As in Q1, a quite correct resilience to the COVID-19 impacts in Q2. The good news is indeed the H1 EBITDAal margin, which was stable yoy despite the slight decline in revenues. Free cash flow should therefore be at least €5bn for the whole year. So we have no concerns about Vodafone’s dividend and we remain at Buy on the stock.
Companies: Vodafone Group Plc
An expected resilience to the COVID-19 negative impacts in Q1. The group can indeed congratulate itself on having strengthened in recent years its fixed activities: in Germany, which represents 40% of Vodafone’s activities in Europe, service revenues were flat yoy in Q1. The monetisation of its infrastructure assets is continuing and, given the slight growth that the group could offer in the coming years, we maintain our Buy on the stock.
Quite a good Q4 supported by improving commercial momentum in Europe. The annual EBITDA grew eventually by 2.6% yoy reflecting the cost programme’s success. The €0.09 dividend is maintained. Vodafone is more highly indebted after its deal with Liberty-Global, but its dividend (cut last year) seems now more in harmony with its balance sheet. Besides, the monetisation of its infrastructure is continuing. Given therefore the slight growth Vodafone should offer in the coming years, we maintain our Buy recommendation on the stock.
A quite correct H1 for Vodafone with a return to growth in terms of revenue in Q2. The performance is still very solid in Germany (which will represent next year 30% of Vodafone’s revenues) and trends are improving in South Africa, Spain and Italy despite fierce competition or regulation. We maintain our opinion at Add on the group with a 15% upside.
The correct but not more than a Q1 trading update has been largely overshadowed by the announcement in parallel of the creation of Europe’s largest tower company with preparations underway for a variety of monetisation alternatives, to be executed during the next 18 months, including an IPO. The EV of this company could be at least of around €13.5bn. It is obviously excellent news and could be the catalyst that everyone expected to boost the stock, finally. We maintain our strong Buy.
Vodafone has released its annual results. Although there was not much new on the operational side, the dividend was cut to €0.09, as was unfortunately expected (but it was probably the right thing to do). This corresponds to 6% of yesterday’s stock price (vs 10% previously). The major telcos, offering a 4.5-5.5% yield, lend it some upside if the market has confidence, like us, in the sustainability of the dividend. We maitain our Buy on the stock.
Although the Q3 numbers are not so bad and the dividend for 2018/19 should be maintained, the pressure on the stock to make Vodafone cut its dividend could continue in the coming months with uncertainty about future Vodafone numbers once the acquisition of Liberty Global’s operations in Germany, the Czech Republic, Hungary and Romania is completed. The only thing that could reassure the markets today would be the sale of some tower assets.
Following a correct H1 release from an operational viewpoint, management has announced it intends to propose a total dividend of €0.1507 per share for 2018/19, stable yoy. So, we still do not see a case for a cut in the dividend for 2018/19 or 2019/20. This is why we are sticking with our Buy opinion.
Q1 revenues declined by 2.1% yoy but this includes a 2.8% negative impact from forex and a 0.8% adverse impact from the disposal of Vodafone Qatar. On an organic basis, service revenue was quite as expected, increasing indeed by 0.3%. A number slightly lower than the 1.4% recorded in Q4 which still reflects strong growth in AMAP, but which was mitigated by a decline in Europe driven by the drag from UK handset financing and the EU roaming regulation. Excluding these factors, Europe grew by 0.5% yoy: a correct number but nothing more. AMAP grew by 7.0% yoy, as in H2 2017/18, with growth that was faster than local inflation in South Africa, Turkey and Egypt. Although Indian revenues (not consolidated) declined by 22.3% yoy due to price competition and MTR cuts, note that it was down by only 1.4% compared to Q4, reflecting finally an appreciated stabilisation. The full-year guidance was reiterated. The group expects EBITDA growth of 1-5%, excluding the impact of UK handset financing in both years, and the significant benefit in the prior year from regulatory settlements in the UK and a legal settlement in Germany.
