Year ending June 2017 presentation Presenter: Liliana Solomon, Chief Financial Officer Date: 18 th September 2017 1
Disclaimer This presentation has been prepared by and is the sole responsibility of Arqiva Group Limited and its subsidiaries (the Company ) and is the sole responsibility of the Company and has been prepared for information and update purposes in respect of the Company s secured debt programmes only (and has not been prepared in any other context) and does not constitute or form part of a prospectus or offering memorandum or of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities nor should it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. This presentation has not been verified and no representation or warranty, either express or implied, is given or made by any person in relation to the fairness, accuracy, completeness, correctness or reliability of the information or any opinions contained herein and no reliance whatsoever should be placed on such information or opinions. No responsibility or liability is or will be accepted by the Company as to or in relation to the accuracy, sufficiency, completeness or correctness of this document or the information forming the basis of the document or for any reliance placed on the document by any person whatsoever. No representation or warranty, expressed or implied, is or will be made as to the achievement or reasonableness of, and no reliance should be placed on, any projection, targets, estimates, forecasts and nothing in this document should be relied on as a promise or representation as to the future. The financial information set forth in this presentation has been subjected to rounding adjustments for ease of presentation. Accordingly, in certain instances, the sum of the numbers in a column or a row in tables may not conform exactly to the total figure given for that column or row. Furthermore, percentage figures included in this presentation have not been calculated on the basis of rounded figures but have been calculated on the basis of such amounts prior to rounding. This material should not be regarded by recipients as a substitute for the exercise of their own judgement and assessment. Any opinions expressed in this material are subject to change without notice and neither the Company nor any other person is under any obligation to update or keep current the information contained herein. This material, which does not purport to be comprehensive, has not been independently verified by the Company or any other party. The document does not constitute an audit or a due diligence review and should not be construed as such. Certain information and statements constitutes "forward-looking statements". These statements, which contain the words "anticipate", "believe", "intend", "estimate", "expect" and words of similar meaning, reflect the directors of the Company s beliefs and expectations and are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, among other factors: actions or decisions by governmental and regulatory bodies, or changes in the regulatory framework in which the Company operates; changes or advances in technology and availability of resources such as bandwidth spectrum, necessary to use new or existing technology, or consumer preferences regarding technology; the changing business or other market conditions and the prospectus for growth anticipated by the management of the Company; the Company s ability to realise the benefits it expects from existing and future projects and investments it is undertaking or plans to or may undertake; the Company s ability to develop, expand and maintain its telecommunications infrastructure; the Company s ability to obtain external financing or maintain sufficient capital to fund existing and future investments and projects; the Company s dependency on only a limited number of key customers for a large percentage of its revenue; and expectations as to revenues under contract. These and other factors could adversely affect the outcome and financial effects of the plans and events described herein. As a result, you are cautioned not to place undue reliance on such forward-looking statements. The Directors disclaim any obligation to update their view of such risks and uncertainties or to publicly announce the result of any revisions to the forward-looking statements made herein, except where it would be required to do so under applicable law. Past performance should not be taken as an indication or guarantee of future results. Certain industry and market data in this presentation was obtained from various external sources that