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Vodafone Group Plc (VOD)

  Print      Mail a friend       Annual reports

Tuesday 21 May, 2013

Vodafone Group Plc

Final Results

RNS Number : 1654F
Vodafone Group Plc
21 May 2013
 



Vodafone announces results for the year ended 31 March 2013

21 May 2013

 

 

Ÿ

Group revenue down -4.2% to £44.4 billion; full year organic service revenue decline -1.9%*; Q4 -4.2%*

Ÿ

EBITDA down -3.1%* at £13.3 billion; organic EBITDA margin down -0.1* percentage points excluding restructuring costs

Ÿ

Verizon Wireless ('VZW') service revenue up 8.1%*; our share of profits up 30.5%* to £6.4 billion

Ÿ

Adjusted operating profit above guidance, up 9.3%* at £12.0 billion; adjusted EPS +5.0% at 15.65p

Ÿ

H2 impairment charge of £1.8 billion, giving a full year total of £7.7 billion in Italy and Spain

Ÿ

Free cash flow towards the higher end of guidance at £5.6 billion after capital additions of £6.3 billion

Ÿ

Final dividend per share of 6.92 pence, giving total dividends per share of 10.19 pence, up 7.0%

 

Financial highlights1

Year ended

Change year-on-year


31 March 2013 

Reported 

Organic 


£m 

%

Group revenue

44,445 

(4.2)

(1.4)

Group service revenue

40,942 

(4.5)

(1.9)

Northern and Central Europe  

18,768 

+2.8 

(0.2)

Southern Europe

9,635 

(16.7)

(11.6)

Africa, Middle East and Asia Pacific ('AMAP')

12,345 

(3.2)

+3.9 

Profit for the financial year

673 



Adjusted operating profit

11,960 

+3.7 

+9.3 

Free cash flow

5,608 

(8.1)


Earnings per share

0.87p



Adjusted earnings per share

15.65p

+5.0 


Total ordinary dividends per share

10.19p

+7.0 


 

 

Ÿ

Further good progress on data: organic revenue growth 13.8%*; European contract smartphone penetration 54.8%, up 9.9 percentage points year-on-year

Ÿ

Vodafone Red now in 14 markets; 4.1 million customers as at 12 May 2013; 67.1% of consumer contract revenue in our European markets from integrated plans in Q4

Ÿ

Unified communications strategy accelerated: acquisitions of Cable & Wireless Worldwide ('CWW') and TelstraClear; fibre deployment planned in Spain and Portugal; wholesale access agreement in Germany

Ÿ

VZW dividend: £2.4 billion dividend received in December 2012; £2.1 billion due in June 2013, to be retained in the business

Ÿ

Aiming to reach ten million Vodafone Red customers by March 2014, and to extend our 3G footprint at 43.2 Mbps and LTE coverage across our five major European markets to around 80% and 40% respectively by March 2015

 

 

          Guidance for the 2014 financial year

Ÿ

Adjusted operating profit in the range of £12.0 billion to £12.8 billion.

Ÿ

Free cash flow of around £7.0 billion, including the £2.1 billion VZW dividend to be received in June 2013.

 

Vittorio Colao, Group Chief Executive, commented:

"Thanks to further strong progress this year in our key areas of strategic focus -data, enterprise and emerging markets3 - and an excellent performance from VZW, we have achieved good growth in adjusted operating profit and adjusted earnings per share. However, we have faced headwinds from a combination of continued tough economic conditions, particularly in Southern Europe, and an adverse European regulatory environment. 

 

"I remain very excited about our longer term prospects, as customer appetite for high speed data grows rapidly, and companies look to embed mobility into their corporate strategies. The launch of Vodafone Red has been very successful, providing a solid underpinning for future revenue as customers take advantage of the best of the Vodafone experience. Our new targets for high speed mobile network coverage, announced today, combined with our growing capabilities in next generation fixed line access, strengthen our Vodafone 2015 strategy.

 

"With the announcement of today's 7% increase, the ordinary dividend per share has grown over 22% in the last three years. The Board remains focused on balancing ongoing shareholder remuneration with the long-term investment needs of the business, and going forward aims at least to maintain the ordinary dividend per share at current levels."

 

Notes:

*

All amounts in this document marked with an "*" represent organic growth which presents performance on a comparable basis, both in terms of merger and acquisition activity and movements in foreign exchange rates. There have been two one-off items impacting organic growth rates in the year. For details see note 4 on page 38.

1

See page 33 for more information on non-GAAP measures.

2

See 'Guidance' on page 8. For consistency with the basis of presentation of joint ventures in previous years, guidance does not take into account the impact on the Group's financial results of adopting IFRS 11, Joint  Arrangements, for the year ending 31 March 2014.

3

Emerging markets comprise India, Vodacom, Egypt, Turkey, Ghana, Qatar and Fiji.

 

 

 

CHIEF EXECUTIVE'S STATEMENT

 

Financial review of the year

Performance was strong in our emerging markets operations, with continued good growth in revenue and improving margins. However, the macroeconomic environment in Southern Europe has been very challenging, and European regulation continues to depress returns in the industry, rather than incentivise investment. VZW, our 45% owned associate in the US, continued to achieve strong growth in revenue, EBITDA, cash flow and market share.

 

Overall, I am satisfied with the progress we have made with our strategic priorities:

 

Ÿ

We have launched Vodafone Red, our new strategic approach to pricing and our customer proposition, in 14 markets, with very positive initial results;

Ÿ

We remain competitive in all markets, gaining or at least holding market share in most of our operations;

Ÿ

We have bought new low frequency spectrum in a number of markets, and have laid the technology platform for the rapid deployment of HSPA+ and 4G/LTE services;

Ÿ

We have accelerated the integration of CWW and TelstraClear, two fixed line businesses acquired during the year, advancing our enterprise and unified communications strategies; and

Ÿ

We have increased the ordinary dividend per share by 7% for the third year in a row, as well as buying back £1.6 billion of shares.

 

Group revenue for the year was down -1.4%* to £44.4 billion, with Group organic service revenue down -1.9%*. Data revenue (+13.8%*) and major emerging markets (India +10.7%*, Vodacom +3.0%*, Turkey +17.3%*) continued to perform strongly. Group EBITDA margin fell -0.5*  percentage points, or -0.1* percentage points excluding restructuring costs, as the impact of steep revenue declines in Southern Europe offset improving margins in India and Vodacom. Group EBITDA fell -3.1%* to £13.3 billion, after restructuring costs of £310 million.

 

Adjusted operating profit from controlled and jointly controlled operations, before our share of associates' profits, was £5.5 billion, down -7.0%* year-on-year, reflecting the decline in EBITDA and relatively consistent depreciation and amortisation year-on-year. Group adjusted operating profit was up 9.3%* year-on-year at £12.0 billion, above our guidance range of £11.1 billion to £11.9 billion, as a result of the strong VZW contribution, which increased 30.5%* year-on-year. Excluding M&A and restructuring costs, adjusted operating profit was £12.3 billion1.

 

We recorded an accounting gain of £0.5 billion on the acquisition of CWW and impairment charges of £7.7 billion relating to our businesses in Italy and Spain. These were driven primarily by lower projected cash flows within business plans, resulting from the tougher macroeconomic environment, and partly by an increase in discount rates.

 

Free cash flow was £5.6 billion, or £5.8 billion1 excluding M&A and restructuring costs, at the top of our guidance range of £5.3 billion to £5.8 billion for the year. The year-on-year decline reflected the relative strength of sterling against the euro, South African rand and Indian rupee over the course of the year, as well as tough trading conditions. In addition to the free cash flow reported above, we received an income dividend of US$3.8 billion (£2.4 billion) from VZW, and will shortly receive a further £2.1 billion which will be retained for general business purposes, including spectrum costs.

 

Capital additions were stable at £6.3 billion, as we continued to maintain a significant level of investment to extend our high speed mobile data coverage across our existing voice footprint. In addition, we spent £2.5 billion during the year on acquiring and renewing spectrum in a number of markets including the UK, India and the Netherlands.

 

Adjusted earnings per share was up 5.0% at 15.65 pence, driven by growth in adjusted operating profit and a lower share count. The Board is recommending a final dividend per share of 6.92 pence, to give total ordinary dividends per share for the year of 10.19 pence, up 7.0% year-on-year.

 

Northern and Central Europe

Organic service revenue in Northern and Central Europe was down -0.2%* year-on-year. Excluding the impact of regulated mobile termination rate ('MTR') cuts, service revenue was up 1.6%*. Underlying performance in the major markets of Germany, the UK and the Netherlands, while robust compared with our competitors, weakened in the second half of the year, reflecting increased competition and some macroeconomic pressure. Turkey continued to grow very well through strong execution.

 

Enterprise revenue grew 0.8%*, with continued growth in Germany (+3.0%*) and Turkey offsetting declines in other markets. The accelerated integration of CWW is proceeding successfully, and we expect it to deliver significant network synergies in the UK and internationally, while also boosting our enterprise business.

 

Data revenue was up 14.4%*, reflecting increased smartphone penetration - now 35.4% in the region, up 9.1 percentage points year-on-year - and further take-up of integrated voice, SMS and data plans. By the fourth quarter, 69.7% of consumer contract revenue in the major markets came from customers on these integrated plans. During the year we launched 4G/LTE services in Romania.

 

Organic EBITDA was down -2.4%* and the EBITDA margin fell -0.7* percentage points. Margin improvement in Turkey, the Netherlands and Ireland only partly offset small declines in Germany and the UK, driven by a lower top line, rising commercial costs and higher restructuring costs in Germany.

 

Southern Europe

Organic service revenue in Southern Europe fell -11.6%* year-on-year, as the effects of severe macroeconomic weakness were intensified by strong competition, and steep cuts to MTRs in Italy and Greece. Combined mobile and fixed offers in Spain and Portugal, from incumbents and fixed operators, made increasing inroads into the market in the second half of the year. Excluding MTR cuts, service revenue fell -8.4%*.

 

Data revenue was up 9.7%*, as demand for data continued to grow despite the economic and competitive pressures. Smartphone penetration increased 7.5 percentage points to 35.5%. During the year we launched 4GLTE services in Italy, Greece and Portugal, announced a partnership with Orange in Spain to deploy fibre to six million homes over the next four years, and committed to extending our fibre network in Portugal to pass over one million homes.

 

Organic EBITDA fell -16.4%* and the EBITDA margin fell -2.2* percentage points, mainly as a result of the steep revenue declines across the region and restructuring costs, offset by operating cost savings. Towards the end of the year, we undertook significant redundancy programmes in Spain and Greece to reduce operating expenses.

 

AMAP

Organic service revenue growth in AMAP was 3.9%*, with continued growth in all of our markets apart from Australia and New Zealand. Growth in India slowed through the year, mainly as a result of increased consumer protection regulation and a more stringent customer verification process, but the competitive environment improved and we continued to gain market share. In Vodacom, continued strong underlying revenue growth in our other sub-Saharan markets offset a weaker performance in South Africa. Despite competitive pressure and the uncertain political environment, service revenue in Egypt grew 3.7%*. Australia continued to experience steep revenue declines on the back of ongoing service perception issues. During the year we launched 4G/LTE services in South Africa and New Zealand.

 

Organic EBITDA rose 10.3%* and the EBITDA margin increased 1.7* percentage points, with strong margin improvements in India and Vodacom offsetting a sharp decline in Australia. Ghana and Qatar also made good margin progress on strong revenue growth and market share gains. Egypt's margin improved 1.4* percentage points.

 

Verizon Wireless

VZW continued to trade very well, launching successful new price plans and making further market share gains. Organic service revenue was up 8.1%* and EBITDA was up 13.6%*. Free cash flow amounted to US$13.2 billion (£8.4 billion), and net debt at 31 March 2013 was US$6.2 billion (£4.1 billion). Our share of VZW's profits for the year amounted to £6.4 billion, up 30.5%* year-on-year.

 

Vodafone 2015

While the macroeconomic and regulatory environment in Europe presents significant short-term challenges, we see a number of positive developments. We expect smartphone adoption to continue to grow in all markets over the next three years, with mobile applications and low cost smartphone availability increasing in mature and emerging markets alike.

 

With the broad deployment of high speed data networks, both mobile and fixed, we expect customers' appetite for data to increase significantly. At the same time, the evolution of network and IT platforms should enable lower cost and more standardised approaches as we further integrate commercial and technology planning.

 

As a result, we believe that the long-term prospects for the mobile market are highly attractive for those that make scale, standardisation and the customer data experience fundamental to how they operate. Vodafone 2015 is our strategy to maximise this opportunity.

 

Consumer 2015

We are adopting a new strategic approach to consumer pricing and bundling in Europe, in order to offer customers greater freedom of usage and, at the same time, stabilise ARPU. We have launched new plans across much of our footprint, branded Vodafone Red in most markets, which incorporate unlimited voice and SMS, and generous data allowances.

 

As a result, we have radically simplified pricing, giving clear visibility of the cost of ownership and enabling simplification of IT and billing. We are progressively enhancing the value proposition through the introduction of a number of additional features, including improved access to technical support, attractive roaming packages, shared data plans, early handset upgrades, storage and back-up in the cloud, and device security, to increase the breadth of service and support ARPU over time.

 

Already, we have 4.1 million customers on Vodafone Red plans across 14 markets. The customer response has been very positive, with strong net promoter scores. Data usage on Vodafone Red plans is much higher, as is the average return on our commercial investment. As expected, we have seen some ARPU dilution, but at a lower level than planned. We aim to have ten million customers on Vodafone Red plans by March 2014.

 

We also see an increasing move towards residential unified communications services in some of our European markets. We expect this trend to grow, with cable operators offering MVNO services, and incumbent fixed line providers combining their domestic broadband services with mobile and TV plans. Our goal is to offer unified communications services in our major European markets, accessing next generation fixed line infrastructure through a combination of negotiated wholesale terms, deployment of our own fibre and, potentially, acquisitions. A clear regulatory framework with regard to accessing incumbent fibre infrastructure will be key.

 

In emerging markets, we aim to build on our success to date to become a clear leader, increasing the value of these markets to the Group through market growth, improving margins, share gains and stronger cash generation. These markets offer very attractive long-term opportunities from sustained GDP growth, the scope for widespread mobile data adoption and the fulfilment of unmet needs such as basic financial services. We aim to maximise these opportunities through superior marketing and distribution, smart data pricing, the development of low-cost smartphones and selective innovation in areas in which we can truly differentiate.

