Vodafone 2009 Annual Report Download - page 39

Performance
Vodafone Group Plc Annual Report 2009 37
2010 nancial year
Adjusted
operating Free
profit cash flow(1)
£bn £bn
2009 performance 11.8 5.7(1)
2010 outlook(2)(3) 11.0 to 11.8 6.0 to 6.5
Notes:
(1) Excludes spectrum and licence payments but includes payments in respect of long standing tax
issues. The amount for the 2009 financial year is stated after £0.3 billion of tax payments,
including associated interest, in respect of a number of long standing tax issues.
(2) Includes assumptions of average foreign exchange rates for the 2010 financial year of
approximately £1:€1.12 (2009: 1.20) and £1:US$1.50 (2009: 1.72). A substantial majority of the
Group’s adjusted operating profit and free cash flow is denominated in currencies other than
sterling, the Group’s reporting currency. A 1% change in the euro to sterling exchange rate would
impact adjusted operating profit by approximately £70 million.
(3) The outlook does not include the impact of reorganisation costs arising from the Alltel
acquisition by Verizon Wireless but includes the impact of the Group’s acquisition of a further
15.0% stake in Vodacom and the consolidation of that entity from 18 May 2009.
In Europe and Central Europe, recent significant declines in GDP and continued
competitive intensity will make operating conditions challenging in the 2010
financial year. In these markets, the Group expects that voice and messaging revenue
trends will continue as a result of ongoing pricing pressures and slowing usage
growth. However, further growth in data revenue is expected. In Turkey, the Group
expects that the 2010 financial year will be challenging. Revenue growth in other
emerging markets, in particular India and Africa, is expected to continue as the Group
drives penetration in these markets. The Group expects another year of good
performance at Verizon Wireless.
Adjusted operating profit is expected to be in the range £11.0 billion to £11.8 billion,
with benefits from the improved foreign exchange environment being offset by
weaker trends in trading. The wider outlook range for adjusted operating profit is
consistent with the uncertain economic environment. Performance will be
determined by actual economic trends, the Group’s speed in closing performance
gaps which exist in certain markets and the extent to which the Group decides to
reinvest part of its cost savings into total communications growth opportunities.
Underlying EBITDA margins in the 2010 financial year, before the impact of
acquisitions and disposals, foreign exchange and business mix, are expected to
decline by a similar amount to the 2009 financial year, reflecting the benefit of the
acceleration of the Group’s cost savings programme in a weaker revenue
environment. Overall Group EBITDA margin is expected to decline at a slightly
slower rate. Total depreciation and amortisation charges are expected to be around
£8.5 billion, higher than in the 2009 financial year as the result of the acquisition of a
further stake in Vodacom and the consolidation of that entity from 18 May 2009,
capital expenditure in India and the impact of foreign exchange rates.
Free cash flow before licence and spectrum payments is expected to be in the range
£6.0 billion to £6.5 billion, ahead of the Group’s medium term target to deliver
between £5.0 and £6.0 billion annual free cash flow. Capitalised fixed asset additions
are expected to be at a similar level to the 2009 financial year after adjusting for the
impact of foreign exchange. European capital intensity will be around 10% of revenue
and the Group expects to continue to invest in India.
The Group continues to make significant cash payments for tax and associated
interest in respect of long standing tax issues. The Group does not expect resolution
of the application of UK Controlled Foreign Company legislation to the Group in the
near term.
The adjusted tax rate percentage is expected to be in the mid 20s for the 2010
financial year, driven by reducing rates of corporate taxation in certain countries where
the Group operates, with the Group targeting a similar level in the medium term.
2009 nancial year
Adjusted Capitalised
operating fixed asset Free
Revenue profit additions cash flow(1)
£bn £bn £bn £bn
Outlook – May 2008(2) 39.8 to 40.7 11.0 to 11.5 5.3 to 5.8 5.1 to 5.6
Operational (1.0) (0.4) (0.2) 0.1
Acquisitions 0.2 – 0.1 (0.1)
Foreign exchange 0.3 0.4 – 0.1
Outlook – November 2008(3) 38.8 to 39.7 11.0 to 11.5 5.2 to 5.7 5.2 to 5.7
Foreign exchange 1.8 0.5 0.3 0.3
Outlook – February 2009(4) 40.6 to 41.5 11.5 to 12.0 5.5 to 6.0 5.5 to 6.0
2009 performance 41.0 11.8 5.9 5.7
Notes:
(1) Before licence and spectrum payments.
(2) The Group’s outlook from May 2008 reflected expectations for average foreign exchange rates
for the 2009 financial year of approximately £1:€1.30 and £1:US$1.96.
(3) The Group’s outlook, as updated in November 2008, reflected the impact of the Group’s
acquisition of stakes in Ghana, Qatar and Poland and by SFR of Neuf Cegetel and updated
expectations for average foreign exchange rates for the 2009 financial year of approximately
£1:€1.26 and £1:US$1.80.
(4) The Group’s outlook, as updated in February 2009, reflected updated expectations for average
foreign exchange rates for the 2009 financial year of approximately £1:€1.20 and £1:US$1.72.
Outlook