- Pre-exceptional net profit up 17.2 percent to HK$1.096 billion (US$140 million) (before accounting loss on disposal of Regional Wireless Company [RWC])
- Significant improvement in cash flow (before the Cyberport investment) to HK$1.241 billion (US$159 million) for the first half 2002 from a negative HK$507 million (negative US$65 million) a year earlier
- Improving cash flow creates flexibility to fulfill commitments and potentially pay dividend
- Loss attributable to shareholders of HK$713 million (US$92 million) due to accounting charges relating to the sale of RWC
- EBITDA up 6 percent year-on-year with EBITDA margin increasing to 40 percent from 35 percent, despite a 4.6 percent decline in core revenue (before one-off items) to HK$10.16 billion (US$1.303 billion)
- Debt repayment program on track. Debt reduced 17 percent year-on-year.
Hong Kong September 5, 2002 – PCCW Limited today announced a 17.2 percent rise in pre-exceptional net profit for the six months to June 30 and improved cash flow, while reducing and lengthening its debt maturity, achieving lower funding costs, and greater operating efficiencies throughout the business.
The loss attributable to shareholders was HK$713 million (US$92 million), after an accounting loss of HK$1.809 billion (US$232 million), due to the disposal of PCCW’s 40 percent interest in mobility company RWC to Telstra Corporation Limited.
Pre-exceptional net profit (before the accounting loss) increased 17.2 percent to HK$1.096 billion (US$140 million) from HK$935 million (US$120 million).
Despite a decline in revenue, EBITDA rose 6 percent to HK$4.131 billion (US$530 million) from HK$3.911 billion (US$501 million), while the EBITDA margin rose to 40 percent from 35 percent. This considerable increase in the margin was a result of cost reductions through an improved operating structure.
The Group maintained a strong financial position. Cash flow improved from a negative HK$508 million (US$65 million) in the first half of 2001 to a positive HK$1.241 billion (US$159 million) in the latest six months, before Cyberport investment payments, which totalled HK$987 million (US$127 million).
As PCCW's project payments for Cyberport diminish, the Company's achievements in increased operating efficiencies and reduced funding costs will drive strong and accelerating free cash flows which will give the Company unprecedented flexibility going forward.
"Based on the current earnings trend, we will be able to attain positive retained earnings within 24 months, and by then we will seriously consider payment of a dividend. We are committed to our stated plan to attain a Single A credit rating. However, given the strength of our free cash flow towards 2004, it is possible to consider payment of a dividend without disrupting our plan," said Chairman and Chief Executive Richard Li.
The Company remains focused on optimizing its capital structure, having reduced debt by 17 percent compared to the first half 2001. This was achieved in part due to the sale of RWC and strong internal cash flow.
Against a backdrop of difficult economic and competitive market conditions globally and in Hong Kong, PCCW’s core revenue (before one-off items) was HK$10.163 billion (US$1.303 billion), compared to HK$10.647 billion (US$1.365 billion) a year earlier. The 4.6 percent decline resulted primarily from slower demand for local fixed-line telecommunications services in a down market.
Consolidated revenues, including one-off items, fell 9.8 percent to HK$10.203 billion (US$1.308 billion) from HK$11.312 billion (US$1.450 billion).
“Despite a tough environment, our free cash flow remains strong, we are growing in key target areas such as broadband and greater China IT&T, and we remain the leading fixed line carrier in Hong Kong, one of the world’s most competitive telecommunications markets. At the same time, we are maintaining our focus on financial prudence and strengthening financial flexibility,” said Chief Operating Officer Mike Butcher.
Telecommunications Services (TSS) was the major contributor of the Group’s revenue and EBITDA. Following its business restructuring last year, the Group’s retail consumer broadband Internet access and multimedia services were injected into TSS for greater synergies and efficiency, which contributed to cost savings and the expanded overall EBITDA margin.
Revenue of the local data business under TSS was higher primarily due to increased consumer broadband Internet access revenue. The number of consumer broadband Internet access customers grew 67 percent year-on-year to approximately 385,000 at the end of June 2002.
Business eSolutions’ contribution to total revenue grew to 11 percent from 9 percent a year earlier. Major IT joint ventures were formed on the mainland with China Telecom and Sinopec, while in Hong Kong, PCCW won many significant IT&T contracts including developing Hong Kong’s new ID card.
The Internet Data Center business was integrated into the Business eSolutions division, thus allowing provision of one-stop-shop IT services and enhancing the Group’s competitive edge.
Net finance costs during the period fell to HK$1.074 billion (US$138 million) from HK$1.769 billion (US$227 million) a year earlier. The decrease was attributable to the Group’s debt reduction, lengthened maturities (to an average of seven years), and declining interest rates (now averaging 4 percent).
“Our financial position continues to strengthen, with improved cash flows and debt reduction, which makes us doubly confident of our potential for improved earnings and growth. We will benefit even further once the global economy and the telecommunications industry begin to recover,” said Mr. Butcher.
On other matters, Robert Lee, chairman of PCCW Infrastructure, was appointed to the Company’s Board of Directors today and Jeff Bowden and Avram Miller have resigned from the Board effective today.
PCCW Limited (SEHK: 0008, ADR-NYSE: PCW), the Hong Kong-listed flagship of the Pacific Century Group, is one of Asia's leading integrated communications companies. From its market-leading position in Hong Kong, PCCW is focused on building shareholder value by leveraging synergies between its core businesses and partners, and by delivering total solutions to customers throughout Asia. PCCW provides key services in the areas of: integrated telecommunications; broadband solutions; connectivity; narrowband and interactive broadband (Internet Services); business e-solutions; data centers and related infrastructure.
To learn more about PCCW, visit www.pccw.com
Click here to view the Chief Operating Officer's Statement.
Click here to download PCCW 2002 Interim Results Announcement Presentation.
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