CAI Corp — Interim / Quarterly Report 2007

Aug 8, 2007

HARBOUR CENTRE DEVELOPMENT LIMITED

Stock Code: 51

Interim Results Announcement

For the six months ended 30 June 2007

GROUP RESULTS

The unaudited Group profit attributable to Shareholders for the six months ended 30 June 2007 amounted to HK$223.3 million, a decrease of 17.2% as compared with HK$269.7 million reported for the corresponding period last year. Earnings per share were HK$0.71 (2006: HK$0.86).

The Group's profit has included an investment property revaluation surplus, after related deferred tax, of HK$21.9 million in the results. Excluding this net surplus, the profit for the period under review would have been HK$201.4 million, an increase of 6.7% over the comparable period.

The Group's operating profit increased by 10.8% to HK$181.0 million, principally attributable to steady growth of rental income from the retail areas of The Marco Polo Hongkong Hotel ("MPHK") and increase in investment return from the Investment Segment.

Interim Dividend

The Board has declared an interim dividend in respect of the half-year period ended 30 June 2007 of HK$0.05 (2006: HK$0.05) per share, payable on Monday, 15 October 2007 to shareholders on record as at 4 October 2007.

MANAGEMENT DISCUSSION AND ANAYLSIS

Segment Review

Total revenue and operating profit of the Hotel Segment during the first half of 2007 slightly declined by 0.5% and 2.4% to HK$201.3 million and HK$68.0 million respectively versus the same period last year. The decrease was mainly attributed to lower occupancy at MPHK and a drop in Food & Beverage revenue arising from the closure of Grippes in November 2006. Average occupancy during the period dropped to 84% from 88% recorded a year earlier. In spite of a drop in occupancy, average room rate grew by 8.0% on the back of high demand for hotel rooms during trade fairs and the Chinese New Year holidays.

Property Investment revenue and operating profit grew by 6.5% and 5.9% to HK$60.5 million and HK$52.0 million respectively. The increase was principally contributed by favourable rental growth amidst the strong retail market. The retail space of MPHK was virtually fully let during the first half of 2007, while the Star House retail units were 75.5% leased during the period.

The Group's investment properties, comprising the office and retail areas in MPHK and the Star House units, were revalued by an independent valuer at 30 June 2007. Net revaluation surplus after deferred tax was HK$21.9 million during the period (2006: HK$80.9 million).

Financial Review

(I) Review of 2007 Interim Results

Turnover

The Group's turnover in the first half 2007 decreased by 32.9% to HK$324.1 million (2006: HK$483.0 million) since no property sale was recorded during the period under review.

Hotel Segment maintained its revenue at HK$201.3 million (2006: HK$202.4 million). No growth was reported mainly due to the impact of the closure of a restaurant in MPHK for renovation since November 2006. Room revenue managed to report a 2.8% year-on-year growth as higher room rates were achieved during the period under review.

Property investment revenue was up by 6.5% to HK$60.5 million (2006: HK$56.8 million) as retail rental income generated from MPHK's retail areas continued to grow steadily, but the increase was mitigated by the decrease in rental income from Star House units on the moving out of a major tenant.

Property Development Segment recorded no property sales during the period under review (2006: HK$176.5 million).

Investment Segment's interest and dividend income generated from the Group's surplus cash and investment increased by 31.7% to HK$62.3 million (2006: HK$47.3 million).

Operating Profit

The Group's operating profit rose by 10.8% or HK$17.7 million to HK$181.0 million (2006: HK$163.3 million). The improvement was mainly attributable to the Property Investment Segment and the Investment Segment with operating profit growth of 5.9% and 33.3% respectively, following their corresponding increase in revenue as mentioned above.

Other Items

Included in the Group's profit is other net income of HK$38.0 million (2006: HK$43.1 million), which mainly included profit of HK$37.2 million on disposal of certain listed investments.

Share of Profits of an Associate

Share of profit of an associate in the first half of 2007 was HK$3.9 million, increased from HK$2.8 million in the same period last year. This was due primarily to the increase in attributable profit from the sales of the remaining car parks at Sorrento during the period.

