Vodafone Group Plc: Preliminary Announcement of Results for the Year Ended 31 March 1999.
BERKSHIRE Berkshire (bärk`shĭr, –shər, bûrk`–) or Berks (bärks, bûrks), former county, S central England. , England--(BUSINESS WIRE)--June 8, 1999--
FINANCIAL HIGHLIGHTS
Year ended Year ended Percentage
31 March 1999 31 March 1998 increase
%
Turnover (pound)3,360.0m (pound)2,470.8m 36
Total Group operating profit :
Group and share of
associates (pound)962.6m (pound)686.4m 40
Profit before taxation (pound)935.2m (pound)650.2m 44
Basic earnings per share before
investment disposals and goodwill
amortisation 18.82p 12.82p 47
Basic earnings per share 20.61p 13.63p 51
Dividends per share 6.36p 5.53p 15
Proportionate turnover (pound)3,837.3m (pound)2,874.2m 34
Proportionate EBITDA(a)(pound)1,218.0m (pound)919.0m 33
Proportionate customers at year
end 10,445,000 5,844,000 79
(a) Proportionate EBITDA (earnings before interest, tax,
depreciation and amortisation) is defined as operating profit before
exceptional reorganisation costs plus depreciation and amortisation of
subsidiary undertakings, associated undertakings and investments,
proportionate to equity stakes.
Lord MacLaurin of Knebworth, Chairman of Vodafone Group Plc,
commented:
"The results for the year show that Vodafone remains at the head
of an industry which continues to develop at tremendous pace in all
its markets. On occasions in the year the UK growth was so rapid that
it caused some problems to the Company's customer-facing systems but
the professionalism and dedication of the whole Vodafone team has
enabled the Group to present record results on all measures.
Shareholders, business partners, suppliers and customers can look
forward with great optimism to the future of our Group, enlarged by
its exciting combination with AirTouch. The Board remains committed to
the delivery of excellence in both customer service and shareholder
value and I am confident that it will continue to do so."
Chris Gent, Chief Executive of Vodafone Group Plc, stated:
"The financial year to March 1999 has beaten all previous
records. The very strong progress made in the UK and in the Group's
international businesses results from a determination to increase the
rate of growth as the Company fulfils its vision of mobile
telecommunications becoming the preferred means of personal
communication.
The Group increased its world-wide customer base by over 4.6
million new customers, proportionate to equity stakes, to end the year
with over 10.4 million customers, growth of 79%. We believe that
mobile penetration rates in most of our major markets will exceed 50%
by the end of 2002.
When completed, our transaction with AirTouch will more than
double our potential for growth in both conventional cellular
telephony, in which we will be a clear world leader, and in the new
services which will mark the arrival of the wireless information age.
As mobile increasingly substitutes for fixed and third generation
technology creates a world standard, the Company will expand its
geographic reach, its services and its customer base, becoming one of
the world's largest companies."
Group highlights:
-- Merger with AirTouch Communications, Inc. announced and approved
by both companies' shareholders. Merger expected to close at the
end of June or in July.
-- Turnover up 36% on prior year to (pound)3,360.0m.
-- World-wide customer base at a record level of 10,445,000
customers, proportionate to equity stakes, with over 4,600,000
added in the year.
-- Total Group operating profit up 40% to(pound)962.6m, and
proportionate EBITDA up 33% on last year to(pound)1,218.0m.
-- Earnings per share growth before investment disposals and
goodwill amortisation of 47%.
-- Dividends increased by 15% to 6.36p per share.
-- 4 for 1 capitalisation (bonus) issue to be proposed at AGM,
subject to completion of AirTouch merger.
UK highlights:
-- Customers increased by 2,145,000 in year. Total customer base of
5,575,000 at year end.
-- Dramatic growth of the Pay As You Talk service, with over
1,800,000 customers, up from 198,000 at the previous year end.
-- Total operating profit of (pound)643.2m, up 14% on prior year
after exceptional operating costs.
-- Market leader with total market share of 37.4%. Total customers
over 1,000,000 more than nearest competitor.
-- Contract ARPU strong with increased usage offsetting the impact
of better value customer tariffs.
-- More roaming agreements, with better coverage, than any other UK
network.
International highlights:
-- Proportionate customers more than doubled in year from 2,414,000
to 4,870,000, with international customer base representing over
46% of Group's total proportionate customer base.
-- Total operating profit contribution from international operations
increased to (pound)319.4m from (pound)122.4m in the prior year.
-- Acquisition of New Zealand's only GSM network completed in
October 1998.
-- Successful launch of Misrfone service in Egypt in November 1998.
-- Successful Initial Public Offering of Panafon on Athens Stock
Exchange in December 1998.
UNITED KINGDOM
Turnover in the UK increased by 17.8% to (pound)2,087.5m from
(pound)1,771.7m, primarily as a result of very strong growth in
customer numbers and increased usage, offset by the impact of tariff
reductions. Total UK operating profit grew by 14.0% to (pound)643.2m
from (pound)564.0m after charging (pound)19.7m of exceptional
operating costs in the previous financial year. Before exceptional
operating costs this growth was (pound)59.5m, an increase of 10.2%.
The growth in total operating profit was less than the growth in
turnover as increased usage was offset by tariff reductions and
connection costs associated with exceptional customer growth.
Network business
The year was marked by the strongest customer growth so far as
Vodafone connected over 2.1 million net new customers, almost four
times the number of net connections in the previous financial year.
The company ended the financial year with 5,575,000 customers, further
increasing its market leadership, having over one million more
customers than its nearest competitor. The customer base has almost
doubled in two years. Overall market share at the year end was 37.4%
and the penetration of mobile phones in the UK had increased to 25.5%
from 15.5% at the end of the previous year.
