Vodafone 2004 Annual Report Download - page 33

Annual Report 2004 Vodafone Group Plc
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For the 2002 financial year, exceptional operating costs of £5,408 million comprised
impairment charges of £5,100 million in relation to the carrying value of goodwill for
Arcor, Cegetel, Grupo Iusacell and Japan Telecom, and £222 million representing the
Group’s share of exceptional items of its associated undertakings and joint ventures,
comprising £107 million of, principally, asset write downs in Vodafone Japan and
£115 million of reorganisation costs in Verizon Wireless and Vizzavi. A further £86
million of reorganisation costs was also incurred in the 2002 financial year, principally
in respect of the Group’s operations in Australia and the UK.
In accordance with applicable accounting standards, the Group regularly monitors the
carrying value of its fixed assets. A review was undertaken at 31 March 2003 to
assess whether the carrying value of assets was supported by the net present value of
future cash flows derived from assets using cash flow projections for each asset in
respect of the period to 31 March 2013.
The results of the review indicated that, whilst no impairment charge was necessary in
respect of the Group’s controlled mobile businesses, impairment charges totalling
£810 million were necessary in respect of non-controlled mobile and non-mobile
businesses as detailed below.
Year ended
31 March 2003
Company £m
Japan Telecom 430
Grupo Iusacell 80
China Mobile 300
810
The charge in respect of China Mobile and £25 million of the charge for Japan
Telecom are included within exceptional non-operating items.
Exceptional non-operating items
Net exceptional non-operating items amounted to £5 million for the year ended
31 March 2003. Exceptional non-operating items during the 2003 financial year
principally included impairment charges of £300 million in respect of the Group’s
interest in China Mobile and £25 million in respect of certain investments held by
Japan Telecom, offset by a profit on disposal of fixed asset investments of £255
million, principally relating to the disposal of the Group’s interest in Bergemann GmbH,
through which the Group’s 8.2% stake in Ruhrgas AG was held, and £55 million
representing the Group’s share of the profit on disposal for cash of AOL Europe shares
by Cegetel.
The 2002 financial year exceptional non-operating costs of £860 million principally
comprised an impairment charge of £900 million in respect of the Group’s investment
in China Mobile, partly offset by an aggregate profit of £60 million on the disposal of
fixed assets, businesses and fixed asset investments, principally relating to the
reduction in the Group’s interest in Vodafone Greece from 55% to 51.9%, the disposal
of the Group’s interest in the Korean mobile operator, Shinsegi, offset by a net loss on
disposal of certain other operations.
Loss on ordinary activities before interest
During the year ended 31 March 2003, the Group reported a loss on ordinary
activities before interest of £5,456 million, compared with a loss for the year ended
31 March 2002 of £12,694 million. The principal items that resulted in the decreased
loss were improved total Group operating profit, before goodwill amortisation and
exceptional items, which increased from £7,044 million for the year ended 31 March
2002 to £9,181 million for the year ended 31 March 2003 and the decrease in
exceptional operating items and exceptional non-operating items, which decreased
from £5,408 million for the year ended 31 March 2002 to £576 million for the year
ended 31 March 2003 and £860 million for the year ended 31 March 2002 to £5
million for the year ended 31 March 2003, respectively. These were partially offset by
the increased charge in respect of goodwill amortisation from £13,470 million for the
year ended 31 March 2002 to £14,056 million for the year ended 31 March 2003.
Net interest payable
Total Group net interest payable, including the Group’s share of the net interest
expense of joint ventures and associated undertakings, decreased from £845 million
for the year ended 31 March 2002 to £752 million for the year ended 31 March
2003. Net interest costs in respect of the Group’s net borrowings decreased from
£503 million for the year to 31 March 2002 to £457 million for the year ended
31 March 2003, reflecting the reduction in average net debt levels. The Group’s share
of the net interest expense of joint ventures and associated undertakings decreased
from £342 million for the year ended 31 March 2002 to £295 million for the year
ended 31 March 2003 partly as a result of the consolidation of the Group’s former
associate undertakings, Japan Telecom and Vodafone Japan, from October 2001, and
of Vizzavi from 29 August 2002, and reduced levels of indebtedness in SFR.
Taxation
The effective rate of taxation for the year ended 31 March 2003 was (47.6)%
compared with (15.8)% for the year ended 31 March 2002. The effective rate
includes the impact of goodwill amortisation and exceptional items, which may not be
deductible for tax purposes. Aside from the negative impact of non-tax deductible
goodwill amortisation on the effective tax rate, the Group’s tax charge for the year
ended 31 March 2003 benefited from the reorganisation of the Group’s Italian
operations and a one-off benefit in Germany arising from the reorganisation of the
German Group of companies. In the year ended 31 March 2002, the Group’s tax
charge included a one-off tax credit received in Germany arising from the distribution
of earnings and also the Visco law incentive scheme in Italy. The Visco law was
subsequently replaced by a less favourable regime.
Basic loss per share
Basic loss per share, after goodwill amortisation and exceptional items, decreased
from a loss of 23.77p for the year ended 31 March 2002 to a loss per share of
14.41p for the year ended 31 March 2003. The loss per share of 14.41p included an
increase in the charge for the amortisation of goodwill from 19.82p per share for the
year ended 31 March 2002, to a charge of 20.62p per share for the year ended
31 March 2003, offset by a decrease in the charge for exceptional items from 9.10p
per share for the year ended 31 March 2002 to 0.60p per share for the year ended
31 March 2003.