Sunrise Communications Group AG. Q financial results 8 November 2018

Transcription

1 Sunrise Communications Group AG Q financial results 8 November 2018

2 Agenda 1 Summary & operational update O. Swantee (CEO) 2 Financials A. Krause (CFO) 3 Conclusion O. Swantee (CEO) 4 Q & A 2

3 Summary: Q3 with organic EBITDA growth and strong customer momentum, as expected Customer growth momentum in key focus areas continued Strong growth in mobile postpaid (+7.9% YoY), internet (+9.4% YoY) and TV (+17.2%) Supported by continued B2B customer wins (Q3 includes: Canton Luzern, Edelweiss Air) Revenue up +1.9% YoY 1) ; service revenue up +1.4% with customer growth momentum more than offsetting lower ARPUs Gross profit growth of +1.4% YoY 1) ; lower run rate than in Q2 (+2.2%) due to summer roaming promotions; acceleration expected in Q4 in-line with guidance Adj. EBITDA up +1.3% 1) when excl. higher network service fees after tower disposal (incl. down -0.6%); B2B transition on-track with GP and EBITDA entering growth territory Guidance 2018 reiterated in this presentation is based on numbers excl. IFRS 15 impact, except where indicated differently; IFRS 15 impact is CHF +0.3m (CHF +0.9m) on revenue (adj. EBITDA) 1) Incl. IFRS 15: Q3 revenue +1.9%, service revenue +1.3%; GP +1.2%, adj EBITDA 0.0%, adj. EBITDA (excl. tower) +1.8% YoY 3

4 Strongest primary SIM net adds since 2012 Postpaid mobile net adds ( 000) Prepaid mobile net adds ( 000) Q3 17 Q4 17 Q1 18 Q2 18 Secondary (data) Primary Q3 17 Q4 17 Q1 18 Q2 18 Postpaid driven by primary SIMs, leading to 1.69m total subscriptions (+7.9% YoY) Primary SIMs driven by B2B, Yallo, Sunrise ONE, strong network quality, broad product offering with attractive price performance ratio, and diversified distribution channels Roaming summer promotion supported momentum, but weighted on ARPU and gross margin Secondary data SIMs supported by demand for mobile broadband and Apple Watch Prepaid with ongoing pre- to postpaid migration, leading to 677k total subscriptions Q3 positively impacted by seasonality as in previous years; focus on valuable customer in-take maintained Targeted promotions supported pre- to postpaid migration 4

5 Growing internet and TV customer base, with increasing share of fiber Internet net adds ( 000) Internet customer base continues to grow: Sunrise now has 449k internet subscriptions Converged tariff Sunrise ONE supported growth: 65k or 39% of billed 4P customer base already on Sunrise ONE (Q2: 60k or 38%) Focus on service excellence including hassle-free switching; more for more move implemented in Q3 1) Q3 17 Q4 17 Q1 18 Q2 18 TV net adds ( 000) TV with solid growth: Sunrise now has 236k TV subscriptions Supported by attractive Sunrise TV offering and improved TV sports content with Sky and Teleclub 23% YoY increase in 4P billed customer base Q3 17 Q4 17 Q1 18 Q Stable order in-take June 17 promo more successful than June 18 promo, leading to less June orders getting activated (=net add) in Q3 this year; YTD and Q3 order in-take stable YoY Extending time delay between order in-take and activation as fiber share is rising; 70% of Q3 internet net adds via fiber technology Internet & TV order in-take June Promo Market liquidity continues to be limited, specially during summer months Apr Jul Oct 5 1) Internet Start tariff moved from CHF45 (40Mbit/s) to CHF50 (50Mbit/s); Internet Comfort moved from CHF65 (100Mbit/s) to CHF70 (200Mbit/s); implemented for new (July) and existing (August) customers; customers could choose to opt-out at existing terms

6 ARPU: Mobile impacted by roaming promo continuation of landline trends Blended mobile ARPU (CHF, incl. IFRS 15 1) ) Blended mobile ARPU stable YoY, as increasing postpaid subscriptions have higher ARPU than decreasing prepaid subscriptions Postpaid decrease accelerated to CHF -1.9 YoY (Q2 CHF -0.8 YoY) mainly due to roaming promo; continued 2 nd SIM dilution Prepaid down CHF -1.1 (Q2: CHF -1.6 YoY): high value prepaid customers migrating to postpaid and shift to OTT Blended mobile ARPU: YoY YoY MTR Q Landline voice ARPU (CHF, incl. IFRS 15) Landline voice down CHF -2.7 YoY due to migration to flat rate packages and fixed to mobile/ott migration resulting in reduced voice usage 25.1 YoY Q3 17 Internet & TV ARPU (CHF, incl. IFRS 15) Internet & TV: supported by more for more move in Trends also impacted by mix effects (e.g. Sunrise ONE) and promotions Blended ARPU up CHF +1.9 YoY to CHF 50.1, driven by TV customer growth Internet ARPU: TV ARPU: Q ) ARPUs excl. IFRS 15: Blended mobile CHF 33.0; landline voice CHF 22.4; internet CHF 36.3; TV CHF 25.9

