Proximus Group financial results – Full year 2019

Regulated info 21/02/2020 7:00

Proximus Group closes 2019 with financial results in line with guidance, driven by solid commercial performances and good cost control throughout the year

  • Continued growth of main customer bases in a highly competitive setting
  • Domestic underlying revenue excluding terminals totaled EUR 4,103 million for the entire year, nearly stable compared to 2018
  • Strong Domestic cost control lowering underlying expenses by 1.4% in 2019
  • Domestic underlying EBITDA increased by 0.4% in 2019. With BICS included, the Group underlying EBITDA ended at EUR 1,870 million, 0.3% higher than the year before
  • Solid full-year 2019 normalized Free Cash Flow of EUR 504 million, acquisition impact excluded
  • Full-year 2019 financial performance ended within guidance
  • Stable total gross dividend of EUR 1.50 per share over the 2019 result

Guillaume Boutin, CEO of the Proximus Group

Through sustained customer growth and continued strong focus on reducing our costs, we delivered full-year results in line with our guidance.

Supported by our appealing year-end campaign, we maintained a good customer momentum for Internet, TV and Mobile postpaid in the last quarter of 2019. Our segmentation strategy again proved successful in a very competitive market, with a growing number of Households signing up for converged offers, with especially the EPIC and Minimus packs having strong traction. By end-2019, over 60% of our Household customer base was convergent. In spite of an increasing number of “skinny bundles” offered on the market, we kept a strong position in the low-end segment through our Scarlet brand, with its attractive no-frills offering appealing to customers looking for the best prices.

Building on our ambition to become a truly digital-centric organization, addressing the digital needs of our customers and creating content-centric experiences, we launched My e-Press with the newspapers Het Laatste Nieuws and Le Soir on 1 December 2019. At the same time, we are vigilant with regard to preserving competitive Mobile pricing and announced an enrichment of our Mobile bundles as from 1 January 2020.
We maintained a strong position in an increasingly competitive Enterprise market. We achieved a further increase in our mobile base, despite high mobile pricing pressure. To remain successful, we continue to reinvent ourselves. Therefore, to unlock the digital potential of our enterprise customers, we launched Proximus Accelerators, a collaborative ecosystem of Proximus subsidiaries with highly specialized digital IT experts. They help companies in their digital transformation by creating fully integrated ICT support.

Our overall focus on digitalization also translates into a lower cost base for our Domestic operations, with, amongst others, a 20% decrease in calls towards our call centers.
As a result, we delivered over the year 2019 a slightly growing Domestic EBITDA.
For BICS, the solid progress in direct margin thanks to volume growth in A2P messaging and TeleSign’s mobile identity business was offset by higher expenses to fuel the growth of TeleSign, and by the progressive insourcing by MTN, be it in a limited way so far.
As we anticipated, the 2019 Group EBITDA therefore ended stable at + 0.3%.

With the agreement concluded with the majority of the Unions on the Fit for Purpose transformation plan, we can continue to build the future of Proximus, developing the right digital skills with specific programs for the reskilling and upskilling of our teams. The agreed-upon workforce reduction is managed through a specific process, starting with a voluntary leave plan for which 1,347 FTEs have signed up. A very limited number of involuntary leaves is expected at the end of the internal mobility and requalification process, which started early February. The period of uncertainty has not been easy for many of our employees, and we are thankful for their continued commitment. We now start a new chapter, working on the future of Proximus with positive energy and ambition.

We operate in a fast-changing market, with shifting customer expectations, fast technological progress and growing competition. In view of the challenges we face, we are working hard on further defining our strategy going forward. I’m looking forward to sharing the outcome at our Capital Markets Day and Press event scheduled for 31 March 2020 in Brussels. At that time, we will also provide you with a view on our financial outlook and the shareholder return.

In a highly competitive setting, Proximus continues to attract customers for Internet, TV and Mobile Postpaid

In a challenging market, with competitive intensity increasing during the typical year-end promotional period, Proximus continued to enlarge its customer base for Fixed Internet, TV and Mobile Postpaid. Furthermore, Proximus further grew its convergent customer base driven by its successful segmentation strategy. With Scarlet, the Group also maintained a strong position in the no-frills segment of the market.

This resulted in an end-of-year market share of 45.9% for Fixed Internet, 38.7% for total Mobile (excl. M2M) and 37.4% for Digital TV.

The Enterprise segment realized a further extension of its mobile customer base, although the revenue this generated was impacted by competitive price pressure. Proximus closed the year with continued growth in ICT and Advanced Business Services as well as an ongoing strong increase in Machine-to-Machine cards.

  • TV customer base grew by 22,000 in 2019, reaching 1,642,000 end 2019 (+ 1.4% year-on-year).
  • The number of Fixed Internet customers totaled 2,089,000, with +31,000 lines added over the entire year (+1.5% year-on-year).
  • By the end of December 2019, the total amount of Fixed Voice lines was 2,401,000, a decrease of 149.000 lines or -5.8% over the last year.
  • Mobile Postpaid customer base grew by 95,000 cards in 2019 (+2.4% year-on-year), to a total of 4,111,000. The number of Prepaid cards totaled 717,000 end December (-106,000 cards or -12.8% year-on-year), while a net amount of 450,000 M2M cards were added in 2019 (+33.8% year-on-year).
  • End December 2019, Proximus counted 1,114,000 convergent households and small offices (HH/SO), increasing its convergence rate to 60.3% on the total multi-play HH/SO, an increase of 2.0 p.p. year-on-year.

