i-CABLE
COMMUNICATIONS LIMITED
Interim Results Announcement
For the six months ended June 30, 2005
Results
Highlights - One million subscribers and a record half
- Capital expenditure declined by 47% to HK$125 million (2004: HK$235
million)
- Free cashflow before dividends rose by 50% to HK$123 million (2004:
HK$82 million)
- Interim dividend per share rose by 17% to 3.5 cents (2004: 3.0 cents).
Pay
TV - Brunt of cost pressure due to competition has been taken
Internet
& Multimedia - Record profit even as competitors are in search of
their first breakeven
Group
Results
The
unaudited Group profit attributable to Shareholders for the six months
ended June 30, 2005 amounted to HK$155 million, as compared to HK$147
million for the corresponding period in 2004. Basic and diluted earnings
per share were both 7.7 cents for 2005, as compared to both 7.3 cents
last year.
Interim
Dividend
The
Board has declared an interim dividend in respect of the six-month period
ended June 30, 2005 of 3.5 cents (2004: 3 cents) per share, payable on
Friday, October 7, 2005 to Shareholders on record as at September 30,
2005.
UNAUDITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended June 30, 2005
|
|
2005
|
|
2004
|
|
Note
|
HK$'000
|
|
HK$'000
|
|
|
|
|
|
Turnover
|
(2,3)
|
1,222,818
|
|
1,154,447
|
|
Programming costs |
|
(420,514)
|
|
(366,624)
|
|
Network and other operating expenses |
|
(197,411)
|
|
(187,535)
|
|
Selling, general and administrative
expenses |
|
(198,210)
|
|
(177,069)
|
Profit from operations before depreciation
|
|
406,683
|
|
423,219
|
|
Depreciation |
|
(250,712)
|
|
(273,740)
|
Profit from operations
|
(3)
|
155,971
|
|
149,479
|
|
Interest income |
(4)
|
411
|
|
3
|
|
Finance costs |
(4)
|
(134)
|
|
(72)
|
|
Non-operating income / (expenses) |
(4)
|
944
|
|
(1,494)
|
Profit before taxation
|
(4)
|
157,192
|
|
147,961
|
|
Income tax |
(5)
|
(1,950)
|
|
(620)
|
Profit attributable to shareholders
|
|
155,242
|
|
147,296
|
Dividends attributable to the period
|
|
|
|
|
|
Final dividend of 4.5 cents (2004: 4
cents) per share in respect of the previous financial year, declared
during the period |
|
90,866
|
|
80,769 |
|
Interim dividend of 3.5 cents (2004: 3
cents) per share declared after the balance sheet date * |
|
70,673
|
|
60,577
|
|
|
|
161,539
|
|
141,346
|
|
Earnings per share |
|
|
|
|
|
Basic |
(6)
|
7.7cents
|
|
7.3cents
|
|
Diluted |
(6)
|
7.7cents
|
|
7.3cents
|
- The interim dividend proposed after the balance sheet date has not
been recognised as liability at the balance sheet date.
UNAUDITED
CONSOLIDATED BALANCE SHEET
At June 30, 2005
|
|
At June
30, 2005
|
|
At December
31, 2004
|
|
Note
|
HK$'000
|
|
HK$'000
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
Property, plant and equipment |
|
1,916,238
|
|
2,050,787
|
|
Programming library |
|
121,204
|
|
127,311
|
|
Deferred tax assets |
|
146,585
|
|
108,963
|
|
Non-current investments |
|
9,725
|
|
9,725
|
|
|
2,193,752
|
|
2,296,786
|
Current assets |
|
|
|
|
|
Inventories |
|
11,068
|
|
16,195
|
|
Accounts receivable from trade debtors |
