ZAIN GROUP FINANCIAL RESULTS - … currency devaluation effected the financial results in USD terms...

Q3 2017

ZAIN GROUP FINANCIALRESULTS

ZAIN GROUP Q3 2017 IR PRESENTATION 1

❖ 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 [email protected] or visit www.zain.com/en/investor-relations/

DISCLAIMER

mailto:[email protected]

http://www.zain.com/en/investor-relations/

ZAIN GROUP OVERVIEW

ZAIN OPERATIONS OVERVIEW

FINANCIAL STATEMENTS

CONTENTS

ZAIN GROUP OVERVIEW


45.3MILLION

ACTIVE CUSTOMERS

13.7MILLION

CUSTOMERSIN IRAQ

4GLONG TERM

EVOLUTION(LTE) NETWORK

IN KUWAIT, SAUDI ARABIA,JORDAN, BAHRAIN, SUDAN &

LEBANON

MORE THAN

6,200EMPLOYEES

MARKETLEADER

IN KUWAIT, IRAQ,REPUBLIC OF SUDAN, JORDAN & LEBANON

$1.04BILLION

IN EBITDA

12.9MILLION

CUSTOMERSIN REPUBLICOF SUDAN

$2.5BILLION

IN REVENUES

6,500 TBAVERAGE

DAILY DATA VOLUME

1

$404MILLION

IN NETINCOME

41.2%EBITDA MARGINONE OF THE

HIGHEST IN THE REGION

Zain At A GlanceQ3 2017

IRAQOwnership: 76% Revenues: $811 m Customers: 13.7 mPrepaid: 99%

Market Share: 40%

KUWAITOwnership: 100%

Revenues: $819 mCustomers: 2.5 mPrepaid: 68%

Market Share: 36%

BAHRAINOwnership: 55% Revenues: $148 m Customers: 726K Prepaid: 75%

SAUDI ARABIAOwnership: 37.05% Revenues: $1.5 bCustomers: 8.3 mPrepaid: 70%

MOROCCOOwnership: 15.5%

LEBANONOwnership: Management Contract Customers: 2.4 mPrepaid: 86%

JORDANOwnership: 96.52%

Revenues: $371 m

Customers: 4.2 mPrepaid: 82%

Market Share: 36%

SUDANOwnership: 100% Revenues: $315 m Customers: 12.9 mPrepaid: 99%

Market Share: 46%

SOUTH SUDANOwnership: 100%Customers: 483KPrepaid: 98%

* exclusive of Morocco, in which Zain

has a 15.5% ownership in the mobile

operator “INWI”

THE WORLD OF ZAINQ3 2017


ZAIN’S WORLD CATERS TO 45.3 MILLION CUSTOMERS IN 8 COUNTRIES*

141133

Q3-16 Q3-17

448

346

Q3-16 Q3-17

911860

Q3-16 Q3-17

GROUP FINANCIAL HIGHLIGHTSQ3 2017

CUSTOMERS (000)

49% 40% 4 3

REVENUES (USDm)

EBITDA (USDm) NET INCOME (USDm)

45,835 45,278

Q3-16 Q3-17

-1% -6%

-23%

Margin %

-6%

EPS (Cents)

6

413 404

9M-16 9M-17

1,294

1,042

9M-16 9M-17

2,7422,529

9M-16 9M-17

GROUP FINANCIAL HIGHLIGHTS9M 2017

CUSTOMERS (000)

47% 41% 11 10

REVENUES (USDm)

EBITDA (USDm) NET INCOME (USDm)

45,835 45,278

9M-16 9M-17

-1% -8%

-19%

Margin %

-2%

EPS (Cents)

7

797

635

508

21%

18%15%

2015 2016 2017 F

Capex Capex / Revenues


CAPEX & CAPEX / REVENUES

F = Forecasted

-20% -20%

Republic of Sudan

38%

Jordan12%

Iraq26%

Bahrain1%

Kuwait16% Others

7%

CAPEX BREAKDOWN

* Group Total Capex (excluding KSA) = USD 274 million

TOTAL CAPEX9M 2017

*Total CAPEX

$274m

Kuwait 43 5%

Iraq 71 9%

Sudan 105 33%

KSA 203 13%

Jordan 32 9%

Bahrain 4 3%

Others 19 N/A

OPCO9M 2017(USDm)

% OF REVENUES


2,516 2,385

745 685

9M-16 9M-17

Long Term Short Term


2,2932,129

1.41.5

9M-16 9M-17

Net Debt Net Debt/EBITDA

Net Debt = Total interest bearing debt (excluding letters of guarantee) after deducting cash and cash equivalents


TOTAL DEBT (USDm) NET DEBT (USDm) & NET DEBT/EBITDA

3,0703,261

-6% -7%

Kuwait6%

Republic of Sudan29%

Jordan9%

S.Sudan1%

KSA18%

Bahrain2% Iraq

30%

Lebanon5%

Republic of Sudan12%

Jordan15%

Kuwait32%

Others3%

Iraq32%

Bahrain6%


Group Customers

45.3m

REVENUE CONTRIBUTION CUSTOMER CONTRIBUTION

Group Revenues

$2.5B


77%

89%

80%

76%

87%

2012 2013 2014 2015 2016

7%

8% 8% 8%7%

2012 2013 2014 2015 2016

50 50

40

3035

2012 2013 2014 2015 2016

685 690

533

388447

2012 2013 2014 2015 2016


ZAIN DIVIDENDS

DIVIDEND PAYOUT RATIO DIVIDEND YIELD (%)

