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RESULTS PRESENTATION 24 JULY 2013 Disclaimer This presentation - - PowerPoint PPT Presentation

2Q13 RESULTS PRESENTATION 24 JULY 2013 Disclaimer This presentation contains forward looking information, including statements which constitute forward looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of


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24 JULY 2013

2Q13 RESULTS PRESENTATION

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This presentation contains forward looking information, including statements which constitute forward looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and assumptions of our management and on information available to management only as of the date such statements were made. Forward-looking statements include (a) information concerning strategy, possible or assumed future results of our operations, earnings, industry conditions, demand and pricing for

  • ur products and other aspects of our business, possible or future payment of dividends and share buy back program; and

(b) statements that are preceded by, followed by or include the words “believes”, “expects”, “anticipates”, “intends”, “is confident”, “plans”, “estimates”, “may”, “might”, “could”, “would”, and the negatives of such terms or similar expressions. These statements are not guarantees of future performance and are subject to factors, risks and uncertainties that could cause the assumptions and beliefs upon which the forwarding looking statements were based to substantially differ from the expectation predicted herein. These factors, risks and uncertainties include, but are not limited to, changes in demand for the company’s services, technological changes, the effects

  • f competition, telecommunications sector conditions, changes in regulation and economic conditions. Further, certain forward looking

statements are based upon assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from the plans, strategy, objectives, expectations, estimates and intentions expressed or implied in such forward-looking

  • statements. Additionally, some of these statements refer to board proposals to be submitted to ZON - Multimédia – Serviços de

Telecomunicações e Multimédia, SGPS, S.A. (“Multimedia” or “ZON”) AGM and subject to (i) its approval by Multimedia’s shareholders, (ii) the market conditions and (iii) the ZON’s financial and accounting position as revealed in the financial statements approved by Multimedia’s AGM. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to provide reasons why actual results may differ. You are cautioned not to place undue reliance on any forward-looking statements. ZON Multimedia is exempt from filing periodic reports with the United States Securities and Exchange Commission (“SEC”) pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934, as amended. The SEC file number for PT Multimedia’s exemption is No. 82-5059. Under this exemption, ZON Multimedia is required to post on its website English language translations, versions or summaries of certain information that it has made or is required to make public in Portugal, has filed or is required to file with the regulated market Eurolist by Euronext Lisbon or has distributed or is required to distribute to its security holders. This presentation is not an offer to sell or a solicitation of an offer to buy any securities.

Disclaimer

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 New record take up of IRIS, with net adds of 54 thousand in 2Q13,

reaching 339 thousand subs, 43% penetration of the Triple Play customer base

 Quadruple Play bundle “IRIS 4+” launched in 2Q13  Agreement reached in 2Q13 to distribute Benfica TV as a premium channel from July  ZAP: very strong yoy revenue growth: +52% in 2Q13 to 11 million euros  EBITDA growth to 80.4 million euros, more than offsetting the 1.7% decline in Operating Revenues, under pressure from premium channel revenues  FCF generation of 21.6 million euros, with strong EBITDA-CAPEX performance of 50.3 million euros

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2Q13 Highlights

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2Q13 Operating Review

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 54.3 thousand IRIS net-adds in 2Q13, the best quarter since launch. IRIS customers now represent 43% of the Triple Play base  4.6 thousand Triple Play net adds, to 786 thousand customers, up 7.6% yoy representing 65.3% of cable customers

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Record net-adds in IRIS, 65.3% Triple Play penetration

Triple Play Customers and Penetration of Cable Base [Thousands, %] IRIS customers and Penetration of Triple Play Customer Base [Thousands, %]

Net Adds [Thousands]

17.9 18.8 32.1 21.9 42.6 31.4 41.8 49.6 54.3

678.5 730.9 786.1 58.6% 60.4% 65.3%

30 % 50 % 70 % 90 % 11 0% 13 0% 15 0% 00 10 20 30 40 50 60 70 80

2Q11 2Q12 2Q13

+7.7% +7.6%

46.2 65.0 97.0 118.9 161.5 193.0 234.8 284.4 338.7

7% 9% 14% 17% 22% 26% 30% 36% 43%

  • 5%
5% 15 % 25 % 35 % 45 % 55 % 65 %
  • 35
15 65 11 5 16 5 21 5 26 5 31 5 36 5

2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13

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IRIS 4+ Bundles

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 Launch of the IRIS 4P offer in May with good levels of take-up  The most flexible and competitive offer in the market:

149 CHANNELS (Additional services included € 5) 100 MEGAS And free access to the ZON@Fon network UNLIMITED In Portugal and to 50 international destinations 1 UNLIMITED SIM CARD € 69,99 Possibility to add a second or third unlimited card to the bundle for only €10 each

TV + NET + PHONE + MOBILE € 69.99 / MONTH

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 Available in SD and HD versions  15 home matches played by Benfica in the Portuguese Football League  Exclusive of the English Premier League, Brazilian Football League, Greek Football League and US Major League Soccer  Programmes from the most famous chefs, such as Anthony Bourdain, Jamie Oliver, Donna Hay, Ljubomir Stanisic and Rodrigo Meneses  Simultaneous launch of the “24Kitchen” app, featuring daily recepies for healthy meals with video instructions and an interactive shopping list

New content – new channel launches

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 Broadband net adds of 5.4 thousand, bringing the total customer base to 805.3 thousand  67% penetration of cable base

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Growing in Broadband and Fixed Voice

Broadband Subscribers

[Thousands, % of Penetration of Cable Base]

Fixed Voice Subscribers

[Thousands; % of Penetration of Cable Base]

 Fixed Voice net adds of 4 thousand, bringing the total customer base to 989.8 thousand  81% penetration of cable customer base

714.8 751.5 805.3 62% 62% 67%

30 % 35 % 40 % 45 % 50 % 55 % 60 % 65 % 70 % 20 30 40 50 60 70 80

2Q11 2Q12 2Q13 826.8 947.0 989.8 70% 76% 81%

40 % 45 % 50 % 55 % 60 % 65 % 70 % 75 % 80 % 85 % 00 20 40 60 80 1, 00

2Q11 2Q12 2Q13

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 Basic ARPU from core Pay TV, BB and Voice services increased 0.6% yoy, supported by the improving customer mix with more IRIS customers and by the price increase which took place in January  Adjusting for the impact of entry level

  • ffers, basic ARPU would have grown by

2.1% yoy  Premium channel subscriptions, primarily sports, still weighing negatively on ARPU, with the end of the football season

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Basic ARPU resilience

Basic, Premium and Blended ARPU

[2Q12 = Base 1]

  • 1.3%

+0.6%

  • 12.8%

0.80 0.85 0.90 0.95 1.00 1.05 1.10 2Q12 3Q12 4Q12 1Q13 2Q13

Blended ARPU Basic ARPU Premium ARPU

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Cinema Exhibition: recovery in 2Q13

Source: ZON, ICA

Cinema tickets sold and revenue per ticket

[Thousands, Euros]

2Q13 Performance of Gross Revenues and Attendance

[%]

 Ticket sales increased yoy by 2.6% although average revenue per ticket fell 4.1% in 2Q13 mainly due to lower mix of 3D movies  Cinema Exhibition gross revenues were down 1.6% in 2Q13, with the market as a whole declining by 13.1% yoy  The comparison of ZON’s performance with the market as a whole should be adjusted due to the closure of Socorama/Castello Lopes. Adjusted total market ticket sales fell by 2.1% yoy (vs. unadjusted drop of 10.9%) and adjusted gross revenue fell by 2.3% (vs. unadjusted drop of 13.1%)  The first IMAX screen was opened on 20 June, with 400 seats. It was a great success with the re-edition

  • f the box-office hit, “Jurassic Park”, made exclusively for IMAX

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1,714 2,383 1,992 1,784 1,758 4.9 4.9 4.7 4.6 4.7

03 04 04 05 05 06 06 07 07 50 10 00 15 00 20 00 25 00 30 00

2Q12 3Q12 4Q12 1Q13 2Q13

Tickets Sold

  • Avg. Revenue Per Ticket
  • 1.6%

2.6%

  • 13.1%
  • 10.9%

Gross Revenue Attendance

ZON Market

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Source: ZON, ICA

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ZON Audiovisuais: Reinforcing leadership in Cinema Distribution

