Q1 2021 results and subsequent events
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Q1 2021 results and subsequent events June 2021
Disclaimer
This investor presentation (the “Presentation”) has been prepared by Joint Stock Company Silknet (the “Company”). For the purposes of this disclaimer, “Presentation” shall mean this document, the oral presentation of the slides
by the Company and the related question-and-answer session and any materials distributed at, or in connection with, that presentation. The information contained herein is subject to change without notice and past performance
is not indicative of future results. No person shall have any right of action (except in case of fraud) against the Company or any other person in relation to the accuracy or completeness of the information contained herein.
This Presentation contains projections and forward looking statements. The words “believe”, “expect”, “anticipate”, “intend” and “plan” and similar expressions identify forward-looking statements. All statements other than
statements of historical facts included in this Presentation, including, without limitation, those regarding the Company’s financial position, business strategy, plans and objectives, are forward-looking statements. Such forward-
looking statements involve known and unknown risks, uncertainties and other factors which may cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company’s present and future business strategies and the
environment in which the Company will operate in the future. Further, certain forward-looking statements are based upon assumptions of future events which may not prove to be accurate. The forward-looking statements in this
document speak only as at the date of this Presentation and the Company assumes no obligation to update or provide any additional information in relation to such forward-looking statements. The contents of this presentation
have not been independently verified by or on behalf of the company or by any other independent third party. No representation, warranty or undertaking, express or implied, is made by any of the company, any of their respective
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agency to make an evaluation. The information presented herein is provided as at the date of this presentation and will be deemed to be superseded by any subsequent versions of this presentation.
Contacts: LILI PSHAVLISHVILI MARIAM JAVAKHIA GIORGI SURAMELASHVILI
CFO Deputy CFO, Head of Budgeting and Reporting Investor Relations
+995-577-149700 +995-598-553335 +995-568-858585
bpshavliishvili@silknet.com mjavakhia@silknet.com investorrelations@silknet.com
2
1 Silknet at a Glance 3
2 Q1 2021 Highlights and Covid-19 9
3 Business Overview 14
Appendix & Q1 2021 Financial Information 22
4
3
Silknet at a glance
Overview Key financials
One of the leading convergent telcos in Georgia1 w/o IFRS 16 with IFRS 16
• #1 fixed line with 57% market share1
GELm 2017 PF 2018 PF 2019 A 2020 A Q1 20 A Q1 21 A 2019 A 2020 A Q1 20 A Q1 21 A
• #2 fixed broadband with 31% market share1 Commercial revenue 319 332 346 348 87 87 346 348 87 87
Carrier services 80 67 41 35 9 9 41 35 9 9
• #2 pay television with 33% market share1
Total revenue 399 399 387 382 96 96 387 382 96 96
• #2 mobile with 34% market share1
Network of 4,000km+ fibre backbone across Georgia; FTTH network passing ~61% of EBITDA 165 188 203 198 49 47 216 211 52 50
households; 98% 4G population coverage
EBITDA margin 41% 47% 52% 52% 51% 49% 56% 55% 54% 52%
Pay TV Fixed broadband Fixed line Mobile
Credit ratings
33% 31% 34% Long-term credit rating Last update
57% Moody’s* B1/Negative March 2021
Fitch B/Stable December 2020
224 thousand 298 thousand 210 thousand 1,667 thousand
services2 services2 services2 SIMs2 * Silknet’s credit rating of B1 affirmed by Moody’s and outlook changed to negative from stable
4 Source: Company information, GNCC
Note: ¹ Based on the number of subscribers as of 31 March 2021; Pay TV market share does not include mobile streaming application subscribers;
2 As of 31 March 2021.Financial performance
Revenue
GELm 399 387 382 96 96 Maintaining commercial revenue despite :
67 41 35 9 9
• …Covid-19 impacting mobility of people, macro
environment, tourism activity…
332 +4% 346 +1% 348 87 -1% 87
Decline in EBITDA and margin due to:
2018PF 2019A 2020A Q1 20A Q1 21A • …GEL depreciation against USD by 13% in Q1 21 y/y
Commercial revenue Carrier services (calculated on average exchange rates)…
• …increased electricity tariffs
52%* 52%* 51%*
EBITDA 49%*
GELm 47% 13 14 3 3
IFRS 16
188 +8% 203 -2% 198 49 -4% 47
IFRS 16 was adopted from 1 January 2019. Impact on
EBITDA is positive GEL 13m in 2019, positive GEL 14m
in 2020, positive GEL 3m in Q1 20 and positive GEL
2018PF 2019A 2020A Q1 20A Q1 21A 3m in Q1 21.
