Vodafone keeps dividend, scraps guidance as FY earnings rise

Mobile phone network operator Vodafone confirmed its dividend but pulled guidance for 2021 due to coronavirus uncertainties as full year core earnings rose 2.6% to €14.9bn.

The company on Tuesday said group revenue grew by 3% to €45bn, driven by improving commercial momentum in Europe, although roaming was down 65% - 75%, offset by higher data usage and lower customer churn.

The full year dividend had already been cut to 9 cents from last year's 15 as the company bolstered its balance sheet, but Vodafone bucked the recent trend of cancelled payouts as firms conserved cash to brace for the impact of the coronavirus pandemic. Sector rival BT last week suspended its dividend.

Vodafone also said its plan to create a separate company for its mobile masts was on schedule for a listing or partial sale in early 2021.

However, it did warn of a "significant" impact" on its markets from the Covid-19 crisis, adding that "we are not immune to the challenges".

"We are experiencing a direct impact on our roaming revenues from lower international travel and we also expect economic pressures to impact our customer revenues over time," Vodafone said.

"However, we are also seeing significant increases in data volumes and further improvements in loyalty, as our customers place greater value on the quality, speed and reliability of our networks."

Vodafone added that current year guidance would be limited to free cash flow, but, based on the current prevailing assessments of the global macroeconomic outlook Adjusted core earnings before interest, tax, depreciation and amortisation may be “flat to slightly down”, compared to a rebased 2020 baseline of €14.5bn.

Net debt soared 56% to €42.2bn due to Vodafone’s purchase of Liberty Global assets in Germany and Eastern Europe.

Hargreaves Lansdown analyst William Ryder said comparisons "will naturally be drawn with BT, which cut its dividend last week to preserve cash for investment".

"We don’t think the comparison is particularly apt given the differing structures of the two groups, but Vodafone shareholders will still be glad their management team feels secure enough to keep paying through the pandemic and transition to 5G,” he said.

Dan Ridsdale at Edison Investment Research said Vodafone’s relative resilience to the lock-down had provided short term relief, but warned that investors were now focused on which stocks woul perform best as the world progressively moved out of lock-down.

"Vodafone’s stable revenue profile means that any impact is unlikely to be significant either way, but on balance, the longer term impacts of reduced spending power and mobility are likely to be headwinds," he said.