Vodafone shares slump as FTSE 100 struggles for growth

FTSE 100 telecoms giant Vodafone has reported a jump in operating profit today and reiterated its financial guidance for the year after a string of asset disposals.

The company told the market this morning that revenue for the first half of its financial year had risen 1.6 per cent to €18.3bn (£15.2bn) as service revenue growth was partially offset by adverse foreign exchange movements.

Overall, service revenue grew by 1.7 per cent to €15.1bn on a reported basis and 4.8 per cent on an organic basis.

Vodafone’s German arm experienced the biggest slowdown. Revenue at the division declined 6.1 per cent in the second fiscal quarter.

Revenue at Vodafone’s business arm accelerated four per cent in the second quarter, while organic growth at its African business hit 9.7 per cent.

The FTSE 100 business reported an overall operating profit of €2.4bn in the first half, up 28.3 per cent, primarily driven by a €0.7bn gain on the disposal of an 18 per cent stake in Indus Towers.

Adjusted earnings before interest, tax, depreciation, amortisation and adjusted lease liabilities (EBITDAaL) on an organic basis increased by 3.8 per cent to €5.4bn. The company said the growth was supported by service revenue growth and lower energy costs in Europe.

Vodafone reiterated its guidance for the full year for adjusted EBITDAaL of €11bn and adjusted free cash flow to be at least €2.4bn.

The company added that its second €500m share buyback tranche was almost complete, with 1.2bn shares repurchased for €1bn by 11 November 2024.

Margherita Della Valle, Vodafone CEO said: “We continue to make good progress on our strategy to change Vodafone. The approval processes for our transactions in the UK and Italy are nearing conclusion. These will complete our programme to reshape the group for growth. We are also investing in Germany to strengthen our market position and taking steps to expand our B2B capabilities.

“As we move through this year of transition, our results in the first half have been consistent with our expectations and we are reiterating our full year guidance. We grew service revenue by 4.8 per cent and adjusted EBITDAaL by 3.8 per cent. We delivered good performances across our markets, with the exception of Germany, where we have been impacted as expected by the TV law change.

“I am confident that the actions we are taking will deliver growth for Vodafone this year and a further acceleration into FY26.”

Vodafone is struggling in a competitive market

Despite the company’s progress on asset disposals and reduced costs, Richard Hunter, head of markets at interactive investor said the company still has plenty of work to do to convince the market its turnaround is paying off.

Richard Hunter said: “For Vodafone, years of underperformance are being addressed, with a major transformation of its business well underway. Even so, turning around a super tanker is never an easy task, especially when the company is in the midst of a highly competitive arena.”

He added: “There is little to catch the eye of the bulls in this release, with the end game still some way off, and the share price has reacted accordingly. The decline adds to a drop of 4 per cent over the last year, which compares to a gain of 10.4 per cent for the wider FTSE100 and the not so steady decline – the shares are down by 70 per cent over the last ten years and by 54 per cent in the last five – leaves the price languishing at multi-decade lows.

“While some progress is clearly being made, prospects for the group remain uncertain. There is a major difference of opinion in those covering the stock’s performance, leading to a market consensus which remains at a hold, with any positive catalysts seemingly remaining further down the line.”