News Column

Vodafone Intends Higher Dividends Despite Investment Programme

May 20, 2014

Steve McGrath

LONDON (Alliance News) - Vodafone Group PLC Tuesday tried to appease investors with the promise of higher dividends, after warning that cash flow would be hit by its huge investment programme in the next few years, and as it reported falling service revenue due to continued weakness in some of its European markets.

The wireless company, which is going through a major transformation after selling its stake in Verizon Wireless late last year, reported earnings before interest, tax, depreciation and amortisation of GBP11.08 billion for the year to end-March, down from GBP11.47 billion a year earlier as customer costs rose.

Revenue was GBP38.35 billion on a statutory basis, up from GBP38.04 billion, although fell to GBP43.62 billion, from GBP44.45 billion, when contributions from joint ventures are consolidated

proportionally. On that basis, Vodafone's preferred measure, its service revenue fell 4.3% in the full year and 3.8% in the fourth quarter.

"Our performance reflected strong growth in our emerging markets and continued demand for data services, offset by competitive pricing pressures, regulatory changes and challenging macroeconomic conditions in Europe," the company said, echoing comments it has been making for the past few years.

It booked GBP6.6 billion in impairments covering operations in Germany, Spain, Portugal, Czech Republic and Romania, although that was an improvement on the GBP7.7 billion in impairments it booked in the previous financial year.

The company is planning to make about GBP19 billion of investments over the next two years, including its so-called Project Spring programme. That programme is using some of the billions it got from its Verizon Wireless stake sale to bolster Vodafone's 3G and 4G networks as well as its customer offering.

"We have commenced our Project Spring two-year investment programme which will accelerate our plans to establish stronger network and service differentiation for our customers. I expect the first signs of this to become evident later this year, with wider 4G coverage in Europe and 3G coverage in emerging markets, improved network performance and increased customer advocacy," Vodafone Chief Executive Vittorio Colao said in a statement.

"While cash flow will be depressed during this investment phase, our intention to continue to grow dividends per share annually demonstrates our confidence in strong future cash flow generation," he added.

The company said it will pay a final dividend of 7.47 pence for its last financial year, bringing the total dividend to 11.0 pence, an 8% increase on the previous year.

Vodafone said it expects to report an Ebitda of between GBP11.4 billion and GBP11.9 billion in the current financial year, and a positive free cash flow after all capital expenditure but before M&A, spectrum and restructuring costs.

Colao said the company is beginning to see encouraging early signs of the steps it has taken to improve its commercial performance in countries like Germany and Italy.

Still, Vodafone shares were down 3.5% at 209.547 pence early Tuesday, the biggest fall on the FTSE 100.

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Source: Alliance News

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