Vodafone 2011 Annual Report Download - page 51

Vodafone Group Plc Annual Report 2011 49
Performance
between debt levels and maturities, and overall market conditions in the
context of the five year business plan. It is expected that Verizon Wireless’
free cash flow will be deployed in servicing and reducing debt in the
near term.
During the year ended 31 March 2011 cash dividends totalling £373 million
(2010: £389 million) were received from SFR. Following SFR’s purchase of
Neuf Cegetel it was agreed that SFR would partially fund debt repayments
by a reduction in dividends between 2009 and 2011 inclusive. In April
2011 we announced an agreement to dispose of our 44% interest in SFR.
We will also receive a final dividend from SFR of €200 million (£176 million)
on completion of the transaction. Future cash flows will be reduced by the
loss of dividends from SFR.
Verizon Communications Inc. has an indirect 23.1% shareholding in
Vodafone Italy and under the shareholders’ agreement the shareholders
have agreed to take steps to cause Vodafone Italy to pay dividends at least
annually, provided that such dividends will not impair the financial
condition or prospects of Vodafone Italy including, without limitation, its
credit standing. During the 2011 financial year Vodafone Italy paid
dividends net of withholding tax totalling €325 million to Verizon
Communications Inc.
Given Vodacom’s strong financial position and cash flow generation, the
Vodacom board has decided to increase its dividend payout ratio
from 40% to approximately 60% of headline earnings for the year ended
March 2011.
Acquisitions
We invested £183 million (2010: £1,777 million), net of cash and cash
equivalents acquired, in acquisition activities during the year.
Other significant transactions
On 10 September 2010 we sold our entire 3.2% interest in China Mobile
Limited for a total consideration of £4.3 billion before tax and transaction
costs. Future cash flows will be reduced by the loss of dividends from China
Mobile Limited.
On 9 November 2010 we agreed to sell to SoftBank Corp. of Japan our
interests which were originally received as part of the proceeds from the
sale of Vodafone Japan in 2006, for a total consideration of ¥412.5 billion
(£3.1 billion). ¥212.5 billion (£1.6 billion) of the consideration was received
in December 2010 and ¥200 billion (£1.5 billion) is expected to be received
in April 2012.
On 30 March 2011 the Essar Group exercised its underwritten put option
over 22.0% of Vodafone Essar Limited (‘VEL’) following which, on 31 March
2011, we exercised our call option over the remaining 11.0% of VEL owned
by the Essar Group. The consideration due under these two options is
US$5 billion (£3.1 billion). The Group does not believe that there is any legal
requirement to withhold tax in respect of these transactions but as discussed
in detail under ‘Legal proceedings’ on page 122, if the Authority for
Advanced Rulings directs tax to be withheld, this amount is anticipated to be
approximately an additional US$1 billion.
On 3 April 2011 we announced an agreement to sell our entire 44% interest
in SFR to Vivendi for a cash consideration of €7.75 billion (£6.8 billion).
Subject to customary competition authority and regulatory approvals,
the transaction is expected to complete during the second calendar quarter
of 2011.
Treasury shares
The Companies Act 2006 permits companies to purchase their own shares
out of distributable reserves and to hold shares in treasury. While 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.
Following the disposal of our 3.2% interest in China Mobile Limited on
10 September 2010, we initiated a £2.8 billion share buyback programme
under the authority granted by our shareholders at the 2010 AGM. In
addition to ordinary market purchases, the Group placed irrevocable
purchase instructions with a number of banks to enable the banks to buy
back shares on our behalf when we may otherwise have been prohibited
from buying in the market. Details of the shares purchased to date, including
those purchased under irrevocable instructions, are shown below:
Date of share purchase
Number of
shares
purchased(1)
’000
Average price
paid per share
inclusive of
transaction
costs
Pence
Total number
of shares
purchased
under share
repurchase
programme(2)
’000
Maximum
value of shares
that may yet
be purchased
under the
programme(3)
£m
September 2010 115,400 161.78 115,400 2,613
October 2010 187,500 165.50 302,900 2,303
November 2010 209,400 170.21 512,300 1,947
December 2010 162,900 167.44 675,200 1,674
January 2011 177,090 176.67 852,290 1,361
February 2011 134,700 179.23 986,990 1,120
March 2011 250,900 177.26 1,237,890 675
April 2011 135,100 176.81 1,372,990 436
May 2011 127,000 170.14 1,499,990 268
Total 1,499,990(4) 172.01 1,499,990 220
Notes:
(1) The nominal value of shares purchased is 11 3/7 US cents each.
(2) No shares were purchased outside the publicly announced share buyback programme.
(3) In accordance with shareholder authority granted at the 2010 AGM.
(4) The total number of shares purchased represents 2.9% of our issued share capital at 16 May 2011.
The aggregate amount of consideration paid by the Company for the shares
at 16 May 2011 was £2,580 million.
Following the announcement of the agreement to dispose of our 44%
interest in SFR on 3 April 2011, we also announced that we will return
£4 billion of the net proceeds to shareholders by way of a share buyback
programme. This programme will commence following completion of the
existing £2.8 billion programme.
Shares purchased are held in treasury in accordance with sections 724 to
732 of the Companies Act 2006 and are cancelled in accordance with the
Association of British Insurers guidelines. The movement in treasury shares
during the year is shown below:
Number
Million £m
1 April 2010 5,146 7,810
Reissue of shares (150) (232)
Purchase of shares 1,238 2,125
Cancelled shares (1,000) (1,532)
31 March 2011 5,234 8,171
Funding
We have maintained a robust liquidity position throughout the year thereby
enabling us to service shareholder returns, debt and expansion through
capital investment. This position has been achieved through continued
delivery of strong operating cash flows, the impact of the working capital
reduction programme, issuances of short-term and long-term debt, and
non-recourse borrowing assumed in respect of the emerging market
businesses. It has not been necessary for us to draw down on our syndicated
committed bank facilities during the year.