ALTICE N.V. - SECOND QUARTER 2016 PRO FORMA[1] RESULTS

  • Successful conclusion of group transformation with closing of Cablevision (Optimum[2]) and media acquisitions in France:
    • Enhanced diversification of assets with balanced global scale and growth opportunities;
      • Altice USA gives group c.41% exposure[3] to large, growing US market; strong underlying revenue growth and further margin expansion potential.
    • Broadened fiber / cable / mobile access and content convergence platform with additional growth opportunities from advertising.
  • Operational momentum increases confidence in expectation for continued improvement in revenue trends throughout 2016:
    • France (SFR Group) - Solid execution in challenging market environment. Focus on improving network quality, customer experience, retention processes and content enriched service bundles, which combined with improving market dynamics is expected to drive significant improvement in revenue trend;
      • FY 2016 revenue trend still expected to be better than FY 2015 (-3.5% YoY), a significant improvement from Q1 2016 (revenue ex-media assets[4] -6.1% YoY) and Q2 2016 (-4.6%4). Revenue declined 4.3% YoY in Q2 2016 pro forma for recent acquisitions of media assets, including double-digit growth (+12.6% YoY) at NextRadioTV, rebranded SFR RadioTV[5];
      • Continued fiber customer net additions (+44k), albeit slower than recent quarters, and reduced mobile postpaid churn YoY (B2C net losses of -199k in Q2 2016 vs. -314k in Q2 2015); seeing early benefits of accelerated network upgrades and content initiatives, as SFR is the clear fiber leader and number 2 mobile operator now in terms of voice quality[6].
    • Portugal (MEO) - Revenue trend continues to improve despite headwind from termination fees reduction;
      • Revenue decline of 3.0% YoY in Q2 2016 (vs. -3.5% in Q1 2016 and -7.3% in FY 2015) driven by stabilizing B2C trend and large corporate customer base stable for last 9 months since Altice took ownership;
      • Fiber growth accelerating (+16k net additions in Q2) as expanding network rapidly with continued B2C postpaid mobile subscriber growth (+14k).
    • US (Suddenlink) - Strong underlying growth in revenue of 5.7% YoY on a constant currency (CC) basis in Q2 2016 excluding PPV[7] event in Q2 2015 (5.2% YoY actual growth on a CC basis);
      • Sustaining growth comfortably above FY 2015 level (+3.7%);
      • Seasonal decline in unique residential customer relationships (8k net losses in Q2), including broadband (-2k) and video customers (-23k), which was better than last year (losses of 13k, 3k and 29k in Q2 2015 respectively);
      • Focus for Suddenlink is on customer retention and improving churn.
    • US (Optimum) - 2.0% underlying revenue growth YoY on a CC basis in Q2 2016 pro forma for Newsday disposal (+0.3% impact) and excluding PPV event in Q2 2015 (1.1% YoY actual growth on a CC basis)[8];
      • Strongest operational performance[9] in Q2 since 2012 with 19k net unique customer relationship additions;
      • 26k additional broadband RGUs and -2k video RGUs, best video performance for four years.
    • Israel (HOT) - Return to revenue growth in Q2 +1.5% YoY on a CC basis, +0.8% on a reported basis);
      • Cable customer base remains stable (-2k) with recent improvements in churn and quality of service sustained;
      • Best practice in improving customer experience here to be adopted in France and Altice USA.
    • Dominican Republic (Altice Hispaniola) - Continued strong growth in revenue in Q2 (+5.1% on a CC basis, +0.7% on a reported basis);
      • Both postpaid mobile subscriber growth (+1k) and fiber customer net additions (+3k).
  • Robust financial performance despite temporary weakness in France with continued record results at MEO and Suddenlink and stronger than expected results from Optimum:
    • Altice N.V. Group EBITDA grew 3.7% YoY on a CC basis driven by the growth in Portugal and Altice USA, partly offset by France:
      • Altice N.V. Group Adjusted EBITDA margin expanded by 2.0% pts YoY to 38.9% in Q2 as efficiency measures continue;
      • Strong growth in Portugal (Adjusted EBITDA +22.5% YoY), Suddenlink (+18.5% on a CC basis), Optimum (+11.1% on a CC basis) and Dominican Republic (+4.5% on a CC basis) offsetting weakness in France including media assets (-6.8%)[10].
    • Altice N.V. Operating Free Cash Flow declined 6.6% on a CC basis in Q2 reflecting accelerated investments (excluding one-off payment related to the network sharing JV in Israel of €61m in Q2 2016, Operating Free Cash Flow declined 1.8% YoY);
      • Very strong growth in Q2 in MEO, Suddenlink and Optimum Operating Free Cash flow, +50.7%, +60.7% and +41.8% YoY respectively.
  • Robust, diversified and long-term capital structure (including Cablevision):
    • Group weighted average debt maturity 6.7 years;
    • Group weighted average cost of 6.3%;
    • No major maturities at SFR or Altice International until 2022, and none at Suddenlink until 2020, following €10bn refinancing in April 2016;
    • Available liquidity of €5.1bn[11].
  • Accelerated re-investments into fiber/mobile networks and selective media and content:
    • France (SFR) - Accelerated fiber broadband coverage expansion (+419k homes passed in Q2 to total 8.5 million as of the end of June 2016, on track for 22 million homes passed by 2022);
      • #1 fiber coverage in France;
      • Leading 4G / 4G+ mobile site build out in France again in Q2 2016 (+1,256 sites, significantly more than peers);
      • Media and content acquisitions advancing "access plus content" strategy.
    • Portugal (MEO) - Accelerated fiber broadband coverage expansion (+180k homes passed in Q2 to total 2.6 million homes passed as of the end of June 2016);
      • On track for 5.3 million homes passed by 2020.
    • US (Suddenlink) - Continuing to deliver next-generation 1Gbps broadband services across the footprint.
    • US (Optimum) - On track to deliver 300Mbps broadband speeds to entire footprint by 2017.
  • Reiterated FY 2016 Altice N.V. Group guidance, including our expectation of an improving trend in Altice Group revenue on a consolidated basis (as given on 15 March 2016 under the prior Group perimeter excluding Optimum and acquired content and media assets, at constant currency). On this basis, we also still expect mid-single digit growth in Group Adjusted EBITDA and Operating Free Cash Flow growth flat to slightly down reflecting accelerated investments. This includes our expectation of growth in the Adjusted EBITDA contribution from France YoY.

