1Q2016 RESULTS ANALYST BRIEFING 25 May 2016
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Performance Overview Financial Review Operating Highlights Concluding Remarks 3
1Q2016 Highlights (1Q2016 vs. 1Q2015) Financial Performance Revenue RM2.86bn (+2.9%) Reported EBIT RM279.9mn (+15.0%) Normalised EBIT RM312.0mn (+26.9%) Reported PATAMI RM322.4mn (+>100.0%) Normalised PATAMI RM195.4mn (+9.6%) Operational Performance Positive growth in Internet & Others revenue- Higher subscriber base, customer projects and ICT-BPO revenue Total broadband take-up continues to grow - now at 2.36mn customers: Streamyx : 1.487mn customers Unifi : 877,000 customers Note: Unless stated otherwise all figures shall be inclusive of Webe 4 4
Performance Overview Financial Review Operating Highlights Concluding Remarks 5
Group Results 1Q2016 Higher profitability YoY due to higher revenue and cost efficiencies RM mn Reported 1Q16 4Q15 % Change QoQ 1Q15 % Change YoY Revenue 2,855.4 3,184.4-10.3% 2,774.1 +2.9% Other Operating Income 41.4 32.7 +26.6% 32.4 +27.8% EBITDA 923.0 879.7 +4.9% 847.6 +8.9% Depn & Amort. 643.1 620.5 +3.6% 604.2 +6.4% EBIT 279.9 259.2 +8.0% 243.4 +15.0% Other Gains / (Loss) 50.5 (24.7) +>100.0% (0.6) +>100.0% Net Finance Cost* 47.7 41.0 +16.3% 35.0 +36.3% FX Gain /(Loss) 104.5 24.6 +>100.0% (41.2) +>100.0% Profit Before Tax (PBT) 393.2 224.6 +75.1% 172.1 +>100.0% PATAMI 322.4 192.5 +67.5% 128.9 +>100.0% Normalised PATAMI 195.4 259.7-24.8% 178.3 +9.6% Note: Unless stated otherwise all figures shall be inclusive of Webe For Normalised EBIT and Normalised PBT refer Slides 7 and 8 *Excludes FX (Gain)/Loss 6
Normalised EBIT Normalised EBIT higher by 26.9% YoY RM mn 1Q16 4Q15 1Q15 Reported EBIT 279.9 259.2 243.4 Non Operational Unrealised FX (Gain)/Loss on International trade settlement 31.9 12.8 2.3 Loss on Sale of Assets 0.2 0.2 0.2 MESRA Programme - 77.4 - Normalised EBIT 312.0 349.6 245.9 Normalised EBIT Margin 10.8% 10.9% 8.8% Reported EBIT Margin 9.7% 8.1% 8.7% EBIT is calculated as Total Revenue (Operating Revenue + Oth. Operating Income) less Operating Cost EBIT Margin is calculated as percentage of EBIT against Total Revenue Normalised EBIT Margin is calculated as percentage of Normalised EBIT against Normalised Total Revenue (Operating Revenue + Oth. Operating Income Loss on Sale of Assets) Note: MESRA Programme: a voluntary separation programme for employees aged 55 Unless stated otherwise all figures stated shall be inclusive of Webe 7
Normalised PBT Normalised PBT higher by 24.9% YoY RM mn 1Q16 4Q15 1Q15 Reported PBT 393.2 224.6 172.1 Non Operational Unrealised FX (Gain)/Loss on International trade settlement 31.9 12.8 2.3 Other (Gain)/Losses* (50.3) 24.9 0.8 Unrealised FX (Gain)/Loss on Long Term loans (104.5) (24.5) 41.2 MESRA Programme - 77.4 - Normalised PBT 270.3 315.2 216.4 * Comprise of fair value (FV) changes of FVTPL (FV through P&L) investment gain/loss on disposal for AFS (available for sale) investments and gain/loss on Sale of Assets Note: MESRA Programme: a voluntary separation programme for employees aged 55 Unless stated otherwise all figures stated shall be inclusive of Webe 8
