Guoco Group Limited — Interim / Quarterly Report 2011

Nov 25, 2011

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

Interim Results For The Six Months Ended 30 September 2011

INTERIM RESULTS

The Board of Directors (the “Board”) of Far East Hotels And Entertainment Limited (the “Company”) announces that the unaudited condensed consolidated financial results of the Company and its subsidiaries (the “Group”) for the six months ended 30 September 2011 are set out as follows:

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 September 2011

Notes Revenue Cost of sales Gross profit Other gains and losses 5 Administrative expenses Finance costs 6 Share of results of associates Loss before taxation Taxation 7 Loss for the period attributable to owners of the Company	Six months ended 30 September 2011 2010 (unaudited) (unaudited) HK$ HK$ 19,113,645 14,947,443 (15,144,208) (14,233,713) 3,969,437 713,730 (5,942,290) 714,558 (8,156,441) (8,004,239) (545,684) (769,472) 251,581 155,639 (10,423,397) (7,189,784) - - (10,423,397) (7,189,784)	Six months ended 30 September 2011 2010 (unaudited) (unaudited) HK$ HK$ 19,113,645 14,947,443 (15,144,208) (14,233,713) 3,969,437 713,730 (5,942,290) 714,558 (8,156,441) (8,004,239) (545,684) (769,472) 251,581 155,639 (10,423,397) (7,189,784) - - (10,423,397) (7,189,784)
		713,730 714,558 (8,004,239) (769,472) 155,639
		(7,189,784)
		-
		(7,189,784)

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CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Continued)

For the six months ended 30 September 2011

For the six months ended 30 September 2011
Notes Other comprehensive income (expenses) for the period Exchange differences arising on translation of foreign operations Total comprehensive expenses for the period attributable to owners of the Company Loss per share - Basic 8	Six months ended 30 September 2011 2010 (unaudited) (unaudited) HK$ HK$ 421,418 (970,716) (10,001,979) (8,160,500) Cents Cents (2.13) (1.47)
		(970,716)
		(8,160,500)
		Cents (1.47)

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CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 September 2011

Notes Non-current assets Property, plant and equipment Investment properties Interests in associates Interest in a jointly controlled entity Loan to a jointly controlled entity 9 Available-for-sale investments Paintings Current assets Held-for-trading investments Inventories Trade and other receivables 10 Deposits and prepayment Amount due from an associate Pledged bank deposits Bank balances and cash Investment property held for sale Current liabilities Trade and other payables 11 Receipt in advance Rental deposits received Amounts due to directors Amounts due to associates Amounts due to related companies Amount due to a non-controlling shareholder Bank borrowings - due within one year 12 Deposit received for investment property held for sale Net current assets	30/09/2011 (unaudited) HK$ 89,421,488 66,479,120 1,426,322 1,830,336 8,707,226 159,188,314 4,220,000 331,272,806 20,680,677 573,794 357,221 1,078,386 213,562 2,118,000 12,187,332 37,208,972 - 37,208,972 7,234,328 4,403,388 3,214,949 228,634 1,342,381 586,301 2,759,382 4,908,000 24,677,363 - 24,677,363 12,531,609 343,804,415	31/03/2011 (audited) HK$ 90,897,768 66,479,120 1,174,741 1,830,336 8,706,948 159,188,314 4,220,000
		332,497,227
		16,849,965 503,829 1,021,965 1,481,896 813,562 2,118,000 8,865,596
		31,654,813 20,500,000
		52,154,813
		8,030,609 4,252,190 2,722,110 - 823,381 592,156 3,977,205 12,075,795
		32,473,446 800,000
		33,273,446
		18,881,367
		351,378,594
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CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Continued)

As at 30 September 2011

Notes CAPITAL AND RESERVES Share capital 13 Reserves NON-CURRENT LIABILITIES Deferred taxation Provision for long service payments Bank borrowings - due after one year 12	30/09/2011 31/03/2011 (unaudited) (audited) HK$ HK$ 48,884,268 48,884,268 244,041,186 253,411,365 292,925,454 302,295,633 8,696,948 8,696,948 2,055,013 2,055,013 40,127,000 38,331,000 50,878,961 49,082,961 343,804,415 351,378,594

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of preparation

The unaudited condensed consolidated interim financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and should be read in conjunction with the 2011 annual financial statements.

