VEON Reports 4Q20 Results
VEON Ltd. (VEON) reported its Q4 2020 results, revealing a 1.4% YoY revenue growth in local currency, despite an 11.3% YoY decline in reported revenue due to currency fluctuations. EBITDA for the quarter increased by 0.8% YoY in local currency, with significant growth from Ukraine and Kazakhstan. The company invested USD 674 million in operational capex, focusing on 4G network expansion, which raised its 4G user base to 80 million. However, the overall profit decreased by 27.6% YoY to USD 35 million. No dividend will be paid for FY2020, while guidance for FY2021 anticipates modest revenue growth.
- Q4 2020 revenue growth of 1.4% YoY in local currency.
- EBITDA increased by 0.8% YoY in local currency, driven by Ukraine and Kazakhstan.
- 4G user base expanded by 20 million YoY to 80 million.
- Successful execution of USD 1.25 billion senior unsecured notes due 2027.
- Strengthened balance sheet with average debt cost reduced to 5.9%.
- Reported revenue decreased by 11.3% YoY, primarily due to currency movements.
- Overall profit down 27.6% YoY to USD 35 million.
- Loss of mobile customers due to churn and roaming restrictions, particularly in Russia.
AMSTERDAM, Feb. 18, 2021 /PRNewswire/ -- VEON Ltd. (VEON) announces results for the fourth quarter ended 31 Dec 2020:
2020 HIGHLIGHTS:
- VEON's recovery continued as growth on a local currency basis returned in the fourth quarter, amidst unprecedented challenges
- Group performance and cost structure were improved by streamlining HQ, empowering local operations and enhancing governance
- VEON executed on a record network rollout, driving growth in 4G users of
34% YoY, (+20 million). Data revenues grew by15.0% YoY in local currency - Portfolio optimization remained a focus, as shown by our exit from Armenia. Further opportunities to unlock value are being explored
2020 saw the global telecoms industry facing unprecedented challenges, as we battled the COVID pandemic with the associated lockdowns and faced a material slowdown in economies. During this time, VEON stepped-up support to our over 200 million customers, addressing their changing demands associated with the new normal - During the last year, the group concluded a major transformation from a centralized entity to a structure with fully empowered country operations governed by the local operating boards. This has enabled us to further strengthen the governance and expedite the decision-making processes across all local business lines
- The Group delivered FY 2020 results in line with guidance, with full-year revenue of USD 7,980 million (down
1.6% YoY in local currency) and EBITDA Adj. of USD 3,453 million (down2.1% YoY in local currency). Capex intensity of23.7% was within guidance range and Group Net Debt/EBITDA of 2.3x (post IFRS) is in line with the Group's medium-term target of 2.4x - 4Q20 Group revenue returned to growth in local currency terms, rising by
1.4% YoY. Encouragingly, almost all operations saw improved YoY trends in the quarter compared to 3Q20, demonstrating resilience to COVID-19 restrictions across our markets. Reported revenue decreased by11.3% YoY mainly due to currency movements - Over the course of the year we have seen a new leadership team led by Alexander Torbakhov being established in Beeline Russia. Supported by the newly formed local board of directors, this team has been executing on the operational turnaround. Beeline Russia recorded steady improvement in local currency revenue trends throughout the second half of the year, with an encouragingly positive YoY revenue trend in December (+
3.6% ) - The Group EBITDA for 4Q20 increased by
0.8% YoY in local currency terms, an encouraging improvement led in particular by the strong double-digit EBITDA growth from Ukraine and Kazakhstan. Reported Group EBITDA was down11.6% YoY due to adverse currency movements during the period - We successfully implemented our investment plans, with total operational capex of USD 1,889 million, supporting the expansion of our 4G customer. The combined 4G population coverage of our subsidiaries reached
73% with an increase of 19 pp over the year. This strong growth in 4G subscribers will be instrumental in driving both the continued growth in the core business and in enabling our digital services - Driven by targeted network investments and other customer care measures the Group's 4G user base increased by 20 million YoY and 5 million QoQ, bringing the total 4G user base to 80 million. The Group recorded a QoQ increase in its total subscribers, which grew by 1.7 million in 4Q20 to 213.5 million
- Mobile data revenues for the year were up by
15.0% YoY in local currency, driven by the growth in 4G users with correspondingly higher ARPUs. 4G subscriber penetration was at38% at year-end and enhancing this over the next few years will be a key tailwind for the Group, driving further growth in data revenues - VEON's digital businesses continued to expand their customer reach. JazzCash closed the quarter with 12.2 million monthly active users (+
67% YoY), Toffee TV in Bangladesh reached 2.3 million monthly active users from launch in November 2019 and Beeline TV had 2.7 million monthly active users (+33% YoY) in 4Q20. We believe that digital opportunities will be key enablers of medium-term growth - The Group's balance sheet was strengthened throughout the year, with USD 3.8 billion in multi-currency debt financing activities which increased the proportion of local currency funding. The average cost of debt was reduced by 1.5 p.p. from
7.4% to5.9% , and the average debt maturity was extended by 13 months from 2.4 to 3.5 years, compared to December 2019
Our co-Chief Executive Officers commented on 2020 results
Kaan Terzioğlu:
"Customers are at the heart of our organization as we work hard on improving their overall experience. This starts from our network investments and continues through the entire value chain, as we redesign our offers, execute on customer appreciation programs, broaden our digital portfolio and reorganize our distribution network.
