Rosedale Hotel Holdings Limited (Incorporated in Bermuda with limited liability) (Stock Code : 1189) 2011 Interim Report

Transcription

1 Rosedale Hotel Holdings Limited (Incorporated in Bermuda with limited liability) (Stock Code : 1189) 2011 Interim Report

2 Corporate Information Directors Executive Directors Mr. Cheung Hon Kit (Chairman) Ms. Chan Ling, Eva (Managing Director) Mr. Chan Pak Cheung, Natalis Independent Non-executive Directors Mr. Kwok Ka Lap, Alva Mr. Poon Kwok Hing, Albert Mr. Sin Chi Fai Company Secretary Ms. Law Sau Lai Registered Office Clarendon House 2 Church Street Hamilton HM 11 Bermuda Head Office and Principal Place of Business Units , 30th Floor, Paul Y. Centre 51 Hung To Road, Kwun Tong Kowloon, Hong Kong Auditor Deloitte Touche Tohmatsu Certified Public Accountants 35/F., One Pacific Place 88 Queensway Hong Kong Principal Share Registrar Butterfield Fulcrum Group (Bermuda) Limited Rosebank Centre 11 Bermudiana Road Pembroke HM 08 Bermuda Hong Kong Branch Share Registrar Tricor Secretaries Limited 26/F., Tesbury Centre 28 Queen s Road East Wanchai, Hong Kong Stock Code Stock Code on The Stock Exchange of Hong Kong Limited: 1189 Clarendon House 2 Church Street Hamilton HM 11 Bermuda Butterfield Fulcrum Group (Bermuda) Limited Rosebank Centre 11 Bermudiana Road Pembroke HM 08 Bermuda

3 Condensed Consolidated Statement of Comprehensive Income The board of directors (the Board ) of Rosedale Hotel Holdings Limited (the Company ) announces the unaudited results of the Company and its subsidiaries (hereinafter collectively referred to as the Group ) for the six months ended 30 June 2011 together with comparative figures for the corresponding period in 2010 as follows: Six months ended NOTES HK$ 000 HK$ 000 (unaudited) (unaudited) Continuing operations Turnover 3 178, ,365 Direct operating costs (156,860) (115,746) Gross profit 21,366 21,619 Other gains and losses (8,628) 3,420 Distribution and selling expenses (1,821) (1,522) Administrative expenses (92,234) (118,676) Fair value (loss) gain on investments held for trading (1,911) 888 Finance costs (19,418) (35,120) Fair value loss on derivative financial instrument 19 (2,080) Impairment loss recognised in respect of property, plant and equipment (9,980) (3,104) Impairment loss recognised in respect of other intangible assets (14,000) (Loss) gain on disposal of subsidiaries 6 (549) 759 Loss on disposal of associates (2,642) Decrease in fair value of investment properties (2,272) (34,000) Loss before taxation 4 (117,527) (182,378) Taxation (charge) credit 5 (818) 3,877 Loss for the period from continuing operations (118,345) (178,501) Discontinued operations Profit for the period from discontinued operations 7 703,915 (Loss) profit for the period (118,345) 525,414 1

4 Condensed Consolidated Statement of Comprehensive Income Six months ended NOTE HK$ 000 HK$ 000 (unaudited) (unaudited) Other comprehensive income (expenses) Exchange difference arising on translation of financial statements of foreign operations 33, Reclassification adjustment of exchange difference reversal on disposal of subsidiaries (1,354) Total comprehensive (expenses) income for the period (85,039) 524,382 (Loss) profit for the period attributable to: Owners of the Company (111,344) 577,983 Non-controlling interests (7,001) (52,569) (118,345) 525,414 Total comprehensive (expenses) income for the period attributable to: Owners of the Company (82,078) 577,040 Non-controlling interests (2,961) (52,658) (85,039) 524,382 (LOSS) EARNINGS PER SHARE 9 From continuing and discontinued operations Basic and diluted (0.17) 1.06 From continuing operations Basic and diluted (0.17) (0.23) 2 Rosedale Hotel Holdings Limited Interim Report 2011

5 Condensed Consolidated Statement of Financial Position At 30 June 2011 At At NOTES HK$ 000 HK$ 000 (unaudited) (audited) (restated) Non-current assets Property, plant and equipment 10 2,079,509 1,910,198 Investment properties , ,493 Interests in associates 4 4 Interest in a jointly controlled entity 17,050 Available-for-sale investments 120, ,136 Intangible assets 47,872 61,558 Investment payments and other assets 42,252 43,116 Amounts due from associates 20 41,085 41,085 Amount due from an investee 20 18,325 17,216 Club debentures, at cost less impairment Pledged bank deposits 14 11,820 2,676,973 2,488,326 Current assets Inventories 5,818 5,874 Amounts due from associates Trade and other receivables 11 53,396 68,172 Investments held for trading 16,507 19,011 Pledged bank deposits 14 2,293 Bank balances and cash 286, , , ,581 Assets classified as held for sale 12 41,769 54, , ,943 Current liabilities Trade and other payables , ,806 Loan from a related company 20 10,000 Tax liabilities 14,989 14,694 Amount due to a related company 20 14,175 Borrowings amount due within one year ,361 56,037 Other borrowings 14 8,148 5,500 Derivative liability 19 2,080 Convertible notes ,842 Amounts due to non-controlling shareholders of subsidiaries 8,936 8,726 Liabilities directly associated with assets classified as held for sale 509, , , , ,339 3

6 Condensed Consolidated Statement of Financial Position At 30 June 2011 At At NOTES HK$ 000 HK$ 000 (unaudited) (audited) (restated) Net current liabilities (104,064) (46,396) Total assets less current liabilities 2,572,909 2,441,930 Non-current liabilities Borrowings amount due after one year ,253 Deferred taxation 175, , , ,779 Net assets 2,169,497 2,269,151 Capital and reserves Share capital 16 6,577 6,577 Reserves 1,919,301 1,998,980 Equity attributable to owners of the Company 1,925,878 2,005,557 Non-controlling interests 243, ,594 Total equity 2,169,497 2,269,151 4 Rosedale Hotel Holdings Limited Interim Report 2011

