Operating profit increased by 27% to HK$86 million (2006: HK$68 million).
The unaudited Group profit attributable to Shareholders
for the six months ended June 30, 2007 amounted to HK$116 million,
as compared to HK$63 million for the corresponding period in 2006.
Basic and diluted earnings per share were both HK$0.057 for 2007,
as compared to both HK$0.031 last year.
The Board has declared an interim dividend in respect
of the six-month period ended June 30, 2007 of HK$0.035 (2006: HK$0.035)
per share, payable on Tuesday, October 9, 2007 to Shareholders on
record as at September 28, 2007.
MANAGEMENT DISCUSSION AND ANALYSIS
A. Review of 2007 Interim Results
The Group reported a satisfactory performance during
the first six months ended June 30, 2007 despite intensifying competition.
With the enhancement of the programming platform particularly in local
production, as well as successful acquisition and retention strategies,
the Pay TV subscriber base grew to 830,000. Profit after tax increased
by 83% to HK$116 million.
Consolidated turnover decreased by 7% to HK$1,185 million,
partly due to non-recurring turnover in 2006. Notably, revenue from
new businesses such as film production and the advertising venture
in the Mainland increased by 260% from a small base.
With effective cost management and resource redeployment,
operating costs before depreciation decreased by 9% to HK$884 million.
Programming costs decreased by 6%; network and other operating costs
by 3%; and selling, general and administrative expenses by 20%.
Earnings before interest, tax, depreciation and amortisation
("EBITDA") was virtually unchanged at HK$301 million.
Depreciation decreased by 11% to HK$194 million to
follow the steady trend in recent years.
Profit from operations therefore increased by 25% to
HK$107 million, while profit before tax increased by 30% to HK$119
million and profit after tax increased by 83% to HK$116 million.
Basic earnings per share were 5.7 cents as compared
to 3.1 cents in 2006.
B. Segmental Information
Subscribers increased by 43,000 or 6% in the period
to 830,000 as compared to 32,000 or 4% during the same period last
year. However, turnover decreased by 14% to HK$827 million, mainly
attributable to dilution from lower yield subscriptions and a return
to normality for commercial airtime sales after FIFA World Cup in
2006. Operating costs after depreciation decreased by 16% to HK$728
million primarily due to the aforementioned decrease in programming
costs, marketing and sales spending and depreciation charge. Operating
profit increased by 2% to HK$100 million (2006: HK$98 million).
Internet & Multimedia
The Broadband subscriber base was largely stable at
324,000 in a mature marketplace; yield was also stable. The VoIP conveyance
service reported 179,000 lines in service as of the period end, as
compared to 168,000 at 2006 year end. Turnover was sustained at HK$295
million. Operating costs after depreciation decreased by 8% to HK$209
million partly due to lower depreciation charges. Operating profit
increased by 27% to a record high of HK$86 million.
C. Liquidity and Financial Resources
As of June 30, 2007, the Group had net cash of HK$552
million, as compared to HK$325 million a year ago.
The consolidated net asset value of the Group as at
June 30, 2007 was HK$2,278 million, or HK$1.1 per share. As at June
30, 2007, the Group had property, plant and equipment with a net book
value of approximately HK$721,000 held under finance lease contract.
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$71
million, 41% lower than the same period last year. Major items included
further network upgrade and expansion, cable modems, investment in
information systems, television production facilities as well as other
Internet & Multimedia equipment.
The Group's 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$231 million which remained unutilised as of June
D. Contingent Liabilities
At June 30, 2007, 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$237 million, of which only
HK$6 million have been utilised by the subsidiaries.
E. Human Resources
The Group had a total of 2,855 employees at the end
of June 2007 (2006: 3,338). Total gross amount of salaries and related
costs incurred in the corresponding period amounted to HK$359 million
(2006: HK$425 million).
The Group is dedicated to attracting, retaining and
developing employees of high quality and to motivating them to excel
in their careers by promoting a pay for performance culture, linking
remuneration and reward to Group performance as well as offering them
with career advancement opportunities.
Being a caring employer, the Group continues to promote
corporate citizenship and participate in community and social welfare
activities both through making donations to non-profit organisations
and social welfare agencies and encouraging employees to participate
in volunteer services.
F. Operating Environment and Competition
The Pay TV terrain was a challenge with the competition
attacking the market aggressively.
Responding to the changing market conditions, the Group
adjusted its marketing and retention offers since the end of last
year. Coupled with enhancement of our local programming platform,
we have held up our position in the market with some degree of success.
On the sports front, the highlight during and subsequent
to the period was the acquisition of the crown jewels of sports, the
2010 FIFA World Cup in South Africa, the Winter Olympics in Vancouver
and the 2012 Summer Olympics in London, all on an exclusive basis
for Hong Kong. The acquisitions affirmed CABLE TV's long-term commitment
towards maintaining solid top-rated sporting programme offerings and
was greeted enthusiastically by local sports fans.
