DGAP-News: freenet AG: freenet Group meets 2019 guidance and proposes unchanged dividend - stable outlook for 2020
DGAP-News: freenet AG
/ Key word(s): Preliminary Results/Annual Results
freenet Group meets 2019 guidance and proposes unchanged dividend - stable outlook for 2020
- Revenue up 1.2 per cent to 2.93 billion euros
- EBITDA of 426.8 million euros at expected level
- Free cash flow in middle of forecast range at 249.0 million euros
- Number of subscribers grows by 2.5 per cent to 8.367 million
- Proposed dividend for 2019: 1.65 euros per share
- 2020 guidance: stable outlook for financial and operational KPIs
Büdelsdorf, 27 February 2020 - freenet AG [ISIN DE000A0Z2ZZ5] today announced its preliminary results for the 2019 financial year.
Group: overall performance in line with 2019 guidance
The freenet Group once again performed well in a highly competitive and saturated market environment. Revenue remained stable compared to the previous year as forecasted at 2.93 billion euros (2018: 2.90 billion euros). At 426.8 million euros, EBITDA fell exactly into the anticipated range for the financial year. In a direct year-on-year comparison, EBITDA decreased by 3.3 per cent (2018: 441.2 million euros), although direct comparability is only possible to a limited extent due to regulatory effects (IFRS 16, international calls/roaming and analogue radio divestment). EBITDA adjusted for the effects mentioned remained virtually unchanged at 402.8 million euros (-0.4 per cent). The same also applies for EBITDA on a quarterly basis. After deducting the positive IFRS 16 effect of 9.8 million euros and the negative result from other regulatory effects of around 6.7 million euros, adjusted EBITDA amounted to 98.0 million euros in the fourth quarter of 2019 after 101.6 million euros in the same prior-year period. Most of the difference from the prior-year quarter was attributable to consulting services associated with Sunrise's planned takeover of UPC Switzerland.
Although the free cash flow of 249.0 million euros was below the previous year's figure (2018: 263.8 million euros), it was still in line with expectations for the year (240.0 to 260.0 million euros). On a quarterly basis, free cash flow was slightly below the previous year at 49.8 million euros (Q4/2018: 53.7 million euros) but met the guidance (50.0 to 60.0 million euros) as well. Overall, free cash flow remained stable, corresponding to 1.94 euros per share.
Subscriber figures showed highly encouraging growth of 2.5 per cent to 8.367 million across all business areas and segments as of the end of December (2018: 8.162 million). This means that the number of subscribers rose by around 205,000 compared with 31 December 2018. The number of waipu.tv subscribers had a significant impact on this development, rising by 62.2 per cent.
Based on the results achieved, the Executive Board and Supervisory Board will propose a dividend of 1.65 euros per share for the 2019 financial year at the Annual General Meeting on 27 May 2020.
Mobile Communications: postpaid customer numbers up slightly, EBITDA stable
After the number of postpaid customers declined slightly in the first half of 2019 due to a quality-related restructuring of the tariff mix and adjustments to product management, this figure returned to growth in the third quarter and continued this trend until the end of the year. The fact that the freenet Group is nevertheless reporting moderate customer growth in this segment compared to the previous year, with 6.903 million at the end of 2019 (2018: 6.896 million), underlines the strong competitive positioning of the Group and the mobilcom-debitel and klarmobil brands in this fiercely competitive customer segment and, in particular, the effectiveness of the various measures implemented across almost all sales and communication channels. The Group also acquired around 34,000 customers by the end of the year with the freenet FUNK tariff introduced in May 2019 - Germany's first app-only tariff. As a result, freenet FUNK offers further proof of the freenet Group's digital innovation and market presence.
The Group's strategic focus on valuable customer relationships was also reflected in the stable development of postpaid ARPU without hardware, which was 18.7 euros at the end of December 2019 (2018: 19.0 euros). The corresponding postpaid revenue from services amounted to 1,540.9 million euros for the year under review, also remaining stable despite regulatory effects (-0.9 per cent compared to 2018). In total, revenue shown in the Mobile Communications segment increased by 52.3 million euros to 2,658.9 million, primarily as a result of higher low-margin hardware revenue. This trend was also significant compared to the prior-year quarter (Q4/2019: 730.2 million euros; Q4/2018: 714.3 million euros).
