Proximus Group financial results – Third quarter 2022
Proximus continues to post strong results in the third quarter, delivering growth at Domestic and International level
- Proximus Group underlying revenue +7.8% YoY, underlying Group EBITDA +0.6% YoY.
- Q3 delivered continued commercial traction.
- Fiber strategy scaling: 19% population coverage and 220,000 activated Fiber lines end-Sept’22.
- Domestic revenue +3.6%, underlying Domestic EBITDA +0.4%.
- International activities BICS and Telesign both delivered double-digit growth in Q3, with BICS +16.4% revenue and +17.6% direct margin. For Telesign, this was respectively +44.0% and +40.1%.
- Raising guidance for Domestic revenue excl. terminals to ‘around +2% YoY’; Group EBITDA to be at upper range of ‘growing up to 1%’.
- Interim dividend of EUR 0.5 per share approved and payable on 9 December 2022.
Highlights Q3 2022
- Proximus Group closed the third quarter of 2022 with strong growth for its Mobile customer base, adding +33,000 Mobile Postpaid cards and grew its Internet base by +6,000 subscriptions. The success of the Flex XS pack and internet offer of Mobile Vikings shows that these products answer evolving customer needs. This emerging trend towards products with no TV subscription also reflects in a changing acquisition mix, leading to a net of -13,000 TV subscriptions in the quarter. The traction for Residential convergent offers continued, growing by +12,000 customers to a total of 1,035,000, +5.7% compared to 12 months ago. Fiber offers gained further traction, adding +27,000 active Residential and Business Fiber lines, bringing the total to 220,000. Reflecting changing customer needs, the Fixed Voice line base further eroded by -42,000 lines over the past three months.
- Proximus' Domestic underlying revenue was up by +3.6% to EUR 1,125 million. Excluding revenue from Terminals, the third-quarter Domestic revenue grew by +3.4%, sequentially improving from +1.1% organic revenue growth for the second quarter. The Residential unit posted a +3.0% revenue increase, largely driven by a +2.8% increase in its Customer Services revenue, with customer growth and the inflation-based price adjustment driving an increase of +8.1% in Convergent revenue. The third-quarter 2022 revenue of the Business unit ended +3.7% above the 2021 comparable basis. IT equipment revenue was up strongly following a partial catch-up in chip-supply affected customer installations. Business Services revenue was marginally down (-0.6%) as eroding Fixed Voice revenue was for a large part compensated for by higher Fixed Data (+3.9%) and Mobile revenue (+0.8%). Proximus' Wholesale unit posted overall a -0.7% revenue decrease, with Fixed and Mobile wholesale services up by +17.3%, offset by interconnect revenue loss, with no meaningful margin impact.
- The third-quarter 2022 Domestic EBITDA totaled EUR 426 million, a +0.4% increase compared to the same period in 2021. The support from higher Direct Margin, up by +3.1%, was for a large part offset by higher operating expenses (+5.9%), with inflationary cost effects, customer and transformation costs partly mitigated by ongoing cost efficiencies.
- Telesign closed the quarter with a strong revenue and direct margin, up for both its Digital Identity and Communication segment. For the third quarter of 2022, Telesign's revenue was up by +44.0% (+24.4% on a constant currency basis), reaching a total of EUR 126 million and its direct margin was up by +40.1% reaching EUR 28 million (+5.2% on a constant currency basis). With investments in Telesign's growth ambitions further increasing its operational costs, the third quarter 2022 EBITDA stood at EUR -1 million.
- For the third quarter of 2022, BICS grew its revenue by +16.4% to EUR 307 million. BICS' Core services revenue was up +13.4% driven by higher mobility services and messaging revenue thanks to a strong post-Covid travel uptake. Growth services revenue was up +44.3% mainly on strong traction for Cloud services, and Legacy services revenue increased by +16.2%. The Direct margin was up +17.6%, and drove a +23.8% EBITDA increase, reaching a total of EUR 35 million.
- In aggregate, the Proximus Group underlying revenue totaled EUR 1,510 million for the third quarter of 2022, a +7.8% growth compared to the same period in 2021. The underlying Group EBITDA totaled EUR 460 million, up by +0.6%.