DIVIDEND PER SHARE (Fils) CASH DIVIDEND (USDm)

ZAIN OPERATIONS OVERVIEW


$25ARPU

170%Penetration

1983Year of launch

2.5 mCustomers

100%Ownership

▪ 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

ZAIN38%

OOREEDOO31%

VIVA31%

4GTechnology

100%Coverage

2,200Number of sites

255270

129114

71 78

Q3-16 Q3-17

FINANCIALS (USDm)

Zain36%

Ooredoo33%

Viva31%

MARKET SHARE

ZAIN KUWAIT

40%EBITDA Margin

803 819

393329

215 206

9M-16 9M-17

Revenues EBITDA Net Income


$7ARPU

87%Penetration

2003Year of acquisition

13.7 mCustomers

76%Ownership

ZAIN38%

OOREEDOO31%

VIVA31%

3GTechnology

99%Coverage


268288

90 102

5 13

Q3-16 Q3-17

FINANCIALS (USDm)

Zain40%

Korek 22%Asiacell

38%

MARKET SHARE

ZAIN IRAQ

35%EBITDA Margin

▪ 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

804 811

284 281

29 24

9M-16 9M-17



$3ARPU

55%Penetration

12.9 mCustomers

100%Ownership

ZAIN38%

OOREEDOO31%

VIVA31%

4GTechnology

90%Coverage


1,273

1,815

527

771

165291

Q3-16 Q3-17

FINANCIALS (SDGm)

Zain46%

Sudani28%

MTN26%

MARKET SHARE

ZAIN SUDAN

39%EBITDA Margin


▪ 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

3,718

5,188

1,5722,047

646 836

9M-16 9M-17



$18ARPU

114%Penetration

8.3 mCustomers

37%Ownership

ZAIN38%

OOREEDOO31%

VIVA31%

4GTechnology

96%Coverage


451494

130168

(71)

1

Q3-16 Q3-17

FINANCIALS (USDm)

ZAIN KSA

33%EBITDA Margin

▪ The operator achieved its 3rd 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


1,4071,536

348514

(225)

15

9M-16 9M-17



$9ARPU

135%Penetration

2003Year of launch

4.2 mCustomers

96.52%Ownership

ZAIN38%

OOREEDOO31%

VIVA31%

4GTechnology

100%Coverage


126 130

64 59

29 24

Q3-16 Q3-17

FINANCIALS (USDm)

Zain36%

Orange32%

Umniah32%

MARKET SHARE

ZAIN JORDAN

47%EBITDA Margin

▪ Higher data and interconnect revenues

▪ Customer base reached 4.2 million, up by 1% YoY


363 371

179 174

79 72

9M-16 9M-17



$15ARPU

226%Penetration

2003Year of launch

726KCustomers

55%Ownership

ZAIN38%

OOREEDOO31%

VIVA31%

4GTechnology

100%Coverage

504Number of sites

46 48

17 15

3 4

Q3-16 Q3-17

FINANCIALS (USDm)

ZAIN BAHRAIN

30%EBITDA Margin

▪ YOY Q3 2017 revenues and net income increased by 3% and 12% respectively


132148

49 45

8 7

9M-16 9M-17



83%Penetration


2.4 mCustomers

MCOwnership

ZAIN38%

OOREEDOO31%

VIVA31%

4GTechnology

99%Coverage


touch54%

Alfa46%

MARKET SHARE

TOUCHManagement Contract

▪ Zain operates in Lebanon under a management contract since June 2004, when it was rebranded to mtc-touch, and subsequently to “touch”


BALANCE SHEET

Unaudited Audited Unaudited

30-Sep-17 31-Dec-16 30-Sep-16

KD ‘000

Assets

Current assets

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 loss989 964 985

Non-current assets held for sale 7,656 - -

808,208 676,520 758,698

Non-current assets

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

Unaudited Audited Unaudited

30-Sep-17 31-Dec-16 30-Sep-16

KD ‘000

Liabilities and Equity

Current liabilities

Trade and other payables 555,432 570,920 698,757

Due to banks 206,608 219,154 224,400

762,040 790,074 923,157

Non-current liabilities

Due to banks 719,576 830,193 757,213

Other non-current liabilities 29,230 48,953 39,212

748,806 879,146 796,425

Equity

Attributable to the Company’s

shareholders

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

Nine months ended

30-Sep

2017 2016

Earnings per share Fils

Basic 31 32

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

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



CASH FLOW STATEMENT

Nine months ended

30-Sep

2017 2016

KD’000

Cash flows from operating activities

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

Nine months ended

30-Sep

2017 2016

KD’000

Cash flows from investing activities

Deposits maturing after three months and bank balances

blocked(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


Website : zain.com

Email : [email protected]

Note: Mobile Penetration rates are sourced from WCIS as of Sep-17

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ZAIN GROUP FINANCIAL RESULTS - … currency devaluation effected the financial results in USD terms...

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