United Group BO H1 2018 financial results presentation 29 August - - PowerPoint PPT Presentation

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United Group BO H1 2018 financial results presentation 29 August - - PowerPoint PPT Presentation

United Group BO H1 2018 financial results presentation 29 August 2018 Disclosure regarding forward-looking statements and the presentation of certain financial information This presentation contains forward-looking statements, which include


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H1 2018 financial results presentation

29 August 2018

United Group BO

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This presentation contains forward-looking statements, which include all statements other than statements of historical facts, including, without limitation, any statements preceded by, followed by or including the words “targets”, “believes”, “expects”, “aims”, “intends”, “may”, “anticipates”, “estimates”, “would”, “will”, “could”, “should” or similar expressions or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond our control that could cause our actual performance or achievements to be materially different from future performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding our present and future strategies and the environment in which we will operate in the future. These forward-looking statements speak

  • nly as at the date of this Presentation. We expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking

statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any

  • f such statements are based.

This Presentation contains summary unaudited condensed financial information for Adria Midco B.V. and its subsidiaries for the six months ended June 30

  • 2018. The statement of financial position for Adria Midco B.V. and its subsidiaries as at 30 June 2018 and as at 30 June 2017, as well as the condensed

consolidated interim statements of profit or loss and cash flows for Adria Midco B.V. and its subsidiaries for the six months periods then ended have been prepared in accordance with IFRS, however have not been reviewed by our independent auditors. Certain financial measures and ratios related thereto in this Presentation, including EBITDA, Adjusted EBITDA, Adjusted EBITDA minus capital expenditure, RGUs and ARPU (collectively, the ‘‘Non-IFRS Measures’’) are not specifically defined under IFRS or any other generally accepted accounting principles. These measures are presented here because we believe that they and similar measures are widely used in our industry as a means of evaluating a company’s

  • perating performance and financing structure. Our management believes this information, along with comparable IFRS measures, is useful to investors

because it provides a basis for measuring the operating performance in the periods presented. These measures are used in the internal management of our business, along with the most directly comparable IFRS financial measures, in evaluating the operating performance. These measures may not be comparable to other similarly titled measures of other companies and are not measurements under IFRS or other generally accepted accounting principles, and you should not consider such items as alternatives to net income (loss), operating income or any other performance measures derived in accordance with IFRS, and they may be different from similarly titled measures used by other companies.

Disclosure regarding forward-looking statements and the presentation of certain financial information

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Highlights Financial review Mergers & Acquisitions

Agenda

Introduction Operational review Appendices

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Introduction to United Group

  • South-East

Europe’s leading multi-play telecommunications and media provider

  • 3.67 million cable and satellite TV, broadband, fixed-line

and mobile RGUs across five countries of former Yugoslavia**

  • Operating in a market characterized by 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
  • ur 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

  • Owned by funds affiliated with KKR, EBRD and the

management

* On June 30, 2017, we had in place a €775 million bond that was issued under the 2013 indenture. These notes were redeemed in full on July 27, 2017 (€817.5 million paid, including accrued and unpaid interest plus redemption costs). In addition, all outstanding borrowings under the RCF dated November 5, 2013 and the PIK facility agreement dated July 3, 2014 were paid

Issuer United Group B.V. Listed International Stock Exchange (Channel Islands) Governing Law State of New York Outstanding notes €575 million Coupon 4.375% Maturity 1-Jul-22 Coupon dates 15 January & 15 July Outstanding notes €325 million Coupon 4.875% Maturity 1-Jul-24 Coupon dates 15 January & 15 July Outstanding notes €450 million Coupon Three-month EURIBOR plus 4.375% Maturity 1-Jul-23 Coupon dates 15 October, 15 January, 15 April, 15 July United Group B.V. Senior Notes * 2022 Fixed Rate Notes 2024 Fixed Rate Notes Floating Fixed Rate Notes

** In January 2018 the group sold Totalna Televizija in Croatia, however it is still present in the country through its United Media subgroup

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Highlights Financial review Mergers & Acquisitions

Agenda

Introduction Operational review Appendices

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H1 2018: operational highlights

  • Healthy

year-on-year RGU growth across all services – Driven predominantly by

  • rganic

subscriber growth, increased multi-play subscribers and acquisitions – Serbia: Kabel Group 85 (RGUs: +4k) – Slovenia: Teleing (RGUs: +31k)

  • Homes passed up by 4% to 1,809k YoY due to

– Expansion of and investment in our network – Acquisitions in Serbia and Slovenia

