Guoco Group Limited — Annual Report 2009

Jul 17, 2009

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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FAR EAST HOTELS AND ENTERTAINMENT LIMITED 遠東酒店實業有限公司 (Incorporated in Hong Kong with limited liability) (Stock Code: 0037)

Announcement Final Results For The Year Ended 31 March 2009

RESULTS

The Board of Directors (the “Board”) of Far East Hotels And Entertainment Limited (the “Company”) announces that the audited consolidated financial results of the Company and its subsidiaries (the “Group”) for the year ended 31 March 2009 are set out as follows:

CONSOLIDATED INCOME STATEMENT

For the year ended 31st March 2009

NOTES 2009 HK$ Revenue from hotel operation 16,704,565 Property rental income 12,434,218 Cost of sales (30,325,761) Gross loss (1,186,978) Dividend income from listed securities 400,700 (Decrease) increase in fair value of held-for-trading investments (21,675,986) Other income 890,640 Gain on disposal of available-for-sale investments - Gain on disposal of investment properties - (Decrease) increase in fair value of investment properties (38,992,202) Provision for onerous contracts (3,706,000) Increase in fair value of financial liabilities at fair value through profit and loss (42,790) Administrative expenses (17,167,601) Finance costs 3 (2,254,762) Share of results of associates 390,607 (Loss) profit before taxtaion (83,344,372) Taxation 4 5,350,690 (Loss) profit for the year (77,993,682) Cents (Loss) earnings per share 5 (15.95)	2008 HK$ 16,558,252 10,488,655 (28,235,399)
	(1,188,492) 146,641 3,175,850 3,684,586 3,428,900 969,015 27,249,807 - (497,635) (25,693,950) (4,219,585) 550,552
	7,605,689 (3,822,329)
	3,783,360
	Cents 0.77

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As at 31st March 2009

CONSOLIDATED BALANCE SHEET

NOTES NON-CURRENT ASSETS Property, plant and equipment Paintings Investment properties Prepaid lease payments Interests in associates Available-for-sale investments CURRENT ASSETS Prepaid lease payments Held-for-trading investments Inventories Trade and other receivables 7 Deposits and prepayment Deposit for acquisition of properties Amount due from an associate Amounts due from related companies Pledged bank deposits Bank balances and cash CURRENT LIABILITIES Trade and other payables 8 Deposits received Amounts due to directors Amounts due to associates Amounts due to related companies Amount due to a minority shareholder Provision for onerous contracts Bank borrowings - due within one year Financial liabilities at fair value through profit and loss Bank overdrafts NET CURRENT (LIABILITIES) ASSETS CAPITAL AND RESERVES Share capital 9 Reserves NON-CURRENT LIABILITIES Deferred taxation Provision for long service payments Bank borrowings - due after one year	2009 HK$ 101,628,623 3,800,000 104,022,140 1,001,448 1,926,387 159,188,314 371,566,912 28,016 10,195,070 414,450 3,407,945 2,506,804 4,844,170 203,562 420,716 2,132,323 2,040,796 26,193,852 7,305,296 3,153,914 370,000 385,381 315,192 3,344,671 3,706,000 9,064,231 540,425 2,495,979 30,681,089 (4,487,237) 367,079,675 48,884,268 237,350,345 286,234,613 6,391,062 2,055,013 72,398,987 80,845,062 367,079,675	2008 HK$ 106,371,482 3,373,523 143,014,342 1,029,464 4,535,780 159,188,314
		417,512,905
		28,016 22,517,895 437,303 3,468,789 7,214,889 - 203,562 472,489 2,410,948 19,457,028
		56,210,919
		6,310,615 1,499,709 - 1,697,717 212,406 1,718,594 - 5,195,638 497,635 -
		17,132,314
		39,078,605
		456,591,510
		48,884,268 315,934,002
		364,818,270
		11,741,752 2,055,013 77,976,475
		91,773,240
		456,591,510

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NOTES

1. Application of New and Revised Hong Kong Financial Reporting Standards

In the current year, the Group and the Company have applied the following amendments and interpretations (new “HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA＂), which are or have become effective.

HKAS 39 & HKFRS 7 (Amendments) Reclassification of Financial Assets – HK(IFRIC) Int 12 Service Concession Arrangements – – HK(IFRIC) Int 14 HKAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

The adoption of the new HKFRSs had no material effect on how the results and financial position of the Group and the Company for the current or prior accounting periods have been prepared and presented. Accordingly, no prior period adjustment has been required.

