NEW WORLD TMT<00301> - Results Announcement
New World TMT Limited announced on 15/10/2004:
(stock code: 00301 )
Year end date: 30/06/2004
Currency: HKD
Auditors' Report: Qualified
(Audited )
(Audited ) Last
Current Corresponding
Period Period
from 01/07/2003 from 01/07/2002
to 30/06/2004 to 30/06/2003
Note ('000 ) ('000 )
Turnover : 368,847 383,461
Profit/(Loss) from Operations : (5,306,510) (479,932)
Finance cost : (82,875) (638,980)
Share of Profit/(Loss) of
Associates : (123,875) 15,534
Share of Profit/(Loss) of
Jointly Controlled Entities : (13,869) 516,110
Profit/(Loss) after Tax & MI : (5,507,258) (690,668)
% Change over Last Period : N/A %
EPS/(LPS)-Basic (in dollars) : (5.78) (0.73)
-Diluted (in dollars) : N/A N/A
Extraordinary (ETD) Gain/(Loss) : N/A N/A
Profit/(Loss) after ETD Items : (5,507,258) (690,668)
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. Analysis of turnover and loss from operations
Turnover (Loss)/profit from operations
2004 2003 2004 2003
HK$'000 HK$'000 HK$'000 HK$'000
(Restated)
Continuing operations
368,847 645 (5,306,510) (1,147,344)
Discontinued operations (Note)
- 382,816 - 154,775
Gain from the Reorganization
- - - 512,637
---------------------------------------------------------
368,847 383,461 (5,306,510) (479,932)
=========================================================
Note: During the year ended 30 June 2003, New World Group undertook a
reorganization (the "Reorganization") to streamline its organisation
structure and to create a greater business focus among its affiliated
businesses. The Reorganization was completed on 29 January 2003. The
discontinued operations represented the Group's investments in roads,
bridges, water treatment, power plant projects (the "Infrastructure
Assets") and investment in NWS Holdings Limited ("NWSH"). As part of the
Reorganization, the Company disposed of its investments in Infrastructure
Assets to NWSH for a consideration of approximately HK$10,227 million
comprising cash, NWSH shares (the "Consideration Share") and undertaking
by NWSH to pay certain liabilities of the Group. In addition, the Group
converted all preference shares of NWSH into ordinary shares and
thereafter distributed all the NWSH ordinary shares including the
Consideration Shares to the shareholders of the Company on 29 January
2003.
2. Other charges, net
2004 2003
HK$'000 HK$'000
(Restated)
Continuing operations:
Impairment losses on:
Intangible assets (401,232) -
Fixed assets (663,663) (10,002)
Other investments (2,272,361) (21,349)
Provision for:
Amounts due from jointly controlled entities (14,469) (158,559)
Amounts due from associated companies (113,040) -
Other receivables (29,246) (39,180)
Deposits for proposed investments (81,281) (122,445)
Deposits for purchase of fixed assets (843,869) -
Loans receivable (99,806) -
Loans to investee companies (304,201) -
Payments on account of proposed joint ventures - (111,635)
Write-down of inventories to net realizable value (291,406) (458,362)
Gain from the Reorganization - 512,637
Gain/(loss) on disposal of:
Fixed assets 58 (3,551)
Subsidiaries - 84,127
Other investments 3,876 (201,367)
Unlisted investment - 118,541
Write-back of impairment loss on other investments 4,738 1,972
-------------------------
(5,105,902) (409,173)
=========================
Discontinued operations:
Impairment losses on fixed assets - (35,000)
=========================
3 Loss per share
The calculation of loss per share is based on the loss for the
year of HK$5,507,258,000 (2003 (Restated): HK$690,668,000) and 952,180,007
(2003: 952,180,007) shares in issue during the year.
Diluted loss per share for the years ended 30 June 2003 and 2004
is not presented as the Company has no dilutive potential shares at year
end.
4 Comparative figures
Comparative figures for gain from the Reorganization, other
operating income and operating costs have been reclassified or extended to
conform with the current year's presentation.
Comparative figures for the taxation charge, gain from the
Reorganization, share of results of associated companies and jointly
controlled entities and dividend have been restated as a result of the
adoption of the new SSAP 12.
5 Qualified auditors' report
The Directors would like to draw to your attention that the auditors'
report on the annual accounts of the Group for the year ended 30 June 2004
has been qualified. The relevant parts of the auditors' report that dealt
with the qualification as well as the relevant notes to the accounts to
which the auditors' report refers to are quoted as follows:
AUDITORS' REPORT
Basis of opinion
We conducted our audit in accordance with Statements of Auditing Standards
issued by the Hong Kong Institute of Certified Public Accountants, except
that the scope of our work was limited as explained below.
An audit includes examination, on a test basis, of evidence relevant to
the amounts and disclosures in the accounts. It also includes an
assessment of the significant estimates and judgements made by the
directors in the preparation of the accounts, and of whether the
accounting policies are appropriate to the circumstances of the Company
and the Group, consistently applied and adequately disclosed.
