Vodafone Group PLC (LSE:VOD) reported improved revenue and profits rose for the past financial year as the telecoms group returned to growth in Germany and benefited from the inclusion of Three UK in its results.
Total revenue increased 8.0% to €40.5 billion, while service revenue rose 8.8% to €33.5 billion.
On an organic basis, service revenue growth was 5.4%, with all segments except Germany recording growth. In the fourth quarter, organic service revenue grew 5.1%, beating the average analyst forecast of 4.9%.
Germany, Vodafone’s largest market, saw organic service revenue decline 0.2% for the year, though fourth-quarter growth improved to 1.3%. The company said competitive pressure and the impact of TV law changes were offset by stronger wholesale revenue and broadband pricing.
Adjusted EBITDAaL rose 3.8% to €11.4 billion, slightly shy of the €11.48 billion consensus estimate, while operating profits swung to €2.8 billion from a loss of €0.4 billion a year earlier, after no repeat of the large impairment charges a year earlier.
The group reported adjusted free cash flow of €2.6 billion, inching up from €2.5 billion to the top end of its guidance range.
Vodafone increased its full-year dividend by 2.5% to 4.6125 eurocents per share and completed the final €0.5 billion tranche of its €2 billion share buyback programme on 11 May. No new buyback was announced, which some expected after the recent deal to take full control of the UK joint venture with Three.
For the 2027 financial year, Vodafone expects adjusted EBITDAaL of €11.9-€12.2 billion and adjusted free cash flow of €2.6-€2.9 billion.
Chief executive Margherita Della Valle said: "After the transformation of the last three years, we are now a simpler company with a stronger growth outlook."
She added: "Our early successes from the UK merger integration reinforce our confidence in its potential and I am delighted that we are now gaining full ownership."
Shares in Vodafone fell 2.6% to 117.2p on Tuesday morning, in line with the wider utilities sector and London market.
"As Vodafone continues to ring the changes, there are increasing signs that the transformation is beginning to reap rewards," said Richard Hunter, head of markets at Interactive Investor.
"In terms of strategy, the group had quite simply been fighting fires on too many fronts while dealing with an increasingly onerous debt burden, leading to the need for a significant transformation."
Asset sales in Italy and Spain, as well as a reduction of its stake in Vantage Towers, were reflected by cash proceeds of €13.3 billion, which reduced net debt to €22.4 billion from a previous €33.2 billion.
However, Hunter noted this has spiked again to €25.4 billion, in part due to the VodafoneThree integration, and "remains an ominous weight on the group".
Even so, he hailed "some promising signs" as Vodafone hit its own guidance, with cash flow higher than estimates.
"All is not plain sailing, however. Despite an improving outlook, the most obvious thorn in the group’s side remains the German operation, which is the group’s largest and accounts for 30% of total revenue."
Customer losses were largely attributable to enforced price increases last year, competitive activity elsewhere and the effects of the change to German TV law, which resulted in a recontracting of customers.
** UPDATE: Adds share price and comments **