The pre-paid Pay As You Talk (PAYT) service contributed
significantly to this spectacular growth, with more than 1.8 million
customers using this service by the year end, an eightfold increase
from the 198,000 customers at the end of March 1998. The success of
this service has continued after an outstanding Christmas period
driven by attractive tariffs, effective advertising and enhanced
distribution channels.
The unexpectedly rapid growth of PAYT caused some problems for
customer service operations. Significant steps have been taken to
stabilise this situation, including opening a new 500 seat call centre
in Birmingham in March 1999. In the six month period from 1 October
1998 to 31 March 1999, Vodafone invested over (pound)20m in customer
care systems and staff, to ensure the overall level of customer
service improves with the growth.
Vodafone has focused on continuing to improve the value of its
services. Major price cuts were made during the year, including
halving the price of off peak calls in June 1998. Further reductions
in call charges and increases in the number of minutes included in
bundles were made in May 1999.
Overall network churn has reduced by 3.0% to 26.0%. This reflects
a 1.2% reduction in contract churn to 27.8% and the impact of the
recent rapid PAYT growth, for which there is an insufficient period to
calculate reliable churn statistics bearing in mind the company's
policy of disconnecting PAYT customers six months after their prepay
credit is expended. PAYT churn averaged 20% for the year but it is
expected to rise.
Average revenue per contract customer has remained relatively
stable at (pound)423 ((pound)553 before trade discounts) for the
twelve months to 31 March 1999, down (pound)4 from the previous year,
with planned price reductions stimulating increased usage. Average
revenue per PAYT customer is calculated to be (pound)159 per annum
((pound)178 before trade discounts), a 10.4% increase on the figure at
30 September 1998. Overall average revenue per customer (both contract
and PAYT) has declined from (pound)419 last year to (pound)378 this
year due to the effect of the increase in the PAYT base.
Over 120 million customers have access to the UK network through
roaming agreements with 174 networks in 91 countries, an increase of
47 networks in 10 countries in the year. Vodafone continues to have
more international roaming agreements with better coverage than any
other UK operator. Roaming revenues, both from Vodafone customers
using their phones overseas and visitors using the UK network,
represented 23.4% of the company's contract digital outgoing airtime
and access revenues.
The average cost per gross contract connection, excluding
migrations, was (pound)88, a reduction from (pound)99 for the year
ended 31 March 1998 as bonus levels have been reduced in line with
falling handset prices. The average cost per gross PAYT activation was
(pound)43.
Vodafone continued to support the OFTEL "Comparative Performance
Initiative" which covers the network's reporting quality of service to
its customers and is still the only network whose methodology for
measuring Quality of Service has been reviewed and endorsed by the
British Approvals Board for Telecommunications. Vodafone's tests
confirmed that it provided a greater than 95% success rate in declared
coverage areas.
Capital expenditure in the year ended 31 March 1999 increased by
28% to(pound)343m as over 1,300 base stations were added to the
network, which now has over 5,100 base stations in operation.
In December 1998 the MMC reported on the references by the
Director General of OFTEL on the charges made by BT, Cellnet and
Vodafone for calls to mobile phones. Under the MMC proposals, BT's
retention and Vodafone's and Cellnet's termination charges were
required to be reduced, although not to the level suggested by OFTEL.
On 1 April 1999, BT announced substantial cuts in the cost of calling
mobile phones and from 30 April 1999 the cost of calling Vodafone and
Cellnet customers from a BT line has been lower than the cost of
calling the other two competitors.
Vodafone is planning to bid for a licence to operate a third
generation mobile phone service, the Universal Mobile
Telecommunications Service (UMTS). Following the recent Government
announcement, the auction is expected to take place in early 2000.
UMTS and internet technologies provide tremendous opportunities for
the expansion of mobile services, including all aspects of e-commerce,
and Vodafone intends to pioneer the introduction of the wireless
information age.
Distribution business
The UK distribution businesses generated net growth at over five
times the level of the previous year. Vodafone contract churn was down
from 30.1% to 26.7%, but rose over the last three months of the year
as some customers found the prepaid service a more attractive
alternative.
In Vodafone Retail, average connections per store grew steadily
throughout the year to more than double the rate achieved in the
previous year. Improvements to customer service and productivity
enabled Retail's shops to increase sales, despite considerable growth
in the distribution of prepaid products by UK retailers. Retail has a
growing role in meeting the service needs of customers, in particular
the sale of PAYT top-up vouchers. Over 80 Vodafone Retail shops now
offer an electronic top-up facility and this will be introduced in all
Retail's shops in the summer. In addition, the site portfolio was
developed further with twelve new shops opened during the year, five
relocated to much improved locations, and seven stores closed. Many of
the new sites are in `flagship' locations such as Oxford Street,
Bluewater Park and the Trafford Centre.
Vodafone Connect continued to enhance distribution for PAYT
phones and top-up vouchers in the general multiple retail sector, with
Tesco, Comet, Argos, Woolworths, Toys R Us, Somerfield and Boots
accounting for a significant proportion of PAYT sales. Distribution
was also won in Dixons and Currys, managed directly by Vodafone
Limited. This distribution has been key in enabling Vodafone to build
and sustain leadership in the prepaid market. The dealer market was
more mixed in performance, with a strong first half balanced by weaker
growth in the second half as the growth of prepaid services and new
retailers affected the traditional distribution channels.
Vodafone Corporate maintained its leadership in the corporate
market although its competitors made increasingly aggressive bids for
key accounts. The relationship with Cable and Wireless Communications
to offer joint fixed and mobile tenders developed during the year and
began to deliver benefits, with a number of accounts successfully won
or defended through this partnership. In April 1999 Vodafone Corporate
acquired the Cable and Wireless UK cellular service provider business.
In May 1999, the transfer of the customer bases of the UK
distribution businesses to a new single billing system was completed,
which will improve both operational efficiency and customer service.
