VIEO B.V. Interim condensed financial report 3rd Quarter 2018

Transcription

1 VIEO B.V. Interim condensed financial report 3rd Quarter st Quarter 2018 Financial Results Page 1

2 TABLE OF CONTENTS DISCLAIMER MANAGEMENT COMMENTARY MANAGEMENT COMMENTARY COMPLIANCE REPORT INVESTOR RELATIONS INTERIM CONDENSED FINANCIAL STATEMENTS VIEO B.V. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS VIEO B.V. INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE PERIOD ENDED 30 SEPTEMBER VIEO B.V. INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER VIEO B.V. INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED 30 SEPTEMBER VIEO B.V. INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES OF EQUITY FOR THE PERIOD ENDED 30 SEPTEMBER NOTES TO THE VIEO B.V. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS VIEO B.V. INTERIM CONDENSED COMPANY FINANCIAL STATEMENTS VIEO B.V. INTERIM CONDENSED COMPANY STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE PERIOD ENDED 30 SEPTEMBER VIEO B.V. INTERIM CONDENSED COMPANY STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER VIEO B.V. INTERIM CONDENSED COMPANY STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED 30 SEPTEMBER VIEO B.V. INTERIM CONDENSED COMPANY STATEMENT OF CHANGES OF EQUITY FOR THE PERIOD ENDED 30 SEPTEMBER NOTES TO THE VIEO B.V. INTERIM CONDENSED COMPANY FINANCIAL STATEMENTS SIGNING VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 2

3 DISCLAIMER VIEO BV is providing the following consolidated financial results (based on preliminary unaudited consolidated financial statements) for the first quarter of 2018 to holders of its EUR Senior Floating Rate Notes due This is in accordance with the requirements set out in the BOND TERMS for VIEO B.V. FRN EUR Senior Secured Callable Bond Issue 2017/2022 (ISIN NO ). This report is for information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy the notes or any other security. This report includes forward-looking statements which are based on our current expectations and projections about future events. All statements other than statements of historical facts included in this notice, including statements regarding our future financial position, risks and uncertainties related to our business, strategy, capital expenditures, projected costs and our plans and objectives for future operations, including our plans for future costs savings and synergies may be deemed to be forward-looking statements. Words such as believe, expect, anticipate, may, assume, plan, intend, will, should, estimate, risk and similar expressions or the negatives of these expressions are intended to identify forward-looking statements. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. You should not place undue reliance on these forward-looking statements. In addition, any forward-looking statements are made only as of the date of this notice, and we do not intend and do not assume any obligation to update any statements set forth in this notice. VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 3

4 1. MANAGEMENT COMMENTARY 1.1. MANAGEMENT COMMENTARY VIEO is active in the telecommunication business through Lebara Mobile, the main operating subsidiary of Lebara Group ( Lebara ). Prior to the acquisition of Lebara by Palmarium, Lebara employed a push sales strategy in which commissions were paid to wholesalers and retailers who, in turn, discount the face value of the product for onward sale to the end consumer. The focus on investment in commissions restricted to some degree investment in product competitiveness and marketing. The net effect is that high volumes of sales resulted in high customer churn. During Q3 2018, Lebara launched a re-branding process to refresh the brand identity to appeal to a broader target audience of Global Citizens, who are seeking international connectivity, flexibility and multi-lingual service. The new brand identity is being rolled out across the Lebara retail footprint during its natural refresh cycle at minimal rebranding costs. The launch of Sim-Only provided an opportunity for the company to redesign its web site and to simplify the online sales process, thus adding an important new channel to complement Lebara s retail footprint Financial Review VIEO is a holding company whose operations are run by Lebara Group and includes the mobile and non-mobile operations of Lebara Mobile B.V., Lebara Service Centre Limited and Lebara Digital Group B.V. Lebara Digital Group B.V. includes Lebara Media Services Ltd. LEBARA DIGITAL GROUP In the third quarter Digital products generated nil revenue and an EBITDA loss of 0.1m which related mainly to residual non-mobile operations of Lebara Money. LEBARA MOBILE GROUP FINANCIAL RESULTS Lebara Mobile Group s consolidated revenue continued to increase quarter on quarter reaching 113.7m. Compared with Q3 2017, a decline of 15.9% was recorded. This Q comparative includes 4.6m benefit from revenue adjustments relating to the release of deferred revenue on expiry of unused vouchers (hereto referred to as deferred revenue adjustments ) and 0.9m VAT provision released to revenue in Denmark. The impact of deferred revenue adjustments on 2018 will be calculated at year end and is excluded from the 2018 figures presented here. Excluding these items revenue decline compared to Q is 12.4 %. The Q EBITDA reaching 11.5m decreased quarter on quarter following, as well as versus Q In Q3 2017, EBITDA includes 4.6m benefit from revenue adjustments and 0.9m VAT provision released to revenue in Denmark. The decrease reflects the impact of certain fixed commitment deals against a slower consumer growth, which have reduced gross margin in the period. COMPETITIVE LANDSCAPE No change to be reported thus far in this quarter TRADING PERFORMANCE At the end of September, the customer base was 2.8m, a reduction of 19k since June. Due to seasonality of certain customer types such as tourists and migrant workers, which tend to peak in the summer months, Q3 is typically the period of highest customer churn. Customer churn Q was 15.3%, up from 13.7% in Q but down against 19.4% in Q Against the same period in 2017, churn improved in all markets. VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 4

