- Report of Foreign Issuer (6-K)
April 28 2011 - 6:07AM
Edgar (US Regulatory)
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 28, 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 the Interim
Report 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 28, 2011
Corporate Information 2 Chairmans Statement 3 Managements
Discussion and Analysis 4 Investor Engagement 10 Customer
Engagement Campaign Service with Heart 12 Unaudited
Consolidated Income Statement 14 Unaudited Consolidated
Statement of Comprehensive Income 15 Unaudited Consolidated
Balance Sheet 16 Unaudited Consolidated Statement of Changes in
Equity 17 Unaudited Condensed Consolidated Cash Flow Statement
18 Notes to Unaudited Interim Financial Report 19 Other
Information 35
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FINANCIAL CALENDAR
Announcement of Interim Results 20 April 2011 Ex-dividend date for Interim Dividend 12 May 2011
Closure of Register of Members 16 to 18 May 2011 (both days inclusive) Record date for Interim
Dividend 18 May 2011 Dispatch of Interim Dividend Warrants (on or around) 31 May 2011
LISTING
City Telecom (H.K.) Limiteds shares are listed under the stock code 1137 on The Stock Exchange
of Hong Kong Limited and in the form of American Depositary Receipts (each representing 20 ordinary
shares of the Company) on the Nasdaq Stock Market in U.S. under the ticker symbol CTEL.
Executive Directors
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Legal Adviser to the Company as to U.S.
and
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Mr. WONG Wai Kay, Ricky (Chairman) Hong Kong Laws Mr. CHEUNG Chi Kin, Paul (Vice Chairman) Mr.
YEUNG Chu Kwong, William (Chief Executive Officer) Jones Day Mr. LAI Ni Quiaque
3
(Chief
Financial Officer and Head of 29th Floor, Edinburgh Tower Talent Engagement) The Landmark 15
Queens Road Central
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Non-executive Director Hong Kong Dr. CHENG Mo Chi, Moses
3
Auditors Independent Non-executive Directors KPMG
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Certified Public Accountants
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8th Floor, Princes Building Mr. LEE Hon Ying, John
2, 4
10 Chater Road Dr. CHAN Kin
Man
1, 3
Central, Hong Kong Mr. PEH Jefferson Tun Lu
1, 3
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1
Members of Audit Committee
2
Chairman of Audit Committee
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Computershare Hong Kong Investor
Services Limited
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3
Members of Remuneration Committee
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46th Floor, Hopewell Centre
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4
Chairman of Remuneration Committee
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183 Queens Road East, Wanchai
Hong Kong
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The Bank of New York Mellon Corporation
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Authorised Representatives 101 Barclay Street, 22nd Floor New York, NY 10286 USA Mr. WONG Wai Kay,
Ricky Mr. CHEUNG Chi Kin, Paul Principal Bankers Registered Office Citibank, N.A.
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DBS Bank Ltd., Hong Kong Branch
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Level 39, Tower 1, Metroplaza The Hongkong and Shanghai Banking Corporation Limited 223 Hing Fong
Road Kwai Chung, New Territories, Hong Kong Website www.ctigroup.com.hk
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2 City Telecom (H.K.) Limited Interim Report 2011
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Dear Fellow Shareholders,
First of all, I would like to thank my talented team for their hardwork and their contribution to
the splendid performance of our Group for 1H FY2011. I expect that the financial performance for 2H
FY2011 will be equally satisfactory.
As mentioned in my Chairmans Statements in the previous years, the Group has entered into a
harvesting phase. The Fibre network that we boldly started investing in a decade ago is unique in
Hong Kong, with distinct competitive advantages in terms of network speed, reliability and customer
satisfaction. There is no comparison from the legacy network by our competitors. For the coming
years, we are very confident about further improving our return on investment (ROI) on our telecom
business, given that we have now surpassed the fixed cost inflexion point.
For 1H FY2011, we are declaring an interim dividend at 68% of profit attributable to shareholders,
which is higher than the same period last year, and in line with our full year guidance between
60%-90%. Our dividend policy is intended to bring steady returns to our shareholders, which will
grow in absolute amount with higher profitability over time. This payout policy will prevail, until
the next major investment opportunity appears, at which point we will then review our dividend
policy.
The other emphasis for the Group in the coming years is Talent development and recruitment. We
strongly believe that in order to survive and excel in the highly competitive telecom market, going
beyond our Fibre network infrastructure competitive edge, investment in human talent will be the
key. It is our Talent that are essential to the Groups long-term superior returns. In recent
years, we have been much more assertive in Talent development and recruitment, and have devoted
more resources to enhancing the Superiority of our Talent compared to our competitors.
Superiority not only refers to the intelligence and ability to cope with different issues, but
also loyalty and passion towards the telecom industry. We hope and we are confident that our Talent
are superior in all aspects, compared to others in the industry.
In the first half of this fiscal year, the Group has participated in the mobile spectrum auction.
We believe that if we could get the spectrum at a reasonable cost, the Group can execute a
quad-play strategy with lower network cost and advanced technology that is based on our Fibre
network advantage over mobile-only operators. There are also operational synergies from up-selling
our existing triple-play customer base to quad-play services. Whilst we did not win the spectrum
this time, we will continue to explore mobile business opportunities going forward but subject to
strict financial discipline with cost effectiveness as the top priority.
As for domestic Free TV, we are still waiting for the Government to approve our license despite
submitting our application in December 2009. Due to personnel changes in the Bureau, press reports
suggest that there is likely delay to the schedule from our original estimation from middle of this
year, to end of this year. Free TV business offers an opportunity for us to step into a new
industry by, once again, changing the entire competitive landscape and the basic rules of the game;
this time, by offering Free TV over our extensive Fibre network. For instance, traditional
over-the-air transmission deployed by the two existing TV operators allows only 1 to 2 channels per
operator in Hong Kong, while our Fibre network can deliver over 100 TV channels. This is
unprecedented in the decades history of Hong Kongs Free TV industry, unshackling audience from
limited choices of channels. If they are entitled to choices among one to two hundred TV channels,
we believe that this will fundamentally change the Free TV industry in Hong Kong, creating infinite
business opportunities for us.
We see Free TV as a long-term investment
, and I sincerely wish our shareholders see eye to eye with
us. Understandably, this business will not generate any substantial financial return in the coming
2 to 3 years. Similar to the situation and the mentality when we started investing in Fibre
infrastructure business over ten years ago, our investment in Free TV will require immense courage
to challenge the giant and steadfast commitment to realising our dream step by step.
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FINANCIAL HIGHLIGHTS
In thousands of Hong Kong dollars except for per share amounts and ratios
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Six months ended Year-On-Year Change
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Turnover 825,906 785,963 39,943 5.1% Earnings before interest, tax, depreciation and amortisation
(EBITDA
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) 301,599 248,848 52,751 21.2% EBITDA margin 36.5% 31.7% 4.8% 15.1% Core
EBITDA
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301,599 258,498 43,101 16.7% Core EBITDA margin 36.5% 32.9% 3.6% 10.9% Profit
attributable to shareholders 167,612 116,388 51,224 44.0% Earnings per share Basic (HK Cents)
21.9 17.3 4.6 26.6% Diluted (HK Cents) 21.1 16.5 4.6 27.9% Dividend declared per ordinary share
(HK cents) 15.0 6.5 8.5 130.8% Capital Expenditures 175,294 176,890 (1,596) (0.9%) Adjusted free
Cash Flow
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127,869 60,294 67,575 112.1%
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As at Year-On-Year Change
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Cash at bank and in hand 476,855 588,665 (111,810) (19.0%) Total outstanding borrowings 129,179
134,662 (5,483) (4.1%) Total equity attributable to equity shareholders 1,759,616 1,688,539 71,077
4.2% Shares in issue (in thousands) 768,511 764,997 3,514 0.5% Net asset per share (HK$) 2.29 2.21
0.08 3.6% Net gearing ratio (times) Net Cash Net Cash
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1 EBITDA for any period means, without duplication, net income/(loss) for such period, plus the
following to the extent deducted in calculating such net income/(loss): net interest
expense/(income), income taxes, depreciation and amortisation expense (excluding any such non
cash charge to the extent it represents an accrual of or reserve for cash charges in any
future period or amortisation of a prepaid cash expense that was paid in a prior period not
included in the calculation).
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2 Core EBITDA represents the EBITDA for any period plus any net loss from extinguishment of
10-year senior notes.
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3 Adjusted free cash flow means EBITDA minus capital expenditure and net finance costs.
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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.
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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).
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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).
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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.
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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.
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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.
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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.
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).
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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:
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28 February 31 August 2011 2010 HK$000 HK$000
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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
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.
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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.
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
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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:
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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)
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2. EBITDA to exceed HK$580 million (unchanged)
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3. Capital expenditure on core telecommunications business of approximately HK$350 million
(unchanged)
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At City Telecom, we believe transparency is key to our investor engagement efforts. An Analyst
Event was held from 28 to 29 March 2011, opened up our executives and operations via unscripted
management discussions, vendor presentations, operation and site tour, and group visit to the
regulator.
Event Schedule
28 March 2011 (Hong Kong)
09:00 11:30
City Telecom Management Technology Presentation
Presentation 12:30
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29 March 2011
(Guangzhou)
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07:45
Departure to Guangzhou
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13:45 Site Visit to City Telecoms call centre 17:00 Operation and Site Tour at CIC Of ce Meeting
with Regulator
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Guangzhou Visit to our Customer Engagement Team Meeting with YK Ha, Deputy
Director-Earnest Li, News Controller, IP-TV General at The Office of the
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Operational Visit Telecommunications Authority
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12:00
Chinese Dim Sum Lunch
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Dick Ip, Associate Director of
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Network Operation Centre, Network
Operation Centre Overview Dinner Site Visit to MayFlower of ce & Presentation
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- Overview on GZ call centre operation Anatomise the new call centre solution How to
prioritise Talent development
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Visit to our Customer Service Centre, at the heart Local Seafood Dinner at Lei Yue Mun of Hong
Kongs shopping district in Mongkok Departure from Guangzhou to Hong Kong
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With the conviction that Happy Talent bring Happy Customers, we have launched our Service with
Heart Customer Engagement Campaign in February 2011. This is an all-rounded 360° degree campaign,
from internal to external, to delight our customers with Service from the Heart.
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Externally, the message was blanketed across Hong Kong via outdoor billboards in prime locations,
print ads, and panels at key public transport terminals, as well as comprehensive TV commercials.
For TV Commercials, please visit:
http://www.hkbn.net/servicewithhear
t/
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Six months ended 28 February 28 February 2011 2010 Note HK$000 HK$000
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Turnover 3 825,906 785,963 Network costs 4 (103,781) (90,185) Other operating expenses (527,911)
(539,612) Other income/(losses), net 5 3,210 (4,251) Finance costs, net 6(a) 247 (12,255)
Profit before taxation 6 197,671 139,660
Income tax expense 8 (30,059) (23,272)
Profit attributable to shareholders 167,612 116,388 Basic earnings per share 10 HK21.9 cents HK17.3
cents Diluted earnings per share 10 HK21.1 cents HK16.5 cents
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Six months ended 28 February 28 February 2011 2010 HK$000 HK$000
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Profit for the period 167,612 116,388
Other comprehensive income
Exchange difference on translation of financial statements of overseas subsidiaries 1,564 (200)
Total comprehensive income attributable to shareholders 169,176 116,188
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28 February 31 August 2011 2010 Note HK$000 HK$000
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Non-current assets
Goodwill 1,066 1,066 Fixed assets 11 1,494,894 1,431,813 Long-term prepayment 4,521 5,174 Deferred
expenditure 11,951 6,626
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Current assets
Accounts receivable 12 65,059 99,729 Other receivables, deposits and prepayments 201,910 89,490
Deferred expenditure 27,273 28,986 Cash at bank and in hand 476,855 588,665
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Current liabilities
Bank overdrafts unsecured 4,961 10,490 Accounts payable 13 22,652 35,128 Other payables and
accrued charges 166,217 195,931 Deposits received 22,661 21,822 Deferred services revenue 89,068
106,798 Tax payable 1,687 1,533 Current portion obligations under finance leases 14 153 212
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307,399 371,914 Net current assets 463,698 434,956 Total assets less current liabilities
1,976,130 1,879,635 Non-current liabilities
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Deferred tax liabilities 16 85,026 55,843 Derivative financial instrument 15 7,423 11,293 Long-term
debt and other liabilities 14 124,065 123,960
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216,514 191,096 Net assets 1,759,616 1,688,539 Capital and reserves
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Share capital 17 76,851 76,500 Reserves 1,682,765 1,612,039
Total equity attributable to equity shareholders of the Company 1,759,616 1,688,539
The notes on pages 19 to 34 form part of this interim financial report.
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Share Share Capital redemption Retained Exchange
capital premium reserve reserve profits reserve Total
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Note HK$000 HK$000 HK$000 HK$000 HK$000 HK$000 HK$000
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At 1 September 2010 76,500 1,074,997 21,064 7 513,208 2,763 1,688,539
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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
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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
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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
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At 28 February 2010 68,281 701,026 17,655 7 462,455 2,660 1,252,084
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Six months ended 28 February 28 February 2011 2010 HK$000 HK$000
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Net cash inflow from operating activities 155,432 189,821 Net cash outflow from investing
activities (150,975) (169,287) Net cash outflow from financing activities (111,524) (108,891)
Decrease in cash and cash equivalent (107,067) (88,357) Cash and cash equivalent at 1 September
578,175 221,052 Effect of foreign exchange rate changes 786 (352) Cash and cash equivalent at 28
February 471,894 132,343 Analysis of the balances of cash and cash equivalents
Cash at bank and in hand 476,855 137,710 Bank overdraft unsecured (4,961) (5,367)
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1 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.
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.
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.
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.
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.
|
2 SIGNIFICANT ACCOUNTING POLICIES
|
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.
|
3 TURNOVER AND SEGMENT INFORMATION
|
The Group is principally engaged in the provision of international telecommunications
services and fixed telecommunications network services to customers in Hong Kong and Canada.
(a) Segment information
|
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:
|
International telecommunications : provision of international long
distance calls services
|
Fixed telecommunications network : provision of dial up and
broadband Internet access services, local voice-over-IP services, IP-TV services
and corporate data services
|
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.
|
Six months ended 28 February 2011 Fixed
International telecomm-telecomm- unications
unications network services services Elimination
Group HK$000 HK$000 HK$000 HK$000
|
Turnover
External sales 98,749 727,157 825,906
Inter-segment sales 2,840 7,625 (10,465)
Reportable segment turnover 101,589 734,782 (10,465) 825,906
Reportable segment profit (note 3(b)) 37,319 156,895 194,214
|
(Expressed in Hong Kong dollars)
|
3 TURNOVER AND SEGMENT INFORMATION (Continued)
|
(a) Segment information (Continued)
|
Six months ended 28 February 2010 Fixed
International telecomm-telecomm- unications
unications network services services
Elimination Group HK$000 HK$000 HK$000
HK$000
|
Turnover
External sales 110,178 675,785 785,963 Inter-segment sales 2,833 8,116 (10,949)
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 reportable segment profit
|
Six months ended 28 February 28 February 2011 2010 HK$000 HK$000
|
Reportable segment profit 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
|
3 TURNOVER AND SEGMENT INFORMATION (Continued)
|
(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.
|
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)
|
Profit before taxation is arrived at after charging and (crediting) the following:
(a) Finance costs, net
|
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
|
6 PROFIT BEFORE TAXATION (Continued)
|
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)
|
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)
|
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 (note
16) 29,183 21,634
|
Income tax expense 30,059 23,272
|
(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
|
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
|
Six months ended 28 February 28 February 2011 2010 HK$000 HK$000
|
At the beginning of the period 1,431,813 1,302,380 Additions 175,294 176,890 Disposal (7,521)
(6,860) Depreciation charge (105,492) (97,524) Exchange adjustments 800 133
At the end of the period 1,494,894 1,375,019
|
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
|
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
|
14 LONG-TERM DEBT AND OTHER LIABILITIES
|
28 February 31 August 2011 2010 HK$000 HK$000
|
Long term-bank loan unsecured (note (a)) 123,727 123,567 Obligation under finance leases
(note (b)) 491 605
|
124,218 124,172 Current portion obligations under finance leases (153) (212)
124,065 123,960
|
Notes:
(a) As at 28 February 2011, HK$125,000,000 was drawn from a bank facility (note 18) which
bears floating interest rate and is repayable on 23 December 2014. The borrowing is subject
to the fulfilment of covenants relating to certain of the Groups balance sheet ratios, as
are commonly found in lending arrangements with financial institutions. If the Group were to
breach the covenants the drawn down facilities would become payable on demand. The Group
regularly monitors its compliance with these covenants. As at 28 February 2011, none of the
covenants relating to this borrowing had been breached. In March 2011, the borrowing has been
fully repaid.
(b) The Groups finance lease liabilities were repayable as follows:
|
28 February 2011 31 August 2010 Present Interest
Interest value of the expense Total Present expense Total
minimum relating to minimum value of the relating to minimum
lease future lease minimum lease future lease payments
periods payments payments periods payments HK$000 HK$000
HK$000 HK$000 HK$000 HK$000
|
Within 1 year 153 24 177 212 30 242
After 1 year but within
|
2 years 101 17 118 105 20 125 After 2 years but within 5 years 237 14 251 288 22 310
|
338 31 369 393 42 435
491 55 546 605 72 677
|
15 DERIVATIVE FINANCIAL INSTRUMENT
|
28 February 31 August 2011 2010 HK$000 HK$000
|
Non-current liabilities
Interest rate swap, at fair value through profit or loss 7,423 11,293
As at 28 February 2011 and 31 August 2010, the Group has a 5-year interest rate swap contract
with a notional amount of HK$175,000,000 to hedge against interest rate risk. Under this
arrangement, the Group will pay a fixed rate interest on the notional amount on quarterly
basis, and receive a floating interest rate at HIBOR rate. The contract is recognised
initially at fair value and is remeasured at each balance sheet.
The interest rate swap does not qualify for hedge accounting under IAS/HKAS 39, Financial
instruments: Recognition and measurement, and therefore changes in its fair value is
recognised immediately in profit or loss.
|
The movements of the net deferred tax (liabilities)/assets recognised in the consolidated
balance sheet are as follows:
|
Six months Year ended ended 28 February 31 August 2011 2010 HK$000 HK$000
|
At the beginning of the period/year (55,843) (15,709) Deferred taxation charged to income
statement relating to the origination and reversal of temporary differences (29,183)
(40,134)
|
At the end of the period/year (85,026) (55,843)
As at 28 February 2011, the Group has not recognised deferred tax assets in respect of unused
tax losses of HK$8,500,000 (31 August 2010: HK$8,242,000) because it is not probable that
future taxable profits can be generated to utilise the tax losses.
The unrecognised tax losses carried forward from prior years will expire in the following
periods:
|
28 February 31 August 2011 2010 HK$000 HK$000
|
After 5 years 2,820 2,553 No expiry date 5,680 5,689
|
16 DEFERRED TAXATION (Continued)
|
The components of deferred tax assets and liabilities in the consolidated balance sheet and
the related movements during the period/year are as follows:
|
28 February 31 August 2011 2010 HK$000 HK$000
|
Deferred tax assets:
At the beginning of the period/year 90,956 116,057 Charged to income statement (16,409)
(25,107) Exchange differences 4 6
At the end of the period/year 74,551 90,956
|
Accelerated depreciation allowances 28 February 31 August 2011 2010 HK$000 HK$000
|
Deferred tax liabilities:
At the beginning of the period/year (146,799) (131,766) Charged to income statement (12,774)
(15,027) Exchange differences (4) (6)
At the end of the period/year (159,577) (146,799)
The following amounts, determined after appropriate offsetting, are shown in the consolidated
balance sheet.
|
28 February 31 August 2011 2010 HK$000 HK$000
|
Deferred tax assets Deferred tax liabilities (85,026) (55,843)
|
Number of shares Amount (HK$000) 28 February 31 August 28 February 31 August 2011 2010 2011 2010
|
Ordinary shares of HK$0.10 each 2,000,000,000 2,000,000,000 200,000 200,000
|
Ordinary shares of HK$0.10 each
At the beginning of the period/year 764,997,344 664,179,970 76,500 66,418 Shares issued upon
exercise of share options 3,513,657 20,317,374 351 2,032 Share issued upon placement
80,500,000 8,050
At the end of the period/year 768,511,001 764,997,344 76,851 76,500
The movement of outstanding share options during the period was as follows:
|
Number of Number of share options share options Exercise outstanding at outstanding at
price 1 September 28 February Date of grant per share 2010 Granted Exercised 2011
|
2002 Share Option Scheme
21 October 2004 HK$1.5224 4,158,680 350,572 3,808,108 5 January 2005 HK$1.5224 16,183,208
16,183,208 22 May 2006 HK$0.6523 5,183,443 2,558,045 2,625,398 6 February 2008
(note) HK$1.7568 5,542,791 5,542,791 11 February 2008 (note) HK$1.8660 6,044,791
6,044,791 15 February 2008 HK$1.7568 604,479 302,240 302,239 2 May 2008 (note) HK$1.7866
932,465 302,800 629,665 5 February 2010 HK$4.2400 6,000,000 6,000,000
|
44,649,857 3,513,657 41,136,200
|
Note:
The Company operates a share option scheme (the 2002 Share Option Scheme) which was adopted
by shareholders of the Company on 23 December 2002 which the directors may, at their
discretion, invite eligible participants to take up share options to subscribe for shares
subject to the terms and conditions stipulated therein.
Each option entitles the holder to subscribe for one ordinary share in the Company at
predetermined exercise price.
During the six months ended 28 February 2011, one of the clauses in the option agreement has
been modified. As a result of this modification, the expiry period of the share option has
been extended to 10 years from the grant date of share options. The Group has accounted for
the modification in accordance with IFRS/HKFRS 2 Share-based payment by measuring the
incremental fair value which is the difference between the fair value of the modified share
options and that of the original share options, both estimated as at the date of the
modification, and recognising the incremental fair value over the period from the
modification date until the date when the modified share options vest. If the modification
occurs after vesting date, the incremental fair value granted is recognised immediately. The
balance of the original grant-date fair value as at the date of modification continues to be
recognised over the remaining original vesting period. For the six months ended 28 February
2011, the amount of incremental fair value recognised in current period in respect of the
modification was HK$116,000.
|
18 CONTINGENT LIABILITIES
|
28 February 31 August 2011 2010 HK$000 HK$000
|
Bank guarantees provided to suppliers 2,760 2,770 Bank guarantee in lieu of payment of
utility deposits 5,572 5,572
|
As at 28 February 2011, HK$133,332,000 (31 August 2010: HK$133,342,000) of the HK$163,870,000
total banking facility (31 August 2010: HK$353,840,000 total banking facility and revolving
loan facility) was utilised by the Company and the subsidiary.
|
28 February 31 August 2011 2010 HK$000 HK$000
|
Purchase of telecommunications, computer and office equipment contracted but not
provided for 130,844 132,340
|
(b) Commitments under operating leases
|
The Group has future minimum lease payments under non-cancellable operating leases as
follows:
|
28 February 31 August 2011 2010 HK$000 HK$000
|
Leases in respect of land and buildings which are payable:
Within 1 year 22,571 24,873 After 1 year but within 5 years 10,927 16,417
|
Leases in respect of telecommunications facilities and
computer equipment which are payable:
Within 1 year 58,695 63,948 After 1 year but within 5 years 13,795 14,200 After 5
years 4,153 4,849
|
19 COMMITMENTS (Continued)
|
(c) Program fee commitments
|
The Group entered into several long-term agreements with program content providers for
rights to use certain program contents in the Groups IP-TV services. Minimum amounts
of program fees to be paid by the Group are analysed as follows:
|
28 February 31 August 2011 2010 HK$000 HK$000
|
Program fee in respect of program rights which are payable:
Within 1 year 23,213 25,539 After 1 year but within 5 years 38,085 48,087
|
20 MATERIAL RELATED PARTY TRANSACTIONS
|
The Group entered into the following material related party transactions.
Key management personnel remuneration
Remuneration for key management personnel of the Group is as follows:
|
Six months ended 28 February 28 February 2011 2010 HK$000 HK$000
|
Short-term employee benefits 21,630 15,469 Post-employment benefits 667 1,315 Equity
compensation benefits 1,338 1,289
|
21 P O S S I B L E I M P A C T O F A M E N D M E N T S , N E W S T A N D A R D S A N D
INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE PERIOD ENDED 28 FEBRUARY 2011
|
Up to the date of issue of these financial statements, the IASB/HKICPA has issued a number of
amendments, new standards and interpretations which are not yet effective for the six months
period ended 28 February 2011.
The Group is in the process of making an assessment of what the impact of these amendments,
new standards and new interpretations is expected to be in the period of initial application.
So far the Group is not yet in a position to state whether the following developments will
have a significant impact on the Groups results of operations and financial position.
|
Effective for accounting periods beginning on or after
|
IFRS/HKFRS (Amendments) Improvements to IFRS/HKFRS (2010) 1 January 2011
IAS/HKAS 24 (Revised) Related party disclosures 1 January 2011
Amendments to IFRS/HKFRS 7 Financial instruments: Disclosures Transfer of 1 July 2011
financial assets
IFRS/HKFRS 9 Financial instruments 1 January 2013
|
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.
DIRECTORS INTERESTS IN SHARES AND UNDERLYING SHARES
As at 28 February 2011, the interests and short positions of the Companys Directors, chief
executive and their associates in the shares and underlying shares of the Company and its
associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the
SFO)), as recorded in the register maintained by the Company required to be kept under Section
352 of the SFO or as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited
(the Stock Exchange) pursuant to the Model Code for Securities Transactions by Directors of
Listed Issuers (the Model Code) as set out in Appendix 10 of the Rules Governing the Listing of
Securities on the Stock Exchange (the Listing Rules) were as follows:
Long positions in ordinary shares and underlying shares of the Company
|
Approximate Interests in percentage Interests in shares underlying interests in the Total
shares Companys Personal Corporate Family interests pursuant to Aggregate issued Name of
Director interests interests interests in shares share options interests share capital
|
Mr. Wong Wai Kay, Ricky 7,145,289 339,814,284 346,959,573 8,091,604 355,051,177 46.20% (Note
2(i))
Mr. Cheung Chi Kin, Paul 17,361,820 24,924,339 42,286,159 8,091,604 50,377,763 6.56% (Note
2(ii))
Mr. Yeung Chu Kwong, William 2,306,000 2,306,000 11,542,956 13,848,956 1.80%
Mr. Lai Ni Quiaque 2,022,899 10,392,506 12,415,405 6,044,791 18,460,196 2.40% (Note 3)
|
DIRECTORS INTERESTS IN SHARES AND UNDERLYING SHARES (Continued)
Long positions in ordinary shares and underlying shares of the Company (Continued)
Notes:
|
1. This percentage is based on 768,511,001 ordinary shares of the Company issued as at 28
February 2011.
|
2. The corporate interests of Mr. Wong Wai Kay, Ricky and Mr. Cheung Chi Kin, Paul arise through
their respective interests in the following companies:
|
(i) 339,814,284 shares are held by Top Group International Limited (Top Group) which is
42.12% owned by Mr. Wong Wai Kay, Ricky; the interests of Top Group in the Company is also
disclosed under the section Substantial Shareholders in this report.
(ii) 24,924,339 shares are held by Worship Limited which is 50% owned by Mr. Cheung Chi Kin,
Paul.
|
3. 10,392,506 shares are jointly owned by Mr. Lai Ni Quiaque and his spouse.
|
Save as disclosed above, as at 28 February 2011, none of the Directors nor the chief executive
(including their spouse and children under 18 years of age) of the Company had any interest or
short positions in the shares, underlying shares and derivative to ordinary shares of the Company
and its associated corporations (within the meaning of Part XV of the SFO) as recorded in the
register required to be kept under Section 352 of the SFO or as otherwise notified to the Company
and the Stock Exchange pursuant to the Model Code.
SHARE OPTION SCHEMES
The Company operates a share option scheme (the 2002 Share Option Scheme) which was adopted by
shareholders of the Company on 23 December 2002 which the directors may, at their discretion,
invite eligible participants to take up options to subscribe for shares subject to the terms and
conditions stipulated therein.
|
SHARE OPTION SCHEMES (Continued)
Details of the share options granted under the 2002 Share Option Scheme during the period for the
six months ended 28 February 2011 were as follows:
|
Closing price immediately Options before the Balance Options Options
cancelled/ Balance date on as at granted exercised lapsed as at which the 1
September during during during 28 February options Date of grant Exercise price
2010 the period Vesting period Exercise period the period the period 2011 were
granted
|
Directors
Mr. Wong Wai Kay, Ricky 5 January 2005 1.5224 8,091,604 5 January 2005 to 5 January 2005 to
8,091,604 1.53 31 December 2006 20 October 2014
Mr. Cheung Chi Kin, Paul 5 January 2005 1.5224 8,091,604 5 January 2005 to 5 January 2005 to
8,091,604 1.53 31 December 2006 20 October 2014
Mr. Yeung Chu Kwong, 22 May 2006 0.6523 165 22 May 2006 to 22 May 2007 to 165 0.64
William 21 May 2009 21 May 2016
|
6 February 2008 1.7568 5,542,791 (Note 2) (Note 2) 5,542,791 1.99
5 February 2010 4.2400 6,000,000 (Note 3) (Note 3) 6,000,000 4.34
|
Mr. Lai Ni Quiaque 22 May 2006 0.6523 2,022,899 22 May 2006 to 22 May 2007 to 2,022,899
0.64 21 May 2009 21 May 2016
|
11 February 2008 1.8660 6,044,791 (Note 4) (Note 4) 6,044,791 1.86
|
Talent under
continuous
employment
contracts
Talent 21 October 2004 1.5224 4,158,680 21 October 2004 to 1 January 2005 to 350,572
3,808,108 1.53 31 December 2006 20 October 2014
|
22 May 2006 0.6523 3,160,379 22 May 2006 to 22 May 2007 to 535,146
2,625,233 0.64 21 May 2009 21 May 2016
|
15 February 2008 1.7568 604,479 (Note 5) (Note 5) 302,240 302,239 1.79 2 May 2008 1.7866
932,465 (Note 6) (Note 6) 302,800 629,665 1.72 Total 44,649,857 3,513,657 41,136,200
|
SHARE OPTION SCHEMES (Continued)
Notes:
|
1. During the six months ended 28 February 2011, 3,513,657 options were exercised and the
weighted average share price at the date of exercise was HK$5.81 per ordinary share.
