SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For May 19
th
2008
CITY TELECOM (H.K.) LIMITED
(Translation of registrants name into English)
Level 39
Tower I, Metroplaza
No. 223 Hing Fong Road
Kwai Chung
New Territories
Hong Kong
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover
Form 20-F or Form 40-F.
Form 20-F
þ
Form 40-F
o
Indicate by check mark whether the registrant by furnishing the information contained in this
Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.
Yes
o
No
þ
City Telecom (H.K.) Limited (the Company) is furnishing under cover of Form 6-K a statement dated
May 19
th
, 2008 relating to the Interim Results for the six months ended February
29
th
, 2008.
SIGNATURE
Pursuant to the requirements of section 12 of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
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CITY TELECOM (H.K.) LIMITED
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By:
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/s/ Lai Ni Quiaque
Name: Lai Ni Quiaque
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Title: Executive Director, Chief
Financial Officer and
Company Secretary
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Dated: May 19
th
, 2008
CITY TELECOM (H.K.) LIMITED
(incorporated in Hong Kong with limited liability under the Companies Ordinance)
(Stock code: 1137)
INTERIM RESULTS FOR THE SIX MONTHS ENDED 29 FEBRUARY 2008
HIGHLIGHTS
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Profit attributable to shareholders increased by 162.0% year-on-year to HK$47.8 million
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Total revenue grew by 10.9% year-on-year to HK$623.8 million due to strong Fixed
Telecommunications Network Services (FTNS) business
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EBITDA decreased by 0.6% year-on-year to HK$187.1 million with EBITDA margin decreased from
33.5% to 30.0% due to increased discretionary investment in brand enhancement
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FTNS turnover increased by 19.1% year-on-year to HK$474.9 million, with subscriptions growth
of 43,000 to 726,000 during the period
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Balance sheet continued to improve with net debt to annualized EBITDA of 1.0x
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Basic earnings per share amounted to HK7.6 cents and diluted earnings per share amounted to
HK7.3 cents
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Declared an interim dividend of HK4 cents per share with a scrip dividend option
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- 1 -
The Board of Directors of City Telecom (H.K.) Limited (the Company or Board) is pleased to
present the consolidated income statement for the six months ended 29 February 2008 and the
consolidated balance sheet as at 29 February 2008 of the Company and its subsidiaries (the
Group), which are unaudited and condensed.
UNAUDITED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 29 FEBRUARY 2008
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Six months ended
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29 February
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28 February
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2008
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2007
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Note
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HK$000
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HK$000
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Turnover
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3
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623,792
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562,370
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Other revenues
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21,509
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10,133
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Network costs and cost of inventories
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4
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(89,469
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(108,605
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Other operating expenses
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(459,971
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(400,798
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Operating profit
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95,861
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63,100
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Finance costs
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(44,426
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(43,721
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Profit before taxation
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5
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51,435
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19,379
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Income tax expense
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7
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(3,672
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)
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(1,150
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Profit attributable to shareholders
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47,763
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18,229
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Dividends
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8
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25,538
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24,567
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Basic earnings per share
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9
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HK7.6 cents
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HK3.0 cents
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Diluted earnings per share
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9
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HK7.3 cents
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HK2.9 cents
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- 2 -
UNAUDITED CONSOLIDATED BALANCE SHEET
AS
AT 29 FEBRUARY 2008
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29 February
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31 August
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2008
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2007
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Note
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HK$000
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HK$000
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Non-current assets
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Goodwill
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1,066
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1,066
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Fixed assets
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1,198,353
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1,237,223
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Other financial assets
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39,213
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Derivative financial instrument
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1,039
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Long term receivable and prepayment
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6,053
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6,932
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Deferred expenditure
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17,868
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7,783
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1,223,340
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1,293,256
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Current assets
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Accounts receivable
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10
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186,821
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170,551
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Other receivables, deposits and prepayments
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87,299
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59,372
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Inventories
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460
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477
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Deferred expenditure
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33,283
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13,584
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Other financial assets
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31,100
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3,779
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Pledged bank deposits
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87,220
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87,220
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Cash at bank and in hand
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304,611
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532,894
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730,794
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867,877
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Current liabilities
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Accounts payable
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11
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64,073
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76,019
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Other payables and accrued charges
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153,254
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145,267
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Deposits received
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16,420
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16,188
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Deferred service income
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77,530
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64,202
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Tax payable
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2,119
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1,481
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Current portion obligations under finance leases
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220
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835
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313,616
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303,992
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Net current assets
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417,178
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563,885
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- 3 -
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29 February
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31 August
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2008
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2007
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Note
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HK$000
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HK$000
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Non-current liabilities
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Deferred tax liabilities
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|
291
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Long-term debt and other liabilities
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680,469
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952,968
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680,469
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953,259
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NET ASSETS
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960,049
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903,882
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Capital and reserves
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Share capital
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|
12
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63,845
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61,650
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Reserves
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|
12
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896,204
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842,232
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|
|
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960,049
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|
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903,882
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|
|
|
|
|
|
|
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- 4 -
Notes:
1.
