Vodafone Group Plc Group Vodafone Annual Report for the year ended 31 March 2007 ended 31 March the year Annual Report for Delivering on our strategic objectives Vodafone Group Plc Registered office: Vodafone House The Connection Newbury Berkshire RG14 2FN England Registered in England No.1833679 Tel: +44 (0) 1635 33251 Vodafone Group Plc Fax: +44 (0) 1635 45713 Annual Report www.vodafone.com For the year ended 31 March 2007 WorldReginfo - 62747ee2-b1f8-4204-9590-ec1516ef53cb Contact Details Our goal is to be the Investor Relations: Telephone: +44 (0) 1635 664447 Media Relations: communications leader Telephone: +44 (0) 1635 664444 Corporate Responsibility: Fax: +44 (0) 1635 674478 E-mail: [email protected] in an increasingly Website: www.vodafone.com/responsibility connected world This constitutes the Annual Report of Vodafone Group Plc (the “Company”) in accordance with In presenting and discussing the Group’s reported financial position, operating results and cash flows, International Financial Reporting Standards (“IFRS”) and with those parts of the Companies Act 1985 certain information is derived from amounts calculated in accordance with IFRS but this information applicable to companies reporting under IFRS and is dated 29 May 2007. References to IFRS refer to is not itself an expressly permitted GAAP measure. Such non-GAAP measures should not be viewed in IFRS as issued by the IASB and IFRS as adopted for use in the European Union (“EU”). This document also isolation or as an alternative to the equivalent GAAP measure. An explanation as to the use of these contains information set out within the Company’s Annual Report on Form 20-F in accordance with the measures and reconciliations to their nearest equivalent GAAP measures can be found on requirements of the United States (“US”) Securities and Exchange Commission (the “SEC”). However, pages 62 to 63. this information may be updated or supplemented at the time of filing of that document with the SEC or later amended if necessary. The content of the Group’s website (www.vodafone.com) should not be The Report of the Directors, incorporating the Business Review, covers pages 4 to 88 of this Annual considered to form part of this Annual Report or the Company’s Annual Report on Form 20-F. Report. This Annual Report contains forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995 with respect to the Group’s financial condition, results of The terms “Vodafone”, the “Group”, “we”, “our” and “us” refer to the Company and, as applicable, its operations and business management and strategy, plans and objectives for the Group. For further details, We want to keep the environmental impact of the documents in our Annual Report package to a minimum. subsidiary undertakings and/or its interests in joint ventures and associated undertakings. please see “Performance – Cautionary Statement Regarding Forward-Looking Statements” We have therefore given careful consideration to the production process. and “Performance – Risk Factors, Seasonality and Outlook” for a discussion of the risks associated with In the discussion of the Group’s reported financial position and results for the year ended 31 March 2007, these statements. This document in printed on Revive 75 Silk, manufactured in the EU at mills with ISO 14001 accreditation and comprising 75% de-inked post consumer waste information in addition to that contained within the Consolidated Financial Statements is presented on and 25% virgin fibre. 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WorldReginfo - 62747ee2-b1f8-4204-9590-ec1516ef53cb 2 Financial Highlights Highlights Highlights for the Year Highlights Key highlights: • The Group has delivered against its financial and operating targets and 4 Chairman’s Statement made good progress on executing against its five strategic objectives 5 Group at a Glance 6 Chief Executive’s Review • Voice and data usage growth offset competitive and regulatory 8 Delivering on our Strategic pressures in Europe Objectives Strategy • Continued strong performance in emerging markets, with the recent acquisition in India significantly increasing Vodafone’s presence in high growth markets • The Group remains confident of delivering its stated capital and 10 Business Overview operating expenditure targets in Europe in the 2008 financial year, 24 Regulation with core cost reduction initiatives well on track Financial performance from continuing operations: • Group revenue of £31.1 billion 29 Performance Introduction • Basic loss per share was 8.94 pence, with loss before taxation for the 30 Critical Accounting Estimates year of £2.4 billion, after impairment losses of £11.6 billion 33 Key Performance Indicators 34 Operating Results • Free cash flow of £6.1 billion and net cash inflow from operating 52 Financial Position and Resources activities of £10.2 billion, after net taxation paid of £2.2 billion 58 Risk Factors, Seasonality and Outlook 61 Cautionary Statement Regarding Performance Business Forward-Looking Statements 62 Non-GAAP Information Increasing returns to shareholders: 64 Board of Directors and Group • Total dividends per share increased by 11.4%, to 6.76 pence, with a Management 67 Corporate Governance final dividend per share of 4.41 pence, giving a dividend pay out ratio 75 Corporate Responsibility and of 60% and a total pay out of £3.6 billion for the financial year Environmental Issues 78 Board’s Report to Shareholders • In recognition of the earnings dilution arising from the Hutchison Essar on Directors’ Remuneration transaction, the Board is targeting modest increases in dividend per 88 Directors Statement of Responsibility Governance 89 Report of Independent Registered share in the near term until the payout ratio returns to 60% in Public Accounting Firm to the accordance with current policy Members of Vodafone Group Plc 91 Report of Independent Registered Public Accounting Firm to the Members of Vodafone Group Plc 92 Consolidated Financial Statements 143 Company Financial Statements of Vodafone Group Plc 149 Independent Auditor’s Report to the Financials Members of Vodafone Group Plc 150 Shareholder Information 157 Form 20-F Cross Reference Guide Shareholders 159 Definition of Terms Glossary WorldReginfo - 62747ee2-b1f8-4204-9590-ec1516ef53cb Financial Highlights Revenue (£m) Operating (loss)/profit (£m) Adjusted operating profit (£m) Year ended 31 March +6.0% Year ended 31 March Year ended 31 March +1.4% 2007 31,104 2007 (1,564) 2007 9,531 2006 29,350 2006 (14,084) 2006 9,399 2005 26,678 2005 7,878 2005 8,353 The selected financial data set out on the following pages is derived from the Statements are prepared in accordance with IFRS, on the basis set out in Consolidated Financial Statements of the Company on pages 92 to 142 and note 1 to the Consolidated Financial Statements, which differ in certain as such should be read in conjunction with them. Certain trends within the significant respects from US GAAP. For further details, see note 38 to the financial data presented below have been impacted by business acquisitions Consolidated Financial Statements. Solely for convenience, amounts and disposals, the most significant of which are described in “Business – represented below in dollars have been translated at $1.9685: £1, the Business Overview – How We Developed”. The Consolidated Financial Noon Buying Rate on 30 March 2007. At/year ended 31 March 2007 2007 2006 2005 $m £m £m £m IFRS Consolidated Income Statement Data Revenue 61,228 31,104 29,350 26,678 Operating (loss)/profit (3,079) (1,564) (14,084) 7,878 Adjusted operating profit (Non-GAAP measure)(1) 18,762 9,531 9,399 8,353 (Loss)/profit before taxation (4,691) (2,383) (14,853) 7,285 (Loss)/profit for the financial year from continuing operations (9,461) (4,806) (17,233) 5,416 (Loss)/profit for the financial year (10,427) (5,297) (21,821) 6,518 Consolidated Cash Flow Data(2) Net cash flows from operating activities 20,065 10,193 10,190 9,240 Net cash flows from