Orange Sa · EURONEXT:ORA
Orange Sa — FY2013 Earnings Presentation
47 slides from Orange Sa's earnings presentation, Mar 6, 2014
Slide 1: FY 2013 results
Orange FY 2013 results Stéphane Richard, Chairman and CEO Gervais Pellissier, Deputy CEO and CFO March 6th, 2014
Slide 2: Agenda
agenda 1 2013 highlights 2 2013 financial and business performance 3 2014 outlook and conclusion 3 FY 2013 results – March 6th, 2014
Slide 3: 2013 highlights
1 2013 highlights Stéphane Richard Chairman and CEO
Slide 4: FY 2013 performance
FY 2013 performance* revenues (€bn) operating cash flow (€bn) 41.0 -4.5% 7.0 -2.6% excl. reg. -11.4% EBITDA** (€bn) net income Group share (€bn) 12.6 -7.5% as % of revenues 30.9% -1.0pt 1.9 x2.3 CAPEX (€bn) 5.6 -2.0% as % of revenues 13.7% +0.4pt * yoy evolution in comparable basis 5 FY 2013 results
Slide 5: 2013 targets achieved
net debt / EBITDA* 2013 around 2.2x** OpCF ≥ €7bn end of 2013 2013 targets 2013 dividend ≥ 0.80€ selective portfolio review achieved … * calculated by dividing (A) net financial debt, including 50% of the net financial debt of the EE JV in the U.K., by (B) restated EBITDA including 50% of the EBITDA
Slide 6: Operating cash flow guidance achieved
operating cash flow guidance achieved 7 € 7,019m 2013 Operating Cash Flow of at least € bn 7 FY 2013 results – March 6th, 2014 Operating Cash flow = restated EBITDA-Capex
Slide 7: Balance sheet strength preserved
balance sheet strength preserved 2.37x 2 2.17x 2.21x 2013 net debt / EBITDA* around .2x 2012 2013 2013 actuals excluding tax litigation 8 FY 2013 results – March 6th, 2014 * excluding 2005 tax litigation
Slide 8: Dividend policy adapted to cash generation
dividend policy adapted to cash generation 0.80 2013 dividend ≥ € €0.30 interim paid on December 11, 2013 balance of €0.50* to be paid in June 9 FY 2013 results – March 6th, 2014 * subject to the Annual General Meeting of Shareholders approval; ex-date June 2nd, record date June 4th, payment date Ju
Slide 9: Portfolio review focused on existing footprint
portfolio review focused on existing footprint, while respecting leverage ratio guidance signings in 2013: + acquisition of remaining 51% of Dailymotion − disposal of Orange Austria selective portfolio − disposal of Etrali − disposal of Sonaecom review − disposal of Orange Dominicana − disposal of W
Slide 10: Thanks to 4 levers
agile marketing modernization and segmentation digitalization of the driving commercial company momentum … thanks to 4 sustained level of investments strong employee engagement levers 11 FY 2013 results – March 6th, 2014
Slide 11: Accelerating commercial momentum in mobile with 4G take off
accelerating commercial momentum in mobile with 4G take off confirmed mobile contract net adds (excl. M2M, in thousands) 1m 4G customers at the end of 2013 France +558 best year since 2009 in contract net adds (+699k FY13 / +316 Q4’13) Spain 63% of gross adds in Q4 on premium offers (+8pts yoy) Pola
Slide 12: Fixed broadband dynamism sustained by convergence and network investments
fixed broadband dynamism sustained by convergence and network investments broadband net adds Orange TV (in thousands) +156 319k FTTH customers end of 2013 (x1.8 yoy; Q4 at +17% vs Q3) 3.4m Open customers Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 38%* VHBB conquest share over 2013 as % of BB convergent base customers
Slide 13: Accelerating the modernization of the company to mitigate revenue pressure