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Basis of preparation and accounting policies
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This unaudited interim financial report has been prepared in accordance with (a) the
applicable disclosure provisions of the Rules Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited; and (b) the same accounting policies as those adopted in
the 2007 annual consolidated financial statements, and comply with Hong Kong Accounting
Standard (HKAS) 34, Interim Financial Reporting issued by the Hong Kong Institute of
Certified Public Accountants (the HKICPA). It was authorised for issuance on 19 May 2008.
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The preparation of an interim financial report in conformity with HKAS 34 requires management
to make judgements, estimates and assumptions that affect the application of policies and
reported amounts of assets and liabilities, income and expenses on a year to date basis.
Actual results may differ from these estimates.
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This interim financial report contains condensed consolidated financial statements and
selected explanatory notes. The notes include an explanation of events and transactions that
are significant to an understanding of the changes in financial position and performance of
the Group since the 2007 annual financial statements. The condensed consolidated interim
financial statements and notes thereon do not include all of the information required for
full set of financial statements prepared in accordance with Hong Kong Financial Reporting
Standards (HKFRSs).
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The financial information relating to the financial year ended 31 August 2007 that is
included in the condensed consolidated interim financial statements as being previously
reported information does not constitute the Companys statutory financial statements for
that financial year but is derived from those financial statements. The statutory financial
statements of the Company for the year ended 31 August 2007 are available at the Companys
registered office. The independent auditors have expressed an unqualified opinion on those
financial statements in their report dated 22 November 2007.
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2.
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Changes in accounting policies
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The HKICPA has issued a number of new and revised Hong Kong Financial Reporting Standards
(HKFRSs, which collective term includes HKASs and Interpretations), that are first
effective or available for early adoption for current accounting periods of the Group. The
Group so far has concluded that the adoption of these new and revised HKFRSs, to the extent
that they are relevant to the Group and which are expected to be reflected in the annual
financial statements for the year ending 31 August 2008, would not have a significant impact
on the Groups results of operations and financial position, except for the adoption of the
amendment to HKAS 1 Presentation of financial statements: Capital disclosures and HKFRS 7
Financial instruments: Disclosures which require additional disclosures to be made in the
2008 annual consolidated financial statements.
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The new and revised HKFRSs that will be effective or are available for voluntary early
adoption in the annual financial statements for the year ending 31 August 2008 may be
affected by the issue of additional interpretation(s) or other changes announced by the
HKICPA subsequent to the date of issuance of these condensed consolidated interim financial
statements. Therefore the policies that will be applied in the Groups financial statements
for that period cannot be determined with certainty at the date of issuance of these
condensed consolidated interim financial statements. The Group has not applied any new
standards or interpretations that are not yet effective for this accounting period.
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- 5 -
3.
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Turnover and segment information
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The Group is principally engaged in the provision of international telecommunications
services and fixed telecommunications network services to customers in Hong Kong and Canada.
(a)
Primary reporting format business segments
The Group is organised on a worldwide basis into two business segments:
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International telecommunications
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:
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provision of international long distance calls services
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Fixed telecommunications network
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:
|
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provision of dial up and broadband Internet access services, local voice-over-IP services and IP-TV services
|
The Groups inter-segment transactions mainly consist of provision of leased lines services. These
transactions were entered into on similar terms as those contracted with third parties.
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Six months ended 29 February 2008
|
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Fixed
|
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International
|
|
|
telecomm-
|
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|
|
|
|
|
|
|
|
telecomm-
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|
unications
|
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|
|
|
|
|
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|
|
unications
|
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|
network
|
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|
|
|
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|
|
services
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|
|
services
|
|
|
Elimination
|
|
|
Group
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External sales
|
|
|
148,866
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|
|
474,926
|
|
|
|
|
|
|
|
623,792
|
|
Inter-segment sales
|
|
|
2,845
|
|
|
|
11,978
|
|
|
|
(14,823
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
151,711
|
|
|
|
486,904
|
|
|
|
(14,823
|
)
|
|
|
623,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment results
|
|
|
50,742
|
|
|
|
45,119
|
|
|
|
|
|
|
|
95,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44,426
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
Profit before taxation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 6 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended 28 February 2007
|
|
|
|
|
|
|
|
Fixed
|
|
|
|
|
|
|
|
|
|
International
|
|
|
telecomm-
|
|
|
|
|
|
|
|
|
|
telecomm-
|
|
|
unications
|
|
|
|
|
|
|
|
|
|
unications
|
|
|
network
|
|
|
|
|
|
|
|
|
|
services
|
|
|
services
|
|
|
Elimination
|
|
|
Group
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External sales
|
|
|
163,523
|
|
|
|
398,847
|
|
|
|
|
|
|
|
562,370
|
|
Inter-segment sales
|
|
|
2,844
|
|
|
|
14,167
|
|
|
|
(17,011
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
166,367
|
|
|
|
413,014
|
|
|
|
(17,011
|
)
|
|
|
562,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment results
|
|
|
23,505
|
|
|
|
39,595
|
|
|
|
|
|
|
|
63,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(43,721
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before taxation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
Secondary reporting format geographical segments
Although the Groups two business segments are managed on a worldwide basis, they operate
mainly in two main geographical areas:
|
|
|
|
|
Hong Kong
|
|
:
|
|
international telecommunications and fixed telecommunications
network services
|
|
|
|
|
|
Canada
|
|
:
|
|
international telecommunications and fixed telecommunications
network services
|
In presenting information on the basis of geographical segments, turnover and segment results are
presented based on the geographical location of customers.