5 In Germany, the customer base declined by 20% when comparing Q to Q offset by a ARPU increase. AVERAGE REVENUE PER USER ARPU is 11.6 for Q3 2018, down from 12.2 for Q Excluding deferred revenue adjustments, Q ARPU is 11.7, showing underlying ARPU has been stable year-on-year. Germany continues to achieve improved ARPU with a 17% ARPU uplift year on year. ARPU in Euros Germany Denmark Spain France UK Netherlands Operating Countries Q3'17 Q3'18 GROSS MARGIN Total gross margin was 25%, down from 33% in the same quarter last year. At the operating country level, gross margin was 28% as compared to 34% in Q Excluding the benefit of deferred revenue adjustments, Q gross margin would be 32%. The decline is the result of lower revenues due to a lower customer base. In France, this revenue decline combined with the cost of the fixed commitment MNO deal led to a break-even gross margin for the period. 65% Gross Margin Percentage 43% 42% 44% 49% 28% 14% 23% 25% 47% 56% 34% 28% 0% Germany Denmark Spain France UK Netherlands Operating Countries Q3'17 Q3'18 MOBILE NETWORK OPERATOR STATUS No MNO negotiations were concluded in Q Two further negotiations are expected to conclude before the end of the year. VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 5

6 PERSONNEL AND ORGANISATION Lebara Group headcount reduced by 2 to 501 during the quarter, of which 446 were at Lebara Mobile Group level and the remaining 55 in Lebara Service Centre and Lebara Digital. OPERATIONAL ENHANCEMENTS Vieo continues to focus on operational enhancements focusing on improved customer experience Factors and Risk Management Vieo Group s operations contain certain risks that could have an impact on earnings and profitability or its financial position. These risks can be divided into industry, operational and financial risks including regulatory and competitive risks. Please refer to the 2017 annual financial statements for a comprehensive discussion of the Group s risks and risk management procedures Outlook Management maintain a positive outlook for the Group and remain confident that it will meet all obligations under its Bond Terms, including the financial covenant COMPLIANCE REPORT As of the Effective Date of the Written Resolution the Financial Covenants are disapplied for the Q and Q1 to Q periods, therefore there is no reference in these interim financial statements to the Q Compliance Report INVESTOR RELATIONS The Group did not publish its 2018 interim reports within 60 days after the end of each reporting period and as a result breached the Bond terms. Discussions with the bondholders regarding the breach continued into 2018 and were finalized with a Written Resolution approved by the bondholders on 12 December 2018 which contains amendments to certain Bond Terms. Investor Relations can be contacted at info@vieo.net. VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 6

7 2. INTERIM CONDENSED FINANCIAL STATEMENTS The unaudited results for the third quarter of 2018 ending on September 30, 2018 are presented in the following way (as agreed per Bond Terms): the consolidated financial results of VIEO B.V. (Chapter 3) the company financial result of VIEO B.V. (Chapter 4) VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 7

8 3. VIEO B.V. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3.1. VIEO B.V. INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE PERIOD ENDED 30 SEPTEMBER 2018 VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 8

9 3.2. VIEO B.V. INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2018 VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 9

10 3.3. VIEO B.V. INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED 30 SEPTEMBER 2018 VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 10

11 3.4. VIEO B.V. INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES OF EQUITY FOR THE PERIOD ENDED 30 SEPTEMBER 2018 VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 11

