33% increase in ADSL Free Cash Flow to 436 million. Successful integration of Alice with a positive contribution of 83 million to the Group s EBITDA

Transcription

1 2010 ANNUAL RESULTS Paris, 9 March 2011 Record revenues of 2 billion Group EBITDA in excess of 39% of revenues 78% growth in net profit to 313 million 2G and 3G roaming deal signed with Orange 33% increase in ADSL Free Cash Flow to 436 million Successful integration of Alice with a positive contribution of 83 million to the Group s EBITDA During the 2010 financial year, the Group continued to implement its profitable growth model, while at the same time continuing to integrate Alice and preparing plans that will drive growth in the future: (i) The 4 th mobile licence was granted in January 2010 and the 2G and 3G roaming contract was signed with Orange on 2 March 2011; (ii) The launch of the Freebox Révolution on 14 December 2010 once again enabled the Group to change the paradigm of the broadband market. KEY FINANCIAL ITEMS OF 2010 Group revenues grew by 4.3% between 31 December 2009 and 31 December 2010 to 2,038 million, exceeding 2 billion for the first time. This increase was due to a combination of dynamic growth under the Free brand and the dilutive impact of Alice over the period. The Group significantly improved its main profitability indicators during 2010, due to further economies of scale in its original group structure and the rapid financial recovery of Alice. (i) Original group structure: the Group managed to maintain strong growth while at the same time improving its profitability: - Revenue organic growth (+9%) between 31 December 2009 and 31 December 2010, - Record EBITDA to more than 40% of revenues and an increase of 1.1 percentage point between 31 December 2009 and 31 December 2010, thanks to the positive effect of the continued unbundling and a controlled increase in the main expense items. 1/7

2 (ii) Alice: 2010 was marked by the continued rapid financial recovery of Alice, due to: - the favourable effect during the year of steps taken in 2009, in particular on network, IT system and fixed costs. - the unbundling of Alice subscribers in areas covered by the Free network, thus maximising the gross margin generated by subscribers. These various measures enabled Alice to report a positive contribution to Group EBITDA of 83 million in 2010, compared to 24 million in the previous year. In 2010, Alice had an accretive impact on the Group s net profit and Free Cash Flow. Rapid debt reduction and sound financial position: This rapid improvement in the Group s profitability went hand-in-hand with a very strong cash flow generation achieved by the ADSL division. The Group thus generated 436 million in ADSL FCF during 2010 (compared to 328 million the previous year). Therefore, and in spite of a committed investment plan (with the acquisition of the mobile licence for more than 240 million), the Group continued to rapidly reduce its debt and posted a leverage ratio of 0.87x at 31 December 2010, compared to more than 2x 1 following the acquisition of Alice in August MAIN INDICATORS Dec. 2010, 31 Dec. 2009, 31 Total number of Broadband subscribers 4,534,000 4,456,000 - Free 3,969,000 3,778,000 - Alice 565, ,000 Unbundled subscribers as % of total 89.2% 85.4% 1 Based on the reported figures (EBITDA and net debt) as of June 30, 2008 and the amount of debt drawn to finance Alice s acquisition. 2/7

3 ( millions) Dec. 2010, 31 Dec. 2009, 31 % change Consolidated revenues 2, , % EBITDA % % revenues 39.2% 33.8% Profit from recurring operations % Consolidated net profit 313.1* % Dividend per share ADSL FCF % Leverage ratio 0.87x 1.01x - *Including non-recurring income of 39.9 million after tax GROUP OBJECTIVES Bolstered by its results, the Group intends to continue to implement its strategy of achieving profitable growth and has set itself the following objectives: (i) Operational objectives: - as part of the rollout of its FTTH network, the Group: plans to have approximately 100,000 FTTH subscribers by the end of 2011; and confirms its target of providing horizontal coverage to 4 million households by the end of as part of the mobile project, the Group plans: to cover 27% of the French population with its proprietary network by January 2012, to launch a commercial offering early in 2012; - a group-wide unbundled rate in excess of 90% in the medium term; - to achieve a broadband market share of 24%-25% in the long term. (ii) Financial objectives: - cumulative ADSL Free Cash Flow in excess of 1.1 billion between 2010 and 2012 (including Alice); - doubling in Group revenues by /7

4 CONSOLIDATED INCOME STATEMENT ( millions) Dec. 2010, 31 Dec. 2009, 31 % change Revenues 2, , % Cost of sales (899.5) (920.3) (2.3%) Gross profit 1, , % Personnel costs (104.4) (108.6) (3.9%) External charges (144.1) (154.0) (6.4%) Taxes and duties (37.3) (42.9) (13.1%) Provision charges (29.0) (29.3) (1.0%) Other operating income and expenses (25.9) (38.0) (31.8%) EBITDA % Employee benefits (8.1) (7.3) 11.0% Amortisation and depreciation (312.1) (294.7) 5.9% Profit from recurring operations % Other operating income and expenses 61.0 (26.5) - Operating profit % Net finance income (expense) (49.5) (49.0) 1.0% Income tax (176.3) (109.0) 61.7% Net profit (loss) from operations sold Consolidated net profit % 4/7

