Orange Polska S.a. · GPW:OPL
Orange Polska — Q4 2020 Earnings Presentation
38 slides from Orange Polska's earnings presentation, Feb 18, 2021
Slide 1: Orange Polska 4Q'20 and FY'20 results
Orange Polska 4Q’20 and FY’20 results 18 February 2021 1
Slide 2: Forward looking statement
Forward looking statement This presentation contains 'forward-looking statements' including, but not limited to, statements regarding anticipated future events and financial performance with respect to our operations. Forward-looking statements can be identified by the fact that they do not relate s
Slide 3: Reconciliation of operating performance measure to financial statements
Reconciliation of operating performance measure to financial statements Disclosures on performance measures, including information on data restatements for the year 2019 in connection with changes in accounting policies, have been presented in the Notes 2 and 3 to IFRS Consolidated Financial Stateme
Slide 4: Contents
Contents 1. Highlights & Business review 2. Financial review 3. Orange.one summary 4. 2021 outlook 5. Q&A session 4
Slide 5: Highlights & Business review
Highlights & Business review Julien Ducarroz Chief Executive Officer 5
Slide 6: 2020 guidance met: EBITDAaL up 3% year-on-year
2020 guidance met: EBITDAaL up 3% year-on-year 2020 guidance FY 2020 results ✓ EBITDAaL PLN 2.8bn Growth vs 2019 +2.9% yoy 2020 expectations Revenues Growth vs 2019 PLN 11.5bn +0.9% yoy ✓ eCapex (excluding spectrum) PLN 1.7-1.9bn, depending on proceeds from asset disposal PLN 1.8bn ✓ 6
Slide 7: 2020 goals achieved in particularly challenging environment
2020 goals achieved in particularly challenging environment Business ▪ 85% of staff on remote work with no disruptions in business processes continuity ▪ Quality of networks more essential than ever: mobile voice traffic +19% yoy, secured mobile data +43% yoy, fixed data +51% yoy ▪ Numerous actions
Slide 8: Fibre customer base up c.10% in 4Q (63k record net additions)
Fibre customer base up c.10% in 4Q (63k record net additions) Significant growth in total FBB net additions Fibre customer base up 39% yoy and Fibre accounts for 27% of total (the best in 3 years) 10% qoq broadband customer base (in k) (in k) (in k) +63 +54 +4% +47 725 40 662 2,607 2,702 520 24 18 2
Slide 9: Value creation visible through strong commercial performance and consistent cost optimisation
Value creation visible through strong commercial performance and consistent cost optimisation Convergence: Mobile handset: Net adds best in 2 years… …and ARPO growth accelerating Strong net adds… … and improving ARPO trend Customer base ARPO Customer base ARPO in PLN in m 8.10 in m in PLN 1.48 7.75
Slide 10: Financial review
Financial review Jacek Kunicki Chief Financial Officer 10
Slide 11: 4Q/FY 2020 financial results key highlights
4Q/FY 2020 financial results key highlights in PLNm 2020 yoy 4Q’20 yoy key points ▪ Growth driven by convergence, IT/IS and revenues 11,508 +0.9% 3,083 +2.8% mobile wholesale EBITDAaL 2,797 +2.9% 654 -4.1% ▪ FY supported by 4% yoy decline in indirect costs ▪ 4Q affected by provisioning for claims an
Slide 12: 4Q revenue growth thanks to strong performance of core telecom services and IT/IS
4Q revenue growth thanks to strong performance of core telecom services and IT/IS Revenue evolution ▪ Core telecom services*** (+3.6% yoy) yoy change +8.6% +9.2%* +8.1%* growth accelerating thanks to strong growth of customer volumes and improving ARPO trends (driven by our value +3.2%* core strateg
Slide 13: 4Q EBITDAaL reflecting growing direct margin and increased provisioning; FY objective delivered
4Q EBITDAaL reflecting growing direct margin and increased provisioning; FY objective delivered EBITDAaL evolution (yoy change in PLNm) ▪ Direct margin up 2% yoy: +2.9% ▪ Thanks to growth of core telecom services & IT/IS 2,718 2,797 ▪ Despite structural drop of legacy services and -4.1% much less ro
