1H 2016 RESULTS
ANALYST BRIEFING
30 August 2016
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Disclaimer
2
Performance Overview
Financial Review
Operating Highlights
Concluding Remarks
3
1H 2016 Highlights
Note: Unless stated otherwise all figures shall be inclusive of Webe
Revenue RM5.90bn(+5.1%)
Reported EBIT
Normalised EBIT
Reported PATAMI
Normalised PATAMI
RM561.0mn(+2.2%)
RM575.0mn(+4.4%)
RM461.9mn(+35.5%)
RM370.5mn(-10.0%)
Financial Performance
Operational Performance
Healthy growth in Internet and data revenue - Higher customer base, customer projects and ICT-BPO revenue
Total broadband take-up continues to grow - now at 2.37mn customers:Streamyx : 1.47mn customersUnifi : > 900,000 customers
4
Healthy performance despite challenging environment
Interim Dividend Interim dividend of 9.3 sen per share or approximately RM349.5mn
Performance Overview
Financial Review
Operating Highlights
Concluding Remarks
5
Group Results 1H 2016
RM mn
Reported
2Q16 1Q16% Change
QoQ2Q15
% Change YoY
1H16 1H15% Change
1H16 v 1H15
Revenue 3,045.4 2,855.4 +6.7 2,840.6 +7.2 5,900.8 5,614.7 +5.1
Other Operating Income
31.6 41.4 -23.7 29.4 +7.5 73.0 61.8 +18.1
EBITDA 953.9 923.0 +3.3 929.4 +2.6 1,876.9 1,777.0 +5.6
Depn & Amort. 672.8 643.1 +4.6 623.9 +7.8 1,315.9 1,228.1 +7.1
EBIT 281.1 279.9 +0.4 305.5 -8.0 561.0 548.9 +2.2
Other Gains / (Loss) (1.1) 50.5 ->100.0 (0.8) -37.5 49.4 (1.4) +>100.0
Net Finance Cost* 57.7 47.7 +21.0 40.4 +42.8 105.4 75.4 +39.8
FX Gain /(Loss) (34.7) 104.5 ->100.0 (14.5) ->100.0 69.8 (55.7) +>100.0
Profit Before Tax(PBT)
195.9 393.2 -50.2 256.1 -23.5 589.1 428.2 +37.6
PATAMI 139.5 322.4 -56.7 212.1 -34.2 461.9 341.0 +35.5
Normalised PATAMI 167.5 203.0 -17.5 231.1 -27.5 370.5 411.8 -10.0
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
Higher EBIT YTD in line with higher revenue
6
Normalised EBIT
RM mn 2Q16 1Q16 2Q15 1H16 1H15
Reported EBIT 281.1 279.9 305.5 561.0 548.9
Non Operational
Unrealised FX (Gain)/Loss on International trade settlement
(18.1) 31.9 (0.8) 13.8 1.5
Loss on Sale of Assets - 0.2 0.2 0.2 0.4
Normalised EBIT 263.0 312.0 304.9 575.0 550.8
Normalised EBIT Margin 8.5% 10.8% 10.6% 9.6% 9.7%
Reported EBIT Margin 9.1% 9.7% 10.6% 9.4% 9.7%
EBIT is calculated as Total Revenue (Operating Revenue + Oth. Operating Income) less Operating CostEBIT Margin is calculated as percentage of EBIT against Total RevenueNormalised EBIT Margin is calculated as percentage of Normalised EBIT against Normalised Total Revenue (Operating Revenue + Oth. Operating Income – Loss on Sale of Assets)
Note: Unless stated otherwise all figures stated shall be inclusive of Webe
Normalised EBIT higher by 4.4% YTD
7
Normalised PBT
RM mn 2Q16 1Q16 2Q15 1H16 1H15
Reported PBT 195.9 393.2 256.1 589.1 428.2
Non Operational
Unrealised FX (Gain)/Loss on International trade settlement
(18.1) 31.9 (0.8) 13.8 1.5
Other (Gain)/Losses* 1.1 (50.3) 1.0 (49.2) 1.8
Unwinding of discount on put option over shares of a subsidiary
7.0 7.6 2.4 14.6 4.8
Unrealised FX (Gain)/Loss on Long Term loans 34.7 (104.5) 14.5 (69.8) 55.7
Normalised PBT 220.6 277.9 273.2 498.5 492.0
* Comprise fair value (FV) changes of FVTPL (FV through P&L) investment gain/loss on disposal for AFS (available for sale) investments, (gain)/loss on Sale of Assets and option over shares of a subsidiary
Normalised PBT higher by 1.3% YTD
Note: Unless stated otherwise all figures stated shall be inclusive of Webe 8
