Hwa Hong : Full Year Results Financial Statement and Related Announcement

UNAUDITED RESULTS FOR FULL YEAR ENDED 31 DECEMBER 2016

PART I - INFORMATION REQUIRED FOR ANNOUNCEMENTS OF QUARTERLY (Q1, Q2 & Q3), HALF-YEAR AND FULL YEAR RESULTS 1(a) An income statement and statement of comprehensive income, or a statement of comprehensive income, for the group, together with a comparative statement for the corresponding period of the immediately preceding financial year Group

Note	Fourth Quarter Ended 31.12.2016 31.12.2015 $'000 $'000		+/(-) %	Financial Year Ended 31.12.2016 31.12.2015 $'000 $'000		+/(-) %
Revenue	2,865 3,250		(11.8) 11,202 13,077			(14.3)
Cost of sales	1	(853) (1,598)		(46.6) (4,209) (4,543)			(7.4)
Gross profit	2,012	1,652	21.8	6,993	8,534	(18.1)
Other income	2	463	2,490	(81.4)	10,867	5,809	87.1
General and administrative costs	3	(1,185)	(674)	75.8	(5,513)	(6,559)	(15.9)
Other operating costs	4	(2,902)	(342)	n.m.	(5,020)	(2,016)	n.m.
Finance costs Share of after tax results of associates	5	(356)	(222)	60.4	(1,366)	(816)	67.4
and joint ventures	6	171 514		(66.7) 830 1,677			(50.5)
(Loss)/profit before taxation	(1,797) 3,418		n.m. 6,791 6,629			2.4
Taxation	7	680 536		26.9 (242) 152			n.m.
Net (loss)/profit after taxation	(1,117) 3,954		n.m. 6,549 6,781			(3.4)

Attributable to: Owners of the Company	(1,117)	3,954	n.m.	6,549	6,781	(3.4)
(Loss)/profit for the year attributable to owners of the Company	(1,117)	3,954	6,549	6,781

n.m. denotes not meaningful.

(Loss)/profit before taxation included the following:

Group

Fourth Quarter Ended Financial Year Ended

31.12.2016 31.12.2015 $'000 $'000		+/(-) %	31.12.2016 $'000	31.12.2015 $'000	+/(-) %
Investment income	258	450	(42.7)	1,151	1,480	(22.2)
Interest income (included in revenue)	338	323	4.6	1,392	837	66.3
Interest on borrowings Depreciation on property, plant and equipment and investment properties	(356) (494)	(222) (422)	60.4 17.1	(1,366) (2,232)	(816) (2,337)	67.4 (4.5)
Allowance written back/(made) for doubtful debts due

from an associate

7 - n.m. (349) - n.m.

Allowance made for doubtful debts due from other receivables (3) - n.m. (20) - n.m. Allowance written-back for impairment loss on

• investment properties 605 355 70.4 605 355 70.4 Allowance made for impairment loss on

  - quoted current investments (136) (342) (60.2) (1,881) (2,016) (6.7)

• unquoted non-current investments (2,770) - n.m. (2,770) - n.m.

Overprovision of taxation in prior years 567 640 (11.4) 567 640 (11.4)

Foreign exchange (loss)/gain (106) 766 n.m. 6,095 (851) n.m. Gain on disposal of an associated company 2 - n.m. 2 - n.m. Gain on disposal of investment securities

- included in revenue 272 402 (32.3) 1,132 2,082 (45.6)

Loss on disposal of property, plant and equipment
- included in general and adminstrative costs	-	-	-	-	(4)	n.m.
Gain on disposal of investment properties
- included in other income	2	2,133	n.m.	2,182	4,785	(54.4)

Notes to Group Profit and Loss Statement:

1. Cost of sales decreased by $0.3 million year-on-year ("yoy") and $0.7 million qoq mainly due a lower property tax expense in the Paya Lebar property tax arising from an amicable settlement with the Comptroller of Income tax ("CPT"). The reduction is offset by an increase in the UK business rates payable of $0.6 million yoy and $0.1 million qoq on 20 Midtown (formerly known as Eagle House) property as the property was undergoing asset enhancement work and not tenanted. In the past, the tenant was liable for the UK business rates payable.

