AsiaSat Announcement of Unaudited Results for the Six Months Ended 30 June 2017
Chairman’s Statement
GENERAL PERFORMANCE
The company entered 2017 with
expectations consistent with our sales
forecast developed over the previous six
months. While net revenues were stable,
new customers continue to be attracted
by competitive pricing. Thanks to our
long-term investments in assets and
partnerships, demand for our broadcast
services remains strong as we expand
into regions still developing their
economic and technical capacities.
However, price pressures remain
challenging in a highly competitive
environment as a result of the cyclical
over-supply of regional capacity and
price expectations, particularly for
data applications. For the data market
there is the expectation that the new
High Throughput Satellites (HTS) will
lower the price for satellite capacity
and even though this ubiquitous coverage
from HTS satellite does not yet exist,
in our markets, it is affecting our
customers' perceptions on pricing
levels. The fact that HTS technology is
not widely available in the market today
and that it is not suitable for all
applications or services has led to
ongoing misconceptions as to future
price levels.
Nevertheless, we have seen increased
demand for mobility-led data services
(maritime and cellular backhaul) along
with greater prospects for other Ka-band
solutions for the aviation sector. In
particular, the company has expanded its
provision of capacity for China’s
aviation market.
Of all satellite operators providing
inflight connectivity within China,
AsiaSat provides the most capacity for
this application, which is being used to
serve several domestic and international
airlines flying over China.
INTERIM FINANCIAL RESULTS
Revenue
For the first half of 2017, revenue was
HK$642 million (2016: HK$640 million).
Operating Expenses
Excluding depreciation, operating
expenses in the first half of 2017
totalled HK$152 million (2016: HK$117
million), an increase of HK$35 million
largely attributable to currency
fluctuations and the impact of a one-off
reversal in prior period of a staff
bonus provision. However, such costs
were partially offset by a write back of
impairment charges on trade receivables
collected during the period.
Other Gains
Other gains for the first half of 2017
were HK$33 million (2016: HK$1 million)
mainly due to a one-off income of
approximately HK$32 million arising from
the resolution of a long pending tax
matter related to the provision of
services to a customer.
Finance Expenses
Finance expenses were HK$61 million
(2016: HK$67 million) of which HK$29
million (2016: HK$46 million) were
capitalised as costs for our new
satellite, AsiaSat 9. Thus net finance
expenses after capitalisation were HK$32
million (2016: HK$21 million)
representing an increase of HK$11
million as compared to the prior period.
Depreciation
Depreciation in the first half of 2017
was HK$261 million (2016: HK$261
million).
Income Tax Expenses/Credit
Income tax expenses were HK$51 million,
as compared to an income tax credit of
HK$7 million in the prior period,
representing an increase of HK$58
million, mainly due to the reversal of a
tax provision of HK$41 million made in
2016 when we reached an agreement with a
tax authority on the treatment of
certain revenues and expenses.
Profit
Profit attributable to owners for the
first half of 2017 was HK$180 million
(2016: HK$249 million), as a result of
higher exchange losses, net finance
expenses, staff costs and increased
income tax expenses, mitigated by other
gains as mentioned above.
Cash Flow
For the first six months of 2017, the
Group generated a net cash inflow of
HK$257 million (2016: net cash outflow
of HK$13 million), including payment of
capital expenditure of HK$139 million
(2016: HK$183 million) and repayment of
bank borrowings of HK$144 million (2016:
HK$292 million). As of 30 June 2017, the
Group had cash and bank balances of
HK$497 million (31 December 2016: HK$241
million).
Dividend
The Board declares an interim dividend
of HK$0.18 per share (2016: HK$ Nil per
share) for this interim period. The
interim dividend will become payable on
or about 3 November 2017 to equity
holders on the share register as at 10
October 2017. The share register will be
closed from 3 to 10 October 2017 (both
days inclusive).
Refinancing Loans
In July 2017, the Group refinanced the
bank borrowings of July 2015 with the
new term loans and revolving credits of
US$220 million with final maturity in
July 2022. The new facilities offered
better terms to the Group, further
strengthening the Group’s capital
structure.
Contracts on Hand
As at 30 June 2017, the value of
contracts on hand remained stable at
around HK$4,076 million (31 December
2016: HK$4,067 million).
SATELLITE FLEET
During the first half of 2017 the
company’s commitment to the provision of
premium services within a highly dynamic
technical and economic environment
served to attract an expanded and
diverse customer base for video
broadcast and data connectivity. With
the additional capacity and expanded
coverage of the soon to be launched
AsiaSat 9, along with the service
flexibility supported by our
restructured sales team, AsiaSat is more
equipped and readily prepared to address
the needs of our current and prospective
commercial and technical customers and
partners.
AsiaSat 3S located at 146 degrees East
remains operational and in service.
AsiaSat 4 at 122 degrees East provides TV broadcast distribution, Direct-to-Home (DTH) and broadband services across the Asia Pacific. A growing number of broadcasters have used AsiaSat 4 as a platform for TV distribution including Ultra HD (UHD) video content via the “4KSAT” channel pioneered by AsiaSat to promote UHD broadcasting via satellite in Asia.
AsiaSat 5 at 100.5 degrees East remains our primary distribution platform for live sports and news from around the world targeting viewers in the region with live news events such as the ASEAN Summit along with soccer tournaments and golf and baseball series. In addition, AsiaSat 5 also serves aviation and telecom customers through the delivery of innovative VSAT services.
AsiaSat 6 at 120 degrees East
provides a high-value platform for the
delivery of quality High Definition TV
(HDTV) services across China.
AsiaSat 7 at 105.5 degrees East is the
regional platform of choice for premium
content distribution in South Asia and
East Asia for global TV networks as well
as an anchor satellite for aero services
within China.