Cost % of Revenue1
22.2% 21.9% 21.6% 22.0%
18.8% 19.3% 17.8% 19.1%
21.4% 20.4% 22.2% 20.9%
11.7% 11.7% 11.0% 11.7%
5.9% 6.2% 6.8% 6.0%
6.0% 6.7% 5.9% 6.4%
3.3% 4.1% 3.1% 3.7%1.0% 0.6%
1.9% 0.8%
1Q16 2Q16 1H15 1H16
Bad debt
Marketing Expenses
Supplies & materials
Maintenance
Other operating cost
Manpower
Direct cost
Dep & Amortisation
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
RM mn
90.6%
RM5,412.8RM5,127.6
90.3%
RM2,795.9RM2,616.9
90.9%90.3%
9
Higher direct cost in line with revenue increase
Group Capital Expenditure
159 137196
29659
363
382
422
100
120
108
220
1Q16 2Q16 1H15 1H16
Core Network Access Support System
Note : Unless stated otherwise all figures shall be inclusive of Webe
10
Capex / Revenue ( %)
RM mn
Capex/Revenue ratio at 15.9%
45% Access32% Core Network23% Support Systems
938
686
15.9%12.2%
620
318
20.4%11.1%
Higher Capex in line with the expansion of major projects
Group Cash Flow
RM mn 1H16 1H15
Cash & cash equivalent at start 3,510.8 2,975.0
Cashflows from operating activities 933.8 833.4
Cashflows used-in investing activities (1,558.6) (1,016.8)
Capex 619.7 685.7
Cashflows from financing activities (281.7) 56.3
Effect of exchange rate changes (0.3) 0.1
Cash & cash equivalent at end 2,604.0 2,848.0
Free cash-flow (EBITDA – Capex) 1,257.2 1,091.3
30 Jun 16 31 Dec 15
Return on Invested Capital1 6.09% 6.69%
Return on Equity2 9.57% 11.66%
Return on Assets1 4.81% 5.90%
Current Ratio3 1.37 1.25
WACC 6.83% 7.36%
30 Jun 16 31 Dec 15
Gross Debt to EBITDA 1.92 1.90
Net Debt/EBITDA 1.11 1.02
Gross Debt/Equity 0.94 0.97
Net Debt/Equity 0.61 0.52
Net Assets/Share (sen) 204.7 207.0
Key Financial Ratios
Note : Unless stated otherwise all figures shall be inclusive of Webe
1 Based on Normalised EBIT2 Based on Normalised PATAMI
Stable Cashflows with Debt Headroom
11
Performance Overview
Financial Review
Operating Highlights
Concluding Remarks
12
831 894 905
1,661 1,799
2Q15 1Q16 2Q16 1H15 1H16
-6.3%
-3.2%
-3.5%
878 849 823
1,732 1,672
2Q15 1Q16 2Q16 1H15 1H16
30% of Group Revenue
Increase by 8.3% YTD, mainly from higher UniFi revenue due to higher customer base
Higher IPTV content revenue, in line with higher HyppTV takeup
Increase in new installations and bandwidth upgrade at Managed Accounts
Group Total Revenue by Product
Voice
Internet
28% of total Group revenue
Lower by 3.5% YTD, mainly due to decrease in usage and DEL customers at Mass Market & Managed Accounts, which offset higher bilateral revenue at Global & Wholesale
Note : Unless stated otherwise all figures shall be inclusive of Webe
YTD
YTDRM mn
+8.3%+8.9%
+1.2%
13
519 476
603
982 1,079
2Q15 1Q16 2Q16 1H15 1H16
613 636 715
1,240 1,351
2Q15 1Q16 2Q16 1H15 1H16
23% of Group Revenue
Higher by 8.9% YoY, mainly contributed higher data services, IRU and Domestic Ethernet at Global & Wholesale
18% of Group Revenue
10% higher, mainly due to higher revenue at Managed Accounts’ customer projects and USP
Higher ICT revenue at VADS
Note : Unless stated otherwise all figures shall be inclusive of Webe
*Others comprise other telco and non-telco services (i.e ICT-BPO, MMU tuition fees, customer projects)
YTD
YTD
RM mn
RM mn
+8.9%+16.6%
+12.3%
Group Total Revenue by Product
Data
Others*
+10.0%+16.3%
+26.8%
14
1,069 1,038 1,146
2,096 2,184
2Q15 1Q16 2Q16 1H15 1H16
1,233 1,260 1,272
2,470 2,532
2Q15 1Q16 2Q16 1H15 1H16
Group Total Revenue by Customer Clusters
Higher revenue YTD by 2.5% to RM2.53bn.
