Vodafone Group forecast a further drop in EBITDA this year fiscal year, as the difficult market conditions in Europe continue and negative currency effects weigh on results. The company expects a result of GBP 11.4-11.9 billion in the year to March 2015, down from GBP 12.8 billion last year. The acceleration of capital expenditure under Project Spring will also put pressure on free cash flow, but Vodafone said it expects adjusted cash flow to remain positive, before any acquisitions or spectrum and restructuring costs. The company also targets a further increase in the dividend.
Capex is expected to grow to GBP 19 billion over the next two years, from GBP 7.1 billion last year, resulting in improved mobile and fixed broadband coverage, more enterprise products, and enhanced customer service. Vodafone said the increased investment should start to help already from late this year and translate into improved ARPU and churn in the medium term and higher sales, profit and cash flow in the longer term. Overall, it expects a payback within seven years, with another GBP 1 billion in free cash flow by 2019.
For the past fiscal year, Vodafone reported revenues down 0.8 percent to GBP 38.3 billion, and a profit of GBP 59.4 billion, including a GBP 45.0 billion gain from the sale of its stake in Verizon Wireless, GBP 6.6 billion in impairment charges and GBP 19.3 billion in deferred tax. On an adjusted basis, excluding Verizon, the company posted operating profit of GBP 4.9 billion, just under its target of GBP 5.0 billion, and free cash flow was down 24 percent to GBP 4.2 billion.
In the three months to March, organic service revenue fell 4.0 percent year-on-year to GBP 9.6 billion. This included growth of 6.0 percent in Africa, the Middle East and Asia and a decline of 8.5 percent in Europe. The underlying decline in revenue accelerated to 18.3 percent in Italy and reached 12.6 percent in Spain, while Germany was down 5.8 percent and the UK fell 3.6 percent. Vodafone said it was taking commercial measures to address the weakness, particularly in Italy and Germany.
The customer base continued to grow, reaching 433.68 million at the end of March, versus 419.40 million three months earlier. Fixed broadband customers grew by 191,000 in the same period to 9.33 million. Around 12 million customers in 20 countries were on the Vodafone Red plans at the end of the period, while 4.7 million customers in 14 countries were using 4G.