Slide 14: Bottom line evolution reflects growing EBITDAaL
Bottom line evolution reflects growing EBITDAaL, Social Plan provisioning in 2019 and much less gains on sale of assets in 2020 Evolution from EBITDAaL to the bottom line in FY 2020 (PLNm) yoy change +79 -63 -4 +186* -209 -34** +9 -36 2,797 -2,511 +62 +61 -5 -342 -16 46 EBITDAaL D&A of PPE Interest
Slide 15: 2020 eCapex reflects much lower proceeds from sale of assets
2020 eCapex reflects much lower proceeds from sale of assets Investment areas (in PLNm) ▪ Fibre capex down 14% yoy mainly reflecting: Capex 2,140 1,893 ▪ Lower investments in backbone ▪ Higher share of 3rd party in the footprint Mobile Network 318 expansion (vs own build) 238 ▪ Mobile capex down 25%
Slide 16: Cash flow reflects strong generation from operating activities; falling financial leverage
Cash flow reflects cash strong generation from operating activities and much lower proceeds from sale of assets. Falling financial leverage Cash flow evolution breakdown in FY 2020 in PLNm yoy change +82 +65 +257 -440 -59 -95 2,767 +238 -2,015 +60 -408 642 Net cash from Repayment Organic operating C
Slide 17: Orange.one summary
Orange.one summary Julien Ducarroz Chief Executive Officer Bożena Leśniewska Deputy CEO in charge of business market Jacek Kunicki Chief Financial Officer 17
Slide 18: Orange.one strategy well executed
Orange.one strategy well executed v a lue NPS #1 Shift in the Focus on Fibre driving Transformation The most commercial convergence rebound in fixed leading to higher recommended approach broadband efficiency operator by 2020 18
Slide 19: Fibre brings competitive advantage and gives support to convergence
Fibre brings competitive advantage and gives support to convergence Fibre network reached c.35% of Polish Monetisation of fibre network has …driving transformation and growth of households accelerated in 2020… FBB customer base Households Retail fibre FBB customer base connectable customers growth +
Slide 20: Convergence as a bedrock of our commercial strategy
Convergence as a bedrock of our commercial strategy Strong growth of convergent customer base… …who is more loyal Penetration Less churn with convergence in B2C FBB +43% 1,483 (average churn difference for 2020) in k 1,035 -4pp 50% 65% convergent customers vs mono FBB B2C customers (for ADSL, VDSL,
Slide 21: Strong trends in mobile reflect effective value strategy
Strong trends in mobile reflect effective value strategy …coupled with churn reduction Value pricing helps improving trend in Steady growth of mobile handset mobile handset ARPO trend customer base … yoy % -1% Mobile handset Average quarterly churn rate in change excl.roaming customers 8.1 mobile po
Slide 22: Digital and adjacent areas: progress made, room for further growth
Digital and adjacent areas: progress made, room for futher growth Digital transformation to further boost Adjacent areas 2020 our journey to online customer relations Orange Finance Share of online sales + Orange Energy 14% + 8% Devices + 2016 2020 Orange Smart Care 2020 revenues PLN 420m (vs >PLN 3
Slide 23: Since 2017 B2B has travelled a long way from legacy telco operator
Since 2017 B2B has travelled a long way from legacy telco operator towards network-native digital service company A leap in revenue growth… +6% 2.2x Boost of ICT ICT revenue Declining telco Rebound in telco other revenue 2017 2020 … accelerated by: value management of legacy investments in fibre net
Slide 24: We have doubled ICT revenue whilst focusing on the most profitable domains
We have doubled ICT revenue whilst focusing on the most profitable domains Over the recent years we have gathered … which resulted in growth of the most margin- competences to address emerging market trends… attractive domains ICT revenue structure 7% Software & apps IT Infrastructure 22% Networking
