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Operating results

2008 financial year compared to the 2007 financial year



and Central
Pacific and
Middle East




% change
  £m £m £m £m £m £m £m £m   £ Organic
Revenue 26,081 4,946 4,399 170 (118) 35,478 31,104   14.1 4.2
Service revenue 24,430 4,617 4,101 (106) 33,042 28,871   14.4 4.3
EBITDA 9,690 1,669 1,476 343 13,178 11,960   10.2 2.6
Adjusted operating profit 6,206 752 530 2,447 140 10,075 9,531   5.7 5.7
Adjustments for:                      
Impairment losses             (11,600)      
Other income and expense             (28) 502      
Non-operating income of associates             3      
Operating profit/(loss)             10,047 (1,564)      
Non-operating income and expense             254 4      
Net financing costs             (1,300) (823)      
Profit/(loss) before taxation             9,001 (2,383)      
Income tax expense             (2,245) (2,423)      
Profit/(loss) for the financial year from continuing operations 6,756 (4,806)      


The Group revised its segment structure during the year. See note 3 to the consolidated financial statements.
During the 2009 financial year, the Group revised its analysis of revenue and costs. Visitor revenue and revenue from MVNOs are now reported in the line ‘other service revenue’, rather than within each of the lines for voice, messaging and data revenue. In the revised presentation of costs: direct costs include amounts previously reported as interconnect costs and other direct costs, except for expenses related to ongoing commission; customer costs include amounts previously reported within acquisition costs and retention costs, as well as expenses related to ongoing commissions, marketing, customer care and sales and distribution; and operating expenses are now comprised primarily of network and IT related expenditure, support costs from HR and finance and certain intercompany items. The following analysis reflects this change.
Common Functions represents the results of the partner markets and the net result of unallocated central Group costs and recharges to the Group’s operations, including royalty fees for use of the Vodafone brand.


Revenue increased by 14.1% to £35,478 million for the year ended 31 March 2008, with organic growth of 4.2%. The impact of acquisitions and disposals was 6.5 percentage points, primarily from acquisitions of subsidiaries in India in May 2007 and Turkey in May 2006 as well as the acquisition of Tele2’s fixed line communication and broadband operations in Italy and Spain in December 2007. Favourable exchange rate movements increased revenue by 3.4 percentage points, principally due to the 4.2% change in the average euro/£ exchange rate, as 60% of the Group’s revenue for the 2008 financial year was denominated in euro.

Revenue grew in the Europe, Africa and Central Europe and Asia Pacific and Middle East regions by 6.1%, 20.8% and 87.4%, respectively, with growth in the Asia Pacific and Middle East region benefiting from an 81.9 percentage point impact from acquisitions and disposals. On an organic basis, Europe recorded growth of 2.0%, Africa and Central Europe delivered an increase of 13.6%, while Asia Pacific and Middle East grew by 15.9%.

Organic revenue growth was driven by the higher customer base and successful usage stimulation initiatives, partially offset by ongoing price reductions and the impact of regulatory driven reductions. Growth in data revenue was particularly strong, up 39.0% on an organic basis to £2,119 million, reflecting increased penetration of mobile PC connectivity devices and improved service offerings.

Operating profit/(loss)

Operating profit increased to £10,047 million for the year ended 31 March 2008 from a loss of £1,564 million for the year ended 31 March 2007. The loss in the 2007 financial year was mainly the result of the £11,600 million of impairment charges that occurred in the year, compared with none in the 2008 financial year.

EBITDA increased to £13,178 million, with growth of 10.2%, or 2.6% on an organic basis. The net impact of acquisitions and disposals reduced reported growth by 4.5 percentage points. The net impact of foreign exchange rates increased EBITDA by 3.1 percentage points, as the impact of the 4.2% increase in the average euro/£ exchange rate was partially offset by the 5.7% and 7.2% decreases in the average US$/£ and ZAR/£ exchange rates, respectively.

On an organic basis, EBITDA increased by 15.6% in Africa and Central Europe, driven largely by a higher customer base and the resulting increase in service revenue. In Asia Pacific and Middle East, EBITDA increased by 14.3% on an organic basis, with the majority of the increase attributable to performances in Egypt and Australia. Europe’s EBITDA declined by 0.1% on an organic basis compared to the 2007 financial year, resulting from the continued challenges of highly penetrated markets, regulatory activity and price reductions.

In Europe, EBITDA was stated after a £115 million benefit from the release of a provision following a revised agreement in Italy relating to the use of the Vodafone brand and related trademarks, which is offset in Common Functions, and was also impacted by higher direct costs, customer costs and the impact of the Group’s increasing focus on fixed line services, including the acquisition of Tele2 in Italy and Spain.

