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UNAUDITED RESULTS FOR 2ND QUARTER ENDED 30 JUNE 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

 

2nd Quarter ended

 

Six Months ended

 

 

30.6.2004

30.6.2003*

+/(–)

30.6.2004

30.6.2003*

+/(–)

 

$’000

$’000

%

$’000

$’000

%

 

 

 

 

 

 

 

Revenue

      9,899

   10,094

      (1.93)

   22,008

   22,196

     (0.85)

Cost of sales

    (4,367)

  (5,117)

    (14.66)

(10,461)

(12,528)

    (16.50)

Gross profit

      5,532

    4,977

      11.15

   11,547

    9,668

      19.44

Other income

      3,271

    5,488

    (40.40)

    4,771

    7,482

    (36.23)

General and

  administrative

  costs

    (3,755)

           

 

  (4,403)

    (14.72)

           

 

  (7,116)

           

 

  (7,530)

      (5.50)

Selling and

  distribution costs

       (933)

           

     (876)

        6.51

           

  (2,028)

           

  (1,839)

      10.28

Other operating

  costs

         (12)

           

      (99)

    (87.88)

           

     (231)

           

  (1,030)

    (77.57)

Operating profit

      4,103

    5,087

    (19.34)

    6,943

    6,751

        2.84

Finance costs

       (328)

     (303)

        8.25

     (635)

     (580)

        9.48

Share of results

  of associated

  companies

       (329)

           

 

      (20)

  1,545.00

           

 

     (627)

           

 

      (25)

  2,408.00

Profit before

   taxation

       3,446

           

    4,764

    (27.67)

           

    5,681

           

    6,146

      (7.57)

Taxation

       (305)

     (436)

    (30.05)

     (835)

     (740)

      12.84

Profit after

   taxation

       3,141

           

    4,328

    (27.43)

           

    4,846

           

    5,406

    (10.36)

Minority interests

           11

         49

    (77.55)

         11

         53

    (79.25)

Profit attributable

   to shareholders

           

    3,152

           

    4,377

    (27.99)

           

    4,857

           

    5,459

    (11.03)

 


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

 

 

GROUP

 

2nd Quarter ended

 

 

30.6.2004

30.6.2003

+/(–)

 

$’000

$’000

%

 

 

 

 

Investment income

         491

         551

(10.89)

 

 

 

 

Other income including interest income

      4,265

      6,485

(34.23)

 

 

 

 

Interest on borrowings

      (328)

      (303)

8.25

 

 

 

 

Depreciation and amortisation and

    impairment loss on fixed assets

      (211)

      (766)

(72.45)

 

 

 

 

Allowance for doubtful debts and bad debts

  written off (included in other operating costs)

        (96)

      (104)

(7.69)

 

 

 

 

Write-off for stock obsolescence

            –

            –

–

 

 

 

 

Write-back/(Provision) for impairment in value

    of investments (included in other income)

           30

      1,053

(97.15)

 

 

 

 

Foreign exchange (loss)/gain

    (included in other income)

        (16)

         411

(103.89)

 

 

 

 

Adjustments for (under) or overprovision

  of tax in respect of prior years

      (204)

            –

n.m.

 

 

 

 

Gain on disposal of investments

           90

         179

(49.72)

 

 

 

 

Gain on disposal of investment properties

  (included in other income)

      1,847

            –

n.m.

