The core issue for the London-listed group is growth – and behind the headline
numbers lies a tale of two parts.
On one hand, Vodafone made good progress in non-European markets, which
account for 30 per cent of revenues. Organic growth there was 8 per cent,
with double-digit rates in the likes of Ghana, Turkey and India.
But that was offset by dire results from southern Europe – notably Spain, a
saturated market where prices are under pressure and where Vodafone has been
losing share to new entrants. So even with a bit of help from northern
Europe – Britain, in particular – the group’s overall service revenues for
2011/12 were only 0.3 per cent higher at £43bn.
Margins
Meanwhile, margins at the earnings before interest, tax, depreciation and
amortisation level slipped 0.6 percentage points (before restructuring
costs) to 31.2 per cent as smartphone-related investments and European
problems took a toll.
This pattern should continue. Regulatory pressures and economic malaise will
mean further (albeit slowing) ebitda margin declines before things stabilise
in 2014, Vodafone forecasts. But operating profits and free cash flow
(before currency factors) should show little change this year, with costs
under good control.
Balance sheet
The balance sheet, meanwhile, is improving with net debt down by a fifth last
year, which will reassure yield-focused investors.
Vodafone shares have gone nowhere during the past year. But they have beaten
both the broader UK market and European telecoms stocks. Who needs
excitement?
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