47 slides from VEON Ltd. ORD's earnings presentation, May 12, 2016
Slide 1: 1Q16 Results Presentation
1Q16 Results Presentation © VimpelCom Ltd 2016 Amsterdam – May 12, 2016 Jean-Yves Charlier – Chief Executive Officer Andrew Davies – Chief Financial Officer 1
Slide 2: Disclaimer
Disclaimer This presentation contains “forward-looking statements”, as the phrase is defined in Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. Forward-looking statements are not historical facts, and include statem
Slide 3: 1Q16 Results update - speakers and agenda
1Q16 Results update - speakers and agenda Jean-Yves Charlier – Chief Executive Officer • Group highlights • Financial highlights © VimpelCom Ltd 2016 Andrew Davies – Chief Financial Officer • Group results review • Country results review • Group FY16 guidance Jean-Yves Charlier – Chief Executive Off
Slide 4: Highlights 1Q16
Highlights 1Q16 Revenue and underlying EBITDA back to organic growth, driven by strong EM, Ukraine and Uzbekistan, partially offset by Russia Strong organic mobile data revenue growth of 27% YoY supported by all operations © VimpelCom Ltd 2016 Italy JV regulatory review process ongoing; Phase II sta
Slide 5: Financial highlights 1Q16
Financial highlights 1Q16 Service revenue EBITDA margin, underlying2 (USD billion) (%) • Results on track with 2016 guidance • Service revenue YoY organic growth of 2.6% 2.0 39.5 driven by Pakistan and Bangladesh, Ukraine and Uzbekistan © VimpelCom Ltd 2016 +2.6% organic1 YoY -0.8 p.p. organic1 YoY
Slide 6: Financial highlights 1Q16 – YoY trends
Financial highlights 1Q16 – YoY trends Service revenue and total revenue YoY organic1 development Underlying2 EBITDA margin development Service revenue Total revenue 40.9% 39.5% 2.6% 3.8% LTM of 40.5% © VimpelCom Ltd 2016 -0.2% -0.5% 1Q 15/14 1Q 16/15 1Q15 1Q16 Capex/revenue development OCF marg
Slide 7: Improving organic growth
Improving organic growth 5% 3% 2% 1% -2% -1% -1% -3% -14% -15% © VimpelCom Ltd 2016 -22% -26% -32% -25% -27% -33% 2Q15 3Q15 4Q15 1Q16 Organic service revenue (YoY) Underlying organic EBITDA (YoY) Underlying reported EBITDA (YoY) Reported service revenue (YoY) Organic service revenue and EBITDA growt
Slide 8: FOREX movements in VimpelCom’s footprint
FOREX movements in VimpelCom’s footprint VIP Coin1 vs USD 100 100 98 94 © VimpelCom Ltd 2016 90 82 80 76 73 70 70 66 66 64 60 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 1 Apr. - 6 May 2016 8 1 VimpelCom Currency weightings calculated from the sum of the individual countries’ relative contribution
Slide 9: Creating a leading converged operator in Italian telecoms
Creating a leading converged operator in Italian telecoms The merger will create a stronger competitor to the two market leaders… Bifurcation Digital divide © VimpelCom Ltd 2016 4G/LTE coverage1 Italy is behind other main European countries • #1/2 players: 75%/64% • Smartphone penetration is low rel
Slide 10: Performance transformation accelerating and on track
Performance transformation accelerating and on track1 Agile operating Procurement Supply chain © VimpelCom Ltd 2016 model • 7% net reduction of headcount • 40% of contract value now • 15% reduction in inventory levels managed globally vs 20% • 30% reduction of micro teams • 7% warehouse space reduct
Slide 11: 1Q16 speakers and agenda
1Q16 speakers and agenda Jean-Yves Charlier – Chief Executive Officer • Group highlights • Financial highlights © VimpelCom Ltd 2016 Andrew Davies – Chief Financial Officer • Group results review • Country results review • Group FY16 guidance Jean-Yves Charlier – Chief Executive Officer • Final rema
Slide 12: 1Q16 service revenue evolution
1Q16 service revenue evolution USD million -13.6% (31) 84 (20) 27 (366) 2,260 reported service revenue declining … 2,319 1,953 © VimpelCom Ltd 2016 Service revenue Voice Data and MFS Interconnect Other Organic service FOREX Service revenue 1Q15 and roaming revenue 1Q16 1Q16 +2.6% -1% YoY +5% YoY +5%
Slide 13: 1Q16 EBITDA evolution
