Slide 1: Harvesting Smiles: FY17 Annual Results Presentation
Harvesting Smiles FY17 Annual Results Presentation for the year ended 31 August 2017 Presentation by Co-Owners: William Yeung, Chief Executive Officer NiQ Lai, Chief Operating Officer 2 November 2017 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, CEO & Co-Owner • Operations & 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: J-Curve Inflection Point
Executive Summary: J-Curve Inflection Point • J-Curve inflection point reached: – 16% HoH increase in EBITDA to HK$560mn – 12.5% YoY increase in FY17 full dividend declared of 45 HK cents per share • Residential Business: – Effected ARPU increase since 1 Sep 2016 (start of FY17) and this will be ful
Slide 6: On Track for "Invest and Harvest" Roadmap
On Track for “Invest and Harvest” Roadmap* FY16 FY17 FY18 FY19 FY20 Broadband + Fixed Invest Harvest Harvest Harvest Harvest Voice • Content Overlay Invest Invest Harvest Harvest Harvest • Mobile Overlay N/A Invest Invest Harvest Harvest Integrate Integrate Enterprise Solutions Harvest Harvest Harve
Slide 7: Financial J-Curve Inflection Point
Financial J-Curve Inflection Point • 16% HoH increase in EBITDA from HK$481mn to HK$560mn • 12.5% YoY increase in FY17 full dividend declared of 45 HK cents per share EBITDA Harvest Phase +16% HoH ($mn) (%) Investment Phase 560 (OTT + MVNO) +3% 511 -3% -3% 495 481 1H FY16 2H FY16 1H FY17 2H FY17 OTT
Slide 8: Residential: Focus on Revenue Growth
Residential: Focus on Revenue Growth Service Revenue up by 8% to HK$1,958mn Higher exit acquisition Residential Broadband Subscriptions Residential ARPU1 $194 and renewal contract 857 +2% 871 ARPU2 754 +14% +$26 (for the 183 -5% 173 month of -3% 168 Aug-17) 37% 37% 37% Aug-15 Aug-16 Aug-17 FY15 FY16
Slide 9: Quad-play Focus to Raise Stickiness and ARPU
Quad-play Focus to Raise Stickiness and ARPU • Monthly delivering >25k myTV boxes to customers No. of boxes ordered FY17 Launch Date myTV SUPER (TVB) 526k Apr 2016 LeEco 274k Oct 2015 Total 800k n/a • Exceeding our 200k registration target Residential Mobile FY17 Launch Date Registered 218k Sep 2016
Slide 10: Growth via ATTACK on Legacy Incumbent
Growth via ATTACK on Legacy Incumbent A for A/xDSL broadband T for home Telephone line M for Mobile Press conference held at Dorsett House on 20 Sep 2017 10
Slide 11: ATTACK Legacy A/xDSL
ATTACK Legacy A/xDSL • Capitalise on 729K A/xDSL & coaxial lines opportunity • Extend fibre coverage to 50K village households in 12 months 11 Source: OFCA (June 2017)
Slide 12: ATTACK Legacy Telephone
ATTACK Legacy Telephone • Capitalise on 1.4mn home telephone lines opportunity • Ground-breaking home telephone & managed Wi-Fi bundled service that removes network coverage constraint 12 Source: HKT 2017 Interim Results Presentation
Slide 13: ATTACK Mobile
ATTACK Mobile • Over-achieved with 218k registered subscriptions by end of FY17 • Full suite of mobile plans to capture LOW to HIGH data usage users (5GB to unlimited) • Upward trend for Revenue and ARPU after introduction of high-tier tariff plans A full array of mobile plans from HK$78/mth for 5GB
Slide 14: Enterprise Solutions: Strong Growth post NWT Acquisition
Enterprise Solutions : Strong Growth post NWT Acquisition • Restart the growth momentum in 2H FY17 after NWT integration (revenue HoH +12%) • Integration challenge with NWT related to incumbent leased lines had been resolved in 2H FY17 Service Revenue grew by 49% to HK$1,208mn Enterprise Customers E
Slide 15: Enterprise Solutions Recent Showcase
Enterprise Solutions Recent Showcase HK$41 mn Contract Sum over Multiple Years HKCEC - Hong Kong Convention and Exhibition Centre • Chosen by a world-class exhibition venue • Enhancing client’s Wi-Fi experience via our cutting-edge, high-density wireless network A large residential estate in Kwai Ch
Slide 16: Operations & Financial Review
Operations & Financial Review NiQ Lai COO & Co-Owner 16
Slide 17: If We Deliver our Core Purpose, Profits will Follow
