Vodafone 2001 Annual Report Download - page 7

FINANCIAL REVIEW
Vodafone Group Plc
Annual Report & Accounts
for the year ended
31 March 2001
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during the year contributed to an EBITDA margin of 45%, an increase
of three percentage points over last year. In the rest of Continental
Europe, the 69% increase in pro forma proportionate EBITDA reflects
strong trading throughout the region with particularly strong margin
improvements in the Group’s subsidiaries in Greece, the Netherlands
and Spain, and the increase in the Group’s ownership interests in Airtel
Móvil S.A. and the acquisition of an interest in Swisscom Mobile SA
during the year.
Proportionate turnover in the UK increased by 17% to £3,458m and
proportionate EBITDA increased by 14% to £1,068m, reflecting further
strong prepaid customer growth and the increased usage of data
services, offset by the impact of tariff reductions.
In the United States, proportionate turnover and EBITDA were
£5,008m and £1,627m, respectively, resulting in an EBITDA margin of
32%. This reflects the profitable trading of Verizon Wireless during the
year, as the business has focused on gaining high value customers
through new customer additions and the migration of existing
analogue customers to digital price plans.
The Asia Pacific region saw an increase in pro forma proportionate
turnover of over 80% to £2,771m and an increase in pro forma
proportionate EBITDA of almost 56% to £587m. This comprised
underlying organic growth of 50% and 28%, respectively, with the
balance being primarily due to the acquisition of increased stakes in
the J-Phone Group and the acquisition of a 2.18% stake in China
Mobile (Hong Kong) Limited during the year.
The Middle East and Africa region reported an increase in pro forma
proportionate EBITDA of almost 60% to £227m. Strong growth
occurred in both the Group’s subsidiary in Egypt and associated
undertaking in South Africa.
The Group’s other non-mobile operations mainly comprise interests
in Mannesmann Arcor, a German fixed line business, Telecommerce,
a German IT and data services business, Cegetel, the second largest
fixed line operator in France and Vizzavi Europe, the Group’s 50%
owned multi-access consumer portal joint venture with Vivendi
Universal. These other operations recorded pro forma proportionate
turnover of £802m, pro forma proportionate EBITDA losses of £27m
and proportionate operating losses of £237m including the Group’s
share of the start-up losses incurred by Vizzavi.
Exch an ge rates
The net impact of movements in exchange rates was not significant
to the year on year increases in pro forma proportionate turnover and
EBITDA, with the effect of adverse exchange rate movements against
the Euro being offset by favourable movements against the US dollar
and Japanese yen.
Employees
The Company and its subsidiary undertakings employed
approximately 56,800 people at 31 March 2001, including 29,800
employees in businesses acquired during the year. This compares
with 25,600 employees at 31 March 2000, after excluding 15,100
people employed in the US wireless businesses transferred to Verizon
Wireless. Of the total employees at 31 March 2001, 81% worked
outside the United Kingdom.
Future results
There are many factors that will influence the Group’s future
performance, including the successful introduction of new services for
both data and voice using existing GPRS and 3G technology, further
development of the Group’s multi-access internet portal and the
completion of the integration process of our recent transactions.
Factors affecting future turnover and profit performance are the
potential for growth of mobile telecommunications markets,
particularly in territories where penetration rates are comparatively
low, the Group’s market share, our ability to retain high value
customers and stimulate more usage of voice and data services using
new GPRS and 3G technologies, the costs of providing and selling
these new products and existing services, the impact of regulatory
changes, and start-up costs of new products and services dependent
on GPRS and 3G technology.
The global market for mobile telecommunications continues to
provide the potential for significant growth. In the immediate future,
the emphasis on cost control and margin management should result
in cash flow growth as the market transitions to the full impact of
the new data services, technologies and spectrum capacity of 3G.
Mobile telephony is expected to continue to substitute for fixed line
networks in both voice and data services and Vodafone, with its
unrivalled global positioning, and its high quality and substantial
customer base, is well placed to sustain its leadership.
Balance sheet
Total fixed assets have increased in the year from £150,851m last
year to £154,375m at 31 March 2001.
At 31 March 2000, the Group’s interest in Mannesmann AG was
included in fixed asset investments at a cost of £101,246m.
Following completion on 12 April 2000, and the consolidation of
the acquired net assets, goodwill has been provisionally calculated
to be £83,028m.
The assets of the US businesses contributed to Verizon Wireless have
been treated as having been disposed, including attributed goodwill of
£19.5 billion arising from the AirTouch transaction that was previously
included in intangible fixed assets. The Group’s interest in the new
venture has been equity accounted within investments in associated
undertakings at an initial value of £19,809m.
The remaining increase in intangible assets primarily comprises
£13,347m in respect of 3G licences acquired in the year and goodwill
on the acquisition of a controlling interest in Airtel Móvil S.A. of
approximately £7,740m. The increase in tangible fixed assets from
£6,307m to £10,586m includes fixed assets from acquisitions of
£4,840m.
Other fixed asset investments at 31 March 2001 include the Group’s
equity interests in China Mobile and Japan Telecom. In an offering
that closed on 3 November 2000, Vodafone acquired newly issued
shares representing approximately 2.18% of China Mobile’s
share capital for a cash consideration of US$2.5 billion and, on
31 January 2001, the Group acquired a 7.5% shareholding in
Japan Telecom for a cash consideration of approximately
£0.7 billion.
Current asset investments with an aggregate value of £13,211m
primarily comprise the Group’s remaining interest in Atecs
Mannesmann AG, a balancing payment of approximately £3,092m
receivable from the exercise of a put option over France Telecom
shares and liquid investments with a value of £7,593m. The liquid
investments arose primarily from the receipt of sales proceeds
following the disposal of Infostrada S.p.A. and receipts in relation to
the France Telecom shares and loan notes received from the disposal
of Orange plc.
Average exchange rates
Year to Year to Percentage
31 March 31 March change
Currency 2001 2000 %
Euro 1.63 1.57 3.8
Greek Drachma 552 514 7.4
Japanese Yen 163.8 178.2 (8.1)
Swedish Krona 14.0 13.6 2.9
US Dollar 1.48 1.61 (8.1)