SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 6-K
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REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For August 13, 2004
i-CABLE Communications Limited
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(Translation of registrant's name into English)
Cable TV Tower
9 Hoi Shing Road
Tsuen Wan, N.T., Hong Kong
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(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F)
Form 20-F X Form 40-F
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(Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes No X
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(If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): N/A.)
i-CABLE Communications Limited Interim Results Announcement
[Logo Omitted]
i-CABLE COMMUNICATIONS LIMITED
Interim Results Announcement
For the six months ended June 30, 2004
Well Braced for New Competition
Results Highlights
o Turnover increased by 11% to HK$1,154 million (2003: HK$1,037 million).
o Net profit increased by 55% to HK$147 million (2003: HK$95 million).
o An interim dividend of 3 cents (2003: 1.5 cents) per share will be paid.
Pay TV - Record Turnover and Operating Profit
o Subscribers grew by 9% year-on-year to 682,000 (2003: 625,000).
o ARPU increased by HK$3 to HK$222 (2003: HK$219).
o Turnover increased by 9% to HK$920 million (2003: HK$844 million).
o Operating profit increased by 12% to HK$235 million (2003: HK$210 million).
Internet & Multimedia - On Firm Ground Towards Profitability
o Broadband subscribers grew by 7% year-on-year to 263,000 (2003: 247,000).
o ARPU increased by 14% to HK$142 (2003: HK$125).
o Turnover increased by 21% to HK$232 million (2003: HK$193 million).
o Operating loss narrowed to HK$27 million (2003: HK$48 million).
Group Results
The unaudited Group profit attributable to Shareholders for the six months
ended June 30, 2004 amounted to HK$147 million, as compared to HK$95 million
for the corresponding period in 2003. Basic and diluted earnings per share
were both 7.3 cents for 2004, as compared with both 4.7 cents last year.
Interim Dividend
The Board has declared an interim dividend in respect of the six-month period
ended June 30, 2004 of 3 cents (2003: 1.5 cents) per share, payable on
Tuesday, October 12, 2004 to Shareholders on record as at October 5, 2004.
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
Six months ended June 30, 2004
2004 2003
Note HK$'000 HK$'000
Turnover (1) 1,154,447 1,036,705
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Programming costs (366,624) (317,648)
Network and other operating expenses (187,535) (174,393)
Selling, general and administrative expenses (177,069) (166,693)
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Profit from operations before depreciation 423,219 377,971
Depreciation (273,740) (264,352)
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Profit from operations (1) 149,479 113,619
Interest income 3 5,055
Finance costs (72) (9,403)
Non-operating expenses (1,494) (5,050)
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Profit before taxation (2) 147,916 104,221
Income tax (3) (620) (8,931)
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Profit attributable to shareholders 147,296 95,290
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Earnings per share (4)
Basic 7.3 cents 4.7 cents
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Diluted 7.3 cents 4.7 cents
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NOTES TO THE accounts
(1) Segment information
Substantially all the activities of the Group are based in Hong Kong and
below is an analysis of the Group's turnover and profit / (loss) from
operations by principal activity for the six months ended June 30, 2004:
Profit/(Loss) from
Turnover Operations
-------------------------------- ---------------------------------
2004 2003 2004 2003
HK$'000 HK$'000 HK$'000 HK$'000
Pay television 920,166 843,914 235,330 210,202
Internet and multimedia 232,462 192,791 (26,520) (47,662)
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208,810 162,540
Unallocated 1,819 - (59,331) (48,921)
-------------- --------------- --------------- ---------------
1,154,447 1,036,705 149,479 113,619
============== =============== =============== ===============
(2) Profit before taxation
Profit before taxation is arrived at after charging:
2004 2003
HK$'000 HK$'000
Depreciation 273,740 264,352
Amortization of programming library* 49,677 42,955
Interest on borrowings 72 9,403
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* included in programming costs
(3) Income tax
The provision for Hong Kong Profits Tax is calculated separately on the
taxable profit of each entity within the Group at the rate of 17.5%
(2003: 17.5%). Taxation for overseas subsidiaries is charged at the
appropriate current rate of taxation ruling in the relevant country. The
taxation charge for the six months ended June 30 represents:
2004 2003
HK$'000 HK$'000
Provision for Hong Kong Profits Tax for the period - 70,066
Under provision for Hong Kong Profits Tax in respect of prior
year 589 -
Current tax provision - overseas 31 -
Deferred tax credit - (61,135)
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620 8,931
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(4) Earnings per share
The calculation of basic earnings per share is based on the profit
attributable to shareholders of HK$147 million (2003: HK$95 million) and
the weighted average number of ordinary shares in issue during the period
of 2,019,234,400 (2003: 2,019,234,400).
