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Zain Group Financial Results
Q2 2018
Disclaimer ❖ 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 theadequacy, 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 oncurrent expectations and reasonable assumptions, we can however give no assurance they will beachieved.
❖ The information contained in this presentation is subject to change and we disclaim any obligationto update you of any such changes, particularly those pertaining to the forward-lookingstatements.
❖ Furthermore, it should be noted that there are a myriad potential risks, uncertainties andunforeseen factors that could cause the actual results to differ materially from the forward-lookingstatements made herein.
❖ Accordingly, this presentation does not constitute an offering of securities or otherwise constitutean invitation or inducement to any person to underwrite, subscribe for, or otherwise acquire ordispose of, securities in any company within Zain Group.
For further information about Zain Group, or the materials contained within this presentation, pleasedirect your enquiries to our Investor Relations team via email at [email protected] or visitwww.zain.com/en/investor-relations/
2
Content
1. Results Review
2. Operations review
3. Financial Statements
Zain At A Glance – Q2 2018
47.4MILLION
ACTIVE CUSTOMERS
14.7MILLION
CUSTOMERSIN IRAQ
4GLONG TERM
EVOLUTION(LTE) NETWORK
IN KUWAIT, SAUDI ARABIA,JORDAN, BAHRAIN, SUDAN &
LEBANON
AROUND
6,200EMPLOYEES
MARKETLEADER
IN KUWAIT, IRAQ,REPUBLIC OF SUDAN, JORDAN & LEBANON
$563MILLION
IN EBITDA
13.9MILLION
CUSTOMERSIN REPUBLICOF SUDAN
$1.7BILLION
IN REVENUES
7,800 TBAVERAGE
DAILY DATA VOLUME
1
$287MILLION
IN NETINCOME
34%EBITDA MARGINONE OF THE
HIGHEST IN THE REGION
4
The World of Zain
IRAQOwnership: 76% Revenues: $558 mCustomers: 14.7 mPrepaid: 98%
Market Share: 43%
KUWAITOwnership: 100%
Revenues: $579 mCustomers: 2.8 mPrepaid: 68%
Market Share: 37%
BAHRAINOwnership: 55% Revenues: $87 m
SAUDI ARABIAOwnership: 37.05% Revenues: $942 mCustomers: 8.4 mPrepaid: 58%
MOROCCOOwnership: 15.5%
LEBANONOwnership: Management Contract Customers: 2.4 mPrepaid: 86%
JORDANOwnership: 96.52%
Revenues: $241 m
Customers: 3.8 mPrepaid: 79%
Market Share: 36%
SUDANOwnership: 100% Revenues: $168 m Customers: 13.9 mPrepaid: 98%
Market Share: 47%
SOUTH SUDANOwnership: 100%Customers: 815KPrepaid: 99%
* exclusive of Morocco, in which Zain
has a 15.5% ownership in the mobile
operator “INWI”
ZAIN’S WORLD CATERS TO 47.4 MILLION CUSTOMERS IN 8 COUNTRIES*
5
Group Financial Highlights – Q2 2018
145 150
Q2-17 Q2-18
344
282
Q2-17 Q2-18
860811
Q2-17 Q2-18
CUSTOMERS (000)
40% 35% 4 3
REVENUES (USDm)
EBITDA (USDm) NET INCOME (USDm)
45,17147,402
Q2-17 Q2-18
+5% -6%
-18%
Margin
%
+4%
6
EPS
(Cent)
Group Financial Highlights – H1 2018
270287
H1-17 H1-18
695
563
H1-17 H1-18
1,669 1,674
H1-17 H1-18
CUSTOMERS (000)
42% 34% 7 7
REVENUES (USDm)
EBITDA (USDm) NET INCOME (USDm)
45,17147,402
H1-17 H1-18
+5% +0.3%
-19%
Margin
%
+6%
7
EPS
(Cent)
635
445501
18%
13%14%
2016 2017 2018 F
Capex Capex / Revenues
-30% +13%
CAPEX & CAPEX / REVENUES
8
* Capex excluding Zain KSA
* Capex includes only tangible assets
Republic of Sudan
18%
Jordan6%
Iraq22%
Kuwait33%
Others21%
CAPEX BREAKDOWN
* Group Total Capex (excluding KSA) = USD 103 million
*Total CAPEX
$103m
Kuwait 34 6%
Iraq 22 4%
Sudan 18 11%
KSA 71 7%
Jordan 6 2%
Bahrain 0.5 1%
S. Sudan 0.3 2%
Others 22 N/A
OPCOH1 2018
(USDm)
% OF
REVENUES
TOTAL CAPEX
9
