Royal Kpn Nv · EURONEXT:KPN
Royal Kpn Nv — Koninklijke KPN — Q1 2016 Earnings Presentation
40 slides from Royal Kpn Nv's earnings presentation, Apr 29, 2016
Slide 1: First Quarter 2016 Results
First Quarter 2016 Results 29 April 2016
Slide 2: Safe harbor
Safe harbor Non-GAAP measures and management estimates This financial report contains a number of non-GAAP figures, such as EBITDA and Free Cash Flow (‘FCF’). These non-GAAP figures should not be viewed as a substitute for KPN’s GAAP figures. KPN defines EBITDA as operating result before depreciatio
Slide 3: Contents
Contents 1 Highlights and operational performance Eelco Blok 2 Financial performance Jan Kees de Jager 3 Outlook and concluding remarks Eelco Blok 3
Slide 4: Highlights Q1 '16
Highlights Q1 ’16 Financial performance reflecting intrayear cost phasing Services & Innovation Operational Financial1 & Portfolio Focus on high value KPN Continued high value Adjusted revenues Q1 ’16: brand driving service base growth Consumer € 1,689m, -3.9% y-on-y revenue growth in Increa
Slide 5: Increasing penetration fixed-mobile in Consumer
Increasing penetration fixed-mobile in Consumer Continued growth Households in Postpaid customers in fixed-mobile bundles1 fixed-mobile bundles 31% 20% 35% 24% Q1 ’15 Q1 ’15 Q1 ’16 Q1 ’16 Fixed-mobile household Fixed-mobile postpaid development development 888 1,172 1,286 k 689 813 k 891 997 554 622
Slide 6: Solid performance in Consumer residential
Solid performance in Consumer residential Increasing share of wallet drives growing ARPU per household Continued Increasing Growing ARPU base growth share of wallet per household Broadband net adds Triple play as % of broadband customers +5.3% 46 43 € 40 € 40 k 34 € 39 33 € 38 € 38 22 54% Q1 ’15 IPT
Slide 7: Value focus in Consumer mobile
Value focus in Consumer mobile High value KPN brand driving strong service revenue growth Strong focus on growing Derisked postpaid high value KPN brand ARPU profile1 Postpaid net adds 80 € 26 € 26 € 27 80 € 25 € 25 k 70 59 36 ~83% ~82% ~82% ~83% ~85% Q1 ’15 Q2 ’15 Q3 ’15 Q4 ’15 Q1 ’16 Q1 ’15 Q2 ’15
Slide 8: Transformation of Business segment ongoing
Transformation of Business segment ongoing Growth in multi play and new services Business revenue growth drivers Challenging environment Q1 ’16 Q1 ’16 Total Mobile customer base adjusted % of total y-on-y adjusted growth revenues 1,787 1,790 1,792 k Business total -6.8% Single play -13% 24% wireless
Slide 9: Developing as best-in-class service provider
Developing as best-in-class service provider Dedicated programs to improve NPS in Business implemented NPS Consumer residential1 NPS Consumer mobile1 NPS Business1 10 10 4 3 -11 -11 +6 +7 Q1 ’15 Q1 ’16 Q1 ’15 Q1 ’16 Q1 ’15 Q1 ’16 1 Source: TNS NIPO. Consumer residential (all brands), Consumer mobile
Slide 10: Contents
Contents 1 Highlights and operational performance Eelco Blok 2 Financial performance Jan Kees de Jager 3 Outlook and concluding remarks Eelco Blok 10
Slide 11: Financial results reflecting intrayear phasing
Financial results reflecting intrayear phasing1 €m Q1 ’16 Q1 ’15 y-on-y % Adjusted revenues 1,689 1,758 -3.9% Adjusted EBITDA 568 595 -4.5% Net profit 48 23 >100% Capex -318 -334 -4.8% FCF -40 30 n.m. 1 All figures based on continuing operations, unless stated otherwise 11
Slide 12: Revenue trend improving
Revenue trend improving Growth in Consumer offset by Business and impact sale SNT end Q1 ’15 Adjusted revenues1 declined by 3.9% vs. -5.9%2 in Q4 ’15 €m 21 1,758 43 4 12 1,689 31 Adj. revenues Consumer Business Wholesale iBasis Other Adj. revenues Q1 ’15 Q1 ’16 1 All figures based on continuing oper
Slide 13: Adjusted EBITDA trend reflects cost phasing
