Proximus Group financial results – Second quarter 2021

Highlights Q2 2021

• Proximus closed the second quarter of 2021 with another strong commercial performance for its core Telecom services, adding +48,000 Mobile postpaid cards, +10,000 Internet and +12,000 TV subscriptions to the Group. Within the Consumer segment, the traction for higher-value offers continued, growing the convergent base by +18,000 customers to a total of 1,163,000, +6.6% compared to 12 months ago. An additional +14,000 Consumer customers signed up for a Fiber product, bringing the total up to 90,000. Over the second quarter, +142,000 customers opted for a Flex offer, bringing the total Flex subscriptions to 619,000. Reflecting changing customer needs, the Consumer base for Fixed Voice lines eroded by -37,000 in the second quarter of 2021.
• Proximus grew its underlying Domestic revenue by +2.4% to EUR 1,080 million. On an organic basis, i.e. excluding the revenue contribution from Mobile Vikings, the Domestic revenue was up by +2.0%. The trend improvement from prior quarters was demonstrated across all Domestic customer segments: Consumer revenue +2.3% (+1.4% organic), Enterprise revenue +3.5% and Wholesale revenue +0.4% compared to one year back.
• Proximus’ Domestic EBITDA totaled EUR 430 million for the second quarter of 2021, -2.7% below the previous year, with the increase in Domestic direct margin (+1.4%) more than offset by expenses which were up by +6.4%, lapping an exceptionally low 2020 baseline impacted by Covid-19 restrictions (EUR 13 million) and a one-off provision release (EUR 6 million). Moreover, expenses were up on higher customer interactions (a.o. Fiber migrations, Flex and technical support), Proximus’ ongoing transformation and the cloudification effects. This was in part offset by the ongoing cost efficiency program focused on non customer impacting areas. On an organic basis, the Domestic EBITDA was -3.0% lower year-on-year.
• Telesign posted EUR 77 million of revenue over the second quarter of 2021, a year-on-year increase of 12.8% and +22.5% on a constant currency basis driven by both Programmable Communications and Digital Identity services. The EBITDA totaled EUR 4 million, including a ramp up of investments to support its growth strategy.
• BICS grew its second-quarter revenue by 2.5% to EUR 242 million, a noticeable trend improvement on the annualized Covid-19 headwind. BICS showed good resilience in a competitive market, with Core services revenue up by +26.4% on a lower comparable base, benefitting from high A2P volumes combined with a favorable destination mix. This was partly offset by the ongoing erosion in revenue from Legacy services. BICS’ EBITDA totaled EUR 26 million for the second quarter of 2021, up by 2.6%.
• In aggregate, the underlying Group EBITDA for the second quarter of 2021 totaled EUR 459 million, -3.7% compared to the year before, with a Group EBITDA margin of 33.5%. On organic basis, the Group EBITDA was lower by -4.0%.
• Excluding spectrum and football broadcasting rights, Proximus’ accrued Capex over the second quarter of 2021 totaled EUR 272 million, bringing the total over the first six months of 2021 to EUR 497 million. The year-on-year increase by EUR 79 million was in large part driven by the ongoing Fiber deployment. With Proximus’ roll-out further accelerating, an additional +89,000 premises were passed with Fiber bringing the Proximus Fiber footprint to a total of 621,000 premises passed by end June 2021, representing a Fiber coverage of just over 10%.
• Over the second quarter of 2021, Proximus Group posted a Free Cash Flow of EUR -11 million, including the cash-out for the acquisition of Mobile Vikings. Excluding this, the second quarter 2021 normalized FCF totaled EUR 119 million, bringing the total normalized FCF over the first six months of 2021 to EUR 262 million. This compares to a normalized FCF of EUR 254 million over the first half of 2020.

Guillaume BoutinCEO Proximus Group

"With continued solid customer growth, we are well on track to deliver on our outlook for the year.

