Vodafone reiterates guidance despite weaker sales

9th Feb 2012 07:30

The world´s largest mobile-phone operator, Vodafone, has provided a weaker than expected update on its sales performance in the final three months of 2011, due to weakness in some European periphery markets, such as Italy and Spain. The company, however, has reiterated previous guidance for adjusted operating profits and free cash flow. The group´s service revenues grew by 0.9% on the year in the final three months of 2011, in organic terms, reaching £10.61bn. That was below the 1.1% rise expected by analysts. In greater detail, and also in organic terms, group service revenues fell 1.7% in Europe, to £7.4bn, but rose 7.6% in the Africa, Middle East and Asia Pacific region, £3.61bn. The company´s business continued to grow in Germany, the UK, the Netherlands and Turkey. However, in Italy service revenues fell 4.9% following a contraction of 3.0% in the previous quarter, due to "macroeconomic challenges and competitive pricing pressures in voice and messaging services."Spain also weighed on the firm´s results although the country did deliver a second quarter of sequential improvement in the service revenue trend, which increased to -8.8% on the quarter versus the -9.3% rate seen in the previous three months. GUIDANCEAdjusted operating profit for the current financial year is expected to be in the £11.4 - £11.8bn range communicated in November 2011. The firm also expects its full year EBITDA margin to decline at a lower rate than that experienced in the prior financial year. Free cash flow is still expected to be in the range of £6.0 - £6.5bn, excluding the £2.8 bn dividend received from Verizon Wireless in January 2012. According to Vittorio Colao, the company´s chief executive, "we are continuing to make progress in the key strategic areas of data, enterprise and emerging markets. Despite the further deterioration of the southern European economic environment during the quarter, our broad geographic mix is delivering a resilient overall performance. Our improved value perception, strong cash generation and healthy balance sheet give us confidence that we can continue to execute well." AB