[close]

 

UNAUDITED RESULTS FOR 1ST QUARTER ENDED 31 MARCH 2004

 

PART I – INFORMATION REQUIRED FOR ANNOUNCEMENTS OF QUARTERLY (Q1, Q2 & Q3), HALF-YEAR AND FULL YEAR RESULTS

 

 

1(a)

An income statement (for the group) together with a comparative statement for the corresponding period of the immediately preceding financial year

 

 

 

 

GROUP

 

1st Quarter Ended

 

 

31.3.2004

31.3.2003*

+/(-)

 

$’000

$’000

%

 

 

 

 

Revenue

      12,109

      12,102

          0.06

Cost of sales

      (6,095)

      (7,411)

     (17.76)

Gross profit

        6,014

        4,691

        28.20

Other income

        1,500

        1,994

     (24.77)

General and administrative costs

      (3,361)

      (3,127)

          7.48

Selling and distribution costs

      (1,095)

        (963)

        13.71

Other operating costs

        (218)

        (931)

     (76.58)

Operating profit

        2,840

        1,664

        70.67

Finance costs

        (307)

        (277)

        10.83

Share of results of associated companies

        (298)

            (5)

   5,860.00

Profit before taxation

        2,235

        1,382

        61.72

Taxation

        (530)

        (304)

        74.34

Profit after taxation

        1,705

        1,078

        58.16

Minority interests

             

              4

    (100.00)

Profit attributable to shareholders

        1,705

        1,082

        57.58

 

 

* Certain comparative figures have been reclassified to conform with current period’s presentation.

 

 

 

 

GROUP

 

1st Quarter Ended

 

 

31.3.2004

31.3.2003

+/(-)

 

$’000

$’000

%

 

 

 

 

Investment income

           49

           41

        19.51

Other income including interest income

      2,503

      3,020

      (17.12)

Interest on borrowings

      (307)

      (277)

        10.83

Depreciation and amortisation

      (301)

      (251)

        19.92

Allowance for doubtful debts and bad debts written off (included in other operating costs)

        (27)

        (99)

      (72.73)

Write-off for stock obsolescence

           

           

             

Write-back/(Provision) for impairment in value of investments (included in other operating costs)

            5

      (697)

    (100.72)

Foreign exchange gain (included in other income)

         156

           14

    1,014.29

Adjustments for under or overprovision of tax in respect of prior years

           

           

             

Gain on sale of investments

      1,284

         195

      558.46

Gain on sale of investment properties (included in other income)

           

           

             

Gain on sale of fixed assets (included in other income)

           97

           

          n.m.

Exceptional items:-

 

 

 

- Negative goodwill amortised (included in other income)

           

         667

    (100.00)

Extraordinary items

           

           

             

 

 

 

n.m. denotes not meaningful.

 

 

 

 

1(b)(i)

A balance sheet (for the issuer and group), together with a comparative statement as at the end of the immediately preceding financial year

 

 

 

 

GROUP

COMPANY

 

As at 31.3.2004

As at 31.12.2003

As at 31.3.2004

As at 31.12.2003

 

$’000

$’000

$’000

$’000

 

 

 

 

 

Fixed assets

      13,559

     13,536

         4,891

       4,945

Investment properties

    128,948

    128,130

              

            

Investment in subsidiaries

             

            

     458,929

    456,373

Investment in associated companies

      58,958

     59,256

              

            

Long term investments

      98,640

    100,355

         3,323

       3,323

Other receivables

          344

          357

              

            

Reinsurer's share of technical provisions

 

 

 

 

Provision for unearned premiums

        3,658

       3,211

              

            

Provision for outstanding claims

        7,585

       7,890

              

            

 

 

 

 

 

Current assets

 

 

 

 

Short term investments

      42,904

     43,157

              

            

Inventories

          377

          386

              

            

Trade receivables

        5,173

       3,914

              

            

Amount due from associated companies

      99,322

     93,979

              

            

Amount due from subsidiaries

             