  • Blended cable ARPU up by 7% to €22.0 YoY as a

result of – Successful execution of our strategy aimed at selling more services to our cable subscribers – Increased revenue from cable network-based services – Migration from lower-priced to higher-priced service packages – Price increases in Serbia, Slovenia and Bosnia and Herzegovina

* 2017 restated – B2B subscribers reclassified from Other services RGU to Services RGU

3,413 3,671 H1 2017* H1 2018

RGUs (k)

+8% 20.4 22.0 H1 2017* H1 2018

Blended cable ARPU (€)

+7%

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H1 2018: financial highlights

  • Revenues up 14% YoY to €285.4 million as a result of
  • Organic growth and acquisitions
  • Growing number of RGUs
  • Price increases
  • Adjusted EBITDA up 16% YoY to €126.7 million
  • Driven by our focus on profitable growth
  • Like-for-like

margin improvements in both cable and mobile businesses

  • Net leverage* down to 4.79x from 5.15x
  • Gross leverage** down compared to Q1 2018 level in spite of cash
  • utflow related to Notes interest payment in April

* Annualized Adjusted Pro Forma EBITDA is calculated as two times (Q1 2018 + Q2 2018) Consolidated Adjusted EBITDA plus €1.0 million of additional synergy effects ** Gross indebtedness was reduced by €200 million, which is the amount deposited on a special account for the acquisition of CME assets in Slovenia and Croatia. The adjustment was made as CME EBITDA is not included in the Group EBITDA which is used in the leverage calculation

249.3 285.4 H1 2017 H1 2018

Revenues (€ m)

+14%

108.8 126.7 H1 2017 H1 2018

Adjusted EBITDA (€ m)

+16%

5.29x 4.89x 5.15x 4.79x Q1 2018 H1 2018

Leverage

Gross leverage Net leverage

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Highlights Financial review Mergers & Acquisitions

Agenda

Introduction Operational review Appendices

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SBB Serbia

  • Increase
  • f

10.1k HP driven by

  • rganic network expansion

Telemach Slovenia

  • Additional 25.3k homes passed due

to both

  • rganic

growth and acquisition of Teleing (+19k) Telemach BH

  • Increase
  • f

4% due to

  • rganic

network expansion Telemach MNE

  • Increase of 29% driven by organic

network expansion

Homes passed across key markets Key developments

Network expansion

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RGUs vs. Unique cable subscribers Key developments

Increasing subscribers and RGUs

  • Increasing

cable subscribers as a result of organic network growth and acquisitions

Kabel Group 85 +4k

Teleing +13.5k

  • Faster growth in RGUs per unique

cable subscriber driving

  • verall

performance

SBB Serbia, Telemach BH & Telemach MNE

  • Cross-selling of multi-play offers to 1-

Play subscribers in all three entities

  • RGU per subscriber growth in Serbia to

2.1x and Bosnia to 2.2x, and in Montenegro to 2.0x

Telemach Slovenia

  • Cross-selling of 3-Play offers to 1-Play

subscribers

Mobile offering supporting take up

  • f multi-play packages
  • Upgrading

existing customers to premium products Our 1,144k unique cable subscribers order on average between 2.0x and 2.7x different services

* 2017 restated – B2B subscribers reclassified from Other services RGU to Services RGU

1,098 1,144 H1 2017* H1 2018

Unique cable subs (k)

+4% 3,413 3,671 H1 2017* H1 2018

RGUs (k)

+8%

RGUs vs. Unique cable subscribers H1 2017* H1 2018 SBB Serbia 2.0x 2.1x Telemach Slovenia 2.7x 2.7x Telemach BH 2.0x 2.2x Telemach MNE 1.7x 2.0x

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RGUs by service Key developments

Increasing RGUs

Healthy YoY RGU growth across almost all services

Cable pay TV growth due to organic growth and Teleing and Kabel Group 85 acquisitions

Broadband internet RGUs increased by 9% as a result of organic growth and acquisition in Slovenia

DTH pay-TV RGUs decreased by 6% YoY due to divestment of TTV Croatia with 33k subscribers on January 12, 2018

OTT subscribers increased by 9% driven by

  • rganic growth and customer base acquisition

with 3k active IPTV subscribers added

Fixed line telephony RGUs up 23% YoY due to continued growth of this service at SBB and Telemach Bosnia and acquisition of 8k subscribers in Slovenia

Mobile services up 12% due to high organic growth at Telemach Slovenia with around 35.5% share of gross adds in the market in H1 2018

Other service RGUs decreased by 8% mostly due to migration of MMDS subscribers to coax video service following the shutdown of the MMDS platform in Montenegro

* 2017 restated – B2B subscribers reclassified from Other services RGU to Services RGU

