Stock Code : 0184 INVESTMENTS (HONG KONG) LIMITED
Interim Report 2009 CORPORATE INFORMATION DIRECTORS HO Kian Guan Executive Chairman HO Kian Hock Deputy Executive Chairman TSE See Fan Paul CHAN Lui Ming Ivan YU Yuet Chu Evelyn HO Chung Tao HO Chung Hui HO Chung Kain (Alternate to HO Chung Hui) * HO Kian Cheong **CHAN Yau Hing Robin **KWOK Chi Shun Arthur **WANG Poey Foon Angela * Non-executive Director **Independent Non-executive Director AUDIT COMMITTEE CHAN Yau Hing Robin Chairman KWOK Chi Shun Arthur WANG Poey Foon Angela REMUNERATION COMMITTEE TSE See Fan Paul Chairman YU Yuet Chu Evelyn CHAN Yau Hing Robin KWOK Chi Shun Arthur WANG Poey Foon Angela AUDITORS KPMG 8th Floor Prince s Building 10 Chater Road Central Hong Kong SHARE REGISTRARS & TRANSFER OFFICE Tricor Tengis Limited 26th Floor, Tesbury Centre 28 Queen s Road East Wanchai Hong Kong REGISTERED OFFICE Room 2902 West Tower Shun Tak Centre 168-200 Connaught Road Central Hong Kong COMPANY S WEBSITE www.keckseng.com.hk COMPANY SECRETARY YUEN Chiu Yuk Ida
Keck Seng Investments (Hong Kong) Limited INTERIM RESULTS The board of directors (the Board ) of Keck Seng Investments (Hong Kong) Limited (the Company ) is pleased to announce the unaudited consolidated interim results of the Company and its subsidiaries (the Group ), and associated companies for the six months ended 30 June 2009. The unaudited consolidated interim results have been reviewed by the Company s auditor, KPMG, in accordance with Hong Kong Standard on Review Engagements 2410, Review of interim financial information performed by the independent auditor of the entity issued by the Hong Kong Institute of Certified Public Accountants and by the Audit Committee. The review report of the auditor is included on page 10. The consolidated profit attributable to equity shareholders of the Company for the six months ended 30 June 2009 was HK$101,344,000 (HK$0.30 per share), compared to HK$177,675,000 (HK$0.52 per share) for the first six months of 2008. The Board has declared an interim dividend of HK$0.025 (2008: HK$0.05) per share for 2009 payable on Wednesday, 21 October 2009, to equity shareholders whose names appear on the register of members of the Company on Friday, 16 October 2009. OPERATIONS REVIEW The Group s business is organized by geographical locations. These locations are mainly divided into Macau, Vietnam, The People s Republic of China ( PRC ), Canada, and other markets classified by location of assets. Macau During the first half of 2009, the Group s turnover in Macau consisted mainly of rental income from its portfolio of residential, commercial and industrial properties. The Macau economy was affected by a reduction in total visitor arrivals as well as decrease in foreign direct investment. In anticipation of improved property market conditions and a more robust economy, the Group has therefore withheld from any sale of its properties in Macau during the first half of the year. Total turnover for the first six months of 2009 was HK$17.8 million, a reduction of 80% as compared to the last corresponding period. Vietnam During the first half of 2009, Sheraton Saigon Hotel and Grand Towers reported a reduction in turnover and contribution to profits. Average room rate reduced in the first half of 2009 to US$197, as compared to US$230 in the first half of 2008. Occupancy rate for the first half of 2009 was 47%, as compared to 68% in the corresponding period in 2008. The reductions are in line with the market conditions in the international lodgings market in Ho Chi Minh City, and are largely a result of reduced international travelling to Vietnam from the main feeder markets. The Caravelle Hotel, in which the Group holds 25%, reported a reduction in profit contribution in the first half of 2009, as compared to 2008. Average room rate also declined to US$178 in the first half of 2009, as compared to US$203 in the first half of 2008. Occupancy rate for the first six months was at 44% in 2009, as compared to 65% in the corresponding period in 2008.
Interim Report 2009 PRC The Holiday Inn Riverside Wuhan reported a reduction in room rates for the first half of 2009 to RMB358, as compared to RMB384 for the first half of 2008. Occupancy rate reduced to 63% for the first six months in 2009, as compared to 67% during the same period of 2008. More new international and local hotels have opened up in the city during the period under review, which heightened the already intensive competition in this segment of the market. Canada During the first half of 2009, the profit contribution from Canadian hotels of the Group was negatively impacted by the financial tsunami. For the first six months of the year, DoubleTree International Plaza Hotel in Toronto reported a reduction in average room rate to C$115 in 2009, as compared to C$116 in 2008. Occupancy rate also dropped to 68% in 2009 as compared to 80% in 2008. The Four Points Hotel by Sheraton in Quebec reported a reduction in average room rate to C$114 in the first half of 2009, as compared to C$117 in the first half of 2008. Occupancy rate also dropped to 64% in 2009 as compared to 75% in 2008. The Sheraton Ottawa Hotel reported a drop in room rate in the first six months of the year to C$148, as compared to C$167 in 2008. Despite the increase in occupancy rate to 72% for the first six months of 2009 as compared to 63% in the corresponding period in 2008, the hotel reported a reduction in net earnings after accounting for tax. The Four Points Hotel by Sheraton in which the Group has a 25% shareholding, was disposed of in July 2009. FINANCIAL REVIEW The Group s turnover was HK$335.8 million for the first six months of 2009, a decrease of 20% over the corresponding period in 2008. The Group withheld from any sale of its properties in Macau during the first half of the year to adhere to the strategy of releasing remaining properties at the best possible time to maximize property development margin. Revenue from hotel operations amounted to HK$316.6 million, a decrease of 5% as compared to HK$331.8 million in the corresponding period in 2008. A profit attributable to shareholders of HK$101.3 million was reported as compared to a profit attributable to shareholders of HK$177.7 million in 2008. At 30 June 2009, the Group had total borrowings of HK$149.8 million and bank deposits and cash of HK$1,437.0 million. Bank deposits and cash are mostly in United Sates dollars, Hong Kong dollars, Australian dollars and Canadian dollars. Taking into account of the cash in hand and available credit facilities, the Group has sufficient working capital for its present requirements. PLEDGE OF ASSETS At 30 June 2009, certain properties held for sale with an aggregate carrying value of approximately HK$101.4 million were mortgaged to various banks to secure banking facilities granted to the Group.
