United Group BO 9M 2016 financial results presentation 29 November - - PowerPoint PPT Presentation

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United Group BO 9M 2016 financial results presentation 29 November - - PowerPoint PPT Presentation

United Group BO 9M 2016 financial results presentation 29 November 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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9M 2016 financial results presentation

29 November 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 nine months ended September 30, 2016. The interim statement of financial position for Adria Midco B.V. and its subsidiaries as at 30 September 2016 and as at 30 September 2015, 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 nine months periods then ended have been reviewed by our independent auditors in accordance with the International Standard on Review Engagements 2410 and have been prepared in accordance with IFRS. 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

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

RGUs across the six 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 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 €775 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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9M 2016: operational highlights

  • Healthy year-on-year RGU growth

– Across all services – Driven predominantly by increased multi-play subscribers and the acquisition of M-Kabl in Montenegro

  • Homes passed up by 4% to 1,553k YoY due to

– Expansion of and investment in our network – Acquisition in Montenegro

  • Blended cable ARPU up by 5% to €19.3 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

912 465 100 541 321 324 113 958 484 112 603 404 380 118 Cable pay- TV DTH pay- TV OTT Broadband internet Fixed -line telephony Mobile services Other services

RGUs by service (k)**

9M 2015 9M 2016 +5% +4% +12% +12% +26% +4% +17%

18.3 19.3

9M 2015 9M 2016

Blended cable ARPU (€)

+5%

1,487 1,553 9M 2015 9M 2016

Homes passed (k)

+4%

** Following the Tušmobil acquisition mobile service RGUs are no longer reported under

Other services due to their increased importance.

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New reporting structure

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

Serbia segment - as of January 1st 2016, results of DTH operations reported within the segment where these operations occur. These changes in the reporting structure were also made for the 9M 2015 results for comparison purposes. – 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. – Telemach Slovenia includes the results of cable and mobile services in Slovenia and DTH

  • perations in Slovenia

– Telemach BH includes the results of cable and DTH services in Bosnia and Herzegovina – 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

  • In 9M 2015 results, which were published last year, results of all DTH operations were included in SBB

Serbia segment

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9M 2016: financial highlights

  • Revenues up 23% YoY to €336.4 million as a result of
  • rganic growth and acquisitions
  • growing number of RGUs
  • price increases
  • Adjusted EBITDA up 21% YoY to €140.9 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* up to 4.15x from 3.97x
  • Leverage increase due to cash outflow related to acquisitions and

the loan issued in connection with the new management incentive plan**

* Annualized Last Two Quarter Adjusted Pro Forma EBITDA is calculated as two times the amount of Consolidated Adjusted Pro Forma L2Q EBITDA ** For further detail, please see the 9M 2016 High Yield Bondholder Report

4.04x 4.34x 3.97x 4.15x H1 2016 9M 2016

Leverage

Gross leverage Net leverage 273.4 336.4 9M 2015 9M 2016

Revenue (€ m)

+23%

116.8 140.9

9M 2015 9M 2016

Adjusted EBITDA (€ m)

21%

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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 9M 2015, with

4k additional homes passed

Telemach BH

  • Increase of 3% due to organic network

expansion

Homes passed across key markets Key developments

Network expansion

839 892 302 306 301 309 9M 2015 9M 2016 9M 2015 9M 2016 9M 2015 9M 2016 SBB Serbia Telemach Slovenia Telemach BH

Homes passed (k)

6% +1% +3%

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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 in both

entities

  • RGU/sub growth in Serbia to 1.9 and in

Bosnia to 2.0

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 958k unique cable subscribers order on average between 1.8x and 2.6x different services 912 958 9M 2015 9M 2016

Unique cable subs (k)

+5%

2,775 3,060 9M 2015 9M 2016

RGUs (k)

+10%

RGUs vs. Unique cable subscribers 9M 2015 9M 2016 SBB Serbia 1.8x 1.9x Telemach Slovenia 2.5x 2.6x Telemach BH 1.8x 2.0x

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RGUs by service Key developments

