Changes in financial reporting - TIM, May 2019

Changes in financial reporting - TIM, May 2019

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  TIM Group Changes infinancial reporting 8 May 2019
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  1 Changes in FinancialReporting May 2019 Safe Harbour This presentation contains statements that constitute forward looking statements regarding the intent, belief or current expectations of future growth in the different business lines and the global business, financial results and other aspects of the activities and situation relating to the TIM Group. Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those projected or implied in the forward looking statements as a result of various factors. The financial results of the TIM Group are prepared in accordance with the International Financial Reporting Standards issued by IASB and endorsed by the EU (IFRS). The accounting policies and consolidation principles adopted in the preparation of the financial results for the FY18 have been applied on a basis consistent with those adopted in the 2017 Consolidated Financial Statements, except for the new standards and interpretations adopted by the Group since 1 January, 2018 (including IFRS 9 - Financial Instruments and IFRS 15 - Revenue from Contracts with Customers). TIM is adopting IFRS 16 from 1 January 2019, using the simplified retrospective approach, without restatement of prior period comparatives. The implementation of the new standard has not been fully completed; the impact of the adoption of IFRS 16 is unaudited and may be subject to change until the publication of TIM’s 2019 Annual Report. Alternative performance measures The TIM Group, in addition to the conventional financial performance measures established by IFRS, uses certain alternative performance measures in order to present a better understanding of the trend of operations and financial condition. Specifically, these alternative performance measures include: EBITDA (reported and organic), EBIT and net debt. Since 1 January 2019, the adoption of IFRS 16 led the TIM Group to adapt its financial indicators with: • EBITDA adjusted After Lease, where EBITDA is adjusted for the impact of lease costs, including depreciation of right-of-use assets and interest expense on lease liabilities; and • Net Financial Position After Lease, without impact of lease liabilities. Such alternative performance measures are unaudited.
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  2 Changes in FinancialReporting May 2019 Table of contents ▪ Overview ▪ IFRS 9/15 ▪ New Revenues Reporting ▪ IFRS 16 ▪ “After Lease” view
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  3 Changes in FinancialReporting May 2019 Additional key financial communication and guidance Overview Introducing TIM’s financial reporting for 2019 Reporting 2018 New Reporting No longer adopted First time adoption in 2019 Old Principles IFRS 9/15 “After Lease” viewIFRS 16 This presentation addresses two items which impact TIM’s financial reporting: 1) New Accounting Standards and KPIs - IFRS 16 and “After Lease” adoption (as from 1 January 2019) - IFRS 9/15 (already introduced in 2018) 2) New Revenues Segments Reporting Structure First time adoption in 2018 last shown in 2019