Certain comparative figures for prior accounting period have been restated to conform with the current period’s presentation.

2. Application of new and revised Hong Kong Financial Reporting Standards

The accounting policies used in the unaudited condensed consolidated interim financial statements are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 31 March 2011.

In addition, in the current period, the Group has applied, for the first time, a number of new and revised Standards, Amendments and Interpretations (collectively the “new and revised HKFRSs”) issued by the HKICPA. The adoption of these new and revised HKFRSs had no material effect on the condensed consolidated financial statements of the Group for the current or prior accounting periods.

The Group has not early applied new and revised Standards, Amendments or Interpretations that have been issued but are not yet effective. The directors of the Company anticipate that the application of the other new and revised Standards, Amendments or Interpretations will have no material impact on the condensed consolidated financial statements of the Group, except HKFRS 9 “Financial Instruments”.

HKFRS 9 which was issued in November 2009 introduces new requirements for the classification and measurement of financial assets. HKFRS 9 (as revised in November 2010) adds requirements for financial liabilities and for derecognition. HKFRS 9 is effective for annual periods beginning on or after 1st January, 2013, with earlier application permitted. The directors anticipate that the application of HKFRS 9 may have an impact on measurement and classification of the Group’s available-for-sale investments, which will be measured at fair value. However, it is not practicable to provide a reasonable estimate of that effect until a detail review has been completed.

3. Segment information

The Group’s operating and reportable segments are as follows:

1. Hotel operation in Hong Kong

2. Hotel operation and property letting in the People’s Republic of China, excluding Hong Kong (“PRC”)

3. Property investment in Hong Kong 4. Securities investment and trading

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Segment revenues and results

The following is an analysis of the Group's revenue and profit (loss) by operating segments:

	Hotel Hotel operation and Property Securities operation in property letting investment in investment Hong Kong in PRC Hong Kong and trading HK$ HK$ HK$ HK$	Hotel Hotel operation and Property Securities operation in property letting investment in investment Hong Kong in PRC Hong Kong and trading HK$ HK$ HK$ HK$	Hotel Hotel operation and Property Securities operation in property letting investment in investment Hong Kong in PRC Hong Kong and trading HK$ HK$ HK$ HK$	Hotel Hotel operation and Property Securities operation in property letting investment in investment Hong Kong in PRC Hong Kong and trading HK$ HK$ HK$ HK$
		Six months ended 30 September (unaudited)
2011 Revenue 10,590,584 Segment profit (loss) 2,269,052 Unallocated gains and losses Unallocated expenses Unallocated finance costs Share of results of associates Loss before taxation Taxation Loss for the period		8,523,061 1,740,988	- (166,229)	- (5,863,584)
2010
Revenue 9,039,708 Segment profit (loss) 1,270,213 Unallocated gains and losses Unallocated expenses Unallocated finance costs Share of results of associates Loss before taxation Taxation Loss for the period Geographical information Hong Kong PRC		5,907,735 (421,942)	- - (496,337) 200,732 Revenue from external customers 2011 2010 (unaudited) (unaudited) HK$ HK$ 10,590,584 9,039,708 8,523,061 5,907,735 19,113,645 14,947,443

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4. Loss before taxation

Loss before taxation has been arrived at after charging: Depreciation Auditor's remuneration Directors' remuneration & other staff costs Salaries, bonus and allowances Retirement benefits cost Share-based payment expenses Operating lease rentals in respect of rental premises Share of taxation of associates (included in share of results of associates) Cost of inventories recognised as an expense and after crediting: Net rental income from properties	Six months ended 30 September 2011 2010 (unaudited) (unaudited) HK$ HK$ 3,693,236 3,561,101 498,366 346,453 6,362,295 6,652,890 430,842 414,681 631,800 - 7,424,937 7,067,571 3,042,379 2,898,919 49,692 30,750 2,122,381 1,994,910 4,056,321 194,622	Six months ended 30 September 2011 2010 (unaudited) (unaudited) HK$ HK$ 3,693,236 3,561,101 498,366 346,453 6,362,295 6,652,890 430,842 414,681 631,800 - 7,424,937 7,067,571 3,042,379 2,898,919 49,692 30,750 2,122,381 1,994,910 4,056,321 194,622
		7,067,571
		2,898,919 30,750 1,994,910
		194,622

