16th May 2023 13:15
(Alliance News) - Vodafone Group PLC was the worst blue-chip performer in London on Tuesday afternoon after the company reported its annual performance slowed in line with its expectations.
"Lacklustre performance has been something markets have come to expect from Vodafone of late, and full-year results didn’t buck the trend," said Matt Britzman, equity analyst at Hargreaves Lansdown.
In the financial year ended on March 31, the telecommunications company said revenue was virtually flat year-on-year, up just 0.3% to EUR45.71 billion from EUR45.58 billion the year before. This is compared with a maximum expected revenue of EUR45.86 billion.
The firm said this was driven by growth in Africa and higher equipment sales, offset by lower European service revenue and "adverse exchange rate movements".
Pretax profit jumped to EUR12.82 billion from EUR4.10 billion, largely due to a gain on the disposal of Vantage Towers.
Adjusted earnings before interest, tax, depreciation and amortisation after leases amounted to EUR14.67 billion, down 3.6% from EUR15.21 billion the year before.
Chief Executive Officer Margherita Della Valle admitted that the company's performance has "not been good enough" and said that to deliver consistently, "Vodafone must change."
Russ Mould, investment director at AJ Bell, argued there were three "glaring" flaws with the new Vodafone boss' plan to return the company to investors' favour, however.
"First, the strategy focuses on 'Customers, Simplicity and Growth,' but growth is not a strategy – it is what results from strategy. Second, there is no growth, as Vodafone is steering down profit and cash flow guidance for the new fiscal year and declares another unchanged dividend," the AJ Bell analysts argued, referring to Vodafone's decision to maintain its dividend at 8 euro cents on Tuesday as it said it guided for broadly flat adjusted Ebitda in financial 2024.
"Finally, the company still looks like an over-indebted investment trust of telecoms assets and the new CEO's plan does nothing to address the structural challenges that face Vodafone, as it tries to compete on too many fronts, in too many markets with too little resource, thanks to its hefty borrowings," Mould said.
Markets appeared to agree with Mould, with the stock down 5.6% at 85.07 pence in London on Tuesday afternoon and down just over 29% in the past 12-months.
"With her strong words accompanied by a plan to remove 11,000 staff from its payroll in just three years, Della Valle has signalled she is not messing about. But it will take more than just streamlining the business to make it relevant for the 21st century world of telecoms," Mould concluded.
By Heather Rydings, Alliance News senior economics reporter
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