 

 

 

 

Gain on disposal of fixed assets

    (included in other income)

            2

            4

(50.00)

 

 

 

 

Exceptional items:-

 

 

 

    - Donation to charities (reclassified and

         included in general and administrative costs)

            –

      (250)

(100.00)

 

 

 

 

  - Negative goodwill amortised (reclassified

         and included in other income)

            –

      2,743

(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 30.6.2004

As at 31.12.2003

As at 30.6.2004

As at 31.12.2003

 

$’000

$’000

$’000

$’000

 

 

 

 

 

Fixed assets

      13,774

     13,536

         4,838

       4,945

Investment properties

    125,723

    128,130

               –

             –

Investment in subsidiaries

              –

             –

     457,575

    456,372

Investment in associated companies

      58,629

     59,256

               –

             –

Long term investments

      96,288

    100,355

         3,323

       3,323

Other receivables

          335

          357

               –

             –

Reinsurer's share of technical provisions

 

 

 

 

Provision for unearned premiums

        3,419

       3,211

               –

             –

Provision for outstanding claims

        7,317

       7,890

               –

             –

 

 

 

 

 

Current assets

 

 

 

 

Short term investments

      47,657

     43,157

               –

             –

Inventories

          279

          387

               –

             –

Trade receivables

        4,867

       3,914

               –

             –

Amount due from associated companies

      99,644

     93,979

               –

             –

Amount due from subsidiaries

              –

             –

               9

            10

Amount due from affiliated companies

          100

          636

             77

          619

Other receivables

        5,348

       5,856

            325

       1,215

Cash and bank balances

      54,938

     63,140

            179

          189

 

    212,833

    211,069

            590

       2,033

 

 

 

 

 

Current liabilities

 

 

 

 

Trade payables and accruals

     (2,956)

     (3,408)

               –

             –

Other payables

     (7,642)

     (8,928)

      (1,352)

     (2,459)

Amount due to subsidiaries

              –

             –

     (42,257)

   (39,857)

Deferred premiums

     (1,523)

     (2,488)

               –

             –

Hire purchase creditors

          (49)

         (49)

               –

             –

Bank overdrafts

        (601)

       (129)

               –

             –

Bank loans

     (2,017)

   (10,801)

               –

             –

Provision for taxation

        (790)

     (1,496)

               –

             –

 

   (15,578)

   (27,299)

     (43,609)

   (42,316)

 

 

 

 

 

Net current assets/(liabilities)

    197,255

    183,770

     (43,019)

   (40,283)

 

 

 

 

 

Non current liabilities

 

 

 

 

Bank loans

   (18,615)

     (9,879)

               –

             –

Hire purchase creditors

          (12)

         (37)

               –

             –

Other payables

        (172)

       (150)

               –

             –

Deferred taxation

     (5,411)

     (5,626)

           (44)

         (45)

Provision for unearned premiums

   (11,787)

   (10,333)

               –

             –

Provision for outstanding claims

   (42,360)

   (44,446)

               –

             –

Provision for premium deficiency

     (1,696)

     (1,696)

               –

             –

 

   (80,053)

   (72,167)

           (44)

         (45)

 

    422,687

    424,338

     422,673

    424,312

 

 

 

 

 

 

 

 

 

 

Share capital

     163,361

    163,255

     163,361

    163,255

Share premium

        8,766

       8,681

         8,766

       8,681

Capital reserve

     128,243

    130,070

     231,964

    230,761

Revenue reserve

     120,845

    121,216

       18,582

     21,615

Currency translation adjustment

  reserve

        1,458

       1,090

               –

             –

Share capital and reserves

     422,673

    424,312

     422,673

    424,312

Minority interests

             14

            26

               –

             –

 

     422,687

    424,338

     422,673

    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 30.6.2004

As at 31.12.2003

Secured

Unsecured

Secured

Unsecured

$2,618,000

–

$10,930,000

–

 

 

 

Amount repayable after one year

 

 

As at 30.6.2004

As at 31.12.2003

Secured

Unsecured

Secured

Unsecured

$18,615,000

–

$9,879,000

–

 

 

 

Details of any collateral

 


The amount of long term bank loans repayable after one year and an amount of $1.92 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 $0.6 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 $0.1 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

 

2nd Quarter ended

 

30.6.2004

30.6.2003

 

$’000

$’000

 

 

 

Cash flow from operating activities:

 

 

 

 

 

