4CSpot + PantoneUV 8422 C IInside_Front_Cover_Eng.ainside_Front_Cover_Eng.ai 99/5/2008/5/2008 111:18:071:18:07 AAMM C M Y CM MY CY CMY K CONTENTS FINANCIAL HIGHLIGHTS 2 CORPORATE INFORMATION 4 CHAIRMAN’S STATEMENT 6 REVIEW OF OPERATIONS OVERVIEW 7 TERRESTRIAL TELEVISION BROADCASTING 7 INTERNATIONAL OPERATIONS 9 HONG KONG PAY TV BUSINESS 10 OTHER BUSINESSES 11 FINANCIAL REVIEW 11 CORPORATE GOVERNANCE AND OTHER INFORMATION 13 FINANCIAL INFORMATION CONDENSED CONSOLIDATED BALANCE SHEET 18 CONDENSED CONSOLIDATED INCOME STATEMENT 20 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 21 CONDENSED CONSOLIDATED CASH FLOW STATEMENT 22 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION 23 INDEPENDENT REVIEW REPORT 43 Television Broadcasts Limited Interim Report 2008 1 FINANCIAL HIGHLIGHTS Turnover (HK$’mil) 1st Half 2nd Half 2008 2,073 2007 4,326 2006 4,201 YEAR 2005 4,177 2004 3,817 2003 3,311 0 1,000 2,000 3,000 4,000 5,000 HK$’ mil Profit Attributable to Equity Holders (HK$’mil) 1st Half 2nd Half 2008 503 2007 1,264 2006 1,189 YEAR 2005 1,180 2004 719 2003 441 0 200 400 600 800 1,000 1,200 1,400 HK$’ mil 2 Television Broadcasts Limited Interim Report 2008 Six months ended 30 June 2008 2007 HK$’mil HK$’mil (Unaudited) (Unaudited) Turnover 2,073 1,919 Profit before income tax 605 603 Profit attributable to equity holders of the Company 503 497 Earnings per share HK$1.15 HK$1.14 Interim dividend per share HK$0.30 HK$0.30 Number of issued shares 438,000,000 shares 438,000,000 shares 30 June 31 December 2008 2007 HK$’mil HK$’mil (Unaudited) (Audited) Property, plant and equipment 2,412 1,722 Programmes and film rights 474 461 Trade and other receivables, prepayments and deposits 1,389 1,468 Bank deposits, cash and cash equivalents 1,743 2,141 Net current assets 2,858 3,277 Net assets 5,244 5,369 Gearing 6.83% – Television Broadcasts Limited Interim Report 2008 3 CORPORATE INFORMATION BOARD OF DIRECTORS EXECUTIVE DIRECTORS Sir Run Run SHAW, G.B.M. (Executive Chairman) Dr. Norman LEUNG Nai Pang, G.B.S., LL.D., J.P. (Executive Deputy Chairman) Mona FONG (Deputy Chairperson and Acting Managing Director) NON-EXECUTIVE DIRECTORS Dr. CHOW Yei Ching, G.B.S. Christina LEE LOOK Ngan Kwan Kevin LO Chung Ping INDEPENDENT NON-EXECUTIVE DIRECTORS Edward CHENG Wai Sun, S.B.S., J.P. Chien LEE Dr. LI Dak Sum, DSSc. (Hon.), J.P. Gordon SIU Kwing Chue, G.B.S., J.P. ALTERNATE DIRECTOR Anthony LEE Hsien Pin (Alternate Director to Christina LEE LOOK Ngan Kwan) 4 Television Broadcasts Limited Interim Report 2008 BOARD COMMITTEES REGISTERED OFFICE TVB City, 77 Chun Choi Street EXECUTIVE COMMITTEE Tseung Kwan O Industrial Estate Sir Run Run SHAW (Chairman) Kowloon, Hong Kong Dr. Norman LEUNG Nai Pang Mona FONG AUDITORS Christina LEE LOOK Ngan Kwan Kevin LO Chung Ping PricewaterhouseCoopers 22/F, Prince’s Building AUDIT COMMITTEE Central, Hong Kong Gordon SIU Kwing Chue (Chairman) (appointed as chairman on 22 January 2008) PRINCIPAL BANKERS Chien LEE Kevin LO Chung Ping Shanghai and Commercial Bank Limited (appointed as member on 18 April 2008) The Hongkong and Shanghai Banking Corporation Limited REMUNERATION COMMITTEE Chien LEE (Chairman) SHARE REGISTRAR AND Edward CHENG Wai Sun TRANSFER OFFICE Gordon SIU Kwing Chue Computershare Hong Kong Investor Services Limited (appointed as member on 22 January 2008) Rooms 1712-1716, 17th Floor Hopewell Centre EXECUTIVE OFFICERS 183 Queen’s Road East Wan Chai, Hong Kong SENIOR MANAGEMENT George CHAN Ching Cheong (Assistant Managing Director) STOCK CODE Stephen CHAN Chi Wan (General Manager – Broadcasting) The Stock Exchange of Hong Kong Limited – Main Board CHEONG Shin Keong (General Manager – Broadcasting) Stock Code: 00511 Mark LEE Po On (General Manager – Finance and Administration) COMPANY SECRETARY AMERICAN DEPOSITARY RECEIPTS Adrian MAK Yau Kee The Bank of New York Mellon Issuer Services DR Symbol: TVBCY WEBSITE www.tvb.com Television Broadcasts Limited Interim Report 2008 5 CHAIRMAN’S STATEMENT The directors of Television Broadcasts Limited of digital television to 75% of the population. Along with (“Directors”) are pleased to present the interim report the analogue channels, the Group now broadcasts four and condensed consolidated financial information for the digital channels – Jade, Pearl, HD (“High Definition”) six months ended 30 June 2008 in respect of Television Jade and J2. The Group will continue to invest in Broadcasts Limited (the “Company” or “TVB”) and its technology for production of high quality programmes for subsidiaries (collectively, the “Group”). The consolidated our home and overseas markets. income statement, consolidated cash flow statement and consolidated statement of changes in equity of the We hope the growth in turnover we witnessed in the Group for the six months ended 30 June 2008, and the first