Mobile phones network giant Vodafone (VOD) has stuck to full year earnings guidance despite outperforming analyst expectations across several measures during the October to December third quarter.
Revenue for the period rose 6.8% to €11.75bn, up from €11bn, year-on-year, while underlying service revenue added 0.8%, with declines in Europe more than offset by growth elsewhere.
‘Key performance indicators (KPIs) suggest good commercial momentum despite low-end competition’, said Jefferies analyst Jerry Dellis. ‘Declining mobile churn, positive German cable net adds (ex-migrations) and positive net adds in Spain across mobile, fixed-line and TV.’
MANAGING EXPECTATIONS
But management are keeping a lid on expectations for the full year, which run s through to 31 March 2020, refusing any temptation to alter guidance. That means investors should anticipate earnings before interest, tax, depreciation and amortisation (EBITDA) of between €14.8bn to 15bn, with pre-spectrum funding free cash flow of around €5.4bn.
Interestingly, the UK is no longer the sick child among Vodafone’s European markets family, posting positive growth versus expected declines elsewhere on organic revenue terms.
‘The UK was actually the star of the show among Vodafone’s larger European markets in the third quarter’ said Megabuyte analyst Philip Carse, despite ‘disappointing’ growth in UK broadband.
Organic service revenue growth year-on-year of 0.8% came in better than the 0.7% of consensus forecasts, with flat Germany bang in line and Italy’s decline of 5% better than the 4.6% predicted by City number crunchers.
‘Notable sequential improvement in Spain from -8% year-on-year to in the second quarter to -6.5% in Q3’, was flagged by Jefferies’ Dellis.
Chief executive Nick Read said Vodafone had maintained momentum in the quarter.
COMPETITION STILL ‘CHALLENGING’
‘Competition in Europe remains challenging, primarily in the value segment, however we continued to improve customer loyalty and to grow in broadband, and we achieved good growth in Africa,’ Read said.
The company expected a further gradual improvement in service revenue growth in the fourth quarter, led by Europe, he added.
Vodafone shares nudged roughly 0.5% higher to 152.08p, valuing the company at just shy of £40.7bn.
