Vodafone 2012 Annual Report Download - page 164

162
Vodafone Group Plc
Annual Report 2012
In the discussion of our reported nancial position, operating results and cash ows, information is presented to provide readers with additional
nancial information that is regularly reviewed by management. However, this additional information presented is not uniformly dened by all
companies including those in the Group’s industry. Accordingly, it may not be comparable with similarly titled measures and disclosures by other
companies. Additionally, certain information presented is derived from amounts calculated in accordance with IFRS but is not itself an expressly
permitted GAAP measure. Such non-GAAP measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure.
EBITDA
EBITDA is operating prot excluding share in results of associates, depreciation and amortisation, gains/losses on the disposal of xed assets,
impairment losses and other operating income and expense. We use EBITDA, in conjunction with other GAAP and non-GAAP nancial measures
such as adjusted operating prot, operating prot and net prot, to assess our operating performance. We believe that EBITDA is an operating
performance measure, not a liquidity measure, as it includes non-cash changes in working capital and is reviewed by the Chief Executive to assess
internal performance in conjunction with EBITDA margin, which is an alternative sales margin gure. We believe it is both useful and necessary to
report EBITDA as a performance measure as it enhances the comparability of prot across segments.
Because EBITDA does not take into account certain items that affect operations and performance, EBITDA has inherent limitations as a performance
measure. To compensate for these limitations, we analyse EBITDA in conjunction with other GAAP and non-GAAP operating performance measures.
EBITDA should not be considered in isolation or as a substitute for a GAAP measure of operating performance.
A reconciliation of EBITDA to the closest equivalent GAAP measure, operating prot, is provided in note 3 to the consolidated nancial statements on
page 107.
Group adjusted operating prot and adjusted earnings per share
Group adjusted operating prot excludes non-operating income of associates, impairment losses and other income and expense. Adjusted earnings
per share also excludes amounts in relation to equity put rights and similar arrangements and certain foreign exchange rate differences, together
with related tax effects. We believe that it is both useful and necessary to report these measures for the following reasons:
a these measures are used for internal performance reporting;
a these measures are used in setting director and management remuneration; and
a they are useful in connection with discussion with the investment analyst community and debt rating agencies.
Reconciliations of adjusted operating prot and adjusted earnings per share to the respective closest equivalent GAAP measures, operating prot
and basic earnings per share, are provided in “Operating results” beginning on page 40.
Cash ow measures
In presenting and discussing our reported results, free cash ow and operating free cash ow are calculated and presented even though these
measures are not recognised within IFRS. We believe that it is both useful and necessary to communicate free cash ow to investors and other
interested parties, for the following reasons:
a free cash ow allows us and external parties to evaluate our liquidity and the cash generated by our operations. Free cash ow does not include
payments for licences and spectrum included within intangible assets, items determined independently of the ongoing business, such as the level of
dividends, and items which are deemed discretionary, such as cash ows relating to acquisitions and disposals or nancing activities. Inaddition, it does
not necessarily reect the amounts which we have an obligation to incur. However, it does reect the cash available for such discretionary activities, to
strengthen the consolidated statement of nancial position or to provide returns to shareholders in the form of dividends or share purchases;
a free cash ow facilitates comparability of results with other companies although our measure of free cash ow may not be directly comparable
tosimilarly titled measures used by other companies;
a these measures are used by management for planning, reporting and incentive purposes; and
a these measures are useful in connection with discussion with the investment analyst community and debt rating agencies.
A reconciliation of cash generated by operations, the closest equivalent GAAP measure, to operating free cash ow and free cash ow, is provided
in“Financial position and resources” on page 55.
Other
Certain of the statements within the section titled “Chief Executive’s review” on pages 14 to 17 contain forward-looking non-GAAP nancial
information for which at this time there is no comparable GAAP measure and which at this time cannot be quantitatively reconciled to comparable
GAAP nancial information.
Certain of the statements within the section titled “Guidance” on page 50 contain forward-looking non-GAAP nancial information which at this
time cannot be quantitatively reconciled to comparable GAAP nancial information.
Organic growth
All amounts in this document marked with an “*” represent organic growth which presents performance on a comparable basis, both in terms
ofmerger and acquisition activity and foreign exchange rates. We believe that “organic growth”, which is not intended to be a substitute for or
superior to reported growth, provides useful and necessary information to investors and other interested parties for the following reasons:
a it provides additional information on underlying growth of the business without the effect of certain factors unrelated to the operating
performance of the business;
a it is used for internal performance analysis; and
a it facilitates comparability of underlying growth with other companies, although the term “organic” is not a dened term under IFRS and may not,
therefore, be comparable with similarly titled measures reported by other companies.
Non-GAAP information