Royal KPN NV · EURONEXT:KPN
Royal KPN NV — KPN — Q3 2020 Earnings Presentation
36 slides from Royal KPN NV's earnings presentation, Oct 28, 2020
Slide 1: KPN Q3 2020 Results
KPN Q3 2020 RESULTS 28 October 2020
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, Business Performance Update, Financial Results
1. HIGHLIGHTS 2. BUSINESS PERFORMANCE UPDATE 3. FINANCIAL RESULTS 3
Slide 4: Highlights Q3 2020
Highlights Q3 2020 Adjusted EBITDA after leases +1.3% y-on-y and FCF +7.3% y-on-y1 Continued strong progress on cost savings program in Q3 (€ 44m), € 256m since start of the program, on track to exceed cost savings target Postpaid base back to growth, strong fiber uptake fuels stabilizing broa
Slide 5: KPN reports solid Q3 results, on track to reach 2020 outlook
KPN reports solid Q3 results, on track to reach 2020 outlook Adj. revenues Adj. net ind. opex savings Adj. EBITDA AL Highlights Q3 2020 Q3 2020 YTD 2020 Q3 2020 YTD 2020 Q3 2020 YTD 2020 Adjusted revenues -5.4% y-on-y – -3.7% excl. impact divestments € 1,299 € 3,920m € 44m € 115m € 598m € 1,759m –
Slide 6: More specific 2020 outlook
More specific 2020 outlook Adjusted Capex FCF Regular DPS EBITDA AL Achievements € 1,759m € 498m € 4.3 cents € 859m YTD 2020 (2019: € 1,733m) (2019: € 442m) interim dividend ~€ 2,320m1 ~€ 750m2 Outlook 2020 (2019: € 2,287m) € 1.1bn € 13.0 cents (2019: € 718m) 2020 Outlook for adjusted EBITDA AL an
Slide 7: Business Performance Update
1. HIGHLIGHTS 2. BUSINESS PERFORMANCE UPDATE 3. FINANCIAL RESULTS 7
Slide 8: Q3 2020: highlights strategic pillars
Q3 2020: highlights strategic pillars 1. The best converged smart infrastructure 2. Focus on profitable growth segments 1A: Further expand leading NL fiber activities Focus on high-value KPN brand 73k FttH added in Q3, despite the vacation period; 326k since start Well on track with customer m
Slide 9: Ramping up fiber roll out, 73k FttH homes passed in Q3 2020
Ramping up fiber roll out, 73k FttH homes passed in Q3 2020 FttH homes passed (k) FttH homes activated (k) Avg. FttH roll out per week (households) +49 +58 +76 +73 +27 +23 +32 +42 ~5,4001 ~5,600 2,672 1,361 ~4,500 2,416 2,465 2,523 2,599 1,237 1,265 1,287 1,319 ~3,750 ~2,300 ~2,000 ~2,500 average ~1
Slide 10: Consumer fiber driving future value for KPN
Consumer fiber driving future value for KPN Growing fiber broadband base (k) Attractive fiber broadband ARPU (€) Growing fiber service revenues (€ m) -138k -5.2% 54 54 54 54 54 +70k 49 49 49 49 50 +8.6% +7.6% 1,823 1,786 1,748 1,721 1,685 270 266 261 258 256 1,048 1,062 1,074 1,091 1,118 168 171 172
Slide 11: Consumer – Delivery Q3 and YTD 2020
Consumer – Delivery Q3 and YTD 2020 Key messages Revenue trend (€ m) Highest Consumer mobile postpaid net adds since Q3 2017, strong 483 480 477 477 480 fiber take-up (+27k) fuels stabilizing broadband base Fixed 248 254 234 229 233 Fixed revenue decreased 0.6%, driven by a decline of legacy Mob
Slide 12: Consumer – KPIs Q3 2020
Consumer – KPIs Q3 2020 Converged households (k) Broadband base (k) Mobile postpaid base (k) -2 -18 +3 -4 -161 -191 -31 -41 -14 -13 -1 +9 1,404 1,402 1,384 1,387 1,383 2,871 2,848 2,823 2,812 2,804 3,602 3,588 3,575 3,574 3,583 49% 49% 49% 49% 49% Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q3 2019 Q4 2
Slide 13: Business – Delivery Q3 and YTD 2020
