The Vodafone (LSE:VDO) share price was down 6% this morning after it didn’t impress with subpar outcomes for the primary half of 2024.

Regardless of initiating a serious transformation of its enterprise this yr, the fast advantages will not be but obvious. From the appears of issues, it could be a while earlier than the corporate sees the fruits of its latest efforts.

Complete income elevated 1.6% to €18.3bn with service income up 4.8% on an natural foundation. This was held again by a 6.2% decline in development in Germany however offset by development in Türkiye, Africa, and different components of Europe.

Working revenue elevated 28.3% to €2.4bn, largely pushed by the disposal of an 18% stake in Indus Towers. It additionally secured €5.4bn in money proceeds via the disposal of property in Spain and components of a stake in Vantage.

An interim dividend of two.25c per share was introduced, together with the completion of just about €500m in share buybacks.

A troublesome decade

The previous 10 years haven’t been variety to the nation’s largest telecommunications community. Since November 2014, the inventory has misplaced 70% of its worth, falling from 230p to 68p per share.

Not that way back, Vodafone was one of many prime dividend-payers on the FTSE 100, with a sexy 10% yield. Though it had seen no development in 5 years, it maintained an honest full-year dividend of 9c per share. However a discount introduced earlier this yr means it’ll fall to 4.5p per share from subsequent yr.

It’s a tragic state of affairs for a inventory that was as soon as a prime characteristic in lots of passive earnings portfolios. Nevertheless, an aggressive turnaround technique is in place — so what might the long run carry?

Trying forward

Vodafone’s price-to-earnings (P/E) ratio has been hovering round 20 for a number of months now. However with earnings forecast to develop 64% within the coming 12 months, it might drop to 11. That may make the present price enticing, and probably stimulate additional development.

Key competitor BT Group is forecast to get pleasure from comparable development, probably bringing its P/E ratio down from 16.7 to 9.4. Total, the forecasts are indicative of a optimistic outlook for the UK telecoms sector.

However development or not, Vodafone nonetheless has some severe steadiness sheet points to deal with. Notably, almost €50bn in debt that’s in all probability weighing on its operational effectivity. With curiosity bills accounting for over half of its working earnings, it doesn’t have a lot to play with by way of funding new developments.

This yr was displaying indicators of a attainable restoration, with the price climbing 12% to succeed in 78p in September. At present’s outcomes erased these positive factors, taking it down 1.5% yr so far. 

However the knee-jerk market response could also be short-lived as there’s already proof of enchancment. Regular development in Africa, a mega-merger deliberate within the UK, and an eventual return on 5G funding.  As is usually the case, I anticipate it can get well most of immediately’s losses within the coming weeks.

Who is aware of, it could even rediscover the expansion it loved in August and shut the yr up. If that occurs, it could be the primary time since 2017.