latest consolidated results: 1st half 2014 (29 July 2014)
Orange stabilises EBITDA margin in 1st half 2014
Solid commercial performance with the high quality of networks well recognised
Restated EBITDA was 6.140 billion euros in the 1st half of 2014, resulting in a margin of 31.3%, unchanged from the 1st half of 2013 on a comparable basis. Restated EBITDA for the 1st half is in line with the objective of restated EBITDA of between 12.0 billion and 12.5 billion euros for the full-year 2014.
Operating costs were reduced by 511 million euros on a comparable basis (-3.7%), offsetting 70% of the downturn in revenues. Direct costs fell 5.9% (298 million euros) and indirect costs declined 2.4% (213 million euros). The cost reduction efforts carried out across the Group has enabled the target for the reduction in indirect costs to be increased to at least 300 million for the year, versus an initial target of at least 250 million euros.
- Revenues were 19.592 billion euros in the 1st half of 2014, a decrease of 3.6% on a comparable basis (-2.6% excluding the impact of regulatory measures). The 2nd quarter performance (-2.3% excluding the impact of regulatory measures) confirms the gradual improvement seen in the 1st quarter (-3.0%, versus -3.8% in the 4th quarter of 2013), related in particular to the performance in France, Belgium, Poland and the Enterprise segment, while strong growth continued in Africa and the Middle East.
- CAPEX was 2.501 billion euros, an increase of 3.1% in relation to the 1st half of 2013 on a comparable basis, in line with the objective of achieving a stable level of CAPEX for the full year. Increasing investment in networks accelerated with the rapid growth of very high-speed broadband (4G and fibre) in Europe, particularly in France, and in mobile usage in Africa and the Middle East. The ratio of CAPEX to revenues was 12.8%, an increase of +0.8 percentage points.
- Commercial momentum remained very strong in the 1st half, supported by investment in very high-speed broadband and the recognised quality of the Group’s mobile networks. France delivered its best performance since 1st half 2010 in terms of net sales of mobile contracts (1) (+146,000). In Spain, the mobile contract1 customer base increased by 147,000 customers while the fixed broadband base rose by 137,000. In Poland, net sales of mobile contract1 sales were 177,000. At 30 June 2014, mobile 4G had a total of 4.2 million customers in the United Kingdom, 2 million in France and 1.4 million in Spain. The mobile customer base in Africa and the Middle East had 3.8 million net additions in the 1st half.
- Net income was 891 million euros in the 1st half of 2014, 318 million euros lower than in the 1st half of 2013, reflecting the pressure on revenues. The Group’s share of net income was 744 million euros in the 1st half of 2014.
- Net debt fell 3.307 billion euros in the 1st half year to 27.419 billion euros at 30 June 2014. Added to the reduction of 562 million euros was the favourable impact of 2.745 billion euros from the Group’s issuance of hybrid bonds (2) in the beginning of the year, which enabled it to strengthen shareholders’ equity. The restated ratio of net debt to EBITDA was 2.17x at 30 June 2014, versus 2.37x at 31 December 2013, in line with the objective of a ratio closer to 2x at the end of 2014.
Outlook for 2014
Taking into account the results for the 1st half of 2014, the Group confirms the target of achieving restated EBITDA (3) of between 12.0 billion and 12.5 billion euros for the full year of 2014. The restated EBITDA margin for full-year 2014 should remain stable compared to 2013.
The Group also confirms the objective of a return to a restated ratio of net debt to EBITDA closer to 2x at the end of 2014 and a restated ratio of about 2x in the medium term in order to preserve Orange's financial strength and investment capacity.
Within this framework, the Group pursues a policy of selective acquisitions by concentrating on markets in which it is already present.
The Group confirms the payment of a dividend of 0.60 euro per share for 2014 (4). An interim dividend for 2014 of 0.20 euros per share will be paid in cash on 9 December 2014 (5).
Commenting on the first-half 2014 results, Orange Group Chairman and CEO Stéphane Richard said:
“These results demonstrate the company’s strength and ability to react in market conditions that continue to be very challenging. We’ve maintained our commercial momentum, despite a hyper-competitive environment, largely due to the investments we’ve made in very high-speed broadband, fibre and 4G. The quality of Orange’s fixed and mobile networks is widely recognised and this has allowed us to differentiate ourselves even more. It is clear that consumers are not just focused on price but are also sensitive to quality and service.
Overall, we had a solid commercial performance, particularly in France, Belgium and Poland, while in Africa and the Middle East we had the strongest growth in four years. Meanwhile, we remain focused on lightening Orange’s cost structure, allowing us to stabilise our margin rate in the first half and to confirm our annual targets for 2014. We are continuing our efforts in this area and have increased our target for lowering indirect costs and now aim to achieve a reduction of more than 300 million euros in 2014. My special thanks go to all our employees for their contribution to these results which are very encouraging for the future of our Group.”
1/ Excluding machine-to-machine contracts.
2/ Perpetual subordinated debt recognised in shareholder equity according to IFRS guidelines.
3/ Following the disposal of Orange Dominicana as from the second quarter of 2014.
4/ Subject to the approval of the Annual General Meeting of shareholders.
5/ The ex-dividend date is set at 5 December 2014 and the record date at 8 December 2014.
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