ABC
COMMUNICATIONS (HOLDINGS) LIMITED
(Incorporated in Bermuda with limited liability)
BUSINESS RESULTS
The Directors of ABC Communications (Holdings) Limited are pleased to announce that the Group recorded an operating profit of HK$52.21 million and achieved a consolidated net profit after exceptional items of HK$14.28 million for the year ended 31st March, 1999. Earnings per share amounted to 3.6 cents. The audited consolidated results of the Group are presented below:
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| Notes:- |
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| 1. | Exceptional
Items
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| 1999 HK$ |
1998 HK$ |
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| Loss
on disposal of an associated company (note a)
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---
|
(6,711,894)
|
|
| Profit
on disposal of interest in an associated company (note b)
|
---
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763,096,289
|
|
| Provision
for permanent diminution in value of long term investments
|
---
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(20,267,501)
|
|
| Provision
for permanent diminution in value of listed investments
|
---
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(122,407,084)
|
|
| Provision
for staff severance payments
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(4,000,000)
|
(13,000,000)
|
|
| Provision
for inventories
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(8,286,149)
|
(10,743,304)
|
|
| Additional
provision for depreciation on fixed assets (note c)
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(9,683,980)
|
---
|
|
| Settlement
of fire insurance claim Deficit on revaluation of investment properties
|
--- ---
|
3,732,480 (4,047,814)
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|
|
|
(42,237,630)
|
609,918,673
|
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| Notes:- |
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| (a) | In
July 1997, the Group disposed of its entire interest in EasyCall Communications
Philippines Inc., an associated company.
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| (b) | In
March 1998, the Group disposed of an 11.86% out of a total of 12.4% interest
in SmarTone Telecommunications Holdings Limited, an associated company.
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| (c) | On
25th May 1999, the Group entered into an agreement with a third party to
dispose of part of the Group's paging services operation. As a result, the
directors are of the opinion that the recoverable amounts of certain fixed
assets have declined below their carrying amounts. Accordingly, additional
provision for depreciation on such fixed assets was made in order to write
down their carrying amounts to their recoverable amounts.
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| 2. | Taxation Hong Kong profits tax has been provided at the rate of 16% (1998 : 16.5%) on the estimated assessable profit for the year.
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| 1999 HK$ |
1998 HK$ |
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| Company
and subsidiaries: Hong Kong profits tax |
653,451 | 3,553,712 | |
|
Overprovision in prior years 10% rebate for 1997/1998 Deferred taxation |
653,451 (641,971) (426,302) (3,013,157) (3,427,979) |
3,553,712 --- --- 74,589 3,628,301 |
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| Associated
companies: Hong Kong profits tax Overseas taxation |
142,176 --- 142,176 (3,285,803) |
20,096,354 278,553 20,374,907 24,003,208 |
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| Deferred tax credit/(charge)for the year has not been provided in the accounts in respect of the following: | |||
| Accelerated
depreciation allowances Tax loss |
143,275 1,976,789 2,120,064
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(1,702,801) 2,550,063 847,262
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| 3. | Transfer
from capital reserve The amount of HK$148,141,784 was transferred from retained profit to capital reserve in the year 1996/1997 being the gain on a deemed disposal of investment in an associated company upon its initial public offering of shares. The Directors are of the opinion that as a major portion of the GroupÕs interests in such associated company was sold, such an amount should be reverted to retained profit.
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| 4. | Earnings
per share The earnings per share is calculated based on the profit attributable to shareholders of HK$14,283,119 (1998: HK$731,871,109) and on the weighted average number of 398,240,000 shares (1998: 399,461,907 shares as a result of the repurchasing of 1,760,000 shares during 1998) in issue during the year.
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The continued erosion of the local paging market in the face of cellular substitution has exerted enormous pressure on our paging business. Although operating costs have been substantially reduced since the re-location of our telephone centre to Macau, these gains have largely been offset by our shrinking customer base and falling tariffs. Subsequent to the year-end, we came to an agreement with China Motion Telecommunications (Hong Kong) Limited for the sale of our paging business to the latter for a consideration equivalent to three months?subscriptions plus a specified amount for equipment cost. As a result of the discontinuation of our paging business, we will incur an exceptional loss of approximately HK$9.7 million, for which full provision has been made in the accounts of the fiscal year under review.
During the fiscal year, our associated company, GTP (Guangdong) Telecom Limited (ÒGTP? also disposed of its pager roaming business for a consideration equivalent to approximately three months?subscriptions for each subscriber transferred. GTP still made a moderate contribution to our earnings during the year.
