RNS Number : 3064V
Cosmedia Group Holdings Limited
27 May 2008
Cosmedia Group Holdings Limited
Preliminary Results for the year ended 31 December 2007
Cosmedia Group Holdings Limited ("Cosmedia") - the AIM listed Chinese advertising, multi-media, and home shopping Group - today
announces its preliminary results for the year ended 31 December 2007.
Highlights
* Revenue increased 95% from HK$13.5 million to HK$26.3 million;
* Net loss decreased to HK$169 million from HK$186 million;
* Potential audience of 31 million households against forecast of 22 million households;
* Agreements signed to launch home shopping business;
* Home shopping business launched on current channel in November 2007;
* Application for a dedicated 24 hour home shopping channel submitted to SARFT awaiting regulatory approval; and
* Anticipated launch of 24 hour home shopping channel in H2 2008.
Chairman's Statement
As of our fiscal year end on 31 December 2007, the potential audience figures for the nationwide satellite channel on which we have
exclusive rights to act as sales agent for the commercial airtime (the "Channel") reached approximately 31 million households in 62 cities,
well beyond its target of 22 million households.
In addition, during 2007 we began in earnest our preparations for the launch of our home shopping business. An important milestone was
achieved when we entered into a series of agreements, with our business affiliates, to commence a home shopping business initially to be
broadcast on the Channel but to grow to a separate dedicated 24 hour home shopping channel in China ("24Hr Shopping Channel"). Accordingly
we hired a core team of experienced home shopping executives and began trial-testing home shopping on the Channel. These preparations
culminated in the formal launch of our home shopping business on the Channel in November 2007.
Applications for the relevant operating licenses and permits for the 24Hr Shopping Channel have been submitted to the State
Administration of Radio, Film and Television ("SARFT"). Subject to such relevant regulatory approval this 24Hr Shopping Channel is expected
to be launched during the second half of 2008. Another important milestone for us was the formal signing of supply contracts for our home
shopping business with leading product suppliers such as Chow Tai Fook Jewellery ("CTF"), one of Asia's largest jewellery retailers in China
and Hong Kong. With 75 years experience, CTF is renowned for its high quality fine jewellery and has 61 retail outlets in Hong Kong and
Macau, 700 retail outlets in over 60 cities in China and near term plans to expand these outlets to over 1,000.
We firmly believe that China's television advertising and television home shopping markets offer attractive growth prospects. China's
economic growth has resulted in double digit increases in advertising expenditures. Accounting for nearly 44% of total Chinese advertising
expenditure (China Media Forecasts 2007), television is the leading advertising medium in China. With respect to the television home
shopping market in China, it accounted for 0.18% of its retail market - compared to mature television home shopping markets such as 2.50% in
Japan, 4.79% in the United States, and 7.50% in Korea - giving it a huge potential to explore in China (Euromonitor).
Stanley Kit Pong
Chairman
27 May 2008
Group President's Review
In 2007, Cosmedia's concentration was on launching our home shopping business while maintaining our television advertising business.
Thus, even though part of the Channel's airtime was given up to allow the trial-testing and eventual launching of the home shopping business
in November 2007, we nonetheless managed to stabilize the television advertising business to generate revenue of HK$14.6 million (compared
to HK$13.5 million in 2006) The home shopping business during its first year in 2007, notwithstanding its short period of operations,
generated income of HK$ 11.4 million.
Given the deterioration in the global markets and economies in general which could potentially cascade down into China, we have decided
to proceed more cautiously than originally planned. In the medium to long term, we still plan to develop both our television advertising and
television home shopping businesses. However, the television advertising business requires more upfront capital since it is highly dependent
upon the Channel paying for landings in additional Chinese cities to increase penetration and acquisition of costly programs by the Channel
to increase ratings - both of which are the main drivers for advertising revenue. In comparison, the television home shopping business
requires lower upfront capital. Furthermore, our trial-testing on the Channel has confirmed to us that it has the potential for rapid growth
while being scalable - that is, sales volume is proportionate to the number of target households reached and hours broadcast. Thus, based on
these findings, in the near term, we have determined that it would be most appropriate for us to focus our efforts on home shopping first while keeping our advertising business stable
at minimum cost.
Antony Chan
Group President
27 May 2008
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: 2007 2006
HK$'000 HK$'000
Revenue 26,339 13,541
Cost of sales (90,539) (84,095)
________ ________
Gross Loss (64,200) (70,554)
Other income/expense, net 14,784 8,187
Gain on disposal of subsidiaries - 576
Selling expenses (16,455) (2,872)
General and administrative expenses (49,977) (79,320)
Personnel expenses (38,020) (28,197)
Finance costs (15,394) (13,880)
________ ________
Net Loss for the year (169,262) (186,060)
________ ________
Loss per share (HK$) (3.84) (5.41)
Revenue increased 95% from HK$13.5 million to HK$26.3 million due to the launching of our home shopping business (which generated
HK$11.4 million in 2007). This launching and its preparation caused corresponding increases in costs of sales, selling expenses and
personnel expenses. A major component of cost of sales is airtime cost of approximately HK$75 million mainly to pay for advertising rights,
landing fees to broadcast, transmission of programs, and production cost. Notwithstanding the increased costs, net loss for 2007 at HK$169
million was less than that for 2006 (HK$186 million).