2.	Other income comprised the following:	4Q2016	4Q2015	+/(-)	FY2016	FY2015	+/(-)
$'000	$'000	%	$'000	$'000	%
Interest income	-	20	(100.0)	20	74	(73.0)
Dividend income	-	(170)	n.m.	-	128	n.m.
Gain on disposal of investment properties	2	2,133	n.m.	2,182	4,785	(54.4)
Refund of property tax	-	-	n.m.	957	-	n.m.
Allowance written back for impairment loss on
investment properties	605	355	70.4	605	355	70.4
Other investment income	(116)	19	n.m.	700	130	n.m.
Foreign exchange gain (net)	(106)	-	n.m.	6,095	-	n.m.

Sundry 78 133 (41.4) 308 337 (8.6) 463 2,490 10,867 5,809

The weakening of the Sterling Pound against Singapore Dollars had resulted in unrealised translation gain mainly attributable to our Sterling Pound loans. Sterling Pound has declined from $2.1159 as at 31 December 2015 to $1.80876 as at 31 December 2016.

1. General and administrative costs decreased by $1.0 million yoy and increased by $0.5 million qoq mainly due to:

2. lower bonus expense of $0.2 million yoy and qoq;

3. prior year foreign exchange loss of $0.9 million and prior quarter foreign exchange gain of $0.8 million were classified within general and administrative costs. This unrealised foreign exchange loss/gain in FY2015 and 4Q2015 arose mainly from the translation of bank loans denominated in Sterling Pounds.

4. Other operating costs comprised the following:

   Allowance written-back/(made) for impairment loss on

   4Q2016 4Q2015 +/(-) FY2016 FY2015 +/(-)

   $'000 $'000 % $'000 $'000 %

   - current investment securities (136) (342) (60.2) (1,881) (2,016) (6.7)

   • non-current investment securities (2,770) - n.m. (2,770) - n.m. Allowance made for doubtful debts

   • due from an associate 7 - n.m. (349) - n.m.

   • due from other receivables (3) - n.m. (20) - n.m. (2,902) (342) (5,020) (2,016)

   Allowance for impairment loss on current and non-current investment securities relate to investment securities that suffered a significant or prolonged decline in the market value below the acquisition cost of those investments.

   As announced by the Group on 16 January 2017, relating to profit guidance for the fourth quarter of the financial year ended 31 December 2016, the impairment loss relating to certain financial assets held by the Group refers mainly to the impairment of $2.8 million on the fair

   value changes in non-current investment securities. Had the $2.8 million impairment not been made, the fourth quarter would have recorded a profit of approximately $1.7 million.

   The non-current investment securities relate to an investment in a 6 storey prime freehold residential building located in London, United Kingdom. The charge relates primarily to carrying costs incurred due to unexpected delays in obtaining planning permission for the redevelopment of the property and also includes the effect of unrealised foreign exchange losses. Following receipt of planning approval, the investment security is accounted for on a fair value basis vis-à-vis the cost method prior to obtaining planning approval.

5. Finance costs increased by $0.6 million yoy and $0.1 million qoq mainly due to draw down of interest bearing loan facilities during the period.

6. Share of results of associates and joint ventures decreased by $0.8 million yoy and $0.3 qoq mainly due to share of loss of $1.1 million yoy and $0.4 million qoq from a newly acquired associated company, Clan Kilmuir (Jersey) Limited in 2Q2016. $0.5 million yoy and $0.2 million qoq share of loss in Clan Kilmuir resulted from the need to depreciate the investment property arising from realignment to Group accounting policy. The share of loss yoy was offset by higher contributions from associated company, Scotts Spazio Pte Ltd and from two joint ventures, Neo Pav E Investments LLP and Neo Bankside Retail LLP of $0.3 million yoy and

   $0.1 million qoq.

7. The effective tax rate for FY2016 was 3.6%. The taxation charge for FY2015, 4Q2016 and 4Q2015 were credit balance mainly due to reversal of tax no longer required to be provided. The taxation charge for the Group for FY2016 was lower than that arrived at by applying the statutory tax rate of 17% to the profit before taxation mainly due to certain gains being capital in nature, absence of tax effect on share of results of associates and joint ventures, offset by certain non-deductible expenses and losses incurred by foreign subsidiaries which are not available for set off against profits of local subsidiaries.