Cinema Gross Revenues by Distributor - Market Share 2Q13

[%]

 Audiovisuals revenues remained stable and ZON maintained leading position  ZON distributed 8 of the Top 10 movies shown in cinemas in Portugal in 2Q13  68.6% market share of cinema distribution gross revenues in 2Q13

ZON 68.6% Columbia 16.2% Big Picture 2 10.2% Others 4.9%

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ZAP – Strong performance

 ZAP continues to post a very positive performance in terms of customer growth  Ranks as one of the leading brands in Angola, repeatedly one of the brands with the highest top of mind brand awareness  Increased distribution network:  Present in most of the largest Angolan provinces  The largest network of distribution agents and door-to-door sales people  New channels launched: Benfica TV

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2Q13 Financial Performance

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14 14

Solid revenue performance

Consolidated Operating Revenues

[Millions of Euros]

 Resilient consolidated revenue performance yoy: -1.7% in 2Q13

428.6 425.0 1H12 1H13 214.4 210.7 2Q12 2Q13

(1.7)% (0.8)%

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15 Pay TV, Broadband & Voice Revenues

[Millions of Euros]

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Pay TV, Broadband and Voice revenues under pressure from premium channel subscriptions

 3.8% yoy decline of Pay TV, Broadband and Voice Revenues, under pressure from the increased level of SportTV disconnections, due to the end of the football season

(3.8)% (2.8)%

191.0 183.7 2Q12 2Q13 382.8 372.1 1H12 1H13

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16 ARPU Revenue Growth

[2Q12 = Base 1]

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ARPU revenue affected by premium channels

ARPU Revenue split

[%]

 Premium ARPU revenue decline of 14.6% in 2Q13, causing a drop of 3.4% yoy on total ARPU Revenues  Basic ARPU revenues show great resilience to the challenging macroeconomic backdrop, declining only 1.4% yoy  Basic ARPU revenues supported by the price increase in 1Q13 and by the resilience of the subscription of core services  Continued pressure from premium channel subscription revenues, with an acceleration in the annual pace of decline in 2Q13 to -14.6% (which compares with -11.5% in 1Q13)

  • 3.4%
  • 1.4%
  • 14.6%

0.80 0.85 0.90 0.95 1.00 1.05 2Q12 3Q12 4Q12 1Q13 2Q13

Total Basic Premium

85% 87% 15% 13% 2Q12 2Q13

Basic Revenues Premium Revenues

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17 17

 Cinema Exhibition revenues grew 1.5% yoy to 12.1 million euros, due to an improvement in the number of tickets sold as from May  Despite the market environment remaining very tough in this segment, ZON is posting better performance than the market as a whole, thus reinforcing its market share

Cinema Revenues

[Millions of Euros]

Audiovisuals Revenues

[Millions of Euros]

Audiovisuals and Cinema revenues: performance ahead of the market, despite challenging environment

11.9 12.1 2Q12 2Q13

+1.5%

17.6 17.0 2Q12 2Q13

(3.6)%

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ZAP already making relevant contribution

 Revenues from ZAP in Angola in Mozambique grew by 51.6% to 36.7 million euros in 2Q13 (ZON’s 30% stake represented 11 million euros)

International Revenues (30% stake in ZAP)

[Millions of Euros]

7.3 9.1 8.8 10.0 11.0 2Q12 3Q12 4Q12 1Q13 2Q13

+51.6%

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Cost savings materializing

 Group-wide efforts to contain and adjust the cost structure to the challenging environment are delivering results  OPEX fell by 3.9% to 130.2 million euros in 2Q13 with important savings being achieved in practically all relevant cost lines  Excluding consolidation of ZAP, consolidated operating costs would have fallen further by 4.9%

Consolidated Operating Costs

[Millions of Euros]

135.6 130.2 2Q12 2Q13

(3.9)%

270.1 261.4 1H12 1H13

(3.2)%

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20 20 Operating Costs

[Millions of Euros]

