244 Vodafone Group Plc Annual Report 2024 244 Vodafone Group Plc Annual Report 2024
Strategic report
Governance
Financials
Other information
Non-GAAP measures (continued) Unaudited information
Return on Capital Employed Non-GAAP measure Return on Capital Employed ('ROCE')
Purpose
Definition
ROCE is a metric used by the investor community and reflects how efficiently we are generating profit with the capital we deploy.
We calculate ROCE by dividing Operating profit by the average of capital employed as reported in the consolidated statement of financial position. Capital employed includes borrowings, cash and cash equivalents, derivative financial instruments included in trade and other receivables/payables, short term investments, collateral assets, financial liabilities under put option arrangements and equity. We calculate pre-tax ROCE (controlled) by using Operating profit excluding interest on lease liabilities, restructuring costs arising from discrete restructuring plans, impairment losses/reversals, other income and expense, the impact of hyper-inflationary adjustments in Turkey and the share of results of equity accounted associates and joint ventures. On a post-tax basis, the measure includes our Adjusted share of results from associates and joint ventures and a notional tax charge. Capital is equivalent to net operating assets and is calculated as the average of opening and closing balances of: property, plant and equipment (including leased assets and lease liabilities), intangible assets (including goodwill), operating working capital (including held for sale assets and excluding derivative balances) and provisions, excluding the impact of hyper-inflationary adjustments in Turkey. Other assets that do not directly contribute to returns are excluded from this measure and include other investments, current and deferred tax balances and post employment benefits. On a post-tax basis, ROCE also includes our investments in associates and joint ventures.
Pre-tax ROCE (controlled) Post-tax ROCE (controlled and associates/joint ventures)
As above.
ROCE using GAAP measures The table below presents the calculation of ROCE using GAAP measures as reported in the consolidated income statement and consolidated statement of financial position. Re-presented 1 FY24 FY23 €m €m Operating profit 2 3,665 14,451 Borrowings 56,987 66,390 Cash and cash equivalents (6,183) (11,705) Derivative financial instruments included in trade and other receivables (4,226) (6,124) Derivative financial instruments included in trade and other payables 1,524 1,422 Short-term investments (3,225) (4,305) Collateral assets (741) (239) Financial liabilities under put option arrangements – 485 Equity 60,998 64,483 Capital employed at end of the year 105,134 110,407 Average capital employed for the year 107,771 111,062 ROCE using GAAP measures 3.4% 13.0% Notes: 1 The results for the year ended 31 March 2023 have been re-presented to reflect that the results of Vodafone Spain and Vodafone Italy are now reported as discontinued operations. See note 7 ‘Discontinued operations and assets held for sale’ in the consolidated financial statements for more information. 2 Operating profit includes Other income/(expense), which includes merger and acquisition activity that is non-recurring in nature.
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