(incorporated in Hong Kong under the Companies Ordinance)



The Board of Directors of China Travel International Investment Hong Kong Limited (the "Company") is pleased to announce that the audited consolidated results of the Company and its subsidiaries (the "Group") for the year ended 31 December 1998 are as follows:

                                           Notes         1998        1997
                                                      HK$'000     HK$'000

Turnover                                            1,331,338   2,107,377
                                                    =========    ========
Operating profit from continuing
  operations                                          328,984     404,955
Exceptional items                           (1)      (532,356)     96,152
Share of results of associated
  companies                                 (2)      (134,971)     44,529
Share of results of jointly
  controlled entities                                  (1,044)       (656)
                                                    ---------    --------
(Loss)profit before taxation                         (339,387)    544,980
Taxation                                    (3)         5,299     (19,614)
                                                    ---------    --------
(Loss)profit before
   minority interests                                (334,088)    525,366
Minority interests                                    (77,136)    (26,289)
                                                    ---------    --------
Net (loss)profit attributable
   to shareholders                                   (411,224)    499,077
Dividends                                                   -    (105,332)
                                                    ---------    --------
Retained (loss)profit for the year                   (411,224)    393,745
                                                    =========    ========
(Loss)earnings per share (cents)            (4)
  - Basic                                              (12.65)      17.01
                                                    =========    ========
  - Diluted                                               N/A       15.30
                                                    =========    ========
Dividend per share (cents)
  - Interim                                                 -        1.80
                                                    =========    ========
  - Final                                                   -        1.50
                                                    =========    ========


(1) Exceptional items

                                                      1998          1997
                                                   HK$'000       HK$'000

Net (loss) on deemed disposal
   of associated companies                            (102)      267,992
Provision for doubtful debts and
   bad debts written off (Note)                    (69,420)     (102,740)
Provision for diminution in value
   of other investments                            (11,069)      (69,100)
Revaluation deficits of hotel properties          (451,048)            -
Loss on disposal of a subsidiary                      (717)            -
                                                  --------      --------
                                                  (532,356)       96,152
                                                  ========      ========

Note: The balance includes an approximately HK$98 million write down of secured loan receivable to the net realizable value of the pledged securities and a write back of doubtful debt provided in 1997.

(2) Share of results of associated companies

                                                           1998      1997
                                                        HK$'000   HK$'000

Share of operating profits of associated companies       72,711    44,529
Share of exceptional losses of associated companies    (207,682)        -
                                                       --------    ------
                                                       (134,971)   44,529
                                                       ========    ======

Details of the share of exceptional items of associated companies are as follows:

                                                          1998       1997
                                                       HK$'000    HK$'000

Citybus Group Limited
  Loss on cancellation of a property agreement         (24,999)         -
  Write off of deferred expenditure                     (5,604)         -
Hing Kong Holdings Limited
  Loss on partial realisation of interest in a
    property development joint venture                 (24,070)         -
  Provision for diminution in value of
    property projects                                  (34,715)         -
  Provision for permanent diminution in value
    of long term listed investments in Hong Kong      (189,294)         -
                                                      --------    -------
                                                      (207,682)         -
                                                      ========    =======

(3) Taxation

                                                     1998         1997
                                                  HK$'000      HK$'000

Company and subsidiaries
  Hong Kong profits tax                             8,521       20,799
  Overseas taxation                               (13,102)       9,250
  Deferred taxation                                  (763)         427
Associated companies
  Hong Kong profits tax                                38      (15,284)
  Overseas taxation                                     0        4,412
Jointly controlled entities
  Overseas taxation                                     7           10
                                                  -------      -------
                                                   (5,299)      19,614
                                                  =======      =======

Hong Kong profits tax is calculated at the rate of 16% (1997: 16.5%) on the estimated assessable profits for the year. Overseas taxation has been provided for at the applicable rates on the estimated assessable profits of the overseas subsidiaries, associated companies and jointly controlled entities.

Deferred taxation represents the tax effect of timing differences calculated under the liability method.

(4) (Loss) earnings per share

The calculation of the basic and diluted (loss) earnings per share for the year is based on the following data:

                                                      1998            1997
                                                   HK$'000         HK$'000

(Loss) profit attributable to shareholders        (411,224)        499,077
Effect of dilutive potential ordinary shares
  Guaranteed Convertible bonds                                      15,585
  Convertible notes                                                      -
Profit for the year for the purposes
   of diluted earnings per share                                   514,662
Number of shares
  Weighted average number of ordinary shares
    for the purposes of basic
    (loss) earnings per share                3,251,110,698   2,933,714,408
Effect of dilutive potential ordinary shares:
  Warrants                                                     180,730,121
  Guaranteed Convertible bonds                                 249,209,136
  Convertible Notes                                                      0
  Share option scheme                                                    0
Weighted average number of ordinary shares for
  the purposes of diluted earnings per share                 3,363,653,665

No diluted loss per share for the current period has been presented as the exercise of the Company's outstanding share options and convertible notes would not have any dilutive effect.