August 9, 2016: Altice N.V. (Euronext: ATC NA and ATCB NA), today announces financial and operating results for the quarter and half year ended June 30, 2016.

Strong pro forma Adjusted EBITDA growth in Altice USA and Portugal in Q2

  • Altice N.V. Group Revenue €5,828m, down 2.6% YoY[12]:
    • €2,781m France (SFR) Revenue[13], down 4.3%.
    • €1,104m Altice International Revenue, up 1.1%[14].
    • €566m US (Suddenlink) Revenue, up 3.0% on a reported basis; increase of 5.2% on a CC basis to $640m in local currency (5.7% underlying growth excluding revenue from PPV event in Q2 2015)
    • €1,432m US (Optimum) Revenue[15], down 1.0% on a reported basis; increase of 1.1% on a CC basis to $1,618m in local currency (2.0% underlying growth excluding revenue from PPV event in Q2 2015).
  • Altice N.V. Group Adjusted EBITDA €2,265m, up 2.7% YoY[16]:
    • €999m France (SFR) Adjusted EBITDA[17], down 6.8%.  
    • €545m Altice International Adjusted EBITDA, up 14.8%[18]; Portugal (MEO) Adjusted EBITDA up 22.5%.
    • €258m US (Suddenlink) Adjusted EBITDA, up 16.0% on a reported basis; increase of 18.5% on a CC basis to $292m in local currency.
    • €471m US (Optimum) Adjusted EBITDA, up 8.7% on a reported basis; increase of 11.1% on a CC basis to $532m in local currency.
  • Altice N.V. Group Adjusted EBITDA margin expanded by 2.0% pts YoY to 38.9%:
    • France (SFR) margin contracted by 1.0% pts to 35.9% due to subscriber losses and heavy promotional activity.
    • Altice International margin expanded by 5.9% pts to 49.3%; Portugal (MEO) margin expanded by 10.1% pts to 48.4%.
    • US (Suddenlink) margin expanded by 5.1% pts to 45.6%.
    • US (Optimum) margin expanded by 2.9% pts to 32.9%.
  • Altice N.V. Group Operating Free Cash Flow[19] of €1,157m, down 7.6% YoY reflecting accelerated investments and one-off payment related to the network sharing JV in Israel; down 6.6% on a CC basis (down 1.8% excluding one-off).

