SHANGHAI LAND<00067> - Results Announcement
Shanghai Land Holdings Limited (Receivers Appointed) announced on 22/03/2005:
(stock code: 00067 )
Year end date: 30/06/2005
Currency: HKD
Auditors' Report: N/A
Interim report reviewed by: Both Audit Committee and Auditors
(Unaudited )
(Unaudited ) Last
Current Corresponding
Period Period
from 01/07/2004 from 01/07/2003
to 31/12/2004 to 31/12/2003
Note ('000 ) ('000 )
Turnover : 34,206 26,865
Profit/(Loss) from Operations : (24,817) (29,342)
Finance cost : (20,221) (10,326)
Share of Profit/(Loss) of
Associates : N/A N/A
Share of Profit/(Loss) of
Jointly Controlled Entities : N/A N/A
Profit/(Loss) after Tax & MI : (45,983) (40,057)
% Change over Last Period : N/A %
EPS/(LPS)-Basic (in dollars) : (0.0151) (0.0131)
-Diluted (in dollars) : N/A N/A
Extraordinary (ETD) Gain/(Loss) : N/A N/A
Profit/(Loss) after ETD Items : (45,983) (40,057)
Interim Dividend : NIL NIL
per Share
(Specify if with other : N/A N/A
options)
B/C Dates for
Interim Dividend : N/A
Payable Date : N/A
B/C Dates for (-)
General Meeting : N/A
Other Distribution for : N/A
Current Period
B/C Dates for Other
Distribution : N/A
Remarks:
(1) Auditors' independent review report contains qualifications and they are
unable to reach a review conclusion as to whether material modifications
should be made to the interim financial report for the six months ended 31
December 2004. The complete independent review report is appended below.
INDEPENDENT REVIEW REPORT
The interim financial report has been reviewed by Nexia Charles Mar Fan &
Co. Their independent review report to the Board of Directors is set out
below.
"INTRODUCTION
We have been instructed by the Company to review the interim financial
report for the six months ended 31 December 2004.
DIRECTORS' RESPONSIBILITIES
The Rules Governing the Listing of Securities on The Stock Exchange of
Hong Kong Limited require the preparation of an interim financial report
to be in compliance with Statement of Standard Accounting Practice 25 "
Interim financial reporting" issued by the Hong Kong Institute of
Certified Public Accountants ("HKICPA") and the relevant provisions
thereof. The interim financial report is the responsibility of the board
of directors (the "Board").
REVIEW WORK PERFORMED
We conducted our review in accordance with Statement of Auditing Standards
700 "Engagements to review interim financial reports" issued by the
HKICPA, except that the scope of our review was limited as explained
below.
A review consists principally of making enquiries of management and
applying analytical procedures to the interim financial report and based
thereon, assessing whether the accounting policies and presentation have
been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as test of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an
audit and therefore provides a lower level of assurance than an audit.
Accordingly, we do not express an audit opinion on the interim financial
report.
The scope of our review was limited as set out below:
1. Statutory financial statements
Our audit reports on the financial statements of the Group for the years
ended 30 June 2004 and 2003 were disclaimed in view of the significance of
the possible effect of the limitations in evidence available to us,
details of which were set out in our reports dated 23 December 2004 and 27
October 2003 respectively. Any adjustments to these financial statements
might have a consequential effect on the net assets of the Group as at 30
June 2004 and 31 December 2004 and the results of the Group for the six
months ended 31 December 2004 and 2003.
2. Disclaimer of liabilities by the Receivers and the Board
The Receivers, despite having taken all reasonable steps, had not been
able to obtain all information and documents for preparing the interim
financial report. Accordingly, they were unable to give an unqualified
representation that all the transactions affecting the Group during the
six months ended 31 December 2004 had been included in the interim
financial report and also as to whether the interim financial report
presented a true and fair view of the operations and cash flows of the
Group for the six months ended 31 December 2004 and the financial position
of the Group as at that date. The Receivers had therefore disclaimed any
liabilities in respect of the interim financial report in relation to the
affairs of the Group for the six months ended 31 December 2004.
The Audit Committee had reviewed and discussed the interim financial
report with the Receivers and the Board. The members of the Audit
Committee were unable to satisfy themselves as to whether the interim
financial report presented a true and fair view and, under such
circumstances, the Audit Committee was unable to make recommendation to
the Board in accepting and/or adopting the interim financial report of the
Group for the six months ended 31 December 2004.
The Board at a meeting held on 22 March 2005 had resolved not to approve
the interim financial report for the six months ended 31 December 2004 as
the Company had not been under the management of the Board for the
relevant accounting period for which the interim financial report was
prepared. In view of the fact that the Receivers would continue to manage
the Company in the near future until further order of the Court, the
Receivers considered it appropriate, notwithstanding the limitations
referred to above, to take up the responsibility from the Board to prepare
and approve the interim financial report. An order from the Court was
obtained on 20 December 2004 conferring upon the Receivers powers, inter
alia, to approve and sign the interim financial report for the six months
ended 31 December 2004.
