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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Hong Kong Television Network Ltd. (MM) | NASDAQ:CTEL | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 6.08 | 0 | 01:00:00 |
CITY TELECOM (H.K.) LIMITED
|
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By: | /s/ Lai Ni Quiaque | |||
Name: | Lai Ni Quiaque | |||
Title: | Executive Director, Chief Financial Officer and Company Secretary | |||
ANNUAL REPORT 2008
Turning Impossible Into Possible City Telecom (H.K.) Limited Stock Code SEHK: 1137; NASDAQ: CTEL _y _____ : 1137; ,,t : CTEL |
Established in 1992, City Telecom (H.K.) Limited (SEHK : 1137, NASDAQ : CTEL) is a fast growing and innovative provider of residential and corporate fixed telecommunications network and international telecommunications services in Hong Kong. Its wholly-owned subsidiary, Hong Kong Broadband Network Limited, is a major fixed telecommunications network services operator, providing broadband Internet access up to 1Gbps, telephony, IPTV, corporate and mobile data services with its self-built Metro Ethernet IP network. In addition to the operations in Hong Kong, the Group also has branch offices in Canada and Guangzhou. Contents Statistical Review 02 Corporate Information 04 Major Milestones and Events 05 Major Milestones and Events in 2008 07 Supplement on Marathon Participation 08 Recognition 09 An Interview with the Chairman 10 Products at a Glance 12 Brand Management 14 Our Network 22 Managements Discussion and Analysis 26 Profile of Directors and Senior Management 32 Financial Information Corporate Governance Report 37 Report of the Directors 45 Independent Auditors Report 55 Consolidated Income Statement 56 Balance Sheet 57 Consolidated Statement of Changes in Equity 59 Consolidated Cash Flow Statement 60 Notes to the Financial Statements 61 Five-Year Financial Summary 108 |
City Telecom (H.K.) Limited Statistical 02 Annual Report 2008 Review Turnover HK $ 000 Number of Registered Broadband Subscriptions Number of Registered Voice-over-IP Subscriptions Number of Registered IP-TV Subscriptions |
Statistical Review 03 City Telecom (H.K.) Limited Annual Report 2008 Number of Registered International Telecommunications Subscriptions International Telecommunications Traffic Volume Million Minutes Turnover by Principal Activities in 2008 International Telecommunications Services Fixed Telecommunications Network Services |
City Telecom (H.K.) Limited Corporate 04 Annual Report 2008 Information FINANCIAL CALENDAR _____ Legal Adviser to the Company as to U.S. and Hong Kong Laws Full-year Results Jones Day Announced on 17 November 2008 29th Floor, Edinburgh Tower The Landmark Annual General Meeting 15 Queens Road Central 19 December 2008 Hong Kong Auditors LISTING _____ KPMG Certified Public Accountants City Telecom (H.K.) Limiteds shares are listed under the stock 8th Floor, Princes Building code 1137 on The Stock Exchange of Hong Kong Limited and in 10 Chater Road the form of American Depositary Receipts (each representing 20 Central, Hong Kong ordinary shares of the Company) on the Nasdaq Stock Market in U.S. under the ticker symbol CTEL. Share Registrar Computershare Hong Kong Investor Services Limited Directors 46th Floor, Hopewell Centre Mr. WONG Wai Kay, Ricky (Chairman) 183 Queens Road East, Wanchai Mr. CHEUNG Chi Kin, Paul (Vice Chairman) Hong Kong Mr. YEUNG Chu Kwong, William (Chief Executive Officer) Mr. LAI Ni Quiaque + (Chief Financial Officer and American Depositary Bank Head of Staff Engagement) The Bank of New York Mellon Corporation Mr. CHENG Mo Chi, Moses + 101 Barclay Street, 22nd Floor Mr. LEE Hon Ying, John *#+ New York, NY 10286 USA Dr. CHAN Kin Man *#+ Mr. PEH Jefferson Tun Lu *#+ Principal Bankers Non-executive Director Citibank, N.A. * Independent Non-executive Directors 44th Floor, Citibank Tower # Members of the Audit Committee Citibank Plaza + Members of the Remuneration Committee 3 Garden Road Registered Office Central, Hong Kong Level 39, Tower 1, Metroplaza The Hongkong and Shanghai No. 223 Hing Fong Road Banking Corporation Limited Kwai Chung, New Territories, Hong Kong HSBC Main Building Authorised Representatives No.1 Queens Road Central Hong Kong Mr. WONG Wai Kay, Ricky Mr. CHEUNG Chi Kin, Paul Company Secretary Mr. LAI Ni Quiaque |
05 City Telecom (H.K.) Limited Major Milestones _____ Annual Report 2008 and Events 1992 MAY City Telecom (H.K.) Limited (City Telecom) was incorporated in Hong Kong SEPTEMBER 888 International Calling Card Service was introduced 1993 JUNE Switching centre was established in Buffalo, New York, USA 1994 JANUARY Launch of 003 international Guarantee Fax Service SEPTEMBER Launch of GlobaLink International Calling Card Service 1997 JANUARY Launch of IDD300 Calling Service MARCH Set up INC (the Specialized IDD Network for Corporations) for corporate sector AUGUST City Telecom was listed on The Stock Exchange of Hong Kong Limited 1998 FEBRUARY Launch of International Simple Resale (ISR) Fax Service JUNE Launch of CTInets Internet Access Service NOVEMBER The first company to receive the license of ISR voice service in Hong Kong 1999 JANUARY Launch of IDD1666 Direct Calling Service NOVEMBER ADR listing on the Nasdaq National Market of USA 2000 FEBRUARY Hong Kong Broadband Network Limited (HKBN), a subsidiary of City Telecom obtained the Local Wireless FTNS license MARCH Launch of Broadband Internet services by HKBN 2001 MAY CTI International awarded the Satellite-based Fixed Carrier license SEPTEMBER City Telecoms 10th Anniversary 2002 MARCH City Telecom awarded the Cable-based External FTNS license APRIL HKBN officially launched local on-net VoIP telephony service HKBN upgraded to become a wireline-based FTNS licensee JUNE Launch of HKBN IDD0030 service HKBN was confirmed by Cisco Systems to have successfully established the largest Metro Ethernet IP network in the world |
Major Milestones and Events _____ City Telecom (H.K.) Limited 06 Annual Report 2008 2003 AUGUST HKBN officially launched IP-TV service 2004 JULY HKBN launched corporate data services AUGUST HKBN launched off-net residential VoIP service, namely, the Broadband Phone Service NOVEMBER HKBN announced the launch of bb100, Hong Kongs first 100Mbps residential broadband service, and the release of its 1Gbps residential broadband service by 2Q 2005 2005 APRIL HKBN officially launched bb1000 Fibre-to-the-Home 1Gbps residential broadband service SEPTEMBER HKBN conferred as the winner of Global Entrepolis@Singapore Award 2005, which was presented by the Asian Wall Street Journal in association with the Economic Development Board of Singapore OCTOBER HKBN launched 2b Broadband Phone Service, providing VoIP service to local and overseas users via software version broadband phone HKBN has become the first service provider in the world to achieve the Cisco Powered Network Metro Ethernet QoS Certified status 2006 JANUARY HKBN received Best Brand Award 2005 (Broadband Service) from PC Weekly SEPTEMBER City Telecom enhanced Work-Life Balance with the launch of eight employee-beneficial measures OCTOBER Liu Xiang Be Ahead of Yourself marketing campaign won the Certificate of Excellence of HKMA/TVB Awards for Marketing Excellence 2006 2007 MARCH HKBN enhanced Digital TV Platform and launched new application bbBOX HKBN received e-zones e-brand award 2006-07 Best Brand for Internet Service Provider JUNE City Telecom received recognition for its Talent Management at the Hong Kong HR Awards 2007 JULY HKBN was awarded Integrated Support Team of the Year at the Asia Pacific Customer Service Consortium (APCSC) Customer Relationship Excellence Awards (CRE Awards) SEPTEMBER HKBN launched Fibre-To-The-Home (FTTH) residential broadband services FibreHome100, FibreHome200 and FibreHome1000 City Telecoms 15th Anniversary HKBN launched first wave marketing campaign Squeeze NOVEMBER HKBN launched second wave marketing campaign Alexander Graham Bell & Kung Fu Fighting Ants |
07 City Telecom (H.K.) Limited Major Milestones _____ Annual Report 2008 and Events in 2008 JANUARY _____ JANUARY _____ FEBRUARY HKBN launched the free WiFi Service at public _____ HKBN launched Dual Mode High Def inition _____ HKBN awarded contract for the provision rental housing estates _____ Terrestrial TV Receiver and IPTV Set-Top-Box _____ of payphone service at the Hong Kong International Airport MAY _____ SEPTEMBER _____ NOVEMBER HKBN launched third wave marketing _____ HKBN launched the National Geographic _____ HKBN launched fourth wave marketing campaign Thats Ridiculous Channels 3 rst ever Interactive Channel _____ campaign 18 Commercials for the 18 Districts |
City Telecom (H.K.) Limited Supplement on 08 Annual Report 2008 Marathon Participation ...enough to run from Hong Kong to Beijing and half way back... RAISING THE LIMITS OF OUR TALENTS Actively promote internal competitions that encourages teams to compete and have fun, across the full distances; and At City Telecom, we believe in Raising the Limits of our Talents. Offer Special Carbo Spaghetti meals in our Free Zone Hong Kong is renowned as a work oriented city where we spend _____ canteen to reward, recognize and support the runners. a large part of our lives desk-bound. With Work-Life Balance and Raising the Limits of our Talents in mind, we have proactively supported the Standard Chartered Hong Kong Marathon for the CTI GROUP PARTICIPATION IN STANDARD past three years. CHARTERED HONG KONG MARATHON In addition to full corporate sponsorship for the entry fee, we are _____ We have seen our participation rate increase from 64 registrations doing the following: in 2007 to 190 in 2009, representing more than 12% of our total Hong Kong workforce. More impressively, total distance registered · Retain two athletic coaches to provide professional training _____ has increased from 684 km in 2007 to 3,362 km in 2009, which is every Tuesday and Thursday from 7 pm to 9 pm, starting _____ enough to run from Hong Kong to Beijing and half way back. eight months before the main event in February 2009; When we started running in 2007, the full 42 km marathon was · Encourage active support by non-runners for our runners on _____ beyond the limits of our Talents. Today, we have 29 Talents the day; attempting to break this limit. We hope our Talents will bring this strengthened mentality towards achieving our company-wide aspirations. Full _____ Half Number of _____ Marathon _____ Marathon 10 km _____ Total Participants/ Talents Distance (km) 42 21 10 Registered _____ Total km _____ km/Talent 2007 0 4 60 64 684 10.7 2008 3 10 155 168 1,887 11.2 2009 29 48 113 190 3,362 17.7 |
09 City Telecom (H.K.) Limited Recognition _____ Annual Report 2008 1. Hi-Tech Weeklys The Best of The Best Awards 2007-08 Best 5. 1st Runner-up at HKIHRM/SCMP People Management Brand for Internet Service Provider _____ Awards 2007 2. TVB Most Popular TV Commercial Awards 2008 Most 6. APCSC Customer Relationship Excellence Awards for Innovative & Most Popular Series Awards Integrated Support Team of the Year 2006 3. ATV The 14th Annual Most Popular TV Commercial Awards 7. e-zones e-brand award 2006-07 Best Brand for Internet Service Provider 4. Hong Kong HR Awards 2007 Best Retention Strategy |
City Telecom (H.K.) Limited An Interview with 10 Annual Report 2008 the Chairman Dear Fellow Shareholders, As Chairman of the Group, I wish to share with you the most pressing strategic issues that we face in the form of Questions and Answers. ON BUSINESS DIRECTION Q The Company has invested in a lot of effort to enhance its brand and image. What do you think of the progress? A This is a very important step for us towards achieving our Big, Hairy & Audacious Goal (BHAG) of becoming the largest Next Generation Network (NGN) provider in Hong Kong by 2016. We have already been recognized by the industry that our Fibre-to-the-Home network in Hong Kong is one of the most advanced networks worldwide. We need to let the consumers and investors know the same, even though most of them do not understand the technical details. Most of them are only guided by the common belief, that the bigger Company should normally have a better technology, which is not always correct. According to all of the consumer surveys conducted in the past 18 months, HKBN has been rated as the 2nd best Internet Service Provider in Hong Kong, and is far better than the 3rd and the 4th ones. Our rating is very close to the dominant player. Our aim is to be ahead of them. Q What particular achievement makes you feel most satisfied? A Company Culture. We are an infrastructure company. We will be in Hong Kong over the next 100 years. We will not be acquired by other big companies. We understand that our future depends on how we behave today. We understand our technology edge over the dominant player today cannot last forever. We need to build up something which is long term and not easy to be copied by others. This is our Company Culture. For details, please refer to our Vision Statement at http://www.ctigroup.com.hk/en/vision.html. I am glad that, we have been making very good progress in implementing our Vision Statement step by step over the last year. We have also seen significant achievements in: Staffs job satisfaction, trust and loyalty to the Company Consumers satisfaction in our overall services What is the most dissatisfied item for me? Delay in network rollout. We will increase our resources in this area to ensure that we can meet the target in the coming year. Q Do you think these achievements help the company to be on the right track of achieving BHAG? A Yes, absolutely. BHAG is a long term goal. Company culture is essential for the company to last. Staff morale is essential for providing excellent customer services. Customers satisfaction is essential for giving us the highest return to our investment. Highest Return on Investment is essential for achieving our BHAG. I am confident that we are on the right track of achieving the BHAG, even though the road ahead is tough. |
An Interview with the Chairman 11 City Telecom (H.K.) Limited Annual Report 2008 Q How has the company been affected by the adverse economic environment? A We expect there will be increasing pressure on the whole industrys Average Revenue Per User. However, due to our uniqueness and the excellence of our products and customer services, we believe that we can maintain our position as the 2nd largest broadband provider in Hong Kong residential market and one of the highest ARPU operators. Our senior notes are only due in 2015. So, financing is not a problem and we are not affected by the recent liquidity crunch. In fact, since most of the material costs and labor costs are expected to be lowered in the coming 2 years, this is a good time for us to further expand our Fiber-to-the Home network in full force. Q How would you see the competition environment in telecom market? A With the anticipated adverse economic environment and too many operators in Hong Kong, the competition in the telecom market will remain keen and be even more intensified. I dont see how that can be relaxed. However, as mentioned above, we have something unique (Ultra high speed Internet access and excellent customer service) which will maintain our leading position. Q What will be the companys future direction? A Our future direction is well defined in our Vision Statement We will be the largest Next Generation Network (NGN) provider by 2016. Q If the public was asked to describe HKBN by one word, what word you wish it would be? A CHANGE ON PERSONAL ASPECT Q It seems that the companys management style has changed a lot in recent years. What triggered these changes? A We are an infrastructure company and we will not be acquired by others. This Company will last longer than the life span of me and my fellow partners. We need to build up a system to ensure: 1. Maintaining the company culture; 2. Managing by a team of professionals, rather than any single individual; and 3. Dedicating authority to the front line and motivating all levels of staff. Q The two co-founders are stepping back from the operations of the company. What do you think about the pros and cons? A A start-up company is driven by entrepreneurship. An enterprise is maintained by a professional team. This is a publicly listed company, not a family business. We, the two co-founders, have been running the company for over 15 years. We now need new ideas and new blood to spur the companys growth. Q Hows the progress of de-centralizing authority? To what stage is the transition at? Are there any issues that the company is facing, and how did you solve them? A The move towards de-centralizing authority has been a huge success and up to my expectation. We will further push down to front line customer contact points to ensure we can build a closer relationship with our customers. Q What do you expect from the new management team? A Dont be afraid to take risk. All big technology companies are exposed to failure risk when they become complacent over their past achievements and is not willing to take risk. I hope the new management team will prepare for all the best and worst scenarios and have the guts to take risks. Wong Wai Kay, Ricky Chairman Hong Kong, 17th November 2008 |
City Telecom (H.K.) Limited Products at a Glance 12 Annual Report 2008 1. Lam Sin Man, Winnie Management Trainee 2. Zhu Wei Jian, Franky Officer General Affairs & Control 3. Lau Ka Yan, Clare Management Trainee 4. Chan Pui Chi, Kathy Management Trainee BROADBAND SERVICE With our fibre network, users can experience 25Mbps, 50Mbps, 100Mbps, 200Mbps and 1000Mbps broadband services with symmetric upload and download speeds. bbMAX provides comprehensive value-added services to our users, including: bbWI3FI We have hotspots all over Hong Kong, which allow users to go online easily with their electronic devices. bbWATCH Allow users to enjoy dedicated splendid TV programmes provided by HKBNs bbTV through their personal computer. bbDRIVE Provide online virtual storage up to 10GB, user-friendly interface and limitless volume file transfer; Users can also back-up their important documents/files safely with bbDrive. |
Products at a Glance 13 City Telecom (H.K.) Limited Annual Report 2008 5. Lu Hui, Simone Training Officer 6. Leung Lee Nam, LurLee Management Trainee 7. Liang Zhan Peng, Brian Customer Relations Supervisor bbGUARD Filter away problematic and spam virus emails at the server before reaching your email in-box. bbMAINT Provide one stop solution to our users in order to help them solve their non-network technical problems. getFAXEASY A service for receipt of fax via a designated email to your personal computer. We will also provide user a Fax to Email personal fax number in order to enhance user privacy. IP TV SERVICE bbTV service now delivers over 80 TV channels, mainly in Chinese language, including 24-hour news channel, movies, animation, Chinese opera, financial news, international news, and entertainment as well as interactive channels, such as stock quote, ringtone download & interactive quiz. TELEPHONY SERVICE HKBN has been providing quality HomeTel Service to Hong Kong people since 2002. We also provide 14 different add-valued services to our users. 2B 2ND GENERATION BROADBAND PHONE 2b 2nd Generation Broadband Phone is a new telephone service and its reliability is as good as traditional fixed line telephone service. 2b enables you to make and receive phone calls from Hong Kong (either home telephones, office telephone or mobile phones) through the Internet wherever you are in Hong Kong or overseas. IDD Our international direct calling services, IDD 1666 & IDD 0030 , allow quality and instant connection to overseas. |
City Telecom (H.K.) Limited Brand 14 Annual Report 2008 Management Our ultimate goal is to be the largest Next Generation Network provider in Hong Kong by 2016 BRAND MANAGEMENT Background Hong Kongs telecommunications market is characterized by intense competition and smart consumers. To succeed, we need the best product, the best service and the best image. From a humble beginning as an IDD service reseller in 1992, we established Hong Kong Broadband Network Limited in 1999 to engage in fixed telecommunications network services. With perseverance, we are laying the foundation for future success. Today, we are two years into our 10-year goal of becoming the largest Next Generation Network provider by 2016. We are pleased to report we are making significant progress, having recently overtaken the incumbent cable TV operator in terms of the number of broadband subscribers and become the largest alternative residential broadband Internet Service Provider in Hong Kong. |
Brand Management
15
City Telecom (H.K.) Limited
Annual Report 2008
Lo Wai Man, Daniel
Manager Finance |
Brand Management _____ City Telecom (H.K.) Limited 16 Annual Report 2008 STAGE 1 STAGE 2 STAGE 3 STAGE 4 STAGE 5 The Brand Evolution Stage 1: Building Network Infrastructure HKBN believes that having the best and most advanced network infrastructure is the fundamental to success. Contrary to other new entrants that typically rely on the incumbent for unbundled resale, we built our own Metro Ethernet network and optic fibre backbone, thereby controlling the end-to-end process on service provisioning and network. This autonomy allows us to offer superior service and value to our customers. (Picture 1: Worker excavation) Stage 2: Service Enhancement In 2005, we began enriching our broadband product spectrum. Going beyond bb10, our basic 10Mbps symmetric broadband connection, we launched bb25, bb50, bb100, bb200 and bb1000, thus providing the widest variety in town catering for every need of broadband users. Another milestone is the Stability Speed Guarantee launched in 2005 which today is still the only service in Hong Kong offering a local speed guarantee. (Picture 2) |
Brand Management 17 City Telecom (H.K.) Limited Annual Report 2008 Stage 3: Service Sublimation Care from the Heart, Serve with Swift Actions Customer experience comprises many small elements. Be it product quality, sales service, installation work, enquiry processing, etc., they are all vital components of our brand experience. Since October 2006, we have redesigned uniforms (Picture 3) for our residential sales team, and also enhanced their skills through internal and external training including celebrity speakers (Picture 4 Alfred Cheung) . In December of the same year, a new Customer Service Centre was opened for providing better service to our customers (Picture 5) . In 2007, we introduced the Special Duty Unit, a customer account management system. Carrying the meaning of Service Devoted to You, this personalized customer care system assigns a designated customer service executive to handle customers individually (Picture 6) . Instead of standard hotlines, our customers now enjoy personal access to their account managers, similar to a premium banking experience. Stage 4: From External to InternalHappy Staff Bring Happy Customers While customers are our external VIPs, our staff are internal VIPs. The prime aim of the Staff Engagement Department (SED), which comprises Learning & Development, Talent Management and Administration teams, is taking care of every talents needs. We are one of the first local companies to take initiatives on Work-Life Balance, voluntarily introducing a five-day work week and offering paternity leave. Other company benefits include an Education Partnership Programme whereby we actively co-invest in our staff for continuous life-long learning. We have also enhanced staff facilities by establishing a Life-Time Learning Centre and Free-Zone Multi-Purpose staff canteen (Picture 7) . More than HK$3 million was invested to replace LCD monitors and ergonomic chairs (Picture 8) for staff at our main Trans Asia office location. |
Brand Management
_____
City Telecom (H.K.) Limited
18 Annual Report 2008
Lau Chi Kong, Kenneth
Assistant Manager Finance |
Brand Management
19
City Telecom (H.K.) Limited
Annual Report 2008
Stage 5: Consumer Market Education
From internal to external, from hardware to software, the company has undergone a revolution like a rebirth. A step further is to let the public know what we have done. Waves of marketing campaigns brought this target into reality. 1. First Wave: Network Differentiation The Squeeze educates the public the kind of broadband services they are using. It featured characters squeezing into a thin tube representing how the incumbent carrier is still providing broadband Internet service through legacy-copper telephone lines. (Picture 9) 2. Second Wave: Consumer Education A character representing telephone inventor Alexander Graham Bell emphasizes that copper telephone wire invented 100 years ago was not designed for present day broadband connection. This is followed by 10 Kung-Fu Fighting Ants ganging up on a single helpless ant to demonstrate how traditional Asymmetric Digital Subscriber Line (ADSL) services typically offer uplink bandwidth that is only a 10th of the downlink capacity. (Picture 10 &11) 3. Third Wave: Rally Public Momentum Thats Ridiculous presents characters singing a hugely popular 1980 canto pop rock song and chiding the continued use old telephone lines for broadband services, conveying the message its time to switch to optic fibre. (Picture 12) 4. Fourth Wave: Building Long-term Creditability The 18 commercials for the 18 districts demonstrate HKBN has fibre optic broadband in every Hong Kong district, celebrating the achievements of the brand. Each commercial, with a scene typical of the district, shows how HKBN fibre optic is discovered in an unusual way, surprising the public that HKBN has all of Hong Kongs districts covered with its fibre optic network. (Picture 13) These multi-dimensional campaigns spanned a wide range of media, including TV commercials, print advertisements, billboards and advertising space on various public transport, carrying home the message optic fibre is the present and future trend for high speed broadband service. |
Brand Management _____ City Telecom (H.K.) Limited 20 Annual Report 2008 What have we achieved? Spanned over years with great e3 orts, we have been rewarded with achievements in many aspects, leading us towards our Big, Hairy & Audacious Goal. REAPING BRAND RESULTS Magazine Surveys · Next Magazine, the popular local weekly infotainment magazine, receives complaints on all consumer products and services. · A complaint ranking system was established in 2003 to show the top 10 companies receiving the most consumer complaints quarterly. · In the second quarter of 2008, HKBN is the only major telecom operator NOT on the list. Commissioned Consumer Survey Results · The survey was conducted from 19 July to 3 August 2008 by the global market research company, Synovate. · A total of 203 street interviews were conducted with respondents aged 15-54 who have access to Internet through residential broadband. Aged _____ Aged 15-29 30-54 89 114 interviewees _____ interviewees TOTAL 203 INTERVIEWEES |
