Telecoms giant maintains momentum with solid Q3 results

As Vodafone announce their company results, we explain what this means for investors.

Article updated: 5 February 2020 11:00am Author: Joe Healey

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  • Results show revenues rose by 6.8% in Q3, with expectations of an improvement in organic service revenue in the following quarter
  • Organic revenue was up 0.8%, with good organic growth on an adjusted basis in ROW regions offsetting the 1.4% decline in Europe
  • Investors will welcome firstly the recovery in Spain and the acceleration of service growth in the UK, then claims from the Group it is on track with the legal separation of their European towers which will be operational in May
  • Shares rise by roughly 2.5% on the back of solid results
  • Recommendation: In our view the shares still represent an attractive yield and maintain our ‘Buy’ recommendation

Vodafone released a solid 3Q trading update this morning, showing revenues have risen by 6.8% in the quarter. With expectations of an improvement in organic service revenue in the following quarter, shares have gone up roughly 2.5% in early trading. Organic revenue, the key metric, was up 0.8%, with good organic growth on an adjusted basis in ROW regions, offsetting the 1.4% decline in Europe. The telecoms group have confirmed its expectation of adjusted EBITDA to be in the range of €14.8-15bn, implying around 2-3% organic growth for the year. Free cash flow generation is expected to be around €5.4bn.

Investors will welcome the recovery in Spain and the acceleration of service growth in the UK. The business has recently announced the sale of its stake in Vodafone Egypt, which should help streamline the groups focus to both Europe and sub-Saharan Africa regions whilst also helping to reduce net debt. More news that will please investors comes as the group claim to be on track with the legal separation of their European towers which will be operational in May. The towers are intended to provide a monetisation opportunity, with the group preparing for a potential IPO in 2021.

All in all, it seems like Vodafone is on track in terms of meeting its business targets. The business remains exposed to the key global drivers of growth, including the demand for data and increased smartphone penetration worldwide with acquisitional expansion continuing to play a role. Cost-cutting measures also seem to be making good progress with the group utilizing AI to help improve efficiencies and customer experience.

Despite the shares poor price performance in recent years alongside the cut in dividend, we would argue the shares still represent an attractive yield in the region of 5%, and see the shares as a ‘BUY’ for investors willing to accept a low to medium level of risk.


All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

Joe Healey

Investment Research Analyst

Following his completion of the graduate scheme, Joe is an Investment Research Analyst covering equities. He holds a BA Hons Business Management degree and is currently studying towards CFA Level II after passing CFA Level I in June 2019.

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