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The objective of this paper is about discuss the financial status of company depends on the Annual Report. In this paper I am discussing about the Vodafone Company which is one of the truly international mobile company having branches more than in 42 countries. This paper mainly deals with the financial status and the relation of share holder with the Vodafone Company. Also discuss on Annual Report of Vodafone Company like is text appropriately balanced with graphs and photographs which is related to the text, how they organize the Annual Report, Increase in profits of Share holders compared to Previous year. Also it includes the key points about the Vodafone Company and analysis about the Company, some research findings on the Vodafone. Description of share price history and operating profit or loss is also discussed in this paper. Also I provide financial data table. And final conclusion about either people can buy the shares of Vodafone Company or not.
Vodafone is one of the world's leading company in mobile telecommunication, with a great presence in Asia, Europe, and the United States. Vodafone is an truly international mobile network company with having more than 260 million customers across the 2 markets and also partner networks in 42 more countries. In the United States this group operates as Verizon Wireless. Vodafone is 1st in UK and 11th globally in the Brands most powerful brands ranking.
VODAFONE OVER THE YEARS
Vodafone was started in 1984 under the name of Racal Electronics Plc. After in September 1991 it is demerged from the Racal Electronics Plc and changed the name to Vodafone Group Plc. Again after merging with the AirTouch Communications, Inc., Vodafone Changed its name to Vodafone AirTouch Plc on 29 June 1999. On 28 July 2000 it changed to the former name Vodafone Group Plc.
KEY MILESTONES OF VODAFONE
In January 2007 Vodafone reaches their number of customers to 200 million.
In March 2006 Vodafone customers with 3G is reached to 10 million.
In 2004 Vodafone launches their first 3G service in Europe.
In 2002 Vodafone starts global mobile payment in Germany. This helps customers to buy goods by using the Vodafone mobile.
Also in 2002 only Vodafone Starts the GPRS roaming Service, it helps customers to access e-mails on their phone.
In 2001 Vodafone Introduces SMS.
Vodafone makes the first 3G roaming call in world in between Japan and Spain.
“At 30 June 2009, based on the registered customers of mobile telecommunications ventures in which it had ownership interests at that date, the Group had 315 million customers, excluding paging customers, calculated on a proportionate basis in accordance with the Company's percentage interest in these ventures.
The Company's ordinary shares are listed on the London Stock Exchange and the Company's American Depositary Shares ('ADSs') are listed on the New York Stock Exchange. The Company had a total market capitalization of approximately £63.6 billion at 30 July 2009.
Vodafone Group Plc is a public limited company incorporated in England under registered number 1833679. Its registered office is Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England (Vodafone, 2009)”.
The role of the mobile phone in the society has changed tremendously over the years. Vodafone is having 1,150 directly owned stores, which sell services to new customers upgrade or renew for existing customers and also Vodafone having 6,500 branded stores, which sell Vodafone's products and services exclusively. And also Vodafone is planning to open 90 more stores in Spain and 21 more stores in Romania during this year. This is a key point because they are planning to open new stores to increase their market and it shows that they are running all current stores in profit and they want to exceed the present market.
“* Group revenue of Â£35.5 billion, an increase of 14.1%, with organic growth of 4.2%
2.0% revenue growth, with outgoing usage up 20.1% and data revenue up 35.7%, all on an organic basis
revenue growth of 45.1%, reflecting acquisitions in India and Turkey. Organic growth of 14.5%
- Group data revenue up 52.7% to Â£2.2 billion, with organic growth of 40.6%
* Group adjusted operating profit up by 5.7% to Â£10.1 billion
- Group EBITDA up 10.2% to Â£13.2 billion
- Verizon Wireless operating profit up 20.3%, driven by 14.5% revenue growth, both in local currency
* Free cash flow of Â£5.5 billion, with European capital intensity of 9.9% (2). Net cash flow from operations of Â£10.5 billion
* Adjusted earnings per share up by 11.0% to 12.50 pence. Basic earnings per share of 12.56 pence
* Full year adjusted effective tax rate lower than previously indicated at around 28%
* Proportionate mobile customer base of 260 million at 31 March 2008
Increasing returns to shareholders
* Total dividends per share up by 11.1% to 7.51 pence. Final dividend per share of 5.02 pence
* Dividend pay out ratio of 60%, in line with policy, and a total payout of Â£4.0 billion for the financial year (iii, 2008)”.
“ Rights attaching to the Company's shares
At 31 March 2009, the issued share capital of the Company was comprised of 50,000 7% cumulative fixed rate shares of £1.00 each and 52,483,872,615 ordinary shares (excluding treasury shares) of US$0.113/7 each (vodafone, 2009)”.