Brand Management 21 City Telecom (H.K.) Limited Annual Report 2008 i. Non-HKBN users agree HKBN is as good if not better than the incumbent; 1. 68% Network Speed (December 2007 66%; May 2008 57%) 2. 61% Network Stability (December 2007 57%; May 2008 48%) 3. 70% Customer Services (December 2007 53%; May 2008 59%) ii. Switching 67% of non-HKBN users agree to consider HKBN when they switch to a new ISP (December 2007 54%; May 2008 46%) 33% DISAGREE 67% AGREE Brand Recognition This year, we proved our branding exercise is a success by winning the award at ATVs 14th Annual Most Popular TV Commercial Awards Competition, and the Most Innovative Award and the Most Popular Series Award at TVBs Most Popular TV Commercial Awards Contest. REAPING FINANCIAL RESULTS 3.3 x increase in net profit to HK$125.2 million, driven by record high profitability in our Fixed Telecom Network Service business. |
City Telecom (H.K.) Limited Our Network 22 Annual Report 2008 Self-built Next Generation Fibre Network COVERAGE Our broadband network currently covers 1.5 million Hong Kong households and we will continue to expand towards the 2.0 million target by 2010, reaching over 90% of all homes in Hong Kong. FIBRE3TO3THE3HOME We are the first ISP to deploy Fibre-To-The-Home (FTTH) in the local residential market while our competitors still predominately use copper wires for their last mile. Our 100% self-built IP network (Metro-Ethernet) with cumulative investment of HK$2.6 billion, is independent from the incumbent operator, which empowers us to offer superior service and value to our customers. Our symmetrical bandwidth ensures unbeatable speed for both uploading and downloading. For example, our bb100 service takes only seven minutes to upload or download a 4.3GB DVD film. CAPACITY Our Metro Ethernet has the bandwidth that should be more than sufficient to meet the demand for next five years. If necessary, we can further upgrade our capacity to 64,000Gbps readily. |
Our Network
23
City Telecom (H.K.) Limited
Annual Report 2008
Yeung Chi Ho, Henry
Senior Manager Network Development (Local Network) |
Our Network _____ City Telecom (H.K.) Limited 24 Annual Report 2008 Fibre-to-the-Home Connectivity |
Our Network 25 City Telecom (H.K.) Limited Annual Report 2008 Internet HKBN network operation center Direct connect to users premises with territory- wide optic fibre network RELIABILITY Currently, we maintain more than 400 computers located at various buildings, simulating user experience to conduct 24-hour network testing. This has ensured that we are closely monitoring our network performance. In addition, we have bandwidth over provision to ensure quality service during periods of heavy traffic congestion. APPLICATIONS Our self-built optic fiber network offers tremendous flexibility, allowing us to be the first operator in Hong Kong to deliver triple-play broadband Internet access, telephony and fully-digitalized IP-TV in 2003, as well as other services such as corporate and mobile data services, all within a single network. PARTNERSHIP To meet the needs of our rapidly increasing subscribers, we collaborated with international carrier to increase our bandwidth by over 60% in 2007-2008. Also, we partner with game operators to provide stable and high speed online game experience to online gamers . In terms of cost per Mbps, our services are among the best value in the world. Our dream of empowering the people of Hong Kong is being realized! |
City Telecom (H.K.) Limited Managements 26 Annual Report 2008 Discussion and Analysis Our solid FY2008 result is strong encouragement for our long term vision that fibre is the future. |
For the year ended | ||||||||
31 August | 31 August | |||||||
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
|
||||||||
Turnover
|
1,302,981 | 1,141,270 | ||||||
Earnings before interest, tax, depreciation and amortization (EBITDA
1
)
|
377,964 | 353,827 | ||||||
EBITDA margin
|
29.0 | % | 31.0 | % | ||||
Profit attributable to shareholders
|
125,190 | 28,865 | ||||||
Earnings per share
|
||||||||
Basic (HK Cents)
|
19.7 | 4.7 | ||||||
Diluted (HK Cents)
|
19.0 | 4.6 | ||||||
Total dividend declared per share (HK cents)
2
|
6.0 | 8.0 | ||||||
Capital expenditures
|
211,684 | 132,250 | ||||||
Adjusted free cash flow
3
|
106,739 | 156,744 |
Managements Discussion and Analysis 27 City Telecom (H.K.) Limited Annual Report 2008 |
As at | As at | |||||||
31 August | 31 August | |||||||
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
|
||||||||
Cash position
4
|
421,610 | 547,309 | ||||||
Total equity attributable to equity shareholders
|
1,032,607 | 903,882 | ||||||
Shares in issue (in thousands)
|
650,622 | 616,503 | ||||||
Net assets per share (HK$)
|
1.59 | 1.47 | ||||||
Gearing ratio
|
0.25 | 0.45 |
1 | EBITDA for any period means, without duplication, net income/(loss) for such period, plus the following to the extent deducted in calculating such net income/(loss): net interest expense/(income), income taxes, depreciation and amortisation expense (excluding any such non cash charge to the extent it represents an accrual of or reserve for cash charges in any future period or amortisation of a prepaid cash expense that was paid in a prior period not included in the calculation). | |
2 | For the dividend declared for the year ended 31 August 2008, a scrip or cash option is provided. | |
3 | Adjusted free cash flow means EBITDA minus capital expenditure and net finance costs. | |
4 | Cash position means cash at bank and in hand and long-term bank deposits, but excluding pledged bank deposits. |
Managements Discussion and Analysis _____ City Telecom (H.K.) Limited 28 Annual Report 2008 |
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
|
||||||||
Repayable within one year
|
121 | 835 | ||||||
Repayable in the second year
|
129 | 121 | ||||||
Repayable in the third to fifth year
|
126 | 254 | ||||||
Repayable after the fifth year
|
683,242 | 952,593 | ||||||
|
||||||||
|
||||||||
Total
|
683,618 | 953,803 | ||||||
|
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
|
||||||||
Net Debt (note)
|
262,008 | 406,494 | ||||||
Net Assets
|
1,032,607 | 903,882 | ||||||
Gearing (times)
|
0.25 | 0.45 |
Note: | Net debt is total long term debt and other liabilities and obligations under finance leases less cash at bank and in hand and long term bank deposits but excluded pledged bank deposits |
Managements Discussion and Analysis 29 City Telecom (H.K.) Limited Annual Report 2008 |
Managements Discussion and Analysis _____ City Telecom (H.K.) Limited 30 Annual Report 2008 |
Managements Discussion and Analysis 31 City Telecom (H.K.) Limited Annual Report 2008 |
City Telecom (H.K.) Limited Profile of Directors and 32 Annual Report 2008 Senior Management EXECUTIVE DIRECTORS Mr. WONG Wai Kay, Ricky Mr. CHEUNG Chi Kin, Paul Mr. YEUNG Chu Kwong, Mr. LAI Ni Quiaque Chairman Vice Chairman William Chief Financial Officer, Company Secretary Chief Executive Officer & Head of Staff Engagement NON3EXECUTIVE DIRECTOR INDEPENDENT NON3EXECUTIVE DIRECTORS Mr. CHENG Mo Chi, Moses Mr. LEE Hon Ying, John Dr. CHAN Kin Man Mr. PEH Jefferson Tun Lu SENIOR MANAGEMENT Mr. CHONG Kin Chun, John Mr. LO Sui Lun Dr. TAM Ming Chit Ms. TO Wai Bing Director of Corporate Division Director, Chief Technology Officer Managing Director of Infrastructure Development Business Development |
Profile of Directors and Senior Management 33 City Telecom (H.K.) Limited Annual Report 2008 |
Profile of Directors and Senior Management _____ City Telecom (H.K.) Limited 34 Annual Report 2008 |
Profile of Directors and Senior Management 35 City Telecom (H.K.) Limited Annual Report 2008 |
City Telecom (H.K.) Limited Financial 36 Annual Report 2008 Information We are on the right track of achieving the Big, Hairy, Audacious Goal even though the road ahead is tough. Financial Information Corporate Governance Report 37 Report of the Directors 45 Independent Auditors Report 55 Consolidated Income Statement 56 Balance Sheet 57 Consolidated Statement of Changes in Equity 59 Consolidated Cash Flow Statement 60 Notes to the Financial Statements 61 Five Year Financial Summary 108 |
37 City Telecom (H.K.) Limited Corporate Governance _____ Annual Report 2008 Report |
(i) | Responsibilities | |
The Board has the responsibility for the oversight of the Company, which includes establishing the strategic direction of the Company, setting the long-term objectives of the Company, monitoring the performance of management, protecting and maximizing the interests of the Company and its shareholders, reviewing, considering and approving the annual budget, management results and performance update against annual budget, together with business reports from the management. The Board has focused on making broad policy decisions and has delegated the responsibility for the implementation of business strategy and management of the day-today operations of the Companys business to the management. | ||
All Directors have full and timely access to all relevant information as well as advice and services of the Company Secretary, with a view to ensuring that Board procedures and all applicable rules and regulations are followed. Upon making request to the Board, all Directors may obtain independent professional advice at the Companys expense for carrying out their functions. | ||
(ii) | Board Composition | |
As at the date of the 2008 Annual Report, the Board consists of eight Directors, including four Executive Directors, one Non-executive Director and three Independent Non-executive Directors. The Board believes that the balance between Executive and Non-Executive Directors is reasonable and adequate to provide sufficient checks and balances that safeguard the interests of shareholders of the Company (the Shareholders ) and the Company. | ||
During the year and up to the date of the 2008 annual report, the following changes in the Board composition of the Company took place: |
(i) | Mr. Yeung Chu Kwong, William was appointed as an Executive Director and Chief Executive Officer with effect from 1 November 2008. | ||
(ii) | Mr. Cheung Chi Kin, Paul resigned as the Chief Executive Officer and was appointed the Vice Chairman with effect from 1 November 2008. |
Corporate Governance Report _____ City Telecom (H.K.) Limited 38 Annual Report 2008 |
Mr. Wong Wai Kay, Ricky, Chairman of the Company, is a first cousin of Mr. Cheung Chi Kin, Paul, Vice Chairman of the Company. Save as disclosed above, there are no financial, business, family, other material and relevant relationships among members of the Board as at the date of 2008 Annual Report. | |||
(iii) | Appointment, re-election and removal of directors | ||
Nominations for members to the Board result from consultations among the Chairman, Chief Executive Officer and other Directors as the Board considers appropriate. | |||
Pursuant to the Articles of Association of the Company, any director appointed by the Board for filling a casual vacancy or as an addition to the existing Board shall hold office only until the next following general meeting of the Company, and shall be eligible for re-election. Every director, including the non-executive director, is subject to retirement by rotation at least once every three years. One-third of the directors must retire from office at each annual general meeting and their re-election is subject to the approval of Shareholders. | |||
In compliance with the provisions of the Articles of Association of the Company, Mr. Wong Wai Kay, Ricky, Mr. Cheung Chi Kin, Paul and Mr. Yeung Chu Kwong, William shall retire by rotation at the coming 2008 Annual General Meeting and, being eligible, will offer themselves for re-election. | |||
(iv) | Chairman and Chief Executive Officer | ||
As at the date of the 2008 Annual Report, the Chairman and the Chief Executive Officer of the Company are Mr. Wong Wai Kay, Ricky and Mr. Yeung Chu Kwong, William respectively. The roles of the Chairman and the Chief Executive Officer are segregated. We believe this segregation of duties helps to provide check and balances and as well as provides for balance of power and authority. | |||
(v) | Non-executive Director and Independent Non-executive Directors | ||
The term of office of all Non-executive Director and Independent Non-executive Directors has been fixed for a specific term of one year. They are subject to retirement by rotation and re-election at the Companys annual general meeting in accordance with the Articles and Association of the Company. | |||
During the year ended 31 August 2008, the Board at all times met the requirements of the Listing Rules relating to the appointment of at least three Independent Non-executive Directors with at least one of them possessing appropriate professional qualifications or accounting or related financial management expertise. | |||
The appointment of Independent Non-executive Directors strictly adheres to the guidelines for assessing independence set out in Rule 3.13 of the Listing Rules. The Company has received written confirmation of their independence from each of the Independent Non-executive Directors and considers them to be independent of the Company and free of any relationship that could materially interfere with the exercise of their independent judgments. | |||
(vi) | Number of Meetings and Directors Attendance | ||
The Board meets from time to time, a no less than four times a year, to discuss and exchange ideas on the affairs of the Company. During the year ended 31 August 2008, the Board held six meetings to approve interim and final results announcement, financial reports, to recommend or declare dividends and to discuss significant issues and general operation of the Company. Individual attendance records of each Director at the respective Board and committee meetings are set out in the table on page 40 of this annual report. | |||
(vii) | Practices and Conduct of Meetings | ||
Notices of regular Board meetings together with all relevant information and reports prepared by management are given to all Directors at least 14 days before the meetings. For other Board and Board Committee meetings, reasonable notice is generally given. The Company Secretary is responsible to take and keep minutes of all Board and committee meetings. Draft version of minutes is normally circulated to the Directors for comment within a reasonable time after each meeting and the final version of which is sent to all Directors for their records and is opened for Directors inspection. |
Corporate Governance Report 39 City Telecom (H.K.) Limited Annual Report 2008 |
(viii) | Training for Directors | ||
In case there is any newly appointed Director, he/she will be provided with an induction course so as to ensure that he/she has appropriate understanding of the business and operations of the Company and that he/she is fully aware of his/her responsibilities and obligations under the Listing Rules and the relevant regulatory requirements. | |||
There are also arrangements in place for providing continuing briefing and professional development to Directors whenever necessary. | |||
To assist their continuous professional development, the Company Secretary recommends Directors to attend relevant seminars and courses. The costs for such training are borne by the Company. | |||
In October 2008, the Group has arranged a professional training workshop the Directors and the senior management in order to keep them abreast of the up-to-date knowledge. |
(i) | Audit Committee | |
The Board has established the Audit Committee in March 1999 and set out details of its overall objectives, authority, roles and responsibilities. | ||
The Audit Committee comprises Mr. Lee Hon Ying, John, Dr. Chan Kin Man and Mr. Peh Jefferson Tun Lu, who are Independent Non-executive Directors and one of whom possess the appropriate professional qualifications or accounting or related financial management expertise as required under Rule 3.10(2) of the Listing Rules. Mr. Lee Hon Ying, John is the Chairman for the Audit Committee. The Audit Committee is provided with sufficient resources to discharge its duties. | ||
The major roles and functions of the Audit Committee are set out clearly in the Audit Committee Charter are made available on the website of the Company at www.ctigroup.com.hk. The Audit Committee is responsible for, inter alia, the appointment, compensation, retention and overseeing the accounting and financial reporting processes of the Group and the audits of the Groups financial statements on behalf of the Board of Directors, and reviewing and discussing the internal audit plans and reports of the audit activities, examinations and results thereof of the Internal Audit Department of the Company. | ||
The Audit Committee held four meetings during the year ended 31 August 2008. Executive Directors, representative from the internal audit department of the Company and the external auditor of the Company were invited to join the discussions at the meetings. | ||
Following is a summary of works performed by the Audit Committee during the year ended 31 August 2008: |
(i) | Reviewed the Companys financial statements for the year ended 31 August 2007 and for the six months ended 29 February 2008; | ||
(ii) | Reviewed the internal audit progress, especially on the compliance of the Sarbanes-Oxley Act; | ||
(iii) | Review the external auditors report on the review of the Companys interim financial report for the six months ended 29 February 2008 and the Companys audited consolidated financial statements for the year ended 31 August 2007; and | ||
(iv) | Pre-approved the audit and non-audit services provided by the Companys external auditor. |
Corporate Governance Report City Telecom (H.K.) Limited 40 Annual Report 2008 |
(ii) | Remuneration Committee | |
The Board had established the Remuneration Committee in August 2001. | ||
The Remuneration Committee comprises six members, namely Mr. Lee Hon Ying, John, Dr. Chan Kin Man, Mr. Peh Jefferson Tun Lu, Mr. Cheng Mo Chi, Moses, Mr. Lai Ni Quiaque and Ms. Choy Mei Yuk, Mimi. Mr. Lee Hon Ying, John is the Chairman for the Remuneration Committee. The Remuneration Committee is provided with sufficient resources to discharge its duties. The Remuneration Committees objectives are as follows: |
(i) | Establish a formal, fair and transparent procedures for developing policy and structure of all remuneration of directors and senior management; | ||
(ii) | Review and consider the Companys policy for remuneration of directors and senior management; and | ||
(iii) | Recommend the remuneration packages of non-executive directors (including independent non-executive directors). |
(i) | Reviewed and approved the proposed discretionary performance bonus for the management committee members; | ||
(ii) | Review and approved the remuneration packages for management committee members; | ||
(iii) | Review and approved the remuneration for the Directors. |
Meetings Attended/Held | ||||||||||||
Audit | Remuneration | |||||||||||
Board | Committee | Committee | ||||||||||
meeting | meeting | meeting | ||||||||||
Executive Directors:
|
||||||||||||
Mr. Wong Wai Kay, Ricky
|
6/6 | N/A | N/A | |||||||||
Mr. Cheung Chi Kin, Paul
|
5/6 | N/A | N/A | |||||||||
Mr. Lai Ni Quiaque
#
|
6/6 | N/A | 2/2 | |||||||||
|
||||||||||||
Non-Executive Director:
|
||||||||||||
Mr. Cheng Mo Chi, Moses
#
|
6/6 | N/A | 2/2 | |||||||||
|
||||||||||||
Independent Non-Executive Directors:
|
||||||||||||
Mr. Lee Hon Ying, John *
#
|
5/6 | 4/4 | 2/2 | |||||||||
Dr. Chan Kin Man *
#
|
5/6 | 3/4 | 1/2 | |||||||||
Mr. Peh Jefferson Tun Lu *
#
|
5/6 | 4/4 | 2/2 | |||||||||
|
||||||||||||
Director, Talent Management:
|
||||||||||||
Ms. Choy Mei Yuk, Mimi
#
|
N/A | N/A | 2/2 |
* | Audit Committee Member | |
# | Remuneration Committee Member |
Corporate Governance Report 41 City Telecom (H.K.) Limited Annual Report 2008 |
(I) | Internal Control Environment | |
Internal control system is designed to assist the achievement of business objectives, safeguard assets against unauthorized use or disposition, ensure maintenance of proper accounting records for the provision of reliable financial information for internal use or for publication, and ensure the Group is in compliance with relevant legislation and regulations. This internal control system is designed to provide reasonable assurance against material misstatements, losses and fraud. The Board is responsible for maintaining and reviewing the effectiveness of the Groups internal control system which adopts a top-down risk-based approach to continuously improve the control system in a more effective and timely manner. | ||
(II) | Internal Audit Function | |
Internal Audit Department is established to conduct independent reviews on the Groups internal control based on a risk-and-control approach. The audit plan is reviewed and approved by the Audit Committee on an annual basis. According to the audit plan, Internal Audit Department reviews the managements control regarding reliability of financial information, operations and procedures of various departments through systematic audit procedures to ensure that the internal controls are effective and in compliance with applicable laws and regulations. In addition, other reviews and investigations are carried out on an ad hoc basis. During the course of audit, Internal Audit Department has unrestricted access to all departments, assets, records and personnel of the Group. | ||
Upon completion of audits, the key control deficiencies and corresponding recommendations are discussed and agreed with related department heads. Implementation of recommendations will be followed up in due course. At least twice a year, the significant audit findings and corrective action plans are reported directly to the Chairman and Audit Committee. Copies of internal audit reports are sent to the Chief Financial Officer and external auditors for attention. |
Corporate Governance Report _____ City Telecom (H.K.) Limited 42 Annual Report 2008 |
(III) | Internal Control Assessment | |
The Group continues to improve its comprehensive internal control and risk management regime with reference to the COSO framework (The Committee of Sponsoring Organizations of the Treadway Commission), namely, control environment, risk assessment, control activities, information and communication and monitoring. These include systems for identifying, monitoring and managing risks associated with its business activities as follows: |
1. | An organizational structure with operating policies and procedures, lines of responsibility and delegated authority has been established; | ||
2. | Code of Business Conduct and Ethics, which is applicable to the Directors, management and all other employees of the Group, is adopted to promote honest and ethical conducts; | ||
3. | Corruption and Conflicts of Interest Policy is established to ensure reputation of the Group not to be tarnished by employees dishonesty or corruption, and maintain integrity and effectiveness of the Group as a whole; | ||
4. | Members of the Board and Management Committee who have access to price-sensitive and specific information are bound by the Model Code for Securities Transactions by Directors of Listed Issuers; | ||
5. | Remuneration Committee is established to ensure there is a fair and transparent procedures for developing policy and structure of all remuneration of the Directors and senior management; | ||
6. | Corporate Social Responsibility Report is launched in 2008 to demonstrate the Groups active embracement of Corporate Citizenship; | ||
7. | 6-month rolling budgets for all capital and operating expenditures are prepared and approved by senior management before being adopted; | ||
8. | Monthly management reports on the financial results and key operating statistics of each business segment are reviewed by the Executive Directors. Regular meetings are held with senior management of each business unit to review the actual performance against budget; | ||
9. | A quarterly review of the Groups financial performance is performed by the Board; | ||
10. | Self-Assessment Questionnaires are issued to business units for completion as a basis for evaluating the general system control environment and risks; | ||
11. | Information technology is used to build an automatic control in our computer systems; | ||
12. | Whistleblower policy is established to facilitate the reporting of any improper activities relating to fraud, questionable accounting or internal control matters; | ||
13. | Internal Audit Department produces a monthly video to share with all staff about the global best practices, knowledge on common Hong Kong Ordinance and demonstrate how such controls can improve operational performance; | ||
14. | Engagement of independent professionals and provision of appropriate trainings are used to ensure compliance with applicable laws and regulations; and | ||
15. | External consultants are engaged to provide advisory services as the Directors consider appropriate. |
Corporate Governance Report 43 City Telecom (H.K.) Limited Annual Report 2008 |
(IV) | Compliance with U.S. Sarbanes-Oxley Act 2002 | |
As the Company is listed on the Nasdaq Stock Market in the U.S., it is bound by the provision of
the U.S. Sarbanes Oxley Act 2002 (the SOX Act), which is a legislation seeking to enhance the
transparency and accountability of the companies in the areas of corporate governance and financial
reporting. Under Section
404(a) of the SOX Act, management of the Group is required to include its assessment of the effectiveness of the Groups internal control procedures over financial reporting in the annual report on Form 20-F to be filed with the U.S. Securities and Exchange Commission beginning in the fiscal year ended 31 August 2008, while no external auditors attestation report on such assessment is required in this fiscal year according to Section 404(b) of the SOX Act. |
||
Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purpose in accordance with generally accepted accounting principles (GAAP). With the assistance of Internal Audit Department and external consultants, management of the Group organizes and conducts a comprehensive assessment of internal control over financial reporting based on the control criteria in COSO framework. As of the date of this annual report, management is not aware of any instances of material weaknesses on its internal control over financial reporting. | ||
Nevertheless, the Group has performed an annual review of the effectiveness of its disclosure controls and procedures in 2008. Based on the review, management considers that the Groups disclosure controls and procedures are effective in providing reasonable assurance that all material information is promptly recorded, processed and disclosed. |
Corporate Governance Report City Telecom (H.K.) Limited 44 Annual Report 2008 |