We planned our audit so as to obtain all the information and explanations
which we considered necessary in order to provide us with sufficient
evidence to give reasonable assurance as to whether the accounts are free
from material misstatement. However, the evidence available to us was
limited as set out below.
Fundamental uncertainty and limitation of audit scope relating to pending
litigations
As described in note 29 to the accounts, the Company commenced litigations
against PrediWave Corporation ("PrediWave") and certain companies
associated with PrediWave (collectively the "PrediWave Companies") and Mr
Tony Qu, the president and founder of the PrediWave Companies. The
Company was seeking recovery of various investments in and other payments
made by the Group to the PrediWave Companies (the "NWTMT Complaint"). On
the other hand, PrediWave also commenced litigations against the Company
(the "PrediWave Complaint"), under which PrediWave alleged that the
Company had failed to make full payments under certain purchase orders and
an agreement of approximately US$59 million (approximately HK$459
million). PrediWave claimed damages of not less than US$58 million
(approximately HK$452 million) and loss of profit of unspecified amount.
As more fully described in note 29 to the accounts, in preparing the
accounts, the directors have concluded that a full provision amounting to
HK$3,082 million against the Group's investments in the PrediWave
Companies, loans to the PrediWave Companies and deposits paid to PrediWave
(collectively the "PrediWave Assets"), is most appropriate for the purpose
of the accounts for the year ended 30 June 2004. In addition, the
directors have not made any provision for any commitment/loss under the
PrediWave Complaint in the accounts as they are of the view that the
Company has proper and valid defences to the PrediWave Complaint.
As a result of the uncertainty of the timing and the outcome of the
litigations which would have a consequential effect on the amount of
assets recoverable, as well as the lack of updated meaningful financial
information on the PrediWave Companies, the evidence available to us for
assessing the carrying values of the PrediWave Assets, the propriety of
the provisions made against the PrediWave Assets and any provision for any
commitment/loss under the PrediWave Complaint was limited. There were no
other practical satisfactory audit procedures that we could adopt to
assess the carrying values of the PrediWave Assets, the propriety of the
provisions made against the PrediWave Assets and any provision for any
commitment/loss under the PrediWave Complaint. Any adjustments to the
carrying values of the PrediWave Assets or provision for any
commitment/loss under the PrediWave Complaint that might have been
necessary should evidence become available to us may have a consequential
significant effect on the Company's and the Group's net assets at 30 June
2004 and the Group's loss for the year then ended.
Limitation of audit scope relating to other investments
Included in other investments is an unlisted equity investment of
approximately HK$377 million in Intellambda Systems Inc. ("Intellambda")
which was acquired by the Group during the year. Mr Tony Qu is the Chief
Executive Officer of Intellambda. As described in note 19 to the
accounts, sufficient financial information on Intellambda was not
available to the directors. Notwithstanding that, the directors remain
confident in the technology and business operation of Intellambda and
consider that no provision for impairment in value of the investment in
Intellambda is required. We were unable to obtain sufficient explanations
and evidence relating to the future prospect of Intellambda. There were
no other practical satisfactory audit procedures that we could adopt to
assess the carrying value of the investment in Intellambda as at 30 June
2004. Any adjustment that might have been necessary should evidence
become available to us would have a consequential impact on the Company's
and the Group's net assets at 30 June 2004 and the Group's loss for the
year then ended.
In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the accounts. We believe that our audit
provides a reasonable basis for our opinion.
Qualified opinion: Disclaimer on view given by the accounts
Because of the significance of the possible effect of the limitation in
evidence available to us concerning the matters referred to in the "Basis
of opinion" paragraphs, we are unable to form an opinion as to whether the
accounts give a true and fair view of the state of affairs of the Company
and of the Group as at 30 June 2004 or of the loss and cash flows of the
Group for the year then ended. In all other respects, in our opinion the
accounts have been properly prepared in accordance with the disclosure
requirements of the Hong Kong Companies Ordinance.
In respect alone of the limitation on our work relating to the matters
described above, we have not obtained all the information and explanations
that we considered necessary for the purpose of our audit.
NOTES TO THE ACCOUNTS
19 Other investments
(b) Also included in other investments is an unlisted equity
investment of approximately HK$377 million in Intellambda Systems Inc.
("Intellambda") which was acquired by the Group during the year. Mr Tony
Qu is the Chief Executive Officer of Intellambda. Intellambda's business
objective is to develop optical transport and switching platform and
provide the optical networking solutions for carriers planning on building
or upgrading their metro and regional infrastructures. Based on the
latest financial information available to the Group, Intellambda was
operating at a loss. The director nominated by the Group to Intellambda
has requested for further financial information from Intellambda for the
purpose of assessing the carrying value of the investment in Intellambda.