The Broadband market is mature and ex-growth. Competition
will therefore shift to service quality, after-sales service quality
as well as value-added services.
The outlook for the remainder of the year is optimistically
cautious, particularly for the Pay TV segment, as competition is expected
to remain keen.
The Group's various marketing and programming enhancement
initiatives have enabled us to hold our market position. Additional
initiatives will be launched in the second half of the year to enhance
our competitiveness. We have also sharpened our sales force and taken
steps to enhance our customer service with the recent consolidation
into a new call centre to deliver quality after sales service.
A new challenge will arise towards the end of the year
with the arrival of digital terrestrial television. Commercial television
broadcasters have been assigned additional radio spectrum for digital
services and will begin to roll out high definition television service
and multi-channel platform. The Group will monitor these developments
closely and implement plans to counteract as appropriate.
While there is no denying that the immediate future
is a challenge, the Group is well prepared to face up to it.
CODE ON CORPORATE GOVERNANCE PRACTICES
During the financial period under review, all the
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 were met by the Company,
except in respect of one code provision providing for the roles of
chairman and chief executive officer to be performed by different
individuals. The deviation is deemed necessary as, given the nature
and size of the Company's business, it is at this stage considered
to be more efficient to have one single person to hold both positions.
The Board of Directors believes that the balance of power and authority
is adequately ensured by the operations of the Board which comprises
experienced and high calibre individuals with a substantial number
thereof being independent Non-executive Directors.
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended June 30, 2007
* The interim dividend proposed after the balance sheet
date has not been recognised as liability at the balance sheet date
CONSOLIDATED BALANCE SHEET
At June 30, 2007
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended June 30, 2007
NOTES TO THE INTERIM FINANCIAL REPORT
(1) 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 ("HKICPA").
The HKICPA has issued certain new and revised Hong
Kong Financial Reporting Standards ("HKFRSs") that are first effective
or available for early adoption for the current accounting periods
of the Group. We believe the adoption of these new and revised HKFRSs
will not have a material impact on the GroupÕs financial position or
results of operations.
The same accounting policies adopted in the annual
financial statements for the year ended December 31, 2006 have been
applied to the interim financial report.
Turnover comprises principally subscription and related
fees for Pay television and Internet services, Internet Protocol Point
wholesale services and also includes advertising income net of agency
deductions, channel service and distribution fees, programme licensing
income, film exhibition and distribution income, network maintenance
income and other related income.
(3) Segment information
Substantially all the activities of the Group are
based in Hong Kong and below is an analysis of the Group's revenue
and result by principal activity for the six months ended June 30:
(4) Profit before taxation
Profit before taxation is stated after charging / (crediting):
(5) Income tax
The provision for Hong Kong Profits Tax is calculated
at 17.5% of the estimated assessable profits for the period (2006:
17.5%). Taxation for the overseas subsidiaries is charged at the appropriate
current rate of taxation ruling in the relevant countries. The income
tax charge for the six months ended June 30 represents:
(6) Earnings per share
The calculation of basic earnings per share is based
on the profit attributable to equity shareholders of the Company of
HK$116 million (2006: HK$63 million) and the weighted average number
of ordinary shares outstanding during the period of 2,019,234,400
The calculation of diluted earnings per share is based
on the weighted average number of ordinary shares of 2,019,234,400
(2006: 2,019,234,400) after adjusting for the effects of all dilutive
potential ordinary shares.
(7) Deferred tax in the balance sheet
The components of deferred tax (assets)/liabilities
recognised in the consolidated balance sheet and the movements during
the period are as follows:
(8) Accounts receivable from trade debtors
An ageing analysis of accounts receivable from trade
debtors (net of impairment losses for bad and doubtful accounts) is
set out as follows:
(9) Amounts due to trade creditors
An ageing analysis of amounts due to trade creditors
is set out as follows:
(10) Review of results
The unaudited interim financial report for the six
months ended June 30, 2007 have been reviewed with no disagreement
by the Audit Committee of the Company.
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.
The Register of Members will be closed from Thursday,
September 20, 2007 to Friday, September 28, 2007, 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, Tricor Tengis Limited, at 26th Floor, Tesbury
Centre, 28 Queen's Road East, Wanchai, Hong Kong, not later than 4:30
p.m. on Wednesday, September 19, 2007.
By Order of the Board
Wilson W. S. Chan
Hong Kong, August 10, 2007
As at the date of this announcement, the Board of Directors of
the Company comprises Mr. Stephen T. H. Ng, Mr. William J. H. Kwan
and Mr. Peter S. O. Mak, together with four independent non-executive
Directors, namely, Dr. Dennis T. L. Sun, Sir Gordon Y. S. Wu, Mr.
Patrick Y. W. Wu and Mr. Anthony K. K. Yeung.