IRC Limited — Interim / Quarterly Report 2004

Apr 16, 2004

Listed Company Information

Listed Company Information
LAI SUN DEV<00488> - Results Announcement Lai Sun Development Company Limited announced on 16/4/2004: (stock code: 00488 ) Year end date: 31/7/2004 Currency: HKD Auditors' Report: N/A Interim report reviewed by: Audit Committee (Unaudited ) (Unaudited ) Last Current Corresponding Period Period from 1/8/2003 from 1/8/2002 to 31/1/2004 to 31/1/2003 Note ($ ) ($ ) Turnover : 1,709,416,000 548,793,000 Profit/(Loss) from Operations : 13,731,000 223,613,000 Finance cost : (157,116,000) (260,470,000) Share of Profit/(Loss) of Associates : (17,673,000) (9,920,000) Share of Profit/(Loss) of Jointly Controlled Entities : N/A N/A Profit/(Loss) after Tax & MI : (167,120,000) (115,524,000) % Change over Last Period : N/A % EPS/(LPS)-Basic (in dollars) : (0.04) (0.03) -Diluted (in dollars) : N/A N/A Extraordinary (ETD) Gain/(Loss) : N/A N/A Profit/(Loss) after ETD Items : (167,120,000) (115,524,000) Interim Dividend : NIL NIL per Share (Specify if with other : N/A N/A options) B/C Dates for Interim Dividend : N/A Payable Date : N/A B/C Dates for (-) General Meeting : N/A Other Distribution for : N/A Current Period B/C Dates for Other Distribution : N/A Remarks: 1. BASIS OF PRESENTATION (a) The condensed consolidated financial statements have not been audited by the Company's auditors but have been reviewed by the Company's audit committee. (b) The Group sustained a net loss from ordinary activities attributable to shareholders of HK$167 million for the six-month period ended 31st January, 2004. The Group is currently having ongoing discussions with all of its financial creditors with the objective of refinancing the Group to put it in a better financial position. On 17th December, 2002, meetings with the holders (the "Exchangeable Bondholders") of US$115 million exchangeable guaranteed bonds (the "Exchangeable Bonds") and the holders (the "Convertible Bondholders ") of US$150 convertible guaranteed bonds (the "Convertible Bonds") were held at which, among other things, resolutions to approve the deferral of the Group's obligations to redeem the Exchangeable Bonds and the Convertible Bonds to 31st March, 2003 were duly passed. The Group defaulted in the repayment of the Debt (note 9) due to Golden Pool Enterprise Limited ("GPEL"), a wholly-owned subsidiary of eSun Holdings Limited ("eSun"), on 31st December, 2002. In addition, the Convertible Bonds were due to be redeemed by the Group on 31st March, 2003 but were not so redeemed and, at the same time, the Group also failed to satisfy the redemption rights exercised by certain of the Exchangeable Bondholders, which in turn, has resulted in the Exchangeable Bonds becoming due for redemption in their entirety. Accordingly, the Group had defaulted in the repayment of the Debt and the redemption of both of the Convertible Bonds and the Exchangeable Bonds. Such defaults, in turn, constituted a technical event of default under all of the Group's other borrowing facilities. As at the date of approval of these condensed consolidated financial statements, the Group has yet to reach an agreement with the Exchangeable Bondholders, the Convertible Bondholders, eSun and its other financial creditors as to the terms of a comprehensive restructuring of the Group's indebtedness (the "Debt Restructuring Plan"). The Group is currently operating under a period of informal standstill and up to now, neither the Exchangeable Bondholders, the Convertible Bondholders, eSun nor its other financial creditors have taken any action to enforce their respective securities. The Group is, with the assistance of its financial and legal advisers, conducting ongoing negotiations with all of its financial creditors with a view to securing the terms of a Debt Restructuring Plan acceptable to all relevant parties. Negotiation with various financial creditors has reached a fairly advanced stage and the directors of the Company are hopeful that the Group will be able to secure the agreement of all its financial creditors to a consensual debt restructuring plan within the year 2004. Throughout the period and up to the date of approval of these condensed financial statements, the Group continued to implement an orderly disposal of its assets, including properties and other investments, to generate positive cash flows for the partial repayment of bank and other borrowings and to help provide sufficient working capital for the Group's operations and for the future partial repayment of Exchangeable Bonds and Convertible Bonds. The directors of the Company believe that the Group will be able to secure the agreement of all its financial creditors to the Debt