VEON Ltd. · NASDAQ:VEON
VEON — Q2 2019 Earnings Presentation
30 slides from VEON's earnings presentation, Aug 1, 2019
Slide 1: Q2 2019 Results
Q2 2019 RESULTS Amsterdam, 1 August 2019
Slide 2: Agenda
Agenda OPENING Nik Kershaw - Head of IR OVERVIEW AND PRIORITIES Ursula Burns – Chairman and CEO COUNTRY RESULTS Kjell Johnsen - COO GROUP FINANCIAL RESULTS Trond Westlie - CFO FINAL REMARKS Ursula Burns – Chairman and CEO Q&A Q2 2019 RESULTS 2
Slide 3: Disclaimer
Disclaimer This presentation contains “forward-looking statements”, as the phrase is defined in Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. These forward- looking statements may be identified by words such as “m
Slide 4: Agenda
Agenda OPENING Nik Kershaw - Head of IR OVERVIEW AND PRIORITIES Ursula Burns – Chairman and CEO COUNTRY RESULTS Kjell Johnsen - COO GROUP FINANCIAL RESULTS Trond Westlie - CFO FINAL REMARKS Ursula Burns – Chairman and CEO Q&A Q2 2019 RESULTS 4
Slide 5: 1H 2019: Good operational execution
1H 2019: Good operational execution TOTAL REVENUE INCREASED ORGANICALLY 1 BY 7.4% DRIVEN BY GOOD OPERATIONAL PERFORMANCE IN PAKISTAN, UKRAINE AND BANGLADESH. REPORTED REVENUE DECREASED BY 3.0% EBITDA DELIVERS ORGANIC1 GROWTH OF 10.7% THROUGH STRONG OPERATIONAL PERFORMANCE AND ONGOING COST REDUCTION.
Slide 6: 1H 2019: Executing on our strategic priorities
1H 2019: Executing on our strategic priorities ENHANCE OUR CORE TARGET COST EFFICIENCIES • Continued investment to improve data capacity and • Corporate costs declined by 15% YoY, to USD 113 million coverage 1 • Focused on costs across all our operations 2 • Increased focus on customer experience •
Slide 7: GTH restructuring underway
GTH restructuring underway • The tax settlement of USD 136 million resolves long-standing tax issues with the Egyptian authorities • MTO offers an attractive exit for GTH minority shareholders; while we remain optimistic on the outcome of this process we will need to wait until the closing of the of
Slide 8: Agenda
Agenda OPENING Nik Kershaw - Head of IR OVERVIEW AND PRIORITIES Ursula Burns – Chairman and CEO COUNTRY RESULTS Kjell Johnsen - COO GROUP FINANCIAL RESULTS Trond Westlie - CFO FINAL REMARKS Ursula Burns – Chairman and CEO Q&A Q2 2019 RESULTS 8
Slide 9: Russia: Challenging competitive environment
Russia: Challenging competitive environment • Despite the market being characterized by continued price competition impacting overall market growth, Beeline continued to make steady progress TOTAL REVENUE MOBILE CUSTOMERS on network performance and distribution optimization (RUB BILLION) (MILLION) +
Slide 10: Ukraine: Solid performance in a growing market
Ukraine: Solid performance in a growing market • Kyivstar sustained another period with strong results in a growing telecoms market, driven by our marketing activities and strong growth in data TOTAL REVENUE MOBILE CUSTOMERS consumption (UAH BILLION) (MILLION) + 24.4 % YoY - 1.1 % YoY • Service reve
Slide 11: Pakistan: Strong momentum continues
Pakistan: Strong momentum continues • Jazz continued to maintain its premium price positioning in Pakistan following successful repricing activities during the quarter despite ongoing TOTAL REVENUE MOBILE CUSTOMERS market competitiveness (PKR BILLION) (MILLION) + 20.5% YoY + 7.2% YoY • Service reven
Slide 12: Algeria: Macro challenges persist
Algeria: Macro challenges persist TOTAL REVENUE MOBILE CUSTOMERS (DZD BILLION) (MILLION) • In Algeria, Djezzy continued to operate in a challenging macro environment - 3.4% YoY + 0.4 % YoY (elections postponed for second time) characterized by aggressive price competition from key competitors 23.1 2
Slide 13: Bangladesh: Operational turnaround continues
Bangladesh: Operational turnaround continues • Banglalink reported good results in 2Q 2019 in a continuously changing regulatory environment as the operational turnaround evident in the first TOTAL REVENUE MOBILE CUSTOMERS quarter continued (BDT BILLION) (MILLION) +5.4% YoY + 3.1 % YoY • Service rev
Slide 14: Uzbekistan: Encouraging sequential improvement
Uzbekistan: Encouraging sequential improvement • Unitel continues to focus on value customers benefiting from its position as a market leader. The Uzbekistan market continued to be driven by TOTAL REVENUE MOBILE CUSTOMERS increased mobile data penetration (UZS BILLION) (MILLION) - 10.6% YoY -6.6% Yo
Slide 15: Agenda
Agenda OPENING Nik Kershaw - Head of IR OVERVIEW AND PRIORITIES Ursula Burns – Chairman and CEO COUNTRY RESULTS Kjell Johnsen - COO GROUP FINANCIAL RESULTS Trond Westlie - CFO FINAL REMARKS Ursula Burns – Chairman and CEO Q&A Q2 2019 RESULTS 15