Taxation

The taxation charge for the period reduced by 30.3% to HK$26.2 million (2006: HK$37.6 million) as a result of the decrease in deferred tax on the corresponding decrease in property revaluation surplus of investment properties during the period.

Profit Attributable to Shareholders

The unaudited Group's profit attributable to shareholders for the first half of 2007 amounted to HK$223.3 million (2006: HK$269.7 million), representing a decrease of HK$46.4 million or 17.2%. Earnings per share were HK$0.71 (2006: HK$0.86).

The Group's investment properties were revalued as at 30 June 2007, resulting in a net surplus after deferred tax of HK$21.9 million (2006: HK$80.9 million) recorded in the profit and loss account.

Excluding this net surplus, the profit for the period was HK$201.4 million, representing an increase of 6.7% over 2006. The favourable results were mainly due to the increase in dividend and interest income, but offset in part by the decrease in profit on disposal of investments.

1. Liquidity and Financial Resources

As at 30 June 2007, the Group's shareholders' equity was HK$5,064.0 million, equivalent to HK$16.1 per share.

As at 30 June 2007, the Group had a net cash of HK$1,469.1 million, decreased by 20.2% from HK$1,840.2 million as at 31 December 2006. The decrease was mainly due to the cash outflow for the net purchase of listed investments, which amounted to HK$478.4 million. The cash surplus was mostly placed as bank deposits. As at 30 June 2007, the Group also maintained a portfolio of investments primarily consisting of blue chip securities, with an aggregate market value of HK$2,163.7 million (2006: HK$1,490.0 million). The favourable performance of the portfolio was in line with the stock markets.

At 30 June 2007, the Group had no significant exposure to foreign exchange rate fluctuations.

1. Human Resources

The Group has approximately 452 employees working at the Group's hotel. Employees are remunerated according to the nature of the job and market trends, with a built-in merit component incorporated in the annual increment to reward and motivate individual performance. Total staff costs for period ended 30 June 2007 amounted to HK$53.5 million (2006: HK$52.7 million).

CODE ON CORPORATE GOVERNANCE PRACTICES

During the financial period under review, all the code provisions set out in the Code on Corporate Governance Practices contained in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited were met by the Company, except in respect of one code provision providing for the roles of chairman and chief executive officer to be performed by different individuals. The deviation is deemed appropriate as it is considered to be more efficient to have one single person to be the Chairman of the Company as well as to discharge the executive functions of a chief executive officer. The Board of Directors believes that the balance of power and authority is adequately ensured by the operations of the Board which comprises experienced and high calibre individuals with a substantial proportion thereof being independent Non-executive Directors.

CONSOLIDATED PROFIT AND LOSS ACCOUNT

FOR THE SIX MONTHS ENDED 30 JUNE 2007

				Unaudited		Unaudited
				30/6/2007		30/6/2006
				HK$		HK$
		Note		Million		Million
Turnover		2		324.1		483.0
Direct costs and operating expenses				(117.5)		(283.9)
Selling and marketing expenses				(11.0)		(22.8)
Depreciation and amortisation				(11.6)		(10.4)
Administrative and corporate expenses				(3.0)		(2.6)
Operating profit		3		181.0		163.3
Increase in fair value of investment properties				26.6		98.1
Other net income		4		38.0		43.1
				245.6		304.5
Share of profits less losses of associates				3.9		2.8
Profit before taxation				249.5		307.3
Taxation		5(b)		(26.2)		(37.6)
Profit attributable to shareholders				223.3		269.7
Proposed interim dividends		6(a)		15.8		15.8
Earnings per share		7		HK$0.71		HK$0.86
Proposed interim dividends per share				HK$0.05		HK$0.05

