Surging energy costs hit profits at Vodafone sending shares crashing
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Rising energy costs squeezed profits at Vodafone, sending shares crashing to a 20-year low
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Vodafone shares plunged to a 20-year low due to rising energy costs and fierce competition.
As the FTSE 100 telecoms giant struggled in key markets including Spain, Germany and Italy, it warned its profit for the year will be up to £13.4bn, down from an earlier forecast of up to £13. 6 billion.
Vodafone also warned it would generate less cash than expected as the economic outlook deteriorates.
Shares fall: Vodafone has warned profit for the year will be up to £13.4bn, down from an earlier forecast of up to £13.6bn
Shares fell 7.9 percent, or 8.27 pence, to 95.89 pence, the lowest level since 2002.
The latest slide puts new pressure on CEO Nick Read, who has come under criticism over Vodafone’s share price performance.
The stock has fallen by more than a third since he took over in 2018. Under his leadership, Vodafone has experienced slow growth and failed to complete meaningful M&A transactions.
The company is under pressure from investors, including French tycoon Xavier Niel and activist Cevian Capital, who took a stake earlier this year urging the company to close more deals and simplify its structure. Cevian has called on Read to divest underperforming parts of the company.
Read insisted plans to merge its UK operations with rival Three are “progressing well”.
The firms confirmed last month that they are in talks about a partnership that would create the UK’s largest mobile supplier with more than 27 million customers.
The company plans to retain a 51 percent stake in the combined company, while Three’s owner, Hong Kong conglomerate CK Hutchison, would own the remainder.
Read has expressed a desire to pursue mergers in markets he believes suffer from excessive competition, including the UK.
Matt Britzman, equity analyst at Hargreaves Lansdown, said things were “definitely not smooth sailing” at the telecom company.
He said: “Warnings that weaker economic conditions and rising costs will drag full-year results down from previous guidance put a damper on half-year results.”
Vodafone’s bleak outlook came as it said total revenue grew just 2 percent to £20.2 billion in the six months to September 30.
Profits fell 2.6 per cent to £6.4bn as it struggled with rising energy costs and rising inflation.