 

Enterprise 2015

We are strengthening our leading position in enterprise, enhancing our product offering to large and medium-sized businesses and creating a dedicated enterprise operational structure, following the market success of Vodafone Global Enterprise ('VGE') and the CWW and TelstraClear acquisitions. Enterprise now represents 27.3% of Group service revenue and we have over 32 million mobile enterprise customers accounting for around 8% of our total customer base.

 

VGE, serving our biggest multi-national accounts, will continue to expand its remit, driven by an increasing appetite among customers to consolidate telecoms procurement cross-border and bring mobility into the heart of their business strategies. In unified communications, we continue to develop Vodafone One Net for small- and medium-sized companies, and increasingly provide total communications services to our larger customers through the purchase of CWW. This acquisition will also allow us to develop our product offering in high growth segments, such as cloud and hosting.

 

In machine-to-machine ('M2M'), we intend to leverage our new business unit organisation, global technical platform and vertical sector competences to exploit the current wave of adoption of M2M solutions across many industry and service sectors.

 

Network 2015

Our network strategy continues to focus on supporting higher speed data in both mature and emerging markets, and delivering a consistently excellent data experience to our customers through the widespread deployment of HSPA+, LTE and high capacity backhaul. We expect to continue our consistent level of investment so that Vodafone customers can be assured of a video-standard data service across our footprint in Europe and we can successfully manage the high growth in data volumes anticipated. We aim to extend our 3G footprint at 43.2 Mbps and LTE coverage across our five major European markets to 80% and 40% respectively by March 2015.

 

To complement our physical infrastructure investment, we are committed to securing the best portfolio of low frequency spectrum to maintain and improve our strong market positions through the improved customer experience this will offer. During the year, we acquired spectrum in the important 800 MHz band in the UK, the Netherlands, Ireland, Romania and in the 1800 MHz band in India, taking our total spectrum investment to £7.9 billion in the last four years.

 

Operations 2015

Over the next three years we plan to simplify further our business model both across and within countries, eliminating legacy structures, reducing non customer-facing costs and moving towards more standardised offerings.

 

This will enable us to maximise the benefits of our scale and share commercial, technical and support functions across geographies in Europe, and to speed up and co-ordinate our time to market for new propositions and services. We see a significant opportunity in unifying network and IT management across multiple markets, in further centralising and standardising procurement, and in offshoring more business functions to shared service centres of expertise. We are targeting an absolute reduction in European2 operating expenses from these and other programmes of £0.3 billion in the 2014 financial year.

 

Prospects for the 2014 financial year3

Entering the new financial year, we continue to face stiff headwinds from regulation, competition and a tough economic environment, particularly in Europe. However, we are well positioned, with broad geographic exposure which includes attractive growth markets in India, Africa and the US, and a differentiated enterprise franchise. We benefit from a strong balance sheet and will continue our major focus on shareholder remuneration, while consistently reinvesting in our network to enhance the customer experience.

 

Regulation remains a key concern for us and the industry. Again we face the significant hurdle of MTR cuts, which we expect to create a drag of over two percentage points on service revenue. However, this effect should reduce substantially in the 2015 financial year based on current regulatory glide paths. We also await clarity on EU fibre regulation, where we are supportive of the pro-investment stance, subject to equality of access and margin squeeze provisions which are enforceable at the country level.

 

We expect adjusted operating profit for the 2014 financial year to be in the range of £12.0 billion to £12.8 billion.

 

We expect free cash flow to be around £7.0 billion, including the £2.1 billion VZW dividend due in June 2013. We expect capital expenditure to remain broadly steady on a constant currency basis.

 

We expect the Group EBITDA margin, excluding M&A and restructuring costs, to decline slightly year-on-year, reflecting the ongoing weak macroeconomic environment in Europe.

 

Notes:

1

Based on 2013 guidance foreign exchange rates.

2

Northern and Central Europe, Southern Europe and Common Functions, excluding restructuring costs.

3

See 'Guidance' on page 8.

 

 

 

GROUP FINANCIAL HIGHLIGHTS

 



2013 

2012 

% change


Page

£m 

£m 

Reported 

Organic 

Financial information1






Revenue

28 

44,445 

46,417 

(4.2)

(1.4)

Operating profit

28 

4,728 

11,187 

(57.7)


Profit before taxation

28 

3,255 

9,549 



Profit for the financial year

28 

673 

7,003 



Basic earnings per share (pence)

28 

0.87p

13.74p



Capital expenditure

34 

6,266 

6,365 

(1.6)


Cash generated by operations

22 

13,727 

14,824 

(7.4)








Performance reporting1 2






EBITDA

13,275 

14,475 

(8.3)

(3.1)

EBITDA margin


29.9%

31.2%

(1.3pp)

(0.5pp)

Adjusted operating profit

9, 36

11,960 

11,532 

3.7 

9.3 

Adjusted profit before tax

11, 36

10,528 

9,918 

6.2 


Adjusted effective tax rate

11 

24.5%

25.3%



Adjusted profit attributable to equity shareholders

11, 36

7,696 

7,550 

1.9 


Adjusted earnings per share (pence)

36 

15.65p

14.91p

5.0 


Free cash flow3

22 

5,608 

6,105 

(8.1)


Net debt

22 

26,958 

24,425 

10.4 


 

Notes:

1

Amounts presented at 31 March or for the year then ended.

2

See page 33 for "Use of non-GAAP financial information" and page 38 for "Definitions of terms".

3

All references to free cash flow are to amounts before licence and spectrum payments. For the year ended 31 March 2013, other items excluded included payments in respect of a tax case settlement and the income dividend received from VZW in December 2012. For the year ended 31 March 2012, payments in respect of a tax case settlement, tax relating to the disposal of our 24.4% interest in Polkomtel, the income dividend received from VZW in January 2012 and the return of a court deposit made in respect of the India tax case are also excluded.

 

 

GUIDANCE

 

Please see page 33 for "Use of non-GAAP financial information", page 38 for "Definitions of terms" and page 39 for "Forward-looking statements".

 

Performance against 2013 financial year guidance

Based on guidance foreign exchange rates1, and excluding M&A and restructuring costs, our adjusted operating profit for the 2013 financial year was £12.3 billion, above the £11.1 billion to £11.9 billion range set in May 2012. On the same basis our free cash flow was £5.8 billion, at the top of the range of £5.3 billion to £5.8 billion.

 

2014 financial year guidance2


Adjusted operating profit

£bn

Free cash flow

£bn

2014 financial year guidance

12.0 - 12.8

Around 7.0

 

 

We expect adjusted operating profit to be in the range of £12.0 billion to £12.8 billion. We expect free cash flow to be around £7.0 billion, including the £2.1 billion VZW dividend due in June 2013. We expect capex to remain broadly steady on a constant currency basis.

 

We expect the Group EBITDA margin, excluding M&A and restructuring costs, to decline slightly year-on-year, reflecting the ongoing weak macroeconomic environment in Europe.

 

Dividend policy

After over 22% growth in the ordinary dividend per share over the last three years, the Board is focused on continuing to balance the long-term needs of the business with ongoing shareholder remuneration, and going forward aims at least to maintain the ordinary dividend per share at current levels.

 

Assumptions

We have based guidance for the 2014 financial year on our current assessment of the global macroeconomic outlook and assume foreign exchange rates of £1:€1.17 and £1:US$1.52. It excludes the impact of licences and spectrum purchases, additional income dividends from VZW, material one-off tax-related payments, restructuring costs and any fundamental structural change to the eurozone. It also assumes no material change to the current structure of the Group.

 

Actual foreign exchange rates may vary from the foreign exchange rate assumptions used. A 1% change in the euro to sterling exchange rate would impact adjusted operating profit by £30 million and free cash flow by approximately £20 million. A 1% change in the dollar to sterling exchange rate would impact adjusted operating profit by approximately £70 million.

 

 

 

Notes:

1

Guidance foreign exchange rates for the year ended 31 March 2013 were £1:€1.23 and £1:US$1.62.

2

For consistency with the basis of presentation of joint ventures in previous years, guidance does not take into account the impact on the Group's financial results of adopting IFRS 11, Joint Arrangements, for the year ending 31 March 2014.

 

 

 

CONTENTS

 


Page

Financial results

Liquidity and capital resources

22 

Other significant developments

26 

Consolidated financial statements

28 

Use of non-GAAP financial information

33 

Additional information

34 

Other information (including forward-looking statements)

38 

Appendices restated financial information prepared in accordance with IFRS 11 and amendments to IAS 19

40 

 

 

FINANCIAL RESULTS

 

Group1


Northern

and 

Central 

Southern 

Africa, 

Middle

East 

and Asia 

Non-

Controlled

Interests and

Common






Europe 

Europe 

Pacific

Functions2 

Eliminations 

2013 

2012 

% change


£m 

£m 

£m 

£m 

£m 

£m 

£m 

£ 

Organic

Voice revenue

8,361 

5,558 

8,542 

22,462 

25,694 



Messaging revenue

2,861 

1,026 

821 

4,708 

5,276 



Data revenue

3,423 

1,644 

1,627 

6,702 

6,233 



Fixed line revenue

3,309 

930 

451 

(2)

4,688 

3,618 



Other service revenue

814 

477 

904 

307 

(120)

2,382 

2,064 



Service revenue

18,768 

9,635 

12,345 

315 

(121)

40,942 

42,885 

(4.5)

(1.9)

Other revenue

1,331 

887 

1,121 

166 

(2)

3,503 

3,532 


 

Revenue

20,099 

10,522 

13,466 

481 

(123)

44,445 

46,417 

(4.2)

(1.4)

Direct costs

(5,268)

(2,194)

(3,411)

(185)

121 

(10,937)

(11,272)



Customer costs

(4,433)

(2,381)

(2,096)

(8,901)

(9,518)



Operating expenses3

(4,685)

(2,464)

(3,781)

(402)

(11,332)

(11,152)



EBITDA

5,713 

3,483 

4,178 

(99)

13,275 

14,475 

(8.3)

(3.1)

Depreciation and amortisation:











Acquired intangibles

(127)

(579)

(706)

(835)




Purchased licences

(935)

(151)

(201)

(1)

(1,288)

(1,302)




Other

(2,571)

(1,531)

(1,772)

76 

(5,798)

(5,769)



Share of result in associates

52 

6,423 

6,477 

4,963 



Adjusted operating profit

2,081 

1,802 

1,678 

6,399 

11,960 

11,532 

3.7 

9.3 


Impairment loss






(7,700)

(4,050)




Other income and expense4






468 

3,705 



Operating profit






4,728 

11,187 



Non-operating income and expense






10 

(162)



Net financing costs






(1,483)

(1,476)



Income tax expense






(2,582)

(2,546)



Profit for the financial year






673 

7,003 



 

Notes:

1

Current year results reflect average foreign exchange rates of £1:€1.23 and £1:US$1.58.

2

Common Functions primarily represent the results of the partner markets and the net result of unallocated central Group costs.

3

Operating expenses for the year ended 31 March 2013 included restructuring charges of £310 million (2012: £144 million).

4

Other income and expense for the year ended 31 March 2013 included a £473 million gain on acquisition of CWW. The year ended 31 March 2012 included a £3,419 million gain on disposal of the Group's 44% interest in SFR and a £296 million gain on disposal of the Group's 24.4% interest in Polkomtel.

 

 

FINANCIAL RESULTS

 

Revenue

Group revenue fell by -4.2% to £44.4 billion, with service revenue of £40.9 billion, a decline of -1.9%* on an organic basis. Our performance reflected continued strong demand for data services and good growth in our major emerging markets, offset by regulatory changes, challenging macroeconomic conditions, particularly in Southern Europe, and continued competitive pressures.

 

In Northern and Central Europe service revenue declined by -0.2%* as growth in Germany and Turkey was offset by increased competition and some macroeconomic pressure in other markets.

 

In Southern Europe service revenue declined by -11.6%* reflecting severe macroeconomic weakness in our main markets, intense competition and MTR cuts.

 

In AMAP service revenue increased by 3.9%* with continued growth in all of our markets apart from Australia and New Zealand. 

 

EBITDA and profit

Group EBITDA decreased by -8.3% to £13.3 billion, primarily driven by lower revenue and higher restructuring costs partially offset by operating cost efficiencies.

 

Adjusted operating profit grew by 3.7%, driven by 31.9% growth in our share of profits of VZW to £6.4 billion, partially offset by lower EBITDA.

 

Operating profit decreased by -57.7% to £4.7 billion, primarily due to the gains on the disposal of the Group's interests in SFR and Polkomtel in the prior year and the higher impairment charges in the current year, partially offset by the gain on acquisition of CWW of £0.5 billion.

 

An impairment loss of £7.7 billion was recorded in relation to Italy and Spain, primarily driven by adverse performance against previous plans and adverse movements in discount rates.

 

Net financing costs

 



2013 

2012 



£m 

£m 

Investment income

305 

456 

Financing costs

(1,788)

(1,932)

Net financing costs

(1,483)

(1,476)

Analysed as:




Net financing costs before income from investments

(1,526)

(1,642)


Interest income arising on settlement of outstanding tax issues

92 


Income from investments

19 



(1,432)

(1,614)

Foreign exchange1

(51)

138 



(1,483)

(1,476)

 

Note:

1

Comprises foreign exchange rate differences reflected in the income statement in relation to certain intercompany balances.

 

 

Net financing costs before income from investments have decreased by -7.1%, primarily due to lower mark-to-market losses associated with interest rate fixing and the impact of the Group's lower average net debt.

 

 

Taxation

 



2013 

2012 



£m 

£m 

Income tax expense

2,582 

2,546 

Tax on adjustments to derive adjusted profit before tax

12 

(242)

Adjusted income tax expense

2,594 

2,304 

Share of associates' tax

11 

302 

Adjusted income tax expense for calculating adjusted tax rate

2,605 

2,606 

Profit before tax

3,255 

9,549 

Adjustments to derive adjusted profit before tax1

7,273 

369 

Adjusted profit before tax

10,528 

9,918 

Add: Share of associates' tax and non-controlling interest

105 

382 

Adjusted profit before tax for calculating adjusted effective tax rate

10,633 

10,300 

Adjusted effective tax rate

24.5% 

25.3% 

Note:

1

See "Earnings per share" below.

 

Our adjusted effective tax rate for the year ended 31 March 2013 was 24.5%, in line with our mid-twenties guidance range. This included the positive impact of amounts principally arising from the settlement of long standing tax disputes.

 

The adjusted effective tax rate is expected to move towards the high-twenties percentage in the future as a result of increasing profits in higher taxed jurisdictions.

 

The Group's share of associates' tax has fallen as a result of a greater share of the VZW profits being taxed at the partnership level.

