ZAIN GROUP FINANCIAL RESULTS Q3 2017
DISCLAIMER Mobile Telecommunications Company KSCP Zain Group has prepared this presentation to the best of its abilities, however, no warranty or representation, express or implied is made as to the adequacy, correctness, completeness or accuracy of any numbers, statements, opinions, estimates, or other information contained in this presentation. Certain portions of this document contain forward-looking statements, which are based on current expectations and reasonable assumptions, we can however give no assurance they will be achieved. The information contained in this presentation is subject to change and we disclaim any obligation to update you of any such changes, particularly those pertaining to the forward-looking statements. Furthermore, it should be noted that there are a myriad potential risks, uncertainties and unforeseen factors that could cause the actual results to differ materially from the forward-looking statements made herein. Accordingly, this presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for, or otherwise acquire or dispose of, securities in any company within Zain Group. For further information about Zain Group, or the materials contained within this presentation, please direct your enquiries to our Investor Relations team via email at IR@zain.com or visit www.zain.com/en/investor-relations/ ZAIN GROUP Q3 2017 IR PRESENTATION 1
CONTENTS ZAIN GROUP OVERVIEW ZAIN OPERATIONS OVERVIEW FINANCIAL STATEMENTS
ZAIN GROUP OVERVIEW
Zain At A Glance Q3 2017 $2.5 BILLION IN REVENUES 45.3 MILLION ACTIVE CUSTOMERS MORE THAN 6,200 EMPLOYEES 1 13.7 MILLION CUSTOMERS IN IRAQ MARKET LEADER IN KUWAIT, IRAQ, REPUBLIC OF SUDAN, JORDAN & LEBANON 6,500 TB AVERAGE DAILY DATA VOLUME 4G LONG TERM EVOLUTION (LTE) NETWORK IN KUWAIT, SAUDI ARABIA, JORDAN, BAHRAIN, SUDAN & LEBANON 12.9 MILLION CUSTOMERS IN REPUBLIC OF SUDAN $1.04 BILLION IN EBITDA 41.2% EBITDA MARGIN ONE OF THE HIGHEST IN THE REGION $404 MILLION IN NET INCOME ZAIN GROUP Q3 2017 IR PRESENTATION 4
THE WORLD OF ZAIN Q3 2017 ZAIN S WORLD CATERS TO 45.3 MILLION CUSTOMERS IN 8 COUNTRIES* MOROCCO Ownership: 15.5% LEBANON Ownership: Management Contract Customers: 2.4 m Prepaid: 86% JORDAN Ownership: 96.52% Revenues: $371 m Customers: 4.2 m Prepaid: 82% Market Share: 36% SUDAN Ownership: 100% Revenues: $315 m Customers: 12.9 m Prepaid: 99% Market Share: 46% IRAQ Ownership: 76% Revenues: $811 m Customers: 13.7 m Prepaid: 99% Market Share: 40% KUWAIT Ownership: 100% Revenues: $819 m Customers: 2.5 m Prepaid: 68% Market Share: 36% BAHRAIN Ownership: 55% Revenues: $148 m Customers: 726K Prepaid: 75% * exclusive of Morocco, in which Zain has a 15.5% ownership in the mobile operator INWI SOUTH SUDAN Ownership: 100% Customers: 483K Prepaid: 98% SAUDI ARABIA Ownership: 37.05% Revenues: $1.5 b Customers: 8.3 m Prepaid: 70% ZAIN GROUP Q3 2017 IR PRESENTATION 5
GROUP FINANCIAL HIGHLIGHTS Q3 2017 CUSTOMERS (000) REVENUES (USDm) -1% -6% 45,835 45,278 911 860 Q3-16 Q3-17 Q3-16 Q3-17 EBITDA (USDm) NET INCOME (USDm) 448-23% 346 141-6% 133 Margin % EPS (Cents) 49% 40% 4 3 Q3-16 Q3-17 Q3-16 Q3-17 6
GROUP FINANCIAL HIGHLIGHTS 9M 2017 CUSTOMERS (000) REVENUES (USDm) -1% -8% 2,742 45,835 45,278 2,529 9M-16 9M-17 9M-16 9M-17 EBITDA (USDm) NET INCOME (USDm) 1,294-19% -2% 413 404 1,042 Margin % EPS (Cents) 47% 41% 11 10 9M-16 9M-17 9M-16 9M-17 7
CAPEX & CAPEX / REVENUES 797-20% -20% 635 508 21% 18% 15% 2015 2016 2017 F Capex Capex / Revenues F = Forecasted ZAIN GROUP Q3 2017 IR PRESENTATION 8
