Royal KPN NV · EURONEXT:KPN
Royal KPN NV — KPN — Q2 2019 Earnings Presentation
34 slides from Royal KPN NV's earnings presentation, Jul 24, 2019
Slide 1: Q2 2019 Results
Q2 2019 RESULTS 24 July 2019
Slide 2: Safe harbor
Safe harbor Alternative performance measures and management estimates This financial report contains a number of alternative performance measures (non-GAAP figures) to provide readers with additional financial information that is regularly reviewed by management, such as EBITDA and Free Cash Flow (‘
Slide 3: Highlights Q2 2019
Highlights Q2 2019 Strong cost Brand strategy: Fiber roll-out in management Telfort integration progress Net indirect opex savings1 € 40m € 66m YTD +54k converged postpaid customers ~40k homes passed YTD +38k converged households 1 Indirect opex after leases, adjusted for the impact of restructuring
Slide 4: The best converged smart infrastructure
The best converged smart infrastructure. Focus on profitable growth segments. Acceleration of simplification and digitalization. 4
Slide 5: Update: accelerated fiber roll-out strategy
Update: accelerated fiber roll-out strategy Started accelerated Ramping up FttH Finalizing FttH roll-out roll-out capacity FttC roll-out 19 projects up and running x4 homes passed per week +180k homes passed YTD by end of 2019 Testing first XGS-PON Part of +500k households connections with customers
Slide 6: All-IP migration on track
All-IP migration on track Number of legacy lines Shutting down steadily declining legacy networks k ~775 ~195 ~400 PSTN SDH ~580 ~125 ~275 ISDN 3G Copper in fiber areas Q4 2018 Q2 2019 PSTN / ISDN Other lines1 1 Core, ASAM, Epacity 6
Slide 7: Customer experience & recognition
Customer experience & recognition Consumer NPS1 Business NPS1 Leading Business awards2 #1 Q2 2019 Q2 2019 Global Microsoft Security & Compliance 13 1 Partner of the Year 2019 award 13 -4 KPN EEN nominated best offer for SME customers2 Q2 2018 Q2 2018 1 2018 restated as result of recalibration of rel
Slide 8: Brand strategy update: Telfort integration
Brand strategy update: Telfort integration Strengthened Impact customer Simplification household acquisition relationships Postpaid customer base = FTE rationalization All Telfort shops closed Converged customer base + Broadband customer base – as of 1 May 2019 Lower IT spend ARPU mix effect + Faste
Slide 9: Consumer convergence
Consumer convergence solid performance, partially due to Telfort integration Households Postpaid SIM cards +41k converged households1 1,399k total converged households +104k 2,230k total converged SIMs converged postpaid base1 1.59 Q2 2018: 1.52 SIMs per household 48% Q2 2018: 44% converged broadban
Slide 10: Convergence offers clear benefits
Convergence offers clear benefits Market leading NPS1 Higher value per Lower mobile churn household ~75% >10% +23 +13 Consumer total Fixed-only Converged Mobile-only Converged household household household household Fixed ARPU KPN brand 10 1 Source: Kantar TNS
Slide 11: Consumer Fixed
Consumer Fixed Broadband base1 Fixed ARPU Residential revenues -24k € 46 +6.0% y-on-y +0.8% y-on-y Partly impacted by brand Price increase effective from Bundled services strategy & price adjustments 1 June 2019 Traditional voice + Digitenne 1 Corrected for migrations to and new customers of small b
Slide 12: Consumer Mobile
Consumer Mobile Growing postpaid Postpaid ARPU Mobile service base KPN brand stable q-on-q revenues +17k Q1 2019: -1k net adds KPN brand € 17 Q2 2018: € 18 € 197m Q2 2018: € 209m flat customer base all brands -5.6% y-on-y -5.8% y-on-y 12
Slide 13: Business revenue trend
