Daily Quommentary: Layoffs, GDP Revision and Profit Warning
Jul 04, 2001 - 10:12:52 HKT
QuamResearch
Daily Quommentary: Layoffs, GDP Revision and Profit Warning
Richard Li promised not to lay off HKT staff within one year after PCCW completed its merger with HKT on 17 August, 2000. To reserve more capital for paying exploding interest costs after the merger, PCCW (8) will today announce a series of layoff plan.
It is rumoured that PCCW will slash as many as 1,400 staff. Initially, the company will lay off more than 200 staff. The majority of them are editors, reporters, and web designers of its Internet division Netvigator, and some of them will be staff of "No One Watch" (NOW). It is also rumoured that the PCCW top executives will also reduce their salaries and benefits. PCCW's acquisition of HKT was a mistake, as it did not have the financial strength to make the offer. The merger ended in PCCW becoming a negative asset with $6.9 billion losses for the first year after the merger. To partially finance the acquisition costs, HKT has earlier raised the fixed line telephone by more than 20%. It seems quite unfair that both all Hong Kong citizens and HKT's staff are now suffering from this mistake made by Richard Li and his multi-billionaire directors.
Incidentally, in response to a global recession, Triumph International, a lady underwear manufacturer, cut 400 staff yesterday. Last week, non-franchised bus operator Kwoon Chung Bus (306) laid off 450 bus drivers. These drivers are offered at around 70% of their original salaries by a new company wholly-owned by Kwoon Chung Bus.
Expecting a worsening economy, the Bank of China (BOC) has substantially trimmed Hong Kong's GDP growth forecast from 4.5% to 2.6%. The BOC expects there to be no major improvement in employment rates and consumer price indices, and therefore revised the unemployment rate upward to 4.5% and the consumer price index to a negative 1.3%. Among major financial institutions, HSBC is the most pessimistic about the local economy. The Bank's 2.2% GDP growth forecast for 2001 is so far the lowest.
Shui On Construction (983) echoed the BOC's gloomy forecast by giving a profit warning yesterday. As a result of a sluggish property market, the company expects a double-digit decline in net profit for the year ending 31 March, 2002. The company announced lackluster net profit of $508 million (EPS: $1.93), up 1% from the previous fiscal year. A final dividend of $1.20 will be paid. Together with the interim dividend of 60 cents, total dividends will be $1.80 (FY99/00: ditto). To reserve more capital for developing the newly acquired Shanghai property project, it is also expected that Shui On will cut the dividend payout ratio to 30-40% from last year's 93%. (to be continued...) |