Key Strategic Update

  • Altice N.V.: On 20 June 2016, Altice announced the reorganization of its group management structure to reflect the global presence of the group centered around Europe and the US. Dexter Goei is now President of Altice N.V. and Chairman & CEO of Altice USA. Michel Combes is now CEO of Altice N.V. and Chairman & CEO of SFR Group. Patrick Drahi has stepped down from his position as President of Altice N.V. and now leads the newly formed Altice Group Advisory Council (setting the strategic, operational and technological agenda for the group).
  • Altice N.V.: On 21 July 2016, Altice announced its international media and content organization, led by Alain Weill as CEO, continuing the strengthening of Altice's corporate and organizational structure.
  • Altice USA: On 21 June 2016, Altice N.V. announced the completion of the acquisition of Cablevision Systems Corporation, the leading communications services provider in the New York metropolitan area. Cablevision together with Suddenlink form Altice USA, the #4 cable operator in the U.S. which serves more than 4.6 million Optimum and Suddenlink customers across 20 states.
  • Altice USA: On 7 July 2016, Patrick Dolan along with Altice USA announced that an entity led by Mr Dolan has acquired 75% of Newsday Media Group. Altice retains a 25% interest in the company.  
  • France (SFR Group): The minority voting stake in NextRadioTV (rebranded SFR RadioTV) was transferred from Altice International to SFR as of 12 May 2016. On 25 May 2016, SFR announced the completion of the acquisition of Altice Media Group France. These content acquisitions are part of a converged strategy to strengthen SFR's product offerings, aiming to reduce reduce churn, increase ARPU and revenue growth (including new advertising revenue). To complement existing TV channels being acquired, SFR has leveraged the NextRadioTV and AMG platforms to launch two new news channels, BFM Paris and BFM Sport, as well as five new SFR Sports Channels all live from 13 August 2016. SFR's new open-platform digital newsstand application (SFR Presse) has significantly expanded it's offering to over 40 titles and it has now been downloaded by 3.2 million customers.
  • France (SFR Group): On August 4, 2016, an agreement was signed between the management and trade unions representing SFR Group's Telecom division, to enable the company to adapt more quickly to the requirements of the French telecoms market by establishing a more competitive and efficient organization. This agreement reiterates the job retention commitments taken until 1 July 2017 and defines internal accompanying guarantees and the process of voluntary retirement.
  • Portugal (MEO): On 26 July 2016, NOS, Vodafone Portugal, Cabovisão, Altice Pictures, PT Portugal and MEO announced the signing of an agreement for reciprocal sharing of: (1) sports event broadcasting rights, and; (2) distribution and broadcasting rights of sports and club channels, which are currently owned or come to be owned by the signatories, who will share the current and future costs of the aforementioned sports content. In addition, on 4 August 2016, PT Portugal / MEO announced that it had signed a memorandum of understanding (MOU) with the objective of entering the share capital of Sport TV.

Michel Combes, Chief Executive Officer of Altice, said: "This quarter saw Altice transform into a leading transatlantic, converged telecoms and media company.

Having successfully closed the Cablevision acquisition, Altice USA has become the 4th largest cable operator in the attractive and competitive US market. We are very excited about the current performance and future prospects for both Suddenlink and Optimum. We are looking forward, with Dexter Goei, to successfully entering a new era for our businesses across the US which are clearly going to be a huge part of Altice's new growth story.

It has been another commercially challenging quarter for SFR in France but we are confident the revenue and Adjusted EBITDA trends will continue to improve with our fiber expansion and accelerated 4G/4G+ network investment program, led by Michel Paulin, already seeing measurable benefits in terms of better quality of service and commercial performance. We are moving forward with our innovative strategy based on the convergence of telecoms, media, content and advertising, enabling us to offer more and more value to our customers. We have also now agreed with labour unions on the next phase of the transformation of the company.

