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Share Name | Share Symbol | Market | Type |
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China Travel International Investment Hong Kong Ltd | TG:CTI | Tradegate | Ordinary Share |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 0.12 | 0.114 | 0.125 | 0.00 | 20:59:58 |
RNS Number:0619K Cathay International Holdings Ld 15 April 2003 15th April, 2003 CATHAY INTERNATIONAL HOLDINGS LIMITED PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2002 CHAIRMAN'S STATEMENT During 2002, your Board and the management team concentrated on improving the performance of the Group and its assets. We have also been engaged in positioning the Company to pursue its core strategy: investing in businesses in the People's Republic of China (the 'PRC') that will earn an attractive return and provide capital growth for our shareholders. 2002 PERFORMANCE In 2002, the PRC economy grew by 8% GDP. This made China one of the fastest growing economies in the world. The Group's hotels were, however, operating in highly competitive markets with particularly strong competition from newly opened restaurants in Beijing and Shenzhen. Rental income from the Group's UK asset, the Stonehill Business Park, remained firm but expenses were greater than anticipated, due to the continued requirement to invest in the repair and maintenance of the ageing buildings and infrastructure on the site. Gross turnover for the year ended 31 December 2002 was USD32,586,000 (2001: USD34,015,000). The operating loss for 2002 was USD61,810,000 (2001: operating loss of USD7,464,000). This included an exceptional charge of USD163,566,000 (2001: USD30,480,000) arising from the write-down in the carrying value of the Xiyuan Hotel and Xiyuan development site, which was partly offset by amortisation of negative goodwill of USD98,140,000 (2001 USD18,288,000). The pre-tax loss before minority interests was USD64,048,000 (2001: USD10,316,000). The loss after tax and minority interests for the year was USD1,011,000 (2001: USD539,000). Net assets per share were USD0.470 (2001: USD0.491). Gearing increased slightly to 27.3% (2001: 26.5%). Gross operating profits for the Xiyuan Hotel in 2002 were 23% higher than the previous year. The average occupancy rate was 75% in 2002, the same as in 2001. The average room rates were 2.9% higher than those achieved in 2001. The Group conducted an annual valuation of its properties. The annual valuation of the Group's Chinese properties was carried out by international real estate advisors, Insignia Brooke (Hong Kong) Limited. In view of the decision to discontinue the Xiyuan joint venture referred to below, the valuation of the Xiyuan development site was carried out on an existing use basis rather than by reference to its development potential, which was the basis used in previous years. The significant decrease in asset values resulted in the exceptional charge mentioned above, which was partly offset by amortisation of the negative goodwill associated with those assets and partly offset by minority interests. The write down in the valuation of the Landmark Hotel of USD9,600,000 has been taken to the revaluation reserve. The average occupancy level of the Landmark Hotel dropped to 65% in 2002 from 68% in 2001. The average room rate dropped by 8% in 2002 compared to 2001. Many restaurants which were targeted toward the high end of the market were opened in Shenzhen during the year. In this extremely competitive environment, the food and beverage turnover decreased by 17% during 2002. Gross operating profits of the Landmark Hotel in 2002 were 13% lower than the previous year at USD1,542,000 (2001: USD1,744,000). Rental income from the Stonehill Business Park, situated on the Lea Valley Trading Estate in North London, was 2% greater in 2002 than in the previous year. However, the gross operating profits of the Park decreased by 10%. The net loss for 2002 was USD231,000 compared to a loss of USD309,000 in 2001. POST BALANCE SHEET EVENTS Although extensive negotiations were conducted in 2002, the sale of the Stonehill Business Park and the distribution of assets by the joint venture company owning the Xiyuan Hotel and development site were not completed until the first quarter of 2003. Following these transactions and notwithstanding the return of surplus cash to shareholders through a tender offer, the Company is in a strong financial position and able to respond rapidly to attractive opportunities for increasing shareholder value. Sale of Stonehill Business Park On 13 January 2003, shareholders approved