i-CABLE
COMMUNICATIONS LIMITED
Stock Code: 1097
Third Quarterly Results
for the nine months ended September 30, 2007
Results
Highlights
-
Turnover decreased by
8% to HK$1,748 million (2006: HK$1,910 million).
-
Net profit after tax increased
by 6% to HK$155 million (2006: HK$147 million).
-
Capital expenditure decreased
by 26% to HK$131 million (2006: HK$178 million).
Pay
TV
-
Subscribers increased by
7% to 845,000 during the nine-month period.
-
Turnover decreased by 16%
to HK$1,212 million (2006: HK$1,440 million).
-
Operating profit decreased
by 30% to HK$132 million (2006: HK$190 million).
Internet
& Multimedia
-
Broadband subscribers decreased
by 3% to 316,000 during the nine-month period.
-
Turnover decreased by 1%
to HK$442 million (2006: HK$445 million).
-
Operating profit increased
by 25% to HK$132 million (2006: HK$105 million) to equal Pay TV.
GROUP
RESULTS
The
unaudited Group profit attributable to Shareholders for the nine months
ended September 30, 2007 amounted to HK$153 million, as compared to HK$146
million for the corresponding period in 2006. Basic and diluted earnings
per share were both HK$0.076 for 2007, as compared to both HK$0.072 last
year.
MANAGEMENT
DISCUSSION AND ANALYSIS
A.
Review of results for the nine months ended September 30, 2007
The Group reported higher net
profit during the first nine months ended September 30, 2007 on lower
depreciation charges and tax provision. Profit after tax increased by
6% to HK$155 million.
Programming enhancement particularly
in local production and effective subscriber acquisition and retention
strategies have contributed to the rise of Pay TV subscriber base to 845,000
during the nine-month period.
Consolidated turnover decreased
by 8% to HK$1,748 million, partly due to the absence of special events
such as FIFA World Cup in 2006 and more competitive service packages.
Revenue from new businesses such as film production and advertising in
the Mainland tripled from a small base.
More effective cost management
and resource redeployment helped to reduce operating costs before depreciation
by 6% to HK$1,322 million. Programming costs decreased by 3%; network
and other operating costs by 5%; and selling, general and administrative
expenses by 15%.
Earnings before interest, tax,
depreciation and amortisation ("EBITDA") decreased by 14% to HK$425 million.
Depreciation decreased by 13%
to HK$282 million.
Profit from operations decreased
by 16% to HK$144 million, while profit before tax decreased by 9% to HK$162
million. With lower tax provision during the period, profit after tax
increased by 6% to HK$155 million.
Basic earnings per share were
7.6 cents as compared to 7.2 cents in 2006.
B.
Segmental Information
Pay
Television
Subscribers
increased by 59,000 or 7% in the period to 845,000 as compared to 23,000
or 3% during the same period last year. However, turnover decreased by
16% to HK$1,212 million, mainly attributable to dilution from lower yield
subscriptions and a return to normality for commercial airtime sales after
FIFA World Cup 2006. Operating costs after depreciation decreased by 14%
to HK$1,080 million due to decrease in programming costs, marketing and
sales spending and depreciation charge. Operating profit decreased by
30% to HK$132 million (2006: HK$190 million).
Internet
& Multimedia
The
Broadband subscriber base was relatively stable at 316,000 in a mature
marketplace; yield was also stable. Turnover was HK$442 million. Operating
costs after depreciation decreased by 9% to HK$310 million partly due
to lower depreciation charges. Operating profit increased by 25% to a
record high of HK$132 million.
C.
Liquidity and Financial Resources
As of September 30, 2007, the
Group had net cash of HK$578 million, as compared to HK$369 million a
year ago.
The consolidated net asset
value of the Group as at September 30, 2007 was HK$2,320 million, or HK$1.1
per share. As at September 30, 2007, the Group had property, plant and
equipment with a net book value of approximately HK$657,000 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$131 million, 26% lower than the same period
last year. Major items included further network upgrade and expansion,
investment in information systems, television production facilities and
leasehold buildings.
The Group's further ongoing
capital expenditure and new business development will be funded by cash
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$32 million which remained unutilised as of September
30, 2007.
D.
Contingent Liabilities
At
September 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$198 million, of which HK$166 million have been utilised by the subsidiaries.
E.
Human Resources
The Group had a total of 2,918
employees at the end of September 2007 (2006: 3,177). Total gross amount
of salaries and related costs incurred in the corresponding period amounted
to HK$545 million (2006: HK$630 million).