5. Other gains and losses

Dividend income from listed securities Decrease in fair value of held-for-trading investments Loss on disposal of property, plant & equipment Bank interest income Other interest income Exchange gain	Six months ended 30 September 2011 2010 (unaudited) (unaudited) HK$ HK$ 637,647 280,555 (6,501,230) (79,823) (89,728) - 11,010 2,250 11 17 - 511,559 (5,942,290) 714,558

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6. Finance costs

Interest on bank borrowings: Wholly repayable within 5 years Not wholly repayable within 5 years	Six months ended 30 September 2011 2010 (unaudited) (unaudited) HK$ HK$ 221,707 147,534 323,977 621,938 545,684 769,472	Six months ended 30 September 2011 2010 (unaudited) (unaudited) HK$ HK$ 221,707 147,534 323,977 621,938 545,684 769,472
		769,472

7. Taxation

No provision for Hong Kong Profits Tax is required as the individual companies comprising the Group either incurred a loss or has tax losses to offset the assessable profits in both periods.

No provision for PRC Enterprise income tax is required as the subsidiary operating in the PRC has tax losses to offset the assessable profits. In last corresponding period, it incurred a loss and no provision is required.

8. Loss per share

• (a) Basic loss per share

The calculation of basic loss per share is based on the loss for the period of HK$10,423,397 (2010: loss of HK$7,189,784) and 488,842,675 (2010: 488,842,675) ordinary shares in issue during the period.

• (b) Diluted loss per share

No diluted loss per share for the six months ended 30 September 2011 was presented as there were no potential ordinary shares outstanding during the period.

No diluted loss per share for the six months ended 30 September 2010 was presented as the exercise of the potential dilutive ordinary shares would result in a reduction in loss per share.

9. Loan to a jointly controlled entity

The loan to the jointly controlled entity is unsecured, interest-free and has no fixed repayment terms.

The loan is not expected to be repaid within twelve months from the end of the reporting period.

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10. Trade and other receivables

Included in trade and other receivables are trade debtors net of allowance of HK$233,150 (31/03/2011: HK$117,237)

Trade debtors mainly comprise of receivable from renting of properties and hotel operation. Rentals are payable on presentation of demand notes. No credit is allowed to these customers. Hotel room revenue is normally settled by cash or credit card. The Group allows an average credit period of not more than 30 days to travel agents and corporate customers.

The following is an aged analysis of trade debtors based on the invoice date:

0 - 30 days 31 - 60 days Over 60 days	30/09/2011 31/03/2011 (unaudited) (audited) HK$ HK$ 147,567 87,512 43,440 8,408 42,143 21,317 233,150 117,237

11. Trade and other payables

Included in trade and other payables are trade creditors of HK$3,737,425 (31/03/2011: HK$4,546,236).

The following is an aged analysis of the trade creditors based on invoice date:

0 - 30 days 31 - 60 days Over 60 days	30/09/2011 (unaudited) HK$ 423,010 356,794 2,957,621 3,737,425	31/03/2011 (audited) HK$ 442,736 551,488 3,552,012
		4,546,236

The average credit period on purchase of goods is 60 days.

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12. Bank borrowings

Bank borrowings comprise: Secured Unsecured The above borrowings are repayable as follows: Within one year More than one year, but not exceeding two years More than two years, but not exceeding three years More than three years, but not exceeding five years More than five years Less: Amount due within one year shown under current liabilities Amount due after one year	30/09/2011 (unaudited) HK$ 45,035,000 - 45,035,000 4,908,000 3,908,000 3,908,000 23,646,000 8,665,000 45,035,000 (4,908,000) 40,127,000	31/03/2011 (audited) HK$ 48,406,795 2,000,000
		50,406,795
		12,075,795 3,408,000 2,908,000 21,896,000 10,119,000
		50,406,795 (12,075,795)
		38,331,000

