Guoco Group Limited — Interim / Quarterly Report 2005

Dec 17, 2004

FAR EAST HOTELS AND ENTERTAINMENT LIMITED

FAR EAST HOTELS AND ENTERTAINMENT LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 0037)

INTERIM RESULTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004

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 2004 as follows:

CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004

	Notes	Six months ended 30 September
		2004	2003
		(unaudited)	(unaudited)
Turnover	3	12,022,674	25,574,385
Cost of sales		(12,005,753)	(14,531,648)
		16,921	11,042,737
Other operating income		2,080	352,146
Administrative expenses		(7,059,586)	(6,839,427)
Other operating expenses		(791,486)	(791,486)
(Loss) Profit from operations		(7,832,071)	3,763,970
Finance costs	5	(1,987,223)	(2,505,764)
Share of results of associates		2,388,826	(3,030,591)
Loss before taxation		(7,430,468)	(1,772,385)
Taxation	6	454,974	35,619
Loss before minority interests		(7,885,442)	(1,808,004)
Minority interests		-	-
Loss for the period		(7,885,442)	(1,808,004)
		Cent	Cent
Loss per share – basic and diluted	7	(1.61)	(0.37)

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

1. Basis of preparation

The condensed consolidated financial statements have been prepared in accordance with the Statement of Standard Accounting Practice No. 25 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants and with the applicable disclosures requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and should be read in conjunction with the 2004 annual financial statements.

FAR EAST HOTELS AND ENTERTAINMENT LIMITED

20-12-2004

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FAR EAST HOTELS AND ENTERTAINMENT LIMITED

2. Accounting policy and comparative figures

The condensed consolidated financial statements have been prepared under the historical cost convention as modified for the revaluation of investment properties and investments in securities.

The accounting policies and methods of computation used in the preparation of these unaudited condensed consolidated financial statements are consistent with those used in the Group's annual financial statements for the year ended 31 March 2004. Certain comparative figures for the prior period have been restated to conform with the current period's presentation.

3. Business And Geographical Segments

Business segments

	Hotel operation HK$	Property rental HK$	Six months ended 30 September (unaudited)
			Securities trading HK$	Loan financing HK$	Investment holding HK$	Others HK$	Consolidated HK$
2004
Turnover	6,328,355	3,937,218	1,104,331	39,561	613,209	-	12,022,674
Segment result	636,355	(1,253,862)	(18,342)	39,561	613,209	-	16,921
Bank interest income							1,900
Dividend income							180
Unallocated administrative expenses							(7,059,586)
Other operating expenses	-	(791,486)	-	-	-	-	(791,486)
Finance costs							(1,987,223)
Share of results of associates	-	213,941	-	8,331,161	-	(6,156,276)	2,388,826
Loss before taxation							(7,430,468)
Taxation							(454,974)
Loss before minority interests							(7,885,442)
Minority interests							-
Loss for the period							(7,885,442)
2003
Turnover	6,077,496	4,351,566	11,113,288	3,425,126	606,909	-	25,574,385
Segment result	198,859	(1,737,543)	8,549,386	3,425,126	606,909	-	11,042,737
Bank interest income							30,188
Dividend income							321,958
Unallocated administrative expenses							(6,839,427)
Other operating expenses	-	(791,486)	-	-	-	-	(791,486)
Finance costs							(2,505,764)
Share of results of associates	-	-	-	(2,706,200)	-	(324,391)	(3,030,591)
Loss before taxation							(1,772,385)
Taxation							(35,619)
Loss before minority interests							(1,808,004)
Minority interests							-
Loss for the period							(1,808,004)

Geographical segments

	Sales revenue by geographical market		Contribution to profit (loss) from operation
	2004 (unaudited) HK$	2003 (unaudited) HK$	2004 (unaudited) HK$	2003 (unaudited) HK$
Hong Kong	9,334,056	23,296,051	2,075,362	13,384,648
Other regions in the People's Republic of China	2,688,618	2,278,334	(2,058,441)	(2,341,911)
	12,022,674	25,574,385	16,921	11,042,737

FAR EAST HOTELS AND ENTERTAINMENT LIMITED

20-12-2004

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FAR EAST HOTELS AND ENTERTAINMENT LIMITED

4. Depreciation And Amortisation

During the period, depreciation of HK$2,528,340 (2003: HK$2,426,555) was charged in respect of the Group's property, plant and equipment.

During the period, amortisation of HK$942,700 (2003: HK$942,700) was charged in respect of the Group's intangible assets.

5. Finance Costs

	Six months ended 30 September
	2004 (unaudited) HK$	2003 (unaudited) HK$
Interest on bank and other borrowings:
Wholly repayable within 5 years	1,782,602	2,158,956
Not wholly repayable within 5 years	180,686	315,152
Interest on finance leases	23,935	31,656
	1,987,223	2,505,764

6. Taxation

The charge in both the current and the prior interim reporting period represent share of taxation attributable to associates.

No provision for Hong Kong Profits Tax in respect of the Company and its subsidiaries has been made in the financial statements as the Company and its subsidiaries has no assessable profit or incurred a tax loss in both the current and the prior interim reporting period.