the Company believes to be reliable, but the Company has not verified such data with independent sources and there can be no assurance as to the accuracy or completeness of the included information. Accordingly, the Company makes no representation as to the accuracy or completeness of that data, and such data involves risks and uncertainties and is subject to change based on various factors. No representation or warranty, expressed or implied, is or will be made and, save in the case of fraud, law or other regulation may restrict the distribution of this document in certain jurisdictions. Accordingly, recipients of this material should inform themselves about and observe all applicable legal and regulatory requirements. Any failure to comply with any applicable restrictions may constitute a violation of the laws of such other jurisdiction. This document does not constitute an offer to sell or purchase or an invitation or solicitation of an offer to subscribe for or purchase securities in any jurisdiction and is not intended to provide, and must not be taken as, the basis of any decision and should not be considered as a recommendation to acquire any securities of the Company. Nothing herein shall be taken as constituting the giving of investment advice. To the fullest extent permitted by law, neither the Company nor any of its affiliates, officers, agents, employees or advisors, accept any liability whatsoever for any loss arising from any use of, or reliance on this presentation. In the United Kingdom, this presentation is being distributed only to, and is directed only at: (i) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the Order); and/or (ii) high net worth entities falling within Article 49 of the Order, and other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as relevant persons). By attending and/or reading this presentation you agree to be bound by the foregoing limitations and conditions. 2
Contents A Executive summary B Divisional review C Detailed financials D Financing 3
Executive summary 4
Arqiva at a glance Terrestrial Broadcast Telecoms & M2M Satellite & Media Terrestrial Broadcast TV and radio broadcast and infrastructure services Digital Platforms Leading provider of Freeview channels for broadcasters Telecoms Leading independent provider of wireless sites, outdoor small cells-as-a-service and DAS M2M Gas & electricity smart meters, water smart meters and Low Power Wide Area IoT (e.g. Sigfox) Satellite & Media Leading UK teleport operator and media management provider Sole provider 1 Number 1 position Independent number 1 A market leader A market leader Revenue 2 273m Revenue 176m Revenue 297m Revenue 49m Revenue 147m EBITDA 329m EBITDA 155m EBITDA 35m Note: Revenues and EBITDA shown relate to Arqiva Broadcast Parent Limited and Arqiva Group Parent Limited for the full year to 30 June 2017. Divisional EBITDA figures exclude central corporate overhead costs of (46)m. Total EBITDA for the ABPL/AGPL is 474m including these corporate costs. The equivalent EBITDA for Arqiva Group Limited (Arqiva s top company) was 467m Source: Arqiva company information 1. Sole provider of Managed Transmission Services and Network access for digital terrestrial television. 2. Terrestrial Broadcast (TB) revenue is post-intercompany TB / Digital Platforms (DP) eliminations 5
Financial summary Strong organic growth in earnings and cashflow Key financials Full year to June 17 results Full year to June 16 results Year on year change Revenue 941m 884m 6% EBITDA 1,3 474m 428m 11% Working capital 45m (49)m n.m Capital expenditure (161)m (163)m 1% Net cashflow after working capital and 328m 203m 62% capex 2 Senior net debt 2,448m 2,464m 1% Senior leverage 3 5.10x 5.75x Summary Revenue up 6% year on year due to new DTT channel sales, 700 MHz Clearance ramp up, DAB rollout, higher Smart Metering revenues, site share and growth in 4G installation services. Prior year includes revenues from non-core business areas that were disposed of. Excluding these disposals, revenue growth from continuing operations was 9%. Reported EBITDA up 11% year on year due to growth in revenues supported by an increasingly efficient cost base Net free cashflow after working capital and capex up 62% year on year principally due to strong EBITDA growth and a positive movement in working capital driven by advance cash receipts in connection with smart metering and 700 MHz clearance Senior financial covenants improve year on year due to better EBITDA performance and improved working capital movement Senior Cashflow 4 ICR 2.53x 2.31x Notes 1. EBITDA refers to earnings before interest, tax, depreciation and amortisation and excludes exceptional costs 2. Net cashflow after working capital and capex above includes exceptional costs 3. For covenant reporting purposes senior leverage is calculated based on an EBITDA of 480m (FY 16: 428m on a covenant adjusted basis) and senior net debt as per values shown above 4. For the purposes of senior cashflow ICR cashflow is defined as EBITDA as per note 3 above less: maintenance capex, net corporation tax paid and issuer profit amount payable 6
