CIFH<00183> - Results Announcement
CITIC International Financial Holdings Limited announced on 16/08/2005:
(stock code: 00183 )
Year end date: 31/12/2005
Currency: HKD
Auditors' Report: N/A
Interim report reviewed by: Auditors
(Unaudited )
(Unaudited ) Last
Current Corresponding
Period Period
from 01/01/2005 from 01/01/2004
to 30/06/2005 to 30/06/2004
Note ('000 ) ('000 )
Turnover : 1,289,369 1,102,019
Profit/(Loss) from Operations : 565,896 482,546
Finance cost : N/A N/A
Share of Profit/(Loss) of
Associates : 17,515 24,354 (Restated)
Share of Profit/(Loss) of
Jointly Controlled Entities : N/A N/A
Profit/(Loss) after Tax & MI : 723,176 424,762 (Restated)
% Change over Last Period : +70.25 %
EPS/(LPS)-Basic (in dollars) : 0.2262 0.1331 (Restated)
-Diluted (in dollars) : 0.2105 0.1211 (Restated)
Extraordinary (ETD) Gain/(Loss) : N/A N/A
Profit/(Loss) after ETD Items : 723,176 424,762 (Restated)
Interim Dividend : 11.3 cents 6.6 cents
per Share
(Specify if with other : N/A N/A
options)
B/C Dates for
Interim Dividend : 06/09/2005 to 09/09/2005 bdi.
Payable Date : 15/09/2005
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) The financial information in this interim results announcement is
unaudited, but has been reviewed by KPMG in accordance with Statement of
Auditing Standards 700 "Engagements to review interim financial reports",
issued by the Hong Kong Institute of Certified Public Accountants. It does
not constitute statutory financial statements.
(2) The financial information relating to the financial year ended 31
December 2004 that is included in this interim results announcement as
being previously reported information does not constitute the Company's
statutory financial statements for that financial year but is derived from
those financial statements, as amended for new and revised accounting
standards that require prior period adjustments. Statutory financial
statements for the year ended 31 December 2004 are available from the
Company's registered office. The auditors have expressed an unqualified
opinion on those financial statements in their report dated 10 March 2005.
(3) The interim results announcement has been prepared in accordance
with the same accounting policies adopted in the 2004 annual financial
statements, except for the accounting policy changes that are expected to
be reflected in the 2005 annual financial statements. Details of these
changes in accounting policies are set out in notes 4 and 5.
(4) Summary of the effect of changes in the accounting policies
(i) Effect on opening balance of total equity at 1 January
2005 (as adjusted)
The following table sets out the adjustments that have
been made to the opening balances at 1 January 2005. These are the
aggregate effect of retrospective adjustments to the net assets as at 31
December 2004 and the opening balance adjustments made as at 1 January
2005.
Capital
Retained and other Total
Effect of new policy profits reserves equity
(increase/(decrease)) HK$'000 HK$'000 HK$'000
-----------------------------------------
Prior period adjustments:
HKFRS 2
Share-based payment transactions
- 4,308 4,308
HKAS 28
Interest in associates 7,340 - 7,340
----------------------------------------
Total increase in equity before opening balance adjustment
7,340 4,308 11,648
---------------------------------------
Opening balance adjustments:
HKAS 32 & 39
Convertible bonds issued 7,658 133,027 140,685
-------------------------------------------
HKAS 39
Derivatives and hedging (86,544) 360,887 274,343
Asset classification and fair values
29,537 13,474 43,011
Impairment 182,471 - 182,471
Associate's opening balance adjustments
2,577 - 2,577
----------------------------------------
128,041 374,361 502,402
-----------------------------------------
135,699 507,388 643,087
----------------------------------------
Total effect at 1 January 2005
143,039 511,696 654,735
=========================================
(ii) Effect on opening balance of total equity at 1 January 2004 (as
adjusted)
The following table sets out the only adjustment that has been made to the
opening balances at 1 January 2004.
