10th November 2015
Communications giant Vodafone has reported that service revenues rose to 1.2% from 0.8% helped chiefly by improving European markets and continued network investment.
On Thursday the market cheered the FTSE 100 constituent’s second quarter results with its shares moving 4% or 9.41p higher to 223.86p by 10am.
However despite service revenues rising, earnings for the group slipped 1.7% to £5.79bn on a reported basis although Ian Forrest, investment research analyst at The Share Centre said investors should acknowledge that the group “still managed to beat analysts forecast of £5.69bn”.
As a result of the solid figures reported this morning, Vodafone has raised its full year guidance from £11.5bn to between £11.7bn and £12bn.
Vodafone group chief executive Vittorio Colao said the business had“reached an important turning point” with a return to organic growth in service revenue.
He said: “Our customers are benefiting from the significant investments we are making in high speed mobile and fixed networks, as evidenced by the huge growth in demand for data and the increased loyalty to Vodafone services.
“We are achieving 4G leadership in Europe, organic revenue growth in fixed and enterprise and sustained commercial momentum in emerging markets, all of which is consistent with our long- term strategy and which is being accelerated through our Project Spring investments. We also remain keenly focused on increasing efficiency and improving margins. We expect progress to continue in the second half of the year.”
Looking at what these results mean for investors Forrest noted that the market has already seen a fair bit of M&A activity in the sector over the past year as rivals consolidate and offer the “quad-play” of fixed line telephone, TV, broadband and mobile phone services.
He said: “Interested investors should be aware that we suspect Vodafone could be seeking more deals to help it roll out its vision of supplying high speed broadband in more homes across Europe.
“As a result of today’s results, we continue to recommend Vodafone as a ‘buy’. The good dividend yield makes this an attractive stock for income seekers who prefer a low to medium level of risk.”