Royal KPN NV · EURONEXT:KPN
Royal KPN NV — KPN — Q2 2021 Earnings Presentation
36 slides from Royal KPN NV's earnings presentation, Jul 27, 2021
Slide 1: Q2 & H1 2021 results
Q2 & H1 2021 results 27 July 2021 kpn. The network of the Netherlands
Slide 2: Safe harbor
Safe harbor Alternative performance measures and management estimates This financial report contains a number of alternative performance measures (non-GAAP figures) to provide readers with additional financial information that is regularly reviewed by management, such as EBITDA and Free Cash Flow (‘
Slide 3: Highlights Q2: strategic execution and delivering ahead of schedule
Highlights Q2: strategic execution and delivering ahead of schedule Mass-market service revenue growth delivered ahead of schedule Consumer Mobile service revenue growth, first time since Q1 2017 Consumer broadband +23k net adds, of which 22k related to Oxxio acquisition SME seeing sequential growth
Slide 4: Accelerate to grow supported by three key pillars
Accelerate to grow supported by three key pillars Three strategic pillars… …to support our ambition to 1. Leverage & expand superior networks • Covering the Netherlands through fiber • Low latency services via 5G and edge computing Connect the Netherlands to a sustainable future • Leading the Dutch
Slide 5: Expand Superior network
Expand Superior network
Slide 6: Expand superior network: on track to reach ~80% fiber coverage by 2026
Expand superior network: on track to reach ~80% fiber coverage by 2026 Passed the 3 million HP milestone Strong FttH activation rate Jointly covering ~80% of NL by end 2026 homes passed, k homes activated own rollout, k homes passed, % of households +106 +113 +56 KPN footprint ~80% +77 +112 +46 +73
Slide 7: Best mobile network and fastest 5G in the Netherlands
Best mobile network and fastest 5G in the Netherlands #1 Excellent 5G position Best mobile network on all counts Differentiated 5G services Ookla awards supporting base growth Best mobile network Leading 5G ecosystem and Highest download speed Leading in Fastest 5G Highest upload speed Security in t
Slide 8: Enhance Customer focus
Enhance Customer focus
Slide 9: B2C: Preferred digital partner for households
B2C: Preferred digital partner for households Serving as a platform for household value growth Achievements in H1 2021 Best digital access Continued SuperWiFi campaign & Convergence, fiber, WiFi & 5G attractive 1Gbps proposition fueling base growth Best digital experience Improved MijnKPN app as cor
Slide 10: B2C: Turning the corner in mobile service revenues
B2C: Turning the corner in mobile service revenues Key take-aways Service revenue trend (€ m) • Mobile service revenues returning to y-on-y growth (+1.3%) for first time since Q1 2017 463 466 466 4572 457 • Broadband net adds +23k, of which 22k related to Oxxio • Growth in Fixed-Mobile revenues (+3.
Slide 11: B2C: Strong performance fiber and mobile portfolio
B2C: Strong performance fiber and mobile portfolio Improving fiber household net adds (k) Customers willing to pay for quality (Q2 2021, €) Fiber service revenues offset copper decline (€ m) +11% 1 47 47 463 71 457 27 64 18 21 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Copper ARPA Fiber ARPA Fixed SR F
Slide 12: B2B: Clearly segmented customer focus
B2B: Clearly segmented customer focus Small & Medium Enterprises (SME) Large & Corporate Enterprises (LCE) Tailored Solutions Modular future-proof portfolio Modular future-proof portfolio Innovation with top customers Converged propositions Converged proposition Converged proposition KPN Sma
Slide 13: B2B: Revenue pressure largely driven by LCE and Tailored Solutions
