Executing on our J-Curve Growth FY18 Interim Results Presentation - - PowerPoint PPT Presentation
Executing on our J-Curve Growth FY18 Interim Results Presentation for six months ended 28 February 2018 Presentation by Co-Owners: William Yeung, Co-Owner & Chief Executive Officer NiQ Lai, Co-Owner & Chief Operating Officer 19 April
FY18 Interim Results Presentation for six months ended 28 February 2018
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Presentation by Co-Owners: William Yeung, Co-Owner & Chief Executive Officer NiQ Lai, Co-Owner & Chief Operating Officer 19 April 2018
Disclaimer
These materials have been prepared by HKBN Ltd. (the “Company”) solely for use at this presentation and have not been independently verified. No representations or warranties, express or implied, are made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions presented or contained in these materials. It is not the intention to provide, and you may not rely on these materials as providing, a complete or comprehensive analysis of the financial or trading positions or prospects of the Company. None of the Company or any of their respective directors, officers, employees, agents, affiliates, advisers or representatives accepts any liability whatsoever in negligence or otherwise for any loss howsoever arising from any information or opinions presented
subject to change without notice and its accuracy is not guaranteed. Statements that are not historical facts, including statements about the beliefs and expectations of the Company, are forward-looking statements. These statements are based on current plans, estimates and projections, and undue reliance should not be placed on them. Forward-looking statements speak only as of the date they are made, and the Company has no obligation to update any of them publicly in light of new information or future events. Forward-looking statements involve inherent risks, uncertainties and assumptions. The Company cautions that if these risks or uncertainties ever materialize or the assumptions prove incorrect, or if a number of important factors occur or do not occur, actual results of the Company may differ materially from those expressed or implied in any forward-looking statement. This document does not constitute, and should not be construed as constituting or forming part of, any advertisement of, or any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any shares of the Company or of any of its controlled entities or affiliates, in any jurisdiction. Neither this document, nor any part of it, shall form the basis of or may be relied upon in connection with, any contract, investment decision or commitment whatsoever, nor does it constitute a recommendation regarding the shares or securities of the Company.
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Agenda
Business Review
William Yeung Co-Owner & CEO
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Executive Summary
– Revenue, EBITDA, and DPS year-on-year growth of 22%, 23% and 18% – DPS at 26 cents in 1H FY18
– Quad-play strategy in full swing with 17% YoY growth in residential revenue – Residential ARPU grew from $166 in 1H FY17 to $173 in 1H FY18
– Solid growth in 1H FY18 with 19% YoY revenue growth to HK$679 mn
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On Track for “Invest and Harvest” Roadmap*
DPS HK$0.40 DPS HK$0.45 Co-Ownership III KPI period for cumulative HK$2.1 to HK$2.4 AFF^ FY16 Actual FY17 Actual FY18 FY19 FY20 Broadband + Fixed Voice Invest Harvest Harvest Harvest Harvest
Invest Invest Harvest Harvest Harvest
N/A Invest Invest Harvest Harvest
Enterprise Solutions Integrate NWT Integrate NWT Harvest Harvest Harvest
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* First shown in HKBN FY17 interim announcement ^ AFF refer to FY18-20 total Cumulative Adjusted Available Cash per Share for Distribution
Industry Reference Points
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HKT Annual Results
Reported Figures
FY17 FY17 YoY %
Total Revenue
33,258
Service Revenue ^
31,499 +1%
Total EBITDA
12,997 +2%
Distribution per Share Stapled Unit (HK cents)