Keck Seng Investments (Hong Kong) Limited CONTINGENT LIABILITIES At 30 June 2009, there were outstanding counter indemnities relating to guarantees issued by bankers of a subsidiary in favour of the Macau SAR Government in respect of properties held for sale amounted to HK$8.3 million. At 30 June 2009, guarantees given by the Company to banks to secure banking facilities made available to an associate amounted to HK$64.2 million. At 30 June 2009, guarantees given by a subsidiary and the Company to a bank to secure banking facilities made available to an associate amounted to HK$32.3 million. PROSPECTS The first quarter of 2009 was an unprecedented period for the global economy with multiple scenarios of financial meltdown. Actions by monetary authorities in terms of drastic increases in money supply and credit expansion have averted further crises for the time being. As we move into the third quarter of the year, there are signs of stability in several key economies. Yet the outlook for the next six to twelve months remains uncertain. For the full year of 2009, Macau is expected to report an increase in GDP. There will be a modest recovery in the property market in the second and third quarters of the year. Uncertainty in the US financial and gaming markets, however, continue to negatively impact, both in terms of sentiments and investment flow into Macau. The visa restrictions imposed by the Chinese authorities have seen signs of some relaxation, although the magnitude of mainland visitor arrivals can still not be predicted with accuracy. The fundamental strength of the Macau economy however remains intact, and will continue to be supported by a gradual increase in investments in fixed assets, as well as low unemployment levels amongst the local working population. The Group s property portfolio in Macau is well positioned to benefit from the recovery. The Group s hotel businesses will continue to be affected by the current economic downturn and the speed of the impending recovery. Both China and Vietnam remain economies with good long term growth potential, despite the current worldwide adjustment. The US economy still remains the largest economy in the world, despite its current economic woes. The Group s recent investment in the US was a move to take advantage of the dramatic reduction in capital values in the first quarter of the year. Capital values and investment sentiments have since then improved. It is the Group s continuing policy to remain focused on seeking further investment opportunities. PERSONNEL At 30 June 2009, the Group had approximately 1,525 employees. A policy of localizing as many of the positions as possible is in place throughout the Group, subject to suitable and sufficient local executives and staff with relevant qualifications and experience being available. Salary and remuneration are competitive and are based on varying conditions of human resources in the different countries in which the Company and its subsidiaries operate.
Interim Report 2009 CORPORATE GOVERNANCE The Company will continue its policy of maintaining a solid, balanced and sensible framework of corporate governance. The Company has conducted a review of its corporate governance regime and framework during the period, and will continue to do so, with a view towards ensuring that such practices are in line with evolving regulatory developments and market expectations. None of the Directors is aware of any information that would reasonably indicate that the Company is not, or was not for any part of the accounting period covered by the interim financial statements, in compliance with the Code on Corporate Governance Practices, except that the Company had not appointed a chief executive officer, since day-to-day operations of the Group were undertaken by the management teams in the respective geographical locations under the supervision of the executive directors. In respect of the management of the Board of the Company, the role is undertaken by Mr HO Kian Guan, Executive Chairman of the Company. The Board is of the view that this structure has served the Company well in the past years and does not impair the balance of responsibility between the Board and the management of the business. Further, the non-executive directors of the Company are not appointed for a specific term. In practice, however, they are subject to retirement by rotation not less than once every three years. SECURITIES TRANSACTIONS BY DIRECTORS The Board of the Company adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the Model Code ) as set out in Appendix 10 of the Listing Rules of The Stock Exchange of Hong Kong Limited. The Company has made specific enquiries of all Directors who have confirmed compliance with the required standards set out in the Model Code during the period under review. AUDIT COMMITTEE The Audit Committee presently comprises three independent non-executive directors. The Audit Committee meets with the Group s senior management, internal and external auditors regularly to review the effectiveness of the internal control system and the interim and annual reports, including the Group s unaudited consolidated financial statements for the six months ended 30 June 2009. REMUNERATION COMMITTEE The Remuneration Committee comprises five members, three of whom are independent non-executive directors. The Committee reviews matters relating to the remuneration for senior management and Directors of the Company.
Keck Seng Investments (Hong Kong) Limited MATERIAL EVENTS SINCE FINANCIAL PERIOD END As per an announcement issued on 6 July 2009, the Company has entered into a Purchase and Sale Agreement to purchase the 404-room W Hotel in San Francisco at a consideration of US$90 million approximately. In July 2009, the acquisition was successfully completed. And as reported in the circular dated 27 July 2009 to shareholders, the Directors consider the acquisition to be a strategic move to further its investments in the hotel sector where the Group has built up considerable experience. It also allows the Group to acquire an established, well managed, branded international hotel property in a prime location at a time when the economic cycle allows the acquisition to be conducted at a reasonable capital cost. BOOK CLOSE The register of members will be closed from Tuesday, 13 October 2009 to Friday, 16 October 2009, both days inclusive, during which period no transfer of shares of the Company will be registered. In order to qualify for the interim dividend, all transfer documents accompanied by the relevant share certificates must be lodged with the Company s share registrars, Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen s Road East, Wanchai, Hong Kong for registration not later than 4:30 p.m. on Monday, 12 October 2009. PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES There was no purchase, sale or redemption by the Company or any of its subsidiaries of the Company s listed securities during the six months ended 30 June 2009.
