REG - Vodafone Group Plc - Half-year Report <Origin Href="QuoteRef">VOD.L</Origin> - Part 3
14/11/2017 07:06
- Part 3: For the preceding part double click ID:nRSN3828Wb
first tranche of the mandatory convertible
bond ('MCB') in August 2017. In order to satisfy the first tranche of the MCB, 729.1 million shares were reissued from
treasury shares on 25 August 2017 at a conversion price of £1.9751. This reflected the conversion price at issue (£2.1730)
adjusted for the pound sterling equivalent of aggregate dividends paid in August 2016, February 2017 and August 2017.
Details of the shares purchased under the Programme, including those purchased under irrevocable instructions, are shown
below:
Number of shares purchased1 Average price paid per share inclusive of transaction costs Total number of shares purchased under publicly announced share buyback programme2 Maximum number of shares that may yet be purchased under the programme3
Date of share purchase 000 Pence 000 000
August 2017 9,562 221.77 9,562 719,515
September 2017 252,851 212.07 262,413 466,664
October 2017 320,849 215.15 583,262 145,815
November 2017 (to date) 119,303 219.75 702,565 26,512
Total4 702,565 214.91 702,565 26,512
Notes:
1. The nominal value of shares purchased is 2020/21 US cents each.
2. No shares were purchased outside the publicly announced share buyback programme.
3. In accordance with shareholder authority granted at the 2017 Annual general meeting.
4. The total number of shares purchased represents 2.6% of our issued share capital, excluding treasury shares, at 13
November 2017.
Post employment benefits
During the six months ended 30 September 2017, the net deficit arising from the Group's obligations in respect of its
defined benefit schemes increased to E0.8 billion compared to E0.6 billion at 31 March 2017 primarily due to a E0.1 billion
reduction in the value of plan assets during the period and E0.1 billion of actuarial losses arising from changes in
financial assumptions, principally due to a decrease in the discount rates in the UK and Eurozone.
On 19 October 2017, the triennial actuarial valuation for the Vodafone Section and Cable & Wireless Section of the Vodafone
UK Group Pension Scheme ('Vodafone UK plan') was completed by independent actuaries appointed by the plan Trustees, with an
effective date of 31 March 2016. These valuations showed a net deficit of £279 million (E317 million) on the schemes'
funding basis, comprising of a £339 million (E385 million) deficit for the Vodafone Section offset by a £60 million (E68
million) surplus for the Cable & Wireless Section. The Group and Trustees of the schemes have agreed a funding plan to
address the valuation deficit over the period to 31 March 2025. This funding plan will utilise existing Group assets and
will not require material near term cash outflows from the Group.
Dividends
Dividends will continue to be declared in euros and paid in euros, pounds sterling and US dollars, aligning the Group's
shareholder returns with the primary currency in which we generate free cash flow. The foreign exchange rate at which
future dividends declared in euros will be converted into pounds sterling and US dollars will be calculated based on the
average exchange rate over the five business days during the week prior to the payment of the dividend.
The directors have announced an interim dividend per share of 4.84 eurocents, representing a 2.1% increase over the prior
financial year's interim dividend. The ex-dividend date for the interim dividend is 23 November 2017 for ordinary
shareholders, the record date is 24 November 2017 and the dividend is payable on 2 February 2018. Dividend payments on
ordinary shares will be paid directly into a nominated bank or building society account.
RISK FACTORS
There are a number of key factors and uncertainties that could have a significant effect on the Group's financial
performance, including the following:
1. Cyber threat and information security
A successful cyber attack or internal event could result in us not being able to deliver services to our customers and/or failing to protect their data.
2. Market disruption
We face increased competition from a variety of new technology providers, new market entrants, evolving customer needs and competitor consolidation. We must be able to keep pace with new technology and to compete in changing markets.
3. Adverse political and regulatory measures
We operate under licence in most markets and encounter frequent changes in regulation, law and operating environments. Significant adverse changes, for example to tax laws, spectrum pricing or an unfavourable regulatory landscape for multi-national companies, could impact our ability to do business in our preferred manner.
4. Failure to converge and integrate acquisitions
We face competition in key markets from providers who have the ability to sell converged services on their existing infrastructure, with regulation that often fails to deliver a level playing field across fixed and content markets.
5. IT transformation failure
As we undertake major IT change programmes in a number of markets, there is a risk that these projects could disrupt services or do not provide the benefits that they should in a timely manner.
