20 Feb 17
Ready to dominate TV distribution and prepared for new competition from Iliad
TI has released a good set of Q4 results: Revenues were up organically by 0.8% yoy (vs -5.2% in Q1, -4.2% in Q2 and -1.2% in Q3) while the EBITDA (excluding the negative impact of non-recurring items) has increased sharply by 5.9% yoy as in Q3 but vs a decline of 1.7% in H1! EBITDA has clearly benefited from the actions implemented in the “cost recovery plan” that started in Q2 in the Domestic Business and in Q3 in the Brazil Business. In Italy, revenues were up by 2.7% yoy (vs +1% in Q3 and -1.7% in the H1). The solid, structural recovery of Mobile revenues was confirmed, thanks both to the maintenance of market share and the stabilisation of ARPU levels. But the key point is the EBITDA which has grown by 8.4% (vs 7.9% in Q3, +6.9% in Q2 and -5.2% in Q1). Excluding non-recurring restructuring charges, EBITDA would have grown by +4.5% in 2016, with an EBITDA margin of 45.9%, up 1.9ppts on 2015. In Brazil, Q4 revenues were down organically and at constant change by only 1.7% yoy (vs -5.2% in Q3 and -14% in H1)! The main issue is that the total number of subscribers (c.63m with a market share of 26%) was still down by 4.3% vs end 2015. Note, however, that like its competitors the group has seen its prepaid customer base contract sharply in 2016, due to the adoption of a restrictive policy for the disconnection of inactive customers according to Anatel’s new criteria (the Brazilian National Telecommunications Agency). Q4 EBITDA was up by 2.8% yoy (vs +0.5% in Q3 and -10.9% in H1) with the start in Q3 of cost-cutting operations.
Companies: TELECOM ITALIA SPA
07 Nov 16
A solid Q3 confirming a good trend
A good Q3 release for the Italian incumbent: revenues were down organically by only 1.2% yoy (vs -5.2% in Q1 and -4.2% in Q2) while the EBITDA (excluding the negative impact of non-recurring items) has increased sharply by 7% yoy (vs a decline of 1.7% in H1!), with an EBITDA margin of 44.4%, 3.3ppts higher than in Q3 15. The EBITDA has clearly benefited from the actions implementing the “cost recovery plan” that started in Q2 in the Domestic Business and in Q3 in the Brazil Business. In Italy, revenues were up by 1% yoy (vs -1.7% in the H1). The solid, structural recovery of Mobile revenues was confirmed, thanks both to the maintenance of market share and the stabilisation of ARPU levels. But the key point is the EBITDA which has grown by 7.9%. Excluding non-recurring restructuring charges (corresponding to 3% of EBITDA), EBITDA would have grown by +3.3% for the first 9m, with an EBITDA margin of 46.5%, up 1.8ppts on 2015, confirming the positive change in trend that started in Q2 (Q3: +7.8%, Q2: +6.9%, Q1: -5.2%). In Brazil, Q3 revenues were down organically and at constant change by 5.2% yoy (vs -14% in H1)! Service revenues were down by 2.4% yoy, while revenues from product sales dropped by c.40%, reflecting a sales policy less focused on the sale of handsets, as well as the impact of the Brazilian macro-economic crisis on family spending decisions. The main issue is that the total number of subscribers (c.63.2m) was still down by 4.5% vs end 2015 (with a market share of 25.2%, vs 25.7% at end 2015). Note, however, that like its competitors the group has seen its prepaid customer base contract sharply in 2016, due to the adoption of a restrictive policy for the disconnection of inactive customers according to Anatel’s new criteria (the Brazilian National Telecommunications Agency). The Q3 EBITDA margin was good at 32.6%, up 1.4ppt on Q3 15. Excluding non-recurring costs, EBITDA has indeed grown by 0.5% with the start of cost-cutting operations which offset the reduction in revenues.
Companies: TELECOM ITALIA SPA
24 Oct 16
An integrated European media powerhouse dies before being born
Once upon a time (say about 6 months ago), Mediaset and Vivendi concluded a splendid strategic alliance: the French group was to acquire 100% of Mediaset Premium, while each entity would be taking a 3.5% stake in the other on the occasion. The ambition was to build a pan-European OTT platform and to create a southern European content and VOD powerhouse… The announced wedding has since moved to the divorce legal battlefield, maybe paving the way for a ménage à trois.
Companies: TELECOM ITALIA SPA
27 Jul 16
Best quarter in Italy since 2009
Q2 revenues were down organically by 4.2% yoy (vs -5.2% in Q1) while the EBITDA (excluding the negative impact of non-recurring items) has decreased by only 1.7% yoy, with an EBITDA margin of 42.0%, 1.4ppts higher than in H1 15.
