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2001A N N U A L R E P O R T
CAFÉ DE CORAL HOLDINGS LIMITED(Incorporated in Bermuda with limited liability)
CAFÉ DE CORAL HOLDINGS LIMITED(Incorporated in Bermuda with limited liability)
CA
FÉ DE C
ORA
L HO
LDIN
GS LIM
ITEDA
NN
UA
L RE
PO
RT
20
01
1
CA
FE DE C
ORA
L HO
LDIN
GS LIM
ITED‘
Contents
2 Directors and Corporate Information
4 Financial Highlights and Calendar
6 Chairman’s Statement
16 Managing Director’s Operational Review
25 Biography of Directors and Senior Management
28 Report of the Directors
37 Consolidated Income Statement
38 Consolidated Statement of Recognised Gains and Losses
39 Balance Sheets
41 Consolidated Cash Flow Statement
43 Notes to the Financial Statements
66 Principal Subsidiaries
70 Report of the Auditors
71 Five Year Summary
Directors and Corporate Information (cont’d)
2
CA
FE DE C
ORA
L HO
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Board of Directors Mr. Chan Yue Kwong, Michael (Chairman)
Mr. Lo Hoi Kwong, Sunny (Managing Director)
Mr. Lo Tang Seong, Victor
Mr. Lo Hoi Chun
Ms. Lo Pik Ling, Anita
Mr. Lo Tak Shing, Peter
Ms. Leung Sau Lai, Kathy
Mr. Hui Tung Wah, Samuel
Mr. Choi Ngai Min, Michael
Mr. Li Kwok Sing, Aubrey
Company Secretaries Ms. Li Oi Chun, Helen
Mr. To Hon Fai, Alfred
Registered Office Cedar House
41 Cedar Avenue
Hamilton HM12
Bermuda
Head Office 10th Floor
Café de Coral Centre
5 Wo Shui Street
Fo Tan, Shatin
New Territories
Hong Kong
Auditors Messrs. Arthur Andersen & Co
Solicitors Messrs. Johnson Stokes & Master
3
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Directors and Corporate Information (cont’d)
Principal Bankers ABN AMRO Bank
The Agricultural Bank of China
Banco Bilbao Vizcaya Argentaria, S.A.
The Bank of East Asia, Ltd.
The Bank of Nova Scotia
The Bank of Tokyo-Mitsubishi, Ltd.
BNP Paribas
The China & South Sea Bank, Ltd.
Credit Agricole Indosuez
Credit Lyonnais
The Dai-Ichi Kangyo Bank, Ltd.
Deutsche Genossenschaftsbank AG
The Fuji Bank, Ltd.
The Hongkong and Shanghai Banking Corporation Ltd.
Rabobank Nederland
The Sanwa Bank Ltd.
Standard Chartered Bank
The Sumitomo Mitsui Banking Corporation
Tai Fung Bank Ltd.
Bermuda Share Registrars The Bank of Bermuda Limited
Hong Kong Branch Central Registration Hong Kong Limited
Share Registrars
Web Site http://www.cafedecoral.com
Financial Highlights and Calendar
4
CA
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FINANCIAL HIGHLIGHTS
Year ended 31st March, 2001 2000 Change
HK$’000 HK$’000 %
Turnover 2,540,326 2,408,822 5.46
Profit attributable to shareholders 254,278 220,542 15.30
Total assets 1,874,414 1,644,370 13.99
Net assets 1,219,946 1,098,661 11.04
Basic earnings per share 46.33 cents 39.94 cents 16.00
Dividend per share 19.50 cents 16.80 cents 16.07
Net assets per share $2.23 $2.00 11.50
FINANCIAL CALENDAR
Half year results Announcement on 12th December, 2000
Full year results Announcement on 5th July, 2001
Annual Report Despatched to shareholders in late July 2001
Share register closed 4th September, 2001 to 11th September, 2001
Annual General Meeting 11th September, 2001
Dividends Interim : 4.4 cents per share paid on 5th January, 2001
Final : 15.1 cents per share to be paid on 18th September, 2001
5
Chairman’s Statement (cont’d)
CA
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Café de Coral GroupStrategic Businesses
SpecialtyRestaurant
Food Processing& Distribution
Fast Food InstitutionalCatering
Property &Development
The SpaghettiHouse
Ah Yee LengTong
Bravo le Café
Super SuperCongee & Noodles
Noodles Plus
Luncheon Star
Asia PacificCatering
Café de Coral(China)
Café de Coral(HK)
Denny’s
Scanfoods
Manchu Wok(USA)
Manchu Wok(Canada)
Property
Franchising
183
106
30 260
20
40
60
80
100
120
140
160
180
200
Manchu Wok Café de Coral Asia PacificCatering
SpecialtyRestaurants
New Shops
14
9
Total : 120
Total : 39 Total : 33
Total : 183
7
(As of 5/7/2001)
Total No. of Operating Units : 375
Financial Growth TrendsGroup Net Profits & EPS Growth
0
50
100
150
200
250
300
95 96 97 98 99 00 010
5
10
15
20
25
30
35
40
45
50
Net ProfitsEPS
Net
Pro
fits
(H
K$M
M)
EPS
(H
K$
cent
s)
21%8%
2%
60%
9%
Systemwide Sales Distribution
Manchu WokSpecialtyRestaurants
InstitutionalCatering
FoodProcessing
Café de Coral
176
221
254
102
128149 143
27.628.6
20.4
33.5
39.9
46.3
24.6
HIGHLIGHTS
• The Group profit again recorded an encouraging gain of 15%, being the sixth consecutive year of
double-digits operating profit growth.
• Specialty restaurants have reported another year of outstanding result, doubling its profit from
that of last year.
• The joint venture acquisition of Manchu Wok has elevated the Group’s vision to globalise into a
world-leading Chinese Quick Service Restaurant chain. With 375 restaurant units globally, it
further enhances our position as the world’s largest Chinese Quick Service Restaurant Group.
• We are honoured that the Group was recognised by Forbes Global, for the third consecutive year,
as one of the “World’s 300 Best Small Companies”.
• Earnings per share increased 16% from last year, once again generating year-on-year value
enhancement to our shareholders.
• Our long term shareholders’ value enhancement is achieved through strategic business
management, global business alliance and disciplined productivity efficiencies.
Chairman’s Statement (cont’d)
6
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ENHANCING
SHAREHOLDERS’ VALUE
GLOBALISATION AND
PROFITABILITY
INTRODUCTION
T h i s y e a r ’s p e r f o r m a n c e i s
particularly encouraging given that
the local economy is still recovering
from a lengthy recession. During the
year, the local business enterprises
continued to operate in a deflation
economy, high unemployment
persisted, consumer purchasing
power remained sluggish, and the
implementation of the Mandatory
Provident Fund scheme at the
beginning of the year put on new
costing burdens to the business
community.
Riding on the back of a breakthrough
profit record of HK$220 million last
year, our operating profit continued
into the sixth straight consecutive
years of double-digits growth. The
Group is pleased to report sales
achievement of HK$2,540 million
and net profits record of HK$254
million during the year, which
represented once again, a net profit
growth of 15% in comparison with
the last year. Earnings per share
increased 16%, generating year-on-
year value enhancement to our
shareholders. Given the increasingly
difficult business environment, such
admirable year-on-year unabated
profits growth was no easy task. The
Board and the management teams
have dedicated themselves to make
it happen, by our commitment to
targeted business goals and clear
business strategies in the right
direction.
With such encouraging results in the
year, coupled with a solid net cash
financial position, the Board would
like to appreciate the continuing
support from our shareholders and is
delighted to recommend a final
dividend of 15.1 cents per share.
Together with the enhanced interim
dividend of 4.4 cents per share paid
on 5th January, 2001, the total
dividend of 19.5 cents per share for
114 Café de Coral fast foodrestaurants (Hong Kong)6 Café de Coral fast foodrestaurants (PRC & Macau)
22 Spaghetti House restaurants
3 Ah Yee Leng Tong restaurants
39 Institutional Catering restaurants
183 Manchu Wok
Chairman’s Statement
4 Bravo le Café restaurants
3 Super Super Congee & Noodles
1 Noodles Plus
7
Chairman’s Statement (cont’d)
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the entire year amounted to HK$106
million, representing a distinguished
return when compared to its peers in
Hong Kong’s food industry.
As the Group continues to deliver
e n c o u r a g i n g r e s u l t s t o o u r
shareholders, the management is
determined to further enhance our
long-term shareholders’ values
t h r o u g h s t r a t e g i c b u s i n e s s
management , g loba l bus iness
alliance and disciplined productivity
efficiencies.
VALUE ENHANCEMENT
THROUGH BUSINESS
MANAGEMENT
Fast Food Business
The quick service restaurant market
faced increased competition. The
number of individual operators
continued to increase drastically,
coupled with the shift of local
consumption to the Mainland, there
has been little room for price
adjustment. Our Café de Coral Fast
Food managed to continue to grow
and expand by way of appealing new
product development, continuous
shop environment revitalisation, and
continuing focus in profitable store
openings, without resorting to the
vicious pr ice-cut t ing game as
adopted by many of our competitors
in the market.
During the year, Café de Coral Fast
Food totally opened 12 new stores in
Hong Kong and in l ine wi th
e x p e c t a t i o n , c o n t r i b u t i n g
encouraging profit results to the
Group . In add i t ion , we have
renovated 13 of our fast food outlets
with a totally brand new design
image. The facelift program not only
has won tremendous praise among
our customers but has set new
industry standard among all operators
t o e n h a n c e t h e t o t a l d i n i n g
experience. In all of our renovated
stores, enhancement in business
Chairman’s Statement (cont’d)
8
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Specialty Restaurant Business
It is another high performance year
for The Spaghetti House chain.
D u r i n g t h e y e a r , t h e p r o f i t
contribution from the chain almost
doubled in comparison with last year.
This remarkable result was
largely attributable to an
effective marketing strategy;
innovative menu development
and new in ter ior des ign
breakthrough.
After a successful market
r e - p o s i t i o n i n g s t r a t e g y
implemented two years ago, The
Spaghetti House chain of 18
outlets has been gaining wide
acceptance as a popular western
concept restaurant by the local
higher-spending younger generation.
More encouragingly, the chain’s new
store image is such a successful
breakthrough that i t has been
constantly attracting new customers
in addition to successful retention of
existing customers.
Aside from good business results
achieved, The Spaghetti House
chain won a distinguished service
award namely “Hong Kong Award
for Services : Customer Services
2000” from the Hong Kong Retail
performance, customers volume and
bot tom- l ine cont r ibu t ion was
immediately delivered.
I am also pleased to report on our 2
Mega store concepts launched during
the year, “The Centro” of 16,000 sq.
ft. and “Pier Marina” at Maritime
Square of Tsing Yi with 14,000 sq.
ft., both together accommodate 4 of
our exciting restaurant concepts. The
mega store concept has been proven
viable, in terms of third party rental
income and operational revenue, to
encourage us in exploring similar
opportunities at suitable locations in
future.
9
Chairman’s Statement (cont’d)
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Another important milestone during
the year was the geographic business
expansion across the territory border.
Three new catering contracts in
Shenzhen were secured with major
conglomerates. Together with the
HSBC contract at Guangzhou , we
now have 4 institutional catering
restaurants operating in China. This
b reak th rough ach ievement i s
promising and is going to lead the
Group in building a meaningful
market presence in the Southern
China region in future.
VALUE ENHANCEMENT
THROUGH BUSINESS
DEVELOPMENT
Globa l i sa t ion and Bus ines s
Alliance
As I reported to our shareholders last
year, the Group is strategically
aiming to capture a greater share of
the food business in the domestic and
Management Association during the
year.
Institutional Catering Business
Despite increase competition from
existing operators and new entrants,
Asia Pacific Catering continued to
sign up new hospital and commercial
catering contracts during the year. A
major achievement was our success
in winning the institutional catering
contract with the University of Hong
Kong. With this , Asia Pacific
Catering is now operating a total of
39 catering units and is by far the
largest operators in the institutional
catering sector in Hong Kong.
Chairman’s Statement (cont’d)
10
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assist the Group in achieving our
globalisation mission in the years
ahead.
By this Manchu Wok acquisition, the
Group now has around 375 restaurant
units under our ownership throughout
the world. This strategic move further
enhances the position of Café de
Coral Group as the largest Chinese
Quick Service Restaurant Group in
the world. Over the six months
operation up to the end of March
2001 since acquisition, both the
system sales and operating earnings
are ahead of budget and last year’s
figures. The total system sales during
Canada and 2 stores in Poland.
Manchu Wok is currently the second
largest Chinese Quick Service
Restaurant chain in the United States
and the largest in Canada, which has
a t rack record of s t rong and
consistent cashflow.
This acquisition is a landmark
accomplishment of the Group in
leveraging on our core business’s
financial strength to make strategic
acquisitions for enhancing long-term
shareholder values. At one stroke, the
acquisition benefits the Group in
establishing a solid foothold in the
Nor th Amer ica qu ick se rv ice
restaurant business. As the Chinese
cuis ine has long been widely
accepted by the local western
customers in the North America,
the growth potential of
Manchu Wok chain is
tremendous. The proven
business track record and
e x p e r i e n c e o f t h e
M a n c h u W o k
management team would
international market and ultimately
to become a leading global market
player. During the year, we have
made an exciting move towards
globalisation and have taken its first
step outside Asia. The Group invested
a cash amount of approximately
HK$24 million for acquisition of an
about 48% equity interest in Manchu
Wok chain in North America. The
total consideration of the entire
a c q u i s i t i o n a m o u n t s t o
approximately HK$167 million. The
current operations comprise 183
restaurant outlets, with 105 stores in
the United States, 76 stores across
11
Chairman’s Statement (cont’d)
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the 6 months period since our
investment amounted to C$70 million
(approximately HK$350 million).