12 3.5. NOTES TO THE VIEO B.V. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Reporting Entity VIEO B.V. (the Company ) is a company domiciled in the Netherlands. These condensed consolidated interim financial statements ( interim financial statements ) as at and for the nine months ended 30 September 2018 comprise the Company and its subsidiaries (together referred to as the Group ). The Group is primarily active in the telecommunication business Basis of preparation These interim condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2017 annual report (issued 21 December 2018). The financial statements have been prepared on the going concern basis. All financial information presented in Euros have been rounded to the nearest thousand (EUR 000), unless otherwise stated. These financial statements have not been audited or reviewed by our external auditor. The company has been incorporated on 21 August 2017, therefore it is not able to compare the statement of profit or loss and other comprehensive income for the reporting period with the previous year. For comparison purpose the statement of profit or loss and other comprehensive income includes the results for the period as of incorporation to year-end (31 December 2017). These interim condensed financial statements were authorised for issue by the Company s board of directors on 21 December Significant accounting policies VIEO B.V. (hereinafter stated as VIEO or the Group ) has applied the same accounting policies and methods of computation in its interim consolidated financial statements as in its 2017 annual financial statements, except for those that relate to new standards and interpretations effective for the first time beginning for the reporting period beginning on 1 January 2018, and will be adopted in the 2018 annual financial statements. New standards impacting the Group that will be adopted in the annual financial statements for the year ended 31 December 2018 and which have given rise to changes in the Group s accounting policies are: IFRS 9 Financial Instruments; and IFRS 15 Revenue from Contracts with Customers Details of the impact these two standards have had, are given below. Other new and amended standards and Interpretations issued by the IASB that will apply for the first time in the next annual financial statements are not expected to impact the Group as they are either not relevant to the Group s activities or require accounting which is consistent with the Group s current accounting policies. IFRS 9 Financial Instruments IFRS 9 has replaced IAS 39 Financial Instruments: Recognition and Measurement. The group has chosen not to restate comparatives on adoption of IFRS 9, but has chosen to use the modified retrospective approach. VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 12

13 The adoption of IFRS 9 has not had a significant effect on the Group s accounting policies related to financial assets and liabilities and derivatives. Classification and measurement of financial assets and financial liabilities The following table explain the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Group s financial assets as at 1 January In note Original classification under IAS 39 Financial assets Equity investment Deposits Trade and other receivables Cash and cash equivalents Total financial assets a b Designated as at FVTPL Loans and receivables Loans and receivables Loans and receivables New classification under IFRS 9 Designated as at FVTPL Original carrying amount under IAS 39 New carrying amount under IFRS 9 2,217 2,217 Amortised cost 2,895 2,895 Amortised cost 74,504 74,504 Amortised cost 31,130 31, , ,746 a. Under IAS 39, these equity investments were designated as at FVTPL because they were managed on a fair value basis and their performance was monitored on this basis. These assets have been classified as measured at FVTPL under IFRS 9, which is the default classification for equity investments under IFRS 9. b. Trade and other receivables that were classified as loans and receivables under IAS 39 are now classified at amortised cost. The impairment model IFRS 9 replaces the incurred loss model in IAS 39 with an expected credit loss (ECL) model. The new impairment model applies to financial assets measured at amortised cost and contract assets. The financial assets at amortised cost consist of deposits, trade receivables and cash and cash equivalents. The Group measures loss allowances at an amount equal to 12-month ECLs: deposits and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition. The Group measures loss allowances for trade receivables at an amount equal to lifetime ECLs. The impairment provision on financial assets measured at amortised cost have been calculated in accordance with IFRS 9 s incurred loss provision, which differs from the incurred loss model previously required by IAS 39. This has not resulted in an adjustment to the impairment provision at 1 January 2018 from that previously reported of 239 thousand. VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 13

14 Impact of the new impairment model Loss allowance at 31 December 2017 under IAS Deposits - Trade and other receivables (2) Contract assets - Cash and cash equivalents - Loss allowance at 1 January To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The contract assets relate to subscriber acquisition costs and do not have credit risk. The expected loss rates are based on the payment profiles of sales over a period of 36 month (of the Lebara group) and the corresponding normalised historical credit losses experienced within this period. These historical credit losses are adjusted to reflect the normalised lifetime expected loss rates (at VIEO group level) due to the 3.5 month period as of acquisition date (14 September 2017) to 31 December The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The group has identified the GDP as the most relevant factor, and accordingly adjusts the historical loss rates based on expected changes in this factor. On that basis, the loss allowance as at 1 January 2018 (on adoption of IFRS 9) was determined as follows for trade receivables: Current Overdue between 0 and 30 days Overdue between 30 and 120 days Overdue by more than 120 days Total Expected loss rate 0.06% 0.00% 1.33% 5.02% Gross carrying amount in 26,656 2, ,359 34,130 Loss allowance in The loss allowances increased by 99 thousand to 336 thousand for trade receivables during the nine months to 30 September The mutation in the loss allowance would not have been materially different under the incurred loss model of IAS 39. Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the group, and a failure to make contractual payments for a period of greater than 120 days past due. The transition to IFRS 9 has had no material effect on the Group, therefore no changes are processed at the date of initial application (i.e. 1 January 2018), and presented in the statement of changes in equity for the 9 months to 30 September VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 14