13. Share capital

Ordinary shares of HK$0.10 each Authorised: At 1 April 2011 and 30 September 2011 Issued and fully paid: At 1 April 2011 and 30 September 2011	Number of shares 750,000,000 488,842,675	Share capital HK$ 75,000,000
		48,884,268

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14. Operating lease

Operating lease arrangements

The Group as lessee:

At 30/09/2011, the Group had commitments for future minimum lease payments under non-cancellable operating leases in respect of rented premises which fall due as follows:

Within one year In the second to fifth year inclusive Over five years The Group as lessor: Within one year		30/09/2011 (unaudited) HK$ 5,150,846 20,603,385 41,206,770		31/03/2011 (audited) HK$ 4,986,347 19,945,388 42,383,949
		66,961,001		67,315,684
		30/09/2011 (unaudited) HK$ 2,336,073		31/03/2011 (audited) HK$ 4,652,157

INTERIM DIVIDEND

The Board has resolved not to declare any interim dividend in respect of the six months ended 30 September 2011.

REVIEW OF OPERATIONS AND PROSPECTS

The overall turnover of Cheung Chau Warwick Hotel has increased by 17% compared with last corresponding period. The Room and Food & Beverages revenue has been increased by 21% and 12% respectively. Both rooms and restaurant facilities have been partially renovated in order to improve the image of the hotel as well as to increase the business. For the Rooms division, the Sales and Marketing Team will continue focusing on the growth of China market in the coming year. Besides doing advertisings in Hong Kong like in the past, the hotel will also do advertisings at China in order to attract more business from this rapid growing market. For the Food & Beverages division, new and tailor-made menus cater for different kinds of clients will be introduced in the coming year.

The turnover of Beijing Warwick Suite Hotel has increased by 44% compared with last corresponding period. This increment brought to this sector a profit of approximately HK1,741,000 as compared to a loss of approximately HK$422,000 with last corresponding period.

In securities investment and trading, the Group has recorded a loss of approximately HK$5,860,000.

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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 30 September 2011, there were outstanding bank loans of HK$45,035,000 (31/03/2011: HK$50,406,795) and unutilised overdraft facilities of HK$4,000,000 (31/03/2011: HK$4,000,000) available to the Group.

At 30 September 2011, the Group did not have any foreign exchange contracts, interest or currency swaps or other financial derivatives.

Shareholders’ funds at 30 September 2011 amounted to approximately HK$293 million (31/03/2011: approximately HK$302 million). Accordingly, the Group’s gearing ratio (total bank borrowings to shareholders’ funds) at 30 September 2011 is 15% (31/03/2011: 17%).

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

During the period, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities.

CORPORATE GOVERNANCE

The Company has complied with Code of Corporate Governance Practices (the “Code”) as set out in Appendix 14 of the Listing Rules throughout the six months ended 30 September 2011, with deviations from code provision A.4.1 of the Code in respect of the service term of Directors.

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’s Articles of Association. 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 of the Company comprises three independent non-executive directors, namely, Mr. Ng Wing Hang Patrick, Mr. Ip Shing Hing, Mr. Choy Wai Shek Raymond and one non-executive director, Mr. Duncan Chiu.

The audit committee has reviewed with management the accounting principles and practices adopted by the Group, and discussed financial reporting matters, including a review of the unaudited interim financial statements for the six months ended 30 September 2011.

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REMUNERATION COMMITTEE

The Company has established a Remuneration Committee with written terms of reference pursuant to the provisions set out in the Code. The committee comprises two independent non-executive directors, namely Mr. Ng Wing Hang Patrick, Mr. Choy Wai Shek Raymond and the Managing Director of the Company, Mr. Derek Chiu.

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.

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) set out in Appendix 10 of the Listing Rules. Upon enquiry by the Company, all directors of the Company have confirmed that they have complied with the required standards set out in the Model Code throughout the six months ended 30 September 2011.

By Order of the Board Far East Hotels And Entertainment Limited Derek Chiu Managing Director & Chief Executive

Hong Kong, 25 November 2011

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. 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.

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