VOD Vodafone Group PLC

--Vodafone Group outlined a new savings target and reported a swing to a pretax profit for fiscal 2020

--The company warned that coronavirus will hit its markets and didn't give earnings guidance for the year ahead

--Shares in the company rose sharply, topping the FTSE 100 gainers

By Adria Calatayud

Shares of Vodafone Group PLC rose Tuesday after the company outlined a new savings plan and posted a swing to a pretax profit for fiscal 2020, but warned that the coronavirus pandemic will deal a significant economic blow to its markets.

The U.K. telecommunications group said it expects to deliver at least 1 billion euros ($1.08 billion) of net cost savings over the next three years. The company said this extends an existing digital-transformation program, as part of which it has reduced costs by EUR800 million over the last two years.

Shares at 1020 GMT were up 8.7% at 122.88 pence, making Vodafone the top riser of the FTSE 100.

Vodafone's cost-savings plan was introduced as the company said its business model isn't immune to challenges posed by the coronavirus pandemic. The company is being hit by lower roaming revenue due to reduced international travel and expects economic pressures to hurt customers over time, it said. Roaming in Europe fell by between 65% and 75% in April, but mobile data usage increased 15%, Vodafone said.

Chief Executive Nick Read believes Vodafone has room to cut costs further to offset coronavirus effects, which makes it confident that cash generation can be at least EUR5 billion in fiscal 2021, excluding spectrum costs, he said in a call with journalists.

Savings will be mainly driven by technology evolution and digitization, Chief Financial Officer Margherita Della Valle said in the call.

However, Vodafone said it isn't able to provide guidance on adjusted earnings before interest, taxes, depreciation and amortization for the year ahead because of the uncertainties. Based on its current assessments, adjusted Ebitda might be flat to slightly down in fiscal 2021 compared with a rebased fiscal 2020 baseline, Vodafone said.

For the year ended March 31, the company made a pretax profit of EUR795 million compared with a loss of EUR2.61 billion a year earlier, when it booked a loss over the sale of its Indian arm and wrote down the value of some of its assets. The company posted a narrowed net loss of EUR920 million compared with EUR8.02 billion a year before.

Revenue for the year increased 3% to EUR44.97 billion, the company said. Analysts expected revenue of EUR45.42 billion, according to a consensus taken from FactSet and based on estimates by 14 analysts.

In the fourth quarter, the company's organic service revenue--a closely-watched metric that tracks revenue from selling telecom services--grew 1.6%, it said.

Adjusted Ebitda--one of the company's preferred profit measures--rose 2.6% to EUR14.88 billion, against Vodafone's guidance range of EUR14.8 billion to EUR15.0 billion.

The board declared a total dividend of 9.0 European cents a share, a week after rival BT Group PLC shocked investors with a suspension of its payout until fiscal 2022.

Vodafone said it remains on track to monetize its European tower assets in early 2021, as Mr. Read said current market conditions are favorable for a potential listing due to interest in telecommunications-infrastructure assets. The U.K. and Germany are the strongest contenders to host an initial public offering of the business, Mr. Read said.

Write to Adria Calatayud at adria.calatayud@dowjones.com

(END) Dow Jones Newswires

May 12, 2020 06:56 ET (10:56 GMT)

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