United Group BO H1 2014 financial results presentation 21 August - - PowerPoint PPT Presentation

H1 2014 financial results presentation

21 August 2014

United Group BO

2

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

3

Highlights Financial review Mergers & Acquisitions

Agenda

Introduction Operational review Appendices

4

Introduction to United Group

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

services

• 2.0 million cable and satellite TV, broadband, fixed and mobile RGUs

across the six countries of former Yugoslavia

• Operating in a market characterised by rapidly growing pay-TV and

broadband that is currently underpenetrated relative to other CEE and Western European markets

• Broad 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

–

extensive 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 successful acquisition of the Group in March 2014, United

Group is now majority-owned by funds affiliated with KKR, EBRD and the management

2020 Senior Notes

Issuer United Group 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)

5

Highlights Financial review Mergers & Acquisitions

Agenda

Introduction Operational review Appendices

6

771 804 H1 2013 H1 2014

Unique cable subs (k)

+4% 16.6 17.7 H1 2013 H1 2014

Blended cable ARPU (€)

+7%

1,212 1,353

H1 2013 H1 2014

Homes passed (k)

+12%

H1 2014: operational highlights

• Homes passed up by 12% to 1,353k vs. H1 2013

Homes passed increased primarily as a result of network expansion and investment in our network as well as organic growth and acquisitions

• Unique cable subscribers up by 4% to 804k vs. H1 2013

The number of subscribers of our cable services increased driven by growing cable network

• Blended cable ARPU up by 7% to €17.7 vs. H1 2013

Driven by increased revenue from cable network based services as a result of:

– migration from lower-priced to higher-priced service packages – growth in subscribers for the multi-play offering, and – price increases in Serbia (March 2014) and Slovenia (April 2014)

7

H1 2014: financial highlights

• Revenues up 17% year-on-year to €136.1 million driven by

– growing RGUs – price increases – organic growth and acquisitions

• EBITDA up 23% year-on-year to €65.3 million

– Group EBITDA grew faster than revenues – Reflects ability to capitalise on customer relationships through sales of

additional and higher margin products

• Net Leverage down to 3.98x from 4.00x at the end of Q1 2014

– Improvement in both gross and net leverage since Q1 2014 116.3 136.1

H1 2013 H1 2014

Revenues (€ m)

+17%

53.0 65.3

H1 2013 H1 2014

EBITDA (€ m)

+23%

4.16x 4.10x 4.00x 3.98x

Q1 2014 Q2 2014

Leverage

Gross leverage Net leverage

8

Highlights Financial review Mergers & Acquisitions

Agenda

Introduction Operational review Appendices

9

• Increasing number of homes passed

across key markets driven by investments aimed at network extension and modernisation

• Slower than planned rollout at Telemach

BH; more intense network expansion expected in H2 2014

• Comparison against H1 2013 affected by

acquisition of Elektro Turnsek

Homes passed across key markets Key developments

Network expansion

770 863 257 299 185 191 H1 2013 H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 SBB Serbia Telemach Slovenia Telemach BH

Homes passed (k)

+12% +16% +3%

10

RGUs vs. Unique cable subscribers Key developments

Increasing subscribers

• Increasing subscribers
• Faster growth in RGUs than unique

cable subscribers

• ARPU per subscriber developing

stronger than ARPU per service Our 804k unique cable subscribers order on average between 1.6x and 2.4x different services 771 804 H1 2013 H1 2014

Unique cable subs (k)

+4%

1,679 1,972 H1 2013 H1 2014

RGUs (k)

+17%

RGUs vs. Unique cable subscribers H1 2013 H1 2014 SBB Serbia Group 1.5x 1.6x Telemach Slovenia Group 2.3x 2.4x Telemach BH Group 1.6x 1.8x

11

RGUs by service Key developments

Increasing RGUs

• Increasing RGUs during H1 2014
• Comparison against H1 2013 affected

by acquisitions

• 74k IPTV RGUs generated through:

– organic growth, – acquisition of Solford (52k), and – acquisition of 7k subscribers from

Bosna TV in June 2014

Q1 2013 Q1 2014

771 374 383 131 20 804 411 74 438 199 46

Cable pay-TV DTH pay-TV IPTV Broadband internet Fixed telephony Other services

RGUs by service (k)

H1 2013 H1 2014 *Revenues from DTH pay-TV services for all six countries of operation reported under SBB Serbia