MEO in Portugal again is showing very strong growth year over year in Adjusted EBITDA from our early efficiency measures, with the revenue trend expected to improve further for the rest of 2016. We are also extremely pleased to see HOT in Israel return to revenue growth as our business in the Dominican Republic continues to show strong growth.

Overall we remain very focused on improving the operational and financial performance of the businesses we've acquired and achieving the efficiency savings we've targeted, strengthening the management team in recent months accordingly."


Contacts

Chief Investor Relations Officer
Nick Brown: +41 79 720 1503 / nick.brown@altice.net

Chief Communications Officer
Arthur Dreyfuss: +41 79 946 4931 / arthur.dreyfuss@altice.net

Conference call details

The company will host a conference call and webcast to discuss the results at 2:30pm CET (1:30pm UK time, 8:30am EDT today).

Webcast live: http://edge.media-server.com/m/p/veh9q9a7

Dial-in Access telephone numbers:

France: +33 1 76 77 22 30

UK: +44 20 3427 1905

USA: +1 212 444 0896

Confirmation Code: 7700540

  



[1] Financials shown in these bullet points are pro forma defined here as results of the Altice N.V. Group as if all acquisitions had occurred on 1/1/15, including PT Portugal (MEO), Suddenlink, Cablevision (Optimum), NextRadioTV and Altice Media Group France (and excluding Newsday Media Group, Cabovisao, ONI, La Reunion and Mayotte mobile activities as if the disposals occurred on 1/1/15). Segments shown on a standalone reporting basis, Group figures shown on a consolidated basis.

[2] "Optimum" financials shown in this release refer to total company earnings from the business previously known as Cablevision Systems Corporation (e.g. including Lightpath), not just from the "Cable" segment, excluding Newsday Media Group (75% stake disposed on 7 July, 2016)

[3] Altice USA Operating Free Cash Flow, defined as EBITDA less capex, as a proportion of total Operating FCF in H1 2016 (Altice USA represented c.35% of Altice N.V. Group revenue in H1 2016).

[4] Excluding acquired content and media assets for comparability (i.e. NextRadioTV and Altice Media Group France).

[5] SFR owns 49% voting stake of NextRadioTV / SFR RadioTV.

[6] Arcep 2016 mobile service quality audit data.

[7] Pay Per View Mayweather Jr. vs. Pacquiao boxing event in Q2 2015.

[8] 0.8% growth YoY on a reported CC basis including Newsday contribution to figures in both years (i.e. assuming no disposal and no pro forma adjustment) and including Pay Per View (PPV) Mayweather Jr. vs. Pacquiao boxing event revenue in Q2 2015. 1.1% growth on a reported CC basis excluding Newsday pro forma and including PPV event revenue. Decline of 1.0% YoY on a pro forma reported basis in Euro terms due to the move in FX rate (USD / EUR FX rate 1.130 vs. 1.106 in Q2 2016 and 2015 respectively).

[9] Optimum KPIs include both residential and commercial segments.

[10] France EBITDA declined 7.6% YoY on a standalone basis excluding acquired content and media assets (i.e. NextRadioTV and Altice Media Group France).

[11] Total group cash of €1,511m (including €188m of cash at ANV/ACF) and total undrawn RCF of €3,665m (total RCF of €4,488m net of €134m LOCs and €688m RCF drawn), net of €61m of restricted cash at CVC.

[12] Group Revenue declined 1.7% on a constant currency (CC) basis.

[13] Includes content and media assets (i.e. NextRadioTV and Altice Media Group France).

[14] International Revenue increased 2.0% on a CC basis.

[15] Excluding Newsday following disposal of 75% stake completed in July 2016.

[16] Group Adjusted EBITDA increased 3.7% on a CC basis.

[17] Includes content and media assets (i.e. NextRadioTV and Altice Media Group France).

[18] International Adjusted EBITDA increased 15.8% on a CC basis.

[19] Defined as EBITDA less Capital Expenditure.

Altice NV Q2 2016 Pro Forma Results



This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Altice NV via Globenewswire

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