March 10 , 2008

i-CABLE COMMUNICATIONS LIMITED
Stock Code: 1097
2007 Final Results Announcement
Business Adjustments Making Satisfactory Progress

Results Highlights

  • The Group is successfully adjusting to the new competitive environment to establish a lower cost base to preserve its profitability despite substantial pressure on revenue.

  • Investment in new businesses is also beginning to bear fruit.

  • Turnover decreased by 10% to HK$2,304 million (2006: HK$2,548 million).

  • Net profit after tax increased by 1% to HK$183 million (2006: HK$181 million).

  • Capital expenditure decreased by 13% to HK$175 million (2006: HK$200 million).

  • Final dividend per share recommended/unchanged at HK$0.05 (2006: HK$0.05).

 

Pay TV

  • New marketing strategy accelerated subscriber growth amidst intense competition.

  • Subscribers increased by 12% to 882,000 (2006: 786,000).

  • Turnover decreased by 16% to HK$1,595 million (2006: HK$1,895 million).

  • Operating profit decreased by 28% to HK$179 million (2006: HK$248 million).

 

Internet & Multimedia

  • Revenue and profit preservation preferred over market share gains.

  • Broadband subscribers decreased by 7% to 306,000 (2006: 328,000).

  • Turnover was almost unchanged at HK$588 million (2006: HK$596 million).

  • Operating profit increased by 40% to HK$180 million (2006: HK$129 million).

 

GROUP RESULTS

Group profit attributable to Shareholders for the year ended December 31, 2007 amounted to HK$182 million (2006: HK$182 million). Basic and diluted earnings per share were both HK$0.09 (2006: HK$0.09).

 

DIVIDENDS

An interim dividend in respect of the year ended December 31, 2007 of HK$0.035 (2006: HK$0.035) per share was paid on October 9, 2007, absorbing a total amount of HK$71 million (2006: HK$71 million). Directors have recommended for adoption at the Annual General Meeting to be held on May 23, 2008 the payment on May 30, 2008 to Shareholders registered on May 23, 2008 of a final dividend in respect of the year ended December 31, 2007 of HK$0.05 (2006: HK$0.05) per share, absorbing a total amount of HK$101 million (2006: HK$101 million). If this recommendation is approved, the total dividend for the year 2007 would amount to HK$0.085 (2006: HK$0.085) per share.

 

MANAGEMENT DISCUSSION AND ANALYSIS

A. Review of 2007 Results

The Group accelerated the growth of its Pay TV subscriber base with enhanced programming and marketing strategies but preferred revenue and profitability preservation over market share for its Internet & Multimedia business.

Consolidated turnover decreased by HK$244 million or 10% to HK$2,304 million.

Successfully establishing a lower cost base to adjust to the new competitive environment, operating costs before depreciation decreased by 8% to HK$1,759 million. Programming costs decreased by 5% to HK$950 million, network and other operating costs decreased by 7% to HK$419 million, while selling, general and administrative expenses decreased by 16% to HK$390 million.

Earnings before interest, tax, depreciation and amortisation or EBITDA decreased by 13% to HK$545 million.

Depreciation decreased by 14% to HK$367 million due to lower depreciation charges on network assets and customer premises equipment following the expiry of their depreciation cycle.

Profit from operations decreased by HK$20 million or 10% to HK$178 million.

Net profit after HK$17 million of income tax expenses for the year increased by 1% to HK$183 million.

Basic and diluted earnings per share were 9.0 cents as compared to 9.0 cents in 2006.

 

B. Segmental Information

Pay Television

Subscribers increased by 96,000 or 12% year-on-year to 882,000. Turnover decreased by HK$300 million to HK$1,595 million. Operating costs after depreciation decreased by 14% to HK$1,417 million primarily due to the aforementioned decrease in programming, network operating and selling costs. Operating profit decreased by 28% to HK$179 million.

 

Internet & Multimedia

Broadband subscribers decreased by 22,000 or 7% year-on-year to 306,000. Turnover was little changed at HK$588 million. Operating costs after depreciation decreased by 13% to HK$407 million. Operating profit reported a record high HK$180 million as compared to HK$129 million a year ago.

 

C. Liquidity and Financial Resources

Net cash inflow reached HK$56 million after financial investments. After dividend payment of HK$172 million, net cash balance increased to HK$642 million at December 31, 2007, as compared to HK$586 million a year ago.

The consolidated net assets value of the Group as at December 31, 2007 was HK$2,271 million or HK$1.1 per share. At December 31, 2007, the Group had property, plant and equipment of net book value of approximately HK$594,000 (December 31, 2006: HK$848,000) 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$175 million as compared to HK$200 million last year. Major items included further network upgrade and expansion, investment in information systems, television production facilities and leasehold buildings.