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  4 Changes in FinancialReporting May 2019 D IFRS 9/15 Post IFRS 9/15 D IFRS16 IFRS 16 D IFRS16 D IAS17 "After lease" EBITDA Organic -0.3 7.8 +0.7 8.5 -0.7 -0.4 7.4 EBITDA Reported -0.3 7.4 +0.7 8.1 -0.7 -0.4 7.0 Domestic -0.3 6.0 +0.4 6.4 -0.4 -0.3 5.6 Brasil -0.0 1.5 +0.3 1.8 -0.3 -0.1 1.4 Net Debt 25.3 +3.6 28.9 -3.6 -1.9 23.3 Debt / EBITDA Reported 3.41x 3.58x 3.33x Debt / EBITDA Organic 3.24x 3.40x 3.16x 1.5 3.11x 3.28x 25.3 8.1 7.7 6.2 New Reporting Pre IFRS 9/15 Reporting 2018 2018FY € Bn Overview Tim will provide comparability and guidance based on “After Lease” view Key impacts on EBITDA and Net Debt shown below ▪ TIM is introducing an “After Lease” view of its main financials, where all leases, including those classified as “Finance leases” on a IAS 17 basis, are reclassified as OPEX instead of amortization and interest expenses as IFRS 16 requires. ▪ All lease liabilities (operating and finance) are at the same time deducted from the Net Debt. ▪ No change for Lease in which TIM Group acts as Lessor Financial leases deducted Operating leases deducted 1 2 1 2 (1) (1) (1) EBITDA Reported excluding non recurring items
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  5 Changes in FinancialReporting May 2019 D IFRS 9/15 Post IFRS 9/15 DNewRep DIFRS16 IFRS 16 D IFRS16 D IAS17 "After lease" Domestic -0.2 15.0 15.0 15.0 o/w Services -0.2 13.7 -0.3 13.4 13.4 Brasil -0.0 3.9 3.9 3.9 Group -0.2 18.9 18.9 18.9 Domestic -0.3 6.4 +0.4 6.7 -0.4 -0.3 6.0 Brasil -0.0 1.5 +0.3 1.8 -0.3 -0.1 1.4 Group -0.3 7.8 +0.7 8.5 -0.7 -0.4 7.4 Domestic -0.3 6.0 +0.4 6.4 -0.4 -0.3 5.6 Brasil -0.0 1.5 +0.3 1.8 -0.3 -0.1 1.4 Group -0.3 7.4 +0.7 8.1 -0.7 -0.4 7.0 Domestic -0.1 3.1 3.1 3.1 Brasil -0.0 0.9 0.9 0.9 Group -0.1 4.0 4.0 4.0 Net Debt 25.3 +3.6 28.9 -3.6 -1.9 23.3 Debt / EBITDA 3.24x 3.40x 3.16x Reporting 2018 New Reporting 2018FY € Bn Pre IFRS 9/15 REVENUES 15.2 13.8 4.0 19.1 EBITDA organic 6.6 1.5 8.1 EBITDA reported 6.2 1.5 7.7 CAPEX ex spectrum 3.2 0.9 4.2 Net Debt (Group) 25.3 3.11x Overview Overview of all changes: accounting and revenues reporting o IFRS16 impacts OPEX (operating leases removed) and Net Debt (operating leases liabilities added) o For “After Lease” view, both IAS17 and IFRS16 effects are removed and all leases reclassified as OPEX. Net Debt is net of all lease liabilities 1 2 3 2 3 New revenues reporting no impact on total revenues1 D IFRS 16 DNewRevs Reporting
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  6 Changes in FinancialReporting May 2019 D IFRS 9/15 Post IFRS 9/15 Domestic -154 15,031 o/w Services -184 13,650 Brasil -16 3,943 o/w Services 3,763 Group -169 18,940 o/w Services -182 17,379 Domestic 112 8,730 Brasil 28 2,476 Group 141 11,191 Domestic -266 6,363 Brasil -44 1,467 Group -310 7,811 Domestic -266 5,955 Brasil -44 1,467 Group -310 7,403 Domestic -116 3,119 Brasil -34 890 Group -150 4,009 Net Debt 25,270 Debt / EBITDA 3.24x 2018FY € Mln Pre IFRS 9/15 REVENUES 15,185 13,834 3,959 3,763 19,109 17,561 OPEX 8,618 2,448 11,050 EBITDA organic 6,629 1,511 8,121 EBITDA reported 6,221 1,511 7,713 CAPEX ex spectrum 3,235 924 4,159 Net Debt (Group) 25,270 3.11x IFRS 9/15 A recap on IFRS 9/15 main differences vs “Old Principles” o Lower revenues (-€169m): IFRS15 key impact deriving from a different allocation of discounts within bundled services, following the principle of Relative Fair Value. o Higher OPEX (+€141m): with IFRS 15 some cost categories (eg. mobile acquisition costs) are no longer capitalized and depreciated but recognized as deferred contract costs. IFRS 9 has introduced the recognition of higher provisions on trade receivables, connected with the introduction of expected credit loss model instead of incurred losses model (required by IAS 39). o Lower CAPEX (-€150m): as a consequence of reduced capitalized OPEX (mobile acquisition costs). o IFRS 9/15 has no impact on EFCF and Net Debt, with positive Working Capital change (+€160m) offsetting the lower EBITDA- CAPEX contribution 1 2 3 4 1 2 3 4 IFRS 9/15 were introduced in 2018. Key variations vs. the “Old Principles” were the following.