7 Condensed Consolidated Statement of Changes in Equity Attributable to owners of the Company Share capital Share premium Special reserve Other reserve Warrant reserve Convertible notes reserve Translation reserve Asset revaluation reserve Accumulated losses Total Non controlling interests Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 At 1 January 2010 (audited) 109,199 1,189, ,303 (38,997) 30, , ,836 1,719 (719,107) 1,503, ,572 1,874,968 Profit (loss) for the period 577, ,983 (52,569) 525,414 Other comprehensive income for the period Exchange difference arising on translation of financial statements of foreign operations Reclassification adjustment arising on disposal of subsidiaries (89) 322 (1,354) (1,354) (1,354) Total comprehensive (expenses) income for the period (943) 577, ,040 (52,658) 524,382 Issue of shares Reduction in share capital (note 16) (103,743) 103,743 Transfer of warrant reserve (30,201) 30,201 Purchase of shares of subsidiaries from non-controlling shareholders (13,093) (13,093) (13,093) Disposal of a subsidiary (768) (768) At 30 June 2010 (unaudited) 5,460 1,189, ,303 (52,090) 131, ,893 1,719 (7,180) 2,067, ,146 2,385,521 At 1 January 2011 (audited) 6,577 1,248, ,303 (60,683) 63, ,622 1,719 (103,786) 2,005, ,594 2,269,151 Loss for the period (111,344) (111,344) (7,001) (118,345) Other comprehensive income for the period Exchange difference arising on translation of financial statements of foreign operations 29,266 29,266 4,040 33,306 Total comprehensive (expenses) income for the period 29,266 (111,344) (82,078) (2,961) (85,039) Redemption of convertible notes (63,757) 63,757 Additional interests in a subsidiary 2,399 2,399 (2,399) Disposal of subsidiaries (14,615) (14,615) At 30 June 2011 (unaudited) 6,577 1,248, ,303 (58,284) 220,888 1,719 (151,373) 1,925, ,619 2,169,497 5

8 Condensed Consolidated Statement of Cash Flows Net cash used in operating activities Six months ended NOTES HK$ 000 HK$ 000 (unaudited) (unaudited) (restated) (24,189) (85,482) Investing activities Purchase of property, plant and equipment 10 (292,713) (162,655) Increase in pledged bank deposits (14,113) Advance to an investee (1,109) (14,386) Proceeds from disposal of property, plant and equipment 62, ,920 Proceeds from disposal of subsidiaries 6 21, ,947 Investment deposits refunded 1, ,591 Proceeds from disposal of associates 44,310 Repayment of loans advanced to certain companies and individuals 4,545 Other investing cash flows 1,188 (47,566) Net cash (used in) from investing activities (221,793) 1,020,706 Financing activities New bank loans raised 502,614 Repayments of borrowings (46,037) Redemption of convertible notes (341,880) Repayment of loans from related companies (10,000) (104,881) Other borrowings raised 2,648 Repayment of amounts due to non-controlling shareholders of subsidiaries (112,356) Purchase of shares of subsidiaries from non-controlling shareholders of subsidiaries (13,093) Other financing cash flows 36,931 (40,280) Net cash from (used in) financing activities 144,276 (270,610) 6 Rosedale Hotel Holdings Limited Interim Report 2011

9 Condensed Consolidated Statement of Cash Flows Six months ended HK$ 000 HK$ 000 (unaudited) (unaudited) (restated) Net (decrease) increase in cash and cash equivalents (101,706) 664,614 Cash and cash equivalents at beginning of the period 387, ,668 Effect of foreign exchange rate changes Cash and cash equivalents at end of the period, represented by 286,538 1,009,351 Bank balances and cash 286,428 1,009,351 Cash included in assets held for sale ,538 1,009,351 7

10 1. BASIS OF PREPARATION 1. The condensed consolidated financial statements have been prepared in accordance 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 with Hong Kong Accounting Standard ( HKAS ) 34, Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants ( HKICPA ). 34 In preparing the condensed consolidated financial statements, the directors of the Company have given careful consideration to the future liquidity and going concern of the Company and its subsidiaries (collectively referred to as the Group ) in light of the Group s loss for the period of approximately HK$118,345,000 and the Group s current liabilities exceed its current assets by approximately HK$104,064,000 as at 30 June The directors of the Company are satisfied that the Group will have sufficient financial resources to meet its financial obligations as they fall due for the foreseeable future, after taking into consideration that there are available borrowing facilities and that there are assets available to pledge for obtaining further banking facilities. 2. PRINCIPAL ACCOUNTING POLICIES 118,345, ,064, The condensed consolidated financial statements have been prepared on the historical cost basis except for investment properties which are measured at fair values. 8 Rosedale Hotel Holdings Limited Interim Report 2011

11 2. PRINCIPAL ACCOUNTING POLICIES (Continued) 2. The accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 June 2011 are the same as those followed in the preparation of the Group s annual financial statements for the year ended 31 December In the current interim period, the Group has applied, for the first time, a number of new and revised Hong Kong Financial Reporting Standards ( HKFRSs ) issued by the HKICPA which are effective to the Group for accounting periods beginning on or after 1 January The Group has applied HKAS 24 Related Party Disclosures (as revised in 2009) for the first time in the current period. HKAS 24 (as revised in 2009) has changed the definition of a related party. HKAS 24 (as revised in 2009) requires retrospective application. The related party disclosures set out in note 20 to the condensed consolidated financial statements have been changed to reflect the application of HKAS 24 (as revised in 2009). The comparative figures on the condensed consolidated financial statements have also been restated Certain of the companies previously considered to be related parties are no longer considered as related parties under the new definition of a related party in accordance with HKAS 24 (as revised in 2009) and accordingly, transactions with these companies are not disclosed separately. 24 9

