NEW WORLD TMT<00301> - Results Announcement
New World TMT Limited announced on 06/10/2005:
(stock code: 00301 )
Year end date: 30/06/2005
Currency: HKD
Auditors' Report: Qualified
(Audited )
(Audited ) Last
Current Corresponding
Period Period
from 01/07/2004 from 01/07/2003
to 30/06/2005 to 30/06/2004
Note ('000 ) ('000 )
Turnover : 353,774 368,847
Profit/(Loss) from Operations : (588,521) (5,306,510)
Finance cost : (106,302) (82,875)
Share of Profit/(Loss) of
Associates : (107,373) (123,875)
Share of Profit/(Loss) of
Jointly Controlled Entities : (74,876) (13,869)
Profit/(Loss) after Tax & MI : (866,224) (5,507,258)
% Change over Last Period : N/A %
EPS/(LPS)-Basic (in dollars) : (0.91) (5.78)
-Diluted (in dollars) : N/A N/A
Extraordinary (ETD) Gain/(Loss) : N/A N/A
Profit/(Loss) after ETD Items : (866,224) (5,507,258)
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 Basis of preparation
The accounts have been prepared in accordance with accounting principles
generally accepted in Hong Kong and comply with accounting standards
issued by the Hong Kong Institute of Certified Public Accountants ("
HKICPA"). The accounts are prepared under the historical cost convention
as modified by the revaluation of non-trading securities.
The HKICPA has issued a number of new and revised Hong Kong Financial
Reporting Standards ("HKFRS") and Hong Kong Accounting Standards ("HKAS")
(collectively the "HKFRSs") which are effective for accounting periods
beginning on or after 1 January 2005. In preparing these accounts, the
Group early adopted the following HKFRS and HKASs:
HKFRS 3 Business Combination
HKAS 36 Impairment of Assets
HKAS 38 Intangible Assets
Following the adoption of HKFRS 3, HKAS 36 and HKAS 38, the Group ceased
amortization of goodwill on acquisitions of subsidiaries, associated
companies and jointly controlled entities from 1 July 2004 but tested it
for impairment annually. Any impairment loss recognized during the year is
charged to the consolidated profit and loss account. Accumulated
amortization as at 1 July 2004 has been eliminated with a corresponding
decrease in the cost of goodwill.
The early adoption of the above standards has not resulted in any changes
to the opening reserves as at 1 July 2004 and does not have any
significant impact to the results for the year ended 30 June 2005.
The Group has not early adopted the other new HKFRSs in the accounts for
the year ended 30 June 2005. The Group has already commenced an
assessment of the impact of these other new HKFRSs but is not yet in a
position to state whether they would have a significant impact on its
results of operations and financial position.
2 Other charges, net
2005 2004
HK$'000 HK$'000
Impairment losses on:
Intangible assets (4,138) (401,232)
Fixed assets (1,314) (663,663)
Other investments (512,881) (2,272,361)
Provision for:
Amounts due from jointly controlled
entities (1,394) (14,469)
Amounts due from associated
companies (4) (113,040)
Other receivables (77,071) (29,246)
Deposits for proposed investments (28,858) (81,281)
Deposits for purchase of fixed
assets - (843,869)
Loans receivable (6,542) (99,806)
Loans to investee companies - (304,201)
Write-down of inventories to net
realizable value (12,955) (291,406)
(Loss)/gain on disposal of:
Fixed assets (2,638) 58
Other investments - 3,876
Gain in relation to disposal of
Wuhan bridges
by NWS Holdings Limited ("NWSH") 154,878 -
Write-back of impairment loss on other
investments - 4,738
Write-back of provision for amounts
due from associated companies 32,005 -
----------- -----------
(460,912) (5,105,902)
=========== ===========
3 Loss per share
The calculation of loss per share is based on the loss for the year of
HK$866,224,000 (2004: HK$5,507,258,000) and 952,180,007 (2004:
952,180,007) shares in issue during the year.
Diluted loss per share is not presented as there is no dilutive potential
share in issue.
4 QUALIFIED AUDITORS' REPORT
The Directors would like to draw to your attention to the fact that the
auditors' report on the annual accounts of the Group for the year ended 30
June 2005 has been qualified. The relevant parts of the auditors' report
that dealt with the qualification as well as the relevant note to the
accounts to which the auditors' report 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 a counter claim against the Company
(the "PrediWave Cross-Complaint"), under which PrediWave alleged that the
Company had failed to make full payments under certain purchase orders and
an agreement totalling approximately US$72 million (approximately HK$564
million). As a result, PrediWave claimed damages against the Company in
an amount to be proved at trial.
As more fully described in note 29 to the accounts, the directors, in
preparing the accounts, have concluded that a full provision amounting to
HK$3,082 million made in the accounts for the year ended 30 June 2004
against the Group's investments in the PrediWave Companies, loans to the
PrediWave Companies and deposits paid to PrediWave (collectively the "
PrediWave Assets"), remains most appropriate for the purpose of the
accounts for the year ended 30 June 2005. In addition, the directors have
not made any provision for any commitment and/or loss under the PrediWave
Cross-Complaint in the accounts as they are of the view that the Company
has proper and valid defences to the PrediWave Cross-Complaint.
As a result of the uncertainty of the timing and the outcome of the
litigations which would have a consequential significant 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 and/or loss under the PrediWave Cross-
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 and/or loss under
the PrediWave Cross-Complaint. Any adjustments to the carrying values of
the PrediWave Assets or provision for any commitment and/or loss under the
PrediWave Cross-Complaint that might have been necessary should evidence
become available to us may have a consequential significant effect on the
net assets of the Company and the Group at 30 June 2005 and the loss of
the Group 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 pending litigations referred to in
the preceding 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 2005 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.
NOTE TO THE ACCOUNTS
29 Pending litigations
(a) In May 2004, the Group 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 Group 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 lawsuit exceeds US$700 million (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.
As the directors of the Company consider that they cannot effectively
monitor the utilization of funds by the PrediWave Companies, they 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 significant
effect on the amount of assets recoverable, the directors have concluded
that a full provision of HK$3,082 million made in the accounts for the
year ended 30 June 2004 against the Group's investments in the PrediWave
Companies, loans to the PrediWave Companies and deposits paid to PrediWave
remains most appropriate for the purpose of the accounts for the year
ended 30 June 2005.
(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 (collectively the "PrediWave Complaint"). In January 2005,
PrediWave dropped the PrediWave Complaint and filed a counter claim
against the Company to the Superior Court of the State of California for
the County of Santa Clara (the "PrediWave Cross-Complaint"). Under the
PrediWave Cross-Complaint, PrediWave alleged that the Group had failed to
make full payments under four purchase orders and one agreement for goods
and services delivered or licenses granted by PrediWave to the Group
relating to the Technology totalling approximately US$72 million (
approximately HK$564 million). As a result, PrediWave claimed damages
against the Company in an amount to be proved at trial, together with
interest and costs of legal proceedings, restitution of the reasonable
value of goods delivered to the Company and a declaration that PrediWave
should be entitled to retain the deposits made by the Company under
various purchase orders and agreements.
The directors are of the view that the Company has proper and valid
defences to the PrediWave Cross-Complaint, and accordingly, no provision
for commitment and/or loss has been accounted for in the accounts.
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