SUNDAY COMM<00866> - Results Announcement
SUNDAY Communications Limited announced on 29/03/2006:
(stock code: 00866 )
Year end date: 31/12/2005
Currency: HKD
Auditors' Report: Unqualified
(Audited )
(Audited ) Last
Current Corresponding
Period Period
from 01/01/2005 from 01/01/2004
to 31/12/2005 to 31/12/2004
Note ('000 ) ('000 )
Turnover : 1,159,439 1,158,609
Profit/(Loss) from Operations : (154,901) 30,931
Finance cost : (42,080) (26,300)
Share of Profit/(Loss) of
Associates : N/A N/A
Share of Profit/(Loss) of
Jointly Controlled Entities : N/A (258)
Profit/(Loss) after Tax & MI : (196,981) 4,373
% Change over Last Period : N/A %
EPS/(LPS)-Basic (in dollars) : (0.066) 0.0015
-Diluted (in dollars) : N/A N/A
Extraordinary (ETD) Gain/(Loss) : N/A N/A
Profit/(Loss) after ETD Items : (196,981) 4,373
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 AND PRINCIPAL ACCOUNTING POLICIES
a. Statement of compliance
The consolidated accounts have been prepared in accordance with Hong Kong
Financial Reporting Standards ("HKFRSs"), which collective term includes
all applicable individual HKFRSs, Hong Kong Accounting Standards ("HKASs")
and Interpretations issued by the Hong Kong Institute of Certified Public
Accountants ("HKICPA"), accounting principles generally accepted in Hong
Kong and the disclosure requirements of the Hong Kong Companies Ordinance.
A summary of the principal accounting policies adopted by the Group is set
out below.
The HKICPA has issued a number of new/revised HKFRSs that are effective or
available for early adoption for accounting periods beginning on or after
1st January 2005.
b. Basis of preparation
The consolidated accounts for the year ended 31st December 2005
incorporate the accounts of the Company and its subsidiaries.
The consolidated accounts have been prepared under the historical cost
convention, as modified by the revaluation of financial assets and
financial liabilities which are carried at fair value.
During the year, the Group has adopted the new/revised HKFRSs below, which
are relevant to its operations. The 2004 comparatives have been restated,
as required, in accordance with the relevant requirements.
HKAS 1 Presentation of Financial Statements
HKAS 2 Inventories
HKAS 7 Cash Flow Statements
HKAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
HKAS 10 Events after the Balance Sheet Date
HKAS 12 Income Taxes
HKAS 14 Segment Reporting
HKAS 16 Property, Plant and Equipment
HKAS 17 Leases
HKAS 18 Revenue
HKAS 19 Employee Benefits
HKAS 21 The Effects of Changes in Foreign Exchange Rates
HKAS 23 Borrowing Costs
HKAS 24 Related Party Disclosures
HKAS 27 Consolidated and Separate Financial Statements
HKAS 31 Interests in Joint Ventures
HKAS 32 Financial Instruments: Disclosure and Presentation
HKAS 33 Earnings per Share
HKAS 36 Impairment of Assets
HKAS 37 Provisions, Contingent Liabilities and Contingent Assets
HKAS 38 Intangible Assets
HKAS 39 Financial Instruments: Recognition and Measurement
HKAS 39 Amendment Transition and Initial Recognition of Financial
Assets and Financial Liabilities
HKFRS 2 Share-based Payment
The adoption of HKASs 1, 2, 7, 8, 10, 12, 14, 17,18, 19, 21, 23, 24, 27,
31, 32, 33, 36, 37 and HKFRS 2 had no material effect on the Group's
accounting policies. The effect of the adoption of certain new/revised
HKFRSs, which results in substantial changes to accounting policies, is
set out below.
i. Asset retirement obligations (HKAS 16)
The adoption of HKAS 16 has resulted in a change in accounting policy
relating to recognition of fixed assets and liabilities subject to
retirement obligations at fair values.