Contracted orderbook Our orderbook stands at 5.5bn as at 30 June 2017 and drives our recurring revenue base Established relationships with bluechip customers Diverse, blue-chip customer base across all business divisions, including all the UK s PSBs and MNOs Established relationships demonstrating the importance of Arqiva s assets and infrastructure to these businesses High revenue visibility Current orderbook Jun-17 5.5bn Customer portfolio Business unit Terrestrial Broadcast Digital Platforms Customers Typical contract length TV: up to c.20 years Radio: 8 12 years 3 6 years Inflation linkage Partial Long-term contracts provide strong, stable and predictable cashflows, with a demonstrable track record of renewals Telecoms 7 10 years New additions in the year The Group added 0.3bn through new contracts and renewals during the financial year M2M c.15 years Key additions included installation services, DAB, 700 MHz Clearance and channel renewals c90% % of expected FY18 revenues contracted at the start of the year Satellite 3 5 years Partial Public Service Broadcasters 7
Highlights from the year Activity Update Delivery Corporate Terrestrial Broadcast Telecoms M2M Satellite and Media FutureFit November 2016 refinancing Credit ratings Shareholder strategic review 700 MHz spectrum clearance on schedule with a significant amount of infrastructure modification works now taking place on site. Arqiva DTT multiplex - main national multiplexes had capacity of 31 videostreams all of which are utilised Digital Audio Broadcasting (DAB) network rollout coverage at 97% and 91% for the BBC and commercial local DAB respectively. 5G trials - Europe s first ever 5G Fixed Wireless Access trials launched in London in July 2017. 4G rollout - completed circa 6,787 4G upgrades for MNOs up to 30 June 2017 since rollout began in 2014. Small cells commercial orders agreed with one MNO. Initiatives being developed to make deployment easier and cheaper to drive additional scale onto the market. WiFi business disposed of in November 2016. Smart energy metering - North - service went live in November 2016 and 92% network coverage achieved to date. Smart water metering Thames Water network is live and over 195,000 smart water meters deployed as at 30 June 2017. Anglian Water trial went live in December 2016 with over 5,600 smart water meters installed as at 30 June 2017. Internet of Things (IoT) The Group is targeting the use of its existing M2M networks in key sectors such as utility infrastructure operations, asset management optimisation and smart building enablement. Margin management - Implementation of technology improvements within existing capacity enabled the Group to create the equivalent of a new transponder s worth of capacity. In the twelve month period to 30 June 2017, FutureFit had delivered 29m of gross savings, of which 22m are recurring. Successful completion of refinancing establishing 1.1bn of new facilities and loans which extended and simplified the Group s financing arrangements. The Group's ratings remained the same throughout FY17. Subsequent to the financial year end, Fitch ratings revised their outlook on both the senior and junior notes from negative to stable. In May 2017 the Group announced that its shareholders are jointly undertaking a strategic review of their investment in Arqiva, which may lead to a transaction involving their interests in the Company. There is no certainty that the strategic review will result in any transaction. There is no update at this point and further announcements will be made as and when appropriate. 8
