Millicom's Q1 2016 Results, 26 April 2016
Millicom International Cellular S.A.
Key highlights of Q1 2016 (i)
- Revenue of $1.53 billion - organic service revenue up 4.1% (ii)
- Adjusted EBITDA (iii) at $550 million, organic growth of 7.0%
- Adjusted EBITDA margin at 36.0% - increased by 1.8 percentage points
- LTE launch in Paraguay, DTH launch in Colombia
- Disposal of DRC mobile business completed
- Refinancing of the SEK bond – maturity profile extended, improved terms
Key financial indicators
|$m||Q1 2016||Q1 2015||% change|
|Adjusted EBITDA margin||36.0%||34.2%|
|Adjusted EPS ($) (v)||0.22||0.38||(42.1%)|
- Latam: Q1 reported organic revenue growth of 0.7% to $1,308 million due to lower handset sales whilst service revenue grew 2.9% as data continued to grow strongly partially offset by competitive intensity on mobile pricing and slower fixed B2B in Colombia, as well as some seasonal effect from Easter holidays falling in Q1 this year. The cable rollout continued strongly with a further 132,000 new HFC homes passed in the quarter. EBITDA was $525 million including $8 million one-off charges relating to a bad debt expense.
- Africa: Q1 reported organic revenue growth of 11.9% to $220 million with service revenue growing 12.1%. All countries with the exception of Rwanda reported double digit growth. Benefiting from actions to improve margins, EBITDA grew strongly, 11.8% on Q4 and 13.5% year-on-year to $57 million at a margin of 25.8%. DRC is now treated as a discontinued operation.
- Corporate costs: Reduction to $41 million compared to $45 million in Q4 15 and $59 million in Q1 15.
(i) This financial information presented in this earnings release is with Guatemala (55% owned) & Honduras (66.7% owned) as if fully consolidated. See page 16 for reconciliation with IFRS numbers. The comparative 2015 financial information in this earnings release has been represented as a result of the classification of our operations in DRC as discontinued operations (in accordance with IFRS 5)
(ii) Organic growth represents year-on year-growth in local currency (includes regulatory changes)
Service revenue is defined as Group revenue excluding telephone & equipment sales
(iii) Adjusted EBITDA is defined as reported EBITDA excluding restructuring and integration costs and other one-off items – See page 7 for reconciliation
(iv) Balance sheet capital expenditure, excludes spectrum and license costs
(v) Basic EPS adjusted for non-operating items see page 15 for reconciliation
Luxembourg, 26 April 2016
“We are squarely focused on improving operational leverage and delivering profitable and responsible growth. During the first quarter of 2016, organic adjusted EBITDA grew by 7.0% ahead of a 4.1% increase in service revenue, in line with our outlook for 2016. This quarter has seen a continuation of the macro headwinds which we forecast earlier in the year and this economic environment has continued to significantly impact our headline performance. However, it is pleasing to see greater resilience and performance improvements in our revenue mix, both by geography and by business unit.
In our Mobile business, growth continued driven by data uptake. Our focus on “volume to value” has delivered rapid improvements in data profitability. We will continue to drive our commercial strategy to optimise investments in 4G.
Momentum is robust in Cable, with the Home segment growing organically by 13.6%. The expansion of our HFC footprint continues as we added 132,000 homes passed, 31,000 new homes connected and 117,000 RGUs. Fixed B2B revenue also delivered a 7.3% increase although this was slower than in Q4 as we saw delays in new contract signings in Colombia. However, we continue to see this as a very promising sector and we have opened new data centres in Paraguay, Tanzania, Ghana and Chad with additional ones coming up in Colombia and Senegal. This will allow us to expand our services to more business customers and to further leverage the Tigo network.
In Latin America revenue grew by 0.7%, reflecting a significant decline in handset sales in Colombia as new third party channels were opened. Service revenue growth was stronger at 2.9% but held back by slightly slower growth in Colombia. Paraguay demonstrated concrete signs of revenue recovery and margin stability. We have further strengthened our service offer in Paraguay with a bolt-on cable acquisition, which is subject to regulatory approval, and launched LTE.
