Ziggo N.V.
Annual Report 2013
Connecting people
Ziggo at a glance
Performance
Governance
Financial statements
CEO Statement
3
Operational review
13
Corporate Governance
36
Ziggo at a glance
5
Financial review
19
Chairman’s Statement
37
Products and services
6
Corporate social
responsibility
Supervisory Board
39
28
Board of Management
41
Investor relations
31
Facts & figures
Mission, trends
and strategy
7
9
Consolidated statement
of income
62
Consolidated statement
of comprehensive
income
63
Consolidated statement
of financial position
64
Dutch Corporate
Governance Code
43
Risk Management and
Internal Control
In Control and
Compliance Statement
Consolidated statement
of changes in equity
65
45
Consolidated statement
of cash flows
66
53
Report of the
Supervisory Board
54
Remuneration Report
56
Notes to the
consolidated financial
statements
Corporate financial
statements
67
102
Notes to the corporate
financial statements
106
Appropriation of result 114
Independent auditor’s
report
115
Contact details and
address
116
This pdf is interactive. The content is clickable
so you can navigate through this document.
Ziggo N.V. Annual Report 2013 2
Ziggo at a glance
Performance
Governance
Financial statements
CEO Statement
“Focus on
the customer”
“The company’s people,
their motivation
and their achievements
impress me.”
René Obermann, CEO
Contents
Ziggo N.V. Annual Report 2013 3
Ziggo at a glance
Performance
Governance
Financial statements
As the new CEO of Ziggo, the Company’s people,
their motivation and their achievements impress me.
In a competitive market, characterized by rapid
technological changes, the Company managed solid
growth, especially in All-in-1 bundles, broadband
internet subscriptions and the segment of home
offices and small and medium-sized businesses of
the business market.
The growth was supported by a revised marketing strategy,
In early 2014, the Company was presented with a potential
which was implemented early in the year. Higher investments
change in ownership. This is still awaiting the acceptance of
in sales, promotions and customer retention all contributed to
shareholders and approval by the authorities. However, given the
Ziggo’s performance in 2013.
great potential of the merger of two strong regionally operating
Dutch companies, it has the full support of the Supervisory
This was also the year the Company took its first steps in
Board and the Board of Management. Until completion of the
offering mobile services and rolled out over 1 million WifiSpots,
transaction, the Company has agreed not to pay or declare any
resulting in more than 300,000 unique users every week.
further (interim) dividend or to make any distribution.
In a converging world, these milestones are important for
our future ambitions of connecting our customers anywhere,
anytime. Driving innovation, together with customer
satisfaction, are key to differentiate Ziggo in a competitive
landscape where technology changes so rapidly.
Growth in 2014 will be based on our strong network and
”Growth in 2014 will be based on
our strong network and appealing
product offerings such as superior
broadband internet, Ziggo Mobile
and our B2B services.“
appealing product offerings, such as superior broadband
internet, Ziggo Mobile and our B2B services. As we anticipate
The dedication of our employees was extremely important in
no substantial change in the intense market competitiveness,
driving customer satisfaction levels in 2013. Again, we were
we intend to make further investments in sales and promotions,
able to outperform the previous year. I would like to thank all
customer retention and product development to strengthen
of them. Also, I would like to thank our customers, for their
our position. We expect that these additional investments,
appreciation and trust in Ziggo. It is my strong belief that 2014
which will be skewed towards the first half of the year, to result
will be a challenging, but successful year.
in a flat EBITDA for 2014 compared to last year. Following
increased network investments to stay ahead of ever-increasing
customer demand for bandwidth, the investments in set top
boxes to support the customer experience, and the continuation
René Obermann
Chief Executive Officer Ziggo
of investments to upgrade our IT systems to enable converged
services, Capex will increase to around €370 million in 2014.
Contents
March 5, 2014
Ziggo N.V. Annual Report 2013 4
Ziggo at a glance
Performance
Governance
Financial statements
Ziggo at a glance
Ziggo is a Dutch provider of
entertainment, information
and communication through
television, broadband internet
and telephony services.
We supply around 2.8 million
households and small
businesses with television,
almost 2.3 million with digital
television, about 1.9 million
with broadband internet,
and 1.6 million with telephony
services. About 1.5 million
customers are subscribers
to our All-in-1 bundle.
Contents
Ziggo N.V. Annual Report 2013 5
Ziggo at a glance
Performance
Governance
Financial statements
Products and services
Ziggo owns a next-generation network capable of providing the
Introduced in 2013
bandwidth required for all future services currently foreseen.
Today we provide 150 Mbps download speed throughout our
Cloud User Interface
complete service area. With the technology currently in place
On March 15, Ziggo officially introduced the first fully cloud-
in the network, we can upgrade this to 400 Mbps, while higher
based interactive DVB-C TV service in the world. By combining
speeds are already tested over our kind of network, proving our
the IP protocol with the DVB-C television standard, even set
infrastructure is a next-generation future-proof network.
top boxes without inbuilt hardware functionality for
interactivity are now able to utilize interactive services via
Television
cable. This enables customers to access interactive services
Ziggo offers customers three digital TV packages, all of which
like Video on Demand or ‘TV Gemist’ via a simple and basic
include interactive television- and premium packages. With this
digital receiver.
offering, customers have access to high quality digital and
HD TV and interactive and recording facilities depending on
Ziggo WifiSpots
the set top box they have selected. In addition to our TV
At the end of April, we launched the roll-out of our WiFi
packages, we offer subscriptions to premium channels such as
Homezone concept in our footprint, called ‘Ziggo WifiSpots’,
HBO, Fox Sports, Film1, Sport1 and channels with a lifestyle
starting with the activation of 65,000 ‘Ziggo WifiSpots’ in the
angle. We have also developed a TV app to enable customers
city of The Hague. The wifi-hotspot concept utilizes the public
to watch live TV on smartphones and tablets, in and around
channel of our wifi EuroDOCSIS 3.0 modems at the customer’s
the house and around our 1 million WifiSpots.
premises, enabling all Ziggo internet customers to access
high-speed internet in the vicinity of an activated Ziggo
Internet
modem. Since its launch in April, 2013, Ziggo has activated
Ziggo offers the highest internet speeds in the market. This is
over 1 million WifiSpots.
due to our ultramodern hybrid fibre coaxial network, with fibre
very close to the home – within less than 300 meters – and
Ziggo Mobile
the implementation of EuroDocsis 3.0. We are able to provide
On September 16, Ziggo launched its mobile voice and data
higher speeds and capacity in line with the development of
service: Ziggo Mobile. Ziggo Mobile has been specially created
the demand for broadband.
for existing Ziggo customers. Ziggo Mobile has two SIM-Only
subscription options for consumers and two for business
Telephony
clients. The basic consumer subscription is available for
Ziggo telephony subscribers can phone each other, other
€15 per month (incl. VAT). This subscription offers 300 minutes
landlines and mobile numbers within The Netherlands for an
call time/text messages, 1,000 MB data and unlimited access to
additional fixed fee of €9.95 per month.
more than 1 million Ziggo WifiSpots. There is an introductory
subscription for business clients of €20 (excl. VAT) with 400
All-in-1 bundles
minutes call time/text messages, 1,000 MB data and unlimited
Over half our customers subscribe to our products in the
access to the Ziggo WifiSpots. Both Ziggo Mobile propositions
triple-play product All-in-1. This is the best bundle in the
come with one-month notice periods.
market, with highest quality content, best HD signal quality,
highest internet speeds and high quality telephony services
CI+ 1.3 module
for an attractive price.
On November 5, we introduced the CI+ 1.3 module, enabling
interactive services such as on-demand movies, television
Business to business
series or missed TV programmes, without the use of a set top
Business-to-business customers use services such as data
box and using the remote control of the television set.
communication, telephony, television and internet. Ziggo
Ziggo is the first in the world to enable interactive television
provides these services over the same network to business
via such a CI+ module. Since the beginning of 2013, an
customers such as home offices, small and medium-sized
increasing number of televisions have been enabled for
businesses, hospitals, hotels, schools and student dorms.
usage of this CI+ 1.3 module. The CI+ 1.3 module makes use
We have a range of different products and services bundled
of the streaming graphical user interface (SGUI) which was
in ways particularly suited to the business sector. For home
deployed earlier in 2013.
offices and small businesses, these services are provided
through business bundles, such as Office Basis and Internet Plus.
Contents
Ziggo N.V. Annual Report 2013 6
Ziggo at a glance
Performance
Governance
Financial statements
Facts & figures
Connected households
and businesses
Broadband internet
connections
Employees
Serving about 2.8 million
With over 1.9 million broadband
Our dedicated employees work
households, home offices and
internet customers, Ziggo is one
day in, day out to meet our
small businesses, Ziggo is one
of the leading companies in
customers’ expectations.
of the largest providers of media
high-speed internet connections
and communication services in
up to 150Mbps.
the Netherlands.
2.8
Mln
1.9
Mln
3,354
FTEs
Digital TV
customers
Telephony
customers
Hybrid Fibre
Coaxial network
With over 2.3 million digital TV
More than 1.6 million customers
The Ziggo Hybrid Fibre Coaxial (HFC)
customers, we are the largest digital
use Ziggo telephony.
network consists of 98% fibre,
television provider, offering the best
extending on average to less than
digital TV quality, in Standard
300 metres from customer homes
Definition, 3D, High Definition and VoD.
and offices, which are connected
by a high-capacity coaxial cable.
2.3
Contents
Mln
1.6
Mln
98%
Ziggo N.V. Annual Report 2013 7
Ziggo at a glance
Performance
Governance
Service area
& locations
Financial statements
Television
subscriptions
Rijswijk
Eindhoven
Groningen
Heerhugowaard
Utrecht
Zwolle
Analog
505
Digital
2013
2,291
Analog
636
Digital
2012
2,256
Service area
Product overview
7,186 7,102
4,247 4,213
2,796 2,892
1,910 1,788
2013
2012
Total RGUs
Contents
2013
Homes
passed
2012
2013
2012
Total TV
customers
872
929
2013
2012
Digital pay TV
customers
2013
2012
Internet
subscribers
1,608 1,493
1,538 1,423
2013
2013
2012
Telephony
subscribers
2012
Total triple
pay
Ziggo N.V. Annual Report 2013 8
Ziggo at a glance
Performance
Governance
Financial statements
Mission, trends
and strategy
At Ziggo, we want our customers to experience the highest
level of convenience and pleasure in the field of information,
communication and entertainment. We offer customers
access to high-quality content and differentiating services,
anywhere and at any time through our state-of-the-art
network. In doing so, our mission is to be the preferred
media and entertainment company.
Ziggo is the largest Dutch cable operator with a network
existing products and realizing our innovation roadmap. These
that covers approximately 56% of total homes passed in the
topics will be discussed in the following paragraph.
Netherlands. Our service portfolio includes TV, broadband
internet and (fixed and mobile) telephony services to
Innovation and growth opportunities
consumers and businesses. Our strategy is to combine
Innovation is key to capturing new growth opportunities and
individual services in attractive packages, offering customers
strengthening our leading position in the dynamic Dutch
benefits in terms of convenience and cost while optimizing
telecom and media market. Our strategy is fully focused on
our network’s utilization.
providing customers access to high-quality content and
services – anywhere and anytime – by leveraging and further
Superior network and product offering
improving our superior infrastructure and introducing new
Instrumental to the success of Ziggo’s strategy is our fully-
products and services.
owned Hybrid Fibre Coaxial (HFC) network, which is very dense
and brings high-capacity fibre very close (on average less than
300 metres) to the premises of our customers. As a result,
we provide individual households in our service area with
connections consisting for 98% out of fibre and a constant
capacity of 3-4 Gbps. Our superior network enables us to offer
our customers the best-value products and services now and
“Our superior network enables
us to offer our customers
the best-value products
and services now and in the
foreseeable future.”
in the foreseeable future. As DOCSIS 3.0 is completely rolled
out, Ziggo chooses to deliver internet speeds up to 150 Mbps
Ziggo continuously monitors the demand for bandwidth and
to all our homes passed today, whilst having the option to
increases the capacity of its network in order to deliver the
increase speeds to 400 Mbps at our discretion using our
best possible service to our customers. At the same time, since
current technology.
DOCSIS 3.1 has been defined as the next industry standard, we
closely monitor the development of the next generation of
Furthermore, we focus on providing our customers with highly
corresponding hardware, so we can roll out DOCSIS 3.1 and
attractive propositions which differentiate us from our
gradually increase internet speeds to up to 10 Gbps as our
competitors in terms of content, speed, functionality and
customers need it. In doing so, Ziggo makes sure it maintains
quality of service. Thanks to our network strength and
its superior network advantage in the longer run.
differentiating service propositions, we have developed leading
positions in triple-play, digital pay TV and broadband internet
Ziggo believes that ubiquitous broadband connectivity will
services within our service area.
become increasingly important for end users and we are
deploying a mix of technologies and infrastructures to cater
We will continue to leverage our network and proposition
to this need. In 2013, Ziggo successfully rolled out more than
advantages to grow by increasing the product penetration of
1.1 million WifiSpots, using Ziggo wifi routers at the premises of
Contents
Ziggo N.V. Annual Report 2013 9
Ziggo at a glance
Performance
Governance
Financial statements
our consumer and business customers as public hotspots for
of our TV Everywhere strategy enabling customers to watch
other Ziggo customers. Moreover, we have started pilots in
interactive television on tablets and smartphones wherever
2013 to further expand the wifi coverage in the public space
they want, whenever they want.
for our customers by installing public hotspots on Ziggo’s
existing street cabinets. The use of public hotspots using wifi
Customer services
routers and street cabinets implies a significant expansion of
Increasing customer satisfaction is of crucial importance
the accessibility of our high-capacity network for individual
to Ziggo. About one-third of our workforce is active in direct
customers far beyond proximity of their homes. Finally, we
customer service. We have invested and will continue to invest
further complement our fixed and wifi coverage with a range
heavily in our customer services. The fact that a significant
of mobile solutions and infrastructures, such as an MVNO
part of our employees’ and management performance
(mobile virtual network operator) and our 2.6Ghz LTE license
bonuses are based on customer satisfaction criteria
acquired in 2010. In September 2013, Ziggo successfully
underscores the importance we attach to customer service.
launched its first mobile propositions offering mobile voice
and data to existing customers. The fact that Ziggo already has
The increase of customer satisfaction and Net Promoter Score
a continually expanding high-density wifi network in place
ratings exceeded our objectives in 2013. We continue to invest
means low-cost, high-speed connectivity to customers and
in improving our products and services in order to meet the
low-cost benefits to Ziggo due to mobile data offloading.
highest standards of customer satisfaction.
Taken together, these elements constitute important steps
towards the realization of our connectivity strategy focused
Business Clients
on providing ubiquitous broadband access to truly converged
Ziggo is traditionally a service provider to private households,
voice and video services.
but our superior network also enables us to deliver premiumquality services with attractive pricing in the business market.
We continue to improve our TV proposition by offering
In recent years we have been gaining market share among home
interactive solutions. In 2013, we launched our cloud-based
offices and small and medium-sized companies and we aim to
user interface offering an interactive TV experience through
further strengthen this position. At the same time, we aim to
a high-end user interface on our customers’ non-interactive
further grow in the business market by serving customers in the
set top boxes. Furthermore, we have rolled out the Interactive
segments of medium and large companies. To this end, Ziggo
CI+1.3 CAM module; combined with our cloud-base UI this
acquired Esprit Telecom in 2013, providing access to their base
enables us to offer interactive services on over 260 CI-certified
in the medium and large segment, indirect sales channels and
television sets, which eliminates the use of set top boxes
national DSL network. Furthermore, we continue to cater to
altogether. Both innovations will increase the penetration of
the business market by developing tailored solutions to our
Interactive Television amongst our customers and, combined
business customers in selected industry verticals.
with our ubiquitous connectivity, contribute to the realization
Contents
Ziggo N.V. Annual Report 2013 10
Ziggo at a glance
Performance
Governance
Financial statements
Connecting people
Ziggo Mobile
Providing customers with television, internet and
telephone services at home was just the beginning.
Ziggo Mobile now makes communication, content
and information available anywhere, anytime.
Already competitively priced, Ziggo Mobile is
supplemented by unlimited access to our more
than one million WifiSpots. Mobile telephony is
an important step towards offering customers
fully converged services.
Contents
Ziggo N.V. Annual Report 2013 12
Ziggo at a glance
Performance
Governance
Financial statements
Performance
Operational review
Over the full year, Ziggo added 27,000 new subscriptions in the
However, we expect to continue to experience churn among
consumer market. At the end of December 2013, total
our TV-only customers as a result of a market moving towards
consumer RGUs reached 6.94 million, an increase of 0.4% year
triple-play and a competitive environment. Churn on all other
on year. The number of subscribers to the All-in-1 bundle grew
product lines, and for the All-in-1 bundle in particular, is
by 100,000 or 7.1% to 1.495 million. The number of internet
significantly lower than churn among TV-only subscribers.
subscribers grew by 104,000 to a total of 1.86 million at
Therefore, we will continue to focus on upgrading customers
year-end 2013 and by 6.0% compared to last year, driven by
to our dual play and triple play bundles.
the growth in All-in-1 and the increase of the internet speeds
and the roll-out of Ziggo WifiSpots. The number of digital TV
The total number of consumer telephony subscribers rose to
subscribers increased to 2.25 million, representing a
1.56 million at year-end 2013, an increase of 6.9% compared to
penetration of over 84.7% of our customer base. The number
a year ago. This increase is mainly the result of the increase in
of TV-only subscribers decreased to a total of 747,000 at
All-in-1 subscriptions, partly mitigated by a number of
December 31, 2013. The decrease was mainly due to the upsell
customers who churn their fixed-line telephony subscription
of the dual play and triple play bundle to our TV-only
and switched from triple play to dual play.
subscribers as well as churn. Among TV-only subscribers,
churn came down compared to the end of last year and the
RGUs per customer grew to 2.56, up 4.6% compared to last
first half of 2013, following higher investments in customer
year, following a growth in RGUs combined with a lower
retention, the upsell to dual play and triple play and the
number of customers. Excluding digital Pay TV as a separate
investment in improved product propositions, like the increase
RGU, Ziggo recorded an average of 2.24 RGUs per customer
of the internet speeds and the roll-out of Ziggo WifiSpots.
or a 5.8% growth compared to the previous year.
Contents
Ziggo N.V. Annual Report 2013 13
Ziggo at a glance
Performance
Governance
Financial statements
Marketing & Sales
TV commercials, advertisements in daily newspapers and
At the start of January, a campaign was launched to counter
several direct mail campaigns, emphasizing the special offer
local FttH (Fiber to the Home) activities. The initiative
for existing Ziggo customers and the additional access to
emphasized the future-proof network of Ziggo, delivering
our Ziggo WifiSpots for subscribers to Ziggo Mobile.
high-speed internet (up to 150Mbps today), superb High
Definition television channels and the best quality telephony,
The launch of Ziggo Mobile in the 2nd half of September was
combined with a special offer. These targeted retention and
followed up by promotions through TV and radio commercials,
win-back campaigns were supported by special retention offers
online banners and direct mail campaigns. The two SIM-Only
granting a free interactive receiver or recorder, in combination
subscriptions for consumers and the two for business clients
with a twelve- or twenty-four month contract, respectively.
were well received.
The campaign was launched in areas where FttH initiatives are
about to set off, and continued to run throughout 2013.
In December of 2013, a special campaign was launched called
the ‘Ziggo Decemberdagen’. Besides the typical bundle
In February we started several new sales and promotional
promotional offers for new customers, existing customers
campaigns focusing on triple play, dual play and upsell to
were offered several free movies on our event channel and a
interactive TV services. New subscribers to our All-in-1 bundle
live cooking workshop with Rudolf van Veen in cooperation
with a minimum twelve-month contract period were invited
with the 24Kitchen channel. During the broadcast, participants
to choose their own ’special offer’: either an introduction
had the opportunity to ask advice and share photos of their
discount on their monthly subscription fee or a free set top
home cooked meals via social media.
box. The Android tablet was added in the second quarter.
Products & Services
During the second quarter we also launched a number of
On March 15, Ziggo officially introduced the first fully cloud-
new campaigns focusing on customer loyalty and customer
based interactive DVB-C TV service in the world, as announced
retention, whereby existing customers can purchase an
in the fourth quarter of 2012. By combining the IP protocol
interactive HD receiver or an interactive HD recorder at
with the DVB-C television standard, even set top boxes without
an attractive discount.
built-in hardware functionality for interactivity, are now able
to utilize interactive services via cable. Part of this innovation
In addition to the sales and retention campaigns that
is the migration of the new streaming graphical user interface
continued from the second quarter onwards, several new
(SGUI). The user-friendly GUI, which is based on HTML5, is
campaigns were launched in the third quarter. The successful
streamed to the user over the DVB-C network using a
sales campaign ‘Overstapweken’ (switching weeks) ran
temporary personal connection. This enables customers to
throughout the summer period and invited new All-in-1
access interactive services like Video on Demand or ‘TV Gemist’
customers to choose their own promotional offer, varying
via a simple and basic digital receiver. By December 31, the
from a discount on the subscription for the first six months,
number of activated decoders with this new SGUI had grown
a free Android tablet, or a free interactive HD receiver to
to over 310,000 (excl. CI+ 1.3). On December 31, we had over
a one-off discount for an interactive HD recorder.
566,000 customers with an interactive device, while those
devices with streaming graphical user interface were already
In August, our new branding campaign was introduced,
accounting for 40-50% of total VOD activity.
emphasizing the new Ziggo pay-off: ‘connected for ever’.
Maintaining close contact plays an important role with the five
At the end of April, we launched the roll-out of our WiFi
characters in the campaign. In different settings, this new line
Homezone concept in our footprint, called ‘Ziggo WifiSpots’,
of TV commercials focuses on the emotional connection
starting with the activation of 65,000 ‘Ziggo WifiSpots’ in the
people have.
city of The Hague. The wifi-hotspot concept utilizes the public
channel of our wifi EuroDOCSIS 3.0 modems at the customer’s
In September the HBO ‘Series Nights and sales campaign’
premises, enabling all Ziggo internet customers to access
started. The campaign had a two-phased approach. The first
high-speed internet in the vicinity of an activated Ziggo
phase kicked off with a loyalty campaign for the existing Ziggo
modem. The introduction was supported by a special
customers. On the free accessible Ziggo TV channel, several
communication campaign through television commercials,
high-quality HBO series were broadcast for a full week. In the
advertising and mailings to explain the concept and
second phase of the campaign, a discount of 50% for four
communicate the benefits for Ziggo customers: mobility and
months was offered to new HBO subscribers.
high-quality internet access on any device, anywhere in our
footprint. Since its launch in April, 2013, Ziggo has activated
On September 16, the introduction of Ziggo Mobile was
over 1 million WifiSpots.
supported by a brand and promotional campaign through
Contents
Ziggo N.V. Annual Report 2013 14
Ziggo at a glance
Performance
Governance
Financial statements
Since the launch, we saw an anticipated strong increase in the
On November 5, we introduced the CI+ 1.3 module, enabling
number of active users of WifiSpots as well as in the size
interactive services such as on-demand movies, television
of data offloaded every day. In the municipality of The Hague
series or missed TV programmes, without the use of a set top
we started with a pilot of adding 120 public, high-quality
box and using the remote control of the television set. Ziggo is
WifiSpots in the public domain as part of a project between
the first in the world to enable interactive television via such a
the city council of The Hague and Ziggo. On top of this
CI+ module. Since the beginning of 2013, an increasing
public wifi initiative, we expect to expand the number of
number of televisions have been enabled for usage of this CI+
Ziggo WifiSpots in The Hague on streetcabinets (non-public)
1.3 module. Many Samsung, LG and Philips televisions have
to 450 by the end of December, enabling Ziggo customers
already been certified by Ziggo for this service and many more
to access the internet in the streets and city centre of
brands are to be expected in 2014. The CI+ 1.3 module makes
The Hague. The implementation of WifiSpots, together with
use of the streaming graphical user interface (SGUI) which was
the internet speed increase, led to a significant increase in
deployed earlier in 2013.
our Net Promoter Score in the third quarter.
Other
By the end of July, we finalized the internet speed increase for
On March 2, the dance event ‘Energy’ was held in the Ziggo
approximately 800,000 internet subscribers. The internet
Dome. A live broadcast was made available to all Ziggo
speed for basic internet subscriptions was raised from 8/1
customers via the Ziggo event channel, enabling them to
MBit/s to 20/2 MBit/s and for All-in-1 Basis from 10/1 MBit/s to
experience the dance event live at home through our digital
20/2 MBit/s. The increase further widens the gap with DSL-
TV service.
based offerings, particularly when the actual speed delivered is
considered. In addition, the highest internet speed for internet
On June 16, a very popular live concert from the Ziggo Dome
Z3 and All-in-1 Extra increased to 150/15 MBit/s and are on
(‘Holland Zingt Hazes’) was broadcasted for our customers via
a par with FttH offered internet speeds.
the Ziggo TV App and via the Ziggo Event Channel. The event
was viewed by approximately 300,000 Ziggo customers. Later
On September 15, Ziggo received an award from the
that month, the Ziggo Dome celebrated its first anniversary
International Broadcast Convention (IBC) in the Content
with a contest in which Ziggo customers could win golden
Delivery category with the first fully cloud-based interactive
seats, enabling them to attend all concerts in the Ziggo Dome
DVB-C TV service in the world. By combining the IP protocol
for a whole year. Approximately one million people have
with the DVB-C television standard, even set top boxes without
attended a concert or event since the Ziggo Dome was opened
built-in hardware functionality for interactivity are able to
in June 2012.
provide interactive services via a cable.
On June 30, the ParkPop concert was broadcasted live via the
On September 16, Ziggo launched its mobile voice and data
Ziggo Event Channel. During this music festival in The Hague,
service on the back of the roll-out of our Ziggo WifiSpots:
Ziggo WifiSpots were placed in the concert area for the
Ziggo Mobile. Ziggo Mobile has been specially created for
concertgoers, and a social media campaign was launched
existing Ziggo customers. Ziggo strives to offer the best
offering participants the chance to win backstage passes for
possible access to its services everywhere, connecting
the event.
customers wherever they are, at attractive rates. Ziggo Mobile
plays an essential role in this respect. Ziggo Mobile has two
In early November we presented the Ziggo MTV Music Week.
SIM-Only subscription options for consumers and two for
In the week prior to the MTV EMA Awards ceremony, which
business clients. The basic consumer subscription is available
was held in the Ziggo Dome, several artists gave small
for €15 per month (incl. VAT). This subscription offers 300
concerts which were broadcasted through our own Ziggo
minutes call time/text messages, 1,000 MB data and unlimited
Event TV channel. In addition to this Music Week, Ziggo
access to more than 1 million Ziggo WifiSpots, a number that
sponsored the MTV EMA Awards and live broadcasted the
will continue to grow. There is an introductory subscription for
ceremony to its customers.
business clients of €20 (excl. VAT) with 400 minutes call time/
text messages, 1,000 MB data and unlimited access to the
At the Ziggo Congress of November 7, it was announced that
Ziggo WifiSpots. Both Ziggo Mobile propositions come with
Bits of Freedom had won the Ziggo Open Society Award 2013.
one-month notice periods, rather than the 1 or 2 years that is
Bits of Freedom is the Dutch digital rights organization focusing
currently common in the market. The introduction of Ziggo
on privacy and communications freedom in the digital age.
Mobile was very well received by the media and customers.
Bernard Dijkhuizen – Ziggo’s former CEO – presented the
Contents
Ziggo N.V. Annual Report 2013 15
Ziggo at a glance
Performance
Governance
Financial statements
award, a trophy and €15,000. The other finalists were NoXqs
recreation and several larger new contracts were won.
and Internet Protection Lab. According to the jury, both
In addition, new product innovations, including IP-VPN services
organizations fulfill an important role in Dutch (open) society.
with Quality of Service over both fiber and hybrid fiber coax
(HFC), supporting multi-site services at cost efficient and
On November 21, Ziggo and the Ziggo Dome won a prestigious
attractive rates for our subscribers, were introduced, offering
award at the ‘SponsorRing’ event. The SponsorRing is a yearly
new areas of future growth for our business operations.
event where the best sponsor promotions are rewarded in
several categories. Ziggo and the Ziggo Dome were praised for
On March 14, Ziggo announced the acquisition of Esprit
the successful partnership and won the award in the innovation
Telecom, a leading provider of voice and data services for
and entertainment categories.
the SME market in the Netherlands, through which it can
further expand its services to these segments. Esprit Telecom
Business Market
has an active sales channel of dealers across the country.
During 2013, almost 18,000 new subscribers signed up to our
The acquisition includes Zoranet, an ICT service provider
Office Basis, Office Plus and Internet Plus business bundles,
that focuses on the retail sector. In 2012, Esprit Telecom
bringing the total to more than 54,800 subscribers for our
generated revenues of €35 million. With this acquisition
business bundles targeted at home offices and SME (Small and
we have strengthened our propositions and services for the
medium-sized) businesses. Relative growth in B2B was
mid-market. We expect that Esprit Telecom, together with
particularly strong with a total of 251,400 RGUs as at year-end
our state-of-the-art infrastructure, will bring new growth
compared to 193,800 RGUs in 2012.
opportunities. Following the go-ahead from the Dutch
Authority for Consumers and Markets (ACM), we finalized
In the first quarter of 2013 Ziggo Zakelijk focused on specific
the acquisition of Esprit Telecom, which was consolidated
sectors like social health care, educational institutes and
as of May 1, 2013.
Contents
Ziggo N.V. Annual Report 2013 16
Ziggo at a glance
Connecting people
Digital & Interactive TV
Contents
Performance
Governance
Financial statements
Television is a mass medium, but the way people use
it has become very personal. Ziggo caters to all tastes
and requirements. Whether a customer only wants to
watch public service programmes on a conventional
television, or requires an interactive HD experience:
we can provide the right solution. And it doesn’t
end there. Tablets can be used as a ‘second screen’
or for taking your favourite programme with you,
to be watched anywhere in or around the house and
around 1.1 million Ziggo WifiSpots.
Ziggo N.V. Annual Report 2013 18
Ziggo at a glance
Performance
Governance
Financial statements
Financial review
Financial performance
Revenues from digital pay TV, including video on demand
(VOD), declined by 0.4%, driven by a decline in the number of
Revenues
subscribers to digital pay TV from 917,000 at the end of 2012
We generated revenues of €1,564.8 million, an increase of
to 853,000 at the end of 2013, which was partly offset by an
1.8% compared to 2012 (€1,536.9 million). Excluding ‘Other
increase in ARPU for digital pay TV by 7.1%, from €14.97 in 2012
Revenues’, revenues increased by 2.9% and by 1.2% excluding
to €16.04 in 2013. The ARPU increase was driven by a strong
the revenue contribution from Esprit Telecom. Esprit Telecom
increase in the number of VOD transactions by 48%.
was consolidated as of May 1, 2013 and has contributed
€25.2 million in revenues since its consolidation. The main
The decline in RGUs for digital pay TV was driven by (a)
drivers of growth in revenues were continued growth in RGUs
depressed consumer confidence given the macro environment,
for internet and telephony, driven by a further uptake of our
(b) the growing popularity of VOD which does not count as an
All-in-1 bundle, and revenues from business services.
RGU, and (c) our marketing focus on customer retention and
Revenues from business services were spurred by organic
All-in-1, and the launch of Ziggo Mobile instead of premium
growth of 10.3% in the business market which, combined
pay TV. The growth in VOD transactions was negatively
with a €25.2 million revenue contribution from Esprit Telecom,
impacted by the price increase for watching live football per
reported total revenue growth of 34.2%.
match from €6.95 to €11.95 in the second half of 2013.
Consumer market revenues declined by 0.6% to €1,423.1 million
In addition to the growing popularity of VOD, growth was
in 2013 (2012: €1,431.3 million). Excluding ‘Other revenues’,
also supported by the rise in the number of customers with
consumer revenues increased by 0.5%. This was driven primarily
an interactive set top box to 566,000 at the end of 2013,
by a further uptake of our All-in-1 bundle during the year,
compared to 359,000 at the end of 2012.
with 100,000 net additions, or 7.1% year-on-year growth.
This resulted in growth in both internet and telephony RGUs
Revenues from telephony usage decreased by 2.8% from
by 6.0% and 6.9%, respectively. In addition, the price increase
€179.7 million in 2012 to €174.7 million in 2013. Excluding
effective February 1, 2013 contributed to the revenue growth
interconnection revenues, revenues from telephony usage
by approximately 1.7%. Revenue growth was partly offset by a
were flat. Interconnection rates were approximately 20.0%
decline in revenues from digital pay TV by 0.4% and revenues
lower as at September 1, negatively affecting revenue by
from telephony usage by 2.8%. Revenues generated through
approximately €5 million. A 6.9% increase in the number of
our All-in-1 bundle increased by 8.3% from €672.0 million
telephony subscribers was more than offset by a lower ARPU
in 2012 to €727.5 million in 2013, representing 52.3% of
for telephony usage, as more subscribers selected a flat-fee
total revenues from subscriptions and usage in the consumer
subscription for calls within the Netherlands and several
market, versus 48.6% in 2012.
foreign countries. The lower ARPU for telephony was also
Contents
Ziggo N.V. Annual Report 2013 19
Ziggo at a glance
Performance
Governance
Financial statements
Financial highlights
As per December 31
Amounts in € million
Subscriptions + usage
Other revenues
Total consumer revenues
Business services revenues
Total revenues
Cost of goods sold
2013
2012
Change
1,391.3
1,383.8
0.5%
31.8
47.5
(33.0%)
1,423.1
1,431.3
(0.6%)
141.7
105.6
34.2%
1,564.8
1,536.9
1.8%
289.1
294.4
(1.8%)
1,275.7
1,242.5
2.7%
% of total revenues
81.5%
80.8%
Operating expenses
312.0
301.5
3.5%
76.9
60.5
27.0%
Total operating expenses
388.9
362.0
7.4%
% of total revenues
24.9%
23.6%
Gross margin
Marketing & Sales
Adjusted EBITDA
886.8
880.4
% of total revenues
56.7%
57.3%
IPO-related costs
EBITDA
0.7%
0.0
39.7
886.8
840.8
5.5%
Depreciation and amortization
277.2
279.1
(0.7%)
Operating income
609.6
561.6
8.5%
Share-based payments
0.5
20.2
(97.5%)
Movement in provisions
(4.1)
(1.0)
305.4%
Change in net working capital
(46.1)
61.1
(175.4%)
Cash flow from operating activities
837.1
921.0
(9.1%)
22.5%
Capital expenditure (Capex)
342.6
279.7
% of total revenues
21.9%
18.2%
Acquisition
15.2
-
Interest received
0.0
(0.4)
Change in financial assets
0.4
0.2
Funding joint venture
7.9
13.0
(38.6%)
Free cash flow
470.9
628.7
(25.1%)
% of total revenues
30.1%
40.9%
Adjusted EBITDA - Capex
544.2
600.8
% of total revenues
34.8%
39.1%
Net result
347.3
192.8
Outstanding shares (in # million)
200.0
200.0
1.74
0.96
Earnings per share (in €)
Contents
(9.4%)
80.2%
80.2%
Ziggo N.V. Annual Report 2013 20
Ziggo at a glance
Performance
Governance
Financial statements
attributable to a higher share of free on-net calls following
pay TV as a separate RGU, Ziggo recorded an average of
growth in the number of telephony subscribers. When a
2.24 RGUs per customer. Additionally, blended ARPU was
Ziggo telephony customer makes a fixed-line call to another
positively affected by the price increase which became
Ziggo telephony customer, the call qualifies as on-net, with
effective on February 1, 2013.
no costs being charged as a result. Both trends resulted in a
higher percentage of non-billable calling minutes compared
Revenue from other sources, predominantly consisting of
with the previous year, as well as an overall decline in average
set top box sales, collection fees and revenues from service
usage per fixed-line telephony subscriber.
numbers, declined by 33.0% y-o-y to €31.8 million in 2013.
