Vodafone is doing better than their competitors and it‘s interesting to see that the gross profit margin is decreasing by all of the companies, though just a little by France Telecom. That could mean that the competition is getting stronger with lower price for services that the companies offer which results in lower revenues. In Vodafone‘s annual report in 2008 is the following stated as part of their strategy: ‘Competition and regulation in Europe are placing significant pressure on pricing. In order to offset these pressures, the Group’s strategy is to drive additional revenue and reduce costs.’ (Vodafone Group Plc, 2008a) So if they manage to obtain their goals, by drive additional revenue and reduce cost, it should help theim keeping the revenues within the company.
Net profit margin
Net profit margin shows what is left of sales revenue after all of the expenses of running the business for the period have been met.
Vodafone has a really good net profit margin in 2005 and 2008. In 2006 – 2007 they are suffering for the impairment charges made, which I mentioned above. Apart from these two years Vodafone has way better results than its competitors which tells that they are paying less interest and tax in proportion to their revenue. It‘s possible that their competitors have more debt and therefore paying higher interests.
Return on capital employed
Return on capital employed looks at the return on the non-current and current assets less current liabilities. Operating profit is used because it is considering the effectiveness of the assets financed both by the shareholders and by the long term creditors and therefore the profit that is shared between these two groups is used. (McLaney, 2006)
Return on capital employed is often used to assess if business generates enough returns to pay for its cost of capital. Vodafone is returning fairly on capital employed. In the case of 31 March 2006 and 2007 we can‘t draw that conclusion about Vodafone that it isn‘t able to generate enough returns to pay its cost of capital since like we have seen before, decpreciation is causing this figures. (McLaney, 2006)
Return on equity
Return on equity is regarded as one of the most important financial ratios. It measures return on share capital and reserves, i.e. the profit figure after all charges have been met. Stockholders invest to get a return on their money, and this ratio tells how well the company is doing in an accounting sense.
(McLaney, 2006)
(Brigham & Houston, 2004)
Vodafone has not had good return on equity in recent years. The reason for that is they have been using equity financing as source of long term finance to great extent like can be seen in the gearing chapter here below. On the other hand, Vodafone‘s competitors, and the sectore on average, have been returning far better in regards to equity, i.e. better rate of return for their shareholders. In case of Telefonica, they have been having higher profit and they are not financing themselves as much as Vodafone with equity. It will be interesting to see if Vodafone will change their long term finance structure, from equity to debts in the future.
Activity
In this chapter I‘m gonna look at activities by the company, i.e. the Vodafone‘s ability to convert different accounts within its balance sheets into cash or sales. Companies will typically try to turn their production into cash or sales as fast as possible because this will generally lead to higher revenues. (Investopedia, 200a)
Net asset turnover
Net asset turnover ratio enables a judgement to be made on how the business has generated revenue. It is a measure how effectively assets are being used to generate sales. The size of this ratio is a reflection of the business‘ strategy on margins and turnover. (McLaney, 2006)
Vodafone‘s net asset turnover is relatively low because of the total assets they have. The theory states that companies with high profit margins tends to have low asset turnover and vice versa. That‘s exactly the case at Vodafone since they have low net asset turnover but relatively high net profit margin. (Investopedia, 2000b)
We could suggest that Vodafone is investing very heavily in its future and therefore we would expect to see major improvement of net asset turnover over the coming years.
Liquidity
A liquidity of a company is crucial for companies. Liquidity determines company‘s ability to pay off its short-terms debts obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover short term debts.
A company‘s ability to turn short-term assets into cash to cover debts is of the utmost importeance when creditors are seeking payment. Bankruptcy analysts and mortgage originators frequently use the liquidity ratios to determine whether a company will be able to continue as a going concern. (Investopedia, 2000c)
Current ratio
Current ratio indicates the extent to which current liabilites are covered by those assets expected to be converted to cash in the near future.
Vodafone has relatively low current ratio and has had over the years. Though is it particular low 31 march 2008. If we look at the graph below we can see the reason for that is the decrease in current assets from 31 March 2005 - 31 March 2006, ie. from £12,813m to £7,532m. According to Vodafone‘s annual report in 2006 it‘s mainly a result of a reduction in cash and liquid investments and the reclassification of Vodafone Japan. After that total current assets and current liabilities increase in proportion to each other. (Vodafone Group Plc, 2006)
Despite the low current ratio it shouldn‘t be of a much worry for Vodafone‘s creditors since they have very little amount of inventories and not too much of receivables because of the nature of the business. Vodafone‘s revenues come from mainly from service they provide which customers ususally pay monthly.
