Business

Vodafone swings to £6.6 billion loss and cuts dividend for first time

Vodafone has swung to a €7.6 billion euro bottom line annual loss and slashed its shareholder dividend payout, its latest results show
Vodafone has swung to a €7.6 billion euro bottom line annual loss and slashed its shareholder dividend payout, its latest results show Vodafone has swung to a €7.6 billion euro bottom line annual loss and slashed its shareholder dividend payout, its latest results show

MOBILE phone giant Vodafone has slashed its shareholder dividend payout for the first time to invest in 5G and cut debts as it revealed a mammoth €7.6 billion (£6.6 billion) annual loss.

It announced a 40 per cent cut to its full-year dividend - which is one of the biggest in the UK - to nine cents a share in what marked a stinging blow to investors.

It came as Vodafone swung deeply into the red over the year to March 31, against profits of £2.8 billion a year earlier, after it wrote down the value of some of its assets and took a hit on the sale of Vodafone India.

The divi cut is the first since the group introduced shareholder payouts and sees recently-appointed boss Nick Read reverse a previous pledge to maintain the divi.

Mr Read said the move was needed to help the group pay down its €27 billion (£23 billion) debt mountain and shore up its balance sheet as it invests heavily in buying 5G spectrum and finalises the €18.4 billion (£16 billion) deal to buy a raft of Liberty Global cable assets across Europe.

In a separate announcement on Tuesday, Vodafone confirmed 5G will go live across seven cities in the UK on July 3, with another 12 cities to follow by the end of the year.

Mr Read, group chief executive of Vodafone, said the group was at a "key point of transformation".

"To support these goals and to rebuild headroom, the board has made the decision to rebase the dividend, helping us to reduce debt and deliver to the low end of our target range in the next few years," he said.

Shares in the group rose 2 per cent despite the divi cut, but had fallen 5 per cent on Monday amid speculation over the move.

Vodafone's results showed annual revenues fell 6.2 per cent to a lower-than-expected €43.7 billion (£37.9 billion), but service revenues rose 0.3 per cent on an underlying basis to €39.2 billion (£34 billion).

It said it came under pressure from increased competition in Spain and Italy and saw "headwinds" in South Africa.

The group posted underlying earnings of €14.1 billion (£12.2 billion) - up 3.1 per cent on a so-called organic basis and in line with its outlook.

Vodafone forecast underlying earnings in the range of €13.8 billion (£12 billion) to €14.2 billion (£12.3 billion) over 2019-20, which it said implied "low single digit" growth on an organic basis.

George Salmon, an equity analyst at Hargreaves Lansdown, said: "Telecoms remains one of the most unloved sectors in the market, and these results are a fair indication of why."