Pccw Limited · HKEX:8
Pccw — FY2001 Earnings Presentation
39 slides from Pccw's earnings presentation, Mar 20, 2002
Slide 1: Building on Fundamentals - FY2001 Annual Results Review
- Building on Fundamentals - FY2001 Annual Results Review for the year ended December 31, 2001 ANALYST PRESENTATION Hong Kong March 20, 2002
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains forward-looking statements as defined in Section 21E of the U.S. Securities Exchange Act of 1934, as amended. These forward-looking statements are not historical facts. Rather, the forward-looking statements are based on the current beliefs, assu
Slide 3: Overview
Overview Mr. Richard Li - Chairman & CEO
Slide 4: Summary Highlights
Summary Highlights Satisfactory operating performance Healthy EBITDA growth Improved EBITDA margin Solid capital structure Growth areas showing traction
Slide 5: Satisfactory Operating Performance
Satisfactory Operating Performance (US$ million) Pro forma Y-o-Y except for earnings per share (HK cents) 2000 (1) 2001 2001 2001 Change Turnover 2,652 2,815 + 6% EBITDA (2) 790 948 + 20% EBITDA margin 30% 34% Operating profit(2) 490 612 + 25% Profit attributable to shareholders 243 EPS - Basic 8.46
Slide 6: Growth in EBITDA 20%
Growth in EBITDA 20% (US$ million) 2001 2001 % of Y-o-Y change (Pro forma 2000) Revenue Total Revenue EBITDA (1) Revenue EBITDA TSS 2,561 91% 1,277 - 1% + 6% Business eSolutions 224 8% 13 + 45% N/A IDC 24 1% (8) + 50% - 100% Internet Services 168 6% (189) + 17% + 28% Infrastructure 175 6% 73 + 88% +
Slide 7: Integrated IT for Enterprise Customers
Integrated IT for Enterprise Customers PCCW FY01 T-Systems Dec 02E BT Mar. 01 % of Group Rev* % of DT Rev(1) % of Group Rev(2) SI Complex Hosting Integrated Local IP Revenue Int'l IP Carrier Services Others 25% 17% 22% • Total integrated solutions approach has deep links into other areas of the core
Slide 8: Building on the Fundamentals
Building on the Fundamentals 2001 Progress Efficiency Opex & capex savings â Strong Cash Flow Solid Capital Lengthened maturity of debt and debt repayment Structure Increasing Customer Reorganization into consumer and commercial groups Focus Broadband Service Uptake Broadband network customers- 282,
Slide 9: PCCW Strategy
PCCW Strategy Broadband Customer Centric Focus Greater China Focus Growth Retention & Growth via Business eSolutions Operational Managing Risks Efficiencies Capital Efficiency Bottom line : Revenue, EBITDA and PAT Growth
Slide 10: Challenges for 2002
Challenges for 2002 Market Challenges PCCW’s Approach Competition - Pricing − Offer mission-critical integrated services leading to pricing power − Pricing for long term sustainability − Increase broadband penetration through enhanced services Growth in Hong Kong − Offer “total solutions” to enterpr
Slide 11: PCCW Structure
PCCW Structure Mr. Fred Ma - Executive Director
Slide 12: Financial Reporting Structure
Financial Reporting Structure Business Business Business Business Internet InternetServices Services Infrastructure Infrastructure eSolutions eSolutions Ventures Ventures Reach RWC IDC TSS Other IDC TSS OtherSubsidiaries Subsidiaries HKTC HKTC
Slide 13: Operating & Governance Structure
Operating & Governance Structure Board Boardofof Committees chaired by members Directors of the main board Directors Chairman Chairman&& CEO CEO Audit Audit Executive Executive Committee Committee Committee Committee Regulatory Regulatory Finance Finance Operational Operational M&A Infrastructure Af
Slide 14: Corporate Governance
Corporate Governance Mr. Robin Nicholson - Senior Advisor to the Board
Slide 15: Corporate Governance Overview