CONSOLIDATED BALANCE SHEET

AS AT 30 JUNE 2007

			Unaudited		Audited
			30/6/2007		31/12/2006
			HK$		HK$
	Note		Million		Million
Non-current assets
Fixed assets
Investment properties			1,690.0		1,663.0
Leasehold land			15.2		15.2
Other properties, plant and equipment			70.7		63.4
Interest in associates			0.2		0.8
Available-for-sale investments			2,163.7		1,490.0
Long term receivables			2.9		3.1
Employee benefits			6.4		6.7
			3,949.1		3,242.2
Current assets
Inventories			7.4		7.6
Trade and other receivables	8		49.3		78.8
Cash and cash equivalents			1,469.1		1,840.2
			1,525.8		1,926.6
Current liabilities
Trade and other payables	9		143.0		140.5
Taxation payable			35.5		22.6
			178.5		163.1
Net current assets			1,347.3		1,763.5
Total assets less current liabilities			5,296.4		5,005.7
Non-current liabilities
Deferred income			-		0.8
Deferred taxation			232.4		226.9
			232.4		227.7
NET ASSETS			5,064.0		4,778.0
Capital and reserves
Share capital			157.5		157.5
Reserves			4,906.5		4,620.5
TOTAL EQUITY			5,064.0		4,778.0

NOTES TO THE FINANCIAL STATEMENTS

1. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

The unaudited interim consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard ("HKAS") 34 "Interim Financial Reporting" ("HKAS 34") issued by the Hong Kong Institute of Certified Public Accountants and applicable disclosure provisions of Appendix 16 of Listing Rules of The Stock Exchange of Hong Kong Limited.

The preparation of the interim financial statements in conformity with HKAS 34 requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates.

The accounting policies and methods of computation used in the preparation of the interim financial statements are consistent with those used in the annual financial statements for the year ended 31 December 2006.

In 2007, the Group adopted the new standard, amendment and interpretations below, which are relevant to its operations.

HKAS 1 (Amendment) Presentation of Financial Statements: Capital Disclosures

HK (IFRIC) – Int 10 Interim Reporting and Impairment

HKFRS 7 Financial Instruments: Disclosure

The Group has assessed the impact of the adoption of these new standard, amendment and interpretations and considered that there was no significant impact on the Group's results and financial position nor any substantial changes in the Group's accounting policies, whereas the adoption of HKAS 1 (Amendment) and HKFRS 7 requires additional disclosures to be made in the annual report.

2. SEGMENT INFORMATION

(a) Business segments

	Segment revenue				Segment results
	30/6/2007		30/6/2006		30/6/2007		30/6/2006
	HK$		HK$		HK$		HK$
	Million		Million		Million		Million
Hotel and restaurants	201.3		202.4		68.0		69.7
Property investment	60.5		56.8		52.0		49.1
Property development	-		176.5		(0.2)		(1.4)
Investments	62.3		47.3		61.2		45.9
	324.1		483.0		181.0		163.3
Increase in fair value of
investment properties					26.6		98.1
Other net income
Investments					38.0		43.1
					245.6		304.5
Associates
Property development					3.9		2.8
Profit before taxation					249.5		307.3

(b) Geographical segments

	Segment revenue				Segment results
	30/6/2007		30/6/2006		30/6/2007		30/6/2006
	HK$		HK$		HK$		HK$
	Million		Million		Million		Million
Hong Kong	304.7		466.4		161.6		146.7
Singapore	19.4		16.6		19.4		16.6
	324.1		483.0		181.0		163.3

No inter-segment revenue has been recorded during the periods.

1. OPERATING PROFIT

	30/6/2007		30/6/2006
	HK$		HK$
	Million		Million
Operating profit is arrived at:
After charging:
Cost of inventories sold	11.3		178.8
Depreciation and amortisation	11.6		10.4
Staff costs including retirement scheme costs
HK$1.8 million (2006: HK$2.8 million)	53.5		52.7
Auditors' remuneration	0.3		0.3
Share of associates' taxation	0.8		0.4
and crediting:
Gross rental income from investment properties	51.4		47.9
Less: direct outgoings	(6.6)		(5.7)
	44.8		42.2
Interest income on bank deposits	40.0		25.2
Dividend income from listed investments	22.3		20.6

1. OTHER NET INCOME

	30/6/2007		30/6/2006
	HK$		HK$
	Million		Million
Release of deferred income	0.8		0.6
Profit on disposal of available-for-sale investments	37.2		42.5
	38.0		43.1

5. TAXATION

(a) The provision for Hong Kong profits tax is based on the profit for the period as adjusted for tax purposes at the rate of 17.5% (2006: 17.5%).

