VEON Ltd. · NASDAQ:VEON
VEON — VimpelCom — Q2 2016 Earnings Presentation
31 slides from VEON's earnings presentation, Aug 4, 2016
Slide 1: Q2 2016 Results presentation
Q2 2016 Results presentation Amsterdam – 4 August 2016 Jean-Yves Charlier – Chief Executive Officer Andrew Davies – Chief Financial Officer
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 and Ericsson entered into a USD 1
Slide 4: Financial highlights Q2 2016
Financial highlights Q2 2016 1 Revenue and EBITDA organic growth are non-GAAP financial measures that exclude the effect of foreign currency translation and certain items such as liquidations and disposals 2 EBITDA underlying excludes: in Q2 2015, USD 3 million related to both to SIM re-verification
Slide 5: Progress on WIND/3 Italia merger
Progress on WIND/3 Italia merger August 2015 Agreed WIND/3 Italia merger conditional on regulatory approvals to create #1 mobile player Significant synergies expected with a material value accretion July 2016 Commitments formally submitted to EC: Sale of spectrum Sale of sites/network sharing Nation
Slide 6: Pakistan: completion of Mobilink and Warid transaction
Pakistan: completion of Mobilink and Warid transaction Strengthening our leadership in Pakistan with 37% customer market share Largest combined footprint and customer base of 50 million Leading telecommunication provider of 2G, 3G and 4G/LTE services with higher quality coverage and the best-in-clas
Slide 7: Overhauling digital IT infrastructure
Overhauling digital IT infrastructure 7-year renewable, USD 1 billion investment with Ericsson for Business Support Systems Globalizing the organization Profound change in the overall operating model Digitize and globalize business processes Replace legacy fragmentation and duplication of heavy CRM
Slide 8: Financial highlights Q2 2016 – YoY trends
Financial highlights Q2 2016 – YoY trends 1 Organic revenue change is a non-GAAP financial measure that excludes the effect of foreign currency translation and certain items such as liquidations and disposals 2 EBITDA underlying exclude in Q2 2015 USD 3 million related to both to SIM re-verification
Slide 9: FOREX movements in VimpelCom's footprint
FOREX movements in VimpelCom’s footprint 1 VimpelCom Currency weightings calculated from the sum of the individual countries’ relative contribution to total countries revenue (= Total Group Revenue - Eliminations - HQ)
Slide 10: Q2 2016 service revenue evolution
Q2 2016 service revenue evolution -16.9 % -0.7 % USD million Reported service revenue declining … … yet organically nearly stable 1 Other consists of operations in Kazakhstan, Kyrgyzstan, Georgia, Armenia, Tajikistan and intercompany eliminations PAK 32 USD mln BAN 4 USD mln ALG (50) USD mln 1
Slide 11: Q2 2016 EBITDA evolution
Q2 2016 EBITDA evolution -25.5% +3.0% USD million 2 1 Q2 2015 exceptional items refers to USD 3 million related to both to SIM re-verification costs and a positive one-off in utility costs in Pakistan 2 Exceptional items in Q2 2016 totaled USD 116 million of which Performance Transformation costs of
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%) D&A and other (512) (538) (5%) EBIT 283 530 (47%) Net financial expenses (187) (190) (2%) FOREX and Other 0 (11) (97%) Profit before tax 96 329 (71%) Tax (135) (55) 144% Profit from continuin
Slide 13: H1 2016 Net income from continued operations
H1 2016 Net income from continued operations USD million +35 1 In H1 2015, exceptional items include USD 5 million above EBITDA, USD 112 million in impairments and USD (75) million reduction in taxes, as a result of legal entity restructurings 2 On organic basis 3 In H1 2016, exceptional items inclu
Slide 14: H1 2016 net cash flow from operating activities
H1 2016 net cash flow from operating activities USD million -11.7% +1.3% 1 Exceptional in H1 2015 consists of payments related to Algeria transaction in total amount of USD 1,312 million and USD 5 million payments related to SIM re-verification in Pakistan 2 Exceptional items in H1 2016 consist of p
Slide 15: Q2 2016 net debt evolution
Q2 2016 net debt evolution 1 Underlying LTM EBITDA, which excludes: in 2015 exceptional items totaled USD 1,051 million and mainly consisted of provisions for investigations (related to SEC/DOJ/OM) of USD 900 million and transformation costs of USD 138 million; in Q1 2016, LTM underlying EBITDA excl
Slide 16: Russia: challenging environment, increasing competition
