Third quarter and nine month year to date FY 12/13 Results presentation

Transcription

1 Third quarter and nine month year to date FY 2/3 Results presentation 30 th May 203 Herb Hribar CEO eircom Group Richard Moat CFO eircom Group

2 Disclaimer This presentation contains information and documents which are for information purposes only. They do not constitute or form part of, and should not be construed as an advertisement, an offer or an invitation to subscribe to or to purchase securities of eircom Finance Limited or any of its subsidiaries, holding companies and subsidiaries of its holding companies (together the Group ) nor are the information or documents contained thereon meant to serve as a basis for any kind of contractual or other obligation. This presentation does not constitute a prospectus or a prospectus equivalent document. The following information and documents are not directed at and may not be viewed or distributed to any person resident and/or domiciled in the United States of America. By reviewing the information in this presentation you confirm that:. you not resident of nor domiciled in the United States of America; or 2. you are a qualified institutional buyer ( QIB ), in reliance on Rule 44A under the U.S. Securities Act of 993, as amended ; 3. you will not distribute any of the information and documents contained thereon to any person resident and/or domiciled in the United States of America; 4. you are resident within a member state of the European Economic Area and are a qualified investor within the meaning of Directive 2003/7/EC, (the Prospectus Directive ) as implemented in Member States of the European Economic Area ( EEA ); and 5. you agree to the terms of this disclaimer. This presentation is being presented to the recipient solely for informational purposes and should not be treated as giving investment advice. No specific investment objectives, financial situation or particular needs of any recipient have been taken into consideration in connection with the preparation of this presentation. This presentation is being presented to the recipient solely for informational purposes and should not be treated as giving investment advice. No specific investment objectives, financial situation or particular needs of any recipient have been taken into consideration in connection with the preparation of this presentation. 2

3 Disclaimer cont. This presentation may include certain forward-looking statements regarding certain of the Group s plans and its current goals, intentions, beliefs and expectations concerning, among other things, the Group s future results of operation, financial condition, liquidity, prospects, growth, strategies and the industries in which the Group operates. These forward looking statements can be identified by the fact that they do not relate only to historical or current facts. Generally, but not always, words such as may, could, should, will, expect, intend, estimate, anticipate, assume, believe, plan, seek, continue, target, goal, would, or their negative variations or similar expressions identify forward looking statements. By their nature, forward-looking statements are inherently subject to risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The Group cautions you that forward-looking statements are not guarantees of future performance and that its actual results of operations, financial condition and liquidity and the development of the industries in which the Group operates may differ materially from those made in or suggested by the forward-looking statements contained in the presentation. In addition, even if the Group s results of operations, financial condition and liquidity and the development of the industries in which the Group operates are consistent with the forward-looking statements contained in this presentation, those results of developments may not be indicative of results or developments in future periods. The Group does not undertake any obligation to review, update or confirm expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise after the date of this presentation. No warranty or representation of any kind, express or implied, is or will be made in relation to, and to the fullest extent permissible by law, no responsibility or liability in contract, tort, or otherwise is or will be accepted by the Group any of the Group s officers, employees, advisers or agents (together, the Group Representatives ) or any of their affiliates as to the accuracy, completeness or reasonableness of the information contained in this presentation, including any opinions, forecasts or projections. Nothing in this presentation shall be deemed to constitute such a representation or warranty or to constitute a recommendation to any person to acquire any Notes or to acquire any interest pursuant to the facilities agreement effective June 202. Any estimates and projections in this presentation were developed solely for the use of the Group at the time at which they were prepared and for limited purposes which may not meet the requirements or objectives of the recipient of this presentation. Nothing in this presentation should be considered to be a forecast of future profitability or financial position and none of the information in this presentation is or is intended to be a profit forecast or profit estimate. The Group Representatives and their respective affiliates, agents, directors, partners and employees accept no liability whatsoever for any loss or damage howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith. The Group and its advisers have not assumed any responsibility for independent verification of any of the information contained herein including, but not limited to, any FORWARD LOOKING STATEMENTS MADE herein. In addition, the Group and its advisers assume no obligation to update or to correct any inaccuracies which may become apparent in this presentation. Any forward looking statements speak only as at the date they are made. The Group does not undertake to release publicly any revision to these forward looking statements to reflect events, circumstances or unanticipated events occurring after the date hereof. This presentation is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefings provided to the recipient by the Group and its advisers. The recipient should be aware that any use they make of this presentation is entirely at their own risk. This presentation has not been approved by any regulatory authority. This presentation has been prepared by, and is the sole responsibility of, the Company and has not been independently verified. 3