ii. Definition of related parties (HKAS 24)
As a result of the adoption of HKAS 24, the definition of related parties
has been expanded to clarify that related parties include entities that
are under the significant influence of a related party that is an
individual (i.e. key management personnel, significant shareholders and/or
their close family members) and post-employment benefit plans which are
for the benefit of employees of the Group or of any entity that is a
related party of the Group. The clarification of the definition of
related parties has not resulted in any material changes to the previously
reported disclosures of related party transactions nor has it had any
material effect on the disclosures made in the current period, as compared
to those that would have been reported had the Statement of Standard
Accounting Practice 20 "Related party disclosures" still been in effect.
iii. Recognition of intangible asset - 3G Licence (HKAS 38)
The adoption of HKAS 38 has resulted in a change in accounting policy
relating to the recognition of the fees and royalties payable for the
third generation licence telecommunications spectrum (the "3G Licence").
The 3G Licence is considered an intangible asset representing the right to
provide a telecommunications service rather than a right to use an
identifiable asset, being the radio spectrum allocated to the Group under
the terms of the licence. In order to measure the intangible asset, HKAS
39 Financial Instruments: Recognition and Measurement is applied for
recognition of the minimum annual fees and royalty payments as they
constitute a contractual obligation to deliver cash and, hence, should be
considered a financial liability. As a result, capitalised minimum annual
payments together with the interest accrued prior to commercial launch,
are classified as an intangible asset and amortised on the straight-line
basis over the remaining licence period from the date the asset is ready
for its intended use. Interest is accrued on the outstanding minimum
annual fees and charged to finance costs in the consolidated profit and
loss account after the commercial launch. Variable annual payments on top
of the minimum annual payments, if any, are recognised in the consolidated
profit and loss account as incurred.
iv. Recognition of intangible assets - subscriber acquisition costs (
HKAS 38)
Costs to acquire contractual relationships with mobile subscribers are
capitalised if it is probable that there will be an inflow of expected
future economic benefits from the subscribers to the Group and such costs
can be measured reliably. Capitalised subscriber acquisition costs are
amortised on the straight-line basis over the minimum contractual period.
v. Rental deposits and prepaid operating rental expenses (HKAS 39)
The adoption of HKAS 39 has required the Group to recognise rental
deposits relating to cell sites, switch centres, shops and offices as
financial assets at fair value. As a result, the difference between
nominal and fair values of the deposits is treated as prepaid rental
expenses. The prepayments are then amortised over the remaining lease
terms of the respective cell sites, shops and offices, while the rental
deposits generate deemed interest income over the remaining lease terms.
All changes in the accounting policies have been made in accordance with
the transition provisions in the respective standards. All standards
adopted by the Group require retrospective application other than HKAS 39
which recognises all derivatives at fair values in the balance sheet on 1
st January 2005 and adjusts the balance to retained earnings as at that
date.
The adoption of HKAS 16 resulted in:
As at
31st December 2005 31st December 2004
HK$'000 HK$'000
Increase in fixed assets 16,328 -
Increase in accumulated losses 1,511 -
Increase in asset retirement
obligations (17,839) -
For the year ended
31st December 2005 31st December 2004
HK$'000 HK$'000
Increase in loss attributable
to shareholders 1,511 -
Increase in loss per share
(basic and diluted) 0.05 cents -
The adoption of HKAS 38 resulted in:
(a) 3G Licence As at
31st December 2005 31st December 2004
HK$'000 HK$'000
Increase in intangible assets 838,110 787,496
Decrease in fixed assets (214,109) (163,369)
Decrease in prepayment for
3G Licence (41,667) (91,667)
Increase in long-term
liabilities (582,334) (532,460)
(b) Subscriber acquisition costs As at
31st December 2005 31st December 2004
HK$'000 HK$'000
Increase in intangible assets 9,806 6,796
Decrease in accumulated losses (9,806) (6,796)
For the year ended
31st December 2005 31st December 2004
HK$'000 HK$'000
Decrease in (loss)/ profit
attributable to shareholders (3,010) 1,171
Decrease in (loss)/earnings
per share
(basic and diluted) (0.10 cents) 0.04 cents
The adoption of HKAS 39 resulted in:
As at
31st December 2005 31st December 2004
HK$'000 HK$'000
Increase in prepaid operating
rental expenses - non-current
assets (Note (a)) 2,354 -
Increase in rental deposits
- non-current assets (Note (a)) 23,610 -
Increase in prepaid operating
rental expenses - current
assets (Note (b)) 928 -
Decrease in rental deposits
- current assets (Note (b)) (26,891) -
Decrease in accumulated losses (1) -
For the year ended
31st December 2005 31st December 2004
HK$'000 HK$'000
Decrease in loss attributable
to shareholders (1) -
Decrease in loss per share
(basic and diluted) - -
Note (a): Classified under "Deposits and prepayments" in consolidated
balance sheet.
