50 slides from VEON Ltd. ORD's earnings presentation, Feb 25, 2015
Slide 1: 4Q14 and FY14 Earnings Presentation
4Q14 and FY14 Earnings Presentation © VimpelCom Ltd 2015 London – February 25, 2015 Jo Lunder – CEO Andrew Davies – CFO 1
Slide 2: Disclaimer
Disclaimer This presentation contains “forward-looking statements”, as the phrase is defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to, among other things, the Company's anticipated performance, future market devel
Slide 3: Delivered on 2014 targets
Delivered on 2014 targets Targets1 2014 Actuals 2014 Low to mid single Revenue -4% YoY digit decline YoY © VimpelCom Ltd 2015 Low to mid single EBITDA -6% YoY digit decline YoY Leverage (Net Debt / EBITDA) ~2.4x 2.5x CAPEX excl. licenses / Revenue ~21% 20% 3 1. The annual targets for 2014 assumed co
Slide 4: Strategic highlights
Strategic highlights • Algeria transaction signed and closed • Portfolio clean up almost complete • Improved capital structure with USD 21 billion in financing activities © VimpelCom Ltd 2015 • USD 0.5 billion annualized net income enhancement from refinancing of Italy and use of proceeds from Alger
Slide 5: Successful investment in high-speed networks
Successful investment in high-speed networks Russia: • Leading NPS in mobile Internet in 4Q14 • Accelerated roll out and network sharing agreement on 4G/LTE Italy: • 97% coverage HSPA+ & 37% coverage 4G/LTE © VimpelCom Ltd 2015 Africa & Asia: • 3G launched and 21 regions covered in Algeria • 2G netw
Slide 6: Leading in customer experience
Leading in customer experience #1 Co-leader Improving Bangladesh Kazakhstan © VimpelCom Ltd 2015 Algeria Pakistan Kyrgyzstan Italy Russia Ukraine Uzbekistan 6 NOTE: Independent agency research
Slide 7: 4Q14 Financial highlights
4Q14 Financial highlights Service revenue Mobile customers1 • Better YoY trajectory in 4Q14 compared to (USD billion) (million) the first 9 months 4.2 222 • EBITDA decreased organically 8% YoY, mainly due to higher network costs related to investments in high-speed data networks © VimpelCom Ltd 2015
Slide 8: FY14 Financial highlights
FY14 Financial highlights Service revenue Net loss • Revenue declined 4% YoY organically, well (USD billion) (USD million) within the FY14 target 18.7 691 • EBITDA declined 6% organically, in line with FY14 target • Solid EBITDA margin © VimpelCom Ltd 2015 - 4% organic2 YoY +74% YoY - 13% reported Y
Slide 9: Business Units Performance
Business Units Performance © VimpelCom Ltd 2015 4Q14 9
Slide 10: Russia: Delivering on plans
Russia: Delivering on plans RUB BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Increasing NPS and improving churn led +3% YoY +1% YoY to the first YoY increase in service 68.7 71.0 70.6 56.5 57.2 revenue and mobile customers since 12.4 13.2 14.2 3Q13 56.3 57.8 56.4 • I
Slide 11: Russia: Continued adjustments to a new reality
Russia: Continued adjustments to a new reality © VimpelCom Ltd 2015 FOREX 4G/LTE network Cost and asset management sharing efficiency program • Hedged all USD cash costs for the first six • ~3,000 base stations in 36 regions • Optimization and increasing efficiencies months • Substantial savings in
Slide 12: Italy: Solid performance in a challenging market
Italy: Solid performance in a challenging market EUR MILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) -7% YoY -3% YoY • Total revenue of EUR 1.1 billion, down 9% YoY; underlying decline of 5% YoY 1,120 1,054 1,038 22.3 21.6 320 • Service revenue trend improving 291 292 • S
Slide 13: Italy: Preparing for the future
Italy: Preparing for the future © VimpelCom Ltd 2015 WIND digital Capital and “Digital Home & Life” transformation cost efficiency • WIND Digital innovative offering • WIND closer to its customer • Innovative insourcing and with customer interaction through “Digital Home & Life” productivity increas