Value Added and Data Services business
Vodafone Value Added and Data Services is a leader in the field
of wireless data and providing solutions to customer requirements
using both current and newly emerging technologies. The company also
provides value added voice services, including the highly successful
Recall voice messaging service that now has over 4,000,000 users.
The text messaging service (SMS) has shown excellent growth, with
approximately 15,000,000 messages being billed in March 1999 - a
sixfold increase on the same period last year. Unlike certain other UK
networks this service is available to all customers, including the
PAYT service which, principally through the youth market, has
accounted for much of the growth. Some 800,000 customers regularly use
this service and it is expected to be a major contributor to profit
growth in the future.
Vodafone Paging maintained its market share and profitability in
an increasingly competitive market. During the year a new network was
installed using the state of the art Flex technology, providing
increased capacity and enhanced services.
INTERNATIONAL
Performance of the Group's international operations grew
strongly, both in terms of turnover (up 82% to (pound)1,272.5m) and
total Group operating profit (up 161% to (pound)319.4m). These results
include the impact of Vodafone New Zealand, which was acquired at the
end of October 1998, and Misrfone in Egypt, which commenced service in
November. Underlying growth in turnover from existing subsidiaries
grew by 52% over the previous financial year. The contribution to
total Group operating profit from the underlying businesses (excluding
New Zealand and Egypt) grew by 165%. The adverse impact of the strong
pound on total Group operating profit for the year was (pound)22.7m.
The Group's share of customers in its international networks at
31 March 1999, adjusted to reflect its percentage shareholdings, more
than doubled to almost 4,870,000. This represented over 46% of the
Group's total. Prepaid services continued to grow strongly and now
account for 30% of total proportionate customers. Over the last two
years, the Group's proportionate international customers have
increased more than threefold as penetration in those markets has
increased. Expectations are for penetration rates in most major
markets to exceed 50% by the end of 2002.
In the year to 31 March 1999, ARPU was (pound)369, a reduction of
19% over the previous year at constant exchange rates, due mainly to
the increase in the proportion of customers using prepaid services.
However, turnover is expected to increase as the continuing strong
growth in customers is expected to more than offset the ARPU decline.
The Group's strategy remains one of increasing its interest in
its core cellular investments and seeking acquisitions wherever these
will enhance shareholder value. The Group is currently involved in a
number of cellular licence bids.
CONTINENTAL EUROPE
France
Societe Francaise du Radiotelephone (SFR), in which the Group has
a 20% shareholding, is one of three GSM operators in France. The
company traded strongly in the year, maintaining its market share at
38% and increasing its customer base by 83% to 4,620,000. Its
contribution to Group profit is expected to increase substantially
over the coming years.
The Group sold the service provider business of its French
subsidiary, Vodafone SA, in November 1998.
Germany
E-Plus Mobilfunk, in which the Group holds a 17.2% interest,
reported customers of 2,352,000 at 31 March 1999, representing growth
of 92% in the financial year. Following the completion of the merger
with AirTouch Communications, Inc., the Group will dispose of its
interest in E-Plus Mobilfunk as AirTouch has a 34.8% interest in
Mannesmann Mobilfunk (D2).
Greece
Panafon, the Group's 55% owned subsidiary, is one of three mobile
operators in Greece. It reported significant profit growth in the
financial year, in spite of fierce competition following the launch of
a third Greek network in 1998. Panafon has continued to grow its
customer base, with a 91% increase in the year of 567,000 customers to
1,191,000 at the year end. Average revenue per customer in the year
ended 31 March 1999 was (pound)410 based on average exchange rates for
the year and churn was 22.1%. In December 1998, a 15% minority
shareholding in Panafon was floated on the Athens Stock Exchange and
the offering was significantly oversubscribed. The market
capitalisation of Panafon increased by 54% in the period from
flotation to 31 March 1999. The Group's shareholding has remained
unchanged at 55%.
Panavox, one of Panafon's principal service providers in which
the Group also has a 55% shareholding, suffered from the high
acquisition incentives which are currently affecting the Greek market
and, in spite of good turnover growth, reported a small loss in the
year.
Netherlands
Libertel performed well in the year in a highly competitive
environment, following the entry of three new competitors into the
market in recent months. Its customer base increased by 800,000 to
1,429,000, of which 49% are connected to prepaid tariffs. Average
revenue per customer in the year ended 31 March 1999 was (pound)291
based on average exchange rates for the year and churn was 20.5%.
Libertel Verkoop en Services (formerly Liberfone), the principal
service provider to the Libertel network, continued to report strong
customer connections, increasing its customer base to 658,000 at 31
March 1999.
ING, owners of 30% of Libertel Groep, has announced its
intention, subject to market conditions to offer a minority
shareholding in Libertel Groep (to be renamed Libertel NV) on the
Amsterdam Stock Exchange through an Initial Public Offering this
summer. Following the IPO, the Group's shareholding will remain
unchanged at 70%.
Sweden
Europolitan, in which the Group has a 20% interest, increased its
customer base by over 40% to 667,000 at 31 March 1999. This publicly
listed company is profitable, cash generative and paying dividends.
AirTouch Communications, Inc. has a 51.1% shareholding in Europolitan.
Malta
Vodafone Malta, the sole operator offering both GSM and analogue
service, continued to grow both profit and customers in the financial
year, with its overall customer base increasing to nearly 24,000.
PACIFIC RIM
Australia
Vodafone Holdings Australia Pty, (formerly Vodafone Network Pty),
a 91% owned subsidiary, is one of three GSM operators in Australia. In
spite of intense competitive activity, the Australian operations
achieved strong growth in customers and a 5% increase in market share.
By 31 March 1999, the customer base had increased by 78% to 971,000.
New market entrants are expected to deploy both CDMA and GSM networks
during the forthcoming year.
