Telecomunicazioni
Press release Orange - Financial results at 30 June 2019
Press release
Paris, 25 July 2019
Financial results at 30 June 2019
Revenues return to growth, EBITDAaL continues to increase
France stabilises its revenues, Africa & Middle East continues to grow strongly.
2019 objectives are confirmed.
This increase was driven by the powerful engine of Africa & Middle East, which rose 5.8%, and by the resilience of France, where revenues stabilised, growing 0.4%, excluding the impact of the ePresse and audiobook offers. Affected by a highly promotional market, Spain fell slightly, declining 1.6%. The other segments contributed to the revenue growth: Europe rose 1.2% thanks to convergence and Enterprise posted its third consecutive quarter of growth, rising 0.7%.
Outlook for 2019
Based on the 1 half 2019 results, and excluding the effects of the new network-sharing contract in Spain, Orange is re-affirming its objectives for 2019:
Commenting on the publication of the 1st half results, Stéphane Richard, Chairman and CEO of Orange Group, said:
"Although there continues to be strong competition in our key markets, the second-quarter results meant the Group delivered a good performance for the first half with revenues increasing 0.2% and growth in EBITDAaL sustained at 0.8%.
It is clear that our strategy in very high-speed broadband remains effective. On fixed services, the acceleration of our fibre deployments in Europe was accompanied by a continually strong commercial performance, which enabled us to attain the level of nearly 7 million fibre customers.
In mobile, Orange now has 62 million 4G customers, including nearly 20 million in Africa and the Middle East, and we are getting ready for the arrival of 5G with numerous tests being carried out with the initial mobile devices, in preparation for commercial launches next year. In addition, the RAN-sharing agreements in Spain and Belgium formalised in recent months show we are committed to the long-term optimisation of our networks.
I would like to highlight the very good performance of our operations in Africa and the Middle East which are, more than ever, an important growth driver for Orange.
This first half also marked a new milestone in our multi-service operator strategy with the acquisition of SecureData and SecureLink in the cyberdefence market, where we have the ambition to become the leader in Europe. Our cyberdefence offer is now available in 12 countries, and already has 3,700 customers and full-year revenues of €600 million.
I would like to extend my sincere thanks to all the Orange teams, who work every day to ensure the satisfaction of our customers and the success of the Group."
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Orange SA's Board of Directors met on 24 July 2019 and reviewed the interim consolidated financial statements at 30 June 2019, which were prepared under its responsibility.
The interim consolidated financial statements at 30 June 2019 are posted on Orange's website in the "Investors / Results and presentations" section.
More detailed information on the Group's financial statements and performance indicators is also available on Orange's website in the same section:
www.orange.com
In accordance with auditing standards, the statutory auditors performed a limited review of the interim consolidated financial statements and verified the information presented in the interim management report.
Key figures
Half-year data
(1) Adjustments to the presentation of EBITDAaL are described in Appendix 2.
(2) Compared with 31 December 2018, the net financial debt as of 30 June 2019 excludes the lease liabilities included in the scope of IFRS 16 and includes debts relating to financed assets.
(3) Ratio calculated based on adjusted EBITDA over the previous 12 months on a historical basis.
(4) Ratio calculated based on an approximation of EBITDAaL over the previous 12 months on a historical basis.
Quarterly data
(1) Adjustments to the presentation of EBITDAaL are described in Appendix 2.
Comments on key Group figures
Revenues
Orange Group revenues were €20.6 billion in the 1 half, up 0.2% on a comparable basis as growth resumed in the 2 quarter (up 0.5%) after being relatively stable in the 1 quarter. Without the impact of the end of the promotional period for ePresse and audiobook offers, revenues would have been up 0.5% in the 1 half.
In the 1 half 2019, the performances of the main services, on a comparable basis, were as follows:
Revenues from Convergence – marketed in all European countries – were €3.5 billion, up 4.1%. This increase enabled Orange to consolidate its position as the leading convergent operator in Europe.
Revenues from mobile-only services were €5.2 billion, up 0.6%.
Revenues from fixed - only services ( €4.8 billion) fell 3.2% as a result of the migration to convergent services and the declining trend in fixed narrowband services.