Business – Delivery Q3 and YTD 2020 Key messages Revenue trend (€ m) Adjusted revenue impacted by COVID-19 (lower roaming, delayed 502 476 528 500 478 461 451 451 439 439 IT projects) and customer migrations Adj. revenues Simplified Business product portfolio by 42% Adj. revenues (excl. divestme
Slide 14: Business – KPIs Q3 2020
Business – KPIs Q3 2020 SME customer migrations1 LE/Corporate customer migrations1 86% 84% 75% 82% 72% 62% 74% 53% 68% 45% Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 86% of eligible SME customers have migrated 75% of eligible LE customers have migrated – Pace
Slide 15: Wholesale – Delivery and KPIs Q3 and YTD 2020
Wholesale – Delivery and KPIs Q3 and YTD 2020 Key messages Revenue trend Solid performance in fixed (WBA/VULA); added 22k broadband 165 154 146 147 153 153 149 149 161 161 lines Adj. revenues Long-term MVNO contract renewed Adj. revenues (excl. divestments) Continuing open wholesale policy bas
Slide 16: Doing business in a sustainable manner
Doing business in a sustainable manner Milestones & ambitions UN SDG Achievements in Q3 2020 Rankings and awards in 2020 2011 SDG9: Secure future-proof infrastructure 100% green energy KPN is expanding KPN Veilig, the online security program for internet-connected devices, with more devices 2015
Slide 17: Financial Results
1. HIGHLIGHTS 2. BUSINESS PERFORMANCE UPDATE 3. FINANCIAL RESULTS 17
Slide 18: Group financials
Group financials Adj. revenues YTD 2020 Δ y-on-y (€ m) YTD 2019 YTD 2020 Δ y-on-y Δ y-on-y excl. impact divestments excl. impact M&A Service revenues 3,819 3,650 -4.4% -3.0% Consumer 2,131 -2.3% Non-service & other 274 270 -1.2% Adjusted revenues 4,093 3,920 -4.2% -2.9% Business 1,368 -5.8% Total ad
Slide 19: Strong and disciplined cost control
Strong and disciplined cost control € 256m net indirect opex savings realized since start in 20191 Net indirect opex savings (€ m) ~94 ~350 Reduction driven by ongoing digitalization and simplification 44 256 33 Confident to exceed target of ~€ 350m by the end of 2021 38 141 FY 2019 Q1 2020 Q2
Slide 20: Strong underlying cash generation
Strong underlying cash generation (€m) YTD 2019 YTD 2020 Δ y-on-y Highlights Adjusted EBITDA after leases 1,756 1,759 +0.2% As % of adj. revenues 42.9% 44.9% Lower operational free cash flow fully driven by different Capex Capex 793 859 +8.3% Operational free cash flow 963 900 -6.5% phasing As % o
Slide 21: Change in working capital
Change in working capital Effect delta Highlights Working capital (€ m) Q4 2019 YTD 2020 working capital Current assets Main effects that impacted working capital movement in YTD 2020 Inventories 54 49 +5 – Lower trade receivables following lower sales levels partly Trade and other receivables 508
Slide 22: KPN has a strong liquidity position
KPN has a strong liquidity position Liquidity considerations Liquidity schedule (€ m) Total committed liquidity of € 2.0bn 1,250 2,042 – € 792m in cash1 – € 1.25bn of committed unused credit lines (RCF) 792 Issued € 600m 12-year Eurobond with 0.875% coupon in September 2020 Cash & short term RCF
Slide 23: Robust balance sheet
Robust balance sheet Financial position Highlights Interest cover 1 7.4x 7.7x 8.7x 9.3x 9.2x Interest cover ratio was 9.2x at the end of the quarter (Q3 2019: 7.4x) Leverage ratio2 2.3x 2.3x 2.4x KPN’s leverage ratio was 2.4x (Q3 2019: 2.3x) 2.2x 2.2x Strong liquidity position at € 2.0bn €m 6,
Slide 24: Disclosure agenda going forward: committed to continuously improving
