CONFORMED COPY
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
April 20, 2011
Commission File Number: 000-30354
CITY TELECOM (H.K.) LIMITED
(Translation of registrants name into English)
Level 39
Tower I, Metroplaza
No. 223 Hing Fong Road
Kwai Chung
New Territories
Hong Kong
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form
20-F or Form 40-F:
þ
Form 20-F
o
Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(1):
o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(7):
o
Indicate by check mark whether the registrant by furnishing the information contained in this Form
is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934:
o
Yes
þ
No
If Yes is marked, indicate below the file number assigned to the registrant in connection with
Rule 12g3-2(b):
City Telecom (H.K.) Limited (the Company) is furnishing under cover of Form 6-K a statement dated
April 20, 2011 relating to the Interim Results for the six months ended February 28, 2011.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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CITY TELECOM (H.K.) LIMITED
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By:
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/s/ Lai Ni Quiaque
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Name:
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Lai Ni Quiaque
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Title:
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Executive Director,
Chief Financial Officer and Company Secretary
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Dated: April 20, 2011
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no
responsibility for the contents of this announcement, make no representation as to its accuracy or
completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or
in reliance upon the whole or any part of the contents of this announcement.
CITY TELECOM (H.K) LIMITED
(incorporated in Hong Kong with limited liability under the Companies Ordinance)
(Stock code: 1137)
INTERIM RESULTS
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2011
HIGHLIGHTS
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Net profit up 44.0% year-on-year to HK$167.6 million with basic earnings per share
amounted to HK21.9 cents versus HK17.3 cents for same period last year
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Declared an interim dividend of HK15 cents per ordinary share, up 131% from HK6.5 cents
per ordinary share for same period last year
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Core EBITDA
(note)
increased by 16.7% year-on-year to HK$301.6 million
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Turnover grew by 5.1% year-on-year to HK$825.9 million driven by higher revenue
contribution from our Fixed Telecommunications Network Service (FTNS) business of 7.6%
year-on-year to HK$727.2 million
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For six months to 28 February 2011, broadband subscription increased by 25,000 net
additions to 551,000, dominating 68% of total estimated market growth of 37,000, despite
large price increase implemented on 1 September 2010
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Note:
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Core EBITDA represents the EBITDA for any period plus any net loss from extinguishment
of 10-year senior notes.
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- 1 -
The Board of Directors (the Board or the Directors) of City Telecom (H.K.) Limited (City
Telecom or the Company) is pleased to present the consolidated income statement for the six
months ended 28 February 2011 and the consolidated balance sheet as at 28 February 2011 of the
Company and its subsidiaries (collectively referred to as the Group), which are unaudited and
condensed.
UNAUDITED CONSOLIDATED INCOME STATEMENT
For the six months ended 28 February 2011
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Six months ended
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28 February
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28 February
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2011
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2010
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Note
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HK$000
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HK$000
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Turnover
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3
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825,906
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785,963
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Network costs
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4
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(103,781
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)
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(90,185
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Other operating expenses
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(527,911
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)
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(539,612
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Other income/(losses), net
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5
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3,210
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(4,251
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)
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Finance costs, net
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6(a)
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247
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(12,255
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)
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Profit before taxation
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6
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197,671
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139,660
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Income tax expense
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8
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(30,059
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(23,272
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Profit attributable to shareholders
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167,612
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116,388
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Basic earnings per share
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10
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HK21.9 cents
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HK17.3 cents
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Diluted earnings per share
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10
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HK21.1 cents
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HK16.5 cents
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- 2 -
UNAUDITED CONSOLIDATED BALANCE SHEET
As at 28 February 2011
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28 February
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31 August
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2011
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2010
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Note
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HK$000
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HK$000
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Non-current assets
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Goodwill
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1,066
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1,066
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Fixed assets
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1,494,894
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1,431,813
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Long-term prepayment
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4,521
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5,174
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Deferred expenditure
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11,951
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6,626
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1,512,432
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1,444,679
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Current assets
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Accounts receivable
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11
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65,059
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99,729
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Other receivables, deposits and prepayments
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201,910
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89,490
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Deferred expenditure
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27,273
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28,986
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Cash at bank and in hand
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476,855
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588,665
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771,097
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806,870
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Current liabilities
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Bank overdrafts unsecured
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4,961
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10,490
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Accounts payable
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12
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22,652
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35,128
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Other payables and accrued charges
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166,217
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195,931
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Deposits received
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22,661
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21,822
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Deferred services revenue
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89,068
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106,798
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Tax payable
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1,687
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1,533
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Current portion obligations under finance leases
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153
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212
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307,399
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371,914
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Net current assets
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463,698
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434,956
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Total assets less current liabilities
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1,976,130
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1,879,635
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- 3 -
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28 February
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31 August
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2011
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2010
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Note
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HK$000
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HK$000
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Non-current liabilities
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Deferred tax liabilities
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85,026
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55,843
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Derivative financial instrument
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7,423
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11,293
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Long-term debt and other liabilities
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124,065
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123,960
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216,514
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191,096
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Net assets
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1,759,616
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1,688,539
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Capital and reserves
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Share capital
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13
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76,851
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76,500
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Reserves
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1,682,765
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1,612,039
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Total equity attributable to equity
shareholders of the Company
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1,759,616
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1,688,539
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Notes:
1
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BASIS OF PREPARATION AND ACCOUNTING POLICIES
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This unaudited interim financial report has been prepared in accordance with the applicable
disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange
of Hong Kong Limited; and comply with International Accounting Standard (IAS) 34, Interim
Financial Reporting, issued by the International Accounting Standards Board (the IASB) and
Hong Kong Accounting Standard (HKAS) 34, Interim Financial Reporting issued by the Hong
Kong Institute of Certified Public Accountants (the HKICPA). It was authorised for issuance
on 20 April 2011.
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This unaudited interim financial report has been prepared in accordance with the same
accounting policy adopted in the financial statements for the year ended 31 August 2010,
except for the accounting policy changes that are expected to be reflected in the financial
statements for the year ending 31 August 2011. Details of these changes in accounting
policies are set out in note 2.
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The preparation of an interim financial report in conformity with IAS 34 and HKAS 34 requires
management to make judgements, estimates and assumptions that affect the application of
policies and reported amounts of assets and liabilities, income and expenses on a year to
date basis. Actual results may differ from these estimates.
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This interim financial report contains condensed consolidated financial statements and
selected explanatory notes. The notes include an explanation of events and transactions that
are significant to an understanding of the changes in financial position and performance of
the Group since the financial statements for the year ended 31 August 2010. The condensed
consolidated interim financial statements and notes thereon do not include all of the
information required for full set of financial statements prepared in accordance with
International Financial Reporting Standards (IFRSs) issued by the IASB and Hong Kong
Financial Reporting Standards (HKFRSs) issued by the HKICPA.
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- 4 -
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The financial information relating to the financial year ended 31 August 2010 that is
included in the condensed consolidated interim financial statements as being previously
reported information does not constitute the Companys statutory financial statements for
that financial year but is derived from those financial statements. The statutory financial
statements for the year ended 31 August 2010 are available at the Companys registered
office. The independent auditors have expressed an unqualified opinion on those financial
statements in their report dated 9 November 2010.
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2
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SIGNIFICANT ACCOUNTING POLICIES
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The IASB has issued a number of new or revised IFRSs, which term collectively includes IASs
and Interpretations, that are first effective or available for early adoption for the current
accounting period of the Group. The equivalent new or revised HKFRSs, which term collectively
includes HKASs and Interpretations, consequently issued by the HKICPA as a result of these
developments have the same effective date as those issued by the IASB and are in all material
aspects identical to the pronouncements issued by the IASB. None of these changes in policies
would have a material impact on the Groups financial statements.
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3
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TURNOVER AND SEGMENT INFORMATION
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The Group is principally engaged in the provision of international telecommunications
services and fixed telecommunications network services to customers in Hong Kong and Canada.
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(a)
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Segment information
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The Group has two reportable segments, as described below, which are the Groups
strategic business units. The strategic business units offer different services, and
are managed separately because they require different technology and marketing
strategies. For each of the strategic business units, the chief operating
decision-maker reviews internal management reports on a monthly basis. The following
summary describes the operations in each of the Groups reporting segments:
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International telecommunications
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:
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provision of international long distance calls services
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Fixed telecommunications network
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:
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provision of dial up and broadband
Internet access services, local voice-over-IP services, IP-TV services
and corporate data services
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The Groups inter-segment transactions mainly consist of provision of leased lines
services. These transactions were entered into on similar terms as those contracted
with third parties.
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Six months ended 28 February 2011
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Fixed
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International
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telecomm-
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telecomm-
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unications
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unications
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network
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services
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services
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Elimination
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Group
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HK$000
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HK$000
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HK$000
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HK$000
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Turnover
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External sales
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98,749
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727,157
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|
825,906
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Inter-segment sales
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2,840
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|
7,625
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(10,465
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)
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Reportable segment turnover
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|
101,589
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|
|
734,782
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(10,465
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)
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|
825,906
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|
|
|
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Reportable segment profit
(note 3(b))
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|
37,319
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|
|
|
156,895
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|
|
|
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|
194,214
|
|
|
|
|
|
|
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|
|
|
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|
- 5 -
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Six months ended 28 February 2010
|
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Fixed
|
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|
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|
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|
International
|
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|
telecomm-
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|
|
|
|
|
|
|
|
telecomm-
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|
unications
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|
|
|
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|
unications
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|
network
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|
|
|
|
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|
services
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|
|
services
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Elimination
|
|
|
Group
|
|
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|
HK$000
|
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|
HK$000
|
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|
HK$000
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|
HK$000
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|
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|
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|
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Turnover
|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External sales
|
|
|
110,178
|
|
|
|
675,785
|
|
|
|
|
|
|
|
785,963
|
|
Inter-segment sales
|
|
|
2,833
|
|
|
|
8,116
|
|
|
|
(10,949
|
)
|
|
|
|
|
|
|
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|
|
|
|
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|
|
Reportable segment turnover
|
|
|
113,011
|
|
|
|
683,901
|
|
|
|
(10,949
|
)
|
|
|
785,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable segment profit
(note 3(b))
|
|
|
33,202
|
|
|
|
122,964
|
|
|
|
|
|
|
|
156,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
|
|
|
|
|
|
|
International
|
|
|
telecomm-
|
|
|
|
|
|
|
telecomm-
|
|
|
unications
|
|
|
|
|
|
|
unications
|
|
|
network
|
|
|
|
|
|
|
services
|
|
|
services
|
|
|
Group
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 28 February 2011
|
|
|
529,479
|
|
|
|
1,754,050
|
|
|
|
2,283,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 31 August 2010
|
|
|
590,888
|
|
|
|
1,660,661
|
|
|
|
2,251,549
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
|
Reconciliation of reporting segment profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
28 February
|
|
|
28 February
|
|
|
|
2011
|
|
|
2010
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
Segment results
|
|
|
194,214
|
|
|
|
156,166
|
|
Other income/(losses), net
|
|
|
3,210
|
|
|
|
(4,251
|
)
|
Finance costs, net
|
|
|
247
|
|
|
|
(12,255
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before taxation
|
|
|
197,671
|
|
|
|
139,660
|
|
|
|
|
|
|
|
|
- 6 -
|
(c)
|
|
Hong Kong Broadband Network Limited (HKBN), a wholly-owned subsidiary of the
Company, is a Fixed Telecommunications Network Services (FTNS) licensee and provides
interconnection services to enable delivery of telecommunications service to customers of
different operators. Since the FTNS license was granted by the Telecommunication Authority
(TA) and interconnection services have been provided, HKBN has been billing mobile
operators for the interconnection services provided to them and recognising revenue (mobile
interconnection charges) based on managements best estimate of the amounts to be collected.
In prior years, majority of the mobile operators rejected HKBNs demand for payment of mobile
interconnection charges. As a result of non-payment by certain mobile operators, in 2004, the
Group requested the TA to make a determination (the 2004 Determination) on the level of
mobile interconnection charges payable by one of the mobile operators (mobile operator under
dispute) to HKBN; and the effective date of the determined mobile interconnection charges.
|
|
|
|
|
In June 2007, the TA issued the 2004 Determination which set out the rates of mobile
interconnection charge payable by the mobile operator under dispute for
interconnection services provided by HKBN for the period from 1 April 2002 to 31
August 2004 and the mobile operator under dispute paid mobile interconnection charge
for the relevant period accordingly.
|
|
|
|
Subsequent to June 2007, HKBN entered into contractual agreements with several mobile
operators which agreed to pay mobile interconnection charges based on the 2004
Determination for the period from 1 April 2002 to 31 August 2004 and with respect to
the period from 31 August 2004 at the interim rate stated in the contractual
agreements. The interim rate was subject to adjustment based on final determination of
the TA.
|
|
|
|
In February 2008, since certain mobile operators had still not yet settled their
mobile interconnection charges for interconnection services provided by HKBN, HKBN
requested TA to make a new determination on the rate of mobile interconnection charge
and interest thereon with four mobile operators.
|
|
|
|
In September 2008, the TA accepted HKBNs request for determination on the rate of
mobile interconnection charges for the period from 1 April 2002 to 26 April 2009
payable by the mobile operators that have not reached contractual agreements with
HKBN, and the rate for the period from 1 September 2004 to 26 April 2009 payable by
those mobile operators that have reached contractual agreements with HKBN, and the
interest rate thereon (the 2008 Determination).
|
|
|
|
In May 2010, the TA issued its decision on the 2008 Determination which set out the
rates of mobile interconnection charges payable by the mobile operators under dispute.
|
|
|
|
Included in the accounts receivable balance as at 28 February 2011 are receivables
relating to mobile interconnection charges of HK$4,634,000 (31 August 2010:
HK$39,763,000).
|
|
|
Network costs mainly include interconnection charges paid to local and overseas carriers,
leased line rentals, program fees, and production costs for the IP-TV service, and do not
include depreciation charge which is included in other operating expenses.
|
- 7 -
5
|
|
OTHER INCOME/(LOSSES), NET
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
28 February
|
|
|
28 February
|
|
|
|
2011
|
|
|
2010
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,317
|
|
|
|
591
|
|
Other income
|
|
|
1,183
|
|
|
|
4,946
|
|
Net exchange gain/(loss)
|
|
|
710
|
|
|
|
(138
|
)
|
Loss on extinguishment of 10-year senior notes
|
|
|
|
|
|
|
(9,650
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,210
|
|
|
|
(4,251
|
)
|
|
|
|
|
|
|
|
|
|
Profit before taxation is arrived at after charging and (crediting) the following:
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
28 February
|
|
|
28 February
|
|
|
|
2011
|
|
|
2010
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
Interest element of finance leases
|
|
|
16
|
|
|
|
21
|
|
Interest on 10-year senior notes
|
|
|
|
|
|
|
6,069
|
|
Interest on bank borrowings and other borrowing costs
|
|
|
3,447
|
|
|
|
1,162
|
|
Change in fair value of derivative financial instrument
|
|
|
(3,870
|
)
|
|
|
4,973
|
|
Amortisation of upfront costs on bank borrowings
|
|
|
160
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(247
|
)
|
|
|
12,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
28 February
|
|
|
28 February
|
|
|
|
2011
|
|
|
2010
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
Advertising and marketing expenses
|
|
|
163,921
|
|
|
|
182,456
|
|
Amortisation of deferred expenditure
|
|
|
18,181
|
|
|
|
27,484
|
|
Depreciation of owned fixed assets
|
|
|
105,194
|
|
|
|
97,167
|
|
Depreciation of fixed assets held under finance leases
|
|
|
298
|
|
|
|
357
|
|
Provision for doubtful debts
|
|
|
7,431
|
|
|
|
10,759
|
|
Gain on disposal of fixed assets
|
|
|
(602
|
)
|
|
|
(185
|
)
|
|
|
|
|
|
|
|
- 8 -
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
28 February
|
|
|
28 February
|
|
|
|
2011
|
|
|
2010
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
Salaries, wages and other benefits
|
|
|
133,851
|
|
|
|
129,702
|
|
Equity settled share-based transactions
|
|
|
2,362
|
|
|
|
1,289
|
|
Retirement benefit costs defined contribution plans
|
|
|
21,795
|
|
|
|
19,238
|
|
Less: Talent costs capitalised as fixed assets
|
|
|
(10,343
|
)
|
|
|
(10,927
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
147,665
|
|
|
|
139,302
|
|
|
|
|
|
|
|
|
|
|
Talent costs include all compensation and benefits paid to and accrued for all
individuals employed by the Group, including directors of the Company.
|
|
|
Talent costs include directors emoluments and research and development cost of HK$5,658,000
(for the six months ended 28 February 2010: HK$5,493,000) but exclude Talent costs of
HK$5,347,000 (for the six months ended 28 February 2010: HK$5,693,000) recorded in network
costs and HK$105,586,000 (for the six months ended 28 February 2010: HK$113,495,000) recorded
in advertising and marketing expenses.
|
|
|
The provision for Hong Kong Profits Tax is calculated by applying the estimated annual
effective tax rate of 15.2% (six months ended 28 February 2010: 16.7%) to the assessable
profit for the six months ended 28 February 2011. Taxation for overseas subsidiaries is
similarly calculated using the estimated annual effective rates of taxation that are expected
to be applicable in the relevant countries.
|
|
|
The amount of income tax expense in the consolidated income statement represents:
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
28 February
|
|
|
28 February
|
|
|
|
2011
|
|
|
2010
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
Current taxation
|
|
|
|
|
|
|
|
|
Hong Kong profits tax
|
|
|
|
|
|
|
|
|
over-provision in respect of prior years
|
|
|
|
|
|
|
(40
|
)
|
Overseas taxation
|
|
|
|
|
|
|
|
|
provision for interim period
|
|
|
1,721
|
|
|
|
1,678
|
|
Special tax credit received in respect of prior year
|
|
|
(845
|
)
|
|
|
|
|
Deferred taxation relating to the origination and reversal of
temporary differences
|
|
|
29,183
|
|
|
|
21,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
30,059
|
|
|
|
23,272
|
|
|
|
|
|
|
|
|
- 9 -
|
(a)
|
|
Dividends attributable to the interim period
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
28 February
|
|
|
28 February
|
|
|
|
2011
|
|
|
2010
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
Interim dividend declared and paid after the interim period end of
HK15 cents per ordinary share (28 February 2010: HK6.5 cents
per ordinary share)
|
|
|
115,277
|
|
|
|
44,383
|
|
|
|
|
|
|
|
|
|
|
At a board meeting held on 20 April 2011, the Directors of the Company have recommended to
pay an interim dividend of HK15 cents per ordinary share in cash for the six months ended 28
February 2011 (for the six months ended 28 February 2010: HK6.5 cents per ordinary share).
The interim dividend will be distributed on or about 31 May 2011 to shareholders whose names
appear on the register of members of the Company as at the close of business on 18 May 2011.
|
|
|
The interim dividend has not been recognised as a liability at 28 February 2011.
|
|
(b)
|
|
Dividends attributable to the previous financial year, approved and paid during the interim
period
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
28 February
|
|
|
28 February
|
|
|
|
2011
|
|
|
2010
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
Final dividend in respect of the financial year ended 31 August
2010, approved and paid during the following interim period,
of HK13.5 cents per ordinary share (2010: HK16 cents per
ordinary share)
|
|
|
103,735
|
|
|
|
108,735
|
|
|
|
|
|
|
|
|
- 10 -
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
28 February
|
|
|
28 February
|
|
|
|
2011
|
|
|
2010
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to shareholders
|
|
|
167,612
|
|
|
|
116,388
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
28 February
|
|
|
28 February
|
|
|
|
2011
|
|
|
2010
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
shares
|
|
|
shares
|
|
|
|
000
|
|
|
000
|
|
|
|
|
|
|
|
|
|
|
Issued ordinary shares at the beginning of the period
|
|
|
764,997
|
|
|
|
664,180
|
|
Effect of share options exercised
|
|
|
2,012
|
|
|
|
9,025
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares at the end of
the period (basic)
|
|
|
767,009
|
|
|
|
673,205
|
|
Incremental shares from assumed exercise of share options
|
|
|
25,877
|
|
|
|
30,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares at the end of
the period (diluted)
|
|
|
792,886
|
|
|
|
703,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
HK21.9 cents
|
|
|
HK17.3 cents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
HK21.1 cents
|
|
|
HK16.5 cents
|
|
|
|
|
|
|
|
|
|
|
The aging analysis of the accounts receivable is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
28 February
|
|
|
31 August
|
|
|
|
2011
|
|
|
2010
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
Current30 days
|
|
|
41,939
|
|
|
|
41,244
|
|
3160 days
|
|
|
9,453
|
|
|
|
9,024
|
|
6190 days
|
|
|
4,960
|
|
|
|
5,245
|
|
Over 90 days
(note)
|
|
|
13,867
|
|
|
|
50,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,219
|
|
|
|
105,552
|
|
Less:
Allowance for doubtful debts
|
|
|
(5,160
|
)
|
|
|
(5,823
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,059
|
|
|
|
99,729
|
|
|
|
|
|
|
|
|
- 11 -
|
|
The majority of the Groups accounts receivable are due within 30 days from the date of
billings. Subscribers with receivable that are more than 3 months overdue are requested to
settle all outstanding balance before further credit is granted.
