Proximus Group financial results – Fourth quarter and full-year 2022
Proximus ends the year continuing its strong commercial trajectory and delivers a sound financial performance in the fourth quarter
- Proximus Group fourth-quarter underlying revenue +8.1% YoY, underlying EBITDA +1.4% YoY.
- Domestic revenue +2.1% to EUR 1,155 million in the fourth quarter, underlying Domestic EBITDA +1.8%.
- Fiber strategy scaling: >21% population coverage and 252,000 activated Fiber lines end-December 2022.
- Q4 delivered continued commercial traction for Mobile Postpaid (+43,000), Internet (+9,000) and convergence (+13,000), and contained net TV customer loss (-9,000).
- International segments Telesign and BICS posted record revenue growth in the fourth quarter of +61.5% and +20.4% respectively.
- Full-year 2022 guidance achieved on all metrics
- For 2023, Domestic revenue expected to grow year-on-year by 1% to 3%; underlying Domestic and Group EBITDA to be around -3% and CapEx to reach its peak at around EUR 1.3 billion.
- Board proposes gross dividend over 2022 result of EUR 1.20 per share, of which EUR 0.70 to be paid in April 2023.
Highlights Q4 2022
- Proximus' Domestic segment closed the fourth quarter of 2022 with strong growth for its Mobile customer base, adding +43,000 Mobile Postpaid cards, and grew its Internet base by +9,000 subscriptions. The success of Residential convergent offers continued, growing by +13,000 customers to a total of 1,048,000, a +5.2% year-on-year increase. Fiber offers gained further traction, with +31,000 active Residential and Business Fiber lines added, bringing the total to 252,000. Proximus managed to contain the net decrease of the TV subscriptions to -9,000 in the fourth quarter, reflecting changing customer needs. The Fixed Voice line base further eroded by -53,000 lines.
- Proximus’ Domestic underlying revenue was up by +2.1% to EUR 1,155 million.The Residential unit posted a +0.7% revenue increase, with the +2.6% increase in Customer Services revenue partly offset by Prepaid, Terminals and Other revenue. Convergent revenue was up +7.6% driven by further customer growth and the inflation-based price adjustment. The fourth-quarter 2022 revenue of the Business unit grew +4.1% year-on-year. IT equipment revenue was up strongly following the continued catch-up in chip-supply affected customer installations. Business Services revenue was slightly down (-0.9%) with eroding Fixed Voice revenue mostly offset by higher Fixed Data (+2.7%) and IT services (+1.0%) revenue. Proximus’ Wholesale unit posted an overall -8.1% revenue decrease, with Fixed and Mobile wholesale services up by +7.8% but more than offset by interconnect revenue loss, with no meaningful margin impact.
- The fourth-quarter 2022 Domestic EBITDA totaled EUR 389 million, a +1.8% increase compared to the same period in 2021. The support from higher direct margin, up by +2.0%, was in part offset by a 2.1% increase in operating expenses, with inflationary cost effects, customer and transformation costs partly mitigated by ongoing cost efficiencies.
- Telesign closed the fourth quarter with another sequential record-breaking revenue and direct margin growth, increasing for both its Digital Identity and Communication segment. Telesign’s revenue was up year-on-year by +61.5% (+46.9% on a constant currency basis), reaching a total of EUR 140 million and its direct margin was up by +48.7% reaching EUR 34 million (+22.5% on a constant currency basis). As a result, despite the continued material investments driving operating costs, Telesign’s fourth-quarter EBITDA was breakeven.
- BICS closed its highest ever growth quarter with revenue +20.4% to EUR 311 million. BICS’ Core services revenue was up +20.6% driven by higher mobility services and messaging revenue thanks to a strong post-Covid travel uptake. Growth services revenue was up +30.5% mainly on strong traction for Cloud services, and low-margin Legacy services revenue increased by +19.3%. The direct margin was up by +12.3%, and EBITDA was up by +3.5%, impacted by inflationary cost items, as well as non-structural performance related expenses. This aside, the EBITDA growth was similar to the previous 2 quarters.