After reading the annual report of this Company I get a positive impression on the Vodafone Company. The annual report is well organized and the report divided into 6 sections. So, it is easy to locate the required information. Text is appropriately balanced with graphs and photographs which is related to the text. The body of the annual report is clearly written with confident tone. Annual report includes the Audit Report on Internal Controls, Critical Accounting Estimates, Consolidated Financial Statements, Audit Report on the Consolidated Financial Statements, and Company Financial Statements. The financial information can easily understand to the average reader also because they provide the all information in a compare manner. They compare 2008 Financial Year with the 2007 & 2006 financial years. So readers can easily understand the company financial position. And the report clearly includes the profits of the shareholders for this year and also compared with previous year. The profits of the shareholders also increased a lot. The graphs are enough to decipher and easy to locate. Tele communication is one of the most powerful communications in the present world and it grows up in the future also. So I would like to buy shares and join as a share holder in this company.
Level 1 Analysis:
Percentage of Revenue growth is increased a lot. Operating profit of the Company also increased a lot when compared to the previous Year. When I analyze the Annual Report of Vodafone Company I Understand that the Revenue, Operating Profit and the Share price are increasing year by year. As I mentioned earlier as a telecommunication company Vodafone is doing the best service to the customers.
“ Revenue: The impact of acquisitions and disposals was 6.5 percentage points, primarily from acquisitions of subsidiaries in India in May 2007 and Turkey in May 2006 as well as the acquisition of Tele2's fixed line communication and broadband operations in Italy and Spain in December 2007. Favorable exchange rate movements increased revenue by 3.4 percentage points, principally due to the 4.2% change in the average euro/£ exchange rate, as 60% of the Group's revenue for the 2008 financial year was denominated in euro.
Revenue grew in the Europe, Africa and Central Europe and Asia Pacific and Middle East regions by 6.1%, 20.8% and 87.4%, respectively, with growth in the Asia Pacific and Middle East region benefiting from an 81.9 percentage point impact from acquisitions and disposals. On an organic basis, Europe recorded growth of 2.0%, Africa and Central Europe delivered an increase of 13.6%, while Asia Pacific and Middle East grew by 15.9%.
Organic revenue growth was driven by the higher customer base and successful usage stimulation initiatives, partially offset by ongoing price reductions and the impact of regulatory driven reductions. Growth in data revenue was particularly strong, up 39.0% on an organic basis to £2,119 million, reflecting increased penetration of mobile PC connectivity devices and improved service offerings.
Operating profit/ (loss)
Operating profit increased to £10,047 million for the year ended 31 March 2008 from a loss of £1,564 million for the year ended 31 March 2007. The loss in the 2007 financial year was mainly the result of the £11,600 million of impairment charges that occurred in the year, compared with none in the 2008 financial year.
EBITDA increased to £13,178 million, with growth of 10.2%, or 2.6% on an organic basis. The net impact of acquisitions and disposals reduced reported growth by
4.5 percentage points.
The net impact of foreign exchange rates increased EBITDA by 3.1 percentage points, as the impact of the 4.2% increase in the average euro/£ exchange rate was partially offset by the 5.7% and 7.2% decreases in the average US$/£ and ZAR/£ exchange rates, respectively.
On an organic basis, EBITDA increased by 15.6% in Africa and Central Europe, driven largely by a higher customer base and the resulting increase in service revenue. In Asia Pacific and Middle East, EBITDA increased by 14.3% on an organic basis, with the majority of the increase attributable to performances in Egypt and Australia. Europe's EBITDA declined by 0.1% on an organic basis compared to the 2007 financial year, resulting from the continued challenges of highly penetrated markets, regulatory activity and price reductions.
In Europe, EBITDA was stated after a £115 million benefit from the release of a provision following a revised agreement in Italy relating to the use of the Vodafone brand and related trademarks, which is offset in Common Functions, and was also impacted by higher direct costs, customer costs and the impact of the Group's increasing focus on fixed line services, including the acquisition of Tele2 in Italy and Spain.
In the Africa and Central Europe and the Asia Pacific and Middle East regions, EBITDA was impacted by the investment in growing the customer base and the impact of the acquisitions in Turkey and India, respectively. Both India and Turkey generated lower operating profits than regional averages, partially as a result of the investment in rebranding the businesses to Vodafone, increasing the customer base and improving network quality in Turkey.
The Group's share of results from associates grew by 5.5%, or 15.1% on an organic basis. The organic growth was partially offset by a 5.5 percentage point impact from the disposal of the Group's interests in Belgacom Mobile S.A. and Swisscom Mobile A.G. during the 2007 financial year and a 4.1 percentage point impact from unfavourable exchange rate movements. The organic growth was driven by 24.8% growth in Verizon Wireless.
