27 Jul
2000

Announcement of Half Year 2000 Financial Results



Somerset Holdings Limited
 


The Board of Directors of Somerset Holdings Limited is pleased to announce the following:

I. UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2000

 
      COMPANY   GROUP  
      6 months ended   6 months ended  
      2000 1999   2000 1999  
      S$'000 S$'000   S$'000 S$'000  
          %+/-     %+/-
 
1. (a) Turnover 17,350 10,230 +70 88,734 71,305 +24
 
  (b) Investment income
- Dividend from subsidiary company
9,081 2,126 +327 - - +24
 
  (c) Other income including interest income 11,661 11,393 +2 7,348 6,086 +21
 
 
2. (a) Operating profit/(loss) before tax,minority interests ('MI'),interest on borrowings, depreciation and amortisation and foreign exchange gain/(loss) 16,759 9,575 +75 41,228 16,111 +156
 
  (b) Interest on borrowings (4,006) (3,654) +10 (20,360) (10,722) +90
 
  (c) Depreciation and amortisation - -   (10,806) (8,620) +25
 
  (d) Foreign exchange gain/(loss) 2,484 2,514 -1 157 3,592 -96
 
  (e) Profit/(loss) before tax 15,237 8,435 +81 10,219 361 nm
 
  (f) Share of profit/(loss) of associated companies - -   2,405 2,957 -19
 
    Profit/(loss) before taxation and minority interests 15,237 8,435 +81 12,624 3,318 +280
 
  (f) Taxation (3,282) (1,752) +87 (7,068) (3,563) +98
 
  (h) (i) Profit/(loss) after tax but before MI and EI 11,955 6,683 +79 5,556 (245) nm
 
    (ii)Minority interests - -   (571) 1,712 -133
 
  (i) Profit/(loss) attributable to Members of the Company 11,955 6,683 +79 4,985 1,467 +240
 
  (j) Extraordinary item ('EI') 694 - nm 6,931 (18,600) nm
 
  (k) Profit/(loss) after tax and EI attributable to Members of the Company 12,649 6,683 +89 11,916 (17,133) nm
 
 
     
GROUP
     
30 JUNE
      2000 1999
3. (a) Earnings in cents per ordinary share based on profit attributable to Members of the Company    
    (i) Based on existing issued share capital #    
    - Before Extraordinary Items 0.39 0.31
    - After Extraordinary Items 0.93 (3.62)
    (ii) On a fully diluted basis *    
    - Before Extraordinary Items 0.39 0.31
    - After Extraordinary Items 0.93 (3.62)
 
  (b) Net tangible asset backing per ordinary share (cents) @ 75 95
 
   
# Net earnings per share calculation is based on share capital of 1,286,919,775 shares of S$0.50 each for 30 June 2000 (30 June 1999: 473,899,763 shares taking into consideration the issue of 2,833,000 ordinary shares upon exercise of share options).
   
* As the exercise prices of the warrants and options are higher than the market price, it is therefore ignored for the purpose of calculating fully diluted earnings per share for both periods.
   
@ Net tangible asset per share calculation is based on 1,286,919,775 shares in issue at 30 June 2000 (30 June 1999: 475,041,346 shares).
 
4. (a)
Taxation is determined on the basis of tax effect accounting using the liability method and is applied to all significant timing differences. It does not contain any adjustment for under or overprovision of tax in respect of prior year.
  (b)
No pre-acquisition profits are included in the results of the Group for the six months ended 30 June 2000.
  (c)
Profits on the sale of properties for the six months ended 30 June 2000 amounted to S$7 million.
 
5.


COMPANY'S PERFORMANCE

Turnover of the Company rose by 70% to reach S$17.3 million and its pre-tax profit increased by 81% compared to the corresponding interim period in 1999. This growth came from increased interest income earned on loans to its subsidiaries and higher dividend income from its subsidiaries. Interest expense increased by 10% due to higher interest rates.

The extraordinary gain at the Company's level relates to the capital gain arising from the divestment of subsidiaries and associated company.

GROUP'S PERFORMANCE

Group's turnover improved by 24% as a result of the contribution from the properties acquired in the second half of last year from Pidemco Land Limited under the Asset Swap, acquisition of balance 60% interest in Junction 8 and the commencement of operations at Somerset Grand Shanghai in Shanghai and Somerset Grand Metropolis in New Zealand.