Part of this decline was the result of accounting for costs of
Total call minutes excluding interconnection decreased by
tablets, which are provided to new subscribers to All-in-1 or
1.0% compared to 2012. On-net calling grew by 4.5%, with
our dual-play proposition TV plus internet with a one-year
the number of billable minutes declining by almost 9.4% as
contract. The costs of these tablets are deferred and allocated
a result of growth in on-net calling and growth in the number
as a discount for the contract period to other revenues, rather
of flat-fee subscriptions by 13%. Average call minutes per
than being expensed. This resulted in a discount as a result of
subscriber declined by 8.4%. The gross margin on telephony
deferred tablet costs of €3.2 million during 2013. Excluding this
usage improved by over 2.3%, supported by reduced FTA rates.
adjustment, revenues from other sources decreased by
€12.5 million, or 26.2%. Although we shipped a higher
Blended ARPU for consumers in 2013 was €42.10, up €2.36
number of set top boxes, we recorded a decline in revenues
(+5.9%) from 2012. This increase was driven by growth in the
due to a lower average sales price per set top box and the
number of subscribers to our All-in-1 bundle and internet,
capitalization of set top boxes covered by a subscription period
which, combined with churn in TV-only subscribers, resulted
of 12 months for which the ownership of the set top boxes
in a 4.6% increase in RGUs per customer to 2.56 (based on
remains with Ziggo.
a maximum of four RGUs per customer). Excluding digital
Expensed
Capitalized
2013
2012
Change
Interactive recorders
140,829
189,742
(48,913)
Interactive receivers
91,938
-
91,938
(89,024)
HD decoders
-
89,024
CI+ modules
16,374
25,138
(8,764)
249,141
303,904
(54,763)
Interactive recorders
82,380
-
82,380
Interactive receivers
34,106
-
34,106
116,486
-
116,486
365,627
303,904
61,723
Total
Our business services activities generated revenues of
Cost of goods sold and gross margin
€141.7 million in 2013, up 34.2% from €105.6 million in 2012.
Cost of goods sold includes the costs of materials and services
This was the result of strong growth in revenues from
directly related to revenues. It consists of copyrights, signal costs
subscriptions to business bundles and the acquisition and
and royalties paid to procure our content, interconnection fees
consolidation of Esprit Telecom effective May 1, 2012.
paid to other network operators, materials and logistics costs
Excluding Esprit Telecom, revenues grew organically by 10.3%.
and costs of guarantees relating to the sale of set top boxes
In 2013, Ziggo added almost 18,000 new subscribers to its
and other products and materials used to connect customers
main B2B bundles products Internet Plus, Office Basis and
to our network.
Office Plus bundle, reaching a total of over 54,800 subscribers
by December 31, 2013. Total revenues from coaxial products
In 2013 cost of goods sold decreased slightly to €289.1 million,
TOM and TOMi, our collective TV contracts, and business
down 1.8% from 2012. The gross margin for 2013 was 81.5% of
bundles for the year grew by over 37% compared to 2012
revenue versus 80.8% in 2012. Excluding the acquisition of
to €48.9 million, representing 42.0% of total B2B revenues
Esprit Telecom (2013 COGS of €15.5 million), which has been
(2012 – 33.7%), excluding revenues from Esprit Telecom.
consolidated since May 1, cost of goods sold would have
declined by 7.1% and the gross margin would have been 82.2%.
Contents
Ziggo N.V. Annual Report 2013 21
Ziggo at a glance
Performance
Governance
Financial statements
Margin improvement was mainly the result of higher gross
The increase in average salary costs was driven by both
margins on internet, telephony and business services
discretionary individual salary increases and a general salary
(excluding Esprit Telecom) and a lower negative margin
increase in line with the collective labour agreement, including
contribution realized on the sale of set top boxes. The lower
an increased employer’s contribution to the pension premium,
negative margin contribution from the sales of set top boxes is
which was partly offset by a decrease in employer charges for
the result of a lower volume of set top boxes recognized as
social securities. The increase in headcount was predominantly
sales (233,000 in 2013 versus 279,000 in 2012, and 16,000 CI+
the result of an increase in the number of external resources,
modules versus 25,000 in 2012) at a lower negative margin
an increase that was more than offset by an increase in
contribution per set top box. A lower average sales price during
capitalized personnel costs of approximately €29.5 million, or
the year compared to 2012 was more than offset by a lower
52%. The increased headcount is the result of an increase in
average purchase price. In addition, 116,000 set top boxes
external personnel hired for projects relating to investments in
were capitalized, as these boxes were provided to customers
innovation and in our core infrastructure and service platforms,
as part of our sales and retention promotions covered by a
facilitating the addition of new services such as mobility and
one-year contract, with the ownership of the set top boxes
converged services and TV Everywhere.
remaining with Ziggo. These capitalized set top boxes
represented a total value of €14.5 million in 2013.
At the end of 2013, our workforce totalled 3,354 FTEs.
Excluding Esprit Telecom, we recorded 3,248 FTEs, compared
“Our business services activities
generated revenues of
€141.7 million in 2013, up 34.2%
from €105.6 million in 2012.”
to 3,018 FTEs at the end of 2012. Excluding external and
temporary employees, we had 2,500 employees versus 2,502 in
the previous year. The number of external resources increased
from 278 FTEs at the end of 2012 to 521 at the end of 2013.
The number of temporary call centre agents decreased slightly
from 238 FTEs at the end of 2012 to 226 at the end of 2013.
Operating expenses (opex)
Operating expenses increased by €26.9 million (excluding IPO
Costs of contracted work, excluding Esprit Telecom, increased
costs in 2012), or 7.4%, to €388.9 million in 2013, from
by 12.8% compared to 2012 (excluding IPO costs in 2012).
€362.0 million in 2012. As a percentage of revenue, operating
This increase was mainly driven by higher costs of our
expenses increased from 23.6% to 24.9%, mainly as a result
external call centres and costs of customer maintenance &
of a 27.0% increase in marketing and sales expenses from
visits. As a result of a strong growth in RGUs in the second
€60.5 million in 2012 to €76.9 million in 2013. The majority
half of 2013 and the roll-out of Ziggo WifiSpots, call volumes
of marketing and sales expenses were spent on sales and
rose by approximately 5% compared to 2012. In combination
customer retention campaigns, the Ziggo branding campaign
with an increase in the average handling time of approximately
and the launch of Ziggo Mobile.
23% and a relatively higher percentage of the call volume being
outsourced, external call centre costs and costs of customer
Excluding marketing and sales, operating expenses increased
maintenance & visits rose by almost 30%. Consultancy costs
by 3.5%, or €10.5 million, compared to 2012. Excluding the
and costs of maintenance of network and technology were
acquisition of Esprit Telecom (€5.4 million), operating expenses
stable. The higher costs of our external call centres and
amounted to €306.9 million, up 1.8% compared to 2012. This
customer maintenance & visits was partly offset by lower
was mainly due to higher costs of contracted work driven by
consultancy costs. Costs of maintenance of our network and
higher costs of our external call centres and costs of customer
technology rose slightly compared to 2012 as a result of an
maintenance & visits.
increase in the capacity of our infrastructure, as well as rising
maintenance costs following investments in our core
Personnel costs increased by 1.6% (excluding IPO costs in 2012)
infrastructure and systems facilitating the addition of new
compared to 2012. Excluding Esprit Telecom (€4.3 million),
services, such as mobility and TV Everywhere.
personnel costs decreased by 0.6%, or €1.2 million.
Office expenses, excluding Esprit Telecom, decreased by
Although headcount increased by 7.7%, excluding Esprit
2.0% compared to 2012 (excluding IPO costs in 2012) to
Telecom, and average salary costs by 3.3%, the resulting
€52.8 million. Costs of housing and sites increased by almost
increase in personnel expenses was offset by higher capitalized
1.6% as the result of the opening of a new data centre in the
personnel costs and a reduction of accrued bonuses by
third quarter to support the new IT infrastructure and service
approximately €4.8 million as company targets were only
platforms, facilitating the addition of new services such as
partially achieved.
mobility and converged services and TV Everywhere.
Investments in innovations for our converged platform and
Contents
Ziggo N.V. Annual Report 2013 22
Ziggo at a glance
Performance
Governance
Financial statements
business applications resulted in additional license and
of the amortization of the Esprit Telecom customer list.
maintenance costs on top of recurring costs of existing IT
The Esprit Telecom customer list has been valued based on
business applications. The increase was more than offset by a
the allocation of the purchase price paid for the acquisition
refund of energy tax for prior years and an increase in coverage
to the individual assets.
of office expenses and office IT as a result of the increase in
the headcount and hours capitalized. Excluding the coverage
Operating income (EBIT) in 2013 increased by 8.5% to
of office expenses and the refund of energy tax, office
€609.6 million, compared to €561.6 million in 2012. Excluding
expenses increased by 4.6%.
the acquisition of Esprit Telecom, operating income increased
by 7.9% to €606.1 million, due to the increase in EBITDA of
Other operating expenses, excluding Esprit Telecom, increased
5.5%, lower depreciation and amortization expenses and the
by 62.4% to €5.0 million, mainly as a result of a release relating
absence of IPO-related expenses.
to the provision for bad debts in 2012 due to improved quality
and ageing of our trade accounts receivable at the time. Other
Net income
expenses also include the proceeds and gain of €6.9 million
Interest costs decreased by 4.0% to €199.1 million in 2013,
from the sale of our transmission towers and an impairment
compared to €207.3 million in 2012. In 2013, €12.6 million
of €6.5 million. This impairment was due to our decision to
was allocated as borrowing costs to work in progress,
replace certain components of a project to build our new
resulting in an interest credit, compared to €10.4 million in
video platform.
2012. Excluding borrowing costs, interest costs decreased by
2.8% or €6.1 million. A reduction in our average debt by
Adjusted EBITDA and operating profit
approximately €160 million lowered our interest expenses
We achieved an adjusted EBITDA of €886.8 million in 2013, up
compared to 2012. The blended interest rate for 2013 was
0.7% versus 2012. The EBITDA margin was 56.7% compared to
6.9% versus approximately 6.8% for 2012.
57.3%. Excluding the EBITDA contribution of €4.3 million from
Esprit Telecom, EBITDA increased by 0.2%, resulting in an
Interest on shareholder loans fell from €52.2 million in 2012
EBITDA margin of 57.3% compared to an EBITDA margin of
to nil in 2013 following the full conversion of the shareholder
57.3% in the prior year.
loans to equity prior to the IPO on March 21, 2012.
Adjusted EBITDA in 2012 excludes IPO-related expenses.
Banking and financing fees increased by 94.9% to €2.0 million
In March 2012, we recognized €39.7 million in costs directly
in 2013, from €1.0 million in the previous year. This increase
related to our IPO on NYSE Euronext Amsterdam. The IPO
is mainly attributable to the new revolving credit facility of
costs include share-based remuneration of €20 million
€400 million, which was put into place in March 2013, replacing
awarded and settled by the shareholders before the IPO,
a revolving credit facility of €50 million.
which, in accordance with IFRS 2, was accounted for as an
equity-settled share-based payment transaction. Therefore,
Amortization of funding costs increased by €38.6 million to
this transaction is reflected as personnel costs and equity,
€51.8 million in 2013. As a result of the refinancing of the old
but did not affect the Company’s cash flow or diluted
€1.1 billion senior credit facility in March 2013, we impaired
shareholders’ equity.
the remaining balance of the capitalized financing costs of
€42.7 million related to this old senior credit facility. The total
Depreciation expenses and amortization of software in 2013
financing fees of €12.7 million relating to (1) the new
decreased by €1.9 million to €277.2 million, from €279.1 million
€750 million, 3.625% senior secured notes issue, (2) the
in 2012. Excluding the acquisition of Esprit Telecom and
new €150 million term loan A and (3) the new €400 million
excluding the amortization of other intangible fixed assets,
revolving credit facility, have been capitalized and will be
depreciation expenses and amortization of software decreased
amortized over the terms of the senior secured notes, the
by €3.4 million. This decrease is the result of high historical
term loan and revolving credit facility.
network and infrastructure investments as well as investments
related to the merger of the three predecessor companies,
As Ziggo does not apply hedge accounting rules for interest
which has led to relatively high depreciation expenses in recent
rate swaps under IFRS, any change in fair value is recognized
years. However, with the current investment programme in
as financial income and expense. In 2013 Ziggo recorded
place in our core infrastructure and systems facilitating the
a €29.1 million gain on other income, due to: (1) the periodic
addition of new services such as mobility and TV Everywhere,
amortization of our negative hedge reserve of €4.6 million,
depreciation and amortization will increase in the future.
(2) a fair value gain on IRS contracts of €33.7 million as a
In 2013, we recognized €0.8 million in amortization of
result of shortened expiration periods of underlying hedges
other intangible assets, which is the result of the recognition
and an increase in the underlying interest. In 2012, we
Contents
Ziggo N.V. Annual Report 2013 23
Ziggo at a glance
Performance
Governance
Financial statements
reported a fair value loss of €10.8 million. A foreign exchange
mainly due to (1) an increase in inventories of €12.0 million
gain on US dollar-denominated purchases of €0.2 million is
as higher inventories for network equipment and interactive
recognised in 2013.
recorders and receivers are kept to avoid shortages, (2) an
increase in trade accounts receivable of €17.9 million as
The €9.1 million net loss from joint ventures predominantly
a result of a one-off delay of the collection of part of the
relates to our 50% share in the results of HBO NL, our joint
December 2013 bill run, due to the implementation of Sepa
venture with HBO. Investments in and results from the joint
in December, while in the prior year the billing of quarterly
venture are accounted for using the equity method. Our share
subscriptions was postponed from the end of December
in the funding of this joint venture amounts to approximately
to the beginning of January; this reduced the balance for trade
€7.9 million in 2013.
receivables at end-2012 by approximately €8 million, and
(3) the balance deferred revenue by €9.2 million, and (4) a
For 2013 Ziggo reported an income tax expense of €29.5 million,
decrease in Other current liabilities of €11.2 million due to the
compared with an income tax expense of €74.7 million in 2012.
relatively high capital expenditure in the last months of 2012.
Higher operating income, combined with reduced interest
costs, partly offset by the impairment of capitalized financing
Working capital excludes corporate income tax due of
costs, resulted in a strong increase in the result before income
€4.7 million as at December 31, 2013. This balance due is the
taxes to €385.9 million, compared to €276.8 million for the
result of an intragroup transaction as part of which certain
prior year. The result before income taxes of €385.9 million
assets were transferred in 2012 in order to renew part of
would have led to a corporate income tax charge of
Ziggo’s tax loss carry-forward position so as to avoid expiry
€96.5 million at an effective tax rate of 25%. However, we
of these losses. One of its subsidiaries is required to report
formalized an agreement with the Dutch tax authorities in
profit for tax purposes based on a percentage of the value
the first quarter of 2013 regarding the innovation box, which
of transferred assets, which cannot be offset against the
will reduce the effective tax rate going forward, as well as
remaining losses of the fiscal unit according to Dutch
reducing it retrospectively for the period 2010 to 2012.
carry-forward rules.
The innovation box is a tax facility under Dutch corporate
The decrease in working capital in the prior year was mainly
income tax law, which taxes profits attributable to innovation
attributable to VAT being payable on a quarterly rather than
at an effective tax rate of 5% instead of the statutory rate of
on a monthly basis (effective 2012), resulting in a reduction
25%. The application of the innovation box resulted in a
in net working capital of approximately €29 million.
one-off benefit of €35.1 million reflecting the period 2010
to 2012, as well as reducing corporate income tax charges
Cash flow from operating activities
for 2013 by € 31.9 million.
Cash flow from operating activities decreased by €83.9 million,
or 9.1%, to €837.1 million versus €921.0 million in 2012.
In 2013 Ziggo posted a net profit of €347.3 million, versus
Although EBITDA excluding share-based payments improved
a net profit of €192.8 million in 2012. Adjusted for (1) interest
by €26.3 million, the cash outflow of €46.1 million as a result
on shareholder loans, amortization of the customer list,
of the increase in working capital in 2013 versus a €61.1 million
(2) amortization of financing fees, (3) non-recurring IPO costs,
cash inflow from a decrease in net working capital in 2012
and (4) changes in fair value on our interest rate hedges (all
and a €3.1 million higher cash outflow from a movement in
adjustments net of income taxes), the net result would
provisions resulted in a decrease in cash flow from operating
have increased from approximately €285 million in 2012 to
activities of €83.9 million.
€364 million in 2013, representing an increase of 28%.
Working capital, cash flow
and liquidity
Capital expenditure (capex)
Capital expenditure and investments relate primarily to
extending, upgrading and maintaining the network, installing
new service equipment at customer premises, cost of modems
Working capital
and investments in the core infrastructure, service platforms
Net working capital excluding accrued interest and corporate
and systems facilitating the addition of new services such as
income tax due increased by €46.9 million, from €270.4 million
mobility and TV Everywhere. They also include increases in
negative at year-end 2012 to €223.5 million negative at year-
intangible assets, primarily expenditures on software, which are
end 2013. In 2012 working capital decreased by €68.9 million.
capitalized. Set top boxes are capitalized if these boxes are
The closing balance as at December 31, 2012 was adjusted
provided to customers covered by a 1- or 2-year subscription
for the opening balance of working capital of the acquisition
and ownership remains with Ziggo.
of Esprit Telecom. The increase in working capital in 2013 is
Contents
Ziggo N.V. Annual Report 2013 24
Ziggo at a glance
Performance
Governance
Financial statements
In 2013 Ziggo recorded capital expenditures of €342.6 million,
facilitate the addition of new services such as mobility and
an increase of 22.5% compared to 2012 (€279.7 million).
TV Everywhere, growth of access capacity and the
The increase of €62.9 million compared to 2012 was mainly
capitalization of interactive recorders and receivers.
driven by investments in core infrastructure and systems to
YTD December
€ million
2013
Customer installation
Network growth
% of total
Increase
2012
% of total
75.3
22%
19.2%
63.2
23%
147.0
43%
22.4%
120.1
43%
Maintenance and other
120.3
35%
24.8%
96.4
34%
Total Capex
342.6
100%
22.5%
279.7
100%
In 2013, €75.3 million (22%) of capital expenditure related to
capital expenditure for the year) compared to €96.4 million
installations of service equipment, modem installations at
for the previous year. In the fourth quarter of 2011, we had
customer premises and set top boxes covered by a one-year
launched an investment programme for core infrastructure and
subscription with the ownership of the set top boxes remaining
systems facilitating the addition of new services such as
with Ziggo (compared to €63.2 million, or 23%, in 2012),
mobility and TV Everywhere. This led to a step-up in capital
whereas 43% (43% in 2012) related to new homes connected
investments in the category maintenance and other.
(new build) and growth of our network capacity
to accommodate our increased subscriber base for internet
Following increased network investments to stay ahead of
and the continuously increasing internet speed and bandwidth
ever-increasing customer demand for bandwidth, the
requirements.
investments in set top boxes to support customer experience
and the continuation of investments to upgrade our IT systems
The increase in customer installations compared to 2012 is
to enable converged services and TV everywhere, Capex will
predominantly due to capitalization of set top boxes (which
increase to around €370 million in 2014.
were not capitalized in the prior year), partly offset by a lower
number of modems installed at customer premises. In 2013
Operational free cash flow
Ziggo capitalized 82,400 interactive recorders and 34,100
Operational free cash flow adjusted for IPO-related costs
interactive receivers, representing a total value of €14.5 million.
(OpFCF, or adjusted EBITDA minus capex) decreased by
More than 432,000 modems were shipped, versus 488,000 in
9.4% to €544.2 million as a result of an increase in capital
2012, reflecting a continuous upgrade of internet subscribers
expenditure of €62.9 million.
to a Wifi-enabled EuroDocsis 3.0 modem and growth in the
activated 1,566,000 EuroDocsis 3.0 modems at customer
Free cash flow and net cash used in
financing activities
premises, of which 1,165,000 were Wifi-enabled, representing
In 2013 free cash flow (cash flow before financing activities)
an increase of 343,000 compared to December 31, 2012.
decreased by €157.8 million to €470.9 million, down 25.1%
number of internet subscribers. At the end of 2013, Ziggo had
from 2012. Although EBITDA excluding share-based payments
Network capacity grew by €26.9 million or 22.4% compared to
increased by €26.3 million, or 3.1%, compared to the previous
2012, mainly due to the additional required network and access
year, the increase in capital expenditure of €62.9 million
capacity to process an approximately 41% increase in internet
combined with the cash outflow from a change in working
traffic, in line with the prior year (approximately 40%), as well as
capital of €46.1 million compared with a cash inflow from
from the roll-out of Ziggo WifiSpot and the upgrading of our
a change in working capital of €61.1 million in 2012, resulted
office IT systems and computer equipment of our employees.
in the decrease of the free cash flow. Free cash flow for 2012
includes a sum of approximately €18.8 million for IPO-related
The remainder of our capital expenditure represents
expenses that has been settled.
maintenance and replacement of network equipment and
recurring investments in our IT platform and systems, as well
Net cash used in financing activities for the year comprises
as other investments in core infrastructure and systems to
interest costs, banking and financing fees related to our loan
facilitate the addition of new services such as mobility and
facilities, prepayments on the senior credit facilities and
TV Everywhere. In 2013, investments in this category increased
drawings on the revolving credit facility. In 2013 we drew
by €23.9 million, or 24.8%, to €120.3 million (or 35% of total
an amount of €90.2 million under our facilities.
Contents
Ziggo N.V. Annual Report 2013 25
Ziggo at a glance
Performance
Governance
Financial statements
Cash interest paid in 2013 amounted to €190.8 million,
Ziggo has a revolving credit facility of €400.0 million in
representing a €27.1 million drop from the previous year.
place, expiring in March 2018. As at December 31, 2013,
The difference can be explained by a slightly lower average
€255.0 million had been drawn under this facility.
debt and a different timing of interest payments following
the refinancing in March 2013. Our senior credit facility with
Net debt and financing structure
interest payable on a monthly basis was partly replaced by
As at December 31, 2013, we carried a total debt balance
a new senior secured note of €750 million with an annual
of €3,073.5 million, including the principal amount, capitalized
interest payment. Interest on both the 6.125% senior secured
funding costs and discount on the issuance date. An amount
and 8.0% senior unsecured notes is payable semi-annually, in
of €405.0 million is owed under our senior credit facility
May and November, and interest on the 3.625% senior secured
(term loan A and revolving credit facility), €750.0 million
note is payable annually in March.
was lent on by Ziggo Finance B.V. (term loan E), which had
issued senior secured notes for a similar amount in 2010,
At the end of 2013, accrued interest on the senior secured and
€750.0 million related to senior secured notes issued in
senior unsecured notes was €38.8 million, compared to
March 2013 and €1,208.9 million related to senior unsecured
€17.8 million at the end of 2012. The increase is due to a different
notes issued in 2010. A summary of the capital structure
timing of interest payments following the refinancing in March
with notional amounts outstanding as at December 31, 2013
2013. At the end of 2013, Ziggo held €77.4 million in cash and
is provided below.
cash equivalents, compared to €92.4 million at the end of 2012.
December 31, 2013
x LTM EBITDA
Margin / Coupon
Senior Credit Facility
405.0
0.46
E + 1.75%
Mar 2018
6.125% Senior Secured Notes
750.0
0.85
6.125%
Nov 2017
750.0
0.85
3.625%
Mar 2020
1,905.0
2.15
8.000%
May 2018
€ million
3.625% Senior Secured Notes
Total Senior Secured Debt
8.000% Senior Unsecured Notes
1,208.9
1.36
Total Debt
3,113.9
3.51
Accrued interest
38.8
0.04
MtM SWAPS
29.5
0.03
(77.4)
(0.09)
3,104.8
3.50
Cash and cash equivalents
Total Net Debt
Maturity
As at December 31, 2013, the outstanding balance of the senior
As at December 31, 2013, an amount of €13.2 million was
credit facility and revolving credit facility amounted to
amortized, resulting in capitalized financing fees of
€399.6 million, including the principal amount (€150.0 million
€16.0 million and a capitalized discount of €5.5 million as at
plus €255.0 million drawn under the revolving credit facility of
the end of Q4 2013. The unsecured notes become callable on
€400.0 million) and capitalized financing fees. Financing fees
May 15, 2014 at a premium of 4.0% of the principal value.
for the senior credit facility and revolving credit facility
amounted to €6.4 million, to be amortized over a period of five
As at December 31, 2013, the balance of senior secured notes
years. As at December 31, 2013, an amount of €0.9 million was
(6.125%, March 2017) amounted to €743.6 million, stated at
amortized, resulting in capitalized financing fees of €5.4 million
amortized cost, including the principal amount (€750.0 million)
as at the end of Q4 2013.
and capitalized funding costs. Financing fees for the senior
secured notes issuance amounted to €10.6 million, to be
As at December 31, 2013, senior unsecured notes (8.0%,
amortized over a period of seven years. As at December 31,
May 2018) amounted to €1,187.4 million. This item is carried
2013, a total amount of €4.2 million had been amortized
at amortized cost, including the principal amount
since issuance, resulting in capitalized financing fees of
(€1,208.9 million), capitalized funding costs and discount
€6.4 million as at the end of Q4 2013. The secured notes
on the issuance date. Financing fees for the notes issuance
became callable on November 15, 2013 at a premium of
amounted to €25.8 million, to be amortized over a period
3.063% of the principal value.
of eight years. The capitalized discount upon issuance
amounted to €8.8 million, to be amortized as interest
expense over a period of eight years.
Contents
Ziggo N.V. Annual Report 2013 26
Ziggo at a glance
Performance
Governance
Financial statements
As at December 31, 2013, the balance of senior secured notes
interest rate swaps (€29.5 million negative as at December 31,
(3.625%, March 2020) amounted to €742.9 million, stated at
2013), reduced by the balance of cash and cash equivalents.
amortized cost, including the principal amount (€750.0 million),
capitalized funding costs and capitalized discount. Financing
The average debt maturity was 4.7 years as at December 31,
fees for the notes issuance amounted to €6.4 million, to be
2013, down from 4.9 years as at the end of December 31, 2012.
amortized over a period of seven years. The capitalized
The refinancing in March 2013 of our senior credit facility
discount upon issuance amounted to €1.5 million, to be
with a maturity in 2017 by a new senior secured note of
amortized as interest expense over a period of seven years.
€750 million with a maturity in March 2020 extended the
As at December 31, 2013, an amount of €0.7 million was
average debt maturity.
amortized, resulting in capitalized financing fees of €5.7 million
and a capitalized discount of €1.4 million as at the end of 2013.
These secured notes are non-callable.
Intangible assets and goodwill and the
acquisition of Esprit Telecom
Following the acquisition of Esprit Telecom and the purchase
Interest on the 6.125% senior secured notes and 8.0% senior
price allocation, we allocated €5.1 million to the customer list
unsecured notes is due semi-annually. The coupon for the
of Esprit Telecom and recognized goodwill of €11.3 million.
new 3.625% is due annually in March. As at December 31, 2013,
The customer list will be amortized in four and a half years.
an amount of €38.8 million was accrued under current liabilities
The cash paid amounted to €17.8 million and an earn-out of
(December 31, 2012: €17.8 million).
€0.5 million has been recognized under provisions.
As at December 31, 2013, the fair value of the interest rate
Outlook
swaps (IRS) amounted to €29.5 million negative, compared
Based on our strong network and appealing product offerings,
to €63.2 million negative as at December 31, 2012. Since the
we will continue to focus on our top line in 2014. This will
issuance of the senior secured notes on October 28, 2010,
predominantly be facilitated by ongoing growth in broadband
any change in fair value has been recognized as financial
internet, Ziggo Mobile and our B2B activities.
income and expense, as Ziggo does apply hedge accounting.
Before the issuance of the senior secured notes, any changes
As we anticipate no substantial change in the current
in fair value were recorded in the hedge reserve as part of
competitiveness in the market, we intend to make further
equity. As at December 31, 2013, the hedge reserve amounted
investments in sales and promotions, customer retention and
to €0.9 million negative, which will be charged to profit or
product development to strengthen our position and improve
loss during the remaining term of the outstanding IRS.
our services. We expect these additional investments, which
will be skewed towards the first half of the year, will result in
In 2013 we entered into forward-starting interest rate swaps
a flat EBITDA for 2014 compared to 2013. Following increased
for the period May 2014 to May 2024 for an amount of
network investments to stay ahead of ever-increasing
€900 million. Using this instrument we have hedged the base
customer demand for bandwidth, the investments in set top
interest rate and consequently reduced our interest rate
boxes to support customer experience and the continuation
exposure for the period 2014-2024, assuming we would call
of investments to upgrade our IT systems to enable converged
our unsecured notes ultimately at the first call date in May 2014.
services, Capex will increase to around €370 million in 2014.
As a result of the intended public offer on all outstanding
shares of Ziggo N.V. by Liberty Global on January 27, 2014
We believe the investments we are making will help secure
and the exchange offer launched for the unsecured notes
continued long-term earnings growth and generate new
in combination with the availability of the term loan B3 to
revenue streams for the business in the medium term. We will
refinance the remainder of the unsecured notes which are
continue to exercise financial self-discipline, which underpins
not tendered, these forward interest rate swaps were settled
the financial flexibility we enjoy. Our strong cash generation
in February 2014 after the exchange offer was successfully
enables us to invest in the future while also gradually
completed and the interest exposure was no longer existing.
increasing shareholder returns.
As at December 31, 2013, our Net Debt to Adjusted LTM
Dividend policy and capital structure
EBITDA leverage ratio was 3.50, up from 3.42x as at year-end
As a result of the public offer on all outstanding shares of
2012. The leverage of 3.50x is in line with our stated leverage
Ziggo N.V. by Liberty Global with the positive recommendation
target of around 3.5x. Net debt is defined as the outstanding
of both the Board of Management and Supervisory Board
balance of the principal amount of our borrowings, plus
of Ziggo, Ziggo has agreed not to pay or declare any further
interest accrued on those borrowings (€38.8 million as at
(interim) dividend or to make any distribution in kind until
December 31, 2013) and the market-to-market value of the
completion of the transaction.
Contents
Ziggo N.V. Annual Report 2013 27
Ziggo at a glance
Performance
Governance
Financial statements
Corporate social
responsibility
Ziggo takes its responsibility as a provider of television,
internet and telephony services very seriously.
The high-quality, reliable products and services we deliver
perform an important role in the lives of millions of people.
Information, communication and entertainment support
and enrich society and support social interaction.
Ziggo and the Open Society
“The focus that Bits of Freedom puts on protecting civil rights
Dutch society is one of the most open societies in the world.
on the internet will continue to increase, and remain important,
Ziggo believes that the quality, availability and accessibility of
in the coming years. We hope that this award acts as both
information, as well as the digitization required to facilitate it
recognition and an additional incentive,” the jury said following
all, can play an important role in maintaining and advancing
its decision. Bernard Dijkhuizen, Ziggo’s CEO at the time,
an Open Society.
presented the award, a trophy and €15,000 to Tim Toornvliet
of Bits of Freedom at the annual Ziggo Congres.
Ziggo wants to be actively involved in thinking about, and
acting towards, an open society, from the perspective of
Ziggo also plays an active role in government and industry
computerization and digitization. Where are the barriers?
initiatives and programmes that shape the present and future
How can we get more people involved? How can we ensure
of our industry. As a vital member of the ECP (Electronic
that everyone is able to participate? How will we maintain
Commerce Platform), we participate in initiatives that promote
the high-quality and diversity levels of the information upon
internet safety and prevent abuse of the internet.
which people base their opinions and, in some cases, even
their identities?
Meldpunt Kinderporno
The ‘Meldpunt Kinderporno’, (the Registration Centre for Child
Ziggo Open Society Award 2013
Pornography) is a foundation that fights against the distribution
To address these issues Ziggo has established an annual prize:
of child sex abuse on and through the internet. Ziggo
the Ziggo Open Society Award (de Ziggo Prijs voor de Open
financially supported the foundation in 2013.
Samenleving). The prize is awarded to organizations or
individuals who have clearly contributed through their ideas,
Unicef Kinderrechten Filmfestival
initiatives or projects to an Open Society; a society in which
Ziggo also supports the Unicef Rights of the Child Movie
everyone is included and has the opportunity to act, think and
Festival (Unicef Kinderrechten Filmfestival), the biggest movie
imagine, and in doing so, increases pluriformity and quality.
project for primary school children in the Netherlands. This
project enables children, together with their school, to create
In 2013, the Ziggo Open Society Award was won by Bits of
their own movies on the subject of the rights of children.
Freedom, a Dutch digital rights organization that focuses
on privacy and communications freedom in the digital age.
