SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For May 27
th
, 2008
CITY TELECOM (H.K.) LIMITED
(Translation of registrant’s 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 Form 20-F or Form 40-F.
Form 20-F
x
Form 40-F
¨
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.
Yes
¨
No
x
City Telecom (H.K.) Limited (the “Company”) is furnishing under cover of Form 6-K the Company’s interim report for the six months ended February 29
th
, 2008.
SIGNATURE
Pursuant to the requirements of section 12 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: May 27
th
, 2008
Contents
Chairman’s Statement
Dear Fellow-shareholders,
The interim results this year had met our target with solid growth in our fixed telecom network business.
The Group’s wholly-owned subsidiary, Hong Kong Broadband Network Limited, principally engages in fixed telecom network business, which is an
infrastructure project spanning over 20 to 30 years. In terms of the “hardware” – our network infrastructure, there is nothing special that needed to report, for our network is showing satisfactory development in both technology and
in coverage. Regarding the “software” – our main focus over the past 2 years – raising our brand image externally, while at the same time upgrading our quality of management internally, enhancing the Group to become more
corporate and systematic.
In recent years, discussion on corporate social responsibility has become a trend among the business sector,
which the Group also shares a similar concern. The corporate social responsibility we strive for is not merely the support to, or participation in charity events, but more about the education of values, to furnish the well-being, being both the
daily and spiritual life of our staff, their families as well as the society as a whole, which shall bring forth long lasting effects.
As a
matter of fact, if we regard our group as a public utility, interests of the shareholders would then become the Group’s social responsibility. I firmly believe, if we could contribute a bit more to the society, engage a bit more in charitable
cause, the Group would naturally become a profitable corporation with contributions to the society.
To further expand our achievements, we
have formed a consortium with two telecom corporations in Singapore. MobileOne & StarHub, with us as the lead, together we are bidding for the Singapore’s Next Generation National Broadband Network project. Our sole competitor is led
by Singapore Telecommunications, partnering up with Canada’s Axia NetMedia, Singapore Power subsidiary SP Telecommunications and Singapore Press Holdings (SPH), where the winner is expected to be announced this August.
Wong Wai Kay, Ricky
Chairman
19 May 2008
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02
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City Telecom (H.K.) Limited Interim Report 2008
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Management’s Discussion and Analysis
Financial Highlights
In thousands of Hong Kong dollars except for per share amounts and ratios
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Six months ended
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29 February
2008
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28 February
2007
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Turnover
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623,792
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562,370
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Earnings before interest, tax, depreciation and amortization (EBITDA
1
)
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187,131
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188,240
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EBITDA margin
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30.0
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%
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33.5
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%
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Profit attributable to shareholders
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47,763
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18,229
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Earnings per share
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– Basic (HK Cents)
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7.6
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3.0
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– Diluted (HK Cents)
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7.3
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2.9
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Dividend declared per share (HK cents)
2
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4.0
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4.0
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Capital Expenditures
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68,446
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69,521
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Adjusted free Cash Flow
3
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88,387
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85,247
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As at
29 February
2008
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As at
31 August
2007
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Cash position
4
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304,611
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547,309
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Total equity attributable to equity shareholders
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960,049
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903,882
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Shares in issue (in thousands)
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638,446
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616,503
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Net asset per share (HK$)
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1.50
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1.47
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Gearing ratio
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0.39
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0.45
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1
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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): interest
expense/(income), income taxes, depreciation and amortization 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 amortization of a prepaid cash expense that was
paid in a prior period not included in the calculation).
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2
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For the interim dividend declared during the six months ended 29 February 2008, a scrip or cash option is provided.
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3
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Adjusted free cash flow means EBITDA minus capital expenditure and net finance costs.
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4
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Cash position means cash at bank and in hand, long term bank deposits but exclude pledged bank deposits.
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City Telecom (H.K.) Limited Interim Report 2008 03
Management’s Discussion and Analysis
Financial Review
For the six months to 29 February 2008, our business grew continuously with consolidated turnover increased by 10.9% year-on-year to HK$623.8 million, mainly driven by the strong double-digit growth in our Fixed
Telecommunications Network Service business (FTNS) of 19.1% to HK$474.9 million. This solid FTNS growth more than compensated for the decline in International Telecommunications Service business (IDD) of 8.9% year-on-year to HK$148.9 million.
Our FTNS business is now the bulk of our business, contributing 76.1% of our total turnover, reflecting the combined results of raising
average revenue per user (ARPU) of our ultra-high speed broadband Internet access service and assertive expansion in our subscription base.
Consolidated EBITDA for 1HFY08 slightly decreased by 0.6% to HK$187.1 million year-on-year, primarily as a result of our investment in brand enhancement – “Network Differentiation” advertising campaign and one-off upfront
customer acquisition costs led by strong growth in subscriptions during the period.
Despite of this, the Group continued to deliver
significant growth in profitability. Benefiting from the continuous shift to higher EBITDA margin FTNS business, substantial subscriptions growth and the effect of change in assets’ estimated useful lives, profits attributable to our
shareholders increased by 162.0% to HK$47.8 million in 1HFY08 with basic earnings per share reached HK7.6 cents and diluted earnings per share reached HK7.3 cents.
Liquidity and Capital Resources
At 29 February 2008, the Group had total cash position of HK$304.6 million (31 August
2007: HK$547.3 million) and outstanding borrowing of HK$680.7 million (31 August 2007: HK$953.8 million). Our long term liability consists mainly of our outstanding 8.75% 10-year senior notes which amounted to HK$680.2 million (31 August 2007:
HK$952.6 million). Our total cash position consisted of cash at bank and in hand, long term bank deposits but exclude pledged bank deposits.
Our capital expenditure for this period was HK$68.4 million, similar to the same period last year of HK$69.5 million. This capital expenditure level was in line with our policy to maintain capital expenditure to below our EBITDA. During
this period, the Group has generated an adjusted positive free cash flow of HK$88.4 million (for the six months ended 28 February 2007: HK$85.2 million).
The on-going capital expenditure on our network development will be met by internally generated cash flow and the proceeds from senior notes issued in January 2005. Our capital expenditure outlook for FY08 is expected
to be about HK$250 million in order to reach our continuous network expansion target towards 2.0 million residential homes pass by 2010.
04 City Telecom (H.K.) Limited Interim Report 2008
Management’s Discussion and Analysis
Liquidity and Capital Resources (Continued)
The debt maturity profiles of the Group as at 29 February 2008 and 31 August 2007 were as
follows:
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29 February
2008
HK$’000
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31 August
2007
HK$’000
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Repayable within one year
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220
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835
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Repayable in the second year
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125
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121
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Repayable in the third to fifth year
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191
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254
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Repayable after the fifth year
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680,153
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952,593
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Total
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680,689
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953,803
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With strong free cash flows, during the six months ended 29 February 2008, the Group reduced
its debt level on the 8.75% 10-year senior notes to approximately US$89.3 million (equivalent to HK$695.2 million) through buy-back (by way of market acquisition) and cancellation of approximately US$35.7 million (equivalent to HK$277.3 million) of
the 8.75% 10-year senior notes.
At 29 February 2008, all outstanding borrowings bear fixed interest rate and are denominated in United
States dollars or Hong Kong dollars.
The Group’s net debt to net asset gearing ratio for the period is 0.39 times which is calculated
as below:
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29 February
2008
HK$’000
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31 August
2007
HK$’000
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Net Debt (note)
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376,078
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406,494
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Net Assets
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960,049
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903,882
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Gearing (times)
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0.39
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0.45
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Note:
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Net debt is total long term debt and other liabilities and obligations under finance leases less cash at bank and in hand and long term bank deposits but excluded pledged bank
deposits
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Charge on Group Assets
At 29 February 2008, the Group had bank facilities of US$9.0 million which was secured by a pledged deposit of US$9.9 million, and certain bank guarantees provided to suppliers and to utility vendors in lieu of
payment of utility deposits were secured by pledged deposits of HK$10.0 million (compared to pledged deposits of US$9.9 million and HK$10.0 million at 31 August 2007).
Exchange Rates
The Group’s
foreign currency exposures mainly arise from its borrowings denominated in foreign currency and from purchase of goods and services of its overseas operations. The Group periodically reviews the potential costs and benefits of hedging, and when
necessary, the Group mainly uses forward foreign exchange contracts and foreign currency deposits to manage the currency exposure.
Contingent Liabilities
At 29 February 2008, the Group had total contingent liabilities in respect of guarantees
provided to suppliers of HK$5.9 million (31 August 2007: HK$5.9 million) and to utility vendors in lieu of payment of utility deposits of HK$5.3 million (31 August 2007: HK$5.3 million).
City Telecom (H.K.) Limited Interim Report 2008 05
Management’s Discussion and Analysis
Business Review
Fixed Telecommunications Network Services (FTNS)
FTNS business continued as the Group’s core
business, which delivered strong growth during the six months to 29 February 2008. Instead of focus on subscription and APRU as individual metrics, we adopted a dynamic strategy to maximize our revenue market share, which enabled us to deliver
19.1% revenue growth in this market segment.
During the six months to 29 February 2008, the Group added 43,000 net subscriptions
across our broadband, voice and IPTV services to 726,000 subscriptions as of 29 February 2008. We managed to grow our subscriber base without sacrificing our revenue yields, with new contracts for our broadband Internet service achieving a
blended ARPU HK$177 per month in February 2008 versus HK$175 in February 2007.
As the pioneer in the Hong Kong telecommunications industry,
during the period, we were the first Internet service provider to launch Fiber-To-The-Home (FTTH) residential broadband services, namely “FiberHome100”, “FiberHome200” and “FiberHome1000” to the mass market, which
enable the end-users in Hong Kong to enjoy the full benefits of future technology today. To facilitate the mass deployment of FTTH service, we also introduced the first Gigabit Passive Optical Network (GPON) technology in Hong Kong. Together with
our Metro Ethernet foundation, these advanced technologies expedite the Group’s network expansion towards achieving 2.0 million homes pass target by 2010 in a cost effective way.
While broadband service is our core focus, emphasis were also put on our voice and IPTV businesses. Notwithstanding the landscape for voice market
remained competitive due to the modest growth environment and incumbent’s strategic retention campaign to maintain stable market share, we managed to stabilize the subscriptions in the past six months while downward pressure on pricing
persists.
During the period, we launched dual mode High Definition Terrestrial TV Receiver and IPTV set-top-box for all customers in Hong
Kong. This new value-added product not only serves our on-net customers, but also allows off-net customers to enjoy the set-top-box via a rental plan.
International Telecom Services (IDD)
IDD service revenue showed continuous decline as a result of
intensive competition from traditional IDD service and other Voice-Over-IP (VOIP) calling options, and also from proactive migration of our IDD customer to our FTNS 2b VOIP service. However, the decline slowed to a moderate level over the past 18
months. Our IDD traffic volume fell by 9.1% year-on-year to 299 million minutes in 1HFY08. On IDD, we will continue to maintain our strategy as “cash flow first, volume come next”.
06 City Telecom (H.K.) Limited Interim Report 2008
Management’s Discussion and Analysis
PROSPECTS
The results for 1HFY08 reflected the continuing growth of our FTNS business and also the discretionary investment in brand enhancement. Our Network Differentiation campaign launched in October 2007 aroused significant voice from the mass
market and also the incumbent. Customer confidence has been built moderately which has formed the foundation in expanding our customer base, while much of the benefit from this investment will come in future years when the revenue realise over the
subscription period.
With the vision to build a future-proof network today, we always take the lead in future technological development.
According to a research results published by Fiber-To-The-Home Council in February 2008, Hong Kong, was ranked the world’s second highest penetration of Fiber-To-The-Home/Building as at year end of 2007, behind South Korea. Our 3-year network
expansion plan to 2.0 million homes pass by 2010 will further enhance Hong Kong’s position being a global showcase for mass market optical fiber connection in a metropolitan city.
With the achievement we made in Hong Kong over the past years, we aim to scale our success in similar market overseas. We are dedicated to participate
into the Singapore Next Generation National Broadband Network project. We formed a strong consortium with two major local operators and submitted a bid proposal to the government to design, build and operate the ultra high speed broadband network in
Singapore. Our joint expertise and determination to build this infocomm infrastructure will enhance the telecommunications development across the region. The winning bid is expected to be announced in the third quarter of 2008.
With our investment in brand enhancement and network expansion locally, and to leverage on our experience and know-how to replicate our successful story
in Singapore, we are confident to deliver higher level of shareholder value and provide favorable cash return to our shareholders in near future.
DIVIDEND
For cash management, we consider adjusted free cash flow, defined as EBITDA less capital expenditure and net
finance costs, is a better indicator of cash generation rather than net profit. As such, after reviewing the favorable operating results for the first six months of FY08 and considering our long-term development plans, the Board has resolved to pay
an interim dividend of HK 4 cents per ordinary share for 1H FY08 based on the percentage of adjusted free cash flow rather than on the percentage of net profits.
City Telecom (H.K.) Limited Interim Report 2008 07
Unaudited Consolidated Income Statement
For the six months ended 29 February 2008
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Note
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Six months ended
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29 February
2008
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28 February
2007
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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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623,792
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562,370
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Other revenues
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21,509
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10,133
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Network costs and cost of inventories
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4
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(89,469
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)
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(108,605
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)
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Other operating expenses
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(459,971
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)
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(400,798
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)
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Operating profit
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95,861
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63,100
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Finance costs
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(44,426
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)
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(43,721
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)
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Profit before taxation
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5
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51,435
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19,379
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Income tax expense
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7
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(3,672
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)
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(1,150
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)
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Profit attributable to shareholders
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47,763
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18,229
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Dividends
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8
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25,538
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24,567
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Basic earnings per share
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9
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HK7.6 cents
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HK3.0 cents
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Diluted earnings per share
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9
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HK7.3 cents
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HK2.9 cents
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The notes on pages 12 to 23 form part of this interim financial report.
08 City Telecom (H.K.) Limited Interim Report 2008
Unaudited Consolidated Balance Sheet
As at 29 February 2008
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Note
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29 February
2008
HK$’000
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31 August
2007
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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10
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1,198,353
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1,237,223
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Other financial assets
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11
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—
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39,213
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Derivative financial instrument
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12
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—
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1,039
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Long term receivable and prepayment
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6,053
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6,932
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Deferred expenditure
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17,868
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7,783
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1,223,340
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1,293,256
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Current assets
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Accounts receivable
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13
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186,821
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|
170,551
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Other receivables, deposits and prepayments
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87,299
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59,372
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Inventories
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|
460
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|
477
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Deferred expenditure
|
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33,283
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|
13,584
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Other financial assets
|
|
11
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|
31,100
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|
3,779
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Pledged bank deposits
|
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|
87,220
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|
87,220
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Cash at bank and in hand
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304,611
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|
532,894
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|
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730,794
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|
867,877
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Current liabilities
|
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Accounts payable
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|
14
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|
64,073
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|
76,019
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Other payables and accrued charges
|
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|
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153,254
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|
145,267
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Deposits received
|
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|
16,420
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|
16,188
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|
Deferred service income
|
|
|
|
77,530
|
|
64,202
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|
Tax payable
|
|
|
|
2,119
|
|
1,481
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|
Current portion – obligations under finance leases
|
|
15
|
|
220
|
|
835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
313,616
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|
303,992
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|
|
|
|
|
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|
|
|
Net current assets
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|
|
|
417,178
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|
563,885
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|
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Total assets less current liabilities
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1,640,518
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|
1,857,141
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|
|
|
|
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Non-current liabilities
|
|
|
|
|
|
|
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Deferred tax liabilities
|
|
16
|
|
—
|
|
291
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Long-term debt and other liabilities
|
|
15
|
|
680,469
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|
952,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
680,469
|
|
953,259
|
|
|
|
|
|
|
|
|
|
NET ASSETS
|
|
|
|
960,049
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|
903,882
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|
|
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|
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Capital and reserves
|
|
|
|
|
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|
|
Share capital
|
|
17
|
|
63,845
|
|
61,650
|
|
Reserves
|
|
|
|
896,204
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|
842,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
960,049
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|
903,882
|
|
|
|
|
|
|
|
|
The notes on pages 12 to 23 form part of this interim financial report.
City Telecom (H.K.) Limited Interim Report 2008 09
Unaudited Consolidated Statement of Changes in Equity
For the six months ended 29 February 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
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|
|
Share
capital
HK$’000
|
|
Share
premium
HK$’000
|
|
Capital
reserve
HK$’000
|
|
|
Retained
profits
HK$’000
|
|
|
Exchange
reserve
HK$’000
|
|
Total
HK$’000
|
|
|
At 1 September 2007
|
|
17
|
|
|
61,650
|
|
622,433
|
|
18,109
|
|
|
200,519
|
|
|
1,171
|
|
903,882
|
|
|
Profit attributable to shareholders
|
|
|
|
|
—
|
|
—
|
|
—
|
|
|
47,763
|
|
|
—
|
|
47,763
|
|
|
Shares issued in respect of scrip dividend of the previous year
|
|
8
|
(b)
|
|
1,123
|
|
18,044
|
|
—
|
|
|
(19,167
|
)
|
|
—
|
|
—
|
|
|
Dividend paid in respect of the previous year
|
|
8
|
(b)
|
|
—
|
|
—
|
|
—
|
|
|
(5,915
|
)
|
|
—
|
|
(5,915
|
)
|
|
Shares issued upon exercise of share options
|
|
|
|
|
1,072
|
|
13,558
|
|
(2,296
|
)
|
|
—
|
|
|
—
|
|
12,334
|
|
|
Equity settled share-based transactions
|
|
|
|
|
—
|
|
—
|
|
1,685
|
|
|
—
|
|
|
—
|
|
1,685
|
|
|
Exchange adjustments on translation of the financial statements of subsidiaries
|
|
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
300
|
|
300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 29 February 2008
|
|
17
|
|
|
63,845
|
|
654,035
|
|
17,498
|
|
|
223,200
|
|
|
1,471
|
|
960,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 September 2006
|
|
17
|
|
|
61,417
|
|
620,298
|
|
12,993
|
|
|
196,289
|
|
|
657
|
|
891,654
|
|
|
Profit attributable to shareholders
|
|
|
|
|
—
|
|
—
|
|
—
|
|
|
18,229
|
|
|
—
|
|
18,229
|
|
|
Shares issued upon exercise of share options
|
|
|
|
|
2
|
|
8
|
|
—
|
|
|
—
|
|
|
—
|
|
10
|
|
|
Equity settled share-based transactions
|
|
|
|
|
—
|
|
168
|
|
3,262
|
|
|
—
|
|
|
—
|
|
3,430
|
|
|
Exchange adjustments on translation of the financial statements of subsidiaries
|
|
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
811
|
|
811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 28 February 2007
|
|
|
|
|
61,419
|
|
620,474
|
|
16,255
|
|
|
214,518
|
|
|
1,468
|
|
914,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes on pages 12 to 23 form part of this interim financial report.
