420 ----------------------------------------------------------------------------------------- 29,731 23,900 5,852 (21) 145 (319) 29,557 (207) 29,350 ========================================================================================= (1) (2) Adjusted Segment Joint Common Operating Other operating result Subsidiaries ventures Associates functions (loss) adjustments profit /profit £m £m £m £m £m £m £m £m Adjusted operating profit Germany (17,904) (17,904) 19,400 1,496 Italy (1,928) (1,928) 3,600 1,672 Spain 968 968 - 968 UK 698 698 - 698 Other Europe 466 466 512 978 ----------------------------------------------------------------------------------------- Europe (17,700) (15,777) (1,928) 5 (17,700) 23,512 5,812 ----------------------------------------------------------------------------------------- Eastern Europe 176 176 - 176 Middle East, Africa and Asia 523 523 - 523 Pacific 140 140 - 140 Associates - US 1,732 1,732 - 1,732 Associates - Other 683 683 (17) 666 ----------------------------------------------------------------------------------------- EMAPA 3,254 472 367 2,415 3,254 (17) 3,237 ----------------------------------------------------------------------------------------- Other 147 139 - 8 215 362 (12) 350 ----------------------------------------------------------------------------------------- (14,299) (15,166) (1,561) 2,428 215 (14,084) 23,483 9,399 ========================================================================================= Notes: (1) Common functions represents results from Partner Markets and unallocated central Group income and expenses (2) Comprises impairments to the carrying value of goodwill relating to the mobile operations in Germany, Italy and Sweden amounting to £23,515 million offset by £17 million of non-operating income in relation to the Group's associated undertakings and £15 million of other items 3 Impairment losses Six months to Six months to Year ended 30 September 30 September 31 March 2006 2005 2006 £m £m £m Germany 6,700 - 19,400 Italy 1,400 - 3,600 Sweden - 515 515 --------- --------- --------- 8,100 515 23,515 ========== ========= ========= The carrying value of goodwill of the Group's operations in Germany and Italy, with each representing a reportable segment, has been impaired following a test for impairment triggered by an increase in long term interest rates and increased price competition in the German market along with continued regulatory pressures. The increase in long term interest rates, which led to higher discount rates, resulted in a reduction in value of £3.7 billion. The impairment losses were based on value in use calculations using pre-tax risk adjusted discount rates and are recognised in the income statement, as a separate line item within operating profit. The carrying values of the Group's operations in Germany and Italy equal their respective ammounts at 30 September 2006 and consequently, any adverse change in a key assumption may cause a further impairment loss to be recognised. Key assumptions The following assumptions have been used in determining the value in use: Germany Italy ------------------------------ ---------------------------- 30 September 31 March 30 September 31 March 2006 2006 2006 2006 % % % % Pre-tax risk adjusted discount rate 10.4 10.1 10.9 10.1 Budgeted EBITDA(1) (5.1) 0.3 (0.7) (1.8) Budgeted capital expenditure(2) 7.7 - 7.4 9.3 - 9.0 9.8 - 8.5 13.4 - 8.5 Long term growth rate 1.1 1.1 1.5 1.5 ============= ============ ============= ============= Notes: (1) Compound annual growth in the initial five years of the Group's approved financial plans (2) Range of capital expenditure as a percentage of revenue in the initial five years of the Group's approved financial plans 4 Taxation Six months to Six months to Year ended 30 September 30 September 31 March 2006 2005 2006 £m £m £m United Kingdom corporation tax (credit)/ charge at 30% (2005: 30%): Current year - 41 169 Adjustments in respect of prior years (39) - (15) Overseas corporation tax: Current year 2,084 1,018 2,077 Adjustments in respect of prior years (162) (134) (418) -------- -------- -------- Total current tax charge 1,883 925 1,813 -------- -------- -------- Deferred tax: United Kingdom deferred tax (50) 218 444 Overseas deferred tax (615) 139 123 -------- -------- -------- Deferred tax (credit)/charge (665) 357 567 -------- -------- -------- Total tax charge 1,218 1,282 2,380 ======== ======== ======== 5 (Loss)/earnings per share Six months to Six months to Year ended 30 September 30 September 31 March 2006 2005 2006 Weighted average number of shares for basic (loss)/earnings per share (millions) 57,515 63,694 62,607 Weighted average number of shares for diluted (loss)/earnings per share (millions)(1) 57,515 63,842 62,607 Basic (loss)/earnings per share from continuing operations (8.02)p 4.07p (27.66)p Diluted (loss)/earnings per share from continuing operations (8.02)p 4.06p (27.66)p Basic (loss)/earnings per share on (loss)/ profit for the period (8.88)p 4.36p (35.01)p Diluted (loss)/earnings per share on (loss) /profit for the period (8.88)p 4.35p (35.01)p Adjusted basic earnings per share 5.98p 5.08p 10.11p Adjusted diluted earnings per share(1) 5.97p 5.07p 10.08p Six months to Six months to Year ended 31 30 September 30 September March 2006 2005 2006 £m £m £m Amounts attributable to equity shareholders: (Loss)/profit for the period (5,105) 2,775 (21,916) Loss/(profit) from discontinued operations 494 (185) 4,598 -------- --------- --------- (Loss)/profit for (loss)/earnings per share from continuing operations (4,611) 2,590 (17,318) Adjustments: - Share of associated undertakings' non-operating income (6) (19) (17) - Impairment losses 8,100 515 23,515 - Other income and expense (1) - (15) - Non-operating income and expense (10) - 2 - Changes in the fair value of equity put rights and similar arrangements(2)(3) (21) 151 161 - Foreign exchange(3)(4) (8) - - - Tax on items not related to underlying business performance (2) - - -------- --------- --------- Profit for adjusted earnings per share 3,441 3,237 6,328 ======== ========= ========= Notes: (1) In the six months ended 30 September 2006, 140 million (year ended 31 March 2006: 183 million) shares have been excluded from the calculation of the weighted average number of shares as they are anti dilutive. The weighted average number of shares for adjusted diluted earnings per share from continuing operations was 57,655 million (31 March 2006: 62,790 million), including the 140 million (31 March 2006: 183 million) shares. (2) Comprises the fair value movement in relation to the potential put rights held by Telecom Egypt over its 25.5% interest in Vodafone Egypt and the fair value of a financial liability in relation to the minority partners of Arcor, the Group's non-mobile operation in Germany. Following the sale of 16.9% of Vodafone Egypt to Telecom Egypt in preceding periods, the Group signed a shareholder agreement with Telecom Egypt setting out the basis under which the Group and Telecom Egypt would each contribute a 25.5% interest in Vodafone Egypt to a newly formed company to be 50% owned by each party. Within this shareholder agreement, Telecom Egypt was granted a put option over its entire interest in Vodafone Egypt giving Telecom Egypt the right to put its shares back to the Group at deemed fair value. In the 2006 financial year, the shareholder agreement between Telecom Egypt and Vodafone expired and the associated rights and obligations contained in the shareholder agreement terminated, including the aforementioned put option. However, the original shareholders agreement contained an obligation on both parties to use reasonable efforts to renegotiate a revised shareholder agreement for their direct shareholding in Vodafone Egypt on substantially the same terms as the original agreement. During the period, the parties agreed to abandon such efforts and as such the financial liability relating to the initial shareholder agreement was released from the Group's balance sheet. Fair value movements are determined by the reference to the quoted share price of Vodafone Egypt. For the period ended 30 September 2006, a credit of £34 million was recognised. The capital structure of Arcor provides all partners, including Vodafone, the right to withdraw capital from 31 December 2026 onwards and this right in relation to the minority partner has been recognised as a financial liability. Fair value movements are determined by reference to a calculation of enterprise value of the partnership. For the period ended 30 September 2006, a charge of £13 million was recognised. The valuation of this financial liability is inherently unpredictable and changes in the fair value could have a material impact on the future results and financial position of the Group. (3) Changes in the fair value of equity put rights and similar arrangements and foreign exchange are included in investment income and financing costs. (4) Comprises the foreign exchange reflected in the income statement in relation to certain intercompany balances, and the foreign exchange on financial instruments received as consideration in the disposal of Vodafone Japan to SoftBank, which completed in April 2006. 6 Dividends Six months Six months Year to to ended 30 September 30 September 31 March 2006 2005 2006 £m £m £m Equity dividends on ordinary shares: Declared and paid during the period: Final dividend for the year ended 31 March 2006: 3.87 pence per share (2005: 2.16 pence per share) 2,328 1,395 1,386 Interim dividend for the year ended 31 March 2006: 2.20 pence per share - - 1,367 --------- --------- --------- 2,328 1,395 2,753 ========= ========= ========= Proposed or declared but not recognised as a liability: Final dividend for the year ended 31 March 2006: 3.87 pence per share - - 2,327 ========= ========= ========= Interim dividend for the year ended 31 March 2007: 2.35 pence per share (2006: 2.20 pence per share) 1,238 1,376 - ========= ========= ========= 7 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 2006 2005 2006 £m £m £m (Loss)/profit for the period from continuing operations (4,548) 2,629 (17,233) (Loss)/profit for the period from discontinued operations (491) 189 (4,588) Adjustments(1): Tax on (loss)/profit 1,088 1,289 2,520 Depreciation and amortisation 2,488 2,871 5,834 Loss on disposal of property, plant and equipment 19 35 88 Share of result in associated undertakings (1,413) (1,187) (2,428) Impairment losses 8,100 515 28,415 Other income and expense (1) - (15) Non operating income and expense (10) (1) 2 Investment income (425) (169) (353) Financing costs 805 540 1,123 Loss on disposal of discontinued operations 747 - - -------- -------- -------- Operating cash flows before movements in working capital 6,359 6,711 13,365 (Increase)/decrease in inventory (92) (85) 23 (Increase)/decrease in trade and other receivables (868) (207) 54 Increase in payables 793 332 81 -------- -------- -------- Cash generated by operations 6,192 6,751 13,523 Tax paid (1,217) (667) (1,682) -------- -------- -------- Net cash flows from operating activities 4,975 6,084 11,841 ======== ======== ======== Note: (1) Adjustments includes amounts relating to continuing and discontinued operations Cash flows from discontinued operations: Six months to Six months to Year ended 30 September 30 September 31 March 2006 2005 2006 £m £m £m Net cash flows from operating activities 135 857 1,651 Net cash flows from investing activities (266) (405) (939) Net cash flows from financing activities (29) (452) (536) -------- -------- -------- Net (decrease)/increase in cash and cash equivalents (160) - 176 Cash and cash equivalents at the beginning of the period 161 4 4 Exchange loss on cash and cash equivalents (1) - (19) -------- -------- -------- Cash and cash equivalents at the end of the period - 4 161 ======== ======== ======== 8 Acquisitions On 24 May 2006, the Group acquired substantially all the assets and business of Telsim Mobil