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Vodafone Posts Hefty H1 Loss, Updates FY19 View; To Cut Costs; Stock Up


British telecom giant Vodafone Group Plc (VOD.L,VOD) reported Tuesday a hefty loss in its first half, compared to prior year's profit, mainly reflecting impairment charges and weak revenues. Looking ahead for fiscal 2019, the company narrowed its EBITDA growth view, and said it sees organic service revenue growth to be slightly higher. Group Chief Executive Nick Read said the firm is on track to reduce net operating expenses for the third year running. Vodafone Shares were trading around 9 percent higher in London.

For the year 2019, the company said it now expects underlying organic adjusted EBITDA growth to be about 3 percent, compared to the previous range of 1 percent to 5 percent. This implies to an adjusted EBITDA range of 14.3 billion euros to 14.5 billion euros for the year.

Under IFRS 15, Vodafone expects slightly higher organic service revenue growth, while absolute adjusted EBITDA will be slightly lower, primarily due to the elimination of the impact of UK handset financing under IAS 18, with no impact on FCF.

The company now targets a reduction in operating expenses in Europe and Common functions of at least 1.2 billion euros by FY21, including savings in FY19 of around 400 million euros.

The company's board announced an interim dividend of 4.84 euro cents per share, while the full-year dividend of 15.07 euro cents per share would be in-line with fiscal 2018. The Board will consider growing the dividend per share over the long-term.

For the first half, loss attributable to owners of the parent was 7.97 billion euros, compared to profit of 1.13 billion euros in the year-ago period. Loss per share were 29.00 euro cents, compared to profit of 4.03 euro cents last year.

The loss was primarily due to a loss on the disposal of Vodafone India, following the completion of the merger with Idea Cellular, and impairments. Adjusted earnings per share were 3.56 euro cents, compared to 6.32 euro cents last year.

Operating loss was 2.07 billion euros, compared to operating profit of 2.01 billion euros in the prior-year period, largely driven by impairments of 3.5 billion euros in Spain, Romania and Vodafone Idea.

Group adjusted EBITDA declined 4.2 percent to 7.08 billion euros from 7.39 billion euros a year ago. On an organic basis, adjusted EBITDA increased 2.9 percent.

Group revenue for the half year declined 5.5 percent to 21.80 billion euros from 23.08 billion euros last year. The result reflected foreign exchange headwinds, the impact of the adoption of IFRS 15, which nets certain components of dealer commissions from service revenues, and the sale of Vodafone Qatar.

Group service revenue dropped 4.3 percent to 19.71 billion euros. Organic service revenue went up 0.8% with good commercial and financial performance in most markets offset by increased competition in Italy and Spain.

Read said, "Our performance in the majority of our markets has been good during the first half of the year, and we have taken decisive commercial and operational actions to respond to challenging competitive conditions in Italy and Spain."

In London, Vodafone shares were trading at 157.93 pence, up 9.40%.

In pre-market activity on Nasdaq, shares gained 9.5 percent to trade at $20.35.

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