- Finance and gearing
One of companies‘ fundamental tasks is how to structure its finance for ongoing operations. Companies can finance themselves for short-term and long-term. Short-term is usually within a year and in a form of bank‘s overdraft. Long term financing is provided for period of more than a year and for companies to keep on growing they have to finance their obligations they make to target their goals.
Various sources of long term finance exist and companies have to have good balance of sources to diversify the risk associated to the company financing structure.
Many businesses borrow by issuing securities with a fixed interest rate payable on a given redemption date. Such securites are known as loan stocks, debentures or bonds.
Convertible loan stocks are securities that bear all of the features of loan stocks except that at a pre-stated date they may be converted by the holders into ordinary shares of the same business.
Preference shares are part of the business‘ risk bearing ownership, but preference shareholders usually have the right to the first slice of any dividend paid.
Issuing a stock in a company and allow investor to buy share in it. They become shareholders in the company and through the voting rights attaching to their shares.
It‘s also possible to raise additional equity by putting earnings from previous year back into the business, making issues of new shares to existing shareholders and making new share issues to the public. (McLaney, 2006)
Vodafone‘s is mainly financed long term like can be seen in sources of finance in Appendix C. They are to large proportion financed by equity but over the years long term debts have been increasing. According to the annual statement in 2008:
‘The Group‘s policy is to borrow centrally, using a mixture of long term and short term capital market issues and borrowing facilities, to meet anticipated funding requirements. These borrowings, together with cash generated from operations, are on-lent or contributed as equity to certain subsidiaries. These internal ratios establish levels of debt that the Group should not exceed other than for relatively short periods of time and are shared with the Group‘s debt rating agencies, being Moody‘s Fitch Ratings and Standard & Poor‘s.’ (Vodafone, 2008a, p116)
So to manage its financing structure, Vodafone uses three debt protection ratios which should result in stable financing structure, i.e. not changing much from year to year. Vodafone uses this debt ratios in co-operation with its credit rating agents and Vodafone‘s target is to have targets low single A long term credit ratings. According to the annual report in 2008: ’Vodafone‘s current credits are P-2 / F2 / A2 short term and Baa1 stable / A- stable /A- stable long term from Moody‘s, Fitch Ratings and Standard & Poor‘s, respectively.‘
(Vodafone, 2008, p57)
4.1 Vodafone‘s long term finance
Vodafone‘s long term finance structure is equity and long term debts. Equity is by far the larger proportion than long term debts. Long-term debts are constantly increasing. From 10.39% in year end 31.3.2005 to 22.50% in year end 31.3.2008. The reason for that could be capital needed for operations and also a change in dividend policy in 2006, where payout of adjusted earnings per share was increased to 60%, which will be covered in the dividend chapter. That means retained earnings will be decreasing given the same amount of profit. We also have seen that Vodafone has by far lower return on equity ratio than their competitors, and would like to boost that for their shareholders.
On the other hand if Vodafone will keep on having high equity in proportion to long term debts, to invest further on without having to gear themselves too much.
4.1.1 Fixed assets to equity
Fixed assets to equity ratio indicates the company's ability to satisfy long-term debt.
There‘s no surprise that Vodafone has much lower fixed assets to equity ratio because we have seen that they rely much more on long term debt financing than equity financing. The reason for that is not simple to explain for both Vodafone and its competitors. The reason could be that Telefonica and France Telecom have more long term investments.
4.1.1 Vodafone‘s long term debts
The long term debts are mostly bonds and loans but there are also some redeemable preference shares which allows Vodafone, on a stated maturidy date, to buy back for value plus dividend. Most of the loans and bond are in fair value hedge relationship. According to the annual report in 2008 interest rates of the borrowings are mostly floating. 80% of the borrowings are in Euro and US dollar, within 15% are in Sterling and Japanese yen and around 5% in other currencies. From those figures I would conclude that most of Vodafone‘s revenues are in Euro and US dollar and by having most of the borrowings in these currencies, the currency risk decreases.
Gearing
Vodafone has over the period that is covered in this report not been gearing themselves too much. They are financed mainly by equity. A good way to measure the gearing is to divide long term debts by equity.
Vodafone has been increasing its gearing in recent years. They have been borrowing slightly more and paying more out as dividend. That means that they have been changing their ratio between long term debts and equity. By borrowing more they will have to pay more interests which leads to lower profit, if other figures stay the same.