4 Highlights Business Update EBITDA stabilising & ahead of budget Positive growth in mobile postpay Managing competitor and DSP impact efibre launched & 4G rollout on track Leveraging bundling opportunity Cost transformation on track Strengthening of senior management team Corporate Update Sale of eircom PhoneWatch High Yield Bond - 350M 4

5 Agenda Business Update Trading Q3 and 9 Months YTD FY 2/3 Corporate Update Key Areas of Focus Q&A 5

6 We continue to invest in a world-class network for Ireland Fibre Mobile Wi-Fi State-of-the-art network will allow the Company to provide super-fast broadband services 325,000 prem by mid May 600,000 prem by Dec 3.2m prem by mid % of premises in Ireland Spectrum acquired to enable 4G rollout and significant improvement to 3G coverage and speeds 4G launch by Sept 203 Vendor appointed for initial deployment phase First LTE trial site live U900 coverage expanded to 65% of the population Nationwide, and only significant, Wi-Fi network in Ireland, with 2,085 hotspots and a plan to extend to 4,000 by July 4 Offers ability to provide customers with Internet Everywhere 6

7 Superfast fibre products launched Commercial launch of retail and wholesale superfast fibre broadband, by An Taoiseach efibre offering uncongested speeds of up to 70Mb/s Over 325,000 premises passed Free upgrade for existing broadband customers efibre for new customers from 40 per month Pictured above, at the eircom efibre launch, left to right; Padraig McManus (Chairman eircom), Herb Hribar (CEO eircom) and An Taoiseach Enda Kenny (Irish Prime Minister) 7

8 TV launch targeted for Autumn 203 TV proposition to launch in Sept 3 combating competitive threat and making eircom the only Irish quad play provider eircom ambassador trials have commenced in parallel with system and end to end testing Customer trial in June 203 Service trials by eircom employees have informed proposition and pricing definition is close to completion following positive customer research eircom is negotiating content deals with 8 Content Providers 6 Content deals signed to date, negotiations on-going and on track for completion in advance of commercial launch A number of senior commercial roles have been appointed with experienced external recruits from the TV industry 8

9 No. of Access Losses '000 Stabilising broadband base helping slow down fixed access churn eircom Retail broadband base stabilised in FY3... Broadband, 000 s of subscribers...helping to slow down fixed access churn Retail Access Lines, 000 s of subscribers (half-yearly basis) (5) (56) (35) (24) Jun Dec Jun 2 Dec 2 Mar 3 eircom Cable Broadband 3 eircom Wholesale broadband base continues to grow eircom Group Broadband 2, 000 s of subscribers (22.2) Dec Jun 2 Dec 2 Mar 3 63% (28.6) (28.4) 38% (9.2) 7% (5.8) Q2 FY2 Q3 FY2 Q4 FY2 Q FY3 Q2 FY3 Multi-play Potential: Triple-Play Penetration of Fixed Line Broadband 4 Jun Dec Jun 2 Dec 2 Mar 3 France UK Ireland Quarterly figure based on last 3 months. 2 Retail broadband eircom and wholesale bitstream 3 Represents UPC approximate share 4 Company estimate eircom retail eircom wholesale Opportunity for the eircom Group to leverage bundling opportunities 9