(7) |
125,907
|
|
118,237
|
|
Deposits, prepayments and other receivables |
|
124,990
|
|
116,119
|
|
Amounts due from fellow subsidiaries |
|
8,500
|
|
1,416
|
|
Amount due from immediate holding company |
|
5,448
|
|
320
|
|
Cash at bank and in hand |
|
147,306
|
|
115,013
|
|
|
|
423,219
|
|
367,300
|
Current liabilities
|
|
|
|
|
|
Amounts due to trade creditors |
(8)
|
66,570
|
|
109,302
|
|
Accrued expenses and other payables |
|
267,082
|
|
354,024
|
|
Receipts in advance and customers' deposits |
|
208,070
|
|
220,564
|
Taxation |
|
17,031
|
12,022
|
|
Amounts due to fellow subsidiaries |
|
22,729
|
|
31,572
|
|
|
|
581,482
|
|
727,484
|
Net current
liabilities
|
|
(158,263)
|
|
(360,184)
|
Total assets less current liabilities
|
|
2,035,489
|
|
1,936,602
|
Non-current liabilities |
|
|
|
|
|
Deferred tax liabilities |
|
143,474
|
|
108,963
|
NET ASSETS
|
|
1,892,015
|
|
1,827,639
|
Capital and reserves
|
|
|
|
|
|
Share capital |
|
2,019,234
|
|
2,019,234
|
|
Reserves |
|
(127,219)
|
|
(191,595)
|
|
|
|
1,892,015
|
|
1,827,639
|
UNAUDITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended June 30, 2005
|
Share
capital
|
Share
premium
|
Special
capital
reserve
|
Revenue
reserve
|
Total
|
|
HK$'000
|
HK$'000
|
HK$'000
|
HK$'000
|
HK$'000
|
Balance at January 1, 2004*
|
2,019,234
|
4,838,365
|
-
|
(5,172,951)
|
1,684,648
|
Profit for the period
|
-
|
-
|
-
|
147,296
|
147,296
|
Dividend approved in respect of the previous year
|
-
|
-
|
-
|
(80,769)
|
(80,769)
|
Balance at June 30, 2004*
|
2,019,234
|
4,838,365
|
-
|
(5,106,424)
|
1,751,175
|
|
|
|
|
|
|
Balance at January 1, 2005* |
2,019,234
|
4,838,365
|
3,345
|
(5,033,305)
|
1,827,639
|
Profit for the period |
-
|
-
|
-
|
155,242
|
155,242
|
Dividend approved in respect
of the previous year |
-
|
-
|
-
|
(90,866)
|
(90,866)
|
Transfer to special capital
reserve** |
-
|
-
|
2,898
|
(2,898)
|
-
|
Balance at June 30, 2005* |
2,019,234
|
4,838,365
|
6,243
|
(4,971,827)
|
1,892,015
|
*
Included in the Group's revenue reserve is positive goodwill written off
against reserves in prior years amounting to HK$197,785,000.
** The special capital reserve
is non-distributable and it should be applied for the same purposes as
the share premium account.
NOTES TO THE ACCOUNTS
- Basis of preparation and
comparative figures
The unaudited interim financial report has been prepared in accordance
with the requirements of the Main Board Listing Rules of The Stock Exchange
of Hong Kong Limited, including compliance with Hong Kong Accounting
Standard 34 "Interim financial reporting" issued by the Hong
Kong Institute of Certified Public Accountants.
The same accounting policies adopted in the annual accounts for the
year ended December 31, 2004 have been applied to the interim financial
report.
- Turnover
Turnover comprises
principally subscription and installation fees for cable television
and Internet services, Internet Protocol Point wholesale services, advertising
income net of agency deductions, marketing contributions, channel service
fees and other related income.
