Vodafone Group has maintained its interim dividend at last year's amount while raising its forecast for adjusted free cash flow in the full year. The operator said it expects to reach the high end of its forecast range for growth in adjusted EBITDAal over the fiscal year to March, after reporting 6.5 percent organic growth in the result in the first half.
Group revenue rose 5.0 percent year-on-year to EUR 22.49 billion in the six months to September, and service revenue was up 3.2 percent to EUR 19.01 billion. On an organic basis, excluding currency effects and changes in scope, service revenue growth slowed to 2.4 percent in the second quarter compared to a 3.3 percent rise in Q1.
All major markets showed lower growth in the second quarter, apart from Italy, where the drop in service revenue slowed to 1.4 percent versus a 3.6 percent decline in Q1. The rate of growth at Vodacom more than halved to 3.1 percent, Germany was up 1.0 percent, the UK grew 0.6 percent, and Spain moved into negative territory again, with a 2.0 percent fall in service revenue in Q2.
Adjusted EBITDAal increased 7.9 percent to EUR 7.57 billion in the fiscal first half and was up 6.5 percent on an organic basis. The result was helped by a one-time legal settlement worth EUR 105 million in Italy.
Operating profit fell 21.9 percent to EUR 2.62 billion in the six months, after a EUR 1 billion gain in the year-earlier period on the merger of Vodafone Australia with TPG Telecom. The change in results from associates offset tax credits in the UK and Italy, and net earnings declined to 3.40 cents per share from 4.30 a year ago.
Vodafone will pay an interim dividend of EUR 0.045 per share, in line with its target for a minimum 9 cents over the full year. The company increased the outlook for adjusted free cash flow in the full year by EUR 100 million, to at least EUR 5.3 billion. In the first half, cash flow fell to EUR 23 million from EUR 451 million a year earlier, impacted by higher licence and spectrum payments, restructuring costs and dividends to minority shareholders.
Under the new forecast, adjusted EBITDAal for the full year is projected to reach EUR 15.2-15.4 billion, compared to an earlier range of EUR 15.0-15.4 billion. The new forecast implies organic annual growth of 4.5-5.9 percent.
Vodafone said the results show it has delivered on its strategy first outlined in 2018. The greater focus on connectivity, customer relationships and optimising its operations and portfolio has not only grown the customer base, but led to an improvement in the EBITDA margin over the period to 33.6 percent in the first half this year from 31.6 percent in FY2018. In addition, there was a 0.4 percentage point improvement in pre-tax ROCE since FY19, to 6.3 percent in the first half.
The next phase of the strategy will focus on improving shareholder returns, through further growth and portfolio transactions, the company said. Some of the focus areas will include driving returns in Germany, Vodafone's biggest and most stable market; further transformation in Spain; and capitalising on upcoming economic stimulus funds in Europe to support business and broadband services.