The other finalists were NoXqs and Internet Protection Lab.
According to the jury, the two runners-up also play an
important role in Dutch (open) society.
Contents
Ziggo N.V. Annual Report 2013 28
Ziggo at a glance
Performance
Governance
Financial statements
© Onno Feringa
Universiteit van Nederland
Quality of content
Our people
In 2013 we supported several initiatives that are aimed at
Ziggo’s direct sphere of influence is formed by its employees.
enhancing the quality of content. A series of ‘Debatlabb’,
Our employees enjoy a range of modern, flexible benefits,
a televised debate on Open Society topics hosted in
and are able to make choices that fit their personal priorities.
Club Ziggo, was broadcast live via our event channel. As in
Throughout the year the Company organizes internal meetings
2012, we supported ‘de Tegel’ (the most important annual
and events, both formal and informal, to exchange information
award for Dutch journalism) together with the ‘Nipkow-schijf’.
and get together. Employees are increasingly taking the
The Nipkow-schijf is an annual award given by Dutch media
opportunity to do voluntary work, or to make donations to
journalists to the best television programme, interview, radio
good causes. Ziggo is an inclusive employer, offering equal
broadcast and multimedia performance of the past season.
opportunities to everyone, irrespective of country of origin,
beliefs, handicap, sexual orientation, gender or age.
‘DE TV-BEELDEN’
The Netherlands plays an important role in the international
In 2013 we continued to invest in our people, ensuring our
television industry. It is the third most successful country in
customers receive the best quality products and services and
terms of developing (successful) new TV formats, behind only
allowing our employees to lead rewarding and fulfilling lives,
the United Kingdom and the United States. Dutch television
both at work and at home. Within the Company, employees
makers are known globally for the quality of their work, but in
have a personal budget that can be spent on items such as
their own country these achievements are still under-exposed.
extra free days, a subscription to a gym or extra pension
‘DE TV-BEELDEN’, a new Dutch television trade award through
payments. In addition to the personal budget, we also offer
which industry producers and creators can honour each
opportunities for personal development through training
other’s work annually, was established to redress this. Ziggo is
courses and coaching programmes.
a founding partner of DE TV-BEELDEN.
Employee representation
‘Universiteit van Nederland’
Ziggo is in frequent contact with its works council, targeting
In 2013 we joined forces with the University of the Netherlands
a level of transparency and cooperation beyond legal
(Universiteit van Nederland). This initiative, led by Alexander
requirements. The relationship is constructive, professional
Klöpping and Marten Blankensteijn, provides the country’s
and mutually beneficial.
leading university professors with a platform to share their
knowledge with a broader audience. The classes are free and
are broadcast on Ziggo’s events channel and over the internet.
We believe these projects will not only stimulate the quality of
broadcast content, but will also contribute to an Open Society.
Contents
Ziggo N.V. Annual Report 2013 29
Ziggo at a glance
Performance
Governance
Financial statements
Ziggo supports Enactus, a non-profit platform for social
Ziggo is a member of The Green Grid. The Green Grid is a
entrepreneurialism and leadership development that is active
group of companies, government and educational institutions
in more than 1,500 schools and universities across
that aim to decrease the environmental impact of the IT
39 countries. Enactus and Ziggo aim to develop sustainable
industry. All members cooperate on research, as well as
leadership among students by introducing them to social
sharing practical tips to achieve greater efficiency in the use of
entrepreneurialism. Enactus students, together with key
energy and power management devices, thereby reducing the
representatives from Ziggo, set up projects aimed at
CO2 footprint of information and communications
sustainably improving the living standards and circumstances
technologies (ICT).
of people less well off than themselves.
Customer data
At the end of 2013, Ziggo employees selected the ‘Nationale
Information security and integrity are a priority at Ziggo.
Voedselbank’ (national food bank) as their charity of choice,
Our guidelines are established in the Code of Conduct,
donating €75,000.
available to all staff. Information security starts with
Sustainability
Ziggo’s approach to environmental sustainability rests on
knowledge and awareness. In 2013, an intensive training
programme was finalized to raise the level of awareness
among our employees.
three pillars: energy conservation, material use and waste
management.
Our National Operations Centre and our Security Operations
Centre monitor our systems and operations continuously
In the last quarter of 2012, we were the first company in the
(24/7), ensuring security and continuity remain at the highest
Netherlands to receive BREEAM-NL certification for one of our
possible level.
new data centres. BREEAM determines the sustainability
performance of buildings, and the data centre was constructed
to be environment friendly (all materials are reusable) and uses
an optimal temperature management system. As a result, the
new data centre consumes 40% less energy. In 2013, a total of
seven data centres received BREEAM-NL certification.
Contents
Ziggo N.V. Annual Report 2013 30
Ziggo at a glance
Performance
Governance
Financial statements
Investor relations
On a regular basis, Ziggo engages in communication with
financial analysts and investors, both from the equity and
credit side. The core of its communication to the financial
community takes place through corporate press releases
which are broadly distributed and made available on the
investor relations section of the corporate website of Ziggo
(www.ziggo.com).
In addition, Ziggo regularly engages in direct investor contacts,
Investor Relations department, frequently accompanied by one
typically through road shows, broker conferences, Company
or more members of the Board of Management. The Company
visits and telephone contacts. These contacts can either take
is strict in its compliance with applicable rules, regulations and
place with (large) groups of shareholders or on a 1-on-1
best practices on fair and nonselective disclosure and equal
bilateral basis. The purpose of these meetings is to inform
treatment of shareholders, bondholders and other investors.
our shareholders, investors and analysts about the Company,
the results, the operations and the strategy, all to the extent
Dividend
publicly disclosed, as well as on the general market environment.
As a result of the intended public offer on all outstanding
Therefore, the timing of these communication moments are
shares of Ziggo N.V. by Liberty Global on January 27, 2014,
skewed towards the first days and weeks following the
the Company has agreed not to pay or declare any (interim)
Company’s quarterly earnings releases.
dividend or to make any distribution in kind until completion
of the transaction.
Furthermore, to maintain an effective dialogue, Ziggo also
engages in investor meetings with the purpose to receive
Historic overview
feedback from its shareholders and bondholders. This
Over the fiscal year 2013, Ziggo has paid an interim dividend of
communication takes place either at the initiative of the
€190 million, equal to €0.95 per share, on September 10, 2013.
Company or at the initiative of individual investors. During
The dividend payments since the Initial Public Offering of
these meetings the Company is generally represented by its
Ziggo N.V. in 2012 are listed in the table below:
Financial year
Interim dividend
Payment date
2013
€ 190.0 million
September 10, 2013
2012
€ 110.0 million
September 11, 2012
Capital Distribution Policy
■■
Ziggo capital distribution policy (which is suspended in view of
Final dividend
Payment date
€ 180.0 million
April 29, 2013
Capital distribution is in principle by means of dividend,
potentially supplemented by share buybacks in the future.
the recommended intended public offer on all outstanding
■■
Dividend to be paid twice per year.
shares of Ziggo N.V. by Liberty Global) is derived from its
■■
Maintain a leverage ratio (net debt/adjusted EBITDA) of
financial strategy and is built around the following principles:
■■
around 3.5.
Distribution of around 100% of Equity Free Cash Flow to
Equity1 (FCFE).
1 Free Cash Flow to Equity (“FCFE”) is defined as EBITDA minus capital expenditure
minus movement in provisions minus change in working capital minus net
interest minus taxes paid. FCFE is a non-IFRS measure and may not be
comparable to similarly titled measures used by other companies.
Contents
Ziggo N.V. Annual Report 2013 31
Ziggo at a glance
Performance
Governance
Financial statements
Analysts’ coverage
Credit Ratings
Ziggo is covered by approximately 40 equity and credit
Ziggo is rated by the leading international rating agencies
analysts who frequently issue reports and provide
Moody’s and Standard & Poor’s.
recommendations on the Company.
Rating agency
S&P
Moody’s 1
Date
Corporate family rating
Senior Secured Notes
Senior Unsecured Notes
October 1, 2013
BB+ (stable)
BBB-
BB-
November 11, 2013
Ba1 (stable)
Baa3
Ba2
1 As per January 28, 2014 Moody’s placed Ziggo’s ratings under review following the intended public offer by Liberty Global.
Share price development
Daily volume and 20 day average
x €1
x 1,000
35
8,000
6,000
30
4,000
25
2,000
20
0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
Volume Euronext
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
20-day average volume Euronext
Total Shareholder Return1
%
45
30
15
0
-15
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Sep
Oct
Nov
Dec
1 Total shareholder Return is the combination of the shareprice development and dividend distributed to shareholders.
Market prices
112
108
104
100
96
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
3.625% Senior Secured Notes
6.125% Senior Secured Notes
8.000% Senior Unsecured Notes
Contents
(Source: Bloomberg)
Ziggo N.V. Annual Report 2013 32
Ziggo at a glance
Performance
Governance
Financial statements
All amounts in € unless otherwise indicated
Relevant trading data (on Euronext Amsterdam)
Number of outstanding shares at year-end
200,000,000
Lowest price intraday (January 24, 2013)
22.02
Lowest closing price (January 24, 2013)
22.02
Highest price intraday (December 12, 2013)
33.98
Highest closing price at year-end (December 31, 2013)
33.20
Share price at year-end
33.20
Market capitalization at year-end
6,640,000,000
Average daily trading volume (in #’s)
608,651
Shareholders
The following shareholders have reported shareholdings in the
AFM register regarding substantial participations:
Shareholder
Notification date
Number of
ordinary
shares
Capital
interest
Previous
notification
Liberty Global Plc.
Morgan Stanley
Ameriprise Financial Inc.
Blackrock Inc.
Direct / Indirect
July 25, 2013
57,000,738
28.50%
15.00%
Indirectly Real
November 22, 2013
1,549,042
7.39%
8.53%
Indirectly Real / Indirectly Potential
October 11, 2013
10,024,853
5.01%
4.85%
Directly Real / Indirectly Real
December 27, 2013
9,614,229
4.93%
5.06%
Indirectly Real / Indirectly Potential
Note: Substantial participations shown above 3% capital interest notification requirement as per December 31, 2013.
Financial calender
January
April
July
October
1
1
1
1
Start of quiet period ahead
Start of quiet period ahead
Start of quiet period ahead
Start of quiet period ahead
of FY and Q4 2013 Results
of Q1 2014 Results
of Q2 2014 Results
of Q3 2014 Results
24
16
17
16
FY and Q4 2013 Results
Q1 2014 Results
Q2 2014 Results
Q3 2014 Results
17
Annual General Meeting of
Shareholders
For more information please visit www.ziggo.com/en/investors
Contact
investorrelations@office.ziggo.nl
Tel: +31 (0)88 717 1799
Postbus 43038
3540 AA Utrecht
Contents
Ziggo N.V. Annual Report 2013 33
Ziggo at a glance
Performance
Governance
Financial statements
Connecting people
WifiSpots
The idea is simple: if every Ziggo customer was to host
a public wifi hotspot, these combined networks would add
up to one large network with complete coverage in a town
or city. And that is just what Ziggo is doing. Over 1 million
Ziggo WifiSpots are now active enabling Ziggo customers
to have wifi connectivity away from home.
Contents
Ziggo N.V. Annual Report 2013 35
Ziggo at a glance
Performance
Governance
Financial statements
Corporate Governance
Structure
The powers of the General Meeting of Shareholders include
Ziggo has a two-tier board structure consisting of a Board of
appointing the Supervisory Board members based on
Management (Raad van Bestuur) and a Supervisory Board (Raad
nominations by the Supervisory Board (for one third of the
van Commissarissen), in accordance with the Dutch complete
appointments the Works Council has an enhanced right of
structure regime for large companies (volledig structuurregime)
recommendation), adopting the financial statements and
as set forth in the provisions of sections 2:158 to 2:162 inclusive
endorsing the manner in which affairs were conducted during
and 2:164 of the Dutch Civil Code (Burgerlijk Wetboek), which
the financial year by the Board of Management and the
is being applied by Ziggo.
supervision thereof by the Supervisory Board. The annual
report, the policy on reserves and dividends and the proposal
The Board of Management is the executive body and is
to distribute a dividend are discussed with the General Meeting
responsible for the day-to-day management of the operations,
of Shareholders. Furthermore, the Board of Management and
supervised by the Supervisory Board. The Board of
the Supervisory Board report to the General Meeting of
Management is required to keep our Supervisory Board
Shareholders on the Corporate Governance Structure.
informed, consult with our Supervisory Board on important
matters and submit certain important decisions to our
The General Meeting of Shareholders may resolve to
Supervisory Board for its approval. The Board of Management
amend the articles of association of Ziggo on proposal
has three members, supported by seven Vice Presidents.
of the Board of Management which has been approved
by the Supervisory Board.
The Supervisory Board is responsible for supervising the
activities of our Board of Management and the general course
Share capital
of our affairs and our business. Our Supervisory Board may
The authorized share capital of Ziggo N.V. consists of
also, at its own initiative, provide the Board of Management
800,000,000 ordinary shares, each with a nominal value
with advice and may request any information from the Board
of €1, of which 200,000,000 shares have been issued and
of Management that it deems appropriate. The Supervisory
paid up. All shares are registered shares and are transferable
Board is authorized to appoint the members of the Board of
based on the Dutch Securities Giro Act. Each share entitles
Management. In performing their duties, our Supervisory Board
the holder to cast one vote.
members must act in accordance with our interests and those
of our business and all stakeholders. The members of our
Supervisory Board are generally not authorized to represent us
in dealings with third parties. The Supervisory Board bears
collective responsibility for carrying out its duties.
Contents
Ziggo N.V. Annual Report 2013 36
Ziggo at a glance
Performance
Governance
Financial statements
Chairman’s Statement
“Setting the
best course
for the future”
“Ziggo continued to
establish itself as a
leading provider of
exciting new and
entertaining services.“
Andy Sukawaty
Chairman Supervisory Board
Contents
Ziggo N.V. Annual Report 2013 37
Ziggo at a glance
Performance
Governance
Financial statements
The year 2013 was our first full year as a listed company.
The year brought on many changes in services, management
and competition. In addition, the headwinds presented by
the general economic situation in the Netherlands were
also a challenge.
The Company was also presented with a potential change in
to change the ownership of the Company. I will not describe
ownership, which of course represents additional uncertainty.
this proposal in great detail here. The benefits and risks that
Despite this level of change and challenge, Ziggo as a business
come with this proposal will be fully described in a document
continued to perform well, with all-important improvements in
that will be issued shortly. In addition, it is described in the
our customer satisfaction ratings and a decrease in customer
merger protocol which can be reviewed online. I will say at this
churn or defection levels. Significant increases in total internet
point that the Supervisory Board and the Board of Management
subscribers and All-in-1 bundles subscribers were also
at Ziggo were rigorous and diligent in our consideration of this
encouraging. These combined developments bode well for
proposal. In doing so, we deeply considered the interests of all
our future. Financially, both Revenues and EBITDA increased,
of our stakeholders. In arriving at the conclusion that this offer
but not at the same rate as previous years, due primarily to our
should be recommended to our shareholders, we also
reactions to competitive pressures and the delay in the
considered the strength and quality of Liberty Global as a
implementation of our new service platforms. Debt levels
potential owner of Ziggo. In combining Ziggo, not only with
also continued to decrease during the year. Overall, Ziggo
UPC Netherlands (the subsidiary of Liberty Global), but also the
continued to establish itself as a leading provider of exciting
large-scale global cable TV business that Liberty Global owns,
new and entertaining services to consumers in the Netherlands,
we put Ziggo in a position to further invest and deliver world-
while maintaining a solid financial condition, enabling us to
leading services to our customers. We believe that the scale and
look forward to further investments and growth.
diversification this brings could generate many benefits for the
customers, employees and shareholders of Ziggo. Of course,
We were pleased to welcome a new Chief Executive Officer to
this combination is subject to various conditions, including
the business, René Obermann, who stepped into the role to
regulatory approval. However, at this stage, weighing all of the
start 2014. Mr. Obermann brings a wealth of experience in our
factors, we are convinced this is the best course for the future.
sector to the role, joining us from his most recent position as
Chief Executive of the global telecoms provider, Deutsche
On behalf of my fellow Supervisory Board members, I would
Telekom. We look forward with great anticipation to his
like to thank our customers for continuing to trust Ziggo to
leadership in working with the Ziggo team to take the Company
provide services to you to enhance your lives. We thank our
to the next stage in its growth. We also owe enormous thanks
staff for your dedication and hard work in delivering world-
to Bernard Dijkhuizen who, with the team, really created
leading services in a way that is sustainable and can grow.
Ziggo as we know it today, from three regional companies.
We also thank our investors for supporting us in our first
He not only led the Company through its creation phase and
full year as a listed company.
through its IPO, but he managed the service development and
a recognized leader in the global Cable TV sector.
Andy Sukawaty
Chairman Supervisory Board
Of course, the second half of the year presented Ziggo
Utrecht, the Netherlands
with proposals from our largest shareholder, Liberty Global,
March 5, 2014
financial performance in such a way that Ziggo has become
Contents
Ziggo N.V. Annual Report 2013 38
Ziggo at a glance
Performance
Governance
Financial statements
Supervisory Board
Andrew (Andy) Sukawaty
Joseph Schull
Chairman
Male, American national, 1955
Member
Male, Canadian national, 1961
Andy Sukawaty joined Zesko Holding B.V.’s Supervisory Board
Joseph Schull joined Zesko Holding B.V.’s Supervisory Board
in 2008 and Ziggo’s Supervisory Board in 2012 and serves as
in 2006 and Ziggo’s Supervisory Board in 2012. He joined
its Chairman. He is also the Executive Chairman of Inmarsat,
Warburg Pincus in 1998, and currently bears responsibility
a global mobile satellite communications service provider.
for the firm’s European investment activities, and is member
He was formerly Chairman of Xyratex Ltd, Chairman of Telenet
of the firm’s Executive Management Group, which coordinates
Communications NV and Deputy Chairman of O2 plc.
the firm’s activities on a worldwide basis. He was involved in a
Andy was CEO and President of Sprint PCS in the United States
number of investments, including Zentiva, Loyalty Management
from 1996 to 2000. Andy Sukawaty is the Chairman of the
Group, Fibernet, Multikabel and United Internet. He is currently
Selection, Appointment and Remuneration Committee.
a Director of MACH, a leading global provider of billing and
The term of appointment of Andrew Sukawaty is 4 years as
settlement services to the mobile telecom industry.
from 20 March 2012.
Joseph Schull is a member of the Selection, Appointment
and Remuneration Committee. The term of appointment of
Joseph Schull is 4 years as from 20 March 2012.
David Barker
Dirk Jan van den Berg
Member
Male, British national, 1968
Member
Male, Dutch national, 1953
David Barker joined Zesko Holding B.V.’s Supervisory Board
Dirk Jan van den Berg joined Zesko Holding B.V.’s Supervisory
in 2006 and Ziggo’s Supervisory Board in 2012. David Barker
Board in March 2009 and Ziggo’s Supervisory Board in 2012.
joined Cinven in 1996 and is head of Cinven’s Technology,
He has been President of the Executive Board of Delft University
Media and Telecommunications sector team. He was involved
of Technology since March 2008. Dirk Jan van den Berg was
in a number of transactions, including Ziggo, Eutelsat,
formerly her Majesty’s ambassador in China, Permanent
Springer, Aprovia and MediMedia. David Barker is a member
Representative for the Netherlands to the United Nations in
of the Selection, Appointment and Remuneration Committee.
New York, Secretary General of the Ministry of Foreign Affairs
The term of appointment of David Barker is 4 years as from
and Deputy Director General at the Ministry of Economic
20 March 2012.
Affairs. Dirk Jan van den Berg is a member of the Selection,
Appointment and Remuneration Committee. The term of
appointment of Dirk Jan van den Berg is 3 years as from
20 March 2012.
Contents
Ziggo N.V. Annual Report 2013 39
Ziggo at a glance
Performance
Anne Willem Kist
Governance
Financial statements
Pamela Boumeester
Member
Male, Dutch national, 1945
Member
Female, Dutch national, 1958
Anne Willem Kist joined Zesko Holding B.V.’s Supervisory Board
Pamela Boumeester joined Ziggo’s Supervisory Board in 2013.
in 2009 and Ziggo’s Supervisory Board in 2012. Anne Willem Kist
Pamela Boumeester had various positions at Nederlandse
regularly advises the Ministry of Infrastructure and Environment.
Spoorwegen (Dutch Railways), including CEO of NS Poort
He was the first Director General of the Dutch Competition
(property and retail activities) and NS Reizigers (services to
Authority (NMA), where he worked from 1997 to 2003. He served
customers, planning and execution of timetable, specification
as a member of the Board of the Netherlands Authority for the
and purchase of equipment). Additionally, she is member of
Financial Markets (AFM) between 2005 and 2007. Anne Willem
the Supervisory Board of Heijmans, Persgroep Nederland B.V.,
Kist also served as Chairman of the Board of the University of
Ordina N.V. and Jaarbeurs Holding B.V. Pamela Boumeester
Leiden from 2003 to 2005. He began his career as a lawyer,
chairs the Selection, Appointment and Remuneration Committee.
and was a partner at Loeff Claeys Verbeke and Pels Rijcken &
The term of appointment of Pamela Boumeester is 4 years as
Droogleever Fortuijn between 1979 and 1997. Anne Willem Kist
from April 18, 2013.
is a member of the Audit Committee. The term of appointment
of Anne Willem Kist is 3 years as from 20 March 2012.
Rob Ruijter
Member
Male, Dutch national, 1951
Rob Ruijter joined Ziggo’s Supervisory Board in 2012.
Rob Ruijter previously held financial Executive Board positions
at Philips Lighting, Baan, KLM, VNU and ASM International.
He currently has an advisory role at Verdonck Klooster &
Associates and is a Supervisory Board member at Unit 4 N.V.
and Wavin N.V. Rob Ruijter is the chairman of the Audit
Committee. The term of appointment of Rob Ruijter is 4 years
as from 20 March 2012.
Contents
Ziggo N.V. Annual Report 2013 40
Ziggo at a glance
Performance
Governance
Financial statements
Board of Management
The statutory Board of Management of Ziggo is comprised
of three members, the Chief Executive Officer, the Chief
Financial Officer and the Chief Technology Officer.
The Company intends to appoint a new Chief Commercial
Officer as per April 18, 2014.
René Obermann
Bert Groenewegen
Chief Executive Officer
Male, German national, 1963
Chief Financial Officer
Male, Dutch national, 1964
René Obermann started as Chief Executive Officer in January
Bert Groenewegen has been Chief Financial Officer of the
2014. Prior to Ziggo, René Obermann worked at Deutsche
Company since March 2010. Prior to joining Zesko Holding B.V.’s
Telekom Group from 1998 till 2013. After fulfilling several roles
Board of Management, Bert Groenewegen was Chief Executive
within that Group, he was appointed as Chief Executive Officer
Officer of PCM Publishers from 2007 to 2009 after having
of Deutsche Telekom AG in November 2006, which he
served as its Chief Financial Officer from 2005 to 2007. From
remained until December 2013.
2004 to 2005 Bert Groenewegen worked for US-based private
equity firm General Atlantic. From 1995 to 2004, he was CFO
René Obermann began his career with a business traineeship
of Exact Software, where he also served as Group Financial
at BMW AG in Munich. Next, he founded his own business in
Controller from 1993 to 1994 and supervised the Company’s
Münster in 1986: ABC Telekom, a company marketing and
initial public offering in June 1999. Before joining Exact, Bert
distributing telecommunication equipment and providing
Groenewegen worked for Arthur Andersen as an auditor
technical services. After the acquisition of ABC Telekom by
from 1989 to 1991 and as financial manager for Sokkia Europe
Hutchison Whampoa in 1991, he became managing partner
from 1991 to 1993. From 1986 to 1989, Bert Groenewegen also
of the resulting company: Hutchison Mobilfunk GmbH.
worked for Exact Software in sales and product development.
Additionally, he was appointed Chief Executive Officer from
Bert Groenewegen studied business administration at the
1993-1998 of that same company.
Tilburg University.
Reporting to the Company’s Chief Executive
Reporting to the Chief Financial Officer
1.Operations
1. Accounting, Financial & Business Control
2. Human Resources
2. Internal Control & Risk Management (IC&RM)
3. Strategy & Legal
3. Internal Audit
4. Corporate Communications
4. Investor Relations
5.Facilities
6. Procurement & Logistics
7. Tax
Contents
Ziggo N.V. Annual Report 2013 41
Ziggo at a glance
Performance
Governance
Financial statements
Marcel Nijhoff
Paul Hendriks
Chief Commercial Officer (left Ziggo as of March 1, 2014)
Male, Dutch national, 1961
Chief Technology Officer
Male, Dutch national, 1968
Marcel Nijhoff has been Chief Commercial Officer of the
Paul Hendriks has been Chief Technology Officer of the
Company since February 2007. He became Zesko Holding B.V.’s
Company since February 2008. He became Zesko Holding B.V.’s
Chief Commercial Officer in 2007 and was appointed
Chief Technology Officer in 2008 and was appointed Managing
Managing Director in accordance with the Articles of
Director in accordance with the Articles of Association in 2010.
Association in 2006. Prior to joining Zesko Holding B.V.’s
Between 1992 and 2007 he managed a range of divisions at
Board of Management, Marcel Nijhoff was Chief Executive
KPN, including Design & Development, Operations South-East,
Offer of Multikabel N.V. for two years and Commercial Director
and Business Lines (Telephony and Broadband Internet), as well
from 2001 to 2005. Marcel Nijhoff worked for PrimaCom
as leading a range of major change programmes, including
RegionMitte in Leipzig, Germany between 2000 and 2001.
VoIP and All IP. Paul Hendriks has been a consultant, project
During the late 1990s, he was Vice President Marketing at
manager and the architect in a range of restructurings,
Amsterdam cable operator UPC/A2000. Marcel Nijhoff left
reorganizations and innovations.
the Company as per March 1, 2014. The Company intends
to appoint Hendrik de Groot as statutory director and Chief
Reporting to the Chief Technical Officer
Commercial Officer as per April 18, 2014.
1. Innovation & Development
Reporting to the Chief Commercial Officer
1. B2B (Ziggo Zakelijk)
2. Consumer Markets & Sales
3. Consumer Relations
4. Consumer Products & Innovation
Hendrik de Groot has been Managing Director of Business-toBusiness at Ziggo since January 2010. Before he joined Ziggo,
he served as Group Director Voice Products at COLT
Telecommunications since 2006 and Head Global Accounts
at Vodafone Group since 2003. From 1994 to 2003 Hendrik de
Groot served in various senior roles at MCI International before
Hendrik de Groot
its acquisition by Verizon in 2005 as Vice President responsible
for Business Development and later for Corporate Accounts
and Services. He started his career at BT Benelux in several
Chief Commercial Officer
Sales and Marketing positions. Hendrik de Groot graduated
(Intended appointment April 18, 2014)
in business administration and business economics at the
Male, Dutch national, 1965
Nyenrode University and at the Vrije Universiteit in Amsterdam.
Contents
Ziggo N.V. Annual Report 2013 42
Ziggo at a glance
Performance
Governance
Financial statements
Dutch Corporate
Governance Code
The Dutch Corporate Governance Code, which was first
Committee and our Selection and Appointment Committee
published on December 9, 2003, contains both principles and
are combined. Ziggo is of the opinion that a combined
best practice provisions governing relations between the Board
committee is more efficient than two separate committees.
of Management, the Supervisory Board and the shareholders
3.Until May 2, 2013 Ziggo did not comply with best practice
(i.e. the General Meeting of Shareholders). Dutch companies
provision III.5.1 as only two of the four members of the
whose shares are listed on a government recognized stock
Selection, Appointment and Remuneration Committee are
exchange, whether in the Netherlands (such as Euronext
independent. Please refer to sub 1.
Amsterdam) or elsewhere, are required under Dutch law to
4.Until March 1, 2013, Ziggo did not comply with best practice
disclose in their annual reports whether or not they apply the
provision III.5.11, which requires that the Remuneration
provisions of the Dutch Corporate Governance Code. In the
Committee may not be chaired by the chairman of the
event that they do not apply a certain provision, they are
Supervisory Board as Mr. Sukawaty chaired the Selection,
required to explain why.
Appointment and Remuneration Committee. As of
April 18, 2013 Mrs. Boumeester chaired this Committee.
We recognize the importance of good corporate governance.
5.Ziggo does not comply with best practice provision
The Board of Management and the Supervisory Board have
IV.3.1, which requires that provision shall be made for
reviewed the Dutch Corporate Governance Code and support
all shareholders to follow any meetings with analysts,
the best practice provisions thereof. Therefore, except as noted
presentations to analysts, presentations to investors and
below or in the case of any future deviation, subject to an
institutional investors and press conferences real time
explanation at the relevant time, we comply with the relevant
by means of webcasting or telephone. Ziggo finds it not
best practice provisions of the Dutch Corporate Governance
practical to make these arrangements and regards the lack
Code, as per December 31, 2013.
of flexibility resulting from such arrangements, as not in the
interests of relations with the investment community.
Departures from the Best Practice Provisions
of the Dutch Corporate Governance Code
6.Ziggo was not in compliance with best practice provision
II.2.8, which provides that remuneration, in the event of a
While we endorse the principles and best practice provisions of
dismissal, may not exceed one year’s fixed salary. In the
the Dutch Corporate Governance Code, we do not comply
event that Mr. Dijkhuizen’s employment agreement was
with the following best practice provisions of the Dutch
terminated at Ziggo’s initiative for a reason which would
Corporate Governance Code:
have been not mainly or solely attributable to acts or
1.Until May 2, 2013 Ziggo did not comply with best practice
omissions by Mr. Dijkhuizen and as a result would have
provision III.2.1, which requires that all members of the
ended prior to January 1, 2014, the basic assumption was
Supervisory Board, with the exception of no more than
that Mr. Dijkhuizen’s severance arrangement would be based
one person are independent during the year under review.
on the neutral Cantonal Court Formula (kantonrechters­
Until the aforementioned date, Messrs. Schull and Barker
formule) (as currently applicable). This would be increased
were non-independent members of the Supervisory Board
by the average amount of the short-term annual cash
within the meaning of best practice provision III.2.1. As a
incentive awarded over the two years prior to the
result of the sale by Warburg Pincus and Cinven of their
termination date of his employment agreement. This was a
shares in Ziggo, the Relationship Agreement concluded
result of commitments in the employment agreement with
between Warburg Pincus, Cinven and Ziggo no longer
Mr. Dijkhuizen made prior to the IPO. Mr. Dijkhuizen retired
applied as of March 22, 2013.
as per January 1, 2014 without the aforementioned
2.Ziggo does not comply with best practice provision III.5,
which requires that if the Supervisory Board consists of more
severance arrangements having been applied.
7.Ziggo does not comply with best practice provision
than four members, it shall appoint from among its members
II.2.5, which provides that shares granted to the Board of
an Audit Committee, a Remuneration Committee and a
Management without financial compensation must be held
Selection and Appointment Committee. Our Remuneration
for at least five years. Ziggo grants shares to its Board of
Management that must be held for at least four years.
Contents
Ziggo N.V. Annual Report 2013 43
Ziggo at a glance
Performance
Diversity in gender
Governance
■■
Financial statements
The Board of Management, subject to prior approval of the
Ziggo aims for a diverse composition of its Boards regarding
Supervisory Board, has been designated as competent body
experience, background, age and gender. Regarding gender,
by the General Meeting of Shareholders to issue shares and
Ziggo endeavours to comply with article 166 of book 2 Dutch
grant rights to subscribe for shares in the capital of Ziggo,
Civil Code and has as a first step appointed Mrs. Pamela
up to a maximum of 10% of the issued and outstanding
Boumeester as a member of the Supervisory Board.
share capital of Ziggo and to limit or exclude pre-emptive
rights of shareholders upon such issue of shares or a grant
Corporate Governance declaration
of rights to subscribe for shares. Furthermore, the Board of
This declaration is made pursuant to the Decree regarding
Management, subject to approval of the Supervisory Board,
further stipulations for the content of annual reports dated
has been authorized by the General Meeting of Shareholders
March 20, 2009 (“the Decree”). The statements as meant in
to acquire, other than for no consideration, shares held
article 3, 3a and 3b of the Decree can be found in the following
by Ziggo of its own capital up to a maximum of 10% of
chapters and on the following pages of this annual report and
the issued and outstanding share capital of Ziggo. These
are deemed to be inserted and repeated herein:
designations and authorizations end on October 18, 2014.
■■
Compliance with principles and best practices of the
The Board of Management has not used these designations
Corporate Governance Code: chapter Corporate
and authorizations.
Governance Structure, page 36.
■■
Most important characteristics of the management and
The Corporate Governance Declaration can also be found on
control systems in connection with the Company’s financial
the website of Ziggo: www.ziggo.com
reporting process: chapter risk management, page 45.
■■
Information on the functioning of the General Meeting of
Shareholders and the most important powers and rights of
the General Meeting of Shareholders: chapter Corporate
Governance Structure, page 36.
■■
The composition and functioning of the Board of
Board of Management
Management: chapter Corporate Governance Structure,
■■
page 36 and chapter Board of Management, page 41.
René Obermann
The composition and functioning of the Supervisory Board:
Bert Groenewegen
chapter Corporate Governance Structure, page 36 and
Paul Hendriks
Supervisory Board page 39.
■■
Information as meant in the article 3b of the Decree (art 10
Decree Take Over Directive): chapter Corporate Governance,
Utrecht, The Netherlands
page 43.
March 5, 2014
Contents
Ziggo N.V. Annual Report 2013 44
Ziggo at a glance
Performance
Governance
Financial statements
Risk Management
and Internal Control
Aligning Risk and Strategy – a focus on true relevance
During 2013 we enhanced our Risk Management framework
Ziggo’s strategy to become the preferred media and
with a clear focus on strategic and project risk management
entertainment company remained unchanged. Our superior
and focussed on simplifying our Internal Control framework
network that allows us to offer our customers the best value in
based on lessons learned from 2012.
products and services, now and in the foreseeable future, is still
capturing new growth opportunities and strengthening our
Our Risk Management Framework – three lines
of defence
leading position in the Dutch telecom and media market.