The Group is committed to attracting,
retaining and nurturing high quality employees, with pay for performance
schemes, staff development programmes, and career advancement opportunities.
As a good employer, the Group
not only takes care of employees' well being, including organising a variety
of health talks, but also actively supports and participates in community
and social welfare events with employees.
F.
Operating Environment and Competition
The operating environment remained
unfavourable as intensified competition continued to affect the Group's
operating and financial performances during the period under review.
In response, on top of unbundling
its Pay TV packages competitively, the Group also re-aligned its sales
strategy and will be opening retails shops in popular areas of the territory
to expand its sales coverage. In the meantime, customer service has been
enhanced following the opening of our integrated customer service centre
in Guangzhou.
The Broadband access service
market is mature, returning stable revenue and profitability to the Group.
Competition has shifted to service quality, after-sales service as well
as value-added services. Pursuant to the acquisition of new media exhibition
rights for the Beijing Olympics next year, the Group has started to prepare
for full exploitation of the rights to maximise its business and other
potential values.
G.
Outlook
The operating environment in
the near and medium term will continue to be challenging with the imminent
launch of digital terrestrial television service by the two commercial
broadcasters, on top of competition from peers in the Pay TV market.
Nonetheless, the Group is sparing
no efforts to consolidate its position in the television market with the
acquisition of prized products, such as the Olympics Games and FIFA World
Cup, enhancement of its own production, as well as sharpening its sales
and marketing and after-sales services.
Some of these efforts are beginning
to bear fruit in enhancing our competitiveness and subscriber loyalty;
and the Group is confident that it would continue to be very competitive
in this crowded market.
UNAUDITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the nine months ended September 30, 2007
|
|
2007
|
|
2006
|
|
Note
|
HK$'000
|
|
HK$'000
|
|
|
|
|
|
Turnover
|
(2,3)
|
1,747,901
|
|
1,909,547
|
|
Programming
costs |
|
(720,893)
|
|
(742,673)
|
|
Network
and other operating expenses |
|
(315,851)
|
|
(332,508)
|
|
Selling,
general and administrative expenses |
|
(285,716)
|
|
(337,682)
|
Profit
from operations before depreciation
|
|
425,441
|
|
496,684
|
|
Depreciation |
|
(281,507)
|
|
(324,812)
|
Profit
from operations
|
(3)
|
143,934
|
|
171,872
|
|
Interest
income |
|
16,154
|
|
7,075
|
Finance
costs |
|
(16)
|
(24)
|
|
Non-operating
income/(expenses) |
(4)
|
1,916
|
|
(193)
|
Profit
before taxation
|
(4)
|
161,988
|
|
178,730
|
|
Income
tax expense |
(5)
|
(6,878)
|
|
(32,092)
|
Profit
after taxation |
|
155,110
|
146,638
|
Attributable
to:
|
|
|
|
145,967
|
|
Equity
shareholders of the Company |
153,218
|
|
Minority
interests |
|
1,892
|
|
671
|
Profit
after taxation |
155,110
|
146,638
|
Dividends
payable to equity shareholders attributable to the period |
|
100,962
|
|
100,962
|
|
Final
dividend of 5 cents (2006: 5 cents) per share in respect of the previous
financial year, declared during the period |
|
Interim
dividend of 3.5 cents (2006: 3.5 cents) per share declared during
the period |
|
70,673
|
|
70,673
|
|
|
|
171,635
|
|
171,635
|
Earnings
per share
|
|
|
|
|
|
Basic |
(6)
|
7.6
cents
|
|
7.2 cents
|
|
Diluted |
(6)
|
7.6
cents
|
|
7.2 cents
|
CONSOLIDATED
BALANCE SHEET
At September 30, 2007
|
|
At September 30, 2007
(unaudited)
|
|
At December
31, 2006
(audited)
|
|
Note
|
HK$'000
|
|
HK$'000
|
|
|
|
|
|
Non-current
assets
|
|
|
|
|
|
Property,
plant and equipment |
|
1,432,157
|
|
1,591,353