64.87 (full year) +5%
“HKT” refers to HKT Trust and HKT Limited, stock code 6823 listed on the Hong Kong Main Board stock exchange * Sources from HKT FY17 annual report ^ Include service revenue only (HKT: total TSS revenue + mobile service s revenue ) # Include service revenue only (HKBN: total revenue minus product revenue)
Financials in HK$mn, unless otherwise stated
HKBN Interim Results
Reported Figures
FY18 1H 1H FY18 YoY %
Total Revenue
1,868 +22%
Service Revenue #
1,781 +18%
Total EBITDA
594 +23%
Dividend Per Share (HK cents)
26 (6 months interim) +18%
2,341 2,784 3,232 1,535 1,868
FY15 FY16 FY17 1H FY17 1H FY18
Revenue
Strong Growth Momentum in 1H FY18
979 1,006 1,041 481 594
FY15 FY16 FY17 1H FY17 1H FY18
EBITDA 392 406 453 191 237
FY15 FY16 FY17 1H FY17 1H FY18
AFCF
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EBITDA
Financials in HK$mn, unless otherwise stated
+3%
Adjusted Free Cash Flow (AFCF)
All financial figures are rounded to nearest HK$ million
+3%
+23%
+3% +12%
+24%
Revenue
+19% +16%
+22%
$ 166 $ 167 $ 173
1H FY17 2H FY17 1H FY18
Residential ARPU
Harvesting Residential Business: Growth in Service Revenue and ARPU
Residential Broadband Subscriptions
857 878 871 872 37% 38% 37% 37%
Aug-16 Feb-17 Aug-17 Feb-18
Residential Broadband Subscriptions ('000) Residential Broadband Market Share
Residential ARPU1
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Service Revenue grew by 17% YoY to HK$1,101mn
+1% +4%
Note: 1) Residential ARPU refers to historical full base residential ARPU for the period. 2) Acquisition and renewal contract ARPU refers to ARPU of the new acquisition and renewal subscriptions for the specific month. Such ARPU was $192 in February 2017, $194 in August 2017 and $183 in February 2018. 3) Market share is calculated by dividing the number of residential broadband subscriptions by the total number of residential broadband subscriptions recorded by the Office of the Communications Authority (OFCA) at the same point in time. The latest available OFCA statistics in broadband services for residential business is as of 31 December 2017. 4) In FY17 annual report, residential ARPU in FY17 is $168
+0% +2%
Attack Roaming with a Disruptive Offer
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(~ US$25/mth)
https://youtu.be/kS79OTrjEWc
Optional Premium Roaming Feature for China Usage at HK$30/500MB only
Strong OTT Overlay with myTV SUPER Partnership
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* Source from Television Broadcasts Limited FY17 annual results announcement on 21 March 2018
Per TVB, myTV SUPER achieved breakeven in Dec 2017 and expects positive earning contribution in FY18 *
myTV SUPER OTT (on accumulative basis) Feb-17 Aug-17 Feb-18
358k 526k 730k myTV SUPER Apps (bundle with HKBN mobile plan) Launched in FY17 1H 82k 165k
Sustaining Growth Momentum in Mobile Business
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in FY17 to 313k in 1H FY18
Residential Mobile FY17 FY18 1H Registered 218k 313k Activated Subscriptions 147k 222k
tier tariff plans
FY17 FY18 1H Mobile (without broadband services) $119 $142 Mobile (with broadband services) $268 $311
Enterprise Solutions Business: Sustaining Strong Growth Momentum
51 54 56
Feb-17 Aug-17 Feb-18 Enterprise Customers ('000)
1,467 1,480 1,526
1H FY17 2H FY17 1H FY18 Enterprise ARPU
Enterprise Customers Enterprise ARPU
+6% +3% +4% +1%
Note: 1) Enterprise ARPU refers to historical full base enterprise ARPU for the period. 2) In FY17 annual report, Enterprise ARPU in FY17 is $1,463
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Enterprise Solutions Business: Sustaining Strong Growth Momentum
569 639 679
Apr-16 1H FY17 2H FY17 1H FY18
Revenue
Enterprise Solutions Service Revenue
Service Revenue grew by 19% YoY to HK$679mn
+12% +6%
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Financials in HK$mn, unless otherwise stated
NWT acquisition completed
Enterprise Solutions Recent Showcases HK$42mn Contract Sum over Multiple Years
