Vodafone Shares Rise Despite Huge Losses

Shares in the telecoms giant Vodafone rose in early trading today as the City welcomed better than expected results and strong underlying growth, despite the company posting one of the largest losses in global corporate history.

Vodafone today reported pre-tax losses of £13.5bn, including a £6bn fall in the value of companies it bought during the technology boom. The company's losses dwarf those of the stricken telecoms equipment group Marconi, which earlier this month reported losses of £5.7bn as a result of a fall in the value of acquisitions in the US.

However, underlying profits mean Vodafone shareholders can expect a dividend of 1.4721p a share, up 5% on the previous year, while chief executive Sir Chris Gent may receive £2m in shares as a bonus payment.

Setting aside the one-off loss, Vodafone reported pre-tax profits of £6.2bn for the year to March 31, up 54% on the previous year. Turnover rose 52% to £22.8bn, while its customer base increased 22% to 101.1 million.

Sir Chris said: "These are excellent results. The bottom line loss could be misleading. This disguises the true performance of the business."

Vodafone said it was taking a goodwill charge of £13.4bn relating to its acquisitions of Japan Telecom, J-Phone and German industrial group Mannesmann.

The group also said it was taking a £6bn impairment charge relating to the value of businesses such as Arcor, Cegetel, Grupo Iusacell and Japan Telecom, meaning it was writing down the value of these investments.

But Vodafone did not write down the value of its £113bn takeover of Mannesmann two years ago, which some analysts had been expecting.

Analysts said the goodwill charge, while pushing the company into loss, would will be largely ignored by the city and reflected an accounting principle to which every company had to adhere. Analysts were focused on the £6bn impairment charge, which came in better than expectations of between £8bn and £20bn.

Sir Chris said: "The past year has seen the group successfully execute its adjusted strategy, delivering very strong operational performance and exceptional financial results, including the generation of substantial free cash flow."

He said that in the current year he expected net customer growth of just below 10%, and double digit revenue growth.

Justin Urquhart Stewart, at Seven Investment Management, said he had expected the group to write off more.

"What they are doing is writing down parts of the landline business but saying - the mobile business we didn't overpay for. I would have expected them to say - here are the big write-offs now, reset the level lower and grow from there."

Shares in the group surged 7% to 112.75p following the announcement, reversing a 7% slide yesterday.