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Annual Report 2005
年 報
CAFE DE CORAL HOLDINGS LIMITED(Incorporated in Bermuda with limited liability)
大家樂集團有限公司
CAFE DE CORAL HOLDINGS LIMITED
(於百慕達註冊成立之有限公司)
(Incorporated in Bermuda with limited liability)
大家樂集團有限公司
Annual Report 2005 年
報
´
´
CA
FE DE C
ORA
L HO
LDIN
GS LIM
ITED大家樂集團有限公司
´
CONTENTS
Directors and Corporate Information 2
Financial Highlights and Calendar 3
Chairman’s Statement 5
Managing Director’s Operational Review 10
Biography of Directors and Senior Management 18
Report of the Directors 22
Consolidated Profit and Loss Account 34
Balance Sheets 35
Consolidated Statement of Changes in Equity 37
Consolidated Cash Flow Statement 38
Notes to the Accounts 40
Principal Subsidiaries 79
Principal Properties held for Investment Purposes 84
Report of the Auditors 85
Five-Year Summary 86
2 DIRECTORS AND CORPORATE INFORMATIONC
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BOARD OF DIRECTORS
Executive DirectorsMr. Chan Yue Kwong, Michael (Chairman)
Mr. Lo Hoi Kwong, Sunny (Managing Director)
Ms. Lo Pik Ling, Anita
Mr. Lo Tak Shing, Peter
Non-executive DirectorsMr. Lo Tang Seong, Victor
Mr. Lo Hoi Chun
Mr. Hui Tung Wah, Samuel
Mr. Choi Ngai Min, Michael*
Mr. Li Kwok Sing, Aubrey*
Mr. Kwok Lam Kwong, Larry*
* Independent Non-executive Directors
COMPANY SECRETARIES
Ms. Li Oi Chun, Helen
Mr. To Hon Fai, Alfred
QUALIFIED ACCOUNTANT
Ms. Chung Sau Man, Grace
REGISTERED OFFICE
Canon’s Court, 22 Victoria Street
Hamilton HM12, Bermuda
HEAD OFFICE
10th Floor, Café de Coral Centre
5 Wo Shui Street, Fo Tan
Shatin, New Territories, Hong Kong
AUDITORS
Messrs. PricewaterhouseCoopers
SOLICITORS
Messrs. Johnson Stokes & Master
PRINCIPAL BANKERS
ABN AMRO Bank N.V.
Bank of China (Hong Kong) Limited
Bank of Communications Co., Ltd.
The Bank of Tokyo-Mitsubishi, Ltd.
BNP Paribas
Calyon Corporate and Investment Bank
China Construction Bank
Citibank, N.A.
Hang Seng Bank Limited
The Hongkong and Shanghai Banking
Corporation Limited
Mizuho Corporate Bank, Ltd
Rabobank, B.A.
Standard Chartered Bank (HK) Ltd
Sumitomo Mitsui Banking Corporation
UFJ Bank Limited
Wing Lung Bank Ltd.
BERMUDA SHARE REGISTRARS
The Bank of Bermuda Limited
HONG KONG BRANCH SHAREREGISTRARS
Computershare Hong Kong Investor
Services Limited
WEBSITE
http://www.cafedecoral.com
FINANCIAL HIGHLIGHTS AND CALENDAR 3
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Year ended 31st March 2005 2004 ChangeHK$’000 HK$’000 %
Turnover 3,038,498 2,723,295 11.57
Profit attributable to shareholders 284,851 258,074 10.38
Total assets 1,998,142 1,831,934 9.07
Net assets 1,673,072 1,548,333 8.06
Basic earnings per share 53.23 cents 48.62 cents 9.48
Interim and final dividendsper share 27.50 cents 24.40 cents 12.70
Special dividends per share – 12.95 cents –
Net assets per share $3.12 $2.91 7.22
FINANCIAL HIGHLIGHTS
FINANCIAL CALENDAR
Half year results Announcement on 8th December, 2004
Full year results Announcement on 12th July, 2005
Annual Report Despatched to shareholders in late July, 2005
Closure of register of 15th September, 2005 to 22nd September, 2005members for the proposedfinal dividend
Annual General Meeting 22nd September, 2005
Dividends Interim : 7.5 cents per share paid on 11th January, 2005
Final : 20 cents per share payable on 30th September, 2005
4C
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HIGHLIGHTS
• The Group’s annual turnover attained new heights, exceeding theHK$3,000 million mark.
• Earning performance continued with its growth momentum to reach thehistoric high of HK$285 million.
• The strong branding and pricing power of our core businesses continuedfor the sixth consecutive year to deliver a double-digit operating profitmargin.
• Our strategic business expansion in Eastern and Southern China at bothfirst and second tier cities have developed into a sizable growth platformof 97 operating units in total.
• For the 10th consecutive year, shareholders’ value was again enhancedwith another increase in total dividend per share.
Café de Coral GroupStrategic Businesses
Total No. of Operating Units: 541(As of 12/7/2005)
Systemwide Sales Distribution Financial Growth Trends
Group Net Profits & EPS Growth
240
200
160
120
80
40
0North China &
AmericanHong Kong
OverseasInstitutional Specialty
QSRQSR
QSRCatering Restaurants
182
126
91
5633
16
9
816
4
Total:198
Total:135
Total:99
Total:72
Total:37
No. of New Shops: 53(since April 01, 2004)
0
50
100
150
200
250
300
350
95 96 97 98 99 00 01 02 03 04 05
Net ProfitsEPS
93
17.7
124
23.9
145139
172
219
252280
243258
285
27.926.9
32.8
39.6
45.8
51.2
44.848.6
53.2
0
10
20
30
40
50
60
53.4%Hong Kong QSR
SpecialtyRestaurants
7.7%
InstitutionalCatering
9.7%
Food Processing& Distribution
2.6%
China &Overseas QSR
6.6% North American QSR20.0%
QSR Institutional Specialty Food Processing Property &Catering Restaurant & Distribution Development
Café de Coral Asia Pacific The Spaghetti Scanfoods Franchising(HK) Catering House
Café de Coral Luncheon Star Ah Yee Leng Denny’s Property(China) Tong
Manchu Wok Bravo le Café(Canada)
Manchu Wok Super Super(USA) Congee & Noodles
Fan Ting Dai Bai Dang(USA) (USA)
New Asia Dabao
Oliver’s SuperSandwiches
Net
Pro
fits
(H
K$m
)
EP
S (
HK
$ ce
nts)
CHAIRMAN’S STATEMENT 5
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TO ALL SHAREHOLDERS,EMPLOYEES AND CUSTOMERS:
I wrote to you in my last annual report saying
that 2004 would be a year clouded with
changing business conditions that required
management to execute all the intended
business initiatives in order to deliver a solid
and healthy result. I reckoned that the rise in
cost at home and business challenges abroad
are the mounting concerns that we have to
deal with during the year.
As we have set out to achieve, we have been
able to deliver a solid financial and operational
performance. Group’s turnover and net profit
registered a record high of HK$3.04 billion
and HK$285 million respectively. As at 31st
March, 2005, the Group’s net asset value
increased to HK$1.67 billion and the Group’s
financial position continued to be strong, with
a net cash of about HK$525 million and
available banking facilities of approximately
HK$836 million. There were no material
changes in contingent liabilities and charges
on assets.
Given the Group continues to maintain a
healthy net cash position for funding future
potential development, I would again
recommend to the Board to repatriate greater
return to our shareholders by distributing a
final dividend of 20 cents per share. Together
with the interim dividend of 7.5 cents paid on
11th January, 2005, a total dividend of 27.5
cents per share would be payable for the entire
year, representing an increase of 12.7% over
that of last year.
The year 2004 saw the continued economic
recovery in Hong Kong, while i t also
witnessed a catering industry with a landscape
that is constantly changing. With the improved
economic condition and the continuous influx
of Mainland travelers under the Individual
Visit Scheme, better performance has been
registered in our local restaurant business,
particularly in the commercial districts. On
the other hand, cost increase in raw materials
and retail rental creeped back as significant
challenges to the industry. In response, we as
a business enterprise must always adapt to
these constant challenges. As demonstrated
positively in this year’s result, not only are we
able to protect the profit margin of our core
business from being eroded by any such cost
increments, we also managed to continue
achieving eff iciency and productivity
enhancement. What was perhaps most exciting
about 2004 was that we began to see the fruits
of our strategic business imperatives initiated
a few years back, which include (1) building
on local branding power; (2) proactiveCafé de Coral at Maritime Square, Tsing Yi
The Spaghetti House at apm, Millennium City 5, Kwun Tong
6 CHAIRMAN’S STATEMENTC
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approach to product improvement; (3)
continuous rollout of new shop design format;
(4) vigorous business technology re-
engineering; and (5) steadily unlocking vast
potential of our overseas markets. All these
initiatives are centered directly on enhancing
value to both our shareholders and our
customers, which is the focus of everything
we do at the Group today.
SUSTAINABLE GROWTH INHOME MARKETS
As an ongoing strategic imperative, we
reckoned that we are serving a target customer
who is constantly redef ining her needs, we
took it upon ourselves to never stop improving
and innovating on our products and shop
environment in order to enhance the branding
power of all of our local restaurant chains.
Coupled with a series of effective customer-
focus marketing campaigns, the strong
branding of Café de Coral and The Spaghetti
House have given us the pricing power to
shelter from cost pressure and margin erosion.
Under the same token, by revamping its
business model, f ine-tuning its product mix,
Oliver’s Super Sandwiches at Festival Walk, Kowloon Tong
rationalizing its costing structures, renovating
its shop images and opening successful new
stores, the Oliver’s Super Sandwiches is also
well-positioned for local business growth.
Speaking of the local market, I am also glad
to repor t that both our Asia Pacif ic
institutional catering and Luncheon Star have
been able to regain their growth momentum
to recuperate from the signif icant business
downturn during the SARS outbreak in 2003.