Cost savings materializing

W&S Direct Costs Commercial Costs Other Op. Costs

Operating Costs (millions of euros) 2Q13 Δ % Drivers

Other Operating Costs 41.9 (5.1%) 5.1% decrease thanks to continued strong cost discipline driving savings in areas such as support services, maintenance and repairs and other SGA Commercial Costs 14.0 (17.6%) 17.6% yoy reduction explained by a continued decrease in the level of commissions and marketing costs led by cost saving initiatives and to lower cost of goods sold on the back of slower commercial activity and subsequently lower gross adds W&S 13.7 (9.7%) Direct Costs 60.7 2.3% ZON is making efforts to accommodate normal staff attrition levels without hiring. In the cinema business in particular, the number of employees per multiplex has been adjusted down, along with the implementation of other cost and efficiency measures. 2.3% increase mainly due to higher royalties in the Cinema Exhibition and Audiovisuals businesses and to the increasing cost base of ZAP

15.1 13.7 2Q12 2Q13

(9.7)%

59.3 60.7 2Q12 2Q13

+2.3%

17.0 14.0 2Q12 2Q13

(17.6)%

44.1 41.9 2Q12 2Q13

(5.1)%

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Strong EBITDA yoy performance

 Core Pay TV, Broadband and Voice margin grew by 1.5pp yoy to 40.4%, the second highest quarterly level and a reflection of the ability to contain costs and improve efficiency, despite the slowdown in operational activity  Group Margin grew by 1.4pp despite dilution from the other lower margin domestic

  • businesses. ZAP’s EBITDA margin of 29.6% was already remarkable given that breakeven

was achieved just one year ago

Group EBITDA, EBITDA Margin

[Millions of Euros, %]

EBITDA Margin

[%] * Adjusted for 2.9 million euros one-off provision in 1Q13

78.8 80.4

36.8% 38.2%

30 % 31 % 32 % 33 % 34 % 35 % 36 % 37 % 38 % 39 % 40 % 30 40 50 60 70 80 90

2Q12 2Q13

+2.0%

Group EBITDA, EBITDA Margin

[Millions of Euros, %] 158.5 163.6

37.0% 38.5%

30% 31% 32% 33% 34% 35% 36% 37% 38% 39% 40% 30 50 70 90 110 130 150 170 190

1H12 1H13

+3.2%

38.4% 40.4% 37.1% 38.2% 15.2% 10.3% 2.6% 29.6%

2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 Pay TV, BB and Voice Group Aud + Cin * International

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22 Net Income

[Millions of Euros]

Strong Net Income Growth of 31.3% yoy

(millions of euros)

2Q13 Δ % Drivers

Income Taxes 5.9 1.4% Income Taxes amounted to 5.9 million euros in 2Q13, representing an effective P&L tax rate for 1H13 of around 29% Net Financial Expenses 13.3 24.4% Net Financial Expenses higher in 2Q13 at 13.3 million euros compared with 10.7 million euros in 2Q12, although just 8.4% higher than in

  • 1Q13. The yoy increase is a result of a progressively higher average cost of interest as some of ZON’s older and less expensive financing

lines matured and with the entrance of the new retail bonds issued in June 2012. This effect is partially compensated by the lower average level of consolidated debt. This aggregate was also impacted by one - off effects relating to an impairment charge of the audiovisuals and cinema fund “FICA” of around 0.5 million euros Yoy decline of 4.9% to 49.0 million euros D&A 49.0 (4.9)%

9.7 12.7 2Q12 2Q13

+31.3%

20.0 24.4 1H12 1H13

+21.6%

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Baseline CAPEX stable

Total CAPEX

[Millions of Euros]

Baseline CAPEX, Baseline CAPEX / Pay TV, BB and Voice Revenues

[Millions of Euros, %]

 CAPEX levels beginning to stabilize  Baseline CAPEX / Pay TV, Broadband and Voice Revenues of 15.8% in 2Q13, including some customer and growth investment as well as Non Recurrent CAPEX due to the upgrade to the MPEG4 compression standard in the DTH business

17.4 18.6 8.0 8.9 2.4 1.6 1.0

27.7 30.1 2Q12 2Q13

Pay TV, BB and Voice Infr. Terminal Equipment Other Baseline CAPEX Non-Recurrent CAPEX