7 Again strong score in 2018 BILANZ telecom ranking Points reached (max 30) Mobile 1) Sunrise 22.5 Swisscom 20.8 Salt 19.7 Internet 1) Sunrise was once more rated the best universal provider for mobile, internet, TV and landline voice in residential and SME categories Result confirms quality strategy of Sunrise Customer survey based test with 9k participants Sunrise 23.0 Swisscom 21.0 UPC 21.0 TV 1) Sunrise 23.0 Swisscom UPC ) Residential results; Source: BILANZ

8 B2B transition on-track Major customer wins over past quarters Positive B2B momentum B2B gross profit YoY (excl. IFRS 15): B2B EBITDA YoY (excl. IFRS 15): -6% 0% 5% 9% -16% -11% -1% 5% Q4 17 Q1 Q2 Q4 17 Q1 Q2 Positive momentum confirmed by improving gross profit and EBITDA trend Focus on customer acquisition in the enterprise segment and cross selling initiatives at SMEs Q3 launch of 5G compatible Indoor Coverage as a Service (ICaaS) and Mobile Service Management (MSM) Recent investments into B2B sales force and support center; further investments expected to support momentum 8

9 Financials A. Krause (CFO) 9

10 Financial Overview excl. IFRS 15 1) Revenue (CHFm) Revenue up +1.9% due to service revenue and hardware Service revenue up +1.4% driven by mobile postpaid and internet/tv; Q3 below Q2 run rate (+2.9% YoY) mainly due to summer roaming promotions Total revenue: +1.9% Service revenue 2) : +1.4% Q3 17 Q3 17 Gross profit & adj. Opex (CHFm) Gross profit growth of +1.4% (Q2: +2.2%), driven by service revenue Gross profit: +1.4% Adj. Opex: +3.5% Adj. Opex up +3.5% due to tower disposal in Aug 2017 leading to increased network service fees; adj. Opex excl. tower up +1.5% (Q2: +1.6%) 306 Q Q Tower effect Adj. EBITDA (CHFm) Adj. EBITDA down -0.6% Adj. EBITDA up +1.3% when excluding higher network service fees after tower sale; run rate below Q2 (+2.8%) due to summer roaming promotions Adj. EBITDA: 158 Q % Tower effect Adj. EBITDA excl. Tower effect: 158 Q % ) Incl. IFRS 15: Q3 revenue +1.9%, service revenue +1.3%; GP +1.2%, adj EBITDA 0.0%, adj. EBITDA (excl. tower) +1.8% YoY 2) Service revenue is total revenue excluding hubbing and mobile hardware revenue, which are low margin

11 Service revenue growth slowed due to roaming promos Revenue bridge (CHFm) Q3 17 Revenue Δ mobile hw (low-margin) Δ hubbing (low-margin) % Mobile hardware: depends on handset innovation, launches and pricing; variations across quarters lead to revenue volatility Hubbing: international trading business which is volatile by nature Service Revenue 464 Δ mobile postpaid 7 Postpaid: Slowdown from CHF +11m YoY in Q2, as strong customer growth was partly offset by lower ARPU due to roaming promotions Δ mobile prepaid -7 Δ landline voice -2 Δ internet/tv Revenue w/o IFRS 15 Δ other -2 IFRS % 0% Prepaid: pre- to postpaid migration and shift to OTT; prepaid accounting for 5% of total revenue Landline voice: fixed to mobile substitution, migration to flat rates, and OTT; landline voice accounting for 7% of total revenue Internet/TV: strong customer growth Other: includes lower-margin areas such as volatile B2B equipment sales and wholesale Revenue IFRS

12 GP growth partly reinvested into operational momentum Gross profit Growth YoY 2.9% 2.2% 1.4% 0.2% 0.3% Q In CHFm % 80.6% Service GM 1) Growth YoY excl. tower In CHFm -0.9% Adjusted Opex 2.4% % +2.2 Tower adj. 1.6% % Q3 17 Tower effect Q3 17 Q3 17 Gross profit +1.4% in Q3, driven by service revenue growth Service gross margin 1) flat: Positive impacts of MTR and utility access deals offset by roaming promotions and revenue mix effects Adj. Opex up to CHF 154m, partly driven by tower deconsolidation, following disposal in Aug 2017, leading to higher network service fees (CHF 3m) Costs excl. tower up to CHF 151m: cost savings reinvested into operational momentum, such as commercial expenses and front line (e.g. shops, B2B staff, B2B support center) Continued commercial push expected in Q4 12 1) Service gross margin is calculated as total gross profit divided by service revenue (i.e. revenue excluding low-margin hardware and hubbing revenue)

