Financial Eveluation of Vodafone

3291 words 14 pages
Finance analysis of the performance of Vodafone Group Plc.

Current Position
Chief Executive Comments
Ratio Analysis Profitability Liquidity and Control of Working Capital Return on Capital Investors' Ratios
Sources of long-term finance
Shareholders wealth
Dividend Policy
Mergers and Acquisitions
Efficient Market – are Vodafone's share priced fairly
Future prospects


This project sets out to give an overview of the current financial position of Vodafone Group plc and its prospects. The position is analyzed by looking at accounting ratios over the last few years, and by an examination of sources of long term finance, gearing, shareholders wealth, dividend policy and
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We are also encouraged with the progress of Vodafone live! where today we have more than 2 million customers and expect further adoption and usage from the forthcoming wider range of lower priced handsets."

It is only to be expected that the CEO will take an upbeat line, and it may be fully justified. This report aims to test the company's financial position against a wider range of metrics based on data obtained from Bloomberg, Vodafone and Bized.

a. Profitability

i. Gross Margin (Net income / Revenue)

2001 42%
2002 41.14%
2003 41.08%

Gross profit levels have been reasonable static over the last three years, showing that the market is resilient and growing and that unit costs are under control. They also indicate that the market has some way to go yet before it matures and margins come under pressure.

ii. Operating Margin (Operating income / Revenue)

2001 -41.74%
2002 -25.79%
2003 -15.8%

This set of figures gives an indication of the pressure that the company's finances have been subjected to by the need to service high levels of debt. While profitability has been good, the benefits of that for the company's day to day operations have been more than completely wiped out in the last three years, leading to an acute shortage of working capital. The good news is that the trend is now firmly in the right direction.

iii. Pre-Tax Profit Margin