07:00 Tue 17 Nov 2020
Vodafone Group Plc - Vantage Towers Capital Markets Day
Vodafone Group Plc ⫶ Vantage Towers CMD
Vantage Towers Capital Markets Day
· A leading tower infrastructure company in
· #1 or #2 tower market share by number of sites in 8 of our 9 markets
·
· H1 FY21 consolidated pro forma adjusted EBITDAaL of
· Commitments for 7,100 new build macro sites with expected run-rate adjusted EBITDAaL contribution of
· Attractive medium term revenue, adjusted EBITDAaL and RFCF growth outlook supported by new build sites, committed new tenancies and rural white spot coverage obligations underpinning a tenancy ratio target of >1.5x
"
People and businesses across
With inflation-linked revenue - secured for the long term - from
A series of on-demand webcasts with supporting presentation materials in relation to the Capital Markets Day will be made available on
1 Including 100% of
2 Aggregate of FY20 pro forma consolidated adj. EBITDAaL of
For more information, please contact:
Investor Relations Media Relations
Investors.vodafone.com Vodafone.com/media/contact
ir@vodafone.co.uk GroupMedia@vodafone.com
Registered Office: Vodafone House, The Connection, Newbury, Berkshire RG14 2FN, England. Registered in England No. 1833679
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Fully-owned operations |
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DE |
ES |
GR5 |
CZ |
PT |
RO |
HU |
IE |
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IT6 |
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Macro sites |
19.1k |
8.8k |
4.9k |
3.8k |
3.5k |
2.2k |
1.9k |
1.3k |
45.5k |
22.1k |
67.6k |
Tenancy ratio7 |
1.2x |
1.6x |
1.6x |
1.1x |
1.2x |
2.0x |
1.3x |
1.5x |
1.4x |
1.9x |
1.5x |
Market position8 |
#2 |
#2 |
#1 |
#2 |
#2 |
#4 |
#2 |
#2 |
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#1 |
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The Company also has over 1,600 non-mobile network operator tenants, such as for public protection and disaster relief, and is targeting growth in this business by bringing new focus and managerial intensity in exploring this market.
Vodafone currently holds a 50% co-controlling shareholding in Cornerstone Telecommunications Infrastructure Limited ("Cornerstone"), the joint venture in the UK which owns 14,300 towers. Subject to reaching a legally binding agreement on a revised MSA with its JV partner, Vodafone intends to transfer this shareholding into
3 1,500 micro sites excluding INWIT
4 Including 100% of Greece; closing of merger with Wind Hellas tower assets in Greece pending completion
5 Including 100% of Greece; closing of merger with Wind Hellas tower assets in Greece pending completion
6 Data represents INWIT's full portfolio
7 Tenancy ratio represents the total number of tenancies (including two tenancies where both Vodafone and another MNO are active sharing on a site) of
8 Estimated based on total number of macro sites compared to other market participants
9 Represents total revenues excluding pass-through revenue in respect of recharged capital expenditure. Recharged capital expenditure revenue was
The Company would equity account for its shareholding in Cornerstone and the actual financial contribution of Cornerstone will depend on the agreed terms of any MSA, the future cost base and the finalisation of accounting treatments.
