RNS Number:4004S
First Pacific Capital (1997) Ld
5 March 2002
First Pacific Company Limited
(Incorporated in Bermuda with limited liability)
2001 Annual Results - Audited
Financial Highlights
• Turnover from continuing businesses decreased by 14.4 per cent to
US$1,550.8 million (HK$12,096.2 million) from US$1,810.8 million
(HK$14,124.2 million).
• Contribution from continuing businesses increased by 12.8 per cent to
US$61.0 million (HK$475.8 million) from US$54.1 million (HK$422.0 million).
• Contribution from operations decreased by 11.0 per cent to US$78.8 million
(HK$614.6 million) from US$88.5 million (HK$690.3 million).
• Recurring profit decreased by 12.5 per cent to US$44.6 million (HK$347.9
million) from US$51.0 million (HK$397.8 million).
• Foreign exchange losses decreased by 84.4 per cent to US$22.4 million
(HK$174.7 million) from US$143.5 million (HK$1,119.3 million).
• A net loss on disposal and dilution of shareholdings and provision for
investments of US$1,819.2 million (HK$14,189.8 million) was recorded in 2001
compared to a net gain of US$143.7 million (HK$1,120.9 million) recorded in
2000. The loss in 2001 includes impairment provisions of US$1,710.5 million
(HK$13,341.9 million) (2000: Nil).
• Loss attributable to ordinary shareholders of US$1,797.0 million
(HK$14,016.6 million) was recorded in 2001 compared to a profit of US$51.2
million (HK$399.4 million) recorded in 2000.
• Loss per share of US57.23 cents (HK446.39 cents) was recorded in 2001
compared to earnings per share of US1.75 cents (HK13.65 cents) recorded in
2000.
• The directors propose that no final dividend be paid for 2001 (2000 final
dividend: US0.13 cent or HK1.00 cent per share).
2001 Annual Results
CONSOLIDATED PROFIT AND LOSS STATEMENT
For the year ended 31 December 2001 2000 2001* 2000*
(Restated)(i) (Restated)(i)
US$m US$m HK$m HK$m
Turnover - Note 1 1,851.7 2,299.2 14,443.3 17,933.8
Cost of sales (1,362.3) (1,561.8) (10,626.0) (12,182.0)
Gross profit 489.4 737.4 3,817.3 5,751.8
(Loss)/gain on disposal and dilution of (2,238.3) 142.3 (17,458.7) 1,109.9
shareholdings and provision for investments - Note 5
Other operating income 17.1 12.9 133.4 100.6
Distribution costs (142.0) (115.0) (1,107.6) (897.0)
Administrative expenses (150.3) (240.9) (1,172.3) (1,879.0)
Other operating expenses (17.7) (142.7) (138.1) (1,113.1)
Operating (loss)/profit - Notes 1 & 2 (2,041.8) 394.0 (15,926.0) 3,073.2
Share of profits less losses of associated companies 11.8 (132.4) 92.0 (1,032.7)
Net borrowing costs - Note 3 (103.6) (107.7) (808.1) (840.1)
(Loss)/profit before taxation (2,133.6) 153.9 (16,642.1) 1,200.4
Taxation - Note 4 (61.4) (35.6) (478.9) (277.7)
(Loss)/profit after taxation (2,195.0) 118.3 (17,121.0) 922.7
Outside interests 398.0 (67.1) 3,104.4 (523.3)
(Loss)/profit attributable to ordinary shareholders (1,797.0) 51.2 (14,016.6) 399.4
- Note 5
2001 2000 2001* 2000*
Per share data USc USc HKc HKc
Basic and diluted (loss)/earnings - Note 6 (57.23) 1.75 (446.39) 13.65
Dividend proposed - Note 7 - 0.13 - 1.00
CONSOLIDATED STATEMENT OF RECOGNIZED GAINS AND LOSSES
For the year ended 31 December 2001 2000 2001* 2000*
US$m US$m HK$m HK$m
Exchange differences on the translation of the (14.9) (180.3) (116.2) (1,406.3)
financial statements of foreign entities
Realization of property revaluation 1.3 24.7 10.1 192.6
Net losses not recognized in the profit and loss (13.6) (155.6) (106.1) (1,213.7)
statement
(Loss)/profit attributable to ordinary shareholders (1,797.0) 51.2 (14,016.6) 399.4
Total recognized losses for the year (1,810.6) (104.4) (14,122.7) (814.3)
Goodwill arising on acquisitions and written off - (312.7) - (2,439.1)
against reserves
(1,810.6) (417.1) (14,122.7) (3,253.4
CONSOLIDATED BALANCE SHEET
As at 31 December 2001 2000 2001* 2000*
(Restated)(i) (Restated)(i)
US$m US$m HK$m HK$m
Non-current assets
Property and equipment 840.2 2,001.6 6,553.6 15,612.5
Associated companies (23.6) 19.1 (184.1) 149.0
Long-term receivables 176.3 207.8 1,375.1 1,620.8
Long-term investments - 5.2 - 40.6
Pledged deposits - 50.7 - 395.4
992.9 2,284.4 7,744.6 17,818.3
Current assets
Cash and bank balances 310.1 369.5 2,418.8 2,882.1
Pledged deposits 41.0 8.0 319.8 62.4
Short-term investments 11.5 16.4 89.7 127.9
Accounts receivable and prepayments - Note 8 328.7 518.5 2,563.8 4,044.3
Inventories 361.5 259.0 2,819.7 2,020.2
1,052.8 1,171.4 8,211.8 9,136.9
Current liabilities
Accounts payable and accruals - Note 9 514.0 401.3 4,009.2 3,130.1
Short-term borrowings 750.2 526.1 5,851.5 4,103.6
Provision for taxation 23.1 27.6 180.2 215.3
1,287.3 955.0 10,040.9 7,449.0
Net current (liabilities)/assets (234.5) 216.4 (1,829.1) 1,687.9
Total assets less current liabilities 758.4 2,500.8 5,915.5 19,506.2
Equity capital and reserves
Share capital 31.4 31.4 244.9 244.9
Reserves (222.6) 338.1 (1,736.3) 2,637.2
Shareholders' equity (191.2) 369.5 (1,491.4) 2,882.1
Outside interests 392.2 935.6 3,059.2 7,297.6
Non-current liabilities
Loan capital and long-term borrowings 391.4 918.5 3,052.9 7,164.3
Deferred liabilities and provisions 130.0 247.4 1,014.0 1,929.7
Deferred taxation 36.0 29.8 280.8 232.5
557.4 1,195.7 4,347.7 9,326.5
758.4 2,500.8 5,915.5 19,506.2
Number of shares in issue (millions) 3,139.8 3,139.8 3,139.8 3,139.8
SUMMARY CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31st December
2001 2000 2001* 2000*
(Restated)(i) (Restated)(i)
US$m US$m HK$m HK$m
Operating (loss)/profit (2,041.8) 394.0 (15,926.0) 3,073.2
Loss/(gain) on disposal and dilution of 2,238.3 (142.3) 17,458.7 (1,109.9)
shareholdings and provision for investments
Exchange losses 15.2 102.8 118.6 801.8
Depreciation 60.5 88.0 471.9 686.4
Dividend income (0.1) (0.1) (0.8) (0.8)
Payments in respect of deferred liabilities and (28.4) (53.6) (221.5) (418.1)
provisions
Loss/(gain) on sale of property and equipment 2.1 (1.3) 16.4 (10.1)
Increase in inventories (13.3) (80.5) (103.8) (627.9)
Increase in long-term receivables (45.8) (12.2) (357.3) (95.2)
Increase in accounts receivable and prepayments (1.4) (46.0) (10.9) (358.8)
Increase in accounts payable and accruals 62.9 32.5 490.6 253.5
Decrease in pledged deposits 14.1 25.2 110.0 196.6
Others (5.4) (35.2) (42.1) (274.6)
Less operating profit attributable to Banking - (34.1) - (265.9)
operations
Cash generated from operations 256.9 237.2 2,003.8 1,850.2
Interest paid (139.3) (130.4) (1,086.5) (1,017.1)
Hong Kong profits tax paid (0.1) (0.2) (0.8) (1.6)
Overseas taxation paid (30.9) (51.5) (241.0) (401.7)
Net cash inflow from operating activities 86.6 55.1 675.5 429.8
Additions of property and equipment (132.4) (177.0) (1,032.7) (1,380.6)
Increased investments in
- subsidiary companies - (23.0) - (179.4)
- associated companies - (7.2) - (56.2)
- short-term investments and others (13.5) (15.6) (105.3) (121.7)
Sale of property and equipment 18.8 28.5 146.6 222.3
Disposals of
- subsidiary companies 129.4 211.2 1,009.3 1,647.4
- associated companies 48.2 - 376.0 -
- short-term investments 19.0 81.8 148.2 638.0
Reduced interest in associated companies - 24.5 - 191.1
Loans (to)/repaid by associated companies (4.3) 87.9 (33.5) 685.6
Interest received 30.1 37.6 234.7 293.3
Dividends
- received from associated companies and 2.7 6.4 21.1 50.0
long-term investments
- received from Banking operations - 4.0 - 31.2
Net cash inflow from investing activities 98.0 259.1 764.4 2,021.0
Net cash inflow before financing activities 184.6 314.2 1,439.9 2,450.8
Proceeds of new borrowings 340.4 626.4 2,655.1 4,885.9
Borrowings repaid (549.3) (957.1) (4,284.5) (7,465.4)
Payment in connection with the shares repurchased by (7.5) - (58.5) -
subsidiary companies
Shares issued to outside interests by subsidiary - 0.2 - 1.6
companies
Dividends
- paid to outside interests in subsidiary companies (8.6) (13.3) (67.1) (103.7)
- paid to shareholders (4.0) (8.9) (31.2) (69.5)
Net cash outflow from financing activities (229.0) (352.7) (1,786.2) (2,751.1)
Decrease in cash and cash equivalents (44.4) (38.5) (346.3) (300.3)
Cash and cash equivalents at 1 January 360.6 491.7 2,812.7 3,835.3
Exchange translation (6.1) (92.6) (47.6) (722.3)
Cash and cash equivalents at 31 December 310.1 360.6 2,418.8 2,812.7
Representing
Cash and bank balances 310.1 369.5 2,418.8 2,882.1
Overdrafts - (1.0) - (7.8)
Other short-term borrowings with an original - (7.9) - (61.6)
maturity of less than 90 days
Cash and cash equivalents at 31 December 310.1 360.6 2,418.8 2,812.7
+ Changes in working capital are stated after excluding movements due to
acquisitions and disposals of subsidiary companies.