6. Unstable economic conditions / inadequate liquidity
As a multinational business, we operate in many countries and currencies so changes to global economic conditions could impact us. A global crisis could result in reduced spending power for customers or the strengthening or weakening of the major currencies in which we transact could impact our profitability and cash flow.
7. Technology failure
If our network or IT systems fail, voice, video or data transmissions may be significantly interrupted. We need to ensure that our critical assets are protected and our systems are resilient so that the impact on our customers is avoided or minimised.
8. Failure to deliver on digital transformation and customer experience
Failure to deliver a digital, differentiated and superior experience to our customers in store, online and by phone, could diminish our brand and reputation. To do this we need to be agile with strong digital capabilities.
9. Non-compliance with legal and regulatory requirements
Vodafone must comply with a multitude of local and international laws as well as more specific regulations. These include licence requirements, customer registration, data privacy, anti-money laundering, competition law, anti-bribery law and economic sanctions.
10. Failure to deliver major Enterprise contracts profitably
If we do not understand the needs of our Enterprise customers and contract on the correct basis to account for the complexity of requirements, we will not be able to deliver services profitably.
11. Electro-magnetic fields related health risks
Concerns have been expressed that electromagnetic signals emitted by mobile telephone handsets and base stations may pose health risks. Authorities, including the World Health Organization ('WHO') agree there is no evidence that convinces experts that exposure to radio frequency fields from mobile devices and base stations operated within guideline limits has any adverse health effects. A change to this view could result in a range of impacts from a change to national legislation, to a major reduction in
mobile phone usage or to major litigation.
Further information in relation to these risk factors and uncertainties, which have not changed significantly since 31
March 2017, can be found on pages 28 to 34 of the Group's annual report for the financial year ended 31 March 2017, which
is available at http://www.vodafone.com/investor.
Brexit implications
We continue to monitor the possible implication of Brexit on our operations. A cross-functional team is in place to
identify potential impacts and corresponding mitigations to address these.
As each of our operating companies is a standalone business incorporated and licenced in local jurisdictions, our ability
to provide services is unlikely to be significantly impacted by Brexit. There remains a possibility of operational impacts,
such as the creation of a data frontier or restrictions on the movement of people. Economic instability in any of our major
markets could also impact our financial performance.
At this time, the outcome of Brexit negotiations and post-Brexit arrangements remains unclear and as such, we continue to
monitor the situation.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
· the unaudited condensed consolidated financial statements have been prepared in accordance with IAS 34, "Interim Financial Reporting", as issued by the International Accounting Standards Board and as adopted by the European Union; and
· the interim management report includes a fair review of the information required by Disclosure Guidance and Transparency Rules sourcebook 4.2.7 and Disclosure Guidance and Transparency Rules sourcebook 4.2.8.
Neither the Company nor the directors accept any liability to any person in relation to the half-year financial report
except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has
demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A
and schedule 10A of the Financial Services and Markets Act 2000.
The names and functions of the Vodafone Group Plc board can be found at:
http://www.vodafone.com/board
By Order of the Board
Rosemary Martin
Group General Counsel and Company Secretary
14 November 2017
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated income statement
Six months ended 30 September
Restated1
2017 2016
Note Em Em
Revenue 2 23,075 24,051
Cost of sales (16,208) (17,530)
Gross profit 6,867 6,521
Selling and distribution expenses (1,987) (2,193)
Administrative expenses (2,770) (2,830)
Share of results of equity accounted associates and joint ventures (58) 73
Other income and expense (44) (56)
Operating profit 2 2,008 1,515
Non-operating income and expense (1) -
Investment income 333 552
Financing costs (181) (675)
Profit before taxation 2,159 1,392
Income tax expense 4 (579) (1,114)
Profit for the financial period from continuing operations 1,580 278
Loss for the financial period from discontinued operations 5 (345) (5,281)
Profit/(loss) for the financial period 1,235 (5,003)
Attributable to:
- Owners of the parent 1,131 (5,129)
- Non-controlling interests 104 126
Profit/(loss) for the financial period 1,235 (5,003)
Earnings/(loss) per share
From continuing operations:
- Basic 6 5.26c 0.54c
- Diluted 6 5.25c 0.54c
Total Group:
- Basic 6 4.03c (18.38c)
- Diluted 6 4.02c (18.32c)
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
Consolidated statement of comprehensive income
Six months ended 30 September
2017 2016
Em Em
Profit/(loss) for the financial period 1,235 (5,003)
Other comprehensive income:
Items that may be reclassified to the income statement in subsequent periods
Foreign exchange translation differences, net of tax (1,716) (1,326)
Fair value losses transferred to the income statement - 4
Other, net of tax (7) 229
Total items that may be reclassified to the income statement in subsequent periods (1,723) (1,093)
Items that will not be reclassified to the income statement in subsequent periods
Net actuarial losses on defined benefit pension schemes, net of tax (182) (869)
Total items that will not be reclassified to the income statement in subsequent periods (182) (869)
Other comprehensive expense (1,905) (1,962)
Total comprehensive expense for the financial period (670) (6,965)
Attributable to:
- Owners of the parent (649) (7,127)
- Non-controlling interests (21) 162
(670) (6,965)
Note:
1. The amounts presented for the six months ended 30 September 2016 have been restated to exclude the results of Vodafone
India which are now included in discontinued operations.