7. Loss Per Share

a) Basic loss per share

The calculation of basic loss per share is based on the Group's loss for the period of HK$7,885,442 (2003: loss of HK$1,808,004) and on the 488,842,675 (2003: 488,842,675) shares in issue during the period.

b) Diluted loss per share

The computation of diluted loss 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 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 2004 (2003: Nil).

REVIEW OF OPERATIONS

Cheung Chau Warwick Hotel has successfully captured more local business with turnover on food and beverage section increased by 4% compared with last interim period. The business of room section remains stable during the period.

The turnover of Beijing Warwick International Apartments has increased by 18% compared with last interim period.

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

The directors of the Company's associate Bolan Holdings N.V. have re-assessed its interest in land situated in Sydney, Australia and made an impairment provision of asset value by US$2.5 million.

PROSPECTS

Phase I's renovation of both the Cheung Chau Warwick Hotel and Beijing Warwick International Apartments has been completed and approximately 50% and 30% of the rooms have been renovated respectively. 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.

On 6 October 2004, a wholly-owned subsidiary (the "Vendor") of the Company, had entered into a Provisional Sale and Purchase Agreement with a Purchaser to dispose of its carport podium at 3rd Floor to 6th Floor, Lisa House, No. 33-37 Nelson Street, Kowloon, Hong Kong (the "Property") at a consideration of HK$34,500,000. The Property will be sold with the underlying lease expiring on 28th February 2005. The current rental of the Property receivable under the lease is HK$210,000 per calendar month. The disposal is subject to the Vendor, prior to completion of the disposal, having entered into a new lease with the existing tenant of the Property for a term of 2 years commencing from 1 March 2005 at a monthly rental of HK$250,000 (exclusive of management fees, rates and other expenses). If the Vendor does not enter into such new lease with the existing tenant, then the Purchaser can choose to demand a return of all consideration paid to the Vendor in respect of the disposal thereby terminating the subject transaction or require the date of completion of the disposal to be extended until such new lease is entered into between the Vendor and the existing tenant.

FAR EAST HOTELS AND ENTERTAINMENT LIMITED

20-12-2004

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FAR EAST HOTELS AND ENTERTAINMENT LIMITED 20-12-2004

FAR EAST HOTELS AND ENTERTAINMENT LIMITED

In view of the turnaround economic situation in Hong Kong, the Company will actively consider the redevelopment of the adjacent lands of the Nob Hill development and look for opportunities in its core business as well as diversifying into other businesses.

EMPLOYEES

The Group has approximately 110 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 30/9/2004, the Group had bank and other borrowings facilities amounting to HK$97,127,000 (31/03/2004: HK$104,384,000), of which HK$90,114,000 (31/03/2004: HK$104,288,000) were utilised. These facilities were secured by legal mortgages over the Group's properties and deposits with an aggregate net book value of HK$82,693,000 (31/03/2004: HK$78,059,000) and HK$2,175,000 (31/03/2004: HK$2,173,000) respectively.

At 30/9/2004, the Group had no material exposure under foreign exchange contracts, interest or currency swaps or other financial derivatives.

Shareholders' funds at 30/9/2004 amounted to approximately HK$471 million (31/3/2004: approximately HK$478 million). Accordingly, the Group's gearing ratio (total bank and other borrowings facilities utilised to shareholders' funds) at 30/9/2004 is 19% (31/3/2004: 22%).

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

During the period under review, the Company and its subsidiaries have not purchased, sold or redeemed any of the securities in the Company.

AUDIT COMMITTEE

The Audit Committee has reviewed the unaudited condensed accounts for the six months ended 30 September 2004.

CORPORATE GOVERNANCE

Compliance with the Code of Best Practice

None of the Directors is aware of information that would reasonably indicate that the Company is not, or was not for any part of the six months ended 30 September 2004, 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 (the "Listing Rules"), except that the independent non-executive directors of the Company were not appointed for specific terms as they are subject to retirement and re-election in accordance with the provision of the articles of associates of the Company.

Securities transactions by directors

The Company has adopted the Model Code as set out in Appendix 10 of the Listing Rules as the code of conduct regarding Directors' securities transactions. The Company has made specific enquiry of all Directors whether the Directors have complied with the required standard set out in the Model Code during the six months ended 30 September 2004 and all Directors confirmed that they have complied with the Model Code.

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.

On behalf of the Board

Derek Chiu

Managing Director & Chief Executive

Hong Kong, 17 December 2004

As at the date of this announcement, the executive Directors are Mr. Deacon Te-ken Chiu, Mr. Derek Chiu, Mr. Desmond Chiu, Ms. Margaret Chiu; the non-executive Directors are Mrs. Chiu Ju Ching-lan, Mr. Dick Tat-sang Chiu, Mr. David Tat-cheong Chiu, Mr. Dennis Tat-shing Chiu, Mr. Duncan Chiu; the independent non-executive Directors are Mr. Ip Shing-hing, Mr. Ng Wing-hang Patrick, Mr. Choy Wai-shek Raymond; and the alternate Directors are Mr. Chan Chi-hing (alternate Director to Mr. Deacon Te-ken Chiu) and Mr. Tang Sung-ki (alternate Director to Mr. Desmond Chiu).

Please also refer to the published version of this announcement in The Standard dated 20 December 2004.