Proximus posts nearly stable Domestic revenue, devices excluded, and realizes a slight Domestic EBITDA growth thanks to sustained cost reduction efforts

Over the year 2019, underlying revenue from Proximus’ Domestic operations totaled EUR 4,386 million, a year-on-year decrease of 1.7%. Excluding devices, the Domestic underlying revenue ended 1.2% below that of the prior year. The revenue was negatively impacted by the regulatory impact on Fixed Termination and International calling and texting rates. Furthermore, Proximus’ revenue was pressured by the ongoing erosion of its Prepaid and Fixed Voice base and by lower Mobile inbound revenue, which were not fully compensated for by the growth in Internet, TV, ICT and Advanced Business Services.

With EUR 3,348 million, Proximus’ 2019 Domestic underlying direct margin ended 0.5% below that of 2018. The year-on-year variance was impacted by a negative effect from the regulatory measures. This regulatory headwind was offset by the positive effect of Proximus’ customer growth and higher margin achieved in ICT and Advanced Business Services, including the benefit from acquired companies.

Over the full-year 2019, Proximus’ Domestic underlying expenses were down by 1.4% to EUR 1,630 million. Proximus’ cost reduction efforts more than offset the acquisition-related costs, higher ICT-driven costs to support its growth, and wage inflation. Within the mix, the Domestic non-workforce costs were down by 2.5% while workforce expenses were down by 0.8%.

Driven by its good cost control, Proximus posted a 0.4% progress for its Domestic underlying EBITDA to a total of EUR 1,718 million.

BICS posts a 2.4% direct margin increase for 2019, while its EBITDA ends slightly lower due to an increased cost base in growth domains

The direct margin of BICS increased by 2.4% year-on-year to total EUR 325 million for 2019. This was driven by BICS’ non-Voice services direct margin which benefitted from the BICS-TeleSign combination, with growing SMS A2P volumes, Telesign’s mobile identity business and the realization of direct cost synergies. This was only in a limited way offset by the impact of the gradual insourcing by MTN, with the effect coming through slower than expected.

BICS closed 2019 with an EBITDA of EUR 153 million, 0.5 % below that of the prior year. This resulted from an increased cost base to support its growth areas and a minor impact of the gradual insourcing by MTN.

Group underlying EBITDA finishes slightly higher compared to 2018, despite pressure on revenue

Over the year 2019, the underlying revenue of the Proximus Group totaled EUR 5,686 million, a decrease of 2.1% in comparison to the previous year.

The Group underlying direct margin remained stable (-0.2%) compared to 2018, totaling EUR 3,673 million for the entire year.

Proximus’ Group underlying operating expenses for the full year decreased by -0.8% to EUR 1,802 million in 2019, supported by strong focus on a structural improvement of the Domestic cost base, by means of efficiency and digitalization.

For the full-year 2019, the Proximus Group underlying EBITDA totaled EUR 1,870 million, 0.3% above that of the prior year. This excludes EUR ‑278 million incidentals mainly recorded in the framework of the Fit for Purpose transformation plan and the early leave plan ahead of retirement and includes lease depreciation and interest for EUR 84 million.

Proximus posted a full-year 2019 Free Cash Flow of EUR 498 million. Excluding cash-out for acquisitions, the normalized FCF was EUR 504 million, fairly stable in relation to the EUR 501 million for 2018. The higher cash needed for Business working capital, payments done in the 2016 Early Leave before Retirement restructuring plan, and less proceeds from building sales, was offset by lower cash-out for income tax and interests, less cash needed for Capex and a positive evolution in underlying EBITDA.

Investment level reflects the Group strategy to invest extensively in enhancing its networks and improving the overall customer experience

In line with its expectations, Proximus invested a total amount of EUR 1,027 million in 2019, which is stable in comparison to the EUR 1,019 million invested in 2018. With Proximus’ Fiber for Belgium project ramping up, it consumed a larger share of the yearly capex envelope. The deployment of this future-proof network kicked off early 2017, and by end-2019, inhabitants of 13 cities were being connected to Fiber. In addition, Proximus also invested extensively in its IT platforms, the ongoing multi-year modernization of its transport network and attractive content for its TV customers. To deal with an ongoing steep increase in mobile data traffic, Proximus also invests to ensure a top-quality mobile network for its mobile customers.

2019 outlook achieved

Proximus reported full-year 2019 financial results in line with its guidance.

Guidance metric FYI18 Actuals FY19 Guidance FY19 Q1 Revised Guidances YTD Actuals
Domestic underlying revenue €4,460M nearly stable    
Domestic underlying revenue excluding terminals €4,153M   nearly stable -1.2%
Group underlying EBITDA €1,865M stable stable 0.3%
Capex (excluding Spectrum) €1,019M stable stable €1,027M

In view of the scheduled Capital Markets Day on 31 March 2020, during which the company strategy over the next years will be explained, the forward-looking financial guidance and shareholder return will be addressed at that point.

Shareholder return over the result of 2019

On 20 February 2020, the Board of Directors approved to propose to the Annual General Shareholder meeting of 15 April 2020 to return over the result of 2019 a gross dividend of EUR 1.50 per share, of which EUR 0.50 interim dividend per share was paid in December 2019.

After approval by the Annual Shareholder Meeting, the normal dividend of EUR 1.00 per share will be paid on 24 April 2020, with record date on 23 April 2020 and ex-dividend date on 22 April 2020.

This brings the total declared dividend over the result of 2019 to EUR 486 million.

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