Hkbn Ltd. · HKEX:1310
Hkbn — H1 FY2017 Earnings Presentation
29 slides from Hkbn's earnings presentation, Apr 20, 2017
Slide 1: Harvesting Begins: FY17 Interim Results Presentation
Harvesting Begins FY17 Interim Results Presentation for the six months ended 28 February 2017 Presentation by Co-Owners: William Yeung, Chief Executive Officer NiQ Lai, Chief Operating Officer 20 April 2017 Photo of HKBN Dragon Boat Team powered by HKBNers: 1 Kim Hue, Shan Tam, Billy Tsang, Johnson
Slide 2: Disclaimer
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
Slide 3: Agenda
Agenda • Business Review – William Yeung, CEO & Co-Owner • Financial Review – NiQ Lai, COO & Co-Owner • Q&A 3
Slide 4: Business Review
Business Review William Yeung CEO & Co-Owner 4
Slide 5: Executive Summary
Executive Summary • Harvesting Residential Business: – Pivot from subscriber to revenue market share focus – Acquisition and renewal contract ARPU of HK$192 for the month of Feb 2017 vs. historical full base residential ARPU of HK$166 for the six months to 28 Feb 2017 • OTT and Mobile Overlay: – 627
Slide 6: "Harvest and Invest" Roadmap
“Harvest and Invest” Roadmap FY16 FY17 FY18 FY19 FY20 Broadband + Invest Harvest Harvest Harvest Harvest Fixed Voice • Content Overlay Invest Invest Harvest Harvest Harvest • Mobile Overlay N/A Invest Invest Harvest Harvest Enterprise Integrate Integrate Harvest Harvest Harvest Solutions NWT NWT 6
Slide 7: Harvesting Residential Business: Positive acquisition and renewal contract ARPU trend
Harvesting Residential Business: Positive acquisition and renewal contract ARPU trend Service Revenue grew by 5% to HK$941mn Higher acquisition Residential Broadband Subscriptions Residential ARPU1 and renewal 192 contract ARPU2 (for the month of +2% 878 +$26 857 Feb-17) +8% 178 -4% 170 -2% 792 166
Slide 8: OTT Overlay
OTT Overlay • >50% of HKBN broadband subscriptions have at least 1 OTT box No. of Boxes Launch Date Ordered myTV SUPER (TVB) 358k Apr 2016 LeTV 269k Oct 2015 Total 627k n/a • OTT players continue to challenge the traditional PayTV market HK PayTV Industry (’000) 2,272 2,297 2,287 2,255 2,212 627 437
Slide 9: Mobile Overlay
Mobile Overlay • 54k mobile services were activated in 1H FY17, with over 100k registration for our mobile services up to mid-April • Targeting 200k registration for our mobile services in FY17 HK Mobile Postpaid Subscribers (’000) 8,161 200 (~2% market share) 2016 2017 Total Postpaid SIM (OFCA) HKB
Slide 10: Growing Enterprise Business: Steady growth post NWT acquisition
Growing Enterprise Business: Steady growth post NWT acquisition on Mar-16 Service Revenue grew by 111% to HK$569mn Enterprise Customers ES ARPU 1,483 -1% 1,467 50 +2% 51 +46% +16% 43 1,017 Feb-16 Aug-16 Feb-17 1H FY16 2H FY16 1H FY17 Enterprise Customers ('000) Enterprise ARPU 10
Slide 11: Enterprise Solutions Recent Showcase
Enterprise Solutions Recent Showcase HK$60 million contract sum over multiple years Telstra • Very large multi-national corporate win for our Mobile service • Opens door to further collaborations Colt Technology Services Ltd • Partner with HKBN to capture more MNC and Banking Customers • Leverage as
Slide 12: Financial Review
Financial Review NiQ Lai COO & Co-Owner 12
Slide 13: Revenue growth driven by larger residential customer base & ES integration
Revenue growth driven by larger residential customer base & ES integration Financials in HK$mn, unless otherwise stated. 2,784 158 2,341 2,131 109 811 78 476 423 +25% 1,535 Inclusion of 1,226 24 NWT’s full six- -57% months results 57 569 269 +111% 1,757 1,815 1,630 899 +5% 941 FY14 FY15 FY16 1H FY16
Slide 14: Maintaining stable EBITDA and AFCF despite mobile service launch
Maintaining stable EBITDA and AFCF despite mobile service launch Financials in HK$mn, unless otherwise stated. EBITDA Adjusted Free Cash Flow (AFCF) Mainly due to 979 +3% 1,006 +16% initial investment in acquisition cost 845 related to mobile service 511 -6% 481 392 +4% 406 311 +26% 185 +3% 191 FY14
Slide 15: Monetize our biggest asset via upselling
Monetize our biggest asset via upselling Comprehensive Upsell to one-stop solutions Quad-play Bundle • Broadband • Broadband • Infinite Voice • Home Tel • Infinite Wi-Fi • OTT • Cloud Solutions • Mobile • Data Center • Mobile >870k residential >50k corporate customers broadband subscriptions Our big