TOTAL CAPEX 9M 2017 CAPEX BREAKDOWN OPCO 9M 2017 (USDm) % OF REVENUES Bahrain 1% Kuwait 43 5% Iraq 26% Jordan 12% *Total CAPEX $274m Kuwait 16% Others 7% Republic of Sudan 38% Iraq 71 9% Sudan 105 33% KSA 203 13% Jordan 32 9% Bahrain 4 3% * Group Total Capex (excluding KSA) = USD 274 million Others 19 N/A ZAIN GROUP Q3 2017 IR PRESENTATION 9
GROUP FINANCIAL HIGHLIGHTS 9M 2017 TOTAL DEBT (USDm) NET DEBT (USDm) & NET DEBT/EBITDA -6% -7% 3,261 2,516 3,070 2,385 2,293 2,129 1.4 1.5 745 685 9M-16 9M-17 9M-16 9M-17 Long Term Short Term Net Debt Net Debt/EBITDA Net Debt = Total interest bearing debt (excluding letters of guarantee) after deducting cash and cash equivalents ZAIN GROUP Q3 2017 IR PRESENTATION 10
GROUP FINANCIAL HIGHLIGHTS 9M 2017 REVENUE CONTRIBUTION CUSTOMER CONTRIBUTION Bahrain 6% Iraq 32% Republic of Sudan 12% Group Revenues $2.5B Jordan 15% Bahrain 2% KSA 18% Iraq 30% Group Customers 45.3m Kuwait 6% Lebanon 5% Others 3% Kuwait 32% S.Sudan 1% Jordan 9% Republic of Sudan 29% ZAIN GROUP Q3 2017 IR PRESENTATION 11
ZAIN DIVIDENDS DIVIDEND PAYOUT RATIO DIVIDEND YIELD (%) 77% 89% 80% 76% 87% 7% 8% 8% 8% 7% 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 DIVIDEND PER SHARE (Fils) 50 50 685 690 CASH DIVIDEND (USDm) 40 30 35 533 388 447 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 ZAIN GROUP Q3 2017 IR PRESENTATION 12
ZAIN OPERATIONS OVERVIEW
ZAIN KUWAIT MARKET SHARE FINANCIALS (USDm) 1983 Year of launch 100% Ownership 170% Penetration Zain 36% 255 270 2.5 m Customers $25 ARPU 40% EBITDA Margin VIVA 31% OOREEDOO Viva 31% 31% ZAIN 38% Ooredoo 33% 129 114 71 78 4G Technology 2,200 Number of sites 100% Coverage Q3-16 Q3-17 803 819 Healthy Q3 performance: Revenues are up 6% and Net Income up 10% Customer base stood at 2.5 million Strong concentration on cost optimization initiatives Data revenues (excluding SMS & VAS) formed 32% of total revenues 393 329 215 206 9M-16 9M-17 Revenues EBITDA Net Income ZAIN GROUP Q3 2017 IR PRESENTATION 14
ZAIN IRAQ MARKET SHARE FINANCIALS (USDm) 2003 Year of acquisition 76% Ownership 87% Penetration Zain 40% 268 288 13.7 m Customers $7 ARPU 35% EBITDA Margin VIVA 31% OOREEDOO 31% Asiacell 38% ZAIN 38% Korek 22% 90 102 5 13 3G Technology 4,448 Number of sites 99% Coverage Q3-16 Q3-17 804 811 Solid Q3 performance, supported by strong acquisition in the Northern region: Revenues, EBITDA and Net Income are up by8%, 13% and 174% respectively Customer base jumped by 16% to reach 13.7 million Strong focus on cost optimization 284 281 29 24 9M-16 9M-17 Revenues EBITDA Net Income ZAIN GROUP Q3 2017 IR PRESENTATION 15
ZAIN SUDAN MARKET SHARE FINANCIALS (SDGm) 2006 Year of acquisition 100% Ownership 55% Penetration 1,815 Zain 46% 1,273 12.9 m Customers $3 ARPU 39% EBITDA Margin VIVA 31% OOREEDOO 31% MTN 26% ZAIN 38% Sudani 28% 527 165 771 291 4G Technology 2,519 Number of sites 90% Coverage Q3-16 Q3-17 Impressive YoY growth in local currency SDG terms Revenues 40%, EBITDA 30% and Net income 29% Customers grew by 4%, to reach 12.9 million 61% currency devaluation effected the financial results in USD terms Significant cost optimization savings Data revenues (excluding SMS & VAS) grew 63% YoY, and formed 15% of total revenues 5,188 3,718 2,047 1,572 646 836 9M-16 9M-17 Revenues EBITDA Net Income ZAIN GROUP Q3 2017 IR PRESENTATION 16
ZAIN KSA FINANCIALS (USDm) 2008 Year of acquisition 37% Ownership 114% Penetration 451 494 8.3 m Customers $18 ARPU 33% EBITDA Margin VIVA 31% OOREEDOO 31% ZAIN 38% 130 168 1 4G Technology 8,216 Number of sites 96% Coverage (71) Q3-16 Q3-17 The operator achieved its 3 rd consecutive quarterly net profit: YoY 9% growth in revenues YoY 48% growth in EBITDA Reporting first-ever 9 Months net profit of USD 15 million License extension impact also contributed to the net income Strong cost optimization program in place Data revenues (excluding SMS & VAS) grew by 42% YoY, and formed 50% of total revenues 1,407 1,536 348 514 15 (225) 9M-16 9M-17 Revenues EBITDA Net Income ZAIN GROUP Q3 2017 IR PRESENTATION 17
