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Half year results of Vodafone
The dividend of Vodafone is a bit like receiving mobile phone inside the M25 – something you take for granted as a matter of course that not disposing of it would be unthinkable and infuriating. Both seem to have improved each year since the company's inception in 1998.
However, some analysts are worried that rising debt, spectrum auction costs and competitive pressures may now threaten Vodafone's payment.
They warned that it would be more difficult to maintain the dividend after the cost of acquiring Liberty Global 's European cable assets pushed the net debt to 31 billion euros and that the company' s share of the company 's share of the net debt rose. 5G spectrum purchase in Italy cost an additional 2.4 billion euros. Some have even tried to call a dividend cut – JPMorgan said it would make sense that selling assets and cutting costs do not reduce debt fast enough.
This morning is perhaps the first time that Vodafone investors are grateful for the failure of a call. In his half-year results, he said the dividend would not be increased but would be maintained. A "stable" interim dividend of 4.84 euro cents – similar to that of last year – will be paid, the "annual dividend per share per share to be comparable to that of the". EF18. "
In fact, the group was able to update the forecasts for the year. He reduced his outlook for organic adjusted net income before tax depreciation before interest, from 1% to 5% to 3%. And he raised his free cash flow forecast to c. 5.4 billion euros on "at least 5.2 billion euros". However, analysts have certainly noted that this number corresponds to "pre-spectrum" costs.
Vodafone's new chief executive, Nick Read, has also tried to ease investors' concerns.
Critics have questioned the € 18.4 billion acquisition of Liberty Global's cable networks in Europe, but Vodafone said it should contribute to the growth of free cash flow that supports the dividend.
And paying the 5G spectrum in the UK and Italy would reduce the cost per gigabyte by 10 times, which would allow the group to limit the future growth of the network's operating costs.
Mr. Read added that his strategic priorities remained focused on "greater consistency in business execution", accelerating digital transformation, simplifying the business model and generating better returns from the bottom line. infrastructure. He claimed that this would generate revenue growth, reduce churn and reduce net European operating expenses by at least 1.2 billion euros by the time of the year. 39, fiscal year 2010.
Key figures:
- The group's turnover down 5.5% to 21.8 billion euros
- Loss of 7.8 billion euros due to loss on disposal of Vodafone India and impairment losses
- Net debt up 6.4% to 32.1 billion euros
As the city was waiting for it? Worse in terms of income. Analysts forecast a 2% drop in their turnover to 22.62 billion euros for the first half. But most were confident about the dividend – Citi told his clients that there was a "constant view on the fact that there was no short-term risk on the dividend ".
What was said: Mr. Read said, "We are on track to reduce net operating expenses for the third year in a row and confirm the mid-point of our ebitda forecast range, with an increased focus on stream generation. cash available. . . The focus on organic growth as well as the strategic and financial benefits of the proposed acquisition of Liberty Global's assets provides confidence in the group's ability to increase its free cash flow, which underpins our dividend. "
Verdict of OQ: The concern over the dividend is one of the reasons why Vodafone shares have been "such a horror" this year, according to Aj Bell analysts. While the company was trying to reassure cash flow, what "frightened people is the Liberty Global deal." But the dividend and the Liberty deal are not the only worries. Concerns remain over the slowdown in Europe, EU regulation, mobile phone financing in the UK and lower revenues from services provided by its operations in India.
Landsec half-year results
"All eyes are on retail pricing" – that is, all commercial real estate investors are focusing on these days, analysts say Peel Hunt. So this morning everyone will be watching Landsec closely to see how their retail assets are going.
Shopping malls and retail warehouses account for 35% of its portfolio value and Landsec is the second largest exhibition of British shopping malls among the listed companies, behind Intu. It has shopping centers, including Westgate Oxford, a joint venture with Crown Estate and a stake in the Bluewater Center in Kent.
And the valuations were down again. Landsec announced a £ 188 million, or 1.4%, decline in the value of its portfolio to £ 14 billion. The decrease is attributable to the still-challenging retail sector, with a 4.5% decline in the value of Landsec's store inventory and a 2.9% decline in its shopping centers and stores.
However, the group was able to increase its profits in the first half of the year despite the decline in the value of these investments. Landsec reported pre-tax profit of £ 42 million in the six months to the end of September, compared to £ 34 million a year earlier. This increase is due to the increase in net rental income and lower costs.
Key figures:
- Portfolio valuation down 1.4% to £ 14 billion
As the city was waiting for it? Peel Hunt lowered its Landsec net asset forecast in October to a 3.4% decline over the year as a whole, reflecting the poor retail outlook.
What was said: Robert Noel, Managing Director, said: "Landsec has achieved a robust performance in an uncertain market. With healthy growth in earnings per share and a strong financial position, we look to the future with confidence, introducing new concepts and expanding our portfolio of development opportunities. "
Verdict of OQ: Landsec's performance seems quite resilient under the circumstances. That being said, it is not certain that commercial property assessments are now recording the extent of the slowdown in the sector.
Last week, Barclays analysts cut estimates of income and net worth across the industry in anticipation of the earnings season to reflect a more pessimistic view of the retail trade , which was still underestimated in the market.
"Transaction markets have dried up, tenant failures have increased and valuation declines are evident. The various structural problems – online sales, tenant failures, reduction in the average lease term – support our thesis over a prolonged period of reduced rents, increased yields and lower valuation of retail assets ", they said.
Nevertheless, Landsec's shares – with a 36% discount on NAV and a dividend yield of 5.6% – are probably more than enough.
Today's Lombard column focuses on the Babcock defense subcontractor and his battle with a hostile equity research firm:
The attack is the best form of defense – just ask the Royal Navy. For centuries, the only tactical debate among British Admirals was to know whether to line up at the rear and fire from the other side of the enemy, or break the line and shoot ground against fleeing ships. Why, then, did Babcock – the British subcontractor who helps run the historic shipyards like Devonport and Faslane – fight back against the marauders for so long?
Read the rest of the Lombard column today.
FT Opening Quote, commented by Matthew Vincent, is your first briefing on Square Mile. You can receive it by email every morning at 8 am by registering here.
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