There were no sales between the geographical segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
|
|
Segment results
|
|
|
|
six months ended
|
|
|
six months ended
|
|
|
|
29 February
|
|
|
28 February
|
|
|
29 February
|
|
|
28 February
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographical segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hong Kong
|
|
|
612,553
|
|
|
|
552,384
|
|
|
|
95,021
|
|
|
|
63,089
|
|
Canada
|
|
|
11,239
|
|
|
|
9,986
|
|
|
|
840
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
623,792
|
|
|
|
562,370
|
|
|
|
95,861
|
|
|
|
63,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 7 -
|
(c)
|
|
Hong Kong Broadband Network Limited (HKBN), a wholly-owned subsidiary of the Group,
as a Fixed Telecommunications Network Services (FTNS) licensee, provides
interconnection services to enable delivery of telecommunications service to customers
of different operators. Since the FTNS license was granted by the Telecommunication
Authority (TA) and interconnection services have been provided, HKBN has been billing
mobile operators for the interconnection services provided to them and recognizing
revenue (mobile interconnection charges) based on managements best estimate of the
amounts it expected to collect. A majority of the mobile operators, however, rejected
HKBNs demand for payment. As a result of non-payment by certain mobile operators, in
2004, the Group asked the TA to make a determination (the Determination) on the level
of mobile interconnection charges payable by one of the mobile operators to HKBN; and
the effective date of the determined mobile interconnection charges.
|
|
|
|
|
In March 2006, TA issued a preliminary analysis (the 2006 PA) on the Determination
with respect to the rates of mobile interconnection charges payable by the mobile
operator under dispute and the timing of the Determination. The final level of mobile
interconnection charges was still subject to the Determination to be issued by TA as
of 31 August 2006.
|
|
|
|
|
In March 2007, TA issued a revised preliminary analysis (the 2007 PA) which
superseded the 2006 PA. The 2007 PA set out the rates of mobile interconnection
charge, which are different from those rates stated in the 2006 PA. Based on the 2007
PA, management re-assessed its measurement basis of the mobile interconnection charges
and the amount it expected to collect for billings outstanding through that date. As a
result of the reassessment, the Group recorded mobile interconnection charges of
HK$26,677,000 for the six months ended 28 February 2007 which comprises of additional
charges for the years ended 31 August 2005 and 2006 of previously measured based on
the 2006 PA.
|
|
|
|
|
As at 28 February 2007, the Group also updated its assessment of the bad debt
provision set up for mobile interconnection charges receivable and reduced the
provision from HK$20,809,000 at 31 August 2006 to HK$11,186,000 at 28 February 2007.
|
|
|
|
|
In June 2007, TA issued a final determination (the Final Determination) which set
out the rates of mobile interconnection charge payable by the mobile operator under
dispute, which approximate the rates stated in the 2007 PA.
|
|
|
|
|
Based on the Final Determination, management estimated the amount of mobile
interconnection charges it expected to be collectible and recorded mobile
interconnection charges of HK$14,339,000 for the six months ended 29 February 2008. As
of the date of issuance of this interim financial report, HKBN is still in the process
of reaching commercial agreements with several mobile operators. Accordingly, the
estimate made by the management is subject to change based on the development of the
commercial negotiation with respective mobile operators.
|
4.
|
|
Network costs and cost of inventories
|
|
|
|
Network costs and cost of inventories mainly include interconnection charges paid to local
and overseas carriers, leased line rentals, program fees, production costs for the IP-TV
service and costs of inventories sold, and do not include depreciation charge which is
included in other operating expenses.
|
|
|
|
The Group estimates the Universal Services Contributions (USC) payable to PCCW-HKT to fund
the costs of network development in remote areas in Hong Kong and includes such
estimated costs as part of the network costs. TA periodically reviews that actual costs of
such developments and revises the amounts owed to PCCW-HKT or to be refunded by PCCW-HKT to
the USC contributing parties.
|
|
|
|
On 28 December 2007, TA issued a statement (TA Statement) on the USC and confirmed the
actual contribution level for the period from 1 January 2005 to 30 June 2007. Based on the TA
Statement, an amount of HK$7,617,000 was recorded as a reduction against the network costs of
the Group for the six months ended 29 February 2008.
|
|
|
|
The actual contribution level since 30 June 2007 is not yet confirmed by TA.
|
- 8 -
5.
