Good afternoon. Welcome to our Q1 Results conference call for 2024. We have the management team in the room today, and we'll do a very brief presentation with our CFO, José Pedro Pereira da Costa , and then we'll jump into Q&A. Thanks.
Hi, good morning, everyone. Thank you for joining. Today on the presentation, we'll focus on the key highlights for the quarter. And I'll invite you to go through our extended earnings report for further information, but obviously, during the Q&A, open to any questions you might have. So going back to the review of the quarter, I think three key messages for today. Firstly, and in line with what we said on the previous quarter, we continue to be a bastion of growth and value. We are still building on the strategic decisions we made in the past, and that is really pushing our technology advantage and the customer experience that we're being able to provide. I think the second important message is around, you know, revenue growth for the quarter.
We really did a very solid, we've had a very solid performance on all segments, highlighting here B2B, and we continue to drive, you know, important free cash flow generation. And then finally, on that front as well, you know, not only from the revenue side, but I think also on our operational momentum, we're showing great results and continuing our trends in terms of CapEx. So I think that's very positive for the overall outcome. So maybe let's go a bit deeper on some key operational metrics. I won't go through all of them, but maybe highlighting, I mean, overall consolidated revenues grew at 5.7% to EUR 403 million. EBITDA after leases grew at 6.3% to EUR 155 million.
Again, highlighting here the CapEx, we continue our downward trend in terms of CapEx on all fronts, and we reduced it in the quarter 5.2% year-on-year. We'll go through a bit, some one-off effect of the quarter, but in general, you know, net income grew at 30.8%, underlying free cash flow at 52.6%, and return on capital employed, for the quarter, stood at 11.1%, so very positive results overall. If we go a bit into the breakdown, I mentioned before the consolidated growth of 5.7% in revenues. I would now break it down a little bit. In terms of telco, the growth stayed at 5.4%.
In terms of our audiovisuals and cinema business, the growth went to 11.6%. So overall, very positive. We're very happy with the results. When we look at B2C in particular, we had a growth of 4.9%. B2B, as I mentioned before, very positive. Overall, 6.7%, although I would highlight corporate segments, which grew at 9.3%. Maybe let's now do a double click on EBITDA after leases. You know, obviously, revenue played a very important part, but I would highlight our strong ongoing cost management. So when we look at the overall results, as I mentioned in the highlights, you know, we grew EBITDA after leases to EUR 155 million, a growth of 6.3%.
When we break it down in the telco and the other visuals business, you know, 6% growth in the telco side, 12.3% in the visuals business. In terms of margins, you know, overall improvements across both consolidated and per business performance. Now, maybe going into the CapEx side of things. As we mentioned before, we reached peak CapEx already, so we are on a downward trend and paying a lot of attention to it. So when we look at, you know, overall performance, -5.2% in terms of CapEx year-on-year, and looking at each one of the components, especially telco on the expansion side, we reduced 14.1% the our costs.
Also applying some of that reduction to our baseline telco costs, and also on the customer-related side, a lot of it driven by the CPEs performance that we've been having in the recent past. Looking at it from a consolidated perspective, we reduced our CapEx or we increased CapEx, apologies, at 5.3%. You know, several drivers contributing to this. I think our cost management ability has been able to mitigate some of the headwinds or inflationary pressures that we have on the cost base, so we're quite satisfied with the results. We also have some increases on the leases.
This is driven by you know more number of sites with Cellnex and some of the cost adjustments to it, which is in our contract, also related to inflation, which for your reference, is capped at 2% in our case. But overall, all of these factors combined, we have a very solid performance in terms of EBITDA after leases minus CapEx of 29% growth to EUR 63.4 million. So I think that summarizes a bit the performance. Maybe let's go into a bit of the operational drivers behind this. To give you an update in terms of network, we've been continuing to expand, as you know, our FTTH coverage. We added 170,000 households during the quarter, and now we stand at roughly 77% of FTTH coverage....