Constant improvement in shop design remains
another important strategic imperative at all
our restaurants within the Group. Following
years of successful shop renovation program
implemented throughout our various chains
of restaurants, we accelerated our efforts in
the rollout of our new interior design program
for all of our restaurants which include Café
de Coral, The Spaghetti House and Oliver’s
Super Sandwiches. This new format provides
a more comfortable dining experience aiming
to add value to our customers in every large
and small ways. The design rollout not only
revolutionizes the dining experience and raises
the bar for the rest of the industry, it is a
business strategy designed to win customer
loyalty, while expanding our customer base.Total Quality Service Regime – Annual Quality ServiceAward Presentation Ceremony
CHAIRMAN’S STATEMENT 7
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Business technology is another one of our
imperatives, which plays an increasingly
important role in the services we offer to
customers. It plays an important role to
strengthen connections with our customers and
to make their lives easier from the speed and
convenience of transaction offered at our
counters. The full-scale implementation of the
computerized Point-of-Sales System and
Business Management System, together with
the smart-card infrastructure and an effective
customer loyalty program, have optimized
market ing effec t iveness , opera t ional
eff iciencies, and product delivery time. The
systems have also helped to maintain a more
timely information update and a more
powerful data analysis at the back office.
CAPITALIZING OPPORTUNITIESIN GROWTH MARKETS
As indicated in many of my previous
statements, unlocking the vast potentials of
our overseas market has always been our long
term imperatives of strategic value. We
recognized that the Group’s continuous
expansion into the China market has been a
key driver for business growth. On this, we
have embarked on a multi-directional
development strategy in China. Our 50% stake
in the 75 store restaurant chain of New Asia
Dabao in Eastern China presents the Group
with a strong foothold in this market of great
potentials. After taking over the management
since acquisition in July 2003, we witnessed
promising results in implementing a series of
value-added business improvement initiatives
in the areas of operational control, purchasing
and product development , market ing
campaigns, staff training, store design as well
as menu innovation, which should eventually
bear fruits in the upcoming years.The Spaghetti House at Hanford House, Nathan Road
8 CHAIRMAN’S STATEMENTC
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Building on the successful cumulated
experience and a more refined business model,
we are now embarking on a more aggressive
branch development program in Southern
China. I am pleased to report that our
established Café de Coral set up some ten
years ago have now recorded meaningful
profitability and consistent earning growth,
with all our new branches in the region also
posting satisfactory results shortly after
opening. At the same time, we have been
relentless in testing out new grounds with our
business re-entry in the f irst tier cities of
China, such as our first The Spaghetti House
restaurant in Shenzhen and the comeback
opening of Café de Coral in Guangzhou and
Shanghai last year with satisfactory results.
As of today, the total number of operating
units in China reaches 97, al l within
management expectation.
We also recognize that expansion outside
greater China is another strategic play for our
long term business growth. As I reported last
year, our managing partner in North American
business continued with i ts business
consolidation and restructuring process.
Concerned with a setback in the business
performance, we are putting in place greater
f inancial scrutiny and stricter corporate
governance on this joint venture business. We
entrust our overseas partner would ensure the
management team of this jointly-controlled
entity to deliver the business targets as set
out.
Café de Coral at Shanghai Times Square
Manchu Wok at New Market, Toronto
LOOKING BACK AND AHEAD
I would like to express my heartfelt gratitude
to every member of our staff for their
continued commitment and perseverance.
Taking this opportunity, I extend my sincerer
appreciation to the long and dedicated
contribution of Ms. Leung Sau Lai, Kathy,
who resigned as non-executive director for
personal reasons during the year, and at the
same time welcoming Mr. Kwok Lam Kwong,
New Asia Dabao at Ruijin Road, Shanghai
CHAIRMAN’S STATEMENT 9
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Larry, who joined the Group in July 2004 as
an independent non-executive director. My
gratitude also goes to our shareholders,
customers and business par tners who
relentlessly supported and contributed for the
well-being of the Group.
I am glad to also report that the Group was
recognized for its corporate governance and
technology excellence in winning the “Overall
Regional Best Managed Medium Cap
Company Award” and the “IT Excellence
Awards” from AsiaMoney and the Hong Kong
Computer Society respectively. At the same
time, I have been bestowed personally with
the “Hong Kong Business Mastermind”
Award, an honor which I am proud to receive
on behalf of the Group.
Looking ahead, we are encouraged with the
improved economic conditions and the
brighter business outlook in Hong Kong at
the back of the continued positive Central
Government policies, the improved inflow of
Mainland visitors to Hong Kong and the
opening of the Disney theme park in
September this year.
While we are witnessing a gradual and healthy
economic recovery under a manageable
inflation, we are also watching out very
closely the general rise in business cost. Each
day, in thousands of ways large and small, we
are constantly looking for ways to improve
on our products and to raise the standards on
the overall dining experience, all focused on
redef ining our brand promise to constantly
strive for excellence for our customers. As
always, I invite you to come and experience
yourself the passion and spirit of innovation
that permeates our enterprise.
Chan Yue Kwong, Michael
Chairman
Hong Kong, 12th July, 2005“Hong Kong Business Mastermind” Award PresentationCeremony
10 MANAGING DIRECTOR’S OPERATIONAL REVIEWC
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INTRODUCTION
The year under review was encouraging but
not without challenge. With focused business
strategies and a competent management team,
taking advantage of the steady recovery of
local economy which resulted in improved
operating environment, the group was able to
deliver stable prof it growth for the year in
the face of rising rent, food and labour costs.
The Group recorded increases in both turnover
of 11.6% to HK$3.04 billion and prof it
attributable to shareholders of 10.4% to
HK$285 million.
While focusing on our core businesses in
Hong Kong, our conscious effort to identify
opportunities that will create value for our
shareholders led us to continuously widening
our business platform overseas. In the PRC,
our strategy for Southern and Eastern China
was one for growth. In North America, we
continued to explore different scenarios with
our joint-venture partner to more effectively
manage and turn around our business there.
FAST FOOD BUSINESS
Café de Coral fast food continued to maintain
its leading position in the industry despite
f ierce local competition. During the year, 5
shops were opened, taking the total number
of Café de Coral fast food restaurants in
Hong Kong to 123 as at 31st March, 2005.
Consistent with our marketing strategy, we
launched adver tising and promotional
campa igns t o p ro j ec t a young and
contemporary image. Our series of TV
commercial with celebrity endorsement
intended to energize our brand was well
received. Our joint loyalty program with MTR
and Octopus was again a success this year.
Café de Coral at Maritime Square, Tsing Yi
Product-wise, we continued to introduce
innovative products to our menu to provide
more and better choices to our customers. The
offering of freshly brewed coffee was a
particular success in winning over the
applause of our customers. Meanwhile, by
upgrading the quality of our core products,
such as Shanghai-Style Spare Ribs with
Vegetable Rice and Baked Pork Chop with
Rice, repackaging them with high quality
utensil, we differentiated our products from
those of our competitors.
Freshly Brewed Coffee
MANAGING DIRECTOR’S OPERATIONAL REVIEW 11
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FAST FOOD BUSINESS (Continued)
Operationally, we initiated a “Q-Shop
program” aimed at promoting the best
products’ and services’ standards across all
Café de Coral shops.
We recognize the importance of continuously
refreshing our stores. We invested over HK$28
million to renovate 16 Café de Coral shops
in order to project a stylish restaurant image.
The renovation program was extended to cover
our mini shops as well as shops at public
housing estates. All of our restaurants are now
smoke-free, assuring our customers a healthy
dining environment as well as extra comfort.
In addition, well-ventilated smoking cabins
have been added to 22 of our restaurants to
provide our smoking customers with a choice.
Training programs focused at service
excellence were conducted for our frontline
staff to ensure a continuous culture of
customer-oriented attitude and effort.
Completion of the 4-year modernization
program upgraded our central kitchen in Hong
Kong, allowing us to improve productivity
while lowering cost. It also helped to maintain
our high standard of hygiene in food
processing. During the year, we successfully
transplanted certain labour intensive food
processing procedures from Hong Kong to our
Dongguan plant. Substantial cost saving had
been realized since the plant was put into full
operation in 2002. We are undergoing a
feasibility study to expand the production
capacity of this plant without losing its
discipline of stringent cost control.
With the strong branding power of Café de
Coral and our continuous effort to upgrade
the quality and standard of our food and
services, we have been able to protect the
profit margin of our fast food operations from
rising costs.
Super Super Congee & Noodles, another fast
food brand of our business in Hong Kong,
delivered satisfactory performance during the
year. As at 31st March, 2005, there were 5
outlets in Hong Kong. With increasing market
acceptance, we have another reputable fast
food chain in Hong Kong that is expansion-
ready.
Oliver’s Super Club
Since taking over the entire operations of
Oliver’s Super Sandwiches restaurants in
June 2003, this concept has regained its
momentum for growth. We were particularly
encouraged by the financial performance that
came so shortly after acquisition. Having
successfully revamped its business model,
f ine-tuned its product mix and upgraded its
shop image, Oliver’s Super Sandwiches is
well positioned as a unique chain of sandwich
restaurants offering high quality, freshly made
products.
12 MANAGING DIRECTOR’S OPERATIONAL REVIEWC
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FAST FOOD BUSINESS (Continued)
During the year, 7 outlets were upgraded to
give them a contemporary lifestyle image.
With the opening of 2 new outlets at
Enterprise Square Three, Kowloon Bay and
apm at Millennium City Phase 5, Kwun Tong,
Oliver’s network of shops has been extended
to East Kowloon.
In Hong Kong, with wide recognition of our
professional catering service amongst
institutional clients, Asia Pacific Catering not
only solidif ied its business relation with the
public sector, but also cultivated a number of
reputable clients in the commercial sector. In
the PRC market, Asia Pacif ic Cateringaccelerated its expansion by securing 3 new
catering contracts during the year. With solid
credentials built over the years, it won
contracts from renowned manufacturers with
international exposure.
New clients of Asia Pacific Catering included
Bank of East Asia and Baptist Hospital in
Hong Kong and Luen Thai Holdings, the
garment manufacturer with facilities in
Dongguan.
