Vodafone 2024 Annual Report

63 Vodafone Group Plc Annual Report 2024

Strategic report



Other information

Long-term viability statement (‘LTVS’)

The preparation of the LTVS includes an assessment of the Group’s long-term prospects in addition to an assessment of its ability to meet future commitments and liabilities as they fall due over the three-year review period. Assessment of viability The Board has chosen a three-year period to assess Vodafone Group’s viability. This is the period in which we believe our principal risks tend to develop. This time horizon is also in line with the structure of long-term management incentives and the outputs from the long-range business-planning cycle. We continue to conduct financial stress testing and sensitivity analysis, considering revenue at risk. The viability assessment started with the available headroom as of 31 March 2024 and considered the plans and projections assembled as part of the forecasting cycle, which include the Group’s cash flow, planned commitments, required funding, and other key financial ratios. We also assumed that debt refinancing will remain available in all plausible market conditions. Finally, we estimated the impact of severe but plausible scenarios for our principal risks on the three-year plan. We also stress-tested a combined scenario taking into account the risk interdependencies as defined in the table on page 58, where the following risks were modelled as materialising in parallel over the three-year period: Adverse changes in macroeconomic conditions: Adverse changes in the macroeconomic environment could result in restricted ability to refinance, while prolonged high inflation rates, may lead to increased interest rates. Cyber threat: A cyber-attack may exploit vulnerabilities, allowing unauthorised access to IT and network systems, leading to a breach of information and a potential GDPR fine. Supply chain disruption: Tensions between the US and China are uncertain, leading to increased volatility in the geopolitical landscape. This has the potential to influence political decisions, which could impact our ability to use equipment from certain vendors.

Legal: Legal disputes and adverse judgements against the company resulting in significant financial liabilities, including increased fines, penalties, or compensatory payments. Assessment of long-term prospects The Board undertakes a robust review and challenge of the strategy and assumptions. Each year the Board conducts a strategy session, reviewing the internal and external environment as well as significant threats and opportunities to the sustainable creation of long-term shareholder value (note that known emerging factors related to each principal risk are described on pages 58 to 61). As an input to the strategy discussion, the Board considers the key risks (including Adverse changes in macroeconomic conditions, Cyber threat, Supply chain disruption, and Legal) with the focus on identifying underlying opportunities and setting the Group’s future strategy. The output from this session is reflected in the strategic section of the Annual Report (page 9), which provides a view of the Group’s long-term prospects. Conclusions The Board assessed the prospects and viability of the Group in accordance with provision 31 of the UK Corporate Governance Code, considering the Group’s strategy and business model, and the principal risks to the Group’s future performance, solvency, liquidity and reputation. The assessment took into account possible mitigating actions available to management were any risk or combination of risks to materialise. Cash and cash equivalents available of €6.1 billion (page 186) at 31 March 2024, along with options available to reduce cash outgoings over the period considered, provide the Group with sufficient positive headroom in all scenarios tested. Reverse stress testing on revenue and adjusted EBITDAaL over the review period confirmed that the Group has sufficient headroom available to face uncertainty. The Board deemed the stress test conducted to be adequate, and therefore confirmed that it has a reasonable expectation that the Group will remain in operation and be able to meet its liabilities as they fall due up to 31 March 2027.

Assessment of prospects

Outlook, strategy and business model Outlook of possible long-term scenarios expected in the sector and the Group’s current position to face them Assessment of the key principal risks that may influence the Group’s long-term prospects Articulation of the main levers in the Group’s strategy and business model to sustain value creation

Assessment of viability

Long-Range Plan is the three-year forecast approved by the Board on an annual basis, used to calculate cash position and headroom Headroom is calculated using cash, cash equivalents and other available facilities, at year end Quantification of the cash impact of combined scenarios where multiple risks materialise across one or more markets, over the three-year period Viability results from comparing the cash impact of severe but plausible scenarios to the available headroom, considering additional liquidity options Sensitivity analysis to assess the level of decline in performance that the Group could withstand, if a black swan event were to occur Severe but plausible scenarios modelled to quantify the cash impact of an individual principal risk materialising over the three-year period Sensitivity analysis Principal risks Combined scenario

Long-term viability statement Directors confirm that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period

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