Date | Activities | Speaker | Position | Venue | ||||
|
||||||||
2008
|
||||||||
|
||||||||
NOV
|
DigiWorld Summit 2008 | Alice Wong | Financial Controller | Montpellier, France | ||||
|
Broadband World Australia 2008 | Henry Yeung | Senior Manager, Network Development (Local Network) | Sydney, Australia | ||||
SEP
|
Asian Telecom Tour by Citigroup | NiQ Lai | CFO | Hong Kong | ||||
|
2008 FTTH Conference & Expo | Mike Ng | Senior Manager, Infrastructure Development | Nashville, Tennessee, USA | ||||
AUG
|
Sales & Excellence World 2008 | William Yeung | COO* | Singapore | ||||
|
The CFO Reengineered | Alice Wong | Financial Controller | Kuala Lumpur, Malaysia | ||||
JUL
|
FTTH Council Asia Pacific 2008 Conference | Henry Yeung | Senior Manager, Network Development (Local Network) | Kuala Lumpur, Malaysia | ||||
MAY
|
ROTH 3rd Annual China Discovery Tour | Alice Wong | Financial Controller | Sanya, PRC | ||||
|
The Next Generation CFOs & Finance Directors' Conference | NiQ Lai | CFO | Singapore | ||||
|
Asian Telecom Tour by Merrill Lynch | NiQ Lai | CFO | Hong Kong | ||||
|
Goldman Sachs Underexplored Telcos Corporate Day | NiQ Lai | CFO | Hong Kong | ||||
APR
|
Next Generation Networks 2008 | Alice Wong/ Daniel Lo | Financial Controller/ Manager, Finance | Shanghai, PRC | ||||
MAR
|
10th Annual Carriers World Asia 2008 | Mike Ng | Senior Manager, Infrastructure Development | Hong Kong | ||||
FEB
|
FTTH Council Europe Conference 2008 | Alice Wong | Financial Controller | Paris, France | ||||
|
ROTH 20th Annual OC Growth Stock Conference | NiQ Lai | CFO | California, USA | ||||
JAN
|
UBS Greater China Conference 2008 | NiQ Lai | CFO | Shanghai, PRC | ||||
|
Fifth Annual Citi Asia Pacific Fixed Income Investor Conference | Ricky Wong | Chairman | Singapore | ||||
|
||||||||
2007
|
||||||||
|
||||||||
DEC
|
IPTV World Forum Asia | Ricky Wong | Chairman | Singapore | ||||
|
IMS Global Congress 2007 | Daniel Lo | Manager, Finance | Amsterdam, Netherlands | ||||
NOV
|
ROTH China - Phoenix Conference | NiQ Lai | CFO | Phoenix, USA | ||||
|
HR Directors Forum 2007 | Mimi Choy/ Lurlee Leung | Director, Talent Management/ Management Trainee | Guangzhou, PRC | ||||
|
2nd Annual CFO Forum | NiQ Lai | CFO | Manila, Philippines | ||||
|
Best Practice Award | Thomas Mok | Director, Learning & Development | Hong Kong | ||||
|
Asia Pacific Compensation and Benefits Forum | NiQ Lai/ Mimi Choy |
CFO/
Director, Talent Management |
Hong Kong | ||||
OCT
|
NGN Summit 2007 | Ricky Wong | Chairman | Singapore | ||||
|
3rd Annual VoIP Conference | Mike Ng | Senior Manager, | Kuala Lumpur, Malaysia | ||||
|
India International Summit 2007 - Telecommunications | NiQ Lai |
Infrastructure Development
CFO |
India | ||||
|
Innovation at Work | William Yeung | COO* | Hong Kong | ||||
SEP
|
Submarine Networks World Asia 2007 | S.L.Lo | Director, Infrastructure Development | Singapore |
* | Mr. William Yeung was appointed as an Executive Director and Chief Executive Officer with effect from 1 November 2008. |
45 City Telecom (H.K.) Limited Report of _____ Annual Report 2008 the Directors |
Report of the Directors _____ City Telecom (H.K.) Limited 46 Annual Report 2008 |
Total | ||||||||
Principal | Consideration | |||||||
Value | Paid | |||||||
Month | US$ | US$ | ||||||
December 2007 (note (i))
|
16,850,000 | 17,062,269.10 | ||||||
January 2008 (note (ii))
|
5,000,000 | 4,995,312.50 | ||||||
February 2008 (note (ii))
|
13,797,000 | 13,295,126.98 | ||||||
|
||||||||
|
35,647,000 | 35,352,708.58 | ||||||
|
(i) | total consideration paid included accrued interest | |
(ii) | total consideration paid included accrued interest and brokers commission |
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
On demand or not exceeding one year
|
121 | 835 | ||||||
More than one year but not exceeding two years
|
129 | 121 | ||||||
More than two years
|
683,368 | 952,847 | ||||||
|
||||||||
|
683,618 | 953,803 | ||||||
|
Report of the Directors 47 City Telecom (H.K.) Limited Annual Report 2008 |
# | Audit Committee members | |
* | Remuneration Committee members |
(i) | Mr. Cheung Chi Kin, Paul resigned as the Chief Executive Officer and was appointed the Vice Chairman with effect from 1 November 2008. | |
(ii) | Mr. Yeung Chu Kwong, William was appointed as an Executive Director and Chief Executive Officer with effect from 1 November 2008. |
Report of the Directors _____ City Telecom (H.K.) Limited 48 Annual Report 2008 |
Approximate | ||||||||||||||||||||||||||||
percentage | ||||||||||||||||||||||||||||
interests | ||||||||||||||||||||||||||||
Interests in | in the | |||||||||||||||||||||||||||
underlying | Companys | |||||||||||||||||||||||||||
shares | issued | |||||||||||||||||||||||||||
Interest in shares | Total | pursuant | share | |||||||||||||||||||||||||
Personal | Corporate | Family | interests | to share | Aggregate | capital | ||||||||||||||||||||||
Name of Director | interests | interests | interests | in shares | options | interests | Note (1) | |||||||||||||||||||||
Mr. Wong Wai Kay, Ricky
|
366,684 |
331,637,811
Note (2)(i) |
| 332,004,495 | 14,093,586 | 346,098,081 | 53.19 | % | ||||||||||||||||||||
Mr. Cheung Chi Kin, Paul
|
11,021,389 |
24,324,620
Note (2)(ii) |
| 35,346,009 | 14,093,586 | 49,439,595 | 7.60 | % | ||||||||||||||||||||
Mr. Lai Ni Quiaque
|
| |
10,142,446
Note (3) |
10,142,446 | 8,029,678 | 18,172,124 | 2.79 | % |
(1) | This percentage is based on 650,621,823 ordinary shares of the Company issued as at 31 August 2008. | |
(2) | The corporate interests of Mr. Wong Wai Kay, Ricky and Mr. Cheung Chi Kin, Paul arise through their respective interests in the following companies: |
(i) | 331,637,811 shares are held by Top Group International Limited (Top Group) which is 42.12% owned by Mr. Wong Wai Kay, Ricky; the interests of Top Group in the Company is also disclosed under the section Substantial Shareholders of this annual report. | ||
(ii) | 24,324,620 shares are held by Worship Limited which is 50% owned by Mr. Cheung Chi Kin, Paul. |
(3) | 10,142,446 shares are jointly owned by Mr. Lai Ni Quiaque and his spouse. |
Report of the Directors 49 City Telecom (H.K.) Limited Annual Report 2008 |
(1) | Purpose | |
To grant share options to the eligible participants as incentives and rewards for their contribution to the Company or its subsidiaries. | ||
(2) | Eligible participants | |
Eligible participants include employees, executives or officers (including executive, non-executive and independent non-executive directors) of the Company or any of its subsidiaries, suppliers and professional advisers of the Group. | ||
(3) | The total number of shares available for issue | |
The total number of shares which may be issued upon exercise of options to be granted under the scheme shall not exceed 10% of the shares in issue as at the date of adoption of the 2002 Share Option Scheme on 23 December 2002 (i.e. 50,302,066 shares). Such limit was refreshed by the shareholders in the general meeting held on 29 December 2004 and 24 December 2007 respectively so that the total number of shares which may be issued shall be 10% of the shares in issue as at the date of the said general meeting (i.e. 61,407,340 shares and 62,704,840 shares respectively). As at the date of this annual report, the number of shares available for issue in respect thereof is 47,413,203 shares, representing approximately 7.29% of the issued share capital of the Company as at the date of the annual report. | ||
The shares which may be issued upon exercise of all outstanding options to be granted and yet to be exercised under the 2002 Share Option Scheme and any other share option scheme(s) of the Company at any time shall not exceed 30% of the shares in issue from time to time. No options shall be granted under any scheme(s) of the Company or any of its subsidiaries if this will result in the 30% limit being exceeded. | ||
(4) | The maximum entitlement of each participant under the 2002 Share Option Scheme | |
The total number of shares shall be issued upon exercise of the options granted under the 2002 Share Option Scheme and any other share option scheme(s) of the Company (including exercised, cancelled and outstanding options) to each participant in any 12-month period up to and including the date of grant shall not exceed 1% of the shares in issue as at the date of grant. | ||
Any further grant of options in excess of this 1% limit shall be subject to the issue of a circular by the Company and the approval of the shareholders of the Company in general meeting with such grantee and his associates abstaining from voting and/or other requirements prescribed under the Listing Rules from time to time. | ||
(5) | The period within which the shares must be taken up under an option | |
The period during which an option may be exercised will be determined by the board of directors at its absolute discretion and no option may be exercised more than 10 years from the date of grant. | ||
(6) | The minimum period for which an option must be held before it can be exercised | |
The board of directors is empowered to impose, at its discretion, any minimum period that an option must be held at the time of grant of any particular option. | ||
(7) | The amount payable on application or acceptance of the option and the period within which payments or calls must or may be made or loans for such purposes must be paid | |
Acceptance of the option must be made within 30 days after the date of offer and HK$1.00 must be paid as a consideration for the grant of option. |
Report of the Directors _____ City Telecom (H.K.) Limited 50 Annual Report 2008 |
(8) | The basis of determining the exercise price | ||
The board of directors shall determine the exercise price of each option offered but in any event shall not be less than the highest of: (a) the official closing price of the shares of the Company on the date of offer as quoted in the Stock Exchange quotation sheet; (b) the average of the closing price of the shares of the Company for the 5 business days immediately preceding the date of offer as quoted in the Stock Exchange quotation sheet; and (c) the nominal value of the shares of the Company. | |||
(9) | The remaining life of the 2002 Share Option Scheme | ||
The 2002 Share Option Scheme is valid and effective from 23 December 2002, being the date of adoption, and shall end on the tenth anniversary of such date (both days inclusive). | |||
(10) | Details of the share options granted under the 2002 Share Option Scheme as at 31 August 2008 are as follows: |
Closing price | ||||||||||||||||||||||||||||||||||||||||||||||||
Adjustment | Adjustment | immediately | ||||||||||||||||||||||||||||||||||||||||||||||
to number | to number | Options | before the | |||||||||||||||||||||||||||||||||||||||||||||
Balance | of options | of options | Options | cancelled/ | date on | |||||||||||||||||||||||||||||||||||||||||||
as at | Options | for 2007 | for 2008 | exercised | lapsed | Balance | which the | |||||||||||||||||||||||||||||||||||||||||
Exercise | 1 September | granted | Final | Interim | during | during | as at | options were | ||||||||||||||||||||||||||||||||||||||||
Date of | price | 2007 | during | Vesting | Exercise | Dividend | Dividend | the year | the year | 31 August | granted | |||||||||||||||||||||||||||||||||||||
grant | HK$ | (note i & ii) | the year | period | period | (note i) | (note ii) | (note v) | (note vi) | 2008 | HK$ | |||||||||||||||||||||||||||||||||||||
Directors
|
||||||||||||||||||||||||||||||||||||||||||||||||
Mr. Wong Wai Kay,
Ricky
|
5 January 2005 | 1.5297 | 8,000,000 | | 5 January 2005 to 31 December 2006 | 5 January 2005 to 20 October 2014 | 31,646 | 21,832 | | | 8,053,478 | 1.53 | ||||||||||||||||||||||||||||||||||||
|
22 May 2006 | 0.6554 | 6,000,000 | | 22 May 2006 to 21 May 2009 | 22 May 2007 to 21 May 2016 | 23,734 | 16,374 | | | 6,040,108 | 0.64 | ||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||
Mr. Cheung Chi Kin,
Paul
|
5 January 2005 | 1.5297 | 8,000,000 | | 5 January 2005 to 31 December 2006 | 5 January 2005 to 20 October 2014 | 31,646 | 21,832 | | | 8,053,478 | 1.53 | ||||||||||||||||||||||||||||||||||||
|
22 May 2006 | 0.6554 | 6,000,000 | | 22 May 2006 to 21 May 2009 | 22 May 2007 to 21 May 2016 | 23,734 | 16,374 | | | 6,040,108 | 0.64 | ||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||
Mr. Lai Ni Quiaque
|
3 June 2004 | 1.4700 | 6,000,000 | | 3 June 2004 to 30 April 2006 | 1 May 2005 to 2 June 2014 | | | 6,000,000 | | | 1.47 | ||||||||||||||||||||||||||||||||||||
|
22 May 2006 | 0.6554 | 3,000,000 | | 22 May 2006 to 21 May 2009 | 22 May 2007 to 21 May 2016 | 7,911 | 5,458 | 1,000,000 | | 2,013,369 | 0.64 | ||||||||||||||||||||||||||||||||||||
|
11 February 2008 | 1.8749 | | 6,000,000 | (note iii) | (note iii) | | 16,309 | | | 6,016,309 | 1.86 |
Report of the Directors 51 City Telecom (H.K.) Limited Annual Report 2008 |
Closing price | ||||||||||||||||||||||||||||||||||||||||||||||||
Adjustment | Adjustment | immediately | ||||||||||||||||||||||||||||||||||||||||||||||
to number | to number | Options | before the | |||||||||||||||||||||||||||||||||||||||||||||
Balance | of options | of options | Options | cancelled/ | date on | |||||||||||||||||||||||||||||||||||||||||||
as at | Options | for 2007 | for 2008 | exercised | lapsed | Balance | which the | |||||||||||||||||||||||||||||||||||||||||
Exercise | 1 September | granted | Final | Interim | during | during | as at | options were | ||||||||||||||||||||||||||||||||||||||||
Date of | price | 2007 | during | Vesting | Exercise | Dividend | Dividend | the year | the year | 31 August | granted | |||||||||||||||||||||||||||||||||||||
grant | HK$ | (note i & ii) | the year | period | period | (note i) | (note ii) | (note v) | (note vi) | 2008 | HK$ | |||||||||||||||||||||||||||||||||||||
Employees under
continuous
employment contacts
|
||||||||||||||||||||||||||||||||||||||||||||||||
Employees
|
21 October 2004 | 1.5297 | 8,340,000 | |
21 October
2004 to 31 December 2006 |
1 January 2005 to 20 October 2014 | 32,397 | 21,002 | 821,344 | 473 | 7,571,582 | 1.53 | ||||||||||||||||||||||||||||||||||||
|
3 October 2005 | 0.8100 | 1,000,000 | | 3 October 2005 to 30 September 2006 | 1 October 2006 to 30 September 2015 | | | 1,000,000 | | | 0.79 | ||||||||||||||||||||||||||||||||||||
|
22 May 2006 | 0.6554 | 13,940,000 | | 22 May 2006 to 21 May 2009 | 22 May 2007 to 21 May 2016 | 45,922 | 27,015 | 5,135,805 | 583,162 | 8,293,970 | 0.64 | ||||||||||||||||||||||||||||||||||||
|
3 July 2006 | 0.6773 | 700,000 | | 3 July 2006 to 2 July 2009 | 3 July 2007 to 2 July 2016 | 2,769 | | | 702,769 | | 0.68 | ||||||||||||||||||||||||||||||||||||
|
3 August 2006 | 0.7052 | 70,000 | | 3 August 2006 to 2 August 2009 | 3 August 2007 to 2 August 2016 | 277 | 191 | 30,119 | | 40,349 | 0.69 | ||||||||||||||||||||||||||||||||||||
|
22 November 2006 | 0.7251 | 200,000 | |
22 November
2006 to 14 November 2009 |
15 November 2007 to 14 November 2016 | 534 | 368 | 65,000 | | 135,902 | 0.75 | ||||||||||||||||||||||||||||||||||||
|
23 May 2007 | 2.0219 | 100,000 | | 23 May 2007 to 11 June 2010 | 12 June 2008 to 11 June 2017 | 396 | | | 100,396 | | 2.03 | ||||||||||||||||||||||||||||||||||||
|
12 December 2007 | 2.4403 | | 1,000,000 |
12 December
2007 to 11 December 2010 |
12 December
2007 to 23 December 2012 |
3,956 | | | 1,003,956 | | 2.42 | ||||||||||||||||||||||||||||||||||||
|
6 February 2008 | 1.7652 | | 6,000,000 | (note iv) | (note iv) | | 16,309 | | | 6,016,309 | 1.99 | ||||||||||||||||||||||||||||||||||||
|
15 February 2008 | 1.7652 | | 4,000,000 | (note iv) | (note iv) | | 10,873 | | 3,008,155 | 1,002,718 | 1.79 | ||||||||||||||||||||||||||||||||||||
|
11 March 2008 | 1.8250 | | 300,000 | 11 March 2008 to 10 March 2011 | 11 March 2008 to 23 December 2012 | | 816 | | | 300,816 | 1.80 | ||||||||||||||||||||||||||||||||||||
|
2 May 2008 | 1.7951 | | 1,000,000 | (note iv) | (note iv) | | 2,718 | | | 1,002,718 | 1.72 | ||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||
Total
|
61,350,000 | 18,300,000 | 204,922 | 177,471 | 14,052,268 | 5,398,911 | 60,581,214 | |||||||||||||||||||||||||||||||||||||||||
|
(i) | As a result of allotment of 11,227,213 new shares to shareholders of the Company who elected to receive the 2007 Final Dividend in shares on 4 February 2008, the exercise price of and the number of share subject to the 51,805,000 options outstanding on 21 December 2007 (being the Record Date for determining the entitlement of 2007 Final Dividend) were adjusted pursuant to the 2002 Share Option Scheme with effect from 4 February 2008. The closing price per ordinary share immediately before the date of the grant of the options was HK$1.70. | |
(ii) | As a result of allotment of 8,838,938 new shares to shareholders of the Company who elected to receive the 2008 Interim Dividend in shares on 23 July 2008, the exercise price of and the number of share subject to the 65,296,047 options outstanding on 6 June 2008 (being the Record Date for determining the entitlement of 2008 Interim Dividend) were adjusted pursuant to the 2002 Share Option Scheme with effect from 23 July 2008. The closing price per ordinary share immediately before the date of the grant of the options was HK$1.79. | |
(iii) | The exercise of the options is subject to the performance of the Companys shares. The options shall be exercised not later than 23 December 2012. | |
(iv) | The exercise of the options is subject to certain conditions that must be achieved by the employee. The options shall be exercised not later than 23 December 2012. | |
(v) | During the year ended 31 August 2008, 14,052,268 options were exercised and the weighted average closing price of shares of the Company immediately before the dates of exercise was HK$1.07 per ordinary share. | |
(vi) | During the year ended 31 August 2008, a total of 5,398,911 options were lapsed and no options cancelled. |
Report of the Directors City Telecom (H.K.) Limited 52 Annual Report 2008 |
(11) | In determining the value of the share options granted during the year ended 31 August 2008, the Black-Scholes option pricing model (the Black-Scholes Model) has been used except for the share options granted on 11 February 2008 which adopts the Monte Carlo model. Both models are the most generally accepted methodologies used to calculate the value of options. The variables of the models include expected life of the options, risk-free interest rate, expected volatility and expected dividend yield of the shares of the Company. | |
In determining the value of the share options granted during the year, the following variables have been applied to the models: |
2 May | 11 March | 15 February | 11 February | 6 February | 12 December | |||||||||||||||||||
Measurement date | 2008 | 2008 | 2008 | 2008 | 2008 | 2007 | ||||||||||||||||||
Variables
|
||||||||||||||||||||||||
Expected life
|
5 years | 5 years | 3 years | average 4 years | 5 years | 5 years | ||||||||||||||||||
Risk-free rate
|
2.88 | % | 2.04 | % | 2.16 | % | 2.16 | % | 2.16 | % | 3.10 | % | ||||||||||||
Expected volatility
|
63.56 | % | 63.35 | % | 63.22 | % | 63.32 | % | 63.22 | % | 61.86 | % | ||||||||||||
Expected dividend yield
|
1.97 | % | 1.97 | % | 1.97 | % | 1.97 | % | 1.97 | % | 1.97 | % |
(i) | The expected life is estimated to be 3 to 5 years from the date of grant (the Measurement Date). | ||
(ii) | The risk-fee rate represents the yield of the Hong Kong Exchange Fund Notes corresponding to the expected life of the options as at the Measurement Date. | ||
(iii) | The expected volatility represents the annualised standard deviation of the return on the daily share price of the Company over the period commensurate to the expected life of the options (taking into account the remaining contractual life of the option and the effect of the expected early exercise of the option). | ||
(iv) | The expected dividend yield is based on the historical dividend yield over the last five years. |
The fair value of the options granted during the year is estimated as below: |
2 May | 11 March | 15 February | 11 February | 6 February | 12 December | |||||||||||||||||||
Date of grant | 2008 | 2008 | 2008 | 2008 | 2008 | 2007 | ||||||||||||||||||
Fair value per share option
|
HK$ | 0.83 | HK$ | 0.87 | HK$ | 0.72 | HK$ | 0.41 | HK$ | 0.90 | HK$ | 1.13 |
Effective from 1 September 2005, upon the adoption of Hong Kong Financial Reporting Standard 2 Share-based payment, the Group recognises the fair value of share options as an expense in the income statement over the vesting period, or as an asset, if the cost qualifies for recognition as an asset. The fair value of the share options is measured at the date of grant. | ||
Both the Black-Scholes Model and Monte Carlo Model, applied for the determination of the estimated value of the options granted under 2002 Share Option Scheme require input of highly subjective assumptions, including the expected stock volatility. As the Companys share options have characteristics significantly different from those of traded options, changes in subjective inputs may materially affect the estimated fair value of the options granted. |
Report of the Directors 53 City Telecom (H.K.) Limited Annual Report 2008 |
Percentage | ||||||||
Interests in shares | interests | |||||||
Name | in long positions | (Note) | ||||||
Top Group International Limited
|
331,637,811 | 50.97 | % |
2008 | 2007 | |||||||
% | % | |||||||
Purchases
|
||||||||
the largest supplier
|
30 | 36 | ||||||
five largest suppliers combined
|
63 | 63 |
Report of the Directors _____ City Telecom (H.K.) Limited 54 Annual Report 2008 |
55 City Telecom (H.K.) Limited Independent _____ Annual Report 2008 Auditors Report |
City Telecom (H.K.) Limited Consolidated Income 56 Annual Report 2008 Statement for the year ended 31 August 2008 (Expressed in Hong Kong dollars) |
2008 | 2007 | |||||||||||
Note | HK$000 | HK$000 | ||||||||||
Turnover
|
3 | 1,302,981 | 1,141,270 | |||||||||
|
||||||||||||
Other revenues
|
3 | 24,989 | 25,820 | |||||||||
|
||||||||||||
Network costs and cost of inventories
|
4 | (178,367 | ) | (214,591 | ) | |||||||
|
||||||||||||
Other operating expenses
|
5 | (a) | (966,094 | ) | (834,104 | ) | ||||||
|
||||||||||||
Operating profit
|
183,509 | 118,395 | ||||||||||
|
||||||||||||
Finance costs
|
5 | (b) | (75,137 | ) | (87,504 | ) | ||||||
|
||||||||||||
Profit before taxation
|
5 | 108,372 | 30,891 | |||||||||
|
||||||||||||
Income tax benefit/(expense)
|
6 | 16,818 | (2,026 | ) | ||||||||
|
||||||||||||
Profit attributable to shareholders
|
7 | 125,190 | 28,865 | |||||||||
|
||||||||||||
Dividends
|
8 | 38,614 | 49,295 | |||||||||
|
||||||||||||
Basic earnings per share
|
9 | HK | 19.7 cents | HK | 4.7 cents | |||||||
|
||||||||||||
Diluted earnings per share
|
9 | HK | 19.0 cents | HK | 4.6 cents | |||||||
|
57 City Telecom (H.K.) Limited Balance Sheet _____ Annual Report 2008 as at 31 August 2008 (Expressed in Hong Kong dollars) |
The Group | The Company | |||||||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||||||
Note | HK$000 | HK$000 | HK$000 | HK$000 | ||||||||||||||||
Non-current assets
|
||||||||||||||||||||
|
||||||||||||||||||||
Goodwill
|
13 | 1,066 | 1,066 | | | |||||||||||||||
Fixed assets
|
14 | 1,231,399 | 1,237,223 | 87,483 | 100,201 | |||||||||||||||
Investments in subsidiaries
|
15 | | | 1,383,812 | 1,488,463 | |||||||||||||||
Other financial assets
|
16 | | 39,213 | | 39,213 | |||||||||||||||
Derivative financial instrument
|
17 | | 1,039 | | | |||||||||||||||
Long term receivable and prepayment
|
5,586 | 6,932 | | | ||||||||||||||||
Deferred expenditure
|
18 | 15,391 | 7,783 | | | |||||||||||||||
Deferred tax assets
|
24 | 26,335 | | | | |||||||||||||||
|
||||||||||||||||||||
|
1,279,777 | 1,293,256 | 1,471,295 | 1,627,877 | ||||||||||||||||
|
||||||||||||||||||||
Current assets
|
||||||||||||||||||||
|
||||||||||||||||||||
Accounts receivable
|
19 | 140,283 | 170,551 | 11,418 | 12,105 | |||||||||||||||
Other receivables, deposits and prepayments
|
82,726 | 59,372 | 3,378 | 4,579 | ||||||||||||||||
Inventories
|
20 | | 477 | | 477 | |||||||||||||||
Deferred expenditure
|
18 | 40,704 | 13,584 | | | |||||||||||||||
Other financial assets
|
16 | 27,997 | 3,779 | 27,997 | | |||||||||||||||
Pledged bank deposits
|
30 | 87,319 | 87,220 | 87,319 | 87,220 | |||||||||||||||
Cash at bank and in hand
|
21 | 421,610 | 532,894 | 90,386 | 220,531 | |||||||||||||||
|
||||||||||||||||||||
|
800,639 | 867,877 | 220,498 | 324,912 | ||||||||||||||||
|
||||||||||||||||||||
Current liabilities
|
||||||||||||||||||||
|
||||||||||||||||||||
Amounts due to subsidiaries
|
| | 10,830 | 10,830 | ||||||||||||||||
Accounts payable
|
22 | 52,324 | 76,019 | 26,440 | 37,477 | |||||||||||||||
Other payables and accrued charges
|
178,114 | 145,267 | 17,831 | 18,694 | ||||||||||||||||
Deposits received
|
16,264 | 16,188 | 7,943 | 7,876 | ||||||||||||||||
Current portion deferred services revenue
|
110,449 | 64,202 | 11,172 | 11,380 | ||||||||||||||||
Tax payable
|
2,103 | 1,481 | 356 | 356 | ||||||||||||||||
Current portion obligations under finance leases
|
25 | 121 | 835 | 112 | 104 | |||||||||||||||
|
||||||||||||||||||||
|
359,375 | 303,992 | 74,684 | 86,717 | ||||||||||||||||
|
||||||||||||||||||||
Net current assets
|
441,264 | 563,885 | 145,814 | 238,195 | ||||||||||||||||
|
||||||||||||||||||||
Total assets less current liabilities
|
1,721,041 | 1,857,141 | 1,617,109 | 1,866,072 | ||||||||||||||||
|
Balance Sheet City Telecom (H.K.) Limited 58 Annual Report 2008 as at 31 August 2008 (Expressed in Hong Kong dollars) |
The Group | The Company | |||||||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||||||
Note | HK$000 | HK$000 | HK$000 | HK$000 | ||||||||||||||||
Non-current liabilities
|
||||||||||||||||||||
|
||||||||||||||||||||
Deferred tax liabilities
|
24 | 4,937 | 291 | 4,937 | | |||||||||||||||
Long-term deferred services revenue
|
| | 14,500 | 17,890 | ||||||||||||||||
Long-term debt and other liabilities
|
25 | 683,497 | 952,968 | 683,480 | 952,943 | |||||||||||||||
|
||||||||||||||||||||
|
688,434 | 953,259 | 702,917 | 970,833 | ||||||||||||||||
|
||||||||||||||||||||
Net assets
|
1,032,607 | 903,882 | 914,192 | 895,239 | ||||||||||||||||
|
||||||||||||||||||||
Capital and reserves
|
||||||||||||||||||||
|
||||||||||||||||||||
Share capital
|
23 | 65,062 | 61,650 | 65,062 | 61,650 | |||||||||||||||
Reserves
|
23 | 967,545 | 842,232 | 849,130 | 833,589 | |||||||||||||||
|
||||||||||||||||||||
Total equity attributable to equity shareholders
of the Company
|
1,032,607 | 903,882 | 914,192 | 895,239 | ||||||||||||||||
|
Wong Wai Kay, Ricky
|
Cheung Chi Kin, Paul | |
Director | Director |
59 City Telecom (H.K.) Limited Consolidated Statement _____ Annual Report 2008 of Changes in Equity for the year ended 31 August 2008 (Expressed in Hong Kong dollars) |
2008 | 2007 | |||||||||||
Note | HK$000 | HK$000 | ||||||||||
Total equity as at beginning of the year
|
903,882 | 891,654 | ||||||||||
|
||||||||||||
