IRC Limited — Interim / Quarterly Report 2005

Apr 15, 2005

Listed Company Information

Listed Company Information
LAI SUN DEV<00488> - Results Announcement Lai Sun Development Company Limited announced on 15/04/2005: (stock code: 00488 ) Year end date: 31/07/2005 Currency: HKD Auditors' Report: N/A Interim report reviewed by: Audit Committee (Unaudited ) (Unaudited ) Last Current Corresponding Period Period from 01/08/2004 from 01/08/2003 to 31/01/2005 to 31/01/2004 Note ($ ) ($ ) Turnover : 396,134,000 1,709,416,000 Profit/(Loss) from Operations : 222,801,000 13,731,000 Finance cost : (52,582,000) (157,116,000) Share of Profit/(Loss) of Associates : 139,111,000 (17,673,000) Share of Profit/(Loss) of Jointly Controlled Entities : N/A N/A Profit/(Loss) after Tax & MI : (1,255,969,000) (167,120,000) % Change over Last Period : N/A % EPS/(LPS)-Basic (in dollars) 2 : (0.19) (0.04) -Diluted (in dollars) : N/A N/A Extraordinary (ETD) Gain/(Loss) : N/A N/A Profit/(Loss) after ETD Items : (1,255,969,000) (167,120,000) 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 PREPARATION AND CORPORATE UPDATE (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) Last year, the Company reached an agreement, in principle, with the informal committee (the "Informal Committee") of the holders (the " Exchangeable Bondholders") of US$115 million exchangeable guaranteed bonds (the "Exchangeable Bonds") and the holders (the "Convertible Bondholders") of US$150 million convertible guaranteed bonds (the "Convertible Bonds") (collectively, the "Bondholders") concerning the settlement of the Exchangeable Bonds and the Convertible Bonds owed by the Group to Bondholders (the Bonds Settlement"). On 28th June, 2004, the Company also entered into a settlement agreement with eSun Holdings Limited ("eSun"), an associate of the Group, in connection with the proposed settlement of an amount payable to Golden Pool Enterprise Limited ("GPEL"), a wholly- owned subsidiary of eSun, of HK$1,500 million (the "Debt") (the "eSun Debt Settlement"). On 6th October, 2005, the Bondholders passed the necessary resolutions to duly approve the terms agreed between the Informal Committee and the Company. Pursuant to a resolution passed at a special general meeting held by eSun on 13th October, 2004, the independent shareholders of eSun approved the eSun Debt Settlement. On the same date, pursuant to a resolution passed at an extraordinary general meeting held by the Company, the Bonds Settlement and the eSun Debt Settlement (collectively, the " Settlements") were duly approved by the independent shareholders of the Company. On 7th December, 2004, all of the conditions precedent had been fulfilled and the Settlements were completed on that date. The major terms of the Settlements have been disclosed in the Company's last annual report. Upon completion of the Bonds Settlement, the Group settled its indebtedness owed to the Bondholders including the outstanding principal amount, accrued outstanding interest, redemption premium in aggregate of HK$2,279 million and an agreed settlement premium of HK$257 million. The total amount due to the Bondholders was settled by: (i) cash repayments of approximately US$38 million (equivalent to approximately HK$300 million) which were made to the Bondholders on about 18th October, 2004; (ii) HK$266,058,100 zero coupon guaranteed secured A Bonds due 2005 ( the "A Bonds") issued by Lai Sun International Finance (2004A) Limited, a wholly-owned subsidiary of the Company; (iii) HK$70,059,100 zero coupon guaranteed secured B Bonds due 2005 (the "B Bonds") issued by Lai Sun International Finance (2004B), a wholly-owned subsidiary of the Company; and (iv) 3,800,040,000 ordinary shares of the Company at a price of HK$0.50 per share. Upon completion of the eSun Debt Settlement, the Group settled the principal amount of the Debt of HK$1,500 million and an agreed settlement premium of approximately HK$1,345 million. The total amount due to eSun was settled by: (i) a cash repayment of HK$20,000,000 which was made to the eSun Group on 18th October, 2004; (ii) a 5-year secured interest-bearing term loan in the principal amount of HK$225,000,000 owed by Furama Hotel Enterprises Limited, a wholly-owned subsidiary of the Company, to GPEL; and (iii) 5,200,000,000 ordinary shares of the Company at a price of HK$0.50 per share. The Group incurred a loss arising from the Settlements of HK$1,484 million which comprised (i) an agreed premium of HK$257 million pursuant to the Bonds Settlement and (ii) an agreed premium of HK$1,345 million pursuant to the eSun Debt Settlement of which was partially offset by the write back of accrued overdue interest on the Debt of HK$119 million as such overdue interest was waived by eSun upon completion of the Settlement. Following the completion of the Settlements, the Group also managed to refinance all major bank and other borrowings to medium and long term loans as necessary. Upon completion of the Settlements, the Group turned around from a deficiency in asset position to a net asset position. As at 31st January, 2005 the Group had consolidated net assets of HK$3,345 million (as at 31st July, 2004: consolidated deficiency in assets of HK$116 million). The Group' has also turned around from a current liability position of from HK$5,664 million as at 31st July, 2004 to a net current asset position of HK$33 million as at 31st January, 2005. 