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Asia Satellite Telecommunications Holdings Limited announces its 2011 annual results for the year ended 31 December 2011.
22 March 2012
Asia Satellite Telecommunications Holdings Limited announces its 2011 annual results for the year ended 31 December 2011.
AsiaSat¡¦s Chairman, JU Wei Min, said, "Despite the continuing global economic uncertainties, we are cautiously optimistic that AsiaSat¡¦s markets will remain stable throughout 2012. We are therefore adopting a positive outlook for the core business in 2012, during which we will continue to develop our business in new and existing markets. Our business will focus chiefly on new opportunities being pursued in relation to continuing growth in HD services and the healthy expansion of the DTH business.
However, we expect significant growth in the near term may be hindered by a number of key factors. As at the end of 2011, utilisation of our satellite fleet had reached 82%. This high level of utilisation will restrict capacity available for major growth until AsiaSat 6 and AsiaSat 8 can be launched in 2014. Our new satellite, AsiaSat 7 will provide limited near term growth opportunities as it will be temporarily used to develop new markets until it eventually replaces AsiaSat 3S. Additionally, with the end of the service life of AsiaSat 2, we will no longer have the positive contribution from its short term lease, resulting in a reduction in revenue when there is little capacity available to compensate for this shortfall.
Chairman¡¦s Statement
Yet another year of record results
I am pleased to start my first year as Chairman of AsiaSat by announcing record results for the year ending 31 December 2011, especially as this follows a record performance the year before.
Growth for the period under review was driven mainly by continuing general demand for satellite capacity, translating into growth for our core transponder-leasing business. Also there was strong performance from wholly-owned subsidiary, SpeedCast Holdings Limited.
Generally favourable economic conditions in the region continued in the second half-year maintaining stability across much of our customer base. Solid performance was seen in the broadcast, content provision and telecommunications sectors, while broadband service providers and occasional-use clients engaged in satellite news gathering experienced healthy demand.
Economic turbulence in various parts of the world appeared to have little impact on the majority of our Asian customers, many of whom spent the year expanding their businesses and offering increasingly more content and services to end users. 2011 saw new services emerging in video and telecommunications ¡V largely as a result of a surge in demand for capacity to address the rapidly-growing Direct-to-Home (DTH) market and the trend towards High Definition Television (HDTV) conversion along with a general requirement for capacity for content delivery to new mobile services.
A highlight of the year was the award of the ¡¥Regional Satellite Operator of the Year¡¦ title to AsiaSat at Euroconsult¡¦s 8th Annual Awards for Excellence in Satellite Management.
This award recognised industry players for their outstanding achievements and was presided over by a panel of judges comprising experts from Euroconsult, the global satellite research and analyst firm, as well as from the Satellite Finance and Space News publications. Judging criteria was based on key performance indicators such as revenue, profit and EBITDA growth, market penetration, innovation, strategic decisions and market impact.
Turnover
Turnover in 2011 was HK$1,718 million (2010: HK$1,456 million), an increase of HK$262 million, representing a rise of 18% compared with the previous year. The increase came from the continued growth of our core business, bolstered by winning significant contracts from new customers. In addition, SpeedCast, our wholly-owned subsidiary, reported revenue of HK$239 million (2010: HK$206 million), as a result of steady demand from customers in the broadband and maritime sectors.
Profit
Profit attributable to shareholders for 2011 was HK$823 million (2010: HK$695 million), representing an increase of 18% compared with 2010. This was primarily the result of strong revenue growth, greater interest income and careful management of expenses during the year.
Operating expenses
Operating expenses in 2011, excluding depreciation, were up at HK$375 million (2010: HK$313 million). The rise was mainly the result of net provision for impairment of trade receivables of HK$37 million, an increase in staff costs of HK$35 million because of additional headcount and salary increment, which was offset by a China business tax refund of HK$12 million.
Depreciation
Depreciation in 2011 was HK$345 million (2010: HK$343 million), close to last year.
Cash flow
During 2011, the Group experienced net cash outflow of HK$20 million (2010: Inflow of HK$802 million) after capital expenditure of HK$975 million (2010: HK$602 million) and dividends of HK$207 million (2010: HK$156 million). As of 31 December 2011, the Group reported a cash and cash equivalents balance of HK$2,266 million (2010: HK$2,286 million).
