Q4 & Full-year 2014 presentation 20 Feb, 2015 1 Todays - PowerPoint PPT Presentation

Q4 & Full-year 2014 presentation 20 Feb, 2015 1

Todays speakers Axel Hjärne Gert Sköld Chief Executive Officer Chief Financial Officer n President and CEO of Eltel since 2009 n CFO of Eltel since July 2014 n Joined in 2004 as Head of Sweden n Previously EVP Finance and CFO of Sandvik Mining and Construction n Previously held leading positions within Eltel as deputy CEO and CEO Eltel Networks Sweden, and n Prior to Sandvik, CFO of ABB Stal and Alstom CEO of ABB Contracting Sweden Power/ABB Alstom Power in Sweden n 20+ years in the industry n 20+ years in the industry 2

Agenda 1. Eltel in brief 2. Q4 & Full-Year Report 2014 3. Events after the period 4. Financial Targets & Financial items 5. Strategy & Summary 3

Eltel is a leading European technical services provider for the critical infrastructures in our society – so called Infranets In brief Net Sales EUR 1.2 billion 8.600 employees Operations in 10 countries 4

Our role in the value chain Operator and/or Independent service Network owner providers End-users Ongoing outsourcing In-house service providers 5 5

Our history – efficiency and growth Today & tomorrow: Complexity § Technical development § Cross-border international players 00s: Privatisation § Smart networks and services § System security & availability § Eltel divested by § Consolidation Fortum § New industry, new 90s: Regulation players THE § Outsourcing – net § State owned owner focus on core WAY 2009 players business 10 § De-regulation s 7 0 e 0 r i 2 t n u o started c f o r e b 2005 m u n # 1 0 0 2 1 9 9 0 7 2 6

Our services – in three business segments Power Communication Transport & Defence 2014 FY 42% 47% 11% Net Sales EUR 515 m EUR 584 m EUR 154 m Homeland Power Power Fixed Mobile Security & Rail Transmission Distribution Telecom Telecom Aviation 7

Our position – a leading European supplier Core markets New markets Market size: EUR 8.1 billion* Market size: EUR 13.3 billion* Annual growth 13-17E: +5% 4% 5% Annual growth 13-17E: +2% Africa Market size: EUR 3.9 billion* Annual growth13-17E: +9% 91% Eltel sales per market 8 *PWC Market Study 2014

The Eltel Way – a specialized model that makes difference Customers (ca 8,000 ) Team (ca 400) Reporting Structure THE District (81) WAY Area business units (29) People and Efficiency culture Business units (6) Group 9

Agenda 1. Eltel in brief 2. Q4 & Full-Year Report 2014 3. Events after the period 4. Financial Targets & Financial items 5. Strategy & Summary 10

Full-year 2014 highlights § Outcome of sales and operative EBITA for Q4 and full year - in line or slightly better than anticipated in the IPO prospectus § Strong organic sales growth of 11% full-year, adjusted for currency effects – Better than our sales growth target (5%+5%), – Growth in all segments. Good demand in core markets and exciting break-throughs in Germany and UK – Growth driven by roll-outs of fibre and transmission and rail projects § Continued improved Group full-year Operative EBITA margin – Up in Power and Communication – Down in Transport & Defence due to mix § Non-recurring items in H2 2014 related to IPO § Exceptionally good cash conversion 11

Full-year Net sales – growth with seasonality FY: EUR 1,242 m Q4: EUR 352 m +8.2% +1.9% Full-year: +11.1% currency adjusted +4,5% currency adjusted § Favourable weather conditions gave very strong Q1 EUR, m § Growth especially within Power 400 in Norway, Poland and Africa § Good activity within rail in all 350 Nordic countries 300 § Fibre and mobile roll-out 250 programmes in Norway and 200 Sweden. Start also in Germany 150 Q4: 100 § Net sales: -2.4% in Power 50 +3.4% in Communication 0 Q1 Q2 Q3 Q4 +17.1% in Transport & Defence 2012 2013 2014 12

Increased Q4 and FY 2014 Operative EBITA FY 2014 Q4 2014 Operative EBITA +4.9% (4.5) +5.0% (4.5) § Q4: EUR 17.7 m (15.4) EUR, m – Good workload, improved 30,0 9,0 efficiency 8,0 § FY: EUR 61.3 m (52.0) 25,0 7,0 – Improved operational efficiency, 20,0 6,0 leverage from growth 5,0 15,0 4,0 EBITA 10,0 3,0 § Q4: EUR 11.0 m (13.2) 2,0 5,0 – non-recurring net EUR -6.7 m 1,0 (-2.2), mainly IPO related 0,0 0,0 § FY: EUR 38.6 m (52.3) – non-recurring net EUR -22.7 m (+0.3), mainly IPO related Operative EBITA Margin Linear (Margin) 13