The calculation of diluted earnings per share was based on the weighted
average number of ordinary shares of 2,019,234,400 (2003: 2,019,234,400)
after adjusting for the effects of all dilutive potential ordinary
shares.
(5) Basis of preparation and comparative figures
The unaudited interim financial report has been prepared in accordance
with the requirements of the Main Board Listing Rules of The Stock
Exchange of Hong Kong Limited, including compliance with Statement of
Standard Accounting Practice ("SSAP") 25 "Interim financial reporting"
issued by the Hong Kong Society of Accountants. The same accounting
policies adopted in the annual accounts for the year ended December 31,
2003 have been applied to the interim financial report.
(6) Review by audit committee
The unaudited interim accounts for the six months ended June 30, 2004
have been reviewed by the Audit Committee of the Company.
COMMENTARY ON INTERIM RESULTS
A. Review of 2004 Interim Results
The financial results of the Group's two core business segments both showed
considerable improvement over the same period in the prior year. Consolidated
turnover increased by 11% to HK$1,154 million. Pay TV turnover increased by 9%
to HK$920 million as a result of subscriber growth and strong increase in
airtime sales. Internet & Multimedia turnover increased by 21% to HK$232
million mainly as a result of recovery in Broadband ARPU which recorded a 14%
year-on-year increase to HK$142.
Operating costs before depreciation increased by 11% to HK$731 million. The
increase was primarily attributable to a 15% increase in programming costs
mainly due to UEFA EURO 2004 and the new Super Soccer Channel and Cable
Entertainment News Channel launched in the second half of 2003. Network and
other operating costs increased by 8% to HK$188 million mainly due to higher
customer service cost and provision for obsolete inventories. Selling, general
and administrative expenses increased by 6% to HK$177 million due primarily to
higher marketing expenses and sales commissions.
Earnings before interest, tax, depreciation and amortization or EBITDA rose by
12% to HK$423 million to surpass all previous periods. EBITDA margin increased
to 37% from 36% in 2003.
Depreciation increased by 4% to HK$274 million due mainly to further capital
investments in digital set-top boxes, cable modems and related broadband
equipment, which were partly offset by lower depreciation on network assets
following the expiration of their depreciation cycle.
Profit from operations of HK$149 million was achieved for the period,
representing a HK$36 million or 32% increase over the HK$114 million level
reported in the first half of 2003.
Interest income decreased by HK$5 million due to a substantial drop in surplus
cash balance following the full redemption of the fixed rate convertible bonds
in November 2003, with a corresponding HK$9 million year-on-year drop in
finance costs.
Profit attributable to shareholders for the first half of 2004 increased by
HK$52 million or 55% to a record high of HK$147 million.
Basic earnings per share were 7.3 cents as compared to 4.7 cents in 2003.
B. Segmental Information
Pay Television
Notwithstanding new competition in the market, subscribers grew by 27,000 in
the first half of 2004 as compared to 19,000 a year ago to reach 682,000 as a
result of strengthened programming contents and an improved economy compared
to one year ago. Pay TV ARPU held up well at HK$222 as compared to HK$219 in
the first half of 2003. Turnover increased by 9% under an improved economy.
Operating costs before depreciation increased by 10% due mainly to the
additional programming investments mentioned earlier while depreciation was
relatively stable at HK$145 million. EBITDA increased by 8% to HK$380 million
while operating profit rose by 12% to HK$235 million, both record highs for
the segment.
