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The Guardian: Macho cash

The Guardian: Macho cash

25 May 2005

The “headline” profits of £10.3bn trumpeted by Vodafone yesterday might have qualified as the Biggest Profit Turned By A British Company – except that would have been misleading.

Followers of the bulge bracket corporate scene this year will have first seen Shell declared as the leader in February with £9.4bn, only to be eclipsed a month later by HSBC with £9.6bn. But comparing the heavyweights of corporate Britain has an air of comparing apples, pears – and oranges, too.

Shell, like other oil majors, declares its headline profit as “net income”, that is, net of tax. HSBC goes for old-fashioned “pre-tax profit” while Vodafone’s £10.3bn was before nasty bits like £14.7bn of goodwill amortisation. The pre-tax loss was actually £4.7bn.

This is not to say Vodafone is doing badly. In fact, it is a cash machine, producing £12.7bn of the hard stuff over the past 12 months. All that’s holding it back on paper are the accounting costs of its rapid expansion. But until those (non-cash) costs are absorbed, it would be wrong to hand Vodafone the corporate crown, and those media brickbats that tend to go with the title.

http://www.guardian.co.uk/business/story/0,,1491505,00.html

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