Mobile customers (million) Russia: challenging environment, increasing competition Price competition increasing Total service revenue decreased due to declining fixed-line and mobile service revenue affected by challenging macro environment and increased competition Mobile data revenue grew 20% YoY
Slide 17: Algeria: increased pressure on results
Algeria: increased pressure on results Service revenue decreased YoY, due to: High churn of customers over the last year ARPU decrease as a result of high-value customers churn and shift in Ramadan Continued strong data revenue growth +53% YoY EBITDA declined YoY as a result of revenue decrease EBIT
Slide 18: Algeria: focus on customer base stabilization
Algeria: focus on customer base stabilization Revenue -15% Customers -4% ARPU -12% Issues Actions Distribution challenges: commission optimization with negative effect on sales, partially corrected Sub-optimal commercial decisions: change in billing increment and forced migration in Q1 2016; billing
Slide 19: Pakistan: strengthening leadership position
Pakistan: strengthening leadership position Double digit revenue growth supported by all revenue streams, gaining revenue market share Strong data revenue growth at 55% YoY MFS revenue represents 3.5% of service revenue, +56% YoY Underlying EBITDA margin, excluding Performance Transformation costs,
Slide 20: Bangladesh: EBITDA margin expansion
Bangladesh: EBITDA margin expansion Service revenue increased 2.9% YoY with data revenue growth at 60% YoY SIM re-verification successfully completed in July: 93% customers verified, almost 100% revenue secured Excluding the effect of shift in Ramadan and additional supplementary duty, service reven
Slide 21: Ukraine: continued robust results
Ukraine: continued robust results UAH BILLION, UNLESS STATED OTHERWISE Mobile Fixed-line +10.7% YoY -2.4% YoY +34.0% YoY -38.2% YoY EBITDA and EBITDA margin Capex excl. licenses and LTM capex/revenue Mobile customers (million) Service revenue Clear market leader in challenging environment Service re
Slide 22: Uzbekistan: strong revenue growth
Uzbekistan: strong revenue growth Service revenue increased 8.3% YoY, with mobile data revenue growing at 10% YoY, notwithstanding the change in the market structure from 2 to 4 players Robust EBITDA margin at 57%, although declined mainly due to the increased customer tax, impacting EBITDA margin n
Slide 23: Italy: improving quarter-on-quarter trend
Italy: improving quarter-on-quarter trend Total Revenue and EBITDA back to growth (+0.9%/+0.5% YoY) Double digit growth in mobile data revenue (+13% YoY) Fixed direct customers base +3.7% YoY, of which broadband segment +5.1% YoY 4G/LTE population coverage approximately 62%, from 56% at year-end 201
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% Service Revenue1 EBITDA underlying margin1 Capex / revenue1 Leverage2 1 All targets, except leverage are calculated at constant currency. Targets for 2016 ass
Slide 25: Appendix
Appendix
Slide 26: Exceptional item summary
Exceptional item summary USD mln, unaudited 2Q16 2Q15 1H16 1H15 EBITDA 795 1,069 1,553 2,006 Performance Transformation costs, of which 74 - 118 - 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 provisions for indirect
Slide 27: Group debt maturity schedule
Group debt maturity schedule Group debt maturity schedule by currency1 As at 30 June 2016, in USD billion Group debt maturity schedule 1 After effect of cross currency swaps 2016 2017 2018 2019 2020 2021 2022 >2022 USD 0.1 1.5 0.6 1.0 0.6 0.7 1.3 1.7 71% RUB 0.3 1.0 0.8 0.0 0.0 0.0 0.0 0.0 20% Other
Slide 28: Debt by entity
Debt by entity As at 30 June 2016, USD million Outstanding debt (millions) Entity Bonds Loans RCF Other Total VimpelCom Holdings B.V. 3,369 - - - - 3,369 VimpelCom Amsterdam B.V. - 1,000 - 664 - 1,664 PJSC VimpelCom 1,773 1,187 - 95 42 3,097 GTH Finance B.V. 1,200 - - - - 1,200 Pakistan Mobile Commu
Slide 29: Liquidity analysis
Liquidity analysis Group Cash breakdown by currency (USD 4.0bn) (30 June 2016) Cash position largely held in USD Unused RCF headroom at the end Q2 2016: VimpelCom - syndicate USD 1.8 billion PJSC VimpelCom - Sberbank RUB 15 billion (USD 0.2 billion) Unused VF/CF headroom at the end Q2 2016: VimpelCo
Slide 30: Net debt/EBITDA
Net debt/EBITDA Net debt / EBITDA1 (30 June 2016) Net debt / EBITDA1 (31 March 2016) 1 Underlying LTM EBITDA
Slide 31: Rates of functional currencies to USD
Rates of functional currencies to USD Average rates Average rates Closing rates 2Q16 2Q15 YoY FY16 Targets 1H16 1H15 YoY 2Q16 1Q16 QoQ Russian Ruble 65.888300000000001 52.654299999999999 0.25133749760228513 70 70.258300000000006 57.396799999999999 0.22408043654001628 64.257499999999993 67.6076000000