2. 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$1,255,969,000 (2004: HK$167,120,000) and the weighted average number of 6,485,145,000 (2004: 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 no diluting event existed during both periods. 3. INTERESTS IN ASSOCIATES Included in the Group's interests in associates as at 31st January, 2005 is the Group's share of net assets of eSun and its subsidiaries (the "eSun Group") of HK$779,048,000. As at 31st December, 2004, the eSun Group recorded consolidated net current liabilities of HK$207 million (2003: HK$172 million), consolidated accumulated losses of HK$2,284 million (2003: HK$2,336 million) and consolidated net assets of HK$1,831 million (2003: HK$1,779 million). Included in the net current liabilities of HK$207 million were bank loans of HK$21 million, loans from directors of HK$10 million and other loans of HK$150 million (collectively, the "Financial Creditors"), all of which are due for repayment within the next 12 months from the balance sheet date. In order to improve the eSun Group's working capital position, profitability and operations, the eSun Group has adopted and continue to implement the following measures: (a) the eSun Group continues to seek ongoing support from its Financial Creditors, and to explore opportunities for different sources of financing to strengthen the Group's working capital position; and (b) the eSun Group continues to implement measures to tighten cost controls over various general and administrative expenses and to attain positive and profitable cash flow operations. The directors of eSun believe that the eSun Group will be successful in obtaining ongoing support from its Financial Creditors and in exploring opportunities for different sources of financing and that it will be successful in improving cash flow through tightening of cost controls and attaining positive and profitable cash flow operations. On this basis, the directors of eSun consider that the eSun Group will have sufficient working capital to finance its operations in the foreseeable future. Accordingly, the directors of eSun are satisfied that it is appropriate to prepare the financial statements on a going concern basis. If the going concern basis was 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. The effects of these potential adjustments have not been reflected in the eSun Group's financial statements. At 31st December, 2004, the film rights of the eSun Group represented all rights, titles and interests in 127 films (the "127 Film Rights") with an aggregate carrying value of HK$190,570,000 (2003: HK$197,541,000) and the television rights to another two films for a period of 10.5 years (the "2 TV Rights") of with an aggregate carrying value of HK$114,000 (2003: HK$ 114,000). The directors of eSun engaged Astoria Films Distribution Limited (the "Valuar"), an independent film distributor, to perform a valuation (the "Valuation") on the 127 Film Rights as at 31st December, 2004. Having regard to the Valuation, which indicated that the fair value of the 127 Film Rights as at 31st December, 2004 was above their carrying value 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 Group's film rights as at 31st December, 2004. The auditors of eSun have issued a qualified opinion on the financial statements of the eSun Group for the year ended 31st December, 2004 in respect of the scope limitation of the carrying value of film rights. In their report, the auditors state that they have been unable to obtain sufficient reliable information to carry out the audit procedures required by the Statement of Auditing Standards 520 "Using the Work of an Expert" ("SAS 520") issued by the HKICPA, to satisfy themselves as to (i) the competence and objectivity of the Valuer; and (ii) the adequacy of the scope of the Valuer's work on the 127 Film Rights. Accordingly, they have been unable to carry out adequate audit procedures to assess the carrying amount of the film rights as at 31st December, 2004. Included in the consolidated profit and loss account for the year ended 31st December, 2004 is an amortisation charge of the eSun Group's film rights of HK$6, 971,000. They are also unable either to obtain sufficient reliable information, or to carry out alternative audit procedures to satisfy themselves as to the appropriateness of the basis of computation of the amortisation charge.