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(Sharecast News) - Telecoms giant Vodafone said it was cutting 11,000 jobs and expected to post flat earnings next year after reporting a decline in annual profits in a performance described as "not good enough" by its chief executive.
Adjusted core earnings fell 1.3% to €14.7bn due to higher energy costs, and commercial underperformance in Germany
"Our performance has not been good enough. To consistently deliver, Vodafone must change," said CEO Margherita Della Valle in a scathing assessment of the company.
Vodafone forecast cash flow of €3.3bn this year, compared with the €4.8bn it reported for the year to March, and against expectations of €3.6bn from analysts.
Growth in Africa and higher handset sales, helped revenue rise a meagre 0.3% to €45.7bn.
The cuts will free up an extra €100m for a marketing blitz on the Vodafone brand, and €150m to improve the customer experience. A wider restructuring includes a review of options for Vodafone's Spanish business, including a potential sale.
"Looking at our position in the industry and the steps we have taken in the last few years, we have probably been too incremental," Della Valle said.
Vodafone is in the closing stages of pushing through a merger with Three to create the UK's biggest mobile company.
Russ Mould, investment director at AJ Bell, said Della Valle's blunt view was "just the sort of message the market wants to hear".
"With her strong words accompanied by a plan to remove 11,000 staff from its payroll in just three years, Della Valle has signalled she is not messing about. But it will take more than just streamlining the business to make it relevant for the 21st century world of telecoms."
Hargreaves Lansdown analyst Matt Britzman said."Lacklustre performance has been something markets have come to expect from Vodafone of late," said "The new chief executive has been very vocal about the host of challenges she's facing in her new role. The honesty is refreshing but not enough to keep the shares falling. Markets will need to see tangible results over the coming year before they get more excited."
Vodafone in November cut its annual profit forecast and announced a €1bn-plus cost-cutting plan, including job cuts, to cope with soaring energy bills and inflation.
A month later, the company ousted the two-decade Vodafone veteran Nick Read after a 40% slump in market value during his four-year tenure as chief executive.
Reporting by Frank Prenesti for Sharecast.com
