Asian Pay Television Trust : Update Report (419 KB)

ASIAN PAY TELEVISION TRUST

KEY FINANCIAL INFORMATION AND BUSINESS UPDATES

FOR THE QUARTER ENDED 31 MARCH 2024

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CONTENTS

REPORT SUMMARY	1
SELECTED FINANCIAL INFORMATION AND OPERATING DATA	4
STATEMENTS OF FINANCIAL POSITION	7
CONSOLIDATED STATEMENT OF PROFIT OR LOSS	8
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME	9
CONSOLIDATED STATEMENT OF CASH FLOWS	10
RECONCILIATION OF PROFIT AFTER INCOME TAX TO EBITDA	11
MATERIAL UPDATES TO FINANCIAL INFORMATION	12
DISCLAIMERS	16

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REPORT SUMMARY

KEY HIGHLIGHTS

• Revenue and EBITDA at $63.5 million1 and $38.2 million for the quarter; EBITDA margin 60.1% for the quarter
• Positive Broadband growth momentum led to continued Broadband revenue improvement in both S$ and NT$
• Despite the removal of non-paying subscribers, TBC added c.7,000 net subscribers during the quarter; continued increase in Premium digital cable TV and Broadband subscribers lifted total subscriber base to c.1,319,000 as at 31 March 2024, from c.1,312,000 as at 31 December 2023
• The Board has re-affirmed distribution guidance of 1.05 cents per unit for the full year 2024; distributions to be paid half- yearly, subject to no material changes in planning assumptions
• Net debt repayments of $21 million made in the quarter; $45 million to be set aside for repayments during the remainder of 2024
• Approximately 90% of outstanding Onshore Facilities (equivalent to 83% of the Group's total debt) are hedged through to 30 June 2025; net exposure to rising interest rates today is contained to only 17% of total outstanding debt

FINANCIAL HIGHLIGHTS

Asian Pay Television Trust ("APTT"2) reported revenue of $63.5 million for the quarter ended 31 March 2024. Earnings before interest, tax, depreciation and amortisation ("EBITDA") and EBITDA margin stood at $38.2 million and 60.1% for the quarter.

Foreign exchange contributed to a negative variance of 2.8% for the quarter compared to the prior corresponding period ("pcp") due to a relatively weaker Taiwan dollar ("NT$"). In constant NT$, revenue decreased by 2.6% for the quarter compared to the pcp.

The positive Broadband growth momentum led to continued Broadband revenue improvement in both S$ and NT$. The strong performance validates the success of TBC's growth strategy. During the quarter, c.8,000 subscribers were added while ARPU3 remained unchanged at NT$392 per month compared to the previous quarter ended 31 December 2023. In NT$, Broadband revenue, which includes revenue from data backhaul, increased by 9.7% for the quarter.

Group		Quarter ended 31 March
Amounts in $'000	2024	2023	Variance4 (%)
	Revenue
	Basic cable TV		43,294		47,889	(9.6)
	Premium digital cable TV		2,561		2,729	(6.2)
	Broadband		17,598		16,462	6.9
	Total revenue		63,453		67,080	(5.4)
	Total operating expenses5		(25,288)		(27,707)	8.7
	EBITDA		38,165		39,373	(3.1)
	EBITDA margin		60.1%		58.7%

1. All figures, unless otherwise stated, are presented in Singapore dollars ("$"), which is APTT's functional and presentation currency. Amounts in the financial information tables have been rounded to the nearest thousand dollars, unless otherwise indicated.
2. APTT refers to APTT and its subsidiaries taken as a whole.
3. ARPU refers to Average Revenue Per User.
4. A positive variance is favourable to the Group and a negative variance is unfavourable to the Group.
5. Operating expenses presented here exclude depreciation and amortisation expense, net foreign exchange gain/loss and mark to market movements on foreign exchange contracts appearing in the consolidated statement of profit or loss, in order to arrive at EBITDA and EBITDA margin presented here.

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Commenting on the success of the TBC's Broadband growth strategy, Mr Brian McKinley, Chief Executive Officer of the Trustee-Manager said, "The growth momentum is evident from the continuous improvement in Broadband revenue, both in S$ and NT$, for over three years. Revenue from Broadband is now over 40% of Basic cable TV revenue, compared to 34% a year ago. As a percentage of total revenue, revenue from this expanding business segment is nearly 28%, up from 25% year on year. Today, the growing number of Broadband subscribers represents more than 50% of our total Basic cable TV subscriber base. Overall, we are moving in the right direction where we aim to grow cash flows from Broadband to a level that more than offsets the decline in our Basic cable TV business over the long term."