Telekomunikasyon Hizmetleri ('Telsim') from the Turkish Savings and Deposit Insurance Fund for consideration of approximately US$4.7 billion. In addition to the consideration price, the Group is due to pay US$0.4 billion of VAT, which is recoverable against Telsim's future VAT liabilities. The Group did not acquire Telsim's liabilities, other than certain minor employee-related liabilities and outstanding service credits to be fulfilled. The initial purchase price allocation has been determined to be provisional pending the completion of the final valuation of the fair value of assets acquired. The transaction has been accounted for by the purchase method of accounting. Fair value Book value adjustments Fair value £m £m £m Net assets acquired: Identifiable intangible assets 13 846 859 Property, plant and equipment 168 - 168 Inventory 2 - 2 Trade and other receivables 178 - 178 Trade and other payables (252) - (252) ----------- ---------- --------- 109 846 955 =========== ========== Goodwill 1,606 --------- Total consideration (including £30 million of directly attributable costs) 2,561 ========= Of the £2,561 million total consideration, the Group had paid £2,547 million at 30 September 2006. The goodwill is attributable to the profitability of the acquired business and the synergies expected to arise after the Group's acquisition of Telsim. Results of the acquired business and assets have been consolidated in the income statement from the date of acquisition, 24 May 2006. The following unaudited pro forma summary presents the Group as if Telsim had been acquired on 1 April 2006 or 1 April 2005, respectively. The pro forma amounts include the results of Telsim, amortisation of the acquired intangibles assets recognised on acquisition and the interest expenses on debt issued as a result of the acquisition. The pro forma amounts do not include any possible synergies from mergers and acquisitions. The pro forma information is provided for comparative purposes only and does not necessarily reflect the actual results that would have occurred, nor is it necessarily indicative of future results of operations of the combined companies. Six months to Six months to Year ended 30 September 30 September 31 March 2006 2005 2006 £m £m £m Revenue 15,736 14,777 29,822 (Loss)/profit for the period (5,097) 2,628 (22,281) (Loss)/profit attributable to equity shareholders (5,163) 2,585 (22,376) Basic (loss)/earnings per share (8.98)p 4.06p (35.74)p Diluted (loss)/earnings per share (8.98)p 4.05p (35.74)p 9 Disposals Japan - Vodafone K.K. On 17 March 2006, the Group announced an agreement to sell its 97.7% holding in Vodafone K.K. to SoftBank. The transaction completed on 27 April 2006 with the Group receiving cash of approximately Y1.42 trillion (£6.9 billion) including the repayment of intercompany debt of Y0.16 trillion (£0.8 billion). In addition, the Group received non-cash consideration with a fair value of approximately Y0.23 trillion (£1.1 billion), comprised of preferred equity and a subordinated loan. SoftBank also assumed debt of approximately Y0.13 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 discontinued operation in Vodafone Group Plc's Annual Report for the year ended 31 March 2006. A loss of £0.7 billion arose on the disposal, being the proceeds less the carrying amount of Vodafone K.K.'s net assets and attributable goodwill together with cumulative exchange difference transferred to the income statement on disposal. £m Net assets disposed: Intangible assets 3,972 Property, plant and equipment 4,562 Inventory 148 Trade and other receivables 1,147 Deferred tax assets 391 Cash and cash equivalents 124 Short and long term borrowings (674) Trade and other payables(1) (2,382) --------- 7,288 Minority interests (87) --------- Net assets disposed 7,201 Total consideration 7,245 Other effects: transfer of foreign exchange differences to the income statement on disposal (794) Other effects: other 3 --------- Loss on disposal (747) ========= Net cash inflow arising on disposal: Cash consideration 6,141 Cash to repay intercompany debt 793 Cash and cash equivalents disposed (124) --------- 6,810 ========= Note: (1) Includes £793 million of intercompany debt Analysis of loss from discontinued operations Six months to Six months to Year ended 30 September 30 September 31 March 2006 2005 2006 £m £m £m Service revenue 376 2,704 5,264 Equipment revenue 144 1,000 2,004 ------- ------- ------- Segment revenue 520 3,704 7,268 Eliminations - (1) (2) ------- ------- ------- Net revenue 520 3,703 7,266 Operating expenses (402) (2,899) (5,667) Depreciation and amortisation(1) - (613) (1,144) Impairment loss - - (4,900) ------- ------- ------- Operating profit/(loss) 118 191 (4,445) Non-operating income and expense - 1 - Net financing income/(costs) 8 4 (3) ------- ------- ------- Profit/(loss) before taxation from discontinued operations 126 196 (4,448) Taxation related to performance of discontinued operations (15) (7) 7 Loss on disposal(2) (747) - - Taxation relating to classification of the discontinued operations 145 - (147) ------- ------- ------- (Loss)/profit from discontinued operations(3) (491) 189 (4,588) ======= ======= ======= Basic (loss)/earnings per share from discontinued operations (0.86)p 0.29p (7.35)p Diluted (loss)/earnings per share from discontinued operations (0.86)p 0.29p (7.35)p Notes: (1) Including gains and losses on disposal of fixed assets (2) Includes £794 million of foreign exchange differences transferred to the income statement on disposal (3) Amount attributable to equity shareholders for the six months ended 30 September 2006 was £(494) million (30 September 2005: £185 million; 31 March 2006: £(4,598) million) 10 Transactions with equity shareholders Called up Share Additional Capital share premium Own shares paid in redemption capital account held capital reserve £m £m £m £m £m 1 April 2005 4,286 52,284 (5,121) 100,081 - Issue of new shares 6 110 - (37) - Purchase of treasury shares - - (2,802) - - Own shares released on vesting of share awards - 7 315 (7) - Share-based payment charge, inclusive of tax credit of £4 million - - - 63 - -------- -------- -------- ------- ------- 30 September 2005 4,292 52,401 (7,608) 100,100 - Issue of new shares 1 42 - (7) - Purchase of treasury shares - - (3,698) - - Own shares released on vesting of share awards - 1 55 (1) - Cancellation of treasury shares (128) - 3,053 - 128 Share-based payment charge, inclusive of tax credit of £5 million - - - 60 - -------- -------- -------- ------- ------- 31 March 2006 4,165 52,444 (8,198) 100,152 128 Issue of new shares 1 25 - (7) - Own shares released on vesting of share awards - - 45 - - Share consolidation - (9,026) - - - 'B' share capital redemption - - - - 5,707 'B' share preference dividend - - - - 3,286 Share-based payment charge, inclusive of tax charge of £3 million - - - 46 - -------- -------- -------- ------- ------- 30 September 2006 4,166 43,443 (8,153) 100,191 9,121 ======== ======== ======== ======= ======= 11 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 £m 1 April 2005 1,521 (79) 339 - 1,781 Gains arising in the period 437 - 574 - 1,011 Tax effect - - (2) - (2) -------- -------- -------- ------- ------- 30 September 2005 1,958 (79) 911 - 2,790 Gains/(losses) arising in the period 1,049 (43) 136 112 1,254 Transfer to the income statement on disposal of foreign operations 36 - - - 36 Tax effect - 13 (3) - 10 -------- -------- -------- ------- ------- 31 March 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 of foreign operations 794 - - - 794 Tax effect - (8) - - (8) -------- -------- -------- ------- ------- 30 September 2006 558 (91) 1,685 112 2,264 ======== ======== ======== ======= ======= 12 Movement in retained losses 30 September 30 September 31 March 2006 2005 2006 £m £m £m 1 April (67,356) (39,511) (39,511) (Loss)/profit for the period (5,105) 2,775 (21,916) Dividends (2,328) (1,395) (2,753) Gain on expiration of equity put right 142 - - Loss on reissue of treasury shares (16) (73) (123) Cancellation of shares - - (3,053) 'B' share capital redemption (5,707) - - 'B' share preference dividend (3,286) - - --------- --------- --------- 30 September / 31 March (83,656) (38,204) (67,356) ========= ========= ========= 13 Related party transactions Transactions between the Company and its subsidiaries, joint ventures and associates represent related party transactions. Transactions with subsidiaries have been eliminated on consolidation. Transactions between the Company and its joint ventures are not material to the extent that they have not been eliminated through proportionate consolidation. Except as disclosed below, no material related party transactions have been entered into, during the period, which might reasonably affect any decisions made by users of these Interim Consolidated Financial Statements. Six months to Six months to Year ended 30 September 30 September 31 March 2006 2005 2006 £m £m £m Transactions with associated undertakings: - Sales of goods and services 160 153 288 ========= ========= ========= - Purchase of goods and services 163 186 268 ========= ========= ========= Amounts owed to joint ventures included within short-term borrowings 575 770 378 ========= ========= ========= In the six months ended 30 September 2006, the Group made contributions to defined benefit pension schemes of £30 million (six months ended 30 September 2005: £24 million, year ended 31 March 2006: £85 million). Compensation paid to the Company's Board of directors and members of the Executive Committee will be disclosed in the Group's Annual Report for the year ending 31 March 2007. 14 Other matters Contingent liabilities There have been no material changes to the Group's contingent liabilities relating to performance bonds and credit guarantees in the six months ended 30 September 2006. There have been no changes to any legal or arbitration proceedings involving the Group in the six months ended 30 September 2006 which are expected to have, or have had, a material effect on the financial position or profitability of the Group. Seasonality or cyclicality of interim operations The Group's financial results and cash flows have, historically, been subject to seasonal trends between the first and second half of the financial year. Traditionally, the Christmas period sees a higher volume of customer connections, contributing to higher equipment and connection revenue in the second half of the financial year and increased acquisition costs. Ongoing airtime revenue also demonstrates signs of seasonality, with revenue generally lower during February, which is a shorter than average month, and revenue from roaming charges higher during the summer months as a result of increased travel by customers. There is no assurance that these trends will continue in the future. Events after the balance sheet date On 25 August 2006, the Group announced the sale of its 25% interest in Proximus, the Group's associated undertaking in Belgium, for consideration of €2.0 billion. The sale completed on 3 November 2006. On 8 November 2006, the Group announced its intention to launch a tender offer for an additional 4.9% of the shares in Vodafone Egypt for a maximum possible consideration of approximately £108 million. Telecom Egypt has given an irrevocable undertaking to accept the tender in respect of at least 3.97% and up to 4.69% of the shares in Vodafone Egypt. If fully accepted, this tender offer will take Vodafone's shareholding in its Egyptian subsidiary to 55%, with a further 45% held by Telecom Egypt. Subject to regulatory approvals, the tender offer is expected to be launched later in November 2006. Changes in estimates There has been no material changes in estimates of amounts reported in the six months ended 30 September 2006 or in the prior financial year. Issuances and repayment of debt See 'Cash Flows and Funding' on pages 19 to 20 for details of issuances and repayment of debt. 15 Summary of differences between IFRS and US GAAP The unaudited Interim Consolidated Financial Statements have been prepared in accordance with IFRS, which differ in certain significant respects from US Generally Accepted Accounting Principles ('US GAAP'). The following is a summary of the effects of the adjustments from IFRS to US GAAP. Financial information as at 30 September 2005 and for the six months then ended has been adjusted for the adoption of SFAS No 123 (Revised 2004). 