Dodo's Financial History
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ACQUISITION OF DODO AND RECOMMENDED OFF-MARKET TAKEOVER OFFER FOR EFTEL For personal use only 18 March 2013 Important Notice and Disclaimer General: This document has been prepared by M2 Telecommunications Group Ltd ACN 091 575 021 (M2) (ASX; MTU) to provide general information on M2’s proposed acquisitions of Dodo Australia Holdings Pty Ltd (Dodo) and Eftel Limited (Eftel) (together, “the Acquisitions”), as announced by M2 to ASX on 18 March 2013. This document (a) does not contain or summarise all information that an investor should consider when making an investment decision in relation to M2 Shares, Eftel Shares or any other financial products; and (b) contains information that may be subject to assumptions and qualifications the appropriateness of which may be subject to significant uncertainties and contingencies outside M2's control. This document should be read as subject to the further and more specific information that will be provided by M2 in the Bidder’s Statement that it intends to publicly release in late March / early April 2013 in relation to the off-market takeover offer for Eftel. Reliance on information from Dodo and Eftel: The information in this document relating to Dodo and Eftel, and those parts of the information relating to the expanded M2 Group which relate to Dodo and Eftel, has been prepared by M2 in reliance on information provided to it by Dodo and Eftel respectively. To the maximum extent permitted by law, neither M2, Dodo or Eftel assumes any responsibility for the accuracy or completeness of those parts of this document that may be derived from information supplied by Dodo or Eftel, and Dodo and Eftel do not assume any responsibility for the accuracy or completeness of the information in this document relating to M2 or those parts of the information relating to the expanded M2 Group which relate to M2. No financial product advice: The information contained in this document is not financial product or investment advice nor a recommendation in respect of M2 Shares or Eftel Shares This document has been prepared without taking into account the objectives, financial situation or needs of shareholders or other persons. Readers should consider the appropriateness of the information having regard to their own objectives, financial situation and needs and seek legal, taxation and financial advice appropriate to their jurisdiction and circumstances. Neither M2, Dodo or Eftel is licensed to provide financial product advice in respect of M2 Shares, Eftel Shares or any other financial products. No cooling-off regime applies (whether by operation of law or otherwise) in relation to the acquisition of M2 Shares or Eftel Shares. Risk of investment: An investment in M2 Shares is subject to investment, and other known and unknown risks, many of which are beyond M2’s control, including the possible loss of income or capital invested. M2 does not guarantee or give any assurance about any particular rate of return or the performance of it, any of its subsidiaries or the expanded M2 Group nor does M2 guarantee or give any assurance about the repayment of capital from any investment or any particular tax treatment. For personal use only Important Notice and Disclaimer (cont.) Forward looking statements : A forecast, estimate, projection or other prospective opinion in this document (Projection) may be based on information and assumptions supplied by a third party, reflect the author's judgment only at a specific date, is subject to change without notice, and is provided on the understanding that assumptions, on which Projections are based, may not be realised and that unanticipated events and circumstances may occur. Projections involve known and unknown risks, uncertainties, assumptions and other important factors that could cause the actual results or performance of M2 or the expanded M2 Group to be materially different from future results, performances or achievements expressed or implied by such Projections. Therefore, any Projections should be construed in light of such risks and undue reliance should not be placed on them. Disclaimer : M2, Dodo, Eftel, their related bodies corporate and their respective directors, officers, employees, consultants, agents and advisers: (a) make no representation or warranty, express or implied, as to the accuracy, currency, reliability or completeness of the information in this document; (b) are under no responsibility or liability to update this document; and (c) to the extent permitted by law, is not responsible or liable in any way whatever for any claim, loss, damage, cost or expense whether direct, indirect, consequential or otherwise, arising (whether in negligence or otherwise) out of or in connection with this