1Q16 EBITDA evolution USD million -19.1% 66 (109) 7 59 (162) (40) 938 945 reported EBITDA declining 799 758 © VimpelCom Ltd 2016 EBITDA Exceptional Underlying EBITDA Service revenue Performance Re-investment in Forex Underlying EBITDA Exceptional EBITDA 1Q15 items 1 1Q15 transformation mono-brand, 1
Slide 14: 1Q16 income statement
1Q16 income statement USD million 1Q16 1Q15 YoY Revenue 2,023 2,312 (12%) EBITDA reported 758 938 (19%) • due to currency headwind impact of USD 162 million and exceptional costs of USD 40 million in 1Q16 and USD 7 million in 1Q15 D&A and other (454) (630) (28%) • a result of local currencies deprec
Slide 15: Net income from continued operations
Net income from continued operations USD million +69 (23) 60 47 (37) © VimpelCom Ltd 2016 (48) 86 6 16 38 17 (88) 105 Net Income from Impairment and Net Income Underlying Net Underlying Depreciation and Net financial Tax Net Forex Impact JV, associates & Net Income Underlying Net Impairments & Net I
Slide 16: Net cash flow from operating activities
Net cash flow from operating activities USD million +10% +10% 123 112 113 146 15 63 611 555 © VimpelCom Ltd 2016 443 488 849 (238) 1,319 (764) Net cash used in Algeria closing and Underlying Net Discontinued Underlying Underlyingnet net Underlying EBITDA Interest & Tax Working capital & Underlyingne
Slide 17: 1Q16 net debt evolution
1Q16 net debt evolution USD million 124 849 (57) (758) 439 189 125 © VimpelCom Ltd 2016 6,407 5,496 5,434 Net debt EBITDA Net Interest Taxes CAPEX 2 Change in WC and Net Debt before Exceptionals in Forex and other Net debt 31 December 2015 other exceptionals 1Q16 3 31 March 2016 Net debt/ 1.4x 1.4x
Slide 18: The capital structure simplification journey started in 2013
The capital structure simplification journey started in 2013… February 2018 RUB 12 billion Tender prioritizing PJSC1 bonds / February 2019 USD 0.6 billion & PJSC1 guaranteed bonds over PJSC February 2023 USD 1.0 billion fall-away guaranteed VimpelCom HQ bonds VimpelCom Bonds with PJSC1 fall- CDB loa
Slide 19: USD 1.2 billion of GTH bonds successfully issued
USD 1.2 billion of GTH bonds successfully issued Key terms Amount issued USD 1.2 billion in two tranches Issuer GTH Finance B.V. (wholly owned subsidiary of Global Telecom Holding S.A.E.) Guarantor VimpelCom Holdings B.V. (guarantee fee: 3.0%4) Use of proceeds Refinancing of the shareholder loan fro
Slide 20: Russia: challenging environment, increasing competition
Russia: challenging environment, increasing competition RUB BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Increasing competition -1.3% YoY +3.5% YoY • Fixed-line service revenue decreased 11% YoY, 12.2 11.3 10.9 mainly as a result of a change in B2B contracts from U.S
Slide 21: Russia: Performance transformation starting to deliver
Russia: Performance transformation starting to deliver RUB MILLION -7.5% -0.7% 26,130 25,948 435 712 965 513 522 39.4% 39.1% © VimpelCom Ltd 2016 323 430 24,160 36.4% EBITDA 1Q15 Fixed-line revenue Performance Monobrand Adjusted Devices One-off Other FOREX EBITDA 1Q16 decrease transformation roll ou
Slide 22: Algeria: transformation program ongoing
Algeria: transformation program ongoing DZD BILLION, UNLESS STATED OTHERWISE Mobile service revenue Mobile customers (million) • Stable service revenue YoY, positively affected by: -0.2% YoY -2.5% YoY ► Favorable change in interconnect rates (+18% YoY) ► Data revenue increase (+135% YoY) • The marke
Slide 23: Pakistan: double digit growth in revenue and EBITDA
Pakistan: double digit growth in revenue and EBITDA PKR BILLION, UNLESS STATED OTHERWISE Mobile service revenue Mobile customers (million) • Double digit revenue growth supported by all +12.5% YoY -0.2% YoY revenue streams, gaining market share • Strong data revenue increase of 80% YoY, due to succe
Slide 24: Bangladesh: continued strong performance
Bangladesh: continued strong performance BDT BILLION, UNLESS STATED OTHERWISE Mobile service revenue Mobile customers (million) • Maintained growth momentum in the face of +6.4% YoY -0.7% YoY intense competition • Ongoing SIM verification process in the market: banglalink has verified 72% of its 31.
