Continued weakness in Vodafone 's Spanish and Turkish businesses forced the world's largest mobile phone company to take a £5.9bn writedown, and left reported pre-tax profits well down on last year.
The bulk of the impairment charge was related to the Spanish business, which saw cash profits slump 10.5 per cent over the year, as the decline in service revenues mirrored the horrific collapse of the country's economy - they fell 4.9 per cent over the year, including an 8.6 per cent decline in the last quarter. The performance in Turkey was worse still - at constant exchange rates, service revenues fell 7.6 per cent over the year and 18.4 per cent in the fourth quarter, prompting a 37.3 per cent slide in cash profits. Trading across western and central Europe was muted, too.
But Vodafone is now such a large and diverse company that it still had enough in its arsenal to put out some relatively decent numbers overall. Chief executive Vittorio Colao's relentless focus on free cash flow saw it hit £5.7bn, the top end of his guidance. And cash profits moved up 10 per cent to £14.5bn, thanks to a strong contribution from its emerging markets operations and Verizon Wireless in the US, which bought rival Alltel in January to become the country's largest network operator.
Asia Pacific and the Middle East saw revenues climb 19 per cent on a pro forma basis, thanks in particular to stellar growth in India, which added 24.6m customers over the year and increased revenues by 33 per cent. Its African business, Vodacom, saw revenues climb 14 per cent, thanks to strong subscriber growth.
However, Mr Colao said that Vodafone's empire building days are behind it, and that the primary focus will remain on driving results from its existing markets. As a result, he has decided to accelerate the company's £1bn cost-saving programme - after delivering annualised savings of £200m last year, he promised to raise that to £650m this year. Even so, adjusted operating profits for 2010 are still anticipated to fall to between £11bn and £11.8bn, as downward pressure on voice and data pricing continues to bite in mature European markets.
Broker Morgan Stanley expects 2010 pre-tax profits of £10.3bn, giving EPS of 15.0p (17.1p in 2009).
VODAFONE (VOD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 127p | MARKET VALUE: | £66.4bn | |
| TOUCH: | 126-127p | 12-MONTH HIGH: | 170p | LOW: 96p |
| DIVIDEND YIELD: | 6.1% | PE RATIO: | 22 | |
| NET ASSET VALUE: | 164p* | NET DEBT: | 40% | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2005 | 26.7 | 7.29 | 8.10 | 4.07 |
| 2006 | 29.4 | -14.9 | -27.7 | 6.07 |
| 2007 | 31.1 | -2.38 | -8.94 | 6.76 |
| 2008 | 35.5 | 9.00 | 12.6 | 7.51 |
| 2009 | 41.0 | 4.19 | 5.84 | 7.77 |
| % change | +16 | -53 | -54 | +3 |
Ex-div: 3 Jun Payment: 7 Aug *Includes intangible assets of £74.9bn, or 143p a share | ||||
