Eltel Ab · OMXSTO:ELTEL
Eltel Ab — Q3 2016 Earnings Presentation
32 slides from Eltel Ab's earnings presentation, November 2016
Slide 1: Eltel AB Q3 2016 road show presentation
Eltel AB Q3 2016 road show presentation November 2016 © Eltel Shaping Future Infranets 1
Slide 2: Today's presenters
Today’s presenters Håkan Kirstein Ingela Ulfves CEO IR and Communications © Eltel Shaping Future Infranets 2
Slide 3: Eltel and the Infranet market
Eltel and the Infranet market Q3 business performance Q3 financials Current challenges and actions © Eltel Shaping Future Infranets 3
Slide 4: Eltel in brief
Eltel in brief European market leader Operations in 10 countries Net sales EUR 1.25 billion Industry with long term 9,600 employees structural growth Scalable platform for growth and M&A Solid customer base and recurring revenues Good financial profile with strong cash generation © Eltel Shaping Fut
Slide 5: Our services – in three business segments
5 Our services – in three business segments Power Communication Transport & Security FY2015 45% 43% 12% Net Sales EURm 568 EURm 544 EURm 152 EURm 1 255 Power Power Fixed Mobile Aviation & Rail & Road Transmission Distribution Communication Communication Security © Eltel Shaping Future Infranets 5
Slide 6: Flow Business
Contract types Contract description Typical contract type and size1) Majority of revenue (>70%) is flow business1) Contract type Typical work order - Comprised of maintenance and upgrade work Project delivery are generally recurring tender-based projects Multi-year to stable and large government
Slide 7: Solid market potential
Solid market potential Core markets New markets Market size: EUR 8.1 billion* 4% 5% Market size: EUR 13.3 billion* Annual growth 13-17E: +5% Annual growth 13-17E: +2% Africa Market size: EUR 3.9 billion* Annual growth13-17E: +9% 91% Eltel sales per market *PWC study, 2014 © Eltel Shaping Future Infr
Slide 8: The Eltel Way – a service model that makes difference
The Eltel Way – a service model that makes difference Customers (approx. 8 000) Team (approx. 400) Districts (92) Empowerment Specialisation Proactivity Area Business Units (37) Culture & Operational Structure Reporting People Efficiency Business Units (6) Group Methods, Tools & Instructions © Eltel
Slide 9: Q3 business performance
Eltel and the Infranet market Q3 business performance Q3 financials Current challenges and actions © Eltel Shaping Future Infranets 9
Slide 10: Q3 2016 Highlights
Q3 2016 Highlights Strong net sales growth mainly driven by acquisitions Order backlog flat compared to level at beginning of 2016 EBITA significantly impacted by challenges mainly in the project business Performance in Power, especially certain electrification projects in Africa In Octobe
Slide 11: Q3 2016 Net sales
Q3 2016 Net sales Q3 net sales EUR 356.2 million Q3 2016: EUR 356.2 m (310.8) +16.2% FX adj. - +16.2% FX adjusted EURm +4.0% organic growth - Driven by acquisitions (Eltel Sönnico, 450 Vete AS, U-SERV GmbH) 400 +4.0% organic growth driven by the 350 Power segment 300 Committed order backlog 25
Slide 12: Q3 2016 Operative EBITA
Q3 2016 Operative EBITA Q3 2016: Q3 2016 Operative EBITA EUR 7.8 m (22.5) - EUR 7.8 million (22.5) including 2.2% margin (7.2) EURm provisions of EUR 5.7 million 30.0 10.0% - 2.2% of net sales (7.2) 9.0% - Challenges within the Power 25.0 segment, majority related to power 8.0% transmission in cer
Slide 13: Power
Power - Mixed geographical market conditions Net sales: • Higher volumes in cabling projects and power transmission projects in the Nordics • Small positive impact from power distribution acquisitions in Germany and transmission in Poland • Growth was offset by lower net sales in certain electrifica
Slide 14: Communication
Communication - Growth driven by Eltel Sønnico and fibre Net sales: • Strong growth mainly due to the consolidation of the Norwegian JV Eltel Sønnico AS in Sep 2015 Operative EBITA • Positive impact from fixed communication business in Norway • Negative impact from a weaker business mix in the rest
Slide 15: Transport & Security
Transport & Security - Hit by isolated performance issues Net sales • The modest development was mainly attributable to the loss of the Rakel contract and lower volumes in the rail and road business in Norway • This was partly offset by a positive contribution from the acquisitions of Vete Signaltje
Slide 16: Q3 financials
Eltel and the Infranet market Q3 business performance Q3 financials Current challenges, actions and outlook © Eltel Shaping Future Infranets 16
Slide 17: Financial KPIs and P&L
Financial KPIs and P&L Jul-Sep Jul-Sep Jan-Sep Jan-Sep EUR million FY 2015 R12 2016 2015 2016 2015 Net sales 356.2 310.8 1,012.7 857.6 1,254.9 1,410.0 EBITA significantly Operative EBITA 7.8 22.5 16.7 41.7 62.2 37.2 impacted by challenges mainly in Operating result (EBIT) 4.1 19.6 5.9 30.1 46.6 22.4