Key developments in our market Market developments Update and/or implications for Arqiva Data growth, M2M and IoT connections UK Government ambitions for next generation mobile technologies BBC Charter renewal in 2017 Robust demand for DTT/hybrid and DTT/broadband services DAB receiver ownership and listening share continues to increase Average monthly mobile data use and subscriptions have continued to increase. 1 Demand for data is expected to grow by 43% pa between 2016 and 2021 2. MNO networks are critical to support the forecast data explosion The UK Government continues to support smart grid initiatives Internet of Things ( IoT ) connections is forecast to grow 36% pa between 2016 and 2024 3 In March 2017, the UK Government released its 5G Strategy document which laid out the ambition and actions required by the Government to create an environment that positions the UK as a global leader in the next generation of mobile technologies and digital communications. The report further states that to deliver the high speed, high capacity capabilities of 5G will likely require a significant number of small cells to be deployed. Arqiva is fully committed and well-placed to support the UK in its efforts to become 5G ready given its recent launch of its 5G FWA trial. The BBC s new Charter commenced on 1 January 2017. It is an 11 year charter which gives the BBC the ability to make longer term decisions. No impact on DTT. Consultation on digital radio switchover date to be determined once coverage criteria are met. DTT-only households make up the largest number of homes in the UK, and rose to the 11 million mark for the first time as at December 2016 2. Freeview Play currently backed by more than 20 leading brands. The platform is the most widely adopted service by manufacturers for catch-up TV in the UK. Since launch, 1.5 million Freeview Play devices have been sold. Advertising revenues have remained robust indicating DTT remains highly relevant to advertisers Steady demand for live broadcast TV (73% 1 viewing share) and ongoing support for the PSB environment. Hybrid platforms underline popularity of DTT as a core free-to-air linear foundation to which a variety of OTT services can be added. Average weekly radio listening in the UK remained at 21 hours in 2016. 1 Overall digital listening across all platforms reached 49%. DAB continues to grow and is the biggest digital platform, accounting for 71% of all digital listening. 4 Percentage of adults owning a DAB set in the home has increased from 38% in 2011 to 57% in 2017. 1 No date has been set for analogue switch off. Arqiva continues to receive revenues for both DAB and analogue services. Sources: 1. Ofcom Communications Market Report August 2017; 2 Cisco VNI mobile forecasts 2016-2021 ; 3 Cambridge Consultants Review of latest developments in the Internet of Things; 4. BARB (as at 30 June 2017); 5. A 5G Strategy for the UK 9
Divisional review 10
Terrestrial Broadcast update Continued development of DTT platform 700 MHz delivery DAB Strategy Service excellence Reinforce DTT's long term market leading position in the UK Be at forefront of DTT proposition development including building a hybrid DTT / IP platform for a pay-lite audience base Expand HD channel selection and support introduction of new channels maximising Arqiva owned DTT Multiplex utilisation levels Manage seamless execution of 700 MHz programme and meet target of May 2020 completion Strengthen the DAB platform through network expansion and increasing channel choice Increase radio channel sales and maintain high DAB Multiplex capacity utilisation Focus on maintaining high levels of service enjoyed by all customers of our networks Operation delivery 700 MHz spectrum clearance on schedule Channel sales on DTT multiplexes DAB radio rollout progressing Arqiva continues to earn revenues and cashflows from programme delivery Programme remains on schedule Arqiva had capacity of 31 videostreams on its main multiplexes, all of which were utilised and had sold new channels on its DVB-T2 (HD enabled) multiplexes HD services also being broadcast on Freeview using Arqiva DVB-T2 multiplexes BBC UK DAB and commercial local DAB network coverage increased to 97% and 91% respectively Orderbook additions Revenue analysis 6% growth Terrestrial Broadcast orderbook stands at at 3.8bn Orderbook additions of 0.1bn in the year related to DAB, 700 MHz clearance and Digital Platform channel renewals Overall year on year growth driven by new DTT channel sales, DAB rollout, 700 MHz Clearance programme and RPI linked increases on broadcast contracts 11
