1. Global Financial Journalism
Week 6: Covering earnings announcements
Jeffrey Timmermans
Thursday, 21 March, 13

2. Corporate disclosure
✤ Directors’ report
✤ Auditor’s report
✤ Profit & loss (or income) statement (P&L)
✤ Balance sheet
✤ Cash-flow statement
✤ Footnotes
Thursday, 21 March, 13

3. Earnings announcements
✤ Every three or six months
✤ In most markets, companies must issue a profit-and-loss statement
showing (among other items):
✤ Revenue
✤ Cost of goods sold & other expenses
✤ Net profit
Thursday, 21 March, 13

4. The importance of net profit
✤ Net profit, or earnings or profit attributable to shareholders, is the main
driver of share prices
✤ particularly expectations about net profit
✤ The definition is standard, so net profit is comparable across industries
✤ Net profit, after subtracting dividends, becomes working capital
Thursday, 21 March, 13

5. Other measures of profit
✤ Gross profit
✤ Operating profit
✤ Ebidta (earnings before interest, depreciation, taxation &
amortization)
✤ Pretax profit
✤ Pro-forma net profit
Thursday, 21 March, 13

6. Earnings ledes
Geely Automobile Holdings Ltd. (175), the publicly traded unit of China’s biggest independent automaker,
reported annual profit beat analyst estimates after exports doubled.
Net income climbed 32 percent to 2.04 billion yuan ($328 million), or 0.26 yuan a share, the company said in a
statement to the Hong Kong Stock Exchange today. That exceeded the 1.86 billion average of 23 analyst
estimates compiled by Bloomberg.
Source: Bloomberg
Cathay Pacific Airways Ltd., the world's largest international air
cargo carrier, returned to profit in the second half of 2012 as a
result of higher cargo volume and cost-cutting measures.
China Telecom, the world's biggest fixed-
line network operator and the nation's The airline reported net profit of HK$916 million ($118 million)
third-largest mobile-phone carrier, for the year ended December, down 83 percent from 2011, and
reported a 9.5 per cent decline in net narrowly missing an average forecast of HK$1.01 bil1ion profit
profit last year due to increased from 15 analysts polled by Thomson Reuters I/B/E/S.
marketing costs to promote the iPhone.
Source: Reuters
Although revenue rose 15.5 per cent to
283.1 billion yuan (HK$353.6 billion), net
profit shrank to 14.9 billion yuan from
16.5 billion yuan in 2011.
Source: South China Morning Post
Thursday, 21 March, 13

7. Writing about net profit
✤ Focus on the percentage change in net, but always give full figures for
both the just-ended period and the year-earlier period
✤ Compare the change to analysts’ expecations
✤ Make sure to include revenue figures as well!
✤ Net profit can “rise” or “fall,” but a net loss will “widen” or “narrow”
✤ Make sure to clearly define the reporting period
✤ Don’t forget to include a brief company description
Thursday, 21 March, 13

8. Structure of an earnings story
✤ Change: How did net profit change from the same period a year
earlier?
✤ Cause: What was the cause of the change in net?
✤ Expectations: What was the market expecting for net?
✤ Context: The current environment and a company description
✤ Comment: from company executives and analysts
✤ Future: Any guidance from company or analysts about future profit?
Thursday, 21 March, 13

9. Key info in earnings stories
✤ Net profit in just-ended and year-earlier periods
✤ Revenue in just-ended and year-earlier periods
✤ Analyst (or company’s) expectations
✤ Analyst and company management reaction
✤ Breakdown of earnings and revenue contributions by unit/business
✤ Any outstanding irregularities in financial statement
Thursday, 21 March, 13

10. Things to remember
✤ Compare the year-on-year change in revenue with the change in net
profit
✤ How does the company’s profit margin change and why?
✤ Compare costs with other companies in same industry
✤ Look for one-time gains or losses from asset sales or revaluations
✤ Look at how the company’s share price reacts to the earnings
announcement
Thursday, 21 March, 13

