Financial Analysis of
Vodafone Group Plc
This is a financial analysis of Vodafone Group Plc based on
the group’s annual report for the financial year ended 31st March 2012.
Student ID 0173061
Lecturer: Orla Lenihan
Vodafone Group Plc who in 1985 made its first mobile telephone call is today a global communications company serving over 404 million customers in more than 30 countries across 5 continents in which they operate in. In 1991 Vodafone enabled the first international mobile roaming call and to support that Vodafone have partners in a further 40 countries which allow it to extend its network beyond its equity interests. Vodafone is one of the world’s largest retailers with around 14,000 stores and the brand is rated as the most valuable telecoms brand in the world valued at $30bn, brand rating AAA+ (Brand Finance).Vodafone’s headquarters is in Paddington, London and employs over 86,000 worldwide. Vodafone Group Plc (VOD) is listed on the London Stock Exchange and the NASDAQ (ADR) in New York and has a current share price of 158.70 as of 25/11/2012 on the London Stock Exchange (LSE).
• Revenue for 2012 was over 46 billion sterling and Operating profit 11.5 billion sterling • Gross Savings of 12% on European costs over two years
• One supply chain with £4.8bn in cumulative saving over 6 years • Dividends per share growth of 7%
• Gained market share in 5/7 markets
• Service revenue growth of 15%
• Free Cash flow of £6.1bn
• Share £6.8bn buyback programme nearing completion
• Special Dividend 4p per share from Verizon Wireless 44% stake • EPS 13.74 pence basic and 13.65 pence diluted (special dividend excluded) • Dividend growth forecasted at 7% for 2013
• Consensus among 35 investment analyst is that Vodafone will outperform market • 89% of European Population now covered by Vodafone 3G
• Data user grown to 108 million and data revenue by 22%
• £6bn per year invested acquiring 4G Spectrum Licenses investing in IT and R&D • Revenue in emerging markets grew by 13.2%
For full list of ratios please refer to appendix
Activity and Liquidity
Receivable days for Vodafone is at 30.54 days for 2012, which is an improvement of 3 days 2011 It is which
worth noting that 81% of Vodafone’s customers are on prepaid representing 28% of service revenue customers
and 12% of customers are on contract representing 33% of service revenue. Payable days have remained consistent at 52 days, Inventory days unchanged at 3.65 days although not highly relevant Inventory
as majority of Vodafone revenue comes from services rather than handset sales ( 92% 2012, 93% vices
2011). All these are compared in chart 1 below against Telefonica SA one of Vodafone’s competitors.
Receivable, Payable & Inventory Days
Chart 1 Vodafone Vs Telefonica
Using these three ratios, the Cash Cycle ratio at 25.47 shows strong cash flow generation. Further these
emphasising this is the Quality of profits ratio at 1.1:1, although down from 2011 it is nevertheless a critical indicator of Vodafone’s ability to generate cash from its trading activity. Current ratio is at 0.83 up from 0.62 in 2011 which is a good improvement although still under 1 and some way off the prudent 1.5. However receivable days and payable days ratios are good and inventory is low, which alleviates any concern with the current ratio. See table 1 for comparison with competitor Telefonica ny
Quality of Profits
Table 1 Vodafone Vs Telefonica
Since 2010, Vodafone identified 6 non...
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