Internet & Multimedia
Subscribers grew by 6,000 in the first half of 2004 to 263,000 as overall
market growth slowed down compared to last year. With successful service
enhancement through network upgrade and the introduction of value-added
services, ARPU increased by 14% year-on-year to HK$142. This coupled with
subscriber growth pushed turnover up by 21% to HK$232 million. Operating costs
before depreciation increased by 9% to HK$133 million due mainly to increase
in customer service and marketing costs. EBITDA increased by 41% to HK$99
million. Depreciation increased by 6% to HK$126 million mainly due to capital
expenditure on network and transmission technology upgrade. Operating loss
under a full cost allocated basis for network cost narrowed to HK$27 million
as compared to HK$48 million in the first half of 2003.
C. Liquidity and Financial Resources
As of June 30, 2004, the Group had net surplus cash of HK$30 million, as
compared to a net debt of HK$130 million a year ago. All the Group's cash and
cash equivalents were denominated in Hong Kong dollars.
The consolidated net asset value of the Group as at June 30, 2004 was HK$1,751
million, or HK$0.87 per share. There was no charge on any of the Group's
assets.
The Group's assets, liabilities, revenues and expenses were mainly denominated
in Hong Kong dollars or U.S. dollars and the exchange rate between these two
currencies has remained pegged. To the extent there were any exchange risk,
the Group made use of financial instruments, where appropriate, to manage
those risks.
Capital expenditure during the period amounted to HK$235 million as compared
to HK$178 million in the same period last year. Major items included
investments on digital set-top boxes, cable modems, television production
facilities as well as further network upgrade and expansion. The digital
conversion program on the Pay TV service is now substantially completed.
Ongoing capital expenditures are expected to be funded by cash generated from
operations and if needed bank borrowings or other external sources of funds.
D. Contingent Liabilities
At June 30, 2004, there were contingent liabilities in respect of guarantees,
indemnities and letters of awareness given by the Company on behalf of
subsidiaries relating to bank overdraft and guarantee facilities of up to
HK$649 million of which only HK$618 million was utilised by the subsidiaries.
The Group is in discussions with the Inland Revenue Department ("IRD")
regarding previous years' tax affairs of two partnerships under the Group
pursuant to a leveraged leasing arrangement entered into during 1993 to 1995.
In order to preserve its right, the IRD has issued protective profits tax
assessments totalling HK$258 million against the two partnerships and other
Group entities involved in the arrangement, relating to the years of
assessment 1995/96 to 2002/03. The IRD has agreed to hold over the tax charged
subject to the Group's purchase of tax reserve certificates in the amount of
HK$18 million.
The outcome of the discussions is uncertain but in the meantime, management
has obtained external advice in respect of this matter and considers that no
provision for profits tax in respect of the protective assessments is
necessary and estimates that the contingent tax exposure at June 30, 2004
amounted to HK$106 million, of which HK$64 million will be indemnified by the
Group's immediate holding company, Wharf Communications Limited, such that the
contingent tax exposure for the Group is estimated at HK$42 million.
E. Human Resources
The Group had a total of 3,003 employees at the end of the first half of 2004.
Total salaries and related costs incurred in the corresponding period amounted
to HK$371 million.
Over the years, our performance management system of accountability for
business performance has successfully instilled a pay-for-performance culture
and thereby established a team of capable and highly motivated employees.
Every member of the workforce has continuously contributed their best to
overcome the many challenges and competition in the operating environment
towards the long-term success of i-CABLE.
F. Operating Environment and Competition
The competitive landscape was extremely fluid during the first half. While two
more competitors, Yes TV and TV Plus, threw in their towels, exTV (operated by
Intelsat and TVB) officially launched its service in February; and NOW
Broadband TV (operated by PCCW) has been attacking the market aggressively.
While the competition has reportedly developed a sizable subscriber base, it
has not so far made a material impact on our Pay TV subscription. On the other
hand, the competition has been particularly aggressive in amassing popular
content, which has led to a significant rise in programme acquisition costs to
put pressure on margin. CABLE TV's recent contract for the next three seasons
of the popular English Premier League is a clear case in point.