10 City Telecom (H.K.) Limited Interim Report 2008
Unaudited Condensed Consolidated Cash Flow Statement
For the six months ended 29 February 2008
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
|
29 February
2008
HK$’000
|
|
|
28 February
2007
HK$’000
|
|
|
Net cash inflow from operating activities
|
|
116,289
|
|
|
380,700
|
|
|
Net cash outflow from investing activities
|
|
(40,897
|
)
|
|
(61,501
|
)
|
|
Net cash outflow from financing activities
|
|
(303,182
|
)
|
|
(44,005
|
)
|
|
(Decrease) /increase in cash and cash equivalents
|
|
(227,790
|
)
|
|
275,194
|
|
|
|
|
|
|
Cash and cash equivalents at 1 September 2007/2006
|
|
532,894
|
|
|
144,917
|
|
|
|
|
|
|
Effect of foreign exchange rate changes
|
|
(493
|
)
|
|
608
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at 29 February 2008/28 February 2007
|
|
304,611
|
|
|
420,719
|
|
|
|
|
|
|
|
|
|
The notes on pages 12 to 23 form part of this interim financial report.
City Telecom (H.K.) Limited Interim Report 2008 11
Notes to Unaudited Interim Financial Report
|
1
|
Basis of preparation and accounting policies
|
This
unaudited interim financial report has been prepared in accordance with (a) the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited; and (b) the same accounting
policies as those adopted in the 2007 annual consolidated financial statements, and comply with 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 19 May 2008.
The preparation of an interim financial report in
conformity with 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 2007 annual financial statements. 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 Hong Kong Financial Reporting Standards (“HKFRSs”).
The financial information relating to the financial year ended 31 August 2007 that is included in the condensed consolidated interim financial
statements as being previously reported information does not constitute the Company’s statutory financial statements for that financial year but is derived from those financial statements. The statutory financial statements of the Company for
the year ended 31 August 2007 are available at the Company’s registered office. The independent auditors have expressed an unqualified opinion on those financial statements in their report dated 22 November 2007.
|
2
|
Changes in accounting policies
|
The HKICPA has
issued a number of new and revised Hong Kong Financial Reporting Standards (“HKFRSs”, which collective term includes HKASs and Interpretations), that are first effective or available for early adoption for current accounting periods of the
Group. The Group so far has concluded that the adoption of these new and revised HKFRSs, to the extent that they are relevant to the Group and which are expected to be reflected in the annual financial statements for the year ending 31 August
2008, would not have a significant impact on the Group’s results of operations and financial position, except for the adoption of the amendment to HKAS 1 “Presentation of financial statements: Capital disclosures” and HKFRS 7
“Financial instruments: Disclosures” which require additional disclosures to be made in the 2008 annual consolidated financial statements.
The new and revised HKFRSs that will be effective or are available for voluntary early adoption in the annual financial statements for the year ending 31 August 2008 may be affected by the issue of additional interpretation(s) or other
changes announced by the HKICPA subsequent to the date of issuance of these condensed consolidated interim financial statements. Therefore the policies that will be applied in the Group’s financial statements for that period cannot be
determined with certainty at the date of issuance of these condensed consolidated interim financial statements. The Group has not applied any new standards or interpretations that are not yet effective for this accounting period.
12 City Telecom (H.K.) Limited Interim Report 2008
Notes to Unaudited Interim Financial Report
|
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)
|
Primary reporting format – business segments
|
The Group is organised on a worldwide basis into two business 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 and IP-TV services
|
The Group’s 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 29 February 2008
|
|
|
|
|
International
telecommunications
services
HK$’000
|
|
Fixed
telecommunications
network services
HK$’000
|
|
Elimination
HK$’000
|
|
|
Group
HK$’000
|
|
|
Turnover
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External sales
|
|
148,866
|
|
474,926
|
|
—
|
|
|
623,792
|
|
|
Inter-segment sales
|
|
2,845
|
|
11,978
|
|
(14,823
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
151,711
|
|
486,904
|
|
(14,823
|
)
|
|
623,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment results
|
|
50,742
|
|
45,119
|
|
|
|
|
95,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs
|
|
|
|
|
|
|
|
|
(44,426
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before taxation
|
|
|
|
|
|
|
|
|
51,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended 28 February 2007
|
|
|
|
|
International
telecommunications
services
HK$’000
|
|
Fixed
telecommunications
network services
HK$’000
|
|
Elimination
HK$’000
|
|
|
Group
HK$’000
|
|
|
Turnover
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External sales
|
|
163,523
|
|
398,847
|
|
—
|
|
|
562,370
|
|
|
Inter-segment sales
|
|
2,844
|
|
14,167
|
|
(17,011
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
166,367
|
|
413,014
|
|
(17,011
|
)
|
|
562,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment results
|
|
23,505
|
|
39,595
|
|
|
|
|
63,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs
|
|
|
|
|
|
|
|
|
(43,721
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before taxation
|
|
|
|
|
|
|
|
|
19,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
City Telecom (H.K.) Limited Interim Report 2008 13
Notes to Unaudited Interim Financial Report
|
3
|
Turnover and segment information (Continued)
|
|
|
(b)
|
Secondary reporting format – geographical segments
|
Although the Group’s two business segments are managed on a worldwide basis, they operate mainly in two main geographical areas:
|
|
|
|
|
|
|
– Hong Kong
|
|
:
|
|
international telecommunications and fixed telecommunications network services
|
|
|
|
|
|
– Canada
|
|
:
|
|
international telecommunications and fixed telecommunications network services
|
In presenting information on the basis of geographical segments, turnover and segment results are
presented based on the geographical location of customers.
There were no sales between the geographical segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover
six months ended
|
|
Segment results
six months ended
|
|
|
|
29 February
2008
HK$’000
|
|
28 February
2007
HK$’000
|
|
29 February
2008
HK$’000
|
|
28 February
2007
HK$’000
|
|
Geographical segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hong Kong
|
|
612,553
|
|
552,384
|
|
95,021
|
|
63,089
|
|
Canada
|
|
11,239
|
|
9,986
|
|
840
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
623,792
|
|
562,370
|
|
95,861
|
|
63,100
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
Hong Kong Broadband Network Limited (“HKBN”), a wholly-owned subsidiary of the Group, as a Fixed Telecommunications Network Services (“FTNS”) licensee,
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 recognizing revenue (“mobile interconnection charges”) based on management’s best estimate of the amounts it expected to collect. A
majority of the mobile operators, however, rejected HKBN’s demand for payment. As a result of non-payment by certain mobile operators, in 2004, the Group asked the TA to make a determination (the “Determination”) on the level of
mobile interconnection charges payable by one of the mobile operators to HKBN; and the effective date of the determined mobile interconnection charges.
|
In March 2006, TA issued a preliminary analysis (the “2006 PA”) on the Determination with respect to the rates of mobile interconnection charges payable by the mobile operator under dispute and the timing of
the Determination. The final level of mobile interconnection charges was still subject to the Determination to be issued by TA as of 31 August 2006.
In March 2007, TA issued a revised preliminary analysis (the “2007 PA”) which superseded the 2006 PA. The 2007 PA set out the rates of mobile interconnection charge, which are different from those rates
stated in the 2006 PA. Based on the 2007 PA, management re- assessed its measurement basis of the mobile interconnection charges and the amount it expected to collect for billings outstanding through that date. As a result of the re- assessment, the
Group recorded mobile interconnection charges of HK$26,677,000 for the six months ended 28 February 2007 which comprises of additional charges for the years ended 31 August 2005 and 2006 of previously measured based on the 2006 PA.
14 City Telecom (H.K.) Limited Interim Report 2008
Notes to Unaudited Interim Financial Report
|
3
|
Turnover and segment information (Continued)
|
As at 28 February 2007, the Group also updated its assessment of the bad debt provision set up
for mobile interconnection charges receivable and reduced the provision from HK$20,809,000 at 31 August 2006 to HK$11,186,000 at 28 February 2007.
In June 2007, TA issued a final determination (the “Final Determination”) which set out the rates of mobile interconnection charge payable by the mobile operator under dispute, which approximate the rates
stated in the 2007 PA.
Based on the Final Determination, management estimated the amount of mobile interconnection charges it expected to
be collectible and recorded mobile interconnection charges of HK$14,339,000 for the six months ended 29 February 2008. As of the date of issuance of this interim financial report, HKBN is still in the process of reaching commercial agreements
with several mobile operators. Accordingly, the estimate made by the management is subject to change based on the development of the commercial negotiation with respective mobile operators.
|
4
|
Network costs and cost of inventories
|
Network
costs and cost of inventories mainly include interconnection charges paid to local and overseas carriers, leased line rentals, program fees, production costs for the IP-TV service and costs of inventories sold, and do not include depreciation charge
which is included in other operating expenses.
The Group estimates the Universal Services Contributions (“USC”) payable to
PCCW-HKT to fund the costs of network development in remote areas in Hong Kong and includes such estimated costs as part of the network costs. TA periodically reviews that actual costs of such developments and revises the amounts owed to PCCW-HKT or
to be refunded by PCCW-HKT to the USC contributing parties.
On 28 December 2007, TA issued a statement (“TA Statement”) on
the USC and confirmed the actual contribution level for the period from 1 January 2005 to 30 June 2007. Based on the TA Statement, an amount of HK$7,617,000 was recorded as a reduction against the network costs of the Group for the six
months ended 29 February 2008.
The actual contribution level since 30 June 2007 is not yet confirmed by TA.
Profit before taxation is
arrived at after (crediting) and charging the following:
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
|
29 February
2008
HK$’000
|
|
|
28 February
2007
HK$’000
|
|
|
Interest income
|
|
(14,128
|
)
|
|
(10,249
|
)
|
|
Interest element of finance leases
|
|
20
|
|
|
34
|
|
|
Interest on 10-year senior notes
|
|
40,774
|
|
|
43,687
|
|
|
Net exchange (gain)/loss
|
|
(1,526
|
)
|
|
1,874
|
|
|
Unrealised gains on other financial assets
|
|
(2,585
|
)
|
|
(1,739
|
)
|
|
Realised and unrealised loss on derivative financial instruments
|
|
1,039
|
|
|
546
|
|
|
Gain on extinguishment of senior notes (note 15(a))
|
|
(2,582
|
)
|
|
—
|
|
|
Advertising and marketing expenses
|
|
141,303
|
|
|
94,942
|
|
|
Amortisation of deferred expenditure
|
|
14,228
|
|
|
7,165
|
|
|
Depreciation of owned fixed assets (note 10)
|
|
105,106
|
|
|
134,872
|
|
|
Depreciation of fixed assets held under finance lease (note 10)
|
|
292
|
|
|
517
|
|
|
Provision/(write-back) for doubtful debts (note)
|
|
8,264
|
|
|
(1,368
|
)
|
|
Staff costs (note 6)
|
|
122,573
|
|
|
108,365
|
|
|
(Gain)/loss on disposal of fixed assets
|
|
(275
|
)
|
|
105
|
|
|
|
|
|
|
Note:
|
|
The amount for the six months ended 28 February 2007 included write-back of provision for mobile interconnection charges receivables of HK$9,623,000(note 3(c)).
|
City Telecom (H.K.) Limited Interim Report 2008 15
Notes to Unaudited Interim Financial Report
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
|
29 February
2008
HK$’000
|
|
|
28 February
2007
HK$’000
|
|
|
Wages and salaries
|
|
111,683
|
|
|
98,171
|
|
|
Charge/(write back) of unutilised annual leave
|
|
1,970
|
|
|
(72
|
)
|
|
Equity settled share-based transactions
|
|
1,584
|
|
|
3,238
|
|
|
Retirement benefit costs – defined contribution plans
|
|
13,387
|
|
|
11,809
|
|
|
Less: Staff costs capitalised as fixed assets
|
|
(6,051
|
)
|
|
(4,781
|
)
|
|
|
|
|
|
|
|
|
|
|
|
122,573
|
|
|
108,365
|
|
|
|
|
|
|
|
|
|
Staff costs include directors’ emoluments but exclude staff costs of HK$7,439,000 (for the
six months ended 28 February 2007: HK$7,045,000) recorded in network costs and HK$81,750,000 (for the six months ended 28 February 2007: HK$63,288,000) recorded in advertising and marketing expenses.
Hong Kong profits tax has been provided
at the rate of 16.5% (for the six months ended 28 February 2007: 17.5%) on the estimated assessable profit for the period. Taxation on overseas profits has been calculated on the estimated assessable profit for the period at the rates of
taxation prevailing in the overseas locations (Canada and the People’s Republic of China) in which the Group operates.
The amount of
tax expense recorded in the condensed consolidated income statement represents:
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
29 February
2008
HK$’000
|
|
|
28 February
2007
HK$’000
|
|
Current tax – Hong Kong profits tax
|
|
|
|
|
|
|
– provision for the interim period
|
|
643
|
|
|
33
|
|
Current tax – Overseas
|
|
|
|
|
|
|
– provision for the interim period
|
|
1,135
|
|
|
1,040
|
|
– under-provision in respect of prior years
|
|
2,185
|
|
|
—
|
|
Deferred taxation relating to the origination and reversal of temporary differences (note 16)
|
|
(291
|
)
|
|
77
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
3,672
|
|
|
1,150
|
|
|
|
|
|
|
|
|
|
(a)
|
Dividends attributable to the interim period:
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
29 February
2008
HK$’000
|
|
28 February
2007
HK$’000
|
|
Interim dividend declared and paid after the interim period end of HK 4 cents per ordinary share (2007: HK 4 cents per ordinary
share)
|
|
25,538
|
|
24,567
|
At a board meeting held on 19 May 2008, the directors has recommended to pay an interim
dividend of HK 4 cents per ordinary share for the six months ended 29 February 2008 (for the six months ended 28 February 2007: HK 4 cents) with a scrip dividend option offered to all shareholders excluding shareholders with registered
address outside Hong Kong. The interim dividend will be distributed on or about 23 July 2008 to shareholders whose names appear on the register of members of the Company as at the close of business on 6 June 2008.
The interim dividend has not been recognised as a liability at the balance sheet date.
16 City Telecom (H.K.) Limited Interim Report 2008
Notes to Unaudited Interim Financial Report
|
|
(b)
|
Dividends attributable to the previous financial year, approved and paid during the interim period:
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
29 February
2008
HK$’000
|
|
28 February
2007
HK$’000
|
|
Final dividend in respect of the financial year ended 31 August 2007, approved and paid during the interim period, of HK 4 cents per
ordinary share (2007: Nil)
|
|
25,082
|
|
—
|
During the interim period, a scrip dividend option was offered to all shareholders excluding
shareholders with registered addresses outside Hong Kong who were entitled to the final dividend in respect of the financial year ended 31 August 2007. 11,227,213 shares were issued during the interim period to the shareholders who had elected
to receive all or part of their entitlement to dividends in the form of scrip.
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
29 February
2008
HK$’000
|
|
28 February
2007
HK$’000
|
|
Profit attributable to shareholders
|
|
47,763
|
|
18,229
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares
|
|
Number of
shares
‘000
|
|
Number of
shares
‘000
|
|
|
|
|
|
|
|
Issued ordinary shares at 1 September 2007/2006
|
|
616,503
|
|
614,175
|
|
Effect of scrip dividend issued
|
|
1,871
|
|
—
|
|
Effect of share options exercised
|
|
7,781
|
|
1
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares at the end of the period
|
|
626,155
|
|
614,176
|
|
Incremental shares from assumed exercise of share options
|
|
27,721
|
|
8,574
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares (diluted)
|
|
653,876
|
|
622,750
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
HK7.6 cents
|
|
HK3.0 cents
|
|
Diluted earnings per share
|
|
HK7.3 cents
|
|
HK2.9 cents
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
|
29 February
2008
HK$’000
|
|
|
28 February
2007
HK$’000
|
|
|
At 1 September 2007/2006
|
|
1,237,223
|
|
|
1,367,234
|
|
|
Additions
|
|
68,446
|
|
|
69,521
|
|
|
Disposal
|
|
(2,770
|
)
|
|
(1,475
|
)
|
|
Depreciation charge (note 5)
|
|
(105,398
|
)
|
|
(135,389
|
)
|
|
Exchange adjustments
|
|
852
|
|
|
235
|
|
|
|
|
|
|
|
|
|
|
At 29 February 2008/28 February 2007
|
|
1,198,353
|
|
|
1,300,126
|
|
|
|
|
|
|
|
|
|
City Telecom (H.K.) Limited Interim Report 2008 17
Notes to Unaudited Interim Financial Report
|
11
|
Other financial assets
|
|
|
|
|
|
|
|
|
|
|
|
29 February
2008
HK$’000
|
|
|
31 August
2007
HK$’000
|
|
|
Debt securities, at fair value and unlisted outside Hong Kong
|
|
31,100
|
|
|
28,577
|
|
|
Long term bank deposit, at amortised cost (note)
|
|
—
|
|
|
14,415
|
|
|
|
|
|
|
|
|
|
|
|
|
31,100
|
|
|
42,992
|
|
|
Current portion
|
|
(31,000
|
)
|
|
(3,779
|
)
|
|
|
|
|
|
|
|
|
|
Balance as at 29 February 2008/31 August 2007
|
|
—
|
|
|
39,213
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
The balance as at 31 August 2007 was a ten-year US$2 million (equivalent to HK$15,600,000) deposit placed with a bank in which the Group received a floating rate deposit
interest. During the six months period ended 29 February 2008, the Group early redeemed the deposit and recognized a gain of HK$1,185,000 in the consolidated income statement.
|
|
12
|
Derivative financial instrument
|
|
|
|
|
|
|
|
|
|
29 February
2008
HK$’000
|
|
31 August
2007
HK$’000
|
|
Interest rate swap, at fair value through profit or loss
|
|
—
|
|
1,039
|
|
|
|
|
|
|
|
|
Note:
|
The balance as at 31 August 2007 was an interest rate swap contract with notional principal amount of HK$46,666,667. During the six months period ended 29 February 2008,
the Group early terminated the interest rate swap contract and recognized a loss of HK$1,219,000 in the consolidated income statement.