Note (b): Classified under "Deposits, prepayments and other receivables"
in consolidated balance sheet.
The preparation of consolidated accounts in conformity with HKFRSs
requires management to make judgements, estimates and assumptions that
affect the application of policies and reported amounts of assets,
liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other factors
that are believed to be reasonable under the circumstances, the results of
which form the basis for making the judgements about the carrying values
of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
A revision to an accounting estimate is recognised in the period in which
the estimate is revised if the revision affects only that period, or in
the period of the revision and future periods if the revision affects both
current and future periods.
2. EXPENSES BY NATURE
2005 2004
HK$'000 HK$'000
(Restated)
(Note 5)
Amortisation expense 31,592 25,978
Cost of inventories sold 198,500 143,915
Depreciation:
Owned fixed assets 225,178 228,645
Leased fixed assets 761 -
Loss on disposals of fixed assets 129 338
Operating lease charges:
Land and buildings, including
transmission sites 225,638 182,383
Leased lines 74,479 58,638
Auditors' remuneration:
Audit services 1,230 1,288
Audit-related services 240 248
Other permitted services 546 368
____________ __________
2,016 1,904
=========== ==========
During the year ended 31st December 2005, the Group incurred operating
expenses of HK$239,799,000 (2004: HK$70,738,000) in relation to the
development of its 3G business, out of which HK$40,705,000 (2004: HK$29,
965,000) has been capitalised as fixed assets. The remainder has been
included in the Group's results before arriving at the loss from
operations.
3. (LOSS)/ EARNINGS PER SHARE
a. Basic (loss)/earnings per share
The calculation of basic (loss)/earnings per share is based on the Group's
loss for the year of approximately HK$196,981,000 (2004 (Restated): Profit
of HK$4,373,000) and the 2,990,000,000 shares (2004: 2,990,000,000 shares)
in issue during the year.
b. Diluted (loss)/earnings per share
There is no dilutive effect upon exercise of the share options on the
earnings per share for the years ended 31st December 2005 and 2004 since:
(i) the exercise prices for the share options were above the average
fair value of the shares; and/or
(ii) as at 31st December 2005, the Group has no outstanding share
options as all outstanding share options had either been cancelled or had
lapsed under the terms of the Company's share option scheme by 9th August
2005, being one month after the date on which the unconditional general
cash offer made by PCCW Mobile Holding No. 2 Limited ("PCCW Mobile")
became unconditional.
4. (LOSS) / PROFIT FROM OPERATIONS
The calculations of (Loss) / Profit from operations for the purpose of the
information required in the Results Announcement Form are based on the
following data:
2005 2004
HK$'000 HK$'000
(Restated)
(Note 5)
Mobile services 993,481 1,031,689
Sales of mobile phones and accessories 165,958 126,920
-----------------
Turnover 1,159,439 1,158,609
Cost of inventories sold and services provided (435,490) (356,479)
----------------------
Gross Profit 723,949 802,130
Other revenues 4,747 3,058
Network costs (319,890) (255,744)
Depreciation (225,939) (228,645)
Rent and related costs (42,945) (38,264)
Salaries and related costs (140,043) (128,889)
Advertising, promotion and other selling costs (70,336) (57,829)
Amortisation expense (31,592) (25,978)
Other operating costs (53,528) (39,126)
--------------------
(155,577) 30,713
Interest income 676 218
--------------------
(Loss) / Profit from operations (154,901) 30,931
=================
5. COMPARATIVE FIGURES
Certain comparative figures have been adjusted or re-classified as a
result of the changes in accounting policies as disclosed in note 1(b).
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