Royal KPN NV · EURONEXT:KPN
Royal KPN NV — KPN — Investor Presentation (April 2019)
46 slides from Royal KPN NV's investor presentation, April 2019
Slide 1: Investor Presentation Q1 2019
INVESTOR PRESENTATION Q1 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: Strategy 2019-2021 Capital Markets Day
STRATEGY 2019-2021 Summary presentation Capital Markets Day 28 November 2018 3
Slide 4: Value over volume. Lean operating model.
Value over volume. Lean operating model. 4
Slide 5: The ecosystem is evolving: integrated converged propositions
The ecosystem is evolving: integrated converged propositions Household Business Cloud TV Security IoT ONE STOP SHOP 5
Slide 6: The ecosystem is evolving: key enabling technologies
The ecosystem is evolving: key enabling technologies Fiber 4G/5G Virtualization & Cloud HYBRID NETWORKS & PLATFORMS 6
Slide 7: The Dutch telecom market: mature and dynamic
The Dutch telecom market: mature and dynamic Leading Highly regulated One of the most broadband market competitive performance in markets Europe Average 4G throughput of 42Mbps Fixed access regulation Revenue growth: Europe: +0.3% >98% of population has at least 100Mbps capable broadband Netherlands
Slide 8: The best converged smart infrastructure
The best converged smart infrastructure. Focus on profitable growth segments. Acceleration of simplification and digitalization. 8
Slide 9: The best converged smart infrastructure
The best converged smart infrastructure digital highway of the Netherlands Fiber roll-out Full mobile network Moving to All-IP acceleration modernization +1 million 100% 100% FttH households by end 2021 by end 2021 5G ready by end 2021 Stable Capex envelope: substantial shift in mix 9
Slide 10: Focus on profitable growth segments
Focus on profitable growth segments Consumer Business SME base LE & Corporate +300k 100% Value over Converged households by end 2021 on KPN EEN¹ by mid 2020 volume 70% Stabilized Postpaid base end-to-end Adjusted EBITDA² converged in 2021 mid 2020 1 Traditional fixed voice and legacy broadband 2 End
Slide 11: Acceleration of simplification & digitalization
Acceleration of simplification & digitalization From 20 to 2 From 5 core Simplified converged IT networks to 1 end-to-end stacks organization ~€ 350 million 2019-2021 new net opex savings program¹ 1 Indirect opex adjusted for the impact of restructuring costs and incidentals 11
Slide 12: Strategic focus 2019-2021
STRATEGIC FOCUS 2019-2021 Network, Consumer Business Operations & IT The best converged smart Best household access Converged simplified infrastructure. and customer experience. product portfolio. Enable innovative Growing converged base Transformation of technologies. and product penetration. opera
Slide 13: Organic Adj. EBITDA growth
Convergence & value focus driving revenue stabilization. New multi-year sustainable opex reduction supports organic Adj. EBITDA growth. Stable Capex envelope: substantial shift in the mix. Organic sustainable Adj. EBITDA and FCF growth contributing to progressive 13 dividend and deleveraging.
Slide 14: Convergence & value focus driving revenue stabilization
Convergence & value focus driving revenue stabilization Consumer Business Wholesale Grow base and Accelerate growth in Grow WBA/VULA value of converged convergence Maintain disciplined households Selective growth in IT strategy Value over volume 14
Slide 15: Acceleration of simplification opex reductions
Acceleration of simplification opex Digitalization & virtualization reductions 1 Rationalization and simplification of 2 End-to-end digitalization and automation front-end 3 All-IP network and virtualization. portfolio. and back-end. 4 IT landscape rationalization. 5 Organizational effectiveness. 15
Slide 16: Stable Capex envelope €1.1bn per annum in 2019-2021
Stable Capex envelope € 1.1bn per annum in 2019-2021 Substantial shift in the mix enabling higher investments in access 16
Slide 17: Committed to solid financial profile
Committed to solid financial profile Solid investment Optimized balance Medium-term grade credit profile sheet position leverage Interest payments Net debt / EBITDA Baa3 / Stable ~55% BBB- / Positive <2.5x BBB / Stable 2014 2018 17
Slide 18: Premium. Value. Focus. Lean.