15 IFRS 15 Revenue from Contracts with Customers IFRS 15 has replaced IAS 18 Revenue and IAS 11 Construction Contracts as well as various Interpretations previously issued by the IFRS Interpretations Committee. It has impacted the Group in the following ways: Contract assets (/subscriber acquisition costs) ( 8.9 million positive). Contract liabilities (/deferred revenue) ( 7.3 million negative). The Group has adopted IFRS 15 using the modified retrospective approach, with the effect of initially applying this standard recognised at the date of initial application (i.e. 1 January 2018). The cumulative effect of adopting IFRS 15 has been recognised as a positive adjustment of 1.6 million to the opening balance of retained earnings at 1 January 2018, with no restatement of comparative information. Had the group continued to report in accordance with IAS 18 for the 9 months ended 30 September 2018, it would have reported the following amounts in these financial statements: Impact of accounting standards to be applied in future periods There are a number of standards and interpretations which have been issued by the International Accounting Standards Board that are effective for periods beginning subsequent to 31 December 2018 (the date on which the Company s next annual financial statements will be prepared up to) that the Group has decided not to adopt early. The most significant of these is IFRS 16 Leases (mandatorily effective for periods beginning on or after 1 January 2019). The Group has progressed further its projects dealing with the implementation of this key new accounting standard in the past 9 months, but has not yet completed its detailed assessment. IFRS 16 Leases IFRS 16 replaces IAS 17 Leases and sets out the principles for the recognition, measurement, presentation and disclosure of leases for both the lessee and the lessor. It eliminates the classification of leases as either operating leases or finance leases and introduces a single lessee accounting model where the lessee is required to recognise assets and liabilities for all material leases that have a term of greater than a year. The standard requires lessees to VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 15

16 recognise a right of use asset and a liability for future payments arising from a lease contract. Lessor accounting requirements remain aligned to the current approach under IAS 17. Transition VIEO has completed an initial assessment of the potential impact on its consolidated financial statements but has not yet completed its detailed assessment. The actual impact of applying IFRS 16 on the financial statement in the period of initial application will depend on future economic conditions, including VIEO s borrowing rate at 1 January 2019, the composition of the lease portfolio at that date, the latest assessment of whether it will exercise any lease renewal options and the extent to which VIEO choses to use the practical expedients and recognition exemptions. Transition VIEO plans to apply IFRS 16 initially on January 1, 2019, using the modified retrospective approach. Therefore, the cumulative effect of adopting IFRS 16 (if any) will be recognised as an adjustment to the opening balance of retained earnings at 1 January 2019, with no restatement of comparative information. VIEO is assessing the potential impact of using several practical expedients on transition Use of estimates and judgements There have been no material revisions to the nature and estimates of amounts reported in the annual financial statements for the year ended 31 December 2017 except where the implementation of IFRS 9 and IFRS 15 requires a different approach to the accounting previously applied. Significant estimates and judgements that have been required for the implementation of these new standard are: Estimating the lifetime losses of short-term trade receivables for the purposes of IFRS 9 s expected credit loss model. Estimating the amount of variable consideration under IFRS 15 for which it is highly unlikely there would be a significant future reversal in the future. Assessing whether goods and services identified in some of the Group s contracts are distinct within the context of the contract and, to the extent they are, estimating the standalone selling prices for the purposes of allocating the transaction price on a relative stand-alone basis to the performance obligations identified. Treatment of sales commission costs for obtaining customers. Under IFRS 15, the sales commissions are capitalised and depreciated over the expected contract term. The Group has not elected to apply the practical expedient approach and have capitalised and amortised subscriber acquisition costs incurred to obtain a contract over average customer tenure that qualify for capitalisation Significant events and transactions Seasonality of operations The Group s operations are subject to seasonality mainly resulting from sales to tourists and migrant workers, both groups which tend to peak in the summers months. Group sales will be the highest in the third quarter, and will be the lowest in the fourth quarter. The first and second quarter are not materially influenced by seasonality. Impairment testing of goodwill During the reporting period, the Group did not update the impairment testing performed as per 31 December 2017, because there are no indications there are changes in circumstances. VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 16