OPERATIONAL PERFORMANCE

TBC's6 operational highlights for the quarter ended 31 March 2024 were as follows:

• RGU adjustments: TBC began a detailed exercise in the second half of 2023 to remove all non-paying subscribers
  (greater than 90 days) across all three of TBC's service offerings. As a result, c.2,100 Basic cable TV subscribers, c.1,700 Premium digital cable TV subscribers and c.1,800 Broadband subscribers were removed during the quarter. It is important to note that the removal of these non-paying subscribers had minimal impact to revenue and cash flows as they have not been contributing to TBC's revenue. Despite these adjustments, c.7,000 net subscribers were added during the quarter, driven by continued growth in Premium digital cable TV and Broadband subscribers. The total subscriber base has increased to c.1,319,000 as at 31 March 2024, from c.1,312,000 as at the previous quarter ended 31 December 2023.
• Basic cable TV: Basic cable TV revenue of $43.3 million for the quarter was down 9.6% compared to the pcp. In constant NT$, Basic cable TV revenue for the quarter decreased by 6.8%. The decline in Basic cable TV revenue was mainly due to lower subscription revenue resulting from the decline in the number of subscribers and lower ARPU. TBC's c.642,000 Basic cable TV RGUs7 contributed an ARPU of NT$442 per month in the quarter to access over 100 cable TV channels. Basic cable TV RGUs decreased by c.7,000 and ARPU was lower by NT$2 per month compared to the previous quarter ended 31 December 2023. The decline in Basic cable TV RGUs was due to a number of factors, including the removal of c.2,100 non-paying subscribers, competition from aggressively priced IPTV, the growing popularity of online video, as well as expectations from consumers for discounts as they compare with the lower cable TV pricing outside of TBC's franchise areas, particularly in the Taipei region. The leasing of television channels, which is mainly to third-party home shopping networks, will continue to face pressure from lower demand for home shopping and heightened competition from internet retailing.
• Premium digital cable TV: Premium digital cable TV revenue of $2.6 million for the quarter was down 6.2% compared to the pcp. In constant NT$, Premium digital cable TV revenue for the quarter decreased by 3.4%. Revenue was generated predominantly from TBC's c.329,000 Premium digital cable TV RGUs each contributing an ARPU of NT$59 per month in the quarter for Premium digital cable TV packages and bundled DVR or DVR-only services. Despite the removal of non- paying subscribers, Premium digital cable TV RGUs increased by c.6,000 compared to the previous quarter ended 31 December 2023. ARPU was marginally lower by NT$1 per month compared to the previous quarter ended 31 December 2023 due to promotions and discounted bundled packages that were offered to generate new RGUs and to retain existing RGUs. Video piracy issues and aggressively priced IPTV have also impacted ARPU.
• Broadband: Despite strong competition from the local telco and from mobile operators offering inexpensive unlimited data plans, and the removal of non-paying subscribers, Broadband RGUs increased by c.8,000 during the quarter. Broadband revenue, including revenue from data backhaul, was $17.6 million for the quarter, an increase of 6.9% compared to the pcp. In constant NT$, Broadband revenue for the quarter increased by 9.7%. Broadband revenue was generated predominantly from TBC's c.348,000 Broadband RGUs each contributing an ARPU of NT$392 per month in the quarter, which remained unchanged from the previous quarter ended 31 December 2023. The continued increase in Broadband subscribers and revenue improvement in both S$ and NT$ reflects the success of TBC's Broadband strategy to target the broadband-only segment, partner with mobile operators, as well as to offer higher speed plans at competitive prices to acquire new RGUs and re-contract existing ones.

1. TBC refers to Taiwan Broadband Communications Group.
2. RGUs refer to Revenue Generating Units, another term for subscribers or subscriptions; the terms are used interchangeably.

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Capital expenditure increased $3.3 million, or 52.2%, for the quarter primarily due to i) higher network investments aimed at increasing fibre density and speed; and ii) the purchase of vehicles to replace leased vehicles that were up for renewal, to save on overall costs. As a percentage of revenue, capital expenditure was 15.1% for the quarter. Going forward, the level of capital expenditure, which will continue to be within industry norms, will be closely monitored and limited to areas that can support TBC's Broadband growth strategy.