In addition to that, we continue our path of increasing the 5G coverage, which now reaches roughly 96% of the population. So again, in line with what we've been, we've been providing guidance. When we look at the commercial momentum, and maybe let's go one by one. On the mobile side, we continue to grow in terms of overall net adds, so our market share also continues to grow. We are roughly now at 30% as per the regulator Q4 results. I would say we need to de-average the numbers on the postpaid. Again, very strong momentum. We've been able to, you know, push some of our clients to convergent packages and grow on that front. On the prepaid, well, firstly, we need to de-average the effect.
On one hand, some of the customers that we are migrating to the postpaid are reflected here, but we also have some seasonal effects from the lower value, non-recurrent prepaid subs, and that's what we're seeing here in the numbers, so something that we were already expecting in some way. On the other components, both pay TV and broadband, we continue to expand our base. Of course, as you know, in Portugal, pay TV penetration stands today at roughly 98% of family residences penetration, so it's natural that it becomes a steeper curve to address in terms of penetration. But overall, you know, year-on-year increase of 1.8% in total ARPUs. We are very satisfied with the performance.
Also, in that line, maybe we can move to the cinemas and audiovisual business. Maybe doing a bit of deep dive in the cinema itself. Again, very solid results, especially when we compare to our record year, which was 2019, so we surpassed that level. This quarter, we had a 14.7% growth in terms of tickets sold, and 15.8% growth in terms of cinema revenue itself. So, a quite boost, quite interesting boost, and obviously driven by some of the blockbusters, but also, you know, a positive calendar outlook for the quarter. So, to summarize, and going through a bit the main KPIs in terms of financial performance.
Our consolidated net income or underlying consolidated net income grew 31% for the quarter to EUR 45.7 million. If we take in consideration the activity fees post-tax, it was actually 67.8 , so a growth of 94%. When we break it down, obviously, EBITDA played a very important role. Also, we had an uplift from some tax incentives that we were able to capture in the quarter, which are represented here at EUR 9.3 million. Obviously, this has multiple effects, but, you know, those tax incentives were a very important one. On the financing side, as expected, some headwinds in terms of interest growth. I'll go into that in a little bit. But in any case, this is what impacted our overall performance.
When we look at free cash flow, overall, an interesting, very interesting growth. On EBITDA AL side, EUR 9.2 million. We also had quite a good improvement in terms of working capital. This reflects, you know, the decrease in the, in the peak CapEx that I mentioned before, namely some, some payouts that we had in the Q1 of 2023 that were related to the last quarter of 2022. So they are a, a good uplift as well. And again, some of the, the tax incentives as well playing, a part here. If we take into consideration the, the activity post fees, we stood at EUR 79.3 million for, overall free cash flow for, the quarter. Finally, looking at our balance sheets, I mean, very solid balance sheets as, as we, we...
It is our historical performance. At the end of the quarter, net financial debt to EBITDA after leases stood at 1.66%, or times, sorry, which demonstrates our very strong balance sheet management, well below our target of 2x. In terms of debt, you know, the average cost of debt now holds at 4.1%. We expect it in the upcoming months to have roughly the same level of debt, so we don't see many changes in the market. For the year, we have taken our positions, and we have a very strong liquidity position at roughly EUR 360 million. Roughly 28% is at fixed rates.
We have 37% of debt with interest rate collars and an average maturity roughly of 2 years and eight months. 90% of our debt is linked to ESG targets, which is, as you know, very committed—it's something we are very committed to overall as within our business strategy. With that, maybe we could go to Q&A.
Thank you. If you would like to ask a question, you'll need to press star one and one on your telephone and wait for your name to be announced. And to withdraw your question, you can press star one and one again. Thank you. We will now take our first question. First question is from the line of Roshan Ranjit from Deutsche Bank. Please go ahead.
Hello, afternoon, everyone. Thanks for the questions. Got 3, please. Firstly, on the consumer revenue line, so a strong performance, I guess, slightly down from what we saw in Q4. I note the price increase for 2024 is lower than 2023, given CPI. So my question is: How can we expect the kind of upselling process that you guys or how do you drive the upselling process to maintain that top line growth, given that the price and benefit will kind of wane through the year? Secondly, on the B2B side, a very strong performance, you cite in the corporate recurring business. Now, in previous quarters, you were talking about the kind of lower margin project-based contributions which impact the top line.