11. Company spin
PCCW reports interim results for 2008
Continued double-digit growth in core business
HONG KONG, August 21, 2008 - PCCW Limited today reported continued double-digit growth in its core business performance
in the first half of 2008 as the Company successfully implemented its growth strategies.
Highlights of the interim results for the six months ended June 30, 2008 are as follows:
• Core revenue* increased by 13% to HK$10,754 million; consolidated revenue including PCPD decreased by 2%
to HK$11,372 million, reflecting lower recognition of property development revenue
• Core EBITDA* increased by 10% to HK$3,364 million; consolidated EBITDA including PCPD decreased by 5% to
HK$3,436 million
• Mobile achieved a positive EBITDA of HK$108 million
• now TV has become the largest local pay-TV operator with installed base up 13% to 927,000
• Profit attributable to equity holders of the Company amounted to HK$656 million
• Basic earnings per share of 9.68 HK cents
• Interim dividend of 7 HK cents per share
The strong core revenue growth was driven by growth in all core business segments - 11% in Telecommunications Services, 45%
in TV & Content, 28% in Mobile and 9% in PCCW Solutions.
Consolidated revenue including Pacific Century Premium Developments (PCPD) was lower than a year ago due to lower property
development revenue recognized from the Bel-Air project in the period.
The 10% core EBITDA increase was primarily attributed to strong revenue growth in all core business segments and significant
improvement in TV & Content and Mobile EBITDA.
Group Managing Director Alex Arena said: "It is encouraging to note that during the first half of 2008, an increasing number of
customers were using more of our unique quadruple-play services via each of the four delivery platforms. We are confident that,
subject to the continuing satisfactory performance of the Hong Kong economy, this trend will continue, thereby contributing to a
rise in household average revenue per user (ARPU), which will drive an increase in core business revenue."
Thursday, 21 March, 13

12. Thursday, 21 March, 13

13. Consolidated vs. unconsolidated
✤ Consolidated, or group, financial results include contributions from a
company’s subsidiaries
✤ Unconsolidated, or stand-alone or parent, results reflect only the
performance of the company itself
Thursday, 21 March, 13

14. Writing the initial earnings story
PCCW 1H Net Down 20% On Lower Property Revenue
706 words
21 August 2008
05:31
HONG KONG (Dow Jones)--PCCW Ltd. (0008.HK), Hong Kong's dominant fixed-line operator, said Thursday its first-half net
profit fell 20% from a year earlier on lower revenue contribution from its property unit.
Net profit for the six months ended June 30 fell to HK$656 million (US$84 million) from HK$822 million a year earlier, the
company said in a statement. Revenue fell 2% to HK$11.37 billion from HK$11.61 billion mainly due to a smaller contribution
from its property unit, Pacific Century Premium Developments Ltd. (0432.HK). The unit holds the development rights to the
Hong Kong government's Cyberport project and owns the nearby Bel-Air residential development.
PCCW said revenue from its core telecommunications services rose 11% to HK$8.55 billion from HK$7.71 billion a year earlier,
driven by growth in international telecommunications services. Revenue from its Hong Kong-based broadband television
business, "now TV," rose 45% to HK$1.04 billion from HK$715 million a year earlier, driven by a larger subscriber base and
higher TV advertising revenue. The broadband TV business reported a loss before interest, tax, depreciation and amortization of
HK$40 million, narrowing from a loss of HK$74 million a year earlier.
Nomura Securities analyst Kelvin Ho said PCCW's first-half net profit was below his expectation of HK$700 million. "I originally
expected now TV to achieve EBITDA breakeven in the first-half but it still reported a EBITDA loss of HK$40 million because of
its investment in high definition TV services," said Ho.
Thursday, 21 March, 13

15. Earnings stories: another look
BoCom profit rises, but growth slows
31 March 2010
The Wall Street Journal Asia
English
SHANGHAI -- Bank of Communications Co., China's fifth-largest lender by
Change
assets, posted a 5.6% increase in 2009 net profit, driven by higher revenue
from fee-based business, such as credit cards and wealth management.
Cause
The growth is the slowest since the state-run bank listed in Hong Kong in 2005,
as China's easy monetary policy weighed on the profitability of its lending
business. The bank, known as BoCom, said it will cut lending growth to 20% Context
this year, about half of last year's level, and expects profit to rise on the
rebound in the local economy.
The company, in which HSBC Holdings PLC owns a 19% stake, said its net
profit for the 12 months ended Dec. 31 was 30.12 billion yuan ($4.41 billion),
up from 28.52 billion yuan the previous year.
"I'm confident this year's earnings will be satisfactory and reasonable. We see
growth in our assets -- net interest margins will continue to recover from low Comment
levels last year," said Yu Yali, chief financial officer at BoCom.
Expectations?
Thursday, 21 March, 13