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MarketScreener Homepage  >  Equities  >  Swiss Exchange  >  Sunrise Communications Group    SRCG   CH0267291224

SUNRISE COMMUNICATIONS GROUP

(SRCG)
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Q3 with market share gains and EBITDA growth

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11/13/2019 | 12:50am EST

Q3 with market share gains and EBITDA growth

  • Continued customer momentum in mobile postpaid (+10% YoY), internet (+9%) and TV (+14%)
  • Service revenue increased +2.0% driven by customer momentum and B2B, while total revenue was up +1.0%
  • Gross profit growth of +1.9% in Q3, with improvement partly reinvested into growth momentum
  • Adj. EBITDA up +2.0% (incl. IFRS 16: +9.4%)
  • Termination of SPA with Liberty Global
  • 2019 guidance confirmed

Revenue (CHF m)

Q3'18

excl. IFRS 16

Q3'19

incl. IFRS 16

Q3'19

excl. IFRS 16*

YoY

incl. IFRS 16

YoY

excl. IFRS 16

Mobile services

321

325

1.3%

Landline services

77

72

(5.7%)

Landline internet

72

76

6.8%

Total revenue

469

474

1.0%

Service revenue (total excl. hubbing & hardware)

385

393

2.0%

Gross profit

310

316

316

1.9%

1.9%

EBITDA

154

175

163

13.0%

5.5%

Adjusted EBITDA

158

173

161

9.4%

2.0%

Net income

32

48

48

51.7%

53.6%

Equity free cash flow

58

88

52.0%

Customers (in k)

Mobile Postpaid

1,686

1,854

9.9%

Mobile Prepaid

677

591

(12.7%)

Landline Voice

460

497

8.0%

Internet

449

490

9.1%

TV

236

269

14.4%


*IFRS 16 has no impact on revenue

Olaf Swantee, CEO of Sunrise, comments: "In Q3 we continued our 5G rollout, covering 309 cities and villages by the beginning of October. Our network leadership, solid Q3 performance and strong score in the BILANZ telecom ranking all confirm our strategic focus on quality across our networks, services and products."

Strong customer growth in postpaid, internet and TV

Momentum in subscriber additions continued, with Sunrise achieving 41,400 postpaid net adds in Q3'19, vs. 31,000 in the same period last year. This strong performance was supported by B2B customer wins (including 'GF Machining Solutions' and 'ewl energie wasser luzern') and a focus on going the extra mile for customers. YoY, Sunrise grew its mobile postpaid customer base +9.9%, up from +9.5% in the previous quarter. The mobile prepaid customer base decreased YoY as customers continue to migrate to postpaid tariffs. Internet and TV subscribers rose by +9.1% YoY and +14.4% YoY respectively. These substantial increases were supported by 2-4P bundle offers, attractive TV content (which includes 'Netflix', 'Sky Sports' and 'Sky Show'), a focus on service excellence, and dedicated promotions.

Revenue growth driven by customer growth

Service revenue increased by +2.0% YoY as a result of mobile postpaid, internet / TV and B2B revenue growth. This represents a slowdown compared to Q2'19 growth (+3.1% YoY), primarily driven by project driven 'Integration' business. Total revenue increased by +1.0% YoY to CHF 474m: Service revenue growth was partly offset by reduced hubbing and mobile hardware sales, which both carry low profitability.

Adj. EBITDA up +2.0%

Gross profit rose by +1.9% YoY to CHF 316m, due to service revenue growth. Service gross margin decreased slightly, mainly due to promotions and customers' higher roaming usage. Gross profit improvement was partly reinvested into growth momentum. Q3 adjusted Opex increased +1.7% YoY as a result of variable customer onboarding and operational momentum costs, driving service revenue growth. Q3 adjusted EBITDA increased +2.0% (incl. IFRS 16 +9.4%) to CHF 161m. Net income improved from CHF 32m last year to CHF 48m supported by EBITDA growth and a deferred tax liability reduction.

Improved eFCF

Equity free cash flow increased from CHF 58m to CHF 88m in Q3 YoY, as a result of EBITDA growth and different Capex and NWC seasonality than last year. Net debt saw an improvement in Q3 to CHF 1,554m vs. CHF 1,636m in Q2 - driven by equity free cash flow. Pro forma IFRS 16 net debt to adjusted EBITDA ratio stood at 2.35x at the end of Q3'19. Excluding IFRS 16, the ratio amounted to 2.10x, a slight YoY increase from 2.08x driven by spectrum payment.

Termination of SPA with Liberty Global

Sunrise canceled the share purchase agreement with Liberty Global as of 12 November 2019. The cancellation triggers the payment of a penalty of CHF 50m to Liberty Global. Sunrise expects total additional costs of CHF 70-75m related to the transaction, consisting of underwriting fees (CHF 19m) advisory and legal fees, as well as already incurred integration costs (CHF 24m). Thereof, CHF 27m are already reflected in the financial statements of the first nine months of 2019, including CHF 24m as other operating expenses.

FY'19 guidance confirmed

FY'19 revenue and adjusted EBITDA continue to be expected between CHF 1,860-1,900m and CHF 618-628m, respectively. This guidance does not yet include the effects of IFRS 16. FY'19 Capex is reiterated in the range of CHF 420-460m. Upon meeting its FY'19 guidance, Sunrise expects to propose a dividend in the range of CHF 4.35-4.45 per share for FY'19, paid out of capital contribution reserves in FY'20.

Complementary 9m'19 results table

Revenue (CHF m)

9m'18

excl. IFRS 16

9m'19

incl. IFRS 16

9m'19

excl. IFRS 16*

YoY

incl. IFRS 16

YoY

excl. IFRS 16

Mobile services

938

929

(1.0%)

Landline services

245

218

(11.0%)

Landline internet

208

229

10.1%

Total revenue

1,390

1,375

(1.1%)

Service revenue (total excl. hubbing & hardware)

1,121

1,151

2.6%

Gross profit

907

933

932

2.9%

2.8%

EBITDA

439

506

472

15.4%

7.7%

Adjusted EBITDA

448

496

463

10.9%

3.4%

Net income

72

109

111

50.4%

54.0%

Equity free cash flow

92

92

(0.4%)

*IFRS 16 has no impact on revenue

Please see www.sunrise.ch/reports for the IFRS report, the investor presentation, and further information.




Provider
Channel
Contact
Tensid EQS Ltd., Switzerland
www.tensid.ch


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Provider/Channel related enquiries
marco@tensid.ch
+41 41 763 00 50
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Financials (CHF)
Sales 2019 1 866 M
EBIT 2019 176 M
Net income 2019 66,6 M
Debt 2019 1 487 M
Yield 2019 5,47%
P/E ratio 2019 54,0x
P/E ratio 2020 32,7x
EV / Sales2019 2,73x
EV / Sales2020 2,68x
Capitalization 3 608 M
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Mean consensus HOLD
Number of Analysts 13
Average target price 78,54  CHF
Last Close Price 80,05  CHF
Spread / Highest target 12,4%
Spread / Average Target -1,88%
Spread / Lowest Target -33,8%
EPS Revisions
Managers
NameTitle
André Krause Chief Executive Officer
Peter Anton Joseph Kurer Chairman
Uwe Schiller Chief Financial Officer
Elmar Grasser Chief Technology Officer
Jens Jesper Ovesen Independent Non-Executive Director
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