PR Newswire
MONTRÉAL, Aug. 2, 2018
This news release contains forward-looking statements. For a description of the related risk factors and assumptions, please see the section entitled "Caution Concerning Forward-Looking Statements" later in this release.
MONTRÉAL, Aug. 2, 2018 /PRNewswire/ - BCE Inc. (TSX: BCE) (NYSE: BCE) today reported results for the second quarter (Q2) of 2018.
"Bell's network leadership coupled with our team's dedicated execution in a competitive marketplace delivered strong operational performance in Q2, including 154,000 net new Fibe TV, Internet and postpaid wireless additions, a 44.3% increase from last year, and continued growth in customer usage of our broadband services. Wireless continued to lead the way as we welcomed 122,092 net new postpaid customers, up 37.8% over last year and our best Q2 result in 18 years. The unmatched performance of Bell's fibre network continues to propel wireline growth, including customer increases in Fibe TV and Internet and improved performance at Bell Business Markets. In a challenging and fast-changing media marketplace, Bell Media continues to deliver the top conventional, pay and specialty channels, including #1 sports network TSN and the most-watched CTV News, innovative new viewing options, and partnerships with the leading Canadian and international content brands," said George Cope, President and CEO of BCE and Bell Canada.
"With 51 consecutive quarters of year-over-year adjusted EBITDA growth, the Bell team's consistently strong operational execution is driving expected free cash flow growth of 3% to 7% in 2018, fully supporting our ongoing investment in the Bell broadband innovation strategy. Bell's network leadership was underscored in Q2 with our ranking as by far the fastest Internet provider in Canada and our selection by the government of Alberta to operate its provincial SuperNet broadband network, and again today as Bell announces that our new 1.5 Gigabit Internet service will be available to consumers beginning this month."
Bell is focused on achieving a clear goal – to be recognized by customers as Canada's leading communications company – through the execution of 6 Strategic Imperatives: Invest in Broadband Networks & Services, Accelerate Wireless, Leverage Wireline Momentum, Expand Media Leadership, Improve Customer Service, and Achieve a Competitive Cost Structure.
BUSINESS DEVELOPMENTS
Bell announces 1.5 Gigabit Internet service; Bell Internet ranked as Canada's fastest
Bell today announced that Bell Fibe Internet speeds of 1.5 Gigabit per second (Gbps), the fastest available to the home in Canada, will launch this month in Ontario, followed by Québec, Atlantic Canada and Manitoba. Bell has already taken the top spot in PCMag's The Fastest ISPs of 2018: Canada, delivering the highest overall Internet speed index ever recorded in Canada by the magazine and scoring more than 30% higher than our nearest competitor. Atlantic Canada's Bell Aliant took second place while Manitoba's Bell MTS moved into the top 10 for the first time. Bell's fibre to the premises (FTTP) network is now available to more than 4.2 million homes and businesses in 7 provinces and continues to expand with the announcement of new all-fibre deployments in the communities of Oshawa, Clarington, Orillia, Chatham-Kent and Winkler.
Bell awarded Alberta SuperNet, IoT, smart city contracts
Bell has been awarded a multi-year contract to operate SuperNet, the Alberta government initiative providing broadband connectivity to schools, hospitals, libraries, provincial, municipal and Indigenous offices, enterprise business customers and Internet service providers in communities throughout the province. Bell has also agreed to acquire Axia NetMedia Corporation, the Calgary-based operator of SuperNet's rural assets, in a transaction expected to close later this month. Bell announced a multi-year agreement with Superior Propane to deliver a comprehensive Internet of Things (IoT) fuel tank monitoring solution for Superior's business and residential customers. We also launched more smart kiosks and other smart city initiatives with the City of Orillia and Metrobus in St. John's, and the North's first smart kiosk in Whitehorse with Northwestel.
Lucky Mobile goes national; Fibe TV innovations
Canada's low-cost prepaid wireless service Lucky Mobile is now available in all 10 provinces with launches in Québec, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador. Fibe TV customers in Ontario and Québec can now use the Fibe TV app to download and go with their recorded television content on laptops, smartphones and tablets even without an Internet connection, and Bell MTS announced the launch of 4K Fibe TV service in Manitoba, the first live 4K programming available in the province.