We apply a COSO Enterprise Risk Management (COSO ERM)
at the foundation of our strategy. Innovation is however key to
based Internal Control and Risk Management framework to
Our risk appetite (the amount of risk Ziggo is willing to accept
continuously and proactively manage risks and to realise our
in pursuit of value) is clearly linked to our strategy, defining the
(strategic) objectives effectively and efficiently, in accordance
boundaries for our business model and taking into account
with our brand values. In addition to COSO ERM, we apply the
internal and external factors, including financial, commercial
COSO Internal Control – Integrated Framework as it enables
and reputational aspects, thus allowing us to focus on truly
us to more effectively and efficiently develop and maintain
relevant risks. In line with our innovation strategy, we strongly
our systems of internal control. During 2013 we assessed the
favour exploring new opportunities and are prepared to accept
impact of the updated COSO Internal Control – Integrated
a reasonable amount of risk if these opportunities are likely to
Framework (Framework) and related illustrative documents,
contribute to the realisation of our strategic, operational and
released on May 14, 2013. We found that the updated
financial goals. Taking into account our risk appetite, we
Framework confirmed our approach to Internal Control and
require our management to pro-actively manage risks and
defined additional areas for enhancements to be implemented
control in order to ensure an acceptable level of risk for Ziggo.
during 2013-2014.
As the execution of our strategy brings its own, unique risks,
Although the implementation of the Ziggo Internal Control and
the challenge for our management is to determine how much
Risk Management framework initially had a strong focus on
risk to accept while realizing our (strategic) objectives.
managing financial reporting risks, during 2013 we continued
This requires a clear strategy in terms of the amount of risk
to extend our scope to managing risks on strategic, tactical
our management is willing to accept and the corresponding
and operational levels also incorporating other than financial
level of control required.
reporting risk factors in line with our Risk Management Roadmap
2015. Despite all efforts exercised, the implementation of
In setting our risk management strategy, we initiated the
an internal control and risk management system only provides
implementation of an integrated Risk Management and Internal
a reasonable level of assurance, risks that are currently
Control framework in 2012 where, based on strategic
not considered material, could however in a later stage have
objectives, risks are identified in a structured way and key
a significant negative effect on the realization of our
(financial) controls defined, implemented and executed in
(strategic) goals.
accordance with defined risk tolerances. Our integrated
approach aids us in developing and achieving our strategic,
The three lines of defence against which we review significant
operational and financial objectives and is both fundamental to
risks are illustrated below.
the day-to-day management of our Company and a critical
success factor in ensuring that our strategy is executed in
a controlled, transparent and compliant manner.
Contents
Ziggo N.V. Annual Report 2013 45
Ziggo at a glance
Performance
Governance
Financial statements
First, our management has ownership, responsibility and
and risk management systems, the internal and external audit
accountability for assessing, controlling and mitigating risk
process, the internal and external auditor’s qualifications,
(first line of defence) on a daily basis.
independence and performance, as well as the Company’s
process for monitoring compliance with laws and regulations.
Second, our management is supported by subject matter
experts (second line of defence) originating from Business
What has this meant in practice this year?
Control, Internal Control & Risk Management, Security &
Core values
Integrity and Compliance.
Ziggo’s core values are best characterized by innovative,
Finally, Internal Audit helps us in accomplishing our objectives
co-operative, challenging and aiming for simplicity. Integrity
by bringing a systematic, disciplined approach to evaluate and
and ethical values are vital elements embedded in our core
improve the effectiveness of risk management, internal control,
values. Ziggo’s performance management cycle is based on
and governance processes (third line of defence). Internal Audit
High Performance principles; as a result we have defined a
directly reports to the Board of Management, represented
High Performance leadership profile which focuses on quality
by the CFO, and has direct access to the Audit Committee
of personal leadership, also including integrity and ethical
of the Supervisory Board.
values. Evaluation of these competences has become a
continuous process throughout the year and therefore
Our Board of Management is the executive body and is
improvement opportunities can be addressed at an early stage.
responsible for the day-to-day management of the operations,
supervised by the Supervisory Board. The Audit Committee
The Board of Management and management at various levels
assists the Supervisory Board in fulfilling its oversight
in the organization articulate and demonstrate the importance
responsibilities for the integrity of the Company’s financial
of integrity and ethical values, applying various forms and
statements, the financial reporting process, the internal control
mechanisms including, but not limited to:
Governance Oversight
Audit Committee
Board of Management
Roles
Ownership &
responsibilties
Activities
Contents
1st line
2nd line
3rd line
Management
Specialist
departments (e.g.
Internal Control &
Risk Management)
Internal Audit &
other assurance
providers
Ownership, responsibility
and accountability for
identifying and managing
risk & control
Own and operate
Support management in
identifying and managing
risk & control
Support management in
design and implementation
of the Ziggo Control
Framework
Design, support &
challenge
Define requirements for
design & control activities
Design risk & control
activities
Identify and manage
(monitor) risk & control
Support in implementation
of risk & control activities
Continuously improve,
monitor and report on
risk & control activities
Define procedures for
monitoring & reporting,
that support 1st line in
meeting its risk and control
responsibilities
Internal independent from
operations and finance
Independent from design,
implementation and
execution of risk & control
activities
Highlight control weakness
and inefficiencies to
management
Assurance
Provide assurance on the
effectiveness of the 1st
and 2nd lines in managing
risk & control
Ziggo N.V. Annual Report 2013 46
Ziggo at a glance
■■
■■
Performance
Financial statements
Companywide communications underpinning the expected
reported to and discussed with the Board of Management and
standards of conduct as laid out in the Code of Conduct;
the Audit Committee of the Supervisory Board.
Timely inquiries and investigations into any alleged conduct
that is inconsistent with the Code of Conduct;
■■
Governance
Corrective action when deviations from expected standards
of conduct occur.
Ziggo’s Code of Conduct, available on the Ziggo intranet,
“During 2013 we focussed
our risk management efforts
on enhancing strategic and
project risk management.”
addresses the fundamental integrity and ethics-related rules
and principles. In order to further enhance and embed
Subsequent to the implementation of the control self-
employee’s awareness of the Code of Conduct, we apply a
assessment process during 2012 and in line with our core value
“Serious Gaming” concept. The Ziggo Serious Game is based
of aiming at simplicity, the focus of the second line of defence
on gaming principles and contains True/False and multiple
for 2013 has been on supporting our management with the
choice questions as well as intervention moments (dilemmas)
rationalisation of the Ziggo Business Control Framework and
covering the fundamentals of the Code of Conduct to ensure
enhancing the quality of control documentation. In line with
the best possible learning curve. During 2013 the Serious Game
our IT strategy and transformation efforts towards an
has been made available to all employees for replay after the
entertainment company, we will be replacing multiple IT
initial launch in 2012 and has become part of the Ziggo
systems during the period 2013-2015. These developments
introduction day for new joiners. A new release of the Ziggo
provide us with a unique opportunity to implement our control
Serious Game is targeted for 2014 and will focus on further
by design concept, aiming at replacing manual controls by
guidance to our rules and principles and more specific
automated controls to the maximum extent possible, which
security-related topics.
will remain a key element in our In Control strategy for the
coming years.
Along with the Code of Conduct, a whistle blower procedure is
in place, ensuring that incidents can be reported, anonymously
Planning and control cycle
if desired.
Ziggo has clearly defined requirements, formats and dates for
our planning reporting and review cycles in order to facilitate
Risk and control assessment
setting company and departmental objectives, budgets,
We systematically identify, prioritize and analyse risks based
forecasts and reports, including both financial and operational
on likelihood and impact on all relevant organizational levels,
aspects. Reporting on the outcome of our risk management
including but not limited to strategic, tactical, operational and
and internal control systems has been synchronised with our
project levels. During 2013 we focussed our risk management
regular planning and control cycle during 2013 through close
efforts on enhancing strategic and project risk management as
cooperation between our Internal Control & Risk Management
the execution of a substantial part of our strategy is performed
teams and Internal Audit, thus providing our management with
by means of projects.
an actionable and integrated view on the, predominantly
financial, Risk and Control next to the financial and operational
As our management is responsible for the design and operating
results for their business area of responsibility.
effectiveness of the risk management and controls systems in
the organization, we deem transparency on the outcomes of
The IIRC (International Integrated Reporting Council), a global
this process of the utmost importance. Throughout the year
organization comprising primarily regulators, investors,
control self-assessments are performed by management for
companies and standard setters, launched the International
key financial and operational controls. The results of these
Integrated Reporting Framework on December 9, 2013. Its goal
control self-assessments are reported to and discussed with
is to bring greater cohesion and efficiency to the reporting
management every quarter by means of the Risk and Control
process, and adopting “integrated thinking” as a way of breaking
reports, providing a consolidated view on the, predominantly
down internal silos and reducing duplication. It’s intent is to
financial reporting, risk and control profile of the business area.
improve the quality of information available to providers of
Every year the results of these control self-assessments are
financial capital to enable a more efficient and productive
Contents
Ziggo N.V. Annual Report 2013 47
Ziggo at a glance
Performance
Governance
Financial statements
allocation of capital. During 2013 we initiated a preliminary
monitoring the quality of the SOC performance as a next
assessment of our approach to Corporate Reporting compared
level of security control.
to the IIRC framework, by that stage available in draft for public
exposure. Based on our initial assessment and the final
Internal Audit
framework released December 9, 2013, we will finalise our
Internal Audit applies a risk-based approach to testing key
efforts to prepare a draft framework for Ziggo in 2014 and will
financial reporting controls, and reports the outcome of their
determine a roadmap to implement accordingly.
procedures performed to the Board of Management and the
Audit Committee of the Supervisory Board. Internal Audit also
Policies and procedures
performs planned audits on specific (key) risk areas and audits
Management establishes and clearly articulates financial
on request of management, both financial and operational by
reporting objectives, including those related to internal control
nature. Audit findings are discussed with responsible (senior)
over financial reporting. We apply a uniform set of operational
management. Updates to the audit plan, major findings and
and financial procedures, including those related to our
the results of follow-up activities are discussed with the
financial reporting and closing process. Our main accounting
Audit Committee on a quarterly basis.
policies have been incorporated in a digitalized accounting
manual which is available on our intranet, accessible for all
Significant risks facing the business
employees, and which is updated on a regular basis.
Furthermore, necessary segregation of duties is in place and
The nature of the industry in which we operate, combined
the risk of singular decision making is minimized.
with our chosen strategy, expose Ziggo to a number of risks.
We have considered the nature and extent of the significant
During 2013 we further professionalised the policies and
risks we face and have summarised our most significant risks,
procedures of our second line of defence functions in
their level and trend as well as our mitigation strategy in the
accordance with our assessment of the updates to the
table below. We have categorized1 our risks in accordance
COSO Internal Control – Integrated Framework. As a result,
with our Risk Management framework as strategic, operational,
the Internal Control and Risk Management team updated
compliance and financial reporting risks.
and documented the principles of our Ziggo Business
Control Framework.
We have visualised the trends in our risk levels (2013 compared
to 2012) in the following table.
Information Security
Information Risk Management (IRM), an integral part of
Enterprise Risk Management, enables Ziggo to protect the
Company assets, including but not limited to our people,
customer services, information sources and other assets.
The IRM function has a key role in our security management
system by identifying and classifying information risks and thus
supporting our management in the design and execution of
information risk management and the implementation of
security controls systems in the organization.
During 2013 Ziggo opened the Security Operations Centre
(SOC), one of the major results of the information security
programme initiated in 2012. The SOC is a major step in
improving security within Ziggo and key to the detection of
and response to operational security threats in our network.
From an IRM perspective the SOC is a key security control
to mitigate our security risks. The IRM function will now start
Contents
Ziggo N.V. Annual Report 2013 48
Ziggo at a glance
Performance
Governance
Financial statements
Strategic Risks
Definition
Mitigation
Business and Industry
We operate in a highly competitive industry and face
significant competition from established and new
competitors. Over the course of 2013 the level of
competition for the Dutch market continued to increase,
including more aggressive price- and promotional
campaigns from competitors like KPN and Telfort as
well as the entrance of new competitors like Netflix.
In addition, Fibre to the Home (FTTH) initiatives have
been continued by our competitors, challenging Ziggo
to adequately manage the perception of the general
public towards FTTH networks compared to the Hybrid
Fibre Coax (HFC) network of Ziggo. As a result, we
encounter more challenges to attract new subscribers
and/or retain existing subscribers, resulting in less usage
of our services and increased price pressure. If we are
not able to compete successfully against our current or
future competitors in any of our businesses, this may
result in a material adverse effect on our business in
terms of increasing churn levels and decreasing results
of operations.
We continuously monitor our competitive environment,
also performing deep dives into competitive product
and service offerings, preparing ourselves in the best
possible way to diligently assess how and where we
can differentiate ourselves from our competition.
While considering our response to the competitive
environment we take into account perspectives from
both new and existing subscribers to ensure a balanced
view between attracting new subscribers and retaining
existing subscribers (churn prevention).
The video, broadband internet and telephony
businesses in which we operate are capital-intensive.
Significant capital expenditures, including expenditures
for equipment and labour costs, are required to add
customers to our network and to increase the capacity
of our network in order to keep up with the increasing
demand for broadband speed. If we are unable to pay
for costs and capital expenditure associated with adding
new customers, expanding or upgrading our network
or making our other planned or unplanned capital
expenditures, our growth could be limited and our
competitive position could be harmed.
The multitude of capital-intensive projects Ziggo
executes requires strong portfolio management to
ensure the proper allocation of resources and funds
for achieving our strategic ambitions. Our integrated
roadmap allows us to determine an appropriate balance
between successful introductions of both commercial
and technological enhancements to existing products
and services, and the introduction of new, innovative,
products and services. Although we continuously
monitor our integrated roadmap to ensure we are well
positioned to achieve our strategic and operational
objectives, it remains difficult to predict the effect of
technological innovations on our business.
Our growth prospects also depend on a continuing
demand for cable and telecommunications products
and services and an increasing demand for bundled
offerings. As we exclusively operate in the Dutch
market, our success is therefore closely tied to general
economic developments in the Netherlands and
cannot be offset by developments in other markets.
Negative developments in or the weakness of the
Dutch economy, in particular increasing levels of
unemployment, may have a direct negative impact on
the spending patterns of retail consumers, both in terms
of the products they subscribe for and usage levels.
Although hard to mitigate, we believe we have effective
measures in place to respond to market conditions in
the best possible way. Our mitigation strategy aims at
reinforcing measures around:
■■ planning, budgeting and forecasting processes;
■■ resource allocation processes;
■■ debt reduction and refinancing;
■■ cost reduction, pricing and gross margin
management initiatives;
■■ customer service and productivity improvement.
One of our main challenges is the rapidly increasing
growth of IPTV and Over The Top (OTT) service
offerings. These types of service offerings forces
us to invest in innovative offerings and to develop
new, attractive services and propositions in order to
stay competitive. We strongly favour exploring new
opportunities and are prepared to accept a reasonable
amount of risk if such opportunities contribute to the
achievement of our strategic and operational objectives.
In order to ensure an appropriate speed of innovation,
we have aligned ourselves with key players in
innovative technologies to leverage their knowledge
and experience. We initiated the implementation of
partner management processes in 2012 and continued
enhancing these processes during 2013. While exploring
new opportunities, we exercise strict quality controls to
ensure the best possible customer experience.
Developing new, attractive services and propositions
also requires an innovative Information Technology
(IT) infrastructure to support the delivery of our
services and propositions. The implementation of
such innovative IT infrastructure requires a clear
transformation strategy. If our transformation strategy
is not executed adequately this may result in the
inability to deliver new services and propositions, thus
harming our competitive position.
In order to ensure our IT infrastructure adequately
supports the delivery of our products and services, a
clear IT strategy has been defined and translated into
Critical To Quality (CTQ) factors which are at the heart
of each system implementation. We also translated our
IT strategy into a multi-year transformation plan which
is diligently executed. Risk Management, Programme
Assurance and Quality Assurance have been embedded
into the transformation plan.
Level – High
Trend – Rising
Innovation
Level – High
We have been and will be continuing and strengthening
our fact-based communication with (potential)
customers on FTTH, meanwhile highlighting the
differentiating factors of our own products and services.
Based on various reputable sources, we estimate that
the demand for bandwidth for fixed connections will
grow exponentially in the Netherlands, by approximately
30% to 40% per year, between now and 2020, which we
deem to be a conservative estimate. Due to the very high
intrinsic capacity of coax, our fibre-coax network (cable)
can deal with such exponential growth in demand for
bandwidth1.
Trend – Stable
1 This has been verified in a study of November 2010 commissioned by the Dutch Ministry of Economic Affairs that addressed forecasting the supply of and demand
for Next Generation Infrastructures in the Netherlands until 2020.
Contents
Ziggo N.V. Annual Report 2013 49
Ziggo at a glance
Performance
Governance
Financial statements
Operational Risks
Definition
Mitigation
Service Excellence
ur products are at the heart of society and tightly
O
integrated in our customers’ day-to-day lives, making
service levels, customer satisfaction and service
excellence our key priorities. The continuity and quality
of our (network) services is the primary condition
for providing our services and subject to the highest
service levels. Our challenge is to be pro-active and
demonstrate customer insight, resulting in an increase in
customer satisfaction and with the possibility to clearly
distinguish ourselves from our competitors. If, however,
our service levels are not met, our customers may not
be satisfied by our products or services. This may lead
to customer churn or additional costs to maintain our
customer base. e continuously monitor our customer satisfaction
W
using Net Promoter Scores (NPS) as a key indicator.
Based on NPS results, we set our priorities for improving
our current processes and training our staff. In addition,
the implementation of our IT strategy will allow us to be
more pro-active and demonstrate customer insight.
The success of our products depends on, among
other things, the quality and variety of the television
programming delivered to our subscribers. We do
not produce our own content and depend upon
broadcasters for programming.
We continuously monitor the quality and variety of
the television programming delivered by broadcasters
as perceived by our customers. As a result, we have
updated our television programming multiple times
during 2013.
Our day-to-day operations are highly dependent on
our IT infrastructure and network. Disruptions to our IT
infrastructure and network may have a negative impact
on the continuity of our services to our customers
and the support of our operations. Despite all efforts
exercised, the potential impact of losses as a result
of sabotage or other external disasters may still be
considerable.
We continuously monitor a variety of business continuity
and security aspects, for example by performing impact
analyses on our critical IT infrastructure and network
components. We also ensure our critical IT infrastructure
and network components are installed taking into
account appropriate levels of redundancy, and
continuously replace old technologies by new ones.
Level – Medium
Trend – Stable
Systems and
Infrastructure
capabilities and
resilience
Level – Medium
A dedicated Business Continuity Officer was appointed
as of September 1, 2013 to further enhance our
mitigation efforts to disruptions to our IT infrastructure
and network.
Trend – Stable
During 2012 a security programme was initiated
to enhance our baseline security controls and as
a result decrease security risks. We opened our
Security Operations Centre as of September 1, 2013,
implemented vulnerability scanning, SIEM and IDS
tooling and enhanced our (security) patch management
processes during 2013.
Human Capital
Level – Medium
Trend – Increasing
Contents
To support our investments in capital-intensive
projects, we need to ensure the availability of personnel
of the highest quality. Especially introductions of
innovative products and services, and the changing
nature of our business which requires the ability to
continuously adjust our processes, require specific
knowledge and skills (competences) from our
employees. We may however not be able to attract and
retain those resources at all times, which may adversely
affect our operations.
Our people strategy, including the strategic staffing
plan, provides a solid base to prepare ourselves in the
best possible way to attract and retain appropriate
resources, taking High Performance Organizations (HPO)
as a benchmark. As a result, an HPO development
programme was initiated during 2012 and continued
during 2013 for (senior) management, next to our
regular investments in training and education for all
our staff. In addition, the set-up of our performance
management cycle ensures a continuous dialogue
between management and staff, allowing us to quickly
identify any lack of specific knowledge and skills
and take appropriate actions.
Ziggo N.V. Annual Report 2013 50
Ziggo at a glance
Performance
Governance
Financial statements
Compliance Risks
Definition
Mitigation
Extensive legislation
The television, broadband internet and telephony
markets in which we operate are regulated more
extensively than many other industries. We are subject to
extensive supervision and regulation by Dutch regulatory
authorities, including the ACM (Autoriteit Consument
en Markt), the Dutch Media Authority, Consumer Data
Protection Agency and the Radio Communications
Agency (Agentschap Telecom), as well as European
Union authorities. Regulatory agencies continuously
monitor the level of competition within our market and
may conclude, based on changes in the competitive
environment, that any organization has obtained
“significant market power”. Although hard to predict the
effect of such regulatory changes, these changes may
influence how we operate our business and may either
result in decreasing revenues caused by increased churn
levels or additional price pressure, or result in additional
costs of adjusting our current processes and systems.
In addition, if despite all efforts exercised, a violation of
laws and regulations occurs, this may result in fines and
loss of reputation.
We continuously monitor changes to the legislative
and regulatory environment, including but not limited
to those on country and European level, to ensure
an appropriate level of compliance. During 2013 we
successfully amended our processes to comply with
the requirements for the notification of personal data
breaches under Directive 2002/58/EC on privacy and
electronic communications.
The upcoming change from an EU directive to an EU
regulation with a likely effective date in 2014 will result in
more strict privacy requirements towards all companies
processing personal information. Next to Ziggo being
in control of personal data processed at or on behalf
of Ziggo, customers should be more empowered to
control their personal information stored, including
the right to know what personal information is stored
and the right to erasure. This change is likely to result
in additional costs due to required adjustments to our
current processes and systems.
As customer privacy has been a key element in
legislation, regulations or government policies, including
the Dutch “Telecomwet”, over the last years we have
intensified our compliance efforts in this domain. Ziggo’s
Legal and Regulatory Affairs department is in charge
of assessing the impact of the new EU regulation on
the organization and providing internal policies and
procedures where required, to provide further guidance
on how these regulations should be embedded in the
day-to-day operations. Furthermore, Ziggo will formalize
and enhance their Compliance framework as laid out in
the Compliance plan 2014.
In the normal course of business, a company may
enter into discussions about tax positions with the tax
authorities based on its tax returns. There is a risk that
the Dutch tax authorities take a different stance on the
Company’s tax positions, which may have an impact on
the tax position of the Company and result in additional
taxation.
On February 7, 2013, we signed a compliance
agreement with the Dutch tax authorities based
on horizontal monitoring. Horizontal monitoring
incorporates a forward-looking way of working
ensuring transparency between the Company and the
tax authorities and incorporates two key elements:
A relationship between the tax payer and the tax
authorities based on mutual trust and understanding
which is recorded in a compliance agreement
(‘handhavingsconvenant’).
Appropriate risk management based on a tax control
framework.
Level – Low
Trend – Stable
Tax compliance
Level – Low
Trend – Stable
In addition, we performed a Compliance Risk
Assessment taking into account both internal (e.g. Code
of Conduct) and external laws and regulations in close
cooperation between various subject matter experts in
our organization who are monitoring our compliance to
these laws and regulations on a daily basis. The outcome
of this Compliance Risk Assessment provides a stepping
stone for enhancing our current Compliance framework
in 2014.
The Dutch tax authorities found the tax controls
and procedures in the Ziggo Business Control
Framework (part of the Ziggo Internal Control and
Risk Management framework) more than adequate to
conclude a compliance agreement. This agreement
confirms our good relationship with the Dutch tax
authorities.
Contents
Ziggo N.V. Annual Report 2013 51
Ziggo at a glance
Financial Reporting
Risks
Capital structure
Level – Low
Trend – Stable
Performance
Governance
Financial statements
Definition
Mitigation
Changes in our business model or the introduction of new
and innovative products or services may require a
revision of our current capital structure and the introduction
of alternative financial instruments. A downgrade in our
credit rating may negatively affect our ability to obtain
funds from financial institutions. It may also hurt our
ability to retain investors and banks, and may increase
our financing costs by raising the interest rates on our
outstanding debt or the interest rates for refinancing
existing debt or incurring new debt.
We continuously manage our capital structure in order
to safeguard the Company’s ability to continue as a
going concern, providing returns for our shareholders
and benefits for our other stakeholders, thus maintaining
the best possible capital structure. As a result, we
have refinanced a substantial amount of our debt,
€800 million, during 2013.
Our agreements and instruments governing the loans
contain restrictions, covenants and limitations that
could adversely affect our ability to operate our business,
to fund capital expenditure, to incur additional debt and
to pay dividends.
Interest rate risk
Level – Low
Our capital structure includes a substantial number
of loans at floating interest rates, which exposes us to
interest rate risk. Fluctuations in interest rates may have
a material adverse effect on our financial results in any
given reporting period.
Our interest rate risk is managed by hedging at least
65-70% of the floating interest rate risk. Fluctuations
in interest rates may however still result in changes
in interest expenses and changes in fair value for the
interest rate swaps.
A portion of our purchases is made in foreign currency,
predominantly in US dollars, exposing us to exchange
rate fluctuations from future commercial transactions.
We apply hedging arrangements and other contracts
in order to reduce our exposure to exchange rate
fluctuations and to minimise our operating or
financing costs.
We are subject to increases in operating costs mainly
due to our intensified Marketing and Sales efforts in
order to counter the increasing level of competition
and an increase in personnel costs mainly due to our
investments in innovation as well as inflation risks
which may adversely affect our earnings as operating
costs may rise faster than associated revenues,
resulting in a negative impact on our cash flow and net
earnings.
We attempt to increase our subscription fees to offset
increases in operating costs as a result of inflationary
increases in salaries, wages, benefits and other
administrative costs. As a result, we updated the
pricing structure for our products and services as of
February 2013.
Trend – Stable
Foreign exchange risk
Level – Low
Trend – Stable
Increases in operating
costs and inflation risks
Level – Low
Trend – Stable
Contents
In addition, our mitigation strategy aims at reinforcing
measures around:
■■ planning, budgeting and forecasting processes;
■■ resource allocation processes;
■■ debt reduction and refinancing;
■■ cost reduction, pricing and gross margin
management initiatives;
■■ customer service and productivity improvement.
Ziggo N.V. Annual Report 2013 52
Ziggo at a glance
Performance
Governance
Financial statements
In Control and
Compliance Statement
The Board of Management is responsible for establishing and
maintaining adequate internal risk management and control
systems. Such systems are designed to manage rather than
eliminate the risk of failure to achieve important business
objectives and can only provide reasonable and not absolute
assurance against material misstatement, fraud and violations
of laws and regulations.
The implementation of internal risk management and control
in full compliance with statutory and regulatory requirements, nor
systems at Ziggo has been initiated with a strong focus on
will we be able to prevent all human errors, including errors of
managing financial risks, but has gradually been enhanced
judgement and mistakes. While doing business, we will however
with the management of operational risks. New developments,
make a conscious effort at all times to weigh the potential
programmes and projects, and new ICT applications and
impact of risk and the cost of control in a balanced manner.
processes are input to our control systems. During 2013 we
evaluated our key controls and strengthened the Ziggo
Referring to section 5.25c paragraph 2, sub c of the Financial
Business Control Framework based on improvements identified
Markets Supervision Act, the Board of Management states that,
as well as inclusion of key controls for supply chain processes
to the best of its knowledge:
and new business acquisitions. Administrative changes in
■■
The annual financial statements for 2013 give a true and fair
outsourced supply chain processes however required separate
view of the assets, liabilities, financial position and profit or
evaluations which have to be further embedded in our regular
loss of Ziggo and its consolidated companies, and
Control Self Assessment process during 2014. Independent
■■
The Annual Report gives a true and fair view of the position
analysis has been performed in critical domains to supplement
as per December 31, 2013 and Ziggo’s development during
the Ziggo Business Control Framework and enhance
2013 and that of its affiliated companies is included in the
the level of control. The outcome of the assessment of our
annual financial statements, together with a description of
Internal Risk Management and Control systems has been
the principal risks Ziggo faces.
shared with the Audit Committee of the Supervisory Board and
discussed with our external auditors.
Based on the adoption of the Dutch Corporate Governance
Code, Ziggo prepared the In Control Statement 2013 in
accordance with best practice provision II.1.5.
Board of Management
With due consideration to the above, we believe that our
internal risk management and control systems provide
René Obermann
reasonable assurance that the financial reporting does not
Bert Groenewegen
contain any errors of material importance and that the internal
Paul Hendriks
risk management and control systems relating to financial
reporting risks operated properly in the year under review.
Our risk management and control systems can however not
provide full assurance that strategic, operational and financial
Utrecht, The Netherlands
objectives will be fully achieved and that we will at all times be
March 5, 2014
Contents
Ziggo N.V. Annual Report 2013 53
Ziggo at a glance
Performance
Governance
Financial statements
Report of the
Supervisory Board
Highlights
Meetings
The year 2013 was again an eventful one for Ziggo. It was
The Supervisory Board of Ziggo N.V. met 10 times in 2013.
Bernard Dijkhuizen’s last year as CEO. The Supervisory Board is
most grateful for the vital contribution he has made over the
One member was unable to attend three meetings, one
years to the merger of three preceding companies into Ziggo,
member was unable to attend two meetings, and two
the growth of the business and customer satisfaction, the
members were unable to attend one meeting. All meetings
introduction of new products and services, and the successful
were held in the presence of the members of the Board of
IPO in 2012. The Supervisory Board was also happy to
Management and the corporate secretary. The principal
announce René Obermann’s appointment as CEO as Bernard’s
matters discussed during the regular meetings were:
successor as of January 1, 2014. Furthermore, the Supervisory
■■
Strategy;
Board has spent much time in evaluating the preliminary
■■
Financing;
proposal for a potential public offer on all outstanding shares
■■
Internal control and risk management;
of Ziggo N.V. by Liberty Global Plc. and the subsequent
■■
Monthly, quarterly, semi-annual and annual results;
discussions. In assessing the proposals of Liberty Global, the
■■
Remuneration and targets of the Board of Management;
Supervisory Board has given due regard to the interests of all
■■
Budget;
stakeholders in Ziggo, including shareholders, customers and
■■
Potential acquisitions;
employees. The discussions with Liberty Global resulted on
■■
Regulatory and public affairs;
January 27, 2014 in a conditional agreement on a public offer
■■
Self-assessment;
by Liberty Global on all outstanding shares of Ziggo N.V.,
■■
The appointment of René Obermann as a member of the
recommended by the Supervisory Board and the Board of
Management.
Board of Management and CEO of Ziggo;
■■
The preliminary proposal regarding a potential bid by
Liberty Global Plc. and subsequent discussions.
Composition
As a result of Ziggo’s former majority shareholders Warburg
The Supervisory Board is in the process of finalizing a
Pincus and Cinven reducing their stake in Ziggo, Paul Best and
self-assessment initiated in 2013.
Caspar Berendsen decided to resign as per December 31, 2012.
Warburg Pincus and Cinven sold their remaining stakes in
The Selection, Appointment and Remuneration Committee
Ziggo in May 2013 and since then all members of the
consists of four Supervisory Board Members: Andrew Sukawaty
Supervisory Board are independent in the context of the
(until April 18, 2013), Pamela Boumeester (as of April 18, 2013 and
Dutch Corporate Governance Code. Pamela Boumeester
Chair), Joseph Schull, David Barker and Dirk Jan van den Berg.
was appointed as a member of the Supervisory Board at the
The committee convened once and discussed the long-term
Annual General Meeting on April 18, 2013. She chairs the
remuneration of the Board of Management based on the
Selection, Appointment and Remuneration Committee,
long-term incentive plan. We refer to the Remuneration Report
replacing Andrew Sukawaty. The Audit Committee continued
on page 56 for more information on this subject.
to be chaired by Rob Ruijter.
The Audit Committee consists of two Supervisory Board
In the view of the Supervisory Board, its current size and
members: Rob Ruijter (Chairman) and Anne Willem Kist.
composition are appropriate considering the nature and size
The Audit Committee convened four times in 2013 to discuss
of Ziggo. The Supervisory Board reflects all aspects of Ziggo,
the Q4 results and full-year results for 2012 and the Q1,
including expertise in fields such as the telecommunication
half-year and Q3 results of 2013. The attendance rate at the
industry, finance, regulatory and public affairs. The particulars
Audit Committee meetings was 100%. All meetings were
of the members of the Supervisory Board can be found on
attended by the Company’s CFO and external auditors EY.
page 39 and 40.
The Audit Committee also met separately with the external
auditors. Recurring items on the agenda were:
Contents
Ziggo N.V. Annual Report 2013 54
Ziggo at a glance
Performance
Governance
Financial statements
■■
The quarterly results and the financial statements;
In the answer by the Board of Management with respect to
■■
The annual accounts;
the question raised by the AFM of how the Company came to
■■
Most important findings of the auditors based on the review
the conclusion in the first quarter of 2011 that the useful life of
of the quarterly results and the financial statements;
the customer contracts and related customer relationships is
■■
Management letter and Auditor’s report;
indefinite, management informed the AFM of its considerations,
■■
Press releases;
in particular those with regard to IAS 38.88, IAS 38.90,
■■
Key findings of internal audit and the internal audit
IAS 38.91, IAS 38.93, IAS 38.94 and IAS 38.123. Furthermore,
programme;
management provided the AFM with their analysis of public
■■
Key findings of Internal Control & Risk Management (IC&RM);
information on the useful life of customer relationships of
■■
Compliance and Fraud management;
peers, the attrition rates of Ziggo observed by management,
■■
Management of interest rate risks and hedges;
and the expected actions by competitors.
■■
Capital expenditure;
■■
Preparation by the Company for the corporate governance
Management is of the opinion that the Company is facing a
and In Control statement;
high level of uncertainty in estimating the useful life.
■■
Tax position of the Company and tax-related items;
Historic rates vary significantly, which would lead to useful
■■
Legal proceedings and provisions.
lives between 25 and over 50 years. Initially management
was inclined to set the useful life at 20 years – equal to their
The Audit Committee also closely monitored EY’s
general view on foreseeable limit – but IAS 38.93 states that
independence for performing non audit-related services
prudence does not do justice when estimating the asset’s
(e.g. when approving the related engagement). A proposal
useful life. Management is aware that IAS 38 BC65 b) mentions
to reappoint EY as external auditor for the year 2014 will
that difficulties in accurately determining useful life does not
be submitted to the General Meeting of shareholders.
provide a basis as such for regarding the useful life as indefinite
but also that following IAS 38.BC74, any arbitrarily determined
In addition to the regular topics, special attention was paid
period would not be representationally faithful.
to the following items:
Impairment test on assets with an indefinite life and finite
After ample consideration, management concluded that
life, and the pre-tax WACC, including the components of
considering the customer contracts and related customer
the WACC;
relationships to have an indefinite useful life would at this
The acquisition of Esprit Telecom and the determination
moment do most justice to the asset identified upon
of the opening balance, the valuation of the customer list
acquisition in a business combination. In line with IFRS the
and goodwill;
asset is annually tested, hereby it is ensured that the carrying
■■
IT security and Data Privacy;
amount will never exceed the asset’s recoverable amount.