EBITDA amounted to 367.3 million euros at the end of the year, thus remaining stable compared to the previous year (2018: 366.0 million euros). Excluding regulatory effects from IFRS 16 and international calls/ roaming as well as inter-segment allocation, EBITDA amounted to 363.1 million euros, keeping it around 6.1 million euros above the previous year's figure at year-end (2018: 357.0 million euros) due to lower customer acquisition costs in Q1/2019. On a quarterly basis, the corresponding EBITDA was slightly below the prior-year figure due to various individual customer-focused measures (Q4/2019: 86.4 million euros; Q4/2018: 88.6 million euros).
TV and Media: waipu.tv clearly exceeds annual target of more than 350,000 subscribers
The development of waipu.tv's customer figures was also highly positive. The 2019 forecast anticipated 350,000 subscribers by the end of the year, and this target was reached by August. By the end of 2019, 408,300 customers had opted for one of the IPTV product's subscription options. This means that the number of subscribers grew faster overall in 2019 (+156,500) than in the 2018 financial year (+149,500). The number of revenue-generating freenet TV users rose by around 6,900 over the course of the year to 1.021 million freenet TV subscribers (RGU) today, thus remaining stable as expected.
Revenue in the fourth quarter continued the positive trend of the three previous quarters, rising by 3.6 per cent or 2.3 million euros to 66.1 million euros (Q3/2019: 63.8 million euros). Full-year revenue in this segment remained approximately 28.7 million euros below the prior-year figure (2018: 282.6 million euros); this was due to the sale of the analogue radio business in 2018. Excluding the regulatory effects of IFRS 16 and the analogue radio divestment as well as inter-segment allocation, EBITDA for financial year 2019 rose by 3.7 million euros to 69.7 million euros (2018: 66.0 million euros). This performance reaffirms the Executive Board's strategic decision to step away from irrelevant parts of the business.
Sale of low-margin hardware retail business MOTION TM
In this context, company management decided to sell the Group's 51 per cent equity investment in MOTION TM Vertriebs GmbH, Troisdorf, as of the end of December 2019 and return the shares to former shareholders for a sale price of 7.0 million euros (of which 0.0 million euros in free cash flow). The strategic reasons cited by the Executive Board for this step included a lack of purchasing synergies, higher risks of default associated with the increase in trading volumes and the typical low-margin character of the hardware business. The company's external revenue contribution amounted to 323.5 million euros in 2019, while its EBITDA contribution was approximately 2.6 million euros (0.8 per cent EBITDA margin) with a cumulative free cash flow of -0.2 million euros for the years 2017 to 2019.
Outlook 2020: stable business performance expected overall
Adjusted for MOTION TM, the freenet Group would have generated revenue of 2,609.1 million euros in 2019. On this basis, the company anticipates stable revenue for the 2020 financial year. EBITDA is also expected to remain largely unchanged within a range of 415 to 435 million euros. This represents solid development even though regulatory effects from 2019 in Mobile Communications will still be evident until mid-2020. No additional regulatory effects affecting profitability are expected for 2020. In connection with the predicted development of revenue and EBITDA, free cash flow of between 235 and 255 million euros is anticipated.
The number of postpaid customers is once again expected to grow moderately with stable development of postpaid ARPU. In the TV and Media segment, the number of waipu.tv subscribers are likely to record solid growth, with the number of freenet TV subscribers (RGU) expected to remain stable. The assumption that the number of freenet TV subscribers (RGU) will remain unchanged does not take into account the effects of any product price changes during the year.
The freenet Group expects to publish its final financial results for 2019 on 27 March 2020. The Annual Report for the year ended 31 December 2019 will then be available in the Investor Relations section at https://www.freenet-group.de/investor/publications/index.html.
Conference call webcast
freenet AG will host an analysts' conference call at 11:00 CET on 28 February 2020. All those interested in attending can follow the conference call via webcast at LINK.
A recording of the conference call will be made available following the event.
1 Sum total of postpaid customers, freenet FUNK customers, freenet TV subscribers (RGU) and waipu.tv subscribers.
Document title: CN Preliminary Results FY 2019 - freenet AG
27.02.2020 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG.
|Phone:||+49 (0)40 51306-778|
|Fax:||+49 (0)40 51306-970|
|WKN:||A0Z2ZZ , A1KQXU|
|Listed:||Regulated Market in Frankfurt (Prime Standard); Regulated Unofficial Market in Berlin, Dusseldorf, Hamburg, Hanover, Munich, Stuttgart, Tradegate Exchange|
|EQS News ID:||985219|
|End of News||DGAP News Service|
We see a rather positive sentiment for Freenet AG NA with 8 Buy predictions and 1 Sell predictions.
With a target price of €22.00 there is a slightly positive potential of 9.181% for Freenet AG NA compared to the current price of €20.15.