Locally, the Group is also driving our
value enhancement through business
alliances. In this regard, we formed
an alliance with Tao Heung Seafood
Hotpot Restaurant Group to own and
manage a Chinese seafood hotpot
restaurant with satisfactory business
results attained. We also teamed up
with Four Seas Mercantile Group’s
distribution network for selling
Denny’s quality bread in major
supermarkets and convenience store
chains.
We reckon the benefits of leveraging
the business network, be it locally or
internationally, for enhancing the
value of the Group and without strain
on the capital resources
employed. We believe
the business alliance
strategy is effective to expand our
business portfolio and will continue
to work on it should opportunities
arise in future.
New Business Dynamic
Scanfoods, our ham processing
business, continued to contribute
satisfactory profits during the year.
In spi te of pr ic ing pressures ,
Scanfoods still managed to grow the
sales volumes and most of all, to
consistently generating satisfactory
profit contribution to the Group. This
p r o f i t a t t a i n m e n t i s l a rg e l y
attributable to the continuous product
quality improvement efforts. During
the year, Scanfoods successfully
obtained the ISO9001 Quali ty
Certificate.
It is also a fruitful and rewarding year
for the newly established Luncheon
Star operation. Since its operation
commencement in September 1999,
the Luncheon Star captured a
meaningful market share of the
student lunch box business in Hong
Kong. Its operation currently include
a central kitchen and 3 re-heat centres
located in different parts of Hong
Kong. During the year, the student
lunch box market has been attracting
new entrants and compet i t ion
intensified. Nevertheless, the Group
would fur ther expand on our
production capacity in this area, and
we are confident our Luncheon Star
Chairman’s Statement (cont’d)
12
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will continue to grow healthily in the
forthcoming year.
For the two home-grown concept
restaurants, Bravo le Café and
Super Super Congee and Noodles,
the business performance has been
satisfactory with addition of one new
Bravo le Café in the central business
core and 2 more Super Super
Congee and Noodles in private and
public housing estates.
VALUE
ENHANCEMENT
THROUGH
PRODUCTIVITY
EFFICIENCIES
B u s i n e s s P r o c e s s
Efficiency
Consistent with previous
years, we continue on our
e f f o r t s i n p u r s u i n g
re-engineering initiatives.
We are in the final phase
of our business process
re-engineering implementation. By
the implementation of a chain-wide
intelligent Branch Management
System including the adoption of new
Point of Sales System for a l l
restaurant outlets, we are confident
of our productivity enhancement. The
success of this re-engineering task
w i l l d e f i n i t e l y i n c r e a s e t h e
competitive edge of the Group and
bring in significant gains in terms of
e f f i c i e n cy, p r o d u c t iv i t y a n d
ultimately margin improvement.
Production Efficiency
The Group has dedicated HK$18
million in the modernisation of
production capabilities and capacities
at our Central Processing Facilities.
Such material appropriation of
resources signifies the Group’s
c o m m i t m e n t i n s t r e a m l i n i n g
workflow, improving economies of
scale and food quality and increasing
productivity. We believe these
changes will further improve the
Group’s competitive advantage and
profit margin for the benefit of the
shareholders.
13
Chairman’s Statement (cont’d)
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Operational Efficiency
Also, with the implementation of the
MPF scheme, the increased costs to
the Group have been considerable. To
alleviate the impact of this cost, the
Group undertook proactive measures
such as operational efficiency
enhancement and the extension of
working hours at the shop level.
Financial Efficiency
The Group continued to maintain a
healthy, solid financial position with
reliable liquidity, sound financial
return on assets and robust capital
structure. At present, the Group has
a net cash of HK$345 million and
available banking facil i t ies of
HK$1,025 million. As at 31st March,
2001, the Group’s net asset value
amounted to HK$1,220 million, an
increase of 11% compared with that
of last year. Net asset value per share
was HK$2.23, a 12% increase from
last year.
Trademarks of Ah Yee Leng Tong,
The Spaghetti House and Manchu
Wok represented valuable intangible
assets to the Group. In
accordance with the newly
i s s u e d a c c o u n t i n g
standards to be adopted
next year, these trademarks
wi l l be appropr ia te ly
amortised such that the
return on assets will be further
enhanced. There will be no material
adverse effect on the Group’s
financial position.
To leverage our potent cash position
to our shareholders, the Group
established a share repurchase
program in previous year. We believe
such share buy-back program plainly
demonstrated the management’s
explicit belief on the unrealised
intrinsic values of our shares and on
the future prospect of the Group.
During the year, the Group bought
back approximately 6,210,000 shares
at an average cost of HK$3 per share.
Chairman’s Statement (cont’d)
14
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PROSPECTS FOR FURTHER
VALUE ENHANCEMENT
The persistent deflation economy in
our domestic market and uncertain
global slowdown will present a
subs t an t ive cha l l enge t o t he
management in the forthcoming year.
Still, we are confident to grow our
business steadily in the year ahead
just as we have been successfully
riding out all economic cycles in the
past three decades. The key is our
ability to adapt to change.
Customer Focus
Our restaurant business will continue
i n a d d i n g
values to our existing loyal customers
by developing & re-packaging new
products and creatively upgrading the
in-store environment. We wil l
continue to open new shops and
launching new restaurant concepts
for expanding our presence in the
restaurant segment.
A s i a P a c i f i c C a t e r i n g a n d
Luncheon Star are expected to do
well in an increasingly competitive
market. With their established track
records and brand image, we are
confident that these two strategic
business units of the Group would
continue to be a leading market
player in their respective arenas.
Managing Efficiency
In the year ahead, our newly installed
Point of Sales System and Branch
Management System will be in full
operation throughout our restaurants
in Hong Kong. The associated
benefits will gradually be reflected in
our customer services, information
management and cost control arenas.
We anticipate that the return on this
investment will not only amount to a
productivity increase, but would
bring in long term benefits to the
G r o u p b y w a y o f d r a m a t i c
improvements in its revitalised
business logistics.
Going Global
The Manchu Wok acquisition is a
milestone breakthrough for the
G r o u p . We b e l i eve w e h ave
established a solid entry into the
North America food business market.
Our globalisation vision in the years
ahead will continue to be pursued in
a disciplined pace through further
acquisition and franchising.
15
Chairman’s Statement (cont’d)
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PRC poses another interesting market
for the Group to revisit in the year
ahead. In view of the latest revival of
China’s economy and its anticipated
entry into the WTO in the near future,
and with our chain of 6 restaurants
in South China now achieving
positive cashflow, the Group will
closely look into new store openings
or acquisition opportunities in the
PRC. Our previous opera t ing
experience has been valuable for the
Group in taking this business
forward.
As The Spaghetti House chain
opened up its fourth franchisee store
in Indonesia in April 2001, our
international franchising focus will
be expanded into the other South East
Asia region. Given our many well-
recognised restaurant brands, we
believe the international franchising
business offers long-term growth
potentials for the Group.
APPRECIATION
The Group continues to receive
highly respected recognition on a
worldwide basis. This year is no
exception. I am honoured that the
Group has been recognised by Forbes
Global, for the third consecutive year,
as one of the “World’s 300 Best
Small Companies”. In addition, our
Café de Coral Fast Food as well as
the specialty restaurants of Ah Yee
Leng Tong and The Spaghetti
House have also been granted
“Quality Tourism Services” award
from the Hong Kong Tourism Board.
Our accomplishment would not have
been accomplished without our
staff ’s tireless dedication in this
demanding year. On this, we owe our
colleagues a very special word of
thanks.
It is not an easy task to grow and it is
even harder to grow on an expanded
base. Given the depth of the resources
we have, the management calibre we
possess, and the robustness of the
business model we have so far
demonstrated, the Group is strongly
posit ioned to take our various
business concepts to new frontiers of
growth at home and abroad, and to
create greater values to our customers
and shareholders as a whole.
Chan Yue Kwong, Michael
Chairman
Hong Kong, 5th July, 2001
Managing Director’s Operational Review (cont’d)
16
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INTRODUCTION
As we are relentlessly working in the
various business and operational
initiatives in the past year, the Group
is pleased to report our s ixth
consecutive double-digits operating
profit growth in this fiscal year. This
result would not have attained if the
Group were not firmly stay in tune
with our management goals and
s t r a t eg i e s . I t i s p a r t i c u l a r l y
chal lenging to managing in a
persistent deflation environment
when the customers are cautious with
their spending.
During the year, the sales
and net profits attributable
to shareholders increased
b y 5 . 5 % a n d 1 5 %
respectively. This sales and
profit expansion were mainly
attributable by our profitable
store opening programs; on-
going shop renovation and new menu
development. Undoubtedly, this is also the
fruitful result of the dedicated efforts of
our management and staff in committing
our business goals.
FAST FOOD BUSINESS
During the year, Café de Coral fast
food business continues to grow
satisfactory in a competitive market.
The pricing competition intensified
as there was many more new
independent operators entered the
market and undercut pricing for
attracting customer patronage.
Nevertheless, the Group persisted to
maintain a stable pricing level for our
products . We bel ieve that our
customers are demanding good
product with the right price instead
of low-price inferior products. With
our thirty years of experiences in
managing a diversified customer
base, we have also cumulated years
of experience in optimizing the price/
value equation.
Still, we have been proactively
pursuing various customer value-
17
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Managing Director’s Operational Review (cont’d)
added initiatives in enhancing our
product and service standards.
During the year, Café de Coral
opened 12 new restaurants in the
prime locations, such as Admiralty,
Mongkok, Tsimshatsui East and Tuen
Mun, for providing convenient food
services to our targeted customers.
These new shops are all making profit
contributions to the Group.
As a continuing effort to enhancing
our service quality, the Group has
renovated 13 of our fast food outlets
with a totally brand new design image
to enrich the dining experience of our
cus tomers . We have inves ted
approximately HK$20 million in this
facelift program.
Throughout the year, Café de Coral
quick service restaurant developed
and launched over 20 new menu
products, for instance Pumpkin &
Chicken Burger Breakfast Set,
Shanghai Vegetable Rice, Twin
Baked Dishes and Lobster Soup &
Sizzling Plate Dinner Set, all with
satisfactory sales results achieved.
We continue to stay tune with our
a d ve r t i s i n g a n d p r o m o t i o n a l
activities for generating the customer
visits to our shops. In order to better
serve the needs of our diverse
customer segment, we introduced a
“Two-pronged Product Launching”
campaign with the intention of
increas ing repea ted cus tomer
patronage on our core products and
attracting new customers with
innovative premium products.
A series of promotional programs and
television advertisement were rolled
ou t on a month ly bas i s . The
promotional activities were tailored
for new product launch as well as
joint promotions for our wide variety
of core products. Our core product
campaigns enhanced our quality
brand image “100% Excellence”
whi le our tac t ica l campaigns
emphasised on the premium and
innovative ingredients. The tactical
campaigns successfully delivered the
message of “Value for Money” to the
customers, which did attract a new
group of customers . With the
Managing Director’s Operational Review (cont’d)
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implementation of effective and
efficient product and communication
strategies, supported by strong
promotional activities and mass
media advertisements, the two-
pronged campaigns were able to drive
sales growth.
In capturing the existing depressed
property market, we also opened two
Megastores in the prime locations,
“The Centro” of 16,000 sq.ft. and
“Pier Marina” at Maritime Square of
Tsing Yi with 14,000 sq.ft., both
t o g e t h e r a c c o m m o d a t e f o u r
restaurants, including Bravo le Café,
The Spaghetti House, Super Super
Congee and Noodles and “Pier 88”,
all operated satisfactory within the
management expectation.
By the end of 31st March, 2001, there
are 112 Café de Coral quick service
restaurants in operation.
INSTITUTIONAL CATERING
Following our success in securing
three hospital contracts last year and
strengthened our presence in the
medical institution segment, Asia
Pacific Catering won another
important catering contract with the
University of Hong Kong during the
year. This further fortified Asia
Pacific Catering’s branding in the
educational institution segment.
Asia Pacific Catering’s
e x p a n s i o n e f f o r t s i n
b u i l d i n g t h e m a r k e t
presence in the Southern
China region has also been
progressing well during the
year. Three new catering
contracts in Shenzhen were secured
and they have been in full operation.
As of 31st March, 2001, Asia Pacific
Catering managed 39 operating units
in Hong Kong and South China,
which include 20 units of hospital
sector, 5 units of educational sector
and 14 units of commercial sector.
This has been and will continue to be
a promising growth arena of the
Group in the years ahead.
It has been an exciting year for
Luncheon Star, our new student
ca t e r i ng bus ine s s . S ince t he
launching of this new business in
September 1999, Luncheon Star has
been performing within management
expectation and profitable. As a
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Managing Director’s Operational Review (cont’d)
result, the Group carried out the
planned expansion program to re-
engineer the existing production
facilities of 3 re-heat centres located
in Fotan, Yuen Long and Chai Wan
and to open 2 more re-heat centres at
Kwun Tong and Ta i Wa i fo r
accommodating new business growth
in future.
With less than two years of business
records, Luncheon Star has attained
10% market share and fi rmly
established a trustworthy brand for
expansion.
