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Vodafone confident on cash flow despite slow sales


Vodafone Group PLC (LON:VOD) saw its reported revenues continue to decline in its third-quarter but it remains confident of hitting full-year profit targets.

Despite another quarter delivering record mobile data traffic as locked-down households fixate on their smartphones, a lack of roaming data and previous disposals means reported service revenue of €9.4bn fell 3.9% in the three months to end-December, 2020.

On an organic basis, however, which excludes the effects of disposals and currency swings, service revenues returned to growth outside of Europe, with a 0.4% gain across the group.

Total revenue, which adds in connection fees, equipment revenue, interest income and lease revenue, was down 4.7% on a reported basis and 0.3% organic.

Guidance for full-year underlying earnings (EBITDA) of €14.4bn-14.6bn and free cash generation of at least €5bn before spectrum and restructuring costs, was reaffirmed by the FTSE 100 company.

Vodafone chief executive Nick Read said the return to organic revenue growth was “a result of the continued commercial momentum across our business, including our largest market Germany”.

He added: “We have made further progress on our strategic priorities, including the IPO of Vantage Towers in early 2021, which remains firmly on track and will now include our 50% shareholding in the UK towers joint venture with Telefonica.”

A more precise date for the Vantage Towers flotation was not given, though a separate trading update will be made on February 15, 2021.

The shares rose 3% to 131.26p after an hour and a half of trading on Wednesday. 

Analysts at Hargreaves Lansdown said: “Telecoms are an essential service, especially in a lockdown, so we’d expect the group to keep ploughing forward. However, closed shops mean investments in digital sales are ever more important, so it’s encouraging to see progress on this front.”

He added that the Vantage Towers IPO “will mark a major step in the Vodafone’s transformation. Vodafone should be in a strong position going forward, but there’s still work to be done in some of the group’s smaller markets.”

   –-Adds shares and broker comment–


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