Vodafone 1998 Annual Report Download

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Annual Report and Accounts 1998
http://www.vodafone.com/download/investor/reports/annual98/index.html29/03/2007 23:02:05

Table of contents

  • Page 1
    Annual Report and Accounts 1998 http://www.vodafone.com/download/investor/reports/annual98/index.html29/03/2007 23:02:05

  • Page 2
    Annual Report and Accounts 1998 - Company Review http://www.vodafone.com/download/investor/reports/annual98/companyreview/crcontents.html29/03/2007 23:02:49

  • Page 3
    Annual Report and Accounts 1998 - Company Review - Statement by the Chairman A strong market position in the UK and an extensive international presence put Vodafone in an excellent position to continue to deliver sustained growth and increased shareholder value. Sir Ernest Harrison OBE CHAIRMAN ...

  • Page 4
    Annual Report and Accounts 1998 - Company Review - Statement by the Chairman Vodafone Value Added Services further developed its highly successful 'Recall' voice messaging service, which now has approximately 2 million users, making it one of the UK's leading providers of voicemail and a ...

  • Page 5
    Annual Report and Accounts 1998 - Company Review - Statement by the Chairman in retailing will further strengthen the Board. As you will have appreciated, 1997/98 was an exceptionally busy year for Vodafone in a highly competitive worldwide marketplace. The Group is well placed to meet the ...

  • Page 6
    Annual Report and Accounts 1998 - Company Review - Retirement of Sir Ernest Harrison and Sir Gerald Whent Sir Ernest Harrison OBE Chairman The Company announced in January 1998 that Sir Ernest Harrison had decided to retire as Chairman and as a Director of the Company after the Annual General ...

  • Page 7
    Annual Report and Accounts 1998 - Company Review - Subsidiary Undertakings SUBSIDIARY UNDERTAKINGS Principal subsidiary undertakings Vodafone Group Plc had at 31 March 1998 the following subsidiaries carrying on businesses which principally affect the profits and assets of the Group. Unless ...

  • Page 8
    Annual Report and Accounts 1998 - Company Review - Subsidiary Undertakings CV Gemeenschapplijk Bezit Libertel (7) Libertel Groep BV Libertel BV Liberfone BV Data Holdings SA Panafon SA (1)(8) Panavox SA (8) Vodafone Finance Limited Vodafone Group Services Limited Vodafone Investments Limited ...

  • Page 9
    ...phone SA (2) Vodafone Fiji Limited(2) Service provider Cellular network operator Cellular network operator 20 FFR6,336.5m 31.12.97 England France 49 F$ 6.0m 31.12.97 Fiji Vodacom Group (Pty) Limited (2) Holding company 32 Rand 100 31.3.98 South Africa http://www.vodafone.com/download...

  • Page 10
    Annual Report and Accounts 1998 - Company Review - Associated Undertakings and Investments Vodacom (Pty) Limited Cellular network operator Service provider Supply of cellular radio telephone equipment South Africa South Africa South Africa Vodac (Pty) Limited Vodacom Equipment Company (Pty) ...

  • Page 11
    Annual Report and Accounts 1998 - Company Review - Five Year Financial Summary FIVE YEAR FINANCIAL SUMMARY Profit and loss 1998 £m Turnover Profit before taxation Taxation Profit after taxation 2,471 650 203 447 1997 £m 1,749 539 172 367 1996 £m 1,402 475 165 310 1995 £m 1,153 371 133 238 1994 ...

  • Page 12
    Annual Report and Accounts 1998 - Company Review - Five Year Financial Summary http://www.vodafone.com/download/investor/reports/annual98/companyreview/fiveyear.html (2 of 2)29/03/2007 23:05:36

  • Page 13
    Annual Report and Accounts 1998 - Directors Information http://www.vodafone.com/download/investor/reports/annual98/directorsinfo/dicontents.html29/03/2007 23:06:10

  • Page 14
    ... Chief Executive in January 1997. He was formerly Managing Director of Vodafone Limited, the UK network operator, and is now Chairman of most of the Group's principal operating subsidiaries. http://www.vodafone.com/download/investor/reports/annual98/directorsinfo/board.html (1 of 5)29/03/2007 23:06...