B2B: Revenue pressure largely driven by LCE and Tailored Solutions Key take-aways Service revenue trend (€ m) • On track to stabilize SME service revenues supported by healthy base developments and effect of lapsing ISDN-2 decommissioning in Q3 422 414 428 411 402 • SME: growth in Broadband & Networ
Slide 14: B2B: On track to stabilize SME service revenues by end 2021
B2B: On track to stabilize SME service revenues by end 2021 Solid up and cross-sell opportunities in KPN EEN… …fueling SME service revenue stabilization by end 2021 (€ m) Customer journey KPN EEN migration 1 ARPU Cross-sell of Workspace or Security services 4 -3.1% 141 134 135 136 133 3 Cross-sell o
Slide 15: Wholesale: Sustainable growth from open access model
Wholesale: Sustainable growth from open access model Key take-aways Service revenue trend (€ m) • Wholesale revenues increased, mainly driven by Broadband • Added +16k broadband lines (corrected for -22k Oxxio) and 65 61 66 66 55 60 58 63 58 58 +23k postpaid customers 34 36 36 37 • Success of open w
Slide 16: ESG milestones and ambitions: aiming for net zero emissions by 2040
ESG milestones and ambitions: aiming for net zero emissions by 2040 Important milestones crossed… …and an ambitious agenda Carbon neutral >30% women in Carbon neutral for own operations senior management without offsets 2015 2023 2030 2011 2020 2025 2040 100% >30% gender ~100% Net zero CO₂e em
Slide 17: Deliver Financial ambitions
Deliver Financial ambitions
Slide 18: Financial performance: on track to reach full-year outlook
Financial performance: on track to reach full-year outlook Adjusted revenues Adj. net indirect opex savings Adjusted EBITDA AL Q2 adjusted revenues +0.2% y-on-y Q2 2021 H1 2021 Q2 2021 H1 2021 Q2 2021 H1 2021 • Driven by non-service revenues € 1,296m € 2,586m € 9m € 30m € 589m € 1,156m • Service rev
Slide 19: Adjusted revenue growth Wholesale and Other partly offset by B2B
Adjusted revenue growth Wholesale and Other partly offset by B2B Adjusted revenues (€ m) Δ y-on-y Consumer revenues flat as growth flat -4.7% +9.0% +0.2% in mobile service revenues was offset by Legacy services 1,292 0 11 1,296 13 Business revenue decline mostly driven by LCE and Tailored Solutions,
Slide 20: Mass-market service revenue growth delivered ahead of schedule
Mass-market service revenue growth delivered ahead of schedule Development mass-market service revenues (€ m) Growth driven by Wholesale and B2C Mobile (€ m) Δ y-on-y 937 943 946 928 942 Q2 2020 937 149 157 159 160 162 Wholesale 13 +8.9% 141 134 135 133 136 185 185 186 186 187 SME -4 -3.1% B2C Mobil
Slide 21: Adjusted EBITDA AL growth driven by higher revenues
Adjusted EBITDA AL growth driven by higher revenues Adjusted EBITDA AL (€ m) Δ y-on-y +0.2% +2.9% -1.4% -3.3% -0.4% -8.4% +0.6% Direct costs impacted by successful promotions and handset sales in Consumer 3 3 589 and increased traffic in Wholesale 585 3 0 3 -9 Personnel driven by ongoing digital tra
Slide 22: Making clear investment decisions: accelerating fiber
Making clear investment decisions: accelerating fiber Increasing fiber Capex (€ m, % of sales) Lower other Capex mainly driven by 625 24.2% rationalization and increased effectiveness in 572 21.8% • Copper infrastructure Fiber rollout 136 5.2% 218 8.4% • IT • Mobile access Other 436 16.6% Step up in
Slide 23: Strong underlying cash generation
Strong underlying cash generation Δ contribution to FCF y-on-y (€ m) Adj. EBITDA AL 1,156 -4 Free Cash Flow of € 301m, 17% higher y-on-y H1 2021 − More favorable working capital developments Capex -625 -53 − Lower cash interest paid − Lower cash restructuring Operational FCF 531 -57 Partly offset
Slide 24: Steadily improving Return on Capital
