Vodafone returns to revenue growth despite pandemic-bruised retail levels

Vodafone has reported a robust rise in revenue in its first-quarter trading as the company returned to growth in Europe despite not yet operating at pre-pandemic levels.

The British telecoms giant pulled in total revenues of €11.1bn (£9.5bn) over the three-month period, up 5.6 per cent on last year.

This included a surprise 3.3 per cent rise in telephone services division revenue — the group’s biggest moneymaker — to €9.3bn.

This included one-off growth of around one percentage point following Covid-related disruption last year.

Shares opened higher this morning, up three per cent to around 119p per share.

The group posted a strong performance in Germany, where it pulled in some €2.8bn of its services revenue.

“In Europe, the operating and retail environment has not yet returned to normal conditions, but we are delivering a good service revenue performance,” group chief executive Nick Read said.

Vodafone cited growth in both Europe and African markets, with its services offering seeing a 3.3 per cent lift to organic growth.

M-Pesa, the company’s African payment system, saw transaction volumes increase 45 per cent year on year, while service revenues within Vodafone Business, which accounts for 27 per cent of the total, rose by 2.7 per cent.

‘Positive surprise’

“In our business segment, we are seeing stronger growth with our public sector and corporate customers, whilst further building a pipeline of demand for our digital services, such as IoT, security and cloud,” the telecoms boss added.

Data roaming and visitor revenues grew 56 per cent year-on-year but remained 54 per cent lower than the first quarter of last year – before the pandemic had hit Europe.

But the impacts of Brexit in the UK mean that data roaming and visitor revenues may swell across Europe once travel returns to levels seen before Covid-19.  

Investment manager at Brewin Dolphin Richard Flood said that although the group’s operating and retail levels had not quite returned to ‘normal’, the telecoms giant has performed surprisingly well.

“Vodafone’s quarterly update is a positive surprise, with revenue returning to growth across most of its markets. 

“This is partly due to the easing of Covid restrictions and will be particularly welcome for shareholders, as the shares have recently traded weakly and are down 13 per cent in the past three months.”

Richard Hunter, head of markets at Interactive Investor, said: “Vodafone’s grind towards higher growth continues, with a combination of strategic success and an improving trading environment playing into the mix.

“A more obvious thorn in the side of late has been the inevitable reduction in roaming and visitor revenues given the extremely limited amount of international travel. The current glass can be seen as half-full or half-empty, with revenues ahead by 56 per cent year-on-year, but still down by 54 per cent on pre-pandemic levels. The improvement is likely to continue, but there is clearly some way to go before the issue can be eliminated from dragging on profits.

Vodafone said it was on track to deliver its full-year targets of between €15bn and €15.4bn in adjusted earnings and adjusted free cash flow of at least €5.2bn.