24.02.2021 - 00:00 Uhr

freenet Group reports successful 2020, with postpaid and waipu.tv repeating strong growth in Q4, and provides optimistic outlook for 2021

  • EBITDA (without regulatory effects/MOTION TM) rises to 445.9 million euros (+9.7 million euros) on the back of stable revenue
  • Free cash flow within the target range at 237.3 million euros
  • Subscriber base grows by more than 100 thousand customers in the fourth quarter to over 8.6 million contracts (+243 thousand compared to 2019) – postpaid and waipu.tv both record strong growth
  • Leverage falls significantly from 4.8 (2019) to 1.7 (2020)
  • Further subscriber growth expected in 2021 guidance

Büdelsdorf, 24 February 2021 – freenet AG [ISIN DE000A0Z2ZZ5] today announced its preliminary results for the 2020 financial year. 

Group: Performance in line with expectations - guidance met in all respects

In EUR million/as indicated FY 2020 FY 2019 Change Q4/2020 Q4/2019 Change
Revenue12,576.22,609.1-32.8670.7706.1-35.4
EBITDA425.9426.8-0.996.7101.0-4.3
   thereof regulatory effects:
      International calls/roaming-20.0-12.0-8.0-5.0-5.00.0
   thereof MOTION TM---2.6-2.6---1.8-1.8
EBITDA without regulatory effects/MOTION TM445.9436.29.7101.7104.2-2.5
Free cash flow237.3249.0-11.717.149.8-32.7
Subscribers2 (in '000s)8,609.88,366.5243.38,609.88,366.5243.3

After a 2020 financial year that was full of exceptional challenges posed by the COVID-19 crisis, the freenet Group came through not only unscathed but with flying colours, fully achieving the targets set even before the outbreak of the pandemic. This success is due to the great adaptability and flexibility of our established business model and, last but not least, our motivated employees. The freenet Group's business model, which is focused on long-term customer relationships as well as flexible cost and sales structures, proved to be more than robust in the face of coronavirus in 2020.

Revenue1 remained stable (-1.3 per cent year-on-year), in line with the guidance issued. At 425.9 million euros, EBITDA also was virtually unchanged from the previous year’s level (426.8 million euros) despite delayed regulatory effects (-8.0 million euros vs. 2019) and the loss of the contribution made by MOTION TM GmbH (-2.6 million euros vs. 2019). This meant that the Group met the expectation of EBITDA between 415 and 435 million euros formulated at the start of the year. The TV & Media segment made a major contribution to this performance, with its EBITDA now accounting for almost 20 per cent of Group EBITDA, as did the consistent monitoring of cost efficiency in all areas. Adjusted EBITDA grew by 2.2 per cent to 445.9 million euros (2019: 436.2 million euros) due, among other things, to cost savings, some of which are long-term.

Working capital, which had a significantly positive effect on free cash flow in the first nine months of the year (+23.7 million euros year-on-year) as a result of various effects, suffered in the wake of COVID-19 related store closures in Germany at the end of the year. The free cash flow at 237.3 million euros is within the guidance, but the GRAVIS stores were only able to sell already supplied goods via online channels (often with longer payment terms) in the important Christmas season. This caused working capital to shed all the gains seen in Q1 to Q3 (+23.7 million euros vs. Q1-Q3/2019) in the fourth quarter (-26.2 million euros vs. Q4/2019).

After strong growth in the previous quarters (Q3: +16.3 thousand; Q2: +60.8 thousand; Q1: +63.1 thousand), the number of subscribers2 grew sharply once again in the fourth quarter of 2020 (+103.0 thousand) to reach approximately 8.610 million customers as at 31 December 2020. The number of own customers rose by 243.3 thousand overall, an increase of 2.9 per cent compared to the same period in the previous year. This meant that the previous year’s growth trend actually accelerated in 2020 (2019: +2.5 per cent or 204.8 thousand customers).