The Australian businesses as a whole passed through break-even in
the first half and reported an overall operating profit for the first
time. The Group is considering an Initial Public Offering in the first
half of 2000 but the Group will maintain its controlling shareholding
after any such offering.
New Zealand
The Group acquired 100% of New Zealand's only GSM operator in
October 1998. The complete re-branding of the business as Vodafone New
Zealand has been well received by the market and the company has
traded well since acquisition. The customer base grew substantially to
over 181,000 at 31 March 1999 from approximately 130,000 customers on
acquisition, an annualised growth rate of 94%.
Fiji
Vodafone Fiji, the sole GSM operator in which the Group has a 49%
shareholding, traded profitably in the financial year. It has over
8,000 customers.
REST OF THE WORLD
South Africa
Vodacom, in which the Group has a 31.5% shareholding, is one of
two GSM operators in the Republic of South Africa. Vodacom, which is
profitable and cash positive, had another strong year of trading and
continued to lead the market, reporting an increase in customers of
over 104% on last year to just under 2 million. Over 55% of the total
customer base are now connected through the "Vodago" prepaid product.
Vodacom's largest service provider, Vodac, in which the Group
also holds a 31.5% interest, continued to trade profitably. Its
customers totalled 582,000 at 31 March 1999, more than doubling in the
financial year.
Egypt
The Group has a 30% shareholding in Misrfone, Egypt's second GSM
operator, which opened for service on 30 November 1998. Under the
trading name Click GSM, initial customer uptake has been very
encouraging and at 31 March, the base had already reached over 97,000
since the launch. The company's trading performance has exceeded
expectations and it is expected to report a profit in the 1999/2000
financial year. AirTouch Communications, Inc. has a 30% interest in
Misrfone.
Uganda
Celtel, in which the Group has a 36.8% shareholding, is one of
two GSM operators in Uganda, following the launch of a competitor in
October 1998. The company increased its customer base to nearly 16,000
in the financial year.
Globalstar
The Group reduced its interest in Globalstar in May 1998 from
5.2% to 3.0%, generating a profit of (pound)62.8m. As at 7 June,
twenty of the forty-eight low earth orbit satellites had been launched
and full commercial service is planned for the third quarter of 1999.
AirTouch Communications, Inc. has a 5.2% interest in Globalstar.
FINANCIAL REVIEW
Profit and loss account
Turnover
Group turnover for the financial year has increased by 36% to
(pound)3,360.0m. This increase includes a full year's turnover from
the acquisition in January 1998 of a controlling interest in the Dutch
network operator, Libertel, and its service provider, Libertel Verkoop
en Services, and turnover in relation to the acquisition in October
1998 of New Zealand's only GSM cellular network business.
Turnover in the UK increased by 18%, principally as a result of
the strong growth in the number of customers connected to the network,
together with increased usage, offset by the impact of tariff
reductions. In addition, higher roaming revenues from both visitors
using the UK digital network and UK customers using overseas networks
were realised.
In Continental Europe turnover increased by 88% to (pound)944.9m
due to the acquisition in January 1998 of the Dutch network operator,
Libertel, and strong turnover growth in both the Netherlands and
Greece. In the Pacific Rim, turnover grew by 67% to (pound)327.6m,
mostly in Australia where Vodafone Holdings Australia Pty's customer
base grew by 78%.
Total Group proportionate turnover, which reflects the Group's
ownership interests in its worldwide operations, increased by 34% to
(pound)3,837.3m in the year, whilst total proportionate customers
increased by 79% to 10,445,000. International businesses increased
proportionate turnover by 61% to (pound)1,666.9m as proportionate
customers increased by 102% to 4,870,000.
Total Group operating profit
Total Group operating profit increased by 40% to (pound)962.6m.
In the UK, total operating profit rose by 14% to (pound)643.2m,
and by (pound)59.5m (10%) after adjusting for last year's exceptional
costs of (pound)19.7m for the reorganisation of the UK service
provider businesses. The growth in total operating profit was less
than the growth in turnover as increased usage was offset by tariff
reductions and connection costs associated with exceptional customer
growth.
International operations made a total operating profit of
(pound)319.4m (1998 - (pound)122.4m). This increase has arisen from
stronger trading in all of the Group's principal overseas interests.
Total operating profit in Continental Europe rose by (pound)119.5m due
to strong growth in the profitability of all of the Group's European
operations and the benefit of a full year's trading from Libertel as a
subsidiary. The improved trading performance of the Pacific Rim
businesses, which made a total operating profit of (pound)8.9m,
compared to losses of (pound)59.2m in the previous year, was due to
the Australian businesses moving through break-even and achieving an
overall profit in the financial year. Profits increased in the Rest of
the World to (pound)53.1m, up by 22%.
The adverse impact of exchange rates on total Group operating
profit was (pound)22.7m due primarily to the strength of sterling
against the South African Rand and Greek Drachma.
Proportionate EBITDA, which reflects the cash flow of all the
Group's activities increased by 33% to (pound)1,218.0m from
(pound)919.0m. Proportionate EBITDA is defined as operating profit
before exceptional reorganisation costs plus depreciation and
amortisation of subsidiaries, associated undertakings and investments,
proportionate to equity stakes.
Profit on disposal of fixed asset investments and businesses
The profit on disposal of fixed asset investments of (pound)66.7m
arose principally from the part-disposal of the Group's interest in
Globalstar, reducing its interest from 5.2% to 3.0%. The Group also
disposed of the business and net assets of its French service provider
business, which was operated by Vodafone SA, in November 1998.
Interest
The Group's net interest cost increased by (pound)33.0m as net
borrowings increased by (pound)391.0m to finance international
acquisitions.
Taxation
The effective tax rate decreased by 4.3% to 27.0% primarily as a
result of the utilisation of brought forward losses in overseas
operations. Excluding the effect of disposals, the effective rate
decreased from 32.5% to 28.7%.