Slide 14: Algeria: Transaction kick starts transformation
Algeria: Transaction kick starts transformation DZD BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Djezzy is the leader in a very attractive –7 % YoY +5% YoY growth market, with a strong local partner 18.4 35.9 33.9 33.5 17.6 • Launch of 3G fueled strong competition •
Slide 15: Pakistan: Network modernization completed
Pakistan: Network modernization completed PKR BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Secured leading customer market –2 % YoY +2% YoY share 38.5 24.7 23.0 24.3 37.6 • Service revenue decreased due to transparent VAS charging and price competition in voice © Vim
Slide 16: Bangladesh: Market position continued to improve
Bangladesh: Market position continued to improve BDT BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Continued double digit revenue growth +18 % YoY +7% YoY YoY 11.2 9.5 10.9 28.8 30.8 • EBITDA increased 38% YoY driven by revenue growth and savings • Banglalink maintain
Slide 17: Ukraine: Good progress of transformation program
Ukraine: Good progress of transformation program UAH BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • # 1 position in NPS leading to -2% YoY +2% YoY substantial YoY improvement in churn 25.8 26.2 and increase in customer base 3.1 3.2 3.1 0.3 0.3 0.2 • Mobile data revenue
Slide 18: CIS: Continued solid results
CIS1: Continued solid results USD MILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Increased YoY market shares in 5 Reported -4% YoY Organic +4% YoY +4% YoY countries 497 494 42 42 475 41 25.4 26.5 • Mobile service revenue increased organically 4% YoY due to strong 455 4
Slide 19: Financial Highlights
Financial Highlights © VimpelCom Ltd 2015 19
Slide 20: 4Q14 Income statement
4Q14 Income statement USD million 4Q14 4Q13 YoY Revenue 4,391 5,551 -21% • Total revenue declined organically 3% YoY, while service revenue declined organically 2% YoY of which service revenue 4,207 5,290 -20% EBITDA 1,600 1,013 58% • EBITDA decreased organically 8% YoY mainly due to currency headwi
Slide 21: FY14 Income statement
FY14 Income statement USD million FY14 FY13 YoY Revenue 19,627 22,546 -13% • Total revenue declined organically 4% YoY, while service revenue declined organically 4% YoY of which service revenue 18,725 21,529 -13% EBITDA 7,970 8,260 -4% • EBITDA decreased organically 6% YoY, mainly due to revenue de
Slide 22: FY14 Cash flow statement
FY14 Cash flow statement USD million FY14 FY13 YoY EBITDA 7,970 8,260 -4% Changes in working capital and other 150 1,403 -89% • FY13 included accrual for Bank of Algeria fine of USD 1.3 billion Net interest paid (2,111) (2,047) 3% • Increase in interest paid mainly as result of one-off payments in I
Slide 23: Capital Structure Optimization
Capital Structure Optimization © VimpelCom Ltd 2015 23
Slide 24: Capital structure a year ago
Capital structure a year ago Unfriendly Investments to be maturity profile made in high speed High data networks © VimpelCom Ltd 2015 leverage High interest expenses WIND PIK becoming cash payable in Summer 2014 Cash trapped in Algeria 24
Slide 25: Capital structure optimization: 2014 progress
Capital structure optimization: 2014 progress Secured new USD 21 billion © VimpelCom Ltd 2015 credit facilities financing activities Refinanced Italy Substantial dividend in 2 phases with reduction to delever PIK repayment and support investments 25
Slide 26: Capital structure optimization: Actions 1Q15
