Proximus Group financial results – First quarter 2020
Regulated Information 30/04/2020 07:00 local time
Proximus Group closes the first quarter delivering stable EBITDA and shows resilience with a limited initial impact of COVID-19
- Proximus posts good progress in its convergent and Mobile Postpaid customer base, with Internet and TV growth impacted by reduced installation capacity.
- Domestic underlying revenue decreased by 1.0%, Domestic underlying direct margin decreased by 2.4% compared to the first quarter of 2019.
- Proximus realized a strong improvement in underlying domestic expenses in the first quarter, -4.9% year-on-year.
- Domestic underlying EBITDA remained stable at EUR 428 million in the first quarter, +0.1% compared to the same period in 2019. With BICS included, the underlying Group EBITDA ended 0.3% higher compared to the same period in 2019.
- Solid first quarter Free Cash Flow of EUR 152 million.
- Full-year 2020 guidance reiterated.
Guillaume Boutin, CEO of the Proximus Group
"With most of Proximus’ business showing a good level of resilience in these exceptional circumstances, along with our strong cost management, we realized stable EBITDA.
The COVID-19 pandemic has been a defining moment for the Telecom sector, underlining our societal responsibility and reinforcing our belief in Proximus’ sense of purpose to open up a world of digital opportunities so people live better and work smarter. I’m proud of our ability to maintain high-quality networks. Thanks to our investment strategy we are coping well with the extraordinary boost in traffic. Monitoring the needs of our customers, we have very recently carried out a large-scale upgrade of the Fixed Internet line profiles, providing upload speeds of up to 20 Mbps for the vast majority of our residential customers, and up to 30 Mbps for professional customers.
Right from the start of the COVID-19 crisis, our focus has been on safeguarding our employees’ and customers’ health and wellbeing. We have massively switched to homeworking where possible (more than 10,000 colleagues). We also decided, even before any government obligation, to close our shops on 16 March and limit our customer installations and repair. We are happy to see these measures paid off. We also launched proactive commercial gestures for our customers in times of confinement and contributed in a large way to support Belgian citizens and society in these difficult times.
The financial impact on our business has remained limited so far, with the effects only materializing during the second half of March.
For our Domestic operations we closed the first quarter with revenue of -1.0% and a stable underlying EBITDA. The Enterprise segment saw its legacy services further eroding, emphasizing the necessity of the major transformation we have set up for this segment in the coming years.
In a competitive Consumer market, our convergence and segmentation strategy once more delivered valuable support, further growing our convergence customer base with 12,000 customers, showing a good performance on Mobile and a continued commercial dynamic on Internet and TV. The Mobile Postpaid customer grew strongly in the first quarter, benefitting from our revamped Mobile portfolio on 1 January 2020. Considering nearly 7,000 Internet customers could not be connected due to the limited customer installations in the last two weeks of March, our Internet customer base would have known a net growth of around 8,000 customers for the first quarter 2020.
It’s clear we are not fully immune to the ongoing COVID crisis, and we expect the impact to become more apparent over the next quarter. The economic recovery remains uncertain and especially Roaming and ICT projects are exposed to further negative effects. While it’s very difficult to have a clear view of what the overall impact will be, so far, there are no signs the financial effect would be worse than what we have anticipated, with the EBITDA effect largely being offset by a lower capex. We therefore reiterate our 2020 full-year guidance of Group EBITDA Capex of EUR 780-800 million.
On 31 March, we announced our new #inspire2022 strategy with our goal to create the Belgian gigabit network of tomorrow with Fiber and 5G. We are the first operator in Belgium to have launched 5G, starting with 30 municipalities. We understand the 5G launch has raised questions amongst some citizens and mayors and have therefor increased our efforts to demystify aspects related to health and environment.
We are in close contact with all concerned municipalities and with the Walloon region. With our investment in the networks of the future, we anticipate the future needs of Belgian companies, cities and citizens. We will offer even more capacity, which will be essential in the connected society of tomorrow, already emphasized by the actual COVID-19 crisis."
