ii view: income play Vodafone now fully reshaped

Full-year results to 31 March 

Total revenues up 2% to €37.4 billion (£31.4 billion)

Pre-tax loss of €1.48 billion, down from a profit of €1.62 billion

Adjusted profit of €10.9 billion, down from €11 billion the year before

Total dividend for the year of 4.5 eurocents per share, down from 9 eurocents the year before

New €2 billion share buyback programme

Net debt of €22.4 billion, down from €33.2 billion

Guidance:

• Targeting adjusted profit for the year ahead (FY2026) of €11-11.3 billion

Chief executive Margherita Della Valle said:   

"Since I set out my plans to transform Vodafone two years ago, Vodafone has changed. We have reshaped Europe, we are seeing the positive impact of our drive for customer satisfaction in all our markets - most noticeably in the UK and Germany - and we have delivered strong operational improvements across the business. Clearly there is much more to do, but this period of transition has repositioned Vodafone for multi-year growth.

“Looking ahead, we expect to see broad-based momentum across Europe and Africa, and for Germany to return to top-line growth during this year. This is reflected in our guidance for profit and cash flow growth for the year ahead."

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ii round-up:

Vodafone Group (LSE:VOD) operates both mobile phone and fixed broadband networks.

It provides services to over 340 million customers in 15 countries, partnering with mobile networks in over 40 more.

For a round-up of these latest results announced on 20 May, please click here. 

ii view:

Vodafone provides one of the largest 5G mobile phone networks in Europe, with fast data services available in 346 cities. The group’s fast broadband network passes more than 50 million European homes with fast data provision making it Europe’s second largest TV platform with around 17 million such customers. In Africa, its M-PESA payment platform enables around 88 million users to make safe financial transactions using their mobile phones. 

Geographically, Germany generated 35% of service-related revenues during this latest year, with the UK 19%, other European countries 16%, Turkey 8%, and Africa most of the 22% balance. A recent completion of its Vodafone UK business with Three UK will see the UK increasing in importance going forward. 

For investors, the group’s biggest German business remains pressured, hindered by a competitive mobile market and previous changes to TV laws. The sale of Italian and Spanish businesses now leaves it less geographically diverse. The dividend payment has again been reduced and effectively halved, while management’s targeting of adjusted profits for the year ahead of up to €11.3 billion - compared to the latest profit of €10.9 billion - suggests slow improvement. 

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On the upside, service revenues away from Germany over this latest year increased, with management now expecting growth markets to generate 67% of the company’s adjusted free cash flows. Cost savings from the now completed merger of Three UK are expected to total around £700 million per year. Group net debt, aided by business sale proceeds, has significantly reduced, while the holding of a sizeable shareholding by UAE telecommunications company e& should continue to apply pressure on management for improved performance. 

In all, and with a reshaping completed, Germany forecast by management to return to growth and the shares offering a forecast dividend yield above 5%, existing shareholders are being paid to remain patient. 

Positives

• Reduced net debt
• Targeting growth in the dividend payment

Negatives

• Intense competition
• Reduced geographical diversification

The average rating of stock market analysts:

Hold