ADRIA BIDCO Q3 2013 Financial Results Presentation 30 January 2014 - - PowerPoint PPT Presentation

Q3 2013 Financial Results Presentation

30 January 2014

ADRIA BIDCO

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This presentation includes forward-looking statements. Forward-looking statements can be identified by the use of forward-looking terminology, including words such as “believes,” “estimates,” “anticipates,” “expects,” “intends,” “may,” “will”, “could” or “should” or, in each case, their negative or other variations thereof or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this presentation and include statements regarding, or based upon, our Management’s current intentions, beliefs or expectations concerning, among other things, our future results of operations, financial condition, liquidity, prospects, growth, strategies, potential acquisitions, or developments in the industry in which we operate. Forward-looking statements are based upon assumptions and estimates about future events or circumstances, and are subject to risks and uncertainties. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these expectations will materialize. Accordingly, our actual results may differ materially from those expressed or implied thereby. Unless otherwise specified, forward-looking statements herein speak only as of the date of this

• presentation. We undertake no obligation, and do not intend, to publicly update or revise any forward-

looking statements, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements referred to above. Readers are cautioned not to place undue reliance on any forward-looking statements.

Disclosure Regarding Forward-Looking Statements

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Q3 2013 Highlights Financial Review Appendices

Agenda

Introduction Operational Review

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Introduction to Adria Bidco



South-East Europe’s leading provider of pay-TV and broadband services



1.82 million cable and satellite TV, broadband, fixed and mobile RGUs across the six countries of former Yugoslavia



Operating in a market characterized by rapidly growing pay- TV and broadband that is currently underpenetrated relative to other CEE and Western European markets



Unmatched reach via cable and direct-to-home platforms across the region, and ethnically targeted over-the-top content platforms internationally



Reputation for providing the most attractive content in its respective markets, available across all devices and formats



Group strategy leverages established proven strengths

–

superior network,

–

differentiated content offerings, and

–

loyal customer base

to further strengthen market leadership in the region and to target the region’s expat community with best in class local content delivered through the internet



Following completion of the transaction, the Group will be majority-owned by funds affiliated with KKR

2020 Senior Notes

Issuer Adria Bidco B.V. Listed GEM, Irish Stock Exchange Governing Law State of New York Outstanding notes €475 million Coupon 7.875% Maturity 15 November 2020 Coupon dates 15 November & 15 May ISIN code XS0992294388 (Reg. S) XS0992293810 (144A)

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Q3 2013 Highlights Financial Review Appendices

Agenda

Introduction Operational Review

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Q3 2013 operational highlights



Homes passed up by 3.6% to 1.26 million vs. Q2 2013, primarily as a result of network expansion



Acquisitions of world-wide OTT operator NetTV.Plus and Slovenian cable operator Elektro Turnsek completed, adding c. 55,000 OTT subscribers and c. 54,000 cable RGUs (c. 25,000 unique cable subscribers), respectively



Number of unique cable subscribers up to 802,000, from 777,000 at end-Q2 2013



RGUs up by 8.2% to 1.82 million since June 2013, driven by organic growth (c. 30,000 RGUs out of total RGU growth

• f c.139,000) and acquisitions of NetTV.plus and Elektro

Turnsek



Blended ARPU for Q3 2013 at €17 (vs. €16.6 for Q2 2013), driven by the migration from lower price analog to higher-priced digital pay-TV services

Homes passed (m) 1.21 1.26 Q2 2013 Q3 2013 1.68 1.82 Q2 2013 Q3 2013 RGUs (m) 16.60 17.00 Q2 2013 Q3 2013 Blended cable ARPU (€) +3.6% +8.2% +2.4%

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Q3 2013 financial highlights



Growing consolidated group revenues at €59.7m

–

SBB Serbia: €31.4 million

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Telemach Slovenia: €20.0 million

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Telemach BH: €4.9 million



Adjusted EBITDA up 4.6% to €27.5 million

–

Acquisitions contributed c.€1.2 million to EBITDA



Increase in operating cash flow to €16.6 million due to

–

positive operating results, and

–

improved working capital, partially offset by…

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higher CAPEX compared to Q2 2013 at €18.9 million driven by increased investments at SBB Serbia and Telemach Slovenia



Net leverage in Q3 2013 improved to 4.19x, from 4.25x in Q2 2013

Revenues (EUR m) 3.3 16.6 Q2 2013 Q3 2013 Operating cash flows (EUR m) 26.3 27.5 Q2 2013 Q3 2013 Adjusted EBITDA (EUR m) 57.8 58.5 59.7 Q1 2013 Q2 2013 Q3 2013 +1.2% +2.1% +4.6% +500%

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Q3 2013 Highlights Financial Review Appendices

Agenda

Introduction Operational Review

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

NetTV.plus - OTT content platform, which distributes local ethnic content to former Yugoslav expats around the world

–

Acquired in August 2013

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Over 150 local-language channels

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Community of 4-7 million people in Western Europe, North America and Australia

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55,000 subscribers as at 30 September 2013

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Significant future growth opportunities



