Welcome, Christel Heydemann, Chief Executive Officer of Orange. You have just presented the Orange Group’s full-year results for 2023, a year that seems to have ended particularly well.
Would you first like to look back at the highlights of 2023?
Hello, Adrian.
First of all, I would like to express my complete satisfaction with the past financial year which truly reflects the orchestration of our Lead the Future plan.
This year, we have put our strategy into action based on value creation by increasing prices, rationalizing our asset portfolio and continuing to reduce costs as part of our Efficiency plan.
So, I would say that 2023 demonstrates the virtuous interaction of our value strategy – with the recent price increases – and the strict control of our operating costs, which has fuelled the growth momentum of EBITDAaL and our cash flow metrics, Organic Cash Flow and the new “all-in” Free cash Flow.
And wherever possible, we have continued to be a market consolidator, as seen with the merger of our activities in Romania, with Voo in Belgium and especially our operations in Spain.
On this latter point, we are hopefully at the very end of the regulatory process, and we are quite confident of its successful completion.
Our Efficiency Plan is fully on schedule, and we have achieved exactly half of our 600-million-euro target in the first year of this three-year plan.
A key point about the past year, is the improvement trend of EBITDAal in the second half of the year for the two segments, Orange France and Orange business.
This is how we were able to publish such excellent 2023 figures, with EBITDAaL up 1.3%, eCapex down 6.7%, Organic Cash Flow up 20% to 3.66 billion euros, and an extremely solid balance sheet structure with a leverage of just 2 times.
And let’s not forget that we have achieved this performance while keeping to our CSR commitments, on the environment, diversity and digital inclusion, all of which are making good progress.
During your Capital Market Day in February last year, and in all your exchanges with the market since then, you have put a lot of emphasis on the concept of value creation. But what does that look like in reality, and where can we find it?
This is a key question, because value creation is one of the pillars of our Lead the Future plan and therefore guides our management decisions.
It is measured through 3 indicators that are now central at Orange.
Firstly, the "all-in" Free Cash Flow (which includes spectrum licence disbursements, hybrid coupons and major litigation) increased by 60% to 2.9 billion euros, an increase of 1.1 billion euros.
Secondly, Return on Capital Employed (ROCE), the core management and operational decision-making tool at Orange, increased by 80 basis points to 6.7%, in other words, by over half of the upper limit of our published target of a 100-to-150 basis-point increase by 2025.
Thirdly, a 16% increase in EPS to 0.85 euros. It’s true that this financial parameter is more closely watched by US investors than European investors, but it’s nevertheless a key indicator of good financial health.
This trio of indicators, which have all performed brilliantly in 2023, fully justifies and underpins our committed 3% dividend increase to 0.72 euros.
You are eagerly awaiting the decision on the merger with Masmovil in Spain. I know you are currently very limited in what you can say, but what can you tell us about it?
Above all else, with this deal, we will become a leader in the Spanish market.
We should obtain clearance from the European Commission by February 22nd at the latest, so we anticipate closing the deal towards the end of this quarter. We reconfirm ongoing annual synergies of over €450M, starting in year 4. Importantly, we have the option to buy back 1% of the shares to be able to reconsolidate the JV.
Before moving on to the divisions, can you say a few words about how you have implemented excellence in cost management using your "Efficiency Plan"?
You may remember our Scale-Up plan, which had already achieved savings of 700 million euros, 100 million euros more than planned from 2020 to 2022. Well, we have now launched a new action plan, simply called “Efficiency”, targeting a new tranche of 600 million euros over the 2022 to 2025 period.
We have already achieved half of this target, derived from the transformation of our business model and increased operational efficiency.
In terms of operational efficiency, a significant contribution will have come from the human resources component, with an early retirement plan – “Senior Part Time” – with 7,600 signatories in France.
Shall we now look at the performance of the different segments in 2023?
Yes, let's first talk about our two main growth drivers which continue to propel Group performance, quarter after quarter.
