When you step through the doors of Vodafone’s Park Lane offices, even the sweets at reception are embossed with the company logo.
But for Andy Halford, only the second CFO in the mobile phone giant’s 25-year
history, there’s no such ostentation. It’s just straight down to business with
the steely self-belief needed to keep a handle on
If you imagine the mobile phone giant as a circus, Halford would be the ultimate plate spinner. He deals with the investor relations demands of a million and a half shareholders, which takes up a quarter of his time. Add to that the overall business planning - not just financial planning - the reporting demands of being dual-listed and overseeing the installation of an IT project to standardise the finance, HR and procurement systems across the entire company, you begin to see how he earned £1.6m last year.
‘When I first was 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. 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”.’
He also has control of the internal audit function and has three divisional FDs below him in addition to heading up tax, treasury and cost-reduction initiatives. He says M&A support has also been a fairly significant part of the business over the last few years.
‘My role is over-seeing, but it is also when there is something of particular substance, you know we have one or two tax cases running around, getting pretty deeply involved with those when we come to key points in them.’
Some would say that’s an understatement. The word ‘Mannesmann’ may well be uttered through gritted teeth in the corridors of power at Vodafone as the £1.7bn case still remains unresolved and Halford has called for the Treasury to provide some clarity on controlled foreign companies tax disputes.
‘It’s been seven or eight years now trying to get clarification on this. We have been through the UK system, we have got to the top of the UK system, its been referred to the European system, the guidance in the European system has then been applied at the bottom end of the UK Courts and we go back up the UK Court process, and on almost all rounds of that we have won, we tied or won and yes, from our point of view to have things hanging around… you know, we really would prefer to get on and get them solved.
‘Now, equally we understand the amounts involved are large, and therefore the government clearly has a fiduciary responsibility to make sure it protects its end, but if there was some way of the process getting sped up, it would be extremely helpful.’
Talking to Halford you get the distinct impression he he processes and analyses questions in a similar way he does Vodafone’s numbers before giving his response.
That’s not to say he’s guarded- there’s just a sense Halford knows that too strident a view from a leading FD on some of the burning issues of the day could be incendiary.
Brought up in Beaconsfield, he studied industrial economics at Nottingham University which sparked his interest in the corporate world, but he says he was a late convert to accountancy.
‘I was very, very clear that I definitely wanted to do something in the business space, I wasn’t totally clear whether I wanted to do something in the accounting space, so I actually didn’t do any accounting during the degree although I could have done. But, by the end of the three years, I realised that actually the accounting was probably quite a good entrée into the business world. I joined Price Waterhouse and I was very clear I was going into busines s. I was less clear it was going to be accounting, but the accounting then actually proved to be a reasonably good foundation.’
When asked what keeps him awake at night, Halford’s quickfire reply is: ‘Recessions.’
Companies are understandably jittery as administrations stand at record levels and businesses feel victimised by the taxman. After the departures of fellow FTSE 100 heavyweights Shire, and WPP, Halford didn’t rule out Vodafone which only makes 4% of its profits in the UK following suit to relocate its HQ overseas for tax purposes.
‘We are not going to take lightly a decision to go and move somewhere else but, we do really need to have a dialogue with the government to make sure that we are getting that right balance between making sure that it is a tax-friendly place to work, whilst accepting clearly the government has got to raise taxes to run the country.’
‘I just think in a world where everything is now more multinational, there is more geographic flexibility, we are competing against the Googles and the Amazons and the Apples and whatever of this world, they have got choices as to where to base their businesses, we have got to make sure that for the new business of today, the UK is every bit as attractive as any of those other locations are and that we don’t lose out at the early stages of development of those businesses.’
The accounting standards and the standard setters have taken a battering as the world economy imploded and Halford does not envy the decision makers’ task.
‘Whenever you get a problem like this, people are going to look at all areas to try to work out what could have been done to do it differently, and the whole issue particularly about the fair value accounting has clearly been incredibly difficult. If you have an asset that has very fee view points in comparison, how do you put a value on it, and how do you minimise the risk?
‘By putting a low value on it you then create another pressure and everybody thinks it’s even worse. I think the accounting standards are a feature of it, but I don’t say that critically, I just think it’s just a very, very complex area.’
Auditors have also come in for criticism recently. In the past week the Big Four have been locked in talks with the government as they try to get protection from lawsuits and the thorny issue of liability caps is never far from an FD’s mind.
Vodafone has been at the discussion table with auditors Deloitte on the issue, but Halford says there is little chance of this happening.
‘I think the issue is this: ‘We understand why liability caps should be something that the accounting firms would want to have, but equally as stewards of our shareholders we’ve got to be very comfortable before going down that route.’
‘Frankly to shave a small amount off an audit fee but to put a cap which otherwise would not exist on the claims that could be made, is an interesting balance so I don’t know how much traction that will actually get. I understand the concept but I think if you look at it from the other side, then the balance of benefit and reward from the shareholder point of view is not overwhelmingly clear.’
Halford says he would ‘possibly’ like to be a CEO one day - maybe even the CEO of Vodafone - but his immediate plan is to keep the mobile phone giant on an even financial keel until the financial storm plays itself out.
Accounting rules and their frustrations
Vodafone’s last annual report weighed in at 160 pages and Halford set out the amount of work that had to be ploughed into getting Vodafone’s filing ready. He also says that the accounting rules end up giving the number crunchers and the people at the coalface selling the Vodafone products very different answers.
‘Well, with the dual-listing we have obviously got more of a burden of reporting than many groups have, although I have to say because we have a) been dual listed and b) done some of the biggest M&A sort of that’s going, it is a very, very well refined process.’
‘If I have a frustration, the issue is about how the statutory reporting and all the books and the rules that are being written on that are in some areas starting to disassociate themselves from what our operational line managers can understand.
‘So all the complex rules on revenue recognition when we come down to actually how we sell the phones and how we commission our staff, you know there is a risk at the way the accounting rules are written gives you one answer, but what a non-financial person or a sales person could recognise as what they have actually done can become slightly different. Trying to be pragmatic about how clearly we need to comply with what is required externally, but how you can actually get the internal derivation of that is a little bit of a challenge from time to time.’
For more about the company, visit Vodafone.com. Get the lowdown about Mannesmann at accountancyage.com and the latest on the mobile communications sector at gsmworld.com. Read our sister publication Financial Director’s interview with Halford at financialdirector.co.uk
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