Capital
Retained and other Total
Effect of new policy profits reserve equity
(increase/(decrease)) HK$'000 HK$'000 HK$'000
----------------------------------------
HKAS 28
Interest in associates 4,754 - 4,754
----------------------------------------
Total effect at 1 January 2004
4,754 - 4,754
=======================================
(iii) Effect on profit after taxation for the six months ended
30 June 2005 (estimated) and 30 June 2004 (as adjusted)
In respect of the six month period ended 30 June 2005, the
following table provides estimates of the extent to which the profits for
that period are higher or lower than they would have been had the previous
policies still been applied in the interim period, where it is practicable
to make such estimates.
In respect of the six month period ended 30 June 2004, the
table discloses the adjustments that have been made to the profits as
previously reported for that period, in accordance with the transitional
provisions of the respective HKFRSs. As retrospective adjustments have not
been made for all changes in policies, the amounts shown for the six month
period ended 30 June 2004 may not be comparable to the amounts shown for
the current interim period.
Six months ended 30 June
2005 2004
Equity Equity
holders of holders of
Effect of new policy the parent the parent
(increase/(decrease)) HK$'000 HK$'000
HKFRS 2
Share-based payment transactions (1,123) -
HKFRS 3
Amortisation of goodwill 34,536 -
HKAS 28
Interest in associates 777 1,624
HKAS 32 & 39
Convertible bonds issued (16,938) -
HKAS 39
Derivatives and hedging (54,203) -
Asset classification and fair values 57,527 -
----------- ---------
3,324 -
----------- ---------
HKAS 40
Investment properties 1,517 -
---------- ----------
Total effect for the period 22,093 1,624
========= =========
In respect of the six months ended 30 June 2005 it is not
practicable to estimate the extent to which the profits for that period
are higher or lower than they would have been had the previous policy on
impairment of financial assets still been applied in the interim period.
(iv) Effect on net income recognised directly in equity for the
six months ended 30 June 2005 (estimated) and 30 June 2004 (as adjusted)
In respect of the six month period ended 30 June 2005, the
following table provides estimates of the extent to which the income or
expenses recognised directly in equity are higher or lower than they would
have been had the previous policies still been applied in the interim
period, where it is practicable to make such estimates.
In respect of the six month period ended 30 June 2004, the
table discloses the adjustments that have been made to the net income or
expenses as previously reported for that period, in accordance with the
transitional provisions of the respective HKFRSs. As retrospective
adjustments have not been made for all changes in policies, the amounts
shown for the six month period ended 30 June 2004 may not be comparable to
the amounts shown for the current interim period.
Six months ended 30 June
2005 2004
Equity Equity
holders of holders of
Effect of new policy the parent the parent
(increase/(decrease)) HK$'000 HK$'000
----------- ----------
HKAS 39
Available-for-sale securities (24,413) -
Hedging derivatives 9,792 -
------------ -----------
(14,621) -
HKAS 40
Investment properties
- effect on other property revaluation reserve
9,724 -
----------- ------------
Total effect for the period (4,897) -
=========== ============
(v) Effect on amounts recognised as capital transactions with
owners for the six months ended 30 June 2005 (estimated) and 30 June 2004
(as adjusted)
In respect of the six month period ended 30 June 2005, the
following table provides estimates of the extent to which the amounts
recorded as capital transactions with owners are higher or lower than they
would have been had the previous policies still been applied in the
interim period, where it is practicable to make such estimates.
In respect of the six month period ended 30 June 2004, the
table discloses the adjustments that have been made to the amounts
recorded as capital transactions with owners as previously reported for
that period, in accordance with the transitional provisions of the
respective HKFRSs. As retrospective adjustments have not been made for all
changes in policies, the amounts shown for the six month period ended 30
June 2004 may not be comparable to the amounts shown for the current
interim period.
Six months ended 30 June
2005 2004
Equity Equity
holders of holders of
Effect of new policy the parent the parent
(increase) HK$'000 HK$'000
HKFRS 2
Employee share option scheme
- effect recognised in share option reserve
2,470 1,850
--------- --------
Total effect for the period 2,470 1,850
========= =========
(5) Changes in accounting policies
(a) Share-based payment transactions (HKFRS 2, Share-based
payment)
(i) Employee share option scheme
In prior years, no amounts were recognised when employees (which term
includes directors) were granted share options over shares in the Company.
If the employees chose to exercise the options, the nominal amount of
share capital and share premium were credited only to the extent of the
option's exercise price receivable.
With effect from 1 January 2005, in order to comply with HKFRS 2, the
Group recognises the fair value of such share options as an expense in the
income statement. A corresponding increase is recognised in a share option
reserve within equity.
As the employees are required to meet vesting conditions before they
become entitled to the options, the Group recognises the fair value of the
options granted over the vesting period.
If an employee chooses to exercise options, the related share option
reserve is transferred to share capital and share premium, together with
the exercise price. If the options lapse unexercised the related share
option reserve is transferred directly to retained earnings.
"The new accounting policy has been applied retrospectively with
comparatives restated in accordance with HKFRS 2, except that the Group
has taken advantage of the transitional provisions set out in paragraph 53
of HKFRS 2 under which the new recognition and measurement policies have
not been applied to the following grants of options:
- all options granted to employees on or before 7 November 2002; and
- all options granted to employees after 7 November 2002 but which had
vested before 1 January 2005."
The amount charged to the income statement as a result of the change of
policy increased staff costs for the six months ended 30 June 2005 by $2,
470,000 (six months ended 30 June 2004: $1,850,000) with the corresponding
amounts credited to the share option reserve.
(ii) Employee Equity Linked Deferred Award
In prior years, when employees (which term includes directors) were
granted Equity Linked Deferred Award ("ELDA"), provision for the ELDA was
made and recognised immediately as expenses in the year in which the
awards were granted.
With effect from 1 January 2005, in order to comply with HKFRS 2, the fair
value of the amount payable is recognised as an expense in the income
statement over the relevant vesting period with a corresponding increase
in liabilities. The liability is remeasured at each balance sheet date
and at settlement date. Any changes in the fair value of the liability
are recognised in the income statement.
The new accounting policy has been applied retrospectively with
comparatives restated in accordance with HKFRS 2. As a result of the
change of policy, staff costs for the six months ended 30 June 2005 has
reduced by $1,152,000 (six months ended 30 June 2004: $1,850,000), with
the corresponding amounts debited to the liabilities.
(b) Investment properties (HKAS 40, Investment property)
In prior years, movements in the fair value of the Group's investment
properties were recognised directly in the investment properties
revaluation reserve except when, on a portfolio basis, the reserve was
insufficient to cover a deficit on the portfolio, or when a deficit
previously recognised in the income statement had reversed, or when an
individual investment property was disposed of. In these limited
circumstances movements in the fair value were recognised in the income
statement.
In addition, in prior years premises (including leasehold land) which the
Group held for an undetermined future purpose was accounted for under the
cost model in SSAP 17, Property, plant and equipment, whereby the premises
was carried at cost less accumulated depreciation and impairment.
"Upon adoption of HKAS 40 as from 1 January 2005:
- all changes in the fair value of investment properties are recognised
directly in the income statement in accordance with the fair value model
in HKAS 40; and
- land held for an undetermined future purpose is recognised as ""investment
property"" if the property is freehold or, if the property is leasehold,
the Group has chosen to recognise such land as investment property rather
than as land held under an operating lease. As such, movements in the fair
value of premises held for an undetermined future purpose are also now
recognised directly in the income statement as they arise in accordance
with the fair value model."
Despite these changes in accounting policy have to be adopted
retrospectively, no adjustment to the opening balances as at 1 January
2004 and 1 January 2005 are required because the net surplus on
revaluation of investment properties for the year ended 31 December 2003
and 31 December 2004 was taken to the income statement as a deficit/
surplus on revaluation in respect of the portfolio of investment
properties had previously been charged to the income statement.