|
|
Programming
library |
|
193,822
|
|
185,702
|
|
Other
intangible assets |
|
9,487
|
|
12,775
|
|
Deferred
tax assets |
(7)
|
364,466
|
|
388,266
|
Other
non-current assets |
|
180,245
|
|
51,079 |
|
|
2,180,177
|
|
2,229,175
|
Current
assets |
|
|
|
|
|
Inventories |
|
4,278
|
|
1,111
|
|
Accounts
receivable from trade debtors |
(8) |
94,504
|
|
85,585
|
|
Deposits,
prepayments and other receivables |
|
102,923
|
|
64,445
|
|
Amounts
due from fellow subsidiaries |
|
3,581
|
|
56,361
|
|
Cash
and cash equivalents |
|
577,502
|
|
586,197
|
|
|
|
782,788
|
|
793,
699 |
Current
liabilities
|
|
|
|
|
|
Amounts
due to trade creditors |
(9)
|
22,973
|
|
42,675
|
|
Accrued
expenses and other payables |
|
341,815
|
|
395,698
|
|
Receipts
in advance and customers' deposits |
|
107,793
|
|
107,527
|
Obligations
under finance leases |
|
217
|
|
705
|
Current
taxation |
|
-
|
|
49
|
Amounts
due to fellow subsidiaries |
|
32,651
|
|
43,735
|
|
Amount
due to immediate holding company |
|
1,979
|
|
989
|
|
|
|
507,428
|
|
591,378
|
Net current
assets
|
|
275,360
|
|
202,321
|
Total
assets less current liabilities
|
|
2,455,537
|
|
2,431,496
|
Non-current
liabilities |
|
|
|
|
|
Deferred
tax liablities |
(7) |
97,996
|
|
115,061
|
Obligations
under finance leases |
|
-
|
72
|
Other
non-current liabilities |
|
37,526
|
53,970
|
|
|
135,522
|
169,103
|
NET ASSETS
|
|
2,320,015
|
|
2,262,393
|
Capital
and reserves |
|
|
|
|
|
Share
capital |
|
2,019,234
|
|
2,019,234
|
|
Reserves |
|
295,212
|
|
239,719
|
|
Total
equity attributable to equity shareholders of the Company |
|
2,314,446
|
|
2,258,953
|
|
Minority
interests |
|
5,569
|
|
3,440
|
TOTAL
EQUITY |
|
2,320,015
|
|
2,262,393
|
UNAUDITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the nine months ended September 30, 2007
Attributable
to equity shareholders of the Company
|
Share
capital
|
Share
premium
|
Special
capital
reserve
|
Exchange
reserve
|
Revenue
reserve
|
Statutory
reserve
Fund
|
Total
reserves
|
Total
|
Minority
interests
|
Total
equity
|
|
HK$'000
|
HK$'000
|
HK$'000
|
HK$'000
|
HK$'000
|
HK$'000
|
HK$'000
|
HK$'000
|
HK$'000
|
HK$'000
|
Balance
at January 1, 2006*
|
2,019,234
|
4,838,365
|
7,924
|
(187)
|
(4,616,969)
|
-
|
229,133
|
2,248,367
|
-
|
2,248,367
|
Profit
for the period
|
-
|
-
|
-
|
-
|
145,967
|
-
|
145,967
|
145,967
|
671
|
146,638
|
Dividend
approved in respect of the previous year
|
-
|
-
|
-
|
-
|
(100,962)
|
-
|
(100,962)
|
(100,962)
|
-
|
(100,962)
|
Translation
of foreign subsidiaries' financial statements
|
-
|
-
|
-
|
(244)
|
-
|
-
|
(244)
|
(244)
|
-
|
(244)
|
Acquisition
of subsidiary
|
-
|
-
|
-
|
(100)
|
-
|
-
|
(100)
|
(100)
|
1,887
|
1,787
|
Transfer
to statutory reserve fund |
-
|
-
|
-
|
-
|
(132)
|
132
|
|
-
|
-
|
-
|
Transfer
to special capital reserve**
|
-
|
-
|
1,594
|
-
|
(1,594)
|
-
|
-
|
-
|
-
|
-
|
Balance
at September 30, 2006*
|
2,019,234
|
4,838,365
|
9,518
|
(531)
|
(4,573,690)
|
132
|
273,794
|
2,293,028
|
2,558
|
2,295,586
|
UNAUDITED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the nine months ended September 30, 2007
Attributable
to equity shareholders of the Company
|
Share
capital
|
Share
premium
|
Special
capital
reserve
|
Exchange
reserve
|
Revenue
reserve
|
Fair
value reserve
|
Total
reserves
|
Total
|
Minority
interests
|
Total
equity
|
|
HK$'000
|
HK$'000
|
HK$'000
|
HK$'000
|
HK$'000
|
HK$'000
|
HK$'000
|
HK$'000
|
HK$'000
|
HK$'000
|
Balance
at January 1, 2007*
|
2,019,234
|
4,838,365
|
13,771
|
(81)
|
(4,612,336)
|
-
|
239,719
|
2,258,953
|
3,440
|
2,262,393
|
Profit
for the period
|
-
|
-
|
-
|
-
|
153,218
|
-
|
153,218
|
153,218
|
1,892
|
155,110
|
Dividend
approved in respect of the previous year
|
-
|
-
|
-
|
-
|
(100,962)
|
-
|
(100,962)
|
(100,962)
|
-
|
(100,962)
|
Translation
of foreign subsidiaries' financial statements
|
-
|
-
|
-
|
555
|
-
|
-
|
555
|
555
|
108
|
663
|
Equity