the proposed disposal of the Stonehill Business Park for a cash consideration of #19,550,000. As reported in the circular to shareholders, the business park represented the only non-China asset of the Group. The Group's management had improved the Stonehill results over recent years, but the property and site required significant additional capital investment to improve the ageing buildings and infrastructure. Your Board believed that the Group's resources would be much better invested in projects in China in line with the Company's core strategy. Your Board also believed that the high values in the UK property market at that time represented an optimum time to dispose of this non-core asset. After adjusting for transaction expenses and taxation the disposal will result in a small exceptional gain which will be reflected in the accounts for the year ending 31 December 2003. Distribution of assets in relation to Xiyuan Hotel and Development Site As a result of the oversupply of commercial buildings in Beijing which has continued to increase, your Board did not pursue the development of the site as it had not, in its view, been in shareholders' best interests to do so. The Beijing Municipal Government clearly expressed its desire to complete the redevelopment of the site in connection with the 2008 Beijing Olympic Games notwithstanding the current oversupply of commercial property. Your Board, however, did not believe that the immediate or longer term prospects for the Beijing property market justified the substantial investment that would be necessary to finance such redevelopment. Furthermore, any such investment would require a significant level of debt funding which your Board did not believe would be prudent. Following discussion of the differing objectives and commercial priorities of the joint venture partners and the Beijing Municipal Government, negotiations took place resulting in an agreement to bring the joint venture to an end. On 24 February 2003, shareholders approved the termination of the joint venture relating to the Xiyuan Hotel and development site in Beijing and a distribution of assets by the joint venture company, Beijing Xiyuan Landmark Limited (" Beijing Xiyuan"). The distribution resulted in a cash entitlement for the Group of USD50,900,000, net of taxes, which included USD18,747,000 of undistributed profits of Beijing Xiyuan. After netting off the remaining negative goodwill of USD4,404,000, the disposal of the 60% equity interest in Beijing Xiyuan will give rise to a small profit which will be reflected in the accounts for the year ending 31 December 2003. Tender Offer Following the sale of the Stonehill Business Park and the distribution of assets by Beijing Xiyuan, your Board concluded that approximately USD23,716,000 would be surplus to the Group's short term requirements and that a tender offer was the most appropriate means of returning such surplus to shareholders. On 24 February 2003, shareholders approved a proposed tender offer by the Company to purchase up to 100,000,000 common shares at a fixed price of 15 pence per common share, representing a 93.5% premium to the closing share price on the day prior to the announcement of the tender offer. The tender offer closed on 26 February 2003 and was fully subscribed. CONCLUSION The management of the Group is actively pursuing appropriate investment opportunities in the PRC. The Group has a sound balance sheet and is well positioned to pursue these opportunities and your Board hopes to be able to announce details of new investments during the current year. The Group is committed to strengthening the management team to support new investments. Changing "best practice" requirements will also be considered and addressed to ensure good corporate governance. The Group is also planning to improve the flow of information to its shareholders . Finally, I would like to thank the management team for its continuing hard work and commitment. James Buchanan Chairman Enquiries: Stephen Hunt (Deputy Chairman) (via Brunswick) 020 7404 5959 Patrick Sung (Director - Finance) Jon Coles, Brunswick 020 7404 5959 OPERATIONAL REVIEW LANDMARK HOTEL (SHENZHEN) Opened in June 1994, the Landmark Hotel is a 5-star hotel located in Shenzhen, the PRC. The property currently comprises 351 guest rooms (or 392 room modules), a business centre, a coffee shop, restaurants, function rooms, disco and karaoke facilities, a golf driving range, a health club and a swimming pool. Since the opening of the Hotel, management has recognized customers' evolving needs through continually upgrading