VEON Ltd. · NASDAQ:VEON
VEON — Q2 2017 Earnings Presentation
35 slides from VEON's earnings presentation, Aug 3, 2017
Slide 1: Q2 2017 Results And Business Update
Q2 2017 Results And Business Update Amsterdam, 3 August 2017 Jean-Yves Charlier - Chief Executive Officer Andrew Davies - Chief Financial Officer
Slide 2: Forward-looking statements
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 “may,” “might,
Slide 3: Agenda
Agenda FINANCIAL AND OPERATIONAL PROGRESS – Q2 2017 Group results highlights Interim dividend Jean-Yves Charlier, CEO Andrew Davies, CFO BUSINESS UPDATE – HIGHLIGHTS VEON platform launch in 5 countries Expand monobrand distribution in Russia Corporate Governance update FINANCIAL AND OPERATIONAL PROG
Slide 4: Q2 2017 Group results highlights
EBITDA margin, underlying2 (%) 40.4% Total revenue (USD billion) 2.4 +3.7% organic1 YoY +12.3% reported YoY -0.9 p.p. organic1 YoY -2.0 p.p. reported YoY Capex excl. licenses (USD million) 332 +17.2% reported YoY LTM capex/revenue: 18.4% Underlying equity free cash flow excluding licenCes3 (USD Mill
Slide 5: Interim Dividend of US 11 cents for 2017 Approved
2015 total dividend of US 3.5 cents 2016 interim dividend of US 3.5 cents 2016 final dividend of US 19.5 cents 2017 interim dividend of US 11 cents US 23 cents for FY 2016 Aug./Sept.1 2017 expected final dividend Interim Dividend of US 11 cents for 2017 Approved 1 Record date 14 August 2017, payment
Slide 6: Agenda
Agenda FINANCIAL AND OPERATIONAL PROGRESS – Q2 2017 Group results highlights Interim dividend Jean-Yves Charlier, CEO Andrew Davies, CFO BUSINESS UPDATE – HIGHLIGHTS VEON platform launch in 5 countries Expand monobrand distribution in Russia Corporate Governance update FINANCIAL AND OPERATIONAL PROG
Slide 7: VEON: The Personal Internet Platform
VEON: The Personal Internet Platform … A single account – and you stay in control Totally free messaging – with chat and voice calling. Even when you are out of credit News, music, video and offers – Personalized for you. Focus for next 18 months: major consumer engagement and improving the efficien
Slide 8: VEON Is Now Out There!
… Is Now Out There! 19 July 2017: VEON launched in Russia, Italy, Ukraine, Pakistan, Georgia with deep self-care integration Also available in 10 more countries, and expanding (including Netherlands, UK & USA) Already available to 134 million potential customers From 3 to almost 100 partners in cont
Slide 9: Expand Monobrand Distribution in Russia
Expand Monobrand Distribution in Russia Store integration to be completed by Q2 2018 Positive immediate effect on revenue and from 2019 onwards on EBITDA Expected number of Beeline monobrand and franchise stores of ~5,500 in medium term Reduce churn and increase customer lifetime through higher leve
Slide 10: Corporate Governance Update
URSULA BURNS Former Xerox Chairman & CEO GUY LAURENCE Former Rogers CEO Corporate Governance Update Ursula Burns and Guy Laurence elected to the Supervisory Board Supervisory Board increased from 9 to 11 members Majority of board now unaffiliated with major shareholders Ursula Burns appointed as new
Slide 11: Agenda
Agenda FINANCIAL AND OPERATIONAL PROGRESS – Q2 2017 Group results highlights Interim dividend Jean-Yves Charlier, CEO Andrew Davies, CFO BUSINESS UPDATE – HIGHLIGHTS VEON platform launch in 5 countries Expand monobrand distribution in Russia Corporate Governance update FINANCIAL AND OPERATIONAL PROG
Slide 12: Significant Corporate Finance Transactions Successfully Executed
Significant Corporate Finance Transactions Successfully Executed Refinanced bank debt at improved terms and moved bank debt from PJSC VimpelCom to VimpelCom Holdings B.V. VimpelCom Holdings B.V.: USD 2.25 billion multicurrency TL/RCF to replace USD denominated facility available to VimpelCom Amsterd
Slide 13: Significant Capital Structure Improvements
Significant Capital Structure Improvements Create more flexibility in the debt structure Improve currency mix Lower average cost of debt and improve maturity Q2 2017 RESULTS Annualized interest cost reduction of ~USD 100 million, with greater flexibility1 As at 31 December 2016 As at 30 June 2017 7.
