Surging energy costs hit profits at Vodafone sending shares crashing to a 20-year low
Vodafone shares crashed to a 20-year low as soaring energy costs and stiff competition hit business.
As the FTSE 100 telecoms giant struggled in key markets, including Spain, Germany and Italy, it warned that profit for the year will come in at a maximum of £13.4billion, down from an earlier forecast of up to £13.6billion.
Vodafone also warned it would generate less cash than expected as the economic outlook worsens.
Shares slump: Vodafone has warned that profit for the year will come in at a maximum of £13.4bn, down from an earlier forecast of up to £13.6bn
Shares fell 7.9 per cent, or 8.27p, to 95.89p, their lowest since 2002.
The latest slide piles fresh pressure on chief executive Nick Read, who has faced criticism over Vodafone’s poor share price performance.
The stock has fallen by more than a third since he took over in 2018. Under his leadership, Vodafone has seen sluggish growth and failed to complete meaningful merger and acquisitions transactions.
The firm is under pressure from investors including French tycoon Xavier Niel and activist Cevian Capital, which earlier this year took a stake and is pushing for the business to strike more deals and simplify its structure. Cevian has called for Read to shed poorly performing parts of the business.
Read insisted plans to merge its UK business with rival Three are making ‘good progress’.
The firms confirmed last month they are in talks about a tie-up that would create Britain’s biggest mobile supplier with more than 27m customers.
The company plans to keep a 51 per cent stake in the combined business, while Three’s owner, Hong Kong conglomerate CK Hutchison, would own the rest.
Read has stated a desire to pursue mergers in markets he deems to be suffering from excessive competition, including the UK.
Hargreaves Lansdown equity analyst Matt Britzman said it is ‘certainly not plain sailing’ at the telecoms firm.
He said: ‘Warnings that weaker economic conditions and rising costs are set to bring full year results down from previous guidance put a dampener on half year results.’
Vodafone’s bleak outlook came as it said overall sales in the six months to September 30 grew just 2 per cent to £20.2billion.
Profit fell 2.6 per cent to £6.4billion as it grappled with spiralling energy costs and rising inflation.