Group adjusted earnings down €2.6 billion for first half of financial year
Vodafone’s H1 results don’t make inspiring reading. The group’s profits fell in the first half of its financial year to the end of September, dragged down by Germany which accounts for 30% of the group’s revenue.
Vodafone’s revenues were up by a modest 2% to €22.9 billion but adjusted earnings before interest, tax, depreciation and amortisation (EBIDTA) were down 2.5% to €7.2 billion, below market expectations of €7.5 billion.
The UK was a bright spot, where revenues grew by 7% to €3.4 billion and an EBITDA of €685 million. Vodafone is negotiations to acquire the UK’s smallest operator, Three UK.
Germany down
However, Germany, Italy and Spain put in disappointing performances, leading the group to lower its outlook for the full year as profits dropped in H1.
Germany’s adjusted EBIDTA fell 7.4% to €2.68 billion, apparently due in part to losing broadband customers and higher customer acquisition costs. Vodafone recently announced a joint venture in Germany with Altice to reach 7 million homes in six years.
Vodafone acquired Liberty Global’s cable assets in Germany, Hungary, Czech Republic and Romania in a controversial deal in 2019 for €18.4 billion.
Group CEO Nick Read said in a statement, “Our recently announced fibre-to-the-home JV in Germany will further enhance our leading gigabit fixed network position in Europe’s largest market”.
Vodafone’s performance in Italy and Spain were worse quarter-on-quarter, attributed to fierce price competition. Earlier this year, Read reportedly turned down an offer from Iliad Group to buy its Italian opco for more than €11 billion.
Worth noting that the French group Iliad this week https://www.reuters.com/business/media-telecom/french-telecom-group-iliads-q3-revenue-rises-8-2022-11-15/reported an 8% jump in like-for-like sales for the third quarter after subscriber numbers grew in France, Italy and Poland.
Lowered expectations
The group lowered its earnings guidance to between €15 billion and €15.2 billion, down from €15 billion to €15.5 billion, and revised its expected free cash flow from €5.3 billion to €5.1 billion.
“In the context of a challenging macroeconomic environment, we are delivering a resilient performance this year,” Vodafone’s Group CEO, Nick Read, said in a statement.
Vodafone will also enjoy a boost to the balance sheet because last week, after months of speculation, the group finally sealed a deal to sell off a majority stake in its Vantage Towers business.
Read noted, “We are pleased the Vantage Towers transaction accomplished our three key objectives – monetisation, deconsolidation and retaining co-control of these strategically important assets – and we continue to deliver portfolio actions to strengthen our businesses and accelerate growth.
The group set a new target to shave more than €1 billion off operating costs by 2026 by “streamlining and further simplifying the group,” Read said. “We are taking a number of steps to mitigate the economic backdrop of high energy costs and rising inflation.
“These include taking pricing action across Europe, whilst at the same time supporting our most vulnerable customers and driving energy efficiency measures across the business.