|
|
Profit before taxation
|
|
|
|
Profit before taxation is arrived at after (crediting) and charging the following:
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
29 February
|
|
|
28 February
|
|
|
|
2008
|
|
|
2007
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
(14,128
|
)
|
|
|
(10,249
|
)
|
Interest element of finance leases
|
|
|
20
|
|
|
|
34
|
|
Interest on 10-year senior notes
|
|
|
40,774
|
|
|
|
43,687
|
|
Net exchange (gain)/loss
|
|
|
(1,526
|
)
|
|
|
1,874
|
|
Unrealised gains on other financial assets
|
|
|
(2,585
|
)
|
|
|
(1,739
|
)
|
Realised and unrealised loss on derivative financial instruments
|
|
|
1,039
|
|
|
|
546
|
|
Gain on extinguishment of senior notes
|
|
|
(2,582
|
)
|
|
|
|
|
Advertising and marketing expenses
|
|
|
141,303
|
|
|
|
94,942
|
|
Amortisation of deferred expenditure
|
|
|
14,228
|
|
|
|
7,165
|
|
Depreciation of owned fixed assets
|
|
|
105,106
|
|
|
|
134,872
|
|
Depreciation of fixed assets held under finance lease
|
|
|
292
|
|
|
|
517
|
|
Provision/(write-back) for doubtful debts
(note)
|
|
|
8,264
|
|
|
|
(1,368
|
)
|
Staff costs
(note 6)
|
|
|
122,573
|
|
|
|
108,365
|
|
(Gain)/loss on disposal of fixed assets
|
|
|
(275
|
)
|
|
|
105
|
|
|
|
|
|
|
|
|
|
|
Note:
|
The amount for the six months ended 28 February 2007 included write-back of provision for
mobile interconnection charges receivables of HK$9,623,000 (note 3(c)).
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
29 February
|
|
|
28 February
|
|
|
|
2008
|
|
|
2007
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
Wages and salaries
|
|
|
111,683
|
|
|
|
98,171
|
|
Charge/(write back) of unutilised annual leave
|
|
|
1,970
|
|
|
|
(72
|
)
|
Equity settled share-based transactions
|
|
|
1,584
|
|
|
|
3,238
|
|
Retirement benefit costs defined contribution plans
|
|
|
13,387
|
|
|
|
11,809
|
|
Less: Staff costs capitalised as fixed assets
|
|
|
(6,051
|
)
|
|
|
(4,781
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
122,573
|
|
|
|
108,365
|
|
|
|
|
|
|
|
|
Staff costs include directors emoluments but exclude staff costs of HK$7,439,000 (for the six
months ended 28 February 2007: HK$7,045,000) recorded in network costs and HK$81,750,000 (for the
six months ended 28 February 2007: HK$63,288,000) recorded in advertising and marketing expenses.
- 9 -
7.
|
|
Taxation
|
|
|
|
Hong Kong profits tax has been provided at the rate of 16.5% (for the six months ended 28
February 2007: 17.5%) on the estimated assessable profit for the period. Taxation on overseas
profits has been calculated on the estimated assessable profit for the period at the rates of
taxation prevailing in the overseas locations (Canada and the Peoples Republic of China) in
which the Group operates.
|
|
|
|
The amount of tax expense recorded in the condensed consolidated income statement represents:
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
29 February
|
|
|
28 February
|
|
|
|
2008
|
|
|
2007
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
Current tax Hong Kong profits tax
|
|
|
|
|
|
|
|
|
provision for the interim period
|
|
|
643
|
|
|
|
33
|
|
Current tax Overseas
|
|
|
|
|
|
|
|
|
provision for the interim period
|
|
|
1,135
|
|
|
|
1,040
|
|
under-provision in respect of prior years
|
|
|
2,185
|
|
|
|
|
|
Deferred taxation relating to the origination and reversal of temporary
differences
|
|
|
(291
|
)
|
|
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
3,672
|
|
|
|
1,150
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Dividends attributable to the interim period:
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
29 February
|
|
|
28 February
|
|
|
|
2008
|
|
|
2007
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
Interim dividend declared and paid after the interim period end of
HK 4 cents per ordinary share (2007: HK 4 cents per ordinary share)
|
|
|
25,538
|
|
|
|
24,567
|
|
|
|
|
|
|
|
|
At a board meeting held on 19 May 2008, the directors has recommended to pay an interim
dividend of HK 4 cents per ordinary share for the six months ended 29 February 2008 (for the
six months ended 28 February 2007: HK 4 cents) with a scrip dividend option offered to all
shareholders excluding shareholders with registered address outside Hong Kong. The interim
dividend will be distributed on or about 23 July 2008 to shareholders whose names appear on
the register of members of the Company as at the close of business on 6 June 2008.
The interim dividend has not been recognised as a liability at the balance sheet date.
|
(b)
|
|
Dividends attributable to the previous financial year, approved and paid during the interim
period:
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
29 February
|
|
|
28 February
|
|
|
|
2008
|
|
|
2007
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
Final dividend in respect of the financial year ended
31 August 2007, approved and paid during the following
interim period, of HK 4 cents per ordinary share (2007: Nil)
|
|
|
25,082
|
|
|
|
|
|
|
|
|
|
|
|
|
- 10 -
During the interim period, a scrip dividend option was offered to all shareholders excluding
shareholders with registered addresses outside Hong Kong who were entitled to the final
dividend in respect of the financial year ended 31 August 2007. 11,227,213 shares were issued
during the interim period to the shareholders who had elected to receive all or part of their
entitlement to dividends in the form of scrip.