|
The aging analysis of the
accounts receivable is as follows:
|
|
|
|
|
|
|
|
|
|
|
29 February
2008
HK$’000
|
|
|
31 August
2007
HK$’000
|
|
|
Current – 30 days
|
|
55,614
|
|
|
50,282
|
|
|
31 – 60 days
|
|
13,594
|
|
|
15,619
|
|
|
61 – 90 days
|
|
5,042
|
|
|
8,876
|
|
|
Over 90 days (note)
|
|
133,170
|
|
|
118,166
|
|
|
|
|
|
|
|
|
|
|
|
|
207,420
|
|
|
192,943
|
|
|
Less: Provision for doubtful debts
|
|
(20,599
|
)
|
|
(22,392
|
)
|
|
|
|
|
|
|
|
|
|
|
|
186,821
|
|
|
170,551
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
The amounts over 90 days for the Group included receivables relating to mobile interconnection charges of HK$118,141,000 as at 29 February 2008 (31 August 2007:
HK$103,847,000).
|
The aging analysis of the
accounts payable is as follows:
|
|
|
|
|
|
|
|
|
29 February
2008
HK$’000
|
|
31 August
2007
HK$’000
|
|
Current – 30 days
|
|
24,956
|
|
18,025
|
|
31 – 60 days
|
|
2,594
|
|
11,097
|
|
61 – 90 days
|
|
1,094
|
|
3,655
|
|
Over 90 days
|
|
35,429
|
|
43,242
|
|
|
|
|
|
|
|
|
|
64,073
|
|
76,019
|
|
|
|
|
|
|
18 City Telecom (H.K.) Limited Interim Report 2008
Notes to Unaudited Interim Financial Report
|
15
|
Long-term debt and other liabilities
|
|
|
|
|
|
|
|
|
|
|
|
29 February
2008
HK$’000
|
|
|
31 August
2007
HK$’000
|
|
|
8.75% senior notes due 2015 (note (a))
|
|
680,153
|
|
|
952,593
|
|
|
Obligations under finance lease (note (b))
|
|
536
|
|
|
1,210
|
|
|
|
|
|
|
|
|
|
|
|
|
680,689
|
|
|
953,803
|
|
|
Current portion of obligations under finance lease
|
|
(220
|
)
|
|
(835
|
)
|
|
|
|
|
|
|
|
|
|
|
|
680,469
|
|
|
952,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29 February
2008
HK$’000
|
|
|
31 August
2007
HK$’000
|
|
|
Long-term debt and other liabilities, repayable:
|
|
|
|
|
|
|
|
8.75% senior notes due 2015
|
|
|
|
|
|
|
|
– after the fifth year
|
|
680,153
|
|
|
952,593
|
|
|
Obligations under finance lease
|
|
|
|
|
|
|
|
– within one year
|
|
220
|
|
|
835
|
|
|
– after 1 year but within 2 years
|
|
125
|
|
|
121
|
|
|
– after 2 years but within 5 years
|
|
191
|
|
|
254
|
|
|
|
|
|
|
|
|
|
|
|
|
536
|
|
|
1,210
|
|
|
Less: Current portion of obligations under finance lease
|
|
(220
|
)
|
|
(835
|
)
|
|
|
|
|
|
|
|
|
|
|
|
316
|
|
|
375
|
|
|
|
|
|
|
|
|
|
|
|
|
680,469
|
|
|
952,968
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
On 20 January 2005, the Company issued unsecured 10-year senior fixed rates notes (the “10-year senior notes”) with a principal amount of US$125 million at an issue
price equal to 100 per cent of the principal amount. The 10-year senior notes mature on 1 February 2015 and bear interest at the fixed rate of 8.75% per annum payable semi-annually on 1 February and 1 August of each year,
commencing 1 August 2005.
|
The 10-year senior notes are unconditionally and irrevocably guaranteed on a joint and several
basis by the Company’s subsidiaries (other than CTI Guangzhou Customer Services Co. Limited) as subsidiary guarantors.
During the six
months ended 29 February 2008, the Group repurchased the 8.75% senior notes with a cumulative principal value of US$35,647,000 (equivalent to HK$277,334,000) in the open market. The total consideration paid was approximately US$35,352,000
(equivalent to HK$275,039,000). The gain on extinguishment of the senior notes was US$332,000 (equivalent to HK$2,582,000) which has been recorded as other revenues of the consolidated income statement.
As at 29 February 2008, the principal amount of the 8.75% notes remaining in issue after the repurchase was US$89,353,000 (equivalent to
HK$695,166,000) and were stated in the balance sheet at amortised cost of US$87,423,000 (equivalent to HK$680,153,000).
The effective
interest rate of the 10-year senior notes for the six months end 29 February 2008 is 9.2% (2007: 9.2%) per annum.
|
|
(b)
|
The Group’s finance lease liabilities are repayable as follows:
|
|
|
|
|
|
|
|
|
|
|
|
29 February
2008
HK$’000
|
|
|
31 August
2007
HK$’000
|
|
|
Within 1 year
|
|
246
|
|
|
869
|
|
|
After 1 year but within 2 years
|
|
142
|
|
|
142
|
|
|
After 2 years but within 5 years
|
|
200
|
|
|
272
|
|
|
|
|
|
|
|
|
|
|
|
|
588
|
|
|
1,283
|
|
|
Future finance charges on finance lease
|
|
(52
|
)
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
|
Present value of finance lease liabilities
|
|
536
|
|
|
1,210
|
|
|
|
|
|
|
|
|
|
City Telecom (H.K.) Limited Interim Report 2008 19
Notes to Unaudited Interim Financial Report
Deferred taxation is calculated
in full on temporary differences under the liability method using the taxation rates prevailing in respective countries in which the Group operates.
The movement of the deferred tax liabilities balance is as follows:
|
|
|
|
|
|
|
|
|
|
|
Six months ended
29 February
2008
HK$’000
|
|
|
Year ended
31 August
2007
HK$’000
|
|
|
At the beginning of the period/year
|
|
291
|
|
|
353
|
|
|
Exchange differences
|
|
—
|
|
|
(3
|
)
|
|
Deferred taxation credited to income statement account
|
|
|
|
|
|
|
|
– relating to the origination and reversal of temporary differences (note 7)
|
|
(291
|
)
|
|
(59
|
)
|
|
|
|
|
|
|
|
|
|
At the end of the period/year
|
|
—
|
|
|
291
|
|
|
|
|
|
|
|
|
|
Deferred tax assets are recognised to the extent that realisation of the related tax benefit
through the utilisation of tax losses against the future taxable profits is probable. As at 29 February 2008, the Group has not recognised deferred tax assets in respect of unused tax losses of HK$239,060,000 (31 August 2007: HK$268,004,000)
because realisation of related tax benefit is not probable in foreseeable future. All tax losses are subject to agreement with local tax authorities.
The unrecognised tax losses carried forward from prior years will expire in the following periods.
|
|
|
|
|
|
|
|
|
29 February
2008
HK$’000
|
|
31 August
2007
HK$’000
|
|
After 5 years
|
|
4,313
|
|
4,313
|
|
From 2 to 5 years
|
|
726
|
|
1,132
|
|
No expiry date
|
|
234,021
|
|
262,559
|
|
|
|
|
|
|
|
|
|
239,060
|
|
268,004
|
|
|
|
|
|
|
The movement in deferred tax assets and liabilities (prior to offsetting of balances within the
same taxation jurisdiction) during the period is as follows:
|
|
|
|
|
|
|
|
|
|
|
Accelerated depreciation
allowances
|
|
|
|
|
29 February
2008
HK$’000
|
|
|
31 August
2007
HK$’000
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
At the beginning of the period/year
|
|
134,910
|
|
|
154,678
|
|
|
Credited to income statement
|
|
(8,677
|
)
|
|
(19,772
|
)
|
|
Exchange differences
|
|
—
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
At the end of the period/year
|
|
126,233
|
|
|
134,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share based payment
|
|
|
Tax losses
|
|
|
Total
|
|
|
|
|
29 February
2008
HK$’000
|
|
31 August
2007
HK$’000
|
|
|
29 February
2008
HK$’000
|
|
|
31 August
2007
HK$’000
|
|
|
29 February
2008
HK$’000
|
|
|
31 August
2007
HK$’000
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At the beginning of the period/year
|
|
—
|
|
(123
|
)
|
|
(134,619
|
)
|
|
(154,202
|
)
|
|
(134,619
|
)
|
|
(154,325
|
)
|
|
Charged to income statement
|
|
—
|
|
123
|
|
|
8,386
|
|
|
19,590
|
|
|
8,386
|
|
|
19,713
|
|
|
Exchange differences
|
|
—
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At the end of the period/year
|
|
—
|
|
—
|
|
|
(126,233
|
)
|
|
(134,619
|
)
|
|
(126,233
|
)
|
|
(134,619
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20 City Telecom (H.K.) Limited Interim Report 2008
Notes to Unaudited Interim Financial Report
|
16
|
Deferred taxation (Continued)
|
Deferred income tax
assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred income taxes relate to the same legal entity and same fiscal authority. The following
amounts, determined after appropriate offsetting, are shown in the condensed consolidated balance sheet.