 

Earnings per share

Adjusted earnings per share was 15.65 pence, an increase of 5.0% year-on-year, reflecting higher adjusted operating profit and a reduction in shares arising from the Group's share buyback programme. Basic earnings per share was 0.87 pence (2012: 13.74 pence), a decrease of -93.7% year-on-year, driven by the £7.7 billion impairment charge recorded in the current year partially offset by the gain on acquisition of CWW. The prior year also benefited from the profit on disposal of our 44% interest in SFR and 24.4% interest in Polkomtel. All these amounts are excluded from adjusted earnings per share. 

 



2013 

2012 



£m 

£m 

Profit attributable to equity shareholders

429 

6,957 

Pre-tax adjustments:




Impairment loss1

7,700 

4,050 


Other income and expense2

(468)

(3,705)


Non-operating income and expense

(10)

162 


Investment income and financing costs3

51 

(138)



7,273 

369 

Taxation1

(12)

242 

Non-controlling interests

(18)

Adjusted profit attributable to equity shareholders

7,696 

7,550 



Million 

Million 

Weighted average number of shares outstanding - basic

49,190 

50,644 

Weighted average number of shares outstanding - diluted

49,434 

50,958 

Notes:

1

Taxation for the year ended 31 March 2012 included a £206 million charge in respect of the disposal of the Group's 24.4% interest in Polkomtel. The gain arising on our acquisition of CWW in the year ended 31 March 2013 and the disposal of our 44% interest in SFR in the 2012 financial year did not give rise to a tax charge. The impairment charges of £7,700 million and £4,050 million in the years ended 31 March 2013 and 2012 respectively did not result in any tax consequences.

2

Other income and expense for the year ended 31 March 2013 included a £473 million gain on acquisition of CWW. The year ended 31 March 2012 included a £3,419 million gain on disposal of the Group's 44% interest in SFR and a £296 million gain on disposal of the Group's 24.4% interest in Polkomtel.

3

See note 1 in "Net financing costs" on page 10.

 

 

Northern and Central Europe



Germany 

UK 

Other 

Northern 

and 

Central 

Europe 

Eliminations 

Northern 

and 

Central 

Europe 

% change



£m 

£m 

£m 

£m 

£m 

£ 

Organic 

31 March 2013








Voice revenue

2,761 

2,218 

3,383 

(1)

8,361 



Messaging revenue

826 

1,274 

761 

2,861 



Data revenue

1,652 

909 

862 

3,423 



Fixed line revenue

1,712 

48 

1,579 

(30)

3,309 



Other service revenue

324 

360 

188 

(58)

814 



Service revenue

7,275 

4,809 

6,773 

(89)

18,768 

2.8 

(0.2)

Other revenue

582 

341 

408 

1,331 



Revenue

7,857 

5,150 

7,181 

(89)

20,099 

2.7 

-  

Direct costs

(1,732)

(1,230)

(2,388)

82 

(5,268)



Customer costs

(1,779)

(1,576)

(1,078)

(4,433)



Operating expenses

(1,611)

(1,135)

(1,946)

(4,685)



EBITDA

2,735 

1,209 

1,769 

5,713 

(3.7)

(2.4)

Depreciation and amortisation:









Acquired intangibles

(6)

(121)

(127)




Purchased licences

(491)

(331)

(113)

(935)




Other

(939)

(578)

(1,054)

(2,571)



Share of result in associates



Adjusted operating profit

1,305 

294 

482 

2,081 

(17.7)

(8.1)

EBITDA margin

34.8%

23.5%

24.6%


28.4%



31 March 2012








Voice revenue

3,116 

2,395 

3,692 

9,203 



Messaging revenue

906 

1,259 

842 

3,007 



Data revenue

1,536 

872 

700 

3,108 



Fixed line revenue

1,849 

45 

247 

2,141 



Other service revenue

262 

425 

214 

(95)

806 



Service revenue

7,669 

4,996 

5,695 

(95)

18,265 



Other revenue

564 

401 

347 

(2)

1,310 



Revenue

8,233 

5,397 

6,042 

(97)

19,575 



Direct costs

(1,781)

(1,473)

(1,763)

95 

(4,922)



Customer costs

(1,803)

(1,576)

(1,088)

(4,465)



Operating expenses

(1,684)

(1,054)

(1,516)

(4,254)



EBITDA

2,965 

1,294 

1,675 

5,934 



Depreciation and amortisation:









Acquired intangibles

(4)

(92)

(96)




Purchased licences

(519)

(331)

(108)

(958)




Other

(955)

(557)

(841)

(2,353)



Share of result in associates



Adjusted operating profit

1,491 

402 

637 

2,530 



EBITDA margin

36.0%

24.0%

27.7%


30.3%



Change at constant exchange rates





Voice revenue

(6.1)

(7.4)

(3.5)





Messaging revenue

(3.7)

1.2 

(4.7)





Data revenue

13.6 

4.2 

29.7 





Fixed line revenue

(2.0)

6.7 

569.7 





Other service revenue

30.8 

(15.3)

(6.6)





Service revenue

0.4 

(3.7)

25.3 





Other revenue

8.3 

(15.0)

22.9 





Revenue

0.9 

(4.6)

25.2 





Direct costs

(3.0)

(16.5)

(42.4)





Customer costs

(4.3)

(4.3)





Operating expenses

(1.0)

7.7 

(34.9)





EBITDA

(2.4)

(6.6)

11.7 





Depreciation and amortisation:









Acquired intangibles

50.0 

(38.9)






Purchased licences

(0.5)

(10.3)






Other

(3.3)

3.8 

(32.1)





Share of result in associates

(49.6)





Adjusted operating profit

(7.2)

(26.9)

(19.6)





EBITDA margin movement (pps)

(1.2)

(0.5)

(3.0)





 

 

Revenue increased by 2.7% including a -4.1 percentage point negative impact from foreign exchange rate movements and a 6.8 percentage point positive impact from M&A and other activity. On an organic basis service revenue declined by -0.2%*, driven by challenging macroeconomic conditions in some markets, increased competition and the impact of MTR cuts, partially offset by continued growth in data revenue. Organic growth in Germany and Turkey was more than offset by declines in all other markets.

 

EBITDA declined by -3.7%, including a -4.3 percentage point negative impact from foreign exchange rate movements and a 3.0 percentage point positive impact from M&A and other activity. On an organic basis EBITDA decreased by -2.4%*, resulting from a reduction in service revenue in most markets, the impact of restructuring costs, and higher customer investment due to the increased penetration of smartphones.

 


Organic 

Other 

Foreign 

Reported 


change 

activity1 

exchange 

change 


pps 

pps 

Revenue - Northern and Central Europe

6.8 

(4.1)

2.7 

Service revenue





Germany

0.5 

(0.1)

(5.5)

(5.1)

UK

(4.0)

0.3 

(3.7)

Other Northern and Central Europe

2.2 

23.1 

(6.4)

18.9 

Northern and Central Europe

(0.2)

7.1 

(4.1)

2.8 

EBITDA





Germany

(2.6)

0.2 

(5.4)

(7.8)

UK

(6.9)

0.3 

(6.6)

Other Northern and Central Europe

1.9 

9.8 

(6.1)

5.6 

Northern and Central Europe

(2.4)

3.0 

(4.3)

(3.7)

Adjusted operating profit





Germany

(7.5)

0.3 

(5.3)

(12.5)

UK

(27.7)

0.8 

(26.9)

Other Northern and Central Europe

4.3 

(23.9)

(4.7)

(24.3)

Northern and Central Europe

(8.1)

(5.4)

(4.2)

(17.7)

Note:

1

"Other activity" includes the impact of M&A activity and the revision to intra-group roaming charges from 1 October 2011. Refer to note 4 on page 38 for more details.

 

 

Germany

 

Service revenue increased by 0.5%*, driven by a 1.3%* increase in mobile service revenue. Growth in enterprise and wholesale revenue, despite intense price competition, was offset by lower prepaid revenue. Data revenue increased by 13.6%* driven by higher penetration of smartphones and an increase in those sold with a data bundle. Vodafone Red, introduced in October 2012, performed in line with expectations and had a positive impact on customer perception. Enterprise revenue grew by 3.0%*, despite the competitive environment.

 

The roll out of LTE services continued and was available in 81 cities, with population coverage of 61% at 31 March 2013.

 

EBITDA declined by -2.6%*, with a -1.3* percentage point reduction in EBITDA margin, driven by higher customer and restructuring costs, partially offset by operating cost efficiencies and a one-off benefit from a legal settlement during Q2.

 

UK

 

Service revenue declined by -4.0%* driven by the impact of MTR cuts effective from April 2012, intense price competition and macroeconomic weakness, which led to lower out-of-bundle usage. Data revenue grew by 4.2%* driven by higher penetration of smartphones. Vodafone Red plans, launched in September 2012, performed well, with over one million customers at 31 March 2013.

 

Following the purchase of additional spectrum in February 2013, preparation for LTE roll-out is underway.

 

The network sharing joint venture between Telefónica UK and Vodafone UK, announced in June 2012, is now operational and the integration of the CWW enterprise businesses into Vodafone UK is proceeding successfully.

 

EBITDA declined by -6.9%*, with a -0.5* percentage point reduction in EBITDA margin, driven by higher retention activity and the impact of restructuring costs.

 

Other Northern and Central Europe1

 

Service revenue increased by 2.2%* as growth in Turkey more than offset declines in the rest of the Other Northern and Central Europe region. Service revenue in Turkey grew by 17.3%*, primarily driven by growth in the contract customer base and an increase in data revenue due to mobile internet and higher smartphone penetration. Revenue also benefited from enterprise growth and the success of commercial initiatives. In the Netherlands service revenue declined by -2.7%* due to more challenging macroeconomic conditions and lower out-of-bundle usage. CWW contributed £1,234 million of revenue since it was acquired on 27 July 2012.

 

EBITDA increased by 1.9%*, with a -0.3* percentage point reduction in the EBITDA margin, as margin improvement in Turkey, driven by the increase in scale and cost management, were partially offset by declines in most other markets primarily resulting from lower revenue. Turkey reported positive operating free cash flow for the first time this year.

 

_________________________________________________________________________________________________________________

Note:

1

The results of CWW are included within the reported results from the date of acquisition, however, they are excluded from the organic results. Refer to note 4 on page 38 for more details.

 

 

 

Southern Europe

 



Italy 

Spain 

Other 

Southern 

Europe 

Eliminations 

Southern 

Europe 

% change



£m 

£m 

£m 

£m 

£m 

£ 

Organic 

31 March 2013








Voice revenue

2,258 

2,164 

1,136 

5,558 



Messaging revenue

697 

177 

152 

1,026 



Data revenue

704 

713 

227 

1,644 



Fixed line revenue

546 

315 

69 

930 



Other service revenue

175 

260 

60 

(18)

477 



Service revenue

4,380 

3,629 

1,644 

(18)

9,635 

(16.7)

(11.6)

Other revenue

375 

275 

239 

(2)

887 



Revenue

4,755 

3,904 

1,883 

(20)

10,522 

(16.0)

(10.8)

Direct costs

(1,016)

(816)

(380)

18 

(2,194)



Customer costs

(844)

(1,195)

(344)

(2,381)



Operating expenses

(987)

(951)

(526)

(2,464)



EBITDA

1,908 

942 

633 

3,483 

(21.5)

(16.4)

Depreciation and amortisation:









Purchased licences

(114)

(10)

(27)

(151)




Other

(631)

(590)

(310)

(1,531)



Share of result in associates



Adjusted operating profit

1,163 

342 

297 

1,802 

(32.3)

(27.5)

EBITDA margin

40.1%

24.1%

33.6%


33.1%



31 March 2012








Voice revenue

2,981 

2,895 

1,363 

7,239 



Messaging revenue

851 

284 

169 

1,304 



Data revenue

713 

646 

224 

1,583 



Fixed line revenue

620 

342 

75 

1,037 



Other service revenue

164 

190 

73 

(25)

402 



Service revenue

5,329 

4,357 

1,904 

(25)

11,565 



Other revenue

329 

406 

224 

(2)

957 



Revenue

5,658 

4,763 

2,128 

(27)

12,522 



Direct costs

(1,248)

(1,006)

(459)

25 

(2,688)



Customer costs

(788)

(1,570)

(372)

(2,728)



Operating expenses

(1,108)

(994)

(566)

(2,668)



EBITDA

2,514 

1,193 

731 

4,438 



Depreciation and amortisation:









Purchased licences

(106)

(9)

(27)

(142)




Other

(673)

(618)

(345)

(1,636)



Adjusted operating profit

1,735 

566 

359 

2,660 



EBITDA margin

44.4%

25.0%

34.4%


35.4%



Change at constant exchange rates





Voice revenue

(19.6)

(20.7)

(11.8)





Messaging revenue

(13.2)

(33.7)

(4.9)





Data revenue

4.4 

16.5 

7.0 





Fixed line revenue

(6.8)

(2.9)

(2.8)





Other service revenue

11.6 

46.1 

(10.7)





Service revenue

(12.9)

(11.7)

(8.6)





Other revenue

18.9 

(28.0)

13.3 





Revenue

(11.0)

(13.1)

(6.3)





Direct costs

13.7 

14.0 

12.7 





Customer costs

(12.7)

19.2 

2.3 





Operating expenses

5.8 

(1.1)

2.0 





EBITDA

(19.5)

(16.0)

(7.5)





Depreciation and amortisation:









Purchased licences

(14.3)

(20.0)

(6.3)






Other

1.1 

(0.9)

4.5 





Share of result in associates

149.6 





Adjusted operating profit

(28.8)

(35.2)

(11.3)





EBITDA margin movement (pps)

(4.2)

(0.9)

(0.4)





 

 

Revenue decreased by -16.0% including a -5.0 percentage point impact from adverse foreign exchange rate movements. On an organic basis service revenue declined by -11.6%*, driven by the impact of MTR cuts, severe macroeconomic weakness and intense competition, partially offset by growth in data revenue. Revenue declined in all of the major markets in the region.

 

EBITDA declined by -21.5%, including a -4.9 percentage point impact from adverse foreign exchange rate movements. On an organic basis EBITDA decreased by -16.4%*, resulting from a reduction in service revenue in most markets and the impact of restructuring costs, partially offset  by a reduction in operating costs.

