Vodafone FY profit more than doubles to $12.5 billion as Asia growth offsets falls elsewhere

By Robert Barr, AP
Tuesday, May 18, 2010

Vodafone full year profit more than doubles

LONDON — Vodafone Group PLC, the world’s largest mobile telephone company, saw its full year profit more than double as strong growth in Asia helped offset declines elsewhere, the company said Tuesday.

The company said net profit in the year ending March 31 was 8.65 billion pounds ($12.5 billion) compared to 3.08 billion pounds a year earlier, while revenue rose 8.4 percent to 44.5 billion pounds.

Despite the solid increase in overall sales, there was a big disparity between regions.

While revenue fell 3.5 percent in Europe and 1.2 percent in Africa and central Europe, Asia Pacific Middle East income swelled 9.8 percent — India led the way with a 14.7 increase in service revenue.

In the fourth quarter, revenue was up 5 percent to 10.5 billion pounds. Vodafone did not break out quarterly earnings.

Vodafone said Verizon Wireless, the U.S. joint venture with Verizon Communications Inc. in which Vodafone has a 45 percent stake, posted a 6 percent increase in full-year revenue.

The company raised total dividends per share by 7 percent to 8.31 pence.

Vodafone shares were down 0.3 percent in midday trading on the London Stock Exchange at 136.00 pence, reversing an early 2 percent jump.

Morten Singleton, analyst at Collins Stewart, was not impressed by Vodafone’s results and said the shares were “one to avoid.”

“Organic revenue trends are barely improving and profitability is hardly moving despite the early completion of the 1 billion pounds cost-efficiency program,” Singleton said.

Vodafone booked an impairment charge of 2.3 billion pounds reflecting unexpectedly higher costs in bidding for six new national licenses in India.

Chief Executive Vittorio Colao said the results “exceeded our upgraded guidance on all measures.”

“Revenue trends have improved again in Q4 driven by growth in mobile data and fixed broadband. Cost reduction targets were delivered ahead of schedule enabling commercial reinvestment to improve market share and further strengthen our technology platforms.”

Colao also said the company is now generating a third of its revenue from services other than mobile voice communications.

A more detailed breakdown of the results also shows that full year earnings were boosted by a reduction in impairment losses from 5.9 billion pounds to 2.1 billion pounds; further gains came from a sharp fall in income tax from 1.1 billion pounds to 56 million pounds, and a reduction in finance costs to about 900 million pounds.

Vodafone said it expected adjusted operating profit in the current year to be between 11.2 billion pounds and 12 billion pounds, compared to 11.5 billion pounds in the recent fiscal year.

“The main negative in today’s statement is India where the group has suffered in an intensely competitive market,” said Jonathan Jackson, analyst at Killik & Co.

“We believe investors should take advantage of the attractive dividend yield and wait for the group to unlock value from its 45 percent stake in Verizon Wireless and to achieve a turnaround of a difficult situation in India.”

May 19, 2010: 1:04 am

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