  • Page 15
    ... 1996, having joined the Group in 1985. He is Managing Director of Vodafone Limited and was previously Chairman of the Group companies responsible for value added services, paging and data networks. http://www.vodafone.com/download/investor/reports/annual98/directorsinfo/board.html (2 of 5)29/03...

  • Page 16
    ... Report and Accounts 1998 - Review of Operations - International DIRECTOR JM Horn-Smith MSc, BSc (ECON) Aged 49, he joined the Group in 1984 and was appointed to the Board in June 1996. He is Managing Director of Vodafone Group International Limited and a director of many of the Group's overseas...

  • Page 17
    ... International Holdings Limited. SECRETARY SR Scott MA, Solicitor Aged 44, he was appointed to his present position in 1991. Head of the Group Legal Department, he is also a director of the Group's pension trustee http://www.vodafone.com/download/investor/reports/annual98/directorsinfo/board.html...

  • Page 18
    Annual Report and Accounts 1998 - Review of Operations - International companies. http://www.vodafone.com/download/investor/reports/annual98/directorsinfo/board.html (5 of 5)29/03/2007 23:06:23

  • Page 19
    ..., health care benefits and a mobile telephone, all of which are subject to income tax. The executive directors participate in the Company's executive share option schemes and are entitled to participate in its all-employee share schemes, the savings related share option scheme and the profit sharing...

  • Page 20
    ... Ernest and Sir Gerald will be retiring from the Board after the Company's Annual General Meeting on 21 July 1998 and their respective agreements will terminate at that time. The other non-executive directors are engaged on letters of appointment which set out their duties and responsibilities and...

  • Page 21
    ... 5. P R Bamford joined the Board on 1 April 1998. Pension benefits earned by the directors in the year to 31 March 1998 Increase in accrued pension during the year (£) 53,800 36,200 28,600 28,800 19,800 Transfer value of increase in accrued pension and change in retirement age (£) 911,000 678,000...

  • Page 22
    Annual Reports and Accounts 1998 - Directos Information - Report of the Remuneratrion Committee Notes 1. The pension benefits earned by the directors are those which would be paid annually on retirement, on service to the end of the year, at the normal retirement age. Salaries have been averaged ...

  • Page 23
    ... granted at a discount to market value may not be exercised unless the growth in the earnings per share of the Company, in the same period, exceeds the growth in the Index of Retail Prices by 2 per cent. Under the executive scheme and the unapproved scheme in the year to 31 March 1998, the following...

  • Page 24
    ... share options in the year by the Company's directors was £3,344,769. The closing middle market price of Vodafone Group Plc's shares at the year end was 624.5p, its highest closing price in the year, its lowest closing price having been 266.5p. Director's interests in the shares of Vodafone Group...

  • Page 25
    Annual Reports and Accounts 1998 - Directos Information - Report of the Remuneratrion Committee Sir William Barlow and Sir Robert Clark both retired from the Board on 31 March 1998, at which time each had an interest in 15,000 shares (1997 - 15,000 shares). There have been no changes in the ...

  • Page 26
    ...issued by the London Stock Exchange the principles of corporate governance set out in the Report are applied by the directors in their leadership and control of the Company. Please see the Review report by the auditors on corporate governance. Board committees The Board of the Company comprises five...

  • Page 27
    ... areas of significant business risk and include: â- â- Financial limits on delegated authority; Detailed policies and procedures regulating treasury activities, approved annually. Associated undertakings are monitored closely through attendance at their board meetings and review of key financial...

  • Page 28
    ... internal financial control during the period covered by this report. Share capital A statement of changes in the share capital of the Company is set out in note 17 of the financial statements. Results and dividends The consolidated profit and loss account is set out in the financial statements. The...

  • Page 29
    ...comprising company newsletters, staff notices and bulletins and the internal distribution of official press releases; Social functions - the Company actively encourages and financially supports a wide range of sports and social functions across the Group for its employees. UK employee share schemes...

