BCE 2019 Annual Report

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BCE 2019 Annual Report Building Better Experiences BCE Inc. 2019 Annual Report Inc.BCE 2019 BCE Inc. 2019 Annual Report OUR GOAL AND STRATEGY Our goal is to advance how Canadians connect with each other and the world In a new world of communication possibilities, Bell is committed to bringing the best digital connections and next-generation services to Canadians, with customer experience at the centre of everything we do. Underscoring our strengths and opportunities, Bell’s 6 Strategic Imperatives position us to deliver continued success in a fast-changing communications marketplace. 1. Build the best networks A critical competitive advantage as we continue to enhance Bell’s network leadership with the expansion of our fibre and wireless networks, including 5G. 2. Drive growth with innovative services Leveraging our leading networks to provide truly differentiated communications services to Canadians and drive revenue growth. 3. Deliver the most compelling content Taking a unified approach across our media and distribution assets to deliver the content Canadians want the most. 4. Champion customer experience Making it easier for customers to do business with Bell at every level, from sales to installation to ongoing support. 5. Operate with agility and cost efficiency Underscoring a focus on operational excellence and cost discipline throughout every part of our business. 6. Engage and invest in our people Strengthening our leading workplace culture, recognizing that Bell’s success requires a dynamic and engaged team. 2 BCE Inc. 2019 Annual Report Our 2019 results were in line with our financial guidance targets, and our 2020 guidance builds on this strong competitive momentum and positive financial and operational outlook for all our operating segments. 2019 financial performance Actual Target Revenue growth 2.1% 1%–3% Adjusted EBITDA (1) growth 6.0% 5%–7% Capital intensity 16.6% ~16.5% Adjusted EPS (1) $3.50 $3.48–$3.58 Free cash flow (1) growth 7.0% 7%–12% Driving growth in shareholder value +17.5 % +324% Total shareholder Total shareholder return return in 2019 (2) 2009–2019 (2) +5 % +128% Increase in dividend Increase in dividend per common share per common share for 2020 2009–2020 (1) Adjusted EBITDA, adjusted EPS, free cash flow and dividend payout ratio are non-GAAP financial measures and do not have any standardized meaning under International Financial Reporting Standards (IFRS). Therefore, they are unlikely to be comparable to similar measures presented by other issuers. For a full description of these measures, see section 10.2, Non-GAAP financial measures and key performance indicators (KPIs) on pp. 105 to 108 of the MD&A. (2) The change in BCE’s common share price for a specified period plus BCE common share dividends reinvested, divided by BCE’s common share price at the beginning of the period. BCE Inc. 2019 Annual Report 3 FINANCIAL AND OPERATIONAL HIGHLIGHTS Network and service innovation is driving customer growth With the highest-performance networks and BCE retail subscribers (millions) 2019 2018 Change unmatched new services and content, Bell is building a better communications experience Wireless 9.96 9.61 +3.6% at home, in the workplace and on the go. And customers are responding: In 2019, Bell welcomed the High-speed Internet (1) 3.56 3.41 +4.3% industry’s highest number of new subscribers across the growth services of retail Internet, IPTV and wireless and diligently managed the decline in traditional home phone and other Television (1) 2.77 2.77 +0.2% legacy services. Total growth services The speed and quality of Canada’s Best National Mobile Network subscribers: retail Internet, 16.29 15.79 +3.2% drove unparalleled gains in both postpaid and prepaid wireless, IPTV and wireless Internet growth accelerated with the fastest consumer home Internet service available, while Fibe TV and Alt TV are winning Local residential customers over with leading product and programing telephone services (1) (2) 2.70 2.96 (8.9%) innovations. Total (2) 18.98 18.75 +1.3% 22.37M New, fast Internet Total Bell consumer, now in your area. business and wholesale customer connections (1) Excludes wholesale subscribers. (2) Excludes business telephone services. 