Net profit recognised directly in equity:
|
||||||||||||
|
||||||||||||
Exchange adjustments on translation of
the financial statements of subsidiaries
|
1,619 | 514 | ||||||||||
Net profit for the year
|
125,190 | 28,865 | ||||||||||
|
||||||||||||
Total recognised profit for the year
|
126,809 | 29,379 | ||||||||||
|
||||||||||||
Dividends paid in respect of the current year
|
(11,371 | ) | (24,635 | ) | ||||||||
Dividends paid in respect of the previous year
|
(5,915 | ) | | |||||||||
|
||||||||||||
|
(17,286 | ) | (24,635 | ) | ||||||||
|
||||||||||||
Movements in equity arising from capital transactions:
|
||||||||||||
|
||||||||||||
Equity settled share-based transactions
|
12 | 4,204 | 5,727 | |||||||||
Shares issued upon exercise of options
|
14,998 | 1,757 | ||||||||||
|
||||||||||||
|
19,202 | 7,484 | ||||||||||
|
||||||||||||
Total equity as at the end of the year
|
1,032,607 | 903,882 | ||||||||||
|
City Telecom (H.K.) Limited Consolidated Cash Flow 60 Annual Report 2008 Statement for the year ended 31 August 2008 (Expressed in Hong Kong dollars) |
2008 | 2007 | |||||||||||
Note | HK$000 | HK$000 | ||||||||||
Net cash inflow from operations
|
26 | (a) | 382,813 | 386,232 | ||||||||
|
||||||||||||
Hong Kong profits tax recovered/(paid)
|
42 | (263 | ) | |||||||||
Overseas tax paid
|
(4,292 | ) | (1,908 | ) | ||||||||
|
||||||||||||
Net cash inflow from operating activities
|
378,563 | 384,061 | ||||||||||
|
||||||||||||
Investing activities
|
||||||||||||
|
||||||||||||
Increase in pledged bank deposits
|
| (198 | ) | |||||||||
Decrease in term deposits
|
| 237,496 | ||||||||||
Interest received
|
15,596 | 22,671 | ||||||||||
Purchases of fixed assets
|
(189,903 | ) | (149,300 | ) | ||||||||
Net proceeds from maturity of investment in debt securities
|
3,900 | | ||||||||||
Net proceeds from redemption of long-term bank deposit
|
15,600 | | ||||||||||
Proceeds from disposal of fixed assets
|
7,057 | 3,384 | ||||||||||
|
||||||||||||
Net cash (outflow)/inflow from investing activities
|
(147,750 | ) | 114,053 | |||||||||
|
||||||||||||
Net cash inflow before financing activities
|
230,813 | 498,114 | ||||||||||
|
||||||||||||
Financing activities
|
||||||||||||
|
||||||||||||
Proceeds from issuance of new shares
|
26 | (b) | 14,998 | 1,757 | ||||||||
Repayment of capital element of finance leases
|
26 | (b) | (834 | ) | (1,321 | ) | ||||||
Interest element of finance leases
|
(34 | ) | (62 | ) | ||||||||
Interest paid on senior notes
|
(70,010 | ) | (85,313 | ) | ||||||||
Repurchase of senior notes
|
26 | (b) | (269,399 | ) | | |||||||
Dividends paid
|
(17,271 | ) | (24,627 | ) | ||||||||
|
||||||||||||
Net cash outflow from financing activities
|
(342,550 | ) | (109,566 | ) | ||||||||
|
||||||||||||
(Decrease)/increase in cash at bank and in hand
|
(111,737 | ) | 388,548 | |||||||||
|
||||||||||||
Cash at bank and in hand at 1 September
|
532,894 | 144,917 | ||||||||||
|
||||||||||||
Effect of foreign exchange rate changes
|
453 | (571 | ) | |||||||||
|
||||||||||||
Cash at bank and in hand at 31 August
|
421,610 | 532,894 | ||||||||||
|
61 City Telecom (H.K.) Limited Annual Report 2008 Notes to the Financial Statements (Expressed in Hong Kong Dollars) |
1 | SIGNIFICANT ACCOUNTING POLICIES |
(a) | Statement of compliance | ||
These financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (HKFRSs) which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (HKASs) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (HKICPA), accounting principles generally accepted in Hong Kong and the requirements of the Hong Kong Companies Ordinance. These financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (Listing Rules). A summary of the significant accounting policies adopted by the Group is set out below. | |||
The HKICPA has issued certain new and revised HKFRSs that are effective or available for early adoption for the current accounting period of the Group and the Company. Note 2 provides information on any changes in accounting policies resulting from initial application of these standards to the extent that they are relevant to the Group for the current and prior accounting periods reflected in these financial statements. | |||
(b) | Basis of preparation of the financial statements | ||
The consolidated financial statements for the year ended 31 August 2008 comprise City Telecom (H.K.) Limited (the Company) and its subsidiaries (collectively referred to as the Group). | |||
The measurement basis used in the preparation of the financial statements is the historical cost basis except that certain financial assets are stated at their fair values or amortised costs as explained in the accounting policies set out below (see notes 1(j), 1(k) and 1(s)). | |||
The preparation of financial statements in conformity with HKFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. | |||
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. | |||
Judgements made by management in the application of HKFRSs that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 33. | |||
(c) | Subsidiaries and controlled entities | ||
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. |
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 62 Annual Report 2008 (Expressed in Hong Kong Dollars) |
1 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
(d) | Group accounting |
(i) | Consolidation | ||
An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control commences until the date that control ceases. | |||
Intra-group balances and transactions and any unrealised profits arising from intra-group transactions are eliminated in full in preparing the consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment. | |||
In the Companys balance sheet, an investment in a subsidiary is stated at cost less impairment losses (see note 1(i)), unless the investment is classified as held for sale or included in a disposal group that is classified as held for sale. | |||
(ii) | Translation of foreign currencies | ||
Transactions in foreign currencies are translated at exchange rates ruling at the transaction dates. Monetary assets and liabilities expressed in foreign currencies are translated at exchange rates ruling at the balance sheet date. Exchange differences arising in these cases are dealt with in profit or loss. | |||
For consolidation purposes, the balance sheets of subsidiaries expressed in foreign currencies are translated at the rates of exchange ruling at the balance sheet date whilst the income statement is translated at an average rate for the year. Exchange differences are dealt with as a movement in reserves. |
(e) | Goodwill | ||
Goodwill represents the excess of the cost of a business combination or an investment in an associate or a jointly controlled entity over the Groups interest in the net fair value of the acquirees identifiable assets, liabilities and contingent liabilities. | |||
Goodwill is stated at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested annually for impairment (see note 1(i)). In respect of associates or jointly controlled entities, the carrying amount of goodwill is included in the carrying amount of the interest in the associate or jointly controlled entity. | |||
Any excess of the Groups interest in the net fair value of the acquirees identifiable assets, liabilities and contingent liabilities over the cost of a business combination or an investment in an associate or a jointly controlled entity is recognised immediately in profit or loss. | |||
On disposal of a cash generating unit, an associate or a jointly controlled entity during the year, any attributable amount of goodwill is included in the calculation of the profit or loss on disposal. | |||
(f) | Investment property | ||
Investment properties are land and/or buildings which are owned and held to earn rental income and/or for capital appreciation. | |||
Investment properties are stated in the balance sheet at cost less accumulated depreciation (see note 1(g)) and impairment losses (see note 1(i)) if any. Any gain or loss arising from the retirement or disposal of an investment property is recognised in the income statement. Rental income from investment property is accounted for in accordance with the accounting policy as set out in note 1(u)(vi). |
Notes to the Financial Statements 63 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
1 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
(g) | Fixed assets | ||
Fixed assets are stated at cost less accumulated depreciation and accumulated impairment losses. | |||
Depreciation is calculated to write off the cost of items of property, plant and equipment, less their estimated residual value, if any, using the straight-line method over their estimated useful lives as follows: |
| Buildings situated on leasehold land are depreciated over the shorter of the unexpired term of lease and their estimated useful lives of 50 years | |||||
|
||||||
|
| Furniture, fixtures and fittings | 4 years | |||
|
||||||
|
| Telecommunications, computer and office equipment | 4 years 20 years | |||
|
||||||
|
| Motor vehicles | 4 years | |||
|
||||||
| Leasehold improvements are depreciated over the shorter of the unexpired term of the leases and their estimated useful lives |
Where the parts of an item of property, plant and equipment have different useful lives, the cost of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually. | |||
Major costs incurred in restoring fixed assets to their normal working condition are charged to profit or loss. Major improvements are capitalised and depreciated over their expected useful lives to the Group. | |||
The gain or loss on disposal of a fixed asset is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in profit or loss on the date of disposal. |
(h) | Assets held under leases | ||
An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease. |
(i) | Classification of assets leased to the Group | ||
Assets that are held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases. | |||
Land held for own use under an operating lease for which its fair value cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease (see note 1(h)(iii)). | |||
(ii) | Finance leases | ||
Where the Group acquired the use of assets under finance leases, the amounts representing the fair value of the leased asset, or, if lower, the present value of the minimum lease payments, of such assets are included in fixed assets with the corresponding liabilities, net of finance charges, recorded as obligations under finance leases. Depreciation and impairment losses are accounted for in accordance with the accounting policy as set out in note 1(g) and note 1(i). Finance charges implicit in the lease payments are charged to profit or loss over the period of the leases so as to produce an approximately constant periodic rate of charge on the remaining balance of the obligations for each accounting period. |
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 64 Annual Report 2008 (Expressed in Hong Kong Dollars) |
1 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
1 |
(iii) | Operating leases | ||
Leases where substantially all the risks and rewards of ownership of assets remain with the leasing company are accounted for as operating leases. Receipts and payments made under operating leases net of any incentives received by/from the lessor are credited/charged to profit or loss on a straight-line basis over the lease periods. |
(i) | Impairment of assets |
(i) | Impairment of investments in debt and equity securities and trade and other receivables | ||
Investments in debt and equity securities and other current and non-current receivables that are stated at cost or amortised cost or are classified as available-for-sale securities are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Group about one or more of the following loss events: |
| significant financial difficulty of the debtor; | ||
| a breach of contract, such as a default or delinquency in interest or principal payments; | ||
| it becoming probable that a debtor will enter bankruptcy or other financial reorganisation; and | ||
| a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost. |
If any such evidence exists, any impairment loss is determined and recognised as follows: |
| For unquoted equity securities and current and non-current receivables that are carried at cost, the impairment loss is measured as the difference between the carrying amount of the financial asset and the estimated future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of discounting is material. Impairment losses for current and non-current receivables that are carried at cost are reversed if in a subsequent period the amount of the impairment loss decreases. Impairment losses for equity securities are not reversed. | ||
| For financial assets carried at amortised cost, the impairment loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows, discounted at the financial assets original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets). This assessment is made collectively where financial assets carried at amortised cost share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group. | ||
If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the assets carrying amount exceeding that would have been determined had no impairment loss been recognised in prior years. | |||
| For available-for-sale securities, the cumulative loss that has been recognised directly in equity is removed from equity and is recognised in profit or loss. The amount of the cumulative loss that is recognised in profit or loss is the difference between the acquisition cost (net of any principal repayment and amortisation) and current fair value, less any impairment loss on that asset previously recognised in profit or loss. | ||
Impairment losses recognised in profit or loss in respect of available-for-sale equity securities are not reversed through profit or loss. Any subsequent increase in the fair value of such assets is recognised directly in equity. |
Notes to the Financial Statements 65 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
1 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
(i) | Impairment of assets (continued) |
(i) | Impairment of investments in debt and equity securities and trade and other receivables (continued) |
Impairment losses in respect of available-for-sale debt securities are reversed if the subsequent increase in fair value can be objectively related to an event occurring after the impairment loss was recognised. Reversals of impairment losses in such circumstances are recognised in profit or loss. |
Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of trade debtors, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade debtors and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss. | |||
(ii) | Impairment of other assets | ||
Internal and external sources of information are reviewed at each balance sheet date to identify indications that the following assets may be impaired or, except in the case of goodwill, an impairment loss previously recognised no longer exists or may have decreased: |
| fixed assets; | ||
| investment property; | ||
| investments in subsidiaries; and | ||
| goodwill. |
If any such indication exists, the assets recoverable amount is estimated. In addition, for goodwill, the recoverable amount is estimated annually whether or not there is any indication of impairment. |
| Calculation of recoverable amount | ||
The recoverable amount of an asset is the greater of its net selling price 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 time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit). | |||
| Recognition of impairment losses | ||
An impairment loss is recognised in profit or loss whenever the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs to sell, or value in use, if determinable. | |||
| Reversals of impairment losses | ||
In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed. | |||
A reversal of an impairment loss is limited to the assets carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised. |
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 66 Annual Report 2008 (Expressed in Hong Kong Dollars) |
1 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
(j) | Other financial assets | ||
The Groups and the Companys policies for investments in debt and equity securities, other than investments in subsidiaries are as follows: | |||
Financial assets at fair value through profit or loss comprise of financial assets held for trading and those designated as at fair value through profit or loss at inception. Such financial assets are initially stated at fair value and are classified as current assets, if they are expected to be realised within 12 months. At each balance sheet date the fair value is remeasured, with any resultant gain or loss being recognised in profit or loss. The net gain or loss recognised in profit or loss does not include any interest earned on these investments. Interest income is recognised in accordance with the policies set out in note 1(u)(v). | |||
Held-to-maturity securities are dated debt securities that the Group or the Company has the positive ability and intention to hold to maturity. Such securities are initially recognised in the balance sheet at fair value plus transaction costs. Subsequently, they are stated in the balance sheet at amortised cost less impairment losses (see note 1(i)(i)). | |||
Any other financial assets that are not classified as held for trading, financial assets at fair value through profit or loss or, held-to-maturity securities, are classified as available-for-sale securities. Available-for-sale securities are initially recognised at fair value plus transaction costs. At each balance sheet date the fair value is remeasured, with any resultant gain or loss recognised directly in equity, except for impairment losses (see note 1(i)(i)) and, in the case of monetary items such as debt securities, foreign exchange gains and losses, which are recognised directly in profit or loss. Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in profit or loss. When these investments are derecognised, the cumulative gain or loss previously recognised directly in equity is recognised in profit or loss. | |||
Investments are recognised on the date the Company commits to purchase the investments. Investments are derecognised when: |
(i) | the contractual rights to the cash flows from the investment securities expire; or | ||
(ii) | the Company transfers the contractual rights to receive the cash flows of the investment securities. |
(k) | Derivative financial instruments | ||
Derivative financial instruments that are not designated as hedges are recognised initially at fair value. At each balance sheet date the fair value is remeasured. The gain or loss on remeasurement to fair value is charged immediately to profit or loss. | |||
(l) | Deferred expenditure | ||
Deferred expenditure represents customer acquisition costs incurred for successful acquisition or origination of a service subscription agreement with a customer. Such costs are deferred and amortised on a straight-line basis over the period of the underlying service subscription agreements. | |||
(m) | Accounts receivables | ||
Trade and other receivables are initially recognised at fair value and thereafter
stated at amortised cost less allowance for impairment of doubtful debts (see note
1(i)(i)), except where the receivables are interest-free loans made to related parties
without any fixed repayment terms or the effect of discounting would be immaterial. In
such cases, the receivables are stated at cost less impairment of
doubtful debts
(see note 1(i)(i)). |
Notes to the Financial Statements 67 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
1 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
(n) | Inventories | ||
Inventories are carried at the lower of cost and net realisable value. | |||
Cost is determined using the first in, first out method (FIFO) and comprises all costs of purchase. | |||
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. | |||
When inventories are sold, the carrying amount of the inventories is recognised in the income statement as cost of inventories sold in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, is recognised as a reduction of cost of inventories sold in the period in which the reversal occurs. | |||
As of 31 August 2008, there was no write-down or provision made against inventories due to change in net realisable value. | |||
(o) | Cash, bank balances and pledged bank deposits | ||
Cash and bank balances consist of cash on hand, cash in bank accounts and interest-bearing savings accounts. Cash that is restricted for use or pledged as security is disclosed separately on the face of the balance sheet, and is not included in the cash and bank balances total in the consolidated statements of cash flows. The pledged bank deposits represent cash maintained at a bank as security for bank facility and bank guarantees issued by the bank to third party suppliers and utility vendors (see note 30). | |||
(p) | Financial guarantees issued, provisions and contingent liabilities |
(i) | Financial guarantees issued | ||
Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the holder) for a loss the holder incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. | |||
Where the Group issues a financial guarantee, the fair value of the guarantee (being the transaction price, unless the fair value can otherwise be reliably estimated) is initially recognised as deferred income within trade and other payables. Where consideration is received or receivable for the issuance of the guarantee, the consideration is recognised in accordance with the Groups policies applicable to that category of asset. Where no such consideration is received or receivable, an immediate expense is recognised in profit or loss on initial recognition of any deferred income. | |||
The amount of the guarantee initially recognised as deferred income is amortised in profit or loss over the term of the guarantee as income from financial guarantees issued. In addition, provisions are recognised in accordance with note 1(p)(ii) if and when (i) it becomes probable that the holder of the guarantee will call upon the Group under the guarantee, and (ii) the amount of that claim on the Group is expected to exceed the amount currently carried in trade and other payables in respect of that guarantee i.e. the amount initially recognised, less accumulated amortisation. | |||
(ii) | Other provisions and contingent liabilities | ||
Provisions are recognised for other liabilities of uncertain timing or amount when the Group or the Company has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation. | |||
Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote. |
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 68 Annual Report 2008 (Expressed in Hong Kong Dollars) |
1 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
(q) | Employee benefits |
(i) | Employee leave entitlements | ||
Employee entitlements to annual leave and long service leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave and long-service leave as a result of services rendered by employees up to the balance sheet date. | |||
Employee entitlements to sick leave and maternity or paternity leave are not recognised until the time of leave. | |||
(ii) | Profit sharing and bonus plans | ||
Provisions for profit sharing and bonus plans are recognised when the Group has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made. | |||
(iii) | Retirement benefit costs | ||
The Group contributes to defined contribution retirement schemes which are available to certain employees. Contributions to the schemes by the Group are calculated as a percentage of employees basic salaries and charged to profit or loss. The Groups contributions are reduced by contributions forfeited by those employees who leave the scheme prior to vesting fully in the contributions. | |||
The assets of the scheme are held in an independently administered fund that is separated from the Groups assets. | |||
(iv) | Share-based payments | ||
The fair value of share options granted to employees is recognised as an employee cost with a corresponding increase in capital reserve within equity. The fair value is measured at grant date using the Black-Scholes option pricing model or Monte Carlo model, taking into account the terms and conditions upon which the options were granted. Where the employees have to meet vesting conditions before becoming unconditionally entitled to the share options, the total estimated fair value of the share options is spread over the vesting period, taking into account the probability that the options will vest. | |||
During the vesting period, the number of share options that is expected to vest is reviewed. Any adjustment to the cumulative fair value recognised in prior years is charged/credited to profit or loss, unless the original employee expenses qualify for recognition as an asset, with a corresponding adjustment to the capital reserve. On vesting date, the amount recognised as an expense is adjusted to reflect the actual number of share options that vest (with a corresponding adjustment to the capital reserve) except where forfeiture is only due to not achieving vesting conditions that relate to the market price of the Companys shares. The amount related to share options expense is recorded in the capital reserve until either the option is exercised or the option expires. |
(r) | Deferred taxation | ||
Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Taxation rates enacted or substantively enacted at the balance sheet date are used to measure deferred tax assets and liabilities. | |||
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. | |||
Deferred taxation is provided on temporary differences arising on investments in subsidiaries except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not be reversed in the foreseeable future. |
Notes to the Financial Statements 69 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
1 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
(s) | Senior notes | ||
Long-term debt, representing senior notes, is recognised initially at fair value less its incidental costs of issuance. Subsequent to initial recognition, the senior notes are stated at amortised cost with any difference between cost and redemption value being recognised in profit or loss over the period of borrowings using the effective interest method. | |||
(t) | Trade and other payables | ||
Trade and other payables are initially recognised at fair value. Except for financial guarantee liabilities measured in accordance with note 1 (p), trade and other payables are subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost. | |||
(u) | Revenue recognition |
