Vodafone 2016 Annual Report Download - page 39

In addition to the commentary on the Group’s consolidated
statement of cash ows below, further disclosure in relation to the
Group’s objectives, policies and processes for managing its capital;
its nancial risk management objectives; details of its nancial
instruments and hedging activities; and its exposures to credit risk
and liquidity risk can be found in “Borrowings”, “Liquidity and capital
resources” and “Capital and nancial risk management” in notes 21,
22and 23 respectively to the consolidated nancial statements.
Cash ows
A reconciliation of cash generated by operations to free cash ow,
a non-GAAP measure used by management is shown on
pages 190 and 191. The reconciliation to net debt is shown below.
2016
£m
2015
£m
EBITDA 11, 612 11, 915
Working capital (386) (121)
Capital expenditure (8,599) (9,197)
Disposal of property, plant and equipment 140 178
Other 117 88
Operating free cash ow12,884 2,863
Taxation (689) (758)
Dividends received from associates
andinvestments 67 224
Dividends paid to non-controlling
shareholders insubsidiaries (223) (247)
Interest received and paid (1,026) (994)
Free cash ow11,013 1,088
Licence and spectrum payments (2,944) (443)
Acquisitions and disposals (96) (7,040)
Equity dividends paid (2,998) (2,927)
Foreign exchange (1,968) 895
Convertible issue 2,754 –
Other2(2,665) (144)
Net debt increase (6,904) (8,571)
Opening net debt (22,271) (13,700)
Closing net debt3(29,175) (22,271)
Notes:
1 Operating free cash ow for the year ended 31 March 2016 excludes £186 million
(2015: £336 million) of restructuring costs, £nil (2015: £365 million) UK pensions
contribution payment and £nil (2015; £116 million) of KDG incentive scheme payments that
vested upon acquisition.
2 Other cash ows for the year ended 31 March 2016 include £2,020 million
(2015: £nil) of debt recognised in respect of spectrum in India and Germany, £186 million
(2015: £336 million) of restructuring costs, £nil (2015: £365 million) UK pensions
contribution payment, £nil (2015: £359 million) of Verizon Wireless tax dividends received
after the completion of the disposal, £nil (2015: £328 million) of interest paid on the
settlement of the Piramal option, £nil (2015: £116 million) of KDG incentive scheme
payments that vested upon acquisition, £nil (2015: £176 million) tax refund relating to the
rationalisation and reorganisation of our non-US assets prior to the disposal of our stake
in Verizon Wireless and a £50 million (2015: £100 million) payment in respect of the
Group’s historic UK tax settlement.
3 Includes cash and cash equivalents of £14 million (2015: £nil) in respect of assets held
for sale.
Cash generated by operations
Excluding restructuring and other costs, cash generated by operations
increased 2.6% to £11.4 billion as lower EBITDA was offset by working
capital movements.
Capital expenditure
Capital expenditure decreased £0.6 billion to £8.6 billion primarily driven
by the completion of the Project Spring investment programme.
Free cash ow
Free cash ow was £1.0 billion, a decrease of £0.1 billion from the prior
year, as higher cash generated by operations excluding restructuring
and other costs and working capital movements in respect of capital
expenditure were offset by lower capital expenditure and lower
dividends received from Indus Towers.
Licence and spectrum payments
Payments for licences and spectrum include amounts relating to the
purchase of spectrum in Germany of £1.4 billion, £0.6 billion in India,
£0.6 billion in Turkey, £0.2 billion in Italy and £0.1 billion in the UK.
Acquisitions and disposals
Payments for acquisitions and disposals for the year ended 31 March
2015 primarily included £2,945 million in relation to the acquisition
of the entire share capital of Ono plus £2,858 million of associated net
debt acquired and £563 million in relation to the acquisition of the
remaining 10.97% equity interest in Vodafone India.
Convertible issue and foreign exchange
A foreign exchange loss of £2.0 billion was recognised on net debt
as losses on the euro and rupee offset favourable foreign exchange
movements on the South African rand.
This was offset by £2.8 billion of proceeds from the issue of £2.9 billion
of mandatory convertible bonds in February 2016, £2.8 billion of which
have been classied as equity after taking into account the cost of future
coupon payments.
The Group also holds $5.0 billion (2015: $5.25 billion) of Verizon
loan notes, and has the potential to utilise the proceeds from these
notes to repurchase the shares issued to satisfy the mandatory
convertible bonds.
This year’s report contains the strategic report on pages 1 to 37,
which includes an analysis of our performance and position, a review
of the business during the year, and outlines the principal risks and
uncertainties we face. The strategic report was approved by the
Board and signed on its behalf by the Chief Executive and Chief
Financial Ofcer.
Vittorio Colao
Chief Executive Nick Read
Chief Financial Ofcer
17 May 2016
Overview Strategy review Performance Governance Financials Additional information
Vodafone Group Plc
Annual Report 2016
37