Revenues from IT and integration services (€1.3 billion) showed slightly accelerated growth of 6.8% versus the 6.5% increase in the 1 half of 2018. This growth was driven by Cloud and security services in the Enterprise segment, as well as by the Enterprise market in Poland.
Revenues from wholesale (€3.9 billion) fell 0.8%, albeit with an improving trend between the 1 and 2 quarters (-1.4% and -0.3%). This decline was primarily due to the decrease in international voice traffic and visitor roaming.
Revenues from equipment sales (€1.4 billion) fell 4.6%, impacted by a decline in subsidies and a more limited range of devices.
Customer base growth
There were 10.6 million convergent customers , up 4.4%, underpinned by very strong growth in Europe.
There were 206.9 million mobile customers , with 3.3 million added in the 1st half.
There were 20.4 million fixed broadband customers , an increase of 209,000 in the 1st half.
EBITDAaL
Group EBITDAaL was €6 billion in the 1 half, up 0.8% on a comparable basis. Growth in EBITDAaL was primarily the result of the success of our operating efficiency plan.
Operating income
In the 1 half, Group operating income was €2.4 billion, an increase of 1.6%, primarily related to the increase in EBITDAaL.
Net income
Orange Group had a consolidated net income of €1,137 million at 30 June 2019, compared to €879 million in the 1 half of 2018, benefitting from improved operating income as well as improved financial income, which included lower impairment of the Group's stake in BT.
eCAPEX
Group eCAPEX was up 5.5% in the 1 half, on a comparable basis, to €3.5 billion. This growth stemmed mainly from the rollout of very high-speed fixed and mobile broadband, primarily in France and to a lesser degree in the countries of Africa & Middle East.
As such, at 30 June 2019, the Group had 35.5 million households connected to very high-speed broadband, including increases in France (up 31%), Spain (up 13%) and Poland (up 30%). The Group also bolstered its 4G coverage, with nearly 100% coverage of the populations in France, Belgium and Poland, and coverage of at least 97% in Spain, Romania and Moldova.
Changes in asset portfolio
Continuing its strategy of diversification into new services, in May 2019 Orange announced that it had signed an agreement to acquire SecureLink, the leading independent cybersecurity player in Europe. The acquisition of SecureLink (closed on 8 July) following on from that of SecureData in January and positions Orange as the cybersecurity market leader in Europe.
On 28 June 2019, Orange also announced the disposal of its residual interest in BT Group plc for a net amount of €542 million.
Net financial debt
Orange Group's net financial debt was €26.7 billion at 30 June 2019. The debt in the 1st half of 2019 was mainly related to the seasonality of certain disbursements , as well as from our strategy of investing in very high-speed broadband networks. The amount of net debt at 30 June does not take into account the disposal of BT shares, the proceeds of which were received on 2 July.
The ratio of “net financial debt to EBITDAaL from telecoms activities” was 2.06x at 30 June 2019. This is in line with the Group's objective to maintain a net debt to EBITDAaL ratio for telecoms activities of around 2x in the medium term.
2019 dividend
Confident in the performance and solidity of the Group's financial structure, on 24 July 2019 the Board of Directors decided on the distribution of an interim dividend for 2019 of €0.30 per share payable on 4 December . The Board also confirmed that it would propose to the 2020 Annual Shareholders' Meeting a dividend of €0.70 per share for FY 2019.
Review by operating segment
France
A strong commercial performance in both mobile and fixed broadband in France, with a stabilisation in revenues.
On a comparable basis, in the 2 quarter, revenues in France stabilised and were up 0.4%, excluding the impact of ePresse and audiobook offers, after a decrease in the 1 quarter.
Retail services revenues were down 1.5% in the 2 quarter of 2019, which is an improvement compared to the 2.6% decline in the 1 quarter. Revenues from convergent offers rose 4%, an acceleration compared to the 2.5% increase in the 1 quarter. Mobile-only revenues fell 3.7% in the 2 quarter (compared to a 5.2% decline in the 1st quarter), impacted by migrations to convergent offers and the increase in the relative weight of Sosh. Fixed-only broadband revenues declined 5.7% (following a 5.9% decline in the 1 quarter), also impacted by migrations to convergent offers and the ongoing reduction in narrowband services.