■■
The correspondence with the AFM as a result of questions
Furthermore, management periodically evaluates if there are
raised by the AFM concerning how the Company came
any changes in the assessment of the customer contracts and
to the conclusion that the useful life of the customer
related customer relationships having an indefinite useful life.
relationships is indefinite;
If changes occur, management may reconsider their
The issuance of the In Control statement by the Board of
assessment and account for this change in accordance with
Management and the inclusion of this statement in the
IAS 8 as a change in an accounting estimate (IAS 38.104 /
annual report.
IAS 38.109) and change the useful life from indefinite to finite
■■
■■
■■
on a prospective basis going forward. The Company and the
AFM are still in the process of exchanging information
regarding this subject and further discussion is ongoing.
Contents
Ziggo N.V. Annual Report 2013 55
Ziggo at a glance
Performance
Governance
Financial statements
Remuneration Report
The objective of Ziggo’s remuneration policy is to provide
■■
A variable, annual cash bonus, related to performance in
a remuneration structure that: (a) Creates a remuneration
the previous year to ensure that the Board of Management
structure that will allow Ziggo to attract, reward and retain
has a healthy incentive to achieve performance targets in
highly qualified executives; and (b) Provides and motivates
members of the Board of Management with a balanced and
the shorter term;
■■
competitive remuneration focused on sustainable results and
A long-term variable incentive, in the form of conditional
performance shares;
aligned with the long-term strategy of Ziggo. The General
■■
Severance arrangements.
Meeting of Shareholders of Ziggo held on February 21, 2012
■■
Members of the Board of Management are eligible for long-
adopted the remuneration policy and the remuneration of the
term incentive awards. This helps to align the interests of the
members of the Supervisory Board and has approved the long-
Board of Management members with those of its long-term
term incentive plan. The individual remuneration of the
(or prospective) shareholders and provides an incentive for
members of the Board of Management has been determined in
the longer-term commitment and retention of the Board of
accordance with this policy, as described below, and any
Management members.
deviations thereof are indicated.
The Ziggo LTI Plan is administered and executed by (and at
Remuneration policy Board of Management
the discretion of) the Supervisory Board. Its main features
In determining the level and the structure of the remuneration
are as follows:
of the members of the Board of Management, the Supervisory
■■
Annual grants of conditional performance shares in Ziggo;
Board took into account, among other things, the financial and
■■
The conditional performance shares vest and are delivered
operational results as well as non-financial indicators relevant to
to the Board of Management members three years after
Ziggo’s long-term objectives. The Supervisory Board performed
the grant date, subject to continued employment and to
and will continue to perform scenario analyses to assess that
achievement of annual targets for the three-year Company
the outcomes of variable remuneration components
plan (as determined by the Supervisory Board), which may
appropriately reflect performance. This is done with due regard
include targets such as customer satisfaction, turnover,
to the risks to which the variable remuneration may expose
Ziggo. The Supervisory Board engaged an independent
EBITDA and cash flow;
■■
The number of conditional performance shares granted shall
consultant who rendered advice regarding remuneration.
be based on percentages of base salary payable within a
He based this on scenario analyses regarding the possible
relevant peer group of comparable national and international
outcome of the variable components of the remuneration
companies at a range between the median and the 75th
of the Board of Management and the consequences for the
percentile level, which can be extended to 120% of this level;
remuneration of the Board of Management. In determining
The number of performance shares vesting after 3 years may
the remuneration of the Board of Management members,
vary between 0% and 150% of the shares granted, depending
the Supervisory Board also takes into account the impact of
the overall remuneration of the Board of Management on
on the extent to which performance targets have been met.
■■
A lock-up applies for one year after vesting.
the pay differential within Ziggo. The remuneration of the
Board of Management is determined at a range between
The Company does not disclose specific details on these
the median and a 75th percentile of remuneration levels
performance targets, as this is considered commercially
payable within a peer group of comparable national and
sensitive information.
international companies relevant to the Company from
a labour market perspective.
The Supervisory Board has the authority to deviate from the
policies set out here, if it considers it necessary or desirable to
The remuneration structure of the members of the Board of
do so in specific individual cases in order to attract and reward
Management consists of the following components:
the most qualified members of the Board of Management.
■■
A fixed, base salary, in addition to which, the members
of the Board of Management have pension and fringe
benefits including a company car, customary insurance
and holiday allowance;
Contents
Ziggo N.V. Annual Report 2013 56
Ziggo at a glance
Performance
Governance
Financial statements
If any variable remuneration component conditionally awarded
salary of €750,000 gross per annum (fixed). He will be entitled
to a member of the Board of Management in a previous
to an annual short-term incentive (cash bonus) of 100% of the
financial year would, in the opinion of the Supervisory Board,
base salary in the case of on-target performance, which may
produce an unfair result, the Supervisory Board has the power
be increased up to a maximum of 150% in the case of
to adjust the value downwards or upwards. This may occur due
outperformance. René Obermann will be eligible to participate
to extraordinary circumstances during the period in which the
in the Ziggo Long-Term Incentive Plan dated 20 March 2012
predetermined performance criteria have been or should have
and to receive an annual LTIP Award equal to 230% of the base
been achieved.
salary, subject to the conditions of the LTIP Plan. He receives
annually a payment equal to 17.8% of the base salary, instead of
Furthermore, the Supervisory Board may recover from
participating in the ABP pension scheme applied within Ziggo.
a member of the Board of Management any variable
remuneration awarded on the basis of incorrect financial or
In order to compensate René Obermann for the expected
other data (claw back clause), which are materially incorrect,
(partial) loss relating to rights under his existing contract with
if such incorrectness is mainly attributable to acts or
his previous employer, he shall, to the extent that such loss
omissions of the Board of Management member (e.g.
occurs, receive a one-time signing bonus of €2.45 million
resulting from fraud or gross negligence).
gross. This signing bonus is in principle conditional upon
continued work by René Obermann for Ziggo for three years
The Supervisory Board expects to continue the Remuneration
after the Appointment Date and shall not be payable until then.
Policy described above in 2014 and in subsequent years.
In the case of termination of the contract by Ziggo during the
Board of Management Members
agreed three year period other than for cause, René Obermann
Further information and a specification of the remuneration for
will be entitled to a gross termination fee equal to the base
the individual members of the Board of Management can be
salary (the Termination Fee) and to payment of the signing
found below and is included in the notes to the consolidated
bonus at once. René Obermann will also be entitled to the
financial statements, Note 7 on page 79.
Termination Fee in the case of non-extension of the contract
after three years.
Bernard Dijkhuizen, Chief Executive Officer, retired from the
Company as of January 1, 2014. Provided the intended public
In case of a termination of the contract in connection with
bid on the shares of Ziggo N.V. by Liberty Global is fulfilled,
a change of control for any reason (except for cause),
the conditional performance shares awarded to Bernard
René Obermann will be entitled to the Termination Fee,
Dijkhuizen as part of the long-term incentive awards 2012 and
the signing bonus, the cash bonus at 100% target level and any
2013 will vest for 50%. If the public bid is not fulfilled the
unvested LTIP Award granted before the date of a change of
conditional shares awarded in 2012 and 2013 will vest partially
control pursuant to the Long-Term Incentive Plan at 100%
in accordance with the targets achieved in 2012 and 2013.
target level.
Marcel Nijhoff, Chief Commercial Officer, has stepped down as
It is intended to appoint Hendrik de Groot, currently Managing
of March 1, 2014. Marcel Nijhoff will receive a termination fee
Director of Business-to-Business at Ziggo, as new Chief
equal to one year base salary. Furthermore, he will receive his
Commercial Officer and member of the Board of Management
short-term bonus over 2013. Additionally, provided the public
of Ziggo with an effective date of April 18, 2014. He will receive
bid on the shares of Ziggo N.V. by Liberty Global is fulfilled, the
a fixed base salary of €300,000 gross per annum (fixed). He will
conditional performance shares awarded to Marcel Nijhoff as
be entitled to an annual short term incentive (cash bonus) of
part of the long-term incentive awards 2012 and 2013 will vest
60% of the base salary in the case of on-target performance.
for 50%. If the public bid is not fulfilled, the conditional shares
Hendrik de Groot will be eligible to participate in the Ziggo
awarded in 2012 and 2013 will vest partially in accordance with
Long-Term Incentive Plan dated March 20, 2012, and to
the targets achieved in 2012 and 2013.
receive an annual LTIP Award equal to 140% of the base salary,
subject to the conditions of the LTIP Plan. He receives annually
In connection with the appointment of René Obermann as
a payment equal to the percentage of the employers
member of the Board of Management and CEO per
contribution to the ABP pension fund (in 2014 18,51% of the
January 1, 2014 the Supervisory Board has used the authority
base salary), instead of participating in the ABP pension
to deviate from the policies set out. He receives a fixed base
scheme applied within Ziggo.
Contents
Ziggo N.V. Annual Report 2013 57
Ziggo at a glance
Performance
Governance
Financial statements
Board of Management variable cash bonus
and long-term incentive awards 2013
€25,000 for chairing the Audit Committee. Pamela Boumeester
The variable annual cash bonus for 2013 depended on a
chairing the Selection, Appointment and Remuneration
weighted score based on the following criteria: Net Promoter
Committee. Andy Sukawaty received a remuneration of
Score, Turnover, Cash flow (EBITDA minus Capex) and
€190,000 in 2013 as chairman of the Supervisory Board.
elements of our innovation roadmap. The maximum
He did not receive a separate remuneration for his membership
percentage for the variable annual cash bonus was set at 70%
and chairmanship of the Selection, Appointment and
of base salary for the CEO and 60% of base salary for the other
Remuneration Committee, which was taken over by Pamela
members of the Board of Management. The Company does
Boumeester in April 2013 .
receives a fee of €25,000 annualy (€19,000 in 2013) for
not disclose specific details on these performance targets,
as this is considered commercially sensitive information.
Further information and a specification of the remuneration for
The criteria for 2012 were the same, with the exception of
the individual members of the Supervisory Board is included in
Net Promoter Score (2012: Customer Satisfaction) and
the notes to the consolidated financial statements, Note 7 on
Innovation Targets (2012: EBITDA). It is expected that based
page 79. Andy Sukawaty agreed prior to the IPO in 2012 to
on the performance for 2013, the variable annual cash bonus
waive his entitlement to part of his annual cash remuneration
will be settled at 18% of the base salary for the CEO and 15%
and to all of his annual equity remuneration. Andy Sukawaty’s
for the other members of the Board of Management, or 25%
remuneration for his engagement as chairman of the
of on target preformance (2012: 66% for the CEO and 56%
Supervisory Board will be €90,000 in 2014. As a compensation
for the other members of the Board of Management, or 94%
for this waiver, Andy Sukawaty received €300,000 from Ziggo
of on target performance).
prior to the closing of the IPO. As compensation for waiving
his annual equity remuneration after the IPO, Andy Sukawaty
The long-term incentive awards are presented in the Notes
received €1,100,000, which he has invested on an after-tax
to the consolidated financial statements.
basis in shares for which a lock-up period of two years applies.
The aforementioned compensation amounts are subject to a
Supervisory Board
pro rata claw back if Andy Sukawaty ceases to be the chairman
Supervisory Board members receive an annual fee of
of the Supervisory Board before the end of his current term
€50,000 and a fee of €7,500 for membership of a committee,
in 2016.
with the following exceptions: Rob Ruijter receives a fee of
Contents
Ziggo N.V. Annual Report 2013 58
Ziggo at a glance
Performance
Governance
Financial statements
Connecting people
Ziggo & Society
Ziggo believes that the quality, availability
and accessibility of information, as well as
the digitisation required to facilitate all of
this, can play a large role in maintaining
and advancing an open society. Ziggo has
instigated the Ziggo Open Society Award
for organizations or individuals that have
clearly contributed to a society in which
everyone is included and in which everyone
has the opportunity to act, think and
imagine; thereby increasing pluriformity
and the quality of life.
Contents
Ziggo N.V. Annual Report 2013 60
Ziggo at a glance
Performance
Governance
Financial statements
Contents Financial Statements
Consolidated financial statements
62
Corporate financial statements
102
Statement of income
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
62
63
64
65
66
Statement of income /
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
102
103
104
105
Notes to the consolidated
financial statements
67
Notes to the corporate
financial statements106
1. The Company and its operations
67
2. Basis of preparation
67
3. Significant accounting policies
69
4. Business combinations
76
5.Revenues
78
6. Personnel expenses
78
7.Remuneration and share-based
payment plans79
8. Net financial income and expense
83
9. Income taxes
83
10. Intangible assets
86
11. Property and equipment
88
12. Other non-current financial assets
88
13. Investments in joint ventures
89
14.Inventories
89
15. Trade accounts receivable
89
16. Other current assets
90
17. Cash and cash equivalents
90
18. Equity attributable to equity holders
90
19. Interest-bearing loans
91
20.Provisions
93
21. Other non-current liabilities
94
22. Other current liabilities
95
23. Commitments and contingencies
95
24. Related party disclosures
95
25. Financial risks
96
26. Financial instruments
98
27.Subsidiaries
100
28. Subsequent events
100
Contents
1. Corporate information
2. Basis of preparation
3. Other income
4. Personnel expenses
5. Costs related to the IPO
6. Dividend income 7. Income taxes
8. Investment in subsidiaries
9. Shareholders’ equity
10. Other current liabilities 11. Commitments and contingencies
12. Related party disclosures
13. Subsequent events
14. Auditor’s fees
106
106
108
108
109
109
109
110
110
111
111
111
111
112
Appropriation of result
Independent auditor’s report
Contact details and address
114
115
116
Ziggo N.V. Annual Report 2013 61
Ziggo at a glance
Performance
Governance
Financial statements
Consolidated statement
of income
For the years ended December 31
Amounts in thousands of € (except ‘per share’ data)
Revenues
Note
2013
2012
5
1,564,843
1,536,865
289,114
294,407
6, 7
193,002
225,525
57,461
51,526
Cost of goods sold
Personnel expenses
Contracted work
Materials & logistics
3,033
3,750
Marketing & sales
76,885
61,507
Office expenses
53,450
55,363
Other operating expenses
Amortisation and impairments
10
Depreciation and impairments
11
5,097
4,034
24,121
28,407
253,068
250,707
Total operating expenses
955,231
975,226
Operating income
609,612
561,639
(223,664)
(284,803)
385,948
276,836
(9,111)
(9,389)
Net financial income (expense)
8
Result before income taxes
Net result of joint ventures and associates (after tax)
Income tax benefit (expense)
13
9
(29,494)
(74,677)
Net result for the year
347,343
192,770
Net result attributable to equity holders
347,343
192,770
Number of shares outstanding (in thousands)
200,000
200,000
Earnings per share - basic (in €)
1.74
0.96
Earnings per share - dilutive (in €)
1.74
0.96
The accompanying notes to this statement of income form an integral part of these consolidated financial statements.
Contents
Ziggo N.V. Annual Report 2013 62
Ziggo at a glance
Performance
Governance
Financial statements
Consolidated statement
of comprehensive income
For the years ended December 31
2013
2012
347,343
192,770
-
-
Cash flow hedges, net of tax
3,462
3,462
Net other comprehensive income not being reclassified to profit
or loss in subsequent periods
3,462
3,462
Total comprehensive income for the period
350,805
196,232
Total comprehensive income attributable to equity holders
350,805
196,232
Amounts in thousands of €
Net result for the year
Net other comprehensive income to be reclassified to profit
or loss in subsequent periods
Items not to be reclassified to profit or loss in subsequent periods:
Contents
Ziggo N.V. Annual Report 2013 63
Ziggo at a glance
Performance
Governance
Financial statements
Consolidated statement
of financial position
Note
December 31, 2013
December 31, 2012
Intangible assets
10
3,416,418
3,358,387
Property and equipment
11
1,473,278
1,434,080
Other non-current financial assets
12
1,125
719
Investments in joint ventures
13
3,437
3,556
9
202,129
223,733
5,096,387
5,020,475
Amounts in thousands of €
Assets
Deferred tax assets
Total non-current assets
Inventories
14
40,004
27,889
Trade accounts receivable
15
37,887
18,240
Other current assets
16
34,541
24,914
Cash and cash equivalents
17
77,397
92,428
189,830
163,471
5,286,217
5,183,946
200,000
200,000
Share premium
3,204,472
3,500,000
Other reserves
(865)
(4,327)
Treasury stock
(33)
(36)
(2,043,366)
(2,316,733)
18
1,360,208
1,378,904
Total current assets
Total assets
Equity and liabilities
Issued share capital
Retained earnings
Equity attributable to equity holders
Interest-bearing loans
19
3,073,489
2,943,816
Derivative financial instruments
26
21,194
63,236
Provisions
20
19,830
23,059
9
414,765
407,824
21
1,986
204
3,531,264
3,438,139
120,187
109,692
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Deferred revenues
Derivative financial instruments
26
8,343
-
Provisions
20
7,072
7,480
88,199
85,563
Trade accounts payable
Corporate income tax
9
4,673
2,323
Other current liabilities
22
166,271
161,845
Total current liabilities
Total equity and liabilities
394,745
366,903
5,286,217
5,183,946
The accompanying notes to this statement of financial position form an integral part of these consolidated financial statements.
Contents
Ziggo N.V. Annual Report 2013 64
Ziggo at a glance
Performance
Governance
Financial statements
Consolidated statement
of changes in equity
Issued
capital
Share
premium
Cash flow
hedge
reserve
Treasury
shares
Retained
earnings
Total
equity
65
36,647
(7,789)
-
(1,090,562)
(1,061,639)
-
-
-
-
192,770
192,770
Cash flow hedges, net of tax
-
-
3,462
-
-
3,462
Total comprehensive income
-
-
3,462
-
192,770
196,232
199,955
3,500,000
-
-
-
3,699,955
(20)
(36,647)
-
-
(1,329,141)
(1,365,808)
199,935
3,463,353
-
-
(1,329,141)
2,334,147
(110,000)
Amounts in thousands of €
Balance at December 31, 2011
Comprehensive income
Net result for the year 2012
Other comprehensive income:
Transactions with shareholders
Share issuance
Effect of pooling of interest accounting
Conversion of shareholders loans
into equity
Dividend payment
-
-
-
-
(110,000)
Purchase of treasury stock
-
-
-
(36)
-
(36)
Share-based payment
-
-
-
-
20,200
20,200
Total transactions with shareholders
199,935
3,463,353
-
(36)
(1,418,941)
2,244,311
Balance at December 31, 2012
200,000
3,500,000
(4,327)
(36)
(2,316,733)
1,378,904
-
-
-
-
347,343
347,343
Cash flow hedges, net of tax
-
-
3,462
-
-
3,462
Total comprehensive income
-
-
3,462
-
347,343
350,805
Dividend payment
-
(295,528)
-
-
(74,472)
(370,000)
Purchase of treasury stock
-
-
-
3
-
3
Share-based payment
-
-
-
-
496
496
Comprehensive income
Net profit for the year 2013
Other comprehensive income:
Transactions with shareholders
Total transaction with shareholders
Balance at December 31, 2013
Contents
-
(295,528)
-
3
(73,976)
(369,501)
200,000
3,204,472
(865)
(33)
(2,043,366)
1,360,208
Ziggo N.V. Annual Report 2013 65
Ziggo at a glance
Performance
Governance
Financial statements
Consolidated statement
of cash flows
For the years ended December 31
Amounts in thousands of €
Note
2013
2012
385,948
276,836
Operating activities
Result before income taxes
Adjustments for:
Amortisation and impairments
10
24,121
28,407
Depreciation and impairments
11
253,068
250,707
496
20,200
20
(4,137)
(1,020)
8
223,664
284,803
883,160
859,933
Share-based payment
Movement in provisions
Net financial expense
Operating cash flow before changes in working capital
Changes in working capital relating to:
Inventories
14
(12,022)
4,291
Trade accounts receivable
15
(17,906)
7,513
Other current assets
16
(6,005)
1,903
(385)
10,908
Trade accounts payable
Deferred revenues
Other current liabilities
22
Change in working capital
9,232
(6,184)
(18,999)
42,685
(46,085)
61,116
837,075
921,049
10, 11
(342,649)
(279,650)
4
(15,186)
-
13
(7,948)
(12,954)
Net cash flow from operating activities
Investing activities
Purchase of intangible and tagible assets
Acquisition of business, net of cash acquired
Additional contribution to joint ventures
Treasury stock
Interest received
Change in financial assets
Net cash flow from investing activities
3
(36)
44
426
(406)
(155)
(366,142)
(292,369)
Financing activities
Proceeds from loans
19
1,378,500
-
Repayments of loans
19
(1,288,348)
(320,000)
Interest paid
(190,762)
(217,906)
Dividend paid
(370,000)
(110,000)
(13,445)
(1,025)
Financing and commitment fees
Other financing activities
Net cash flow from financing activities
Net (decrease) / increase in cash and cash equivalents
Net cash and cash equivalents at January 1
(1,909)
-
(485,964)
(648,931)
(15,031)
(20,251)
92,428
112,679
Net cash flow from operating, investing and financing activities
(15,031)
(20,251)
Net cash and cash equivalents at December 31
77,397
92,428
The accompanying notes to this statement of cash flows form an integral part of these consolidated financial statements.
Contents
Ziggo N.V. Annual Report 2013 66
Ziggo at a glance
Performance
Governance
Financial statements
Notes to the consolidated
financial statements
1. The Company and its operations
The Company is the owner and operator of a broadband cable network in the Netherlands and provides analogue and digital radio
and television, broadband internet and telephony services in the Netherlands to 2.9 million households and businesses under the
brand name Ziggo. The principal activity of the Company is the exploitation of its broadband cable network.
2. Basis of preparation
Date of authorisation of issue
The consolidated financial statements of Ziggo N.V. for the year ended December 31, 2013 were prepared by the Board of
Management and adopted on March 5, 2014. The Company is a public limited company incorporated in Utrecht (registered office:
Atoomweg 100, 3542 AB Utrecht) in the Netherlands.
Statement of compliance
The consolidated financial statements of the Company and all its subsidiaries have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union and in accordance with part 9 of Book 2 of the Dutch Civil Code.
Measurement basis
The consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments that
have been measured at fair value. The consolidated financial statements are presented in thousands of euros (€) except when
otherwise indicated.
Foreign currency translation
The consolidated financial statements are presented in euros (€), which is the Company’s functional and presentation currency.
Transactions in currencies other than the functional currency are recorded at the rates of exchange prevailing at the transaction
dates. Monetary items denominated in foreign currencies are translated into the Company’s functional currency at the spot rate
of exchange ruling at the reporting date. Exchange differences arising on the settlement of monetary items and the translation of
monetary items are included in net income for the period. Non-monetary items that are measured on a historical cost basis in a
foreign currency are translated using the exchange rates ruling at the dates of the initial transactions.
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at December 31, 2013.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continue
to be consolidated until the date that such control ceases.
Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the
Group has:
■■
Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);
■■
Exposure, or rights, to variable returns from its involvement with the investee;
■■
The ability to use its power over the investee to affect its returns.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or
more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and
ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of
during the year are included in the statement of comprehensive income from the date the Group gains control until the date the
Group ceases to control the subsidiary.
Contents
Ziggo N.V. Annual Report 2013 67
Ziggo at a glance
Performance
Governance
Financial statements
The financial statements of the subsidiaries are prepared for the same financial year as those of the parent company, using consistent
accounting policies. Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of
the parent company. All intra-group balances, transactions, income and expenses and unrealised gains and losses resulting from
intra-group transactions are eliminated in full on consolidation.
The consolidated financial statements of the Company include the subsidiaries mentioned in Note 27.
Use of estimates and assumptions
The preparation of financial statements requires management to make a number of estimates and assumptions. These estimates
and assumptions affect the reported amounts of assets and liabilities, of revenues and expenses and the disclosure of contingent
assets and liabilities. All assumptions, expectations and forecasts used as a basis for certain estimates within these consolidated
financial statements represent good-faith assessments of the Company’s future performance for which management believes
there is a reasonable basis. These estimates and assumptions represent the Company’s view at the times they are made, and only
then. They involve risks, uncertainties and other factors that could cause the Company’s actual future results, performance and
achievements to differ materially from those forecasted. The estimates and assumptions that management considers most critical
relate to:
■■
Impairment of goodwill and intangible assets with indefinite lives (Note 3 and Note 10)
■■
Deferred tax assets (Note 3 and Note 9)
■■
Fair value of financial instruments (Note 3, Note 25 and Note 26)
■■
Other long-term employee benefits (Note 3 and Note 20)
■■
Provisions and contingencies (Note 3 and Note 20)
Change in presentation
In 2013 the Company changed presentation of some items previously included in cost of goods of sold to office expenses.
Comparative information 2012 has been adjusted as follows:
December 31, 2012
Amounts in thousands of €
Previously
reported
Change in
presentation
Adjusted
295,013
(606)
294,407
54,757
606
55,363
Item Income Statement
Cost of goods sold
Office Expenses
Change in accounting policies
IAS 19, “Employee Benefits,” (as revised June 2011) became effective for the Company as of January 1, 2013. The amendments
require, amongst other things, the recognition of changes in defined benefit obligations and in fair value of plan assets as they
occur, hence eliminating the ”corridor approach” permitted under the previous version of IAS 19, and accelerate the recognition of
past service costs. All actuarial gains and losses are recognized immediately through other comprehensive income in order for the
net pension asset or liability recognized in the consolidated balance sheet to reflect the full value of the plan deficit or surplus.
Furthermore, the interest cost and expected return on plan assets used in the previous version of IAS 19 have been replaced with
a ”net-interest” amount, which is calculated by applying the discount rate to the net defined liability or asset. IAS 19 (as revised)
introduces certain changes in the presentation of the defined benefit cost including more extensive disclosures. As the Company
is not able to recognize its multi-employer defined benefit plans as defined benefit plans, the amendment does not have an impact
accounting for these plans.
IFRS 13, “Fair value measurement,” became effective for the Company as of January 1, 2013. It is applied prospectively. IFRS 13 aims
to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value
measurement and disclosure requirements for use across all IFRSs. The requirements do not extend the use of fair value
accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards
within the IFRSs. The adoption of IFRS 13 does not have a significant effect on the Company’s financial position or performance.
For more information about financial instruments and fair value measurements, see Note 25.
Contents
Ziggo N.V. Annual Report 2013 68
Ziggo at a glance
Performance
Governance
Financial statements
In addition, the following new and amended IASB pronouncements have been early adopted. The initial application of
these pronouncements has been assessed and they do not have any significant effect on the Company’s financial position
or performance.
■■
IFRS 10, “Consolidated financial statements” and amendments to IAS 27, “Separate financial statements”;
■■
IFRS 11, “Joint arrangements” and amendments to IAS 28, “Investments in associates and joint ventures”;
■■
IFRS 12, “Disclosures of interests in other entities”.
3. Significant accounting policies
Significant accounting policies applied in the preparation of the consolidated financial statements are presented below.
These policies have been consistently applied through all years presented, unless otherwise stated.
Segment reporting
IFRS 8 “Operating Segments” defines an operating segment as a component of the Company that engages in business activities
from which it may earn revenues and incur expenses. The operating segment’s operating result is reviewed regularly by the Board
of Management (Chief Operating Decision Maker), which makes decisions as to the resources to be allocated to the segment and
assesses its performance, based on discrete financial information available.
Segment results are reported to the Board of Management include items directly attributable to a segment as well as those that
can be allocated on a reasonable basis. Performance of the segments is evaluated on the basis of several measures, of which
operating income excluding depreciation and amortisation (EBITDA) is the most important. Segment assets and liabilities do not
include corporate assets and liabilities and income tax assets and liabilities. Segment capital expenditure is the total cost incurred
during the period to acquire property, plant and equipment, and intangible assets other than goodwill.
In the assessment of operating segments, the Company concluded there is only one operating segment, based on the
following assumptions:
■■
Chief Operating Decision Maker (Board of Management of the Company) makes decisions on the basis of financial results
for the Company as one company;
■■
The Company has only one geographic area in which it operates;
■■
The Company has an integrated network for all activities;
■■
The Company’s investments and related costs are not allocated to its specific business lines or products.
Business combinations
Business combinations are accounted for using the acquisition accounting method. The cost of an acquisition is measured as the
aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest
in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair
value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in
other operating expenses.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is classified as an asset or liability are remeasured at subsequent reporting
dates in accordance with IAS 39 “Financial Instruments: Recognition and Measurement” or IAS 37 “Provisions, Contingent Liabilities and
Contingent Assets” as appropriate, with the corresponding gain or loss being recognised in the statement of income. Contingent
consideration that is classified as equity is not re-measured at subsequent reporting dates until it is finally settled within equity.
Share-based payments
Members of the Board of Management of the Company are eligible for share-based payment arrangements in return for services
delivered and will be granted shares based on the performance of the Company. The share-based payment transactions are
accounted for by the Company as equity-settled share-based payment transactions, in which the entity receives goods or services as
consideration for equity instruments of the entity. The employees have the option to settle income tax by selling part of the shares.
Contents
Ziggo N.V. Annual Report 2013 69
Ziggo at a glance
Performance
Governance
Financial statements
The services received by the Company in a share based payment transaction are recognised when the services are rendered.
The Company recognises a corresponding increase in equity, and as the services are consumed over a three year period an
expense is recognised accordingly, with an estimate of the total costs being made and spread over the applicable period of
the arrangement. Services received and the corresponding increase in equity are measured at fair value at the grant date.
The performance shares granted each year will vest in three years; one-third is to be decided upon every year, depending on the
defined vesting conditions.
Intangible assets
Goodwill
Goodwill represents the excess of costs of an acquisition over the Company’s interest in the net fair value of the identifiable assets,
liabilities, and contingent liabilities at the date of acquisition, and is carried at cost less accumulated impairment losses. Goodwill
paid on the acquisition of joint ventures and associates is included in the carrying amount of the investment.
For the purposes of impairment testing, goodwill is allocated to each of the Company’s cash-generating units (or groups of
cash-generating units) that is expected to benefit from the synergies of the combination. The Company identifies one main
cash-generating unit, as the network of the Company services all business operations and cannot be allocated to specific segments.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit
or loss on disposal.
Other intangible assets
Intangible assets acquired separately are measured at cost on initial recognition. The cost of intangible assets acquired in a
business combination is the fair value as at the date of acquisition. Following initial recognition, intangible assets are carried
at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets,
excluding capitalised development costs, are not capitalised. Expenditures are reflected in the statement of income in the year
in which the expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortised over their useful economic lives and assessed for impairment whenever there is
an indication that the economic benefits related to the intangible asset decreased. The amortisation period and the amortisation
method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected
useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by
changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. Such a change in
the useful life assessment is made on a prospective basis.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually. The assessment of indefinite
life is reviewed annually to determine whether the indefinite life of the asset remains indefinite. If not, the change in useful life from
indefinite to finite is made on a prospective basis.
Customer lists acquired upon the merger into Ziggo in 2008 represent the customer relationships of Multikabel, Casema and @Home.
Those customer lists, which are initially measured at fair value, are recognised as an asset with an indefinite life due to a high level of
uncertainty in estimating the useful life as historic attrition rates vary significantly. The asset is tested for impairment at least annually.
The customer list recorded upon the acquisition of Esprit Telecom will be amortised on a straight-line basis over 4.5 years, since
the customers acquired are not dependent on the infrastructure (network) of the Company the life of the asset isn’t evaluated
as indefinite.
Software is amortised in 3-5 years using the straight-line method over its economically useful life.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal
proceeds and the carrying amount of the assets and are recognised in the statement of income when the asset is derecognised.
Contents
Ziggo N.V. Annual Report 2013 70
Ziggo at a glance
Performance
Governance
Financial statements
Property and equipment
Property and equipment is stated at cost less accumulated depreciation and accumulated impairment losses, if any. The cost
includes direct costs (materials, replacement parts, direct labour and contracted work) and directly attributable office expenses.
The present value of the expected cost for the decommissioning of the asset after its use is included in the cost of the respective
asset if the recognition criteria for a provision are met.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial
period of time to get ready for its intended use are capitalised as part of the costs of the respective assets. Borrowing costs consist
of interest and other costs that an entity incurs in connection with the borrowing of funds. The interest percentage used reflects
the weighted average interest expense of the Company.
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset, taking into account residual value.
Borrowing costs are depreciated over the estimated useful life of the corresponding asset. Land is not depreciated. The useful lives
of the assets are as follows:
Useful lives
Network active (head-end, local network)
10-12 years
Network passive (fibre)
12-20 years
Network equipment (IP and datacom equipment)
5 years
Other
3-20 years
The assets’ residual values, useful lives and methods of depreciation are reviewed and adjusted if appropriate at each financial
year-end. Any change in accounting caused by this review is applied prospectively.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be
measured reliably. The carrying amount of the replaced part is derecognised.
An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected from its use
or disposal. Any gain or loss arising from derecognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in the statement of income in the year the asset is derecognised.
Repairs and maintenance are charged to expense during the financial period in which they incur.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an
assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the asset.
Finance leases, which transfer substantially all the risks and benefits incidental to ownership of the leased item to the Company,
are capitalised at the inception of the lease at the fair value of the leased item or, if lower, at the present value of the minimum
lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve
a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense once they occur.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no
reasonable certainty that the Company will obtain ownership by the end of the lease term.
Operating lease payments are recognised as an expense in the statement of income on a straight-line basis over the lease term.
Impairment of non-financial assets
The Company assesses at each financial year-end whether there is an indication that an asset may be impaired. If any such
indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s
recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs of
Contents
Ziggo N.V. Annual Report 2013 71
Ziggo at a glance
Performance
Governance
Financial statements
disposal and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable
amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, an appropriate valuation
model is used. These calculations are substantiated by valuation multiples, quoted share prices for publicly traded subsidiaries or
other available fair value indicators.
Impairment losses of continuing operations recognised in the statement of income will be recorded in a separate line item in those
expense categories consistent with the classification of the impaired asset.