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
29 February
|
|
|
28 February
|
|
|
|
2008
|
|
|
2007
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to shareholders
|
|
|
47,763
|
|
|
|
18,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
shares
|
|
|
shares
|
|
|
|
000
|
|
|
000
|
|
Weighted average number of ordinary shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued ordinary shares at 1 September 2007/2006
|
|
|
616,503
|
|
|
|
614,175
|
|
Effect of scrip dividend issued
|
|
|
1,871
|
|
|
|
|
|
Effect of share options exercised
|
|
|
7,781
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares at the end of the period
|
|
|
626,155
|
|
|
|
614,176
|
|
Incremental shares from assumed exercise of share options
|
|
|
27,721
|
|
|
|
8,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares (diluted)
|
|
|
653,876
|
|
|
|
622,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
HK7.6 cents
|
|
HK3.0 cents
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
HK7.3 cents
|
|
HK2.9 cents
|
|
|
|
|
|
|
|
10.
|
|
Accounts receivable
|
|
|
|
The aging analysis of the accounts receivable is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
29 February
|
|
|
31 August
|
|
|
|
2008
|
|
|
2007
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
Current 30 days
|
|
|
55,614
|
|
|
|
50,282
|
|
31 60 days
|
|
|
13,594
|
|
|
|
15,619
|
|
61 90 days
|
|
|
5,042
|
|
|
|
8,876
|
|
Over 90 days
(note)
|
|
|
133,170
|
|
|
|
118,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
207,420
|
|
|
|
192,943
|
|
Less: Provision for doubtful debts
|
|
|
(20,599
|
)
|
|
|
(22,392
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
186,821
|
|
|
|
170,551
|
|
|
|
|
|
|
|
|
|
|
Note:
|
The amounts over 90 days for the Group included receivables relating to mobile
interconnection charges of HK$118,141,000 as at 29 February 2008 (31 August 2007: HK$103,847,000).
|
- 11 -
11.
|
Accounts payable
|
|
|
The aging analysis of the accounts payable is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
29 February
|
|
|
31 August
|
|
|
|
2008
|
|
|
2007
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
Current 30 days
|
|
|
24,956
|
|
|
|
18,025
|
|
31 60 days
|
|
|
2,594
|
|
|
|
11,097
|
|
61 90 days
|
|
|
1,094
|
|
|
|
3,655
|
|
Over 90 days
|
|
|
35,429
|
|
|
|
43,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,073
|
|
|
|
76,019
|
|
|
|
|
|
|
|
|
12. Capital and reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
|
|
|
Share
|
|
|
Capital
|
|
|
Retained
|
|
|
Exchange
|
|
|
|
|
|
|
capital
|
|
|
premium
|
|
|
reserve
|
|
|
profits
|
|
|
reserve
|
|
|
Total
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
HK$000
|
|
|
HK$000
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 September 2007
|
|
|
61,650
|
|
|
|
622,433
|
|
|
|
18,109
|
|
|
|
200,519
|
|
|
|
1,171
|
|
|
|
903,882
|
|
Profit attributable to shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,763
|
|
|
|
|
|
|
|
47,763
|
|
Shares issued in respect of scrip dividend
of the previous year
|
|
|
1,123
|
|
|
|
18,044
|
|
|
|
|
|
|
|
(19,167
|
)
|
|
|
|
|
|
|
|
|
Dividend paid in respect of the previous year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,915
|
)
|
|
|
|
|
|
|
(5,915
|
)
|
Shares issued upon exercise of share options
|
|
|
1,072
|
|
|
|
13,558
|
|
|
|
(2,296
|
)
|
|
|
|
|
|
|
|
|
|
|
12,334
|
|
Equity settled share-based transactions
|
|
|
|
|
|
|
|
|
|
|
1,685
|
|
|
|
|
|
|
|
|
|
|
|
1,685
|
|
Exchange adjustments on translation of the
financial statements of subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300
|
|
|
|
300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 29 February 2008
|
|
|
63,845
|
|
|
|
654,035
|
|
|
|
17,498
|
|
|
|
223,200
|
|
|
|
1,471
|
|
|
|
960,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
|
|
|
Share
|
|
|
Capital
|
|
|
Retained
|
|
|
Exchange
|
|
|
|
|
|
|
capital
|
|
|
premium
|
|
|
reserve
|
|
|
profits
|
|
|
reserve
|
|
|
Total
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
HK$000
|
|
|
HK$000
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 September 2006
|
|
|
61,417
|
|
|
|
620,298
|
|
|
|
12,993
|
|
|
|
196,289
|
|
|
|
657
|
|
|
|
891,654
|
|
Profit attributable to shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,229
|
|
|
|
|
|
|
|
18,229
|
|
Shares issued upon exercise of share options
|
|
|
2
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
Equity settled share-based transactions
|
|
|
|
|
|
|
168
|
|
|
|
3,262
|
|
|
|
|
|
|
|
|
|
|
|
3,430
|
|
Exchange adjustments on translation of the
financial statements of subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
811
|
|
|
|
811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 28 February 2007
|
|
|
61,419
|
|
|
|
620,474
|
|
|
|
16,255
|
|
|
|
214,518
|
|
|
|
1,468
|
|
|
|
914,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 12 -
FINANCIAL REVIEW
For the six months to 29 February 2008, our business grew continuously with consolidated turnover
increased by 10.9% year-on-year to HK$623.8 million, mainly driven by the strong double-digit
growth in our Fixed Telecommunications Network Service business (FTNS) of 19.1% to HK$474.9
million. This solid FTNS growth more than compensated for the decline in International
Telecommunications Service business (IDD) of 8.9% year-on-year to HK$148.9 million.