Wholesale revenues grew 3.3% in the 2 quarter, an acceleration on the 1 quarter (up 0.9%), driven by the construction of publicly funded networks (RIPs), which offset the decline in unbundling.
Revenues from equipment sales were down 4.4%, an improvement compared to the 6.4% decline in the 1 quarter, due to a significantly slowing market.
In the 2 quarter, ARPO was €17.0 for mobile-only, €36.5 for fixed broadband only and €66.9 for convergent offers.
In terms of the solid sales performance in the 2 quarter, mobile contracts recorded 61,000 net sales and an improved churn rate, which was 10.9%, 0.8 percentage points lower year on year and 1.4 points lower compared to the previous quarter.
Fixed broadband registered 41,000 net sales in the 2 quarter, with record sales for fibre (160,000 net sales) for a 2 quarter. At 30 June 2019, Orange had 13.5 million connected households and a total of 2.9 million fibre customers.
The convergent customer base rose 3.1% year on year, reaching 5.7 million customers, and the churn rate of convergent customers was 2.9 percentage points lower than the average rate for retail fixed broadband customers.
EBITDAaL declined 0.4% in the 1 half, but would have increased 1.8% excluding the impact of ePresse and audiobook offers, driven by a decline in indirect costs.
Spain
Revenues under pressure in Spain, while EBITDAaL continued to grow thanks to cost rationalisation.
On a comparable basis, Orange Spain revenues fell 1.6% in the 2 quarter in a very volatile market environment.
Retail revenues fell 3.9% in the 2 quarter and 1.7% in the 1 half.
Due to a market environment that remains very promotional, convergent and mobile-only revenues were down 3.6% and 7.8%, respectively in the 2 quarter. Fixed only revenues rose 4.1% in the same period, thanks in particular to the growth of Orange Spain on the Enterprise market.
Wholesale revenues continued to grow, up 9.8% in the 2 quarter and up 13.6% in the 1 half, fuelled by sustained international traffic.
Revenues from equipment sales continued to decline in the 2 quarter (down 1.3%), but improved substantially compared to the 17.1% decline in the 1 quarter due to the commercial actions that were taken.
Against this backdrop, Orange focused on preserving its customer base: in the 2 quarter Orange Spain had 38,000 net mobile contract sales and a decline in the churn rate of 2.6 percentage points compared to the 1 quarter. Very high-speed fixed broadband (fibre) increased by 71,000 net sales.
EBITDAaL rose 2.0% in the 1 half, demonstrating Orange Spain's resilience and its ability to rationalise costs by automating and digitalising its operational processes.
Europe
Europe revenues increased, driven by rising retail services as a result of convergence.
On a comparable basis, Europe revenues (which consists of Belgium, Luxembourg, Moldova, Poland, Romania and Slovakia) rose 1.2% in the 2 quarter and 1.3% in the 1 half. This increase was the result of solid growth in retail services, but was still impacted by the decline in wholesale services.
Retail services revenues grew 2.5% in the 2 quarter, a slight slowdown compared to the 3.6% growth in the previous quarter.
In this segment, convergent revenues continued their robust growth, up 35.5% in the 2 quarter and 39.0% in the first six months.
Mobile-only revenues declined 2.1%, impacted particularly by migrations to convergent offers, which now represent 17% of the total mobile contract base .
Fixed-only revenues declined 8.5% in the 2 quarter. Nonetheless, the broadband growth drivers are in place with a FTTH customer base which grew by a little over 290,000 customers over the last 12 months (reaching a total of 914,000 customers).
Revenues from IT and integration services continued to increase strongly, up 22.8% in the 2 quarter, driven principally by Poland.
Wholesale revenues were down 5.8% in the 2 quarter, but this was an improvement compared to the 1 quarter (down 8.1%).