Business revenue trend Adjusted revenues y-on-y growth trend Q2 2019 Revenue y-on-y trend Q2 2019 Communication Services -8.0% Mobile service revenues IoT -8.4% 11% considerably Broadband & Network Services -1.0% impacted by migrations & ‘value over volume’1 Fixed voice -17% Other -8.9% y-on-y IT Se
Slide 14: Migrations from legacy portfolio accelerating
Migrations from legacy portfolio accelerating SME customers LE customers Small business portfolio 59% SME base1 migrated 33% LE base 1 migrated 34% converged customers Q1 2019: 50% Q1 2019: 25% Q1 2019: 33% 100% mid-2020 100% in 2020 +7k net adds in Q2 2019 1 Migrated from traditional fixed voice an
Slide 15: KPN's value over volume strategy
KPN’s value over volume strategy premium, value, trustworthy, focus Customer retention Increase share of Improve customer wallet lifetime value Higher NPS Strong customer relationships Up and cross-sell services Reduced churn (e.g. cloud, security, workspace) Repricing Reduced cost to serve 15
Slide 16: Financial highlights Q2 2019
Financial highlights Q2 2019 Adjusted revenues Adjusted EBITDA Free Cash Flow after leases (excl. TEFD dividend) € 1,359m € 594m € 147m -3.1% y-on-y +3.6% y-on-y -34% y-on-y Q2 2018: € 1,402m Q2 2018: € 573m Q2 2018: € 222m 16
Slide 17: Financial performance Q2 and H1 2019 key P&L metrics
Financial performance Q2 and H1 2019 key P&L metrics €m Q2 2018 Q2 2019 Δ y-on-y H1 2018 H1 2019 Δ y-on-y Consumer 738 722 -2.1% 1,481 1,450 -2.1% Business 536 507 -5.5% 1,069 1,013 -5.2% Wholesale 155 159 2.4% 308 316 2.7% Other -27 -29 6.0% -53 -58 -9.4% Adjusted revenues1 1,402 1,359 -3.1% 2,804
Slide 18: Adjusted revenues declined y-on-y
Adjusted revenues declined y-on-y €m -3.1% 1,402 16 4 1,359 30 2 Adj. revenues Consumer Business Wholesale Other (incl. Adj. revenues Q2 2018 eliminations) Q2 2019 18
Slide 19: Solid growth Adjusted EBITDA AL
Solid growth Adjusted EBITDA AL supported by simplification and digitalization €m +3.6% -0.1% 6 594 10 24 573 24 43 Adj. EBITDA Revenues Cost of goods Personnel IT/TI Other operating Adj. EBITDA after leases & services expenses expenses1 after leases Q2 2018 Q2 2019 1 Incl. lease-related expenses 19
Slide 20: Indirect opex savings program on track
Indirect opex savings program on track € 66m net savings YTD 1 ~€ 350m target 2019 – 2021 1 1 Indirect opex after leases, adjusted for the impact of restructuring costs and incidentals 20
Slide 21: Financial performance Q2 and H1 2019 – FCF
Financial performance Q2 and H1 2019 – FCF y-on-y mainly impacted by working capital €m Q2 2018 Q2 2019 Δ y-on-y H1 2018 H1 2019 Δ y-on-y Adjusted EBITDA after leases 573 594 3.6% 1,138 1,157 1.7% Interest lease liabilities 8 7 -14% 17 15 -13% Depreciation right-of-use asset 36 35 -2.2% 74 70 -4.9%
Slide 22: FCF development in H1 2019
FCF development in H1 2019 H1 2019 €m 1,157 85 70 1,172 3 -37% y-on-y H1 2018: € 343m 165 168 7 216 531 88 Adj. Lease- Restructuring EBITDA Change in Change in Interest Taxes Capex Other1 FCF EBITDA AL related H1 2019 provisions working paid paid (excl. TEFD H1 2019 expenses capital dividend) H1 201
Slide 23: Solid financial position
Solid financial position €m 7,151 Senior bond redeemed 6,036 5,700 5,644 5,934 5,554 £ 96m 6.0% coupon1 Q2 2019 leverage ratio Q2 2018 Q1 2019 Q2 2019 2.4x Q1 2019: 2.5x Gross debt Net debt 1 Swapped to € 123m with a fixed rate of 4.58% 23
Slide 24: Outlook 2019 and 2019 – 2021 ambitions
Outlook 2019 and 2019 – 2021 ambitions organic sustainable growth Outlook 2019 2019 – 2021 ambitions Adjusted EBITDA AL Slightly growing compared with 20181 Organic growth Capex € 1.1bn Stable at € 1.1bn annually FCF Incidentally lower FCF compared with 2018 due to Three-year mid-single digit CAGR3
Slide 25: Value over volume. Lean operating model.