Our FTNS business is now the bulk of our business, contributing 76.1% of our total turnover,
reflecting the combined results of raising average revenue per user (ARPU) of our ultra-high speed
broadband Internet access service and assertive expansion in our subscription base.
Consolidated EBITDA for 1HFY08 slightly decreased by 0.6% to HK$187.1 million year-on-year,
primarily as a result of our investment in brand enhancement Network Differentiation
advertising campaign and one-off upfront customer acquisition costs led by strong growth in
subscriptions during the period.
Despite of this, the Group continued to deliver significant growth in profitability. Benefiting
from the continuous shift to higher EBITDA margin FTNS business, substantial subscriptions growth
and the effect of change in assets estimated useful lives, profits attributable to our
shareholders increased by 162.0% to HK$47.8 million in 1HFY08 with basic earnings per share reached
HK7.6 cents and diluted earnings per share reached HK7.3 cents.
LIQUIDITY AND CAPITAL RESOURCES
At 29 February 2008, the Group had total cash position of HK$304.6 million (31 August 2007:
HK$547.3 million) and outstanding borrowing of HK$680.7 million (31 August 2007: HK$953.8 million).
Our long term liability consists mainly of our outstanding 8.75% 10-year senior notes which
amounted to HK$680.2 million (31 August 2007: HK$952.6 million). Our total cash position consisted
of cash at bank and in hand, long term bank deposits but exclude pledged bank deposit.
Our capital expenditure for this period was HK$68.4 million, similar to the same period last year
of HK$69.5 million. This capital expenditure level was in line with our policy to maintain capital
expenditure to below our EBITDA. During this period, the Group has generated an adjusted positive
free cash flow of HK$88.4 million (for the six months ended 28 February 2007: HK$85.2 million).
The on-going capital expenditure on our network development will be met by internally generated
cash flow and the proceeds from senior notes issued in January 2005. Our capital expenditure
outlook for FY08 is expected to be about HK$250 million in order to reach our continuous network
expansion target towards 2.0 million residential homes pass by 2010.
- 13 -
The debt maturity profiles of the Group as at 29 February 2008 and 31 August 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
29 February
|
|
|
31 August
|
|
|
|
2008
|
|
|
2007
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
Repayable within one year
|
|
|
220
|
|
|
|
835
|
|
Repayable in the second year
|
|
|
125
|
|
|
|
121
|
|
Repayable in the third to fifth year
|
|
|
191
|
|
|
|
254
|
|
Repayable after the fifth year
|
|
|
680,153
|
|
|
|
952,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
680,689
|
|
|
|
953,803
|
|
|
|
|
|
|
|
|
With strong free cash flows, during the six months ended 29 February 2008, the Group reduced its
debt level on the 8.75% 10-year senior notes to approximately US$89.3 million (equivalent to
HK$695.2 million) through buy-back (by way of market acquisition) and cancellation of approximately
US$35.7 million (equivalent to HK$277.3 million) of the 8.75% 10-year senior notes.
At 29 February 2008, all outstanding borrowings bear fixed interest rate and are denominated in
United States dollars or Hong Kong dollars.
The Groups net debt to net asset gearing ratio for the period is 0.39 times which is calculated as
below:
|
|
|
|
|
|
|
|
|
|
|
29 February
|
|
|
31 August
|
|
|
|
2008
|
|
|
2007
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
Net Debt
(note)
|
|
|
376,078
|
|
|
|
406,494
|
|
Net Assets
|
|
|
960,049
|
|
|
|
903,882
|
|
Gearing (times)
|
|
|
0.39
|
|
|
|
0.45
|
|
|
|
Note:
|
Net debt is total long term debt and other liabilities and obligations under finance leases
less cash at bank and in hand and long term bank deposits but excluded pledged bank deposits
|
Charge on Group Assets
At 29 February 2008, the Group had bank facilities of US$9.0 million which was secured by a pledged
deposit of US$9.9 million, and certain bank guarantees provided to suppliers and to utility vendors
in lieu of payment of utility deposits were secured by pledged deposits of HK$10.0 million
(compared to pledged deposits of US$9.9 million and HK$10.0 million at 31 August 2007).
