Interim Results Presentation For the period ended 30 June 2018 - - PowerPoint PPT Presentation

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Interim Results Presentation For the period ended 30 June 2018 - - PowerPoint PPT Presentation

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Interim Results Presentation For the period ended 30 June 2018 Highlights H1 2018 Key performance indicators +5 % +16 % 13 % YOY YOY of revenue Revenue EBITDA Capital Expenditure R7.8 Billion R2.4 Billion R1 Billion +11 % +31 % -33 %

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Interim Results Presentation

For the period ended 30 June 2018

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Highlights – H1 2018 Key performance indicators

+5%

YOY Revenue R7.8 Billion

+16%

YOY EBITDA R2.4 Billion

13%

  • f revenue

Capital Expenditure R1 Billion

+11%

YOY Service Revenue R6.9 Billion

+31%

EBITDA Margin YOY 3%

  • 33%

YOY Net Loss After Tax R0.6 Billion

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Positive results

Summary of reported financial information

R’m H1 2018 H1 2017 % Change Service revenue 6 861 6 196 11 Non-service revenue 914 1 189

  • 23

Total revenue 7 775 7 385 5 Gross margin 4 311 3 854 12 Gross margin % 55% 52% 3 EBITDA 2 378 2 048 16 EBITDA margin % 31% 28% 3 Net profit/(loss) after tax (645) (968) 33

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Unpacking our subscribers

Million H1 2018 H1 2017 % Change Total active subscribers 16.3 15.7 4 MVNO subscriber base 1.7 1.3 31 Total active data subscribers 12.1 12.6 4 Data revenue (R’m) 2 961 2 473 20 Capital expenditure (R’m) 1 016 494 >100 Increase in smartphone users YOY 11 Smartphones on our network (million) 9.0 8.1 Rand H1 2018 H1 2017 % Change Total ARPU 72 70 3 Prepaid 56 56

  • Contract

227 209 9

13.0 0.4 0.7 0.4 1.7 12.4 0.5 0.9 0.6 1.3

Prepaid Postpaid Hybrid Broadband Wholesale

Other key performance indicators

H1 2018 Subscriber Base Composition H1 2017 Subscriber Base Composition

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Revenue by subscriber type

Segment (R mln) H1 2018 H1 2017 % change Prepaid 3 657 3 363 9 Postpaid 906 882 3 Hybrid 721 774 7 Broadband 384 302 27 Mobile revenue 5 668 5 321 7 Other 183 162 13 Wholesale 486 322 51 Incoming 524 391 34 Service revenue 6 861 6 196 11

50.60% 32% 4.80% 12.60%

Service revenue market share Vodacom MTN Telkom Cell C

0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% H1 2016 H1 2017 H1 2018

Service revenue growth

Cell C Market

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Products & services at a glance

  • 1. DATA
  • Data revenue increased by 20% whilst

data traffic has increased by 62% YOY;

  • Data

revenue now makes up 52%

  • f

mobile revenue compared to 46% a year ago; and

  • The

effective price

  • f

data per MB has decreased by more than 28% YOY.

  • 2. VOICE
  • Voice revenue decreased by 6% YOY

in line with a decrease in voice traffic by 10% YOY;

  • Effective price of outgoing voice per

minute increasing by 3% YOY; and

  • Voice traffic carried by other means such

as WhatsApp Calling and other VoIP services.

  • 3. WHOLESALE
  • Wholesale

revenue increased by R164 million (or 51%) to R486 million YOY driven by the growth in the customer base; and

  • Customer data usage in this area

generated the bulk of the revenue growth.

  • 4. FTTH
  • Competitive products and pricing;
  • Exceptional organic growth aided by

acquisitions going forward; and

  • The customer base grew from 3 733

in H1 2017 to 16 425 in H1 2018.

