Pending a margin recovery in H2
The Q2 release confirms the stabilisation of revenues previously noted during Q4 16 and Q1 17. They were indeed down by 0.4% (pro forma for the acquisition of media assets) and a little bit disappointing compared to Q1 (+0.6%) due to a still significant decline in the fixed subscriber base (-2.8% yoy but only -0.25% qoq). The guidance for revenue stabilisation for the whole year 2017 has been logically reiterated. EBITDA was down by 4.6%, a slight improvement compared to the 5.1% decline recorded in Q1. This indeed reflects the recently acquired content rights and is not worrying as savings from voluntary leavers (after the labour agreement with the unions last summer) are yet to be fully realised.
28 Jul 17
Confirmation of revenue stabilisation
The Q1 release has confirmed the stabilisation of revenues previously noted during Q4. They were indeed up by 0.6% (pro forma for the acquisition of media assets) and the guidance for revenue stabilisation for the whole year 2017 has been reiterated. But the EBITDA was, however, down by 5.1% and was less important than expected. This indeed reflects the recently acquired content rights and is not worrying as savings from the voluntary leavers (after the labour agreement with the unions of last summer) are yet to be fully realised.
11 May 17
After the return to EBITDA growth, the return to... revenue growth
After a disappointing H1 (revenues were down by 4.1% yoy while EBITDA had decreased by 7.6% yoy), the Q3 release was quite reassuring with revenues down by only 2.4% yoy and an EBITDA up by 0.6% (pro forma, i.e. including the recently-acquired media assets), the group has delivered quite a good set of results for its Q4 since revenues were finally up by 0.6 yoy (after 24 quarters of decline!) while the adjusted EBITDA has increased sharply by 15.4% yoy. As expected the global revenue trend for the whole year (-3.2% yoy) was a little bit better than in 2015 (-3.5% yoy) while EBITDA was globally flat yoy. For 2017, SFR Group’s revenues are expected to stabilise compared to FY 2016. As for EBITDA, note that, in summer 2016, SFR signed a labour agreement with the Unions. The objective was to simplify durably the corporate structures inherited from multiple acquisitions, to improve the quality of the customer experience and services, and to make SFR more digital. The first round of voluntary departures began in the distribution business in December. The second round, still being negotiated, will be implemented from July 2017.
09 Mar 17
Return to EBITDA growth
After a disappointing H1 (revenues were down by 4.1% yoy while EBITDA had decreased by 7.6% yoy), the Q3 release on 11 November was quite reassuring with revenues down by only 2.4% yoy (including the 0.4% impact of retail roaming EU tariffs) and an EBITDA up by 0.6% (pro forma, i.e. including the recently-acquired media assets). Note Q3 revenue excluding media assets declined by 2.6% yoy (vs. -6.1% and -4.6% in Q1 and Q2). The global revenue trend for the whole year is still expected to be better than in 2015 (-3.5% yoy). With its fibre-led convergence strategy and further planned cost transformations, management remains confident of achieving its medium-term target of a 45% adjusted EBITDA margin. Remember, on 25 May 2016, SFR announced the completion of the acquisition of Altice Media Group France (AMG). The minority voting stake in Next RadioTV (rebranded SFR RadioTV) was transferred from Altice to SFR as of 12 May 2016. The results for Next RadioTV and AMG are incorporated into SFR’s Q3 financial statements (around €100m of revenues).
14 Nov 16
A disappointing Q1
Q1 revenues were down by 6.1% yoy, while the EBITDA declined surprisingly by 9% yoy with the margin contracting by 1.1ppt due to heavy promotional activity. In parallel, note on 27 April 2016, SFR announced the acquisition of Altice’s 49% minority stake in NextRadioTV, a French media operator focused on mainstream news, sports, business, high-tech and discovery (including leading brands BFM and RMC); the proposed transaction values NextRadioTV at an EV of €741m. SFR also announced it will acquire Altice Media Group France at an EV of €241m or 4.5x EBITDA. These content acquisitions are part of a convergent strategy to strengthen SFR’s product offerings, aimed at reducing churn, and increasing ARPU and revenue growth (including new advertising revenues). To complement existing TV channels, SFR will launch two new news channels, BFM Paris and BFM Sport, as well as five new SFR Sports Channels. Note also the group recently priced $5.2bn of 10-year Senior Secured Notes and issued new $1,425m and €850m term loans. Consequently, the group has extended its average maturity from 5.9 years to 8.1 years, without any major repayments before May 2022.