Mobile Communications segment: Further strong customer growth in fourth quarter of 2020

In EUR million/as indicated FY 2020 FY 2019 Change Q4/2020 Q4/2019 Change
Revenue12,306.12,335.5-29.3602.4633.8-31.4
   thereof revenue from services, Postpaid:1,521.61,540.9-19.3381.0381.2-0.2
   thereof revenue from services, NoFrills/Prepaid:119.7134.3-14.629.932.1-2.1
EBITDA354.8367.3-12.477.685.4-7.9
   thereof regulatory effects:
      International calls/roaming-20.0-12.0-8.0-5.0-5.00.0
   thereof MOTION TM---2.6-2.6---1.8-1.8
   thereof inter-segment allocation-9.1-7.4-1.7-2.3-1.8-0.5
EBITDA without regulatory effects/MOTION TM/inter-segment allocation383.9384.1-0.184.990.5-5.6
Postpaid customers (in '000s)7,078.76,902.9175.87,078.76,902.9175.8
Postpaid ARPU (in EUR)18.218.7-0.518.018.5-0.4
freenet FUNK/Flex customers (in '000s)56.834.322.556.834.322.5

Although most of the Group's own stores and other key bricks-and-mortar sales channels like Media Markt or Saturn remained closed for several weeks, the freenet Group achieved its moderate target for postpaid customer growth in the Mobile Communications business in 2020. The Group registered net new customer growth both in the six-week lockdown in the first half of the year and during the rest of 2020. The crucial factor here was the exceptional flexibility of the omnichannel sales model and its ability to adapt rapidly to the “new normal”.

After encouraging net growth in postpaid customers during the third quarter (+65.5 thousand), this figure grew even more significantly in the fourth quarter (+73.7 thousand). This means that the postpaid customer base has grown by 175.8 thousand customers since the start of the year and is now well in excess of the 7.0 million mark. As a result of this customer growth, revenue from postpaid services in the fourth quarter (381.0 million euros) reached the same level as the previous year (381.2 million euros) and the previous quarter (381.9 million euros), even though postpaid ARPU continued to suffer from the negative impact triggered by COVID-19 (lack of roaming revenue). In addition, delayed regulatory effects (international calls/fee reduction [MNP]) were responsible for postpaid ARPU for the full year being just under 2.7 per cent lower than the previous year’s figure at 18.2 euros. Revenue from postpaid services fell accordingly by 1.3 per cent to 1,521.6 million euros in the period under review (2019: 1,540.9 million euros), with the negative trend abating recently. 

In addition to the postpaid customer base, the customer base for the fully app-based freenet FUNK/ freenet Flex tariffs rose sharply during the past year, increasing by 65.7 per cent to 56.8 thousand customers (2019: 34.3 thousand). As a result, the total number of these relatively high-profitability mobile communications customers grew by almost 200 thousand to 7.135 million during the year, providing a strong foundation for the performance of the Mobile Communications segment to remain stable in future.

Mobile Communications revenue remained stable overall at 2,306.1 million euros (2019 (adjusted for MOTION TM): 2,335.5 million euros). By contrast, fourth quarter revenue was down on the prior-year quarter (-31.4 million euros compared to Q4/2019) due to COVID-19-related store closures from 16 December 2020 onwards and the resulting lack of (hardware) revenue from the Christmas season. However, this effect did not directly impact EBITDA due to the lower margin.

Segment EBITDA came to 354.8 million euros in 2020, down slightly by 3.4 per cent compared to the same period in the previous year (2019: 367.3 million euros). Due to a preventative measure (loss allowances on receivables from customers in anticipation of a deterioration in payment behaviour due to COVID-19), the fourth quarter deviated from the otherwise stable business performance and quarterly trend during the year. Excluding regulatory effects, the earnings contribution of sold subsidiary MOTION TM GmbH and segment allocations, adjusted EBITDA was on a par with the previous year at 383.9 million euros (2019: 384.1 million euros).


TV & Media segment: Contribution to Group EBITDA continues to grow

In EUR million/as indicated FY 2020 FY 2019 Change Q4/2020 Q4/2019 Change
Revenue259.0253.95.168.166.11.9
EBITDA79.773.56.220.720.9-0.3
   thereof inter-segment allocation-6.3-6.60.2-1.3-1.50.2
EBITDA without inter-segment allocation86.080.15.922.022.5-0.5
waipu.tv subscribers (in '000s)572.5408.3164.2572.5408.3164.2
freenet TV subscribers (RGU) (in '000s)901.91,021.1-119.2901.91,021.1-119.2

Customer numbers in the TV & Media segment also developed in line with expectations. With strong subscriber growth in the last quarter of the year (+63.0 thousand), waipu.tv comfortably exceeded the previous forecast of 550 thousand subscribers by the end of the year. After a somewhat restrained third quarter due to a lack of major televised sporting events, the IPTV product's customer base recorded the strongest quarter since its launch in 2016, growing to 572.5 thousand subscribers. This represents a year-on-year increase of 164.2 thousand customers (+40.2 per cent), with the company therefore continuing its robust growth from 2019.

