Royal KPN NV · EURONEXT:KPN

Royal KPN NV — KPN — Q1 2020 Earnings Presentation

37 slides from Royal KPN NV's earnings presentation, Apr 30, 2020

  1. Slide 1: KPN Q1 2020 Results

    KPN Q1 2020 RESULTS 30 April 2020

  2. 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 (‘

  3. Slide 3: Highlights, Business Performance Update, Financial Results

    1. HIGHLIGHTS 2. BUSINESS PERFORMANCE UPDATE 3. FINANCIAL RESULTS 3

  4. Slide 4: Key highlights

    Key highlights  Q1 marks a solid start of the year – Solid performance, strong cost savings compensating (slowing) revenue decline – Well on track to deliver ~€ 350m indirect opex savings by end 2021 (€ 180m realized)  Solid operational performance – Continued accelerated fiber roll-out: +58k hous

  5. Slide 5: Key figures: solid performance in the first quarter

    Key figures: solid performance in the first quarter Adj. revenues Adj. net ind. opex savings Adj. EBITDA AL Highlights in Q1 2020  Adjusted revenues -2.4% y-on-y – -1.9% excl. impact divestments € 1,329m € 38m € 575m – Growth in Wholesale and Professional -2.4% +2.1% Services and Security in Busine

  6. Slide 6: Premature to say what the total impact of COVID-19 will be for KPN

    Premature to say what the total impact of COVID-19 measures will be for KPN for the remainder of the year  Solid Q1 2020 results; strong balance sheet and liquidity; relatively resilient business; on track with the execution of our strategy  However, risks to our 2020 outlook increased due to the

  7. Slide 7: Managing our business through the COVID-19 situation

    We continue to manage our business through the COVID-19 situation, closely monitoring a number of business drivers Adjusted revenues KPN Group  KPN provides essential connectivity services with predominantly long- term contracts (FY 2019): € 5,386m1  Monitor payment behavior, net working capital a

  8. Slide 8: COVID-19: KPN measures for employees, customers, society and shareholders

    COVID-19: KPN measures for employees, customers, Dutch society and shareholders Employees Customers  All office personnel working from home  Additional free TV content for IPTV customers until 1 June 2020  To minimize physical contact we closed all shops on 18 March  Free conference numbers unti

  9. Slide 9: COVID-19: ensuring connectivity in challenging times

    COVID-19: ensuring connectivity in challenging times Equipped for peak levels Broadband usage KPN network in March 2020  ~100% increase in mobile voice traffic vs. pre 16 March Social distancing measures announced  ~25% increase in broadband traffic vs. pre 16 March +25%  ~25% increase in streami

  10. Slide 10: Business Performance Update

    1. HIGHLIGHTS 2. BUSINESS PERFORMANCE UPDATE 3. FINANCIAL RESULTS 10

  11. Slide 11: Strategic progress in the first quarter

    Strategic progress in the first quarter 1. The best converged smart infrastructure 2. Focus on profitable growth segments Further expand leading NL fiber activities  Focus on high-value KPN brand, integrated Telfort mobile  58k FttH added in Q1, almost half of entire 2019  Continued good progress

  12. Slide 12: KPN has the largest fiber footprint in the Netherlands

    KPN has the largest fiber footprint in the Netherlands: >2.5m homes  Accelerating fiber roll-out at fastest pace possible Strong fiber coverage in both urban and rural areas (Q1 2020) – Ambition to reach +1m households FttH end 2021 vs. end 2018 – Investing in fast and reliable internet for Dutch s

  13. Slide 13: Ramping up fiber roll out: 58k FttH homes passed in Q1 2020

    Ramping up fiber roll out, driving value for shareholders: 58k FttH homes passed in Q1 2020, nearly half of 2019 production FttH homes passed (k) FttH homes activated (k) Avg. FttH roll out per week (households) +24 +32 +49 +58 +163k +23 +20 +27 +23 +93k ~4,500 ~3,750 2,360 2,384 2,416 2,465 2,523 1

  14. Slide 14: Consumer – Delivery Q1 2020

    Consumer – Delivery Q1 2020 Highlights Revenue trend (€ m)  Mobile service revenue trend improving (rate of decline is slowing 477 475 483 480 477 down) Fixed 251 246 248 254 234  Market remained competitive, three players focusing on FMC, all Mobile operators offering Unlimited mobile data Q1 201