30 September 30 September 31 March 2006 2005 2006 (Adjusted) £m £m £m Revenue (IFRS) 15,594 14,548 29,350 Items (decreasing)/increasing revenue: Discontinued operations (31) (536) (944) Basis of consolidation (3,139) (2,821) (5,756) Connection revenue 170 598 1,106 --------- --------- --------- Revenue (US GAAP) 12,594 11,789 23,756 ========= ========= ========= (Loss)/profit for the period (IFRS) (5,039) 2,818 (21,821) Items (increasing)/decreasing net loss: Investments accounted for under the equity method (733) (2,426) (1,230) Connection revenue and costs 2 6 10 Goodwill and other intangible assets (6,681) (7,191) (14,299) Impairment losses 6,700 (368) 15,377 Amortisation of capitalised interest (54) (54) (108) Interest capitalised during the period 23 15 36 Other 670 47 (42) Income taxes 2,650 2,600 8,902 Minority interests (66) (43) (95) --------- --------- --------- Net loss (US GAAP) (2,528) (4,596) (13,270) ========= ========= ========= Total equity (IFRS) 67,573 113,656 85,312 Items increasing/(decreasing) shareholders' equity: Investments accounted for under the equity method (2,883) (3,340) (2,287) Connection revenue and costs (3) (9) (5) Goodwill and other intangible assets 32,232 23,824 32,552 Capitalised interest 1,382 1,490 1,443 Other 60 207 210 Income taxes (25,382) (36,229) (30,354) Minority interests (197) 115 113 --------- --------- --------- Shareholders' equity (US GAAP) 72,782 99,714 86,984 ========= ========= ========= INDEPENDENT REVIEW REPORT BY DELOITTE & TOUCHE LLP TO VODAFONE GROUP PLC Introduction We have been instructed by the Company to review the financial information for the six months ended 30 September 2006 which comprise the consolidated income statement, the consolidated balance sheet, the consolidated statement of recognised income and expense, the consolidated cash flow statement and related notes 1 to 15. We have read the other information contained in the Interim Consolidated Financial Statements and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the Company in accordance with Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed. Directors' responsibilities The Interim Consolidated Financial Statements, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Consolidated Financial Statements in accordance with the Listing Rules of the Financial Services Authority and the requirements of IAS 34 which require that the accounting policies and presentation applied to the interim figures are consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with International Standards on Auditing (UK and Ireland) and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 September 2006. Deloitte & Touche LLP Chartered Accountants London 14 November 2006 Basis of preparation The tables of financial information below are presented on a proportionate basis from continuing operations. Proportionate presentation is not a measure recognised under IFRS and is not intended to replace the full year results prepared in accordance with IFRS. 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 full year results prepared in accordance with IFRS. IFRS requires consolidation of entities which the Group has the power to control and allows either proportionate consolidation or equity accounting for joint ventures. IFRS also requires equity accounting for interests in which the Group has significant influence but not a controlling interest. The proportionate presentation, below, is a pro rata consolidation, which reflects the Group's share of revenue and expenses in entities, both consolidated and unconsolidated, in which the Group has an ownership interest. Proportionate results are calculated by multiplying the Group's ownership interest in each entity by each entity's results. Proportionate presentation of financial information differs in material respects to the proportionate consolidation adopted by the Group under IFRS for its joint ventures. Proportionate information includes results from the Group's equity accounted investments and other investments. The Group may not have control over the revenue, expenses or cash flows of these investments and may only be entitled to cash from dividends received from these entities. Group proportionate revenue is stated net of intercompany revenue. 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. Reconciliation of proportionate revenue to statutory revenue 30 30 31 September September March 2006 2005 2006 £m £m £m Proportionate revenue 21,897 20,315 41,355 Minority share of revenue in subsidiary undertakings 420 322 666 Group share of revenue in associated undertakings and other investments (6,723) (6,089) (12,671) -------- -------- -------- Statutory revenue 15,594 14,548 29,350 ======== ======== ======== Reconciliation of proportionate EBITDA to operating (loss)/profit for the period 30 30 31 September September March 2006 2005 2006 £m £m £m Proportionate EBITDA 8,786 8,155 16,380 Minority share of EBITDA in subsidiary undertakings 145 101 224 Group's share of EBITDA in associated undertakings and other investments (2,689) (2,349) (4,838) -------- -------- -------- Group EBITDA 6,242 5,907 11,766 Charges for depreciation and amortisation (2,491) (2,261) (4,709) Loss on disposal of property, plant and equipment (17) (35) (69) Share of results in associated undertakings 1,413 1,190 2,428 Impairment losses (8,100) (515) (23,515) Other income and expense 1 - 15 -------- -------- -------- Operating (loss)/profit (2,952) 4,286 (14,084) ======== ======== ======== 1) Copies of this document