Vodafone's emerging market operations have yet to compensate for the tough trading conditions in Europe. So the mobile telecoms giant has accelerated cost savings plans and is now aiming for £2bn in savings by 2012, double the previous target.
Vodafone's emerging markets division now accounts for 32 per cent of group revenues, up from 26.7 per cent a year ago, but not all regions have performed well. For instance, the group's passage to India is not proving as profitable as analysts had hoped. Despite increasing its average mobile customer base by 55 per cent and revenues by 26 per cent to £1.49bn in the six-month period, cash profits only rose 6.5 per cent to £357m, as usage per customer fell and market penetration shifted towards more rural areas. And Vodafone Turkey - which accounted for a £1.7bn impairment loss in the first half last year - suffered from a near 12 per cent decline in the average customer base and a sharp fall in prices due to greater competition. Overall revenues from the operation declined by 7.5 per cent in constant currencies.
Trading in recession-hit Europe was particularly poor. Revenues from the UK fell 7.4 per cent and cash profits declined a painful 17 per cent to £583m, reflecting continued competitive pressures and further declines in active pre-paid customers. In Spain, underlying revenues dropped 7.5 per cent, but chief executive Vittorio Colao says there were some signs of stabilisation in the region and this represented a 1.2 per cent improvement on the first quarter. Performance was relatively stronger in Germany and Italy, but only because the headline figures were boosted significantly by foreign exchange gains.
Despite the mixed trading performance, with the cost reduction programme on track, the board has reiterated its full-year adjusted operating profit guidance of between £11bn and £11.8bn. And with free cash flow - up 29 per cent to £4bn - full-year cash flow is expected to be at the higher end of Vodafone's previous guidance of between £6bn and £6.5bn.
On an adjusted basis, first-half pre-tax profits edged up from £5.3bn to £5.5bn. On the same basis, analysts at Citi are expecting full-year adjusted pre-tax profits of £9.6bn and EPS of 14p (£10.7bn and 17.2p in 2009).
VODAFONE (VOD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 133p | MARKET VALUE: | £70.1bn | |
| TOUCH: | 133.25-133.3p | 12-MONTH HIGH: | 148p | LOW:105.5p |
| DIVIDEND YIELD: | 5.9% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 167p* | NET DEBT: | 39% | |
| Half-year to 30 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 19.9 | 3.31 | 4.04 | 2.57 |
| 2009 | 21.8 | 5.75 | 9.17 | 2.66 |
| % change | +9 | +73 | +127 | +4 |
Ex-div: 18 Nov Payment: 5 Feb *Includes intangible assets of £77.7bn, or 147p a share | ||||