SPECIALTY RESTAURANTS
Building on an expanded base, The
Spaghetti House chain’s profit
almost doubled during the
y e a r. O u r e f f o r t s i n
designing new shop image
and developing new product
menu, such as Australia
Deep Sea Red Rock Lobster
& Fresh Fruit Salad, Boston
Lobster Au Gratin served
with Linguine, Squid Ink
Seafood Risotto and Creamy New
Zealand Mussel, have been paid off
handsomely in terms of the customer
growth and building branded core
products for future growth. To
capture on this encouraging
results, The Spaghetti House
chain opened two new restaurants
in Maritime Square and Telford
Plaza in July 2000 and December
2000 respectively.
The Ah Yee Leng Tong consolidation
program rendered the closure of
another low-performance restaurant
during the year. As of 31st March,
2001, there are 3 Ah Yee Leng Tong
restaurants located in the prime
tourist districts of Tsimshatsui,
Jordan and Cityplaza. The local
Chinese restaurant sector remained
weak in a deflation economy. Despite
the adversities, the competitive
strength of Ah Yee Leng Tong brand
cont inues to command s t rong
followings in the tourist segment.
Over the years, Bravo le Café has
successfully built up its customer
loyalty and enlarged its market share
since its introduction in 1997. In July
2000, a new outlet was added in the
central business core. This up-market
outlet at the Central serves Chinese,
Japanese as well as Western cuisine
to the white-collars. Another new
outlet was established in Hong Kong
International Airport serving both
local customers and tourists. We now
have 4 Bravo le Café in the territory.
Managing Director’s Operational Review (cont’d)
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SCANFOODS
During the year, Scanfoods has been
delivering satisfactory profit growth
in a tough falling price market
environment. This performance was
attributable to the continuous product
improvement and our ability to
generate genuine sales volume
growth. New products manufactured
out of this plant included smoked
sausage and turnip pudding. We are
confident that Scanfoods offers a
strong food processing business
platform for further development in
the years ahead.
CAFÉ DE CORAL IN THE PRC
AND MACAU
Having accumulated years’ of
experience in China and Macau,
w e h a v e s t r a t e g i c a l l y
streamlined the China operation
by closing 3 shops during the
year. Currently, we are running
5 outlets in South China and 1
in Macau. In the past couple of
years, we started repositioning
our fa s t food shops and
modifying the pricing and
marketing strategies in order to
adapt to the local spending power and
taste. The Group’s crucial tactics in
localising the management and
purchasing teams to support such
revitalisation have been proven to be
effective in reducing the overhead
expenses and in turning around the
China operation to a profitable
direction. We continue to closely
monitor the progressive improvement
of our businesses in such a massive
consumer food market and look for
fu tu re bus ines s deve lopmen t
opportunities in the years ahead.
With the anticipated entry of the PRC
into the World Trade Organisation,
the Group reckons the huge growth
potentials of this market and has set
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Managing Director’s Operational Review (cont’d)
an unambiguous management focus
through exploring new operating
concepts, careful site selection and
joint venture franchising to expand
our business presence in th is
emerging new market.
MANCHU WOK
As the Group has strongly established
Café de Coral quick serv ice
restaurant as a leading brand in Hong
Kong, we are also taking bold steps
for expanding globally. In September
2000, the Group made our first
important international acquisitions
through an equity investment in the
Manchu Wok restaurant chain in
North America.
With a well-established brand name,
extensive 183 restaurant networks
and supported by an experienced
management team, we are confident
that the Manchu Wok restaurant
chain will be a valuable growth
engine of the Group in the years
ahead. Over the six months operation
up to the end of March 2001 since
acquisition, both the system sales and
operating profit in Canada, the United
States and Poland have outperformed
budgeted and last year’s figures.
Manchu Wok have genera ted
systemwide sales of approximately
HK$350 million and earnings before
interest, tax, depreciation, and
amortisat ion of approximately
HK$22 million since acquisition. As
well, the Manchu Wok operation
offered a good franchising business
model for the Group to replicate in
future.
NEW BUSINESS
During the year, our new restaurant
concepts, Super Super Congee and
Noodles and Noodles Plus, were
making expected satisfactory profit
contributions to the Group.
Super Super Congee and Noodles
has been proven its business model
is sustainable and good growth
potentials exist. During the year, two
new Super Super Congee and
Noodles shops were opened in two
major shopping malls, namely,
Maritime Square, Tsing Yi and
Managing Director’s Operational Review (cont’d)
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Sheung Tak Shopping Centre, Tseung
Kwan O. Since its first restaurant in
1999, Super Super Congee and
Noodles has successfully established
its niche position in a competitive
mass customer market and captured
good brand recognition. Under the
current economic conditions, Super
S u p e r C o n g e e a n d N o o d l e s
demonstrated a great potential to
capture an increasing patronage and
to explore another market segment
for the Group.
Noodles Plus commenced i t s
business in Causeway Bay in
November 1999 serving Japanese
food. During the year, new products
launched including Jumbo Topical
Noodle. This new Japanese style
restaurant is well received by the
m a r ke t a n d m a ke i m m e d i a t e
contribution to the Group.
Denny’s bakery, acquired in prior
year, was successfully re-launched in
t h e r e t a i l m a r k e t t h r o u g h
supermarkets and convenience stores.
The packaging was re-designed to
uplift the brand image. We foresee
that Denny’s bakery will bring
synergistic benefits to the Group.
LOGISTIC SUPPORTS
The unrelenting efforts of the current
management team is crucial to the
G r o u p ’s a c h i eve m e n t i n t h e
admirable growth of both sales and
net profit. To improve operational
e f f i c i e n cy, p r o d u c t iv i t y a n d
streamlining of work flows, various
Business Process Re-engineering
programs have been commenced
since last year. A new Branch
Management System and Point of
Sales System would be set up to
e n h a n c e t h e p r o g r e s s . T h e
implementation of these systems will
undoubtedly increase the competitive
edge of the Group in terms of
efficiency and productivity.
Moreover, the Group has dedicated
HK$18 million in the modernisation
of production capabil i t ies and
capacities at our Central Processing
Facilities. We believe these changes
will streamline workflow, improve
efficiency and food quality, increase
productivity and further improve the
Group’s profit margin for the benefit
of the shareholders.
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Managing Director’s Operational Review (cont’d)
HUMAN RESOURCES
The Group has 7,200 employees as
at 31st March, 2001. We believe in
rewarding employees by allowing
them to share in the growth of the
Group. Hence, an unique Employee
Share Option Scheme coupled with
profit sharing bonus and performance
incentive system are innovatively
s t ructured as a mean of s taff
remuneration as well as enabling
them to share in the Group’s success.
Meanwhile, quality people is an
essence of success in catering
businesses. The opening of Café de
Coral Management Academy
provided an excellent venue
and facilities for all internal
t r a i n i n g a c t iv i t i e s a n d
improved the front-end quality of
services. This will also guarantee the
smooth and effective implementation
of management plans in business
process re-engineering.
BUSINESS OUTLOOK
With our proven business models
operating successfully in the past
three decades, we are also open-
minded in adapting changes to
embrace for bigger success in the
years ahead. On th is , we are
positioning the Group from three
dimensions namely scale, size and
scope.
Using Scale To Drive Sales And
Cost Efficiency
Our Café de Coral quick service
restaurant business definitely reaches
an operation scale whereby it creates
distinctive competitive advantages
for the Group to grow further. Despite
another challenging year ahead, we
believe the Group can use the
expanding scale of our core business
to further strengthen the central
kitchen operating system and the
bargaining posi t ions with our
suppliers. All these will generate
substantial cost efficiency which can
pass on to our customers and
ultimately, enhance the sales volume
of our core business.
Leveraging On Financial Size To
Expand Globally
As we have successfully attained a
strong presence in the territory, the
Group is also exploring new global
markets for growth. Our strong
balance sheet allowed us to make the
Managing Director’s Operational Review (cont’d)
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Manchu Wok acquisition in North
America last year and definitely the
Group is financially capable to make
further acquisitions for attaining
bigger share of the international
restaurant business should the
opportunities arise.
Expanding Scope For Balanced
Growth
As the Group expands our quick
service restaurant business locally
and internationally, we are committed
to further develop Luncheon Star,
Bravo le Café, Super Super Congee
and Noodles and Scanfoods
operations. We believe that the
continuing expansion of these new
ideas is paramount for the Group in
attaining a desired balanced business
portfolio in the long term.
CONCLUSION
Over the years, the Group has not
only delivered quality services but
also innovative and ingenious
products to our customers. The Group
has successfully built up customer
loyalty and is striving for continuous
growth of customer patronage. We
are devoted to continuously improve
our product range and quality, to
render distinct catering services and
to implement customer-oriented
promotion campaigns.
We a r e p roud o f t h i s yea r ’s
exceptional results among our peers
and we t reasure the t rust and
invaluable relationship with our
customers.
It is going to be challenging in the
for thcoming year and yet our
diversified business portfolio shall
lead us to consistently delivering
steady growth in future.
Lo Hoi Kwong, Sunny
Managing Director
Hong Kong, 5th July, 2001
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Biography of Directors and Senior Management (cont’d)
EXECUTIVE DIRECTORS
Mr. Chan Yue Kwong, Michael, aged 49, is the Executive Chairman of the Company. He joined the Company in 1984
and was appointed as Director in 1988. He has been the Managing Director of the Group since 1989 and is now the
Executive Chairman of the Group. Having worked as a professional town planner for various Government bodies in
Hong Kong and Canada, he has considerable experience in planning and management. He holds a Degree in Sociology
and Political Science, a Master Degree in City Planning from the University of Manitoba, Canada and an Honorary
Doctorate Degree in Business Administration. He is currently the Honorary President of Hong Kong Foodstuffs Association,
the Honorary Adviser of the Hong Kong Institute of Marketing and the Institute of Business Administrants, and a full
member of the Canadian and Hong Kong Institute of Planners. He is the son-in-law of Mr. Lo Tang Seong, Victor, another
Director of the Company.
Mr. Lo Hoi Kwong, Sunny, aged 46, is the Managing Director of the Company. He is responsible for business development
in Hong Kong and overseas, marketing, operation and food processing functions of the Group. He joined the Company in
1982 and was appointed as Director in 1985. He holds a Master Degree in Chemical Engineering from Stanford University.
He is the son of Mr. Lo Tang Seong, Victor, another Director of the Company.
Ms. Lo Pik Ling, Anita, aged 49, is the General Manager (Fast Food and Institutional Catering) of the Company. She
joined the Company as Director in 1980 and is responsible for the sales and marketing of the Hong Kong Fast Food,
Contract Catering Business and School Lunch-Box Catering Business. She holds a Degree in Social Sciences from the
University of Hong Kong. She is the daughter of Mr. Lo Tang Seong, Victor, another Director of the Company.
Mr. Lo Tak Shing, Peter, aged 39, is the Director of Business Logistics of the Company. He joined the Company in 1996
and was appointed as Director in 1998. He is responsible for central food processing, central purchasing and project
management functions of the Group. He holds a Degree in Electronic Engineering & Physics from the Loughborough
University of Technology, a Master Degree in Medical Physics from the University of Surrey and a Doctor of Philosophy
in Medical Physics from the University of London. He is the great-nephew of Mr. Lo Tang Seong, Victor, another Director
of the Company. He is a director of Wandels Investment Limited which has discloseable interests under the provisions of
Part II of the Securities (Disclosure of Interests) Ordinance in the Company.
Biography of Directors and Senior Management
Biography of Directors and Senior Management (cont’d)
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NON-EXECUTIVE DIRECTORS
Mr. Lo Tang Seong, Victor, aged 86, is the founder and Director of the Company. He had considerable experience in the
food and beverage industry. Prior to founding the Company, he was in charge of the production management in The Hong
Kong Soya Bean Products Company, Limited for 17 years.
Mr. Lo Hoi Chun, aged 63, joined the Company in 1976 and was appointed as Director in 1977. Prior to joining the
Company, he had considerable experience in the food and beverage industry. He is the nephew of Mr. Lo Tang Seong,
Victor, another Director of the Company.
Ms. Leung Sau Lai, Kathy, aged 47, joined the Company in 1977 and was appointed as Director in 1980. She has been
a Non-executive Director of the Company since July 1994. She is a director of Tsang Fook Panio Co., Ltd. She holds a
Degree in Business Administration from the University of San Francisco.
Mr. Hui Tung Wah, Samuel, aged 47, joined the Company in 1984 and was appointed as Director in 1988. He has been
a Non-executive Director since March 1997. He is a director of Wui Loong Scaffolding Works Co., Ltd. He holds a
Degree in Social Sciences from the University of Hong Kong and a Master Degree in Business Administration from the
Brunel University.
INDEPENDENT NON-EXECUTIVE DIRECTORS
Mr. Choi Ngai Min, Michael, aged 44, was appointed as an Independent Non-executive Director of the Company in
1994. He is the chairman of Land Power International Holdings Limited. He holds a Master Degree in Business
Administration from the University of East Asia, Macau.
Mr. Li Kwok Sing, Aubrey, aged 51, was appointed as an Independent Non-executive Director of the Company in 1994.
He is director of Management Capital Limited, a direct investment and financial advisory firm, and non-executive director
of The Bank of East Asia, Limited, China Everbright International Limited, Chinney Alliance Group Limited and CNPC
(Hong Kong) Limited. Mr. Li has a Master of Business Administration from Columbia University and a Bachelor of
Science in Civil Engineering from Brown University.