- In aggregate, the Proximus Group underlying revenue totaled EUR 1,558 million for the fourth quarter of 2022, up +8.1%, making it the highest growth quarter of the year. The underlying Group EBITDA totaled EUR 415 million, up by +1.4%.
- Excluding spectrum and football broadcasting rights, the Proximus Group CapEx ended the year 2022 at EUR 1,305 million. The year-on-year increase of EUR 101 million from 2021 was in large part driven by Proximus’ investments in its Gigabit networks. Fiber related investments accounted for 35% of the total CapEx. Proximus increased its fiber footprint to 1,282,000 premises, representing a coverage of over 21% of Belgium.
- Over the year 2022, Proximus Group posted a Free Cash Flow of EUR 167 million, or EUR 181 million when adjusted for M&A-related transaction costs. The decrease from the comparable adjusted 2021 FCF of EUR 376 million (EUR 237 million reported FCF) mainly resulted from higher cash-out for CapEx, as well as from an unfavorable year-on-year evolution of business working capital needs, in part offset by lower year-on-year income tax payments, cash out for ongoing transformation plans and a lower amount of equity injections in the Fiber joint ventures.
Guillaume BoutinCEO of the Proximus GroupWe concluded 2022 with strong momentum and delivered our highest Group revenue growth quarter of the year at +8.1%, supported by both our Domestic and International segments. We continued to effectively mitigate inflationary pressures to drive EBITDA growth.
After 2 years marked by Covid and its aftermaths, 2022 proved to be another challenging year from a macroeconomic perspective. The war in Ukraine and its impact on the world economy has resulted in inflation rates unprecedented in Belgium for nearly 50 years.
In this complex context, I am proud of the strong performance that Proximus Group has delivered over the past year, and particularly in this last quarter, which shows the success of our #inspire2022 strategy. After a record Q3, we further improved Group revenue growth and with our continued focus on strict cost management to mitigate inflationary effects, we delivered 1.4% EBITDA growth for the Group.
Domestically, we maintained good commercial momentum across our different brands. Our multi-brand strategy continues to be a key success factor which enables us to address all customer segments and accommodate fast evolving customer needs.
While we are delivering strong operational and financial performances quarter after quarter, we are equally transforming the company for the future. The significant part of the available spectrum acquired in June last year will allow us to maintain our mobile leadership position for the next 20 years, with the strong ambition to cover 100% of Belgium with 5G by 2025.
As for Fixed, our roll-out of the best Gigabit Fiber network in Belgium has now reached over 21% of Belgian premises, extending our lead over the competition. Over the past years we have onboarded over 250,000 customers on our fiber network. And this is just the beginning of our journey - as our 10 Gbps Fiber product, currently available in 5 cities, will be progressively rolled out nationwide by summertime.
Investing in the future also means investing in our people, culture and operating model. More concretely this is translating into a common sense of purpose and values embraced by all employees. One of the key elements of this transformation is the transition to agile ways of working, with a company-wide rollout that is well underway and which is already delivering benefits for both customers and our employees. This transformation has been realized in an open and constructive dialogue with our social partners and it is in this same mindset that we have also just concluded a new collective agreement for 2023-2024 with them last Wednesday.
Proximus also takes its societal responsibilities very seriously. This is why we decided last week to offer free calls and texts to Türkiye and Syria after the devastating earthquake, allowing our customers to stay in touch with their loved ones. We also joined a national fundraising action organised by the Belgian Red Cross.
At the same time, we continue to contribute to the fight against global warming. In 2022, Proximus became the third operator in the world to have its short- and long-term greenhouse gas emission reduction targets validated by the Science Based Target initiative (SBTi). Adding to this recognition, our company has been selected to be part of the Bel ESG index, launched last Wednesday. This new high-profile index will track Brussels listed companies that demonstrate the best Environmental, Social and Governance (ESG) practices.