Analysis of changes in financing
Share Outside Bank 2001 2000 2001* 2000*
capital interests and other Total (Restated) Total (Restated)
and borrowings financing (i) financing (i)
share Total Total
premium financing financing
US$m US$m US$m US$m US$m HK$m HK$m
At January 940.1 935.6 1,435.7 3,311.4 4,796.8 25,828.9 37,415.0
Attributable to Banking - - - - (219.8) - (1,714.4)
operations
Sources of financing 940.1 935.6 1,435.7 3,311.4 4,577.0 25,828.9 35,700.6
activities
Exchange translation - (38.8) (15.7) (54.5) (436.9) (425.1) (3,407.9)
Net cash outflow - (8.6) (208.9) (217.5) (343.8) (1,696.5) (2,681.6)
Increased shareholding in a - - - - 61.1 - 476.6
subsidiary company
Balances in disposed - (31.2) (68.5) (99.7) (596.3) (777.7) (4,651.1)
subsidiary companies
Attributable (loss)/profit - (398.0) - (398.0) 49.8 (3,104.4) 388.4
Other movements - (66.8) (1.0) (67.8) 0.5 (528.8) 3.9
At 31 December 940.1 392.2 1,141.6 2,473.9 3,311.4 19,296.4 25,828.9
(i) Refer to Note 12
* The Company maintains its accounts and reports to its shareholders in
United States dollars. The figures shown in Hong Kong dollars are for
illustration only and are based on a fixed exchange rate of 7.8 Hong
Kong dollars to one United States dollar.
Notes:-
1. Segmental Information
Segment information is presented in respect of the Group's business and
geographical segments. Business segment information is chosen as the
primary reporting format because this is more relevant to the Group in
making operating and financial decisions.
By principal activities - 2001
Consumer Telecom- Property Disposed Head 2001 2001*
munications businesses Office Total Total
(^)
US$m US$m US$m US$m US$m US$m HK$m
Profit and loss
Turnover 1,414.9 1.5 134.4 300.9 - 1,851.7 14,443.3
Segment results 195.2 (9.1) (1.1) 25.0 (13.5) 196.5 1,532.7
Loss on disposal (2,238.3) (17,458.7)
and dilution of
shareholdings
and provision for
investments
Operating loss (2,041.8) (15,926.0)
Share of profits less (0.6) 9.5 (0.6) 3.5 - 11.8 92.0
losses of associated
companies
Net borrowing costs (103.6) (808.1)
Loss before taxation (2,133.6) (16,642.1)
Taxation (61.4) (478.9)
Loss after taxation (2,195.0) (17,121.0)
Outside interests 398.0 3,104.4
Loss attributable to (1,797.0) (14,016.6)
ordinary shareholders
Assets and
liabilities
Segment assets 1,208.2 7.6 637.6 - 215.9 2,069.3 16,140.5
Associated companies 2.4 (75.7) 49.7 - - (23.6) (184.1)
Total assets 1,210.6 (68.1) 687.3 - 215.9 2,045.7 15,956.4
Total liabilities 877.5 3.1 498.2 - 465.9 1,844.7 14,388.6
Other information
Capital expenditure 76.1 2.7 61.8 7.6 - 148.2 1,156.0
Depreciation 34.4 0.5 8.7 16.8 0.1 60.5 471.9
Impairment charge - 299.6 565.8 1,188.5 - 100.0 2,153.9 16,800.4
Note 5
By principal markets -2001
Indonesia Philippines Others Disposed Head 2001 2001*
businesses Office
(^) Total Total
US$m US$m US$m US$m US$m US$m HK$m
Turnover 1,414.9 134.4 1.5 300.9 - 1,851.7 14,443.3
Segment results 195.2 (1.1) (9.1) 25.0 (13.5) 196.5 1,532.7
Total assets 1,210.6 743.2 (124.0) - 215.9 2,045.7 15,956.4
Capital expenditure 76.1 61.8 2.7 7.6 - 148.2 1,156.0
(^) Represents Berli Jucker, Darya-Varia and Savills plc.
By principal activities - 2000
Consumer Telecom-munications Property Disposed Head 2000 2000*
businesses Office
# Total Total
US$m US$m US$m US$m US$m US$m HK$m
Profit and loss
Turnover 1,490.3 80.5 240.0 488.4 - 2,299.2 17,933.8
Segment results 188.2 (17.4) 30.9 56.0 (6.0) 251.7 1,963.3
Gain on disposal 142.3 1,109.9
and dilution of
shareholdings
less provision
for investments
Operating profit 394.0 3,073.2
Share of profits - (133.7) (7.0) 8.3 - (132.4) (1,032.7)
less losses of
associated
companies
Net borrowing (107.7) (840.1)
costs
Profit before 153.9 1,200.4
taxation
Taxation (35.6) (277.7)
Profit after 118.3 922.7
taxation
Outside interests (67.1) (523.3)
Profit 51.2 399.4
attributable to
ordinary
shareholders
Assets and
liabilities
Segment assets 1,223.5 2.7 1,693.0 323.7 193.8 3,436.7 26,806.2
Associated 3.3 (69.6) 69.9 15.5 - 19.1 149.0
companies
Total assets 1,226.8 (66.9) 1,762.9 339.2 193.8 3,455.8 26,955.2
Total liabilities 956.6 - 549.4 154.6 490.1 2,150.7 16,775.5
Other information
Capital 55.1 87.2 91.3 21.4 0.1 255.1 1,989.8
expenditure
Depreciation 38.9 14.2 10.9 23.8 0.2 88.0 686.4
By principal markets - 2000
Indonesia Philippines Others Disposed Head 2000 2000*
businesses Office
# Total Total
US$m US$m US$m US$m US$m US$m HK$m
Turnover 1,490.3 320.5 - 488.4 - 2,299.2 17,933.8
Segment results 188.2 13.5 - 56.0 (6.0) 251.7 1,963.3
Total assets 1,226.8 1,821.2 (125.2) 339.2 193.8 3,455.8 26,955.2
Capital 55.1 178.5 - 21.4 0.1 255.1 1,989.8
expenditure
# Represents Berli Jucker, Darya-Varia, Savills plc, SPORTathlon
and First Pacific Bank.