EBITDA margin Impact of IFRS 16 *EBITDA margin without
Capex1 giving effect to IFRS 16
GELm
30% 33%
25% 26%
26% Approximately 80% of the capex in Q1 21 was related to network
development, mostly the final stages of the projects initiated in
2020 and accounted for as PP&E additions in 2021. As the
99 102 114 32
25 company has not initiated new capital expenditure programs in
2021, we expect the capex rate to decline in the course of 2021.
2018A 2019A 2020A Q1 20A Q1 21A
% revenue
5 Note: 1 Capex in this presentation represents recurring capex and is sum of property and equipment and intangible asset additions. Capex does not include non-recurring projects: 1) IT transformation
of GEL 8m and GEL 2m in 2019 and 2020, respectively 2) Euronews operating license of GEL 5m in 2020 3) Acquisition of subscriber contracts from local operator in amount of GEL 5m in 2020.-0.6% Commercial revenue evolution
+1.8% -1.3%
1.2 -0.4%
1.6
-0.3%
0.3 -0.7% +0.6% -0.8%
0.2 +0.6%
0.6 0.5 0.7 0.5
87.2
86.7
Q1 20 Mobile data Mobile voice Roaming Other mobile Fixed Pay TV Fixed line Other fixed Q1 21
services broadband services
Percentage changes attributable to each component
Factors affecting the evolution of commercial revenue:
• Mobile services – voice revenue under pressure with Covid-19 impacting mobility of people; roaming affected by significant
decrease in tourism activity; negative movements in macro environment offset by increased data consumption resulting in mobile
data revenue growth.
• Fixed services – impacted by slowdown in new customer acquisition and temporary suspension of fixed services by HoReCa, retail,
entertainment and other businesses.
6Quarterly performance
Quarterly financials
GELm Q1 20 Q2 20 Q3 20 Q4 20 2020 Q1 21
Commercial Revenue 87 81 90 89 348 87 Telecommunications remains one of the most resilient sectors. However, the lockdown
Carrier Services 9 8 8 10 35 9 has significantly impacted other sectors, resulting in slight decline in the demand for
Total revenue 96 89 98 99 382 96 some of our services
We managed to achieve some cost optimization through temporary closure of shops and
EBITDA 52 50 55 55 212 50 offices and adaptation of other administrative processes. However, the optimization
EBITDA margin 54% 56% 56% 55% 55% 52%
impact was netted against the increased cost of certain operating expenditures as a
result of GEL depreciation against USD & EUR
CAPEX 32 19 23 41 114 25
% of revenues 33% 21% 24% 41% 30% 26%
Commercial revenue growth y/y Commercial Revenue EBITDA -3%
CAPEX
-22%
-1%
56% 55% 41%
54%
56% 55%
90 89 55 55 41
87 87 52
81 50 50
33%
8% 32
7% 26%
24%
21% 25
23
5%
19
2%
2%
-1%
Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21
-1%
7 -2%
-2%
EBITDA margin % of revenues8
2.68
5%
95%
2.69
USD/EUR
R E VE N U E
2.87
GEL
2.96
Note: 1 Cash capex proportion
2.87
28%
72%
L E AS E S )
O P E X (I N C
F X BREAKDOWN
3.28
3.06
3.29
GE L / U S D H IST ORIC A L EXCH ANGE R ATE
82%
18%
3.28
C AP E X 1
3.41
3.27
100
120
130
140
150
90
110
1-Jan-20
11-Jan-20
5%
21-Jan-20
31-Jan-20
10-Feb-20
20-Feb-20
16%
1-Mar-20
11-Mar-20
21-Mar-20
31-Mar-20
5%
10-Apr-20
Source: Bloomberg
20-Apr-20
30-Apr-20
10-May-20
20-May-20
GEL/USD
30-May-20
9-Jun-20
19-Jun-20
74%
29-Jun-20
9-Jul-20
19-Jul-20
29-Jul-20
GROSS DEBT
8-Aug-20
18-Aug-20
TRY/USD
28-Aug-20
7-Sep-20
17-Sep-20
27-Sep-20
7-Oct-20
E X CH A N GE RA T E S RE L A T IV E T O U S D
17-Oct-20
GEL
27-Oct-20
6-Nov-20
16-Nov-20
EUR/USD
26-Nov-20
6-Dec-20
16-Dec-20
