Vodafone 2005 Annual Report Download - page 11

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Strategy |9
Increasing shareholder returns
Overall, the business is performing well. We are generating strong cash flows and,
through our focus on customers and leveraging our scale and scope, we continue to
see strong growth prospects for the business.
These factors have enabled us to deliver a substantial increase in shareholder returns
in the year. At our interim results we doubled the dividend and indicated we would do
the same for the final dividend, which we have now proposed for approval at the AGM.
In addition to increasing the dividend, we re-purchased £4 billion of our shares in the
year to March 2005. The result was an increase in cash returns to shareholders
compared to the previous year from £2.3 billion to £6 billion.
Through our shareholder returns policy, we wish to continue to provide shareholders
with a mix of dividends and share purchases, whilst retaining flexibility within our debt
capacity to pursue selective acquisition opportunities should they arise. Given our
strong financial position, we see no need for the business to reduce absolute levels of
debt in the future.
Having increased the dividend by 100% in the year, we currently expect future
increases in dividends to be in line with underlying growth in earnings. We also intend
to continue to purchase shares on an ongoing basis, although this is subject to gaining
shareholder approval each year. For the year to March 2006, we are targeting another
£4.5 billion of share purchases. Given our expectations for cash generation in the year
ahead, we would expect shareholder returns to represent a pay out ratio of
approximately 100%.
Expanding market boundaries
The proposed acquisition of TIW’s mobile interests in Romania and the Czech Republic
is very much in line with our acquisition strategy, focusing on selected opportunities,
primarily in Central and Eastern Europe. These businesses are fast growing and we
believe they will benefit fully from the global services and scale benefits that our Group
can deliver. Retaining financial flexibility to pursue these incremental opportunities
enables us to act quickly and decisively when the ability to enhance shareholder
value arises.
Executing our strategy
We have made excellent progress in executing against our strategic goals in the year
but there is still much to do. We have restructured the business to more closely align
ourselves to these goals and have outstanding and passionate leaders and people in
the organisation to deliver them. Our commitment to deliver on our goals is underlined
by our values, which state that everything we do is driven by our passion for
customers, our people, results and the world around us.
Outlook
For the year ahead, we see continued good growth in mobile revenue. We expect to
add approximately a further £5 billion of fixed assets as we continue to expand our 3G
networks. Free cash flow is anticipated to be in the £6.5 billion to £7 billion range,
with a lower level of dividends expected from Verizon Wireless combined with higher
cash expenditure on taxation and fixed assets offsetting growth in operating cash flow.
This year Vodafone has taken important steps to deliver ongoing growth and increased
shareholder returns. The future for mobile telecommunications is both challenging and
exciting. We face increasing competition and differing regulatory environments but the
opportunities for us remain significant. We are in a unique position and, through our
launch of 3G and the establishment of One Vodafone, we are creating platforms to
deliver differentiated services to the benefit of both our customers and shareholders.
Arun Sarin
Chief Executive
March 2005
March 2004
March 2003
£1.3bn £1.0bn
£1.1bn £nil
£4bn
Cash Dividends Cash Share Purchases
£2bn
Total
£6bn
Total
£2.3bn
Total
£1.1bn
Delight our
Customers
Leverage Scale
and Scope
Build the Best
Global Vodafone Team
Provide Superior
Shareholder Returns
Be a Responsible
Business
Expand Market
Boundaries
•Consumer launch of 3G; launch of
Vodafone Simply; expanding business
services; simplifying tariffs
•Implementing One Vodafone; launch of
new roaming proposition
•Acquiring control in Romania and Czech
Republic; extending Partner Networks
•Simplifying management structure to
focus on customers and deliver on
strategic goals
•Integrating Corporate Responsibility
into the business
•Doubled the dividend and increased
share purchases to £4bn in the year
Cash returns to shareholders Executing our strategic goals