2. Operating (loss)/profit
For the year ended 31 December 2001 2000 2001* 2000*
US$m US$m HK$m HK$m
Operating (loss)/profit is stated after crediting
Net rental income from investment properties 0.2 1.8 1.6 14.0
Operating lease income less outgoings 0.6 1.3 4.7 10.1
Dividends from unlisted investments 0.1 0.1 0.8 0.8
Gain on sale of property and equipment - 1.3 - 10.1
Unrealized gain on short-term investments 0.5 0.7 3.9 5.5
and charging
Employee remuneration 159.4 231.3 1,243.3 1,804.1
Depreciation 60.5 88.0 471.9 686.4
Doubtful debt provisions 7.6 21.3 59.3 166.1
Net exchange loss on monetary items 15.2 102.8 118.6 801.8
Operating lease rentals
- Land and buildings 1.1 7.1 8.6 55.4
- Hire of plant and equipment 7.4 6.9 57.7 53.8
- Other 0.3 0.1 2.3 0.8
Auditors' remuneration
- Audit services 1.1 1.4 8.6 10.9
- Other services 0.5 0.4 3.9 3.1
Loss on sale of property and equipment 2.1 - 16.4 -
3. Net borrowing costs
For the year ended 31 December 2001 2000 2001* 2000*/#
US$m US$m HK$m HK$m
Loan capital 11.1 37.5 86.6 292.5
Bank loans, overdrafts and other loans 108.2 127.1 844.0 991.4
Total interest expense 119.3 164.6 930.6 1,283.9
Other borrowing costs 20.4 40.8 159.1 318.2
Total borrowing costs 139.7 205.4 1,089.7 1,602.1
Less borrowing costs capitalized (9.8) (53.3) (76.5) (415.7)
Less interest income (26.3) (44.4) (205.1) (346.3)
Net borrowing costs 103.6 107.7 808.1 840.1
# Excluding interest expense and interest income for the Group's
Banking operations (included in Turnover).
4. Taxation
Hong Kong profits tax has been provided at the rate of 16.0 per cent
(2000: 16.0 per cent) on the estimated assessable profits for the year.
Taxation on assessable profits generated outside Hong Kong has been
provided at the rates of taxation prevailing in the countries in which
the Company's subsidiary and associated companies operate.
For the year ended 31 December 2001 2000 2001* 2000*
US$m US$m HK$m HK$m
Subsidiary companies
Current taxation
- Overseas 35.5 42.0 276.9 327.7
- Hong Kong - 3.8 - 29.6
Deferred taxation - Overseas 14.0 18.8 109.2 146.6
Subtotal 49.5 64.6 386.1 503.9
Associated companies
Current taxation
- Overseas 4.9 11.5 38.2 89.7
- Hong Kong - 0.9 - 7.0
Deferred taxation - Overseas 7.0 (41.4) 54.6 (322.9)
Subtotal 11.9 (29.0) 92.8 (226.2)
Total 61.4 35.6 478.9 277.7
Excluding the effects of disposals and impairment provisions, which were
not subject to tax, the effective tax rate for 2001 was 38.0 per cent
(2000: 38.2 per cent).
5. (Loss)/profit attributable to ordinary shareholders
(Loss)/profit attributable to ordinary shareholders includes impairment
provisions of US$1,710.5 million (HK$13,341.9 million) (2000: Nil) and
exchange losses of US$22.4 million (HK$174.7 million) (2000: US$143.5
million) (HK$1,119.3 million) as set out below.
Analysis of impairment provisions 2001 2000 2001* 2000*
For the year ended 31 December US$m US$m HK$m HK$m
(Loss)/gain on disposal and dilution of (2,238.3) 142.3 (17,458.7) 1,109.9
shareholdings and provision for investments
Less: loss/(gain) on disposal and dilution of 102.2 (142.3) 797.1 (1,109.9)
shareholdings and others
Included in operating loss (2,136.1) - (16,661.6) -
Included in associated companies' results (17.8) - (138.8) -
Subtotal (2,153.9) - (16,800.4) -
Impairment provisions attributable to outside 443.4 - 3,458.5 -
interests
Total (1,710.5) - (13,341.9) -
An annual review of the carrying costs of PLDT, Indofood and Metro
Pacific is performed in order to assess whether their book values
continue to be appropriate. Due to the country risks associated with the
Philippines and Indonesia and the depreciation of their currencies since
the dates of acquisition, the estimated values of these investments are
currently significantly below their book values. Therefore, impairment
provisions totaling US$1.7 billion were recognised in the 2001 Financial
Statements to reduce the book values of these investments to levels more
consistent with current market values.
The estimated values of PLDT and Indofood have been calculated by
reference to discounted cash flow models. The discount rates used ranged
from 13.5 per cent to 17.5 per cent for PLDT and 16.5 per cent to 18.5
per cent for Indofood. The estimated value of Metro Pacific represents
the US$98.2 million loan plus accrued interest extended to Metro Pacific
by Larouge, a wholly-owned subsidiary of First Pacific.
An analysis of the impact of impairment provisions on consolidated
balance sheet categories is set out below.
For the year ended 31 December 2001 2000 2001* 2000*
US$m US$m HK$m HK$m
Impairment charge for
- Property and equipment (689.6) - (5,378.9) -
- Goodwill reserve (874.0) - (6,817.2) -
- Exchange reserve (264.0) - (2,059.2) -
- Inventories (92.3) - (719.9) -
- Other tangible assets (216.2) - (1,686.4) -
Total (2,136.1) - (16,661.6) -
Analysis of exchange losses 2001 2000 2001* 2000*
For the year ended 31 December US$m US$m HK$m HK$m
Subsidiary companies (15.2) (120.6) (118.6) (940.7)
Less capitalized within net borrowing costs - 17.8 - 138.9
Included in other operating expenses (15.2) (102.8) (118.6) (801.8)
Associated companies (19.8) (152.1) (154.4) (1,186.4)
Subtotal (35.0) (254.9) (273.0) (1,988.2)
Exchange differences attributable to taxation and 12.6 111.4 98.3 868.9
outside interests
Total (22.4) (143.5) (174.7) (1,119.3)
An analysis of exchange losses by principal operating company is set out
below. Exchange losses arose primarily on the translation of unhedged
U.S. dollar denominated borrowings of PLDT and Indofood as a result of
the depreciation of the peso and the rupiah during 2001 and 2000.
2001 2000 2001* 2000*
US$m US$m HK$m HK$m
PLDT (12.3) (103.7) (95.9) (808.9)
Indofood (2.8) (23.5) (21.8) (183.3)
Others (7.3) (16.3) (57.0) (127.1)
Total (22.4) (143.5) (174.7) (1,119.3)
The (loss)/profit attributable to ordinary shareholders includes loss of
US$589.1 million (HK$4,595.0 million) (2000: profit of US$23.5 million
or HK$183.3 million) in respect of the Company.
6. Basic and diluted (loss)/earnings per share
For the year ended 31 December 2001 2000 2001* 2000*
U.S. U.S. HK HK
(Loss)/earnings per share are based on
- (loss)/profit attributable to ordinary (1,797.0) 51.2 (14,016.6) 399.4
shareholders of ($m)
- and an average number of shares in issue of 3,139.8 2,923.9 3,139.8 2,923.9
(millions)
resulting in (loss)/earnings per share of (cents) (57.23) 1.75 (446.39) 13.65
As the impact of convertible instruments is anti-dilutive, the basic and
diluted (loss)/earnings per share figures are the same in 2001 and 2000.
7. Ordinary share dividends
U.S. cent per share US$m HK cent per share HK$m
2001 2000 2001 2000 2001* 2000* 2001* 2000*
Interim dividend paid - 0.13 - 3.7 - 1.00 - 28.9
Final dividend paid - 0.13 - 4.0 - 1.00 - 31.2
Total - 0.26 - 7.7 - 2.00 - 60.1
8. Accounts receivable and prepayments
Included in accounts receivable and prepayments are trade receivables of
US$169.0 million (HK$1,318.2 million) (2000: US$228.6 million or
HK$1,783.1 million) with an ageing profile as follows:
At 31 December 2001 2000 2001* 2000*
US$m US$m HK$m HK$m
Less than 30 days 144.2 156.1 1,124.7 1,217.6
30-60 days 7.7 16.8 60.1 131.0
60-90 days 4.2 4.7 32.8 36.7
Over 90 days 12.9 51.0 100.6 397.8
Total 169.0 228.6 1,318.2 1,783.1
For Indofood, there are 60 days of credit for sub-distributors/
wholesalers and between 15-60 days of credit for other customers. For
Metro Pacific, contract receivables are collectible by installments for
periods ranging from two to 10 years.
