Slide 1: Achieving Purposeful Profits
Achieving PURPOSEFUL PROFITS FY18 Annual Results Presentation for the Year Ended 31 August 2018 Presentation by Co-Owners: William Yeung, Co-Owner & Executive Vice-chairman NiQ Lai, Co-Owner & Chief Executive Officer 1 November 2018
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: Business & Financial Review
Business & Financial Review NiQ Lai Co-Owner & Chief Executive Officer 3
Slide 4: Pursue Purposeful Profits
Pursue Purposeful Profits If we deliver our Core Purpose, profits will follow 4
Slide 5: HKBN's Outstanding Total Returns since IPO
HKBN’s Outstanding Total Returns since IPO (Rebased) HKBN (with dividends)2 Hang Seng Index3 Performance of HKBN vs. Hang Seng1 180 WTT merger Acquired announcement ICG 160 Acquired Launched Launched NWT MVNO +45.2% OTT 140 40.2% Excess 120 return +5.0% 100 80 60 IPO 2016 2017 2018 Current (Mar 2015
Slide 6: Executive Summary
Executive Summary Industry-leading YoY growth: - Revenue, EBITDA, and DPS year-on-year growth of 22%, 13% and 24% - DPS at 56 HK cents in FY18 (45 HK cents in FY17) Residential Business: - Harvesting our expansion into OTT and Mobile 2-3 years ago with 16% YoY growth in residential service revenue -
Slide 7: 24% Growth in DPS to 56 HK Cents
24% Growth in DPS to 56 HK Cents Maintained >95% core Adjusted Free Cash Flow (AFCF) payout ratio in full year declared dividend in 3 successive years DPS HK cents FY16 FY17 FY18 (Core AFCF Payout ratio) Interim 20 (109%) 22 (116%) 26 (110%) Full Year # 40 (99%) 45 (100%) 56 (97%) # The dividend pol
Slide 8: Property Purchase for Core Network Planning
Property Purchase for Core Network Planning • For our long-term strategic core network planning • No DPS impact as the related payment is excluded from AFCF Reconciliation (HK$mn) FY18 Property Status Remarks EBITDA 1,180 Sha Tin Industrial Completed Facilitate the planning for future Building (1 fl
Slide 9: Industry-leading Growth in FY18
Industry-leading Growth in FY18 Financials in HK$mn, unless otherwise stated Revenue EBITDA Adjusted Free Cash Flow (AFCF) +22% +13% 3,949 +3% 1,180 +16% 3,232 1,006 1,041 +28%578 # 2,784 +12% 453 406 FY16 FY17 FY18 FY16 FY17 FY18 FY16 FY17 FY18 Revenue EBITDA AFCF All financial figures are rounded
Slide 10: Across-the-board Revenue Growth
Across-the-board Revenue Growth Financials in HK$mn, unless otherwise stated • Residential – driven by ARPU increment through quad-play and mobile business expansion • Enterprise – harvesting the synergy of full NWT integration +22% 3,949 292 +16% 3,232 2,784 66 +342% 1,379 158 -58% 1,208 +14% 811 +
Slide 11: Harvesting Residential Business: Growth in Service Revenue and ARPU
Harvesting Residential Business: Growth in Service Revenue and ARPU Service Revenue grew by 16% YoY to HK$2,278mn Residential Broadband Subscriptions : Residential ARPU1 Churning price sensitive customers +2% 871 -1% +5% 857 860 -3% 37% 37% 36% $ 173 $ 176 $ 168 FY16 FY17 FY18 Aug-16 Aug-17 Aug-18 R
Slide 12: Enterprise Solutions Business: Promising Growth
Enterprise Solutions Business : Promising Growth Revenue FY18 : HK$1,379mn FY18 : 57k FY18 : HK$1,510 FY17 : HK$1,208mn FY17 : 54k FY17 : HK$1,463 14% 6% 3% 12
Slide 13: Going Strong post NWT Full Integration
Enterprise Solutions Business: Going Strong post NWT Full Integration • Sustaining growth momentum on both number of customer and ARPU Enterprise Service Revenue (HK$mn) Enterprise Customers (‘000) Enterprise ARPU +6% 57 +14% 1379 +8% NWT acquisition 54 +3% 1208 $1,510 completed in 50 +19% $1,463 +4
Slide 14: Manageable Debt Profile
Manageable Debt Profile • Manageable debt profile post NWT acquisition 3.4 3.4 3.0 FY16 FY17 FY18 Net Debt to EBITDA (x) • In Oct-18, a new term loan of $580mn is completed with similar terms as existing loan. The net debt to EBITDA ratio will return to 3.5x level as a result. Amount (HK$mn) Maturit
Slide 15: 130+ Managers Listen to Our Customer Calls
130+ Managers Listen to Our Customer Calls Management trip to Guangzhou contact centres 19 to 21 March 2018 Rapid iteration enabled by a team of 130+ Management Talents through a systematic and user-oriented approach. 3 strategic priorities derived in 3 days, resulting in enhanced experience for bot
