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NUMERICABLE
1 1 x 912
B2 stable/ B stable
29 August 2013
TELECOM - FRANCE Pierre MERVEILLE Fixed Income Analyst +33 (0)4 72 68 27 13 pfmerveille@oddo.fr
Numericable posted positive results in 2Q13. The acceleration of the revenue growth to +4.0% in Q2 was above our expectations and it reflects the success of the multi-play bundles, as well as managements strategy to invest in SAC costs in order to support the top line. Subscriber net additions were lower in Q2 due to seasonality. We however expect a recovery in Q3 during the back to school period. Management also remains optimistic about growth prospects for the rest of year. We have slightly reduced our adjusted EBITDA forecast to EUR 460 m in 2013 (+1%) to incorporate the higher than expected SAC costs in 2Q13. Progress has also been made on the capital structure, with the extension of bank debt in late July, and proposed amendments that will facilitate a potential IPO of Numericable-Completel (some amendments still need to be agreed by banks before 5th September 2013, but an approval is expected). An IPO of Numericable-Completel remains our central scenario for late 2013 / 2014, and it will be beneficial to bondholders, either through the combination of the credit groups (leading to a blended leverage of 4.4x ), or through a ring-fenced structure (with Completel remaining an independent credit group and paying dividends to Numericable). We understand the management has a preference for the 1st scenario. We maintain our Accumulate (2) recommendation on 2019 notes, with a preference for the 8.75% notes given the high probability that the IPO claw-back provision will be exercised on the 12.375% notes.
Numericable reported positive results in 2Q13. However, the accelerated revenue growth translates into higher SAC costs and slightly lower EBITDA
The revenue growth has accelerated in 2Q13 to +4.0% yoy (EUR 228 m), ahead of our forecast (+3.0% yoy to EUR 225 m) and the revenue growth rate observed in 1Q13 (+3.5% yoy). 1H13 revenues were up by +3.8% to EUR 453 m. - Digital Cable revenues (+5.5% yoy to EUR 175 m) continue to benefit from strong customer gross adds (+44% yoy in 2Q13 and +41% yoy in 1H13) thanks to the success of the innovative set-top-box LaBox (216 000 subscribers in June vs. 121 000 at year-end 2012), and sustained demand for multi-play and mobile products (151 000 mobile RGUs at the end of June 2013, +150% yoy). The number of Digital customers increased by +1.7% yoy to 1.24 million in 2Q13 (with +2 000 net adds during the quarter vs. -12 000 in 2Q12) since the growth of the multi-play customer base (+6.4% yoy, +9 000 net adds during the quarter) more than offset the decline of the TV-only customer base (15.4% yoy). Churn remained stable at 17.8% in 2Q13. Digital Cable ARPU increased by +1.0% yoy to EUR 41.4/month and is supported by the positive contribution of gross adds ARPU (EUR 42.2/month in 2Q13). - Analog TV (-23% to EUR 7 m) suffered from lower demand for this legacy product and Bulk revenues dropped by -4% yoy to EUR 17 m. - Wholesale revenues grew by +6.2% yoy to EUR 12 m, partially due to some non-recurring infrastructure revenue in 2Q13. - White Label revenues were up by +10.7% to EUR 20 m on account of a 30% increase of WL end users to 320 000. The revenue growth rate has softened compared with previous quarters due to the migration of Darty customers by Bouygues (Bouygues WL users generate lower ARPU, but the profitability is similar). Adjusted EBITDA declined by -1.5% to EUR 115 m in 2Q13 (1H13: flat EBITDA of 230 m EUR). The adjusted EBITDA margin dropped to 50.7% (vs. 53.5% in 2Q12) on the back of a significant rise in subscriber acquisition costs (+38% to EUR 22m), as well as staff incentives.
Revenues ( m) Digital Bulk Analog White Labels Wholesale Total revenues Revenue growth Digital Bulk Analog White Labels Wholesale Total revenues Adjusted EBITDA Adjusted EBITDA margin yoy growth FY11 660 70 51 54 30 865 FY11 (0.8%) (6.8%) (26.4%) 100.8% 181.1% 2.1% 436 50.3% 1.9% 1Q12 162 18 10 17 10 217 1Q12 (3.7%) 0.5% (31.9%) 62.6% 191.5% 1.1% 113 51.8% 0.4% 2Q12 163 18 9 18 11 219 2Q12 (2.7%) 2.3% (29.4%) 45.8% 184.5% 2.2% 117 53.5% 5.4% 1H12 325 36 20 35 21 436 1H12 (3.2%) 1.4% (30.7%) 53.4% 187.9% 1.7% 230 52.7% 2.9% FY12 650 70 37 75 42 874 FY12 (1.5%) 0.2% (27.9%) 39.9% 39.8% 1.1% 456 52.1% 4.6% 1Q13 167 17 8 24 9 225 1Q13 2.8% (4.0%) (23.5%) 46.9% (16.5%) 3.5% 115 50.9% 1.7% 2Q13 172 17 7 20 12 228 2Q13 5.5% (3.8%) (23.4%) 10.7% 6.2% 4.0% 115 50.7% (1.5%) 1H13 339 34 15 44 20 453 1H13 4.2% (3.9%) (23.5%) 28.1% (4.8%) 3.8% 230 50.8% 0.1%
This is a non-contractual document, it is strictly for the private use of the recipient, and the information it contains is based on sources we believe to be reliable, but whose accuracy and completeness cannot be guaranteed. The opinions given in the document reflect our appraisal at the time of publication and may therefore be revised at a later date. Please refer to the disclaimers and disclosures at the end of this document.
