Vodafone Raises Full-Year Cash Flow Forecast After Strong First-Half Performance
Vodafone has raised its financial forecasts for the year after stronger first-half trading, with business services and African operations helping offset weaker performance in Germany.
The telecommunications group announced on 10 November that it now expects adjusted free cash flow of between €2.8 billion and €3 billion for the financial year ending March 2027. This represents an increase on its previous forecast of €2.6 billion to €2.9 billion. The company also upgraded its adjusted earnings guidance, reflecting improved operating performance and continued efforts to control costs.
Vodafone expects adjusted earnings before interest, tax, depreciation and amortisation after leases to reach between €13.2 billion and €13.4 billion. Its previous forecast stood at €13 billion to €13.3 billion. At the midpoint of the revised range, the company anticipates around 7 per cent organic growth in adjusted earnings and approximately 21 per cent growth in adjusted free cash flow.
Group revenue increased by 11.4 per cent to €21.9 billion during the six months to the end of September. Service revenue rose by 12.8 per cent to €18.4 billion, while organic service revenue growth reached 5.8 per cent. The reported figures also reflected the consolidation of Safaricom, VodafoneThree and Telekom Romania into the group's results.
Adjusted earnings after leases increased by 12.6 per cent to €6.5 billion, while organic growth was 6.4 per cent. Vodafone attributed the improvement to higher service revenue and better operating efficiency. Its adjusted earnings margin also improved by 0.5 percentage points to 29.5 per cent on an organic basis.
Business services were among the strongest performers, with organic service revenue increasing by 5.8 per cent. Growth accelerated to 6.6 per cent in the second quarter, which Vodafone described as its best-ever performance in this area. Demand for digital services across Europe, alongside improvements in core connectivity products, helped support the result.
Africa also delivered stronger growth, with organic service revenue rising by 13.4 per cent across Vodacom's markets. The improvement came from both connectivity services and financial services. Vodafone said growth was recorded across all its African markets, making the region an important contributor to the group's overall performance.
The UK business recorded organic service revenue growth of 0.9 per cent. Strong fixed-line performance and higher mobile wholesale revenue supported the increase. Germany, however, remained a weaker area, with organic service revenue growth of just 0.4 per cent in the first half, reflecting continued pressure in mobile services and declining television revenue.
Chief executive Margherita Della Valle welcomed the group's overall performance but acknowledged that Germany was not yet delivering the results required. She said Vodafone had an action plan focused on simplifying its German operations and improving customer satisfaction across its services. The company is seeking to address competitive pressures and strengthen its position in one of its most important markets.
Vodafone's restructuring programme has also involved significant workforce reductions. Around 3,000 roles were removed across Europe and shared operations during the first half, generating approximately €200 million in gross savings. The company has separately announced plans to cut a further 2,300 jobs in Germany over two years as part of its efforts to improve the performance of the business there.
Despite the stronger operating results, Vodafone reported a statutory loss of €3.6 billion for the financial period, compared with a profit of €1.1 billion a year earlier. The loss was largely linked to non-cash accounting charges, including an impairment relating to Germany and a reduction in deferred tax assets in the UK following the VodafoneThree transaction. These accounting adjustments affected reported profitability but did not represent an equivalent cash outflow.
The group's financial position also reflected substantial investment and acquisition activity. Net debt stood at €33.5 billion at the end of September, compared with €25.4 billion at the end of March. Vodafone attributed the increase to cash outflows, acquisitions and disposals, including the purchase of the remaining stake in VodafoneThree and an additional investment in Safaricom.
Vodafone also announced an interim dividend of 2.306 eurocents per share, an increase of 2.5 per cent compared with the same period last year. The payment forms part of its progressive dividend policy. The company said the upgraded forecasts reflected a stronger start to its new growth strategy, although the performance of its German operation and the impact of restructuring will remain important factors during the rest of the financial year.
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