Premium. Innovative Value. operating ORGANIC model. SUSTAINABLE Focus. commercial GROWTH approach. Lean. 18
Slide 19: Q4 & FY 2018 Results
Q4 & FY 2018 RESULTS 30 January 2019 19
Slide 20: Highlights FY 2018
Highlights FY 2018 Successful Delivered on Strategy update Simplification full-year outlook 2019 – 2021 Adjusted EBITDA ~€ 225m +0.8% y-on-y ORGANIC run-rate Capex and opex FY 2018: € 2,303m SUSTAINABLE savings1 GROWTH FCF (excl. TEFD dividend) +10% y-on-y 1 Realized: end Q4 2018 vs. end Q4 2016 FY
Slide 21: The best converged smart infrastructure
The best converged smart infrastructure. Focus on profitable growth segments. Acceleration of simplification and digitalization. 21
Slide 22: Preparing for accelerated fiber roll-out
Preparing for accelerated fiber roll-out Strong starting Increase access +1m FttH point investments households ~30% of households Preparations for 2.36m FttH households +1m FttH households in 2019 – 2021 >40% 5G trials and mobile of households network modernization by end 2021 FttH YE 2018 in progre
Slide 23: Further strengthening household relationships growing converged base
Further strengthening household relationships growing converged base Converged SIMs per Converged households household postpaid base All brands 46% 1 (FY 2018) 1.54 57% FY 2017: 1.51 70% KPN brand 1 As % of broadband customers 23
Slide 24: Continued focus on value in Consumer in Q4 2018
Continued focus on value in Consumer in Q4 2018 and improving customer experience Postpaid ARPU in line Broadband base1 Best-in-class NPS2 +25 converged Q4 2017: € 18 Q4 2017: +13 1 Corrected for migrations to and new customers of small business proposition (7k) launched in Q4 2017 2 Source: Kantar
Slide 25: Progress made in Business, but still work to do
Progress made in Business, but still work to do Adjusted revenues Gradually improving 1 y-on-y growth trend organic revenue trend Q4 2018 FY 2018 Communication Services -7.6% -7.9% Mobile service revenues -6.3% -6.3% -4.3% IoT -10% 3.0% -5.9% Broadband & Network Services -3.6% -2.7% -7.3% -8.6% Fixe
Slide 26: Transformation of operating platform
Transformation of operating platform Migrating customers1 Improving Business 2 from legacy services customer satisfaction (NPS) Q4 2018 0 -1 ~41% Q4 2017 SME base 1 Traditional fixed voice and legacy broadband 2 Source: Kantar TNS 26
Slide 27: Financial highlights FY 2018
Financial highlights FY 2018 delivered on full-year outlook Adjusted revenues Adjusted EBITDA Free cash flow (excl. TEFD dividend) € 5,639m € 2,303m € 804m -1.9% y-on-y +0.8% y-on-y +10% y-on-y FY 2017: € 5,749m FY 2017: € 2,285m FY 2017: € 730m 27
Slide 28: Financial performance Q4 and FY 2018 key P&L metrics
Financial performance Q4 and FY 2018 key P&L metrics €m Q4 2018 Q4 2017 Δ y-on-y FY 2018 FY 2017 Δ y-on-y Consumer 758 766 -1.1% 2,992 3,044 -1.7% Business 549 562 -2.2% 2,143 2,183 -1.9% Wholesale 157 159 -1.5% 618 672 -8.0% Other -27 -35 -22% -115 -150 -24% Adjusted revenues1 1,436 1,452 -1.1% 5,6
Slide 29: Adjusted revenues declined by 1.1% in Q4 2018
Adjusted revenues declined by 1.1% in Q4 2018 €m -1.1% FY 2018: € 5,639m 1,452 9 12 2 7 1,436 -1.9% FY 2017: € 5,749m y-on-y Adj. revenues Consumer Business Wholesale Other (incl. Adj. revenues Q4 2017 eliminations) Q4 2018 29
Slide 30: Adjusted EBITDA supported by Simplification
Adjusted EBITDA supported by Simplification €m +1.0% +1.0% FY 2018: € 2,303m 9 572 567 3 11 +0.8% FY 2017: € 2,285m y-on-y 16 2 Adj. EBITDA Revenues Cost of Personnel IT/TI Other Adj. EBITDA Q4 2017 goods & expenses operating Q4 2018 services expenses 30
Slide 31: 2nd wave Simplification yielded €225m savings
2nd wave Simplification yielded € 225m savings the final year will roll-over in new program 2nd wave Simplification program realized New net opex reduction program run-rate Capex and opex savings savings target2 ~€ 225m end Q4 2018 1 ~€ 350m 2019 – 2021 1 Realized: end Q4 2018 vs. end Q4 2016 2 Indi
Slide 32: Financial performance Q4 and FY 2018 key cash flow metrics