 


Organic 

Other 

Foreign 

Reported 


change 

activity 1 

exchange 

change 


pps 

pps 

Revenue - Southern Europe

(10.8)

(0.2)

(5.0)

(16.0)

Service revenue





Italy

(12.8)

(0.1)

(4.9)

(17.8)

Spain

(11.5)

(0.2)

(5.0)

(16.7)

Other Southern Europe

(8.2)

(0.4)

(5.1)

(13.7)

Southern Europe

(11.6)

(0.1)

(5.0)

(16.7)

EBITDA





Italy

(19.5)

(4.6)

(24.1)

Spain

(15.4)

(0.6)

(5.0)

(21.0)

Other Southern Europe

(7.1)

(0.4)

(5.9)

(13.4)

Southern Europe

(16.4)

(0.2)

(4.9)

(21.5)

Adjusted operating profit





Italy

(28.7)

(0.1)

(4.2)

(33.0)

Spain

(34.3)

(0.9)

(4.4)

(39.6)

Other Southern Europe

(10.4)

(0.9)

(6.0)

(17.3)

Southern Europe

(27.5)

(0.3)

(4.5)

(32.3)

Note:

1

"Other activity" includes the impact of M&A activity and the revision to intra-group roaming charges from 1 October 2011. Refer to note 4 on page 38 for more details.

 

 

Italy

 

Service revenue declined by -12.8%* driven by the severe macroeconomic weakness and intense competition, as well as the impact of MTR cuts starting from 1 July 2012. Data revenue increased by 4.4%* driven by mobile internet growth and the higher penetration of smartphones, which more than offset the decline in mobile broadband revenue. Vodafone Red plans, branded as "Vodafone Relax" in Italy, continued to perform well and now account for approximately 30% of the contract customer base at 31 March 2013. The majority of contract additions are Vodafone Relax tariffs. Fixed revenue declined by -6.8%* driven by intense competition and a reduction in the customer base due to the decision to stop consumer acquisitions in areas where margins are impacted by unfavourable regulated wholesale prices.

 

LTE commercial services were launched in October 2012 and were available in 21 cities at 31 March 2013.

 

EBITDA declined by -19.5%*, with a -4.3* percentage point fall in the EBITDA margin, driven by the decline in service revenue and an increase in commercial costs, partially offset by operating cost efficiencies such as site sharing agreements and the outsourcing of network maintenance.

 

Spain

 

Service revenue declined by -11.5%* driven by continued macroeconomic weakness, high unemployment leading to customers optimising their spend, and a lower customer base following our decision to remove handset subsidies for a period earlier in the year. Competition remains intense with the increased popularity of converged consumer offers in the market. Data revenue grew by 16.5%* driven by the higher penetration of smartphones and an increase in those sold with a data bundle. Vodafone Red, which was launched in Q3, continues to perform well. Fixed revenue declined by -2.9%*, primarily due to intense competition, although new converged fixed/mobile tariffs had a positive impact on fixed broadband customer additions during Q4.

 

In March 2013 Vodafone Spain signed an agreement with Orange to co-invest in a fibre network in Spain, with the intention to reach six million households and workplaces across 50 cities by September 2017. The combined capital expenditure is expected to reach €1 billion.

 

EBITDA declined by -15.4%*, with a -0.7* percentage point reduction in EBITDA margin, primarily driven by lower revenue and the impact of restructuring costs offset by commercial and operating cost efficiencies. The EBITDA margin stabilised in H2, benefiting from lower operating and commercial costs.

 

Other Southern Europe

 

Service revenue declined by -8.2%*, driven by declines in Greece and Portugal, which more than offset growth in Albania and Malta. Macroeconomic weakness and intense competition resulted in service revenue declines of -13.4%* and -8.2%* in Greece and Portugal, respectively. Greece and Portugal were also impacted by an MTR cut.

 

EBITDA declined by -7.1%*, with a -0.4* percentage point reduction in EBITDA margin, primarily driven by lower service revenue, partially offset by operating cost efficiencies.

 

 

Africa, Middle East and Asia Pacific

 



India 

Vodacom 

Other 

AMAP 

Eliminations

AMAP 

% change



£m 

£m 

£m 

£m 

£m 

£ 

Organic

31 March 2013








Voice revenue

3,215 

3,077 

2,250 

8,542 



Messaging revenue

156 

258 

407 

821 



Data revenue

369 

743 

515 

1,627 



Fixed line revenue

19 

91 

341 

451 



Other service revenue

533 

251 

121 

(1)

904 



Service revenue

4,292 

4,420 

3,634 

(1)

12,345 

(3.2)

3.9 

Other revenue

32 

786 

303 

1,121 



Revenue

4,324 

5,206 

3,937 

(1)

13,466 

(2.9)

4.3 

Direct costs

(1,255)

(904)

(1,253)

(3,411)



Customer costs

(187)

(1,359)

(550)

(2,096)



Operating expenses

(1,642)

(1,052)

(1,087)

(3,781)



EBITDA

1,240 

1,891 

1,047 

4,178 

1.5 

10.3 

Depreciation and amortisation:









Acquired intangibles

(294)

(231)

(54)

(579)




Purchased licences

(75)

(2)

(124)

(201)




Other

(650)

(462)

(660)

(1,772)



Share of result in associates

52 

52 



Adjusted operating profit

221 

1,196 

261 

1,678 

14.0 

26.7 

EBITDA margin

28.7%

36.3%

26.6%


31.0%



31 March 2012








Voice revenue

3,253 

3,452 

2,369 

9,074 



Messaging revenue

207 

289 

435 

931 



Data revenue

347 

690 

483 

1,520 



Fixed line revenue

15 

225 

200 

440 



Other service revenue

393 

252 

141 

786 



Service revenue

4,215 

4,908 

3,628 

12,751 



Other revenue

50 

730 

337 

1,117 



Revenue

4,265 

5,638 

3,965 

13,868 



Direct costs

(1,303)

(1,152)

(1,206)

(3,661)



Customer costs

(226)

(1,396)

(667)

(2,289)



Operating expenses

(1,614)

(1,160)

(1,029)

(3,803)



EBITDA

1,122 

1,930 

1,063 

4,115 



Depreciation and amortisation:









Acquired intangibles

(331)

(358)

(47)

(736)




Purchased licences

(85)

(1)

(115)

(201)




Other

(646)

(487)

(609)

(1,742)



Share of result in associates

36 

36 



Adjusted operating profit

60 

1,084 

328 

1,472 



EBITDA margin

26.3%

34.2%

26.8%


29.7%



Change at constant exchange rates













Voice revenue

11.1 

(0.6)

(3.4)





Messaging revenue

(15.4)

0.2 

(6.2)





Data revenue

19.8 

21.1 

7.6 





Fixed line revenue

41.6 

(60.3)

77.3 





Other service revenue

52.1 

8.3 

(14.2)





Service revenue

14.5 

(0.2)

1.7 





Other revenue

(27.9)

20.8 

(9.8)





Revenue

14.0 

2.5 

0.7 





Direct costs

(8.2)

15.5 

(5.8)





Customer costs

7.0 

(9.9)

17.2 





Operating expenses

(14.6)

0.5 

(7.8)





EBITDA

23.9 

10.3 

(0.6)





Depreciation and amortisation:









Acquired intangibles

26.7 

(16.6)






Purchased licences

(0.1)

(39.5)

(7.7)






Other

(13.1)

(4.4)

(10.9)





Share of result in associates

39.0 





Adjusted operating profit

287.7 

25.1 

(21.7)





EBITDA margin movement (pps)

2.3 

2.5 

(0.3)





 

 

Revenue declined by -2.9% including a -8.2 percentage point adverse impact from foreign exchange rate movements, particularly the Indian rupee and the South African rand. On an organic basis service revenue grew by 3.9%* driven by customer and data revenue growth, partially offset by the impact of MTR reductions, competitive and regulatory pressures, and a general weakening in macroeconomic conditions. Growth was led by robust performances in India, Vodacom, Egypt, Ghana and Qatar, offset by service revenue declines in Australia and New Zealand.

 

EBITDA increased by 1.5% after a -9.4percentage point adverse impact from foreign exchange rate movements. On an organic basis, EBITDA grew by 10.3%* driven primarily by strong growth in India, Vodacom and Egypt as well as improved contributions from Ghana and Qatar, offset in part by declines in Australia and New Zealand.

 


Organic 

Other 

Foreign 

Reported 


change 

activity1 

exchange 

change 


pps 

pps 

Revenue - AMAP

4.3 

1.0 

(8.2)

(2.9)

Service revenue





India

10.7 

3.8 

(12.7)

1.8 

Vodacom

3.0 

(3.2)

(9.7)

(9.9)

Other AMAP

(2.1)

3.8 

(1.5)

0.2 

AMAP

3.9 

1.1 

(8.2)

(3.2)

EBITDA





India

24.0 

(0.1)

(13.4)

10.5 

Vodacom

10.3 

(12.3)

(2.0)

Other AMAP

(2.6)

2.0 

(0.9)

(1.5)

AMAP

10.3 

0.6 

(9.4)

1.5 

Adjusted operating profit





India

291.1 

(3.4)

(19.4)

268.3 

Vodacom

24.8 

0.3 

(14.8)

10.3 

Other AMAP

(12.5)

(9.2)

1.3 

(20.4)

AMAP

26.7 

(2.1)

(10.6)

14.0 

 

Note:

1

"Other activity" includes the impact of M&A activity, the revision to intra-group roaming charges from 1 October 2011, and the impact of Indus Towers revising its accounting for energy cost recharges. Refer to note 4 on page 38 for more details.

 

 

India

 

Service revenue grew by 10.7%* driven by strong growth in mobile voice minutes and data revenue, partially offset by the impact of regulatory changes. Average customer growth slowed in Q4, as Q3 regulatory changes affecting subscriber verification continued to impact gross additions, however customer acquisition costs remained low.

 

For the year as a whole, growth was negatively impacted by the introduction of new consumer protection regulations on the charging of access fees and the marketing of integrated tariffs and value-added services. However, in Q4 the customer base returned to growth and usage increased. Data revenue grew by 19.8%* driven by increased data customers and higher smartphone penetration. At 31 March 2013 active data customers totalled 37.3 million including approximately 3.3 million 3G data customers.

 

There was a lower rate of growth at Indus Towers, our network infrastructure joint venture, with a slow down in tenancies from smaller entrants, some operators exiting sites following licence cancellations and a change in the pricing structure for some existing customers in the first half of the year.

 

EBITDA grew by 24.0%*, with a 3.3* percentage point increase in EBITDA margin, driven by the higher revenue, operating cost efficiencies and the impact of lower customer acquisition costs, partially offset by inflationary pressure.

Vodacom

 

Service revenue grew by 3.0%* mainly driven by growth in Tanzania, the Democratic Republic of Congo ('DRC') and Mozambique. In South Africa, service revenue decreased by -0.3%*, with the growth in data revenue and the success of new prepaid offers being more than offset by MTR reductions, macroeconomic weakness leading to customer spend optimisation with lower out-of-bundle usage, and a weaker performance from independent service providers. Data revenue in South Africa grew by 16.1%*, with higher smartphone penetration and data bundles offsetting continued pricing pressure. Vodafone Smart and Vodafone Red, our new range of integrated contract price plans, were introduced in South Africa during March 2013.

 

On 10 October 2012, Vodacom announced the commercial launch of South Africa's first LTE network, with 601 LTE sites operational at 31 March 2013.

 

Vodacom's mobile operations outside South Africa delivered strong service revenue growth of 23.3%*, excluding Vodacom Business Africa, driven by a larger customer base and increasing data take-up. M-Pesa continues to perform well in Tanzania, with approximately 4.9 million active users, and was launched in DRC in November 2012. During the year Vodacom DRC became the first operator to launch 3G services in the DRC.

 

EBITDA grew by 10.3%*, with a 1.6* percentage point increase in EBITDA margin, primarily driven by revenue growth in Vodacom's mobile operations outside South Africa and savings in network costs in South Africa following investment in single RAN and transmission equipment.

 

Other AMAP

 

Organic service revenue decreased by -2.1%* with growth in Egypt, Ghana and Qatar more than offset by revenue declines in Australia and New Zealand. Australia continued to experience steep revenue declines on the back of ongoing service perception issues and a declining customer base. There has been a strong focus on network improvement and arresting the weakness in brand perception. In Egypt the launch of value management initiatives, take-up of data sevices and the increase in international incoming call volumes and rates drove service revenue growth of 3.7%*, despite competitive pressures and the uncertain political environment. Data revenue continued to show strong growth of 29.6%* and fixed line revenue grew by 29.0%*. In Qatar service revenue grew by 29.8%*, driven by the growth in the customer base, which is now over one million, supported by successful new propositions. In Ghana, continued strong growth in the customer base and the success of integrated tariffs led to service revenue growth of 24.2%*.

 

EBITDA declined by -2.6%*, with EBITDA margin remaining stable, with the impact of service revenue declines in Australia and New Zealand offsetting growth in Egypt, Qatar and Ghana.

 

Non-Controlled Interests

 

Verizon Wireless1 2

 


2013 

2012 

% change


£m 

£m 

£ 

Organic

Service revenue

19,697 

18,039 

9.2 

8.1 

Revenue

21,972 

20,187 

8.8 

7.8 

EBITDA

8,831 

7,689 

14.9 

13.6 

Interest

(25)

(212)

(88.2)


Tax2

13 

(287)

(104.5)


Group's share of result in VZW

6,422 

4,867 

31.9 

30.5 






KPIs (100% basis)





Retail connections ('000)3

98,930 

92,988 



Retail postpaid accounts ('000)

34,943 

34,569 



Retail postpaid ARPA4 (US$)

148.3 

138.6 



Total smartphone percentage of postpaid phone base

61.4% 

46.8% 



Retail churn

14.5% 

14.8% 



 

In the US VZW reported 5.9 million net mobile retail connection additions in the year, bringing its closing mobile retail connection base to 98.9 million, up 6.4%.

 

Service revenue growth of 8.1%* continued to be driven by the expanding number of accounts and ARPA growth from increased smartphone penetration and a higher number of connections per account.

 

EBITDA margin improved, with efficiencies in operating expenses and direct costs partially offset by higher acquisition and retention costs reflecting the increased new connections and demand for smartphones.

 

VZW's net debt at 31 March 2013 totalled US$6.2 billion5 (2012: US$6.4 billion5). During the year VZW paid a US$8.5 billion income dividend to its shareholders and completed the acquisition of spectrum licences for US$3.7 billion (net).

 

 

Notes:

 

1

All amounts represent the Group's share based on its 45% equity interest, unless otherwise stated.

2

The Group's share of the tax attributable to VZW relates only to the corporate entities held by the VZW partnership and certain US state taxes which are levied on the partnership. The tax attributable to the Group's share of the partnership's pre-tax profit is included within the Group tax charge.