For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously
recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the Company makes an
estimate of the recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the
estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the
carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount
that would have been determined, net of depreciation, if no impairment loss had been recognised for the asset in prior years.
Such a reversal is recognised in the statement of income. Impairment losses recognised in relation to goodwill are not reversed for
subsequent increases in its recoverable amount.
Goodwill and other assets with indefinite lives are reviewed for impairment, annually or more frequently if events or changes in
circumstances indicate that their carrying amounts may be impaired. An indicator for impairment may be a drop in the share price
of Ziggo N.V. below the issue price of €18.50. Impairment is determined for goodwill by assessing the recoverable amount of the
cash-generating unit (or group of cash-generating units) to which the goodwill relates. The recoverable amount is the higher of
the cash-generating unit’s fair value less cost to sell and its value in use. The value in use of the cash-generating unit is determined
using the discounted cash flow method. Where the recoverable amount of the cash-generating unit is less than the carrying
amount of the cash-generating unit to which goodwill has been allocated, an impairment loss is recognised. Impairment losses
relating to goodwill cannot be reversed in future periods.
Investments in joint ventures and associates
A joint venture is a joint arrangement whereby the Company and one or more other parties have joint control and rights to he net
assets of the arrangement. Associates are entities over which the Company has significant influence but not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights.
Joint ventures and associates are accounted for using the equity method. Under the equity method, investments in joint ventures
and associates are measured at cost and adjusted for post-acquisition changes in the Company’s share of the net assets of the
investment (net of any accumulated impairment in the value of individual investments).
Inventories
Inventories are measured at cost or net realisable value, whichever is the lower. Cost consists of all costs of purchase, costs of
conversion and other costs incurred in bringing the inventories to their present location and condition. Net realisable value is the
estimated selling price in the ordinary course of business, less the estimated marketing, distribution and selling expenses.
Most of the inventory is not sold to customers but used in the Company’s network and capitalised once used. Sold inventory is
included in the cost of goods sold.
Provisions
Provisions are recognised when a legal or constructive obligation, which can be reliably estimated, exists as a result of a past event
and it is probable that an outflow of economic benefits will be required to settle the obligation. Where the Company expects some
or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision is presented in the statement of income net of any reimbursement.
A provision for restructuring is recognised when management has approved a detailed and formal restructuring plan and the
restructuring has either commenced or has been announced to the parties concerned.
Contents
Ziggo N.V. Annual Report 2013 72
Ziggo at a glance
Performance
Governance
Financial statements
The Company recognises a provision for asset retirement obligations related to dismantling and removing items at leased property
and restoring the site on which these items are located after termination of the lease agreement. In addition, the Company is
exposed to costs of returning customer premises equipment upon termination of the subscription or renewals.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where
appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is
recognised as finance cost.
The net assets and net liabilities recognised in the consolidated statement of financial position for defined benefit plans and other
long-term employee benefits represent the net amount of the defined benefit obligations and unrecognised past-service costs less
plan assets. Actuarial gains and losses are recognised in other comprehensive income. Any net asset resulting from the calculation
is limited to unrecognised past-service cost, plus the present value of available refunds and reductions in future contributions to
the plan. No adjustment for the time value of money is made in case that the Company has an unconditional right to a refund of
the full amount of the surplus, even if such a refund is realisable only at a future date.
Defined benefit obligations are actuarially calculated at least annually on the reporting date using the projected unit credit method.
The present value of the defined benefit obligations is determined by discounting the estimated future cash outflows using interest
rates of high-quality corporate bonds denominated in the currency in which the benefits will be paid, and that have an average
duration similar to the expected duration of the related pension liabilities.
The Company provides pension plans for qualifying employees. The plans are multi-employer defined benefit plans with publicly
or privately administered pension insurance organisations (known as ”bedrijfstak-pensioenfonds”). These pension insurance
organisations are not able to provide the Company with sufficient information in order to account for the plans as defined benefit
plans. As a result, the defined benefit pension plans are treated as defined contribution plans.
Contributions to defined contribution plans are recognised as an expense when they are due. Post-employment benefits provided
through industry multi-employer plans, managed by third parties, are generally accounted for using defined contribution criteria.
Provisions are recognised for other long-term employee benefits on the basis of discount rates and other estimates that are
consistent with the estimates used for the defined benefit obligations. For these provisions the corridor approach is not applied
and all actuarial gains and losses are recognised in the consolidated statement of income immediately.
Financial instruments
Financial assets
The Company initially recognises loans and receivables and deposits on the date they originated. All other financial assets
(including assets designated at fair value through profit or loss) are recognised initially on the trade date, which is the date that
the Company becomes a party to the contractual provisions of the instrument.
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers
the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and
rewards of ownership of the financial asset are transferred.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets
are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and
receivables are measured at amortised cost using the effective interest method, less any impairment losses.
An impairment is recorded in operating expenses when it is probable (based on objective evidence) that the Company will not be
able to collect all amounts due under the original terms. Impairments are calculated on an individual basis and on a portfolio basis
for groups of receivables that are not individually identified as impaired. Impaired loans and receivables are derecognised when
they are assessed as uncollectible.
Loans and receivables comprise cash and cash equivalents, and trade and other receivables. Cash and cash equivalents comprise
cash balances and call deposits with original maturities of three months or less.
Contents
Ziggo N.V. Annual Report 2013 73
Ziggo at a glance
Performance
Governance
Financial statements
Financial liabilities
The Company initially recognises debt securities issued and subordinated liabilities on the date they originated. All other financial
liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date, which is the
date that the Company becomes a party to the contractual provisions of the instrument.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and
the recognition of a new liability, with the difference in the respective carrying amounts being recognised in the statement of income.
The Company classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are
recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial
liabilities are measured at amortised cost using the effective interest method.
Other financial liabilities comprise loans and borrowings, bank overdrafts, and trade accounts and other payables.
Derivative financial instruments and hedging
The Company entered into several interest rate swaps in order to mitigate its risks associated with interest rate fluctuations. These
derivatives are recognised at fair value. The fair value of interest rate swaps is the estimated amount that would be received or paid
to terminate the swap at the reporting date, taking into account the current interest rates and creditworthiness of the swap counter
parties. As a result of the refinancing of the Company in October 2010, hedge accounting is no longer applied. Since October 2010
changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the statement of income.
Until October 2010 changes in the fair value were recorded as hedge reserve in shareholders’ equity. This hedge reserve is charged
linear to the income statement since October 2010 based on the term of the underlying hedge instrument.
The fair values of various derivative instruments used for hedging purposes are disclosed in Note 26. The full fair value of a
hedging derivative is classified as a non-current asset or liability when the remaining term to maturity of the hedged item is more
than 12 months, and as a current asset or liability when the remaining term to maturity of the hedged item is less than 12 months.
Trading derivatives are classified as a current asset or liability.
When a hedging instrument expires or is sold, any cumulative gain or loss recorded in equity at that time is immediately transferred
to the statement of income under ‘Other net financial income and expense’.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can
be reliably measured. Revenue from the services provided in the ordinary course of business is measured at the fair value of the
consideration received or receivable, net of sales tax, customer discounts and other sales-related discounts.
Revenue primarily comprises revenues earned from subscription and usage fees on the delivery of standard cable (analogue and
digital signal) and digital pay television, broadband internet and telephony and subscriptions and services provided to the business
market. Revenue from other sources primarily comprises revenue from the sale of set top boxes and other goods, revenues
customer care service numbers, revenues from connection- and installation fees and various other items. Subscription and usage
revenues are recognised at the time services are provided to customers. Pre-invoiced revenues are deferred and allocated to the
respective period they relate to. Any unearned revenue is recognised as deferred revenue within current liabilities. Revenue from
the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually
on delivery of the goods.
The Company may provide the subscriber with an installation to establish the connection to its network and offers connectionrelated services. Revenue from installations is recognised immediately when the installation and services have been rendered for
contracts with undefined contractual terms and is allocated to the concerning periods of a contract with a defined terms.
Contents
Ziggo N.V. Annual Report 2013 74
Ziggo at a glance
Performance
Governance
Financial statements
Cost of goods sold
Cost of goods sold includes the costs for purchases of materials and services directly related to revenue, such as copyright,
interconnection costs, signal delivery costs, royalties, internet service provider fees and materials and logistics cost directly related
to the sale of set top boxes.
Income tax
Current income tax is recognised in the consolidated statement of income except to the extent that it relates to items recognised
in other comprehensive income. The current income tax is based on the best estimate of taxable income for the year, using tax
rates that have been enacted or substantively enacted at the reporting date, and adjustments for current taxes payable (receivable)
for prior years.
Deferred income tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and
liabilities and the corresponding tax basis used in the computation of taxable income. Deferred income tax assets are generally
recognised for all temporary differences, carry forwards of unused tax credits and unused tax losses, to the extent that it is
probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused
tax credits and unused tax losses can be utilised except to the extent that a deferred income tax asset arises from the initial
recognition of goodwill. Deferred income tax liabilities are generally recognised for all temporary differences.
Deferred income tax assets and liabilities are based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to
reverse or are substantively enacted at the reporting date. The effect of a change in tax rates on deferred income tax assets
and liabilities is recognised in the period that includes the enactment date. Deferred income tax assets are reduced by a valuation
allowance when the Company cannot make the determination that it is more likely than not that some portion or all of the
related tax assets will be realised.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has
become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax
liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Statement of cash flows
The statement of cash flows is prepared using the indirect method with a breakdown into cash flows from operating, investing
and financing activities. The purchase of the business combination in investing activities is presented net of cash acquired.
Bank overdrafts that are repayable on demand and form an integral part of the Company’s cash management are included as
a component of cash and cash equivalents for the purpose of the statement of cash flows.
Standards issued but not yet effective
The following new standards, amendments to standards and interpretations are not yet effective for the year ended
December 31, 2013 and have not been applied in preparing these consolidated financial statements:
Issued and effective as from the 2014 financial year:
■■
Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39) (issued June 2013)
■■
Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36) (issued May 2013)
■■
IFRIC 21 Levies (issued May 2013)
■■
Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) (issued October 2012)
■■
Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) (issued December 2011)
Contents
Ziggo N.V. Annual Report 2013 75
Ziggo at a glance
Performance
Governance
Financial statements
Issued in previous financial years and not yet effective as from 2014:
■■
IFRS 9 Financial Instruments (issued in November 2009) and subsequent amendments (amendments to IFRS 9 and IFRS 7 issued
in December 2011)
Issued by the IASB in this financial year but not yet effective as from 2014:
■■
Annual Improvements to IFRSs 2010–2012 Cycle (issued December 2013)
■■
Annual Improvements to IFRSs 2011–2013 Cycle (issued December 2013)
■■
Defined Benefit Plans: Employee Contributions (Amendments to IAS 19) (issued November 2013)
The Company will introduce the new standards, amendments to standards and interpretations as of their effective date unless
otherwise indicated. Adoption of the standards and interpretations for the next financial year are not expected to have an impact
on the Consolidated statement of income, the Consolidated statement of comprehensive income and on the disclosure notes to
the financial statements of the Company.
4. Business combinations
On May 1, 2013 Ziggo acquired 100% of the shares of Esprit Telecom B.V. (“Esprit Telecom”). The acquisition enables the Company
to further expand its services for the business market. Esprit Telecom is a leading provider of voice and data services for the SME
(Small and Medium Enterprises) market in the Netherlands, and has an active sales channel of dealers across the country.
Esprit Telecom is the 100% parent company of Zoranet Connectivity Services B.V. (an ICT service provider that focuses on the retail
sector) and XB Facilities B.V.
Assets acquired and liabilities assumed
The fair value of the identifiable assets and liabilities of Esprit Telecom as at the date of acquisition were:
Amounts in thousands of €
Fair value
recognised on
acquisition
Assets
Intangible assets
5,402
Property and equipment
2,467
Deferred tax asset
1,041
Inventories
93
Trade receivables
1,741
Other current assets
2,655
Cash and cash equivalents
Total assets
2,630
16,030
Liabilities
Loans from financial institutions
914
Deferred tax liability
1,274
Trade payables
2,971
Other current liabilities
3,862
Total liabilities
9,021
Net asset value acquired
7,008
Goodwill arising on acquisition
11,308
Total purchase consideration
18,316
Contents
Ziggo N.V. Annual Report 2013 76
Ziggo at a glance
Performance
Governance
Financial statements
The purchase consideration comprises:
Amounts in thousands of €
Purchase consideration
Cash consideration
17,816
Contingent consideration
500
Total purchase consideration
18,316
Contingent consideration
As part of the purchase agreement with the previous owner of Esprit Telecom, a contingent consideration has been agreed.
Payment is conditional upon the renewal of an Internet & Data agreement with a primary customer prior to July 1, 2014 against
market practice prices for a period of at least 12 months. As at the acquisition date, the fair value of the contingent consideration
was €0.5 million, as it is expected that this Internet & Data agreement with this customer will be extended prior to July 1, 2014.
If the contractual criteria are met, the maximum cash payable will not materially differ from the liability recorded. In the remainder
of the half year there were no changes in the underlying assumptions of the contingent consideration that required a change in
the fair value of the cash payment.
Cash flow on acquisition
Amounts in thousands of €
Cash flow on acquisition
Net cash acquired with the subsidiary
2,630
Cash consideration
(17,816)
Net cash flow on acquisition
(15,186)
Of the total purchase consideration of €18.3 million, an amount of €11.3 million is allocated to the goodwill for the acquisition
of the sales channel and product portfolio of Esprit Telecom. Additionally, the Company expects to realize synergy advantages
mainly within interconnection costs from the acquisition in the future.
From the date of acquisition, Esprit Telecom contributed €25.2 million in revenues and €3.5 million to the operating income of the
Company. If the combination had taken place per January 1, 2013, revenue from continuing operations would have been
€37.8 million and the operating income from continuing operations would have been €4.5 million for the Company.
Contents
Ziggo N.V. Annual Report 2013 77
Ziggo at a glance
Performance
Governance
Financial statements
5. Revenues
The Company’s revenues comprise the following:
For the years ended
Amounts in thousands of €
December 31, 2013
December 31, 2012
Standard cable subscription
447,363
464,533
Digital pay television services
167,497
168,139
Total Video revenues
614,860
632,672
Broadband Internet subscription
464,354
442,419
Telephony subscription
137,357
129,048
Telephony usage
174,768
179,701
Total Telephony revenues
312,125
308,749
Revenues from other sources
Total Consumer Market
Business Services
Total revenues
31,805
47,461
1,423,144
1,431,301
141,699
105,564
1,564,843
1,536,865
Revenues generated from bundle subscriptions amounted to €727.5 million (2012: €672.0 million) and have been allocated to
the individual products Video-, Broadband internet- and Telephony subscriptions based on the individual product prices for
each product as a percentage of the sum of the individual product price.
The Company’s revenues are generated through a large customer base and no customer generates more than 10% of total
revenues. Revenues from other sources primarily comprise revenue from the sale of goods. Revenues from the sale of goods
as at December 31, 2013 amounted to €19.1 million (2012: €27.8 million).
6. Personnel expenses
The Company’s personnel expenses comprise the following:
For the years ended
December 31, 2013
December 31, 2012
145,862
174,893
Social security costs
17,368
19,135
Pensions and other long-term employee benefits
20,737
18,087
External personnel
78,307
53,093
Lease- & mileage costs
11,030
10,556
6,555
7,090
(86,857)
(57,329)
193,002
225,525
Amounts in thousands of €
Wages and salaries
Other
Work Capitalized
Total personnel expenses
The number of employees of the Company in full time equivalents (FTEs) as at December 31, 2013 was 2,606 (2012: 2,502).
The average number of employees in 2013 was 2,571 FTEs (2012: 2,448).
Contents
Ziggo N.V. Annual Report 2013 78
Ziggo at a glance
Performance
Governance
Financial statements
Employee bonuses
In 2012, employees of the Company received a bonus in relation to the IPO depending on the number of years of their
employment for the Company. Employees of the Company were free to choose between receiving a bonus in cash or in shares.
To encourage employees to choose a bonus in shares, the gross amount of an employee’s bonus was multiplied by 1.2 if the
employee had chosen to use the bonus to subscribe for shares. Per December 31, 2012 the total employee bonus amounted
to €14.2 million.
7. Remuneration and share-based payment plans
Remuneration
The remuneration of the members of the Board of Management is determined by the Supervisory Board. The total remuneration
in 2013 consisted of basic salaries, short-term performance incentives (in cash), long-term performance incentives (in shares)
and other benefits. As at December 31, 2013, the members of the Board of Management of the Company were:
■■
Bernard Dijkhuizen (Chief Executive Officer)
■■
Bert Groenewegen (Chief Financial Officer)
■■
Paul Hendriks (Chief Technology Officer)
■■
Marcel Nijhoff (Chief Commercial Officer)
Remuneration of the members of the Board of Management in 2013 and 2012 was as follows:
Amounts in
thousands of €
Bernard Dijkhuizen
Bert Groenewegen
Paul Hendriks
Marcel Nijhoff
Pension
Other
benefits and
expense
reim­burse­
ment
89
106
15
864
76
88
6
4,858
-
94
71
8
609
216
2,441
47
66
0
3,152
54
-
89
71
10
606
204
2,441
42
58
3
3,109
54
-
94
71
9
610
216
2,441
47
61
2
3,149
ShortTerm
Incentive
(Cash)
Share- Long-term
based Incentive
payment
(share
upon IPO
awards)
Financial
Year
Base
salary
2013
561
93
-
2012
561
371
3,756
2013
382
54
2012
382
2013
382
2012
361
2013
382
2012
382
Total
Remuneration
Total 2013
1,707
255
-
366
319
42
2,690
Total 2012
1,686
1,007
11,079
212
273
11
14,268
Remuneration of the members of the Supervisory Board is determined by the General Meeting of Shareholders.
At December 31, 2013, the members of the Supervisory Board of the Company were:
■■
Andrew Sukawaty (Chairman)
■■
David Barker
■■
Dirk Jan van den Berg
■■
Anne-Willem Kist
■■
Joseph Schull
■■
Rob Ruijter (appointed as from March 20, 2012)
■■
Pamela Boumeester (appointed as from April 28, 2013)
■■
Caspar Berendsen (retired as from December 31, 2012)
■■
Paul Best (retired as from December 31, 2012)
Contents
Ziggo N.V. Annual Report 2013 79
Ziggo at a glance
Performance
Governance
Financial statements
Supervisory Board members receive an annual fee of €50 and a fee of €7.5 for membership of a committee, with the following
exceptions: The chairman of the Supervisory Board receives an annual fee of €190. The chairman of the Audit Committee receives
an additional fee of €25 for chairing the committee. The chairman of the Selection, Appointment and Remuneration Committee
receives an additional fee of €25 for chairing the committee. Remuneration of the members of the Supervisory Board in 2013 and
2012 was as follows:
For the years ended
2013
2012
58
43
-
43
50
58
-
43
Pamela Boumeester
69
-
Anne-Willem Kist
58
58
Rob Ruijter
75
75
Joseph Schull
58
43
Andrew Sukawaty
190
4,590
Total
558
4,953
Amounts in thousands of €
David Barker
Caspar Berendsen
Dirk Jan van den Berg
Paul Best
In 2012 the Chairman of the Supervisory Board received a remuneration of €290. He did not receive a separate remuneration for
his membership and chairmanship of the selection, appointment and remuneration committee. In 2012 the Chairman of the
Supervisory Board received €1.4 million compensation for waiving his entitlement to part of his annual cash remuneration
(€0.3 million) and to all of his annual equity remuneration (€1.1 million) post-offering. If the Chairman of the Supervisory Board
leaves the Company within the lock-up period of two years, the compensation of €1.4 million needs to be repaid in cash.
In addition, the Chairman received a share-based payment upon the IPO of the Company of €2.8 million, representing 152,265 shares
valued at the price of €18.50 against which the Company was listed in March 2012.
Short-term incentive plan (STIP)
The members of the Board of Management of the Company are eligible to receive a short-term incentive in cash based on
financial and non-financial target ranges which are set at the beginning of each year by the Supervisory Board. Target ranges are
set for Net Promoter Score, Revenue, Cash flow and Innovation roadmap (2012: Customer Satisfaction, Revenue, EBITDA and
Cash flow). For “on target” achievement, the STI will be 70% of basic salary for the CEO and 60% for the other members of the
Board of Management. Cost recognised related to the STI amounted to €0.3 million (realizing 25% of the targets) (2012:
€1.0 million realizing 94% of the target).
Share-based payment upon IPO
In March 2012, shares in the Company were granted by Cinven Cable Investments S.à r.l. and WP Holdings IV B.V. to members
of the Board of Management, the chairman of the Supervisory Board and certain employees of the Company. The fair value of
the share-based payments on the grant date amounted to €20.0 million, consisting of ordinary shares with a nominal value of
€18.50 per share. There are no additional vesting conditions and shares are granted immediately. The share-based payment is
accounted for as an equity-settled share-based payment transaction. Therefore, this transaction is recognised under personnel
costs and equity; the transaction did not affect the Company’s cash flow and did not dilute shareholders’ equity.
Long-term incentive plan (LTIP)
The Supervisory Board of the Company introduced a Long-Term Incentive Plan as part of the remuneration policy, under which the
members of the Board of Management of the Company are eligible to receive conditional performance shares in the Company.
Allocation of the conditional performance shares is based on the performance of the Company versus its three-year plan.
Contents
Ziggo N.V. Annual Report 2013 80
Ziggo at a glance
Performance
Governance
Financial statements
At the start of each calendar year shares will be granted to the CEO equal to 155% of base salary for the CEO, and, to the other
members of the Board of Management equal to 140% of their base salaries. For 2013, the grant date was February 15, 2013 (for
2012: March 21, 2012 in relation to the IPO). The allocation of shares based on the actual performance versus the targets can vary
between 0% and 150%. The maximum number of performance shares conditionally awarded lies between 210%-232.5% of base
salary divided by the value of one performance share (i.e. reflecting maximum achievement). The Company defines stretching
targets, whereas for “on target” achievement, the value of performance shares will be 100% of 155% of base salary for the CEO
and 100% of 140% of base salary for the other members of the Board of Management.
Performance will be measured on an annual basis based on the achievement of Revenues, Net Promoter Score (NPS) (for 2012:
customer satisfaction), EBITDA and Cash flow targets, as defined in the three-year plan.
At the end of each Performance Period, 50% of one-third of the Conditional Performance Shares granted will be determined on
the performance on the above-mentioned criteria for each year. At the end of each year of the performance period, the Total
Shareholder Return (TSR) of the Company is compared with the Peer Group. For this purpose TSR is defined as the change in price
of the shares of the Company plus the dividend paid in a year. The Peer Group consists of the following companies: Telenet Group
Holding N.V., Kabel Deutschland Holding A.G., Liberty Global Inc., Virgin Media Inc., Zon Multimedia SGPS S.A., KPN N.V., Belgacom
N.V., BT Group P.L.C., Deutsche Telekom A.G. and Ziggo N.V. If the TSR in a year is in the lowest quartile compared to the Peer
Group, the number of shares determined on the basis of the criteria test for that year will not vest at the end of the performance
period. The vesting of the other 50% of one-third of the Conditional Performance Shares granted at the end of each performance
period is determined on the basis of a targeted cash flow per share. Scenario analyses are used to estimate the possible outcomes
of the value of the shares vesting in the coming years.
The performance shares will vest and be delivered to a member of the Board of Management after the end of the performance
period (three years), provided that the member of the Board of Management is still employed by the Company. After vesting, the
performance shares still need to be retained for another year as a result of a lock-up, except to the extent necessary to settle any
tax obligation resulting from the LTIP. During the lock-up the shares may not be transferred, assigned to any third party,
encumbered or otherwise disposed of.
Details of performance shares granted to the Board of Management are as follows:
March 21,
2012
2012
Conditional
2013* Conditional
Bert
Groenewegen
Paul Hendriks
27,243
24,216
March 21,
2012
March 21,
2012
2012
Conditional
Marcel Nijhoff
Total
27,243
123,107
No
No
No
9,806
6,395
€11.37
€10.71
€11.37
7,771
7,771
4,768
Number of
shares vested
Vesting date
Fair value at
grant date
Number
of shares
recognized
Fair value at
grant date
Number
of shares
recognized
10,423
Part B
€14.15
January 1,
2015
-
€13.48
January 1,
2015
-
€14.15
January 1,
2015
-
2013* Conditional
No
7,719
€10.71
4,768
€13.48
January 1,
2015
2012
No
5,684
€11.37
4,238
€14.15
January 1,
2015
-
€13.48
January 1,
2015
-
Conditional
2013* Conditional
March 21,
2012
Full Control
Status
44,405
Performance
year
Bernard
Dijkhuizen
Grant date
Board of
management
Maxi­mum
performance
share grant
Part A
No
6,861
€10.71
4,238
Conditional
No
6,395
€11.37
4,768
€14.15
January 1,
2015
2013* Conditional
No
7,719
€10.71
4,768
€13.48
January 1,
2015
2012
28,897
€11.37
21,545
€14.15
2013*
32,105
€10.71
21,544
€13.48
2012
* 2013 number of shares recognized is accumulated 2012 and 2013.
Contents
Ziggo N.V. Annual Report 2013 81
Governance
19,584
February
15, 2013
2013
Conditional
No
4,896
€14.33
Paul Hendriks
19,584
February
15, 2013
2013
Conditional
No
4,896
€14.33
Marcel Nijhoff
19,584
February
15, 2013
Total
90,674
2013
Status
Conditional
Conditional
No
No
5,320
€14.33
Vesting date
Bert
Groenewegen
2013
Number
of shares
recognized
February
15, 2013
Full Control
31,922
Performance
year
Maxi­mum
performance
share grant
Bernard
Dijkhuizen
Grant date
Board of
management
Number of
shares vested
Part B
Fair value at
grant date
Part A
Financial statements
Fair value at
grant date
Performance
Number
of shares
recognized
Ziggo at a glance
€18.20
January 1,
2016
-
3,264
€18.20
January 1,
2016
-
3,264
€18.20
January 1,
2016
-
January 1,
2016
-
-
4,896
€14.33
3,264
€18.20
20,008
€14.33
9,792
€18.20
-
The fair value per share of the 2013 grant Part A was €14.33 per share, the fair value per share of the 2013 grant Part B was
€18.20 (share price on the grant date €25.64). The fair value per share of the 2012 grant in 2013 of Part A is €10.71 (2012: €11.37),
the fair value per share in 2013 of Part B is €13.48 (2012: €14.15). The fair value per share is based on the share price at the grant
date adjusted for the effects of the right to receive dividend after vesting, the lock-up period after vesting and the chance Total
Shareholder Return is not in the lowest quartile compared to the Peer Group. Under IFRS 2 the fair value of the LTIP is charged to
the statement of income over the vesting period. In 2013, costs recognised for the LTIP amounted to €0.5 million
(2012: €0.2 million).
Number of Shares held by management
The number of shares held by the members of the Board of Management and Supervisory Board are presented below:
Board of management
Number of shares
Bernard Dijkhuizen
343,167
Bert Groenewegen
251,546
Paul Hendriks
376,579
Marcel Nijhoff
Total shares
Supervisory Board
116,205
1,087,497
Number of shares
Andy Sukawaty
513,208
Total shares
513,208
In 2013, the Supervisory Board of the Company introduced a Long-Term Incentive Plan as part of the remuneration policy for
higher management. At the start of each calendar year shares will be granted to higher management equal to 100% of base salary.
All other conditions defined in the LTIP for higher management equal those defined in the LTIP for the Board of Management of
the Company. Total shares granted to higher management amount to 25,474 shares. In 2013, costs recognised for the LTIP for
higher management amounted to €0.1 million (2012: nil).
Contents
Ziggo N.V. Annual Report 2013 82
Ziggo at a glance
Performance
Governance
Financial statements
8. Net financial income and expense
For the years ended
Amounts in thousands of €
Interest on loans from financial institutions
December 31, 2013
December 31, 2012
(114,004)
(119,834)
Interest on shareholder loans
-
(52,182)
Interest on 8.0% senior notes
(96,708)
(96,708)
Interest on 3.625% senior notes
Other interest expense
Capitalisation of borrowing cost
Interest expense
Interest income
Amortisation of financing fees, including write-offs of terminated facilities
Fair value gains (losses) on derivative financial instruments
Commitment fees
Foreign exchange results
Other net financial income and expense
Net financial income (expense)
-
-
(2,019)
(1,672)
12,591
10,447
(200,140)
(259,949)
1,025
426
(51,799)
29,083
(13,228)
(10,789)
(2,041)
(1,047)
208
(216)
(24,549)
(25,280)
(223,664)
(284,803)
The Company’s financing has changed in 2012 and in 2013, which is discussed in Note 19. As a consequence of this change, the
Company’s financial expense decreased in 2013 compared to 2012 by €61.1 million as the Company no longer incurs interest on
the terminated shareholder loans and a gain was realised on the derivative financial instruments, offset by a write-off of capitalized
financing fees for terminated credit facilities in 2013.
IAS 23 ‘Borrowing Costs’ requires the Company to capitalise borrowing costs that are directly attributable to the construction
of a qualifying asset, hence the Company’s assets under construction. Other interest expense relates mainly to the interest
added to provisions and long-term employee benefits.
9. Income taxes
The subsidiaries of the Company are incorporated into the fiscal unity of Ziggo N.V. for corporate income tax purposes.
For financial reporting purposes, its consolidated subsidiaries calculate their respective tax assets, tax liabilities and tax benefits
on a consolidated tax return basis. The Company’s income tax comprises:
For the years ended
Amounts in thousands of €
Deferred tax assets
December 31, 2013
December 31, 2012
(21,491)
(68,271)
Deferred tax liabilities
(5,786)
(4,110)
Current tax liabilities
(2,217)
(2,296)
(29,494)
(74,677)
Income tax benefit (expense)
Contents
Ziggo N.V. Annual Report 2013 83
Ziggo at a glance
Performance
Governance
Financial statements
A reconciliation between the statutory tax rates of 25.0% and the Company’s effective tax rate is as follows:
For the years ended
Tax rate
Amounts in thousands of €
Profit for the period
2013
Tax rate
385,948
Notional tax income at statutory rates
25.00%
2012
276,836
96,487
25.00%
69,209
Adjustments:
Non-deductable items
0.04%
141
1.98%
5,468
Innovation tax facilities
(17.36%)
(67,010)
-
-
Research and development deduction
(0.03%)
(124)
-
-
Effective tax rate / Income tax benefit
7.64%
29,494
26.98%
74,677
The Company reached an agreement with the Dutch tax authorities regarding the innovation box. The innovation box is a tax
facility under Dutch corporate income tax law which taxes profits attributable to innovation at an effective tax rate of 5% instead
of the statutory rate of 25%. The innovation box reduces the effective tax rate going forward but also reduces it retrospectively
for the period 2010 to 2012.
The Company and the Dutch tax authorities have reached agreement on all income tax filings up to and until 2009. In 2013
no taxes were paid in cash (2012: nil). A current tax liability is included for corporate income tax due per December 31, 2013 of
€4.7 million (2012: €2.3 million). This is the result of an intragroup transaction in which the Company transferred part of its
assets in order to renew part of the tax loss carry-forward position to avoid expiration of these losses. In one of the subsidiaries
the Company will report a profit for tax purposes based on a percentage of the value of the transferred assets, which cannot be
offset against the remaining losses of the fiscal unity according to Dutch carry-over rules.
Income tax recognised under other comprehensive income comprises:
For the years ended
December 31, 2013
Amounts in thousands of €
Cash flow hedges
Contents
December 31, 2012
Before tax
Tax benefit
Net of tax
Before tax
Tax benefit
4,616
(1,154)
3,462
4,615
(1,154)
Net of tax
3,462
4,616
(1,154)
3,462
4,615
(1,154)
3,462
Ziggo N.V. Annual Report 2013 84
Ziggo at a glance
Performance
Governance
Financial statements
The tax effects of temporary differences influencing significant portions of the deferred tax assets and deferred tax liabilities as of
December 31, 2013 and 2012 are presented below:
Amounts in
thousands of €
December
31, 2011
Recog­
nised in
profit or
loss
Recog­
nised
in other
com­pre­
hen­sive
income
Reclassification
overdraft
257,961
(125,882)
-
Tax loss carry-forwards
Property and
equipment
December
31, 2012
Recog­
nised
in profit
or loss
Recog­
nised
in other
com­pre­
hen­sive
income
Acquired
in a
business
combination
December
31, 2013
-
132,079
(7,903)
-
1,041
125,217
-
54,914
-
20,934
75,848
(6,321)
-
-
69,527
Derivative financial
instruments
14,264
2,696
(1,154)
-
15,806
(7,267)
(1,154)
-
7,385
Deferred tax assets
272,225
(68,272)
(1,154)
20,934
223,733
(21,491)
(1,154)
1,041
202,129
(382,865)
(2,493)
-
-
(385,358)
(3,241)
-
(1,156)
(389,755)
85
(1,617)
-
(20,934)
(22,466)
(2,545)
-
(382,780)
(4,110)
-
(20,934)
(407,824)
(5,786)
-
(1,156)
(414,765)
(110,555)
(72,382)
(1,154)
-
(184,091)
(27,277)
(1,154)
(115)
(212,636)
Intangible assets
Property and
equipment
Deferred tax liabilities
Deferred tax assets
and liabilities
(25,011)
The deferred tax asset and tax liability are calculated at a tax rate of 25.0%.
Recognised deferred tax assets relating to fiscal losses reflect management’s estimate of realisable amounts based on historic
growth numbers and expected future net results. The amounts of tax loss carry-forwards are subject to assessment by local tax
authorities.
The deferred tax asset furthermore relates to derivative financial instruments and a balance as a result of the loss renewal. The loss
renewal transaction resulted in a temporary difference on the fiscal value of transferred assets and thus a higher fiscal depreciation
base. This balance will decrease in time due to the higher fiscal depreciation.
