Financial Performance Analysis of Vodafone Plc and BT Group Plc

Running head: FINANCIAL MANAGEMENT
Financial Management
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1FINANCIAL MANAGEMENT
Executive Summary:
For the current report, the organisation chosen is Vodafone Plc and its major competitor, BT
Group Plc operating in the UK telecommunication and utilities sector. From the conducted
analysis, it is apparent that BT Group Plc is in a better position than Vodafone Plc in the UK
telecommunications sector owing to better financial performance in the past five years. In
addition, by considering stock market performance, the investors are recommended to invest in
the shares of BT Group for maximising their return on investment. However, the analysis is
subject to certain limitations, since it has considered historical data only for decision-making.
Therefore, research reports and price/earnings ratio have been taken into consideration, which
reveal that the performance of BT Group is expected to decline in the upcoming years, especially
in terms of earnings per share and dividend payments. Hence, the investors need to consider
these aspects as well before investing in the shares of BT Group Plc.

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Table of Contents
Introduction:....................................................................................................................................3
Comparison and analysis of the financial performance of Vodafone Plc and its competitor, BT
Group Plc:........................................................................................................................................4
Recommendations regarding buying shares in any of the two organisations:...............................15
Problems, limitations and assumptions:........................................................................................15
Conclusion:....................................................................................................................................16
References and Bibliographies:.....................................................................................................18
Appendices:...................................................................................................................................21

3FINANCIAL MANAGEMENT
Introduction:
For the current report, the organisation chosen is Vodafone Plc and its major competitor,
BT Group Plc operating in the UK telecommunication and utilities sector. Vodafone Plc is a
leading UK-based telecommunication service provider having its operations spread in Africa,
Middle East, Europe and the Asia Pacific. The main products of the organisation include mobile
services like text, call, broadband, data, voice, telephone offerings, mobile money services and
others (Vodafone.co.uk 2019). On the other hand, BT Group Plc is a British telecommunications
firm having it’s headquarter in London, UK. The organisation has its business operations in
above 180 nations and it is the biggest provider of broadband, fixed-line and mobile services
along with IT and subscription television services in UK (Btplc.com 2019).
The UK telecommunications sector remains one of the biggest in Europe, which is
characterised by intense competition resulting in minimised pricing for the end-users. Recently,
Vodafone UK and Telefonica UK (O2) would be entering into a new infrastructure-sharing
relationship lying ahead of the 5G rollout. These two organisations have shared infrastructure
activities and the proposed plan would provide significant benefits to Vodafone Plc in terms of
capturing a greater portion of market share in UK. Vodafone would start 1,000 5G-enabled
network sites in UK by 2020 for providing fast browsing experiences to its customers, which
would assist in gaining competitive advantage over its competitor, BT Group Plc. This is because
BT Group Plc has undertaken certain developments like transfer of 31,000 staffs to Openreach
Limited and it is working with Huawei for 3Tb/s channel trial over the current fibre
(Budde.com.au 2019).

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Comparison and analysis of the financial performance of Vodafone Plc and its competitor,
BT Group Plc:
For conducting the financial analysis of Vodafone Plc and BT Group Plc, certain ratios
have been taken into consideration and their detailed analysis is presented as follows:
Liquidity analysis:
For carrying out the profitability analysis of Vodafone Plc and its competitor, BT Group
Plc, the two liquidity ratios that have been taken into account comprise of current ratio and quick
ratio, which are presented as follows:
Table 1: Liquidity ratios of Vodafone Plc for the years 2014-2018
(Source: Vodafone.com 2019)
Table 2: Liquidity ratios of BT Group Plc for the years 2014-2018
(Source: Btplc.com 2019)

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2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
Vodafone Plc BT Group Plc
-
0.20
0.40
0.60
0.80
1.00
1.20
Liquidity Ratios
Current ratio
Quick ratio
Figure 1: Liquidity ratios of Vodafone Plc and BT Group Plc for the years 2014-2018
(Source: Vodafone.com 2019: Btplc.com 2019)
From the above tables and figure, it could be seen that the current ratio of Vodafone Plc
after witnessing sharp decline in 2015 has increased until 2017; however, there has been a slight
decline in 2018. In this context, Baños-Caballero, García-Teruel and Martínez-Solano (2014)
stated that current ratio represents the ability of covering short-term obligations and dues by
current assets. Current ratio has declined in 2018 because of the fall in current assets, especially
cash and cash equivalents during the financial year. On the other hand, the current ratio for BT
Group Plc is observed to be fluctuating over the years and the ratio is below Vodafone Plc from
2016 to 2018. However, the ratio for both the organisations is well below the ideal standard of
2:1. Hence, they need to be cautious while dealing with short-term liabilities.
Quick ratio, on the other hand, implies short-term liquidity and from the above table, it
could be identified that the position for Vodafone Plc is better in comparison to BT Group Plc.
However, it has been observed that the ratio for both the organisations is close to the ideal