First, there’s Africa and the Middle East, which posted a turnover increase of more than 11%, a 10-year record, and an increase of more than 12% in the fourth quarter. All countries contributed to this growth, with all engines running at full speed, whether Data, B2B and Fixed Broadband or Orange Money, which posted an incredible 28% growth.
EBITDAaL grew by +12.7%, a rate that continued to outpace revenue growth, thanks to strict cost control.
The margin increased by 40 basis points to over 38%.
Second, we have Europe, where revenues grew by over 2% in 2023 and where the measures taken to counter inflationary pressures improved EBITDAaL by +5.8% (or €165 million). This performance was mainly thanks to growth in Spain of more than 12%, and in Poland of almost 3%.
And then there are two areas where it is more difficult, namely France and Orange Business.
First, France, which recorded a year-on-year revenue decrease of 1.4%, while its EBITDAaL fell by 3.6%.
However, as expected, we saw a directional change in the second half (-2.2% after -5.1% in H1), thanks to the full effect of the price increases implemented in the first half.
And our value strategy continued to bear fruit in the fourth quarter, delivering non-PSTN retail revenue growth of 3.1%, in line with our Lead The Future objectives.
Finally, Orange Business, which delivered a slightly positive year-on-year increase in turnover and an EBITDAaL decline of -15.4%.
Here too, we saw a smaller EBITDAaL decline in the second half of the year of around -14%, an improvement compared to the -17% decline in first half of the year.
All-in-all, the action plan unveiled at our Capital Market Day is proceeding to plan, with all the measures starting to deliver positive effects. The voluntary redundancy plan has been provisioned in the 2023 accounts, and will be implemented in 2024. Orange business is expected to halve the rate EBITDAaL decline seen last year, paving the way for a full EBITDAaL recovery in 2025.
Just quickly on Orange Bank, where do we stand there?
At Orange Bank, our exit plan is well underway. We finalized the social program with employee representatives in France.
At this point, I would remind you that Orange Bank's activities in Africa are not affected by this exit.
One final important point to note, this transaction does not in any way call into question the Group's planned financial trajectory over the 2023 to 2025 period.
Can you give us an update on your guidance for 2024 and 2025?
I believe you wanted to make a very clear distinction between ‘before’ and ‘after’ the Spain deconsolidation.
Yes, as you have correctly noted, we wanted to give the market a clear understanding of our commitments, both before and after Orange Spain's exit from our scope of consolidation, to maintain the greatest transparency of our underlying performance.
In 2024, we are targeting objectives that are absolutely unchanged compared to the current scope :
That is to say, a slight growth in EBITDAaL, strict discipline on eCapex, an Organic Cash Flow of at least 3.8 billion euros, unchanged leverage of around 2x net debt-to-EBITDAaL over the medium term, and a dividend of 0.75 euros per share (payable in 2025).
Assuming the European Commission’s upcoming decision is positive, the deconsolidation of Spain does not change our EBITDAaL target of slight growth, or our strict discipline on eCapex.
By contrast, we have adjusted our Organic Cash Flow target excluding Orange Spain, and we are aiming for an increase of over 300 million euros between 2023 and 2025, thereby reaching at least 3.3 billion euros in 2024 and 3.5 billion euros in 2025.
Any final words?
In the first year of our Lead the Future plan, all of us in the Group can be particularly proud of our achievements. Throughout the plan’s deployment, we have maintained strict discipline in execution:
- Strict discipline in selecting in pricing policy
- Strict discipline in the execution of our cost reduction plan
- Strict discipline in our investment and divestment decisions.
We are firmly on the right track with the focused execution of the Lead the Future strategic plan exemplified by the sustainable growth of all financial metrics, including a strong growth trajectory of organic cash flow growth and “all-in free cash flow” as well as a clear improvement in value creation.
Christel Heydemann, Chief Executive Officer of the Orange Group, thank you!
Thank you, too!