(i) | Revenue for the provision of international telecommunications and fixed telecommunications network services is recognised, when an arrangement exists, service is rendered, the fee is fixed or determinable, and collectibility is probable. | ||
(ii) | Tariff-free period granted to subscribers of fixed telecommunications network services are recognised in profit or loss rateably over the term of the service subscription agreement. Unbilled revenue represents revenue recognised in accordance with the requirement in note 1(u) (i) that has not been billed to the subscriber. | ||
(iii) | Amount received in advance for the provision of fixed telecommunications network services is deferred and included under deferred services income, and subsequently recognised as revenue on a straight-line basis over the related service period. | ||
(iv) | Revenue from the sales of products is recognised upon the transfer of risks and rewards of ownership, which generally coincides with the time when the goods are delivered to customers and title has passed. | ||
(v) | Interest income is recognised as it accrues using the effective interest method. | ||
(vi) | Rental income receivable under operating leases is recognised in profit or loss in equal instalments over the periods covered by the lease term. Lease incentives granted are recognised in profit or loss as an integral part of the aggregate net lease payments receivable. |
(v) | Borrowing costs | ||
Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of that asset. | |||
All other borrowing costs are charged to profit or loss in the year in which they are incurred. | |||
(w) | Segment reporting | ||
In accordance with the Groups internal financial reporting, the Group has determined that the primary reporting format is business segment and secondary reporting format is geographical segment. | |||
Segment assets consist primarily of goodwill, fixed assets, receivables and cash. Segment liabilities comprise operating liabilities and exclude items such as taxation and certain corporate borrowings. Capital expenditure comprises additions to fixed assets. | |||
In respect of geographical segment reporting, sales are reported based on the country in which the customer is located. Total assets and capital expenditure are reported based on where the assets are located. |
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 70 Annual Report 2008 (Expressed in Hong Kong Dollars) |
1 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
(x) | Accounting for barter transactions | ||
When goods or services are exchanged for goods or services which are of a similar nature and value, the exchange is not regarded as a revenue generating transaction. | |||
When goods are sold or services are rendered in exchange for dissimilar goods or services, the exchange is regarded as a transaction which generates revenue. The revenue is measured at the fair value of the goods or services rendered, adjusted by the amount of any cash or cash equivalents transferred. When the fair value of the goods or services received cannot be measured reliably, the revenue is measured at the fair value of the goods or services given up, adjusted by the amount of any cash or cash equivalents transferred. | |||
(y) | Related parties | ||
For the purposes of these financial statements, a party is considered to be related to the Group if: |
(i) | the party has the ability, directly or indirectly through one or more intermediaries, to control the Group or exercise significant influence over the Group in making financial and operating policy decisions, or has joint control over the Group; | ||
(ii) | the Group and the party are subject to common control; | ||
(iii) | the party is an associate of the Group or a joint venture in which the Group is a venturer; | ||
(iv) | the party is a member of key management personnel of the Group or the Groups parent, or a close family member of such an individual, or is an entity under the control, joint control or significant influence of such individuals; | ||
(v) | the party is a close family member of a party referred to in (i) or is an entity under the control, joint control or significant influence of such individuals; or | ||
(vi) | the party is a post-employment benefit plan which is for the benefit of employees of the Group or of any entity that is a related party of the Group. |
Close family members of an individual are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity. |
2 | CHANGES IN ACCOUNTING POLICIES | |
The HKICPA has issued a number of new and revised HKFRSs and Interpretations that are effective or available for early adoption for the current accounting period of the Group and the Company. | ||
There have been no significant changes to the accounting policies applied in these financial statements for the years presented as a result of adoption of these new standards. However, as a result of the adoption of HKFRS 7, Financial instruments: Disclosures and the amendment to HKAS 1, Presentation of financial statements: Capital disclosures , there have been some additional disclosures provided as follows: | ||
As a result of the adoption of HKFRS 7 and as compared with the information previously required to be disclosed by HKAS 32, Financial instruments: Disclosure and presentation , the financial statements include expanded disclosure about the significance of the Groups financial instruments and the nature and extent of risks arising from those instruments. These disclosures are provided throughout these financial statements, in particular in note 27. | ||
The amendment to HKAS 1 introduces additional disclosure requirements to provide information about the level of capital and the Group and the Companys objectives, policies and processes for managing capital. These new disclosures are set out in note 23(d). | ||
Both HKFRS 7 and the amendment to HKAS 1 do not have any material impact on the classification, recognition and measurement of the amounts recognised in the financial instruments. | ||
The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period (see note 34). |
Notes to the Financial Statements 71 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
3 | TURNOVER, OTHER REVENUES AND SEGMENT INFORMATION | |
The Group is principally engaged in the provision of international telecommunications services and fixed telecommunications network services to customers in Hong Kong and Canada. Revenues recognised during the year are as follows: |
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Turnover
|
||||||||
International telecommunications services
|
291,943 | 324,470 | ||||||
Fixed telecommunications network services (note 3(c))
|
1,011,038 | 816,800 | ||||||
|
||||||||
|
1,302,981 | 1,141,270 | ||||||
|
||||||||
Other revenues
|
||||||||
Interest income
|
15,596 | 22,671 | ||||||
Other income
|
9,393 | 3,149 | ||||||
|
||||||||
|
24,989 | 25,820 | ||||||
|
||||||||
Total revenues
|
1,327,970 | 1,167,090 | ||||||
|
(a) | Primary reporting format business segments | ||
The Group is organised on a worldwide basis into two business segments: |
|
| International telecommunications | : | provision of international long distance calls services | ||
|
||||||
|
| Fixed telecommunications network | : | provision of dial up and broadband Internet access services, local voice-over-IP services and IP-TV services |
The Groups inter-segment transactions mainly consist of provision of leased lines services. These transactions were entered into on similar terms as those contracted with third parties. |
2008 | ||||||||||||||||
International | Fixed | |||||||||||||||
tele- | tele- | |||||||||||||||
communications | communications | |||||||||||||||
services | network services | Elimination | Group | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
Turnover
|
||||||||||||||||
External sales
|
291,943 | 1,011,038 | | 1,302,981 | ||||||||||||
Inter-segment sales
|
5,692 | 22,680 | (28,372 | ) | | |||||||||||
|
||||||||||||||||
|
297,635 | 1,033,718 | (28,372 | ) | 1,302,981 | |||||||||||
|
||||||||||||||||
Segment results
|
81,980 | 101,529 | 183,509 | |||||||||||||
|
||||||||||||||||
Finance costs
|
(75,137 | ) | ||||||||||||||
|
||||||||||||||||
Profit before taxation
|
108,372 | |||||||||||||||
Income tax benefit
|
16,818 | |||||||||||||||
|
||||||||||||||||
Net profit
|
125,190 | |||||||||||||||
|
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 72 Annual Report 2008 (Expressed in Hong Kong Dollars) |
3 | TURNOVER, OTHER REVENUES AND SEGMENT INFORMATION (CONTINUED) |
(a) | Primary reporting format business segments (continued) |
2007 | ||||||||||||||||
International | Fixed | |||||||||||||||
tele- | tele- | |||||||||||||||
communications | communications | |||||||||||||||
services | network services | Elimination | Group | |||||||||||||
HK$000 | HK$000 | HK$000 | HK000 | |||||||||||||
Turnover
|
||||||||||||||||
External sales
|
324,470 | 816,800 | | 1,141,270 | ||||||||||||
Inter-segment sales
|
5,699 | 27,633 | (33,332 | ) | | |||||||||||
|
||||||||||||||||
|
330,169 | 844,433 | (33,332 | ) | 1,141,270 | |||||||||||
|
||||||||||||||||
Segment results
|
68,705 | 49,690 | 118,395 | |||||||||||||
|
||||||||||||||||
Finance costs
|
(87,504 | ) | ||||||||||||||
|
||||||||||||||||
Profit before taxation
|
30,891 | |||||||||||||||
Income tax expense
|
(2,026 | ) | ||||||||||||||
|
||||||||||||||||
Net profit
|
28,865 | |||||||||||||||
|
2008 | ||||||||||||
International | Fixed | |||||||||||
tele- | tele- | |||||||||||
communications | communications | |||||||||||
services | network services | Group | ||||||||||
HK$000 | HK$000 | HK$000 | ||||||||||
Segment assets
|
426,781 | 1,627,300 | 2,054,081 | |||||||||
Unallocated assets
|
26,335 | |||||||||||
|
||||||||||||
Total assets
|
2,080,416 | |||||||||||
|
||||||||||||
Segment liabilities
|
80,756 | 276,771 | 357,527 | |||||||||
Unallocated liabilities
|
690,282 | |||||||||||
|
||||||||||||
Total liabilities
|
1,047,809 | |||||||||||
|
||||||||||||
|
||||||||||||
Capital expenditure incurred during the year
|
4,293 | 207,391 | 211,684 | |||||||||
Depreciation for the year
|
19,587 | 190,464 | 210,051 |
2007 | ||||||||||||
International | Fixed | |||||||||||
tele- | tele- | |||||||||||
communications | communications | |||||||||||
services | network services | Group | ||||||||||
HK$000 | HK$000 | HK$000 | ||||||||||
Segment assets
|
541,502 | 1,619,631 | 2,161,133 | |||||||||
|
||||||||||||
Segment liabilities
|
101,148 | 201,738 | 302,886 | |||||||||
Unallocated liabilities
|
954,365 | |||||||||||
|
||||||||||||
Total liabilities
|
1,257,251 | |||||||||||
|
||||||||||||
|
||||||||||||
Capital expenditure incurred during the year
|
4,060 | 128,190 | 132,250 | |||||||||
Depreciation for the year
|
21,707 | 236,396 | 258,103 |
Notes to the Financial Statements 73 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
3 | TURNOVER, OTHER REVENUES AND SEGMENT INFORMATION (CONTINUED) |
(b) | Secondary reporting format geographical segments | ||
The Groups two business segments are managed on a worldwide basis in two main geographical areas: |
|
Hong Kong | : |
international telecommunications and fixed telecommunications
network services
|
|||
|
||||||
|
Canada | : |
international telecommunications and fixed telecommunications
network services
|
2008 | ||||||||||||||||
Segment | Total | Capital | ||||||||||||||
Turnover | results | assets | expenditure | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
Hong Kong
|
1,281,069 | 182,345 | 2,040,496 | 211,482 | ||||||||||||
Canada
|
21,912 | 1,164 | 13,585 | 202 | ||||||||||||
|
||||||||||||||||
|
1,302,981 | 2,054,081 | 211,684 | |||||||||||||
|
||||||||||||||||
Operating profit
|
183,509 | |||||||||||||||
|
||||||||||||||||
Unallocated assets
|
26,335 | |||||||||||||||
|
||||||||||||||||
Total assets
|
2,080,416 | |||||||||||||||
|
2007 | ||||||||||||||||
Segment | Total | Capital | ||||||||||||||
Turnover | results | assets | expenditure | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
Hong Kong
|
1,120,538 | 118,260 | 2,149,728 | 132,031 | ||||||||||||
Canada
|
20,732 | 135 | 11,405 | 219 | ||||||||||||
|
||||||||||||||||
|
1,141,270 | 2,161,133 | 132,250 | |||||||||||||
|
||||||||||||||||
Operating profit
|
118,395 | |||||||||||||||
|
(c) | Hong Kong Broadband Network Limited (HKBN), a wholly-owned subsidiary of the Group, as a FTNS licensee, provides interconnection services to enable delivery of telecommunications service to customers of different operators. Since the FTNS license was granted by the Telecommunication Authority (TA) and interconnection services have been provided, HKBN has been billing mobile operators for the interconnection services provided to them and recognising revenue (mobile interconnection charges) based on managements best estimate of the amounts it expected to collect. In prior years, majority of the mobile operators, however, rejected HKBNs demand for payment. As a result of non-payment by certain mobile operators, in 2004, the Group asked TA to make a determination (the 2004 Determination) on the level of mobile interconnection charges payable by one of the mobile operators to HKBN; and the effective date of the determined mobile interconnection charges. | ||
In March 2006, TA issued a preliminary analysis (the 2006 PA) on the 2004 Determination with respect to the rates of mobile interconnection charges payable by the mobile operator under dispute. However, as of 31 August 2006, the final level of mobile interconnection charges was still subject to the 2004 Determination to be issued by TA. |
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 74 Annual Report 2008 (Expressed in Hong Kong Dollars) |
3 | TURNOVER, OTHER REVENUES AND SEGMENT INFORMATION (CONTINUED) |
(c) | (continued) | ||
In March 2007, TA issued a revised preliminary analysis (the 2007 PA) which superseded the 2006 PA. The 2007 PA set out the rates of mobile interconnection charges, which are different from those rates stated in the 2006 PA. | |||
In June 2007, TA issued the 2004 determination which set out the rates of mobile interconnection charge payable by the mobile operator under dispute for interconnection services provided by HKBN for the period from 1 April 2002 to 31 August 2004, which superseded the rates stated in both the 2006 PA and 2007 PA issued by TA previously. | |||
For the year ended 31 August 2007, the Group recognised revenue related to mobile interconnection charges of HK$40,877,000 based on the 2004 Determination which included charges for the year ended 31 August 2007 and additional charges for the years ended 31 August 2005 and 2006 previously measured based on the 2006 PA. The Group has also written back bad debt provision for mobile interconnection charges receivables of HK$9,404,000 to the income statement based on the amount it expected to collect for billings outstanding through that date. | |||
During the year ended 31 August 2008, HKBN entered into contractual agreements with additional mobile operators which agreed to pay mobile interconnection charges based on the 2004 Determination for period from 1 April 2002 to 31 August 2004 and for the subsequent period at an interim rate stated in the agreements which will be adjusted based on further determination to be issued by TA. | |||
In February 2008, HKBN requested TA to make a new determination with four mobile operators (the 2008 Determination) on the rate of mobile interconnection charge and interest thereon. In September 2008, TA indicated that it accepted HKBNs request for determination, which covers the mobile interconnection charges payable by the mobile operators under the determination, for the period from 1 April 2002 to 26 April 2009 (for those mobile operators who have not reached the relevant contractual agreements with HKBN) or for the period from 1 September 2004 to 26 April 2009 (for those mobile operators who have reached the relevant contractual agreements with HKBN), and the interest rate therefor. | |||
For the year ended 31 August 2008, the Group recognised revenue related to mobile interconnection charges of HK$29,568,000 representing the amount of mobile interconnection charges management expects to collect. |
4 | NETWORK COSTS AND COST OF INVENTORIES | |
Network costs and cost of inventories mainly include interconnection charges paid to local and overseas carriers, leased line rentals, program fees, production costs for the IP-TV service and costs of inventories sold, and do not include depreciation charge which is included in other operating expenses. | ||
The Group estimates the Universal Services Contributions (USC) payable to PCCW-HKT to fund the costs of network development in remote areas in Hong Kong and includes such estimated costs as part of the network costs. TA periodically reviews the actual costs of the network development and revises the amounts owed to PCCW-HKT or to be refunded by PCCW-HKT to the USC contributing parties. | ||
On 28 December 2007, TA issued a statement (TA Statement) on the USC and confirmed the actual contribution level for the period from 1 January 2005 to 30 June 2007. Based on the TA Statement, an amount of HK$7,617,000 was recorded as a reduction against the network costs of the Group for the year ended 31 August 2008. | ||
The actual contribution level for the period subsequent to 30 June 2007 has not yet been confirmed by TA. |
Notes to the Financial Statements 75 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
5 | PROFIT BEFORE TAXATION | |
Profit before taxation is arrived at after charging/(crediting) the following: |
(a) | Other operating expenses |
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Advertising and marketing expenses (note (i))
|
307,743 | 203,673 | ||||||
Amortisation of deferred expenditure (note 18)
|
33,777 | 15,580 | ||||||
Auditors remuneration
|
3,687 | 2,933 | ||||||
Depreciation of owned fixed assets
|
209,464 | 257,052 | ||||||
Depreciation of fixed assets held under finance lease
|
587 | 1,051 | ||||||
Operating lease charges in respect of land and buildings
|
13,296 | 13,879 | ||||||
Operating lease charges in respect of equipment
|
50 | 32 | ||||||
Provision for doubtful debts (note (ii))
|
14,293 | 6,569 | ||||||
Loss on disposal of fixed assets
|
1,431 | 1,714 | ||||||
Staff costs (note 5(c))
|
247,460 | 221,102 | ||||||
Others
|
134,306 | 110,519 | ||||||
|
||||||||
|
966,094 | 834,104 | ||||||
|
Notes: | ||
(i) | Included in the advertising and marketing expenses is expense in respect of equity settled share-based transaction of HK$90,000 (2007: HK$361,000). | |
(ii) | The amount for the year ended 31 August 2007 included write-back of provision for mobile interconnection charges receivables of HK$9,404,000 (note 3(c)). |
(b) | Finance costs |
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Interest element of finance leases
|
34 | 62 | ||||||
Interest on 10-year senior notes
|
70,010 | 85,313 | ||||||
Amortisation of incidental issuance costs
|
1,665 | 2,129 | ||||||
Other borrowing cost
|
3,428 | | ||||||
|
||||||||
|
75,137 | 87,504 | ||||||
|
(c) | Staff costs |
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Wages and salaries
|
226,097 | 201,057 | ||||||
Unutilised annual leave
|
2,642 | 213 | ||||||
Equity settled share-based transaction
|
4,114 | 5,366 | ||||||
Retirement benefit costs defined contribution plans (note 10)
|
29,738 | 23,933 | ||||||
Less: staff costs capitalised as fixed assets
|
(15,131 | ) | (9,467 | ) | ||||
|
||||||||
|
247,460 | 221,102 | ||||||
|
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 76 Annual Report 2008 (Expressed in Hong Kong Dollars) |
5 | PROFIT BEFORE TAXATION (CONTINUED) |
(d) | Other items |
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Net exchange (gain)/loss
|
(1,923 | ) | 114 | |||||
Realised and unrealised gain on other financial assets
|
(3,284 | ) | (1,887 | ) | ||||
Realised and unrealised loss on derivative financial instruments
|
1,039 | 806 | ||||||
Realised and unrealised gain on long-term bank deposit
|
(1,185 | ) | (739 | ) | ||||
Gain on extinguishment of 10-year senior notes (note 25(a))
|
(2,582 | ) | | |||||
Cost of inventories (note 20(b))
|
477 | 331 |
6 | INCOME TAX BENEFIT/(EXPENSE) | |
Hong Kong profits tax has been provided at the rate of 16.5% (2007: 17.5%) on the estimated assessable profit for the year. Taxation on overseas profits has been calculated on the estimated assessable profit for the year at the income tax rates prevailing in the overseas countries in which the Group operates. | ||
The amount of tax benefit / (expense) in the consolidated income statement represents: |
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Current taxation:
|
||||||||
Hong Kong profits tax
|
(391 | ) | (121 | ) | ||||
Overseas taxation
|
(1,929 | ) | (1,964 | ) | ||||
Under-provision of overseas taxation in prior years
|
(2,552 | ) | | |||||
Deferred taxation relating to the origination and reversal of temporary differences
|
21,690 | 59 | ||||||
|
||||||||
Income tax benefit/(expense)
|
16,818 | (2,026 | ) | |||||
|
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Profit before taxation
|
108,372 | 30,891 | ||||||
|
||||||||
Notional tax on profit before taxation, calculated at the prevailing tax rates
applicable to profit in the countries concerned
|
(18,927 | ) | (6,412 | ) | ||||
Effect of income not subject to taxation
|
3,878 | 4,219 | ||||||
Effect of expenses not deductible for taxation purposes
|
(6,353 | ) | (772 | ) | ||||
Recognition of prior year unrecognised tax losses (note 24)
|
26,335 | | ||||||
Under-provision in prior years
|
(2,552 | ) | | |||||
Effect of utilisation of prior year unrecognised tax losses
|
12,013 | 6,678 | ||||||
Effect of share based payment
|
2,324 | (1,125 | ) | |||||
Effect of tax losses not recognised
|
(74 | ) | (4,539 | ) | ||||
Others
|
174 | (75 | ) | |||||
|
||||||||
Income tax benefit/(expense)
|
16,818 | (2,026 | ) | |||||
|
Notes to the Financial Statements 77 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
7 | PROFIT ATTRIBUTABLE TO SHAREHOLDERS | |
The profit attributable to shareholders is dealt with in the financial statements of the Company to the extent of HK$17,037,000 (2007: loss of HK$12,945,000). | ||
8 | DIVIDENDS |
(a) | Dividends payable to equity shareholders of the Company attributable to the year |
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Interim dividend declared and paid of HK4 cents per ordinary share
(2007: HK4 cents per ordinary share)
|
25,602 | 24,635 | ||||||
Final dividend proposed after the balance sheet date, of HK2 cents
per ordinary share (2007: HK4 cents per ordinary share)
|
13,012 | 24,660 | ||||||
|
||||||||
|
38,614 | 49,295 | ||||||
|
During the year ended 31 August 2008, a scrip dividend option was offered to all shareholders with registered addresses in Hong Kong that were entitled to the interim dividend in respect of the six-month period ended 29 February 2008. 8,838,938 shares were issued during the year ended 31 August 2008 to shareholders who had elected to receive all or part of their entitlement to dividends in form of scrip. | |||
The final dividend proposed after the balance sheet date has not been recognised as a liability at the balance sheet date. | |||
(b) | Dividends attributable to the previous financial year, approved and paid during the year: |
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Final dividend in respect of the financial year ended 31 August 2007,
approved and paid of HK4 cents per ordinary share (2007: Nil)
|
25,082 | |
9 | EARNINGS PER SHARE |
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Profit attributable to shareholders
|
125,190 | 28,865 | ||||||
|
2008 | 2007 | |||||||
Number | Number | |||||||
of shares | of shares | |||||||
Weighted average number of ordinary shares | 000 | 000 | ||||||
Issued ordinary shares at the beginning of the year
|
616,503 | 614,175 | ||||||
Effect of scrip dividend issued
|
7,353 | | ||||||
Effect of share options exercised
|
10,159 | 665 | ||||||
|
||||||||
Weighted average number of ordinary shares at the end of the year (basic)
|
634,015 | 614,840 | ||||||
Incremental shares from assumed exercise of share options
|
23,982 | 16,479 | ||||||
|
||||||||
Weighted average number of ordinary shares at the end of the year (diluted)
|
657,997 | 631,319 | ||||||
|
||||||||
Basic earnings per share
|
HK19.7 cents | HK4.7 cents | ||||||
|
||||||||
Diluted earnings per share
|
HK19.0 cents | HK4.6 cents | ||||||
|
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 78 Annual Report 2008 (Expressed in Hong Kong Dollars) |
10 | RETIREMENT BENEFIT COSTS | |
The Group contributes to an Occupational Retirement Scheme (the ORSO Scheme), a defined contribution retirement scheme, which is available to some of its employees in Hong Kong. Under the ORSO Scheme, the employees are required to contribute 5% of their monthly salaries, while the Groups contributions are calculated at 10% and 5% of the monthly salaries of senior management staff and all other staff respectively. The employees are entitled to 100% of the employers contributions after 10 years of completed service, or at a reduced scale after completion of 3 to 9 years service. Contributions to the ORSO Scheme are reduced by contributions forfeited by those employees who leave the ORSO Scheme prior to vesting fully in the Groups contributions. | ||
A mandatory provident fund scheme (the MPF Scheme) has been established under the Hong Kong Mandatory Provident Fund Scheme Ordinance in December 2000. The then existing employees of the Group in Hong Kong could elect to join the MPF Scheme, while all new employees joining the Group in Hong Kong from then onwards are required to join the MPF Scheme. Both the Group and the employees are required to contribute 5% of each individuals relevant income with a maximum amount of HK$1,000 per month as a mandatory contribution. Employers mandatory contributions are 100% vested in the employees as soon as they are paid to the MPF Scheme. Senior employees may also elect to join a Mutual Voluntary Plan (the Mutual Plan) in which both the Group and the employee, on top of the MPF Scheme mandatory contributions, make a voluntary contribution to the extent of contributions that would have been made under the ORSO Scheme. | ||
Pursuant to the relevant regulations in the Peoples Republic of China (the PRC), the Group contributes to the defined contribution retirement scheme organised by the local social security bureau for each employee of the subsidiary in the PRC at a rate of 20% of a standard salary base as determined by the local social security bureau. The Group has no other obligation to make payments in respect of retirement benefits of these employees. | ||
The retirement schemes for staff of the Group in other countries follow the local statutory requirements of the respective countries. | ||
The aggregate employers contributions, net of forfeited contributions, which have been dealt with in the consolidated income statement during the year are as follows: |