Providing seamless customer experience across all dimensions remains the priority of our operating companies. A good example is Russia, where the new leadership team delivered on improving network quality with record rollout, improved the accessibility of our products, and grew our range of digital services resulting in a steady improvement in both subscriber and revenue trends."
Sergi Herrero:
"This was a year in which we made further progress in building out our digital platforms across the three verticals of fintech, adtech and entertainment. We continue to see immense opportunity for the digital business across our various operations and this will remain a key driver of the long-term growth prospects for our Group.
In Pakistan we have again led the market, reaching record revenue in 4Q20. In Ukraine, we delivered solid results, building on the best 4G network. In Kazakhstan, we posted
KEY FIGURES
- 4Q20 Revenue: USD 1,998 million, -
11.3% YoY on a reported basis due to currency movements; back to growth +1.4% YoY in local currency, with solid growth in Ukraine, Kazakhstan, Pakistan, Bangladesh revenues and improving trends in Russia - 4Q20 EBITDA: USD 826 million, -
11.6% YoY on a reported basis due to currency movements; back to growth +0.8% YoY in local currency as increase in Ukraine, Kazakhstan and Bangladesh EBITDA, as well as cost optimization at HQ, - 4Q20 Operational Capex: USD 674 million, with full-year capex intensity of
23.7% , in line with our investment plans - Solid capital structure in 4Q20: leverage level at 2.0x excluding lease liabilities, 2.3x including lease liabilities; total cash and undrawn committed credit lines at USD 3.2 billion; average cost of debt of
5.9% and improved average debt maturity of 3.5 years - 4Q20 profit for the period: USD 35 million, down
27.6% YoY, mainly due to currency movements
Note: in the above table EBITDA Adjusted for 2019 excludes special compensation of USD 38 million and other operating income of USD 350 million (for further discussion of adjustments made for one-off and non-recurring items, see "Non-recurring items that affect year-on-year comparisons." on page 3)
KEY RECENT DEVELOPMENTS
- USD 1.25 billion
3.375% notes due 2027 issued under the Group's Global Medium-Term Note (MTN) program in November 2020 - Early redemption of USD 600 million
3.95% Senior notes due June 2021 completed in December 2020 - VEON's subsidiaries in Ukraine and Kazakhstan signed bilateral long-term loan agreements in local currencies worth c.USD 170 million
- Leonid Boguslavsky appointed as director of VEON's Board of Directors
- Beeline Russia completed 4G coverage of all Moscow metro stations with expanded 4G coverage across Moscow
- The Group will not be paying a dividend for FY 2020, in line with guidance
- FY 2021 guidance of low to mid-single-digit revenue and EBITDA growth, capex intensity of 22
-24%
CONTENTS
KEY RECENT DEVELOPMENTS...............................................................4
GROUP PERFORMANCE...........................................................................5
COUNTRY PERFORMANCES....................................................................8
CONFERENCE CALL INFORMATION......................................................14
ATTACHMENTS.........................................................................................16
PRESENTATION OF FINANCIAL RESULTS
VEON's results presented in this earnings release are based on IFRS unless otherwise stated and have not been audited.
Certain amounts and percentages that appear in this earnings release have been subject to rounding adjustments. As a result, certain numerical figures shown as totals, including those in tables, may not be an exact arithmetic aggregation of the figures that precede or follow them.
All comparisons are on a year on year (YoY) basis unless otherwise stated.
The non-IFRS measures disclosed in the document, i.e. EBITDA, EBITDA margin, EBITDA Adjusted and EBITDA Adjusted margin, Net Debt, Equity Free Cash Flow (after licenses), Operational Capital Expenditures, Capex Intensity, local currency year on year change, ARPU are being defined in Appendix A.
The non-IFRS measures disclosed in the document, i.e. EBITDA, EBITDA Adjusted, Net Debt, Equity Free Cash Flow (after licenses), Operational Capital Expenditures, local currency year on year change, are reconciled to the comparable IFRS measures in Attachment C.
NON-RECURRING ITEMS THAT AFFECT YEAR-ON-YEAR COMPARISONS FOR REVENUE AND EBITDA
- In 1Q19, VEON recorded a one-off vendor payment to the Company of USD 350 million, which was accounted for as other income and is reflected in EBITDA.
- 2Q19 revenue and EBITDA were positively impacted by USD 38 million received in relation to the termination of a network sharing agreement in Kazakhstan between our subsidiary KaR-Tel LLP and Kcell Joint Stock Company ("Kcell") following Kazakhtelecom JSC's acquisition of 75 percent of Kcell's shares. This was accounted in revenue and is reflected in EBITDA.
- On 29 October 2020, VEON announced the sale of CJSC "VEON Armenia", VEON's operating subsidiary in Armenia. Armenia results were deconsolidated from VEON Group numbers starting from 4Q20.
Local currency year-on-year trends for 4Q20 and 2020 disclosed in this earnings release exclude the impact of foreign currency movements (see full definition in Attachment A) and also exclude non-recurring items listed above.
