Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cellnex Telecom SA (CLNXF, Financial) is in advanced negotiations for the disposal of its Austrian assets, which will simplify its structure and strengthen its balance sheet.
- The company has launched its first bond as a full investment-grade issuer, which has been used to repay higher-cost variable debt.
- Organic revenues increased by 7.4%, and organic EBITDA after leases grew by 10.7%, indicating strong business fundamentals.
- Recurring levered free cash flow increased to EUR781 million from EUR741 million last year, showing improved cash flow generation.
- The company is on track to meet its short and medium-term targets, demonstrating consistent delivery on its commitments.
Negative Points
- The Austrian asset disposal process includes a EUR400 million gross write-down, which may impact overall valuation.
- The company needs to complete antitrust reviews and receive associated proceeds before considering shareholder distributions, which could delay returns to shareholders.
- Sequential free cash flow performance was impacted by changes in working capital, tax payments, and dividends paid to minorities in the Nordics, indicating timing effects that could affect annual performance.
- The company faces potential risks from market consolidation, such as the integration between Hutchison and Vodafone, which could impact existing contracts and revenue streams.
- There are ongoing discussions with clients in France and Portugal to manage counterparty risks, indicating potential vulnerabilities in these markets.
Q & A Highlights
Q: Can you provide more details on the write-down related to the Austrian asset sale process and its implications?
A: We are in the middle of the process and have taken a prudent approach. The new enterprise value valuation is accretive, slightly below a 20 multiple. We aim to complete the Austrian deal quickly and will discuss our plan with rating agencies post-summer. The goal is to accelerate shareholder remuneration while maintaining our investment-grade rating.
Q: How will the sale of assets in Austria and Ireland affect your guidance and growth rates?
A: Both countries are not the strongest performers in our portfolio. Post-disposal, we will provide updated guidance. The remaining portfolio is expected to show higher growth rates.
Q: What is the scale of the potential share buyback following asset sales?
A: We are committed to maintaining our investment-grade rating. Any proceeds not needed for this will be allocated to shareholder remuneration. The exact scale of the buyback will depend on the final debt reduction commitments agreed with rating agencies.
Q: How do you view the gap between public and private multiples for asset sales?
A: The gap varies case by case. Factors like buyer synergies and antitrust complexities influence the final number. Generally, our portfolio's quality and country risk are good, but the delta between public and private multiples depends on specific circumstances.
Q: Can you elaborate on the new contracts with CTIL in the UK and their impact?
A: The new contracts provide significant flexibility and transform CTIL agreements into anchor-like contracts. This enhances revenue security and offers potential for network quality improvements. If the Hutchison-Vodafone merger proceeds, we expect stable revenues with opportunities for further growth.
Q: What is your strategy for capital allocation between debt repayment and shareholder returns?
A: We will use proceeds from asset sales to repay variable debt, which is the most expensive. Fixed-rate debt maturities will also be managed. After ensuring our investment-grade rating, any remaining funds will be allocated to shareholder remuneration.
Q: How do you plan to manage the Land Co. and its returns?
A: The Land Co. aims to protect strategic sites and manage costs. We are not currently seeking minority investors but may consider optimizing the capital structure in the future. The focus is on maintaining control and ensuring high returns.
Q: What is the outlook for your build-to-suit (BTS) program and its impact on EBITDA?
A: The BTS program is accretive, similar to buying sites at slightly below 16 times EBITDA. This provides a decent return and supports our growth strategy.
Q: How do you view the potential for further asset sales in markets with lower organic growth?
A: We continuously review our portfolio and capital allocation. While some markets show strong performance, we evaluate each market's potential and may consider further asset sales if it aligns with our strategic goals.
Q: What is the worst-case scenario for the UK market if the Hutchison-Vodafone merger does not proceed?
A: The worst-case scenario is not materially different from the base case. The three UK anchor contract is secure, and any risk would come from a potential request for accelerated respiration rates, which is not significant.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