|
|
Note:
|
|
The amounts over 90 days for the Group included receivables relating to mobile
interconnection charges of HK$4,634,000 as at 28 February 2011 (31 August 2010:
HK$39,763,000).
|
|
|
The aging analysis of the accounts payable is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
28 February
|
|
|
31 August
|
|
|
|
2011
|
|
|
2010
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
Current30 days
|
|
|
5,229
|
|
|
|
6,838
|
|
3160 days
|
|
|
1,129
|
|
|
|
1,982
|
|
6190 days
|
|
|
152
|
|
|
|
1,647
|
|
Over 90 days
|
|
|
16,142
|
|
|
|
24,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,652
|
|
|
|
35,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
|
|
|
Share
|
|
|
Capital
|
|
|
redemption
|
|
|
Retained
|
|
|
Exchange
|
|
|
|
|
|
|
|
|
|
|
capital
|
|
|
premium
|
|
|
reserve
|
|
|
reserve
|
|
|
profits
|
|
|
reserve
|
|
|
Total
|
|
|
|
Note
|
|
|
HK$000
|
|
|
HK$000
|
|
|
HK$000
|
|
|
HK$000
|
|
|
HK$000
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 September 2010
|
|
|
|
|
|
|
76,500
|
|
|
|
1,074,997
|
|
|
|
21,064
|
|
|
|
7
|
|
|
|
513,208
|
|
|
|
2,763
|
|
|
|
1,688,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
income for the
period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
167,612
|
|
|
|
1,564
|
|
|
|
169,176
|
|
Dividend paid in
respect of previous
year
|
|
9
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(103,735
|
)
|
|
|
|
|
|
|
(103,735
|
)
|
Shares issued upon
exercise of share
options
|
|
|
|
|
|
|
351
|
|
|
|
4,418
|
|
|
|
(1,495
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,274
|
|
Equity settled
share-based
transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 28 February 2011
|
|
|
|
|
|
|
76,851
|
|
|
|
1,079,415
|
|
|
|
21,931
|
|
|
|
7
|
|
|
|
577,085
|
|
|
|
4,327
|
|
|
|
1,759,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 September 2009
|
|
|
|
|
|
|
66,418
|
|
|
|
681,208
|
|
|
|
23,232
|
|
|
|
7
|
|
|
|
454,802
|
|
|
|
2,860
|
|
|
|
1,228,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
income for the
period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116,388
|
|
|
|
(200
|
)
|
|
|
116,188
|
|
Dividend paid in
respect of previous
year
|
|
9
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(108,735
|
)
|
|
|
|
|
|
|
(108,735
|
)
|
Shares issued upon
exercise of share
options
|
|
|
|
|
|
|
1,863
|
|
|
|
19,818
|
|
|
|
(6,866
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,815
|
|
Equity settled
share-based
transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 28 February 2010
|
|
|
|
|
|
|
68,281
|
|
|
|
701,026
|
|
|
|
17,655
|
|
|
|
7
|
|
|
|
462,455
|
|
|
|
2,660
|
|
|
|
1,252,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 12 -
BUSINESS REVIEW
At the outset of FY2011, we communicated a very clear message to all internal and external
stakeholders our focus for FY2011 will be on harvesting the record growth of over 500,000 plus
broadband subscriptions we achieved in FY2010 for increased profitability. Our 1H FY2011 financial
performance proves that we are very much on track for higher profitability driven by our Fixed
Telecommunications Network Service (FTNS) business, as well as lower financial costs.
1.
|
|
The Group turnover increased by 5.1% year-on-year to HK$825.9 million.
Revenue growth driven
mainly by an increase in FTNS businesss turnover by 7.6% to HK$727.2 million, which more than
offset the decline in International Telecommunications Service business (IDD) of 10.4%
year-on-year to HK$98.7 million. In absolute terms, FTNS revenues increased by HK$51.4 million
versus IDD revenues decline of HK$11.5 million. FTNSs turnover contributed to 88.0% of the
Group turnover in 1H FY2011 (86.0% in 1H FY2010).
|
2.
|
|
Strong growth in core EBITDA and net profit.