Adjusted EBITDA1 trend reflects cost phasing Temporarily higher IT related expenses offsetting cost savings Adjusted EBITDA1 declined by 4.5% €m 595 1 2 3 18 1 568 30 8 5 1 2 Adj. EBITDA Revenues Cost of Personnel IT/TI Other iBasis Other Adj. EBITDA Q1 ’15 goods & expenses operating Q1 ’16 services
Slide 14: Free cash flow influenced by intrayear phasing
Free cash flow1 influenced by intrayear phasing €m 559 50 27 78 226 0 318 -40 Reported Change in Change in Taxes received Interest paid Capex Other FCF EBITDA provisions working capital (paid) Q1 ’16 Q1 ’16 1 2 3 Less cash from change in working capital mainly due to lower Capex level and 1 intrayea
Slide 15: Solid financial position
Solid financial position Reduced gross debt resulting in lower cash interest payments Lower gross debt y-on-y… …driving lower cash interest € bn Gross debt € 0.9bn lower vs. Q4 ’15 Bond redemptions repaid by available 9.6 cash 8.7 7.8 7.3 Net debt € 1.1bn lower vs. Q4 ’15 6.5 2.4 Net Cash pr
Slide 16: Contents
Contents 1 Highlights and operational performance Eelco Blok 2 Financial performance Jan Kees de Jager 3 Outlook and concluding remarks Eelco Blok 16
Slide 17: On track for outlook 2016
On track for outlook 2016 Growing shareholder remuneration Outlook 2016 Shareholder remuneration Adjusted EBITDA in line with 2015 Intended DPS of € 10ct in respect of 2016 Capex ~€ 1.2bn Intention to grow regular DPS in line with FCF growth profile Free cash flow > € 650m (excl. TEFD divi
Slide 18: Q&A
Q&A 18
Slide 19: Q1 2016 – Information Pack
Q1 2016 – Information Pack For further information please contact KPN Investor Relations +31 70 44 60986 ir@kpn.com ir.kpn.com 19
Slide 20: Contents
Contents 1 KPN ADR program 2 Group results analysis 3 Group KPI overview 4 Debt overview 5 Spectrum 6 Fixed infrastructure 7 Telefónica Deutschland stake 20
Slide 21: KPN ADR program
KPN ADR program KPN has a sponsored Level 1 ADR program ADR program Bloomberg ticker KKPNY Trading platform Over-the-counter (OTC) CUSIP 780641205 Ratio 1 ADR : 1 Ordinary Share Depositary bank Deutsche Bank Trust Company Americas Depositary bank contact Begonia Roberts +1 212 250 9100 (New York) AD
Slide 22: Contents
Contents 1 KPN ADR program 2 Group results analysis 3 Group KPI overview 4 Debt overview 5 Spectrum 6 Fixed infrastructure 7 Telefónica Deutschland stake 22
Slide 23: Group results Q1 '16
Group results Q1 ’161 (€ m) Q1 ’16 Q4 ’15 Q1 ’15 y-on-y % Revenues 1,689 1,745 1,758 -3.9% Adjusted revenues 1,689 1,745 1,758 -3.9% Operating expenses (excl. D&A) 1,130 1,167 1,182 -4.4% EBITDA 559 578 576 -3.0% Adjusted EBITDA 568 582 595 -4.5% Depreciation 251 282 273 -8.1% Amortization 167 136 1
Slide 24: Group cash flow Q1 '16
Group cash flow Q1 ’161 (€ m) Q1 ’16 Q1 ’15 y-on-y % EBITDA 559 576 -3.0% Interest paid/received -226 -222 1.8% Tax paid/received 50 -10 n.m. Change in provisions2 -27 -1 >100% Change in working capital2 -78 21 n.m. Other movements - - n.m. Net cash flow from operating activities 278 364 -24% Capex
Slide 25: Financials by segment
Financials by segment The Netherlands Consumer Business 57.6% 55.6% 58.4% 61.1% 58.7% 60.3% 750 781 771 632 630 589 432 434 450 386 370 355 Q1 ’15 Q4 ’15 Q1 ’16 Q1 ’15 Q4 ’15 Q1 ’16 Wholesale Network, Operations & IT 67.9% 68.9% 69.4% 184 180 180 125 124 125 -297 -295 -305 Q1 ’15 Q4 ’15 Q1 ’16 Q1 ’1
Slide 26: Dutch wireless disclosure
Dutch wireless disclosure Service revenues (€ m) Q1 ’16 Q1 ’15 % Consumer 287 271 5.9% Business1 175 178 -1.7% Other2 35 37 -5.4% KPN The Netherlands 497 486 2.3% SAC/SRC per subscriber (€) Q1 ’16 Q1 ’15 % Consumer (postpaid)3 221 188 18% Business (mobile only – mainly SME) 175 195 -10% 1 Includes m
Slide 27: Contents