Increasing RGUs

  • Healthy YoY RGU growth across all

services

  • Cable pay TV growth due to organic

growth and M-Kabl acquisition

  • DTH pay-TV RGUs increased by 4%

compared to 9M 2015 due to additional subscribers and lower churn rate

  • OTT RGUs increased by 12% driven

by organic growth

  • Fixed line telephony RGUs up 26%

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

  • Mobile services – increase due to

additional organic growth at Telemach Slovenia due to around 40% share of gross adds in the market

  • Other service RGUs increased by 4%

mostly due to organic growth of B2B and MMDS subscribers

** Following the Tušmobil acquisition mobile service RGUs are no longer reported under

Other services due to their increased importance.

912 465 100 541 321 324 113 958 484 112 603 404 380 118 Cable pay- TV DTH pay-TV OTT Broadband internet Fixed -line telephony Mobile services Other services

RGUs by service (k)**

9M 2015 9M 2016 +5% +4% +12% +12% +26% +4% +17%

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Group

  • Blended cable ARPU up 5% to €19.3 in 9M

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
  • Price increase of analogue TV service as of

August 1, 2016

Blended cable ARPU Key developments

ARPU development

in € 9M 2015 9M 2016 9M 2015 9M 2016 9M 2015 9M 2016 Cable pay-TV 8.1 8.9 16.8 17.2 7.4 7.8 Broadband internet 9.7 9.9 15.8 16.1 8.7 8.6 Fixed-line telephony 5.3 5.0 3.8 3.8 10.6 9.7 Blended cable ARPU 14.4 16.1 31.1 32.2 15.5 16.0 SBB Serbia Telemach Slovenia Telemach BH

14.4 16.1 31.1 32.2 15.5 16.0 9M 2015 9M 2016 9M 2015 9M 2016 9M 2015 9M 2016 SBB Serbia Telemach Slovenia Telemach BH

Blended cable ARPU per segment (€)

+11% +4% +3%

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Highlights Financial review Mergers & Acquisitions

Agenda

Introduction Operational review Appendices

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Revenue development 9M 2016 Key drivers

Revenue development by segment

Group

  • 9M 2016 revenues up 23% YoY to €336.4 million

driven by growing RGUs, overall increase in ARPU, organic growth and acquisitions SBB Serbia

  • Reported revenues up by 7% to €136.2 million YoY
  • Price increase and growth od unique cable

subscribers and RGUs Telemach Slovenia

  • Revenue up by 30% to €139.3 million
  • Acquisition of Tušmobil in April 2015
  • Increase in the number of multi-play subscribers

Telemach BH

  • Revenue up by 34% to €39.7 million
  • Acquisition of 6 entities in July 2015
  • Realization of synergies from past acquisitions
  • Growth of internet and fixed-line telephony

segments United Media

  • Growth of 59% due to increased sales of

distribution rights and increase of price for own channels Other Businesses

  • Revenue growth of 32% YoY as a result of organic

growth in Solford and Telemach Montenegro, and also as result of acquisition of M-Kabl 273.4 336.4 9M 2015 9M 2016

Revenue (€ m)

+23% 127.7 106.8 29.5 33.3 17.0 136.2 139.3 39.7 53.0 22.5 SBB Serbia Telemach Slovenia Telemach BH United Media Group Other Businesses w/o IC

Revenue by segment (€ m)

9M 2015 9M 2016 +34% +59% +7% +30% +32%

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Key drivers

Adjusted EBITDA development

Group

  • Adjusted EBITDA up by 21% to €140.9 million

YoY as a result of: – Increased revenues, cost discipline and integration of acquired companies – Acquisition of Tušmobil, six Bosnian entities and M-Kabl in Montenegro

SBB Serbia

  • Increase of 22% YoY driven by price increase in

January, subscriber and RGU growth

Telemach Slovenia

  • Increase of 12% compared to 9M 2015 due to
  • rganic growth, price increase in March and

acquisition of Tušmobil

Telemach BH

  • EBITDA growth of 13% YoY driven by

acquisition of 6 entities, higher revenue, price increase of analogue service in August and lower operating expenses