Slide 14: Currency Trend Continues to Improve
Currency Trend Continues to Improve VEON coin against USD, Index (1Q14=100) VEON currency weightings calculated from the sum of the individual countries’ relative contribution to total countries revenue *Based on historical reported revenues, no restatement applied Q2 2017 RESULTS
Slide 15: Revenue Evolution
Revenue Evolution Organic growth, currency tailwinds and Warid acquisition driving revenue growth +3.7% 1 Other also includes intercompany eliminations 2 Other consists of operations in Kazakhstan, Kyrgyzstan, Georgia, Armenia, Tajikistan and intercompany eliminations USD MILLION +12.3% 1 +8.5% PAK
Slide 16: EBITDA Evolution
Q2 2017 RESULTS EBITDA Evolution Organic growth, currency tailwinds and Warid acquisition driving EBITDA growth 1 Exceptional items in Q2 2016 consists of costs primarily related to the performance transformation program 2 Exceptional items in Q2 2017 consists of costs primarily related to the perfo
Slide 17: Russia: Improving Results
Russia: Improving Results TOTAL REVENUE (RUB BILLION) MOBILE CUSTOMERS (MILLION) Total revenue increased, mainly as a result of mobile service revenue growth Mobile service revenue increased by 4% YoY, mainly driven by 18% mobile data revenue growth Mobile ARPU grew by 3.6% YoY Fixed-line service re
Slide 18: Pakistan: Synergies Target Delivered, Spectrum Investment for Future Growth
Pakistan: Synergies Target Delivered, Spectrum Investment for Future Growth 1 NOTE: Q2 2016 pro-forma results assume that the results of Warid have been consolidated (including intercompany eliminations) with effect from 1 January 2016 2 Q2 2016 EBITDA negatively impacted by performance transformati
Slide 19: Algeria: Turnaround in Progress
Q2 2017 RESULTS Algeria: Turnaround in Progress 1 Q2 2016 EBITDA negatively impacted performance transformation costs of DZD 21 million TOTAL REVENUE (DZD BILLION) MOBILE CUSTOMERS (MILLION) Revenue trend gradually improving: Accelerating data revenue in Q2 (+89% YoY) Strong focus on customer base r
Slide 20: Bangladesh: Sustained Data Growth, Spectrum Disadvantage
Bangladesh: Sustained Data Growth, Spectrum Disadvantage 1 Q2 2016 EBITDA negatively impacted by performance transformation and SIM re-verification costs of BDT 0.5 billion TOTAL REVENUE (BDT BILLION) MOBILE CUSTOMERS (MILLION) Continued aggressive competition on customer acquisition 0.2 million QoQ
Slide 21: Ukraine: Market Leader, Continued Strong Performance
Ukraine: Market Leader, Continued Strong Performance 1 Q2 2017 EBITDA negatively impacted by UAH 28 million related to performance transformation costs and other TOTAL REVENUE (UAH BILLION) EBITDA AND EBITDA MARGIN (UAH BILLION AND %) MOBILE CUSTOMERS (MILLION) CAPEX EXCL. LICENSES AND LTM CAPEX/REV
Slide 22: Uzbekistan: Solid Results
Uzbekistan: Solid Results TOTAL REVENUE (UZS BILLION) MOBILE CUSTOMERS (MILLION) Revenue grew by 20% YoY driven by USD-denominated tariffs Customer base grew 3% YoY, second consecutive quarter of YoY growth Mobile data revenue increased 28% YoY, as a result of promotions and introduction of new data
Slide 23: Italy: Wind Tre Synergy Realization Drives Underlying EBITDA Margin Expansion
Italy: Wind Tre Synergy Realization Drives Underlying EBITDA Margin Expansion Tougher competitive environment, ahead of Iliad entry Service revenue declined by 1.6% YoY with: Mobile service revenue declining at 2.2% YoY mainly due to increased competition impacting the customer base. Mobile ARPU sta
Slide 24: Q2 2017 Income Statement