General and Administrative expenses decreased to HK$50.0 million in 2007 from HK$79.3 million in 2006 largely due to the following
items incurred in 2006:
2007 2006
HK$'000 HK$'000
General and Administrative expenses 49,977 79,320
Cash-settled share-based payments expenses - (19,562)
IPO expenses - (15,914)
Allowance and write-off for bad and doubtful debts (3,682) (13,074)
________ ________
46,295 30,770
________ ________
________ ________
However overall expenses increased, as expected, in line with increases in personnel for home shopping.
For further information, please contact:
Cosmedia Group Holdings Limited
Stanley Pong +852 2136 8222
Collins Stewart Europe Limited
Adrian Hadden +44 (0) 20 7523 8350
Catullus Consulting
Alex Mackey +44 (0) 20 7736 2938
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2007
NOTES 2007 2006
HK$'000 HK$'000
Revenue 7 26,339 13,541
Cost of sales (90,539) (84,095)
________ ________
Gross loss (64,200) (70,554)
Other income/expense, net 8 14,784 8,187
Gain on disposal of subsidiaries - 576
Selling expenses (16,455) (2,872)
Administrative expenses (87,997) (107,517)
Finance costs 9 (15,394) (13,880)
________ ________
Loss before taxation (169,262) (186,060)
Income tax expense 10 - -
________ ________
Loss for the year 11 (169,262) (186,060)
======= =======
Attributable to:
Equity holders of the Company (169,262) (186,060)
Minority interests - -
________ ________
(169,262) (186,060)
======= =======
Loss per share (HK$)
Basic 12 (3.84) (5.41)
======= =======
Diluted (3.84) (5.41)
======= =======
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2007
2007 2006
HK$'000 HK$'000
Non-current assets
Property, plant and equipment 33,266 25,321
Programme and film rights - 751
Loan receivable 5,731 2,324
________ ________
38,997 28,396
________ ________
Current assets
Trade receivables 7,905 5,175
Inventories 444 -
Prepayments, deposits and other receivables 39,405 107,874
Amount due from immediate holding company 18 14
Amounts due from fellow subsidiaries 447 2,072
Other financial assets - 4,401
Pledged bank deposits 139,662 119,627
Cash and cash equivalents 7,975 8,543
________ ________
195,856 247,706
________ ________
Current liabilities
Trade payables 7,881 512
Other payables 20,314 15,754
Amount due to a minority shareholder of a subsidiary 524 526
Other financial liabilities 21,364 24,046
Bank borrowings 320,734 206,500
________ ________
370,817 247,338
________ ________
Net current (liabilities) assets (174,961) 368
________ ________
Total assets less current liabilities (135,964) 28,764
________ ________
Non-current liabilities
Other financial liabilities - 5,352
Deferred tax liabilities 83 83
________ ________
83 5,435
________ ________
Net assets (liabilities) (136,047) 23,329
======= =======
Capital and reserves
Share capital 36,285 35,623
Reserves (172,332) (12,294)
________ ________
Equity attributable to equity holders of the Company (136,047) 23,329
======= =======
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE year ENDED 31 DECEMBER 2007
Attributable
Own Equity to equity
Share Share Special shares held Deemed instrument Exchange Accumulated holders of
Minority
capital premium reserve by a trust appropriation reserve reserve losses the Company
interests Total
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
HK$'000 HK$'000
At 1 January 2006 18 63,399 - - - - 51 (299,896) (236,428)
- (236,428)
Foreign exchange differences - - - - - - (4,775) - (4,775)
- (4,775)
recognised directly in equity
Loss for the year - - - - - - - (186,060) (186,060)
- (186,060)
_____ _____ _____ _____ _____ _____ _____ _____ _____
_____ _____
Total recognised loss for the - - - - - - (4,775) (186,060) (190,835)
- (190,835)
year
_____ _____ _____ _____ _____ _____ _____ _____ _____
_____ _____
Capitalisation of a 1 186,523 - - - - - - 186,524
- 186,524
shareholder loan
Issue of shares of a then 9 193,739 - - - - - - 193,748
- 193,748
subsidiary - Cosmedia Capital
Limited ("CCL")
Issue of shares of the Company 31,105 (442,317) 411,212 - - - - - -
- -
upon group reorganization
(Note 1)
Elimination of issued share (28) - 28 - - - - - -
- -
capital of a then subsidiary -
CCL upon group reorganisation
Treasury shares of the Company - - - (1,781) - - - (1,781)
- (1,781)
held by the Group
-
Issuance of put and call - - - - - - - (5,434)
- (5,434)
options (5,434)
Expenses incurred in - (1,344) - - - - - - (1,344)
- (1,344)
connection with the issue of
shares of a then subsidiary -
CCL
Issue of new shares 4,518 75,263 - - - - - - 79,781
- 79,781
Expenses incurred in - (1,614) - - - - - - (1,614)
- (1,614)
connection with the issue of
shares
Recognition of equity-settled - - - - - 712 - - 712
- 712
share-based payments
_____ _____ _____ _____ _____ _____ _____ _____ _____
_____ _____
At 31 December 2006 35,623 73,649 411,240 (1,781) (5,434) 712 (4,724) (485,956) 23,329
- 23,329
Foreign exchange differences - - - - - (9,604) - (9,604)
- (9,604)
recognised directly in equity
-
Loss for the year - - - - - - - (169,262) (169,262)
- (169,262)
_____ _____ _____ _____ _____ _____ _____ _____ _____
_____ _____
Total recognised loss for the - - - - - (9,604) (169,262) (178,866)
- (178,866)
year -
_____ _____ _____ _____ _____ _____ _____ _____ _____
_____ _____
Exercise of equity-settled 357 10,508 - - (712) - - 10,153
- 10,153
share-based payment -
Issue of new shares 305 8,393 - - - - - - 8,698
- 8,698
Treasury shares released upon - 622 - 21 - - - 643
- 643
the exercise
of phantom options
-
Expenses incurred in - (4) - - - - - (4)
- (4)
connection
with the issue of shares
-
_____ _____ _____ _____ _____ _____ _____ _____ _____
_____ _____
At 31 December 2007 36,285 93,168 411,240 (1,760) (5,434) - (14,328) (655,218) (136,047)
- 136,047
======== ======== ======== ======== ======== ======== ======== ======== ========
======== ========
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 2007
2007 2006
HK$'000 HK$'000
Operating activities
Loss before taxation (169,262) (186,060)
Adjustments for:
Finance costs 15,394 13,880
Depreciation of property, plant and equipment 8,401 6,470
Loss arising from initial recognition of a loan 3,275 1,627
receivable
Decrease in fair value of call and put options 1,507 -
Allowance for bad and doubtful debts 1,793 13,074
Write off of amount due from a fellow subsidiary 1,889 -
Impairment and write off of programme and film rights 751 10,031
Loss on disposal of property, plant and equipment 8 19
Interest income (7,205) (3,004)
Change in obligation under phantom option scheme (4,498) -
Deemed interest income (248) -
Cash-settled share-based payment expenses - 19,562
Write-off of programming prepayments - 1,183
Equity-settled share-based payment expenses - 712
Amortisation of programme and film rights - 248
Gain on disposal of subsidiaries - (576)
________ ________
Operating cash flows before movements
in working capital (148,195) (122,834)
Decrease in prepayments,
deposits and other receivables 70,579 23,834
Decrease (increase) in trade payables 7,002 (711)
Decrease in other payables 2,243 6,711
Increase in trade receivables (4,156) (5,771)
Increase in inventories (422) -
________ ________
Cash used in operations (72,969) (98,771)
Interest paid (14,547) (10,308)
________ ________
Net cash used in operating activities (87,516) (109,079)
________ ________
Investing activities
Increase in pledged bank deposit (20,035) (111,291)
Purchase of property, plant and equipment (14,397) (8,708)
Advance to a business partner (6,186) (4,000)
Advance to fellow subsidiaries (265) (883)
Advances to immediate holding company (5) (5)
Interest received 7,205 3,004
Acquisition of a subsidiary 228 -
Proceeds on disposal of property, plant and equipment 12 296
Addition of programme and film rights - (7,623)
Disposal of a subsidiary - (110)
Repayment from directors - 17
________ ________
Net cash used in investing activities (33,443) (129,303)
________ ________
2007 2006
HK$'000 HK$'000
Financing activities
Bank borrowings raised 605,918 142,290
Proceeds from exercise of warrants 10,153 -
Proceeds from exercise of call and put options 8,698 -
Advances from fellow subsidiaries - 328
Repayment of bank borrowings (504,124) (70,172)
Expenses paid in connection with the issue of shares of the Company (4) (1,614)
Proceeds from issue of shares of a then subsidiary-CCL - 193,748
Advances from ultimate holding company - 11,092
Proceeds from issue of new shares - 5,360
Expenses incurred in connection with the issue of shares of a then subsidiary - CCL - (1,344)
________ ________
Net cash from financing activities 120,641 279,688
________ ________
Net (decrease) increase in cash and cash equivalents (318) 41,306
Cash and cash equivalents at beginning of the year 8,543 (30,514)
Effect of foreign exchange rate changes (250) (2,249)
________ ________
Cash and cash equivalents at end of the year 7,975 8,543
======= =======
Analysis of cash and cash equivalents:
Bank balances and cash 7,975 8,543
________ ________
7,975 8,543
======= =======
NOTES TO THE PRELIMINARY RESULTS
FOR THE year ENDED 31 DECEMBER 2007
1. GENERAL
The financial information set out in this announcement does not constitute the Group's financial statements for the year ended 31
December 2006 and the year ended 31 December 2007. The Company was incorporated on 20 September 2006 in the Cayman Islands as an exempted
company with limited liability. 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 annual financial statements.
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 year ended 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 financial information set out in this announcement was approved by the Board of Directors on 19 May 2008.
Copies of the Annual Report and Accounts for the year ended 31 December 2007 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. BASIS OF PREPARATION
At 31 December 2007, the Group's accumulated losses were HK$655,218,000, its current liabilities exceeded its current assets by
HK$174,961,000 and its total liabilities exceeded its total assets by HK$136,047,000. These factors indicate that there exist material
uncertainties which cast significant doubts on the Group's ability to continue as a going concern and therefore, it may be unable to realise
its assets and discharge its liabilities in the normal course business. As of the report date, management has committed to take procedures
to deal with these uncertainties, such as obtaining cash injection from certain shareholders to eliminate the working capital deficiency
position according to the unconditional commitment committed by those shareholders and improving financial performance by expansion of the
existing business and exploration of new business in the foreseeable future. The first batch of funds injection of HK$ 35,000,000 through
financial institutions supported by the shareholders will be obtained on or before 30 May 2008, in which HK$20,000,000 has been granted under a banking facility letter dated 30 April 2008. However, the
eventual outcome of these cannot be determined with reasonable certainty. The consolidated financial statements have been prepared on a
going concern basis.
3. SIGNIFICANT ACCOUNTING POLICIES
These preliminary results have been prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the
International Accounting Standards Board 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 (including special purpose
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 in full on consolidation.
Business combinations
Acquisitions of businesses are accounted for using the purchase method. The cost of the business combination is measured as the
aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by
the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree's
identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are
recognised at their fair values at the acquisition date.
The interest of minority shareholders in the acquiree is initially measured at the minority's proportion of the net fair value of the
assets, liabilities and contingent liabilities recognised.
Merger accounting for business combinations involving entities under common control
The consolidated financial statements incorporate the financial statement items of the combining entities or businesses in which the
common control combination occurs as if they had been combined from the date when the combining entities or businesses first came under the
control of the controlling party.
The net assets of the combining entities or businesses are consolidated using the existing book values from the controlling parties'
perspective. No amount is recognised in respect of goodwill or excess of acquirer's interest in the net fair value of acquiree's
identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the
continuation of the controlling party's interest.
The consolidated income statement includes the results of each of the combining entities or businesses from the earliest date presented
or since the date when the combining entities or businesses first came under the common control, where this is a shorter period, regardless
of the date of the common control combination.
The comparative amounts in the consolidated financial statements are presented as if the entities or businesses had been combined at the
previous balance sheet date or when they first came under common control, whichever is shorter.
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.
Revenue from sale of advertising airtime is recognised when the advertisements are broadcasted.
Sales of goods are recognised when all the following conditions are satisfied:
* the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
* the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over
the goods sold;
* the amount of the revenue can be measured reliably;
* it is probable that the economic benefits associated with the transaction will flow to the entity; and
* the costs incurred or to be incurred in respect of the transaction can be measured reliably.
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 from financial assets 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.
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 and are stated at cost less accumulated amortisation and accumulated impairment
losses. Programme and film rights which are available for broadcast are included in programme and film right. 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 of tangible and intangible assets excluding goodwill
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.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of
the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless
the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
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.
Inventories
Inventories are stated at the lower of cost and net realisable value. The cost of inventory comprises all costs of purchase, costs of
conversion, and other costs incurred to bring the inventory to its present location and condition. The cost of inventory is calculated using
the first-in-first-out basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of
completion and costs necessary to make the sale.
Foreign currencies
The functional currency of the Company is Renminbi ("RMB"). These preliminary results 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.
Current 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
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 enacted and the 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 assets or liabilities.
Current and deferred tax for the period
Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debited
directly to equity, in which case the tax is also recognised directly in equity, or where they arise from the initial accounting for a
business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or in determining
the excess of the acquirer's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities
over the cost of the business combination.
