232 Vodafone Group Plc Annual Report 2026
Strategic report
Governance
Financials
Other information
Return on Capital Employed Non-GAAP measure Purpose
Non-GAAP measures - Unaudited information (continued) Cash flow and funding The table below presents the reconciliation between Inflow from operating activities and Free cash flow.
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 and other financial instruments included in trade and other receivables/payables, short-term investments, non- current investments in sovereign securities, 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 hyperinflationary adjustments 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 based on the average of month end capital employed balances during the period 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 hyperinflationary adjustments. 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.
Return on Capital Employed (‘ROCE’)
FY26 €m
FY25 €m
I nflow from operating activities
14,291 15,373 – (1,657) 15,279 14,617 (7,291) (6,862) 988 901
Net tax paid
Cashflows from discontinued operations Cash generated by operations
Capital additions
Working capital movement in respect of capital additions Disposal of property, plant and equipment and intangible assets Working capital movement in respect of integration capital additions Integration capital additions
241 48 (209) 118
404
9 8
Pre-tax ROCE (controlled)
As above.
(31)
Licences and spectrum Interest received and paid 1
(404) (421) (1,696) (1,598) (914) (728) (245) (249) (3,542) (3,288) 557 530
Post-tax ROCE (controlled and associates/joint ventures)
Taxation
Dividends received from associates and joint ventures Dividends paid to non-controlling shareholders in subsidiaries Payments in respect of lease liabilities Payment for the future use of the Vodafone brand in Italy and Spain
–
(491) (50)
Other
(147)
Free cash flow
1,795 1,850
Note: 1. Includes interest on lease liabilities of €577 million (FY25: €451 million), excluding discontinued operations. The table below presents the reconciliation between Borrowings, Gross debt and Net debt.
Year-end FY26 €m
Year-end FY25 €m
Borrowings Lease liabilities Collateral liabilities Gross debt Collateral liabilities Cash and cash equivalents Short-term investments Collateral assets
(52,636) (53,143) 12,388 10,826 1,644 2,357 (38,604) (39,960) (1,644) (2,357) 8,982 11,001 3,431 5,280 915 913 1,169 1,010 1,163 2,291 (823) (575) (25,411) (22,397)
Non-current investments in sovereign securities
Derivative and other financial instruments Less mark-to-market gains deferred in hedge reserves
Net debt
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