The expiration of the available tax loss carry-forwards and recognised tax assets is as follows:
Amounts in thousands of €
2013
December 31, 2015
1,062
December 31, 2016
97,722
December 31, 2017
153,700
December 31, 2018
145,444
December 31, 2019
102,940
Total net operating loss
500,868
Contents
Ziggo N.V. Annual Report 2013 85
Ziggo at a glance
Performance
Governance
Financial statements
10. Intangible assets
The Company’s intangible assets comprise:
Amounts in thousands of €
Goodwill
Customer lists
Software
Total
Balance as of January 1, 2012
1,782,449
1,538,755
38,532
3,359,736
Additions
-
-
27,058
27,058
Amortisation and impairment
-
-
(28,407)
(28,407)
Total changes in net book value 2012
-
-
(1,349)
(1,349)
1,782,449
2,401,568
288,898
4,472,915
-
(862,813)
(251,715)
(1,114,528)
1,782,449
1,538,755
37,183
3,358,387
-
-
65,442
65,442
11,308
5,093
309
16,710
Cost
Accumulated amortisation
Balance as of December 31, 2012
Additions
Acquired through business combinations
Amortisation and impairment
Total changes in net book value 2013
Cost
-
(755)
(23,366)
(24,121)
11,308
4,338
42,385
58,030
1,793,757
2,406,661
354,649
4,555,067
-
(863,568)
(275,081)
(1,138,649)
1,793,757
1,543,093
79,568
3,416,418
Accumulated amortisation
Balance as of December 31, 2013
Value in use calculations for goodwill and customer lists are based on cash flow projections covering a maximum period of
five years and a terminal value; the four-year financial plan approved by the Company’s management and the years beyond
the four-year financial plan are based on models for this projection period using growth rates that do not exceed the long-term
average growth rate and are consistent with forecasts included in industry reports. The terminal value is calculated based on
a growth rate that does not exceed the long-term average growth rate and discounted at the weighted average cost of capital.
The key assumptions used in the goodwill impairment test and the customer list impairment test are set out below.
The main parameters used for impairment testing are as follows:
Parameters
2013
2012
WACC
8.78%
8.78%
Growth rate (after 2018)
2.00%
2.00%
Goodwill
All goodwill acquired through business combinations has been allocated for impairment testing purposes to the one cashgenerating unit at which management monitors the operating results. Impairment testing is based on the current group of
customers of the Company.
■■
Growth rate – The growth rates in the four-year financial plan reflect historic growth numbers and current market
developments. The years beyond the four-year financial plan are extrapolated using estimated growth rates that do not exceed
the long-term average growth rate and are consistent with forecasts included in industry reports.
■■
Cash flow– Free cash flow consists of operating cash flow before changes in working capital, changes in net working capital
and capital expenditures. Revenues are estimated based on historic growth numbers and expected future market penetration
levels, resulting in related costs and capital expenditures. Cash flow projections beyond the five-year period are captured in
a terminal value and are extrapolated from the final year cash flows, discounted by the appropriate discount rate.
■■
Discount rate – The pre-tax discount rate is calculated taking into account the relative weights of each component of the
capital structure and is used by management as a benchmark to assess operating performance and future investments.
The pre-tax discount rate used for the 2013 goodwill impairment test is 8.78% (2012: 8.78%).
Contents
Ziggo N.V. Annual Report 2013 86
Ziggo at a glance
Performance
Governance
Financial statements
Customer lists
Customer lists acquired upon the merger of Multikabel, Casema and @Home into Ziggo in 2008 were initially amortised on
a straight-line basis in 12-14 years. As from April 2011, the Company ceased amortising its customer lists as it was concluded
that the useful life of its underlying customer relationships connected to the Company’s network is indefinite (See Note 2).
Consequently the asset is subject to impairment testing for assets with indefinite lives as discussed in Note 3. The impairment
test for the customer lists is based on the historic number of active connections at the time the customer list was acquired.
■■
Customer Relationship – The Company defines a customer relationship as an active connection to the Company’s network
multiplied by the number of residential products sold to this connection, also referred to as Revenue Generating Units (RGUs)
for the consumer market. The maximum number of RGUs per active connection is 4 RGUs.
■■
Attrition – Attrition represents the expected decline of the customer relationships and is based on both historical information
as well as management expectations and market developments.
■■
Growth rate – The growth rates in the four-year financial plan reflect historic growth numbers and current market
developments. The years beyond the four-year financial plan are extrapolated using estimated growth rates that do not exceed
the long-term average growth rate and are consistent with forecasts included in industry reports.
■■
Cash flow – Free cash flow consists of operating cash flow before changes in working capital, changes in net working capital
and capital expenditures. Revenues comprise all revenues related to existing customer relationships at the time of the merger
and exclude revenues resulting from new customer relationships. Revenues are estimated based on historic growth numbers
and expected future market penetration levels, resulting in related costs and capital expenditures. Cash flow projections beyond
the five-year period are captured in a terminal value and are extrapolated from the final year cash flows, discounted by the
appropriate discount rate.
■■
Discount rate – The pre-tax discount rate is calculated taking into account the relative weights of each component of
the capital structure and is used by management as a benchmark to assess operating performance and future investments.
The pre-tax discount rate used for the 2013 customer lists impairment test is 8.78% (2012: 8.78%).
Sensitivity to changes in assumptions
With regard to the sensitivity analyses, no reasonably possible change in any of the above key assumptions would cause the
carrying amount of the unit to materially exceed its recoverable amount.
Software
During 2013 the Company did not impair capitalised development of software (2012: nil).
Contents
Ziggo N.V. Annual Report 2013 87
Ziggo at a glance
Performance
Governance
Financial statements
11. Property and equipment
The Company’s property and equipment comprises:
Amounts in thousands of €
Network
Land
Other
Assets under
construction
Total
Balance as of January 1, 2012
1,212,575
3,023
68,502
137,286
1,421,386
241,164
465
19,483
2,289
263,401
(253)
-
253
-
-
Additions
Reclassification - cost
Reclassification - accumulated
depreciation
Depreciation and impairment
Total change in net book value 2012
Cost
21
-
(21)
-
-
(227,118)
-
(23,589)
-
(250,707)
13,814
465
(3,874)
2,289
12,694
4,788,111
3,488
215,793
139,575
5,146,967
Accumulated depreciation
(3,561,722)
-
(151,165)
-
(3,712,887)
Balance as of December 31, 2012
1,226,389
3,488
64,628
139,575
1,434,080
251,064
779
25,687
12,278
289,808
1,197
-
1,270
-
2,467
Additions
Acquired through business combinations
Disposals
Depreciation and impairment
Total change in net book value 2013
Cost
-
-
(9)
-
(9)
(233,288)
-
(19,780)
-
(253,068)
18,973
779
7,168
12,278
39,198
5,040,372
4,267
242,106
151,853
5,438,598
Accumulated depreciation
(3,795,010)
-
(170,310)
-
(3,965,320)
Balance as of December 31, 2013
1,245,362
4,267
71,796
151,853
1,473,278
Network
The additions to the network include capitalised borrowing costs of €12.6 million (2012: €10.4 million). Generally, the capitalisation
rate used to determine the amount of capitalised borrowing costs is a weighted average of the interest rate applicable. For 2013,
an average interest rate of 6.91% (2012: 6.76%) was applied.
During 2013 the Company did not recognise any impairments for property and equipment (2012: nil).
Mortgages on all registered properties, related movable assets and network-related elements established under the Senior Credit
Facilities as explained in Note 19.
Assets under construction
Assets under construction relates to projects for the expansion and improvement of the Company’s network and IT infrastructure.
Included in assets under construction is software, which is recognised as an intangible asset once in use.
12. Other non-current financial assets
Financial assets consist of long-term prepaid expenses (related to information technology contracts) of €1.021 (2012: €578),
participation in the association COIN €99, and other financial assets €5 (2012: €42).
Contents
Ziggo N.V. Annual Report 2013 88
Ziggo at a glance
Performance
Governance
Financial statements
13. Investments in joint ventures
2013
Amounts in thousands of €
HBO
Nederland
Cooperatief
U.A.
ZUM
B.V.
2012
ZUM B
B.V.
Other
noncurrent
liabilities
HBO
Nederland
Cooperatief
U.A.
ZUM
B.V.
ZUM B
B.V.
Other
noncurrent
liabilities
(104)
-
(104)
Balance as of January 1
Investments in joint ventures
3,556
(110)
Joint ventures with a negative
equity value presented within other
non-current liabilities
Adjustment starting balance
Expected profit / (loss) for the year
(190)
(14)
(204)
170
-
-
-
(42)
-
-
-
(8,237)
(96)
(922)
(1,018)
(9,237)
(86)
(23)
(109)
Funding
7,948
-
-
-
12,945
-
9
9
Balance as of December 31
3,437
(286)
(936)
(1,222)
3,556
(190)
(14)
(204)
The Company has a 50% interest in ZUM B.V. and ZUMB B.V. ZUM B.V. and ZUMB B.V. were established to participate in, finance
or have any other interest in, or conduct the management of frequency licences for mobile telecommunication.
The Company has a 50% interest in HBO Nederland Coöperatief U.A., which holds all the shares in HBO Netherland Distribution B.V.,
which is responsible for the marketing and distribution of premium HBO content in the Netherlands through television operators.
Net equity value of ZUM B.V. and ZUMB B.V. is negative. Subsequently, the net equity value is presented within other
non-current liabilities.
14. Inventories
December 31, 2013
December 31, 2012
Equipment and cables
17,712
12,951
Set top boxes
17,201
11,416
5,659
4,386
Amounts in thousands of €
Customer premises equipment
Allowance for obsolete stock
Total Inventories
(568)
(864)
40,004
27,889
2013
2012
864
1,718
Movements in the provision for obsolete stock were as follows:
Amounts in thousands of €
Balance as of January 1
Additions
218
-
Used
(514)
(854)
Balance as of December 31
568
864
15. Trade accounts receivable
Trade accounts receivable as at December 31, 2013 amounted to €37.9 million (2012: €18.2 million). The provision for doubtful
debts is calculated on an individual basis and on a portfolio basis for groups of receivables that are not individually identified.
The doubtful debts provision reflects probable losses in the accounts receivable balance based on historical experience by type
of trade debtor and other currently available evidence.
Contents
Ziggo N.V. Annual Report 2013 89
Ziggo at a glance
Performance
Governance
Financial statements
Movements in the provision for doubtful debts were as follows:
Amounts in thousands of €
2013
2012
Balance as at January 1
3,783
5,103
Additions
3,104
2,080
Acquired in a business combination
Used
Released
Balance as of December 31
839
-
(2,866)
(1,836)
-
(1,565)
4,860
3,783
A pledge has been given on all receivables as mentioned in Note 19.
Trade accounts receivable are non-interest-bearing and are generally due on 30 days’ terms. Note 25 discloses the Company’s
credit risk related to the trade accounts receivable.
16. Other current assets
December 31, 2013
December 31, 2012
Prepaid expenses
14,171
11,820
Revenues to be invoiced
11,185
10,649
Amounts in thousands of €
Related parties
1,756
688
Other current assets
7,429
1,757
Total current assets
34,541
24,914
Revenues for December, to be invoiced with the bill run of January 2014, comprise Telephony usage revenues and Video on
Demand revenues.
17. Cash and cash equivalents
All cash and cash equivalents within the Company are held within bank accounts and earn interest at floating rates based on
bank deposit rates.
A pledge has been given on the accounts of the Company as mentioned in Note 19.
18. Equity attributable to equity holders
The Company is incorporated as a public limited liability company under Dutch law. Its registered capital consists entirely of
ordinary shares. The authorised capital is divided into 200 million shares of €1 nominal value each. With the contribution of
Zesko B.V. at fair value a share premium resulted of €3,500 million (see Note 2 Accounting principles for more details on the IPO).
With the application of the pooling of interest method for the contribution of Zesko B.V. an adjustment in retained earnings is
recognised for the difference between the fair value and the net asset value of Zesko B.V. at contribution.
Share-based payments recognised in equity in 2013 amount to €0.5 million (2012: €20.2 million and relate to the IPO of the
Company and the long-term incentive plan for members of the Board of Management. Reference is made to Note 7
Remunerations and share-based payment plans).
Treasury stock recognised in equity amounts to €33 (1,806 shares at €18.50 per share).
Contents
Ziggo N.V. Annual Report 2013 90
Ziggo at a glance
Performance
Governance
Financial statements
Other reserves represents the cash flow hedge reserve. Prior to the Company’s refinancing in October 2010, hedge accounting was
applied resulting in a cash flow hedge reserve. After the refinancing, the Company no longer applied hedge accounting, with the
hedge reserve released to statement of income during the remainder of the contractual period of the underlying hedge contracts.
19. Interest-bearing loans
December 31, 2013
December 31, 2012
Loans from financial institutions
1,143,218
1,760,439
8.0 % Unsecured Notes, due 2018
1,187,357
1,183,377
Amounts in thousands of €
3.625% Senior Secured Notes, due 2020
742,914
-
3,073,489
2,943,816
2013
2012
Balance at January 1
2,943,816
3,257,243
Repayments on loans
(1,063,348)
(320,000)
Interest bearing loans
Movements in total interest-bearing loans were as follows:
Amounts in thousands of €
New facility A financial institutions
150,000
Issuance of 3.625% Senior Secured Notes
750,000
-
(1,500)
-
480,000
-
(225,000)
-
Disagio on 3.625% Senior Secured Notes
Drawings revolving facility
Repayments revolving facility
Incretion due to disagio
Financing fees new facilities and senior notes
Amortisation and impairment of financing fees
Balance at December 31
1,167
-
(13,445)
(7,587)
51,799
14,160
3,073,489
2,943,816
In 2013 the Company refinanced part of its loans from financial institutions to reduce financing costs, extend the debt maturity and
increase flexibility. The existing Facility B loan and the revolving facility were replaced by a 3.625% Senior Secured Notes with a due
date of March 2020, a new term loan A under a new credit facility of €150.0 million and a revolving credit facility of €400.0 million.
The remaining balance of capitalized financing fees of the terminated facilities in the amount of €42.7 million were impaired and
charged to the income instatement. Financing fees in 2013 relate to the refinancing of the Senior Credit Facility and the 3.625%
Senior Secured Notes. Capitalized financing fees in 2012 relate to the IPO consent fee of €7.6 million payable to the lenders of the
senior credit facilities upon completion of the IPO.
Loans from financial institutions
Loans from financial institutions can be broken down as follows:
Interest rate
Maturity
December 31, 2013
Facility A loan - new
EURIBOR +1.75%
March 2018
150,000
-
Facility B loan
EURIBOR +3.00%
-
-
922,906
Amounts in thousands of €
December 31, 2012
Senior Credit Facilities
Facility E loan (Sr. Secured Notes)
Facility F loan
Revolving Credit Facility
Total
Financing fees
Total
Contents
6.125%
March 2018
750,000
750,000
EURIBOR +3.625%
-
-
140,431
EURIBOR +1.75%
March 2018
255,000
-
1,155,000
1,813,337
(11,782)
(52,898)
1,143,218
1,760,439
Ziggo N.V. Annual Report 2013 91
Ziggo at a glance
Performance
Governance
Financial statements
Facility A loan - new
In March 2013, Ziggo agreed on a new Facility A loan under a new credit facility of €150.0 million. Interest on the Facility A loan is
Euribor+1.75% and is paid monthly. Financing fees for this new facility have been capitalized for an amount of €6.4 million.
Facility B loan
In 2013 the Facility B loan of €922.9 million was fully repaid. In 2012 no repayments were made on the Facility B loan.
Facility E loan
In October 2010, Ziggo Finance B.V., a company managed by Deutsche Bank International Trust Company N.V., issued Senior
Secured Notes of €750.0 million with a nominal interest rate of 6.125%, due in 2017. Interest on the Notes is payable semi-annually
on May 15 and November 15 of each year. Ziggo Finance B.V. granted the proceeds of the Senior Secured Notes to the Company.
The Facility E loan is stated at amortised cost. Financing fees have been charged for an amount of €10.6 million, which are
presented as a deduction from the loan. The subsequent effective interest rate is 6.37%, which is recognised as financial expense.
Revolving and capital expenditure restructuring facility
As per December 31, 2013, an amount of €255.0 million is drawn under the new revolving facility.
Prepayment
On certain occasions prepayment of part or all of the drawn facilities is mandatory. If such events materialise, all outstanding
utilisations and ancillary outstandings, together with accrued interest, become immediately due and payable.
Securitisation
The total Senior Credit Facility is secured over the Company’s assets as follows:
■■
Mortgage on all registered properties, related movable assets, the network-related elements and the claims
■■
Pledges on all bank accounts, intellectual property rights, receivables and movable assets
The Company needs to comply on a quarterly basis with covenants set by the lenders of the senior credit facility. These covenants
are the interest coverage ratio and net leverage ratio. These financial covenants were all met during the years 2013 and 2012.
Financing fees
Financing fees associated with the issuance of the facilities are subtracted from the loans from financial institutions and amortised
over the period of the related loan. Amortisation costs on financing fees are recognised as other net financial income and expense
in financial income and expense.
8.0% Senior Notes
On April 27, 2010, Ziggo Bond Company B.V., an indirect, wholly-owned subsidiary of the Company, issued unsecured Senior
Notes for an amount of €1,208.9 million at a price of 99.271% with a nominal interest rate of 8.0% due in 2018. Interest on the
notes is payable semi-annually on May 15 and November 15.
The notes are senior obligations of the Company and are guaranteed on a senior subordinated basis by all of the subsidiaries of
Ziggo Bond Company B.V. Financing fees have been charged in the amount of €25.9 million, which are presented as a deduction
from the loan. The subsequent effective interest rate is 8.36%, which is recognised as financial expense.
3.625% Senior Secured Notes
In March 2013 Ziggo refinanced part of its capital by issuing a Senior Secured Note for the amount of €750.0 million at a price
of 99.8% with a nominal interest rate of 3.625% due in 2020 (disagio amounts to €1.5 million). Interest on the notes is payable
annually on March 27. The notes are Senior Secured Obligations of Ziggo B.V. and are guaranteed on a senior secured basis by
ABC B.V., Torenspits II B.V. and by the issuer’s subsidiaries Ziggo Netwerk B.V. and Ziggo Netwerk II B.V. Financing fees have been
capitalized for an amount of €6.3 million, which is presented as a deduction on the value of the Senior Secured Note.
Contents
Ziggo N.V. Annual Report 2013 92
Ziggo at a glance
Performance
Governance
Financial statements
20.Provisions
Amounts in thousands of €
Other longterm employee
benefits
Restructuring
Legal claims
Other
Total
13,144
2,025
4,791
11,818
31,778
1,051
1,025
-
4,662
6,738
(1,665)
(1,216)
-
(2,446)
(5,327)
Balance as of December 31, 2011
Additions (including interest cost)
Usage
Released
Balance as of December 31, 2012
(276)
(262)
(1,599)
(514)
(2,651)
12,254
1,572
3,192
13,521
30,539
1,719
1,095
-
4,666
7,480
Non-current
Current
10,535
477
3,192
8,855
23,059
Balance as of December 31, 2012
12,254
1,572
3,192
13,521
30,539
Additions (including interest cost)
914
1,473
-
5,314
7,701
Acquired in business combination
-
-
-
500
500
(1,768)
(1,384)
-
(8,263)
(11,415)
(423)
-
-
-
(423)
10,977
1,661
3,192
11,072
26,902
Current
1,767
1,299
-
4,006
7,072
Non-current
9,210
362
3,192
7,066
19,830
10,977
1,661
3,192
11,072
26,902
Usage
Released
Balance as of December 31, 2013
Balance as of December 31, 2013
Defined benefit plans
The Company has no obligations for deficits other than higher future pension-insurance payments. The Company pays
contributions on a contractual basis. The Company has no further payment obligations once the contributions have been paid.
The contributions are recognised as employee benefit expenses in the statement of income when they are due. The defined
benefit plans for which contributions are paid are multi-employer plans.
At December 31, 2013 the main administered pension insurance organisation had a coverage ratio of 106% (2012: 96%).
Other long-term employee benefits provision
In addition to the pension plan, the Company offers eligible participants a reduction of their working time with partial continuation
of income. The plan offers eligible employees born before January 1, 1957 or employees born before January 1, 1959 and in
service for at least 25 years as at December 31, 2008:
■■
a working time reduction of 20% between the ages of 55 and 59; and
■■
a working time reduction of up to 40% between the ages of 59 and 65.
According to the plan rules, 75% of the working time reduction is compensated by the Company. The employee benefit plan is
wholly unfunded and consequently the Company funds the plan as claims are incurred. The present value of the defined benefit
obligation and service cost were measured using the Projected Unit Credit Method.
Net periodic benefit expense, which is presented in the consolidated statement of income as a component of personnel expenses,
was as follows:
For the years ended
Amounts in thousands of €
Service cost
Interest cost
December 31, 2013
December 31, 2012
603
691
311
360
Actuarial (gains) / losses
(423)
(276)
Net periodic benefit cost
491
775
Contents
Ziggo N.V. Annual Report 2013 93
Ziggo at a glance
Performance
Governance
Financial statements
Changes in the present value of the defined benefit obligation were as follows:
Amounts in thousands of €
Defined benefit obligation at January 1
Service cost
Interest cost
Actuarial (gains) / losses
Benefits paid
Defined benefit obligation at December 31
2013
2012
12,254
13,144
603
691
311
360
(423)
(276)
(1,768)
(1,665)
10,977
12,254
Since the Company recognises all actuarial results related to other long-term employee benefits immediately as an expense,
the defined benefit obligation equals the liability recognised in the statement of financial position.
The assumptions used in the actuarial calculations of the defined benefit obligation and net periodic benefit expense require
a degree of judgement. The key assumptions required to calculate the actuarial present value of benefit obligations and net
periodic benefit expense are as follows:
2013
2012
Discount rate
2.60%
2.60%
Price inflation
1.00%
1.00%
Future salary increase
Turnover rates
1.00%
1.00%
0.50% - 1.00%
0.50% - 1.00%
Additional turnover rate early retirement at 62
Mortality table
10.00%
10.00%
AG Table
AG Table
2012 - 2062
2012 - 2062
The Company has applied defined benefit accounting for the other long-term employee benefit plan since January 1, 2009.
The experience table is as follows:
Amounts in thousands of €
2013
Effect of change(s) in assumptions
2012
2011
2010
2009
-
(7)
159
244
549
Experience adjustments
(423)
(269)
(531)
(1,285)
(294)
Actuarial (gains) losses
(423)
(276)
(372)
(1,041)
255
Restructuring provision
The Company recognised a provision for restructuring for a number of employees.
Legal claims provision
The Company recognised a provision for a limited number of disputes.
Other provisions
Other provisions include asset retirement obligations, the guarantee provision and onerous contracts.
21. Other non-current liabilities
Other non-current liabilities consisted of the negative investments in ZUM B.V. and ZUMB B.V.in the amount of €1,222 (2012: €204)
and financial lease obligations of €765 (2012: nil). Reference is made to note 13 Investments in joint ventures.
Contents
Ziggo N.V. Annual Report 2013 94
Ziggo at a glance
Performance
Governance
Financial statements
22. Other current liabilities
The Company’s other current liabilities comprise the following:
Amounts in thousands of €
December 31, 2013
December 31, 2012
Accrued interest
38,768
17,976
Accrued expenses
65,597
73,555
Taxes and social securities
49,463
52,819
Accrued employee benefits
12,443
17,495
166,271
161,845
Total other current liabilities
23. Commitments and contingencies
Lease commitments
The Company leases buildings, certain office equipment and vehicles and has entered into various maintenance and support
contracts for the support for network equipment. Lease terms generally range from three to five years with the option of renewal
for varying terms. Lease commitments for the coming periods are shown in the following schedule:
December 31, 2013
Amounts in thousands of €
December 31, 2012
Buildings
Other
contracts
Total
Total
Within 1 year
10,127
5,893
16,020
16,279
Between 1 and 5 years
32,058
6,760
38,818
38,375
After 5 years
10,313
72
10,385
15,754
Total Lease commitments
52,498
12,725
65,223
70,408
Purchase commitments
The Company enters into purchase commitments in the ordinary course of business. As at December 31, 2013 it had purchase
commitments for an amount of €77 million (2012: €62 million).
Legal proceedings
The Company is involved in a number of legal proceedings. The legal proceedings may result in a liability that is material to the
Company’s financial condition, results of operations, or cash flows. The Company may enter into discussions regarding settlement
of these proceedings, and may enter into settlement agreements, if it believes settlement is in the best interest of the Company.
In accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, the Company has recognised provisions with
respect to these proceedings, where appropriate, which are reflected in the consolidated statement of financial position and Note 20.
Guarantees
The company has provided guarantees to unrelated parties for an amount of €3.9 million (2012: €3.9 million).
24.Related party disclosures
Identification of related parties
Parties are considered to be related if one party has the ability to control or exercise significant influence over the other party’s
financial or operational decisions. The related parties comprise associated companies, key management personnel and close
family members of related parties.
Contents
Ziggo N.V. Annual Report 2013 95
Ziggo at a glance
Performance
Governance
Financial statements
Transactions and positions
The following significant related party transactions occurred during the year ended December 31, 2013:
■■
In 2013, no management fees were charged to the Company (2012: €0.4 million);
■■
As at year-end 2013 the Company had a current account receivable with ZUM B.V. of €1,621 (2012: €688), a trade receivable
with HBO Nederland Coöperatief U.A. of €347 (2012: nil) and a trade account payable with HBO Nederland Coöperatief U.A.
of nil (2012: €818) for premium content;
■■
Remuneration of the Board of management and the Supervisory Board for which reference is made to Note 6 and Note 7.
In the normal course of business, the Company and its subsidiaries conduct various types of ordinary business with related parties
(mainly as a provider of internet, television and telephony services). These transactions are not considered material to the
Company, either individually or in the aggregate.
25. Financial risks
The Company’s financial risk management focuses on the unpredictability of financial markets and seeks to minimise potential
adverse effects on the Company’s financial position and performance. The Company is exposed to the following financial risks:
■■
Credit risk;
■■
Liquidity risk; and
■■
Market risk.
For each of these financial risks, which are included in the Company’s risk management programme, the Company’s exposure,
objectives, policies and processes for measuring and managing risk are presented below.
Credit risk
The credit risk on consumer trade accounts receivable is considered to be low as a result of the large consumer customer base,
the relatively small amount of receivables per customer and the high percentage of customers who pay by direct debit. The risk
on trade accounts receivable from the Company’s business customers is also considered low, but this concerns a smaller
customer base with on average larger receivables per customer than for the Company’s consumer customers.
The analysis of the ageing of the trade accounts receivables is as follows:
Amounts in
thousands of €
Total
Not due
Past due, but not impaired
<30 days
30-60 days
60-90 days
90-180 days
180-365 days
>365 days
2013
37,887
23,687
8,984
1,843
2,665
707
-
2012
18,240
10,368
2,001
1,216
2,326
2,329
-
The Company’s maximum exposure to credit risk in the event that a counterparty fails to fulfil its obligations in relation to each
class of recognised financial asset, including derivatives, is the carrying amount of those assets in the consolidated statement of
financial position.
Liquidity risk
The Company manages its liquidity risk on a consolidated basis with cash provided from operating activities being a primary source
of liquidity. The Company manages short-term liquidity based on a rolling forecast for projected cash flows for a six-month period.
Based on the current operating performance and liquidity position, the Company believes that cash generated by operating
activities and available cash balances will be sufficient for working capital, capital expenditures, interest payments, dividends and
scheduled debt repayment requirements for the next twelve months and the foreseeable future.
Contents
Ziggo N.V. Annual Report 2013 96
Ziggo at a glance
Performance
Governance
Financial statements
The following table summarises the maturity profile of the Company’s financial liabilities:
December 31, 2013
Amounts in thousands of €
Carrying Contractual
January amount
cash flows March 2014
April December
2014
2015 2016 - 2018
After 2018
Non - derivative
financial liabilities
Loans from financial
institutions
(1,143,218)
(1,379,285)
(2,009)
(51,964)
(53,973)
(1,271,339)
-
8.0% Unsecured Notes
(1,187,357)
(1,692,691)
-
(96,708)
(96,708)
(1,499,275)
-
3.625% Senior Secured
Notes
742,914
(994,852)
(27,188)
-
(27,188)
(81,564)
(858,912)
(765)
(845)
(72)
(217)
(289)
(267)
-
Trade accounts payable
(88,199)
(88,199)
(88,199)
-
-
-
-
Derivative financial
liabilities
Interest rate swaps used
for hedging
(29,537)
(42,941)
(8,322)
(6,424)
(8,685)
(19,510)
-
(3,191,990)
(4,198,813)
(125,790)
(155,313)
(186,843)
(2,871,955)
(858,912)
Carrying Contractual
amount
cash flows
January March 2013
April December
2013
2014
2015 - 2017
After 2017
Finance lease
Total
December 31, 2012
Amounts in thousands of €
Non - derivative
financial liabilities
Loans from financial
institutions
(1,760,439)
(2,245,737)
(22,216)
(67,881)
(90,097)
(2,065,544)
-
8.0 % Unsecured Notes
(1,183,377)
(1,727,894)
(23,846)
(72,862)
(96,708)
(290,124)
(1,244,354)
Trade accounts payable
(85,563)
(85,563)
(85,563)
-
-
-
-
Derivative financial
liabilities
Interest rate swaps used
for hedging
Total
(63,236)
(69,119)
(8,475)
(25,425)
(15,161)
(20,058)
-
(3,092,615)
(4,128,313)
(140,100)
(166,168)
(201,966)
(2,375,726)
(1,244,354)
Market risk
The Company is exposed to market risks, including interest rate and foreign currency exchange rate risks, associated with
underlying assets, liabilities and anticipated transactions. Based on the analysis of these exposures, the Company selectively enters
into derivatives to manage the related risk exposures.
Interest rate risk
Exposure to the risk of changes in the market interest rates relates primarily to the Company’s long-term debt obligations with
a (partly) floating interest rate. The Company manages its exposure to changes in interest rates and its overall cost of financing
by using interest rate swap (IRS) agreements. These IRS agreements are used to transform the interest rate exposure on the
underlying liability from a floating interest rate into a fixed interest rate. It is the Company’s policy to keep at least 70% of its
borrowings at fixed rates of interest. The net interest rate risk can be analysed as follows:
Amounts in thousands of €
Notional amount borrowing (floating)
Cash (floating) & deposits (floating and / or fixed)
December 31, 2013
December 31, 2012
(405,000)
(1,063,337)
77,397
92,428
Notional amount IRS (fixed)
250,000
1,000,000
Net interest rate risk - including offset IRS
(77,604)
29,091
At December 31, 2013, after taking into account the effect of interest rate swaps, approximately 97% of the Company’s borrowings
were at a fixed interest rate (2012: 101%).
Contents
Ziggo N.V. Annual Report 2013 97
Ziggo at a glance
Performance
Governance
Financial statements
Sensitivity analysis for interest rate risk
The following table demonstrates the sensitivity to a possible change in interest rates, with all other variables held constant, of
the Company’s result before tax (through the impact on floating rate borrowings). There is no impact on the Company’s equity.
December 31, 2013
December 31, 2012
+ 20bp
(155)
58
+ 10bp
(78)
29
- 10bp
78
(29)
- 20bp
155
(58)
Amounts in thousands of €
Increase / decrease in basis points
Foreign currency risk
The Company has transactional currency exposures arising from purchases in USD. The Company enters into foreign exchange
swaps to partially mitigate this risk. As at December 31, 2013 the net foreign currency exposure of the USD amounted to
USD 5.0 million (2012: USD 0.6 million), relating to the net amount of cash and cash equivalents, foreign exchange swaps and
trade accounts payable. At year-end 2013 the Company entered into 2 foreign exchange swaps with a nominal value of
€9.0 million (2012: nil). The fair value of the swaps is close to zero.
26.Financial instruments
Fair values
The following table presents the fair values of financial instruments, based on the Company’s categories of financial instruments,
including current portions, compared to the carrying amounts at which these instruments are recognised in the consolidated
statement of financial position:
Amounts in thousands of €
December 31, 2013
Carrying
amount
December 31, 2012
Fair value
Carrying
amount
Fair value
Financial assets
104
104
141
141
Trade accounts receivable
Loans
37,887
37,887
18,240
18,240
Cash and cash equivalents
77,397
77,397
92,428
92,428
115,388
115,388
110,809
110,809
Loans from financial institutions
(1,143,218)
(1,175,510)
(1,760,439)
(1,867,029)
8% Unsecured Notes
(1,187,357)
(1,285,310)
(1,183,377)
(1,334,570)
(742,914)
(752,340)
-
-
(765)
(765)
-
-
Total financial assets
Financial liabilities
3.625% Senior Secured Notes
Finance lease
Trade accounts payable
Total financial liabilities at amortised cost
Derivative financial instruments
Total financial liabilities
(88,199)
(88,199)
(85,563)
(85,563)
(3,162,453)
(3,302,122)
(3,029,379)
(3,287,162)
(29,537)
(29,537)
(63,236)
(63,236)
(3,191,990)
(3,331,660)
(3,092,615)
(3,350,398)
The carrying amounts of receivables, other current assets, cash and cash equivalents and accounts payable approximate their fair
values because of the short-term nature of these instruments and, for receivables, because of the fact that any recoverability loss
is reflected in an impairment loss. The fair values of quoted borrowings are based on year-end ask-market quoted prices. The fair
values of other non-derivative financial assets and liabilities that are not traded in an active market are estimated using discounted
cash flow analyses based on market rates prevailing at year-end.
Contents
Ziggo N.V. Annual Report 2013 98
Ziggo at a glance
Performance
Governance
Financial statements
Hedging activities
At December 31, 2013, the Company had concluded interest rate swap (IRS) agreements with a total notional amount
of €250.0 million (2012: €1,000.0 million) under which it pays a fixed rate of interest (between 3.55% and 3.59%) and receives
a variable rate equal to EURIBOR on the notional amount. These IRS agreements are used to reduce the exposure to changes
in the variable EURIBOR rates on the outstanding loan portfolio of €405.0 million (2012: €1,063.3 million).
As at December 31, 2013 the Company did not have any swap agreements to reduce its exposure to fluctuations in its purchase
obligations denominated in US dollars (2012: nil).
Hedge accounting
As a consequence of the refinancing of the Company in October 2010, the Company no longer applies hedge accounting
for IRS, as the underlying hedges became ineffective. As of October 2010 any change in fair value of IRS is reported in financial
income and expense. The cash flow hedge reserve recognised under other comprehensive income is released to financial
income and expense over the remaining contractual period of the hedges concerned.