Capital structure optimization: Actions 1Q15 Use of proceeds from Algeria transaction to retire debt © VimpelCom Ltd 2015 Closed transaction Exploring sale of in Algeria Italian towers 26
Slide 27: Significantly improved debt maturity schedule
Capital structure optimization: Significantly improved debt maturity schedule As at December 31, 2014 (in USD billion) Group debt maturity schedule © VimpelCom Ltd 2015 5.8 6.0 3.2 2.7 2.2 2.0 1.9 1.5 1.1 2015 2016 2017 2018 2019 2020 2021 2022 >2022 27
Slide 28: Increased credit facilities
Capital structure optimization: Increased credit facilities As at March 31, 2014 As at December 31, 2014 pro forma1 (in USD billion) (in USD billion) 3.1 © VimpelCom Ltd 2015 1.2 0.6 0.3 0.4 2014 2015 2016 2017 2018 2019 28 1 Pro forma for group as at 31 December 2014 reflects HQ repayment RCF for U
Slide 29: Leverage: Reduced gross debt
Capital structure optimization: Leverage 1Q14 debt and leverage Reduced gross Gross debt / EBITDA December 31, 2014 December 31, 2014 pro forma1 3.3 © VimpelCom Ltd 2015 2.9 2.3 1.7 Excluding Group Excluding Group Italy Italy 29 1 Pro forma for group as at 31 December 2014 reflects debt reduction fr
Slide 30: Leverage: Reduced net debt and leverage
Capital structure optimization: Leverage 1Q14 Reduced net debt and leverage Net debt / EBITDA December 31, 2014 December 31, 2014 pro forma1 © VimpelCom Ltd 2015 2.5 2.4 1.2 1.1 Excluding Group Excluding Group Italy Italy 30 1 Pro forma for group as at 31 December 2014 reflects debt reduction from A
Slide 31: Significantly reduced the cost of debt
Significantly reduced the cost of debt Average cost of debt 1Q14 Average cost of debt 4Q14 © VimpelCom Ltd 2015 8.3% 6.3% 31
Slide 32: Cash flow enhancing from financing improvements
Cash flow enhancing from financing improvements Targeted potential1 Targeted potential Expected savings 2013-2015 In-house finance company USD 50 million USD 20 million © VimpelCom Ltd 2015 Debt optimization USD 150 million USD 375 million Gross debt reduction USD 150 million USD 275 million Withhol
Slide 33: Significant financing improvements
Significant financing improvements Delivering on promises announced on the A&I day 2014: • USD 21 billion of finance activities in FY14 • Improved maturity schedule • Increased credit facilities and liquidity © VimpelCom Ltd 2015 • Average cost of debt substantially reduced With a strong cash positi
Slide 34: Targets 2015
Targets 2015 Targets 20151 Flat to low single Service Revenue digit decline YoY Flat to minus one © VimpelCom Ltd 2015 EBITDA Margin p.p. YoY EPS2 USD 0.35 – 0.40 CAPEX / Revenue ~20% Leverage (Net Debt / EBITDA) ~3.2x Excl. Italy … ~1.7x 1. The annual targets for 2015 assume constant currency, no m
Slide 35: Conclusion
© VimpelCom Ltd 2015 35 Conclusion
Slide 36: Conclusion
Conclusion • Delivered on targets in a challenging environment • Reported results impacted by currency headwinds • Closed Algeria © VimpelCom Ltd 2015 • Significantly improved capital structure • Successful investments in high speed networks • Building a more customer centric organization • Solid mo
Slide 37: Q&A
© VimpelCom Ltd 2015 37 Q&A
Slide 38: VimpelCom Analyst & Investor site visit
VimpelCom Analyst & Investor site visit Georgia and Kazakhstan March 31, 2015 April 1, 2015 Tbilisi, Georgia Almaty, Kazakhstan © VimpelCom Ltd 2015 Presentations by Head of BU Presentations by local CIS and local management management 38
Slide 39: Financial calendar 2015 – accelerating reporting
Financial calendar 2015 – accelerating reporting 20151 A&I site visit Georgia and Kazakhstan March 31 – April 1 1Q15 results May 13 © VimpelCom Ltd 2015 A&I site visit Russia July 8 2Q15 results (analyst meeting in London) August 6 A&I Conference (London) October 8 - 9 3Q15 results November 5 39 1.
