Six months ended

FINANCIAL AND BUSINESS HIGHLIGHTS
30th June, 2013
Six months ended
30th June, 2012
During the period under review, the Group's core hotel business continued to achieve steady performance, but as the interim results attained last year included profit contributions from the sale of houses in Regalia Bay as well as from the realisation of hedge reserve, which was one-off in nature, the profit recorded for the current period was comparatively lower.

Ø The five initial Regal Hotels in Hong Kong owned by Regal REIT, a listed subsidiary of the Company, are leased to the Group for hotel operations, and therefore, while these hotels assets are classified by Regal REIT as investment properties and stated at market valuations in its financial statements without depreciation charges, they are instead treated by the Group as fixed assets and subject to depreciation charges in accordance with currently applicable accounting standards.

Ø Total depreciation charges of HK$193.1 million were provided on the Group's hotel properties which, though not having any impact on cash flow, have adversely affected the Group's overall profit for the period.

Ø Despite some softer periods and a relatively more competitive environment in the hotel market overall, the five initial Regal Hotels in Hong Kong managed to maintain a combined average occupancy of about 87.3% during the period under review, approximately the same level as that of the prior year comparative period, while the combined average room rate gained by about 0.9%. The aggregate net property income for the half year amounted to HK$406.6 million, which is well above the prorated base rent of HK367.0 million payable to Regal REIT.

Ø Agreements have been entered into for the sale to Cosmopolitan International Holdings Limited of the effective interests held by the Group in a development land parcel in Tianjin City and in the property project under development in Chengdu City, Sichuan Province, China, respectively, based on independent professional valuations.

Ø To rationalise the holding of their separate equity interests in Cosmopolitan, the Group and the Paliburg group have agreed to sell all their holdings in the issued shares and convertible bonds of Cosmopolitan to P&R Holdings Limited, a joint venture equally owned by Paliburg Holdings Limited and the Group, so that they will be consolidated into one strategic block held through the jointly controlled company.

Ø The proposed acquisitions by Regal REIT of the two hotels under development by P&R Holdings will increase the number of hotels owned by Regal REIT in Hong Kong to eight and its total hotel room inventory from 3,984 by approximately 14.7% to a total of 4,570 guestrooms and suites.


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