accelerating the modernization of the company to mitigate revenue pressure yoy change in Group Opex base revenue decline offset by opex savings (in €m) (in % of revenue decline) -37 Group France -129 57% -182 -197 -346 -219 -312 48% 23% -421 17% -441 initial target > €600m 8% -583 -617 -3% 2011 2012
Slide 14: Increased CAPEX on 4G and FTTH to support future growth
increased CAPEX on 4G and FTTH to support future growth investment in very high speed networks x2 yoy CAPEX evolution (CAPEX evolution over 2013, in €m) (in % yoy) end of 2013 > 4,200 4G sites, covering 50% of population xx% CAPEX as % of revenues 2.6m FTTH homes connectable +4.5% 5m VDSL-ready line
Slide 15: Strong employee engagement facilitating the modernization of the company
strong employee engagement facilitating the modernization of the company ongoing improvement in French employee satisfaction top employer awards received in 2013 92% France 90% Spain 88% Poland 84% UK (OBS) Belgium 79% Romania Slovakia Senegal Jun-10 Jun-11 Jun-12 Jun-13 Dec-13 Ivory Coast Uganda %
Slide 16: 2013 financial and business performance
2 2013 financial and business performance Gervais Pellissier Deputy CEO and CFO
Slide 17: 2013 Group financial performance
2 .1 2013 Group financial performance
Slide 18: FY 2013 performance
FY 2013 performance Q4 13 var. FY 13 var. in €m actual cb actual cb key points >40% of revenue decrease (-€1,9bn vs. 2012) revenues 10,216 -5.1% 40,981 -4.5% is due to regulation 236m customers, +3.8m in Q4, with excl. regulation -3.8% -2.6% momentum confirmed in France, Spain and Poland restate
Slide 19: Q4 and FY 2013 revenues
Q4 and FY 2013 revenues slight increase in fourth quarter revenue contraction as mobile retail and convergent offer repricing moves through our customer base focus on Q4 revenue trend France %yoy % yoy revenues - in €m Q4 13 cb ex.reg FY 13 cb ex.reg drop in mobile services revenues trend Group 10
Slide 20: FY 2013 Group EBITDA
FY 2013 Group EBITDA reduction of direct and indirect costs mitigating ~50% of revenue pressure change in EBITDA* in €m -1.0pt 31.8% overall Opex down by €929m to €28,332m (-3.2%) +140 30.9% regulatory pressure still weighing on profitability (~27% of +232 +107 EBITDA drop) +449 13,670 direct
Slide 21: FY and H2 2013 EBITDA evolution by segment
FY and H2 2013 EBITDA evolution by segment stable trend at the Group level with Opex savings offsetting revenue pressures H2 13 var. FY 13 var. Group restated EBITDA - in €m actual cb actual cb cost reduction efforts accelerates in 2013, especially in France and Group 6,232 -7.4% 12,649 -7.5% Pola
Slide 22: 2 representative initiatives
Chrysalid drives the modernisation of the company processes and helps cost reduction decreased unitary cost of customer management in France and Spain -8.7% -5.1% -15.4% -16.9% France Spain 2 representative initiatives FY 2012 Chrysalid gross savings in €bn FY 2013 3.0 2.0 average cost per average c
Slide 23: Indirect cost reduction across nearly all costs lines
indirect cost reduction across nearly all costs lines yoy indirect cost reduction in €m labour cost savings despite internalization of activities relating to -346m€ distribution, customer management, network and IT 18,428 general expenses decreased by -7% thanks to reduced -107 consulting costs
Slide 24: First decrease of labour expenses