As at 30 June 2005, in accordance with HKAS 40, premises held for an
undetermined future purpose is reclassified as investment property at its
fair value resulting to an increase in the Group's profit before taxation
for the six months ended 30 June 2005 by $1,517,000 and in other property
revaluation reserve (before deferred tax) by $8,174,000.
(c) Interest in associates (HKAS 28, Investments in associates)
In prior years, investments held by the Group with 20% or more of the
voting power of the investees that were acquired and held exclusively with
a view to subsequent disposal in the near future were classified as other
investments in securities and stated at fair value.
With effect from 1 January 2005, and in accordance with HKAS 28, such
investments are reclassified as an investment in associate and accounted
for in the consolidated financial statements under the equity method.
The new accounting policy has been applied retrospectively with
comparatives restated in accordance with HKAS 28. As a result of the
change of policy, the Group's profit before taxation for the six months
ended 30 June 2005 has increased by $914,000 (six months ended 30 June
2004: $1,980,000), with the corresponding amounts debited to interest in
associates.
(d) Financial instruments (HKAS 32, Financial instruments:
Disclosure and presentation and HKAS 39, Financial instruments:
Recognition and measurement)
(i) Convertible bonds issued
In prior years, convertible bonds issued were recorded as liability and
stated at cost.
With effect from 1 January 2005, and in accordance with HKAS 32 and HKAS
39, convertible notes issued are split into their liability and equity
components at initial recognition by recognising the liability component
at its fair value and attributing to the equity component the difference
between the proceeds from the issue and the fair value of the liability
component. The liability component is subsequently carried at amortised
cost. The equity component is recognised in the convertible bond -
equity component until the note is either converted (in which
case it is transferred to share premium) or the note is redeemed (in
which case it is released directly to retained profits).
(ii) Derivatives and hedging
In prior years, derivatives that were held for trading purposes were
accounted for at fair value and carried as assets when the fair value was
positive and as liabilities when the fair value was negative. Gains or
losses from changes in fair value were recognised in the income statement.
Derivatives held for non-trading purposes and qualified as hedges were
accounted for on an equivalent to the underlying assets, liabilities and
positions.
With effect from 1 January 2005 and in accordance with HKAS 39, all
derivatives are initially recognised at fair value and carried as assets
when the fair value is positive and as liabilities when the fair value is
negative. Subsequent changes in fair value are recognised depending on
the intended use of the derivatives as follows:
Derivatives designated as hedges will apply hedge accounting provided
certain qualifying criteria are met. There are two types of hedges:
- Fair value hedge, a hedge against the fair value of recognised assets or
liabilities. This will be accounted for with the changes in fair value of
the derivatives, together with the changes in fair value of the hedged
assets or liabilities that are attributable to the hedged risk, recorded
in the income statement.
- Cash flow hedge, a hedge against the cash flows attributable to
recognised assets or liabilities. This is accounted for with changes in
the fair value of the derivatives initially through equity, and
subsequently released into the income statement in line with the
recognition of income or expense of the assets or liabilities being
hedged.
Derivatives held for trading purposes and those that do not qualify for
hedge accounting, will be accounted for with changes in fair value
reported in the income statement.
Interest receipts and payments of interest rate derivatives of qualifying
hedges are accounted as interest income or interest expenses following the
underlying recognised assets or liabilities. Interest receipts and
payments of other interest rate derivatives are recognised as part of "
Other operating income" in the income statement.
(iii) Asset classification and fair value
Financial assets
In prior years, all financial assets were carried at cost or amortised
cost, net of provisions, except for securities held for trading purposes
were held at fair value. Gains and losses from change in fair value were
recognised in the income statement in respect of securities held for
trading.
In accordance with HKAS 39, financial assets are recognised based on the
following classifications.
Loans and receivables
Loans and receivables not intended for trading are carried at amortised
cost less impairment allowances.