half will continue in the second half of the year, consolidated balance sheet of the Group as at 30 June while uncertainties related to global credit concerns and 2008, all of which are unaudited and condensed, along general inflation remain. with explanatory notes, are set out on pages 18 to 42 of this report. RESULTS AND INTERIM DIVIDEND We report that the Group’s turnover for the six months ended 30 June 2008 (the “Period”) increased by 8% to HK$ 2,073 million (2007: HK$1,919 million) which was Run Run Shaw contributed mainly by revenue increase from Hong Kong Executive Chairman and Taiwan. Our cost of sales and overhead expenses both increased by 14%, reflecting the costs as a result of Hong Kong, 27 August 2008 operating the new channels and the general inflationary environment. As we had previously reduced our equity interest in TVB Pay Vision Holdings Limited (“TVBPVH”) to 29%, the losses shared by us amounted to HK$31 million (2007: HK$69 million), a decrease of 55%. Profit attributable to shareholders increased by 1% to HK$503 million (2007: HK$497 million). Earnings per share was HK$1.15 (2007: HK$1.14). Directors are pleased to declare an interim dividend of HK$0.30 (2007: HK$0.30) per share for the 438,000,000 ordinary shares in issue of HK$0.05 each in respect of the six months ended 30 June 2008. The interim dividend will be paid to shareholders, on or around 26 September 2008, whose names are recorded on the Register of Members on 19 September 2008. BUSINESS AND OUTLOOK On 31 December 2007, the Group officially commenced digital terrestrial television (“DTT”) broadcasting from Temple Hill in Hong Kong. We are pleased to report that six additional transmission stations have come on stream subsequent to the Period end, extending the coverage 6 Television Broadcasts Limited Interim Report 2008 REVIEW OF OPERATIONS OVERVIEW TERRESTRIAL TELEVISION BROADCASTING OPERATING RESULTS FOR THE PERIOD ADVERTISING REVENUE For the six months ended 30 June 2008, the Group Advertising revenue derived from our terrestrial TV recorded a turnover of HK$2,073 million (2007: HK$1,919 channels for the first six months of 2008 grew by 5%. million), an increase of 8% over the same period of last A healthy Christmas season at the end of 2007 led year. Cost of sales amounted to HK$962 million (2007: to increased advertising activities in the lead up to HK$841 million), an increase of 14% over the same Chinese New Year particularly from the credit card and period of last year. Gross profit for the Period stood at supermarket categories. This spending growth in the HK$1,111 million (2007: HK$1,078 million). credit card category continued during the first half of the year. Other categories with increased spending during Included in cost of sales were the cost of programmes, the Period as a result of the healthy retail environment film rights and stocks for the Period which amounted included fast food restaurants, financial services to HK$655 million (2007: HK$547 million), an increase companies, skin care products and movie promoters. of 20% over the same period of last year, reflecting the Competitive advertising campaigns in the Internet higher cost of production and programming contents for Service Provider category also contributed to growth. the new digital channels. The Beijing 2008 Olympic Games afforded us During the Period, our overhead costs increased, which the opportunity to create innovative sponsorship was caused mainly by general increases in staff costs arrangements for advertisers. We also capitalised on and operating costs in an inflationary environment. Hong Kong’s hosting of the 2008 Olympic Equestrian Selling, distribution and transmission costs for the Period events to attract new business from entities rarely amounted to HK$247 million (2007: HK$215 million), associated with television advertising. which represented an increase of 15%. General and administrative expenses amounted to HK$286 million We commenced selling innovative cross-platform (2007: HK$252 million), which represented an increase advertising packages involving our new HD Jade and J2 of 13%. digital channels and our enhanced www.tvb.com portal in the second quarter. This proved to be an effective driver The Group’s equity interest in an associate, TVBPVH, for business development and we intend to expand this had been reduced from 49% to 29% upon a disposal of successful strategy in the second half of this year. shares in TVBPVH to Gemstone Pacific Limited in 2007. During the Period, equity accounting of the results of the associate was based on 29%, reflecting our economic interest therein even though the Group’s voting interest in TVBPVH has been lowered to 15%. For the Period, the Group’s share of the losses of TVBPVH was reduced to HK$31 million (2007: HK$69 million).