Despite going strong into the Indian market in 2007, like is covered in the mergers and acquisition chapter, they haven‘t been borrowing heavily.
- Dividend policy
A dividend policy is a company‘s decision if the shareholders should be paid part of the income. And if they are to be paid part of the company‘s income then the company has to decide how much of its income should be distributed to the shareholders. In what way the dividend is paid also matters. It can be distributed to the shareholders by cash or it could be passed on to them by buying back some of the stock they hold. A decision has also have to be made if the dividends should be stable and dependable from year to year. All these decisions form the dividend policy which investor often rely on when investing in a company.
It depends from investor to investor if they prefer to be paid dividend. Some investors will like to rely on their dividends but other rather want the company to put the earnings back into the business and hope that it will result in more capital gain. It can be argued that either way is done it will result in capital gain for investors. If dividend is paid then more investor will like to buy, which increases the price, and if the earnings are put back into the business, in ideal world, it will eventually lead to capital gain.
Some theories have been made over the years. The main theories are:
- Dividend irrelevance theory
The theory states that a firm‘s dividend policy has no effect on either its value or its cost of capital. This theory was made of Merton Miller and Franco Modigliani. They argued that the firm‘s value is determined only by its basic earning power and its business risk, i.e. they argued that the value of the firm depends only on the income produced by its assets, not on how this income is split between dividends and retained earnings.
The theory states that a firm‘s value will be maximized by setting a high dividend payout ratio.
The theory states taht investors might prefer a low dividend payout because long-term capital gains are generally taxed at lower rate than dividend, and the tax is not paid until a stock is sold and if a stock is held
by someone until he or she dies, no capital gains tax is due at all.
(Moneyterms, 2008)
(Brigham & Houston, 2004)
What ever the theories are in my opinion it varies from investor to investor, from market to market and from the nature of the invest.
5.1 Vodafone‘s dividend policy
Vodafone updated it‘s dividend policy in May 2006. In a press release from Vodafone 30.5.2006 which was about stragety update from Vodafone was following stated: ‚Vodafone today announced an increased, 60% dividend payout of adjusted earnings per share for FY05/06. Vodafone will continue to target a 60% payout in the future, with increases in dividends linked to the increase in its underlying earnings per share.‘ (Vodafone,
2006a)
Vodafone does both pay dividend as cash and also buy back its shares. In table 9 we can see the dividend payout ratio for the years. Because of the impairment losses in the years ending 3 March 2005 and 2006 the dividend was calculated from adjusted earnings.
It‘s not stated in the press release about the dividend policy if the dividends are to be paid as cash or the shares being bought back. But over the years they have been mixing it up. By buying the shares back, then fewer shares are outstanding and by the law of supply and demand, assuming no other factors present, the price of the share must go up. (Frankfurter, Wansley & Wood, 2003)
5.1.1 Response to Vodafone‘s change in dividend policy
It‘s interesting to see if the share price is affected by the press release Vodafone released.
On the graph here on left the share price from 10 May 2006 – 2 June 2006 is displayed. The share price rised from 1.20 up to 1.27 after the press release was released, which is 5,8%. It‘s though difficult to conlude if that was the change in dividend policy that caused the rise or it was the results for the year that ended 31 March 2006 beacuse a press release regarding the results was released the same day. But certainly the change in dividend policy affected to some extent. (Vodafone, 2008a)
Dividend yield
Dividend yield seeks to assess the cash return on investment earned by the shareholders. To this extent it enables a comparison to be made with other investment opportunities available.
Vodafone is giving a good return for its shareholders, 6.99%, compared to the sectore of wireless telecommunication service in UK, 2.86%. But by comparing Vodafone to its competitors they are on par with Telefonica SA, 6.89%. France Telecom, is with by far better dividend yield, 11.82%. The reason for that could be that they are listed on a stock exchange in another country.
Capital growth
Investors do not just only look at dividends when deciding to invest. They also look for capital growth. Capital growth is the increase in the market price of an asset over a period of time. When looking at the capital growth from 31 March 2004 – 31 March 2008 then we can see that Vodafone has reasonable good rate of return in terms of capital growth, around 10% every year. There is one exception though, from 31 March 2005 – 31 March 2006 the share prices fell around 15%.
It‘s also interesting to see the correlation between the share price of France Telcom and Vodafone, despite being on a seperate market.
