review of - i-cable communications limited · profit before taxation 297 233 +27% taxation (13)...

evieweview of of 2004 Final Results2004 Final ResultsRR

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Pay TVPay TVInvestment in differentiation pays

3

2004 2003 chg.Subs (000) 702 656 +47

ARPU (HK$) 225 220 +5

• Subs continued to grow notwithstanding new competition• Net addition of 20K in 2H• Sub growth momentum resumed in 4Q after a soft 3Q

Pay TVInvestment in differentiation pays

4| Financial ReviewFinancial Review | Business Review |

(HK$ M) 2004 2003 % chg.Turnover 1,888 1,734 +9%

Opex before dep’n (1,140) (1,001) +14%EBITDA 748 733 +2%

Depreciation (279) (289) -4%

Operating profit 469 444 +6%

• Turnover, EDITDA & operating profit reached new high• Opex before dep’n increased by 14% due mainly to higher

programming costs resulting from increased competition• Depreciation peaked in 2003


Pay TVInvestment in differentiation pays

&&Regaining m arket share momentu m

InternetInternet MultimediaMultimedia

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2004 2003 Chg.

Broadband Subs (000) 291 258 +34

Broadband ARPU (HK$) 140 129 +11

VoIP lines in service (000) 29 - -

• Broadband sub net addition increased to 28K in 2H04 due to service enhancement and bundled package

• ARPU increased 9% YoY • VoIP lines surpassed 29K after launch in 2H04


Internet & multimediaRegaining market share momentum

(HK$ M) 2004 2003 % Chg.Turnover 481 409 +18%

Opex before dep’n (277) (250) +11%EBITDA 204 159 +28%

Depreciation (248) (244) +2%

Operating loss (44) (85) -48%

EBITDA margin 42% 39%

• Turnover reached new historic high• Profitability and margin continued to improve


Internet & multimediaRegaining market share momentum

(HK$M) 2004 2003 % chg.Turnover 2,372 2,143 +11%Opex before dep’n (1,544) (1,354) +14%EBITDA 828 789 +5%Depreciation (532) (539) -1%Operating profit 296 250 +18%Net interest expense (0) (7) -100%Non-operating expense 1 (10) -Profit before taxation 297 233 +27%Taxation (13) (13) -Net profit 284 220 +29%

• Turnover, Operating profit & Net profit surpassed all previous years

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Consolidated results

• Programming costs increased mainly due to carriage of UEFA Euro 2004, higher English Premier League costs in 2H04 & new development projects

• Depreciation started to decline in 2H04

Operating expenses

791 (+22%)

380 (+5%)

373 (+9%)

532 (-1%)

650

361

343

539

0

500

1000

1500

2000

2500

2004 2003

Depreciation

S, G&A

Network & Others

Programming

2,076 (+10%)1,893

HK$ Million

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• Capex declined to HK$428 million (2003: HK$437 million)

• Net cash increased to HK$115 million (2003: HK$29 million)

-

100

200

300

400

500

600

700

800

900

2000 2001 2002 2003 2004

HK

$ M

illio

n

EBITDA

CAPEX

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Liquidity & financial resources

(HK cents) 2004 2003 2002 2001

Interim DPS 3.0 1.5 1.5 -

Final DPS 4.5 4.0 1.5 2.5

Total DPS 7.5 5.5 3.0 2.5EPS 14.1 10.9 9.4* 8.3

Payout ratio 53% 50% 32% 30%

* before impairment loss on investments

• Final dividend of 4.5 cents per share recommended• Established increasing dividend stream

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2004 Dividend

• Record turnover and profit achieved in spite of intensified competition in core businesses

• Continued growth in pay TV subscriber and turnover offsets the impact of increased programming cost due to competition

• Broadband growth started to benefit from service enhancement and new bundling strategies

• 29,000 voice lines in service in less than 4 months

• Capex continued to trend downwards


Summary

usiness

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ReviewB

• “Triple play”– pay television, broadband and voice

• NOW– In the market now for one and a half years– Aggressive in marketing & content acquisition

• Galaxy– In the market now for 1 year– Intelsat pulled out in late 2004– TVB obtained 12-month waiver of ownership

restriction from government– Started to become more aggressive

in marketing15| Financial Review | Business ReviewBusiness Review |

Pay TV - Competitive landscape

Pay TV StrategyMaintain programming edge over competitors

• Maintain product differentiation• Revamp sports platform:

– Direct acquisition of exclusive English Premier League rights

– Launched new channels, i.e. EPL, Soccer Betting, Odds Express, Sports Times

– Launched NBA TV– Digitized Sports Centre in full operation for FIFA

World Cup 06 • Further enhancement on local production:

– News platform to be strengthened with emphasis on finance and live carriage

– New look entertainment platform planned for 2H05

16| Financial Review | Business ReviewBusiness Review |

• Pay TV migration to digital transmission completed

• Develop new pay TV packages to counter competitors’offerings

• Continue to enhance service quality and upgrade transmission technology of Broadband service

• Pay TV and Broadband bundled packages proved to be competitive

• Exploit “triple play” bundling opportunities

Marketing and Servicing Strategies


• Satellite service launched in September to serve households (& floating objects) not previously served

• A leading video content supplier for Internet & mobile access

• Sole supplier of inflight local news service to CathayPacific

New MarketsBroadening distribution in Hong Kong


• Horizon Channel

– Focus on expanding its distribution in the Mainland

– Overseas coverage expanded to the Americas

– Landing in Malaysia by 2Q05

– Concluded deal to open up mobile content opportunities in the Mainland

– Concluded deal for “Horizon Daily” for distribution on a digital network in Shanghai


New MarketsBroadening distribution in Hong Kong

• Logical step in advancing i-CABLE’s strategy to further invest in content business to enhance growth

• Plan to produce up to 20 films in the next two years

• Long term prospects of Chinese films in both the Mainland and international markets are positive

• Synergies with our Pay TV movie and entertainment platform

• Investments will be carefully evaluated on a project by project basis and closely monitored in terms of both quality and budget control


New MarketsFilm production

• Competition is expected to remain keen in the core businesses

• Programming edge and realization of “triple play”opportunity will enhance our competitiveness

• Further content investment and distribution in new markets to expand beyond core businesses and enhance growth

Summary


i-CABLE Communications LimitedHKSE Stock Code: 1097.HK

NASDAQ Symbol: ICAB

DisclaimerAll information and data are provided for information purposes only. All opinions included herein constitute i-CABLE’s judgement as of the date hereof and are subject to change without notice. i-CABLE and its subsidiaries and affiliates hereby disclaim (i) all express, implied, and statutory warranties of any kind to user and/or any third party including warranties as to accuracy, timeliness, completeness, or fitness for any particular purpose; and (ii) any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the information and data contained herein.

review of - i-cable communications limited · profit before taxation 297 233 +27% taxation (13)...

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