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Vodafone – Post Pandemic Recovery Gathers Pace

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Vodafone Group plc (LON:VOD) reported a 5.0% increase in half year revenues, reaching €22.5bn, reflecting increased handset sales post-pandemic, and higher roaming charges, as well as good customer growth in Europe and Africa.

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Underlying cash profits before leases rose 6.5% to €7.6bn, reflecting the increase in revenues and a favourable legal settlement in Italy. Guidance for full year underlying cash profits before leases rose slightly to €15.2bn - €15.4bn (previously €15.0bn - €15.4bn).

Vodafone announced an interim dividend of 4.5 eurocents per share, in line with what was announced last year.

Vodafone shares rose 4.0% in early trading.

Vodafone's Handset Sales Are Up

Nicholas Hyett, Equity Analyst at Hargreaves Lansdown:

“With pandemic restrictions in retreat, Vodafone is starting to show signs of business returning to normal. Handset sales are up as consumers look to update their phones before venturing back into the world, while lucrative roaming fees are back as international travel resumes. While there a whole host of adjustments related to ongoing restructuring muddying the picture, the underlying trend seems to be one of gathering momentum.

Having done significant work to streamline its business Vodafone is now a more focused operation. Most recently African operations have been gathered under subsidiary Vodacom – with Egypt next to be shuffled in –  and the Vantage Towers IPO has moved infrastructure assets outside the main group. Going forwards the focus is firmly on capitalising on the group’s strong European market positions.

All this is sensible – and we’re pleased to see the group benefitting from changes to the economic winds. But despite the recovery, cash continues to walk out the door and net debt is rising even as the group shrinks, now sitting at around 3 times full year cash profits. Exclude the cost of spectrum auctions and things are a little better, but spectrum is a very real cost that telecoms groups have to pay to remain competitive. It’s not going away, and we strongly believe all telecoms groups need to find a way of meeting the cost without simply “adjusting it out" of the accounts.”

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