11 May 16
A secure... high yield
Q4 revenues were down by 3.3% yoy (compared to -4.6% yoy in Q1 and -3.5% yoy in Q3) but were perfectly stable compared to Q1. The trend is slightly better than at the beginning of 2015 and the group should record stable revenues (or with a decline of less than 0.5% yoy) in…2016. The key point is that Numericable-SFR has managed to stabilise both its fixed and mobile customer bases: during Q4, the residential mobile customer base increased by 1.1% qoq to reach 12.6m (the B2B mobile base was up by 1.65%...yoy at 6.8m) while the number of fixed customers was stable qoq (but the ultra-fast broadband base was up by 4.5% qoq and represents nearly 30% of the global base). As for EBITDA, Numericable-SFR had delivered an impressive set of H1 results but the strong growth trajectory seen in H1 is confirmed in Q4 with an EBITDA up by 28% thanks to the continued good progress of the synergies implementation plan (even if Q4 is a little bit less significant than the other quarters, representing only 21.5% of the annual EBITDA). As a result, the annual EBITDA margin was up 6.9% to 35%, which gives Numericable’s management strong confidence in achieving earlier than originally planned its medium-term target of a 45% EBITDA margin. With stable revenues, the group should generate €4.2-4.3bn of EBITDA in 2016 corresponding to a margin of 38-39%, before its sales return to growth in 2017. Its EBITDA could reach €5bn before the end of the decade. The capex spent by the group was eventually down by 2% yoy to €1.85bn (16.8% of sales). The key point is that investments were dedicated to enable the group to continue its ambitious Fibre and 4G roll-out plans. More than 7.7m households and commercial sites (up by 20% yoy) now have a fibre connection (ranging from 100M to 1G of fibre speed). Since the beginning of the year, the group has deployed around 1.3m additional plugs. The rate of deployment will continue to accelerate to a level of 2m plugs per annum in order to reach the targets of 12m fibre homes passed at end 2017 and 20m by the end of 2020. Group net debt amounted to €14.4bn at the end 2015. The deleveraging of the group with a net debt/EBITDA ratio which had fallen to under 3x after Q3 has been stopped following the decision to issue a €2.5bn dividend. The group’s net debt/EBITDA ratio has increased to 3.73x but the EBITDA less capex has increased by 50% yoy to reach €2bn, so this ratio could be back to 3.2x at end 2016 (including a possible new comfortable dividend of €1bn!).
15 Mar 16
Q3 less impressive than Q2 but customer flight is slowing
Numericable-SFR had delivered an impressive set of H1 results. The Q3 marked a return to normal: the good trend recorded in H1 is of course continuing but quite logically the performance is stabilising… quarter on quarter. Q3 revenues are down by 3.5% yoy but by only 0.3% compared to Q2. The trend is not however a clear improvement on the revenue performance in Q1 which had worried investors slightly with a 4.6% yoy decline. The key point is that the group has managed to stabilise both its fixed and mobile customer bases in Q3 thanks to a successful back to school campaign. As for EBITDA, the strong growth trajectory seen in H1 is confirmed in Q3 with an EBITDA at €1.03bn, up 15% thanks to the continued good progress of the synergies implementation plan. As a result, the EBITDA margin was up 6.1% to 37.3%, which gives Numericable’s management strong confidence in achieving its medium-term target of 45% EBITDA margin. At the same time, we have to mention that the Q2 performance was better than that of Q3 (with an EBITDA of €1.06bn and an EBITDA margin up by 7.2% to 38.4%).
28 Oct 15
An impressive Q2, but clearly needs to be watched
Numericable-SFR had delivered an impressive set of Q1 results. Q2 is… even better! Q2 revenues are down by only 2.4% yoy. The trend is a clear improvement on the revenue performance in Q1 which had worried investors a little bit with a 4.6% yoy decline. Note Q2 revenues are indeed up by 1.3% compared to Q1. As for EBITDA, the strong growth trajectory seen in Q1 is confirmed in Q2 with an EBITDA at €1.06bn, up 19% thanks to the continued good progress of the synergies implementation plan. As a result, the EBITDA margin was up 7.2% to 38.4%, which gives Numericable’s management strong confidence in achieving its medium-term target of 45% EBITDA margin. Quite impressive indeed!
29 Jul 15