USD unhedged
26-Dec-20
5-Jan-21
15-Jan-21
25-Jan-21
(1 JAN 2020=100)
4-Feb-21
14-Feb-21
24-Feb-21
RUB/USD
6-Mar-21
16-Mar-21
USD hedged with cash balance
26-Mar-21
5-Apr-21
15-Apr-21
25-Apr-21
USD hedged with cross-currency swap
5-May-21
15-May-21
25-May-21
FX exposure
143
114
92
1181 Silknet at a Glance 3
2 Q1 2021 Highlights and Covid-19 9
3 Business Overview 14
Appendix & Q1 2021 Financial Information 22
4
9Country’s response to COVID-19
Daily cases in Georgia: Economic outlook :
International Monetary Fund (IMF) forecasts 3.5% real GDP growth in
6,000
2021, after the 2020 decline. The government of Georgia freshly
5,000 updated its forecast to 6.5% growth in 2021
The growth is expected to be driven by internal demand, as tourism
4,000
is unlikely to rebound in a significant fashion. We see encouraging
3,000
signs of the economic activity picking up as the economy has been
gradually opening up (see slide 11)
2,000 With the opening of the land borders, the very few remaining
restrictions are unlikely to stem economic activity. However, the still
1,000
low vaccination rate in Georgia and in its neighboring countries
- poses a challenge. There are some encouraging indications on the
availability of vaccines in Georgia in Q3 and Q4 2021
The sizeable aid and financing from the IMF, World Bank and other
international organizations and financial institutions (IFIs), directed at
After reopening of the economy accompanied with heavy internal tourism activity in August, the both public and private sectors, helped the government to manage
number of infected cases accelerated, but from the beginning of the new year, the number of cases the crisis prudently
have relatively stabilized. During the past two months, the government has been trying to ease recently
imposed restrictions, which drives the number of infected cases a little bit upwards.
The NBG and the banking sector have jointly implemented various
measures to help the banking sector stay healthy. Despite the
Georgia’s real GDP growth forecast: pandemic, bank loan portfolio grew by 9% in December 2020 y/y
(excluding the currency effect) and continued to grow by 3% in
7.4%
April 2021 compared to December 2020 and by 9% compared to
6.2% 6.4% April 2020
5.8%
4.8% 4.8% 5.1%
4.4% Georgian Lari depreciated in Q1, reaching 3.41 GEL/USD at the end
3.6% 3.5%
2.4%
3.0% 2.9% of the quarter and 3.45 at the peak in early May. As the currency
depreciation affected the inflation, the NBG increased the
refinancing rate to 9.5% and announced the plan alter foreign
currency reserve requirements for banks. As the result, exchange
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 F 2022 F rate reacted and came down to 3.27 GEL/USD at the end of May
-3.7% Stable currency, growing economy YTD and prudent fiscal and
monetary policy are likely to be conducive to healthy economy in
-6.2%
2021 and beyond
Source: Geostat, IMF
10
Note: Detailed information about the pandemic statistics and responsive plans of the country can be found on the website introduced by the Government – www.stopcov.geEconomy on the right track
Recovery of the economic activity reflected in
macroeconomic data:
Exports (y/y change): Imports (y/y change):
Economic activity has been accelerating YTD,
hand-in-hand with the gradual reopening of the
economy…
70.0%
56.5% …after the second-wave downturn in Q4 2020
and January 2021
13.3%
30.6% 8.1% 4m 2021 real GDP growth bodes well with
8.3% 3.9%
18.5%