DEBT MANAGEMENT

As at 31 March 2024, approximately 90% of outstanding Onshore Facilities were hedged with interest rate swaps through to 30 June 2025, at an average fixed rate of 0.94% which is currently lower than the prevailing three-month Taipei Interbank Offered Rate ("TAIBOR"). As Onshore Facilities constitute approximately 92% of the Group's total outstanding debt, approximately 83% of total debt is protected against the risk of rising interest rates through to mid-2025. The net exposure to rising interest rates today is therefore contained to only 17% of total debt. The Trustee-Manager is confident that this level of exposure will not materially impact cash flows or affect business operations.

The refinanced 30-month Offshore Facilities, comprising a $46.6 million term loan facility and a $75 million revolving loan facility, are $83.4 million lower than the previous Offshore Facilities ($125 million term loan facility and $80 million revolving loan facility) - a direct result of accelerated debt repayments as part of the debt management programme. The Trustee- Manager plans to complete the next refinancing in 2025, prior to the maturity of the Offshore Facilities in January 2026.

Accelerated debt repayments continued during the quarter, as net debt of $21 million was repaid. For the remainder of 2024, the Trustee-Manager will set aside $45 million for debt repayments.

Mr McKinley said, "The Trust is now in a stronger position to navigate an increasingly challenging and competitive environment. Apart from our Broadband growth momentum, our debt management programme is also making good progress. We will keep up with our disciplined debt repayments to lower our borrowings. We also intend to initiate discussions for the refinancing of our Offshore and Onshore debt facilities, aiming to complete the next refinancing around mid-2025."

OUTLOOK

Operationally, while the Trustee-Manager does not expect growth in Basic cable TV RGUs due to Taiwan's saturated cable TV market, we expect the number of Premium digital cable TV and Broadband RGUs to continue increasing in 2024. Total revenue will, however, be influenced by the ability to maintain ARPUs which will remain under pressure due to market dynamics. The decline in demand for home shopping and competition from internet retailing will continue to impact channel leasing revenue. The Trustee-Manager is managing every expense line item very closely. Total operating expenses in 2024 are expected to be in line with 2023.

DISTRIBUTIONS

The Board of Directors of the Trustee-Manager (the "Board") is re-affirming the distribution guidance for the full year ending 31 December 2024. The distribution for 2024 is expected to remain unchanged at 1.05 cents per unit, to be paid in half-yearly instalments of 0.525 cents per unit, subject to no material changes in planning assumptions. The first half-yearly distribution for the period from 1 January 2024 to 30 June 2024 will be paid in September 2024.

The 2024 distribution guidance takes into account elevated interest rates and a weaker NT$ against S$. At this distribution level, the Board is confident that operational cash flows can still support disciplined debt repayments and fund capital expenditure to future-proof TBC's Broadband business.

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SELECTED FINANCIAL INFORMATION AND OPERATING DATA

The selected financial information and operating data presented on the following pages support the distributions to unitholders and therefore are key financial and operating metrics that the Trustee-Manager focuses on to review the amount of distributions that will be paid to unitholders. Some of the selected financial information includes non-IFRS measures.

Non-IFRS measures

EBITDA and EBITDA margin are supplemental financial measures of the Group's performance and liquidity and are not required by, or presented in accordance with International Financial Reporting Standards ("IFRS") or any other generally accepted accounting principles. Furthermore, EBITDA and EBITDA margin are not measures of financial performance or liquidity under IFRS or any other generally accepted accounting principles and should not be considered as alternatives to net income, operating income or any other performance measures derived in accordance with IFRS or any other generally accepted accounting principles. EBITDA and EBITDA margin may not reflect all of the financial and operating results and requirements of the Group. In particular, EBITDA and EBITDA margin do not reflect the Group's needs for capital expenditures, debt servicing or additional capital that may be required to replace assets that are fully depreciated or amortised. Other companies may calculate EBITDA and EBITDA margin differently, limiting their usefulness as comparative measures.

The Trustee-Manager believes that these supplemental financial measures facilitate operating performance comparisons for the Group from period to period by eliminating potential differences caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods of changes in effective tax rates or net operating losses), the age and book depreciation of tangible and intangible assets (affecting relative depreciation and amortisation expense) and impairment loss on goodwill, intangible assets and property plant and equipment. In particular, EBITDA eliminates the non-cash depreciation and amortisation expense that arises from the capital-intensive nature of the Group's businesses and intangible assets recognised in business combinations. The Trustee-Manager presents these supplemental financial measures because it believes these measures are frequently used by securities analysts and investors in evaluating similar issuers.

