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FY 2018 financial results presentation 29 April 2019 United Group BO
FY 2018 financial results presentation
29 April 2019
United Group
BO
2
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 futureperformance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerousassumptions regarding our present and future strategies and the environment in which we will operate in the future. These forward-looking statements speakonly as at the date of this presentation. We expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-lookingstatements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which anyof such statements are based.
This presentation contains summary audited condensed financial information for Adria Midco B.V. and its subsidiaries for the twelve months ended December31, 2018. The statement of financial position for Adria Midco B.V. and its subsidiaries as at 31 December 2018 and as at 31 December 2017, as well as thecondensed consolidated interim statements of profit or loss and cash flows for Adria Midco B.V. and its subsidiaries for the twelve months periods then endedhave been audited by our independent auditors 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. Thesemeasures are presented here because we believe that they and similar measures are widely used in our industry as a means of evaluating a company’soperating performance and financing structure. Our management believes this information, along with comparable IFRS measures, is useful to investorsbecause it provides a basis for measuring the operating performance in the periods presented. These measures are used in the internal management of ourbusiness, along with the most directly comparable IFRS financial measures, in evaluating the operating performance. These measures may not be comparableto other similarly titled measures of other companies and are not measurements under IFRS or other generally accepted accounting principles, and you shouldnot consider such items as alternatives to net income (loss), operating income or any other performance measures derived in accordance with IFRS, and theymay be different from similarly titled measures used by other companies.
Disclosure regarding forward-looking statements and the presentation of certain financial information
3
Financial review
Mergers & Acquisitions
Agenda
Introduction
Operational review
Appendices
4
Introduction to United Group
South-East Europe’s leading multi-play
telecommunications and media provider
3.8 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 BC Partners, KKR and
the management
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
5
Financial review
Mergers & Acquisitions
Agenda
Introduction
Operational review
Appendices
6
SBB Serbia
Increase of 3% driven by organic network
expansion
Telemach Slovenia
Additional 3k homes passed due to
organic growth
Telemach BH
Increase of 3% due to organic network
expansion
Telemach MNE
Additional 21k homes passed driven by
organic growth
Homes passed across key markets Key developments
Network expansion
7
RGUs vs. Unique cable subscribers Key developments
Increasing subscribers and RGUs
Increasing cable subscribers as a
result of organic network growth
Faster growth in RGUs per unique
cable subscriber driving overall
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
and Bosnia to 2.2x, and in Montenegro
to 2.1x
Telemach Slovenia
Cross-selling of 3-Play offers to 1-Play
subscribers
– Mobile offering supporting take up
of multi-play packages
Upgrading existing customers to
premium products
Our 1,164k unique cable subscribers order on average between 2.1x
and 2.7x different services
RGUs vs. Unique cable subscribers 2017 2018
SBB Serbia 2.1x 2.2x
Telemach Slovenia 2.7x 2.7x
Telemach BH 2.1x 2.2x
Telemach MNE 1.9x 2.1x
8
RGUs by service Key developments
Increasing RGUs
Healthy YoY RGU growth across almost all
services
Cable pay TV growth resulting from organic
growth of our operations
Broadband internet RGUs increased by 6%
YoY, primarily attributable to an increase in
multi-play subscriptions
DTH pay-TV RGUs decreased by 8% YoY due
to the sale of DTH operations in Croatia with
33k subscribers on January 12, 2018
OTT subscribers growth of 2% driven by
organic growth
Fixed line telephony RGUs up 17% YoY due to
an increase in multi-play subscriptions
Mobile services up 10% due to high organic
growth at Telemach Slovenia
Other service RGUs decreased by 1% mostly
due to lower number of MMDS subscribers.
9
Group
Blended cable ARPU up 7% to €22.1 in FY
2018 as a result of positive trends across all
markets
SBB Serbia
ARPU growth primarily a result of the
continued positive impact of subscribers
upgrading to multi-play packages and the
price increase of the basic cable service
starting from January 2018
Telemach Slovenia
Blended cable ARPU increase of 1% driven
by the growth in the number of our multi play
subscribers.