10 Six key levers aimed at reducing fixed line churn Key Lever Progress. Launch of efibre Commercial launch of high speed broadband on May 20th speeds of up to 70mb/s Upgrade existing customers at no extra cost 40 price point for new retail customers Wholesale variant (VUA) starting from 7.50 standalone Broadband and 2 with voice 2 2. Launch of FMC Launched bundled proposition in Oct 2 (home phone + home broadband + mobile) targeting fixed line base - starting from 55 per month 3. Launch of IPTV offering eircom will launch a value-based TV bundle in Autumn 203, establishing a unique quad play offering in Ireland 4. Persistent re-contracting Consumer fixed broadband churn YoY rate reduction from 27% Mar 2 to 23.4% Mar % of our retail fixed broadband base in contract, up from 43% Mar 2 Consumer fixed access churn YoY rate reduction from 2% to 8% 5. Retail pricing flexibility Acceptable decisions issued by ComReg Retail price flexibility has enabled the use of improved value retention offers 6. Longer contracts Longer contracts for customers on multi-product bundles launched Q3 FY3 Annualised rate based on YTD March Subject eircom to usage charges 0

11 Mobile: Strong shift to higher postpay ARPU Proportion of Customers on Postpay Increasing at a Fast Rate, With Further Scope to Grow % Customers on Postpay ARPU 2 in Both Segments has been Declining, but is Showing Signs of Flattening Postpay ARPU ( ) Prepay ARPU ( ) 9% 22% 25% 29% 3% Jun Dec Jun 2 Dec 2 Mar 3 Jun Dec Jun 2 Dec 2 Mar 3 Jun Dec Jun 2 Dec 2 Mar 3 Significant Improvements Achieved in Reducing Postpay Churn......with Further Initiatives Under Way to Improve Prepay Churn Postpay Churn % 29% 22% 23% 8% 6% Prepay Churn % 49% 49% 50% 55% 59% Jun Dec Jun 2 Dec 2 Mar 3 Jun Dec Jun 2 Dec 2 Mar 3 Includes handsets and mobile broadband. Dec and Dec 2 figures based on last six months, Jun and Jun 2 figures based on full year. 2 ARPU includes mobile broadband.

12 Six Key Themes Drive Profitable Mobile Growth Key Lever. Shift in Customer Base to High ARPU Postpay Progress Postpay base share increased from 22% at Dec to 3% at end of Mar 3 Continuing trend of existing Customer migrations from Prepay to Postpay Strong Postpay customer base growth: 5k in Q3 FY3 (4k in H FY3) 2. ARPU Stabilisation Prepay price increases implemented in H FY3 Programme of MTR reduction completes Jun 3 3. Churn Reduction Postpay churn 23% in Jun 2, 6% in Mar 3 (based on last three months) Invested to improve our churn propensity model, and our ability to then target offers effectively 4. Fixed Mobile Convergence (Bundles) Launched Oct 2-87% of customers new to emobile Further improvements: addition of fibre, TV and single billing 5. B2B Growth Mobile launched for government / major corporates in Dec 2 2 to take advantage of cross-selling opportunity 6. Network Enhancement 4G launch September 203 Significant improvements to 3G data speed and coverage in % of UTMS 900 sites now integrated balance will be completed by end of June Churn includes mobile broadband 2 soft eircom Launch in Dec 2. 2

13 Leveraging ICT and MNS within the eircom Business & Wholesale segments Progress Successfully launched Cloud proposition B2B Full launch of mobile into all B2B segments Mar 3 Qualified for Government Mobile Procurement Framework Qualified for GB Public Sector Network Framework NGA Fibre launched on May 20 th 203 Wholesale WLR and Bitstream customer bases ahead of plan Mosaic contract won and in delivery phase 3

14 Cost Transformation process underway Progress YoY opex savings of 24m achieved in nine months up to Mar 3 - ~ 30m annualised pay savings expected from 489 exits in February 3 Headcount reduction of 783 FTE to date - Further 36 FTE expected before the year end Major Network and IT vendor support contract negotiations underway Outsourcing a portion of NGA installation activity Consolidating retail consumer and wholesale service management centres Significant cost savings included in recent RAN contract negotiation Total savings targeted 2-00M Mobile Radio Access Network 2 Q4 FY4 run rate versus FY 2 4

