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Fleccy, or anybody else, Do you know what interest rate (on average), Vod pays on it's debts? It seems to me this is crucial in deciding, if vod should pay off deb't, instead of paying a dividend. Thank's for any info on this.
Danielh
Click on the pdf links to get the interest rate details
https://investors.vodafone.com/debt-investors/bonds-outstanding-eu-and-us
I’m sure I read a post by fleecy saying there is a £2bn bond debt due in twelve months?
There's around €3.5 Billion maturing this month:
https://docs.google.com/spreadsheets/d/e/2PACX-1vSNxkKmgR2PzSL1NH5uvhJAIl6TyUm-PpH2hChEFWELeB8mLB-V562E7qRdDL0lOSa8NyAUBbokBjVp/pubchart?oid=17624073&format=interactive
In terms of annual interest paid and received on debt, it's currently around €1.1 Billion:
https://docs.google.com/spreadsheets/d/e/2PACX-1vSNxkKmgR2PzSL1NH5uvhJAIl6TyUm-PpH2hChEFWELeB8mLB-V562E7qRdDL0lOSa8NyAUBbokBjVp/pubchart?oid=325944045&format=interactive
Yearly Debt maturity:
https://docs.google.com/spreadsheets/d/e/2PACX-1vSNxkKmgR2PzSL1NH5uvhJAIl6TyUm-PpH2hChEFWELeB8mLB-V562E7qRdDL0lOSa8NyAUBbokBjVp/pubchart?oid=1681133451&format=interactive
If anyone see's any mistakes, let me know and I'll make corrections.
Just had a quick look at the Bonds outstanding (EU and US) page and can see that $3 Billion of Debt maturing on the 16th of this month has already been removed:
$2bn 3.75% 92857WBH2 $ 2,000,000,000 €1,840,000,000 1,000 3.75 S/A 16/01/2024
$1bn FRN 92857WBN9 $ 1,000,000,000 €920,000,000 1,000 $ LIBOR + 0.99% Quarterly 16/01/2024
Thanks for that, but I still don't know the average A.P.R. vod is paying on it's debt. I will get a divi in Febuary, & will invest it in a savings acccount earning almost 5% A.P.R. so if vod is paying less than 5% average on it's debt it is good to pay a divi, even if it has to borrow to pay it, but if vod is paying over 5% then paying a divi is not so good. It seems strange that this info is not available, so we must just take vods word for it that it is doing right thing?
At H1 update Nov 2023 MDV said she was very pleased at the strength of the VOD balance sheet and said it was 'remarkable'. '...recognising net debt with a very long maturity on average 11.7 years and interest attached to it of c.2.5%....'
Daniel the annual average interest paid on the Euro Bonds wont vary, as they're fixed rate Bonds, what may alter are interest payments for Bonds denominated in other currencies, which are also fixed but may alter due to currency fluctuations. When I did my charts I didn't realise that I could do currency conversion in Google sheets, but I've now discovered there's a way to do it; I used a fixed conversion for $ Bonds at conversion rate of 0.92 (currently 0.91) so the Euro values were millions out on current exchange rates, insignificant in the scheme of things but I've just now corrected anyway. Other Bonds in currencies like CHF, HKD, etc were also similarly affected, now corrected.
Daniel, if you look at the chart I posted a link to previously you'll see the interest paid and received during FY22/23 was €-1.164 Billion
Just on debt, I recall VOD buying back kerzillion shares over the last two years which weren't cancelled, as I recall, sketchy here on memory, but my reading of the purpose was to cover bonds which could be redeemed with shares. They'd have been better off keeping the cash as they were buying back at £1+ however, is that factored into current debt calcs? Also, they don't pay divi on the treasury shares.... Happy new year all longs
"is that factored into current debt calcs? "
GeoChem
Those bonds no longer exist as they were exchanged for shares, on maturity ....to keep the share total stabilised and thus avoiding dilution...VOD bought back shares using cash ...
Many of those bondholders receiving shares "could" well have sold them, contributing to the share price gradual decline
Sorry but I think you are missing my point. What I am saying is if vod is paying less in interest % wise than vod shareholders ( who own vod) can get in interest by re investing there divi payments, then that may justify borrowing to pay the divi. Forget charts, bla bla bla, Just maths is what I am talking about. If I could borrow the amount that vod pays in divi per year at a lower % interest rate than I could get by reinvesting it at about 5%, then I would. So if vod is borrowing at less that 5% , then paying a divi from borrowed money could be a good thing. Old school mathematics I guess. If you can borrow at 4% & invest at 5% you can become very rich if you have enough money, as vod does. Thanks fleccy, but you still don't seem to grasp the basic point, do vod pay more % on there debts, than there shareholders make by reinvesting there dividends? No spreadsheet charts please! Common sense answer please . Thank you. I realise of course that vods debt's are very complex, which is probably why we have to leave it to the vod bod accountants, unless you know better?
