Remgro Limited · JSE:REM
Remgro — Investor Day (June 2022)
36 slides from Remgro's investor day presentation, Jun 13, 2022
Slide 1: CIVH: Connecting South Africa
CIVH Connecting South Africa
Slide 2: Executive Team Delivering on the Vision
Executive Team Delivering on the Vision CIVH Leadership FibreCo Leadership Raymond Ndlovu Graham McGregor Neo Moshimane Dietlof Mare Byron Billet Andries Delport CEO CFO CCO CEO FibreCo CFO FibreCo CEO DFA CEO RofA Prior experience at Prior experience at Prior experience Prior experience Prior exper
Slide 3: Agenda
1 Introduction to CIVH 2 Creating an integrated Fibre Platform 3 Bridging the Digital Divide 4 FibreCo: DFA and Vumatel Agenda 5 Financial Performance 6 Final Thoughts and Q&A
Slide 4: Introduction to CIVH
Introduction to CIVH
Slide 5: CIVH Journey
CIVH Journey 2019 2009 2012 2016 Acquisition of Pretoria to Cape Town to 38% stake Vumatel 2022 Mtunzini Yzerfontein acquired in Acquisition of Vumatel increases long-haul route long-haul route SA Digital Villages remaining SADV stake in completed completed (“SADV”) stake Herotel to 48% 2007 2010 20
Slide 6: Servicing South Africa's Fibre Connectivity Needs
Servicing South Africa’s Fibre Connectivity Needs • Premier open access enterprise fibre • Open access fibre provider focused on last mile connectivity provider in South Africa fibre-to-the-home (“FTTH”) products and services • Metro and long-haul telecommunication • FTTH market leader in South Afri
Slide 7: Potential Range of Adjacencies
Potential Range of Adjacencies Enterprise / Edge Spectrum Towers and Geographic Data Centres Small Cells Expansion Global over-the-top (“OTT”) Wireless Open Access VumaCam infrastructure CIVH Africa providers and global Network (“WOAN”) paused could be developed into carriers are establishing tower
Slide 8: Data's Exponential Growth Trajectory
Data’s Exponential Growth Trajectory Exponential growth in data Data growth in Use cases driving the rapid rise in demand expected to continue Sub-Saharan Africa data consumption Average usage per consumer is expected to be Unique mobile subscribers 11GB per month by 2027 4.3% (GB per month) CAGR 47
Slide 9: 'Democratising the Internet'
‘Democratising the Internet’ Delivering capacity at scale Having a large, contiguous network enables economies of scale Wholesale and Open access Driving higher network uptake Accessible broadband internet Prepaid internet Ambition : uncapped internet from R100 per month Expanding connectivity in Af
Slide 10: Creating an integrated Fibre Platform
Creating an integrated Fibre Platform
Slide 11: Strategic Rationale for the Vodacom Transaction
Strategic Rationale for the Vodacom Transaction Vodacom is a natural strategic partner to CIVH with numerous potential synergies and complementary world class abilities A strategic investor with a large balance sheet, increases the ability of CIVH to capitalise on the many available opportunities in
Slide 12: Transaction Overview: Creation of a World Class FibreCo
Transaction Overview Creation of a World Class FibreCo Vodacom will subscribe in cash for FibreCo shares Step 1 totalling R6.0bn ✓Transaction implemented at the newly formed FibreCo SA Vodacom will contribute its fibre-to-the-home (FTTH), fibre-to-the-business (FTTB) and fibre-to-the-base Step 2 sta
Slide 13: FibreCo Structure Post Vodacom Transaction
FibreCo Structure Post Vodacom Transaction 57.0% 37.5% 5.5% Subject to regulatory approval 70.0% 30.0% FibreCo 13 Source: Company information
Slide 14: Herotel: Leading Operator within 'Secondary' Cities
Herotel Leading Operator within ‘Secondary’ Cities Capex Total users Aerial fibre build model >57k fibre users >71k wireless users Retail ARPU User segmentation Consistent average Diverse mix of users across revenue per user (“ARPU”) residential and business maintained across fibre and wireless Pres
Slide 15: Ambitions post Herotel Transaction
Ambitions post Herotel Transaction Existing Herotel network could act as an enabler for Vumatel’s low LSM products in secondary cities and towns, with a capex light roll-out strategy and scale benefits Herotel and CIVH are natural strategic partners The existing Herotel footprint may provide opportu
Slide 16: Positioning CIVH for the Future
Positioning CIVH for the Future ✓Market leading integrated wholesale 57.0% 37.5% 5.5% player Subject to regulatory approval ✓Democratisation of the internet ✓Expansion into secondary 70.0% 30.0% cities and other geographies Rest of Africa FibreCo In progress ✓Expanding capacity at scale ✓Exploration
Slide 17: FibreCo: DFA and Vumatel
Connecting South Africa FibreCo: DFA and Vumatel Dietlof Mare
Slide 18: Bridging South Africa's Digital Divide
Bridging South Africa’s Digital Divide 9.7m Number of homes with household monthly KEY market income < R5k Number of homes with 4.8m household monthly income between R5k REACH market R30k 2.2m Number of homes with household monthly CORE market income > R30k 18 Source: Stats SA
Slide 19: Key Market Segments: Market Size