Has that now all kind of been done, and you've laid the foundations for this stronger recurring business going forward? And finally, on EBITDA, again, you've previously highlighted the benefits of the transformation program have largely been completed, but we saw another quarter year-on-year of margin expansion. I think you last quarter, you kind of not given guidance, but in terms of the outlook for 2024, going into margin expansion, can we expect something near double-digit EBITDA growth this year? Thank you.
Hi, thank you so much for the questions. Maybe going on the order that you just posted them. So on, in terms of the consumer revenue, namely the upselling process, I think as we mentioned the previous quarter, firstly, we've been doing it and the slower RGU growth, I would say, comes mostly from, as I mentioned, you know, very high penetration levels. So our strategy in the past and still going forward, will be really around this being much smarter and efficient in doing this upselling within our base. And this is done through, I would say, two different dimensions. One is really around innovative services, better quality services. And we feel that we are very well positioned in that front.
We have, as we mentioned, you know, a leading networks, both on the fixed and the mobile side. And not only that, but we've been pushing a lot of, you know, different and innovative components, to our customers, both on mobile and fixed services, and that plays a very important role. On the other hand, we've been investing quite a lot, I would say, within our... the context of the transformation overall, but with a particular focus on AI, on being able to drive that growth, in a much more efficient way. So we are able to be much better at providing offers really tailored to the needs of our customer base, and that actually, we're seeing a lot of stickiness on the offers that we're making more recently.
So I think between solid product itself and a much better way to address and target the customers, that will be the driver, the engine for growth in this segment going forward. Now, when you look at B2B performance, you mentioned the specific one-off or resale businesses that in the past we've been discussing. I think it's again, we've been operating on two dimensions here. One is, we've been much more strict on the way we price and structure these deals in order to make sure that the margins are there and that we're able to drive them with healthy, although obviously smaller than the typical telco business, but they are there. On the other hand, I mean, some of these businesses are driven by the recurring revenues themselves.
So some customers, for us to sign the contracts in terms of the recurring telco and managed services deals, we also need to provide some of these more one-off and resale projects. So those will continue to exist. We don't expect them to play again. They don't play an important role in our strategy going forward, so our focus is on the core business. But we are being much more strict on the way we manage those to ensure that when we need to do them, the margins are there and very solid. Then finally, regarding EBITDA, I think you mentioned the end of the transformation program. I mean, the way we look at transformation is really an ongoing process.
I would say for sure that, you know, transformation had different flavors in the past. Going forward, I would say there are two key dimensions or pillars that will drive the transformation. On one hand, I would say, I would say pure efficiency programs. We are looking very seriously at every part of the business in terms of where can we take out any less efficient components and, and optimize that, and optimize our CapEx and OpEx? On the other hand, we will be doubling down on, if you'd like, AI-centric transformation going forward. Leveraging on not only generative AI, which obviously is very important, but also on the solid foundations that we built in the past, we expect our AI transformation to be able to drive very significant efficiencies going forward as well.
So I think that's going to impact very significantly EBITDA AL in terms of what would be our historical trajectory. In terms of the results themselves, we don't have any specific guidance to provide at this point.
That's great. Thank you. Just on the B2B side, you mentioned in pricing, did I hear correct saying that the price increases weren't as high as on the consumer side? If so, are we kind of, I don't know, talking about kind of kind of 2% type price increases on the B2B side then? Is that fair?
... I didn't specifically mention that. You know, B2B pricing, as you know, has a different dynamics from the consumer side or the SME side of business. So on the consumer side and residential-like contracts, we do the price increases as per inflation. Obviously, on the corporate and large enterprise segments, we have multi-year contracts in which we established pricings, and we review them as per market dynamics. So we don't have a specific percentage target increase. It really depends on the competitive landscape, on the new clients coming in, so that just follows normal market dynamics.
Understood. Thank you.
Thank you. We'll now take our next question. This is from Nuno Vaz from CaixaBI. Please go ahead.
Hi. Good afternoon. Thank you for the opportunity to ask questions. I had also three from my side. Two were sort of financial questions, and the third one is more on the strategy side. So first one, you mentioned this quarter, you had some impact from energy costs and increase in the regulated tariffs. Just wondering if you could talk a little bit about it and what was the impact, if you could say that, and whether do you expect this to be a similar impact throughout the rest of the year? Then second, on CapEx, we saw, as you mentioned, a decline in CapEx.
