British mobile network operator Vodafone Group Plc (VOD, VOD.L) Tuesday reported higher profit for six months ended on September 30, driven by higher revenues, which reflected the favorable impacts of exchange rate movements, lower tax and merger and acquisition activity. The company also lifted its interim dividend and confirmed its full-year 2010 adjusted operating profit outlook.
The company's profit for the period attributable to equity shareholders was GBP 4.82 billion or 9.14 pence per share, compared to GBP 2.14 billion or 4.02 pence per share a year ago. Profit for the period rose to GBP 4.80 billion from GBP 2.17 billion in the previous year.
The company's profit before taxation rose to GBP 5.75 billion from GBP 3.31 billion in the previous year. Adjusted effective tax rate was 21.5%, down from 26.5% last year.
On an adjusted basis, profit attributable to equity shareholders was GBP 4.58 billion, higher than last year's GBP 3.99 billion. Adjusted earnings per share grew 16% to 8.72 pence from 7.52 pence last year, with substantially all of the increase arising from movements in exchange rates.
For the period, adjusted operating profit increased 2.4% to GBP 5.9 billion with a positive contribution from Verizon Wireless and foreign currency benefits offsetting lower profit in Europe.
The company's revenue for the first-half was GBP 21.76 billion, up 9.3% from GBP 19.90 billion in the prior year, with favourable exchange rate movements contributing 7.9 percentage points and the benefit of merger and acquisition activity contributing 4.4 percentage points to revenue growth. Organic revenue declined 3% in the period. Total service revenue reached GBP 20.47 billion, an increase of 9.8% from GBP 18.64 billion in the prior-year period. Service revenue dropped 2.6% on an organic basis.
Voice revenue totaled GBP 13.98 billion, up from GBP 13.27 billion a year ago. Messaging revenue rose to GBP 2.31 billion from GBP 2.17 billion in the previous year. Group data revenue was up 35.2% for the period to GBP 1.99 billion. On an organic basis, data revenue rose 19.8%. Fixed line revenue increased to GBP 1.58 billion from GBP 1.24 billion in the prior-year period.
Geographically, Europe posted revenue growth of 3%, benefiting from foreign exchange. Organic service revenue was down 4.5% reflecting the economic and competitive environment. Data grew 17.8% and fixed line grew 7.3%, but were offset by ongoing price pressures, the company noted. Europe enterprise revenue was down 5.4% during the period, due to the impact of higher unemployment, lower business travel and aggressive price competition across the region.
Africa and Central Europe revenue growth was 35.9% including Vodacom acquisition. Service revenue increased 34.6%, reflecting the full consolidation of Vodacom following completion of the stake purchase in May 2009 and foreign exchange. On organic basis, service revenue was down 3.2% with continued growth in Vodacom being offset by declines in Turkey and Romania.
Asia Pacific and Middle East recorded a 15.9% rise in revenues reflecting the performance in India. Service revenue was up 17.8%, reflecting service revenue growth of 20.5% in India on a constant currency basis. During the period, the company added 14.1 million customers in India.
Vodafone said that its directors have announced an interim dividend of 2.66 pence per share, an increase of 3.5% over last year's interim dividend. The record date for the interim dividend is November 20 and the dividend is payable on February 5, 2010.
The company also stated that Verizon Wireless achieved 2.4 million net customer additions in the period bringing the closing customer base to 89.0 million.
On June 9, Vodafone Australia completed its merger with Hutchison 3G Australia to form a 50:50 joint venture, Vodafone Hutchison Australia Pty Limited. The company stated that integration continues according to plan with significant progress being made in reorganising head office, customer services and property locations. Implementation plans on retail stores, networks and IT are advancing well and in line with expectations, the company noted.
In addition, the company said that the integration of the Alltel business is going according to plan. Verizon Wireless has entered into agreements to sell the 105 overlapping properties arising from the acquisition of Alltel. AT&T (T) will acquire the network assets and mobile licences of 79 markets, corresponding to 1.5 million customers for US$ 2.35 billion. Atlantic Tele-Network (ATNI) will acquire the network assets and mobile licences of the remaining 26 markets and 0.7 million customers for US$ 0.2 billion. Both transactions are expected to complete in early 2010.
Among peers, Deutsche Telekom AG (DT) has reported higher third-quarter profit, helped by revenue growth, mainly in its overseas business, and cost-cutting measures. In the third quarter, the company's net profit grew 7.2% to 959 million euros from 895 million euros a year ago. The company also reported quarterly net revenues of 16.26 billion euros, up 5.2% from 15.45 billion last year.
Moving forward, Vodafone said that the first-half results support its expectations for full-year adjusted operating profit in the range of GBP 11.0 billion - GBP 11.8 billion and free cash flow around the upper end of the GBP 6.0 billion - GBP 6.5 billion range.
Further, the company stated that its expectations for fiscal 2010 capital expenditure remain unchanged, and capital expenditure is expected to be similar to last year after adjusting for foreign currency, with slightly slower investment in India and more in Europe to support our revenue growth opportunities.
In addition, the company's GBP 1 billion cost reduction programme is expected to be delivered a year ahead of plan. The company has extended this to a further GBP 1 billion of cost savings by 2012.
VOD closed Monday's trading at $23.18.
VOD.L is trading at 133.75 pence on the LSE, down 4.20 pence, on a volume of 78.80 million shares.
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