9. Accounts payable and accruals
Included in accounts payable and accruals are trade payables of US$182.3
million (HK$1,421.9 million) (2000: US$176.8 million or HK$1,379.0
million) with on ageing profile as follows:
At 31 December 2001 2000 2001* 2000*
US$m US$m HK$m HK$m
Less than 30 days 100.7 136.1 785.5 1,061.6
30-60 days 28.7 20.7 223.9 161.4
60-90 days 14.6 11.4 113.8 88.9
Over 90 days 38.3 8.6 298.7 67.1
Total 182.3 176.8 1,421.9 1,379.0
10. Contingent liabilities
Contingent liabilities in respect of subsidiary companies are set out
below.
At 31 December 2001 2000 2001* 2000*
US$m US$m HK$m HK$m
Guarantees for credit facilities given to
- Associated companies 100.1 100.4 780.8 783.1
- Others 2.6 19.3 20.3 150.6
Total 102.7 119.7 801.1 933.7
Guarantees in respect of associated companies relates to credit
facilities extended to Escotel, which are guaranteed by the Escotel's
shareholders on a pro-rata basis. Guarantees of US$100.1 million
(HK$780.8 million) at 31 December 2001 represents the Group's 49% share
of Escotel's bank borrowings.
At 31 December 2001, there were no contingent liabilities in respect of
the Group's associated companies.
11. Employee information
2001 2000
US$m US$m
Remuneration 159.4 231.3
Average number of employees 52,252 52,187
The above includes remuneration paid to Directors.
The remuneration of Executive Directors and senior executives are
determined annually by the Executive Chairman and certain Non-executive
Directors who are advised by compensation and benefits consultants. The
Executive Chairman's remuneration is subject to review by Non-executive
Directors representing the major shareholder. Non-executive Directors'
fees and emoluments are determined annually by the Executive Chairman.
12. Prior year adjustments
In 2001, the Group changed its accounting policies in respect of the
definition of subsidiaries and accounting for dividends proposed after
the period end. These changes were required as a result of the
introduction of SSAP 32 and SSAP 9 (Revised) respectively which became
effective from 1 January 2001. In addition, the Group has opted to adopt
early SSAP 15 (Revised) regarding the presentation of the cash flow
statement. Details of the requirements of these new accounting standards
are summarised below.
• SSAP 32 "Consolidated Financial Statements and Accounting for
Investments in Subsidiaries" requires companies to consolidate
those investees that it has the power to control even in the
absence of majority shareholding or voting power. SSAP 32
defines control as "the power to govern the financial and
operating policies of another enterprise so as to obtain benefit
from its activities". Accordingly, Indofood, which was
previously accounted for as an associated company, is now
treated as a subsidiary under SSAP 32. This change has no effect
either on the profit attributable to ordinary shareholders or
the shareholders' equity of the Group.
• SSAP 9 (Revised) "Events After the Balance Sheet Date", has
been amended such that dividends proposed after the balance
sheet date no longer meet the definition of a liability at the
balance sheet date. Accordingly, no liability is recognized at
the balance sheet date in respect of proposed dividends.
• SSAP 15 (Revised) "Cash Flow Statements" has been revised to
classify cash flows under operating, investing or financing
activities. Although adoption is required for periods beginning
on or after 1 January 2002, the Group has opted to adopt the
revised standard in its 2001 financial statements.
In order to reflect the requirements of the new accounting standards,
these changes have been applied retrospectively and their impact on
figures reported for prior periods is summarized as follows.
As Restatement As As Restatement As
previously restated previously restated
reported reported
For the SSAP 32 SSAP 15 For the For the SSAP 32* SSAP 15 For the
year ended year year ended year ended
(Revised) ended (Revised)
31 31 * 31
December 31 December December
2000 December 2000* 2000*
2000
US$m US$m US$m US$m HK$m HK$m HK$m HK$m
Profit and loss
statement
Turnover 808.9 1,490.3 - 2,299.2 6,309.4 11,624.4 - 17,933.8
Operating profit 209.0 185.0 - 394.0 1,630.2 1,443.0 - 3,073.2
Profit after 56.7 61.6 - 118.3 442.3 480.4 - 922.7
taxation
Profit 51.2 - - 51.2 399.4 - - 399.4
attributable to
ordinary
shareholders
Cash flow
statement
Net cash (outflow)
/inflow from
- operating (12.1) 249.3 (182.1) 55.1 (94.4) 1,944.5 (1,420.3) 429.8
activities
- investing 274.5 (63.4) 48.0 259.1 2,141.1 (494.5) 374.4 2,021.0
activities
- financing (199.2) (131.3) (22.2) (352.7) (1,553.8) (1,024.1) (173.2) (2,751.1)
activities
As Restatement As
previously previously
reported reported
As Restatement As
restated restated
For the SSAP 32 SSAP 15 For the For the SSAP 32* SSAP 9 For the
year ended year year ended year ended
(Revised) ended (Revised)
31 31 * 31
December 31 December December
2000 December 2000* 2000*
2000
US$m US$m US$m US$m HK$m HK$m HK$m HK$m
Balance Sheet
Total assets 2,322.4 1,133.4 - 3,455.8 18,114.7 8,840.5 - 26,955.2
Total liabilities 1,198.1 956.6 (4.0) 2,150.7 9,345.2 7,461.5 (31.2) 16,775.5
Shareholders' 365.5 - 4.0 369.5 2,850.9 - 31.2 2,882.1
equity
Outside interests 758.8 176.8 - 935.6 5,918.6 1,379.0 - 7,297.6
13. Subsequent events
A. On 9 January 2002, the Company announced that its
wholly-owned subsidiary, Larouge, had been advised by Metro
Pacific that Metro Pacific was unable to repay the US$90.0
million loan (HK$702.0 million) (together with US$8.2 million
(HK$64.0 million) of accrued interest), which had been extended
by Larouge to Metro Pacific in April 2001. The loan was due and
payable on 31 December 2001, and is secured by a pledge over a
50.4 per cent equity interest that Metro Pacific owns in
Bonifacio Land Corporation ("BLC").
In light of this non-payment, Larouge will co-manage with Metro
Pacific the on-going sale of its 69.6 per cent controlling stake
in BLC which was announced in October 2001. When agreement is
reached for such a sale, Larouge intends to offer the 50.4 per
cent interest in BLC, which it holds as a secured creditor, as
part of the sale transaction.
B. On 1 March 2002, Metro Pacific announced its intention to
implement a debt reduction plan which may include the sale of
assets, discussions with creditors for extended interest and
principal repayment grace periods, the conversion of short-term
loans into longer facilities and the conversion of certain debts
into equity of Metro Pacific's subsidiaries. If successfully
implemented, this plan will reduce the overall indebtedness of
the Metro Pacific group and/or extend the maturity profile of
certain debts to match anticipated future revenue streams.
C. The Group repurchased and canceled US$117.3 million (HK$914.9
million) of convertible bonds from the market at a total cost of
US$157.5 million (HK$1.2 billion) in January 2002 through a
combination of cash on hand and the drawdown of US$190.0 million
(HK$1.48 billion) from a US$200.0 million (HK$1.56 billion)
facility provided by ING Bank NV.
After the conclusion of the open market purchase exercise, there
remain outstanding convertible bonds in the principal amount of
US$130.5 million (HK$1.02 billion). These convertible bonds will
be redeemed at their full redemption value payable at maturity
on 27 March 2002, plus accrued interest, at a total cost of
approximately US$176.3 million (HK$1.38 billion). On 31 January
2002, First Pacific deposited sufficient funds with the
appointed trustee of the convertible bonds, for the purpose of
redeeming in full all of the outstanding bonds upon maturity.
14. Comparative figures
Amounts have been reclassified and comparatives have been restated, as
appropriate, in accounting for the consolidation of Indofood and
dividends proposed after the year end and in the presentation of the
cash flow statement (Note 12). In addition, as required by SSAP 30, the
goodwill reserve is no longer presented as a separate item on the
balance sheet but is included within the revenue reserve. Such
reclassifications and restatements have the effect of increasing the
shareholders' equity as at 31 December 2000 from US$365.5 million
(HK$2.85 billion) to US$369.5 million (HK$2.88 billion) but have no
effect on the previously reported profit attributable to ordinary
shareholders.
