BLUECHIP : Vodafone is upwardly mobile

It is an irony that while Racal Electronics issued its third profits warning in six months last week, as it released disastrous full-year figures, Vodafone (290.5p), the mobile phone operator it spun off nine years ago, should be announcing record profits of pounds 539m.

Racal shares, of course, have been something of a dead loss. Until chairman Sir Ernest Harrison has reached some sort of decisive agreement on the future, Racal is best avoided.

Vodafone, however, remains something of a tease. The shares have easily outperformed the FTSE-100 index. However, the mobile phone business is becoming increasingly cut-throat. Is the best past, or do the shares offer investors further riches?

Given that holders since flotation have seen the value of their investment quadruple, it is tempting to take profits. But Vodafone's management has an excellent track record, fending off the opposition with some ease.

Take the recent results. The big problem facing the group over the last year has been transferring customers from its old analogue service to the new digital standard. To tempt customers to make the switch, it was willing to pay out pounds 52m to subsidise supplying new digital handsets. But the move seems to have paid off. Vodafone's churn rate - the proportion of customers changing to another supplier - was 27 per cent; higher than average, but good in the circumstances. Digital churn was only 15 per cent.

There was good news elsewhere. For the first time, overseas operations moved into the black, contributing pounds 10.5m to pre-tax profits of pounds 539m. The twist here is the expected rate of growth. The City sees overseas profits leaping to pounds 100m this year, and pounds 200m next year.

On that basis, the shares trade at around 20 times current year earnings. That remains a premium to the market, and rightly so. But it is a remarkably cheap premium if, as looks likely, such growth can be achieved.

Overall, the group has 4 million customers worldwide, double the number a year ago. Chief executive Chris Gent said Vodafone would not seek any new opportunities overseas, but would concentrate on growing existing businesses. A cloud came in the shape of a slightly disappointing performance by E-Plus Mobilfunk in Germany. But overall Vodafone is doing well - the shares remain a buy.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Client Services Assistant

£18000 - £20000 per annum: Recruitment Genius: A Client Services Assistant is ...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Ashdown Group: Training Coordinator - Financial Services

£32000 - £38000 per annum + benefits: Ashdown Group: A highly successful, inte...

Recruitment Genius: Business Development Executive - Affiliates & Partnerships

£20000 - £35000 per annum: Recruitment Genius: This multi-award winning foreig...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor