First six months of 2013

Results and Key Operating Data

The total sales volume of the Group for the first half of 2013 was 394,000 tonnes (2012: 398,000 tonnes), representing a decrease of 1.0% over the same period last year. The consolidated revenue was HK$804 million (2012: HK$769 million), representing an increase of 4.6% over the same period last year. The Group’s sales in Mainland China accounted for 95.0% of the consolidated revenue, whereas the sales in overseas and Hong Kong accounted for 5.0% of the consolidated revenue. The unaudited consolidated loss of the Group for the period under review was HK$93.97 million (2012: HK$101.6 million), representing a decrease of 7.5% year-on-year. The decrease in unaudited consolidated loss was mainly attributable to the increase in average selling price of beer products during the period under review.

The board of directors of the Company resolved not to declare the payment of an interim dividend for the six months ended 30 June 2013 (2012: Nil).

Business and Financial Review

The Group’s average costs of sales per tonne of beer for the first half of the year increased by 0.1% over the same period last year. The selling and distribution expenses for the first half of the year was HK$121 million (2012: HK$103 million), representing an increase of 17.5% over the same period last year. The average selling and distribution expenses per tonne of beer was HK$307 (2012: HK$259), representing an increase of 18.5% over the same period last year. The increase in the selling and distribution expenses per tonne of beer for the period under review was mainly attributable to the increase in marketing and promotion expenses of the Group in an effort to maintain the market share and competitiveness of the Kingway brand. The Group’s administrative expenses for the first half of the year was HK$82.71 million (2012: HK$85.27 million), representing a decrease of 3.0% over the same period last year. The professional fees incurred in relation to the disposal of the Company’s subsidiaries for the first half of the year was HK$13.92 million, representing an increase of 72.7% over the same period last year. The increase in the related professional fees was mainly attributable to the high demand for such services during the period under review. The Group’s finance costs for the first half of the year was HK$1.66 million (2012: HK$0.26 million), representing an increase of 538.5%. The increase in finance costs was mainly due to bank loans amounted to HK$62.77 million obtained during the period under review.

Capital Expenditure

The Group’s capital expenditure, on a cash basis, for the period under review was approximately HK$41.65 million (2012: HK$20.39 million), which mainly represented the expenditure incurred for construction of staff quarters and improvement of production equipment for our brewery plants.

Financial Resources, Liquidity and Debt Position

The Group had cash and bank balances of HK$1,085 million as at 30 June 2013 (including restricted bank balances and pledged bank deposits of HK$679 million in aggregate), of which 96.9% was in RMB, 2.0% was in HKD and 1.1% was in USD.

Net cash inflow from operating activities for the period under review was HK$197 million. As at 30 June 2013, the outstanding balance of interest-bearing bank loans of the Group was HK$62.77 million (31 December 2012: Nil), and the loans were mainly used for working capital purpose. The Group has sufficient working capital to finance its daily operations. As at 30 June 2013, the Group did not have any material contingent liabilities.

Progress of disposal of the equity interests in 9 subsidiaries of the Company

On 5 February 2013, the Company entered into a conditional master agreement (“Master Agreement”) with China Resources Snow Breweries Limited(華潤雪花啤酒有限公司), pursuant to which, the Company has, subject to the satisfaction of the relevant conditions precedent, agreed to sell the equity interests in 9 whollyowned subsidiaries and certain of their loans and debts owing to the remaining Group at a total consideration of RMB5,384.2 million (equivalent to approximately HK$6,643.0 million), subject to adjustments. The said 9 subsidiaries are mainly engaged in the production, distribution and sale of beer. Completion (“Completion”) of the transactions contemplated in the Master Agreement (“Transactions”) is conditional upon the satisfaction of certain conditions.

During the period under review, the Company received an amount of approximately HK$664 million from China Resources Snow Breweries Limited as security money in relation to the Transactions. The Transactions were approved by the shareholders of the Company on 9 May 2013. On 8 August 2013, the Company received the review decision notice from the Anti-monopoly Bureau of the Ministry of Commerce of the People’s Republic of China stating that it would not prohibit the transactions. As disclosed in the announcement of the Company dated 11 August 2013, the Company had been and would continue to be working closely with China Resources Snow Breweries Limited in relation to the other Completion related matters.

Buxin Project

The land parcel of Kingway Shenzhen Plant 1 Land retained by the Company which is the site where Kingway Shenzhen Plant 1 situates and is located in the Buxin Area of Luohu District at the central area of Shenzhen. It has a total area of approximately 87,000 square metres, and is within walking distance to the Buxin and Shuibei Metro stations of the Shenzhen Metro. The Company intends to develop the Kingway Shenzhen Plant 1 Land under the “Buxin Project”, which will be built in three phases, to cater to the demand for office space and ancillary apartments generated by the blooming jewellery design, exhibition and sales industry in the nearby areas. During the period under review, the related works of the Buxin Project has been commenced according to the expected timetable of the Group.

Human Resources

As at 30 June 2013, the Group had a total of 2,881 (31 December 2012: 2,835) employees. Reasonable remuneration packages based on business performance, market practices and market conditions are offered to employees by the Group. In addition, discretionary bonuses are also granted based on the results of the Group and the performance of individual employees.

Outlook

In the second half of the year, the Group will mainly focus on reinforcing its existing beer markets and sales channels and ensure the normal operation for each of the sale companies.

In addition, the Group will use its best endeavors to procure the fulfillment of the conditions precedent as set out in the Master Agreement and earnestly cooperate with China Resources Snow Breweries Limited for the completion of the Transactions.

Last but not least, the Board would like to acknowledge the efforts made by the management and staff members during the period under review. Under the leadership of the Board, the Company is optimistic about its future business prospect. The Company will proactively push forward its property development business and will continue as always to strive to generate better returns to its shareholders.