12 2. PRINCIPAL ACCOUNTING POLICIES (Continued) Summary of the effect of the above changes 2. As a result of the changes to the definition of a related party, amounts due from certain companies previously considered to be related parties ( former related parties ) at 30 June 2011 with the aggregate carrying amount of HK$2,856,000 have been classified as trade and other receivables. In addition, at 30 June 2011, amounts due to former related parties amounting to approximately HK$82,673,000 and loans from former related parties amounting to approximately HK$8,148,000 have been respectively classified as trade and other payables and other borrowings. 2,856,000 82,673,000 8,148,000 The effect of changes in the definition of a related party described above on the financial position of the Group as at 31 December 2010 is as follows: At At (originally stated) Adjustments (restated) HK$ 000 HK$ 000 HK$ 000 Amounts due from related companies 2,583 (2,583) Trade and other receivables 65,589 2,583 68,172 Trade and other payables 101,930 51, ,806 Amounts due to related companies 51,876 (51,876) Loans from related companies 15,500 (5,500) 10,000 Other borrowings 5,500 5, , , Rosedale Hotel Holdings Limited Interim Report 2011

13 2. PRINCIPAL ACCOUNTING POLICIES (Continued) Summary of the effect of the above changes (Continued) 2. The effect of changes in the definition of a related party described above on the financial position of the Group as at 1 January 2010 is as follows: Amounts due from related companies At At (originally stated) Adjustments (restated) HK$ 000 HK$ 000 HK$ ,610 (35,981) 629 Trade and other receivables 309,157 35, ,138 Trade and other payables 636,342 62, ,799 Amounts due to related companies 65,019 (62,457) 2,562 Loans from related companies 119,881 (101,881) 18,000 Other borrowings 101, ,881 1,167,009 1,167,009 The changes in the definition of a related party have had no impact on the reported profit or loss and (loss) earnings per share for the current and prior years. 11

14 2. PRINCIPAL ACCOUNTING POLICIES (Continued) 2. The Group has not early applied the following new or revised standards that have been issued but are not yet effective. The following new or revised standards have been issued after the date the consolidated financial statements for the year ended 31 December 2010 were authorised for issuance and are not yet effective. HKFRS 10 Consolidated Financial Statements 1 HKFRS 11 Joint Arrangements 1 HKFRS 12 Disclosure of Interests in Other Entities 1 HKFRS 13 Fair Value Measurement 1 HKAS 1 (Amendments) Presentation of Items of Other Comprehensive Income 2 HKAS 19 (Revised in 2011) Employee Benefits 1 HKAS 27 (Revised in 2011) Separate Financial Statements 1 HKAS 28 (Revised in 2011) Investments in Associates and Joint Ventures Effective for annual periods beginning on or after 1 January Effective for annual periods beginning on or after 1 July Rosedale Hotel Holdings Limited Interim Report 2011

15 2. PRINCIPAL ACCOUNTING POLICIES (Continued) 2. Five new or revised standards on consolidation, joint arrangements and disclosures were issued by the HKICPA in June 2011 and are effective for annual periods beginning on or after 1 January Earlier application is permitted provided that all of these five new or revised standards are applied early at the same time. The directors of the Company anticipate that these new or revised standards will be applied in the Group s consolidated financial statements for financial year ending 31 December 2013 and the potential impact is described below. HKFRS 10 replaces the parts of HKAS 27 Consolidated and Separate Financial Statements that deal with consolidated financial statements. In addition, HKFRS 10 includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) ability to use its power over the investee to affect the amount of the investor s returns. Extensive guidance has been added in HKFRS 10 to deal with complex scenarios. Overall, the application of HKFRS 10 requires a lot of judgement (a) (b) (c) HKFRS 11 replaces HKAS 31 Interests in Joint Ventures. HKFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be classified. Under HKFRS 11, there are two types of joint arrangements: joint ventures and joint operations. The classification in HKFRS 11 is based on parties rights and obligations under the arrangements. In contrast, under HKAS 31, there are three different types of joint arrangements: jointly controlled entities, jointly controlled assets and jointly controlled operations

16 2. PRINCIPAL ACCOUNTING POLICIES (Continued) 2. In addition, joint ventures under HKFRS 11 are required to be accounted for using the equity method of accounting, whereas jointly controlled entities under HKAS 31 can be accounted for using the equity method of accounting or proportionate accounting The directors of the Company are still in the process of assessing the impact of HKFRS 10 and HKFRS 11 on the future results and financial position of the Group Based on their assessment so far, the directors of the Company anticipate that the application of the other new or revised standards will have no material impact on the results and the financial position of the Group. 3. SEGMENT INFORMATION 3. Segment information reported externally was analysed on the basis of the types of services provided and activities carried out by the Group s operating divisions. The Group is currently organised into two operating divisions hotel and leisure services, and securities trading. The information reported to the Group s chief operating decision maker (i.e. Executive Directors) for the purposes of resource allocation and assessment of performance is focused on these operating divisions. However, limited securities trading activities are noted for both periods. 14 Rosedale Hotel Holdings Limited Interim Report 2011

17 3. SEGMENT INFORMATION (Continued) 3. The following is an analysis of the Group s revenue and results by reportable and operating segments from continuing operations, for the period under review: Six months ended 30 June 2011 (unaudited) Continuing operations Hotel and leisure services Securities trading Consolidated HK$ 000 HK$ 000 HK$ 000 Segment turnover External sales 178, ,226 Results Amount excluding impairment loss recognised in respect of property, plant and equipment Impairment loss recognised in respect of property, plant and equipment (62,049) (1,916) (63,965) (9,980) (9,980) Segment results (72,029) (1,916) (73,945) Interest income 87 Finance costs (19,418) Central administrative costs and other unallocated expenses Fair value loss on derivative financial instrument (19,350) (2,080) Loss on disposal of subsidiaries (549) Decrease in fair value of investment properties (2,272) Loss before taxation (117,527) 15