- Mergers and acquisitions
Most corporate growth occurs by internal expansion, which takes place when a firm‘s existing divisions grow through normal capital budgeting activities. However, the most dramatic examples of growth, and often the largest increases in firms‘ stock prices, result from mergers. Conditions change over time, causing firms to sell off, or divest, major divisions to other firms that can better utilize the divested assets. (Brigham & Houston, 2004)
Three main types of mergers exist:
A combination of two firms that produce the same type of good or service
A merger between a firm and one of its suppliers or customers.
A merger of companies in totally different industries.
(Brigham & Houston, 2004)
Many reasons have been proposed by financial managers and theorists. Some of the primary motives behind mergers are following:
It‘s when value of two merging company exceeds the value of the companies if they would still be working sperately.
A merger of companies where the main aim is to have greater market power to compete against the competitors.
When company is merging to another company to diversify risk, i.e. often it would be a congomerate merger. It has been argued that companies should stick to what they do best, possibly running current business, and let investors diversify their risk.
Often business managers like power and more power is attached to running a larger corporation than a smaller one.
Merger where the main aim is to increase earnings per share. It‘s often done by merging with a risky company and cross fingers that it will lead to increasing in earnings per share.
Mergers can be either friendly or hostile. Hostile mergers are when the directors of the targeted business resists any merger attempt. Friendly mergers are on the other hand when directors do not try to resist the merger attempt. Most mergers are friendly.
(Becock, 2008)
6.1 Vodafone‘s mergers and acquisitions
Vodfone (2008b) states on its website that they ’will be the communications leader in an increasingly connected world’. So to do so they have to expand all the time and get into new markets and expand on markets they are currently operating on. To do that they have to merge with and take over companies. Through theyear they have been active in doing that.
Vodafone‘s expansion can be best looked by see how much the customer base worldwide has increased. In a press release 4 November 2000 Vodafone stated that the customer base was over 65.75 millions (Vodafone, 2000), but they are around 269 millions today. It‘s increase of 384% in 8 years, which is enormous.
Vodafone have over the years tried to expand by going into emerging market and in May 2007 they entered into the Indian market with full power. (Vodafone, 2008b)
The Indian market
Vodafone had gone into the Indian market to little extent by buying a 5.6% stake in Bharti Airtel Ltd in October 2005. But Vodafone didn‘t come with full force into the Indian market until they acquired 67% stake in a friendly acquisition of India‘s Hutchinson Essar Limited, India‘s fourth largest mobile operator in May 2007. Vodafone paid $11.1 billion to buy a majority stake in the company and added over 34millions of customers to its customer base. Chief executive of Vodafone, Arun Sarin, said in an interview with BBC that the acquisition was: ’clear evidence of how we are executing our strategy of developing our presence in emerging markets.‘ (BBC News, 2007)
In July the same year Vodafone sold its 5.6% equity stake in Bharti Airtel Ltd for $1.6 billionto prevent a conflict of interest. The Vodafone brand was then launched in September 2007. (Vodafone 2005, 2007)
AT&T in USA
In New York Times 17 March 2004 was a news about that Vodafone was seen as favoured buyer of AT&T wireless: AT&T Wireless, the nation's third-largest wireless telephone operator, appears to be leaning toward a buyout offer from the Vodafone Group of Britain, executives close to the talks said last night.’ (Richtel & Ross, 2004)
This acquisition was seen as further expansion on the US market and the market was regarded as less saturated than many markets in Europe and Asia, offering strong growth potential. But Cinculare Wireless won an acution for smaller rival AT&T with a $41 billion offer that edged out Vodfone‘s interest and they withdrew from the auction and stated in a press release in that: ’it was no longer in its shareholder's best interests to continue discussions.‘ (Vodafone, 2004)
Cinculares wireless‘deal was the largest all cash offer in history and would had been one of the biggest acquisition Vodafone had gone into.
Other mergers and acquisitions
Here are some other mergers and acquisition Vodafone has made:
- Telsim Mobil Telekomunikasyon Hizmetleri AS
Vodafone paid $4,5 billion in May 2006 to acquire Turkey‘s second largest telecommunication network provider in a friendly acquisition.
Vodafone paid €2.0 billion for 6.21% stake in January 2003 to acquire 100% ownership of its Spanish Subsidiary in a friendly acquisition.
One of the largest acquisition was an hostile acquisition of the German telecom and engineering giant Mannesmann AG in March 2000. After að few rejected proposals Vodafone acquired 98.62% of Mannesmann share capital in deal reported to be valued around £91 billion.
