PCCW<00008> - Results Announcement (Summary)
PCCW Limited announced on 4/3/2004:
(stock code: 00008 )
Year end date: 31/12/2003
Currency: HKD
Auditors' Report: Unqualified
(Audited )
(Audited ) Last
Current Corresponding
Period Period
from 1/1/2003 from 1/1/2002
to 31/12/2003 to 31/12/2002
Note ('Million ) ('Million )
Turnover : 22,550 20,112
Profit/(Loss) from Operations : 2,388 4,544
Finance cost : (2,249) (2,161)
Share of Profit/(Loss) of
Associates : 65 281
Share of Profit/(Loss) of
Jointly Controlled Entities : (891) 550
Profit/(Loss) after Tax & MI : (6,100) (7,762)
% Change over Last Period : 21%
EPS/(LPS)-Basic (in dollars) : (1.2281) (1.6853)
-Diluted (in dollars) : (1.2281) (1.6853)
Extraordinary (ETD) Gain/(Loss) : N/A N/A
Profit/(Loss) after ETD Items : (6,100) (7,762)
Final Dividend : Nil Nil
per Share
(Specify if with other : N/A N/A
options)
B/C Dates for
Final Dividend : N/A
Payable Date : N/A
B/C Dates for (-)
General Meeting : N/A
Other Distribution for : N/A
Current Period
B/C Dates for Other
Distribution : N/A
Remarks:
1. Provisions for impairment losses
2003 2002
HK$ million HK$ million
Provisions for impairment of:
Fixed assets (note a) 1,167 204
Multimedia business related assets (note b) 301 309
Game business related assets (note c) 893 -
Other non-current assets 91 21
---------- -----------
2,452 534
===== ====
(a) Due to technology and market changes in the sectors in which the
PCCW Group (the "Group") operates, certain of the Group's fixed assets
have become obsolete or impaired. Accordingly, the Group has recognized
an impairment loss of approximately HK$1,155 million in the income
statement for the year ended December 31, 2003. Further, an impairment
loss of approximately HK$12 million on the fixed assets of the game
business has been recognized as described in remark (c) below.
(b) Following the launch of certain value-added services in 2003, the
Group has reviewed the recoverable amount of its multimedia business
related assets and identified that the usage of certain content archive
will be diminishing. The income to be generated from such assets is
expected to be insignificant. Accordingly, the Group has fully written
down the remaining carrying value of a content licence as at December 31,
2003 to zero and recognized an impairment loss of approximately HK$301
million.
(c) During the year, JALECO LTD. ("JALECO"), the Group's majority
owned subsidiary listed in Japan, has restructured its on-line game and
game development businesses and exited certain legacy businesses. In view
of the continual losses incurred by JALECO, management has performed an
assessment of the fair value of its interest in JALECO, including the
related goodwill that had previously been eliminated against reserves as
at December 31, 2003. As a result, based on the estimated value in use of
JALECO determined using a discount rate of 12.5 percent (2002: 12.5
percent), the Group has recognized impairment losses for goodwill and
other assets of HK$742 million and HK$151 million respectively in the
income statement for the year.
2. Restructuring costs
During the current year, JALECO incurred restructuring costs of
approximately HK$38 million representing mainly the severance payments and
the write-off of development cost and inventory in relation to the
restructuring exercise described in remark 1(c) above.
During 2002, the Group subcontracted a significant portion of its network
maintenance function to 17 newly-established subcontracting companies
owned by individuals previously employed by the Group. Approximately
1,600 former employees joined these subcontracting companies in November
2002 and approximately 3,000 of the Group's employees joined a new wholly
-owned subsidiary, Cascade, on January 1, 2003. In addition, the Group
reset staff levels in 2002 involving approximately 1,400 employees.
Restructuring costs of approximately HK$311 million in 2002 mainly
represent the ex-gratia payments, curtailment losses on the related
defined benefit retirement schemes, Cascade incentive bonuses on
employment transfers and payments in lieu of notice for the above
exercises.
3. Impairment losses on interests in jointly controlled companies and
associates
2003 2002
HK$ million HK$ million
Impairment losses on interests in:
Reach Ltd. ("REACH") (note a) 4,159 8,263
Another jointly controlled company (note b) 227 -
Other associates 78 -
------ -------------
4,464 8,263
====== ========
(a) On April 15, 2003, REACH and its bankers amended the terms of
REACH's US$1,500 million syndicated term loan facility, which was
subsequently reduced to US$1,200 million, with effect from April 25, 2003.
The amendments to the term loan facility were intended to provide REACH
with greater financial flexibility and an improved capital structure.
REACH continues to operate in a difficult environment and the industry is
expected to remain challenging for a period of time due to aggressive
pricing and oversupply of capacity.
The Group has performed an assessment of the fair value of its interest in
REACH, including the related goodwill that had previously been eliminated
against reserves, as at December 31, 2003. As a result, based on the
estimated value in use of REACH determined using a discount rate of 10
percent (2002: 9 percent), the Group has made full provision for
impairment of its previously unimpaired interest in REACH, recognizing an
impairment loss of approximately HK$4,159 million (2002: HK$8,263 million)
in the income statement for the year ended December 31, 2003.
Accordingly, the Group's total interest in REACH has been written down to
zero as at December 31, 2003 (2002: HK$3,930 million).
(b) Due to continual losses sustained, the Group has performed an
assessment of the carrying value of its interest in a jointly controlled
company, which is engaged in the on-line game business, as at December 31,
2003. Based on the result of the assessment, the Group has made a full
provision for impairment of its interest in this jointly controlled
company of approximately HK$227 million in the income statement for the
year ended December 31, 2003.
4. Loss per share
The calculation of basic loss per share is based on the following data:
2003 2002
Loss (HK$ million) (6,100) (7,762)
======= =========
Weighted average number of ordinary shares 4,967,178,732 4,605,653,512
============= ==============
The diluted loss per share for the year ended December 31, 2003 and 2002
is the same as the basic loss per share as all potential ordinary shares
are anti-dilutive.
The weighted average number of ordinary shares in 2003 and 2002 for the
purposes of calculating the basic and diluted loss per share has been
retrospectively adjusted for the five-to-one share consolidation which
took place in January 2003.
5. The interest income of HK$132 million (2002: HK$164 million) is
included in "Profit / (Loss) from Operations" for the purpose of this form
but is included in "Finance costs, net" for the purposes of the annual
results announcement and annual report. A reconciliation of the annual
report to the Hong Kong Stock Exchange (HKSE) announcement form is as
follows :-
Per annual Reclassification HKSE 2003 annual results
report 2003 of interest Announcement
income Form
HK$'M HK$'M HK$'M
Turnover
22,550 22,550
Profit/(Loss) from Operations
2,256 132 2,388
Finance cost
(2,117) (132) (2,249)
Share of Profit /(Loss) of Associates
65 65
Share of Profit / (Loss) of Jointly Controlled Entities
(891) (891)
Profit / (Loss) after Taxation & MI
(6,100) (6,100)
Per annual Reclassification HKSE 2002 annual results
report 2002 of interest Announcement
income Form
HK$'M HK$'M HK$'M
Turnover
20,112 20,112
Profit/(Loss) from Operations
4,380 164 4,544
Finance cost
(1,997) (164) (2,161)
Share of Profit /(Loss) of Associates
281 281
Share of Profit / (Loss) of Jointly Controlled Entities
550 550
Profit / (Loss) after Taxation & MI
(7,762) (7,762)
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