Slide 1: FY23 Annual Results Announcement: Transcendence
FY23 Annual Results Announcement TRANSCENDENCE From Telco to ICT Powerhouse NiQ Lai Co-Owner & Group CEO William Yeung Co-Owner & Executive Vice-chairman Derek Yue Co-Owner & CFO 2 November 2023 © HKBN Ltd. 2023. All Rights Reserved.
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: Overview
Overview NiQ Lai Co-Owner & Group Chief Executive Officer © HKBN Ltd. 2023. All Rights Reserved.
Slide 4: FY23 A Transitional Year
FY23 A Transitional Year Revenue EBITDA AFF $11,692m $2,290m $763m YoY +1% YoY -12% YoY -33% Full Year DPS: 40 HK Cents Financials in HK$mn, unless otherwise stated © HKBN Ltd. 2023. All Rights Reserved. 4
Slide 5: Enterprise Solutions
Enterprise Solutions NiQ Lai Co-Owner & Group Chief Executive Officer © HKBN Ltd. 2023. All Rights Reserved.
Slide 6: Traditional ICT Business Segmentation
Traditional ICT Business Segmentation >10x TAM* Top Down from Layer 7-2 = System Integration, ~20-30% Gross Profit, ~95% of total ICT market, highly fragment with very low barrier of entry … >10x the revenue size the Layer 1-4 Bottom Up from Layer 1-4 = Telco, >70% Gross Profit, ~5% of total ICT mar
Slide 7: FY23 Table-turning Financial and Business Performance
FY23 Table-turning Financial and Business Performance Enterprise 1H FY24 Services >$4,000m 6-mth Pipeline Revenue $4,825m 25+ $20M+ Projects 9% Mainland China ICT-native Team Executives Joined 1,900+ Talents 14 10+ offices © HKBN Ltd. 2023. 7 All Rights Reserved.
Slide 8: Segmental Service Approach to ICT Service Delivery
Segmental Service Approach to ICT Service Delivery Segment Approach • High touch custom join SI/Telco team approach with full support A) Top 1-1,000 from SI pre and post sales Fortune 500-like Corporates • 12-18 months sales cycle B) 1,001-10,000 • Mild touch account, i.e. simple, repeatable Proof o
Slide 9: A) Large Enterprise – Tailored Network Design
A) Large Enterprise – Tailored Network Design Customer: One of the largest global financial institutions Project Background: The customer, unsatisfied with the solutions from their incumbent carrier, needed fully diversified fibre paths across its multiple Hong Kong data centres. Any compromise on n
Slide 10: B) Mid-Tier - AegisConnect
B) Mid-Tier - AegisConnect Fortune-500 Service for TOP 1,001-10,000 Enterprises 50-100% premium over bare broadband © HKBN Ltd. 2023. All Rights Reserved.
Slide 11: AegisConnect Case Study
AegisConnect Case Study Customer: A retail brand with over 100 branches Project background: • 1 IT Manager managing 100 branches • Past network failure required ½ day to restore; problem shoot difficult, uncertain if line problem or branch equipment issue; IT manager getting screamed at by everyone.
Slide 12: C) SMEs: IT‧Simplified – A New Solution for SMEs
C) SMEs: IT‧Simplified – A New Solution for SMEs Broadband ONLY Business Solutions HK$200 - 500/month ARPU vs © HKBN Ltd. 2023. All Rights Reserved. 12
Slide 13: Our LUCA – Unmatched Distribution and Support
Our LUCA – Unmatched Distribution and Support Vs Fragmented SI-only providers AegisConnect Service Launch IT • Simplified Service Launch Hong Kong, Sept 2023 Guangzhou, July 2023 ISO-27001 certified 7x24x365 Security Operations Centre (SOC) support backed by 200+ Professionals with ITIL v3/v4 certif
Slide 14: Growing Orders for Enterprise Business
Growing Orders for Enterprise Business 3,250 Full Year YoY 18% Booking 2,875 2,500 2,125 1,750 1,375 1,000 FY22 1H FY22 2H FY23 1H FY23 2H Financials in HK$mn, unless otherwise stated . © HKBN Ltd. 2023. All Rights Reserved. 14
Slide 15: FY23 Strong Backlog Waterfall to Future Revenue
FY23 Strong Backlog Waterfall to Future Revenue FY23 Backlog ~20% booked as Revenue in FY23 FY23 Backlog ~50% booked as Revenue in FY24 FY23 Backlog ~30% booked as Revenue in FY25 © HKBN Ltd. 2023. All Rights Reserved.
Slide 16: FY23 Strong Backlog Waterfall to Future Revenue
FY23 Strong Backlog Waterfall to Future Revenue 2023 2024 2025 FY23 Backlog FY24 Backlog FY25 Backlog ~20% ~20% ~20% booked as Revenue booked as Revenue booked as Revenue FY22 Backlog FY23 Backlog FY24 Backlog ~50% ~50% ~50% v booked as Revenue booked as Revenue booked as Revenue FY21 Backlog FY22 B
Slide 17: Virtuous ICT Powerhouse Flywheel
Virtuous ICT Powerhouse Flywheel Box Moving 5-10% Gross Profit ICT Services Maintenance Service (MA) SI 15-25% Gross Profit 20-50% Gross Profit Telco >70% Gross Profit Managed Service (MS) 20-40% Gross Profit © HKBN Ltd. 2023. All Rights Reserved.
Slide 18: Residential Solutions
Residential Solutions William Yeung Co-Owner & Executive Vice-chairman © HKBN Ltd. 2023. All Rights Reserved.