Slide 16: Konnichiwa from 250 Top HKBN Performers
Konnichiwa from 250 Top HKBN Performers Incentive trip to Tokyo 30 August to 3 September 2018 Rewarding excellence for top performers from all front-line and back-end departments. Check out: https://reg.hkbn.net/WwwCMS/upload/web/en/Engagement-news-201809-Tokyo-Incentive-Trip-web.html 16
Slide 17: From Vietnam to Sri Lanka
From Vietnam to Sri Lanka Inspired by John Wood’s talk at our FY18 management experiential trip in Vietnam … … a group of HKBNers and their family members volunteered to visit the literacy program and new library implemented in Sri Lanka Check out: https://reg.hkbn.net/WwwCMS/upload/web/en/Engagemen
Slide 18: Talent Efficiency
Talent Efficiency HKBN Talent Efficiency (HK$mn) FY15 FY16 FY17 FY18 CAGR Remarks (NWT FY15-18 Acquisition) Service Revenue 2,232 2,626 3,166 3,657 17.9% Non advertising & marketing expenses 429 542 531 522 6.8% Mostly support functions and overheads, mainly fixed Talent costs included in advertisin
Slide 19: Business Outlook
Business Outlook William Yeung Co-Owner & Executive Vice-chairman 19
Slide 20: 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 Actual FY19 FY20 Broadband + Fixed Invest Harvest Harvest Harvest Harvest Voice • Content Overlay Invest Invest Harvest Harvest Harvest • M
Slide 21: myTV SUPER Partnership Coming to Fruition
myTV SUPER Partnership Coming to Fruition • Within 2 to 3 years, we have achieved our committed target on myTV OTT boxes • myTV SUPER of TVB has turned profitable in 1H FY18 and expected further growth in FY18 * myTV SUPER OTT Launch Aug-17 Aug-18 (on accumulative basis) Date No. of boxes ordered Ap
Slide 22: Continual Growth in Mobile Business
Continual Growth in Mobile Business • Residential mobile activated subscriptions increased from 147k in FY17 to 265k in FY18 Residential Mobile FY17 FY18 Activated Subscriptions 147k 265k • Mobile ARPU increased in FY18 after introduction of high usage data plans Mobile ARPU FY17 FY18 Mobile (withou
Slide 23: Bright Future in Times of Recession
Bright Future in Times of Recession We are well positioned in an economic downturn • Our service nature makes us recession resilient • We provide great value for money While others are at pain in times of recession, we THRIVE 23
Slide 24: Thank You from 2,981 Talents
Thank You from 2,981 Talents* GZ Management Trip 24 19-21 March 2018 * 2,981 permanent full-time talents as at 31 August 2018
Slide 25: Appendix
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Slide 26: Operational Highlights – Residential
Operational Highlights – Residential YoY FY17 FY18 Changes Residential homes passed ('000) 2,249 2,297 +2% Subscriptions ('000) - Broadband 871 860 -1% - Voice 518 500 -3% Market share - Broadband 37.0% 36.3% -0.7pp - Voice 22.2% 21.8% -0.4pp Residential customers ('000) 994 1,017 +2% Broadband chur
Slide 27: Operational Highlights – Enterprise Solutions
Operational Highlights – Enterprise Solutions YoY FY17 FY18 Changes Commercial building coverage 2.3 2.4 +4% Subscriptions ('000) - Broadband 53 57 +8% - Voice 132 140 +6% Market share - Broadband 18.9% 19.3% +0.4pp - Voice 7.2% 7.7% +0.5pp Enterprise customers ('000) 54 57 +6% Broadband churn rate
Slide 28: Consolidated Income Statement (YoY)
Consolidated Income Statement (YoY) (HK$ million, unless otherwise stated) FY17 FY18 YoY Changes Residential Revenue 1,958 2,278 +16% Enterprise Revenue 1,208 1,379 +14% Product Revenue 66 292 +342% Turnover 3,232 3,949 +22% Other net income 11 22 +100% Network costs (665) (974) +46% Costs of invent
Slide 29: Consolidated Balance Sheet (Summary)
Consolidated Balance Sheet (Summary) (HK$ million, unless otherwise stated) At 31 August 2017 At 31 August 2018 Non-current assets 5,708 5,627 Current assets 878 954 Current liabilities 762 915 Total assets less current liabilities 5,823 5,666 Non-current liabilities 4,694 4,629 Net assets 1,129 1,0
Slide 30: Reconciliation of EBITDA and Adjusted Free Cash Flow
Reconciliation of EBITDA and Adjusted Free Cash Flow (HK$ million, unless otherwise stated) FY17 FY18 YoY Changes Profit/ (loss) for the year 171 397 +132% Finance costs 211 117 -44% Interest income 0 (2) +200% Income tax 86 92 +7% Depreciation 420 425 +1% Amortisation of intangible assets 129 130 0