ZAIN JORDAN MARKET SHARE FINANCIALS (USDm) 2003 Year of launch 96.52% Ownership 135% Penetration 126 130 Zain 36% 4.2 m Customers $9 ARPU 47% EBITDA Margin VIVA 31% OOREEDOO Umniah 31% 32% ZAIN 38% Orange 32% 64 29 59 24 4G Technology 2,808 Number of sites 100% Coverage Q3-16 Q3-17 363 371 Higher data and interconnect revenues Customer base reached 4.2 million, up by 1% YoY Data revenues (excluding SMS & VAS) grew by 14% YoY, and formed 37% of total revenues 179 174 79 72 9M-16 9M-17 Revenues EBITDA Net Income ZAIN GROUP Q3 2017 IR PRESENTATION 18
ZAIN BAHRAIN FINANCIALS (USDm) 2003 Year of launch 55% Ownership 226% Penetration 46 48 726K Customers $15 ARPU 30% EBITDA Margin VIVA 31% OOREEDOO 31% ZAIN 38% 17 15 3 4 4G Technology 504 Number of sites 100% Coverage 132 Q3-16 Q3-17 148 YOY Q3 2017 revenues and net income increased by 3% and 12% respectively Data revenues (excluding SMS & VAS) grew by 29% YoY, and formed 44% of total revenues 49 45 8 7 9M-16 9M-17 Revenues EBITDA Net Income ZAIN GROUP Q3 2017 IR PRESENTATION 19
TOUCH Management Contract MARKET SHARE 2004 Year of acquisition MC Ownership 83% Penetration touch 54% 2.4 m 1,315 99% VIVA 31% ZAIN 38% Customers Number of sites Coverage OOREEDOO 31% Alfa 46% 4G Technology Zain operates in Lebanon under a management contract since June 2004, when it was rebranded to mtc-touch, and subsequently to touch ZAIN GROUP Q3 2017 IR PRESENTATION 20
FINANCIAL STATEMENTS
BALANCE SHEET Assets Current assets Unaudited Audited Unaudited 30-Sep-17 31-Dec-16 30-Sep-16 KD 000 Cash and bank balances 283,932 208,752 291,445 Trade and other receivables 491,095 450,386 450,952 Inventories 24,536 16,418 15,316 Investment securities at fair value through profit or loss 989 964 985 Non-current assets held for sale 7,656 - - Non-current assets 808,208 676,520 758,698 Investment securities available for sale 17,110 22,134 22,851 Investments in associates and joint ventures 189,877 190,396 191,408 Due from associates 407,265 381,661 375,043 Other assets 15,081 15,598 15,386 Property and equipment 747,589 798,156 909,389 Intangible assets and goodwill 935,096 1,007,237 1,124,539 2,312,018 2,415,182 2,638,616 Total Assets 3,120,226 3,091,702 3,397,314 Liabilities and Equity Current liabilities Unaudited Audited Unaudited 30-Sep-17 31-Dec-16 30-Sep-16 KD 000 Trade and other payables 555,432 570,920 698,757 Due to banks 206,608 219,154 224,400 Non-current liabilities 762,040 790,074 923,157 Due to banks 719,576 830,193 757,213 Other non-current liabilities 29,230 48,953 39,212 Equity Attributable to the Company s shareholders 748,806 879,146 796,425 Share capital 432,706 432,706 432,706 Share premium 1,707,164 1,707,164 1,707,164 Treasury shares - (567,834) (567,834) Legal reserve 216,353 216,353 216,353 Foreign currency translation reserve (1,152,322) (1,100,094) (786,452) Treasury shares reserve - 1,967 1,967 Investment fair valuation reserve 4,237 3,484 982 Hedge reserve (247) (120) (553) Retained earnings 244,552 571,503 516,503 1,452,443 1,265,129 1,520,836 Non-controlling interests 156,937 157,353 156,896 Total equity 1,609,380 1,422,482 1,677,732 Total Liabilities and Equity 3,120,226 3,091,702 3,397,314 ZAIN GROUP Q3 2017 IR PRESENTATION 22
