Corporate Analysis – Vodafone

This assessment is part of Corporate Finance module in phase 1 in MSc Finance and Investment at University of Brighton 2008-2009. The main emphases of this assessment is to make written report that comments on a specific company’s financial performance and future prospects. The company I chose to report about is Vodafone Group Plc, which is listed on the London Stock Exchange and part of the FTSE 100 index.

The reason for I chose Vodafone Group Plc is because I think the market that the company operates on is very interesting, i. e. the fact that the company relies heavily on technology and the competition on the market is enormous. In this assessment I’m gonna try to recognise the company’s strengths and its weaknesses by using accounting statements and ratio analysis. Try to estimate how well the company is doing compared to its competitiors and the market as a whole. Get to know how the company is financed long term and how its gearing is. I’m gonna try to estimate if the company is priced fairly, get to know the company’s dividend policy and find out the stragedy the comany follows in mergers, acquisitions and corporate restrucuturing.

To cover all these things I’m going to use theories and principal that has been taught in the course and use other sources like library and internet to find references. In the analysis I will use Reuters to support my calculation of ratios and other things. 2. About the company Like I mentioned above I chose to make a report about Vodafone Group Plc, which I will hereafter most often refer to as Vodafone. Vodafone was formed in 1984 as a subsidiary of Racal Electronics Plc.

Then known as Racal Telecom Limited, approximately 20% of the company’s capital was offered to the public in October 1988. It was fully demerged from Racal Electronics Plc and became an independent company in September 1991, at which time it changed its name to Vodafone Group plc. Following it s merger with AirTouch Communications, Inc. (Air Touch’), the company changed its name to Vodafone AirTouch Plc on 29 June 1999 and, following approval by the shareholders in General Meeting reverted to its former name, Vodafone Group Plc, on 28 july 2000.

Vodafone Group Plc, hereafter called Vodafone, is the world’s leading mobile telecommunications company, with a significant presence in Europe, the Middle East, Africa, Asia Pacific and the United States through the Company’s subsidiary undertakings, joint ventures, associated undertakings and investments. Vodafone has categorized its main services and products in four different categories:

The services that Vodafone provides are accessed on a wide range of handsets, i. e. mobile phones, equipment to connect to the internet and so on. (Vodafone, 2008c) At 30 June 2008, based on the registered customers of mobile telecommunications ventures in which it had ownership interests at that date, the Group had 269 million customers. In almost every civilized country in the world people are aware of the brand Vodafone and in 2007 Vodafone was ranked as 22nd biggest brand in the world by one of the world’s leading research companies, Millward Brown. The brand was estimated to be worth 21,107,000,000 dollars.

Vodafone topped the list of brands from UK beating of competition from the likes of HSBC, Tesco and Marks ; Spencer. (Millward Brown, 2007) 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 capitalisation of approximately i?? 79 billion at 30 June 2008. (Vodafone, 2008b) 3. Analysis of company performance In this chapter Vodafone’s performance will be analyzed using accounting statements and ratio analysis.

The analysis is supposed to bring forward the company’s strengths and weaknesses, compare its performance with that of other companies in the same industry and evulating what has been happening in the company over the period. First of all I’m gonna look at profitability ratios. Profitability is the net result of a number of policies and decisions by the company and probably the best measure how the company is performing. Looking at figures from the profit and loss account we see that it has been operating proft for last four years around i?? 10,000m.

Revenue and operating costs have been increasing a bit in proportion to each other. According to this graph the business seems to be in a stable condition and is growing litle year by year. The only interesting fact from the graph is that how dramatically the depreciation increases from 31 March 2005 to 31 March 2006. According to the company’s annual report in 2006 an impairment charge was recorded to the carrying value of goodwill in the company’s operations in Germany and Italy reflecting a revision of the Group’s view of the prospects for these businesses, particularly in the medium to long term.

These actions affect the the balance sheet and I will not analyze these actions further and will use data from Reuters to calculate ratios. Like can be seen on the graph, and on the consolidated profit and loss account in Appendix B the depreciation are higher than operating costs. Figures from the profit and loss accounts in recent years. Like I said last four years the business seems to be in stable phase and growing little by little year by year. To see if that’s really what is happening in the company I’m gonna analyze it further by take a look at some ratios and interpret it.