27 Apr 17
Spain now represents nearly 15% of Orange's revenues
Q1 revenues have grown organically by 0.8% yoy. This is quite a correct performance, in line with market’s expectations, and which confirms the good trend recorded in the previous quarter. Remember, revenues had increased by 0.3% during H1 16 and by 0.9% in H2 16. The great story in Spain continued apace with revenue growth of 8.5% yoy. In France, revenues were stable, the impact of roaming being offset by a clear improvement in the mobile trend while the fixed services grew by 1.6% yoy. Q1 EBITDA increased by 2% yoy. With no surprise, the group has confirmed its objective for 2017 of a higher EBITDA than in 2016 on a comparable basis (lifted by the strong commercial momentum supported by capex, and continuing efforts to transform the cost structure). As a reminder, the group will pay a dividend of €0.60 per share for 2016 and €0.65 for…2017.
23 Feb 17
4.6% yoy EBITDA growth in Q4!
Q4 revenues have grown organically by 1% yoy. This is quite a good performance, slightly better than the market’s expectations. Remember, revenues had increased by 0.3% during H1 and by 0.8% in Q3. As in Q3, growth was remarkable in Spain (+7.9%), led by mobile services and mobile equipment sales, while the growth in fixed broadband continued to be strong with the success of fibre (1.45m customers at end 2016). In France, revenues declined by only 0.8% yoy, the impact of roaming being completely offset by a clear improvement in the mobile trend. Q4 EBITDA rose by 4.6% yoy (corresponding to a margin of 31.3%), tied to revenue growth and a reduction in labour expenses (with the average number of full-time equivalent employees falling 2.8% in the quarter). This is a good performance as it was merely stable during H1. With no surprise the group has set an objective for 2017 of a higher EBITDA than in 2016 on a comparable basis (lifted by the strong commercial momentum supported by capex, and continuing efforts to transform the cost structure). With no surprise, the group will propose the payment of a dividend of €0.60 per share for 2016 but of €0.65 for…2017.
25 Oct 16
Que viva Espana !
Q3 revenues have grown organically by 0.8% yoy. This is quite a good performance, slightly better than the market’s expectations. Remember, revenues had increased by 0.3% during H1 (they were even stable in Q2). Growth was remarkable in Spain (+7.8%), led by mobile services and mobile equipment sales, while the growth in fixed broadband continued to be strong with the success of fibre (1.4m customers at end September). In France, revenues declined by only 0.6% yoy, the impact of roaming being completely offset by a clear improvement in the mobile trend. EBITDA rose by 1.6% yoy to €3.6bn (corresponding to a margin of 31.3%), mainly tied to revenue growth: a good performance as it was merely stable during H1. The group has confirmed the objective for the full year of a higher EBITDA in 2016 than in 2015 on a comparable basis. With no surprise, the group plans to propose the payment of a dividend of €0.60 per share for 2016.
26 Jul 16
Ultra-fast broadband growth offsets the decline in French and European roaming
Q2 revenues were perfectly stable yoy after rising 0.6% in Q1. They were indeed in line with expectations and over and above the decline in national roaming in France and the first effects of the new roaming regulation in Europe. They confirm the gradual improvement in Orange’s activities, in particular in Spain (+6.2% organically after +1.8% in Q1).