Should we assume EUR 92 million times four for the rest of the year, or is that a bit too pushy, and most likely might see a bit of an increase in CapEx towards the end of the year to fall more in line with last year CapEx? And then the strategy question, you should soon have a new entrant that I think it's sort of fair to say that they're planning to rely quite a bit on social media, a sort of word of mouth, to potentially market their products, and less on sales force or call centers. Just wondering on your thoughts on how easy it may be to target the average consumer like this, and what do you see on your side?
Do you still see a big proportion of sales happening in retail stores and through call centers and through your sales force? If there's any big differences when it comes to mobile or fixed on how they're sold to the average consumer? Thank you.
Thank you very much for the questions. Again, let's follow maybe the order that you just asked them. So on the energy cost side, I would say that, I mean, this year we definitely had some headwinds on the valleys themselves, namely with what you just mentioned around the increase of the ERSE tariffs. Our expectation is for that increase to increase or the levels of the tariffs to maintain or slight increase, but to stabilize, I would say. What I can also say is that we are looking at. We've been tapping into the, you know, energy prices in the market, and actually what we see is some sort of, you know, short-term decrease in the overall cost of energy.
So I would say in general, expectation is between the decrease in energy costs and the decrease in energy costs and the increase in the tariffs to be able to sustain more or less the levels that we've been seeing today. But obviously, we'll update you as we go along. As you know, the energy component has some volatility that we don't control outright. On the CapEx side, as we mentioned before, we have an expectation to continue our downward trend in terms of CapEx. We target medium-term CapEx of EUR 350 million a year, and obviously we'll post that. We'll continue to do a push in that sense. So I think that's a bit the guidance that we gave in that regard.
I wouldn't provide any more specific details to the year end. But in general, I mean, as we mentioned, expansion CapEx is decreasing. As you see from the numbers, we also we've been able to contain also baseline CapEx due to, again, operational efficiency and some more intelligence that we're able to put on the way we operate. And so that's, I would say the baseline is EUR 350. Finally, on the competitive landscape. Yes, it's true that, you know, what we see in other markets has been a very word of mouth, social media kind of approach. We feel that that has a very limited ability to expand. So, if we think of the way we see our customers acquiring, yes, retail plays a very important component.
But not only that, but, you know, the overall operations that we have, both on digital and both on call centers, also play a very relevant role. But I think it's the combination of assets that really drives the market dynamics. We see that across our competitors or established competitors as well. So we feel that naturally there is some word of mouth and more organic dynamics, but that has very limited or we expect it to have limited traction.
Thank you. Thank you very much.
I don't know if that answers your question. Yeah.
Yes, yes. Yes, it does. Thank you.
Thank you. We'll now take our next question. This is from António Seladas, from AS Independent Research. Please go ahead.
... Hi, good morning. Thank you for taking my questions. I have two. First one is related to your performance, Q1 performance, and I know that you don't like to give guidance, but maybe you can help us to elaborate a little bit or explain a little bit, what could be different in the coming quarters from the performance that we saw in the Q1? Because the economy is stable and the competitive environment is also seems also very stable. So, first idea is that performance could be, could be repeated over the rest of the year. That's the first ques- Second question is related with your customer base.
Apparently, nothing is really changed, but nevertheless, we are all worried about the customers just starting to ask for broadband and mobile, and mobile data, and canceling or switching off the TV box. I don't know if you can elaborate or explain a little bit if something of this is already happening or not. Thank you very much.
Thank you for your question. I mean, overall performance, when you look at our numbers, and the quarter performance, obviously you see some slight changes that's due to typical seasonality and market dynamics. And I think those changes will continue, the pattern will continue to exist. Having said that, our expectation across the board is to keep the trajectory that we've been showing, at least in this quarter. So for the remaining of the year to follow, that's the same path of strong mobile performance, continuous growth on the pay TV and broadband side, and continue to push as someone asked before, you know, this upsell trajectory that we've been able to sustain in the past quarters.
