How well are these two LSE players performing after releasing their financial results: Vodafone Group & Softcat?

Summary

  • Vodafone Group Plc has reported a revenue decline of 2.3% during H1 FY21.
  • The Company has acquired the TDD spectrum from the National Telecommunications Regulatory Authority.
  • Softcat Plc has reported a revenue increase of 8.6% year-on-year in FY20.
  • Cash conversion after capital expenditure stood at 88% as of 31 July 2020.

Vodafone Group Plc (LON: VOD) and Softcat Plc (LON: SCT) are telecommunication and technology stocks, respectively. Shares of VOD and SCT were down by 1.97% and 0.33%, respectively, from their last closing price (as on 17 November 2020, before the market close at 08:15 AM GMT).

Are roaming revenues of Vodafone Group Plc going to get affected by Covid-19?

Vodafone Group Plc is the FTSE 100 listed Company, which is engaged in technology communications having its presence in 22 countries, and the Company has over 300 million mobile customers.

 

Key Operational Highlights of H1 FY21 ended 30 September 2020 as reported on 16 November 2020

  • Customer loyalty of the Company has improved for consecutive eight quarters.
  • The Company has launched 5G across 127 cities in 9 markets in Europe.
  • The Company has reduced its retail footprint by over 728 stores in the last 12 months.
  • The Company has completed the merger of Vodafone Hutchison Australia Pty Limited (VHA) with TPG Telecom.

H1 FY21 financial highlights (ended 30 September 2020) as reported on 16 November 2020

(Source: Company result)

 

  • The revenue of the Company has declined by 2.3% year-on-year to €21.42 billion for H1 FY21 ended on 30 September 2020 due to the impact of Covid-19 on roaming revenue and lower headset sales. Similarly, adjusted EBITDA also declined by 1.9% despite having reasonable cost control.
  • The adjusted earnings per share of the Company during H1 FY21 were 4.11 Eurocents better than the adjusted earnings per share reported in H1 FY20 of 0.85 Eurocents reflecting the resilient financial performance of the Company.
  • With regards to its financial position, the free cash flow (pre spectrum and restructuring) has increased by 14.5% to €0.451 billion and net debt as of 30 September stood at €43.98 billion on account of FY20 final dividend payment of €1.2 billion.
  • The Company will pay an interim dividend of 4.50 Eurocents per share on 05 February 2021.

 

Recent News

On 4 November 2020, the Company has announced that its Egypt Business has acquired 40 MHz of 2.6 GHz TDD spectrum from the NTRA (National Telecommunications Regulatory Authority) enabling the Company to meet the growing demand for reliable, high-quality voice and data services by this significant expansion. The spectrum has a 10-year license term till 2030 and payment will be done in 3 phases: payment of $270 million upon receipt of the spectrum and two payments of $115 million each to be paid in 2021 and 2022.

On 1 September 2020, the Company has updated that it has agreed with the merger of Indus Towers Limited and Bharti Infratel Limited. As estimated by Bharti Infratel, Vodafone's stake in the combined company would have a value of approximately INR 151 billion (€1.7 billion) and Vodafone Idea would receive approximately INR 40 billion (€464 million) in cash upon completion.

Share Price Performance Analysis of Vodafone Group Plc

(Source: Refinitiv, chart created by Kalkine Group)

Shares of Vodafone Group Plc were trading at GBX 125.26 and were down by close to 1.97% against the previous closing price (as on 17 November 2020, before the market close at 08:15 AM GMT). VOD's 52-week High and Low were GBX 160.44 and GBX 87.11, respectively. Vodafone Group Plc had a market capitalization of around £31.06 billion.

Business Outlook

The Company has shown robust financial performance during H1 FY21 despite several business challenges. The Company is expecting its free cash flow (pre-spectrum and restructuring) for FY21 to remain around €5 billion and adjusted EBITDA in the range from €14.4 billion to €14.6 billion. The Company will focus on having lucrative strategic tie-ups bringing out synergies and giving critical importance towards customer loyalty by delivering quality, speed and reliability of the networks.

 

 

Would the corporate client segment of Softcat Plc witness recovery in demand?

Softcat Plc is the FTSE 250 listed company which is a leading UK provider of IT infrastructure technology and services. The Company is serving various clients in the corporate and public sector markets.

 

Q1 FY21 trading update (for the first quarter ended 31 October 2020) as reported on 16 November 2020

  • The Company has witnessed strong trading performance during Q1 FY21 and reported year-on-year growth in revenue, gross profit and operating profit.
  • Regarding the financial position, cash generation has remained in line with expected trends.

FY20 financial highlights (ended 31 July 2020) as reported on 20 October 2020

(Source: Company result)

  • The sales during FY20 has reported an increase of 8.6% from £991.8 million in FY19 to £1,077.1 million in FY20. Similarly, operating profit has also surged by 10.9% to £93.7 million during FY20 ended on 31 July 2020. The Company has extended its record delivering growth in revenues and operating profit to sixty consecutive quarters.
  • Regarding the financial position, the net cash of the Company stood at £80.1 million as of 31 July 2020 while it was £79.3 million as of 31 July 2019 reflecting the Company's strong financial position. Cash conversion after capital expenditure stood at 88% as of 31 July 2020. The slight reduction in cash conversion was due to refurbishment of both the Marlow and Manchester offices.
  • The Company has witnessed an increase in customer base and average gross profit per customer, reflecting the strategic progress made during the period.
  • The headcounts of the Company have increased by 15% demonstrating ongoing investment in particular in the services, technical and specialist capabilities.

Segmental Analysis

(Source: Company result)

The Company has witnessed growth across all three business segments while the services segment has seen the highest growth of 36.6% and the hardware segment has shown the least growth of 2.6% 

Share Price Performance Analysis of Softcat Plc

(Source: Refinitiv, chart created by Kalkine Group)

Shares of Softcat Plc were trading at GBX 1,198.00 and were down by around 0.33% against the previous closing price (as on 17 November 2020, before the market close at 08:15 AM GMT). SCT's 52-week High and Low were GBX 1,454.32 and GBX 826.67, respectively. Softcat Plc had a market capitalization of around £2.21 billion.

Business Outlook

The technology industry should continue to meet the evolving needs of the customers. The Company has witnessed strong public sector business during the last four months of FY20. However, the Company has experienced a reduction in demand from corporate customers during FY20, and it is expecting that the corporate customers will be extra cautious regarding their spending in FY21 as well. The Company has accepted the challenging market conditions and will focus on increasing its market share by making lucrative investments to take the advantages of its strong financial position.

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