United Group BO H1 2016 financial results presentation 30 August - - PowerPoint PPT Presentation

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United Group BO H1 2016 financial results presentation 30 August - - PowerPoint PPT Presentation

United Group BO H1 2016 financial results presentation 30 August 2016 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 2016 financial results presentation

30 August 2016

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,

  • 2016. Both H1 2015 and H1 2016 data is based on management results, which may differ from IFRS results.

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 provider of pay-TV and broadband

services, with a strong presence in mobile telephony following the Tušmobil acquisition

  • 2.95 million cable and satellite TV, broadband, fixed-line and mobile

RGUs across the six countries of former Yugoslavia

  • Operating in a market characterised 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 our 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

2020 Senior Notes

Issuer United Group B.V. Listed GEM, Irish Stock Exchange Governing Law State of New York Outstanding notes €625 million Coupon 7.875% Maturity 15 November 2020 Coupon dates 15 November & 15 May

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Highlights Financial review Mergers & Acquisitions

Agenda

Introduction Operational review Appendices

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H1 2016: operational highlights

  • Healthy year-on-year RGU growth

– across all services – driven predominantly by increased multi – play subscribers and acquisitions in Bosnia and Herzegovina

  • Homes passed up by 12% to 1,542k YoY due to

– expansion of and investment in our network – acquisition

  • f

6 entities in Bosnia and Herzegovina

  • Blended cable ARPU up by 3% to €19.1 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 – Blended ARPU growth dampened by one time negative effect of BH acquisitions, which had lower blended ARPU than existing BH

  • perations

1,377 1,542

H1 2015 H1 2016

Homes passed (k)

+12% 18.5 19.1 H1 2015 H1 2016

Blended cable ARPU (€)

+3%

817 454 96 489 296 324 104 928 474 110 579 382 361 116 Cable pay- TV DTH pay- TV OTT Broadband internet Fixed -line telephony Mobile services Other services

RGUs by service (k)

H1 2015 H1 2016 +14% +4% +15% +18% +29% +11% +11%

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New reporting structure

  • Prior to January 1 2016, results of DTH operations throughout the region were reported within SBB Serbia

segment - as of January 1 2016, results of DTH operations reported within the segment where these

  • perations occur

– SBB Serbia includes the results of cable services in Serbia and DTH operations in Serbia, Croatia and Macedonia, including the results of EUnet (acquired in May 2015). Absolut Solutions and Totalna TV Croatia results are included in the SBB Serbia segment, however their results are not reflected in the consolidated results of SBB Serbia Group. In H1 2015 SBB Serbia results also included DTH operations in Slovenia, Bosnia and Herzegovina, and Montenegro – Telemach Slovenia includes the results of cable and mobile services in Slovenia and DTH

  • perations in Slovenia (as of January 1, 2016)

– Telemach BH includes the results of cable and DTH services in Bosnia and Herzegovina (as of January 1, 2016) – United Media Group (formerly Adria Media Group) includes the results of media and content business including the results of N1 Info, Grand Production and Orlando Kids and Bambino – Other Businesses includes other operating businesses, such as NetTV and Telemach Montenegro (renamed from Broadband Montenegro) including DTH services in Montenegro (as of January 1, 2016) Please see appendix for a comparisons of revenue, adjusted EBITDA and capital expenditures for H1 2016

  • vs. restated H1 2015 as per the new reporting structure.
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H1 2016: financial highlights

  • Revenues up 29% YoY to €221.7 million as a result of

  • rganic growth and acquisitions

– growing number of RGUs – price increases

  • Adjusted EBITDA up 28% YoY to €94.3 million

– EBITDA growth in line with revenue growth despite inclusion of mobile business in Slovenia with lower margins than the cable business – Like for like margin improvements in both cable and mobile businesses

  • Net leverage* down to 3.97x from 4.01x

– Leverage decrease due to Adjusted EBITDA growth, despite payment of interest for the bond in May 2016

* Annualised Last Two Quarter Adjusted Pro Forma EBITDA is calculated as two times the amount of Consolidated Adjusted Pro Forma L2Q EBITDA 171.4 221.7 H1 2015 H1 2016