Conclusion on mergers and acquisitions
Vodafone‘s main mergers and acquisitions are horizontal and friendly and ususally the aim is to increase the market power. In other words, they try to expand by acquiring companies in the same industry and offer same or similar services as they do. Most of their acquisitions are friendly, i.e. in favour of directors in the targeted company.
Their strategy is clearly to expand on current markets and developing their presence in emergin market all in favour to meet their goal of being the communications leader in an increasingly connected world.
7 Efficient markets - Vodafone‘s price
Most countries in the civilized world have a market where shares in local and international businesses can be bought and sold. These markets are called capital markets but are usually referred as stock markets or stock exchanges. These markets also provide a market for purchase and sale of loan stock for priavte sector businesses and governments.
By having this form on the market, the price of the securities being trade with are totally set on the market by the market‘s participants causing pricing efficiency to occur. There‘s a hypothesis, efficient-market hypothesis, which was developed by professor Eugene Fama in the early 1960s. He said that there was three form of market efficiency:
Excess returns can‘t be earned by using investment strategies based on historical share prices, price reflect all past price information.
Share prices adjust to new information available to the public very rapidly.
Share prices reflect all information about the company and no one can earn excess returns
I think it‘s fair to say that most markets are semi-strong efficient and it‘s difficult to find a market which is of strong form efficiency, because there is always inside information available.
(McLaney, 2006)
(Brigham & Houston, 2004)
In this chapter I‘m gonna try to find out what affects the share price, if it‘s changing on good or bad news and try to find out if the company is fairly priced.
7.1 Vodafone‘s share price
The picture above shows the share price movements of Vodafone‘s share in Londont Stock Exchange from end of December 2004 – October 2008 on the blue line and the FTSE 100 on the red line. For that period the return for the share price in vodafone is -16.10% but FTSE 100‘s rate of return is -10.44%. In 2005 Vodafone‘s share prece has far worse rate of return than FTSE 100 and biggest reason for that was a fall in share price of around 10% because it gave a disapointing outlook for the future (see below). From the end of year 2006 we can see that Vodafone‘s share price moves in line with FTSE 100 but on a bit bigger scale. Considering Vodafone‘s beta of 0.93, according to Reuters, that‘s very rational that Vodafone‘s share price moves in line with FTSE 100.
Taking a closer look at the first real drop in price, in November 2005. 15 November Vodafone made an announcement about the result for the six montsh to 30 September 2005. Despite good result for the six months and a promise to increase dividend payout the share price dropped from 143 to 129.95 on the day, a staggering 9.6%. The reason for that was: ’caution from the company came as it said higher levels of mobile phone usage and the greater impact of lower termination rates - calls connected to other networks - were likely to reduce the rate of revenues growth.‘ (Evans, 2005)
It‘s interesting to see the market react as it did although the six months results were good and also anouncement about a rice in dividend payout. In the announcement were both good and bad news but the market only reacted to the bad news.
3 March 2006 Vodafone made an announcement because of speculation regarding its struggling Japanese subsidiary: ’Vodafone confirms it is in discussions regarding a potential sale of a controlling interest in Vodafone Japan to SoftBank. These discussions may or may not lead to a transaction.‘ (Vodafone, 2006b) After this announcement the market reacted and the the share price rose by 8.4% within the day. (BBC News, 2006)
In an interim management statement for the quarter ended 30 June 2008 there was stated: ’As a result of the first quarter performance and recent economic weakness together with lower than expected equipment revenue.’ (Vodafone Group Plc, 2008b)
Following the statement the company‘s shares fell 14% to 129 pence. The day after Vodafone reacted by announcing £1 billion share repurchase programme with immediate effect. The shares rose 3.3% after the announcement.
It‘s clear that the market is reallly quick to react to news and it seems that it reacts more to bad news than to good news. (C114, 2008)
From above examples and having examined the share price movements to various news I would say that the market was efficient. Like I had already stated I think there is difficult to find market that has strong form of efficiency. I would say that the market was semi strong efficent because there are always reactions to news when they are published. It seems to me that there are stronger reactions to bad news rather than good news that results in bigger drop in share price on bad news than rise in price on good news.
I think that in the year 2008 the market is not efficient. Movement in share prices are not rational because investors do not know how to behave on the market. The market has been very irrational all the year because of the global financial crisis and share price movements are not just reflecting news that are published. It seems to be able to go up or down at anytime for no particular reason.
