Vodafone Group Plc fell as much as 6% in London, on track for a 25-year low, after it adjusted its outlook to the low end of a previous range and launched a more-than €1 billion ($1 billion) cost savings plan to confront high energy prices and inflation.
(Bloomberg) — Vodafone Group Plc fell as much as 6% in London, on track for a 25-year low, after it adjusted its outlook to the low end of a previous range and launched a more-than €1 billion ($1 billion) cost savings plan to confront high energy prices and inflation.
- Vodafone expects €500 million more in energy costs in 2024, it said in slides accompanying the results. That’s on top of a €300 million rise in 2023.
- Vodafone sees adjusted earnings before interest, taxes, depreciation, amortization after leases staying flat or a slight decline, expecting €15 billion to €15.2 billion for the fiscal year ending in March, the company said in a statement on Tuesday. That compares to previous guidance of €15 billion to €15.5 billion for the year. Adjusted free cash flow will be about €200 million lower than previous guidance.
- Vodafone posted second-quarter organic service revenue growth of 2.5%, versus an average estimate of 2.3% from analysts in a Bloomberg survey.
Key Insights
- The UK-based telecommunications company said it plans to find the savings by 2026 “through streamlining and simplifying our group-wide structure and further accelerating the digitalization of our operations,” it said in the statement.
- Growth in the UK and other markets continued to offset falling sales in Germany, Italy and Spain, it said.
- Chief Executive Officer Nick Read has pledged to reshape the Newbury, England-based wireless and cable group and pay down debt through big deals. Last week he agreed to sell a large stake in mobile-mast business Vantage Towers AG, and he’s in talks to merge Vodafone’s UK arm with CK Hutchison Holdings Ltd.’s Three UK.
- Read’s also had to field high-profile investors, who’ve urged him to move fast. Although activist Cevian Capital sold down most of its stake earlier in the year, as rising interest rates undermined its investment thesis, in September, French billionaire Xavier Niel bought 2.5% of the company.
- Bloomberg Intelligence Analyst Erham Gurses said Vodafone was showing “limited ability to mitigate inflationary cost pressures amid a challenging performance in Germany, Italy and Spain, with each country registering worse-than-expected fiscal 2Q sales.”
Market Context
- Vodafone shares had fallen 7.2% in the year to Tuesday. That compares to a 12% drop in the Stoxx 600 Europe Telecommunications Index.
- The stock was down 5.8% to 98.11 pence a share at 9:20 a.m. in London on Tuesday.
- Of 25 analysts surveyed by Bloomberg, 13 rate the stock Buy, 9 Hold and 3 Sell.
- Vodafone Drops on ‘Mixed’ 2Q, Ebitda Guidance Cut: Street Wrap
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(Updates with shares, detail on energy costs.)
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