Vodafone Raises Full-Year Guidance After Cutting 3,000 Roles Across Europe

The British telecoms group also raised its adjusted free cash flow guidance to €2.8 billion to €3.0 billion, from €2.6 billion to €2.9 billion. At the midpoints, the new ranges imply organic growth of about 7% in EBITDAaL and about 21% in adjusted free cash flow, according to Investing.com's account of the results. The company described the year as the first of a plan to deliver double-digit organic cash flow growth.

The upgrade rests as much on costs as on customers. Vodafone made more than €200 million of gross cost savings in the six months to September, and it has a separate programme of 2,300 job cuts in Germany over two years. Germany, its largest market, is still the weak point: organic service revenue there grew 0.4% in the half, and City AM reported that German earnings fell 2.4%. Chief executive Margherita Della Valle said the German business was "not yet where it needs to be".

Group revenue rose 11.4% to €21.9 billion. Most of that increase came from consolidating Safaricom, VodafoneThree and Telekom Romania, and currency moves partly offset it. Service revenue rose 12.8% to €18.4 billion, or 5.8% on an organic basis, with growth in every segment. Adjusted EBITDAaL rose 12.6% to about €6.5 billion, or 6.4% organically, and the margin widened by 0.5 percentage points to 29.5%.

At the statutory level, Vodafone reported a €3.6 billion loss for the half, compared with a €1.1 billion profit a year earlier. Non-cash items drove the swing. The biggest was an impairment in Germany linked to higher interest rates, which City AM put at nearly €5 billion and attributed to government bond yields and lower expected cash flows. Vodafone also wrote down UK deferred tax assets after buying out CK Hutchison's stake in VodafoneThree. A non-cash gain on the Safaricom transaction partly offset the charges.

Outside Germany, growth was strongest in Africa, where organic service revenue rose 13.4%. Vodafone Business grew 5.8%, with 6.6% in the second quarter, its best result yet. UK organic service revenue rose 0.9%, and the company raised its synergy target for VodafoneThree, its UK merger with Three, to £0.8 billion a year by the 2030 financial year and £1 billion by 2032.

Shareholders will receive an interim dividend of 2.306 euro cents a share, up 2.5%.

The Africa expansion still faces a legal risk. Vodacom's purchase of a further 20% of Kenya's Safaricom is being challenged in court: the High Court declared the deal void in September, and the Court of Appeal has ordered that the status quo be kept while it hears the case.