Minority interests
The increase in the minority interests in profit on ordinary
activities after taxation is primarily due to the impact of the
increased profits arising in the Group's 55% owned Greek subsidiary,
Panafon.
Balance sheet
Fixed assets
Total fixed assets increased by (pound)940.6m primarily due to
the effect of continued capital investment in network operations,
goodwill arising on acquisitions and investment in new businesses.
Intangible fixed assets, which are capitalised in accordance with the
Group's accounting policy, increased by (pound)191.7m of which
(pound)172.6m related to goodwill net of amortisation charges arising
on acquisitions completed during the year. Tangible fixed assets
increased by (pound)578.7m, primarily as a result of capital
expenditure on digital networks in the UK, Australia, the Netherlands
and Greece and the inclusion of Vodafone New Zealand's fixed assets on
acquisition. The movement in investments, which includes equity
investments and loans advanced to associated undertakings and other
investments, is analysed in the table below.
(pound)m
At 1 April 1998 202.2
Net new investments 101.4
Share of profits in associated undertakings 71.5
Currency translation (2.7)
===================
At 31 March 1999 372.4
===================
Working capital
Working capital (excluding amounts included within Group net
debt) decreased by (pound)5.5m, primarily as a result of an increase
in creditors due within one year of (pound)215.4m offset by a
(pound)194.1m increase in debtors. These changes are due to the
inclusion of working capital balances of subsidiaries acquired in the
year and the growth of the business.
Equity shareholders' funds
The Group's equity shareholders' funds do not include any
valuations that could be placed on licences that were acquired for no
initial cost. Licences that have an initial cost to the Group are
capitalised at cost and written-off in accordance with the Group's
accounting policy. The balance sheet also excludes any value
attributed to future income streams that are anticipated from existing
customers.
Equity shareholders' funds increased by (pound)532.1m to
(pound)814.6m, mainly due to retained profits of (pound)439.9m and the
benefit of scrip dividends of (pound)64.8m.
Cash flows and net borrowings
Net cash flow generated from operating activities increased by
(pound)158.8m to (pound)1,045.2m and was used mainly to fund capital
expenditure of (pound)754.4m, primarily to enhance and expand the
digital networks in the UK, Australia, the Netherlands and Greece, pay
tax of (pound)194.6m and finance interest and dividends to minority
shareholders of (pound)89.8m and (pound)118.5m of equity dividends.
Net new investments of (pound)264.8m comprised a cash outflow of
(pound)343.9m in respect of acquisitions and investments offset by a
cash inflow of (pound)79.1m from investment and business disposals. As
a result net borrowings increased by (pound)391.0m to (pound)1,508.0m.
An analysis of net cash outflows in respect of investments is set out
in the table below.
(pound)m
Vodafone New Zealand 234.6
Misrfone 63.1
Other 46.2
==============
343.9
==============
Future investment
Vodafone companies in the Group at 31 March 1999 expect to spend
approximately (pound)1,000m on tangible fixed assets in 1999/2000.
About half of this expenditure will be in the UK, where capacity
continues to be added to the digital network to accommodate growth in
customer numbers and traffic generated by visitors. The balance will
be expended mainly on the digital networks in the Netherlands,
Australia and Greece to enhance capacity and improve quality of
service. The Group also intends to bid for third generation mobile
phone licences, the UK auction for which is currently scheduled for
early 2000.
Funding and liquidity
The Group's policy is to borrow centrally, using a mixture of
long term and short term loans and borrowing facilities, to meet
anticipated funding requirements. These borrowings, together with cash
generated from operations, are lent or contributed as equity to
subsidiaries.
The Group has a strong financial position demonstrated by credit
ratings of A-1/P-1 short term and A+/A2 long term from Standard and
Poor's and Moody's respectively, which enables the Group to access a
wide range of debt finance including Eurobonds, commercial paper and
committed bank facilities. Following the completion of the merger with
AirTouch it is anticipated that these ratings will continue to be
investment grade at A-1/P-1 short term and A/A2 long term.
The Group's net debt profile at the end of the year is shown
below.
Analysis by repayment year: (pound)m
Less than 1 year 371.1
Between 2-5 years 1,136.9
================
1,508.0
================
A substantial proportion of the debt maturing within one year is
commercial paper, issued under the Group's (pound)800m multi-currency
Euro commercial paper programme which is fully supported by committed
bank facilities that expire in the period to 30 November 2003. The
maturities of the committed facilities available to the Group at 31
March 1999, (excluding facilities available to fund the merger with
AirTouch Communications, Inc.) are shown below.
Analysis by year of expiry: Committed
Bank
Facilities Bonds Total
(pound)m (pound)m (pound)m
Within 1 year 50.0 - 50.0
Between 1-2 years 495.0 250.0 745.0
Between 2-5 years 1,023.6 250.0 1,273.6
=============== ============= ==========
1,568.6 500.0 2,068.6
=============== ============= ==========
Syndication has commenced on a facility for $10.0 billion to
finance the merger with AirTouch Communications, Inc. The facility is
split into three tranches. Tranche A is a $4 billion revolving loan
facility and Tranche B is a $2.5 billion term loan facility, each of
which is available for 364 days with the option to extend the
repayment of advances under those tranches for a further year. Tranche
C is a $3.5 billion revolving loan facility, available for five years.
Advances may be drawn in US Dollars, Sterling or Euros.
Foreign exchange and interest rate management
The Group's policy is to hedge foreign currency exposures on
known future transactions. Although the Group does not hedge its
international net assets its policy is to denominate its debt in
foreign currencies in accordance with the expected future cash
generation of its overseas interests.
The Group's interest rate management policy is to fix interest
rates on a proportion of floating rate debt when net interest is
forecast to have a significant impact on profits. The Group's main
interest exposure is to sterling interest rates, although there is a
smaller exposure to Euro, Australian Dollar and Greek Drachma interest
rates.