Oliver’s Super Sandwiches at Enterprise Square Three,Kowloon Bay
Our student catering business, LuncheonStar, recorded encouraging business growth
and prof it contribution to the Group. The
outbreak of SARS heightened parents’ and
schools’ awareness of food safety and hygiene.
Having been awarded the international
accreditation of “HACCP” and “ISO9001” on
food safety and monitoring system, LuncheonStar strengthened its competitive edge as a
recognized and trusted leading school meal
caterers for quality and healthy food amongst
parents and teachers.
In order to meet increasing demand, the
existing reheat center in Yuen Long will be
expanded in the coming year to better serve
neighbouring schools.
We are conf ident that Oliver’s Super
Sandwiches has great growth potential both
locally and overseas. As at 31st March, 2005,
Oliver’s Super Sandwiches restaurant chain
comprised of 13 operating units in Hong
Kong, with 8 units of franchised restaurants
in the Philippines.
INSTITUTIONAL CATERING
Asia Pacific Catering recovered from the
hard hit suffered at the outbreak of SARS in
2003 and regained its momentum this past
year.
During the year, Asia Pacific Catering was
able to secure additional contracts with 9 new
units, making a total of 69 operating units as
at 31st March, 2005, including 5 units in
Dongguan and Shenzhen, PRC. These units
were primarily in the health-care sector, the
educational sector, the commercial and
manufacturing sector and the hospitality and
banking sectors.
Oliver’s Super Sandwiches at Festival Walk, Kowloon Tong
MANAGING DIRECTOR’S OPERATIONAL REVIEW 13
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SPECIALTY RESTAURANT
The Spaghetti House outperformed its peers
in the mid-priced specialty restaurants sector
in Hong Kong amid intense competition. Two
new restaurants were added to the concept’s
portfolio. One was located at Festival Walk,
Kowloon Tong while the other was opened at
apm, Millennium City Phase 5, Kwun Tong.
Both are prestigious shopping arcades
strategically situated at transportation hubs in
Kowloon.
In addition to growth, The Spaghetti House
also focused on building up a trendy and
stylish image to differentiate itself from the
competitors. An image uplift program was
carried out throughout the year to the existing
7 The Spaghetti House restaurants to enrich
the dining experience of our customers.
Innovative products with high-perceived value
were also introduced during the year. They
were well received by our customers.
Supported by our promotion and loyalty
programs, they all led to increment of
patronage and enlargement of customer base.
Management also tested this business model
outside of Hong Kong. In December, 2004,
the f irst company-owned store was opened at
“Mix City”, Shenzhen, PRC. We received
encouraging response from local customers
and are ref ining the business model with an
aim to rolling out this concept in the Greater
China region.
The Spaghetti House at apm, Millennium City 5, Kwun Tong
Lobster Au Gratin and Veal Scaloppini vol-au-vent
As at 31st March, 2005, we had 25 The
Spaghetti House in operation, of which 24
were in Hong Kong and 1 was in Shenzhen,
PRC.
For the strategic franchise business, The
Spaghetti House had 2 franchise restaurants
in operation overseas, both located in
Indonesia.
14 MANAGING DIRECTOR’S OPERATIONAL REVIEWC
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SPECIALTY RESTAURANT(Continued)
The Spaghetti House was again recognized
this year by the community for its excellent
services and outstanding dining environment.
It was awarded “2004 Service Retailer (Food
and Catering Category)” by Hong Kong
Retail Management Association and the
“Hong Kong Smoke Free Workplace
Leading Company Award 2004” by Hong
Kong Council on Smoking and Health.
continued to introduce new products and
extend its distribution channels to further
enhance performance.
In the PRC, Scanfoods extended its business
network from Dongguan to Shenzhen and
Guangzhou. Its products have become popular
in major supermarkets and other retail
channels. Riding on the back of a well-
equipped manufacturing plant in Dongguan,
Scanfoods is poised to establish a stronger
business presence in the Pearl River Delta
region.
CAFÉ DE CORAL IN THE PRCAND MACAU
With continuous growth of the PRC economy,
business performance of this market has been
encouraging. As reported to you last year, we
had been back on the store opening program
in the PRC. During the year, we opened
another three new stores in Southern China,
two in Dongguan and one in Guangzhou,
making a total of 14 operating units in
Southern China with one shop in Macau as at
31st March, 2005. All stores contributed profit
to the Group.
Located at Hong Kong International Airport,
Ah Yee Leng Tong enhanced its exposure as
a soup-cum-specialty-dish Chinese restaurant
concept. As at 31st March, 2005, there were
2 outlets in operation. Management is in
search of an expansion strategy to grow this
concept when the opportunity comes.
SCANFOODS
Scanfoods , our food processing and
distribution business, delivered satisfactory
result to the Group despite the general rise in
raw material cost. Scanfoods’ “Viking Boat”
brand of ham and sausage products have long
been recognized for its high quality. Over the
years, Scanfoods has successfully established
a so l id foo thold in the Hong Kong
institutional market with a strong and stable
client base. During the year, Scanfoods
Total Quality Service Regime – Annual Quality ServiceAward won by The Spaghetti House
Opening Ceremony of Café de Coral at TeeMall, Guangzhou
MANAGING DIRECTOR’S OPERATIONAL REVIEW 15
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CAFÉ DE CORAL IN THE PRCAND MACAU (Continued)
Our performance in Guangzhou, a f irst-tier
city in Southern China, is particularly
noteworthy as it shows the maturity and
competence of our local management team
and their ability to operate the existing
business model in a highly competitive
business environment. The encouraging results
of all these stores, together with our strategic
association with major retail business partners,
strengthened our confidence in opening stores
to capture larger market share of this fast
growing eating-out sector in China.
In the years to come, with the improving living
standard of the people in China, we intend
for Café de Coral fast food restaurants in
Southern China to become another growth
driver for the Group.
NEW ASIA DABAO
Since taking up management control of New
Asia Dabao, a f ifty-percent owned joint
venture business, we have embarked upon a
series of value-added initiatives aimed at
improving the business performance of this
75-store restaurant chain.
While continuing effort was being devoted to
improve product quality and service standards,
we renovated existing stores to upgrade the
dining environment and rationalized the store
por tfolio by closing down some non-
performing shops. We are confident that with
our proven management strength, this
restaurant chain will become another profit
generator to the Group.
As a long-term development strategy, we not
only continued to fine tune the business model
of New Asia Dabao, but also explored the
possibility to open new stores at strategic
locations in the outer regions of Shanghai and
neighbouring provinces. We believe our
investment in New Asia Dabao provides us
with a valuable business platform in the
Eastern China region to build up our
management strength in this new market.
Café de Coral at TeeMall, Guangzhou
Subsequent to year-end, we opened 2
additional operating units in Southern China,
with 1 unit in Guangzhou and 1 unit in
Jiangmen. As of today, we have commitment
to open 3 additional operating units in
Southern China, including 2 units in
Guangzhou. With tremendous emphasis and
commensurate effor t on staff training,
product ion process development and
information technology enhancement, we have
now in place specif ic business strategies to
support our PRC expansion program. As part
of a long-term plan, we are undergoing a
feasibility study of setting up a sizable
logistics center in Southern China to support
future growth in the region. New Asia Dabao at Minheng District, Shanghai
16 MANAGING DIRECTOR’S OPERATIONAL REVIEWC
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NEW ASIA DABAO (Continued)
As reported to you last year, this joint-venture
will test the mid-priced fast casual dining
concept and will act as a vehicle to enter the
lucrative restaurant market in Shanghai. In
November 2004, we opened the first Café de
Coral fast food restaurant in Times
Square, Shanghai. We are optimistic
of the growth potential of this
concept and plan to open the second
shop once a suitable place is located.
MANCHU WOK
The business of Manchu Wok was
a disappointment to management.
Despite the fact that we brought
corporate overheads under control
and improved the performance of
some of our street-site locations in
Canada, overall sales of our North
American operation remained weak
in the face of fierce competition and
cost pressure coming from labour and rental.
that turnaround of this business unit in the
near term is one of our bigger challenges.
Having said that however, our overseas
partner, with our joint effort, will formulate a
more ref ined business strategy whereby
Manchu Wok can be more eff iciently
managed to unlock its potential as an Asian
Fast Food leader in the North
American market.
As at 31st March, 2005, Manchu
Wok had a total of 201 restaurants
in operation in North America,
including 1 Dai Bai Dang and 2
Fan Ting in the United States.
NEW BUSINESSPROCESSES
A f t e r o u r s u c c e s s f u l
implementation of the Business
Management System in prior year,
we continued to roll out the system
to the other business units in Hong
Kong. As at 31st March, 2005, the
system had been installed in all the operating
units of Café de Coral, The Spaghetti House,
Super Super Congee & Noodles, Oliver’s
Super Sandwiches and Asia Pacific Catering
in Hong Kong.
Undoubtedly, the system greatly enhanced our
competitive edge in terms of business
eff iciency and shortened our response time
to market changes. Fur ther, with the
application of information technology to our
internal logistics, we have effectively
substituted many manual repetitive processes
by automated systems, leading to substantial
savings in manpower and administrative
expenses at our back off ice. We believe our
business performance can and will be further
enhanced by implementing different IT
solutions to our existing business processes.
Manchu Wok at Etobicoke, Toronto
Leaflet of Manchu Wok
We w i t n e s s e d t h e i n s t a l l a t i o n o f
the point-of-sale system that helped
management better respond to market. We
have diligently explored growth opportunities
in non-traditional venues. More resources have
been directed to the United States markets
where challenges were most felt. We believe
MANAGING DIRECTOR’S OPERATIONAL REVIEW 17
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FINANCIAL REVIEW
The Group’s f inancial position, as at 31st
March, 2005, continues to be very strong, with
a net cash of close to about HK$525 million
and available banking facilities of HK$836
million.
As at 31st March, 2005, the Group did not
have any exter nal bor rowing (2004:
HK$10,000,000) and maintained a healthy
gearing (being total bor rowings over
shareholders’ funds) of Nil (2004: 0.65%).
There has been no material change in
contingent liabilities or charges on assets since
31st March, 2004.
