Non-GAAP Information
Group adjusted operating profit and adjusted earnings per share
Group adjusted operating profit excludes non-operating income of associates, impairment losses and other income and expense. Adjusted earnings per share also excludes changes in fair value of equity put rights and similar arrangements and certain foreign exchange differences, together with related tax effects. The Group believes that it is both useful and necessary to report these measures for the following reasons:
- these measures are used by the Group for internal performance analysis;
- these measures are used in setting director and management remuneration;
- it is useful in connection with discussion with the investment analyst community and debt rating agencies; and
- adjusted operating profit is used as the Group’s measure of segment performance.
Reconciliation of adjusted operating profit and adjusted earnings per share to the respective closest equivalent GAAP measure, operating profit/(loss) and basic earnings/(loss) per share, is provided in Operating Results.
Cash flow measures
In presenting and discussing the Group’s reported results, free cash flow and operating free cash flow are calculated and presented even though these measures are not recognised within IFRS. The Group believes that it is both useful and necessary to communicate free cash flow to investors and other interested parties, for the following reasons:
- free cash flow allows the Company and external parties to evaluate the Group’s liquidity and the cash generated by the Group’s operations. Free cash flow does not include items determined independently of the ongoing business, such as the level of dividends, and items which are deemed discretionary, such as cash flows relating to acquisitions and disposals or financing activities. In addition, it does not necessarily reflect the amounts which the Group has an obligation to incur. However, it does reflect the cash available for such discretionary activities, to strengthen the Consolidated Balance Sheet or to provide returns to shareholders in the form of dividends or share purchases;
- free cash flow facilitates comparability of results with other companies, although the Group’s measure of free cash flow may not be directly comparable to similarly titled measures used by other companies;
- these measures are used by management for planning, reporting and incentive purposes; and
- these measures are useful in connection with discussion with the investment analyst community and debt rating agencies.
A reconciliation of net cash inflow from operating activities, the closest equivalent GAAP measure, to operating free cash flow and free cash flow, is provided in Financial Position and Resources.
Other
Certain of the statements within the section titled Chief Executive’s Review contain forward-looking non-GAAP financial information for which at this time there is no comparable GAAP measure and which at this time cannot be quantitatively reconciled to comparable GAAP financial information.
Certain of the statements within the section titled Outlook contain forward-looking non-GAAP financial information which at this time cannot be quantitatively reconciled to comparable GAAP financial information.
Organic growth
The Group believes that “organic growth”, which is not intended to be a substitute, or superior to, reported growth, provides useful and necessary information to investors and other interested parties for the following reasons:
- it provides additional information on underlying growth of the business without the effect of factors unrelated to the operating performance of the business;
- it is used by the Group for internal performance analysis; and
- it facilitates comparability of underlying growth with other companies, although the term “organic” is not a defined term under IFRS and may not, therefore, be comparable with similarly titled measures reported by other companies.