contribution from minority interest
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
129
|
129
|
Change
in fair value of available for sale securities |
-
|
-
|
-
|
-
|
-
|
2,682
|
2,682
|
2,682
|
-
|
2,682
|
Transfer
to special capital reserve**
|
-
|
-
|
57
|
-
|
(57)
|
-
|
-
|
-
|
-
|
-
|
Balance
at September 30, 2007*
|
2,019,234
|
4,838,365
|
13,828
|
474
|
(4,560,137)
|
2,682
|
295,212
|
2,314,446
|
5,569
|
2,320,015
|
*
Included in the Group's revenue reserve is positive goodwill written off
against reserves in prior years amounting to HK$197,785,000.
** The special capital reserve is non-distributable and it should be applied
for the same purposes as he share premium acount.
NOTES TO THE INTERIM FINANCIAL
REPORT
- Basis of preparation
and comparative figures
The unaudited interim financial report has been prepared in accordance
with the requirements of the Main Board Listing Rules of The Stock Exchange
of Hong Kong Limited, including compliance with Hong Kong Accounting
Standard 34 "Interim financial reporting" issued by the Hong Kong Institute
of Certified Public Accountants ("HKICPA").
The HKICPA has issued
certain new and revised Hong Kong Financial Reporting Standards ("HKFRSs")
that are first effective or available for early adoption for the current
accounting periods of the Group. We believe the adoption of these new
and revised HKFRSs will not have a material impact on the Group's financial
position or results of operations.
The same accounting policies adopted in the annual financial statements
for the year ended December 31, 2006 have been applied to the interim
financial report.
- Turnover
Turnover comprises principally subscription and related fees for Pay
television and Internet services, Internet Protocol Point wholesale
services. It also includes advertising income net of agency deductions,
channel service and distribution fees, programme licensing income, film
exhibition and distribution income, network maintenance income and other
related income.
- Segment information
Substantially all the activities of the Group are based in Hong Kong
and below is an analysis of the Group's revenue and result by principal
activity for the nine months ended September 30:
¡@
|
|
Segment
revenue
|
|
Segment
result
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
|
HK$'000
|
|
HK$'000
|
|
HK$'000
|
|
HK$'000
|
|
|
|
|
|
|
|
|
|
Pay
television
|
|
1,211,643
|
|
1,439,912
|
|
132,013
|
|
189,569
|
Internet and multimedia
|
|
442,295
|
|
444,660
|
|
131,891
|
|
105,127
|
Unallocated
|
|
112,787
|
|
36,929
|
|
(116,250)
|
|
(122,824)
|
Inter-segment
elimination |
(18,824)
|
(11,954)
|
(3,720)
|
-
|
|
|
1,747,901
|
|
1,909,547
|
|
143,934
|
|
171,872
|
Profit
from operations |
|
|
|
|
|
143,934
|
|
171,872
|
Interest
income |
16,154
|
7,075
|
Finance
costs |
(16)
|
(24)
|
Non-operating
income/(expenses) |
1,916
|
(193)
|
Income
tax expense |
(6,878)
|
(32,092)
|
Profit
after taxation |
155,110
|
146,638
|
- Profit before taxation
Profit before taxation is stated after charging / (crediting):
|
|
Nine
months ended September 30, 2007 |
|
2006
|
|
|
HK$'000
|
|
HK$'000
|
|
Depreciation |
|
|
|
|
|
|
-
assets held for use under operating leases |
|
24,925
|
|
29,917
|
|
|
-
other assets |
|
256,582
|
|
294,895
|
|
281,507
|
324,812
|
|
|
|
|
Amortisation
of programming library* |
|
91,185
|
|
66,476
|
Amortisation
of other intangible assets** |
|
3,288
|
-
|
|
Staff
costs |
|
513,029
|
|
578,675
|
|
Contributions
to defined contribution retirement plans |
|
21,593
|
|
23,134
|
|
Cost
of inventories used |
|
5,961
|
|
10,237
|
|
Auditors'
remuneration |
|
2,923
|
|
2,216
|
|
|
|
|
|
|
|
Non-operating
(income)/expenses |
|
|
|
|
|
Net
(gain)/loss on disposal of property, plant and equipment |
|
(1,916)
|
|
193
|
* Amortisation of programming
library is under programming costs in the consolidated results of the
Group.