Financial information ⫶
· Aggregated FY20 pro forma adjusted EBITDAaL of
‒
‒ The Group's 33.2% share of INWIT10 CY19 estimated pro forma adjusted EBITDAaL of
·
·
|
FY20 (€m) |
H1FY21 (€m) |
Revenue (excl. pass through) |
945 |
479 |
Adjusted EBITDA |
814 |
413 |
Margin (%) |
86% |
86% |
Depreciation of lease-related right of use assets and interest on leases12 |
(291) |
(146) |
Adjusted EBITDAaL |
523 |
267 |
Margin (%) |
55% |
56% |
Maintenance capital expenditure |
(29) |
(14) |
Recurring OpFCF (adjusted EBITDAaL - maintenance capex) |
494 |
253 |
Cash conversion (Recurring OpFCF / adj. EBITDAaL) |
94% |
95% |
Recurring free cash flow (RFCF)13 |
373 |
190 |
Commercial focus ⫶ Clear strategic roadmap with multiple levers of growth
The Company has strong visibility on the drivers of tenancy growth in the medium term with commitments for approximately 13,400 additional net new tenancies from new site builds, committed new tenancies and rural white spot coverage obligations. This includes a commitment from tenants, primarily Vodafone, for 7,100 new macro BTS sites which are expected to contribute an incremental
In order to meet its medium term target of in excess of 15,500 new tenancies,
10 The 33.2% share in INWIT will be equity accounted
11 See basis of preparation for further information on pro forma adjustments
12 Along with Vodafone Group,
13 See glossary for further definition
14 Opportunities the Company has identified, including current negotiations and future opportunities
The Company also has preferred supplier status with Vodafone for additional deployment requirements. In addition, with its extensive footprint, attractive strategic locations and strong relationships with leading mobile operators,
Growth from the focus on increasing the tenancy ratio is expected to lead to strong growth in cash flow and enhance our return on capital as a result of the high operating leverage in our business. Opportunities also exist to deliver efficiencies by driving best practices and optimising costs across
Growth outlook ⫶ Key FY21 guidance and medium term targets
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FY21 PF15 |
Medium Term Targets16 |
Tenancy Ratio for |
~1.38x |
>1.50x |
Consolidated Revenue (ex. pass-through) |
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Mid-single digit CAGR |
Consolidated Adj. EBITDAaL |
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High 50s percentage margin |
Consolidated RFCF |
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Mid to high single digit CAGR |
There is also further organic growth potential beyond the core.
The Company will also consider strategic M&A opportunities if they enhance shareholder value and meet its investment criteria. These opportunities could include in-market bolt-on opportunities (as demonstrated by the recent acquisition in Greece), expanding
Capital structure and dividend policy ⫶ Growth and shareholder returns
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FY21 |
Policy |
Dividend |
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Payout ratio: 60% of RFCF (including dividends from joint ventures18) |
Initial Leverage |
4.0x Net Financial Debt / Adj. EBITDAaL |
Consistent with investment grade credit rating |
15 FY21 guidance on pro forma numbers; excluding the UK and before any adjustment for ongoing lease reassessment
16 Medium term guidance on actuals; excluding the UK and before any adjustment for ongoing lease reassessment
17 To be paid following 2021 AGM
18 Subject to the availability of distributable profits (Bilanzgewinn) and legal restrictions with respect to the distribution of profits and available funds
The capital structure and dividend policy will ensure
This provides
Separation roadmap ⫶ Moving at pace
Since the announcement of Vodafone's intention to separate its European tower infrastructure operations in
We have also recently announced the nomination of Rüdiger Grube as Independent Chairman of the Supervisory Board. Rüdiger Grube brings over 30 years of international executive and non-executive Board experience. Dr. Grube previously had a long career at Daimler across a variety of roles, was CEO of Deutsche Bahn, and was Chairman and non-executive Director of Airbus. He is excited to be nominated as Chairman of the Supervisory Board of Vantage Towers, and is committed to dedicating appropriate time and focus to this role. We are in advanced discussions with additional independent Supervisory Board members, who will be announced in due course.
Basis of preparation
Introduction
The financial information presented above sets out certain summary pro forma consolidated financial results for Vantage Towers for the twelve months ended
The basis of the pro forma information for the consolidated group reflects the historical results of Vantage Towers (including its operations in Germany, Spain, Greece, Ireland, Portugal, Romania, Hungary and Czech Republic).
The pro forma results of operations are adjusted for the expected financial impact of the separation of the business from Vodafone Group Plc ("Vodafone"). The impact of commercial agreements, including the Master Services Agreements ("MSAs") and Long Term Agreements ("LTAs") which have been or are expected to be entered into with Vodafone, together with expected incremental running costs of Vantage Towers, are included as if they had been in place throughout the twelve month period and six month periods respectively.
