Orange : Financial information at December 31, 2021

Orange achieves all of its 2021 targets and expects to generate organic cash flow of at least 2.9 billion euros in 2022

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• Revenues up 0.8% for the full year 2021, driven by the solid performance of Africa & Middle East (+10.6%) and a strong increase in equipment sales (+8.5%)
• Excellent performance in Fiber: 11.8 million fiber (FTTH) customers (+22.1%) out of 56.5 million connectable households (+19.7%). In France, the FTTH customer base recorded a year-on-year increase of 31.7%.
• EBITDAaL 0.5% lower for the year, in line with the target
  Excluding the 2021 employee shareholding program, EBITDAaL was up 0.8% as a result of the notable performances in Africa & Middle East and Europe excluding Spain, which offset the decline in Spain, the Enterprise segment and France. Excluding co-financing, France posted year-on-year EBITDAaL growth of 1.5% with a very strong commercial performance.
• eCAPEX rose 7.8% in 2021 to 7.7 billion euros, in line with the target, after the high level of co-financing and the pandemic-related slowdown in investment seen in 2020. eCAPEX began to decline in the second half of the year.
• Organic cash-flow from telecoms activities stood at 2.4 billion euros, fully in line with the goal to exceed 2.2 billion euros.
• The Shareholders' Meeting of 19 May 2022 will decide on the distribution of a dividend of 0.70 euros per share.

Orange has set itself the following targets for 2022:

• EBITDAaL to increase by 2.5% to 3%
• eCAPEX no greater than 7.4 billion euros
• Organic cash flow from telecoms activities of at least 2.9 billion euros
• Net debt/EBITDAaL ratio for telecoms activities unchanged at around 2x in the medium term
• Maintaining the dividend for the financial year 2022 at 0.70 euros including an interim dividend of 0.30 euros in December 2022

For 2023, Orange confirms all of its commitments including organic cashflow from telecoms activities of at least 3.5 billion euros.

Commenting on the publication of these results, Stéphane Richard, Chairman and Chief Executive Officer of the Orange group, said:

"The Group's results reflect a solid 2021 performance. Indeed, Orange has delivered on its commitments and is confirming all its objectives for 2023, including organic cashflow of between 3.5 and 4 billion euros. Thanks to our investments, today we're the uncontested European fiber optic leader with a vast network of over 56 million connectable households across the Group's footprint.

Our European leadership in convergence has also been confirmed with 11.5 million clients, and the integration of TKR in Romania and the process that is well under way in Belgium to acquire Voo are further reinforcing this.
In France, our largest market, our commercial performance has been very strong and customer satisfaction is constantly growing.
The dynamic in our Africa zone has been remarkable, with a 11% increase in revenues. With over 44 million 4G clients, mobile data continues its development generating revenues in this segment that are up 25%.

Our ambitious moves into cybersecurity and banking are paying off. With revenues of 800 million euros, cybersecurity has delivered a 14% growth in 2021 while Orange Bank now has 1.7 million clients in Europe.

Finally, our operational efficiency program "Scale Up" is well under way and we are driving our efforts forward in this regard.

The Group's commercial performance has also been excellent, actively contributing to the achievement of our 2021 objectives in a context marked by important challenges: the move from copper to Fiber, the transition to providing IT services and also the turnaround of the situation in Spain. So, excluding non-operational factors such as the employee share offer, our margin and organic cash-flow are growing.

I'd like to express my gratitude to all of the Group's teams right around the world who, thanks to their relentless application, have allowed us to deliver this excellent performance.

With my mandate as Chairman and Chief Executive drawing to a close in the coming weeks, it is with pride that I look upon everything that we have accomplished over these past twelve years. I am confident about Orange's future, that of a solid company that has shown itself capable of capturing new growth opportunities while at the same time strengthening its network leadership."

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The Board of Directors of Orange SA met on February 16, 2022 to review the consolidated financial statements for the year ended December 31, 2021. The Group's statutory auditors performed their audit procedures on those financial statements and the audit report relating to their certification will be issued at the beginning of March 2022
More detailed information on the Group's financial results and performance indicators is available on the Orange website at https://www.orange.com/en/consolidated-results.

Comments on Group key figures

Revenues

The Orange group posted 2021 revenues of 42.5 billion euros, a year-on-year increase of 0.8% after 0.5% growth in the fourth quarter.

Africa & Middle East was the main contributor to this growth, with a year-on-year increase of 10.6%, followed by Europe excluding Spain (+2.6%) and the Enterprise segment (+0.5%). The decline in France (-1.6%) was due to a reduction in Fiber network co-financing compared to 2020.

Retail services continued to expand, driven by convergent services (+1.9% year-on-year) in France and Europe excluding Spain, and mobile-only services (+4.2%) in Africa & Middle East. Fixed only services declined 2.8%.

Wholesale revenues were down 6.8% due to co-financing in France, while IT&IS services and equipment sales continued to increase, the latter returning to close to their 2019 level.

Customer base growth

There were 11.5 million convergent customers Group-wide at December 31, 2021, up 2.1% year-on-year.