The Group and the Company have not early adopted the following new and revised standards, amendments or interpretations that have been issued but are not yet effective.

HKFRSs (Amendments)	Improvements to HKFRSs1
HKFRSs (Amendments)	Improvements to HKFRSs 20092
HKAS 1 (Revised)	Presentation of Financial Statements3
HKAS 23 (Revised)	Borrowing Costs3
HKAS 27 (Revised)	Consolidated and Separate Financial Statements4
HKAS 32 & 1 (Amendments)	Puttable Financial Instruments and Obligations
	Arising on Liquidation3
HKAS 39 (Amendment)	Eligible Hedged Items4
HKFRS 1 & HKAS 27 (Amendments)	Cost of an Investment in a Subsidiary, Jointly
	Controlled Entity or Associate3
HKFRS 2 (Amendment)	Vesting Conditions and Cancellations3
HKFRS 3 (Revised)	Business Combinations4
HKFRS 7 (Amendment)	Improving Disclosures about Financial Instruments3
HKFRS 8	Operating Segments3
HK(IFRIC)–Int 9 &	Embedded Derivatives5
HKAS 39 (Amendments)
HK(IFRIC)–Int 13	Customer Loyalty Programmes6
HK(IFRIC)–Int 15	Agreements for the Construction of Real Estate3
HK(IFRIC)–Int 16	Hedges of a Net Investment in a Foreign Operation7
HK(IFRIC)–Int 17	Distributions of Non-Cash Assets to Owners4
HK(IFRIC)–Int 18	Transfers of Assets from Customers8

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• 1 Effective for annual periods beginning on or after 1st January, 2009 except the amendments to HKFRS 5, effective for annual periods beginning on or after 1st July, 2009

• 2 Effective for annual periods beginning on or after 1st January, 2009, 1st July, 2009 and 1st January 2010, as appropriate

• 3 Effective for annual periods beginning on or after 1st January, 2009 4 Effective for annual periods beginning on or after 1st July, 2009

• 5 Effective for annual periods ending on or after 30th June, 2009

• 6 Effective for annual periods beginning on or after 1st July, 2008

• 7 Effective for annual periods beginning on or after 1st October, 2008

• 8 Effective for transfers on or after 1st July, 2009

The adoption of HKAS 1 results in changes in the presentation of primary financial statements. The adoption of HKFRS 3 (Revised) may affect the Group's accounting for business combination for which the acquisition date is on or after 1st April, 2010. HKAS 27 (Revised) will affect the Group's accounting treatment for changes in the Group's ownership interest in a subsidiary.

The directors of the Company anticipated that the application of the other new or revised standards, amendments and interpretations will have no material impact on the results and the financial position of the Group.

2. Business And Geographical Information

Business segments

For management purposes, the Group is currently organised into three operating divisions - hotel operation, property letting and securities investment and trading. These divisions are the basis on which the Group reports its primary segment information.

Principal activities are as follows:

Hotel operation - operation of a hotel Property letting - leasing of investment properties and service apartments Securities investment and trading - investment and trading in securities

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Segment information about these businesses is presented below:

2009 REVENUE RESULTS Segment profit (loss) Bank interest income Unallocated other income Unallocated corporate expenses Finance costs Share of results of associates Loss before taxation Taxation Loss for the year 2008 REVENUE RESULTS Segment (loss) profit Bank interest income Unallocated corporate expenses Finance costs Share of results of associates Profit before taxation Taxation Profit for the year Geographical segments Hong Kong Other regions in the PRC	Hotel operation HK$ 16,704,565 32,943 16,558,252 (102,115)	Securities Property investment letting and trading HK$ HK$ 12,434,218 - (45,562,076) (21,318,076) 10,488,655 - 24,341,972 615,449 Sales revenue by geographical market 2009 2008 HK$ HK$ 18,374,984 17,096,833 10,763,799 9,950,074 29,138,783 27,046,907	Consolidated HK$ 29,138,783
			(66,847,209) 73,134 817,506 (15,523,648) (2,254,762) 390,607
			(83,344,372) 5,350,690
			(77,993,682)
			27,046,907
			24,855,306 1,155,860 (14,736,444) (4,219,585) 550,552
			7,605,689 (3,822,329)
			3,783,360

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3. Finance Costs

Interest on bank borrowings: Wholly repayable within five years Not wholly repayable within five years Interest on finance leases	2009 HK$ 918,050 1,336,712 - 2,254,762	2008 HK$ 189,151 3,966,096 64,338
		4,219,585

4. Taxation

Taxation represents the deferred taxation credit (2008: deferred taxation charge) for the year.