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A multinational internet company running one of the largest search engine in the world A rapidly growing financial company with soaring ambition A leading medical corporation offering health care solutions in more than 60 countries A global travel agency providing online ticketing service
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Intensified ATTACK on WTT
launched service
Coffee Jacket Lift Door Sticker Moving Billboard Outdoor Billboard Print Advertisement
Operations & Financial Review
NiQ Lai Co-Owner & COO
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(FY18-FY20)
660 supervisors & above
Co-Ownership I Co-Ownership II
Integration
Owners in HK & GZ
Co-Ownership III
Buyout
above Co-Owners
Co-Ownership Culture
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Co-Ownership Plan III Milestone
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Apr 2018 Dec 2017 June 2018 July 2018 Nov 2020 AGM approval Post Interim Announcement Application Deadline Payment Deadline Granting
Cascading Co-Ownership into Annual pain/GAIN
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CO III = FY18 p/G + FY19 p/G + FY20 p/G
Co-Ownership III’s aspirational KPI of HK$2.1 to HK$2.4 AFF^ is cascaded into annual pain/GAIN contracts for our Residential and Enterprise department heads
^ AFF refer to FY18-20 total Cumulative Adjusted Available Cash per Share for Distribution
CO III 3-Years KPI
p/G p/G p/G
Skin in the Game
Long term Co-Ownership and annual pain/Gain… this is something unique to HKBN
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William* Co-Owner & CEO Billy* Co-Owner and Enterprise COO ES Commanders with pain/GAIN: * Note: Majority of family net worth in single HKBN 1310 stock NiQ* Co-Owner & Group COO Residential Commanders with pain/GAIN:
Herman Pun Co-Owner & Director of Operations Support Annie Chan Co-Owner & Associate Director of Customer Service Elinor Shiu Co-Owner & Head of Marketing Mikron Ng Co-Owner & Director of Customer Acquisition Ben Hui Co-Owner & Director of Customer Retention & Retail Ben Yeung Co-Owner & Head of Business Development & Partnership Loretta Ko Co-Owner & Head of System Integration & Product Management Clio Ip Co-Owner & Director of Specialized Products Mikron Ng Co-Owner & Head of Commercial Sales Adrian Watt Co-Owner & Head of Carrier and International Business Edward Jim Co-Owner & Head of Corporate Sales
18% Growth in Interim DPS to 26 Cents
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Maintained ~100% payout ratio in full year declared dividend in 2 successive years
DPS HK cents (Payout ratio) FY15 FY16 FY17 1H FY18 Interim Unlisted 20 (109%) 22 (116%) 26 (110%) Full Year # 20 * (100%) 40 (99%) 45 (100%)
* Dividend for FY15 is payout in respect to the relevant period since the listed date of 12 March 2015 # The dividend policy of the Company is to pay dividends in an amount of not less than 90% of the Adjusted Free Cash Flow with an intention to pay 100%
18% YoY Growth
Across-the-board Growth in ES & Residential
1,757 1,815 1,958 941 1,101 476 811 1,208 569 679 109 158 66 24 87
FY15 FY16 FY17 FY17 1H FY18 1H
Residential Revenue Enterprise Revenue Product Revenue
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Financials in HK$mn, unless otherwise stated
2,341 2,784
+22%
+17% +19% +263%
3,232 1,535 1,868
+16% +19%
large corporations
+8% +49%
+3% +70% +45%
Next Round
Harvest the ARPU Increase started on 1 Sep 2017
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Renewal customers at expiry
Note: 1) Residential ARPU refers to historical full base residential ARPU for the period.
Residential ARPU1 FY17 FY18 FY19 FY20
Month 24 Month 1
1H $166 1H $173
FY17 Price Increment FY18 Price Increment
2H $167
Impact of FY18 price increment in FY19/20
Two-year contract sum
Impact of FY17 price increment in FY18/19
Prudent CAPEX Investment
380 412 364 173 182 16% 15% 11% 11% 10% FY15 FY16 FY17 FY17 1H FY18 1H
CAPEX CAPEX as % of Revenue
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Financials in HK$mn, unless otherwise stated
All financial figures are rounded to nearest HK$ million Note: CAPEX paid during 1H FY18 for Adjusted Free Cash Flow Calculation is HK$189mn.
