If you like your returns served in cash, Zegona just set the table. The London-based private equity owner of Vodafone Spain said on Thursday it will distribute €400 million to shareholders, split between a €200 million repurchase program starting up and €200 million of dividends paid during the next fiscal year. Management also signaled a steadily rising dividend and reiterated its intention to "return all free cash flow to shareholders over time."
Zegona acquired Vodafone Spain two years back and has since completed two fiber transactions, generating €1.8 billion in cash proceeds. June saw the company refinance €3.7 billion of debt. The operating backdrop has improved too: revenue growth at Vodafone Spain has picked up over the past year, helped by tariff reductions and a steadier customer base.
Chief Executive Officer Eamonn O'Hare said, "The significant reduction in leverage and cost of debt, together with the growing free cash flow, has resulted in a much stronger and more efficient capital structure." Its target is to keep net debt at 2.25 to 2.75 times EBITDA after leases, and it anticipates being close to the bottom of that band shortly.
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Barclays analyst Maurice Patrick estimates total shareholder returns could add up to €2 billion to €3 billion by 2030, which would be as much as 65% of today's market value. During early trading in London, shares were down 0.6% at 1,760 pence as of 8:26 a.m., while the year-to-date gain remains 26%.
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