- Excluding spectrum and football broadcasting rights, the year-to-date Proximus Group CAPEX was EUR 841 million, with the year-on-year increase largely driven by Proximus' investments in Fiber, which counted for 36% of the total Capex. In the third quarter of 2022, Proximus passed an additional +93,000 homes and businesses with Fiber, bringing the total to 1,124,000 by end-September 2022, which represents a Fiber population coverage of 19%. Moreover, the CAPEX includes a rising level of termination and activation costs for Fiber customers, higher investments in the domain of IT transformation and Digitalization, as well as the ongoing Mobile network consolidation.
- Over the first nine months of 2022, Proximus Group posted a Free Cash Flow of EUR 69 million, or EUR 82 million when adjusted for M&A-related transaction costs. The decrease from the comparable adjusted 2021 FCF of EUR 408 million (EUR 276 million reported FCF) mainly resulted from higher cash-out for Capex and an unfavorable year-on-year evolution of business working capital needs, in part offset by less Cash out for ongoing transformation plans, income tax payments and equity injections in the Fiber joint ventures.
Guillaume BoutinCEO of the Proximus GroupSupported by both the Domestic and International segments, Proximus Group delivered a strong +7.8% revenue growth. With inflationary cost increases mitigated and Domestic revenue as well as Group EBITDA outperforming, we positively revise our guidance for the year.
Geopolitical events related to the war in Ukraine are having profound impacts on the energy market, affecting all players in the economy, households and businesses alike. This new context raises challenges and calls for new responses. Today we are already among the European leaders in terms of energy savings. Nonetheless we are gradually implementing a set of measures, aiming to reduce our overall energy consumption for next winter season through the additional optimization of our buildings, data centers and infrastructure. In parallel we will launch a plan to expand our solar panel park in order to reduce our energy dependence.
The energy efficiency measures taken today will also be supportive for our longer term decarbonization ambitions. We want our initiatives to lead to concrete results and significantly lower our greenhouse gas emissions and becoming net-zero across our whole value chain by 2040. In that perspective, we can be proud Proximus is the first large Belgian company and 3rd telco worldwide to have SBTi -the Science Based Targets initiative- validated near-and long-term greenhouse gas (GHG) emission reduction targets.
The geopolitical and economic context continues to provide headwinds. Nonetheless, the Proximus Group delivered the strongest revenue performance since years, with an increase of 7.8% for the third quarter, which emphasises the resilience of our Domestic activities and our unique exposure to international markets. Furthermore, through focused cost control we delivered a +0.6% EBITDA growth for the Group, despite inflationary cost pressure.
In a next step to position Proximus as the clear leader in terms of customer internet propositions in Belgium, I'm really proud that we set again the pace by introducing 10 Gbps Fiber technology across 5 cities this week and nation-wide by summer 2023.
In the meantime, our Fiber footprint continues to grow at a strong pace, with end-September 1,124,000 homes and business passed with Fiber, of which 93,000 added over the past 3 months – a number that includes the typical slowdown during the summer holiday period. This brings us to a nation-wide coverage level of 19%, right on target to reach the 22% population coverage targeted by the end of this year. From a commercial perspective, +27,000 active Fiber lines were added over the third quarter, bringing the total 220,000.
Over the quarter, the commercial trajectory in our Domestic market continued to see positive momentum, supporting a sustained growing revenue, accelerating for the third quarter to +3.6% compared to last year. A key enabler supporting that growth was a strong evolution of our NPS across our 3 brands with Proximus, Scarlet and Mobile Vikings.
Our customer base continued its progress towards convergent offers, with residential customers combining Fixed and Mobile increasing by +12,000 over the past 3 months. This trend was supported by the new offers launched earlier this year. While retaining customers within the Proximus family, our Proximus Flex XS pack and the Mobile Vikings Internet offer are clearly addressing evolving needs of certain customer segments. Especially during the Back-to-School season we noted a lower take-up of TV subscriptions in the customer acquisition mix.
