for personal use only - · pdf filefor personal use only 16 august 2012 . ......
TRANSCRIPT
Results for the year ended 30 June 2012
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Today’s Agenda
1 – The leading challenger
2 – Record results across key metrics
3 – A focus on execution
4 – Well positioned for future growth
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FY12 – another year of significant growth
• Acquisition of TransACT in November 2011 - network infrastructure assets and strong Corporate & Government division
• Acquisition of Internode in January 2012 – loyal customers, solid business revenues, strong cultural fit with mutual focus on technology and services
• Enablers in place to deliver acquisition synergies and further cost improvements in FY13/14
• AAPT billing migration substantially complete (maintains AAPT earnings in FY13)
• Leading competitive DSLAM footprint – now at 445 exchanges
• Significant growth in business division revenues, annualised run rate now >$170m
• Landmark victory in the iiNet copyright case
• Improved regulatory environment and benefit of interim determination on wholesale ADSL
• NBN starting to gather momentum – iiNet is the number one provider
• Continued strategic focus on selling more products to existing customers
iiNet Limited FY12 Results - 16 August 2012 3
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The clear No. 2 in DSL broadband
iiNet Limited FY12 Results - 16 August 2012 4
Source: Company reports, other public media and management statements, DSL only and excludes HFC, Fibre and satellite customers
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Today’s Agenda
2 – Record results across key metrics
3 – A focus on execution
4 – Well positioned for future growth
1 – The leading challenger
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Another set of excellent results
iiNet Limited FY12 Results - 16 August 2012 6
• Strong financial performance – Revenue up 19% to $831m – EBITDA up 47% to $145m – EBIT up 45% to $79m – EPS up 9% to 24 cps
• Strong balance sheet – Manageable gearing (net debt / equity) at 77% post-
acquisitions – 5x interest cover on EBIT
• Strong growth in cash flows – Operating cash flow pre interest payments up 16% to $119m1
• Continued growth in dividend – Final dividend of 8.0 cps fully franked – Total FY12 dividends up 17% to 14.0 cps fully franked
Note 1 - excludes acquisition deal costs per page 7 of Appendix 4E
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Strong growth in revenue and earnings
Revenue up 19% to $831m due to: • 5 months of Internode revenues • 7 months of TransACT revenues • organic growth in core products,
services and sectors (Business)
iiNet Limited FY12 Results - 16 August 2012 7
EBITDA up 47% to $145m and margin up from 14.0% to 17.4% due to: • organic and inorganic growth contributions • focus on core network efficiency – on-net mix,
bandwidth costs, etc. • regulatory benefits from interim determination
on wholesale ADSL • financial recognition of new IP capacity IRU • further operational cost-outs and acquisition
synergies to come in FY13 and beyond
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Increasing returns to shareholders
• Reported NPAT up 11% to $37.1m, with underlying NPAT (1) up 12% to $43.6m
• NPAT growth incorporates higher depreciation, amortisation and interest from acquisitions plus additional amortisation from IP capacity IRU contracts (see Appendix on page 30)
• Underlying EPS (+10%) incorporates additional shares issued for acquisition of Internode
• Synergies from acquisitions will help to drive NPAT and EPS growth in FY13
• Underlying ROE at 16.5%
iiNet Limited FY12 Results - 16 August 2012 8
Note 1: See page 3 of Appendix 4E for reconciliation of Reported to Underlying NPAT
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Strong operating cash flows
• Reported operating cash flow before interest up 16%
• growth in revenue and earnings
• benefits of acquisitions
• Capex well within FY12 guidance
• bulk of capex spent on DSLAM capacity and customer and network expansion at TransACT
• partially helped by disposal of wireless tower assets at Internode
• Manageable gearing
• Net debt / equity of 77% post acquisitions
• 5x interest cover
• headroom for growth
iiNet Limited FY12 Results - 16 August 2012 9
$m FY12 FY11
Operating cash flow 118.5 102.5
Net interest (14.9) (6.5)
Capital expenditure (46.2) (45.8)
Acquisition of ISP businesses (129.0) (75.1)
Costs incurred on ISP acquisitions (2.7) (3.9)
Subscriber acquisition costs (5.5) (6.2)
Net cash outflow before financing (79.8) (35.0)
Net debt 221.7 96.3
Shareholder’s equity 286.6 242.5
Gearing 77% 40%
Interest cover on underlying EBIT 5x 9x
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Continued growth in dividends
Increased dividend reflects strong earnings growth, excellent cash-flow generation, strong balance sheet and confidence in growth outlook
iiNet Limited FY12 Results - 16 August 2012 10
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Today’s Agenda
2 – Record results across key metrics 3 – A focus on execution
4 – Well positioned for future growth
1 – The leading challenger
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Growth in profitable on-net customer base
• Total group services up 26% to 1.6m, despite increasingly competitive market due to
– acquisitions of Internode and TransACT
– increased bundling
– increased focus on products per customer
• Continued focus on customer migrations, with 65% on-net
• AAPT customer billing migration to iiNet substantially complete ensuring full iiNet service experience
iiNet Limited FY12 Results - 16 August 2012 12
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Continued strong ARPU and margins
• Service model delivering steady on-net broadband ARPUs
• Broadband margin improvement from ACCC interim declaration on wholesale ADSL pricing and new IP capacity IRUs
• Fixed telephone ARPU impacted by call usage declines, consistent with prior trends
iiNet Limited FY12 Results - 16 August 2012 13
Note: margin is calculated on direct network and carrier costs only (excludes TransACT and Internode)
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Continued best-in-class service & churn
• High NPS throughout FY12
• Service orientated culture maintained across brand and product expansion
• Low churn despite increasingly competitive market (blended on-net and off-net)