Interim Report 2009 DIRECTORS INTERESTS AND SHORT POSITIONS IN SHARES The directors of the Company who held office at 30 June 2009 had the following interests in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the SFO )) (the Associated Corporations ) at that date as recorded in the register required to be kept under section 352 of the SFO or as otherwise notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code: Number of ordinary shares (unless otherwise specified) Long Positions: Name of Personal Corporate % Name of Company Directors Interests (1) Interests Total Interest Keck Seng Investments Ho Kian Guan 204,480 197,556,320 (2) 197,760,800 58.13 (Hong Kong) Ltd Ho Kian Hock 480 197,556,320 (2) 197,556,800 58.07 Ho Kian Cheong 55,160,480 55,160,480 16.21 Tse See Fan Paul 288,720 288,720 0.08 Chan Yau Hing Robin 180,000 720,000 (3) 900,000 0.26 Kwok Chi Shun Arthur 202,000 202,000 0.06 Lam Ho Investments Pte Ltd Ho Kian Guan 32,410,774 (4) 32,410,774 99.70 Ho Kian Hock 32,410,774 (4) 32,410,774 99.70 Ho Kian Cheong 96,525 96,525 0.30 Shun Seng International Ltd Ho Kian Guan 83,052 (5) 83,052 83.05 Ho Kian Hock 83,052 (5) 83,052 83.05 Ho Kian Cheong 1,948 1,948 1.95 Hubei Qing Chuan Hotel Co Ltd Ho Kian Guan 13,163,880 (6) 13,163,880 80.76 paid in registered capital in US$ Ho Kian Hock 13,163,880 (6) 13,163,880 80.76 Ho Kian Cheong 1,017,120 1,017,120 6.24 Kwok Chi Shun Arthur 489,000 (7) 489,000 3.00 Golden Crown Development Ltd Ho Kian Guan 56,675,000 (8) 56,675,000 80.96 common shares Ho Kian Hock 56,675,000 (8) 56,675,000 80.96 Ho Kian Cheong 1,755,000 1,755,000 2.51 Tse See Fan Paul 50,000 50,000 0.07 Ocean Gardens Management Ho Kian Guan 100,000 (9) 100,000 100.00 Co Ltd Ho Kian Hock 100,000 (9) 100,000 100.00 Shun Cheong International Ltd Ho Kian Guan 4,305 (10) 4,305 43.05 Ho Kian Hock 4,305 (10) 4,305 43.05 Ho Kian Cheong 195 195 1.95 Kwok Chi Shun Arthur 5,500 (11) 5,500 55.00 KSF Enterprises Sdn Bhd Ho Kian Guan 10,000 (12) 10,000 100.00 Ho Kian Hock 10,000 (12) 10,000 100.00 Chateau Ottawa Hotel Inc Ho Kian Guan 4,950,000 (13) 4,950,000 55.00 common shares Ho Kian Hock 4,950,000 (13) 4,950,000 55.00 Chateau Ottawa Hotel Inc Ho Kian Guan 2,475,000 (14) 2,475,000 55.00 preferred shares Ho Kian Hock 2,475,000 (14) 2,475,000 55.00
Keck Seng Investments (Hong Kong) Limited DIRECTORS INTERESTS AND SHORT POSITIONS IN SHARES (continued) Notes: (1) This represents interests held by the relevant directors as beneficial owners. (2) This represents 100,909,360 shares held by Kansas Holdings Limited and 96,646,960 shares held by Goodland Limited, in which companies each of Ho Kian Guan and Ho Kian Hock had 1/2 interest indirectly. (3) This represents interests held by United Asia Enterprises Inc controlled by Dr Chan Yau Hing Robin by virtue of the fact that United Asia Enterprises Inc or its directors were accustomed to act in accordance with the directions of Dr Chan. (4) This represents 29,776,951 shares (91.6%) indirectly held by the Company and 2,633,823 shares (8.1%) held by Goodland Limited in which each of Ho Kian Guan and Ho Kian Hock had 1/2 interest indirectly. (5) This represents 75,010 shares (75.01%) indirectly held by the Company and 8,042 shares (8.04%) held by Goodland Limited in which each of Ho Kian Guan and Ho Kian Hock had 1/2 interest indirectly. (6) This represents US$8,965,000 (55%) indirectly contributed by the Company and US$4,198,880 (25.76%) contributed by Goodland Limited in which each of Ho Kian Guan and Ho Kian Hock had 1/2 interest indirectly. (7) This represents interests held by AKAA Project Management International Limited which was wholly owned by Kwok Chi Shun Arthur. (8) This represents 49,430,000 shares (70.61%) indirectly held by the Company and 7,245,000 shares (10.35%) held by various companies in which each of Ho Kian Guan and Ho Kian Hock had 1/2 interest indirectly. (9) This represents 1 quota of Ptc99,000 (99%) indirectly held by the Company and 1 quota of Ptc1,000 (1%) held by Goodland Limited in which each of Ho Kian Guan and Ho Kian Hock had 1/2 interest indirectly. (10) This represents 3,501 shares (35.01%) indirectly held by the Company and 804 shares (8.04%) held by Goodland Limited in which each of Ho Kian Guan and Ho Kian Hock had 1/2 interest indirectly. (11) This represents interests held by Larcfort Incorporated in which Kwok Chi Shun Arthur had a controlling interest. (12) This represents 2,500 shares (25%) directly held by the Company, 2,499 shares (24.99%) held by Goodland Limited in which each of Ho Kian Guan and Ho Kian Hock had 1/2 interest indirectly and 5,001 shares (50.01%) held by Keck Seng (Malaysia) Bhd in which each of Ho Kian Guan and Ho Kian Hock was a substantial shareholder and a director. (13) This represents 4,500,000 common shares (50%) indirectly held by the Company and 450,000 common shares (5%) held by Allied Pacific Investments Inc in which each of Ho Kian Guan and Ho Kian Hock had 1/2 interest indirectly. (14) This represents 2,250,000 preferred shares (50%) indirectly held by the Company and 225,000 preferred shares (5%) held by Allied Pacific Investments Inc in which each of Ho Kian Guan and Ho Kian Hock had 1/2 interest indirectly. Save as mentioned above, at 30 June 2009, none of the directors of the Company or any of their associates had interests or short positions in the shares, underlying shares or debentures of the Company or any of its Associated Corporations, as recorded in the register required to be kept under section 352 of the SFO or as otherwise notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code.