Monetising the critical mass we achieved in
FY2010, our core EBITDA for 1H FY2011 increased by 16.7% year-on-year to HK$301.6 million,
resulting in core EBITDA margin expansion to 36.5% versus 32.9% a year ago. During 1H FY2011,
we also benefited from the full period net interest savings from repurchase and redemption of
our senior notes during FY2010, and our profit attributable to shareholders increased by 44.0%
year-on-year to HK$167.6 million in 1H FY2011 with basic earnings per share at HK21.9 cents
(HK17.3 cents in 1H FY2010).
|
3.
|
|
Continuous broadband subscription growth.
Despite fierce competition and increasing our core
symmetric 100Mbps broadband service from HK$99/month to HK$169/month on 1 September 2010, for
the six months to 28 February 2011, we achieved 25,000 net additions to 551,000 broadband
subscriptions, which represents a dominant 68% of total market growth estimated at 37,000. Our
estimate of total market growth is based on the latest official statistics from The Office of
the Telecommunications Authority (OFTA)
(http://www.ofta.gov.hk/en/datastat/eng_cus_isp.pdf), for five months period of 2,139,282 as
of 31 January 2011 less 2,108,417 as 31 August 2010 x 6/5. For clarification, we report
subscriptions, which are consistent with the OFTA statistics.
|
4.
|
|
131% increase in Dividend Per Share to HK15 cents.
For the six months to 28 February 2011, we
have declared an interim dividend of HK15 cents per ordinary share representing a payout of
about 68% in profit attributable to shareholders. Whilst this is higher than same period last
year, it is
consistent with our dividend payout policy announced last year of between 60-90% of profit
attributable to shareholders.
|
- 13 -
Fixed Telecommunications Network Services (FTNS)
As guided in our FY2010 annual report, our focus for FY2011 is on profitability. Effective from 1
September 2010, the first day of our new financial year, we ended our ten months promotional
broadband marketing offer for symmetric 100Mbps at HK$99/month towards either HK$199/month for
symmetric 100Mbps triple play service or HK$199/month for 1Gbps broadband only service.
We are fully aware of the sticker shock impact of this effective doubling of price and
anticipated that it will take time to return to normal growth. In FY2006, we had a similar
experience when we raised prices and actually experienced a 9,000 net broadband subscriptions
decline before returning to rapid growth in the later years. With our 10-year Big, Hairy, Audacious
Goal (BHAG) of becoming the largest broadband service provider by 2016, extreme Zig-Zag pricing is
an intentional part of our strategy. Aggressive cuts in pricing are required to shake the market
share away from competitors, and then assertive price increases are needed to drive profitability.
Minor moves in pricing will not be enough to drive the dramatic market share gains that we need to
achieve our BHAG.
Last year, FY2010, we cut the price of our symmetric 100Mbps standalone broadband service in half
to HK$99/month to achieve record 35% increase to 526,000 broadband subscriptions, dominating 91% of
the net market growth, and this year, FY2011, we increased the pricing by 70.7% to HK$169/month to
drive towards profitability. During 1H FY2011, we still managed to expand our triple-play
subscriptions with net addition of 49,000 to 1,159,000 as at 28 February 2011, comprised of 25,000
additions to 551,000 for broadband, 18,000 additions to 449,000 for local telephony and 6,000
additions to 159,000 for IP-TV subscriptions. Also very encouraging, is our broadband churn rate
stayed below 1.0% per month during the period, which is evidence of the extreme stickiness of our
service.
To solidify our pricing foundation and to further expand the average revenue per user (ARPU), we
are proactively up-selling, which drives our relative value positioning. Our entry level symmetric
100Mbps is priced at HK$169/month. For an extra HK$30/month, we offer a bundled add-on for voice
and IP-TV with over 100 channels or an upgrade to 1Gbps symmetric broadband service. Relative to
our competitors standalone prices for voice and IP-TV, our HK$30/month incremental triple play
offers phenomenal value. Whereas other carriers are offering 100Mbps-1Gbps on a limited basis and
on much higher price points for corporate branding purpose, we are proactively commoditising
bandwidth as our objective is to make Fibre-base broadband so compelling that everyone wants to be
on it. We want to change consumer mindsets from Why do I need 1Gbps? to Why dont I get 1Gbps?.
In addition to superior Fibre performance, our core values emphasises our Talent Advantage We
are Peoples leader and pioneer. On 15 February 2011, we
launched our Service with Heart campaign featuring our private-bank style personal account
management. Instead of the traditional monopoly mindset of mass hotlines for customer service, each
of our 500,000-plus broadband subscriptions can now enjoy the personal attention from a dedicated
Customer Engagement Officer. Having 1,453 of our total 2,931 Talent base in Guangzhou allows us to
cost effectively offer personalise service. Our customer engagement is based on two-way, long-term
relationships and we consider this to be our competitive advantage rather than a cost of doing
business.
- 14 -
On local telephony, we continue to take market share in an already matured sector.
