Outlook

Outlook

In December 2018 during the Capital Markets Day we presented our strategic plan for the next three years up to 2021. As we managed to deliver on all our financial objectives in 2019, we are off to a solid start to deliver sustainable profitable growth over the 2018-2021 period. As a reminder, we are targeting an Operating Free Cash Flow CAGR of 6.5 to 8.0% over the 2018-2021 period (excluding the recognition of football broadcasting rights and mobile spectrum licenses and excluding the impact of IFRS 16, applicable as of January 1, 2019).

Looking ahead into 2020, our financial results will include a twelve-month contribution from the acquisition of the remaining 50% of the local media company De Vijver Media as opposed to a seven-month contribution in 2019. Similar to how we presented our guidance in 2019, we will give our 2020 guidance on a rebased basis as if 100% of De Vijver Media had been included in our results as of January 1, 2019. Our rebased revenue profile for 2020 is expected to improve from the modest 1.2% decline we recorded in 2019. On the one hand, our cable subscription revenue is expected to perform well driven by low single-digit ARPU growth through (i) a growing share of higher tier broadband internet subscribers in our mix, (ii) solid FMC sales and (iii) the benefit from certain rate adjustments. On the other hand, we continue to see healthy growth prospects in the business market, both in the SOHO and SME markets, driven by our improved market positioning following the Nextel acquisition. These opportunities are broadly neutralized by two external pressures impacting our other revenue. Firstly, there is the continued impact from the loss of the MEDIALAAN MVNO, which started to adversely impact our business as of April 2019. As such, our Q1 2020 rebased revenue will still be negatively impacted before the effect lapses a full year as of Q2 2020. Secondly, to the extent that the regulator would decide to adjust the regulated wholesale tariff, our rebased top line would be affected by such adjustment.

Turning to our Adjusted EBITDA, we will maintain our focus on tight cost control and generating operating leverage throughout our operations. The move to an all-scale agile business model and the favorable dynamics from the digital transformation project, as highlighted during the December 2018 Capital Markets Day, underpin this ambition. These impacts will contribute to our Adjusted EBITDA in 2020. On a rebased basis, we therefore expect our Adjusted EBITDA to return to growth in 2020, targeting rebased growth of around 1% for the full year 2020.

One of our core financial metrics is Operating Free Cash Flow, which is the sum of our Adjusted EBITDA and accrued capital expenditures (excluding the recognition of football broadcasting rights and mobile spectrum licenses and excluding the impact from IFRS 16 on our accrued capital expenditures). Having delivered a robust 18% rebased growth in 2019 on the back of a declining capital intensity, we now expect a more moderate performance in 2020. As mentioned earlier, we remain fully committed to our three-year Operating Free Cash Flow CAGR between 6.5% to 8.0%. For 2020, we target rebased Operating Free Cash Flow growth of around 2% versus 2019. Compared to 2019, our Adjusted Free Cash Flow should benefit in 2020 from (i) the aforementioned growth in Operating Free Cash Flow, (ii) lower cash taxes versus the €159.4 million we paid in 2019 and (iii) lower cash interest expenses following certain refinancing transactions in late 2019 and early this year. Relative to last year, our vendor financing program is expected to remain broadly stable at around €355.0 million of short-term commitments. With that, we target a robust Adjusted Free Cash Flow of between €415.0 million and €435.0 million versus the €391.0 million we delivered in 2019.

For more information on our 2020 outlook we refer to the Q4 2019 Investor & Analyst Toolkit.