The pro forma results relating to Vantage Towers Greece are based on the historical results of the tower assets contributed by Vodafone-Panafon Hellenic Telecommunications Company S.A ("Vodafone Greece") and Wind Hellas Telecommunications SA ("Wind Hellas") and reflect the commercial arrangements (including the Master Services Agreement) between Vantage Towers Greece, Vodafone Greece and Wind Hellas, and certain expected incremental costs of Vantage Towers Greece on a standalone basis, as if they had been in place for 100% of both businesses throughout the twelve month period and six month period respectively.
In addition, Vantage Towers is expected to hold Vodafone's equity stake in Infrastrutture Wireless Italiane S.p.A ("INWIT"). Selected financial information in relation to INWIT is set out separately. This investment is classified as an equity accounted joint venture and will therefore not be included in consolidated EBITDA measures for financial reporting purposes.
The financial information presented herein has been neither audited nor reviewed by Vodafone or Vantage Towers' independent auditors and may be subject to changes.
Pro forma financial information for
Historical financial information for the twelve months ended
The summary historical financial information used as the basis for the pro forma financial information for the twelve months ended
· Revenues from tenants other than Vodafone;
· Costs which are directly attributable to the tower infrastructure assets, such as energy, maintenance, depreciation of property, plant and equipment ("PPE") and lease costs recognised under IFRS 16; and
· The non-current PPE assets and related asset retirement obligations.
The same accounting policies and measurement principles as were applied by Vodafone in preparing its consolidated financial information for inclusion in its Annual Report for the year ended
Historical financial information for the six months ended
The summary historical financial information used as the basis for the pro forma financial information for the six months ended
· Vantage Towers S.L.U ("Vantage Towers Spain") -
· Vantage Towers GmbH ("Vantage Towers Germany") -
· Vantage Towers Limited ("Vantage Towers Ireland") -
· Vodafone Towers Portugal S.A. ("Vantage Towers Portugal") -
· Vantage Towers s.r.o. ("Vantage Towers Czech Republic") -
The post-demerger financial information has been combined with historical results for the pre-demerger periods in the above markets, and historical results for the full period for Vantage Towers Hungary, Vantage Towers Romania and Vantage Towers Greece. This historical financial information has been prepared by extracting the directly attributable revenues and costs of the passive infrastructure to be included in
Pro forma adjustments
Pro forma financial adjustments have then been made to present what the material effects of the separation of Vantage Towers from Vodafone would have had on the historical financial information if Vantage Towers had existed in the structure set out in the introduction above, for the twelve months ended
· Revenue from Vodafone based on the terms of the relevant MSA that are/will be in place for each market. This adjustment includes the anchor tenant rental income from Vodafone.
· Costs required to run Vantage Towers on a standalone basis. This adjustment includes charges for local Vodafone markets, such as maintenance and other support services, and group services and other contractual arrangements covering, inter alia, maintenance and insurance costs.
· Employment and other general and administrative costs.
The adjustments set out above are based on the commercial arrangements that have been or are expected to be entered into between Vantage Towers and other members of the Vodafone group, and with Wind Hellas in Greece, and the expected future costs of Vantage Towers, and are subject to potential change. These changes might result from amendments to the proposed portfolio of assets and equity investments to be held by Vantage Towers, the scope and pricing of services supplied by Vantage Towers, the actual incremental costs of Vantage Towers, changes to accounting policies and related estimates and other potential business developments. The pro forma results exclude any one-off costs in relation to the separation of Vantage Towers from Vodafone.
Along with Vodafone Group, it is expected that Vantage Towers will reassess the IFRS 16 lease term for its head leases once all Vantage Towers assets have been separated. This may result in minor historical restatement of the pro forma depreciation of lease-related right of use assets and interest on leases.
