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
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 correctness of the information or opinions presented or contained in these materials. It is not the intention to provide, and you may not rely on these materials as providing, a complete or comprehensive analysis of the financial or trading positions or prospects of the Company. None of the Company or any of their respective directors, officers, employees, agents, affiliates, advisers or representatives accepts any liability whatsoever in negligence or otherwise for any loss howsoever arising from any information or opinions presented or contained in these materials or otherwise arising in connection with these materials. The information presented or contained in these materials is subject to change without notice and its accuracy is not guaranteed. Statements that are not historical facts, including statements about the beliefs and expectations of the Company, are forward-looking statements. These statements are based on current plans, estimates and projections, and undue reliance should not be placed on them. Forward-looking statements speak only as of the date they are made, and the Company has no obligation to update any of them publicly in light of new information or future events. Forward-looking statements involve inherent risks, uncertainties and assumptions. The Company cautions that if these risks or uncertainties ever materialize or the assumptions prove incorrect, or if a number of important factors occur or do not occur, actual results of the Company may differ materially from those expressed or implied in any forward-looking statement. This document does not constitute, and should not be construed as constituting or forming part of, any advertisement of, or any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any shares of the Company or of any of its controlled entities or affiliates, in any jurisdiction. Neither this document, nor any part of it, shall form the basis of or may be relied upon in connection with, any contract, investment decision or commitment whatsoever, nor does it constitute a recommendation regarding the shares or securities of the Company. 2
Business & Financial Review NiQ Lai Co-Owner & Chief Executive Officer 3
Pursue Purposeful Profits If we deliver our Core Purpose, profits will follow 4
HKBN’s Outstanding Total Returns since IPO HKBN (with dividends) 2 (Rebased) Hang Seng Index 3 Performance of HKBN vs. Hang Seng 1 180 WTT merger Acquired announcement ICG 160 Launched Acquired +45.2% MVNO Launched NWT OTT 140 40.2% Excess 120 return +5.0% 100 80 60 IPO Current 2016 2018 2017 (Mar 2015) (Oct 2018) Source: HKBN’s disclosure, FactSet Note: Based on market data as of 31 Oct 2018; 1 Both of HKBN share price and Hang Seng Index were rebased to 100 on 12 Mar, 2015; 2 Includes accumulated DPS based on actual timing of dividends payment; 3 Hang Seng Index reflects cash dividend or distribution in the total return index counterpart as reinvestment on the ex-date 5
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 - Residential ARPU grew from $168 in FY17 to $176 in FY18 Enterprise Solutions Business: - Solid growth since FY17 with 14% YoY service revenue growth to HK$1,379mn 6
24% Growth in DPS to 56 HK Cents Maintained >95% core Adjusted Free Cash Flow (AFCF) payout ratio in full year declared dividend in 3 successive years DPS HK cents FY16 FY17 FY18 (Core AFCF Payout ratio) Interim 20 (109%) 22 (116%) 26 (110%) Full Year # 40 (99%) 45 (100%) 56 (97%) # The dividend policy of the Company is to pay dividends in an amount of not less than 90% of the Adjusted Free Cash Flow with an intention to pay 100% of the Adjusted Free Cash Flow in respect of the relevant year/period, after adjusting for potential debt repayment, if required. 7
Property Purchase for Core Network Planning • For our long-term strategic core network planning • No DPS impact as the related payment is excluded from AFCF Reconciliation (HK$mn) FY18 Property Status Remarks EBITDA 1,180 Sha Tin Industrial Completed Facilitate the planning for future Building (1 floor) in Sep-18 network upgrades AFCF (before adjusting property transactions) 506 - Securing ownership of existing TAC + Mita Completed Capital expenditure on Shatin Property # 39 Network Centers (2 floors + rooftop) in Sep-18 - Rooftop for chillers Deposit paid on acquisition of Cosmo True Limited * 33 AFCF (after adjusting property transactions) 578 All financial figures are rounded to nearest HK$ million # Represent $39 million partial payment for the purchase of a property in Shatin, which was completed in September 2018. * Represent deposit of $33 million paid on acquisition of Cosmo True Limited, a property holding company holding the two network centres currently occupied by the Group, which was 8 completed in September 2018.
