VEON Ltd. · NASDAQ:VEON
VEON — Q3 2017 Earnings Presentation
38 slides from VEON's earnings presentation, Nov 9, 2017
Slide 1: Q3 2017 results and business update
Q3 2017 results and business update Amsterdam, 9 November 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: Q3 2017 results agenda
Q3 2017 results agenda FINANCIAL AND BUSINESS HIGHLIGHTS Group results highlights Strategy execution Recent management changes Jean-Yves Charlier, CEO Andrew Davies, CFO FINANCIAL RESULTS AND CORPORATE FINANCE UPDATE Group results Country results, including: Wind Tre refinancing Sale of Pakistan tow
Slide 4: Group results highlights
EBITDA margin, underlying2 (%) 40.4% Total revenue (USD billion) 2.5 +3.2% organic1 YoY +4.0% reported YoY +0.1 p.p. organic1 YoY - 0.3 p.p. reported YoY Capex excl. licenses (USD MILLION) 398 +4.1% reported YoY LTM capex/revenue: 18.4% Underlying equity free cash flow excluding licenSes3 (USD MILLI
Slide 5: Strategy execution
Strategy execution Q3 2017 RESULTS REVITALIZING OUR BUSINESS On 8 November, VEON submitted a mandatory cash tender offer in relation to Global Telecom Holding Telenor completed the third sell down of VEON shares – increasing free float Wind Tre refinancing successfully completed – EUR 270m of annual
Slide 6: GTH: mandatory tender offer
On 8 November 2017, VEON submitted an application to the Egyptian Financial Supervisory Authority (EFSA) to approve a mandatory tender offer (MTO) by VEON Holdings B.V. for any and all of the outstanding shares of GTH which are not owned by VEON (up to 1,997,639,608 shares, representing 42.31% of GT
Slide 7: Telenor sale – free float to increase to 44% by 2019
Telenor sale – free float to increase to 44% by 2019 Telenor completed the third sell down of VEON shares, with free float now close to 30% 1 LetterOne Investment Holdings S.A. (“LetterOne”) is the sole shareholder of L1T VIP Holdings S.à r.l. and, in such capacity, may be deemed to be the beneficia
Slide 8: VEON – commercial launch in five markets
Q3 2017 RESULTS VEON – commercial launch in five markets Commercial launch of VEON in Italy, Russia, Pakistan, Ukraine and Georgia 5.3 million downloads to date Passed 1 million download mark in each of Italy, Russia and Pakistan After the first week: #1 top free app on Google Play Store and Apple A
Slide 9: Recent management changes
Recent management changes Trond Westlie (former Chief Financial Officer at AP Moller-Maersk) appointed Group Chief Financial Officer, succeeding Andrew Davies, effective from 9 November 2017 Joshua Drew (former Associate General Counsel at VEON and former Vice President and Associate General Counsel
Slide 10: Q3 2017 results agenda
Q3 2017 results agenda FINANCIAL AND BUSINESS HIGHLIGHTS Group results highlights Strategy execution Recent management changes Jean-Yves Charlier, CEO Andrew Davies, CFO FINANCIAL RESULTS AND CORPORATE FINANCE UPDATE Group results Country results, including: Wind Tre refinancing Sale of Pakistan tow
Slide 11: Revenue evolution
+3.2% Revenue evolution Organic growth in data revenue is the key driver 1 Other also includes intercompany eliminations 2 Other consists of operations in Kazakhstan, Kyrgyzstan, Georgia, Armenia, Tajikistan and intercompany eliminations USD MILLION +4.0% 1 2 Q3 2017 RESULTS (7)
Slide 12: EBITDA evolution
EBITDA evolution Robust performance for the portfolio 2 1 +16.4% +3.5% 2 1 USD MILLION 3 Q3 2017 RESULTS 1 Exceptional items in Q3 2016 consists of costs primarily related to the performance transformation programme 2 Exceptional items in Q3 2017 consists of a net benefit of USD 49 million, resultin
Slide 13: Russia: continued improvements in mobile business
Russia: continued improvements in mobile business TOTAL REVENUE (RUB BILLION) MOBILE CUSTOMERS (MILLION) Mobile service revenue increased by 4.2% YoY, mainly driven by 13.8% mobile data revenue growth Mobile ARPU grew by 3.2% YoY Fixed-line service revenue decreased by 11.7% YoY, due to negative FOR