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Biography of Directors and Senior Management (cont’d)
SECRETARY
Ms. Li Oi Chun, Helen, aged 43, joined the Company in 1981. She is currently the Group Company Secretary and
Director of Professional Logistics of the Company. She is responsible for finance and accounting, company secretarial
and information technology function of the Group. She holds a Master Degree in Business Administration from the
University of Surrey in United Kingdom and a Master Degree in Marketing Management from the Macquarie University
in Australia. She is currently a Fellow member of both the Hong Kong Institute of Company Secretaries and The Institute
of Chartered Secretaries and Administrators in United Kingdom and also holds a Postgraduate Diploma in Corporate
Administration from The Hong Kong Polytechnic University.
SENIOR MANAGEMENT
Ms. Lau Lee Fong, Rosa, aged 46, joined the Company in 1979 and is currently the General Manager (Western Restaurants)
of the Company. She is responsible for development and management of the chain of the Spaghetti House Restaurants as
well as Bravo le Café. She holds a Master Degree in Business Administration from the University of East Asia, Macau
and a Master of Science in Hotel & Tourism Management from The Hong Kong Polytechnic University. She is currently
a member of the Hotel & Catering International Management Association (U.K.).
Mr. Wong Yau Kwong, aged 46, joined the Company in 1983 and is the General Manager of the Food Manufacturing
and Distribution - China. He is responsible for development and management of the Scanfoods Group of business and the
central food processing functions in the PRC. He is a graduate of Business Management Department, Baptist University.
Mr. Leung Cho Shing, Joe, aged 45, joined the Company in 1983 and is currently the General Manager of Asia Pacific
Catering Corporation Limited. He is responsible for development and management of the institutional catering business.
He holds a Degree in Hotel and Catering Management from The Hong Kong Polytechnic University.
Report of the Directors (cont’d)
(Amounts expressed in Hong Kong dollars)
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The directors are pleased to present their annual report together with the audited financial statements of Café de Coral
Holdings Limited (the “Company”) and Subsidiaries (the “Group”) for the year ended 31st March, 2001.
PRINCIPAL ACTIVITIES
The Company is an investment holding company. The Group is principally engaged in the operation of quick service
restaurants, fast casual dining, institutional catering and specialty restaurant chains, and the food manufacturing business.
An analysis of the Group’s turnover by geographical area together with their respective contributions to trading results
for the year is as follows:
Profit beforeTurnover taxation
$’000 $’000
Hong Kong 2,496,216 285,512
The People’s Republic of China (“the PRC”) 44,110 3,595
The United States, Canada and Poland (See Note below) — 3,141
2,540,326 292,248
Note:
During the year, the Group acquired an approximately 48% equity interest in Manchu Wok Enterprises, Inc (“MWEI”), a
jointly controlled entity. Since the date of acquisition, MWEI has generated systemwide sales of approximately $350,242,000
in the United States, Canada and Poland and earnings before interest, tax, depreciation and amortisation of approximately
$21,985,000.
MAJOR CUSTOMERS AND SUPPLIERS
For the year ended 31st March, 2001, the percentage of sales or purchases attributable to the Group’s five largest customers
or suppliers was less than 30%.
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Report of the Directors (cont’d)
(Amounts expressed in Hong Kong dollars)
RESULTS AND DIVIDENDS
The results of the Group for the year ended 31st March, 2001 and the state of affairs of the Company and of the Group as
at 31st March, 2001 are set out on pages 37, 39 and 40 of the accompanying financial statements.
The details of dividends for the year ended 31st March, 2001 are set out in Note 6 to the accompanying financial statements.
An interim dividend of 4.4 cents per share was paid, and the directors recommend the payment of a final dividend of 15.1
cents per share.
PRINCIPAL SUBSIDIARIES
Particulars of the Company’s principal subsidiaries as at 31st March, 2001 are set out on pages 66 to 69.
FIXED ASSETS
Details of the movement in fixed assets are set out in Note 8 to the accompanying financial statements.
BANK LOANS AND OVERDRAFTS
Particulars of bank loans and overdrafts as at 31st March, 2001 are set out in Notes 15 and 16 to the accompanying
financial statements.
SHARE CAPITAL
Details of the movement in share capital of the Company are set out in Note 18.a to the accompanying financial statements.
SHARE OPTIONS
Details of the share option schemes of the Company are set out in Note 18.b to the accompanying financial statements.
Report of the Directors (cont’d)
(Amounts expressed in Hong Kong dollars)
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RESERVES
Movements in reserves of the Group and the Company during the year are set out in Note 19 to the accompanying
financial statements. As at 31st March, 2001, reserves of approximately $193,201,000 of the Company were available for
distribution to shareholders.
PURCHASE, SALE OR REDEMPTION OF SHARES
During the year, the Company purchased and cancelled 6,210,000 shares of $0.10 each in the Company on The Stock
Exchange of Hong Kong Limited with details as follows:
Price per share Total cash paidMonth and year Number of shares Highest Lowest (Including related of purchase purchased price paid price paid expenses)
$ $ $’000
August 2000 2,194,000 2.975 2.900 6,483October 2000 1,894,000 3.000 2.800 5,554November 2000 756,000 3.000 2.850 2,242December 2000 750,000 3.250 3.100 2,428January 2001 148,000 3.250 3.250 483February 2001 468,000 3.250 3.250 1,528
6,210,000 18,718
Therefore, an amount of approximately $18,718,000 was transferred from contributed surplus to capital redemption reserve.
Other than the above purchase of shares, neither the Company nor any of its subsidiaries purchased, sold or redeemed any
listed securities of the Company for the year ended 31st March, 2001.
The directors considered that the purchase of shares would be to the benefit of the Company and would lead to an
enhancement of the net assets, earnings per share and liquidity of shares.
PRE-EMPTIVE RIGHTS
There is no provision for pre-emptive rights under the Company’s Bye-Laws and the laws in Bermuda.
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Report of the Directors (cont’d)
(Amounts expressed in Hong Kong dollars)
DIRECTORS AND DIRECTORS’ SERVICE CONTRACTS
The directors who held office during the year and up to the date of this report are:
Executive directors
Mr. Chan Yue Kwong, Michael (Chairman)
Mr. Lo Hoi Kwong, Sunny (Managing Director)
Ms. Lo Pik Ling, Anita
Mr. Lo Tak Shing, Peter
Non-executive directors
Mr. Lo Tang Seong, Victor
Mr. Lo Hoi Chun
Ms. Leung Sau Lai, Kathy
Mr. Hui Tung Wah, Samuel
Independent non-executive directors
Mr. Choi Ngai Min, Michael
Mr. Li Kwok Sing, Aubrey
All non-executive directors and independent non-executive directors have been appointed for a term of 2-3 years subject
to retirement by rotation as required by the Company’s Bye-Laws.
In accordance with Section 109(A) of the Company’s Bye-Laws, Ms. Lo Pik Ling, Anita, Mr. Lo Tak Shing, Peter and
Mr. Li Kwok Sing, Aubrey retire by rotation at the forthcoming Annual General Meeting and, being eligible, offer
themselves for re-election.
None of the directors has an unexpired service contract with the Company which cannot be terminated by the Company
within one year without payment of compensation (other than statutory compensation).
Report of the Directors (cont’d)
(Amounts expressed in Hong Kong dollars)
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DIRECTORS’ INTERESTS IN SHARES AND SHARE OPTIONS
As at 31st March, 2001, the following directors of the Company had or were deemed to have interests under the provisions
of the Securities (Disclosure of Interests) Ordinance (the “SDI Ordinance”) in the Company or any associated corporations
thereof (within the meaning of the SDI Ordinance) as recorded in the register kept by the Company pursuant to Section
29 of the SDI Ordinance:
Personal Family Corporate Other
Mr. Chan Yue Kwong, Michael 3,121,407 1,189,400 — (a) & (f)
Mr. Lo Hoi Kwong, Sunny 3,120,000 — — (a), (b) & (f)
Ms. Lo Pik Ling, Anita 12,104,339 — — (a) & (f)
Mr. Lo Tak Shing, Peter — — — (c) & (f)
Mr. Lo Tang Seong, Victor 1,520,000 — — —
Mr. Lo Hoi Chun 132,000 — — (d) & (e)
Ms. Leung Sau Lai, Kathy 3,257,000 — — —
Mr. Hui Tung Wah, Samuel 25,837 — — —
Mr. Choi Ngai Min, Michael — — — —
Mr. Li Kwok Sing, Aubrey 55,000 — — —
Notes:
(a) 49,800,000 shares were held under a family trust of which the beneficiaries included associates of Mr. Chan Yue Kwong,
Michael, Mr. Lo Hoi Kwong, Sunny and his associates, Ms. Lo Pik Ling, Anita and her associates.
(b) 37,383,394 shares were held under a family trust of which associates of Mr. Lo Hoi Kwong, Sunny were the beneficiaries.
(c) 87,626,213 shares were held under a family trust of which Mr. Lo Tak Shing, Peter and his associates were the beneficiaries.
(d) 35,997,701 shares were held under a family trust of which Mr. Lo Hoi Chun and his associates were the beneficiaries.
(e) 36,169,133 shares were held under a family trust of which associates of Mr. Lo Hoi Chun were the beneficiaries.
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Report of the Directors (cont’d)
(Amounts expressed in Hong Kong dollars)
DIRECTORS’ INTERESTS IN SHARES AND SHARE OPTIONS (Cont’d)
(f) During the year, the movements of the executive share options of the directors were as follows:
Number of shares included in executive share options
Beginning Exercised during
Name Note of year the year End of year
Mr. Chan Yue Kwong, Michael (i) 1,500,000 — 1,500,000
(ii) 600,000 (600,000) —
Mr. Lo Hoi Kwong, Sunny (i) 1,500,000 — 1,500,000
(ii) 500,000 (500,000) —
Ms. Lo Pik Ling, Anita (i) 400,000 — 400,000
(ii) 300,000 (300,000) —
Mr. Lo Tak Shing, Peter (i) 350,000 — 350,000
5,150,000 (1,400,000) 3,750,000
Notes:
(i) As at 31st March, 2001, the executive share options, which were granted on 4th November, 1999, are exercisable at $2.95
per share during the period from 1st April, 2003 to 31st March, 2013.
(ii) The executive share options, which were granted on 21st February, 1991, were brought forward from the prior year and
fully exercised during the year.
Other than certain nominee shares in subsidiaries held by directors in trust for the Company or the intermediate holding
companies, no directors held any interest in the share capital of the Company’s subsidiaries.
Save as disclosed above, the Company has no notice of any interests to be recorded under Section 29 of the SDI Ordinance
as at 31st March, 2001 and at no time during the year was the Company or any of its subsidiaries a party to any arrangements
to enable any of the Company’s directors or members of its management to acquire benefits by means of the acquisition
of shares in, or debentures of, the Company or any other body corporate.
Report of the Directors (cont’d)
(Amounts expressed in Hong Kong dollars)
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SUBSTANTIAL SHAREHOLDERS’ INTERESTS
As at 31st March, 2001, the following entities had or were deemed to have interests in the Company under the provisions
of the SDI Ordinance as recorded in the register kept by the Company under Section 16(1) of the SDI Ordinance:
Number ofshares held in Percentage ofthe Company holding
Wandels Investment Limited (a) 87,626,213 16.02%
GZ Trust Corporation (b) 121,966,834 22.30%
(a) It held the shares for the family trust disclosed in Note (c) under Directors’ Interests in Shares and Share Options (with Barclays
Private Bank & Trust Limited, the trustee of the said family trust, holding the entire share capital of Wandels Investment Limited).
(b) It held the shares for the family trusts disclosed in Note (a), (d) and (e) under Directors’ Interests in Shares and Share Options.
Save as disclosed above, the Company has no notice of any interests to be recorded under Section 16(1) of the SDI
Ordinance as at 31st March, 2001.
DIRECTORS’ INTERESTS IN CONTRACTS
The Group had two franchise agreements (the “Franchise Agreements”) with Furanka Limited (“Furanka”), a company
in which Ms. Lo Pik Ling, Anita and an associate of Mr. Chan Yue Kwong, Michael had beneficial interests. Under the
Franchise Agreements, the Group has to provide management services to Furanka and has to grant licences to Furanka to
operate two restaurants under the name ‘Café de Coral’ (the “Restaurants”), until 11th April, 2000.
On 11th April, 2000, Weli Company Limited (“Weli”), a wholly owned subsidiary of the Company, entered into a sale
and purchase agreement and a tenancy agreement with Furanka and Tinway Investments Limited (“Tinway”) respectively.
Under the sale and purchase agreement, Weli agreed to purchase the assets relating to the operation of the Restaurants at
a cash consideration of $2,572,827. Under the tenancy agreement, Weli agreed to rent the premises at which Furanka
operated one of the Restaurants from Tinway for a monthly rental of $170,000 from 12th April, 2000 to 11th April, 2003.
Tinway was controlled by Ms. Lo Pik Ling, Anita, an associate of Mr. Chan Yue Kwong, Michael and Ardley Enterprises
Limited, a company wholly and beneficially owned by the family members of Mr. Lo Hoi Kwong, Sunny. Details of the
transactions were announced on 11th April, 2000.