Revenue in m (€)

+29% 73.9 94.3

H1 2015 H1 2016

Adjusted EBITDA in m (€)

28%

4.11x 4.04x 4.01x 3.97x Q1 2016 H1 2016

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 of 6% caused by organic

network expansion Telemach Slovenia

  • Organic increase against H1 2015,

with 3k additional homes passed Telemach BH

  • Increase
  • f

54% due to the acquisition of 6 cable operators in July 2015 and organic network expansion

Homes passed across key markets Key developments

Network expansion

831 884 302 305 200 307 H1 2015 H1 2016 H1 2015 H1 2016 H1 2015 H1 2016 SBB Serbia Telemach Slovenia Telemach BH

Homes passed (k)

6% +1% +54%

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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

  • Faster growth in RGUs per unique

cable subscriber driving

  • verall

performance

SBB Serbia & Telemach BH

  • Start of cross-selling of multi-play
  • ffers to 1-Play subscribers
  • Decline

in Bosnia resulting from acquisition of 6 entities attributed with 144k RGUs and RGU/sub of 1.6

Telemach Slovenia

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

subscribers

Mobile offering to accelerate take up of multi-play packages

  • Upgrading

existing customers to premium products Our 928k unique cable subscribers order on average between 1.8x and 2.6x different services

RGUs vs. Unique cable subscribers H1 2015 H1 2016 SBB Serbia 1.8x 1.9x Telemach Slovenia 2.5x 2.6x Telemach BH 2.0x 1.9x 817 928 H1 2015 H1 2016

Unique cable subs (k)

+14%

2,580 2,951 H1 2015 H1 2016

RGUs (k)

+14%

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RGUs by service Key developments

Increasing RGUs

  • Healthy YoY RGU growth across all

services

  • DTH pay-TV RGUs increased by 4%

compared to H1 2015 due to additional subscribers and lower churn rate

  • OTT RGUs increased by 15% driven

by organic growth

  • Fixed line telephony RGUs up 29%

YoY due to continued growth following the introduction of this service at SBB and Telemach Bosnia

  • Mobile services – increase due to

additional organic growth atTelemach Slovenia – around 40% share of gross adds in the market

  • Other service RGUs increased by 11%

mostly due to organic growth of B2B and MMDS subscribers

* Following theTušmobil acquisition mobile service RGUs are no longer reported under

Other services due to their increased importance.

817 454 96 489 296 324 104 928 474 110 579 382 361 116 Cable pay- TV DTH pay-TV OTT Broadband internet Fixed -line telephony Mobile services Other services

RGUs by service (k)*

H1 2015 H1 2016 +14% +4% +15% +18% +29% +11% +11%

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Group

  • Blended cable ARPU up 3% to €19.1 in H1

2016 as a result of positive trends across all

  • f our markets

SBB Serbia

  • Key drivers included migration to multi-play

packages and a price increase of analogue TV service as of January 1, 2016 Telemach Slovenia

  • Growth in multi-play subscribers
  • Price increase positively affected pay-TV

and internet revenues Telemach BH

  • Growth in subscribers for multi-play offering
  • Increase in revenue from cable services
  • Decline as a result of the acquisition of six

companies with lower blended ARPU of €12.4 in July 2015.

Blended cable ARPU Key developments

ARPU development

14.3 16.0 31.2 32.2 16.3 15.5 H1 2015 H1 2016 H1 2015 H1 2016 H1 2015 H1 2016 SBB Serbia Telemach Slovenia Telemach BH

Blended cable ARPU per segment (€)

+12%

+3%

  • 5%

in € H1 2015 H1 2016 H1 2015 H1 2016 H1 2015 H1 2016 Cable pay-TV 8.1 8.9 16.8 17.2 7.4 7.5 Broadband internet 9.7 9.9 15.9 16.0 9.3 8.4 Fixed-line telephony 5.3 4.9 3.9 3.8 10.4 9.6 Blended cable ARPU 14.3 16.0 31.2 32.2 16.3 15.5 SBB Serbia Telemach Slovenia Telemach BH