|
|
|
|
|
|
|
|
|
29 February
2008
HK$’000
|
|
31 August
2007
HK$’000
|
|
Deferred tax assets
|
|
—
|
|
—
|
|
Deferred tax liabilities
|
|
—
|
|
291
|
|
|
|
|
|
|
|
|
|
—
|
|
291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares
|
|
Amount (HK$’000)
|
|
|
|
29 February
2008
|
|
31 August
2007
|
|
29 February
2008
|
|
31 August
2007
|
|
Authorised:
|
|
|
|
|
|
|
|
|
|
Ordinary shares of HK$0.10 each
|
|
2,000,000,000
|
|
2,000,000,000
|
|
200,000
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
Issued and fully paid:
|
|
|
|
|
|
|
|
|
|
Ordinary shares of HK$0.10 each
|
|
|
|
|
|
|
|
|
|
At the beginning of the period/year
|
|
616,503,404
|
|
614,175,404
|
|
61,650
|
|
61,417
|
|
Shares issued in respect of scrip dividend of the previous year
|
|
11,227,213
|
|
—
|
|
1,123
|
|
—
|
|
Shares issued upon exercise of share options
|
|
10,715,000
|
|
2,328,000
|
|
1,072
|
|
233
|
|
|
|
|
|
|
|
|
|
|
|
At the end of the period/year
|
|
638,445,617
|
|
616,503,404
|
|
63,845
|
|
61,650
|
|
|
|
|
|
|
|
|
|
|
The movement of outstanding share options during the period was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date of grant
|
|
Exercise prices of share options
|
|
Number of
share options
outstanding
at 1 September
2007
|
|
Adjustment
(note)
|
|
Granted
|
|
Exercised
|
|
|
Lapsed
|
|
Number of
share options
outstanding
at 29 February
2008
|
|
|
before
adjustment
|
|
after
adjustment
(note)
|
|
|
|
|
|
|
|
2002 Share Option Scheme
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 June 2004
|
|
HK$1.4700
|
|
HK$1.4700
|
|
6,000,000
|
|
—
|
|
—
|
|
(6,000,000
|
)
|
|
—
|
|
—
|
|
21 October 2004
|
|
HK$1.5400
|
|
HK$1.5339
|
|
8,340,000
|
|
32,397
|
|
—
|
|
(280,000
|
)
|
|
—
|
|
8,092,397
|
|
5 January 2005
|
|
HK$1.5400
|
|
HK$1.5339
|
|
16,000,000
|
|
63,292
|
|
—
|
|
—
|
|
|
—
|
|
16,063,292
|
|
3 October 2005
|
|
HK$0.8100
|
|
HK$0.8100
|
|
1,000,000
|
|
—
|
|
—
|
|
(1,000,000
|
)
|
|
—
|
|
—
|
|
22 May 2006
|
|
HK$0.6600
|
|
HK$0.6573
|
|
28,940,000
|
|
101,301
|
|
—
|
|
(3,370,000
|
)
|
|
—
|
|
25,671,301
|
|
3 July 2006
|
|
HK$0.6800
|
|
HK$0.6773
|
|
700,000
|
|
2,769
|
|
—
|
|
—
|
|
|
—
|
|
702,769
|
|
3 August 2006
|
|
HK$0.7100
|
|
HK$0.7072
|
|
70,000
|
|
277
|
|
—
|
|
—
|
|
|
—
|
|
70,277
|
|
22 November 2006
|
|
HK$0.7300
|
|
HK$0.7271
|
|
200,000
|
|
534
|
|
—
|
|
(65,000
|
)
|
|
—
|
|
135,534
|
|
23 May 2007
|
|
HK$2.0300
|
|
HK$2.0219
|
|
100,000
|
|
396
|
|
—
|
|
—
|
|
|
—
|
|
100,396
|
|
12 December 2007
|
|
HK$2.4500
|
|
HK$2.4403
|
|
—
|
|
3,956
|
|
1,000,000
|
|
—
|
|
|
—
|
|
1,003,956
|
|
6 February 2008
|
|
HK$1.7700
|
|
Not applicable
|
|
—
|
|
—
|
|
6,000,000
|
|
—
|
|
|
—
|
|
6,000,000
|
|
11 February 2008
|
|
HK$1.8800
|
|
Not applicable
|
|
—
|
|
—
|
|
6,000,000
|
|
—
|
|
|
—
|
|
6,000,000
|
|
15 February 2008
|
|
HK$1.7700
|
|
Not applicable
|
|
—
|
|
—
|
|
4,000,000
|
|
—
|
|
|
—
|
|
4,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,350,000
|
|
204,922
|
|
17,000,000
|
|
(10,715,000
|
)
|
|
—
|
|
67,839,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
As a result of allotment of 11,227,213 new shares to shareholders who elected to receive the 2007 Final Dividend in shares on 4 February 2008, the exercise price of and the
number of share subject to the 51,805,000 share options outstanding on 21 December 2007 (being the Record Date for determining the entitlement of 2007 Final Dividend) were adjusted pursuant to the 2002 Share Option Scheme with effect from
4 February 2008. The adjustments to the exercise price and the additional options granted have no material financial or accounting impact to the Group’s result of operations for the six months ended 29 February 2008.
|
City Telecom (H.K.) Limited Interim Report 2008 21
Notes to Unaudited Interim Financial Report
|
17
|
Share capital (Continued)
|
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.
Each option entitles the holder to subscribe for one ordinary share of
HK$0.10 each in the Company at a predetermined exercise price.
|
18
|
Contingent liabilities
|
|
|
|
|
|
|
|
|
|
29 February
2008
HK$’000
|
|
31 August
2007
HK$’000
|
|
Bank guarantees provided to suppliers (note 20(i) and (ii))
|
|
5,903
|
|
5,903
|
|
Bank guarantee in lieu of payment of utility deposits (note 20(iii))
|
|
5,272
|
|
5,272
|
|
|
|
|
|
|
|
|
|
11,175
|
|
11,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29 February
2008
HK$’000
|
|
31 August
2007
HK$’000
|
|
Purchase of telecommunications, computer and office equipment – contracted but not provided for
|
|
130,527
|
|
54,165
|
|
|
|
|
|
|
|
|
(b)
|
Commitments under operating leases
|
|
|
(i)
|
The Group has future aggregate lease income receivable under non-cancellable operating leases as follows:
|
|
|
|
|
|
|
|
|
|
29 February
2008
HK$’000
|
|
31 August
2007
HK$’000
|
|
Leases in respect of telecommunications facilities and computer equipment which are receivable:
|
|
|
|
|
|
Within 1 year
|
|
1,188
|
|
1,065
|
|
After 1 year but within 5 years
|
|
375
|
|
214
|
|
|
|
|
|
|
|
|
|
1,563
|
|
1,279
|
|
|
|
|
|
|
|
|
(ii)
|
The Group has future aggregate minimum lease payments under non-cancellable operating leases as follows:
|
|
|
|
|
|
|
|
|
|
29 February
2008
HK$’000
|
|
31 August
2007
HK$’000
|
|
Leases in respect of land and buildings which are payable:
|
|
|
|
|
|
Within 1 year
|
|
7,889
|
|
12,562
|
|
After 1 year but within 5 years
|
|
2,222
|
|
2,484
|
|
|
|
|
|
|
|
|
|
10,111
|
|
15,046
|
|
Leases in respect of telecommunications facilities and computer equipment which are payable:
|
|
|
|
|
|
Within 1 year
|
|
31,384
|
|
31,004
|
|
After 1 year but within 5 years
|
|
8,041
|
|
21,166
|
|
After 5 years
|
|
8,021
|
|
16,384
|
|
|
|
|
|
|
|
|
|
47,446
|
|
68,554
|
|
|
|
|
|
|
|
|
|
57,557
|
|
83,600
|
|
|
|
|
|
|
22 City Telecom (H.K.) Limited Interim Report 2008
Notes to Unaudited Interim Financial Report
|
19
|
Commitments (Continued)
|
|
|
(c)
|
Program fee commitments
|
The Group entered into
several long-term agreements with program content providers with respect to the licensing of program rights and the use of certain program contents. Minimum amounts of licensing fees to be paid by the Group are analysed as follows:
|
|
|
|
|
|
|
|
|
29 February
2008
HK$’000
|
|
31 August
2007
HK$’000
|
|
Program fee in respect of program rights which are payable:
|
|
|
|
|
|
Within 1 year
|
|
11,005
|
|
10,345
|
|
After than 1 year but within 5 years
|
|
695
|
|
3,636
|
|
|
|
|
|
|
|
|
|
11,700
|
|
13,981
|
|
|
|
|
|
|
As at 29 February 2008, the
Group had pledged bank deposits of US$9,900,000 (equivalent to HK$77,220,000) and HK$10,000,000 as security for the following significant banking facilities:
|
|
(i)
|
bank facility of US$9,000,000 (equivalent to HK$70,020,000) granted by a bank for issuance of bank guarantees to third party suppliers, letters of credit, short-term loan,
overdraft, foreign exchange and interest rate hedging arrangements. As of 29 February 2008, bank guarantees of HK$1,603,000 were issued against this bank facility (31 August 2007: HK$1,603,000);
|
|
|
(ii)
|
bank guarantees of HK$4,300,000 (31 August 2007: HK$4,300,000) issued by a bank to third party suppliers of the Company and one of its subsidiaries for payment of certain products
and services procured by the Group from these third party suppliers; and
|
|
|
(iii)
|
bank guarantees of HK$5,272,000 (31 August 2007: HK$5,272,000) issued by a bank to certain utility vendors of the Group in lieu of payment of utility deposits.
|
As at 31 August 2007, the Group had pledged bank deposits of US$9,900,000 (equivalent to HK$77,220,000) and
HK$10,000,000 for the above significant banking facilities.
|
21
|
Possible impact of amendments, new standards and interpretations issued but not yet effective for the period ended 29 February 2008
|
Up to the date of issue of these financial statements, the HKICPA has issued a number of amendments, new standards and interpretations which are not yet
effective for the six months period ended 29 February 2008:
|
|
|
|
|
|
|
|
|
|
|
Effective for
accounting period
beginning on or after
|
|
HKFRS 8
|
|
Operating segments
|
|
1 January 2009
|
|
HKAS 23
|
|
Borrowing costs
|
|
1 January 2009
|
The above amendments, new standard and interpretation were not applied in this interim financial report because
the directors expect that the group will not early apply them when preparing the group annual financial statements for the year ended 31 August 2008.