* Capex includes only tangible assets
2,468
1,260
490
H1 2017 H1 2018
Long Term Short Term
2,215
2,964
2,450
2.1 2.2
H1 2017 H1 2018
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
2,9583,475
-15% -17%
Group Financial Highlights
10
Kuwait6%
Republic of Sudan
30%
Jordan8%
S.Sudan2%
KSA18%
Iraq31%
Lebanon5%
Republic of Sudan
10%
Jordan15%
Kuwait35%
Others2%
Iraq33%
Bahrain5%
Group Customers
47.4m
REVENUE CONTRIBUTION CUSTOMER CONTRIBUTION
Group Revenues
$1.7B
Group Financial Highlights
11
89%80% 76%
87%95%
2013 2014 2015 2016 2017
8% 8% 8%
7%
8%
2013 2014 2015 2016 2017
50
40
3035 35
2013 2014 2015 2016 2017
690
533
388447
506
2013 2014 2015 2016 2017
DIVIDEND PAYOUT RATIO DIVIDEND YIELD (%)
DIVIDEND PER SHARE (Fils) CASH DIVIDEND (USDm)
ZAIN DIVIDENDS
12
Content
1. Results Review
2. Operations review
3. Financial Statements
$25ARPU
173%Penetration
1983Year of launch
2.8 mCustomers
100%Ownership
▪ Customer base increase by 7%
▪ Top line jumped by 5% mainly due to higher enterprise revenues
▪ Net income up by 2% supported by lower D&A
▪ Strong concentration on cost optimization initiatives
▪ Data revenues (excluding SMS & VAS) grew 6% YoY, and formed
32% of total revenues
ZAIN38%
OOREEDOO31%
VIVA31%
4GTechnology
100%Coverage
2,350Number of sites
289259
11493
74 67
Q2-17 Q2-18
FINANCIALS (USDm)
Zain37%
Ooredoo32%
Viva31%
MARKET SHARE
31%EBITDA Margin
ZAIN KUWAIT
14
549579
215180
128 130
H1-17 H1-18
Revenues EBITDA Net Income
$6ARPU
95%Penetration
2003Year of acquisition
14.7 mCustomers
76%Ownership
ZAIN38%
OOREEDOO31%
VIVA31%
3GTechnology
99%Coverage
4,551Number of sites
270282
93 98
10 10
Q2-17 Q2-18
Zain43%
Korek 20%
Asiacell37%
MARKET SHARE*
35%EBITDA Margin
▪ Solid H1 performance, supported by strong acquisition initiatives in the
northern region; customer base jumped by 15%
▪ Introduction of new BTL offers on Know Your Offer (KYO) platform, and
improving customer experience by successful communication plans
▪ CVM activities boosted Voice and Data revenues
▪ Strong focus on cost optimization
▪ Robust growth in enterprise (B2B) segment
FINANCIALS (USDm)
ZAIN IRAQ
15
523558
179 194
11 18
H1-17 H1-18
Revenues EBITDA Net Income
*Korek market share estimated based on year end 2017
$2ARPU
71%Penetration
13.9 mCustomers
100%Ownership
ZAIN38%
OOREEDOO31%
VIVA31%
4GTechnology
90%Coverage
2,547Number of sites
1,713
2,335
683
960
288 383
Q2-17 Q2-18
Zain47%
Sudani26%
MTN27%
MARKET SHARE
40%EBITDA Margin
2006Year of acquisition
▪ Impressive YoY growth in local currency SDG terms
▪ Customers grew by 8%, to reach 13.9 million
▪ 40% currency devaluation affected the financial results in USD terms
(from an average of 15.8 in H1-17 to 26.5 SDG/USD in H1-18)
▪ Significant cost optimization savings
▪ Data revenues (excluding SMS & VAS) grew 52% YoY, and formed
17% of total revenues
FINANCIALS (SDGm)
ZAIN SUDAN
16
3,373
4,423
1,276
1,762
545 688
H1-17 H1-18
Revenues EBITDA Net Income
$18ARPU
168%Penetration
8.4 mCustomers
37%Ownership
ZAIN38%
OOREEDOO31%
VIVA31%
4GTechnology
97%Coverage
8,964Number of sites
497 492
169 164
2
(10)
Q2-17 Q2-18
34%EBITDA Margin
▪ Customers down by 8% due to the bio-metric verifications and two-sim
policy for expats
▪ Top line dropped by 7%, due to lower interconnection revenue affected
by the new MTR rates
▪ Removal of VOIP restrictions impacted the international revenues
▪ Higher D&A due to acquiring spectrum and additional equipment
▪ Data revenues (excluding SMS & VAS) formed 53% of total revenues
