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Vodafone - Returning to growth

Steve Clayton | 10 November 2015 | A A A
Vodafone - Returning to growth

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Vodafone Group plc USD0.20 20/21

Sell: 109.48 | Buy: 109.52 | Change -4.48 (-3.93%)
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Interim results from Vodafone show a return to organic growth in both service revenues and EBITDA. The dividend rises by 2.2% to 3.68p, net debt has increased to £25.4bn following £2.1bn of spectrum purchases and the cost of Project Spring. EBITDA rose 2% to £5.8bn, but adjusted operating profit fell 6% due to the higher depreciation and amortisation charges caused by the Project Spring investments.

Vodafone shares rose by approaching 2% in initial trading, following the release of the results.

Revenue trends improved, for the fifth consecutive quarter. Group organic service revenue growth was 1.2%, consisting of a 1% decline in Europe and 6.7% growth in the AMAP (Africa, Middle East, Asia Pacific) division, all at constant currency rates. Data traffic growth was 75%, with the average European customer increasing their usage by 39% in the latest quarter. Vodafone now has 12.5m broadband customers and is marketing high speed broadband to 66 million European homes.

In a sign of the growth of the Internet of Things, Vodafone report machine-to-machine revenue growth of 29%. The group claim top be achieving leadership in European 4G services.

Free cash flow was a negative £0.5bn, due to Project Spring outflows. Full year free cash flow is seen positive, as Project Spring reaches completion. Guidance for overall EBITDA for the full year is nudged up slightly, to a range of £11.7bn - £12.0bn. Vodafone has also announced today that from the next financial year onwards, the group will change its reporting currency to euros.

The group's Unified Communications strategy continues. Broadband coverage has increased by 3.6 million homes since last year, with 0.5m homes signing up in the first half of the year, and the company is continuing to invest in order to expand coverage in Spain, Portugal and Italy. UK consumer broadband was launched and a pay TV service will follow shortly. Overall in H1, just over a quarter of Vodafone's European service revenue came from fixed line.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information.