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Revenue segmented

Segment (R mln) H1 2018 H1 2017 % change Voice 2 243 2 389 6 Data 2 961 2 473 20 Other 465 458 2 Mobile revenue 5 668 5 321 7 Wholesale, FTTH and other 669 485 38 Incoming 524 391 34 Service revenue 6 861 6 196 11 Equipment revenue 914 1 189 23 Total revenue 7 775 7 385 5

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FINANCIAL RESULTS

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Strengthened balance sheet

R’m June 2018 Dec 2017 % Change Network assets 12 570 11 706* 7 Intangible assets 1 380 1 341 3 Trade receivables and other assets 4 607 4 896

  • 6

Deferred tax 4 094 4 094

  • Total assets

22 651 22 037 3 Loans and borrowings (7 956) (6 824) 17 Other liabilities provisions (5 792) (6 875) 16 Lease obligations (5 465) (5 454)*

  • Total liabilities

(19 213) (18 276) 5 Net equity 3 438 3 760

  • 9

* Estimated impact on adopting IFRS 16

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H1 2018 Results presentation

R’m H1 2018 H1 2017 % Change Total revenue 7 775 7 385 5 EBITDA 2 378 2 048 16 Depreciation, amortisation and impairment (1 443) (1 370) 5 EBIT 935 678 38 Net Finance Costs (1 580) (1 646) 4 Net (loss)/profit before tax (645) (968) 33

Reported financial key performance indicators

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H1 2018 Results presentation

R’m H1 2018 H1 2017 % Change EBITDA 2 378 2 048 16 Depreciation 1 087 1 105 2 Network, equipment and

  • ther

552 667 17 Network lease 536 438 22 Amortisation and impairment 356 265 34 Total depreciation and amortisation 1 443 1 370 5

Focus on depreciation and amortisation

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H1 2018 Results presentation

Reconciliation of adjusted H1 2017 results

R’m Note H1 2017 IFRS 15/16 H1 2017 restated Total revenue 1 7 707 (322) 7 385 Gross margin 2 3 984 (130) 3 854 Net operational expenditure 3 (2 371) 565 (1 806) EBITDA 3 1 613 435 2 048 Depreciation, amortisation and impairment 2 (1 007) (363) (1 370) EBIT 606 72 678 Net Finance Costs 4 (1 619) (27) (1 646) Net (loss)/profit (1 013) 45 (968) Note 1. Under IFSR 15, subsidies received from CEC are recognised net of revenue compared to finance charges in 2017; 2. Under IFRS 15, costs to fulfil and obtain a customer contract are capitalised as an intangible asset and amortised over the period of the contract. Cell C has elected to apply the practical expedient and costs incurred for prepaid contracts are recognised as an expense in the month incurred; 3. Under IFRS 16, leases that have a term greater than 12 months are recognised as a finance lease. The right of use asset is amortised over the contract period and the lease liability is amortised as a finance lease interest expense; 4. Admin and margin expenses are recognised as finance expenses compared to a subscriber acquisition cost in 2017.

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Revenue analysis

2.6 2.5 2.5 2.4 2.2 0.9 1.4 1.9 2.5 3.0

  • 0.5

1.0 1.5 2.0 2.5 3.0 3.5 H1 2014 H1 2015 H1 2016 H1 2017 H1 2018

  • Growth in customer base;
  • Increased customer spend;
  • Data centric product offerings;
  • Increased smartphone users; and
  • Improved network quality.

Voice Data

Voice vs. data revenue

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Cost containment

R’m H1 2018 H1 2017 % Change Direct expenditure 3 464 3 531 2 Operating expenditure 2 031 1 907 6 Depreciation, amortisation and impairment 1 443 1 370 5 Total expenditure 6 938 6 808 2 R’m H1 2016 H1 2017 H1 2018 Capital expenditure 1 754 494 1 016

  • Capital expenditure has been strategically focused to enable us to provide mobile voice,

data services and content through a combination of our own LTE-Advanced network that

  • verlays our LTE, 3G and 2G networks.
  • Cell C capital expenditure has slowed in H1 2017 due to the delayed recapitalization but

picked up again post recapitalisation. Our total capital expenditure was:

Capital Expenditure Operational Expenditure

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Analysis of debt and finance cost

Period 2018 2017 1 January 12.39 13.73 30 June 13.72 13.09

Analysis of forex rates R mln 2018 2017 2018 2017 2018 2017 2018 2017 Long term debt 6 418 17 914 427 591 145 32 17.8% 7.0% Short term debt 1 528 417 111 28 14.5% 13.4% Leases 5 465 5 081 447 451 16.4% 17.8% Other finance 80 81 218 30

  • n.r.

n.r. Cash / interest income 674

  • 159
  • 33
  • 23
  • n.r.

n.r. Net debt excl. leases 7 272 18 172 505 677 363 2 17.2% 7.1% Net debt inc. leases 12 737 23 253 952 1 128 363 2 16.9% 9.4% HSF / CEC 1 795 1 959 185 207 18.3% 18.5% BLT 2 700 309 22.9% Debt Interest F-X Indicative interest rate

Leases include operating leases recognised as a finance lease, under IFRS 16, to the value of R3 946 at June 2018 and R3 098 at June 2017.