I would like to open this quarter’s result looking back to the recent devastating floods in Belgium. My thoughts go to all the victims and their families in the affected regions. At the same time, over the past 2 weeks, I have been astonished by the commitment of many Proximus colleagues. These events have unveiled, once again, the important societal role we play, firstly through our infrastructure and the connectivity it provides, but also more broadly as a key part of the Belgian economic fabric of society. The last two weeks have also sent us a vivid reminder of our climate vulnerability and the relevance of our sustainability ambition as part of our #inspire2022 strategy.

Looking back at the second quarter, we saw strong continued commercial traction for our products and services. In a highly competitive setting, we delivered another consecutive quarter of customer growth for our main telecom customer bases. This is especially true for the premium segments of the market, as demonstrated by the nice increase in our TV base by +12,000 subscriptions. We also closed another strong quarter for Mobile, growing the Postpaid base by 48,000 subscriptions. These results demonstrate solid mobile growth on the Enterprise segment as well as the continued success of our Flex range, reaching 619,000 subscriptions. Our Consumer convergence base grew by 18,000 over the quarter, with customers generating a higher-than-average ARPC.

With the green light received from the Belgian Competition Authority, I am delighted to welcome Mobile Vikings to the Proximus family, the leading brand for the Belgian digital lovers and perfectly complementing our Scarlet and Proximus offers.

Our Fiber acceleration is delivering according to plan. During the second quarter, we brought the average weekly deployment up to 7,400 homes and business passed, leading to an additional 89,000 premises passed with Fiber and bringing our coverage to just over 10%. The superiority of Fiber was clearly demonstrated in June with a 25Gbps world-record in Antwerp, and this is also materializing in our customer numbers. Over the second quarter of 2021, we recorded 14,000 Fiber net adds, totaling 90,000 customers on our Consumer Fiber offers at end June 2021.

As announced yesterday, I’m happy that our Fiber partnership for the southern part of Belgium with Eurofiber has been cleared by the European authorities. The newly created joint-venture Unifiber will pass at least 500,000 premises with Fiber by 2028. With our two Fiber partnerships now being operational, and the ramp up of our own Fiber deployment, we are well on track to realize our ambition to pass a total of 4.2 million premises in Belgium by 2028.

As for our Enterprise segment, the ongoing transformation is being well-managed, with its effects offset by continued strong results for Telecom services. Specifically, for ICT, the increased digital adoption is bringing structural opportunities with a particular focus on cloud, security, IoT and collaboration. In that context, our converged Telco-ICT solutions and our emerging end-to-end servicing offers are leading to an increasing share of higher margin ICT Service revenues.

Beyond our domestic operations, Telesign continued to show strong revenue growth, up by 22.5% on a constant currency basis, driven by both Programmable Communications and Digital Identity services. The second quarter ended with a strong sales pipeline, which will support a continued double-digit revenue trajectory in the second half of the year.

With the Covid-19-effect on worldwide travel annualized, our segment BICS showed a noticeable trend improvement from previous quarters. Especially revenue from BICS’ core services showed a strong increase compared to the previous year, driven by the solid growth in Application-to-Person messaging and Cloud Communications, both in the Telecom and Digital enterprise market.

Overall, we are very pleased with our strategic progress and the financial results achieved so far in 2021. For the remainder of the year, there is still some uncertainty on the speed of recovery from Covid-19 restrictions. Despite this uncertainty we are confident to meet our full-year guidance, expecting for 2021 on an organic basis an Underlying Domestic revenue close the level of 2020, an Underlying Group EBITDA between EUR 1750-1775 million and Capex, excluding spectrum and football rights, close to EUR 1.2 billion. The level of Net debt/EBITDA is expected to remain below 1.6X."

Key Figures

Outlook 2021 and shareholder return

Based on the results for the first six months and taking into account its best estimate for the remainder of the year, with ongoing uncertainty around Covid-19, Proximus reiterates its 2021 expectations on organic basis, i.e. excluding the contribution of Mobile Vikings.

Proximus reiterates its intention to return over the result of 2021 and 2022 an annual gross dividend of EUR 1.2 per share, to be considered as a floor.

• Read the full Q2 Financial Report here