Elektro Turnsek - Slovenian cable company

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Acquired in September 2013

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Added 25,404 cable pay-TV RGUs, 15,206 internet RGUs and 13,800 telephony RGUs to customer portfolio

Homes passed across key markets Key developments

Network expansion driven by bolt-on acquisitions

(‘000)

*Includes KDS and JET TV subscribers in Serbia

770 772 257 296 185 188 Q2 2013 Q3 2013 Q2 2013 Q3 2013 Q2 2013 Q3 2013 SBB Serbia* Telemach Slovenia Telemach BH

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

RGUs up by 8.2% to 1.82 million since June 2013, driven by

–

• rganic growth, and

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acquisitions (NetTV.plus and Elektro Turnsek)



Cable pay-TV RGUs positively affected by organic growth and acquisitions in Slovenia



Growth in telephony RGUs driven by Elektro Turnsek acquisition and increase in multi-play subscriptions

• ver the period



55,000 IPTV RGUs added through acquisition of NetTV.Plus

RGUs by service Key developments

RGUs

(‘000)

44% 34% 20% 1% 1%

Serbia* Slovenia

43% 27% 27% 2% 61% 30% 9% 1%

Bosnia 772 374

• 383

131 19 799 387 55 403 153 20 Cable pay-TV DTH pay-TV IPTV Broadband internet Fixed telephony Other services Q2 2013 Q3 2013 +3.5% +3.5% +5.2% +5.3% +16.8% *Revenues from DTH pay-TV services for all six countries of

• peration reported under SBB

Serbia

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

Q3 2013 blended cable ARPU up 2.4% to €17 on Q2 2013 SBB Serbia

–

Delayed price increase expected to come in 2014

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Promotional campaigns

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Lower telephony traffic

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FX impact

Telemach Slovenia

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Growth in subscribers for multi-play

• ffering

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Subscriber migration from lower-priced analogue cable pay-TV services to higher-priced digital pay-TV services

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Price increase for triple-play package

Telemach BH

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Growth in subscribers for multi-play

• ffering

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Price increases for cable pay TV and broadband internet services

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Higher telephony services revenues

ARPU per unique subscriber Key developments

Continued growth in blended cable ARPU

Blended cable ARPU (€)

12.9 12.6 28.7 30.4 12.9 13.7 Q2 2013 Q3 2013 Q2 2013 Q3 2013 Q2 2013 Q3 2013 SBB Serbia* Telemach Slovenia Telemach BH SBB Serbia* Telemach Slovenia Telemach BH in € Q2 2013 Q3 2013 Q2 2013 Q3 2013 Q2 2013 Q3 2013 Cable pay-TV 7.6 7.5 16.9 17.0 6.9 7.2 Broadband internet 11.3 10.9 16.3 17.2 10.0 10.3 Telephony 7.5 7.0 5.1 5.0 12.4 12.1

*Includes KDS and JET TV subscribers in Serbia

16.6 17.0 Q2 2013 Q3 2013

Cable ARPU by country(€)

+2.4%

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Q3 2013 Highlights Financial Review Appendices

Agenda

Introduction Operational Review

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57.8 58.5 59.7 Q1 2013 Q2 2013 Q3 2013

YTD revenue development Q3 2013 drivers

Revenue development

EUR (m)

+1.2% +2.1%



Group revenue up by 2.1% to €59.7 million due to organic growth, an overall increase in ARPU and acquisitions SBB Serbia



Increased revenue in RSD terms driven by subscriber base growth and migration to multi-play packages, offset by FX impact, resulting in a 1.4% decline to €31.4 million Telemach Slovenia



Revenue up by 9.9% to €20.0 million due to:

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acquisition of Elektro Turnsek

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continued subscriber migration to higher priced digital pay TV services

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increase in the number of multi play subscribers Telemach BH



Revenue up by 6.7% to €4.9 million due to organic subscriber base growth and increased service penetration United Media Group



Stable revenues at €6.8 million in line with gradual subscriber base growth

31.8 18.2 4.6 6.7 31.4 20.0 4.9 6.8 SBB Serbia Telemach Slovenia Telemach BH United Media Group Q2 2013 Q3 2013

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EBITDA reconciliation

EBITDA by business segment

EBITDA development



Adjusted EBITDA up 4.6% to €27.5 million

22,766 3,836 37 29 106 743 27,516

Reported EBITDA Refinancing costs Non-cash impairment charges Donation expenses Rent expenses Other Adjusted EBITDA

EUR (‘000)

26.3 27.5 Q2 2013 Q3 2013 EUR (‘000)

Adjusted EBITDA

+4.6% 36% 47% 8% 8% 1% Telemach Slovenia SBB Serbia Telemach BH United Media Net TV Plus & Other

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Capital expenditures

CAPEX development Q3 2013 drivers



Higher growth-driven CAPEX vs. Q2 2013 at €18.9 million due to more intensive investments in Serbia and Slovenia SBB Serbia



Increase due to investments in customer premise equipment, head- end and network Telemach Slovenia



Increased investments into customer premise equipment, backbone and network

9.0 2.8 2.5 12.6 4.4 1.5 SBB Serbia Telemach Slovenia Telemach BH Q2 2013 Q3 2013

