31 slides from VEON Ltd. ORD's earnings presentation, Aug 4, 2016
Slide 1: Q2 2016 Results presentation
Q2 2016 Results presentation © VimpelCom Ltd 2016 Amsterdam – 4 August 2016 Jean-Yves Charlier – Chief Executive Officer Andrew Davies – Chief Financial Officer 1
Slide 2: 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. Forward-looking statements are not historical facts, and include statem
Slide 3: Highlights
Highlights H1 2016 results in line with expectations, with slightly weaker than expected service revenue trend in Q2 Q2 2016 operational performance particularly strong in Pakistan and Ukraine, weaker in Algeria Mobile data revenue in Q2 2016 grew 26% YoY © VimpelCom Ltd 2016 FY 2016 guidance confir
Slide 4: Financial highlights Q2 2016
Financial highlights Q2 2016 Service revenue EBITDA margin, underlying2 (USD billion) (%) • Group total revenue organically flat YoY • Service revenue declined 0.7% YoY organically, with a strong performance in Pakistan and 2.1 42.3 Ukraine, offset by Algeria weakness ► Excluding Algeria +1.5% YoY ©
Slide 5: Progress on WIND/3 Italia merger
Progress on WIND/3 Italia merger August 2015 July 2016 September 2016 onward © VimpelCom Ltd 2016 • Agreed WIND/3 Italia merger • Commitments formally submitted • EC to make its decision by conditional on regulatory to EC: 8 September ► Sale of spectrum approvals to create #1 mobile • Subject to EC
Slide 6: Pakistan: completion of Mobilink and Warid transaction
Pakistan: completion of Mobilink and Warid transaction Pakistan - among the fastest growing telecom markets Transaction • Strengthening our leadership in Pakistan with 37% customer market share Population of ~200 million people • Largest combined footprint and customer base of 50 million • Leading t
Slide 7: Overhauling digital IT infrastructure
Overhauling digital IT infrastructure 7-year renewable, USD 1 billion investment with Ericsson for Business Support Systems Primary foundation of globalization, simplification and digitalization for the Group… Globalizing the Becoming agile Enabling the digital organization leader © VimpelCom Ltd 20
Slide 8: Financial highlights Q2 2016 – YoY trends
Financial highlights Q2 2016 – YoY trends Total revenue and service revenue YoY organic1 development Underlying2 EBITDA margin development +0.8 p.p. YoY +1.2 p.p. organic YoY Total revenue Service revenue 41.5% 42.3% LTM of 40.8% LTM of 40.6% 0.1% © VimpelCom Ltd 2016 -0.9% -0.7% -0.7% 2Q 15/14 2Q 1
Slide 9: FOREX movements in VimpelCom's footprint
FOREX movements in VimpelCom’s footprint VIP Coin1 vs USD 100 98 94 © VimpelCom Ltd 2016 82 76 73 70 66 66 64 66 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 July 2016 9 1 VimpelCom Currency weightings calculated from the sum of the individual countries’ relative contribution to total countries
Slide 10: Q2 2016 service revenue evolution
Q2 2016 service revenue evolution USD million -16.9 % (109) 88 (14) 18 (408) Reported service revenue declining … 2,515 2,497 2,089 © VimpelCom Ltd 2016 Service revenue Voice Data and MFS Interconnect Other Organic service FOREX Service revenue 2Q15 and roaming revenue 2Q16 2Q16 -0.7 % (25) (14) 16
Slide 11: Q2 2016 EBITDA evolution
Q2 2016 EBITDA evolution USD million -25.5% (3) (17) 96 (48) (186) (116) 1,069 1,066 911 reported EBITDA declining 795 © VimpelCom Ltd 2016 EBITDA Exceptional Underlying EBITDA Service revenue Performance Re-investment in Forex Underlying EBITDA Exceptional EBITDA 2Q15 items 1 2Q15 transformation mo
Slide 12: Q2 2016 Income statement
Q2 2016 Income statement USD million 2Q16 2Q15 YoY Revenue 2,156 2,570 (16%) EBITDA reported 795 1,069 (26%) Currency headwind impact of USD 178 million and exceptional costs of USD 116 million in Q2 2016 D&A and other (512) (538) (5%) Local currencies depreciation and lower impairment charges: USD
Slide 13: H1 2016 Net income from continued operations
H1 2016 Net income from continued operations USD million +35 (15) 50 (157) 127 © VimpelCom Ltd 2016 (12) 42 42 262 (264) 227 186 (2) Net Income from Impairment and Net Income EBITDA Depreciation and Net financial Tax Net Forex Impact JV and associates Net Income Impairments & Net Income from Net Inc
Slide 14: H1 2016 net cash flow from operating activities
H1 2016 net cash flow from operating activities USD million +1.3% -11.7% (224) © VimpelCom Ltd 2016 375 (929) (301) 42 1,316 1,353 21 1,371 105 1,129 997 442 37 Net cash from Exceptionals 1 Underlying Net Discontinued Underlyingnet Underlying net EBITDA Interest & Tax Working capital & Underlying ne
Slide 15: Q2 2016 net debt evolution
Q2 2016 net debt evolution USD million 302 116 149 (911) 276 © VimpelCom Ltd 2016 98 6,575 6,407 138 6,157 Net debt EBITDA Net Interest Taxes CAPEX Change in WC Net Debt Exceptionals Forex and Net debt 31 March Underlying before in 2Q16 2 other 30 June 2016 exceptionals 2016 and Forex Net debt/ 1.7x
Slide 16: Russia: challenging environment, increasing competition
Russia: challenging environment, increasing competition LCCY BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers • Price competition increasing (million) -2.0 % YoY +0.3% YoY • Total service revenue decreased due to declining fixed-line and mobile service revenue affected 11.2 10.9 10.
