AsiaSat Reports 2016 Interim Results

17 August 2016

Asia Satellite Telecommunications Holdings Limited nnounced its 2016 interim results for the six months ended 30 June 2016.

AsiaSat’s Chairman, JU Wei Min, said, “For the remainder of 2016, we do not anticipate any significant changes in market conditions and believe that they will continue to pose a challenge not only for AsiaSat but the industry as a whole. The increased competition from terrestrial systems that is affecting satellite operators in other parts of the world is not expected to significantly impact Asia in the near to medium term, due to the lack of quality terrestrial networks in many parts of the Asia-Pacific region.”

“While core business should remain stable for the remainder of the year, it should be noted that a number of the adjustments that impacted first half results will not be realised in the second half of the year. The new contracts signed in the first half will only partially compensate for the expiry of short-term revenue from a to-be retired satellite and the termination of a number of contracts which will occur in the second half due to changes in regulations. In addition, we will not have the benefit of the tax credit of HK$41 million realised in the first half,” Mr. JU added.

ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED (Incorporated in Bermuda with limited liability) Stock Code: 1135

Announcement of Unaudited Results for the Six Months Ended 30 June 2016

Chairman’s Statement

For the first six months of 2016, AsiaSat continued to contend with a challenging market environment characterised by increasing competition, fierce pricing pressure and the overall downturn in the global economy.

Revenue and net profit remained relatively flat when compared to the corresponding period in 2015.

Despite the challenging market conditions, there were a number of new contracts for AsiaSat during the review period. Our advanced new satellites, AsiaSat 6 and AsiaSat 8, were in full operation with new customers acquired in Mainland China, Bangladesh and Thailand. We also added new customers from around the region, including the emerging market of Myanmar, as well as India, Pakistan, Singapore and Vietnam, among others.

We have started to make inroads into Ultra HD (UHD), the ultra-high definition television broadcasting standard of the future, for which we are becoming widely recognised as a pioneer in Asia.

INTERIM RESULTS

Revenue

For the first half of 2016, revenue was HK$640 million (2015: HK$641 million), which was about the same as the prior period.

Contracts on Hand

As at 30 June 2016, the value of contracts on hand remained stable at around HK$3,543 million (31 December 2015: HK$3,517 million), as compared with the last year end.

Operating Expenses

Excluding depreciation, operating expenses in the first half of 2016 totalled HK$117 million (2015: HK$126 million), a decrease of HK$9 million as compared with the corresponding interim period last year. The decrease mainly came from lower exchange loss and staff costs, offset by a higher impairment charges on trade receivables.

Finance Expenses

Finance expenses were HK$67 million (2015: HK$39 million), of which HK$46 million (2015: HK$26 million) was capitalised as a cost of satellite. The finance expenses increased in line with the higher level of borrowings as a result of the dividend re-capitalisation completed in 2015.

Depreciation

Depreciation in the first half of 2016 was HK$261 million (2015: HK$220 million), an increase of HK$41 million, mainly due to the full six-month depreciation charge on AsiaSat 6 and AsiaSat 8 during the current interim period.


Income Tax Credit/Expense

The income tax credit was HK$7 million, compared to income tax expenses of HK$50 million in the prior period, representing a decrease of HK$57 million. The decrease was mainly due to a reversal of a tax provision in respect of previous years after reaching an agreement with a tax authority on the tax treatment of certain revenue and expenses items.

Profit

Profit attributable to owners for the first half of 2016 was HK$249 million (2015: HK$250 million), relatively flat compared to prior period. Higher depreciation charges were fully mitigated by income tax credits as mentioned above.

Cash Flow

For the first six months of 2016, the Group had a net cash outflow of HK$13 million (2015: HK$10 million), including payment of capital expenditure of HK$183 million (2015: HK$441 million) and repayment of bank borrowings of HK$292 million (2015: HK$144 million). As at 30 June 2016, the Group had cash and bank balances of HK$225 million (31 December 2015: HK$238 million).

Dividend

The Board has not declared an interim dividend (2015: special interim dividend of HK$11.89 per share and interim dividend of HK$0.18 per share) for this interim period.


SATELLITES

During the first half of 2016, we continued to provide premium services to customers across the Asia-Pacific with our growing fleet of satellites.

AsiaSat 3S remains currently operational and is being leased to a customer for short-term use.

AsiaSat 4, at 122 degrees East, provides a wide range of satellite services to clients, including TV broadcast distribution, Direct-to-Home (DTH) and broadband services across our footprint in the Asia-Pacific region. In the first half of 2016, a growing number of broadcasters began to make use of this satellite as a platform for UHD programming, as evidenced by the launch of more video content from our UHD content partners on “4K-SAT” channel.

AsiaSat 5, at 100.5 degrees East, was again the number one platform for transmitting live sports and news events from around the world to viewers in Asia. These included the Australian Open, the Wimbledon tennis championship, the 2016 Dakar Rally, the Masters Golf Tournament and various European soccer tournaments, as well as coverage of news and events such as the Taiwan presidential election and the MTV Movie Awards. In addition, AsiaSat 5 became a vehicle for delivering VSAT services for aviation and telecom customers.