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Report of the Directors (cont’d)
(Amounts expressed in Hong Kong dollars)
DIRECTORS’ INTERESTS IN CONTRACTS (Cont’d)
On 23rd December, 1999, each of Yumi Yumi Caterers Limited (“Yumi”) and Very Nice Fast Food Limited (“Very Nice”),
the two indirect wholly-owned subsidiaries of the Company, as tenants entered into tenancy agreements with LBK Trustee
Holding Corporation (“LBK”) as landlord renewing the existing tenancies in respect of two premises at 77 Tung Choi
Street and 108 Prince Edward Road West for the operation of fast food restaurants (collectively the “Premises”). LBK
was wholly and beneficially owned by the family members of Mr. Lo Hoi Chun, a non-executive director of the Company.
Mr. Lo Hoi Chun and his associates were directors of LBK. Mr. Lo Hoi Chun was also a director of Yumi. Under the
agreements, Yumi and Very Nice were required to pay a monthly rental of $61,000 and $110,000 respectively from 1st
January, 2000 to 31st December, 2002.
Except as disclosed above, no contracts of significance in relation to the Group’s business to which the Company or any
of its subsidiaries was a party and in which a director of the Company had a material interest subsisted at the end of the
year or at any time during the year.
Other than the operation of Furanka as disclosed above, none of the directors have interests in a competing business.
CODE OF BEST PRACTICE
In the opinion of the directors, the Company has complied with the Code of Best Practice as set out in Appendix 14 of the
Listing Rules of The Stock Exchange of Hong Kong Limited for the year ended 31st March, 2001.
AUDIT COMMITTEE
In April 1999, the Company established an audit committee consisting of two independent non-executive directors of the
Company, Mr. Choi Ngai Min, Michael and Mr. Li Kwok Sing, Aubrey, with written terms of reference which deal
clearly with its authority and duties. Amongst the committee’s principal duties is to review and supervise the Company’s
financial reporting process and internal controls.
Report of the Directors (cont’d)
(Amounts expressed in Hong Kong dollars)
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AUDITORS
The accompanying financial statements have been audited by Messrs. Arthur Andersen & Co. A resolution for the
reappointment of Messrs. Arthur Andersen & Co as the Company’s auditors for the ensuing year is to be proposed at the
forthcoming Annual General Meeting.
On behalf of the Board of Directors,
CHAN YUE KWONG, MICHAEL
Chairman
Hong Kong, 5th July, 2001
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Consolidated Income StatementFor the year ended 31st March, 2001
(Amounts expressed in Hong Kong dollars)
Note 2001 2000$’000 $’000
Turnover 2,540,326 2,408,822
Cost of sales (2,164,773) (2,038,182)
Gross profit 375,553 370,640
Administrative expenses (115,730) (125,225)
Other revenue, net 54,540 49,604
Profit from operations 314,363 295,019
Finance costs (25,987) (39,514)
288,376 255,505
Share of profit of an associate 731 —
Share of profit of a jointly controlled entity 3,141 —
Profit before taxation 2 292,248 255,505
Taxation 4 (37,970) (34,963)
Profit attributable to shareholders 5 254,278 220,542
Dividends 6 (106,476) (92,685)
Retained profit for the year 147,802 127,857
Basic earnings per share 7 46.33 cents 39.94 cents
Diluted earnings per share 7 46.27 cents 39.86 cents
Consolidated Statement of Recognised Gains and LossesFor the year ended 31st March, 2001
(Amounts expressed in Hong Kong dollars)
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2001 2000$’000 $’000
Deficit on revaluation of investment properties (705) (11,350)
Exchange differences arising on consolidation 2,365 (179)
Net gains (losses) not recognised in the income statement 1,660 (11,529)
Net profit for the year 254,278 220,542
Net recognised gains 255,938 209,013
Goodwill eliminated directly against reserves (14,174) —
241,764 209,013
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Balance Sheets (cont’d)
As at 31st March, 2001
(Amounts expressed in Hong Kong dollars)
Consolidated CompanyNote 2001 2000 2001 2000
$’000 $’000 $’000 $’000
ASSETSNon-current assetsFixed assets 8 890,154 861,413 — —Construction in progress — 5,338 — —Trademarks 9 62,274 62,694 — —Investment in subsidiaries 10 — — 413,734 428,595Investment in an associate 11 1,614 — — —Investment in a jointly
controlled entity 12 14,339 — — —Other investments 13 18,547 18,562 — —
986,928 948,007 413,734 428,595
Current assetsStocks 49,375 54,188 — —Prepayments and deposits 122,154 101,369 109 111Trade and other debtors 14 25,475 16,092 — —Dividend receivable from
a subsidiary — — 83,000 71,000Short-term investments 9,169 — — —Cash and bank placements 681,313 524,714 15 25
887,486 696,363 83,124 71,136
Current liabilitiesShort-term bank borrowings 15 236,541 221,278 — —Trade creditors 14 58,198 52,129 — —Other creditors and
accrued liabilities 153,232 146,780 16 596Taxation payable 12,428 11,424 — —Proposed final dividend 6 82,690 70,547 82,690 70,547
543,089 502,158 82,706 71,143
Net current assets (liabilities) 344,397 194,205 418 (7)
Total assets less current liabilities 1,331,325 1,142,212 414,152 428,588
Non-current liabilitiesNon-current bank loans 16 100,000 31,536 — —Deferred taxation 17 11,379 12,015 — —
111,379 43,551 — —
NET ASSETS 1,219,946 1,098,661 414,152 428,588
Balance SheetsAs at 31st March, 2001
(Amounts expressed in Hong Kong dollars)
Balance Sheets (cont’d)
As at 31st March, 2001
(Amounts expressed in Hong Kong dollars)
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Consolidated CompanyNote 2001 2000 2001 2000
$’000 $’000 $’000 $’000
CAPITAL AND RESERVESShare capital 18 54,689 55,066 54,689 55,066Reserves 19 1,165,257 1,043,595 359,463 373,522
Shareholders’ equity 1,219,946 1,098,661 414,152 428,588
Approved by the Board of Directors on 5th July, 2001 and signed on behalf of the Board by
CHAN YUE KWONG, MICHAEL LO HOI KWONG, SUNNYChairman Managing Director
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Consolidated Cash Flow Statement (cont’d)
For the year ended 31st March, 2001
(Amounts expressed in Hong Kong dollars)
2001 2000$’000 $’000 $’000 $’000
Operating activitiesProfit before taxation 292,248 255,505Interest expense 25,987 39,372Interest income (39,698) (29,593)Accretion of discount on investment
in promissory notes — (12,012)Depreciation of fixed assets 114,524 118,265Net loss on disposals of fixed assets 6,141 17,196Provision for impairment of trademarks 420 2,000Unrealised loss on short-term investments 611 —Loss on disposal of other investments 5 —Share of profit of an associate (731) —Share of profit of a jointly controlled entity (3,141) —Decrease (Increase) in stocks 4,813 (4,322)Increase in prepayments and deposits (20,785) (4,282)Increase in trade and other debtors (9,383) (189)Increase (Decrease) in trade creditors 6,069 (1,238)Increase in other creditors and
accrued liabilities 6,452 8,479
383,532 389,181
Returns on investmentsand servicing of finance
Interest received 39,698 29,593Interest paid (25,987) (39,372)Proceeds from redemption
of a promissory note — 19,131Dividends paid (94,333) (78,992)
(80,622) (69,640)
TaxationHong Kong profits tax refunded 2,156 911Hong Kong profits tax paid (38,214) (32,593)Overseas profits tax paid (261) (139)
(36,319) (31,821)
Cash inflow before investing activities 266,591 287,720
Consolidated Cash Flow StatementFor the year ended 31st March, 2001
(Amounts expressed in Hong Kong dollars)
Consolidated Cash Flow Statement (cont’d)
For the year ended 31st March, 2001
(Amounts expressed in Hong Kong dollars)
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2001 2000$’000 $’000 $’000 $’000
Cash inflow before investing activities 266,591 287,720
Investing activitiesAdditions of fixed assets (158,878) (132,109)Proceeds from disposals of fixed assets 14,105 518Additions of construction in progress — (5,338)Addition of a trademark — (420)Acquisition of an associate (1,000) —Acquisition of a jointly controlled entity (24,086) —Proceeds from repayment of a
promissory note — 250,000Proceeds from disposal of other
investments 10 —Purchase of short-term investments (9,780) —
(179,629) 112,651
Cash inflow before financing 86,962 400,371
Financing (Note 23)Net proceeds from issue of shares
on exercise of share options 4,715 3,717Payment for repurchase of shares (18,718) (7,579)Net borrowing (repayment) of bank loans 3,727 (266,373)
(10,276) (270,235)
Increase in cash and cash equivalents 76,686 130,136Effect of foreign exchange rate changes (87) (179)Cash and cash equivalents,
beginning of year 459,714 329,757
Cash and cash equivalents, end of year 536,313 459,714
Analysis of cash and cash equivalentsCash and bank placements 681,313 524,714Bank overdrafts and loans (145,000) (65,000)
536,313 459,714
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Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
1. PRINCIPAL ACCOUNTING POLICIES
a. Basis of presentation
The financial statements of the Company and its subsidiaries (the “Group”) have been prepared under thehistorical convention as modified by the revaluation and valuation of investment properties and short-terminvestments, and in accordance with Statements of Standard Accounting Practice issued by the Hong KongSociety of Accountants, the accounting principles generally accepted in Hong Kong, the disclosure requirementsof the Hong Kong Companies Ordinance and the Rules Governing The Listing of Securities on The StockExchange of Hong Kong Limited.
b. Basis of consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries.All significant intra-group transactions and balances have been eliminated on consolidation.
Goodwill arising on consolidation (representing the excess of the fair value of the consideration given overthe fair value of the Group’s share of separable net assets of the subsidiaries acquired) is amortised to theincome statement over a period of five years unless it is not considered by the directors to be of future benefit,in which case it is eliminated immediately against available reserves.
c. Fixed assets and depreciation
Initial purchases of utensils, cutlery and glassware are capitalised at original historical cost and are includedin restaurant equipment. Costs of subsequent replacements are charged to the income statement in the year ofexpenditure.
Fixed assets, other than utensils, cutlery, glassware and investment properties, are stated at cost or valuationless accumulated depreciation. The cost of an asset comprises its purchase price and any directly attributablecosts of bringing the asset to its working condition and location for its intended use. Expenditure incurredafter the fixed assets have been put into operation, such as repairs and maintenance and overhaul costs, isnormally charged to the income statement in the period in which it is incurred. In situations where it can beclearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expectedto be obtained from the use of the fixed assets, the expenditure is capitalised as an additional cost of the fixedassets.
Depreciation is calculated on the straight-line basis at annual rates estimated to write off the cost of each assetover its expected useful life. Leasehold land is amortised over the remaining period of the respective lease.The annual rates are as follows:
Leasehold improvements Over the unexpired period of the leaseLand Over the remaining period of the leaseBuildings 2.5%Furniture and restaurant equipment 15% to 20%
When assets are sold or retired, their cost and accumulated depreciation are eliminated from the accounts andany gain or loss resulting from their disposal is included in the income statement.
Notes to the Financial Statements31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
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1. PRINCIPAL ACCOUNTING POLICIES (Cont’d)
d. Investment properties
Investment properties are interests in land and buildings in respect of which construction work and developmenthave been completed and which are held for their investment potential and for the long-term.
Investment properties are included in the balance sheet at their open market value, on the basis of an annualvaluation by professionally qualified executives of the Group and by independent valuers at intervals of notmore than three years. Changes in the value of investment properties are dealt with as movements in theproperty revaluation reserve. If the total of this reserve is insufficient to cover a reduction in the open marketvalue on a portfolio basis, the excess is charged to the income statement.
Upon the disposal of an investment property, the relevant portion of the revaluation reserve realised in respectof previous valuations is released from the property revaluation reserve to the income statement as part of theprofit or loss on disposal of the investment property.
No depreciation is provided on investment properties unless the unexpired lease term is 20 years or less, inwhich case depreciation is provided on their carrying value over the unexpired lease term.
e. Trademarks
Trademarks acquired are included in the balance sheet at the lower of cost and fair value as determined by thedirectors of the Company and no amortisation is provided. Where appropriate, provision is made for anyimpairment in value.
f. Subsidiaries
A company is a subsidiary company if more than 50% of the issued voting capital is held long-term, directlyor indirectly.
In the Company’s balance sheet, investment in subsidiaries is stated at cost less provision for impairment invalue where considered necessary by the directors. The results of the subsidiaries are included in the Company’sincome statement to the extent of dividends declared by the subsidiaries.
g. Associates
An associate is an enterprise over which the Group has significant influence, but not control or joint control,and thereby has the ability to participate in its financial and operating policy decisions.
In the consolidated financial statements, investment in an associate is accounted for under the equity methodof accounting, whereby the investment is initially recorded at cost and the carrying amount is adjusted torecognise the Group’s share of the post-acquisition profits or losses of the associate, distributions receivedfrom the associate and other necessary alterations in the Group’s proportionate interest in the associate arisingfrom changes in the equity of the associate that have not been included in the income statement.
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Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
1. PRINCIPAL ACCOUNTING POLICIES (Cont’d)
h. Jointly controlled entity
A jointly controlled entity is an entity under a contractual arrangement where the Group and other partiesundertake an economic activity which is subject to joint control and none of the participating parties hasunilateral control over the economic activity.
In the consolidated financial statements, the Group’s interest in a jointly controlled entity is initially recordedat cost and adjusted thereafter for the post-acquisition change in the Group’s share of the net assets of thejointly controlled entity. The Group’s share of post-acquisition results of the jointly controlled entity is includedin the consolidated income statement.