+8.6%

57.3 52.8

15.0% 14.2%

00 % 05 % 10 % 15 % 20 % 25 % 30 % 00 10 20 30 40 50 60 70

1H12 1H13

(7.9)%

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Strong FCF generation cycle

EBITDA - CAPEX

[Millions of Euros]

 Strong performance in EBITDA-CAPEX led by the continuously resilient level of EBITDA  Free Cash Flow generation of 21.6 million euros

Free Cash Flow

[Millions of Euros]

51.1 54.5 34.1 57.4 50.3 2Q12 3Q12 4Q12 1Q13 2Q13

(1.5)%

33.6 9.9 46.7 15.6 21.6 20.0 35.6* 2Q12 3Q12 4Q12 1Q13 2Q13

(35.8)%

* Adjusted for the upfront payment of 20 million euros related to the renewal of the Portuguese Football League contract.

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Solid Capital Structure, deleveraging to 1.9x Net Financial Debt / EBITDA

Change in Net Financial Debt

[Millions of Euros] 605.2 2.0 37.3 2.8 11.0 7.0 9.7 50.3 589.7 2Q13 Other Items Dividends Income Taxes Paid Net Interest Paid Long Term Contracts Non-Cash Items and Working Capital EBITDA-CAPEX 1Q13

 Net Financial Debt of 605.2 million euros at the end

  • f 2Q13

 Net Financial Debt / EBITDA of 1.9x  Average cost of debt of 5.67% in 1H13  1.68 years of average maturity

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Wrap-up

 Good operational and financial performance  Continued strong uptake of higher value added bundles with record levels of new IRIS customers  Additional pressure on premium channel revenues offset by the improving customer mix, price increase, and efficient management of the cost structure  ZAP: continued strong pace of growth  Strong Operating Cash Flow momentum

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Appendix

Financial Highlights Operational Highlights

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Financial Highlights

(Millions of Euros) 2Q12 2Q13 ∆ y.o.y. 1H12 1H13 ∆ y.o.y. Operating Revenues 214.4 210.7 (1.7%) 428.6 425.0 (0.8%) Pay TV, Broadband and Voice 191.0 183.7 (3.8%) 382.8 372.1 (2.8%) Audiovisuals 17.6 17.0 (3.6%) 34.7 34.1 (1.8%) Cinema Exhibition 11.9 12.1 1.5% 23.7 23.9 0.8% International 7.3 11.0 51.6% 13.7 21.0 n.a. Other (13.3) (13.0) (2.0%) (26.3) (26.1) (1.0%) EBITDA 78.8 80.4 2.0% 158.5 163.6 3.2% EBITDA Margin 36.8% 38.2% 1.4pp 37.0% 38.5% 1.5pp Pay TV, Broadband and Voice 74.2 74.2 (0.0%) 149.5 153.7 2.8% EBITDA Margin 38.9% 40.4% 1.5pp 39.0% 41.3% 2.3pp Cinema and Audiovisuals 4.0 3.0 (26.4%) 8.3 3.6 (56.3%) EBITDA Margin 13.7% 10.3% (3.5)pp 14.2% 6.2% (7.9)pp International 0.6 3.3 n.a. 0.7 6.2 n.a. EBITDA Margin 7.8% 29.6% 21.8pp 5.4% 29.7% 24.4pp Income from Operations 27.3 31.4 15.1% 51.0 59.9 17.4% Net Income 9.7 12.7 31.3% 20.0 24.4 21.6% CAPEX 27.7 30.1 8.6% 57.3 55.8 (2.6%) EBITDA minus CAPEX 51.1 50.3 (1.5%) 101.2 107.8 6.5% Net Financial Debt 660.4 605.2 (8.4%) 660.4 605.2 (8.4%) CAPEX as % of Revenues 12.9% 14.3% 1.4pp 13.4% 13.1% (0.2)pp Net Financial Debt / EBITDA [x] 2.1x 1.9x n.a. 2.1x 1.9x n.a.

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Operational Highlights

Note: Figures refer to Portuguese Operations

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30

José Pedro Pereira da Costa CFO Maria João Carrapato Head of Investor Relations ir@zon.pt ZON Multimedia Rua Ator António Silva, 9 1600-404 Lisboa, Portugal Tel.: +351 21 782 47 25 Fax: +351 21 782 47 35

Contacts

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