47% 32% 15% 7%

Telemach BH Group

47% 31% 10% 11%

Telemach Slo Group

34% 23% 1% 31% 12%

SBB Serbia Group*

Cable pay-TV Broadband Internet Fixed Telephony IPTV DTH pay-TV Other services

12

13.0 13.7 30.2 30.5 12.9 14.7 H1 2013 H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 SBB Serbia Telemach Slovenia Telemach BH

Blended cable ARPU per segment (€)

Group

• Blended cable ARPU up 7% to €17.7 in H1

2014 SBB Serbia

• Key drivers: price increase (March 2014)

and positive impact of promotional campaigns

• DTH ARPU down slightly to €8.9 (H1 2013:

€9.2) due to very good sales resulting in a higher number of customers in the initial promotion period Telemach Slovenia

• Subscriber migration from lower-priced to

higher-priced service packages continues

• Price increase positively affected Video and

Internet business line

• Blended cable ARPU impacted by

reclassification of B2B subscribers Telemach BH

• Growth in subscribers for multi-play offering
• Pressure on Telephony ARPU caused by

Internet calls Other

• IPTV ARPU (NetTV Plus) at €11.1

Blended cable ARPU Key developments

ARPU development

+5% +14% +1% SBB Serbia Telemach Slo Telemach BH in € H1 2013 H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 Cable pay-TV 7.6 8.0 16.8 16.3 7.0 7.3 Broadband internet 11.5 11.0 15.9 15.7 10.2 9.5 Fixed telephony 7.6 6.3 5.3 5.0 12.7 11.7 Blended Cable ARPU 13.0 13.7 30.2 30.5 12.9 14.7

13

Highlights Financial review Mergers & Acquisitions

Agenda

Introduction Operational review Appendices

14

Revenue development H1 2014 Key drivers

Revenue development by segment

Group

• H1 2014 revenues up 17% year-on-year to

€136.1 million as a result of growing RGUs, price increases, organic growth and acquisitions

• Total revenue in Q2 2014 at €70.2 million, up by

7% vs. Q1 2014 SBB Serbia

• Revenue up by 4% to €69.3 million driven by

subscriber base growth and migration to multi- play packages

• Price increase implemented as of March 2014
• ~3.3% currency translation impact

Telemach Slovenia

• Revenue up by 18% to €41.7 million
• Price increase implemented as of April 2014
• Increase in the number of multi-play subscribers
• Faster than expected digitalisation at Elektro

Turnsek Telemach BH

• Revenue up by 21% to €11.0 million due to
• rganic subscriber base growth
• Growth of internet and fixed telephony segments

116.3 136.1

H1 2013 H1 2014

Revenues (€ m)

+17%

66.4 35.4 9.1 13.0

• 7.6

69.3 41.7 11.0 16.2

• 2.1

SBB Serbia Group Telemach Slo Group Telemach BH Group United Media Group Other and intra- company

Revenue by segment (€ m)

H1 2013 H1 2014

*

+4% +18%

*Other and intra-company contains N1, Solford and intra-Company

+21% +25%

15

EBITDA development H1 2014 Key drivers

EBITDA development by segment

Group

• Group EBITDA up by 23% to €65.3 million vs. H1

2013 as a result of increased revenues and cost efficiency

• EBITDA in Q2 2014 up by 3% to €33.1 million in

Q2 2014, from €32.2 million in Q1 2014

• €0.5 million of additional cost related to Grand

content and launch of N1 TV channel SBB Serbia

• Increased EBITDA as a result of increased

revenues, cross selling of multi-play bundles and increased cost efficiency

• Harmonised bad debt policy anticipated €1.5

million EBITDA in Q1 2014

• Price increase implemented as of March 2014

Telemach Slovenia

• Price increase implemented as of April 2014
• Continued subscriber migration to higher priced

service packages Telemach Bosnia

• Increased EBITDA as a result of increased

revenues, growth of more profitable internet and fixed telephony segments and cost control 27.5 16.7 3.9 4.8 0.1

31.3 21.0 5.2 6.4 1.4

SBB Serbia Group Telemach Slo Group Telemach BH Group United Media Group Other and intra- company

EBITDA by segment (€ m)

H1 2013 H1 2014

*

53.0 65.3

H1 2013 H1 2014

EBITDA (€ m)

+23%

*Other and intra-company contains N1, Solford and intra-company

+14% +26% +33% +33%

16

• United Media Group: content operations in the

former Yugoslav region and NetTV Plus, serving ex-pat community worldwide

• Increasing contribution to Group results:

–

Revenue up by 25% to €16.2 million (H1 2013: €13.0 million)

–

67% of revenue generated from third parties; 33% intra-company transactions

–

EBITDA rising faster than revenue; up by 33% to €6.4 million (H1 2013: €4.8 million)

• Content rights include

–

Champions League (2012 - 2015)

–

WTA Premier (2013 - 2016)

–

FA Cup/NT matches (2012 - 2018) (linear pro-rata amortization applied)

United Media Group revenue and EBITDA development

13.0 16.2

H1 2013 H1 2014

Revenues (€ m)

+25%

4.8 6.4

H1 2013 H1 2014

EBITDA (€ m)

+33%

External vs. intra-company revenue H1 2014 Key developments

5.4 10.8

United Media Group

Revenue Intra-Company Revenue External

17

Revenue share by segment

Organic growth and foreign currency exchange impact

• 51% of Group revenue is generated by the SBB Serbia segment

which includes revenue denominated in Serbian Dinar (RSD) and

• ther currencies (e.g. from the DTH business)
• Around 45% of Group revenue is RSD-denominated
• Negative currency translation impact of ~3.3% in H1 2014 vs. H1

2013 on results 51% 31% 8% 12%

• 2%

SBB Serbia Group Telemach Slo Group Telemach BH Group United Media Group Other and intra-company

H1 2013 H1 2014

Revenue Organic Growth

+13% H1 2013 H1 2014

EBITDA Organic Growth

+19%

18

Capital expenditures

CAPEX development Key drivers

Group

• H1 2014 Capex at €42.3 million compared to

below-average Capex of €25.8 million in H1 2013 (FY 2013 Capex: €81.3 million), as the Group continued investments in network extension, modernisation and content

• H1 2014 Capex impacted by capitalised set-

up costs for the launch of N1 TV channel SBB Serbia

• Investments in customer premise equipment

and network extension in line with subscriber growth Telemach Slovenia

• Investments into customer premise

equipment, backbone and network upgrades and network extension following integration of newly-acquired entities Telemach BH

• Slower than expected rollout in H1 2014
• More intense network expansion planned for

H2 2014

15.5 5.4 3.6 1.3 0.0 16.6 12.0 3.4 5.9 4.4

SBB Serbia Group Telemach Slo Group Telemach BH Group United Media Group Other and intra- company

Capex by segment (€ m)

H1 2013 H1 2014

25.8 42.3

H1 2013 H1 2014

Capex Group (€ m)

19

EBITDA-CAPEX and leverage development

Key drivers

• EBITDA-Capex reduced despite higher

EBITDA due to below-average Capex in the comparable H1 2013 period

• H1 2014 EBITDA-Capex covers HYB

interest payment of €18.7 million

• Improvement in both gross and net

leverage since Q1 2014 as a result of higher than expected EBITDA growth driven by organic growth and acquisitions Annualised Last Two Quarters EBITDA is calculated by multiplying EBITDA for the two most recent quarters by two.

27.2 23.0

H1 2013 H1 2014

EBITDA - Capex (€ m)

Leverage EBITDA-CAPEX

4.16x 4.10x 4.00x 3.98x Q1 2014 Q2 2014 Gross leverage Net leverage

20

Highlights Financial review Appendices

Agenda

Introduction Operational review Mergers & Acquisitions

21

Mergers & Acquisitions

• Awaiting competition authorities’ approval for agreed acquisitions of Grand Production, Orlando Kids and

Broadband Montenegro (14% acquired)

• Asset deal with Bosna TV closed in June 2014 adding c.7k worldwide OTT Pay TV subscribers to complement our

NetTV Plus business

• The Group will continue to monitor M&A opportunities and is currently in the early stages of evaluating multiple

potential opportunities

–

In line with its stated strategy, the Company is looking for acquisitions that are value accretive and offer substantial synergies with the Company’s existing operations

22

Highlights Financial review Appendices

Agenda

Introduction Operational review Mergers & Acquisitions

23

Income Statement

in €000 H1 2013 H1 2014 Revenue 116,295 136,142 Other income 1,839

• Content cost

(23,321) (27,317) Satellite capacity cost (3,652) (3,654) Internet link cost (3,346) (1,488) Materials cost (3,449) (2,689) Staff costs (10,796) (12,396) Other operating expenses (20,589) (23,325) EBITDA 52,981 65,273 Depreciation (23,471) (27,550) Amortisation of intangible assets (9,052) (10,803) Results from operating activities 20,458 26,920 Other non-operating expenses (5,485) (48,367) Finance income 1,632 176 Finance costs (10,691) (31,599) Net finance costs (9,059) (31,423) Profit/(loss) before tax 5,914 (52,870) Income tax (expenses)/benefit (1,744) (28) Minority share

