LONDON (Reuters) – Vodafone Group Plc topped forecasts for half-year earnings and raised some of its full-year expectations on Tuesday despite continuing tough European mobile markets, sending its shares to a 12-month peak.
British-based Vodafone said earnings before interest, tax, depreciation and amortization (EBITDA) for the first half to September 30 rose to 6.24 billion pounds, well ahead of forecasts of between 5.98 billion and 6.19 billion.
Underlying earnings per share also came in well ahead of the average market forecast at 5.98 pence, and Vodafone stuck to its full-year forecasts for organic mobile revenue growth of 5-6.5 percent and EBITDA margins 1 percentage point lower.
However, it raised its outlook for free cash flow to 4.7-5.2 billion pounds after it deferred around 700 million pounds in taxes and said it expected its effective tax rate for the full year and future years to be lower than previously indicated.
“The operating performance looks solid. The tax charge is a little bit lower which helped the earnings and the cash flows. But lower taxes is still cash in the bank. Very little to complain about, I would say,” said Richard Marwood, fund manager at AXA Investments, a Vodafone shareholder.
“With this set of results Vodafone has further reduced investor uncertainty and reaffirmed progress on its business plan… Bulls have plenty to be happy about in these results,” said Dresdner Kleinwort analyst Robert Grindle.
Chief Executive Arun Sarin, who faced shareholder discontent earlier this year over the group’s slowing growth and strategy, said the growth had been flat in its mature European markets while its businesses in developing markets of eastern Europe, Middle East, Asia and Africa had grown 14 percent.
“Pricing is coming down I’d say 15 percent in our European markets. The fact that we are adding a lot of customers helps us maintain our revenue (growth) of about 6 percent,” said Sarin.
Vodafone said it had added 12 million new customers in the half year, taking its total base to 191 million users.
The group unveiled a surprise 8.1-billion-pound ($15.5 billion) knock to the goodwill value at its German and Italian units, blaming higher interest rates along with pricing and continued regulatory pressures in the German market.
The fresh impairment charge dragged it to a headline loss of 4.55 billion pounds. A similar impairment charge led Vodafone to report a 21.8-billion-pound loss in the last fiscal year, the biggest in European corporate history.
Chief Financial Officer Andy Halford said nearly half — 3.7 billion pounds — of the goodwill hit stemmed from higher interest rates and the rest mainly from price cuts in Germany.
However, shares in the group, already up 26 percent in the last 3 months, shrugged off the headline losses and rose as much as 4 percent, taking them to levels last seen just before interim results in November last year.
By 1205 GMT, the stock was up 0.9 percent at 137-1/4 pence. The stock trades at nearly 13 times next year’s forecast earnings, compared with 14.1 percent for the European telecoms sector.
Vodafone raised its interim dividend by 6.8 percent to 2.35 pence a share, and reaffirmed plans to pay out 60 percent of its earnings for the full year. The company has already stopped share buybacks this year, after spending billions last year.
It also paid out a special dividend of 9 billion pounds last August, principally from the proceeds of its Japanese unit’s disposal to Softbank Corp. earlier this year.
CEO Sarin, under whose watch the once acquisitive behemoth is making selective disposals to refine its portfolio, doused hopes it could exit France or the Swiss markets in a hurry and dismissed reports it could do a deal with Russia’s Alfa group.
Sarin said Vodafone was happy with its 44-percent stake in French mobile operator SFR and the chances of its sale to partner Vivendi were “highly unlikely” and if anything, Vodafone was interested in raising its stake at the right price.
However, Sarin said Vodafone would look at a sale of its 25-percent stake in Swisscom Mobile “if there was a full offer put on the table”.
Fuente: Reuters, Santosh Menon