Slide 18: Guidance given on October 2016
Guidance given on 14 October 2016 Challenges are expected to continue in 2016 and to impact Q4 2016 net sales and EBITA Management estimates Group Q4 2016 EBITA expected to be EUR 10-15 million Group full-year 2016 EBITA expected to be EUR 27-32 million For 2017 Net sales for power trans
Slide 19: Current challenges and actions
Eltel and the Infranet market Q3 business performance Q3 financials Current challenges and actions © Eltel Shaping Future Infranets 19
Slide 20: Operating environment
Operating environment Long term opportunities Short term challenges Transmission: increasing investments Transmission: soft order intake LTM, in Germany and UK intense competition in Nordics, postponed investments in Poland, Power Distribution: further smart meter roll- outs in Europe Germany
Slide 21: Despite recent challenges, solid track record of projects
Despite recent challenges, solid track record of projects - on average 2% margin improvement from order to finalisation Order margin compared to realised margin 2011-2016 5.0% 3.0% 1.0% -1.0% -3.0% -5.0% 2011 2016 Rolling ten latest projects > EUR 10 million 75% of the projects have improved mar
Slide 22: Challenges in project business during 2016
Challenges in project business during 2016 Norway – rail projects Bad project execution in two rail projects in Norway from too fast ramp-up as Eltel entered Norway rail business in 2013-2014 Delivery inspections during Q2 in one of the projects showed unsatisfactory technical work quality A d
Slide 23: Operational project review ongoing - action plan during November
Operational project review ongoing - action plan during November Actions taken – specific projects Focus areas in ongoing review Several managerial changes made Full review of all projects - analysis ongoing during the past months Action plan ready in November Project management further As
Slide 24: Underlying drivers for organic growth
Underlying drivers for organic growth POWER COMMUNICATION TRANSPORT & SECURITY Ageing infrastructure Global connections Increased transport needs Smart networks Mobile evolution Increased security needs Sustainability Data traffic volumes Integrated EU-market © Eltel Shaping Future
Slide 25: Appendix
Appendix For further information: Ingela Ulfves VP – IR and Group Communications ingela.ulfves@eltelnetworks.com Tel: +358 40 311 3009 © Eltel Shaping Future Infranets 25
Slide 26: Market leader in fibre roll-outs
Market leader in fibre roll-outs Eltel has more than 10 years of experience from large scale roll-out and field services within fibre Market leading position with ~10 million homes passed in Northern Europe Projects ranging in size from small pilots to ~200,000 homes passed Eltel ‘Fibre Force’
Slide 27: Large share of the market still to explore
Large share of the market still to explore Fibre penetration in Europe 2014 100.0% 90.0% • Mobile data increases dramatically 80.0% • 5G will demand 20x more fibre than today • Europe built out next 15-20 years 70.0% • Eltel’s wanted position in all our countries #1 60.0% 50.0% 40.0% 30.0% 20.0% 10.
Slide 28: Eltel's Fibre Force – further specialisation
Eltel’s Fibre ForceTM – further specialisation ‘Fibre Force’ - specialisation of Eltel’s fibre organisation within Fixed Communication Development and implementation of unified process for massive fibre roll-outs Methods and tools for the implementation of best practise technologies for maximi
Slide 29: Eltel M&A and business development
Eltel M&A and business development Strong presence Present Not Present Actions 2015 Nordics Actions 2016 Sweden Finland Norway Denmark Baltics Poland UK Germany Fixed BT/Carillion Comm. EltelSønnico Huawei/EE/ Mobile EltelSønnico Vodafone Comm. Power National Grid Edi.Son Transmission Statnett Power
Slide 30: Eltel's strategic agenda
Eltel’s strategic agenda Vision: Be the European Leader in Infranet Technical Services Medium- to long-term financial targets 1 2 3 Further Improve Drive Organic Growth Pursue Selective M&A Operating Performance © Eltel Shaping Future Infranets 30
Slide 31: Financial targets
Financial targets Financial targets, mid- to long-term (3-5 years) Average annual sales growth of around 10%, with split into Sales growth 5% organic and 5% growth from M&A EBITA-margin EBITA-margin of approximately 6% Cash conversion An average cash conversion of 95-100% of EBITA Capital structure
Slide 32: Financial comments and assessments
Financial comments and assessments Asset-light business. Historical annual net capex of slightly more than 1% of net sales. Capex In Q3 2016 the net capex was EUR 2.7 million, 0.8% of net sales. Goodwill of EUR 475.8 million at end of Q3 2016, mainly related to 3i acquisition of Eltel in Goodwill 20