KEY RECENT DEVELOPMENTS
USD 1.25 billion
On 25 November 2020, VEON Holdings B.V. ("VEON Holdings", a subsidiary of VEON Ltd.), issued USD 1.25 billion
In addition, on 17 December 2020, VEON Holdings completed an early redemption of all of its outstanding USD 600 million
VEON's subsidiaries in Ukraine and Kazakhstan signed bilateral long-term loan agreements in local currencies worth approximately USD 170 million
On 24 December 2020, VEON announced that its operating company in Ukraine, Kyivstar, had signed three bilateral unsecured loan agreements with Raiffeisen Bank, Alfa-Bank and OTP Bank for an aggregate amount of UAH 4.1 billion (approximately USD 145 million). The loan agreement with Raiffeisen has a 5-year term, and the loan agreements with Alfa-Bank and OTP have 3-year terms, respectively. It also announced its operating company in Kazakhstan, KaR-Tel, had signed a bilateral unsecured loan agreement with Forte Bank for KZT 10 billion (approximately USD 25 million), which has a 3-year term.
Leonid Boguslavsky appointed as director of the VEON Board of Directors
On 15 January 2021, VEON announced the appointment of Leonid Boguslavsky to the Group's Board of Directors. Mr. Boguslavsky joins following the departure Mr. de Beer, who stepped down in December 2020.
Beeline Russia completed coverage of all Moscow metro stations with 4G and expanded 4G coverage in Moscow
In December 2020, VEON announced that Beeline Russia achieved
No final dividend declared by the VEON for FY2020
The VEON Group will not be paying a dividend for FY2020, in line with previous guidance.
FY 2021 guidance
VEON announces FY 2021 financial guidance anticipating low to mid-single-digit local currency YoY growth in both Group revenue and EBITDA, Capex Intensity of 22
GROUP PERFORMANCE
4Q20 saw the group return to growth on a local currency basis despite the continued impact of the COVID-19 pandemic on our operations as second infection waves affected a number of our markets and caused lockdowns to be selectively reintroduced. However, the adaptations we have made to our business operations, including the greater use of digital channels to engage with our customers, helped the Group, underscoring the resilience of our operating companies to the restrictions that remain in place.
All of our countries are still facing travel restrictions, which negatively impact roaming revenues and led to the loss of migrant customers from our subscriber base during the quarter, particularly in Russia. Demand for our data services remained strong, enabling us to continue to grow our data revenues at a double-digit pace.
Reported total revenue decreased by
Russia reported YoY revenues in 4Q20 of -
Ukraine and Kazakhstan recorded double-digit revenue YoY local currency growth in 4Q20. Pakistan recorded good YoY growth, strengthening its market leadership. Bangladesh showed positive YoY revenue growth in local currency and while Algeria's revenue declined YoY due to price competition, it continued to perform well within a contracting market.
Group EBITDA decreased by
Group corporate costs reduced significantly YoY by USD 64 million to USD 41 million in 4Q20 as a result of the new operating model that has been implemented across the Group, resulting in a lean and more streamlined HQ.
For the table with performance by country see page 9, where "Other" includes the results of Kyrgyzstan, Georgia and Armenia (included in FY 2019 numbers and 9M 2020).
INCOME STATEMENT & CAPITAL EXPENDITURES
Note: in the above table non-recurring items include compensation of USD 38 million and other operating income of USD 350 million, both recorded in 2019 (for further discussion of adjustments made for one-off and non-recurring items, see "Non-recurring items that affect year-on-year comparisons." on page 3)
For discussion on EBITDA performance please refer to the "Group performance" section.
Depreciation, amortization, impairments and other charges were broadly stable YoY in 4Q20. Depreciation expenses decreased YoY due to the devaluation of local currencies against the US dollar, which was partially offset by a one-off net loss recorded as a result of the sale of our Armenia operations. VEON sold its Armenia operations on 29 October 2020 to Team LLC for an amount of USD 51 million resulting in a net loss of USD 77 million at the Group level, driven by the negative accumulated translation reserve in equity that had to be recognized on the income statement upon disposal. In 4Q20 VEON has recorded a reversal of USD 7 million on fixed assets.
Financial income and expenses decreased YoY from negative USD 213 million in 4Q19 to negative USD 112 million in 4Q20, as a result of one-off income as VEON updated the fair value of its put option liability in Pakistan. This followed the completion of the independent valuation process triggered by the exercise of the put option by the Dhabi Group in September 2020. This process has determined a fair value of USD 272.5 million, resulting in a gain of USD 59 million. In addition, financial expenses were reduced by our financing activities during 2020, which decreased our average cost of debt by 1.5p.p.
Income tax expense decreased by
The group recorded profit for the period of USD 35 million, a decrease of
Operational Capex was USD 674 million in 4Q20, up from the USD 579 million recorded in 4Q19, due mainly to VEON's focus on its 4G network investment program. Capex intensity over the last twelve months (FY2020) was
FINANCIAL POSITION & CASH FLOW
Note: Certain comparative amounts have been reclassified to conform to the current period presentation
Gross debt increased in 4Q20 compared to 3Q20 as a result of the third drawdown under the Group's MTN Program of USD 1.25 billion
Net debt (excluding lease liabilities) increased QoQ in 4Q20 to USD 6,108 million due to foreign exchange movements, appreciation of RUB versus USD in 4Q20 versus 3Q20. As a result, the Group's net debt (excl. lease liabilities) to LTM EBITDA ratio was 2.0x in 4Q20.
