1998 INTERIM RESULTS
Consolidated Profit and Loss Account - Unaudited
Note:
Hong Kong profits tax is calculated at 16% (1997: 16.5%) on the estimated assessable profits for the period. Overseas taxation is calculated at rates of tax applicable in countries in which the Group is assessable for tax. Tax provisions are reviewed regularly to take into account changes in legislation, practice and status of negotiations.
2. Interim dividend
An interim dividend of HK3¢ (1997: HK11.5¢) per share has been declared and will be paid on 5th October 1998 to shareholders registered at the close of business on 14th September 1998. The share register will be closed from 14th September 1998 to 18th September 1998, both dates inclusive.
3. Reserves
Share capital
During the period under review, Cathay Pacific Airways Limited made the following purchases of its shares on the Hong Kong Stock Exchange. These purchases were made as a result of a fall in the price of the shares. All the shares purchased were cancelled.
At 30th June 1998, 3,384,199,848 shares were in issue (30th June 1997: 3,429,063,848 shares).
Year 2000
The Year 2000 ("Y2K") or millennium date change issue has arisen because many computer systems and electronic devices which store date information based on a two-digit year sequence are unable to accurately process dates for the Year 2000 and beyond. The problem affects IT and all other systems and equipment that rely on embedded electronic chip technology. Cathay Pacific recognises that this is first and foremost a business management problem. It has the potential to impact on any business that does not take adequate steps to upgrade or replace non-complaint systems, guard against third-party risk from critical suppliers or customers, and manage its risk-exposure through the development of comprehensive contingency plans.
The Cathay Pacific Group is addressing the millennium date change issue as a matter of priority. Sponsored by the Chairman of Swire Pacific and Cathay Pacific, and reporting to a central steering committee, the Swire Group Y2K Programme Office is working with external consultants to monitor progress towards Y2K readiness on a Group-wide basis. A separate Aviation Division subcommittee is co-ordinating the progress of Y2K projects within the Cathay Pacific Group. The airline's Y2K project team began work on the modification of its systems and programmes in 1996.
Cathay Pacific aims to achieve Y2K readiness for its business-critical systems by March 1999 and compliance by June 1999. This will leave a reasonable lead time for anomalies to be addressed in advance of the millennium, with the objective that neither the performance nor function of the Group's key business assets will be materially affected by the date change.
Y2K readiness will have been achieved when an inventory of all relevant equipment and systems (that is all business-critical IT systems and equipment relying on embedded electronic chips failure of which to operate in a manner unaffected to a material extent by the date change at Y2K would have a material adverse effect on the business or operations of the Group) has been made; such equipment and systems have been assessed and tested for potential Y2K problems identified by the relevant project team and a course of action relating to any identified problems has been decided upon and the equipment or services required to implement this have been ordered or arranged. Critical suppliers of such equipment and systems will have been audited for Y2K compliance and compliant alternates identified for those suppliers that are deemed unlikely to achieve Y2K compliance in time. The Cathay Pacific Group of companies aims to have business contingency plans in place to apply in the event of disruptions caused by system or equipment failure or third party non-compliance.
Having achieved readiness, Cathay Pacific aims to achieve Y2K compliance by June 1999. By this we mean, in relation to our own relevant equipment and systems, the modification or replacement of all such equipment and systems that fail our Y2K compliance test and, in respect of suppliers of such equipment and systems, we mean that all critical suppliers will have passed our Y2K compliance audit, or have been replaced by those that have.
Cathay Pacific began to address Y2K issues at a relatively early stage. As part of regular and budgeted enhancements to its business systems, the Company has worked closely with vendors on systematic upgrade programmes to deal with the Y2K problem.
Cathay Pacific's transfer in July to the new Hong Kong International Airport, has also seen the planned upgrade of a number of potentially Y2K-sensitive systems and equipment, including the introduction of a new IT infrastructure as part of its investment in its new headquarters at Chek Lap Kok. The Company has spent HK$226 million in replacing systems, with upgraded versions the vendors of which have represented as being Y2K compliant, and as a consequence has avoided the expense of remedial work. The cost of these new assets has been capitalised in the accounts. The aggregate of the costs to achieve Y2K compliance has not yet been ascertained. Costs of the Y2K programme are expensed in the accounts as and when incurred. As at 30th June 1998 a total of HK$63 million has been contracted for of which HK$22 million has been provided for in the accounts for the six months period ended 30th June 1998.
Cathay Pacific is supporting International Air Transport Association's ("IATA") initiative to monitor and assist Y2K readiness among airports and other industry suppliers. IATA has launched a global programme to audit international airports and air traffic control systems for Y2K readiness and plans to provide a report to its members by mid-1999.
Corporate governance
None of the Directors of the Company is aware of any information that would reasonably indicate that the Company is not, or was not for any part of the accounting period covered by the interim report, in compliance with the Code of Best Practice as set out in the Listing Rules of The Stock Exchange of Hong Kong Limited.
Interim report
The 1998 interim report will be sent to shareholders on 19th August 1998.
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