Consolidated statement of financial position
30 September 31 March
2017 2017
Note Em Em
Non-current assets
Goodwill 26,534 26,808
Other intangible assets 18,355 19,412
Property, plant and equipment 28,813 30,204
Investments in associates and joint ventures 9 2,611 3,138
Other investments 3,231 3,459
Deferred tax assets 24,202 24,300
Post employment benefits 3 57
Trade and other receivables 4,117 4,569
107,866 111,947
Current assets
Inventory 639 576
Taxation recoverable 92 150
Trade and other receivables 10,573 9,861
Other investments 6,868 6,120
Cash and cash equivalents 5,358 8,835
23,530 25,542
Assets held for sale 5 15,681 17,195
Total assets 147,077 154,684
Equity
Called up share capital 4,797 4,796
Additional paid-in capital 150,136 151,808
Treasury shares (8,475) (8,610)
Accumulated losses (106,692) (105,851)
Accumulated other comprehensive income 28,277 30,057
Total attributable to owners of the parent 68,043 72,200
Non-controlling interests 1,647 1,525
Put options over non-controlling interests (4) (6)
Total non-controlling interests 1,643 1,519
Total equity 69,686 73,719
Non-current liabilities
Long-term borrowings 32,221 34,523
Deferred tax liabilities 466 535
Post employment benefits 817 651
Provisions 1,062 1,130
Trade and other payables 2,054 1,737
36,620 38,576
Current liabilities
Short-term borrowings 11,961 12,051
Taxation liabilities 677 661
Provisions 957 1,049
Trade and other payables 16,179 16,834
29,774 30,595
Liabilities held for sale 5 10,997 11,794
Total equity and liabilities 147,077 154,684
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
Consolidated statement of changes in equity
Share capital Additional paid-in capital1 Treasury shares Accumulated comprehensive losses2 Equity attributable to the owners Non- controlling interests Total equity
Em Em Em Em Em Em Em
1 April 2016 4,796 151,694 (8,777) (64,388) 83,325 1,811 85,136
Issue or reissue of shares - 2 149 (132) 19 - 19
Share-based payments - 53 - - 53 - 53
Transactions with non-controlling interests in subsidiaries - - - (7) (7) 18 11
Comprehensive expense - - - (7,127) (7,127) 162 (6,965)
Dividends - - - (2,447) (2,447) (272) (2,719)
30 September 2016 4,796 151,749 (8,628) (74,101) 73,816 1,719 75,535
1 April 2017 4,796 151,808 (8,610) (75,794) 72,200 1,519 73,719
Issue or reissue of shares3 1 (1,741) 1,870 (116) 14 - 14
Share-based payments - 69 - - 69 - 69
Transactions with non-controlling interests in subsidiaries4 - - - 814 814 302 1,116
Comprehensive (expense)/income - - - (649) (649) (21) (670)
Dividends - - - (2,670) (2,670) (157) (2,827)
Repurchase of treasury shares5 - - (1,735) - (1,735) - (1,735)
30 September 2017 4,797 150,136 (8,475) (78,415) 68,043 1,643 69,686
Note:
1. Includes share premium, capital redemption reserve, merger reserve and share-based payment reserve. The merger reserve
was derived from acquisitions made prior to 31 March 2004 and subsequently allocated to additional paid-in capital on
adoption of IFRS.
2. Includes accumulated losses and accumulated other comprehensive income.
3. Includes the reissue of 729.1 million of shares (E1,742 million) in August 2017 in order to satisfy the first tranche of
the Mandatory Convertible Bond.