Regarding our international segments, we continue to achieve exceptional results. Since our decision to buy out the minority shareholders, we have set Telesign and BICS back on high growth tracks, with a renewed focus on strong management execution and a growing presence in new markets, which translates into record growth rates. We are therefore delighted to see BICS and Telesign growing respectively by 20.4% and 61.5% year-on-year, and contributing significantly to the direct margin growth of the Group.
Building a digital society that people can trust is of utmost importance for the Group. As such, we are particularly proud to have launched Proximus Ada in May, the first Belgian center of expertise combining artificial intelligence and cybersecurity know-how, and to be one of the first operators in the world to have concluded an agreement with Microsoft to develop a sovereign cloud. This will allow us to offer our customers the power of the artificial intelligence of Microsoft Cloud services, combined with an optimal level of security, guaranteed by Proximus.
Summing up, in a turbulent economic climate I am very pleased that we have been able to exceed the initial financial objectives we had set for 2022. The Proximus Domestic revenue excluding terminals grew by +2.5%, our underlying Domestic EBITDA was up year-on-year by +0.7% and the Group EBITDA grew +0.8% from 2021. With our Fiber rollout accelerating, we closed 2022 with CapEx of EUR 1.3 billion excl. spectrum and football rights. Our 2022 net debt-to-EBITDA ratio currently sits at 2.3X (S&P definition), in line with our plans.
Having achieved our #inspire2022 objectives, we look to the future with confidence and determination as we embark on the next phase.
At our Capital Markets Day 16th of January 2023, we set out our new 3-year strategy bold 2025, focusing on long-term growth and value creation. With bold2025 we will benefit from our 1st mover advantage in Fiber, we will keep good commercial momentum and mitigate inflation effects through our upscaled cost efficiency program. For international segments, already exposed to highly growing markets, we foresee further expansion in new geographies and products. Overall, bold 2025 will ideally position us to successfully meet the challenges of the coming years, with the objective to grow our 2025 Group EBITDA slightly above the 2022 level.
For the year 2023, we expect our Domestic revenue to grow by 1% to 3%. With significant headwinds tied to wage inflation and energy costs we expect underlying Domestic EBITDA to decline by around -3%. For our International segments BICS and Telesign, we expect to deliver high single digit direct margin growth for 2023. In aggregate, our Group underlying EBITDA is expected to land at around -3% compared to 2022. Our CapEx will peak, at around EUR 1.3 billion in 2023, and we project the Net Debt/EBITDA ratio under the S&P definition to be around 2.6X.
To conclude, our Board of Directors approved to propose to the Annual General Shareholders’ Meeting, to return a gross dividend of EUR 1.20 per share over the result of 2022. In line with our newly announced 3-year dividend policy over the 2023-2025 period, we maintain a very attractive shareholder return over the result of 2023, with the annual gross dividend kept at EUR 1.20 per share.
