Surging Forward FY16 Annual Results Presentation for the year ended - - PowerPoint PPT Presentation
Surging Forward FY16 Annual Results Presentation for the year ended 31 August 2016 Presentation by Co-Owners: William Yeung, Chief Executive Officer NiQ Lai, Chief Talent & Financial Officer 9 November 2016 1 Photo of HKBN Dragon Boat
FY16 Annual Results Presentation for the year ended 31 August 2016
Presentation by Co-Owners: William Yeung, Chief Executive Officer NiQ Lai, Chief Talent & Financial Officer 9 November 2016
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Photo of HKBN Dragon Boat Team powered by HKBNers: Kim Hue, Shan Tam, Billy Tsang, Johnson Chu, Mavis Chow, Ben Kwok, Yat Hin Chan, Jason Tam, John Zhang, Dallas Chang, Herman Hui, Marco Li, William Wong
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 or contained in these materials or otherwise arising in connection with these materials. The information presented or contained in these materials is 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
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. 2
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FY16 YoY Service Revenue HK$2.6bn 18% EBITDA HK$1.0bn 3% Residential Broadband Subscriptions 857k 14% Low Churn Rate (below 1%) 0.8%
1,490 1,630 1,757 1,815 371 423 476 811 FY13 FY14 FY15 FY16
Residential Revenue Enterprise Revenue
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Financials in HK$mn, unless otherwise stated.
+10% +9%
All financial figures are rounded to nearest HK$ million
1,861 2,053 2,233 2,626
+18% +9% +8% +3% +14% +12% +70% HKBN ES business (ex-NWT) grew by 20% YoY
158 175 183 173 FY13 FY14 FY15 FY16 Residential ARPU 660 692 754 857 33% 34% 37% 40% Aug-13 Aug-14 Aug-15 Aug-16 Residential Broadband Subscriptions ('000) Residential Broadband Subscriptions Market Share
Residential Broadband Subscriptions Residential ARPU
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Service Revenue grew by 3% to HK$1,815mn
+5% +9% +11% +5%
Note: Our market share in residential broadband services in Hong Kong is calculated by dividing the number of residential broadband subscriptions we have at a given point in time by the total number of residential broadband subscriptions recorded by the Office of the Communications Authority (OFCA) at the same point in time (Aug-YE).
+14%
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Note: 1. The addressable market size of double-play, triple-play and quad-play are calculated by multiplying the estimated number of addressable households (2 million) within the Group’s coverage by the service penetration rate and the estimated annualized ARPU for respective services. Disclaimer: The above is not based on any independent research or analysis and shall not be relied upon in any circumstances whatsoever. All recipients of this presentation shall seek independent advice (including legal, financial, etc.) and exercise their own independent judgment based on such advice sought.
Mobile Content
HK$24bn1 “Quad-play” market
Fixed broadband Fixed voice
Since Oct 2015 LeEco / Le Sports (EPL)
>250k subscriptions
Since Apr 2016 TVB myTV SUPER
>250k subscriptions
Since Sep 2016 MVNO partnership with two major mobile network operators
30k subscribers
Compelling value paving for revenue growth
948 1,026 1,010 1,2341 FY13 FY14 FY15 FY16 Enterprise ARPU 29 32 39 502 Aug-13 Aug-14 Aug-15 Aug-16 Enterprise Customers ('000)
Enterprise Customers ES ARPU
Service Revenue grew by 70% to HK$811mn1
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+10% +22% +8%
Note:
customers of both HKBN and NWT in the respective month. This metric may be distorted by the impact of certain particularly large contracts we have with enterprise customers.
+28% +22% ES ARPU on August 2016 is approximately HK$1,4213
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1,490 1,630 1,757 1,815 371 423 476 811 89 78 109 158 FY13 FY14 FY15 FY16
Residential Revenue Enterprise Revenue Product Revenue
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Financials in HK$mn, unless otherwise stated.
