Financial results Q1 2015
Numericable-SFR returns to growth, EBITDA up by 21%
- Clear market leader in Fiber with investment plan to accelerate the Fiber and 4G deployments
- Marketing now focused on high end customers and Quadruple Play convergence
- Growing Fixed ARPU and Stabilization of Mobile Postpaid ARPU
- Synergies achieved larger than announced
- Strong growth in EBITDA (+21%) and Operating Free Cash Flow (+17%)
- EBITDA margin mid-term target 45%
- Significant 20% deleveraging from EBITDA growth
- A massive investment plan to accelerate the Fiber and 4G deployments in 2015
With the largest optical Fiber network in France today and its 6.7 million Fiber connections (100Mbit/s up to 1Gbit/s), Numericable-SFR is the clear market leader and convinced that 2015 will be a year of strong momentum in Fiber take-up.
According to the nPerf barometer on fixed Internet connections in France for Q1 2015, Numericable and SFR are ranked number one for high speed and very high speed broadband connections.
With a massive investment plan, which will allow to connect 7.7 million Fiber homes by the end of 2015, 12 million by end 2017 and 15 million by end 2020, Numericable-SFR intends to remain the market leader in Fiber and to contribute to the success of the French Government’s very high speed broadband plan. Numericable-SFR will continue to drive the market and promote the migration of both residential and business customers from DSL to Fiber.
Concerning the 4G network, Numericable-SFR will cover 70% of the population by the end of 2015, 90% by end 2017 and 99% by end 2020.
Improving service quality on the mobile network remains a priority for the Group. Our customers’ global satisfaction in renovated areas (4G and 3G in 900MHz) has improved since the end of 2014 according to the Group’s surveys. In Paris, the mobile network, renovated since March 2015 brings again the best performances on voice services.
- Marketing now focused on high end customers and 4P convergence
In Q1 2015, Numericable-SFR Group has focused on ARPU growth and value generation rather than volume growth in order to be in the best possible position to refocus its sales dynamics in the coming months. Fixed ARPU has remained high and was up 0.9% over the last twelve months. But more importantly, the gross adds ARPU is now significantly above the customer base ARPU. Also, and for the first time, mobile ARPU is on path towards stabilization, reversing the trend of previous years. Mobile postpaid customer ARPU is almost flat in Q1 2015 compared to Q4 2014. A clear strategic priority has been given on ARPU and value generation.
- Fixed Customer Base up in very high speed broadband and ARPU up on Fixed
On March 31st 2015, the Group’s Fixed-line subscriber pool amounted to 6,520,000 customers. The very high speed broadband subscriber pool (30Mbit/s or more) grew by 6.7% reaching 1,595,000 customers. The ADSL subscriber base decreased by 4% reaching 4,925,000 customers on March 31st 2015. The ADSL customer base will continue to recede in 2015, as customers migrate to the Group’s THD network. Fixed-line ARPU amounted to €34.3, up by 0.9% as compared to the Q1 2014.
- Mobile customer base and ARPU down slightly in mobile, but stabilization in mobile postpaid ARPU
On March 31st 2015, the Group’s mobile base amounted to 22,494,000 customers, down slightly by 2.5% compared to Q1 2014. In a highly competitive mobile market, the residential mobile base amounted to 15,816,000 down by 5.7%. This decrease can mainly be attributed to the prepaid segment, down by 19%. The postpaid mobile base amounted to 12,860,000 customers, down by 2.1%. On a sequential basis, mobile postpaid ARPU has now stabilized with an ARPU of €25.5 in Q1-15 versus €25.9 in Q4-14 if you adjust for the traditionally weaker level of consumption and services in Q1. Besides, the gross adds mobile ARPU is now at par with the mobile ARPU of the customer base.
- Synergies larger than previously announced
The Group’s expected synergies have been implemented quickly during the first quarter 2015. With a strong contribution from non-industrial synergies, the implementation of this program is ahead of initial targets. The objective to achieve €1.1 billion annual gross synergies by the end of 2017 should be exceeded.
- Strong growth in EBITDA and Operating Free Cash Flow
After four years of decline at SFR, and thanks to a strong start in the synergies realization plan, EBITDA is up by 21% compared to Q1 2014 and Operating Free Cash Flow (or EBITDA-CAPEX) is up 17%.
- Commercial performance on Fiber confirmed
Since December 2014, Fiber net adds have been four times higher than in the same period of the previous year with 58,000 Fiber. During the first quarter of 2015, we have gained 48,000 fiber net adds, which compares positively to the 68,000 fiber customers added during the whole of 2014.
After having launched Fiber for all its brands and customers (Box TV Fibre by SFR at the end of 2014, SFR Access Max for small businesses in January 2015, RED Fibre in April 2015), the Group has experienced a good start in migrations from DSL to Fiber.
Q1 2015 key figures
- Revenue and adjusted EBITDA
For Q1 2015, Numericable-SFR posted revenue of €2.74 billion, down by 4.6% compared to Q1 2014. This decrease was due in large part to the erosion in mobile revenue, in both the residential and B2B segments.
Adjusted EBITDA, which amounted to €930 million, up by 21%, compared to Q1 2014. The Group’s EBITDA margin amounted to 34%, up by 7.2% basis points compared to Q1 2014.
Total CAPEX spent by the Group on Q1 2015 amounted to €400 million, up by 27% compared to Q1 2014. This investment campaign in Fixed and Mobile networks will be continued in 2015. As a % of Sales, our CAPEX has gone up from 11.0% to 14.6%.
- Net income
Net income amounted to €816 million, due to two non-recurring positive effects, a financial income of €643.5 million and a tax income of €40.5 million, as a result of the recent agreement signed with Vivendi. Excluding these non-recurring elements, the Group’s net income amounted to €132 million.
- Net debt
Group’s net debt amounted to €10.772 billion at the end of Q1 2015. Thanks to EBITDA’s strong growth, the Group’s net leverage has decreased by 20% from 3.6x by the end of December 2014 to 3.3x by the end of March 2015 and below 3.0x using last quarter EBITDA annualized and before taking into account payment to Vivendi which will take place in Q2 2015.
- Adjusted EBITDA and Operating Free Cash Flow
For 2015, Numericable-SFR aims to achieve above 20% growth in adjusted EBITDA(1) and generate and EBITDA-CAPEX between €1.9bn and €2.0bn.
Numericable-SFR also raises its medium-term EBITDA margin target to above 45%.
(1)Based on Proforma 2014 reported Adjusted EBITDA of €3.1bn
Post Balance Sheet Events
- Acquisition of 20% stake in Numericable-SFR from Vivendi
On May 6, Altice S.A and Numericable-SFR S.A. each acquired a 10% stake in Numericable-SFR. Upon this transaction, Altice's stake in the share capital and voting rights of Numericable-SFR Group will increase from 60% to 78%.
Key financial indicators for Q1 2014 and 2015