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SELECTED FINANCIAL INFORMATION

Group1		Quarter ended 31 March
Amounts in $'000	Note2	2024	2023	Variance3 (%)
Revenue
Basic cable TV	1(i)	43,294	47,889	(9.6)
Premium digital cable TV	1(ii)	2,561	2,729	(6.2)
Broadband	1(iii)	17,598	16,462	6.9
Total revenue		63,453	67,080	(5.4)
Operating expenses4
Broadcast and production costs		(11,952)	(13,108)	8.8
Staff costs	2(i)	(6,100)	(6,043)	(0.9)
Trustee-Manager fees	2(ii)	(1,960)	(1,944)	(0.8)
Other operating expenses	2(iii)	(5,276)	(6,612)	20.2
Total operating expenses		(25,288)	(27,707)	8.7
EBITDA		38,165	39,373	(3.1)
EBITDA margin5		60.1%	58.7%
Profit after income tax6		13,792	7,176	92.2
Capital expenditure	3
Maintenance		3,546	3,461	(2.5)
Network, broadband and other		6,037	2,834	(>100)
Total capital expenditure		9,583	6,295	(52.2)
Maintenance capital expenditure as % of revenue		5.6	5.2
Total capital expenditure as % of revenue		15.1	9.4
Income tax paid, net of refunds		(1,166)	(383)	(>100)
Interest and other finance costs paid		(11,765)	(13,099)	10.2

1. Group refers to APTT and its subsidiaries taken as a whole.
2. Refer to accompanying notes for more details.
3. A positive variance is favourable to the Group and a negative variance is unfavourable to the Group.
4. Operating expenses presented here exclude depreciation and amortisation expense, net foreign exchange gain/loss and mark to market movements on foreign exchange contracts appearing in the consolidated statement of profit or loss, in order to arrive at EBITDA and EBITDA margin presented here.
5. EBITDA margin is a non-IFRS financial measure and is calculated by dividing EBITDA by total revenue.
6. Profit after income tax is calculated in the consolidated statement of profit or loss and a reconciliation is presented in reconciliation of profit after income tax to EBITDA.

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SELECTED OPERATING DATA

Group			As at
2024	2023
	31 March		31 December 30 September	30 June	31 March

RGUs ('000)

Basic cable TV		642
Premium digital cable TV		329
Broadband		348

649		659	667	672
323		320	321	314
340		335	330	322

Group			Quarter ended
2024	2023
			31 March		31 December 30 September	30 June	31 March
	ARPU1 (NT$ per month)

Basic cable TV		442
Premium digital cable TV		59
Broadband		392

444		448	455	460
60		61	63	64
392		389	386	384

AMCR2 (%)

Basic cable TV		(0.7)
Premium digital cable TV		(1.3)
Broadband		(0.9)

(0.8)		(0.7)	(0.5)	(0.5)
(1.4)		(1.9)	(1.1)	(1.0)
(1.1)		(0.9)	(0.6)	(0.5)

1

2

Average Revenue Per User ("ARPU") is calculated by dividing the subscription revenue for Basic cable TV or Premium digital cable TV or Broadband, as applicable, by the average number of RGUs for that service during the period.

Average Monthly Churn Rate ("AMCR") is calculated by dividing the total number of churned RGUs for a particular service during a period by the number of RGUs for that service as at the beginning of that period. The total number of churned RGUs for a particular service for a period is calculated by adding together all deactivated subscriptions, including deactivations caused by failure to make payments for that service from the billing system for the period.

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STATEMENTS OF FINANCIAL POSITION

Financial information of the Trust includes the results and balances of the parent only, i.e. APTT. Financial information of the Group includes balances from all entities that are controlled by APTT. The material additional balances are in respect of TBC.