17 Written Resolution dated 27 July 2018 The Company amended the terms of the bonds by the Written Resolution (hereinafter stated as July Written Resolution ) approved on 27 July Refer to note for more details on the impact of the July Written Resolution. Other significant transactions During the reporting period VIEO did not have other significant transactions and/or other significant events that should be reported Segment reporting Segment reporting for the reporting period Note: international carrier costs have been included as UK costs, as incurred. For the purposes of management commentary these costs have been allocated to each country based on usage. VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 17

18 Segment reporting for the reporting period (cont d) VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 18

19 Segment reporting for the period ended 31 December 2017 VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 19

20 Segment reporting for the period ended 31 December 2017 (cont d) Revenue 9 month period ended 30 September 2018 Period ended 31 December 2017 Rendering of services 333, ,741 Sale of goods Other revenues 1,038 1, , ,272 Disaggregation of revenue VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 20

21 Income tax Tax is charged at 1.7% for the nine months ended 30 September 2018 (31 December 2017: -4.0%) representing the best estimate of the average annual effective tax rate expected to apply for the reporting period, applied to the pretax income of the three month period Bonds The Company amended the terms of the bonds by the Written Resolution (hereinafter stated as July Written Resolution ) approved on 27 July In the July Written Resolution amendments to the Bond Terms it has been agreed, amongst others, that: The Maturity Date of the Bonds shall be 7 September 2020; The Margin shall be subject to an increase of 4.00 percent per annum for the period from and including the date of the July Written Resolution to the earlier of (i) the date of delivery of the 2017 annual financial statements and the interim accounts Q1/2018 or (ii) 30 November 2018 (the Additional Margin Amount ), and Adjusted timelines for financial reporting. As a result of the July resolution, the Group revised its estimates of payments on the bonds. The Group adjusted the amortised cost of the bond liability to reflect actual and revised estimated contractual cash flows. The Group recalculated the amortised cost of the bond liability as the present value of the estimated future contractual cash flows that are discounted at the bond s original effective interest rate. The adjustment was recognised in profit or loss as an expense. The Group then adjusted the carrying amount of the liability for costs incurred in the modification. These costs are subsequently amortised over the remaining term of the modified liability. Movement schedule Cash movements 2018 Non-cash movements 2018 Total 2018 Opening balance as at 1 January ,705 Loss from modification due to the July Written Resolution - 11,154 11,154 Transaction costs associated with the July Written Resolution (121) (81) (202) Bond interest and amortisation - 20,247 20,247 Interest paid (17,982) - (17,982) Closing balance (18,103) 31, ,922 The balance as per 30 September 2018 includes an amount of 1.6 million of overdue Additional Margin Amount. The Company issued million Senior Secured Callable Bonds (the Bonds ) on 7 September 2017, as amended by the Written Resolution (hereinafter stated as Written Resolution ), approved on 12 December Due to the breach of covenant, the bonds became payable on demand. Consequently, the issued Bonds are classified as current liabilities. Refer to note for further details. VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 21

22 Other liabilities (non-current) 30 September December 2017 "Share-in-Success -scheme 7,427 7,373 Closing balance 7,427 7,373 Share in Success scheme Other liabilities (non-current) relate to the remaining 50% of the Share in Success scheme, which is part of the PPA. The SPA between the Company and the seller stipulated that qualifying (former) employees of the Lebara Group B.V. shall be granted a special bonus in an amount specified by the sellers under the conditions of the Lebara Share in Success incentive plan. Lebara s original Share in Success incentive plan was replaced by a newly committed liability of the Group to pay 50% of the discretionary bonus ( 7.5 million) 6 months subsequent to the business combination and the remaining 50% ( 7.5 million) 24 months subsequent to the business combination, which has been discounted as per balance sheet date. There are no further conditions to this incentive plan. There are no post-acquisition compensation costs Other liabilities (current) 30 September December 2017 "Share-in-Success -scheme - 7,500 Contingent consideration as a result of business combinations - 2,298 Deferred consideration as a result of business combinations 5,805 9,986 Closing balance 5,805 19,784 Share in Success scheme Refer to note for further details on the Share in Success scheme. An amount of 0.8 million of the 50% of the discretionary bonus ( 7.5 million) payable within 6 months subsequent to the business combination, has been paid out during the first quarter of The remaining ( 6.7 million) has been paid in April Contingent consideration The contingent consideration relates to the UK Tax Refund claim, and has been paid out during the reporting period. Deferred consideration The deferred consideration relates to the Dutch Tax claim of 5.2 million and Australian claim 4.2 million. The Australian claim has been settled during the reporting period. The amount of the Dutch Tax refund claim will be paid out after this claim has been (finally) settled with the respective tax authority. VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 22

