After returning to growth in Sep quarter, Vodafone ups earnings guidance

Vodafone, the world's second largest mobile operator, increased its full-year earnings guidance, reflecting improving organic growth trends as difficult markets in Spain and Italy start to ease and it integrates its German cable acquisition.

The company reported organic service revenue growth of 0.3% in the first half, as it returned to growth in the second quarter thanks to improvements in South Africa, Spain and Italy and a solid retail performance in Germany.

Organic core earnings rose 1.4% in the half, and it said its growth rate would accelerate in the second half, enabling it to up its forecast for adjusted core earnings to 14.8-15.0 billion euros from its previous forecast of 13.8-14.2 billion euros.

But it tempered it forecast for free cash flow to "around" 5.4 billion euros, from "at least" 5.4 billion euros, as it said lower cash flows from India and the sale of New Zealand offset the initial accretion from its Liberty Global acquisition.

Chief Executive Nick Read said he was pleased at the speed with which he was executing his plan.

"This is reflected in our return to top-line growth in the second quarter, which we expect to build upon in the second half of the year in both Europe and Africa," he said on Tuesday.

Read cut Vodafone's dividend for the first time in May after tough market conditions and a need to invest in its networks and airwaves caused him to backtrack on his pledge not to reduce the payout.

Shares in the firm have recovered 30% from a trough since the dividend cut.