ROYAL KPN N.V.
Royal KPN N.V.
Royal KPN N.V. Press Release: Accelerate to grow
24-Nov-2020 / 07:30 CET/CEST
Accelerate to grow: KPN plans return to growth by connecting the Netherlands
to a sustainable future through nation-wide fiber
· Accelerating fiber rollout to cover the Netherlands; crossing 50% in
2023 and doubling fiber footprint to 65% of the Netherlands in 2025
· Total service revenues in Consumer, SME and Wholesale to return to
growth by end 2021
· Differentiated services and outstanding digital customer experience for
families and businesses
· Next wave of simplification and digitalization to deliver additional
cost savings of at least &euro 250m in 2021-2023
· Committed to progressive dividend, +3-5% annual growth covered by
growing Free Cash Flow
Message from the CEO, Joost Farwerck
"Our plan is to accelerate to grow. We'll further accelerate the rollout of
our next-generation fiber network to cover the majority of households and
businesses in the Netherlands. The importance of connectivity has never been
stronger than today. Working from home has become the norm. Therefore, the
need for fast and reliable Internet is greater than ever. The delivery of
our strategy will ensure the Dutch society stays connected and will drive
the digitalization of services across sectors - from health care to
education.
With the majority of our revenues and EBITDA generated in the Consumer and
SME segment, also through our Wholesale partners, we are primarily a
mass-market service company. Our aim is to grow these mass-market service
revenues by end 2021 through a growing customer base and by offering
differentiated services and an outstanding digital experience to families
and businesses.
We will take the next step to accelerate digitalization and simplification
of our services, processes and organization, building on the strong and
simple operating model that we developed over the years. We'll continue
equipping our vital and motivated workforce with the mindset and skill set
required for our digital transformation as we adjust our way of working to
the new normal. This will further improve customer experience and provide
for a next wave of cost savings.
With this strategy we go all out to connect the Netherlands to a sustainable
future. At the same time, we are confident to deliver growth in adjusted
EBITDA after leases and Free Cash Flow, and we commit to our progressive
dividend policy. I am confident that our 'Accelerate to grow' strategy will
maximize value for all stakeholders."
Outlook 2021 and ambitions 2023
KPN reiterates the FY 2020 outlook presented at its Q3 2020 results and
presents a new outlook for FY 2021 and ambitions for FY 2023:
FY 2020 FY 2021 outlook FY 2023 ambitions
outlook
Adjusted &euro 2,320m Growth >&euro 2,450m
EBITDA AL
Capex &euro 1.1bn &euro 1.2bn &euro 1.1-1.2bn
Free Cash Flow &euro 750m &euro 750m >&euro 870m
Regular DPS &euro 13ct Progressive Progressive
dividend, dividend,
+3-5% growth +3-5% annual
growth
Documents and related information
The presentation starts at 14:30 CET. A link to the webcast and all relevant
information will be published on KPN's website: ir.kpn.com [1].
Strategic priorities: Accelerate to grow
KPN has identified three key pillars underpinning its 'Accelerate to grow'
strategy:
1) Leverage & expand superior network
2) Grow & strengthen customer footprint
3) Simplify & streamline operating model
With this strategy, KPN will continue its progressive dividend policy,
covered by Free Cash Flow, and it will grow mass-market service revenues and
EBITDA. It will also lead the Dutch digitalization wave to connect the
Netherlands to a sustainable future.
Leverage & expand superior network
Over the past years, KPN has built an incredibly strong fiber foundation,
covering one third of the Netherlands with fiber and adding approximately
300k homes passed in 2020. In the coming years, KPN will leverage and expand
this superior network as it sees attractive returns from fiber investments
with increased network penetration, more loyal customers with an increased
willingness to pay for quality, and lower maintenance costs. To offer more
households and businesses access to this best-in-class network, KPN will
accelerate its fiber rollout to approximately 500k homes passed per year,
crossing the 50% mark in 2023 and reaching approximately 65% of Dutch
households by 2025. KPN's 5G strategy is focused on differentiated services
for B2B customers in specific industries.
