Vodafone 2001 Annual Report Download - page 6

4FINANCIAL REVIEW
Vodafone Group Plc
Annual Report & Accounts
for the year ended
31 March 2001
Profi t and loss account
The statutory consolidated profit and loss account presented on page
25, and the accompanying notes, have been prepared on the basis
required by accounting standards in the United Kingdom and include
the results of a number of significant transactions completed during
the year.
The results and net assets of Mannesmann have been consolidated in
the Group’s financial statements with effect from 12 April 2000, the
date the acquisition was completed. Non-core businesses sold following
the acquisition of Mannesmann AG, including Atecs Mannesmann AG,
Orange plc, Mannesmann’s watches and tubes businesses, Ipulsys,
Infostrada S.p.A. and tele.ring, have not been consolidated in the results
for the year.
The results and net assets of Airtel Móvil S.A. have been fully
consolidated with effect from 29 December 2000. Prior to the
acquisition of a controlling interest, the Group’s 21.7% interest in
Airtel Móvil S.A. was accounted for as an associated undertaking
within continuing operations under the equity accounting method.
The Group’s interest in Verizon Wireless, which was formed on 3 April
2000, has been accounted for using equity accounting in the current
year and the Group’s share of results is disclosed within continuing
operations. In the year ended 31 March 2000, turnover of £2,585m
and operating losses of £100m (after goodwill amortisation) in respect
of the Group’s US businesses were fully consolidated.
Group turnover and total Group
operating (loss)/profi t
Group turnover increased to £15,004m from £7,873m last year.
This reflects growth in continuing operations from £5,288m to
£6,637m, after adjusting for the results of US operations in prior year
turnover, and includes £8,367m in respect of acquired businesses.
Turnover from continuing operations, including the Group’s share of
joint ventures and associated undertakings, increased from £11,521m
to £15,155m, reflecting the strong growth of these businesses.
Total Group operating loss of £6,998m for the year (31 March 2000:
profit of £796m) is after charging exceptional operating costs of
£320m (31 March 2000: £30m) and goodwill amortisation of
£11,882m (31 March 2000: £1,712m). Total Group operating profit,
before exceptional operating costs and amortisation of goodwill,
increased to £5,204m, compared with £2,538m last year.
Acquisitions represented £2,087m of the increase with a further
increase of £579m to £3,117m from continuing operations.
Exceptional operating items of £320m primarily comprise impairment
charges of £91m in relation to the carrying value of certain assets
within the Group’s Globalstar service provider businesses, exceptional
reorganisation costs of £85m relating to the restructuring of the Group’s
operations in Germany and the US, and £141m in relation to the
Group’s share of the restructuring costs incurred by Verizon Wireless.
The increase in the goodwill amortisation charge from £1,712m to
£11,882m is primarily due to amortisation of the goodwill arising
from the acquisition of Mannesmann AG, provisionally calculated to be
£83 billion, goodwill on formation of the Verizon Wireless joint venture
partnership and a full year’s amortisation charge for goodwill relating
to the acquired AirTouch operations (excluding US businesses
contributed to Verizon Wireless). These charges for goodwill
amortisation do not affect the cash flows of the Group or the ability
of the Group to make dividend payments.
Exceptional non-operating items
2001 2000
£m £m
Profit on termination of hedging instrument 261 –
Impairment of fixed asset investments (193) –
Profit on disposal of fixed assets 6 –
Profit on disposal of fixed asset investments 6 954
–––––– ––––––
80 954
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The profit on termination of the hedging instrument arose in March
2001 upon the settlement of a hedging transaction entered into by the
Group in order to obtain protection against an adverse market-related
price adjustment included in the original terms of the agreement for
the sale of Infostrada S.p.A. This hedging transaction was terminated
with cash proceeds to the Group of approximately K410 million.
The impairments of fixed asset investments are in relation to the
Group’s interests in Globalstar and Shinsegi Telecom, Inc.
The profit of £954m in the prior year arose mainly on disposal of
the Group’s interest in E-Plus Mobilfunk GmbH as a condition of
the European Commission’s approval of the merger with AirTouch
Communications, Inc.
Interest
Total Group interest, including the Group’s share of the net interest
expense of joint ventures and associated undertakings, increased by
£776m to £1,177m.
Net interest costs in respect of the Group’s net borrowings increased
by £517m to £850m, compared with £333m (before exceptional
finance costs of £17m) in the year to 31 March 2000. The increase
includes interest on Mannesmann’s debt of £12,551m, which was
assumed at acquisition on 12 April 2000.
Taxation
The effective rate of taxation for the year, before goodwill and
exceptional non-operating items, increased to 33.9% from 32.5%
in the year ended 31 March 2000. The 1.4% increase in the
effective tax rate is primarily the result of the integration of the
Mannesmann businesses into the Group’s result.
Pro forma proportionate fi nancial
information
Due to the significance of the acquisition of Mannesmann AG and the
merger with AirTouch Communications, Inc. on the results for each of
the years ended 31 March 2001 and 31 March 2000, unaudited pro
forma proportionate financial information has been presented on the
basis that these transactions took place on 1 April in each financial
year. The following discussion of pro forma proportionate Group
turnover and EBITDA, before exceptional items, provides a more direct
comparison of year on year operating performance.
Pro forma proportionate turnover for the Group’s mobile businesses
increased by over 29% to £21,428m and pro forma proportionate
EBITDA, before exceptional items, increased by 28% from £5,504m to
£7,043m, reflecting the strong progress of the business following the
Mannesmann transaction and formation of Verizon Wireless.
After making adjustments for acquisitions completed in the year,
primarily the increased stakes in Airtel Móvil S.A. in Spain, the
J-Phone Group in Japan and the acquisition of shareholdings in
Swisscom Mobile SA and China Mobile (Hong Kong) Limited,
underlying organic growth in both mobile pro forma proportionate
turnover and EBITDA, at constant exchange rates, was 25%.
In Continental Europe pro forma proportionate turnover grew by
almost 21% to £9,743m. This increase reflects the rapid growth in
customer numbers in all major markets, the Group’s increased
shareholding in Airtel Móvil S.A. and the acquisition of an equity
interest in Swisscom Mobile SA.
Pro forma proportionate EBITDA for Continental Europe increased by
almost 22% to £3,534m. In Germany, the costs of connection and
marketing associated with the near doubling of the customer base
lowered the EBITDA margin of D2 Vodafone by six percentage points
to 35%. This represents an improvement on the 30% margin
reported in the first half of the financial year, partially due to the
implementation of changes to commercial policies. In Italy, which
has much lower equipment subsidies, customer growth of 40%