Telecoms & M2M update Strategy Mobile towers Small cells and in-building DAS Smart meters and M2M business Strengthen Arqiva s position as leading independent tower provider by increasing number of sites and maintaining long term contracts with MNOs Be a leading UK provider of small cells by leveraging Arqiva street infrastructure exclusive concessions gained in prime locations and develop indoor distributed antenna systems (DAS) Grow the value of our M2M business 5G Operation delivery Small cells and DAS Smart and M2M Europe s first ever 5G FWA trials launched in London in July 2017 Additional 28GHz spectrum licence acquired from Luminet in summer 2017 Received first commercial orders for roll-out of small cells 15 year agreement made in July 2017 to deliver 4G connectivity at Bluewater Shopping centre using DAS Secured a further three London Borough concessions in Kingston Upon Thames, Lambeth and Waltham Forest Smart North service went live in November 2016 and 92% network coverage achieved to date Thames Water smart meters - network is live and over 195,000 smart water meters deployed to date Anglian Water smart meters trial went live in December 2016 with over 5,600 smart water meters installed to date Orderbook additions Revenue analysis 9% growth Telecoms & M2M orderbook stands at 1.4bn Orderbook additions of < 0.2bn in the year related to installation services, site share upgrades, smart energy metering change requests and smart water metering Year on year growth driven by installation service activities, site share upgrades and smart metering partially offset by impact of Secure Solutions business disposal 12
Satellite and Media update Strategy Efficient operations Margin improvement UKDTH growth International markets Expand media management and IP capability Continue to develop Service Excellence initiative to drive operational efficiency whilst delivering industry leading service Create new saleable capacity through improved compression Focus on maintaining high asset utilisation and higher margin services Drive incremental UK DTH growth from demand for HD channels Drive growth from provision of Managed Services across international markets using UK infrastructure Continued expansion of media management capability including video-on-demand, streaming, metadata management and other OTT services; increasingly operating off a virtualised environment which offers customers greater speed to market and flexibility and incurs lower capex for Arqiva Orderbook additions Operation delivery UK DTH growth Margin management IP and OTT Achieved growth of HD channels from CNN, BT Sports, Bloomberg and others Renewal agreement reached on more flexible terms with Eutelsat in July 2017 for high-power transponders at 28 East for provision of DTH services Exited the Hotbird satellite market, which was subject to structural oversupply, resulting in margin improvement Implementation of technology improvements within existing capacity enabled the Group to create the equivalent of a new transponder s worth of capacity Suite of new cloud based IP and OTT products launched, including remote and pop-up play-out as well as IP Streaming, by building off the capability introduced from the Capablue acquisition in 2014 Revenue analysis 2% growth Satellite and Media orderbook stands at 0.2bn Orderbook additions of < 0.1bn in the year related to numerous renewals Revenue growth was driven by new HD channel sales, a new agreement with Al Jazeera Media Network for global teleport and distribution services, and foreign exchange gains partially offset by exiting certain low margin contracts 13
Detailed financials 14
Results driven by growth in continuing operations 5% CAGR 6% CAGR (2)% CAGR 7% CAGR 4% CAGR 2% CAGR 5% CAGR 6% CAGR 11% CAGR Key highlights Revenue growth over three years has been driven by DAB rollout, Digital Platforms, and 700 MHz Clearance, installation services, site share and smart metering,. EBITDA growth over the same period has been driven by revenue growth and cost savings as a result of company wide transformation and FutureFit initiatives. Key drivers by division are as follows: Terrestrial Broadcast revenues and EBITDA continue to grow underpinned by long term TV and radio contracts, DAB rollout, Digital Platforms capacity increase and high utilisations, and progress 700 MHz clearance programme. Telecoms & M2M: o FY 17 has seen strong growth in higher revenues in site share business coupled with M2M, installation service activities and also underpinned by a stepped increase in smart metering revenues and earnings. Satellite and Media is stable and continued focus on higher margin services and cash generation Corporate costs have remained flat over the past two years whilst supporting strong revenue growth with an efficient cost base. 15