Commercial first-quarter performance shows good progress for convergent offers and Mobile Postpaid base, while Internet and TV growth were impacted by COVID-19 measures
In the first quarter of 2020, Proximus delivered a solid performance in terms of Mobile Postpaid net adds and managed to further grow its convergent customer base. In view of the safety of its customers and employees, Proximus decided mid-March to proactively close all of its shops and limit its customer installations to urgent interventions only. This significantly impacted the activation of new customers, more than offsetting lower churn, and therefore slowing down Internet and TV growth for the Consumer segment.
The Enterprise segment saw a continued growth of its Mobile customer base in highly competitive market and posted another strong increase in M2M, while Fixed Voice and legacy data services continued to erode. As regards ICT, Proximus achieved a year-on-year growth of 1.8%, mainly driven by professional services such as Security and hybrid Cloud solutions. Proximus continues to support the digital transformation of professional customers, reinforced by the launch of Proximus Accelerators, a collaborative partnership of highly specialized ICT subsidiaries steering the strategic focus towards ICT services rather than low-margin ICT products.
- TV customer base grew by 1,000 in the first quarter, reaching 1,641,000 end March 2020 (+0.9% year-on-year).
- The number of Fixed Internet customers totaled 2,090,000, with 1,000 lines added over the first quarter (+1.2% year-on-year).
- Considering nearly 7,000 Internet customers could not be connected due to the limited customer installations in the last two weeks of March, the Internet customer base would have known a net growth of around 8,000 customers for the first quarter 2020.
- By the end of March 2020, the total amount of Fixed Voice lines was 2,349,000, a decrease of 52,000 lines in the first quarter of 2020 (-6.5% year-on-year).
- Mobile Postpaid customer base grew by 30,000 cards in the first quarter of 2020 (+2.4% year-on-year), to a total of 4,133,000. The number of Prepaid cards totaled 698,000 end March (-19,000 cards over the first quarter, -10.9% year-on-year), while a net amount of 123,000 M2M cards were added since the beginning of 2020 (+32.9% year-on-year).
- End March 2020, Proximus counted 1,079,000 convergent customers, increasing its convergence rate to 58.2% of the customers having at least a Fixed and a Mobile component. This represents an increase of 2.4 p.p. year-on-year.
Proximus posts stable Domestic underlying EBITDA for the first quarter, with strong cost reduction offsetting margin pressure
For the first quarter of 2020, Proximus posted Domestic underlying revenue of EUR 1,086 million, 1.0% below that of the previous year. The revenue was supported by the growth in convergent offers, Mobile joint-offers and ICT, as well as the contribution from e-Press. This was however more than offset by the continued Fixed Voice and Inbound erosion, the pricing pressure in Proximus’ Enterprise segment and some initial negative COVID-19 related effects. Part of the revenue impact related to COVID-19 resulted from Proximus’ pro-active commercial gestures for its customers in times of confinement, including a.o. an increase in the mobile data allowance free of charge, free calls from Fixed/Mobile to Fixed and an expanded access to content. In addition, roaming revenues were negatively affected by virus-related travel bans, especially regarding non-EU zones.
Proximus posted an underlying direct margin of EUR 827 million for its Domestic operations in the first quarter, 2.4% down on the previous year, including a EUR -5 million regulatory headwind following the regulation of international calling and texting rates. The Consumer direct margin, supported by e-Press, showed only a limited decrease compared to last year, whereas the Enterprise direct margin reflects the decrease in high-margin revenue. Both customer segments showed some initial effects of the COVID-19 related travel bans, leading to a decrease in Roaming traffic, especially affecting non-EU roaming. The Domestic direct margin as a percentage of revenue was 76.2% for the first quarter.
