Royal KPN NV ((KKPNY)) has held its Q1 earnings call. Read on for the main highlights of the call.
In the recent earnings call, Royal KPN NV showcased a balanced performance, highlighting strong growth in service revenues and EBITDA. Despite facing challenges in free cash flow and net profits due to specific one-off costs, the company demonstrated resilience amid economic uncertainties. KPN emphasized its strategic efforts to enhance customer satisfaction and reduce churn, reflecting a positive outlook for future growth.
Solid Group Service Revenue Growth
KPN reported a commendable increase in service revenues, which rose by 3.8% year-on-year. The Consumer segment saw a 4.6% growth, while the Business segment experienced a 5.1% increase. This growth underscores the company’s robust performance across its core service areas.
EBITDA Growth and Margin Expansion
The company achieved a 4.7% growth in adjusted EBITDA after leases, with an EBITDA margin increase of 72 basis points to 44.7%. This margin expansion indicates effective cost management and operational efficiency.
Fiber Expansion
KPN continued to expand its fiber footprint, adding 100,000 homes and now covering 64% of Dutch households. This expansion is part of the company’s strategy to enhance its infrastructure and service delivery.
Operational Free Cash Flow Increase
Operational free cash flow saw a significant increase of 12% year-on-year, bolstered by contributions from Althio and Youfone. This improvement highlights KPN’s ability to generate cash from its operations effectively.
Award for Best Mobile Network
KPN was recognized by Umlaut for having the Best Mobile Network in the Netherlands. This accolade reflects the company’s commitment to providing high-quality mobile services.
Free Cash Flow Decline
Despite the positive growth in other areas, free cash flow decreased by 70% or €26 million compared to last year. This decline was attributed to higher interest payments and the phasing of working capital.
Net Profit Decrease
The company reported a decrease in net profits despite the growth in EBITDA. This was primarily due to one-off costs related to the Althio transaction, impacting the bottom line.
Consumer Net Promoter Score Decline
KPN experienced a decline in the Consumer Net Promoter Score, influenced by challenging consumer sentiment at the start of the year. This indicates potential areas for improvement in customer satisfaction.
Challenges in LCE Service Revenue Growth
The LCE service revenues remained stable, facing some price pressure in the mobile segment. This stability amidst pressure suggests a need for strategic pricing adjustments.
Forward-Looking Guidance
Looking ahead, KPN has set ambitious goals for growth. The company aims for a 3% CAGR in service revenues and adjusted EBITDA, and a 7% CAGR in free cash flow over the coming years. Supported by its Connect, Activate & Grow strategy, KPN has upgraded its full-year 2025 outlook to over €2.6 billion in adjusted EBITDA after leases and €920 million in free cash flow, maintaining stable CapEx at around €1.25 billion.
In conclusion, Royal KPN NV’s earnings call reflected a strong performance in service revenue and EBITDA growth, despite facing challenges in free cash flow and net profits. The company’s strategic initiatives in fiber expansion and customer satisfaction are poised to drive future growth, with a positive outlook for the coming years.