Android. If your figure of 2.5% is correct, then that is very good justification for paying a very high divi rather than paying off deb't. In the long term of course, vod needs to keep its debt under control. Investing is all about %'s In £'s or billions of £'s .
Danielh
You are talking gobbledegook..... anyone would be mad to borrow money just to buy risky shares, in the hope they can get a dividend like that.... but not knowing if their capital invested was holding its original value
The City uses leverage to trade shares based on their share prices, not buy dividends
Dividends are a bonus and not a reason to be borrowing money...ludicrous
Did you read what he wrote, as it doesn't look like you did
He's not advocating investors borrowing money to invest in VOD shares. He's saying the debt VOD has is effectively cheap debt so should keep paying money to investors, but he's wrong in that aspect. VOD cannot achieve a return in excess of there cost of capital, but the debt element of that capital is cheap, whereas the cost of equity would be high (in part due to the higher dividend yield (although some use a government bond yield beta to get to a cost of equity). So the question isn't about trading debt vs dividend, its about using the cash to make a good ROCE or return the money to shareholders, and at the moment they are saying they can't do that.
'VOD cannot achieve a return in excess of there cost of capital'
VOD can achieve a return in excess of its cost of capital if it pursues mergers eg UK and exits underperforming markets eg spain.
Market is forward looking so should be looking to rerate this year imo
Dan, like Poker, I can't really understand your question. Vodafone can either afford the dividend, or they can't. Long term what really counts is growing Free Cash Flow, probably by reducing Capex and through reduction in payments for things like Spectrum and Licences. The interest on the debt isn't significant in proportion to other outgoings, with interest payments currently around €1Billion a year, but they also need to consider debt maturity when it's time to pay the Piper. As far as I can tell they set aside Working Capital at H1 each year, which shows as a temporary drop in Free Cash Flow and temporary increase in Net Debt, and is likely used to pay down debt as it matures. You're right it is complex and I wont pretend to understand how Vodafone manage their accounts, but they have a lot of debt maturing over the next 7 years which probably explains why they're making disposals and building a cash buffer. The Hybrid Bonds also have call dates due between now and 2031, with one call date already passed, so they may also need to be paid. Although I don't see the debt as a risk for Vodafone. As far as the dividend's concerned, I have no idea if it's affordable.
"As far as the dividend's concerned, I have no idea if it's affordable."
The BOD are guardians of the assets and the financial performance and have a responsibility towards both , and they report to the stakeholders
The covenants and key debt ratios should give indications as to whether the dividend moves towards being "unaffordable" and shareholders usually send out alarm bells when these ratios get concerning , by selling their shares
Selling assets reduces revenue, which reduces EBITDA and FCF ..... and with the number of shares remaining the same .... it will need an equal improvement in revenue and EBITDA from the remaining assets to replace that lost from the asset sales.....unless they use smoke and mirrors and hand back asset sale cash as a disguised performance dividend (not advised)
Germany looks like taking much longer to get back to previous performances given the economical problems and strong competition there
The Final dividend decision will come in May after the Final Results.....but speculation will rise once the 3rd Quarter results come out on February 5th
"If I could borrow the amount that vod pays in divi per year at a lower % interest rate than I could get by reinvesting it at about 5%, then I would."
Beo1
Danielh mentioned the above so gave the impression about using leverage ...
I get the impression he thinks VOD could borrow money , stick it in the bank, make some interest on it, and pay shareholders a dividend with the interest earned and also pay the lenders their borrowing rate too ..and somehow make that a good idea, despite inflation eating the value of the money borrowed
...but ...that seems a crazy way to run a business
Dan, if VOD continue to overpay a div then they must make new borrowings to do it. They will borrow at over 5% for you to invest the cash at under 5% so no does not make sense to borrow money and give it to investors.
VOD’s current pile of debt totals 65bn (bonds leases and bank loans) and interest paid last 6 months was 1.1bn (2.2 annual), so blended rate of 3.3%, but new borrowings would come with a much higher rate.
It makes little sense to sell assets, pay off low interest bonds and re borrow at a much higher rate to pay a div.
Mole, where do you get " interest paid last 6 months was 1.1bn (2.2 annual)" from? As far as I can tell it was €560 Million up to H1, so around €1.1 Billion for the year.
Fleccy, Mole
I see Finance costs at (1,473m Euro ) in H1 from the H1 Report - page 14
that is offset , though by 368m Euro investment income to get the 1.1 billion Euro NET figure shown on page 26 )
https://investors.vodafone.com/sites/vodafone-ir/files/2023-11/Vodafone-H1%20FY24-Results-Announcement.pdf
Pokerchips, what I said is, if vod is paying a high divi rather than paying off more deb't, Is that wise? I don't know, but it depends whether the % interest rate they pay on the deb't is higher than the % interest rate its shareholders can get on there divi.
Fleccy, half year results consolidated cashflow p26 where total interest paid is given.
The headline interest paid/received figure excludes interest due on lease contracts.