Vodafone Group PLC (LON:VOD) signalled a recovery in European markets as the mobile phone firm boosted underlying revenue and posted “largely encouraging” guidance.
Vodafone said trading in Europe, where it has faced a bumpy economy and growing competitive and regulatory pressure, stabilised in the fourth quarter.
Full-year organic service revenue in Europe fell 0.6% year-on-year, but rose 0.5% in the fourth quarter as the company’s two biggest markets, Germany and Italy, returned to growth.
Group revenue for the year dropped 3% to £41bn due mainly to foreign exchange rate movements, but group organic service revenue returned to growth with a 1.5% gain.
Group underlying earnings fell 2.5% to £11.6bn due largely to foreign exchange rate movements, with organic earnings rose 2.7%, faster than revenues despite higher operating costs from its Project Spring restructuring plan.
Vodafone said it had hit almost all its major Project Spring targets including extending its European 4G coverage to 87% of its markets, just below a target of 90% due to delays in Germany and the UK.
The group said it expected organic earnings in 2017 to increase in the range of 3-6%, implying €15.7bn-€16.2bn (£12.4bn-£12.8bn) at guidance FX rates.
Vodafone plans to switch to reporting in euros in the year to March 31 2017, as previously announced.
Chief executive Vittorio Colao said: “I’m confident we will sustain our positive momentum in the coming year.”
Shares rose 2% to 228.25p in early London trading.
Vodafone is the third largest holding in the £400mln Henderson UK Alpha Fund.
The fund’s manager, James Ross, said the results were solid and the guidance was largely encouraging.
He highlighted the improved underlying revenue growth, earnings rising ahead of revenues and potential further margin improvement.
“Finally, and slightly more negatively, the ongoing capital intensity of the business looks to be slightly higher than we had hoped and this moderates our assumptions for ongoing cash generation,” Ross said.
“All-in-all an encouraging set of numbers that displays continuing operational progress.”