Vodafone 2008 Annual Report Download - page 59

Funding
The Group’s consolidated net debt position at 31 March was as follows:
2008 2007
£m £m
Cash and cash equivalents (as presented in the
Consolidated Balance Sheet) 1,699 7,481
Trade and other receivables(1) 892 304
Trade and other payables(1) (544) (219)
Short term borrowings (4,532) (4,817)
Long term borrowings (22,662) (17,798)
(26,846) (22,530)
Net debt shown in the Consolidated Balance Sheet (25,147) (15,049)
Note:
(1) Trade and other receivables and payables included in net debt represent certain derivative
financial instruments (see notes 17 and 27 to the Consolidated Financial Statements).
(2) The amount for the 2008 financial year includes £2,625 million related to put options over
minority interests, including those in Vodafone Essar and Acror, which are reported as
financial liabilities.
At 31 March 2008, the Group had £1,699 million of cash and cash equivalents,
with the decrease since 31 March 2007 being due to the holding of funds at
31 March 2007 prior to the completion of the Vodafone 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 2008 were money market
funds, commercial paper and bank deposits.
Net debt increased to £25,147 million, from £15,049 million at 31 March 2007,
as the impact of business acquisitions and disposals, movements in the liability
related to written put options and equity dividend payments were partially offset
by free cash flow. The impact of foreign exchange rates increased net debt by
£3,238 million, primarily as approximately 80% of net debt is denominated in euro
and the euro/£ exchange rate increased by 17.2% during the 2008 financial year.
Net debt represented approximately 31% of the Group’s market capitalisation
at 31 March 2008 compared with 16% at 31 March 2007. Average net debt at
month end accounting dates over the 12 month period ended 31 March 2008
was £22,194 million and ranged between £14,876 million and £25,147 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. 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 2008, €1,686 million (£1,342 million), £81
million and £33 million equivalent of other currencies were drawn under the euro
commercial paper programme, with such funds being provided by counterparties
external to the Group. There were no drawings under the US commercial paper
programme. 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. The commercial paper
facilities were supported by $11.3 billion (£5.7 billion) of committed bank facilities
(see “Committed facilities” below), comprised of a $6.1 billion Revolving Credit
Facility that matures on 24 June 2009 and a $5.2 billion Revolving Credit Facility
that matures on 22 June 2012. At 31 March 2008 and 31 March 2007, no amounts
had been drawn under either bank facility. On 8 May 2007, these facilities were
increased from $5.9 billion and $5.0 billion, respectively.
Bonds
The Group has a €25 billion Euro Medium Term Note programme and a US shelf
programme, which are used to meet medium to long term funding requirements.
At 31 March 2008, the total amounts in issue under these programmes split by
currency were $13.0 billion, £1.5 billion, €10.3 billion and AUD$ 0.3 billion.
In the year to 31 March 2008, bonds with a nominal value of £1.6 billion were
issued under the US shelf and the Euro Medium Term Note programme.
The bonds issued during the year were:
US shelf/
Euro Medium
Term Note
Amount (“EMTN”)
Date of bond issue Maturity of bond Currency Million programme
6 June 2007 6 June 2014 EUR 1,250 EMTN
6 June 2007 6 June 2022 EUR 500 EMTN
24 October 2007 27 February 2037 USD 500 US shelf
At 31 March 2008, the Group had bonds outstanding with a nominal value of
£17,143 million. On 13 May 2008, the Group issued €250 million of 3.625% bonds
maturing on 29 November 2012.
Committed facilities
The following table summarises the committed bank facilities available to the
Group at 31 March 2008.
Committed bank facilities Amounts drawn
24 June 2004
$6.1 billion Revolving Credit No drawings have been made against this
Facility, maturing 24 June 2009. facility. The facility supports the Group’s
commercial paper programmes and may
be used for general corporate purposes,
including acquisitions.
24 June 2005
$5.2 billion Revolving Credit No drawings have been made against this
Facility, maturing 22 June 2012. facility. The facility supports the Group’s
commercial paper programmes and may
be used for general corporate purposes,
including acquisitions.
21 December 2005
¥258.5 billion Term Credit The facility was drawn down in full on
Facility, maturing 16 March 2011, 21 December 2005. The facility is available
entered into by Vodafone for general corporate purposes, although
Finance K.K. and guaranteed amounts drawn must be on-lent to the
by the Company. Company.
16 November 2006
€0.4 billion Loan Facility, The facility was drawn down in full on
maturing 14 February 2014 14 February 2007. The facility is available
for financing capital expenditure in the
Group’s Turkish operating company.
Under the terms and conditions of the $11.3 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. This is in addition to the rights of lenders
to cancel their commitment if the Company has committed an event of default.
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.
Substantially the same terms and conditions apply in the case of Vodafone
Finance K.K.’s ¥258.5 billion term credit facility, although the change of control
provision is applicable to any guarantor of borrowings under the term credit facility.
Additionally, the facility agreement requires Vodafone Finance K.K. to maintain a
positive tangible net worth at the end of each financial year. As of 31 March 2008,
the Company was the sole guarantor.
Vodafone Group Plc Annual Report 2008 57