Guoco Group Limited — Annual Report 2004

Jul 23, 2004

Far East Hotels And Entertainment Limited

FAR EAST HOTELS AND ENTERTAINMENT LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 0037)

ANNOUNCEMENT OF FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2004

RESULTS

The Board of Directors of Far East Hotels And Entertainment Limited (the "Company") announces the audited consolidated financial results of the Company and its subsidiaries (the "Group") for the year ended 31 March 2004 as follows:

CONSOLIDATED INCOME STATEMENT

For the year ended 31 March 2004

	Notes	Year ended 31 March
		2004HK$	2003HK$(restated)
Turnover	2	52,724,890	76,353,502
Cost of sales		(40,473,830)	(47,994,260)
		12,251,060	28,359,242
Other operating income		6,255,934	933,140
Administrative expenses		(17,658,830)	(21,321,033)
Revaluation increase (decrease) on investment properties		3,150,000	(9,888,702)
Revaluation increase (decrease) on hotel property		2,010,459	(6,297,782)
Profit (loss) from operations		6,008,623	(8,215,135)
Finance costs		(4,630,842)	(5,339,219)
Share of results of associates		(12,623,490)	59,182,244
(Loss) profit before taxation		(11,245,709)	45,627,890
Taxation	3	(548,907)	(8,699,996)
(Loss) profit before minority interests		(11,794,616)	36,927,894
Minority interests		-	1,499,797
(Loss) profit for the year		(11,794,616)	38,427,691
		Cents	Cents
(Loss) earnings per share -basic & diluted	4	(2.41)	7.86

NOTES

1. Basis Of Preparation And Accounting Policies

The accounting policies and methods of computation used in the preparation of these financial statements are consistent with those used in the Group's annual financial statements for the year ended 31 March 2003, except that the Group has adopted the revised Statement of Standard Accounting Practice 12 "Income Taxes" issued by the Hong Kong Society of Accountants which are effective for accounting periods commencing on or after 1 January 2003.

As a result of this change in accounting policy, the Group's revaluation reserve at 1st April 2002 has been decreased by HK$11,934,000 and deficit at 1st April 2002 has been increased by HK$51,188,299. The Group's loss for the year has been decreased by HK$5,486,025 (2003: profit for the year increased by HK$163,547).

Far East Hotels And Entertainment Limited

23-7-2004

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Far East Hotels And Entertainment Limited

2. Segmental Information

Business segments

| | Hotel operation HK$ | Property letting HK$ | Securities investment and trading HK$ | Loan financing HK$ | Investment holding HK$ | Others HK$ | Consolidated HK$ | | --- | --- | --- | --- | --- | --- | --- | --- | | 2004 | | | | | | | | | REVENUE | | | | | | | | | Turnover | 11,180,180 | 6,294,399 | 28,499,312 | 5,530,882 | 1,220,117 | – | 52,724,890 | | RESULTS | | | | | | | | | Segment results | 769,140 | (11,075,106) | 15,866,115 | 4,691,428 | 1,220,117 | (1,138,684) | 10,333,010 | | Bank interest income | | | | | | | 71,153 | | Dividend income | – | – | 732,797 | – | – | – | 732,797 | | Unallocated administrative expenses | | | | | | | (10,288,796) | | Revaluation increase on investment properties | – | 3,150,000 | – | – | – | – | 3,150,000 | | Revaluation increase on hotel property | 2,010,459 | – | – | – | – | – | 2,010,459 | | Finance costs | | | | | | | (4,630,842) | | Share of results of associates | – | 116,768 | – | (5,217,211) | – | (7,523,047) | (12,623,490) | | Loss before taxation | | | | | | | (11,245,709) | | Taxation | | | | | | | (548,907) | | Loss before minority interests | | | | | | | (11,794,616) | | Minority interests | | | | | | | – | | Loss for the year | | | | | | | (11,794,616) | | 2003 | | | | | | | | | REVENUE | | | | | | | | | Turnover | 11,235,094 | 6,540,791 | 23,098,413 | 34,866,574 | 612,630 | – | 76,353,502 | | RESULTS | | | | | | | | | Segment results | (485,934) | (7,070,736) | (1,840,327) | 31,555,029 | (12,942,210) | (1,137,392) | 8,078,430 | | Bank interest income | | | | | | | 625,479 | | Dividend income | – | – | 307,661 | – | – | – | 307,661 | | Unallocated administrative expenses | | | | | | | (1,040,221) | | Revaluation decrease on investment properties | – | (9,888,702) | – | – | – | – | (9,888,702) | | Revaluation decrease on hotel property | (6,297,782) | – | – | – | – | – | (6,297,782) | | Finance costs | | | | | | | (5,339,219) | | Share of results of associates | – | – | – | 58,054,398 | – | 1,127,846 | 59,182,244 | | Profit before taxation | | | | | | | 45,627,890 | | Taxation | | | | | | | (8,699,996) | | Profit before minority interests | | | | | | | 36,927,894 | | Minority interests | | | | | | | 1,499,797 | | Profit for the year | | | | | | | 38,427,691 |

