Presentation on theme: "Axia Investor Presentation (All figures in C$ millions unless otherwise noted) AXX:TSX March 2014."— Presentation transcript:
Axia Investor Presentation (All figures in C$ millions unless otherwise noted) AXX:TSX March 2014
22 Forward-Looking Statements This presentation contains forward-looking statements, including, without limitation, statements containing the words “should”, “believe”, “anticipate”, “may”, “plan”, “will”, “continue”, “intend”, “expect”, “estimate” and other similar expressions which constitute “forward-looking information” within the meaning of applicable Canadian securities laws. These statements are based on our current expectations, estimates, forecasts and assumptions about the operating environment, economies and markets in which we operate and are subject to important assumptions, risks and uncertainties that are difficult to predict. Examples of these statements would include those where Axia forecasts its success and timing in winning new NGN business, the timing of completion and estimated total costs of our networks, the revenues and operating costs associated with these networks over time, and Axia’s ability to generate future cash flows and avail itself of other financing alternatives given current market conditions. The assumptions, risks and uncertainties that could cause actual results to differ materially from the forward- looking information, include, but are not limited to, changes in customer markets, changes in demand for our services, our inability to deliver services in a timely and cost efficient manner, technological change, general economic conditions and other risks detailed from time to time in our ongoing filings with the Canadian securities regulatory authorities, including those in our Annual Information Form, which filings can be found at www.sedar.com. Given these assumptions, risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Unless otherwise required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements either as a result of new information, future events or otherwise.
33 Delivering Critical Fibre Optic Services >Axia owns, operates and sells services over fibre optic communications infrastructure Recurring bandwidth and dark fibre sales account for over 95% of Service Revenue 1 >Focus on non-metro communities in Alberta and France Over 75% of Service Revenue from Business / Government end users 1 >Differentiated business model Total focus on fibre transport connectivity gives customer choice of web services Leverage government grants/committed spend Support public policy, deliver infrastructure and competition in under-served regions >Axia grows its business by Connecting new customers to its networks Bringing new services to market Selectively expanding its network footprint 1 Based on NGN Services Revenue reported in Business Unit results as defined on page 11
44 Company Snapshot Share Price (Mar 14/2014)$2.56 52 Week – High/Low$2.78 / $1.24 Market Cap$160m Shares (m) – Basic/Diluted62.3 / 64.6 Management & Insiders 1 9% Cash / Debt (Dec 31/2013)$39m / $2m Credit Facility$20m senior fixed rate debt / Undrawn DividendJan 6/2014 declared first quarterly dividend of $0.0125 Normal Course Issuer BidRenewed Dec/2013 2012 - 2013 purchased 1.7m shares at average cost of $1.42/share 1 Excludes 5m shares held by Bell Canada
55 Balanced Plan To Increase Shareholder Value >Focused growth and investment in two geographies Alberta and France have critical mass in terms of profitability, network infrastructure and favorable operating/regulatory environments Large, underserved non-metro markets to exploit >Alberta Strong base of government business, maintain and extend relationship Significant opportunity to grow private sector Fibre-to-the-Premise (FTTP) business in select under-served regions across the province >France Substantial growth within existing network footprint as market further penetrated Healthy pipeline of new bids >Returning cash to shareholders Given confidence in cash generation and potential for future growth recently initiated quarterly dividend coupled with ongoing Normal Course Issuer Bid
66 Alberta >Well positioned with existing customer base Extended key contractual relationship with the Government of Alberta (GoA) through June 30, 2018 Deliver services to rural residential and business customers via 95 Retail Service Providers >By mid-2015 Axia will operate the most comprehensive, high quality and resilient fibre network (CiG) in the province Have begun a 12 – 18 month investment in fibre and related electronics, $20m senior fixed rate debt funding State of the art electronics, operating and business systems, new revenue highly accretive >Large FTTP opportunity emerging Select communities represent an addressable market of $225 - $275m $10m of cash on hand earmarked over next two years to fund local connection cost in select locations 2013 revenue of $50m and EBITDA of $22m Effective July 2015 local access fee of $6m annually replaces current Bell revenue share Over 13,000km of fibre connects to every community in the province Approximately 80% of revenue from GoA sites, remainder from rural commercial and residential customers Recently refreshed key elements of service delivery platform – electronics, OSS/BSS systems CiG – a province-wide fibre network that interconnects all communities in Alberta Alberta Summary