Power – weaker Q4, but strong Full-year Q4 2014 growth Important Events Q4 § Strong business for network weatherproofing projects -2.4% in Finland § Nordic transmission deliveries lower in the quarter FY +7.2% § Margin affected by German growth initiatives Q4 2014 Operat. EBITA margin Important Events Full-year 5.6% § Strong sales growth for transmission, mainly in Norway, Poland and Africa FY 6.2% § Distribution business affected by change in ownership of a main customer => postponed investments FY Power net sales of total § Margins supported positively by compensation for project delay 42% 14

Communication – major roll-outs with leverage Q4 2014 growth Important Events Q4 § Sales up as a result of maintenance work due to storms +3.4% in Sweden + substantial fibre roll-out and mobile roll-out projects in Norway FY +5.9% § JV with Sonnico signed contract with Telenor § Margin supported by efficiency improvements and Q4 2014 Operat. EBITA margin volume leverage 6.0% Important Events Full-year § Roll-outs: fibre in Sweden, mobile in Norway FY 4.4% § Start of fibre roll-out in UK and Germany § Margins strengthened by volume leverage and FY Communication net sales of total favourable weather conditions 47% 15

Transport & Defence – strong growth with new mix Q4 2014 growth Important Events Q4 § Several rail electrification and signalling projects in the +17.1% Nordics § Margin impacted negatively by Denmark and Rakel FY +25.8% phase out Q4 2014 Operat. EBITA margin Important Events Full-year 5.4% § Strong volumes of rail electrification and signalling projects in the Nordics FY 7.9% § Denmark market entry for rail § Higher portion of rail projects caused negative margin FY T&D net sales of total mix effect 11% 16

Q4 and Full-year cash conversion % Full-Year 2014 cash flow impacts: 250 230 Operative cash flow including EBITDA, § change in net working capital and capex 200 => EUR 88.9 million (57.3) Cash conversion of 230% § 150 – increase in customer advances 109 – good operational working capital 100 management and cash collection 65 Adj. for provisions for non-recurring § 50 costs, cash conversion of 145% 0 FY 2012 2013 2014 17

Agenda 1. Eltel in brief 2. Q4 & Full-Year Report 2014 3. Events after the period 4. Financial Targets & Financial items 5. Strategy & Summary 18

Successful IPO ¡ ¡ ¡ ¡ Shareholders ¡ Share of capital § On 12 January 2015 Eltel announced its and votes, % ¡ 3i-controlled entities * ¡ 20.0% ¡ intention of listing on Nasdaq Stockholm Zeres Capital* ¡ 10.5% ¡ § On 6 February 2015 completed the IPO of its The Fourth Swedish National Pension Fund* ¡ 8.5% ¡ ordinary shares BNP Paribas S.A.* ¡ 7.6% ¡ Swedbank Robur Fonder* ¡ 5.5% ¡ § Subscription price set at 68 SEK/share Lannebo Fonder*) ¡ 5.2% ¡ § Market Cap of SEK 4,258 million Didner & Gerge småbolag ** ¡ 2.1% ¡ § New owner base: Fidelity Nordic fund** ¡ 2.1% ¡ Länsförsäkringar och Länsf. fonder ** ¡ 1,6% ¡ – 4 anchor investors; Zeres Capital, 4 AP- SEB fonder** ¡ 1,2% ¡ Fund, Robur, Lannebo Total top 10 shareholders ¡ 64.3% ¡ – Approx. 100 institutional investors Managers in Eltel ¡ 5.1% ¡ – Approx. 3500 retail investors Other shareholders ¡ 30,6% ¡ Total ¡ 100.0% ¡ * as notified SFSA trading day 6.2. **Euroclear statistics as per 13.2. 19

Q1 2015, re-financing and Telia agreement § In January 2015 Eltel signed a new five-year frame agreement with TeliaSonera, covering the Nordic and Baltic regions – Expansion of the geographical scope to include new regions in Sweden Eltel’s financing was renewed at IPO § – Interest-bearing liabilities amounting to EUR 330.9 million at 31 December 2014 repaid and replaced with a EUR 210 million loan facility – More flexible and cost-effective financing for the next five years Year-end leverage proforma ratio with reduced debt level after IPO was 3.2 (3.3) § – Adjusted for non-recurring items leverage ratio was 2.2 (3.3) 20

Agenda 1. Eltel in brief 2. Q4 & Full-Year Report 2014 3. Events after the period 4. Financial Targets & Financial items 5. Strategy & Summary 21

Financial targets Financial targets, mid to long term (3-5 years) Average annual organic sales growth of around 5% and 5% annual growth from Sales growth n M&A including new outsourcing deals EBITA-margin EBITA-margin of approximately 6% n Cash conversion An average cash conversion of 95-100% of EBITA n Capital structure Leverage of 2.0-2.5x net debt / EBITDA n Approx. 50 percent pay-out ratio of net profit with some flexibility Dividend Policy The first dividend is expected to occur in 2016, based on the results in 2015 ̶ Scope for acquisitions and deleveraging ̶ 22