Mobile services had 224.3 million access lines at December 31, 2021, up 4.3% year-on-year, including 82.0 million contracts, an increase of 4.8% compared to a year ago.

Fixed services totaled 46.4 million access lines at December 31, 2021 (down 1.7% year-on-year), including 11.8 million FTTH access lines, which continued their strong growth (+22.1% year on year). Fixed narrowband access lines were down 13.3% year-on-year.

Mobile Financial Services had nearly 1.7 million customers in Europe and 0.7 million customers in Africa.

EBITDAaL

Group EBITDAaL stood at 12.6 billion euros in 2021 (-0.5%), in line with the objective of "stable but negative" EBITDAaL. This result included an expense of 172 million euros related to the 2021 employee shareholding program that involves approximately 1% of share capital and mainly concerns France and the Enterprise segment. Excluding this program, EBITDAaL was up 0.8%. The still low level of roaming compared to 2019 was also a factor in this result.

EBITDAaL from telecom activities was 12.7 billion euros, down 0.8%.

Operating income

Group operating income stood at 2,521 million euros in 2021, down from 5,537 million euros on a comparable basis in 2020.

This decrease was mainly due to the recognition in the first half 2021 of a goodwill impairment for Spain amounting to 3.7 billion euros.

Net income

The Orange group's consolidated net income totaled 778 million euros in 2021, compared with 5,055 million euros in 2020.

This decline was linked to lower operating income as well as the 2.2 billion euros in tax income recognized at the end of 2020.

eCAPEX

Group eCAPEX was up 7.8% to 7,660 million euros in 2021, following the slowdown in investment related to the public health crisis and the significant co-financing received in 2020. This was in line with the stated target of between 7.6 billion euros and 7.7 billion euros.

At December 31, 2021, Orange had 56.5 million households with FTTH connectivity worldwide (up 19.7% year on year). In France, the FTTH customer base was up 31.7%.

Organic cash flow

Organic cash-flow from telecoms activities stood at 2.4 billion euros in 2021 (versus 2.5 billion euros in 2020), fully in line with the goal to exceed 2.2 billion euros.

Before allocation of the tax refund received in 2020, organic cash flow amounted to 2.7 billion euros, in keeping with the return to growth that began in 2020.

Net financial debt

The Orange group's net financial debt at December 31, 2021 stood at 24.3 billion euros. This increase of 0.8 billion euros compared to 2020, despite the disposal of 50% of Orange Concession, was mainly the result of the tax refund allocation and telecommunication license payments (notably the 5G license in Spain).

The net debt ratio at December 31, 2021 was 1.91x, substantially in line with the medium-term objective of around 2x.

"Scale Up" operational efficiency program

To ensure it achieves its objectives, in 2020 Orange launched the "Scale Up" operational efficiency program, thereby confirming its commitment to generating 1 billion euros in net savings from a defined scope of 13.8 billion euros in indirect costs in 2019.

By 2021 year-end, cumulative net savings of more than 300 million euros had been generated from within that scope versus 2019. These savings were mainly the result of a structural decline in the workforce and a change in working methods precipitated by the pandemic, with positive impacts on the cost base.

Against a backdrop of inflation and strong pressure on energy prices, Orange expects to achieve cumulative net savings of around 600 million euros by the end of 2022, a further step towards reaching its target of 1 billion euros by the end of 2023.

Changes in asset portfolio

On November 3, 2021, Orange completed the disposal of 50% of the capital of Orange Concessions to a consortium comprising La Banque des Territoires, CNP Assurances and EDF Invest. The sale was based on an enterprise value of 2.7 billion euros for 100% of the capital and resulted in Orange renouncing sole control over this entity and its subsidiaries.

On December 24, 2021, Orange Belgium signed an agreement to acquire 75% minus one share of VOO SA based on an enterprise value of 1.8 billion euros for 100% of the capital. The transaction, which is part of the Group's convergence strategy, is expected to generate significant synergies linked to the transfer of VOO's MVNO business to the Orange Belgium network. The acquisition has been submitted for European Commission approval, which is expected in 2022.

Dividend

For the fiscal year 2021, the Shareholders' Meeting of May 19, 2022 will decide on the distribution of a dividend of 0.70 euros per share. Taking into account the 0.30-euro interim dividend paid on December 15, 2021, the balance of the dividend to be proposed to the Shareholders' Meeting will be 0.40 euros per share, to be paid in cash on June 9, 2022. The ex-dividend date will be June 7, 2022.

For fiscal year 2022, the 2023 Shareholders' Meeting will be asked to approve a maintained dividend of 0.70 euros per share. An interim dividend of 0.30 euros per share will be paid in December 2022.

(The entire press release is available on PDF file)

1/ Unless otherwise stated, the changes presented in this press release are on a comparable basis
2/ Before taking into account the pending acquisition of Voo in Belgium
3/ Retail services (B2C and B2B). See definition in the attached glossary.
4/ Unless otherwise stated, the changes presented in this press release are on a comparable basis
5/ Scope corresponding to Group indirect costs excluding (i) Africa & Middle East and Mobile Financial Services, and (ii) labor expenses, other network expenses and IT expenses for Enterprise IT and integration services.

Marc PINON

17/02/202207:30 CET