Bell Media content leadership: Just for Laughs, major studio agreements
Bell Media and Montreal Canadiens owners Groupe CH joined ICM Partners and Howie Mandel in acquiring Groupe Juste pour rire, producer of the world's largest comedy festival in Montréal and other Just For Laughs TV and live comedy productions in Canada and worldwide. Bell Media announced new and exclusive long-term deals with major Hollywood movie studios, including 20th Century Fox, Fox Searchlight Films, Entertainment One, Sony Pictures Entertainment, Universal Pictures, Focus Features and Warner Bros., to bring blockbuster movies to multiple platforms, complementing partnerships with premium TV brands HBO, SHOWTIME and Starz already in place. Bell Media also announced new ad-supported video-on-demand services CTV Movies and CTV Vault, each featuring thousands of hours of content.
Mental health and environmental leadership
The Bell Let's Talk Community Fund, which doubled in value to $2 million annually as of 2018, has selected 120 front-line community mental health groups in every province to receive grants this year. Bell Let's Talk and The Rossy Family Foundation made a joint $500,000 donation to the Fédération des cégeps and the Fondation de l'Université du Québec à Montréal to support the mental health of CÉGEP students. Bell was named one of Canada's Greenest Employers for the second consecutive year.
BCE RESULTS
FINANCIAL HIGHLIGHTS |
|||
($ millions except per share amounts) (unaudited) |
Q2 2018 |
Q2 2017 |
% change |
BCE |
|||
Operating revenues |
5,786 |
5,688 |
1.7% |
Net earnings |
755 |
814 |
(7.2%) |
Net earnings attributable to common shareholders |
704 |
765 |
(8.0%) |
Adjusted net earnings(1) |
777 |
795 |
(2.3%) |
Adjusted EBITDA(2) |
2,430 |
2,382 |
2.0% |
EPS |
0.79 |
0.85 |
(7.1%) |
Adjusted EPS(1) |
0.86 |
0.89 |
(3.4%) |
Cash flows from operating activities |
2,057 |
2,154 |
(4.5%) |
Free cash flow(3) |
994 |
1,094 |
(9.1%) |
"We delivered another solid quarter of revenue and adjusted EBITDA growth consistent with plan, led by continued strong wireless operating profitability, improved organic wireline revenue growth and a healthy contribution to overall consolidated BCE free cash flow from Bell Media," said Glen LeBlanc, Chief Financial Officer for BCE and Bell. "With a focus on profitable subscriber growth, we continued to leverage our advanced broadband networks and services to deliver higher wireless postpaid and residential wireline net customer additions in a financially disciplined manner during a seasonally slower quarter, providing the foundation for sustained financial performance going forward. Our operating results in 2018 and ongoing confidence in our business outlook provide us with considerable financial flexibility to execute our strategy and achieve our 2018 guidance targets, all of which we reconfirm today."
BCE operating revenue was up 1.7% in Q2 to $5,786 million, reflecting a 1.0% increase in service revenue to $5,129 million and 7.7% higher product revenue of $657 million. This was driven by increases at both Bell Wireless and Bell Wireline, partly offset by a modest year-over-year revenue decline at Bell Media.
Net earnings decreased 7.2% to $755 million while net earnings attributable to common shareholders totalled $704 million, or $0.79 per share, down 8.0% and 7.1% respectively. Despite higher adjusted EBITDA, net earnings declined due mainly to higher other expense and increased depreciation and amortization.
Excluding severance, acquisition and other costs, net gains or losses on investments, net mark-to-market changes on derivatives used to economically hedge equity settled share-based compensation plans, early debt redemption costs and impairment charges, adjusted net earnings decreased 2.3% to $777 million, or $0.86 per common share.