1. Taxation in the consolidated profit and loss account represents:

	30/6/2007		30/6/2006
	HK$		HK$
	Million		Million
Current taxation
Provision for Hong Kong profits tax for the period	20.9		19.8
Overprovision in respect of prior years	(0.2)		-
	20.7		19.8
Deferred taxation
Origination and reversal of temporary differences	0.8		0.6
Change in fair value of investment properties	4.7		17.2
	5.5		17.8
Total tax charge	26.2		37.6

6. DIVIDENDS

(a) Dividends attributable to the period

	30/6/2007		30/6/2006
	HK$		HK$
	Million		Million
Proposed interim dividends after the balance sheet date:
5.0 cents (2006: 5.0 cents)	15.8		15.8

The interim dividends proposed after the balance sheet date has not been recognised as a liability at the balance sheet date.

(b) Dividends attributable to the previous financial year, approved and paid during the period

	30/6/2007		30/6/2006
	HK$		HK$
	Million		Million
Final dividend in respect of the previous financial
year, approved and paid during the period, of
24.0 cents per share (2006: 12.0 cents per share)	75.6		37.8

7. EARNINGS PER SHARE

The calculation of earnings per share is based on the profit for the period of HK$223.3 million (2006: HK$269.7 million) and on 315.0 million (2006: 315.0 million) ordinary shares in issue throughout the period ended 30 June 2007. For the period under review and the preceding comparative period, there is no difference between the basic and diluted earnings per share.

1. TRADE AND OTHER RECEIVABLES

Included in trade and other receivables are trade debtors (net of provision for bad and doubtful debts) with ageing analysis as at 30 June 2007 as follows:

	30/6/2007		31/12/2006
	HK$		HK$
	Million		Million
Due within 30 days	15.0		48.4
Due after 30 days but within 60 days	3.4		6.6
Due after 60 days but within 90 days	0.2		0.9
Over 90 days	0.2		-
	18.8		55.9

The Group has defined credit policies for each of its core businesses. The general credit terms allowed range from 0 to 60 days.

1. TRADE AND OTHER PAYABLES

Included in trade and other payables are trade creditors with ageing analysis as at 30 June 2007 as follows:

	30/6/2007		31/12/2006
	HK$		HK$
	Million		Million
Due within 30 days	8.1		14.0
Due after 30 days but within 60 days	4.1		5.6
Due after 60 days but within 90 days	0.4		-
Over 90 days	0.1		-
	12.7		19.6

10. REVIEW OF RESULTS

The unaudited interim results for the six months ended 30 June 2007 have been reviewed with no disagreement by the Audit Committee of the Company.

PURCHASE, SALE OR REDEMPTION OF SHARES

Neither the Company nor any of its subsidiaries has purchased, sold or redeemed any listed securities of the Company during the financial period under review.

BOOK CLOSURE

The Register of Members will be closed from Thursday, 27 September 2007 to Thursday, 4 October 2007, both days inclusive, during which period no transfer of shares of the Company can be registered. In order to qualify for the abovementioned interim dividend, all transfers, accompanied by the relevant share certificates, must be lodged with the Company's Registrars, Tricor Tengis Limited, at 26th Floor, Tesbury Centre, 28 Queen's Road East, Wanchai, Hong Kong, not later than 4:30 p.m. on Tuesday, 25 September 2007.

By Order of the Board

Wilson W. S. Chan

Secretary

Hong Kong, 8 August 2007

As at the date of this announcement, the Board of Directors of the Company comprises Mr. Gonzaga W. J. Li and Mr. T. Y. Ng, together with three independent non-executive Directors, namely, Mr. H. M. V. de Lacy Staunton, Mr. Michael T. P. Sze and Mr. Man Kou Tan.