Goodwill arising from the acquisition of the jointly controlled entity (representing the excess of the fair valueof the consideration given over the fair value of the Group’s share of separable net assets of the jointly controlledentity acquired) is eliminated immediately against available reserves.
i. Other investments
Other investments, intended to be held on a continuing basis, are included in the balance sheet at cost less anyprovision for impairment in value.
The carrying amounts of other investments are reviewed at each balance sheet date to assess whether the fairvalues have declined below the carrying amounts. When such a decline has occurred, the carrying amounts arereduced and the reduction is recognised as an expense in the income statement unless there is evidence that thedecline is temporary.
Provisions against the carrying value of other investments are reversed to the income statement when thecircumstances and events that led to the write-downs or write-offs cease to exist and there is persuasive evidencethat the new circumstances and events will persist for the foreseeable future.
Upon disposal or transfer of the other investments, any profit and loss thereon is accounted for in the incomestatement.
j. Short-term investments
Short-term investments are listed shares carried at fair value in the balance sheet. Any unrealised holding gainor loss on short-term investments is recognised in the income statement in the period when it arises.
Upon disposal or transfer of short-term investments, any profit or loss thereon is accounted for in the incomestatement.
Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
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1. PRINCIPAL ACCOUNTING POLICIES (Cont’d)
k. Stocks
Stocks comprise mainly food and consumable stores.
Stocks are stated at the lower of cost and net realisable value.
Cost is based on the first-in, first-out cost formula and comprises all costs of purchase, costs of conversion andother costs incurred in bringing the stocks to their present location and condition.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs ofcompletion and the estimated costs necessary to make the sale. Provision is made for obsolete, slow-movingor defective items where appropriate.
l. Cash and cash equivalents
Cash represents cash on hand and placements with banks or other financial institutions which are repayable ondemand.
Cash equivalents represent short-term, highly liquid investments which are readily convertible into knownamounts of cash and which are within three months of maturity when acquired, less advances from banksrepayable within three months from the dates of the advances.
m. Turnover
Turnover comprises (i) the value of sales in the normal course of business and (ii) rental income.
n. Revenue recognition
Provided it is probable that the economic benefits associated with a transaction will flow to the Group and therevenue and costs, if applicable, can be measured reliably, turnover and other revenue are recognised on thefollowing bases:
(i) Sales of goods and services
Sales of goods and services are recognised when the significant risks and rewards of ownership of thegoods have been transferred or services are rendered.
(ii) Rental income
Rental income is recognised when rentals become due and receivable.
(iii) Interest income
Interest income from bank placements is recognised on a time proportion basis on the principal outstandingand at the rate applicable.
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Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
1. PRINCIPAL ACCOUNTING POLICIES (Cont’d)
o. Cost of sales
Cost of sales represents costs which vary directly or indirectly with the level of sales of the Group. It comprisescost of stocks and operating costs incurred for generating sales of goods and services, and rental income. Theoperating costs include mainly operating lease rentals, staff costs, utility costs and depreciation of fixed assetsincurred by quick service restaurants, fast casual dining, institutional catering and specialty restaurant chains,and outgoings for rental income.
p. Deferred taxation
Deferred taxation is provided under the liability method, at the current tax rate, in respect of significant timingdifferences between profit as computed for taxation purposes and profit as stated in the financial statements,except when it is considered that no liability will arise in the foreseeable future. Deferred tax assets are notrecognised unless the related benefits are expected to crystallise in the foreseeable future.
q. Operating leases
Leases where substantially all the risks and rewards of ownership of the leased assets remain with the lessorsare accounted for as operating leases. Rentals applicable to such leases are charged to the income statement ona straight-line basis over the period of the relevant leases.
r. Foreign currencies
Companies within the Group maintain their books and records in the primary currencies of their respectivecountries (the “functional currencies”).
In the financial statements of the individual companies, monetary assets and liabilities denominated in othercurrencies at the balance sheet date are translated into the respective functional currencies at rates of exchangein effect at the balance sheet date. Transactions in other currencies during the year are translated into therespective functional currencies at rates of exchange in effect at the time of the transactions. Exchangedifferences are dealt with in the income statements of the individual companies.
For the purpose of consolidation, all assets and liabilities of subsidiaries other than those originally funded inHong Kong dollars are translated into Hong Kong dollars at rates of exchange in effect at the balance sheetdate; those originally funded by Hong Kong dollars are translated at historical rates. All income and expenseitems are translated at the monthly average rates of exchange over the year. Exchange differences arising onsuch translation are credited or charged to the cumulative translation reserve.
Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
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2. PROFIT BEFORE TAXATION
The consolidated profit before taxation was determined after charging and crediting the following:
2001 2000$’000 $’000
After charging
Operating lease rentals in respect of rented premises 275,963 276,712Interest expense on bank overdrafts and loans wholly
repayable within five years 25,987 39,514Depreciation of fixed assets 114,524 118,265Net loss on disposals of fixed assets 6,141 17,196Unrealised loss on short-term investments 611 —Realised loss on disposal of other investments 5 —Cost of stocks 796,299 717,941Provision for impairment of trademarks (Note 9) 420 2,000Staff costs (including directors) 681,163 630,120Auditors’ remuneration 2,037 1,803
After crediting
Gross rental income from investment properties 6,679 7,392Less: Outgoings (188) (71)
6,491 7,321Other rental income less outgoings 6,725 5,010Interest income 39,698 29,593
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Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
3. DIRECTORS’ AND SENIOR EXECUTIVES’ EMOLUMENTS
a. Details of directors’ emoluments are as follows:
2001 2000$’000 $’000
Fees— Executive directors 200 200— Non-executive directors and independent
non-executive directors 400 300
Other emoluments for executive directors— Basic salaries, gratuity and other allowances 3,715 4,055— Benefits from share options exercised 1,846 1,189— Contributions to pension scheme 475 474— Discretionary bonuses 6,284 6,733
12,920 12,951
No directors waived any emoluments during the year.
Analysis of the emoluments of the executive directors by number of directors and emolument ranges is asfollows:
2001 2000
Nil to $1,000,000 1 1$1,500,001 to $2,000,000 1 1$4,500,001 to $5,000,000 1 1$5,000,001 to $5,500,000 1 1
4 4
The emoluments of all non-executive directors were below $1,000,000.
Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
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3. DIRECTORS’ AND SENIOR EXECUTIVES’ EMOLUMENTS (Cont’d)
b. Details of emoluments earned by the five highest paid individuals (including directors and employees) are asfollows:
2001 2000$’000 $’000
Directors’ fees 150 150Basic salaries, gratuity and other allowances 3,985 4,370Benefits from share options exercised 2,378 1,337Contributions to pension scheme 593 511Discretionary bonuses 6,827 7,264
13,933 13,632
Three (2000 - Three) of the five highest paid individuals were directors of the Company, and their emolumentshave been included in Note 3.a.
During the year, no emoluments were paid by the Group to the five highest paid individuals (including directorsand employees) as inducement to join or as compensation for loss of office.
Analysis of the emoluments earned by the five highest paid individuals (including directors and employees)by number of individuals and emolument ranges is as follows:
2001 2000
Nil to $1,000,000 1 2$1,000,001 to $1,500,000 1 —$1,500,001 to $2,000,000 1 1$4,500,001 to $5,000,000 1 1$5,000,001 to $5,500,000 1 1
5 5
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Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
4. TAXATION
The Company is exempted from taxation in Bermuda until 2016. Hong Kong profits tax has been provided at therate of 16% (2000 - 16%) on the estimated assessable profits for the year. Overseas taxation has been calculated onthe estimated assessable profits for the year at the rates prevailing in the respective jurisdictions of countries inwhich the Group operated.
Taxation in the consolidated income statement comprised:
2001 2000$’000 $’000
Company and subsidiaries:Hong Kong profits tax 37,062 32,792Overseas taxation 261 139Deferred taxation (Note 17) (636) 2,032
36,687 34,963
Associate:Hong Kong profits tax 117 —
Jointly controlled entity:Overseas taxation 1,166 —
37,970 34,963
5. PROFIT ATTRIBUTABLE TO SHAREHOLDERS
The consolidated profit attributable to shareholders included a profit of approximately $106,043,000(2000 - $93,030,000) dealt with in the financial statements of the Company.
Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
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6. DIVIDENDS
Dividends comprised:
2001 2000$’000 $’000
Interim dividend paid: 4.4 cents per share(2000 - 4.0 cents per share) 24,059 22,096
Final dividend proposed: 15.1 cents per share(2000 - 12.8 cents per share) 82,690 70,547
Interim dividend for current year in respectof share options exercised and sharespurchased prior to the dividend payment date 2 —
Final dividend for preceding year in respectof share options exercised and sharespurchased prior to the dividend payment date (275) 42
106,476 92,685
7. EARNINGS PER SHARE
Basic earnings per share was calculated based on the consolidated profit attributable to shareholders of approximately$254,278,000 (2000 - $220,542,000) and the weighted average number of 548,795,754 shares (2000 - 552,193,498shares) in issue during the year.
Diluted earnings per share was calculated based on the consolidated profit attributable to shareholders ofapproximately $254,278,000 (2000 - $220,542,000) and the weighted average number of 549,554,693 shares(2000 - 553,336,830 shares) in issue having been adjusted to reflect the effects of all dilutive potential ordinaryshares during the year.
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Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
8. FIXED ASSETS
a. Movements
Movements in fixed assets (consolidated) were as follows:
2001 2000
Furniture andInvestment Land and Leasehold restaurantproperties buildings improvements equipment Total Total
$’000 $’000 $’000 $’000 $’000 $’000
Cost or valuation
Beginning of year 89,450 570,531 249,881 625,973 1,535,835 1,495,551Revaluation (705) — — — (705) (11,350)Additions — 9,898 21,866 132,452 164,216 135,473Reclassification
(see Note (i)) 8,605 (9,700) — — (1,095) —Disposals — (9,882) (36,042) (46,643) (92,567) (83,839)
End of year 97,350 560,847 235,705 711,782 1,605,684 1,535,835
Representing
At cost — 560,847 235,705 711,782 1,508,334 1,446,385At professional
valuation in2001 97,350 — — — 97,350 —2000 — — — — — 89,450
97,350 560,847 235,705 711,782 1,605,684 1,535,835
Accumulateddepreciation
Beginning of year — 75,371 190,851 408,200 674,422 622,282Charges for the year — 10,425 15,649 88,450 114,524 118,265Reclassification
(see Note (i)) — (1,095) — — (1,095) —Disposals — — (35,572) (36,749) (72,321) (66,125)
End of year — 84,701 170,928 459,901 715,530 674,422
Net book value
End of year 97,350 476,146 64,777 251,881 890,154 861,413
Beginning of year 89,450 495,160 59,030 217,773 861,413 873,269
(i) During the year, certain land and buildings with a cost of approximately $9,700,000 and accumulateddepreciation of approximately $1,095,000 were reclassified as investment properties at net book value. As at31st March, 2001, such investment properties were revalued on an open market value basis. (See alsoNote 8.b)
Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
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8. FIXED ASSETS (Cont’d)
b. Details of investment properties and land and buildings
The carrying amount of investment properties and land and buildings (consolidated) comprised:
Investment properties Land and buildings2001 2000 2001 2000
$’000 $’000 $’000 $’000
Situated in Hong Kong 97,350 89,450 409,455 426,591Situated in the PRC — — 49,486 51,274Situated in Macau — — 17,205 17,295
97,350 89,450 476,146 495,160
Investment properties and land and buildings situated in Hong Kong and Macau are held under long-termleases. Land and buildings situated in the PRC are held under land use rights for a period of 50 years expiringbetween January 2031 and February 2041.
The investment properties were revalued as at 31st March, 2001 on an open market value basis by FPD Savills(Hong Kong) Limited, professional valuers.
Certain of the Group’s investment properties and land and buildings with carrying amounts of approximately$198,145,000 (2000 - $195,695,000) were mortgaged to secure certain of the Group’s banking facilities (seeNote 21).
9. TRADEMARKS
Trademarks (consolidated) comprised:
2001 2000$’000 $’000
TrademarksBeginning of year 64,694 64,274Additions — 420
End of year 64,694 64,694
Less: Provision for impairment in value (2,420) (2,000)
62,274 62,694
The trademarks mainly represented the intellectual properties relating to the ‘Ah Yee Leng Tong’ and ‘The SpaghettiHouse’ operations. They were valued by professional valuers on 30th June, 1991 and 29th February, 1992, respectively,at their fair value, and the valuations were equal to the costs of acquisition of these trademarks.
The directors are of the opinion that the fair value of the trademarks was less than the book value. Accordingly, aprovision of approximately $420,000 (2000 - $2,000,000) was made for the impairment in value and was nettedagainst other revenue, net, in the income statement (see Note 2).
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Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
10. INVESTMENT IN SUBSIDIARIES
In the Company’s balance sheet, investment in subsidiaries comprised:
2001 2000$’000 $’000
Unlisted shares, at cost 331,802 331,802Due from subsidiaries 81,932 96,793
413,734 428,595
Details of principal subsidiaries as at 31st March, 2001 are set out on pages 66 to 69. None of the subsidiaries hadany loan capital in issue at any time during the year ended 31st March, 2001.
The amounts due from subsidiaries were unsecured, non-interest bearing and not repayable within the next twelvemonths.
The directors are of the opinion that the underlying value of the subsidiaries is not less than the carrying value at31st March, 2001.