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Highlights Financial review Mergers & Acquisitions

Agenda

Introduction Operational review Appendices

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Revenue development H1 2016 Key drivers

Revenue development by segment

Group

  • H1 2016 revenues up 29% YoY to €221.7million

driven by growing RGUs, overall increase in ARPU,

  • rganic growth and acquisitions

SBB Serbia

  • Results affected by sale of Total TV to Telemach

entities as of 1 January 2016, no effect on United Group results

  • Reported revenues up by 2% to €83.6 million YoY

Telemach Slovenia

  • Revenue up by 55% to €94.1 million
  • Acquisition of Tušmobil in April 2015 and inclusion of

Total TV Slovenia results from 1 January 2016

  • Increase in the number of multi-play subscribers

Telemach BH

  • Revenue up by 106% to €26.0 million
  • Acquisition of 6 entities in July 2015 and inclusion of

Total TV BH results from 1 January 2016

  • Realization of synergies from past acquisitions
  • Growth of internet and fixed-line telephony segments

United Media

  • Growth of 40% due to increased sales of distribution

rights to various channels and increase of price for

  • wn channels

Other Businesses

  • Revenue growth of 59% YoY as a result of organic

growth in Solford and Telemach Montenegro, which now includes Total TV Montenegro results 171.4 221.7 H1 2015 H1 2016

Revenue (€ m)

+29%

82.3 60.7 12.6 22.6 7.7 83.6 94.1 26.0 31.7 12.2 SBB Serbia Telemach Slovenia Telemach BH United Media Group Other Businesses w/o IC

Revenue by segment (€ m)

H1 2015 H1 2016 +106% +40% +2% +55% +59%

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Key drivers

Adjusted EBITDA development

Group

  • Adjusted EBITDA up by 28% to €94.3 million

YoY as a result of: – Increased revenues and cost discipline and successful integration of acquired companies – Acquisition of Tušmobil and 6 Bosnian entities

SBB Serbia

  • Increase of 8% YoY driven by price incease and

RGU growth

  • EBITDA growth dampened by sale of Total TV`s

to Telemach entities

Telemach Slovenia

  • Increase of 31% compared to H1 2015 due to
  • rganic growth and acquisition of Tušmobil and

Total TV Slovenia

Telemach BH

  • EBITDA

growth

  • f

45% YoY driven by acquisition of 6 entities and Total TV Bosnia, higher revenue and lower operating expenses

United Media

  • Higher

revenue (including Intercompany revenues) among key drivers of EBITDA growth

Other Businesses

  • EBITDA growth of 52% YoY due organic growth
  • f Solford and Telemach Montenegro (including

Total TV Montenegro)

Adjusted EBITDA development H1 2016

73.9 94.3

H1 2015 H1 2016

Adjusted EBITDA (€ m)

28%

34.3 24.0 6.1 6.7 3.0 36.9 31.5 8.8 12.6 4.6 SBB Serbia Telemach Slovenia Telemach BH United Media Group Other Businesses w/o IC

Adjusted EBITDA by segment (€ m)

H1 2015 H1 2016 45% +90% +8% +31% 52%

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Capital expenditures

Capex development* Key drivers

* Management capex data incl. capitalized inventory for H1 2016, but excl. capitalized inventory for H1 2015 Group

  • Capex growth as result of network expansion,

acquisition of Tušmobil and Bosnian entities, and investment in SWAP MPEG 4 project in DTH countries

  • Capex is expected not to exceed depreciation

levels on a long-term basis SBB Serbia

  • H1 2016 capex impacted by lower investment in

DTH end user equipment (sale of Total TV) Telemach Slovenia

  • Higher capex mainly driven by additional

spending on Tušmobil’s 4G network and end- user equipment for Total TV (incl SWAP project) Telemach BH

  • Higher capex in H1 2016 due to Coax network

expansion and end-user equipment for Total TV (incl SWAP project) United Media

  • Higher capex due to variations in timing of

content investments Other businesses

  • Increase due to end user equipment for Total TV

Montenegro and Telemach Pogorica growth capex

44.2 59.8

H1 2015 H1 2016

Capex Group (€ m)