Geographical segments

	Sales revenue by geographical market	Contribution to loss from operations
2004
HK$	2003
HK$	2004
HK$	2003
HK$
Hong Kong	48,652,765	71,256,075
People's Republic of China	4,072,125	5,097,427
	52,724,890	76,353,502

Far East Hotels And Entertainment Limited

23-7-2004

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Far East Hotels And Entertainment Limited

3. Taxation

| | 2004 HK$ | 2003 HK$ (restated) | | --- | --- | --- | | Deferred taxation | | | | Current year | (178,880) | (163,547) | | Attributable to a change in tax rate | 659,855 | - | | | 480,975 | (163,547) | | Share of taxation of associates | 67,932 | 8,863,543 | | | 548,907 | 8,699,996 |

No provision for Hong Kong Profits Tax has been made in the financial statements as the Company and its subsidiaries have no assessable profit in both years.

4. (Loss) Earnings Per Share

(a) Basic (loss) earnings per share

The calculation of basic (loss) earnings per share is based on the loss for the year of HK$11,794,616 (2003: profit of HK$38,427,691) and on 488,842,675 (2003: 488,842,675) ordinary shares in issue during the year.

(b) Diluted (loss) earnings per share

The computation of diluted (loss) earnings per share has not assumed the exercise of the outstanding share options of the Company since their exercise prices were greater than the average market price of shares for both years.

5. Depreciation

During the year, depreciation of HK$5,719,342 (2003: HK$5,670,123) was charged in respect of the Group's property, plant and equipment.

DIVIDENDS

The Board does not recommend the payment of any dividend for the year (2003: Nil).

REVIEW OF OPERATIONS

The business of Cheung Chau Warwick Hotel remains stable during the year. However, the business of Beijing Warwick International Apartments was severely affected by SARS and turnover decreased by 20% compared with last year.

The carport podium in Mongkok, Kowloon held by the Group that is let to a carpark operator continues securing a stable rental income to the Group.

All the residential units including private car parking spaces of the Nob Hill development, our Company's joint venture development project with Cheung Kong (Holdings) Limited, were sold.

The directors mentioned in our last year annual report that Old Sydney Town Theme Park, which owns and operates by the Company's associate Bolan Holdings N.V., ceased its operation in early 2003. Under such circumstances, the directors of that associate have re-assessed its interest in land situated in Sydney, Australia and made an additional impairment provision of asset value by US$6 million.

PROSPECTS

The Group continues the pre-redevelopment work of the adjacent lands of the Nob Hill development.

Since the close of the Old Sydney Town Theme Park, the Company had then engaged professionals to explore the possibility of future usage of the piece of land where the Theme Park was situated.

Both the Cheung Chau Warwick Hotel and Beijing Warwick International Apartments are now under renovation. After renovation, the directors believe that both the room rate and occupancy rate will improve and have positive effect on both the turnover and revenue of these two establishments.