  15. Slide 15: Consumer – KPIs Q1 2020

    Consumer – KPIs Q1 2020 Converged households (k) Broadband base (k) Mobile postpaid base (k) +41 +5 -2 -18 +27k -31 -24 -24 -25 -104k 0 -3 -14 -13 -31k 1,358 1,399 1,404 1,402 1,384 2,927 2,896 2,871 2,848 2,823 3,606 3,605 3,602 3,588 3,575 +105k 46% 48% 49% 49% 49% +17 +36 +28 +24 KPN brand Q1 201

  16. Slide 16: Business – Delivery Q1 2020

    Business – Delivery Q1 2020 Highlights Revenue trend (€ m)  Adjusted revenue trend corrected for impact of divestments 506 498 507 498 502 494 528 518 478 478 gradually improving Adj. revenues  Strategic actions considerably impacted revenue trend; Last Adj. revenues (excl. M&A) twelve months reve

  17. Slide 17: Business – KPIs Q1 2020

    Business – KPIs Q1 2020 SME customer migrations1 LE/Corporate customer migrations1 82% 74% 68% 62% 53% 59% 45% 33% 50% 25% Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020  82% of SME customers eligible for migration have migrated  62% of LE customers eligible for mi

  18. Slide 18: Wholesale – Delivery and KPIs Q1 2020

    Wholesale – Delivery and KPIs Q1 2020 Highlights Revenue trend  Strong adjusted revenue growth excluding impact divestments 156 145 159 148 165 154 146 147 153 153  Solid performance in fixed (WBA and ODF access) Adj. revenues – Added 21k broadband lines Adj. revenues (excl. M&A)  Continued growt

  19. Slide 19: Financial Results

    1. HIGHLIGHTS & PROGRESS AGAINST STRATEGY 2. BUSINESS PERFORMANCE UPDATE 3. FINANCIAL RESULTS 19

  20. Slide 20: Group financials

    Group financials (€ m) Q1 2019 Q1 2020 Δ y-on-y Δ y-on-y Adjusted revenues Q1 2020 excl. impact divestments Δ y-on-y excl. impact M&A Service revenues 1,265 1,234 -2.5% -1.9% Consumer 712 -2.3% Non-service & other 96 95 -1.4% -1.4% Adjusted revenues 1,362 1,329 -2.4% -1.9% Business 478 -4.0% Total a

  21. Slide 21: Strong and disciplined cost control

    Strong and disciplined cost control  € 180m net indirect opex savings realized since start in 20191 Net indirect opex savings (€ m) ~170 ~350  Reduction driven by personnel and IT/TI expenses  ~€ 170m net indirect opex savings to be realized of the target 38 180 141  Confident to reach our targe

  22. Slide 22: Strong underlying cash generation

    Strong underlying cash generation (€m) Q1 2019 Q1 2020 Δ y-on-y Highlights Adjusted EBITDA after leases 563 575 +2.1% As % of adj. revenues 41.4% 43.3%  Strong operational free cash flow driven by Capex -261 -278 +6.3% Operational free cash flow 302 297 -1.5% – Growing adj. EBITDA AL due to discipl

  23. Slide 23: Change in working capital

    Change in working capital Effect delta Working capital (€ m) Q4 2019 Q1 2020 working capital Highlights Current assets Inventories 54 55 -1  Main effects that impacted working capital movement in Q1 2020 Trade and other receivables 508 481 27 – Higher prepayments, partly in line with regular trend

  24. Slide 24: Liquidity position

    Liquidity position Liquidity considerations Liquidity schedule (€ m)  Total committed liquidity of € 2.2bn 300 2,247 – € 696m in cash & short-term investments at hand 1,250 1,899 – € 1.55bn of committed unused credit lines (€ 1.25bn RCF and € 300m EIB facility2) -348 275 422  Liquidity is sufficie

  25. Slide 25: Financial position

    Financial position Financial position Highlights Interest cover1 7.4x 7.7x 8.7x  Interest cover ratio was 8.7x at the end of the 6.1x 6.3x quarter (Q4 2019: 7.7x) Leverage ratio2 2.5x 2.4x 2.3x  KPN’s leverage ratio was 2.2x (Q4 2019: 2.2x), 2.2x 2.2x including equity credit on the hybrid bonds (0

