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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Cosmedia | LSE:CGHL | London | Ordinary Share | KYG244331073 | ORD USD0.10 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.00 | - |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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Cosmedia Group Holdings Limited
29 May 2007
29 May 2007
Cosmedia Group Holdings Limited
Preliminary Results for the year ended 31 December 2006
Cosmedia Group Holdings Limited (the "Company"), the holding company of an
advertising and media group (the "Group") with a focus on television advertising
in China, today announces its maiden set of results since its flotation on the
Alternative Investment Market ("AIM") of the London Stock Exchange in December
2006.
Company Overview
The Company and its subsidiaries ("Cosmedia") is a broad based China-focused
media group. It was founded in 1996, and successfully developed a business in
China. During this period of time, Cosmedia worked closely with China Great
Wall Art and Culture Center ("Great Wall").
Great Wall is a wholly-owned subsidiary of the State Administration of Radio,
Film and Television of China ("SARFT"), and is licensed to engage in TV
programme production and distribution.
Great Wall created a multimedia content platform known as "Pop TV" to be
distributed via a nationwide satellite TV channel, internet and other mobile
media devices, offering to advertisers a highly effective and efficient total
advertising package encompassing multimedia platforms. Great Wall entered into
an exclusive long-term cooperation arrangement with a provincial level TV
station of Qinghai, the People's Republic of China which is licensed to broadcast
a new satellite channel on a nationwide basis (the "Channel"). The Channel was
trial launched in October 2005, and officially launched on 28 February 2006.
Prior to the official launching of the Channel, in December 2004, Great Wall
granted to Cosmedia the exclusive right to sell all commercial airtime on this
new Pop TV platform for the next 15 years, commencing March 2006. Thus,
Cosmedia is positioned to benefit from China's vast television advertising
market, and Pop TV offers Cosmedia unique advertising platforms, with full
convergent access in China.
On 28 December 2006, the Company listed on AIM of the London Stock Exchange.
The Company is preparing to expand its business into home shopping in China
through the existing Pop TV multimedia platforms now available to it. The home
shopping business will enable the Company to explore the huge China retail
market. The TV home shopping business will leverage off the Company's existing
infrastructure and entertainment content, and will supplement its current
advertising business and is expected to be a major contributor to the Company's
revenue.
Chairman's Statement
It is my great pleasure to report to you on our first year's results, since we
listed on London's AIM market. We have made tremendous progress and we are well
on track in our collaboration with Great Wall which operates a unique
entertainment Channel with nationwide satellite coverage across the People's
Republic of China. The Channel was fully launched in March 2006 and broadcast
to 20 cities in China. Notwithstanding it being a start-up year for the
Channel, we achieved US$1.7 million of revenue in 2006.
While still at the investment stage, we expect our business to grow aggressively
and reach scale in the next 2 years benefiting in the shorter term from next
year's Olympic Games in Beijing. The Channel is targeted by Great Wall to become
one of the top 10 satellite TV channels in China, ultimately reaching a top 5
position in the near term.
In addition to benefiting from the revenues derived from the expansion of the
existing Channel, it is part of our corporate strategy to participate in the
launch of a dedicated, 24-hour home shopping channel near the end of 2007, which
is dedicated to home shopping and delivered over the digitized cable networks.
The roll-out of this home shopping channel comes about with SARFT's plan to
digitize all cable networks in the nation by 2015. We expect the home shopping
business to have initial coverage in the most affluent regions in the country
since wealthy cities such as Beijing, Shenzhen, Dalian, Qingdao, and Hangzhou
will be amongst the first to have access to a digital cable network.
As part of our corporate strategy, we will be collaborating with one of Asia's
premier brands, both as a retailer of their merchandise, and to develop a new
product line dedicated to the home shopping channel. Our branded product will
deliver a much higher gross margin. We will continue to source products with a
quality brand image to serve the Channel's TV shopping customers, and to reach
scale and critical mass rapidly.
We are also in the process of exploring a number of new revenue opportunities,
including the development of mobile VAS (value-added services), mobile TV,
web-based content and services, etc. We believe these relatively new
technologies represent huge untapped sources of revenue which could become a
major driver of sustainable corporate growth in the coming years.
Finally, we are exploring the opportunity to leverage the content of the Channel
to launch a modern Chinese culture and lifestyle TV channel internationally,
which will initially be distributed into Asian countries and then progressively
to the rest of the world. It is our belief that with increasing overseas
interest in China, such programming will be warmly received.
China is one of most promising economies in the world, having enjoyed economic
growth of over 10% in the past decade and it is expected to grow at a similar
rate in the coming decade. We are well positioned to benefit from its growth.
China is also a large country, which is ideal for the business that we operate,
for which scale is one of the key economic drivers.
We are very optimistic and confident in the underlying strength of our
businesses and of the economies in which they operate. The 2006 results reflect
well on staff across the group and I thank them for their hard work and
commitment throughout the year.
Stanley Pong
Chairman
29 May 2007
Group President's Review
Fiscal 2006 marks a year of significant progress and achievement for Cosmedia.
Our revenue has grown as the nationwide Channel, for which we are the exclusive
agent for all of the advertising air time, has successfully expanded its
coverage to reach 12 million households in China, with most of them located in
the high income cities.
Going forward, we understand the Channel plans to continue its expansion in
coverage by negotiating landing rights with a significant number of new, local
cable networks. While sales of the Channel today are relatively small, the goal
of the Channel is to become one of the top five revenue generating provincial
satellite TV players within a few years. That goal will be substantiated by a
solid plan, which the Channel has developed in consultation with us, and is
outlined in the following paragraphs.
In terms of geographic coverage, the Channel will continue to expand its
footprint by negotiating with local cable operators. The landing plan is to
cover 22 million cable households by the end of 2007, almost doubling the
coverage achieved in 2006. These are the core cities for domestic and
multinational advertisers, where media rating surveys are conducted by leading
research houses
While expanding its coverage, the Channel will also revamp the programme wheel
by July 2007 to achieve higher ratings from our targeted viewers. New programmes
will have a focus on entertainment, lifestyle and shopping. This will be unique,
and very different from the drama content that most of the other satellite
channels are currently focusing. We will leverage our experience, connections,
and expertise to sign up popular movie stars and singers to promote this brand
image.
In the coming year, we also plan to collaborate with Great Wall in launching a
nationwide home shopping channel. We expect this to be the key revenue driver
and growth engine for our business. At this point in time the Channel has
already started trial home shopping programmes and expects to launch over the
digital cable platform by the end of 2007.
In addition, we have also begun trial runs of mobile VAS (value-added services)
over the Channel. By introducing such an element of interactivity into existing
programmes, we aim to encourage viewers' participation. Such a move would
greatly strengthen our existing online community and social networking which
already has attracted over 200,000 unique and repeated visitors daily on our
website. This would form an integral part of our "multi-content multi-contact"
strategy across the mobile, TV and the internet media. Our relationship with -
and knowledge of - our viewers will be greatly enhanced and this will be
beneficial to both our existing revenue streams and future growth.
With such progress, we are confident that we are well on track in fulfilling our
vision to be a leading multi-platform, multi-access media service provider in
China. Our future business will be supported by three main areas.
Firstly, the Channel plans to increase penetration and broaden its coverage.
Secondly, we intend to work with local content providers and production houses
to improve the ratings of the Channel. We also plan to leverage the content of
the Channel for both programme and channel distribution overseas in order to
capitalise on the increasing advertising needs of Chinese brands expanding into
international markets.
Thirdly, we intend to work with brand owners across different product categories
to tap into the fast-growing home shopping market.
We expect China will continue to be the growth engine of the world in the coming
decades. We are well positioned to capture this tremendous growth opportunity,
with the unique ability to serve the media advertising and home shopping sectors
as a foreign invested company. Cosmedia has a team of vastly experienced
professional executives in China's media market, and has forged the necessary
partnerships over the past 10 years.
We are pleased to report that your company continues to build a successful
business, and are very optimistic that we will achieve our ambitious goal.
Antony Chan
Group President
29 May 2007
Group Chief Financial Officer's Review
The following is a financial summary of the consolidated results of Cosmedia
Group Holdings Limited and its subsidiaries.
Results: 2006 2005
HK$'000 HK$'000
Revenue 13,541 2,250
Gross Loss (70,554) (36,002)
Net Loss for the year (186,060) (102,000)
Loss per share (HK$) (5.41) (3.86)
Net loss for the year includes the following items:
2006 2005
HK$'000 HK$'000
Net loss for the year (186,060) (102,000)
Cash-settled share-based payments expenses 19,562 -
IPO expenses 15,914 -
Allowance and write-off for bad and doubtful debts 13,074 -
________ ________
(137,510) (102,000)
________ ________
* Cash-settled share-based payments expenses relate to a share option scheme
adopted by the Company on 20 December 2006 for the primary purpose of
attracting skilled and experienced personnel and incentivising them to
remain in the Group. The board of directors of the Company granted
2,283,719 phantom shares to participants exercisable over a ten year
period. Grantees under the option scheme receive a conditional right to be
paid a bonus based on the value of the ordinary shares of the Company at
the time of exercise. The phantom shares granted was fair valued by an
independent appraiser.
* IPO expenses are the costs paid by the Company for listing on London's AIM
market. Also included is the warrant for 456,708 ordinary shares of the
Company exercisable over a period of three years granted to Collins Stewart
Europe Limited, the Nominated Adviser and Broker to the Company for the
London AIM listing. The fair value of the warrant is estimated at
approximately HK$712,000 based on the market value of the services rendered
by Collins Stewart.
* Allowance and write-off for bad and doubtful debts is mainly due to an
airtime prepayment write-off related to a receivable from a local Chinese
production house that had produced some dramas which were intended to be
used to obtain airtime for the Group. The airtime was not obtained, and
the production had not been able to monetize its productions to entirely
repay the Group. Consequently, the partial write-off of the prepayment made
by the Group to the production house.
* The above items are also the principal reason for the increase in the
Company's Administrative expenses from HK$56,746,000 in 2005 to
HK$107,517,000 in 2006.
Equity Shareholder's Funds:
* On 6 June 2006, prior to public listing of the Company on London's AIM
market, Heap Profit Investments Limited (majority owned by Shui On
Investment Company Limited) acquired a one-third equity interest in the
Company for approximately US$25 million.
* On 28 December 2006, the Company listed on the London's AIM market with a
market capitalisation of US$130.2 million, and raised a total of US$10
million before expenses.
* On 2 March 2007, predominately through the exercise of options by Collins
Stewart Europe Limited (the Company's Nominated Adviser and Broker) and by
Stanley Kit Pong (the Company's majority Shareholder), the Company raised a
total of approximately US$2.5 million.
* As at 31 December 2006, the Company's Share Capital, Reserves, and
Accumulated Losses were as follows:
2006 2005
HK$'000 HK$'000
Share Capital 35,623 18
Reserves 473,662 63,450
Accumulated Losses (485,956) (299,896)
Cash In Hand:
* As at 31 December 2006, the Company's bank balances and cash were
US$1.1 million.
Berry Kwock
Group Chief Financial Officer
29 May 2007
For further information, please contact:
Cosmedia Group Holdings Limited
Stanley Pong +852 2136 8222
Collins Stewart Europe Limited
Adrian Hadden +44 (0) 20 7523 8350
Catullus Consulting
Alex Mackey +44 (0) 20 7736 2938
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2006
NOTES 2006 2005
HK$'000 HK$'000
Revenue 5 13,541 2,250
Cost of sales (84,095) (38,252)
________ ________
Gross loss (70,554) (36,002)
Other income 8,187 5,578
Gain on disposal of subsidiaries 576 -
Selling expenses (2,872) (3,003)
Administrative expenses (107,517) (56,746)
Finance costs 6 (13,880) (11,827)
________ ________
Loss before taxation (186,060) (102,000)
Income tax expense 7 - -
________ ________
Loss for the year 8 (186,060) (102,000)
======= =======
Attributable to:
Equity holders of the Company (186,060) (101,956)
Minority interests - (44)
________ ________
(186,060) (102,000)
======= =======
Loss per share (HK$)
Basic 9 (5.41) (3.86)
======= =======
Diluted (5.41) (3.86)
======= =======
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2006
2006 2005
HK$'000 HK$'000
Non-current assets
Property, plant and equipment 25,321 22,305
Programme and film rights 751 3,653
Loan receivable 2,324 -
________ ________
28,396 25,958
________ ________
Current assets
Trade receivables 5,175 469
Prepayments, deposits and other receivables 107,874 68,377
Amount due from immediate holding company 14 9
Amounts due from fellow subsidiaries 2,072 181
Amount due from a director - 22
Other financial assets 4,401 -
Pledged bank deposits 119,627 7,864
Cash and cash equivalents 8,543 9,156
________ ________
247,706 86,078
________ ________
Current liabilities
Trade payables 512 1,154
Other payables 15,754 13,331
Amounts due to fellow subsidiaries - 15,144
Amount due to a minority shareholder of a subsidiary 526 526
Amount due to a director - 5
Other financial liabilities 24,046 -
Bank borrowings 206,500 126,775
Bank overdrafts 39,670
________ ________
247,338 196,605
________ ________
Net current assets (liabilities) 368 (110,527)
________ ________
Total assets less current liabilities 28,764 (84,569)
======= =======
Capital and reserves
Share capital 35,623 18
Reserves (12,294) (236,446)
________ ________
Equity attributable to equity holders of the Company 23,329 (236,428)
________ ________
Non-current liabilities
Amount due to ultimate holding company - 151,776
Other financial liabilities 5,352 -
Deferred tax liabilities 83 83
________ ________
5,435 151,859
________ ________
28,764 (84,569)
======= =======
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE year ENDED 31 DECEMBER 2006
Attributable
Own Equity to equity
Share Share Special shares instrument Exchange Accumulated holders of Minority
held
capital premium reserve by a reserve reserve losses the Company interests Total
trust
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
At 1 January 2005 18 - - - - 52 (197,940) (197,870) - (197,870)
Foreign exchange
differences
recognised
directly in
equity - - - - - (1) - (1) - (1)
Loss for the
year - - - - - - (101,956) (101,956) (44) (102,000)
_______ _______ _______ _______ _______ _______ _______ _______ _______ _______
Total recognised
income and expense
for the year - - - - - (1) (101,956) (101,957) (44) (102,001)
_______ _______ _______ _______ _______ _______ _______ _______ _______ _______
Capitalisation
