Vodafone Group reported a doubling of its pretax profits to €2.11 billion in the first half of its current financial year, up from a restated €830 million in the previous year. This growth was driven by an overall increase in income and a 40% reduction in financing costs, which fell to €843 million. Adjusted earnings before interest, tax, depreciation, amortisation, and adjusted loss (EBITaL) reached €5.4 billion, a 3.8% organic increase. Group revenue also saw a 1.7% increase, reaching €18.28 billion.
Despite the positive overall performance, Vodafone's largest market, Germany, showed a significant decline. Total revenue in Germany decreased by 4.4% to €6.1 billion, with service revenue falling by 3.9%. This was largely attributed to the full effect of new regulations ending bulk TV contracting in multi-dwelling units (MDUs) from July 2024, as well as a smaller broadband customer base following price increases in the prior year. An analyst from Begbies Traynor, Julie Palmer, commented that Vodafone's "grip over Germany, for years its strongest market, is weakening."
The challenges in Germany led to a 2.6% fall in adjusted profit for the group to €7.24 billion for the six months ending September. This downturn caused Vodafone to lower its full-year adjusted profit forecast to between €15 billion and €15.2 billion, down from an earlier projection of €15 billion to €15.5 billion. The company's shares fell by 4.1% in London following the announcement, reaching their lowest point since March 2020. Vodafone aims to implement a new cost-saving target of over €1 billion to streamline operations.
To address the weakening position in Germany, Vodafone has entered a joint venture with Altice, named FibreCo. This partnership aims to deploy fibre-to-the-home (FTTH) to up to 7 million homes in Germany over six years, with FibreCo investing up to approximately €7 billion. Vodafone is expected to receive up to €1.2 billion in cash proceeds from Altice through this deal, comprising an upfront payment, deferred payments, and earn-outs based on FibreCo's performance. This initiative is designed to complement Vodafone's existing network upgrades and support Germany's broadband ambitions.
While Germany struggled, Vodafone saw growth in other European markets, Africa, and Turkey, which partially offset the declines in its largest market. The company also maintained an interim dividend payment of 4.5 euro cents per share. However, intense competition, regulatory changes, and a net debt exceeding €40 billion continue to present challenges for Vodafone.