Share-based payment transactions
Share-based payment transactions with cash alternatives - Shares options under the Phantom Scheme granted to employees, 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 recognized in profit or loss.
Equity-settled share-based payment transactions - Warrants granted to consultant (the "Collins Stewart Warrant")
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.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that
necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such
time as the assets are substantially ready for their intended use or sale.
All other 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 retirement benefits scheme under Mandatory Provident Fund Schemes Ordinance in Hong Kong or
State-managed retirement benefit schemes in 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 classified into one of the two categories: financial assets at fair value through profit or loss
("FVTPL") and loans and receivables.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over
the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and
points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
through the expected life of the financial asset, or, where appropriate, a shorter period.
Financial assets at FVTPL
The Group's financial assets at FVTPL represent derivatives that are not designated and effective as hedging instruments which are
deemed as financial assets held for trading.
At each balance sheet date subsequent to initial recognition, financial assets at FVTPL are measured at fair value, with changes in fair
value recognised directly in profit or loss in the period in which they arise.
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 receivable, trade receivables, deposits
and other receivables, amount due from immediate holding company, amount due from fellow subsidiaries, pledged bank deposits and cash and
cash equivalents) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting
policy on impairment loss on financial assets below).
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are
impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the
financial asset, the estimated future cash flows of the financial assets have been impacted.
For financial assets, objective evidence of impairment could include:
* significant financial difficulty of the issuer or counterparty; or
* default or delinquency in interest or principal payments; or
* it becoming probable that the borrower will enter bankruptcy or financial re-organisation.
For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are
subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include
the Group's past experience of collecting payments.
For financial assets carried at amortised cost, 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.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of
trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable considered
uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to
profit or loss.
For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease
can be related objectively to an event occurring after the impairment losses was recognised, the previously recognised impairment loss is
reversed through profit or loss to the extent 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 instruments
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 Group's financial liabilities are generally classified into financial liabilities and financial liabilities at FVTPL.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense
over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected
life of the financial liability, or, where appropriate, a shorter period.
Interest expense is recognised on an effective interest basis.
Financial liabilities at FVTPL
The Group's financial liabilities at FVTPL represent derivatives that are not designated and effective as hedging instruments which are
deemed as financial liabilities held for trading.
At each balance sheet date subsequent to initial recognition, financial liabilities at FVTPL are measured at fair value, with changes
recognised directly in profit or loss in the period in which they arise.
Financial liabilities
Financial liabilities including bank borrowings, trade payables, other payables, amounts due to fellow subsidiaries and amount due to
minority shareholder of a subsidiary 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.
Treasury shares
The shares in the Company held by the 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. When the shares are subsequently reissued or transferred, the proceeds received, net of direct
issue costs, is recognised as an increase in equity.
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.
4. 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 receivables. Allowances are
applied to trade receivables where events or changes in circumstances indicate that the balances may not be collectible. The amount of the
impairment loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows
discounted at the financial assets original effective interest rate. The measure of impairment loss requires management to estimate future
cash flows. Where the actual cash flow is different from the estimate, such a difference will impact the carrying value of trade 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 of future operating cash flows and discount rates adopted.
Fair value of financial instruments
The directors use their judgement in selecting an appropriate valuation technique for financial instruments not quoted in an active
market. The fair value is assessed using certain pricing model which involve certain assumptions of market conditions. Favourable or
unfavourable changes to these assumptions would result in changes in the fair value and corresponding adjustments to the amount of gain or
loss in the income statement.
5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES ON FINANCIAL INSTRUMENT
The Group's major financial instruments include loan receivables, pledged bank deposit, cash and cash equivalents, deposits and other
receivables other payables, other financial liabilities and bank borrowings. Details of these financial instruments are disclosed in the
respective notes. The risks associated with these financial instruments and the policies applied by the Group to mitigate these risks are
set out below. Management monitors these exposures to ensure appropriate measures are implemented in a timely and effective manner.
(1) Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the bases of measurement and
the bases on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity
instrument are disclosed in Note 3 to these preliminary results.
(2) Categories of financial instruments
At 31 December At 31 December
2007 2006
HK$'000 HK$'000
Financial assets
Financial assets at FVTPL - 4,401
Loans and receivables (including cash and
cash equivalents) 164,499 218,014
Financial liabilities
Financial liabilities at FVTPL (excluding 6,942 9,836
liabilities under Phantom Scheme)
Financial liabilities at amortised cost 349,453 217,940
(3) Financial risk management objectives
The Group monitors and manages the financial risks relating to the operation through analysing exposures by degree and magnitude of
risks. These risks, including market risk, foreign currency risk and liquidity risk, associated with these financial instruments and
policies applied by the Group to mitigate these risks are set out below. Management monitors these exposures to ensure appropriate measures
are implemented in a timely and effective manner.
Market risk
The Group's activities expose primarily to the financial risks of changes in interest rates and foreign currency exchange rates (see
below).
There has been no change to the Group's exposure to market risks or the manner in which it manages and measures the risk.
Interest rate risk
The Group's fair value interest rate risk relates primarily to its fixed rate borrowings. The Group currently does not use any
derivative contracts to hedge its exposure to interest rate risk. However, management will consider hedging significant interest rate
exposure should the need arise. The Group maintains the bank borrowings in short-term borrowings to mitigate the interest rate risk.
Currency risk
Several subsidiaries of the Company have foreign currency assets and liabilities, which expose the Group to foreign currency risk.
Certain pledged bank deposits and bank borrowings of the Group are denominated in US Dollar. The Group currently does not have a foreign
currency hedging policy. However, management monitors foreign exchange exposure and will consider hedging significant foreign currency
exposure should the need arise.
The carrying amount of the Group's foreign currency denominated monetary assets and monetary liabilities at the respective balance sheet
dates are as follow:
At 31 December At 31 December
2007 2006
HK$'000 HK$'000
Assets
US Dollars 141,257 124,721
======= =======
Liabilities
US Dollars 21,870 29,924
======= =======
Foreign currency sensitivity
The Group is mainly exposed to the US Dollar. The following table details the Group's sensitivity to a 5% increase and decrease in the
functional currency of the respective Group entity, against US Dollar. The sensitivity analysis includes only outstanding foreign currency
denominated monetary items and adjusts their translation at the year end for a 5% change in foreign currency rates. If there is 5% increase
in RMB against US Dollar, the increase in the loss for the year is shown as below. For a 5% decrease in RMB against US Dollar, an equal and
opposite impact would be resulted in the loss for the year.
At 31 December At 31 December
2007 2006
HK$'000 HK$'000
US Dollars
Increase in loss for the year 5,969 4,740
_____ _____
_____ _____
Credit risk
The Group's credit risk is primarily attributable to loan receivables, its trade receivables and pledged bank deposits and cash and cash
equivalents. At the balance sheet date, the Group's maximum exposure to credit risk which will cause a financial loss to the Group due to
failure to discharge an obligation by the counterparties arises from the carrying amount of the respective recognised financial assets
stated in the balance sheet.
In order to minimise the credit risk, management of the Group has delegated a team responsible for determination of credit limits,
credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In this regard, the
directors of the Group consider that the Group's credit risk is significantly reduced.
The credit risk on pledged bank deposits and cash and cash equivalents is limited because the counterparties are banks with high
credit-ratings assigned by international credit-rating agencies.
The Group has concentration of credit risk as 45.21% (2006: 38.82%) and 82.19% (2006: 79.39%) of the total trade receivables was due
from the Group's largest customer and the five largest customers respectively within the advertising and home shopping business segment.
Capital risk
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the
return to stakeholders through the optimisation of the debt and equity balance. The Group's overall strategy remains unchanged from prior
year.
The capital structure of the Group consists of debt, net of cash and cash equivalents and equity attributable to equity holders of the
Company, comprising issued share capital, reserves and accumulated losses.
The directors of the Company review the capital structure on a semi-annual basis. As part of this review, the directors consider the
cost of capital and the risks associates with each class of capital. Based on recommendations of the directors, the Group will balance its
overall capital structure through new share issues as well as the issue of new debt or the redemption of existing debt.
Liquidity risk
As stated in Note 2, the Group's accumulated losses are HK$655,218,000, its current liabilities exceeded its current assets by
HK$174,961,000 and its total liabilities exceeded its total assets by HK$136,047,000 at 31 December 2007. In addition to taking action to
improve the financial performance, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management
to finance the Group's operations and mitigate the effects of fluctuations in cash flows. The management monitors the utilisation of bank
borrowings and ensures compliance with loan covenants.
The Group relies on bank borrowings and shareholders' funding as significant sources of liquidity. To mitigate the liquidation risk,
the Group plans to obtain cash injection to eliminate the working capital deficiency position according to the unconditional commitment by
shareholders. The first batch of funds injection of HK$ 35,000,000 through financial institutions supported by the shareholders will be
obtained on or before 30 May 2008, in which HK$20,000,000 has been granted under a banking facility letter dated 30 April 2008. At the same
time, the Group is in negotiation with bank to obtain additional bank facilitates.
The following table details the Group's remaining contractual maturity for its financial liabilities. For non-derivative financial
liabilities, the table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which
the Group can be required to pay. The table includes both interest and principal cash flows.
For derivative instruments settled on a net basis, undiscounted net cash (inflows)/outflows are presented. Where they require gross
settlement, the undiscounted gross (inflows) and outflows on these derivatives are shown in the table.
6 months Total undiscounted Total
On demand or less 6-12 months cash flow carrying amount
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
At 31 December 2007
Non-derivative financial
liabilities
Fixed rates bank borrowings - 322,300 - 322,300 320,734
Trade payables 544 7,337 - 7,881 7,881
Other payables 11,174 - 9,140 20,314 20,314
Amount due to a minority 524 - - 524 524
shareholder
____ _____ ____ _____ _____
12,242 329,637 9,140 351,019 349,453
Derivative financial 6,942 - - 6,942 6,942
liabilities
____ _____ ____ _____ _____
19,184 329,637 9,140 357,961 356,395
_____ _____ _____ _____ _____
_____ _____ _____ _____ _____
At 31 December 2006
Non-derivative financial
liabilities
Fixed rates bank borrowings - 208,149 - 208,149 206,500
Trade payables 512 - - 512 512
Other payables 11,595 - 4,159 15,754 15,754
Amount due to a minority 526 - - 526 526
shareholder
____ _____ ____ _____ _____
12,633 208,149 4,159 224,941 223,292
Derivative financial 9,836 - - 9,836 9,836
liabilities
____ _____ ____ _____ _____
22,469 208,149 4,159 234,777 233,128
_____ _____ _____ _____ _____
_____ _____ _____ _____ _____
Fair value of financial instruments
The fair value of the Group's financial assets and financial liabilities (excluding derivative instruments) are determined in accordance
with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and
dealer quotes for similar instruments.
The fair value of derivative instruments is determined using option pricing models.
The directors of the Company consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost
in the financial statements approximate their fair values.
6. SEGMENT INFORMATION
For management purpose, the Group is organised into two major operating divisions - Qinghai TV advertising business and home shopping
business. These divisions are the basis on which the Group reports its primary segment information. The principal products and services of
each of these divisions are as follows:
Qinghai TV business - the sales of advertising time in PRC through
Qinghai TV
Synthesis Channel
Home shopping business - the sale of goods via TV home shopping program in
PRC
Other operations - business other than the above
Segment information about these businesses is presented below.
Advertising Home shopping Other operations Elimination Consolidated
2007 2006 2007 2006 2007 2006 2007 2006 2007 2006
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
REVENUE
External Sales 14,580 13,541 11,399 - 360 - - - 26,339 13,541
Inter-segment sales 56,412 - - - - - (56,412) - - -
_____ _____ ____ ____ ____ ____ ____ ____ _____ _____
Total 70,992 13,541 11,399 - 360 - (56,412) - 26,339 13,541
_____ _____ ____ ____ ____ ____ ____ ____ _____ _____
_____ _____ ____ ____ ____ ____ ____ ____ _____ _____
RESULT
Segment result (118,206) (175,184) (20,880) - (3,656) - - - (142,742) (175,184)
_____ _____ ____ ____ ____ ____ ____ ____
Unallocated corporate (18,579) -
expenses
Finance costs (15,394) (13,880)
Interest income 7,453 3,004
Income Tax - -
_____ _____
Loss for the year (169,262) (186,060)
_____ _____
_____ _____
OTHER INFORMATION
Segment assets 56,279 276,102 17,912 - 9,564 - 83,755 276,102
Unallocated corporate assets 151,098 -
_____ _____
Consolidated total assets 234,853 276,102
_____ _____
Segment liabilities 15,310 252,773 9,288 - 339 - 24,937 252,773
Unallocated corporate 345,963 -
liabilities
_____ _____
Consolidated total 370,900 252,773
liabilities
_____ _____
Depreciation and 7,031 6,718 504 - - - 7,535 6,718
amortisation
Unallocated 866 -
_____ _____
8,401 6,718
_____ _____
_____ _____
Allowance for bad and 1,793 13,074 - - - - 1,793 13,074
doubtful debts
_____ _____
_____ _____
Write-off of amount due from
a fellow subsidiary 94 - - - - - 94 -
Unallocated 1,795 -
_____ _____
1,889 -
_____ _____
_____ _____
Impairment and write-off of
programme and film rights 751 10,031 - - - - 751 10,031
_____ _____
_____ _____
Capital expenditure 7,692 16,331 3,243 - 3,329 - 14,264 16,311
Unallocated 133 -
_____ _____
14,397 16,331
_____ _____
_____ _____
The Group's revenue and results are substantially derived from business segments within PRC and substantially all of the Group's assets
and customers are located in PRC, accordingly, no geographic segment information is presented.
7. REVENUE
Revenue represents (i) income from the sales of advertising airtime; (ii) income from the sale of goods from TV home shopping; (iii)
event promotion income; (iv) and licensing income from the distribution of programmes and films, net of business tax and rebate.