Vodafone‘s true value?
In estimating the true value of the company I‘m going to use the method of discounting estimated future cashflow. To estimate the future cashflow I have to get a few variables sorted:
- Long term growth rate for the company (5 years)
By going to Reuters and look at estimation I can see that Reuters expects long term growth of the company to be 7.7%. Looking at how the economy is today and the fact that we are heading into recession, I would say that was an overstatement. I would that long term growth rate for the company was around 4.5%.
- Free cash flow from last annual report
Free cashflow from last annual report was £5,500m
- Number of outstandind shares
Current number of outstanding shares are 52,470.36m.
- Expected growth rate from year six to year 10
I‘m estimating that in 6 years time the economy will be getting over the recession and the growth will be 3.5%.
I‘m estimating that the growth will be up to 5.5% in 10 years time.
With the average capital growth of Vodafone‘s share of 4.6% in last four years I would expect 7% rate of return if I investing in vodafone for long term.
Estimated cash flow would be following:
Each cashflow would then be discounted with rate of return which would give present value of: 56,939,498,953
The present value divided by number of shares = is the estimated share price.
Comparing that given estimted price of 108.5 pence with the price early on Friday morning 7 November 2008 which was around 110 pence I would estimate that Vodafone‘s share price are fairly priced. But with a bit of a change of properties given above that could change.
- Conclusion
It has been really interesting doing this project. Having never done such an analysis before it was hard to find one point to start. But as the analysis progressed I got more and more familiar with things and got more confidence in my work. But, there‘s one clear thing, that to make a thorough analysis of such a big company as Vodafone is, you need more than 10-15 paper to do that. To be able to understand all the decisions of the company like why is the long term source of finance like it it is today and why is it changeing, you have to dig deep in all sorts of accounts and statements to be able to conclude with confidence why this and that is done. But, this has been really informative work and will help doing next analysis.
I think Vodafone is an interesting company, working on an interesting market. I think the company is well managed and that is resulting in increase in revenues and good profit margins. The competition on the market makes it more and more difficult to get the revenues go upwards all the time and Vodafone has to follow its strategy of reducing cost by all means.
The company‘s long term finance seems to be changing with its changing dividend policy and long term debts are getting more and more weighted by every year. In my opinion they are still funding its long term finance with equity and should find a good balance between debt and equity and by doing that they would get healthier return on equity ratio.
It was really interesting to see how the share price changes to the news on the market which makes the market efficient. In my opinion it will always be semi strong efficient definition of the market since I think there is always an insider who can use information which the public can‘t access. Also it‘s interesting to see that it seems to be that the market reacts more to bad news than good news.
With its brand and market power on the telecomunication market, I think Vodafone has a bright future and is ready to challenge its competitors by going into emerging markets and strengthen their position on current markets.
Appendix A
Balance sheets
Vodafone‘s consolidated balance sheets for 31 March every year from 2005 – 2008.
Appendix C
Sources of finance
Vodafone‘s sources of finance dated 31 March every year from 2005 – 2008 according to Vodafone‘s annual statements for given years.
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Vodafone, (2007) Vodafone is here: Hutch is now Vodafone. [Online] < http://www.vodafone.com/start/media_relations/news/local_press_releases/india/vodafone_essar_press/vodafone_is_here_.html
> [Accessed 30 October 2008]
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> [Accessed 30 October 2008]
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Vodafone Group Plc, (2005) Vodafone Group Plc Annual Report. Vodafone Group Plc
Vodafone Group Plc, (2006) Vodafone Group Plc Annual Report. Vodafone Group Plc
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Vodafone Group Plc, (2008a) Vodafone Group Plc Annual Report. Vodafone Group Plc
Vodafone Group Plc, (2008b) Interim management statement for the quarter ended 30 june 2008
I noticed that net profit margin is not always calculated the same way. It‘s either used net profit before or after long-term interest and tax. I prefer to use it after tax since it‘s better for using the data from Reuters.
‘The Group’s policy is to use derivative instruments (primarily interest rate swaps) to convert a proportion of its fixed rate debt to floating rates in order to hedge the interest rate risk arising, principally, from capital market borrowings. The Group designates these as fair value hedges of interest rate risk with changes in fair value of the hedging instrument recognised in the income statement for the period together with the changes in the fair value of the hedged item due to the hedged risk, to the extent the hedge is effective. The ineffective portion is recognised immediately in the income statement.‘ (Vodafone, 2008a, p95)