• (385)

Profit/(Loss) for the period 4,170 (53,283)

24

Statement of Financial Position

in €000 H1 2013 H1 2014 Assets Property, plant and equipment 197,434 223,478 Goodwill 386,026 712,738 Intangible assets 124,320 131,595 Investment property 608 64 Other financial assets 1,012 1,035 Deferred tax assets 1,775 1,619 Non-current assets 711,175 1,070,529 Programming rights held for sale

• 4,288

Inventories 178 3,769 Trade and other receivables 44,735 51,163 Short term loan receivables 869 1,142 Prepayments 12,521 15,877 Income tax receivable 626 1,963 Cash and cash equivalents 16,221 15,372 Current assets 75,150 93,574 Total assets 786,325 1,164,103 in €000 H1 2013 H1 2014

Equity Issued and fully paid share capital 200 125 Share premium 1,800 564,591 Preferred equity 277,060

• Contributions by the owner

168,379

• Translation reserves

(4,095) 377 Accumulated losses (924) (28,898) Equity attributable to owners of the Company 442,420 536,195 Non-controlling interests 9,202 8,988 Total equity 451,622 545,183 Liabilities Loans and borrowings 228,690 42,631 Bond loan

• 475,000

Amortisation of bond related fees

• (20,986)

Long term provisions 2,161 883 Deferred revenue 7,514 7,417 Finance lease liabilities 2,802 10,167 Deferred tax liabilities 16,264 12,955 Employee benefits 633 691 Non-current liabilities 258,064 528,758 Trade and other payables 64,361 77,085 Current tax liabilities 380 334 Loans and borrowings 10,221 2,150 Deferred revenue 1,094 5,253 Finance lease liabilities 583 5,340 Current liabilities 76,639 90,162 Total liabilities 334,703 618,920 Total equity and liabilities 786,325 1,164,103

25

Statement of Cash Flows

in €000 H1 2013 H1 2014 Cash flows from operating activities Profit/(Loss) for the year 5,914 (53,283) Adjustments for: Depreciation 23,471 27,550 Amortisation 9,052 10,803 Impairment of trade and other receivables 2,743

• Impairment of property, plant and equipment

840

• Tax (income)/expense
• 28

Minority interest 385 Gain on revaluation of investment/step acquisition (1,051)

• Net finance cost

6,025 31,423 Operating cash flows before WC changes 46,994 16,906 Changes in working capital: (Increase)/Decrease in accounts receivables and prepayments (10,117) (6,959) Increase/(Decrease) in deferred income 108 121 (Increase)/Decrease in deferred cost 260 (226) (Increase)/Decrease in inventories 7,636 (469) (Increase)/Decrease of programming rights

• (4,921)

Increase/(Decrease) in trade and other payables (15,613) (5,627) Cash generated from operations 29,268 (1,175) Interest paid (7,338) (23,190) Income tax paid (1,211) (595) Net cash from operating activities 20,719 (24,960) in €000 H1 2013 H1 2014 Cash flows from investing activities Purchase of property, plant and equipment (24,162) (32,315) Purchase of intangible assets (1,670) (9,946) Decrease in other financial assets 4,885 6,238 Increase in long-term investments (1,535) (2,682) Acquisition of subsidiaries, net of cash acquired (15,416) (550,450) Net cash used in investing activities (37,898) (589,155) Cash flows from financing activities Proceeds from borrowings 20,208 43,189 Repayment of borrowings (2,000) (312,296) Proceeds from finance lease, net

• 6,972

Capital increase

• 418,140

Net cash used in financing activities 18,208 156,005 Net increase in cash and cash equivalents 1,029 (458,110) Cash and cash equivalents at 1 January 15,193 8,229 Cash at ESCROW account as at 31.12.2013

• 465,500

Effects of movements in exchange rates on cash held (1) (247) Cash and cash equivalents at end of period 16,221 15,372

26

Presentation of Financial Information United Group half year pro forma financial statements have been prepared in accordance with Group Accounting Policies. Pro Forma combined financial information gives effect to the business combination (acquisition of Slovenia Broadband S.a.r.l. and its subsidiaries) as if it had occurred as at 1 January 2014 including Adria Midco B.V. and all its subsidiaries. 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 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