2008Year of acquisition
FINANCIALS (USDm)
ZAIN KSA
17
1,009942
346 316
14
(31)
H1-17 H1-18
Revenues EBITDA Net Income
$10ARPU
100%Penetration
2003Year of launch
3.8 mCustomers
96.52%Ownership
ZAIN38%
OOREEDOO31%
VIVA31%
4GTechnology
100%Coverage
2,813Number of sites
122 122
5748
2318
Q2-17 Q2-18
Zain36%
Orange32%
Umniah32%
MARKET SHARE
40%EBITDA Margin
▪ Aggressive price competition led the customer base shrink by 10%
▪ Stable revenue for the period mainly due to higher interconnect and
data revenues
▪ EBITDA dropped by 17%, mainly due to lower gross margin and
higher Opex
▪ Data revenues (excluding SMS & VAS) grew by 3% YoY, and
formed 38% of total revenues
FINANCIALS (USDm)
ZAIN JORDAN
18
241 241
11696
48 36
H1-17 H1-18
Revenues EBITDA Net Income
$16ARPU
216%Penetration
2003Year of launch
55%Ownership
4GTechnology
100%Coverage
545Number of sites
50
43
1510
3 3
Q2-17 Q2-18
23%EBITDA Margin
▪ Net Income jumped by 60% YoY due to better monetization and
operational efficiencies.
▪ Data revenues (excluding SMS & VAS) formed 45% of total
revenues
FINANCIALS (USDm)
ZAIN BAHRAIN
19
9887
3020
4 6
H1-17 H1-18
Revenues EBITDA Net Income
76%Penetration
2004Year of acquisition
2.4 mCustomers
MCOwnership
ZAIN38%
OOREEDOO31%
VIVA31%
4GTechnology
99%Coverage
1,318Number of sites
Touch54%
Alfa46%
MARKET SHARE
▪ Zain operates in Lebanon under a management contract since June
2004, when it was rebranded to mtc-touch, and subsequently to
“touch”
TOUCH - LEBANONManagement Contract
20
Content
1. Results Review
2. Operations review
3. Financial Statements
BALANCE SHEET
22
Unaudited Audited Unaudited
30-Jun-18 31-Dec-17 30-Jun-17
Assets KD ‘000
Current assets
Cash and bank balances 153,555 244,398 154,849
Trade and other receivables 419,570 455,801 479,533
Contract assets 43,355 - -
Inventories 19,261 34,402 19,313
Investment securities at FVTPL 11,622 778 996
Non-current assets held for sale 7,656 7,656 -
655,019 743,035 654,691
Non-current assets
Contract assets 13,469 - -
Investment securities at FVOCI 8,312 - -
Investment securities available for sale - 16,118 18,315
Investments in associates and joint ventures 188,886 188,412 190,162
Due from associates 434,271 415,759 397,306
Other assets 15,232 15,131 15,044
Property and equipment 676,975 743,586 753,911
Intangible assets and goodwill 858,931 911,630 959,173
2,196,076 2,290,636 2,333,911
Total assets 2,851,095 3,033,671 2,988,602
Unaudited Audited Unaudited
30-Jun-18 31-Dec-17 30-Jun-17
Liabilities and equity KD ‘000
Current liabilities
Trade and other payables 469,245 467,616 507,713
Deferred revenue 49,864 47,768 56,949
Due to banks 148,198 199,564 381,402
667,307 714,948 946,064
Non-current liabilities
Due to banks 746,372 670,637 670,209
Other non-current liabilities 40,543 38,482 36,436
786,915 709,119 706,645
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
Legal reserve 216,353 216,353 216,353
Foreign currency translation reserve (1,293,692) (1,189,469) (1,131,206)
Treasury shares - - (567,834)
Treasury shares reserve - - 1,967
Investment fair valuation reserve 875 3,251 4,068
Share of reserves of associates (747) (326) (320)
Retained earnings 177,782 281,919 517,242
1,240,441 1,451,598 1,180,140
Non-controlling interests 156,432 158,006 155,753
Total equity 1,396,873 1,609,604 1,335,893
Total liabilities and equity 2,851,095 3,033,671 2,988,602
INCOME STATEMENT
23
Six months ended
30-Jun
Earnings per share 2018 2017
Basic – Fils 20 21
Six months ended
30-Jun
2018 2017
KD’000
