Profile: Andy Halford, FD of Vodafone

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
Vodafone’s finances.

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