In Africa, we had a strong quarter as actions to improve our profitability started to take effect. Revenue grew almost 12% with Ghana growth accelerating and Chad recovering. We also saw a recovery in adjusted EBITDA which, excluding DRC, increased 11.8% compared to Q4 15. We opened our Fintech centre of excellence in Tanzania to capitalize on our leadership of Mobile Financial Services in the country and announced full mobile money interoperability – a world first.
We continue to deliver reductions in our cost base at all levels of the business and this quarter we once again brought down corporate costs from $59 million a year ago to $41 million, and also commenced a number of transformation activities and outsourcing projects at the local level to focus on cost control and optimizing the way we work.
Meanwhile, our investment strategy is concentrated on our most promising markets and on investments which add value to our core business. Whilst we have also set about rebalancing the capital structure through decisive steps to strengthen our balance sheet and reorientate our portfolio. Last week we completed the sale of our mobile business in DRC, whilst the week before we refinanced our Swedish bond on improved terms. We now have only around $400 million of debt maturing before 2018 and sit on a comfortable level of liquidity.
The Nomination Committee announced proposals for a new Chairman and new Members of the Board of Directors and we welcomed our new Chief Human Resources Officer, Daniel Loria, into the group.
Looking forward, we will continue to execute our strategy to build The Digital Lifestyle for our customers and monetise it for our shareholders and staying focused on improving profitability. We are driving our cash flow through increasing margins and lower capex whilst being disciplined in our capital allocation. We are well positioned to use our infrastructure, our network, our talent and our customer understanding to harness the strong fundamentals presented in our markets. ”
Millicom outlook for 2016 remains:
|Service revenue (a)||To grow mid-single digit|
|Adjusted EBITDA (b)||To grow mid to high-single digit|
|Capex (c)||Between $1.15 and $1.25 billion|
(a) Service revenue is Group revenue excluding telephone and equipment sales
(b) Adjusted EBITDA excludes restructuring and integration costs and other one-off items
(c) Capex excludes the impact of spectrum and licence costs
The outlook for 2016 is based on constant currency, at a constant perimeter with Guatemala and Honduras fully consolidated and on our current assessment of the emerging markets macroeconomic outlook. For service revenue this is a 2015 currency adjusted basis (using February 2016 exchange rates) of $5.73 billion and for Adjusted EBITDA a currency adjusted basis of $2.09 billion.
At the AGM to be convened on 17 May 2016, the Board will propose an ordinary dividend payment of $2.64 per share.
We reiterate our dividend policy for no less than $2 per share, and at least 30% of adjusted net profit (vi).
(vi) Adjusted net profit is defined as reported net profit excluding non-operating items and similar items classified under ‘other non-operating income (expenses)’.
Guatemala and Honduras
On 31 December 2015, the existing call options with local partners lapsed and under IFRS 10 and 11, Millicom deconsolidated its investments in Comcel (Guatemala) and Celtel (Honduras).
From 31 December 2015 onwards, Millicom accounts for its investments in Comcel and Celtel under the equity method and thus reports its share of the net income of each of these businesses in the income statement in the caption “Income (loss) from joint ventures” starting 1 January 2016. For the purpose of comparison and to provide users of this report a full understanding of the financial condition of the Group, the financial information presented in this earnings release is and will continue to be as if the Honduran and Guatemalan businesses continue to be fully consolidated, in line with our segmental reporting established in accordance with IFRS 8.
Further information on the accounting implications of the deconsolidation are provided in the notes to the financial statements as of 31 December 2015.