Fair value hierarchy
Of the Company’s financial instruments, only derivatives are measured at fair value using the Level 2 inputs as defined in IFRS 7
“Financial Instruments: Disclosures”. These inputs are inputs other than quoted prices that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices). The fair value of derivative instruments is estimated by
discounting future cash flows at prevailing market rates or based on the rates and quotations obtained from third parties.
The Company enters into derivative financial instruments with various counterparties, principally financial institutions with
investment grade ratings. There were no changes in the valuation method of the financial instruments of the Company in
2013 and 2012.
Derivatives
The numbers and the maturities of derivative contracts, the fair values and the qualification of the instruments for accounting
purposes are presented in the table below:
Amounts in thousands of €
December 31, 2013
Number of
contracts
December 31, 2012
Fair value
Number of
contracts
Fair value
Interest rate swaps
Within one year
6
(8,343)
-
-
Within two - five years
5
(21,194)
6
(63,236)
11
(29,537)
6
(63,236)
Total derivative financial instruments
As per December 31, 2013 the Company hedged 62% of the outstanding balance with a floating interest rate under the Senior
Credit Facility. A hedge contract of €1 billion and an offset hedge contract of €750 million expire on March 31, 2014. As of this date,
an interest rate hedge of €500 million becomes effective with an expiration date of March 31, 2017. Besides the above mentioned
hedges the Company entered into forward starting swaps of €900 million, starting on May 15, 2014 and expiring on March 31, 2024
in order to hedge the current forward EURIBOR rate, assuming the Company will refinance the €750 million Senior Secured
Notes and the €1.2 billion Unsecured Senior Notes early 2014, latest at the call date for the Unsecured Senior Notes in May 2014.
For more information on the refinancing reference is made to Note 28. Subsequent events.
Contents
Ziggo N.V. Annual Report 2013 99
Ziggo at a glance
Performance
Governance
Financial statements
27. Subsidiaries
The following companies were Ziggo N.V.’s significant subsidiaries as at December 31, 2013. Unless otherwise indicated,
these are wholly owned subsidiaries. Subsidiaries that are not material to providing an insight into the group as required
under Dutch law are omitted from this list.
With respect to the separate financial statements of a number of legal entities included in the consolidation, the Company used
the exemption laid down in section 403, subsection 1 of Book 2 of the Dutch Civil Code. Pursuant to this section, the Company
has issued liability statements for its subsidiaries. These companies are marked with an * in the following table.
Zesko B.V., Amsterdam, the Netherlands
Ziggo Bond Company Holding B.V., Amsterdam, the Netherlands
Ziggo Bond Company B.V., Amsterdam, the Netherlands
Amsterdamse Beheer- en Consultingmaatschappij B.V., Amsterdam, the Netherlands
Torenspits II B.V., Amsterdam, the Netherlands*
Ziggo B.V., Groningen, the Netherlands*
Ziggo Netwerk B.V., Groningen, the Netherlands*
Esprit Telecom B.V., Almere, the Netherlands
Breezz Nederland B.V., Den Dolder, the Netherlands
Ziggo Netwerk II B.V., Utrecht, the Netherlands
ZUM B.V., Amsterdam, the Netherlands (50.0%)
ZUMB B.V., Amsterdam, the Netherlands (50.0%)
HBO Nederland Coöperatief U.A, Amsterdam, the Netherlands (50.0%)
28.Subsequent events
On January 27, 2014 the Company announced together with Liberty Global Plc. that they have reached a conditional agreement
(the “Merger Protocol”) on a recommended offer (the “Offer”) pursuant to which Liberty Global will acquire Ziggo in a stock and
cash transaction valuing Ziggo at approximately €10.0 billion. After careful consideration, the Board of Management and the
Supervisory Board of Ziggo (the “Boards”) believe the Offer to be in the best interests of Ziggo and its stakeholders, including its
shareholders, and have agreed to fully and unanimously support and recommend the Offer for acceptance to Ziggo’s
shareholders. This potential change in ownership is still awaiting the acceptance of shareholders and approval by the requisite
authorities. Based on the required steps and subject to the necessary approvals, Liberty Global and Ziggo anticipate that the Offer
will close in the second half of 2014.
In relation to the Offer the Company has refinanced its outstanding debt. The following steps have been taken since the
announced offer on January 27, 2014:
■■
The €225 million Revolving Credit Facility and the €150 million Facility A Loan have been refinanced through senior debt Facility
B1 Loan on February 26, 2014. The Facility B1 Loan has an interest rate of Euribor +275 bps;
■■
The 2020 3.625% €750 million Senior Secured Notes have been tendered for €678 million and the tendered notes have
been redeemed through a new senior debt Facility B2 Loan (Euribor +275 bps) on February 27, 2014. The remainder is still
outstanding;
■■
The 2017 6.125% €750 million Senior Notes have been refinanced through senior debt Facility B1 Loan on March 4, 2014;
■■
Regarding the 2018 8.000% €1,208.9 million Senior Unsecured Notes, the Company has commenced an offer to exchange up to
€934 million aggregate principal amount. As per February 24, 2014 €743 million has been validly tendered and accepted in the
Exchange Offer. The exchanged principal amount and the outstanding principal amount post exchange have been deposited in
an escrow account until successful completion of the Offer. Upon closing new 2024 Notes will be issued by Liberty Global and
the remainder of the current outstanding amount for the Senior Unsecured Notes will be called and refinanced through Facility
B3 Loan;
Contents
Ziggo N.V. Annual Report 2013 100
Ziggo at a glance
■■
Performance
Governance
Financial statements
The Facility B1, B2 and B3 Loan have a duration of 8 years and are composed of a Euro and US Dollar component. The Euro
component has – as defined under the Senior Facility Agreement - an interest rate of Euribor +275 bps/300 bps (margin
depending on leverage). The US Dollar component has – as defined under the Senior Facility Agreement - an interest rate of is
Libor +250bps/275 bps (margin depending on leverage). Both Euribor and Libor have a floor of 75bp;
■■
The US Dollar exposure and variable interest rate exposure on the new Facility Loans have been hedged as per March 6, 2014.
The Market-to-Market positions for all interest rate hedges, including the forward rate hedges, which were outstanding as per
December 31, 2013, have been settled for cash.
Also in relation to the Offer, the Company and Liberty Global have agreed that the 2012 and 2013 Awards as well as the 2014 and
2015 Awards (if any) will be cancelled per the Settlement Date without any compensation being due to the relevant person,
provided that:
(a) 50% of the originally granted conditional shares under the 2012 and 2013 Awards will be treated as if they had vested on
the Settlement Date in respect of which the members of the Board of Management, and former members of the Board of
Management and the other participants will be entitled to the Offer Price as if those persons had tendered those vested shares
under the offer;
(b) Liberty Global shall or shall ensure that the relevant company within the Liberty Global Group, shall, subject to the Liberty
Global 2014 Incentive Plan (effective on or around 1 March 2014) replace 100% of the originally granted conditional shares
under the 2014 Awards.
Ziggo announced on February 19, 2014 that Marcel Nijhoff, Chief Commercial Officer, will step down as of March 1, 2014.
The Supervisory Board intends to appoint Hendrik de Groot as Chief Commercial Officer and member of Board of Management of
Ziggo as of April 18, 2014. The intended appointment will be put on the agenda of the Annual General Meeting of shareholders of
Ziggo on April 17, 2014 for information purposes. Hendrik de Groot is currently Managing Director of Business-to-Business at Ziggo.
Contents
Ziggo N.V. Annual Report 2013 101
Ziggo at a glance
Performance
Governance
Financial statements
Statement of income /
Statement of comprehensive income
For the years ended December 31
Note
2013
2012
Other income
3
3,156
2,042
Personnel expenses
4
Amounts in thousands of € (except per share data)
4,002
38,091
Contracted work
-
650
Marketing & sales
-
976
35
1,455
Office expenses
Other operating expenses
Total operating expenses
5
Operating income (expense)
Net financial income (expense)
Dividend income
6
Result before income taxes
Income tax benefit (expense)
7
-
985
4,037
42,157
(881)
(40,115)
(1,373)
3
370,000
110,000
367,746
69,888
563
4,584
Net result for the year / Total comprehensive income
368,310
74,472
Net result attributable to equity holders
368,310
74,472
Number of shares outstanding (in thousands)
200,000
200,000
Earnings per share - basic (in €)
1.84
0.37
Earnings per share - dilutive (in €)
1.84
0.37
The accompanying notes to this statement of income / statement of comprehensive income form an integral part
of these financial statements.
Contents
Ziggo N.V. Annual Report 2013 102
Ziggo at a glance
Performance
Governance
Financial statements
Statement of financial position
Note
December 31, 2013
December 31, 2012
Investments in subsidiaries
8
3,700,000
3,700,000
Deferred tax asset
7
5,147
4,584
3,705,147
3,704,584
Cash and cash equivalents
179
5
Total current assets
179
5
3,705,326
3,704,589
Amounts in thousands of €
Assets
Total non-current assets
Total assets
Equity and liabilities
Issued share capital
Share premium
Treasury stock
200,000
200,000
3,204,472
3,500,000
(33)
(36)
279,006
(15,328)
3,683,445
3,684,636
Deferred income tax liability
1
1
Total non-current liabilities
1
1
Retained earnings
Equity attributable to equity holders
Other current liabilities
Total current liabilities
Total equity and liabilities
9
10
21,879
19,952
21,879
19,952
3,705,326
3,704,589
The accompanying notes to this statement of financial position form an integral part of these financial statements.
Contents
Ziggo N.V. Annual Report 2013 103
Ziggo at a glance
Performance
Governance
Financial statements
Statement of changes in equity
Amounts in thousands of €
Issued
capital
Share
premium
Treasury
shares
Retained
earnings
Total
equity
Balance at January 1, 2012
45
-
-
-
45
-
-
-
74,472
74,472
199,955
3,500,000
-
-
3,699,955
Dividend payment
-
-
-
(110,000)
(110,000)
Purchase of Treasury stock
-
-
(36)
-
(36)
Share-based payment
-
-
-
20,200
20,200
Total transaction with shareholders
199,955
3,500,000
(36)
(89,800)
3,610,119
Balance at December 31, 2012
200,000
3,500,000
(36)
(15,328)
3,684,636
-
-
-
368,310
368,310
Dividend payment
-
(295,528)
-
(74,472)
(370,000)
Purchase of Treasury stock
-
-
3
-
3
Share-based payment
-
-
-
496
496
Comprehensive income
Net profit for the year 2012
Transactions with shareholders
Share issuance
Comprehensive income
Net profit for the year 2013
Transactions with shareholders
Total transaction with shareholders
Balance at December 31, 2013
Contents
-
(295,528)
3
(73,976)
(369,501)
200,000
3,204,472
(33)
279,006
3,683,445
Ziggo N.V. Annual Report 2013 104
Ziggo at a glance
Performance
Governance
Financial statements
Statement of cash flows
For the years ended December 31
Amounts in thousands of €
Note
2013
2012
367,746
69,888
496
20,200
Operating activities
Income (loss) before income taxes
Adjustments for:
Share-based payment
Net financial income and expense
Operating cash flow before changes in working capital
1,373
(3)
369,615
90,085
Changes in working capital relating to:
Other current liabilities
10
Net cash flow from operating activities
567
19,952
567
19,952
370,183
110,037
Investing activities
Treasury stock
9
3
(36)
(12)
2
(9)
(34)
Dividend payment
(370,000)
(110,000)
Net cash flow from financing activities
(370,000)
(110,000)
174
3
5
2
Interest received / (paid)
Net cash flow used in investing activities
Financing activities
Net (decrease) / increase in cash and cash equivalents
Net cash and cash equivalents at January 1
Net cash flow from operating, investing and financing activities
174
3
Net cash and cash equivalents at December 31
179
5
Contents
Ziggo N.V. Annual Report 2013 105
Ziggo at a glance
Performance
Governance
Financial statements
Notes to the corporate financial statements
1. Corporate information
Ziggo N.V. is a public limited company having its corporate seat in Utrecht (registered office: Atoomweg 100, 3542 AB Utrecht)
the Netherlands.
Ziggo N.V.’s principal activities are to act as a holding company for the group companies of the Ziggo group, the owner and
operator of a broadband cable network in the Netherlands, and providing analogue and digital radio and television, broadband
internet and telephony services in the Netherlands to 2.9 million households and businesses under the brand name Ziggo.
2. Basis of preparation
Date of authorisation of issue
The corporate financial statements of Ziggo N.V. for the year ended December 31, 2013 were prepared by the Board of
Management and adopted on March 5, 2014.
Statement of compliance
The corporate financial statements of Ziggo N.V. have been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union.
Measurement basis
In the corporate financial statements of Ziggo N.V., the same accounting principles were applied as set out in the notes to the
consolidated financial statements, except for the valuation of the investments as presented under financial fixed assets in the
corporate financial statements. These policies were consistently applied to all years presented. The amounts in the corporate
financial statements are presented in thousands of euros (€) except when otherwise indicated.
Foreign currency translation
The corporate financial statements have been drawn up in euros (€), which is Ziggo N.V’s functional and presentation currency.
Transactions in currencies other than the functional currency are recorded at the rates of exchange prevailing at the transaction
dates. Monetary items denominated in foreign currencies are translated into Ziggo N.V.’s functional currency at the spot rate of
exchange ruling at the reporting date. Exchange differences arising on the settlement of monetary items and the translation of
monetary items are included in net income for the period. Non-monetary items that are measured on a historical cost basis in a
foreign currency are translated using the exchange rates ruling at the dates of the initial transactions.
Use of estimates and assumptions
The preparation of financial statements requires management to make a number of estimates and assumptions. All assumptions,
expectations and forecasts used as a basis for certain estimates within these corporate financial statements represent good-faith
assessments of Ziggo N.V.’s future performance for which management believes there is a reasonable basis. These estimates and
assumptions represent Ziggo N.V.’s view at the times they are made, and only then. They involve risks, uncertainties and other
factors that could cause Ziggo N.V.’s actual future results, performance and achievements to differ materially from those forecasted.
The estimates and assumptions that management considers most critical for the corporate financial statements relate to:
■■
Investments in associates (Note 2 and Note 8)
■■
Deferred tax assets (Note 2 and Note 7)
Investments in subsidiaries
Investments in subsidiaries and associated companies are stated at cost, less impairment. Dividend income from Ziggo N.V.’s
subsidiaries and associated companies is recognised in the statement of income when the right to receive payment is established.
Contents
Ziggo N.V. Annual Report 2013 106
Ziggo at a glance
Performance
Governance
Financial statements
Impairment of investments in subsidiaries and associated companies
Ziggo N.V. assesses at each reporting date whether there is an indication that the investment in subsidiaries and associated
companies may be impaired. An indicator for impairment may be a drop in the share price of Ziggo N.V. below the issue price of
€18.50. If any such indication exists, Ziggo N.V. makes an estimate of the asset’s recoverable amount. The recoverable amount is
defined as the higher of an investment’s fair value less costs of disposal and its value in use. Where the carrying amount of an asset
exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment
losses of continuing operations are recognised in the statement of income.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses
may no longer exist or may have decreased. If such an indication exists, Ziggo N.V. makes an estimate of the recoverable amount.
A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s
recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased
to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of
depreciation, if no impairment loss had been recognised for the asset in prior years. Such a reversal is recognised in the statement
of income.
Income tax
Current income tax is recognised in the statement of income except to the extent that it relates to items recognised directly in
equity. The current income tax benefit is based on the best estimate of taxable income for the year, using tax rates that have been
enacted or substantively enacted at the reporting date, and adjustments for current taxes payable (receivable) for prior years.
Deferred income tax assets and liabilities are based on differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse or are
substantively enacted at the reporting date. The effect of a change in tax rates on deferred income tax assets and liabilities is
recognised in the period that includes the enactment date. Deferred income tax assets are reduced by a valuation allowance when
Ziggo N.V. cannot make the determination that it is more likely than not that some portion or all of the related tax assets will be
realised. Deferred income tax assets are generally recognised for all temporary differences, carry-forwards of unused tax credits
and unused tax losses, to the extent that it is probable that taxable profit will be available. Deferred income tax liabilities are
generally recognised for all temporary differences.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has
become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax
liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Statement of cash flows
The statement of cash flows is prepared using the indirect method with a breakdown into cash flows from operating, investing
and financing activities.
Bank overdrafts that are repayable on demand and form an integral part of Ziggo N.V.’s cash management are included as a
component of cash and cash equivalents for the purpose of the statement of cash flows.
Standards issued but not yet effective
The following new standards, amendments to standards and interpretations are not yet effective for the year ended
December 31, 2013 and have not been applied in preparing these corporate financial statements:
Contents
Ziggo N.V. Annual Report 2013 107
Ziggo at a glance
Performance
Governance
Financial statements
Issued and effective as from the 2014 financial year:
■■
Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39) (issued June 2013)
■■
Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36) (issued May 2013)
■■
IFRIC 21 Levies (issued May 2013)
■■
Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) (issued October 2012)
■■
Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) (issued December 2011)
Issued in previous financial years and not yet effective as from 2014:
■■
IFRS 9 Financial Instruments (issued in November 2009) and subsequent amendments (amendments to IFRS 9 and IFRS 7 issued
in December 2011)
Issued by the IASB in this financial year but not yet effective as from 2014:
■■
Annual Improvements to IFRSs 2010–2012 Cycle (issued December 2013)
■■
Annual Improvements to IFRSs 2011–2013 Cycle (issued December 2013)
■■
Defined Benefit Plans: Employee Contributions (Amendments to IAS 19) (issued November 2013)
The Company will introduce the new standards, amendments to standards and interpretations as of their effective date unless
otherwise indicated. Adoption of the standards and interpretations for the next financial year are not expected to have an impact
on the Consolidated statement of income, the Consolidated statement of comprehensive income and on the disclosure notes to
the financial statements of the Company.
3. Other income
Other income recognised in 2013 comprises a management fee charged to the Ziggo N.V.’s subsidiary Zesko B.V. for services
provided by the Board of Management for an amount of €3.2 million (2012: €2.0 million).
4. Personnel expenses
Ziggo N.V.’s personnel expenses comprise the following:
For the years ended
Amounts in thousands of €
December 31, 2013
December 31, 2012
3,086
17,584
45
34
Wages and salaries
Social security costs
Pensions and other long-term employee benefits
319
273
Share-based payments
496
20,200
Lease- & mileage costs
41
-
Other
15
-
4,002
38,091
Total personnel expenses
The number of employees of Ziggo N.V. in full time equivalents (FTE’s) as at December 31, 2013 was 4 (2012: 4).
Wages and salaries comprise the remuneration of the members of the Board of Management (including Short-Term Incentive
plan and Long-Term Incentive Plan) and the Supervisory Board. In 2012 the wages and salaries also include the IPO bonus for the
Board of Management, the bonus to the chairman of the Supervisory Board related to the IPO and the Employee bonus related
to the IPO (Reference is made to Note 6 and Note 7 of the Consolidated Financial Statements).
Contents
Ziggo N.V. Annual Report 2013 108
Ziggo at a glance
Performance
Governance
Financial statements
5. Costs related to the IPO
The costs presented under the categories Contracted work, Marketing & Sales, Office expenses and Other operating expenses
relate to costs incurred for the IPO in March 2012.
6. Dividend income
Dividend income from Ziggo N.V.’s subsidiaries is recognised when the right to receive payment is established. Dividend income
recognised for 2013 amounted to €370.0 million (2012: €110.0 million).
7. Income taxes
The Company’s Dutch subsidiaries are part of a Dutch fiscal unit headed by Ziggo N.V. The standard conditions for a Dutch fiscal
unit stipulate that all companies included in the fiscal unity are jointly and severally liable for all tax liabilities borne by the parent
company until the tax unit ceases to exist. The Company’s corporate income tax is calculated as if separately liable for tax,
however, taking into account benefits from the Dutch fiscal unit Ziggo N.V.
A reconciliation between the statutory tax rates of 25.0% and Ziggo N.V.’s effective tax rate is as follows:
For the years ended
Tax rate
Amounts in thousands of €
Profit (Loss) for the period
2013
Tax rate
2012
367,746
Notional tax income at statutory rates
25.00%
91,937
69,888
25.00%
17,472
Adjustments:
0.00%
-
7.79%
5,444
Dividend income
Non-deductable items
(25.15%)
(92,500)
(39.35%)
(27,500)
Effective tax rate / Income tax benefit
(0.15%)
(563)
(6.56%)
(4,584)
The income tax benefit for the year is recognised on the corporate statement of financial position as deferred tax assets.
As the company is head of the fiscal unity, the income tax benefit for the year is utilized on a fiscal unity level given the total
income tax expense. The corporate position is as follows:
Amounts in thousands of €
Recognised in
profit or loss
December 31,
2013
Recognised in
profit or loss
December 31,
2012
December 31,
2011
Tax loss carry-forwards
563
5,147
4,584
4,584
-
Deferred tax assets
563
5,147
4,584
4,584
-
The deferred tax asset is calculated at a tax rate of 25.0%.
Recognised deferred tax assets reflect management’s estimate of realisable amounts based on historic growth numbers
and expected net result. The amounts of tax loss carry-forwards are subject to assessment by local tax authorities.
Contents
Ziggo N.V. Annual Report 2013 109
Ziggo at a glance
Performance
Governance
Financial statements
8. Investment in subsidiaries
Movements of Ziggo N.V.’s investment in subsidiaries were as follows:
Amounts in thousands of €
Balance at January 1
2013
2012
3,700,000
43
Establishment new investment
-
-
Acquisition of Zesko B.V.
-
3,699,957
3,700,000
3,700,000
Balance at December 31
On March 20, 2012, Ziggo N.V acquired a 100% interest in Zesko B.V., which is head of the Ziggo Group and owner and operator
of a broadband cable network in the Netherlands. It provides analogue and digital radio and television, broadband internet and
telephony services in the Netherlands to 2.9 million households and businesses under the brand name Ziggo (see also Note 2).
9. Shareholders’ equity
Ziggo N.V. is incorporated as a public limited company under Dutch law. Its authorised capital consists entirely of ordinary shares.
December 31, 2013
December 31, 2012
Ordinary shares 200 million of €1 each
200,000
200,000
Issued and fully paid (200 million shares)
200,000
200,000
3,204,472
3,500,000
Amounts in thousands of €
Authorised capital
Share premium
Treasury stock
Retained earnings
Equity attributable to equity holders
(33)
(36)
279,006
(15,328)
3,683,445
3,684,636
The difference between equity in the consolidated statement of financial position and the corporate statement of financial position
is presented below.
December 31, 2013
December 31, 2012
Equity in the consolidated financial statement of Ziggo N.V.
1,360,208
1,378,904
Acquisition of Zesko B.V. at fair value in corporate financial statements
2,427,492
2,427,492
Amounts in thousands of €
Cumulative dividend received from subsidiaries
Cumulative result of subsidiaries
Cumulative cash flow hedge reserve
Equity in the corporate financial statement of Ziggo N.V.
480,000
110,000
(577,331)
(228,298)
(6,924)
(3,462)
3,683,445
3,684,636
The effect of the acquisition of Zesko B.V. at fair value in the corporate financial statements equals the difference between the fair
value of Zesko B.V. (€3.7 billion) and its net asset value (€1.3 billion) on March 20, 2012.
Contents
Ziggo N.V. Annual Report 2013 110
Ziggo at a glance
Performance
Governance
Financial statements
The difference between the net result in the consolidated statement of income and the corporate statement of income is
presented below:
Amounts in thousands of €
Net result in the consolidated financial statement of Ziggo N.V.
Dividend received from subsidiaries
December 31, 2013
December 31, 2012
347,343
192,770
370,000
110,000
Result of subsidiaries in consolidated financial statements
(349,033)
(228,298)
Net result in the corporate financial statement of Ziggo N.V.
368,310
74,472
10. Other current liabilities
Ziggo N.V. has the following intercompany balances with group companies, included under other current liabilities:
Amounts in thousands of €
Ziggo B.V.
Personnel-related liabilities
Total other current liabilities
December 31, 2013
December 31, 2012
20,668
19,952
1,211
-
21,879
19,952
11. Commitments and contingencies
Ziggo N.V. has no outstanding commitments or contingencies.
12. Related party disclosures
Identification of related parties
Parties are considered to be related if one party has the ability to control or exercise significant influence over the other party’s
financial or operational decisions. Related parties include associated companies, key management personnel and close family
members of related parties.
Transactions and positions
In the normal course of business, Ziggo N.V. conducts various types of ordinary business with related parties (mainly as a provider
of internet, television and telephony services). These transactions are not considered material to Ziggo N.V., either individually or in
the aggregate.
Remuneration
For the remuneration of the members of the Board of Management, reference is made to Note 7 in the consolidated financial
statements.
13. Subsequent events
On January 27, 2014 the Company announced together with Liberty Global Plc. that they have reached a conditional agreement
(the “Merger Protocol”) on a recommended offer (the “Offer”) pursuant to which Liberty Global will acquire Ziggo in a stock and
cash transaction valuing Ziggo at approximately €10.0 billion. After careful consideration, the Board of Management and the
Supervisory Board of Ziggo (the “Boards”) believe the Offer to be in the best interests of Ziggo and its stakeholders, including its
shareholders, and have agreed to fully and unanimously support and recommend the Offer for acceptance to Ziggo’s
shareholders. This potential change in ownership is still awaiting the acceptance of shareholders and approval by the requisite
authorities. Based on the required steps and subject to the necessary approvals, Liberty Global and Ziggo anticipate that the Offer
will close in the second half of 2014.
Contents
Ziggo N.V. Annual Report 2013 111
Ziggo at a glance
Performance
Governance
Financial statements
In relation to the Offer the Company has refinanced its outstanding debt. The following steps have been taken since the
announced offer on January 27, 2014:
■■
The €225 million Revolving Credit Facility and the €150 million Facility A Loan have been refinanced through senior debt Facility
B1 Loan on February 26, 2014. The Facility B1 Loan has an interest rate of Euribor +275 bps;
■■
The 2020 3.625% €750 million Senior Secured Notes have been tendered for €678 million and the tendered notes have been
redeemed through a new senior debt Facility B2 Loan (Euribor +275 bps) on February 27, 2014. The remainder is still outstanding;
■■
The 2017 6.125% €750 million Senior Notes have been refinanced through senior debt Facility B1 Loan on March 4, 2014;
■■
Regarding the 2018 8.000% €1,208.9 million Senior Unsecured Notes, the Company has commenced an offer to exchange up to
€934 million aggregate principal amount. As per February 24, 2014 €743 million has been validly tendered and accepted in the
Exchange Offer. The exchanged principal amount and the outstanding principal amount post exchange have been deposited in
an escrow account until successful completion of the Offer. Upon closing new 2024 Notes will be issued by Liberty Global and
the remainder of the current outstanding amount for the Senior Unsecured Notes will be called and refinanced through Facility
B3 Loan;
■■
The Facility B1, B2 and B3 Loan have a duration of 8 years and are composed of a Euro and US Dollar component.
The Euro component has – as defined under the Senior Facility Agreement - an interest rate of Euribor +275 bps/300 bps
(margin depending on leverage). The US Dollar component has – as defined under the Senior Facility Agreement - an interest
rate of is Libor +250bps/275 bps (margin depending on leverage). Both Euribor and Libor have a floor of 75bp;
■■
The US Dollar exposure and variable interest rate exposure on the new Facility Loans have been hedged as per March 6, 2014.
The Market-to-Market positions for all interest rate hedges, including the forward rate hedges, which were outstanding as per
December 31, 2013, have been settled for cash.
Also in relation to the Offer, the Company and Liberty Global have agreed that the 2012 and 2013 Awards as well as the 2014 and
2015 Awards (if any) will be cancelled per the Settlement Date without any compensation being due to the relevant person,
provided that:
(a) 50% of the originally granted conditional shares under the 2012 and 2013 Awards will be treated as if they had vested on
the Settlement Date in respect of which the members of the Board of Management, and former members of the Board of
Management and the other participants will be entitled to the Offer Price as if those persons had tendered those vested shares
under the offer;
(b) Liberty Global shall or shall ensure that the relevant company within the Liberty Global Group, shall, subject to the Liberty
Global 2014 Incentive Plan (effective on or around 1 March 2014) replace 100% of the originally granted conditional shares
under the 2014 Awards.
Ziggo announced on February 19, 2014 that Marcel Nijhoff, Chief Commercial Officer, will step down as of March 1, 2014. The
Supervisory Board intends to appoint Hendrik de Groot as Chief Commercial Officer and member of Board of Management of
Ziggo as of April 18, 2014. The intended appointment will be put on the agenda of the Annual General Meeting of shareholders of
Ziggo on April 17, 2014 for information purposes. Hendrik de Groot is currently Managing Director of Business-to-Business at Ziggo.
14. Auditor’s fees
The fees for services provided by the Company’s independent auditor, EY, and its member firms and/or affiliates to the Company
and its subsidiaries can be broken down as follows:
Amounts in thousands of €
2013
2012
Audit and audit-related fees
715
750
Tax-related fees
245
-
-
950
Transactional related (compliance) fees
Other non-audit fees
Total
155
356
1,115
2,056
In 2013, Ziggo N.V. paid Auditor’s fees of €1.1 million of which €0.2 million tax-related fees and €0.2 million other non-audit fees.
Ziggo N.V. paid auditor’s fees for 2012 for a total amount of €2.1 million of which €1.0 million transactional (compliance) fees
related to the IPO and €0.4 million other non-audit fees.
Contents
Ziggo N.V. Annual Report 2013 112
Ziggo at a glance
Performance
Governance
Financial statements
The financial statements are signed by Board of Management:
Rene Obermann
Bert Groenewegen
Paul Hendriks
Utrecht, The Netherlands
March 5, 2013
Contents
Ziggo N.V. Annual Report 2013 113
Ziggo at a glance
Performance
Governance
Financial statements
Appropriation of result
As a result of the conditional agreement (the “Merger Protocol”)
which has been agreed on January 27, 2014 between the
Company and Liberty Global Plc. on a recommended offer
pursuant to which Liberty Global will acquire Ziggo, it is
proposed to declare a dividend of €0.95 per ordinary share.
In 2013, an interim dividend of €0.95 per ordinary share was
paid in cash. Accordingly it is proposed that no final dividend
will be paid. Net income not paid in the form of dividends will
be added to the retained earnings.
Contents
Ziggo N.V. Annual Report 2013 114
Ziggo at a glance
Performance
Governance
Financial statements
Independent auditor’s report
To: the Shareholders of Ziggo N.V.
Report on the financial statements
In making those risk assessments, the auditor considers
We have audited the accompanying financial statements 2013
internal control relevant to the entity’s preparation and fair
of Ziggo N.V., Amsterdam. The financial statements include the
presentation of the financial statements in order to design
consolidated financial statements and the corporate financial
audit procedures that are appropriate in the circumstances,
statements. The consolidated financial statements comprise
but not for the purpose of expressing an opinion on the
the consolidated statement of income for the year ended
effectiveness of the entity’s internal control. An audit also
December 31, 2013, the consolidated statement of
includes evaluating the appropriateness of accounting
comprehensive income for the year ended December 31, 2013,
policies used and the reasonableness of accounting estimates
the consolidated statement of financial position as at
made by management, as well as evaluating the overall
December 31, 2013, the consolidated statement of changes in
presentation of the financial statements.
equity and the consolidated statement of cash flows for the
year then ended, and the notes, comprising a summary of the
We believe that the audit evidence we have obtained is sufficient
accounting policies and other explanatory information. The
and appropriate to provide a basis for our audit opinion.
corporate financial statements comprise the corporate
statement of income / statement of comprehensive income for
Opinion with respect to the financial statements
the year ended December 31, 2013, the corporate statement of
In our opinion, the financial statements give a true and fair view
financial position as at December 31, 2013 and the notes,
of the financial position of Ziggo N.V. as at December 31, 2013,
comprising a summary of the accounting policies and other
its result and its cash flows for the year then ended in
explanatory information.
accordance with International Financial Reporting Standards as
adopted by the European Union and with Part 9 of Book 2 of
Management’s responsibility
the Dutch Civil Code.
Management is responsible for the preparation and fair
presentation of these financial statements in accordance with
Report on other legal and regulatory requirements
International Financial Reporting Standards as adopted by the
Pursuant to the legal requirement under Section 2:393 sub 5
European Union and with Part 9 of Book 2 of the Dutch Civil
at e and f of the Dutch Civil Code, we have no deficiencies to
Code, and for the preparation of the board report in accordance
report as a result of our examination whether the board report,
with Part 9 of Book 2 of the Dutch Civil Code. Furthermore,
to the extent we can assess, has been prepared in accordance
management is responsible for such internal control as it
with Part 9 of Book 2 of this Code, and whether the
determines is necessary to enable the preparation of the
information as required under Section 2:392 sub 1 at b-h
financial statements that are free from material misstatement,
has been annexed. Further we report that the board report,
whether due to fraud or error.
to the extent we can assess, is consistent with the financial
statements as required by Section 2:391 sub 4 of the Dutch
Auditor’s responsibility
Civil Code.
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in
Amsterdam, March 5, 2014
accordance with Dutch law, including the Dutch Standards on
Auditing. This requires that we comply with ethical requirements
Ernst & Young Accountants LLP
and plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free from material
signed by F.J. Blenderman
misstatement.
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor’s
judgement, including the assessment of the risks of material
misstatement of the financial statements, whether due to
fraud or error.
Contents
Ziggo N.V. Annual Report 2013 115
Ziggo at a glance
Performance
Governance
Financial statements
Contact details and address
Ziggo N.V.
Postal address:
Corporate Communications
P.O. Box 43048
P.O. Box 43048
3540 AA Utrecht
3540 AA Utrecht
The Netherlands
The Netherlands
Visiting address:
pers@office.ziggo.nl
Atoomweg 100
www.ziggo.com
3542 AB Utrecht
The Netherlands
Telephone: +31 (0) 88 717 0000
Disclaimer
The annual report and accounts contain certain forward-looking statements with respect to the financial condition, results,
operations and businesses of Ziggo N.V. These statements and forecasts involve risk and uncertainty because they relate to
events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual
results or developments to differ materially from those expressed or implied by these forward-looking statements and
forecasts. Nothing in this annual report and accounts should be construed as a profit forecast. The financial statements
were audited by Ernst & Young Accountants LLP.
Contents
Ziggo N.V. Annual Report 2013 116