Slide 16: Good 2Q 2019 results
Good 2Q 2019 results R E P O R T E D REPORTED EQUITY FCF EXCL. LICENSES 2 TOTAL REVENUE E B I T D A P r e - I F R S 1 6 P r e - I F R S 1 6 $567$2.3bmn $8661.7mX $54$249mm +7.5% organic1 YoY +11.1% organic1 YoY -0.4% reported YoY +1.0% reported YoY Reported, post - I F R S 1 6 Reported, post - I F R
Slide 17: Revenue and EBITDA development by country
Revenue and EBITDA development by country Good operational performance in Pakistan and Ukraine USD MILLION (-0.4%) YoY reported 60 42 7 75 0 (7) (8) (179) 2,439 2,270 2,261 Reported total Russia Pakistan Ukraine Bangladesh Algeria Uzbekistan Other 1 Organic total revenue FOREX Reported total revenue
Slide 18: Revenue and EBITDA development by product
Revenue and EBITDA development by product Data revenue driving organic growth in revenue and EBITDA USD MILLION (+7.5%) YoY organic 22 141 (179) (56) 63 2,439 2,270 2,261 1 Reported total Equipment & accessories Voice Data and MFS Other Organic total revenue FOREX Reported total revenue 2Q19 revenue
Slide 19: Q2 2019 income statement
Q2 2019 income statement USD MILLION 2Q19 2Q18 Reported YoY Organic1 2Q19 Pre-IFRS 16 Reported Pre-IFRS 16 YoY 2Q19 pre-IFRS 16 versus 2Q18 reported Revenue 2,261 2,261 2,270 (0.4%) 7.5% Service revenue 2,080 2,080 2,136 (2.6%) 5.0% EBITDA 994 866 857 1.0% 11.1% Depreciation, amortization and other
Slide 20: Continued strong cash flow generation
Continued strong cash flow generation USD MILLION Includes first payment on INCLUDING IFRS 16 IMPACT, UNLESS STATED OTHERWISE GTH tax settlement of USD 54 million. 21 (71) 91 94 ( 201 ) 33 55 (89) 120 447 338 249 196 Russia Pakistan Algeria Bangladesh Ukraine Uzbekistan Other countries Group OpCF Wo
Slide 21: Q2 2019 net debt development
Q2 2019 net debt development USD MILLION (2,068) 2,094 117 428 147 (866) (94) 156 8,265 8,179 6,197 6,085 Net debt IFRS 16 impact Net debt EBITDA Change in working Financial Taxes Cash capex incl. FOREX and Other Net debt IFRS 16 impact Net debt 31 March 31 March 2019 pre-IFRS 16 capital charges lic
Slide 22: 2019 guidance confirmed
2019 guidance confirmed 1H 2019 FY 2019 actual GUIDANCE 7.4% Low single-digit Total revenue 1 Organic growth organic1 growth 10.7% Low to mid single- EBITDA 1 Organic growth digit organic1 growth ► EFCF target is based on currency rates of 20 February 2019 and excludes USD 630 USD 136 million paymen
Slide 23: Agenda
Agenda OPENING Nik Kershaw - Head of IR OVERVIEW AND PRIORITIES Ursula Burns – Chairman and CEO COUNTRY RESULTS Kjell Johnsen - COO GROUP FINANCIAL RESULTS Trond Westlie - CFO FINAL REMARKS Ursula Burns – Chairman and CEO Q&A Q2 2019 RESULTS 23
Slide 24: Summary
Summary 2019 guidance confirmed with directional upside to revenue and EBITDA We will continue to target further cost efficiencies GTH restructuring underway and key step in simplifying corporate structure Exploring opportunities to drive long-term growth Q2 2019 RESULTS 24
Slide 25: Appendix
VEON APPENDIX
Slide 26: Debt currency mix
Debt currency mix • At the end of Q2 2019, the balance of USD debt swapped to RUB is ~USD 1.2 billion • Average cost of debt rose to 7.3% due to elimination of EUR debt and an increase in the relative share of RUB debt. The impact of 0.9 p.p. higher average cost of debt is more than offset by the US
Slide 27: Group debt maturity schedule
Group debt maturity schedule 30 JUNE 2019 USD BILLION Group debt maturity schedule HQ Pakistan Other GTH Russia Bangladesh 2.0 1.5 1.2 1.2 0.9 0.5 2019 2020 2021 2022 2023 2024 Group debt maturity schedule by currency – before considering fx derivatives and excluding lease liabilities Currency break
Slide 28: Liquidity overview
Liquidity overview GROUP CASH BREAKDOWN BY CURRENCY1 UNUSED RCF HEADROOM 30 JUNE 2019 30 JUNE 2019 Syndicated RCF facility USD 1.03 billion 18% USD UNUSED CF HEADROOM RUB 30 JUNE 2019 7% DZD 49% PKR Pakistan – credit facilities PKR 96.1 billion (USD 0.46 billion) 7% UZS HQ Bilateral Short-term Facil
Slide 29: Debt by entity
Debt by entity 30 JUNE 2019 USD MILLION Outstanding debt Type of debt Cash-pool Entity Bonds Loans Total overdrafts1 VEON Holdings B.V. 2,079 2,919 45 5,043 GTH Finance B.V. 1,200 - - 1,200 PJSC VimpelCom 279 - - 279 Pakistan Mobile Communications Limited 7 384 - 391 Banglalink Digital Communication
Slide 30: Forex
Forex Guidance rates Average rates Closing rates FY 2019 2Q19 2Q18 YoY 2Q19 2Q18 YoY Russian ruble 66.00 64.56 61.80 4.5% 63.08 62.76 0.5% Algerian dinar 119.00 119.35 115.80 3.1% 118.65 117.50 1.0% Pakistan rupee 139.00 147.06 116.80 25.9% 159.52 121.58 31.2% Bangladeshi taka 84.00 84.29 83.78 0.6%