Disclosure agenda going forward: committed to continuously improving Consumer Delivered in YTD 2020 New revenue breakdown to reflect focus on convergence ROCE and segment Adjusted EBITDA after leases – Fixed-mobile service revenues – Published with H1 and FY results – Fixed-only broadband serv
Slide 25: Closing remarks
Closing remarks Adjusted EBITDA after leases +1.3% y-on-y and FCF +7.3% y-on-y1 Continued strong progress on cost savings program in Q3 (€ 44m), € 256m since start of the program, on track to exceed cost savings target Postpaid base back to growth, strong fiber uptake fuels stabilizing broadba
Slide 26: Q&A
Slide 27: Appendices
Appendices I Q3 & YTD 2019 financials corrected for impact of divestments II Tax III Debt portfolio IV Treatment of hybrid bonds V Fixed infrastructure VI Mobile infrastructure VIII Spectrum 27
Slide 28: I: Q3 2019 financials corrected for impact of divestments
I: Q3 2019 financials corrected for impact of divestments Income statement (€ m) Q3 2019 Impact Q3 2019 Q3 2020 Δ y-on-y This table shows the divestments excl. divestments excl. divestments estimated adjustments of Q3 Consumer 731 - 731 713 Business 502 -25 476 439 -7.9% 2019 results for the Wholesa
Slide 29: I: YTD 2019 financials corrected for impact of divestments
I: YTD 2019 financials corrected for impact of divestments Income statement (€ m) YTD 2019 Impact YTD 2019 YTD 2020 Δ y-on-y This table shows the divestments excl. divestments excl. divestments estimated adjustments of Consumer 2,182 - 2,182 2,131 YTD 2019 results for the Business 1,515 -62 1,452 1,
Slide 30: II: Tax Q3 and YTD 2020
II: Tax Q3 and YTD 2020 P&L Cash flow P&L Cash flow Regions (€ m) Q3 2019 Q3 2020 Q3 2019 Q3 2020 YTD 2019 YTD 2020 YTD 2019 YTD 2020 The Netherlands -42 -47 - - -103 -114 -7 -1 Other - 1 - - - 1 - - Total reported tax -42 -46 - - -103 -113 -7 -1 Of which discontinued operations - - - - - - - - Repo
Slide 31: III: Debt portfolio
III: Debt portfolio Nominal debt by type1 Nominal debt by currency1 Fixed vs. floating interest2 Debt redemption profile3 (€ bn) 1.1 8% 13% 1.0 25% 14% 0.6 0.6 0.6 0.7 21% 6% 0.5 0.5 0.4 0.5 66% 0.3 72% 75% ’21 ’22 ’23 ’24 ’25 ’26 ’27 ’28 ’29 ’30 ’32 Eurobonds EUR Fixed USD hybrid (1st call) GBP Glo
Slide 32: IV: Treatment of hybrid bonds
IV: Treatment of hybrid bonds KPN & credit rating agencies IFRS Hybrid bonds are recognized as 50% equity and 50% debt by EUR tranche is a perpetual instrument, accounted for as equity the rating agencies Coupon payments treated as equity distribution (dividend), hence not expensed through P&L,
Slide 33: V: Fixed infrastructure
V: 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 FttH – G-PON CO Passive split ~1Gbps Passive FttH – XGS-PON Up to 10Gbps CO split Fib
Slide 34: VI: Mobile infrastructure
VI: Mobile infrastructure Modernizing sites with the latest technologies, 5G ready Spectrum auctions in NL Typical current site Typical modernized site 2020: Multi band auction (KPN acquired 75MHz) 4 frequency bands 6-8 frequency bands 700MHz: 2 blocks of 2x5MHz (new spectrum) 2x2 MIMO 4x4 or high
Slide 35: VII: Spectrum in the Netherlands
VII: Spectrum in the Netherlands 700MHz VodZig KPN T-Mob 2 x 30 (Paired) 2 x 10 2 x 10 2 x 10 800MHz T-Mob VodZig KPN 2 x 30 (Paired) 2 x 10 2 x 10 2 x 10 900MHz VodZig KPN T-Mob 2 x 35 (Paired) 2 x 10 2 x 10 2 x 15 1.4GHz VodZig KPN T-Mob 1 x 40 (Unpaired) 3x5 3x5 2x5 1.8GHz KPN VodZig T-Mob 2 x 70
Slide 36: KPN Investor Relations
KPN Investor Relations ir.kpn.com