Royal KPN NV (
Q3 2010 Earnings Call
October 26, 2010 16:00 pm ET
Vivienne van Asten – de Leeuw - Head of IR
A.J. Scheepbouwer - Chairman & CEO
C.M.S. Smits-Nusteling - CFO
Steve Malcolm - Evolution
John Davies - ING
Jonathan Dann - Barclays Capital
Luis Prota - Morgan Stanley
Paul Sidney - Credit Suisse
Hugh Mccaffrey - Goldman Sachs
Matthew Bloxham - Deutsche Bank
Nick Lyall - UBS
Brian Rusling - Arête Research
Frederic van Daele - Kempen
Karen Egan - RBS
Frédéric Doussard - Oddo Securities
Peter Nielsen - Skælskør
Luigi Minerva - HSBC
Good morning, and welcome to the KPN Conference Call. At this moment all participants are in listen-only mode and later we will conduct a question-and-answer session. We’d like to hand over the conference to Mrs. Vivienne van Asten, Head of Investor Relations. Go ahead please ma’am.
Vivienne van Asten – de Leeuw
Good morning, everyone. Seated beside me are Ad Scheepbouwer, our CEO and Carla Smits-Nusteling, CFO who will take you through the third quarter results presentation we published this morning. The presentation as usual will be followed by Q&A. Let me briefly point out that the Safe-Harbor applies to this presentation and any forward-looking statements made in this presentation do not differ from those already made in the press release.
Now I’d like to hand over to Ad Scheepbouwer.
Good morning. I’ll start with the highlights, and then Carla will take you through the financials, and after that I’ll be back with the operating review for the Netherlands and International.
If I start with the highlights, during the third quarter we’ve seen year-on-year revenue growth for the first time since the first quarter of 2009. And that’s of course, not a precedent for coming quarters, because we will get some regulatory effects and some of those are not known yet, but nevertheless, we are pleased with this first growth in this quarter.
Our focus on cost, customer value and market share in the Dutch Telco has led to a continued increase in profitability. Germany has done very well with higher service revenue growth and very strong margin. And we are rolling out our high-speed mobile data network at an increased speed in Germany, and we will be launching commercial services in the first cities next week. We are also confirming our outlook for this year and next year.
Then some of the financials. Revenues up 1.4%, EBITDA nearly 6%, CapEx 431 million and up on last year, free cash flow 681, 1.6 million year-to-date. That’s 100 million up on the first nine months last year. And earnings per share were €0.27.
Our financial profile, Carla will get to you later on that. And we’ve continued, of course, our industry leading shareholder returns and nearly 70% of our repurchase program is completed. So, that means we’ve got another 30% to go in the next couple of months. We paid our interim dividend per share of €0.27 in the third quarter, a total amount of 419 million.
Then the outlook, by means of share of revenue and EBITDA growth in the third quarter, we are on track and remain on track to deliver our objectives for this year. We expect higher revenues for the second half of 2010, compared to the last six months in 2009, leading to in line revenues for this year.
EBITDA is up 230 million in the first nine months providing us with confidence that we will reach the target of 5.5 for the full year. And we continue to be mindful of balancing profitability with market shares. And that’s very important for us that we keep our eye on that. Market shares are very important to us.
No glide pass for MTRs for the Netherlands, and Belgium, have been announced. Germany is still unknown and that’s probably only known by the end of November. Despite the impact of regulation in the Netherlands and Belgium, we remain confident that we can deliver on the objectives that we set for 2010 and 2011, and the outlook is therefore, confirmed.
Well, I probably shared that we are committed to industry leading shareholder returns and confirm the €0.80 dividend per share objective for 2010. 2011, we expect growing EBITDA, free cash flow and dividend. And over the full-year 2011 our target is a dividend per share of €0.85.
I will now hand over to Carla for a financial review.
Thank you, Ad. Good morning, everyone. Let’s start with the Group results. As Ad just said in the third quarter growth has returned into our topline. Revenues grew by 1.4%. And if we exclude the effect from disposed businesses, revenue increase was even a bit higher at 2%.
If we look underlying, we see revenue increases at Mobile International and iBasis, and these are partly offset by lower revenues at Dutch Telco and Getronics. EBITDA continued to grow in the third quarter by about 80 million and with all segments contributing.
Mobile International performed strongly, with especially Germany showing a very high margin. For the full year, we have guided for 5.5 billion EBITDA, a step-up of about 300 million. And with 75% of the year’s targeted step-up achieved so far, we are on track.
This quarter we see higher financial expenses in the third quarter, close to 130 million, and this results from the bond tender in September and higher average borrowings. And therefore, we experienced a decline in the profit before tax, and however, profit after-tax is up because of a lower effective tax rate.