15 Business Update Trading Q3 and 9 Months YTD FY 2/3 Corporate Update Key Areas of Focus Q&A 5

16 Trading Highlights Q3 and 9 months YTD 202/3 Q3 EBITDA of 22m was 2m better than Q2 and 5m better than forecast YTD EBITDA of 365m was 8m ahead of budget Stabilising EBITDA average 40.5m in the quarter consistent with H average Strong cost control 24m saving YTD versus last year with full benefit of February VL exits from April onwards Fixed Line losses averaging 6.5k per month for 9 months YTD compared to 9k average last year some uptick in losses due to DSP and competition xx Strong growth in mobile postpay 5k net adds in quarter (56k YTD) Maintaining strong liquidity closing cash 243m 6

17 Group Q3 Financial KPIs Q3 v Budget v Budget v Prior Year v Prior Year FY3A Better/(Worse) Better/(Worse) Better/(Worse) Better/(Worse) m m % m % Fixed Revenue 267 (5) -2% (32) -% Mobile Revenue 83 (2) -2% (6) -6% Eliminations (2) 0 0% -6% Group Revenue 338 (7) -2% (37) -0% Cost of Sales (64) 8 % 5 9% Gross Profit 274 0% (22) 7% % Margin 8.2% Pay Costs (70) 4 6% 2 3% Non Pay Costs (83) 3 4% 4 0 Operating Expenses (53) 8 5% 7 4% Group EBITDA % (5) -% Fixed 6 7 6% (6) -2% Mobile % 5% xx Cash Capex (64) 3 7%.9% EBITDA - Cash Capex % (4) -20% Net Change in Cash % 59 38% Closing Cash Balance 243 5% (40) -4% Q3 EBITDA of 22m was 2m better than previous quarter (Q2), 8m ahead of Budget and 5m ahead of Q Forecast Closing cash of 243m was m ahead of budget Includes VL and interest charges Based on unaudited management accounts for 3 months ended 3 March 203 7

18 Group Year to date March Financial KPIs YTD Mar v Budget v Budget v Prior Year v Prior Year FY3A Better/(Worse) Better/(Worse) Better/(Worse) Better/(Worse) m m % m % Fixed Revenue 835 (7) -% (69) -8% Mobile Revenue 267 (3) -% (5) -5% Eliminations (40) 0 0% () 3% Revenue,062 (0) -% (86) -7% Cost of Sales (226) 9 4% 22 9% Gross Profit 835 (0) 0% (64) -7% % Margin 78.7% Pay Costs (26) 7 3% 9 4% Non Pay Costs (254) 2 5% 5 6% Operating Expenses (470) 9 4% 24 5% EBITDA % (40) -0% Fixed % (45) -% xx Mobile % 5 28% Cash Capex (339) (4) -4% (90) -28% EBITDA - Cash Capex 26 (23) -47% (230) -90% Net Change in Cash (05) 2 0.% % Closing Cash Balance % (40) (4.)% EBITDA of 365m for the 9 months ended 3 March 203 was 8m ahead of budget and 8m better than forecast Includes VL and interest charges Based on unaudited management accounts for 9 months ended 3 March 203 8

19 Jul 2 Aug 2 Sep 2 Oct 2 Nov 2 Dec 2 Jan 3 Feb 3 Mar 3 Jul 2 Aug 2 Sep 2 Oct 2 Nov 2 Dec 2 Jan 3 Feb 3 Mar 3 Jul 2 Aug 2 Sep 2 Oct 2 Nov 2 Dec 2 Jan 3 Feb 3 Mar 3 Jul 2 Aug 2 Sep 2 Oct 2 Nov 2 Dec 2 Jan 3 Feb 3 Mar 3 Current Trading / Recent Developments Actual Revenue ( m) Actual Operating Costs ( m) Commentary During Q3, the business has continued to perform in line with management expectations and trends in trading have been broadly consistent with H FY3 EBITDA has remained relatively constant in the range 40-43m with the exception of December ( 37m) which was impacted by seasonal mobile SAC and lower levels of peak traffic Actual EBITDA ( m) Day Adjusted EBITDA 2 ( m) Average: 40.5m Average: 40.5m Average: 40.m Average: 4.3m For three months to March, EBITDA has averaged 40.5 million per month - consistent with average EBITDA of 40.5 million per month in H Average Day adjusted EBITDA has increased from 40.m per month in H to 4.3m in Q3 Continued focus on reducing operating costs over the period 24m savings for 9 months to Mar 3 compared with prior year Includes 2m corporate finance costs. 2 Day Adjusted data calculated by taking group monthly data and dividing by the number of actual days in the month and multiplying the quotient by 30.4 (which is 365 divided by 2). 9

