Text and the City: Vodafone's CFO, Andy Halford

We may call it a global recession, but Halford points out that, while the business has been “slightly negative on revenue growth in Europe”, in places such as South Africa and China, “it is a question of how fast you can put a network up”. There’s double-digit growth in India and Egypt, too ­ and even the US.

Last November, Halford made a commitment to shareholders to generate free cash flow of £5bn-6bn a year over the next several years. “If we can do that even during the depths of recession then we think this is a strong business.” The levers he can pull include scaling back on a fairly hefty capital expenditure programme, “albeit you have got to balance the short and the long term.” Beyond that, he says, it’s a case of “squeezing all the pips everywhere else to make sure that the cash is still coming out in reasonable substance at the bottom.” The first results of this will be seen at the end of May, for the year to end-March.

Extra income
Verizon is a heavily-indebted but hugely cash-generative business in which Vodafone has a 45% stake ­ but no dividend stream. At some point, though, this will be an additional source of cash for Halford. (Vodafone has the right to appoint one director to the board ­ which is why, in 2002, Halford found himself in New York as CFO. “I arrived as the one Vodafone person with the other 29,999 all working for Verizon Communications, the other major shareholder.”)

Halford is starting to take better advantage of Vodafone’s global scale, having established a centralised procurement operation in Luxembourg to handle purchases of big-ticket things such as network and IT equipment and other services, but not (for now) handsets which, he explains, are “the most tailored” items for local markets. There is also a shared service centre in Hungary and another is being set up in India.

Halford is big on standardising processes across the group and is currently two-and-a-half years into an SAP installation programme.

With or without standardisation, though, this is still a huge, complex business for any FD to control properly. We ask whether his role is really more akin to being chairman of a number of specialist sub-committees. “When I was first appointed into the role, I remember one of the non-executives saying to me, ‘This may be the first time in your life that the majority of people who work for you will know more about their subject areas than you are ever going to know ­ but you should not in any way see that as a negative,’” he recalls. “What is key is that you understand enough to be able to get involved when you need to get involved, and basically to leave them to run the job the rest of the time.

What has really struck me is, this is hugely about quality of people: it is a very big organisation and if you have first class people there, then you can do a lot of things - and particularly in the tax and treasury space.”

Talk of treasury matters takes us to the banking crisis and counterparty risk in the City. Halford admits they lost a bit of money in one of the bank failures, “but in the overall scheme of things it was very small. Our treasury team did a fantastic job in making sure that where we had exposure we generally managed to extract ourselves ahead of time.

But quite clearly it is an important part of the business and one which we are very focused on.”

On the broader issue, we wonder what Halford, from his viewpoint as a finance director in a huge, complicated business, thinks that his opposite numbers were doing in the banks. Did they take their eye off the ball? Did they get swamped by detail? “If you look at different sectors at different points in time, the competitive environment gets tougher, margins become narrower, people become more creative and thinking of different products and different ways of expanding the business,” he says.

“Some of those can end up with the risk-reward balance becoming a little bit more stretchy. My impression is that in financial services there has been some incredibly bright people who have thought of some incredibly complex structures which have at one level sounded absolutely fine, but when they are aggregated, you get the impression that relatively few people really understood the full complexity of what was being undertaken and the likelihood of it unravelling.

“I am to the heart of your question very glad that I didn’t go into the financial services sector and I am very comfortable that in this sector and this business, there are areas that are complex ­ but nothing, nothing like that sort of degree of complexity.”

Curriculum Vitae
Name Andy Halford
Age 50
Qualification FCA (1983)

CAREER
2005- Vodafone, CFO
2002-05 Verizon Wireless, CFO (45%-owned by Vodafone)
1999-2002 Vodafone, FD of various businesses including UK, northern Europe, Middle East, north Africa
1992-1998 East Midlands Electricity, business development director, group IT director, then group FD from 1997
1980-1992 Price Waterhouse, UK & South Africa

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