As at 31st March, 2005, the Company has
given guarantees totalling approximately
HK$900,347,000 (2004: HK$946,050,000) to
financial institutions in connection with the
total banking facili t ies granted to i ts
subsidiaries and in respect of the outstanding
loans drawn by certain jointly controlled
entities.
Regarding foreign exchange fluctuations, the
Group earned revenue and incurred costs and
expenses are mainly denominated in Hong
Kong dollars, while those of our North
America and PRC jointly controlled entities
are denominated in United States dollars,
Canadian dollars and Renminbi respectively.
Exchange losses are nevertheless recognized
in our jointly-controlled North American
entities and our share of these losses have
been included in this annual results. While
foreign currency exposure did not pose
signif icant risk for the Group, we will
continue to take proactive measures and
monitor closely of our exposure to such
currency movement.
HUMAN RESOURCES
As at 31st March, 2005, the Group (other than
associated companies and jointly controlled
entities) employed approximately 10,390
employees. Remuneration packages are
generally structured by reference to market
terms and individual qualif ications and
experience. With a unique Executive Share
Option Scheme together with prof it sharing
bonus and performance incentive system,
employees were entitled to share in the growth
of the Group.
During the year, various training activities
have been conducted to improve the front-
end quality of services as well as to ensure
the smooth and effective installation of the
Group’s business systems.
CONCLUSION
The year ahead is full of challenges and
opportunities. The recovery of local economy
helps to stimulate local spending sentiment,
thereby boosting sales. However, with
increasing cost pressure at home, the re-
emergence of inflation is inevitable. To
maintain a stable and steady growth of our
profit, continuous efforts have to be made by
introducing value-added products and
services, exercising stringent cost control, and
enhancing business efficiency to improve our
profitability.
While we are solidifying our local core
businesses, more resources will be deployed
to drive up prof itability of our overseas
operating units, in particular, our North
America and PRC businesses, to ensure they
will become new and additional profit drivers
for our Group in the years to come.
Lo Hoi Kwong, SunnyManaging Director
Hong Kong, 12th July, 2005
18 BIOGRAPHY OF DIRECTORS AND SENIOR MANAGEMENTC
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CHAIRMAN
Mr. Chan Yue Kwong, Michael, aged 53, is
the Executive Chairman of the Group. He
joined the Group in 1984 and was appointed
as a director of the Group 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
an Executive Committee Member of the Hong
Kong Retail Management Association,
Council Member of the Employers’ Federation
of Hong Kong, Elected Member of the Quality
Tourism Services Association, a Full member
of the Canadian and the Hong Kong Institute
of Planners, Honorary President of Hong
Kong Foodstuffs Association, Honorary
Adviser of the Hong Kong Institute of
Marketing and the Institute of Business
Administrants. In past years, Mr. Chan has
won “The Stars of Asia Awards”, the
“Executive of the Year Award”, the “Bauhinia
Cup Outstanding Enterpreneur Awards”, the
“Directors of the Year Award” and more
recen t ly, the “Hong Kong Bus iness
Mastermind Award” in 2004. He is the son-
in-law of Mr. Lo Tang Seong, Victor, another
Director of the Company. He is also a relative
of Mr. Lo Hoi Kwong, Sunny, Ms. Lo Pik
Ling, Anita, Mr. Lo Hoi Chun and Mr. Lo
Tak Shing, Peter, all of whom are Directors
of the Company.
MANAGING DIRECTOR
Mr. Lo Hoi Kwong, Sunny, aged 49, is the
Managing Director of the Group. He joined
the Group in 1982 and has been an Executive
Director of the Company since 1990. He is
responsible for business development in Hong
Kong and overseas, as well as the marketing,
operation and food processing functions of
the Group. He holds a Master Degree in
Chemical Engineering from Stanford
University. Mr. Lo is the son of Mr. Lo Tang
Seong, Victor and is the brother of Ms. Lo
Pik Ling, Anita, both of whom are Directors
of the Company. He is also a relative of Mr.
Chan Yue Kwong, Michael, Mr. Lo Hoi Chun
and Mr. Lo Tak Shing, Peter, all of whom are
Directors of the Company. Mr. Lo is a director
of NKY Holding Corporation which has
discloseable interests in the shares of the
Company under the provisions of Part XV of
the Securities and Futures Ordinance.
EXECUTIVE DIRECTORS
Ms. Lo Pik Ling, Anita, aged 52, is an
Executive Director and the Group General
Manager. She joined the Company in 1982
and has been an Executive Director of the
Company since 1990. She 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 Bachelor Degree in Social Sciences
from the University of Hong Kong. She is the
daughter of Mr. Lo Tang Seong, Victor and is
the sister of Mr. Lo Hoi Kwong, Sunny, both
of whom are Directors of the Company. Ms.
Lo is also a relative of Mr. Chan Yue Kwong,
Michael, Mr. Lo Hoi Chun and Mr. Lo Tak
Shing, Peter, all of whom are Directors of the
Company. She is a director of NKY Holding
Corporation which has discloseable interests
in the shares of the Company under the
provisions of Part XV of the Securities and
Futures Ordinance.
BIOGRAPHY OF DIRECTORS AND SENIOR MANAGEMENT 19
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EXECUTIVE DIRECTORS(Continued)
Mr. Lo Tak Shing, Peter, aged 43, is the
Director of Business Logistics of the Group.
He joined the Company in 1996 and has been
an Executive Director of the Company since
1998. He is responsible for central food
processing, central purchasing and project
management functions of the Group. He holds
a Bachelor Degree in Electronic Engineering
& Physics from the Loughborough University
of Technology, a Master Degree in Medical
Physics from the University of Surrey and a
Doctorate Degree in Medical Physics from the
University of London. Mr. Lo is a relative of
Mr. Lo Tang Seong, Victor, Mr. Lo Hoi Chun,
Mr. Chan Yue Kwong, Michael, Mr. Lo Hoi
Kwong, Sunny and Ms. Lo Pik Ling, Anita,
all of whom are Directors of the Company.
He is a director of Wandels Investment
Limited, Verdant Success Holdings Limited
and Sky Bright International Limited, each of
which has discloseable interests in the shares
of the Company under the provisions of Part
XV of the Securities and Futures Ordinance.
NON-EXECUTIVE DIRECTORS
Mr. Lo Tang Seong, Victor, aged 90, is the
founder of the Group and has been a Non-
executive Director of the Company since 1990.
He had considerable experience in the food
and beverage industry. Prior to founding the
Group in 1968, he has been in charge of the
production management at The Hong Kong
Soya Bean Products Company, Limited for 17
years. Mr. Lo is the father of Ms. Lo Pik
Ling, Anita, Mr. Lo Hoi Kwong, Sunny and
the father-in-law of Mr. Chan Yue Kwong,
Michael, all of whom are Directors of the
Company. Mr. Lo is also a relative of Mr. Lo
Hoi Chun and Mr. Lo Tak Shing, Peter, both
of whom are Directors of the Company. He is
a director of NKY Holding Corporation which
has discloseable interests in the shares of the
Company under the provisions of Part XV of
the Securities and Futures Ordinance.
Mr. Lo Hoi Chun, aged 66, joined the Group
in 1976 and has been a Non-executive Director
of the Company since 1990. Prior to joining
the Company, he had considerable experience
in the food and beverage industry. He is a
relative of Mr. Lo Tang Seong, Victor, Mr.
Chan Yue Kwong, Michael, Mr. Lo Hoi
Kwong, Sunny, Ms. Lo Pik Ling, Anita and
Mr. Lo Tak Shing, Peter, all of whom are
Directors of the Company. Mr. Lo is a director
of LBK Holding Corporation and MMW
Holding Corporation, both of which have
discloseable interests in the shares of the
Company under the provisions of Part XV of
the Securities and Futures Ordinance.
Mr. Hui Tung Wah, Samuel, aged 51, joined
the Group in 1984 and has been a Non-
executive Director of the Company since 1997.
He is the managing director and the chief
executive off icer of Omnicorp Limited. He
holds a Bachelor Degree in Social Sciences
from the University of Hong Kong and a
Master Degree in Business Administration
from the Brunel University.
20 BIOGRAPHY OF DIRECTORS AND SENIOR MANAGEMENTC
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INDEPENDENT NON-EXECUTIVEDIRECTORS
Mr. Choi Ngai Min, Michael, aged 47, was
appointed as an Independent Non-executive
Director of the Company in 1994. He is the
chairman of Land Power International
Holdings Limited. Mr. Choi has been in the
real estate industry for 25 years with extensive
knowledge and experience in the real estate
markets in Hong Kong and Mainland China.
Currently, he is a member of the Housing
Authority, a member of the Infrastructure
Development Advisory Committee of the
Hong Kong Trade Development Council and
a member of the Real Estate and Infrastructure
Committee of the Hong Kong General
Chamber of Commerce. Mr. Choi was also a
Past President of the Society of Hong Kong
Real Estate Agents (92-96), a Vice President
of the Hong Kong Association For The
Advancement of Real Estate and Construction
Technology (97-01) and a member of the
Estate Agents Authority (97-02). Mr Choi
graduated from the Business Management
Department of the Hong Kong Baptist College
and obtained a Master Degree in Business
Administration from the University of East
Asia, Macau.
Mr. Li Kwok Sing, Aubrey, aged 55, has been
an Independent Non-executive Director of the
Company since 1994. He is a director of
Management Capital Limited, a direct
investment and f inancial advisory f irm. Mr.
Li holds a Master Degree in Business
Administration from Columbia University and
a Bachelor Degree of Science in Civil
Engineering from Brown University.
Mr. Kwok Lam Kwong, Larry, J.P. aged 49,
was appointed as an Independent Non-
executive Director of the Company in July
2004. Mr. Kwok is a practising solicitor in
Hong Kong and is also qualif ied to practise
as a solicitor in Australia, England and
Singapore. He is also qualif ied as an
accountant in Hong Kong and Australia. He
graduated from the University of Sydney,
Austral ia with Bachelor’s degrees in
economics and laws respectively as well as a
master’s degree in laws. He is currently the
Vice-Chairman of the Consumer Council, a
member of the Hospital Governing Committee
of Kwai Chung Hospital/Princess Margaret
Hospital, the Traff ic Accident Victims
Assistance Advisory Committee, the Trade and
Industry Advisory Board, the Insurance
C l a i m s C o m p l a i n t s Pa n e l a n d t h e
Telecommunications (Competition Provisions)
Appeal Board in Hong Kong. He is also a
member of the Poli t ical Consultat ive
Committee of Guangxi in the People’s
Republic of China.