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  7 Changes in FinancialReporting May 2019 New Revenues Reporting New revenues reporting: Wireline Old FY'18 New Service Revenues 9,875 Service Reve Traditional Services 3,485 Retail Servic Voice 2,809 o/w Broadb Business Data & Others trad 676 o/w ICT Se Innovative Services 3,150 Domestic W Broadband and Content 2,388 Internationa ICT Service 763 Subsidiaries Domestic Wholesale 2,021 Equipments TIS Group 1,272 TOTAL Subs. Adj. and Other -53 (1) Organization Equipments 602 TOTAL 10,477 Old FY'18 New Service Revenues 4,405 Service Reve Traditional Services 1,982 Retail Servic Wireline Revenues Mobile Revenues ▪ Adapting to organizational and business evolution, with a “Retail” and “Wholesale” view ▪ Overcoming anachronistic Traditional / Innovative view, with bundled services now being the norm ▪ Within Retail services, focus on Broadband and content and ICT services remains TOTAL WIRELINE REVENUES o/w ICT Services Domestic Wholesale (1) International Wholesale Subsidiaries, adjustments and other Equipments 2,066 756 529 216 228 5 353 602 13 1,272 634 1,660 2,546 2,774 2,380 6,524 9,875 10,477 135 7 323 510 186 569 1,618 2,458 2,593 5 310 515 189 614 1,639 2,468 2,572 o/w Broadband and content 2,538 2,402 563 1,607 136 -3 286 512 165 104 4Q18 FY18 REVENUES (€ mln) Wireline Service Revenues Retail Services 1Q18 2Q18 3Q18
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  8 Changes in FinancialReporting May 2019 REVENUES (€ mln) TOTAL MOBILE REVENUES Mobile Service Revenues o/w Incoming Wholesale and Other Handsets and Handsets Bundle (1) 4Q'18 MSR including non linear items (€34 mln) 1,274 1,078 408 289 3,699 4,107 5,185 314 80 73 880 960 228 88 73 946 1,034 277 102 74 942 1,044 259 138 70 931 1,069 4Q18 FY18 Retail Services 3Q181Q18 2Q18 1,262 1,3281,321 (1) New Revenues Reporting New revenues reporting: Mobile ▪ Adapting to organizational and business evolution, with a “Retail” and “Wholesale” view, the latter including MVNOs, Visitors and Inwit ▪ Overcoming anachronistic Traditional / Innovative view ▪ Revenues related to mobile handsets with bundled service promo (“Prova TIM”) are now booked in the “Handsets / Handsets bundle” revenue line ▪ Mobile ARPU calculation has been aligned accordingly Old FY'18 New Service Revenues 4,405 Service Reve Traditional Services 1,982 Retail Servi Outgoing voice 1,424 o/w Inco Incoming voice 315 Wholesale Messaging 242 Handsets an Innovative Services 2,121 TOTAL Browsing 1,647 Internet Content 474 Wholesale Services 302 Handsets 780 TOTAL 5,185 Mobile Revenues -2.4€-15% ARPU Old Principles New ARPU IFRS 9/15 Wholesale Prova TIM
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  9 Changes in FinancialReporting May 2019 Post IFRS 9/15 DNewRep DIFRS16 IFRS 16 Domestic 15.0 15.0 o/w Services 13.7 -0.3 13.4 Brasil 3.9 3.9 Group 18.9 18.9 Domestic 6.4 +0.4 6.7 Brasil 1.5 +0.3 1.8 Group 7.8 +0.7 8.5 Domestic 6.0 +0.4 6.4 Brasil 1.5 +0.3 1.8 Group 7.4 +0.7 8.1 Domestic 3.1 3.1 Brasil 0.9 0.9 Group 4.0 4.0 Net Debt 25.3 +3.6 28.9 Debt / EBITDA 3.24x 3.40x 2018FY € Bn REVENUES EBITDA organic EBITDA reported CAPEX ex