**Amortisation of other intangible assets is under network and other
operating expenses in the consolidated results of the Group.
- Income tax
The provision for Hong Kong Profits Tax is calculated at 17.5% of the
estimated assessable profits for the period (2006: 17.5%). Taxation
for the overseas subsidiaries is charged at the appropriate current
rate of taxation ruling in the relevant countries. The income tax charge
for the nine months ended September 30 represents:
|
2007
|
|
2006
|
|
HK$'000
|
|
HK$'000
|
|
|
|
|
Current
tax provision - overseas |
143
|
|
174
|
Net
deferred tax expenses |
6,735
|
|
31,918
|
|
6,878
|
|
32,092
|
- Earnings per share
The calculation of basic earnings per share is based on the profit attributable
to equity shareholders of the Company of HK$153 million (2006: HK$146
million) and the weighted average number of ordinary shares outstanding
during the period of 2,019,234,400 (2006: 2,019,234,400).
The calculation of diluted earnings per share is based on the weighted
average number of ordinary shares of 2,019,234,400 (2006: 2,019,234,400)
after adjusting for the effects of all dilutive potential ordinary shares.
- Deferred tax in
the balance sheet
The components
of deferred tax (assets)/liabilities recognised in the consolidated
balance sheet and the movements during the period are as follows:
Deferred
tax arising from:
|
|
Depreciation
allowances in excess of related depreciation
|
|
Tax
losses
|
|
Other
|
|
Total
|
|
|
HK$'000
|
|
HK$'000
|
|
HK$'000
|
|
HK$'000
|
|
|
|
|
|
|
|
|
|
At January 1, 2007
|
|
164,215
|
|
(440,051)
|
|
2,631
|
|
(273,205)
|
Charged/(credited)
to consolidated profit and loss account (Note 5) |
(32,687)
|
40,409
|
(987)
|
6,735
|
At
September 30, 2007
|
|
131,528
|
|
(399,642)
|
|
1,644
|
|
(266,470)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
September 30, 2007
|
At
December
31, 2006
|
|
|
|
|
|
|
HK$'000
|
HK$'000
|
Net
deferred tax assets recognised on the balance sheet |
|
(364,466)
|
(388,266)
|
Net
deferred tax liabilities recognised on the balance sheet |
|
97,996
|
115,061
|
|
|
|
|
|
|
(266,470)
|
(273,205)
|
- Accounts receivable from
trade debtors
An
ageing analysis of accounts receivable from trade debtors (net of
impairment losses for bad and doubtful accounts) is set out as follows:
|
At
September 30, 2007
|
|
At
December 31, 2006
|
|
HK$'000
|
|
HK$'000
|
|
|
|
|
0 to 30 days
|
38,351
|
|
24,819
|
31
to 60 days |
12,021
|
|
24,428
|
61
to 90 days |
18,746
|
|
16,869
|
Over 90 days
|
25,386
|
|
19,469
|
|
94,504
|
|
85,585
|
The Group has a defined credit policy. The general credit terms allowed
range from 0 to 60 days.
- Amounts due to trade
creditors
An
ageing analysis of amounts due to trade creditors is set out as follows:
|
At
September 30, 2007
|
|
At
December 31, 2006
|
|
HK$'000
|
|
HK$'000
|
|
|
|
|
0 to 30 days
|
5,688
|
|
3,806
|
31
to 60 days |
5,914
|
|
3,916
|
61
to 90 days |
2,626
|
|
6,537
|
Over 90 days
|
8,745
|
|
28,416
|
|
22,973
|
|
42,675
|
By Order of the Board
Wilson W. S. Chan
Secretary
Hong Kong, November 15, 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.
|