Vodafone 2024 Annual Report

Notes to the consolidated financial statements (continued) 188 Vodafone Group Plc Annual Report 2024 2020 20. Leases (continued) Optional lease periods 188 Vodafone Group Plc Annual Report 2024 Strategic report Governance


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Where practicable the Group seeks to include extension or break options in leases to provide operational flexibility, therefore many of the Group’s lease contracts contain optional periods. The Group’s policy on assessing and reassessing whether it is reasonably certain that the optional period will be included in the lease term is described in note 1 ‘Basis of preparation’ under ‘Critical accounting judgements and key sources of estimation uncertainty’. After initial recognition of a lease, the Group only reassesses the lease term when there is a significant event or a significant change in circumstances, which was not anticipated at the time of the previous assessment. Significant events or significant changes in circumstances could include merger and acquisition or similar activity, significant expenditure on the leased asset not anticipated in the previous assessment, or detailed management plans indicating a different conclusion on optional periods to the previous assessment. Where a significant event or significant change in circumstances does not occur, the lease term and therefore lease liability and right-of-use asset value, will decline over time. The Group’s cash outflow for leases in the year ended 31 March 2024 was €3,567 million (2023 re-presented 1 : €3,067 million, 2022 re-presented 1 : €3,018 million) and absent significant future changes in the volume of the Group’s activities or other strategic or structural changes to the Group resulting in the use of more or fewer owned assets, this level of cash outflow from leases would be expected to continue for future periods, subject to contractual price increases. The future cash outflows included within lease liabilities are shown in the maturity analysis below. The maturity analysis only includes the reasonably certain payments to be made; cash outflows in these future periods will likely exceed these amounts as payments will be made on optional periods not considered reasonably certain at present and on new leases entered into in future periods. The Group’s leases for customer connectivity are normally either under regulated access or network sharing or similar preferential access arrangements and as a result the Group normally has significant flexibility over the term it can lease such connections for; generally the notice period required to cancel the lease is less than the notice period included in the service contract with the end customer. As a result, the Group does not have any significant cash exposure to optional periods on customer connectivity as the Group can cancel the lease when the service agreement ends. In some circumstances the Group is committed to minimum spend amounts for connectivity leases, which are included within reported lease liabilities. Sale and leaseback In the year ended 31 March 2023, the Group disposed of its interest in Vantage Towers A.G. (‘Vantage Towers’) into a new joint venture, Oak Holdings 1 GmbH (‘Oak’); Vodafone retained an interest of 64.2% in Oak, which owns 89.3% of Vantage Towers (see note 27 ‘Acquisitions and disposals’ for additional details). The Group has agreements with Vantage Towers to lease back spaces on its towers (see note 30 ‘Related party transactions’). The Group de-recognised assets related to the mobile base stations with a net book value of €4,793 million. A total net gain on disposal of €9,287 million was realised in the year ended 31 March 2023 as a result of the disposal of Vantage Towers; €680 million of this gain, reflecting the gain on the proportion of sold towers retained through the leaseback, was recorded in the year ended 31 March 2023 as a reduction in the value of the right-of-use asset recognised for the leaseback of tower space and will be realised as a reduction in depreciation over the term of the leaseback until November 2028. Other sale and leaseback transactions entered into by the Group were not material, individually or in aggregate. Amounts recognised in the primary financial statements in relation to lessee transactions Right-of-use assets The carrying value of the Group’s right-of-use assets, depreciation charge for the year and additions during the year are disclosed in note 11 ‘Property, plant and equipment’. Lease liabilities The Group’s lease liabilities are disclosed in note 21 ‘Borrowings’. The maturity profile of the Group’s lease liabilities is as follows: 2024 2023 €m €m Within one year 2,603 3,452 In more than one year but less than two years 1,984 2,574 In more than two years but less than three years 1,599 2,200 In more than three years but less than four years 1,461 1,981 In more than four years but less than five years 1,129 1,810 In more than five years 2,366 3,240 11,142 15,257 Effect of discounting (1,470) (1,893) Lease liability - as disclosed in note 21 ‘Borrowings’ 9,672 13,364 At 31 March 2024 the Group has committed to enter into future lease contracts with future undiscounted lease payments of €1,339 million (31 March 2023 restated 2 : €1,491 million) which includes €1,031 million (31 March 2023: €1,171 million) of commitments to Vantage Towers A.G. for tower leases which are due to commence over the period until March 2026 and which will be payable during the eight year lease term following the commencement of respective individual leases. Notes: 1 The cash outflows for the years ended 31 March 2023 and 31 March 2022 have been re-presented to reflect that the results of Vodafone Spain and Vodafone Italy are now reported as discontinued operations, decreasing the previously disclosed amounts by €1,412 million (2022: €1,320 million). See note 7 ‘Discontinued operations and assets held for sale’ for more information. 2 The prior year comparative amount has been restated to reflect the commitments to Vantage Towers A.G. that were not previously reported.

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