Slide 1: Surging Forward: FY16 Annual Results Presentation
Surging Forward FY16 Annual Results Presentation for the year ended 31 August 2016 Presentation by Co-Owners: William Yeung, Chief Executive Officer NiQ Lai, Chief Talent & Financial Officer 9 November 2016 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, Chief Talent and Financial Officer & Co-Owner • Q&A 3
Slide 4: Business Review
Business Review William Yeung CEO & Co-Owner 4
Slide 5: Executive Summary
Executive Summary • Consistently delivering 3 Highs & 1 Low FY16 YoY Service Revenue HK$2.6bn 18% EBITDA HK$1.0bn 3% Residential Broadband Subscriptions 857k 14% Low Churn Rate (below 1%) 0.8% • Final dividend declared at 20 HK cents per share • Full year dividend at 40 HK cents per share 5
Slide 6: Strong Service Revenue Growth
Strong Service Revenue Growth Financials in HK$mn, unless otherwise stated. +18% 2,626 HKBN ES business +9% 2,233 (ex-NWT) grew by +10% 2,053 811 20% YoY 1,861 +70% 476 423 +12% 371 +14% +8% 1,757 +3% 1,815 1,490 +9% 1,630 FY13 FY14 FY15 FY16 Residential Revenue Enterprise Revenue 6 All financial fi
Slide 7: Residential Business: 103k net addition
Residential Business: 103k net addition Service Revenue grew by 3% to HK$1,815mn Residential Broadband Subscriptions Residential ARPU 857 +14% +9% 754 +5% 692 660 183 175 +5% -5% 173 40% +11% 158 37% 33% 34% Aug-13 Aug-14 Aug-15 Aug-16 FY13 FY14 FY15 FY16 Residential Broadband Subscriptions ('000) R
Slide 8: Quad-play in Action!
Quad-play in Action! Since LeEco / Le Sports (EPL) Oct 2015 >250k subscriptions Fixed Content broadband Since TVB myTV SUPER Apr HK$24bn1 2016 >250k subscriptions “Quad-play” market MVNO partnership with two major Since mobile network operators Fixed Sep Mobile voice 2016 30k subscribers Compelling
Slide 9: Enterprise Business: Strong organic growth and NWT integration
Enterprise Business: Strong organic growth and NWT integration Service Revenue grew by 70% to HK$811mn1 ES ARPU on Enterprise Customers ES ARPU August 2016 is approximately HK$1,4213 502 1,2341 +28% +22% 39 1,026 -2% 1,010 +8% +22% 948 32 29 +10% Aug-13 Aug-14 Aug-15 Aug-16 FY13 FY14 FY15 FY16 Enter
Slide 10: Financial Review
Financial Review NiQ Lai Chief Talent and Financial Officer & Co-Owner 10
Slide 11: Revenue growth driven by larger residential customer base & ES integration
Revenue growth driven by larger residential customer base & ES integration Financials in HK$mn, unless otherwise stated. +19% 2,784 Solid organic growth of 158 underlying ES business +10% +9% 2,341 +45% + 2,131 109 5 months inclusion of 1,949 +39% 811 NWT’s results -12% 78 +70% (Apr-16 to Aug-16) 89
Slide 12: Zig-zag approach to market share and ARPU
Zig-zag approach to market share and ARPU 191 182 183 175 175 173 155 158 135 139 130 103 67 74 60 57 62 27 34 32 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 Net Additions of Residential Broadband Subscriptions ('000) ARPU Exit New and Renewal Contracts Broadband Bundle Blended ARPU Note: FY07
Slide 13: Changes in pricing may take years to run through
Changes in pricing may take 4 years to run through Delay in ARPU Impact Accumulated impact over the period Renewal customers Year 1 Year 2 Year 3 Year 4 at expiry Month 24 Month 23 Month 22 Month 21 Month 20 Month 19 Month 18 Month 17 Month 16 Month 15 Month 14 Month 13 Month 12 Month 11 Month 10 Mo
Slide 14: Maintaining stable EBITDA and AFF despite accelerated growth and intensified competition
Maintaining stable EBITDA and AFF despite accelerated growth and intensified competition Financials in HK$mn, unless otherwise stated. EBITDA Adjusted Free Cash Flow 38% 40% 42% 36% 979 +3% 1,006 +16% +14% 845 741 392 +4% 406 +26% 311 +37% 227 FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16 EBITDA EBITDA Ma
Slide 15: Prudent CAPEX investment
Prudent CAPEX investment Financials in HK$mn, unless otherwise stated. 412 380 346 324 17% 16% 16% 15% FY13 FY14 FY15 FY16 CAPEX CAPEX as % of Revenue All financial figures are rounded to nearest HK$ million 15 Note: CAPEX paid during FY16 for Adjusted Free Cash Flow Calculation is HK$393mn.
