Wednesday, April 27, 2005

Media_Different judgement on China Southern Airline's annual report

When a newspaper and a news wire tell a totally different story on a company's annual report, I know something must be going wrong in one side.

So here is the story. When China Southern Airline, China's second-biggest airlines by sales, disclose the annual result of 2004, a Hong Kong local newspaper reported the result in a net profit of 94 million yuan, while Bloomberg, a financial news wire, said a net loss of 48 million yuan citing the burden of surging oil costs.

Amy is curious to dig into the company's website to get the real result, and it is here. Bloomberg is right that the Airline lost money last year, while the unlinkable South China Morning Post is totally wrong.

The PR person in the China Southern Airline might be happy to see the story on the largest local English newspaper. They may careful cut the story down from the paper and post it on their own records, with some note such as "Our great PR job".

The reporter in the newspaper said that the mistake is caused by his inexperience in reading simplified Chinese, which is in different form from the popular traditional Chinese in Hong Kong, though I would like to call it an "unavoidable" mistake in the newspapers.

Newspaper itself suffers most from the popularity of online news and blogs. Michael Eliott, the Editor of Time Asia, said that he already knew newspaper will be the victim in the Internet era, instead of the magazine, because the latter's quality is better. Newspaper's revenues grows up slowly, leading many experienced reporters leaving for other better-paid positions such as Public Relation person and financial analysts. In that case, how you expect some entry-level or inexperienced reporters to bring in-depth or right stories to the readers?

If the circle is like that, guess what will happen at last?


Victor said...

Yes, the SCMP reporter had made a mistake, and it should be avoidable. However, this also reflects the difficult in reading the results for H-shares, or statep-owned shares.

When they release results, they will publish its results according to the IFRS and PRC accounting standards. As such, there will be two results figure. In IFRS, which HK is using now, CSA reported a net loss of RMB48M; in PRC accounting standards, CSA reported a profit.

Most H-shares will also report results on a quarterly basis. they will use PRC accounitng standards alone, however. This might be the reason why the report made the mistake, although this was a full year results announcement.

Can the Internet eventually replace newspapers? I rather doubt it, at least I will read several of them everyday.

Amy or koala said...

hoho, thanks, Victor, your insight is great. But shouldn't H-share company publish the result according to the universal IFRS standards for they are HK-listed company?

For the Internet and newspaper, I do believe that Internet will finally replace newspaper with the increasing of online advertising revenue? More and more elites will finally be attracted to the higher-paid online news site.

Victor said...

The HKEX only requires main board companies to publish six-month and full-year results, and thus the H-share companies are required to publish their interim and final results under IFRS. Only the PRC exchanges require them to publish 1Q and 3Q results, so they will only use PRC accounting rules.

I am reading some on-line newspapers such as AWJ, FT, and SCMP. I think the database is more useful for me. Online advertising revenue remains insignificant at the moment.