REVIEW OF BUSINESSES
Below is an analysis of results by individual company.
Contribution Summary
Contribution to
Turnover Group (loss)/profit(i)
2001 2000 2001 2000
US$m US$m US$m US$m
Indofood 1,414.9 1,490.3 48.1 55.7
PLDT(^) - - 42.8 25.6
Smart(ii) - 80.5 - (9.0)
Metro Pacific 134.4 240.0 (14.6) (6.4)
Escotel(^) - - (6.2) (11.8)
Infrontier 1.5 - (9.1) -
From continuing businesses 1,550.8 1,810.8 61.0 54.1
From disposed businesses(iii) 300.9 488.4 17.8 34.4
From operations 1,851.7 2,299.2 78.8 88.5
Corporate overhead (12.4) (13.2)
Net finance charges (21.0) (25.7)
Other (expenses)/income (0.8) 1.4
Recurring profit 44.6 51.0
Exchange losses (22.4) (143.5)
(Loss)/gain on disposal and dilution of shareholdings and (1,819.2) 143.7
provision for investments
(Loss)/profit attributable to ordinary shareholders (1,797.0) 51.2
(^) Associated companies.
(i) After taxation and outside interests, where appropriate.
(ii) Merged with PLDT on 24 March 2000.
(iii) Represents Berli Jucker, Darya-Varia, Savills plc, First Pacific
Bank and SPORTathlon.
PT Indofood Sukses Makmur Tbk is the leading processed-foods group in Indonesia.
It is based in Jakarta, and is listed on the Jakarta and Surabaya stock
exchanges. The principal businesses of Indofood are Instant Noodles, Flour and
Edible Oils & Fats, and it also has interests in Snack Foods, Baby Foods, Food
Seasonings and Distribution. First Pacific held a 48.7 per cent economic
interest in Indofood at 31 December 2001 which, as a consequence of Indofood's
continuing share buy back program, has now increased to 49.2 per cent. Further
information on Indofood can be found at www.indofood.co.id.
Indofood contributed a profit of US$48.1 million (HK$375.2 million) (2000:
US$55.7 million HK$434.5 million), positioning Indofood as the largest
contributor to Group profits. Indofood's net sales revenue increased by 15 per
cent to Rupiah 14.6 trillion (US$1,414.9 million HK$11.0 billion), against
Rupiah 12.7 trillion (US$1,490.3 million HK$11.6 billion) recorded in 2000. All
of Indofood's divisions recorded increased sales revenues, with the exception of
Baby Foods which did not record comparable aid-related sales in 2001. Indofood's
principal divisions of Noodles, Flour and Edible Oils & Fats recorded growth of
11 per cent, 29 per cent and four per cent, respectively, in rupiah terms.
During the year the rupiah declined to 10,400 against the U.S. dollar in
December 2001, from 9,650 at the start of 2001. This resulted in increasing the
costs of imported U.S. dollar denominated raw materials - principally wheat,
packaging materials and fuel oil - thereby eroding Indofood's gross margin to
26.4 per cent (2000: 29.4 per cent). Despite this, Indofood's gross profit
improved by three per cent to Rupiah 3.9 trillion (US$0.4 billion HK$3.1
billion). Increased transportation and salary costs contributed to the decline
in Indofood's rupiah operating margin to 13.9 per cent (2000: 18.9 per cent).
Despite the contraction in operating profit, Indofood's reported rupiah net
income grew by 15 per cent to Rupiah 746.3 billion (US$72.5 million HK$565.5
million) principally because of lower foreign exchange losses due to lower
balances of U.S. dollar denominated debt. Indofood continued to generate strong
cash flows, recording EBITDA of US$232.9 million (HK$1.8 billion) - equivalent
to US$19 million (HK$148.2 million) per month - in 2001. This enabled Indofood
to repay some US$200 million (HK$1.6 billion) of debt during the year, thereby
improving Indofood's debt to equity ratio to 1.6 times (2000: 2.1 times) and its
net gearing ratio to 1.3 times (2000: 1.5 times).
Philippine Long Distance Telephone Company is the leading telecommunications
provider in the Philippines. Through its three principal business groups - Fixed
Line, Wireless and Information and Communications Technology - PLDT offers a
wide range of telecommunications services across the country's most extensive
fiber optic backbone, fixed line and cellular network. PLDT is based and listed
in Manila, and has ADRs listed on the New York Stock Exchange and the Pacific
Exchange located in San Francisco, California. First Pacific holds an economic
interest of 24.4 per cent, and a voting interest of 31.5 per cent in PLDT.
Further information on PLDT can be found at www.pldt.com.ph.
PLDT's contribution grew by 67 per cent to US$42.8 million (HK$333.8 million)
(2000: US$16.6 million HK$129.5 million), as PLDT's Wireless business turned a
year 2000 operating loss of Pesos 3.5 billion (US$79.2 million HK$617.8 million)
into a 2001 operating income of Pesos 2.9 billion (US$56.6 million HK$441.5
million).
Cellular, which accounts for 96 per cent of the total revenues of Wireless,
fuelled the recovery and growth of this segment, principally through the 75 per
cent gain in cellular revenues from Smart. Underpinning this was strong
subscriber growth as Smart closed the year with 4.9 million (2000: 2.9 million)
subscribers while Piltel, reseller of Smart's GSM service under its Talk 'N Text
brand, closed with 1.5 million (2000: 0.7 million) subscribers. Over the year,
Smart and Piltel more than doubled their combined GSM subscriber base to almost
six million (2000: 2.7 million), with Piltel growing its Talk 'N Text subscriber
base to 1.3 million subscribers, from 0.4 million subscribers one year ago.
Subscriber growth has been driven in part by the phenomenal growth of the
Philippines' cellular phone culture and, in particular, the popularity of SMS,
or text messaging, as a preferred means of communicating. During 2001, 12.3
billion (2000: 3.9 billion) outgoing messages were sent over Smart's network,
which translates to 33.8 million messages per day during 2001. The ratio of text
to voice calls now stands at nine text to one voice, and SMS revenues have risen
accordingly to Pesos 6.2 billion (US$121.5 million HK$947.7 million) in 2001.
Fixed Line, PLDT's foundation business segment, recorded respectable growth
despite the phenomenal success of Cellular, subscribers of which now outnumber
Fixed Line subscribers by three to one. Fixed Line revenues reached Pesos 46.9
billion (US$918.4 million HK$7.2 billion) in 2001, up two per cent, with growth
largely from Local Exchange and Data services which, together, make up 56.8 per
cent of Fixed Line revenues.
Local Exchange benefited from the increase in the average number of billed lines
in service and currency linked adjustments, while Data services continued to
expand its range of services which resulted in a corresponding growth in
revenues. Revenues from Data, which is PLDT's fastest growth segment, continue
to grow in size and significance and now represent 10 per cent of total Fixed
Line revenues.
Fixed Line's International and National Long Distance businesses have returned
weaker results in 2001. Despite inbound international minutes improving 18 per
cent, declining international settlement rates eroded revenues. Outbound call
volumes grew by 20 per cent, however revenues declined on lower prices. National
Long Distance revenues were adversely affected by lower call volumes, which have
been negatively impacted by alternate means of communicating, and price
reductions introduced to encourage use.
PLDT's Information and Communications Technology interests are operated through
ePLDT, a wholly owned subsidiary of PLDT. A recently formed entity, ePLDT is in
its nascent stage of development and is currently loss making. However ePLDT
continues to roll out its services such that revenues, while modest in absolute
terms, have almost doubled over 2001 and now contribute almost one per cent of
PLDT's operating revenues.
During 2001 PLDT undertook a series of liability management initiatives designed
to address its maturing debts. Between 2002 and 2004 PLDT has US$1.3 billion
(HK$10.1 billion) of debt obligations maturing of which approximately half will
be serviced through internally generated cash flows. To this end, PLDT pared
back capex spend to Pesos 9.7 billion (US$190.0 million HK$1.5 billion) and has
reduced cash spend over successive quarters. These cost containment initiatives
will continue, and PLDT is in on-going discussions with lenders, having recently
secured a US$149.0 million (HK$1.2 billion) facility from Kreditanstalt fur
Wiederaufbau (KfW) of Germany.
Metro Pacific Corporation, which is based and separately listed in Manila, has
interests principally in Property (Bonifacio Land Corporation, Landco Pacific
and Pacific Plaza Towers). The First Pacific Group holds an economic interest of
80.6 per cent. Further information on Metro Pacific can be found at
www.metropacific.com.