Exchange Rates
The Groups foreign currency exposures mainly arise from its borrowings denominated in foreign
currency and from purchase of goods and services of its overseas operations. The Group periodically
reviews the potential costs and benefits of hedging, and when necessary, the Group mainly uses
forward foreign exchange contracts and foreign currency deposits to manage the currency exposure.
- 14 -
Contingent Liabilities
At 29 February 2008, the Group had total contingent liabilities in respect of guarantees provided
to suppliers of HK$5.9 million (31 August 2007: HK$5.9 million) and to utility vendors in lieu of
payment of utility deposits of HK$5.3 million (31 August 2007: HK$5.3 million).
BUSINESS REVIEW
Fixed Telecommunications Network Services (FTNS)
FTNS business continued as the Groups core business, which delivered strong growth during the six
months to 29 February 2008. Instead of focus on subscription and APRU as individual metrics, we
adopted a dynamic strategy to maximize our revenue market share, which enabled us to deliver 19.1%
revenue growth in this market segment.
During the six months to 29 February 2008, the Group added 43,000 net subscriptions across our
broadband, voice and IPTV services to 726,000 subscriptions as of 29 February 2008. We managed to
grow our subscriber base without sacrificing our revenue yields, with new contracts for our
broadband Internet service achieving a blended ARPU HK$177 per month in February 2008 versus HK$175
in February 2007.
As the pioneer in the Hong Kong telecommunications industry, during the period, we were the first
Internet service provider to launch Fiber-To-The-Home (FTTH) residential broadband services, namely
FiberHome100, FiberHome200 and FiberHome1000 to the mass market, which enable the end-users
in Hong Kong to enjoy the full benefits of future technology today. To facilitate the mass
deployment of FTTH service, we also introduced the first Gigabit Passive Optical Network (GPON)
technology in Hong Kong. Together with our Metro Ethernet foundation, these advanced technologies
expedite the Groups network expansion towards achieving 2.0 million homes pass target by 2010 in a
cost effective way.
While broadband service is our core focus, emphasis were also put on our voice and IPTV businesses.
Notwithstanding the landscape for voice market remained competitive due to the modest growth
environment and incumbents strategic retention campaign to maintain stable market share, we
managed to stabilize the subscriptions in the past six months while downward pressure on pricing
persists.
During the period, we launched dual mode High Definition Terrestrial TV Receiver and IPTV
set-top-box for all customers in Hong Kong. This new value-added product not only serves our on-net
customers, but also allows off-net customers to enjoy the set-top-box via a rental plan.
International Telecom Services (IDD)
IDD service revenue showed continuous decline as a result of intensive competition from traditional
IDD service and other Voice-Over-IP (VOIP) calling options, and also from proactive migration of
our IDD customer to our FTNS 2b VOIP service. However, the decline slowed to a moderate level over
the past 18 months. Our IDD traffic volume fell by 9.1% year-on-year to 299 million minutes in
1HFY08. On IDD, we will continue to maintain our strategy as cash flow first, volume come next.
- 15 -
PROSPECTS
The results for 1HFY08 reflected the continuing growth of our FTNS business and also the
discretionary investment in brand enhancement. Our Network Differentiation campaign launched in
October 2007 aroused significant voice from the mass market and also the incumbent. Customer
confidence has been built moderately which has formed the foundation in expanding our customer
base, while much of the benefit from this investment will come in future years when the revenue
realise over the subscription period.
With the vision to build a future-proof network today, we always take the lead in future
technological development. According to a research results published by Fiber-To-The-Home Council
in February 2008, Hong Kong, was ranked the worlds second highest penetration of
Fiber-To-The-Home/Building as at year end of 2007, behind South Korea. Our 3-year network expansion
plan to 2.0 million homes pass by 2010 will further enhance Hong Kongs position being a global
showcase for mass market optical fiber connection in a metropolitan city.
With the achievement we made in Hong Kong over the past years, we aim to scale our success in
similar market overseas. We are dedicated to participate into the Singapore Next Generation
National Broadband Network project. We formed a strong consortium with two major local operators
and submitted a bid proposal to the government to design, build and operate the ultra high speed
broadband network in Singapore. Our joint expertise and determination to build this infocomm
infrastructure will enhance the telecommunications development across the region. The winning bid
is expected to be announced in the third quarter of 2008.
With our investment in brand enhancement and network expansion locally, and to leverage on our
experience and know-how to replicate our successful story in Singapore, we are confident to deliver
higher level of shareholder value and provide favorable cash return to our shareholders in near
future.
DIVIDEND
For cash management, we consider adjusted free cash flow, defined as EBITDA less capital
expenditure and net finance costs, is a better indicator of cash generation rather than net profit.
As such, after reviewing the favorable operating results for the first six months of FY08 and
considering our long-term development plans, the Board has resolved to pay an interim dividend of
HK 4 cents per ordinary share for 1H FY08 based on the percentage of adjusted free cash flow rather
than on the percentage of net profits.
EMPLOYEE REMUNERATION
Including the directors of the Group, as at 29 February 2008, the Group employed a total of 2,626
full-time employees. The Group provides remuneration package consisting of basic salary, bonus and other benefits. Bonus payments are discretionary and
dependent on both the Groups and individual performances. The Group also provides comprehensive
medical coverage, competitive retirement benefits schemes, staff training programs and operates
share option schemes.