Q2 2017 Income Statement 2Q17 reported 2Q16 pro forma Warid1 2Q16 reported Reported YoY Organic2 YoY Revenue 2,417 2,228 2,153 12.3% 3.7% Service revenue 2,331 2,158 2,086 11.8% 3.4% EBITDA 931 811 795 17.1% 10.6% Depreciation & amortization and other (542) (542) (512) 5.7% EBIT 389 269 283 37.6% Ne
Slide 25: Q2 2017 Net Debt Evolution
Q2 2017 Net Debt Evolution 1 Exceptional items in Q2 2017 cash flow consists of performance transformation cash out of USD 46 million 2 EBITDA LTM (last twelve months); in Q2 2017 LTM underlying EBITDA excludes exceptional items of USD 267 million NET DEBT EBITDA2 2.1x 2.2x 2.2x 1 Q2 2017 RESULTS US
Slide 26: Robust Underlying Equity Free Cash Flow Excluding Licenses
Robust Underlying Equity Free Cash Flow Excluding Licenses1 1 Underlying equity free cash flow excluding licenses is defined as free cash flow from operating activities less free cash flow used in investing activities, excluding capex for licences and withholding tax for spectrum in Pakistan of USD
Slide 27: 2017 Guidance Confirmed
Q2 2017 RESULTS 2017 Guidance Confirmed 1 FY 2017 targets based on pro-forma results for 2016, including 12 months of Warid contribution; organic targets for revenue and underlying EBITDA margin are at constant currency, excluding exceptional items, e.g. transformation costs and M&A. Underlying equi
Slide 28: Agenda
Agenda FINANCIAL AND OPERATIONAL PROGRESS – Q2 2017 Group results highlights Interim dividend Jean-Yves Charlier, CEO Andrew Davies, CFO BUSINESS UPDATE – HIGHLIGHTS VEON platform launch in 5 countries Expand monobrand distribution in Russia Corporate Governance update FINANCIAL AND OPERATIONAL PROG
Slide 29: Appendix
VEON APPENDIX
Slide 30: Debt Maturity Schedule
Debt Maturity Schedule Group debt maturity schedule by currency1 AS AT 30 JUNE 2017, USD BILLION Group debt maturity schedule 2017 2018 2019 2020 2021 2022 >2022 USD 1.3 0.3 1.1 0.7 0.4 0.7 2.6 61% EUR 0.0 0.0 0.0 0.3 0.9 0.0 0.0 10% RUB 0.4 0.2 0.0 0.4 0.8 0.5 0.0 20% PKR 0.1 0.1 0.1 0.1 0.1 0.0 0.
Slide 31: Liquidity Analysis
Liquidity Analysis Group cash breakdown by currency 30 JUNE, 2017 Unused RCF headroom at the end of Q2 2017: Unused VF/CF headroom at the end of Q2 2017: Group cash: USD 3.22 billion Q2 2017 RESULTS VimpelCom – syndicate USD 1.68 billion VimpelCom - CDB RMB 0.27 billion (USD 0.04 billion) Algeria -
Slide 32: Debt by Entity
Debt by Entity Entity Bonds Loans RCF Vendor Financing Other Total VimpelCom Holdings B.V. 3,885 3,210 - 63 - 7,158 VimpelCom Amsterdam B.V. - - - 538 - 538 PJSC VimpelCom 976 - - - 61 1,037 GTH Finance B.V. 1,200 - - - - 1,200 Pakistan Mobile Communications Limited 55 776 - - - 831 Banglalink Digit
Slide 33: Underlying Equity Free Cash Flow (Excluding Licenses) Reconciliation Table
Underlying Equity Free Cash Flow (Excluding Licenses) Reconciliation Table 2Q17 2Q16 1H17 1H16 Net cash from operating activities 578 428 1,162 67 Exceptional items: PT costs 46 74 67 119 WHT on license in Pakistan 30 - 30 IRAQNA Provision - - 69 - Settlement with DOJ/SEC/OM investigation - - - 795
Slide 34: EBITDA Underlying Reconciliation Table
Q2 2017 RESULTS 2Q17 2Q16 Pro-forma Warid 1H17 1H16 Pro-forma Warid EBITDA 931 811 1,792 1,589 Performance Transformation costs of which: HQ and Other 37 56 58 89 Russia 1 3 4 4 Emerging Markets 6 16 12 24 Other exceptional 2 43 2 42 EBITDA Underlying 977 928 1,868 1,747 EBITDA Underlying Reconcilia
Slide 35: Forex assumptions and average and closing rates
Russian Ruble Algerian Dinar Pakistan Rupee Bangladeshi Taka Ukrainian Hryvnia Kazakh Tenge Uzbekistan Som Armenian Dram Kyrgyz Som Georgian Lari Forex assumptions FY 2017 67.00 118.00 107.00 79.00 28.00 350.00 3,231.34 480 70.00 2.25 Average rates 2Q17 2Q16 YoY 57.15 65.89 (13.3%) 109.04 109.54 (0.