Metro Pacific recorded a loss of US$14.6 million (HK$113.9 million), against a
loss of US$6.4 million (HK$49.9 million) in 2000, reflecting a depressed
Philippine real estate market and the completion of Big Delta, prompting the
recognition in April 2000 of the remaining revenues and profits from prior land
sales.
Bonifacio Land concluded two land sales in 2001, however these were insufficient
to generate comparable revenues to those recognized over recent years over the
development of Big Delta. Toward the end of 2001, agreement was reached on the
sale of a five-hectare area, adjacent to the Manila Golf Course, for Pesos 2.5
billion, with the site earmarked for mixed-use development. This sale was
concluded in early 2002. The Bonifacio Stopover and HatchAsia developments were
both completed and occupied during the year, and lease agreements were made with
new Global City locators, most notably a 50-year lease with St. Luke's to build
a medical complex.
There was continued interest in Pacific Plaza Towers, Metro Pacific's signature
residential project in the Bonifacio Global City, with cumulative sales reaching
293 units by year-end (2000: 220 units). However, a depressed property market
put Pacific Plaza Towers' margins under pressure. Landco Pacific improved its
turnover as its Punta Fuego luxury development was completed and sold, however
the property market conditions also contributed to the erosion of Landco
Pacific's margins. Nenaco improved its operating profit as it reaped the
benefits of cost cutting measures and introduced efficiencies.
Escotel Mobile Communications Limited, which is based in New Delhi, provides GSM
cellular telephone services in Uttar Pradesh (West), Haryana and Kerala. The
First Pacific Group holds an economic interest of 49.0 per cent. Further
information on Escotel can be found at www.escotelmobile.com.
Escotel reduced its losses by almost half, contributing a loss of US$6.2 million
(HK$48.4 million) in 2001. Revenues were up 50 per cent to Rupees 2.5 billion
(US$53.5 million HK$417.3 million) as Escotel added subscribers at an average
rate of 13 thousand per month. Over 2001, Escotel's subscriber base grew 54 per
cent to close the year at 441,504 (2000: 286,800), accounting for over eight per
cent of the overall Indian cellular market, and it continues to enhance its
market leadership in all three of its markets.
ARPUs in 2001 averaged Rupees 532 (US$11.3 HK$88.1) (2000: Rupees 684 US$15.2
HK$118.6). This decline is attributable to the fact that 68 per cent of
Escotel's subscribers are now on prepaid services.
In March 2001, Escotel put in place five-year financing when it refinanced
US$75.2 million (HK$586.6 million) of offshore debt and secured a domestic debt
facility equivalent to approximately US$112 million (HK$873.6 million). These
facilities enabled the repayment of short-term debt and provide the funds for
network enhancements necessary to support Escotel's growing subscriber base.
Over the year, average interest rates were broadly similar with Escotel's
increase in net borrowing costs largely attributable to higher average debt
balances.
Infrontier, which is headquartered in Hong Kong, is a business solutions
provider that is wholly-owned by First Pacific. Further information on
Infrontier can be found at http://www.infrontier.com/.
Infrontier recorded a loss of US$9.1 million (HK$71.0 million) in its first year
of commercial operations. Revenues, excluding sales to Group companies, of
US$1.5 million (HK$11.7 million) were generated, arising approximately 60 per
cent from Business Solutions and approximately 40 per cent from Technical and
Professional Services. Approximately half of Infrontier's total revenues are
generated from third party clients, which include large, local and multinational
companies involved in the industries of logistics, consumer goods and
pharmaceuticals.
Infrontier's revenues were offset by staff and consultancy costs, while
borrowings as at 31 December 2001 were US$1.5 million (HK$11.7 million).
Disposed businesses: Savills plc, contributed US$1.6 million (HK$12.5 million),
prior to its disposal in March 2001. Berli Jucker and Darya-Varia, both of which
were disposed in December 2001, contributed US$13.5 million (HK$105.3 million)
and US$2.7 million (HK$21.1 million), respectively, prior to disposal.
Note: Unless stated otherwise, quoted comparatives and margins are based
on Hong Kong GAAP adjusted U.S. dollar figures.
FINANCIAL REVIEW
Asset Values
In accordance with the Group's accounting policies, an annual review of the
carrying cost of investments is performed in order to assess whether their book
values continue to be appropriate. The values of investments are estimated
within the context of prevailing circumstances and by reference, where
appropriate, to the present value of future cash flows for each investment. To
the extent that book values exceed estimated values, impairment provisions are
recognized where it is considered that such diminutions in value are unlikely to
be recovered in the near-term. This accounting treatment is consistent with Hong
Kong SSAP 31, "Impairment of Assets".
First Pacific's reporting currency is the U.S. dollar and, accordingly, all
investments are recorded in U.S. dollars in the Financial Statements. The
Company's principal investments are located in the Philippines and Indonesia and
were made in local currencies and recorded in U.S. dollar equivalents calculated
at the prevailing exchange rates at the dates of acquisition. Details of the
Company's original acquisition costs in local currency terms, together with the
prevailing exchange rates at the dates of acquisition, are set out below:
Year of Historical cost/ Exchange rate to Historical Historical
acquisition share (i) US$ (i) cost/share investment cost
US$ US$m
Metro Pacific 1986-2001 Pesos 1.6 32.8 0.05 747.0
PLDT 1998/2000 Pesos 1,239.8 41.2 30.09 1,241.0
Indofood 1999/2000 Rupiah 1,338.6 8,330.0 0.16 706.6
(i) Weighted average.
During the period since First Pacific's investment in the above companies, the
peso and rupiah have experienced a significant depreciation against the U.S.
dollar. At 31 December 2001 those exchange rates stood at Peso 51.6 and Rupiah
10,400 to the U.S. dollar compared to the prevailing rates at the time of
acquisition. This currency depreciation has significantly reduced the value of
First Pacific's investments in U.S. dollar terms.
Furthermore, the country risks associated with the Philippines and Indonesia
have adversely affected equity values in those countries and, as a result of
this negative sentiment, the estimated values of First Pacific's investments in
PLDT, Metro Pacific and Indofood are significantly below these book values. In
addition to country risk factors, Metro Pacific's investment in Bonifacio Land
has been significantly and adversely affected by the protracted decline in the
Philippine property market.
Due to the prolonged negative sentiment in relation to the Philippines and
Indonesia and the impact of the depreciation of the peso and rupiah against the
U.S. dollar, there does not appear to be any near-term prospect of a significant
increase in values. Accordingly, as a result of the above factors, the book
values of First Pacific's investments have been reduced to levels more
consistent with current market values by the recognition of impairment
provisions totaling US$1.7 billion.
In keeping with First Pacific's prudent and conservative approach to financial
reporting, the provisions have the effect of writing down investments to the
lower end of their respective estimated value ranges. Calculations to determine
the estimated value of PLDT and Indofood, based on the present value of future
cash flows, indicate per share values in the following ranges:
PLDT: Pesos 700 to Pesos 1,000
Indofood: Rupiah 1,200 to Rupiah 1,600
The impairment provisions recognised in 2001 may be analysed as follows.
At 31 December 2001 Company Consolidated
Pre-adjusted Impairment Adjusted Pre-adjusted Impairment Adjusted
book value provisions book book value provisions book
(i) value (ii) value
US$m US$m US$m US$m US$m US$m
PLDT(iii) 1,241.0 (681.7) 559.3 1,125.1 (565.8) 559.3
Indofood(iii) 706.6 (200.0) 506.6 806.2 (299.6) 506.6
Metro Pacific(iv) 747.0 (648.8) 98.2 843.3 (745.1) 98.2
Escotel(v) 63.0 - 63.0 (8.3) - (8.3)
Infrontier 17.2 - 17.2 3.2 - 3.2
Metrosel(vi) - - - - - -
2,774.8 (1,530.5) 1,244.3 2,769.5 (1,610.5) 1,159.0
Provisions for other
exposures(vii) (100.0) (100.0)
Impairment charge (1,630.5) (1,710.5)
(i) Acquisition cost.
(ii) Acquisition cost plus attributable share of post-acquisition
reserves.
(iii) Adjusted book value represents Pesos 700/share and Rupiah 1,200/
share for PLDT and Indofood, respectively.
(iv) Adjusted book value represents US$90.0 million of loan, and US$8.2
million of accrued interest due from Metro Pacific.