18 3. SEGMENT INFORMATION (Continued) Six months ended 30 June 2010 (unaudited) 3. Continuing operations Hotel and leisure services Securities trading Consolidated HK$ 000 HK$ 000 HK$ 000 Segment turnover External sales 137, ,365 Results Amount excluding impairment loss recognised in respect of intangible assets, and property, plant and equipment Impairment loss recognised in respect of intangible assets, and property, plant and equipment (66,556) 876 (65,680) (17,104) (17,104) Segment results (83,660) 876 (82,784) Interest income 373 Finance costs (35,120) Central administrative costs and other unallocated expenses Gain on disposal of a subsidiary Loss on disposal of associates Decrease in fair value of investment properties (28,964) 759 (2,642) (34,000) Loss before taxation (182,378) 16 Rosedale Hotel Holdings Limited Interim Report 2011

19 3. SEGMENT INFORMATION (Continued) 3. Segment result represents the profit earned or loss incurred by each segment without allocation of central administrative costs and other unallocated expenses, interest income, finance costs, decrease in fair value of investment properties and the derivative financial instrument, and (loss) gain on disposal of subsidiaries and associates. This is the measure reported to the Group s chief operating decision maker for the purposes of resource allocation and performance assessment. 4. LOSS BEFORE TAXATION 4. Six months ended HK$ 000 HK$ 000 (unaudited) (unaudited) Continuing operations Loss before taxation has been arrived at after charging: Amortisation of other intangible assets 2,931 5,523 Depreciation of property, plant and equipment 52,729 35,754 Payments in respect of rented premises 45,218 33,511 and after crediting: Interest income

20 5. TAXATION (CHARGE) CREDIT 5. Six months ended HK$ 000 HK$ 000 (unaudited) (unaudited) Continuing operations Taxation (charge) credit comprises: Current tax: Hong Kong Other jurisdiction (2,618) (388) Deferred tax: Current period 1,800 4,265 Taxation (charge) credit relating to continuing operations (818) 3,877 Hong Kong Profits Tax is recognised based on management s best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate used is 16.5% for both periods under review. People s Republic of China ( PRC ) enterprise income tax is calculated at the applicable rates in accordance with the relevant laws and regulations in the PRC. Taxation arising in other jurisdiction is recognised based on management s best estimate of the weighted average annual income tax rate expected for the full financial year. 16.5% 18 Rosedale Hotel Holdings Limited Interim Report 2011

21 6. DISPOSAL OF SUBSIDIARIES 6. On 25 October 2010, the Group entered into an agreement with an independent third party and the agreement entitled the counterparty to purchase one out of two shares of Sinomatrix Limited ( Sinomatrix ), a wholly-owned subsidiary of the Group, at a consideration of US$2,200,000 (approximately equivalent to HK$17,050,000). The transaction was completed in June 2011, and the Group has retained a 50% interest in Sinomatrix. Accordingly, Sinomatrix and its subsidiaries ( Sinomatrix Group ) ceased to be subsidiaries of the Company and Sinomatrix became a jointly controlled entity of the Company on that day. This transaction has resulted in the recognition of an impairment loss of approximately HK$ 3,638,000 in profit or loss in 2010 upon the reclassification of Sinomatrix Group as an asset classified as held-for-sale. No further losses arose from the disposal during the current period. Sinomatrix Limited S i n o m a t r i x 2,200, , 0 5 0, Sinomatrix 50% SinomatrixSinomatrix Sinomatrix Sinomatrix 3,638,000 In December 2010, the Group entered into an agreement for the sale of its entire interest in ( ), a 50.5% owned subsidiary of the Group, at a consideration of RMB3,000,000 (approximately equivalent to HK$3,519,000). The transaction was completed in January This transaction has resulted in the recognition of a loss of approximately HK$395,000 in profit or loss during the current period. 50.5% 3,000,000 3,519, ,000 During the period, the Group entered into an agreement for the sale of its 100% interest in Wise Mark International Investment Inc. ( Wise Mark ), a wholly-owned subsidiary of the Group, to an independent third party, at a consideration of HK$3,000,000. The transaction was completed in April This transaction has resulted in the recognition of a loss of approximately HK$154,000 in profit or loss. 100% 3,000, ,000 19

22 6. DISPOSAL OF SUBSIDIARIES (Continued) 6. On 10 February 2010, the Group disposed of its 51% interest in ( ) at a consideration of approximately HK$1,718, % 1,718,000 The net assets of the subsidiaries at the respective dates of disposal were as follows: Sinomatrix Group at Wise Mark at at Total at (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Sinomatrix Net assets disposed of 48,714 3,914 3,154 55,782 1,921 Non-controlling interests (14,614) (14,614) (768) Translation reserve realised (194) Fair value of remaining 50% equity interest retained as interest in a jointly controlled entity 50% (17,050) (17,050) (Loss) gain on disposal (395) (154) (549) 759 Total consideration 17,050 3,519 3,000 23,569 1,718 Satisfied by: Deposit received in prior period 2,478 2,478 Cash 17,050 1,041 3,000 21,091 1,718 17,050 3,519 3,000 23,569 1,718 Net cash outflow arising on disposal Cash 17,050 3,519 3,000 23,569 1,718 Bank balances and cash disposed of (301) (301) (2,077) 17,050 3,218 3,000 23,268 (359) 20 Rosedale Hotel Holdings Limited Interim Report 2011