The Group continues to be debt free.
Dividend
The directors do not recommend the payment of any final dividend for the year ended 31 December 2011.
Core business performance
The Company¡¦s satellites continued to provide uninterrupted service to our customers throughout 2011, offering unrivalled coverage of more than 50 countries and serving some two-thirds of the world¡¦s population.
The Group¡¦s total number of transponders leased or sold as of 31 December 2011 was 108 (31 December 2010: 97) with an overall utilisation rate of 82% (31 December 2010: 73%). This figure includes the six Hong Kong Broadcast Satellite Service (BSS) transponders leased to DISH-HD Asia Satellite.
New contracts won during the period under review amounted to a total value of HK$551 million (2010: HK$986 million), while renewed contracts were worth HK$607 million (2010: HK$864 million). New and renewed contracts combined amounted to HK$1,158 million (2010: HK$1,850 million). The reduction in total new and renewed contract value was mainly the result of shorter terms opted for by new customers and fewer major contracts renewed during 2011.
During the year, AsiaSat achieved solid growth in its core transponder leasing activity and its subsidiary SpeedCast. In addition to the continued demand for video and television programming in the region, our business of delivering content to telecommunications service providers for onward distribution remained steady, thanks largely to the increasing demand for mobile delivered content. This is being driven by government agencies, maritime services and the brisk take-up of smartphones and other handheld devices.
Growth in emerging markets
A key growth area has been the development of television services in emerging markets served by AsiaSat. A particular example is India, which was tipped by analysts last year to become the largest DTH satellite services market in the world by 2012.
By the end of 2011, India was reported to have 44 million DTH subscribers with an expectation of having 69 million subscribers in 2014.
In India, AsiaSat provides Ku-band capacity to DTH operators for satellite television services locally, as well as C-band capacity for content distribution to pay-TV and cable television operators across the country.
A loosening of regulations has had the effect of allowing greater access to India¡¦s DTH market, while generating pay-TV business opportunities.
AsiaSat 7
Our new AsiaSat 7 satellite was launched in November last year from Baikonur in Kazakhstan, and completed in-orbit testing to verify performance and integrity in early January 2012.
In line with our replacement policy, AsiaSat 7 was launched well ahead of the date on which it must replace AsiaSat 3S. This move was made in order to address launch risk and ensure the smooth and transparent transfer to AsiaSat 7 for our existing AsiaSat 3S customers in advance of the latter¡¦s end of life in late 2014. In the meantime, AsiaSat 7 will be used in the interim to provide us with business expansion opportunity in new markets before it eventually replaces AsiaSat 3S. Our approach exemplifies AsiaSat¡¦s unwavering commitment to quality by assuring customers of service continuity.
AsiaSat 6 and 8 satellites under construction
A significant development during 2011, in terms of AsiaSat¡¦s ongoing growth trajectory, was the placement of orders with Space Systems/Loral to build AsiaSat 6 and AsiaSat 8.
These new satellites will expand our fleet from four to six satellites, following their launch in the first half of 2014, and will significantly enhance our capability to provide a broader range of services to meet increasing demand for quality satellite capacity in the Asia-Pacific.
In December, AsiaSat strengthened its competitive position in the region by signing a co-operation agreement with Thaicom Public Company Limited (¡§Thaicom¡¨), the Thailand-based satellite and telecommunications operator. This agreement will enable AsiaSat to access new markets and expand our business scope by providing satellite services from AsiaSat 6 at the 120¢XE orbital location.
Expansion of Tai Po Earth Station in Hong Kong
Our project to expand AsiaSat¡¦s earth station at Tai Po in Hong Kong, scheduled for completion by end of the first quarter 2012, will enable AsiaSat to offer a greater array of value-added services to customers, while providing the Company with future growth opportunities.
The expansion includes the construction of additional infrastructure that will enable the installation of new antennas, allowing us to offer a greater range of services to customers in the broadcast and telecommunications industries.
The improved Tai Po facility will open up new streams of revenue through services that include co-location of equipment, satellite signal uplinking, facilities for disaster recovery and a playout capability for TV service providers.
SpeedCast
SpeedCast growth was driven by strong demand for broadband services from markets in developing economies, particularly in the Middle East, where SpeedCast addresses the need for basic telecommunications, military applications and private network requirements.