11. INVESTMENT IN AN ASSOCIATE
Investment in an associate (consolidated) represents:
2001 2000$’000 $’000
Share of net assets of the associate 814 —Loan to the associate 800 —
1,614 —
a. Details of the associate as at 31st March, 2001 were as follows:
Issued and Equity interestPlace and date of fully paid attributable to Principal activities/
Name incorporation share capital the Group Place of operation
Miracle Time Enterprises Hong Kong/ $1,000,000 20% Operating a restaurant/Limited 21st February, 2000 Hong Kong
b. The loan to the associate was unsecured, bore interest at commercial bank rate and was not repayable withinthe next twelve months.
c. The directors are of the opinion that the underlying value of the associate was not less than its carryingamount as at 31st March, 2001.
Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
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12. INVESTMENT IN A JOINTLY CONTROLLED ENTITY
Investment in a jointly controlled entity (consolidated) represents:
2001 2000$’000 $’000
Share of net assets of the jointly controlled entity 13,549 —Due from jointly controlled entity 790 —
14,339 —
a. On 28th September, 2000, the Group acquired an interest in a jointly controlled entity which manages andoperates a quick service restaurant chain known as “Manchu Wok” in the United States, Canada and Poland ata consideration of approximately $24,086,000 including goodwill of approximately $14,174,000 which waseliminated immediately against available reserves.
b. Details of the jointly controlled entity as at 31st March, 2001 were as follows:
Issued and Equity interestPlace and date of fully paid attributable to Principal activities/
Name incorporation share capital the Group Place of operation
Manchu Wok Enterprises, Canada/ Redeemable preference 48% Restaurants/Inc (“MWEI”) 28th July, 2000 shares: The United States,
Class A — Canada, PolandCDN$2,865,000(see Note (i));Class B —CDN$3,435,000(see Note (ii)); and
Ordinary shares:Class C —CDN$1,000(see Note (iii))
(i) As at 31st March, 2001, the Group held all of the Class A shares which are non-voting. The Group is entitled toreceive a cumulative dividend and, upon dissolution, any unpaid dividends plus its stated capital prior to any returnof such amounts to the Class B and Class C shareholders.
(ii) As at 31st March, 2001, the Group held approximately 44% of the Class B shares which are non-voting. The Groupis entitled to receive a cumulative dividend and, upon dissolution, any unpaid dividends plus its stated capital, afterthe return of such amounts to the Group itself (as the Class A shareholder) but before any distributions to the ClassC shareholders.
(iii) As at 31st March, 2001, the Group held approximately 48% of the Class C voting shares.
c. The amount due from the jointly controlled entity was unsecured, non-interest bearing and not repayablewithin the next twelve months.
d. The directors are of the opinion that the underlying value of the jointly controlled entity was not less than itscarrying amount as at 31st March, 2001.
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Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
13. OTHER INVESTMENTS
Other investments (consolidated) represented:
2001 2000$’000 $’000
Listed shares, at cost— listed in Hong Kong* 18,197 18,212
Club debenture, at cost 350 350
18,547 18,562
* Quoted market value of listed investments 9,822 13,843
14. TRADE DEBTORS AND CREDITORS — CREDIT POLICY AND AGING ANALYSIS
The Group’s sales to customers are mainly on a cash basis. The Group also grants a credit period which is usuallyless than 90 days to certain customers for the sales of the Group’s institutional catering services and foodmanufacturing businesses.
As at 31st March, 2001, approximately 90% of the Group’s trade debtors was aged less than 60 days while over99% of the trade creditors was aged less than 60 days.
15. SHORT-TERM BANK BORROWINGS
Short-term bank borrowings (consolidated) comprised:
2001 2000$’000 $’000
Bank overdrafts and loans— with maturity within three months 145,000 65,000— with maturity more than three months 90,000 155,000
Current portion of non-current bank loans (Note 16) 1,541 1,278
236,541 221,278
Secured 166,541 106,278
Unsecured 70,000 115,000
Details of the Group’s banking facilities and pledged assets are set out in Note 21.
Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
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16. NON-CURRENT BANK LOANS
Non-current bank loans (consolidated) comprised:
2001 2000$’000 $’000
Secured bank loans repayable within a period— not exceeding one year 1,541 1,278— of more than one year but not exceeding two years 40,000 1,536
41,541 2,814
Less: Amounts repayable within one year included under short-term bank borrowings (Note 15) (1,541) (1,278)
40,000 1,536
Unsecured bank loans repayable within a period of— more than one year but not exceeding two years 60,000 30,000
100,000 31,536
Details of the Group’s banking facilities and pledged assets are set out in Note 21.
17. DEFERRED TAXATION
Deferred taxation (consolidated) resulted from the following:
2001 2000$’000 $’000
Accelerated depreciation allowances for taxation purposes 11,379 12,015
Movements in deferred taxation (consolidated) were as follows:
2001 2000$’000 $’000
Beginning of year 12,015 9,983(Write-back of) Provision for net timing differences (Note 4) (636) 2,032
End of year 11,379 12,015
There was no significant unprovided deferred taxation.
Deferred taxation was not provided for the property revaluation surplus because such surplus would not constitutea timing difference for taxation purposes and the realisation of the surplus would not be subject to taxation.
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Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
18. SHARE CAPITAL AND SHARE OPTIONS
a. Share capital
2001 2000Number of Number of
shares Nominal value shares Nominal value’000 $’000 ’000 $’000
Authorised
Ordinary shares of $0.10 each 1,000,000 100,000 1,000,000 100,000
Issued and fully paid
Beginning of year 550,658 55,066 551,788 55,179Shares issued under the share
option schemes (Note 18.b) 2,440 244 1,910 191Shares purchased and cancelled
by the Company (i) (6,210) (621) (3,040) (304)
End of year 546,888 54,689 550,658 55,066
(i) During the year, the Company purchased and cancelled 6,210,000 (2000 - 3,040,000) of its ordinaryshares of $0.10 on The Stock Exchange of Hong Kong Limited at a price range of $2.800 to $3.250 pershare with a total consideration of approximately $18,718,000 (2000 - $7,590,000) including relatedexpenses.
Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
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18. SHARE CAPITAL AND SHARE OPTIONS (Cont’d)
b. Share options
The Company has share option schemes, pursuant to which it may grant options to executive directors andemployees of the Group to subscribe for shares in the Company, subject to a maximum of 10% of the issuedshare capital of the Company from time to time excluding for this purpose shares issued on the exercise ofoptions. The subscription price per share will be determined by the Company’s directors, and (i) will not beless than 80% nor more than 100% of the average of the closing price of the shares quoted on The StockExchange of Hong Kong Limited on the five business days immediately preceding the date of offer of theoption or (ii) the nominal value of a share (whichever is the greater). As at 31st March, 2001, the share optionswere exercisable at $2.232 to $2.95 per share during the period from 8th August, 1997 to 31st March, 2013.
Details of executive share options are as follows:
Number of shares
CancelledExercised as a result of
Subscription Beginning during Lapsed on termination ofDate of grant price of year the year expiry employment End of year
21st February, 1991 $1.820 2,060,000 (2,060,000) — — —
1st August, 1992 $2.820 1,700,000 (200,000) (460,000) (300,000) 740,000
1st November, 1994 $2.232 1,000,000 (180,000) — — 820,000
4th November, 1999 $2.950 27,300,000 — — (1,800,000) 25,500,000
32,060,000 (2,440,000) (460,000) (2,100,000) 27,060,000
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Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
19. RESERVES
Movements in reserves (consolidated) were as follows:
2001 2000
Capital Cumulative PropertyShare redemption translation Capital revaluation Contributed Retained
premium reserve reserve reserve reserve surplus profits Total Total$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Consolidated
Beginning of year 125,958 35,212 (1,186) 11,704 7,807 202,019 662,081 1,043,595 931,016Premium on shares issued
on exercise of shareoptions 4,471 — — — — — — 4,471 3,526
Premium on repurchaseof shares (18,097) — — — — — — (18,097) (7,275)
Transfer of reserveson repurchase of shares — 18,718 — — — (18,718) — — —
Deficit on revaluationof investment properties — — — — (705) — — (705) (11,350)
Goodwill arising onacquisition of a jointlycontrolled entity — — — (14,174) — — — (14,174) —
Exchange differencesarising on consolidation — — 2,365 — — — — 2,365 (179)
Profit attributable toshareholders — — — — — — 254,278 254,278 220,542
Dividends — — — — — — (106,476) (106,476) (92,685)
End of year 112,332 53,930 1,179 (2,470) 7,102 183,301 809,883 1,165,257 1,043,595
Company
Beginning of year 125,958 35,212 — — — 211,289 1,063 373,522 376,926Premium on shares issued
on exercise of shareoptions 4,471 — — — — — — 4,471 3,526
Premium on repurchaseof shares (18,097) — — — — — — (18,097) (7,275)
Transfer of reserveson repurchase of shares — 18,718 — — — (18,718) — — —
Profit attributable toshareholders — — — — — — 106,043 106,043 93,030
Dividends — — — — — — (106,476) (106,476) (92,685)
End of year 112,332 53,930 — — — 192,571 630 359,463 373,522
Under the Companies Act of Bermuda, contributed surplus is distributable to shareholders, subject to the conditionthat the Company cannot declare or pay a dividend, or make a distribution out of contributed surplus if (i) it is, orwould after the payment be, unable to pay its liabilities as they became due, or (ii) the realisable value of its assetswould thereby be less than the aggregate of its liabilities and its issued share capital and share premium account.
Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
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20. PENSION SCHEME
Pension schemes are provided to all the employees eligible and employed by the Group in Hong Kong. Certaineligible employees enjoyed either one of the two defined contribution schemes while all other eligible employeeswere under a defined benefit scheme.
The Group’s contribution to the two defined contribution schemes was 5% of monthly salary. Employees under thetwo schemes were entitled to 100% of the employer’s contribution and the accrued interest upon retirement orleaving the Group after completing 9 and 10 years of service respectively counting from the date of joining theschemes, or at a reduced scale from 30% to 90% and from 20% to 90% after completing 2 to 8 years and 2 to 9 yearsof service respectively counting from the date of joining the schemes.
On 1st December, 2000, the Group and the eligible employees under the above two schemes terminated their liabilityto make the contributions. The two schemes were replaced by the Mandatory Provident Fund Scheme (“MPF”), adefined contribution scheme managed by an independent trustee. Under the MPF, each of the Group and the eligibleemployees in Hong Kong make monthly mandatory contributions to the scheme at 5% of the employees’ relevantincome as defined under the Mandatory Provident Fund Schemes Ordinance. The mandatory contributions by eachparty are subject to a maximum of $1,000 per month.
As for the defined benefit scheme, the Group’s contribution to the scheme was calculated on an actuarial basis. Thebenefit entitlement under the scheme is calculated based on the final salary of the staff and the length of servicewith the Group. The scheme was approved by the Government of HKSAR and could be continued after theimplementation of MPF.
The pension schemes which covered the PRC employees were defined contribution schemes at various applicablerates of monthly salary that were in accordance with the local practice and regulations.
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Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
20. PENSION SCHEME (Cont’d)
The aggregate employer’s contributions, net of forfeited contributions, amounted to:
2001 2000$’000 $’000
Employer’s contribution under the defined contribution schemes 4,195 5,418
Less: forfeited contributions utilised to offset employer’s contribution to the defined contribution schemes (745) (1,107)
3,450 4,311
Employer’s contribution under the defined benefit scheme 6,841 8,561
Employer’s contribution under the MPF 8,738 —
19,029 12,872
The contributions by the Group were charged to the income statement on an accrual basis.
The latest actuarial report on the defined benefit scheme was prepared by Ms. Kim Wong and Mr. Calvin Wu,Fellows of the Society of Actuaries, whose report dated 8th September, 2000 showed that the scheme was fullyfunded on a variation of the aggregate method. The market value of the scheme assets as at 31st March, 2000 wasapproximately $106,559,000, representing 123% of the fund’s discontinuance liabilities at that date. The actuarialbasis used included rate of return, salary escalation rate, withdrawal rates, mortality rates and rate of ill health.
21. BANKING FACILITIES AND PLEDGED ASSETS
As at 31st March, 2001, the banking facilities of the Group were covered by:
a. mortgages of certain investment properties and land and buildings of the Group with carrying amounts ofapproximately $198,145,000 (2000 - $195,695,000) (see Note 8.b);
b. corporate guarantees given by the Company.
Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
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22. COMMITMENTS AND CONTINGENT LIABILITIES
a. Lease commitments
The Group’s total future minimum lease payment commitments under operating leases, were as follows:
2001 2000$’000 $’000
(Note 25)Land and buildings
— Not later than one year 238,857 196,263— Later than one year and not later than five years 337,906 249,034— Later than five years 16,945 5,277
593,708 450,574
The above lease commitments only include commitments for basic rentals, and do not include commitmentsfor additional rentals payable, if any, when turnover of individual restaurants exceeds a pre-determined levelas it is not possible to determine in advance the amount of such additional rentals.
b. Capital commitments
The Group had the following capital commitments which have not been provided in the consolidated financialstatements:
2001 2000$’000 $’000
Authorised and contracted for 6,336 7,146Authorised but not contracted for 149,934 83,287
156,270 90,433
c. Guarantees
As at 31st March, 2001, the Group had given guarantees totalling approximately $1,103,000,000 (2000 -$1,050,000,000) to financial institutions in connection with their loans granted to its subsidiaries and jointlycontrolled entity.