23 7. DISCONTINUED OPERATIONS 7. On 3 February 2010, the Group entered into a sale agreement to dispose of its 90% equity interest in HKWOT (BVI) Limited ( HKWOT ), which carried out all of the Group s travel and related services operations. The disposal was completed on 27 May 2010, on which date the Group passed the control of HKWOT to C-Travel International Limited, the purchaser of 90% equity interest in HKWOT (the Purchaser ). The Group has retained the remaining 10% interest in HKWOT as an availablefor-sale investment and carried at deemed cost less impairment, if any. HKWOT (BVI) LimitedHKWOT 90% HKWOT HKWOTC-Travel International Limited HKWOT 90% HKWOT 10% On 13 March 2010, the Group entered into a termination agreement to terminate the rolling stock purchase agreement ( RSPA ) with the contractor of the Group s luxury trains under construction. The termination of the RSPA became effective on 3 May 2010, on which date the Group s operation in the luxury trains services was discontinued, all obligations of the parties under the RSPA have been terminated and the luxury trains under construction were passed to the contractor. Proceeds of approximately HK$277,931,000 (equivalents to US$35,663,000) would be received upon the termination and was settled during In addition, a payable on construction cost of approximately HK$233,909,000 was waived with the agreement with the contractor. The purpose of the termination was to generate cash flows to settle the debts related to the luxury trains services. 277,931,000 35,663, ,909,000 21

24 7. DISCONTINUED OPERATIONS (Continued) 7. The profit (loss) from the discontinued operations for the prior period is analysed as follows: Travel and related services Luxury trains services Total discontinued operations to to to HK$ 000 HK$ 000 HK$ 000 (unaudited) (unaudited) (unaudited) Profit of travel and related services Gain on disposal of travel and related services Loss of luxury trains services Loss on termination of luxury trains services 40,740 40, , ,936 (34,674) (34,674) (19,087) (19,087) 757,676 (53,761) 703, Rosedale Hotel Holdings Limited Interim Report 2011

25 7. DISCONTINUED OPERATIONS (Continued) 7. The results of the travel and related services, and luxury trains services operations for the prior period were as follows: Travel and related services Luxury trains services Total discontinued operations to to to HK$ 000 HK$ 000 HK$ 000 (unaudited) (unaudited) (unaudited) Turnover 750, ,487 Cost of sales (644,641) (644,641) Investment income 2 2 Other income Selling expenses (10,535) (10,535) Administrative expenses (50,486) (12,485) (62,971) Finance costs (149) (4,398) (4,547) Impairment loss recognised in respect of amount due from a jointly controlled entity (16,175) (16,175) Share of results of associates (396) (396) Share of results of a jointly controlled entity (1,616) (1,616) Profit (loss) before tax 45,000 (34,674) 10,326 Income tax expense (4,260) (4,260) Profit (loss) for the period 40,740 (34,674) 6,066 23

26 7. DISCONTINUED OPERATIONS (Continued) 7. Profit (loss) for the prior period from discontinued operations including the following: Travel and related services Luxury trains services Total discontinued operations to to to HK$ 000 HK$ 000 HK$ 000 (unaudited) (unaudited) (unaudited) Depreciation and amortisation 1, ,784 Loss on disposal of property, plant and equipment (4) (4) 24 Rosedale Hotel Holdings Limited Interim Report 2011

27 7. DISCONTINUED OPERATIONS (Continued) 7. The net liabilities of HKWOT at the date of disposal were as follows: HKWOT At HK$ 000 (unaudited) Net liabilities disposed of (153,193) Fair value of remaining 10% equity interest in HKWOT retained HKWOT10% (56,258) Translation reserve realised (1,160) Transaction costs on disposal 12,971 Gain on disposal 716,936 Total consideration 519,296 Satisfied by: Cash 684,000 Other payables associated with the post-completion adjustment (note) (164,704) 519,296 Net cash inflow arising on disposal: Total cash consideration received 684,000 Bank balances and cash disposed of (12,723) Transaction costs paid on disposal (12,971) 658,306 Note: Amount represented net current liabilities of HKWOT at completion date of which in accordance with the terms of the sale agreement, the Group shall repay such amounts to the Purchaser, as a reduction in the consideration. HKWOT 25

28 7. DISCONTINUED OPERATIONS (Continued) 7. On 27 May 2010, the Company has also entered into a shareholders agreement ( Shareholders Agreement ) with the Purchaser upon the completion of the disposal of its 90% interest in HKWOT (hereinafter together with its subsidiaries collectively referred to as the Disposal Group ) to regulate their rights and obligations as between themselves in respect of certain matters pertaining to the ownership, operations, management and governance of HKWOT. HKWOT 90% HKWOT The Shareholders Agreement has, inter-alia, given the Company a put option in respect of its 10% interest in HKWOT if (i) HKWOT has not made a filing to commence an initial public offering (in accordance with the applicable rules of the relevant stock exchange) on or before the third anniversary of the date of the Shareholders Agreement; or (ii) there is any change in the scope or nature of a substantial part of the business of the Disposal Group so that the revenue of the business represents less than 50% of the aggregate revenue of the enlarged business as at the date on which such acquisition completes and on a pro forma basis for the immediately preceding financial year of the Disposal Group; or (iii) there is a disposal of a substantial part of the business of the Disposal Group or any transaction the effect of which is that either (a) HKWOT will cease to own more than 50% of the shares of Hong Kong Wing On Travel Service Limited ( WOTSL ) carrying the right to vote in all circumstances and to share pro rata in all distributions of WOTSL; or (b) the Purchaser ceases to be the legal and beneficial owner of more than 50% of the shares of HKWOT carrying the right to vote in all circumstances and to share pro rata in all distribution of HKWOT (either of these being a Disposal Event ), except that the Company has given its written consent(s) on such matters as mentioned in (ii) and (iii) above, the Company shall have an option of requiring the Purchaser to purchase all its 10% interest in HKWOT at an amount in Hong Kong dollars equal to 20 times of the consolidated net profit after tax of HKWOT as shown in the audited consolidated financial statements for the latest full financial year as at the date on which the option is exercised. HKWOT 10% (i)hkwot (ii) 50%(iii) (a) HKWOT 50% (b) HKWOT 50% HKWOT (ii) (iii) HKWOT 20 HKWOT 10% The management has assessed the fair value of the aforesaid put option at the date of the Shareholders Agreement and as of 30 June 2011 and determined that the value of such option is not significant. 26 Rosedale Hotel Holdings Limited Interim Report 2011