of a shareholder
loan - 63,399 - - - - - 63,399 - 63,399
Waiver of payable
to a minority
shareholder - - - - - - - - 44 44
_______ _______ _______ _______ _______ _______ _______ _______ _______ _______
At 31 December
2005 18 63,399 - - - 51 (299,896) (236,428) - (236,428)
Foreign exchange
differences
recognised
directly in
equity - - - - - (4,775) - (4,775) - (4,775)
Loss for the
year - - - - - - (186,060) (186,060) - (186,060)
_______ _______ _______ _______ _______ _______ _______ _______ _______ _______
Total recognised
income and expense
for the year - - - - - (4,775) (186,060) (190,835) - (190,835)
_______ _______ _______ _______ _______ _______ _______ _______ _______ _______
Capitalisation
of a shareholder
loan 1 186,523 - - - - - 186,524 - 186,524
Issue of shares
of a then
subsidiary -
Cosmedia Capital
Limited ("CCL") 9 193,739 - - - - - 193,748 - 193,748
Issue of shares
of the Company
upon group
reorganization
(Note 1) 31,105 (442,317) 411,212 - - - - - - -
Elimination of
issued share
capital of a
then
subsidiary -
CCL upon group
reorganisation (28) - 28 - - - - - - -
Treasury shares
of the Company
held by the Group - - - (1,781) - - - (1,781) - (1,781)
Issuance of
equity
instruments - - - - (5,434) - - (5,434) - (5,434)
Expenses incurred
in connection
with the issue of
shares of a then
subsidiary - CCL - (1,344) - - - - - (1,344) - (1,344)
Issue of new
shares 4,518 75,263 - - - - - 79,781 - 79,781
Expenses incurred
in connection
with the issue
of shares - (1,614) - - - - - (1,614) - (1,614)
Recognition of
equity-settled
share-based
payments - - - - 712 - - 712 - 712
_______ _______ _______ _______ _______ _______ _______ _______ _______ _______
At 31 December
2006 35,623 73,649 411,240 (1,781) (4,722) (4,724) (485,956) 23,329 - 23,329
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
The special reserve represents the difference between the nominal amount of the
shares issued by the Company and the aggregate amount of share capital and share
premium of the subsidiaries acquired pursuant to the Group's reorganisation.
CONSOLIDATED CASH FLOW STATEMENT
FOR THE year ENDED 31 DECEMBER 2006
2006 2005
HK$'000 HK$'000
Operating activities
Loss before taxation (186,060) (102,000)
Adjustments for:
Cash-settled share-based payment expenses 19,562 -
Finance costs 13,880 11,827
Allowance for (written back of) bad and doubtful debts 13,074 (2,113)
Impairment and write off of programme and film rights 10,031 1,505
Depreciation of property, plant and equipment 6,470 3,588
Loss arising from initial recognition of a loan receivable 1,627 -
Write off of programming prepayments 1,183 1,303
Equity-settled share-based payment expenses 712 -
Amortisation of programme and film rights 248 -
Loss on disposal of property, plant and equipment 19 899
Interest income (3,004) (81)
Gain on disposal of subsidiaries (576) -
________ ________
Operating cash flows before movements
in working capital (122,834) (85,072)
Increase in trade receivables (5,771) (61)
Decrease (increase) in prepayments,
deposits and other receivables 23,834 (54,063)
Increase in trade payables (711) (824)
(Increase) decrease in other payables 6,711 (6,250)
________ ________
Cash used in operations (98,771) (146,270)
Interest paid (10,308) (8,331)
________ ________
Net cash used in operating activities (109,079) (154,601)
________ ________
Investing activities
Purchase of property, plant and equipment (8,708) (15,779)
Addition of programme and film rights (7,623) (5,158)
Advance of a loan (4,000) -
Advance to fellow subsidiaries (883) -
Disposal of subsidiaries (110) -
Advances to immediate holding company (5) (5)
Interest received 3,004 81
Proceeds on disposal of property, plant and equipment 296 6
Repayment from directors 17 57
________ ________
Net cash used in investing activities (18,012) (20,798)
________ ________
2006 2005
HK$'000 HK$'000
Financing activities
Proceeds from issue of shares of a subsidiary 193,748 -
Bank borrowings raised 142,290 70,553
Advances from ultimate holding company 11,092 109,745
Proceeds from issue of new shares 5,360 -
Advances from fellow subsidiaries 328 9,753
Increase in pledged bank deposit (111,291) (7,864)
Repayment of bank borrowings (70,172) (1,880)
Expenses paid in connection with the issue of shares of the (1,614) -
Company
Expenses incurred in connection with the issue of shares of a then (1,344) -
Subsidiary - CCL
Repayment of loan from a former shareholder - (4,500)
Advance from a minority shareholder of a subsidiary - 526
________ ________
Net cash from financing activities 168,397 176,333
________ ________
Net increase in cash and cash equivalents 41,306 934
Cash and cash equivalents at beginning of the year (30,514) (31,448)
Effect of foreign exchange rate changes (2,249) -
________ ________
Cash and cash equivalents at end of the year 8,543 (30,514)
======= =======
Analysis of cash and cash equivalents:
Bank balances and cash 8,543 9,156
Bank overdrafts - (39,670)
________ ________
8,543 (30,514)
======= =======
NOTES TO THE PRELIMINARY RESULTS
FOR THE year ENDED 31 DECEMBER 2006
1. GENERAL