1,098 498 118 729 502 430 37 1,144 469 128 795 616 483 35 Cable pay- TV DTH pay-TV OTT Broadband internet Fixed -line telephony Mobile services Other services

RGUs by service (k)

H1 2017* H1 2018 +4%

  • 6%

+9% +9% +23%

  • 7%

+12%

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Group

  • Blended cable ARPU up 7% to €22.0 in H1

2018 as a result of positive trends across all markets SBB Serbia

  • Key drivers include migration to multi-play

packages and a price increase for analogue TV service as of January 1, 2018, as well as the effect of IFRS 15 implementation Telemach Slovenia

  • Growth in multi-play subscribers
  • Pay-TV and internet revenues positively

affected by a price increase in April 2017 and IFRS 15 adoption Telemach BH

  • Growth in subscribers for multi-play offering

and a price increase in April 2018

  • Increase in revenue from cable services and

IFRS 15 adoption

  • Conversion of ARPU levels in companies

acquired in 2015 to Group levels Telemach MNE

  • Blended cable ARPU increased to €17.4 in

H1 2018 (+12% vs. H1 2017)

Blended cable ARPU Key developments

ARPU development

in € H1 2017* H1 2018 H1 2017* H1 2018 H1 2017* H1 2018 H1 2017* H1 2018 Cable pay-TV 9.2 10.3 18.3 18.9 8.8 9.6 10.5 11.1 Broadband internet 9.7 10.2 17.2 17.8 9.3 9.5 8.5 8.2 Fixed-line telephony 4.4 4.2 3.6 3.5 8.8 7.5 5.0 3.3 Blended cable ARPU 17.0 18.8 35.0 36.1 18.0 19.7 15.5 17.4 SBB Serbia Telemach Slovenia Telemach BH Telemach MNE

17.0 18.8 35.0 36.1 18.0 19.7 15.5 17.4 H1 2017* H1 2018 H1 2017* H1 2018 H1 2017* H1 2018 H1 2017* H1 2018 SBB Serbia Telemach Slovenia Telemach BH Telemach MNE

Blended cable ARPU per segment (€)

+11% +3% +9% +12%

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Highlights Financial review Mergers & Acquisitions

Agenda

Introduction Operational review Appendices

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Revenue development H1 2018 Key drivers

Revenue development by segment

Group

  • H1 2018 revenues up 14% YoY to €285.4 million driven

by growing RGUs, overall increase in ARPU driven by

  • rganic growth and acquisitions, and IFRS 15 adoption

SBB Serbia

  • Reported revenues up by 11% YoY to €113.2 million

driven by a price increase and organic growth of unique cable subscribers and RGUs, and positive effect of Ikom acquisition Telemach Slovenia

  • Revenue up by 15% to €109.0 million due to higher

number of mobile and multi-play subscribers Telemach BH

  • Revenue up by 11% to €33.8 million driven by growth
  • f internet and fixed-line telephony segments

Telemach MNE

  • Revenue down by 7% to €6.8 million as a result of

lower Intercompany revenues. Subscription revenues in line with H1 2017

United Media

  • Growth of 21% due to higher sales of distribution rights,

a price increase for own channels, higher advertising revenues and acquisition of IDJ and Fight channels

Other Businesses

  • Revenue growth of 31% YoY as a result of organic

growth in Solford and intragroup revenues in Holding companies

249.3 285.4 H1 2017 H1 2018

Revenues (€ m)

+14%

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Key drivers

Adjusted EBITDA development

Group

  • Adjusted EBITDA up by 16% YoY to €126.7 million as a result
  • f:

– Increased revenues, cost discipline and integration of acquired companies – Acquisition of cable operators Ikom, Kabel Group 85 in Serbia, Teleing in Slovenia and content companies Fight channel (Croatia) and IDJ – Implementation of IFRS 15

SBB Serbia

  • Growth of 29% YoY driven by a price increase in January,
  • rganic subscriber and RGU growth, and acquisitions

Telemach Slovenia

  • Increase of 14% compared to H1 2017 due to higher revenues

and Teleing acquisition

Telemach BH

  • EBITDA on the same level YoY

Telemach MNE

  • Decrease of 31% YoY driven by higher bad debt

United Media

  • EBITDA growth due to higher revenue and two acquisitions

Other Businesses

  • EBITDA decline due to negative impact of Holding companies.