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Notes to the Financial Statements (cont’d)
31st March, 2001
(Amounts expressed in Hong Kong dollars unless otherwise stated)
23. NOTE TO CONSOLIDATED CASH FLOW STATEMENT
Analysis of changes in financing during the year is as follows:
2001 2000
Share capital Bank loans withand share maturity overpremium three months Total Total
$’000 $’000 $’000 $’000
Beginning of year 181,024 187,814 368,838 639,073
Issue of shares upon exerciseof share options 4,715 — 4,715 3,717
Repurchase of shares (18,718) — (18,718) (7,579)
Net borrowing (repayment)of bank loans — 3,727 3,727 (266,373)
End of year 167,021 191,541 358,562 368,838
24. SUBSEQUENT EVENTS
On 3rd July, 2001, the Group cancelled certain banking facilities amounting to $220,000,000 which were not utilizedas of 31st March, 2001.
25. COMPARATIVE FIGURES
Certain of the 2000 comparative figures have been reclassified to conform to the current year’s presentation due tothe adoption of Statement of Standard Accounting Practice Number 14 “Leases” issued by the Hong Kong Societyof Accountants.
Principal Subsidiaries (cont’d)
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The following is a list of the principal subsidiaries whose operations and assets materially affect the results or assets ofthe Group.
Country of Percentage
incorporation and Issued share Class of of shares Principal
Name of subsidiary operation capital shares held held * activities
Ah Yee Leng Tong Hong Kong HK$600,000 Ordinary 100% Catering
Restaurants Limited
Amigo Mio Limited Hong Kong HK$20 Ordinary 100% Catering
Ashlone Limited Hong Kong HK$1,320,000 Ordinary 100% Catering
Asia Pacific Catering Hong Kong HK$20 Ordinary 100% Catering
Corporation Limited
Bamburgh Limited Hong Kong HK$20 Ordinary 100% Catering
Barneston Limited Hong Kong HK$20 Ordinary 100% Investment holding
Barson Development Limited Hong Kong HK$10,000 Ordinary 100% Property investment
Birgitta Limited Hong Kong HK$900,000 Ordinary 100% Investment holding
Bloomcheer Limited Hong Kong HK$500,000 Ordinary 100% Catering
Bravo le Café Limited Hong Kong HK$2 Ordinary 100% Catering
Brilliantwin Limited Hong Kong HK$2 Ordinary 100% Catering
Café de Coral Assets Limited British Virgin Islands US$1 Ordinary 100% Investment holding
Café de Coral Central Hong Kong HK$20 Ordinary 100% Food processing
Processing Limited
Café de Coral (China) Limited Hong Kong HK$40,000,000 Ordinary 100% Investment holding
Café de Coral (Denmark) ApS Denmark DKK125,000 Ordinary 100% Investment holding
Café de Coral British Virgin Islands US$1 Ordinary 100% Investment holding
Development Limited*
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Principal Subsidiaries (cont’d)
Country of Percentage
incorporation and Issued share Class of of shares Principal
Name of subsidiary operation capital shares held held * activities
Café de Coral Fast Food Limited Hong Kong HK$20 Ordinary 100% Catering
Café de Coral Group Limited Hong Kong HK$44,894,967 Ordinary 100% Catering
Café de Coral (Guangzhou)
Catering Company Limited The PRC HK$21,000,000 Ordinary 100% Catering
Café de Coral (Macau) Limited Macau MOP300,000 Ordinary 70% Catering
Café de Coral Overseas Limited British Virgin Islands US$1 Ordinary 100% Investment holding
Café de Coral Properties Limited British Virgin Islands US$1 Ordinary 100% Investment holding
Charley’s Chicken Limited Hong Kong HK$2 Ordinary 100% Catering
City Energy Limited Hong Kong HK$200,000 Ordinary 100% Property investment
Dai Lo Foo (Holdings) Limited Hong Kong HK$1,340,000 Ordinary 100% Catering
Diners Court Management Hong Kong HK$2 Ordinary 100% Catering
Limited
Dongguan Continental Foods The PRC RMB13,000,000 Ordinary 100% Food processing
Limited
Eldoon Limited Hong Kong HK$10,000 Ordinary 100% Catering
Exo Enterprises Limited Hong Kong HK$4,000,000 Ordinary 100% Catering
Foshan Café de Coral The PRC HK$6,000,000 Ordinary 100% Catering
Catering Company Limited
Gateway City Limited Hong Kong HK$20 Ordinary 100% Catering
Glory Congee and Noodles Hong Kong HK$2 Ordinary 100% Investment holding
Food Limited (securities)
Goodton Development Limited Hong Kong HK$10,000 Ordinary 100% Investment holding
Principal Subsidiaries (cont’d)
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Country of Percentage
incorporation and Issued share Class of of shares Principal
Name of subsidiary operation capital shares held held * activities
Grand Seasons (Central) Food Hong Kong HK$10,000 Ordinary 100% Catering
and Beverages Caterers
Company Limited
Interface Consultants Limited British Virgin Islands US$1 Ordinary 100% Provision of
consultancy services
Invol Resources Limited Hong Kong HK$6,125,000 Ordinary 100% Property investment
(incorporation)/
The PRC (operation)
Jiangmen Café de Coral The PRC HK$5,000,000 Ordinary 100% Catering
Catering Company Limited
Kolink Enterprises Limited Hong Kong HK$2 Ordinary 100% Leasing of premises
space
Maradona Limited Hong Kong HK$20 Ordinary 100% Catering
Paramount Success Limited Hong Kong HK$2 Ordinary 100% Catering
Radeberg Limited Hong Kong HK$20 Ordinary 100% Investment holding
Roberto Assets Limited British Virgin Islands US$1 Ordinary 100% Investment holding
Samworth Investments Limited British Virgin Islands US$1 Ordinary 100% Investment holding
Scanfoods International S.A. The Republic US$3,000,000 Ordinary 100% Investment holding
of Panama
Scanfoods Limited Hong Kong HK$2,100,000 Ordinary 100% Food trading
Shenzhen Café de Coral The PRC HK$12,000,000 Ordinary 100% Catering
Catering Company Limited
Sheriafort Assets Limited British Virgin Islands US$1 Ordinary 100% Investment holding
(securities)
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Principal Subsidiaries (cont’d)
Country of Percentage
incorporation and Issued share Class of of shares Principal
Name of subsidiary operation capital shares held held * activities
Sparango Limited Hong Kong HK$20 Ordinary 100% Catering
Speedy Chef Limited Hong Kong HK$2 Ordinary 100% Catering
Sturgate Investments Limited British Virgin Islands US$1 Ordinary 100% Investment holding
The Spaghetti House Hong Kong HK$10,000,000 Ordinary 100% Investment holding
Restaurants Limited
Very Nice Fast Food Limited Hong Kong HK$17,025,000 Class A 100% Catering
HK$5,675,000 Class B 100%
Weli Company Limited Hong Kong HK$1,000,000 Ordinary 100% Catering
Winfast Holdings Limited Hong Kong HK$10,000 Ordinary 100% Property investment
(incorporation)/
The PRC (operation)
Worldway Limited Macau MOP300,000 Ordinary 100% Property investment
Yumi Yumi Caterers Limited Hong Kong HK$6,701,560 Class A 100% Catering
HK$2,872,100 Class B 100%
Zhuhai Café de Coral The PRC HK$4,000,000 Ordinary 100% Catering
Catering Company Limited
* Café de Coral Development Limited is held directly by the Company. All other subsidiaries are held indirectly.
Report of the Auditors
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Arthur Andersen & Co
21st Floor, Edinburgh Tower
The Landmark
15 Queen’s Road Central
Hong Kong
AUDITORS’ REPORTTO THE SHAREHOLDERS OF CAFÉ DE CORAL HOLDINGS LIMITED(Incorporated in Bermuda with limited liability)
We have audited the financial statements on pages 37 to 69 which have been prepared in accordance with accountingprinciples generally accepted in Hong Kong.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The company’s directors are responsible for the preparation of financial statements which give a true and fair view. Inpreparing financial statements which give a true and fair view it is fundamental that appropriate accounting policies areselected and applied consistently.
It is our responsibility to form an independent opinion, based on our audit, on those statements and to report our opinionto you.
BASIS OF OPINION
We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society ofAccountants. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in thefinancial statements. It also includes an assessment of the significant estimates and judgements made by the directors inthe preparation of the financial statements, and of whether the accounting policies are appropriate to the circumstances ofthe company and of the group, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessaryin order to provide us with sufficient evidence to give reasonable assurance as to whether the financial statements are freefrom material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation ofinformation in the financial statements. We believe that our audit provides a reasonable basis for our opinion.
OPINION
In our opinion the financial statements give a true and fair view of the state of affairs of the company and of the group asat 31st March, 2001 and of the profit and cash flows of the group for the year then ended, and have been properlyprepared in accordance with the accounting principles generally accepted in Hong Kong and the disclosure requirementsof the Hong Kong Companies Ordinance.
Arthur Andersen & CoCertified Public Accountants
Hong Kong, 5th July, 2001
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Five Year Summary (cont’d)
For the five years ended 31st March, 2001
(Amounts expressed in Hong Kong dollars)
CONSOLIDATED INCOME STATEMENTS
2001 2000 1999 1998 1997$’000 $’000 $’000 $’000 $’000
Turnover 2,540,326 2,408,822 2,350,904 2,181,544 2,037,417Cost of sales (2,164,773) (2,038,182) (2,045,171) (1,891,028) (1,799,216)
Gross profit 375,553 370,640 305,733 290,516 238,201Administrative expenses (115,730) (125,225) (116,930) (108,076) (106,880)Other revenue, net 54,540 49,604 55,806 42,424 91,176
Profit from operations 314,363 295,019 244,609 224,864 222,497Finance costs (25,987) (39,514) (52,441) (52,587) (49,584)
288,376 255,505 192,168 172,277 172,913
Share of profit of an associate 731 — — — —Share of profit of a jointly
controlled entity 3,141 — — — —
Profit before taxation 292,248 255,505 192,168 172,277 172,913Taxation (37,970) (34,963) (16,005) (29,371) (24,163)
Profit attributable to shareholders 254,278 220,542 176,163 142,906 148,750Dividends (106,476) (92,685) (77,305) (69,817) (70,355)
Retained profit for the year 147,802 127,857 98,858 73,089 78,395Retained profit brought forward 662,081 534,224 435,366 362,277 283,882
Retained profit carried forward 809,883 662,081 534,224 435,366 362,277
Basic earnings per share 46.33cents 39.94cents 33.52cents 27.64cents 28.58cents
Diluted earnings per share 46.27cents 39.86cents 33.46cents 27.63cents 28.50cents
CONSOLIDATED BALANCE SHEETS
ASSETSNon- current assetsFixed assets 890,154 861,413 873,269 921,383 904,647Construction in progress — 5,338 3,364 1,423 2,451Trademarks 62,274 62,694 64,274 64,274 65,203Notes receivable — — — 232,687 232,687Investment in an associate 1,614 — — — —Investment in a jointly
controlled entity 14,339 — — — —Other investments 18,547 18,562 18,562 12,992 350
986,928 948,007 959,469 1,232,759 1,205,338
Five Year SummaryFor the five years ended 31st March, 2001
(Amounts expressed in Hong Kong dollars)
Five Year Summary (cont’d)
For the five years ended 31st March, 2001
(Amounts expressed in Hong Kong dollars)
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CONSOLIDATED BALANCE SHEETS (Cont’d)
2001 2000 1999 1998 1997$’000 $’000 $’000 $’000 $’000
Current assetsStocks 49,375 54,188 49,866 54,107 38,193Prepayments and deposits 122,154 101,369 97,087 100,162 109,063Trade and other debtors 25,475 16,092 15,903 19,225 12,179Short-term investment
in promissory notes — — 257,119 24,432 24,432Taxation recoverable — — — — 3,419Short-term investments 9,169 — — — —Cash and bank placements 681,313 524,714 419,757 141,318 208,215
887,486 696,363 839,732 339,244 395,501
Current liabilitiesShort-term bank borrowings 236,541 221,278 481,294 141,182 205,943Trade creditors 58,198 52,129 53,367 47,039 49,081Other creditors and accrued liabilities 153,232 146,780 138,301 133,743 242,580Taxation payable 12,428 11,424 10,314 7,352 922Proposed final dividend 82,690 70,547 56,854 50,849 52,115
543,089 502,158 740,130 380,165 550,641
Net current assets (liabilities) 344,397 194,205 99,602 (40,921) (155,140)
Total assets less current liabilities 1,331,325 1,142,212 1,059,071 1,191,838 1,050,198
Non-current liabilitiesNon-current bank loans 100,000 31,536 62,893 389,091 334,909Deferred taxation 11,379 12,015 9,983 20,683 18,494
111,379 43,551 72,876 409,774 353,403
NET ASSETS 1,219,946 1,098,661 986,195 782,064 696,795
CAPITAL AND RESERVESShare Capital 54,689 55,066 55,179 50,873 52,095
Share Premium 112,332 125,958 129,707 28,867 46,153Capital Redemption Reserve 53,930 35,212 27,633 26,785 7,731Cumulative Translation Reserve 1,179 (1,186) (1,007) (1,134) (961)Capital Reserve (2,470) 11,704 11,704 11,704 —Property Revaluation Reserve 7,102 7,807 19,157 19,157 —Contributed Surplus 183,301 202,019 209,598 210,446 229,500Retained Profits 809,883 662,081 534,224 435,366 362,277
Total reserves 1,165,257 1,043,595 931,016 731,191 644,700
Shareholders’ equity 1,219,946 1,098,661 986,195 782,064 696,795