KPN Q2 Results Slightly Ahead Of Consensus; Credit Neutral

Rating: Baa3[P]/BBB/BBB

• Solid set of results in line with the steady nature of the credit that puts the company on track to meet FY guidance albeit with some slight pressure on FCF to do so with H1 FCF of EUR 364mn vs. FY guidance of EUR >890mn. Not clear what’s driving the move lower in equity,
  
  
• Revenue +4.5% YoY (+0.9% vs. company-provided consensus) with service revenues +3.7%, consumer +7.2%, business +3.4% and wholesale -10%.
• EBITDAal +4.7% accounting for Youfone (reported +1.1% vs. consensus) to give a margin of 45.2% from 44.8% in Q223 driven mostly by service revenue growth.
• KPIs looks solid with subscriber and ARPU growth across the consumer segment.
• CapEx of EUR 337mn was up from EUR 292mn in Q223 (vs. consensus of EUR 299mn) though this is attributed to investment project timing. This offset the impact of higher EBITDAal on opFCF which was flat YoY (-9.7% vs. consensus). FCF of EUR 210mn was up from EUR 190mn in Q223 (-1% vs. consensus) on WC improvements.
• Net debt of EUR 6bn is +7.9% from Q1 to give a leverage ratio of 2.4x from 2.3x at Q1 on the back of the Youfone acquisition and payouts.
• FY guidance confirmed