DGAP-News: freenet AG: freenet Group reports very solid figures for the first quarter of 2020 and confirms guidance, even after taking COVID-19 into account
DGAP-News: freenet AG
/ Key word(s): Quarterly / Interim Statement/Quarter Results
freenet Group reports very solid figures for the first quarter of 2020 and confirms guidance, even after taking COVID-19 into account
- Revenue up 4.3 per cent to 648.8 million euros compared to the previous year
- EBITDA (excluding regulatory effects) stable at 109.2 million euros (+1.7 per cent)
- Free cash flow up significantly to 49.9 million euros (+10.1 per cent)
- Number of subscribers grows by 3.2 per cent to 8.430 million customers
- Guidance issued in February 2020 confirmed, even after taking COVID-19 into account.
- Executive Board and the Supervisory Board propose to the Annual General Meeting a one-time suspension of the dividend in order to maintain financial stability and flexibility
Büdelsdorf, 03 May 2020 - freenet AG [ISIN DE000A0Z2ZZ5] today announced its results for the first quarter of 2020.
Group: Performance in line with expectations, COVID-19 without effect
At 648.8 million euros, revenue in the first quarter of 2020 exceeded the prior-year revenue figure adjusted for MOTION TM (Q1/2019: 622.4 million euros). This increase was attributable to the revenue trend seen in the Mobile Communication segment. EBITDA for the first three months of the year totalled 104.2 million euros, 3.4 per cent lower than in the prior-year quarter (Q1/2019: 107.9 million euros). The reduction of 3.7 million euros was primarily due to the delayed effects of the regulation on international calls/roaming effective since 15 May 2019 (regulatory effects: -5.0 million euros). By contrast, EBITDA excluding regulatory effects and MOTION TM rose slightly by 1.9 million euros to 109.2 million euros (Q1/2019: 107.4 million euros). Free cash flow increased by 10.1 per cent to 49.9 million euros compared to the prior-year quarter (Q1/2019: 45.3 million euros). This significant 4.6-million-euro rise is primarily attributable to an improvement in working capital caused by a reduction in inventories. The subscriber base2 grew compared to the prior-year quarter (31 March 2019: 8.168 million customers) by 261,600 customers (+3.2 per cent) to 8.430 million customers. This corresponds to a net increase of around 63,100 subscribers compared to the end of 2019 (8.367 million customers). It is encouraging to see the postpaid customer base continuing to develop positively in addition to solid growth in waipu.tv subscribers.
Mobile Communications: postpaid customer numbers up moderately, EBITDA stable
The positive trend for the last two quarters in postpaid customers continued, despite the fact that the impact of the coronavirus pandemic was already making itself felt at the end of the past quarter, as demonstrated by factors such as the closure of many of the Group's own shops as well as MediaMarkt-Saturn markets. At the end of the quarter, the number of particularly valuable postpaid customers reached 6.925 million, representing an increase of 63,400 customers compared to the same quarter in 2019 and 22,100 since the start of the year. The response to the app-based freenet FUNK tariff remained encouraging as well. Despite the pause function being limited to exactly 30 days per year and the introduction of an activation fee of 10 euros, the number of active users remained stable compared to the end of the year at 35,300 users.
By contrast, postpaid ARPU fell slightly compared to the prior-year quarter (Q1/2020: 18.4 euros; Q1/2019: 18.8 euros). This trend was primarily due to delayed regulatory effects (International Calls/Roaming: -5.0 million euros), which directly impact revenue from services, thus explaining the slight 4.8-million-euro drop in revenue in postpaid services to 382.5 million euros (Q1/2019: 387.2 million euros). Both postpaid ARPU and the corresponding revenue from services remained relatively stable compared to the end of 2019. In total, reported revenue in the Mobile Communications segment increased by 25.5 million euros to 582.6 million euros due to higher revenue at GRAVIS stores. EBITDA amounted to 91.6 million euros at the end of the quarter (Q1/2019: 96.5 million euros). As in previous quarters, excluding regulatory effects, MOTION TM and segment allocation shows stable and consistent performance compared to the prior-year quarter (+1.0 per cent compared to Q1/2019).