-2.2% 2.9% the prospects for the year
-6.7%
Increased tourist activity, albeit far from the 2019
4.9% peaks, is likely to further contribute to growth
-13.7% -7.5% -16.2%
-0.9% -13.4% -17.1% -17.6% -11.9% -8.2%
-23.4% -10.4% -21.0% -12.9%
-28.5% -15.3% -17.7%
-33.3% -16.6% -15.5%
-31.3%
-38.6%
Source: GeoStat Source: GeoStat
VAT turnover (y/y change): Real GDP growth: Remittances (y/y change):
145.4%
44.8%
93.4%
28.6%
14.6% 22.1% 25.8% 18.6% 19.3%
5.1% 17.6% 49.5%
3.2% 2.2% 8.6% 9.4% 17.8% 12.5%15.9%
-6.2% 21.5% -0.7% 4.0%
7.6%
0.7%
10.5%
-3.9%-7.4% -2.3%-4.2% -5.1%
-2.7% -7.7% -5.3% -3.9% -9.0% -9.6%
-22.2% -5.5% -7.7% -5.1%
-32.8% -8.1% -7.9% -42.3%
-16.6%
-13.5% -11.5%
Source: GeoStat Source: GeoStat preliminary data Source: NBG
11Proactive COVID-19 response limited potential impact
Gradual restart of
economy:
Curfew for all reopening of
big cities shopping malls,
imposed. cinemas, sports
Full lockdown and Shopping malls, facilities, cafes &
state of Hotels and Borders with some hotels and restaurants in open
All international emergency in State of restaurants countries restaurants spaces; reopening
flights banned place emergency lifted reopened reopened closed of land borders.
Georgia
Early March 21 March 8 April 14 April Late May 13 July 4 August
18 March 21 May 8 June 1 August 9 November From late
February…till
now
Silknet
Most of the Closure of Installation fee Silkschool Start of Step-by- Launch of digital Installation fee
workforce shops and on new FBB/IPTV available for step reopening of onboarding and on new
switching to switch to the connections free shops SIM delivery FBB/IPTV
remote work digital sales imposed, turning services connections
channels postpaid Donation of GEL terminated
customers to 2m to StopCOV
prepaid
12
Source: Various official information; company informationDirect COVID-19 impact
FBB and IPTV total bandwidth (Gbps)1: Comments:
Commercial revenue change y/y:
650 Even as the economy stuttered, demand for our
600 11% services has mostly endured, while consumption of
9% certain services has increased significantly
550 7%
500 5% As our consumers’ dependence on OTT services
3% Impact of Covid-19 grows, demand for fixed and mobile services
450 1%
2019 follows suit
400 -1%
2020 -3% While some of these behavioral shifts may be
350 -5% temporary, the accelerated digitalization patterns
2021
300 -7% will stay with us, providing additional headroom to
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar benefit from elevated consumption and growing
20 20 20 20 20 20 20 20 20 20 20 20 21 21 21 demand for digital services in the long-run
Actual revenue change y/y
So far, we see that data traffic, for both mobile
We secure connectivity through closely monitoring and We calculate the impact of the Covid-19 as the difference between and fixed services, remains significantly higher y/y
managing our network load. Our network capacity enables us y/y revenue growth between pre-Covid-19 and post-Covid-19
to handle the elevated traffic periods. Our estimated impact of Covid-19 on total revenue of 2020 is
approximately 8%, or GEL 32m.
Mobile voice traffic (m minutes): Mobile data traffic (terabytes):
320 7,000
6,000
300
5,000
280 4,000
Unlimited data
260 3,000 packages
2,000
240
1,000
220 -
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2019 2020 2021 2019 2020 2021
To promote mobile data consumption and compensate for heavy Wi-Fi
usage during the home confinement, we launched unlimited data
packages.