Year 2000
The Group is giving high priority to the impact of the millennium
and is taking significant and positive steps to minimise the effect of
the date change issues before, after and during the year 2000 on its
ability to maintain its networks and to continue to provide services
to customers. The Group initiated a comprehensive millennium
programme, which seeks to ensure that the Group does not experience
difficulties resulting from failures of hardware, software and
electronic equipment or of services due to any date change around the
transition into the new millennium and beyond. The millennium
programme covers the cellular, paging and data networks, billing and
administrative functions, as well as buildings, power, security, air
conditioning and other similar functions. Critical suppliers are being
checked for assurance that the continuity of supply of products and
services will be maintained by them.
The millennium programme is being implemented by each subsidiary
within the Group whose activities are being managed through an
executive steering committee chaired by a director of that company.
The programme is monitored on a monthly basis by the Executive
Committee of Vodafone Group Plc.
The Group is operating to policies which seek to ensure that the
businesses and all operations of the Group meet the definition of Year
2000 conformity, as set out in DISC PD2000-1:1998 "A Definition of
Year 2000 Conformity Requirements" issued by the British Standards
Institute. The Group's planned remediation and millennium testing
activities were successfully completed for all essential systems by
the target date of 31 December 1998. Rollout of these systems is
already largely complete with a target end date in the second quarter
of 1999. Activities still to be completed in 1999 include transition
and contingency planning, business scenario testing and completing
millennium activities for all non-critical systems.
It is the Group's policy that all developments and all new
systems and applications which may be affected must be demonstrated to
be Year 2000 compliant on entering service and that changes to
existing systems do not adversely affect the compliance status
achieved. It is also the Group's policy to monitor, through its board
representation, the steps taken by its principal associated
undertakings and investments to be Year 2000 compliant.
Representatives of some of these companies have attended conferences
organised by the Group to address Year 2000 issues.
The Group incurred costs in relation to Year 2000 compliance of
approximately (pound)14m in the financial year to 31 March 1999, and
(pound)4m in the previous financial year, although many costs are not
separately identifiable as millennium modifications are often embodied
in software purchased and developed in the normal course of business.
The Group is satisfied that the total future amount will not be
material to the future profitability or liquidity of the Group.
Capitalisation (bonus) issue
The directors intend to propose a resolution at the Company's
Annual General Meeting to be held on 21 July 1999 to increase the
authorised share capital of the Company, to capitalise part of the
Company's share premium account and to allot new shares to holders on
the Company's share register on 30 September 1999 on the basis of four
new ordinary shares for every one ordinary share then held. The
resolution shall lapse if the merger with AirTouch Communications,
Inc. is not completed by 30 September 1999.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 MARCH 1999
Year to Year to
31 March 31 March
1999 1998
(pound)m (pound)m
Turnover
- Continuing operations 3,302.3 2,470.8
- Acquisitions 57.7 -
=========== ==========
3,360.0 2,470.8
=========== ==========
Operating profit/(loss)
- Continuing operations 849.3 626.8
- Acquisitions (2.6) -
----------- -----------
846.7 626.8
Share of operating profit in
associated undertakings 115.9 59.6
----------- -----------
Total Group operating profit : Group and share of
associated undertakings 962.6 686.4
Disposal of fixed asset
investments 66.7 24.9
-----
----------- -----------
Profit on ordinary activities
before interest 1,029.3 711.3
Net interest payable
- Group (76.2) (49.4)
- Associated undertakings (17.9) (11.7)
----------- -----------
Profit on ordinary activities
before taxation 935.2 650.2
Tax on profit on ordinary
activities (252.1) (203.2)
----------- -----------
Profit on ordinary activities
after taxation 683.1 447.0
Equity minority interests (46.4) (28.2)
----------- -----------
Profit for the financial year 636.7 418.8
Equity dividends (196.8) (170.3)
=========== ===========
Retained profit for Group and
its share of associated
undertakings 439.9 248.5
=========== ===========
Basic earnings per share 20.61p 13.63p
----------- -----------
Adjusted basic earnings
per share 18.82p 12.82p
----------- ----------
Diluted earnings per share 20.52p 13.59p
----------- ----------
CONSOLIDATED BALANCE SHEET
31 MARCH 1999
31 March
31 March 1998
1999 Restated
(pound)m (pound)m
Fixed assets
Intangible assets 329.3 137.6
Tangible assets 2,150.4 1,571.7
Investments 372.4 202.2
----------- -----------
2,852.1 1,911.5
Current assets
Stocks 44.7 28.9
Debtors 740.7 546.6
Liquid investments - 0.4
Cash at bank and in hand 6.1 14.9
----------- -----------
791.5 590.8
Creditors: amounts falling due
within one year 1,529.9 1,426.4
----------- -----------
Net current liabilities (738.4) (835.6)
----------- -----------
Total assets less current
liabilities 2,113.7 1,075.9
Creditors: amounts falling due
after more than one year 1,179.4 685.1
Provisions for liabilities and
charges 10.0 11.3
=========== ===========
924.3 379.5
=========== ===========
Capital and reserves
Called up share capital 155.0 154.3
Share premium account 96.1 78.0
Profit and loss account 563.5 50.2
----------- -----------
Total equity shareholders' funds 814.6 282.5
Equity minority interests 105.3 73.8
Non-equity minority interests 4.4 23.2
=========== ===========
924.3 379.5
=========== ===========