            

             56

            10

Amount due from affiliated companies

            91

          636

             68

          619

Other receivables

        6,526

       5,855

         1,224

       1,214

Cash and bank balances

      59,604

     63,140

             85

          189

 

    213,997

    211,067

         1,433

       2,032

 

 

 

 

 

Current liabilities

 

 

 

 

Trade payables and accruals

     (3,347)

     (3,408)

              

            

Other payables

     (7,656)

     (8,927)

      (1,896)

     (2,459)

Amount due to subsidiaries

             

            

     (40,157)

   (39,857)

Deferred premiums

     (1,521)

     (2,488)

              

            

Hire purchase creditors

          (49)

         (49)

              

            

Bank overdrafts

        (760)

       (129)

              

            

Bank loans

     (2,785)

   (10,801)

              

            

Provision for taxation

     (2,007)

     (1,496)

              

            

 

   (18,125)

   (27,298)

     (42,053)

   (42,316)

 

 

 

 

 

Net current assets/(liabilities)

    195,872

    183,769

     (40,620)

   (40,284)

 

 

 

 

 

Non current liabilities

 

 

 

 

Bank loans

   (18,371)

     (9,879)

              

            

Hire purchase creditors

          (24)

         (37)

              

            

Other payables

        (176)

            

              

            

Tenancy deposits

             

       (150)

              

            

Deferred taxation

     (5,381)

     (5,626)

           (44)

         (45)

Provision for unearned premiums

   (12,180)

   (10,333)

              

            

Provision for outstanding claims

   (43,231)

   (44,445)

              

            

Provision for premium deficiency

     (1,696)

     (1,696)

              

            

 

   (81,059)

   (72,166)

           (44)

         (45)

 

    426,505

    424,338

     426,479

    424,312

 

 

 

 

 

GROUP

COMPANY

 

As at 31.3.2004

As at 31.12.2003

As at 31.3.2004

As at 31.12.2003

 

$’000

$’000

$’000

$’000

 

 

 

 

 

Share capital

     163,258

    163,255

     163,258

    163,255

Share premium

        8,683

       8,681

         8,683

       8,681

Capital reserve

     130,315

    130,070

     233,318

    230,761

Revenue reserve

     122,921

    121,216

       21,220

     21,615

Currency translation adjustment reserve

        1,302

       1,090

              

            

Share capital and reserves

     426,479

    424,312

     426,479

    424,312

Minority interests

             26

            26

              

            

 

     426,505

    424,338

     426,479

    424,312

 

 

 

 

1(b)(ii)

Aggregate amount of group’s borrowings and debt securities

 

 

 

Amount repayable in one year or less, or on demand

 

 

As at 31.3.2004

As at 31.12.2003

Secured

Unsecured

Secured

Unsecured

$3,545,000

$10,930,000

 

 

 

Amount repayable after one year

 

 

As at 31.3.2004

As at 31.12.2003

Secured

Unsecured

Secured

Unsecured

$18,371,000

$9,879,000

 

 

 

Details of any collateral

 


The amount of long term bank loans repayable after one year and an amount of $2.085 million (31.12.2003: $10.09 million) of long term bank loans repayable within one year of a subsidiary are secured over the investment properties of the Group.  Short term bank overdrafts of $0.76 million (31.12.2003: $0.13 million) of two subsidiaries are secured by corporate guarantees supported by charges over time deposits.  Short term bank loans of $0.7 million (31.12.2003: $0.71 million) of another subsidiary are secured by its plant and machinery.