document, its context or any omissions from it. This document is not a prospectus or product disclosure statement and does not constitute, and under no circumstances is to be used or considered as, an offer of securities for issue or sale, an invitation to apply for the issue of securities, an invitation to offer to purchase securities, or an offer to underwrite securities or to provide finance. Recipients of this document are not clients of M2, Dodo, Eftel nor of M2’s financial advisers. Financial data and rounding : All dollar values are in Australian dollars (A$) unless otherwise stated. A number of figures, amounts, percentages, estimates, calculations of value and fractions in this document are subject to the effect of rounding. Other: “FY" refers to Financial Year (year ended 30 June). Goldman Sachs and / or its affiliates (“Goldman Sachs”) is acting as exclusive financial adviser to M2 in relation to the Acquisitions and sole mandated lead arranger, underwriter and bookrunner to the $400m acquisition facilities. For personal use only Overview of Transactions Acquisition of Dodo Australia Holdings Pty Ltd (“Dodo”) for $203.9m on Dodo a debt-free and cash-free basis Recommended off-market takeover offer for Eftel Limited (“Eftel”) at an offer price of $0.3581 per share with cash or scrip consideration Eftel alternatives, implying a total enterprise value of $44.1m (inclusive of $5.6m net debt) Management expects the Acquisitions to contribute in excess of $400m revenue and $50m EBITDA in FY14, implying an indicative EBITDA valuation multiple for the Acquisitions of approximately 5.0x Financial impact Based on median broker FY14 EPS estimates (1) for M2 and assuming the Acquisitions contribute in excess of $50m of EBITDA, the Acquisitions are expected to result in underlying FY14 EPS (2)(3) accretion of approximately 20% (4) (1) Median broker estimate for underlying FY14 EPS is $0.41 per share as of 18 March 2013. For personal use only (2) Underlying EPS includes an add-back of a non-cash cost for amortisation associated with customer contracts acquired in the relevant period (in accordance with Australian Accounting Standards). (3) Australian Accounting Standards allow for 12 months from completion to finalise accounting and purchase price allocation. Fair value adjustments will be subject to purchase price allocation after completion. No amortisation charge has been included for any customer contracts deemed under Australian Accounting Standards, to have been acquired through the acquisition of Dodo and Eftel. (4) Based on M2’s current expectations for the earnings contribution from Dodo and Eftel in FY14 that were developed as part of M2’s due diligence, and there being no material change to the run rate performance or growth of those businesses during the period. M2 Investor Presentation, 18 March 2013, Slide 4 Overview of Dodo Founded in 2001, Dodo has grown organically to become one of Australia’s leading brands and largest privately owned telecommunications providers Focused on being a single point retailer of essential services to residential customers Broadband Mobile Home phones Wireless broadband Power and Gas Car, home building and contents insurance Over 400,000 customers and 660,000 active services For personal use only MOBILES MOBILES ADSL2+ HOME PHONE ELECTRICITY GAS INSURANCE BROADBAND BROADBAND & VoIP M2 Investor Presentation, 18 March 2013, Slide 5 Dodo’s Channels to Market Dodo has leading edge sales and marketing capabilities Online lead capture Electronic direct marketing Retail outlet partners Represented in over 14,000 retail outlets For personal use only M2 Investor Presentation, 18 March 2013, Slide 6 Dodo Power & Gas Dodo has an early stage power and gas business that is growing strongly Licensed to retail both electricity and gas in Victoria, New South Wales, South Australia, Queensland and the ACT Started offering electricity in Victoria in 2011 and has since expanded into New South Wales and Queensland. Launched gas offering to Victorian customers in December 2012 Significant growth to date, with more than 45,000 active energy customers today Demonstrated ability to cross-sell telecommunication and energy products with ~25% of all Dodo’s current energy customers also purchasing a Dodo telecommunication service Low cost new customer acquisition model, leveraging existing Manila customer service capability For personal use only M2 Investor Presentation, 18 March 2013, Slide 7 Dodo’s Financial History Dodo has a strong track record of organic revenue and EBITDA growth Revenue ($m) EBITDA ($m) 263 29 174 21 151 5 For personal use only FY11 FY12 FY13 FY11 FY12 FY13 M2 Investor Presentation, 18 March 2013, Slide 8 Business Overview of Eftel An ASX-listed market leading provider of a full suite of telecommunication