+35%

27.7 11.7 3.7 0.8 0.4 23.0 19.3 9.5 5.7 2.3 SBB Serbia Telemach Slovenia Telemach BH United Media Group Other Businesses

Capex by segment (€ m)

H1 2015 H1 2016 +157% +651%

  • 17%

+65% +459%

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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 4G network, and at Telemach BH

  • Capex growth in UM segment will be

lower in 2H 2016 compared to 2H 2015 due to earlier payment of content rights

  • Both gross and net leverage down

compared to Q1 2016

  • High and stable EBITDA growth

driving positive trend

Annualised Last Two Quarter Adjusted Pro Forma EBITDA is calculated as two times the amount of Consolidated Adjusted Pro Forma L2Q EBITDA

Leverage Adjusted EBITDA-CAPEX

29.6 34.5

H1 2015 H1 2016

Adjusted EBITDA - Capex (€ m)

+17%

4.11x 4.04x 4.01x 3.97x Q1 2016 H1 2016

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

  • In July 2015, we completed the acquisition of a majority interest in BHB Cable TV d.o.o, a cable pay-TV
  • perator in Bosnia and Herzegovina, and five relatively small cable TV operators in Bosnia and
  • Herzegovina. The consideration for these acquisitions consists of an initial cash consideration of €20

million, and an additional €10 million which has been deposited in an escrow account. Current balance of the escrow account is €1.8m, this amount will be paid out until the end of 2016 if certain conditions are met.

  • In July 2016, we closed the acquisition of M-Kabl, a cable operator in Montenegro with 20k subscribers, for

a total consideration of €12.7 million, of which €11.2 has been paid with the remaining deferred consideration subject to certain conditions being met

  • In Q1 2016, we signed an SPA for the acquisition of Maxtel, a Dark fibre B2B operator in Slovenia, for a

total consideration of €4 million. Still waiting on Regulatory approval

  • On August 29 we signed an SPA for the acquisition of Ikom, a cable operator in Serbia with almost 100

thousand unique cable subscribers. The total consideration is €45m

  • The Group continually monitors M&A opportunities and is currently in 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 2015 H1 2016 Revenue 171,406 221,694 Other income 518 1,128 Content cost (29,901) (30,358) Satellite capacity cost (3,652) (4,012) Interconnection link cost (1,131) (18,996) Materials cost (3,512) (19,327) Staff costs (17,874) (23,728) Other operating expenses (48,098) (37,889) IFRS EBITDA 67,756 88,512 Depreciation (33,060) (35,700) Amortisation of intangible assets (11,169) (23,276) Results from operating activities 23,527 29,536 Finance income 5,823 757 Finance costs (29,565) (32,971) Net finance costs (23,742) (32,214) Profit/(loss) before tax (215) (2,678) Income tax (expenses)/benefit (51) (3,789) Minority share (879) (1,159) Profit/(Loss) for the period (1,145) (7,626)

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Statement of financial position

in €000 H1 2015 H1 2016 Assets Property, plant and equipment 275,606 334,048 Goodwill 663,318 649,094 Intangible assets 217,736 243,626 Investment property 612 459 Deferred costs 321 131 Other financial assets 1,571 2,016 Deferred tax assets 5,563 7,850 Long term loans 491 Long term investments 31,214 Non-current assets 1,196,432 1,237,224 Programming rights held for sale 22 Inventories 3,961 5,625 Trade and other receivables 64,962 83,831 Short term loan receivables 266 6,476 Receivables from government Prepayments 22,198 27,726 Income tax receivable 2,314 1,602 Cash and cash equivalents 49,090 14,216 Other current assets 5,824 Current assets 148,637 139,476 Total assets 1,345,069 1,376,700

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Statement of financial position - continued