The financial information set out in this announcement does not constitute the
Group's financial statements for the year ended 31 December 2005 and the year
ended 31 December 2006. The Company was incorporated on 20 September 2006 in
the Cayman Islands as an exempted company with limited liability and has not
previously submitted annual financial statements. The financial information set
out in this announcement has been prepared on the basis of the accounting
policies to be adopted in the Group's first annual financial statements. The
Group's annual financial statements will be delivered to the Registrar of
Companies following the company's annual general meeting.
Through a group reorganisation to rationalise the structure of the Company and
its subsidiaries (hereinafter collectively referred to as the "Group") in
preparation for the listing of the Company's shares (the "Group
Reorganisation"), the Company became the ultimate holding company of the Group
on 19 October 2006. The Group resulting from the Group Reorganisation is
regarded as a group in continuing operation. Accordingly, the consolidated
financial statements for the year ended 31 December 2006 have been prepared
using the principles of merger accounting. The consolidated income statements,
consolidated statement of changes in equity and the consolidated cash flow
statements for the years ended 31 December 2005 and 31 December 2006 have been
prepared on the basis as if the current group structure had been in existence
throughout the years or since their date of incorporation where this is a
shorter period. The consolidated balance sheets of the Group as at 31 December
2005 and 31 December 2006 have been prepared to present the assets and
liabilities of the companies now comprising the Group as if the current group
structure had been in existence as at those dates.
The financial information set out in this announcement was approved by the Board
of Directors on 25 May 2007.
Copies of the Annual Report and Accounts for the year ended 31 December 2006
will be available in due course from the Company Secretary, Cosmedia Group
Holdings Limited, 25/F, Henley Building, 5 Queen's Road Central, Hong Kong.
2. SIGNIFICANT ACCOUNTING POLICIES
These preliminary results have been prepared in accordance with International
Financial Reporting Standards ("IFRS") and on the historical cost basis except
for certain financial instruments which are measured at fair value. The
principal accounting policies are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) made up to
31 December each year. Control is achieved where the Company has the power to
govern the financial and operating policies of an entity so as to obtain
benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included
in the consolidated income statement from the effective date of acquisition or
up to the effective date of disposal, as appropriate.
When necessary, adjustments are made to the financial statements of subsidiaries
to bring their accounting policies into line with those used by other members of
the Group. All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
Merger accounting for business combinations involving entities under common
control
Business combinations under common control are account by merger accounting. In
applying merger accounting, financial statement items of the combining entities
or businesses for the reporting period in which the common control combination
occurs, and for any comparative periods disclosed, are included in the
consolidated financial statements of the combined entity as if the combination
had occurred from the date when the combining entities or businesses first came
under the control of the controlling party or parties. The combined entity
recognises the assets, liabilities and equity of the combining entities or
business at the carrying amounts in the consolidated financial statements of the
controlling party or parties prior to the common control combinations.
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable. Revenue is reduced for estimated customer returns, rebates and
other similar allowances.
Advertising income generated from the sale of the advertising airtime is
recognised when the advertisements are broadcasted.
Agency and promotion income is recognised when the services are rendered.
Licensing income from the distribution of television programmes and films is
recognised when the Group's entitlement to such payments has been established
which is upon the delivery of the master copy.
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount.
Rental income is recognised on a straight-line basis over the term of the
relevant lease.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other
leases are classified as operating leases.
The Group as lessor
Rental income from operating leases is recognised on a straight-line basis over
the term of the relevant lease. Initial direct costs incurred in negotiating
and arranging an operating lease are capitalised and recognised on a
straight-line basis over the lease term.