Growth led by Mass Market due to higher UniFi revenue.
Positive revenue growth driven by major LOBs, mainly at TM Government and VADS.
Healthy revenues mainly contributed by ICT and customer projects.
Mass Market Managed Accounts
YTD YTD
RM mn RM mn
+3.2%
+2.5%
+7.3%
+4.2%
+1.0%
+10.4%
Note : Unless stated otherwise all figures shall be inclusive of Webe 15
410 429 493
803
922
2Q15 1Q16 2Q16 1H15 1H16
129 128 134
246 263
2Q15 1Q16 2Q16 1H15 1H16
Note: Unless stated otherwise all figures shall be inclusive of Webe
Higher YTD revenue by 14.9%, mainlycontributed by increase in IRU sales andhigher Domestic Ethernet revenue.
Higher YTD growth by 6.6%, mainly dueto additional revenue from propertydevelopment (share of higher GDV).
Global & Wholesale Others*
Group Total Revenue by Customer Clusters
*Others include revenue from Property Development, TM R&D, UTSB & MKL
YTD YTD
RM mn RM mn
+20.2%
+14.9%
+4.2%
+6.6%
+14.7%
+4.2%
16
3029 29
28 29
ARPU
1,506 1,501 1,501 1,487 1,465
782 793 839 877 900
2Q15 3Q15 4Q15 1Q16 2Q16
3,461 3,426 3,403 3,364 3,319
782 793 839 877 900
2Q15 3Q15 4Q15 1Q16 2Q16DEL UniFi
-0.6%
*call usage only
+3.4%
Physical Highlights
Broadband
190
+0.1%
86
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RP
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RM
)
UniFi ARPU (Blended) Streamyx Net ARPU
UniFi continues to drive growth, with over 900,000 customers
Total broadband customers at 2.37mn
Unifi ARPU at RM194 and StreamyxARPU stable at RM89
87
192
89
190
2,288 2,294 2,340 2,364
89
192
Higher take up on new plans drive stronger UniFi ARPU.
2,365
89
194
17
4,243 4,219 4,242 4,241 4,219
-0.5%
Cu
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In t
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RM
)
ARPU steady at RM29
Fixed Line
Performance Overview
Financial Review
Operating Highlights
Concluding Remarks
18
19
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Key Takeaways
Note : Unless stated otherwise all figures shall be inclusive of Webe 20
Operating revenue grew by 5.1% YTD, driven by Internet
Reported EBIT higher by 2.2% YTD to RM561mn Normalised EBIT higher by 4.4% YoY at RM575mn
Reported PATAMI higher by 35.5% YTD at RM461.9mn Normalised PATAMI lower by 10% YTD at RM370.5mn
Capex/revenue ratio at 15.9%
Broadband champion: Total broadband customers 2.37mn to date 60% customers on packages 4Mbps and above Stable ARPU
Interim dividend of 9.3 sen per share or approximately RM349.5mn
Appendices
21
Normalised EBITDA
RM mn 2Q16 1Q16 2Q15 1H2016 1H2015
Reported EBITDA 953.9 923.0 929.4 1,876.9 1,777.0
Non Operational
Unrealised FX (Gain)/Loss on International trade Settlement
(18.1) 31.9 (0.8) 13.8 1.5
Loss on Sale of Assets - 0.2 0.2 0.2 0.4
Normalised EBITDA 935.8 955.1 928.8 1,890.9 1,778.9
Normalised EBITDA Margin 30.4% 33.0% 32.4% 31.7% 31.3%
Reported EBITDA Margin 31.0% 31.9% 32.4% 31.4% 31.3%
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 RevenueNormalised EBITDA Margin is calculated as percentage of Normalised EBITDA against Normalised Total Revenue (Operating Revenue + Oth. Operating Income – Loss on Sale of Assets)
Note: Unless stated otherwise all figures stated shall be inclusive of Webe
Normalised EBITDA higher by 6.3% YTD
22
Normalised PATAMI
RM mn 2Q16 1Q16 2Q15 1H2016 1H2015
Reported PATAMI 139.5 322.4 212.1 461.9 341.0
Non Operational
Unrealised FX (Gain)/Loss on International trade Settlement (net of tax)
(14.8) 27.8 1.1 13.0 8.5
Other (Gain)/Losses* 1.1 (50.3) 1.0 (49.2) 1.8
Unwinding of discount on put option over shares of a subsidiary
7.0 7.6 2.4 14.6 4.8
