2006 targets beaten, demonstrating the profitable growth strategy of Neuf Cegetel and allowing for an aggressive investment plan

March 7, 2007

4 Min Read

PARIS -- Neuf Cegetel reports its 2006 financial results, which beat the targets set at the time of the IPO:

  • Revenues of €2,897m, up by €145m*, driven by the Mass Market division (€872m, up 18% compared to 2005*) and the Enterprises division (€971m, up 7%*). With a 7.1%* rise in revenues in H2, the group delivered on its commitment to increase the growth rate compared to H1 (up 3.4%*).

  • EBITDA(1) of €544m, up by €309m*. With an EBITDA(1) margin of 20% excluding IPO related expenses in H2, the target of reaching this 20% margin on a run-rate basis before the end of 2006 was beaten.

  • Operating cash flow(2) of €212m, up by €307m*,

  • Net profit of €213m, up by €407m.

  • Proposed dividend of €0.40 per share, payable in July 2007, in line with the commitment to distribute a dividend in 2007 based on 2006 earnings.

This profitable growth momentum means the targets for 2007 and beyond can be confirmed and raised:

  • Revenues to grow by more than 40% in 2007 in the Mass Market division and by between 5% and 10% in the Enterprises division.

  • EBITDA(1) margin to reach 25% by the end of 2008, mainly as a result of enhanced profitability in the Mass Market business and a tighter control on general and administrative costs.

  • Operating cash flow(2) to double on a run-rate basis between early 2006 and late 2007, and to exceed €400m in 2008. This target factors in an improvement in the company's profitability and an aggressive and disciplined capex plan aimed at expanding the unbundled footprint and tapping the FTTx opportunity in the Mass Market segment. The group targets one million homes passed and 250,000 FTTx clients by the end of 2009, at a cost of around €1,200 per client (including the infrastructure to the home and the hook up).

Strong market share growth for the Mass Market and Enterprises divisions, driven by innovation and quality of service

One million new ADSL subscribers were gained in 2006, half of which through the acquisition of AOL France's Internet access business, and the other half as a result of robust organic growth, as evidenced out by the 19.7% market share on net additions in the last quarter of 2006. With 2,172,000 ADSL subscribers at the end of 2006, the group now commands a share of more than 18% of this market, which it only entered three years ago. For 2007, revenues in the Mass Market division are expected to grow by more than 40%, supported by growing market share, the expansion of ARPU, which is expected to reach €35 by the end of 2007, and the integration of AOL France's Internet access business.

In the Enterprises segment, the number of sites connected to the Neuf Cegetel network increased by 35% in one year to 139,000 at the end of 2006. Market share kept growing, as illustrated by the 7% growth in revenues in a market that contracted by around 5% in 2006. In the Enterprises division, revenues are expected to grow by 5% to 10% in 2007, thanks to the development of VoIP and mobile data offerings, and the growth in the small enterprises market.

The ability of the group to grow is being fuelled by the steady flow of innovations, the capacity to provide clients with the most advanced technologies and unparalleled ease of use, as well as strong commitments to quality of service, as illustrated in particular by the “Neuf s’engage” programme announced today.

In the Mass Market segment, Neuf Cegetel stood out with the new Neuf Box, in house developed in 2006 and launched at the beginning of 2007. The box is FTTx enabled, offers the most advanced WiFi functionality and is very easy to install and to use. Neuf Cegetel has launched Neuf Mobile Liberté, the first free mobile contract with no commitment. Since November, the TWINTM, the first hybrid telephone, offers unlimited usage of multimedia services, including access to more than 30 TV channels. The group will be introducing a new GSM/WIFI telephone to establish a range of TWINTM handsets in April.

In the Enterprises market, with “9pass”, the small companies enjoy a unique multi-service solution, while new Mobile Data solutions have been added to the services offered to mid and large companies.

Margins materially increased in 2006; EBITDA(1) margin of 25% by the end of 2008

Mutualising the costs and the capital expenditures over an ever larger customer base has helped improve the company's profitability dramatically.

Neuf Cegetel Group (Euronext: NEUF)

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