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For the six months ended 31 December 2012, the Group recorded a consolidated revenue of approximately HK$300.3 million, while the revenue for the year ended 30 June 2012 was approximately HK$612.5million. Profit attributable to shareholders of the Company was approximately HK$1.2 million, as compared to approximately HK$152.9million for the year ended 30 June 2012. Basic earnings per share was approximately HK0.04 cent, as compared to approximately HK6.12cents for the year ended 30 June 2012.

Revenue

During the six months ended 31 December 2012, the revenue of the Group was principally derived from the following business segments.

(i) Digital cable television business

The revenue for the six months ended 31 December 2012 generated from the digital cable television business amounted to approximately HK$65.8 million (year ended 30 June 2012: HK$153.5 million) or approximately 22% (period ended 30 June 2012: 25%) of the total revenue for this financial period, including operational revenues from basic subscription and other value added technology as well as market service income arising from the 1,000,000 subscribers of the Hebei rural television network and sales of digital cable television business related products.

(ii) Wireless digital television value-added services business

Revenue generated from the wireless digital television value-added services business for the six months ended 31 December 2012 amounted to approximately HK$45.8 million (year ended 30 June 2012: HK$48.1 million) or 15% (year ended 30 June 2012: 8%) of the total revenue.

(iii) Information safety technology business

The revenue for the six months ended 31 December 2012 generated from the encrypted integrated circuits and the derived integrated business amounted to approximately HK$2.9 million (year ended 30 June 2012: HK$101.5 million) or approximately 1% (year ended 30 June 2012: 17%) of the total revenue.

(iv) Wireless digital audio products business

The revenue for the six months ended 31 December 2012 generated from the wireless digital audio products business and the related technical services amounted to approximately HK$37.1 million (year ended 30 June 2012: HK$183.5 million) or approximately 12% (year ended 30 June 2012: 30%) of the total revenue.

(v) Wireless digital terrestrial television network equipment integration business

The revenue for the six months ended 31 December 2012 generated from the wireless digital terrestrial television network equipment integration business amounted to approximately

HK$148.7 million (year ended 30 June 2012: HK$125.8 million) or approximately 50% (year ended 30 June 2012: 20%) of the total revenue.

Gross Profit Margin

Gross profit margin of the Group was approximately 12% (year ended 30 June 2012: 42%).

Other Income

Other income amounted to approximately HK$12.1 million (year ended 30 June 2012: HK$62.0 million).

Other Operating Expenses

Other operating expenses were approximately HK$74.2 million for the six months ended 31 December 2012, compared to approximately HK$131.2 million for the year ended 30 June 2012. Other operating expenses included net loss on remeasurement of assets classified as held for sale of approximately HK$28.2 million.

Finance Costs

Finance costs amounted to approximately HK$4.5 million (year ended 30 June 2012: HK$14.2 million), of which approximately HK$4.2 million (year ended 30 June 2012: HK$14.0 million) represented non-cash effective interest expenses on convertible notes issued by the Company before their full conversions.

Property, plant and equipment

Property, plant and equipment amounted to approximately HK$265.6million, representing an increase of approximately 14% compared to HK$232.4 million as at 30 June 2012. The increase was mainly due to the purchases of components, such as underground cable lines, optical transmission equipment and other equipment to enable the delivery of the intended digital cable television services in different target regions and pilot cities, which were purchased from the local television operatorsand other suppliers selected by the Group.

Intangible assets

Intangible assets amounted to approximately HK$127.7 million, representing an increase of approximately 3% compared to HK$123.5 million as at 30 June 2012. As the wireless television business of the Group was shrinking, the Group disposed some of its idol proprietary technology and intangible assets developed within this business for higher considerations during the six months ended 31 December 2012.

Inventories

Inventories amounted to approximately HK$29.2 million, representing an decrease of approximately 83% compared to HK$174.4 million as at 30 June 2012. The inventories comprised set-top boxes, software and equipment for trading.

Trade receivables

Total trade receivables (net of allowance for doubtful debts) amounted to approximately HK$399.2 million, representing a decrease of approximately 11% compared to HK$448.0 million as at 30 June 2012. Based on past experience, the directors of the Company are of the opinion that no provision (year ended 30 June 2012: HK48.4 million) for impairment is necessary in respect of individual balance of trade receivables as there has not been a significant change in credit quality and the balances are still considered fully recoverable. According to current government policy in China, there is usually only one state-owned broadcasting entity in each province or region that has the authority to operate television broadcasting. Typically such a stateowned broadcasting entity will delegate responsibilities to its subsidiaries or its business partners to perform such work as digital television network construction, conversion, digitalisation and related technical standard setting in the province or region. As such the broadcasting entity has a virtual monopolistic status in the relevant province or region, free from competition from foreign or other domestic television operators. With such special status, these state-owned broadcasting entities benefit from the growth in demand in television digitalisation and value added services in their respective areas. In this industry, the payment terms of the subscribers for the services are predominantly on a cash/pay in advance basis. Taking into consideration the aforesaid special status of the state-owned broadcasting entities in each province or region, the room for expansion of their businesses and their practice of requiring advance cash payment from subscribers, the Directors consider that the risk of bad debts relating to these trade receivables to be extremely low.

Prepayments, deposits and other receivables

Prepayment, deposits and other receivables amounted to approximately HK$188.9 million as at 31 December 2012, a decrease of approximately 50% when compared to HK$375.7 million as at 30 June 2012. The increase was mainly due to prepayments to suppliers for purchase of goods and services as a result of the Groups increased engagements for implementation of its businesses during the period under review. The prepayment was made in the Groups ordinary and usual course of business.

Trade payables

Trade payables amounted to approximately HK$48.6 million as at 31 December 2012, a decrease of approximately 4% when compared to HK$50.6 million as at 30 June 2012.

Other payables and accruals

Other payables and accruals amounted to approximately HK$36.7 million as at 31 December 2012, an increase of approximately 187% when compared to HK$12.8 million as at 30 June 2012.

Bonds

On 28 December 2010, an aggregate of HK$200,000,000 principal amount of redeemable convertible bonds (Convertible Bonds) were issued to Sandmartin International Holdings Limited (Sandmartin). Further details are set out in the Companys announcement dated 17 December 2010. On 27 December 2012, the Company redeemed the Convertible Bonds

upon their maturity. On the same day, the Company and Sandmartin entered into a subscription agreement pursuant to which Sandmartin subscribed for the bond in an aggregate principal amount of HK$100 million. The bond carries interest at the rate of 6% per annum and will mature for redemption on 26 December 2014. Details are set out in the Companysannouncement dated 27 December 2012.

On 22 November 2012, the Company entered into a conditional placing and underwriting agreement (the Placing Agreement) with Emperor Securities Limited (the Placing Agent) pursuant to which the Placing Agent agreed to act as placing agent for the purposes of arranging subscribers for the issue of (i) the First Tranche Bonds in an aggregate principal amount of HK$50 million on a fully underwritten basis; and (ii) the Second Tranche Bonds in an aggregate principal amount of up to HK$100 million on a best effort basis. The Placing of the First Tranche

Bonds was completed on 21 December 2012 in accordance with the terms and conditions of the Placing Agreement. The bond carries interest at the rate of 6% per annum and will mature for redemption on 20 December 2014. Details are set out in the Companys announcements dated 22 November 2012 and 21 December 2012.

Grant of Options

To capture the growth in the digital television market in the PRC, the Company has engaged the services of two consultants to provide marketing services and financial services to the Group and conditionally granted to each of the consultants the option to subscribe for 20,000,000 shares at an exercise price of HK$0.32 per share. Details of the agreements are set out in the Companys announcement dated 20 November 2012.

 

CHANGE OF FINANCIAL YEAR END DATE

The Board announced on 12 November 2012 the change of financial year end date of the Company from 30 June to 31 December to align the financial year end date of the Company with that of its subsidiaries which were incorporated in the Peoples Republic of China. The consolidated financial statements presented, therefore, covered a six-month period from 1 July 2012 to 31 December 2012.

On 18 December 2012, the Company completed a placing of shares to two independent investors and net proceeds amounted to approximately HK$89.9 million, thereby providing the Group with additional cash resources for its operations and expansion initiatives.

EMPLOYEE INFORMATION

As at 31 December 2012, the Group had 166 full-time employees in Hong Kong and the PRC (30 June 2012: 188). The total employees remuneration, including that of the Directors, mounted to approximately HK$11.9 million (year ended 30 June 2012: HK$25.3 million). The Group continues to provide remuneration packages to employees according to market practices, their experience and performance. Remuneration policy is basically determined with reference to individual performance as well as the financial results of the Group. Remuneration

to staff will be revised from time to time when warranted considering the performances of staff. Other benefits include medical insurance scheme and contribution of statutory mandatory provident fund for the employees. The Group also has a share option scheme whereby qualified participants may be granted options to acquire shares of the Company.

There has been no major change in staff remuneration policies during the six months ended 31 December 2012.