Adjusted EBITDA grew 2.0% to $2,430 million, driven by increases of 6.2% at Bell Wireless and 1.1% at Bell Wireline. Bell Media adjusted EBITDA was down 8.5% due to the combined impact of lower advertising revenue and higher programming costs compared to last year. BCE's consolidated adjusted EBITDA margin(2) expanded to 42.0% from 41.9% in Q2 2017, reflecting the high flowthrough of strong wireless revenue growth, increasing broadband Internet scale, improved year-over-year wireline business markets performance, and disciplined spending on wireless postpaid and residential wireline subscriber acquisitions.
BCE continued to lead strategic investment in Canada's advanced broadband wireline and wireless infrastructure with capital expenditures of $1,056 million in Q2, up 1.3% over last year. This represented a capital intensity(4) ratio (capital expenditures as a percentage of total revenue) of 18.3%, the same percentage as in Q2 2017. Capital investment focused primarily on expanding our fibre to the premises (FTTP) footprint and connecting more homes and businesses directly to the network; the deployment of wireless small-cells to optimize mobile coverage, signal quality and data backhaul; and ongoing investment in Manitoba to improve broadband network coverage, capacity and speeds.
BCE cash flows from operating activities were $2,057 million, down 4.5% from last year, as higher adjusted EBITDA was more than offset by a decrease in cash from working capital. Free cash flow generated in the quarter was $994 million, 9.1% lower than Q2 2017, reflecting a decrease in cash flows from operating activities, excluding acquisition and other costs paid, and higher capital expenditures.
In Q2, BCE reported 122,092 net new wireless postpaid subscribers and a decrease of 7,606 net wireless prepaid customers; 10,816 net new high-speed Internet customers; 20,653 net new IPTV customers and a decrease of 19,844 net satellite TV customers; and a decrease in residential NAS lines of 70,665.
BCE customer connections across wireless, Internet, TV and residential NAS totalled 19,127,867 at the end of Q2, up 1.9% from last year. The total included 9,309,534 wireless customers, up 4.6% over last year (including 8,593,113 postpaid customers, an increase of 5.7%); 3,856,555 high-speed Internet subscribers, up 3.7%; 2,835,227 TV subscribers (including 1,599,142 IPTV customers, an increase of 7.9%), up 0.4%; and 3,126,551 residential NAS lines, down 6.2%.
BCE OPERATING RESULTS BY SEGMENT
Bell Wireless
Bell Wireless delivered another strong quarter of financial results with total Q2 operating revenue up 5.0% to $2,046 million. Service revenue increased 3.6% to $1,574 million, reflecting continued subscriber base expansion, including a higher proportion of postpaid customers. Product revenue grew 9.8% to $472 million due to increased sales of higher-value smartphones.
Wireless adjusted EBITDA was up 6.2% to $904 million, yielding a 0.5 percentage-point increase in revenue margin to 44.2%, on strong revenue growth flow-through and disciplined spending on postpaid customer acquisitions and device upgrades. Operating costs were 4.0% higher compared to last year due to increased cost of goods sold, driven by higher handset sale volumes; increased network operating expenses; and higher customer support costs due to subscriber base growth and increasing data usage.
Bell Wireline
Total wireline operating revenue was up 0.6% to $3,135 million on a 0.4% increase in service revenue to $2,947 million and 3.9% higher product revenue of $188 million. These increases were due to positive residential services revenue growth driven by strong Internet and IPTV customer gains and higher household ARPU(4), as well as improved Bell Business Markets performance from higher Internet Protocol (IP) broadband connectivity revenue and increased sales of professional services, including non-recurring contributions in the quarter from the G7 Summit and Ontario general election.
With increasing broadband subscriber scale, more favourable business markets results and relatively stable operating costs that grew a modest 0.2% over last year to $1,814 million, wireline adjusted EBITDA was up 1.1% to $1,321 million, driving a 20 basis-point increase in Bell's North American-leading revenue margin to 42.1%.
Bell Media
Bell Media reported revenues of $791 million, a 0.6% decline over last year as advertising revenue for conventional and non-sports specialty TV decreased due to ongoing market softness and viewership declines for traditional linear TV. This was moderated by advertising revenue from the 2018 FIFA World Cup, increases at specialty TV news service CP24 and continued growth in Astral outdoor advertising.