29 8. DIVIDEND 8. No dividends were paid, declared or proposed during the reporting period. The directors do not recommend the payment of an interim dividend. 9. (LOSS) EARNINGS PER SHARE 9. The calculation of the basic and diluted (loss) earnings per share attributable to the owners of the Company is based on the following data: From continuing and discontinued operations (Loss) earnings for the purposes of basic and diluted (loss) earnings per share (Loss) earnings for the period attributable to owners of the Company Six months ended HK$ 000 HK$ 000 (unaudited) (unaudited) (111,344) 577,983 Number of shares Weighted average number of ordinary shares for the purposes of basic and diluted (loss) earnings per share 657,675, ,007,049 27

30 9. (LOSS) EARNINGS PER SHARE (Continued) From continuing and discontinued operations (Continued) 9. The computation of diluted loss per share for the period ended 30 June 2011 has not assumed the conversion of the Company s previously outstanding convertible notes since their exercise would result in a decrease in loss per share from continuing operations. The computation of diluted earnings per share for the period ended 30 June 2010 has not assumed the conversion of the Company s outstanding convertible notes because the exercise price of the convertible notes was higher than the average market price for shares for From continuing operations The calculation of basic and diluted loss per share from continuing operations attributable to the owners of the Company is based on the following data: Six months ended HK$ 000 HK$ 000 (unaudited) (unaudited) (Loss) profit for the period attributable to the owners of the Company Less: Profit for the period from discontinued operations (111,344) 577, ,915 Loss for the purposes of basic and diluted loss per share from continuing operations (111,344) (125,932) 28 Rosedale Hotel Holdings Limited Interim Report 2011

31 9. (LOSS) EARNINGS PER SHARE (Continued) 9. From continuing operations (Continued) The calculation of diluted loss per share from continuing operations for the period ended 30 June 2011 and 2010 has not assumed the conversion of the Company s previously outstanding convertible notes as these potential ordinary shares are anti-dilutive during both periods. The denominators used are the same as those detailed above for both basic and diluted (loss) earnings per share. From discontinued operation Basic and diluted earnings per share from discontinued operations was HK$1.29 per share for the six months ended 30 June 2010 (for the six months ended : HK$Nil per share), based on the profit for the respective period from discontinued operations of HK$703,915,000 (for the six months ended : HK$Nil) and the denominators detailed above for both basic and diluted (loss) earnings per share. 10. MOVEMENTS IN PROPERTY, PLANT AND EQUIPMENT AND INVESTMENT PROPERTIES ,915, D u r i n g t h e p e r i o d, t h e G ro u p s p e n t a p p ro x i m a t e l y HK$292,713,000 (for the six months ended : HK$162,655,000) on acquisition of property, plant and equipment of which approximately HK$270,650,000 was in relation to properties under construction (for the six months ended : HK$9,336,000). 292,713, ,655, ,650,000 9,336,000 In addition, during the period, the Group disposed of certain leasehold improvements and other plant and equipment with an aggregate carrying amount of approximately HK$66,727,000 for cash proceeds of approximately HK$62,194,000, resulting in a loss on disposal of approximately HK$4,533, ,727,000 62,194,000 4,533,000 29

32 10. MOVEMENTS IN PROPERTY, PLANT AND EQUIPMENT AND INVESTMENT PROPERTIES (Continued) 10. The fair value of investment properties at 30 June 2011 has been arrived on the basis of a valuation carried out on that date by Asset Appraisal Limited ( Asset Appraisal ) and Norton Appraisals Limited ( Norton Appraisals ), independent qualified professional valuers not connected with the Group. Asset Appraisal and Norton Appraisals are members of the Hong Kong Institute of Surveyors, and have appropriate qualifications and has recent experiences in the valuation of similar properties in the relevant locations. The valuation was arrived at using the capitalisation of the net income approach and a combination of depreciated replacement cost approach and direct comparison approach. The valuation for both the building portion and land portion of the existing investment property was arrived at using the capitalisation of the net income approach. The resulting decrease in fair value of investment properties of HK$2,272,000 (for the six months ended : HK$34,000,000) has been recognised in profit or loss. 2,272,000 34,000,000 The directors have reviewed the recoverability of the carrying amounts of the Group s leasehold improvements in respect of hotel properties at the end of the reporting period. The recoverable amounts of the relevant assets have been determined on the basis of their value in use. The discount rate in measuring the amounts of value in use was 15.7%. The directors determined that the carrying amounts of the leasehold improvements of HK$183,730,000 exceeded their recoverable amounts. Accordingly, an impairment loss of approximately HK$9,980,000 (for the six months ended : HK$3,104,000) has been recognised in respect of these leasehold improvements. 15.7% 183,730,000 9,980,000 3,104, Rosedale Hotel Holdings Limited Interim Report 2011

33 11. TRADE AND OTHER RECEIVABLES 11. Included in trade and other receivables are trade receivables o f a p p r o x i m a t e l y H K $ 1 5, 8 8 9, ( a t : HK$22,704,000) and the aged analysis of the trade receivables (net of impairment) at the end of the reporting period is as follows: 15,889,000 22,704,000 At HK$ 000 (unaudited) At HK$ 000 (audited) 0 30 days ,199 7, days ,400 1, days ,685 Over 90 days 90 4,547 11,400 15,889 22,704 The Group allows an average credit period of 0 to 30 days to its trade customers. 030 Included in other receivables at 30 June 2011 are prepaid lease rentals and other deposits related to the Group s budget hotels located in the PRC and other prepayments in aggregate of approximately HK$26,770,000 that are expected to be utilised within one year (at : HK$30,461,000). 26,770,000 30,461,000 31

