Headline numbers: weathering the storm, for now

The numbers themselves showed Vodafone, like many telecoms players, holding up comparatively well during the pandemic so far, especially with Group leadership offering various favourable viewpoints from which to look at the data.

Q2 saw service revenue dip only 0.4%, to €9.3bn (£8.4bn) — although this was on an ‘organic’ basis, thus shunting Vodafone’s ongoing headache of emerging market currency weakness, and the impact of outgoing M&A, to one side. In ‘reported’ form, service revenue was actually down 2.5%, with Vodacom Group’s figures suffering particularly from unfavourable exchange rate movement (see separate).

True to form, Vodafone sought to present COVID‑19 as a one‑off, external event, offering up service revenue figures with roaming and visitor usage (as well as M&A and exchange rate movement) taken out. Through this narrow lens, the Group achieved growth of 1.5% — although this was still slightly down on the 1.6%‑increase it produced in January 2020–March 2020, its last pre‑lockdown quarter.

Read and Della Valle’s tight grip on cost control was evident in profitability numbers, with ‘adjusted’ earnings before interest, taxation, depreciation, and amortisation (EBITDA) declining less sharply than total revenue across H1 (‑1.9% versus ‑2.3%). Free cash flow dropped into negative territory during the six months, at ‑€101m, but Della Valle assured this was down to phasing of spend, regulatory fee payments, and “other collection-related activities”, and reiterated free cash flow guidance for the FY.

Beyond the roaming drag from travel restrictions, there were no obvious signs of further COVID‑19 nasties in the data or executive commentary, with Della Valle reporting no “material impact on businessesso far” in terms of bad debt. Looking forward from the mid‑November 2020 presentation, which came as governments in Europe prepared their latest coronavirus response-tightening moves, the CFO highlighted “international travel” and “government support packages” as the two key areas of uncertainty facing the operator.