13
Note: 1 Average of daily traffic peaks;1 Silknet at a Glance 3
2 Q1 2021 Highlights and Covid-19 9
3 Business Overview 14
Appendix & Q1 2021 Financial Information 22
4
142021 highlights
• Silknet’s credit rating of B1 affirmed by Moody’s and outlook changed to negative
from stable
• USD 10m private placement bond was repaid upon maturity at 31 March 2021
• David Birman joined Silknet as the Chief Brand Officer, a newly created position
reporting to the CEO. David has >20 years experience in leading banks and telcos in
Georgia and Azerbaijan, with focus on branding, digital product development and
customer experience
• Ookla recognized Silknet as the fastest mobile network operator in Georgia (see
slide 16)
• We completed the deployment of 230 gigabit-LTE sites in major cities and
communicated heavily around this, hand-in-hand with significant promotional
campaigns
• We reached an agreement with Adjarasport on sharing the UEFA about broadcasting
rights of various UEFA competitions (Champions League, Europa League,
Conference League and Junior Champions League) for the next three years
• Silknet signed the agreement on partnership with SAS, a world leader in customer
data analytics. Silknet will implement SAS campaign management solution,
including a loyalty system, which will afford Silknet to provide tailored offers based
on customers’ needs. In addition, the companies will join forces to offer various SAS
products and solutions to Silknet clients
15Silknet – the fastest mobile network operator in Georgia Silknet received the Speedtest Award for Fastest Mobile Network from Ookla, the global leader in internet testing and analysis Based on the results of thousands of consumer- initiated tests taken using Speedtest, Silknet’s network was revealed as Georgia’s fastest mobile network, based on analysis of Speedtest Intelligence® data for Q3–Q4 2020 This is yet another external recognition of the quality of our mobile network, after the Communications Commission drive tests results in 2020 16
17,000
Mobile
16,000
Silknet’s monthly 15,000
14,000
retail revenue
GEL ‘000s
13,000
12,000 Key takeaways
11,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Silknet’s mobile revenue demonstrated y/y growth in
2020 2021 March, despite the pandemic effects, especially on
tourism
MNO’s retail 2020 change y/y In Q1 we heavily promoted our new Gigabit-LTE
revenue 114 120 121 networks (230 sites in major cities), offering our
GELm 20 22 22 Silknet
Market w/o
Silknet subscribers much more data for usual tariffs. As a
54 54 56 result, our revenue was temporarily impacted while the
0%
data traffic increased significantly
40 44 43
Q1 19 Q1 20 Q1 21
Mobile services comprised 47% of Silknet’s total
Silknet MagtiCom Veon (Beeline)
revenue in Q1 21
-3%
10.4 10.0
Evolution of 9.0 8.6
9.1
B2C ARPU 10.0 9.6 9.2 Subscribers evolution1
8.5 8.3
‘000s
5.4 5.8 5.6 5.4
5.0 1,953 1,955 1,972 1,997
1,912
Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 1,705 1,647 1,658 1,656 1,667
Silknet MagtiCom Veon (Beeline)
1,246 1,223 1,242 1,251 1,266
Q1 20 Q2 20 Q3 20 Q4 20 Q1 21
17 Silknet MagtiCom Veon (Beeline)
Source: GNCC
Note: 1 Number of subscribers (SIM cards) at the end of the periodMobile data usage
Key takeaways
• Significant growth in mobile data traffic in Q1 21, +89% y/y
• Average consumption per mobile data user now >6.0GB/m
• The growth is facilitated by the ongoing network modernization, with population coverage reaching 98%, the launch and promotion of pioneering gigabit-LTE
• Data promotion campaigns
6,119 6,443
5,612 5,878 5,718
5,269 5,327 5,170 5,267
Evolution of mobile internet subscribers1 Silknet’s monthly 4,526 4,622 4,753
‘000s mobile internet traffic 3,195 3,604
2,816 Unlimited data
terabytes packages
1,054
1,022 1,016
975 985
955 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
929
904
849 2020 2021
829
901 920
875
843 832
Q1 20 Q2 20 Q3 20 Q4 20 Q1 21
Evolution of mobile 64
Silknet MagtiCom Veon (Beeline) internet traffic 34