AsiaSat 8 at 4 degrees West carries
high-powered 24 Ku-band transponders
plus a Ka-band payload. Following a
utilisation agreement concluded with
Spacecom in December 2016 for the use of
the entire Ku-band payload for a minimum
of four years, the satellite was
relocated to 4 degrees West, commencing
service in late-February 2017.
Construction of AsiaSat 9, the replacement satellite for AsiaSat 4 at 122 degrees East was completed in April 2017 with the launch date recently confirmed by launch-provider ILS to be at the end of September 2017 following Proton’s successful return to flight in June 2017. With 28 C-band and 32 Ku-band transponders plus a Ka-band payload, AsiaSat 9 will provide additional power and spectrum capacity specifically tailored for emerging markets such as Indonesia and Myanmar.
As of 30 June 2017, the total number
of transponders leased or utilised was
125 including the AsiaSat 8 with 24 Ku
band transponders lease to Spacecom, as
compared with 99 as of 31 December 2016.
Overall transponder utilisation for the
period ended 30 June 2017 was 73% as
compared to 67% as of 31 December 2016.
Meanwhile, the Company is at the
advanced planning stage for the design,
procurement and launch of a High
Throughput Satellite carrying Ka-band
capacity for data services.
NEW AND RENEWING CUSTOMERS
During the first six months of 2017,
AsiaSat added a number of new customers
and partners looking for innovative,
reliable and cost competitive video and
data distribution across the region.
Meanwhile our enhanced video customers
and partnerships continue to benefit
from our longestablished, superior
neighbourhood represented by over 250
video and radio broadcasters and some
700 television and radio channels
serving more than 830 million homes via
terrestrial, cable TV, DTH and IPTV
platforms in the Asia-Pacific.
Among the AsiaSat roster of additional and renewing customers were broadcast and data distributors in Australia, India, Pakistan, Bangladesh, Myanmar, Singapore, Taiwan, Hong Kong and China, as well as Europe and the United States. During the first half of 2017 the Company signed new and renewal agreements with Globecast, the European Broadcasting Union, KBZ of Myanmar, and commitments for RTR Planeta of Russia’s television service in Asia and TRT of Turkey for a new HD international news service.
Sales opportunities for video and data distribution in emerging markets in South Asia and South East Asia, such as Myanmar and Sri Lanka, continue to evolve as the company matches its DTH capacity to the region’s changing demographics and economic development. In the meantime, the increase of capacity use due to upgrades from Standard Definition (SD) to High Definition (HD) services remained in line with expectations along with the high utilisation rate of the company’s wide-beam C-band capacity, as a result of new HD services introduced by customers from Asia, Europe and the Middle East.
For Occasional Use (OU) services,
during the first six months of the year
AsiaSat supplied capacity for
distribution of the Australian Open
Tennis tournament, the German
Bundelsliga, English Premier League and
FA Cup football, the Golden Globes and
the Academy Awards in California, the
World Economic Forum in Davos and The
One Belt One Road Forum in Beijing along
with the 20th Anniversary Celebrations
of Hong Kong’s Handover to China.
MARKET REVIEW
While the global satellite market
remains challenging, the economic and
demographic positives for much of the
Asia Pacific continue to be compelling
with on-going annual GDP growth in
markets such as China, India, Indonesia
and Vietnam conservatively forecast to
remain above 5% per year to 2020 and
beyond.
The youthful demographics and
increasingly sophisticated demand for
technically flexible video and data
services translates into positive
prospects for satellite services in the
region. Our detailed market knowledge
and long-term relationships provide us
with a unique capacity to meet the needs
and expectations of our service partners
and end users alike.
The fast evolving business models for
Over-the-Top (OTT) services and a more
pervasive highspeed distribution ground
segment for mobile and fixed-line
broadband video and data is attracting
new investment to the telecoms and video
sectors leading to improved demand for
satellite services, albeit at lower
pricing for the price pressure reasons
outlined above.
With just 20% of pay TV homes across the
region having migrated from SD to HD
services AsiaSat is well positioned to
benefit from a significant gap in the
market, while HD pay TV penetration
reaches over 70% in some countries in
the Americas such as Brazil and the
United States. Furthermore, as of early
2017 just 12% of Asian TV households had
access to UHD 4K services largely due to
a lack of genuine 4K content. We
envisage that a largely untapped hunger
for higher value 4K and 8K formatted
Ultra High Definition (UHD) and video
gaming services will be boosted by the
2020 Japan Olympics and other high-value
sports and entertainment events over the
next 3-5 years.
OUTLOOK For the remainder of 2017, we do
not anticipate any significant changes
in broad market conditions and
challenges for AsiaSat are consistent
with those for the broader satellite
industry. The increased competition from
terrestrial systems 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 areas of the Asia-Pacific
region.
As a result of the early repayment of a
bank loan drawn down in July 2015, the
Group will write off the balance of the
unamortised arrangement fees of
approximately HK$26 million thus
impacting profits during the second half
of 2017. The new facilities offered
better terms to the Group, further
strengthening the Group’s capital
structure.
ACKNOWLEDGEMENTS
I would like to take this opportunity to
thank past Board members Mr. James
Watkins, Mr. Kenneth McKelvie and Mr.
Alex Ying for their valuable
contributions and to welcome Mr. Steven
Leonard, Mr. Marcel Fenez and Mr. Herman
Chang as new members of the AsiaSat
Board of Directors.
Finally, I express my gratitude to the
management team and operations staff who
work so hard to retain AsiaSat’s
position at the forefront of our
industry. I also sincerely thank our
customers and shareholders for their
continuous support to the company.
JU Wei Min Chairman
Hong Kong, 17 August 2017