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AsiaSat 7, at 105.5 degrees East, continued to be the platform of choice for premier content from South Asia, East Asia and global TV networks during the first six months of the year. Among the new customers acquired during this period were Sony Pictures Networks India, KBZ Gateway and SEANET in Myanmar for a nationwide VSAT network for broadband data connectivity services. Japan International Broadcasting Inc. also expanded its service offering for its NHK WORLD TV HD English language news and lifestyle TV network serving the Asia- Pacific.

For the most recent additions to our fleet, AsiaSat 6 and AsiaSat 8, we began to see take-up for these satellites by customers during the review period.

On AsiaSat 6, at 120 degrees East, we acquired new customer after receiving licensing approval from the State Administration of Press, Publication, Radio, Film and Television of the People’s Republic of China. We believe that AsiaSat 6 will be the future platform for HDTV in China.

AsiaSat 8, at 105.5 degrees East, is collocated with AsiaSat 7, where it is providing high-powered Ku-band capacity for China, India, the Middle East and Southeast Asia. During the review period, AsiaSat 8 was selected by Thai Aerospace Industries Company Limited (TAI) to provide mobility services in the South East Asia region.

Construction of AsiaSat 9, the replacement satellite for AsiaSat 4, remained on schedule for completion in early 2017. AsiaSat 9 will allow us to address new markets that are not presently covered by AsiaSat 4. We are actively engaged in advance the marketing of this satellite.

The number of transponders leased or sold as of 30 June 2016 was 103, as compared with 96 as of 31 December 2015. However, due to the addition of available transponders from the two new satellites, the overall utilisation rate for the period ended 30 June 2016 decreased to 60% from 72% as of 31 December 2015.

New Customers

During the first six months of 2016, AsiaSat added a growing number of customers looking for advanced, reliable services for television and radio programme distribution as well as VSAT network services across the Asia-Pacific region.

We were particularly pleased to have the opportunity to re-enter the China video market via AsiaSat 6, following approval by the State Administration of Press, Publication, Radio, Film and Television at the beginning of the year to distribute broadcast video in China. It is our belief that the acquisition of new customer for this satellite marks the beginning of future partnerships in support of the development of HD broadcasting in China.

We also look forward to working with our customers in building up communications infrastructure in the region through AsiaSat 9 after its launch next year.

MARKET REVIEW

The Market

The market for the worldwide satellite industry continues to be challenging, not only as a result of the sluggish economy but also due to excess capacity, reduced demand due to changes in the video market and the impact of the slowing economy, and competition that have created greater pressure on pricing.

However, we remain confident about our long-term prospects in the Asia-Pacific region, given AsiaSat’s solid reputation in the market, our established base of leading customers and our quality service offering of advanced technology solutions and other value-added services.

Advances in Broadcasting Technology

We continue to be regarded as one of Asia’s pioneers in the development of UHD video during the review period. As the market for UHD opens up in the region, we will be in an advantageous position as we are already well recognised in the market for our work bringing this technology forward. Although in the short term, UHD is not likely to generate significant revenue we believe our investment may begin to pay off in the second half of next year. With the launch of AsiaSat 9, with its high power and wider coverage, it is ideally positioned to be the new platform for UHD video content.

Industry Events

We continued to participate extensively in regional and international exhibitions, conferences and meetings throughout the review period, as these events raise our industry profile by enabling us to demonstrate our expertise in satellite broadcasting and communications.

Among the many industry events in which we took part during the first six months of 2016 were the CASBAA India Forum, CABSAT in Dubai, WBU-IMCG Forum, CASBAA Satellite Industry Forum and CommunicAsia, Asia’s most established ICT, broadcast and digital multimedia event.

Over the past six months under review, we have been leveraging our participation in these events by making greater use of online media to disseminate the information we present, including speeches, interviews and white papers.

OUTLOOK

For the remainder of 2016, we do not anticipate any significant changes in market conditions and believe that they will continue to pose a challenge not only for AsiaSat but the industry as a whole. The increased competition from terrestrial systems that is affecting satellite operators in other parts of the world is not expected to significantly impact Asia in the near to medium term, due to the lack of quality terrestrial networks in many parts of the Asia-Pacific region.

While core business should remain stable for the remainder of the year, it should be noted that a number of the adjustments that impacted first half results will not be realised in the second half of the year. The new contracts signed in the first half will only partially compensate for the expiry of short-term revenue from a to-be retired satellite and the termination of a number of contracts which will occur in the second half due to changes in regulations. In addition, we will not have the benefit of the tax credit of HK$41 million realised in the first half.

ACKNOWLEDGEMENTS

I would like to take this opportunity to welcome to the management team Ms. Zhang Yan who assumed the role of Vice President, China, in May of this year following the retirement of Mr. Zhang Hai Ming.

I would also like to express my gratitude to our customers, our management team and staff who work so hard to keep AsiaSat at the forefront of our industry, and to our shareholders for continuing to place their faith in us.


JU Wei Min Chairman

17 August 201