ANNUAL RESULTS ANNOUNCEMENT 2017
ANNUAL RESULTS ANNOUNCEMENT 2017
FORWARD-LOOKING STATEMENTS
This presentation and subsequent discussion contain certain forward-looking
statements with respect to the financial condition, results of operations and
business of Clear Media as well as our current expectations, consumptions,
estimates and projections about our industry. All statements other than
statements of historical fact, including the statements under the heading
“Outlook”, are forward-looking statements. These forward-looking statements
represent Clear Media’s current expectations or beliefs concerning future events
and involve known and unknown risks and uncertainties which could cause
actual results, performance or events to differ materially from those expressed or
implied in such statements. We do not intend to update or otherwise revise the
forward-looking statements in this presentation, whether as a result of new
information, future events or otherwise. You should not place any undue reliance
on any forward-looking statements. Shareholders and investors are advised to
exercise caution when dealing in the Company’s shares after resumption of
trading.
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INTRODUCTION
Leader in bus shelter advertising industry in China
Operate over 50,000 panels
Nationwide network in 24 cities
Market share of more than 70% in key cities
Nearly 400 sales personnel servicing both customers and their advertising agencies
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• Higher turnover from core bus shelter advertising business
• Early Chinese New Year and campaign postponement posed challenges in 1Q2017
• Sales growth resumed in 2Q2017 through to 4Q2017
• Net profit increased by +1.1% as increase in EBIT was partial offset by increase in amortization due to investment in new concession rights
• Growing contributions from e-commerce & IT customers
(RMB’M) FY16 (re-stated)
FY17 YOY%
Turnover 1,608 1,706 +6.1%
EBITDA 698 739 +5.8%
EBIT 374 396 +6.0%
Net profit 241 243 +1.1%
Basic EPS (RMB) 0.4444 0.4492 +1.1%
Final DPS (HK$) 0.17 0.17
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FY17 RESULTS HIGHLIGHTS
FY17 CONSOLIDATED INCOME STATEMENT
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(RMB’M) FY16 (restated)*
FY17 YoY%
Turnover 1,608 1,706 +6.1%
Cost of sales, excluding amortization 587 614 +4.7%
Operating expenditure, excluding depreciation &
amortization
323 353 +9.3%
EBITDA 698 739 +5.8%
Depreciation & amortization 325 343 +5.7%
EBIT 374 396 +6.0%
Net profit 241 243 +1.1%
Basic EPS (RMB) 0.4444 0.4492 +1.1%
(*) The Board of Directors, through the announcements dated 2 January 2018, 8 February 2018 and 19 March 2018 informed the shareholders and
potential investors that there was a misappropriation of certain funds. The impact of this to 2017 reported EBITDA and net profit was a reduction by
RMB 4.1M. The impact of this to 2016 reported EBITDA and net profit was a reduction by RMB 2.4M.
COSTS & EXPENSES
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FY16
FY17
YoY%
Rental 357 391 +9.7%
Maintenance 120 123 +3.1%
Electricity 56 41 -27.5%
Sales & Cultural Tax 54 59 +8.9%
Direct operating costs 587 614 +4.7%
S, G & A & other expenses 323 353 +9.3%
Total costs & expenses, excluding depreciation & amortization
910 967 +6.4%
• Increase in rental costs mainly due to higher rental rates upon contract renewal • Increase in maintenance costs due to revision to standard maintenance fee • Decrease in electricity costs due to conversion to LED lighting structures and over-provision in prior
period • Increase in S, G & A & other expenses was due to higher provision of bad debt and salary increase
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(RMB’M) Dec 31, 2016 Jun 30, 2017 Dec 31, 2017
Current – 90 days 291 340 347
91 – 180 days 235 176 298
Over 181 - 360 days 89 129 97
Over 360 days 34 44 46
649 689 788
Less: provision for impairment (37) (62) (58)
3rd party receivables 612 627 730
Turnover days (time wt. avg.) 119 days 122 days 117 days
Due from GWH/WHA/WSI (time wt. avg.)
77 days 76 days 93 days
TRADE RECEIVABLES
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(RMB’M) FY16 (restated)
FY17 YoY%
Net cash flows from operating activities 494 575 +16.5%
Net cash flows used in investing activities (300) (426) +42.1%
Net cash flows used in financing activities (266) (242) -9.2%
Net decrease in cash & cash equivalents (72) (92) +27.8
Net cash & cash equivalents
at the beginning of period 507 442
effect of foreign exchange rate changes, net 7 (12)
at the end of year 442 337 -23.6%
INCREASE IN CASH FLOWS
The misappropriation had the effect of reducing the Group’s cash and cash equivalents by RMB 77 million.
STEPS TAKEN BY THE COMPANY
• Established a special committee to oversee investigation of the Misappropriation
• Engaged an independent law firm and independent accounting firm to conduct a forensic investigation, and to confirm that the bank balances held with all other banks were unaffected
• Filed police reports with the PRC police authorities and provided full cooperation to the police investigations
• Immediately implemented enhanced internal control measures
• The Company is considering all available remedies and options to recover the losses and minimize any damage caused by the Misappropriation
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KEY FINDINGS ON THE MISAPPROPRIATION
• Two employees under police arrest and investigation
• The Misappropriation involved two company bank accounts. Most of the losses took place in prior years
• Effect of reducing the Company’s cash & cash equivalents by RMB 77 million as of end of 2017
• Main culprit was a cashier who made unauthorized transactions, and fabricated documentation and used deception to avoid detection
• The cashier colluded with another employee on certain transactions
• No senior management or board members implicated
• Three unauthorized off book bank accounts (two closed and one open) were identified during the investigation
• The Company is not currently aware of any liability attached to those accounts
• The Misappropriation and the three unauthorized off book bank accounts are currently subject to police investigation
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ENHANCED INTERNAL CONTROL MEASURES
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• Focused on payments, bank balances and control of the Company’s chops. For example:
o Internet bank tokens are now separately controlled by 2 senior finance personnel separate from the cashier
o A daily cash transfer listing including branch offices will be printed for COO to review
o Bank statements with internet banking will be printed directly from banks.
o For banks without internet banking, statements will be collected by independent accounting personnel
o Strong segregation of duties was implemented to control all company chops
o Quarterly management visits and reviews of all branches
• The board has commissioned a special committee to review the Company’s financial systems and controls to further develop enhancements. This will be overseen by the Audit Committee
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TRADING SUSPENSION
• After discussions with the Hong Kong Stock Exchange (“HKSE”), trading was suspended on April 3
• April 3 Company Announcement:
o Basis of trading suspension
o Auditor disclaimed an opinion in the auditor’s report
o Unrecorded Bank Receipts and Payments
o Unrecorded Bank Accounts
o Customer Development Expenses
Next steps:
Address issues in the disclaimer of opinion of the Company’s auditor
Complete forensic investigation report
Cooperate with HKSE to seek approval for trading resumption
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2017 HIGHLIGHTS
• Moderating economic growth
• Operating environment remained challenging & volatile
• Late confirmation and last minute cancellation of orders continued
throughout the year
• Despite a challenging Q1, sales growth resumed in Q2 through Q4
• Contributions from e-commerce & IT customers were strong
• Demand from traditional industries were mixed
REVENUE BY INDUSTRY
FY16 FY17 E-commerce 23% 29%
IT digital products – (hardware: 16% / 15%) 26% 28%
– (software: 10% / 12%)
Entertainment 10% 7%
Business /Consumer services 4% 5%
Beverages 7% 5%
Food 7% 5%
Transportation 2% 4%
Realty 6% 3%
Telecommunications 3% 3%
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POWER OF OUR NETWORK (For the year ended 31 December 2017)
Yield (in RMB)
Avg Panel No. Sales
Key cities 0% +6% +6%
Mid-tier cities +10% -5% +5%
TOTAL +6% 0% +6%
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KEY STRATEGIES
• Expand national network strategically & selectively
• Recruit new customers in high growth industries
• Focus on customer relations management
• Maintain high product quality & develop innovative solutions
• Adhere to strict financial discipline and improve efficiencies
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OUTLOOK
• Cautiously optimistic about the overall operating environment in 2018
• Revenue from new economy industries is expected to perform relatively well
• Capital expenditure budget for 2018 will be similar to 2017
• Cooperating with HKSE to seek approval for trading resumption as soon as possible
• The police investigation into the Misappropriation and off book bank accounts are ongoing
• Shareholders and investors are advised to exercise caution when dealing in the Company’s shares after resumption of trading
ANNUAL RESULTS ANNOUNCEMENT 2017
ANNUAL RESULTS ANNOUNCEMENT 2017