Regarding the customer base, we don't see a trend of cord cutting or switching off. So what we see... As you know, the Portuguese market is one of those that has the highest pay TV penetration. It continues to do so, so the clients value that offering. And we continue even in, if you like, the lowest segments or what you could call typical markets, you know, very naked offerings. We still see from those segments a request for TV products, be it the ones we have today or even simpler offerings. But, I mean, our market research suggests that this is very important to the play, and then building on market dynamics, we also feel that that's gonna be an important aspect in terms of any market disruption.
Because the fact is that this market likes and wants pay TV with all the premium components that it has. You know, the TV experience itself, as you know, in Portugal, is very advanced. So all of those factors are, and we believe that will continue to be critical for the success in the market.
Okay. Thank you very much for the answers.
Thank you. We'll now take our next question. As a reminder, it's star one on one to ask a question. The next question is from Luigi Minerva from HSBC. Please go ahead.
Yes, good afternoon. Thanks for taking my questions. I have three. So the first one is on 5G CapEx, and I mean, we are one of the most advanced operators in Europe with a 5G deployment. And I suppose, you know, there is firstly a coverage phase in the 5G CapEx cycle, but then what follows is a capacity phase, which may go for longer. So I was wondering, you know, how advanced are you? I mean, because obviously the coverage statistics are very good, but what about the capacity kind of CapEx? And secondly, related to 5G, I think in the past you mentioned about your ability to charge some kind of premium for 5G services.
I would just want to check whether you still think that's viable and sustainable as 5G becomes more widespread. And then, perhaps a follow-up on the last question from the previous analyst. I understand that TV is very important in Portugal, and so the TV experience is very advanced. Still, if we think about the new entrant, I struggle to see why they cannot launch, you know, a content-free product, where they offer over the top on the broadband connectivity. Thank you.
Thanks for the questions. On the first one related to 5G and the CapEx itself, the capacity component has already been made. So, you know, in the medium term, we don't expect any further capacity increases on the network based on the projections that we have in terms of customer demand and expectation. So we haven't just rolled out coverage, but we have already rolled out capacity dimensions. Yeah? So we don't expect any further capacity CapEx cycle regarding this component in the foreseeable future. If you like, the 5G monetization, which I guess it was a bit the question that you were having. What we still expect... I mean, the market hasn't evolved. Hasn't evolved in that sense, we haven't seen additional offerings.
What we do expect is for us to be able to move into, if you like, value-added services on 5G. So as 5G becomes the norm, as the customer base has the devices to support it, we expect to be able to provide, let's say, 5G boosters, so specific bandwidth capabilities on specific situations in which clients want to sustain that. We also expect. We want to experiment and test some added value, especially on the consumer side, you know, some added value use cases in which consumers will be able to pay more for the ability that we provide them. That's on the B2C side. On the B2B front, there are very concrete enterprise-grade solutions that we can deploy on 5G.
As an example, but of course there are more, we can think of, you know, backup redundancy that typically is done on fixed networks, with an additional redundancy in the 5G side, which clients will definitely pay to have, you know, more security and enhanced connectivity on their premises. So in all of these fronts, we are exploring that, and we expect to have some upsell on that front. Finally, on the competitive dynamics. So again, an additional data point. If we look at the hours of TV watched in Portugal, they haven't decreased at all. So, and that's not just... That's not something you can just, if you like, provide on the OTT front. Obviously, OTT plays a role, like in our current base.
Obviously, our clients also have OTT. But when you think of premium content, when you think of local content, all of these components are key to a large base of customers across Portugal. So again, obviously, we know that there is a limited component of the market that wants simpler solutions and skinnier solutions, and those already have that. So not only with a potential new entrant, but also with the NOS. So our WOO brand already provides that type of solution. So again, coming back, if we think of the overall market, I think there's a small component that wants that type of solutions. We have that for our customers. On the other, more material and bigger chunk of the market, you know, pay TV will continue to play an important role.
Okay, I appreciate it. Thank you.
Yeah.
Thank you. There are no further questions at this time. I will hand back to the speakers for closing.
Okay, well, thanks, thanks so much for everybody on the call and listening. As usual, we're available to take your, your follow-up questions, and look forward to speaking to you next quarter. Bye.