Hkbn Ltd. · HKEX:1310
Hkbn — 1H FY2018 Earnings Presentation
35 slides from Hkbn's earnings presentation, Apr 19, 2018
Slide 1: Executing on our J-Curve Growth
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 2018 1
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, Co-Owner & CEO • Operations & Financial Review • NiQ Lai, Co-Owner & COO • Q&A 3
Slide 4: Business Review
Business Review William Yeung Co-Owner & CEO 4
Slide 5: Executive Summary
Executive Summary • Harvesting! – Revenue, EBITDA, and DPS year-on-year growth of 22%, 23% and 18% – DPS at 26 cents in 1H FY18 • Residential Business: – 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 • Ente
Slide 6: On Track for "Invest and Harvest" Roadmap
On Track for “Invest and Harvest” Roadmap* Co-Ownership III KPI period for cumulative HK$2.1 to DPS HK$0.40 DPS HK$0.45 HK$2.4 AFF^ FY16 Actual FY17 Actual FY18 FY19 FY20 Broadband + Fixed Invest Harvest Harvest Harvest Harvest Voice • Content Overlay Invest Invest Harvest Harvest Harvest • Mobile O
Slide 7: Industry Reference Points
Industry Reference Points Financials in HK$mn, unless otherwise stated HKT Annual Results HKBN Interim Results FY17 YoY 1H FY18 Reported Figures FY17 Reported Figures FY18 1H % YoY % Total Revenue 33,258 -2% Total Revenue 1,868 +22% Service Revenue ^ 31,499 +1% Service Revenue # 1,781 +18% Total EBI
Slide 8: Strong Growth Momentum in 1H FY18
Strong Growth Momentum in 1H FY18 Financials in HK$mn, unless otherwise stated Revenue EBITDA Adjusted Free Cash Flow (AFCF) +16% +3% +3% +19% 3,232 2,784 979 1,006 1,041 2,341 +22% +23% +3% +12% 453 1,535 1,868 594 392 406 +24% 481 237 191 FY15 FY16 FY17 1H FY17 1H FY18 FY15 FY16 FY17 1H FY17 1H FY
Slide 9: Harvesting Residential Business: Growth in Service Revenue and ARPU
Harvesting Residential Business: Growth in Service Revenue and ARPU Service Revenue grew by 17% YoY to HK$1,101mn Residential Broadband Subscriptions Residential ARPU1 878 -1% +2% 871 +0% 872 $ 173 +4% $ 166 $ 167 857 +1% 37% 38% 37% 37% Aug-16 Feb-17 Aug-17 Feb-18 1H FY17 2H FY17 1H FY18 Residentia
Slide 10: Attack Roaming with a Disruptive Offer
Attack Roaming with a Disruptive Offer HK$198/mth 5GB Local Data 5GB Global Data (~ US$25/mth) Optional Premium Roaming Feature for China Usage at HK$30/500MB only https://youtu.be/kS79OTrjEWc 10
Slide 11: Strong OTT Overlay with myTV SUPER Partnership
Strong OTT Overlay with myTV SUPER Partnership Per TVB, myTV SUPER achieved breakeven in Dec 2017 and expects positive earning contribution in FY18 * myTV SUPER OTT Feb-17 Aug-17 Feb-18 (on accumulative basis) No. of boxes ordered 358k 526k 730k myTV SUPER Apps Launched 82k 165k (bundle with HKBN mo
Slide 12: Sustaining Growth Momentum in Mobile Business
Sustaining Growth Momentum in Mobile Business • Residential mobile registered subscriptions increased from 218k in FY17 to 313k in 1H FY18 Residential Mobile FY17 FY18 1H Registered 218k 313k Activated Subscriptions 147k 222k • Mobile ARPU increased in 1H FY18 after introduction of high- tier tariff
Slide 13: Enterprise Solutions Business: Sustaining Strong Growth Momentum
Enterprise Solutions Business: Sustaining Strong Growth Momentum • Focus on winning more BIG projects while maintaining the SME market expansion momentum Enterprise Customers Enterprise ARPU 56 1,526 54 +4% +3% +6% 51 +1% 1,480 1,467 Feb-17 Aug-17 Feb-18 1H FY17 2H FY17 1H FY18 Enterprise Customers
Slide 14: Enterprise Solutions Business: Sustaining Strong Growth Momentum
Enterprise Solutions Business: Sustaining Strong Growth Momentum Financials in HK$mn, unless otherwise stated • Strong growth after full integration of NWT in 1H FY17 Service Revenue grew by 19% YoY to HK$679mn Enterprise Solutions Service Revenue +6% 679 +12% 639 569 NWT acquisition completed Apr-1
Slide 15: Enterprise Solutions Recent Showcases
Enterprise Solutions Recent Showcases HK$42mn Contract Sum over Multiple Years 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 A multinational in
Slide 16: Intensified ATTACK on WTT
Intensified ATTACK on WTT • Target to roll out in 19 Wharf buildings, 13 of which already launched service • Leverage on our mobile and roaming offers • Acquired New World Telecom at ~20 cents on gross book value Print Advertisement Coffee Jacket Lift Door Sticker Outdoor Billboard Moving Billboard
Slide 17: Operations & Financial Review
Operations & Financial Review NiQ Lai Co-Owner & COO 17
Slide 18: Co-Ownership Culture
Co-Ownership Culture Co-Ownership I Co-Ownership II Co-Ownership III • 2015 Initial Public Offering • 2018 J-Curve Harvest • 2012 Management • 2016 HKBN + ex-NWT • 3 years aspiration goal Buyout Integration (FY18-FY20) • 87 managerial grade • Over 310 Point 3x up Co- • Open to approximately above Co
Slide 19: Co-Ownership Plan III Milestone
