Vodafone profit warning as sales drop

May 20, 2014 by Roland Jackson
Vodafone's annual net profit rockets to £59.25 billion, boosted by the enormous sale of its stake in US joint-venture Verizon Wireles

Vodafone's annual profit rocketed to £59.3 billion, boosted by the sale of a stake in US joint-venture Verizon Wireless and despite more problems in Europe, the British mobile phone giant said on Tuesday.

Earnings after taxation surged to the equivalent of $100 billion or 73 billion euros in the year to March 31, Vodafone revealed in a results statement.

That compared with net profit of just £413 million in 2012/2013, when the group was hit by special charges.

Revenues dipped 1.9 percent to £43.6 billion, hurt by ongoing pressures in Europe.

But shares in the company sank by four percent on the back of downbeat guidance, and after it was forced again to write down the value of its troubled European businesses.

The London-listed group agreed to sell its 45-percent holding in joint venture Verizon Wireless in 2013 to partner Verizon for $130 billion in a move to strengthen its strategy, boost infrastructure investment and slash debt.

The deal generated a huge capital gain, and the company used part of the proceeds to return $85 billion to shareholders, and made strategic acquisitions including the purchases of Kabel Deutschland (KDG), the largest cable operator in Germany, and Spanish cable firm Ono.

"It has been a year of substantial strategic progress," said chief executive Vittorio Colao in the statement.

"The sale of our Verizon Wireless stake has rewarded shareholders for their support, and enabled the acceleration of our strategy through the acquisition of KDG, the pending acquisition of Ono and our Project Spring investment programme."

Despite soaring profits, Vodafone's share price plunged 4.22 percent to 207.997 pence in late morning deals on London's FTSE 100 index, which was down 0.46 percent at 6,813.24 points.

Shares slid as Vodafone took impairment charges totalling £6.6 billion in Germany, Spain, Portugal, Czech Republic and Romania, citing lower projected cash flows, the tough economic backdrop and intense competition.

On a brighter note, emerging markets continued to deliver strong results.

"Our operational performance has been mixed," added Colao.

"The group's emerging markets businesses have performed strongly throughout the year: we have executed our strategy well and have successfully positioned ourselves for the rapid growth in data we are now witnessing.

"In Europe, where we continue to face competitive, regulatory and macroeconomic pressures, we have taken steps to improve our commercial performance, particularly in Germany and Italy, and are beginning to see encouraging early signs."

Turning to the outlook for 2014/2015, Vodafone forecast underlying earnings—or profit before interest, tax, depreciation and amortisation (Ebitda)—would fall to between £11.4 billion and £11.9 billion, compared with £12.8 billion in 2013/2014.

The group added that the Ebitda figure was expected to drop owing to investment costs and foreign exchange movements.

Explore further: Flush with cash, Vodafone eyes investment

add to favorites email to friend print save as pdf

Related Stories

Flush with cash, Vodafone eyes investment

Nov 12, 2013

With a cash infusion coming soon from the sale of its U.S. business, British cellphone company Vodafone on Tuesday shot down speculation it might go "shopping" for new acquisitions, saying it would focus on investing in its ...

Recommended for you

Out-of-patience investors sell off Amazon

5 hours ago

Amazon has long acted like an ideal customer on its own website: a freewheeling big spender with no worries about balancing a checkbook. Investors confident in founder and CEO Jeff Bezos' invest-and-expand ...

States ascend into the cloud

11 hours ago

Seven years ago, the state of Delaware started moving computer servers out of closets and from under workers' desks to create a consolidated data center and a virtual computing climate.

Microsoft drops Nokia name from smartphones

13 hours ago

Microsoft said Friday it was dropping the Nokia name from its Lumia smartphones, rebranding following the acquisition earlier this year of the Finnish group's handset division.

Amazon's loss makes holidays a question mark

14 hours ago

Amazon's trademark smile icon is becoming more of a grimace. The world's largest online retailer reported a wider third-quarter loss than analysts expected and gave a disappointing holiday forecast.

User comments : 0