  • Page 30
    Annual Report and Accounts 1998 - Directors Information - Report of the Directors employees, irrespective of their length of service, to acquire Vodafone Group Plc shares on an advantageous basis. These schemes are highly regarded by staff and over 50% of staff currently participate in one or both ...

  • Page 31
    ...Investment Management Limited has a holding of 5.3%, Mercury Asset Management has a holding of 3.5% and the Prudential Corporation group of companies has a holding representing 3.1%. By Order of the Board Stephen Scott Secretary 2 June 1998 http://www.vodafone.com/download/investor/reports/annual98...

  • Page 32
    ...on a going concern basis unless it is inappropriate to presume that the Company and the Group will continue in business. The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and the Group and to...

  • Page 33
    Annual Report and Accounts 1998 - Review of Operations http://www.vodafone.com/download/investor/reports/annual98/reviewops/rocontents.html29/03/2007 23:07:00

  • Page 34
    Annual Report and Accounts 1998 - Review of Operations - Introduction Vodafone estimates that this demand will lead to penetration levels that exceed 50% of the population in all markets in the developed world and that mobile telephony will become the preferred means of personal communications. C ...

  • Page 35
    ... on customer service, total quality Changes have been and value for money implemented to the channels of distribution that the Group uses to reach its customers. Historically, Vodafone had acquired a number of service providers with disparate brand names, all of which had a high street presence. All...

  • Page 36
    Annual Report and Accounts 1998 - Review of Operations - UK Network Vodafone Limited had a good year, adding 563,000 customers to give a year-end total of over 3.4 million, a market share of 38%. Performance highlights Vodafone Limited had a good year, adding 563,000 customers to give a year-end ...

  • Page 37
    ... phone services and to maintain the reliability and quality of the network. In addition, Vodafone has installed base stations in key areas such as the terminal buildings at Heathrow Airport and at the NEC and Olympia exhibition centres. Marketing In order to increase market penetration in the UK...

  • Page 38
    Annual Report and Accounts 1998 - Review of Operations - UK Network departure lounge at Heathrow Airport. Tariffs Significant tariff reductions took place during the year as part of the Company's aim to be recognised as not only the best quality network in the UK, but also the best value for money...

  • Page 39
    ... in the marketing of additional services in the years to come. The Vodafone loyalty scheme, which offers Air Miles as a reward to customers, remained popular and will continue to form part of the Company's marketing programme. http://www.vodafone.com/download/investor/reports/annual98/reviewops...

  • Page 40
    Annual Report and Accounts 1998 - Review of Operations - Value Added Service Companies These companies continued to expand their business activities which complement Vodafone'sother UK network and service activities through provision of specialist value added and data services. British Gas uses ...

  • Page 41
    Annual Report and Accounts 1998 - Review of Operations - Value Added Service Companies Vodafone Paging maintained its market share in the traditional contract paging market and increased its total customer base to almost 400,000. An exciting new range of 'Zap!' pagers was introduced during the year...

  • Page 42
    ... - Review of Operations - Distribution This network of 240 outlets is the biggest and only truly national chain of mobile phone shops in the UK and puts the Vodafone brand prominently and powerfully onto the high street The Vodafone retail store in Oxford Street, London. In July 1997, the Group...

  • Page 43
    ...range of support programmes within a consistent, managed framework, whilst gaining the full benefits that come from entrepreneurial businesses. Mobile Phone Centre Limited (MPC), in which Vodafone raised its share from 45% to 100% during the year, offers a franchise brand to selected dealers. By the...

  • Page 44
    ...telephone services. These relationships, together with new products and tariffs being developed by the network, will ensure that the needs of corporate customers continue to be well served. 'Pay As You Talk' point of display in Woolworths. http://www.vodafone.com/download/investor/reports/annual98...

  • Page 45
    Annual Report and Accounts 1998 - Review of Operations - International Panafon's network now provides extensive coverage of the Greek Islands Performance highlights Vodafone's international activities continue to go from strength to strength, confirming Vodafone's position as a major multi-...

