Grim earnings forecast for Vodafone
LONDON, England
Vodafone earnings will drop this year, in part due to rising costs, the British mobile phone giant warned yesterday as it slashed the value of its European operations.
Vodafone’s share price slumped after the group forecast that underlying earnings — or profit before interest, tax, depreciation and amortisation (Ebitda) — would fall to between 11.4 billion and 11.9 billion (US$19.1 billion and US$20 billion, 14 billion euros and 14.6 billion euros) in 2014/2015.
That compared with Ebitda of 12.8 billion in 2013/2014, the company said in its annual results statement.
Vodafone, which has struggled for years with maturing markets in Europe, also took a 6.6 billion charge against its assets in Germany, Spain, Portugal, Czech Republic and Romania.
Revenues dipped 1.9 per cent to 43.6 billion in 2013/14, hurt by the pressures in Europe.
The grim news sent Vodafone’s share price diving 5.92 per cent to 204.29 pence on the British capital’s FTSE 100 index, which was 0.57-per cent lower at 6,805.58 points.
Vodafone also revealed yesterday that annual net profits rocketed to 59.3 billion in the group’s financial year to March 31 but only because of a huge one-off gain.
The group had registered net profit of just 413 million in 2012/2013.
However, profits for Vodafone’s last financial year were skewed by the enormous sale of its stake in US joint-venture Verizon Wireless.
The London-listed group agreed to sell its 45-per cent holding in joint venture Verizon Wireless in 2013 to partner Verizon for US$130 billion in a move to strengthen its strategy, boost infrastructure investment and slash debt.
The deal generated a huge capital gain, and the company used part of the proceeds to return US$85 billion to shareholders.
Vodafone has also made a concerted push into the cable pay-television industry, amid broader consolidation in the global sector.
The British mobiled phoine giant has made strategic acquisitions including the purchases of Kabel Deutschland (KDG), the largest cable operator in Germany, and Spanish cable firm Ono.
“It has been a year of substantial strategic progress,” said chief executive Vittorio Colao in the results statement.
“The sale of our Verizon Wireless stake has rewarded shareholders for their support, and enabled the acceleration of our strategy through the acquisition of KDG, the pending acquisition of Ono and our Project Spring investment programme.”
Colao added that emerging markets continued to deliver strong results.
“Our operational performance has been mixed,” he admitted.
“The group’s emerging markets businesses have performed strongly throughout the year: we have executed our strategy well and have successfully positioned ourselves for the rapid growth in data we are now witnessing.
“In Europe, where we continue to face competitive, regulatory and macroeconomic pressures, we have taken steps to improve our commercial performance, particularly in Germany and Italy, and are beginning to see encouraging early signs,” Colao said.
—AFP