TV and Media: waipu.tv still in the mood for growth
waipu.tv continued its solid growth in the first three months of the new year. The paying customer base reached a new record high with around 452,500 subscribers. Subscribers rose by around 166,100 compared to the prior-year quarter and by around 44,200 subscribers compared to the end of 2019. The number of revenue-generating freenet TV users fell marginally by around 0.3 per cent over the course of the year to 1.017 million freenet TV subscribers (RGU) today, thus continuing to remain stable. It remains to be seen what effect the increase in the monthly subscription price from 5.75 euros to 6.99 euros announced on 1 May will have on user numbers.
Revenue in the TV and Media segment remained stable year-on-year in the first three months of 2020 at 60.7 million euros. Revenue from services included in this figure rose, while marketing (Media Barter) and event-based revenue (temporarily) fell due to the initial effects of the coronavirus crisis in March. At EBITDA level, this development was more than offset primarily by a reduction in marketing expenses planned even before the crisis, causing EBITDA to grow by 8.3 per cent to 15.5 million euros (Q1/2019: 14.3 million euros). Due to the prevailing stability of inter-segment allocation, this trend also applies to EBITDA adjusted for these allocations.
2020 guidance: At present, the Group is expected to perform in line with the guidance, even after taking COVID-19 into account
At the start of the calendar year, the growth forecasts for both the global and German economies were still tentatively positive. However, the coronavirus crisis has caused massive disruption to social and economic life in almost all developed economies. It is not possible to foresee the extent to which the supply shock triggered by the so-called shutdown will translate into a systemic economic crisis. The telecommunications market previously showed itself to be relatively crisis-proof and thus less susceptible to economic fluctuations during the financial crisis of 2008/2009. Even in the current situation, the sector is proving to be comparatively defensive due to its subscription-based business models. Nevertheless, the coronavirus crisis also having an impact on this industry.
The freenet Group believes that the risks to its own business primarily relate to sales. However, the Executive Board is convinced of the resilience of the freenet Group's business model, even under the current circumstances. Based on the current assessment of operating trends and the associated evaluation of sales risks, freenet's management sees no need to adjust its financial and non-financial key performance indicator forecasts and, from today's perspective, confirms the guidance issued at the end of February 2020. However, at present it is impossible to asses the duration and intensity of the crisis and any restrictions resulting from it. Even if the immediate general conditions for the freenet Group's business activities do not change completely, macroeconomic and social changes or upheavals in the course of the year could lead to a correction of the current assessment. The guidance given is therefore subject to greater uncertainty than at the beginning of the year.
Dividend: One-time suspension of dividend proposed to maintain financial stability and flexibility
The freenet AG Management Board and Supervisory Board have decided to propose to the Annual General Meeting on 27 May 2020, apart from the mandatory minimum dividend of 0.04 euros per share, the one-time retention of retained earnings (suspension of dividend). The decision was made against the background of the as yet unforeseeable impact of the coronavirus crisis on the financial sector and the potentially challenging refinancing of two promissory notes in the amount of EUR 700 million. The Group's financial stability and flexibility should thus be maintained even if the situation on the financial markets deteriorates. For the future, the company stands by its current dividend policy, which provides for a payout of at least 80 percent of free cash flow.
freenet AG will host an analysts' conference call at 10:00 CEST on 4 May 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 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. To improve comparability, the previous year's figures for sales and EBITDA are therefore presented adjusted for MOTION TM.
Document title: Q1 2020 eng
03.05.2020 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG.
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|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:||1034961|
|End of News||DGAP News Service|
With 8 Buy predictions and only 1 Sell predictions the community sentiment for the stock is positive.
As a result the target price of €22.00 shows a slightly positive potential of 9.181% compared to the current price of €20.15 for Freenet AG NA.