- Segment information
Substantially all the activities of the Group are based in Hong Kong
and below is an analysis of the Group's turnover and profit / (loss)
from operations by principal activity for the six months ended June
30:
|
|
Turnover
|
|
Profit/(Loss) from
Operations
|
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
|
HK$'000
|
|
HK$'000
|
|
HK$'000
|
|
HK$'000
|
|
|
|
|
|
|
|
|
|
Pay television
|
|
948,368
|
|
920,166
|
|
194,843
|
|
235,330
|
Internet and multimedia
|
|
279,293
|
|
232,462
|
|
30,839
|
|
(26,520)
|
|
|
|
|
|
|
225,682
|
|
208,810
|
Unallocated
|
|
1,537
|
|
1,819
|
|
(69,711)
|
|
(59,331)
|
Inter-segment elimination |
(6,380)
|
-
|
-
|
-
|
|
|
1,222,818
|
|
1,154,447
|
|
155,971
|
|
149,479
|
-
Profit before taxation
Profit before taxation is stated after charging / (crediting):
|
|
Six months
ended June 30, |
|
|
2005
|
|
2004
|
|
|
HK$'000
|
|
HK$'000
|
Operating expenses
|
|
|
|
|
|
Depreciation |
|
|
-assets
held for use in operating leases |
|
27,709
|
|
31,855
|
|
|
- others |
|
223,003
|
|
241,885
|
|
Amortisation of programming library* |
|
38,378
|
|
49,677
|
|
Staff costs |
|
351,551
|
|
331,651
|
|
Cost of inventories |
|
10,594
|
|
9,972
|
|
Rentals payable under operating leases
in respect of land and buildings |
|
20,930
|
|
20,284
|
|
Contribution to defined contribution
plans |
|
14,038
|
|
13,150 |
|
Auditors' remuneration |
|
1,096
|
|
1,059
|
|
Other operating expenses |
|
379.548
|
|
305,435
|
|
Total operating expenses |
|
1,066,847
|
|
1,004,968
|
|
Rentals receivable under operating leases
in respect of: |
|
|
|
|
|
|
- sub-leased
land and buildings |
|
(2,374)
|
|
(2,359)
|
|
|
-
owned plant and machinery |
|
(50,651)
|
|
(42,865)
|
Non-operating (income) /expenses
|
|
|
|
|
|
Net gain on disposal of property, plant
and equipment |
|
(944)
|
|
(1,544)
|
|
Impairment loss on property,
plant and equipment |
|
-
|
|
3,038
|
|
Total non-operating (income)
/ expenses |
|
(944)
|
|
1,494
|
*
Amortisation of programming library is included within programming costs
in the consolidated profit and loss account of the Group.
-
Income tax
The provision for Hong Kong Profits Tax is calculated separately on
the taxable profit of each entity within the Group at the rate of
17.5% (2004: 17.5%). Taxation for overseas subsidiaries is charged
at the appropriate current rate of taxation ruling in the relevant
country. The taxation charge for the six months ended June 30 represents:
|
2005
|
|
2004
|
|
HK$'000
|
|
HK$'000
|
|
|
|
|
Provision for protective assessments on leasing partnerships
|
5,000
|
|
-
|
Current tax provision - overseas |
61
|
|
31
|
Under provision in respect of prior
year |
-
|
|
589
|
Net deferred tax credit
|
(3,111)
|
|
-
|
|
1,950
|
|
620
|
- Earnings per share
The calculation of basic earnings per share is based on the profit attributable
to shareholders of HK$155 million (2004: HK$147 million) and the weighted
average number of ordinary shares in issue during the period of 2,019,234,400
(2004: 2,019,234,400).
The calculation of diluted earnings per share was based on the weighted
average number of ordinary shares of 2,019,234,400 (2004: 2,019,234,400)
after adjusting for the effects of all dilutive potential ordinary shares.
- Accounts receivable from trade debtors
An ageing analysis of accounts receivable from trade debtors (net of
allowance for doubtful accounts) is set out as follows:
|
At June 30, 2005
|
|
At December 31, 2004
|
|
HK$'000
|
|
HK$'000
|
|
|
|
|
0 to 30 days
|
92,472
|
|
75,521
|
31 to 60 days |
10,690
|
|
19,612
|
61 to 90 days |
12,841
|
|
13,588
|
Over 90 days
|
9,940
|
|
9,516
|
|
125,907
|
|
118,237
|
The Group has a defined credit policy. The general credit terms allowed
range from 0 to 60 days.
-
Amounts
due to trade creditors
An
ageing analysis of amounts due to trade creditors is set out as follows:
|
At June 30, 2005
|
|
At December 31, 2004
|
|
HK$'000
|
|
HK$'000
|
|
|
|
|
0 to 30 days
|
4,403
|
|
5,490
|
31 to 60 days |
11,159
|
|
21,814
|
61 to 90 days |
13,437
|
|
26,989
|
Over 90 days
|
37,571
|
|
55,009
|
|
66,570
|
|
109,302
|
- Review by the audit committee
The unaudited interim accounts for the six months ended June 30,
2005 have been reviewed by the Audit Committee of the Company.
MANAGEMENT
DISCUSSION AND ANALYSIS
A.
Review of 2005 Interim Results
The Group continued to achieve profitable growth in the first six months
ended June 30, 2005 with increase in both Pay TV and broadband subscriber
bases despite further intensifying competition, particularly in the Pay
TV market, with the deployment of innovative bundling and other marketing
strategies.