In consequence, we have been unable to obtain adequate assurance regarding
the completeness and accuracy of the assets, liabilities, income and
expenses, cash flows as well as the disclosures appearing in the interim
financial report.
3. Accounting records and documents
The Receivers, notwithstanding their appointment as the legal
representatives and the directors of Shanghai Yihe Longbai Hotel Limited
("Longbai") and Shanghai Hongxin Real Estate Development Company Limited
("Hongxin") on 16 December 2003 and 15 January 2004 respectively, had
limited access to the books and records of Longbai and Hongxin as their
former legal representatives were uncooperative and failed to surrender
the books and records and/or certain original documents of Longbai and
Hongxin.
In addition, Bowyer Profits Limited ("Bowyer") terminated the services of
Shanghai Nongkai Development Group Limited ("Shanghai Nongkai") on 29
April 2004 as agent to act on its behalf for all matters relating to the
leasing of its investment properties. Shanghai Nongkai has yet to return
all the relevant records and documents and monies held in trust for
Bowyer.
Accordingly, we have been unable to ascertain whether the following
balances, related to Hongxin, Longbai and Bowyer, have been properly
accounted for in the interim financial report:
- Turnover of HK$1,381,000;
- Finance costs of HK$20,221,000;
- Taxation of HK$945,000;
- Debtors, deposits and prepayments of HK$955,207,000;
- Cash, bank balances and deposits of HK$51,227,000;
- Creditors and accruals of HK$125,727,000;
- Purported loans of HK$614,250,000;
- Tax payable of HK$1,738,000; and
- Deferred tax liabilities of HK$68,656,000.
The Receivers have taken out various actions, to recover the amounts
advanced by Longbai, Hongxin and Bowyer totaling HK$921,400,000. The
Receivers are unable to ascertain whether these amounts will be
recoverable in full.
In addition, we have also been unable to ascertain whether cash and bank
balances of HK$23,147,000 have been properly classified as cash and cash
equivalents in the condensed consolidated cash flow statement.
4. Amount due from Shun Loong Holdings Limited ("Shun Loong")
Shun Loong had filed an Originating Summons seeking declaratory reliefs
against Profitex Investments Limited ("Profitex") to the effect that the
sub-tenancy agreement entered into between Shun Loong and Profitex dated
23 May 2003 effectively came to an end on 19 October 2003 by virtue of
Shun Loong's own repudiation of it. Profitex filed an affirmation in
opposition to the Originating Summons. The Originating Summons will be set
down for argument by Counsel before a Judge in open court on 29 September
2005.
In view of the foregoing, we are unable to ascertain if the amount due
from Shun Loong as at 31 December 2004 of HK$5,896,000 included in
deposits, prepayments and other receivables is fully recoverable.
Any adjustments arising in relation to the matters referred to in
paragraphs 1 to 4 above would have a consequential significant effect on
the loss and cash flows of the Group for the six months ended 31 December
2004 and the net assets of the Group as at that date.
FUNDAMENTAL UNCERTAINTY RELATING TO THE GOING CONCERN OF CERTAIN
SUBSIDIARIES
In arriving at our review conclusion, we have considered the adoption of
the going concern basis in consolidating Longbai and Hongxin.
a. Longbai
Longbai's hotel properties, with a carrying value of RMB170,000,000 (
equivalent to HK$160,650,000), were secured against a loan of RMB350,000,
000 (equivalent to HK$330,750,000) granted by Shanghai Pudong New District
Liuli Rural Credit Cooperative Union ("Liuli SRCC"). As a result of the
decrease in the carrying value of the hotel properties, Longbai had net
liabilities as at 31 December 2004. Thus, Longbai might have a going
concern problem. In addition, Longbai will lose its ownership of the hotel
properties if the enforcement action against Longbai is completed. The
Receivers are also currently unable to determine whether there are any
other contingent liabilities resulting from Liuli SRCC's enforcement
action against Longbai.
b. Hongxin
Hongxin's property under development, with a carrying value of
RMB285,000,000 (equivalent to HK$269,325,000), was secured against a loan
of RMB300,000,000 (equivalent to HK$283,500,000) granted by the Shijidadao
Branch of Shanghai Pudong New District Rural Credit Cooperative Union ("
Shijidadao SRCC"). The Receivers have been unable to determine whether
Hongxin is able to meet all its liabilities as the Receivers only had
limited access to Hongxin's books and records. Further, according to the
information obtained by the Receivers, fund equivalent to the purported
loan was deposited and/or advanced to a PRC entity. Should this receivable
become irrecoverable and the proceeds from the realisation of the property
under development be insufficient to cover the purported loan and other
liabilities, Hongxin might have a going concern problem.
