Great Eagle Holdings Limited — Interim / Quarterly Report 2001

Sep 7, 2001

(Incorporated in Hong Kong with limited liability)

ANNOUNCEMENT OF INTERIM RESULTS

FOR THE SIX MONTHS ENDED 30 JUNE 2001

UNAUDITED INTERIM RESULTS

Six months ended 30 June

2001 2000

Notes HK$'000 HK$'000

Turnover (2) 156,828 292,632

Cost of sales (133,262 ) (236,382 )

Gross profit 23,566 56,250

Net realised gain on disposal of interests

in a subsidiary 16,253 -

Net unrealised gains (losses) on trading

securities 6,957 (8,789 )

Other revenue (3) 5,702 5,518

Marketing expenses (6,108 ) (6,820 )

Administration expenses (46,043 ) (32,684 )

Profit from operations (4) 327 13,475

Finance costs (18,950 ) (12,968 )

Share of results of associates 4,047 1,814

Share of results of jointly controlled entities 89,074 33,811

Profit before taxation 74,498 36,132

Taxation (5) (16,237 ) (13,613 )

Profit before minority interests 58,261 22,519

Minority interests (145 ) (1,370 )

Net profit attributable to shareholders 58,116 21,149

HK cents HK cents

Earnings per share (6)

Basic 0.7 0.5

Diluted N/A 0.5

Notes:

(1) Review by Auditors

The interim financial report of the Company for the six months ended 30 June 2001 has been reviewed by our auditors, Messrs. Deloitte Touche Tohmatsu, in accordance with the Statement of Auditing Standard 700 "Engagements to Review Interim Financial Reports" issued by the Hong Kong Society of Accountants and an unmodified review conclusion has been issued. Without modifying their review conclusion, the auditors draw attention to the fact that the comparative condensed financial information for the six months ended 30 June 2000 disclosed in the interim financial report has not been subject to an equivalent review.

(2) Turnover and contribution analysis

The Group's turnover for the period was wholly derived from activities carried out in the People's Republic of China (the "PRC") rather than Hong Kong activities. The breakdown by principal activity of the Group's turnover and contribution to profit before taxation is as follows:

Contribution to

Turnover profit before taxation

Six months ended Six months ended

30 June 30 June

2001 2000 2001 2000

HK$'000 HK$'000 HK$'000 HK$'000

By principal activity:

Property development 150,570 290,674 3,720 41,250

Hotel and property

Management and

property agency 3,586 1,958 (4,657 ) (3,166 )

Building materials 2,672 - (399 ) -

156,828 292,632 (1,336 ) 38,084

Net realised gain on disposal

of interests in a subsidiary 16,253 -

Net unrealised gains (losses)

on trading securities 6,957 (8,789 )

Other revenue 5,702 5,518

Indirect overheads (27,249 ) (21,338 )

Profit from operations 327 13,475

Finance costs (18,950 ) (12,968 )

Contribution from associates 4,047 1,814

Contribution from jointly

controlled entities 89,074 33,811

Profit before taxation 74,498 36,132

(3) Other revenue

Six months ended 30 June

2001 2000

HK$'000 HK$'000

Dividend income

• unlisted shares 1,009 1,009

• listed shares - 746

Interest income on bank deposits and loans receivable 2,208 2,793

Other income 2,485 970

5,702 5,518

(4) Profit from operations

Profit from operations has been arrived at after charging:

Six months ended 30 June

2001 2000

HK$'000 HK$'000

Depreciation of property, plant and equipment 2,675 2,623

Less: amount capitalized on property under development (186 ) (234 )

2,489 2,389

Amortisation of:

Goodwill on consolidation 802 217

Premium on acquisition of associates and jointly

controlled entities 366 366

(5) Taxation

Six months ended 30 June

2001 2000

HK$'000 HK$'000

PRC income tax

Company and subsidiaries

• current period provision 3,562 9,551

• over-provision in prior years (3,147 ) (3,050 )

Share of tax of associates 1,023 564

Share of tax of jointly controlled entities 14,799 6,548

16,237 13,613

Hong Kong Profits Tax has not been provided as the Group has no assessable profit subject to Hong Kong Profits Tax for the six months ended 30 June 2001. Certain of the Group's subsidiaries operating in the PRC are eligible for tax exemptions and concessions. PRC income tax is calculated at the applicable rates on assessable profits.

(6) Earnings per share

The calculation of basic and diluted earnings per share is based on the following data:

Six months ended 30 June

2001 2000

HK$'000 HK$'000

Earnings

Earnings for the purposes of basic and diluted earnings

per share 58,116 21,149

Six months ended 30 June

2001 2000

HK$'000 HK$'000

Number of Shares

Weighted average number of ordinary shares for

the purposes of basic earnings per share 8,490,658,332 4,138,455,842

Effect of dilutive potential ordinary shares:

Warrants - 53,548,061

Weighted average number of ordinary shares for

the purposes of diluted earnings per share 8,490,658,332 4,192,003,903

There was no bonus element in the rights issue approved on 13 October 2000. Accordingly, no adjustment is made on the number of ordinary shares issued in calculating the basic earnings per share for the six months ended 30 June 2000.

The computation of diluted earnings per share for the six months ended 30 June 2001 does not assume the conversion of the Company's outstanding convertible loan notes since their exercise would result in an increase in earnings per share from continuing ordinary operations.