The LTM net leverage mildly decreased to 5.2x. Liquidity improved following the bank debt extension in July
Numericable generated EUR 38 m of FCF in 1H13 (vs. EUR 27 m in 1H12) on the back of WC improvements (EUR -7 m vs. EUR -34 m in 1H12) and stable Capex (EUR 101 m). Interest paid rose to EUR 80 m (vs. EUR 64 m in 1H12) due to the partial refinancing of bank debt with high coupon secured bonds in February and October 2012. Total net debt mildly decreased to EUR 2.38 bn (Dec. 2012: EUR 2.39 bn). The LTM net leverage improved to 5.2x from 5.3x at-year end 2012 thanks to positive FCF. Liquidity stood at EUR 72 m as of 30 June 2013, including EUR 7m of cash in hand and the undrawn EUR 65m RCF. Numericable repaid EUR 30 m of bank debt maturities in 1H13, and EUR 6 m remained due this year. In July 2013, Numericable completed an amend and extend process to extend its bank debt and prepare for a potential IPO. Bank lenders agreed to roll: - EUR 46m of B1 commitments due June 2014 and EUR 616m of B2 commitments due June 2016 into a new EUR 662m B3 tranche maturing in Dec. 2017, carrying a margin of E+500 bps that will be reduced by 25 bps upon IPO. - EUR 106m of C1 commitments due December 2015 into a new C3 tranche that has the same terms as the new B3 tranche. - EUR 396m of C2 commitments due December 2017 into a new C4 tranche due maturing in Dec. 2018, with no change to the existing margin (E+550 bps) and a margin reduction of 25 bps upon IPO. The debt maturity profile has improved and Numericable has no significant debt repayments scheduled before 2017 (EUR 6 m in 2H13, EUR 33 m in 2014, EUR 73 m in 2015 and EUR 115 m in 2016).
Management guidance for 2013 is confirmed: EUR 220-240 m of capex and positive growth prospects
The capex guidance of EUR 220-240 m in 2013 is affirmed; with 300-400k fiber plugs to be installed (190k installations in 1H13). Management remains optimistic about growth prospects for the rest of 2013.
This is a non-contractual document, it is strictly for the private use of the recipient, and the information it contains is based on sources we believe to be reliable, but whose accuracy and completeness cannot be guaranteed. The opinions given in the document reflect our appraisal at the time of publication and may therefore be revised at a later date. Please refer to the disclaimers and disclosures at the end of this document.
(Source: Bloomberg)
This is a non-contractual document, it is strictly for the private use of the recipient, and the information it contains is based on sources we believe to be reliable, but whose accuracy and completeness cannot be guaranteed. The opinions given in the document reflect our appraisal at the time of publication and may therefore be revised at a later date. Please refer to the disclaimers and disclosures at the end of this document.