Price increase, effective as of February
2018, had a positive impact on pay-TV and
Internet revenues
Telemach BH
Increase in blended cable ARPU per
customer primarily due to a price increase in
April 2018 and full year effect of a price
increase from March 2017
Telemach MNE
ARPU growth driven by increase in the
number of our multi-play subscribers
Blended cable ARPU Key developments
ARPU development
in € 2017 2018 2017 2018 2017 2018 2017 2018
Cable pay-TV 9.4 10.3 18.5 18.8 8.9 9.8 10.6 11.1
Broadband internet 9.7 10.2 17.3 17.8 9.2 9.6 8.5 8.3
Fixed-line telephony 4.4 4.0 3.7 3.3 8.4 7.4 5.1 3.3
Blended cable ARPU 17.3 19.0 35.5 36.0 18.2 20.0 15.9 17.7
Telemach MNESBB Serbia Telemach Slovenia Telemach BH
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Financial review
Mergers & Acquisitions
Agenda
Introduction
Operational review
Appendices
11
Revenue development FY 2018 Key drivers
Revenue development by segment
Group
• FY 2018 revenues up 23% YoY to 635.6 million driven
by growing RGUs, overall increase in ARPU, organic
growth and effect of acquisitions
SBB Serbia
• Reported revenues up by 9% YoY to €227.4 million
driven by price increase (Jan 2018) and increase in
multi-play subscribers
Telemach Slovenia
• Revenue up by 11% to €221.5 million due to growth of
RGUs, price increase (Feb 2018) and higher mobile
handsets sales
Telemach BH
• Revenue up by 12% to €69.3 million driven by growth
of internet and fixed-line telephony segments and price
increase (April 2018)
Telemach MNE
• Stable total revenue, however with external revenue
(excl. intercompany revenue) up 1% YoY due to
organic growth
United Media
• Growth of 64% primarily driven by acquisitions of Nova
Croatia and Direct Media Group in the third quarter of
2018
Other Businesses
• Revenue growth of 24% YoY primarily as a result of
organic growth of our OTT business
12
Key drivers
Adjusted EBITDA development
Group
Adjusted EBITDA up by 17% YoY to €260.6 million as a
result of growth in profitability across our business segments
and contribution from acquisitions
SBB Serbia
• Growth of 23% YoY driven by new subscribers, upselling of
existing subscribers to more profitable packages, a price
increase for cable subscribers and the full year effect of the
Ikom acquisition
Telemach Slovenia
• Increase of 9% compared to FY 2017 due to ARPU and
organic RGU growth as well as the full year effect of Teleing
acquisition
Telemach BH
• EBITDA growth of 10% YoY driven by organic growth
Telemach MNE
• Decrease of 10% YoY mostly due to higher programming
costs
United Media
• EBITDA growth of 28% as a combination of organic growth
and acquisitions of Nova Croatia and Direct Media Group in
the third quarter of 2018
Other Businesses
• EBITDA decline primarily due to negative impact of Holding
companies
Adjusted EBITDA development FY 2018
13
Capital expenditures
Capex development Key drivers
Group
Group Capex reached 30% of consolidated revenues in 2018
The majority of investments during this period were related to the
upgrade and expansion of our network, customer premise
equipment, purchase of new programming rights and investment
in mobile infrastructure
SBB Serbia
Growth in FY 2018 mostly coming from higher CPE and Acquisition Cost
CAPEX resulting from organic growth as well as one-off project of
digitalization of Belgrade network
Telemach Slovenia
Increase in FY 2018 primarily due to network expansion, network
modernization (one-off project), investment in new data center & new
premises and higher Acquisition Cost CAPEX
Telemach BH
Growth attributable to additions to our backbone, which was partially
offset by a lower level of investment in network
Telemach MNE
Higher capex in FY 2018 due investments in fiber and reconstruction /
upgrade of acquired coaxial network.