The Group is comfortable with its present financial and liquidity position. Further 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$32 million which remained unutilised as of December 31, 2007.

 

D. Contingent Liabilities

At December 31, 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 provided by banks up to HK$199 million, of which HK$167 million had been utilised by the subsidiaries.

 

E. Human Resources

The Group had a total of 2,907 employees at the end of 2007 (2006: 3,016). Total gross amount of salaries and related costs incurred in the corresponding period amounted to HK$736 million (2006: HK$828 million).

With pay for performance culture linking remuneration and reward to Group performance, we nurture a team of professionals and inspired talents to work together and support our growth and development.

The Group has always strived to contribute to the local communities. Being one of the Caring Companies, we were awarded the "5 Consecutive Years Logo Award" by the Hong Kong Council of Social Service in recognition of our continuous commitment in corporate social responsibility. The Group will continue to support and encourage employees to participate in social welfare activities.

 

F. Operating Environment and Competition

During the year, the Group successfully adjusted to the new competitive environment to establish a lower cost base to preserve its profitability despite substantial pressure on revenue. At the same time, it held steadfastly to its development strategy, emphasising sustainable long-term overall growth, as the main competitor continued with its attempts to shake the Pay TV market by aggressive marketing and content acquisition tactics.

Our comprehensive and balanced development approach to all major content platforms contrasted with that of our competitors.

During the year under review, we further strengthened the fundamentals of our popular news and entertainment platforms, and acquired a range of premier international sports events, which will maintain the strength and lead of our programming over the immediate and medium terms.

Complemented by an expanded range of subscription plans and marketing initiatives that are designed to tap all market strata in the shifting operating topography, growth in our subscriber base accelerated, against market speculation at the beginning of the year about massive customer drain.

The much-hyped Digital Terrestrial Television service of the two free-to-air broadcasters was officially launched at the end of 2007. The jury is however still out on whether the full potential of expanded channel capacity and improved picture quality of digital and High-Definition services would have much impact on the Pay TV market in the foreseeable future.

On the Broadband front, our subscriber base and turnover consolidated as we preferred revenue and profit preservation over market share gains. Profitability for this sector took a handsome leap, attributable to service and operational enhancements as well as cost management.

 

G. Outlook

The Group will celebrate the 15th anniversary of service commencement in October 2008.

Our production and programming prowess, as well as operational and marketing expertise, firmly established over the past decade and a half, are hard to emulate. Their roles as the cornerstone of our subscriber loyalty are more clearly demonstrated as competition further heats up in the market.

We are committed to building for the future. On top of scaling up our local television and movie production, we have bagged the most prized sports events in the world, FIFA World Cup and Winter Olympics in 2010 and the Summer Olympics in 2012.

These investments demonstrate our confidence in the Group's continued business development and our revitalised products and services will put us in good stead to reach more new milestones as we celebrate our 15th anniversary.

 

CODE ON CORPORATE GOVERNANCE PRACTICES

During the financial year 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.

 

CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended December 31, 2007

2007

2006

Note

HK$'000

HK$'000

Turnover

(3,4)

2,303,884

@

2,547,595

  

Programming costs

(950,375)

@

(1,005,273)

Network and other operating expenses

(419,439)

@

(450,889)

Selling, general and administrative expenses

(389,567)

@

(464,855)

Profit from operations before depreciation

544,503

@

626,578

Depreciation

(5)

(366,522)

@

(428,121)

Profit from operations

177,981

@

198,457

Interest income

20,566

@

11,640

Finance costs, net   (18) (7)

Impairment loss on investment

(1,600)

@

-

Non-operating income/(expenses)

(5)

2,311

@

(322)

Profit before taxation

(5)

199,240

@

209,768

Income tax expense

(6)

(16,646)

@

(28,649)

Profit after taxation   182,594 181,119

Attributable to:

@

182,115

  Equity shareholders of the Company 181,852

Minority interests

742

@

(996)

Profit after taxation 182,594 181,119
Dividends payable to equity shareholders attributable to the year   70,673   70,673
  Interim dividend of 3.5 cents (2006: 3.5cents) per share declared and paid during the year

Final dividend of 5 cents (2006: 5 cents) per share proposed after the balance sheet date

100,840

@

100, 962

 

171,513

@

171,635

Earnings per share

(7)

Basic

9.0 cents

9.0 cents

Diluted

9.0 cents

9.0 cents

 

 

CONSOLIDATED BALANCE SHEET
At December 31, 2007

2007

2006

Note

HK$'000

HK$'000

Non-current assets

@

  