Revenue for the year is analysed as follows:
2007 2006
HK$'000 HK$'000
Advertising income 14,580 13,086
Sale of goods from TV Home Shopping 11,399 -
Event promotion 360 -
Licensing income - 455
________ ________
26,339 13,541
======= =======
8. OTHER INCOME/EXPENSE, NET
2007 2006
HK$'000 HK$'000
Interest income 7,205 3,004
Change in the obligation under phantom Option scheme
charged to profit of loss 4,498 -
Rental income 4,130 3,976
Deemed interest income 248 -
Others 210 1,207
Change of fair value of call and put option
charged to profit or loss (1,507) -
________ _________
Total 14,784 8,187
======= =======
9. FINANCE COSTS
2007 2006
HK$'000 HK$'000
Interest on:
- bank borrowings wholly repayable within five years 15,394 10,503
- loans from ultimate holding company and
a fellow subsidiary - 3,377
________ ________
15,394 13,880
======= =======
10. 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
operations in the PRC during 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 PopTV Trade Development Company Limited
which are subject to a preferential rate of 15% because they are established in Zhuhai, a special economic zone in PRC.
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:
2007 2006
HK$'000 HK$'000
Loss before taxation (169,262) (186,060)
======= =======
Tax at the preferential domestic income tax rate of 15% (25,389) (27,909)
(2006: 15%),
Tax effect of different tax rates of subsidiaries (1,173) 9,012
Tax effect of expenses not deductible for tax purpose 3,547 2,726
Tax effect of tax losses not recognised 22,690 16,113
Tax effect of other deferred tax assets not recognized 325 58
________ ________
Tax charge for the year - -
======= =======
On 16 March 2007, the People's Republic of China promulgated the Law of the People's Republic of China on Enterprise Income Tax (the
"New Law") by Order No. 63 of the President of the People's Republic of China. On 6 December 2007, the State Council of the PRC issued
Implementation Regulations of the New Law. The New Law and Implementation Regulations will change the tax rate applicable to the Group
effective 1 January 2008. For enterprises previously enjoying the enterprise income tax rate of 15%, the tax rate will be applied as
follows from 2008 and thereafter.
Effective tax rate Year
18% 2008
20% 2009
22% 2010
24% 2011
25% 2012 and thereafter
For the enterprises previously applicable to the enterprise income tax rate of 33%, the applicable tax rate of 25% should be applied
from 2008 and thereafter.
11. LOSS FOR THE YEAR
Loss for the year has been arrived at after charging (crediting):
2007 2006
HK$'000 HK$'000
Directors' emoluments 4,061 8,191
Expenses recognized in respect of other staffs
share-based payments transactions with cash - 13,559
alternatives
Other staff's salaries 30,759 24,453
Retirement benefit scheme contributions
in respect of other staff 3,440 2,092
________ ________
Total staff cost 38,260 48,295
________ ________
Auditors' remuneration 1,125 1,530
Allowance for bad and doubtful debts 1,793 13,074
Write-off of amount due from a fellow subsidiary 1,889 -
Depreciation of property, plant and equipment 8,401 6,470
Impairment and write-off of programme and film rights
(included in administrative expenses) 751 10,031
Amortisation of programme and film rights - 248
Share-based payment expenses to a consultant - 712
Write off of programming prepayments - 1,183
Loss on disposal of property, plant and equipment 8 19
Change in obligation under phantom option credited to
profit and loss (4,498) -
Change of fair value of call and put options charged to
profit or loss 1,507 -
Loss arising from initial recognition of a loan 3,275 1,627
receivable
Rental income under operating leases in respect of
premises, net of insignificant outgoings
- office premises (4,130) (3,976)
Foreign exchange loss 406 1,819
Deemed interest income (248) -
Bank interest income (7,205) (3,004)
======= =======
12. LOSS PER SHARE
The calculation of the basic and diluted losses per share attributable to ordinary equity holders of the Company is based on the
following data:
Losses
2007 2006
HK$'000 HK$'000
Losses for the purposes of basic and diluted
losses per share being losses attributable
to equity holders of the Company (169,262) (186,060)
======= =======
Number of shares
2007 2006
Weighted average number of ordinary shares for the 44,116,238 34,399,203
purposes of calculating basic and diluted losses per
share
======== ========
The weighted average number of ordinary shares is calculated after eliminating the shares in the Company held by the employee benefit
trust. The computation of diluted loss per share does not assume the exercise of the outstanding share options since they would result in a
decrease in loss per share.
The Company was incorporated on 20 September 2006 and issued 39,878,289 shares on 19 October 2006 in connection with the acquisition of
CCL, which was accounted for as a reorganisation of entities under common control. In calculating EPS for the year ended 31 December 2006
the weighted average number of shares for the period prior to 19 October 2006 has been computed by multiplying the number of CCL shares in
issue by the exchange ratio.
-END-
This information is provided by RNS
The company news service from the London Stock Exchange
END
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