Operating profit increased by 27% to HK$86 million (2006:
HK$68 million).
GROUP RESULTS
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.
INTERIM DIVIDEND
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
Pay Television
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 30,
2007.
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.
G. Outlook
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 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.
(2) Turnover
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 (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.
(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.
BOOK CLOSURE
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
Secretary
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.