Further, the registered capital of Hongxin according to the business
licence of Hongxin issued on 15 January 2004 is listed at US$30,000,000,
of which only US$16,700,000 has been paid up. The investment amount which
was originally listed at US$50,000,000 is subsequently listed at US$90,
000,000 pursuant to Hongxin's Certificate of Approval. Hongxin has
requested the Foreign Economic Commission of Huangpu District Shanghai ("
FEC") to extend the deadline for paying up the additional registered
capital to 24 November 2005. In light of the judgment on Hongxin dated 17
November 2004, FEC has verbally rejected Hongxin's application to extend
the payment of the additional registered capital to 24 November 2005.
Should the business licence of Hongxin be revoked, Hongxin might also have
a going concern problem.
In addition, Hongxin will lose its ownership of the property under
development if the enforcement action against Hongxin is completed. The
Receivers are also currently unable to determine whether there are any
other contingent liabilities resulting from Shijidadao SRCC's enforcement
action against Hongxin.
As the Receivers have indicated that they will unlikely be providing the
necessary funding to maintain Longbai and Hongxin as a going concern, the
interim financial report includes appropriate adjustments to state
Longbai's hotel properties and Hongxin's property under development at
valuation on a forced sale basis and to reclassify the purported loans
under current liabilities. No adjustments have been made to restate the
other assets to their recoverable amounts and to provide for any further
liabilities that might arise as the amounts are not quantifiable.
DISAGREEMENT ABOUT ACCOUNTING TREATMENT
Interest expenses of HK$51,142,000 have been accrued on the purported loan
borrowed by Hongxin and were recorded as prepayments in the interim
financial report. The interest accrued should be accounted for as an
expense as required by Statement of Standard Accounting Practice 19 "
Borrowing costs" ("SSAP 19") issued by HKICPA. If the Group had accounted
for the borrowing costs in accordance with SSAP 19, the Group's loss
attributable to shareholders for the six months ended 31 December 2004
would have been increased by HK$31,477,000, accumulated losses as at 1
July 2004 of HK$19,665,000 and the debtors, deposits and prepayments as at
31 December 2004 would have been decreased by HK$51,142,000.
INABILITY TO REACH A REVIEW CONCLUSION
Because of the significance of the possible effect of the limitations in
evidence available to us, we are unable to reach a review conclusion as to
whether material modifications should be made to the interim financial
report for the six months ended 31 December 2004."
(2) TURNOVER AND SEGMENTAL INFORMATION
Turnover represents income from operations from the hotel investment and
rental income from investment properties earned during the six months
ended 31 December 2004 and is analysed as follows:
Business segments
Business segment analysis is chosen as the primary reporting format as the
Group's results during the current and prior interim periods were
principally affected by hotel investment, property investment and property
development activities.
Six months ended 31 December
Hotel investment Property investment
2004 2003 2004 2003
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
HK$'000 HK$'000 HK$'000 HK$'000
Turnover 32,825 25,921 1,381 944
=======================================================
Segment
results 13,353 8,789 991 780
=======================================================
Taxation (618) (132) (327) (257)
Six months ended 31 December
Property development Consolidated
2004 2003 2004 2003
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
HK$'000 HK$'000 HK$'000 HK$'000
Turnover - - 34,206 26,865
=======================================================
Segment
results - - 14,344 9,569
===============================
Interest income 10,478 6,266
Unallocated administrative expenses net of other
revenue (49,639) (45,177)
-------------------------
Loss from operations (24,817) (29,342)
Finance costs (20,221) (10,326)
-------------------------
Loss from ordinary activities before taxation (45,038) (39,668)
Taxation - - (945) (389)
-------------------------
Loss attributable to shareholders (45,983) (40,057)
=========================
No inter-segment sales and transfers were transacted during the current
and prior interim periods.
Geographical segments
No geographical analysis is provided as the hotel investment, property
investment and property development activities during the current and
prior interim periods were all carried out in the PRC.
(3) CONDENSED CONSOLIDATED INCOME STATEMENT
Six months ended
31 December
2004 2003
(Unaudited) (Unaudited)
HK$'000 HK$'000
Turnover 34,206 26,865
Direct expenses (9,062) (7,476)
--------------------------
25,144 19,389
Other revenue 10,602 6,420
Net foreign exchange loss (3,892) (5,741)
Administrative expenses (56,671) (49,410)
--------------------------
Loss from operations (24,817) (29,342)
Finance costs (20,221) (10,326)
--------------------------
Loss from ordinary activities before taxation
(45,038) (39,668)
Taxation (945) (389)
---------------------------
Loss attributable to shareholders
(45,983) (40,057)
==========================
Basic loss per share (1.51) cents (1.31) cents
=============================
Dividend - -
=============================
(4) BASIC LOSS PER SHARE
The calculation of basic loss per share is based on the consolidated loss
attributable to shareholders for the six months ended 31 December 2004 of
HK$45,983,000 (2003: HK$40,057,000) and 3,051,438,765 shares (2003: 3,051
,438,765 shares) in issue during the interim period. There were no
dilutive potential ordinary shares in existence during the current and
prior interim periods.
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