5th Dec 2022 15:44
(Alliance News) - Vodafone Group PLC shareholders would be forgiven for being glad to see the back of Chief Executive Nick Read, who has presided over a near 45% share price slide during his four years at the top of the telecommunications firm.
While Read has had the Covid-19 pandemic and now a cost-of-living crisis to contend with since taking on the role in October 2018, analysts and investors have been less-than-impressed by his tenure as CEO.
Shares now stand at 91.13 pence, down 0.1% on Monday afternoon in London and 44% lower than they were ahead of Read assuming the role of CEO.
Read had joined the Vodafone board in April 2014 and was chief financial officer until late-July 2018.
Read steps down in December. Chief Financial Officer Margherita Della Valle will step up as an interim CEO, in addition to continuing her role as CFO. The board has begun a process to find a replacement CEO.
Prior to joining the FTSE 100 listing's board, he held various role for Vodafone's UK unit and was also former regional CEO for Africa, Middle East & Asia Pacific.
With all that experience, Read was a logical choice for CEO. AJ Bell analyst Russ Mould said it would be difficult to assess Read's time as CEO "as anything other than a disappointment".
"Read has faced some exceptional challenges in that time, notably an inflation crisis and a global pandemic, however he has struggled to persuade the market and, ultimately his employers, that he has a strategic plan to help revive Vodafone's growth," Mould said.
"It was a damning indictment back in October that activist investor Cevian Capital had apparently begun to give up on hopes of Vodafone ever turning it around as it slashed its stake in the company."
Read's final set of results did little to lift investor confidence.
Vodafone last month reported half-year pretax profit of EUR1.73 billion for the six months to September 30, up 35% from EUR1.28 billion a year prior. Revenue rose 2.0% to EUR22.93 billion from EUR22.49 billion.
However, the company back in November lowered its full-year outlook for financial year 2023 for adjusted earnings before interest, tax, depreciation, and amortisation and special losses to between EUR15.0 billion and EUR15.2 billion.
Previously, it had guided between EUR15.0 billion and EUR15.5 billion. For financial 2022, adjusted Ebitda amounted to EUR15.2 billion.
Hargreaves Lansdown analyst Susannah Streeter commented: "Although any change of Chief Executive is unsettling, the restructuring strategy Nick Read headed up, hasn't yet reaped rewards. Investors were disheartened by the weaker than expected outlook with profit and cash flow guidance getting a downgrade. Bleaker macro-economic conditions and higher energy costs are clearly challenges to navigate, and given how competitive it is in the mobile space, navigating price hikes will be tricky given the cost-of-living crisis in key markets.
"The pivot to Africa provides good longer-term growth opportunities but steady progress in the medium-term still looks elusive. His successor will need some bright ideas about how to differentiate the company when consumers are so super-sensitive to price in the mobile market."
Streeter also questioned what the departure means for talks with CK Hutchinson Holdings Ltd, over the future of Three.
CK in October confirmed it is in discussions with Vodafone over a possible merger of Three UK and Vodafone UK.
The Hong Kong-based conglomerate said the envisaged transaction would involve both companies combining their UK businesses, with CK Hutchinson holding 49% and Vodafone holding 51% of the combined business.
CK Hutchinson noted that Three and Vodafone do not have "the necessary scale" to earn their cost of capital in relation to 5G. The combination will ensure Three and Vodafone gain "the necessary scale to be able to accelerate the rollout of full 5G in the UK and expand broadband connectivity to rural communities and small businesses."
Streeter added: "What this means for merger talks between Three UK and Vodafone UK remains to be seen, Read's track record of finalizing deals was murky at best and we wouldn't be surprised to see talks slow until a permanent replacement is found."
By Eric Cunha, Alliance News news editor
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