  • Page 46
    ... service is already making a positive contribution to the company's results. Panafon's network now provides extensive coverage of the Greek Islands which is particularly important to tourists wishing to use their GSM mobile phones. A third mobile phone operator was licensed in Greece during the year...

  • Page 47
    Annual Report and Accounts 1998 - Review of Operations - International Key roaming agreements are now in place ahead of the 1998 tourist season and the company should benefit from the increased usage of the network by visitors. Pacific Rim Vodafone Network Pty Limited in Australia had an excellent ...

  • Page 48
    Annual Report and Accounts 1998 - Review of Operations - International has a 30% interest, was awarded a licence in March 1998 to operate Egypt's second GSM network. The new network is expected to open for service later in the 1998/99 financial year. Vodacom's Community PhoneShop initiative gives ...

  • Page 49
    ... and programmes that build on its expertise as a global leader in communications and channels support to areas where it will have a high value and do most good. During the year Vodafone donated over 150 computers to schools close to its Newbury Headquarters. Education in the area also benefited from...

  • Page 50
    Annual Report and Accounts 1998 - Review of Operations - Community Base stations can be unobtrusively sited on existing structures such as lighthouses, windmills or advertising hoardings. Environment The Group is committed to responsible environmental practices in the interests of the community. ...

  • Page 51
    ...impact of the Company's equipment. Environmental policy is under continual review and is intended to lead to the introduction of an environmental management system in accordance with BS7750 and ISO 1400. http://www.vodafone.com/download/investor/reports/annual98/reviewops/community.html (3 of 3)29...

  • Page 52
    Annual Report and Accounts 1998 - Financial Review http://www.vodafone.com/download/investor/reports/annual98/financialreview/frcontents.html29/03/2007 23:08:46

  • Page 53
    ...Review Profit and loss account Turnover Group turnover for the financial year increased by 41% to £2,470.8m, up 23% excluding the effects of acquisitions. This increase included £62.8m as a result of the acquisition of a controlling interest in the Dutch network operator Libertel, and its service...

  • Page 54
    ...consolidated for a full twelve months. Net losses in the Pacific Rim increased by £20.2m to £59.2m, primarily due to the Australian businesses. However, the network company went through break-even in January 1998 and the Australian businesses as a whole should achieve overall profitability in 1998...

  • Page 55
    ... businesses. In many of the international markets where the Group operates, cellular penetration continues to be low, which should enable the international businesses to grow more rapidly than the UK and make a larger contribution to Group profits. http://www.vodafone.com/download/investor/reports...

  • Page 56
    ...the UK, Australia and Greece together with the inclusion of the fixed assets of Libertel, the Dutch network operator, acquired in the year. The movement in investments, which includes equity investments and loans advanced to associates and other investments, is analysed here. Working capital Working...

  • Page 57
    ...in the UK, where capacity continues to be added to the digital network to accommodate growth in customer numbers and traffic generated by visitors. The balance will be expended on the digital networks in the Netherlands, Australia and Greece to enhance capacity and maintain a high quality of service...

  • Page 58
    ... authorised and reviewed annually by the Board and are reported regularly to the Board. The Group uses a number of derivative instruments which are transacted, for risk management purposes only by specialist treasury personnel. There has been no change during the year, or since the year end, to...

  • Page 59
    ... rates are managed within limits approved by the Board, using derivative financial instruments such as interest rate swaps, futures and forward rate agreements. At the end of the year, 55% of the Group's gross borrowings were fixed for a period of at least one year. A one percentage rise in market...

  • Page 60
    ... the share price accelerated in the year to 31 March 1998, more than doubling to 624.5p. This increase reflected the general rise in equity prices, investors' re-rating of the mobile telecommunications sector and confidence in the Group's prospects http://www.vodafone.com/download/investor/reports...