At the country level, Poland reported the fourth consecutive quarter of revenue growth (up 2.0% in the 2 quarter), due in particular to the excellent performance of convergence services (up 21.4%). Revenues in Belgium and Luxembourg increased 1.9% in the 2 quarter; all segments of retail revenues (convergent, mobile-only, fixed-only, IT & integration) rose, but wholesale revenues were still down 13.0% due to the impact of the termination of MVNO contracts. Revenues from Central Europe declined 0.5% in the 2 quarter, an improvement on the 1.9% decline in the previous quarter; although the performance of retail services improved (up 2.5%), the overall decline was related to pressure on wholesale services.
Despite the good dynamic overall, Europe EBITDAaL eroded slightly falling 1.8% in the 1 half, mainly due to three factors: the loss in 2018 of MVNO contracts in Belgium, higher costs for content to support the growth of convergence, and higher access costs for third-party fixed broadband networks in connection with the growth of our customer base.
Africa & Middle East
Continued growth in Africa & Middle East, underpinned by the solid performance of retail services.
As the strongest contributor to the Group's growth, Africa & Middle East delivered a 5.8% increase in 2 quarter revenue on a comparable basis, a slight acceleration from the previous quarter (5.3%). This was driven by the strong performance of retail services , which produced its 7 consecutive quarter of growth of around 8% (7.9% in the 2 quarter).
This performance resulted primarily from the continued growth of mobile-only services, which rose 7.2% in the 2 quarter, driven by the growth in data services. Africa & Middle East had nearly 20 million 4G customers while the Orange Money active customer base rose 6% compared to the previous quarter, to 16.5 million customers. Taken together, Africa & Middle East countries registered 122.6 million mobile customers, 2.2 million more than in the previous quarter.
Revenue growth remained strong thanks to fixed services , rising 15.2% in the 2 quarter after increasing 8.1% in the 1 quarter, and in particular due to broadband services which registered 1.1 million clients.
Wholesale services fell 7.5% in the 2 quarter, principally due to reduced volumes in direct international incoming traffic.
The four operations acquired in 2016 accounted for more than one-quarter of the revenue growth in the 2 quarter. Over the quarter, Africa & Middle East also benefited from the performance of Egypt and Sonatel Group, which grew 9.2% and 5.5% year on year, respectively; while Côte d'Ivoire returned to growth with a 6.1% increase in revenues year on year.
The EBITDAaL of Africa & Middle East grew strongly, up 10.5% in the 1 half, reaching a margin of 31.7%, an increase of 1.4 percentage points year on year thanks to sound cost management.
Enterprise
Enterprise revenue increased for the third consecutive quarter.
In the 2 quarter, revenues in the Enterprise segment increased 0.7% on a comparable basis, the third consecutive quarter of growth. IT and integration services were the drivers of this growth.
IT and integration services revenues rose 6.6% in the 2 quarter, an acceleration compared to the 4.6% increase in the previous quarter. These continued to be driven by Cyberdefense and Cloud services, which grew 15% and 20%, respectively, in the quarter.
Mobile revenues fell 1.8% in the 2 quarter. Revenues from traditional voice and data services decreased 2.6% despite the stability of data services (0% change), underpinned by WAN (Wide Area Networks) offers. In July, Orange Business Services won the largest SD WAN (Software Defined Wide Area Networks) contract to date, with Sony, for the rollout of this solution in 50 countries.
After acquiring SecureData in January, Orange concluded the acquisition of SecureLink, the leading independent cybersecurity player in Europe, in July 2019. The cumulated annual revenues of SecureLink, Secure Data and Orange Cyberdefense reached more than €600 million in 2018, making Orange a European leader in cyberdefence, with a presence in 12 European countries and a portfolio of 3,700 customers.
International Carriers & Shared Services
On a comparable basis, revenues from International Carriers and Shared Services decreased 4.8% in the 2 quarter, with a decline in services to international carriers.
At the same time, growth in other revenues continued to accelerate strongly rising 15.9% in the 2 quarter, compared to 5.0% in the 1 quarter. Other revenues consist mainly of the laying and maintenance of submarine cables, content (OCS and Orange Studio), consulting (Sofrecom) and secure-TV access (Viaccess). With the success of the TV series 'Game of Thrones' and 'Chernobyl', OCS recorded 400,000 new subscribers in the 2 quarter.
