VEON Ltd. Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2021; annual report filed April 29, 2022. Although the request refers to 2021 Q4, this filing reports audited full-year results, not standalone fourth-quarter results. Financial statements are prepared under IFRS in U.S. dollars. Comparatives were adjusted to present Algeria as a discontinued operation.
Business context
VEON provides mobile, fixed-line, broadband and digital services across several emerging markets. Its reportable segments are Russia, Pakistan, Ukraine, Kazakhstan, Uzbekistan and Bangladesh. Russia and Ukraine represented approximately 51% and 14% of 2021 revenue, respectively. Algeria was classified as held for sale and discontinued operations after VEON exercised its put option to sell its stake.
Key financial metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Total operating revenue | US$7.788bn | US$7.291bn |
| Operating profit | US$1.544bn | US$0.511bn |
| Profit/(loss) from continuing operations | US$0.650bn | (US$0.395bn) |
| Profit/(loss) for the period, including discontinued operations | US$0.801bn | (US$0.316bn) |
| Adjusted EBITDA (non-IFRS) | US$3.333bn | US$3.151bn |
| Adjusted EBITDA margin (calculated) | 42.8% | 43.2% |
| Operating cash flow from continuing operations | US$2.376bn | US$2.231bn |
| Cash purchases of property, equipment and intangible assets | US$1.796bn | US$1.677bn |
| Cash and cash equivalents at year-end | US$2.252bn | US$1.669bn |
| External bank loans and bonds, principal outstanding | US$7.595bn | US$7.678bn |
| Lease liabilities | US$2.667bn | US$1.912bn |
| Working capital | (US$0.830bn) | (US$1.560bn) |
Revenue increased 6.8%, mainly from mobile data and fixed-line growth. Adjusted EBITDA rose 5.8%, while its margin declined slightly. Operating profit improved substantially, primarily because the prior year included a US$784 million impairment loss; the 2021 impairment charge was US$20 million. FY2021 profit also included a US$101 million gain on disposal of subsidiaries, associated with the Russian tower sale. Algeria contributed US$151 million of after-tax profit as a discontinued operation.
Cash flow from continuing operations increased, supported by higher EBITDA and improved working capital. Investing cash outflow was US$1.067 billion, lower than in 2020, in part due to Russian tower-sale proceeds. Capital expenditure excluding licenses and right-of-use assets was US$1.825 billion. VEON did not pay a dividend for FY2021. The filing does not provide standalone Q4 financial results or numerical FY2022 guidance.
Material changes and significant events
- Revenue grew across Pakistan, Ukraine and Kazakhstan, among other markets; Uzbekistan revenue declined 2.0% in U.S. dollar terms but rose 3.6% in local currency.
- VEON acquired the remaining 15% of Pakistan Mobile Communications Limited for US$273 million, reaching full ownership.
- VEON sold its Russian tower subsidiary for RUB70.65 billion (approximately US$957 million) and entered into long-term lease arrangements for tower access.
- VEON exercised its option to sell its 45.57% stake in Algeria to Algeria’s National Investment Fund. The expected sale price was US$682 million, with completion anticipated in 2022; the sale was not yet completed at filing.
- Gross debt principal was broadly lower year over year, while lease liabilities increased. The filing reported US$7.595 billion of external debt principal and US$2.667 billion of lease liabilities at year-end.
Outlook, risks and contingencies
- Going concern: The auditor’s report includes a substantial-doubt paragraph related to the Russia-Ukraine conflict. Management concluded a material uncertainty remained, despite expecting available liquidity to cover current obligations for at least 12 months under its assumptions. The statements do not include adjustments that might result if VEON could not continue as a going concern.
- Conflict and sanctions: The conflict began after the reporting date but was expected to materially affect 2022 results, liquidity and operations. Risks include damage or disruption to Ukrainian networks, weaker Russian results in U.S. dollar terms, currency controls, sanctions and export restrictions, supplier and counterparty withdrawals, and potential restrictions on moving cash between subsidiaries and headquarters.
- Liquidity and debt: The filing identified upcoming bond maturities in February and April 2023 and uncertainty about refinancing, covenant compliance and cash transfers. After year-end, VEON reported approximately US$1.3 billion of accessible Amsterdam-headquarters cash, over US$500 million of operating-company cash, and about US$700 million available under its revolving credit facility; it was in the process of drawing the remaining facility commitments.
- Impairment and assets: VEON anticipated potentially material impairment charges for Russia and/or Ukraine in 2022 but could not estimate an amount or range. Russia had approximately US$1.084 billion of goodwill at year-end. Impairments could affect debt covenants and, in adverse circumstances, prompt early repayment obligations.
- Other exposures: Risks include foreign-exchange volatility, regulation and license renewals, tax disputes, competition, cybersecurity, network and supplier disruption, and restrictions on subsidiary distributions. The filing identifies quantified contingencies, including uncertain income tax positions of US$158 million and non-income-tax provisions of US$88 million. The potential outcomes of legal and tax matters remain uncertain.
- Listing: NASDAQ notified VEON in April 2022 that its ADS price did not meet the minimum-bid requirement; the notice did not immediately affect trading, but compliance had to be regained within the applicable period.
Most important facts for investors to verify
- Current liquidity, revolving-credit-facility availability and drawdowns, and the ability to meet the 2023 bond maturities without breaching covenants.
- Developments in sanctions, export controls, currency restrictions and the ability to transfer cash to and from Russia and Ukraine.
- Actual operating performance and customer trends in Russia and Ukraine, and any 2022 impairment charges or related covenant effects.
- Completion, timing and proceeds of the Algeria sale, and whether proceeds are accessible for group liquidity needs.
- NASDAQ listing compliance and any changes in auditor, counterparties, financing access or other material post-filing developments.