Consolidated turnover increased by 6% or HK$68 million to HK$1,223 million
with a HK$47 million increase in Internet & Multimedia turnover and
a HK$28 million increase in Pay TV turnover.
Operating costs before depreciation increased by 12% to HK$816 million
as programming costs increased by 15% to HK$421 million due to increase
acquisition costs for sports rights and other programme enhancements.
Network and other operating costs increased by 5% to HK$197 million due
mainly to transponder costs of a satellite service which commenced in
September 2004 and an increase in customer fulfillment costs. Selling,
general and administrative expenses increased by 12% to HK$198 million
due primarily to increase in Pay TV marketing and sales spending to fend
off competition.
Earnings before interest, tax, depreciation and amortization or EBITDA
dropped slightly by 4% to HK$407 million.
Depreciation decreased by 8% to HK$251 million due to lower depreciation
charges on analogue set-top boxes, cable modems and network assets resulting
from expiry of their depreciation cycle.
Profit from operations rose by HK$6 million or 4% to HK$156 million.
Income tax charges for the period represented a HK$5 million additional
provision for the potential tax liability from a leveraged leasing arrangement,
as partly set off by the recognition of HK$3 million net deferred tax
assets for the Group.
Net profit attributable to shareholders increased by 5% or HK$8 million
to HK$155 million.
Basic earnings per share were 7.7 cents as compared to 7.3 cents in 2004.
B. Segmental Information
Pay Television
Subscribers grew by 36,000 or 5% to 718,000 year-on-year while growth
in the first half of this year slowed to 16,000 from 20,000 in the second
half of 2004. ARPU decreased slightly by 3% to HK$216, primarily due to
the rollout and aggressive marketing of mini packages in response to changing
market conditions. Turnover increased by 3% to HK$948 million, aided partly
by higher commercial airtime revenue. Operating costs after depreciation
increased by 10% to HK$754 million primarily due to the aforementioned
increase in programming costs. Operating profit decreased by 17% to HK$195
million.
Internet & Multimedia
Broadband subscribers grew by 37,000 or 14% to 301,000 year-on-year due
mainly to successful service enhancement through network upgrade, bundling
strategies and the continued introduction of value-added services. ARPU
increased by HK$2 to HK$144. The VoIP conveyance service reported 69,000
lines in service as of the period end, as compared to 29,000 at the end
of 2004. Turnover increased by 20% to HK$279 million. Operating costs
after depreciation decreased by 4% to HK$248 million due primarily to
savings achieved in depreciation and selling, general and administrative
expenses. Operating profit reported a record high figure of HK$31 million
as compared to an operating loss of HK$27 million incurred a year ago.
C. Liquidity and Financial Resources
As of June 30, 2005, the Group had net cash of HK$147 million, as compared
to net cash of HK$30 million a year ago.
The consolidated net asset value of the Group as at June 30, 2005 was
HK$1,892 million, or HK$0.94 per share. The Group's assets were free from
any charge.
The Group's assets, liabilities, revenues and expenses were mainly denominated
in Hong Kong dollars or U.S. dollars and the exchange rate between these
two currencies has remained pegged.
Capital expenditure during the period amounted to HK$125 million as compared
to HK$235 million in the same period last year. Major items included further
network upgrade and expansion, broadband and VoIP equipment, television
production facilities as well as investment in information systems.
The Group is comfortable with its present financial and liquidity position.
Further ongoing capital expenditure and new business development will
be funded by cash to be generated from operations and, if needed, bank
borrowings or other external sources of funds. The Group also had total
short-term bank credit facilities of approximately HK$670 million which
remained unutilized as of June 30, 2005.
D. Contingent Liabilities
At June 30, 2005, 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 banks up
to HK$662 million, of which only HK$431 million have been utilised by
the subsidiaries.
Subsequent to the end of the period under review, the Group has reached
a settlement agreement with the Inland Revenue Department on a tax dispute
concerning a leveraged leasing arrangement already expired in September
2003. Net of the amount indemnified by Wharf Communications Limited as
tax liability pertaining to events occurring up to the Group's Initial
Public Offering on November 1, 1999, the Group's HK$17 million share of
the settlement payment has been fully provided up to the end of June 2005.
E. Human Resources
The Group had a total of 3,273 employees at the end of the first half
of 2005. Total salaries and related costs incurred during the corresponding
period amounted to HK$389 million (2004: HK$371 million). The Group has
a performance bonus scheme in place to motivate and reward employee performance
to fulfill the Group's business targets.