INCOME STATEMENT (EUR m) Revenues Gross profit EBITDA (adjusted) EBITDA (reported) EBIT (adjusted) EBIT (reported) Net income OPERATING METRICS YoY growth Revenue growth EBITDA growth (adjusted) EBIT growth (adjusted) Operating margins Gross margin EBITDA margin (adjusted) EBIT margin (adjusted) CASH FLOW (EUR m) EBITDA (adjusted) Others & non-cash items Interest paid Tax paid FFO Change in WC CFO CAPEX FCF Acquisitions / disposals Dividends Share & shareholder loan issue (buy Discretionary FCF DEBT STRUCTURE (EUR m) Secured debt Unsecured debt Subordinated debt Total debt (unadjusted) Cash & marketable securities Total net debt (unadjusted) Shareholder loans Pension deficit Adjustment for operating leases Adjusted net debt CREDIT RATIOS Coverage EBIT / Interest EBITDA / Interest EBITDA - Capex / Interest Leverage Secured net leverage Unsecured net leverage Total gross leverage (unadjusted) Total net leverage (unadjusted) Total net leverage (incl. shareholder lo Total net debt (adjusted) / EBITDAR Cash Flow FFO margin FFO / Net debt CFO / Net debt FCF / Net debt FCF / Adjusted net debt Capex / Revenue
FY11 865 675 436 425 230 220 179 FY11 2.1% 1.9% 14.2%
FY12 874 690 456 433 247 224 36 FY12 1.1% 4.6% 7.2% 78.9% 52.1% 28.2% FY12 456 (5) (135) (9) 307 (29) 278 (219) 59 59 FY12 2 364 35 2 399 5 2 393 163 88 2 645 FY12 1.5x 2.8x 1.4x 5.2x 5.3x 5.3x 5.6x 5.6x 35.1% 12.8% 11.6% 2.5% 2.2% 25.1%
2Q13 228 180 115 111 69 65 22 2Q13 4.0% (1.5%) (4.9%) 79.0% 50.7% 30.2% 2Q13 115 (2) (40) (2) 71 (1) 70 (43) 27 27 2Q13 2 354 36 2 391 7 2 383 166 136 2 686 2Q13 1.5x 2.8x 1.5x 5.1x 5.2x 5.2x 5.6x 5.7x 31.2% 12.3% 12.2% 2.9% 2.6% 19.0%
1H13 LTM'2Q13 453 891 359 706 230 456 224 438 124 238 118 220 29 39 1H13 LTM'2Q13 3.8% 0.1% (6.5%) 79.3% 50.8% 27.4% 79.3% 51.2% 26.7%
FY13E 907 721 460 448 244 232 48 FY13E 3.7% 0.9% (1.1%) 79.5% 50.7% 26.9% FY13E 460 (2) (168) (9) 281 1 282 (235) 47 47 FY13E 2 348 37 2 386 6 2 380 169 275 2 823 FY13E 1.4x 2.7x 1.3x 5.1x 5.2x 5.2x 5.5x 5.9x 31.0% 11.8% 11.8% 2.0% 1.7% 25.9%
FY14E 934 743 475 463 255 243 67 FY14E 3.0% 3.3% 4.4% 79.6% 50.9% 27.3% FY14E 475 (2) (163) (10) 300 (2) 298 (240) 58 58 FY14E 2 315 39 2 355 25 2 330 174 275 2 778 FY14E 1.6x 3.0x 1.5x 4.8x 5.0x 4.9x 5.3x 5.6x 32.1% 12.9% 12.8% 2.5% 2.1% 25.7%
FY15E 955 762 489 477 266 254 88 FY15E 2.3% 3.0% 4.4% 79.8% 51.3% 27.9% FY15E 489 (2) (160) (11) 316 (2) 314 (245) 69 69 FY15E 2 242 42 2 284 15 2 269 179 275 2 723 FY15E 1.8x 3.3x 1.6x 4.6x 4.7x 4.6x 5.0x 5.3x 33.1% 13.9% 13.9% 3.1% 2.5% 25.7%
78.3% 50.4% 23.8% FY10 427 (19) (138) (0) 270 7 277 (190) 87 8 95 FY10 2 456 31 2 486 59 2 427 149 54 2 630 FY10 1.3x 2.8x 1.6x 5.6x 5.8x 5.7x 6.0x 6.0x 31.9% 11.1% 11.4% 3.6% 3.3% 22.4%
78.0% 50.3% 26.6% FY11 436 24 (117) (9) 333 5 338 (186) 152 156 309 FY11 2 382 33 2 415 34 2 380 188 73 2 641 FY11 1.5x 2.9x 1.7x 5.4x 5.5x 5.5x 5.9x 5.9x 38.5% 14.0% 14.2% 6.4% 5.8% 21.4%
1H13 LTM'2Q13 230 456 (2) (3) (80) (151) (4) (10) 144 292 (5) (2) 139 290 (101) (220) 38 70 38 70 1H13 LTM'2Q13 2 354 2 354 36 36 2 391 2 391 7 7 2 383 2 383 166 166 136 136 2 686 2 686 1H13 LTM'2Q13 1.5x 2.8x 1.5x 5.1x 5.2x 5.2x 5.6x 5.7x 31.8% 12.3% 12.2% 2.9% 2.6% 22.3% 1.5x 2.8x 1.5x 5.1x 5.2x 5.2x 5.6x 5.8x 32.8% 12.3% 12.2% 2.9% 2.6% 24.7%
This is a non-contractual document, it is strictly for the private use of the recipient, and the information it contains is based on sources we believe to be reliable, but whose accuracy and completeness cannot be guaranteed. The opinions given in the document reflect our appraisal at the time of publication and may therefore be revised at a later date. Please refer to the disclaimers and disclosures at the end of this document.
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This is a non-contractual document, it is strictly for the private use of the recipient, and the information it contains is based on sources we believe to be reliable, but whose accuracy and completeness cannot be guaranteed. The opinions given in the document reflect our appraisal at the time of publication and may therefore be revised at a later date. Please refer to the disclaimers and disclosures at the end of this document.