first decrease of labour expenses FY Group labour expenses down €107m Group headcount* down 3.0% over 2013 in €m (cumulative variation, in ‘000s) France Poland Others -1,2% -2.7 -1.0 -2.7 -2.1 -0.3 -4.7 -5.1 -73 Q1 13 Q2 13 Q3 13 Q413 +198 -99 €107m reduction in labour expenses over 2013 (after a
Slide 25: FY 2013 CAPEX
FY 2013 CAPEX sustained investment in VHBB to consolidate network leadership in €m and in % (CAPEX / sales) 58% of group CAPEX allocated to networks (+4pts yoy) FY 12cb (13.4%) 5,744 3.127 network 3.261 4G 233 +331 FTTH / 1.201 98 VDSL* IT 1.068 other -444 464 CPE’s** FY13 (13.7%) 5,631 506 submarin
Slide 26: Net income
net income increase in net income due to a lower level of impairments 2012 2012 2013 1 in €m historical cb actual termination of customer base amortization in EBITDA restated 13,670 12,649 Spain restatements* -1,381 -414 EBITDA reported depreciation & amortization 12,495 -6,329 12,289 -6,239 12,235
Slide 27: Cash flow statement
cash flow statement in €m 2012a 2013 restated EBITDA* – CAPEX 7,967 7,019 licences & spectrum -1,255 -449 1 mainly Romania (-€164m) and Belgium (€-135m) net interest expense cash out -1,370 -1,566 income taxes cash out -1,145 -3,287 2 2012 positively impacted by exceptional dividend received f
Slide 28: Net debt kept stable despite €2.1bn tax litigation
net debt kept stable despite €2.1bn tax litigation net debt evolution (in €bn) €-2.0 bn 30.5 includes €270m mainly Romania 0.5€ per 30.7 EE dividends & Belgium share +0.4 +28.6 +2.1 +0.5 +1.3 -0.2 -7.0 +0.4 +1.1 +1.6 net debt restated net financial taxes (excl. spectrum working dividends to dividend
Slide 29: Debt
debt high liquidity combined with a smooth repayment profile bonds*/bank loans/leases repayments end of 2013 in €bn high liquidity position of €12.3bn as of December 31, 2013 including bonds bank loans &others 17.0 €5.9bn in cash 4.6 in addition opportunistic issuances early 2014 with attractive
Slide 30: 2013 business performance
2 .2 2013 business performance
Slide 31: FY 2013 France financials
FY 2013 France financials EBITDA margin approaching stabilization thanks to cost reduction var var mobile ARPU at -11.5% yoy (-8% excl. reg.) in €m 4Q13 in cb FY 13 in cb – end of 2013, 85% contract customer base on a post-2011 offer revenues 4,954 -7.0% 20,018 -6.6% excl. regulation -6.2% -4.8%
Slide 32: FY 2013 Spain
FY 2013 Spain growth in revenues with strong EBITDA improvement (+9.2%) var var in €m 4Q13 in cb FY13 in cb sustained commercial momentum … revenues 992 -1.9% 4.052 +0.6% – strong Q4 mobile contract net adds (+152 k) pushed by 4G success excl. regulation +2.7% +4.4% – market leader in ADSL with hi
Slide 33: FY 2013 Poland
FY 2013 Poland improving commercial momentum in mobile helps alleviate full year revenue erosion var var in €m 4Q13 in cb FY13 in cb commercial momentum continuously improving… revenues 755 -9.4% 3,079 -8.6% – convergence strategy on track with +75k 4Q13 net adds in Open customers, adding to a 286
Slide 34: FY 2013 Rest of the World
FY 2013 Rest of the World revenue growth in emerging markets offsetting difficulties in Europe var var in €m 4Q13 in cb FY13 in cb European and other countries total ROW revenues 1,971 -1.9% 7,792 -0.5% in Q4, European revenues down -11%, with excl. regulation -0.8% +1.3% – Belgium at -19% excl. r
Slide 35: FY 2013 Enterprise
FY 2013 Enterprise despite unfavorable macro-environment in 2013, revenue decrease slowdown in Q4 vs. Q3 var var ongoing pressure on prices in parallel with migrations to IP solutions in €m Q4 13 in cb FY13 in cb IPVPN customer base continues to grow but pressure on revenues coming total enterpr