We also continue to see resilience in the Business unit, with revenue up 3.7%. Besides a catch-up in product revenue, we saw good performance in Fixed internet, Mobile and recurring IT services. We continue to innovate in the business unit and focus on bringing solutions to changing needs. This quarter, as one of the first operators worldwide, we successfully tested 5G network slicing, in cooperation with Ericsson. This achievement further paves the way for a dedicated handling of business-critical applications in an Enterprise environment.
Our international activities, BICS and Telesign, delivered a double-digit growth quarter. The combined revenue of the two companies, as well as their direct margin, each grew by 23.2% compared to the previous year. BICS continued its double-digit EBITDA increase, up by 23.8% for the third quarter, driven by direct margin growth in all its 3 services.
Our second international business, Telesign, pursued the strong commercial trajectory of the last quarters, posting revenue growth of 44.0%, thereby emphasizing the success of the strategic course it has taken to reinforce its position in the Digital Identity and Communication market. Telesign remains fully on track in its growth ambitions set for the year.
Overall, I'm very pleased with our trajectory over the first 9 months of the year. It is the result of our strong commercial performance, continuous focus on customer experience, successfully managed portfolio repricing and strong trajectory of our international activities. This, combined with our focus on strict cost management for our Domestic activities, leaves us in a good position to face the economical headwinds. We are therefore confident to end the year 2022 with Domestic revenue excluding terminals to grow around 2%; and our Group EBITDA to be at the upper range of growing 'up to 1%'.
As a last point, I'm pleased to announce to our shareholders the Board of Directors approved the interim dividend over the accounting year 2022, with the 0.5€ gross per share to be paid on 9 December 2022.
Key Figures
Operationals, in thousands
| Net adds in the quarter | Park at end of quarter | ||||||
|---|---|---|---|---|---|---|---|
| 2021 | 2022 | % | 2021 | 2022 | % | ||
| Fiber | Home Passed | 65 | 93 | 686 | 1,124 | 63.7% | |
| Activated retail lines | 15 | 27 | 126 | 220 | 75.3% | ||
| Residential customers | Convergent | 10 | 12 | 979 | 1,035 | 5.7% | |
| Group (subscriptions/SIM cards) | Internet | 5 | 6 | 2,163 | 2,207 | 2.0% | |
| TV | 5 | -13 | 1,707 | 1,708 | 0.6% | ||
| Fixed Voice | -50 | -42 | 2,049 | 1,863 | -9.1% | ||
| Mobile Postpaid (excl. M2M) | 58 | 33 | 4,598 | 4,775 | 3.8% | ||
| M2M | 165 | 212 | 3,211 | 3,913 | 21.8% | ||
| Prepaid | -20 | -22 | 709 | 640 | -9.7% | ||
Financials (EUR million)
| 3rd Quarter | Year-to-date | ||||||
|---|---|---|---|---|---|---|---|
| 2021 | 2022 | % Change | 2021 | 2022 | % Change | ||
| Revenue (underlying) |
Group | 1,400 | 1,510 | 7.8% | 4,137 | 4,351 | 5.2% |
| Domestic | 1,085 | 1,125 | 3.6% | 3,250 | 3,322 | 2.2% | |
| BICS | 263 | 307 | 16.4% | 740 | 821 | 10.9% | |
| Telesign | 87 | 127 | 44.0% | 241 | 333 | 38.4% | |
| Direct Margin (underlying) |
Group | 895 | 939 | 4.9% | 2,679 | 2,787 | 4.0% |
| Domestic | 819 | 844 | 3.1% | 2,463 | 2,521 | 2.3% | |
| BICS | 60 | 71 | 17.6% | 169 | 198 | 17.1% | |
| Telesign | 20 | 28 | 40.1% | 57 | 80 | 40.8% | |
| Expenses (underlying) |
Group | -438 | -479 | 9.4% | -1,316 | -1,416 | 7.6% |
| Domestic | -395 | -418 | 5.9% | -1,191 | -1,245 | 4.5% | |