In the first quarter of 2020, Proximus reduced its Domestic expenses by 4.9% year-on-year to EUR 399 million, largely resulting from the employees that left the company in the framework of the Early Leave Plan ahead of retirement and the Fit for Purpose plan. Furthermore, the company continued its structural cost efficiencies and posted a lower commercial spend compared to the first quarter of 2019. The indirect Domestic expenses were year-on-year down by 5.6%.
Driven by the strong cost reduction in the first quarter of 2020, Proximus posted for its Domestic operations a stable EBITDA of EUR 428 million, +0.1% compared to the same period in 2019.
Strong performance of TeleSign drives slightly growing BICS direct margin, leading to a first-quarter EBITDA 2.5% above the level of 2019
For the first quarter of 2020, BICS posted a direct margin of EUR 79 million, up by 0.5% compared to the previous year. The first-quarter result was not yet negatively impacted by COVID-19. While the progressive insourcing by MTN somewhat affected the first-quarter margin, this was offset by a strong performance of TeleSign, especially in the authentication business.
BICS posted a first-quarter 2020 EBITDA of EUR 36 million, up by 2.5% compared to the previous year, with the increase in direct margin reinforced by lower expenses.
Proximus posts slight progress of its underlying EBITDA at Group level, as lower operating expenses offset the direct margin decrease
In aggregate, the Proximus Group underlying revenue for the first quarter of 2020 totaled EUR 1,393 million, a 1.5% decrease compared to the same period in 2019.
The underlying direct margin of the Proximus Group in the first quarter ended 2.1% lower compared to last year, totaling EUR 906 million.
Proximus’ Group underlying operating expenses for the first quarter 2020 were down by 4.5%, totaling EUR 442 million. This resulted from a 4.9% decrease in the operating expenses of Proximus’ Domestic operations and a year-on-year decrease of BICS expenses by 1.2%.
The first-quarter underlying EBITDA of the Proximus Group totaled EUR 464 million, +0.3% in comparison to the same period in 2019. The underlying Group EBITDA margin improved by 0.6 p.p. to 33.3%.
Proximus posted a strong FCF of EUR 152 million for the first quarter 2020. This compares to EUR 112 million for the first quarter of 2019, or EUR 143 million excluding net cash-out for acquisitions. The first quarter 2020 included about EUR 60 million of the anticipated 2020 cash-out related to the Fit for Purpose plan. This was more than offset by less cash needed for Capex and a favorable year-on-year evolution in Business working capital.
Capex slightly increased over the first quarter as Proximus continues to deploy its future-proof Fiber network
Proximus invested a total amount of EUR 232 million in the first three months of 2020. This was EUR 219 million for the comparable period of 2019, spectrum capex excluded, with the year-on-year increase driven by the timing of some content contract renewals.
Proximus continues its Fiber for Belgium project, deploying its future-proof network now for the inhabitants of 13 cities and municipalities. End-March 2020, Proximus passed 307,000 homes and businesses with Fiber. As announced at the Capital Markets Day end-March 2020, Proximus is planning to further accelerate its roll-out as of next year.
Since mid-March, COVID-19 related measures have slowed down field operations, with Fiber construction activities put on hold and overall customer installations limited to urgent interventions only.
Proximus reiterates its full-year 2020 outlook of EUR 780-800 million Group EBITDA – CAPEX, as was announced at its Capital Markets Day 31 March 2020.
The full-year outlook does include the company’s best estimate for the COVID-19 impact on its revenue and operations and considers that impacts on the Group EBITDA would be compensated by Capex adjustments.
|Guidance metric ( Eur million)||FY19 actuals||FY20 Guidance||YTD20 Actuals|
|EBITDA - Capex||844||780-800||233|
|Group underlying EBITDA||1,870||-||464|
|Capex (excluding Spectrum & football rights)||1,027||-||232|
Proximus reiterates its intention to return over the result of 2020, 2021 and 2022 an annual gross dividend of EUR 1.2 per share, to be considered as a floor.