Key Figures
Operationals, in thousands
| Net adds in the quarter | Park at end of quarter | ||||||
|---|---|---|---|---|---|---|---|
| 2021 | 2022 | % | 2021 | 2022 | % | ||
| Fiber | Homes Passed | 126 | 158 | 813 | 1,282 | 57.7% | |
| Activated retail lines | 20 | 31 | 146 | 252 | 72.9% | ||
| Residential customers | Convergent | 17 | 13 | 996 | 1,048 | 5.2% | |
| Group (subscriptions/SIM cards) | Internet | 15 | 9 | 2,178 | 2,216 | 1.7% | |
| TV | 14 | -9 | 1,721 | 1,710 | -0.7% | ||
| Fixed Voice | -45 | -53 | 2,004 | 1,810 | -9.7% | ||
| Mobile postpaid (excl. M2M) | 53 | 43 | 4,651 | 4,817 | 3.6% | ||
| M2M | 154 | 63 | 3,365 | 3,976 | 18.2% | ||
| Prepaid | -20 | -19 | 689 | 621 | -9.8% | ||
Financials (EUR million)
| 4th Quarter | Year-to-date | ||||||
|---|---|---|---|---|---|---|---|
| 2021 | 2022 | % Change | 2021 | 2022 | % Change | ||
| Revenue (underlying) |
Group | 1,441 | 1,558 | 8.1% | 5,578 | 5,909 | 5.9% |
| Domestic | 1,132 | 1,155 | 2.1% | 4,381 | 4,478 | 2.2% | |
| BICS | 259 | 311 | 20.4% | 999 | 1,132 | 13.3% | |
| Telesign | 87 | 140 | 61.5% | 327 | 473 | 44.5% | |
| Direct margin (underlying) |
Group | 900 | 935 | 3.8% | 3,579 | 3,722 | 4.0% |
| Domestic | 823 | 839 | 2.0% | 3,286 | 3,360 | 2.2% | |
| BICS | 58 | 66 | 12.3% | 227 | 263 | 15.9% | |
| Telesign | 23 | 34 | 48.7% | 79 | 114 | 43.0% | |
| Expenses (underlying) |
Group | -491 | -520 | 5.9% | -1,807 | -1,936 | 7.1% |
| Domestic | -441 | -450 | 2.1% | -1,633 | -1,695 | 3.8% | |
| BICS | -33 | -40 | 18.9% | -126 | -143 | 14.1% | |
| Telesign | -20 | -34 | 64.9% | -63 | -112 | 79.3% | |
| EBITDA (underlying) |
Group | 409 | 415 | 1.4% | 1,772 | 1,786 | 0.8% |
| as % of revenue | 28.4% | 26.6% | -1.8 p.p. | 31.8% | 30.2% | -1.5 p.p. | |
| Domestic | 382 | 389 | 1.8% | 1,654 | 1,665 | 0.7% | |
| BICS | 25 | 26 | 3.5% | 102 | 120 | 18.1% | |
| Telesign | 2 | 0 | -86.0% | 17 | 1 | -93.5% | |
| Group EBITDA (reported) |
425 | 419 | -1.6% | 1,828 | 1,826 | -0.1% | |
| Net income | 87 | 81 | -6.7% | 445 | 450 | 1.1% | |
| Accrued CapEx (excl. spectrum and football rights) |
467 | 464 | -0.6% | 1,203 | 1,305 | 8.4% | |
| FCF (adjusted) |
-32 | 99 | > 100% | 376 | 181 | -52.0% | |
| Adjusted net fin position (excl. lease liabilities) |
n.r. | n.r. | -2,740 | -2,758 | -0.7% | ||
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Notes
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Outlook 2022 achieved
Supported by #Inspire2022, the 3-year strategy Proximus Group embarked on in 2020, all guidance metrics set for 2022 were achieved. Proximus Domestic revenue excluding terminals grew by +2.5%, underlying Domestic EBITDA was up year-on-year by +0.7% and the Group EBITDA grew +0.8% from 2021.
With the Fiber rollout progressing well, Proximus ended 2022 with CapEx of EUR 1,305 million excl. spectrum and football rights, i.e. close to EUR 1.3 billion. The 2022 net debt-to-EBITDA ratio reached 2.3X (S&P definition).