The Group as lessee
Operating lease payments are recognised as an expense on a straight-line basis
over the lease term. Contingent rentals arising under operating leases are
recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases,
such incentives are recognised as a liability. The aggregate benefit of
incentives is recognised as a reduction of rental expense on a straight-line
basis.
Property, plant and equipment
Property, plant and equipment other than construction in progress are stated at
cost less subsequent accumulated depreciation and any accumulated impairment
losses.
Depreciation is charged so as to write off the cost of assets, other than
properties under construction, over their estimated useful lives, using the
straight-line method. The estimated useful lives, residual values, and
depreciation method are reviewed at each year end, with the effect of any
changes in estimate accounted for a prospective basis.
Construction in progress represents property, plant and equipment in the course
of construction for production or for own use purposes. Construction in
progress is carried at cost less any recognised impairment loss. Cost includes
professional fees and for qualifying assets borrowing costs capitalised in
accordance with the Group's accounting policy.
The gain or loss arising on the disposal or retirement of property, plant and
equipment is determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in profit or loss.
Programme and film rights
Programme and film rights are acquired by the Group, which are initially stated
at cost less accumulated amortisation. Programme and film rights which are
available for broadcast are included in programme and films rights; prepaid
rights which are not yet available for broadcast are included in prepayments,
deposits and other receivables. Costs are charged to the consolidated income
statement on the proportion of actual income earned during the year to the total
estimated income from the sales of the programme and film rights.
Impairment losses
At each balance sheet date, the Group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. If the recoverable amount of an
asset is estimated to be less than its carrying amount, the carrying amount of
the asset is reduced to its recoverable amount. An impairment loss is
recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset
is increased to the revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised for the asset in prior
years. A reversal of an impairment loss is recognised as income.
Foreign currencies
The functional currency of the Company is Renminbi ("RMB"). The consolidated
financial statements are presented in Hong Kong dollars, which is the currency
management uses when controlling and monitoring the performance and financial
position of the Group.
In preparing the financial statements of each individual group entity,
transactions in currencies other than the functional currency of that entity
(foreign currencies) are recorded in the respective functional currency (i.e.
the currency of the primary economic environment in which the entity operates)
at the rates of exchanges prevailing on the dates of the transactions. At each
balance sheet date, monetary items denominated in foreign currencies are
retranslated at the rates prevailing on the balance sheet date. Non-monetary
items carried at fair value that are denominated in foreign currencies are
retranslated at the rates prevailing on the date when the fair value was
determined. Non-monetary items that are measured in terms of historical cost in
a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the
translation of monetary items, are recognised in profit or loss in the period in
which they arise. Exchange differences arising on the retranslation of
non-monetary items carried at fair value are included in profit or loss for the
year except for differences arising on the retranslation of non-monetary items
in respect of which gains and losses are recognised directly in equity, in which
cases, the exchange differences are also recognised directly in equity.
For the purposes of presenting the consolidated financial statements in Hong
Kong dollars, the assets and liabilities of the Group which are stated at
functional currency of the respective group entity other than Hong Kong dollars
are translated into Hong Kong dollars at the rate of exchange prevailing at the
balance sheet date, and their income and expenses are translated at the average
exchange rates for the year, unless exchange rates fluctuate significantly
during the period, in which case, the exchange rates prevailing at the dates of
transactions are used. Exchange differences arising, if any, are recognised as
a separate component of equity (the translation reserve). Such exchange
differences are recognised in profit or loss in the period in which the foreign
operation is disposed of.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from profit as reported in the consolidated income statement
because it excludes items of income or expense that are taxable or deductible in
other years and it further excludes items that are never taxable or deductible.
The Group's liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised on differences between the carrying amounts of assets
and liabilities in the consolidated financial statements and the corresponding
tax bases used in the computation of taxable profit, and is accounted for using
the balance sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences, and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised. Such
assets and liabilities are not recognised if the temporary difference arises
from goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax liabilities are measured at the tax rates that are expected to
apply in the period in which the liability is settled; based on tax rates (and
tax laws) that have been enacted or substantively consequences that would follow
from the manner in which the Group expects, at the reporting date to recover or
settle the carrying amount of its liabilities.
Share-based payment transactions
Cash-settled share-based payment transactions
Shares options granted to employee, directors and consultant
For cash-settled share-based payments, the Group measures the goods or services
acquired and the liability incurred at the fair value of the liability. At each
balance sheet date, the liability is remeasured at its fair value until the
liability is settled, with any changes in fair value recognised in profit or
loss.
Equity-settled share-based payment transactions
Warrants granted to consultant
Equity-settled share-based payment transactions with other parties are measured
at the fair value of the goods and services received, except where the fair
value cannot be estimated reliably, in which case, they are measured at the fair
value of the equity instruments granted measured at the date the Group obtains
the goods or the counterparty renders the service.