Interim Report 2009 SUBSTANTIAL INTERESTS AND SHORT POSITIONS IN SHARES At 30 June 2009, the interests and short positions of those persons (other than the Directors) in the shares and underlying shares of the Company as recorded in the register required to be kept by the Company under Section 336 of the SFO were as follows: Long Positions: % of total Number of issued share Capacity in which shares ordinary capital of Name were held shares held the Company Ocean Inc. (Note 1, 2) Interests of controlled corporations 197,556,320 58.1 Pad Inc (Note 1) Interests of controlled corporations 96,646,960 28.4 Lapford Limited (Note 1) Interests of controlled corporations 96,646,960 28.4 Kansas Holdings Limited (Note 1) Interests of controlled corporations 96,646,960 28.4 Kansas Holdings Limited (Note 2) Beneficial owner 100,909,360 29.7 Goodland Limited (Note 1) Beneficial owner 96,646,960 28.4 Notes: (1) Ocean Inc, Pad Inc, Lapford Limited and Kansas Holdings Limited had deemed interests in the same 96,646,960 shares beneficially held by Goodland Limited. (2) Ocean Inc had deemed interests in the same 100,909,360 shares beneficially held by Kansas Holdings Limited. Save as mentioned above, at 30 June 2009, the Company had not been notified of any interests and short positions in the shares and underlying shares of the Company which had been recorded in the register required to be kept under section 336 of the SFO. Hong Kong, 24 September 2009 Ho Kian Guan Executive Chairman
10 Keck Seng Investments (Hong Kong) Limited REVIEW REPORT TO THE BOARD OF DIRECTORS OF KECK SENG INVESTMENTS (HONG KONG) LIMITED (Incorporated in Hong Kong with limited liability) Introduction We have reviewed the interim financial report set out on pages 11 to 26 which comprises the consolidated balance sheet of Keck Seng Investments (Hong Kong) Limited as of 30 June 2009 and the related consolidated income statement, statement of comprehensive income and statement of changes in equity and condensed consolidated cash flow statement for the six month period then ended and explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of an interim financial report to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34, Interim financial reporting, issued by the Hong Kong Institute of Certified Public Accountants. The Directors are responsible for the preparation and presentation of the interim financial report in accordance with Hong Kong Accounting Standard 34. Our responsibility is to form a conclusion, based on our review, on the interim financial report and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Scope of review We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, Review of interim financial information performed by the independent auditor of the entity, issued by the Hong Kong Institute of Certified Public Accountants. A review of the interim financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the interim financial report as at 30 June 2009 is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34, Interim financial reporting. KPMG Certified Public Accountants 8th Floor, Prince s Building 10 Chater Road Central, Hong Kong Hong Kong, 24 September 2009
Interim Report 2009 11 CONSOLIDATED INCOME STATEMENT Unaudited Six months ended 30 June Note HK$ 000 HK$ 000 Turnover 3 335,806 420,836 Cost of sales (67,225) (77,933) 268,581 342,903 Other revenue 4(a) 8,862 25,728 Other net income 4(b) 56,473 41,706 Direct costs and operating expenses (93,032) (84,688) Marketing and selling expenses (17,127) (17,676) Depreciation of fixed assets (35,918) (32,476) Administrative and other operating expenses (51,250) (60,285) Operating profit 136,589 215,212 (Decrease)/increase in fair value of investment properties 9 (6,493) 20,420 130,096 235,632 Finance costs 5(a) (44) (240) Share of profits less losses of associates 8,288 15,422 Profit before taxation 5 138,340 250,814 Income tax 6 (9,506) (12,922) Profit for the period 128,834 237,892 Attributable to: Equity shareholders of the Company 101,344 177,675 Minority interests 27,490 60,217 Profit for the period 128,834 237,892 Earnings per share, basic and diluted (cents) 8 29.8 52.2 The notes on pages 16 to 26 form part of these interim financial statements. Details of dividends payable to equity shareholders of the Company are set out in note 7.
12 Keck Seng Investments (Hong Kong) Limited CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Unaudited Six months ended 30 June HK$ 000 HK$ 000 Profit for the period 128,834 237,892 Other comprehensive income for the period (after tax and reclassification adjustments): Exchange differences arising from translation of overseas operations 3,059 2,849 Interest-free loans from minority shareholders: net movement in other capital reserve (2,841) (2,587) Available-for-sale securities: net movement in fair value reserve 567 84 785 346 Total comprehensive income for the period 129,619 238,238 Attributable to: Equity shareholders of the Company 101,524 178,021 Minority interests 28,095 60,217 Total comprehensive income for the period 129,619 238,238 The notes on pages 16 to 26 form part of these interim financial statements.
Interim Report 2009 13 CONSOLIDATED BALANCE SHEET (Unaudited) (Audited) At 30 June At 31 December Note HK$ 000 HK$ 000 Non-current assets Fixed assets 9 Investment properties 240,907 247,400 Other properties and fixed assets 624,175 653,979 Interests in leasehold land held for own use under operating lease 119,172 120,959 984,254 1,022,338 Interest in associates 150,299 138,177 Available-for-sale securities 2,352 1,785 1,136,905 1,162,300 Current assets Trading securities 2,017 37,692 Properties held for sale 332,719 332,767 Inventories 2,447 2,663 Trade and other receivables 10 25,688 36,303 Derivative financial assets 3,221 296 Deposits and cash 11 1,437,036 1,326,426 1,803,128 1,736,147 Current liabilities Bank loans 10,000 Trade and other payables 12 167,729 193,423 Loans from associates 1,364 1,364 Loans from minority shareholders 13 129,117 37,014 Loan from an affiliated company 28,733 Amount due to an affiliated company 19,363 20,890 Derivative financial liabilities 8,082 6,106 Taxation payable 26,486 29,974 Dividend payable 42,525 394,666 327,504 Net current assets 1,408,462 1,408,643 Total assets less current liabilities 2,545,367 2,570,943 Non-current liabilities Loans from minority shareholders Deferred tax liabilities 13 10,531 96,117 11,654 10,531 107,771 NET ASSETS 2,534,836 2,463,172 CAPITAL AND RESERVES Share capital Reserves 14 14 340,200 1,745,768 340,200 1,686,769 Shareholders equity 2,085,968 2,026,969 Minority interests 448,868 436,203 TOTAL EQUITY 2,534,836 2,463,172 The notes on pages 16 to 26 form part of these interim financial statements.
14 Keck Seng Investments (Hong Kong) Limited CONSOLIDATED STATEMENT OF CHANGES IN EQUITY unaudited For the six months ended 30 June 2009 Attributable to equity shareholders of the Company Other Fair Share Share Legal capital Exchange value Retained Minority capital premium reserve reserve reserve reserve profits Sub-total interests Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 At 1 January 2008 340,200 158,105 12,758 13,219 19,225 3,110 1,356,956 1,903,573 358,482 2,262,055 Total comprehensive income for the period (2,587 ) 2,849 84 177,675 178,021 60,217 238,238 Dividends approved in respect of the previous year (40,824 ) (40,824 ) (40,824 ) Dividends paid by the subsidiaries to minority interests (15,430 ) (15,430 ) At 30 June 2008 340,200 158,105 12,758 10,632 22,074 3,194 1,493,807 2,040,770 403,269 2,444,039 At 1 January 2009 340,200 158,105 12,758 7,778 22,563 1,193 1,484,372 2,026,969 436,203 2,463,172 Total comprehensive income for the period (2,841 ) 2,454 567 101,344 101,524 28,095 129,619 Dividends approved in respect of the previous year (42,525 ) (42,525 ) (42,525 ) Dividends paid by the subsidiaries to minority interests (15,430 ) (15,430 ) At 30 June 2009 340,200 158,105 12,758 4,937 25,017 1,760 1,543,191 2,085,968 448,868 2,534,836 The notes on pages 16 to 26 form part of these interim financial statements.
Interim Report 2009 15 CONDENSED CONSOLIDATED CASH FLOW STATEMENT Unaudited Six months ended 30 June Note HK$ 000 HK$ 000 Net cash generated from operating activities 65,723 180,801 Net cash used in investing activities (28,850 ) (15,895 ) Net cash used in financing activities (61,167 ) (20,419 ) (Decrease)/increase in cash and cash equivalents (24,294 ) 144,487 Cash and cash equivalents at 1 January 11 1,292,376 1,073,404 Effect of foreign exchange rate changes 69,941 34,109 Cash and cash equivalents at 30 June 11 1,338,023 1,252,000 The notes on pages 16 to 26 form part of these interim financial statements.
16 Keck Seng Investments (Hong Kong) Limited Notes to the unaudited interim financial statements 1. Basis of preparation These interim financial statements have been prepared in accordance with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, including compliance with Hong Kong Accounting Standard ( HKAS ) 34, Interim financial reporting, issued by the Hong Kong Institute of Certified Public Accountants ( HKICPA ). It was authorised for issue on 24 September 2009. These interim financial statements have been prepared in accordance with the same accounting policies adopted in the 2008 annual financial statements, except for the accounting policy changes that are expected to be reflected in the 2009 annual financial statements. Details of these changes in accounting policies are set out in note 2. The preparation of the interim financial statements in conformity with HKAS 34 requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates. These interim financial statements contain condensed consolidated financial statements and selected explanatory notes. The notes include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the 2008 annual financial statements. The condensed consolidated interim financial statements and notes thereon do not include all of the information required for full set of financial statements prepared in accordance with Hong Kong Financial Reporting Standards ( HKFRSs ). The interim financial statements are unaudited, but have been reviewed by KPMG in accordance with Hong Kong Standard on Review Engagement 2410, Review of interim financial information performed by the independent auditor of the entity, issued by the HKICPA. KPMG s independent review report to the Board of Directors is included on page 10. The financial information relating to the financial year ended 31 December 2008 that is included in the interim financial statements as being previously reported information does not constitute the Company s statutory financial statements for that financial year but is derived from those financial statements. Statutory financial statements for the year ended 31 December 2008 are available at the Company s registered office. The auditors have expressed an unqualified opinion on those financial statements in their report dated 23 April 2009.