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 1999
Year to Year to
31 March 31 March
1999 1998
(pound)m (pound)m
Net cash inflow from operating
activities 1,045.2 886.4
Dividends received from associated
undertakings 2.9 2.9
Net cash outflow for returns on investments
and servicing of finance (89.8) (43.4)
Taxation (194.6) (162.9)
Net cash outflow for capital expenditure and
financial investment (688.4) (509.6)
Net cash outflow for acquisitions
and disposals (316.8) (364.4)
Equity dividends paid (118.5) (124.1)
---------- ----------
Cash outflow before management of
liquid resources (360.0) (315.1)
Net cash inflow from management
of liquid resources 0.4 10.2
Net cash inflow from financing 352.3 292.9
========== ===========
Decrease in cash in the year (7.3) (12.0)
========== ===========
Reconciliation of net cash flow to
movement in net debt
Decrease in cash in the year (7.3) (12.0)
Cash inflow from increase in debt (359.4) (279.1)
Cash inflow from change in liquid
resources (0.4) (10.2)
---------- ----------
Increase in net debt resulting
from cash flows (367.1) (301.3)
Debt acquired on acquisition of
subsidiaries - (119.8)
Deferred consideration on acquisition
of associated undertakings - (21.4)
Accrued interest on discounted
financial instruments (4.9) (3.0)
Translation difference (19.0) 9.1
---------- ----------
Increase in net debt in the year (391.0) (436.4)
Opening net debt (1,117.0) (680.6)
============ =============
Closing net debt (1,508.0) (1,117.0)
============ =============
CONSOLIDATED STATEMENT
OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 31 MARCH 1999
Year to Year to
31 March 31 March
1999 1998
(pound)m (pound)m
Profit for the financial year 636.7 418.8
Currency translation 5.9 (147.2)
========= =========
Total recognised gains and losses
relating to the year 642.6 271.6
========= =========
MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 31 MARCH 1999
Profit for the financial year 636.7 418.8
Equity dividends (196.8) (170.3)
------ ------
439.9 248.5
Currency translation 5.9 (147.2)
New share capital subscribed 18.8 24.3
Goodwill written-off directly to reserves -- (709.7)
Goodwill transferred to the profit and
loss account in respect of business
disposals 10.9 74.5
Scrip dividends 64.8 34.7
Other (8.2) (12.6)
--------- ----------
Net movement in equity shareholders' funds 532.1 (487.5)
Opening equity shareholders' funds 282.5 770.0
========= =========
Closing equity shareholders' funds 814.6 282.5
========= =========
NOTES TO THE PRELIMINARY RESULTS
FOR THE YEAR ENDED 31 MARCH 1999
(1) Basis of preparation
The preliminary results for the year ended 31 March 1999 are
an abridged statement of the full Group accounts which were
approved by the Board of Directors on 8 June 1999. The
Auditors' Report on these accounts was unqualified. The
preliminary results do not comprise statutory accounts within
the meaning of section 240 of the Companies Act 1985. The
information relating to the year ended 31 March 1998, except
where restated for accounting standards adopted in the year,
is an extract from the published accounts for that year,
which have been delivered to the Registrar of Companies, on
which the Auditors' Report was unqualified.
The Group adopted FRS 9 - "Associates and Joint Ventures" in
the year to 31 March 1998. In the current financial year, the
Group adopted the following Financial Reporting Standards
issued by the Accounting Standards Board, FRS 10 - "Goodwill
and Intangible Assets", FRS 11 - "Impairment of Fixed Assets
and Goodwill", FRS 12 - "Provisions, Contingent Liabilities
and Contingent Assets", FRS 13 - "Derivatives and Other
Financial Instruments: Disclosures" and FRS 14 - "Earnings
Per Share". Where compliance with these standards has
required changes to prior year figures, these have been
restated.
The implementation of FRS 10 has required goodwill arising in
the year ended 31 March 1999 to be capitalised and amortised
over its estimated useful economic life. Goodwill arising on
acquisitions prior to 31 March 1998 has not been reinstated.
(2) Segmental analysis
The Group operates substantially in one class of business,
the supply of mobile telecommunications services and
products. Analysis of turnover, total Group operating profit
and net assets by geographical region is set out below. Total
Group operating profit is stated after the inclusion of the
Group's share of operating profit in associated undertakings.
Year to Year to
31 March 1999 31 March 1998
Total Group Total Group
Operating Operating
Turnover Profit Turnover Profit/(loss)
(pound)m (pound)m (pound)m (pound)m
United Kingdom 2,087.5 643.2 1,771.7 564.0
Continental Europe 944.9 257.4 502.5 137.9
Pacific Rim 327.6 8.9 196.6 (59.2)
Rest of the World -- 53.1 -- 43.7
======== ======= ======= =======
3,360.0 962.6 2,470.8 686.4
======== ======= ======= =======
NOTES TO THE PRELIMINARY RESULTS
FOR THE YEAR ENDED 31 MARCH 1999
31 March 31 March
1999 1998
Net Assets Net Assets
(pound)m (pound)m
United Kingdom 779.0 559.0
Continental Europe 707.6 425.4
Pacific Rim 752.8 393.4
Rest of the World 192.9 118.7
Net borrowings (1,508.0) (1,117.0)
=========== ==========
924.3 379.5
=========== ==========
(3) Exceptional operating costs
Operating profit in the year ended 31 March 1998 is stated
after charging (pound)19.7m of exceptional costs relating to
the reorganisation of the Group's six wholly owned UK service
providers into three distribution businesses, each focused on
a particular market sector and distribution route.
(4) Tax on profit on ordinary activities
Year to Year to
31 March 31 March
1999 1998
(pound)m (pound)m
United Kingdom taxation 168.6 154.3
International taxation
Subsidiary undertakings 73.3 42.2
Associated undertakings 10.2 6.7
--------- --------
83.5 48.9
========= ========
252.1 203.2
========= ========
(5) Equity dividends
The merger with AirTouch Communications, Inc. is expected to
complete at the end of June or in July. The record date for
the final dividend for the year ended 31 March 1999 is 18
June 1999 and the dividend is payable on 13 August 1999.