are available from the Company's registered office: Vodafone House The Connection Newbury Berkshire RG14 2FN 2) This interim results announcement will be available on the Vodafone Group Plc website, www.vodafone.com, from 14 November 2006. For further information: Vodafone Group Investor Relations Media Relations Telephone: +44 (0) 1635 664447 Telephone: +44 (0) 1635 664444 High resolution photographs are available to the media free of charge at www.newscast.co.uk. Video interviews with Arun Sarin, Chief Executive, and Andy Halford, Chief Financial Officer, are available from midday on www.vodafone.com and www.cantos.com and are also available in audio and transcript from the Company's registered office. Vodafone, Vodafone live!, Vodafone Mobile Connect, Vodafone Office, Vodafone At Home, Vodafone Zuhause, Vodafone Casa, Oficina Vodafone, Vodafone Simply, Vodafone Passport, Stop the Clock and Vodafone Radio DJ are trademarks of the Vodafone Group. Other product and company names mentioned herein may be the trademarks of their respective owners. FORWARD-LOOKING STATEMENTS This document contains 'forward-looking statements' within the meaning of the US Private Securities Litigation Reform Act of 1995 with respect to the Group's financial condition, results of operations and businesses and certain of the Group's plans and objectives. In particular, such forward-looking statements include statements with respect to Vodafone's expectations as to launch and roll-out dates for products, services or technologies offered by Vodafone; intentions regarding the development of products and services introduced by Vodafone or by Vodafone in conjunction with initiatives with third parties; the ability to integrate all operations throughout the Group; the development and impact of new mobile technology; anticipated benefits to the Group of the One Vodafone programme; anticipated benefits to the Group from core cost reduction programmes, outsourcing, supply chain management and IT operations initiatives; anticipated benefits to the Group of the Mobile Plus strategy; growth in customers and usage, including improvements in customer mix; future performance, including revenue, average revenue per user ('ARPU'), cash flows, costs, capital expenditure, capitalised fixed asset additions and margins; the rate of dividend growth by the Group or its existing investments; expectations regarding the Group's access to adequate funding for its working capital requirements; expected effective tax rates and expected tax payments; the ability to realise synergies through cost savings, revenue generating services, benchmarking and operational experience; future acquisitions, including increases in ownership in existing investments and pending offers for investments; future disposals; the management of the Group's portfolio; contractual obligations; mobile penetration and coverage rates; the impact of regulatory and legal proceedings involving Vodafone; expectations with respect to long-term shareholder value growth; Vodafone's ability to be the mobile market leader, overall market trends and other trend projections. Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as 'anticipates', 'aims', 'could', 'may', 'should', 'expects', 'believes', 'intends', 'plans' or 'targets'. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, the following: changes in economic or political conditions in markets served by operations of the Group that would adversely affect the level of demand for mobile services; greater than anticipated competitive activity, from both existing competitors and new market entrants, including Mobile Virtual Network Operators ('MVNOs'), which could require changes to the Group's pricing models, lead to customer churn and make it more difficult to acquire new customers, and reduce profitability; the impact of investment in network capacity and the deployment of new technologies, or the rapid obsolescence of existing technology; slower than expected customer growth and reduced customer retention; changes in the spending patterns of new and existing customers; the possibility that new products and services, including mobile internet platforms, 3G, Vodafone live!, Vodafone Radio DJ and other products and services, will not be commercially accepted or perform according to expectations or that vendors' performance in marketing these technologies will not meet the Group's requirements; the Group's ability to win 3G licence allocations; the Group's ability to realise expected synergies and benefits associated with 3G technologies; a lower than expected impact of GPRS, 3G, Vodafone live!, Vodafone Radio DJ and other new or existing products, services or technologies on the Group's future revenue, cost structure and capital expenditure outlays; the ability of the Group to harmonise mobile platforms and delays, impediments or other problems associated with the roll-out and scope of 3G technology, Vodafone live!, Vodafone Radio DJ and other new or existing products, services or technologies in new markets; the ability of the Group to offer new services and secure the timely delivery of high-quality, reliable GPRS and 3G handsets, network equipment and other key products from suppliers; the Group's ability to develop competitive data content and services that will attract new customers and increase average usage; future revenue contributions of both voice and non-voice services; greater than anticipated prices of new mobile handsets; changes in the costs to the Group of or the rates the Group may charge for terminations and roaming minutes; the Group's ability to achieve meaningful cost savings and revenue improvements as a result of its One Vodafone and outsourcing initiatives; the ability to realise benefits from entering into partnerships for developing data and internet services and entering into service franchising and brand licensing; the possibility that the pursuit of new, unexpected strategic opportunities may have a