COMPANY SECRETARY
Ms. Li Oi Chun, Helen, aged 46, joined the
Group in 1981. She is currently the Group
Company Secre tary and Direc tor of
Professional Logistics of the Group. She is
responsible for f inance and accounting and
information technology functions of the
Group. She holds a Doctorate Degree in
Business Administration from The Hong Kong
Polytechnic University, a Master Degree in
Business Administration from the University
of Surrey and a Master Degree in Marketing
Management from the Macquarie University.
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
Administrat ion from The Hong Kong
Polytechnic University.
BIOGRAPHY OF DIRECTORS AND SENIOR MANAGEMENT 21
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QUALIFIED ACCOUNTANT
Ms. Chung Sau Man, Grace, aged 40, joined
the Group in 2004 as Senior Manager (Finance
& Accounting). She is currently the Qualified
Accountant of the Company, and i s
responsible for f inance, accounting, and
taxation functions of the Group. Prior to
joining the Group, she has considerable
profess ional exper ience in f inancia l
management at Hong Kong public listed
companies and a Canadian corporation in food
and beverage industry, including external
auditing with one of the Big 4 accounting
f irms. Ms. Chung holds a Master Degree in
Business Administration from The University
of Western Ontario in Canada. She is a
member of The Association of Chartered
Certif ied Accountants in United Kingdom,
Hong Kong Institute of Certif ied Public
Accountants , and Cer t i f ied Genera l
Accountants Association of Ontario in
Canada.
SENIOR MANAGEMENT
Ms. Lau Lee Fong, Rosa, aged 50, joined
the Group in 1979 and is currently the Senior
General Manager – Specialty Restaurants of
the Group. She is responsible for development,
management and overseas franchising of the
chain of The Spaghetti House Restaurants and
Oliver’s Super Sandwiches. She holds a
Master Degree in Business Administration
from the University of East Asia, Macau and
a Master of Science in Hotel & Tourism
Managemen t f rom The Hong Kong
Polytechnic University. She is currently a
member of the Hotel & Catering International
Management Association (U.K.) and an
Executive Council Member of Hong Kong
Institute of Marketing.
Mr. Wong Yau Kwong, aged 49, joined the
Group 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 49, joined
the Group in 1983 and is currently the General
Manager of Café de New Asia Group Co.,
Limited. He is responsible for development
and management of New Asia Dabao and Café
de Coral fast food business in Eastern China
region. He holds a Bachelor Degree in Hotel
and Catering Management from The Hong
Kong Polytechnic University.
22 REPORT OF THE DIRECTORSC
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The directors are pleased to present their annual report together with the audited accounts of
Café de Coral Holdings Limited (the “Company”) and its subsidiaries (together with the Company
hereinafter as the “Group”) for the year ended 31st March, 2005.
PRINCIPAL ACTIVITIES
The principal activity of the Company is investment holding. The Group is principally engaged
in the operation of quick service restaurants, fast casual dining, institutional catering and specialty
restaurant chains, and the food processing and distribution business. The activities of the principal
subsidiaries are set out on pages 79 to 83.
RESULTS AND APPROPRIATIONS
The results of the Group for the year are set out in the consolidated profit and loss account on
page 34.
The details of dividends for the year ended 31st March, 2005 are set out in Note 9 to the
accounts. An interim dividend of 7.5 cents per share, totalling approximately HK$40,174,000
was paid on 11th January, 2005. The directors recommend the payment of a final dividend of 20
cents per share, totalling approximately HK$107,967,000.
RESERVES
Movements in the reserves of the Group and of the Company during the year are set out in Note
27 to the accounts.
Distributable reserves of the Company at 31st March, 2005 amounted to approximately
HK$298,208,000.
FIXED ASSETS
Details of the movements in f ixed assets of the Group are set out in Note 13 to the accounts.
PRINCIPAL PROPERTIES
Details of the principal properties held for investment purposes are set out on page 84.
DONATIONS
During the year, the Group made charitable and other donations amounting to HK$212,000.
BANK LOANS
Particulars of bank loans as at 31st March, 2005 are set out in Note 22 to the accounts.
REPORT OF THE DIRECTORS 23
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SHARE CAPITAL
Details of the movements in share capital of the Company are set out in Note 25 to the accounts.
FIVE-YEAR SUMMARY
A summary of the results and of the assets and liabilities of the Group for the last five f inancial
years is set out on pages 86 to 88.
PRE-EMPTIVE RIGHTS
There is no provision for pre-emptive rights under the Company’s Bye-Laws and there is no
restriction against such rights under the laws of Bermuda.
PURCHASE, SALE OR REDEMPTION OF SHARES
There were no purchases, sales or redemptions by the Company or any of its subsidiaries, of the
Company’s listed securities during the year.
CONVERTIBLE SECURITIES, OPTIONS, WARRANTS OR SIMILARRIGHTS
Other than the share option schemes described below, the Company had no outstanding convertible
securities, options, warrants or similar rights as at 31st March, 2005. Save as disclosed below,
there has been no issue or exercise of any convertible securities, options, warrants or similar
rights during the year.
SHARE OPTION SCHEMES
Pursuant to a share option scheme adopted by the Company on 30th January, 1991 (the “Previous
Scheme”), the Company has granted certain options to executives and employees of the Group
including executive directors employed by the Group to subscribe for ordinary shares in the
Company subject to the terms and conditions stipulated therein. The Previous Scheme was
terminated upon the passing of a shareholders’ resolution for adoption of another share option
scheme on 19th September, 2000 (the “Scheme”). Accordingly, no options can be granted under
the Previous Scheme as at the date of this report. However, for the outstanding options granted
and yet to be exercised under the Previous Scheme, the existing rights of the grantees are not
affected. No options had been granted under the Scheme since its adoption.
On 24th September, 2003, the Scheme was terminated upon the passing of a shareholders’
resolution for adoption of a new share option scheme (the “New Scheme”). Pursuant to the New
Scheme, the Company may grant options to executive and non-executive directors, employees,
suppliers and customers of the Group and consultants, advisors, managers, off icers and
corporations that provided research, development or other technical support to the Group to
subscribe for ordinary shares in the Company subject to the terms and conditions stipulated
therein. No options have been granted under the New Scheme since its adoption.
24 REPORT OF THE DIRECTORSC
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SHARE OPTION SCHEMES (Continued)
Summary of details of the New Scheme is as follows:
Purpose
Participants
Total number of ordinary shares availablefor issue and the percentage of the issuedshare capital that it represents as at the dateof the annual report
Maximum entitlement of each participant
Period within which the securities must betaken up under an option
Minimum period for which an option mustbe held before it can be exercised
Amount payable on acceptance of the option
Basis of determining the exercise price
The remaining life of the scheme
To grant incentive for retaining and rewardingeligible participants who contribute to thebusiness and development of the Group
Employees (whether full-time or part-time),executive directors, non-executive directors andindependent non-executive directors of theCompany or any of its subsidiaries, suppliersand customers of the Group and consultants,advisors, managers, off icers and corporationsthat provided research, development or othertechnical support to the Group to subscribefor ordinary shares in the Company
53,103,403 ordinary shares representing 9.84%of the issued share capital as at 12th July, 2005
In any 12-month period shall not exceed 1%of the shares in issue
5 years commencing on the date on which anoption becomes exercisable and expiring on thelast day of the 5-year period save that suchperiod shall not expire later than 10 years fromthe date on which the option is deemed to begranted and accepted in accordance with theNew Scheme
Not applicable
HK$1.00
Not less than the highest of (i) the closingprice of the Shares as stated in The StockExchange of Hong Kong Limited (the “StockExchange”) daily quotations sheet on the dateof grant, which must be a business day or (ii)the average of the closing prices of the Sharesas stated in the Stock Exchange’s dailyquotations sheet for the f ive business daysimmediately preceding the date of grant or (iii)the nominal value of a share
The New Scheme remains in force until 23rdSeptember, 2013 unless otherwise terminated
under terms of the New Scheme
REPORT OF THE DIRECTORS 25
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SHARE OPTION SCHEMES (Continued)
Details of the share options outstanding as at 31st March, 2005 which have been granted under
the Previous Scheme are as follows:
Options Options
Options exercised Options cancelled upon Options
outstanding at during lapsed termination of outstanding at
Type of grantees Note 1st April, 2004 the year on expiry employment 31st March, 2005
Executive directors
Mr. Chan Yue Kwong, (i) 1,500,000 (600,000) – – 900,000
Michael
Mr. Lo Hoi Kwong,
Sunny 1,500,000 – – – 1,500,000
Ms. Lo Pik Ling,
Anita 400,000 – – – 400,000
Mr. Lo Tak Shing,
Peter (i) 350,000 (70,000) – – 280,000
Continuous contract
employees (ii) 15,890,000 (3,900,000) – (180,000) 11,810,000
19,640,000 (4,570,000) – (180,000) 14,890,000
Notes:
(i) For the category of “Executive Directors”, the weighted average closing price of the Company’s
shares immediately before the dates on which the share options were exercised during the year was
HK$7.67.
(ii) For the category of “Continuous contract employees”, the weighted average closing price of the
Company’s share immediately before the dates on which the share options were exercised during
the year was HK$7.13.
The above share options were granted on 4th November, 1999 and are exercisable at HK$2.95
per share. The holders of share options may exercise the share options during the period from
1st April, 2003 to 31st March, 2013.
Save as disclosed above, no share options were granted, exercised, lapsed or cancelled during
the year.
