Vodafone delivers ‘sustainable’ growth thanks to German market
Vodafone reports “solid” results, with total revenue growth of 5 per cent to €22.5bn in the six months to end-September. This was driven by service revenue growth in Europe and Africa and a recovery in handset sales following COVID-19 disruption in the prior year.
Adjusted core earnings came in at €7.6bn, with growth boosted by a 0.7 point margin increase.
Vodafone raised its forecast for this year’s free cash flow today after it reported 6.5 per cent growth in adjusted core earnings in its first half, driven by a good performance in Germany, its largest market.
The British Mobile group raised the floor of its full-year earnings guidance to €15.2bn from €15bn, with the top remaining at 15.4bn, and upped its free cash flow target to at least €5.3bn from at least €5.2bn.
Shares were subsequently up five per cent this afternoon to 118.8p.
Chief Executive Nick Read said the results demonstrated “solid commercial momentum”.
“Our strengthened performance in Africa and Europe puts us on track to be at the top end of our guidance for this year, as well as firmly within our medium-term financial ambitions,” he said.
Chris Beauchamp, Chief Market Analyst at IG Group, the trading and investment platform, said: “This morning’s update from Vodafone does provide some hope that the decline in the shares can be reversed, as Vodafone joins M&S as the latest company to provide some positive news after recent losses.”
“A rebound in activity in key markets like Europe is welcome indeed, and provides further evidence that the European economy is, at last, following the US into the recovery phase, something that should provide a foundation for future earnings upgrades from Vodafone.”
However, Richard Flood, investment manager at Brewin Dolphin, is less optimistic, and said: “Vodafone’s results are good and very much in line with investors’ expectations. Clearly, however, investors remain sceptical of the company’s growth and return prospects – the share price has been weak, falling more than 20% in the past six months in a generally strong market, despite being supported by a dividend yield of 7%. It is hard to see what the catalyst is for the share price trend to improve.”