Cost % of Revenue 1 YoY: lower cost % across several categories RM mn RM2,563.1 RM2,957.9 RM2,616.9 91.3% 91.9% 90.3% 2.0% 0.0% 4.1% 1.0% 3.2% 3.3% 6.0% 9.4% 6.0% 7.2% 6.6% 5.9% 10.9% 11.6% 22.6% 21.8% 17.9% 19.1% 11.7% 21.4% 18.8% Bad debt Marketing expenses Supplies & material Maintenance cost Other operating cost Manpower cost Direct cost Dep & amortisation 21.5% 19.3% 22.2% 1Q15 4Q15 1Q16 Total Cost / Revenue ( %) 1 Revenue = Operating Revenue + Other Operating Income Note: The classification of cost is as per financial reporting (Please refer to Appendix for breakdown) Note : Unless stated otherwise all figures shall be inclusive of Webe 9
Group Capital Expenditure Higher Capex in line with expansion of HSBB and SUBB footprint RM mn 9.3% 11.1% 258 38 81 139 318 99 59 160 Capex/Revenue ratio at 11.1% 50% Access 19% Core Network 31% Support Systems 1Q15 1Q16 Access Core Network Support System Capex / Revenue ( %) Note : Unless stated otherwise all figures shall be inclusive of Webe 10
Group Cash Flow Stable Cashflows with Debt Headroom RM mn 1Q16 1Q15 Cash & cash equivalent at start 3,510.8 2,975.0 Cashflows from operating activities 528.3 145.7 Cashflows used-in investing activities (769.9) (502.8) Capex 317.6 258.0 Cashflows from financing activities (77.8) 268.8 Effect of exchange rate changes (0.3) 0.1 Cash & cash equivalent at end 3,191.1 2,886.8 Free cash-flow (EBITDA Capex) 605.4 589.6 Key Financial Ratios 31 Mar 16 31 Dec 15 Return on Invested Capital 1 6.76% 6.69% Return on Equity 2 10.20% 11.66% Return on Assets 1 5.19% 5.90% Current Ratio 3 1.31 1.25 WACC 6.88% 7.36% 31 Mar 16 31 Dec 15 Gross Debt to EBITDA 2.08 1.90 Net Debt/EBITDA 1.17 1.02 Gross Debt/Equity 1.03 0.97 Net Debt/Equity 0.61 0.52 Net Assets/Share (sen) 200.7 209.2 1 Based on Normalised EBIT 2 Based on Normalised PATAMI Note : Unless stated otherwise all figures shall be inclusive of Webe 11
Performance Overview Financial Review Operating Highlights Concluding Remarks 12 12
Group Total Revenue by Product Voice -0.6% RM mn -3.5% 849 853 880 YoY 30% of total Group revenue Lower by 0.6% YoY, mainly due to lower voice revenue at Mass Market and Managed Accounts which offset higher revenue at Global & Wholesale 854 849 1Q15 4Q15 1Q16 RM mn Internet +7.7% +3.7% YoY 31% of Group Revenue 830 862 894 Higher by 7.7% YoY mainly from increase in UniFi revenue and higher cumulative UniFi customer base and higher revenue from IPTV Content 1Q15 4Q15 1Q16 Note : Unless stated otherwise all figures shall be inclusive of Webe *Total revenue is after inter-co elimination. 13
Group Total Revenue by Product Data +1.4% YoY RM mn -14.2% 22% of Group Revenue 627 741 636 Higher by 1.4% YoY, mainly contributed by GITN and Global & Wholesale 1Q15 4Q15 1Q16 Others* RM mn +2.8% YoY -32.1% 17% of Group Revenue 701 463 476 2.8% higher, mainly due to higher USP amortisation revenue Increased revenue at Managed Accounts by VADS and Government 1Q15 4Q15 1Q16 *Others comprise other telco and non-telco services (i.e ICT-BPO, MMU tuition fees, customer projects) Note : Unless stated otherwise all figures shall be inclusive of Webe 14