3

The definition of "connections" reported by VZW is the same as "customers" as reported by Vodafone.

4

Average monthly revenue per account.

5

Net debt excludes pending credit card receipts.

 

 

LIQUIDITY AND CAPITAL RESOURCES

 

Cash flows and funding

 


2013 

2013 

2012 

2012 



£m 

£m 

£m 

£m 

%

EBITDA


13,275 


14,475 

(8.3)

Working capital


318 


206 


Other


134 


143 


Cash generated by operations


13,727 


14,824 

(7.4)

Cash capital expenditure1


(6,195)


(6,423)


  Capital expenditure

(6,266)


(6,365)



  Working capital movement in respect of capital

  expenditure

71 


(58)



Disposal of property, plant and equipment


153 


117 


Operating free cash flow


7,685 


8,518 

(9.8)

Taxation


(2,933)


(1,969)


Dividends received from associates and investments2


2,420 


1,171 


Dividends paid to non-controlling shareholders in subsidiaries


(379)


(304)


Interest received and paid


(1,185)


(1,311)


Free cash flow


5,608 


6,105 

(8.1)

Tax settlement3


(100)


(100)


Licence and spectrum payments


(2,507)


(1,429)


Acquisitions and disposals4


(1,723)


4,872 


Equity dividends paid


(4,806)


(6,643)


Purchase of treasury shares


(1,568)


(3,583)


Foreign exchange


(828)


1,283 


Income dividend from VZW


2,409 


2,855 


Other5


982 


2,073 


Net debt (increase)/decrease


(2,533)


5,433 


Opening net debt


(24,425)


(29,858)


Closing net debt


(26,958)


(24,425)

10.4 

Notes:

1

Cash capital expenditure comprises the purchase of property, plant and equipment and intangible assets, other than licence and spectrum payments, during the year.

2

Dividends received from associates and investments for the year ended 31 March 2013 includes a £2,389 million (2012: £965 million) tax distribution from the Group's 45% interest in VZW. In the year ended 31 March 2012 a final dividend of £178 million was received from SFR prior to the completion of the disposal of the Group's 44% interest. It does not include the £2,409 million income dividend received from VZW in December 2012 and the £2,855 million income dividend received from VZW in January 2012.

3

Related to a tax settlement in the year ended 31 March 2011.

4

Acquisitions and disposals for the year ended 31 March 2013 primarily included the £1,050 million payment in relation to the acquisition of the entire share capital of CWW and £243 million in respect of convertible bonds acquired as part of the CWW acquisition, and £440 million in relation to the acquisition of TelstraClear. The year ended 31 March 2012 primarily included £6,805 million proceeds from the sale of the Group's 44% interest in SFR, £784 million proceeds from the sale of the Group's 24.4% interest in Polkomtel and the £2,592 million payment in relation to the purchase of non-controlling interests in Vodafone India.

5

Other for the year ended 31 March 2013 primarily includes the remaining £1,499 million consideration for the disposal of SoftBank Mobile Corp. interests in November 2010, received in April 2012, partially offset by £322 million in relation to fair value and interest accrual movements on financial instruments. The year ended 31 March 2012 primarily included £2,301 million movement in the written put options in relation to India and the return of a court deposit made in respect of the India tax case (£310 million).

 

Cash generated by operations decreased by -7.4% to £13.7 billion, primarily driven by lower EBITDA. Free cash flow decreased by -8.1% to £5.6 billion primarily due to lower EBITDA and higher payments for taxation, partially offset by lower cash capital expenditure, working capital movements and higher dividends received from associates and investments.

 

Cash capital expenditure decreased by -£0.2 billion primarily driven by working capital movements.

 

Payments for taxation increased by 49.0% to £2.9 billion primarily due to increased US profits and a reduction in the rate of accelerated tax depreciation in the US.  

 

Dividends received from associates and investments increased by £1.2 billion due to the receipt of higher tax distributions from VZW to cover the higher tax liabilities in the US, partially offset by the loss of dividend income following the disposal of our 44% interest in SFR in June 2011.

 

Net interest payments decreased by -9.6% to £1.2 billion primarily due to the items responsible for the reduction in net financing costs (see page 10) and timing differences on coupon payments relating to certain of the Group's interest rate management instruments.

 

Analysis of net debt:

 



2013 

2012 



£m 

£m 

Cash and cash equivalents

7,623 

7,138 

Short-term borrowings




Bonds

(2,133)

(1,289)


Commercial paper1

(4,054)

(2,272)


Put options over non-controlling interests

(938)


Bank loans

(2,929)

(1,635)


Other short-term borrowings2

(2,235)

(1,062)



(12,289)

(6,258)

Long-term borrowings




Put options over non-controlling interests

(77)

(840)


Bonds, loans and other long-term borrowings

(29,031)

(27,522)



(29,108)

(28,362)





Other financial instruments3

6,816 

3,057 

Net debt  

(26,958)

(24,425)

Notes:

1

At 31 March 2013 US$3,484 million was drawn under the US commercial paper programme; €2,006 million, US$35 million, JPY 5 billion and £10 million were drawn under the euro commercial paper programme.

2

At 31 March 2013 the amount includes £1,151 million (2012: £980 million) in relation to cash received under collateral support agreements.

3

Comprises i) mark-to-market adjustments on derivative financial instruments which are included as a component of trade and other receivables (2013: £3,032 million; 2012: £2,959 million) and trade and other payables (2013: £1,104 million; 2012: £889 million); and ii) short-term investments primarily in index linked government bonds and a managed investment fund included as a component of other investments (2013: £4,888 million; 2012: £987 million).

 

Net debt increased by £2.5 billion to £27.0 billion, primarily due to the purchase of CWW and TelstraClear, share buybacks, payments to acquire spectrum, foreign exchange movements and dividend payments to equity holders, partially offset by cash generated by operations, the remaining consideration from the Group's disposal of SoftBank Mobile Corp and the £2.4 billion income dividend from VZW.

 

The following table sets out the Group's undrawn committed bank facilities:

 



2013 


Maturity

£m 

US$4.2 billion committed revolving credit facility provided by 30 banks1 2

March 2017

2,794 

€4.2 billion committed revolving credit facility provided by 31 banks1

July 2015

3,569 

Other committed credit facilities

Various

1,309 

Undrawn committed facilities


7,672 

Notes:

1

Both facilities support US and euro commercial paper programmes of up to US$15 billion and £5 billion, respectively.

2

US$155 million of this facility matures March 2016.

 

The Group's £4,054 million of commercial paper maturing within one year is covered 1.9 times by the £7,672 million of undrawn credit facilities. In addition, the Group has historically generated significant amounts of free cash flow which has been allocated to pay dividends, repay maturing borrowings and pay for discretionary spending. The Group currently expects to continue generating significant amounts of free cash flow.

 

The Group has a €30 billion euro medium-term note ('EMTN') programme and a US shelf registration programme which are used to meet medium- to long-term funding requirements. At 31 March 2013 the total amounts in issue under these programmes split by currency were US$21.2 billion, £2.6 billion, €8.0 billion and £0.1 billion sterling equivalent of other currencies.

 

At 31 March 2013 the Group had bonds outstanding with a nominal value of £22.8 billion (2012: £18.3 billion). Details of bonds issued between 1 April 2012 and 30 September 2012 are included in the Group's half-year financial report for the six months ended 30 September 2012. Between 1 October 2012 and 31 March 2013 the following bonds were issued:

 

Date issued

Maturity

Currency

Amount

million

Sterling

Equivalent

million

 

 

Programme

19 February 2013

19 February 2016

US$

1,600

1,053

US shelf programme

19 February 2013

19 February 2018

US$

1,400

921

US shelf programme

19 February 2013

19 February 2023

US$

1,600

1,053

US shelf programme

19 February 2013

19 February 2043

US$

1,400

921

US shelf programme

 

Dividends

In May 2010 the directors issued a dividend per share growth target of at least 7% per annum for each of the financial years in the period ending 31 March 2013.

 

Accordingly, the directors have announced a final dividend per share of 6.92 pence, representing a 7.0% increase over the prior financial year's final dividend.

 

Going forward the Board aims at least to maintain the ordinary dividend per share at current levels.

 

The ex-dividend date for the final dividend is 12 June 2013 for ordinary shareholders, the record date is 14 June 2013 and the dividend is payable on7 August2013. Dividend payments on ordinary shares will be paid by direct credit into a nominated bank or building society account or, alternatively, into the Company's dividend reinvestment plan. The Company does not pay dividends by cheque. Ordinary shareholders who have not already done so should provide appropriate bank account details to the Company's Registrars: Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol, BS99 6ZY.

 

Share buyback programmes

Following the disposal of the Group's entire 44% interest in SFR to Vivendi on 16 June 2011, the Group initiated a £4.0 billion share buyback programme which was completed on 6 August 2012. Under this programme the Group purchased a total of 2,330,039,575 shares at an average price per share, including transaction costs, of 171.67 pence.

 

On 12 November 2012 VZW declared a dividend of US$8.5 billion (£5.3 billion), of which Vodafone's share was US$3.8 billion (£2.4 billion). The Board of Vodafone therefore announced a £1.5 billion share buyback programme which commenced on receipt of the dividend in December 2012 and was initiated under the authority granted by the shareholders at the 2012 annual general meeting.

 

Details of the shares purchased to date, including those purchased under irrevocable instructions, are shown below:

 


Number of shares

purchased1

Average price paid per

share inclusive of

transaction costs

Total number of

shares purchased

under publicly

announced share

buyback programme2

Maximum value of

shares that may yet

be purchased under

the programme3

Date of share purchase

'000

Pence

'000

£m

December 2012

90,755

158.85

90,755

1,356

January 2013

118,500

164.48

209,255

1,161

February 2013

44,396

172.55

253,651

1,084

March 2013

18,000

183.98

271,651

1,051

April 2013

43,000

192.54

314,651

968

May 2013

91,750

196.05

406,401

789

Total

406,401

175.06

406,40144

789

 

Notes:

1

The nominal value of shares purchased is 113/7 US cents each.

2

No shares were purchased outside the publicly announced share buyback programme.

3

In accordance with authorities granted by shareholders in general meeting.

4

The total number of shares purchased represents 0.83% of our issued share capital, excluding treasury shares, at 20 May 2013.

 

 

Option agreements and similar arrangements

 

The Group is party to a number of option agreements which could result in it being required to pay cash to maintain or increase its equity interests in its operations in India and the US.

 

Details of the option agreements in relation to India and the US are available on page 59 of the Group's annual report for the year ended 31 March 2012.

 

 

 

OTHER SIGNIFICANT DEVELOPMENTS

 

Indian tax

 

On 16 March 2012 the Indian government introduced proposed legislation (the 'Finance Bill 2012') purporting to overturn the Indian Supreme Court judgment with retrospective effect back to 1962. On 17 April 2012 Vodafone International Holdings BV ('VIHBV') filed a trigger notice under the Dutch-India Bilateral Investment Treaty ('BIT') signaling its intent to invoke arbitration under the BIT should the new laws be enacted. The Finance Bill 2012 received Presidential assent and became law on 28 May 2012 (the 'Finance Act 2012'). The Finance Act 2012 is intended to tax any gain on transfer of shares in a non-Indian company, which derives substantial value from underlying Indian assets, such as VIHBV's transaction with Hutchison Telecommunications International Limited group (' HTIL') in 2007. Further it seeks to subject a purchaser, such as VIHBV, to a retrospective obligation to withholding tax.

 

The Indian Government commissioned a committee of experts (the 'Shome committee') consisting of academics, and current and former Indian government officials, to examine, and make recommendations in respect of, aspects of the Finance Act 2012 including the retrospective taxation of transactions such as VIHBV's transaction with HTIL referred to above. On 10 October 2012 the Shome committee published its draft report for comment. The draft report concluded that tax legislation in the Finance Act 2012 should only be applied prospectively or, if applied retrospectively, that only a seller who made a gain should be liable and, in that case, without any liability for interest or penalties. The Shome committee's final report was submitted to the Indian Government on 31 October 2012, but no final report has been published, and it remains unclear what the Indian Government intends to do with the Shome committee's final report or its recommendations.

 

VIHBV has not received any formal demand for taxation following the Finance Act 2012, but it did receive a letter on 3 January 2013 reminding it of the tax demand raised prior to the Indian Supreme Court judgment and purporting to update the interest element of that demand in a total amount of INR 142 billion (£1.6 billion). The separate proceedings taken against VIHBV to seek to treat it as an agent of HTIL in respect of its alleged tax on the same transaction, as well as penalties of up to 100% of the assessed withholding tax for the alleged failure to have withheld such taxes, remain pending despite the issue having been ruled upon by the Indian Supreme Court. Should a further demand for taxation be received by VIHBV or any member of the Group as a result of the new retrospective legislation, the Group believes it is probable that it will be able to make a successful claim under the BIT. Although this would not result in any outflow of economic benefit from the Group, it could take several years for VIHBV to recover any deposit required by an Indian Court as a condition for any stay of enforcement of a tax demand pending the outcome of VIHBV's BIT claim. However, VIHBV expects that it would be able to recover any such deposit. VIHBV is exploring with the Indian Government whether a mechanism exists under Indian law which would allow the parties to explore the possibility of a negotiated resolution of this dispute, but there is no certainty that such a mechanism exists or that a resolution acceptable to both VIHBV and the Indian Government could be reached.

 

The Group did not carry a provision for this litigation or in respect of the retrospective legislation at 31 March 2013 or at previous reporting dates.

 

Additional details on this matter are available under "Legal proceedings" on page 138 of the Group's annual report for the year ended 31 March 2012.

 

Telecom Egypt arbitration

 

In October 2009 Telecom Egypt commenced arbitration against Vodafone Egypt in Cairo alleging breach of non-discrimination provisions in an interconnection agreement as a result of allegedly lower interconnection rates paid to Vodafone Egypt by Mobinil.

 

Final submissions in the Telecom Egypt arbitration case were submitted on 5 February 2013. The arbitration hearing, previously scheduled to last fifteen days, commencing 7 May 2013, has been postponed. No new date for the hearing has yet been set. Additional details on this matter are available under "Legal proceedings" on page 138 of the Group's annual report for the year ended 31 March 2012.

 

TelstraClear Limited

 

On 30 October 2012 regulatory approval was received for Vodafone New Zealand's acquisition of TelstraClear Limited. The transaction completed on 31 October 2012 for a cash consideration of NZ$840 million (£440 million).

 

India spectrum

 

On 15 November 2012 Vodafone India acquired 1800 MHz licences in 14 telecom circles for a total amount of INR 11.3 billion (£138 million).