Subscriber revenue increased 1.9% in Q2, reflecting continued steady growth in CraveTV and TV Everywhere GO platforms, as well as revenue generated from our newly launched direct-to-consumer sports streaming services TSN Direct and RDS Direct.
Adjusted EBITDA for Bell Media fell 8.5% to $205 million, mainly due to higher operating costs from sports broadcast rights, including for the 2018 FIFA World Cup, and CraveTV programming expansion.
COMMON SHARE DIVIDEND
BCE's Board of Directors has declared a quarterly dividend of $0.755 per common share, payable on October 15, 2018 to shareholders of record at the close of business on September 14, 2018.
OUTLOOK FOR 2018
BCE confirmed its financial guidance targets for 2018, which were updated on May 3, 2018 to reflect the adoption of International Financial Reporting Standard 15 (IFRS 15):
May 3 Guidance |
August 2 Guidance | |
Revenue growth |
2% – 4% |
On track |
Adjusted EBITDA growth |
2% – 4% |
On track |
Capital intensity |
approx. 17% |
On track |
Adjusted EPS |
$3.45 – $3.55 |
On track |
Adjusted EPS growth |
1% – 4% |
On track |
Free cash flow growth |
3% – 7% |
On track |
Annualized common dividend per share |
$3.02 |
$3.02 |
Dividend payout policy(3) |
65% – 75% of free cash flow |
On track |
CALL WITH FINANCIAL ANALYSTS
BCE will hold a conference call for financial analysts to discuss Q2 2018 results on Thursday, August 2 at 8:00 am (Eastern). Media are welcome to participate on a listen-only basis. Please dial toll-free 1-800-377-0758 or 416-340-2216. A replay will be available for one week by dialing 1-800-408-3053 or 905-694-9451 and entering pass code 5118526#.
A live audio webcast of the conference call will be available on BCE's website at BCE Q2-2018 conference call. The mp3 file will be available for download on this page later in the day.
NOTES
The information contained in this news release is unaudited.
In Q1 2018, we updated our definition of adjusted net earnings and adjusted EPS to exclude net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans as they may affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Adjusted net earnings and adjusted EPS for 2017 have also been updated for comparability purposes.
(1) The terms adjusted net earnings and adjusted EPS do not have any standardized meaning under IFRS. Therefore, they are unlikely to be comparable to similar measures presented by other issuers. We define adjusted net earnings as net earnings attributable to common shareholders before severance, acquisition and other costs, net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net losses (gains) on investments, early debt redemption costs and impairment charges. We define adjusted EPS as adjusted net earnings per BCE common share. We use adjusted net earnings and adjusted EPS, and we believe that certain investors and analysts use these measures, among other ones, to assess the performance of our businesses without the effects of severance, acquisition and other costs, net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net losses (gains) on investments, early debt redemption costs and impairment charges, net of tax and non-controlling interest (NCI). We exclude these items because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Excluding these items does not imply they are non-recurring. The most comparable IFRS financial measures are net earnings attributable to common shareholders and EPS. The following table is a reconciliation of net earnings attributable to common shareholders and EPS to adjusted net earnings on a consolidated basis and per BCE common share (adjusted EPS), respectively.