The computation of diluted earnings per share for the six months ended 30 June 2001 does not assume the exercise of the Company's outstanding share options and warrants as the exercise prices are higher than the average market price per share.

MANAGEMENT DISCUSSION AND ANALYSIS

Interim Business Review

The Group's net profit attributable to shareholders for the period under review was HK$58,116,000 (2000: HK$21,149,000), representing an 175% increase over the previous period. The significant increase in net profit is mainly due to a greater profit contribution from a jointly controlled entity - Shenzhen Tian An Cyberpark Co., Ltd.

During the period, total sales of 41,310 m2 Gross Floor Area ("GFA") from residential/commercial property was recorded (2000: 59,820 m2 from residential/commercial property and 600 m2 from industrial property). Under the same period, 84,760 m2 GFA were completed (2000: 64,700 m2) whereas 254,000 m2 GFA were under construction (2000: 312,000 m2).

The improving purchasing power of consumers and low mortgage loan interest rates prevailing in the PRC have encouraged new purchasers to become home-owners. The abolition of the traditional bonus house allocation system and the unification of the domestic and foreign housing markets are viewed as two long-term favourable factors for the property market in the PRC.

Potential house buyers are becoming more demanding in their property selection. The development of high quality properties and provision of satisfactory after-sale services including first class property management represent the Group's strategy to maintain competitive advantage in the market.

The acquisition of a controlling interest in Interform Ceramics Technologies Limited ("Interform"), the shares of which are listed on The Stock Exchange of Hong Kong Limited, was completed on 15 May 2001.

Financial Position

Liquidity and Financing

The Group managed to maintain its liquidity at a healthy level with a well-balanced portfolio of financial resources. As at 30 June 2001, bank balances and cash of the Group (mainly in Renminbi) were maintained at HK$254 million, providing sufficient working capital for the daily operations of the Group.

As at 30 June 2001, the total borrowings in current liabilities and non-current liabilities amounted to HK$649 million and HK$442 million respectively. Since the investments of the Group are located in the PRC and the interest rate on bank borrowings in Renminbi is lower than that on Hong Kong dollars, most of the bank borrowings are obtained from PRC banks in Renminbi in order to reduce the borrowing costs and minimize the risk of exchange rate fluctuations. Approximately 15% of the Group's bank borrowings bear interest at floating rates and the remaining 85% are at fixed rates.

The gearing ratio (net debt over shareholder's equity) of the Group was maintained at a healthy level of 21% as at 30 June 2001.

Charges on Assets

As at 30 June 2001, all the Company's undertaking and assets and the Group's interest in an associate with a carrying value of HK$484,310,000 were pledged against a bank overdraft facility granted to the Company. Bank deposits of HK$9,581,000, aggregate carrying values of development properties of approximately HK$373,337,000 and the Group's interest in certain subsidiaries with aggregate carrying values of approximately HK$100,912,000 were pledged to banks for banking facilities granted to those subsidiaries.

Contingent Liabilities

As at 30 June 2001, guarantees given to banks by the Group in respect of banking facilities granted to jointly controlled entities, a third party and a minority shareholder were HK$122,616,000, HK$46,449,000 and HK$18,692,000 respectively. Guarantees given to banks in respect of mortgage loans granted to property purchasers totalled HK$411,570,000.

Employees

As at 30 June 2001, the Group, including its subsidiaries but excluding associates and jointly controlled entities, employed approximately 391 persons. Total staff costs for the period under review amounted to approximately HK$22,532,000. The remuneration policies and bonus schemes of the Group are based on the performance of the staff and market conditions.

OUTLOOK

The industry figures for the PRC property market signify its recovery from its consolidation stage, especially for the residential market. The increase in net household incomes and the desire for improved living standards will continue stimulate individuals' demand for new and high-grade houses. It is further expected that the high level of household deposits, reasonable return from rental properties and new encouraging policies will attract funds flow into the property market.

The holding of APEC, the entry to the WTO and Beijing's successful bid for the 2008 Olympic Games will stimulate a wide range of industries, attract new foreign investments and enhance further economic reforms and real economic growth. It is anticipated that the effect will be most significant in the major cities. The management has taken actions to increase our quality landbank in Beijing and Shanghai and will continue to seek further additions through various means.

The GDP growth of the PRC is widely predicted to reach 8% this year. Some Chinese economists expect that the PRC will enjoy sustained high growth in the next two years or even longer despite the global slowdown. The property market will benefit from such long-run growth.

The completion of the acquisition of Interform, which is a building materials provider, will provide better support to project development and enhance controls over construction costs.

In view of these factors, management believes the property market will continue to record growth in excess of GDP growth in the PRC and the Group is well prepared and equipped to capture the major opportunities, the outcome of which should be significant for the Group.

INTERIM DIVIDEND

The Directors consider that it is prudent to retain an appropriate level of funds to take advantage of business opportunities as and when they arise, and therefore do not intend to declare an interim dividend (2000: nil).

PUBLICATION OF INTERIM RESULTS ON THE STOCK EXCHANGE'S WEBSITE

A detailed interim results announcement of the Group for the six months ended 30 June 2001 containing all the information required by paragraphs 46(1) to 46(6) inclusive of Appendix 16 of the Listing Rules of the Stock Exchange will be published on the website of the Stock Exchange in due course.

By Order of the Board

David Hui Yip Wing

Managing Director

Hong Kong, 6 September 2001

"Please also refer to the published version of this announcement in the Hong Kong i-mail"