Slide 25: Ukraine: robust results enabled by successful 3G launch
Ukraine: robust results enabled by successful 3G launch UAH BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Strong market leader in challenging +12.4% YoY -3.1% YoY environment 0.3 0.3 • Robust mobile service revenue growth driven 0.2 by successful 3G launch 26.1 • Mobi
Slide 26: Italy: improving mobile top line trend
Italy: improving mobile top line trend EUR MILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Mobile service revenue trend further improved, -1.7% YoY -2.0% YoY almost flat YoY 278.2 267.6 263.0 • Mobile ARPU YoY growth at 1.5%, confirming signs of market recovery 21.4 20.
Slide 27: 2016 guidance confirmed
2016 guidance confirmed Actual 2015 Targets Flat to low single digit Service Revenue1 (0.2%) growth YoY © VimpelCom Ltd 2016 EBITDA Margin1 40.8% Flat to +1 p.p. CAPEX / Revenue1 18.2% 17-18% OCF margin1 22.6% Flat to +2 p.p. (EBITDA-CAPEX)/Revenue Leverage2 1.4x ~2x 1 All targets except leverage ca
Slide 28: 1Q16 speakers and agenda
1Q16 speakers and agenda Jean-Yves Charlier – Chief Executive Officer • Group highlights • Financial highlights © VimpelCom Ltd 2016 Andrew Davies – Chief Financial Officer • Group results review • Country results review • Group FY16 guidance Jean-Yves Charlier – Chief Executive Officer • Final rema
Slide 29: Final remarks
Final remarks 1 Challenging macro-economic environment still weighting on reported results, however improvement in sight 2 Revenue and underlying EBITDA back to organic growth in 1Q16 © VimpelCom Ltd 2016 3 Italy transaction closing expected around the end of 2016 4 Performance transformation accele
Slide 30: 1Q16 speakers and agenda
1Q16 speakers and agenda Jean-Yves Charlier – Chief Executive Officer • Group highlights • Financial highlights © VimpelCom Ltd 2016 Andrew Davies – Chief Financial Officer • Group results review • Country results review • Group FY16 guidance Jean-Yves Charlier – Chief Executive Officer • Final rema
Slide 31: Further information
Further information Investor Relations Claude Debussylaan 88 1082 MD Amsterdam The Netherlands © VimpelCom Ltd 2016 T: +31 20 79 77 234 E: ir@vimpelcom.com Visit our website www.vimpelcom.com 31
Slide 32: Appendix
© VimpelCom Ltd 2016 32 Appendix
Slide 33: Kazakhstan: gaining EBITDA market share despite intense competition
Kazakhstan: gaining EBITDA market share despite intense competition KZT BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Mobile service revenue decreased by -6.7% YoY -4.3% YoY 4% YoY, excluding MTR reductions • Fixed-line service revenue growth of 29% YoY 3.7 4.6 4.8 9.