and improving hotel facilities by, for example, the establishment of a new shuttle service to the railway station, the installation of a new business centre on the executive floors, the provision of internet access, the addition of new parking facilities and the addition of a golf driving range and a billiard room in the health club. In 2002, the Landmark Hotel was adversely affected by the extremely competitive conditions in Shenzhen. The Hotel experienced a 3% lower average occupancy rate than in 2001 and the food and beverage turnover decreased by 17%. This decrease was mainly due to the opening of many new Chinese restaurants in Shenzhen. During the year the management focused on upgrading and improving hotel facilities for corporate customers. For example, a new enlarged meeting room of 52 sq.m., ideal for seminars and training sessions, was added on the 4th floor and broadband internet connections were installed in every room for laptop users. The Hotel continues to take stringent steps to reduce costs. Staff numbers were reduced from 561 at the beginning of the year to 506 at the end of 2002. With tight expense control and continued investment in this major asset, improved results are expected from the Landmark Hotel. XIYUAN HOTEL AND SITE (BEIJING) In 1993, the Group acquired a 60% equity interest in Beijing Xiyuan to operate the Xiyuan Hotel and to develop the site of some 68,000 sq.m. in the Haidian District of Beijing. During 2002, the Group continued to invest in the facilities of the Hotel. The western bar and restaurant on the 25th floor were completely renovated. Conference and meeting rooms were refurbished. Lifts were reconditioned and in some cases replaced. In a very competitive market, Beijing Xiyuan managed in 2002 to maintain its average occupancy rate at 75%, the same level as in 2001. Average room rates were 2.9% higher than those achieved in 2001. The food and beverage result decreased by 3.4% from 2001 to 2002. Because of the growing oversupply of commercial buildings in Beijing, which has continued to increase in recent years, the Board chose not to pursue the development of the site. As reported in the Chairman's Statement, the joint venture relating to Beijing Xiyuan was terminated and its assets distributed in February 2003. UK PROPERTY (STONEHILL BUSINESS PARK) Stonehill Business Park, a 27-acre industrial estate, is situated on the Lea Valley Trading Estate in North London. During 2002, the Group continued to engage GVA Grimley to provide professional management of the park. Stonehill maintained a steady performance in 2002 against the background of increasingly uncertain market conditions. The occupancy level remained high throughout the year, rising from 88% of lettable space at the end of 2001 to 89% at year end 2002. Rental income showed a modest 2% increase in 2002. Although Stonehill Estates Limited's results have improved over recent years, the property has required a growing amount of capital investment to maintain the ageing buildings and infrastructure. As reported in the Chairman's Statement, this property was sold in January 2003. GROUP PROFIT AND LOSS ACCOUNT For the year ended 31 December 2002 Year Ended Year ended 31 December 31 December 2002 2001 Notes USD'000 USD'000 TURNOVER 2 Continuing operations 9,793 11,795 Discontinued operations 22,793 22,220 _________ _________ 32,586 34,015 COST OF SALES (25,491) (27,620) _________ _________ GROSS PROFIT 7,095 6,395 ADMINISTRATIVE EXPENSES Administrative expenses (3,479) (1,667) Deficit on revaluation of fixed assets (163,566) (30,480) Amortisation of negative goodwill 98,140 18,288 __________ _________ (68,905) (13,859) __________ _________ OPERATING PROFIT Continuing operations 783 656 Discontinued operations (62,593) (8,120) __________ _________ (61,810) (7,464) EXCEPTIONAL ITEMS Reorganisation costs of continuing operations - (782) Profit on sale of fixed assets 274 - __________ _________ LOSS ON ORDINARY ACTIVITIES BEFORE INTEREST AND TAXATION (61,536) (8,246) INTEREST (2,512) (2,070) __________ _________ LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION 2 (64,048) (10,316) TAXATION 4 (993) (1,028) __________ _________ LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (65,041) (11,344) MINORITY INTERESTS 64,030 10,805 __________ _________ ACCUMULATED LOSS ATTRIBUTABLE TO SHAREHOLDERS (1,011) (539) __________ _________ LOSS PER SHARE 5 BASIC (0.36) cents (0.19 cents) __________ _________ __________ _________ GROUP BALANCE SHEET As at 31 December 2002 As at As at 31 December 31 December 2002 2001 USD'000 USD'000 FIXED ASSETS