Vodafone's 450,000 Irish shareholders should hold on to their stock, according to UK analysts, who yesterday said that the group's interim results indicated that it had the potential to deliver growth over the next two years.
The group yesterday reported that in the six months to September 30th, turnover increased by 13 per cent to £16.9 billion (€24 billion) from €14.9 million during the same period in 2002.
It made a loss on ordinary activities of €1.9 billion, a 14 per cent improvement on the €2.3 billion losses it reported for the same period in 2002. Following a goodwill write-off of £7.7 billion, losses for the six-month financial period stood at £4.25 billion, a 2 per cent improvement on last year, when they came to just over £4.3 billion.
Group profit before tax, goodwill and exceptional items grew by 26 per cent to £5.4 billion from £4.2 billion. The group recommended a 20 per cent increase in dividend per share to 0.95p. The group posted a loss per share of 6.24 pence, compared with 6.36 pence last year.
The company generated net cash inflow from its activities of £6 billion, and had free cashflow of £4.6 billion after a £2.2 billion capital expenditure bill for the period. Net debt was virtually unchanged at £10.9 billion.
Vodafone yesterday said it had allocated £2.5 billion for a share repurchase programme, but did not outline how this would be put into operation.
The group's shares closed at 133.5 pence sterling (€1.90) from 128.5 pence in London last night. The price was considerably below the effective £1.75 that 450,000 Irish shareholders paid for the stock in May 2001 when they exchanged two Eircell shares for 0.948 Vodafone shares, leaving the average Irish stakeholder with 240 shares.
Last night's close valued the average Irish stake at £320.40, compared with the £420 they paid for it. Yesterday, UK analysts said the Irish shareholders should stick with the stock. Mr Gareth Jenkins of Deutsche Bank in London described the six-month performance as very strong. He pointed out that on the basis of those figures, the company had the capability to generate in the order of £7 billion in free cashflow in a full year. "Some of that cash will be returned to shareholders," he said.
Mr Jenkins added that the firm believed that the share price did not reflect the company's potential for growth. He said it would not be possible to predict how the share buyback programme would impact on the price.
His opposite number at Lehman Brothers, Mr James Britain, said that chief executive, Mr Arun Sarin and the board had "given very strong guidance for growth" to analysts and the market yesterday. "They would not do that unless they were very confident," he said. Mr Britain said he believed the results indicated that the firm could deliver strong underlying growth.