United Media

  • Higher revenue (including Intercompany

revenues) among key drivers of EBITDA growth

Other Businesses

  • EBITDA growth of 11% YoY due organic growth
  • f Solford and Telemach Montenegro and

acquisition of M-Kabl

Adjusted EBITDA development 9M 2016

46.4 41.3 12.3 10.5 6.3 56.4 46.1 13.9 17.8 6.9 SBB Serbia Telemach Slovenia Telemach BH United Media Group Other Businesses w/o IC

Adjusted EBITDA by segment (€ m)

9M 2015 9M 2016 +13% +70% +22% +12% +11%

116.8 140.9

9M 2015 9M 2016

Adjusted EBITDA (€ m)

21%

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Capital expenditures

Capex development* Key drivers

* Management capex data incl. capitalized inventory for 9M 2016, but excl. capitalized inventory for 9M 2015

Group

  • Capex growth driven by network expansion,

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

  • Capex expected not to exceed depreciation

levels on a long-term basis SBB Serbia

  • 9M 2016 capex impacted by lower investment in

DTH and cable services end user equipment Telemach Slovenia

  • Higher capex mainly driven by additional

spending on Tušmobil’s 4G network Telemach BH

  • Higher capex in 9M 2016 due to network

expansion after the acquisitions United Media

  • Content investments broadly stable vs. 9M 2015

Other businesses

  • Capex in line with 9M 2015
  • Investments driven by expansion if our footprint

in Montenegro

92.8 96.7

9M 2015 9M 2016

Capex Group (€ m)

+4%

37.2 32.1 8.2 11.9 3.4 32.3 35.4 14.7 11.1 3.3 SBB Serbia Telemach Slovenia Telemach BH United Media Group Other Businesses

Capex by segment (€ m)

9M 2015 9M 2016 +79%

  • 7%
  • 13%

+10%

  • 2%
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Adjusted EBITDA-CAPEX and leverage development

Key drivers

  • Increase in adjusted EBITDA-Capex 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 up compared to

H1 2016

  • Leverage increase due to cash outflow

related to acquisitions and the loan issued in connection with the new management incentive plan

Annualized 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

4.04x 4.34x 3.97x 4.15x H1 2016 9M 2016

Leverage

Gross leverage Net leverage

23.9 44.2

9M 2015 9M 2016

Adjusted EBITDA - Capex (€ m)

+85%

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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 consisted of an initial cash consideration of €20

million and an additional €10 million deposited in an escrow account of which the remaining €3.2 million will be paid out by 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 20 thousand

subscribers, for a total consideration of €12.7 million, of which €11.2 million has been paid with the remaining deferred consideration subject to certain conditions being met (€0.5 million of this amount was paid in October 2016).

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

total consideration of €4 million. This transaction was closed in November 2016.

  • On 29 August 2016, we signed an SPA for the acquisition of Ikom, a cable operator in Serbia with almost

100 thousand unique cable subscribers, for a total consideration of €45 million.

  • 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

Group in €000 9M 2015 9M 2016 Revenue 273,388 336,402 Other income 2,555 2,185 Content cost (45,604) (46,899) Satellite capacity cost (5,624) (5,542) Interconnection link cost (21,793) (29,552) Materials cost (8,325) (27,455) Staff costs (29,408) (37,201) Other operating expenses (58,442) (59,615) IFRS EBITDA 106,747 132,323 Depreciation (46,543) (54,296) Amortisation of intangible assets (29,433) (35,387) Results from operating activities 30,771 42,640 Finance income 2,182 1,093 Finance costs (39,812) (50,469) Net finance costs (37,630) (49,376) Profit/(loss) before tax (6,859) (6,736) Income tax (expenses)/benefit (308) (6,862) Profit/(Loss) for the period (7,167) (13,598) (Loss)/profit attributable to: Owners of the Company (8,595) (14,338) Non-controlling interests 1,428 740 (Loss)/profit for the period (7,167) (13,598)