The group is in process of making an assessment of the impact of these amendments, new standards and new interpretation in the period of initial application and has so far concluded that the adoption of them is unlikely to have a
significant impact on the group’s results of operations and financial position.
City Telecom (H.K.) Limited Interim Report 2008 23
Other Information
Employee Remuneration
Including the directors of the Group, as at 29 February 2008, the Group employed a total of 2,626 full-time employees. The Group provides remuneration package consisting of basic salary, bonus and other benefits.
Bonus payments are discretionary and dependent on both the Group’s and individual performances. The Group also provides comprehensive medical coverage, competitive retirement benefits schemes, staff training programs and operates share option
schemes.
Purchase, Sale or Redemption of Listed Securities
During the six months ended 29 February 2008, the Company has bought back a total principal value of US$35,647,000 of the Company’s 8.75% 10-year Senior Notes due 2015 which are listed on Singapore Exchange Securities Trading
Limited. Details of the buybacks are as follows:
|
|
|
|
|
|
|
|
|
Month
|
|
Principal
Value
US$
|
|
Total
Consideration
Paid
US$
|
|
|
|
December 2007
|
|
16,850,000
|
|
17,062,269.10
|
|
(Note 1)
|
|
January 2008
|
|
5,000,000
|
|
4,995,312.50
|
|
(Note 2)
|
|
February 2008
|
|
13,797,000
|
|
13,295,126.98
|
|
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
35,647,000
|
|
35,352,708.58
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
1
|
including accrued interest
|
|
2
|
including accrued interest and broker’s commission
|
Save as
disclosed above, during the six months ended 29 February 2008, the Company has not redeemed any of its listed securities. In addition, neither the Company nor any of its subsidiaries has purchased or sold any of the Company’s listed
securities.
24 City Telecom (H.K.) Limited Interim Report 2008
Other Information
Directors’ Interests in Shares and Underlying Shares
As at 29 February 2008, the interests of the directors and the chief executives of the Company 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interests in shares
|
|
Total
|
|
Interests in
underlying
shares
|
|
|
|
Approximate
percentage
interests
in the
Company’s
issued
|
|
|
Name of Director
|
|
Personal
interests
|
|
Corporate
interests
|
|
Family
interests
|
|
interests
in shares
|
|
pursuant to
share options
|
|
Aggregate
interests
|
|
share capital
(Note 1)
|
|
|
Mr. Wong Wai Kay, Ricky
|
|
260,219
|
|
325,979,908
|
|
—
|
|
326,240,127
|
|
14,055,380
|
|
340,295,507
|
|
53.30
|
%
|
|
|
|
|
|
(Note 2 (i))
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Cheung Chi Kin, Paul
|
|
10,754,204
|
|
24,324,620
|
|
—
|
|
35,078,824
|
|
14,055,380
|
|
49,134,204
|
|
7.70
|
%
|
|
|
|
|
|
(Note 2 (ii))
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Lai Ni Quiaque
|
|
—
|
|
—
|
|
9,896,569
|
|
9,896,569
|
|
8,007,911
|
|
17,904,480
|
|
2.80
|
%
|
|
|
|
|
|
|
|
(Note 3)
|
|
|
|
|
|
|
|
|
|
Notes:
|
1.
|
This percentage is based on 638,445,617 ordinary shares of the Company issued as at 29 February 2008.
|
|
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)
|
325,979,908 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 headed “Substantial Shareholders” in this report.
|
|
|
(ii)
|
24,324,620 shares are held by Worship Limited which is 50% owned by Mr. Cheung Chi Kin, Paul.
|
|
3.
|
9,896,569 shares are jointly owned by Mr. Lai Ni Quiaque and his spouse.
|
Save as disclosed above, as at 29 February 2008, none of the directors nor the chief executives of the Company (including their spouse and children under 18 years of age) had any interest or short position 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.
City Telecom (H.K.) Limited Interim Report 2008 25
Other Information
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.
Details of the share options granted under the 2002 Share
Option Scheme during the period for the six months ended 29 February 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
price
per
share
|
|
|
Weighted
average
closing
price of
shares
immediately
before the
date(s) on
which
Options
were
exercised
|
|
Closing
price of the
shares
immediately
before the
date(s) on
which the
Options
were
granted
|
|
Vesting
|
|
Exercise
|
|
Balance as
at
1 September
|
|
Options
granted
during
the
|
|
Adjusted
number
of
Options
during
the
period
|
|
Options
Exercised
during
the
|
|
Options
cancelled/
lapsed
during
the
|
|
Balance as
at
29 February
|
|
Participants
|
|
Date of grant
|
|
HK$
|
|
|
HK$
|
|
HK$
|
|
period
|
|
period
|
|
2007
|
|
period
|
|
(Note 1)
|
|
period
|
|
period
|
|
2008
|
|
Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Wong Wai Kay, Ricky
|
|
5 January
|
|
1.5339
|
|
|
—
|
|
—
|
|
5 January
|
|
5 January
|
|
8,000,000
|
|
—
|
|
31,646
|
|
—
|
|
—
|
|
8,031,646
|
|
|
2005
|
|
(Note 1
|
)
|
|
|
|
|
|
2005 to
|
|
2005 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December
|
|
20 October
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22 May
|
|
0.6573
|
|
|
—
|
|
—
|
|
22 May
|
|
22 May
|
|
6,000,000
|
|
—
|
|
23,734
|
|
—
|
|
—
|
|
6,023,734
|
|
|
|
2006
|
|
(Note 1
|
)
|
|
|
|
|
|
2006 to
|
|
2007 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21 May
|
|
21 May
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Cheung Chi Kin, Paul
|
|
5 January
|
|
1.5339
|
|
|
—
|
|
—
|
|
5 January
|
|
5 January
|
|
8,000,000
|
|
—
|
|
31,646
|
|
—
|
|
—
|
|
8,031,646
|
|
|
2005
|
|
(Note 1
|
)
|
|
|
|
|
|
2005 to
|
|
2005 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December
|
|
20 October
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22 May
|
|
0.6573
|
|
|
—
|
|
—
|
|
22 May
|
|
22 May
|
|
6,000,000
|
|
—
|
|
23,734
|
|
—
|
|
—
|
|
6,023,734
|
|
|
|
2006
|
|
(Note 1
|
)
|
|
|
|
|
|
2006 to
|
|
2007 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21 May
|
|
21 May
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Lai Ni Quiaque
|
|
3 June
|
|
1.4700
|
|
|
2.8800
|
|
—
|
|
3 June
|
|
1 May
|
|
6,000,000
|
|
—
|
|
—
|
|
6,000,000
|
|
—
|
|
—
|
|
|
2004
|
|
|
|
|
|
|
|
|
2004 to
|
|
2005 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 April
|
|
2 June
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22 May
|
|
0.6573
|
|
|
2.8800
|
|
—
|
|
22 May
|
|
22 May
|
|
3,000,000
|
|
—
|
|
7,911
|
|
1,000,000
|
|
—
|
|
2,007,911
|
|
|
|
2006
|
|
(Note 1
|
)
|
|
|
|
|
|
2006 to
|
|
2007 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21 May
|
|
21 May
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11 February
|
|
1.8800
|
|
|
—
|
|
1.8600
|
|
(Note 2)
|
|
(Note 2)
|
|
—
|
|
6,000,000
|
|
—
|
|
—
|
|
—
|
|
6,000,000
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 City Telecom (H.K.) Limited Interim Report 2008
Other Information
Share Option Schemes (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
price
per
share
|
|
|
Weighted
average
closing
price of
shares
immediately
before the
date(s) on
which
Options
were
exercised
|
|
Closing
price of the
shares
immediately
before the
date(s) on
which the
Options
were
granted
|
|
Vesting
|
|
Exercise
|
|
Balance as
at
1 September
|
|
Options
granted
during the
|
|
Adjusted
number
of
Options
during
the
period
|
|
Options
Exercised
during the
|
|
Options
cancelled/
lapsed
during
the
|
|
Balance as
at
29 February
|
|
Participants
|
|
Date of grant
|
|
HK$
|
|
|
HK$
|
|
HK$
|
|
period
|
|
period
|
|
2007
|
|
period
|
|
(Note 1)
|
|
period
|
|
period
|
|
2008
|
|
Employees under continuous employment contracts
|
|
Employees
|
|
21 October
|
|
1.5339
|
|
|
2.3200
|
|
—
|
|
21 October
|
|
1 January
|
|
8,340,000
|
|
—
|
|
32,397
|
|
280,000
|
|
—
|
|
8,092,397
|
|
|
|
2004
|
|
(Note 1
|
)
|
|
|
|
|
|
2004 to
|
|
2005 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December
|
|
20 October
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 October
|
|
0.8100
|
|
|
2.1000
|
|
—
|
|
3 October
|
|
1 October
|
|
1,000,000
|
|
—
|
|
—
|
|
1,000,000
|
|
—
|
|
—
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
2005 to
|
|
2006 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 September
|
|
30 September
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22 May
|
|
0.6573
|
|
|
2.2300
|
|
—
|
|
22 May
|
|
22 May
|
|
13,940,000
|
|
—
|
|
45,922
|
|
2,370,000
|
|
—
|
|
11,615,922
|
|
|
|
2006
|
|
(Note 1
|
)
|
|
|
|
|
|
2006 to
|
|
2007 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21 May
|
|
21 May
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 July
|
|
0.6773
|
|
|
—
|
|
—
|
|
3 July
|
|
3 July
|
|
700,000
|
|
—
|
|
2,769
|
|
—
|
|
—
|
|
702,769
|
|
|
|
2006
|
|
(Note 1
|
)
|
|
|
|
|
|
2006 to
|
|
2007 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 July
|
|
2 July
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 August
|
|
0.7072
|
|
|
—
|
|
—
|
|
3 August
|
|
3 August
|
|
70,000
|
|
—
|
|
277
|
|
—
|
|
—
|
|
70,277
|
|
|
|
2006
|
|
(Note 1
|
)
|
|
|
|
|
|
2006 to
|
|
2007 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 August
|
|
2 August
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22 November
|
|
0.7271
|
|
|
2.0600
|
|
—
|
|
22 November
|
|
15 November
|
|
200,000
|
|
—
|
|
534
|
|
65,000
|
|
—
|
|
135,534
|
|
|
|
2006
|
|
(Note 1
|
)
|
|
|
|
|
|
2006 to
|
|
2007 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14 November
|
|
14 November
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23 May
|
|
2.0219
|
|
|
—
|
|
—
|
|
23 May
|
|
12 June
|
|
100,000
|
|
—
|
|
396
|
|
—
|
|
—
|
|
100,396
|
|
|
|
2007
|
|
(Note 1
|
)
|
|
|
|
|
|
2007 to
|
|
2008 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11 June
|
|
11 June
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 December
|
|
2.4403
|
|
|
—
|
|
2.4200
|
|
12 December
|
|
12 December
|
|
—
|
|
1,000,000
|
|
3,956
|
|
—
|
|
—
|
|
1,003,956
|
|
|
|
2007
|
|
(Note 1
|
)
|
|
|
|
|
|
2007 to
|
|
2007 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11 December
|
|
23 December
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 February
|
|
1.7700
|
|
|
—
|
|
1.9900
|
|
(Note 2)
|
|
(Note 2)
|
|
—
|
|
6,000,000
|
|
—
|
|
—
|
|
—
|
|
6,000,000
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 February
|
|
1.7700
|
|
|
—
|
|
1.7900
|
|
(Note 2)
|
|
(Note 2)
|
|
—
|
|
4,000,000
|
|
—
|
|
—
|
|
—
|
|
4,000,000
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,350,000
|
|
17,000,000
|
|
204,922
|
|
10,715,000
|
|
—
|
|
67,839,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
City Telecom (H.K.) Limited Interim Report 2008 27
Other Information
Share Option Schemes (Continued)
Notes:
|
1.