Other income and expense for the year ended 31 March 2007 included the gains on disposal of Belgacom S.A. and Swisscom Mobile A.G., amounting to £441 million and £68 million, respectively (Chairman, 2008)”.
Share price history:
“On 11 October 1988 when the company starts, the value of ordinary share is 170 pence each. On 16 September 1991, when the Company was finally demerged, for UK taxpayers the base cost of Racal Electronics Plc shares was apportioned between the Company and Racal Electronics Plc for Capital Gains Tax purposes in the ratio of 80.036% and 19.964% respectively. Opening share prices on 16 September 1991 were 332 pence for each Vodafone share and 223 pence for each Racal share.
On 21 July 1994, the Company effected a bonus issue of two new shares for every one then held and, on 30 September 1999, it effected a bonus issue of four new shares for every one held at that date. The flotation and demerger share prices, therefore, may be restated as 11.333 pence and 22.133 pence, respectively.
The share price on 31 March 2009 was 122.8 pence where 150.9 pence on 31 March 2008. The price of the share on 18 May 2009 was 127.5 pence (vodafone, 2009)”.
I take these concepts of Revenue, Operating Profit/loss, and Share Price History from the Annual Report because of I think that I can get the actual real financial information of the company in the Annual Report rather than collecting the information from other sources.
I do some research on Shareholder Services. The stock symbol for Vodafone in stock exchange is VOD. All financial statements of Vodafone are in sterling. We can get the Annual Report, Financial Statements, and Annual Review from the Financial Results Section. Vodafone announced its results in May and in November. And we cannot purchase the ordinary shares of Vodafone in United States but we can buy the American Depository Receipts(ADR). Every year all shareholders are invited to attend the Company Annual General Meeting. If something important issue is there to decide then they didn't wait until the AGM. The Most important event of shareholder for the year is Annual General Meeting. It gives the opportunity for shareholders to review the Vodafone performance over the past year and to ask questions. Also have the opportunity to question about the company.
“Much of the work of Group R&D is done in collaboration with others, both within the Group and externally, with the Group's traditional suppliers and increasingly with other companies in the communications, media and internet industries. During the 2008 financial year the following has been achieved:
Research collaboration was started with IBM which has led to the development of a mobile private social network called BuddyCom
A research agreement was also established with Huawei
A continuing programme of work with academic institutions, which includes student placements in Vodafone laboratories during summer vacations
The continued development of Vodafone Betavine, a web based research and innovation platform;
The hosting of an academic conference where academic partners were brought together to launch a new programme – 3D internet and academic collaborations in India have started (vodafone, 2008)”.
From my research on Vodafone Annual Report I feel that Vodafone is in a strong position in financial and expanding its operations throughout the world. It had millions of customers and it is creating some excellent records in the telecommunication industry. It attracts the customers with new offers and providing excellent services. So I feel that it's a good idea that buys shares of Vodafone. In the recession time also the sales of the Vodafone product is good and it increased year by year. When I studies about the financial statements of the company they clearly mention the profits of the share holders and also the total assets of the company. So it is clarified that the profits are increasing yearly and lot of people are buying shares.
Level 2 Analysis:
Vodafone having the total assets of £127,270 billion in 2008 where total assets of £109,617 billion in 2007. It shows the company fast growth in the recession time also. Total equity funds of shareholders are increased to £78.0 billion at 2008 from £67.1 billion at 2007. So I can say that the telecommunication field is secured and it never affects by any recession.
“The increase comprises primarily of the profit for the year of £6.8 billion less equity dividends of £3.7 billion, a £5.8 billion benefit from the impact of favorable exchange rate movements and the unrealized holding gains on other investments discussed above (2008, p. 25)”.
” During the 2008 financial year, the Group increased its net cash inflow from operating activities by 1.4% to £10,474 million. The Group generated £5,540 million of free cash flow from continuing operations, a reduction of 9.6% on the 2007 financial year, primarily as a result of higher payments for taxation and interest and an increase in capital expenditure (2008, p. 26)”.
The increase comprises primarily of the profit for the year of £6.8 billion less equity dividends of £3.7 billion, a £5.8 billion benefit from the impact of favorable exchange rate movements and the unrealized holding gains on other investments discussed above.
“The Consolidated Financial Statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The Consolidated Financial Statements are also prepared in accordance with IFRS adopted by the European Union (“EU”), the Companies Act 1985 and Article 4 of the EU IAS Regulations (FR UWSURKNRVAUR, 2009)”.
