Vodafone Plc Buck the Trend, to Pay Dividend as Earnings Increase

In the United Kingdom, when many companies have already deferred their dividend after Bank of England urged the companies to preserve their cash through bonuses and dividend deferrals for the future. While the big-name such as Aviva, Mondi, ITV, Intercontinental Hotels Group and Essentra etc. complied with the directives and have already announced dividend cancellation with many others also deferring it for the future period. But, there are many companies who have gone by their previous announcements and declared dividends or have announced a fresh dividend, Vodafone Plc has become one of the latest in the lot, which announced that its board had recommended the total dividends per share of 9.0 euro cents for the FY2020, same as of the previous year. The company further stated that for the final dividend of ordinary shareholders, the ex-dividend date is 11th June 2020 and the record date is 12th June 2020. The dividend is to be paid on 7th August 2020.

The Chief Executive Officer of Vodafone Plc, Nick Read, stated that the company had performed well in terms of revenue growth, rise in adjusted EBITDA and positive free cash flow while creating a robust commercial proposition.

The company stated that during the novel coronavirus crisis, it had delivered significant connectivity for the hospital across London, Cardiff, Manchester and Glasgow. Not only this, but it has also donated around €100 million of goods and services. The loss of the company has reduced significantly in the FY2020 as compared to FY2019, as per the preliminary results of the company.

The preliminary results of the company for FY20

(source: company website)

• Due to the improvement in commercial performance and the contribution from the acquired Liberty Global assets, the group revenue increased by 3.0 per cent to €45.0 billion during the FY2020.
• The cost makeover plan, together with enhanced commercial drive and growth in organic service revenue increase led to 33.1 per cent rise in adjusted EBITDA margin in FY2020 from 28.3 per cent in FY2015.
• Greater cash interest, as well as capital additions for the acquired Liberty Global Assets, were partly overshadowed the organic adjusted EBITDA growth and the adjusted EBITDA contribution from the acquired Liberty Global assets.
• The free cash flow of the company improved by 4.7 per cent to €5.7 billion (FY19: €5.4 billion) during the FY2020.
• As at 31st March 2020, the net debt of the company was €42.2 billion versus €27.0 billion as at 31st March 2019. The net debt increased due to the acquisition of the Liberty Global assets in Germany and Central and Eastern Europe with cash outflow and debt of €18.5 billion, which was mainly on account of to 5G spectrum procurements in Germany at the cost of €1.7 billion, €2.3 billion of dividend payment, and also due to the repurchase for the compulsory convertible bonds of €1.1 billion, which was issued in the year 2016.
• At the end of the FY2020, the financial leverage of the company was reported at 2.8x.
• Return on capital employed of the company increased by 80 basis points to 6.1 per cent on a pre-tax basis, while there was an increase of 50 basis points to 4.0 per cent on a post-tax basis during the FY2020.

Overview of Vodafone Plc

Vodafone Plc (LON:VOD) is the prominent player in the communication sector, which provides TV, Broadband, Mobile and fixed services. The company is operating in 24 nations and provide fixed broadband in nineteen markets. The company has around 22 million Television consumers, 625 million mobile consumers, as well as 27 million fixed broadband consumers.

The Share price performance of the company - The stock of the company is trading at GBX 125.20 on the London Stock Exchange at around 02:12 AM GMT on 13^th May 2020. The stock price increased by 1.60 per cent or 1.97 points as compared to the previous day’s closing price of GBX 122.88.

Vodafone’s vital supports through critical connectivity amid novel coronavirus epidemic

• In Italy, the company has distributed over 1.2K mobile phones and tablets to foundations and non-profit organization apart from hospitals. The company’s main aim was to allow patients to remain in touch with families via phone and tablets.
• The company has provided 60 GB mobile data with more than 30K sim cards to care centre and hospitals in Spain.
• In South Africa, Vodacom combined with Discovery Health to provide online access to all South African citizen for novel coronavirus broadcast and consultations.
• The company is working toward contributing hands-free accessories and equipment to medical personals in major novel coronavirus hospitals in Greece.
• The company has installed remote monitoring cameras in more than 100 hospitals of Portugal so that doctors can observe the patients.
• The company is involved with health ministries in the Czech Republic and Hungary to deliver official novel coronavirus news via extra features on their Life-Saving applications.

Global Telecommunication industry amid novel coronavirus outbreak

• Most of the stores of the telecom companies have been shut temporarily around the world due to novel coronavirus spread. The retails companies such as T-Mobile, Sprint and Verizon in the United States had announced the closure of their outlets in March 2020. Apple which had announced to close its operation until 27th March 2020 in china amid novel coronavirus spread, later stated that the closure would be in effect till further notice.
• There is a high possibility that telecom companies can lay-offs many of their employees as many of the businesses are working online instead of the outlets and offices.
• Due to lockdown in most of the countries, the internet usage has increased as people are doing their day to day work as well as office works through internet only, putting pressure on the telecom companies to provide the internet with high speed.
• The is also a silver lining with the industry, as the Telecommunication companies are comparatively less impacted due to novel coronavirus as compared to other industry but may have to face challenges in cash flow in the coming period of time.
• The mobile phone launch will be postponed due to an impact on distribution chain supply.
• Many companies had planned to make huge investment to expand the business in 5G network, which could get impacted due to the weak financial health.