In the case of freenet TV, the number of revenue-generating users (RGU) fell to just under 900 thousand as expected in the updated forecast issued in the third quarter of 2020. This year-on-year decline of 11.7 per cent or 119.2 thousand customers is attributable to the 20 per cent price increase introduced in May 2020 as well as the shutdown of satellite customers for profitability reasons completed at the end of the year. Based on the current customer base, the price increase will nevertheless have a positive impact on gross profit and EBITDA in future.

The revenue trend in the TV & Media segment reflects both the price increase at freenet TV and the growing customer base at EXARING AG (waipu.tv) and increased by 5.1 million euros to 259.0 million euros (2019: 253.9 million euros) despite the lack of revenue from Media Broadcast’s event business. Both revenue and sales-related effects also have a direct impact on segment EBITDA, which increased by 8.4 per cent to 79.7 million euros (2019: 73.5 million euros). The increase was mainly driven by waipu.tv, whose EBITDA contribution increased by 7.0 million euros compared to the previous year. As a result, the TV & Media business’s share of consolidated EBITDA has reached almost 20 per cent overall, with a segment EBITDA margin of more than 30 per cent (+1.8 percentage points compared to 2019). The stable B2B business combined with the growing B2C business provides a sound basis for recording growth via the TV & Media segment in the medium term.


2021 guidance: Stable expectations for the freenet Group

Revenue for financial year 2020 was in line with expectations at 2,576.2 million euros. Revenue is likely to remain stable overall in 2021. This expectation is based on moderate revenue growth in the TV & Media segment and stable performance in the Mobile Communications core business. Based on this, management expects EBITDA to remain largely unchanged within a range of 415 to 435 million euros.

The free cash flow figure of 237.3 million euros for 2020 includes a positive contribution of around 36.0 million euros from the equity interest in Sunrise (2020 dividend less interest payments) that will no longer be recognized in free cash flow in future due to the disposal of the Sunrise shares in November 2020. If adjusted, this would result in a sustainable free cash flow of 201.3 million euros for 2020. Free cash flow of between 200 and 220 million euros is anticipated for 2021.

The postpaid customer base is once again expected to grow moderately with stable development of postpaid ARPU. When it comes to customer numbers in the TV & Media segment, robust growth in waipu.tv subscribers is anticipated, while the number of freenet TV subscribers (RGU) is likely to decline moderately.

In EUR million/as indicated 2020 reference value 2021 guidance
Financial performance indicators
Revenue2,576.2stable
EBITDA425.9415-435
Free cash flow (without Sunrise contribution)201.3200-220
Postpaid ARPU (in EUR)18.2stable
Non-financial performance indicators
Postpaid customers (in millions)7.079moderate increase
freenet TV subscribers (RGU) (in millions)0.902moderate decrease
waipu.tv subscribers (in millions)0.572solid growth

The freenet Group expects to publish its final financial results for 2020 on 26 March 2021. The Annual Report for the year ended 31 December 2020 will then be available in the Investor Relations section at https://www.freenet-group.de/investor/publications/index.html.


Conference call webcast

freenet AG will host an analysts’ conference call at 10:00 a.m. (CET) on 25 February 2021. All those interested in attending can follow the conference call via webcast at LINK.

A recording will be made available following the event.


 

1    The Executive Board decided to sell the Group’s 51 per cent equity investment in MOTION TM Vertriebs GmbH, Troisdorf, as of the end of December 2019. The company's external revenue contribution amounted to 323.5 million euros in the period from January to December 2019 (Q4/2019 96.4 million euros), while its EBITDA contribution was approximately 2.6 million euros (Q4/2019: 1.8 million euros). To improve comparability, the previous year's figures for sales and EBITDA are therefore presented adjusted for MOTION TM.

2    Sum total of postpaid customers, active freenet FUNK customers, freenet Flex customers, freenet TV subscribers (RGU) and waipu.tv subscribers.




**********************************

 

Contact:

freenet Group
Investor Relations & ESG

Tel.: +49 (0) 40 / 513 06 778

E-Mail: ir@freenet.ag

https://www.freenet-group.de

 

 

Our brand portfolio