Slide 34: Uzbekistan: competition intensifying
Uzbekistan: competition intensifying UZS BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers +14.6% YoY (million) • Strong growth in mobile service revenue of -8.3% YoY 15% YoY 3.4 3.4 3.5 • Competition expected to increase 492.6 • Increase in customer tax negatively impacted 464.9 © V
Slide 35: Armenia: strengthened market position
Armenia: strengthened market position AMD BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • NPS position improved to leading position -13.6% YoY +6.7% YoY • Growing customer and EBITDA market share in a declining market 6.9 6.5 5.8 • Mobile data revenue growth of 12% YoY
Slide 36: Kyrgyzstan: remained clear market leader
Kyrgyzstan: remained clear market leader KGS BILLION, UNLESS STATED OTHERWISE Mobile service revenue Mobile customers (million) • Clear market leader, #1 in NPS as a result of -0.1% YoY -6% YoY network quality and value proposition • Customer base decreased YoY mainly due to emigration as a result o
Slide 37: Georgia: continued customer improvement
Georgia: continued customer improvement GEL MILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Service revenue pressure due to mobile price -17.1% YoY -3.5% YoY competition and fixed-line transit traffic cancelation 3.3 2.3 0.0 • Strong mobile data revenue growth of 35% Yo
Slide 38: Tajikistan: outperformance in a challenging market
Tajikistan: outperformance in a challenging market USD MILLION, UNLESS STATED OTHERWISE Mobile service revenue Mobile customers (million) • Challenging environment with increasing -26.6% YoY -5.6% YoY competition and currency headwinds • Lower incoming international traffic due to fewer migrants liv
Slide 39: 1Q16 cash flow statement
1Q16 cash flow statement 1Q16 1Q15 YoY USD million EBITDA 758 938 (179) Changes in working capital and other (805) (1,220) 415 Net interest paid (189) (252) 63 © VimpelCom Ltd 2016 Income tax paid (125) (342) 217 Net operating cash flow from discontinued 123 112 11 operations Net cash from/(used in)
Slide 40: VimpelCom debt structure
VimpelCom debt structure VimpelCom HQ debt as at 31 March 2016 Outstanding USD million Maturity Coupon (USD) Currency Debt Issuance VimpelCom Holdings (PJSC Guarantee) 2017 6.2546% 349 USD Structural Objectives VimpelCom debt as at 31 March 2016 VimpelCom Holdings (PJSC Guarantee) 2022 7.5043% 1,280
Slide 41: Liquidity analysis
Liquidity analysis Group Cash breakdown by currency Unused RCF headroom at the end 1Q16: (March 31, 2016) VimpelCom - syndicate USD 1.8 billion PJSC VimpelCom - Sberbank RUB 15 billion (USD 0.2 billion ) © VimpelCom Ltd 2016 39% Unused VF/CF headroom at the end 1Q16: VimpelCom - CDB RMB 0.7 billion
Slide 42: Net debt/EBITDA
Net debt/EBITDA Net debt / EBITDA1 Net debt / EBITDA1 (December 31, 2015) (March 31, 2016) © VimpelCom Ltd 2016 3.1 2.9 1.7 1.4 Group Including Italy Group Including Italy 42 1 Underlying EBITDA
Slide 43: Group debt maturity schedule
Group debt maturity schedule As at 31 March 2016, in USD billion Group debt maturity schedule 2.7 Russia GTH HQ 1.6 1.1 1.2 1.3 1.0 © VimpelCom Ltd 2016 0.7 0.1 2016 2017 2018 2019 2020 2021 2022 >2022 Group debt maturity schedule by currency1 2016 2017 2018 2019 2020 2021 2022 >2022 USD 0.4 1.5 0.6
Slide 44: Debt by entity
Debt by entity As at 31 March 2016, USD million Outstanding debt (millions) Type of debt/lender Entity Bonds Loans RCF Vendor Financing Other Total VimpelCom Holdings B.V. 3,360 - - - - 3,360 VimpelCom Amsterdam B.V. - 1,000 - 622 - 1,622 PJSC VimpelCom 2,008 1,299 - 103 43 3,453 © VimpelCom Ltd 201
Slide 45: Reconciliation of reported to underlying EBITDA
Reconciliation of reported to underlying EBITDA 1Q16 1Q15 USD million, unaudited EBITDA 758 938 Transformation costs, of which 44 - © VimpelCom Ltd 2016 Other transformation costs at OpCo level 9 - - Other transformation costs at HQ level 35 Other exceptional items in OpCos, of which (4) 7 Reversal
Slide 46: Reconciliation of consolidated net debt
Reconciliation of consolidated net debt 31 31 March December 2016 2015 USD million Net debt 6,407 5,496 © VimpelCom Ltd 2016 Cash and cash equivalents 2,928 3,614 Long - term and short-term deposits 351 434 Gross debt 9,686 9,544 Interest accrued related to financial liabilities 148 179 Fair value a
Slide 47: Rates of functional currencies to USD
Rates of functional currencies to USD Average rates Closing rates Closing rates FY16 1Q16 1Q15 YoY 1Q16 1Q15 YoY 4Q15 4Q14 YoY Targets Russian Ruble 74.63 62.19 20.0% 70.00 67.61 58.46 15.6% 72.88 56.26 29.5% Euro 0.91 0.89 2.0% 0.88 0.88 0.93 -5.5% 0.92 0.83 11.4% © VimpelCom Ltd 2016 Algerian Dina