However, Intellambda imposed certain conditions before it would make
available further financial information to the director nominated by the
Group to Intellambda. In view of the conditions imposed, no further
information was obtained from Intellambda. Despite the litigation against
Mr Tony Qu, the directors of the Company remain confident in the
technology held by Intellambda and consider that there is no reason to
believe why Mr Tony Qu would not pursue the business objective of
Intellambda and make it a successful operation. As a result, the
directors of the Company consider that no provision for impairment in
value of the investment in Intellambda is required.
29 Pending litigations
(a) In May 2004, the Company filed complaints to the Superior Court of
the State of California for the County of Santa Clara in the United States
of America ("US") ("NWTMT Complaint") against the PrediWave Companies and
Mr Tony Qu, the president and founder of the PrediWave Companies. Under
the NWTMT Complaint, the Company alleged that, in reliance of the
representations given by Mr Tony Qu and PrediWave, the Company entered
into various agreements with the PrediWave Companies under which the Group
invested in the PrediWave Companies and placed various purchase orders for
goods and services relating to the technology (the "Technology") of video
-on-demand and other digital broadcasting and related technology and added
value services. The Group had paid approximately HK$5 billion to the
PrediWave Companies for investments in and loans to the PrediWave
Companies, and purchases of goods and services from PrediWave. The
Company complained of various breaches, in relation to goods and services
relating to the Technology, by Mr Tony Qu and the PrediWave Companies
relating to the parties' agreements. Accordingly, the Company claimed
damages for an amount to be determined at trial together with interest,
rescission of all agreements, restitution of all monies obtained from the
Group, punitive and exemplary damages, costs of legal proceedings and
other declaratory relief and equitable relief. The total monetary amount
sought by the Company in the law suit exceeds US$700 million (equivalent
to approximately HK$5,460 million).
The directors have been advised by their external legal counsel that the
NWTMT Complaint will not be concluded in a short period of time and the
outcome of the NWTMT Complaint is uncertain.
Based on the unaudited management accounts of the PrediWave Companies as
at 31 December 2003 which were obtained prior to the commencement of the
NWTMT Complaint, there was a balance of approximately US$344 million
(approximately HK$2,683 million) in their bank accounts.
In June 2004, with the objective of preventing improper withdrawals of
funds, Mr Jimmy Li, the director nominated by the Group to certain
PrediWave Companies sought to exercise the co-signing rights in relation
to withdrawals of funds in excess of US$0.5 million from the bank accounts
of certain PrediWave Companies by requesting a temporary restraining order
from the court. However, such request was denied by the Superior Court of
the State of California for the County of Santa Clara in the US.
In August 2004, the Superior Court of the State of California for the
County of Santa Clara in the US made an order in favour of Mr Jimmy Li
permitting him to inspect all corporate books and records of certain
PrediWave Companies. Mr Jimmy Li is assisted by an accounting firm in the
US to inspect the books and records but no meaningful financial
information has been extracted as of the date of approval of the accounts.
As the directors of the Company were unable to freeze the bank accounts or
enforce the co-signing rights, the directors of the Company consider that
they cannot effectively monitor the utilization of funds by the PrediWave
Companies. Notwithstanding that the bank balance of the PrediWave
Companies were approximately US$344 million as at 31 December 2003 based
on their unaudited management accounts, the directors expect that the
utilization of funds for legal costs and other causes beyond their control
will be significant throughout the period up to the date when the NWTMT
Complaint is concluded. In addition, in the absence of the availability
of meaningful and updated financial information on the PrediWave Companies
and given the uncertainty of the timing and the outcome of the litigation
which would have a consequential effect on the amount of assets
recoverable, the directors have concluded that a full provision of
HK$3,082 million made against the Group's investments in the PrediWave
Companies, loans to the PrediWave Companies and deposits paid to PrediWave
is most appropriate for the purpose of the accounts for the year ended 30
June 2004.
(b) In May 2004, PrediWave filed complaints to the Superior Court of
the State of California for the County of Los Angeles in the US against
the Company (the "PrediWave Complaint"). Under the PrediWave Complaint,
PrediWave alleged that the Company had failed to make full payments under
three purchase orders and one agreement for goods and services delivered
or licenses granted by PrediWave to the Group relating to the Technology
with an outstanding amount of approximately US$59 million (equivalent to
approximately HK$459 million). PrediWave claimed damages against the
Company in an amount to be proved at trial, but not less than US$58
million (equivalent to approximately HK$452 million) together with
interest and costs of legal proceedings, and a declaration that the
Company should pay PrediWave the profits PrediWave would have received had
the Company performed its obligations under various purchase order and
agreements and that PrediWave should be entitled to retain the deposits
made by the Company thereunder.
The directors are of the view that the Company has proper and valid
defences to the PrediWave Complaint, and accordingly, no provision for
commitment/loss has been accounted for in the accounts.
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