Vodafone PLC (VOD) - Reshaped European footprint, €8bn sale of Vodafone Italy & €4bn capital return

[idpickering]

Reshaped European footprint, €8bn sale of Vodafone Italy & €4bn capital return

Vodafone Group Plc ("Vodafone") announces today the final step of the portfolio right-sizing announced in May 2023, with a binding agreement to sell 100% of its Italian operations ("Vodafone Italy") to Swisscom AG ("Swisscom") (the "Transaction").1

· Reshaped European footprint focused on growing markets, with strong positions and local scale

· Value-creating sale of Vodafone Italy to Swisscom for €8 billion upfront cash proceeds

· Attractive valuation, representing c.26x consensus OpFCF2 and 7.6x consensus Adjusted EBITDAaL2 for FY24

· New capital allocation framework, including dividend to be rebased to 4.5c per share from FY25 onwards, €4 billion capital return via share buybacks and new leverage range of 2.25x - 2.75x

"Today, I am announcing the third and final step in the reshaping of our European operations. Going forward, our businesses will be operating in growing telco markets - where we hold strong positions - enabling us to deliver predictable, stronger growth in Europe. This will be coupled with our acceleration in B2B, as we continue to take share in an expanding digital services market.

The sale of Vodafone Italy to Swisscom creates significant value for Vodafone and ensures the business maintains its leading position in Italy, which has been built through the dedicated commitment of our colleagues to serving our customers over many years.

Our transactions in Italy and Spain will deliver €12 billion of upfront cash proceeds and we intend to return €4 billion to shareholders via buybacks, as part of our broader capital allocation review."

Margherita Della Valle
Group Chief Executive

https://www.investegate.co.uk/announcem ... rn/8089340

Also posted on Company News here; viewtopic.php?p=653675#p653675

I don't hold these, but I know some here do, so this may prove of interest here.

Ian.

[funduffer]

So the inevitable dividend rebase has finally arrived......

Yield really was 'too good to be true', and unsustainable.

There are lessons here for all of us.

FD

[idpickering]

So the inevitable dividend rebase has finally arrived......

Yield really was 'too good to be true', and unsustainable.

There are lessons here for all of us.

FD

I know where you're coming from, thanks for your input. I've always felt uncomfortable with holding VOD, mainly due to the possibility of such a 'rebasement'. Strangely VOD are up over 4% as I type?

dividenddata have the VOD forward yield at 5.81%.

https://www.dividenddata.co.uk/dividend ... y?epic=VOD

Ian.

[daveh]

So the inevitable dividend rebase has finally arrived......

Yield really was 'too good to be true', and unsustainable.

There are lessons here for all of us.

FD

I know where you're coming from, thanks for your input. I've always felt uncomfortable with holding VOD, mainly due to the possibility of such a 'rebasement'. Strangely VOD are up over 4% as I type?

dividenddata have the VOD forward yield at 5.81%.

Ian.

The market could see it coming, and it was probably necessary as, depending how you calculated it it was uncovered by earnings and barely covered by free cashflow. So the market is pleased they are doing what they consider the sensible thing.

Also debt levels were/are getting too high too. I hope they prioritise bringing down the debt over share buybacks until the debt is back under control. Though with the share price as low as it is its a good time for the company to be buying back shares, but I want to see the debt coming down too.

I still hold, but have not been buying more even though they are/were top of my HYPTUSS spreadsheet as I was waiting to see if/when they would have to cut the dividend.

[moorfield]

There are lessons here for all of us.

Yes, Pyad's original selection process is flawed
(as described here: https://web.archive.org/web/20160609102 ... 050304.htm)

I have come to think that should have been the other way round, ie:
Rank the FTSE100 or maybe the 350 shares by descending ascending yield (from the FTSE100 yield) then work your way down up, picking a share from each sector.

If you think about what this means in practice, it is that you are allocating your hard-earned/saved to lower risk shares first, rather than last, when building an HYP (if you accept there is a correlation between yield and risk of a dividend cut). In all likelihood anyone building a new 15-HYP yesterday would then not have got up to Vodafone.

[monabri]

"Our transactions in Italy and Spain will deliver €12 billion of upfront cash proceeds and we intend to return €4 billion to shareholders via buybacks, as part of our broader capital allocation review.""

12bn upfront ...4bn buybacks..........8bn ...?

[daveh]

"Our transactions in Italy and Spain will deliver €12 billion of upfront cash proceeds and we intend to return €4 billion to shareholders via buybacks, as part of our broader capital allocation review.""

12bn upfront ...4bn buybacks..........8bn ...?

I assume they are very sensibly paying down debt.

[monabri]

My VOD history...FWIW.

A few years ago (in the early days of TLF when the verb "to picker" was not in the Collins dictionary) I bought my first tranche of VOD. It was held in a taxable account. Come the new tax year, I decided to move them to an ISA before the Final ex dividend date in June. However, being greedy, after buying tranche 2 in the ISA, I thought " why not leave the first tranche where it is and sell after the shares have gone ex dividend and the share price has recovered - double bubble VOD dividend? The rest is history....the share price didn't recover.

That's how I came to hold two tranches of VOD which nowadays I would not go anywhere near .

[Smautf]

My VOD history...FWIW.

A few years ago (in the early days of TLF when the verb "to picker" was not in the Collins dictionary) I bought my first tranche of VOD. It was held in a taxable account. Come the new tax year, I decided to move them to an ISA before the Final ex dividend date in June. However, being greedy, after buying tranche 2 in the ISA, I thought " why not leave the first tranche where it is and sell after the shares have gone ex dividend and the share price has recovered - double bubble VOD dividend? The rest is history....the share price didn't recover.

That's how I came to hold two tranches of VOD which nowadays I would not go anywhere near .

Well, if we're in a confessional mood...

I bought VOD as part of my initial HYP when I started in 2010. The price then was 167p.

After the disposal of Verizon was announced, I sold the shares, and then re-bought after the deal had gone through. This was to avoid the complications of holding US listed shares, if I remember rightly.

The first part of this manoeuvre was a good idea, it turned out. The second, less so.

It looks like I somehow managed to sell at 220p and then buy at 244p. Ouch. Probably a decade-long high point.

Since then I have watched with grim determination as the price slid inexorably downwards. Oh, apart from the moment in 2018 when I thought that topping up at 193p would be a good idea.

As I type, the price is 66p.

Previous shares have come to look like poor ideas in hindsight - Balfour Beatty, Tesco, Microfocus - but I don't think any have been quite so relentlessly rubbish as Vodafone !

Of course, the value of the holding as an overall percentage of the portfolio is now fairly trivial - but I think I can probably find better uses for that money nonetheless.

Chris