Slide 25: We met all our financial promises
We met all our financial promises Financial commitments as presented in September 2017 (strategy announcement) 2018 2019 2020 Revenue stabilisation growth ✓ Adj. EBITDA(aL) stabilisation growth growth ✓ CAPEX (PLNbn) 2.0-2.2 2.0-2.2 ~2.0 ✓ Net debt decreasing decreasing ✓ 25
Slide 26: We reversed multi-year negative trends and delivered a financial turnaround
We reversed multi-year negative trends and delivered a financial turnaround Turnaround of EBITDAaL* +7% 2014 2015 2016 2017 2018 2019 2020 Revenues EBITDAaL** Indirect costs Net debt +4% +7% -15% -13% vs vs vs vs 2017 2018 2017 2017 *Until 2018 growth rates of adjusted EBITDA. Both adjusted EBITDA (
Slide 27: 2021 outlook
2021 outlook Julien Ducarroz Chief Executive Officer 27
Slide 28: Key priorities for 2021
Key priorities for 2021 Sustaining strong commercial momentum ▪ Further focus on fibre and Covid impact management convergence ▪ Post pandemic plan ▪ B2B & ICT Execution on FiberCo project Acquisition of 5G spectrum ▪ Project on track with expected ▪ New auction process not yet signing in 1H started
Slide 29: 2021 guidance
2021 guidance 2020 2021 guidance EBITDAaL PLN 2,797m Low single digit growth vs 2020 Revenues PLN 11,508m Low single digit growth vs 2020 eCapex PLN 1.80bn PLN 1.7-1.9bn, depending on proceeds from asset disposal (excluding spectrum) 29
Slide 30: Q&A
Q&A 30
Slide 31: Appendix
Appendix 31
Slide 32: Details of bottom line evolution in 4Q and FY 2020
Details of bottom line evolution in 4Q and FY 2020 in PLNm 2020 2019 Change 4Q’20 4Q’19 Change EBITDAaL 2,797 2,718 +79 654 682 -28 D&A of PPE and intangible assets -2,511 -2,448 -63 -649 -698 +49 add-back interest expense on lease 62 66 -4 15 15 0 liabilities Adjustments* -5 -191 +186 -3 -179 +176
Slide 33: Details of organic cash flow evolution in 4Q and FY
Details of organic cash flow evolution in 4Q and FY 20 in PLNm 2020 2019 Change 4Q’20 4Q’19 Change Net cash flow from operating activities 2,767 2,685 +82 707 734 -27 before change in working capital Change in working capital 238 173 +65 42 197 -155 Net cash flow from operating activities 3,005 2,85
Slide 34: Orange.one financial commitments and outcomes
Orange.one financial commitments and outcomes 2018 2019 2020 promise result promise result promise result Revenue stabilisation +2.9% ✓ growth +0.9% ✓ Adj. EBITDA(aL) stabilisation +3.1% ✓ growth +4.5% ✓ growth +2.9% ✓ CAPEX (PLNm) 2.0-2.2 2.2 ✓ 2.0-2.2 2.1 ✓ ~2.0 1.8 ✓ ND/EBITDAaL✓ - PLN 0.6bn -PLN
Slide 35: Indirect costs down c.20% in the past 4 years
Indirect costs down c.20% in the past 4 years Strong pace of net savings in indirect costs… …with 50% coming from non-labour areas Indirect costs cumulative: 2017- 2020 yoy change in PLNm and in % 50% Labour 5% 7% 4% 4% 10% CRM subcontracting services 6% IT & Network 16% General expenses & other 17%
Slide 36: We successfully combine business turnaround with social responsibility
We successfully combine business turnaround with social responsibility Environment Social Governance We implement our business goals with We make new technologies a supporter Our corporate governance is designed to respect for ecology rules and in harmony of economic and social development provide r
Slide 37: Glossary (1/2)
Glossary (1/2) 4G fourth generation of mobile technology, sometimes called LTE (Long Term Evolution) ARPO Average Revenue per Offer data user a customer who used mobile data transmission in a given month Revenues from B2C convergent offers (excluding equipment sales). A convergent offer is defined a
Slide 38: Glossary (2/2)
Glossary (2/2) Convergent services, mobile retail and wholesale, fixed broadband, IT and integration services, Growth services equipment and B2B network solutions and adjacent services Households (HH) connectable in fibre Households where broadband access service based on fibre technology can be ren