4 BCE Inc. 2019 Annual Report FINANCIAL AND OPERATIONAL HIGHLIGHTS Marketplace momentum delivers solid financial performance With strong momentum in a highly competitive market environment, Bell’s wireless, wireline and media operating segments all contributed to increases in revenue and adjusted EBITDA, supporting growth in the free cash flow that fueled our capital investment program and dividend growth for shareholders. Operating revenues Operating revenues 2019 2018 11.7% ($ millions) by segment 11.4% (%) 2019 +2.1% 50.4% 51.2% $23,964 Bell Wireline 37.9% 37.4% 2018 Bell Wireless $23,468 Bell Media Adjusted EBITDA Net earnings Adjusted net earnings (1) ($ millions) ($ millions) ($ millions) 2019 +6.0% 2019 +9.4% 2019 +0.1% $10,106 $3,253 $3,153 2018 2018 2018 $9,535 $2,973 $3,151 Cash flows from operating activities Free cash flow Capital expenditures ($ millions) ($ millions) ($ millions) 2019 +7.8% 2019 +7.0% 2019 +0.4% $7,958 $3,818 $3,988 2018 2018 2018 $7,384 $3,567 $3,971 (1) Adjusted net earnings is a non-GAAP financial measure and does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers. For a full description of this measure, see section 10.2, Non-GAAP financial measures and key performance indicators (KPIs) on p. 105 of the MD&A. For more information, please refer to section 7 on page 83 – Selected annual and quarterly information of the MD&A. BCE Inc. 2019 Annual Report 5 MESSAGE FROM THE CHAIR OF THE BOARD BCE ready for the new era of communications opportunity As Canada’s enduring communications leader, BCE delivers the networks, products and support that provide exceptional value to consumers, businesses and governments in every region, and the execution that delivers strong results and sustainable value to our shareholders. As the communications industry enters an exciting new phase of innovation and opportunity, the Bell group of companies will be ready to deliver the benefits to all stakeholders. BCE is renowned for its strong management team, and we are pleased to welcome seasoned Bell executive Mirko Bibic as our new President and Chief Executive Officer. The 14th chief executive in the 140-year history of our great Canadian company, Mirko brings to the role the vision, skills and experience necessary to build on Bell’s proven strengths and embrace the new opportunities of the future. Working closely with his predecessor George Cope, Mirko has been at the centre of Bell’s resurgence over the last decade as a formidable competitor in the marketplace and the industry’s innovation and investment leader. As our Chief Operating Officer, Mirko led the Bell business units in delivering outstanding growth in new customers and driving a strong financial performance for BCE in 2019. A solid financial performer Each of BCE’s wireless, wireline and media segments contributed to growth in revenue, adjusted EBITDA and free cash flow in 2019, and this steady financial and operating momentum is reflected in our growth targets for 2020. We have a positive business outlook and the foundation of an investment-grade balance sheet, substantial liquidity position and fully funded pension plan. Together with government and regulatory policies that support investment, BCE is well positioned to continue our ambitious network capital investment program and deliver consistent dividend growth to our shareholders. Our latest 5% increase in the BCE common share dividend to $3.33 is effective with the Q1 2020 payment on April 15, 2020. This is the 12th consecutive year in which we have increased the dividend by 5% or more while maintaining our payout ratio within the target policy range of 65% to 75% of free cash flow. Our total shareholder return over that timeframe has been 324%. 6 BCE Inc. 2019 Annual Report At the same time, Bell continued our industry-best investments in Bell was again named one of Canada’s Top 100 Employers network deployment, service enhancement and communications in 2019, and also honoured as a leading green employer research and development. The rollout of our world-leading for our consistent focus on environmental sustainability; all-fibre network across 7 provinces continues apace alongside one of Canada’s best workplaces for young people, reflecting our unprecedented deployment of broadband Internet service our award-winning programs for new graduates; to rural Canada. And we continued to enhance Bell’s 4G wireless and an outstanding diversity employer. network as we laid the groundwork for the mobile 5G revolution. We are committed to attracting top leadership talent, and we Further strengthening our financial position, Bell Canada renewed enable a pay-for-performance culture at Bell that aligns with the its public debt program in 2019, enabling the company to offer up interests of our shareholders. We seek to reflect the communities to $5 billion of debt securities. Bell Canada successfully accessed we serve and focus on promoting diversity and inclusion at the the capital markets to raise a total of approximately $1.95 billion board and operational levels. For example, BCE is a member in gross proceeds from the public issuance of debt securities, of the 30% Club and a signatory to the Catalyst Accord 2022, allowing us to maintain our after-tax cost of outstanding publicly which aims to increase the percentage of women on Canadian issued debt securities at a historically low 3.1%. corporate boards to at least 30% or greater by 2022. Your director nominees this year include 4 women, representing 29% of Our strategy to reinforce the solvency position of our Defined non-executive director nominees.
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