Restructuring Plan and, at the same time, will be able to continue the orderly disposal of the assets of the Group and to obtain financing or refinancing arrangements to generate additional positive cash flows. On this basis, the directors of the Company consider that the Group will have sufficient working capital to finance its operations in the foreseeable future. Accordingly, the directors of the Company are satisfied that it is appropriate to prepare the financial statements on a going concern basis. If the going concern basis is not appropriate, adjustments would have to be made to restate the values of the assets to their recoverable amounts, to provide for any further liabilities which might arise and to reclassify non-current assets and liabilities as current assets and liabilities, respectively. 2. ACCOUNTING POLICIES The unaudited condensed consolidated financial statements have been prepared in accordance with Statement of Standard Accounting Practice ("SSAP") No. 25 "Interim financial reporting" issued by the Hong Kong Society of Accountants. The accounting policies and basis of presentation used in the preparation of these interim financial statements are the same as those used in the audited financial statements for the year ended 31st July, 2003, except that the revised SSAP 12 "Income tax" and the new interpretations relating to which have been retrospectively adopted for the first time in the preparation of the current period's condensed consolidated interim financial statements. SSAP 12 (Revised) prescribes the basis for accounting for income taxes payable or recoverable, arising from the taxable profit or loss for the current period (current tax); and income taxes payable or recoverable in future periods, principally arising from taxable and deductible temporary differences and the carry forward of unused tax losses (deferred tax). Due to the adoption of SSAP 12 (Revised) in the current period, prior year adjustments were made to recongnise the deferred tax assets and liabilities in relation to the differences between capital allowance for tax purposes and depreciation for financial reporting purpose and other taxable and deductible temporary differences, which are generally fully provided for, whereas previously the deferred tax was recognised for timing differences only to the extent that it was probable that the deferred tax asset or liability would crystallise in the foreseeable future. Certain comparative amounts of the audited consolidated balance sheet as at 31st July, 2003 have been restated to conform with the current period's presentation. The accumulated losses as at 1st August 2002 and 2003 were restated and increased by HK$28,635,000 and HK$44,161,000, respectively, which represented the net effect of additional provision for the deferred tax liabilities. This change has resulted in an increase in deferred tax liabilities as at 31st July, 2002 and 2003 by HK$31,162,000 and HK$48,112,000, respectively. The loss for the six months ended 31st January, 2003 was increased by HK$9,648,000. 3. LOSS PER SHARE The calculation of basic loss per share is based on the net loss from ordinary activities attributable to shareholders for the period of HK$167,120,000 (2003: HK$115,524,000) and the weighted average number of 3,746,002,000 (2003: 3,746,002,000) ordinary shares in issue during the period. Diluted loss per share amounts for the current and prior periods have not been disclosed, as the potential ordinary shares of the Group outstanding during these periods had an anti-dilutive effect on the basic loss per share for these periods. 4. INTERESTS IN ASSOCIATES Included in the Group's interests in associates as at 31st January, 2004 is the Group's share of net assets of eSun Holdings Limited ("eSun") and its subsidiaries (the "eSun Group") of HK$786,372,000. The eSun Group recorded a net loss attributable to shareholders of approximately HK$93 million for the year ended 31st December, 2003 (2002: HK$69 million). As at 31st December, 2003, the eSun Group had consolidated net current liabilities of HK$172 million (2002: net current assets of HK$5 million), consolidated accumulated losses of HK$2,336 million (2002: HK$2,243 million) and consolidated net assets of HK$1,779 million (2002: HK$1,822 million). Included in the net current liabilities of HK$172 million were bank loans of HK$19 million, loans from a related company and directors aggregating HK$101 million and other loans of HK$45 million (the "Loan Providers"), all of which are scheduled to mature within the next 12 months from the balance sheet date. In order to improve the eSun Group's financial position, immediate liquidity, cash flows, profitability and operations, the eSun Group have