Property, plant and equipment

1,391,222

@

1,591,353

Programming library

183,317

@

185,702

  Other intangible assets   8,390   12,775
Interests in associate 58,500 -

Deferred tax assets

354,166

@

388,266

Other non-current assets   104,983   51,079

2,100,578

@

2,229,175

Current assets        

  

Inventories

6,351

@

1,111

  Accounts receivable from trade debtors (8) 81,847   85,585
  Deposits, prepayments and other receivables   100,407   64,445

Amounts due from fellow subsidiaries

3,765

@

56,361

Cash and cash equivalents

642,049

@

586,197

      834,419   793,699

Current liabilities

@

Amounts due to trade creditors

(9)

35,040

@

42,675

Accrued expenses and other payables

329,263

@

395,698

Receipts in advance and customers' deposits  

106,917

@

107,527

Obligations under finance leases   72   705
Current taxation   347   49
Amounts due to fellow subsidiaries   57,418   43,735

Amount due to immediate holding company

3,029

@

989

 

532,086

@

591,378

Net current assets

302,333

@

202,321

Total assets less current liabilities

2,402,911

@

2,431,496

Non-current liabilities        
  Deferred tax liabilities   97,117   115,061
Obligations under finance leases   - 72
Other non-current liabilities   34,553 53,970
    131,670 169,103

NET ASSETS

2,271,241

@

2,262,393

Capital and reserves        
  Share capital   2,016,792   2,019,234
  Reserves   249,975   239,719
  Total equity attributable to equity shareholders of the Company   2,266,767   2,258,953
  Minority interests   4,474   3,440
TOTAL EQUITY   2,271,241   2,262,393

 

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the year ended December 31, 2007

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the year ended December 31, 2007

 

NOTES TO THE FINANCIAL STATEMENTS

  1. Basis of preparation

    The financial statements for the year ended December 31, 2007 have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards ("HKFRS") which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards ("HKAS") and Interpretations issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA"), accounting principles generally accepted in Hong Kong and the requirements of the Hong Kong Companies Ordinance. They also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.


  2. Impact of new and revised Hong Kong Financial Reporting Standards

    The HKICPA has issued certain new and revised HKFRSs that are first effective or available for early adoption for the current accounting period of the Group and the Company.


    In 2007, the Group has adopted all new HKFRSs that are first effective for accounting periods beginning on or after January 1, 2007. The adoption of these new HKFRSs did not result in substantive changes to the Group's accounting policies.

    The following sets out information on additional disclosures provided for the current and prior accounting periods reflected in these financial statements:

    The adoption of HKFRS 7, Financial instruments: Disclosures has expanded disclosure about the significance of the Group's financial instruments and the nature and extent of risks arising from those instruments.

    The adoption of the amendment to HKAS 1, Presentation of financial statements: Capital disclosures, has introduced additonal disclosure requirements to provide information about the level of capital and the Group's objectives, policies and processes for managing capital.

  3. Turnover

    Turnover comprises principally subscription and related fees for Pay television and Internet services and 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.

  4. Segment information

    Substantially all of the activities of the Group are based in Hong Kong and below is an analysis of the Group's revenue and result by principal activities:


    @

    Segment revenue

    Segment result

    2007

    2006

    2007

    2006

    HK$'000

    HK$'000

    HK$'000

    HK$'000

    Pay television

    1,595,114

    @

    1,895,221

    @

    178,606

    @

    248,224

    Internet and multimedia

     

    587,784

    @

    596,013

    @

    180,479

    @

    128,961

    @  

    @

    @

    359,085

    @

    377,185

    Unallocated

     
    150,171
    74,167
     

    (176,578)

    @

    (178,437)

    Inter-segment elimination
    (29,185)
    (17,806)
    (4,526)
    (291)

    2,303,884

    2,547,595

    177,981

    198,457

    Profit from operations          
    177,981
    198,457
    Interest income
    20,566
    11,640
    Finance costs, net
    (18)
    (7)
    Impairment loss on investment
    (1,600)
    -
    Non-operating income/(expenses)
    2,311
    (322)
    Income tax expense
    (16,646)
    (28,649)
    Profit after taxation
    182,594
    181,119



    @

    Segment assets

    Segment liabilities

    2007

    2006

    2007

    2006

    HK$'000

    HK$'000

    HK$'000

    HK$'000

    Pay television

    1,160,268

    @

    1,242,902

    @

    353,595

    @

    383,812

    Internet and multimedia

     