($ millions except per share amounts) | |||||
Q2 2018 |
Q2 2017 | ||||
TOTAL |
PER SHARE |
TOTAL |
PER SHARE | ||
Net earnings attributable to common shareholders |
704 |
0.79 |
765 |
0.85 | |
Severance, acquisition and other costs |
18 |
0.02 |
27 |
0.04 | |
Net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans |
22 |
0.02 |
- |
- | |
Net losses on investments |
20 |
0.02 |
- |
- | |
Early debt redemption costs |
13 |
0.01 |
3 |
- | |
Impairment charges |
- |
- |
- |
- | |
Adjusted net earnings |
777 |
0.86 |
795 |
0.89 |
(2) The terms adjusted EBITDA and adjusted EBITDA margin do not have any standardized meaning under IFRS. Therefore, they are unlikely to be comparable to similar measures presented by other issuers. We define adjusted EBITDA as operating revenues less operating costs, as shown in BCE's consolidated income statements. Adjusted EBITDA for BCE's segments is the same as segment profit as reported in Note 4, Segmented information, in BCE's Q2 2018 Financial Statements. We define adjusted EBITDA margin as adjusted EBITDA divided by operating revenues. We use adjusted EBITDA and adjusted EBITDA margin to evaluate the performance of our businesses as they reflect their ongoing profitability. We believe that certain investors and analysts use adjusted EBITDA to measure a company's ability to service debt and to meet other payment obligations or as a common measurement to value companies in the telecommunications industry. We believe that certain investors and analysts also use adjusted EBITDA and adjusted EBITDA margin to evaluate the performance of our businesses. Adjusted EBITDA is also one component in the determination of short-term incentive compensation for all management employees.
Adjusted EBITDA and adjusted EBITDA margin have no directly comparable IFRS financial measure. Alternatively, the following table provides a reconciliation of net earnings to adjusted EBITDA.
($ millions) |
|||
Q2 2018 |
Q2 2017 | ||
Net earnings |
755 |
814 | |
Severance, acquisition and other costs |
24 |
36 | |
Depreciation |
787 |
767 | |
Amortization |
221 |
210 | |
Finance costs |
|||
Interest expense |
246 |
238 | |
Interest on post-employment benefit obligations |
17 |
18 | |
Other (expense) income |
88 |
1 | |
Income taxes |
292 |
298 | |
Adjusted EBITDA |
2,430 |
2,382 | |
BCE operating revenues |
5,786 |
5,688 | |
Adjusted EBITDA margin |
42.0% |
41.9% |
(3) The terms free cash flow and dividend payout ratio do not have any standardized meaning under IFRS. Therefore, they are unlikely to be comparable to similar measures presented by other issuers. We define free cash flow as cash flows from operating activities, excluding acquisition and other costs paid (which include significant litigation costs) and voluntary pension funding, less capital expenditures, preferred share dividends and dividends paid by subsidiaries to NCI. We exclude acquisition and other costs paid and voluntary pension funding because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Excluding these items does not imply they are nonrecurring. We consider free cash flow to be an important indicator of the financial strength and performance of our businesses because it shows how much cash is available to pay dividends, repay debt and reinvest in our company. We believe that certain investors and analysts use free cash flow to value a business and its underlying assets and to evaluate the financial strength and performance of our businesses. The most comparable IFRS financial measure is cash flows from operating activities. We define dividend payout ratio as dividends paid on common shares divided by free cash flow. We consider dividend payout ratio to be an important indicator of the financial strength and performance of our businesses because it shows the sustainability of the company's dividend payments. The following table is a reconciliation of cash flows from operating activities to free cash flow on a consolidated basis.
($ millions) |
||
Q2 2018 |
Q2 2017 | |
Cash flows from operating activities |
2,057 |
2,154 |
Capital expenditures |
(1,056) |
(1,042) |
Cash dividends paid on preferred shares |
(35) |
(30) |
Cash dividends paid by subsidiaries to non-controlling interest |
- |
(9) |
Acquisition and costs paid |
28 |
21 |
Free cash flow |
994 |
1,094 |
(4) We use ABPU, ARPU, churn and capital intensity to measure the success of our strategic imperatives. These key performance indicators are not accounting measures and may not be comparable to similar measures presented by other issuers.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements made in this news release are forward-looking statements. These statements include, without limitation, statements relating to our 2018 financial guidance (including revenues, adjusted EBITDA, capital intensity, adjusted EPS and free cash flow), BCE's common share dividend payout policy and 2018 annualized common share dividend, our network deployment plans and related capital investments, our business outlook, objectives, plans and strategic priorities, and other statements that are not historical facts. Forward-looking statements are typically identified by the words assumption, goal, guidance, objective, outlook, project, strategy, target and other similar expressions or future or conditional verbs such as aim, anticipate, believe, could, expect, intend, may, plan, seek, should, strive and will. All such forward-looking statements are made pursuant to the 'safe harbour' provisions of applicable Canadian securities laws and of the United States Private Securities Litigation Reform Act of 1995.