No provision for Hong Kong Profits Tax has been made in the consolidated financial statements as the Company and its subsidiaries have no assessable profit in both years. No provision for People’s Republic of China (“PRC”) Enterprise income tax as there is no assessable profit for both years for the subsidiary operated in PRC.

5. (Loss) Earnings Per Share

The calculation of basic (loss) earnings per share is based on the loss for the year of HK$77,993,682 (2008: profit of HK$3,783,360) and 488,842,675 (2008: 488,842,675) ordinary shares in issue during the year.

No diluted loss per share for the current year is presented as there was no potential dilutive ordinary shares subsisted during the year. No diluted earnings per share was presented for prior year as the exercise of the potential dilutive ordinary shares would result in an increase in earnings per share.

6. Depreciation

During the year, depreciation of HK$9,329,348 (2008: HK$9,763,070) was charged in respect of the Group’s property, plant and equipment.

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7. Trade And Other Receivables

The Group generally allows an average credit period of not more than 30 days to its customers.

The following is an aged analysis of trade and other receivables at the balance sheet date:

0 - 30 days 31 - 60 days Over 60 days Trade and other receivables Less: allowance for doubtful debts	2009 2008 HK$ HK$ 3,398,878 3,409,065 - 53,974 519,612 516,295 3,918,490 3,979,334 (510,545) (510,545) 3,407,945 3,468,789 THE GROUP	2009 2008 HK$ HK$ 3,398,878 3,409,065 - 53,974 519,612 516,295 3,918,490 3,979,334 (510,545) (510,545) 3,407,945 3,468,789 THE GROUP
		3,979,334 (510,545)
		3,468,789

8. Trade And Other Payables

The following is an aged analysis of trade payables at the balance sheet date:

0 - 30 days 31 - 60 days Over 60 days Trade payables Other payables	2009 2008 HK$ HK$ 495,384 974,698 449,781 125,830 3,065,808 1,596,711 4,010,973 2,697,239 3,294,323 3,613,376 7,305,296 6,310,615 THE GROUP

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9. Share Capital

Authorised: At 1st April 2008 Capital reduction At 31st March 2009 Issued and fully paid: At 1st April 2008 Capital reduction At 31st March 2009	Number of shares 2009 2008 750,000,000 750,000,000 - - 750,000,000 750,000,000 488,842,675 488,842,675 - - 488,842,675 488,842,675	Number of shares 2009 2008 750,000,000 750,000,000 - - 750,000,000 750,000,000 488,842,675 488,842,675 - - 488,842,675 488,842,675	Share capital 2009 2008 HK$ HK$ 75,000,000 750,000,000 - (675,000,000) 75,000,000 75,000,000 48,884,268 488,842,675 - (439,958,407) 48,884,268 48,884,268	Share capital 2009 2008 HK$ HK$ 75,000,000 750,000,000 - (675,000,000) 75,000,000 75,000,000 48,884,268 488,842,675 - (439,958,407) 48,884,268 48,884,268
	750,000,000	750,000,000		75,000,000
	488,842,675 -	488,842,675 -		488,842,675 (439,958,407)
	488,842,675	488,842,675		48,884,268

Pursuant to a special resolution passed at an extraordinary general meeting of the Company held on 1st June 2007, and the subsequent Order of the High Court of the Hong Kong Special Administrative Region granted on 20th July 2007, the Company effected a capital reduction which took effect on 20th July 2007. The paid-up capital on each of its issued ordinary shares of HK$1.00 was cancelled to the extent of HK$0.90 per share, and the nominal value of all of the ordinary shares of the Company, both issued and unissued, was reduced from HK$1.00 per share to HK$0.10 per share.

DIVIDENDS

The Board does not recommend the payment of any dividend for the year (2008: Nil).

REVIEW OF OPERATIONS AND PROSPECTS

The loss for the year ended 31 March 2009 amounting to HK$77,993,682 was mainly due to a decrease in fair value of investment properties of approximately HK$39 million, a loss of approximately HK$22 million from securities investment and trading and provision for onerous contracts of approximately HK$3.7 million.

The recent impact of the economic crisis and swine flu has deeply affected all industries worldwide, especially hospitality industry which has recorded a significant decrease in average room rate and occupancy. However, the turnover of Cheung Chau Warwick Hotel has remained stable for the year concerned as compared with last year. This year the management tries to broaden our local market by closely monitoring our competitors’ room rate in order to stay competitive, and work more closely with local agents. Besides, we try to improve our current service by adding some extra elements to our hotel.

