Posted on 05/30/2006 7:58:42 AM PDT by FostersExport
Vodafone made a £14.9bn ($27.9bn) loss last year - a record for a UK firm - after writing down the value of assets.
It incurred one-off costs of more than £23.5bn after revaluing its German business Mannesmann, which it bought in 2000 for £112bn ($183bn at the time).
The firm said it would also cut 400 jobs as part of a move to reduce costs.
Excluding one-off costs, Vodafone made a £8.8bn profit and it said its overall performance had exceeded expectations, after adding 21 million new customers.
The news of the write-offs was greeted positively by investors, who are hoping that Vodafone will now be able to put its problems behind it.
Vodafone's shares rose nearly 2% after it said it would return a further £3bn to shareholders - in addition to the £6bn it has already earmarked for investors following the sale of its Japanese arm to Softbank.
Vodafone's losses would total £21.8bn ($41bn) if the loss in value of its Japanese subsidiary, which it sold in March, were included.
Richard Hunter, at stock brokers Hargreaves Lansdown, spoke of a possible turning point for the company:
"Given the mauling that the share price has had over the last year, down 14% during which time the FTSE 100 has risen 16%, inevitably some positive news was overdue," he said.
Vodafone, whose global headquarteres are situated in Newbury, Berkshire, warned earlier this year that its assets may be worth up to £28bn less than previously calculated.
When Vodafone bought German mobile phone operator Mannesmann in February 2000 - in what was Germany's first hostile takeover by a foreign firm - it added substantial value to its balance sheet.
However, the real income generated by Mannesmann did not live up to the £112bn price tag, and now Vodafone has adjusted the value of its subsidiary on its books - a process that accountants call a write-down.
The firm's sales have been under pressure over the past year with the firm coming up against tougher competition.
It decided to sell its Japanese business for £8.9bn after failing to make much headway in the country.
However, it has seen continued growth in other key markets such as Germany, Spain and the United States.
Vodafone said the market remained "challenging" and that it needed to do more to meet customer demands for new products.
But it stressed that its business remained fundamentally healthy, despite the huge loss.
"Vodafone has met or exceeded expectations, outperforming its competitors in an increasingly challenging marketplace," said chief executive Arun Sarin.
"Vodafone is well positioned to deliver on its strategy."
A new strategic focus will see Vodafone concentrate on growing sales in emerging countries such as India, reducing costs in more mature European markets and seeking to be more innovative.
Mr Sarin has been under pressure from investors as the firm's previously buoyant sales growth has slowed.
CUSTOMERS BY MARKET (IN MILLIONS) Germany: 29.1 million United States (associate): 23.5 Italy: 18.4 UK: 16.3 Spain: 13.5 South Africa(joint venture): 10.9 Romania: 6.3 Greece: 4.4 Portugal: 4.2 Australia: 3.1 Source: Vodafone(March 2006)
Revenue growth is set to slow to between 5% and 6.5% next year while profit margins from mobile phone activities are set to be 1% lower.
Mr Sarin has sought to stamp his authority over the company by restructuring the firm's senior management and pulling out of markets such as Japan.
He stressed that Vodafone may exit other markets which did not offer strong long term growth prospects and that future acquisitions would be subject to "strict criteria".
However, Vodafone gave a vote of confidence to its US joint venture business Verizon Wireless - in which it owns a 45% stake - which some analysts want it to sell.
Verizon Wireless's market share grew to 25% in the US, as it added more than three million new customers, while Vodafone's share of profit from the business rose by more than 21%.
The record loss in the title refers to British corporates but it represents a write down of assets bought six years ago, not a trading loss.
What, is that about 3 times the profit Exxon/Mobil made last year?
Not far off. The Mannesmann deal was a pretty big one. I believe it was the biggest ever takeover at the time.
I wonder what Vodafone pays to sponser Ferrarri F1 cars.
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