Slide 16: Exceptional opportunity to upsell more services to our broadband customer base
Exceptional opportunity to upsell more services to our broadband customer base Double Play Triple Play Quad Play (Broadband + (Broadband + (Broadband + Fixed Fixed Voice) Fixed Voice + OTT) Voice + OTT + Mobile) TVB CMHK (since Apr-16) (since Feb-17) LeTV SmarTone (since Oct-15) (since Sep-16) MBO I
Slide 17: Intensified activity level with additional investment in OTT and Mobile
Intensified activity level with additional investment in OTT and Mobile in the last 18 months HKBN Gross Addition by Services ('000) 702 437 332 218 54 161 176 90 110 190 62 59 175 36 32 99 117 72 56 FY14 FY15 FY16 1HFY16 1HFY17 Broadband Fixed Voice OTT MVNO 17
Slide 18: Prudent CAPEX investment
Prudent CAPEX investment Financials in HK$mn, unless otherwise stated. 412 380 346 171 173 16% 16% 15% 14% 11% FY14 FY15 FY16 1H FY16 1H FY17 CAPEX CAPEX as % of Revenue All financial figures are rounded to nearest HK$ million 18 Note: CAPEX paid during 1H FY17 for Adjusted Free Cash Flow Calculatio
Slide 19: Manageable Debt Profile
Manageable Debt Profile • Manageable Debt Profile post NWT Acquisition Including HK$700mn to fund acquisition 4.0x 3.7x 3.1x 3.4x of NWT 2.8x FY13 FY14 FY15 FY16 1H FY17 Net Debt to EBITDA • Refinancing exercise during 1H FY17 extended debt expiry to 2021 Interest Rate Interest Rate Interest Rate Am
Slide 20: Corporate Social Investment
Corporate Social Investment Youth Upward Mobility (YUM) Programme 8 certified professional Since September 2016, HKBN volunteers have been mentoring 8 secondary broadband engineers school graduates (who achieved unsatisfactory public examination results) to become certified professional broadband en
Slide 21: Attracting Top Talents to nurture into Future Co-Owners
Attracting Top Talents to nurture into Future Co-Owners 0.4% acceptance rate “The Next CTO” Graduate Technical Trainee Programme 2017 • > 500 applications received for our Graduate Technical Trainee Programme for 2 positions • Groom elite talents with technical background to be future leaders 1.1% “
Slide 22: Outlook
Outlook • Residential Business – Revenue growth via integrated Quad-play ARPU increase • Enterprise Solutions – Revenue & market share growth – Fixed + Mobile bundle – Sell idle NWT capacity 22
Slide 23: Q&A
Q&A Hong Kong Talent Meeting 2016 23
Slide 24: Appendix
Appendix : “al SEES. Se 2 aoe > — > és pees 5 oT ail ~ Pld ai i ~gaatry oe
Slide 25: Operational Highlights – Residential
Operational Highlights – Residential YoY 1H FY16 1H FY17 Changes Residential homes passed ('000) 2,162 2,225 +3% Subscriptions ('000) - Broadband 792 878 +11% - Voice 485 524 +8% Market share - Broadband 35.2% 37.6% +2.4pp - Voice 20.6% 22.2% +1.6pp Residential customers ('000) 852 928 +9% Broadband
Slide 26: Operational Highlights – Enterprise Solutions
Operational Highlights – Enterprise Solutions YoY 1H FY16 1H FY17 Changes Commercial building coverage ('000) 2.1 2.3 +10% Subscriptions ('000) - Broadband 40 50 +25% - Voice 102 127 +25% Market share - Broadband 15.4% 17.8% +2.4pp - Voice 5.5% 6.8% +1.3pp Enterprise customers ('000) 43 51 +19% Broa
Slide 27: Consolidated Income Statement
Consolidated Income Statement (HK$ million, unless otherwise stated) 1H FY16 1H FY17 YoY Changes Residential Revenue 899 941 +5% Enterprise Revenue 269 569 +111% Product Revenue 57 24 -58% Turnover 1,226 1,535 +25% Other net income 8 7 - Network costs and costs of sales (137) (304) +122% Advertising
Slide 28: Consolidated Balance Sheet (Summary)
Consolidated Balance Sheet (Summary) (HK$ million, unless otherwise stated) At 31 August 2016 At 28 February 2017 Non-current assets 5,779 5,888 Current assets 826 729 Current liabilities 826 724 Total assets less current liabilities 5,779 5,894 Non-current assets 4,416 4,681 Net assets 1,363 1,213
Slide 29: Reconciliation of EBITDA and Adjusted Free Cash Flow
Reconciliation of EBITDA and Adjusted Free Cash Flow (HK$ million, unless otherwise stated) 1H FY16 1H FY17 YoY Changes Profit/ (loss) for the period 135 46 -66% Finance costs 66 117 +76% Interest income (1) (0) -86% Income tax 48 44 -9% Depreciation 179 210 +17% Amortisation of intangible assets 57