13
‘000 terabytes 34
10
15
10 18
Q1 20 Q1 21
Silknet MagtiCom Veon (Beeline)
18
Source: GNCC
Note: 1 Number of subscribers (SIM cards) at the end of the periodFixed broadband
Key takeaways
+4%
• c.83% household fixed broadband penetration in Georgia1 Revenue evolution
69 72
• Silknet has 31% subscriber market share1 GELm
• c.15k new FTTH homes passed by Silknet in YTD 2021, c. 675K homes 13 14
passed in total (c. 61% of households)
32 33
• Fixed broadband comprised 26% of Silknet’s total revenue in Q1 21
24 25
ARPU dynamics Q1 20 Q1 21
• ARPU rebounded and grew y/y after the dip in Q2 20 and Q3 20 Silknet MagtiCom Other
as a result of the temporary suspension of services and shrinking
disposable income of the households due to the pandemic 19.7
19.5
• Significant pricing difference still remains between Tbilisi and B2C ARPU evolution3 19.4
other areas. Further expansion in small towns and rural areas may GEL 19.0 18.9
lead to overall ARPU decline 19.2
18.7 18.8
18.5
18.3
Q1 20 Q2 20 Q3 20 Q4 20 Q1 21
Market w/o Silknet Silknet
Subscribers evolution2
‘000s Silknet’s subscribers by key technologies: DSL and wireless continues to be cannibalized by FTTH
469
‘000s 292 298
450 455 458 462 278 288
266 278
243
18 11 11
21
22 23 21 35 22
289 291 293 292 298 13 61
90
120
135
190 183 189 190 187 235 259 266
165 196
95 124
Q1 20 Q2 20 Q3 20 Q4 20 Q1 21
2015 2016 2017 2018 2019 2020 Q1 21
Silknet MagtiCom Other
FTTH DSL Wireless
19
Source: GNCC
Note: 1 As of 31 March 2021; 2 Number of subscribers at the end of the period.Pay television
Key takeaways
• c.62% household pay television penetration
• Silknet holds 33% subscriber market share1 compared to 31% in fixed broadband on the back of the superior content offering and successful service bundling
• Pay TV comprised 12% of Silknet’s total revenue in Q1 21
Subscribers evolution1
‘000s
+4%
337 342 344 344 348
30 31
224 229 230 228 224
Revenue 3 3
evolution 16 16
100 105 105
90 97
GELm 11 12
Q1 20 Q1 21
Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Silknet MagtiCom Other
Silknet MagtiCom Other
ARPU evolution
17.1
GEL 16.7
16.3
15.6 15.8
14.8 14.6 14.6 14.5
14.3
Source: GNCC Q1 20 Q2 20 Q3 20 Q4 20 Q1 21
20 Note: 1 Number of subscribers at the end of the period; Excluding mobile streaming
Market w/o Silknet Silknet
application subscribers.Unique content portfolio
Unrivalled sports proposition with the widest selection of sports competition on the Georgian market
From the 2021/2022 seasons will share the UEFA competitions (Champions League, Europa League, Conference League
and Junior Champions League) with Adjarasport for a three-year period. In addition, Silknet has a revenue-sharing
agreement with Adjarasport with respect to the English Premier League
Exclusive rights to 25 Russian-language entertainment channels
Attractive VOD/ streaming offering through Amediateka on an exclusive basis
Exclusive sports content including our in-house sports channels already available at silksport.ge and silkgo.ge
We continue to evolve our content offering with Euronews Georgia, launched in Georgian language in August 2020
Rights to Setanta sport channels owned by Adjarasport with various sports content available on its two channels including
German Bundesliga, Italian Serie A, France Ligue 1, Formula 1, UFC and other.
Digital pioneer in the Georgian market and continuously developing streaming applications for Android, iOS and PC
21
Source: Company information1 Silknet at a Glance 3
2 Q1 2021 Highlights and Covid-19 9
3 Business Overview 14
Appendix & Q1 2021 Financial Information 22
4
22Statement of financial position
GELm 31 Dec 2019 31 Dec 2020 31 Mar 2021
ASSETS
Non-current assets
Property and equipment 378 394 393
Intangible assets and contract costs 200 196 193
1 Silknet repaid the USD10 mln private placement bond in Q1. as the result,
Other non-current assets 42 40 40 our cash and cash equivalents, as well as current loans and borrowings