77 France >Business results meeting plan >Growth opportunity within existing network footprint as market further penetrated Currently at about 10% penetration, Axia expects Covage market penetration to reach 15 – 20% in next 3 – 5 years High proportion of incremental revenue flows through to EBITDA as cost base largely fixed >Pipeline of potential new Departments Covage active on several bids, a mixture of Covage’s traditional business/government fibre builds and newer large-scale Fibre-to-the-Home (FTTH) initiatives Axia has earmarked $20 - $30m of cash on hand to help fund potential new wins Current pipeline would increase Covage’s 2013 revenue and EBITDA by approximately 100% - 200% over 5 – 10 years 2013 revenue of $60m and EBITDA of $17m 19 regional network segments interconnected to a 3,700km national fibre backbone Covage emerging as largest “pure play” independent fibre operator in French market Covage has begun making interest payments on shareholder loans used to establish the business. Axia received the first of these interest payments in Dec/13 which totaled $2.8m. France Summary
88 Capital Investment Summary NetworkAxia SpendSourceProjectPotential Impact Alberta$20m committed over next 12 – 18 months Approx. $10m over next 2 years Debt 1 Cash on Hand Strategic Fibre (CiG) FTTP Axia can offer services to private sector in all Alberta communities Select communities representing an addressable market of $225 - $275m France$20 - $30m over next 4 years Cash on Hand New contract bids for FTTP – business and residential Current bid pipeline represents approximately $50 - $100m of revenue and $20 - $50m of EBITDA in 5 – 10 years 1 Senior fixed rate debt
99 Returning Cash To Shareholders >Prudent strategy of returning cash to shareholders while maintaining a strong balance sheet >Initial quarterly dividend of $0.0125 declared in January 2014 >Renewed Normal Course Issuer Bid for third consecutive year Current dividend yield 1.9% Dividend paid from operating cash flows In past two years repurchased 1.7m shares at an average cost of $1.42 per share Cash Return Summary
Business Unit Review 100% View All figures in C$ millions unless otherwise noted
1111 Q4/2013 Business Unit Trends 1 Q4/13 customer connections grew 10% YoY to 9,328 from 8,512 1On Jan 1, 2013, Axia adopted International Financial Reporting Standards (IFRS) 11 which changed reporting for Axia’s French business unit from proportionate consolidation to equity accounting. To aid in the analysis of the business, Axia provides a business unit summary which is the sum of 100% of the financial and operational results of North America, France and Corporate costs. Q4/13 recurring service revenue grew 22% YoY to $27.3m from $22.4m Service revenue accounted for 87% of total revenue in Q4/13 vs. 91% a year ago Q4/13 EBITDA grew 38% YoY to $8.1m from $5.9m Q4/13 EBITDA margin expanded to 30% from 26% last year
1212 Alberta – Positioning for Growth Overview Began operations in 2005, over 8,000 fibre miles, connects every community in the province. Education, Health, GoA, Libraries, Municipalities 80% of revenue, private sector accounts for remainder. Extensive network reach and scalable platform. Have upgraded network electronics and OSS/BSS systems, begun project to deploy strategic fibre. By mid-2015 Axia will operate what it believes is the most comprehensive, highest quality, most resilient fibre network in the province. Large fibre-to-the-premise opportunity to exploit. Key Metrics Headcount126 Infrastructure Replacement Cost$380m Axia Investment$40m Axia Ownership100% Customer Connections4,804
1313 France – Capitalizing on Strong Market Position Overview Covage began operations in 2006. Countrywide network, 19 regional segments connected to a 3,700 km national fibre backbone. Long-term concessions, awarded by local government for commercial market (enterprise, SME, government) and more recently FTTH. Federal Government established goal of deploying FTTH broadly throughout France within 10 years. Rural areas receive €6b of federal/local gov’t funding, €300m of grants per year available for 10 years. Key Metrics Headcount131 Infrastructure Replacement Cost$290m Axia Investment$90m Axia Ownership50% Customer Connections4,524
1414 Western Massachusetts >Government funded network build. Committed base of government business, 10 year extendable operating agreement signed in 2011. >Potential upside from success-based FTTP capital investments – e.g. connect government facilities not part of committed base of business. Long-term IRU provides ability to develop to private sector business. >Network build completed early 2014, operations at early stage. Initial government sites being connected.
1515 Investment Summary >Differentiated provider of critical fibre-based communications infrastructure. >Focused growth and investment in two key geographies; Long track record of profitable operations in Alberta >Select investments to open up large FTTP opportunity in private sector market French business has reached operational inflection point >Further penetrate market within existing network footprint >Pipeline of attractive potential new bids >Prudent return of cash to shareholders. >Strong balance sheet.