Vodafone Falls On “Lacklustre” FY Results, Leads FTSE 100 Lower As Restructuring Plans Announced

Telecoms giant Vodafone Group was the leading FTSE 100 faller on Tuesday as it announced full-year trading numbers and restructuring plans.

At 84p per share Vodafone shares were trading 6.7% lower.

Revenues at the business edged 0.3% higher in the 12 months to March, to €45.7bn. Organic service revenues meanwhile increased 2.2% year on year to €38bn.

But comparable service revenues in Germany dropped 1.6% in the period. Trading conditions remain tough in its key Central European market following the introduction of the Telecommunications Act in 2021.

The legislation banned automatic contract renewals and caused Vodafone’s cable broadband and TV customer bases to fall 119,000 and 412,000 respectively last year.

Adjusted pre-tax profit at Vodafone dropped 10% to €4.1bn. Adjusted cash flow fell by almost €600m year on year, to €4.8bn, but net debt fell by a fifth over the period to €33.4bn.

Vodafone kept the full-year dividend locked at 9 US cents per share.

Transformation Plans

Following a strategic review, Vodafone announced on Tuesday “a new roadmap” that it hopes will make it best-in-class in Europe and Africa and the leading Business platform in its European marketplace.

This will include steps to “to maximise the potential of Vodafone Business,” a division which the firm said “has a unique set of capabilities and has a strong position in a large and growing market as organisations digitise.” Organic service revenues here rose 2.6% in financial 2023.

The FTSE firm also announced its desire to be “a leaner and simpler organisation.” This will result in the axing of 11,000 jobs across the globe over the next five years.

“Vodafone Must Change”

Vodafone chief executive Margherita Della Valle said that “today I am announcing my plans for Vodafone. Our performance has not been good enough. To consistently deliver, Vodafone must change.”

She commented that “my priorities are customers, simplicity and growth. We will simplify our organisation, cutting out complexity to regain our competitiveness. We will reallocate resources to deliver the quality service our customers expect and drive further growth from the unique position of Vodafone Business.”

“Lacklustre Performance”

Matt Britzman, equity analyst at Hargreaves Lansdown, commented that “lacklustre performance has been something markets have come to expect from Vodafone of late, and full-year results didn’t buck the trend.”

He said that the new chief executive “has been very vocal about the host of challenges she’s facing in her new role” and described her honesty as “refreshing.”

But Britzman added that while her transformation package “makes sense on paper… markets will need to see tangible results over the coming year before they get more excited.”

Mark Crouch, analyst at social investing platform eToro, said that Della Valle “has echoed this morning what many shareholders have been feeling for years; that the telecoms giant has been an underperformer for an unacceptable period of time.”

He noted that Vodafone’s share price has more than halved during the past five years “as revenues and earnings have plateaued.”

Crouch added that “it’s about time Vodafone had a clear and sensible roadmap for growth, one aimed at making it a leaner, nimbler group that actually cares about customer service.” He said that so far the company lacked the ideas or resolve to reinvigorate itself “other than betting the ranch on a proposed mega-merger with rival Three.”