Other financial instrument at FVTPL – net change in fair value - 13 16 decreased. Other changes in these captions are primarily due to the
Investment property 30 63 66 currency depreciation
Rights-of-use assets 53 45 43
Prepayments related to IRU contracts 10 10 10
Total non-current assets 712 761 760
2 Increase in trade and other payables in Q1 2021 was primarily due to the
Current assets currency depreciation, while the increase in 2020 was mainly driven by:
Inventories 11 11 10
Prepayments related to IRU contracts 2 2 2 Effort to maintain the strong cash liquidity in uncertain market
Trade and other receivables 37 30 31 conditions of 2020. We were able to negotiate extended payment
Cash and cash equivalents 75 78 69 1 terms with some of our major vendors
Total current assets 125 121 112
TOTAL ASSETS 837 882 872 Heavy capital investments in network
EQUITY AND LIABILITIES Local currency depreciation against USD and EUR. Due to our
Equity heavy dependence on international network equipment &
Share capital 84 84 84 software providers, the major part of payables are foreign
Additional paid-in capital 8 8 8 currency denominated
Accumulated losses (64) (151) (178)
Equity attributable to owner of the Company 28 (59) (86)
Non-controlling interests 0 (0) 0
TOTAL EQUITY 28 (59) (86)
LIABILITIES
Non-current liabilities
Loans and borrowings 618 668 694
Lease liabilities 45 40 38
Trade and other payables 13 33 27 2
Advances received related to IRU contracts and subscribers 15 14 14
Total non-current liabilities 691 755 773
Current liabilities
Loans and borrowings 17 54 42 1
96 108
Trade and other payables
Advances received related to IRU contracts and subscribers
67
22 23 23
2
Lease liabilities 12 12 12
Total current liabilities 118 186 184
TOTAL LIABILITIES 810 941 958
TOTAL LIABILITIES AND EQUITY 837 882 872
23Capital structure
31 Dec 19 31 Dec 20 31 Mar 21
Facility (GELm)
Eurobond 1 571.4 641.8 685.4 a)1 On 2 April 2019 the company issued USD 200m Eurobonds and refinanced all outstanding bank
Silknet 2017 Bond 34.5 34.5 2 - loans and promissory notes.
Silknet Private Placement Bond 28.7 32.8 34.4
Gross debt 634.8 709.1 719.8 Transaction costs of USD 3.9m deferred over a 5-year period, which resulted in the
Cash and cash equivalents (74.9) (77.8) (68.5) carrying amount of USD 196.1m
Net debt2 559.9 631.3 651.3
During the 2019 the company repurchased its Eurobonds in amount of USD 2.6m
Leverage1 2.59 2.98 3.11
a)
2 USD 10m private placement bond was repaid upon maturity at 31 March 2021
Net Debt EBITDA
(LTM) Leverage1
GEL651.3m 3.11X
GEL209.7m
Leverage evolution Debt maturities (GELm)
31 Dec 2019 31 Mar 2020 30 Jun 2020 30 Sep 2020 31 Dec 2020 31 Mar 2021 Silknet Private Placement Bond Silknet 2017 Bond Eurobond
685.4
Gross debt 634.8 727.8 669.0 730.3 709.1 719.8
Cash and cash equivalents (74.9) (116.0) (63.1) (95.4) (77.8) (68.5)
Net debt2 559.9 611.8 605.9 634.9 631.3 651.3
Leverage1 2.59 2.78 2.78 2.98 2.98 3.11
34.4
2021 2022 2023 2024
Source: Company information
Note: 1 Leverage is calculated based on the methodology defined in Eurobonds Terms & Conditions: EBITDA with IFRS 16 divided by the net debt; 2 Other than the debt disclosed above, the company has unused credit facility
24
(RCF) of USD20m with the sole purpose to serve coupon payments of USD200m Eurobond, in addition to letters of credits & guarantees with the aggregate amount of GEL36.0m (most of these guarantees are part of the
company’s ordinary course of business and are already included in working capital (trade payables)).Statement of profit or loss
GELm Q1 20 Q1 21 Y/Y Y/Y %
Revenues: 95.7 95.9 0.2 0%
Commercial revenue 87.2 86.7 (0.5) -1%
Carrier services 8.5 9.2 0.7 8%
Costs and expenses:
Interconnect fees and roaming expense (4.4) (4.3) 0.1 -2%
Pay TV content cost (3.2) (3.1) 0.1 -4%
Costs of SIM cards, scratch cards and other cost of sales (0.3) (0.2) 0.1 -33%
Advertising and marketing (1.6) (1.8) (0.2) 9%
Depreciation and amortisation charges (29.3) (29.5) (0.2) 1%
Salaries and benefits (14.5) (15.8) (1.3) 9%
