Vodafone shares slumped today despite delivering first half revenues and profits in line with City forecasts and promising shareholders a long awaited “acceleration” of growth next year.
By mid-morning the shares were trading around 4% lower at just over 70p making the mobiles giant the second biggest faller in the FTSE-100.
The company is in the throes of a major strategic restructuring to make it more focused on faster growing markets. It hopes to have the sale of its Italian business and the merger of its UK operation with those of rival Three cleared by regulators by the end of 2024, with completion of both deals early next year.
But analysts said the shake-up was the corporate equivalent of “turning round a super tanker” after years of underperformance with investors impatient for higher returns.
Group revenues were up by 1.6% to €18.3 billion (£15.2 billion) in the six months to end September - in line with expectations - while underlying earnings were 3.8% higher at €5.4 billion. Operating profits increased by 28.3% to €2.4 billion largely because of a €0.7 billion gain on the disposal of an 18% holding in Indus Towers.
In the UK revenues were 2% higher at €3.45 billion, while earnings were 10% higher at €707 million. However mobile service revenue slipped by 1.3% in part because of lower inflation linked price rises compared with last year,
Net debt fell from €50,804 to €48.7 billion.
CEO Margherita Della Valle, said: “We continue to make good progress on our strategy to change Vodafone. The approval processes for our transactions in the UK and Italy are nearing conclusion. These will complete our programme to reshape the group for growth. We are also investing in Germany to strengthen our market position and taking steps to expand our B2B capabilities.
“As we move through this year of transition, our results in the first half have been consistent with our expectations and we are reiterating our full year guidance. We grew service revenue by 4.8% and Adjusted EBITDAaL by 3.8%. We delivered good performances across our markets, with the exception of Germany, where we have been impacted as expected by the TV law change.
“I am confident that the actions we are taking will deliver growth for Vodafone this year and a further acceleration into FY26.”
Richard Hunter, head of markets at interactive investor, said: “For Vodafone, years of underperformance are being addressed, with a major transformation of its business well underway. Even so, turning around a super tanker is never an easy task, especially when the company is in the midst of a highly competitive arena.”
He added: “The planned halving of the dividend payment will nonetheless result in a yield of 5.1%, effectively paying investors to wait as the transformation continues, although some of the elevated yield level comes from a decreasing share price.
But Albie Amankona, analyst at research house Third Bridge, said: “Vodafone relies on third-party content deals with providers like Sky, making its offerings less unique. Its upcoming merger with Three, while creating the UK’s largest mobile provider, might distract Vodafone with integration issues, giving rivals more time to expand.
“To stay competitive, Vodafone will need to invest in exclusive content and seamless bundles post-merger. Without these moves, Vodafone risks losing customers and, in the long run, revenue needed for reinvestment, putting its future growth in jeopardy.”
