Vodafone 2012 1Q financial analysis
|2012 May 23||Posted by admin under 2012 1Q, Services, UK, Vodafone|
Vodafone 2012 Q1 (yearly) results are negative. Although yearly revenue has increased from 45,9 bn.£ to 46,4 bn.£ (Δ+1,2%), but main indicator Net Income before Depreciation has decreased from 15,8 bn.£ to 14,9 bn.£ (Δ-5,6%). Income analysis is quite poor because company provides only revenue date on quarterly basis. And half year analysis show very differences at 1st half and 2nd half, so only yearly result analysis can be done. Companies fiscal year is at Q1. Also this is the first company that I analyse which has financial statements in other then $ currency.
Companies main segment Voice 55% has decreased from 27,2 bn.£ to 26 bn.£ but other segments grew more which lead to revenue increase. Main companies revenue ~70% comes from Europe market which should fall in rescission in Y2012. Two large market countries Spain and Italy will be hit the most takes 22% of companies revenue. UK and Germany which should show small growth takes 30%. Remaining markets are South Africa and India (former British colonies).
A factor that makes companies evaluation the most complicated is 45% ownership of US company Verizon Wireless. This companies yearly revenue was 18 bn.£ with increase of 4,6% and Net Income before depreciation is 7,2 bn.£ with increase of 6%. Vodafone share of Net Income before depreciation would be 3,2 bn.£. This company has paid 10 bn.$ of dividends to its shareholders Vodafone received 45% of that 4,5 bn.$ or around 2,8 bn.£. It is doubtful that this company will manage to pay such dividends in the futures but ~2 bn.£ would be reasonable, these dividend is already calculated into companies income. If this company would be included into group fully then companies results and geography diversification would be considered as good only lacking China which holdings was sold at China, French, Japan and Poland because company did not had the majority at these companies. In general companies results are negative.
Companies balance sheet looks normal. Company provides only with half-year balance sheet information. Equity level is steady around 56-57%. Liquidity ratio at the moment is 0,8 but has increased from 2009 Q3 0,5 by increasing current asset and decreasing short term liabilities. After 2010 Q3 companies total asset has steadily declined so as companies equity level due to quite aggressive own share repurchase with 4,6 bn.£ + 6,9 bn.£ paid dividends company has outputted 11,5 bn.£ of its earnings which is 77% from Net Income before depreciation and 164% of Net Income which is half lower due to high depreciation cost ~8 bn.£/year lead by telecommunication sector demand for large investments. Decrease of equity is bad for the company in long term as it shrinks companies ability of expansion.
Investments into long term asset is ~7 bn.$ lack was covered by 7 bn.$ income in sale of companies investments. Companies cash management can be considered as quite aggressive. Companies account payable turnover is 83 days while account payable is even worse 174 days. Taking in consideration liquidity ratio below 1 this is quite risky. In general companies balance sheet is a bit risky.
|Equity / share||78,2 bn.£||4,96 bn.||15,8 £/sh.|
|Market value||17,1£ (26,9$)||+1,3£||0,4 years|
|Year Net income before Depreciation||14,9 bn.£||+3,0 £/sh.||17,5%|
Companies share basic value is ~15,8£ which is very near to present market value ~17,1£ (26,9$ x 0,63734863). Difference 1,3£ which is only 0,4 years of Net income before Depreciation. This shows that companies share is undervalued. Share profitability (Share market price/Net income before Depreciation) is 17,5% which very good ratio.
Company pays dividends 2 times in a year (unusual to other US share quarterly payments) one Interim – smaller amount at January and Final around double larger dividend at June. Due to that is it quite tricky to calculate. 2012 Interim dividends is 0,464$ Final should be around 1$ so total dividends is ~1,5$ or ~5,6% dividend yield which is very good. If calculating extra dividends connected to Verizon Wireless 0,62$ yield would be even 7,8% but such large dividends from this subsidiary non US company is likely happen on regular basis, but some can be expected at the future also so yield including special dividends should be around ~7% which is even better. Dividend payout ratio if including special dividends is ~40% which is a bit high.
Analysis source: Vodafone 2012 1Q financial results
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