Without this negative effect, Solford EBITDA growth was 12% compared to H1 2017

Adjusted EBITDA development H1 2018

108.8 126.7

H1 2017 H1 2018

Adjusted EBITDA (€ m)

+16%

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Capital expenditures

Capex development Key drivers

Group

  • Group Capex reached 30% of consolidated revenues in H1

2018

  • Capex not expected to exceed depreciation levels on a

long-term basis SBB Serbia

  • Decrease in H1 2018 capex due to lower level of

capitalized inventories compared to H1 2017 and lower value of installed CPE in Belgrade due to a delay in the implementation of the digitalization project Telemach Slovenia

  • Capex increase due to higher investment in network,

higher acquisition costs and one off capex from a purchase

  • f a new building in Ljubljana (€3.8 million)

Telemach BH

  • Higher capex in H1 2018 due to higher acquisition costs

and capitalized inventories Telemach MNE

  • Higher capex in H1 2018 due higher subscriber acquisition

costs and investment in network United Media

  • Content investments up 108% vs. H1 2017 due to timing of

programming rights purchases (FIBA, UFC, Hours deal and PGA) and investment in proprietary software development (Cloud project) * IFRS view of CAPEX at United Group level

** Management view of Subgroup CAPEX. This figure includes capitalized

  • inventory. Restated 2017 figures

69.0 86.4

H1 2017 H1 2018

Capex Group (€ m)*

+25%

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Adjusted EBITDA-CAPEX and leverage development

Key drivers

  • Adjusted EBITDA-Capex growth due to

EBITDA growth exceeding capex growth

  • Growth in capex mainly at Telemach

Slovenia, resulting from investments in new building in Ljubljana and at United Media group

  • Net leverage* down to 4.79x from

5.15x

  • Gross leverage** of 4.89 down

compared to Q1 2018 in spite of cash outflow related to Notes interest payment in April

  • * Annualized Adjusted Pro Forma EBITDA is calculated as two times (Q1 2018 +

Q2 2018) Consolidated Adjusted EBITDA plus €1.0 million of additional synergy

  • ** Gross indebtedness was reduced by €200 million, which is the amount

deposited on a special account for the acquisition of CME assets in Slovenia and

  • Croatia. The adjustment was made as CME EBITDA is not included in the Group

EBITDA which is used in the leverage calculation

Leverage Adjusted EBITDA-CAPEX

39.9 40.3

H1 2017 H1 2018

Adjusted EBITDA - Capex (€ m)

+1%

5.29x 4.89x 5.15x 4.79x Q1 2018 H1 2018

Leverage

Gross leverage Net leverage

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Highlights Financial review Appendices

Agenda

Introduction Operational review Mergers & Acquisitions

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Mergers & Acquisitions

  • On January 3, 2018, Ikom merged with SBB d.o.o., Serbia.
  • On March 1, 2018, Kabel Group 85 merged with SBB d.o.o., Serbia. Both mergers are part of routine corporate structure optimization.
  • On January 12, 2018, Totalna TV Croatia was sold to V-Investment Holdings for a total consideration of €3.0 million.
  • In April 2018, SBB paid a deferred consideration of €211 thousand to the former owners of Kabel Group 85, Čačak.
  • In May 2018, SBB paid a deferred consideration of €5 million to the former owners of Ikom.
  • In March 2018, Solford acquired BH OTT, Sarajevo (3,135 active IPTV subscribers) for a total consideration of €1.0 million (€320 per active subscriber).
  • On July 31, 2018, we announced that Slovenia Broadband closed the acquisition of CME Croatia for a total consideration of €86.3million.
  • The special mandatory redemption provisions under the bonds relating to the €200.0 million held for the acquisition of CME’s assets in Slovenia and

Croatia were removed pursuant to the consent solicitation in July/August 2018 and the Supplemental Indenture dated August 3, 2018. In any event, United Group B.V. continues to endeavour to complete the acquisition of CME’s assets in Slovenia as soon as Slovenian regulatory approval is granted.

  • United Group continually monitors M&A opportunities and is currently in the early stages of evaluating multiple potential opportunities. In line with its stated

strategy, the Group is looking for acquisitions that are value accretive and offer substantial synergies with the Group’s existing operations.

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Highlights Financial review Appendices