As a good corporate citizen, we continue our dedication to contribute
towards the building of a more caring and cohesive society in terms of
real engagement. In appreciation of the involvement of our Corporate Volunteer
team in serving the needy, the Secretariat of Steering Committee on Promotion
of Volunteer Service has presented us the Gold Award for Volunteer Service,
and the Hong Kong Council of Social Service has once again awarded us
the Caring Company Logo.
F. Operating Environment and Competition
In the first half of 2005, competition in both the Pay TV and broadband
sectors was more intense than at any time since the Group began operation
12 years ago. Bundled "triple play" service of television, voice
and data was the main battlefield.
The latest competitor to join that battlefield is TVB's Galaxy, rebranded
SuperSUN TV after having secured new investors. Galaxy has concluded an
agreement for its service to be distributed over Hutchison Global Communications'
broadband network and to be bundled with the latter's voice and data services.
NOW Broadband TV, meanwhile, continued to play aggression in marketing
its services.
These developments caused the Group's Pay TV subscription growth to stutter
and the Group rolled out mini packages, at a lower price point, with a
higher profile marketing campaign to respond.
In the meantime, bundled packages continued to spur growth for our broadband
subscription in a keenly contested operating environment. The Group's
packages have proven to be competitive in sustaining the growth momentum
which has been rebuilding since the middle of last year.
The Group will continue to monitor market developments closely and will
adjust its marketing strategy accordingly. Swift action taken by the Group
has so far managed to contain the impact of competition with some degree
of success, albeit at the expense of margin erosion in some sectors. The
outlook for the remainder of the year will remain harsh and the Group
has to work very hard to stay on top of the game.
G. Outlook
Through service enhancement and timely response to changes in market
conditions, the Group managed to emerge relatively unscathed from a keen
competitive market place in the first half of 2005, reporting growth in
performance for its core businesses.
However, with other Pay Television players beginning to establish themselves
in the market, competition will only become more severe in the remainder
of the year. While our programming platform, now parading close to 100
channels, still leads the rest of the pack, we need to market our products
more effectively and spend our resources more intelligently to stay on
top. At the same time, we shall continue to look beyond the conventional
market for new opportunities.
On the broadband service front, while we are encouraged by the business
returning to a profitable growth track, we shall continue to enhance our
service by improving our after sales service and the introduction of more
value-added services. We shall continue to look out for new opportunities
to expand our multimedia content provision service.
Competition poses challenges to us as well as to our competitors. But
we believe we can prevail with our expertise in running Pay TV and broadband
services and in producing multimedia contents; our experience in marketing
our products and our established infrastructure in servicing customers.
COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE PRACTICES
During the financial period under review, the Company has complied with
all those code provisions set out in the Code on Corporate Governance
Practices contained in Appendix 14 of the Rules Governing the Listing
of Securities on The Stock Exchange of Hong Kong Limited which became
applicable to the Company in respect of the period under review, except
for one code provision with respect to the roles of chairman and chief
executive officer to be performed by different individuals.
PURCHASE, SALE OR REDEMPTION OF SHARES
Neither the Company nor any of its subsidiaries has purchased, sold or
redeemed any listed securities of the Company during the financial period
under review.
BOOK CLOSURE
The Register of Members will be closed from Monday, September 26, 2005
to Friday, September 30, 2005, both days inclusive, during which period
no transfer of shares of the Company can be registered. In order to qualify
for the abovementioned interim dividend, all transfers, accompanied by
the relevant share certificates, must be lodged with the Company's Registrars,
Tengis Limited, at Ground Floor, Bank of East Asia Harbour View Centre,
56 Gloucester Road, Wanchai, Hong Kong, not later than 4:30 p.m. on Friday,
September 23, 2005.
By Order of the Board
Wilson W. S. Chan
Secretary
Hong
Kong, August 12, 2004
As at the date of
this announcement, the Board of Directors of the Company comprises Mr. Stephen
T. H. Ng, Mr. Samuel S. F. Wong and Mr. Quinn Y. K. Law, and five independent
non-executive Directors, namely, Mr. F. K. Hu, Mr. Victor C. W. Lo, Dr.
Dennis T. L. Sun, Sir Gordon Y. S. Wu and Mr. Anthony K. K. Yeung.
|