Steadily improving Return on Capital €m NOPLAT 200 177 179 Improving adjusted EBITDA AL ROCE Lower restructuring charges ROCE 1 10.3% 9.8% Q2 2019 Q2 2020 Q2 2021 9.0% Previous Q (€ bn) Capital employed 7.3 7.0 7.3 H1 2019 H1 2020 H1 2021 Increase due to spectrum licenses ~15% acquired in July
Slide 25: Glaspoort JV implications on P&L and balance sheet
Glaspoort JV implications on P&L and balance sheet P&L Balance sheet Consolidated figures (€ m) 2021 Consolidated figures (€ m) 2021 Income statement Q1 Q2 Balance sheet Q1 Q2 Revenues 1,290 2,136 Goodwill … 1,496 1,432 1 EBITDA 599 1,459 1 Other non-current assets Current assets 936 1,401 1,418 1,6
Slide 26: Robust liquidity position, committed to investment-grade credit profile
Robust liquidity position, committed to investment-grade credit profile 9.9x 11.0x 11.0x Robust liquidity… 9.3x 9.2x €m 1,250 2,045 2.3x 2.4x 2.3x 2.3x 2.2x 795 €m 6,154 6,376 6,197 5,835 5,221 5,996 5,248 5,584 5,332 5,201 Cash & short RCF Total liquidity term investments1 end Q2 2021 907 792 864 6
Slide 27: 2021 outlook and 2023 ambitions reiterated
2021 outlook and 2023 ambitions reiterated Achievements Outlook Ambitions H1 2021 FY 2021 FY 2023 Adjusted EBITDA AL € 1,156m ~€ 2,345m >€ 2,450m Capex € 625m € 1,200m € 1.1-1.2bn Free Cash Flow € 301m ~€ 765m >€ 870m € 4.5 cents € 13.6 cents Progressive dividend Regular DPS interim dividend 1 +4.6%
Slide 28: Disciplined financial framework aimed at long-term value creation
Disciplined financial framework aimed at long-term value creation Successful strategy Disciplined, value Progressive regular 13.6 execution creating reinvestment dividend 12.0 12.5 13.0 10.0 11.0 7.0 8.0 Capex: € 1.2bn +3-5% annually 1 ) Creating long-term • Fiber € 450-500m value for stakeholders •
Slide 29: Closing remarks: strategic execution and delivering ahead of schedule
Closing remarks: strategic execution and delivering ahead of schedule Mass-market service revenue growth delivered ahead of schedule Consumer Mobile service revenue growth, first time since Q1 2017 Consumer broadband +23k net adds, of which 22k related to Oxxio acquisition SME seeing sequential grow
Slide 30: Accelerate to grow
Accelerate to grow
Slide 31: Appendices
Appendices I Tax II Debt portfolio III Treatment of hybrid bonds IV Spectrum
Slide 32: I: Tax Q2 and H1 2021
I: Tax Q2 and H1 2021 P&L Cash flow P&L Cash flow Regions (€ m) Q2 2020 Q2 2021 Q2 2020 Q2 2021 H1 2020 H1 2021 H1 2020 H1 2021 The Netherlands -36 -235 - -14 -66 -275 - -24 Other - - - - - - - - Total reported tax -36 -235 - -14 -66 -275 - -24 Of which discontinued operations - - - - - - - - Report
Slide 33: II: Debt portfolio
II: Debt portfolio Nominal debt by type 1 Nominal debt by currency 1 Fixed vs. floating interest 1 Debt redemption profile (€ bn) 2 1.1 8% 1.0 14% 27% 15% 0.6 0.6 0.7 22% 0.5 0.4 0.5 0.5 7% 64% 0.3 70% 0.3 73% ’21 ’22 ’23 ’24 ’25 ’26 ’27 ’28 ’29 ’30 ’31 ’32 Eurobonds EUR Fixed Global bonds GBP1 Floa
Slide 34: III: Treatment of hybrid bonds
III: Treatment of hybrid bonds KPN & Credit rating agencies IFRS Rating agencies recognize hybrid bonds as EUR tranche is a perpetual instrument, accounted for as equity 50% equity Coupon payments treated as equity distribution (dividend), 50% debt hence not expensed through P&L, not included in F
Slide 35: IV: Spectrum in the Netherlands
IV: Spectrum in the Netherlands 700MHz VodZig KPN T-Mob 2 x 30 (Paired) 2 x 10 2 x 10 2 x 10 800MHz T-Mob VodZig KPN 2 x 30 (Paired) 2 x 10 2 x 10 2 x 10 900MHz VodZig KPN T-Mob 2 x 35 (Paired) 2 x 10 2 x 10 2 x 15 1.4GHz VodZig KPN T-Mob 1 x 40 (Unpaired) 3x5 3x5 2x5 1.8GHz KPN VodZig T-Mob 2 x 70
Slide 36: KPN Investor Relations
KPN Investor Relations ir.kpn.com