Summary historical financial information for INWIT
Vodafone owns a 33.2% stake in INWIT, which it intends to transfer into Vantage Towers. This stake will be equity accounted by Vantage Towers. The merger of Vodafone Towers Srl ("Vodafone Towers Italy") and INWIT was effective from
The financial information presented in respect of INWIT for the 12 months ended
The pro forma income statement in the INWIT prospectus represents INWIT's financial performance for the 12 months ended
KPIs and financial terms
A number of Alternative Performance Measures ("APMs") are presented in this announcement, which are used in addition to IFRS statutory performance measures. These APMs, which are not considered to be a substitute for or superior to IFRS measures, provide stakeholders with additional helpful information on the performance of the business.
Adjusted EBITDA is defined as operating profit before depreciation on lease-related right of use assets and interest on leases, depreciation, amortisation and gains/losses on disposal for owned fixed assets, and excluding share of results in associates and joint ventures, impairment losses, restructuring costs arising from discrete restructuring plans, other operating income and expense and significant items that are not considered by management to be reflective of the underlying performance of the Group.
Adjusted EBITDAaL is defined as operating profit, less capital expenditure recharge revenue and after depreciation on lease-related right of use assets and interest on leases, but excluding depreciation, amortisation and gains/losses on disposal for owned fixed assets, and excluding share of results in associates and joint ventures, impairment losses, restructuring costs arising from discrete restructuring plans, other operating income and expense and significant items that are not considered by management to be reflective of the underlying performance of the Group.
Capital expenditure recharge revenue represents direct recharges to tenants of capital expenditure in connection with upgrades to existing sites.
Aggregated adjusted EBITDAaL represents adjusted EBITDAaL for the
Recurring operating free cash flow ("OpFCF") is adjusted EBITDAaL less maintenance capital expenditure.
Maintenance capital expenditure represents capital expenditure required to maintain and continue the operation of the existing tower network and other passive infrastructure. For the avoidance of doubt, maintenance capital expenditure excludes capital investment in new sites or other growth initiatives and should not be taken to be indicative of the total future investment requirement of Vantage Towers.
Recurring free cash flow ("RFCF") is recurring OpFCF less taxation, interest and changes in operating working capital. For the pro forma results, pro forma income statement taxation and interest have been used as a proxy for cash paid as no pro forma cash flow has been prepared.
Tenancy ratio represents the total number of tenancies (including both Vodafone and another MNO where there is existing active sharing on a site) of Vantage Towers divided by the total number of towers.
Glossary
"Active Equipment" |
the customers' equipment used to receive and transmit mobile network signals.
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"BTS" |
build-to-suit and corresponds to committed new build site programs and related services that have been contracted with different clients, including ad-hoc capital expenditure which might be required.
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"CAGR"
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compound annual growth rate. |
"Company" |
Vantage Towers.
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"Consolidated Tower Grid"
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the combination of the mobile network of two or more operators which are sharing both physical infrastructure (i.e. macro sites) and the communication equipment placed on the macro sites.
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" |
the European tower infrastructure business in Germany, Spain, Greece, Portugal, Romania, Czech Republic, Hungary and Ireland in which Vantage Towers has, or is planned to have, a controlling interest.
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"DAS" |
distributed antenna system, which is a network of spatially separated antenna nodes connected to a common source via a transport medium that provides wireless service within a geographic area or structure.
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"FTTS" |
Fibre to the Site, which refers to the optical fibre connection to transmit the high-frequency signal from the macro or micro site to the rest of the mobile network.
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"INWIT" |
Infrastrutture Wireless Italiane S.p.A.
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"IoT" |
Internet of Things, the interconnection of uniquely identifiable embedded computing devices within the existing internet infrastructure.
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"JV" |
Joint Venture.
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"Macro sites" |
the physical infrastructure, either ground-based ("
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"Micro sites"
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indoor / outdoor smalls cells, repeater sites, mobile sites and distributable antenna system.
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"MNO" |
mobile network operator.
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"MSA" |
master services agreement.
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"Passive Infrastructure" |
an installation comprising a set of different elements located at a Site and used to provide support to the Active Equipment.
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"Physical tenancy" |
the installation of Active Equipment on a Site.