Operating profit

      4,103

      5,087

 

 

 

Adjustments for:-

 

 

Interest income

    (1,754)

    (1,804)

Depreciation and impairment loss on fixed assets

         211

         766

Exchange gain on adoption of INT FRS 19

             –

    (1,114)

Negative goodwill amortised

             –

    (2,743)

Gain on disposal of investment properties

    (1,847)

             –

Gain on disposal of fixed assets

          (2)

          (4)

Provision for outstanding claims

      2,354

      3,020

Write-back of provision for unearned premiums

       (154)

       (484)

 

    (1,192)

    (2,363)

Operating income before reinvestment in working capital

      2,911

      2,724

 

 

 

(Increase)/Decrease in receivables and short term investments

    (3,496)

     13,109

Decrease/(Increase) in inventories

           99

       (100)

Decrease in payables

       (604)

    (1,083)

 

    (4,001)

     11,926

Cash (used in)/generated from operations

    (1,090)

     14,650

 

 

 

Net claims paid

    (2,959)

    (3,496)

Interest received

      1,754

      1,804

Interest paid

       (328)

       (303)

Income taxes paid

    (1,211)

       (345)

 

    (2,744)

    (2,340)

Net cash (used in)/generated from operating activities

    (3,834)

     12,310

 

 

 

Cash flow from investing activities:

 

 

Purchase of fixed assets

       (556)

        (45)

Purchase of investment properties

             –

    (1,462)

Decrease/(Increase) in other investments

      2,351

    (2,765)

Proceeds from disposal of investment properties

      3,301

             –

Proceeds from disposal of fixed assets

         132

             4

Net cash generated from/(used in) investing activities

      5,228

    (4,268)

 

 

 

Cash flow from financing activities:

 

 

Net (repayment of)/proceeds from bank loans

       (525)

      2,164

Decrease in bank overdrafts

       (159)

        (57)

Increase in amount due from associated companies

       (321)

             –

Dividends paid

    (5,228)

    (7,640)

Repayment to hire purchase creditors

        (13)

        (13)

Proceeds from issue of shares

         186

             –

Net cash used in financing activities

    (6,060)

    (5,546)

 

 

 

Net (decrease)/increase in cash and cash equivalents

    (4,666)

      2,496

Cash and cash equivalents at beginning of the period

     59,604

     49,498

Cash and cash equivalents at end of the period

     54,938

     51,994

 

 

 

 

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

 

2nd Quarter ended

2nd Quarter ended

 

30.6.2004

30.6.2003

30.6.2004

30.6.2003

 

$’000

$’000

$’000

$’000

 

 

 

 

 

Share capital

 

 

 

 

Balance at beginning of the period

   163,258

  163,240

   163,258

  163,240

Issue of shares

         103

            –

         103

            –

Balance at end of the period

   163,361

  163,240

   163,361

  163,240

 

 

 

 

 

 

 

 

 

 

Share premium

 

 

 

 

Balance at beginning of the period

      8,683

      8,681

      8,683

      8,681

Issue of shares

           83

            –

           83

            –

Balance at end of the period

      8,766

      8,681

      8,766

      8,681

 

 

 

 

 

 

 

 

 

 

Revenue reserve

 

 

 

 

Balance at beginning of the period

   122,921

  121,461

    21,220

    31,700

Profit for the period

      3,152

      4,377

      2,590

      1,985

Dividend

    (5,228)

   (7,640)

    (5,228)

   (7,640)

Balance at end of the period

   120,845

  118,198

    18,582

    26,045

 

 

 

 

 

 

 

 

 

 

Capital reserve

 

 

 

 

Balance at beginning of the period

   130,315

  137,358

   233,318

  225,728

Adjustment due to liquidation of subsidiaries

            –

        (64)

            –

            –

Adjustment due to disposal of investment properties

    (2,027)

            –

            –

            –

Net surplus/(deficit) on revaluation of

 

 