20 Dec Jan 2 Feb 2 Mar 2 Apr 2 May 2 Jun 2 Jul 2 Aug 2 Sep 2 Oct 2 Nov 2 Dec 2 Jan 3 Feb 3 Mar 3 7,928 7,44 0,57,008,463 9,372 7,53 6,2 7,90 5,33 4,80 6,334 5,299 6,093 7,82 9,36 Fixed Line KPIs Total Retail Lines (000 s) ARPU ( ) Commentary,22, FY0A FYA FY2A H FY3 9M to Mar 3 Retail Access Lines Retail Broadband Lines 28.5 % Fixed Line Churn (%) 30.2 % 23.3% 22.6% 28.4 % 2.3% 22.4% 7.% 23.4 % 8.3% FY0A FYA FY2A H FY3 9M to Mar 3 Consumer Access Churn (%) Consumer Broadband Churn (%) FY0A FYA FY2A H FY3 9M to Mar 3 Retail PSTN Retail Broadband Retail Access Line Losses Rate of retail fixed line losses reduced to an average of 6,500 per month in nine months up to Mar 3 compared to an average of 9,000 per month in FY and FY2 Fixed line churn decreased in H FY3 due to proactive customer retention campaigns and improved offers for existing customers in Q3 FY3 churn increased due to DSP and competitive impacts Retail BB share of 42% and combined retail and wholesale share of 66% provides solid platform for launch of NGA in May 203 ARPU has been marginally improving since Dec 2, contributing to relative stability in Adjusted EBITDA performance over the last three months Retail access line losses negatively affected over the last 3 months by government decision to reduce level of subsidy for Department of Social Protection (DSP) customers, leading to an increase in monthly losses from this area. 20

21 Mobile KPIs Total Handsets (000 s) Prepaid vs. Postpaid ARPU ( ) Commentary,043,03,076,076, eircom has delivered marketleading Postpay base growth in each of the six quarters up to Dec FY0A FYA FY2A H FY3 9M to Mar 3 Prepay Handsets Postpay Handsets Mobile Broadband Mobile Churn (%) 56.4 % 45.8 % 49.0 % 49.6 % 54.7% 30.3% 28.6% 23.3% 8.3% 7.5% FY0A FYA FY2A H FY3 9M to Mar 3 Prepaid Postpaid FY0A FYA FY2A H FY3 9M to Mar 3 Prepaid Postpaid Net Postpay Subscriber Gains (000 s) (3) (8) (2) Jun Sep Dec Mar 2 Jun 2 Sep 2 Dec 2 eircom Vodafone O2 3 Tesco Mobile As at end Mar 3, Postpaid subscribers were at 303k, an increase of 5k compared with Dec 2, and 56k compared with Jun 2 Reduced rate of ARPU decline in FY3 as MTR reductions start to bottom out Postpay churn reduced significantly due to improved competitive offerings, focused retention activity and improved customer experience Prepay handset subscribers declined over the period driven by high levels of customer churn During quarter ended Dec 2, eircom attained 50% of net postpay subscriber growth in the market Derived eircom from ComReg data December