 

 

 

 

1(c)

A cash flow statement (for the group), together with a comparative statement for the corresponding period of the immediately preceding financial year

 

 

 

 

GROUP

 

1st Quarter ended

 

31.3.2003

31.3.2002

 

$’000

$’000

 

 

 

Cash flow from operating activities:

 

 

 

 

 

Operating profit

      2,840

      1,664

 

 

 

Adjustments for:-

 

 

Interest income

    (1,857)

    (2,038)

Depreciation on fixed assets

         301

         251

Negative goodwill amortised

            

       (667)

Gain on sale of fixed assets

        (97)

            

Allowance for doubtful receivables from affiliated companies

            

           92

Provision for outstanding claims

      1,870

      3,865

Provision/(Write-back) for unearned premiums

      1,085

       (749)

 

      1,302

         754

Operating income before reinvestment in working capital

      4,142

      2,418

 

 

 

Increase in receivables and short term investments

    (1,725)

       (699)

Decrease in inventories

             9

           89

Decrease in payables

    (1,985)

    (1,945)

 

    (3,701)

    (2,555)

Cash generated from/(used in) operations

         441

       (137)

 

 

 

Net claims paid

    (2,777)

    (3,860)

Interest received

      1,857

      2,038

Interest paid

       (307)

       (277)

Income taxes paid

        (19)

        (64)

 

    (1,246)

    (2,163)

Net cash used in operating activities

       (805)

    (2,300)

 

 

 

Cash flow from investing activities:

 

 

Purchase of fixed assets

       (300)

        (71)

Decrease in other investments

      1,716

         358

Proceeds from disposal of fixed assets

           98

            

Net cash generated from investing activities

      1,514

         287

 

 

 

Cash flow from financing activities:

 

 

Net proceeds from bank loans

         476

         187

Increase in bank overdrafts

         631

         121

Increase in amount due from associated companies

    (5,344)

            

Repayment to hire purchase creditors

        (13)

        (13)

Proceeds from issue of shares

             5

            

Net cash (used in)/generated from financing activities

    (4,245)

         295

 

 

 

Net decrease in cash and cash equivalents

    (3,536)

    (1,718)

Cash and cash equivalents at beginning of the period

     63,140

     51,216

Cash and cash equivalents at end of the period

     59,604

     49,498

 



 

 

1(d)(i)

A statement (for the issuer and group) showing either (i) all changes in equity or (ii) changes in equity other than those arising from capitalisation issues and distributions to shareholders, together with a comparative statement for the corresponding period of the immediately preceding financial year

 

 

 

 

GROUP

COMPANY

 

1st Quarter ended

1st Quarter ended

 

31.3.2004

31.3.2003

31.3.2004

31.3.2003

 

$’000

$’000

$’000

$’000

 

 

 

 

 

Share capital

 

 

 

 

Balance at beginning of the period

   163,255

  163,240

   163,255

  163,240

Issue of shares

            3

           

            3

           

Balance at end of the period

   163,258

  163,240

   163,258

  163,240

 

 

 

 

 

 

 

 

 

 

Share premium

 

 

 

 

Balance at beginning of the period

      8,681

      8,681

      8,681

      8,681

Issue of shares

            2

           

            2

           

Balance at end of the period

      8,683

      8,681

      8,683

      8,681

 

 

 

 

 

 

 

 

 

 

Revenue reserve

 

 

 

 

Balance at beginning of the period

   121,216

  120,379

    21,615

    32,055

Profit/(Loss) for the period

      1,705

      1,082

      (395)

      (355)

Balance at end of the period

   122,921

  121,461

    21,220

    31,700

 

 

 

 

 

 

 

 

 

 

Capital reserve

 

 

 

 

Balance at beginning of the period

   130,070

  150,590

   230,761

  237,420

Net surplus/(deficit) on revaluation of

 

 

             

 

  - investment properties

           

            1

           

           

  - subsidiaries

           

           

      2,557

  (11,692)

  - associated companies

           

(13,233)

           

           

Deferred tax adjustment due to  reduction in corporate tax rate

         245

           

           

           

Balance at end of the period

   130,315

  137,358

   233,318

  225,728

 

 

 

 

 

 

 

 

 

 

Currency translation adjustment reserve

 

 

 

 

Balance at beginning of the period

      1,090

   (1,494)

           

           

Exchange differences arising on consolidation

         212

         103

           

           

Balance at end of the period

      1,302

   (1,391)