- 16 -
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES
During the six months ended 29 February 2008, the Company has bought back a total principal value
of US$35,647,000 of the Companys 8.75% 10-year Senior Notes due 2015 which are listed on Singapore
Exchange Securities Trading Limited. Details of the buybacks are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
Consideration
|
|
|
|
Principal Value
|
|
|
paid
|
|
Month
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
December 2007
|
|
|
16,850,000
|
|
|
17,062,269.10
(Note 1)
|
January 2008
|
|
|
5,000,000
|
|
|
4,995,312.50
(Note 2)
|
February 2008
|
|
|
13,797,000
|
|
|
13,295,126.98
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,647,000
|
|
|
|
35,352,708.58
|
|
|
|
|
|
|
|
|
Notes:
1
|
|
including accrued interest
|
|
2
|
|
including accrued interest and brokers commission
|
Save as disclosed above, during the six months ended 29 February 2008, the Company has not redeemed
any of its listed securities. In addition, neither the Company nor any of its subsidiaries has
purchased or sold any of the Companys listed securities.
COMPLIANCE WITH CODE ON CORPORATE GOVERNANCE PRACTICES
During the six months ended 29 February 2008, the Company has complied with the code provisions of
the Code on Corporate Governance Practices as set out in Appendix 14 of the Rules Governing the
Listing of Securities on The Stock Exchange of Hong Kong Limited (the Listing Rules).
CODE OF CONDUCT FOR SECURITIES TRANSACTIONS BY DIRECTORS
The Company has adopted the Model Code of the Listing Rules as the code of conduct for securities
transactions by directors of the Company (the Company Code).
Having made specific enquiry of all directors, the Company confirmed that the directors have
complied with the required standard as set out in the Company Code during the period covered by
this interim report, except for the following deviation:
Model Code Provision B.8
This code provision stipulates that a director must not deal in any securities of the listed issuer
without first notifying in writing the chairman or a director designated by the board and receiving a dated written acknowledgement. The relevant date of the
dealing was 17 October 2007 on which Mr. Lai Ni Quiaque had duly notified the chairman before the
dealing but the written acknowledgement was dated the date after the relevant date of the said dealing by Mr. Lai Ni Quiaque, as such, it is regarded as a
deviation of this model code provision B.8 which requires the receipt of the written
acknowledgement dated before the dealing in securities.
- 17 -
REVIEW BY AUDIT COMMITTEE
The Audit Committee has reviewed and discussed with the management of the Company the unaudited
interim results for the six months ended 29 February 2008.
The Audit Committee comprises Mr. Lee Hon Ying, John (the Chairman of the Audit Committee), Dr.
Chan Kin Man and Mr. Peh Jefferson Tun Lu who are the Independent Non-executive Directors of the
Company.
INTERIM DIVIDEND
The Board has resolved to declare an interim dividend of HK4 cents per ordinary share for the six
month ended 29 February 2008 (six months ended 28 February 2007: HK4 cents) to shareholders of the
Company whose names are recorded on the register of members of the Company as at the close of
business on 6 June 2008. The dividend will be payable in cash or alternatively by a scrip dividend.
The scrip dividend option will be offered to all shareholders excluding shareholders with
registered addresses outside Hong Kong (whom the Company upon proper enquiries considers such
exclusion necessary or expedient on account either of the legal restrictions under the laws of the
relevant place or the requirements of the relevant body or stock exchange in that place). A
circular containing details of the scrip dividend and the form of election will be mailed to
shareholders of the Company on or about 19 June 2008 and elections will be required to be made on
or before 9 July 2008. Dividend warrants will be dispatched to shareholders of the Company on or
around 23 July 2008.
CLOSURE OF REGISTER OF MEMBERS
The register of members of the Company will be closed from 4 June 2008 to 6 June 2008 (both days
inclusive) during which period no transfers of shares would be effected. In order to qualify for
the interim dividend, all transfer of shares together with the relevant share certificates must be
lodged with the Companys Share Registrar, Computershare Hong Kong Investor Services Limited at
Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queens Road East, Wanchai, Hong Kong not later
than 4:30 p.m. on 3 June 2008.
As at the date of this announcement, the executive directors of the Company are Mr. Wong Wai Kay,
Ricky (Chairman), Mr. Cheung Chi Kin, Paul (Chief Executive Officer), Mr. Lai Ni Quiaque (Chief
Financial Officer); the non-executive director is Mr. Cheng Mo Chi, Moses; and the independent
non-executive directors are Mr. Lee Hon Ying, John, Dr. Chan Kin Man and Mr. Peh Jefferson Tun Lu.
|
|
|
|
|
By Order of the Board
|
|
|
Lai Ni Quiaque
|
|
|
Executive Director, Chief Financial Officer
|
|
|
and Company Secretary
|
Hong Kong, 19 May 2008
- 18 -
Hong Kong Television Network Ltd. (MM) (NASDAQ:CTEL)
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