+9% +10%
All financial figures are rounded to nearest HK$ million
1,949 2,131 2,341 2,784
+19% +9% +8% +3% +14% +12% +70%
+39% +45%
Solid organic growth of underlying ES business + 5 months inclusion of NWT’s results (Apr-16 to Aug-16)
12 27 67 74 130 60 57 34 32 62 103 175 191 182 135 139 155 158 175 183 173 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16
Net Additions of Residential Broadband Subscriptions ('000) ARPU Exit New and Renewal Contracts Broadband Bundle Blended ARPU
Note: FY07 – FY09 data from City Telecom Group (CTI), FY10 – FY11 data from HKBN Offering Memorandum, FY12 – FY16 data from HKBN prospectus and announcement (FY12 Hong Kong Broadband Network Limited (Op-Co) and FY13 – FY16 HKBN Ltd. (list-co). Exit New and Renewal Contracts Broadband Bundle Blended ARPU is reported by CTI Annual Report/ HKBN OM and is of different basis to full base Residential ARPU reported for HKBN Ltd. The data provided is only for reference only. Disclaimer: The above is not based on any independent research or analysis and shall not be relied upon in any circumstances whatsoever. All recipients of this presentation shall seek independent advice (including legal, financial, etc.) and exercise their own independent judgment based on such advice sought.
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Month 13 Month 14 Month 15 Month 16 Month 17 Month 18 Month 19 Month 20 Month 21 Month 22 Month 23 Month 24
Year 1 Year 2 Next Round
Year 4 Year 3 Accumulated impact over the period
Renewal customers at expiry 13
Delay in ARPU Impact
14 741 845 979 1,006 FY13 FY14 FY15 FY16 EBITDA
EBITDA
Financials in HK$mn, unless otherwise stated.
+14% +16% +37% +26%
Adjusted Free Cash Flow
All financial figures are rounded to nearest HK$ million
+3%
38% 40% 42% 36%
+4%
EBITDA Margin 227 311 392 406 FY13 FY14 FY15 FY16 Adjusted Free Cash Flow (AFCF)
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Financials in HK$mn, unless otherwise stated.
All financial figures are rounded to nearest HK$ million Note: CAPEX paid during FY16 for Adjusted Free Cash Flow Calculation is HK$393mn.
324 346 380 412 17% 16% 16% 15% FY13 FY14 FY15 FY16 CAPEX CAPEX as % of Revenue
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All financial figures are rounded to nearest HK$ million. The interest margin will be subject to a margin grid determined by reference to the net leverage ratio. * The 3.5 years hedging arrangement commencing from 23 February 2015, fixing the HIBOR interest rate exposure at 1.453% per annum.
4.0x 3.1x 2.8x 3.4x FY13 FY14 FY15 FY16 Net Debt to EBITDA Amount (HK$ mn) Interest Rate Hedging Period Maturity Date IPO Bank Loan – Fixed rate portion 2,635 3.513% 3.5 years* 20 Jan 2020 IPO Bank Loan – Floating rate portion 465 HIBOR + 2.06% n/a 20 Jan 2020 NWT Acquisition Bank Loan – Floating rate portion 700 HIBOR + 1.85% n/a 31 Mar 2021 Total Bank Loan (Principal Amount) 3,800 n/a n/a n/a Including HK$700mn to fund acquisition
– Shifted from market share gain to revenue focus – Focus on offering best value Quad-play services on integrated single bill
– Execute the synergy plan from NWT integration – Continue to focus on SME clients with expanded service offerings
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Broadband + Fixed Voice Content Mobile (3 sims per household) Total Services Quad-play Estimated ARPU ~$250 ~$150 ~$600 ~$1,000 Estimated Addressable Market Size ~$24bn
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Note: 1. The addressable market size of double-play, triple-play and quad-play are calculated by multiplying the estimated number of addressable households (2 million) within the Group’s coverage by the service penetration rate and the estimated annualized ARPU for respective services. Disclaimer: The above is not based on any independent research or analysis and shall not be relied upon in any circumstances whatsoever. All recipients of this presentation shall seek independent advice (including legal, financial, etc.) and exercise their own independent judgment based on such advice sought.
~$5bn ~$3bn ~$16bn
HKBN , 44% Others, 56%
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Note: 1. Estimated based on the % of HKBN homes passed coverage per total apartments available in Hong Kong.
penetration rate and the estimated annualized ARPU for respective services. Disclaimer: The above is not based on any independent research or analysis and shall not be relied upon in any circumstances whatsoever. All recipients of this presentation shall seek independent advice (including legal, financial, etc.) and exercise their own independent judgment based on such advice sought.