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Statement of financial position

Group in €000 9M 2015 9M 2016 Assets Property, plant and equipment 307,267 342,185 Goodwill 649,094 660,994 Intangible assets 255,728 246,832 Investment property 497 447 Deferred costs 5,077 2,182 Other financial assets 2,049 32,002 Non current prepayments 5,987 14 Deferred tax assets 5,467 7,860 Non-current assets 1,231,166 1,292,516 Inventories 8,110 6,245 Trade and other receivables 77,326 91,744 Short term loan receivables 4,145 4,541 Prepayments 20,904 22,208 Income tax receivable 2,433 939 Cash and cash equivalents 25,370 37,735 Current assets 138,288 163,412 Total assets 1,369,454 1,455,928

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Statement of financial position - continued

Equity Issued and fully paid share capital 125 125 Share premium 564,592 570,592 Other capital reserves 26,000 Translation and other reserves (11,637) (16,757) Accumulated losses (86,036) (118,394) Equity attributable to owners of the Company 493,044 435,566 Non-controlling interests 13,841 12,515 Total equity 506,885 448,081 Liabilities Loans and borrowings 32,582 34,214 Bond loan 619,950 775,010 Long term liabilities 2,704 94 Long term provisions 3,868 7,225 Deferred revenue 7,234 6,222 Finance lease liabilities 16,264 7,576 Deferred tax liabilities 32,117 31,610 Employee benefits 1,175 502 Non-current liabilities 715,894 862,453 Trade and other payables 112,275 101,698 Interest payable 19,184 21,156 Current tax liabilities 275 2,471 Loans and borrowings 2,055 867 Deferred revenue 8,670 7,966 Finance lease liabilities 4,216 11,236 Current liabilities 146,675 145,394 Total liabilities 862,569 1,007,847 Total equity and liabilities 1,369,454 1,455,928

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Consolidated statement of cash flows

Capex data including capitalized inventory

Group in €000 9M 2015 9M 2016 Cash flows from operating activities Profit/(Loss) for the year (7,167) (13,598) Adjustments for: Depreciation 46,543 54,296 Amortisation 29,433 35,387 Impairment of trade and other receivables 3,969 2,777 Impairment of PPE and Intangibles 2,472 954 Tax (income)/expense 99 6,872 Minority interest Employee benefits (103) (32) Net finance cost 39,857 51,042 Operating cash flows before WC changes 115,103 137,698 Changes in working capital: (Increase)/Decrease in accounts receivables and prepayments (12,811) (16,638) Increase/(Decrease) in deferred income 2,228 (46) (Increase)/Decrease in deferred cost (5,077) (1,415) (Increase)/Decrease in inventories (3,302) (28) (Increase)/Decrease in prepayments 182 3,489 Increase/(Decrease) in trade and other payables 2,373 (17,584) Cash generated from operations 98,696 105,476 Interest paid (25,618) (27,471) Income tax paid (150) (3,427) Net cash from operating activities 72,928 74,578 Cash flows from investing activities Purchase of property, plant and equipment (82,933) (73,250) Purchase of intangible assets (21,012) (31,379) Acqusition of NCI (568) (280) Acquisition of subsidiaries, net of cash acquired (65,149) (12,238) Change in short term loan receivables (3,418) 667 (Increase)/decrease in non-current financial asset 919 (30,000) Net cash used in investing activities (172,161) (146,480) Cash flows from financing activities Proceeds from bond issue 159,750 157,875 Proceeds from borrowings 130,513 107,825 Repayment of borrowings (175,566) (138,700) Transaction costs related to loans and borrowings (6,344) (4,359) Proceeds from finance lease 9,735 6,162 Repayment of finance lease (9,707) (14,142) Distribution of share premium (20,000) Net cash used in financing activities 108,381 94,661 Net increase in cash and cash equivalents 9,148 22,759 Cash and cash equivalents at 1 January 16,182 15,126 Cash at ESCROW account

  • Effects of movements in exchange rates on cash held

40 (150) Cash and cash equivalents at end of period 25,370 37,735