On IP-TV, whilst we will continue to refine our service offering, we consider IP-TV to be a limited
life ancillary service to our core broadband service. Overtime, we will embrace the structural
trend that is brought by Over-The-Top content driven by the vibrant ecosystem of content providers,
connected TVs/devices and abundant bandwidth offered by Fibre. These will allow most customers to
cut the cord on the Pay-TV industry.
International Telecom Services (IDD)
IDD service revenue was down 10.4% to HK$98.7 million for 1H FY2011, with IDD traffic volume fell
by 10.4% from 230 million minutes in 1H FY2010 to 206 million minutes in 1H FY2011, and only
contributed 12.0% of the Group turnover. This segment continues to face intensive competition from
traditional IDD service as well as other Voice-Over-IP (VoIP) calling options, many of whom are
offered free of charge on PC to PC platforms. Having said that, on IDD, our strategy is to focus on
cash flow and profitability rather than market share.
LIQUIDITY AND CAPITAL RESOURCES
As of 28 February 2011, the Group had total cash at bank and in hand of HK$476.9 million (31 August
2010: HK$588.7 million) and outstanding borrowing of HK$129.2 million (31 August 2010: HK$134.7
million), which led to a net cash position of HK$347.7 million (31 August 2010: HK$454.0 million).
As of 28 February 2011, the Group had total unutilised banking facility of HK$30.5 million (31
August 2010: total unutilised banking and revolving loan facility of HK$220.5 million).
Our long-term liability consists mainly of our outstanding 5-year bank loan which amounted to
HK$123.7 million (31 August 2010: HK$123.6 million). There is no pledged bank deposit as at 28
February 2011 and 31 August 2010. During the year, the Group has a 5-year interest rate swap
contract with a HK$175 million notional amount to hedge against interest rate risk which is
recognised initially at fair value and is remeasured at each balance sheet date. On 24 March 2011,
the Group fully repaid the 5-year bank loan, while the 5-year interest rate swap contract remains
valid.
The debt maturity profiles of the Group as at 28 February 2011 and 31 August 2010 were as follows:
|
|
|
|
|
|
|
|
|
|
|
28 February
|
|
|
31 August
|
|
|
|
2011
|
|
|
2010
|
|
|
|
HK$000
|
|
|
HK$000
|
|
|
|
|
|
|
|
|
|
|
Repayable within one year
|
|
|
5,114
|
|
|
|
10,702
|
|
Repayable in the second year
|
|
|
101
|
|
|
|
105
|
|
Repayable in the third to fifth year
|
|
|
123,964
|
|
|
|
123,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
129,179
|
|
|
|
134,662
|
|
|
|
|
|
|
|
|
- 15 -
As of 28 February 2011, all outstanding borrowings bear fixed or floating interest rates and are
denominated in Hong Kong dollars. As the Group was in net cash position as of 28 February 2011 and
31 August 2010, no net gearing ratio is presented.
One of our growth factors is to expand our fibre network coverage to reach 2.0 million residential
homes pass by 31 December 2011. We had a good progress in 1H FY2011 with 63,000 homes pass
additions to 1.83 million as of 28 February 2011. Our capital expenditure for this period was
HK$175.3 million, slightly lower than the same period last year of HK$176.9 million. Although we
are aggressively expanding our network, our policy to manage capital expenditure incurred below our
EBITDA continues. During the period, the Group has generated an adjusted free cash flow of HK$127.9
million, which is defined as EBITDA less capital expenditure and less net finance costs (1H FY2010:
HK$60.3 million).
The on-going capital expenditure to complete our network coverage target will be mainly funded by
internally generated cash flow. Our capital expenditure outlook for FY2011 is expected to be about
HK$350 million. After we achieve our 2.0 million homes pass target by 31 December 2011, we expect
our capital expenditure on our core telecommunications business to substantially fall. Overall, the
Group is financially well positioned for continuous business and network expansion.
CHARGE ON GROUP ASSETS
As of 28 February 2011 and 31 August 2010, the Group did not maintain any pledged deposits to
secure its banking facilities.
EXCHANGE RATE
All the Groups monetary assets and liabilities are primarily denominated in either Hong Kong
dollars or United States dollars. Given the exchange rate of the Hong Kong dollar to the United
States dollar has remained close to the current pegged rate of HKD7.80 = USD1.00 since 1983,
management does not expect significant foreign exchange gains or losses between the two currencies.
The Group is also exposed to a certain amount of foreign exchange risk based on fluctuations
between the Hong Kong dollars and the Renminbi arising from its operations in the PRC. In order to
limit this foreign currency risk exposure, the Group maintained Renminbi cash balance that
approximates two to three months of operating Renminbi cash flow requirements.
CONTINGENT LIABILITIES
At 28 February 2011, the Group had total contingent liabilities in respect of guarantees provided
to suppliers of HK$2.7 million (31 August 2010: HK$2.7 million) and to utility vendors in lieu of
payment of utility deposits of HK$5.6 million (31 August 2010: HK$5.6 million).
Save as disclosed above, there are no material contingent liabilities.
