When Vodafone Group PLC (LSE:VOD)’s finance chief-turned-chief executive Margherita Della Valle took the permanent reins in April, her remit was plain and simple: Steer the failing telecoms group’s share price back to bluer waters.
Shareholders gave her predecessor Nick Read the boot after four years of failing to do so, but one wonders if they’ll bother waiting this long a second time around.
If you take her word for it, Della Valle’s priorities are “customers, simplicity and growth”.
Two of those words are essentially meaningless (customers and growth should really be givens, no?) though that S-word lends her mission statement a bit of substance.
She stated: “We will simplify our organisation, cutting out complexity to regain our competitiveness.”
Judging by today’s decision to cull 11,000 jobs, apparently a tenth of Vodafone’s global workforce was too complex.
But the sackings do nothing to tackle to root causes weighing Vodafone down, namely
£30bn of debt (which in fairness has dropped 20% in the past 12 months) and severe underperformance in Vodafone’s largest market Germany (Spain and Italy, too, are witnessing negative growth).
Other European markets also saw piddling revenue growth of 2.8% over the past year, while Vodacom in Africa was marginally better at 3.5%.
On the plus side, the UK grew by 5.6% while ‘Other Markets’, which is how Vodafone bundles Egypt and Turkey is a major driver of growth with a more than 30% bump in revenues.
Simplicity, Della Valle wants? There appear to be some pretty superfluous entities of diminishing value rattling around ripe for the culling.
Prospective buyers have already logged their interest in Spain, where Vodafone’s market share has been shrinking. Vodafone said it “would consider offers at the right price” but a deal has yet to be announced.
However, a “strategic review in Spain” mentioned in today’s results is likely to set chins wagging.
Concentrating efforts on fewer fronts and making them successful sounds like a better approach to doing many things poorly.
AJ Bell’s Russ Mould really couldn’t have said it any better: “The company still looks like an over-indebted investment trust of telecoms assets and the new CEO’s plan does nothing to address the structural challenges that face Vodafone, as it tries to compete on too many fronts, in too many markets with too little resource, thanks to its hefty borrowings.”
Strong comments, but as Della Valle attempts to prove her worth to shareholders, there’s every chance that we could see a significant structural overhaul in the year ahead.
As for the share price, Vodafone is running at something like a 60% discount to book value, which seems to be an irresistible bargain if you actually think there’s a good chance that Della Valle can turn things around, especially with Vodafone’s propensity for healthy – some say far too healthy – dividend payments.
But that’s another discussion in and of itself.