Vodafone Group’ share price rose after the firm reported encouraging trading results from Europe in the last quarter.
At 76.5p per share the telecoms giant was trading 4% higher on Monday. This made it the second-biggest gainer on the FTSE 100 in start-of-week business.
Group service revenues at Vodafone fell 4.2% during the three months to June, to €9.1 billion. However, on an organic basis revenues rose 3.7% over the period.
Organic service revenue growth was also up from 1.9% in the prior three months. Vodafone said it had seen “broad-based service revenue improvement across almost all European markets.”
Organic service revenues in its critical German market fell 1.3% in the first quarter, though broadband price rise helped sales improve from the 2.8% decline reported in the previous quarter. Business in Germany has been hampered by legislation introduced in late 2021 that banned automatic contract renewals on bundled services.
In the UK, Vodafone’s second-largest market, organic service revenues increased 5.7% in quarter one. That was up from 3.8% in the prior three-month period.
At its Vodafone Business division, organic service revenue growth accelerated to 4.5% from 2.9% over the period. Comparable revenues at its Vodacom division in Africa improved to 9% in the last quarter from 7%.
Guidance Maintained
Chief executive Margherita Della Valle commented “as we progress our plans to transform Vodafone, we have achieved a better service revenue performance across almost all of our markets. We have delivered particularly strong trading in our Business segment and returned to service revenue growth in Europe.”
She added that “we have taken the first steps of our action plan focused on customers, simplicity and growth, but we have much more still to do.”
Vodafone maintained its full-year guidance and said it expects to report adjusted earnings before interest, taxes, depreciation and amortisation after leases (EBITDAaL) of €13.3 billion. The business also predicted adjusted free cash flow of €3.3 billion.
Mucic Incoming
Vodafone also announced that Luka Mucic will assume the role of chief financial officer from 1 September. He had previously worked at software business SAP where he held the same role for seven years until March 2023.
Della Valle said that Mucic “has a strong track record of international leadership, corporate repositioning and value-creation. Luka is joining us at a critical time as we undertake the transformation of Vodafone.”
“Mixed Results”
Matthew Dorset, analyst at Quilter Cheviot, commented that “Vodafone delivered mixed results today, though with revenue ahead of expectations and the company taking advantage of price rises in April they are more on the positive side.”
He said that “key indicators do show some deterioration across the business,” with falling broadband customer numbers being shown in Germany, Spain and Italy. Vodafone’s mobile customer base also declined in the UK and Spain, Dorset added.
Adam Vettese, analyst at eToro, noted that the business enjoyed a “solid” revenue improvement in the period. He said that “key market Germany continues to struggle, which is acting as a drag on the wider group, although the UK, another key market, had a decent quarter due to consumer price rises.”
Vettese added that “Vodafone shareholders will know better than to assume this is the start of consistent and continued growth so early on in the turnaround process, but they will hope Della Valle has some answers to boost long-term performance.”
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