Vodafone 2014 Annual Report Download - page 105

Commentary on the consolidated statement of cash ows
The consolidated statement of cash ows shows the
cash ows from operating, investing and nancing
activities for the year. Closing net debt has reduced
to £13.7 billion from £25.4 billion. The reduction
has primarily been achieved as the result of cash
retained from the sale of our interest in Verizon
Wireless after the return of value to shareholders.
Our liquidity and working capital may be affected by a material decrease
in cash ow due to a number of factors as outlined in “Principal
risk factors and uncertainties” on pages 196 to 200. We do not use
non-consolidated special purpose entities as a source of liquidity or for
other nancing purposes.
Purchase of interests in subsidiaries, net of cash acquired
During the year we acquired Kabel Deutschland for net cash
consideration of £4.3 billion. Further details on the assets and liabilities
acquired are outlined in note 28 ”Acquisitions and disposals”.
Purchase of intangible assets
Cash payments for the purchase of intangible assets comprise
£1.4 billion for purchases of computer software and £0.9 billion for
acquired spectrum.
Purchase of investments
The Group purchases short-term investments as part of its treasury
strategy. See note 13 “Other investments”.
Disposal of interests in associates and joint ventures
During the year, we disposed of our US Group whose principal asset was
its 45% interest in Verizon Wireless for consideration which included net
cash proceeds of £34.9 billion. There were no signicant disposals in the
prior year.
Disposal of investments
In the prior year we received the remaining consideration of £1.5 billion
from the disposal of our interests in SoftBank Mobile Corp.
Dividends received from joint ventures and associates
Dividends received from associates reduced by 11.6% to £4.9 billion.
Dividends received primarily comprise tax dividends and income
dividends from Verizon Wireless of £4.8 billion in both the current and
prior nancial years.
Movements in borrowings
Funds retained from the sale of our interest in Verizon Wireless, after the
return of value to shareholders, has enabled us to reduce the overall
amount of the Group’s borrowings.
Purchase of treasury shares
Cash payments of £1.0 billion relate to the completion of a £1.5 billion
share buyback programme that commenced following the receipt
of a US$3.8 billion (£2.4 billion) income dividend from VZW in December
2012. Further details are provided on page 101.
B and C share payments
B share payments formed part of the return of value to shareholders
following the disposal of the Group’s interest in Verizon Wireless.
Further details are provided on page 101.
Equity dividends paid
Equity dividends paid during the year increased by 5.6%. A special
dividend was paid during the year to 31 March 2012 following the
receipt of an income dividend from VZW. Further details on the
Group’s dividends are provided on page 101.
Other transactions with non-controlling shareholders
in subsidiaries
During the year we acquired the non-controlling interests in Vodafone
India Limited and commenced the legal process of acquiring the
remaining shares in Kabel Deutschland.
Cash ow reconciliation
A reconciliation of cash generated by operations to free cash ow
and net debt, two non-GAAP measures used by management, is
shown below. Cash generated by operations increased by 5.7% to
£12.1 billion, primarily driven by working capital improvements, partially
offset by a reduction in EBITDA. Free cash ow decreased by 24% to
£4.2 billion, the largest contributing factor being a £0.9 billion increase
in tax payments principally arising from the early settlement of certain
taxes payable in the United States due to the disposal of our US Group.
2014
Restated
2013
£m £m %
EBITDA 11,084 11,466 (3.3)
Working capital 1,381 177
Other (318) (149)
Cash generated by operations 12,147 11,494 5.7
Cash capital expenditure (5,857) (5,217)
Capital expenditure (6,313) (5,292)
Working capital movement in respect
of capital expenditure 456 75
Disposal of property, plant and
equipment 79 105
Operating free cash ow 6,369 6,382 (0.2)
Taxation (3,449) (2,570)
Dividends received from associates
and investments 2,842 3,132
Dividends paid to non-controlling
shareholders in subsidiaries (264) (379)
Interest received and paid (1,315) (1,064)
Free cash ow 4,183 5,501 (24.0)
Tax settlement (100) (100)
Licence and spectrum payments (862) (2,499)
Acquisitions and disposals 27,372 (1,723)
Equity dividends paid (5,076) (4,806)
Special return (14,291) –
Purchase of treasury shares (1,033) (1,568)
Foreign exchange 2,423 (716)
Income dividend from VZW 2,065 2,409
Other (3,027) 1,149
Net debt decrease/(increase) 11,654 (2,353)
Opening net debt (25,354) (23,001)
Closing net debt (13,700) (25,354)
Net debt
Net debt reduced by £11.7 billion to £13.7 billion, primarily as a result
of cash we have retained from the sale of our interest Verizon Wireless
after the return of value to shareholders, partially offset by cash
payments for the acquisition of Kabel Deutschland and also as a result
of the other cash movements discussed above.
The nancial commentary on this page is unaudited.
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