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(Sharecast News) - Troubled telecoms giant Vodafone posted slightly better annual results than forecast, driven by a strong final quarter, as it continued to offload businesses and move towards its tie-up with rival operator Three.
Operating profit fell 74.6% to €3.7bn, mainly as a result of disposals in the prior financial year, in particular the €8.6bn gain on disposal of Vantage Towers. The results excluded Vodafone's Italian and Spanish operations, which it has agreed to sell for a combined €13bn as it tries to simplify its business model.
Core adjust earnings fell 11.3% to €11.02bn, in line with forecasts, although organic growth of 2.2% was better than expected. Free cash flow of €2.6bn was ahead of market expectations of €2.44bn.
Group fourth-quarter revenue grew 2.8% to €9.4bn.
GERMANY RETURNS TO GROWTH
Chief executive Margherita Della Valle reported growth in all of the company's markets across Europe and Africa, although she warned "much more still needs to be done".
Germany, the company's largest market, returned to growth with service revenue increasing 0.2% for the full year and 0.6% in the final quarter. However, adjusted core earnings dropped by 5.8% due to higher energy and other inflationary costs.
Vodafone also confirmed it was it was halving its dividend next year and handing back €2bn to shareholders after the sale of its Spanish unit. It is targeting a rebased payout of 4.5 cents a share "with an ambition to grow over time".
An extra €2bn could be spent on a buyback from the proceeds of the sale of Vodafone Italy, expected in the first half of 2025, it added.
Vodafone unveiled plans for £16.5bn merger Three last year with plans to close the deal by the end of this year if approved by UK the competition regulator which is to make a decision by September 18.
The Competition and Markets authority has expressed concerns about the risk of less competition for consumers.
Vodafone last year agreed to sell its Spanish business to UK-based investment firm Zegona Communications for up to €5bn and in March signed a deal to sell Vodafone Italy to Swisscom for €8bn.
"It's fourth quarter to the rescue for Vodafone, as growth starts again. It's taken all year, but revenue growth across all segments in the final quarter was exactly what Vodafone needed to deliver," said Hargreaves Lansdown analyst Matt Britzman.
"After shipping off underperforming businesses, Vodafone can now focus on growing its core markets, but investors will need to accept the fact that it's now a smaller business."
"Don't confuse progress with a completed transformation, though. Vodafone is still facing plenty of challenges, from higher costs to a core German market that's still under pressure. Growth in Germany returned in the fourth quarter, but regulatory changes are starting to hurt-this will be a key battleground over the coming year."
Reporting by Frank Prenesti for Sharecast.com
