Vodafone Group (LSE:VOD) on Tuesday raised its full-year profit and cash flow guidance after first-half organic service revenue grew 5.8% and adjusted EBITDAaL rose 6.4% on an organic basis, prompting the London-listed telecoms operator to lift its FY27 targets for the second time since May.
Group adjusted EBITDAaL climbed 12.6% to €6.5 billion in the six months to 30 September, from €5.7 billion a year earlier, while total revenue rose 11.4% to €21.9 billion, boosted by the consolidation of Safaricom, VodafoneThree and Telekom Romania alongside underlying growth.
Vodafone swung to a loss of €3.6 billion for the period, from a profit of €1.1 billion in the prior-year half, after booking a €4.85 billion non-cash impairment in Germany driven by adverse interest-rate movements and a €2.2 billion write-down of UK deferred tax assets following the buyout of CK Hutchison Group Telecom.
Those charges were partially offset by a €3.0 billion non-cash accounting gain tied to the Safaricom transaction.
Germany, the group's largest market by revenue, posted organic service revenue growth of just 0.4%, with gains in broadband and digital services offsetting continued mobile pressure and TV decline; chief executive Margherita Della Valle said the division "is not yet where it needs to be" despite a structural simplification plan underway.
"We have made a strong start to Vodafone's new growth chapter, with organic service revenue increasing by 5.8%," Della Valle said, adding that Vodafone Business delivered "our best-ever growth" with record digital services performance.
The UK grew organic service revenue by 0.9%, driven by fixed-line growth and higher mobile wholesale revenue, while Africa accelerated to 13.4% organic growth, with all of Vodacom's markets contributing across connectivity and financial services.
Vodafone Business delivered organic service revenue growth of 5.8%, including a record 6.6% in the second quarter, driven by double-digit digital services growth in Europe.
The interim dividend rises 2.5% year-on-year to 2.306 eurocents per share, in line with Vodafone's progressive dividend policy.
Net debt increased to €33.5 billion at period end, from €25.4 billion at 31 March, reflecting a free cash outflow alongside the buyout of the remaining 49% of VodafoneThree, the purchase of an additional 15% stake in Safaricom, and debt acquired in the Safaricom consolidation.
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Cash and short-term investments totalled €8.4 billion, down from €12.4 billion at the last year-end.
Vodafone's acquisition of a further 20% of Safaricom, completed on 30 June to take its combined stake to 55%, remains subject to a Kenyan legal challenge; the High Court declared the transaction null and void on 15 September, and the Court of Appeal in Nairobi ordered on 13 October that the status quo be maintained pending its ruling, leaving Vodacom as registered holder of the disputed shares.
Vodafone now expects Group adjusted EBITDAaL of €13.2 billion to €13.4 billion for FY27, up from the €13.0 billion to €13.3 billion range set in July, and adjusted free cash flow of €2.8 billion to €3.0 billion, up from €2.6 billion to €2.9 billion.
The upgraded ranges imply organic growth at the mid-point of 7% in adjusted EBITDAaL and 21% in adjusted free cash flow, which Della Valle said marks the first year of a targeted "multi-year double-digit cash flow growth trajectory."