Net cash from operating activities declined in 4Q20 against the previous year mainly due to negative foreign exchange headwinds in EBITDA that offset positive operational dynamics, as well as lower interest expenses and a decline in taxes paid.
Net cash flow used in investing activities was USD 500 million in 4Q20, broadly stable YoY. Investment activities in 4Q20 were related to the Group's investment in high-speed data networks and the acceleration of a network deployment program in Russia in particular.
Net cash from financing activities was USD 590 million in 4Q20, up from negative USD 171 million in 4Q19, primarily as a result of movements in the gross debt as described above and lease payments (principal amount).
COUNTRY PERFORMANCE
- Russia
- Pakistan
- Ukraine
- Kazakhstan
- Uzbekistan, Algeria and Bangladesh
Key figures by countries
RUSSIA
2020 was a year in which Beeline Russia made considerable network investments. The key focus of the Beeline team was stabilising the business' operating performance and improving our customer experience, including 4G and digital services. We anticipate further improvements in operational KPIs including network performance metrics and subscriber trends, in the first half of 2021 with positive YoY growth in total revenue for Russia during the period.
Total revenue trends continued to improve, with Russia recording only a
Fixed-service revenue continued to show strong positive performance, growing by
Business customers remained a strong focus, with B2B revenue increasing by
Beeline's total mobile customer base declined by
Beeline TV monthly active users increased to 2.7 million in 4Q20 (
Beeline continues to focus its distribution through online channels with a focus on self-registration products. The monthly active users of the self-care application MyBeeline increased by
EBITDA decreased by
Capex excluding licenses and leases (operational capex) increased by
UKRAINE
Kyivstar, Ukraine's market-leading telecoms operator, recorded double-digit growth in both revenue and EBITDA in 2020, driven by a continued focus on 4G connectivity and digitalizing solutions for its customers. We anticipate that Kyivstar will continue to deliver double-digit revenue growth in 2021.
Total revenue for Kyivstar showed double-digit growth for the second quarter in a row, achieving a full recovery after lockdown measures were implemented in the spring of 2020. In 4Q20, revenue was up
B2B revenues increased by
Kyivstar's total mobile customer base showed a YoY decline due to the decline of second SIM cards in the market and lower gross additions during lockdown when the strict measures resulted in the partial closure of Kyivstar stores. In 4Q20, Kyivstar mobile customer base demonstrated growth compared to 3Q20, which was supported by the strong growth in the 4G segment with users up by 0.5 million (+
COVID-19 lockdown measures have accelerated digital adoption. In 4Q20, the number of MyKyivstar self-care users was at 2.9 million, up
EBITDA increased by
Capex excluding licenses and leases (operational capex) increased by
1.4G users disclosed in the 3Q20 Earnings Release were restated due to technical error and as a result the number of 3Q20 4G users in Ukraine was 8.8 million
PAKISTAN
Jazz strengthened its leading position in the market in 4Q20 and delivered record revenues, maintaining its strategic focus on expanding digital services to drive further growth in what is one of our most exciting growth markets.
Total revenue grew by
Additional users contributed to an almost
Our leading digital financial services business in Pakistan, JazzCash, experienced another strong quarter. The State Bank of Pakistan's temporary removal of fees on money transfers impacted JazzCash's total revenues, which declined by
Jazz's self-care app, Jazz World, continued to enjoy strong levels of customer adoption. Its monthly active user base grew by
EBITDA decreased by
Capex excluding licenses and leases (operational capex) was PKR 12.3 billion in 4Q20, resulting in capex intensity of
The ex-Warid license renewal was due in May 2019. Pursuant to the directions from Islamabad High Court, the Pakistan Telecommunication Authority ("PTA") issued a license renewal decision on 22 July 2019 requiring payment of USD 39.5 million per MHz for 900 MHz spectrum and USD 29.5 million per MHz for 1800 MHz spectrum, equating to an aggregate price of approximately USD 450 million (excluding advance tax of
In 2019 and 2020 Pakistan revenue and EBITDA were impacted by changes in tax and service charges related to the Supreme Court's "suo moto order" in April 2019 and our subsequent discussions with the PTA. Following a hearing on 25 June 2020, the PTA issued a decision dated on 8 October 2020 directing Jazz to refund within 30 days the full amount of service charges levied and collected from 24 April to 12 July 2019. Jazz appealed the PTA's decision to the Islamabad High Court and on 6 November 2020 the High Court restrained recovery of the impugned amounts. The next hearing date before High Court is yet to be fixed. For further background, on the "suo moto order" and the subsequent discussions with the PTA, please see our 3Q20 earnings release dated 29 October 2020.