Forward-looking statements, by their very nature, are subject to inherent risks and uncertainties and are based on several assumptions, both general and specific, which give rise to the possibility that actual results or events could differ materially from our expectations expressed in or implied by such forward-looking statements and that our business outlook, objectives, plans and strategic priorities may not be achieved. As a result, we cannot guarantee that any forward-looking statement will materialize and we caution you against relying on any of these forward-looking statements. The forward-looking statements contained in this news release describe our expectations as of August 2, 2018 and, accordingly, are subject to change after such date. Except as may be required by Canadian securities laws, we do not undertake any obligation to update or revise any forward-looking statements contained in this news release, whether as a result of new information, future events or otherwise. Except as otherwise indicated by BCE, forward-looking statements do not reflect the potential impact of any special items or of any dispositions, monetizations, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after August 2, 2018. The financial impact of these transactions and special items can be complex and depends on the facts particular to each of them. We therefore cannot describe the expected impact in a meaningful way or in the same way we present known risks affecting our business. Forward-looking statements are presented in this news release for the purpose of assisting investors and others in understanding certain key elements of our expected 2018 financial results, as well as our objectives, strategic priorities and business outlook for 2018, and in obtaining a better understanding of our anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes.
Material Assumptions
A number of economic, market, operational and financial assumptions were made by BCE in preparing its forward-looking statements contained in this news release, including, but not limited to:
Canadian Economic and Market Assumptions
Assumptions Concerning our Bell Wireless Segment
Assumptions Concerning our Bell Wireline Segment
Assumptions Concerning our Bell Media Segment
Financial Assumptions Concerning BCE
The following constitute BCE's principal financial assumptions for 2018:
The foregoing assumptions, although considered reasonable by BCE on August 2, 2018, may prove to be inaccurate. Accordingly, our actual results could differ materially from our expectations as set forth in this news release.
Material Risks
Important risk factors that could cause our assumptions and estimates to be inaccurate and actual results or events to differ materially from those expressed in, or implied by, our forward-looking statements, including our 2018 financial guidance, are listed below. The realization of our forward-looking statements, including our ability to meet our 2018 financial guidance, essentially depends on our business performance which, in turn, is subject to many risks. Accordingly, readers are cautioned that any of the following risks could have a material adverse effect on our forward-looking statements. These risks include, but are not limited to:
We caution that the foregoing list of risk factors is not exhaustive and other factors could also adversely affect our results. We encourage investors to also read BCE's 2017 Annual MD&A dated March 8, 2018 (included in BCE's 2017 Annual Report) and BCE's 2018 First and Second Quarter MD&As dated May 2, 2018 and August 1, 2018, respectively, for additional information with respect to certain of these and other assumptions and risks, filed by BCE with the Canadian provincial securities regulatory authorities (available at Sedar.com) and with the U.S. Securities and Exchange Commission (available at SEC.gov). These documents are also available at BCE.ca.
About BCE
BCE is Canada's largest communications company, providing advanced Bell broadband wireless, TV, Internet and business communication services throughout the country. Bell Media is Canada's premier content creation company with leading assets in television, radio, out of home, and digital media. To learn more, please visit Bell.ca or BCE.ca.
The Bell Let's Talk initiative promotes Canadian mental health with national awareness and anti-stigma campaigns like Bell Let's Talk Day and significant Bell funding of community care and access, research and workplace mental health initiatives. To learn more, please visit Bell.ca/LetsTalk.
Media inquiries:
Jean Charles Robillard
514-870-4739
[email protected]
Investor inquiries:
Thane Fotopoulos
514-870-4619
[email protected]
View original content:http://www.prnewswire.com/news-releases/bce-reports-second-quarter-2018-results-300690807.html
SOURCE Bell Canada