           

           

 

 

 

 

 

 

 

 

 

 

Share capital and reserves

   426,479

  429,349

   426,479

  429,349



 

 

1(d)(ii)

Details of any changes in the company’s share capital arising from rights issue, bonus issue, share buy-backs, exercise of share options or warrants, conversion of other issues of equity securities, issue of shares for cash or as consideration for acquisition or for any other purpose since the end of the previous period reported on. State also the number of shares that may be issued on conversion of all the outstanding convertibles as at the end of the current financial period reported on and as at the end of the corresponding period of the immediately preceding financial year

 

 

 

Since 31 December 2003, changes in the issued ordinary share capital of the Company are as follows:

 

 

 

No. of shares of

$0.25 each

 

 

 

As at 31 December 2003

 

      653,020,000

Issue and allotment of shares arising from exercise of options granted under the terminated Hwa Hong Corporation Limited Executives’ Share Option Scheme

 

 

 

              12,000

As at 31 March 2004

 

      653,032,000

Issue and allotment of shares arising from exercise of options granted under the terminated Hwa Hong Corporation Limited Executives’ Share Option Scheme

 

 

 

             412,000

As at 14 May 2004

 

      653,444,000

 

 

 

Issued ordinary share capital as at 14 May 2004

 

     $163,361,000

 

As at 31 March 2004, there were unexercised options to subscribe for 472,000 ordinary shares of $0.25 each in the capital of the Company under the terminated Hwa Hong Corporation Limited Executives’ Share Option Scheme as compared with 544,000 as at 31 March 2003.


No options have been granted under the Hwa Hong Corporation Limited (2001) Share Option Scheme since its adoption on
29 May 2001.

 

 

 

 

2.

Whether the figures have been audited, or reviewed and in accordance with which standard (e.g. the Singapore Standard on Auditing 910 (Engagements to Review Financial Statements), or an equivalent standard)

 

 

 

The figures have not been audited nor reviewed by our auditors.

 

 

 

 

3.

Where the figures have been audited or reviewed, the auditors’ report (including any qualifications or emphasis of matter)

 

 

 

Not applicable.

 

 

 

 

4.

Whether the same accounting policies and methods of computation as in the issuer’s most recently audited annual financial statements have been applied

 

 

 

The Group has applied the same accounting policies and methods of computation in the financial statements for the current reporting period as those of the most recently audited consolidated financial statements for the financial year ended 31 December 2003.

 

 

 

 

5.

If there are any changes in the accounting policies and methods of computation, including any required by an accounting standard, what has changed, as well as the reasons for, and the effect of, the change

 

 

 

Not applicable.

 

 

 

 

 

6.

Earnings per ordinary share of the group for the current period reported on and the corresponding period of the immediately preceding financial year, after deducting any provision for preference dividends

 

 

 

 

 

Group

 

 

1st Quarter ended

 

 

31.3.2004

31.3.2003

 

 

 

 

Earnings per $0.25 ordinary share after deducting any provision for preference dividends:-

 

 

i)

Based on the weighted average number of ordinary shares on issue

0.26 cents

0.17 cents

ii)

On a fully diluted basis

0.26 cents

0.17 cents

 

 

 

 

7.

Net asset value (for the issuer and group) per ordinary share based on issued share capital of the issuer at the end of the (a) current period reported on and (b) immediately preceding financial year

 

 

 

 

Group

Company

 

As at 31.3.2004

As at 31.3.2003

As at 31.3.2004

As at 31.3.2003

 

 

 

 

 

Net asset value per $0.25 ordinary share


65.31 cents


64.98 cents


65.31 cents


64.98 cents

 

 

 

 

8.