spectrum Net Debt (Group) IFRS16 First adoption of IFRS 16 in 2019: key impacts ▪ Lower OPEX(€-0.7bn) due to the reclassification of operating leases expenses as Right of Use amortization and Lease liabilities interests, leading to a higher EBITDA. ▪ Higher Net Debt (+€3.6bn): related to the Lease Liabilities and Higher RoU Assets (+€3.6bn) 1 2 TIM is adopting IFRS 16 from 1st Jan 2019, with simplified retrospective approach (no restatement of Y2018). IFRS 16 introduces the requirement for all lease agreements (excluding those below threshold and <12months) to be booked on the balance sheet, with the same accounting model already adopted under IAS 17 for finance lease agreements 2 1 DNewRevs Reporting D IFRS 16
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  10 Changes in FinancialReporting May 2019 IFRS 16 D IFRS16 D IAS17 "After lease" Domestic 15.0 15.0 o/w Services 13.4 13.4 Brasil 3.9 3.9 Group 18.9 18.9 Domestic 6.7 -0.4 -0.3 6.0 Brasil 1.8 -0.3 -0.1 1.4 Group 8.5 -0.7 -0.4 7.4 Domestic 6.4 -0.4 -0.3 5.6 Brasil 1.8 -0.3 -0.1 1.4 Group 8.1 -0.7 -0.4 7.0 Domestic 3.1 3.1 Brasil 0.9 0.9 Group 4.0 4.0 Net Debt 28.9 -3.6 -1.9 23.3 Debt / EBITDA 3.40x 3.16x 2018FY € Bn REVENUES EBITDA organic EBITDA reported CAPEX ex spectrum Net Debt (Group) «After Lease» view After Lease adoption ▪ Impacts of IFRS 16 on operating leases reversed, with related expenses reclassified as OPEX. ▪ Impacts of IAS 17, which was already present in 2018 accounts, neutralized as well, to provide a full “After Lease” view. ▪ “Net debt AL” excludes all lease liabilities under IFRS 16 and IAS17. No reclassification made for Lease in which TIM Group acts as Lessor 1 2 1 2 3 3 Both financial and operating leases reclassified as OPEX and Net Debt excluding all lease liabilities
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  11 Changes in FinancialReporting May 2019 D IFRS 9/15 Post IFRS 9/15 D IAS17 "After lease" Domestic -154 15,031 15,031 o/w Services -184 13,650 -298 13,352 Brasil -16 3,943 3,943 o/w Services 3,763 3,763 Group -169 18,940 18,940 Domestic -266 6,363 -330 6,033 Brasil -44 1,467 -69 1,398 Group -310 7,811 -399 7,412 Domestic -266 5,955 -330 5,625 Brasil -44 1,467 -69 1,398 Group -310 7,403 -399 7,004 -144 4,255 -215 4,040 +0 2,587 2,587 EBIT Group -166 561 -184 377 +7 1,348 -184 1,164 2018FY € Mln Pre IFRS 9/15 REVENUES 15,185 13,834 3,959 3,763 19,109 EBITDA organic 6,629 1,511 8,121 EBITDA reported 6,221 1,511 7,713 Depreciation and Amortization 4,399 Gain/lo s s es /impairment o n no n current as s ets 2,587 727 Financial Expenses 1,341 «After Lease» view After Lease P&L reclassification DNewRevs Reporting D IAS 17 399 RoU Amortization and Financial Expenses reclassified as “OPEX”
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  12 Changes in FinancialReporting May 2019 IR Webpage www.telecomitalia.com/investors +39 06 3688 1 +39 02 8595 1 Phone E-mail Investor_relations@telecomitalia.it Contact details for all IR representatives: www.telecomitalia.com/ircontact s Investor Relations Contact Details TIM Slideshare www.slideshare.net/telecomitaliacorporatewww.twitter.com/TIMNewsroom TIM Twitter