KAZAKHSTAN
Beeline Kazakhstan was the fastest-growing business in VEON's portfolio in 4Q20, recording a revenue increase of close to
Total revenues grew by
Demand for Beeline's digital services remained strong throughout 4Q20. Beeline TV saw its monthly active user base (MAU) double YoY due to increased sales in fixed business and integration of TV offers into mobile bundles. Beeline's MyBeeline self-care app doubled MAUs YoY, reaching 1.9 million. Beeline's dedicated digital operator and mobile OTT services provider 'Izi' also saw further growth in its customer base, which had risen to 45,000 users by the end of 4Q20. Elsewhere, Beeline continues to connect new agents to the company's mobile financial services platform. As a result, the number of wallet users grew by
Despite the strong growth in Beeline's 4G customers, total customers fell by
Fixed-line service revenues demonstrated strong growth of
EBITDA rose by
Capex excluding licenses and leases (operational capex) was KZT 20.1 billion and capex intensity was
UZBEKISTAN
In Uzbekistan, COVID-19 restrictions continued to have an impact on the business and pricing pressure persisted. As a result, the customer base and revenue declined by
Further improvement to our high-speed data networks continues to be the priority for Beeline Uzbekistan, as increasing mobile data penetration is the key long-term growth driver for us in the Uzbekistan market.
ALGERIA
In Algeria, COVID-19 pandemic has seen a resurgence in 4Q20 with new curfew measures implemented in November and December 2020. This resulted in lower customer mobility which further impacted the market, while competition remained strong. Djezzy maintained its segmented approach to stay competitive in a challenging environment, notably repositioning itself towards the Algerian youth with a dedicated digital-centric platform. The
BANGLADESH
Banglalink delivered solid results in 4Q20 with YoY revenue and EBITDA growth for the second consecutive quarter despite pandemic situation.
Banglalink's ARPU rose
The Bangladesh tax authority introduced several changes to the local tax regime in June 2020. These include supplementary duty on mobile usage, which increased from
CONFERENCE CALL INFORMATION
On 18 February 2021, VEON will host a conference call by senior management at 14:00 CET (13:00 GMT), which will be made available through following dial-in numbers. The call and slide presentation may be accessed at http://www.veon.com.
14:00 CET investor and analyst conference call
Netherlands dial-in number:
+31 (0) 207 157 566
Confirmation ID: 4087516
US dial-in number:
+1 646 787 12 26
Confirmation ID: 4087516
UK and International dial-in number:
+44 (0) 203 0095709
Confirmation ID: 4087516
The conference call replay and the slide presentation webcast will be available for 12 months after the end of the event at the same link as the live webcast.
The slide presentation will also be available for download from VEON's website.
CONTACT INFORMATION
INVESTOR RELATIONS
Nik Kershaw
ir@veon.com
Tel: +31 20 79 77 200
DISCLAIMER
This press release contains "forward-looking statements", as the phrase is defined in Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. These forward-looking statements may be identified by words such as "may," "might," "will," "could," "would," "should," "expect," "plan," "anticipate," "intend," "seek," "believe," "estimate," "predict," "potential," "continue," "contemplate," "possible" and other similar words. Forward-looking statements include statements relating to, among other things, VEON's plans to implement its strategic priorities, including operating model and development plans, among others; anticipated performance and guidance for 2021, including VEON's ability to sufficient cash flow; VEON's assessment of the impact of the COVID-19 pandemic on its current and future operations and financial condition; future market developments and trends; operational and network development and network investment, including expectations regarding the roll-out and benefits of 3G/4G/LTE networks, as applicable; spectrum acquisitions and renewals; the effect of the acquisition of additional spectrum on customer experience; VEON's ability to realize the acquisition and disposition of any of its businesses and assets and to execute its strategic transactions in the timeframes anticipated, or at all; VEON's ability to realize financial improvements, including an expected reduction of net pro-forma leverage ratio following the successful completion of certain dispositions and acquisitions; our dividends; and VEON's ability to realize its targets and commercial initiatives in its various countries of operation. The forward-looking statements included in this press release are based on management's best assessment of VEON's strategic and financial position and of future market conditions, trends and other potential developments. These discussions involve risks and uncertainties. The actual outcome may differ materially from these statements as a result of further unanticipated developments related to the COVID-19 pandemic, such as the effect on consumer spending, that negatively affected VEON's operations and financial condition; demand for and market acceptance of VEON's products and services; our plans regarding our dividend payments and policies, as well as our ability to receive dividends, distributions, loans, transfers or other payments or guarantees from our subsidiaries; continued volatility in the economies in VEON's markets; including adverse macroeconomic developments caused by recent volatility in oil prices in the wake of COVID-19; unforeseen developments from competition; governmental regulation of the telecommunications industries; general political uncertainties in VEON's markets; government investigations or other regulatory actions; litigation or disputes with third parties or other negative developments regarding such parties; the impact of export controls and laws affecting trade and investments on our and important third-party suppliers' ability to procure goods, software or technology necessary for the services we provide to our customers; risks associated with data protection or cyber security, other risks beyond the parties' control or a failure to meet expectations regarding various strategic priorities, the effect of foreign currency fluctuations, increased competition in the markets in which VEON operates and the effect of consumer taxes on the purchasing activities of consumers of VEON's services. Certain other factors that could cause actual results to differ materially from those discussed in any forward-looking statements include the risk factors described in VEON's Annual Report on Form 20-F for the year ended December 31, 2019 filed with the U.S. Securities and Exchange Commission (the "SEC") and other public filings made by VEON with the SEC. Other unknown or unpredictable factors also could harm our future results. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Under no circumstances should the inclusion of such forward-looking statements in this press release be regarded as a representation or warranty by us or any other person with respect to the achievement of results set out in such statements or that the underlying assumptions used will in fact be the case. Therefore, you are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements speak only as of the date hereof. We cannot assure you that any projected results or events will be achieved. Except to the extent required by law, we disclaim any obligation to update or revise any of these forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made, or to reflect the occurrence of unanticipated events. Furthermore, elements of this press release contain or may contain, "inside information" as defined under the Market Abuse Regulation (EU) No. 596/2014.All non-IFRS measures disclosed further in this press release (including, without limitation, EBITDA, EBITDA margin, EBT, net debt, equity free cash flow after licenses (excluding capitalized leases), local currency growth, capital expenditures excluding licenses and LTM (last twelve months) capex excluding licenses/revenue) are reconciled to comparable IFRS measures in Attachment C to this earnings release. In addition, we present certain information on a forward-looking basis. We are not able to, without unreasonable efforts, provide a full reconciliation to IFRS due to potentially high variability, complexity and low visibility as to the items that would be excluded from the comparable IFRS measure in the relevant future period, including, but not limited to, depreciation and amortization, impairment loss, loss on disposal of non-current assets, financial income and expenses, foreign currency exchange losses and gains, income tax expense and performance transformation costs, cash and cash equivalents, long - term and short-term deposits, interest accrued related to financial liabilities, other unamortized adjustments to financial liabilities, derivatives, and other financial liabilities.