INCOME STATEMENT Nine months ended 30-Sep 2017 2016 KD 000 Revenue 767,431 826,410 Cost of sales (214,147) (200,733) Gross profit 553,284 625,677 Nine months ended 30-Sep 2017 2016 Earnings per share Fils Basic 31 32 Operating and administrative expenses (230,577) (232,787) Depreciation and amortization (141,849) (164,966) Provision for impairment trade and other receivables (6,571) (2,976) Operating profit 174,287 224,948 Interest income 18,057 4,965 Investment income 502 (1,741) Share of results of associates and joint ventures 1,067 (26,578) Other (expense)/income (5,765) 2,021 Finance costs (30,596) (23,911) Provision for impairment loss on property and equipment (21,292) - Loss from currency revaluation (18,500) (29,021) Net monetary gain 25,506 - Profit before contribution to KFAS, NLST, ZAKAT, 143,266 150,683 income taxes and Board of Directors' remuneration Contribution to Kuwait foundation for Advancement of Sciences (881) (744) National Labour Support Tax and Zakat (4,904) (5,615) Income tax expenses (11,558) (15,798) Board of Directors remuneration (206) (206) Profit for the period 125,717 128,320 Attributable to: Shareholders of the Company 122,450 124,474 Non-controlling interests 3,267 3,846 125,717 128,320 ZAIN GROUP Q3 2017 IR PRESENTATION 23
CASH FLOW STATEMENT Cash flows from operating activities Nine months ended 30-Sep 2017 2016 KD 000 Profit for the period before income tax 137,275 144,118 Adjustments for: Depreciation and amortization 141,849 164,966 Interest income (18,057) (4,965) Investment income (502) 1,741 Share of loss of associates and joint ventures (1,067) 26,578 Provision for impairment loss on property and equipment 21,292 - Finance costs 30,596 23,911 Loss on currency revaluation 18,500 29,021 Net monetary gain (25,506) - Operating profit before working capital changes 304,380 385,370 Increase in trade and other receivables (81,837) (42,586) (Increase)/decrease in inventories (8,400) 12,001 Decrease in trade and other payables (12,707) (94,342) Cash generated from operations 201,436 260,443 Paid to Kuwait Foundation for Advancement of Sciences (250) (500) National Labour Support Tax and Zakat paid (7,427) (4,441) Income tax paid (11,838) (18,316) Net cash from operating activities 181,921 237,186 Cash flows from investing activities Deposits maturing after three months and bank balances blocked Nine months ended 30-Sep 2017 2016 KD 000 (6,382) 2,913 Net cash outflow on acquisition of non-controlling interests - (26) Purchase of investments (4,129) (670) Proceeds from sale of investments 9,360 3,009 Acquisition of property and equipment (net) (82,254) (118,355) Acquisition of intangible assets (net) (11,357) (35,186) Interest received 18,613 4,214 Dividend received 246 703 Net cash used in investing activities (75,903) (143,398) Cash flows from financing activities Proceeds from bank borrowings 228,986 138,907 Repayment of bank borrowings (340,424) (115,648) Loan to an associate (10,178) (26,954) Dividends paid to Company s shareholders (136,324) (117,020) Dividends paid to minority shareholders of subsidiaries (1,718) (15,059) Finance costs paid (29,251) (18,045) Proceeds from sale of treasury shares 255,172 - Net cash used in financing activities (33,737) (153,819) Net increase/(decrease) in cash and cash equivalents 72,281 (60,031) Effect of foreign currency translation (3,483) (5,410) Cash and cash equivalents at beginning of period 177,150 228,266 Cash and cash equivalents at end of period 245,948 162,825 ZAIN GROUP Q3 2017 IR PRESENTATION 24
THANK YOU FINANCIAL STATEMENTS Website : zain.com Email : IR@zain.com Note: Mobile Penetration rates are sourced from WCIS as of Sep-17