13 efcf with different Capex seasonality, as expected Equity Free Cash Flow (CHFm) 1) Capex (CHFm) Reported EBITDA Δ NWC (35) Interest (35) Other financ. activities Capex normalization NWC normalization Capex (349) efcf normalised Tax (47) (20) efcf 101 LTM Q2 18 LTM (16) (322) (48) (35) (23) NWC LTM down due to higher handset prices and settlement of accrued roaming discounts Capex driven by different seasonality than last year; expect YoY decrease in Q4 in-line with guidance Other includes installment of Swisscom access deal Capex norm.: CHF 30m one-off in Q4 17 2) ; landline access NWC norm.: higher handset prices and settlement of accrued roaming discounts Q2 18 LTM Net debt/adj. EBITDA 2.76 Q LTM Tower disposal Leverage ratio 1) 1.97 Q3 17 Landline access Customer growth Innovation & Development Infrastructure & Δ Capex payables Strategic investments ) IFRS 15 has no impact on total efcf as the impact on EBITDA is offset by the impact on NWC; efcf chart: LTM EBITDA and NWC are based on IFRS 15 for 2018 and are without IFRS 15 for 2017 quarters; Leverage ratio: LTM EBITDA is based on IFRS 15 for 2018 and without IFRS 15 for 2017 quarters; 2017 leverage ratio is pro forma taking into account annualized network service fees related to tower disposal 2) CHF 30m one-off Capex after tower disposal as communicated on 24 May 2017

14 Conclusion O. Swantee CEO 14

15 Sunrise Investing into 3 strategic growth priorities Network quality Leading European network quality 1) Outstanding mobile network with leading dropped call ratios, 28 Mbit/s average experienced download speed, and 99.9%/95.8% LTE population/geographic coverage covering 68% YoY data growth First 5G antenna started live operations in mid 2018; second 5G network planned in Laax as per end of Nov; spectrum auction in Jan 2019 Landline access via FTTH, xdsl, and MBB Customer interface 4,8 Sunrise Support category in BILANZ ranking 2) 4,4 Swisscom 4,3 UPC 3,9 Salt No. 1 of large providers in BILANZ residential category Support Leading connect mobile shop test in DACH region 3) ; ongoing shop refurbishment and opening of new shop in Q3; pilot project with shop-in-shop and pop-up store concepts Increasing online distribution channel share and digital service transactions Innovative converged products Drive convergence Sunrise amongst first European telcos offering mobile services on new Apple and Samsung Galaxy Watch; Sunrise TV remote control now also via Apple Watch Internet tariffs with more for more in ; reduced to one ethnic mobile brand ( Lebara ); introduced 2 new Yallo high-end tariffs B2B with launch of Mobile Service Management (MSM) and 5G compatible Indoor Coverage as a Service (ICaaS); Q3 customer wins include Canton Luzern and Edelweiss Air 15 1) Source: P3 as per 24 November 2017; see FY 17 investor presentation for more details 2) Source: BILANZ ; referring to residential results; average rating across Mobile Telephony, TV, and Internet Service Provider except for Salt which is Mobile Telephony only in ranking 3) Source: Connect

16 Q3 conclusion Growing GP and customer base confirming guidance Customers Continued strong subscriber growth in mobile postpaid, internet and TV; supported by B2B FY 18 guidance reiterated Revenue Profitability Cash Flow Service Revenue growth driven by customer momentum Adj. EBITDA (excl. tower effect) up with GP growth partly reinvested into operational momentum; Q3 growth run rate below Q2 due to summer roaming promo Equity FCF as expected; reduced leverage after tower disposal gives flexibility for strategic investments Revenue: CHF 1,830-1,870m Adj. EBITDA: CHF m Capex 1) : CHF m Dividend: CHF Guidance is incl. IFRS 15 impact 2) 16 1) Includes CHF 56m upfront investments for fibre access at SFN, IWB and SIG 2) See IFRS 15 update in appendix