On the Broadband front, the Group responded to the competition in May by
offering bundling with a mini-basic Pay TV package. Subscriber growth regained
momentum. While the overall revenue to the Group from bundling is little
affected, the Broadband margin would on a segmental basis face some erosion.
Looking ahead, the operating environment is not expected to improve with
competition on both fronts becoming increasingly keen. The Group will continue
to grow its revenue by enhancing its programming with the addition of more
channels and improving the performance of its Broadband service while at the
same time, exercise tight control over other operating costs to offset the
unavoidable increase in content costs.
G. Prospects
Investment on programme and service enhancements has enabled the Group to
benefit from the economic recovery since the second half of last year to grow
its Pay TV and Broadband subscribers and improve its profitability during the
first half of this year.
The Group will continue to improve its service and the latest initiative will
be the introduction of a satellite service later this year to cover homes
previously not reached by our fibre or microwave networks.
These investments have and will equip the Group with prime programming and
service improvements to face up to new competition. The Group now parades 86
channels, providing the territory's most comprehensive programming and
subscription choice to viewers. We are confident that our Pay TV will continue
to be competitive in the new market environment and will prevail over the new
competition.
Our consistent efforts to improve service quality and to provide value-added
services have enabled our Broadband service to stay relatively unscathed
through a period of cut-throat competition. As the market began to
consolidate, we focused on rebuilding our growth momentum and profitability.
These efforts have begun to be rewarded by gains in subscription and revenue
in the first half of the year. We shall continue to work on the goal for an
early return to profitability for this segment.
Our efforts to expand our service beyond Hong Kong is beginning to bear fruit.
Our Horizon Channel has expanded rapidly both in terms of distribution and
recognition in China. We shall soon begin to distribute the channel to the
Americas. Albeit a modest start, we have successfully established a beachhead
in some of our future target markets and we shall continue to build on that
foundation.
New competition has unavoidably created pressure within the industry and we
need to continue to enhance our programming and service quality to consolidate
our leadership position. It will make our task ahead all the more challenging.
However, the Group has gone through worse external environments before and we
are confident that we would continue to grow like the rest of Hong Kong.
COMPLIANCE WITH CODE OF BEST PRACTICE
None of the Directors of the Company is aware of any information which would
reasonably indicate that the Company was not in compliance with the Code of
Best Practice, as set out in Appendix 14 of the Rules Governing the Listing of
Securities (the "Listing Rules") on The Stock Exchange of Hong Kong Limited
(the "Stock Exchange"), at any time during the six-month period ended June 30,
2004.
BOOK CLOSURE
The Register of Members will be closed from Tuesday, September 28, 2004 to
Tuesday, October 5, 2004, both days inclusive, during which period no transfer
of shares of the Company can be registered. In order to qualify for the
abovementioned interim dividend, all transfers, accompanied by the relevant
share certificates, must be lodged with the
Company's Registrars, Tengis Limited, at Ground Floor, Bank of East Asia
Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, not later than
4:30 p.m. on Monday, September 27, 2004.
PUBLICATION OF FURTHER INFORMATION ON THE STOCK EXCHANGE'S WEBSITE
All the financial and other related information of the Company required by
paragraphs 46(1) to 46(6) of Appendix 16 of the Listing Rules in force prior
to March 31, 2004, which remain applicable to results announcement in respect
of accounting periods commencing before July 1, 2004 under the transitional
arrangements, will be published on the Stock Exchange's website in due course.
By Order of the Board
Wilson W. S. Chan
Secretary
Hong Kong, August 12, 2004
As at the date of this announcement, the Board of Directors of the Company
comprises Mr. Stephen T. H. Ng, Mr. F. K. Hu, Mr. Quinn Y. K. Law, Mr. Victor
C. W. Lo, Dr. Dennis T. L. Sun, Mr. Samuel S. F. Wong and Sir Gordon Y. S. Wu.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be issued on its behalf by the
undersigned, thereunto duly authorized.
i-CABLE Communications Limited
By: /s/ Samuel Wong
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Name: Samuel Wong
Title: Chief Financial Officer
Dated: August 13, 2004