| Guidance metric | FY21 Actuals |
FY22 Initial outlook 18 Feb 2022 |
FY22 Outlook Revised upward 28 Oct 2022 |
FY22 Actuals |
|---|---|---|---|---|
| Underlying Domestic revenue Excl. terminals/th> |
€ 4,075M | Growing up to 1% YoY | Growing around +2% YoY | € 4,176M +2.5% |
| Domestic underlying EBITDA | € 1,654M | Growing up to 1% YoY | Upper range of "Growing up to 1% YoY" | € 1,665M +0.7% |
| Underlying Group EBITDA | € 1,772M | Around -1% | Upper range of "Growing up to 1% YoY" |
€ 1,786M +0.8% |
| CapEx (excluding Spectrum & football rights) |
€ 1,203M | Close to € 1.3Bn | Close to € 1.3Bn | € 1,305M |
| Net debt / EBITDA | 1.55X | Around 1.6X | Around 1.6X | 1.5X (Proximus) 2.3X (S&P) |
Shareholders return over the 2022 result
In line with Proximus’ announced three-year dividend policy over the period 2020-2022, the Board of Directors approved the decision to propose to the Annual General Shareholders’ Meeting of 19 April 2023 to return, based on the result of 2022 a gross dividend of EUR 1.20 per share, of which EUR 0.50 interim dividend per share was paid in December 2022.
After approval by the Annual Shareholders’ Meeting, the normal dividend of EUR 0.70 per share will be paid on 28 April 2023.
2023 full-year guidance
As was announced in Proximus’ Capital Markets Day on 16th of January 2023, the company is launching its new bold2025 strategy, built on a foundation of unique domestic and international assets that are truly positioned in their markets to capture growth and provide long term sustainable value for all its stakeholders.
Domestically Proximus will deploy its multi-brand strategy, continued convergent leadership and value management to capture revenue growth, with 2023 Domestic revenue expected to grow by 1% to 3%.
As of 2023, Proximus will activate its second wave of cost savings, with EUR 220 million over the next 3 years, mitigating the effects of the inflationary pressure on OpEx. For 2023 a significant headwind from inflation is expected, leading to a temporary year-on-year underlying Domestic EBITDA decline of around -3%.
The International activities provide a unique growth pathway for Proximus, allowing it to take leadership positions in double-digit growth markets. Proximus expects its International segments BICS and Telesign to deliver a high single digit direct margin growth for 2023.
In aggregate, Proximus expects to end the year 2023 with an inflation-driven decline in Group underlying EBITDA of around -3%.
Proximus expects its Group CapEx to reach its peak of around EUR 1.3 billion in 2023, primarily due to Fiber CapEx to pass, connect and activate Fiber customers and investments in Mobile for the ongoing mobile network consolidation and 5G roll-out. Inflation impacts on CapEx will be managed through CapEx optimization and efficiency programs.
The Net Debt/EBITDA ratio for 2023 is expected to be around 2.6X, allowing for sustained solid investment-grade credit ratings and near-term financing at low interest rates.
| Guidance metric | FY22 Actuals |
FY23 Outlook 1/16/2023 |
|---|---|---|
| Underlying Domestic revenue | € 4,478M | +[1-3%] YoY |
| Domestic underlying EBITDA | € 1,665M | Around -3% YoY |
| International direct margin | € 377M | High single digit growth |
| Underlying Group EBITDA | € 1,786M | Around -3% YoY |
| CapEx (excluding Spectrum & football rights) | € 1,305M | Peak at around € 1.3Bn |
| Net debt / EBITDA | 1.5X (Proximus) 2.3X (S&P) |
Around 2.6X (S&P) |
Shareholders return policy 2023-2025
In line with the bold2025 strategy and deriving shareholder return policy, Proximus intends to return over the result of 2023 a stable gross dividend of EUR 1.2 per share, provided a financial performance delivery in line with its strategic plan.
Over the result of 2024 and 2025, Proximus will rebase its dividend level to EUR 0.60 per share. The rebased sustainable dividend level incorporates all currently known macro and inflationary headwinds, as well as expected changes in market structure. The proposed dividend is reviewed and submitted to the Board of Directors on an annual basis, in order to keep strategic financial flexibility for future growth, organically or via selective M&A, with a clear focus on value creation. This also includes confirming appropriate levels of distributable reserves.