Group Total Revenue by Line of Business Mass Market Managed Accounts RM mn +3.5% RM mn +0.9% -1.4% -12.3% 1,225 1,208 1,182 1,167 1,027 1,037 1Q15 4Q15 1Q16 1Q15 4Q15 1Q16 YoY Higher revenue growth led by increase in UniFi revenue at TM Consumer YoY Positive revenue growth driven by major LOBs, mainly at VADS, in particular ICT-BPO products Note: Unless stated otherwise all figures shall be inclusive of Webe 15
Group Total Revenue by Line of Business Global & Wholesale Others* RM mn +9.3% RM mn -3.0% -23.4% -16.1% 393 561 429 187 216 181 1Q15 4Q15 1Q16 YoY Higher YoY revenue by 9.3%, mainly contributed by higher bilateral revenue *Others include revenue from Property Development, TM R&D, TMIM, UTSB, MKL & Webe YoY 1Q15 4Q15 1Q16 Lower YoY by 3.0%, mainly due to lower revenue at Webe Note: Unless stated otherwise all figures shall be inclusive of Webe 16
Physical Highlights Strong growth of Unifi customers YoY. ARPU levels are steady Broadband Customers (In thousand) ARPU (RM) 190 190 192 190 192 89 86 87 +4.3% 2,266 2,288 2,294 89 2,340 +1.0% 89 2,364 UniFi continues to drive growth, with 877,000 customers (38,000 net adds QoQ) Total broadband customers at 2.36mn Unifi ARPU at RM192 and Streamyx ARPU stable at RM89 UniFi ARPU (Blended) Streamyx Net ARPU 17
Performance Overview Financial Review Operating Highlights Concluding Remarks 18 18
Key Takeaways Operating revenue grew by 2.9% YoY, driven by Internet & Others Reported EBIT higher by 15% YoY to RM279.9mn Normalised EBIT higher by 26.9% YoY at RM312mn Reported PATAMI higher by >100.0% YoY at RM322.4mn Normalised PATAMI higher by 9.6% YoY at RM195.4mn Capex/revenue ratio at 11.1% Leadership in broadband: Total broadband customers 2.36mn to date 59% customers on packages 4mbps and above Stable ARPU Note : Unless stated otherwise all figures shall be inclusive of Webe 19
Appendices 20
Normalised EBITDA Normalised EBITDA higher by 12.4% YoY RM mn 1Q16 4Q15 1Q15 Reported EBITDA 923.0 879.7 847.6 Non Operational Unrealised FX (Gain)/Loss on International trade Settlement 31.9 12.8 2.3 Loss on Sale of Assets 0.2 0.2 0.2 MESRA Programme - 77.4 - Normalised EBITDA 955.1 970.1 850.1 Normalised EBITDA Margin 33.0% 30.2% 30.3% Reported EBITDA Margin 31.9% 27.3% 30.2% EBITDA is calculated as Total Revenue (Operating Revenue + Oth. Operating Income) less Operating Cost (Exc. Depreciation, Amortisation & impairment). EBITDA Margin is calculated as percentage of EBITDA against Total Revenue Normalised EBITDA Margin is calculated as percentage of Normalised EBITDA against Normalised Total Revenue (Operating Revenue + Oth. Operating Income Loss on Sale of Assets) Note: MESRA Programme: a voluntary separation programme for employees aged 55 Unless stated otherwise all figures stated shall be inclusive of Webe 21
Normalised PATAMI Normalised PATAMI higher by 9.6% YoY RM mn 1Q16 4Q15 1Q15 Reported PATAMI 322.4 192.5 128.9 Non Operational Unrealised FX (Gain)/Loss on International trade settlement 27.8 8.0 7.4 Other (Gain)/Losses* (50.3) 24.9 0.8 Unrealised FX (Gain)/Loss on Long Term loans (104.5) (24.5) 41.2 MESRA Programme (Net of tax) - 58.8 - Normalised PATAMI 195.4 259.7 178.3 * Comprise of fair value (FV) changes of FVTPL (FV through P&L) investment gain/loss on disposal for AFS (available for sale) investments and gain/loss Sale of Assets Note: MESRA Programme: a voluntary separation programme for employees aged 55 Unless stated otherwise all figures stated shall be inclusive of Webe 22