negative impact on the Group's financial performance; developments in the Group's financial condition, earnings and distributable funds and other factors that the Board of Directors takes into account in determining the level of dividends; any unfavourable conditions, regulatory or otherwise, imposed in connection with pending or future acquisitions or dispositions and the integration of acquired companies in the Group's existing operations; the risk that, upon obtaining control of certain investments, the Group discovers additional information relating to the businesses of that investment leading to restructuring charges or write-offs or with other negative implications; changes in the regulatory framework in which the Group operates, including possible action by regulators in markets in which the Group operates or by the EU regulating rates the Group is permitted to charge; the impact of legal or other proceedings against the Group or other companies in the mobile telecommunications industry; the possibility that new marketing or usage stimulation campaigns or efforts and customer retention schemes are not an effective expenditure; the possibility that the Group's integration efforts do not reduce the time to market for new products or improve the Group's cost position; loss of suppliers or disruption of supply chains; the Group's ability to satisfy working capital requirements through borrowing in capital markets, bank facilities and operations; changes in exchange rates, including particularly 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 weighted average tax rate; changes in tax legislation in the jurisdictions in which the Group operates; and final resolution of open issues which might impact the effective tax rate; timing of tax payments relating to the resolution of open issues. Furthermore, a review of the reasons why actual results and developments may differ materially from the expectations disclosed or implied within forward-looking statements can be found under 'Risk Factors, Trends and Outlook - Risk Factors' in Vodafone Group Plc's Annual Report for the year ended 31 March 2006. All subsequent written or oral forward-looking statements attributable to the Company or any member of the Group or any persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. No assurances can be given that the forward-looking statements in this document will be realised. Neither Vodafone nor any of its affiliates intends to update these forward-looking statements. In presenting and discussing the Group's reported financial position, operating results and cash flows, certain information is derived from amounts calculated in accordance with IFRS but this information is not itself an expressly permitted GAAP measure. Such non-GAAP measures should not be viewed in isolation as 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 the nearest 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 Group EBITDA Operating profit/(loss) Proportionate financial information on page 37 Adjusted operating profit Operating profit/(loss) Business review on page 7 Adjusted profit before tax Profit/(loss) before tax Financial update on page 17 Adjusted profit for the period Profit/(loss) for the Note 5 on page 29 attributable to equity period attributable to shareholders equity shareholders Adjusted earnings per share Earnings/(loss) per share Note 5 on page 29 Operating free cash flow Net cash flows from Cash flows and funding on page operating activities 19 Free cash flow Net cash flows from Cash flows and funding on page operating activities 19 Net debt Borrowings Cash flows and funding on page 19 Proportionate revenue Statutory revenue Proportionate financial information on page 37 Proportionate EBITDA Operating profit/(loss) Proportionate financial information on page 37 Adjusted effective tax rate Tax on profit/(loss) as a Financial update on page 17 percentage of profit/(loss) before taxation Term Definition 3G broadband 3G services enabled with High Speed Downlink Packet Access ('HSDPA') technology which enables data transmission speeds of up to 2 megabits per second. 3G device A handset or device capable of accessing 3G data services. Acquired intangibles Amortisation relating to intangible assets identified and recognised amortisation separately in respect of a business combination in excess of the intangible assets recognised by the acquiree prior to acquisition. Active customer A customer who pays a monthly fee or has made or received a chargeable event in the last three months. ARPU Total revenue excluding handset revenue and connection fees divided by the weighted average number of customers during the period. Average monthly ARPU Total ARPU in an accounting period divided by the number of months in the period. Capitalised fixed asset This measure includes the aggregate of capitalised property, plant and additions equipment additions and capitalised software costs. Change at constant Changes relating to one country are calculated based on local currency exchange rates amounts in both periods. For changes relating to multiple countries, calculations exclude the effect of exchange rate movements by restating the prior period's results as if they had been generated at the current period's exchange rates. Churn Total gross customer disconnections in the period divided by the average total customers in the period. Controlled and jointly The networks include the Group's mobile operating subsidiaries and controlled networks joint ventures. Measures for controlled and jointly controlled networks include 100% for subsidiaries and the Group's proportionate share for joint ventures. Customer A customer is defined as a SIM, or in territories where SIMs do not exist, a unique mobile telephone number, which has access to the network for any purpose (including data only usage) except telemetric applications. Telemetric applications include, but are not limited to, asset and equipment tracking, mobile payment/billing