Co-Ownership Plan III Milestone AGM Post Interim Application Payment Granting approval Announcement Deadline Deadline of RSUs Dec 2017 Apr 2018 June 2018 July 2018 Nov 2020 AWESOME CO III JOURNEY • The relevant bases for granting and vesting may or may not materialize. • The granting and vesting wou
Slide 20: Cascading Co-Ownership into Annual pain/GAIN
Cascading Co-Ownership into Annual pain/GAIN CO III 3-Years KPI Co-Ownership III’s aspirational KPI of HK$2.1 to HK$2.4 AFF^ is cascaded into annual pain/GAIN contracts for our Residential and Enterprise department heads p/G p/G p/G CO III = FY18 p/G + FY19 p/G + FY20 p/G ^ AFF refer to FY18-20 tota
Slide 21: Skin in the Game
Skin in the Game Long term Co-Ownership and annual pain/Gain… this is something unique to HKBN William* Co-Owner & CEO NiQ* Billy* Co-Owner & Group COO Co-Owner and Enterprise COO Residential Commanders with pain/GAIN: ES Commanders with pain/GAIN: Mikron Ng Ben Hui Ben Yeung Co-Owner & Director of
Slide 22: 18% Growth in Interim DPS to 26 Cents
18% Growth in Interim DPS to 26 Cents Maintained ~100% payout ratio in full year declared dividend in 2 successive years DPS HK cents FY15 FY16 FY17 1H FY18 (Payout ratio) 18% YoY Interim Unlisted 20 (109%) 22 (116%) 26 (110%) Growth Full Year # 20 * (100%) 40 (99%) 45 (100%) * Dividend for FY15 is
Slide 23: Across-the-board Growth in ES & Residential
Across-the-board Growth in ES & Residential Financials in HK$mn, unless otherwise stated • Residential – driven by quad-play and price strategy with improved ARPU • ES – harvesting the success of NWT integration as well as more big wins from large corporations +16% 3,232 +19% 66 2,784 -58% 158 2,341
Slide 24: Harvest the ARPU Increase started on 1 Sep 2017
Harvest the ARPU Increase started on 1 Sep 2017 Renewal Residential ARPU1 customers at FY17 FY18 FY19 FY20 expiry Two-year contract sum Month 24 1H $173 2H Impact of FY18 price $167 increment in FY19/20 FY18 Price 1H Increment $166 Impact of FY17 price Next Round FY17 Price increment in FY18/19 of R
Slide 25: Prudent CAPEX Investment
Prudent CAPEX Investment Financials in HK$mn, unless otherwise stated 412 380 364 16% 15% 173 182 11% 11% 10% FY15 FY16 FY17 FY17 1H FY18 1H CAPEX CAPEX as % of Revenue All financial figures are rounded to nearest HK$ million 25 Note: CAPEX paid during 1H FY18 for Adjusted Free Cash Flow Calculation
Slide 26: Manageable Debt Profile
Manageable Debt Profile • Manageable debt profile post NWT acquisition 3.7 3.4 3.4 3.1 2.8 FY15 FY16 FY17 1H FY17 FY18 1H Net Debt to EBITDA (x) • Refinancing exercise with interest savings through improved terms and extended maturity Total Debt Maturity Interest Rate Existing $3.9bn Nov 2021 HIBOR
Slide 27: Books that Truly Inspired Us
Books that Truly Inspired Us … Skin in the game is the best alignment Purpose + Passion … this cannot be = Profits given, rather it must be bought Click here to view the HKBN/Goldman Sachs Purpose book launch event https://www.youtube.com/watch?v=rWsirt3R-1U&feature=youtu.be 27
Slide 28: On Track for "Invest and Harvest" Roadmap
On Track for “Invest and Harvest” Roadmap* Co-Ownership III KPI period for cumulative HK$2.1 to DPS HK$0.40 DPS HK$0.45 HK$2.4 AFF^ FY16 Actual FY17 Actual FY18 FY19 FY20 Broadband + Fixed Invest Harvest Harvest Harvest Harvest Voice FY16 • Content Overlay FY17 Invest Invest FY18-20 Harvest Harvest
Slide 29: Thank You from >2900 HKBNers
Thank You from >2900 HKBNers HK Talent Meeting GZ Talent Meeting 12 April 2018 13 April 2018 Crowne Plaza Hong Kong Kowloon East, The Grand Ballroom of LN Garden Hotel, Hong Kong Guangzhou 29 29
Slide 30: Appendix
Appendix 30 30
Slide 31: Operational Highlights – Residential
Operational Highlights – Residential YoY 1H FY17 1H FY18 Changes Residential homes passed ('000) 2,225 2,266 +2% Subscriptions ('000) - Broadband 878 872 -1% - Voice 524 515 -2% Market share - Broadband 37.6% 37.0% -0.6pp - Voice 22.2% 22.3% +0.1pp Residential customers ('000) 928 1,003 +8% Broadban
Slide 32: Operational Highlights – Enterprise Solutions
Operational Highlights – Enterprise Solutions YoY 1H FY17 1H FY18 Changes Commercial building coverage 2,316 2,368 +2% Subscriptions ('000) - Broadband 50 55 +10% - Voice 127 137 +8% Market share - Broadband 17.8% 19.0% +1.2pp - Voice 6.8% 7.4% +0.6pp Enterprise customers ('000) 51 56 +10% Broadband
Slide 33: Consolidated Income Statement
Consolidated Income Statement (HK$ 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% Advert
Slide 34: Consolidated Balance Sheet (Summary)
Consolidated Balance Sheet (Summary) (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
Slide 35: Reconciliation of EBITDA and Adjusted Free Cash Flow
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 -77% Interest income (0) (1) +100% Income tax 44 47 +7% Depreciation 210 215 +2% Amortisation of intangible assets 6