Cost % of Revenue 1Q16 4Q15 1Q15 Comments (1Q2016 vs. 1Q2015) Operating Revenue (RM mil) 2,855.4 3,184.4 2,774.1 - Other Operating Income (RM mil) Direct Costs % 18.8 19.1 17.9 41.4 32.7 32.4 - RM mil. 544.5 615.1 502.3 Higher International Outpayment at TM Global Manpower % 21.4 21.8 22.6 Lower due to reduction in certain allowances and employee RM mil. 620.4 700.7 633.1 leasing cost Supplies & Materials % 6.0 9.4 6.0 RM mil. 174.9 301.1 167.1 Bad & Doubtful Debts % 1.0 0.0 2.0 RM mil. 30.1 1.2 57.3 Marketing Expenses % 3.3 4.1 3.2 RM mil. 95.9 133.1 89.1 Maintenance Cost % 5.9 6.6 7.2 RM mil. 169.9 213.5 202.9 Other Operating Costs % 11.7 11.6 10.9 RM mil. 338.1 372.7 307.1 Increase mainly in COS Material at Managed Accounts Lower rate of expected losses from Mass Market due to better credit management Higher A&P at Mass Market for webe activities Reduction of OPEX maintenance in TM Government Increase in forex loss for trading settlement and deposits Depreciation & Amortisation % 22.2 19.3 21.5 Higher assets write-off and accelerated depreciation in RM mil. 643.1 620.5 604.2 Webe, higher amortisation of content cost Total (RM mil) 2,616.9 2,957.9 2,563.1 Total (%) 90.3 91.9 91.3 Note : Unless stated otherwise all figures shall be inclusive of Webe 23
Group Balance Sheet RM million As at As at 31 Mar 2016 31 Dec 2015 Shareholders Funds 7,541.5 7,780.6 Non-Controlling Interests 311.5 258.1 Deferred & Long Term Liabilities 10,566.1 10,551.8 Long Term Borrowings 7,179.2 7,175.4 Deferred Tax 1,392.9 1,367.6 Deferred Income 1,670.2 1,661.7 Derivative financial instruments 295.0 321.9 Trade and other payables 28.8 25.2 18,419.1 18,590.5 Current Assets 6,882.6 7,297.5 Trade Receivables 2,142.8 2,353.1 Other Receivables 654.2 594.0 Cash & Bank Balances 3,191.9 3,511.6 Others 893.7 838.8 Current Liabilities 5,247.7 5,822.6 Trade and Other Payables 3,601.3 4,367.0 Short Term Borrowings 587.7 408.3 Others 1,058.7 1,047.3 Net Current Assets/(Liabilities) 1,634.9 1,474.9 Property Plant & Equipment 14,903.0 15,186.9 Other Non-Current Assets 1,881.2 1,928.7 18,419.1 18,590.5 Note : Unless stated otherwise all figures shall be inclusive of Webe 24
Mass Market & Managed Accounts RM mn Revenue by Product +2.3% -6.8% 2,194 2,407 2,245 396 650 418 772 814 844 Others Internet Data Voice 405 399 397 712 694 685 1Q15 4Q15 Note: Total revenue is after inter-co elimination. Revenue by product is before inter-co elimination Global & Wholesale 1Q16 *Others comprise other telco and non-telco services (i.e: ICT-BPO, MMU tuition fees, customer projects) RM mn Revenue by Product +9.3% -23.4% 393 31 277 561 35 405 429 31 299 Others Data Voice 141 190 168 1Q15 4Q15 1Q15 Note : Unless stated otherwise all figures shall be inclusive of Webe 25
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