Interim Report 2009 17 2. Changes in accounting policies The HKICPA has issued one new HKFRS, a number of amendments to HKFRSs and new Interpretations that are first effective for the current accounting period of the Group and the Company. Of these, the following developments are relevant to the Group s financial statements: HKFRS 8, Operating segments HKAS 1 (revised 2007), Presentation of financial statements Amendments to HKFRS 7, Financial instruments: Disclosures improving disclosures about financial instruments Improvements to HKFRSs (2008) Amendments to HKAS 27, Consolidated and separate financial statements cost of an investment in a subsidiary, jointly controlled entity or associate HKAS 23 (revised 2007), Borrowing costs HKFRS 8 requires segment disclosure to be based on the way that the Group s chief operating decision maker regards and manages the Group, with the amounts reported for each reportable segment being the measures reported to the Group s chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters. The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Group s senior executive management, and has resulted in amended disclosures being presented (see note 3). As this is the first period in which the Group has presented segment information in accordance with HKFRS 8, additional explanations have been included in the interim financial statements which explain the basis of preparation of the information. Corresponding amounts have been restated on a basis consistent with the revised segment information. As a result of the adoption of HKAS 1 (revised 2007), details of changes in equity during the period arising from transactions with equity shareholders in their capacity as such have been presented separately from all other income and expenses in a revised consolidated statement of changes in equity. All other items of income and expense are presented in the consolidated income statement, if they are recognised as part of profit or loss for the period, or otherwise in a new primary statement, the consolidated statement of comprehensive income. The new format for the consolidated statement of comprehensive income and the consolidated statement of changes in equity has been adopted in these interim financial statements and corresponding amounts have been restated to conform to the new presentation. This change in presentation has no effect on reported profit or loss, total income and expense or net assets for any period presented. The amendments to HKAS 23 have no material impact on the Group s financial statements as the amendments and interpretations are consistent with policies already adopted by the Group. In addition, the amendments to HKFRS 7 do not contain any additional disclosure requirements specifically applicable to the interim financial statements. The Improvements to HKFRSs (2008) comprise a number of minor and non-urgent amendments to a range of HKFRSs which the HKICPA has issued as an omnibus batch of amendments. The Improvements to HKFRSs (2008) have no material impact on the Group s financial statements. The amendments to HKAS 27 have removed the requirement that dividends out of pre-acquisition profits should be recognised as a reduction in the carrying amount of the investment in the investee, rather than as income. The amendments to HKAS 27 have no material impact on the Group s financial statements.
18 Keck Seng Investments (Hong Kong) Limited 3. Segmental information The Group manages its businesses by divisions, which are organised by a mixture of both business lines (products and services) and geographical locations. The Group has identified the following four reportable segments in a manner consistent with the way in which information is reported internally to the Group s senior executive management for the purposes of resource allocation and performance assessment. Hotel operations segment is primarily engaged in the businesses of hotel room accommodation, provision of food and beverage at hotel restaurant outlets and operation of slot machines at one of the Group s hotels. Property investment segment is primarily engaged in the businesses of property leasing of the Group s investment properties, which mainly consist of retail and office properties in Macau. Property development segment is primarily engaged in the businesses of development, construction, sales and marketing of the Group s trading properties in Macau. Investment and corporate segment is primarily engaged in the businesses of management of the Group s corporate assets and liabilities, available-for-sale and trading securities, financial instruments and other treasury operations. Segment results and assets Information regarding the Group s reportable segments is provided to the Group s most senior executive management for the purposes of resource allocation and assessment of segment performance. Revenue and expenses are allocated to the reportable segments with reference to sales generated by those segments and the expenses incurred by those segments. Segment assets principally comprise all tangible assets, intangible assets and current assets directly attributable to each segment.
Interim Report 2009 19 3. Segmental information (continued) (a) Analysis of segment results of the Group Other Inter- revenue Depreciation Share of External segment Total and net of fixed Finance results of Income Contribution turnover turnover turnover income assets costs associates tax to profit HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 For the six months ended 30 June 2009 Hotel operations The Peoples Republic of China 25,766 25,766 414 (5,944) 144 Vietnam 290,859 290,859 2,197 (25,169) 5,089 (10,603) 71,437 Canada 3,203 3,203 Property development 250 250 200 Property investment 17,614 939 18,553 10,685 (4,767) (14) 1,044 4,049 Investment and corporate 1,317 1,265 2,582 52,039 (38) (30) (4) 53 49,801 Inter-segment elimination (2,204) (2,204) Total 335,806 335,806 65,335 (35,918 ) (44 ) 8,288 (9,506 ) 128,834 For the six months ended 30 June 2008 Hotel operations The Peoples Republic of China 24,828 24,828 12,797 (6,336) (103) 13,513 Vietnam 307,002 307,002 1,472 (21,615) 8,263 (6,861) 97,952 Canada 7,159 7,159 Property development 63,940 63,940 (6,155) 45,126 Property investment 23,572 138 23,710 8,313 (4,487) (59) 85 30,955 Investment and corporate 1,494 7,327 8,821 44,852 (38) (78) 9 43,187 Inter-segment elimination (7,465) (7,465) Total 420,836 420,836 67,434 (32,476 ) (240 ) 15,422 (12,922 ) 237,892