Tangible assets 197,464 369,121 Negative goodwill (4,404) (102,544) ___________ ___________ 193,060 266,577 ___________ ___________ CURRENT ASSETS Stocks 1,116 1,140 Debtors 1,882 1,788 Cash at bank and in hand 43,320 39,865 ___________ ___________ 46,318 42,793 CREDITORS: amounts falling due within one year (39,334) (28,682) ___________ ___________ NET CURRENT ASSETS 6,984 14,111 ___________ ___________ TOTAL ASSETS LESS CURRENT LIABILITIES 200,044 280,688 CREDITORS: amounts falling due after one year (23,286) (33,870) ___________ ___________ 176,758 246,818 MINORITY INTEREST (44,738) (108,882) ___________ ___________ NET ASSETS 132,020 137,936 ========= ========= CAPITAL AND RESERVES Called up share capital 14,042 14,042 Revaluation reserve 67,683 76,213 Capital and special reserve 3,206 3,206 Statutory reserve 2,550 2,463 Merger reserve 58,433 58,433 Exchange equalisation reserve 4,687 1,029 Profit and loss account (18,581) (17,450) ____________ ___________ SHAREHOLDER'S FUNDS 132,020 137,936 ========== ========= GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the year ended 31 December 2002 Year ended Year ended 31 December 31 December 2002 2001 USD'000 USD'000 LOSS FOR THE YEAR (1,011) (539) Unrealised (loss)/gain on revaluation of hotel properties (8,378) 2,546 ___________ ___________ Total (loss)/gain for the year before currency adjustments (9,389) 2,007 Exchange adjustments 3,473 22 ___________ ___________ TOTAL (LOSS)/GAIN RECOGNISED FOR THE YEAR (5,916) 2,029 ___________ ___________ RECONCILIATION OF SHAREHOLDERS' FUNDS Total recognised (loss)/gain (5,916) 2,029 Shareholders' funds at beginning of year 137,936 135,907 ___________ ___________ Shareholders' funds at end of year 132,020 137,936 ========= ========= GROUP CASH FLOW STATEMENT For the year ended 31 December 2002 Year ended Year ended 31 December 31 December 2002 2001 Note USD'000 USD'000 OPERATING ACTIVITES Net cash inflow from operating activities 6 4,598 5,892 SERVICING OF FINANCE Interest paid (2,409) (2,656) Interest received 525 1,301 ___________ ___________ Net cash outflow from servicing of finance (1,884) (1,355) ___________ ___________ TAXATION - paid (940) (1,117) ___________ ___________ CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Payments to acquire tangible fixed assets (2,154) (6,371) ___________ ___________ Cash outflow from capital expenditure and financial investment (2,154) (6,371) ___________ ___________ ACQUISITIONS AND DISPOSALS Cash disposed of with subsidiary undertaking - (104) Proceeds from disposal of tangible fixed assets 1,576 - ___________ ___________ 1,576 (104) ___________ ___________ MANAGEMENT OF LIQUID RESOURSES Decrease/(increase) in short tem deposits 7 4,982 (6,579) ___________ ___________ NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING 6,178 (9,634) ___________ ___________ FINANCING (Repayment of)/receipts from borrowing 7 (3,122) 2,517 New loans 7 2,359 4,230 Costs associated with group reorganisation - (782) ___________ ___________ Net cash (outflow)/inflow from financing (763) 5,965 ___________ ___________ Increase/(decrease) in cash 5,415 (3,669) ========= ========= GROUP CASH FLOW STATEMENT For the year ended 31 December 2002 Year ended Year ended 31 December 31 December 2002 2001 Note USD'000 USD'000 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Increase/ (decrease) in cash 5,415 (3,669) Cash inflow from increase in loans - (2,517) Repayment of loans 3,122 - Cash (inflow from)/outflow to short term deposits (4,982) 6,579 New loans (2,359) (4,230) ___________ ___________ Change in net debt resulting from cash flows 7 1,196 (3,837) Exchange differences 7 907 449 Other non-cash items 7 (628) 937 ___________ ___________ MOVEMENT IN NET DEBT 1,475 (2,451) NET DEBT AT 1 JANUARY 7 (11,420) (8,969) ___________ ___________ NET DEBT AT 31 DECEMBER 7 (9,945) (11,420) ========= ========= Notes: 1. BASIS OF PREPARATION AND ACCOUNTING The financial statements have been prepared under the historical cost convention, modified where appropriate to incorporate the professional valuation of certain fixed assets, and in accordance with applicable UK accounting standards. 