In the interests of prudence, we have also made a provision for possible exchange losses over revenues due from Vietnam in our accounts for the year under review.
Taiwan
Our paging operation, Hoyard Communication Inc., has merged with another regional operator during the year, for better synergies and in keeping with the current trend of market consolidation in Taiwan. Start-up losses have been incurred by Hoyard in the race to acquire customers and these have been fully reflected in our accounts for the fiscal year. Meanwhile, our cellular investment in Taiwan has performed extremely well, with profits already recorded since early 1999. We would expect the value of our cellular investment to appreciate even further in the coming months with its continued subscriber and revenue growth.
Prospects
Subsequent to the disposal of our paging business, the focus of the Group will be to develop businesses in new growth sectors. Continued efforts will be devoted to improving our earnings in the Internet and financial information services. Meanwhile, technology advances will give rise to new business opportunities in the telecommunications and technology sectors. We will be exploring such opportunities most aggressively in the coming months.
THE IMPACT OF YEAR 2000
The Group has adopted the definition of the British Standard Institute, summarized below, in addressing the issue of "Year 2000 compliance?
"Year 2000 conformity shall mean that neither performance nor functionality is affected by dates prior to, during and after the Year 2000, in particular.
The Directors are aware that our Group is heavily dependent on information systems to provide various services to our customers and to bill them accordingly. In the event that such systems fail to be Year 2000 compliant, our services to customers may be interrupted. Failure of the billing system may result in billing errors and may necessitate manual data entry.
A task force led by our Information Technology Manager has been set up by the Group since August 1997 to assess our Year 2000 problems and to identify areas where conversions, replacements or upgrades are required. All internally developed computer programmes have been modified and extensively tested to ensure Year 2000 compliant by 30 June 1999. Assurances have also been obtained from most third-party vendors on the state of their Year 2000 readiness and tests have been conducted where practicable. As at 30 June 1999, we had yet to be supplied software patches from three third-party vendors in respect of their systems. We expect these software upgrades will be ready and fully tested by the end of the third quarter.
Overall, the Group has expended approximately HK$1.6 million for third-party hardware and software conversions in preparation of our Year 2000 compliance, of which HK$1.2 million has been spent on capital expenditure. The costs of hardware involved in this exercise have been capitalized and amortized in accordance with the Group's depreciation policies. The costs of software upgrades have been charged to the profit and loss account as incurred.
Despite the comprehensive studies our Group has conducted of our internal systems, it has to be recognized that we cannot control systems outside our control with which we might be interlinked. However, based on on-going tests of our systems, we believe the issue of Year 2000 is not likely to adversely impact on the operations of the Group in any significant manner.
AUDIT COMMITTEE
In compliance with the requirements of The Stock Exchange of Hong Kong Limited, an audit committee was formed in 1999. The committee comprises three non-executive directors and reports to the Board of Directors. The audit committee reviews matters within the scope of audit, such as financial statements and internal control, to protect the interests of the Company's shareholders.
PURCHASE, SALE OR REDEMPTION OF SHARES
Save as disclosed herein, neither the Company nor any of its subsidiary companies has purchased or sold any of the Company securities during the year and the Company has not redeemed any of its securities during the year.
No pre-emptive rights exist under the laws of Bermuda in relation to issues of new shares by the Company.
On behalf of the Board
Michael Tse
Chairman
Hong Kong 26th July 1999
NOTICE IS HEREBY GIVEN that the Annual General Meeting of the shareholders of ABC Communications (Holdings) Limited will be held at Pearl Room, 3rd Floor, Furama Hotel, 1 Connaught Road, Central, Hong Kong on Friday, 3rd September 1999 at 10:00 a.m. for the following purposes:
"Relevant Period" means the period from the passing of this Resolution until whichever is the earliest of:-
2. "THAT:-
3. THAT:-
conditional upon the passing of Resolutions 5(1) and 5(2) as set out in the Notice convening this Meeting, the aggregate nominal amount of the shares which are repurchased by the Company pursuant to and in accordance with Resolution 5(2) above shall be added to the aggregate nominal amount of the shares which may be allotted or agreed conditionally or unconditionally to be allotted by the Directors of the Company pursuant to and in accordance with Resolution 5(1).
Notes:
By Order of the Board
Patricia Yeung Shuk Kwan
Secretary