4. See note 14 "Other matters" for further details.
5. This represents the irrevocable and non-discretionary share buyback programme announced on 25 August 2017.
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
Consolidated statement of cash flows
Six months ended 30 September
Restated1
2017 2016
Note Em Em
Net cash flow from operating activities 10 5,821 5,820
Cash flows from investing activities
Purchase of interests in subsidiaries, net of cash acquired 8 (6) (18)
Purchase of interests in associates and joint ventures (5) (27)
Purchase of intangible assets (1,681) (1,080)
Purchase of property, plant and equipment (2,795) (3,976)
Purchase of investments (1,155) (1,344)
Disposal of property, plant and equipment 9 6
Disposal of investments 205 1,116
Dividends received from associates and joint ventures 284 3
Interest received 241 206
Cash flow from discontinued operations (366) (425)
Net cash flow from investing activities (5,269) (5,539)
Cash flows from financing activities
Issue of ordinary share capital and reissue of treasury shares 18 25
Net movement in short term borrowings 558 962
Proceeds from issue of long term borrowings 974 4,643
Repayment of borrowings (1,879) (4,715)
Purchase of treasury shares (549) -
Equity dividends paid 7 (2,637) (2,449)
Dividends paid to minority shareholders in subsidiaries (154) (274)
Other transactions with non-controlling shareholders in subsidiaries 1,091 4
Other movements in loans with associates and joint ventures (147) 32
Interest paid (539) (437)
Cash flow from discontinued operations (402) (2,059)
Tax on financing activities (110) -
Net cash flow from financing activities (3,776) (4,268)
Net cash flow (3,224) (3,987)
Cash and cash equivalents at beginning of the financial period2 12 9,302 12,911
Exchange loss on cash and cash equivalents (457) (325)
Cash and cash equivalents at end of the financial period2 12 5,621 8,599
Note:
1. The amounts presented for the six months ended 30 September 2016 have been restated to include the cash flows of
Vodafone India as discontinued operations, separately under investing and financing activities.
2. Includes cash and cash equivalents as presented in the statement of financial position of E5,358m (31 March 17: E8,835m)
and cash and cash equivalents presented in assets held for sale of E287m (31 March 2017: E467m), together with overdrafts
of E24m (31 March 2017: Enil).
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
Notes to the unaudited condensed consolidated financial statements
For the six months ended 30 September 2017
1 Basis of preparation
The unaudited condensed consolidated financial statements for the six months ended 30 September 2017:
· were prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" ('IAS 34') as issued by the International Accounting Standards Board and as adopted by the European Union;
· are presented on a condensed basis as permitted by IAS 34 and therefore do not include all disclosures that would otherwise be required in a full set of financial statements and should be read in conjunction with the Group's annual report for the year
ended 31 March 2017;
· apply the same accounting policies, presentation and methods of calculation as those followed in the preparation of the Group's consolidated financial statements for the year ended 31 March 2017, which were prepared in accordance with International
Financial Reporting Standards ('IFRS') as issued by the International Accounting Standards Board and were also prepared in accordance with IFRS adopted by the European Union ('EU'), the Companies Act 2006 and Article 4 of the EU IAS Regulations. Income
taxes are accrued using the tax rate that is expected to be applicable for the full financial year, adjusted for certain discrete items which occurred in the interim period in accordance with IAS 34;
· include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the periods presented;
· do not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006; and
· were approved by the Board of directors on 14 November 2017.
The information relating to the year ended 31 March 2017 is an extract from the Group's published annual report for that
year, which has been delivered to the Registrar of Companies, and on which the auditors' report was unqualified and did not
contain any emphasis of matter or statements under section 498(2) or 498(3) of the UK Companies Act 2006.
The results for the six months ended 30 September 2016 have been restated to exclude the results of Vodafone India which
has been classified as discontinued operations following the agreement to combine with Idea Cellular.
After reviewing the Group's budget for the remainder of the financial year, and longer term plans, the directors are
satisfied that, at the time of approving the unaudited condensed consolidated financial statements, it is appropriate to
continue to adopt a going concern basis of accounting.
The preparation of the unaudited condensed consolidated financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the end of the reporting period, and the reported amounts of revenue and expenses during the reporting period. Actual
results could vary from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future periods if the revision affects both current and future
periods.
On 1 April 2017, the Group adopted certain new accounting policies where necessary to comply with amendments to IFRS, none
of which had a material impact on the consolidated results, financial position or cash flows of the Group; further details
are provided in the Group's annual report for the year ended 31 March 2017.