Purchased services (8.9) (10.8) (1.9) 22%
Network management and maintenance costs (4.1) (4.0) 0.2 -5%
Infrastructure capacity rentals, IRU and lease expenses (2.1) (1.5) 0.6 -28%
Other expenses (7.2) (5.1) 2.1 -29%
Profit from operating activities 20.0 19.8 (0.3) -1%
Finance income 1.2 1.2 0.0 2%
Finance expense (23.0) (23.5) (0.5) 2%
Other financial instrument at FVTPL – net change in fair
12.7 2.6 (10.2)
value
Net Foreign exchange gain /(loss) (95.0) (26.6) 68.4
Profit/(loss) before income tax (84.0) (26.6) 57.4
Income tax expense (0.3) (0.1) 0.2
Total profit/(Loss) for the period (84.4) (26.7) 57.7
25Statement of cash flow GELm Q1 20 Q1 21 Y/Y Y/Y % Cash flows from operating activities Cash received from subscribers 101 100 (1) -1% Cash received from other telecom operators and for IRU contracts 5 6 1 12% Salaries and benefits paid to and on behalf of employees (13) (16) (3) 20% Interconnection fees and expenses paid (2) (3) (1) 66% Purchase of inventory (3) (2) 1 -29% Taxes paid other than on income (8) (12) (4) 47% Income tax paid - (0) (0) 0% Network management and maintenance costs paid (3) (3) 0 -5% Other operating expenses paid (17) (19) (2) 14% Net cash from operating activities 60 51 (9) -15% Cash flows from investing activities Acquisition of property and equipment (17) (12) 5 -29% Acquisition of investment property - (0) (0) 0% Acquisition of intangible assets (9) (11) (2) 25% Proceeds from disposals of property and equipment - 0 0 0% Interest received 1 1 (0) -23% Net cash used in investing activities (26) (23) 3 -12% Cash flows from financing activities Proceeds from borrowings - - - 0% Repayment of borrowings - (34) (34) 0% Interest paid (2) (3) (1) 44% Net payments of other financial instruments at FVTPL - - - 0% Lease payments (3) (2) 1 -26% Dividends paid - - 0% Net cash from financing activities (5) (39) (34) 679% Effect of exchange rate changes on cash and cash equivalents 12 2 (10) -86% Net increase in cash and cash equivalents 41 (9) Cash and equivalents at the beginning of the period 75 78 Cash and cash equivalents at the end of the period 116 69 26
Adjusted EBITDA
GELm Q1 20 Q1 21 Y/Y
Profit/(loss) for the year (84.4) (26.7) 57.7
Depreciation and amortisation 29.3 29.5 0.2
Finance costs 23.0 23.5 0.5
Finance income (1.2) (1.2) (0.0)
Net foreign exchange loss 95.0 26.6 (68.4)
Other financial instrument at FVTPL – net change in fair value (12.7) (2.6) 10.2
Income tax (benefit)/expense 0.3 0.1 (0.2)
Specific items (see below) 2.7 0.9 (1.8)
Adjusted EBITDA 52.0 50.2 (1.8)
GELm Q1 20 Q1 21 Y/Y
Loss on disposals of property and equipment 0.7 (0.0) (0.7)
Professional fees, one-time consulting expenses 0.9 0.6 (0.3)
Charity 1.2 0.3 (0.9)
Other (income)/expenses (0.1) 0.1 0.2
Total specific items 2.7 0.9 (1.8)
27Sources of financial information
• 2017 and 2018 are pro forma financial statements compiled by Silknet to illustrate the impact of the
Geocell acquisition on company’s financial statements and are based on the assumption that the
acquisition was completed at the beginning of the period. For further details and the basis of
preparation of pro forma financial information refer to the prospectus document of USD 200 million
Eurobonds on Silknet’s website
• 2019 and 2020 figures are based on audited Consolidated Financial Statements, unless otherwise
noted
• Q1 20 and Q1 21 figures are based on unaudited Consolidated Financial Statements, unless otherwise
noted
• EBITDA in this presentation means adjusted EBITDA as per audited Consolidated Financial Statements
• Figures are with giving effect to IFRS 16, unless otherwise stated
• Certain figures included in this presentation have been subject to rounding adjustments; accordingly,
figures shown for the same category presented in different tables may vary slightly and figures shown as
total in certain tables may not be an arithmetic aggregation of the figures which precede them
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