- Q3 service revenue up 5.2%
- Germany declined by 6.4%
- Full-year guidance maintained
Despite revealing accelerating revenue growth in the third quarter and maintaining full-year guidance, shares in Vodafone (VOD) sank to the bottom of the FTSE 100, losing 7% to 65.7p over concerns of a worsening performance in Germany.
The shares continue to lag the FTSE 100, having lost more than half their value over the last five years compared with a 15% gain in the blue-chip index.
WHAT DID THE COMPANY SAY?
Vodafone CEO Margherita Della Valle commented: ‘Group service revenue growth accelerated to 5.2% in the third quarter. This was driven by a step-up in the UK and strong performance in Türkiye and Africa, whilst Germany is impacted by the TV law change.
‘We are continuing to invest in the turnaround of our German business, and we are starting to see improving customer trends, although conditions have become more challenging in the mobile market.’
Group service revenue increased by 5.6% to €7.9 billion, which was 5.2% higher on an organic basis, up from 4.2% in the prior period. Service revenue in the company’s largest market Germany fell by 6.4% and, excluding the impact of the TV law change, declined by 2.6% due to lower broadband revenue.
From 1 July 2024 German tenants were permitted to opt-out of TV services provided by landlords and bundled in with the rent.
Group adjusted EBITDAal (earnings before interest, tax, depreciation, and amortisation after lease expenses) increased 2.2% on an organic basis to €2.8 billion.
Vodafone reiterated 2025 guidance to the end of March comprised of EBITDal of circa 11 billion, and group adjusted free cash flow of at least €2.4 billion.
The company intends to use some of the proceeds from the Vodafone Italy sale to initiate a new €2 billion share buyback once the final €0.5 billion tranche of the existing €2 billion buyback concludes.
EXPERT VIEW
Russ Mould, investment director at AJ Bell, commented: ‘Vodafone’s long decline shows no sign of letting up. While there are some reasons for encouragement in the UK market ahead of the now-approved merger with Three, and robust performance in other geographies too, the market has tuned these out and is focused on the growing problems in its German operation.
‘The company will hope to win investors over with share buybacks this year but, again, it needs to demonstrate it can achieve sustainable growth. Until then, everything else it does looks like tinkering at the edges.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author (Martin Gamble) and the editor (James Crux) own shares in AJ Bell.