Corporate Governance Overview • The review of Corporate Governance being undertaken by the Stock Exchange, the Enron situation in the US and other well publicized corporate failures have brought Corporate Governance into focus • The market rewards sound Corporate Governance plus management and finan
Slide 16: Corporate Governance Objective
Corporate Governance Objective • PCCW’s objective is to adopt prudent Corporate Governance standards in line with best international market practice. • This standard was also adopted by the Stock Exchange when framing the revised Listing Rules. • Corporate Governance involves more than compliance wi
Slide 17: PCCW Believes Key Elements Involve
PCCW Believes Key Elements Involve:- • Management structure which permits informed and efficient decision making. • Proper levels of delegation and effective oversight arrangements. • Effective compliance procedures which are properly understood at all management levels. • Creation of a culture whic
Slide 18: Corporate Governance Initiatives
Corporate Governance Initiatives • New committee structure designed to strengthen decision making and oversight of all key areas within the Group. • Each committee meets regularly and reports back to Excom which has overall delegated authority from the Board. • Adoption of revised authority matrix d
Slide 19: Review of Financials
Review of Financials Mr. David Prince - CFO
Slide 20: Key Financial Highlights
Key Financial Highlights Y-o-Y (Pro forma 2000) Revenue Growth 6% é Broadband and data services 15% é Business eSolutions 45% Operating Efficiencies é EBITDA margin 30% to 34% Prudent Investment ê Capex reduced 41% ê Internet Services - maintained commitment Capital Structure ê Gross debt reduced 32
Slide 21: Financial Highlights
Financial Highlights (US$ million, except EPS) 2000 (1) 2001 2001 Turnover 935 2,815 Operating profit/(loss) before net gain on investments and provisions for impairment losses 67 612 Gains/(losses) on investments, net (627) 98 Provision for impairment losses(2) (15,731) (12) Profit/(loss) from oper
Slide 22: Growth in EBITDA 20%
Growth in EBITDA 20% (US$ million) 2001 2001 % of Y-o-Y change (Pro forma 2000) Revenue Total Revenue EBITDA (1) Revenue EBITDA TSS 2,561 91% 1,277 - 1% + 6% Business eSolutions 224 8% 13 + 45% N/A IDC 24 1% (8) + 50% - 100% Internet Services 168 6% (189) + 17% + 28% Infrastructure 175 6% 73 + 88% +
Slide 23: TSS - Balanced Revenue Stream Strong Market Position
TSS - Balanced Revenue Stream Strong Market Position Pro forma 2001 2001 2000 Y-o-Y Drivers (US$ million) (US$ million) Local Telephony 925 36% 976 38% + 6% é Tariff increase. Jan ’01 Local Data 433 17% 495 19% + 14% é Local data bandwidth grew 63% é Wholesale broadband lines grew 43% Int’l Telecomm
Slide 24: Business eSolutions - Winning Projects
Business eSolutions - Winning Projects Strong Revenue Growth Externalizing Revenue Stream US$ million US$ million 250 250 200 108% 200 45% 66% 150 150 46% 100 100 50 50 0 0 2000 2001 2000 2001 Internal External SI & Solutions Biz Access TDL/Other JVs Ÿ Winning new projects against world class compet
Slide 25: Operating Efficiency Improving EBITDA Margin
Operating Efficiency Improving EBITDA Margin US$ million Revenue +6% 1,084 988 Operating Costs(1) - 9% Staff costs + 4% ê Savings US$ (26)m 557 580 Staff é New business US$ 24m é Restructuring costs US$ 15m 527 Other(1) 408 Other Opex (1) - 23% ê Increased operating efficiencies 2000 2001 Pro forma
Slide 26: Prudently Managing Portfolio of Investments
Prudently Managing Portfolio of Investments PCCW Group Investments (US$ million) 2000 2001 2001 Provision (667) (59) Other gain/(loss) investment 40 157 Net gain/(loss) on investment (627) 98 Carrying value of investments 348 298 Non-current 309 217 Current 39 81 PCCW Ventures • Only follow on inves