A review of the performance of the group, to the extent necessary for a reasonable understanding of the group’s business. The review must discuss any significant factors that affected the turnover, costs, and earnings of the group for the current financial period reported on, including (where applicable) seasonal or cyclical factors. It must also discuss any material factors that affected the cash flow, working capital, assets or liabilities of the group during the current financial period reported on

 

 

 

The Group achieved a revenue of $12.11 million for the first quarter ended 31 March 2004 (“1Q 2004”) as compared to $12.10 million for the first quarter ended 31 March 2003 (“1Q 2003”).  The main reasons were as follows:

 

(i)

Tenet Insurance Company Ltd (“Tenet”), an insurance subsidiary, recorded an increase in gross written premiums (1Q 2004: $8.03 million; 1Q 2003: $6.994 million) mainly due to higher premium rates;

 

 

(ii)

There were higher gains from the disposal of investments by the Group (1Q 2004: $1.13 million; 1Q 2003: $0.19 million);

 

 

(iii)

Revenue from manufacturing and trading division decreased (1Q 2004: $0.613 million; 1Q 2003: $2.42 million) mainly due to uncertainty over price of raw materials and strong competition from other Chinese producers of Choline Chloride.  Management has decided not to pursue market share at the expense of profitability; and

 

 

(iv)

Group interest income and rental income had decreased (1Q 2004: $1.86 million; 1Q 2003: $2.01 million) due mainly to lower interest earned on the Group’s investment in fixed income securities as assets were re-allocated to take advantage of opportunities in the equities market, and lower occupancy and rental rates at the Group’s warehouse/industrial building in Singapore.

 

Cost of sales decreased by about 17.76% mainly due to the decrease in cost of sales (1Q 2004: $0.46 million; 1Q 2003: $2.2 million) from the manufacturing and trading division as a consequence of lower revenue.  In addition, Tenet had a release of prior years’ claims reserves (1Q 2004: $1.5 million; 1Q 2003: $0.5 million) and this has reduced its cost of sales.

 

Thus improvement in gross profit is due mainly to change in the revenue and cost of sales mix as highlighted above (i.e. Group enjoyed increase in high margin businesses and suffered decrease in low margin businesses).

 

Other income decreased by about 24.77% mainly due to an amount of $0.667 million in amortisation of negative goodwill in 1Q 2003.  Negative goodwill has been fully amortised in the financial year ended 31 December 2003, hence, there was no amortisation in 1Q 2004.

 

General and administrative costs increased mainly due to professional fees incurred by Tenet for a rating exercise and also for certification of premium and loss reserves.  Tenet also increased its provision for staff bonus in accordance with its contractual obligations.

 

Selling and distribution costs increased by about 13.71% mainly due to the increase in commission expenses (1Q 2004: $0.98 million; 1Q 2003: $0.78 million) incurred by Tenet as a consequence of higher revenue.

 

Other operating costs decreased by about 76.58% mainly due to the decrease in provision for impairment losses on investments and the decrease in provision for doubtful debts.

 

Finance costs increased by about 10.83% mainly due to the additional borrowings for financing properties purchased in United Kingdom.

 

There was an increase in the share of net losses of associated companies mainly due to the increase in the share of losses (1Q 2004: loss of $111,500; 1Q 2003: profit of $177,500) in Riverwalk Promenade Pte Ltd, a 50% joint venture with CapitaLand Residential Limited for the redevelopment of the Trademart property, as a consequence of lower rental revenue.

 

Thus, Group profit before taxation increased by about 61.72% mainly attributable to the reasons explained above.

 

The effective rate of taxation for the Group for 1Q 2004 is higher than the applicable Singapore income tax rate of 20% mainly due to certain expenses being not tax deductible.  The effective rate of taxation for the Group for 1Q 2003 is lower than the then applicable Singapore income tax rate of 22% mainly due to certain income being not subjected to tax.

 

 

 

 

9.

Where a forecast, or a prospect statement, has been previously disclosed to shareholders, any variance between it and the actual results

 

 

 

Not applicable.

 

 

 

 

10.