In terms of service revenues, Q4 was quite as expected with organic growth at constant change of 1.4%, slightly better than the +1.1% recorded in Q3 but lower than the 2% recorded in H1. European growth, which had moderated to 0.3% in Q3, was 0.6% (excluding the positive impact of a legal settlement in Germany). Note that, in Europe, the increased drag from roaming regulation was completely offset by an improved global performance in mobile. In parallel, growth in AMAP was still strong at +7.7% during the quarter (vs 6.8% in Q3) but it was completely offset in reported terms by an 1.5ppt adverse impact from FX (particularly with regards to the Turkish lira). Note the group’s revenue for the whole year declined by 2.2% yoy in reported terms, primarily due to the deconsolidation of Vodafone Netherlands following the creation of the JV VodafoneZiggo and FX. Like in H1, the good news came from the EBITDA which was up organically by 10.6% yoy. Excluding the negative impact of net roaming declines in Europe and the benefits in the UK from the introduction of handset financing and regulatory settlements in the period, organic adjusted EBITDA grew by a solid 6.5% (lower, however, than the impressive +9.3% recorded in H1) with a broad-based EBITDA improvement in 20 out of Vodafone’s 25 markets. The group which had raised its full-year guidance to +10% last November (vs +4-8% previously) has eventually exceeded its target with an annual organic EBITDA growth of 11.8%. But the bad surprise was the announcement in parallel of the succession plan for the CEO. Effective from 1 October 2018, Vittorio Colao will be succeeded by Group CFO Nick Read. So it won’t be Colao(who was very much appreciated by investors) who will manage the recent big acquisitions made by the group (see our latest “_A brilliant deal which deserved a high price_”). As for 2018/19, the group expects EBITDA growth of 1-5%, excluding the impact of UK handset financing in both years, and the significant benefit in the prior year from regulatory settlements in the UK and a legal settlement in Germany. It’s a guidance that is a little bit disappointing, corresponding (on guidance FX rates) to an adjusted EBITDA range of €14.15-14.65bn for the year (we have €14.8bn in our model). Finally, note the final dividend per share of €0.1023, up 2%, giving the total dividends per share for the year of €0.1507. The board still intends to increase dividends per share annually.
Vodafone agreed two days ago to acquire Liberty Global’s operations in Germany, the Czech Republic, Hungary and Romania for an EV of €18.4bn. This deal values the acquired operations at 10.9x their current EBITDA before synergies but management expects to generate cost and capex synergies before integration costs of €535m per annum by the fifth year after completion (thus valuing these activities at 8.6x their future EBITDA before integration costs). Vodafone intends to finance the acquisition using existing cash, new debt facilities (including hybrid debt securities) and around €3bn of mandatory convertible bonds.
In terms of service revenues, Q3 was a little bit disappointing with organic growth at constant change of 1.1%, slightly lower than that recorded in the previous quarter (1.3% in Q2). European growth moderated to 0.3% or 1.9% excluding the impacts of the roaming regulation and the handset financing in the UK (these growths are indeed 0.5% below the Q2 numbers). Note, however, in parallel, growth in AMAP was still strong at +6.8% during the quarter (vs 6.2% in Q2). Note also that, as usual, reported numbers exclude the results of Vodafone Netherlands following the disposal of its consumer fixed business and subsequent merger into VodafoneZiggo (this has an impact of 5.3% on the European revenues).
In terms of service revenues, Q2 was quite as expected with organic growth at constant change of 1.7% yoy, slightly lower however than those recorded in the previous quarter (+2.2% yoy). Note that in Europe (+0.8% yoy in Q2 exactly like in Q1) the increased drag from roaming regulation was completely offset by an improved global performance in mobile. For once the slight global slowdown was indeed more driven by AMAP regions with an organic growth of +6.2% yoy vs +7.9% in Q1. Note group revenue for the H1 declined by 4.1% in reported terms, primarily due to the deconsolidation of Vodafone Netherlands following the creation of the JV VodafoneZiggo and forex. But the good news came from the H1 EBITDA which was up organically by 13% yoy! Excluding the negative impact of net roaming declines in Europe and the benefits in the UK from the introduction of handset financing and regulatory settlements in the period, organic adjusted EBITDA grew by an impressive 9.3%, with a broad-based EBITDA improvement in nine out of Vodafone’s ten largest markets. As a result the group is raising its full-year guidance: the EBITDA should be up by 10% this year (vs +4-8% previously). Remember also that, on 20 March 2017, Vodafone announced an agreement to combine Vodafone India with Idea Cellular. The transaction is subject to regulatory approvals and is expected to close during calendar year 2018. The combined company will be jointly controlled by Vodafone and the Aditya Birla Group. Vodafone India has been classified as discontinued operations for group reporting purposes.