34 12. ASSETS/LIABILITIES CLASSIFIED AS HELD FOR SALE 12. In June 2011, the directors of the Company resolved to dispose of its 100% interest in a wholly-owned subsidiary, Sky Victory Resources Limited ( Sky Victory ), a subsidiary of which operates a budget hotel in Henan Province, the PRC and to dispose of a vessel. Since then, the directors have started negotiations with several interested parties. The assets and liabilities attributable to Sky Victory and the vessel, which are expected to be sold within twelve months, have been classified as a disposal group held for sale and are separately presented in the condensed consolidated statement of financial position. Sky Victory and the vessel are included in the Group s hotel and leisure services for segment reporting purposes (see note 3). Sky Victory Resources LimitedSky Victory 100% Sky Victory Sky Victory 3 The assets/liabilities classified as held for sale as at 31 December 2010 relate to the disposal of Sinomatrix and. Details of which are set out in note 6. Sinomatrix 6 On 22 August 2011, the Group entered into an agreement with an independent third party for the sale of its entire interest in Sky Victory. The net proceeds of disposal are expected to exceed the net carrying amount of the relevant assets and liabilities. Sky Victory 32 Rosedale Hotel Holdings Limited Interim Report 2011

35 12. ASSETS/LIABILITIES CLASSIFIED AS HELD FOR SALE (Continued) 12. Major classes of assets and liabilities classified as held for sale are as follows: Sinomatrix and Sky Victory at Vessel at Total at HK$ 000 HK$ 000 HK$ 000 HK$ 000 Sinomatrix Sky Victory Property, plant and equipment 1,007 33,852 34,859 4,903 Intangible assets 5,853 5,853 Available-for-sale investments 48,714 Inventories Trade and other receivables Other assets (Rental deposits, and bank balances and cash) Total assets classified as held for sale 7,917 33,852 41,769 54,362 Trade and other payables (729) (729) (1,660) Tax liabilities (44) (44) (74) Total liabilities classified as held for sale (773) (773) (1,734) An amount of HK$44,000 relating to the disposal group classified as held for sale has previously been recognised in other comprehensive income and is accumulated in equity. 44,000 33

36 13. TRADE AND OTHER PAYABLES 13. Included in trade and other payables are trade payables o f a p p r o x i m a t e l y H K $ 1 1, 0 7 7, ( a t : HK$11,151,000) and the aged analysis of the trade payables at the end of the reporting period is as follows: 11,077,000 11,151,000 At HK$ 000 (unaudited) At HK$ 000 (audited) 0 30 days ,223 5, days ,559 2, days , Over 90 days 90 2,912 2,676 11,077 11,151 (a) Included in other payable balances at 30 June 2011 are deposits of approximately HK$16,375,000 (at : approximately HK$11,386,000) received in advance from customers related to the Group s hotel operations that are expected to be utilised within one year. (a) 16,375,000 11,386, Rosedale Hotel Holdings Limited Interim Report 2011

37 13. TRADE AND OTHER PAYABLES (Continued) 13. (b) Included in other payable balances at 30 June 2011 are payables of approximately HK$39,313,000 (at : approximately HK$21,666,000) for construction costs incurred for the Group s hotel properties, which are unsecured, interest free and repayable within one year. (b) 39,313,000 21,666,000 (c) Included in other payable balances at 30 June 2011 are various accrued operating expenses amounting to HK$60,040,000 (at : approximately HK$69,135,000) that are expected to settled within one year. These accrued expenses include accrued salary of approximately HK$8,056,000, accrued utilities of HK$10,124,000, and others related to the Group s hotel operations. (c) 60,040,000 69,135,000 8,056,000 10,124, BORROWINGS 14. During the period, the Group obtained three new bank loans amounting to HK$502,614,000 (2010: HK$Nil). The loans bear interest at Hong Kong Interbank Offer Rate ( HIBOR ) plus 1.75%, HIBOR plus 2.46% and Renminbi Benchmark Deposit and Loan Rate times 120% per annum respectively. They are repayable over a period of 3 to 4 years. HK$269,000,000 of the loans which are not due for repayment within the next twelve months have been classified as current liabilities as the loan contains repayable on demand clause. Bank deposits of approximately HK$14,113,000 (2010: HK$Nil) and properties of approximately HK$1,193,666,000 were pledged as securities for these bank borrowings as at 30 June ,614, % 269,000,000 14,113,000 1,193,666,000 35

38 14. BORROWINGS (Continued) 14. HK$269,000,000 of the proceeds were used to finance the construction of hotel properties. 269,000,000 Included in other borrowings is a loan of approximately HK$8,148,000 from an entity that has a common significant shareholder with the Company. The loan is unsecured, interest bearing at 10% per annum and repayable on demand. 15. CONVERTIBLE NOTES 8,148, The movement of the liability component of the convertible notes for the period is set out below: At HK$ 000 (unaudited) At HK$ 000 (audited) Carrying amount at the beginning of the period 330, ,766 Interest charge 11,038 49,513 Interest paid (31,080) (9,066) Redeemed during the period (310,800) Repurchased during the year (345,371) Carrying amount at the end of the period 330, Rosedale Hotel Holdings Limited Interim Report 2011