             

 

  - investment properties

            –

          29

            –

            –

  - subsidiaries

            –

            –

    (1,354)

      2,329

Deferred tax adjustment

        (45)

            –

            –

            –

Balance at end of the period

   128,243

  137,323

   231,964

  228,057

 

 

 

 

 

 

 

 

 

 

Currency translation adjustment reserve

 

 

 

 

Balance at beginning of the period

      1,302

   (1,391)

            –

            –

Exchange differences arising

  on consolidation

         156

        (28)

            –

            –

Balance at end of the period

      1,458

   (1,419)

            –

            –

 

 

 

 

 

 

 

 

 

 

Share capital and reserves

   422,673

  426,023

   422,673

  426,023



 

 

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 March 2004, changes in the issued ordinary share capital of the Company are as follows:

 

 

 

 

No. of shares of

$0.25 each

 

 

 

As at 1 April 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 30 June 2004 and 12 August 2004

 

     653,444,000

 

 

 

Issued ordinary share capital as at 30 June 2004

  and 12 August 2004

 

                      

   $163,361,000

 

 

 

 

 

As at 30 June 2004, there were unexercised options to subscribe for 60,000 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 30 June 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

 

2nd Quarter ended

 

30.6.2004

30.6.2003

 

 

 

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

 

 

(i)

Based on the weighted average number of ordinary shares in issue


0.48 cents


0.67 cents

(ii)

On a fully diluted basis

0.48 cents

0.67 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 30.6.2004

As at 31.12.2003

As at 30.6.2004

As at 31.12.2003

 

 

 

 

 

Net asset value per $0.25 ordinary share

 

64.68 cents

 

64.98 cents

 

64.68 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’s profit after taxation for the second quarter ended 30 June 2004 (“2Q 2004”) decreased by about 27.43% as compared to the second quarter ended 30 June 2003 (“2Q 2003”).  However, the Group’s profit after taxation for the six months ended 30 June 2004 as compared to the previous corresponding period decreased by about 10.36% mainly due to higher profit after taxation recorded by the Group in the first quarter of 2004.  In the first quarter of 2004, the Group reported an increase in profit after taxation of about 58.16% from $1.078 million for the first quarter of 2003 to $1.705 million for the first quarter of 2004.

 

The main reasons for the fluctuation in the Group’s results for 2Q 2004 are set out below:

 

Group revenue for 2Q 2004 decreased by about 1.93% from $10.09 million for 2Q 2003 to $9.90 million for 2Q 2004.  This was mainly attributable to:

 

(a)        decrease in gross written premiums (2Q 2004: $5.95 million; 2Q 2003: $6.05 million) from Tenet Insurance Company Ltd (“Tenet Insurance”); and

 

(b)        lower interest income earned by the Group (2Q 2004: $1.75 million; 2Q 2003: $1.8 million) mainly as a result of re-allocation of Group’s assets.

 

The lower revenue resulted in lower cost of sales.  In addition, net claims incurred (2Q 2004: $2.35 million; 2Q 2003: $3.019 million) by Tenet Insurance also decreased.

 

The reasons as set out above contributed mainly to the decrease in cost of sales and increase in gross profit for 2Q 2004 as compared with 2Q 2003.

 

Other income decreased mainly due to (i) lower write-back of provision for impairment in value of investments (2Q 2004: $30,000; 2Q 2003: $1.05 million), (ii) lower exchange gains (2Q 2004: loss of $16,000; 2Q 2003: gain of $411,000), and (iii) recognition in 2Q 2003 of the remaining amount of negative goodwill arising from the acquisition of Tenet Insurance (2Q 2004: Nil; 2Q 2003: $2.74 million).  The decrease was partially offset by gain on disposal of an investment property in United Kingdom (2Q 2004: $1.85 million; 2Q 2003: Nil).