Manageable Debt Profile
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2.8 3.4 3.7 3.4 3.1 FY15 FY16 FY17 1H FY17 FY18 1H
Net Debt to EBITDA (x)
Total Debt Maturity Interest Rate Existing $3.9bn Nov 2021 HIBOR + 1.35% New * $3.9bn May 2023 HIBOR + 1.05%
* New refinancing is expected to complete by May 2018
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Books that Truly Inspired Us …
Skin in the game is the best alignment … this cannot be given, rather it must be bought Purpose + Passion = Profits
Click here to view the HKBN/Goldman Sachs Purpose book launch event https://www.youtube.com/watch?v=rWsirt3R-1U&feature=youtu.be
On Track for “Invest and Harvest” Roadmap*
DPS HK$0.40 DPS HK$0.45 Co-Ownership III KPI period for cumulative HK$2.1 to HK$2.4 AFF^ FY16 Actual FY17 Actual FY18 FY19 FY20 Broadband + Fixed Voice Invest Harvest Harvest Harvest Harvest
Invest Invest Harvest Harvest Harvest
N/A Invest Invest Harvest Harvest
Enterprise Solutions Integrate NWT Integrate NWT Harvest Harvest Harvest
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* First shown in HKBN FY17 interim announcement ^ AFF refer to FY18-20 total Cumulative Adjusted Available Cash per Share for Distribution
FY16 $0.40 DPS FY17 $0.45 DPS FY18-20 $2.1 to $2.4 AFF^
CO III
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HK Talent Meeting 12 April 2018 Crowne Plaza Hong Kong Kowloon East, Hong Kong GZ Talent Meeting 13 April 2018 The Grand Ballroom of LN Garden Hotel, Guangzhou
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Operational Highlights – Residential
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1H FY17 1H FY18 YoY Changes Residential homes passed ('000) 2,225 2,266 +2% Subscriptions ('000)
878 872
524 515
Market share
37.6% 37.0%
22.2% 22.3% +0.1pp Residential customers ('000) 928 1,003 +8% Broadband churn rate 0.7% 0.9% +0.2pp Residential ARPU $166 $173 +4%
Our market share in broadband or voice services in Hong Kong, for residential or enterprise business, is calculated by dividing the number of broadband or voice subscriptions we have at a given point in time by the total number of corresponding broadband or voice subscriptions recorded by the Office of the Communications Authority (OFCA) at the same point in time. The latest available OFCA statistics in broadband or voice services for residential business is as of 31 December 2017.
Operational Highlights – Enterprise Solutions
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1H FY17 1H FY18 YoY Changes Commercial building coverage 2,316 2,368 +2% Subscriptions ('000)
50 55 +10%
127 137 +8% Market share
17.8% 19.0% +1.2pp
6.8% 7.4% +0.6pp Enterprise customers ('000) 51 56 +10% Broadband churn rate 1.3% 1.2%
Enterprise ARPU $1,467 $1,526 +4%
Our market share in broadband or voice services in Hong Kong, for residential or enterprise business, is calculated by dividing the number of broadband or voice subscriptions we have at a given point in time by the total number of corresponding broadband or voice subscriptions recorded by the Office of the Communications Authority (OFCA) at the same point in time. The latest available OFCA statistics in broadband
Consolidated Income Statement
(HK$ million, unless otherwise stated) 1H FY17 1H FY18 YoY Changes Residential Revenue 941 1,101 +17% Enterprise Revenue 569 679 +19% Product Revenue 24 87 +263% Turnover 1,535 1,868 +22% Other net income 7 8 +19% Network costs and costs of sales (304) (545) +80% Advertising and marketing expenses (295) (290)
Talent costs (246) (235)
Other operating expenses (490) (491) +0% Finance costs & others (117) (27)
Profit/ (loss) before taxation 90 288 +220% Income tax (44) (47) +8% Profit/ (loss) for the period 46 241 +424% Amortisation of intangible assets 65 65
(10) (10)
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Adjusted Net Profit 174 296 +70%
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All financial figures are rounded to nearest HK$ million
Consolidated Balance Sheet (Summary)
34 (HK$ million, unless otherwise stated) At 31 August 2017 At 28 February 2018 Non-current assets 5,708 5,584 Current assets 878 862 Current liabilities 762 688 Total assets less current liabilities 5,823 5,759 Non-current liabilities 4,694 4,610 Net assets 1,129 1,149 Capital and Reserves 1,129 1,149 Additional Info: Goodwill and intangible assets 3,385 3,295 Property, plant and equipment 2,290 2,256 Cash and cash equivalents 385 358 Bank loans 3,831 3,848
All financial figures are rounded to nearest HK$ million
Reconciliation of EBITDA and Adjusted Free Cash Flow
(HK$ million, unless otherwise stated) 1H FY17 1H FY18 YoY Changes Profit/ (loss) for the period 46 241 +100% Finance costs 117 27
Interest income (0) (1) +100% Income tax 44 47 +7% Depreciation 210 215 +2% Amortisation of intangible assets 65 65 0% EBITDA 481 594 +23% EBITDA margin 31.3% 31.8% +0.05pp Capital expenditure (197) (189)
Net interest paid (57) (50)
Other non-cash items 4 1
Income tax paid (121) (114)
Changes in working capital 80 (5)
Adjusted Free Cash Flow 191 237 +24% Dividend 221 260 +18% DPS (HK cents) 22 26 +18% Dividend Payout Ratio 116% 110% n/a
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All financial figures are rounded to nearest HK$ million