Vodafone 2005 Annual Report Download - page 50

Operating and Financial Review and Prospects continued
48 |Performance
on a weighted average price method, is attributed to distributable profits which would
not occur for the sale of non-treasury shares. Any excess above the original purchase
price must be transferred to the share premium account.
Vodafone Italy share purchase
On 19 April 2005, the Board of directors of Vodafone Italy approved a proposal to buy
back issued and outstanding shares for approximately €7.9 billion (£5.4 billion). If the
proposal is approved by the shareholders of Vodafone Italy, participation will be invited
on a pro rata basis. In accordance with Dutch and Italian corporate law the buy back
will take place in two tranches, the first in June 2005 and the second expected to be in
October 2005. After the transaction is completed the Company and Verizon
Communications Inc. will continue to hold approximately 77% and 23%, respectively, of
Vodafone Italy indirectly through their wholly owned subsidiaries. It is anticipated that
the buy back will be funded from currently available and forecast available cash of
Vodafone Italy. At 31 March 2005, Vodafone Italy had net cash on deposit with Group
companies of €7.2 billion (£4.9 billion).
Funding
The Group’s consolidated net debt position at 31 March 2005 reduced marginally to
£8,339 million, from £8,488 million at 31 March 2004, principally as a result of the
cash flow items above, share purchases, equity dividend payments and £143 million of
foreign exchange movements. This represented approximately 9% of the Group’s
market capitalisation at 31 March 2005 compared with 10% at 31 March 2004.
Average net debt at month end accounting dates over the twelve month period ended
31 March 2005 was £8,350 million, and ranged between £7,472 million and £8,994
million during the year.
A further analysis of net debt, including a full maturity analysis, can be found in notes
18 and 19 to the Consolidated Financial Statements.
The Group remains committed to maintaining a solid credit profile, as currently
demonstrated by its stable credit ratings of P-1/F1/A-1 short term and A2/A/A long
term from Moody’s, Fitch Ratings and Standard & Poor’s, respectively. Credit ratings
are not a recommendation to purchase, hold or sell securities, in as much as ratings do
not comment on market price or suitability for a particular investor, and are subject to
revision or withdrawal at any time by the assigning rating organisation. Each rating
should be evaluated independently.
The Group’s credit ratings enable it to have access to a wide range of debt finance,
including commercial paper, bonds and committed bank facilities.
Commercial paper programmes
The Group currently has US and euro commercial paper programmes of $15 billion and
£5 billion, respectively, which are available to be used to meet short term liquidity
requirements and which were undrawn at 31 March 2005 and 31 March 2004. The
commercial paper facilities are supported by $10.4 billion (£5.5 billion) of committed
bank facilities, comprised of a $5.5 billion Revolving Credit Facility that matures on
24 June 2009 and a $4.9 billion Revolving Credit Facility that matures on 26 June
2006. As at 31 March 2005, no amounts had been drawn under either facility.
Bonds
The Group has a €15 billion Medium Term Note programme and a $12 billion US shelf
programme, both of which are used to meet medium to long term funding
requirements. At 31 March 2005, amounts of €9.2 billion and $nil, respectively, were
in issue from these programmes. No bonds were issued under either programme in
the 2005 financial year.
On 29 September 2004, the Group filed a Shelf Registration Statement in Japan for a
¥600 billion shelf programme which became effective from 7 October 2004. No bonds
have been issued under this programme.
At 31 March 2005, the Group had capital market debt in issue with a nominal value of
£10,582 million.
Committed facilities
The following table summarises the committed bank facilities currently available to the
Group.
Committed Bank Facilities Amounts drawn
29 November 2001
¥225 billion term credit facility, maturing The facility was drawn down in full on
15 January 2007, entered into by 15 October 2002. The facility is
Vodafone Finance K.K. and guaranteed available for general corporate
by the Company. purposes, although amounts drawn
must be on-lent to the Company.
24 June 2004
$5.5 billion Revolving Credit Facility, No drawings have been made
maturing 24 June 2009. against this facility. The facility
supports the Group’s commercial
paper programmes and may be used
for general corporate purposes
including acquisitions.
24 June 2004
$4.9 billion Revolving Credit Facility, No drawings have been
maturing 26 June 2006. made against this facility. The
facility supports the Group’s
commercial paper programmes and
may be used for general corporate
purposes including acquisitions.
Under the terms and conditions of the $10.4 billion committed bank facilities, lenders
have the right, but not the obligation, to cancel their commitments and have
outstanding advances repaid no sooner than 30 days after notification of a change of
control of the Company. The facility agreements provide for certain structural changes
that do not affect the obligations of the Company to be specifically excluded from the
definition of a change of control. This is in addition to the rights of lenders to cancel
their commitment if the Company has committed an event of default.
Substantially the same terms and conditions apply in the case of Vodafone Finance
K.K.’s ¥225 billion term credit facility, although the change of control provision is
applicable to any guarantor of borrowings under the term credit facility. As of
31 March 2005, the Company was the sole guarantor.
In addition, Vodafone Japan has a fully drawn bilateral facility totalling ¥8 billion
(£40 million) which expires in January 2007.
Furthermore, two of the Group’s subsidiary undertakings are funded by external
facilities which are non-recourse to any member of the Group other than the borrower,
due to the level of country risk involved. These facilities may only be used to fund their
operations. Vodafone Egypt has a partly drawn (EGP550 million (£50 million))
syndicated bank facility of EGP1.2 billion (£110 million) that fully expires in September
2007, and Vodafone Albania has partly drawn (€60 million (£41 million)) syndicated
bank facilities of €85 million (£58 million) that expire at various dates up to and
including October 2012.
During the 2005 financial year, Vodafone Hungary fully repaid and cancelled its
syndicated bank facility of €350 million.
In aggregate, the Group has committed facilities of approximately £6,814million, of
which £5,572 million was undrawn at 31 March 2005.