Financial overview. Jari Kinnunen CFO

Transcription

1 Financial overview Jari Kinnunen CFO

2 1 Performance update 2 Profit and growth generation 3 Capital allocation 4 CFO priorities Elisa s unique strategy generates profit and growth

3 Performance update Strong track record of high growth 2016 LTM 1) CAGR Revenue 6.7% EBITDA 7.0% EBIT 7.9% EPS 9.3% 1) Last twelve months, comparable figures 3

4 Performance update industry-leading performance Revenue growth CAGR 2016 LTM Operating cash flow conversion LTM ROCE 2018 estimate Elisa 7% Elisa 63% Elisa 27% DNA 3% Telenor 61% Swisscom 11% Telekom Austria 3% KPN 53% Telecom Austria 10% Telecom Italia 1% Tele2 52% KPN 10% Swisscom 1% BT 52% Proximus 10% Proximus -1% Telekom Austria 46% TI 9% Telia -1% Telecom Italia 45% Telefonica 9% BT -1% DNA 45% BT 9% Tele2-5% Swisscom 42% Orange 7% Telenor -5% Telia 42% DT 6% KPN -9% Proximus 39% Vodafone Average 1) -1% Average 1) 48% Average 1) 8% 6% Source: Bloomberg 1) Peer group average 4 Source: Bloomberg (EBITDA - CAPEX) / EBITDA Source: Citi Research 2018 estimate

5 Performance update and long-term track record in medium-term financial targets Revenue growth above industry 1) average EBITDA margin In target Below target 15% Target area 10% 5% 0% -5% -10% LTM Revenue growth Peers CAPEX-to-sales ratio 12% 2) 15% 2) 10% 5% Target area 0% LTM 38% 36% 34% 32% 30% 28% 2,0 1,5 1,0 Target area LTM EBITDA % Capital structure Net debt / EBITDA Equity ratio >35% Target area Q18 50% 45% 40% 35% 30% 25% 20% Target area Q18 CAPEX-to-sales Net debt / EBITDA Equity ratio 1) European telecom operators 2) Special guidance due to acquisitions 5

6 Profit and growth generation ¾ of revenue in growing digital and mobile services Share of revenue LTM Organic CAGR 2016 LTM Mobile service revenue 44% 4% Interconnection & roaming 4% -2% Equipment sales 12% 10% Mobile revenue 60% 4% Fixed revenue 24% -5% Domestic digital services 13% 8% International digital services 2% 15% Other digital services 1% -24% Digital services total 16% 6% Total revenue 100% 2% 6

7 Profit and growth generation Strong performance in Estonian business Solid revenue growth continues Total revenue market shares in Estonia 1) 151 CAGR 6.0% Reported 14% 31% Elisa CAGR 34.9% Pro Forma Telia Tele LTM 54% with improving EBITDA Elisa revenue split 167m LTM 50 CAGR 4.3% % Reported Consumers CAGR 34.6% Pro Forma Corporate LTM 80% 1) Reported total revenues in Estonia for Elisa, Telia and Tele2, 533m LTM 7

8 Profit and growth generation Drivers to achieve medium-term EBITDA margin target LTM 35% By end of 2021 >37% Increase mobile and fixed service revenues Upselling to higher speeds and monetising 5G Add-on services Product changes Grow digital service businesses Growth in domestic and international markets Improved portfolio management Improve efficiency and quality Systematic continuous productivity improvement Digitalisation, RPA, machine learning, AI Cost synergies in acquired companies 8

9 Capital allocation Disciplined 12% CAPEX-to-sales policy continues CAPEX vs. peers 1) CAPEX allocated efficiently 18% Mobile data usage LTM CAGR: 39% 3) 16% 14% 12% 10% LTM 2017 CAPEX in Finland 2), EURm % 13% 15% 133 Peers Elisa FTTx household coverage: 72% Mobile network peak hour utilisation: 27% 5G-ready connections to 4G base stations: 86% High network density, macro cell sites 3 international average Elisa Telia DNA CAPEX CAPEX-to-sales 1) Peer group: BT, DNA, KPN, Proximus, Swisscom; Tele2, Telecom Italia, Telekom Austria; Telenor, Telia 2 ) Company reports, reported revenue and CAPEX (Telia w/o rights for the ice hockey league) in Finland 3) Elisa s network in Finland 9

10 Capital allocation excellent frequency position in Finland, all main frequencies secured until the end of 2033 Renewal of 900 MHz, 1,800 MHZ and 2,100 MHz in 2019 Beauty contest renewal until end of GHz licence granted for 15 years - 5G network rollout starts in the beginning of 2019 Elisa s licence price EUR 26m, payable in 5 years Elisa acquired an additional 50 MHz of 2,600 MHz spectrum Licence valid until end of 2029, 2,600 MHz frequencies to be used for 4G and 5G services Elisa has biggest amount of spectrum in Finland MHz Telia MHz DNA MHz 700 MHz 800 MHz 900 MHz 1,800 MHz 2,100 MHz 2,600 MHz 3.5 GHz 10