(v) The negative consolidated book value represents the amount by which
the attributable share of post-acquisition losses of US$71.3 million
exceeds the investment cost of US$63.0 million.
(vi) Full impairment provision made in 1998.
(vii) General risk, including provision for the potential effect of
further depreciation of the peso and the rupiah.
As a result of the above adjustments, the book values of investments, both at
the Company and consolidated balance sheets, are now stated at levels which are
more consistent with prevailing market values.
Liquidity and Financial Resources
Consolidated Net Indebtedness and Gearing by Operating Company
Net Net Gearing Net Net Gearing
indebtedness assets indebtedness assets
(i)
2001 2001 2001 2000 2000 2000
US$m US$m times US$m US$m times
Head Office 83.3 693.5 0.09 150.0 1,500.1 0.10
Indofood 442.5 318.6 1.39 494.5 271.6 1.82
Metro Pacific 264.6 188.7 1.40 303.1 1,287.9 0.24
Infrontier 0.1 (14.0) - - - -
Disposed businesses(ii) - - - 68.8 159.4 0.43
Consolidated before goodwill 790.5 1,186.8 0.67 1,016.4 3,219.0 0.32
reserve
Goodwill reserve - (985.8) - - (1,913.9) -
Consolidated after goodwill 790.5 201.0 3.93 1,016.4 1,305.1 0.78
reserve
Associated companies
PLDT 3,321.1 1,733.5 1.92 3,730.3 1,746.1 2.14
Escotel 200.2 (78.5) - 176.6 (46.0) -
(i) Includes pledged deposits and excludes inter-company indebtedness.
(ii) Represents Berli Jucker and Darya-Varia.
• Head Office's gearing improved principally as a result of the proceeds
from disposals of Berli Jucker, Savills plc and Darya-Varia, partly
offset by the impact of advancing a US$90.0 million loan to Metro
Pacific.
• Indofood's gearing improved as a result of the reduction in net
indebtedness and increase in net assets.
• Metro Pacific's gearing increased mainly because of the reduction of
net assets due to impairment provisions, partly offset by the repayment
of convertible bonds in April 2001.
• PLDT's gearing improved as a consequence of the deconsolidation of
Piltel in June 2001.
The maturity profile of consolidated debt is summarized below. The change to the
debt maturity profile principally reflects the fact that Head Office's US$247.8
million convertible bonds (due March 2002) and Indofood's US$339.8 million bank
loan (due 2002) were due within one year from 31 December 2001.
Maturity Profile of Consolidated Debt
At 31 December
2001 2000
US$m US$m
Within one year 750.2 526.1
One to two years 86.0 637.1
Two to five years 285.1 221.7
Over five years 20.3 59.7
Total 1,141.6 1,444.6
Included above are amounts due by the Metro Pacific group with the following
maturity profile:
2001
US$m
Within one year 161.8
One to two years 36.7
Two to five years 66.0
Over five years 18.5
Total 283.0
On 1 March 2002, Metro Pacific announced its intention to implement a debt
reduction plan. If successfully implemented, this plan will reduce the overall
indebtedness of Metro Pacific group and/or extend the maturity profile of
certain debts to match anticipated future revenue streams. Consequently, Metro
Pacific's debt maturity profile may ultimately differ from that set out above.
The maturity profile of the borrowings of the Group's associated companies
follows. The change in the debt maturity profile of PLDT primarily reflects the
deconsolidation of Piltel with effect from June 2001. The improvement in
Escotel's maturity profile reflects the impact of a debt refinancing completed
in March 2001.
Associated Companies
At 31 December PLDT Escotel
2001 2000 2001 2000
US$m US$m US$m US$m
Within one year 548.7 340.4 8.5 91.9
One to two years 687.0 657.3 28.3 24.3
Two to five years 1,292.9 1,518.3 148.7 45.9
Over five years 869.5 1,407.9 18.1 16.4
Total 3,398.1 3,923.9 203.6 178.5
Charges on Group Assets
At 31 December 2001, property and equipment, accounts receivable and inventories
with net book amount totaling US$163.7 million (2000: US$168.9 million) were
mortgaged as securities for certain of the Group's banking facilities.
Net Current Liabilities
As at 31 December 2001, consolidated net current liabilities stood at US$234.5
million, analyzed as follows:
2001 2000
US$m US$m
Cash, bank balances and short-term investments (i) 362.6 393.9
Accounts receivable and prepayments 328.7 518.5
Inventories 361.5 259.0
Current assets 1,052.8 1,171.4
Account payable, accruals and taxation 537.1 428.9
Short-term borrowings 750.2 526.1
Current liabilities 1,287.3 955.0
Net current (liabilities)/assets (234.5) 216.4
(i) Includes pledged deposits of US$41.0 million (2000: US$8.0 million).
The principal reason for consolidated net current liabilities at 31 December
2001 is the increase in short-term borrowings to US$750.2 million, which may be
analyzed by company as follows:
2001
US$m
Head Office 247.8
Metro Pacific 161.8
Indofood 339.8
Infrontier 0.8
Total 750.2
The amount in respect of Head Office relates entirely to the convertible bond
due 27 March 2002. In addition, the redemption premium payable on the bond of
US$80.2 million was included in accounts payable at 31 December 2001. Subsequent
to the year end, the Company fully funded the repayment of the convertible bond
from available cash and a two year bank loan facility.
Metro Pacific intends to implement a debt reduction plan which if successfully
implemented will reduce and/or extend the maturity profile of its debts.
Accordingly, it is anticipated that Metro Pacific will not be required to settle
its US$161.8 million of short-term borrowings in full during 2002.
Indofood's short-term borrowings include various bank loans which mature in
2002. Indofood intends to repay/refinance these borrowings as part of its normal
treasury management process.
Accordingly, the various steps taken at the relevant companies to repay or
refinance maturing debt obligations will address the apparent mismatch of
current assets and current liabilities at 31 December 2001.
Financial Risk Management
Foreign Currency Risk
(A) Company Risk
As all Head Office debt was denominated in U.S. dollars at year-end 2001
and the bank loan draw down in early 2002 is denominated in HK dollars
which is pegged to the U.S. dollar, foreign currency risk relates mainly
to the receipt of cash dividends, and to the translation of non-U.S.
dollar denominated investments in subsidiary and associated companies.
The Company actively reviews the potential benefits of hedging based on
forecast dividend flows, but does not actively seek to hedge risks
arising from foreign currency translation of investments due to their
non-cash nature and the high cost associated with such hedging.
Accordingly, First Pacific is exposed to the impact of foreign currency
fluctuations on the U.S. dollar value of its investments.
As most of the principal components of the Company's NAV (with the
exception of Escotel and Head Office amounts) relate to investments held
in Pesos or Rupiah, any depreciation of those currencies from their
level at 31 December 2001 would have a negative impact on the Company's
NAV in U.S. dollar terms.
The following table illustrates the estimated impact on the Company's
adjusted NAV for a 1.0 per cent depreciation against the U.S. dollar of
the Peso and the Rupiah.
Effect on
Effect on adjusted NAV
adjusted NAV per share
Company US$m HK cents
Indofood (2.64) (0.65)
PLDT (3.34) (0.83)
Metro Pacific (0.87) (0.22)
Total(i) (6.85) (1.70)
(i) The NAV of the Group's investment in Escotel is based on the
historical U.S. dollar cost and accordingly any depreciation of
the rupee would not affect the Company's adjusted NAV.
(B) Group Risk
First Pacific's policy is for each operating entity to borrow in local
currencies where possible. However, it is often necessary for companies
to borrow in U.S. dollars which results in a translation risk in their
local currency results. A summary of consolidated net indebtedness by
currency follows.
Consolidated Net Indebtedness by Currency
US$ Peso Rupiah Other Total
US$m US$m US$m US$m US$m
Total borrowings 643.7 283.0 212.8 2.1 1,141.6
Cash and bank balances(i) (221.2) (18.4) (104.0) (7.5) (351.1)
Net indebtedness/(cash) 422.5 264.6 108.8 (5.4) 790.5
Representing:
Head Office 90.2 - - (6.9) 83.3
Indofood 333.4 - 108.8 0.3 442.5
Metro Pacific(ii) - 264.6 - - 264.6
Infrontier (1.1) - - 1.2 0.1
Net indebtedness/(cash) 422.5 264.6 108.8 (5.4) 790.5
Associated companies
PLDT 2,893.5 250.6 - 177.0 3,321.1
Escotel 75.2 - - 125.0 200.2
(i) Includes pledged deposits.
