Tuesday November 11, 10:39 AM
Vodafone net profit drops 35%, plans cost cuts
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LONDON (AFP) - British mobile phone company Vodafone (LSE: VOD.L - news) said on Tuesday that its net profit had slumped 35 percent in the first half of its financial year as it booked a hefty loss on the value of its Turkish business.
Vodafone said that it planned to cut costs by about one billion pounds annually from 2011, while the group downgraded its full-year revenue outlook.
The share price of Vodafone jumped 6.93 percent to 115.8 percent on London's FTSE 100 index, which was down 1.62 percent in late morning trade.
"Investors in Vodafone... will be pleased that income remains solid in a challenging market and there was no skeleton in the cupboard to scare us off," said Simon Denham, managing director of Capital Spreads.
Vodafone said in an earnings statement that profit after tax slid to 2.14 billion pounds (2.63 billion euros, 3.35 billion dollars) in the six months to September 30 compared with the first half of 2007/08.
The company booked a loss of 1.7 billion pounds on the value of Vodafone Turkey.
"Our turnaround in Turkey is taking longer than we anticipated," Vodafone's new chief executive Vittorio Colao said in the company's earnings statement.
Group revenue rose 17 percent to 19.90 billion pounds in the six months to September 30 compared with the first half of 2007/08, thanks to benefits derived from currency exchange rates.
However Vodafone downgraded its forecast for full-year revenue to between 38.8 and 39.7 billion pounds from a previous top estimate of 40.7 billion pounds. Vodafone is the world's biggest mobile phone company by revenues.
"The first half results reflect a solid overall performance in a challenging operating and a weaker macro economic environment," said Colao, who in July replaced Arun Sarin, who stepped down after five years as Vodafone chief executive.
"Operating conditions are expected to continue to be challenging in Europe given ongoing competitive and regulatory pressures and recent deterioration of economic conditions in certain markets," Colao added.
In recent years, Vodafone has expanded into emerging markets across Africa and Asia, as it looks to offset flagging sales and fierce competition in maturing Western markets.
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