EUR (m)

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4.30x 4.35x 4.25x 4.19x Q2 2013 Q3 2013 Gross leverage Net leverage

Operating cash flow

Cash flow generation and financial position

3.3 16.6 Q2 2013 Q3 2013

EUR (m)

Q3 2013 drivers



Despite higher capex due to increased investments at SBB Serbia and Telemach Slovenia, significant increase in operating cash flow driven by:

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positive operating results, and

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improved working capital due to regulatory changes in Serbia

–

increase in trade and other payables was a result of a change in local legislation in Serbia, which shortened supplier payment periods. This was a one-

• ff effect in H1. In addition,

significant Capex was realised in Q3 which led to an increase in liabilities

5x

Leverage

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Q3 2013 Highlights Financial Review Appendices

Agenda

Introduction Operational Review

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P&L statement

Group in €000 Q2 2013 Q3 2013 Revenue 58,477 59,680 Other income 788

• Content cost

(11,951) (13,878) Satellite capacity cost (1,825) (1,828) Internet cost (851) (914) Materials cost (1,641) (1,703) Staff costs (5,300) (5,403) Depreciation (11,793) (12,524) Amortisation of intangible assets (4,242) (5,300) Other operating expenses (12,279) (13,188) Results from operating activities 9,383 4,942 Finance income 106 226 Finance costs (6,461) (5,763) Net finance costs (6,355) (5,537) Profit/(loss) before tax 3,028 (595) Income tax (expenses)/benefit (1,780) 523 Profit/(Loss) for the period 1,248 (72)

*includes €890,000 of extraordinary items in Q2 2013 and €4,750,000 of extraordinary items in Q3 2013

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Balance Sheet

in EUR ‘000

Q2 2013 Q3 2013 Non-current assets Goodwill 386,026 418,011 Intangible assets 124,320 145,486 Plant, property and equipment 197,434 206,063 Other non-current assets 3,394 7,997 711,174 777,556 Current assets Inventory 178 539 Trade and other receivables 46,230 52,867 Prepayments 12,521 14,331 Cash and cash equivalents 16,221 36,621 75,150 104,358 Total assets 786,324 881,914 Equity Share capital 200 200 Share premium 1,800 1,800 Other equity 454,641 454,974 Translation reserves (4,096) (5,615) Retained earnings (924) (2,547) 451,621 448,812 Non-current liabilities Long term provisions 2,161 2,012 Loans and borrowings 228,690 286,257 Finance lease 2,802 3,231 Other non-current liabilities 24,411 26,554 258,064 318,055 Current liabilities Loans and borrowings 10,221 16,370 Finance lease 583 508 Trade payables and other liabilities 64,741 95,227 Deferred revenue 1,094 2,942 76,639 115,047 Deferred tax liabilities Total equity and liabilities 786,324 881,914

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Cash flow statement

in €000 Q2 2013 Q3 2013 Cash flows from operating activities Profit/(Loss) before tax 3,028 (595) Adjustments for: Depreciation 11,793 12,524 Amortisation 4,242 5,300 Impairment of receivables 1,810 6 Unrealised net finance cost (3,750) 4,738 Operating cash flows before WC changes 17,123 21,073 Changes in working capital: Increase in trade and other receivables (3,245) (3,712) Increase/(Decrease) in deferred revenue 1,067 (1,010) Decrease in deferred costs 108 (1,362) Decrease in other current assets and liabilities (2,095) (159) Increase in trade and other payables (4,706) 6,324 Cash generated from operations 8,252 22,054 Interest paid (3,830) (4,874) Income tax paid (1,103) (612) Net cash from/(used in) operating activities 3,319 16,568 Cash flows from investing activities Purchase of property, plant and equipment (15,419) (17,244) Purchase of intangible assets 1,784 (4,449) Acquisition of subsidiaries (326) (29,350) Repayment of financial assets 1,310

• Increase in non-current financial assets

(149) (3,501) Net cash used in investing activities (12,800) (54,544) Cash flows from financing activities Proceeds from borrowings 10,000 59,396 Repayment of borrowings (2,720) (1,020) Net cash used in financing activities 7,280 58,375 Net increase in cash and cash equivalents (2,201) 20,400 Cash and cash equivalents at beginning of period 18,422 16,221 Cash and cash equivalents at end of period 16,221 36,621

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Presentation of Financial Information This Presentation presents the following financial information, which has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS”). The unaudited condensed consolidated financial statements of the Group as of and for the three months, and as of and for the six months ended June 30, 2013 and 2012. Non-IFRS Financial Measures The Group may present financial information herein that is not prepared in accordance with IFRS or any other generally accepted accounting principles, such as EBITDA, Adjusted EBITDA and other financial measures. This non-IFRS financial information should be considered in addition to, but not as a substitute for, financial information prepared in accordance with IFRS. Since not all companies compute these or other non-IFRS financial measures in the same way, the manner in which the Group has chosen to compute the non-IFRS financial measures presented herein may not be comparable with similarly defined terms used by other companies.

Presentation of Consolidated Financial Data