Orange Bank
In the 1 half, Orange Bank registered nearly 20,000 new accounts per month with a total of 320,000 customers at 30 June 2019, of which around 60% are active users.
The improvement in the quality of the app is evident and recognised by customers, who rate it 4.4 on the App Store.
Schedule of upcoming events
29/10/2019 - Publication of third-quarter 2019 results
Contacts
Disclaimer
This press release may contain forward-looking statements about Orange, particularly objectives and trends regarding Orange's financial situation, investments, results of operations, business and strategy. These forward-looking statements do not represent forecasts within the meaning of European Regulation No. 809/2004 and although we believe they are based on reasonable assumptions, they are subject to numerous risks and uncertainties, including matters not yet known to us or not currently considered material by us, and there can be no assurance that anticipated events will occur or that the objectives set out will actually be achieved. More detailed information on the potential risks that could affect our financial results is included in the Registration Document filed on March 21, 2019 with the French Financial Markets Authority (AMF) and in the annual report on Form 20-F filed on April 16, 2019 with the U.S. Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made. Other than as required by law, Orange does not undertake any obligation to update them in light of new information or future developments.
Appendix 1: indicators used until 31 December 2018 (historical basis)
Appendix 2: adjusted data to income statement items
Appendix 3: key performance indicators
Numbers to 30 June 2018 are on a comparable basis
The key indicators by country are shown in the Investors section of the Orange Group website, orange.com, in the document "Orange Investors data book Q2 2019". This is directly accessible through the following link:
https://www.orange.com/en/Investors/Results-and-presentation/Folder/All-consolidated-results
Appendix 4: glossary
Key figures
Data on a comparable basis: data based on comparable accounting principles, scope of consolidation and exchange rates are presented for previous periods. The transition from data on an historical basis to data on a comparable basis consists of keeping the results for the period ended and then restating the results for the corresponding period of the preceding year for the purpose of presenting, over comparable periods, financial data with comparable accounting principles, scope of consolidation and exchange rate. The method used is to apply to the data of the corresponding period of the preceding year, the accounting principles and scope of consolidation for the period just ended as well as the average exchange rate used for the income statement for the period ended. Changes in data on a comparable basis reflect organic business changes. Data on a comparable basis is not a financial aggregate as defined by IFRS and may not be comparable to similarly-named indicators used by other companies.
EBITDAaL or “EBITDA after Leases” (from January 1, 2019): operating income (i) before depreciation and amortization of fixed assets, effects resulting from business combinations, reclassification of cumulative translation adjustment from liquidated entities, impairment of goodwill and fixed assets, share of profits (losses) of associates and joint ventures, (ii) after interest on debts related to financed assets and on lease liabilities, and (iii) adjusted for significant litigation, specific labour expenses, fixed assets, investments and businesses portfolio review, restructuring programs costs, acquisition and integration costs and, where appropriate, other specific elements. EBITDAaL is not a financial aggregate as defined by IFRS standards and may not be directly comparable to similarly-named indicators in other companies.
eCAPEX or “economic CAPEX” (from January 1, 2019): (i) acquisitions of property, plant and equipment and intangible assets, excluding telecommunications licenses and financed assets, (ii) less the price of disposal of property, plant and equipment and intangible assets. eCAPEX is not a financial performance indicator as defined by IFRS standards and may not be directly comparable to indicators referenced by similarly-named indicators in other companies.
Operating Cash Flow (EBITDAaL – eCAPEX from January 1, 2019): EBITDAaL (see definition) less eCAPEX (see definition). Orange uses this indicator to measure the performance of the Group in generating cash from its operations. Operating Cash Flow is not a financial aggregate defined by IFRS and may not be comparable to similarly-named indicators used by other companies.
Reported EBITDA (until December 31, 2018): operating income before depreciation and amortisation, before impacts related to acquisitions of controlling interests, before reversal of reserves of liquidated entities, before impairment of goodwill and assets, and before income from associates. Reported EBITDA is not a financial aggregate as defined by IFRS standards and may not be directly comparable to similarly-named indicators in other companies.