Income statement summary (1) ( m, FY-end 30 June) 2017 2016 % ABPL and AGPL (Junior and Senior) Revenue 941 884 6% Cost of sales (354) (344) (3)% Gross Profit 588 541 9% Operating expenses (114) (112) (2)% EBITDA* 474 428 11% Exceptional costs (30) (14) (117)% Depreciation (142) (128) (10)% Amortisation (13) (10) (22)% Share of results of associates and joint ventures and other income 1 0 (200)% Operating profit 291 276 5% * EBITDA refers to earnings before interest, tax, depreciation and amortisation. For covenant reporting purposes EBITDA is reported as 480m (FY 16: 428m) Key highlights Revenue 6% up year on year due to new DTT channel sales, 700 MHz Clearance ramp up, DAB rollout, higher Smart Metering revenues, site share and growth in 4G installation services. Prior year includes revenues from non-core business areas that were disposed of. Excluding these disposals, revenue growth from continuing operations was 9%. Gross profit 9% up year on year due to strong revenue growth and improvements in efficiency of service delivery EBITDA 11% up year on year due to growth in revenues supported by an increasingly efficient cost base Exceptional costs up year on year due to reorganisation costs arising from the Group s FutureFit initiative, disposals and refinancing Depreciation 10% up year on year due to increase in tangible asset base driven by capex and accelerated depreciation on certain contracts including 700 MHz Amortisation up 22% year on year due to increase in underlying intangible asset base and the accelerated amortisation of certain assets linked to the Group s IT transformation Operating profit 5% year on year due to EBITDA growth partially offset by increased exceptional costs, depreciation and amortisation charges 16
Income statement summary (2) ( m, FY-end 30 June) 2017 2016 2017 2016 ABPL (Junior) AGPL (Senior) Operating profit 291 276 291 276 Interest receivable and similar income 4 1 4 1 Net bank loan and other interest (231) (225) (174) (168) Other net interest (34) (33) (30) (29) Other gains and losses (113) (0) (113) (0) Exceptional other gains and losses (21) 14 (21) 14 Loss on ordinary activities after external interest (104) 34 (43) 95 Interest payable to parent undertakings (93) (85) (136) (129) Loss on ordinary activities before taxation (197) (50) (179) (34) Tax 0 0 0 0 Loss for the financial year (197) (50) (179) (34) ABPL key highlights Net bank loan and other interest 6m up year on year due to higher rates and phasing of new swap instruments restructured as part of November 2016 refinancing, and annual margin step-up on the Group s former bank facilities prior to refinancing Other gains and losses (non-cash) of (113)m - 104m as a result of movements in the fair value of swaps. This loss was principally due to changes in market yields and credit spreads. A further 8m loss arose from foreign exchange movements on foreign denominated debt instruments, but this is hedged in cashflow terms. These charges are entirely non-cash. Exceptional other gains and losses of (21)m included close out of swap arrangements relating to November 2016 refinancing and a loss on disposal of WiFi business in November 2016 Interest payable to parent undertakings 8m up year on year due to the additional interest on higher interest accrued and outstanding balances Accounting loss of (197)m principally due to 413m of noncash items including depreciation, amortisation, other gains and losses, interest payable to parent undertakings and other net interest charges. Excluding the non-cash charges results in an adjusted profit of 217m 17
Cashflow summary ( m, FY-end 30 June) 2017 2016 2017 2016 ABPL (Junior) AGPL (Senior) EBITDA 474 428 474 428 Exceptional costs and other (30) (13) (30) (13) Working capital 46 (49) 46 (49) Net cash inflow from operating activities 490 366 489 366 Net capital expenditure and financial investment (161) (163) (161) (163) Net cash flow after working capital and capex 328 203 328 203 Disposals 23 16 24 16 Net interest paid and financing charges (237) (231) (180) (174) Principal accretion on ILS (53) (26) (53) (26) Refinancing costs (45) - (45) - Net cash flow before financing 16 (38) 73 19 Movement in external borrowings (19) 5 (19) 5 Financing - parent undertakings - - (57) (57) (Decrease) in cash (4) (34) (3) (34) ABPL key highlights Net cash flow after working capital and capex 126m up year on year principally due to strong EBITDA growth and a positive working capital driven by advance cash receipts in connection with smart metering and 700 MHz clearance Disposals relate to proceeds in connection with WiFi business. The prior year related to payphones business Net interest paid 6m up year on year as explained for P&L movement Principal accretion on ILS 27m up year on year due to higher year on year inflation Refinancing costs of (45)m related to cashflow on close out of swaps, debt issue costs and swap option termination proceeds following the November 2016 refinancing External borrowings relate to net repayment of 19m bank facilities 18