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DIRECTORS’ RIGHT TO ACQUIRE SHARES OR DEBENTURE
Save as disclosed above, at no time during the year was the Company or any of its subsidiaries a
party to any arrangements to enable the directors of the Company to acquire benefits by means
of acquisition of shares in, or debentures of, the Company or any other body corporate.
DIRECTORS
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 (resigned on 1st December, 2004)
Mr. Hui Tung Wah, Samuel
Independent non-executive directors
Mr. Choi Ngai Min, Michael
Mr. Li Kwok Sing, Aubrey
Mr. Kwok Lam Kwong, Larry (appointed on 14th July, 2004)
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 Bye-law 109(A) of the Company’s Bye-Laws, Mr. Lo Hoi Chun, Mr. Hui
Tung Wah, Samuel and Mr. Choi Ngai Min, Michael retire by rotation at the forthcoming
Annual General Meeting and, being eligible, offer themselves for re-election.
The Company has received an annual confirmation of independence from each of the independent
non-executive directors, Mr. Choi Ngai Min, Michael, Mr. Li Kwok Sing, Aubrey and Mr. Kwok
Lam Kwong, Larry, and as at the date of this report considers them to be independent.
REPORT OF THE DIRECTORS 27
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DIRECTORS’ SERVICE CONTRACTS
None of the directors who are proposed for re-election at the forthcoming Annual General
Meeting has a service contract with the Company which is not determinable by the Company
within one year without payment of compensation, other than statutory compensation.
DIRECTORS’ INTERESTS IN CONTRACTS AND CONNECTEDTRANSACTIONS
The following are disclosures made pursuant to the Rules Governing the Listing of Securities on
The Stock Exchange of Hong Kong Limited (the “Listing Rules”), which is in force prior to
31st March, 2004.
Pursuant to the revised Listing Rules (effective 31st March, 2004), the following connected
transactions had been reclassified as continuing connected transactions. However, each of the
following continuing connected transactions is exempted from any disclosure or reporting
requirements by virtue of the de minimis provision under Chapter 14A of the revised Listing
Rules.
(i) On 11th April, 2000, Weli Company Limited (“Weli”), an indirectly wholly-owned
subsidiary of the Company, as tenant entered into a tenancy agreement with Tinway
Investments Limited (“Tinway”) as landlord in respect of Shop G50 on the Ground Floor,
Shops Nos. 116, 117, 124-149, 165, 173 and 174 on the First Floor of Man On House,
Nos. 151-163 Wan Chai Road, Nos. 12A-C Burrows Street and Nos. 17-27 Cross Lane,
Wanchai, Hong Kong for the operation of a Café de Coral restaurant. Tinway is a company
jointly owned by Ms. Lo Pik Ling, Anita, a Director of the Company, an associate of Mr.
Chan Yue Kwong, Michael, the Chairman of the Company and Ardley Enterprises Limited,
a company wholly and beneficially owned by the family members of Mr. Lo Hoi Kwong,
Sunny, a Director of the Company. Under the tenancy agreement, Weli was required to
pay a monthly rental of HK$170,000 from 12th April, 2000 to 11th April, 2003.
On 29th August, 2003, Weli renewed the tenancy agreement mentioned in the above
paragraph with Tinway for a term of three years from 12th April, 2003 to 11th April,
2006 at a monthly rental of HK$138,000. Tinway is a connected person within the meaning
of the Listing Rules. Accordingly, the renewal of the tenancy agreement constituted a
connected transaction. Details of this transaction were announced on 29th August, 2003.
28 REPORT OF THE DIRECTORSC
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DIRECTORS’ INTERESTS IN CONTRACTS AND CONNECTEDTRANSACTIONS (Continued)
(ii) On 31st March, 2003, Very Nice Fast Food Limited (“Very Nice”), an indirectly wholly-
owned subsidiary of the Company, as tenant entered into a tenancy agreement with LBK
Holding Corporation (“LBK”) as landlord in respect of Shops A and B on Ground Floor,
Honland Building, Nos. 108-118 Prince Edward Road West, Mong Kok, Kowloon, Hong
Kong for the operation of a Café de Coral restaurant. LBK is controlled by the associates
of Mr. Lo Hoi Chun, a non-executive Director of the Company. Pursuant to the agreement,
Very Nice was entitled to one month rent free period in January 2003 and was required to
pay a monthly rental of HK$90,000 from 1st February, 2003 to 31st December, 2003.
On 11th February, 2004, Very Nice renewed the aforesaid tenancy agreement with LBK
for a term of 3 years from 1st January, 2004 to 31st December, 2006. Pursuant to the
agreement, Very Nice was entitled to one month rent free period in January 2004 and was
required to pay a monthly rental of HK$90,000 from 1st February, 2004 to 31st December,
2006. LBK is a connected person within the meaning of the Listing Rules. Accordingly,
the renewal of the tenancy agreement constituted a connected transaction. Details of this
transaction were announced on 11th February, 2004.
The Company’s independent non-executive Directors had reviewed the above connected
transactions and confirmed that the transactions were in the ordinary and usual course of business
of the Group, on normal commercial terms and were fair and reasonable as far as the shareholders
of the Company were concerned.
Except as disclosed above, no contracts of signif icance in relation to the Group’s business to
which the Company, any of its subsidiaries, fellow subsidiaries was a party and in which a
Director of the Company had a material interest, whether directly or indirectly, subsisted at the
end of the year or at any time during the year.
None of the Directors have interests in a competing business to the Group’s businesses.
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DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORTPOSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES
As at 31st March, 2005, the interests of each Director and chief executive of the Company in the
shares, underlying shares and debentures of the Company and its associated corporations (within
the meaning of Part XV of the Securities and Futures Ordinance (“SFO”)), as recorded in the
register maintained by the Company under Section 352 of the SFO or as notified to the Company
and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of
Listed Companies were as follows:
Interests in shares and underlying shares of the Company
Number of ordinary shares (long position)
% of
Trusts and Equity total
Personal Family Corporate similar derivatives Total issued
Director Note interests interests interests interests (Note (g)) interests shares
Mr. Lo Hoi Kwong,
Sunny (a) & (b) 3,120,000 – – 88,539,394 1,500,000 93,159,394 17.39%
Mr. Lo Tak Shing, Peter (c) – – – 87,626,213 280,000 87,906,213 16.41%
Mr. Lo Hoi Chun (d) 132,000 – – 67,880,834 – 68,012,834 12.69%
Ms. Lo Pik Ling, Anita (a) 8,936,339 – – 51,156,000 400,000 60,492,339 11.29%
Mr. Chan Yue Kwong,
Michael (a) & (e) 3,721,407 1,189,400 – 51,156,000 900,000 56,966,807 10.63%
Mr. Li Kwok Sing,
Aubrey (f) 55,000 – – – – 55,000 0.01%
Mr. Hui Tung Wah,
Samuel – 25,837 – – – – 25,837 0.01%
Mr. Lo Tang Seong,
Victor – – – – – – – –
Mr. Choi Ngai Min,
Michael – – – – – – – –
Mr. Kwok Lam Kwong,
Larry – – – – – – – –
30 REPORT OF THE DIRECTORSC
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DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORTPOSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES(Continued)
Notes:
(a) 51,156,000 shares were held under a family trust of which Mr. Lo Hoi Kwong, Sunny, Ms. Lo Pik
Ling, Anita and the associate of Mr. Chan Yue Kwong, Michael were beneficiaries.
(b) Mr. Lo Hoi Kwong, Sunny was deemed to be interested in 37,383,394 shares held under a family
trust in the capacity of founder.
(c) These shares were held by Wandels Investment Limited (“Wandels”). Wandels was 50% owned by
Sky Bright International Limited (“Sky Bright”) and 50% owned by Verdant Success Holdings
Limited (“Verdant Success”). Both of Sky Bright and Verdant Success were wholly-owned
subsidiaries of Royal Bank of Canada Trustees Limited which was the trustee of two discretionary
family trusts. Mr. Lo Tak Shing, Peter was deemed to be interested by virtue of being beneficiary
of one of the family trusts.
(d) 31,911,701 shares were held under a family trust of which Mr. Lo Hoi Chun and his associates
were benef iciaries. 35,969,133 shares were held under a family trust of which Mr. Lo Hoi Chun
was the founder and associates of Mr. Lo Hoi Chun were beneficiaries.
(e) Mr. Chan Yue Kwong, Michael was deemed to be interested in 1,189,400 shares through interests
of his associates.
(f) These shares were held by Mr. Li Kwok Sing, Aubrey jointly with his spouse.
(g) These represented interests of options granted to Directors under a share option scheme to subscribe
for shares of the Company, further details of which are set out in the section “Share Option
Schemes”.
All interests in the shares and underlying shares of equity derivatives of the Company are long
positions. None of the Directors held any short position in the shares, underlying shares of
equity derivatives or debentures of the Company.
Save as disclosed above and other than certain nominee shares in subsidiaries held by the
Directors in trust for the Company, none of the Directors or their respective associates had any
interest or short position in any shares, underlying shares of equity derivatives or debentures of
the Company or any of its associated corporations within the meaning of the SFO.
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SUBSTANTIAL SHAREHOLDERS’ INTERESTS
As at 31st March, 2005, the interests and short positions of every persons, other than a director
or chief executive of the Company, in the shares and underlying shares of the Company, being
5% or more of the Company’s issued share capital, as recorded in the register kept by the
Company under Section 336 of the SFO were as follows:
Number of ordinary shares (long position)
Trusts and % of total
Personal Family Corporate similar Total issued
Name of shareholder Note interests interests interests interests interests shares
GZ Trust Corporation (a) – – – 119,036,834 119,036,834 22.22%
Wandels Investment Limited (b) – – – 87,626,213 87,626,213 16.36%
Sky Bright International Limited (b) – – – 87,626,213 87,626,213 16.36%
Verdant Success Holdings Limited (b) – – – 87,626,213 87,626,213 16.36%
Royal Bank of Canada Trustees Limited (b) – – – 87,626,213 87,626,213 16.36%
Ms. Lo Wong Mei Mui (c) – – – 67,880,834 67,880,834 12.67%
Mr. Man Tak Wah (d) – 60,492,339 – – 60,492,339 11.29%
NKY Holding Corporation (e) – – – 51,156,000 51,156,000 9.55%
Ms. Tso Po Ping (f) – 42,003,394 – – 42,003,394 7.84%
Ardley Enterprises Limited (g) – – – 37,383,394 37,383,394 6.98%
Ms. Man Bo King (h) – 36,101,133 – – 36,101,133 6.74%
LBK Holding Corporation (i) – – – 35,969,133 35,969,133 6.71%
MMW Holding Corporation (j) – – – 31,911,701 31,911,701 5.96%
32 REPORT OF THE DIRECTORSC
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SUBSTANTIAL SHAREHOLDERS’ INTERESTS (Continued)
Notes:
(a) GZ Trust Corporation was deemed to be interested in the capacity of trustee.