Revenue 503,162 508,070
Cost of sales (162,025) (143,708)
Gross profit 341,137 364,362
Operating and administrative expenses (166,147) (148,543)
Depreciation and amortization (76,901) (97,322)
Provision for impairment – trade and other receivables - (4,178)
Expected credit loss on financial assets (ECL) (5,801) -
Operating profit 92,288 114,319
Interest income 14,450 11,737
Investment income 298 427
Share of results of associates and joint ventures (3,553) 1,045
Other expenses (17,029) (2,162)
Finance costs (19,817) (19,847)
Provision for impairment loss on property and equipment (9,648) (21,292)
Loss from currency revaluation (7,805) (12,482)
Net monetary gain 50,269 24,019
Profit before contribution to KFAS, NLST,
99,453 95,764 ZAKAT, income taxes and Board of
Directors' remuneration
Contribution to Kuwait foundation for
Advancement of Sciences (KFAS) (480) (620)
National Labour Support Tax (NLST) and Zakat (1,905) (3,382)
Income tax expenses (8,104) (7,696)
Board of Directors’ remuneration (138) (138)
Profit for the period 88,826 83,928
Attributable to:
Shareholders of the Company 86,451 82,286
Non-controlling interests 2,375 1,642
88,826 83,928
24
CASH FLOW STATEMENT Six months ended
30-Jun
2018 2017
Cash flows from operating activities KD’000
Profit for the period before income tax 96,930 91,624
Adjustments for:
Depreciation and amortization 76,901 97,322
ECL / provision for impairment 5,801 4,178
Interest income (14,450) (11,737)
Investment income (298) (427)
Share of results of associates and joint ventures 3,553 (1,045)
Provision for impairment loss on property and equipment 9,648 21,292
Finance costs 19,817 19,847
Loss from currency revaluation 7,805 12,482
Net monetary gain (50,269) (24,019)
Gain on sale of property and equipment (54) -
Operating profit before working capital changes 155,384 209,517
Increase in trade and other receivables (73,681) (53,930)
Decrease/(increase) in inventories 14,821 (2,889)
Increase/(decrease) in trade and other payables 21,176 (4,906)
Cash generated from operations 117,700 147,792
Paid to KFAS (319) (250)
NLST and Zakat paid (5,492) (5,049)
Income tax paid (8,476) (9,325)
Net cash from operating activities 103,413 133,168
Six months ended
30-Jun
2018 2017
Cash flows from investing activities KD’000
Deposits maturing after three months and cash at bank under lien (5) (7,418)
Investments in securities (3,738) (3,963)
Proceeds from sale of investments 316 8,068
Increase in due from associates (7,039) (5,776)
Acquisition of property and equipment (net) (30,559) (42,378)
Acquisition of intangible assets (net) (308) (7,650)
Interest received 2,668 12,359
Dividend received 253 246
Net cash used in investing activities (38,412) (46,512)
Cash flows from financing activities
Proceeds from bank borrowings 142,901 219,824
Repayment of bank borrowings (120,587) (208,768)
Dividends paid to Company’s shareholders (148,760) (134,319)
Dividends paid to minority shareholders of subsidiaries (470) (1,718)
Finance costs paid (16,692) (20,850)
Net cash used in financing activities (143,608) (145,831)
Net decrease in cash and cash equivalents (78,607) (59,175)
Effect of foreign currency translation (5,744) (2,146)
Transition adjustment on adoption of IFRS 9 (6,497) -
Cash and cash equivalents at beginning of period206,432 177,150
Cash and cash equivalents at end of period 115,584 115,829
THANK YOU
Website : zain.com
Email : [email protected]
Note: Mobile Penetration rates are sourced from GSMA Intelligence
