It’s no secret that many retail commercial properties are suffering as a direct cause of this double dip recession Britain has found itself in.
With multiple closures, bankruptcies and administrations announced on a daily basis, you would be hard pressed to name any chain that has made pre-financial problem profits annually since 2008. Yet one sector of the retail industry has remained surprisingly buoyant during these difficult times – mobile phone retail commercial properties.
However, it appears that even this most resilient commercial property initiative is also beginning to feel the pinch, as was revealed this week when technological giants Vodafone announced flat profits in the 2010-2011 financial year.
Although still relatively successful in the UK – one of its strongest market bases – the Euro crisis and worldwide financial troubles appear to have taken their toll on the company. As a result, Vodafone commercial properties have been warned that they may miss their desired revenue growth in the current financial year.
Northern European countries such as the UK, the Netherlands and Germany have allowed the mobile phone retailers to make up losses from more troubled neighbours, namely Italy, Spain and, of course, Greece, where talks of pulling out of the Euro and returning to the traditional currency, the Drachma, are currently being held in an attempt to resolve many of the problems in the Mediterranean country.
In a statement released following the commercial property company’s announcement, Vodafone said; “The tough macroeconomic and regulatory environment in much of Europe has made revenue growth in that region increasingly challenging.
“As in the prior year, we saw a broad divide between the more stable markets of northern Europe, with Germany, the UK and the Netherlands all growing; and the much weaker markets of southern Europe, with Italy and Spain suffering from strong competition and a very poor macroeconomic environment.”
As a result of these figures, Vodafone has written down the values of its assets in southern European countries by a staggering £4 billion. However, despite poor performance in its southern European commercial properties, the company still made a £9.549 billion pre-tax profit in the last financial year, up 0.5 per cent from the 2009-2010 financial year.
Although Vodafone are still continuing to grow, the first signs of trouble for a commercial property chain come when the company struggles to meet its growth targets. The original forecast for the 2012-2013 financial year was a revenue growth of between 1 and 4 per cent, but that will have to be carefully examined to determine whether this is an achievable aim.
Vodafone’s statement continued; “Given larger regulatory reductions than previously envisaged, we now expect organic service revenue growth in the 2013 financial year to be slightly below our previous medium term guidance range.”
Of course, should mobile phone parent companies such as Vodafone, Orange or O2 begin to struggle, this will have a direct effect upon high street commercial properties which have contracts with them. Carphone Warehouse and Phones 4U, for example, could well be the next victims of the recession should revenue growth fail to pick up.
However, as the UK is one of the main markets for the mobile phone giants, Vodafone should not be overly worried, believes Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers.
He says; “Even though southern Europe threatened to spoil the party, Vodafone’s scale and reach won through.
“The results are in line with expectations and show particular strength in its preferred strategic areas, such as data and emerging markets.”
Vodafone recently sealed a deal to take over Cable and Wireless Worldwide, a telecoms group valued at the princely sum of £1 billion. This will allow the network to operate landlines within the UK, and also to expand their interests in the field of data processing, which has already proven successful with the advent of smartphones able to access the internet.
Are you a Vodafone customer, and believe this commercial property chain deserves to remain buoyant where so many retail commercial properties are failing? Or do you believe Vodafone’s struggles were inevitable given the current economic situation in Europe?