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Available facilities

Facility Estimated value Status New ZAR facility R1.4 billion Approved post June 2018 Vendor financing R1.4 billion In progress Shareholder support R1 billion In progress

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Breakdown on CAPEX disclosed

R’m H1 2016 H1 2017 H1 2018 Network assets 1 539 277 588 IT assets 16 1 22 Other assets 38 10 31 Intangible assets 37 62 100 Leased assets 124 144 275 Network CAPEX 1 754 494 1 016 Customer Intangibles 108 211 294 Total CAPEX 1 862 705 1 310

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Company updates

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Cell C senior management changes

Chief Financial Officer

  • Process to appoint new Chief Financial Officer is well underway
  • In the interim, the Finance portfolio is managed by:
  • Robert Pasley (Chief Strategy Officer), responsible for the capital structure of the

business

  • Douglas Craigie Stevenson (Chief Operations Officer) responsible for operational

finance Chief Procurement Officer

  • This role will not be replaced and the function is now reporting into the Chief Operations

Officer Chief Digital Officer

  • The position will not be replaced and this function will fall under a different structure

going forward

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Fibre to the home

  • Cell C offers unlimited, unrestricted, unshaped symmetrical and asymmetrical fibre packages C-Fibre

subscribers benefit from value added services that include a FREE Wi-Fi Router, FREE installation, FREE connection, personalised device set-up and 1GB LTE mobile data p/m for 12 months.

  • Cell C launched a triple play offer that includes mobile, fibre and entertainment through the black platform.

C-Fibre H1 2018 H1 2017 % Var Customer base 16 425 3 733 340 C-Fibre H1 2018 H1 2017 % Var Revenue (R mln) 62 13 375

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black

2.5m Number of customers browsed black to date Current user log-ins Number of customers

  • n free trial

Number of completed transactions

  • Launched in November 2017, black is gaining traction amongst its key target audiences.
  • According the Digital Lifestyle Measure report published by SA ICT research company, BMI-T:
  • black is the top streaming service for the DLM 3 market, the average internet users, which represent a

large portion of the population in SA

  • In the DLM 5 segment (high-tech users) the awareness of black has grown by 14%
  • There has been a sharp increase in content consumption since Cell C zero-rated its data for black content

streaming

  • Cell C customers make up 70% of subscribers on black with 30% of subscribers belonging to other networks

80 000 260 000 60 000

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MTN roaming: Cell C LTE footprint prior to new roaming deal (April 2018)

Most LTE sites in urban areas

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MTN roaming: Cell C LTE footprint after MTN roaming deal (est. November 2018)

Broad LTE coverage outside of main metros

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End-User and Subscriber Service Charter Regulations

  • Cell C has pioneered changes and is already largely compliant with the provisions in the amended

EUSSC regulations

  • Rollover of data (with DataExtenda and current data bundles)
  • Data transfer
  • Automatic rollover of up to 60 days on larger data bundles (10GB, 20GB and 30GB)
  • Automatic rollover of up to 1 month on SmartData contracts
  • Usage notifications on data bundles (including 100% depletion)
  • Ongoing campaigns to:
  • Convert customers to use data bundles (and benefit from lower rates)
  • Notify customers who purchased data bundles before and are out of bundle to purchase another

bundle

  • Bill limits on postpaid accounts that allow customers to manage their monthly bill
  • Further changes need to be rolled out across product portfolio through complex system

configurations.

  • Cell C continues to make changes to its systems to be fully compliant, despite current legal process

and intends to be fully compliant by Q4 2018

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Strategic pillars Service Quality Innovation Human Capital

Grow & retain talent through skills development Empowerment through the Believe Trust

Convergence

  • f services

Fibre, mobile and content

Competitive landscape

Support for WOAN Customer experience journey by enhancing every touch point Network through build and buy strategy Products and services