The Group's operating profit increased by S$25.1 million this year as compared to that in the first half of 1999. Full half-year contribution from the Singapore based properties under the Asset Swap and Junction 8, improved performance of Somerset Compass and Somerset Liang Court, and the continued contribution from the sale of residential projects in London and Sydney were the main drivers for the improved performance. The improved performance was despite start-up losses of Somerset Grand Shanghai and Somerset Grand Metropolis, Auckland. Consequently the Group achieved a pre-tax profit of S$12.6 million as compared to a pre-tax profit of S$3.3 million in the first half of 1999. This is despite an increase in interest, and depreciation and amortisation cost by S$9.6 million and S$2.2 million respectively.

The Group's interest expense increased by S$9.6 million due mainly to increased borrowings and borrowings on completed properties, where interest expenses were previously capitalised but were expensed to the profit and loss accounts when such properties commenced operations.

The Group's depreciation and amortisation increased by S$2.2 million due mainly to the commencement of operations of Somerset Grand Shanghai and Masters Golf Course and the acceleration of depreciation rates to conform with those of the holding company.

The Group's share of associated companies' profits decreased by S$0.6 million as Junction 8 is no longer contributing as an associated company since it became a wholly- owned subsidiary in December 1999. There was also a provision of S$2 million written back in the first half of last year for the development property held by an associated company. The decrease in associated companies' profits was partially offset by the increase in profits recognised by an associated company from completed sale of units in a residential project in London.

The Group's overall tax rate remained high because of non-deductible interest expenses (related to the funding of investments that are not yet revenue-generating), non-deductible depreciation expense (on leasehold land and building), losses incurred by some subsidiaries and associated companies which cannot be offset against profits earned by other companies in the Group.

The Group's extraordinary gain of S$6.9 million relates mainly to the capital gain arising from the sale of an investment property in London.

In the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen since the end of the half year to the date of this report which would affect substantially the results of the Group or of the Company.
 
6.


CURRENT YEAR'S PROSPECTS

The Group's hospitality and retail property operations are expected to benefit from the continuing strength of the Singapore economy and general recovery in the region. Further losses are to be anticipated for the second half of the year in Somerset Grand Metropolis, Auckland and Somerset Grand Shanghai, although occupancy has been steadily improving.

Barring unforeseen circumstances, second half performance should continue to be profitable, but directors do not expect the second half profits to be as high as that of the first half.

The proposed merger between The Ascott Limited and Somerset Holdings Limited, which was announced on 12 July 2000, is subject to regulatory and shareholders' approval. Assuming that the merger takes place before the end of the year, Somerset Holdings Limited will be delisted and become a wholly-owned subsidiary of The Ascott Limited. Accordingly the full year results of the Group will be consolidated and reported under The Ascott Limited.
 
7.


DIVIDENDS

No interim dividend for the period ended 30 June 2000 has been recommended.
 
8.


SHARE CAPITAL

Since the last financial year ended 31 December 1999, there has been no increase in the issued and paid-up capital of the Company.

As at 30 June 2000, there were 89,075,769 Warrants outstanding, each Warrant carrying the right to subscribe for one Share, exercisable on or before 31 August 2000.

Under the 1999 Scheme, options for 11,498,000 unissued shares of S$0.50 each were granted to and accepted by 183 executives of the Group during the period at the subscription price of S$0.60. The options may be exercised at any time between 18 February 2001 and 17 February 2010.

No shares of the Company were issued during the period under review by virtue of the exercise of Options to take up unissued shares of the Company. As at 30 June 2000, there were 11,162,000 unissued ordinary shares of S$0.50 each of the Company under Option under the aforesaid Scheme. Details of the 1999 Scheme were set out in the Directors' Report for the year ended 31 December 1999.
 
9. GROUP BORROWINGS
 
    As at As at
    30.06.00 31.12.99
    S$'000 S$'000
  Repayable in one year or less or on demand    
  - secured 399,405 361,817
  - unsecured 139,841 174,193
 
  Repayable after one year    
  - secured 407,540 394,596
  - unsecured 980 945
    947,766 931,551
 
BY ORDER OF THE BOARD
Chia Lee Meng
Secretary
Singapore
27 July 2000