03 May 16
The inflection point is confirmed quarter after quarter
As in the two previous quarters, Q1 revenues rose organically by 0.6% yoy. They were in line with expectations and confirm the gradual improvement in Orange’s activities, in particular in the France Enterprise activities (+2.1%) and Spain (+1.8% organically). But also like in the previous quarters, the EBITDA grew by 0.3% yoy (excluding the €50m impact of the employee shareholding operation for the Ambition 2016 programme). The halt in declining revenue was accompanied by a significant decrease of nearly 2% yoy in labour expenses (but restructuring expenses amounted to €113m vs €14m a year ago). Remember that Q1 EBITDA at €2.57bn corresponds to a margin of 25.7%, which is not significant for the whole year. Because the group is listed in the US, it had to apply IFRIC 21 in 2014, i.e. earlier than most other French and European groups for which the compulsory application was 2015. To align with the standard practice which emerged during Q1 15, Orange has modified its IFRIC 21 accounting approach in its interim accounts and the annual costs of the IFER and property taxes (€533m) are now accounted when the obligation event occurs (i.e. on 1 January). The group has confirmed the objective for the full year of higher EBITDA in 2016 than in 2015 on a comparable basis. The group has also confirmed the payment of a dividend of €0.60 for 2015. An interim dividend of €0.20 was paid on 09/12/2015 and the balance of €0.40 will be paid on 23/06/2016. The group plans to pay a dividend of €0.60 for 2016. Capex rose by 10.4% in Q1 (it had already risen by 9.3% for the whole year 2015) and represented 14.6% of revenues. This is in line with Orange’s 2020 strategic plan: investment in fibre rose sharply (+55% yoy), mainly in Europe and particularly in France. Remember Orange has presented its new strategic plan for 2015-18. In France, Orange will triple its investments in fibre and increase the number of connected homes from 5.5m at end March to 12m in 2018 and to 20m in 2022. In Spain, the group will also expand its fibre network and its TV offering, aiming (with Jazztel) to reach 10m connectable homes in 2016 (7.4m connected at end March) and 14m by the end of 2020. In Poland, more than 4.7m households were eligible for VDSL at end December, and 818k households had fibre connectivity at 31/03. Note also Orange is the 4G leader in France with coverage of 81% of the population at end December. A 4G coverage which reached 87% of the population in Spain, 89% in Poland, 99% in Belgium, 72% in Romania, 65% in Slovakia and 84% in Moldova. In addition, 4G is deployed in Botswana, Jordan, Morocco, Mauritius, Cameroon and Guinea-Bissau. Remember also the group has laid the foundations for its future mobile banking services by signing an agreement that will allow it to take a stake of 65% in Groupama Banque, which will become Orange Bank.
16 Feb 16
Slight growth but growth
As in the previous quarter, Q4 revenues rose organically by 0.3% yoy (excluding regulatory measures). They were in line with expectations and confirm the gradual improvement in Orange’s activities, in particular in France (+0.3% vs -0.1% in H1) and Spain (-0.6% vs -2.1% in H1). But also like the previous quarter, the good news is that EBITDA grew by 1.4% yoy (vs +1.1% in Q3 excluding regulatory measures while it was only perfectly stable yoy in H1). The halt in declining revenue was accompanied by a significant decrease of 1.8% yoy in labour expenses (note the average number of employees declined by 4% yoy). With an EBITDA of €12.43bn, the group has eventually beaten the target of €12.3bn in EBITDA for the full-year 2015 it had given after the Q3 results (including the integration of Jazztel and Meditel) and which corresponded to the top end of the target range announced at the beginning of the year for the previous scope of operations. Capex rose by 14% in Q4 (and by 9.3% for the whole year) and represented 16.1% of revenues for the whole year. This is in line with Orange’s 2020 strategic plan: investment in fibre rose sharply (+55% yoy), mainly in Europe and particularly in France. Remember Orange has presented its new strategic plan for 2015-18. In France, Orange will triple its investments in fibre and increase the number of connected homes from 5.1m at end December to 12m in 2018 and to 20m in 2022. In Spain, the group will also expand its fibre network and its TV offering, aiming (with Jazztel) to reach 10m connectable homes in 2016 (6.8m connected at end December). In Poland, more than 4.7m households were eligible for VDSL at end December, and 716k households had fibre connectivity at that date. Note also Orange is the 4G leader in France with coverage of 80% of the population at end December. A 4G coverage which reached 85% of the population in Spain, 84% in Poland, 99% in Belgium, 72% in Romania, 65% in Slovakia and 84% in Moldova. In addition, 4G is deployed in Botswana, Jordan, Morocco, Mauritius, Cameroon and Guinea-Bissau. For 2016, Orange aims for a restated EBITDA higher than in 2015 on a comparable basis. This objective will be supported by continued efforts to reduce the cost structure. The group confirms the payment of a dividend of €0.60 per share for 2015 and … 2016. As expected, Stephane Richard confirmed that at the start of the year discussions had resumed with the Bouygues Group with the aim of a business combination with Bouygues Telecom. “These discussions are ongoing and require at least several weeks before any decision is taken.”