In the Africa and Central Europe and the Asia Pacific and Middle East regions, EBITDA was impacted by the investment in growing the customer base and the impact of the acquisitions in Turkey and India, respectively. Both India and Turkey generated lower operating profits than regional averages, partially as a result of the investment in rebranding the businesses to Vodafone, increasing the customer base and improving network quality in Turkey.

The Group’s share of results from associates grew by 5.5%, or 15.1% on an organic basis. The organic growth was partially offset by a 5.5 percentage point impact from the disposal of the Group’s interests in Belgacom Mobile S.A. and Swisscom Mobile A.G. during the 2007 financial year and a 4.1 percentage point impact from unfavourable exchange rate movements. The organic growth was driven by 24.8% growth in Verizon Wireless.

Other income and expense for the year ended 31 March 2007 included the gains on disposal of Belgacom S.A. and Swisscom Mobile A.G., amounting to £441 million and £68 million, respectively.

Net financing costs

Investment income 714 789
Financing costs (2,014) (1,612)
Net financing costs (1,300) (823)
Analysed as:    
Net financing costs before dividends from investments (823) (435)
Potential interest charges arising on settlement of outstanding tax issues (399) (406)
Dividends from investments 72 57
Foreign exchange(1) (7) (41)
Changes in fair value of equity put rights and similar arrangements(2) (143) 2
  (1,300) (823)


Comprises foreign exchange differences reflected in the consolidated income statement in relation to certain intercompany balances and the foreign exchange differences on financial instruments received as consideration in the disposal of Vodafone Japan to SoftBank.
Includes the fair value movement in relation to put rights and similar arrangements held by minority interest holders in certain of the Group’s subsidiaries. The valuation of these financial liabilities is inherently unpredictable and changes in the fair value could have a material impact on the future results and financial position of Vodafone. Also includes a charge of £333 million representing the initial fair value of the put options granted over the Essar Group’s interest in Vodafone Essar, which has been recorded as an expense. Further details of these options are provided here.

Net financing costs before dividends from investments increased by 89.2% to £823 million due to increased financing costs, reflecting higher average debt and effective interest rates. After taking account of hedging activities, the net financing costs before dividends from investments are substantially denominated in euro. At 31 March 2008, the provision for potential interest charges arising on settlement of outstanding tax issues was £1,577 million (2007: £1,213 million).


The effective tax rate was 24.9% (2007: 26.3% exclusive of impairment losses). The rate was lower than the Group’s weighted average statutory tax rate due to the structural benefit from the ongoing enhancement of the Group’s internal capital structure and the resolution of historic issues with tax authorities. The 2008 financial year tax rate benefits from the cessation of provisioning for UK Controlled Foreign Company (‘CFC’) risk as highlighted in the 2007 financial year. The 2007 financial year additionally benefited from one-off additional tax deductions in Italy and favourable tax settlements in that year.

The 2007 effective tax rate including impairment losses was (101.7)%. The negative tax rate arose from no tax benefit being recorded for the impairment losses of £11,600 million.

Earnings/(loss) per share

Adjusted earnings per share increased by 11.0% from 11.26 pence to 12.50 pence for the year to 31 March 2008, primarily due to increased adjusted operating profit and the lower weighted average number of shares following the share consolidation which occurred in July 2006. Basic earnings per share from continuing operations were 12.56 pence compared to a basic loss per share from continuing operations of 8.94 pence for the year to 31 March 2007.

Profit/(loss) from continuing operations
attributable to equity shareholders
6,660 (4,932)
Impairment losses 11,600
Other income and expense(1) 28 (502)
Share of associated undertakings’ non-operating income and expense (3)
Non-operating income and expense(2) (254) (4)
Investment income and financing costs(3) 150 39
  (76) 11,130
Tax on the above items 44 13
Adjusted profit from continuing operations attributable to equity shareholders 6,628 6,211
Weighted average number of shares outstanding Million Million
Basic 53,019 55,144
Diluted(4) 53,287 55,144


The amount for the 2008 financial year represents a pre-tax charge offsetting the tax benefit arising on recognition of a pre-acquisition deferred tax asset.
The amount for the 2008 financial year includes £250 million representing the profit on disposal of the Group’s 5.60% direct investment in Bharti Airtel.
See notes 1 and 2 in net financing costs.
In the year ended 31 March 2007, 215 million shares have been excluded from the calculation of diluted loss per share as they are not dilutive.