(b) These interests were held by Wandels Investment Limited (“Wandels”). Wandels was 50% owned
by Sky Bright International Limited (“Sky Bright”) and 50% owned by Verdant Success Holdings
Limited (“Verdant Success”). Both of Sky Bright and Verdant Success were wholly-owned
subsidiaries of Royal Bank of Canada Trustees Limited which was the trustee of the two discretionary
family trusts. Mr. Lo Tak Shing, Peter, being a director of the Company, is also deemed to be
interested by virtue of his being beneficiary of one of the family trusts.
(c) Ms. Lo Wong Mei Mui was deemed to be interested in the capacity of trustee. These interests were
the aggregate of the interests disclosed in Notes (i) and (j) below.
(d) Mr. Man Tak Wah was deemed to be interested through the interests of his spouse, Ms. Lo Pik
Ling, Anita (of which 400,000 shares were interests in underlying shares).
(e) These interests were held by NKY Holding Corporation in the capacity of trustee. These interests
represented part of the interests held by GZ Trust Corporation and disclosed in Note (a) above.
(f) Ms. Tso Po Ping was deemed to be interested in these shares through the interests of her spouse,
Mr. Lo Hoi Kwong, Sunny (of which 1,500,000 shares were interests in underlying shares).
(g) These interests were held by Ardley Enterprises Limited in the capacity of trustee. These interests
represented part of the interests of Mr. Lo Hoi Kwong, Sunny, being a director of the Company.
(h) Ms. Man Bo King was deemed to be interested in these shares through the interests of her spouse,
Mr. Lo Hoi Chun.
(i) These interests were held by LBK Holding Corporation in the capacity of trustee. These interests
represented part of the interests held by GZ Trust Corporation and disclosed in Note (a) above.
(j) These interests were held by MMW Holding Corporation in the capacity of trustee. These interests
represented part of the interests held by GZ Trust Corporation and disclosed in Note (a) above.
All interests in the shares and underlying shares of equity derivatives of the Company held by
the above persons are long positions.
Save as disclosed above, as at 31st March, 2005, the directors are not aware of any other persons
(other than a director or chief executive of the Company) who have interests or short positions
in the shares, underlying shares of equity derivatives of the Company which would be required
to be disclosed to the Company pursuant to Part XV of the SFO.
MANAGEMENT CONTRACTS
No contracts concerning the management and administration of the whole or any substantial
part of the business of the Company were entered into or existed during the year.
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MAJOR CUSTOMERS AND SUPPLIERS
For the year ended 31st March, 2005, the percentage of sales or purchases attributable to the
Group’s five largest customers or suppliers was less than 30%.
COMPLIANCE WITH THE CODE OF BEST PRACTICE OF THE LISTINGRULES
In the opinion of the directors, the Company has complied with the Code of Best Practice (the
“Code”) as set out in Appendix 14 of the Listing Rules, which was still in force prior to 1st
January, 2005 and remains applicable to the year ended 31st March, 2005.
The Code was replaced by the Code on Corporate Governance Practices (the “Code on CG
Practices”) which has become effective for accounting periods commencing on or after 1st
January, 2005. Appropriate actions are being taken by the Company for complying with the
Code on CG Practices.
AUDIT COMMITTEE
The final results of the Group for the year ended 31st March, 2005 have been reviewed by the
audit committee of the Company. The audit committee was established in April, 1999 and now
comprises three independent non-executive directors namely Mr. Li Kwok Sing, Aubrey, Mr.
Choi Ngai Min, Michael and Mr. Kwok Lam Kwong, Larry. Amongst the committee’s principal
duties is to review and supervise the Company’s financial reporting process and internal controls.
AUDITORS
The accompanying accounts have been audited by PricewaterhouseCoopers who retire and, being
eligible, offer themselves for re-appointment at the forthcoming Annual General Meeting.
On behalf of the Board of Directors
CHAN YUE KWONG, MICHAEL
Chairman
Hong Kong, 12th July, 2005
34 CONSOLIDATED PROFIT AND LOSS ACCOUNTC
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2005 2004
Note HK$’000 HK$’000
Turnover 4 3,038,498 2,723,295
Cost of sales (2,568,071) (2,302,148)
Gross profit 470,427 421,147
Administrative expenses (136,310) (117,319)
Other income, net 4 36,448 29,335
Surplus on revaluation of investment properties 3,700 2,600
Profit from operations 374,265 335,763
Finance costs 5 (1,061) (237)
373,204 335,526
Share of profit/(loss) of
An associated company 2,888 1,471
Jointly controlled entities (26,558) (23,628)
Profit before taxation 6 349,534 313,369
Taxation 7 (64,683) (55,295)
Profit attributable to shareholders 8 284,851 258,074
Dividends 9 148,141 199,284
Basic earnings per share 10 53.23 cents 48.62 cents
Diluted earnings per share 10 52.29 cents 47.66 cents
BALANCE SHEETS 35
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Consolidated Company
2005 2004 2005 2004
Note HK$’000 HK$’000 HK$’000 HK$’000
Non-current assets
Fixed assets 13 863,564 876,337 – –
Intangibles 14 18,452 21,289 – –
Investment in subsidiaries 15 – – 546,814 394,763
Investment in an associated company 16 2,205 1,180 – –
Investment in jointly controlled entities 17 65,873 63,597 – –
Other investments 18 866 3,244 – –
Held-to-maturity securities 19 215,667 167,313 – –
Deferred tax assets 24 5,580 5,358 – –
Other non-current assets 828 1,657 – –
1,173,035 1,139,975 546,814 394,763
Current assets
Stocks, at cost 64,728 50,994 – –
Prepayments, deposits and
other current assets 111,786 113,459 112 112
Trade and other debtors 21 36,116 29,541 – –
Short-term investments 20 87,488 24,722 – –
Cash and bank balances 524,989 473,243 28 264
825,107 691,959 140 376
Current liabilities
Short-term bank loans 22 – 10,000 – –
Trade creditors 21 73,399 62,087 – –
Other creditors and accrued liabilities 215,230 183,953 12 16
Taxation payable 22,324 12,126 – –
310,953 268,166 12 16
Net current assets 514,154 423,793 128 360
Total assets less current liabilities 1,687,189 1,563,768 546,942 395,123
36 BALANCE SHEETSC
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Consolidated Company
2005 2004 2005 2004
Note HK$’000 HK$’000 HK$’000 HK$’000
Non-current liabilities
Deferred taxation 24 14,117 15,435 – –
14,117 15,435 – –
Net assets 1,673,072 1,548,333 546,942 395,123
Capital and reserves
Share capital 25 53,576 53,119 53,576 53,119
Reserves (including f inal
dividend proposed of
HK$107,967,000;
(2004: HK$131,292,000)) 27 1,619,496 1,495,214 493,366 342,004
Shareholders’ equity 1,673,072 1,548,333 546,942 395,123
Approved by the Board of Directors on 12th July, 2005 and signed on behalf of the Board by
CHAN YUE KWONG, MICHAEL LO HOI KWONG, SUNNY
Chairman Managing Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 37
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2005 2004
Note HK$’000 HK$’000
Total equity at beginning of year 1,548,333 1,463,148
Exchange differences arising on consolidation 27 (1,931) 7,409
Net (loss)/gain not recognised in the consolidated
profit and loss account (1,931) 7,409
Profit attributable to shareholders 27 284,851 258,074
Dividends paid 27 (171,663) (163,579)
Issue of shares under share option scheme 26, 27 13,482 10,384
Repurchase of shares 27 – (27,103)
126,670 77,776
Total equity at end of year 1,673,072 1,548,333
38 CONSOLIDATED CASH FLOW STATEMENTC
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2005 2004
Note HK$’000 HK$’000
Cash flows from operating activities
Profit before taxation 349,534 313,369
Interest expense 1,061 237
Interest income (19,449) (13,075)
Depreciation of fixed assets 134,751 132,380
Amortisation of trademarks 2,704 2,704
Amortisation of goodwill 133 113
Surplus on revaluation of investment properties (3,700) (2,600)
Net loss on disposals of fixed assets other than
investment properties 4,364 4,566
Net gain on disposal of an investment property – (150)
Provision for impairment in value of other investments 2,522 –
Net gain related to investments (631) (5,076)
Share of results of an associated company (2,888) (1,471)
Share of results of jointly controlled entities 26,558 23,628
Operating profit before working capital changes 494,959 454,625
(Increase)/decrease in stocks (13,734) 1,972
Decrease/(increase) in prepayments, deposits and
other current assets 1,673 (9,589)
Increase in trade and other debtors (6,575) (2,955)
Increase in amount due from jointly controlled entities (711) (549)
Increase in trade creditors 11,312 722
Increase/(decrease) in other creditors and accrued liabilities 31,277 (14,843)
Cash generated from operations 518,201 429,383
Hong Kong profits tax refunded 4,178 2,195
Hong Kong profits tax paid (58,323) (61,925)
Overseas taxation paid (2,990) (2,123)
Net cash from operating activities 461,066 367,530
CONSOLIDATED CASH FLOW STATEMENT 39
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2005 2004
Note HK$’000 HK$’000
Cash flows from investing activities
Additions of fixed assets (123,710) (111,269)
Proceeds from disposals of fixed assets 1,068 3,860
Acquisition of a business – (3,352)
Acquisition of jointly controlled entities – (38,236)
Advances to jointly controlled entities (29,473) (11,749)
Dividend received from an associated company 1,620 920
Proceeds from redemption of held-to-maturity securities 181,627 195,057
Purchase of other investments – (2,625)
Purchase of held-to-maturity securities (229,981) (276,391)
Proceeds from disposals of other investments – 7,971
Proceeds from disposals of short-term investments 17,281 1,102
Purchase of short-term investments (79,561) (15,616)
Decrease/(increase) in non-current assets 829 (1,657)
Interest received 19,449 13,075
Net cash used in investing activities (240,851) (238,910)
Cash flows from financing activities
Net proceeds from issue of shares on exercise of share options 13,482 10,384
Payment for repurchase of shares – (27,103)
New bank borrowings 175,000 –
Repayment of bank borrowings (185,000) (210,000)
Interest paid (1,061) (237)
Dividends paid (171,663) (163,579)
Net cash used in financing activities (169,242) (390,535)
Increase/(decrease) in cash and bank balances 50,973 (261,915)
Effect of foreign exchange rate changes 773 1,877
Cash and Cash equivalents, beginning of year 473,243 733,281
Cash and Cash equivalents, end of year 524,989 473,243
Analysis of Cash and Cash equivalents:
Cash and bank balances 524,989 473,243
40 NOTES TO THE ACCOUNTSC
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1. ORGANISATION AND OPERATIONS
Café de Coral Holdings Limited (the “Company”) was incorporated in Bermuda as an
exempted company under the Companies Act 1981 of Bermuda with limited liability on
1st October, 1990.