In terms of service revenues, Q1 was quite as expected with solid organic growth at constant change of 2.2% yoy, slightly better than those recorded in the previous quarter (+1.5% yoy). The trend is indeed similar to the 2% recorded during the first 9m of 2015/16, despite the negative impact in Europe of the roaming regulation. Excluding this impact, the global growth should have been… 3%, quite a good number in the telecom sector. Note growth in AMAP was still strong at +7.9% during the quarter. Remember that on 20 March 2017, Vodafone announced an agreement to combine Vodafone India with Idea Cellular. The transaction is subject to regulatory approvals and is expected to close during calendar year 2018. The combined company will be jointly controlled by Vodafone and the Aditya Birla Group. Vodafone India has been classified as discontinued operations for group reporting purposes. Service revenue has indeed declined by 13.9% yoy in Q1 as a result of continued price competition from the new entrant and incumbents but the sequential quarterly trend is clearly stabilising as SIM consolidation is beginning to improve ARPU in the low-value segment, helping offset pricing pressure in the mid and high-value segments of the base. Note also the reported numbers exclude the results of Vodafone Netherlands following the disposal of its consumer fixed business and subsequent merger into VodafoneZiggo (it has an impact of 4.2% on the European revenues).
Vodafone has released its full-year results at end March. First of all, remember that, on 20 March 2017, Vodafone announced an agreement to combine Vodafone India with Idea Cellular. The transaction is subject to regulatory approvals and is expected to close during calendar 2018. The combined company will be jointly controlled by Vodafone and the Aditya Birla Group. Vodafone India has been classified as discontinued operations for group reporting purposes. In terms of service revenues, Q4 was quite as expected with organic growth at constant change of 1.5% yoy. This is a number rather lower than the 2% recorded during the first 9m, but like in Q3 the recovery in Europe was partially offset by regulatory headwinds (in Q4 Europe would not have been flat but should have recorded growth of +1.4% if we exclude the roaming regulation). Note growth in AMAP was still strong at +6.8% during the quarter. The rather good news is that EBITDA (excluding India) has grown by 5.8% yoy organically for the whole year (and by more than 7% in H2!), growing by more than revenues: both Europe and AMAP have delivered margin improvements. The group has also given a solid guidance for 2017-18: excluding Vodafone India, the EBITDA should grow on an organic basis by 4-8%, implying a range of €14-14.5bn at guidance FX rates. This is quite a solid number, as we had in our model an EBITDA growth of 4.1% for 2017-18 (excluding India). As for India, note service revenue declined by 11.5% yoy in Q4 (vs -1.9% in Q3) as a result of heightened competitive pressure following free services offered by the new entrant during H2. EBITDA declined by nearly 25% yoy in H2 (-10.5% for the whole year after 2.6% growth in H1), with a 4.5ppt deterioration in the EBITDA margin to 25% (the EBITDA margin was flat during H1). Remember that in H1 Vodafone recorded a non-cash impairment of €6.4bn relating to its Indian business. Impairment testing at 31 March 2017, following the announcement of the merger of Vodafone India with Idea Cellular, gave rise to a partial reversal of that impairment. As a result, the impairment charge for the year reduced to €4.5bn.
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Calnex Solutions has announced very strong maiden interim results, with H1/21 revenue up 37% to £7.7m and adjusted PBT up 90% to £2.3m. Calnex has firmly established a trusted reputation worldwide, launching multiple first to market telecoms and network testing solutions. The exponential growth of data creation and secular migration of industries to cloud computing along with the long-term transition of the telecoms industry to 5G is driving demand for high value test instrumentation. Given the strength of H1/21 reported today we have upgraded our revenue forecasts for FY21E and FY22E by 10.6% and 12.2% to £15.4m and £16.4m and increased forecast EPS up 24.1%. and 14.3% respectively. Calnex is accelerating its growth investment plans, ahead of our previous expectations, expanding both R&D and sales capacity to capture increased market share within a substantial and growing global market.
Companies: Calnex Solutions Plc
Gamma’s trading update for its financial year to the end of December 2020 reflects another strong year for the Group and we adjust our FY 2020E numbers upwards by 2-3% to reflect guidance of an above-consensus outturn for adjusted EBITDA and EPS numbers. Following the sale of Gamma’s Manchester-based fibre business, the period-end cash balance of £54.1m was higher than expected and a touch up over the year - despite the Group spending £48m on acquisitions in the period. Gamma’s European business is now firmly established in Germany, Spain and the Netherlands while the Group retains a strong balance sheet position. The business continues to display resilience in the current operating environment as cancellations and bad debts remain at low levels, and it retains a range of growth opportunities in both the UK and European unified communications (UCaaS) markets.
