188 Vodafone Group Plc Annual Report 2026
Strategic report
Governance
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The Group income statement is exposed to foreign exchange risk from both the generation of profits and losses in currencies other than euro and from the translation of balance sheet items not held in functional currency. The following table details the Group’s sensitivity to foreign exchange risk as an impact on profit before tax. Each incremental 10% movement in foreign currency exchange rates would have approximately the same effect as the initial 10% detailed in the table. 31 March 2026 Change in exchange rates Weakening 10% €m Strengthening 10% €m EGP (68) 83 TRY (40) 49 ZAR (41) 50 GBP 60 (79) 31 March 2025 Change in exchange rates Weakening 10% €m Strengthening 10% €m EGP (50) 61 TRY (24) 29 ZAR (101) 124 GBP 66 (88) In 2026 the Group changed the presentation of sensitivity to foreign exchange risk by presenting the sensitivity using a 10% change in the foreign exchange rates instead of the percentage based on the average exchange rates movement in the previous three annual reporting periods. The change was done to improve comparability with prior reporting periods and does not have a material impact on financial statements. Equity risk A 10% change in the share price of AST would have a €105 million impact on the value of the Group’s equity investment. There is no other material equity risk relating to the Group’s equity investments. See note 13 ‘Other investments’ for further information.
22. Capital and financial risk management (continued) Market risk Interest rate management Under the Group’s interest rate management policy, interest rates on long-term monetary assets and liabilities are principally maintained on a fixed rate basis. At 31 March 2026 and after hedging, substantially all of our bonds are held on a fixed interest rate basis in accordance with treasury policy. For each one hundred basis point rise in market interest rates for all currencies in which the Group had borrowings at 31 March 2026 there would be a decrease in profit before tax by €9 million (2025: €26 million decrease) including mark to market revaluations of interest rate and other derivatives and the potential interest on cash and short-term investments. For each one hundred basis point fall in market interest rates for all currencies in which the Group had borrowings at 31 March 2026 there would be an increase in profit before tax by €19 million (2025: €39 million increase). There would be no material impact on equity. At 31 March 2026, the Group had limited exposure through interest rate derivatives and floating rate bonds referencing LIBOR and other interbank offered rates (IBORs). Foreign exchange management As Vodafone’s primary listing is on the London Stock Exchange its share price is quoted in sterling. Since the sterling share price represents the value of its future multi-currency cash flows, principally in euro, South African rand and sterling, the Group maintains the currency of debt and interest charges in proportion to its expected future principal cash flows and has a policy to hedge external foreign exchange risks on transactions denominated in other currencies above a certain de minimis level. At 31 March 2026, 11% of net debt was denominated in currencies other than euro (8% South African rand and 3% other). This allows South African rand to be serviced in proportion to expected future cash flows and therefore provides a partial economic hedge against income statement translation exposure. Under the Group’s foreign exchange management policy, foreign exchange transaction exposure in Group companies is generally maintained at the lower of €5 million per currency per month or €15 million per currency over a six-month period. The Group recognises foreign exchange movements in equity for the translation of net investment hedging instruments and balances treated as investments in foreign operations. However, there is no net impact on equity for exchange rate movements on net investment hedging instruments as there would be an offset in the currency translation of the foreign operation. At 31 March 2026 the Group held financial liabilities in a net investment hedge against the Group’s South African rand operations. Sensitivity to foreign exchange movements on the hedging liabilities, analysed against a strengthening of the South African rand by 10% would result in a decrease in equity of €112 million (2025: €131 million) which would be fully offset by foreign exchange movements on the hedged net assets. Weakening of the South African Rand by 10% would result in an increase of equity of €91 million (2025: €107 million). In addition, cash flow hedges of principally US dollar borrowings would result in an increase in equity of €235 million (2025: €372million) against a strengthening of US dollar by 10% and a decrease in equity of €192 million (2025: €304 million) against a weakening of US dollar by 10%.
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