Capex Growth capex breakdown: FY16 FY17 Smart metering energy and water 63m 61m Terrestrial engineering incl 700 MHz Clearance 10m 40m Radio 37m 12m Satellite and Media 13m 12m Telecoms 19m 3m Other smart M2M 1m 0m Net other 9m 15m Contracted and non-contracted growth capex 151m 143m Growth capex Maintenance capex Capital creditors/accruals (3)m (4)m Sales of fixed assets (6)m - Net Growth capex (as per chart) 143m 139m Note - Growth capex also includes cash sales of fixed assets and change in capital creditors as shown in the table opposite 19
Covenant reporting and guidance September 2016 certificate (projected) 30 Jun 17 30 Jun 18 September 2017 certificate (actual) September 2017 certificate (projected) EBITDA* 441m 480m 510m Senior net debt 2,440m 2,448m 2,397m Senior leverage 5.53x 5.10x 4.70x Junior leverage N/A 6.29x N/A Key highlights Senior financial covenants better than guidance for year ending 30 June 2017 principally due to a better than forecast EBITDA performance and strong cashflows driven by improved working capital movement Senior ICR 2.29x 2.53x 2.66x Junior ICR N/A 1.92x N/A Note All financials are reported as per covenant reporting definitions * EBITDA refers to earnings before interest, tax, depreciation and amortisation and is reported as per covenant reporting definitions. 20
Financing 21
Arqiva debt position 22 SENIOR As at 30 June 2017 m Maturity Structure Leverage Public Bonds (BBB/BBB) 1 400 Dec-32 Public Bonds (BBB/BBB) 1 350 Jun-35 (exp. Jun-20) Public Bonds (BBB/BBB) 1 164 Dec-37 (exp. Jun-30) USPP 1 USD tranche 2 236 Jun-25 USPP 1 GBP tranche 163 Jun-25 USPP 2 300 Jun-29 EIB Loan 190 Feb-38 (exp. Jun 24) Institutional Term Loan 180 Feb-38 (exp. Dec 23) Capex and working capital facility 86 Mar-21 Tranche 1a term loan 155 Dec-24 (exp. Jun-20) USPP 3 219 Dec-29 TOTAL DRAWN SENIOR DEBT 4 2,442 5.10x EBITDA 3 JUNIOR Junior Notes (B- / B3) 5 600 Mar-20 WBS Platform TOTAL DRAWN DEBT 3,042 6.29x EBITDA 3 Note all values are reported at their carrying value unless specified otherwise 1. Fitch / S&P 2. Sterling equivalent of US $358 in principal amount, swapped into sterling at an exchange rate of US $1.52 3. Net leverage as per the latest covenant compliance certificates published September 2017, as at 30 June 2017 4. Total drawn senior debt on this page represents gross debt. On a covenant reporting basis, gross debt is adjusted for finance leases and the deduction of total cash balances to arrive at a reported senior net debt value in the certificate of 2,448m
Inflation linked swaps (ILS) ILSs convert fixed rate liabilities into inflation linked liabilities ILSs match inflation exposure as seen in Arqiva s revenue contracts Coupon and principal amount accrete with RPI ILSs are overlaid on fixed rate bond and fixed rate PP debt Notional c. 1.3bn Maturity 2027 Fair value [1] (843m) 1.1bn notional has no mandatory break 0.2bn notional has break in 2023 Seniority Super senior to senior debt (but carries no voting or enforcement rights) Long term structural hedge no crystallisation of MTM if not terminated early 1. IFRS risk adjusted mark to market reported as at 30 June 2017 23
Interest rate swaps (IRS) Arqiva has interest rate swaps covering 1,023m of notional principal value of which all are in WBS All breaks removed following November 2016 refinancing All swaps now restructured to match underlying EIB, ITL, USPP2 and USPP3/bank term loan floating rate facilities [1] Platform Notional Maturity Underlying Debt Fair value WBS 353m 2027 USPP3/Tranche 1a (116)m WBS 180m 2024 ITL (54)m WBS 190m 2024 EIB (69)m WBS 300m 2029 USPP 2 (127)m Total 1,023m (366)m [1] 1. IFRS risk adjusted fair value reported as at 30 June 2017 Long term structural hedge no crystallisation of MTM 24
Covenant summary Financial covenant ratios and senior trigger events Ratios (maintenance tests) Forward and backward looking Historic (Jun 17) Projected (Jun 18) Trigger Threshold Consequence of Trigger Event of Default Threshold Senior Net Debt to EBITDA Ratio 5.10x 4.70x Trigger: 6.50x 7.50x (Historic test) Senior Trigger Event: Distribution lockup Senior Cashflow DSCR 2.53x 2.47x Trigger: 1.30x 1.05x (Historic test) Senior Cashflow ICR 2.53x 2.66x Trigger: 2.0x 1.55x (Historic test) Junior leverage 6.29x N/A m Maturity Facility Capex facility 250 2 March 21 Working capital facility 140 March 21 Senior liquidity facility 250 364 day (renewable) 1. As at 30 June 2017, 86m of the working capital facility was drawn. Liquidity facilities 25
Q&A 26
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