23 Oct 15
An important inflection point in growth
As in the previous quarter (+0.4% yoy), Q3 revenues rose organically by 0.6% yoy (excluding regulatory measures) after falling by 0.3% in Q1. They were slightly better than expected and confirm the gradual improvement in Orange’s activities, in particular in France and Spain. Note that the full consolidation of Jazztel in Spain and Meditel in Morocco contributed €430m in term of revenues (corresponding 4.4% of Orange's global revenues). The good news is that EBITDA grew by 1.2% yoy (excluding regulatory measures) after declining by 1.2% in Q1 and growing by 0.9% in Q2. Labour expenses decreased by 1.7% (note the average number of employees declined by 4% yoy). The group is giving a new target of €12.3bn in EBITDA for the full-year 2015 including the integration of Jazztel and Meditel to be consolidated in H2. Note this corresponds to the top end of the target range announced at the beginning of the year for the previous scope of operations. Capex rose by 6.9% in Q3 (it has already risen by 6.5% in H1) and represented 15.1% of revenues. This is in line with Orange’s 2020 strategic plan: investment in fibre rose sharply (+57% yoy), mainly in Europe and particularly in France. Remember Orange has presented its new strategic plan for 2015-18. In France, Orange will triple its investments in fibre and increase the number of connected homes from 4.3m at end June to 12m in 2018 and to 20m in 2022. In Spain, the group will also expand its fibre network and its TV offering, aiming (with Jazztel) to reach 10m connectable homes in 2016. Orange has also an ambitious plan to deploy its own fibre network in Poland.
28 Jul 15
It had been a long time since Orange has recorded revenue growth
Q2 revenues rose by 0.4% yoy (excluding regulatory measures) after falling by 0.3% in Q1. They are slightly better than expected and confirm the gradual improvement in Orange’s activities, in particular in France and Spain. The other good news is that the EBITDA grew by nearly 1% yoy (excluding regulatory measures) after declining by 1.2% in Q1. Indirect costs fell by €156m in H1 with labour expenses decreasing by 0.9% (note the average number of employees declined by 4% yoy). The group is maintaining its target of €12bn in EBITDA for the full-year 2015 (this does not include the integration of Jazztel and Meditel which will be consolidated in H2). Capex (€2,672m in H1) increased by 6.5% and represented 13.7% of revenues. This is in line with Orange’s 2020 strategic plan: investment in fibre rose sharply (+74% yoy), mainly in Europe and particularly in France. Remember Orange has presented its new strategic plan for 2015-18. In France, Orange will triple its investments in fibre and increase the number of connected homes from 4.3m at end June to 12m in 2018 and to 20m in 2022. In Spain, the group will also expand its fibre network and its TV offering, aiming (with Jazztel) to reach 10m connectable homes in 2016. Orange has also an ambitious plan to deploy its own fibre network in Poland. Net debt was €26.4bn at 30 June 2015, nearly stable in relation to end 2014. The ratio of net debt to EBITDA was 2.13x at 30/06/2015. In H2, net debt will be impacted by the consolidation of Jazztel and by the disbursement of the acquisition price of €3.4bn. In all, this should temporarily increase the ratio of net debt to EBITDA slightly, to about 2.2x at the end of 2015. This change is consistent with the objective of a ratio of around 2x in the medium term, in view of the disposal of the EE joint venture to come (note that in our model we include the cash from this disposal in 2015).
Research, Charts & Company Announcements
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25 Apr 17
Fenner (FENR): Forecast upgrades follow strong interims (BUY) | Omega Diagnostics* (ODX): In-line trading update and FY18 estimates (CORP) | Minds + Machines* (MMX): Prelims pressing ahead (CORP) | Imaginatik* (IMTK): Year-end trading update (CORP) | OptiBiotix* (OPTI): FY16 results in line with expectations (CORP) | Europa Oil & Gas*, (EOG): Irish seismic contractor (CORP) | Sound Energy (SOU): Schlumberger investment (HOLD) | CityFibre* (CITY): Strategy proof point (CORP) | Connect (CNCT): Investment being made to drive growth (BUY)
Companies: FENR ODX MMX IMTK OPTI EOG SOU CFHL CNCT
12 Jan 17
The Slide Rule
What is The Slide Rule? The Slide Rule has been designed to dramatically simplify the identification of the best companies in the UK small/mid-cap sector by making a quantitative assessment of the relative potential of each company. At its core, The Slide Rule aims to identify those companies that create genuine shareholder value through strong returns on capital and solid growth, but also present a value opportunity with the potential tailwind of earnings momentum. Companies are assessed within a Quality, Value, Growth and Momentum (QVGM) framework.