|
As a result of allotment of 11,227,213 new shares to shareholders who elected to receive the 2007 Final Dividend in shares on 4 February 2008, the exercise price of and the
number of share subject to the 51,805,000 share options outstanding on 21 December 2007 (being the Record Date for determining the entitlement of 2007 Final Dividend) were adjusted pursuant to the 2002 Share Option Scheme with effect from
4 February 2008. The closing price per share immediately before the date of the grant of the Options was HK$1.7000.
|
|
2.
|
The exercise of the Options is subject to certain conditions that must be achieved by the employee. The Options shall be exercised not later than 23 December 2012.
|
In assessing the value of the share options granted during the period, the Black-Scholes option pricing model has been used except for the
option granted on 11 February 2008 which adopts the Monte Carlo model. Both models are one of the most generally accepted methodologies used to calculate the value of options. The variables of the models include expected life of the options,
risk-free interest rate, expected volatility and expected dividend of the shares of the Company.
In assessing the value of the share options granted
during the period, the following variables have been applied to the models:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measurement Date
|
|
15 February
2008
|
|
|
11 February
2008
|
|
|
6 February
2008
|
|
|
12 December
2007
|
|
|
Variables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected life
|
|
3 years
|
|
|
average 4 years
|
|
|
5 years
|
|
|
5 years
|
|
|
Risk-free rate
|
|
2.16
|
%
|
|
2.16
|
%
|
|
2.16
|
%
|
|
3.10
|
%
|
|
Expected volatility
|
|
63.22
|
%
|
|
63.32
|
%
|
|
63.22
|
%
|
|
61.86
|
%
|
|
Expected dividend yield
|
|
1.97
|
%
|
|
1.97
|
%
|
|
1.97
|
%
|
|
1.97
|
%
|
The above variables were determined as follows:
|
(i)
|
The expected life is estimated to be 3 to 5 years from the date of grant (the “Measurement Date”).
|
|
(ii)
|
The risk-free rate represents the yield of the Hong Kong Exchange Fund Notes corresponding to the expected life of the options as at the Measurement Date.
|
|
(iii)
|
The expected volatility represents the annualised standard deviation of the continuously compounded rates of return on the shares of the Company for the most recent period from the
measurement date that is generally commensurate with the expected term of the option (taking into account the remaining contractual life of the option and the effects of expected early exercise).
|
|
(iv)
|
A dividend yield of 1.97% has been assumed.
|
The fair value of the
options granted during the period is estimated as below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date of grant
|
|
15 February
2008
|
|
11 February
2008
|
|
6 February
2008
|
|
12 December
2007
|
|
Fair value per share option
|
|
HK$
|
0.72
|
|
HK$
|
0.41
|
|
HK$
|
0.90
|
|
HK$
|
1.13
|
Effective from 1 September 2005, upon the adoption of Hong Kong Financial Reporting Standard 2 Share-based
payment, the Group recognises the fair value of share options as an expense in the profit and loss account over the vesting period, or as an asset, if the cost qualifies for recognition as an asset. The fair value of the share options is measured at
the date of grant.
Both models require input of highly subjective assumptions, including the expected stock volatility. As the Company’s share
options have characteristics significantly different from those of traded options, changes in subjective inputs may materially affect the estimated fair value of the options granted.
28 City Telecom (H.K.) Limited Interim Report 2008
Other Information
Substantial Shareholders
At 29 February 2008, the interests and 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 maintained by the Company
required to be kept under Section 336 of the SFO were as follows:
|
|
|
|
|
|
|
|
Name
|
|
Interests in shares
in long positions
|
|
Percentage interests
(Note)
|
|
|
Top Group International Limited
|
|
325,979,908
|
|
51.06
|
%
|
|
EK Investment Management Limited
|
|
55,542,000
|
|
8.70
|
%
|
|
Note:
|
This percentage is based on 638,445,617 ordinary shares of the Company issued as at 29 February 2008.
|
Save as disclosed above, as at 29 February 2008, 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 six months ended 29 February 2008, 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 as the code of conduct for securities transactions by directors
of the Company (the “Company Code”).
Having made specific enquiry of all directors, the Company confirmed that the directors have complied with
the required standard as set out in the Company Code during the period covered by this interim report, except for the following deviation:
Model Code
Provision B.8
This code provision stipulates that a director must not deal in any securities of the listed issuer without first notifying in writing
the chairman or a director designated by the board and receiving a dated written acknowledgement. The relevant date of the dealing was 17 October 2007 on which Mr. Lai Ni Quiaque had duly notified the chairman before the dealing but the
written acknowledgement was dated the date after the relevant date of the said dealing by Mr. Lai Ni Quiaque, as such, it is regarded as a deviation of this model code provision B.8 which requires the receipt of the written acknowledgement
dated before the dealing in securities.
Remuneration Committee
The Company’s 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 Committee also assists the Company to review and consider the Company’s policy for remuneration of directors and senior management and to determine their remuneration packages.
City Telecom (H.K.) Limited Interim Report 2008 29
Other Information
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 29 February 2008.
The Audit Committee comprises Mr. Lee Hon Ying, John (the Chairman of the Audit Committee), Dr. Chan Kin Man and Mr. Peh Jefferson Tun Lu who are the Independent Non-executive Directors of the Company.
Interim Dividend
The Board has resolved to declare an
interim dividend of HK4 cents per ordinary share for the six months ended 29 February 2008 (six months ended 28 February 2007: HK4 cents) to shareholders of the Company whose names are recorded on the register of members of the Company as
at the close of business on 6 June 2008. The dividend will be payable in cash or alternatively by a scrip dividend. The scrip dividend option will be offered to all shareholders excluding shareholders with registered addresses outside Hong Kong
(whom the Company upon proper enquiries considers such exclusion necessary or expedient on account either of the legal restrictions under the laws of the relevant place or the requirements of the relevant body or stock exchange in that place). A
circular containing details of the scrip dividend and the form of election will be mailed to shareholders of the Company on or about 19 June 2008 and elections will be required to be made on or before 9 July 2008. Dividend warrants will be
dispatched to shareholders of the Company on or around 23 July 2008.
Closure of Register of Members
The register of members of the Company will be closed from 4 June 2008 to 6 June 2008 (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 Company’s Share Registrar, Computershare Hong Kong Investor Services Limited at Shops
1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not later than 4:30 p.m. on 3 June 2008.
By Order of the Board
Wong Wai Kay, Ricky
Chairman
Hong Kong, 19 May 2008
30 City Telecom (H.K.) Limited Interim Report 2008
Hong Kong Television Network Ltd. (MM) (NASDAQ:CTEL)
過去 株価チャート
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Hong Kong Television Network Ltd. (MM) (NASDAQ:CTEL)
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