ABOUT VEON
VEON is a NASDAQ and Euronext Amsterdam-listed global provider of connectivity and digital services, headquartered in Amsterdam. Our vision is to empower customer ambitions through technology, acting as a digital concierge to guide their choices and connect them with resources that match their needs.
For more information visit: http://www.veon.com
CONTENT OF THE ATTACHMENTS
Attachment A Definitions 17
Attachment B Customers 19
Attachment C Reconciliation tables 19
Attachment D Average rates of functional currencies to USD 22
Attachment E VEON financial schedules 23
For more information on financial and operating data for specific countries, please refer to the supplementary file Factbook4Q2020.xls on VEON's website at http://veon.com/Investor-relations/Reports--results/Results/.
ATTACHMENT A: DEFINITIONS
ARPU (Average Revenue Per User) measures the monthly average revenue per mobile user. We generally calculate mobile ARPU by dividing our mobile service revenue during the relevant period, including data revenue, roaming revenue, MFS and interconnect revenue, but excluding revenue from connection fees, sales of handsets and accessories and other non-service revenue, by the average number of our mobile customers during the period and dividing by the number of months in that period.
Mobile data customers are mobile customers who have engaged in revenue generating activity during the three months prior to the measurement date as a result of activities including USB modem Internet access using 2.5G/3G/4G/HSPA+ technologies.
Capital expenditures (capex) are purchases of new equipment, new construction, upgrades, licenses, software, other long-lived assets and related reasonable costs incurred prior to intended use of the non-current asset, accounted at the earliest event of advance payment or delivery. Long-lived assets acquired in business combinations, are not included in capital expenditures.
Operational capital expenditures (operational capex) calculated as capex, excluding purchases of new spectrum licenses and capitalised leases. Capex intensity is a ratio, which is calculated as LTM operational capex divided by LTM revenue.
EBIT or Operating Profit is calculated as EBITDA plus depreciation, amortization and impairment loss. Our management uses EBIT as a supplemental performance measure and believes that it provides useful information of earnings of the Company before making accruals for financial income and expenses and net foreign exchange (loss)/gain and others. Reconciliation of EBIT to net income attributable to VEON Ltd., the most directly comparable IFRS financial measure, is presented in the reconciliation tables section in Attachment C below.
EBITDA (called Adjusted EBITDA in the Form 20-F published by VEON) is a non-IFRS financial measure. VEON calculates Adjusted EBITDA as (loss)/profit before interest, tax, depreciation, amortization, impairment, gain / loss on disposals of non-current assets, other non-operating gains / losses and share of profit / loss of joint ventures and associates Our Adjusted EBITDA may be used to evaluate our performance against other telecommunications companies that provide EBITDA.
Additionally, a limitation of EBITDA's use as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenue or the need to replace capital equipment over time. Reconciliation of EBITDA to net income attributable to VEON Ltd., the most directly comparable IFRS financial measure, is presented in the reconciliation tables section in Attachment C below.
EBITDA margin is calculated as EBITDA divided by total revenue, expressed as a percentage.
EBITDA Adjusted is calculated as EBITDA adjusted on non-recurring items that materially affect year-on-year comparison, reconciliation to EBITDA and list of non-recurring items are presented in the reconciliation tables in Attachment C below. EBITDA Adjusted margin is calculated as EBITDA Adjusted divided by total revenue, expressed as a percentage.
Gross Debt is calculated as the sum of long-term notional debt and short-term notional debt including capitalised leases.
Equity free cash flow - is a non-IFRS measure and is defined as free cash flow from operating activities less cash flow used in investing activities, after license payments and lease payments (principal amount); excluding M&A transactions, inflow/outflow of deposits, financial assets and other one-off items. Reconciliation to the most directly comparable IFRS financial measure, is presented in the reconciliation tables section in Attachment C below.