Companies: AMO APF FDEV FCRM IDEA MAI PAF PHD SCS
10 Apr 17
BlackRock Smaller Companies Trust is considering ending the restriction on AIM investment in its portfolio. Currently, the trust is not allowed to invest more than 40% of its portfolio value in AIM-quoted companies. If the required consents and regulatory approvals are received, a resolution may be put forward at the annual general meeting in June. Vets practices owner CVS is currently the largest investment in the trust’s portfolio and wound management firm Advanced Medical Solutions is also in the top ten. The rest of the top ten are fully listed companies. The best performer in February was telematics equipment and services provider Quartix. BlackRock is considering this change at a time when the Small and Mid-Cap Investors Survey 2017 suggests that there is a positive change in attitude towards AIM. Overall, investors believe that AIM is better than it has ever been. The average size of companies continues to rise and this is taken as an indication of maturity but there is still concern about the lower end of the market. There is little pressure on AIM companies to move to the Main Market even if they are relatively large for AIM. There are currently eight companies on AIM valued at more than £1bn, accounting for around one-sixth of the total market value of AIM.
Companies: MANX INS FRAN ACSO NAH GMAA TCM
25 Apr 17
Strategy proof point
Prelims are in line with consensus expectations unchanged at the January trading update: EBITDA of £2.5m (consensus £2.4m) was delivered from revenue of £15.4m (£15.0m), including revenue growth of 140% and maiden positive EBITDA (FY15: £-2.9m). Momentum in connected premises (3,962 at FY16) and a strong backlog of contracted premises still to be connected (3,558) means the total value of unreleased future contracted revenue has built to £106m at a typical gross margin of over 90%. Growth across public sector and business sectors remains strong, while mobile network operators are keenly aware of the benefits of CityFibre's national fibre network. Regulatory uncertainty is giving way to clear opportunity, with OFCOM’s policy proposals making encouraging noises around fostering “network based competition”. CityFibre continues to deliver on its strategy, in line with expectations: target 130p reiterated.
27 Mar 17
The Joy of Techs
Enterprise-focused niche applications of tech illustrate how, while trends appear to be fluctuating away from the current poster children of fintech and the Internet of Things, in fact these developments are refining appropriate application of existing technologies.
Companies: 7DIG AMO ARTA BVC BOTB CTP CFHL ISL DTC DOTD ELCO ESV FDSA FDEV GBG IDEA IDOX IMTK IGP IOM KBT KCOM KWS LRM MAI MMX NASA NET ONEV PHD QTX QXT RCN 932 SSY SEE SIM SPE TAX TEP TPOP TRAK UNG VIP ZOO
27 Apr 17
Unexpected strong performance in Mobile Networks
Nokia reported Q1 revenues of €5,388m, down 6% yoy at comparable currency and down 3.8% on reported figures. The Ultra Broadband Networks segment went down by 3.5% yoy (€3,597m), with a flattish Mobile Networks (€3,096m, -0.6%) and a strongly decreasing Fixed Networks (€501m, -18.3%). IP Networks and Applications came in at €1,304m, also down yoy (-10.2%), with all sub-segments being down by double-digit but Applications & Analytics (€359m, flat yoy. As a consequence, the overall Networks business was down by 5.4% yoy. Nokia Technologies displayed a strong increase yoy (€247m, +24.7%). The adjusted gross margin came in at 40.8%, up 140bp yoy, for an IFRS gross margin of 39.5%. The adjusted EBIT margin came in at 6.3%, up 10bp yoy, for an IFRS EBIT margin of -2.4%, leading to an IFRS loss of €473m. For 2017, the company maintained a negative outlook for its addressable market, which is expected to decrease by 2.2%, as well as an operating margin of 8-10%; capex is still expected to be c. €500m, and the cost-savings target of €1.2bn in 2018 is maintained.