At the time when the warrants are exercised, the amount previously recognised in
the equity instrument reserve will be transferred to share capital and share
premium. When the warrants are forfeited after the vesting date or are still
not exercised at the expiry date, the amount previously recognised in the equity
instrument reserve will be transferred to accumulated losses.
Treasury shares
The shares in the Company held by employee benefit trust have been accounted for
using the treasury share method whereby consolidated shareholders' equity is
reduced by the carrying amount of the shares in the Company held by the said
trust at the date when the trust purchases the shares of the Company.
Borrowing costs
All borrowing costs are recognised as, and included in, finance costs in the
consolidated income statement in the year in which they are incurred.
Retirement benefit costs
Payments to the defined contribution Mandatory Provident Fund retirement
benefits scheme under Mandatory Provident Fund Schemes Ordinance in Hong Kong or
State-managed retirement benefit schemes in the People's Republic of China (the
"PRC") are charged as an expense when employees have rendered service entitling
them to the contribution.
Financial instruments
Financial assets and financial liabilities are recognised on the consolidated
balance sheet when a group entity becomes a party to the contractual provisions
of the instrument. Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly attributable to the
acquisition or issue of financial assets and financial liabilities (other than
financial assets and financial liabilities at fair value through profit or loss)
are added to or deducted from the fair value of the financial assets or
financial liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognised immediately in
profit or loss.
Financial assets
The Group's financial assets are mainly classified into loans and receivables.
All regular way purchases or sales of financial assets are recognised and
derecognised on a trade date basis. Regular way purchases or sales are
purchases or sales of financial assets that require delivery of assets within
the time frame established by regulation or convention in the marketplace.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. At each balance
sheet date subsequent to initial recognition, loans and receivables (including
loan receivables, trade receivables, deposits and other receivables, amount due
from immediate holding company, amount due from fellow subsidiaries, amount due
to a director, pledged bank deposits and bank deposits) are carried at amortised
cost using the effective interest method, less any identified impairment losses.
An impairment loss is recognised in profit or loss when there is objective
evidence that the asset is impaired, and is measured as the difference between
the asset's carrying amount and the present value of the estimated future cash
flows discounted at the original effective interest rate. Impairment losses are
reversed in subsequent periods when an increase in the asset's recoverable
amount can be related objectively to an event occurring after the impairment was
recognised, subject to a restriction that the carrying amount of the asset at
the date the impairment is reversed does not exceed what the amortised cost
would have been had the impairment not been recognised.
Financial liabilities and equity
Financial liabilities and equity instruments issued by a group entity are
classified according to the substance of the contractual arrangements entered
into and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the
assets of the Group after deducting all of its liabilities. The accounting
policies adopted in respect of financial liabilities and equity instruments are
set out below.
Financial liabilities
Financial liabilities including bank borrowings, bank overdrafts, trade
payables, other payables, amounts due to fellow subsidiaries, amount due to a
minority shareholder of a subsidiary and amount due to a director are
subsequently measured at amortised cost, using the effective interest method.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received,
net of direct issue costs.
Derivative financial instruments
Derivatives are initially recognised at fair value at the date a derivative
contract is entered into and are subsequently remeasured to their fair value at
each balance sheet date. The resulting gain or loss is recognised in profit or
loss immediately unless the derivative is designated and effective as a hedging
instrument, in which event the timing of the recognition in profit or loss
depends on the nature of the hedge relationship.
Derecognition
Financial assets are derecognised when the rights to receive cash flows from the
assets expire or, the financial assets are transferred and the Group has
transferred substantially all the risks and rewards of ownership of the
financial assets. On derecognition of a financial asset, the difference between
the asset's carrying amount and the sum of the consideration received and
receivable and the cumulative gain or loss that had been recognised directly in
equity is recognised in profit or loss.
Financial liabilities are derecognised when the obligation specified in the
relevant contract is discharged, cancelled or expires. The difference between
the carrying amount of the financial liability derecognised and the
consideration paid and payable is recognised in profit or loss.
3. KEY SOURCES OF ESTIMATION UNCERTAINTY
The Group makes estimates and assumptions concerning the future. The estimates
and assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year,
are discussed below.
Allowances for bad and doubtful debts
The Group makes allowances for bad and doubtful debts based on an assessment of
the recoverability of trade and other receivables. Allowances are applied to
trade and other receivables where events or changes in circumstances indicate
that the balances may not be collectible. The identification of bad and
doubtful debts requires the use of judgment and estimates. Where the
expectation is different from the estimate, such a difference will impact the
carrying value of trade and other receivables and doubtful debts expense in the
year in which the estimate is changed.