20 Keck Seng Investments (Hong Kong) Limited 3. Segmental information (continued) (b) Analysis of total assets of the Group Segment Interest in assets associates Total assets HK$ 000 HK$ 000 HK$ 000 At 30 June 2009 Hotel operations The Peoples Republic of China 203,144 203,144 Vietnam 578,338 63,668 642,006 Canada 55,573 55,573 Property development 290,574 290,574 Property investment 499,399 499,399 Investment and corporate 1,218,279 31,058 1,249,337 Total 2,789,734 150,299 2,940,033 At 31 December 2008 Hotel operations The Peoples Republic of China 203,737 203,737 Vietnam 614,979 58,580 673,559 Canada 49,280 49,280 Property development 288,583 288,583 Property investment 463,701 463,701 Investment and corporate 1,189,270 30,317 1,219,587 Total 2,760,270 138,177 2,898,447 4. Other revenue and net income (a) Other revenue Six months ended 30 June HK$ 000 HK$ 000 Interest income from bank deposits 8,131 24,504 Dividend income from available-for-sale securities 84 66 Other revenue from hotel and club operations and miscellaneous income 647 1,158 8,862 25,728 (b) Other net income Six months ended 30 June HK$ 000 HK$ 000 Net realised and unrealised losses on trading securities (1,527) (4,766 ) Net exchange gain 58,000 46,472 56,473 41,706
Interim Report 2009 21 5. Profit before taxation Profit before taxation is arrived at after charging/(crediting): Six months ended 30 June HK$ 000 HK$ 000 (a) Finance costs: Interest on bank advances and other borrowings wholly repayable within five years 33 184 Interest payable on amount due to an affiliated company 11 56 44 240 (b) Staff costs: Salaries, wages and other benefits 21,674 23,549 Contributions to defined contribution retirement plans 1,244 1,273 22,918 24,822 (c) Other items: Cost of properties sold 49 12,660 Cost of inventories 25,219 19,193 Rentals receivable from investment properties less direct outgoings of HK$2,772,000 (2008: HK$3,406,000) (11,063) (15,514 ) Other rental income less direct outgoings (640) (692 ) 6. Income tax Taxation in the consolidated income statement represents: Six months ended 30 June HK$ 000 HK$ 000 Current tax Hong Kong Profits Tax Provision for the period Current tax Overseas Provision for the period 12,719 15,955 Over-provision in respect of prior periods (note (iii)) (2,090) (5,483 ) 10,629 10,472 Deferred taxation Change in value of investment properties (798) 2,450 Origination and reversal of temporary differences (325) (1,123 ) 2,450 9,506 12,922
22 Keck Seng Investments (Hong Kong) Limited 6. Income tax (continued) Notes: (i) (ii) (iii) The provision for Hong Kong Profits Tax is calculated at 16.5% (2008: 16.5%) of the estimated assessable profits for the six months ended 30 June 2009. No provision for Hong Kong Profits Tax has been made in respect of subsidiaries of the Group operating in Hong Kong as these subsidiaries incurred tax losses during the six months ended 30 June 2008 and 30 June 2009. Taxation for overseas subsidiaries is similarly calculated using the estimated annual effective rates of taxation that are expected to be applicable in the relevant countries. Over-provision of tax of HK$2,090,000 (2008: HK$5,483,000) primarily represented Macau complementary tax made in prior years. (iv) Share of associates tax for the six months ended 30 June 2009 of HK$3,347,000 (2008: HK$5,941,000) is included in the share of profits less losses of associates. 7. Dividends (a) Dividends payable to equity shareholders of the Company attributable to the interim period Six months ended 30 June HK$ 000 HK$ 000 Interim dividend declared after the interim period of HK$0.025 (2008: HK$0.05) per ordinary share 8,505 17,010 The interim dividend declared after the balance sheet date has not been recognised as a liability at the balance sheet date. (b) Dividends attributable to the previous financial year, approved during the interim period Six months ended 30 June HK$ 000 HK$ 000 Final dividend in respect of the previous financial year, approved during the following interim period, of HK$0.125 (six months ended 30 June 2008: HK$0.12) per ordinary share 42,525 40,824 8. Earnings per share The calculation of basic earnings per share is based on the Group s profit attributable to equity shareholders of the Company of HK$101,344,000 (2008: HK$177,675,000) and 340,200,000 ordinary shares in issue during both periods. For the period under review and the preceding comparative period, there is no difference between the basic and diluted earnings per share.
Interim Report 2009 23 9. Fixed assets Investment properties carried at fair value were revalued at 30 June 2009 at their open market value. The valuations were carried out by an independent firm of surveyors, Infinity Property Development and Planning Limited, who have recent experience in the location and category of property being valued. As a result of the update, a net deficit of HK$6,493,000 (2008: net gain of HK$20,420,000), and deferred tax credit thereon of HK$798,000 (2008: deferred tax expense of HK$2,450,000), have been recognised in profit or loss for the period in respect of investment properties. At 30 June 2009, certain properties held for sale with an aggregate carrying value of HK$101,437,000 (31 December 2008: HK$101,437,000) were mortgaged to various banks to secure banking facilities granted to the Group. 10. Trade and other receivables Included in trade and other receivables are trade receivables (net of specific provisions for bad and doubtful debts) with the following ageing analysis: At 30 June At 31 December HK$ 000 HK$ 000 Current or less than one month overdue 8,249 11,236 One to three months overdue 5,402 7,142 More than three months overdue but less than twelve months overdue 48 Trade receivables 13,651 18,426 The Group s credit risk is primarily attributable to trade and other receivables. The Group has a defined credit policy for trade receivables. The general credit terms allowed range from 0 30 days. Trade receivables with balances that are more than three months overdue are requested to settle all outstanding balances before any further credit will be granted. 11. Deposits and cash At 30 June At 31 December HK$ 000 HK$ 000 Deposits with banks and other financial institutions 1,417,755 1,292,286 Cash at bank and in hand 19,281 34,140 1,437,036 1,326,426 Less: Deposits with maturity greater than three months (99,013) (34,050 ) Cash and cash equivalents in the condensed consolidated cash flow statement 1,338,023 1,292,376