Slide 19: Residential Growth Trends
Residential Growth Trends Growth in Broadband Subscriptions Continuous Upgrade to Higher Bandwidth 920K 2000M 48K 897K 40K FY22 FY23 FY22 FY23 537K Increasing Uptake of Home Wi-Fi Solutions 1000M 253K 461K 226K FY22 FY23 FY22 FY23 © HKBN Ltd. 2023. All Rights Reserved.
Slide 20: New Contract ARPU vs Base ARPU
New Contract ARPU vs Base ARPU New contract ARPU $201 (Acquisition + Retention) $10 x 920k x 12mth = $110.4 m UP 26% $184 $185 $183 $182 $184 $181 $181 $180 $179 $179 $178 $178 $179 $178 $178 $179 Base ARPU $178 $175 $175 $175 $173 $170 $164 $162 $160 Focus on Subs growth Focus on ARPU maximization
Slide 21: More Customer Value
Connectivity Beyond Mobility & Travel 5G + Roaming Worldclass Contents OTT More Customer Value Upsell with Cyberthreat & Fraud Protection Cybersecurity Home Network Coverage Wi-Fi 6 Demand for Bandwidth / Gamer 2000M Reliable Connectivity Dual Guarantee © HKBN Ltd. 2023. All Rights Reserved.
Slide 22: Focus on Values & Solutions for Customers
Focus on Values & Solutions for Customers HKBN is increasing the value we deliver to customers and pricing accordingly Mar23 May23 Jul23 Aug23 Sep23 Real world market competition © HKBN Ltd. 2023. All Rights Reserved.
Slide 23: ESG
ESG William Yeung Co-Owner & Executive Vice-chairman © HKBN Ltd. 2023. All Rights Reserved.
Slide 24: FY23 ESG Key Achievements
FY23 ESG Key Achievements ^ • Highest grade • No. 1 among HK Telcos for 4 • Top 9% among Telcos worldwide* consecutive years • Top 10% of HK rated companies AAA AAA AAA AA AA AA+ AA+ A A AA AA AA BBB AA- BB A+ B A CCC A- to BBB- FY21 FY22 FY23 FY21 FY22 FY23 *as of receiving AAA grade ^https://reg.h
Slide 25: Financials
FINANCIALS Derek Yue Co-Owner & Chief Financial Officer © HKBN Ltd. 2023. All Rights Reserved.
Slide 26: Stable Revenue Growth
Stable Revenue Growth Product YoY +1% YoY • Global demand falls in office computer change equipment following the accelerated 11,626 11,692 equipment purchases during Covid-19 period 4,766 4,474 -6.1% Residential Service 2,433 2,393 • Residential service revenue slightly -1.6% decreased amid intense
Slide 27: Enhancing Cost Efficiency for Better EBITDA
Enhancing Cost Efficiency for Better EBITDA EBITDA YoY -12% EBITDA • Declined YoY by $320m, mainly due to 2,610 increase in network costs and cost of sales 2,290 by $369m FY22 FY23 Cost of Inventories • Decline in line with product sales Network Costs and Cost of Inventories 7,156 7,525 YoY Network
Slide 28: Non-Cash Accounting Goodwill Adjustment
Non-Cash Accounting Goodwill Adjustment Financials in HK$mn, unless otherwise stated Nature: Goodwill • Non-cash, nil impact on dividend and interest payment models Goodwill: • Generated when a company acquires new business • Purchase amount paid in excess of the book value of the net assets Impairm
Slide 29: Fitter, Leaner, Generating more Cash for Growth
Fitter, Leaner, Generating more Cash for Growth Financials in HK$mn, unless otherwise stated Operating Expenses* Capital Expenditure Cash From Operation Save 1% Save 5% +10% 2,222 2,027 1,899 1,886 540 512 FY22 FY23 FY22 FY23 FY22 FY23 Opex/ Capex/ CFO/ Revenue: 16.3% 16.1% Revenue: 4.6% 4.4% EBITDA
Slide 30: Q&A
Q&A © HKBN Ltd. 2023. All Rights Reserved.
Slide 31: FY23 Annual Results Announcement: Transcendence
FY23 Annual Results Announcement TRANSCENDENCE From Telco to ICT Powerhouse 2 November 2023 © HKBN Ltd. 2023. All Rights Reserved.
Slide 32: Appendix
Appendix © HKBN Ltd. 2023. All Rights Reserved. 32
Slide 33: Operational Highlights
Operational Highlights © HKBN Ltd. 2023. All Rights Reserved. 33
Slide 34: Consolidated Income Statement
Consolidated Income Statement © HKBN Ltd. 2023. All Rights Reserved. 34
Slide 35: Consolidated Balance Sheet (Summary)
Consolidated Balance Sheet (Summary) © HKBN Ltd. 2023. All Rights Reserved. 35
Slide 36: Reconciliation of EBITDA and Adjusted Free Cash Flow
Reconciliation of EBITDA and Adjusted Free Cash Flow • * Dividend amount included the distribution to Vendor Loan Note holders, who are entitled to the same DPS on the equivalent number of shares based on the terms of the Vendor Loan Notes. • # Depreciation and amortisation of the Disposal Group was
Slide 37: Manageable Debt Profile
Manageable Debt Profile Undrawn Revolving Net Leverage Ratio^ Avg. Finance Cost Facilities 5.1x 5.3% $1.8bn (FY22: 4.6x) (FY22: 2.7%) (FY22: $1.7bn) Average weighted maturity of the Group's borrowings was 2.4 years as of Aug 23. ^ The Group has entered into facility agreements with various internati