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88 Vodafone Group Plc Annual Report 2006
Notes to the Consolidated Financial Statements
continued
8. (Loss)/earnings per share 2006 2005
Millions Millions
Weighted average number of shares for basic (loss)/earnings per share 62,607 66,196
Effect of dilutive potential shares: restricted shares and share options –231
Weighted average number of shares for diluted (loss)/earnings per share 62,607 66,427
£m £m
(Loss)/earnings for basic and diluted earnings per share
Continuing operations (17,318) 5,375
Discontinued operations (4,598) 1,035
Total (21,916) 6,410
Pence per share Pence per share
(Loss)/earnings per share from continuing operations:
Basic (loss)/earnings per share (27.66) 8.12
Diluted (loss)/earnings per share(2) (27.66) 8.09
(Loss)/earnings per share from continuing and discontinued operations(1):
Basic (loss)/earnings per share (35.01) 9.68
Diluted (loss)/earnings per share(2) (35.01) 9.65
£m £m
Basic and diluted (loss)/earnings per share for continuing operations is stated inclusive of the following items:
Impairment losses (note 10) (23,515) (475)
Other income and expense 15 –
Share of associated undertakings non-operating income (note 14) 17 –
Non-operating income and expense (2) (7)
Changes in fair value of equity put rights and similar arrangements (note 5)(3) (161) (67)
Tax on the above items –(3)
Pence per share Pence per share
Impairment losses (37.56) (0.72)
Other income and expense 0.02 –
Share of associated undertakings non-operating income 0.03 –
Non-operating income and expense –(0.01)
Changes in fair value of equity put rights and similar arrangements(3) (0.26) (0.10)
Tax on the above items ––
Notes:
(1) See note 29 for further information on discontinued operations including the per share effect of discontinued operations.
(2) In the year ended 31 March 2006, 183 million shares have been excluded from the calculation of diluted loss per share as they are anti dilutive.
(3) Comprises the fair value movement in relation to the potential put rights held by Telecom Egypt over its 25.5% interest in Vodafone Egypt and the fair value of a financial liability in relation to the minority partners of Arcor, the Group’s non-mobile
operation in Germany.
Following the sale of 16.9% of Vodafone Egypt to Telecom Egypt, the Group signed a shareholder agreement with Telecom Egypt setting out the basis under which the Group and Telecom Egypt would each contribute a 25.5% interest in Vodafone
Egypt to a newly formed company to be 50% owned by each party. Within this shareholder agreement, Telecom Egypt was granted a put option over its entire interest in Vodafone Egypt giving Telecom Egypt the right to put its shares back to the Group
at deemed fair value. In the 2006 financial year, the shareholder agreement between Telecom Egypt and Vodafone expired and the associated rights and obligations contained in the shareholder agreement terminated, including the aforementioned
put option. However, the original shareholders agreement contained an obligation on both parties to use reasonable efforts to renegotiate a revised shareholder agreement for their direct shareholding in Vodafone Egypt on substantially the same
terms as the original agreement, which may or may not lead to a new agreement containing a put option under the terms described above. As of 31 March 2006, the parties have not agreed to abandon such efforts and as such the financial liability
relating to the initial shareholder agreement has been retained in the Group’s balance sheet as at 31 March 2006. Fair value movements are determined by the reference to the quoted share price of Vodafone Egypt. For the year ended 31 March 2006, a
charge of £105 million was recognised.
The capital structure of Arcor provides all partners, including Vodafone, the right to withdraw capital from 31 December 2026 onwards and this right in relation to the minority partner has been recognised as a financial liability. Fair value movements are
determined by reference to a calculation of enterprise value of the partnership. For the year ended 31 March 2006, a charge of £56 million was recognised.
The valuation of these financial liabilities is inherently unpredictable and changes in the fair value could have a material impact on the future results and financial position of Vodafone.