Reconciliation of organic growth to reported growth is shown where used, or in the table below:
| Organic growth % |
Impact of foreign exchange Percentage points |
Impact of acquisitions and disposals Percentage points |
Reported growth % |
|
|---|---|---|---|---|
| 31 March 2008 | ||||
| Group | ||||
| Data revenue | 40.6 | 5.4 | 6.7 | 52.7 |
| Europe | ||||
| Voice revenue | (1.8) | 3.1 | – | 1.3 |
| Outgoing voice revenue | (0.3) | 3.3 | – | 3.0 |
| Incoming voice revenue | (4.6) | 3.2 | (0.3) | (1.7) |
| Roaming and international visitor revenue | (8.0) | 2.1 | – | (5.9) |
| Messaging revenue | 8.1 | 3.4 | – | 11.5 |
| Data revenue | 35.7 | 4.8 | – | 40.5 |
| Fixed line revenue | 4.7 | 5.2 | 12.5 | 22.4 |
| Other Europe – data revenue | 44.0 | 6.0 | – | 50.0 |
| Interconnect costs | 4.1 | 3.2 | 1.2 | 8.5 |
| Other direct costs | 1.3 | 3.9 | 2.6 | 7.8 |
| Acquisition costs | 6.0 | 3.2 | 1.1 | 10.3 |
| Retention costs | 10.1 | 3.5 | 0.2 | 13.8 |
| Operating expenses | 0.1 | 3.3 | 1.3 | 4.7 |
| Depreciation and amortisation | 0.2 | 2.9 | 0.3 | 3.4 |
| Italy | ||||
| Total costs | (1.0) | 4.4 | 5.2 | 8.6 |
| Interconnect costs | 6.2 | 4.5 | 4.7 | 15.4 |
| Other direct costs | (15.8) | 4.4 | 9.7 | (1.7) |
| Acquisition costs | 18.7 | 6.0 | 5.8 | 30.5 |
| Operating expenses | (7.4) | 4.1 | 4.8 | 1.5 |
| Spain | ||||
| Service revenue for the six months ended 31 March 2008 | 5.8 | 10.1 | 3.1 | 19.0 |
| Interconnect costs | (0.1) | 4.1 | 2.5 | 6.5 |
| Acquisition costs | (9.0) | 3.7 | 1.9 | (3.4) |
| Retention costs | 28.3 | 6.0 | 0.4 | 34.7 |
| Operating expenses | 4.0 | 4.5 | 2.8 | 11.3 |
| EMAPA | ||||
| Voice revenue | 12.8 | 2.6 | 32.0 | 47.4 |
| Messaging revenue | 6.5 | 6.5 | 10.5 | 23.5 |
| Data revenue | 87.9 | 8.9 | 63.3 | 160.1 |
| Eastern Europe – interconnect costs | 7.5 | 7.1 | 6.0 | 20.6 |
| Eastern Europe – operating expenses | 5.7 | 7.5 | 12.0 | 25.2 |
| Eastern Europe – depreciation and amortisation | 16.0 | 8.7 | 3.7 | 28.4 |
| Middle East, Africa & Asia – other direct costs | 38.0 | (9.0) | 125.1 | 154.1 |
| Middle East, Africa & Asia – operating expenses | 23.4 | (8.6) | 97.0 | 111.8 |
| Middle East, Africa & Asia – depreciation and amortisation | 36.3 | (5.5) | 66.5 | 97.3 |
| 31 March 2007 | ||||
| Group | ||||
| Voice revenue(1) | 2.5 | (1.8) | 3.8 | 4.5 |
| Messaging revenue | 7.0 | (1.3) | 3.4 | 9.1 |
| Data revenue | 30.7 | (0.8) | 0.2 | 30.1 |
| Europe | ||||
| Voice revenue(1) | (0.6) | (0.4) | (1.6) | (2.6) |
| Incoming voice revenue | (7.4) | (0.4) | (1.2) | (9.0) |
| Roaming revenue | 1.2 | (0.4) | (2.8) | (2.0) |
| Messaging revenue | 4.6 | (0.5) | (1.0) | 3.1 |
| Data revenue | 29.5 | (0.7) | (1.7) | 27.1 |
| Other direct costs | 16.7 | (0.5) | (1.3) | 14.9 |
| Acquisition and retention costs | 0.1 | (0.4) | (2.2) | (2.5) |
| Operating expenses | 7.4 | (0.4) | (2.8) | 4.2 |
| Adjusted operating profit(2) | (3.7) | (0.5) | 0.1 | (4.1) |
| EMAPA | ||||
| Non-service revenue | 28.9 | (13.7) | 16.3 | 31.5 |
| Eastern Europe – interconnect costs | 23.8 | (3.2) | 25.7 | 46.3 |
| Middle East, Africa & Asia – interconnect costs | 26.8 | (19.0) | 37.2 | 45.0 |
| Notes: | |
|---|---|
| (1) | Revenue relating to fixed line activities provided by mobile operators, previously classified within voice revenue, is now presented as fixed line revenue, together with revenue from fixed line operators and fixed broadband. All prior periods have been adjusted accordingly. |
| (2) | During the year ended 31 March 2008, the Group changed its organisational structure and the Group’s associated undertaking in France, SFR, is now managed within the Europe region and reported within Other Europe. The results are presented in accordance with the new organisational structure. |