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Vodafone is a worldwide international telecommunication company that offers a various mobile services to its customers from voice calling, texting and internet access. . The company boasts a wide market across the globe with a significant presence in Africa, Asia-Pacific, Europe, and the Middle East. Vodafone has always committed to deliver useful innovations where in 1991 “we enabled the world’s first international mobile roaming.” (Vodafone, 2016). Vodafone is the largest network company in the UK and its headquartered in Newbury, England. The very first phone call was made after midnight on the 1st of January in 1985. (essays, 2015). Vodafone has a market value of about one hundred billion pound, which makes it the top in the market share.

BT Group PLC

BT is one of the leading communication companies in the world, serving around 180 countries. Its headquarters is in London, England. Where the company provides a various range of services such as, fixed-line services, broadband, mobile and TV products. (BT, 2016)

BT also sell wholesale products and services to communication providers in the UK and even around the world. BT has around 900,000 customers in the UK serving fixed voice, networking, cloud services and broadband.

After analysing the various ratios and comparing the two companies the interpretation reveals the proper financial position of the two companies

Profitability Ratios:-

When looking at Return of Capital Employed of both the companies BT group’s rate dropped by .40% to 17.90% in 2015. Even after making a overall growth in the operating profit the ROCE dropped for BT due to significant rise in non-current liabilities like retirement benefit obligations etc. whereas the equity also has risen but not as much as the liabilities.

While Vodafone Group’s -4% has risen up to 2.10% in 2015. This is largely due to rise of operating profit for Vodafone group from a loss of 3913M GBP to 1967M GBP profit in 2015.

Operating Profit Margin for BT increased by 2.20% to 19.40% in 2015 whereas for Vodafone Group it rose from -10.20% to 4.66%.

This shows us that both the companies made more profit on the revenue attained than last year and have managed to bring down operating cost(in case of BT) or increase revenue( as in case of Vodafone).

Net Profit Margin for Vodafone was down from 29% to 14% in 2015 while BT posted a growth of .9% to move to 11.9%. Vodafone group overall had posted a Net Profit margin of 155% but this was largely due to sale of some businesses like the Verizon deal. But the drop was a result of drop in profits from both continued as well as discontinued operations. BT showed growth even after posting a lower revenue than last year, It was largely due to increase in profits for the year.

Liquidity Ratios: -

The Current ratio for Vodafone group had a fall of .30 to 0.69 in 2015 while BT Group had a rise of 0.23 to 0.97. The current assets for Vodafone group reduced during the year by 4875M GBP while the liabilities rose. BT Group had a increase in current assets while their liabilities did not rise by very much

The Quick ratio for Vodafone group also had a fall to 0.67 from 0.97 while BT group showed a rise to 0.96 from 0.73 in 2015.

Efficiency in use of assets

Asset Turnover for BT Group fell from 1.06 to 0.92 in 2015 while Vodafone group rose from 0.4 to 0.45. This implies that both Vodafone and BT Group is now making more efficient use of its net assets and create more revenues from it.

Inventory Turnover of Vodafone group reduced to 5.69 days from 5.76 which is very miniscule while BT group decreased from 2.4 days to 2 days. The reduce in Vodafone group’s inventory turnover was due to increase in cost of sales of the company being very high as compared to Inventory. BT group on the other hand had a increase in inventory but a decrease in cost of sales.

Receivable Days for Vodafone group reduced from 35 days to 34 days but BT Group increased from 27 days to 30 days in 2015.

Solvency/Gearing Ratios:-

Long term debt to Equity ratio for BT group fell by 7.40% to 96% while it showed a rise of 1.90% to 27.70 % for Vodafone in 2015. This rise was due to the fact that the total Equity of the company reduced by

4048M GBP and the non-current liabilities rose up by 923M GBP. For BT Group the transition took place because of the rise in non-current liabilities by 872M GBP while the total equity rose from a deficit by 1400M GBP.

Interest cover for BT group saw a change of 0.22 to 3.97 times while for Vodafone Group the Interest cover went up by 4 times from -3 to 1.

Investor Ratios

Dividend per share Increased for BT Group to 12p from 9p but for Vodafone group it remained constant at 11p in 2015. The change in dividend per share for BT was due to increase in dividend amount by 148M GBP and also the rise of weighted number of shares outstanding.

Earnings Per Share for BT Group has increased by 0.8p but Vodafone group saw a dive of 212.09p.

Q3) A critical evaluation the financial performance of each company using all the information at your disposal

For the probability ratio Vodafone, has shown a rise in their profit while on the other hand BT Groups profit has fallen in 2015. This is an indicator that proves that Vodafone was being more successful than BT Groups.

While the operating profit maring for BT increased in 2015 more than Vodafone.

And at last for the net profit Margin, Vodafone was down for abot 15% while but showed a growth of around 2%.

Overall, BT Groups performance on Profitability ratio was better than Vodafone Group in 2015.