Held-to-maturity
Non-derivative financial assets with fixed or determinable payments and
fixed maturities that the Group has the positive intention and ability to
hold to maturity are carried at amortised cost less impairment allowances.
At fair value through profit or loss
Non-derivative financial assets that have been acquired or incurred
principally for the purpose of selling or repurchasing in the near term
are classified as held for trading.
If a financial asset meets the criteria set out below, and is so
designated by management at inception, it is classified as financial
assets designated at fair value through profit or loss. The Group
designates financial instruments at fair value because the designation:
- eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise from measuring assets or
liabilities or recognising the gains and losses on them on different
bases; or
- relates to financial instruments containing one or more embedded
derivatives which significantly modify the cash flows resulting from the
financial instruments, and which would otherwise require separate
accounting.
Available-for-sale
Available-for-sale investments are those non-derivative financial assets
that are designated as available for sale or are not classified as loans
and receivables, held-to-maturity investments or financial assets at fair
value through profit or loss. Gains and losses from changes in fair value
are recognised in equity until the financial asset is derecognised or
impaired, at which time the cumulative gain or loss previously recognised
in equity will be transferred to the income statement.
Financial assets except for those classified at fair value are initially
recognised at fair value plus transaction costs and carried at amortised
costs using the effective interest method. Financial assets classified at
fair value are recognised initially at fair value and transaction costs
taken directly to the income statement. The changes in fair value are
recognised in the income statement as they arise.
Financial liabilities
In prior years, all financial liabilities except trading securities short
positions were carried at cost or amortised cost. Trading securities
short positions were carried at fair value and any gains and losses from
changes in fair value were recognised in the income statement.
In accordance with HKAS 39, the Group's financial liabilities are
recognised based on the following classifications:
Financial liabilities designated as at fair value through profit or loss
Financial liabilities that are held for trading, including trading
securities short positions, are carried at fair value. Gains and losses
from change in fair value are recognised in the income statement as they
arise.
Financial liabilities designated as at fair value through profit or loss,
including own debt securities in issue, are designated as such at
inception and the classification criteria are set out above under "
Financial assets - At fair value through profit or loss". Gains and
losses from the changes in fair value are recognised in the income
statement as they arise.
Deposits, debt securities in issue and other liabilities
Deposits and debt securities in issue, other than those designated as
trading liabilities or at fair value, and other financial liabilities, are
carried at amortised cost.
Interest income and expense
Interest income and interest expense of trading assets and liabilities and
financial assets and liabilities designated as at fair value are
recognised as part of "Other operating income", instead of "Interest
income" and "Interest expense" as for those arising from other financial
assets and liabilities.
(iv) Impairment
Loans and receivables
In prior years, provisions for bad and doubtful debts were classified into
specific and general provisions. Specific provisions on loans were
assessed individually or, for individually insignificant loans, on a
portfolio basis. General provisions were assessed on loans which were not
identified as impaired individually. When a loan was considered doubtful,
interest was suspended and ceased to accrue.
In accordance with HKAS 39, impairment allowances are made on a loan when
objective evidence of impairment loss has been incurred. Impairment loss
is assessed either individually for individually significant loans, or
collectively for loan portfolios with similar credit risk characteristics.
Impairment loss of an individually assessed loan is measured as the
difference between the loan's carrying value and the present value of
estimated future cash flows discounted at the loan's original effective
interest rate.
For the purpose of collective assessment of impairment, individually
insignificant loans and loans which have been assessed individually and
determined to have no objective evidence of impairment are grouped on the
basis of similar credit risk characteristics and collectively assessed
based on historical loss experience of each type of loans and management
judgement of the current economic and credit environment.
Interest will continue to be recognised on impaired financial assets using
the interest rate for discounting future cash flows for the purpose of
measuring the related impairment loss. Subsequent unwinding of discount
allowance is recognised as interest income.
