Proactive Investors - Mobile phone giant Vodafone (LON:VOD) will see almost no revenue growth over the next five years, according to a leading City bank.
Sales have been stalling recently and UBS (NYSE:UBS) predicts that by March 2028 they will be at €46.2bn annually or just 1% higher than the €45.7bn reported in its latest results a week ago.
Instead, said the Swiss bank, any investment case rests on M&A deals, shareholder Etisalat upping its stake and cost cutting, where new chief executive Margherita Della Valle has already announced 11,000 jobs are to go.
In a note after meeting with Della Valle, UBS highlighted other self-help changes including shifting management incentives to focus on customer metrics such as market share (10% weighting) and NPS (customer satisfaction)/churn (30%) with the rest being financial metrics (earning/ free cash flow (FCF)).
“B2B is an area of strength (3% growth) but Vodafone believes it can do even better and will likely be more prominent in future updates.”
UK consolidation (with Three often reported as the partner) and disposals in Spain and Italy are likely, UBS suggests. with post any restructuring a free cash flow yield of 9% one of the company's appeals.
That’s enough for UBS to stick with a buy rating, plus it also sees the self-help efforts boosting profits by 40% to around €4.6bn in 2028 from €3.1bn in the year just ended.
Annual dividends will be unchanged at 9c over the period while debt will edge down from €33.3bn currently to €30bn.
The twelve-month target price is 105p against 82p, down 1.7% today.