 

Ireland spectrum

 

On 16 November 2012 Vodafone Ireland acquired spectrum for a total amount of €161 million (£130 million). Vodafone Ireland acquired 2x10 MHz in the 800 MHz band, 2x10 MHz in the 900 MHz band, and 2x15 MHz in the 1800 MHz band valid from 2013 until 2015. Vodafone Ireland also acquired 2x10 MHz in the 800 MHz band, 2x10 MHz in the 900 MHz band, and 2x25 MHz in the 1800 MHz band valid from 2015 until 2030.

 

Netherlands spectrum

 

On 14 December 2012 Vodafone Netherlands acquired spectrum of 2x10 MHz in the 800 MHz band, 2x10 MHz in the 900 MHz band, and 2x20 MHz in the 1800 MHz band, all valid for 17 years. Additionally, Vodafone Netherlands acquired 2x5 MHz in the 2.1 GHz band for four years. The total amount payable was €1.4 billion (£1.1 billion).

 

UK spectrum

 

On 20 February 2013 Vodafone UK acquired 2 x 10 MHz of 800 MHz spectrum, 2 x 20 MHz of 2.6 GHz spectrum and 25 MHz of 2.6 GHz unpaired spectrum for a cost of £803 million.

 

Adoption of new accounting standards

 

The Group adopted a number of new international financial reporting standards (IFRS) on 1 April 2013, the most significant being IFRS 11 Joint Arrangements and amendments to IAS 19 Employee Benefits.

 

Unaudited restated financial information prepared in accordance with IFRS 11 and amendments to IAS 19 for the six months ended 30 September 2012 and the year ended 31 March 2012 was provided in a press release issued on 4 April 2013, available at vodafone.com/investor, which includes further details on the changes implemented.

 

Unaudited restated financial information prepared in accordance with IFRS 11 and amendments to IAS 19 for the year ended 31 March 2013 is shown on pages 40 to 44.

 

Revenue restructure

 

Effective from 1 April 2013 the Group has changed the classification of service revenue from voice, messaging and data revenue to mobile in-bundle, mobile out-of-bundle and mobile incoming revenue. Data revenue will continue to be disclosed separately. Results for the 2013 financial year have been restated in line with this new basis and are disclosed in the results spread sheet available at vodafone.com/investor.

 

Verizon Wireless dividend

 

On 13 May 2013 VZW declared a dividend of US$7.0 billion (£4.6 billion). The dividend will be received by the end of  June 2013. As a 45% shareholder in VZW, Vodafone's share of the dividend is US$3.2 billion (£2.1 billion). The cash will be retained in the business.

 

 

CONSOLIDATED FINANCIAL STATEMENTS

 

Consolidated income statement

 


2013 

2012 


£m 

£m 

Revenue

44,445 

46,417 

Cost of sales

(30,505)

(31,546)

Gross profit

13,940 

14,871 

Selling and distribution expenses

(3,258)

(3,227)

Administrative expenses

(5,199)

(5,075)

Share of result in associates

6,477 

4,963 

Impairment loss

(7,700)

(4,050)

Other income and expense

468 

3,705 

Operating profit

4,728 

11,187 

Non-operating income and expense

10 

(162)

Investment income

305 

456 

Financing costs

(1,788)

(1,932)

Profit before taxation

3,255 

9,549 

Income tax expense

(2,582)

(2,546)

Profit for the financial year

673 

7,003 

Attributable to:



- Equity shareholders

429 

6,957 

- Non-controlling interests

244 

46 


673 

7,003 

Earnings per share



- Basic

0.87p

13.74p

- Diluted

0.87p

13.65p







Consolidated statement of comprehensive income




2013 

2012 


£m 

£m 

Losses on revaluation of available-for-sale investments, net of tax

(73)

(17)

Foreign exchange translation differences, net of tax

362 

(3,673)

Net actuarial losses on defined benefit pension schemes, net of tax

(198)

(272)

Foreign exchange losses/(gains) transferred to the income statement

(681)

Fair value gains transferred to the income statement

(12)

Other, net of tax

(4)

(10)

Other comprehensive income/(loss)

76 

(4,653)

Profit for the financial year

673 

7,003 

Total comprehensive income for the financial year

749 

2,350 

Attributable to:



- Equity shareholders

604 

2,383 

- Non-controlling interests

145 

(33)


749 

2,350 

 

 

Consolidated statement of financial position

 


2013 

2012 


£m 

£m 

Non-current assets



Goodwill

30,372 

38,350 

Other intangible assets

22,025 

21,164 

Property, plant and equipment

20,331 

18,655 

Investments in associates

38,635 

35,108 

Other investments

774 

791 

Deferred tax assets

2,920 

1,970 

Post employment benefits

52 

31 

Trade and other receivables

4,302 

3,482 


119,411 

119,551 

Current assets



Inventory

450 

486 

Taxation recoverable

452 

334 

Trade and other receivables

9,412 

10,744 

Other investments

5,350 

1,323 

Cash and cash equivalents

7,623 

7,138 


23,287 

20,025 

Total assets

142,698 

139,576 




Equity



Called up share capital

3,866 

3,866 

Additional paid-in capital

154,279 

154,123 

Treasury shares

(9,029)

(7,841)

Retained losses

(88,785)

(84,184)

Accumulated other comprehensive income

11,146 

10,971 

Total equity shareholders' funds

71,477 

76,935 

Non-controlling interests

1,890 

2,090 

Put options over non-controlling interests

(879)

(823)

Total non-controlling interests

1,011 

1,267 

Total equity

72,488 

78,202 

Non-current liabilities



Long-term borrowings

29,108 

28,362 

Taxation liabilities

150 

250 

Deferred tax liabilities

6,698 

6,597 

Post employment benefits

629 

337 

Provisions

907 

479 

Trade and other payables

1,494 

1,324 


38,986 

37,349 

Current liabilities



Short-term borrowings

12,289 

6,258 

Taxation liabilities

1,919 

1,898 

Provisions

818 

633 

Trade and other payables

16,198 

15,236 


31,224 

24,025 

Total equity and liabilities

142,698 

139,576 

 

 

Consolidated statement of changes in equity

 


Share 

capital 

Additional 

paid-in 

capital1

Treasury 

shares 

Accumulated 

comprehensive 

 income2

Equity 

shareholders'

funds 

Non- 

controlling 

interests 

Total

equity 


£m 

£m 

£m 

£m 

£m 

£m 

£m 

1 April 2011

4,082 

153,760 

(8,171)

(62,116)

87,555 

87,561 

Issue or reissue of shares

277 

(208)

71 

71 

Redemption or cancellation of shares

(216)

216 

4,724 

(4,724)

Purchase of own shares

(4,671)3 

(4,671)

(4,671)

Share-based payment

1454 

145 

145 

Transactions with non-controlling interests in subsidiaries

(1,908)

(1,908)

1,599 

(309)

Comprehensive income

2,383 

2,383 

(33)

2,350 

Dividends

(6,654)

(6,654)

(305)

(6,959)

Other

14 

14 

14 

31 March 2012

3,866 

154,123 

(7,841)

(73,213)

76,935 

1,267 

78,202 









Issue or reissue of shares

287 

(237)

52 

52 

Purchase of own shares

(1,475)3

(1,475)

(1,475)

Share-based payment

1524 

152 

152 

Transactions with non-controlling interests in subsidiaries

(7)

(7)

(17)

(24)

Comprehensive income

604 

604 

145 

749 

Dividends

(4,801)

(4,801)

(384)

(5,185)

Other

15 

17 

17 

31 March 2013

3,866 

154,279 

(9,029)

(77,639)

71,477 

1,011 

72,488 

 

Notes:

1

Includes share premium, capital redemption reserve and merger reserve. The merger reserve was derived from acquisitions made prior to 31 March 2004 and subsequently allocated to additional paid-in capital on adoption of IFRS.

2

Includes retained losses and accumulated other comprehensive income.

3

Amount for 2013 includes a commitment for the purchase of own shares of £1,026 million (2012: £1,091 million).

4

Includes an £18 million tax credit (2012: £2 million).

 

 

Consolidated statement of cash flows

 


2013 

2012 


£m 

£m 

Net cash flow from operating activities

10,694 

12,755 




Cash flows from investing activities



Purchase of interests in subsidiaries and joint ventures, net of cash acquired

(1,432)

(149)

Other investing activities in relation to the purchase of subsidiaries

310 

Purchase of interests in associates

(6)

(5)

Purchase of intangible assets

(4,036)

(3,090)

Purchase of property, plant and equipment

(4,666)

(4,762)

Purchase of investments

(4,249)

(417)

Disposal of interests in subsidiaries and joint ventures, net of cash disposed

27 

832 

Disposal of interests in associates

6,799 

Disposal of property, plant and equipment

153 

117 

Disposal of investments

1,523 

66 

Dividends received from associates

4,827 

4,023 

Dividends received from investments

Interest received

459 

322 

Taxation on investing activities

(206)

Net cash flow from investing activities

(7,398)

3,843 




Cash flows from financing activities



Issue of ordinary share capital and reissue of treasury shares

52 

71 

Net movement in short-term borrowings

1,672 

1,206 

Proceeds from issue of long-term borrowings

5,422 

1,642 

Repayment of borrowings

(1,720)

(3,520)

Purchase of treasury shares

(1,568)

(3,583)

Equity dividends paid

(4,806)

(6,643)

Dividends paid to non-controlling interests in subsidiaries

(379)

(304)

Contributions from non-controlling shareholders in subsidiaries

22 

Other transactions with non-controlling interests in subsidiaries

(7)

(2,605)

Interest paid

(1,644)

(1,633)

Net cash flow from financing activities

(2,956)

(15,369)




Net cash flow

340 

1,229 

Cash and cash equivalents at beginning of the financial year

7,088 

6,205 

Exchange gain/(loss) on cash and cash equivalents

170 

(346)

Cash and cash equivalents at end of the financial year

7,598 

7,088 

 

 

1. Basis of preparation

The preliminary results for the year ended 31 March 2013 are an abridged statement of the full annual report which was approved by the Board of directors on 21 May 2013. The consolidated financial statements within the full annual report are prepared in accordance with International Financial Reporting Standards ('IFRS') as issued by the International Accounting Standards Board. They are also prepared in accordance with IFRS as adopted by the European Union ('EU'), the Companies Act 2006 and Article 4 of the EU IAS Regulations.

 

The auditor's report on those consolidated financial statements was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report, and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006. The preliminary results do not comprise statutory accounts within the meaning of section 434(3) of the Companies Act 2006. The annual report for the year ended 31 March 2013 will be delivered to the Registrar of Companies following the Company's annual general meeting to be held on 23 July 2013.

 

The financial information included in this preliminary announcement does not itself contain sufficient information to comply with IFRS. The Company will publish full financial statements that comply with IFRS in June 2013.

 

The preparation of the preliminary results requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the end of the reporting period 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 on-going 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.

 

 

2. Equity dividends

 


2013 

2012 


£m 

£m 

Declared during the financial year:



Final dividend for the year ended 31 March 2012: 6.47 pence per share (2011: 6.05 pence per share)

3,193 

3,102 

Interim dividend for the year ended 31 March 2013: 3.27 pence per share (2012: 3.05 pence per share)

1,608 

1,536 

Second interim dividend for the year ended 31 March 2013: nil (2012: 4.00 pence per share)

2,016 


4,801 

6,654 




Proposed after the end of the reporting period and not recognised as a liability:



Final dividend for the year ended 31 March 2013: 6.92 pence per share (2012: 6.47 pence per share)

3,377 

3,195 

 

 

 

USE OF NON-GAAP FINANCIAL INFORMATION

 

In the discussion of the Group's reported financial position, operating results and cash flows, information is presented to provide readers with additional financial information that is regularly reviewed by management. However, this additional information presented is not uniformly defined by all companies including those in the Group's industry. Accordingly, it may not be comparable with similarly titled measures and disclosures by other companies. Additionally, certain information presented is derived from amounts calculated in accordance with IFRS but is not itself an expressly permitted GAAP measure. Such non-GAAP measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure.

 

A summary of certain non-GAAP measures included in this results announcement, together with details of where additional information and reconciliation to the nearest equivalent GAAP measure can be found, is shown below.

 

Non-GAAP measure

Equivalent GAAP measure

Location in this results announcement of reconciliation and further information

EBITDA

Operating profit

Group results on page 9

Adjusted operating profit

Operating profit

Group results on page 9

Adjusted operating profit from controlled and jointly controlled operations, before our share of associates profit

Operating profit

Group results on page 9

Adjusted profit before tax

Profit before taxation

Taxation on page 11

Adjusted effective tax rate

Income tax expense as a percentage of profit before taxation

Taxation on page 11

Adjusted income tax expense

Income tax expense

Taxation on page 11

Adjusted profit attributable to equity shareholders

Profit attributable to equity shareholders

Earnings per share on page 11

Adjusted earnings per share

Basic earnings per share

Earnings per share on page 11 and 36

Operating free cash flow

Cash generated by operations

Cash flows and funding beginning on page 22

Free cash flow

Cash generated by operations

Cash flows and funding beginning on page 22

Net debt

Short-term borrowings, long-term borrowings, cash and cash equivalents and other financial instruments

Analysis of net debt on page 23


ADDITIONAL INFORMATION

 

Regional results for the year ended 31 March

 



Revenue


EBITDA


Adjusted operating

profit/(loss)


Capital expenditure


Operating free

cash flow



2013 

2012 


2013 

2012 


2013 

2012 


2013 

2012 


2013 

2012 



£m 

£m 


£m 

£m 


£m 

£m 


£m 

£m 


£m 

£m 

Germany

7,857 

8,233 


2,735 

2,965 


1,305 

1,491 


1,073 

880 


1,717 

2,136 

UK

5,150 

5,397 


1,209 

1,294 


294 

402 


601 

575 


772 

673 

Other Northern and Central Europe
















CWW

1,273 


169 


(128)


252 


(63)


Netherlands

1,639 

1,775 


584 

600 


313 

340 


225 

243 


376 

393 


Turkey

1,948 

1,704 


322 

265 


15 


247 

266 


83 

(7)


Romania

627 

701 


225 

262 


106 

84 


79 

80 


147 

158 


Other1

1,694 

1,862 


469 

548 


176 

213 


212 

240 


299 

298 


7,181 

6,042 


1,769 

1,675 


482 

637 


1,015 

829 


842 

842 

Intra-region eliminations

(89)

(97)





Northern and Central Europe

20,099 

19,575 


5,713 

5,934 


2,081 

2,530 


2,689 

2,284 


3,331 

3,651 

Italy

4,755 

5,658 


1,908 

2,514 


1,163 

1,735 


567 

621 


1,430 

1,836 

Spain

3,904 

4,763 


942 

1,193 


342 

566 


377 

429 


503 

680 

Other Southern Europe
















Greece

742 

875 


189 

202 


66 

43 


66 

78 


50 

191 


Portugal

941 

1,065 


365 

446 


190 

267 


129 

151 


256 

307 


Other1

200 

188 


79 

83 


41 

49 


30 

31 


51 

47 


1,883 

2,128 


633 

731 


297 

359 


225 

260 


357 

545 

Intra-region eliminations

(20)

(27)





Southern Europe

10,522 

12,522 


3,483 

4,438 


1,802 

2,660 


1,169 

1,310 


2,290 

3,061 

India

4,324 

4,265 


1,240 

1,122 


221 

60 


554 

805 


729 

531 

Vodacom

5,206 

5,638 


1,891 

1,930 


1,196 

1,084 


703 

723 


1,356 

1,415 

Other AMAP
















Egypt

1,259 

1,262 


568 

552 


312 

320 


210 

210 


356 

257 


Other1

2,678 

2,703 


479 

511 


(51)


510 

583 


88 

57 


3,937 

3,965 


1,047 

1,063 


261 

328 


720 

793 


444 

314 

Intra-region eliminations

(1)





AMAP

13,466 

13,868 


4,178 

4,115 


1,678 

1,472 


1,977 

2,321 


2,529 

2,260 

Non-Controlled Interests and Common Functions

481 

615 


(99)

(12)


6,399 

4,870 


431 

450 


(465)

(454)

Inter-region eliminations

(123)

(163)





Group

44,445 

46,417 


13,275 

14,475 


11,960 

11,532 


6,266 

6,365 


7,685 

8,518 

Notes:

1

Includes elimination of £10 million (2012: £13 million) of intercompany revenue between operating companies within the Other Northern and Central Europe segment, £2 million (2012: £3 million) of intercompany revenue between operating companies within the Other Southern Europe segment and £4 million (2012: £5 million) of intercompany revenue between operating companies within the Other AMAP segment.

