Vodafone (LSE: VOD) (NASDAQ: VOD.US) is due to announce its half-year results on Tuesday next week (12 November).
The pending sale of Vodafone’s 45% stake in US phones firm Verizon Wireless (VZW), together with a raft of things that turn on the £84bn sale, are going to have an impact on how Vodafone presents its half-year results.
At the time of writing, Vodafone’s shares are trading at 230p — up 12% from their price before news of the potential VZW deal broke on 1 September, compared with a 5% rise for the FTSE 100 over the same period.
Pro forma
Vodafone has rightly said that the company’s statutory results for its current financial year (ending March 2014) will not be representative of performance going forward.
As such, the board has provided pro forma guidance for the year, and will no doubt also provide pro forma results — alongside the statutory numbers — for both the half-year and full-year, to better aid investors’ understanding of the ‘new’ Vodafone.
The pro forma results will assume, in effect, that the VZW deal — which includes Vodafone’s acquiring full ownership of Vodafone Italy — had already completed before the start of this year.
Vodafone has told us that on this basis it “expects to deliver adjusted operating profit of around £5bn and free cash flow of £4.5bn-£5.0bn” for the year. So, we should be looking to see how next week’s pro forma interim numbers look in light of that full-year guidance, and whether the guidance is reaffirmed.
Revenue
Vodafone has struggled to grow revenue over the past couple of years, as the table below shows.
| Revenue growth 2011/12 (%) |
Revenue growth 2012/13 (%) |
|
|---|---|---|
| Germany | +4.3 | -4.5 |
| UK | +2.5 | -4.3 |
| Other Northern and Central Europe | +3.5 | +18.9 |
| Total Northern and Central Europe | +3.7 | +2.7 |
| Italy | -1.2 | -16.0 |
| Spain | -7.1 | -18.0 |
| Other Southern Europe | -3.7 | -11.4 |
| Total Southern Europe | -3.9 | -15.9 |
| India | +10.9 | +1.4 |
| Vodacom | +2.9 | -7.5 |
| Other Africa, Middle East and Asia Pacific | 0.0 | -0.5 |
| Total Africa, Middle East and Asia Pacific | +4.3 | -2.8 |
| Non-Controlled Interests and Common Functions | — | — |
| Total Group | +1.2 | -4.2 |
As you can see, Southern Europe has been a problem in both years. Revenue declines accelerated there last year, but growth in most other geographies also turned negative. Out of the nine countries and sub-regions that Vodafone breaks down, only two — ‘Other Northern and Central Europe’ (+18.9%) and India (+1.4%) — showed revenue growth for the year.
Shareholders should be looking particularly closely at the revenue performances of Southern Europe as a whole, plus the two largest single-country contributors to Vodafone’s top line: Germany and the UK.
Dividend
Within the galaxy of next week’s numbers, there’s one fixed star that shareholders should find easy to spot: a 3.53p interim dividend, which would be an 8% increase on last year. The board has already said that this is the dividend it is proposing to pay.