Slide 40: Further information
Further information Investor Relations Claude Debussylaan 88 1082 MD Amsterdam The Netherlands T: +31 20 79 77 234 E: ir@vimpelcom.com © VimpelCom Ltd 2015 Visit our awards winning website Install VimpelCom’s App www.vimpelcom.com iPadApp 40
Slide 41: Thank you!
© VimpelCom Ltd 2015 41 Thank you!
Slide 42: Appendices
© VimpelCom Ltd 2015 42 Appendices
Slide 43: Credit facilities
Credit facilities USD 6.2 bn credit facilities arranged in FY14: Available RCF headroom at the end 2014: Financing VimpelCom USD 1.3 billion USD 1.8 billion RCF VIP Holdings USD 1.0 billion CF AlfaBank OJSC VimpelCom USD 0.3 billion (RUB 15 billion) USD 1.0 billion VF CDB/BoC WIND USD 0.6 billion (E
Slide 44: Debt maturity profile
Debt maturity profile As at 31 December 2014, in USD billion Group debt maturity schedule by Business Units Italy Russia 5.8 6.0 A&A HQ 3.2 © VimpelCom Ltd 2015 2.7 2.2 2.0 1.9 1.5 1.1 2015 2016 2017 2018 2019 2020 2021 2022 >2022 Group debt maturity schedule by currency1 2015 2016 2017 2018 2019 20
Slide 45: Debt by entity
Debt by entity As at 31 December 2014, in USD billion Outstanding debt Type of debt/lender Vendor Entity Bonds Loans RCF Other Total Financing VimpelCom Holdings B.V. 3,813 3,813 © VimpelCom Ltd 2015 VimpelCom Amsterdam B.V. 1,000 500 752 2,252 OJSC VimpelCom 4,078 1,583 207 45 5,913 WIND Telecomuni
Slide 46: Forex sensitivities
Forex sensitivities FOREX translation sensitivities on Group level FOREX sensitivities1 FY14 RUB vs. USD EUR vs. USD UAH vs. USD © VimpelCom Ltd 2015 USD billion +/-10% +/-10% +/-10% Revenue 19.6 Average 4% 3% 0.5% FOREX EBITDA 8.0 4% 3% 0.6% Gross Debt 26.4 1% 5% n.a. Year-end FOREX Net Debt 20.0 1
Slide 47: FOREX rates used in annual targets for 2015
FOREX rates used in annual targets for 2015 Currency FX rates versus USD Algeria DZD 92.0 Armenia AMD 415.0 © VimpelCom Ltd 2015 Bangladesh BDT 79.0 Egypt EGP 7.5 Georgia GEL 1.8 Italy EUR 0.91 Kazakhstan KZT 190.0 Kyrgyzstan KGS 55.0 Pakistan PKR 105.0 Russia RUB 70.0 Ukraine UAH 25.0 47
Slide 48: Revenue and EBITDA development in 4Q14 and FY14
Revenue and EBITDA development in 4Q14 and FY14 4Q 2014 vs 4Q 2013 Revenue EBITDA FX and FX and Business Units Organic Reported Organic Reported others others Russia 3% (30%) (27%) (0%) (34%) (34%) Italy (9%) (8%) (17%) (16%) (7%) (23%) Africa & Asia (5%) (4%) (9%) (19%) (2%) (21%) © VimpelCom Ltd 2
Slide 49: Reconciliation of EBITDA
Reconciliation of EBITDA USD mln 4Q14 4Q13 FY14 FY13 Unaudited EBITDA 1,600 1,013 7,970 8,260 Depreciation (623) (810) (2,839) (3,050) Amortization (324) (458) (1,479) (1,791) Impairment loss (1,051) (2,906) (992) (2,973) Loss on disposals of non-current assets (23) (57) (74) (100) EBIT (421) (3,218
Slide 50: Reconciliation of consolidated net debt and OCF
Reconciliation of consolidated net debt and OCF Reconciliation of consolidated net debt USD mln 4Q13 3Q14 4Q14 Net debt 22,604 21,736 19,992 C ash and cash equivalents 4,454 5,852 6,342 Long-term and short-term deposits 396 126 109 Gross debt 27,454 27,714 26,443 Interest accrued related to financia