2

From 1 October 2011 the Group revised its intra-group roaming charges. Whilst neutral to Group revenue and profitability, these changes have had an impact on reported revenue by country and regionally since 1 October 2011. Prior year reported revenue has not been restated.

See page 33 for "Use of non-GAAP financial information" and page 38 for "Definitions of terms".

 

 

Service revenue - quarter ended 31 March

 


Group1 2

Northern and

Central Europe 

Southern Europe

AMAP 






2013 

2012 

2013 

2012 

2013 

2012 

2013 

2012 






£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 





Voice revenue

5,435 

6,039 

2,045 

2,162 

1,270 

1,611 

2,122 

2,264 





Messaging revenue

1,144 

1,271 

703 

750 

242 

293 

199 

229 





Data revenue

1,787 

1,604 

903 

802 

433 

408 

444 

396 





Fixed line revenue

1,392 

909 

1,012 

538 

240 

259 

141 

111 





Other service revenue

654 

557 

217 

206 

132 

94 

239 

214 





Service revenue

10,412 

10,380 

4,880 

4,458 

2,317 

2,665 

3,145 

3,214 






% change






Group 

Northern and

Central Europe 

Southern Europe

AMAP 






Reported 

Organic 

Reported 

Organic 

Reported 

Organic 

Reported 

Organic 





Voice revenue

(10.0)

(8.5)

(5.4)

(6.7)

(21.2)

(22.6)

(6.3)

0.6 





Messaging revenue

(10.0)

(10.2)

(6.3)

(7.2)

(17.4)

(19.1)

(13.1)

(8.5)





Data revenue

11.4 

11.9 

12.6 

11.1 

6.1 

4.0 

12.1 

21.0 





Fixed line revenue

53.1 

(3.3)

88.1 

(2.4)

(7.3)

(9.6)

27.0 

19.9 





Other service revenue

17.4 

8.6 

5.3 

(2.9)

40.4 

36.8 

11.7 

(1.7)





Service revenue

0.3 

(4.2)

9.5 

(2.9)

(13.1)

(14.8)

(2.1)

2.6 



















Germany 

UK 

Italy 

Spain 

India

Vodacom 


2013 

2012 

2013 

2012 

2013 

2012 

2013 

2012 

2013 

2012 

2013 

2012 


£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 

Voice revenue

672 

720 

542 

585 

497 

664 

512 

639 

848 

842 

714 

850 

Messaging revenue

202 

229 

315 

324 

166 

197 

37 

54 

41 

51 

61 

72 

Data revenue

446 

395 

221 

220 

182 

178 

190 

171 

107 

88 

196 

178 

Fixed line revenue

438 

456 

13 

12 

142 

151 

79 

90 

57 

Other service revenue

83 

71 

97 

112 

64 

52 

66 

39 

146 

109 

63 

69 

Service revenue

1,841 

1,871 

1,188 

1,253 

1,051 

1,242 

884 

993 

1,148 

1,096 

1,034 

1,226 


% change


Germany 

UK 

Italy 

Spain 

India

Vodacom 


Reported 

Organic 

Reported 

Organic 

Reported 

Organic 

Reported 

Organic 

Reported 

Organic 

Reported 

Organic 

Service revenue

(1.6)

(3.5)

(5.2)

(6.6)

(15.4)

(17.0)

(11.0)

(12.7)

4.7 

7.2 

(15.7)

(0.9)

 

 

 

Notes:

1

From 1 October 2011 the Group revised its intra-group roaming charges. Whilst neutral to Group revenue and profitability, these changes have had an impact on reported service revenue by country and regionally since 1 October 2011. Whilst prior year reported revenue has not been restated, to ensure comparability in organic growth rates, country and regional revenue in the prior financial year have been recalculated based on the new pricing structure to form the basis for our organic calculations.

2

The sum of the regional amounts may not be equal to Group totals due to Non-Controlled Interests and Common Functions, and intercompany eliminations.

 


Reconciliation of adjusted earnings

 



Note

Reported

Adjustments

Adjusted

Year ended 31 March 2013


£m

£m

£m

Operating profit

1

4,728 

7,232 

11,960 

Non-operating income and expense


10 

(10)

Net financing costs

2

(1,483)

51 

(1,432)

Profit before taxation


3,255 

7,273 

10,528 

Income tax expense


(2,582)

(12)

(2,594)

Profit for the financial year


673 

7,261 

7,934 

Attributable to:





- Equity shareholders


429 

7,267 

7,696 

- Non-controlling interests


244 

(6)

238 

Basic earnings per share


0.87p 


15.65p 

 

Notes:

1

Adjustment primarily relates to the £4,500 million impairment loss for Vodafone Italy and the £3,200 million impairment loss for Vodafone Spain and a gain on acquisition of CWW of £473 million.

2

Adjustment comprises foreign exchange rate movements on certain intercompany balances.

 

 



Note

Reported

Adjustments

Adjusted

Year ended 31 March 2012


£m

£m

£m

Operating profit

1

11,187 

345 

11,532 

Non-operating income and expense

2

(162)

162 

Net financing costs

3

(1,476)

(138)

(1,614)

Profit before taxation


9,549 

369 

9,918 

Income tax expense

4

(2,546)

242 

(2,304)

Profit for the financial year


7,003 

611 

7,614 

Attributable to:





- Equity shareholders


6,957 

593 

7,550 

- Non-controlling interests


46 

18 

64 

Basic earnings per share


13.74p 


14.91p 

Notes:

1

Adjustment primarily relates to the £3,419 million gain arising from the disposal of the Group's 44% interest in SFR, £296 million gain arising from the disposal of the Group's 24.4% interest in Polkomtel and the £4,050 million impairment charge.

2

Adjustment primarily consists of losses in relation to equity investments.

3

Adjustment comprises foreign exchange rate movements on certain intercompany balances.

4

Primarily consists of £206 million tax arising on the disposal of the Group's 24.4% interest in Polkomtel and £36 million tax in relation to foreign exchange rate movements on certain intercompany balances.

 

 

Mobile customers1

 

(in thousands)






Country  

1 January 

2013 

Net 

additions/ 

(disconnections) 

Other 

movements 

31 March 

2013 

Prepaid2 

Northern and Central Europe






Germany

33,890 

(1,480)

32,410 

52.1% 

UK

19,544 

(323)

19,221 

42.2% 


53,434 

(1,803)

51,631 

48.4% 

Other Northern and Central Europe






Netherlands

5,288 

10 

5,298 

32.2% 

Turkey

18,928 

229 

19,157 

64.6% 

Czech Republic

3,375 

(17)

3,358 

43.9% 

Hungary

2,631 

(25)

2,606 

49.4% 

Ireland

2,201 

(39)

2,162 

63.4% 

Romania

8,122 

(41)

8,081 

59.3% 


40,545 

117 

40,662 

56.6% 

Northern and Central Europe

93,979 

(1,686)

92,293 

52.0% 







Southern Europe






Italy

22,587 

(144)

22,443 

81.5% 

Spain3 

15,344 

(617)

(331)

14,396 

32.2% 


37,931 

(761)

(331)

36,839 

65.2% 

Other Southern Europe






Greece

4,407 

102 

4,509 

65.7% 

Portugal

6,267 

(175)

6,092 

82.3% 

Albania

2,020 

15 

2,035 

95.0% 

Malta

340 

(10)

330 

84.2% 


13,034 

(68)

12,966 

78.6% 

Southern Europe

50,965 

(829)

(331)

49,805 

68.3% 

AMAP






India

147,476 

4,878 

152,354 

94.4% 

Vodacom4 

58,902 

109 

59,011 

89.6% 


206,378 

4,987 

211,365 

93.0% 

Other AMAP






Australia

3,110 

(108)

3,002 

37.3% 

Egypt

40,000 

(1,930)

38,070 

92.0% 

Fiji

338 

340 

94.7% 

Ghana

5,224 

385 

5,609 

99.5% 

New Zealand

2,314 

(7)

2,307 

66.7% 

Qatar

1,005 

79 

1,084 

92.4% 


51,991 

(1,579)

50,412 

85.6% 

AMAP

258,369 

3,408 

261,777 

91.5% 

 





 

Group

403,313 

893 

(331)

403,875 

79.6% 

  





 

Memorandum:






Group's share of VZW connections5 

44,204 

315 

44,519 

5.8% 

Vodafone Group plus the Group's share of VZW

447,517 

1,208 

(331)

448,394 

65.3% 

Notes:

 

1

Group customers represent subsidiaries on a 100% basis and joint ventures (being Italy, Australia and Fiji) based on the Group's equity interests.

2

Prepaid customer percentages are calculated on a venture basis. At 31 March 2013 there were 512.9 million venture customers.

3

Other movements relate to a change in the disconnection policy.

4

Vodacom refers to the Group's interests in Vodacom Group Limited and its subsidiaries, including those located outside of South Africa.

5

Includes VZW's retail connections only, based on the Group's equity interest. The definition of connections reported by Verizon Communications for VZW is the same as customers as reported by Vodafone.

 

 

 

 

 

OTHER INFORMATION

 

1)       Copies of this document are available from the Company's registered office at Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN.

 

2)       The preliminary results will be available on the Vodafone Group Plc website, vodafone.com/investor, from 21 May 2013.

 

 

 

For further information:

 


Vodafone Group Plc

 


Investor Relations

Media Relations

Telephone: +44 7919 990 230

Telephone: +44 1635 664 444

 

 

 

Notes:

 

1.  Vodafone and the Vodafone logo, Vodacom, M-Pesa, Vodafone One Net, Vodafone Red, Vodafone Relax, Vodafone 2015 and Vodafone Smart are trademarks of the Vodafone Group. Other product and company names mentioned herein may be the trademarks of their respective owners.

2.  All growth rates reflect a comparison to the year ended 31 March 2012 unless otherwise stated.

3.  References to "Q2" are to the quarter ended 30 September 2012, references to the "Q3" are to the quarter ended 31 December 2013, and references to "Q4" and "fourth quarter" are to the quarter ended 31 March 2013 unless otherwise stated. References to the "first half of the year" are to the six months ended 30 September 2012 and references to "H2" or the "second half of the year" are to the six months ended 31 March 2013 unless otherwise stated. References to the "year" or "financial year" are to the financial year ended 31 March 2013, references to the "prior financial year" are to the financial year ended 31 March 2012, and references to the "new financial year" are to the financial year ended 31 March 2014 unless otherwise stated. References to the "2013 financial year", the "2014 financial year", and the "2015 financial year" are to the financial years ended/ending 31 March 2013, 2014 and 2015, respectively.

4.  All amounts marked with an "*" represent organic growth which presents performance on a comparable basis, both in terms of merger and acquisition activity and movements in foreign exchange rates. From 1 October 2011 the Group revised its intra-group roaming charges. Whilst neutral to Group revenue and profitability, these changes have had an impact on reported service revenue by country and regionally since 1 October 2011. Whilst prior period reported revenue has not been restated, to ensure comparability in organic growth rates, country and regional revenue in the prior financial periods have been recalculated based on the new pricing structure to form the basis for our organic calculations. During the 2013 financial year, Indus Towers (reported within the India segment) revised its accounting for energy cost recharges to operators from a net to a gross basis, to reflect revised energy supply terms. The impact of this upward revenue adjustment has been excluded from reported organic growth rates. The adjustment has no profit impact.

5.  Reported growth is based on amounts in pounds sterling as determined under IFRS.

6.  Vodacom refers to the Group's interest Vodacom Group Limited ('Vodacom') in South Africa and its subsidiaries, including its operations in the DRC, Lesotho, Mozambique and Tanzania.

7.  Quarterly historical information including service revenue, mobile customers, churn, voice usage, messaging volumes, data volumes, ARPU, smartphones and fixed broadband customers is provided in a spread sheet available at vodafone.com/investor.

 

Copyright © Vodafone Group 2013

 

 

 

Definitions of terms

Term

Definition

HSPA+

An evolution of high speed packet access ('HSPA') or third generation ('3G') technology that enhances the existing 3G network with higher speeds for the end user.

For definitions of other terms please refer to pages 170 to 171 of the Group's annual report for the year ended 31 March 2012.