17 Q & A 17

18 Appendix 18

19 IFRS 15 update without and with IFRS 15 Expected FY 18 impact unchanged Revenue +1.9% 460 Gross Profit +1.4% 469 with IFRS % % At Sunrise, the 2018 impact of IFRS 15 is mainly related to the capitalization of costs to obtain a contract, resulting in a positive Opex effect The 2018 adj. EBITDA upside from IFRS 15 is expected to be mid to high-single digit (CHFm); it will be offset by a low to mid single-digit YoY headwind in 2019 and IFRS 15 reporting at Sunrise Adj. EBITDA -0.6% 0.0% in this presentation is based on numbers without IFRS 15, except where indicated differently 158 Q3 17 w/o IFRS w/o IFRS Q3 17 w/o IFRS IFRS 15 IFRS report focuses primarily on IFRS 15; complementary it provides numbers under IAS 18 in the operational and financial review 19

20 Bridge adjusted to reported EBITDA EBITDA bridge Adj. EBITDA Share based payment expenses Prior year events 0 Non-recurring / non-operating events Reported EBITDA Share-based payment provisions for multi-year compensation plans Prior year related events mainly include adjustments of provisions/accruals based on newly available information Non-recurring / non-operating events mainly represent costs for one-time expenses, e.g. advisory fees related to spectrum auction preparation, expenses related to head office relocation, and costs for early employee contract terminations 20

21 Strong BILANZ telecom ranking 2018 Mobile experience Full service experience (4P) Quality 5 Mobile 23 Support Innovation 3 Landline voice 17 Internet Flexibility Price Sunrise Swisscom Salt TV Sunrise Swisscom UPC 9k telecom users participated in independent annual survey published by magazine BILANZ Rated were quality, innovation, price, flexibility and support on a scale from 1-lowest and 6-highest Sunrise ahead of large providers in residential mobile and 4P experience 1) 21 1) Source: BILANZ

22 Income Statement P&L (CHFm) Q incl. IFRS 15 Q excl. IFRS 15 Q excl. IFRS 15 Mobile services thereof mobile postpaid thereof mobile prepaid thereof hardware Landline services thereof landline voice thereof hubbing Landline internet & TV Total revenue % YoY growth 1.9% 1.9% (3.7%) Service revenue (total excl. hubbing & hardware) % YoY growth 1.3% 1.4% (0.9%) COGS (159) (158) (154) Gross profit % YoY growth 1.2% 1.4% 0.2% % margin 66.1% 66.2% 66.6% Opex (156) (157) (152) EBITDA % YoY growth 0.2% (0.3%) (1.4%) Adjusted EBITDA % YoY growth (0.0%) (0.6%) -2.5% % margin 33.6% 33.5% 34.3% % margin (excluding hubbing revenues) 35.1% 34.9% 36.4% Depreciation and amortization (106) (106) (106) % YoY growth (0.1%) (0.1%) 6.2% Operating income Net financial items (9) (9) (18) Gain on disposal of subsidiary Income taxes (8) (8) (9) Net income Thereof (before tax impact): PPA effect (32) (32) (31) Additional information: Net income excl. gain on disposal of subsidiary EPS excl. gain on disposal of subsidiary

23 Cash Flow Statement Cash Flow (CHFm) Q incl. IFRS 15 Q excl. IFRS 15 Q excl. IFRS 15 EBITDA Change in net working capital Movement in pension and provisions Interest paid (6) (6) (7) Corporate income and withholding tax paid (20) (20) (21) Cash flow from operating activities Capex (76) (76) (50) % Capex-to-revenue 16.2% 16.2% 10.8% Sales of subsidiary Cash flow after investing activities Repayment other financing items (1) (1) (3) Proceeds/(repayments) from debt, net (4) (4) (451) Payment of dividend Total cash flow Cash and cash equivalents as of BoP Foreign currency impact on cash Cash and cash equivalents as of Sep Equity Free Cash Flow Q incl. IFRS 15 Q excl. IFRS 15 Q excl. IFRS 15 CHF million EBITDA Change in net working capital Interest paid (6) (6) (7) Corporate income and withholding tax paid (20) (20) (21) Capex (76) (76) (50) Other financing activities (1) (1) (3) Equity free cash flow

24 Leverage ratio Net debt (CHFm) September 30, 2018 June 30, 2018 December 31, 2017 September 30, 2017 Senior Secured Notes issued February Term loan B 1'410 1' Senior Secured Notes issued June Total cash-pay borrowings 1'610 1'610 1'410 1'410 Financial lease Total debt 1'615 1'617 1'419 1'421 Cash & Cash Equivalents (376) (320) (272) (270) Net debt 1'239 1'297 1'147 1'151 Net debt / pro forma adj. EBITDA 1) 2.1x 2.2x 2.0x 2.0x 1) Based on pro forma view until June , taking into account annualized network service fees related to tower disposal 24

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26 Contact Information Investor Relations Uwe Schiller Stephan Gick

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