This wholly-owned subsidiary continues to provide services ¡V mainly for broadband applications ¡V via very small aperture terminals (VSAT) in areas not adequately served by terrestrial infrastructure, as well as at sea.
SpeedCast¡¦s turnover for the year ending 31 December 2011 was HK$239 million (2010: HK$206 million), representing an increase of 16%. The Company recorded net profit of HK$26 million for the year (2010: HK$23 million).
DISH-HD Asia Satellite
Agreement was reached in late 2011 to dispose of the Company¡¦s stake in DISH-HD Asia Satellite, a joint venture between AsiaSat and EchoStar Corporation, which delivers DTH satellite services to viewers in Taiwan and other markets.
Completion of the transaction is subject to approval from the Hong Kong Broadcasting Authority. The move to dispose of our stake in the joint venture was based on a strategic business decision prompted by a prolonged period of underperformance. Although AsiaSat has sold its interest in DISH-HD Asia Satellite, we continue to provide capacity and support services for DISH-HD
Asia Satellite¡¦s ongoing operations.
During 2011, DISH-HD Asia Satellite, which was formed in 2009, continued to incur a loss, of which AsiaSat¡¦s share and impairment loss on loan to DISH-HD Asia Satellite was approximately HK$105 million (2010: HK$42 million).
Outlook
Despite the continuing global economic uncertainties, we are cautiously optimistic that AsiaSat¡¦s markets will remain stable throughout 2012. We are therefore adopting a positive outlook for the core business in 2012, during which we will continue to develop our business in new and existing markets. Our business will focus chiefly on new opportunities being pursued in relation to continuing growth in HD services and the healthy expansion of the DTH business. Demand for capacity in the expanding telecommunications markets will continue to be a key area for our growth. AsiaSat also plans to capitalise on occasional-use opportunities arising from major events such as the London 2012 Olympic and Paralympic Games and the UEFA EURO 2012 soccer tournament.
However, we expect significant growth in the near term may be hindered by a number of key factors. As at the end of 2011, utilisation of our satellite fleet had reached 82%. This high level of utilisation will restrict capacity available for major growth until AsiaSat 6 and AsiaSat 8 can be launched in 2014. Our new satellite, AsiaSat 7 will provide limited near term growth opportunities as it will be temporarily used to develop new markets until it eventually replaces AsiaSat 3S. Additionally, with the end of the service life of AsiaSat 2, we will no longer have the positive contribution from its short term lease, resulting in a reduction in revenue when there is little capacity available to compensate for this shortfall. Finally, it still remains to be seen whether economic issues in various parts of the world will begin to have a greater negative impact on the markets in which we operate.
Aside from these factors above, it recently came to the attention of the Group that a new Finance Bill has been proposed in India. This Bill, if passed by the Indian Parliament in May 2012, could have unfavourable consequences to the Group¡¦s current tax proceedings in the Indian Courts. In the past, we have obtained favourable judgment from the High Court in India that the Group will not be liable for income tax and we are seeking clarification from our legal and tax advisors on the impact that this new bill may have on the Group's tax position.
Notwithstanding the above, AsiaSat is ideally positioned as Asia Pacific¡¦s premier operator and benefits from strong management and sound financial fundamentals. With its strong market presence and healthy balance sheet, AsiaSat will continue to explore opportunities involving partnerships similar to our cooperation with Thaicom, as well as other collaborative ventures and acquisitions that will help to strengthen our foundation for future growth.
Directors and Senior Management
Following almost two decades with the Company Executive Chairman Mr. Peter Jackson retired from full-time service on 31 July 2011. On 9 January 2012, Mr. Guan Yi resigned as a Non-executive Director of the Company and Mr. Peter Jackson was appointed as a Non-executive Director of the Company. At the same time Mr. Chong Chi Yeung was appointed as an Alternate Director to Mr. Mi Zeng Xin.
I am very pleased to be appointed as Chairman of the Company as of 1 February 2012 and thank both Mr. Sherwood Dodge and Mr. Peter Jackson, who both acted as Chairman during past year. I would also like to thank Mr. Guan Yi for his past service.
Finally, as I take over as Chairman I would like to take this opportunity to thank our customers and equity holders for their continued support, as well as the Board and all staff members for their dedication, professionalism and commitment to success.
JU Wei Min
Chairman
Hong Kong, 22 March 2012
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