Companies: NOKIA OYJ
25 Apr 17
Too little improvement offset by persistent weaknesses
Ericsson reported Q1 revenues of SEK46.4bn, corresponding to a decrease of 11.2% yoy on a reported basis, while on a comparable basis (comparable units and currency) the decline was 16%. Latin America (-29%), Northern (-24%) and Central (-17%) Europe witnessed sharp drops, while South-East Asia & Oceania showed some growth (+7%). Under the new reporting structure, Networks fell by 12.7% yoy (SEK34.9bn), IT & Cloud by 2.9% (SEK9.5bn) and Media by 19.6% (SEK2bn). Provisions and customer project adjustments had a one-off negative impact of SEK1.4bn. The gross margin came in at 13.9% and was massively impacted by restructuring charges (SEK1.5bn) and customer-related provisions (SEK6.7bn), leading to an adjusted gross margin of 30.5%, down 340bp yoy. Similarly, EBIT was impacted negatively by a total of SEK13.4bn of charges: SEK1.7bn of restructuring, SEK3.3bn of write-downs and SEK8.4bn of provisions; as a consequence, the adjusted EBIT margin came in at 2.3% but the reported EBIT margin at -26.6%. EPS came in at SEK-3.29. The company maintained its annual run rate target of SEK7bn for IPR Licensing (SEK10bn in 2016) and the RAN equipment market forecast at between -2% to -6% in USD; restructuring charges are now expected to reach SEK6-8bn, while renewed Managed Services contracts with reduces scope in North America will have a negative impact on Q2 and Q3 revenues, while an additional negative impact of SEK10bn by 2019 is expected due to low-performing operations in the Managed Services and Networks roll-out.
Companies: ERICSSON LM-B SHS
03 Dec 15
Northland Capital Morning Report
Starcom (STAR.L) – CORP: Major supply agreement | Sunrise Resources (SRES.L) – SPECULATIVE BUY*: County Line update | Amino Technologies (AMO.L) – BUY: Trading update | DiamondCorp (DCP.L): Corporate update | Churchill Mining (CHL.L) – SPECUALTIVE BUY*: ICSID Arbitration update | Bilby (BILB.L): Trading update
Companies: STAR SRES AMO DCP CHL BILB
05 Apr 16
Northland Capital Partners Update Note
AdEPT continues its transition from a provider of fixed-line telephony services to an integrated communications services provider. In its April 5th Trading Update AdEPT reported strong performance for the year to March 31st 2016, indicating EBITDA of £6.10m, +33%YoY, ahead of our outlook of £5.9m; reduced net debt at £(6.2)m (previous NCP estimate £(7.0)m; and, notably, an increase in recommended year-end dividend from 3.00p/share to 3.50p/share, ahead of our outlook, to be paid in early October 2016. This takes the proposed full year dividend to 6.50p/share. Based on the medium-term outlook for AdEPT’s integrated communications offering we have raised our price target from 285p to 300p.
Companies: Adept Telecom
30 Sep 16
Interims to June 2016
Interims have delivered LBITDA of £3.8m from revenue of £1.7m, and net cash of £3.1m. A strategic drive towards proactive churn to ensure significant improvement in the quality of the customer base, alongside a drive to cost cutting which management expect will reduce the monthly burn rate to £115k by January, is forecast to result in materially unchanged FY LBITDA expectations from revised revenue forecasts. With a debt facility established and funding commitment from key shareholders, TPO's US growth aspirations have the opportunity to deliver the path to profit and positive cash flow. Target 50p (60p).