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The turnover of Beijing Warwick Suite Hotel has increased by 8% compared with last year. During the year, the renovation work of all the rooms on Level 1, Level 2 and the external wall of the main building (East Building) of Beijing Warwick Suite Hotel has been completed. To cope with the increase in demand of service office, some guest rooms have been converted and renovated to spacious fully furnished office suite. New facilities such as conference service are available. For the aspect of sales, more emphasis will be placed on both local and overseas short term business clients and overseas tours, as well as service office clients with different packages offered.

EMPLOYEES

The Group has approximately 100 employees. Employees are remunerated in accordance with nature of the job and market conditions. Staff incentive bonus would be granted to reward and motivate those well-performed employees.

FINANCE ACTIVITIES

At 31 March 2009, the Group had bank credit facilities amounting to approximately HK$86,963,000 (2008: HK$92,172,000), of which approximately HK$83,959,000 (2008: HK$83,172,000) were utilised. These facilities, other than HK$3,500,000 which was unsecured, were secured by legal mortgages over the Group’s properties and bank deposits.

At 31 March 2009, the Group had no material exposure under foreign exchange contracts, interest or currency swaps or other financial derivatives.

Shareholders’ funds at 31 March 2009 amounted to approximately HK$286 million (2008: approximately HK$365 million). Accordingly, the Group’s gearing ratio (total bank credit facilities utilized to shareholders’ funds) at 31 March 2009 is 29% (2008: 23%).

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

During the year ended 31 March 2009, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed securities.

MODEL CODE FOR DIRECTORS’ SECURITIES TRANSACTIONS

The Board has adopted a new code of conduct regarding Directors’ securities transactions on terms no less exacting than the required standard set out in the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules. The Directors confirmed that there were not any non-compliance with the standard set out in the Model Code and the Company’s code of conduct regarding Directors’ securities transactions during the year ended 31 March 2009.

CORPORATE GOVERNANCE

The Company has complied with the Code as set out in Appendix 14 of the Listing Rules throughout the year ended 31 March 2009, with deviations from code provision A.4.1 of the Code in respect of the service term of Directors.

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None of the existing Non-executive Directors of the Company is appointed for a specific term. This constitutes a deviation from code provision A.4.1 of the Code. However, all Directors of the Company are subject to the retirement by rotation at each annual general meeting under Articles 78 and 79 of the Company. As such, the Company considers that sufficient measures have been taken to ensure that the Company’s Corporate Governance Practices are no less exacting than those in the Code.

AUDIT COMMITTEE

The Audit Committee has reviewed with management the accounting principles and practices adopted by the Group and discussed auditing, internal controls, and financial reporting matters including the review of the audited financial statements for the year ended 31 March 2009 approved by the directors.

REMUNERATION COMMITTEE

The Company has established a Remuneration Committee with written terms of reference pursuant to the provisions set out in the Code. The Remuneration Committee is principally responsible for formulation and making recommendation to the Board on the Group’s policy and structure for all remuneration of directors and senior management.

SUBSEQUENT EVENTS

On 29 June 2009, a subsidiary of the Group entered into a provisional sale and purchase agreement with a purchaser to dispose of one of its investment properties at a consideration of HK$27,380,000, which will result in an increase in fair value of approximately HK$4,900,000 for the year ending 31 March 2010.

During the year, the Group entered into contracts with independent third parties to acquire properties at aggregate purchase price of HK$32,229,000. Subsequent to the balance sheet date, the underlying properties were sold to independent third parties at HK$28,523,000 (net with associated transaction costs). Accordingly, a provision for onerous contracts of HK$3,706,000 was recognised in the consolidated income statement for the year ended 31 March 2009, which represented the difference between the sales proceeds and the unavoidable costs of meeting the obligations under the contracts.

On behalf of the Board

Derek Chiu

Managing Director & Chief Executive Hong Kong, 17 July 2009

As at the date of this announcement, the executive Directors are Mr. Deacon Te Ken Chiu, Mr. Derek Chiu, Ms. Margaret Chiu; the non-executive Directors are Mrs. Chiu Ju Ching Lan, Mr. Dick Tat Sang Chiu, Mr. David Chiu, Mr. Dennis Chiu, Mr. Duncan Chiu; the independent non-executive Directors are Mr. Ip Shing Hing, Mr. Ng Wing Hang Patrick, Mr. Choy Wai Shek Raymond; alternate Director is Mr. Chan Chi Hing (alternate Director to Mr. Deacon Te Ken Chiu).

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