23 Derivatives 30 September December 2017 Foreign exchange forward contract asset Closing balance derivative assets Foreign exchange forward contract liability - 1,134 Embedded derivative ( zero floor ) 1,522 3,448 Closing balance derivative liabilities 1,522 4,582 Embedded derivative ( zero floor ) The movement during the reporting period is as follows: Opening balance as at 1 January ,448 Fair value gain to the statement of profit or loss during the period (1,926) Closing balance 1,522 The embedded derivative is linked to the bonds, and is therefore payable on demand, refer to notes and for further details. Approximately 1.0 million of the balance as at 30 September 2018 is short term. The fair value of the zero floor was determined by using the Reuters option pricing model. The unobservable input includes the volatility of the 3-month Euribor rate, forward rates in line with the curve and the EONIA curve for discounting (market practice) Fair values Interest rate risk The Senior Secured Callable Bonds issued by the Group bear interest of Euribor %, subject to a zero floor for the Euribor. Movements in the market interest rates impact both the interest expenses and the fair value of the floor. The zero floor is accounted for as an embedded derivative. Movements in the interest rates impact the fair value of the derivative. An increase of 100bps in Euribor would have increased the interest expense for the period by 0.7 million and would have resulted in a fair value gain on the interest rate floor of 1.2 million (impact on income after tax: gain of 0.4 million). A decrease of 100bps in Euribor would have resulted in a loss on the interest rate floor of 5.9 million (impact on income after tax: loss of 4.4 million). VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 23

24 Fair value hierarchy The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities Level 2: other techniques for which inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly Level 3: techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data. There s been no change in the classification and fair value hierarchy of financial assets and financial liabilities during the reporting period. There s been no change in the valuation methods used during the reporting period, besides for the embedded derivative for which this reporting period the Reuters option pricing model has been used (2017: Bloomberg option pricing model). The Group s embedded derivative (zero floor) is a level 3 financial instrument. The fair value of the zero floor was determined by using the Reuters option pricing model. The unobservable input includes the volatility of the 3-month Euribor rate, forward rates in line with the curve and the EONIA curve for discounting (market practice). Refer to paragraph interest rate risk for the sensitivity of the embedded derivative. The Group s investment (Etihad) of 2.2 million is a level 3 financial instrument. The fair value of the investments was determined by using a discounted cash flow model. Significant unobservable inputs as at 30 September 2018 include the Weighted Average Cost of Capital ( WACC of 11.8%) and terminal growth rate (2.0%). The growth rate and the WACC are not interrelated. A reasonably possible change in the growth rate of +/- 1.0% would result in: An increase in carrying value of 320 thousand (+1.0%) A decrease in the carrying value of 260 thousand (-1.0%) A reasonably possible change in the WACC of +/- 1.0% would result in: A decrease in carrying value of 219 thousand (+1.0% An increase in the carrying value of 268 thousand (-1.0%) Carrying Amount versus Fair Value The group considers that the carrying amount of the following financial assets and financial liabilities are a reasonable approximation of their fair value: Trade and related party receivables Cash and cash equivalents Finance lease liabilities Other liabilities (current) Trade and other payables VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 24

25 (in ) As at 30 September 2018 At 31 December 2017 Carrying amount Carrying amount Fair value Fair value Financial assets Financial assets 5,098 5,098 5,112 5,112 Derivatives Foreign exchange contracts ,447 5,447 5,112 5,112 Financial liabilities Bonds, including the embedded derivative (zero floor) 350, , , ,250 Derivatives Foreign exchange contracts - - 1,134 1, , , , ,384 Based on quoted price (level 1), the fair value of the bonds (including the embedded floor) on the reporting date was million, however, due to the breach of covenant (refer to note for more details), the bonds became payable on demand and therefore in accordance with IFRS their fair value (including the embedded floor) is not less than the amount payable on demand, discounted from the first date that the amount could be required to be paid. This amount is determined to be million, calculated by discounting the redemption value and accrued interest over a period of 60 days from the reporting date. The investment (Etihad) of 2.2 million, part of the Group s financial assets, is a level 3 financial instrument. The fair value of the investments was determined by using a discounted cash flow model. The assumptions used in this model are the Weighted Average Cost of Capital ( WACC of 11.8%) and terminal growth rate (2.0%). The other financial assets comprise of deposits with mobile network operators. As the mobile network operators are obliged to repay the full amount of deposit, it is reasonable to assume that the fair values of such deposits approximate their carrying values Related party transactions Besides transactions with key management personnel, no related party transactions took place during the reporting period. Transactions within the Group (shared service centre and other recharges) are not included as they are eliminated on consolidation). Key management personnel The key management personnel consist of the Company s directors and members of the Executive Suite. During the reporting period, VIEO AG charged a total amount of 1.8 million corresponding to its services delivered to VIEO during the first three quarters in These services include the Board Members and other management support provided to VIEO. Palmarium Advisors AG charged a total of 1.2 million regarding advisory provided to VIEO by Palmarium AG. The remuneration of the members of the Executive Suite for the reporting period is as follows: YTD Basic Pay 2018 Short term employee benefits 2018 Termination benefits Post employment benefits Key management personnel Total VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 25