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"Site" |
the Passive Infrastructure on which Active Equipment is mounted as well as its physical location.
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"Small Cells" |
low-powered radio access nodes used in the completion of macro cells and in areas of high traffic concentration.
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"White Spot" |
a specific geographical location where no mobile operator has network coverage.
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Forward-looking statements
This report contains "forward-looking statements" within the meaning of the US Private Securities Litigation Reform Act of 1995 with respect to the Company's results of operations, financial condition, liquidity, prospects, growth and strategies. Forward-looking statements include, but are not limited to, statements regarding objectives, targets, strategies, outlook and growth prospects, including guidance for the financial year ending
Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as "will", "could", "may", "should", "expects", "intends", "prepares" or "targets" (including in their negative form or other variations). By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. All subsequent written or oral forward-looking statements attributable to the Company or any member of the Vodafone Group, including any member of Vantage Towers, or any persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. No assurances can be given that the forward-looking statements in this document will be realised. Any forward-looking statements are made of the date of this announcement. Subject to compliance with applicable law and regulations, neither Vodafone nor Vantage Towers intend to update these forward-looking statements and do not undertake any obligation to do so.
Important Information
This announcement is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation of such jurisdiction or which would require any registration or licensing within such jurisdiction. Any failure to comply with these restrictions may constitute a violation of the laws of any such jurisdiction. This announcement 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 the Vodafone Group, including, for the avoidance of doubt, any company within Vantage Towers.
This announcement contains certain summary pro forma financial information of Vantage Towers for the financial year ended
This announcement also contains non-IFRS financial information which Vodafone's and Vantage Towers' management teams believe is valuable in understanding the performance of Vantage Towers. For a description of this information, please see "KPIs and financial terms" above. In this document, the Company utilises certain alternative performance measures, including but not limited to revenue (excluding pass through revenue), adjusted EBITDA, adjusted EBITDAaL, aggregated adjusted EBITDAaL, recurring OpFCF and RFCF, that in each case are not recognized under International Financial Reporting Standards ("IFRS"). These non-IFRS measures are presented as the Company believes that they and similar measures are widely used in the markets in which it operates as a means of evaluating a company's operating performance and financing structure. They may not be comparable to other similarly titled measures of other companies and are not measurements under IFRS or other generally accepted accounting principles, nor should they be considered as substitutes for the information contained in the financial statements included in this document.
This announcement does not purport to contain all information required to evaluate the Company and/or its financial position. Financial information in this announcement is preliminary and unaudited and certain financial information (including percentages) has been rounded according to established commercial standards. In addition, the Company is currently still in the process of establishing capital markets readiness by expanding the scope of management reporting, financial accounting as well as forecasting and budgeting processes through the hiring and training of additional resources and rolling out market standard policies and procedures. As a result, some of the financial and/or operational information set forth in this announcement remains subject to change and/or completion. Certain market positioning data about Vantage Towers included in this announcement is sourced from third party sources. Third party industry publications, studies and surveys generally state that the data contained therein have been obtained from sources believed to be reliable, but that there is no guarantee of the fairness, quality, accuracy, relevance, completeness or sufficiency of such data. Such research and estimates, and their underlying methodology and assumptions, have not been verified by any independent source for accuracy or completeness and are subject to change without notice. Accordingly, Vodafone and Vantage Towers expressly disclaim any responsibility for, or liability in respect of, such information and undue reliance should not be placed on such data.
References to Vodafone are to Vodafone Group Plc and references to Vodafone Group are to Vodafone Group Plc and its subsidiaries unless otherwise stated. References to Vantage Towers are either a reference to a member of the group of entities and investments comprising Vodafone's European towers business as described in this announcement, or to the group as a whole, depending on the context and unless otherwise stated. Vodafone, the Vodafone Speech Mark Devices, Vodacom and The future is exciting. Ready? are trade marks owned by Vodafone. Vantage Towers is a trade mark owned by Vantage Towers. Other product and company names mentioned herein may be the trade marks of their respective owners.
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