Industry-leading Growth in FY18 Financials in HK$mn, unless otherwise stated EBITDA Revenue Adjusted Free Cash Flow (AFCF) +13% +22% 1,180 +3% 3,949 +28% 1,041 1,006 +16% 3,232 578 # 2,784 453 +12% 406 FY16 FY17 FY18 FY16 FY17 FY18 FY16 FY17 FY18 Revenue AFCF EBITDA All financial figures are rounded to nearest HK$ million 9 # Exclude property related transactions
Across-the-board Revenue Growth Financials in HK$mn, unless otherwise stated • Residential – driven by ARPU increment through quad-play and mobile business expansion • Enterprise – harvesting the synergy of full NWT integration +22% 3,949 292 3,232 +16% 66 2,784 +342% 1,379 158 -58% 1,208 +14% 811 +49% 2,278 1,958 1,815 +8% +16% FY16 FY17 FY18 10 All financial figures are rounded to nearest HK$ million Residential Revenue Enterprise Revenue Product Revenue
Harvesting Residential Business: Growth in Service Revenue and ARPU Service Revenue grew by 16% YoY to HK$2,278mn Residential Broadband Subscriptions : Residential ARPU 1 Churning price sensitive customers 871 +2% -1% +5% 860 857 -3% $ 176 37% 37% 36% $ 173 $ 168 FY16 FY17 FY18 Aug-16 Aug-17 Aug-18 Residential Broadband Subscriptions ('000) Residential ARPU Residential Broadband Market Share Note: 1) Residential ARPU refers to historical full base residential ARPU for the period. 2) Acquisition and renewal contract ARPU refers to ARPU of the new acquisition and renewal subscriptions for the specific month. Such ARPU was $194 in August 2017 and $189 in August 2018. 3) Market share is calculated by dividing the number of residential broadband subscriptions by the total number of residential broadband subscriptions recorded by the Office of the Communications Authority (OFCA) at the same point in time. The latest available OFCA statistics in broadband services for residential business is as of 31 July 2018. 11 4) In FY18 interim report, residential ARPU in 1H FY18 is $173
Enterprise Solutions Business : Promising Growth Revenue FY18 : HK$1,379mn FY18 : 57k FY18 : HK$1,510 FY17 : HK$1,208mn FY17 : 54k FY17 : HK$1,463 14% 6% 3% 12
Enterprise Solutions Business: Going Strong post NWT Full Integration • Sustaining growth momentum on both number of customer and ARPU Enterprise ARPU Enterprise Service Revenue (HK$mn) Enterprise Customers (‘000) +6% 57 1379 +14% +8% 54 NWT acquisition +3% 1208 $1,510 completed in n 50 +19% $1,463 +49% Ap Apr1 r16 $1,234 811 FY16 FY17 FY18 Aug-16 Aug-17 Aug-18 FY16 FY17 FY18 NWT full NWT ull integratio ion Note: 1) Enterprise ARPU refers to historical full base enterprise ARPU for the period. 13 2) In FY18 interim report, Enterprise ARPU in FY18 1H is $1,526
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 $580mn is completed with similar terms as existing loan. The net debt to EBITDA ratio will return to 3.5x level as a result. Interest Rate Amount (HK$mn) Maturity (Nov-16 to Aug-18) Debt - fixed portion # 2,635 May 2020 1.45% + Margin Debt - floating portion 1,265 May 2023 HIBOR + Margin Total debt (Aug-18) 3,900 New Debt - floating portion (from Oct 18) * 580 Oct 2023 n/a Total debt 4,480 All financial figures are rounded to nearest HK$ million. The interest margin will be subject to a margin grid determined by reference to the net leverage ratio. # After August 2018, the interest rate will be at 2.26% + margin per annum. Margin was 1.05% as at 31 August 2018 with leverage below 3.5x. * The interest rate of the new term loan of $580m will be HIBOR plus interest margin per annum (subject to a margin grid determined by reference to the net leverage ratio) 14
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