Contents 1 KPN ADR program 2 Group results analysis 3 Group KPI overview 4 Debt overview 5 Spectrum 6 Fixed infrastructure 7 Telefónica Deutschland stake 27
Slide 28: Consumer
Consumer Fixed-Mobile KPI’s Fixed-Mobile household Fixed-Mobile postpaid development development 29% 31% 33% 35% 20% 24% 554 813 791 1,172 1,286 888 3,236 2,923 2,816 2,572 2,421 2,343 Q1 ’15 Q4 ’15 Q1 ’16 Q1 ’15 Q4 ’15 Q1 ’16 F-M base (k) Fixed-only base (k) F-M base (k) Mobile-only base (k) F-M pe
Slide 29: Consumer (cont'd)
Consumer (cont’d) Residential KPI’s Household base (k) RGUs and ARPU per household 3,790 3,736 3,704 1.97 2.07 2.10 1,472 1,634 1,670 773 767 40 40 484 764 38 438 425 1,061 897 845 Q1 ’15 Q4 ’15 Q1 ’16 Q1 ’15 Q4 ’15 Q1 ’16 Triple play Unbundled (BB only) Dual play Unbundled ARPU per household (€) (P
Slide 30: Consumer (cont'd) Mobile KPI's
Consumer (cont’d) Mobile KPI’s Mobile net adds Mobile postpaid ARPU € 80 59 26 25 25 36 % committed ARPU -16 -21 ~83% ~83% ~85% -58 Q1 ’15 Q4 ’15 Q1 ’16 Q1 ’15 Q4 ’15 Q1 ’16 Postpaid (k) Prepaid (k) Service revenues Committed ARPU breakdown 40% 41% 6% 6% 6% Incoming (MTA) 271 284 287 5.9% 5% 5% 3% A
Slide 31: Business
Business Total Business Mobile Multi play (mainly SME) 1,787 1,790 1,792 58 68 39 178 176 175 53 -1.7% 45 44 y-on-y Q1 ’15 Q4 ’15 Q1 ’16 Q1 ’15 Q4 ’15 Q1 ’16 Total Business mobile service revenues1 (€ m) ARPU per multi play seat (€) Total Business mobile customer base (k) Multi play seats (k) Mobile
Slide 32: Contents
Contents 1 KPN ADR program 2 Group results analysis 3 Group KPI overview 4 Debt overview 5 Spectrum 6 Fixed infrastructure 7 Telefónica Deutschland stake 32
Slide 33: Debt portfolio
Debt portfolio Breakdown of € 8.8bn nominal debt1 including hybrid bonds Breakdown nominal debt1 (total € 8.8bn) Nominal debt by currency Other 1% GBP2 Hybrid bonds Eurobonds EUR 25% 23% 67% 61% Global bonds USD2 9% 14% Bond redemption profile Fixed vs. floating interest 1.1 1.2 0.9 0.9 1.0 0.8 0.8
Slide 34: Treatment of hybrid bonds
Treatment of hybrid bonds KPN & Credit rating agencies IFRS Each tranche of the hybrid bonds is EUR tranche is a perpetual, recognized as 50% equity and 50% accounted for as equity debt by the rating agencies Coupon payments treated as equity distribution, hence not expensed through Definiti
Slide 35: Contents
Contents 1 KPN ADR program 2 Group results analysis 3 Group KPI overview 4 Debt overview 5 Spectrum 6 Fixed infrastructure 7 Telefónica Deutschland stake 35
Slide 36: Spectrum in The Netherlands
Spectrum in The Netherlands Current status 800MHz Tele2 VOD KPN 2*30 (Paired) 2*10 2*10 2*10 900MHz VOD KPN T-Mob 2*35 (Paired) 2*10 2*10 2*15 1.8GHz KPN VOD T-Mob 2*70 (Paired) 2*20 2*20 2*30 1.9GHz T-Mob KPN VOD T-Mob 1*35 (Unpaired) 10 5 5.4 14.6 2.1GHz VOD KPN T-Mob KPN VOD T-Mob 2*59.4 (Paired)
Slide 37: Contents
Contents 1 KPN ADR program 2 Group results analysis 3 Group KPI overview 4 Debt overview 5 Spectrum 6 Fixed infrastructure 7 Telefónica Deutschland stake 37
Slide 38: Infrastructure
Infrastructure Fixed network ahead of customer demand Next round of upgrades Download Active in speed network (up to) CO VDSL2 50Mbps VDSL2 pair bonding CO 100Mbps SC Vectoring 120Mbps Bonded vectoring SC 240Mbps Bonded VPLUS SC 400Mbps NG.PON SC >1Gbps ODF FttH Fiber Copper 1Gbps 38
Slide 39: Contents
Contents 1 KPN ADR program 2 Group results analysis 3 Group KPI overview 4 Debt overview 5 Spectrum 6 Fixed infrastructure 7 Telefónica Deutschland stake 39
Slide 40: Telefónica Deutschland stake
Telefónica Deutschland stake Accounting treatment Balance sheet Stake included as financial asset1 Fair value of KPN’s stake based on Telefónica Deutschland’s share price and adjusted quarterly Fair value movements recorded in other comprehensive income Significant or prolonged value decreas