A fixed-mobile convergence customer (FMC customer) is a customer on a one month Active Broadband Connection subscribing to a converged bundle consisting of at least fixed internet subscription and at least one mobile SIM.
Mobile financial services (MFS) of Digital financial services (DFS) is a variety of innovative services, such as mobile commerce or m-commerce, that use a mobile phone as the primary payment user interface and allow mobile customers to conduct money transfers to pay for items such as goods at an online store, utility payments, fines and state fees, loan repayments, domestic and international remittances, mobile insurance and tickets for air and rail travel, all via their mobile phone.
Mobile customers are generally customers in the registered customer base as at a given measurement date who engaged in a mobile revenue generating activity at any time during the three months prior to such measurement date. Such activity includes any outgoing calls, customer fee accruals, debits related to service, outgoing SMS and MMS, data transmission and receipt sessions, but does not include incoming calls, SMS and MMS or abandoned calls. Our total number of mobile customers also includes customers using mobile internet service via USB modems and fixed-mobile convergence ("FMC").
Net debt is a non-IFRS financial measure and is calculated as the sum of interest bearing long-term debt including capitalised leases and short-term notional debt minus cash and cash equivalents, long-term and short-term deposits. The Company believes that net debt provides useful information to investors because it shows the amount of notional debt outstanding to be paid after using available cash and cash equivalents and long-term and short-term deposits. Net debt should not be considered in isolation as an alternative to long-term debt and short-term debt, or any other measure of the Company financial position. Net debt excluding lease obligations is a net debt less capitalised leases.
Net foreign exchange (loss)/gain and others represents the sum of Net foreign exchange (loss)/gain, VEON's share in net (loss)/gain of associates and Other (expense)/income (primarily (losses)/gains from derivative instruments) and is adjusted for certain non-operating losses and gains mainly represented by litigation provisions.
Net Promoter Score (NPS) is the methodology VEON uses to measure customer satisfaction.
Local currency trends (growth/decline) in revenue and EBITDA are non-IFRS financial measures that reflect changes in Revenue and EBITDA, excluding foreign currency movements and other factors, such as businesses under liquidation, disposals, mergers and acquisitions. For other factors please refer to section "non-recurring items that affect year-on-year comparisons".
VEON's reportable segments are the following, which are principally based on business activities in different geographical areas: Russia, Pakistan, Algeria, Bangladesh, Ukraine, Uzbekistan, Kazakhstan and HQ based on the business activities in different geographical areas.
ATTACHMENT B: CUSTOMERS
ATTACHMENT C: RECONCILIATION TABLES
RECONCILIATION OF CONSOLIDATED EBITDA
RECONCILIATION OF CAPEX
RECONCILIATION OF ORGANIC AND REPORTED GROWTH RATES
1 In 2Q19 exceptional item of a one-off payment of USD 38 million received in 2Q19 in relation to the termination of a network sharing agreement in Kazakhstan between our subsidiary KaR-Tel LLP and Kcell Joint Stock Company ("Kcell") following Kazakhtelecom JSC's acquisition of 75 percent of Kcell's shares and a one-off vendor payment of USD 350 million received in 1Q19.
RECONCILIATION OF VEON CONSOLIDATED NET DEBT
RECONCILIATION OF EQUITY FREE CASH FLOW
EBITDA RECONCILIATION ON COUNTRY LEVEL
4Q 2020
FY 2020
RATES OF FUNCTIONAL CURRENCIES TO USD
ATTACHMENT E: VEON LTD FINANCIAL SCHEDULES
VEON LTD UNAUDITED CONSOLIDATED STATEMENT OF INCOME | ||||||
for the years ended December 31 | ||||||
2020 | 2019 | 2018 | ||||
(In millions of U.S. dollars, except per share amounts) | ||||||
Service revenues | 7,471 | 8,240 | 8,526 | |||
Sale of equipment and accessories | 392 | 465 | 427 | |||
Other revenues / other income | 117 | 158 | 133 | |||
Total operating revenues | 7,980 | 8,863 | 9,086 | |||
Other operating income | 5 | 350 | — | |||
Service costs | (1,508) | (1,554) | (1,701) | |||
Cost of equipment and accessories | (382) | (479) | (415) | |||
Selling, general and administrative expenses | (2,641) | (2,965) | (3,697) | |||
Depreciation | (1,576) | (1,652) | (1,339) | |||
Amortization | (343) | (394) | (495) | |||
Impairment (loss) / reversal | (785) | (108) | (858) | |||
Gain / (loss) on disposal of non-current assets | (37) | (43) | (57) | |||
Gain / (loss) on disposal of subsidiaries | (78) | 1 | 30 | |||
Operating profit | 635 | 2,019 | 554 | |||
Finance costs | (683) | (892) | (816) | |||
Finance income | 23 | 53 | 67 | |||
Other non-operating gain / (loss) | 111 | 21 | (68) | |||
Net foreign exchange gain / (loss) | (60) | (20) | 15 | |||