22 Opex Cost Breakdown FY0A - FY3 60.5m 727m 0m 376m 55.2m 54.m FY0A FY2A CAGR: (5.4)% 663m 650m 345m 354m 34m 38m 296m 38m 72m 46m 52m 82m 70m FY0A FYA FY2A H FY3 3M to Mar 3 Total Pay Costs Total Non Pay Costs Other¹ Headcount 53.0m 50.6m Total 9M to Mar 3: 470m Average Monthly Opex Commentary Average monthly opex has decreased from 54.m in FY2 to 53.0m in H FY3 to 50.6m in 3 months to 3 Mar 3 FY2 costs included c. 2.5m in savings from 9 day fortnight which was reversed in October 203 Non-pay costs decreased at (3.0)% CAGR as overhead costs were rationalised. Savings across Mosaic, accommodation, sales and marketing and bad debts and general administration Headcount of 4,929 at end of Mar 3 compared with 5,444 at end of Dec 2 Headcount reduction of 783 FTE at year to date May (ex impact of 9DF) 6,297 5,485 5,547 5, ,929 Focus on delivering accelerated cost reductions - 00m target savings by FY4 Jun Dec Jun 2 Dec 2 Mar 3 FTE 9 day forthnight Excludes Non Cash Pension Charge. 2 For indicative purposes includes impact of reversal of 9-day fortnight working arrangement in Oct 2 of ~450 FTE Reported number for June 2 was 5,097 FTE 22

23 Capex Breakdown FYA - FY3 5.0% 35.4% 2.0% Total 9M to Mar 3: 327m Commentary Continued focus on growth programmes in FY3 with acquisition of spectrum licences ( 45m), rollout of the NGA fibre network ( 62m), IPTV ( 7m) and Next Generation billing ( 8m) 8.9% 227m 256m 45m Capital investment programme for FY3 is on plan, with capex of 327m incurred for the nine months up to the end of Mar 3 on track to meet capital investment targets for FY3 50m 227m FY3 and FY4 are peak years of capex investment, with NGA rollout and 4G largely complete by FY5. 50m m 7m 7m FYA FY2A H FY3 3M to Capex¹ Spectrum Mar 3 Incurred capex. 2 Includes spectrum investments in H FY3. Capex % Sales 2 23

24 eircom Maintains Strong Cash Balance Net cash outflow of 05m in 9 months to Mar 3 Operating ( 36m) Finance ( 69m) 30 June Cash Cash Capex (94m) Interest (6m) Debt (8m) 348m EBITDA +365m 3 Mar Cash Spectrum (45m) 243m VL Costs (26m) Payments for Provisions (26m) Other (0m) Other operating cashflow includes 3m WC and NCP, (9)m deferred revenue, (9)m tax, 9m restricted cash and (4)m other. 24

25 Business Update Trading Q3 and 9 Months YTD FY 2/3 Corporate Update Key Areas of Focus Q&A 25

26 High Yield Bond - Transaction Overview Sources and Uses Sources m Uses m Senior Secured Notes 350 Repurchase Senior Facilities Debt Transaction Fees 0.7 Total 350 Total 350 Pro Forma Capitalisation 3 m Cum. % x Adjusted EBITDA Margin / Coupon Maturity Cash (243) (.3)% Senior Facilities, % Existing Tetra Debt % E bps cash pay/00bps pik 5 years Senior Secured Notes % 9.25% 7 years Net Total Debt 2, % 4.2x LTM Dec 202 Adjusted EBITDA 54 Assumes a purchase price of per.00 of 364 million in aggregate principal amount of repurchased debt. 2 Tetra debt Other long term debt ( 23m) and Current borrowings ( 8m). Tetra debt amounts attributable to eircom s 56% interest in Tetra. 3 For indicative purposes only subject to changes 26

27 PhoneWatch Disposal Sale of PhoneWatch Business completed on 0 th May 203 Residential monitored alarms business non core to eircom Business 00% share capital acquired by Sector Alarm (private Norwegian Security Company) Proceeds can be used to re-invest in the business (within 2 months) eircom continues to provide services to PhoneWatch 27

28 Business Update Trading Q3 and 9 Months YTD FY 2/3 Corporate Update Key Areas of Focus Q&A 28

29 Key areas of Focus Continued improvements in customer experience Fixed line churn - mitigate impacts of DSP and the competition to stabilise broadband base Pass 600,000 premises with NGA by December 203 Leverage spectrum assets 4G mobile network in service by Sept 203 Leverage FMC; establish a unique quad play in Ireland Maintain mobile postpay trading momentum Continued focus on prepay churn Continue cost transformation journey 29

30 Business Update Trading Q3 and 9 Months YTD FY 2/3 Corporate Update Key Areas of Focus Q&A 30

31 Thank you