Slide 14: Italy: aggressive competition weighs on margins, synergies on track
Italy: aggressive competition weighs on margins, synergies on track TOTAL REVENUE (EUR MILLION) -6.4% YoY MOBILE CUSTOMERS (MILLION) 1 Q3 2017 EBITDA negatively impacted by integration costs of ~EUR 60m 2 CPE = Customer Premises Equipment 3 Calculated as Net Debt / LTM Q3 EBITDA before ~EUR 260m int
Slide 15: Wind Tre refinancing successfully completed
Wind Tre refinancing successfully completed Major milestone for Wind Tre has been completed: optimizing the capital structure, reducing annual interest costs and enhancing maturities Wind Tre completed the refinancing of its external debt: On 3 November 2017, Wind Tre issued ~EUR 7.3bn equivalent of
Slide 16: Progress on Wind Tre synergies
Progress on Wind Tre synergies ~EUR 270m annual interest savings from refinancing are incremental to opex and capex synergies, accelerating cash flow generation and deleveraging Opex synergies realized year to date at Q3 2017: EUR 98m Opex and capex synergy target confirmed: EUR 700m annualized run-
Slide 17: Pakistan: strong growth and margin expansion
Pakistan: strong growth and margin expansion 1 Q3 2016 EBITDA negatively impacted by performance transformation costs of PKR 0.7 billion. Q3 2017 EBITDA negatively impacted by performance transformation costs of PKR 0.7 billion TOTAL REVENUE (PKR BILLION) MOBILE CUSTOMERS (MILLION) +6.9% YoY +4.1% Y
Slide 18: Sale of Pakistan tower business
EV = USD 940m1 Deodar to be transferred on a debt-and-cash free basis Cash proceeds at/after closing: ~USD 760m2 Deferred component (vendor loan note): ~USD 180m3 USE OF PROCEEDS Funding of recently awarded spectrum in Pakistan Repayment of a proportion of Jazz’s debt Remaining amount will be distri
Slide 19: Algeria: regulatory environment improved, aggressive competition
Algeria: regulatory environment improved, aggressive competition 1 Q3 2016 EBITDA negatively impacted by performance transformation costs of DZD 1.4bn. Q3 2017 EBITDA negatively impacted by performance transformation costs of DZD 47m 2 Company estimate on current promotions TOTAL REVENUE (DZD BILLIO
Slide 20: Bangladesh: market pressure impacting revenue and EBITDA
Bangladesh: market pressure impacting revenue and EBITDA 1 Q3 2016 EBITDA negatively impacted by performance transformation and SIM re-verification costs of BDT 0.1bn. Q3 2017 negatively impacted by performance transformation costs of BDT 0.1bn TOTAL REVENUE (BDT BILLION) MOBILE CUSTOMERS (MILLION)
Slide 21: Ukraine: sustained robust performance
Ukraine: sustained robust performance 1 Q3 2017 EBITDA negatively impacted by UAH 6m related to performance transformation costs TOTAL REVENUE (UAH BILLION) EBITDA AND EBITDA MARGIN (UAH BILLION AND %) MOBILE CUSTOMERS (MILLION) CAPEX EXCL. LICENSES AND LTM CAPEX/REVENUE (UAH BILLION AND %) +10.0% Y
Slide 22: Uzbekistan: continued organic growth and currency liberalization
Uzbekistan: continued organic growth and currency liberalization TOTAL REVENUE (UZS BILLION) MOBILE CUSTOMERS (MILLION) +24.4% YoY -0.1% YoY +10.3% YoY -57.8% YoY 576 502 625 EBITDA AND EBITDA MARGIN (UZS BILLION AND %) CAPEX EXCL. LICENSES AND LTM CAPEX/REVENUE (UZS BILLION AND %) Revenue grew 24.4
Slide 23: Uzbek som liberalization
Uzbek som liberalization After 4 September 2017 The Central Bank changed the official exchange rate from 4,210 UZS/USD to 8,100 USD/UZS, bringing the official rate in line with the market rate; since then the currency has slightly strengthened All telecom tariffs were fixed in local currency at the
Slide 24: Q3 2017 income statement
Q3 2017 income statement 3Q17 3Q16 Reported YoY Organic1 YoY Revenue 2,456 2,361 4.0% 3.2% Service revenue 2,359 2,276 3.6% 3.0% EBITDA 1,042 896 16.4% 16.7% Depreciation & amortization (481) (490) (1.7%) EBIT 561 406 38.1% Net financial income and expenses (202) (211) (3.7%) Net FOREX and other gai
Slide 25: Q3 2017 net debt evolution
