Telenet.be
 
 
 
 

Investment Proposition

 
 

Outlook

Outlook

We delivered a solid financial performance in 2020 relative to our revised full year 2020 outlook as presented at the end of April last year. This positions us well with regards to our medium-term outlook as presented during the December 2018 Capital Markets Day. 2021 will be the final year of our current three-year plan, during which we expect to return back to growth both from a rebased topline and Adjusted EBITDA perspective. We will also drive healthy Adjusted Free Cash Flow from our operations despite a modest contraction in rebased Operating Free Cash Flow in 2021 as referenced to below. We have rebased our FY 2020 headline financials (see section 6.1) to reflect (i) the divestment of our Luxembourg cable business to Eltrona in which we hold an unconsolidated 50% minus 1 share ownership stake and (ii) changes related to the IFRS accounting outcome of certain content rights agreements entered into during the third quarter of 2020. The latter has started to impact both our Adjusted EBITDA and Operating Free Cash Flow performance as of then, whereas 2021 will show a full twelve-month impact.

In 2021, we will focus on five distinct pillars after having laid the foundations in recent years. First, we seek to extend and deepen our customer relationships, enabling our customers to get greater value from living and working digitally. Next, we aim to accelerate growth in the business segment by differentiating through our human touch. Thirdly, we will build a deep customer-centric customer experience by a "digital first" approach and radical simplification. Furthermore, we will continue to thrive via excellent networks tailored to our customers' needs and via flexible platforms. And finally, we look to empower our employees to create value through improved team collaboration in an inspiring culture through the adoption of an agile organization structure.

Zooming in on our financial outlook for the year ahead, we expect our topline to reach an inflection point in 2021 returning back to growth on a rebased basis. We anticipate a partial recovery from the COVID-19 pandemic which mainly affected our other revenue in 2020. The recovery in our other revenue will to some extent be offset by a reduction in the regulated cable access fee, which became effective as of July 1, 2020, and a continued pressure on our interconnect revenue given the switch to data messaging. Elsewhere, our rebased revenue performance will be driven by growth in our B2B business and a modest increase in our subscription revenue from customer uptiering and certain price adjustments. For the full year 2021, we expect our rebased revenue to expand up to 1% compared to 2020.

We have a proven track record when it comes to generating operating leverage across our business. While certain cost buckets are expected to increase in line with our revenue performance, we will maintain a tight focus on our overall cost base while reaping the benefits of our digital transformation program as outlined during the December 2018 Capital Markets Day. Relative to the full year 2020, we anticipate a healthy increase in our rebased Adjusted EBITDA between 1 and 2% in 2021.

In 2020, our Operating Free Cash Flow grew nearly 3% on a rebased basis driven by modest Adjusted EBITDA growth and slightly lower accrued capital expenditures (excluding the impact of lease-related capital additions). Relative to 2020, we expect a modest increase in our investment levels as the prior year was impacted by the COVID-19 pandemic. In addition, we anticipate higher IT-related investments as we finalize the implementation of our state-of-the-art customer-facing platform as well as increased investments in driving the customer experience in line with our aforementioned strategic pillars. Finally, we've also carefully planned for certain selective network-related investments, creating optionality for future cost-effective fixed and mobile network upgrades. For the full year 2021, we expect our Operating Free Cash Flow to modestly decrease by around 1% on a rebased basis. With that, we still expect to deliver on the lower end of our 2018-2021 Operating Free Cash Flow CAGR of between 6.5% to 8.0%.

In 2020, we achieved €415.8 million of Adjusted Free Cash Flow, which was sharply up versus 2019. Despite the anticipated modest contraction in our Operating Free Cash Flow in 2021, we are confident on our ability to generate a robust Adjusted Free Cash Flow between €420.0 and €440.0 million. Growth in our Adjusted Free Cash Flow will amongst other factors be driven by both lower cash taxes and lower cash interest expenses, while our vendor financing program is expected to remain broadly stable compared to end-2020.

 

OUTLOOK FY 2018 - 2021 FY 2018 rebased(a) As presented on December 4, 2018 As reaffirmed on February 11, 2021
Operating Free Cash Flow CAGR (rebased)(b, c) €674.7 million Between 6.5% - 8.0% Lower end of the 6.5% - 8.0% range

 

OUTLOOK FY 2021 FY 2020 Rebased(a) As presented on February 11, 2021
Revenue growth (rebased)(d) €2,573.2 million Up to 1%
Adjusted EBITDA growth (rebased) (b) €1,346,5 million Between 1-2%
Operating Free Cash Flow growth (rebased) (b, c) €825.8 million Around -1%
Adjusted Free Cash Flow (b, e) - € 420.0 - 440.0 million range

(a) For purposes of calculating rebased growth rates on a comparable basis for the periods shown above, we have adjusted our historical revenue and Adjusted EBITDA to reflect the impact of the following transactions to the same extent revenue and adjusted EBITDA related to these transactions is included in our current results: (i) exclude the revenue and Adjusted EBITDA of our former Luxembourg cable subsidiary Coditel S.à r.l. (deconsolidated as of April 1, 2020) and (ii) reflect changes related to the IFRS accounting outcome of certain content rights agreements entered into during the third quarter of 2020.

(b) Quantitative reconciliations to net profit (including net profit growth rates) and cash flows from operating activities for our Adjusted EBITDA, Operating Free Cash Flow and Adjusted Free Cash Flow guidance cannot be provided without unreasonable efforts as we do not forecast (i) certain non-cash charges including depreciation and amortization and impairment, restructuring and other operating items included in net profit, nor (ii) specific changes in working capital that impact cash flows from operating activities. The items we do not forecast may vary significantly from period to period.

(c) Excluding the recognition of the capitalized football broadcasting rights and mobile spectrum licenses and excluding the impact from lease-related capital additions on our accrued capital expenditures.

(d) Relative to our reported revenue for the full year 2020, our revenue growth for the full year 2021 would be equivalent to up to 1%.

(e) Assuming certain payments are made for the temporary prolongation our current 2G and 3G mobile spectrum licenses in 2021, yet excluding payments on any future spectrum licenses as part of the upcoming multiband auction, and assuming the tax payment on our 2020 tax return will not occur until early 2022.