These Consolidated Financial Statements are approved by the Arun Sarin Board of Director and Chief Financial Officer Andy Halford on 27 may 2008.
“Selected Financial Data
Restated Restated Restated
2009 2008 2007 2006 2005
At/year ended 31 March £m £m £m £m £m
Data of Consolidated Income Statement
Revenue 41,017 35,478 31,104 29,350 26,678
Operating profit/(loss) 5,857 10,047 (1,564) (14,084) 7,878
Profit/(loss) before taxation 4,189 9,001 (2,383) (14,853) 7,285
Profit/(loss) for the financial 3,080 6,756 (4,806) (17,233) 5,416
year from continuing operations
Profit/(loss) for the financial year3,080 6,756 (5,222) (20,131) 6,598
Data of Consolidated Balance Sheet
Total assets 152,699 127,270 109,617 126,502 145,218
Total equity 84,777 76,471 67,293 85,312 111,958
Total equity shareholders' funds86,162 78,043 67,067 85,425 112,110
Earnings Per Share
Weighted average number of shares (millions)
Basic 52,737 53,019 55,144 62,607 66,196
Diluted 52,969 53,287 55,144 62,607 66,427
Basic Earnings/ loss Per Ordinary Share
Profit/(loss) from continuing operations5.84p12.56p (8.94)p (27.66)p 8.12p
Profit/(loss) for the financial year5.84p 12.56p (9.70)p (32.31)p 9.80p
Diluted Earnings/ loss Per Ordinary Share
Profit/(loss) from continuing operations5.81p12.50p (8.94)p (27.66)p 8.09p
Profit/(loss) for the financial year5.81p 12.50p (9.70)p (32.31)p 9.77p
Cash Dividends (1)(2)
Amount per ordinary share (pence)7.77p 7.51p 6.76p 6.07p 4.07p
Amount per ADS (pence) 77.7p 75.1p 67.6p 60.7p 40.7p
Amount per ordinary share (US cents)11.11c 14.91c 13.28c 10.56c 7.68c
Amount per ADS (US cents)111.1c 149.1c 132.8c 105.6c 76.8c
Ratio of earnings to fixed charges(3) 1.2 3.9 – – 7.0
Deficit – – (4,389) (16,520) –
Above table clearly states that the growth difference from 2005 to 2009 in Revenue, Operating Profit, Profit for the financial year, Total Assets, Total Equity, earnings per share, basic earnings per share, diluted earnings per ordinary shares, and cash Dividends of the Vodafone Company. All are increasing in every financial year this shows that the Vodafone Company running successfully and getting profits for the company as well as for the share holders also. So I am confident on Vodafone and I would like to buy shares of the company.
As I mentioned above Vodafone is the world's leading mobile telecommunications company, running successfully with profits. Now a day's communication is playing the vital role in the society for everything and telecommunication is the communication which is most used by the people. So as a telecommunication field Vodafone has a very great future in the market. The company also still expanding the stores in several countries and providing good service to the customers. From the financial statements and auditory statements of the company I can say that the profit of the company also increasing year by year. The value of the shares in the share market also increasing and a lot of people are interested to buy shares of Vodafone Company. From all of my experience and research on Vodafone Company I can say that it is safe to buy shares of Vodafone and I don't think any risk in this. So I would like to buy the shares of Vodafone Company and also I recommend people to buy the Vodafone shares.
Chairman. (2008, March 31). vodaphone. Retrieved October 12, 2009, from vodaphone: http://www.vodafone.com/static/annual_report09/performance/operating_results/2008_comp_2007/index.html
FR UWSURKNRVAUR. (2009, May 19). investegate. Retrieved October 14, 2009, from investegate: http://www.investegate.co.uk/article.aspx?id=200905190700154622S&fe=1
iii. (2008, May 27). Retrieved October 2009, 2009, from iii: http://www.iii.co.uk/investment/detail?code=cotn:VOD.L&display=news&action=article&articleid=6729309&from=rss
vodafone. (2008, March 31). Retrieved October 14, 2009, from vodafone: http://www.vodafone.com/static/annual_report/downloads/vodafone_ar_performance.pdf
vodafone. (2008, March 31). Retrieved October 12, 2009, from vodafone: http://www.vodafone.com/static/annual_report/business/tech_and_resources/research_and_dev.html
vodafone. (2009, March 31). Retrieved October 12, 2009, from vodafone: http://www.vodafone.com/static/annual_report09/additional_information/index.html
Vodafone. (2009, October 12). Retrieved October 12, 2009, from Vodafone: http://www.vodafone.com/start/about_vodafone/who_we_are.html