Slide 36: 2014 outlook and conclusion
3 2014 outlook and conclusion Stéphane Richard Chairman and CEO
Slide 37: Leveraging on sector transformation to fuel future revenue
leveraging on sector transformation to fuel future revenue… trends our levers to adapt 1 increasing penetration of SIMO and convergent offers adapted marketing segmentation to keep value leadership 2 sustained investments in Very High Speed networks and increasing usage requiring more speed, network
Slide 38: Continuing cost reduction efforts to reach EBITDA margin stabilization
… while continuing cost reduction efforts to reach EBITDA margin stabilization % of revenues decline offset by Opex savings targeting a stabilization in the Group’s restated EBITDA margin for FY 2014 100% -0.5pt 57% -1.1pt 48% -1.0pt 23% -1.6pt 17% -1.5pt 8% -3% -2.0pt 2011 2012 2013 2014e 2011 2012
Slide 39: Guidance
2014 restated net debt / EBITDA** EBITDA* closer to 2x by year- €12.1bn - €12.6bn end 2014 and stabilised EBITDA* around 2x in the margin rate medium term 2014 dividend 2014 €0.60 selective M&A policy, focus on interim payment existing footprint guidance €0.20 in December 2014 * restated EBITDA and
Slide 40: Thank you
thank you today changes with
Slide 41: Appendices
appendices today changes with
Slide 42: Details on revenues
details on revenues Q4 13 FY 13 % yoy % yoy cb % yoy % yoy cb in €m actual actual cb excl.reg cb excl.reg Group revenues 10,216 -5.1% -3.8% 40,981 -4.5% -2,6% France 4,954 -7.0% -6.2% 20,018 -6.6% -4,8% mobile services 1,980 -12.1% -11.0% 8,348 -10.3% -7,0% handset sales 184 -1.4% -1.4% 538 -3.7% -3
Slide 43: Quarterly Group EBITDA over 2013
quarterly Group EBITDA over 2013 -0.8 pt -1.3 pt 31.2% 33.1% -526 +48 +26 31.9% +23 30.4% +44 -441 3,346 +71 -14 3,597 +104 3,293 +139 3,124 -€302m o/w -€88m regulatory effects -€422m o/w -€102m regulatory effects Q1 revenues interco commercial labour IT&N, Q1 13 Q2 revenues interco commercial labou
Slide 44: EBITDA restatements
EBITDA restatements 2012 2013 in €m cb actual EBITDA restated 13,670 12,649 restructuring o/w optimization of the internal and -299 1 mainly Poland and France external workforce -78 contents distribution networks -87 -102 2 onerous contracts in France other -32 litigations major litigations
Slide 45: FY 2013 France mobile KPIs
FY 2013 France mobile KPIs strong mobile contract performance with1 million customers best contract net adds excl. M2M since 4th player launch increasing value share in a contracting market with mix rebound towards premium offers (Origami + Open) mobile contract net adds (excl. M2M) retail market sh
Slide 46: FY 2013 France fixed KPIs
FY 2013 France fixed KPIs fixed broadband dynamism confirmed with increasing share of fibre FTTH net adds ramp-up, contributing to increasing VHBB increasing Open penetration with favorable impact share of conquest at 38%* in 2013 on both fixed and mobile churn Q4 12 Q4 13 40%* share of Open in 41.9
Slide 47: EE: FY adj. EBITDA margin improving to 24.3%
EE: FY adj. EBITDA* margin improving to 24.3%, +1.1% underlying service revenue growth in Q4, c. 2m 4G subs Q4 mobile service revenue grows 1.1% ex Solid postpaid net adds** regulation, £m -1.5% +1.1% -38 +57 -41 1,467 1,429 1,445 Q4/12 regulation Q4/12 postpaid prepaid Q4/13 ex * * excluding MVNOs