Slide 27: Share of Results of Associates & Joint Ventures
Share of Results of Associates & Joint Ventures (US$ million) 2000 2001 2001 2001 Total Reach (11 months) EBITDA 398 Share of jointly controlled companies (13) 67 PBT 181 Total RWC (11 months) Share of results of associates (8) 20 EBITDA 160 PBT 95 Share of results of unconsolidated subsidiaries 101
Slide 28: Improving Shareholder Deficit
Improving Shareholder Deficit (US$ million) 2000 2001 2001 2001 Key Movements Current assets 4,166 1,757 Sale of 60% of CSL Non-current assets 4,706 4,976 Total assets 8,872 6,733 Repayment of bridging loan Current liabilities (9,315) (1,406) Non-current liabilities (1,369) (6,237) Extending maturit
Slide 29: Debt Reduced
Debt Reduced Group HKTC (1) PCCW Group Improving Strong Cash Flows Gross Debt Paying Down Debt US$ million 10,000 8,755 6 Jun-01 Dec-01 5x 6,550 4.1 x 4x 5,991 3.5 x 5,000 3 0 0 Dec-00 Jun-01 Dec-01 Debt/ EBITDA (2) EBITDA/ Interest Dec 2001 Dec2001 2001 (US$ million) Dec 2000 Jun 2001 Dec y-o-y Gro
Slide 30: Extending Maturity of Debt
Extending Maturity of Debt $7,655 Dec 2000 (US$ million) $1,100 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2031 Bridge Loan Convertible Bond Credit Ratings: S&P BBB, Moody’s Baa1 Mar 2002 (US$ million) $1,475 $1,541 $1,000 $ 885 $825 $250 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Slide 31: Prudently Investing
Prudently Investing • 41% reduction in capex(1) to US$310 million from US$528 million – Digital & broadband upgrade mostly completed (US$ million) 2000 2001 2001 2001 • 70% of spend on meeting demand projects Capex 528 310 • Prudent investment criteria – including IRR, NPV – Type of business - matur
Slide 32: 2002 Cyberport
2002 Cyberport • Invested approx. US$263m as of Feb ‘02 • Funding Plan: - PCCW Group cash, and/ or - Committed but unutilized facilities, and/or - Internal cash flows generated from sales/ presales • Residential pre-sales expected by 1Q2003 • Plans for self funding post 2002
Slide 33: Summary Highlights
Summary Highlights Solid operating performance Strong EBITDA growth Enhanced EBITDA margin Improved capital structure Growth areas showing traction
Slide 34: Q&A
Q&A
Slide 35: Appendix
Appendix
Slide 36: Metrics
Metrics TSS Revenue TSS Operating Drivers (US$ million) 2000 (1) 2001 2001 2000 2001 2001 2001 Local Telephone Services 925 976 Local Telephony ('000) (Direct Exchange Lines, interconnection, Exchange lines in service 3,703 3,489 local access link and exchange co-location) Business lines 1,545 1,470
Slide 37: Metrics
Metrics Business eSolutions Internet Data Center (US$ million) 2000 2001 2001 2001 (US$ million) 2000 2001 2001 Revenue Revenue SI & Solutions 87 138 IP based services 7 14 Business Internet Access 29 48 Facilities management 9 10 TDL/Other minor JVs 38 38 Total 16 24 Total 154 224 EBITDA (4) (8) EB
Slide 38: Metrics
Metrics Internet Services Headcount - as at Dec 31 (US$ million) 2000 2001 2001 2001 2000 2001 2001 2001 Y-o-Y Change Revenue 143 168 TSS 11,557 10,965 - 5% EBITDA (261) (189) Business eSolutions 1,442 1,298 - 10% Consumer Broadband Subscribers (‘000) IDC 120 94 - 22% (including iTV) 249 320 Interne
Slide 39: Metrics
Metrics Reach - 11 months to Dec RWC - 12 months to Dec 2001 2001 HKGAAP 2000 2001 2001 (US$ million) USGAAP HKGAAP (US$ million) Revenue 1,279 1,279 Revenue 663 601 EBITDA 398 398 EBITDA 152 175 EBITDA margin 23% 29% EBITDA margin 31% Capex 78 52 EBIT 180 272 PBT 89 181 ARPU (HK$) 454 410 PCCW owne
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