United Media
Content investments up 85% YoY due to production of new exclusive
content for certain of our channels, costs associated with acquisitions
and the increased cost of sports rights
* IFRS view of CAPEX at United Group level
** Management view of Subgroup CAPEX. This figure includes capitalized inventory.
Restated 2017 figures
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Adjusted EBITDA-CAPEX and leverage development
Key drivers
Adjusted EBITDA less Capex declined
due to Capex growth exceeding
Adjusted EBITDA growth
CAPEX growth due mainly to
investments in production of new
exclusive content in Media Segment and
network upgrade projects
Net leverage* down to 4.88x from
5.20x
Gross leverage* down to 5.04x
vs. 2017, mainly due to strong
EBITDA growth.
• * Annualized Last 2 Quarter Adjsuted Pro Forma EBITDA calculated as two
times Q3+Q4 2018 Adjusted EBITDA plus two times €0.3 million of 1 months
2018 Nova Croatia EBITDA (consolidated as of 1 August 2018) plus two times
negative €0.8 million of 2 months 2018 DM & PINK EBITDA (consolidated as of
1 September 2018) plus €4.2 million of expected synergies with Nova Croatia
plus €12.4 million of expected synergies with DM & PINK.
Leverage
Adjusted EBITDA-CAPEX
15
Financial review
Appendices
Agenda
Introduction
Operational review
Mergers & Acquisitions
16
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.
The mergers of Ikom and Kabel Group 85 were both 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 an additional earn out amount of €211 thousand to the former owners of Kabel Group 85,
Čačak.
In May 2018, SBB paid an additional earn out amount of €5.0 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 €86.3 million.
On September 4, 2018, the Group acquired Direct Media for total consideration of €106.7 million
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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Financial review
Appendices
Agenda
Introduction
Operational review
Mergers & Acquisitions
18
Income statement
in €000FY 2017*
RestatedFY 2018
Revenue 517,627 635,627
Other income 7,047 15,329
Content cost (78,606) (103,274)
Satellite capacity cost (6,291) (4,718)
Link and interconnection cost (39,090) (41,054)
Materials cost (39,121) (45,623)
Staff costs (55,059) (99,011)
Other operating expenses (117,450) (144,061)
Impairment loss on trade and other receivables, including contract assets (6,303) (12,563)
Impairment loss on other financal assets - -
Impairment loss on goodwill (60,025) (9,255)
Impairment loss on other financial assets (2,563)
IFRS EBITDA 122,729 188,834
Depreciation (89,089) (99,642)
Amortisation of intangible assets (58,934) (68,483)
Results from operating activities (25,294) 20,709
Finance income 17,549 7,343
Finance costs (112,501) (71,005)
Net finance costs (94,952) (63,662)
Profit/(loss) before tax (120,246) (42,953)
Income tax (expenses)/benefit (6,465) (3,046)
Minority share - -
Profit/(Loss) for the period (126,711) (45,999)
Currency translation differences 6,857 (1,016)
Other comprehensive loss (income) for the period 6,857 (1,016)
Total comprehensive loss (income) for the period (119,854) (47,015)
(Loss)/profit attributable to:
Owners of the Company (129,146) (48,279)
Non-controlling interests 2,435 2,280
(Loss)/profit for the period (126,711) (45,999)
Total comprehensive (loss)/income attributable to:
Owners of the Company (122,289) (49,295)
Non-controlling interests 2,435 2,280
Total comprehensive (loss)/income for the period (119,854) (47,015)
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Statement of financial position
in €000FY 2017*
RestatedFY 2018
Assets
Property, plant and equipment 372,189 401,405
Goodwill 649,115 761,335
Intangible assets 250,755 304,257
Investment property 386 336
Loans to related parties 32,011 30,000
Other financial assets 3,088 7,373
Non current prepayments 1,239 161
Contract assets 0 4,148
Deferred costs 3,175 4,385
Deferred tax assets 3,609 4,156