39 16. SHARE CAPITAL 16. Number of shares Amount HK$ 000 Authorised Shares of HK$0.01 each at 1 January 2010, 31 December 2010 and 30 June ,000,000,000 1,500,000 Issued and fully paid Shares of HK$0.01 each at 1 January ,919,844, ,199 Issued of shares on exercise of warrants 352,462 4 Consolidation of shares (10,374,187,575) Ordinary shares of HK$0.20 each ,009, ,203 Capital reduction (103,743) Shares of HK$0.01 each at 30 June ,009,872 5,460 Shares of HK$0.01 each at 1 January 2011 and 30 June ,675,872 6,577 37

40 16. SHARE CAPITAL (Continued) 16. On 2 February 2010, the Company had completed a capital reorganisation which involved the following: (i) share consolidation: the consolidation of every 20 then issued shares of HK$0.01 each into 1 issued consolidated share of HK$0.20 each; and (ii) capital reduction: the reduction of the nominal value of each share in issue from HK$0.20 to HK$0.01 by cancelling paid-up capital to the extent of HK$0.19 on each issued share of the Company such that the then issued share capital of the Company was reduced by the sum of approximately HK$103,743,000 for transfer to the special reserve. The full amount of HK$103,743,000 was then applied to set off against the accumulated losses of the Company. (i) (ii) ,743, ,743, CAPITAL COMMITMENTS 17. At HK$ 000 (unaudited) At HK$ 000 (audited) Contracted for but not provided in the condensed consolidated financial statements in respect of Capital expenditure on investment property 17,430 10,882 Investment in an associate 11,115 11,115 Purchase of property, plant and equipment 134, , , , Rosedale Hotel Holdings Limited Interim Report 2011

41 18. OPERATING LEASE COMMITMENTS As lessee 18. At 30 June 2011, the Group had commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows: At HK$ 000 (unaudited) At HK$ 000 (audited) Hotel property Within one year 87,157 86,999 In the second to fifth years inclusive 245, ,344 Over five years 89, , , ,672 Office premises and staff quarters Within one year 1,052 1,052 In the second to fifth years inclusive 526 1,052 1,578 39

42 18. OPERATING LEASE COMMITMENTS (Continued) As lessor 18. At the end of the reporting period, the Group had contracted with tenants for the following future minimum lease payments under non-cancellable operating leases for its investment properties and premises within the hotel properties: At HK$ 000 At HK$ 000 Within one year 19,813 19,766 In the second to fifth years inclusive 44,442 44,767 Over five years 2,014 2,014 66,269 66, DERIVATIVE LIABILITY 19. During the period, the Group entered into an interest rate swap with a bank which is not under hedge accounting. The major terms of the interest rate swap are as follows: Notional amount Commencement date Maturity date Swaps HK$100,000, March December 2014 From 1.765% to 3 months HIBOR 100,000, The fair value of the interest rate swap was at a loss of approximately HK$2,080,000 and was charged directly to profit or loss for the period. 2,080, Rosedale Hotel Holdings Limited Interim Report 2011

43 20. RELATED PARTY TRANSACTIONS 20. The following is a summary of significant related party transactions carried out during the period: Six months ended HK$ 000 HK$ 000 (unaudited) (unaudited) Nature of transactions Name of company Interest paid and payable on convertible notes Asia Will Limited ( Asia Will ) (Note) 1,133 Loan interest paid and payable by the Group ITC Management Limited ( ITC Management ) (Note) ITC Management Limited ITC Management Note: The holding company of Asia Will and ITC Management has significant influence over the Company. ITC Management The amounts due from associates and an investee are unsecured, non-interest bearing and repayable on demand. At 30 June 2011, the Group expects that such balances will be repayable in more than one year and they are classified as noncurrent. The loan from ITC Management at 31 December 2010 is unsecured, carries interest at Hong Kong Dollar Prime Rate plus 2% per annum and repaid during the current period. ITC Management 2 The amount due to ITC Management is unsecured, interest free and will be repayable within one year. ITC Management 41

44 20. RELATED PARTY TRANSACTIONS (Continued) Compensation of key management personnel 20. The remuneration of key management personnel, which are the directors of the Company, during the period was as follows: Six months ended HK$ 000 HK$ 000 (unaudited) (unaudited) Short-term benefits 472 1, Rosedale Hotel Holdings Limited Interim Report 2011

45 Management Discussion and Analysis REVIEW OF OPERATIONS The Group attained a turnover of HK$178.2 million from its continuing operations for the six months ended 30 June 2011, represented an increase of 29.7% as compared to the HK$137.4 million for the corresponding period of The results of the Group for the six months ended 30 June 2011 was a loss of HK$118.3 million against the profit of HK$525.4 million for the corresponding period of 2010, which was mainly attributable to a gain on disposal of the travel and related business of approximately HK$716.9 million. However, the aforesaid gain on disposal was a non-recurring item and there was no similar item recorded for the six months ended 30 June Notwithstanding that the Group has recorded a loss from its continuing operations of HK$118.3 million for the six months ended 30 June 2011 (for the six months ended 30 June 2010: HK$178.5 million), this represented a 33.7% reduction of loss from that of the corresponding period of previous year. This significant improvement was resulted mainly from decreases in various cost items during the reporting period. Loss for the period from continuing operations was arrived at after charging administrative expenses of HK$92.2 million (for the six months ended 30 June 2010: HK$118.7 million); finance costs of HK$19.4 million (for the six months ended 30 June 2010: HK$35.1 million); impairment loss recognised in respect of other intangible assets arising from certain under-performed hotel lease contracts of HK$Nil (for the six months ended 30 June 2010: HK$14.0 million); impairment loss recognised in respect of property, plant and equipment of HK$10.0 million (for the six months ended 30 June 2010: HK$3.1 million) and decrease in fair value of investment properties of HK$2.3 million (for the six months ended 30 June 2010: HK$34.0 million). 178,200, ,400, % 118,300, ,400, ,900, ,300, ,500, % 92,200, ,700,000 19,400,000 35,100,000 14,000,000 10,000,000 3,100,000 2,300,000 34,000,000 43