Slide 16: Manageable Debt Profile post NWT Acquisition
Manageable Debt Profile post NWT Acquisition • Manageable Debt Profile post NWT Acquisition Including HK$700mn to fund acquisition 4.0x 3.1x 3.4x of NWT 2.8x FY13 FY14 FY15 FY16 Net Debt to EBITDA • Weighted average debt maturity extended to ~3.6 years Amount Interest Hedging Maturity (HK$ mn) Rate
Slide 17: Outlook: Beginning of the next harvest period
Outlook: Beginning of the next harvest period • Residential Business – Shifted from market share gain to revenue focus – Focus on offering best value Quad-play services on integrated single bill • Enterprise Solutions – Execute the synergy plan from NWT integration – Continue to focus on SME clients
Slide 18: Residential Quad-play opens up room for revenue growth
Residential Quad-play opens up room for revenue growth Broadband Mobile + Fixed Content Total (3 sims per household) Voice Services Quad-play Estimated ~$250 ~$150 ~$600 ~$1,000 ARPU Estimated Addressable ~$5bn ~$3bn ~$16bn ~$24bn Market Size Note: 1. The addressable market size of double-play, trip
Slide 19: Room for revenue growth by upselling Quad-play to existing customers
Room for revenue growth by upselling Quad-play to our existing customer base Total Billing Market Share ~44% Total Billing Market Share (898k HKBN customers/ 2.0mn1 households within HKBN coverage) HKBN , 44% Others, 56% Upsell Potential ~7% HKBN residential revenue/ estimated Quad-play market (HK$1
Slide 20: LIFE@HKBN (LIFE-work Priority)
LIFE@HKBN (LIFE-work Priority) 20
Slide 21: HKBN Korea Management Trip 2016
HKBN Korea Management Trip 2016 114 HKBN Managers @ Military Base HKBN Experiential Management Trip “KA” Taekwondo Program Year Location 1999 Gold Coast, Australia 2001 Star Cruises, Hong Kong 2002 Sanya, China 2003 Zhuhai, China & Macau 2004 Qingdao, China 2005 Zhuhai, China 2006 Bangkok, Thailand
Slide 22: Q&A
Q&A 22
Slide 23: Appendix
Appendix : “al SEES. Se 2 aoe > — > és pees 5 oT ail ~ Pld ai i ~gaatry oe
Slide 24: Operational Highlights – Residential
Operational Highlights – Residential YoY FY15 FY16 Changes Residential homes passed ('000) 2,143 2,202 +3% Subscriptions ('000) - Broadband 754 857 +14% - Voice 534 520 -3% Market share - Broadband 36.6% 40.1% +3.5 pp - Voice 22.0% 22.0% +0.0 pp Residential customers ('000) 822 898 +9% Broadband chu
Slide 25: Operational Highlights – Enterprise Solutions
Operational Highlights – Enterprise Solutions YoY FY15 FY16 Changes Commercial building coverage ('000) 2.0 2.3 +15% Subscriptions ('000) - Broadband 35 47 +34% - Voice 98 120 +22% Market share - Broadband 14.3% 17.8% +3.5 pp - Voice 5.3% 6.5% +1.2 pp Enterprise customers ('000) 39 50 +28% Broadband
Slide 26: Consolidated Income Statement
Consolidated Income Statement (HK$ million, unless otherwise stated) FY15 FY16 YoY Changes Residential Revenue 1,757 1,815 +3% Enterprise Revenue 476 811 +70% Product Revenue 109 158 +45% Turnover 2,341 2,784 +19% Other net income 17 16 -6% Network costs and costs of sales (306) (451) +47% Advertisi
Slide 27: Consolidated Balance Sheet (Summary)
Consolidated Balance Sheet (Summary) (HK$ million, unless otherwise stated) At 31 August 2015 At 31 August 2016 Non-current assets 4,924 5,779 Current assets 627 826 Current liabilities 489 826 Total assets less current liabilities 5,062 5,779 Non-current assets 3,548 4,416 Net assets 1,514 1,363 Ca
Slide 28: Reconciliation of EBITDA and Adjusted Free Cash Flow
Reconciliation of EBITDA and Adjusted Free Cash Flow (HK$ million, unless otherwise stated) FY15 FY16 YoY Changes Profit/ (loss) for the period 104 245 +136% Finance costs 260 142 -45% Interest income (3) (1) -67% Income tax 86 90 +5% Depreciation 366 384 +5% Amortisation of intangible assets 110 12