 

General and administrative costs decreased mainly due to the provision for impairment loss on fixed assets in 2Q 2003 (2Q 2004: Nil; 2Q 2003: $480,000).

 

Selling and distribution costs increased mainly due to the increase in net commission expense (2Q 2004: $902,000; 2Q 2003: $712,000) of Tenet Insurance which was mainly due to the decrease in commission rate received and the non renewal of a treaty protection from reinsurance.  This reduced the commission received and hence, increased the net commission expense.

 

Other operating costs decreased mainly due to lower provision for doubtful debts from an affiliated company (2Q 2004: $118,000; 2Q 2003: $190,000).

 

The increase in finance costs was mainly due to additional borrowings obtained to finance the purchase of properties in United Kingdom.

 

Share of net losses of associated companies increased mainly due to the increase in the share of losses (2Q 2004: loss of $0.15 million; 2Q 2003: profit of $0.18 million) in Riverwalk Promenade Pte Ltd, and this was mainly due to lower rental income as tenancies are not renewed to pave the way for the re-development of the property at Trademart site.

 

On the Group level, taxation for 2Q 2004 is lower than the amount determined by applying the applicable Singapore income tax rate of 20% to the profit for 2Q 2004 mainly due to certain income being not subjected to tax.

 

Net current assets of the Group increased mainly because a subsidiary has refinanced its bank borrowings, replacing short term borrowings with long term borrowings.



 

 

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

 

 

 

Tenet Insurance Company Ltd continued to operate in a competitive environment with pressure on premium rates.  The financial markets remain cautious following the recent US Federal rate increases.  Terrorism and regional political tensions and higher oil prices are likely to erode investor confidence further.  As such, returns from investment earnings will be moderate.

 

The industrial property market had shown an increase in interest in the 1st quarter of 2004.  However, the level of activity tapered off in the 2nd quarter of 2004.  Rental rates are unchanged in the 2nd quarter of 2004 and are expected to remain at the same level in the current year.

 

The share of losses from Riverwalk Promenade Pte Ltd will increase in the current year as tenancies are not renewed to prepare for the redevelopment of the Trademart site.  The Group’s property interests in London continue to generate satisfactory rental income.  In August, contracts were exchanged for the sale of a commercial property in London which will contribute a gain of approximately $900,000 to the Group’s results for the 3rd quarter of 2004.

 

 

11.

Dividend

 

 

 

(a) Current Financial Period Reported On

 

Any dividend declared for the current financial period reported on?    Yes.

 

 

Name of Dividend

Interim

 

Dividend Type

Cash

 

Dividend Rate

1 cent per share (4%),

less tax

 

Par value of shares

$0.25

 

Tax Rate

20%

 



 

 

 

(b) Corresponding Period of the Immediately Preceding Financial Year

 

Any dividend declared for the corresponding period of the immediately preceding financial year?    Yes.

 

 

Name of Dividend

Interim

 

Dividend Type

Cash

 

Dividend Rate

1 cent per share (4%),

less tax

 

Par value of shares

$0.25

 

Tax Rate

22%

 



 

 

 

(c) Date payable

 


10 September 2004

 

 

 

(d) Books closure date

 


NOTICE IS HEREBY GIVEN that the Share Transfer Books and Register of Members of the Company will be closed on 1 September 2004 for the preparation of dividend warrants.  Duly completed registrable transfers received by the Company’s Share Registrars, Lim Associates (Pte) Ltd, 10 Collyer Quay, #19-08 Ocean Building, Singapore 049315 up to 5.00 p.m. on 31 August 2004 will be registered before entitlements to the dividend are determined.  In respect of shares in securities accounts with The Central Depository (Pte) Limited (“CDP”), the said dividend will be paid by the Company to CDP which will in turn distribute the dividend entitlements to holders of shares in accordance with its practice.

 

 

 

 

12.

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

 

 

 

Not applicable.

 

 

 

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.

 

 

 

 

17.

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
12 AUGUST 2004