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MARKET COMMENT
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Who needs Sir Chris Gent? Arun Sarin may be the new chief executive, but Vodafone (LSE: VOD)(NYSE: VOD) continues to churn out great results. Impressive numbers from this morning's interim statement included turnover increasing 13% to £16.9b, pre-tax profits leaping 26% to £5.4b and earnings per share soaring 46% to 4.78p. Rewind six months to Vodafone's preliminary results, and you'll recall shareholders fretting about mega 3G write-offs. No longer. These days, investors now have the return of cash at the forefront of their minds. As a response, Vodafone lifted its interim dividend by 20% and proposed a £2.5b share buy-back programme. However, income investors should not get too excited -- the dividend yield is still only 1.5%. Indeed, with the first-half payout covered five times, Vodafone hasn't thrown the 3G expansion towel in just yet to become a cash cow. The buy-back fund is also small beer, representing just 3.7p per share. Nonetheless, Vodafone remains a business powerhouse. Operating margins are a whopping 34%, while net debt of £10.3b looks very manageable when free cash flow of £7b is forecast for the current year. Let's not forget either that Vodafone enjoys resilient, repeat revenues, possesses leading industry positions in many countries and re-affirmed the prospect of 10% underlying customer number growth for the next year or two. Up 6p (4.8%) to 131.5p, Vodafone shares trade on a price to earnings (P/E) multiple of 15.8 based on profits for the twelve months ending September 2003. Assume a 10% earnings increase in line with customer numbers, and the P/E falls to 14.4. The legendary Gent may have gone and the cash handouts may be low, but at current levels, long termers should still be looking to buy.