Drahi’s Altice Boosts Profit as U.S. Purchases Bring Growth

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  • Adjusted quarterly Ebitda rises 2.7% to EU2.27b, beating views
  • Stock soars as much as 16% as French business recovers

Altice NV, billionaire Patrick Drahi’s holding company, reported an increase in second-quarter profit, bolstered by gains in the U.S. and Portugal and signs of improvement at French phone carrier SFR Group SA. The stock jumped.

Adjusted earnings before interest, taxes, depreciation and amortization grew 2.7 percent to 2.27 billion euros ($2.5 billion) as sales fell 2.6 percent to 5.83 billion euros in period, the company said in a statement Tuesday. Analysts projected adjusted Ebitda of 2.14 billion euros on sales of 5.76 billion euros, the average of estimates compiled by Altice.

Billionaire Patrick Drahi

Photographer: Ivan Guilbert/Bloomberg

Altice acquired U.S. cable carriers Cablevision Systems Corp. in June and Suddenlink Communications last year to diversify beyond the sputtering European market. The company plans to reduce 5,000 jobs at SFR by 2019 as it faces price competition from Iliad SA and Bouygues Telecom.

The earnings were “strong,” and the company’s projection for growth is "reassuring," Andrew Lee, an analyst at Goldman Sachs Group Inc., said in a note to clients. In France, the second-quarter performance improved sequentially “across the board despite still-high promotional intensity.”

Altice rose 15 percent, the most in 2 1/2 years, to 15 euros in Amsterdam. SFR advanced 9.4 percent to 22.90 euros in Paris, its biggest gain since January.

Adjusted Ebitda rose 16 percent at Suddenlink in the second quarter, while advancing 8.7 percent at the former Cablevision business, now called Optimum. The results reflect pro-forma adjustments as if Altice owned both from the year-earlier period. Revenue at the U.S. businesses now makes up 41 percent of the total at Altice.

SFR’s adjusted Ebitda fell 6.8 percent to 999 million euros due to subscriber losses while profit rose 22.5 percent in Portugal. The French job-cut program will allow the company to adapt to the "new competitive environment," Altice Chief Executive Officer Michel Combes said on a conference call with reporters.

Cost Savings

During a conference call with analysts, Combes said SFR’s plan will generate annual savings of around 400 million euros. The company expects to reduce annual labor costs by one third at Paris-based SFR, where employee costs totaled 1.2 billion euros in 2015. Combes said Altice expects one-time costs linked to the plan totaling about double the average annual savings, or 800 million euros.

The company maintained its forecasts for this year. Altice aims for mid-single digit percentage growth in adjusted Ebitda and an operating free cash flow growth flat to slightly down, reflecting accelerated investments. The company expects adjusted Ebitda from France to increase.

Altice is considering selling its Belgian business to focus on bigger operations in markets such as the U.S. and France, a person familiar with the situation said last month. Dexter Goei, Altice president and Altice USA CEO, said to reporters the selling process is still ongoing and an update will be done to the market "when we have something to say."

Asked about potential new acquisitions, Combes said the focus of Altice for the coming quarters will be on operations instead of deals.