|
2. The exercise of the options is subject to certain conditions that must be achieved by the
grantee. A modification to the expiry date of the options granted to the grantee was approved
by shareholders of the Company on 21 December 2010 and the options shall be exercised not
later than 5 February 2018.
|
3. The exercise of the options is subject to certain conditions that must be achieved by the
grantee. The options shall be exercised not later than 4 February 2020.
|
4. The exercise of the options is subject to the performance of the Companys shares and certain
conditions that must be achieved by the grantee. A modification to the expiry date of the
options granted to the grantee was approved by shareholders of the Company on 21 December 2010
and the options shall be exercise not later than 10 February 2018.
|
5. The exercise of the options is subject to certain conditions that must be achieved by the
grantee. The options shall be exercised not later than 23 December 2012.
|
6. The exercise of the options is subject to certain conditions that must be achieved by the
grantee. A modification to the expiry date of the options granted to the grantee was approved
by shareholders of the Company on 21 December 2010 and the options shall be exercised not
later than 1 May 2018.
|
7. During the six months ended 28 February 2011, no options were lapsed and cancelled.
|
SUBSTANTIAL SHAREHOLDERS
At 28 February 2011, the interests or short positions of the persons, other than the directors or
chief executive of the Company, in the shares and underlying shares of the Company as recorded in
the register required to be kept under Section 336 of the SFO were as follows:
|
Name in long positions Percentage interests
|
Top Group International Limited 339,814,284 44.22% Jennison Associates LLC 53,825,740 7.00%
Note : This percentage is based on 768,511,001 ordinary shares of the Company issued as at 28
February 2011.
Save as disclosed above, as at 28 February 2011, the Company had not been notified of any persons
(other than the directors and chief executive of the Company) having any interest or short position
in the shares and underlying shares of the Company as recorded in the register required to be kept
by the Company under Section 336 of the SFO.
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 Listing
Rules.
|
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.
CHANGES OF DIRECTORS INFORMATION
During the period for six months ended 28 February 2011, the Executive Directors, Mr. Wong Wai Kay,
Ricky, Mr. Cheung Chi Kin, Paul, Mr. Yeung Chu Kwong, William and Mr. Lai Ni Quiaque received
discretionary performance bonuses in the amounts of HK$1,000,000, HK$1,000,000, HK$1,500,000 and
HK$750,000 respectively.
The basis of determining the Directors emoluments (including bonus payments) remained unchanged
during the six months ended 28 February 2011.
Save as disclosed above, during the six months ended 28 February 2011, there was no other change to
the Directors information since the date of the 2010 annual report of the Company which required
to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules.
REMUNERATION COMMITTEE
The Remuneration Committee which is chaired by Mr. Lee Hon Ying, John, an Independent Non-executive
Director, currently has a membership comprising three Independent Non-executive Directors,
Non-executive Director, Chief Financial Officer and Director-Talent Management. The Remuneration
Committee is responsible for establishing a formal, fair and transparent procedure for developing
policy and structure of all remuneration of directors and senior management of the Company. The
Remuneration Committee also assists the Company to review and consider the Companys policy for
remuneration of directors and senior management and to determine their remuneration packages.
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
Wong Wai Kay, Ricky
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