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Gross contributions
|
29,738 | 24,545 | ||||||
Less: forfeited contributions utilised to offset the Groups contributions during the year
|
| (612 | ) | |||||
|
||||||||
Net contributions charged to the income statement (note 5(c))
|
29,738 | 23,933 | ||||||
|
At 31 August 2008, there was no forfeited contribution available to offset future contributions by the Group to the ORSO Scheme (2007: Nil). | ||
11 | DIRECTORS AND SENIOR MANAGEMENTS EMOLUMENTS |
(a) | Directors remuneration | ||
The remuneration of each director for the year ended 31 August 2008 is set out below: |
Employers | ||||||||||||||||||||||||
contribution | ||||||||||||||||||||||||
Discretionary | Share-based | to defined | ||||||||||||||||||||||
Fee | Salary | bonuses | payment | contribution | Total | |||||||||||||||||||
Name of Director | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | ||||||||||||||||||
Wong Wai Kay, Ricky
|
| 6,482 | 1,054 | 558 | 648 | 8,742 | ||||||||||||||||||
Cheung Chi Kin, Paul
|
| 6,482 | 1,054 | 558 | 648 | 8,742 | ||||||||||||||||||
Lai Ni Quiaque
|
| 2,250 | 225 | 809 | 225 | 3,509 | ||||||||||||||||||
Cheng Mo Chi, Moses
|
152 | | | | | 152 | ||||||||||||||||||
Lee Hon Ying, John
|
168 | | | | | 168 | ||||||||||||||||||
Chan Kin Man
|
158 | | | | | 158 | ||||||||||||||||||
Peh Jefferson Tun Lu
|
158 | | | | | 158 | ||||||||||||||||||
|
||||||||||||||||||||||||
Total
|
636 | 15,214 | 2,333 | 1,925 | 1,521 | 21,629 | ||||||||||||||||||
|
Notes to the Financial Statements 79 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
11 | DIRECTORS AND SENIOR MANAGEMENTS EMOLUMENTS (CONTINUED) |
(a) | Directors remuneration (continued) | ||
The remuneration of each director for the year ended 31 August 2007 is set out below: |
Employers | ||||||||||||||||||||||||
contribution | ||||||||||||||||||||||||
Discretionary | Share-based | to defined | ||||||||||||||||||||||
Fee | Salary | bonuses | payment | contribution | Total | |||||||||||||||||||
Name of Director | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | ||||||||||||||||||
Wong Wai Kay, Ricky
|
| 6,051 | 488 | 1,293 | 605 | 8,437 | ||||||||||||||||||
Cheung Chi Kin, Paul
|
| 6,051 | 488 | 1,293 | 605 | 8,437 | ||||||||||||||||||
Lai Ni Quiaque
|
| 1,687 | 203 | 482 | 169 | 2,541 | ||||||||||||||||||
Cheng Mo Chi, Moses
|
145 | | | | | 145 | ||||||||||||||||||
Lee Hon Ying, John
|
160 | | | | | 160 | ||||||||||||||||||
Chan Kin Man
|
150 | | | | | 150 | ||||||||||||||||||
Peh Jefferson Tun Lu
|
150 | | | | | 150 | ||||||||||||||||||
|
||||||||||||||||||||||||
Total
|
605 | 13,789 | 1,179 | 3,068 | 1,379 | 20,020 | ||||||||||||||||||
|
No director waived any emoluments in respect of the years ended 31 August 2007 and 2008. | |||
The above emoluments include the fair value of share options granted to certain directors under the Companys share option scheme as estimated at the date of grant. The details are disclosed in note 12. | |||
(b) | Five highest paid individuals | ||
The five individuals whose emoluments were the highest in the Group for the year include three (2007: three) directors whose emoluments are reflected in the analysis presented above. The emoluments payable to the remaining two (2007: two) individuals during the year are as follows: |
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Basic salaries, other allowances and benefits in kind
|
8,512 | 6,792 | ||||||
Discretionary bonuses
|
1,137 | 1,131 | ||||||
Share-based payments
|
1,316 | 885 | ||||||
Retirement benefit costs defined contribution plans
|
589 | 547 | ||||||
|
||||||||
|
11,554 | 9,355 | ||||||
|
Number of individual | ||||||||
2008 | 2007 | |||||||
HK$2,500,001 HK$3,000,000
|
1 | 1 | ||||||
HK$6,500,001 HK$7,000,000
|
| 1 | ||||||
HK$9,000,001 HK$10,000,000
|
1 | |
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 80 Annual Report 2008 (Expressed in Hong Kong Dollars) |
12 | EQUITY SETTLED SHARE-BASED TRANSACTIONS | |
The Company operates a share option scheme (the 2002 Share Option Scheme) which was adopted by shareholders of the Company on 23 December 2002 whereby the directors may, at their discretion, invite eligible participants to receive options to subscribe for shares subject to the terms and conditions stipulated therein. |
(a) | The terms and conditions of the options that existed during the years are as follows, whereby all options are settled by physical delivery of shares: |
Number of | Vesting | Exercisable | ||||||||||
option | conditions | Period | ||||||||||
2002 Share Option Scheme
|
||||||||||||
|
||||||||||||
Options granted to directors:
|
||||||||||||
|
||||||||||||
- 3 June 2004
|
6,000,000 | Condition 1 | On or prior to 2 June 2014 | |||||||||
- 5 January 2005
|
16,106,956 | Condition 1 | On or prior to 20 October 2014 | |||||||||
- 22 May 2006
|
15,093,585 | Condition 1 | On or prior to 21 May 2016 | |||||||||
- 11 February 2008
|
6,016,309 | Condition 2 | On or prior to 23 December 2012 | |||||||||
|
||||||||||||
Options granted to employees:
|
||||||||||||
|
||||||||||||
- 21 October 2004
|
8,393,399 | Condition 1 | On or prior to 20 October 2014 | |||||||||
- 3 October 2005
|
1,000,000 | Condition 1 | On or prior to 30 September 2015 | |||||||||
- 22 May 2006
|
14,012,937 | Condition 1 | On or prior to 21 May 2016 | |||||||||
- 3 July 2006
|
702,769 | Condition 1 | On or prior to 2 July 2016 | |||||||||
- 3 August 2006
|
70,468 | Condition 1 | On or prior to 2 August 2016 | |||||||||
- 22 November 2006
|
200,902 | Condition 1 | On or prior to 14 November 2016 | |||||||||
- 23 May 2007
|
100,396 | Condition 1 | On or prior to 11 June 2017 | |||||||||
- 12 December 2007
|
1,003,956 | Condition 1 | On or prior to 23 December 2012 | |||||||||
- 6 February 2008
|
6,016,309 | Condition 3 | On or prior to 23 December 2012 | |||||||||
- 15 February 2008
|
4,010,873 | Condition 3 | On or prior to 23 December 2012 | |||||||||
- 11 March 2008
|
300,816 | Condition 1 | On or prior to 23 December 2012 | |||||||||
- 2 May 2008
|
1,002,718 | Condition 3 | On or prior to 23 December 2012 | |||||||||
|
||||||||||||
Total share options
|
80,032,393 | |||||||||||
|
Notes to the Financial Statements 81 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
12 | EQUITY SETTLED SHARE-BASED TRANSACTIONS (CONTINUED) |
(b) | The number and weighted average exercise prices of share options are as follows: |
2008 | 2007 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
average | average | |||||||||||||||
exercise | exercise | |||||||||||||||
price | Number of | price | Number of | |||||||||||||
HK$ | options | HK$ | options | |||||||||||||
2002 Share Option Scheme
|
||||||||||||||||
|
||||||||||||||||
Outstanding at the beginning of the year
|
1.09 | 61,350,000 | 1.08 | 65,760,000 | ||||||||||||
Adjustment to number of options
for 2007 Final Dividend (note (i))
|
1.10 | 204,922 | | | ||||||||||||
Adjustment to number of options
for 2008 Interim Dividend (note (ii))
|
1.28 | 177,471 | | | ||||||||||||
Granted during the year
|
1.84 | 18,300,000 | 1.16 | 300,000 | ||||||||||||
Exercised during the year
|
1.07 | (14,052,268 | ) | 0.82 | (1,910,000 | ) | ||||||||||
Lapsed during the year
|
1.63 | (5,398,911 | ) | 0.91 | (2,800,000 | ) | ||||||||||
|
||||||||||||||||
Outstanding at the end of the year
|
1.27 | 60,581,214 | 1.09 | 61,350,000 | ||||||||||||
|
||||||||||||||||
Exercisable at the end of the year
|
1.22 | 36,463,198 | 1.31 | 40,460,000 | ||||||||||||
|
(i) | As a result of allotment of 11,227,213 new shares to shareholders who elected to receive the 2007 Final Dividend in shares on 4 February 2008, the exercise price of and the number of share subject to the 51,805,000 share options outstanding on 21 December 2007 (being the Record Date for determining the entitlement of 2007 Final Dividend) were adjusted pursuant to the 2002 Share Option Scheme with effect from 4 February 2008. The closing price per ordinary share immediately before the date of the grant of the Options was HK$1.70. | ||
(ii) | As a result of allotment of 8,838,938 new shares to shareholders who elected to receive the 2008 Interim Dividend in shares on 23 July 2008, the exercise price of and the number of share subject to the 65,296,047 share options outstanding on 6 June 2008 (being the Record Date for determining the entitlement of 2008 Interim Dividend) were adjusted pursuant to the 2002 Share Option Scheme with effect from 23 July 2008. The closing price per ordinary share immediately before the date of the grant of the Options was HK$1.79. |
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 82 Annual Report 2008 (Expressed in Hong Kong Dollars) |
12 | EQUITY SETTLED SHARE-BASED TRANSACTIONS (CONTINUED) |
(c) | Fair value of share options and assumptions | ||
In determining the value of the share options granted, the Black-Scholes Model has been used except for the option granted on 11 February 2008 which has adopted the Monte Carlo Model. Both models are one of the most generally accepted methodologies used to calculate the value of options. The variables of the models include expected life of the options, risk-free interest rate, expected volatility and expected dividend of the shares of the Company. | |||
In determining the value of the share options granted during the year, the following variables have been applied to the models: |
2 May | 11 March | 15 February | 11 February | 6 February | 12 December | |||||||||||||||||||
Measurement date | 2008 | 2008 | 2008 | 2008 | 2008 | 2007 | ||||||||||||||||||
Variables
|
||||||||||||||||||||||||
Expected life
|
5 years | 5 years | 3 years | average 4 years | 5 years | 5 years | ||||||||||||||||||
Risk-free rate
|
2.88 | % | 2.04 | % | 2.16 | % | 2.16 | % | 2.16 | % | 3.10 | % | ||||||||||||
Expected volatility
|
63.56 | % | 63.35 | % | 63.22 | % | 63.32 | % | 63.22 | % | 61.86 | % | ||||||||||||
Expected dividend yield
|
1.97 | % | 1.97 | % | 1.97 | % | 1.97 | % | 1.97 | % | 1.97 | % |
(i) | The expected life is estimated to be 3 to 5 years from the date of grant (the Measurement Date). | ||
(ii) | The risk-free rate represents the yield of the Hong Kong Exchange Fund Notes corresponding to the expected life of the options as at the Measurement Date. | ||
(iii) | The expected volatility represents the annualised standard deviation of the return on the daily share price of the Company over the period commensurate to the expected life of the options (taking into account the remaining contractual life of the option and the effect of the expected early exercise of the option). | ||
(iv) | The expected dividend yield is based on the historical dividend yield over the last five years. |
2 May | 11 March | 15 February | 11 February | 6 February | 12 December | |||||||||||||||||||
Date of grant | 2008 | 2008 | 2008 | 2008 | 2008 | 2007 | ||||||||||||||||||
Fair value per share option
|
HK$0.83 | HK$0.87 | HK$0.72 | HK$0.41 | HK$0.90 | HK$1.13 |
Notes to the Financial Statements 83 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
13 | GOODWILL GROUP |
The Group | ||||
HK$000 | ||||
Cost and carrying amount:
|
||||
|
||||
At 31 August 2008/2007
|
1,066 |
Impairment tests for cash-generating units containing goodwill | ||
Goodwill is allocated to the Groups cash-generating units (CGU) identified according to country of operation and business segment as follows: |
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Fixed telecommunications network service segment
|
1,066 | 1,066 |
The recoverable amount of the CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows for the five-year period are estimated based on growth rates between 1% to 14% and a pre-tax discount rate of 14%. Cash flows beyond the five year period are assumed to remain constant. The estimated growth rates used are comparable to the growth rate for the industry. | ||
The key assumption used in the value-in-use calculation is the annual growth of the turnover of the fixed telecommunications network services and it is determined based on the past performance and managements expectation for market development. The discount rate used is pre-tax and reflects specific risks relating to the fixed telecommunication services segment. | ||
The carrying amount of the unit approximates to its recoverable amount. Any adverse change in the key assumption could reduce the recoverable amount below carrying amount. |
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 84 Annual Report 2008 (Expressed in Hong Kong Dollars) |
14 | FIXED ASSETS | |
Group |
Telecom- | ||||||||||||||||||||||||||||
munications, | ||||||||||||||||||||||||||||
Leasehold | Furniture, | computer | ||||||||||||||||||||||||||
Investment | land and | Leasehold | fixtures | and office | Motor | |||||||||||||||||||||||
property | buildings | improvements | and fittings | equipment | vehicles | Total | ||||||||||||||||||||||
|
HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||||||||||
Cost:
|
||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
At 1 September 2007
|
5,197 | 79,598 | 80,638 | 17,419 | 2,475,775 | 6,818 | 2,665,445 | |||||||||||||||||||||
Additions
|
| 4,646 | 2,469 | 2,189 | 196,230 | 6,150 | 211,684 | |||||||||||||||||||||
Disposals
|
| | | (478 | ) | (30,564 | ) | (344 | ) | (31,386 | ) | |||||||||||||||||
Exchange adjustments
|
| | 1,470 | 445 | 2,840 | | 4,755 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
At 31 August 2008
|
5,197 | 84,244 | 84,577 | 19,575 | 2,644,281 | 12,624 | 2,850,498 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Accumulated
depreciation:
|
||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
At 1 September 2007
|
2,101 | 9,123 | 50,309 | 13,952 | 1,346,854 | 5,883 | 1,428,222 | |||||||||||||||||||||
Charge for the year
|
104 | 1,604 | 9,626 | 1,617 | 196,198 | 902 | 210,051 | |||||||||||||||||||||
Disposals
|
| | | (286 | ) | (22,390 | ) | (222 | ) | (22,898 | ) | |||||||||||||||||
Exchange adjustments
|
| | 1,334 | 313 | 2,077 | | 3,724 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
At 31 August 2008
|
2,205 | 10,727 | 61,269 | 15,596 | 1,522,739 | 6,563 | 1,619,099 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Net book value:
|
||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
At 31 August 2008
|
2,992 | 73,517 | 23,308 | 3,979 | 1,121,542 | 6,061 | 1,231,399 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Cost:
|
||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
At 1 September 2006
|
5,197 | 79,598 | 78,241 | 17,770 | 2,352,253 | 6,956 | 2,540,015 | |||||||||||||||||||||
Additions
|
| | 1,627 | 496 | 129,950 | 177 | 132,250 | |||||||||||||||||||||
Disposals
|
| | (3 | ) | (1,100 | ) | (8,988 | ) | (315 | ) | (10,406 | ) | ||||||||||||||||
Exchange adjustments
|
| | 773 | 253 | 2,560 | | 3,586 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
At 31 August 2007
|
5,197 | 79,598 | 80,638 | 17,419 | 2,475,775 | 6,818 | 2,665,445 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Accumulated
depreciation:
|
||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
At 1 September 2006
|
1,997 | 7,531 | 40,428 | 12,447 | 1,104,864 | 5,514 | 1,172,781 | |||||||||||||||||||||
Charge for the year
|
104 | 1,592 | 9,269 | 2,028 | 244,581 | 529 | 258,103 | |||||||||||||||||||||
Disposals
|
| | | (683 | ) | (4,465 | ) | (160 | ) | (5,308 | ) | |||||||||||||||||
Exchange adjustments
|
| | 612 | 160 | 1,874 | | 2,646 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
At 31 August 2007
|
2,101 | 9,123 | 50,309 | 13,952 | 1,346,854 | 5,883 | 1,428,222 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Net book value:
|
||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
At 31 August 2007
|
3,096 | 70,475 | 30,329 | 3,467 | 1,128,921 | 935 | 1,237,223 | |||||||||||||||||||||
|
Notes to the Financial Statements 85 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
14 | FIXED ASSETS (CONTINUED) | |
Company |
Telecom- | ||||||||||||||||||||||||
munications, | ||||||||||||||||||||||||
Furniture, | computer | |||||||||||||||||||||||
Investment | Leasehold | fixtures | and office | Motor | ||||||||||||||||||||
property | improvements | and fittings | equipment | vehicles | Total | |||||||||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||||||||
Cost:
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||
At 1 September 2007
|
5,197 | 8,332 | 7,046 | 312,158 | 3,665 | 336,398 | ||||||||||||||||||
Additions
|
| | 2,177 | 229 | 1,236 | 3,642 | ||||||||||||||||||
|
||||||||||||||||||||||||
At 31 August 2008
|
5,197 | 8,332 | 9,223 | 312,387 | 4,901 | 340,040 | ||||||||||||||||||
|
||||||||||||||||||||||||
Accumulated
depreciation:
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||
At 1 September 2007
|
2,101 | 6,199 | 6,802 | 217,704 | 3,391 | 236,197 | ||||||||||||||||||
Charge for the year
|
104 | 726 | 346 | 14,978 | 206 | 16,360 | ||||||||||||||||||
|
||||||||||||||||||||||||
At 31 August 2008
|
2,205 | 6,925 | 7,148 | 232,682 | 3,597 | 252,557 | ||||||||||||||||||
|
||||||||||||||||||||||||
Net book value:
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||
At 31 August 2008
|
2,992 | 1,407 | 2,075 | 79,705 | 1,304 | 87,483 | ||||||||||||||||||
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||
Cost:
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||
At 1 September 2006
|
5,197 | 7,957 | 7,151 | 312,435 | 3,665 | 336,405 | ||||||||||||||||||
Additions
|
| 375 | 72 | 1,908 | | 2,355 | ||||||||||||||||||
Disposals
|
| | (177 | ) | (2,185 | ) | | (2,362 | ) | |||||||||||||||
|
||||||||||||||||||||||||
At 31 August 2007
|
5,197 | 8,332 | 7,046 | 312,158 | 3,665 | 336,398 | ||||||||||||||||||
|
||||||||||||||||||||||||
Accumulated
depreciation:
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||
At 1 September 2006
|
1,997 | 5,506 | 6,828 | 203,669 | 3,391 | 221,391 | ||||||||||||||||||
Charge for the year
|
104 | 693 | 151 | 16,219 | | 17,167 | ||||||||||||||||||
Disposals
|
| | (177 | ) | (2,184 | ) | | (2,361 | ) | |||||||||||||||
|
||||||||||||||||||||||||
At 31 August 2007
|
2,101 | 6,199 | 6,802 | 217,704 | 3,391 | 236,197 | ||||||||||||||||||
|
||||||||||||||||||||||||
Net book value:
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||
At 31 August 2007
|
3,096 | 2,133 | 244 | 94,454 | 274 | 100,201 | ||||||||||||||||||
|
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 86 Annual Report 2008 (Expressed in Hong Kong Dollars) |
14 | FIXED ASSETS (CONTINUED) |
(a) | The Groups total future aggregate lease income receivable under non-cancellable operating lease are receivable as follows: |
The Group | The Company | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
Leases in respect of investment
property which are receivable:
|
||||||||||||||||
Within 1 year
|
258 | 228 | 258 | 228 | ||||||||||||
After 1 year but within 5 years
|
258 | | 258 | | ||||||||||||
|
||||||||||||||||
|
516 | 228 | 516 | 228 | ||||||||||||
|
||||||||||||||||
|
||||||||||||||||
Leases in respect of
telecommunications
facilities and computer equipment
which
are receivable:
|
||||||||||||||||
Within 1 year
|
979 | 1,065 | | | ||||||||||||
After 1 year but within 5 years
|
292 | 214 | | | ||||||||||||
|
||||||||||||||||
|
1,271 | 1,279 | | | ||||||||||||
|
||||||||||||||||
|
1,787 | 1,507 | 516 | 228 | ||||||||||||
|
(b) | The net book value of interests in leasehold land and buildings and investment property situated in Hong Kong are analysed as follows: |
The Group | The Company | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
Leases of between 10
to 50 years
|
76,509 | 73,571 | 2,992 | 3,096 | ||||||||||||
|
Representing: |
The Group | The Company | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
Leasehold land and
building carried at
cost
|
73,517 | 70,475 | | | ||||||||||||
Investment property
arrived at cost
less impairment loss
|
2,992 | 3,096 | 2,992 | 3,096 | ||||||||||||
|
||||||||||||||||
|
76,509 | 73,571 | 2,992 | 3,096 | ||||||||||||
|
(c) | In addition to the leasehold land and buildings classified as being held under a finance lease, the Group leases telecommunications, computer and office equipment under finance leases expiring from one to five years. At the end of the lease term the Group has the option to purchase the equipment at a price deemed to be a bargain purchase option. None of the leases included contingent rental. | ||
At 31 August 2008, the net book value of telecommunications, computer and office equipment under finance lease held by the Group amounted to HK$1,411,000 (2007: HK$1,998,000). |
Notes to the Financial Statements 87 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
15 | INVESTMENTS IN SUBSIDIARIES |
The Company | ||||||||
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Unlisted investments, at cost (note (a))
|
51,791 | 51,791 | ||||||
Amounts due from subsidiaries (note (b))
|
1,342,205 | 1,446,420 | ||||||
|
||||||||
|
1,393,996 | 1,498,211 | ||||||
Less: Impairment loss
|
(10,184 | ) | (9,748 | ) | ||||
|
||||||||
|
1,383,812 | 1,488,463 | ||||||
|
Notes: |
(a) | The following is a list of the principal subsidiaries which principally affected the results, assets or liabilities of the Group at 31 August 2008: |
Principal | Particulars | |||||||||
Place of | activities and place | of issued | Percentage of | |||||||
Name | incorporation | of operations | share capital | interest held | ||||||
Attitude Holdings Limited | British Virgin Islands |
Inactive
|
Ordinary
US$1 |
100 | ||||||
|
||||||||||
Automedia Holdings Limited | British Virgin Islands |
Investment holding
in Hong Kong |
Ordinary
US$1 |
* 100 | ||||||
|
||||||||||
City Telecom (B.C.) Inc. # | Canada |
Provision of international
telecommunications
and dial-up Internet
access services in
Canada
|
Common Canadian dollar (CAD) 501,000 | 100 | ||||||
|
||||||||||
City Telecom (Canada) Inc. # | Canada |
Leasing and maintenance
of switching equipment
and provision of
operational services
in Canada
|
Common
CAD100 |
100 | ||||||
|
||||||||||
City Telecom Inc. # | Canada |
Provision of international
telecommunications
and dial-up Internet
access services
in Canada
|
Common
CAD1,000 |
100 | ||||||
|
||||||||||
City Telecom International Limited | British Virgin Islands |
Investment holding
in Hong Kong |
Ordinary
US$5,294 |
* 100 | ||||||
|
||||||||||
Credibility Holdings Limited | British Virgin Islands |
Investment holding
in Hong Kong |
Ordinary
US$1 |
* 100 |
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 88 Annual Report 2008 (Expressed in Hong Kong Dollars) |
15 | INVESTMENTS IN SUBSIDIARIES (CONTINUED) | |
Notes: (continued) |
(a) | (continued) |
Principal | Particulars | |||||||||
Place of | activities and place | of issued | Percentage of | |||||||
Name | incorporation | of operations | share capital | interest held | ||||||
CTI Guangzhou Customer
Services Company Limited (translated from the registered name in Chinese) # |
PRC |
Provision of administrative
support services
in the PRC
|
Paid in capital of HK$8,000,000 | * 100 | ||||||
|
||||||||||
CTI Marketing Company Limited | Hong Kong |
Provision of media marketing
services in Hong Kong
|
Ordinary HK$10,000 | 100 | ||||||
|
||||||||||
Golden Trinity Holdings Limited | British Virgin Islands |
Investment holding
in Hong Kong |
Ordinary US$1 | * 100 | ||||||
|
||||||||||
Hong Kong Broadband
Network Limited |
Hong Kong |
Provision of international
telecommunications
and fixed
telecommunications
network services in
Hong Kong
|
Ordinary HK$383,049 | 100 | ||||||
|
||||||||||
IDD1600 Company Limited | Hong Kong |
Provision of international
telecommunications
services in Hong Kong
|
Ordinary HK$2 | 100 | ||||||
|
||||||||||
SGBN Singapore Broadband Network Pte. Limited | Singapore |
Inactive
|
Ordinary
Singapore dollar 1 |
* 100 |
* | Shares held directly by the Company. | |
# | Subsidiaries not audited by KPMG. |
(b) | Except for a loan to a subsidiary of HK$753,860,000 (2007: HK$753,860,000) which bears fixed interest of 9% per annum, all the amounts due from subsidiaries are unsecured, interest-free and have no fixed terms of repayment. |
Notes to the Financial Statements 89 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
16 | OTHER FINANCIAL ASSETS |
The Group | The Company | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
Debt securities, at fair value and unlisted outside
Hong Kong (note (i))
|
27,997 | 28,577 | 27,997 | 24,798 | ||||||||||||
Long-term bank deposit, at amortised cost (note (ii))
|
| 14,415 | | 14,415 | ||||||||||||
|
||||||||||||||||
|
27,997 | 42,992 | 27,997 | 39,213 | ||||||||||||
Current portion
|
(27,997 | ) | (3,779 | ) | (27,997 | ) | | |||||||||
|
||||||||||||||||
Balance as at the end of the year
|
| 39,213 | | 39,213 | ||||||||||||
|
Notes: | ||
(i) | Included in the balance as at 31 August 2007 was a debt security with principal amount of US$500,000 (equivalent to HK$3,900,000). During the year ended 31 August 2008, the debt security matured. | |
(ii) | The balance as at 31 August 2007 was a ten-year US$2 million (equivalent to HK$15,600,000) deposit placed with a bank in which the Group receives a floating rate deposit interest. During the year ended 31 August 2008, the Group early redeemed the deposit and recognised a gain of HK$1,185,000 in the consolidated income statement. |
17 | DERIVATIVE FINANCIAL INSTRUMENT |
The Group | ||||||||
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Interest rate swap, at fair value through profit or loss
|
| 1,039 |
Note: | The balance as at 31 August 2007 was an interest rate swap contract with notional principal amount of HK$46,666,667. During the year ended 31 August 2008, the Group early terminated the interest rate swap contract and recognised a loss of HK$1,039,000 in the consolidated income statement. |
18 | DEFERRED EXPENDITURE |
The Group | ||||||||
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Balance as at the beginning of the year
|
21,367 | 12,445 | ||||||
Additions during the year
|
68,505 | 24,502 | ||||||
Less: Amortisation charge for the year (note 5(a))
|
(33,777 | ) | (15,580 | ) | ||||
|
||||||||
|
56,095 | 21,367 | ||||||
Current portion
|
(40,704 | ) | (13,584 | ) | ||||
|
||||||||
Balance as at the end of the year
|
15,391 | 7,783 | ||||||
|
Deferred expenditure represents costs incurred to acquire subscribers of the services offered by the Group, which is treated as customer acquisition costs and are amortised over the period of the underlying service subscription agreements. |
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 90 Annual Report 2008 (Expressed in Hong Kong Dollars) |
19 | ACCOUNTS RECEIVABLE |
The Group | The Company | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
Accounts receivable
|
152,227 | 192,943 | 12,396 | 13,026 | ||||||||||||
Less: Allowance for doubtful debts
|
(11,944 | ) | (22,392 | ) | (978 | ) | (921 | ) | ||||||||
|
||||||||||||||||
|
140,283 | 170,551 | 11,418 | 12,105 | ||||||||||||
|
(a) | Aging analysis | ||
The aging analysis of accounts receivable is as follows: |