Companies: Gamma Communications PLC
The Interims are as announced in the October update; H1 2021 was better than expected considering the lockdown and leaves SRT well positioned to benefit from meeting Systems delivery milestones, receiving major cash payments and signing new contracts in H2. As last year, H1 revenues are just from Transceivers, with no Systems milestones booked in the period. Last year, that was a quirk of timing in project deliveries, but this year Systems deployments were paused due to the pandemic. Despite global lockdowns, the Transceiver business is growing impressively on the back of new products and channels. Meanwhile, Systems recommenced delivery of the Philippines BFAR system and awaits news on three major contracts in the Middle East, expected to be signed and started this H2. Importantly, the group cash position is strong; £8.5m of Systems payments and the £5.3m April refinancing left gross cash of £5.0m at September; vital for working capital to deliver the Philippines project, which continues to make solid progress. Otherwise, investors await the anticipated new Systems contracts currently in negotiation. The fundamental demand drivers for Maritime Domain Awareness (MDA) systems remain undiminished and the validated sales pipeline remains firm at 17 new contract opportunities totalling £550m.
Companies: SRT Marine Systems plc
Telefonica announced this morning that its subsidiary Telxius has signed an agreement with American Tower for the sale of its towers division in Europe for €7.7bn. It’s indeed an impressive price and TEF succumbed logically to the sirens of American Tower to reduce its debt a little more. We maintain our opinion at Buy on the stock.
Companies: Telefonica SA
MTI Wireless Edge Ltd | CAP-XX Ltd
Companies: MTI Wireless Edge Ltd
Warren Buffett once said that as an investor, it is wise to be ‘fearful when others are greedy and greedy when others are fearful’. Fear is not in short supply right now.
Companies: TIME ALU ANCR BLV CONN CRC STU GATC HAT LEK MMH MCB MWE NXR NTBR NOG PAF PEG RFX SRC TEF TEG TPT VTU WYN XLM
Disney+ hits 22m mobile users, SoftBank backed firm downsizes IPO, German mobile carrier selects Huawei
Companies: ENET 7DIG MVR ZOO AMO BOOM MIRA MWE
Calnex Solutions is a leading provider of test and measurement hardware and software solutions that enable performance validation and standards conformance of critical infrastructure associated with telecoms and high-speed data networks. 5G network evolution is a significant, long-term driver of growth for the business along with the continued expansion of hyperscale datacentre enterprises and their increasing participation in telecoms infrastructure markets. Calnex has established a trusted reputation worldwide, launching multiple first to market testing solutions. We have initiated coverage with very conservative forecasts given the strong financial track record with historical revenue CAGR of over 27.7% between FY18 and FY20. Calnex is profitable, cash generative and entered FY21E with a record order backlog.
Today’s update demonstrates 20% operating profit growth at the technology group specialising in comprehensive radio frequency communication solutions across multiple sectors for the first nine months - a function of revenue growth (+2%) coupled with cost savings and operating leverage. A good performance given the global backdrop. EBIT margin increased 150bps to 10.1% and this higher margin means MTI remains on track to meet our FY20 profit forecasts albeit on a lower revenue base and we reduce revenue forecasts by 6%. We anticipate limited cost inflation in FY21 and hence profit forecasts remain unchanged but we trim revenue. We also introduce FY22 forecasts. MTI has a diversified business and each division can point to structural growth drivers. Despite a good share price performance this year (+28%), the current price fails to reflect MTI’s track record and growth potential, balance sheet strength and yield. We set a new fair value (63p from 46p), equivalent to an FY21 EV/EBITDA of 11.4x falling to 10.1x in FY22.
ADT has produced a resilient set of interims despite being impacted by the lockdown and is well positioned to benefit from recovery both from an operational and financial leverage point of view. Group revenues declined by 8% yoy in H1 with Managed Services seeing a 6% organic decline, mainly due to weaker project work (-17%) while recurring Managed Services revenues decline was held to 3%. Margins and cash flow remained robust with senior net debt reduced to £24.8m from £27.9m at end March and c. £10m headroom on the RCF. ADT trades on an historic FCF yield of >6%, but this should rise to >10% as recovery begins.
Companies: AdEPT Technology Group Plc
We are adjusting our estimates following completion of the SpaceQuest acquisition just before the end of FY20. With a negligible income and cash flow impact in FY20 due to the timing, the deal will be reflected in an expanded balance sheet. However, with an EBITDA margin of more than 20% and significant growth expected in FY21, the deal is a major enhancement to group performance going forward.
Companies: AAC Clyde Space AB