The comparative figure of diluted earnings per share has been adjusted in accordance with the revised HKSSAP 5 to conform with current presentation.


The Board of Directors does not recommend the payment of a final dividend for the year ended 31 December 1998 (1997: HK$1.50 cents per share)


The Group recorded unsatisfactory results for 1998. The consolidated operating profit before exceptional items was HK$329 million, representing a 18% decrease as compared with 1997. Due to a significant exceptional loss and provision taken against the value of the Group's hotel properties as well as the associated companies, Hing Kong Holdings Limited and Citybus Group Limited, the Group recorded a net loss attributable to shareholders of HK$411 million (as compared with a net profit attributable to shareholders of HK$499 million in 1997). The net assets value of the Group in 1998 was HK$6.02 billion as compared with HK$7.26 billion in 1997.

The economy continued to deteriorate in 1998 following the aftermath of Asian financial turmoil in 1997. Most of the Asian economies suffered from recession and drastic devaluation in their respective currencies. Although Hong Kong was immune from this currency volatility, it could not escape facing up to the most difficult challenges of the decade.

A cutback on spending in the surrounding regions and a relatively strong Hong Kong dollar dampened the demands for both tourism and retail businesses in Hong Kong. This had an adverse impact on the Group's existing core businesses, and thus undermined its performance. Despite the decline in our overall performance, we are encouraged by a continued growth of certain of our businesses due mainly to an improvement in our operational management practices and stringent cost control efforts. The Group is encouraged by the outstanding performance of its Tour Operation and Leisure Businesses. The theme parks recorded more than 30% increase in operating profits and HK & Macau Tour business achieved its best record ever.

The Group has faced up to the difficulties and challenges brought about by the economic downturn in the past year with determination and resilience. The Group's management took a number of steps examining and improving its existing core businesses in order to enhance its overall efficiency and competitiveness as well as exploring new opportunities. On the other hand, in order to strengthen our financial status, the Group embarked on new investment opportunities in both infrastructure and transportation, which would secure a steady stream of income flow, provide reliable income sources and attain a higher return on investment.

The Group will continue to adopt a prudent strategy facing the recovering economy in the coming year. If the Hong Kong Government finalizes its plan to co-operate with the Walt Disney Company in relation to the construction of a major theme park on reclaimed land at North Lantau Island this year. This should boost the tourism and leisure businesses of the Group, stimulate local consumption as well as attract more tourists from the mainland and the Asian countries in future. Improving management practices, strengthening risk control, streamlining organizational structure, tightening operational costs and expanding new customers' base will be the Group's strategies for its existing businesses. Attractive returns, stable income streams and low risk profile, on the other hand, are the top priorities for determining new investment projects. The Group foresees that the above measures coupled with an upgrade on our management practices as well as the diversification in our infrastructure projects will improve our performance in 1999.


Year 2000 problem arises from computer systems and software programs storing date information based on two-digit year and are unable to process four-digit year dates for the year 2000 and beyond which causes disruptions in the operational systems. The Group commenced rectification work on year 2000 problem since the interim of 1998 to ensure that business operations of the Group will not be disrupted in the year 2000 and beyond.

The Group's year 2000 problem mainly stems from the application software of its subsidiaries. If the year 2000 problem cannot be resolved by then, this may lead to a loss of customer information, improper processing of accounting activities, disruption in transportation logistics and halting of hotel cashier system. The Group has initiated a comprehensive program and requested the Group's subsidiaries to identify its operations which are likely to be year 2000 non-compliant and to take appropriate measures to tackle the problems, including demanding all application software vendors to upgrade their respective computer hardware, rectifying and replacing existing application software. China Travel Hi-Tech Computer Hong Kong Limited has been appointed to monitor and to resolve part of the process. Moreover, the vendors were asked to certify that all vendor-supplied software is Y2000 compliant. The rectification work progressed satisfactorily and over 85% of the work has been completed up to the date of this report. The Group aims to complete the year 2000 compliance program by October 1999.

The total costs for the project are estimated to be approximately HK$3.30 million and HK$1.39 million, representing 42.43% of the total costs, were incurred up to 31 December, 1998 mainly to renew the hardware and software. Such expenses were capitalized when incurred and do not require approval from the Board of Directors. As at 31 December, 1998, there is no commitment authorized by the Directors and contracted or not contracted for in respect of year 2000 compliance.


During the year, the 4.25% Guaranteed Convertible Bonds due 1998 issued by a wholly owned subsidiary of the Company, except for those previously converted, were redeemed. Besides that, no shares of the Company, or the 6% Convertible Notes due on 2001 issued by the Company were purchased, sold or redeemed by the Company or any of its subsidiaries.

By Order of the Board
Zhu Yuening

Hong Kong, 19 May 1999

Source: China Travel International Investment Hong Kong Limited
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