Total Billing Market Share (898k HKBN customers/ 2.0mn1 households within HKBN coverage)
HKBN residential revenue/ estimated Quad-play market (HK$1.8bn out of HK$24bn2) Total Billing Market Share
Upsell Potential
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“KA” Taekwondo Program 114 HKBN Managers @ Military Base K-POP by HKBNers
Year Location 1999 Gold Coast, Australia 2001 Star Cruises, Hong Kong 2002 Sanya, China 2003 Zhuhai, China & Macau 2004 Qingdao, China 2005 Zhuhai, China 2006 Bangkok, Thailand 2006 Singapore 2009 Osaka, Tokyo, Japan 2010 Frankfurt, Rudesheim, Eisenach, Weimar, Leipzig, Nuremberg, Munich, Titisee, Germany 2011 Phnom Penh, Siem Reap, Cambodia 2012 Los Angeles, Las Vegas, San Francisco, USA 2013 Johannesburg, Cape Town, South Africa 2014 Japan (cancelled due to volcano eruption) 2015 Taiwan 2016 Cheorwon-gun, Seoul, South Korea
HKBN Experiential Management Trip
Video Link: https://youtu.be/tA76ggppCM8
Yummy Korean Cooking Class
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FY15 FY16 YoY Changes Residential homes passed ('000) 2,143 2,202 +3% Subscriptions ('000)
754 857 +14%
534 520
Market share
36.6% 40.1% +3.5 pp
22.0% 22.0% +0.0 pp Residential customers ('000) 822 898 +9% Broadband churn rate 0.6% 0.8% +0.2 pp Residential ARPU $183 $173
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 (Aug-YE).
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FY15 FY16 YoY Changes Commercial building coverage ('000) 2.0 2.3 +15% Subscriptions ('000)
35 47 +34%
98 120 +22% Market share
14.3% 17.8% +3.5 pp
5.3% 6.5% +1.2 pp Enterprise customers ('000) 39 50 +28% Broadband churn rate 0.8% 1.3% +0.5 pp Enterprise ARPU $1,010 $1,234* +22%
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 (Aug-YE). * For reference, enterprise ARPU on August 2016 is approximately HK$1,421 - calculated by dividing the revenue generated in the relevant month from the enterprise telecom business from both HKBN and NWT businesses (excluding revenue from IDD services) by the number of enterprise customers of both HKBN and NWT in the respective month
(HK$ million, unless otherwise stated) FY15 FY16 YoY Changes Residential Revenue 1,757 1,815 +3% Enterprise Revenue 476 811 +70% Product Revenue 109 158 +45% Turnover 2,341 2,784 +19% Other net income 17 16
Network costs and costs of sales (306) (451) +47% Advertising and marketing expenses (399) (482) +21% Talent costs (404) (515) +27% Other operating expenses (799) (875) +10% Finance costs & others (260) (142)
Profit/ (loss) before taxation 190 335 +76% Income tax (86) (90) +5% Profit/ (loss) for the period 104 245 +136% Amortisation of intangible assets 110 120 +9% Deferred tax arising from amortisation of intangible assets (18) (19) +6% Loss on extinguishment of senior notes 96
Originating fee for banking facility expired 12
Listing expenses 56
Transaction costs in connection with business combination
n/a Adjusted Net Profit 360 373 +4%
All financial figures are rounded to nearest HK$ million
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27 (HK$ million, unless otherwise stated) At 31 August 2015 At 31 August 2016 Non-current assets 4,924 5,779 Current assets 627 826 Current liabilities 489 826 Total assets less current liabilities 5,062 5,779 Non-current assets 3,548 4,416 Net assets 1,514 1,363 Capital and Reserves 1,514 1,363 Additional Info: Goodwill and intangible assets 2,925 3,322 Property, plant and equipment 1,970 2,420 Cash and cash equivalents 329 355 Bank loans 3,019 3,721
(HK$ million, unless otherwise stated) FY15 FY16 YoY Changes Profit/ (loss) for the period 104 245 +136% Finance costs 260 142
Interest income (3) (1)
Income tax 86 90 +5% Depreciation 366 384 +5% Amortisation of intangible assets 110 120 +9% Listing expenses 56
Transaction costs in connection with business combination
n/a EBITDA 979 1,006 +3% EBITDA margin 41.8% 36.1%
Capital expenditure (324) (393) +21% Net interest paid (139) (104)
Other non-cash items (7) 3 n/a Income tax paid (86) (106) +24% Changes in working capital (31) (0)
Adjusted Free Cash Flow 392 406 +4% Dividend 201* 402 n/a DPS (HK cents) 20* 40 n/a Dividend Payout Ratio n/a 99% n/a
* Dividend for FY15 is payout in respect to the relevant period since the listed date of 12 March 2015. All financial figures are rounded to nearest HK$ million
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