Conference call details
A presentation and conference call to discuss results of the quarter will take place at 14.00 Stockholm / 14.00 Luxembourg / 13.00 London / 08.00 New York, on Tuesday 26April 2016. For those unable to attend, Millicom will also provide a conference call. Dial-in numbers: + 46 (0) 850 65 3931, + 352 2088 1429, + 44 203 427 1920, +1 646 254 3374. Access code: 6047515
A live audio stream of the analyst presentation can also be accessed at www.millicom.com. Please dial in / log on 10 minutes prior to the start of the conference call to allow time for registration. Slides to accompany the conference call are available at www.millicom.com.
Significant events of the quarter
8 Feb 2016: Millicom to sell its Democratic Republic of Congo business to Orange
15 Feb 2016: Millicom signs agreement to acquire TV Cable Parana in Paraguay
11 Mar 2016: The Nomination Committee proposes new Board Directors
30 Mar 2016: Millicom appoints Daniel Loria as EVP of HR
12 Jan 2016: Tigo Paraguay to offer customers 4G internet accessible on all enabled smartphones
19 Jan 2016: Tigo announces the construction of Paraguay’s first UPTIME Tier 3 Certified Data Centre
18 Feb 2016: Airtel, Tigo and Vodacom agree on mobile money interoperability in Tanzania
8 Jan 2016: Fitch affirms Millicom at BB+
10 Feb 2016: Millicom Q4 and FY 2015 results
29 Feb 2016: Millicom and Comcel senior ratings maintained at Ba1 by Moody’s, with negative outlook
4 Apr 2016: Publication of Millicom 2015 Annual Report and CR …
12 Apr 2016: Millicom announces tender offer for its 2017 SEK bond
13 Apr 2016: The Nomination Committee proposes additional new Board Director
18 Apr 2016: Millicom announces success of its Early Tender Offer and new bond placement
21 Apr 2016: Millicom announces closing of DRC sale to Orange
17 May 2016: 2016 AGM
21 Jul 2016: Q2 16 results
25 Oct 2016: Q3 16 results
Tabitha Aldrich-Smith, Interim Communications Director
Tel: +352 277 59084 (Luxembourg) / +44 7971 919 610 / email@example.com
Nicolas Didio, VP, Head of Investor Relations
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Risks and uncertainty factors
Millicom operates in a dynamic industry characterized by rapid evolution in technology, consumer demand, and business opportunities. Combined with a focus on emerging markets in various geographic locations, the Group has a proactive approach to identifying, understanding, assessing, monitoring and acting on balancing risks and opportunities. For a description of risks and Millicom’s approach to risk management, refer to the 2015 Annual Report (http://www.millicom.com/media/4562100/full-annual-report-millicom-2015.pdf). In addition to the information in the 2015 Annual Report and the information provided in this release, please refer to Millicom’s press release, dated October 21, 2015, entitled “Millicom reports to authorities potential improper payments on behalf of its Guatemalan joint venture.” At this time, Millicom’s investigation remains on-going, and Millicom cannot predict the outcome or consequences of this matter.
Millicom is a leading telecom and media company dedicated to emerging markets in Latin America and Africa. Millicom sets the pace when it comes to providing innovative and customer-centric digital lifestyle services to the world’s emerging markets. The Millicom Group employs more than 16,000 people and provides mobile services to over 63 million customers. Founded in 1990, Millicom International Cellular SA is headquartered in Luxembourg and listed on NASDAQ OMX Stockholm under the symbol MIC. In 2015, Millicom generated revenue of USD 6.7 billion and EBITDA of USD 2.2 billion.
This press release may contain certain “forward-looking statements” with respect to Millicom’s expectations and plans, strategy, management’s objectives, future performance, costs, revenue, earnings and other trend information. It is important to note that Millicom’s actual results in the future could differ materially from those anticipated in forward-looking statements depending on various important factors, including those included in this release. All forward-looking statements in this press release are based on information available to Millicom on the date hereof. All written or oral forward-looking statements attributable to Millicom International Cellular S.A., and Millicom International Cellular S.A. employees or representatives acting on Millicom’s behalf are expressly qualified in their entirety by the factors referred to above. Millicom does not intend to update these forward-looking statements.