Key Market Segments: Market Size Fibre-to-the-Telco (FTTT) Fibre-to-the-Business (FTTB) Fibre-to-the-Home (FTTH) 41k mobile base station 460k commercial 3.6m homes tenancies in South Africa premises passed in passed in South Africa South Africa 25% of mobile base 45.6% average stations potentially s
Slide 20: FTTH: The Market Opportunity
FTTH: The Market Opportunity REACH KEY Note: Currently FTTH pilot project within Alexandra is underway to measure both technical and commercial viability to roll-out LLSM FTTH based networks 20 Source: Company information
Slide 21: Fibre Business Model
Fibre Business Model FTTT FTTB FTTH Companies / Telco’s Residential enterprises ISPs / managed service providers (“MSPs”) Fibre Network Operators (“FNOs”) SINGLE INTEGRATED FIBRE NETWORK Core Network Access Networks 21 Source: Company information
Slide 22: Overview of FibreCo Network
Overview of FibreCo Network CIVH (FY22E)(1) FTTT FTTB FTTH 20k sites connected 297k commercial >1.4m homes premises passed in passed in South Africa South Africa 3k small cells poles 33.8% average constructed by VumaCam 22k commercial network uptake rate buildings connected >30,000km 13,800km of fib
Slide 23: FibreCo Product Offering: Market Segments
FibreCo Product Offering: Market Segments DFA Vumatel Core / Aggregation Transmission Tower End-Customer Connectivity National Long Infrastructure Distance Long-haul fibre Collocation and Fibre infrastructure Fibre to base stations Last mile fibre infrastructure between submarine aggregation facilit
Slide 24: Integrated Fibre Network
Integrated Fibre Network 1 DFA long-haul connected point A and B 2 DFA built metro rings for redundancy and to connect back haul to buildings within the ring 3 Vumatel started connecting high income suburban areas with FTTH, focusing on neighbouring areas to reduce back-haul links and increase the b
Slide 25: Urban to Peri-Urban and Rural Expansion
Urban to Peri-Urban and Rural Expansion 1 CIVH’s networks are currently predominantly in urban areas 2 CIVH will expand its network into rural towns in line with its Unlimited Access Strategy, “leaving nobody behind” 3 CIVH’s network will cover urban, peri-urban and rural areas across South Africa,
Slide 26: 5G Opportunity for Fibre
5G Opportunity for Fibre Relevance of last mile fibre networks in urban areas increases as MNOs will seek to secure back-haul MACRO 4G – 5G MACRO & MINI-MACRO 5G 4G sites in urban areas require fibre back- Growth in 4G and 5G sites and fibre 5G sites will require MNOs to use haul which is predominan
Slide 27: Primed for a Connected World
Primed for a Connected World Mall City Motorway Rural AERIAL NETWORKS 5G SMALL CELL WI-FI EDCs(1) SINGLE INTEGRATED FIBRE NETWORK Note: 1. EDCs = Edge data centres 27 Source: GSMA
Slide 28: Financial Performance
Financial Performance Graham McGregor
Slide 29: Financial Snapshot
Financial Snapshot CIVH (standalone) DFA Vumatel Discontinued Op’s CIVH Group 25% 3,619 37% EBITDA (ZAR’m)(1) 7% 2,899 2,067 1,592 1,698 1,509 85% 25% ( 97) ( 105) ( 131) ( 15) FY21A FY22E FY21A FY22E FY21A FY22E FY21A FY22E FY21A FY22E 538% Headline Earnings (ZAR’m)(1) 1,763% 503 104% 245 7% 33 7%
Slide 30: Significant Continued Investment
Significant Continued Investment Capex (ZAR’m)(1) Other Financial Considerations ✓Deep and continued investment into infrastructure capacity has led to assessed losses which will be utilised in future 3,617 3,127 16% ✓Limited working capital requirements given fixed payment terms with customers and
Slide 31: Valuation Drivers: Key Principles
Valuation Drivers: Key Principles FTTT FTTB FTTH • Predominantly mobile network • One enterprise / business connected • Vumatel able to successfully implement transmission to switches and towers likely to have multiple links mid to lower LSM strategy • Forms core backbone fibre network • DFA is one
Slide 32: Remgro CIVH Valuation
Remgro CIVH Valuation Cash flow valuation based on CIVH management 10-year forecast (1) (excluding Herotel) ZAR’bn ZAR’bn 57% (2) 41.2 26.5 (14.7) 15,1 Net enterprise value Net debt CIVH equity value Remgro equity value Notes: 1. Valuation date 31 December 2021 32 Source: Remgro valuation analysis 2
Slide 33: Vodacom Transaction Implied CIVH Valuation
Vodacom Transaction Implied CIVH Valuation Deal parameters Implied valuation(1) (excluding Herotel) ZAR’bn ZAR’bn ZAR’bn 3.0 13.2 30.8 44.0 4.2 40%(3) 57% x 70% of R44.0bn (implied 100% equity value) 6.0 13.2 17,5 Cash Fibre assets Cash top-up Investment Vodacom 30% Gross up of Implied 100% Implied
Slide 34: Final Thoughts
Final Thoughts
Slide 35: CIVH: A Unique, High-Growth Integrated Network Infrastructure Asset
CIVH: A Unique, High-Growth Integrated Network Infrastructure Asset African Champion Truly Open Value Creation Long Termed Market Access Engine Partnerships Leading Infrastructure Management Platform Team ✓ Driving digital ✓ Scale and contiguous ✓ Deep investment in ✓ Supportive, ✓ Strong, ethical c
Slide 36: Q&A
Q&A