Financial performance Q4 and FY 2018 key cash flow metrics €m Q4 2018 Q4 2017 Δ y-on-y FY 2018 FY 2017 Δ y-on-y EBITDA 530 531 -0.2% 2,186 2,169 0.8% Interest paid / received -70 -73 -4.0% -310 -351 -12% Tax paid / received 16 - n.m. -9 -13 -33% Change in provisions 19 25 -21% 53 54 -1.5% Change in
Slide 33: Free cash flow growth in FY 2018
Free cash flow growth in FY 2018 €m 2,186 53 7 310 9 804 1,106 3 FY 2018 Reported Change in Change in Interest Taxes Capex Other FCF +10% FY 2017: € 730m y-on-y EBITDA provisions working paid paid (excl. TEFD FY 2018 capital dividend) FY 2018 33
Slide 34: Solid financial position
Solid financial position € bn 7.2 6.6 6.6 6.0 6.2 5.9 Q4 2018 net debt / EBITDA 2.5x Q3 2018: 2.7x Q4 2017 Q3 2018 Q4 2018 Gross debt1 Net debt 1 Gross debt defined as the nominal value of interest bearing financial liabilities, excluding derivatives and related collateral, representing the net repa
Slide 35: Restructuring accretive benefits back-end loaded
Restructuring accretive benefits back-end loaded 1 Restructuring 3 recorded in P&L Restructuring accretive to financials 2 Restructuring cash out Impact on FCF T=0 T= 6 months T= >12 months 35
Slide 36: Outlook 2019 and 2019-2021 ambitions
Outlook 2019 and 2019 – 2021 ambitions organic sustainable growth Outlook 2019 2019 – 2021 ambitions Adjusted EBITDA In line with 2018 Organic growth Capex € 1.1bn Stable at € 1.1bn annually Front-end loaded restructuring charges leading Three-year mid-single digit CAGR1 FCF (excl. TEFD dividend) to
Slide 37: Information pack
INFORMATION PACK CSR Dutch mobile service revenues Tax KPI overview Debt portfolio Treatment of hybrid bonds Fixed infrastructure TEFD stake - accounting treatment 37
Slide 38: Doing business in a sustainable manner
Doing business in a sustainablemanner Leading position in benchmarks Achievements in Q4 2018 Expanded circular manifesto with suppliers to achieve a near to 100% circular company by 2025 of annual spend on network 70% equipment and hardware for the provision of services to customers covered by agree
Slide 39: Dutch mobile service revenues
Dutch mobile service revenues €m Q4 2018 Q4 2017 Δ y-on-y FY 2018 FY 2017 Δ y-on-y Consumer 206 211 -2.2% 833 887 -6.1% 1 Business 134 144 -6.7% 549 581 -5.6% Other2 43 45 -4.4% 162 159 1.9% Total The Netherlands 383 399 -4.1% 1,544 1,627 -5.1% 1 Includes M2M service revenues 2 Includes amongst othe
Slide 40: Tax FY 2018
Tax FY 2018 P&L Cash flow Regions (€ m) FY 2018 FY 2017 FY 2018 FY 2017 The Netherlands -233 -119 -9 -13 Other -5 -17 -4 1 Total reported tax -238 -136 -13 -12 Of which discontinued operations -5 -17 -4 1 Reported tax from continuing operations -233 -119 -9 -13 Effective tax rate continuing operatio
Slide 41: KPI overview
KPI overview Consumer fixed Consumer mobile Business Q4 2018 Q4 2017 Q4 2018 Q4 2017 Q4 2018 Q4 2017 Household base (k) Postpaid base (k) Customer base (k) F-M households 1,343 1,253 F-M postpaid customers 2,065 1,886 Mobile 1,855 1,882 Fixed-only households 2,093 2,323 Mobile-only postpaid customer
Slide 42: 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% 13% 17% 17% 0.8 0.6 0.6 0.6 0.6 11% 0.6 0.5 0.5 € 7.2bn 55% 0.4 28% 75% 83% 0.1 ’19 ’20 ’21 ’22 ’23 ’24 ’25 ’26 ’28 ’29 ’30 ’32 Eurobonds EUR Fixed Global bonds GBP 2 Fl
Slide 43: 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 50% debt by the rating agencies for as financial liability Coupon payments treated as regular bond coupon, he
Slide 44: 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 SC ~400Mbps NG.PON SC >1Gbps FttH ODF ~1Gbps Fiber Copper 44
Slide 45: Telefónica Deutschland stake accounting treatment
Telefónica Deutschland stake accounting treatment Balance sheet P&L Cash flow statement Tax Stake included as financial asset1 Dividends received reported as Dividends received reported as Dividends, not qualifying as specific finance income within net finance finance income within net finance capit
Slide 46: Contact Information: KPN Investor Relations
Contact Information: KPN Investor Relations +31 70 44 60986 [email protected] ir.kpn.com