Proximus Group financial results – First quarter 2022

Highlights Q1 2022

• Proximus Group closed the first quarter of 2022 with good growth for its main customer bases, +38,000 Mobile postpaid cards, +15,000 Internet and +11,000 TV subscriptions. The traction for higher-value offers continued, growing the Residential convergent base by +15,000 customers to a total of 1,011,000, +6.1% compared to 12 months ago. On an enlarging footprint, Fiber offers gained further traction, adding +25,000 Residential and Business lines, bringing the total to 170,000. Over the first quarter, +88,000 customers opted for a Flex offer, bringing the total Flex subscriptions to 922,000. Reflecting changing customer needs, the Fixed Voice line base further eroded by -53,000 lines over the first three months of 2022.
• Proximus’ Domestic underlying revenue was up by +1.2% to EUR 1,097 million. Excluding low-margin Terminals revenue, the Domestic revenue grew by +2.2% (+0.7% organic). The Residential unit posted a +1.9% revenue increase, largely driven by a strong progress in Convergent revenue and Mobile Vikings contributing to the Mobile-only revenue growth. The Business unit revenue was -1.6% lower, with the revenue increase from IT services and Fixed Data offset by lower-margin Product revenue and the ongoing Fixed Voice erosion. Proximus’ Wholesale unit posted a +3.3% revenue increase on strong growth in Fixed and Mobile wholesale services.
• The first-quarter 2022 Domestic EBITDA totaled EUR 419 million, a +0.3% increase from the comparable period in 2021. The support from higher Direct Margin was largely offset by an increase in operating expenses. Proximus delivered considerable cost efficiencies mitigating inflationary cost increases, transformation cost, and higher customer-related opex.
• Telesign posted strong revenue growth for both its Digital Identity and Communications segment, with a total revenue of EUR 100 million over the first quarter of 2022. The year-on-year increase by +30.9% (+ 22.7% on a constant currency basis) was driven by new customers and by keeping a strong Net Revenue Retention rate of 124%. Telesign’s first-quarter 2022 direct margin was up by 31.3% to EUR 24 million. On a constant currency basis, this was + 9.4%. Telesign’s EBITDA remained positive at EUR 2 million for the first quarter of 2022, including significant investments made to support its growth ambitions.
• For the first quarter of 2022, BICS grew its revenues by 4.5% to EUR 245 million. The Core services revenue was up +10.4% from a low comparable base in 2021, with the first months of 2021 still impacted by the global Covid19-related travel restrictions. BICS’ Growth services revenue increased by +49.5%, on a strong traction for cloud communication amongst world leading digital companies. The resulting higher Direct margin drove a 18.6% EBITDA increase, to a total of EUR 27 million for the first quarter of 2022.
• In aggregate, the Proximus Group underlying revenue totaled EUR 1,404 million for the first quarter of 2022, a +2.7% growth from the comparable period of 2021. The underlying Group EBITDA totaled EUR 448 million, up by 0.4%.
• Excluding spectrum and football broadcasting rights, the Proximus Group CAPEX over the first quarter of 2022 totaled EUR 270 million. The year-on-year increase was in large part driven by Fiber investments, making up 33% of the total Capex. In the first three months of the year, Proximus passed an additional 95,000 homes and businesses with Fiber, bringing the total to 909,000. Furthermore, CAPEX increased amongst others for customer activations and timing effects of TV content renewal.
• Over the first quarter of 2022, Proximus Group posted a Free Cash Flow of EUR 29 million, or EUR 33 million when adjusted for M&A-related transaction costs. The decrease from the first quarter 2021 FCF was mainly a result of higher cash-out for Capex, including a significant carry-over effect from year-end 2021 Fiber investments, as well as from higher business working capital needs, including timing effects.
• Proximus keeps a sound financial position and actively manages its long-term debt portfolio by having hedged its interest rate exposure of the bonds maturing in 2024 and 2025.

Guillaume BoutinCEO Proximus Group

Keeping a strong commercial momentum and reiterating full-year guidance.

The first months of this year have brought massive disruption – and sadness – across the world. Since some months now, a massive war is happening on our continent, devastating Ukrainian families, and deeply touching all of us. As highlighted by the numerous solidarity efforts observed across the world, this dramatic situation has left no one unaffected. We decided to help where we could, with Proximus taking up its societal role by launching a series of actions to support the Ukrainian people: providing free calls and SMS to and from Ukraine for our customers; distributing pre-paid cards to refugees with data, unlimited calls and SMS in Belgium; or providing buildings to accommodate Ukrainian families in the next months.

This war has also impacted the conditions in which Proximus operates, accentuating the steep inflation trend and further impacting global supply chains, which were already fragile after the Covid crisis. Nonetheless, over the first three months of 2022, we have kept our focus, as highlighted by a series of achievements. On the network side, we have further pushed our fiber rollout, now being deployed in 50 cities across the country. Our Fiber technology is now passing 909.000 homes and businesses, and we are confident to reach the symbolic 1 million milestone in June, keeping us fully on track to reach our ambition of 22% coverage of the country by the end of this year.

On the commercial side, I am also pleased with our performance in the first quarter of 2022, at both domestic and international levels. Our main Domestic customer bases continued their healthy growth, with net additions of 15,000 Internet and 11,000 TV subscriptions as well as 38,000 Postpaid sim cards. Our Residential convergent base continued its growth trajectory, adding 15,000 customers over the first quarter of 2022. Furthermore, we see good progress regarding our fiber uptake with our Residential and Business units having activated an additional 25,000 fiber lines, bringing the total to 170,000 by end-March 2022.

