Vodafone Group PLC (LSE:VOD) shares topped the FTSE 100 leaderboard on Monday morning after the telecoms group said it expects to reach the upper end of annual earnings guidance after making a strong start to its financial year.
Organic service revenue increased 5.2% in the first quarter, with growth recorded across every segment, and inching up from 5.1% in the final quarter of the past year.
Reported service revenue rose 9.8% to €8.6 billion, while total revenue climbed 9.7% to €10.3 billion, helped by the merger of its UK business with Three.
Underlying profits (EBITDAaL) increased 6.7% to €2.9 billion, or 6.2% on an organic basis, as margins improved by 0.6 percentage points to 28.5%, partly reflecting the higher service revenue.
After returning to growth last year, Germany delivered organic service revenue growth of 1.2% as stronger wholesale and fixed-line revenue offset continued competition in mobile.
UK growth improved to 0.6% from a 0.2% decline in the preceding quarter, supported by consumer broadband and a return to growth for fixed-line business services.
Africa remained the strongest region, with organic service revenue rising 12.6%.
Vodafone upgraded its full-year guidance to adjusted EBITDAaL of €13-13.3 billion and adjusted free cash flow of €2.6 billion to €2.9 billion. This follows the consolidation of East African network Safaricom, following the upping of its stake to 55%
Chief executive Margherita Della Valle said Vodafone had made “a good start to this financial year”. She said earnings were boosted by the new phase of multi-year cost-cutting initiatives announced in May.
"And after our good start to the year, we are expecting to deliver the upper end of the new group ranges."
The shares climbed 3.6% to 118.75p in early trades.
Analysts at Hargreaves Lansdown said it was "an encouraging start", with every part of the business growing and profits rising faster than revenue.
"Stable growth from Germany was key and better than expected, as demand for broadband picked up and income from other network providers helped balance a competitive mobile market."
They added: "There’s still work to do, but the direction of travel is positive, and we should see some consensus upgrades off the back of these numbers."
** UPDATE: Adds shares and analyst comment **