    509,099

    @

    631,237

    @

    129,123

    @

    132,665

    @  

    1,669,367

    @

    1,874,139

    @

    482,718

    @

    516,477

    Unallocated assets/liabilities  
    1,265,630
     
    1,148,735
     
    181,038
     
    244,004

    2,934,997

    3,022,874

    663,756

    760,481



    Additions to property, plant and equipment
    Additions to programming library
    Depreciation
    Amortisation
    Impairment loss on property, plant and equipment
    2007
    2006
    2007
    2006
    2007
    2006
    2007
    2006
    2007
    2006
    HK$'000
    HK$'000
    HK$'000
    HK$'000
    HK$'000
    HK$'000
    HK$'000
    HK$'000
    HK$'000
    HK$'000
    Pay television
    62,040
    129,343
    97,372
    108.719
    220,269
    235,516
    97,430
    84,394
    2,071
    6,617
    Internet and
    multimedia
    68,175
    63,802
    -
    -
    141,702
    188,223
    -
    -
    1,176
    1,459
    Unallocated
    44,662
    7,070
    32,843
    35,244
    4,551
    4,382
    39,555
    19,646
    -
    3,565

    174,877

    200,215

    130,215

    143,963

    366,522

    428,121

    136,985

    104,040

    3,247

    11,641




  5. Profit before taxation

    Profit before taxation is stated after charging / (crediting):

    2007

    2006

    HK$'000

    HK$'000

      Depreciation        

      - assets held for use under operating leases

    29,915

    @

    39,492

        - other assets   336,607   388,629
      366,522 428,121
         
      Amortisation of programming library*   132,600   101,117
    Amortisation of other intangible assets**   4,385 2,923
      Staff costs   692,467   769,770
      Contributions to defined contribution retirement plans   28,985   30,541
      Cost of inventories used   8,753   12,999
      Dividend income from investment in equity securities   (1,365)   (1,872)

    Auditors' remuneration

    5,404

    @

    3,137

     

    @

    Non-operating (income)/expenses

    @

    Net (gain)/loss on disposal of property, plant and equipment

    (2,311)

    @

    322


    * Amortisation of programming library is included within 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.



  6. Income tax
    The provision for Hong Kong Profits Tax is calculated at 17.5% of the estimated assessable profits for the year (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 year ended December 31 represents:

    @

    2007

    @

    2006

    @

    HK$'000

    @

    HK$'000

    @ @ @ @

    Current provision for Hong Kong Profits Tax

    -

    @

    75

    Current provision for overseas tax
    490
    222
    Net deferred tax expense
    16,156
    28,352
    Income tax expense

    16,646

    @

    28,649




  7. Earnings per share

    The calculation of basic earnings per share is based on the profit attributable to equity shareholders of the Company of HK$182 million (2006: HK$182 million) and the weighted average number of ordinary shares outstanding during the year of 2,018,965,236 (2006: 2,019,234,400).

    The calculation of diluted earnings per share is based on the profit attributable to equity shareholders of the Company of HK$182 million (2006: HK$182 million) and the weighted average number of ordinary shares of 2,018,965,236 (2006: 2,019,234,400) after adjusting for the effects of all dilutive potential ordinary shares.


  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:

    @

    2007

    @

    2006

    @

    HK$'000

    @

    HK$'000

    @ @ @ @

    0 to 30 days

    19,131

    @

    24,819

    31 to 60 days
    23,763
    24,428
    61 to 90 days
    17,255
    16,869

    Over 90 days

    21,698

    @

    19,469

    @

    81,847

    @

    85,585


    The Group has a defined credit policy. The general credit terms allowed range from 0 to 90 days.


  9. Amounts due to trade creditors

    An ageing analysis of amounts due to trade creditors is set out as follows:

  10. @

    2007

    @

    2006

    @

    HK$'000

    @

    HK$'000

    @ @ @ @

    0 to 30 days

    2,603

    @

    3,806

    31 to 60 days
    6,844
    3,916
    61 to 90 days
    3,895
    6,537

    Over 90 days

    21,698

    @

    28,416

    @

    35,040

    @

    42,675




  11. Review of Financial statements

    The financial results for the year ended December 31, 2007 have been reviewed with no disagreement by the Audit Committee of the Group. This preliminary results announcement has also been agreed with the Group's Auditors.



PURCHASE, SALE OR REDEMPTION OF SHARES

During the year, the Company repurchased on The Stock Exchange of Hong Kong Limited (the "Stock Exchange") a total of 4,108,000 ordinary shares at an aggregate price of HK$6,509,254.

Save as disclosed above, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any listed securities of the Company during the year under review.

 

BOOK CLOSURE

The Register of Members of the Company will be closed from Friday, May 16, 2008 to Friday, May 23, 2008, both days inclusive, for the purpose of determining shareholders' entitlements to the proposed final dividend. In order to qualify for the final 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 Thursday, May 15, 2008.

 

By Order of the Board
Wilson W. S. Chan
Company Secretary

Hong Kong, March 10, 2008

 

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.