Vodafone 2025 Annual Report

Vodafone Group Plc Annual Report 2025 179

Strategic report

Governance

Financials

Other information

The only judgement that has a material impact on the valuation is the Zegona share price volatility. An increase/(decrease) of the share price volatility by 10% would have € nil impact due to fair value being capped at the nominal value of the RPS, including accrued interest at 31 March 2025. Net financial instruments The table below shows the Group’s financial assets and liabilities that are subject to offset in the balance sheet and the impact of enforceable master netting or similar agreements. Related amounts not set off in the balance sheet Amounts Right of set off Collateral presented in with derivative (liabilities)/ Gross amount Amount set off balance sheet counterparties assets 1 Net amount At 31 March 2025 Derivative financial assets Derivative financial liabilities Total €m 4,197 (1,906) 2,291 €m – – – €m 4,197 (1,906) 2,291 €m (1,146) 1,146 – €m (2,357) 1,010 (1,347) €m 694 250 944 Related amounts not set off in the balance sheet

22. Capital and financial risk management (continued) Fair value and carrying value information

The carrying value and valuation basis of the Group’s financial assets are set out in notes 13 ‘ Other investments ’ , 14 ‘ Trade and other receivables ’ and 19 ‘ Cash and cash equivalents ’ . For all financial assets held at amortised cost the carrying values approximate fair value except as disclosed in note 13 ‘ Other investments ’ . The carrying value and valuation basis of the Group’s financial liabilities are set out in notes 15 ‘ Trade and other payables ’ and 21 ‘ Borrowings ’. The carrying values approximate fair value for the Group’s trade payables and other payables categories. For other financial liabilities a comparison of fair value and carrying value is disclosed in note 21 ‘ Borrowings ’ . Level 3 financial instruments The Group’s borrowings include € nil (2024 : €1, 720 million) of bank borrowings that were secured against the Group’s shareholdings in Indus Towers and Vodafone Id ea (see note 12 ‘ Associates and joint arrangements ’ for further details of these assets) that were repaid during the year through the sale of the shareholding in Indus Towers. This arrangement contained an embedded derivative option which was separately fair valued. The 31 March 2024 valuation of the embedded derivative asset of €22 million was presented within derivative assets in current assets (see note 14 ‘Trade and other receivables’). A Black Scholes model for European put options was used as a valuation model and primarily used market inputs (quoted share prices and volatilities for Indus Towers and Vodafone Idea) along with a strike price equal to the amount payable under the loan. The valuation included an unobservable adjustment to reflect the potential timeframe to settle the loan and was modelled using a range of potential durations up to 30 September 2025. As a result of this unobservable adjustment, the option was classified as a level 3 instrument under the fair value hierarchy. Following the completion of the sale of Vodafone Spain on 31 May 2024 (See note 7 ‘Discontinued operations and assets held for sale’ ), the Group received the non- cash consideration component in the form of €900 million Redeemable Preference Shares (‘RPS’) issued by EJLSHM Funding Ltd (‘EJLSHM’). The RPS will be redeemed 6 years after completion, or earlier if there is a material liquidity event or exit from Zegona that releases funds to its shareholders. The RPS have a nominal value, including accrued interest, of €937 million on 31 March 2025. EJLSHM subscribed for new ordinary shares in Zegona, equivalent to the value of the RPS, the future proceeds from which will be used to repay the RPS. Per the contractual arrangement, these ordinary shares do not carry voting rights, and their value is capped at the nominal value, including accrued interest, of the RPS. EJSHM is a consolidated special purpose entity for the Group, resulting in the elimination of the RPS and the recognition of an investment in the Zegona shares for the Group. The Zegona shares are recorded at fair value through profit and loss and have a fair value of €937 million on 31 March 2025. The valuation approach for the Zegona shares reflects the contractual terms of the RPS arrangement and utilises a bespoke option model which draws on observable Level 2 market data inputs, including bond yields, share prices, and foreign exchange rates. The model also includes certain key inputs that requires judgement. These include the timing of when EJLSHM will sell its shares in Zegona to settle its RPS liability to the Group, Zegona’s share price volatility and the share’s expected dividend yield.

Amounts presented in balance sheet

Right of set off with derivative counterparties

Collateral (liabilities)/

Gross amount Amount set off

assets 1 Net amount

At 31 March 2024 Derivative financial assets Derivative financial liabilities

€m

€m

€m

€m

€m

€m

4,226 (1,524) 2,702

– –

4,226 (1,524) 2,702

(899) (2,628)

699 116 815

899

741 (1,887)

Total

Note: 1. Excludes non- cash collateral of € 613 million (2024 : € 370 million) which is not recognised on balance sheet, but which would become payable to the Group in the event of a counterparty default on the related derivative financial assets. Financial assets and liabilities are offset and the net amount reported in the consolidated balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Derivative financial instruments that do not meet the criteria for offset could be settled net in certain circumstances under ISDA (‘International Swaps and Derivatives Association’) agreements where each party has the option to settle amounts on a net basis in the event of default from the other. Collateral may be offset and net settled against derivative financial instruments in the event of default by either party. The aforementioned collateral balances are recorded in notes 13 ‘ Other investments’ or 21 ‘ B orrowings’ respectively.

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