11 Capital allocation Value-driving M&A continues Focus areas Domestic telecom services Domestic IT services International digital services Value-creating acquisition criteria Supports strategy Financially accretive Distribution intact or improved Solid capital structure and balance sheet M&A activities Company Year Acquisition price, m Valuation EV/EBITDA Santa Monica Starman Anvia PPO Other 5 Total/median Financial development in EPS, EUR % Dividend, EUR % Net debt / EBITDA

12 Capital allocation as well as solid capital structure and efficient funding Medium-term target reiterated Net debt / EBITDA Equity ratio >35% Average interest rate 1.7% Fixed/variable 80/20% Return ratios 1) 28% 30% 30% 17% 18% 18% LTM 1) Comparable figures 12 ROE ROI Diversified maturity profile 30 Sep 2018, EURm Bonds Bank loans Undrawn RCF s Cash, net debt and interest rate Cash / net debt 30 Sep ) 50% Telenor 40% BT Telia 30% KPN Telecom 20% Proximus Italia Elisa Telekom 10% DNA Tele2 Austria 0% Swisscom 1,75% 2,25% 2,75% 3,25% 3,75% 4,25% 4,75% Effective interest rate 2) 1) Source: Bloomberg, At the end of quarter 2) Source: Bloomberg, FY2017 (Total Interest Incurred / average short and long term debt ) * 100

13 Capital allocation Strong cash flow growth Operating cash flow, EURm Operating cash flow margin 1) 24% CAGR +6.3% % 20% 18% 16% 14% LTM 12% LTM Elisa Peers 13 1) (EBITDA CAPEX) / sales Peer group: BT, DNA, KPN, Proximus, Swisscom; Tele2, Telecom Italia, Telekom Austria; Telenor, Telia Source: Bloomberg

14 Capital allocation and high cash flow conversion Focused business model Continuous earnings improvement Industry s lowest CAPEX-to-sales Disciplined M&A policy Low effective tax rate Low interest expenses Industry s best equity-free cash flow conversion Average 30% Elisa Telia 44% DNA 41% Vodafone 37% Telenor 36% KPN 35% Swisscom 32% Telefonica 31% Proximus 26% Orange 14% BT 13% 50% Source: JP Morgan 2018 estimate 0% 10% 20% 30% 40% 50% EFCF / EBITDA 14

15 Capital allocation lead to reliable growing dividend Distribution policy reiterated Commitment to high profit distribution Policy: payout ratio % LTM EPS EUR 1.94, 7.2% YoY growth Consensus estimates lead to under-leveraging Dividend history CAGR 6.1% 104% 94% 91% 93% 89% 1,30 1,32 1,40 1,50 1, Payout ratio Dividend Consensus estimates Dividend / sales Target { 1.7 1,75 Source: Bloomberg 1, , ,01 1,3 2018e 2019e 2020e 2021e Dividend Net debt/ EBITDA 20% 15% 10% 5% 0% E Source: Bank of America Merrill Lynch. See appendix for disclaimer. Elisa BT Deutsche Telekom KPN Telefonica Telecom Italia Orange Telia Telenor Proximus Swisscom Vodafone 15

16 IFRS 16 effects 2019 onwards no effect on cash flow Mainly office premises, network-related real estate and cars Debt and fixed assets to increase by approx. EUR 60m EBITDA to improve by approx. EUR 13m Increase in depreciation EUR 12m Increase in interest EUR 1m EBITDA margin up by approx. 0.7% Net debt / EBITDA CAPEX target excluding IFRS 16 change P&L effects Revenue Other operating income Materials and services -13 Employee expenses Other operating expenses EBITDA 13 Depreciation, amortisation and impairment 12 EBIT 1 Financial income Financial expenses 1 Share of associated companies profit Profit before tax 0 16

17 CFO priorities Elisa s unique strategy generates profit and growth Elisa s strategy Profit and growth generation Increase mobile and fixed service revenues Improve operational leverage CAPEX efficiency Grow digital service businesses Disciplined M&A Growth and profitability improvement Improve efficiency and quality Productivity improvements Efficient capital structure 17

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19 Statements made in this document relating to the future, including future performance and other trend projections, are forward-looking statements. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. There can be no assurance that actual results will not differ materially from those expressed or implied by these forward-looking statements, due to many factors, many of which are outside of Elisa s control.

20 Appendix Disclaimer Slide 17: Dividend/sales Reprinted by permission. Copyright 2018 Merrill Lynch, Pierce, Fenner & Smith Incorporated. The use of the above in no way implies that Merrill Lynch endorses the views or interpretation or the use of such information or acts as any endorsement of [the licensee s] use of such information. The information is provided "as is" and Merrill Lynch does not warrant the accuracy or completeness of the information.