		Group as at		Trust as at
Amounts in $'000	Note1	31 March	31 December		31 March	31 December
2024	2023	2024	2023

Assets

Current assets

Cash and cash equivalents	4	71,354	91,940
Trade and other receivables		10,975	11,355
Derivative financial instruments	5	2,721	1,803
Contract costs		475	572
Other assets		3,463	2,716

1,046	6,028
-	-
2,721	1,803
-	-
407	45

88,988108,386

Non-current assets

4,1747,876

Investment in subsidiaries		-	-
Property, plant and equipment		171,405	176,962
Intangible assets		1,833,458	1,868,200
Derivative financial instruments	5	9,530	7,182
Contract costs		66	106
Other assets		1,621	1,376

776,351	776,351
-	-
-	-
324	57
-	-
2	2

			2,016,080	2,053,826	776,677	776,410
	Total assets		2,105,068	2,162,212	780,851	784,286
	Liabilities
	Current liabilities
	Borrowings from financial institutions	6	64,871	62,131	-	-
	Derivative financial instruments	5	-	215	-	215
	Trade and other payables	7	20,073	22,429	1,960	3,973
	Contract liabilities		30,683	32,053	-	-
	Retirement benefit obligations		1,129	1,372	-	-
	Income tax payable		8,858	7,032	-	-
	Other liabilities		17,431	21,231	165	206

143,045146,463

Non-current liabilities

2,1254,394

	Borrowings from financial institutions	6	1,143,658	1,186,807	-	-
	Derivative financial instruments	5	51	371	51	371
	Retirement benefit obligations		2,641	2,887	-	-
	Deferred tax liabilities		107,550	106,967	-	-
	Other liabilities		22,545	23,024	-	-
			1,276,445	1,320,056	51	371
	Total liabilities		1,419,490	1,466,519	2,176	4,765
	Net assets		685,578	695,693	778,675	779,521
	Equity
	Unitholders' funds		1,389,351	1,389,351	1,389,351	1,389,351
	Reserves		59,350	73,774	-	-
	Accumulated deficit		(765,279)	(769,553)	(610,676)	(609,830)
	Equity attributable to unitholders of APTT		683,422	693,572	778,675	779,521
	Non-controlling interests		2,156	2,121	-	-

Total equity	685,578	695,693

1 Refer to accompanying notes for more details.

778,675779,521

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CONSOLIDATED STATEMENT OF PROFIT OR LOSS

Group		Quarter ended 31 March
Amounts in $'000	Note1	2024	2023	Variance2 (%)
	Revenue
	Basic cable TV	1(i)	43,294		47,889		(9.6)
	Premium digital cable TV	1(ii)	2,561		2,729		(6.2)
	Broadband	1(iii)	17,598		16,462		6.9
	Total revenue		63,453		67,080		(5.4)
	Operating expenses
	Broadcast and production costs		(11,952	)	(13,108	)	8.8
	Staff costs	2(i)	(6,100)		(6,043)		(0.9)
	Depreciation and amortisation expense3		(12,917	)	(15,044	)	14.1
	Trustee-Manager fees	2(ii)	(1,960)		(1,944)		(0.8)
	Net foreign exchange gain/(loss)4		2,389		(150)		>100
	Mark to market gain on derivative financial instruments5		2,365		401		>100
	Other operating expenses6	2(iii)	(5,276)		(6,612)		20.2
	Total operating expenses		(33,451	)	(42,500	)	21.3
	Operating profit		30,002		24,580		22.1
	Amortisation of deferred arrangement fees		(832)		(776)		(7.2)
	Interest and other finance costs		(10,100	)	(11,050	)	8.6
	Profit before income tax		19,070		12,754		49.5
	Income tax expense		(5,278)		(5,578)		5.4
	Profit after income tax		13,792		7,176		92.2
	Profit after income tax attributable to:
	Unitholders of APTT		13,757		7,140		92.7
	Non-controlling interests		35	36	(2.8)
	Profit after income tax		13,792		7,176		92.2
	Basic and diluted earnings per unit attributable to unitholders of APTT (cents)7		0.76		0.40

1. Refer to accompanying notes for more details.
2. A positive variance is favourable to the Group and a negative variance is unfavourable to the Group.
3. Decrease in depreciation and amortisation expense was mainly due to lower depreciation expense on network equipment and amortisation expense on software and programming rights compared to the pcp.
4. Variance in net foreign exchange gain/(loss) is mainly due to translations at the subsidiary level which are not expected to be realised.
5. Variance in mark to market gain on derivative financial instruments was due to exchange rate movements on foreign exchange contracts.
6. Decrease in other operating expenses during the quarter was mainly due to lower pole rental expenses and marketing and selling expenses.
7. Earnings per unit is calculated by dividing profit after income tax attributable to unitholders of APTT by the weighted average number of APTT units outstanding during the period.

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