Other financial assets
In prior years, financial assets, other than loans and receivables, were
reviewed on each balance sheet date to determine whether there was any
indication of impairment. Provisions were made when carrying amounts were
not expected to be fully recovered and recognised as an expense in the
income statement.
In accordance with HKAS 39, held-to-maturity investments and available-
for-sale financial assets are assessed for objective evidence of
impairment at each balance sheet date. Impairment loss for held-to-
maturity investments is recognised in the income statement. When an
available-for-sale financial asset is determined to be impaired, the
cumulative loss previously recognised in equity will be transferred to the
income statement.
(v) Opening balance adjustments
The new accounting policies have been applied prospectively with effect
from 1 January 2005, and as in accordance with HKAS 39, no restatement of
comparative amounts has been made. Adjustments to the opening balances of
the retained profits and reserves as at 1 January 2005 are shown in note
4(i).
(e) Amortisation of positive goodwill (HKFRS 3, Business combinations
and HKAS 36, Impairment of assets)
In prior periods, positive goodwill which arose on or after 1 January 2001
was amortised on a straight line basis over its useful life and was
subject to impairment testing when there were indications of impairment.
With effect from 1 January 2005, in accordance with HKFRS 3 and HKAS 36,
the Group no longer amortises positive goodwill. Such goodwill is tested
annually for impairment, including in the year of its initial recognition,
as well as when there are indications of impairment. Impairment losses are
recognised when the carrying amount of the cash generating unit to which
the goodwill has been allocated exceeds its recoverable amount.
Also with effect from 1 January 2005 and in accordance with HKFRS 3, if
the fair value of the net assets acquired in a business combination
exceeds the consideration paid (i.e. an amount arises which would have
been known as negative goodwill under the previous accounting policy), the
excess is recognised immediately in the income statement as it arises.
The new policy in respect of positive goodwill has been applied
prospectively in accordance with the transitional arrangements under HKFRS
3. As a result, comparative amounts have not been restated, the cumulative
amount of amortisation as at 1 January 2005 has been offset against the
cost of the goodwill and no amortisation charge for goodwill has been
recognised in the income statement for the six months ended 30 June 2005.
This has increased the Group's profit before taxation for the six months
ended 30 June 2005 by $34,536,000.
(f) Minority interests (HKAS 1, Presentation of financial statements
and HKAS 27, Consolidated and separate financial statements)
In prior years, minority interests at the balance sheet date were
presented in the consolidated balance sheet separately from liabilities
and as deduction from net assets. Minority interests in the results of the
Group for the period were also separately presented in the income
statement as a deduction before arriving at the profit attributable to
shareholders.
With effect from 1 January 2005, in order to comply with HKAS 1 and HKAS
27, minority interests at the balance sheet date are presented in the
consolidated balance sheet within equity, separately from the equity
attributable to the equity holders of the parent, and minority interests
in the results of the Group for the period are presented on the face of
the consolidated income statement as an allocation of the total profit or
loss for the period between the minority interests and the equity holders
of the parent.
The presentation of minority interests in the consolidated balance sheet,
income statement and statement of changes in equity for the comparative
period has been restated accordingly.
(6) The provision for Hong Kong Profits Tax is calculated at 17.5% of
the estimated assessable profits for the period. Taxation for branches
and subsidiaries outside Hong Kong is charged at the appropriate current
rates of taxation ruling in the relevant countries.
(7) The calculation of basic earnings per share for the six months
ended 30 June 2005 is based on profit attributable to equity holders of
parent of $723,176,000 (six months ended 30 June 2004 restated: $424,762,
000) and the weighted average number of ordinary shares of 3,196,526,236
(2004: 3,190,812,579).
(8) The calculation of diluted earnings per share for the six months
ended 30 June 2005 is based on adjusted profit attributable to equity
holders of the parent of $741,867,000 (six months ended 30 June 2004
restated: $426,505,000) and the weighted average number of ordinary shares
of 3,523,868,310 (2004: 3,520,548,969), after adjusting for the effects of
all dilutive potential ordinary shares.
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