CAPITAL STRUCTURE, LIQUIDITY AND FINANCIAL RESOURCES

The Group primarily financed its operations with internally generated cash flows. As at 31 December 2012, the cash and bank balances of the Group amounted to approximately HK$13.1 million (30 June 2012: HK$149.0 million). The Renminbi denominated balances of approximately HK$8.1 million (30 June 2012: HK$128.1 million) were placed with licensed banks in the PRC and the conversion of these balances into foreign currencies is subject to the rules and regulation of foreign exchange control promulgated by the PRC government.

During the six months ended 31 December 2012, the Group has net cash outflow of approximately HK48.6 million (year ended 30 June 2012: cash inflow of HK$50.5 million) from its operating activities, net cash outflow of approximately HK$89.0 million (year ended 30 June 2012: HK$176.0 million) from its investing activities and net cash inflow of approximately HK$45.1 million (year ended 30 June 2012: outflow of HK$17.8 million) from its financing activities. As at 31 December 2012, the Group had current assets of approximately HK$1,220.3 million (30 June 2012: HK$1,151.5 million), while its current liabilities were approximately HK$228.4 million (30 June 2012: HK$338.3 million). The current ratio (current assets to current liabilities) of the Group was approximately 5.34 (30 June 2012: 3.40); and its gearing ratio (total borrowings over shareholders funds) was approximately 0.08 (30 June 2012: 0.00). Net asset value per share was approximately HK$0.66 as at 31 December 2012 (30 June 2012: HK$0.69). During the six months ended 31 December 2012, an aggregate of 300,000,000 new shares were issued by the Company.

FOREIGN EXCHANGE EXPOSURE

During the six months ended 31 December 2012, the majority of the Groups income and expenses were denominated in Renminbi and Hong Kong dollars. Up to 31 December 2012, the management of the Company is of the opinion that the Group has insignificant exposure to foreign exchange risk. As a result, the Group did not use any financial instruments for hedging against fluctuation in foreign exchange for the six months ended 31 December 2012. Nevertheless, the management of the Company will closely monitor and from time to time reassess the exchange risk exposures of the Group and enter into non-speculative hedging arrangements if considered necessary.

CHARGES ON GROUP ASSETS

As at 31 December 2012, bank deposits amounting to HK$7,055,000 (30 June 2012: Nil) have been pledged to banks for short term loans amounting to HK$7,596,000 (30 June 2012: Nil) granted to subsidiaries. The Company has also provided guarantee to the extent of HK$4,000,000 (30 June 2012: Nil).

CONTINGENT LIABILITIES

As at 31 December 2012, the Group had no significant contingent liabilities (30 June 2012: Nil).

ACQUISITIONS, DISPOSALS AND SIGNIFICANT INVESTMENT

On 20 November 2012, America Assets Holding Group Limited (America Assets) and Star Hub Investments Limited (Star Hub), an indirect wholly-owned subsidiary of the Company, entered into a sale and purchase agreement, pursuant to which Star Hub conditionally agreed to sell to America Assets, and America Assets conditionally agreed to purchase from Star Hub, the entire issued share capital of Magic Golden Limited, at a cash consideration of RMB328 million (equivalent to approximately HK$403.4 million). The disposed group includes 北京

中廣視通科技有限公司(Beijing Zhongguang Shitong Technology Co., Ltd (Beijing Zhongguang)) which engages principally in the wireless digital terrestrial television network equipment integrated business, and research, design, manufacturing and trading of information safety products. Details of the disposal are set out in the Companys circular dated 17 December 2012. The disposal was completed on 24 January 2013. Details of assets classified as held for sale and the net loss at the disposal based on the figures as at 31 December 2012 are set out in notes to the consolidated financial statements 25 and 44(a). On 7 December 2012, 北京金橋恒泰科技有限公司 (Beijing Jinqiao Hengtai Technology Co., Ltd (Beijing Jinqiao)), an indirect wholly

owned subsidiary of the Company, and 煙台新潮實業股份有限公司 (Yantai Xinchao Industry Co., Ltd (Xinchao)) entered into a sale and purchase agreement, pursuant to which Xinchao agreed to sell to Beijing Jinqiao, and Beijing Jinqiao agreed to purchase from Xinchao, 25% equity interests in 煙台新牟電纜有限公司 (Yantai Xinmu Cable Co., Ltd (Xinmu)) at a cash consideration of RMB139 million (equivalent to approximately HK$170.97 million). Xinmu is principally engaged in (i) production and sales of small physical foamed cable, small coaxial cable, access network, and high-speed data transfer cable for broadband transmission cable television (CATV) and (ii) property development in the PRC. Details of the acquisition are set out in the Companys announcement dated 17 December 2012. The acquisition is yet to be completed.