Adjusted EBITDA (until December 31, 2018): reported EBITDA (see definition), adjusted for the impacts of key disputes, specific personnel expenses, the review of the portfolio of shares and operations, restructuring and consolidation costs, and, as applicable, other specific and systematically identified items. Adjusted EBITDA is not a financial aggregate as defined by IFRS standards and may not be directly comparable to similarly-named indicators in other companies.
CAPEX (until December 31, 2018): capital expenditure on tangible and intangible assets excluding telecommunication licences and investments through finance leases. CAPEX is not a financial performance indicator as defined by IFRS standards and may not be directly comparable to indicators referenced by similarly-named indicators in other companies.
Operating Cash Flow (Adjusted EBITDA – CAPEX until December 31, 2018): Adjusted EBITDA less CAPEX. Orange used this indicator to measure the performance of the Group in generating cash from its operations. Operating Cash Flow is not a financial aggregate defined by IFRS and may not be comparable to similarly-named indicators used by other companies.
Convergence
The customer base and the revenues invoiced to convergence services customers (excluding equipment sales) was for convergent offers defined as the combination of, at a minimum, a fixed broadband access and a mobile contract subscribed by retail market customers.
Convergent ARPO: the average quarterly revenues per convergent offer (ARPO) is calculated by dividing revenues from retail convergent services offers invoiced to customers generated over the past three months (excluding IFRS 15 adjustments) by the weighted average number of retail convergent offers over the same period. ARPO is expressed by monthly revenues per convergent offer.
Mobile Only services
Revenues from Mobile Only services consists of revenues invoiced to customers of mobile offers excluding retail convergence and equipment sales. The customer base includes customers with a contract excluding retail convergence, machine-to-machine contracts and prepaid cards.
Mobile Only ARPO: the average quarterly revenues from Mobile Only (ARPO) is calculated by dividing the revenue from Mobile Only services (excluding machine-to-machine and IFRS 15 adjustments) generated over the past three months by the weighted average of Mobile Only customers (excluding machine-to-machine) over the same period. The ARPO is expressed as monthly revenues per Mobile Only customer.
Fixed Only services
Revenues from Fixed Only services include the revenue of fixed services excluding retail convergence and equipment sales: traditional fixed-line telephony, fixed broadband and enterprise solutions and networks . The customer base consists of fixed-line telephony and fixed broadband customers, excluding retail convergence customers.
Fixed Only Broadband ARPO: the average quarterly revenues from Fixed Only Broadband (ARPO) is calculated by dividing the revenue from Fixed Only Broadband services (excluding IFRS 15 adjustments) generated over the past three months by the weighted average of Fixed Only Broadband customers over the same period. ARPO is expressed as monthly revenues per Fixed Only Broadband customer.
IT & integration services
Revenues from IT and integration services include revenue from unified communication and collaboration services (Local Area Network and telephony, consulting, integration, project management and video conferencing offers), hosting and infrastructure services (including cloud computing), application services (customer relations management and other application services), security services, machine-to-machine services (excluding connectivity), as well as equipment sales for the products and services above.
Wholesale
Revenues from other carriers consists of (i) mobile services to other carriers including incoming traffic, visitor roaming, network sharing, national roaming and Mobile Virtual Network Operators (MVNOs), and (ii) fixed services to other carriers including national networking, services to international carriers, high-speed and very high-speed broadband access (fibre access, unbundling of telephone lines and xDSL access sales) and the sale of telephone lines on the wholesale market.
Excluding machine to machine
the leading independent provider of cybersecurity solutions in the United Kingdom
in particular, the payment of the balance of the dividend
The ex-dividend date is set for 2 December 2019 and the record date for 3 December 2019.
Excluding machine-to-machine
Excluding machine-to-machine
customers making at least one transaction per month
Mobile revenues include mobile services and mobile equipment sales invoiced to businesses and incoming mobile traffic from businesses invoiced to other carriers
With the exception of France, where enterprise solutions and networks are listed under the Enterprise business segment.
Attachment
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