Non-current assets 1,315,567 1,517,556
Inventories 7,014 22,172
Trade and other receivables 110,674 163,722
Short term loan receivables and deposits 209,361 5,711
Prepayments 26,628 35,609
Contract assets ST 0 12,926
Income tax receivable 5,202 7,480
Cash and cash equivalents 32,560 43,430
Other current assets 4,085 0
Current assets 395,524 291,050
Total assets 1,711,091 1,808,606
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Statement of financial position - continued
in €000FY 2017*
RestatedFY 2018
Equity
Issued and fully paid share capital 125 125
Share premium 337,557 337,557
Other capital reserves - 32,809
Translation and other reserves (14,026) (15,042)
Accumulated losses (251,653) (296,887)
Equity attributable to owners of the Company 72,003 58,562
Non-controlling interests 10,509 10,584
Total equity 82,512 69,146
Liabilities
Loans and borrowings 77,729 69,902
Other financial liabilities 1,330,844 1,333,867
Long term liabilities 296 3,568
Long term provisions 22,413 24,652
Deferred revenue 7,185 3,859
Contract liabilities - 2,065
Finance lease liabilities 1,449 1,006
Deferred tax liabilities 27,029 29,957
Employee benefits 639 631
Non-current liabilities 1,467,584 1,469,507
Trade and other payables 135,943 240,560
Current tax liabilities 4,218 10,516
Loans and borrowings 1,037 3,031
Deferred revenue 14,597 7,283
Contract liabilities 0 7,442
Finance lease liabilities 5,200 1,121
Current liabilities 160,995 269,953
Total liabilities 1,628,579 1,739,460
Total equity and liabilities 1,711,091 1,808,606
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Consolidated statement of cash flows
Capex data including capitalized inventory
in €000FY 2017*
RestatedFY 2018
Cash flows from operating activities
Profit/(Loss) for the year (126,711) (45,999)
Adjustments for: - -
Depreciation 89,089 99,642
Amortization 58,934 68,483
Impairment of trade and other receivables 6,303 12,007
Impairment of contract assets - 556
Impairment of other financial assets - 2,563
Impairment of inventories 690 1,023
Impairment loss on goodwill 60,025 9,255
Impairment loss on acquisition cost 367 1,321
Income tax 6,465 3,046
Gain on sale of subsidiary - (7,654)
Long term provision 10,113 764
Share based payment - 32,809
Net finance cost 94,952 63,662
Operating cash flows before WC changes 200,227 241,478
Changes in working capital:
Trade and other receivables (33,619) (21,960)
Deferred revenue 5,041 (5,954)
Deferred cost (1,753) (2,487)
Contract assets - (5,120)
Contract liabilities - 3,665
Employee benefits 40 (8)
Inventories (1,972) 273
Prepayments (10,893) (6,084)
Trade and other payables 78 30,589
Cash generated from operations 157,149 234,392
in €000FY 2017*
RestatedFY 2018
Interest paid (80,322) (62,164)
Income tax paid (4,355) (6,791)
Net cash from operating activities 72,472 165,437
Cash flows from investing activities
Acquisition of property, plant and equipment (91,852) (130,081)
Acquisition of intangible assets (44,650) (65,247)
Acquisition of subsidiaries, net of cash
acquired (53,909) (137,499)
Change in short term loan receivables (203,888) 203,882
Other (outflows)/inflows 197 (390)
Net cash used in investing activities (394,102) (129,335)
Cash flows from financing activities
Distribution of share premium (231,035) -
Proceeds from bond issue 1,350,000 -
Repayment of bond (775,000) -
Proceeds from borrowings 199,617 204,400
Repayment of borrowings (163,992) (217,243)
Transaction costs related to loans and
borrowings (23,165) -
Acquisition of non-controlling interest (1,770) (3,799)
Repayment of derivate (2,871) (1,546)
Proceeds from finance lease - -
Repayment of finance lease (10,838) (5,583)
Dividends paid to non-controlling interest (752) (1,470)
Net cash used in financing activities 340,194 (25,241)
Net increase/(decrease) in cash and cash
equivalents 18,564 10,861
Cash and cash equivalents at 1 January 13,941 32,560
Effects of movements in exchange rates on
cash held 55 9
Cash and cash equivalents at end of
period 32,560 43,430
