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KPN maintains outlook as Q2 sales fall 7.1%

KPN reported second-quarter revenues down 7.1 percent to EUR 2.00 billion. The decline slowed from 9.8 percent a year earlier, but the Dutch operator continued to suffer from difficult conditions in the mobile and business markets. EBITDA was still up 41 percent year-on-year thanks to the release of a pension provision. Excluding that, EBITDA fell 19 percent to EUR 633 million, giving a margin of 31.6 percent. The margin was up slightly from the previous quarter but down almost 5 percent points from a year earlier. 

Revenue and EBITDA KPN 2014 Q2

Net profit roughly doubled to EUR 346 million or EUR 0.08 per share, thanks to the pensions gain. As part of discontinued operations, KPN wrote off EUR 744 million on its German operator E-Plus, due to the fall in share price at Telefonica Deutschland. Including this, KPN had a net loss of EUR 180 million in the quarter. The sale of E-Plus to Telefonica is expected to close in the current quarter, leaving KPN with a 20.5 percent stake in Telefonica Deutschland. 

The company also disclosed that the proposed increase in its stake in Reggefiber, from 51 to 60 percent, will cost EUR 161 million. The acquisition was first announced in January, for a price of EUR 116-161 million and still requires approval from the competition regulator. Following the deal, KPN will fully consolidate Reggefiber and have full management control of the FTTH operator.

KPN said its cost reduction programme has led to the loss of 350 jobs and EUR 75 million in savings so far this year. The company’s net debt ratio increased slightly in the quarter to 2.2 times EBITDA, from 2.1 in the previous quarter. This is based on pro forma figures for the sale of E-Plus and bigger stake in Reggefiber. 

KPN maintained its outlook for 2014 and 2015. It expects results to stabilise towards the end of this year, while capex is forecast at less than EUR 1.4 billion and the dividend at 7 cents a share in 2014. In 2015, capex will remain below EUR 1.5 billion and the company expects a return to growth in free cash flow, helped by lower taxes and interest charges. 

KPN reported revenues from its residential consumer business down 0.8 percent, while EBITDA rose 19 percent. It lost 7,000 broadband customers in the three months, but gained 43,000 TV subscribers. The operator plans to accelerate the roll-out of VDSL vectoring in order to reach 50 percent of households with access to 100 Mbps by the end of this year. 

Revenues fell 9.0 percent and EBITDA was down 63 percent at the Consumer Mobile division, hurt by an end to its handset leasing offer as well as higher costs for signing up 53,000 new postpaid customers. At the Business division, revenues fell 12 percent, and EBITDA was down 17 percent. KPN has cut 150 jobs at the division since the start of the year and targets 400-500 reductions by year-end. It added 16,000 business mobile customers in Q2. 

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