Q3 2017 net debt evolution 1 Exceptional items in Q3 2017 consists of a net benefit of USD 49 million, resulting from exceptional income of USD 106 million from a one-off adjustment to a vendor agreement, offset by costs of USD 57 million related to the performance transformation costs and other leg
Slide 26: Robust underlying equity free cash flow evolution
Robust underlying equity free cash flow1 evolution 1 Underlying equity free cash flow 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 29.5m in Q2 2017, M&A transa
Slide 27: 2017 guidance confirmed
2017 guidance confirmed 1FY 2017 targets after Uzbekistan currency regime adjustment are 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
Slide 28: Q3 2017 results agenda
Q3 2017 results agenda FINANCIAL AND BUSINESS HIGHLIGHTS Group results highlights Strategy execution Recent management changes Jean-Yves Charlier, CEO Andrew Davies, CFO FINANCIAL RESULTS AND CORPORATE FINANCE UPDATE Group results Country results, including: Wind Tre refinancing Sale of Pakistan tow
Slide 29: Appendix
VEON APPENDIX
Slide 30: Pakistan towers sale - structure and key terms
Pakistan towers sale - structure and key terms Start of a long-term partnership with a highly experienced counterparty 1 Tower operating company owned by edotco Group Sdn. bhd. (edotco) and Dawood Hercules Corporation (Dawood) 2 Exchange rate of USD/PKR: 105 3 Structure after completion of the trans
Slide 31: Uzbekistan currency
Uzbekistan currency 9M16 Average rate USD/UZS 2,908 Official exchange rate at 8,100 USD/UZS In 9M 2017 total organic revenue growth in Uzbekistan was 18.3%, as Beeline´s price plans were pegged to U.S. dollars until 4 September 2017 In September 2017 prices were fixed at rate of 4,210 Uzbek som per
Slide 32: Group debt maturity schedule
Group debt maturity schedule Group debt maturity schedule by currency1 AS AT 30 SEPTEMBER 2017, USD BILLION 2017 2018 2019 2020 2021 2022 >2022 USD 0.3 0.3 1.1 0.7 0.4 0.7 2.6 53% EUR 0.0 0.0 0.0 0.3 1.0 0.0 0.0 11% RUB 0.4 0.2 0.0 0.5 1.2 0.8 0.0 28% PKR 0.0 0.2 0.1 0.1 0.1 0.0 0.0 5% OTHER 0.1 0.1
Slide 33: Liquidity analysis
Liquidity analysis Group cash breakdown by currency 30 SEPTEMBER, 2017 Unused RCF headroom at the end of Q3 2017: Unused VF/CF headroom at the end of Q3 2017: Group cash: USD 2.78 billion Q3 2017 RESULTS VEON – syndicate USD 1.68 billion VEON – CDB RMB 0.27 billion (USD 0.04 billion) Algeria – syndi
Slide 34: Debt by entity
Q3 2017 RESULTS Debt by entity Outstanding debt (millions) Type of debt/lender AS AT 30 SEPTEMBER 2017, USD MILLION Entity Bonds Loans RCF Vendor Financing Other Total VEON Holdings B.V. 3,889 3,079 - 64 - 7,032 VEON Amsterdam B.V. - - - 522 - 522 PJSC VimpelCom 984 - - - 61 1,045 GTH Finance B.V. 1
Slide 35: Underlying equity free cash flow reconciliation table
Underlying equity free cash flow (excluding licenses) reconciliation table 3Q17 3Q16 9M17 9M16 Net cash from operating activities from continued operations 833 741 1,997 807 Exceptional items: One-off adjustment to a vendor agreement1 (66) - (66) - PT costs 55 71 121 191 Other 9 45 22 69 Settlement
Slide 36: Underlying EBITDA reconciliation table
3Q17 3Q16 9M17 9M16 Pro-forma Warid EBITDA 1,042 896 2,834 2,485 One-off vendor adjustment (106) - (106) - Performance Transformation costs of which: HQ and Other 49 40 104 165 Russia - 6 2 9 Emerging Markets 8 20 20 49 Other exceptional - - 6 EBITDA underlying 993 962 2,861 2,708 Underlying EBITDA
Slide 37: Forex assumptions
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 3Q17 3Q16 YoY 59.02 64.62 (8.7%) 109.9 109.77 0.1%
Slide 38: IFRS 9 & 15: expected impact for VEON
IFRS 15 The scope of IFRS 15 includes the timing of revenue recognition and costs of obtaining contracts with customers Contract costs are now required to be capitalized and amortized over the average customer life VEON will apply IFRS 15 for the first time in the 2018 financial statements, using th