The Group | The Company | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
Current 30 days
|
45,462 | 50,282 | 4,233 | 4,756 | ||||||||||||
31 60 days
|
17,507 | 15,619 | 4,783 | 5,279 | ||||||||||||
61 90 days
|
7,249 | 8,876 | 886 | 607 | ||||||||||||
Over 90 days
|
82,009 | 118,166 | 2,494 | 2,384 | ||||||||||||
|
||||||||||||||||
|
152,227 | 192,943 | 12,396 | 13,026 | ||||||||||||
|
The majority of the Groups accounts receivable are due within 30 days from the date of billings. Subscribers with receivable that are more than 3 months overdue are requested to settle all outstanding balance before further credit is granted. | |||
(b) | Impairment of accounts receivable | ||
Impairment losses in respect of accounts receivable are recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against accounts receivable directly (see note 1(i)(i)). | |||
The movement in the allowance for doubtful debts during the year, including both specific and collective loss components is as follows: |
The Group | The Company | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
Balance as at the beginning of the year
|
22,392 | 55,745 | 921 | 1,058 | ||||||||||||
Impairment loss recognised
|
14,293 | 6,569 | 954 | 796 | ||||||||||||
Uncollectible amounts written off
|
(24,741 | ) | (39,922 | ) | (897 | ) | (933 | ) | ||||||||
|
||||||||||||||||
Balance as at the end of the year
|
11,944 | 22,392 | 978 | 921 | ||||||||||||
|
The allowance for doubtful debts as at 1 September 2006 includes provision for mobile interconnection charges receivable of HK$20,809,000. Following TAs 2004 Determination issued in June 2007 (note 3(c)), the Group has written back HK$9,404,000 of the allowance for mobile interconnection charges to the consolidated income statement and written off the remaining balance of allowance of HK$11,405,000 against the accounts receivable relating to mobile interconnection charges. |
Notes to the Financial Statements 91 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
19 | ACCOUNTS RECEIVABLE (CONTINUED) |
(c) | Accounts receivable that are not impaired | ||
The aging analysis of accounts receivable that are neither individually nor collectively considered to be impaired are as follows: |
The Group | The Company | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
Neither past due nor impaired
|
45,462 | 50,282 | 4,233 | 4,756 | ||||||||||||
0 30 days past due
|
17,507 | 15,619 | 4,783 | 5,279 | ||||||||||||
31 60 days past due
|
7,249 | 8,876 | 886 | 607 | ||||||||||||
Over 60 days past due
|
70,065 | 95,774 | 1,516 | 1,463 | ||||||||||||
|
||||||||||||||||
|
140,283 | 170,551 | 11,418 | 12,105 | ||||||||||||
|
Receivables that were neither past due nor impaired relate to a wide range of customers for whom there was no recent history of default. | |||
The amount over 60 days past due for the Group included receivable relating to mobile interconnection charges of HK$64,407,000 as at 31 August 2008 (31 August 2007: HK$92,383,000) (note 3(c)). | |||
Other accounts receivable that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Group does not hold collateral over these balances. |
20 | INVENTORIES |
(a) | Inventories in the balance sheet comprise: |
The Group and | ||||||||
the Company | ||||||||
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Finished goods
|
| 477 | ||||||
|
(b) | The amount of inventories recognised as an expense is analysed as follows: |
The Group | The Company | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
Cost of inventories
|
477 | 331 | 477 | 330 | ||||||||||||
|
21 | CASH AT BANK AND IN HAND |
The Group | The Company | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
Time deposits with banks and other financial
institutions
|
264,943 | 482,730 | 62,854 | 203,494 | ||||||||||||
Cash at bank and in hand
|
156,667 | 50,164 | 27,532 | 17,037 | ||||||||||||
|
||||||||||||||||
Cash at bank and in hand in the balance sheet
|
421,610 | 532,894 | 90,386 | 220,531 | ||||||||||||
|
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 92 Annual Report 2008 (Expressed in Hong Kong Dollars) |
22 | ACCOUNTS PAYABLE | |
The aging analysis of the accounts payable was as follows: |
The Group | The Company | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
Current 30 days
|
18,802 | 18,025 | 4,952 | 5,770 | ||||||||||||
31 60 days
|
4,025 | 11,097 | 2,072 | 2,073 | ||||||||||||
61 90 days
|
8,334 | 3,655 | 7,992 | 3,013 | ||||||||||||
Over 90 days
|
21,163 | 43,242 | 11,424 | 26,621 | ||||||||||||
|
||||||||||||||||
|
52,324 | 76,019 | 26,440 | 37,477 | ||||||||||||
|
23 | CAPITAL AND RESERVES |
(a) | Group |
Share | Share | Capital | Retained | Exchange | ||||||||||||||||||||
capital | premium | reserve | profits | reserve | Total | |||||||||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||||||||
At 1 September 2007
|
61,650 | 622,433 | 18,109 | 200,519 | 1,171 | 903,882 | ||||||||||||||||||
Profit attributable
to shareholders
|
| | | 125,190 | | 125,190 | ||||||||||||||||||
Dividend paid in
respect of previous
year
|
| | | (5,915 | ) | | (5,915 | ) | ||||||||||||||||
Shares issued in
respect of
scrip dividend of
previous year
|
1,123 | 18,044 | | (19,167 | ) | | | |||||||||||||||||
Dividend paid in
respect of current
year
|
| | | (11,371 | ) | | (11,371 | ) | ||||||||||||||||
Shares issued in
respect of
scrip dividend of
current year
|
884 | 13,347 | | (14,231 | ) | | | |||||||||||||||||
Shares issued upon
exercise of
share option
|
1,405 | 16,893 | (3,300 | ) | | | 14,998 | |||||||||||||||||
Equity settled
share-based
transactions
|
| | 4,204 | | | 4,204 | ||||||||||||||||||
Exchange
adjustments on
translation of
the financial
statements of
subsidiaries
|
| | | | 1,619 | 1,619 | ||||||||||||||||||
|
||||||||||||||||||||||||
At 31 August 2008
|
65,062 | 670,717 | 19,013 | 275,025 | 2,790 | 1,032,607 | ||||||||||||||||||
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||
At 1 September 2006
|
61,417 | 620,298 | 12,993 | 196,289 | 657 | 891,654 | ||||||||||||||||||
Profit attributable
to shareholders
|
| | | 28,865 | | 28,865 | ||||||||||||||||||
Dividend paid in
respect of current
year
|
| | | (24,635 | ) | | (24,635 | ) | ||||||||||||||||
Shares issued upon
exercise of
share option
|
233 | 2,135 | (611 | ) | | | 1,757 | |||||||||||||||||
Equity settled
share-based
transactions
|
| | 5,727 | | | 5,727 | ||||||||||||||||||
Exchange
adjustments on
translation of
the financial
statements of
subsidiaries
|
| | | | 514 | 514 | ||||||||||||||||||
|
||||||||||||||||||||||||
At 31 August 2007
|
61,650 | 622,433 | 18,109 | 200,519 | 1,171 | 903,882 | ||||||||||||||||||
|
Notes to the Financial Statements 93 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
23 | CAPITAL AND RESERVES (CONTINUED) |
(b) | Company |
Share | Share | Capital | Retained | |||||||||||||||||
capital | premium | reserve | profits | Total | ||||||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | ||||||||||||||||
At 1 September 2007
|
61,650 | 622,433 | 18,109 | 193,047 | 895,239 | |||||||||||||||
Profit attributable
to shareholders
|
| | | 17,037 | 17,037 | |||||||||||||||
Dividend paid in
respect of previous
year
|
| | | (5,915 | ) | (5,915 | ) | |||||||||||||
Shares issued in
respect of scrip
dividend of
previous year
|
1,123 | 18,044 | | (19,167 | ) | | ||||||||||||||
Dividend paid in
respect of current
year
|
| | | (11,371 | ) | (11,371 | ) | |||||||||||||
Shares issued in
respect of scrip
dividend of
current year
|
884 | 13,347 | | (14,231 | ) | | ||||||||||||||
Shares issued upon
exercise of share
option
|
1,405 | 16,893 | (3,300 | ) | | 14,998 | ||||||||||||||
Equity settled
share-based
transactions
|
| | 4,204 | | 4,204 | |||||||||||||||
|
||||||||||||||||||||
At 31 August 2008
|
65,062 | 670,717 | 19,013 | 159,400 | 914,192 | |||||||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
At 1 September 2006
|
61,417 | 620,298 | 12,993 | 230,627 | 925,335 | |||||||||||||||
Loss attributable
to shareholders
|
| | | (12,945 | ) | (12,945 | ) | |||||||||||||
Dividend paid in
respect of current
year
|
| | | (24,635 | ) | (24,635 | ) | |||||||||||||
Shares issued upon
exercise of share
option
|
233 | 2,135 | (611 | ) | | 1,757 | ||||||||||||||
Equity settled
share-based
transactions
|
| | 5,727 | | 5,727 | |||||||||||||||
|
||||||||||||||||||||
At 31 August 2007
|
61,650 | 622,433 | 18,109 | 193,047 | 895,239 | |||||||||||||||
|
Nature and purpose of reserves |
(i) | Share premium | ||
The application of the share premium account is governed by Sections 48B of the Hong Kong Companies Ordinance. | |||
(ii) | Capital reserve | ||
The capital reserve which comprises the fair value of the actual or estimated number of unexercised share options granted to employees of the Group was recognised in accordance with the accounting policy adopted for share based payment in note 1(q). | |||
(iii) | PRC statutory reserve | ||
In accordance with Accounting Regulations for Business Enterprises, foreign investment enterprises in the PRC are required to transfer at least 10% of their profit after taxation, as determined under accounting principles generally accepted in the PRC (PRC GAAP) to the general reserve until the balance of the general reserve is equal to 50% of their registered capital. | |||
For the year ended 31 August 2008, CTI Guangzhou Customer Services Company Limited (CTIGZ), a wholly-owned subsidiary of the Group, made appropriation to the statutory reserve of RMB324,000 (2007: RMB379,000). The accumulated balance of the statutory reserve maintained at the CTIGZ as at 31 August 2008 was RMB905,000 (2007: RMB581,000). The statutory reserve can be used to reduce previous years losses and to increase the capital of the subsidiary. | |||
(iv) | Exchange reserve | ||
The exchange reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations. The reserve is dealt with in accordance with the accounting policies set out in note 1(d)(ii). |
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 94 Annual Report 2008 (Expressed in Hong Kong Dollars) |
23 | CAPITAL AND RESERVES (CONTINUED) |
(c) | Share capital |
2008 | 2007 | |||||||||||||||
No. of | Amount | No. of | Amount | |||||||||||||
shares | HK$000 | shares | HK$000 | |||||||||||||
Authorised:
|
||||||||||||||||
|
||||||||||||||||
Ordinary shares of
HK$0.10 each
|
2,000,000,000 | 200,000 | 2,000,000,000 | 200,000 | ||||||||||||
|
||||||||||||||||
|
||||||||||||||||
Issued and fully
paid:
|
||||||||||||||||
|
||||||||||||||||
Ordinary shares of
HK$0.10 each
|
||||||||||||||||
|
||||||||||||||||
At the beginning of
the year
|
616,503,404 | 61,650 | 614,175,404 | 61,417 | ||||||||||||
Shares issued in
respect of scrip
dividend of the
previous year (note
(i))
|
11,227,213 | 1,123 | | | ||||||||||||
Shares issued in
respect of scrip
dividend of the
current year (note
(ii))
|
8,838,938 | 884 | | | ||||||||||||
Shares issued upon
exercise of
share options (note
(iii))
|
14,052,268 | 1,405 | 2,328,000 | 233 | ||||||||||||
|
||||||||||||||||
At the end of the
year
|
650,621,823 | 65,062 | 616,503,404 | 61,650 | ||||||||||||
|
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per ordinary share at meetings of the Company. All ordinary shares rank equally with regard to the Companys residual assets. |
Notes: | ||
(i) | On 4 February 2008, the Company issued and allotted 11,227,213 ordinary shares to shareholders who elected to receive, the 2007 final dividend in shares pursuant to the scrip dividend scheme announced by the Company on 4 January 2008. These shares rank pari passu with the existing shares of the Company in all respects. | |
(ii) | On 23 July 2008, the Company issued and allotted 8,838,938 ordinary shares to shareholder, who elected to receive the 2008 interim dividend in shares pursuant to the scrip dividend scheme announced by the Company on 19 June 2008. These shares rank pari passu with the existing shares of the Company in all respects. | |
(iii) | During the year ended 31 August 2008, 14,052,268 ordinary shares (2007: 2,328,000 ordinary shares) were issued at a weighted average price of HK$1.07 per ordinary share (2007: HK$0.75 per ordinary share), to share option holders who had exercised their options. These shares so issued rank pari passu with the existing ordinary shares in issue. |
Notes to the Financial Statements 95 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
23 | CAPITAL AND RESERVES (CONTINUED) |
(c) |
Share capital (continued)
Notes: (continued) |
(iv) | The movement of outstanding share options during the year was as follows: |
Adjustment to | Adjustment to | |||||||||||||||||||||||||||||||||||
Number of | number of | number of | Number of | |||||||||||||||||||||||||||||||||
share options | options for | options for | share options | |||||||||||||||||||||||||||||||||
outstanding at | 2007 final | 2008 interim | outstanding | |||||||||||||||||||||||||||||||||
Exercise price | 1 September | dividend | dividend | Lapsed/ | at 31 August | |||||||||||||||||||||||||||||||
Date of grant | per share | 2007 | Granted | (note (i)) | (note (ii)) | Exercised | Cancelled | 2008 | ||||||||||||||||||||||||||||
3 June 2004
|
HK$ | 1.4700 | 6,000,000 | | | | 6,000,000 | | | |||||||||||||||||||||||||||
21 October 2004
|
HK$ | 1.5297 | 8,340,000 | | 32,397 | 21,002 | 821,344 | 473 | 7,571,582 | |||||||||||||||||||||||||||
5 January 2005
|
HK$ | 1.5297 | 16,000,000 | | 63,292 | 43,664 | | | 16,106,956 | |||||||||||||||||||||||||||
3 October 2005
|
HK$ | 0.8100 | 1,000,000 | | | | 1,000,000 | | | |||||||||||||||||||||||||||
22 May 2006
|
HK$ | 0.6554 | 28,940,000 | | 101,301 | 65,221 | 6,135,805 | 583,162 | 22,387,555 | |||||||||||||||||||||||||||
3 July 2006
|
HK$ | 0.6773 | 700,000 | | 2,769 | | | 702,769 | | |||||||||||||||||||||||||||
3 August 2006
|
HK$ | 0.7052 | 70,000 | | 277 | 191 | 30,119 | | 40,349 | |||||||||||||||||||||||||||
22 November 2006
|
HK$ | 0.7251 | 200,000 | | 534 | 368 | 65,000 | | 135,902 | |||||||||||||||||||||||||||
23 May 2007
|
HK$ | 2.0219 | 100,000 | | 396 | | | 100,396 | | |||||||||||||||||||||||||||
12 December 2007
|
HK$ | 2.4403 | | 1,000,000 | 3,956 | | | 1,003,956 | | |||||||||||||||||||||||||||
6 February 2008
|
HK$ | 1.7652 | | 6,000,000 | | 16,309 | | | 6,016,309 | |||||||||||||||||||||||||||
11 February 2008
|
HK$ | 1.8749 | | 6,000,000 | | 16,309 | | | 6,016,309 | |||||||||||||||||||||||||||
15 February 2008
|
HK$ | 1.7652 | | 4,000,000 | | 10,873 | | 3,008,155 | 1,002,718 | |||||||||||||||||||||||||||
11 March 2008
|
HK$ | 1.8250 | | 300,000 | | 816 | | | 300,816 | |||||||||||||||||||||||||||
2 May 2008
|
HK$ | 1.7951 | | 1,000,000 | | 2,718 | | | 1,002,718 | |||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||
|
61,350,000 | 18,300,000 | 204,922 | 177,471 | 14,052,268 | 5,398,911 | 60,581,214 | |||||||||||||||||||||||||||||
|
During the year ended 31 August 2008, options were granted under the 2002 Share Option Scheme to eligible participants for the subscription of 18,300,000 shares of the Company at a weighted average exercise price of HK$1.84 each. | |||
Each option entitles the holder to subscribe for one share of HK$0.10 each in the Company at a predetermined exercise price. |
(d) | Capital management | ||
The Groups primary objectives when managing capital are to maintain a reasonable capital structure and safeguard the Groups ability to continue as a going concern, in order to provide returns for shareholders. | |||
The Group manages the amount of capital in proportion to risk, and makes adjustments to its capital structure through the amount of dividend payment to shareholders, issuance of scrip and new shares, and managing its debt portfolio in conjunction with cash flow requirements, taking into account its future financial obligations and commitments. | |||
The Group monitors its capital structure by reviewing its net debt to net asset gearing ratio. For this purpose, the Group defines net debt as total loans less cash at bank and in hand and long-term bank deposits. |
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 96 Annual Report 2008 (Expressed in Hong Kong Dollars) |
23 | CAPITAL AND RESERVES (CONTINUED) |
(d) | Capital management (continued) | ||
The net debt to net asset gearing ratio as at 31 August 2008 and 2007 are as follows: |
The Group | ||||||||
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Unsecured
|
||||||||
8.75% senior notes due 2015
|
683,242 | 952,593 | ||||||
Obligations under finance lease
|
376 | 1,210 | ||||||
|
||||||||
Total loans
|
683,618 | 953,803 | ||||||
Less: Cash at bank and in hand
|
(421,610 | ) | (532,894 | ) | ||||
Less: Long-term bank deposit
|
| (14,415 | ) | |||||
|
||||||||
Net debt
|
262,008 | 406,494 | ||||||
Net asset
|
1,032,607 | 903,882 | ||||||
|
||||||||
Net debt to net asset gearing ratio
|
0.25 | 0.45 | ||||||
|
The decrease in net debt to net asset gearing ratio is mainly due to the repurchase of the 8.75% senior notes (note 25(a)). | |||
During the year, the Group has complied with the externally imposed capital requirement related to the 8.75% senior notes. |
24 | DEFERRED TAXATION | |
Deferred taxation is calculated in full on temporary differences under the liability method using the taxation rates prevailing in respective countries in which the Group operates. Deferred tax assets are recognised to the extent it is probable that future taxable profits will be generated against which the temporary differences can be utilised. | ||
The components of deferred tax assets/ (liabilities) recognised in the consolidated balance sheet and the movements are as follows: |
The Group | The Company | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
As at the beginning
of the year
|
(291 | ) | (353 | ) | | | ||||||||||
Exchange differences
|
(1 | ) | 3 | | | |||||||||||
Deferred taxation
(charged)/credited to
income statement
|
||||||||||||||||
relating to the
origination and
reversal of
temporary differences
|
(4,645 | ) | 59 | (4,937 | ) | | ||||||||||
relating to the
recognition of
unrecognised
tax losses in prior
years
|
26,335 | | | | ||||||||||||
|
||||||||||||||||
As at the end of the
year
|
21,398 | (291 | ) | (4,937 | ) | | ||||||||||
|
Management projects future taxable income by considering all available information, including tax planning strategies, historical taxable incomes, and the expiration period of the unused tax losses carry forwards of each of the Company and its subsidiaries. During the year ended 31 August 2008, taking into consideration of the current results of operations, management assessed that it is probable that sufficient future taxable profits will be generated to utilise the unused tax losses of HK$159,606,000 which resulted in the recognition of deferred tax assets of HK$26,335,000. | ||
As at 31 August 2008, the Group has not recognised deferred tax assets in respect of unused tax losses of HK$9,518,000 (2007: HK$268,004,000) because it is not probable that future taxable profits can be generated to utilise the tax losses. All tax losses are subject to agreement with local tax authorises. |
Notes to the Financial Statements 97 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
24 | DEFERRED TAXATION (CONTINUED) |
The Group | ||||||||
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
After 5 years
|
3,810 | 4,313 | ||||||
From 2 to 5 years
|
| 1,132 | ||||||
No expiry date
|
5,708 | 262,559 | ||||||
|
||||||||
|
9,518 | 268,004 | ||||||
|
The movement in deferred tax assets and liabilities (prior to offsetting of balances within the same taxation jurisdiction) during the year is as follows: |
The Group | ||||||||
Accelerated | ||||||||
depreciation allowances | ||||||||
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Deferred tax liabilities
|
||||||||
|
||||||||
At the beginning of the year
|
(134,910 | ) | (154,678 | ) | ||||
Credited to consolidated income statement
|
8,463 | 19,772 | ||||||
Exchange differences
|
| (4 | ) | |||||
|
||||||||
At the end of the year
|
(126,447 | ) | (134,910 | ) | ||||
|
The Group | ||||||||||||||||||||||||
Share based payment | Tax losses | Total | ||||||||||||||||||||||
2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |||||||||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||||||||
Deferred tax assets
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||
At the beginning of
the year
|
| 123 | 134,619 | 154,202 | 134,619 | 154,325 | ||||||||||||||||||
Credited/(charged) to
consolidated income
statement
|
| (123 | ) | 13,227 | (19,590 | ) | 13,227 | (19,713 | ) | |||||||||||||||
Exchange differences
|
| | (1 | ) | 7 | (1 | ) | 7 | ||||||||||||||||
|
||||||||||||||||||||||||
At the end of the year
|
| | 147,845 | 134,619 | 147,845 | 134,619 | ||||||||||||||||||
|
The Company | ||||||||
Accelerated | ||||||||
depreciation allowances | ||||||||
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Deferred tax liabilities
|
||||||||
At the beginning of the year
|
(11,072 | ) | (13,293 | ) | ||||
Credited to the income statement
|
2,327 | 2,221 | ||||||
|
||||||||
At the end of the year
|
(8,745 | ) | (11,072 | ) | ||||
|
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 98 Annual Report 2008 (Expressed in Hong Kong Dollars) |
24 | DEFERRED TAXATION (CONTINUED) |
Tax losses | ||||||||
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Deferred tax assets
|
||||||||
|
||||||||
At the beginning of the year
|
11,072 | 13,293 | ||||||
Charged to the income statement
|
(7,264 | ) | (2,221 | ) | ||||
|
||||||||
At the end of the year
|
3,808 | 11,072 | ||||||
|
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred income taxes relate to the same legal entity and same fiscal authority. The following amounts, determined after appropriate offsetting, are shown in the balance sheet: |
The Group | The Company | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
Deferred tax asset
|
26,335 | | | | ||||||||||||
Deferred tax liabilities
|
(4,937 | ) | (291 | ) | (4,937 | ) | | |||||||||
|
||||||||||||||||
|
21,398 | (291 | ) | (4,937 | ) | | ||||||||||
|
25 | LONG-TERM DEBT AND OTHER LIABILITIES |
The Group | The Company | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
8.75% senior notes due 2015 (note (a))
|
683,242 | 952,593 | 683,242 | 952,593 | ||||||||||||
Obligation under finance lease (note (b))
|
376 | 1,210 | 350 | 454 | ||||||||||||
|
||||||||||||||||
|
683,618 | 953,803 | 683,592 | 953,047 | ||||||||||||
Current portion of
obligation under finance lease
|
(121 | ) | (835 | ) | (112 | ) | (104 | ) | ||||||||
|
||||||||||||||||
|
683,497 | 952,968 | 683,480 | 952,943 | ||||||||||||
|
At 31 August 2008, the Groups and the Companys long-term debt and other liabilities were repayable as follows: |
The Group | The Company | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
|
||||||||||||||||
Long-term debt and other liabilities, repayable:
|
||||||||||||||||
8.75% senior notes due 2015
|
||||||||||||||||
after the fifth year
|
683,242 | 952,593 | 683,242 | 952,593 | ||||||||||||
|
||||||||||||||||
Obligations under finance lease
|
||||||||||||||||
Within 1 year
|
121 | 835 | 112 | 104 | ||||||||||||
After 1 year but within 2 years
|
129 | 121 | 120 | 112 | ||||||||||||
After 2 years but within 5 years
|
126 | 254 | 118 | 238 | ||||||||||||
|
||||||||||||||||
|
376 | 1,210 | 350 | 454 | ||||||||||||
Less: Current portion of obligations under finance lease
|
(121 | ) | (835 | ) | (112 | ) | (104 | ) | ||||||||
|
||||||||||||||||
|
255 | 375 | 238 | 350 | ||||||||||||
|
||||||||||||||||
|
683,497 | 952,968 | 683,480 | 952,943 | ||||||||||||
|
Notes to the Financial Statements 99 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
25 | LONG-TERM DEBT AND OTHER LIABILITIES (CONTINUED) |
Notes: |
(a) | On 20 January 2005, the Company issued unsecured 10-year senior fixed rates notes (the 10-year senior notes) with a principle amount of US$125 million at an issue price equal to 100 per cent of the principal amount. The 10-year senior notes mature on 1 February 2015 and bear interest at the fixed rate of 8.75% per annum payable semi-annually on 1 February and 1 August of each year, commencing 1 August 2005. | ||
The 10-year senior notes are unconditionally and irrevocably guaranteed on a joint and several basis by the Companys subsidiaries (other than CTI Guangzhou Customer Services Company Limited) as subsidiary guarantors. | |||
During the year ended 31 August 2008, the Group repurchased a portion of the 10-year senior notes with a cumulative principal value of US$35,647,000 in the open market. The total consideration paid was approximately US$35,352,000. The gain on extinguishment of the 10-year senior notes was US$332,000 (equivalent to HK$2,582,000) which has been recorded in other revenues of the consolidated income statement. | |||
As at 31 August 2008, the remaining principal amount of the 10-year senior notes remaining in issued after the repurchase was US$89,353,000 (equivalent to HK$697,847,000). The amortised cost of the 10-year senior notes was US$87,483,000 (equivalent to HK$683,242,000) as at 31 August 2008. | |||
The effective interest rate of the 10-year senior notes for the year ended 31 August 2008 is 9.2% (2007: 9.2%) per annum. | |||
(b) | At 31 August 2008, the Group had obligations under finance leases repayable as follows: |
The Group | ||||||||||||||||||||||||
2008 | 2007 | |||||||||||||||||||||||
Present | Interest | Present | Interest | |||||||||||||||||||||
value of | expense | Total | value of | expense | Total | |||||||||||||||||||
the minimum | relating to | minimum | the minimum | relating to | minimum | |||||||||||||||||||
lease | future | lease | lease | future | lease | |||||||||||||||||||
payments | periods | payments | payments | periods | payments | |||||||||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||||||||
Within 1 year
|
121 | 21 | 142 | 835 | 34 | 869 | ||||||||||||||||||
|
||||||||||||||||||||||||
After 1 year but within 2 years
|
129 | 13 | 142 | 121 | 21 | 142 | ||||||||||||||||||
After 2 years but within 5 years
|
126 | 4 | 130 | 254 | 18 | 272 | ||||||||||||||||||
|
||||||||||||||||||||||||
|
255 | 17 | 272 | 375 | 39 | 414 | ||||||||||||||||||
|
||||||||||||||||||||||||
|
376 | 38 | 414 | 1,210 | 73 | 1,283 | ||||||||||||||||||
|
At 31 August 2008, the Company had obligations under finance leases repayable as follows: |
The Company | ||||||||||||||||||||||||
2008 | 2007 | |||||||||||||||||||||||
Present | Interest | Present | Interest | |||||||||||||||||||||
value of | expense | Total | value of | expense | Total | |||||||||||||||||||
the minimum | relating to | minimum | the minimum | relating to | minimum | |||||||||||||||||||
lease | future | lease | lease | future | lease | |||||||||||||||||||
payments | periods | payments | payments | periods | payments | |||||||||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||||||||
Within 1 year
|
112 | 20 | 132 | 104 | 27 | 131 | ||||||||||||||||||
|
||||||||||||||||||||||||
After 1 year but within 2 years
|
120 | 12 | 132 | 112 | 20 | 132 | ||||||||||||||||||
After 2 years but
within 5 years
|