2. Segmental Information 2.1 Turnover An analysis of turnover is as follows: Hotel Property Operations Investment Total USD'000 USD'000 USD'000 For the year ended 31 December 2002 United Kingdom - 2,404 2,404 PRC 29,806 376 30,182 __________ _________ ________ Turnover 29,806 2,780 32,586 ========= ======== ======= For the year ended 31 December 2001 United Kingdom - 2,364 2,364 PRC 31,596 55 31,651 _________ _________ ________ Turnover 31,596 2,419 34,015 ========= ======== ======= 2.2 Business and regional analysis Property Corporate Hotel Property Investment Property Property Office Operations Investment United Development Development Hong PRC PRC Kingdom PRC UK Kong Total USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 For the year ended 31 December 2002 Profit (loss) before (2,912) 589 311 (60,274) - (1,762) (64,048) taxation Net operating assets 144,254 1,297 22,334 17,220 3,459 - 188,564 _________ ________ _________ __________ __________ ________ ________ For the year ended 31 December 2001 Profit (loss) before 1,093 55 268 (8,955) - (2,777) (10,316) taxation Net operation assets 156,155 2,618 20,347 77,799 3,127 - 260,046 ======== ======= ======== ======== ======== ====== ====== Included in losses for the period is a deficit on revaluation of properties of USD163,566,000 (2001: USD30,480,000) which principally relates to hotel properties and properties held for development situated in Beijing. Negative goodwill of USD98,140,000 (2001: USD18,288,000) has been amortised in respect of this, the balance of the write down was borne by the minority shareholder in that subsidiary. Reconciliation of net assets At At 31 December 31 December 2002 2001 USD'000 USD'000 Net operating assets (note 2.2) 188,564 260,046 Cash at bank and in hand 43,320 39,865 Tax liabilities (1,861) (1,808) Bank overdraft and loans (36,025) (36,604) Loan from a related company (9,001) (9,053) Loan from immediate parent undertaking (8,239) (5,628) ________________ _______________ 176,758 246,818 Minority interests (44,738) (108,882) ________________ _______________ Net assets 132,020 137,936 ============== ============= The minority interest relates to Beijing Xiyuan Landmark Limited the significant underlying assets of which are the property held for development and the Xiyuan Hotel in Beijing. 3. DIRECTORS' EMOLUMENTS The Directors at 31 December 2002 were as follows: J.R.H. Buchanan Wu Zhen Tao S. B. Hunt J.H. Cosson P. Sung R. Chow Their aggregate emoluments for the year ended 31 December 2002 were USD564, 000 (2001: USD554,000). 4. TAXATION Year ended Year ended 31 December 31 December 2002 2001 USD'000 USD'000 Profits tax payable in the PRC at 33% 993 1,028 __________ __________ The Group has tax losses of approximately USD6.1m available to carry forward against taxable profits make in the UK in future years. These losses are not available to group relieve against profits earned in the PRC. 5. EARNINGS PER SHARE Basic earnings per share is based upon the loss attributable to shareholders of USD1,011,000 (2001: USD539,000) and the weighted average number of A shares and Common shares in issue during the year of 13,522,036 and 267,320,069 respectively (2001: A shares: 14,042,105, Common shares: 266,800,000). Since there were no shares options for both years, no adjustment to basic earnings per share is necessary in calculating the diluted earnings per share. 6. RECONCILIATION OF OPERATING LOSS TO NET CASH INFLOW FROM OPERATING ACTIVITES 31 December 31 December 2002 2001 USD'000 USD'000 Operating loss (61,810) (7,464) Loss on disposal of fixed assets 67 42 Impairment of fixed assets 163,566 30,480 Amortisation of negative goodwill (98,140) (18,288) Depreciation of fixed assets 1,531 1,395 Provision for doubtful debts - 36 Decrease in stocks 24 157 Increase in debtors (94) (229) Decrease in creditors (546) (237) ____________ ___________ Net cash inflow from operating activities 4,598 5,892 ========== ========== 7. ANALYSIS OF NET DEBT At Other At 1 January Cash Exchange Non-cash 31 December 2002 flow difference movements 2002 USD'000 USD'000 USD'000 USD'000 USD'000 Cash at bank and in hand 4,218 6,989 1,975 - 13,182 Bank overdrafts (651) (1,574) (69) - (2,294) ____________ ____________ ___________ ____________ ____________ Cash 3,567 5,415 1,906 - 10,888 Short term deposits 35,647 (4,982) (527) - 30,138 Bank loans (35,953) 2,722 (500) - (33,731) Loan from a related (9,053) 400 21 (369) (9,001) Company Loan from an immediate parent undertaking (5,628) (2,359) 7 (259) (8,239) ___________ ____________ ___________ ____________ ____________ (11,420) 1,196 907 (628) (9,945) ========= ========== ========= ========== ========== 8. FINANCIAL INFORMATION The above figures have been extracted from the full financial statements of Cathay International Holdings Limited and on which the auditors have made an unqualified audit report. This information is provided by RNS The company news service from the London Stock Exchange END FR IAMTTMMBBBPJ
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