24 Keck Seng Investments (Hong Kong) Limited 12. Trade and other payables Included in trade and other payables are trade payables with the following ageing analysis: At 30 June At 31 December HK$ 000 HK$ 000 Due within one month or on demand 28,501 8,517 Due after one month but within three months 947 15,726 Due after three months but within six months 176 1,655 Trade payables 29,624 25,898 13. Loans from minority shareholders Loans from minority shareholders are unsecured, non-interest bearing and repayable on demand, except for a loan with nominal value of HK$103,996,000 (31 December 2008: HK$103,894,000) before the effect of discounting in the amount of HK$4,936,000 (31 December 2008: HK$7,778,000) which is repayable on 30 April 2010 and classified as current liabilities at 30 June 2009. 14. Share capital and reserves (a) Share capital Authorised: No. of shares Amount 000 HK$ 000 Ordinary shares of HK$1 each 500,000 500,000 Issued and fully paid: At 1 January 2009 and 30 June 2009 340,200 340,200 (b) Reserves Details of the movements in reserves of the Group during the six months ended 30 June 2008 and 30 June 2009 are set out in the consolidated statement of changes in equity. 15. Commitments At 30 June 2009, the Group had commitments in respect of development expenditure not provided for as follows: At 30 June At 31 December HK$ 000 HK$ 000 Contracted for 9,082 14,302 Authorised but not contracted for 16,114 3,742 25,196 18,044
Interim Report 2009 25 16. Contingent liabilities (a) At 30 June 2009, there were outstanding counter indemnities relating to guarantees issued by bankers of a subsidiary in favour of the Macau SAR Government in respect of properties held for sale amounted to HK$8,252,000 (31 December 2008: HK$8,252,000). (b) (c) (d) At 30 June 2009, guarantees given by the Company to banks to secure banking facilities made available to an associate amounted to HK$64,230,000 (31 December 2008: HK$65,989,000). At 30 June 2009, guarantees given by a subsidiary and the Company to a bank to secure banking facilities made available to an associate amounted to HK$32,260,000 (CA$5,000,000) (31 December 2008: HK$31,941,000 (CA$5,000,000)). At 30 June 2009, the Directors do not consider it probable that a claim will be made against the Group and the Company under any of the guarantees. The Group and the Company have not recognised any deferred income in respect of any of the above guarantees as their fair values cannot be reliably measured and they were issued many years ago and their transaction price was HK$Nil. 17. Material related party transactions In addition to the transactions and balances disclosed elsewhere in these interim financial statements, the Group entered into the following material related party transactions, which were on commercial terms, with Goodland Limited ( Goodland ) and Mr Ho Kian Cheong ( KC Ho ). Goodland is an affiliated company which holds 28% of equity interest in the Company at 30 June 2009. Messrs Ho Kian Guan and Ho Kian Hock, executive directors of the Company, each had 1/2 indirect interest in Goodland and are also directors of Goodland. They are deemed to be interested in the following transactions. KC Ho is a non-executive director and a substantial shareholder of the Company at 30 June 2009. Six months ended 30 June Note HK$ 000 HK$ 000 (a) Transactions with Goodland Rental income receivable (i) 372 372 Management fee payable (ii) 1,602 1,602 Interest expense payable (iii) 11 56 At 30 June At 31 December HK$ 000 HK$ 000 (b) Balances with Goodland Loans from Goodland (iii) 52,160 79,340 Amounts due to Goodland (iii) 19,363 20,890 (c) Balances with KC Ho Loans from KC Ho (iv) 12,628 19,219 Amounts due to KC Ho (iv) 4,055 4,256
26 Keck Seng Investments (Hong Kong) Limited 17. Material related party transactions (continued) Notes: (i) (ii) (iii) A subsidiary of the Company rented certain of its properties to Goodland and received rental income (net of outgoings) amounted to HK$372,000 for the six months ended 30 June 2009 (2008: HK$372,000). Certain subsidiaries of the Company paid management fees to Goodland amounted to HK$1,602,000 for the six months ended 30 June 2009 (2008: HK$1,602,000). Loans from Goodland are unsecured, non-interest bearing and repayable on demand, except for a loan with nominal value of HK$54,759,000 (31 December 2008: HK$54,702,000) before the effect of discounting in the amount of HK$2,599,000 (31 December 2008: HK$4,095,000) which is repayable on 30 April 2010. Amounts due to Goodland of HK$19,363,000 at 30 June 2009 (31 December 2008: HK$20,890,000) comprises of: interest bearing accounts with certain subsidiaries of the Company amounted to HK$2,539,000 (31 December 2008: HK$2,703,000). Interest payable by the subsidiaries amounted to HK$11,000 for the six months ended 30 June 2009 (2008: HK$56,000). non-interest bearing accounts with certain subsidiaries of the Company amounted to HK$16,824,000 (31 December 2008: HK$18,187,000). (iv) Loans from KC Ho are unsecured, non-interest bearing and repayable on demand, except for a loan with nominal value of HK$13,258,000 (31 December 2008: HK$13,251,000) before the effect of discounting in the amount of HK$630,000 (31 December 2008: HK$992,000) which is repayable on 30 April 2010. Amounts due to KC Ho represent non-interest bearing accounts with certain subsidiaries which are unsecured and repayable on demand. 18. Non-adjusting post balance sheet event On 2 July 2009, the Group entered into a sale and purchase agreement to acquire a hotel from an independent third party for an aggregate consideration of US$90.0 million (equivalent to approximately HK$697.5 million). The hotel is located in San Francisco, California, United States. The transaction was completed in July 2009 and the consideration was fully settled. 19. Comparative figures As a result of the application of HKAS 1 (revised 2007), Presentation of financial statements, and HKFRS 8, Operating segments, certain comparative figures have been adjusted to conform to current period s presentation and to provide comparative amounts in respect of items disclosed for the first time in 2009. Further details of these developments are disclosed in note 2.