Grow & strengthen customer footprint
Approximately 75% of KPN's revenues and 90% of its adjusted EBITDA AL are
generated in the 'mass-market' or Consumer, SME, and Wholesale segments. KPN
expects to grow mass-market service revenues by end 2021 through a
strengthened and growing customer footprint. In Consumer, the ambition is to
grow service revenues by end 2021. KPN will be the preferred digital partner
for households through (i) the best digital access with fiber, 5G, and
in-home WIFI; (ii) the best digital omni-channel experience with a
mobile-first and app-centric customer approach; and (iii) the best digital
third-party services through entertainment partnerships. In Business, KPN
has a clear segmented customer focus for SME, LCE and Tailored Solutions. In
SME, KPN expects to stabilize service revenues by end 2021 through
finalizing migrations and cross-sell opportunities from the KPN EEN
platform. The LCE strategy is fully aligned with its Smart Combinations
portfolio, but transformation is lagging SME by 1-2 years. For its largest -
Tailored Solutions - customers KPN offers the full range of B2B services and
focuses on sustainable customer relationships and value. In Wholesale, KPN
continues its open access policy to offer access to third-party operators.
Fiber contributes to continued growth of Wholesale revenues.
Simplify & streamline operating model
KPN will further simplify and streamline its operating model to prepare for
the next wave of digitalization, which will truly change customer
experience, enhances KPN's time-to-market and contributes to a next wave of
cost efficiencies. KPN raises its current cost savings program to &euro
375-400m and the final year will be embedded in a new cost savings program
of at least &euro 250m running from 2021 until 2023. Along with portfolio
simplification, digital customer journeys, and IT and network
rationalization, KPN is executing on COVID-accelerated cost opportunities;
e.g. moving to more remote working and an adjusted office footprint.
Outlook
In 2021, KPN expects to invest &euro 450-500m in the accelerated fiber
rollout, compared to &euro 270-290m in 2020. As a result, the total 2021
Capex envelope is raised to &euro 1.2bn. In the years 2022 & 2023 KPN
expects Capex of &euro 1.1-1.2bn, while fiber investments are maintained at
an elevated level. Furthermore, KPN expects adjusted EBITDA AL to grow in
2021 and reach a level of more than &euro 2,450m in 2023, driven by growing
mass-market service revenues and continued cost savings. KPN expects Free
Cash Flow to be approximately &euro 750m in 2021 and more than &euro 870m in
2023. Due to a combination of fiscal unity and loss compensation rules, cash
taxes are expected to be approximately &euro 50-60m in 2021. In 2022 and
beyond, KPN expects cash taxes of approximately &euro 150m due to
anticipated new legislation that will limit the annual use of tax losses,
but KPN's tax losses will be available indefinitely. Growing Free Cash Flow
will support KPN's continued progressive dividend policy and regular
dividend per share growth of 3-5% per annum. KPN remains committed to an
investment grade credit profile and targets a leverage ratio of less than
2.5x.
All related documents can be found on KPN's website: ir.kpn.com [1]
Safe harbor
Alternative performance measures and management estimates
This financial report contains a number of alternative performance measures
(non-GAAP figures) to provide readers with additional financial information
that is regularly reviewed by management, such as EBITDA and Free Cash Flow
('FCF'). These non-GAAP figures should not be viewed as a substitute for
KPN's GAAP figures and are not uniformly defined by all companies including
KPN's peers. Numerical reconciliations are included in KPN's quarterly
factsheets and in the Integrated Annual Report 2019. KPN's management
considers these non-GAAP figures, combined with GAAP performance measures
and in conjunction with each other, most appropriate to measure the
performance of the Group and its segments. The non-GAAP figures are used by
management for planning, reporting (internal and external) and incentive
purposes. KPN's main alternative performance measures are listed below. The
figures shown in this financial report are based on continuing operations
and were rounded in accordance with standard business principles. As a
result, totals indicated may not be equal to the precise sum of the
individual figures.
Financial information is based on KPN's interpretation of IFRS as adopted by
the European Union as disclosed in the Integrated Annual Report 2019 and do
not take into account the impact of future IFRS standards or (MORE TO FOLLOW) Dow Jones Newswires
November 24, 2020 01:30 ET (06:30 GMT)