Value over volume. Lean operating model. 25
Slide 26: Information pack
INFORMATION PACK CSR Tax KPI overview Debt portfolio Treatment of hybrid bonds Fixed infrastructure Spectrum 26
Slide 27: Doing business in a sustainable manner
Doing business in a sustainablemanner Leading position in benchmarks Achievements in Q2 2019 Reuse & KPN and Apple started a recycle collaboration on recycling iPhones Society Pilot to give emergency vehicles green traffic lights as they rush to an emergency Reputationranking1 #1 Dutch companies Rep
Slide 28: Tax Q2 and H1 2019
Tax Q2 and H1 2019 P&L Cash flow Regions (€ m) Q2 2018 Q2 2019 H1 2018 H1 2019 Q2 2018 Q2 2019 H1 2018 H1 2019 The Netherlands -44 -37 -68 -61 -20 -8 -25 -7 Other -1 - -3 - -2 - -3 - Total reported tax -45 -37 -71 -61 -22 -8 -28 -7 Of which discontinued operations -1 - -3 - -2 - -3 - Reported tax fr
Slide 29: KPI overview
KPI overview Consumer fixed Consumer mobile Business Q2 2018 Q2 2019 Q2 2018 Q2 2019 Q2 2018 Q2 2019 Household base (k) Postpaid base (k) Customer base (k) F-M households 1,299 1,399 F-M postpaid customers 1,980 2,230 Mobile 1,865 1,811 Fixed-only households 2,200 1,933 Mobile-only postpaid customer
Slide 30: Debt portfolio
Debt portfolio Nominal debt1 Nominal debt Fixed vs. floating Bond redemption by type by currency interest3 profile € bn 1.0 0.9 1% 14% 19% 19% 0.8 0.6 0.6 0.6 0.6 11% 0.5 0.5 € 6.5bn 52% 0.4 29% 74% 81% 0.1 Eurobonds EUR Fixed ’19 ’20 ’21 ’22 ’23 ’24 ’25 ’26 ’28 ’29 ’30 ’32 2 Global bonds GBP Floati
Slide 31: Treatment of hybrid bonds
Treatment of hybrid bonds KPN & credit rating agencies IFRS Each tranche of the hybrid bonds is recognized as 50% equity and GBP and USD tranche have 60 years specified maturity, accounted for 50% debt by the rating agencies as financial liability Coupon payments treated as regular bond coupon, he
Slide 32: Fixed infrastructure
Fixed infrastructure Download Active in speed network CO VDSL2 ~50Mbps VDSL2 pair bonding CO ~100Mbps Vectoring SC ~120Mbps Bonded vectoring SC ~240Mbps Bonded VPlus ~400Mbps SC FttH – P2P ~1Gbps PoP Passive FttH – XGS / GPON Up to 10Gbps CO split Fiber Copper 32
Slide 33: Spectrum in the Netherlands
Spectrum in the Netherlands 800MHz T-Mob VodZig KPN 2*30 (Paired) 2*10 2*10 2*10 900MHz VodZig KPN T-Mob 2*35 (Paired) 2*10 2*10 2*15 1.8GHz KPN VodZig T-Mob 2*70 (Paired) 2*20 2*20 2*30 2.1GHz VodZig KPN T-Mob KPN VodZig T-Mob 2*59.4 (Paired) 2*14.6 2*14.8 2*10 2*5 2*5 2*10 2.6GHz T-Mob KPN T-Mob 1
Slide 34: Contact Information: KPN Investor Relations
Contact Information: KPN Investor Relations +31 70 44 60986 ir.kpn.com