Equity Issued and fully paid share capital 125 125 Share premium 564,591 570,592 Preferred equity Other capital reserves Translation and other reserves (7,298) (11,010) Accumulated losses (78,086) (112,922) Equity attributable to owners of the Company 479,332 446,785 Non-controlling interests 10,117 14,454 Total equity 489,449 461,239 Liabilities Loans and borrowings 27,299 107,376 Bond loan 625,000 625,000 Amortization of bond related fees (14,678) (6,379) Long term liabilities 3,175 Long term provisions 3,336 1,621 Deferred revenue 7,413 8,324 Finance lease liabilities 12,264 9,811 Deferred tax liabilities 28,447 32,014 Employee benefits 929 507 Non-current liabilities 690,010 781,449 Trade and other payables 137,712 88,863 Interest payable 6,187 6,104 Current tax liabilities 178 1,727 Loans and borrowings 293 12,794 Deferred revenue 9,363 12,102 Finance lease liabilities 11,877 12,422 Current liabilities 165,610 134,012 Total liabilities 855,620 915,461 Total equity and liabilities 1,345,069 1,376,700

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Consolidated statement of cash flows

Capex data including capitalized inventory

in €000 H1 2015 H1 2016 Cash flows from operating activities Profit/(Loss) for the year (1,148) (7,626) Adjustments for: Depreciation 33,060 35,700 Amortisation 11,169 23,276 Impairment of trade and other receivables 920 Impairment of property, plant and equipment 836 Provisions (27) Tax (income)/expense 51 3,789 Minority interest 879 1,159 Net foreign exchange (gain) / loss 817 5,048 Net finance cost 22,927 27,083 Operating cash flows before WC changes 67,755 90,158 Changes in working capital: (Increase)/Decrease in accounts receivables and prepayments 8,207 (9,655) Increase/(Decrease) in deferred income 1,453 6,239 (Increase)/Decrease in deferred cost (321) 636 (Increase)/Decrease in inventories 1,276 592 (Increase)/Decrease of programming rights

  • (Increase)/Decrease in escrow account

(5,824) Increase/(Decrease) in trade and other payables (4,183) (26,729) Cash generated from operations 68,364 61,241 Interest paid, net (18,917) (25,071) Income tax paid (2,827) (2,091) Net cash from operating activities 46,620 34,078 Cash flows from investing activities Purchase of property, plant and equipment (46,994) (47,476) Purchase of intangible assets (4,080) (14,226) Change in other financial assets (338) Acquisition of subsidiaries, net of cash acquired (68,764) (Increase)/decrease in non-current financial asset (586) Net cash used in investing activities (120,424) (62,040) Cash flows from financing activities Proceeds from borrowings 277,393 66,625 Repayment of borrowings (175,014) (15,200) Proceeds from finance lease 9,645 6,021 Repayment of finance lease (6,198) (10,395) Distribution of share premium (20,000) Net cash used in financing activities 105,825 27,052 Net increase in cash and cash equivalents 32,022 (910) Cash and cash equivalents at 1 January 16,182 15,126 Effects of movements in exchange rates on cash held 886 Cash and cash equivalents at end of period 49,090 14,216

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Revenue, EBITDA and Capex development by segment*

Revenue development H1 2016

* comparisons of revenue, adjusted EBITDA and capital expenditures for H1 2016 vs. Restated H1 2015 as per the new reporting structure.

76.9 63.4 17.1 22.6 10.6 83.6 94.1 26.0 31.7 12.2 SBB Serbia Telemach Slovenia Telemach BH United Media Group Other Businesses w/o IC

Revenue by segment (€ m)

H1 2015 H1 2016 +52% +40% +9% +48% +15%

EBITDA development H1 2016

31.2 25.0 7.0 6.7 3.9 36.9 31.5 8.8 12.6 4.6 SBB Serbia Telemach Slovenia Telemach BH United Media Group Other Businesses w/o IC

Adjusted EBITDA by segment (€ m)

H1 2015 H1 2016 +26% +90% +18% +26% +19%

Capex development H1 2016

25.2 11.9 5.3 0.8 1.1 23.0 19.3 9.5 5.7 2.3 SBB Serbia Telemach Slovenia Telemach BH United Media Group Other Businesses w/o IC

Capex by segment (€ m)

H1 2015 H1 2016 +80% +651%

  • 9%

+62% +102%