26 Events after the reporting period Bond terms and agreed amendments The Company amended the terms of the 350 million Senior Secured Callable Bond Issue 2017/2022 (ISIN NO ) (hereinafter stated as Bond Terms ) by the Written Resolution (hereinafter stated as Written Resolution ), approved on 12 December 2018 (hereinafter stated as Effective Date ) which supersedes the first amendment of the Bond Terms dated 6 July 2018 between the Issuer and the Bond Trustee on behalf of the Bondholders (hereinafter stated as First Amendment ) and the terms of the written resolution and the proposal set out in the notice of written resolution dated 27 July 2018 (hereinafter stated as July Written Resolution ) which was adopted by the requisite majority on 1 August In the Written Resolution amendments to the Bond Terms it has been agreed, amongst others, that: The Maturity Date of the Bonds shall be 7 September 2020; The Leverage ratio Financial Covenants is disapplied for the Q and Q1 to Q periods; The Liquidity Financial Covenant is disapplied; VIEO s obligation to procure that the Cash Injection occurs cease and the Buy-Back offer will be offered exclusively if VIEO has received the Cash Injection; The Tranche 2, the Tranche 3 and the Additional Margin Amount and October Crystallised Interest obligations cease; Amendments of several definitions and clarification of terms and measures included in the Bond Terms; and Adjusted timelines for financial reporting. As of the Effective Date of the Written Resolution, the Group undertakes to comply with the Financial Covenants at all times (with the exception of Q and Q1 to Q3 2018, during which Financial Covenants shall be disapplied), such compliance to be measured on each Quarter Date and certified by the Issuer by the delivery of a Compliance Certificate, with the delivery of each Annual Financial Statements or Interim Accounts. Leverage Ratio Covenant According to the Bond Terms, the Group shall ensure that the Group maintains a maximum leverage ratio (hereinafter stated as Leverage Ratio ) of 5.50x up to and including 31 December The Leverage Ratio means the ratio of Net Interest-Bearing Debt to EBITDA as per definition within the Bond Terms amended by the Written Resolution. As of the Effective Date of the Written Resolution the Group undertakes to comply with the Leverage ratio at all times with the exception of Q and Q1 to Q3 2018, during which Financial Covenants shall be disapplied. Liquidity Covenant According to the Bond Terms, the Group shall ensure that the Group maintains minimum Liquidity (hereinafter stated as Liquidity ) of not less than 15 million. As per the Bond Terms, Liquidity means the sum of (i) the aggregate book value of the Group s Cash and Cash Equivalents; and (ii) undrawn committed revolving credit lines available to the Group (but excluding committed revolving credit lines with less than six (6) months to maturity). As of the Effective Date of the Written Resolution the Liquidity covenants is disapplied. Q3 and Q Compliance Report As of the Effective Date of the Written Resolution, the Compliance Certificate in respect of the reporting period ending 30 September 2017 shall be conclusive evidence that the Financial Covenants) of the Bond Terms were met at all times during that period. Financial Covenants are disapplied for the Q and Q1 to Q periods, therefore there is no reference in these financial statements to the Q Compliance Report. VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 26