  • Page 61
    Annual Report and Accounts 1998 - Company Review - Statement by the Chairman http://www.vodafone.com/download/investor/reports/annual98/financialreview/shareholders.html (2 of 2)29/03/2007 23:09:28

  • Page 62
    ... profitability or liquidity of the Group. However, an element of the cost of Year 2000 compliance is not separately identifiable, as millennium modifications are often embodied in software purchased and developed in the normal course of business. http://www.vodafone.com/download/investor/reports...

  • Page 63
    ... and the Executive Committee of Vodafone Group Plc reviews the impact of EMU where strategic and operational matters are considered. The financial cost of preparations for EMU are not material to the Group. http://www.vodafone.com/download/investor/reports/annual98/financialreview/singleeuro.html29...

  • Page 64
    ... has been adopted in these financial statements and has necessitated the restatement of comparative amounts. The Group's accounting policies are conservative and appropriate to the business. http://www.vodafone.com/download/investor/reports/annual98/financialreview/basis.html29/03/2007 23:09:53

  • Page 65
    Vodafone Report and Accounts - Financial Review - Going Concern Going concern After reviewing the Group's and Company's budget for 1998/99 and other longer term plans, the directors are satisfied that, at the time of approving the financial statements, it is appropriate to adopt the going concern ...

  • Page 66
    Annual Report and Accounts 1998 - Finance http://www.vodafone.com/download/investor/reports/annual98/finance/fcontents.html29/03/2007 23:10:18

  • Page 67
    ...the Group as at 31 March 1998 and of the profit of the Group for the year then ended and have been properly prepared in accordance with the Companies Act 1985. Deloitte & Touche Chartered Accountants and Registered Auditors Hill House 1 Little New Street London EC4A 3TR 2 June 1998 Review report by...

  • Page 68
    ... the Company's compliance with the other paragraphs of the Code specified for our review by Listing Rule 12.43 (j). Deloitte & Touche Chartered Accountants and Registered Auditors Hill House 1 Little New Street London EC4A 3TR 2 June 1998 http://www.vodafone.com/download/investor/reports/annual98...

  • Page 69
    Vodafone Report and Accounts - Finance - Group Profit and Loss Account CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 March 1998 1998 Note Turnover Continuing operations Acquisitions 1 £m 2,408.0 62.8 2,470.8 1997 Restated £m 1,749.0 1,749.0 Operating profit Continuing operations ...

  • Page 70
    ... - Group Profit and Loss Account Profit for the financial year 418.8 363.8 Equity dividends 6 (170.3) (147.5) Retained profit for the Group and its share of associated undertakings 18 248.5 216.3 Earnings per share 7 13.63p 11.89p http://www.vodafone.com/download/investor/reports...

  • Page 71
    Consolidated Balance Sheet CONSOLIDATED BALANCE SHEET at March 31 1998 1998 Note Fixed assets Intangible assets Tangible assets Investments 8 9 10 1997 £m £m 137.6 1,571.7 202.2 1,911.5 147.4 1,260.3 518.9 1,926.6 Current assets Stocks Debtors Liquid investments Cash at bank and in hand 11 ...

  • Page 72
    Consolidated Balance Sheet Provisions for liabilities and charges 16 5.4 379.5 7.3 828.6 Capital and reserves Called up share capital Share premium account Capital reserve Profit and loss account 17 18 18 18 154.3 78.0 -50.2 153.3 54.7 4.1 557.9 Total equity shareholders' funds Equity ...

  • Page 73
    ... Loans to associated undertakings Loans repaid by associated undertakings Net cash outflow for capital expenditure and financial investment (162.9) (150.1) (24.9) (491.5) 6.7 (1.3) 1.4 (0.8) (350.4) (240.4) 4.7 2.8 (46.1) 4.2 (509.6) (626.0) http://www.vodafone.com/download/investor/reports...

  • Page 74
    ... of ordinary share capital Issue of shares to minorities Purchase of shares from minorities Debt due within a year: Increase in commercial paper programme increase/(decrease) uncommitted bank facilities Debt due beyond a year: Increase/(decrease) in bank loans Repayment of debt acquired Issue of...