A commentary at the date of the announcement of the competitive conditions of the industry in which the group operates and any known factors or events that may affect the group in the next reporting period and the next 12 months

 

 

 

Concerns about soaring crude oil prices and interest rate hikes have resulted in a volatile stock market environment which may impact the results for the current year under review.  Rental rates for warehousing are still flat owing to the excessive supply of space.  The launch of the residential development at the Trademart site is on schedule pending award of the building tender and completion of the show flats.

 

Premium rates for Fire & Motor Insurance are facing downward pricing pressures.  The favourable result of Tenet for 1Q 2004 was primarily due to a $1.5 million release of prior years’ claims reserves.  Although Tenet expects to see further releases, the amount is expected to be lower.  However, Tenet continues to explore various business opportunities to meet the challenges ahead.

 

On 30 April 2004, the Income Tax Board of Review allowed the Company’s claim on certain expenses but rejected the Company’s appeal against the interest restriction formula used by the Inland Revenue Authority of Singapore (“IRAS”).  The Company’s lawyers have advised that there is good legal basis to appeal to the High Court of Singapore against this decision.  Accordingly, the Company’s lawyers have been instructed to submit the appeal.  It is envisaged that the Company may have to write-off, as a matter of prudence, an amount of about $1 million of the tax recoverable in the profit and loss account for the second quarter ending 30 June 2004 as an underprovision of prior year’s taxation.

 

The impact of the additional tax expense of about $1 million as mentioned above will be mitigated by a potential write-back of overprovision of tax of $0.935 million by Tenet.  Provision for taxation of Tenet for the Year of Assessment 2002 was made on the basis that additional provisions for premium and claims liabilities made in the financial year ended 31 December 2001 were not deductible for tax purposes.  IRAS had advised on 25 January 2004 that the additional provisions for premium and claims liabilities were deductible for tax purposes.  The tax may be written back to the profit and loss account when the Notice of Assessment of Tenet is received.

 

 

 

 

11.

Dividend

 

 

 

(a) Current Financial Period Reported On

 

 

Any dividend declared for the current financial period reported on?  No.

 



Name of Dividend

Not applicable.

 

Dividend Type

Not applicable.

 

Dividend Rate

Not applicable.

 

Par value of shares

Not applicable.

 

Tax Rate

Not applicable.

 

 

 

 

 

(b) Corresponding Period of the Immediately Preceding Financial Year

 

Any dividend declared for the corresponding period of the immediately preceding financial year?  No.

 

 

 

 

 

(c) Date payable

 


Not applicable.

 

 

 

(d) Books closure date

 


Not applicable.

 

 

 

12.

If no dividend has been declared/recommended, a statement to that effect

 

 

 

No dividend has been declared or recommended.

 

 

 

PART II – ADDITIONAL INFORMATION REQUIRED FOR FULL YEAR ANNOUNCEMENT (This part is not applicable to Q1, Q2, Q3 or Half Year Results)

 

 

 

13.

Segmented revenue and results for business or geographical segments (of the group) in the form presented in the issuer’s most recently audited annual financial statements, with comparative information for the immediately preceding year

 

 

 

Not applicable.

 

 

 

14.

In the review of performance, the factors leading to any material changes in contributions to turnover and earnings by the business or geographical segments

 

 

 

Not applicable.

 

 

 

15.

A breakdown of sales

 

 

 

Not applicable.

 

 

 

 

 

16.

A breakdown of the total annual dividend (in dollar value) for the issuer’s latest full year and its previous full year

 

 

Not applicable.

 

 

 

 

INTERESTED PERSON TRANSACTIONS

 

 

 

 

 

 

 

Name of interested person

Aggregate value of all interested person transactions during the financial year under review (excluding transactions less than $100,000 and transactions conducted under shareholders’ mandate pursuant to Rule 920)

Aggregate value of all interested person transactions conducted under shareholders’ mandate pursuant to Rule 920 (excluding transactions less than $100,000)

 

 

 

 

Nil

 

 

Nil

 

Nil

 

 

BY ORDER OF THE BOARD

 

 

TAN MEE CHOO

COMPANY SECRETARY

14 MAY 2004