Companies: TELECOM ITALIA SPA
16 May 16
The new CEO's aim to reach 2019 with €1.6bn of efficiencies
Q1 revenues were down organically by 5.6% yoy: In Italy, revenues were down by 2.3% yoy (as in the two previous quarters). This is a little bit disappointing: the recovery trend is slowing slightly compared to the previous quarters, after, in particular, a worsening of the performance in the Fixed segment, while the solid, structural recovery of Mobile revenues was confirmed, thanks both to maintenance of market share and stabilisation of ARPU levels. Note the revenues of the Consumer segment in the Q1 (55% of Domestic revenues) have increased by 2% yoy. In Brazil, Q1 revenues were down by 15% yoy! Service revenues were down by 8.3% yoy while revenues from product sales dropped by 61%, reflecting a sales policy less focused on the sale of handsets, as well as the impact of the Brazilian macro-economic crisis on family spending decisions. The main issue is that the total number of subscribers was 67.273m, a fall of 11.2% yoy, but this corresponds to a slight increase compared to end 2015 (with a market share of 26.1%, vs 25.7% at end 2015 and 26.7% a year ago). EBITDA was down by 7.5% yoy excluding non-recurring charges, with a quite correct margin of 43.34% in Italy while the Brazilian one was 28.7%, down 0.8 ppts on the previous year due to the contraction in revenues.
Companies: TELECOM ITALIA SPA
17 Feb 16
Don’t miss the opportunity to buy TI at a good price
The stock declined sharply by 4% yesterday following the release of mixed results in Q4. The stock has now declined just over 30% from its highs of last autumn (when Bolloré and Niel invited themselves to the capital of the Italian telco). 2015 revenues were down by 4.6% yoy, while the EBITDA declined by 17.9%, but this includes non-recurring charges of €1bn. Without these, the organic decline would have been of 4.5% with a margin of 41% (1.8ppt higher than in 2014!).
Companies: TELECOM ITALIA SPA
06 Nov 15
A good recovery trend in Italy but tough market conditions in Brazil
Q3 revenues were down by 4.6% yoy at constant currency. While the domestic decline of 1.4% yoy was slightly better than expected we note, however, that market conditions were once again tougher than expected in Brazil which recorded a sharp drop of 15% in its revenues (at constant currency) due largely to a 58% reduction in handset sales (sold with no margin a year ago). Q3 EBITDA was down by only 3.7% yoy organically and at constant change. Note in particular the Brazilian margin was up by 3.8ppt from 27.4% to 31.2%, while the domestic margin was back to a more reasonable number (44.7%) after an exceptional Q3 14 (at 47.2%!). Note in parallel to this release that the board proposed to convert TI’s saving shares (representing 30% of the capital but carrying no voting rights) into ordinary shares. This will have a dilutive effect on Vivendi’s stake in TI which could be only 13% given the 20% currently held by the French group.
Companies: TELECOM ITALIA SPA
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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
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
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
31 Jan 17
Alumasc (ALU): Interims show strong sales growth but some margin pressure (BUY) | Joules Group (JOU): Marginal increase to FY17E forecast (BUY) | CityFibre* (CITY): Prospects shine (CORP) | Nasstar* (NASA): Trading update (CORP) | SCS Group (SCS): LFL order intake slowed during Q2 (BUY)
Companies: ALU JOUL CFHL NASA SCS
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 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.
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
22 Jul 16
Northland Capital Partners Morning Report
AdEPT Telecom (ADT.L) – BUY*: Director shareholding | Edenville Energy (EDL.L) – CORP: MEM and TANESCO Site Visit
Companies: Adept Telecom Edenville Energy
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
21 Apr 17
Excluding EU roaming and despite cable costs, Q1 EBITDA increased by 12%
Q1 revenues were nearly stable yoy (-0.7%) but the mobile equipment sales (representing a little less than 10% of the global turnover) were down by 13% with the reduction in the number of subsidised devices and also a different launch date of some popular models. In Q1, Orange Belgium generated service revenues of €274m, a very correct increase of 0.6% compared with the same period last year (i.e. +2.6% excluding the EU Roaming Regulation): the rapid adoption of 4G data usage and the increase in both the postpaid customer base and ARPU contributed substantially to this positive development and fully offset the negative impact of the EU Roaming Regulation. EBITDA increased by 3.6% yoy (excluding the 2016 Walloon pylon tax provision of €15.8m booked in Q1 16) to €72.2m as a result of both the positive trend in the top-line and its sustained focus on cost optimisation. Note also the reduction of roaming prices in Europe had an adverse impact on the EBITDA of €5.3m in Q1. Excluding this effect and despite the higher cable wholesale costs related to the Internet and TV offering, EBITDA would have increased by an impressive 12.2% yoy. The group has reiterated its guidance for 2017: growth in total service revenues and an EBITDA between €290m and €310m. As a reminder, this guidance shows a strong ambition especially taking into account the €32m adverse impact of the EU Roaming Regulation in 2017.
Companies: MOBISTAR SA
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