Annual Report 2019 | 3 4
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FINANCIAL REPORT 2019 This page is intentionally left blank. Compliance Statement The undersigned certify that, to their knowledge: • The annual report of the Board of Directors gives a fair view • The consolidated financial statements which have been on the development and performance of the business and the prepared in accordance with the applicable standards, give a position of the Company and the entities included in the true and fair view of the equity, financial position and consolidation, together with a description of the principal risks performance of the Company and the entities included in the and uncertainties to which they are exposed. consolidation; John Porter Bert De Graeve Chief Executive Officer Chairman Table of contents Consolidated annual report of the board of directors for 2019 to the shareholders of Telenet Group Holding NV 6 Definitions ......................................................... 7 Important reporting changes ............................. 7 1. Information on the company 10 1.1 Overview ............................................. 10 1.2 Video ................................................... 11 1.3 Enhanced video .................................... 11 1.4 Broadband internet .............................. 11 1.5 Telephony ............................................ 12 1.6 Business services .................................. 13 1.7 Network .............................................. 13 1.8 Strategy ............................................... 14 2. Discussion of the consolidated financial statements 14 2.1 Revenue by service ............................... 14 2.2 Total expenses ..................................... 15 2.3 Expenses by nature .............................. 15 2.4 Net Result ............................................ 16 2.5 Adjusted EBITDA .................................. 17 2.6 Capital expenditure .............................. 18 2.7 Operating Free Cash FLow.................... 18 2.8 Cash flow and liquidity ......................... 18 2.9 Debt profile, cash balance and net leverage ratio ....................................... 20 2.10 Shareholder remuneration .................... 21 3. Risk factors 24 3.1 General information ............................. 22 3.2 Legal proceedings ................................ 23 Telenet | Annual Report 2019 | 3 4. Information about subsequent events 24 5. Information on research and development 25 6. Use of financial instruments 26 7. Non-financial information 27 7.1 Introduction ......................................... 27 7.2 Labor ................................................... 27 7.3 Environment ......................................... 28 7.4 Human rights ....................................... 30 7.5 Anti-corruption and bribery .................. 31 7.6 Non-financial indicators ........................ 32 7.7 2020 Sustainability outlook................... 34 8. Corporate governance statement 35 8.1 Reference code ..................................... 35 8.2 Regulatory developments and their impact on Telenet ................................. 35 8.3 Capital and shareholders ...................... 36 8.4 Internal control and risk management systems ................................................ 40 8.5 Board of directors ................................. 43 8.6 Daily management ............................... 50 8.7 Remuneration report ............................ 52 8.8 Audit of the company ........................... 60 Telenet Group Holding NV consolidated financial statements 61 1. Consolidated statement of financial position 68 2. Consolidated statement of profit or loss and other comprehensive income 70 3. Consolidated statement of changes in shareholders' equity 72 4. Consolidated statement of cash flows 75 4 | Telenet | Annual Report 2019 | 5. Notes to the consolidated financial statements for the year ended December Abridged annual report of the 31, 2019 77 board of directors to the 5.1 Reporting entity and basis of annual general meeting of preparation .......................................... 77 shareholders 183 5.2 Significant accounting policies .............. 79 5.3 Risk management ................................. 92 1. Abridged non-consolidated balance sheet 184 5.4 Property and equipment ....................... 102 5.5 Goodwill .............................................. 103 2. Abridged non-consolidated income 5.6 Other intangible assets ......................... 105 statement 185 5.7 Investments in and loans to equity accounted investees.............................. 106 5.8 Trade receivables .................................. 108 3. Capital 186 5.9 Other assets ......................................... 109 5.10 Inventories ............................................ 110 4. Accounting policies 187 5.11 Cash and cash equivalents .................... 110 4.1 General ................................................ 187 5.12 Shareholders' equity ............................. 111 4.2 Specific accounting policies................... 187 5.13 Loans and borrowings .......................... 121 5.14 Derivative financial instruments............. 130 5.15 Deferred taxes ...................................... 134 5. Abridged annual report concerting the statutory annual accounts of Telenet 5.16 Other non-current liabilities .................. 138 Group Holding NV 188 5.17 Employee benefit plans ......................... 138 5.1 Comments on the balance sheet........... 188 5.18 Accrued expenses, other current 5.2 Comments on the income statement .... 191 liabilities and provisions ........................ 142 5.3 Information on research and 5.19 Revenue ............................................... 144 development ........................................ 192 5.20 Expenses by nature ............................... 147 5.4 Risk factors ........................................... 192 5.21 Finance income / expense ..................... 149 5.5 Information about subsequent events ... 192 5.22 Income tax expense .............................. 149 5.6 Going concern ...................................... 192 5.23 Earnings per share ................................ 151 5.7 Application of legal rules regarding ............................... 5.24 Acquisition of subsidiaries ..................... 152 conflicts of interest 193 ............. 5.25 Non cash investing and financing 5.8 Branch offices of the Company 193 transactions .......................................... 158 5.9 Extraordinary activities and special .. 5.26 Commitments and contingencies .......... 158 assignments carried out by the auditor 193 5.10 5.27 Related parties ...................................... 162 Telenet hedging policy and the use of financial instruments............................. 193 5.28 Subsidiaries .......................................... 165 5.11 Grant of discharge to the directors and 5.29 Subsequent events ............................... 177 statutory auditor ................................... 193 5.30 External audit ....................................... 178 5.12 Information required pursuant to article 34 of the Belgian Royal Decree of November 14, 2007 and the law of April 6, 2010 ........................................ 193 Telenet | Annual Report 2019 | 5 Consolidated annual report of the board of directors for 2019 to the shareholders of Telenet Group Holding NV The board of directors of Telenet Group Holding NV has the pleasure to submit to you its consolidated annual report for the year ended December 31, 2019, in accordance with articles 3:6 and 3:32 (previously articles 96 and 119) of the Belgian Code of Companies and Associations. In this report, the board of directors also reports on relevant corporate governance matters as well as certain remuneration matters. In accordance with article 3:6, §2, 1° of the Belgian Code of Companies and Associations and the Royal Decree of 12 May 2019 the board of directors has decided to adopt the 2020 Belgian Corporate Governance Code as the reference code for corporate governance matters. 6 | Telenet | Annual Report 2019 | Introduction depreciation, amortization and impairment. Adjusted EBITDA is defined as EBITDA before stock-based compensation, post Definitions measurement period adjustments related to business acquisitions and restructuring charges, and before operating charges or credits (1) For purposes of calculating rebased growth rates on a comparable related to successful or unsuccessful acquisitions or divestitures. basis for the year ended December 31, 2019, Telenet has adjusted Operating charges or credits related to acquisitions or divestitures its historical revenue and Adjusted EBITDA to include (i) the pre- include (i) gains and losses on the disposition of long-lived assets, acquisition revenue and Adjusted EBITDA of Nextel (fully (ii) due diligence, legal, advisory and other third-party costs directly consolidated since May 31, 2018), (ii) the pre-acquisition revenue related to the Company’s efforts to acquire or divest controlling and Adjusted EBITDA of De Vijver Media (fully consolidated since interests in businesses, and (iii) other acquisition-related items, such June 3, 2019) and (iii) the impact of International Financial as gains and losses on the settlement of contingent consideration. Reporting Standards ("IFRS 16") (applied as of January 1, 2019) in Adjusted EBITDA is an additional measure used by management our rebased amounts for the year ended December 31, 2018 to to demonstrate the Company’s underlying performance and should the same