I Cable Communications : 2017 Interim Results Announcement

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i-CABLE COMMUNICATIONS LIMITED

(Incorporated in Hong Kong with limited liability)

Stock Code: 1097

Interim Results Announcement For the half-year period ended June 30, 2017 RESULTS HIGHLIGHTS

• The Group's financial performance in the first half of 2017 was seriously affected by the decline of advertising and subscription revenues, partly due to the prolonged uncertainties about the Group's future since early March.

• The advertising market remained quite weak generally and was exacerbated by competition from free TV, digital and OTT platforms. On the subscription business front, contraction of customer base remained but ARPU continued to improve.

• Fantastic TV launched its Cantonese channel in May and is adopting an incremental initial approach to the market.

• In April, the Group proposed an Open Offer, underwritten by Forever Top (Asia) Limited, and a Loan Capitalisation to raise about HK$1 billion of new equity. All major regulatory hurdles have been cleared.

• New equity is expected to be injected by September 2017 to address uncertainties about the Group's funding. Upon the close of the Open Offer and the completion of the Loan Capitalisation, Forever Top (Asia) Limited will become the Controlling Shareholder.

• In May 2017, the Group accepted renewal of its Pay TV Licence for a period of 12 years until 31 May 2029. Its Unified Carrier Licence is valid until 17 January 2030 and Fantastic TV's Free TV Licence until 30 May 2028.

GROUP RESULTS (unaudited)

The unaudited Group loss attributable to Shareholders for the six months ended June 30, 2017 was HK$141 million (2016: HK$135 million). Basic and diluted loss per share were both HK$0.07 (2016: HK$0.07).

INTERIM DIVIDEND

No dividend will be paid for the six months ended June 30, 2017 (2016: Nil).

MANAGEMENT DISCUSSION AND ANALYSIS

1. Review of 2017 Interim Results

   Consolidated revenue decreased by HK$69 million or 10% to HK$641 million.

   Operating costs before depreciation increased by 3% to HK$759 million. Network related cost increased by 17% (mainly due to a provision for Government rent recently assessed on in-building wiring network for the period since 1997, to which the Group has objected), programming increased by 3%, while cost of sales decreased by 10% and selling, customer services, general & administrative expenses were unchanged.

   EBITDA loss was HK$118 million (2016: HK$24 million). Net loss was HK$141 million (2016: HK$135 million), after recognition of HK$82 million of profit on sale of surplus properties. Basic and diluted loss per share was HK$0.07 (2016: HK$0.07).

2. Segmental Information

   Television

   Revenue decreased by 11% to HK$471 million on lower subscription and advertising income. Operating costs before depreciation increased by 3% to HK$590 million. EBITDA loss was HK$119 million (2016: HK$44 million).

   Internet & Multimedia

   Revenue decreased by 4% to HK$162 million. Operating costs before depreciation increased by 12% to HK$109 million. EBITDA decreased by 25% to HK$54 million (2016: HK$71 million).

3. Liquidity and Financial Resources

   As of June 30, 2017 the Group had net debt of HK$662 million, as compared to HK$393 million at June 30, 2016.

   Consolidated net asset value was HK$364 million, or HK$0.18 per share.

   The Group's assets, liabilities, revenues and expenses were mainly denominated in Hong Kong or U.S. dollars and the exchange rate between these two currencies has remained pegged.

   Capital expenditure during the period amounted to HK$109 million (2016: HK$110 million). Major items included network equipment, TV production and broadcast facilities as well as the new FANhub set-top-box.

   The Group's ongoing capital expenditure and new business development will be funded by internal cash flows generated from operations, new equity injection and credit facilities.

4. Contingent Liabilities

   At June 30, 2017, there were contingent liabilities in respect of guarantees, indemnities and letters of awareness given by the Company on behalf of subsidiaries relating to overdraft and guarantee facilities of borrowings up to HK$806 million (2016: HK$806 million), of which HK$705 million (2016: HK$415 million) was utilised by the subsidiaries.

5. Human Resources

   The Group had 1,940 employees at the end of June 2017 (2016: 2,176). Total gross salaries and related costs incurred in the period amounted to HK$345 million (2016: HK$352 million).

6. Operating Environment

   The Group's financial performance in the first half of 2017 was seriously affected by the decline of advertising and subscription revenues, partly due to the prolonged uncertainties about the Group's future since early March. In addition, the advertising market remained quite weak generally and was exacerbated by competition from free TV, digital and OTT platforms. On the subscription business front, contraction of customer base remained but ARPU continued to improve.

   Fantastic TV launched its Cantonese channel in May and is adopting an incremental initial approach to the market. By pooling creative, production as well as network expertise, we would more effectively build scale in programming and in airtime sales, as well as gain more buying and selling power, more operational efficiency and access to a bigger pool of talents and new ideas.

7. Outlook

In April 2017, the Group proposed an Open Offer, underwritten by Forever Top (Asia) Limited to raise about HK$704 million (before expenses), and a Loan Capitalisation in the amount of HK$300 million. New equity is expected to be injected by September 2017 to address uncertainties about the Group's funding. Upon the close of the Open Offer and the completion of the Loan Capitalisation, Forever Top (Asia) Limited will become the Controlling Shareholder.

In May 2017, the Group accepted renewal of its Pay TV Licence for a period of 12 years until 31 May 2029. Its Unified Carrier Licence is valid until 17 January 2030 and Fantastic TV's Free TV Licence until 30 May 2028.

Initiatives to contain costs have been more effective than those to improve revenues. More initiatives will be introduced in the rest of 2017. They may or may not produce the results that we need but we will keep the momentum to transform the Group into a more robust business.

Against that backdrop, the Group will exercise additional prudence in continuing to invest in programming, content enrichment, HD/OTT upgrades, customer service improvement, GPON for higher speed broadband service and new businesses, as well as new marketing and media initiatives to sharpen our competitiveness.