If We Deliver our Core Purpose, Profits will Follow We believe our Hong Kong is a better place to live today because HKBN: • In 1990s - shattered the International Direct Dial monopoly • In 2000s – pioneered Fibre broadband • Today – leading integrated Quad-play disruption 17
Slide 18: Plenty of Growth for HKBN in Hong Kong
Plenty of Growth for HKBN in Hong Kong Last Reported Major Listed Hong Kong Stock Price as Market Cap Stock Code Annual Revenue Telecom Carriers of 30 Oct # (HK$ bn) (HK$ bn) HKT-SS 6823 9.52 72.1 33.8 SmarTone 315 9.71 10.7 8.7 Hutchison Telecom HK 215 2.81 13.5 12.0* WTT Trade Sale Price (Oct 2016
Slide 19: Rex Tso HD Live – Our Gift to Hong Kong
Rex Tso HD Live – Our Gift to Hong Kong The largest YouTube livestream event in Hong Kong’s history • >215K concurrent live views on match day • >1.18mn accumulated views within 48 hours post event 19
Slide 20: Osaka, Japan Top 10% Performance Trip
Osaka, Japan Top 10% Performance Trip for ~300 Non-managerial Talents • 4-day extravaganza for a balanced mix between frontline and support functions; Hong Kong, Guangzhou and Shenzhen offices • No commission cap for our sales force as we want our top sales to be the best paid in the industry • HK$5
Slide 21: Ho Chi Minh City, Vietnam InnoVIETour
Ho Chi Minh City, Vietnam InnoVIETour Annual Management Experiential Trip with 105 Leaders attended • > Decade old tradition • 5 day /4 night packed with plenty of team building activities and lots of bowls of pho • Workshop by John Wood on his upcoming new book HKBN management had a marvelous time
Slide 22: Co-Ownership: Interest Alignment on FY18-20 goals
Co-Ownership 3 (Subject to Shareholder Approval) – Interest Alignment on FY18-20 goals We have been looking forward to this… 2012:Co-Ownership 1 2015: Co-Ownership 2 Aspirational Goals: • Offer to top ~600 Talents out of ~3000 total to invest 2-12 months salary. • Must achieve cumulative AFF/share o
Slide 23: Sustain Revenue Growth Momentum
Sustain Revenue Growth Momentum Financials in HK$mn, unless otherwise stated. +16% 3,232 +19% 66 2,784 -58% 2,341 158 1,208 +45% 109 811 +49% 476 +70% +8% 1,757 +3% 1,815 1,958 FY15 FY16 FY17 Residential Revenue Enterprise Revenue Product Revenue 23 All financial figures are rounded to nearest HK$ m
Slide 24: Full Impact of ARPU Increment will be Reflected in FY18
Full Impact of ARPU Increment will be Reflected in FY18 Accumulated impact over the period New customers / Renewal FY17 FY18 FY19 customers at expiry ARPU increment in FY17 Month 12 Month 11 Month 10 Month 9 Month 8 Month 7 Month 6 Month 5 Month 4 Month 3 Month 2 Month 1 24 24-month contracts period
Slide 25: Focusing on Bundling Strategy for Mobile Service
Focusing on Bundling Strategy for Mobile Service • Bundling strategy further enhanced with mobile • Potential upsell opportunities in >90% of broadband subscriptions base without mobile services Subscriptions ARPU (FY17) Mobile (without broadband services) 78k $119 Mobile (with broadband services) 6
Slide 26: Mini J-curve Per Mobile Subscriptions
Mini J-curve Per Mobile Subscriptions • First contract is mainly used to cover the upfront expense • Generate value in the long-run as lower cost in retention Year 1 Year 2 Year 3 Year 4 Contract 1st Contract 2nd Contract Period Cumulative Negative ~Breakeven Positive Very Positive Cash Flow Acquisi
Slide 27: EBITDA & AFCF Hiking up with J-Curve Coming to Fruition
EBITDA & AFCF Hiking up with J-Curve Coming to Fruition Financials in HK$mn, unless otherwise stated. EBITDA Adjusted Free Cash Flow (AFCF) +3% 1,041 +12% 453 +3% 1,006 979 +4% 406 392 FY15 FY16 FY17 FY15 FY16 FY17 EBITDA AFCF 27 All financial figures are rounded to nearest HK$ million
Slide 28: Prudent CAPEX Investment
Prudent CAPEX Investment Financials in HK$mn, unless otherwise stated. 412 380 364 16% 15% 11% FY15 FY16 FY17 CAPEX CAPEX as % of Revenue All financial figures are rounded to nearest HK$ million 28 Note: CAPEX paid during 1H FY17 for Adjusted Free Cash Flow Calculation is HK$197mn.