 

Forward-looking statements

 

This report 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, but are not limited to: statements with respect to: expectations regarding the Group's financial condition or results of operations contained within the Group Chief Executive's statement on pages 3 to 6 of this report and within the guidance for adjusted operating profit, free cash flow and EBITDA margin for the 2014 financial year on pages 6 and 8; expectations for the Group's future performance generally, including EBITDA growth and capital expenditure; expectations regarding the Group's future dividends; statements relating to Vodafone's ongoing efficiency programme to deliver £0.3 billion of absolute reduction in European opex; expectations regarding the operating environment and market conditions and trends, including customer usage, competitive and macroeconomic pressures, price trends and opportunities in specific geographic markets; intentions and expectations regarding the development, launch and expansion of products, services and technologies either introduced by Vodafone or by Vodafone in conjunction with third parties or by third parties independently, including Vodafone One Net, Vodafone Red, the launch of a number of additional features, including improved access to technical support, and the launch of LTE services in South Africa in 2013; expectations regarding smartphone adoption; expectations regarding Vodafone 2015, its new strategic approach to consumer pricing, its plans for strengthening positions in certain market segments and geographical markets, its plans for sustained investment in high speed data networks and the anticipated Group standardisation programme; growth in customers and usage; statements relating to the stabilisation of ARPU; expectations regarding spectrum licence acquisitions, including anticipated new 3G and 4G availability; expectations regarding adjusted operating profit, EBITDA margins, capital expenditure, free cash flow, and foreign exchange rate movements; expectations regarding the integration or performance of current and future investments, associates, joint ventures, non-controlled interests and newly acquired businesses, including CWW and TelstraClear Limited, and the network sharing agreement with Telefónica; and the outcome and impact of regulatory and legal proceedings involving Vodafone and of scheduled or potential regulatory changes.

 

Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as "will", "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, which could require changes to the Group's pricing models, lead to customer churn or make it more difficult to acquire new customers; the impact of investment in network capacity and the deployment of new technologies, or the rapid obsolescence of existing technology; higher than expected costs or capital expenditures; slower than expected customer growth and reduced customer retention; changes in the spending patterns of new and existing customers and the possibility that new products and services will not be commercially accepted or perform according to expectations; the Group's ability to expand its spectrum position or renew or obtain necessary licences, including spectrum; the Group's ability to achieve cost savings; the Group's ability to execute its strategy in mobile data, enterprise and broadband and in emerging markets; changes in foreign exchange rates, including, particularly, the exchange rate of sterling to the euro and the US dollar, or interest rates; the ability to realise benefits from entering into partnerships or joint ventures and entering into service franchising and brand licensing; unfavourable consequences of acquisitions or disposals; 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 to regulate 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; loss of suppliers or disruption of supply chains; developments in the Group's financial condition, earnings and distributable funds and other factors that the Board takes into account when determining levels of dividends; the Group's ability to satisfy working capital and other requirements through access to bank facilities, funding in the capital markets and operations; changes in statutory tax rates or profit mix which might impact the weighted average tax rate; and/or changes in tax legislation or final resolution of open tax issues which might impact the Group's tax payments or effective tax rate.

 

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 "Forward-looking statements" in our half-year financial report for the six months ended 30 September 2012 and "Forward-looking statements" and "Principal risk factors and uncertainties" in our annual report for the year ended 31 March 2012. The half-year financial report and the annual report can be found on the Group's website (vodafone.com/investor). 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. Subject to compliance with applicable law and regulations, Vodafone does not intend to update these forward-looking statements and does not undertake any obligation to do so.

 

APPENDICES - RESTATED FINANCIAL INFORMATION

Consolidated income statement for the year ended 31 March 2013

 

  

Audited 

Unaudited

 

As 

reported 

Measurement 

adjustments1 

Presentation 

adjustments2 

New basis 

 

£m 

£m 

£m 

£m 

Revenue

44,445 

(6,404)

38,041 

Cost of sales

(30,505)

3,938 

(26,567)

Gross profit

13,940 

(2,466)

11,474 

Selling and distribution expenses

(3,258)

398 

(2,860)

Administrative expenses

(5,199)

(21)

1,061 

(4,159)

Share of results of equity accounted associates and joint ventures

6,477 

520 

6,997 

Impairment loss

(7,700)

(7,700)

Other income and expense

468 

468 

Operating profit

4,728 

(21)

(487)

4,220 

Non-operating income and expense

10 

10 

Investment income

305 

305 

Financing costs

(1,788)

136 

(1,652)

Profit before taxation

3,255 

(21)

(351)

2,883 

Income tax expense

(2,582)

351 

(2,226)

Profit for the financial year

673 

(16)

657 

Attributable to:





- Equity shareholders

429 

(16)

413 

- Non-controlling interests

244 

244 

 

673 

(16)

657 

Earnings per share





- Basic

0.87p

(0.03p)

0.84p

- Diluted

0.87p

(0.03p)

0.84p

 

 

Consolidated statement of comprehensive income for the year ended 31 March 2013

 


Audited 

Unaudited


As 

reported 

Measurement 

 adjustments 1 

Presentation 

adjustments 

New basis 


£m 

£m 

£m 

£m 

Losses on revaluation of available-for-sale investments, net of tax

(73)

(73)

Foreign exchange translation differences, net of tax

362 

362 

Net actuarial losses on defined benefit pension schemes, net of tax

(198)

16 

(182)

Foreign exchange losses transferred to the income statement

Fair value gains transferred to the income statement

(12)

(12)

Other, net of tax

(4)

(4)

Other comprehensive income

76 

16 

92 

Profit for the financial year

673 

(16)

657 

Total comprehensive income for the financial year

749 

749 

Attributable to:





- Equity shareholders

604 

604 

- Non-controlling interests

145 

145 


749 

749 

Notes:

1

Impact of adopting the amendments to IAS 19.

2

Primarily relates to the restatement of the Group's interest in Vodafone Italy, Vodafone Hutchison Australia, Vodafone Fiji and Indus Towers using the equity method of accounting.

 

 

Consolidated statement of cash flows for the year ended 31 March 2013

 


Audited 

Unaudited


As 

reported 

Measurement 

adjustments 

Presentation 

adjustments 1

New basis 


£m 

£m 

£m 

£m 

Net cash flow from operating activities

10,694 

(1,870)2 

8,824 






Cash flows from investing activities





Purchase of interests in subsidiaries and joint ventures, net of cash acquired

(1,432)

(1,432)

Purchase of interests in associates

(6)

(6)

Purchase of intangible assets

(4,036)

2782 3

(3,758)

Purchase of property, plant and equipment

(4,666)

7082 

(3,958)

Purchase of investments

(4,249)

(4,249)

Disposal of interests in subsidiaries and joint ventures, net of cash disposed

27 

27 

Disposal of property, plant and equipment

153 

(48)2 

105 

Disposal of investments

1,523 

1,523 

Dividends received from associates

4,827 

7122 

5,539 

Dividends received from investments

Interest received

459 

22 

461 

(7,398)

1,652 

(5,746)






Cash flows from financing activities





Issue of ordinary share capital and reissue of treasury shares

52 

17 

69 

Net movement in short-term borrowings

1,672 

(91)

1,581 

Proceeds from issue of long-term borrowings

5,422 

5,422 

Repayment of borrowings

(1,720)

(1,720)

Purchase of treasury shares

(1,568)

(1,568)

Equity dividends paid

(4,806)

(4,806)

Dividends paid to non-controlling interests in subsidiaries 

(379)

(379)

Other transactions with non-controlling interests in subsidiaries 

15

15 

Other movements in loans with associates

168 

168 

Interest paid 

(1,644)

1192 

(1,525)

Net cash flow from financing activities

(2,956)

213 

(2,743)






Net cash flow

340 

(5)

335 






Cash and cash equivalents at beginning of the financial year

7,088 

(87)

7,001 

Exchange gain on cash and cash equivalents

170 

170 

Cash and cash equivalents at end of the financial year

7,598 

(92)

7,506 

Notes:

1

Primarily relates to the restatement of the Group's interest in Vodafone Italy, Vodafone Hutchison Australia, Vodafone Fiji and Indus Towers using the equity method of accounting.

2

Comprises the £107 million adjustment to free cash flow disclosed on pages 42 and 44.

3

Includes spectrum payments of £8 million, which are excluded from free cash flow.

 

 

Group financial highlights for the year ended 31 March 2013

 


As 

reported 

Measurement 

changes 1

Presentation 

changes 2

New basis 


£m 

£m 

£m 

£m 

Financial information





Revenue

44,445 

(6,404)

38,041 

Operating profit

4,728 

(21)

(487)

4,220 

Profit before taxation

3,255 

(21)

(351)

2,883 

Profit for the financial year

673 

(16)

657 

Basic earnings per share (pence)

0.87p 

(0.03)p

0.84p 

Capital expenditure

6,266 

(974)

5,292 

Cash generated by operations

13,727 

(2,233)

11,494 






Performance reporting3 4





EBITDA

13,275 

(21)

(2,061)

11,193 

EBITDA margin

29.9%

(0.1pp) 

(0.4pp)

29.4% 

Adjusted operating profit

11,960 

(21)

(487)

11,452 

Adjusted profit before tax

10,528 

(21)

(351)

10,156 

Adjusted effective tax rate

24.5%

24.5%

Adjusted profit attributable to equity shareholders

7,696 

(16)

7,680 

Adjusted earnings per share (pence)

15.65p 

(0.04)p

15.61p 

Free cash flow

5,608 

(107)

5,501 

Net debt

26,958 

(1,604)

25,354 

Notes:

1

Impact of adopting the amendments to IAS 19.

2

Primarily relates to the restatement of the Group's interest in Vodafone Italy, Vodafone Hutchison Australia, Vodafone Fiji and Indus Towers using the equity method of accounting.

3

Amounts presented at 31 March or for the year then ended.

4

See "Use of non-GAAP financial information" on page 33 and "Definitions of terms" on page 38.

 

 

Group financial results for the year ended 31 March 2013

 


As

reported 

Measurement 

adjustments1

Presentation 

adjustments2

New basis 


£m 

£m 

£m 

£m 

Voice revenue

22,462 

(2,914)

19,548 

Messaging revenue

4,708 

(960)

3,748 

Data revenue

6,702 

(912)

5,790 

Fixed line revenue

4,688 

(546)

4,142 

Other service revenue

2,382 

(578)

1,804 

Service revenue

40,942 

(5,910)

35,032 

Other revenue

3,503 

(494)

3,009 

Revenue

44,445 

(6,404)

38,041 

Direct costs

(10,937)

1,349 

(9,588)

Customer costs

(8,901)

1,201 

(7,700)

Operating expenses 

(11,332)

(21)

1,793 

(9,560)

EBITDA3 

13,275 

(21)

(2,061)

11,193 

Depreciation and amortisation:






Acquired intangibles

(706)

27 

(679)


Purchased licences

(1,288)

127 

(1,161)


Other

(5,798)

900 

(4,898)

Share of result in associates

6,477 

520 

6,997 

Adjusted operating profit3 

11,960 

(21)

(487)

11,452 


Impairment loss

(7,700)

(7,700)


Other income and expense

468 

468 

Operating profit

4,728 

(21)

(487)

4,220 

Non-operating income and expense

10 

10 

Net financing costs

(1,483)

136 

(1,347)

Income tax expense

(2,582)

351 

(2,226)

Profit for the financial year

673 

(16)

657 

 

Notes:

1

Impact of adopting the amendments to IAS 19.

2

Primarily relates to the restatement of the Group's interest in Vodafone Italy, Vodafone Hutchison Australia, Vodafone Fiji and Indus Towers using the equity method of accounting.

3

See "Use of non-GAAP financial information" on page 33 and "Definitions of terms" on page 38.

 

 

Adjusted effective tax rate for the year ended 31 March 2013

 



As 

reported 

Measurement 

adjustments1

Presentation 

adjustments2

New basis 



£m 

£m 

£m 

£m 

Income tax expense

2,582 

(5)

(351)

2,226 

Tax on adjustments to derive adjusted profit before tax

12 

12 

Adjusted income tax expense3 

2,594 

(5)

(351)

2,238 

Share of associates' tax

11 

351 

362 

Adjusted income tax expense for calculating adjusted tax rate

2,605 

(5)

- 

2,600 

Profit before tax 

3,255 

(21)

(351)

2,883 

Adjustments to derive adjusted profit before tax

7,273 

7,273 

Adjusted profit before tax3

10,528 

(21)

(351)

10,156 

Add: Share of associates' tax and non-controlling interest

105 

351 

456 

Adjusted profit before tax for calculating adjusted effective tax rate

10,633 

(21)

- 

10,612 

Adjusted effective tax rate3 

24.5% 

24.5% 

Notes:

1

Impact of adopting the amendments to IAS 19.

2

Primarily relates to the restatement of the Group's interest in Vodafone Italy, Vodafone Hutchison Australia, Vodafone Fiji and Indus Towers using the equity method of accounting.

3

See "Use of non-GAAP financial information" on page 33 and "Definitions of terms" on page 38.

 

 

Net debt reconciliation for the year ended 31 March 2013

 

 

As 

reported 

Measurement 

adjustments1

Presentation 

adjustments2

New basis 

 

£m 

£m 

£m 

£m 

EBITDA3

13,275 

(21)

(2,061)

11,193 

Working capital

318 

21 

(162)

177 

Other

134 

(10)

124 

Cash generated by operations

13,727 

(2,233)

11,494 

Cash capital expenditure

(6,195)

978 

(5,217)

  Capital expenditure

(6,266)

974 

(5,292)

  Working capital movement in respect of capital expenditure

71 

75 

Disposal of property, plant and equipment

153 

(48)

105 

Operating free cash flow3

7,685 

(1,303)

6,382 

Taxation

(2,933)

363 

(2,570)

Dividends received from associates and investments

2,420 

712 

3,132 

Dividends paid to non-controlling shareholders in subsidiaries

(379)

(379)

Interest received and paid

(1,185)

121 

(1,064)

Free cash flow3

5,608 

(107)

5,501 

Tax settlement

(100)

(100)

Licence and spectrum payments

(2,507)

(2,499)

Acquisitions and disposals

(1,723)

(1,723)

Equity dividends paid

(4,806)

(4,806)

Purchase of treasury shares

(1,568)

(1,568)

Foreign exchange

(828)

112 

(716)

Income dividend from VZW

2,409 

2,409 

Other

982 

167 

1,149 

Net debt decrease3

(2,533)

180 

(2,353)

Opening net debt3

(24,425)

1,424 

(23,001)

Closing net debt3

(26,958)

1,604 

(25,354)

Notes:

1

Impact of adopting the amendments to IAS 19.

2

Primarily relates to the restatement of the Group's interest in Vodafone Italy, Vodafone Hutchison Australia, Vodafone Fiji and Indus Towers using the equity method of accounting.

3

See "Use of non-GAAP financial information" on page 33 and "Definitions of terms" on page 38.

 

 

-ends-

 


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