  26. Slide 26: Disclosure agenda going forward

    Disclosure agenda going forward: committed to continuously improving Consumer Business  New revenue breakdown to reflect focus on convergence  Reflect KPN’s focus on converged portfolio for different – Fixed-mobile service revenues customer segments, by providing further detail on revenue – Fixed-

  27. Slide 27: Closing remarks

    Closing remarks  Q1 marks a solid start of the year – Solid performance, strong cost savings compensating (slowing) revenue decline – Well on track to deliver ~€ 350m indirect opex savings by end 2021 (€ 180m realized)  Solid operational performance – Continued accelerated fiber roll-out: +58k hou

  28. Slide 28: Q&A

  29. Slide 29: Appendices

    Appendices I: Q1 2019 financials corrected for impact of divestments II: Tax III: Debt portfolio IV: Treatment of hybrid bonds V: Fixed infrastructure VI: Mobile infrastructure VII: Spectrum 29

  30. Slide 30: I: Q1 2019 financials corrected for impact of divestments

    I: Q1 2019 financials corrected for impact of divestments Income statement (€ m) Q1 2019 Impact Q1 2019 Q1 2020 Δ y-on-y divestments excl. divestments excl. divestments This table shows the Consumer 728 - 728 712 -2.3% estimated adjustments of Business 506 -8 498 478 -4.0% Q1 2019 results for the Wh

  31. Slide 31: II: Tax

    II: Tax Q1 FY 2020 P&L Cash flow Regions (€ m) Q1 2019 Q1 2020 Q1 2019 Q1 2020 The Netherlands -24 -30 - - Other - - - - Total reported tax -24 -30 - - Of which discontinued operations - - - - Reported tax from continuing operations -24 -30 - - Effective tax rate continuing operations 21,4% 21,1% 

  32. Slide 32: III: Debt portfolio

    III: Debt portfolio Nominal debt by type1 Nominal debt by currency1 Fixed vs. floating interest3 Bond redemption profile (€ bn) 1.1 1% 15% 1.0 15% 20% 7% 0.6 0.6 0.6 23% 0.5 0.5 0.5 0.5 0.4 62% 77% 80% 0.1 ’20 ’21 ’22 ’23 ’24 ’25 ’26 ’28 ’29 ’30 ’32 Eurobonds EUR Fixed USD hybrid (1st call) GBP Glob

  33. Slide 33: IV: Treatment of hybrid bonds

    IV: Treatment of hybrid bonds KPN & credit rating agencies IFRS  Hybrid bonds are recognized as 50% equity and 50% debt by  EUR tranche is a perpetual instrument, accounted for as equity the rating agencies Coupon payments treated as equity distribution (dividend), hence not expensed through P&L,

  34. Slide 34: V: Fixed infrastructure

    V: Fixed infrastructure Download Active in speed network CO VDSL2 ~50Mbps  VDSL2 pair bonding CO ~100Mbps  Vectoring SC ~120Mbps  Bonded vectoring SC ~240Mbps  Bonded VPlus ~400Mbps SC FttH – P2P ~1Gbps  PoP FttH – G-PON CO Passive split ~1Gbps  Passive FttH – XGS-PON Up to 10Gbps CO split Fib

  35. Slide 35: VI: Mobile infrastructure

    VI: Mobile infrastructure Modernizing sites with the latest technologies, 5G ready Upcoming spectrum auctions in NL Typical current site Typical modernized site 2020: Multi band auction (220 MHz in total) 4 frequency bands 6-8 frequency bands  700MHz: 6 blocks of 2x5MHz (new spectrum) 2x2 MIMO 4x4

  36. Slide 36: VII: Spectrum in the Netherlands

    VII: Spectrum in the Netherlands 800MHz T-Mob VodZig KPN 2*30 (Paired) 2*10 2*10 2*10 900MHz VodZig KPN T-Mob 2*35 (Paired) 2*10 2*10 2*15 1.8GHz KPN VodZig T-Mob 2*70 (Paired) 2*20 2*20 2*30 2.1GHz VodZig KPN T-Mob KPN VodZig T-Mob 2*59.4 (Paired) 2*14.6 2*14.8 2*10 2*5 2*5 2*10 2.6GHz T-Mob KPN T-

  37. Slide 37: KPN Investor Relations

    KPN Investor Relations ir.kpn.com

KPN — Q1 2020 Earnings Presentation on 6ix