Vodafone reports first year of organic growth since 2008

UK operator Vodafone hailed its Project Spring investment programme as it reported its first year of annual revenue growth since 2008.

The group brought in £41 billion revenue for the financial year ended 31 March 2016, with £37 billion of that service revenue and two thirds of that coming from Europe. Total group organic (excluding M&A and currency fluctuations) revenue was up 2.3%, organic service revenue was up 1.5% and EBITDA was up 2.7%. Adjusted operating profit, however, was down 3.9%. the 2017 financial year guidance anticipates organic EBITDA growth of 3-6%. Vodafone shares were up a couple of percent in London at time of writing.

“This has been a year of strong execution for the group, returning to organic growth in both revenue and EBITDA for the first time since 2008,” said Chief Exec Vittorio Colao. “We achieved the first quarter of positive revenue growth in Europe since December 2010 while growth in AMAP [Africa, Middle East and APAC] accelerated with strong performance in South Africa, Turkey and Egypt. EBITDA margins also grew year-on-year, supported by our cost efficiency programmes.

“We have now successfully concluded our Project Spring organic investment programme. This has transformed the quality of our technology, enhancing our customers’ experience and enabling us to expand our Enterprise services. We are pleased to be the leader or co-leader in mobile network quality tests and Net Promoter Scores in the majority of our markets. We have also posted a record quarter of net additions in fixed as our convergence strategy continues to accelerate.”

Here are some of the highlights, according to Vodafone:

“Vodafone will be encouraged by an upbeat set of results that again illustrated recovery in Europe and impressive growth in emerging markets,” said Kester Mann of CCS Insight. “The stand-out metric was a first quarter of positive service revenue growth in Europe since December 2010. This offered further evidence of the European sector’s emergence from a prolonged period of brutal price competition and weak economic growth.

“Good momentum in enterprise was a leading highlight. It reflects long-standing strategic focus on business customers and efforts to expand away from pure mobile voice and data services into total communications, IoT, cloud and hosting and IP-VPN.

“Performance in the UK was mixed. Momentum in fixed-line was offset by operational challenges in mobile following a billing system migration that led to higher churn. Despite delays in 4G roll-out, the number of customers saw steady growth to reach 7 million. Consumer broadband uptake remains in its early stages however, with the company having secured just 38,000 customers by end-March 2016.”

The return to organic growth will, of course, be welcomed by Vodafone and its shareholders, but the improvement was not dramatic. The billions invested through Project Spring don’t seem to have translated to a major competitive boost yet, but Vodafone is expecting EBITDA growth to double this year and investors seem mildly pleased with the latest numbers.