First six months of 2014

Results and Key Operating Data

Since the completion of the disposal of the entire equity interests in 9 previous subsidiaries that engaged in the production and sale of beer in September 2013, the Group has changed to focus on the businesses of property development and investment.  The Group holds certain investment properties that generate rental income, as well as the Buxin Project which is under development, all of which are located in Shenzhen.

The Group’s results for the six months ended 30 June 2014 was derived from the businesses of property development and investment, whereas the results for the corresponding period of last year was derived from the sold businesses of production, distribution and sale of beer.

In the first half of 2014, the Group recorded consolidated revenue of HK$1.61 million derived from the rental income from investment properties (2013: consolidated revenue of HK$804 million derived from the sale of beer), representing a decrease of 99.8% from the corresponding period of last year.  During the period under review, the unaudited consolidated profit of the Group was HK$71.91 million (2013: consolidated loss of HK$93.97 million).

The board of directors of the Company resolved not to declare the payment of an interim dividend for the six months ended 30 June 2014 (2013: Nil).

Business and Financial Review

In the first half of 2013, the Group recorded a consolidated loss of HK$93.97 million from the business operation of production, distribution and sale of beer, which has been discontinued since September 2013.  During the period under review, the Group did not incur loss generated from that business.

During the period under review, the Group implemented an employee quarters allocation plan as approved by local government and disposed of the staff quarters to the eligible employees who meet certain prerequisites and criteria in accordance with the required procedures and approved prices stipulated by the relevant department of the local government.  The disposal contributed a gain of approximately HK$72.06 million to the Group.  The disposal process of certain staff quarters has not completed as of 30 June 2014.

Due to the receipt of consideration for the disposal of the 9 previous subsidiaries, the Group recorded a significant increase in the consolidated cash and bank balances from the corresponding period of last year.  Bank interest income for the first half of 2014 was HK$70.38 million (2013: HK$1.15 million), representing an increase of approximately 60 times from the corresponding period of last year.  Imputed interest income arising from changes in fair value of long-term other receivables was HK$18.85 million for the first half of 2014 (2013: nil).

Almost all the fund held by the Group were denominated in Renminbi.  As a result of the fact that Renminbi suffered a slight depreciation against Hong Kong dollar during the first half of 2014, the Group recorded a foreign exchange loss in its financial statement which is presented in Hong Kong dollar.  For the six months ended 30 June 2014, the Group recorded a net foreign exchange loss of HK$36.66 million (2013: HK$0.37 million), representing a significant increase from the corresponding period of last year.

During the period under review, the Group did not record any sale and distribution expenses (2013: HK$121 million).  The Group’s administrative expenses for the first half of the year was HK$45.70 million (2013: HK$82.71 million), representing a decrease of 44.7% over the same period last year.  The decrease in administrative expenses was mainly attributable to the decrease in general administrative expenditures arising from the streamline of corporate structure after the disposal of 9 previous subsidiaries by the Group.  The Group had no bank loan during the period under review and therefore did not incur finance costs (2013: HK$1.66 million).

The Buxin Project

During the period under review, the Group worked very closely with the relevant urban renewal authorities to fine tune the urban renewal unit planning proposal, with the aim to facilitating the urban renewal authorities in its reviewing process and to thereby shortening the time needed for the official approval on the urban renewal unit planning proposal to be issued.  At the same time, the Group is carrying out the preliminary works for Buxin Project, which mainly include the preliminary planning and design of the project, arrangement and disposal of the existing plant and machinery on the land for development, and tendering for designer and consultant for the project.

With the aim of securing a higher plot ratio for development of the land and other favourable construction indices for the Buxin Project, the Group estimates that the approval procedures for the urban renewal unit planning proposal will complete in the first half of 2015, based on the information currently available and the latest communications with the relevant governmental authorities. The Group anticipates that the construction work will commence in around the second half of 2015 and the pre-sale process will commence in around 2017.  The above estimation is based on the information currently available and the Group will update the schedule of the project as appropriate in accordance with the progress of various tasks for the Buxin Project.

Capital Expenditure

The Group’s general capital expenditure, on a cash basis, for the period under review was HK$0.90 million (2013: HK$41.65 million).  In addition, preliminary expenditures related to the Buxin Project was HK$1.95 million. 

Financial Resources and Liquidity

As at 30 June 2014, the Group had cash and bank balances of HK$3.06 billion (including restricted bank balances of HK$0.19 million), almost all of which were denominated in Renminbi.  During the period under review, net cash flows from operating activities recorded was HK$6.57 million.  The Group was in a sound financial position and possessed sufficient financial resources to finance its existing operation.  As at 30 June 2014, none of the assets of the Group was pledged to any creditors and there was no material contingent liability recorded.

Human Resources

As at 30 June 2014, the Group had a total of 254 (31 December 2013: 546) employees.  Reasonable remuneration packages based on business performance, market practices and market conditions are offered to employees of the Group.  In addition, discretionary bonuses are also granted based on the results of the Group and the performance of individual employees.