- 16 -
PROSPECTS
For 2H FY2011, our primary focuses are to continuously solidifying our FTNS pricing foundation and
on full speed delivery of our Service with Heart campaign. While the subscription growth rate was
slower than planned during 1H FY2011 due to price increase, we expect the sticker shock impact to
evaporate over time. At HK$199/month (US$26) for symmetric 1Gbps, our service is amongst the best
value in the world in terms of dollar per Mbps, which leads us to believe that there is scope for
upward price adjustments in the years to come. For reference, our US$26/month for symmetric 1Gbps
price point compares with the fastest option offered by Verizon FiOS in the US at US$139.95 for
50Mbps download and 20Mbps upload (source:
http://www22.verizon.com/residential/fiosinternet/plans/plans.htm).
General perception that Hong Kong is a matured broadband market with about 85% household
penetration hides the fact that the Group is driving a Fibre renaissance from a low base, with
Fibre-based broadband household penetration at only 34% (See Graph below). In short, the industry
is evolving from dial-up to broadband to Fibre and we are the market leader within the Fibre space.
Graph: Economies with the Highest Penetration of Fibre-to-the-Home/Building + LAN
Source: http://s.ftthcouncil.org/files/2010_sept_global_ranking_ftth.pdf
- 17 -
UPDATE ON GUIDANCE FOR FULL YEAR TO 31 AUGUST 2011
Now more than half way through our final year to 31 August 2011, we are confident that we can
deliver the full year guidance as set out in the section headed Prospects on page 20 of the
Companys 2010 Annual Report, subject to a mild reduction on subscription growth as detailed below:
1.
|
|
Broadband subscriptions growth from 526,000 as of 31 August 2010 to exceed 580,000 as of 31
August 2011 (previously was 600,000 subscriptions)
|
2.
|
|
EBITDA to exceed HK$580 million (unchanged)
|
3.
|
|
Capital expenditure on core telecommunications business of approximately HK$350 million
(unchanged)
|
TALENT REMUNERATION
Including the directors of the Group, as at 28 February 2011, the Group had 2,931 permanent
full-time Talent. The Group provides remuneration package consisting of basic salary, bonus and
other benefits. Bonus payments are discretionary and dependent on both the Groups and individual
performances. The Group also provides comprehensive medical insurance coverage, competitive
retirement benefits schemes, Talent training programs and operates share option scheme.
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES
Neither the Company nor its subsidiaries has purchased, sold or redeemed any of the Companys
listed securities during the period for the six months ended 28 February 2011.
COMPLIANCE WITH CODE ON CORPORATE GOVERNANCE PRACTICES
During the period for six months ended 28 February 2011, the Company has complied with the code
provisions of the Code on Corporate Governance Practices as set out in Appendix 14 of the Rules
Governing the Listing of Securities (the Listing Rules) on The Stock Exchange of Hong Kong
Limited.
CODE OF CONDUCT FOR SECURITIES TRANSACTIONS BY DIRECTORS
The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers
contained in Appendix 10 to the Listing Rules as the code of conduct for securities transactions by
directors of the Company (the Company Code).
Having made specific enquiry of all directors of the Company, the Company confirmed that they have
complied with the required standard as set out in the Company Code during the six months ended 28
February 2011.
- 18 -
REVIEW BY AUDIT COMMITTEE
The Audit Committee has reviewed and discussed with the management of the Company the unaudited
interim results for the six months ended 28 February 2011.
The Audit Committee comprises three Independent Non-executive Directors, namely Mr. Lee Hon Ying,
John (the Chairman of the Audit Committee), Dr. Chan Kin Man and Mr. Peh Jefferson Tun Lu.
INTERIM DIVIDEND
The Board has resolved to declare an interim dividend of HK15 cents per ordinary share in cash for
the six months ended 28 February 2011 (six months ended 28 February 2010: HK6.5 cents per ordinary
share) to shareholders of the Company whose names are recorded on the register of members of the
Company as at 18 May 2011. Dividend warrants will be dispatched to shareholders of the Company on
or around 31 May 2011.
CLOSURE OF REGISTER OF MEMBERS
The register of members of the Company will be closed from 16 May 2011 to 18 May 2011 (both days
inclusive) during which period no transfers of shares would be effected. In order to qualify for
the interim dividend, all transfer of shares together with the relevant share certificates must be
lodged with the Companys Share Registrar, Computershare Hong Kong Investor Services Limited at
Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queens Road East, Wanchai, Hong Kong not later
than 4:30 p.m. on 13 May 2011.
|
|
|
|
|
By Order of the Board
|
|
|
City Telecom (H.K.) Limited
|
|
|
Lai Ni Quiaque
|
|
|
Executive Director, Chief Financial Officer and
|
|
|
Company Secretary
|
Hong Kong, 20 April 2011
As at the date of this announcement, the executive directors of the Company are Mr. Wong Wai Kay,
Ricky (Chairman), Mr. Cheung Chi Kin, Paul (Vice Chairman), Mr. Yeung Chu Kwong, William (Chief
Executive Officer), Mr. Lai Ni Quiaque (Chief Financial Officer); the non-executive director is Dr.
Cheng Mo Chi, Moses; and the independent non-executive directors are Mr. Lee Hon Ying, John, Dr.
Chan Kin Man and Mr. Peh Jefferson Tun Lu.
Where the English and the Chinese texts conflicts, the English text prevails
- 19 -
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