Impairment of property, plant and equipment
The Group assesses regularly whether property, plant and equipment have any
indication of impairment in accordance with the existing accounting policy. The
recoverable amounts of property, plant and equipment are determined based on
value-in-use calculations. These calculations require the use of judgment and
estimates.
Amortisation and impairment of programme rights and titles
Programme rights and titles are amortised using a method that reasonably relates
the net carrying amount of programme rights and titles to the revenue expected
to be realised. If the actual revenue differs from the estimated revenue
expected to be realised, such difference will impact the amortisation for the
remaining period as well as the impairment.
4. SEGMENT INFORMATION
The Group's revenue and results are substantially derived from the single
business segment of selling of advertising time in PRC. Moreover, as
substantially all of the Group's assets and customers are located in PRC, no
segmental analysis of financial information is presented.
5. REVENUE
Revenue represents (i) income from the sale of advertising airtime; (ii)
licensing income from the distribution of programmes and films; and (iii) agency
and promotion income, net of business tax and rebate.
Revenue for the year is analysed as follows:
2006 2005
HK$'000 HK$'000
Advertising income 13,086 1,828
Licensing income 455 195
Agency and promotion income - 227
________ ________
13,541 2,250
======= =======
6. FINANCE COSTS
2006 2005
HK$'000 HK$'000
Interest on:
- bank borrowings wholly repayable within five years 10,503 6,372
- loans from ultimate holding company and
a fellow subsidiary 3,377 5,439
- loan from a former shareholder - 16
________ ________
13,880 11,827
======= =======
7. INCOME TAX EXPENSE
Hong Kong Profits Tax has not been provided as the Group did not generate any
assessable profits arising in Hong Kong during the year. Enterprise income tax
in the PRC has not been provided as the Group did not generate any assessable
profits attributable to its operation in the PRC during the year. The income
tax of its subsidiaries in Hong Kong is calculated at the rate of 17.5% of the
estimated assessable profit for the year. In accordance with relevant rules and
regulations in PRC, all subsidiaries in PRC are subject to PRC income tax levied
at a rate of 33%, except for Zhuhai China Media Company Limited and Zhuhai
Cosmos Art and Culture Consulting Services Company Limited at 15%. No income
tax is charged to the Company and subsidiaries incorporated/established in
British Virgin Islands ("BVI") and Cayman Islands.
The charge for the year is reconciled to the loss before taxation as follows:
2006 2005
HK$'000 HK$'000
Loss before taxation (186,060) (102,000)
======= =======
Tax at the domestic income tax rate of 15% (2005: 15%), (27,909) (15,300)
where the principal activities of the Group
and certain of its subsidiaries located
Tax effect of different tax rates of subsidiaries 9,012 4,061
Tax effect of expenses not deductible for tax purpose 2,726 821
Tax effect of tax losses not recognised 16,113 10,022
Tax effect of other deferred tax assets not recognised 58 396
________ ________
Tax charge for the year - -
======= =======
8. LOSS FOR THE YEAR
Loss for the year has been arrived at after changing:
2006 2005
HK$'000 HK$'000
Directors' emoluments 8,191 1,772
Other staff's cash-settled share-based payments 13,559 -
Other staff cost 24,453 29,201
Other staff retirement benefit scheme contributions 2,092 1,421
________ ________
Total staff cost 48,295 32,394
________ ________
Auditors' remuneration 1,530 503
Allowance for (write back of) bad and doubtful debts 13,074 (2,113)
Depreciation of property, plant and equipment 6,470 3,588
Impairment and write-off of programme and film rights 10,031 1,505
Amortisation of programme and film rights 248 -
Equity-settled share-based payment expenses 712 -
Write off of programming prepayments 1,183 -
Loss on disposal of property, plant and equipment 19 899
And after crediting:
Rental income under operating leases in respect of premises,
net of insignificant outgoings
- office premises 3,976 2,400
- studio premises - 686
________ ________
3,976 3,086
________ ________
Bank interest income 3,004 81
======= =======
9. LOSS PER SHARE
The calculation of the basic and diluted losses as per share attributable to
ordinary equity holders of the Company is based on the following data:
Losses
2006 2005
HK$'000 HK$'000
Losses for the purposes of basic and diluted
losses per share being losses attributable
to equity holders of the Company (186,060) (101,956)
======= =======
Number of shares
2006 2005
Weighted average number of ordinary shares for the purposes of 34,399,203 26,443,781
calculating basic and diluted losses per share
======== ========
The weighted average number of ordinary shares are calculated on the assumption
that the Group Reorganisation has been effective on 1 January 2005. Such number
of shares for the year ended 31 December 2006 has been arrived at after
eliminating the shares in the Company held by the trust. The computation of
diluted loss per share does not assume the exercise of the outstanding share
options and warrants since they would result in a decrease in loss per share.
-END-
This information is provided by RNS
The company news service from the London Stock Exchange
END
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