Slide 17: Algeria: increased pressure on results
Algeria: increased pressure on results DZD BILLION, UNLESS STATED OTHERWISE Mobile service revenue Mobile customers • Service revenue decreased YoY, due to: (million) ► High churn of customers over the last year -15.1% YoY -4.4% YoY ► ARPU decrease as a result of high-value customers churn and shift
Slide 18: Algeria: focus on customer base stabilization
Algeria: focus on customer base stabilization Revenue Customers ARPU -15% -4% -12% • Distribution challenges: commission • High-value customer churn on the © VimpelCom Ltd 2016 optimization with negative effect on sales, back of the gap in 3G and better on-net • Legacy under- Issues partially correc
Slide 19: Pakistan: strengthening leadership position
Pakistan: strengthening leadership position PKR BILLION, UNLESS STATED OTHERWISE Mobile service revenue Mobile customers • Double digit revenue growth supported by all (million) revenue streams, gaining revenue market share +13.1% YoY +17.0% YoY • Strong data revenue growth at 55% YoY • MFS revenue
Slide 20: Bangladesh: EBITDA margin expansion
Bangladesh: EBITDA margin expansion LCCY BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers • Service revenue increased 2.9% YoY with data (million) revenue growth at 60% YoY +2.9% YoY -2.8% YoY • SIM re-verification successfully completed in July: ► 93% customers verified, almost 100
Slide 21: Ukraine: continued robust results
Ukraine: continued robust results UAH BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers • Clear market leader in challenging environment (million) +10.7% YoY -2.4% YoY • Service revenue increased 10.7% YoY, with mobile data revenue growing at 79% YoY 0.3 0.3 0.2 • Strong EBITDA margi
Slide 22: Uzbekistan: strong revenue growth
Uzbekistan: strong revenue growth UZS BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers • Service revenue increased 8.3% YoY, with +8.3% YoY (million) mobile data revenue growing at 10% YoY, -9.3% YoY notwithstanding the change in the market 442 468 479 structure from 2 to 4 players
Slide 23: Italy: improving quarter-on-quarter trend
Italy: improving quarter-on-quarter trend EUR MILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers • Total Revenue and EBITDA back to growth (million) (+0.9%/+0.5% YoY) -1.9% YoY -2.5% YoY • Double digit growth in mobile data revenue 277.0 263.0 264.0 (+13% YoY) 21.4 20.9 • Fixed direct
Slide 24: FY 2016 guidance confirmed
FY 2016 guidance confirmed - lower end of range for service revenue and underlying EBITDA margin, while capex/revenue is trending towards 17% Targets FY 2016 H1 2016 Flat to low single digit Service Revenue1 growth YoY +0.8% YoY © VimpelCom Ltd 2016 EBITDA underlying margin1 Flat to +1 p.p. YoY Orga
Slide 25: Appendix
© VimpelCom Ltd 2016 25 Appendix
Slide 26: Exceptional item summary
Exceptional item summary 2Q16 2Q15 1H16 1H15 USD mln, unaudited EBITDA 795 1,069 1,553 2,006 Performance Transformation costs, of which 74 - 118 - © VimpelCom Ltd 2016 HQ and Other 55 90 Russia 3 3 Emerging Markets 16 24 Other exceptional items, of which 42 (3) 39 5 In other and HQ, mainly due to pr
Slide 27: Group debt maturity schedule
Group debt maturity schedule As at 30 June 2016, in USD billion Group debt maturity schedule 2.7 Russia GTH HQ 1.7 1.7 1.3 © VimpelCom Ltd 2016 1.2 0.6 0.7 0.7 2016 2017 2018 2019 2020 2021 2022 >2022 Group debt maturity schedule by currency1 2016 2017 2018 2019 2020 2021 2022 >2022 USD 0.1 1.5 0.6
Slide 28: Debt by entity
Debt by entity As at 30 June 2016, USD million Outstanding debt (millions) Type of debt/lender Vendor Entity Bonds Loans RCF Other Total Financing VimpelCom Holdings B.V. 3,369 - - - - 3,369 VimpelCom Amsterdam B.V. - 1,000 - 664 - 1,664 © VimpelCom Ltd 2016 PJSC VimpelCom 1,773 1,187 - 95 42 3,097
Slide 29: Liquidity analysis
Liquidity analysis Group Cash breakdown by currency (USD 4.0bn) Unused RCF headroom at the end Q2 2016: (30 June 2016) VimpelCom - syndicate USD 1.8 billion PJSC VimpelCom - Sberbank RUB 15 billion (USD 0.2 billion) © VimpelCom Ltd 2016 42% Unused VF/CF headroom at the end Q2 2016: VimpelCom - CDB R
Slide 30: Net debt/EBITDA
Net debt/EBITDA Net debt / EBITDA1 Net debt / EBITDA1 (31 March 2016) (30 June 2016) 3.1 3.2 © VimpelCom Ltd 2016 1.7 1.8 Group Including Italy Group Including Italy 30 1 Underlying LTM EBITDA
Slide 31: Rates of functional currencies to USD
Rates of functional currencies to USD Average rates Average rates Closing rates FY16 2Q16 2Q15 YoY 1H16 1H15 YoY 2Q16 1Q16 Targets Russian Ruble 65.89 52.65 25.1% 70.00 70.26 57.40 22.4% 64.26 67.61 Euro 0.89 0.90 -2.0% 0.88 0.90 0.90 0.0% 0.90 0.88 Algerian Dinar 109.54 98.27 11.5% 100.00 108.68 95