1st Feb 2023 10:55
(Alliance News) - Vodafone Group PLC shares were hit by an uninspiring third-quarter update on Wednesday, leaving new boss Margherita Della Valle with a "mountain to climb" at the start of her tenure.
The stock was down 2.1% at 91.10 pence each in London on Wednesday morning, the second-worst blue-chip performer after gold miner Fresnillo PLC. Vodafone is down 29% over the past 12 months.
"Vodafone faces the twin perils of an extremely competitive landscape and some deteriorating economic conditions, and the latest update highlights the effects of both," interactive investor analyst Richard Hunter commented.
On an organic basis, service revenue growth slowed in the third-quarter ended December 31. It rose 1.8% year-on-year, having climbed 2.5% yearly in the second quarter.
On a reported basis, service revenue was 1.3% lower than a year before at EUR9.52 billion from EUR9.65 billion. Total revenue amounted to EUR11.64 billion, down 0.4% from EUR11.68 billion.
Service revenue is a key marker for a telecommunications firm such as Vodafone. The measure includes airtime costs, access charges and roaming.
A weaker quarter in Vodafone's major market of Germany was central to the company's service revenue woe. Organic service revenue fell 1.8% in Germany. In Italy, it declined by 3.3% and in Spain by 8.7%.
The UK, where organic service revenue rose 5.3%, was more promising. That was not enough to lift investor sentiment on Wednesday, however.
Vodafone has much to do to win back investor confidence, new CEO Della Valle suggested.
"Although we're continuing to target our financial guidance for the year, the recent decline in revenue in Europe shows we can do better. We need to do more for our customers by delivering quality connectivity in an easy way. We've already taken action, including simplifying our structure to give local markets full autonomy and accountability to make the best commercial decisions for their customers," she explained.
Della Valle became interim chief executive at the start of the year, replacing Nick Read who departed after just over four years and a roughly 40% fall in Vodafone's share price.
ii's Hunter added: "[Wednesday's] share price performance continues to reflect the enormity of the challenges ahead.
"Whether the newly appointed CEO can revitalise fortunes remains to be seen, but there is unquestionably a mountain to climb. As such, the jury remains out on immediate prospects, with the market consensus coming in at a hold, albeit a strong one."
Vodafone backed guidance, expecting adjusted earnings before interest, tax, depreciation, amortisation and after leases between EUR15.0 billion and EUR15.2 billion for all of financial 2023, which ends on March 31. At best, that would be around the EUR15.21 billion achieved in financial 2022.
Vodafone also expects adjusted free cashflow of around EUR5.1 billion, which would be down around 6.2% from EUR5.44 billion the year prior.
By Eric Cunha, Alliance News news editor
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