Slide 29: Manageable Debt Profile
Manageable Debt Profile • Manageable Debt Profile post NWT Acquisition 3.7 3.4 3.4 2.8 FY15 FY16 FY17 1H FY17 Net Debt to EBITDA (x) • Refinancing exercise during FY17 extended debt expiry to 2021 % of Interest Rate Interest Rate Amount (HK$mn) (Nov-16 (Sep-18 Total Debt to Aug-18)1 to May-20)2 Debt
Slide 30: Outlook
Outlook • Residential Business – Growth via ATM* – Quad play strategy to reduce churn and drive up ARPU • Enterprise Solutions – Implode market to grow our revenue via market share gain – Fixed + mobile bundle – Sell idle NWT capacity purchase at fraction of replacement cost * A for “A”/xDSL broadba
Slide 31: Q&A
Q&A # StartfromLimit Hong Kong All-Talent Townhall 31 KITEC 07/2017
Slide 32: Appendix
Appendix 32
Slide 33: Operational Highlights – Residential
Operational Highlights – Residential YoY FY16 FY17 Changes Residential homes passed ('000) 2,202 2,249 +2% Subscriptions ('000) - Broadband 857 871 +2% - Voice 520 518 -0% Market share - Broadband 37.2% 37.1% -0.1pp - Voice 22.0% 22.2% +0.2pp Residential customers ('000) 898 994 +11% Broadband churn
Slide 34: Operational Highlights – Enterprise Solutions
Operational Highlights – Enterprise Solutions YoY FY16 FY17 Changes Commercial building coverage ('000) 2.3 2.3 - Subscriptions ('000) - Broadband 47 53 +13% - Voice 120 132 +10% Market share - Broadband 17.8% 18.8% +1.0pp - Voice 6.5% 7.2% +0.7pp Enterprise customers ('000) 50 54 +8% Broadband chur
Slide 35: Consolidated Income Statement (YoY)
Consolidated Income Statement (YoY) (HK$ million, unless otherwise stated) FY16 FY17 YoY Changes Residential Revenue 1,815 1,958 +8% Enterprise Revenue 811 1,208 +49% Product Revenue 158 66 -58% Turnover 2,784 3,232 +16% Other net income 16 11 -31% Network costs and costs of sales (451) (710) +57% A
Slide 36: Consolidated Income Statement (HoH)
Consolidated Income Statement (HoH) (HK$ million, unless otherwise stated) FY17 1H FY17 2H HoH Changes Residential Revenue 941 1,017 +8% Enterprise Revenue 569 639 +12% Product Revenue 24 42 +75% Turnover 1,535 1,697 +11% Other net income 7 4 -43% Network costs and costs of sales (304) (406) +34% Ad
Slide 37: Consolidated Balance Sheet (Summary)
Consolidated Balance Sheet (Summary) (HK$ million, unless otherwise stated) At 31 August 2016 At 31 August 2017 Non-current assets 5,779 5,708 Current assets 826 878 Current liabilities 826 762 Total assets less current liabilities 5,779 5,823 Non-current liabilities 4,416 4,694 Net assets 1,363 1,1
Slide 38: Reconciliation of EBITDA and Adjusted Free Cash Flow
Reconciliation of EBITDA and Adjusted Free Cash Flow (HK$ million, unless otherwise stated) FY16 FY17 YoY Changes Profit/ (loss) for the period 245 171 -30% Finance costs 142 211 +49% Interest income (1) - n/a Income tax 90 86 -4% Depreciation 384 420 +9% Amortisation of intangible assets 120 129 +8