For liquidity ratios, BT Groups showed again a rise in their current ratio while Vodafone Groups showed a fall in the current ratio. On the other hand, for current assets, Vodafone groups reduced them as their liabilities has rose, for BT Groups the current assets has risen and their liabilities has risen as well but not very much.

The quick ratio for Vodafone group has fallen for about 0.30 while BT groups ratio has risen about 0.13 in 2015.

For the asset turnover, BT shown fall of around 0.14, while for Vodafone, it has shown a rise of around 0.41 in 2015.

While for the inventory turnover, Vodafone group reduced while BT Groups has decreased as well.

At last, a Long-Term Equity ratio for BT has been fallen for around 7.40% while on the other hand Vodafone has shown a rise of 1.90% in 2015.

Overall BT Groups has shown us by numbers that they are performing better than Vodafone Groups since they are doing more profit, less liabilities and more fixed assets.

4.0. Effects of Brexit Decision on the Business Strategy and Business Model of Vodafone and BT Group Plc

Pulling out of the European Union by the UK has so far left most businesses in flux as many big and small companies are revealing collapsed business deals, job cuts and plans to shift their headquarters and therefore changing their base countries away from the UK. Vodafone is one of the large enterprises that have announced it is an intention to move it is Headquarters out of the UK; this decision made in the best interest of the customers, shareholders as well as the employees of the company. The decision to move the base country from the UK pegged on the outcome of the negotiations on the UK curbing freedom of movement after exiting the European Union (Palmer, 2016). Traditionally, the unfettered flow of capital, people and goods across European greatly benefited Vodafone Company since it generated an average of 11 percent of the company's profits from the UK operations. In the case of BT Group plc, immediately after the referendum indicating that the UK citizens had voted heavily for the exits of the UK from the European Union, the stocks of BT Group plummeted massively by 19.4 percent (Sparks, 2016).

The impact of the Brexit on BT Group and Vodafone Company clearly show that the large British multinational companies that operated in many different countries across Europe were severely affected by the Brexit. The Brexit negatively impacted the British-Based technology companies with multinational operations. There is significant concern that information-technology companies like the BT Group and Vodafone company could quickly lose their unrestricted access to the massive European market and thus make the competition ability of these businesses in the UK tight. Evidence from the stock prices of the two companies after the Brexit decision through the referendum shows that the shares of the company have been on a downward trend and thus suggesting a significant loss of investor's wealth in the operations of the two companies. The charts showing the trend of the historical stock prices of the two companies after the Brexit are as below:

Figure 1: BT Group plc past six month’s stock prices

Source: Yahoo Finance (2016a)

Figure 2: Historical six months stock Prices for Vodafone plc

Source: Yahoo Finance (2016)

Evidence shows that concerns about the performance of BT Group plc and Vodafone Company after the Brexit had a significant impact on the stock prices of the company. This trend could explain the market sentiments that made the share prices of Vodafone company fail to increase in 2015 even after the company had a strong performance as established from the financial statements of the enterprise.

Traditionally, BT Group and Vodafone Company, two large British technology companies, benefited greatly from the large market that was available when the UK was in the European Union. However, after the Brexit, the two companies will face limited access to the whole European region as the UK will close it is borders, and they are treated as a foreign company operating in this market (Slobodchikoff, 2010). The consequences are that the companies will face that problem of limited market access, limited movement of capital, limited movement of labor across the countries. Additionally, there will be restrictions on the nature of operations by the companies in the European market, and the two companies will also be required to file their tax returns to the UK as well as to the respective economies or the general European Union region (Tavlas, 2004). These results, therefore, suggests that the Brexit is technically detrimental to the business operations of both Vodafone Company and BT Group plc.

References:

Palmer, K 2016, The Telegraph: How businesses have reacted to Brexit. so far , < HYPERLINK http://www.telegraph.co.uk/business/0/how-businesses-have-reacted-to-brexit-so-far/ >. Accessed on 16th November 2016.

Slobodchikoff, M 2010, 'The New European Union: Integration as a Means of Norm Diffusion,' Journal of Ethnopolitics and Minority Issues in Europe, vol 9, no. 1, pp. 1-25.

Sparks, D 2016, fool.com: BT Group plc Plummets 19% in Brexit Aftershock, < HYPERLINK http://www.fool.com/investing/2016/06/24/bt-group-plc-plummets-19-in-brexit-aftershock.aspx >. Accessed on 16th November 2016.

Tavlas, GS 2004, 'Benefits and costs of entering the Eurozone', Cato Journal, vol 24, no. 1/2, pp. 89-106.

Yahoo Finance 2016, BT Group Historical Stock Prices - 6 months, < HYPERLINK https://uk.finance.yahoo.com/echarts?s=BT-A.L#symbol=BT-A.L;range=1d >. Accessed on 16th November 2016.

Yahoo Finance 2016, Historical Stock Prices Vodafone plc, < HYPERLINK https://uk.finance.yahoo.com/echarts?s=VOD.L#symbol=VOD.L;range=1d >. Accessed on 16th November 2016.