Annual Report 2003 - Clear Media

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MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL REVIEW Turnover The Group’s turnover in 2003 amounted to HK$488 million, representing an increase of 14% compared with fiscal year 2002. This is mainly due to the increasing revenue of the Group’s core business, bus shelter advertising. All of the Group’s turnover was derived from China. The Group’s core bus shelter advertising business continued to perform well. Total bus shelter sales increased by 18% from HK$404 million in 2002 to HK$476 million in 2003. This was due to a 14% increase in weighted average number of shelters, a 2% increase in occupancy rate from 68% in 2002 to 70% in 2003, and a 1% increase in average selling price. Sales in Beijing in 2003 were HK$75 million, representing only a 1% increase over the 2002 figure of HK$74 million. Though the average number of shelters increased by 7% and the average selling price increased by 2%, the occupancy rate dropped from 86% in 2002 to 80% in 2003 due mainly to the impact of SARS in the first half. Despite that, the average occupancy rate for Beijing rebounded to 88% in the second half of 2003, from 70% in the first half. The lower-thanaverage performance in the second quarter affected the overall performance in 2003. Sales in Shanghai increased by 10% to HK$64 million in 2003 from HK$58 million in 2002. This is mainly the results of the increase in occupancy rate from 68% in 2002 to 75% in 2003, with the average number of shelters remaining about the same level. Sales rebounded after SARS in the second half resulting from the Group’s efforts to improve the flexibility of our sales packages and enhance client support. Pent-up demand helped increase the average selling price in the second half by 24%, bringing the 2003 average selling prices at about the same level as 2002. Guangzhou has experienced the highest increase in sales at 25%. This is mainly the result of a 9% increase in the average selling price, despite the fact that there was a short-term reduction in the effective number of panels in the fourth quarter under the bus routes relocation scheme in Guangzhou. Most of the bus shelters were either reinstalled or relocated to new routes. TURNOVER BY OPERATION IN 2003 TURNOVER BY GEOGRAPHICAL LOCATION IN 2003 1.20% 1.29% 16% 49% 13% Beijing Shanghai Guangzhou Shenzhen Others Bus Shelter POS Unipole 97.50% 6% 16% Clear Media Limited Annual Report 2003 20
MANAGEMENT DISCUSSION AND ANALYSIS Revenues from POS and unipole advertising decreased from HK$23 million to HK$12 million in 2003 as the Group arranged to either subcontract out the operation or jointly operate the media with third parties in exchange for a reduction in direct costs including rental and electricity charges. The Group expects these two business segments to remain small in relation to our core bus shelter business. EBITDA The Group’s earnings before interest, tax, depreciation and amortisation (“EBITDA”) has increased to HK$209 million in 2003 from HK$180 million in 2002. The Group’s EBITDA margin increased to 43% in 2003 (2002: 42%). It is noteworthy, however, that the EBITDA margin for the bus shelter business, the Group’s primary focus, remains stable at 48% (2002: 48%) despite the increase in costs associated with the large number of advertising panels built and acquired during the year. The Group has successfully implemented various cost-saving measures, including re-negotiation of rentals on new panels and electricity, as well as deploying cost-saving techniques on advertising panels. Expenses During the year under review, direct operating costs, which include electricity, rental maintenance, increased by 6% to HK$146 million (2002: HK$137 million). However, it should be noted that direct costs on a per unit basis have dropped significantly compared to 2002 as a result of cost-saving measures implemented in 2003. In 2002, sales and cultural levies were at 4% due to one-off rebates, but the levy was back to a normal 8.5% in 2003. The expansion of the Group’s bus shelter network has also resulted in higher amortisation of concession rights which increased to HK$93 million in 2003 from HK$86 million in 2002. To strengthen our sales capability and better serve our increasing client list, the Group has also increased the number of sales and marketing staff by 23, bringing the total sales and marketing head count to 217 in 2003 (2002: 194) which resulted in higher selling expenses, such as sales staff salary, travelling and other related expenses. Control of traveling and entertainment expenses, coupled with gains on other investments, resulted in lower SG&A expenses which accounted for 19% of sales in 2003 (2002: 22%). COST BREAKDOWN 2002 2003 HK$'000 HK$'000 5,536 Depreciation of owned assets 7,193 34,089 Selling expenses 37,621 59,323 Adminstrative expenses 55,422 Amortisation of concession rights and depreciation of POS Direct operating costs 153,283 88,391 95,703 186,437 THE AGE OF CONSUMERS 21
Page 5 and 6: OUR GOAL IS TO BE THE BEST AND THE
Page 7 and 8: CORPORATE PROFILE Clear Media is th
Page 9 and 10: LETTER FROM THE CHAIRMAN Dear Fello
Page 11 and 12: INTERVIEW WITH THE CEO THE AGE OF C
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Page 17 and 18: MANAGEMENT DISCUSSION AND ANALYSIS
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Page 41 and 42: SERVICE INDUSTRY Whatever you’re
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Page 47 and 48: BIOGRAPHIES OF DIRECTORS Teo Hong K
Page 49 and 50: BIOGRAPHIES OF DIRECTORS Pedro Man
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Page 69 and 70: BALANCE SHEET 31 December 2003 2003
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NOTICE OF ANNUAL GENERAL MEETING (c
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GLOSSARY accounts payable accounts
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FINANCIAL SUMMARY 2003 2002 2001 20
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