We also introduced new products that will help fuel our growth over the coming months. Scarlet, our price-seeker provider, launched a new triple play pack, combining Internet, TV and a mobile subscription, for a monthly subscription of EUR 50, the lowest price in Belgium. I am happy to share that all Mobile Vikings customers have now switched to the Proximus network, allowing them to benefit from the best mobile network in Belgium, and bringing, as of April, the anticipated cost synergies for the Proximus Group.

Proximus’ Business Unit has been affected by the global supply shortages but has nonetheless shown good progress on its transformation journey, with revenue from IT services growing by 2.0%, with especially a strong performance in Cloud and Security services.

Turning to our international segments, our two subsidiaries BICS and Telesign both posted good results for the first three months of 2022. BICS closed the quarter with a very strong performance, increasing its EBITDA by 18.6% compared to the same period last year. Growing revenue in Core services led to a higher margin, because of an incremental recovery in world-wide travel, which drove strong volumes in messaging and roaming. Furthermore, BICS achieved significant progress in its Growth services, thanks to a strong performance in cloud offers, for which it onboarded major new enterprise customers.

Telesign has delivered a first-quarter financial performance in line with its previously disclosed targets, with a strong revenue increase driven by healthy volume growth. Based on a strong sales pipeline and the launch of several new products within the Identity suite, we expect the momentum to continue. In a tough setting with markets affected by rising geo-political tensions, Telesign’s listing process is following its course, with targeted closure in the second quarter. We remain fully committed to bringing Telesign to the public market.

Finally, we also progressed on our Group transformation. First, we reached a major milestone with the launch of Proximus Ada, a new center of excellence dedicated to the fields of artificial intelligence and cybersecurity. The expertise of this fully owned subsidiary will serve all entities of the Proximus Group by providing innovative solutions across multiple sectors.

Second, on digital innovation, we progressed well thanks to the signing of a strategic collaboration between our teleconsultation app Doktr and major actors of the ecosystem: the doctors’ association Domus Medica, and the health insurance funds CM and Solidaris. Finally, from an internal perspective, we made very concrete progress towards our objective to create, for our employees, a sustainable and inspiring digital campus through the binding agreement with Immobel for the redevelopment of Proximus’ headquarters. Proximus acquired rights and gave commitments to dispose of property, plant and equipment for approximately EUR 143 million, in that case followed by a lease-back of part of the renovated building with a significant contribution of EUR 20 million of Immobel in the fit-out and multiple months of free lease.

To conclude, I am overall very pleased with our achievements over the first three months of the year: progressing on our strategy while delivering financial results in line with our expectations, allowing us to reiterate our full-year guidance for 2022.

Q1 key figures

Operationals, in thousands

Financials, in million EUR

Guidance for full-year 2022 reiterated

Based on the first quarter 2022 financial results and the company’s best estimate for the remainder of the year, the guidance for full-year 2022 is reiterated:

• Proximus expects its underlying Domestic revenue excluding Terminals to grow up to 1% from the preceding year. The return to revenue growth, supported by the Residential unit’s commercial momentum including the migration of Mobile Viking customers on to the Proximus network, are expected to drive higher Domestic Direct Margin.
• Through its ongoing cost efficiency program, Proximus targets to partially offset projected additional customer growth costs, IT transformation expenses and headwinds from inflationary driven costs increases. Nonetheless, supported by the expected growth of the Direct Margin, Proximus expects to grow the underlying Domestic EBITDA up to 1% for 2022.
• For BICS, the 2022 EBITDA will be comparing to a high-2021, which benefitted from a favourable exceptional destination mix. This mix effect aside, BICS expects its Direct Margin to continue to benefit from positive underlying trends whereby its Growth and Core segments are expected to compensate for the erosion in Legacy voice at lower margin. BICS as well will face inflationary cost headwinds and will invest in the acceleration of its Growth segment.
• As part of Telesigns’ listing process, announced 16 December 2021, it disclosed a multi-year strategy and financial projection in its investor presentation: www.telesign.com/investors. This includes an estimated EBITDA of USD -23 million for 2022, under USGAAP, and on a reported basis. Proximus reports Telesign figures in €, under IFRS, and with the underlying EBITDA adjusted for Telesign’s Share Based Remuneration. For 2022 the difference between the Telesign-view and Proximus’ underlying EBITDA is estimated to add up to a positive amount of about $7-8 million.
• In aggregate, Proximus expects its 2022 Group underlying EBITDA to be down around -1.0 % from 2021.
• In line with Proximus’ announced accelerated Fiber deployment strategy, the Group CAPEX for 2022 is expected to go up to close to EUR 1.3Bn. The debt ratio for 2022 is expected to be around 1.6X underlying EBITDA.

Shareholder return

The Annual Shareholders’ Meeting of April 2022 approved the return to the Proximus shareholders of gross EUR 1.2 per share. The normal dividend of EUR 0.70 per share is payable on 29 April 2022, with record date on 28 April 2022 and ex-dividend date on 27 April 2022.

Proximus remains committed to an attractive remuneration for its shareholders and intends to return over the result of 2022 an annual gross dividend of € 1.2 per share, in line with Proximus’ announced 3-year dividend policy over the period 2020-2022.