adopted and are in the process of implementing the following measures: (a) continue to seek the creditors' and the Loan Providers' ongoing support to the eSun Group; (b) endeavour to recover the amount due from Furama Hotel Enterprises Limited ("FHEL"), a wholly owned subsidiary of the Company, of HK$1,500,040,000 (the "Debt") together with the interest income thereon; and (c) strengthen cost controls over various general and administrative expenses and to explore profitable business opportunities. In the opinion of the directors of eSun, in light of the measures taken to date and the expected outcome of other measures in progress as planned, including the attainment of profitable and positive cash flow operations, the eSun Group will have sufficient working capital and cash resources to meet its financial obligations in full as they fall due in the foreseeable future. On this basis, the directors of the eSun consider that the eSun Group will have sufficient working capital to finance its operations in the foreseeable future. Accordingly, the directors of the eSun are satisfied that it is appropriate to prepare the financial statements on a going concern basis. Should the eSun Group be unable to continue as a going concern, adjustments would have to be made to restate the values of the assets to their recoverable amounts, to provide for any further liabilities which might arise and to reclassify non-current assets and liabilities as current assets and liabilities, respectively. The effects of these potential adjustments have not been reflected in the eSun Group's financial statements. As at 31st December, 2003, the Debt due by FHEL remained outstanding and overdue. In respect of the recoverability of the Debt, the directors of eSun consider that pending the outcome of the Debt Restructuring Plan of the Group as detailed in note 1 to the condensed consolidated financial statements, the eSun Group is uncertain as to the extent of the recovery of the Debt. The directors of eSun consider that the recoverable amount of the Debt is currently uncertain and, in the absence of reliable information, they are unable to estimate the amount of any specific provision against the Debt at the current time. As at 31st December, 2003, the film rights of the eSun Group represented all rights, titles and interests in 127 films (the "127 Film Rights") with aggregate carrying value of HK$197,541,000 and the TV Rights to another 2 films for a period of 10.5 years (the "2 TV Rights") of an aggregate carrying value of HK$114,000. The directors of eSun engaged Astoria Films Distribution Limited (the "Valuer"), an independent film distributor, to perform a valuation (the "Valuation") of the 127 Film Rights as at 31st December, 2003. Having regard to the Valuation, which indicated that the fair value of the eSun Group's 127 Film Rights as at 31st December, 2003 was above their cost as stated in the eSun Group's financial statements and having regard to the current market conditions, the directors of eSun are of the opinion that there was no impairment in the eSun Group's film rights as at 31st December, 2003. The auditors of eSun has issued a disclaimer opinion on the financial statements of the eSun Group for the year ended 31st December, 2003. In their report, the auditors state that: (i) they are unable to obtain sufficient reliable information to satisfy themselves as to the recoverability of the Debt; (ii) they have been unable to carry out the auditing procedures required by the Statement o Auditing Standards 520 "Using the Work of an Expert" issued by the Hong Kong Society of Accountants, to satisfy themselves as to (a) the competence and objectivity of the scope of the Valuer; and (b) the adequacy of the scope of the Valuer's work as to the 127 Film Rights. Accordingly, they have been unable to carry out adequate auditing procedures to assess the carrying amount of the eSun Group's film rights as at 31st December, 2003. Included in the eSun's consolidated profit and loss account for the year ended 31st December, 2003 is an amortisation charge of the eSun Group's film rights of HK$2,591,000. They are also unable either to obtain sufficient reliable information, or to carry out alternative auditing procedures to satisfy themselves as to the appropriateness of the basis of computation of the amount of the amortisation charge; and (iii) they consider that appropriate disclosures concerning the adoption of the going concern basis have been made, but because of the significant uncertainty relating to the success of the measures currently undertaking by the Group, but they are not able to determine whether the going concern basis adopted in the eSun Group's financial statements is appropriate.