Vodafone share price eases on half-year report

on Nov 12, 2013
Updated: Oct 21, 2019

iNVEZZ.com, Tuesday, November 12: Vodafone (LON:VOD) has increased the size of its ‘Project Spring’ organic investment programme by £1.0 billion to £7.0 billion in a bid to boost its competitiveness and improve performance after posting disappointing service revenue results for its fiscal second quarter through September.

The telecoms giant said its quarterly service revenues fell by 4.9 percent on an organic basis, which excludes sales and acquisitions and currency swings, with the dip driven by challenging conditions in Europe. The decline was higher than the 4.6 percent expected by analysts polled by Bloomberg. The contraction was also the largest on record and came after the prior quarter’s 3.5 percent decline.

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Vodafone CEO Vittorio Colao said in the statement: “Whilst trading conditions in Europe remain very tough at present, we are encouraged by the forecast return to economic growth over the next two years and the potential for a shift in regulatory focus to support greater industry investment and consolidation.”.
The company’s share price opened 1.5 percent lower today but soon regained ground to be trading at 226.85 pence at 9:01 UTC, down 0.2% from yesterday’s close.

**Investment for growth**
Colao noted also that Project Spring would further accelerate the company’s plans to establish a stronger network and differentiate itself from the competition. “We plan to invest approximately £7 billion in capex in the next two financial years, including up to £0.5 billion committed in the current financial year,” he said, adding that recovery of the outlay is expected to take about seven years.

The bulk of the investment, around £3 billion, will go to Europe where the company aims to deliver deeper 3G coverage and capacity and accelerate its 4G network build, so as to offer a best-in-market voice and video experience. About £1.5 billion will be invested in extending 3G coverage across major cities and key regions in Africa, the Middle East and Asia Pacific (AMAP). Some £1 billion will be committed towards unified communications solutions and services across the world and another billion on improving ‘customer experience’. £500 million has been earmarked for a strengthening of the group’s enterprise product suite.

Ratings agency Moody’s yesterday said that Vodafone’s increased capex spending would pressure its European rivals to also boost investment “in order to accelerate convergence to set off the challenges coming from Vodafone.” But whereas many European telecoms may struggle to find funds for investment, Vodafone is financing its capex programme from the proceeds from the $130 billion sale of its 45 percent stake in US mobile operator Verizon Wireless, due to be completed early next year.
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**Half-year results**

Vodafone reported EBITDA of £6.6 billion for its fiscal first-half, down 4.1 percent year-on-year. The core profit was higher than a company-compiled estimate of £6.4 billion. Total revenues fell 3.2 percent on an organic basis to £22 billion, while service revenue was down 4.2 percent, to £20 billion, hit by a 14.9 percent drop in Southern Europe and a 3.9 percent decline in Northern and Central Europe. The AMAP region saw 5.8 percent growth.
Adjusted operating profit fell 8.3 percent to £5.7 billion, due to lower EBITDA and higher depreciation and amortisation charges and reflecting just five months of profit contribution from Verizon Wireless, but was 0.5 percent higher on an organic basis.
**Full-year outlook maintained**
Vodafone has confirmed its full-year outlook, saying it is on target to deliver adjusted operating profit of around £5 billion and free cash flow of between £4.5 and £5.0 billion range. The company notes that a successful completion of the sale of Verizon Wireless during Q4 will boost the final dividend per share by eight percent. Together with the 3.53 pence interim dividend per share announced today, total dividend for the 2014 fiscal year is expected to be 11 pence.
**As of 8.48 UTC buy Vodafone shares at 226.65p.**
**As of 8.48 UTC sell Vodafone shares at 226.55p.**
Trade these shares now through Hargreaves Lansdown from £5.95 per deal.
Prices can go up and down meaning you can get back less than you invest. This is not advice. Dealing services provided by Hargreaves Lansdown.
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