Orange shares spooked by drop in enterprise earnings

Orange shares spooked by drop in enterprise earnings
FILE PHOTO: The logo of French telecom operator Orange is seen at the regional company headquarters in Nantes, France, January 24, 2022. REUTERS/Stephane Mahe

PARIS :Shares in Orange SA, France’s biggest telecom firm, fell on Thursday as investors worried about a plunge in first-half profits at its enterprise and IT services division.

The stock was down more than 3 per cent at 0751 GMT, the third-worst performer on France’s blue chip index, despite the group reporting second-quarter results in line with analyst forecasts.

Orange said its enterprise division saw core operating profit, or EBITDAaL, drop more than 25 per cent in the first half from a year earlier, fuelling concerns over the group’s ability to reach its full-year profit targets, which it confirmed.

“They’re a little bit behind their guidance for the year in terms of EBITDAaL, so that might be a little bit of a concern in terms of their ability to still meet the annual target,” said Oddo BHF analyst Stephane Beyazian.

Less profitable IT integration services did not fully offset a steep fall in voice services contracts, Orange said. The group aims to halve the unit’s core profit decline in the second half with a turnaround plan that will entail cost cutting, it said.

Group earnings before interest, taxees, depreciation and amortisation after leases (EBITDAaL) rose by 0.5 per cent to 3.31 billion euros ($3.38 billion) in the first half.

Orange confirmed its full-year target for core operating profit growth of 2.5 per cent to 3.0 per cent.

The group has struggled to revive its stock valuation and renew growth in its two biggest markets, France and Spain, as it faces costly investments to deploy fixed and broadband networks on top of stiff competition in the two countries.

Orange’s Spanish market in particular has weighed on profits lately. The group expects that division’s earnings to grow again from next year, potentially helped by the unit’s planned $19 billion tie-up with MasMovil.

New group CEO Christel Heydemann will present a strategic plan in February.

($1 = 0.9800 euros)

 

Source: Reuters