Unrealised FX (Gain)/Loss on Long Term loans 34.7 (104.5) 14.5 (69.8) 55.7
Normalised PATAMI 167.5 203.0 231.1 370.5 411.8
* Comprise of fair value (FV) changes of FVTPL (FV through P&L) investment gain/loss on disposal for AFS (available for sale) investments, (gain)/loss Sale of Assets and option over shares of a subsidiary
Normalised PATAMI lower by 10.0% YTD
23Note: Unless stated otherwise all figures stated shall be inclusive of Webe
Cost % of Revenue
2Q16 1Q16 2Q15 1H16 1H15Comments
(1H2016 vs. 1H2015)
Operating Revenue (RM mil) 3,045.4 2,855.4 2,840.6 5,900.8 5,614.7 -
Other Operating Income(RM mil)
31.6 41.4 29.4 73.0 61.8 -
Direct Costs % 19.3 18.8 17.7 19.1 17.8 Increase in International Outbound at TM Global and higher cost of outsourcing at VADSRM mil. 594.3 544.5 507.5 1,138.8 1,009.8
Manpower % 20.4 21.4 21.8 20.9 22.2-
RM mil. 627.4 620.4 624.7 1,247.8 1,257.8
Supplies & Materials % 6.7 6.0 5.8 6.4 5.9 Increase in material cost and other materialsmainly at VADS and TM GovernmentRM mil. 207.6 174.9 167.8 382.5 334.9
Bad & Doubtful Debts % 0.6 1.0 1.8 0.8 1.9-
RM mil. 19.0 30.1 51.0 49.1 108.3
Marketing Expenses % 4.1 3.3 3.1 3.7 3.1 Higher A&P at Webe from LTE event launches and events management RM mil. 124.8 95.9 89.0 220.7 178.1
Maintenance Cost % 6.2 5.9 6.4 6.0 6.8-
RM mil. 190.6 169.9 183.8 360.5 386.7
Other Operating Costs % 11.7 11.7 11.0 11.7 11.0 Increase in rental of buildings & premises fordata centreRM mil. 359.4 338.1 316.8 697.5 623.9
Depreciation & Amortisation %
21.9 22.2 21.7 22.0 21.6 Increase at Webe due to accelerated depreciation of Webe’s WIMAX sites
RM mil. 672.8 643.1 623.9 1,315.9 1,228.1
Total (RM mil) 2,795.9 2,616.9 2,564.5 5,412.8 5,127.6
Total (%) 90.9 90.3 89.4 90.6 90.3
Note : Unless stated otherwise all figures shall be inclusive of Webe24
Group Balance Sheet
Note : Unless stated otherwise all figures shall be inclusive of Webe25
RM millionAs at
30 Jun 2016As at
31 Dec 2015
Shareholders’ Funds 7,694.1 7,780.6
Non-Controlling Interests 237.4 258.1
Deferred & Long Term Liabilities 10,753.2 10,551.8
Long Term Borrowings 7,266.2 7,175.4
Derivative financial instruments 274.5 321.9
Deferred tax liabilities 1,486.9 1,367.6
Deferred income 1,707.4 1,661.7
Trade and other payables 18.2 25.2
18,684.7 18,590.5
Current Assets 6,459.2 7,297.5
Trade Receivables 2,398.4 2,353.1
Other Receivables 635.4 594.0
Cash & Bank Balances 2,604.6 3,511.6
Others 820.8 838.8
Current Liabilities 4,726.7 5,822.6
Trade and Other Payables 3,286.8 4,367.0
Short Term Borrowings 430.2 408.3
Others 1,009.7 1,047.3
Net Current Assets/(Liabilities) 1,732.5 1,474.9
Property Plant & Equipment 15,019.6 15,186.9
Other Non-Current Assets 1,932.6 1,928.7
18,684.7 18,590.5
721 686 6821,435 1,368389 397 401
794 799830 894 906
1,659 1,800
478 419 558
885 977
2Q15 1Q16 2Q16 1H15 1H16Voice Data Internet Others*
2,4182,297
4,566 4,716
Mass Market & Managed Accounts
Revenue by Product by Customer Clusters
Note : Unless stated otherwise all figures shall be inclusive of Webe 31
+5.1%+3.3%
+5.3%
Note: Total revenue is after inter-co elimination. Revenue by product is before inter-co elimination *Others comprise other telco and non-telco services (i.e: ICT-BPO, MMU tuition fees, customer projects)
RM mn
163 168 150304 318
282 299 370
560669
31 31 34
6265
2Q15 1Q16 2Q16 1H15 1H16Voice Data Others*
493410 429
922803
+20.2%+14.9%
+14.7%
Global & Wholesale
2,302
THANK
YOU
Investor Relations
Level 11 (South Wing), Menara TM
Jalan Pantai Baharu
50672 Kuala Lumpur
Malaysia
Tel: (603) 2240 4848/ 7366 / 7388
27
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