Companies: People's Operator
20 Apr 17
TEP’s trading update for the year to March 2017 highlights modest growth as expected, with a total dividend of 48p (25p final dividend) in line (49pE). FY18 forecasts are trimmed 3% at adjusted PBT level, to remain in line with FY17, with better quality customers taking all possible services – at a higher cost of acquisition but better prospective year 2 margins. With the positive outlook that a narrowing of the gap between standard variable energy tariffs and aggressively priced introductory deals has led to an encouraging upward trend in Q4 to March, prospects for restored growth in revenue (FY18) and profit (FY19) are strong. Improved incentivisation of the self employed salesforce, after a few years of lower growth, is complemented by the imminent addition of Home Insurance, adding sales momentum and increased customer interest as utility prices rise. With the double upside to the £70m tender offer in summer, and the June release of FY19 forecasts illustrating growth following greater detail available at prelims, the future is brighter for TEP. Target 1360p reiterated.
Companies: Telecom Plus
10 Nov 16
Next Fifteen Communications (NFC.L) | Lightwave RF (LWRF.L) | Young & Co’s Brewery (YNGA.L) | Mercia Technologies ( MERC.L) | Mobile Streams (MOS.L) | Mincon Group (MCON.L) | Proactis Holdings (PHD.L) | ABCAM (ABC.L) | IDOX (IDOX.L) | Condor Gold (CNR.L)
Companies: NFC YNGN MERC MOS MIO PHD ABC IDOX CNR LWRF
20 Mar 17
Creation of a new mobile Indian leader
Vodafone will combine its subsidiary Vodafone India (excluding its 42% stake in Indus Towers) with Idea, which is listed on the Indian Stock Exchange. The implied EVs are $12.4bn for Vodafone India and $10.8bn for Idea. This is a merger of equals with joint control of the combined company between Vodafone and the Aditya Birla Group (which controls Idea), governed by a shareholders’ agreement. Vodafone will indeed own 45.1% of the combined company after transferring a stake of 4.9% to the Aditya Birla Group for $579m in cash concurrent with the completion of the merger. The Aditya Birla Group will then own 26% and has the right to acquire more shares from Vodafone under an agreed mechanism with a view to equalising the shareholdings over time. Until equalisation is achieved, the voting rights of the additional shares held by Vodafone will be restricted and votes will be exercised jointly under the terms of the shareholders’ agreement. Vodafone India will be deconsolidated by Vodafone, reducing Vodafone’s net debt by c.$8.2bn and lowering Vodafone Group’s leverage by around 0.3x the EBITDA. The transaction is expected to close during 2018, subject to the customary approvals.
26 Apr 17
Consumer business is doing very well
Q1 revenues were still down by 2.4% yoy, like in the previous quarter (note, however, the trend is clearly improving compared to H1 16): this was mainly due to the impact of price pressure in the wholesale voice carrier market (iBasis). But revenues for the Netherlands were only 1.5% lower yoy and if KPN is still suffering from the decline in the business market size, the consumer revenues were, however, up by 2.1% yoy supported by the positive impact of base growth and a higher ARPU. But the key point is that the Q1 EBITDA was very solid, 2.8% higher yoy. Quite a good performance, driven by growth in the customer base and the positive impact of cost savings. KPN remains, however, cautious for its 2017 outlook with an EBITDA in line with 2016 (including the negative impact of c.€45m from the European roaming regulation). KPN still intends to pay a regular dividend of €0.11 for 2017 and increase the regular dividend in line with its free cash flow growth profile thereafter. As a reminder, on 13 March, KPN exchanged 6% of Telefónica Deutschland shares for approximately 1.4% of Telefónica’s share capital. Subsequently, KPN has started to sell its shares in Telefónica with a value-driven focus. The 9.5% stake in Telefónica Deutschland is treated as a financial investment. KPN intends to distribute the expected Telefónica Deutschland dividend over 2016 to its shareholders in the form of a special interim dividend distribution of €0.017 per share.
Companies: KONINKLIJKE KPN NV
26 Apr 17
A Q1 slightly better than expected in terms of revenues
Q1 revenues in local currencies, excluding acquisitions and disposals, increased by 3% yoy, while the EBITDA declined by 0.9% in local currencies, excluding acquisitions and disposals. In reported currency, net sales fell by 5.6% yoy: the effect of exchange rate fluctuations was a positive 1.6%, while the effect of acquisitions and disposals was a negative 10.2%.
Companies: TELIASONERA AB