Vodafone to cut costs by £1bn

Telecoms giant reports 10.5% increase in group operating profits but lowers expectations for second half of the year

Hemscott Editor | 11-11-08 | E-mail Article

Vodafone has said despite seeing growth in revenues and profits over the six months to the end of September, it is lowering its trading expectations in light of the deepening problems in the UK economy. Vodafone also said it intends to improve its operational performance by implementing £1bn worth of cost cutting measures.

Adjusted operating profits at the group rose 10.5% to £5.8bn, which Vodafone attributed to benefits it saw in foreign currency exchange as well as in growth in its Verizon Wireless business.

The international telecoms company said its European business saw a 14.3% uplift in revenues over the six months to end of September. However, on an organic basis revenues actually fell by 1.1% resulting from ongoing pricing pressures in core voice and messaging services.

Free cash flow, excluding licence payments, increased some 15% to £3.1bn, with foreign currency a key driver.

Vittorio Colao, chief executive at Vodafone, said the group has raised its free cash flow over the six months and delivered strong cash generation but has still reduced its trading expectations. He said: “Our updated strategy reflects the changing environment and market conditions and it will drive execution with a continuing focus on free cash flow.”

The group announced its interim dividend will increase to 2.57p per share, up 3.2% over the same point last year.

Shares in Vodafone rose sharply on the back of this morning’s announcement, up almost 10% by 2pm.

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