Given the timing of the completion of the merger, the
directors have decided that, instead of proposing a 1999
final dividend for approval at the Annual General Meeting,
they should instead declare a second interim dividend of
3.24p (1998 - final dividend of 2.82p) per share to
shareholders on the register of members on 18 June 1999,
making a total of 6.36p (1998 - 5.53p) for the year. Payment
of this second interim will be made on 13 August 1999. As a
second interim dividend, the dividend payment will not
require the approval of shareholders at the Annual General
Meeting. Shareholders may take a scrip dividend alternative
to the cash dividend in accordance with the rules of Vodafone
Group Plc's Scrip Dividend Scheme. The ex-dividend date is
14 June 1999 and the last date for elections or variations to
mandates under the Scrip Dividend Scheme is 14 July 1999.
NOTES TO THE PRELIMINARY RESULTS
FOR YEAR ENDED 31 MARCH 1999
6 Earnings per share
Year to Year to
31 March 31 March
1999 1998
(pound)m (pound)m
Earnings for basic and diluted
earnings per share 636.7 418.8
Disposals of fixed asset investments
net of attributable taxation (63.9) (24.9)
Goodwill amortisation 8.6 -
======== =========
Adjusted earnings 581.4 393.9
======== =========
Weighted average number of shares (millions)
Basic and adjusted 3,089 3,073
Diluted 3,102 3,082
7 Reconciliation of operating profit to net cash inflow from
operating activities
Year to Year to
31 March 31 March
1999 1998
(pound)m (pound)m
Operating profit 846.7 626.8
Depreciation and amortisation 296.9 238.1
Increase in stocks (14.5) (7.4)
Increase in debtors (212.8) (82.9)
Increase in creditors 128.9 111.8
=========== ========
1,045.2 886.4
=========== ========
8 Net cash outflow for capital expenditure and financial investment
Year to Year to
31 March 31 March
1999 1998
(pound)m (pound)m
Purchase of intangible fixed
assets (17.6) (24.9)
Purchase of tangible fixed assets (736.8) (491.5)
Purchase of trade investments (4.2) -
Loans repaid by associated
undertakings 2.6 0.1
Disposal of trade investments 53.6 -
Other 14.0 6.7
============ ===========
(688.4) (509.6)
============ ===========
NOTES TO THE PRELIMINARY RESULTS
FOR THE YEAR ENDED 31 MARCH 1999
9 Net cash outflow for acquisitions and disposals
Year to Year to
31 March 31 March
1999 1998
(pound)m (pound)m
Purchase of subsidiary
undertakings (255.4) (354.0)
Net cash acquired with subsidiary
undertakings - 25.2
Disposal of interest in subsidiary
undertaking 19.4 -
Purchase of interests in associated
undertakings (74.8) (131.3)
Purchase of customer bases (9.5) (3.5)
Disposal of interests in associated
undertakings 3.5 99.2
=========== ==========
(316.8) (364.4)
=========== ==========
10 Analysis of net debt
Other
1 April non-cash Exchange 31 March
1998 Cash flow changes movement 1999
(pound)m (pound)m (pound)m (pound)m (pound)m
Liquid investments 0.4 (0.4) - - -
------------- ----------- --------- ----------- ---------
Cash at bank and in
hand 14.9 (9.5) - 0.7 6.1
Bank overdrafts (7.8) 2.2 - (0.9) (6.5)
------------- ----------- ----------- ---------- --------
7.1 (7.3) - (0.2) (0.4)
------------- ----------- ----------- ----------- -------
Debt due within one year
(other than bank
overdrafts) (481.3) 130.4 (1.5) (18.3) (370.7)
Debt due after one
year (643.2) (489.8) (3.4) (0.5) (1,136.9)
------------- ----------- --------- ----------- -------
(1,124.5) (359.4) (4.9) (18.8) (1,507.6)
------------- ----------- --------- ----------- -------
(1,117.0) (367.1) (4.9) (19.0) (1,508.0)
============= =========== ========= =========== =======
A substantial proportion of the debt maturing within one year is
commercial paper, issued under the Group's (pound)800m multi-currency
Euro commercial paper programme which is fully supported by committed
bank facilities that expire in the period to 30 November 2003.
NOTES TO THE PRELIMINARY RESULTS
FOR THE YEAR ENDED 31 MARCH 1999
11 Summary of differences between UK and US GAAP
The preliminary results have been prepared in accordance with
UK GAAP, which differs in certain significant respects from
US GAAP. With the exception of accounting for goodwill for
which UK GAAP has changed substantially following the
implementation of FRS 10 in the year, a description of the
relevant accounting principles which differ materially is
given on page 74 of Vodafone Group Plc's Annual Report &
Accounts for the year ended 31 March 1998. The effects of
these differing accounting principles are as follows:
Year to Year to
31 March 31 March
1999 1998
(pound)m (pound)m
Net income as reported in
accordance with UK GAAP 636.7 418.8
Items (decreasing)/increasing net income:
Goodwill amortisation (99.1) (62.0)
Profit on disposal of fixed asset
investments 4.4 14.5
Deferred income taxes (28.0) 3.0
Other (3.6) (0.1)
============ =========
Net income in accordance with
US GAAP 510.4 374.2
============ =========
Basic earnings per ordinary share in
accordance with US GAAP 16.52p 12.18p
12 Rates of dividend
1999 1998
Second interim declared
(1998 - final paid) 64.8% 56.4%
(% of nominal value)
Amount absorbed (to shareholders (pound)100.3m (pound)86.9m
on the Register at close of business on
18 June 1999)
Interim already paid
(% of nominal value) 62.4% 54.2%
Amount absorbed (pound)96.5m (pound)83.4m
TOTAL (% of nominal value) 127.2% 110.6%
TOTAL AMOUNT ABSORBED (pound)196.8m (pound)170.3m
COPYRIGHT 1999 Business Wire
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1999, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.
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