27 Event of Default of bond terms The event of default of bond terms is not related to non-payments but other non-compliance with provisions of the Bond Terms occurred and continued since the issue of the Bonds till the Effective Date of the Written Resolution. According to the Bond Terms, the Bond Trustee may, in its discretion, in order to protect the interests of the Bondholders, or upon instruction received from the Bondholders declare that the Outstanding Bonds, together with accrued interest and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable, at which time they shall become immediately due and payable. Accordingly, the Bonds are reclassified from non-current liabilities to current liabilities in the consolidated and company statement of financial position. Waiver and classification of Bonds as current liabilities As of the Effective Date of the Written Resolution, any breach of the Financial Covenants in respect of the reporting period ended 30 September 2017 shall be permanently waived and Financial Covenants shall be disapplied for the Q and Q1 to Q periods. These events occurred subsequent to the balance sheet date. The date of the approval of the Written Resolution is 12 December 2018, and therefore it is an event subsequent to the balance sheet date and in accordance with the applied accounting standards, the classification of liabilities is based on circumstances present at the balance sheet date. Consequently, the issued Bonds are classified as current liabilities until the Effective Date of the Written Resolution. Non-substantial modification of the bond terms The amendments include non-substantial modifications of the bond terms. The estimated cumulative impact of the modifications amounts to a gain of 4.9 million as of the Effective Date of the Written Resolution. Bonds buy back offer The Written Resolution sets a revised deadline for VIEO AG (parent company) to make a capital injection of 15 million into the Company for the purposes of effecting a bond buy-back. VIEO AG s obligation to make this capital injection have been secured in favour of the bond trustee by a second ranking share pledge over the shares in the Company. The Written Resolution contains a revised deadline for receipt by the Company of the capital injection which is 60 Business Days after the 2017 annual financial statements are made available. Other For other subsequent events, reference is made to the financial statements Besides the previous events, there has been no other subsequent events between 31 December 2017 and the date of approval of the financial statements. VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 27

28 4. VIEO B.V. INTERIM CONDENSED COMPANY FINANCIAL STATEMENTS 4.1. VIEO B.V. INTERIM CONDENSED COMPANY STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE PERIOD ENDED 30 SEPTEMBER 2018 VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 28

29 4.2. VIEO B.V. INTERIM CONDENSED COMPANY STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2018 VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 29

30 4.3. VIEO B.V. INTERIM CONDENSED COMPANY STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED 30 SEPTEMBER 2018 VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 30

31 4.4. VIEO B.V. INTERIM CONDENSED COMPANY STATEMENT OF CHANGES OF EQUITY FOR THE PERIOD ENDED 30 SEPTEMBER 2018 VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 31

32 4.5. NOTES TO THE VIEO B.V. INTERIM CONDENSED COMPANY FINANCIAL STATEMENTS Basis of preparation These interim condensed company financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2017 annual report (issued 21 December 2018). The financial statements have been prepared on the going concern basis. All financial information presented in Euros have been rounded to the nearest thousand (EUR 000), unless otherwise stated. These financial statements have not been audited or reviewed by our external auditor. For additional information on items not explained in the notes to the Company financial statements (including accounting policies), reference is made to the notes to the consolidated financial statements. These interim financial statements were authorised for issue by the Company s board of directors on 21 December Other income Other income of 1.4 million relates to the fee regarding to management services provided to the Lebara Play business, which has not been part of the business combination. The management contract ended in May 2018, following the sale of the Lebara Play business Investments in subsidiaries Investments in subsidiaries are stated at cost less accumulated impairment losses Bonds Reference is made to note of the consolidated financial statements for further details Other liabilities (non-current) Reference is made to note of the consolidated financial statements for further details Other liabilities (current) Reference is made to note of the consolidated financial statements for further details Derivatives Reference is made to note of the consolidated financial statements for further details Fair values Reference is made to note of the consolidated financial statements for further details. VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 32

33 Related party transactions Reference is made to note of the consolidated financial statements for details on the related party transactions on a consolidated level. The following related party transactions took place on a company level during the reporting period. Period ended 30 September 2018 Lebara Group B.V. Paid on current account (927) Received on current account 927 Recharges via current account 410 Interest Lebara Limited Received on current account 20,444 Recharges via current account (UK tax claim & Australian claim; Share in Success scheme) 8,728 Interest ,667 Lebara Media Services Limited Costs regarding the services provided for the Play Business 2,238 Received funds by Lebara Media Services Limited regarding the sale of the Lebara Play (2,815) business Recharges via current account ( Share in Success scheme) 40 Interest 31 (506) Lebara B.V. Recharges via current account ( Share in Success scheme) 3,496 Interest 46 3,542 Lebara Mobile Limited Recharges via current account ( Share in Success scheme) 491 Interest Lebara Mobile Germany Recharges via current account ( Share in Success scheme) 480 Interest Lebara Aps (Denmark) Recharges via current account ( Share in Success scheme) 150 Interest Lebara France Limited Recharges via current account ( Share in Success scheme) 459 Interest Events after the reporting period Reference is made to note of the consolidated financial statement for further details. VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 33

34 5. SIGNING Date: 21 December, 2018 On behalf of the Board of Directors of VIEO BV Raphael Auerbach Chairman of the Board of Directors VIEO BV Suzanei Archer Member of the Board of Directors VIEO BV Alexander Zito Member of the Board of Directors VIEO BV Patrick Wild Member of the Board of Directors VIEO BV VIEO B.V. Interim condensed financial report 3rd Quarter 2018 Page 34