(ii) Excludes inter-company funding from Head Office of US$90.0 million.
Indofood hedges its U.S. dollar debt through foreign currency swap agreements,
revenue from exports and U.S. dollar deposits. In addition, US$165.0 million
U.S. dollar denominated borrowings were repaid in 2001 to further reduce its
exposure to movements in the rupiah exchange rate. At the end of 2001,
approximately 93 per cent of Indofood's US$333.4 million of U.S. dollar
denominated net borrowings were hedged through foreign currency swap agreements
which mature on various dates in 2005.
Following the repayment of its convertible bonds in April 2001, Metro Pacific
has no third party U.S. dollar debt. Its remaining U.S. dollar exposure arises
from a US$90.0 million inter-company loan extended by Head Office.
PLDT carries U.S. dollar debt primarily because international vendors of
telecommunications equipment quote prices and require payment in U.S. dollars.
In addition, large funding requirements often cannot be satisfied in local
currency due to an inherent lack of depth in the financial markets in the
Philippines. As a result, finance frequently needs to be sourced from the
international capital market, principally in U.S. dollars. Although it is not
possible to hedge significant U.S. dollar balances in the Philippines, PLDT has
actively hedged approximately 14 per cent of its U.S. dollar borrowings.
However, substantial revenues of PLDT are either denominated in, or linked to,
the U.S. dollar. For example, PLDT's U.S. dollar denominated international
inbound revenue accounted for approximately US$176.0 million or 12.2 per cent of
the company's total revenue in 2001. In addition, under certain circumstances,
PLDT is able to adjust its monthly recurring rates for the fixed line service by
1.0 per cent for every Peso 0.1 change in the U.S. dollar exchange rate.
Escotel carries U.S. dollar borrowings for similar reasons to PLDT.
Approximately 66 per cent of the U.S. dollar debt has been hedged into the
Rupee.
As a result of the relatively large unhedged U.S. dollar net indebtedness,
particularly at PLDT, the Group's results are sensitive to fluctuations in U.S.
dollar exchange rates. The following table illustrates the estimated impact,
arising from unhedged U.S. dollar net indebtedness, on the Group's reported
profitability for a 1.0 per cent depreciation of the principal operating
currencies of subsidiary and associated companies against the U.S. dollar. This
does not reflect the indirect impact on the Group's operational results as a
consequence of changes in local currency revenues and costs due to fluctuations
in U.S. dollar exchange rates.
Total US$ Hedged Unhedged Profit Group
exposure amount(i) amount(i) impact of 1% profit
currency impact(ii)
depreciation
US$m US$m US$m US$m US$m
PLDT 2,893.5 416.0 2,477.5 (24.7) (4.1)
Metro Pacific(iii) 90.0 - 90.0 (0.9) (0.5)
Total Philippines 2,983.5 416.0 2,567.5 (25.6) (4.6)
Indofood (Indonesia)(iii) 403.5 310.0 93.5 (0.9) (0.3)
Escotel (India) 75.2 50.0 25.2 (0.3) (0.1)
Head Office(iv) 90.2 - 90.2 - -
Infrontier (1.1) - (1.1) - -
Total 3,551.3 776.0 2,775.3 (26.8) (5.0)
(i) Excludes the impact of "natural hedges".
(ii) Net of tax effect.
(iii) Includes inter-company funding from Head Office of US$90.0 million
for Metro Pacific and premium payable on hedging contracts of US$70.1
million for Indofood.
(iv) As the Group reports its results in U.S. dollars, unhedged U.S.
dollar debt at Head Office carries no exchange exposure.
During 2001, Indofood and Metro Pacific paid down their U.S. dollar denominated
net indebtedness by US$84.0 million and US$66.9 million respectively in order to
reduce their exposure to movements in exchange rates.
PLDT's U.S. dollar denominated net indebtedness decreased principally as a
result of the deconsolidation of Piltel in June 2001 and increased utilization
of peso borrowings to refinance U.S. dollar debt.
Interest Rate Risk
The Company and the majority of its operating entities are exposed to changes in
interest rates to the extent that they impact the cost of variable rate
borrowings. An analysis of consolidated net indebtedness by fixed and variable
rate borrowings, together with details for associated companies, follows:
Consolidated Fixed Variable Cash and Net
interest interest bank indebtedness
borrowings borrowings balances(i) Total
US$m US$m US$m US$m
Head Office 297.8 - (214.5) 83.3
Indofood 101.6 457.7 (116.8) 442.5
Metro Pacific(ii) 97.4 185.6 (18.4) 264.6
Infrontier 1.5 - (1.4) 0.1
Consolidated net indebtedness 498.3 643.3 (351.1) 790.5
Associated companies
PLDT 2,149.0 1,249.1 (77.0) 3,321.1
Escotel 139.0 64.6 (3.4) 200.2
(i) Includes pledged deposits.
(ii) Excludes inter-company funding from Head Office of US$90.0 million.
As a result of variable interest rate debt at a number of operating companies,
the Group's results are sensitive to fluctuations in interest rates. The
following table illustrates the estimated impact on the Group's reported
profitability of a 1.0 per cent increase in average annual interest rates for
those entities which hold variable interest rate debt.
Variable Profit Group
interest impact of profit
borrowings 1% increase impact(i)
in interest
rates
US$m US$m US$m
Indofood 457.7 (4.6 ) (1.6 )
PLDT 1,249.1 (12.5 ) (2.1 )
Escotel 64.6 (0.6 ) (0.3 )
Metro Pacific 185.6 (1.9 ) (1.0 )
Total 1,957.0 (19.6 ) (5.0 )
(i) Net of tax effect.
Subsequent to the year end, US$117.3 million of fixed interest borrowings in
respect of the Head Office convertible bonds were repaid. In addition, funds of
US$130.5 million were deposited with the bond trustee to fully fund the
repayment of the outstanding bonds at 27 March 2002. The settlement of the bond
was partially funded by the drawdown of US$190.0 million from a bank loan
facility. This variable interest loan has been swapped into a fixed interest
rate to the extent of US$100.0 million, such that a 1.0 per cent increase in
interest rates would reduce Group profit by a further US$0.9 million.
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES
No purchase, sale or redemption of any of the Company's listed securities has
been made by the Company or any of its subsidiary companies during the year.
In April 2001, Metro Pacific redeemed US$72.1 million of convertible bonds for a
consideration of US$92.9 million.
In October 2001, the Group repurchased and canceled US$20.1 million face value
of the two per cent 2002 convertible bonds for a consideration of US$25.5
million.
During October to December 2001, Indofood repurchased approximately 125 million
shares from the market at an average price of approximately Rupiah 619 per
share.
In December 2001, the Group disposed of 132,602,457 common shares (83.5 per
cent) of Berli Jucker for a consideration of US$125.0 million and 501,183,516
common shares (89.5 per cent) of Darya-Varia for a consideration of US$35.0
million.
Except as described or referred to above, there has been no issue, redemption or
conversion of any convertible securities or options in issue by the Company's
subsidiary companies.
COMPLIANCE WITH CODE OF BEST PRACTICE
The Company has complied throughout the year with the Company's Code of Best
Practice, which incorporates the items set out in Appendix 14 of the Rules
Governing the Listing of Securities issued by The Stock Exchange of Hong Kong
Limited.
In compliance with the additional requirement of The Stock Exchange of Hong Kong
Limited to its Code of Best Practice, the Company established an Audit Committee
in 1998, which is currently composed of the two independent Non-executive
Directors. Reporting to the Board of Directors, the Audit Committee reviews
matters within the purview of audit, such as Financial Statements and internal
control, to protect the interests of the Company's shareholders. The Audit
Committee meets regularly with the Company's external auditors to discuss the
audit process and accounting issues.
DETAILED RESULTS ANNOUNCEMENT
A detailed results announcement containing all the information required by the
Listing Rules paragraphs 45(1) to 45(3) of Appendix 16 will be published on the
Stock Exchange's website in due course.
ANNUAL REPORT
The 2001 Annual Report will be sent to shareholders on or about the 8 April
2002.
By Order of the Board
Manuel V. Pangilinan
Executive Chairman
4 March 2002
Please also refer to the published version of this announcement in the South
China Morning Post (English) and Hong Kong Economic Times (Chinese).
This information is provided by RNS
The company news service from the London Stock Exchange
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