Vodafone, the UK-based telecoms group, will embark on a £1.5bn share buyback after receiving a $3.8bn cash dividend from its stake in Verizon Wireless in the US.
The company will return the capital to shareholders despite revealing £5.9bn of impairments following a further deterioration in many of Europe’s mobile telephony markets resulting in an interim £492m pre-tax loss.
The company admitted its overall performance in the first half of the 2013 financial year had been “slightly below our expectations” as a result of a further weakening in the macroeconomic environment. It warned that business conditions would be similar in the second half.
Service revenues adjusted for acquisition activity and foreign exchange declined by 0.4 per cent to £20.2bn, dragged down by a fall of almost 10 per cent in revenues in southern Europe, where its business units in Spain, Italy and Greece are fighting against worsening economic conditions. On a reported basis, group revenue was down 7.4 per cent to £21.8bn.
Shares in the group, which have underperformed the FTSE 100 this year, fell 4.6 per cent in early afternoon trading to 158.98p.
Vittorio Colao, chief executive, said: “In the short term, our results reflect tougher market conditions, mainly in southern Europe. We remain very positive about the longer-term opportunities.”
Vodafone has been forced to shoulder further impairments of £5.9bn for Spain and Italy in the first half, blaming “challenging market conditions and changes to discount rates”.
The pre-tax loss of £492m compares with an £8bn profit last year. The company reported a basic loss per share of 4.01p, mainly because of the impairments.
The company also missed forecasts on its earnings before interest, tax, depreciation and amortisation of £6.6bn, down 2.9 per cent, and an Ebitda margin down 1 percentage point. This again related to weakness in its European business, with an adjusted revenue fall of 3.2 per cent in the UK and modest growth of 1.8 per cent in Germany also weaker than expected.
Operating profit improved, with adjusted operating profit rising 8.5 per cent to £6.2bn and Vodafone guided that this would end up in the upper half of the forecast range for the full year.
Free cash flow of £2.2bn disappointed analysts, however, and the company said that it was likely to be in the lower half of the guidance range for the full year. The interim dividend of 3.27p per share has been raised 7.2 per cent.
Robin Bienenstock, analyst at Bernstein, said there were poor numbers in “pretty much every region top and bottom lines”, with the accounting of the Verizon Wireless profits holding up the numbers. She added that the current strategy looked ill-suited to major structural headwinds in Europe.
On Monday night, Verizon surprised the market by announcing an $8.5bn dividend to its joint venture parents several weeks ahead of an expected decision. This means that the payment will come this year, and ahead of proposed tax increases in the US in 2013.
It marks just the second non-recurring dividend payment since the US mobile operator resumed distributions with a $10bn dividend last year for the first time since 2005, and will fuel hopes that this will be a regular annual event for shareholders in future.
The 45 per cent stake owned by Vodafone means that the company is in line for a payout of $3.8bn, or £2.4bn, roughly in line with expectations.
The brightest parts of Vodafone’s first-half performance came from the US, where Verizon Wireless reported better-than-expected figures, and its emerging markets business. Revenues in Turkey rose 18 per cent, and in India by 11 per cent.
The company, which is moving towards pricing plans based around tiered charges for data usage while bundling in unlimited voice and texts, said there was continued strong growth in data revenues of 13.7 per cent. This comes on the back of a smartphone penetration in Europe of almost a third.
The company will return the capital to shareholders despite revealing £5.9bn of impairments following a further deterioration in many of Europe’s mobile telephony markets resulting in an interim £492m pre-tax loss.
The company admitted its overall performance in the first half of the 2013 financial year had been “slightly below our expectations” as a result of a further weakening in the macroeconomic environment. It warned that business conditions would be similar in the second half.
Service revenues adjusted for acquisition activity and foreign exchange declined by 0.4 per cent to £20.2bn, dragged down by a fall of almost 10 per cent in revenues in southern Europe, where its business units in Spain, Italy and Greece are fighting against worsening economic conditions. On a reported basis, group revenue was down 7.4 per cent to £21.8bn.
Shares in the group, which have underperformed the FTSE 100 this year, fell 4.6 per cent in early afternoon trading to 158.98p.
Vittorio Colao, chief executive, said: “In the short term, our results reflect tougher market conditions, mainly in southern Europe. We remain very positive about the longer-term opportunities.”
Vodafone has been forced to shoulder further impairments of £5.9bn for Spain and Italy in the first half, blaming “challenging market conditions and changes to discount rates”.
The pre-tax loss of £492m compares with an £8bn profit last year. The company reported a basic loss per share of 4.01p, mainly because of the impairments.
The company also missed forecasts on its earnings before interest, tax, depreciation and amortisation of £6.6bn, down 2.9 per cent, and an Ebitda margin down 1 percentage point. This again related to weakness in its European business, with an adjusted revenue fall of 3.2 per cent in the UK and modest growth of 1.8 per cent in Germany also weaker than expected.
Operating profit improved, with adjusted operating profit rising 8.5 per cent to £6.2bn and Vodafone guided that this would end up in the upper half of the forecast range for the full year.
Free cash flow of £2.2bn disappointed analysts, however, and the company said that it was likely to be in the lower half of the guidance range for the full year. The interim dividend of 3.27p per share has been raised 7.2 per cent.
Robin Bienenstock, analyst at Bernstein, said there were poor numbers in “pretty much every region top and bottom lines”, with the accounting of the Verizon Wireless profits holding up the numbers. She added that the current strategy looked ill-suited to major structural headwinds in Europe.
On Monday night, Verizon surprised the market by announcing an $8.5bn dividend to its joint venture parents several weeks ahead of an expected decision. This means that the payment will come this year, and ahead of proposed tax increases in the US in 2013.
It marks just the second non-recurring dividend payment since the US mobile operator resumed distributions with a $10bn dividend last year for the first time since 2005, and will fuel hopes that this will be a regular annual event for shareholders in future.
The 45 per cent stake owned by Vodafone means that the company is in line for a payout of $3.8bn, or £2.4bn, roughly in line with expectations.
The brightest parts of Vodafone’s first-half performance came from the US, where Verizon Wireless reported better-than-expected figures, and its emerging markets business. Revenues in Turkey rose 18 per cent, and in India by 11 per cent.
The company, which is moving towards pricing plans based around tiered charges for data usage while bundling in unlimited voice and texts, said there was continued strong growth in data revenues of 13.7 per cent. This comes on the back of a smartphone penetration in Europe of almost a third.
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