Vodafone Swings to Fiscal Year Net Profit; Sarin Steps Down

LONDON -(Dow Jones)- Vodafone Group has posted a GBP6.7 billion net profit for fiscal 2008 compared with a loss a year earlier and announced that Chief Executive Arun Sarin will step down and be replaced by his deputy Vittorio Colao.

"I felt the timing was right to handover as the company is in a good position strategically...I've achieved what I set out to achieve when I took the position" Sarin said in a conference call.

Sarin, who has run the world's largest mobile phone operator by sales for the past five years, will retire after the company's annual general meeting July 29.

The Newbury, England-based mobile phone operator said net profit for the 12 months to end-March was GBP6.66 billion, compared with a net loss of GBP4.93 billion a year earlier. The swing to net profit was fueled by a number of cost reduction and outsourcing programs in Western Europe. Last year, Vodafone also had higher losses after taking impairment charges on its Italian and German operations.

Adjusted net profit, which excludes impairment losses, non-operating income from associate companies, and some currency effects, rose 6.7% to GBP6.63 billion, in line with analysts' estimates.

Annual sales rose 14.1% to GBP35.5 billion, driven by increased data sales, growth in emerging markets and positive currency exchange rates, in particular the strong rupee and euro against the British pound. The sales figure slightly exceeded analysts' consensus of GBP35.2 billion and was above company guidance for full-year revenue of GBP34.5 billion to GBP35.1 billion.

Vodafone derives 60% of sales from countries where the euro is the main currency and has an extensive Indian operation in Vodafone Essar.

The results, combined with news of Vodafone's CEO succession, pushed its shares higher Tuesday. At 0732 GMT, the stock was up 4 pence, or 2.1%, at 167 pence, one of the leading risers on the FTSE 100.

"The guidance for 2009 is likely to push up people's forecasts," said John Davis, analyst at Dresdner Kleinwort.

In its outlook, the company said that it expects fiscal 2009 revenue to rise to between GBP39.8 billion and GBP40.7 billion, and operating profit for 2009 between GBP11 billion and GBP11.5 billion.

"The group continues to drive revenue growth, particularly in respect of its communications strategy for data and fixed broadband services and in emerging markets," Vodafone said in a statement.

Sarin said in a conference call that the worldwide macro-economic slowdown and rising inflation and food prices in the developing world were the biggest challenges for the company, but that Vodafone would "navigate through them".

He said the company is interested in possible acquisitions in Africa and Asia but would not comment on specific deals.

Earnings before interest, taxes, depreciation and amortization, or Ebitda, rose 10% to GBP13.2 billion in fiscal 2008, compared with GBP11.96 billion a year earlier.

Vodafone increased its total dividend per share by 11.1% to 7.51 pence, another factor likely to be welcomed by markets according to Cantor.

-By Erica Herrero-Martinez, Dow Jones Newswires; 44 207 842 9353; erica.herrero-martinez@dowjones.com

(END) Dow Jones Newswires

Posted to the site on 27th May 2008