As the effect of SARS has faded out and the CEPA (Closer Economic Partnership Arrangement) has been put into effect, the general economy of Hong Kong is now recovering. Further, the promotion of individual traveler to Hong Kong by the Chinese Government has a very positive effect on the retail and hotel and travel industries. In the circumstances, the directors will capture such opportunity and consider new business and investment opportunities that may provide the Group with better recurrent income.

The Group has approximately 110 employees. Employees are remunerated according to nature of the job and market trend, with built-in merit component incorporated in the annual increment to reward and motivate individual performance.

FINANCE ACTIVITIES

At the balance sheet date, the bank and other loans facilities of the Group and the Company amounted to approximately HK$89,356,000 (2003: HK$159,456,000) and HK$67,200,000 (2003:HK$132,931,000) respectively, of which approximately HK$89,260,600 (2003:HK$152,456,000) and HK$67,104,000 (2003:HK$125,931,000) were utilized, respectively.

Far East Hotels And Entertainment Limited 23-7-2004

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Far East Hotels And Entertainment Limited

These facilities were secured by the following:

	THE GROUP		THE COMPANY
	2004	2003	2004	2003
	HK$	HK$	HK$	HK$
Hotel property	40,338,777	36,586,333	-	-
Leasehold land and buildings	8,900,000	11,694,598	-	-
Investment properties	28,820,000	26,580,000	-	-
Bank deposits	2,173,166	2,161,807	2,053,157	2,042,265
	80,231,943	77,022,738	2,053,157	2,042,265

At the balance sheet date, bank loan of approximately HK$52 million is due and payable within one year. The Company has taken positive step to negotiate with bank to restructure the bank loan.

At 31 March 2004, the Group had no material exposure under foreign exchange contracts, interest or currency swaps or other financial derivatives.

Shareholders' funds at 31 March 2004 amounted to approximately HK$478 million (2003: approximately HK$493 million). Accordingly, the Group's gearing ratio (total bank and other loans facilities utilized to shareholders' funds) at 31 March 2004 is 19% (2003: 31%).

PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES

During the year ended 31 March 2004, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed securities.

AUDIT COMMITTEE

The Audit Committee has reviewed with management the accounting principles and practices adopted by the Group and discussed internal control and financial reporting matters including the audited financial statements for the year ended 31st March 2004.

CORPORATE GOVERANCE

The Company has complied throughout the year ended 31 March 2004 with the Code of Best Practice as set out in Appendix 14 of the Rules Governing the Listing of Securities ("Listing Rules") on The Stock Exchange of Hong Kong Limited ("Stock Exchange").

PUBLICATION OF THE ANNUAL RESULTS ON THE INTERNET WEBSITE OF THE STOCK EXCHANGE

The financial and other information required by Paragraphs 45(1) to 45(3) of Appendix 16 of the Listing Rules will be published on the website of the Stock Exchange in due course.

On behalf of the Board

Derek Chiu

Managing Director & Chief Executive

Hong Kong, 22 July 2004

As at the date of this announcement, the directors of the Company comprises executive directors namely Mr. Deacon Te-ken Chiu, Mr. Derek Chiu, Mr. Desmond Chiu, Ms. Margaret Chiu; non-executive directors namely Mr. Daniel Tat-jung Chiu, Mrs. Chiu Ju Ching-lan., Mr. Dick Tat-sang Chiu, Mr. David Tat-cheong Chiu, Mr. Dennis Tat-shing Chiu, Mr. Duncan Chiu; independent non-executive directors namely Mr. Ho-fai Ma, Mr. Shing-hing Ip and alternate directors namely Mr. Chi-hing Chan (alternate director to Mr. Deacon Te-ken Chiu) and Sung-ki Tang (alternate director to Mr. Desmond Chiu).

Please also refer to the published version of this announcement in The Standard dated 23 July 2004.

Far East Hotels And Entertainment Limited 23-7-2004