| BICS | -32 | -36 | 12.1% | -92 | -104 | 12.3% | |
| Telesign | -15 | -29 | 92.4% | -42 | -79 | 86.2% | |
| Ebitda (underlying) |
Group | 457 | 460 | 0.6% | 1,362 | 1,371 | 0.6% |
| as % of revenue | 32.6 % | 30.4 % | -2.2 p.p. | 32.9% | 31.5% | -1.4 p.p. | |
| Domestic | 424 | 426 | 0.4% | 1,272 | 1,276 | 0.3 % | |
| BICS | 28 | 35 | 23.8% | 76 | 94 | 22.9% | |
| Telesign | 5 | -1 | nr | 14 | 1 | -94.8% | |
| Group Ebitda (reported) |
466 | 469 | 0.6% | 1,403 | 1,407 | -0.3% | |
| Net income | 116 | 126 | 8.1% | 358 | 369 | 3.1% | |
| Accrued capex (excl. spectrum & football rights) |
239 | 283 | 18.5% | 736 | 841 | 14.2% | |
| Free Cash Flow (normalized) |
146 | 85 | -42.2 % | 408 | 82 | -80.0% | |
| Adjusted net fin. position (excl. lease liabilities) |
nr | nr | -2,526 | -2,710 | -7.2% | ||
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Notes
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Full-year 2022 guidance
Based on the strong results over the first nine months of 2022, Proximus sees its Domestic segment to end the year 2022 with revenue excluding Terminals to grow around 2% year-on-year. The positive development reflects the good commercial momentum, with price changes having landed well and IT hardware installations starting to catch-up.
The 2022 Domestic EBITDA outlook remains confirmed at the upper range of 'growing up to 1%' year-on-year. The domestic revenue growth runs ahead of EBITDA due to some inflationary cost increases, including automatic wage indexation effects.
In terms of the Proximus Group EBITDA, expectations have turned somewhat more positive, including a continued strong result of BICS. Therefore, Proximus is confident to end the year 2022 with its Group EBITDA at the upper range of 'growing up to 1%'.
With Proximus' Fiber deployment program well on track, the 2022 Group CAPEX expectations remain unchanged, i.e., to go up to close to EUR 1.3 Bn (excl. spectrum and football rights).
The expected net debt ratio for 2022 remains unchanged at around 1.6X underlying EBITDA.
| Guidance metric | FY21 Actuals |
FY22 Guidance |
FY22 Reviewed Guidance 29 July 2022 |
Q3'22 YTD Actuals |
FY22 Reviewed Guidance 28 October 2022 |
|---|---|---|---|---|---|
| Underlying Domestic revenue (excluding terminals) | € 4,075M | Growing up to 1% YoY | Growing by 1%-2% YoY | +2.5% YoY | Growing around 2% YoY |
| Domestic underlying EBITDA | € 1,654M | Growing up to 1% YoY | Upper range of 'Growing up to 1% YoY' | +0.3% YoY | Reiterating Upper range of 'Growing up to 1% YoY' |
| Underlying Group EBITDA | € 1,772M | Around -1% YoY | Growing up to 1% YoY | +0.6% YoY | Upper range of 'Growing up to 1% YoY' |
| Capex (excluding Spectrum & football rights) | € 1,203M | Close to € 1.3Bn | Reiterating 'Close to € 1.3Bn' | € 841M | Reiterating 'Close to € 1.3Bn' |
| Net debt / EBITDA | 1.55X | Around 1.6X | Reiterating 'Around 1.6X' | nr | Reiterating 'Around 1.6X' |
Shareholder return
Proximus remains committed to an attractive remuneration for its shareholders and intends to return over the result of 2022 an annual gross dividend of EUR 1.2 per share, in line with Proximus' announced three-year dividend policy over the period 2020-2022.
The Proximus Board of Directors approved on 26 October 2022 to pay the interim dividend over the 2022 accounting year, EUR 0.50 gross per share, on 9 December 2022.
Net dividend (30% withholding tax assumed): EUR 0.35/share
- Ex-coupon date: 7 December 2022
- Record date: 8 December 2022
- Payment date: 9 December 2022