5 Revenues Group revenues increased by 4.3%, from 1,954 million during the year to 31 December 2009 to 2,038 million during the year to 31 December 2010, due to: organic growth under the Free brand (up 5% in 2010). The subscriber base thus grew by 191,000 over the period; the negative base effect of the Alice brand (down 16.7% in 2010), as a result of the termination of wholesale operations and an eroding subscriber base; the rise in value-added services. During the year to 31 December 2010, revenues from this type of services totalled 489 million, compared to 475 million for the year to 31 December 2009, which was an increase of more than 3% over the period. This change was due to: (i) the decline in the share of telephony (decline in fixed line termination rates of 23.5% over the period and inclusion of new countries in the basic package); (i) the continued growth in added value audiovisual services. In the 2010 financial year, more than 10 million VOD and SVOD subscriptions were thus registered, representing an annual increase of nearly 18%. The commercial success of Free s product offering and the synergies made possible by the integration of Alice enabled the Group to maintain its ARPU above 36 in the 4 th quarter 2010, at EBITDA Group EBITDA grew by 20.7% to 798 million for the year to 31 December 2010, compared to the year to 31 December The EBITDA to revenue ratio gained 5.4 percentage points to 39.2% for the year to 31 December 2010, compared to 33.8% in This marked improvement was the result of: the positive impact of the rise in the unbundled rate, thanks to the business dynamism of the Free brand and the opening of more than 700 new cluster nodes in 2010, enabling a 3.8 percentage point improvement in the unbundled rate. The Group unbundled rate thus reached 89.2% for the year to 31 December 2010, much higher than the initial target; the growth in value-added audiovisual services, as specified above; the absorption of the fixed cost base by increased revenues; the results of the synergies implemented on Alice (positive contribution by Alice of 83 million to Group EBITDA in 2010). 5/7

6 Operating profit Operating profit amounted to 539 million for the year to 31 December 2010, compared to 333 million for the year to 31 December The Group s operating profit thus posted growth of 61.9% between 31 December 2009 and 31 December 2010, as a result of: the improvement in EBITDA, as specified above; the recognition of a net non-recurring income of 61 million, comprising (i) non-recurring income totalling 125 million, (ii) the 40 million impairment of the Wimax licence and (iii) various nonrecurring provision charges; the end of the recognition of expenses relating to the restructuring of Alice. Capital expenditure Cash outflows relating to capital expenditure grew to 794 million during 2010, compared to 424 million in This development reflected the Group s committed investment policy in projects that will drive growth, comprising in particular: investments relating to the ADSL business (including network investment relating to the rise in unbundled and subscriber investment relating to modems and other connection charges) of 326 million in 2010, compared to 308 million in This moderate increase resulted from the production of Freebox Révolution for 50 million over the last quarter of 2010, in order to start deliveries from 3 January 2011; the increase in FTTH investments excluding leases (up 73% compared to 2009), to 194 million, due to the accelerated pace of horizontal rollout carried out by the Group; 262 million capital expenditure as part of the mobile project, including 243 million for the licence. Cash flow The Group s 2010 cash flow and cash position were primarily affected by the following movements: an increase of nearly 33% in Free Cash Flow from the ADSL business to 436 million; cash outflows of 262 million recorded as part of the rollout of the mobile business; Free Cash Flow breaking even at Group level; an extended term for the Group s sources of cash, with the refinancing of the 1,200 million credit facility (new syndicated credit facility of 1,400 million), and the setting up of a 150 million credit line with the European Investment Bank (EIB). 6/7

7 BALANCE SHEET At 31 December 2010, the Group had gross debt of 1,036 million and net debt of 691 million. Despite the acquisition of the mobile licence for over 240 million during the period, the Group remains one of the least indebted telecom operators in Europe with a leverage ratio of 0.87x at 31 December 2010, compared to 1.01x at 31 December GLOSSARY Unbundled subscribers: ADSL subscribers who have signed up for Free ADSL service on a Central Office unbundled by Free. Broadband ARPU (Average Revenue per User): includes revenues from the flat-rate package and the value-added services but excludes non-recurring revenues (e.g. migration from one offer to the other or connection and unsubscription fee) divided by the total number of Broadband subscribers invoiced for the period. EBITDA: or operating profit before non-current asset depreciation and amortisation and employee benefits (corresponding to non-cash personnel costs associated with employee stock options). Total Broadband Subscribers: at the end of a period consists of the total number of customers identified by their individual phone lines who have signed up for Free or Alice ADSL service, excluding those for whom an unsubscription notice has been registered. Recruitment: corresponds to the difference between the total number of Broadband subscribers at the end of two different periods. ADSL Free Cash Flow: represent EBITDA less investments made in connection with property, plant and equipment and intangible assets acquired for the Group s ADSL operations. FTTH: Fibre To The Home is a data delivery technology that directly connects subscribers homes to an optical node. Leverage ratio: corresponds to the ratio between net debt (short and long-term financial liabilities less cash and cash equivalents) and EBITDA. The Iliad Group is a major player in the French telecommunications and Internet access market via Free and Alice (4,534,000 Broadband subscribers as of 31 December 2010), One.Tel (fixed telephony providers), as well as Free Mobile. The Iliad Group is listed on Euronext Paris under the ticker ILD. Exchange: Euronext Paris Ticker: ILD Marketplace: Eurolist A of Euronext Paris (SRD) ISIN code: FR FTSE ranking: 974 Internet Member of Euro stoxx, SBF 120, Next 150, CAC mid 100 7/7