functionality (for example, vending machines and meter readings) and includes voice enabled customers whose usage is limited to a central service operation (for example, emergency response applications in vehicles). Data revenue Data revenue includes all non-voice service revenue excluding messaging, fixed line and DSL. Depreciation and other This measure includes the profit or loss on disposal of property, amortisation plant and equipment and computer software. DSL A Digital Subscriber Line which is a fixed line enabling data to be transmitted at high speeds. HSDPA High Speed Downlink Packet Access is a wireless technology enabling data transmission speeds of up to 2 megabits per second. ISDN An Integrated Service Digital Network which can be used for sending voice, video and data over digital telephone lines or normal telephone wires and supports data transfer rates of 64 kilobits per second. Messaging revenue Messaging revenue includes all SMS and MMS revenue including wholesale messaging revenue, revenue from the use of messaging services by Vodafone customers roaming away from their home network and customers visiting the local network. Net debt Long-term borrowings, short-term borrowings and mark to market adjustments on financing instruments less cash and cash equivalents. Organic growth The percentage movements in organic growth are presented to reflect operating performance on a comparable basis. Where an entity, being a subsidiary, joint venture or associated undertaking, was newly acquired or disposed of in the current or prior period, the Group adjusts, under organic growth calculations, the results for the current and prior period to remove the amount the Group earned in both periods as a result of the acquisition or disposal of subsidiary or associated undertakings. Where the Group increases, or decreases, its ownership interest in a joint venture or associated undertaking in the current or prior period, the Group's results for the prior period are restated at the current period's ownership level. Further adjustments in organic calculations exclude the effect of exchange rate movements by restating the prior period's results as if they had been generated at the current period's exchange rates and excludes the amortisation of acquired intangible assets. Organic growth for proportionate results is adjusted to reflect current year and prior year results at constant exchange rates, using like-for-like ownership levels in both years. Partner Markets Markets in which the Group has entered into a Partner Agreement with a local mobile operator enabling a range of Vodafone's global products and services to be marketed in that operator's territory and extending Vodafone's brand reach into such new markets. Purchased licence Amortisation relating to capitalised licence and spectrum fees amortisation purchased directly by the Group or existing on recognition through business combination accounting, and such fees recognised by an acquiree prior to acquisition. Vodafone live! active A handset or device equipped with the Vodafone live! portal which has device made or received a chargeable event in the last month. REGIONAL ANALYSIS FOR THE SIX MONTHS ENDED 30 SEPTEMBER Adjusted Capitalised fixed Free Revenue EBITDA operating profit asset additions cash flow(1) ----------------- --------------- ---------------- --------------- ---------------- 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 £m £m £m £m £m £m £m £m £m £m EUROPE Germany 2,827 2,913 1,263 1,353 724 775 198 296 990 1,090 Italy(2) 2,174 2,240 1,128 1,207 839 923 184 191 878 1,024 Spain 2,268 1,968 813 721 585 529 213 183 432 438 UK 2,549 2,568 785 781 318 320 305 265 393 396 Greece 636 625 250 241 167 164 74 59 160 152 Netherlands 600 604 176 185 102 106 50 52 136 117 Portugal 466 452 168 146 107 84 44 53 101 48 Other 519 762 225 277 152 138 55 102 146 142 Intra-region revenue (209) (183) - - - - - - - - ----------------- --------------- ---------------- --------------- ---------------- Total Europe 11,830 11,949 4,808 4,911 2,994 3,039 1,123 1,201 3,236 3,407 EMAPA Romania(3) 355 213 175 105 68 40 82 50 121 74 Turkey(4) 283 - 65 - (18) - 36 - 134 - Egypt 355 255 198 141 155 98 66 56 137 101 South Africa(2) 727 454 261 164 152 122 92 81 139 64 Pacific 666 636 165 167 66 58 104 137 61 28 Other subsidiaries 397 298 120 88 41 25 77 68 72 41 Other joint ventures(2) 294 153 116 66 59 41 101 40 27 33 United States - - - - 1,015 772 - - - - Other Associates - - - - 390 396 - - - - Intra-region revenue (2) - - - - - - - - - ----------------- --------------- ---------------- --------------- ---------------- Total EMAPA 3,075 2,009 1,100 731 1,928 1,552 558 432 691 341 Common functions 86 70 208 182 136 153 67 53 110 37 Other operations 706 622 126 83 83 38 76 64 (16) (24) Inter-region revenue (103) (102) - - - - - - - - ----------------- --------------- ---------------- --------------- ---------------- Total Group 15,594 14,548 6,242 5,907 5,141 4,782 1,824 1,750 4,021 3,761 ================= =============== ================ =============== Net interest paid (186) (165) Tax paid (1,217) (698) Dividends received and other 337 354 ---------------- Free cash flow - Continuing Operations 2,955 3,252 - Discontinued operations(5) (8) 443 ---------------- 2,947 3,695 ================ Notes: (1) For the Group's operating companies, common functions and other operations, the cash flows presented reflect operating free cash flow (2) The results of joint ventures have been included using proportionate consolidation (3) Includes periods in the 2006 financial year where accounted for as a joint venture (4) Presents the results from 24 May 2006, being the date of acquisition (5) Discontinued operations represent Vodafone Japan See page 40 for use of non-GAAP financial information and page 41 for definition of terms This information is provided by RNS The company news service from the London Stock Exchange

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