Profit / (loss) before tax from continuing operations | 26 | 1,181 | (248) | |||
Income tax expense | (342) | (498) | (369) | |||
Profit / (loss) from continuing operations | (316) | 683 | (617) | |||
Profit / (loss) after tax from discontinued operations | — | — | (300) | |||
Gain / (loss) on disposal of discontinued operations | — | — | 1,279 | |||
Profit / (loss) for the period | (316) | 683 | 362 | |||
Attributable to: | ||||||
The owners of the parent (continuing operations) | (349) | 621 | (397) | |||
The owners of the parent (discontinued operations) | — | — | 979 | |||
Non-controlling interest | 33 | 62 | (220) | |||
(316) | 683 | 362 | ||||
Basic and diluted gain / (loss) per share attributable to ordinary equity holders of the parent: | ||||||
From continuing operations | ( | ( | ||||
From discontinued operations | ||||||
Total | ( | |||||
VEON LTD UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION | |||
as of December 31 | |||
2020 | 2019 | ||
(In millions of U.S. dollars) | |||
Assets | |||
Non-current assets | |||
Property and equipment | 6,879 | 7,340 | |
Intangible assets | 4,152 | 5,688 | |
Investments and derivatives | 305 | 235 | |
Deferred tax assets | 186 | 134 | |
Other assets | 179 | 163 | |
Total non-current assets | 11,701 | 13,560 | |
Current assets | |||
Inventories | 111 | 169 | |
Trade and other receivables | 572 | 628 | |
Investments and derivatives | 165 | 82 | |
Current income tax assets | 73 | 16 | |
Other assets | 335 | 354 | |
Cash and cash equivalents | 1,594 | 1,250 | |
Total current assets | 2,850 | 2,499 | |
Total assets | 14,551 | 16,059 | |
Equity and liabilities | |||
Equity | |||
Equity attributable to equity owners of the parent | 163 | 1,226 | |
Non-controlling interests | 850 | 994 | |
Total equity | 1,013 | 2,220 | |
Non-current liabilities | |||
Debt and derivatives | 8,832 | 7,759 | |
Provisions | 141 | 138 | |
Deferred tax liabilities | 127 | 141 | |
Other liabilities | 28 | 33 | |
Total non-current liabilities | 9,128 | 8,071 | |
Current liabilities | |||
Trade and other payables | 1,977 | 1,847 | |
Debt and derivatives | 1,224 | 2,585 | |
Provisions | 151 | 222 | |
Current income tax payables | 175 | 102 | |
Other liabilities | 883 | 1,012 | |
Total current liabilities | 4,410 | 5,768 | |
Total equity and liabilities | 14,551 | 16,059 | |
VEON LTD UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOW | ||||||
for the years ended December 31 | ||||||
(In millions of U.S. dollars) | 2020 | 2019 | 2018 | |||
Operating activities | ||||||
Profit / (loss) before tax from continuing operations | 26 | 1,181 | (248) | |||
Non-cash adjustments to reconcile profit before tax to net cash flows | ||||||
Depreciation, amortization and impairment loss / (reversal) | 2,704 | 2,154 | 2,692 | |||
(Gain) / loss on disposal of non-current assets | 37 | 43 | 57 | |||
(Gain) / loss on disposal of subsidiaries | 78 | (1) | (30) | |||
Finance costs | 683 | 892 | 816 | |||
Finance income | (23) | (53) | (67) | |||
Other non-operating (gain) / loss | (111) | (21) | 68 | |||
Net foreign exchange (gain) / loss | 60 | 20 | (15) | |||
Changes in trade and other receivables and prepayments | (107) | (224) | 96 | |||
Changes in inventories | 40 | (28) | (88) | |||
Changes in trade and other payables | 94 | 52 | 274 | |||
Changes in provisions, pensions and other | (29) | 106 | 40 | |||
Interest paid | (644) | (714) | (736) | |||
Interest received | 23 | 58 | 60 | |||
Income tax paid | (388) | (516) | (404) | |||
Net cash flows from operating activities | 2,443 | 2,949 | 2,515 | |||
Investing activities | ||||||
Purchase of property, plant and equipment and intangible assets | (1,778) | (1,683) | (1,948) | |||
Payments on deposits | (142) | (922) | (32) | |||
Receipts from deposits | 69 | 698 | 1,066 | |||
Proceeds from sale of Italy Joint Venture | — | — | 2,830 | |||
Receipts from / (investment in) financial assets | (89) | (9) | 62 | |||
Other proceeds from investing activities, net | 30 | 28 | 19 | |||
Net cash flows from / (used in) investing activities | (1,910) | (1,888) | 1,997 | |||
Financing activities | ||||||
Proceeds from borrowings, net of fees paid * | 4,621 | 2,610 | 807 | |||
Repayment of debt | (4,376) | (2,978) | (4,122) | |||
Acquisition of non-controlling interest | (1) | (613) | — | |||
Dividends paid to owners of the parent | (259) | (520) | (508) | |||
Dividends paid to non-controlling interests | (88) | (138) | (93) | |||
Net cash flows from / (used in) financing activities | (103) | (1,639) | (3,916) | |||
Net increase / (decrease) in cash and cash equivalents | 430 | (578) | 596 | |||
Net foreign exchange difference | (48) | (9) | (119) | |||
Cash and cash equivalents at beginning of period | 1,204 | 1,791 | 1,314 | |||
Cash and cash equivalents at end of period, net of overdraft ** | 1,586 | 1,204 | 1,791 | |||
* Fees paid for borrowings were US | |||
** Overdrawn amount was US |
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SOURCE VEON Ltd
FAQ
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