New accounting pronouncements to be adopted on or after 1 April 2018
IFRS 9 "Financial Instruments" and IFRS 15 "Revenue from Contracts with Customers" will be adopted by the Group on 1 April
2018. IFRS 16 "Leases" will be adopted by the Group on 1 April 2019. Information on the Group's implementation process in
respect of these new accounting pronouncements was provided in the Group's annual report for the year ended 31 March 2017;
all of the standards will be applied with the cumulative effect of applying the standard recorded as an adjustment to
retained earnings on the initial application date. An update on the implementation of these accounting standards, which
should be used in conjunction with that disclosed in the Group's annual report for the year ended 31 March 2017, is
provided below; further information will be provided in the Group's annual financial statements for the year ending 31
March 2018.
IFRS 9 "Financial Instruments"
IFRS 9 will impact the classification and measurement of the Group's financial instruments and will require certain
additional disclosures. The primary changes relate to the assessment of hedging arrangements and the measurement of
financial assets, including the potentially earlier recognition of provisions and costs relating to potential future credit
losses. The Group is continuing to analyse the impact of these changes, which are not considered likely to have a
significant impact on the Group's current accounting treatments or hedging activities.
IFRS 15 "Revenue from Contracts with Customers"
IFRS 15 will have a material impact on the consolidated income statement and consolidated statement of financial position
when adopted by the Group retrospectively with the cumulative impact of initially applying the standard recognised on 1
April 2018.
The Group's approach to the assessment of the impact and ongoing implementation of IFRS 15, which is ongoing, has not
changed during the period and the Group expects to be in a position to estimate and communicate the impact of IFRS 15
before the publication in July 2018 of the Group's Trading Update for the quarter ending 30 June 2018. In addition, all of
the Group's financial reports for the year ending 31 March 2019 are expected to include reporting on both an existing IAS
18 and IFRS 15 basis, to ensure an effective transition for users to the new standard whilst meeting all necessary
compliance requirements.
IFRS 16 "Leases"
IFRS 16 will have a material impact on the consolidated income statement, consolidated statement of financial position and
consolidated statement of cash flows when adopted by the Group retrospectively with the cumulative effect on initially
applying the standard recognised on 1 April 2019.
The Group's approach to the assessment of the impact and ongoing implementation of IFRS 16, which is ongoing, has not
changed during the period and the Group expects to be in a position to estimate and communicate the impact of IFRS 16 in
the first quarter of the year commencing 1 April 2019, including the provision of proforma financial information for the
year ending 31 March 2019, to ensure an effective transition for users to the new standard whilst meeting all necessary
compliance requirements.
2 Segmental analysis
The Group has a single group of related services and products being the supply of communications services and products.
Revenue is attributed to a country or region based on the location of the Group company reporting the revenue. The
segmental revenue and profit of India are included in discontinued operations for all periods reported. See note 5
"Discontinued operations and assets held for sale" for details.
Segment revenue Intra-region revenue Regional revenue Inter-region revenue Group revenue Adjusted EBITDA
Em Em Em Em Em Em
Six months ended 30 September 2017
Germany 5,277 (13) 5,264 (10) 5,254 1,929
Italy 3,107 (17) 3,090 (1) 3,089 1,200
UK 3,515 (10) 3,505 (1) 3,504 930
Spain 2,512 (21) 2,491 (1) 2,490 751
Other Europe 2,452 (27) 2,425 (5) 2,420 773
Europe 16,863 (88) 16,775 (18) 16,757 5,583
Vodacom 2,799 - 2,799 - 2,799 1,063
Other AMAP 2,900 - 2,900 (14) 2,886 790
AMAP 5,699 - 5,699 (14) 5,685 1,853
Other1 675 - 675 (42) 633 (51)
Group 23,237 (88) 23,149 (74) 23,075 7,385
Six months ended 30 September 2016 restated
Germany 5,265 (18) 5,247 (10) 5,237 1,788
Italy 3,006 (17) 2,989 (1) 2,988 1,104
UK 3,575 (11) 3,564 (2) 3,562 674
Spain 2,496 (23) 2,473 - 2,473 692
Other Europe 3,304 (34) 3,270 (2) 3,268 1,040
Europe 17,646 (103) 17,543 (15) 17,528 5,298
Vodacom 2,464 - 2,464 - 2,464 952
Other AMAP 3,422 - 3,422 (8) 3,414 940
AMAP 5,886 - 5,886 (8) 5,878 1,892
Other1
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