Vodafone 2007 Annual Report Download - page 57

Vodafone Group Plc Annual Report 2007 55
31 March 2007. During such time that the remaining B shares are
outstanding, they will accrue a non-cumulative dividend at the rate of 75%
of sterling LIBOR, payable semi-annually in arrears until redemption. The
Company has the right to redeem all remaining B shares by 5 August 2008.
Other returns
As a result of targeting a lower credit rating in May 2006 and the £9 billion
special distribution, the Group has no current plans for further share
purchases or other one-off shareholder returns. The Board will periodically
review the free cash flow, anticipated cash requirements, dividends, credit
profile and gearing of the Group and consider additional shareholder
returns.
Treasury shares
The Companies Act 1985 permits companies to purchase their own shares
out of distributable reserves and to hold shares with a nominal value not to
exceed 10% of the nominal value of their issued share capital in treasury. If
shares in excess of this limit are purchased they must be cancelled. Whilst
held in treasury, no voting rights or pre-emption rights accrue and no
dividends are paid in respect of treasury shares. Treasury shares may be sold
for cash, transferred (in certain circumstances) for the purposes of an
employee share scheme, or cancelled. If treasury shares are sold, such sales
are deemed to be a new issue of shares and will accordingly count towards
the 5% of share capital which the Company is permitted to issue on a non
pre-emptive basis in any one year as approved by its shareholders at the
AGM. The proceeds of any sale of treasury shares up to the amount of the
original purchase price, calculated on a weighted average price method, is
attributed to distributable profits which would not occur in the case of the
sale of non-treasury shares. Any excess above the original purchase price
must be transferred to the share premium account. The Company did not
repurchase any of its own shares, between 1 April 2006 and 31 March 2007.
Shares purchased are held in treasury in accordance with section 162 of the
Companies Act 1985. The movement in treasury shares during the financial
year is shown below:
Number
million £m
1 April 2006 6,133 8,198
Consolidation of shares (762) –
Re-issue of shares (120) (151)
31 March 2007 5,251 8,047
Funding
The Group’s consolidated net debt position for continuing operations is as
follows:
2007 2006
£m £m
Cash and cash equivalents (as presented in the
consolidated cash flow statement) 7,458 2,932
Bank overdrafts 23 18
Cash and cash equivalents for discontinued
operations –(161)
Cash and cash equivalents (as presented in the
consolidated balance sheet) 7,481 2,789
Trade and other receivables(1) 304 310
Trade and other payables(1) (219) (219)
Short term borrowings (4,817) (3,448)
Long term borrowings (17,798) (16,750)
(22,530) (20,107)
Net debt as extracted from the consolidated
balance sheet (15,049) (17,318)
Note:
(1) Trade and other receivables and payables include certain derivative financial instruments (see
notes 17 and 27 to the Consolidated Financial Statements).
At 31 March 2007, the Group had £7.5 billion of cash and cash equivalents,
with the increase since 31 March 2006 being due to the funding
requirements in relation to the completion of the Hutchison Essar
transaction, which occurred on 8 May 2007. Cash and cash equivalents are
held in accordance with the Group treasury policy.
The Group holds its cash and liquid investments in accordance with the
counterparty and settlement risk limits of the Board approved treasury
policy. The main forms of liquid investments at 31 March 2007 were money
market funds, commercial paper and bank deposits.
Net debt decreased to £15,049 million, from £17,318 million at 31 March
2006, principally as a result of the cash flow items noted above, partly offset
by equity dividend payments and £367 million of adverse foreign exchange
movements. This represented approximately 16% of the Group’s market
capitalisation at 31 March 2007 compared with 24% at 31 March 2006.
Average net debt at month end accounting dates over the 12 month period
ended 31 March 2007 was £15,631 million, and ranged between
£9,835 million and £20,229 million during the year.
Consistent with the development of its strategy, the Group targets low
single A long term credit ratings, with its current credit ratings being
P-2/F2/A-2 short term and Baa1 stable/A- stable/A- stable long term from
Moody’s, Fitch Ratings and Standard & Poor’s respectively. Following the
acquisition of Hutchison Essar, Moody’s downgraded their long term credit
rating for the Group from A3 to Baa1 on 16 May 2007. 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. At 31 March 2007, $26 million
(£13 million) was drawn under the US commercial paper programme and
€1,531 million (£1,040 million) and £50 million were drawn under the euro
commercial paper programme. At 31 March 2006, $696 million
(£400 million) was drawn under the US commercial paper programme and
$80 million (£46 million) and £285 million were drawn under the euro
commercial paper programme. The commercial paper facilities were
supported by $10.9 billion (£5.6 billion) of committed bank facilities (see
“Committed facilities” below), comprised of a $5.9 billion Revolving Credit
Facility that matures on 24 June 2009 and a $5.0 billion Revolving Credit
Facility that matures on 22 June 2012. At 31 March 2007 and 31 March
2006, no amounts had been drawn under either bank facility. On 8 May
2007, the Group’s $5.9 billion Revolving Credit Facility was extended to
$6.1 billion and the $5.0 billion Revolving Credit Facility was extended to
$5.2 billion.
Bonds
The Group has a €25 billion Euro Medium Term Note programme and a
$12 billion US shelf programme, which are used to meet medium to long
term funding requirements. At 31 March 2007, the total amounts in issue
under these programmes split by currency were $16.5 billion, £1.5 billion,
€9.3 billion and AUD 0.3 billion.
Performance