118 | 4 | 122 | 238 | 16 | 254 | ||||||||||||||||||
|
||||||||||||||||||||||||
|
238 | 16 | 254 | 350 | 36 | 386 | ||||||||||||||||||
|
||||||||||||||||||||||||
|
350 | 36 | 386 | 454 | 63 | 517 | ||||||||||||||||||
|
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 100 Annual Report 2008 (Expressed in Hong Kong Dollars) |
26 | NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT |
(a) | Reconciliation of profit before taxation to net cash inflow from operations |
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Profit before taxation
|
108,372 | 30,891 | ||||||
Depreciation of owned fixed assets
|
209,464 | 257,052 | ||||||
Depreciation of fixed assets held under finance lease
|
587 | 1,051 | ||||||
Amortisation of deferred expenditure
|
33,777 | 15,580 | ||||||
Interest income
|
(15,596 | ) | (22,671 | ) | ||||
Interest element of finance lease
|
34 | 62 | ||||||
Loss on disposal of fixed assets
|
1,431 | 1,714 | ||||||
Realised and unrealised gain on other financial assets
|
(3,284 | ) | (1,887 | ) | ||||
Realised and unrealised gain on long term deposit
|
(1,185 | ) | (739 | ) | ||||
Equity settled share-based transactions
|
4,204 | 5,727 | ||||||
Realised and unrealised loss on derivative financial instrument
|
1,039 | 806 | ||||||
Gain on extinguishment of 10-year senior notes
|
(2,582 | ) | | |||||
Interest, amortisation and exchange difference on 10-year senior notes
|
72,640 | 89,879 | ||||||
|
||||||||
Net cash inflow before working capital changes
|
408,901 | 377,465 | ||||||
Decrease in long-term receivable and prepayment
|
1,346 | 5,600 | ||||||
Decrease/(increase) in accounts receivable, other receivables, deposits and prepayments
|
6,914 | (11,742 | ) | |||||
Decrease in inventories
|
477 | 379 | ||||||
Increase in deferred expenditure
|
(68,505 | ) | (24,502 | ) | ||||
(Decrease)/increase in accounts payable, other payables, accrued charges and
deposits received
|
(12,567 | ) | 8,573 | |||||
Increase in deferred services revenue
|
46,247 | 30,459 | ||||||
|
||||||||
Net cash inflow from operations
|
382,813 | 386,232 | ||||||
|
(b) | Analysis of changes in financing during the year |
Share capital | ||||||||||||
(including share | Obligations | |||||||||||
premium and | under | |||||||||||
capital reserve) | finance lease | Senior notes | ||||||||||
HK$000 | HK$000 | HK$000 | ||||||||||
Balance at 1 September 2006
|
694,708 | 2,373 | 948,027 | |||||||||
Issue of new shares
|
1,757 | | | |||||||||
Acquisition of fixed assets
|
| 158 | | |||||||||
Repayment of capital element of finance lease
|
| (1,321 | ) | | ||||||||
Amortisation of incidental issuance costs
|
| | 2,129 | |||||||||
Equity settled share-based transactions
|
5,727 | | | |||||||||
Effect of foreign exchange rate changes
|
| | 2,437 | |||||||||
|
||||||||||||
Balance at 31 August 2007
|
702,192 | 1,210 | 952,593 | |||||||||
|
||||||||||||
|
||||||||||||
Balance at 1 September 2007
|
702,192 | 1,210 | 952,593 | |||||||||
Issue of new shares
|
14,998 | | | |||||||||
Share issued in respect of scrip dividend
|
33,398 | | | |||||||||
Repayment of capital element of finance lease
|
| (834 | ) | | ||||||||
Repurchase of 10-year senior notes
|
| | (269,399 | ) | ||||||||
Gain on extinguishment of 10-year senior notes
|
| | (2,582 | ) | ||||||||
Amortisation of incidental issuance costs
|
| | 1,665 | |||||||||
Equity settled share-based transactions
|
4,204 | | | |||||||||
Effect of foreign exchange rate changes
|
| | 965 | |||||||||
|
||||||||||||
Balance at 31 August 2008
|
754,792 | 376 | 683,242 | |||||||||
|
Notes to the Financial Statements 101 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
27 | FINANCIAL INSTRUMENTS | |
Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Groups business. These risks are limited by the Groups financial management policies and practices described below. |
(a) | Credit risk | ||
The Groups credit risk is primarily attributable to trade and other receivables, and debt investments. Management has a credit policy in place and the exposure to the credit risk is monitored on an ongoing basis. | |||
In respect of trade and other receivables, credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the customers past history of making payments when due and current ability to pay, and take into account information specific to the customer as well as pertaining to the economic environment in which the customer locates. These receivables are due within 30 days from the date of billing. Subscribers with receivables that are more than 3 months overdue are requested to settle all outstanding balances before any further credit is granted. The Group generally does not obtain collateral from customers. | |||
The Groups exposure to credit risk is influenced mainly by individual characteristics of each customer. The default risk of the country in which customer locates also has an influence on credit risk but to a lesser extent. Concentrations of credit risk with respect to accounts receivable are limited due to the Groups customer base being large and unrelated. As such, management does not expect any significant losses of accounts receivable that have not been provided for by way of allowances as disclosed in note 19. | |||
The maximum exposure to credit risk is represented by the carrying amount of each financial asset after deducting any impairment allowance, in the balance sheet. Except for the financial guarantee given by the Group as disclosed in note 28, the Group does not provide any other guarantees which expose the Group to credit risk. The maximum exposure to credit risk in respect of these financial guarantees at the balance sheet date is disclosed in note 28. | |||
Further quantitative disclosures in respect of the Groups exposure to credit risk arising from accounts receivable are set out in note 19. | |||
(b) | Liquidity risk | ||
The Company has a cash management policy, which includes the short term investment of cash surpluses and the raising of loans and other borrowings to cover expected cash demands. The Companys policy is to regularly monitor current and expected liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient cash and readily realisable marketable securities and adequate amount of | |||
committed credit facilities from major financial institutions to meet its liquidity requirements in the short and long term. Due to the dynamic nature of the underlying business, the Company aims to maintain flexibility in funding by maintaining committed credit lines available. | |||
The following table details the remaining contractual maturities at the balance sheet date of the Groups and the Companys financial liabilities, which are based on undiscounted cash flows (including interest) and the earliest date the Group and the Company are required to pay. | |||
Group |
2008 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||
Total | More than | More than | Total | More than | More than | |||||||||||||||||||||||||||||||||||||||||||
contractual | Within | 1 year but | 2 years but | contractual | Within | 1 year but | 2 years but | |||||||||||||||||||||||||||||||||||||||||
Carrying | undiscounted | 1 year or | less than | less than | More than | Carrying | undiscounted | 1 year or | less than | less than | More than | |||||||||||||||||||||||||||||||||||||
amount | cash flow | on demand | 2 years | 5 years | 5 years | amount | cash flow | on demand | 2 years | 5 years | 5 years | |||||||||||||||||||||||||||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||||||||||||||||||||||||||
Current liabilities
|
||||||||||||||||||||||||||||||||||||||||||||||||
Accounts payable
|
52,324 | 52,324 | 52,324 | | | | 76,019 | 76,019 | 76,019 | | | | ||||||||||||||||||||||||||||||||||||
Other payables and
accrued charges
|
178,114 | 178,114 | 178,114 | | | | 145,267 | 145,267 | 145,267 | | | | ||||||||||||||||||||||||||||||||||||
Deposits received
|
16,264 | 16,264 | 16,264 | | | | 16,188 | 16,188 | 16,188 | | | | ||||||||||||||||||||||||||||||||||||
Obligations under
finance leases
|
121 | 142 | 142 | | | | 835 | 869 | 869 | | | | ||||||||||||||||||||||||||||||||||||
Tax payable
|
2,103 | 2,103 | 2,103 | | | | 1,481 | 1,481 | 1,481 | | | | ||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||
Non current liabilities
|
||||||||||||||||||||||||||||||||||||||||||||||||
10-year senior rate
|
683,242 | 1,093,852 | 61,012 | 61,012 | 183,036 | 788,792 | 952,593 | 1,614,184 | 85,278 | 85,278 | 255,834 | 1,187,794 | ||||||||||||||||||||||||||||||||||||
Obligation under
finance leases
|
255 | 272 | | 142 | 130 | | 375 | 414 | | 142 | 272 | | ||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
932,423 | 1,343,071 | 309,959 | 61,154 | 183,166 | 788,792 | 1,192,758 | 1,854,422 | 325,102 | 85,420 | 256,106 | 1,187,794 | ||||||||||||||||||||||||||||||||||||
|
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 102 Annual Report 2008 (Expressed in Hong Kong Dollars) |
27 | FINANCIAL INSTRUMENTS (CONTINUED) |
(b) | Liquidity risk (continued) | ||
Company |
2008 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||
Total | More than | More than | Total | More than | More than | |||||||||||||||||||||||||||||||||||||||||||
contractual | Within | 1 year but | 2 years but | contractual | Within | 1 year but | 2 years but | |||||||||||||||||||||||||||||||||||||||||
Carrying | undiscounted | 1 year or | less than | less than | More than | Carrying | undiscounted | 1 year or | less than | less than | More than | |||||||||||||||||||||||||||||||||||||
amount | cash flow | on demand | 2 years | 5 years | 5 years | amount | cash flow | on demand | 2 years | 5 years | 5 years | |||||||||||||||||||||||||||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||||||||||||||||||||||||||
Current liabilities
|
||||||||||||||||||||||||||||||||||||||||||||||||
Amount due to
subsidiaries
|
10,830 | 10,830 | 10,830 | | | | 10,830 | 10,830 | 10,830 | | | | ||||||||||||||||||||||||||||||||||||
Accounts payable
|
26,440 | 26,440 | 26,440 | | | | 37,477 | 37,477 | 37,477 | | | | ||||||||||||||||||||||||||||||||||||
Other payables and
accrued charges
|
17,831 | 17,831 | 17,831 | | | | 18,694 | 18,694 | 18,694 | | | | ||||||||||||||||||||||||||||||||||||
Deposits received
|
7,943 | 7,943 | 7,943 | | | | 7,876 | 7,876 | 7,876 | | | | ||||||||||||||||||||||||||||||||||||
Obligations under
finance leases
|
112 | 132 | 132 | | | | 104 | 131 | 131 | | | | ||||||||||||||||||||||||||||||||||||
Tax payable
|
356 | 356 | 356 | | | | 356 | 356 | 356 | | | | ||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||
Non current
liabilities
|
||||||||||||||||||||||||||||||||||||||||||||||||
10-year senior rate
|
683,242 | 1,093,852 | 61,012 | 61,012 | 183,036 | 788,792 | 952,593 | 1,614,184 | 85,278 | 85,278 | 255,834 | 1,187,794 | ||||||||||||||||||||||||||||||||||||
Obligation under
finance leases
|
238 | 254 | | 132 | 122 | | 350 | 386 | | 132 | 254 | | ||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
746,992 | 1,157,638 | 124,544 | 61,144 | 183,158 | 788,792 | 1,028,280 | 1,689,934 | 160,642 | 85,410 | 256,088 | 1,187,794 | ||||||||||||||||||||||||||||||||||||
|
(c) | Interest rate risk | ||
The Groups interest-rate risk arises mainly from its 8.75% 10-year senior notes which bear interest at the fixed rate of 8.75% per annum. Borrowings issued at fixed rates expose the Group to fair value interest-rate risk. |
(i) | Interest rate profile | ||
The following table details the interest rate profile of the Groups and the Companys net borrowings at the balance sheet date. |
The Group | The Company | |||||||||||||||||||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||||||||||||||||||
Effective | Effective | Effective | Effective | |||||||||||||||||||||||||||||
interest | interest | interest | interest | |||||||||||||||||||||||||||||
rate | rate | rate | rate | |||||||||||||||||||||||||||||
% | HK$000 | % | HK$000 | % | HK$000 | % | HK$000 | |||||||||||||||||||||||||
Fixed rate
borrowings:
|
||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
10-year senior notes
|
9.2 | 683,242 | 9.2 | 952,593 | 9.2 | 683,242 | 9.2 | 952,593 | ||||||||||||||||||||||||
Obligations under
finance lease
|
6.8 | 376 | 6.8 | 1,210 | 6.8 | 350 | 6.8 | 454 | ||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
|
683,618 | 953,803 | 683,592 | 953,047 | ||||||||||||||||||||||||||||
|
Notes to the Financial Statements 103 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
27 | FINANCIAL INSTRUMENTS (CONTINUED) |
(c) | Interest rate risk (continued) |
(ii) | Sensitivity analysis | ||
Management determines that the Groups exposure of interest rate risk was not significant and hence no sensitivity analysis is prepared. |
(d) | Foreign currency risk | ||
All the Groups monetary assets and liabilities are primarily denominated in either Hong Kong dollars or United States dollars. Given the exchange rate of the Hong Kong dollar to the U.S. dollar has remained close to the current pegged rate of HKD7.80 = USD1.00 since 1983, management does not expect significant foreign exchange gains or losses between the two currencies. | |||
The Group is also exposed to a certain amount of foreign exchange risk based on fluctuations between the Hong Kong dollars and the Renminbi arising from its operations in the PRC. In order to limit this foreign currency risk exposure, the Group maintained Renminbi cash balance that approximate three months of operating cash flows. |
(i) | Exposure to currency risk | ||
The following table details the Groups and the Companys exposure at the balance sheet date to currency risk arising from recognised assets or liabilities denominated in a currency other than the functional currency of the entity to which they relate. | |||
Group |
2008 | 2007 | |||||||||||||||||||||||
United | United | |||||||||||||||||||||||
States | Japanese | Canadian | States | Japanese | Canadian | |||||||||||||||||||
Dollars | Yen | Dollars | Dollars | Yen | Dollars | |||||||||||||||||||
000 | 000 | 000 | 000 | 000 | 000 | |||||||||||||||||||
Cash at bank and in
hand and pledged
bank deposits
|
22,330 | 1,099 | 176 | 21,172 | 2,218 | 111 | ||||||||||||||||||
Accounts payable
|
(2,500 | ) | | | (4,781 | ) | | | ||||||||||||||||
Other payables and
accrued charges
|
(3,390 | ) | | | (1,563 | ) | | | ||||||||||||||||
10-year senior notes
|
(87,483 | ) | | | (122,127 | ) | | | ||||||||||||||||
|
||||||||||||||||||||||||
Overall net exposure
|
(71,043 | ) | 1,099 | 176 | (107,299 | ) | 2,218 | 111 | ||||||||||||||||
|
Company |
2008 | 2007 | |||||||||||||||||||||||
United | United | |||||||||||||||||||||||
States | Japanese | States | Japanese | |||||||||||||||||||||
Dollars | Renminbi | Yen | Dollars | Renminbi | Yen | |||||||||||||||||||
000 | 000 | 000 | 000 | 000 | 000 | |||||||||||||||||||
Amounts due from
subsidiaries
|
7 | 100,195 | | 7 | 40,872 | | ||||||||||||||||||
Cash at bank and in
hand and pledged
bank deposits
|
21,387 | | 1,099 | 21,172 | | 2,218 | ||||||||||||||||||
Amount due to
a subsidiary
|
(90 | ) | | | (90 | ) | | | ||||||||||||||||
Accounts payable
|
(2,010 | ) | | | (4,317 | ) | | | ||||||||||||||||
Other payables and
accrued charges
|
| | | (21 | ) | | | |||||||||||||||||
10-year senior notes
|
(87,483 | ) | | | (122,127 | ) | | | ||||||||||||||||
|
||||||||||||||||||||||||
Overall net exposure
|
(68,189 | ) | 100,195 | 1,099 | (105,376 | ) | 40,872 | 2,218 | ||||||||||||||||
|
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 104 Annual Report 2008 (Expressed in Hong Kong Dollars) |
27 | FINANCIAL INSTRUMENTS (CONTINUED) |
(d) | Foreign currency risk (continued) |
(ii) | Sensitivity analysis | ||
The Companys foreign currency risk is mainly concentrated on the fluctuation of the Renminbi against the Hong Kong dollar. It is assumed that the pegged rate between the Hong Kong dollar and the United States dollar would be materially unaffected by any changes in movement in value of the United States dollar against other currencies. The following table details the Companys sensitivity to a 10% increase or decrease in the Hong Kong dollar against the Renminbi. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the year end for a 10% change in foreign currency rates. A positive number indicates an increase in profit for the year where the Renminbi strengthens against the Hong Kong dollar. For a 10% weakening of the Renminbi against the Hong Kong dollar, there would be an equal and opposite impact on the profit and the balance below would be negative. |
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Renminbi
|
11,469 | 4,231 |
(e) | Fair values | ||
Except for the following instruments, all financial instruments are carried at amounts not materially different from their fair values as at 31 August 2008 and 2007: |
2008 | 2007 | |||||||||||||||
Carrying | Carrying | |||||||||||||||
amount | Fair value | amount | Fair value | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
The Group and the Company
|
||||||||||||||||
|
||||||||||||||||
Long-term bank deposit
|
| | 14,415 | 14,277 | ||||||||||||
8.75% senior notes
|
683,242 | 672,236 | 952,593 | 970,125 | ||||||||||||
|
(f) | Estimation of fair values | ||
Fair value of financial instruments is estimated as follows: |
(i) | The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The fair value of the 8.75% senior notes is determined based on quoted market price. The fair value of the long-term bank deposits are determined based on the issuers quoted price. | ||
(ii) | The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. | ||
(iii) | Trade receivables less impairment provision and account payables are assumed to approximate their fair values. |
Notes to the Financial Statements 105 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
28 | CONTINGENT LIABILITIES |
The Group | The Company | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
Bank guarantees
provided to suppliers
(notes 30(i) and (ii))
|
24,671 | 5,903 | 24,568 | 5,800 | ||||||||||||
Bank guarantee in
lieu of payment of
utility deposits
(note 30(iii))
|
5,272 | 5,272 | | | ||||||||||||
Corporate guarantee
provided to a
subsidiary for
shared banking
facility (note)
|
| | 52,694 | 70,200 | ||||||||||||
|
||||||||||||||||
|
29,943 | 11,175 | 77,262 | 76,000 | ||||||||||||
|
Note:
|
Corporate guarantee provided to a subsidiary represented the maximum amount of contingent liabilities of the Company had the shared banking facility of HK$52,694,000 as at 31 August 2008 (2007: HK$70,200,000) been fully drawn. As at 31 August 2008, HK$29,943,000 (2007: HK$11,175,000) of the HK$87,319,000 (2007: HK$80,200,000) total banking facility (note 30(i)) was utilised by the Company and the subsidiary. |
29 | COMMITMENTS |
(a) | Capital commitments |
The Group | The Company | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
Purchase of telecommunications,
computer and office equipment
contracted but not provided for
|
143,888 | 54,165 | 22 | 40 | ||||||||||||
|
(b) | Commitments under operating leases | ||
At 31 August 2008 and 2007 the Group and the Company has future aggregate minimum lease payments under non-cancellable operating leases as follows: |
The Group | The Company | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||
Leases in respect of land and
buildings which are payable:
|
||||||||||||||||
Within 1 year
|
16,472 | 12,562 | | | ||||||||||||
After 1 year but within 5 years
|
11,645 | 2,484 | | | ||||||||||||
|
||||||||||||||||
|
28,117 | 15,046 | | | ||||||||||||
|
||||||||||||||||
Leases in respect of
telecommunications facilities and
computer equipment
which are payable:
|
||||||||||||||||
Within 1 year
|
38,623 | 31,004 | 1,128 | 723 | ||||||||||||
After 1 year but within 5 years
|
12,876 | 21,166 | | 37 | ||||||||||||
After 5 years
|
7,384 | 16,384 | | | ||||||||||||
|
||||||||||||||||
|
58,883 | 68,554 | 1,128 | 760 | ||||||||||||
|
||||||||||||||||
|
87,000 | 83,600 | 1,128 | 760 | ||||||||||||
|
Notes to the Financial Statements _____ City Telecom (H.K.) Limited 106 Annual Report 2008 (Expressed in Hong Kong Dollars) |
29 | COMMITMENTS (CONTINUED) |
(c) | Program fee commitments |
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Program fee in respect of program rights which are payable:
|
||||||||
Within 1 year
|
6,583 | 10,345 | ||||||
After 1 year but within 5 years
|
279 | 3,636 | ||||||
|
||||||||
|
6,862 | 13,981 | ||||||
|
30 | PLEDGE OF ASSETS |
(i) | bank facility of US$9,900,000 (equivalent to HK$77,319,000) granted by a bank for issuance of bank guarantees to third party suppliers, letters of credit, short-term loan, overdraft, foreign exchange and interest rate hedging arrangements. As of 31 August 2008, bank guarantees of HK$20,371,000 were issued against this bank facility (31 August 2007: HK$1,603,000); | ||
(ii) | bank guarantees of HK$4,300,000 (2007: HK$4,300,000) issued by the bank to third party suppliers of the Company and one of its subsidiaries for payment of certain products and services procured by the Group from these third party suppliers; and | ||
(iii) | bank guarantees of HK$5,272,000 (2007: HK$5,272,000) issued by the bank to certain utility vendors of the Group in lieu of payment of utility deposits. |
31 | MATERIAL RELATED PARTY TRANSACTIONS |
2008 | 2007 | |||||||
HK$000 | HK$000 | |||||||
Short-term employee benefits
|
28,850 | 26,791 | ||||||
Post-employment benefits
|
2,425 | 2,197 | ||||||
Equity compensation benefits
|
3,664 | 4,388 | ||||||
|
||||||||
|
34,939 | 33,376 | ||||||
|
Notes to the Financial Statements 107 City Telecom (H.K.) Limited Annual Report 2008 (Expressed in Hong Kong Dollars) |
32 | COMPARATIVE FIGURE | |
Certain comparative figures have been reclassified to conform with the current years presentation. | ||
33 | ACCOUNTING ESTIMATES AND JUDGEMENTS | |
Key sources of estimation uncertainty | ||
Notes 12 and 27 contain information about the assumptions and risk factors relating to fair value of share options and financial instruments. Other key sources of estimation uncertainty are as follows: | ||
Impairment loss for doubtful accounts | ||
The Group maintains impairment loss for doubtful accounts based upon evaluation of the recoverability of the accounts receivable and other receivables which takes into account the historical write-off experience and recovery rates. If the financial condition of the customers were to deteriorate, additional impairment may be required. | ||
Depreciation | ||
Depreciation is calculated to write off the cost of items of property, plant and equipment, less their estimated residual value, if any, using the straight-line method over their estimated useful lives. The Group reviews the estimated useful lives of the assets annually in order to determine the amount of depreciation expense to be recorded during any reporting period. The useful lives are based on the Groups historical experience with similar assets and takes into account anticipated technological changes. The depreciation expense for future periods is adjusted if there are significant changes from previous estimates. | ||
Deferred tax | ||
At 31 August 2008, the Group has recognised a deferred tax asset in relation to tax loss carry forward as set out in note 24. The realisability of the deferred tax asset mainly depends on whether it is probable that future taxable profits will be available against which the asset can be utilised. In assessing the need to reduce a deferred tax asset, management consider all available evidence, including projected future taxable income, tax planning strategies, historical taxable income, and the expiration period of the loss carry forwards. In cases where the actual future taxable profits are less than expected, a reversal of deferred tax asset may arise, which will be recognised in the income statement for the period in which such a reversal takes place. |
34 | POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE YEAR ENDED 31 AUGUST 2008 | |
Up to the date of issue of these financial statements, the HKICPA has issued a number of amendments, new standards and interpretations which are not yet effective for the year ended 31 August 2008 and which have not been adopted in these financial statements. | ||
The Group is in the process of making an assessment of what the impact of these amendments, new standards and new interpretations is expected to be in the period of initial application. So far it has concluded that the adoption of the following developments is unlikely to have significant impact on the Groups results of operations and financial position. |
Effective for | ||||
accounting periods | ||||
beginning on or after | ||||
HK(IFRIC) Interpretation 13
|
Customer loyalty programmes | 1 July 2008 | ||
|
||||
HKAS 1 (Revised)
|
Presentation of financial statements | 1 January 2009 | ||
|
||||
HKAS 23 (Revised)
|
Borrowing costs | 1 January 2009 | ||
|
||||
HKFRS 8
|
Operating segments | 1 January 2009 |
City Telecom (H.K.) Limited Five-Year 108 Annual Report 2008 Financial Summary (Expressed in Hong Kong dollars) |
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | ||||||||||||||||
Results
|
||||||||||||||||||||
Turnover
|
1,302,981 | 1,141,270 | 1,159,579 | 1,137,356 | 1,169,880 | |||||||||||||||
|
||||||||||||||||||||
Profit/(loss) before taxation
|
108,372 | 30,891 | (99,485 | ) | (220,042 | ) | 51,506 | |||||||||||||
Income tax benefit/(expense)
|
16,818 | (2,026 | ) | 7,244 | 6,725 | (2,043 | ) | |||||||||||||
|
||||||||||||||||||||
Profit/(loss) attributable
to shareholders
|
125,190 | 28,865 | (92,241 | ) | (213,317 | ) | 49,463 | |||||||||||||
|
||||||||||||||||||||
Assets
|
||||||||||||||||||||
Goodwill
|
1,066 | 1,066 | 1,066 | 1,066 | 2,131 | |||||||||||||||
Fixed assets
|
1,231,399 | 1,237,223 | 1,367,234 | 1,336,543 | 1,158,875 | |||||||||||||||
Other financial assets
|
| 39,213 | 40,274 | 41,441 | 41,204 | |||||||||||||||
Derivative financial
instruments
|
| 1,039 | 1,845 | | | |||||||||||||||
Long term receivable and
prepayment
|
5,586 | 6,932 | 12,532 | 13,099 | 6,206 | |||||||||||||||
Deferred tax asset
|
26,335 | | | | 229 | |||||||||||||||
Deferred expenditure
|
56,095 | 21,367 | 12,445 | 21,131 | 21,563 | |||||||||||||||
Current assets
|
759,935 | 854,293 | 688,819 | 884,327 | 453,200 | |||||||||||||||
|
||||||||||||||||||||
Total assets
|
2,080,416 | 2,161,133 | 2,124,215 | 2,297,607 | 1,683,408 | |||||||||||||||
|
||||||||||||||||||||
Liabilities
|
||||||||||||||||||||
Current liabilities
|
359,375 | 303,992 | 283,105 | 369,146 | 398,011 | |||||||||||||||
Non-current liabilities
|
688,434 | 953,259 | 949,456 | 957,828 | 109,699 | |||||||||||||||
|
||||||||||||||||||||
Total liabilities
|
1,047,809 | 1,257,251 | 1,232,561 | 1,326,974 | 507,710 | |||||||||||||||
|
||||||||||||||||||||
Net assets
|
1,032,607 | 903,882 | 891,654 | 970,633 | 1,175,698 | |||||||||||||||
|
Concept, design and printing: iOne Financial Press Limited. Website: www.ione.com.hk #Ýväo#»#ì#Fìq#àãSó#üLÀö#i -Ô#Fwww.ione.com.hk |
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