  • Page 75
    ... difference (119.8) (21.4) (3.0) 9.1 (12.9) (20.2) (2.9) 4.0 Increase in net debt in the year Opening net debt Closing net debt 25 (436.4) (680.6) (1,117.0) (473.1) (207.5) (680.6) http://www.vodafone.com/download/investor/reports/annual98/finance/cashflow.html (3 of 3)29/03/2007 23:10:43

  • Page 76
    ... RECOGNISED GAINS AND LOSSES for the year ended 31 March 1998 1998 £m Profit for the financial year Currency translation 418.8 (147.2) 1997 £m 363.8 (123.2) Total recognised gains and losses relating to the year 271.6 240.6 http://www.vodafone.com/download/investor/reports/annual98/finance...

  • Page 77
    ...FUNDS for the year ended 31 March 1998 1998 £m Profit for the financial year Equity dividends 418.8 (170.3) 1997 £m 363.8 (147.5) 248.5 Currency translation New share capital subscribed Goodwill written-off Goodwill transferred to the profit and loss account in respect of business disposals Scrip...

  • Page 78
    ..., balance sheets at the beginning of the year and equity additions and withdrawals during the financial year are dealt with as a movement in reserves. Other translation differences are dealt with in the profit and loss account. Turnover http://www.vodafone.com/download/investor/reports/annual98...

  • Page 79
    ...charged to the profit and loss account represent contributions payable in respect of the period. Research and development Expenditure on research and development is written-off in the year in which it is incurred. Scrip dividends Dividends satisfied by the issue of ordinary shares have been credited...

  • Page 80
    ... to produce a constant rate of charge on the outstanding balance. Lease obligations which are satisfied by cash and other assets deposited with third parties are set-off against those assets in the Group's balance sheet. http://www.vodafone.com/download/investor/reports/annual98/finance/statement...

  • Page 81
    ... US Generally Accepted Accounting Principles ("US GAAP") and UK Generally Accepted Accounting Principles ("UK GAAP") that are significant to Vodafone Group Plc. The principles are set out below. Net income and earnings per ordinary share 1998 £m Net income as reported in accordance with UK GAAP...

  • Page 82
    ...liability method at tax rates applicable to the relevant future year. Capitalisation of interest costs Under UK GAAP, interest on borrowing used to finance the construction of an asset is not required to be included in the http://www.vodafone.com/download/investor/reports/annual98/finance/uspolicies...

  • Page 83
    ... respectively, by 3,073,032,493 and 3,060,400,713 which are the approximate weighted average number of ordinary shares outstanding for the years ended 31 March 1998 and 1997 respectively. http://www.vodafone.com/download/investor/reports/annual98/finance/uspolicies.html (3 of 3)29/03/2007 23:12:13

  • Page 84
    ...: amounts falling due after more than one year Borrowings Provisions for liabilities and charges Called up share capital Reserves Goodwill Non-equity minority interests Leased assets Capital commitments http://www.vodafone.com/download/investor/reports/annual98/finance/noteindex.html (1 of 2)29/03...

  • Page 85
    ... asset investments Debtors Creditors: amounts falling due within one year Creditors: amounts falling due after more than one year Deferred taxation Profit and loss account Contingent Liabilities http://www.vodafone.com/download/investor/reports/annual98/finance/noteindex.html (2 of 2)29/03/2007 23...

  • Page 86
    ... than one year 2,128.3 1,786.8 32 626.8 1,501.5 504.2 1,282.6 Capital and reserves Called up share capital Share premium account Capital reserve Profit and loss account 17 18 34 154.3 78.0 87.9 1,181.3 153.3 54.7 87.9 986.7 http://www.vodafone.com/download/investor/reports/annual98/finance...

  • Page 87
    Company Balance Sheet Total equity shareholders' funds 1,501.5 1,282.6 CC GENT K J HYDON 2 June 1998 Chief Executive Financial Director http://www.vodafone.com/download/investor/reports/annual98/finance/companysheet.html (2 of 2)29/03/2007 23:12:25