Agenda

Introduction Operational review Mergers & Acquisitions

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Income statement

in €000 H1 2017 H1 2018 Revenue 249,293 285,412 Other income 1,484 11,419 Content cost (37,771) (44,954) Satellite capacity cost (3,142) (2,509) Interconnection link cost (18,376) (20,397) Materials cost (16,772) (20,538) Staff costs (26,875) (29,720) Other operating expenses (47,423) (50,730) IFRS EBITDA 100,418 127,983 Depreciation (42,267) (46,336) Amortisation of intangible assets (28,752) (30,350) Results from operating activities 29,399 51,297 Finance income 8,742 4,652 Finance costs (75,075) (34,183) Net finance costs (66,333) (29,531) Profit/(loss) before tax (36,934) 21,766 Income tax (expenses)/benefit (2,920) 102 Minority share Profit/(Loss) for the period (39,854) 21,868 Other comprehensive loss Items that are or may be reclassified subsequently to profit and loss Currency translation differences 2,481 893 Other comprehensive loss (income) for the period 2,481 893 Total comprehensive loss (income) for the period (37,373) 22,761 (Loss)/profit attributable to: Owners of the Company (41,273) 20,581 Non-controlling interests 1,419 1,287 (Loss)/profit for the period (39,854) 21,868 Total comprehensive (loss)/income attributable to: Owners of the Company (38,792) 21,474 Non-controlling interests 1,419 1,287 Total comprehensive (loss)/income for the period (37,373) 22,761

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Statement of financial position

in €000 H1 2017 H1 2018 Assets Property, plant and equipment 369,853 386,384 Goodwill 673,318 650,089 Intangible assets 272,531 250,144 Investment property 410 361 Loans to related parties 32,007 32,014 Other financial assets 944 17,050 Non current prepayments 29 51 Contract assets 5,014 Deferred costs 1,228 3,274 Deferred tax assets 10,254 9,118 Non-current assets 1,360,574 1,353,499 Programming rights held for sale Inventories 5,311 7,359 Trade and other receivables 91,462 117,743 Short term loan receivables and deposits 11,361 5,111 Prepayments 28,781 42,449 Contract assets ST 8,293 Income tax receivable 4,969 2,529 Cash and cash equivalents 22,764 226,648 Current assets 164,648 410,132 Total assets 1,525,222 1,763,631

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Statement of financial position - continued

Equity Issued and fully paid share capital 125 125 Share premium 568,592 337,557 Other capital reserves Translation and other reserves (21,023) (13,133) Accumulated losses (159,770) (209,110) Equity attributable to owners of the Company 387,924 115,439 Non-controlling interests 10,762 10,039 Total equity 398,686 125,478 Liabilities Loans and borrowings 6,194 87,461 Other financial liabilities

  • 1,328,632

Amortization of bond related fees Long term liabilities 94 274 Long term provisions 8,262 10,442 Deferred revenue 6,187 6,095 Finance lease liabilities 3,104 966 Deferred tax liabilities 33,243 29,371 Employee benefits 676 605 Non-current liabilities 57,760 1,463,846 Trade and other payables 117,869 129,080 Interest payable 8,209 25,561 Current tax liabilities 3,274 4,876 Previous Bonds 805,417 Loans and borrowings 119,275 1,003 Deferred revenue 7,474 11,030 Finance lease liabilities 7,258 2,757 Current liabilities 1,068,776 174,307 Total liabilities 1,126,536 1,638,153 Total equity and liabilities 1,525,222 1,763,631

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Consolidated statement of cash flows

Capex data including capitalized inventory

in €000 H1 2017 H1 2018 Cash flows from operating activities Profit/(Loss) for the year (39,854) 21,868 Adjustments for: Depreciation 42,267 46,336 Amortisation 28,752 30,350 Impairment of trade and other receivables 2,968 3,592 Impairment of PPE and Intangibles 190 138 Tax (income)/expense 2,920 (102) Net finance cost 66,333 29,531 Operating cash flows before WC changes 103,576 131,713 Changes in working capital: Trade and other receivables (10,309) (12,322) Deferred revenue (3,080) (4,657) Deferred cost 194 (99) Contract assets (13,307) Provision in employees benefits (34) Inventories (269) (497) Prepayments (7,539) (11,561) Trade and other payables 1,301 24,623 Cash generated from operations 83,874 113,859 Interest paid (32,265) (30,392) Income tax paid (2,301) (2,843) Net cash from operating activities 49,308 80,624 Cash flows from investing activities Purchase of property, plant and equipment (51,093) (64,925) Purchase of intangible assets (17,217) (25,359) Acquisition of subsidiaries, net of cash acquired (41,577) Change in short term loan receivables (5,888) 204,237 Change in other non-current financial asset (399) (9,749) Net cash used in investing activities (116,174) 104,204 Cash flows from financing activities Proceeds from borrowings 101,500 83,000 Repayment of borrowings (18,933) (69,000) Acquisition of NCI (768) (13) Repayment of finance lease (6,128) (3,263) Dividends paid (1,470) Net cash used in financing activities 75,671 9,254 Net increase in cash and cash equivalents 8,805 194,082 Cash and cash equivalents at 1 January 13,941 32,560 Effects of movements in exchange rates on cash held 18 6 Cash and cash equivalents at end of period 22,764 226,648