• TIO customer complaints declined significantly
iiNet Limited FY12 Results - 16 August 2012 14
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Capturing market potential in Business segment
• A material segment to iiNet Group
• Detailed segmentation of the business customer base to support product development, marketing, sales and service processes and structures
• Customer insight led approach to capture the opportunity due to high level of market dissatisfaction with current providers
• Organisational structural review complete to leverage sales and service capabilities of newly acquired companies
iiNet Limited FY12 Results - 16 August 2012 15
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Delivering integration benefits from recent acquisitions
iiNet Limited FY12 Results - 16 August 2012 16
Systems integration
synergies of
$2-3m in FY13/14
Network synergies of $7m in FY13 F
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Acquired customers benefiting from group approach
iiNet Limited FY12 Results - 16 August 2012 17
Scale benefits lead to expanding content/gaming
Group wide access to unmetered content
Delivering the iiNet service experience
Sharing product &
service innovation F
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Further acquisition benefits to come
Scale benefits and a wider more focused integration effort
• Supplier contractual benefits through scale based agreements e.g. international
bandwidth
• Commercial leverage – new channels/ partnerships and routes to market
• Deeper back office integration – non customer facing departments – streamline
processes and systems, remove duplication
• Organisational improvements – centralise and maximise expertise and accountability
iiNet Limited FY12 Results - 16 August 2012 18
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Consolidation savings on international bandwidth agreements
iiNet Limited FY12 Results - 16 August 2012 19
Long term certainty of lower unit prices in place with further benefits to come in FY13-14
Accounting treatment of IRU capacity leases aligns iiNet with other telcos
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Today’s Agenda
2 – Record results across key metrics
3 – A focus on execution
4 – Well positioned for future growth
1 – The leading challenger
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Delivering the strategic vision
iiNet Limited FY12 Results - 16 August 2012 21
A segmented, customer insight led approach…
…to increase our products per customer from 2.1 to 3.0
19k customers (+16k)
78k customers (+33k)
15k customers (+8k)
>250k BoB™ units
Over 300 visits per month (now in Perth, Melbourne and Sydney)
Residential customers
SoHo/SMB
Enterprise Solutions
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Enablers in place – unassisted sales experience
iiNet Limited FY12 Results - 16 August 2012 22
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Improving products per customer
iiNet Limited FY12 Results - 16 August 2012 23
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The mobile opportunity – handsets launched today
iiNet Limited FY12 Results - 16 August 2012 24
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Capturing market potential in Business
• Growth in Business brand awareness, building credibility and enhancing service framework
• Business product progression to align iiNet as integrated communications services provider
• Integrated sales and service offering across brands to capture growth in target segments
iiNet Limited FY12 Results - 16 August 2012 25
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NBN – an exciting opportunity for iiNet and our customers
The first ISP to offer NBN products on Fibre, Wireless and Satellite
iiNet Limited FY12 Results - 16 August 2012 26
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In Summary
FY12 was another exceptional year with growth across key metrics • Major acquisitions of TransACT and Internode • Integration of AAPT largely completed • Strong growth in revenue, earnings and cash flow • Manageable gearing, even after acquisitions • Continued growth in dividends
More growth to come in FY13 • Complete integration of TransACT and Internode – full year of earnings and further synergies • Focus on products per subscriber and capture the opportunity in mobile • New and innovative product releases scheduled throughout FY13 • Continue to grow presence in key Business markets • Continued growth in NBN services - focused on new opportunities, continuing to
differentiate on awesome customer service, strong brand and innovative products
iiNet Limited FY12 Results - 16 August 2012 27
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Q&A For
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DISCLAIMER Some of the information contained in this presentation contains “forward-looking statements” which may not directly or exclusively relate to historical facts. These forward-looking statements reflect iiNet Limited current intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside the control of iiNet Limited. Important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks. Because actual results could differ materially from iiNet Limited current intentions, plans, expectations, assumptions and beliefs about the future, you are urged to view all forward-looking statements contained herein with caution.
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Appendix: FY12 reported depreciation & amortisation expense
• The majority of expense relates to plant & equipment depreciation across all group companies
• Amortisation of inorganically acquired customers bases relates to the subscriber base assets of Westnet, Netspace & AAPT – this is a non-cash charge to earnings
• The D&A charge also includes the effect of two IP capacity IRU’s (see slide 19)
• the new iiNet network capacity supply agreement IRU lease signed in August 2011
• Internode had an existing network capacity supply agreement IRU which also impacts the amortisation line
Description $m
Plant, equipment and leasehold improvements 35.3
Subscriber base amortisation 11.0
Split iiNet $10.5m and Internode $0.5m
Capitalised development costs 1.8
Subscriber acquisition costs 5.0
Patents, trademarks and other intangible assets 12.4
Includes IRU lease charges of $6.9m for iiNet and Internode
Reported total D&A charge to earnings 65.5
iiNet Limited FY12 Results - 16 August 2012
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