Guoco Group Limited — Interim / Quarterly Report 2001

Dec 17, 2001

FAR EAST HOTELS AND ENTERTAINMENT LIMITED

(Incorporated in Hong Kong with limited liability)

INTERIM RESULTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2001

INTERIM RESULTS

The Board of Directors of Far East Hotels And Entertainment Limited (the "Company") announces the unaudited interim financial results of the Company and its subsidiaries (the "Group") for the six months ended 30 September 2001 as follows:

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 30 September 2001

Six months ended

30 September

2001 2000

(Unaudited) (Unaudited)

Notes HK$ HK$

Turnover 2 11,493,477 15,492,278

Cost of sales (10,910,003 ) (13,736,651 )

Gross profit 583,474 1,755,627

Administrative expenses (5,991,105 ) (5,641,722 )

Other operating expenses (791,486 ) (791,486 )

Loss from operations (6,199,117 ) (4,677,581 )

Finance costs (1,945,491 ) (2,024,558 )

Share of results of associates (146,572 ) 420,734

Loss before taxation (8,291,180 ) (6,281,405 )

Taxation 4 - -

Loss before minority interests (8,291,180 ) (6,281,405 )

Minority interests 358,414 319,393

Net loss attributable to shareholders (7,932,766 ) (5,962,012 )

Cents Cents

Loss per share - Basic 5 (1.62 ) (1.22 )

Notes:

1. Accounting Policies

The accounting policies adopted are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 March 2001, except as described below.

SSAP 26 "Segment Reporting" has introduced new principles for reporting financial information by segment. Segment disclosures for the six months ended 30 September 2000 have been modified in order to conform with the requirement of the standard.

2. Segmental Information

By principal activity:

Turnover Segment Result

Six months ended Six months ended

30 September 30 September

2001 2000 2001 2000

HK$ HK$ HK$ HK$

Hotel operation 5,086,136 5,004,701 560,704 1,179,248

Property rental 4,407,175 5,062,881 (2,128,158 ) (1,712,638 )

Securities trading and investments 82 2,148,084 (640,642 ) (1,779,081 )

Interest income 2,000,084 3,276,612 2,000,084 3,276,612

11,493,477 15,492,278 (208,012 ) 964,141

Unallocated corporate expenses (5,991,105 ) (5,641,722 )

Loss from operation (6,199,117 ) (4,677,581 )

By geographical location of operation:

Turnover Segment Result

Six months ended Six months ended

30 September 30 September

2001 2000 2001 2000

HK$ HK$ HK$ HK$

Hong Kong 7,086,301 10,429,397 1,603,903 2,364,530

Other regions in the People's Republic

of China ("PRC") 4,407,176 5,062,881 (1,811,915 ) (1,400,389 )

11,493,477 15,492,278 (208,012 ) 964,141

Unallocated corporate expenses (5,991,105 ) (5,641,722 )

Loss from operation (6,199,117 ) (4,677,581 )

3. Depreciation

During the period, depreciation of HK$2,601,076 (2000: HK$2,627,919) was charged in respect of the Group's property, plant and equipment.

4. Taxation

No provision for Hong Kong Profits Tax has been made in the financial statements as the Company and its subsidiaries incurred tax losses in both the current and the prior interim reporting period.

5. Loss Per Share

(a) Basic loss per share

The calculation of basic loss per share is based on the Group's loss attributable to shareholders of HK$7,932,766 (2000: HK$5,962,012) and on the 488,842,675 (2000: 488,842,675) shares in issue during the period.

(b) Diluted loss per share

No diluted loss per share has been presented because the exercise prices of the outstanding share options of the Company were greater than the average market price of shares for both the current and the prior interim reporting period.

INTERIM DIVIDEND

The Board has resolved not to declare any interim dividend in respect of the six months ended 30 September 2001 (2000: Nil).

REVIEW OF OPERATIONS AND PROSPECT

As the global economy had shown no signs of recovery during the period under review and coupled with the "911 event", the businesses of the Company was inevitably further affected. As a result, Cheung Chau Warwick Hotel recorded a slightly increase in turnover by 2% while Beijing Warwick International Apartments recorded a downturn of 13% in its turnover respectively compared with corresponding previous period.

Loss in securities trading and investments was mainly due to a provision made for diminution in value of securities held of approximately HK$650,000.

Our overseas associated company, which owns and operates the Old Sydney Town Theme Park in Australia and is also travel related, also suffered loss of which the Group shared a loss of approximately HK$141,000.

The result of the sale of the joint venture project, Nob Hill's residential units was encouraging under the current low interest period. Although the "911 event" did cause negative effect on the sale, our associated company, Central More Limited, could and can still maintain a steady sale thereafter.

It is anticipated that the certificate of compliance of the Nob Hill will be issued in July 2002 and the Company is quite optimistic that the sale of the residential units will pick up in accordance with the market trend by then. As to the commercial portion of the project, Central More Limited has commenced to negotiate with potential tenants and the Company believes that the successful letting out of the commercial units will bring positive recurrent income accordingly.

EMPLOYEES

The Group has approximately 130 employees. Employees are remunerated according to nature of the job and market trend, with build-in merit component incorporated in the annual increment to reward and motivate individual performance.

FINANCE ACTIVITIES

At the interim reporting date, the Group had bank loans and overdraft facilities amounted to HK$131,141,457 (31/03/2001: HK$71,468,853), of which HK$111,875,198 (31/03/2001: HK$53,569,961) were utilised. These facilities were secured by legal mortgages over the Group's properties and deposits with an aggregate net book value of HK$60,383,706 (31/03/2001: HK$58,362,430) and HK$2,232,561 (31/03/2001: HK$2,283,911) respectively. A floating charge on all assets, properties and undertakings both present and future including uncalled capital of the Company.

At 30 September 2001, the Group had no material exposure under foreign exchange contracts, interest or currency swaps or other financial derivatives.

Shareholders' funds at 30/09/2001 amounted to approximately HK$599 million (31/03/2001: approximately HK$607 million). Accordingly, the Group's gearing ratio (total bank loans and overdraft facilities utilised to shareholders' funds) at 30/09/2001 is 19% (31/03/2001: 9%).

DISCLOSURE UNDER PRACTICE NOTE 19 TO THE LISTING RULES

As at 30 September 2001, the Group advanced a total of approximately HK$242 million to an associate, Central More Limited. The balance due includes an amount in respect of land transferred of approximately HK$136 million, advances of approximately HK$48 million and accumulated accrued interest charged thereon of approximately HK$58 million. The balance is interest bearing at the Hong Kong Prime Rate, unsecured and has no fixed repayment term.

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

During the six months ended 30 September 2001, 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 policies adopted by the Group and discussed internal controls and financial reporting matters including a review of the unaudited interim financial results for the six months ended 30 September 2001 with Directors.

CODE OF BEST PRACTICE

None of the directors of the Company is aware of any information that would reasonably indicate that the Company is not, or was not for any part of the six months ended 30 September 2001, in compliance with the Code of Best Practice as set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

DISCLOSURE OF INFORMATION ON THE WEBSITE OF THE STOCK EXCHANGE

The financial and other information required by Paragraphs 46(1) to 46(6) of Appendix 16 of the Listing Rules will be published on the website of the Stock Exchange in due course.

Derek Chiu

Managing Director & Chief Executive

Hong Kong, 14 December 2001

Please also refer to the published version of this announcement in the Hong Kong iMail.