Vodafone 2024 Annual Report

27 Vodafone Group Plc Annual Report 2024

Strategic report

Governance

Financials

Other information

Taxation

Safaricom Associate (Kenya) – 27.8% ownership Safaricom service revenue declined to €2.1 billion, as the devaluation of the local currency was only partially offset by a higher customer base and strong mobile data and M-Pesa growth. Vodafone’s lower share of results was due to the depreciation of the Kenyan shilling versus the euro. During the year, Vodafone received €122 million in dividends from Safaricom. Indus Towers Limited Associate (India) – 21.0% ownership Following the sale of shares in Indus Towers Limited (‘Indus Towers’) in February and March 2022, the Group holds 567.2 million shares in Indus Towers. Vodafone’s higher share of results in FY24 was largely due to higher adjusted EBITDAaL. Vodafone Idea Limited Joint Venture (India) – 31.4% ownership See note 29 ‘Contingent liabilities and legal proceedings’ in the consolidated financial statements for more information. Vodafone Idea Limited has undertaken equity fund-raisings totalling €2.2 billion since 31 March 2024, reducing the Group’s shareholding to 23.2%. TPG Telecom Limited Joint Venture (Australia) – 25.1% ownership TPG Telecom Limited is a fully integrated telecommunications operator in Australia. Hutchison Telecommunications (Australia) Limited owns an equivalent economic interest of 25.1%, with the remaining 49.9% listed as free float on the Australian stock exchange. We also hold a 50% share of loan facilities of AU$2.5 billion, US$1.0 billion and €0.6 billion (2023: US$3.5 billion) held within the structure that holds the Group’s equity stake in TPG Telecom. During the year, Vodafone received €23 million in dividends from TPG Telecom. Net financing costs FY24 €m Re-presented 1 FY23 €m Reported change %

Re-presented 1 FY23 %

FY24 % 3.1%

Change pps

Effective tax rate Adjusted effective tax rate 2

3.8% (0.7)

24.5% 25.6% (1.1)

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. Adjusted effective tax rate is a non-GAAP measure. See page 235 for more information. The Group’s effective tax rate (‘ETR’) for the year ended 31 March 2024 was 3.1%, (FY23: 3.8%). The rate remains low following the recognition of a €1,019 million deferred tax asset on losses in Luxembourg as a result of favourable case law during the year. The ETR also reflects a tax credit of €249 million (2023: €309 million) relating to the impacts of inflation in Turkey. The year ended 31 March 2023 included gains on the disposals of Vantage Towers and Vodafone Ghana which were largely exempt from tax, except for a €88 million charge relating to the disposal of Vantage Towers, as well as the hyperinflation accounting impacts in Turkey and utilisation of losses in Luxembourg. The Group’s Adjusted ETR (‘AETR’) for the year ended 31 March 2024 was 24.5% (FY23: 25.6%). The AETR excludes the recognition of a deferred tax asset in Luxembourg, the impact of a €598 million tax charge (2023: €33 million) relating to the use of losses in Luxembourg and the effects of inflation in Turkey. The charge on losses in Luxembourg is higher than the prior year because of an internal restructuring in 2023 which resulted in a loss. As a result of that restructuring, profits in Luxembourg are no longer subject to changes in the value of investments. The effects of hyperinflation accounting in Turkey, and the tax charge relating to the disposal of Vantage Towers in 2023, are set out above. The main drivers for the reduction in the AETR are the mix of profits between jurisdictions in 2024 compared to 2023 and Vodafone Spain moving to discontinued operations accounting in 2024 as previously the non-recognition of tax losses in Spain increased AETR.

Investment income Financing costs Net financing costs Adjustments for: Mark-to-market losses

581

232

(2,626) (1,609) (2,045) (1,377)

(48.5)

97 (534)

Foreign exchange losses Adjusted net financing costs 2

173

135

(1,775) (1,776)

0.1

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. Adjusted net financing costs is a non-GAAP measure. See page 235 for more information. Net financing costs increased by €668 million, primarily due to year-on-year changes of mark-to-market gains recycled from reserves on derivatives that were previously in cash flow hedge relationships and mark-to-market movements on the revaluation of the embedded derivative option linked to the Group’s bank borrowings secured against Indian assets. Adjusted net financing costs are in line with prior year, reflecting both a decrease in average net debt balances and higher returns on cash and short-term investments, offset by interest movements on lease liabilities and other items outside of net debt.

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