The principal activity of the Company is investment holding. The Company’s subsidiaries
are principally engaged in the operation of quick service restaurants, fast casual dining,
institutional catering and specialty restaurant chains, and the food processing and
distribution business.
2. PRINCIPAL ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these accounts are set out
below:
(a) Basis of preparation
The accounts have been prepared in accordance with accounting principles generally
accepted in Hong Kong and comply with accounting standards issued by the Hong
Kong Institute of Certif ied Public Accountants (“HKICPA”). They have been
prepared under the historical cost convention except that, as disclosed in the
accounting policies below, certain properties and investments in securities are stated
at fair value.
The HKICPA has issued a number of new and revised Hong Kong Financial
Reporting Standards and Hong Kong Accounting Standards (“new HKFRSs”) which
are effective for accounting periods beginning on or after 1st January, 2005. The
Group has not early adopted these new HKFRSs in the accounts for the year ended
31st March, 2005. The Group has already commenced an assessment of the impact
of these new HKFRSs but is not yet in a position to state whether these new
HKFRSs would have a significant impact on its results of operations and financial
position.
(b) Group accounting
(i) Consolidation
The consolidated accounts include the accounts of the Company and its
subsidiaries made up to 31st March.
Subsidiaries are those entities in which the Company, directly or indirectly,
controls more than one half of the voting power; has the power to govern the
f inancial and operating policies; to appoint or remove the majority of the
members of the board of directors; or to cast majority of votes at the meetings
of the board of directors.
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2. PRINCIPAL ACCOUNTING POLICIES (Continued)
(b) Group accounting (Continued)
(i) Consolidation (Continued)
The results of subsidiaries acquired or disposed of during the year are
included in the consolidated profit and loss account from the effective date
of acquisition or up to the effective date of disposal, as appropriate.
All significant intercompany transactions and balances within the Group are
eliminated on consolidation.
In the Company’s balance sheet, the investments in subsidiaries are stated at
cost less provision for impairment losses. The results of subsidiaries are
accounted for by the Company on the basis of dividends received and
receivable.
(ii) Joint ventures
A joint venture is a contractual arrangement whereby the Group and other
parties undertake an economic activity which is subject to joint control and
none of the participating parties has unilateral control over the economic
activity.
The consolidated profit and loss account includes the Group’s share of the
results of jointly controlled entities for the year, and the consolidated balance
sheet includes the Group’s share of the net assets of the jointly controlled
entities and goodwill (net of accumulated amortisation) on acquisition.
(iii) Associated company
An associated company is a company, not being a subsidiary or a joint
venture, in which an equity interest is held for the long-term and significant
influence is exercised in its management.
The consolidated profit and loss account includes the Group’s share of the
results of an associated company for the year, and the consolidated balance
sheet includes the Group’s share of the net assets of the associated company
on acquisition.
Equity accounting is discontinued when the carrying amount of the investment
in an associated company reaches zero, unless the Group has incurred
obligations or guaranteed obligations in respect of the associated company.
42 NOTES TO THE ACCOUNTSC
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2. PRINCIPAL ACCOUNTING POLICIES (Continued)
(b) Group accounting (Continued)
(iii) Associated company (Continued)
Unrealised gains on transactions between the Group and its associated
company are eliminated to the extent of the Group’s interest in the associated
company; unrealised losses are eliminated unless the transaction provides
evidence of an impairment of the asset transferred.
(iv) Translation of foreign currencies
Transactions in foreign currencies are translated at exchange rates ruling at
the transaction dates. Monetary assets and liabilities expressed in foreign
currencies at the balance sheet date are translated at rates of exchange ruling
at the balance sheet date. Exchange differences arising in these cases are
dealt with in the profit and loss account.
The balance sheets of subsidiaries, jointly controlled entities and an associated
company expressed in foreign currencies are translated at the rates of
exchange ruling at the balance sheet date whilst the profit and loss accounts
are translated at average rates. Exchange differences are dealt with as a
movement in reserves.
(c) Intangibles
(i) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair
value of the Group’s share of the net assets of the acquired subsidiary/jointly
controlled entities/business at the date of acquisition.
Goodwill on acquisitions occurring on or after 1st April, 2001 is recognised
as an asset in the balance sheet and amortised using the straight-line method
over its estimated useful life of 10 to 20 years. With respect to investment in
jointly controlled entities accounted for under the equity method of
accounting, goodwill is included in the carrying amount of the investment.
Goodwill on acquisitions that occurred prior to 1st April, 2001 was eliminated
against reserves. Any impairment arising on such goodwill is accounted for
in the profit and loss account.
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2. PRINCIPAL ACCOUNTING POLICIES (Continued)
(c) Intangibles (Continued)
(ii) Trademarks
Expenditure on acquired trademarks is capitalised and amortised using the
straight-line method over their useful lives, but not exceeding 20 years.
Trademarks are not revalued as there is no active market for these assets.
(iii) Impairment of intangible assets
Where an indication of impairment exists, the carrying amount of any
intangible asset, including goodwill previously written off against reserves,
is assessed and written down immediately to its recoverable amount.
(d) Fixed assets
(i) Investment properties
Investment properties are interests in land and buildings in respect of which
construction work and development have been completed and which are held
for their investment potential, any rental income being negotiated at arm’s
length.
Investment properties are valued annually by independent professional valuers.
The valuations are on an open market value basis related to individual
properties and separate values are not attributed to land and buildings. The
valuations are incorporated in the annual accounts. Increases in valuation
are credited to the property revaluation reserve. Decreases in valuation are
first set off against increases on earlier valuations on a portfolio basis and
thereafter are debited to the profit and loss account. Any subsequent increases
are credited to the prof it and loss account up to the amount previously
debited.
Upon the disposal of an investment property, the relevant portion of the
property revaluation reserve realised in respect of previous valuations is
released from the property revaluation reserve to the profit and loss account.
(ii) Other properties
Other properties are interests in land and buildings other than investment
properties and are stated at cost less accumulated depreciation and
accumulated impairment losses.
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2. PRINCIPAL ACCOUNTING POLICIES (Continued)
(d) Fixed assets (Continued)
(iii) Other fixed assets
Leasehold improvements, furniture, restaurant and other equipment are stated
at cost less accumulated depreciation and accumulated impairment losses.
(iv) Depreciation
No depreciation is provided for investment properties unless the unexpired
lease term is 20 years or less, in which case depreciation is provided on the
then carrying value over the unexpired lease term.
Freehold land is not depreciated. Leasehold land of other properties is
depreciated over the period of the lease while other f ixed assets (except for
utensils, cutlery and glassware) are depreciated at rates suff icient to write
off their cost less accumulated impairment losses over their estimated useful
lives on a straight-line basis. The principal annual rates are as follows:
Leasehold land Over the remaining period of the lease
Buildings 2.5%
Leasehold improvements Over the unexpired period of the lease
Furniture, restaurant and
other equipment 12.5% to 20%
(v) Impairment and gain or loss on disposal of fixed assets
At each balance sheet date, both internal and external sources of information
are considered to assess whether there is any indication that assets included
in other properties and other fixed assets are impaired. If any such indication
exists, the recoverable amount of the asset is estimated and where relevant,
an impairment loss is recognised to reduce the asset to its recoverable amount.
Such impairment losses are recognised in the profit and loss account.
The gain or loss on disposal of a fixed asset other than investment properties
is the difference between the net sales proceeds and the carrying amount of
the relevant asset, and is recognised in the prof it and loss account. Any
property revaluation reserve balance remaining attributable to the relevant
asset is transferred to retained profits and is shown as a movement in reserves.
NOTES TO THE ACCOUNTS 45
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2. PRINCIPAL ACCOUNTING POLICIES (Continued)
(e) Assets under operating leases
Leases where substantially all the risks and rewards of ownership of assets remainwith the leasing company are accounted for as operating leases. Payments madeunder operating leases net of any incentives received from the leasing company arecharged to the profit and loss account on a straight-line basis over the lease periods.
(f) Investment in securities
(i) Other investments
Other investments are stated at cost less any provision for impairment losses.
The carrying amounts of individual investments are reviewed at each balancesheet date to assess whether the fair values have declined below the carryingamounts. When a decline other than temporary has occurred, the carryingamounts of such securities will be reduced to their fair values. The impairmentloss is recognised as an expense in the prof it and loss account. Thisimpairment loss is written back to the profit and loss account when thecircumstances and events that led to the write-downs or write-offs cease toexist and there is persuasive evidence that the new circumstances and eventswill persist for the foreseeable future.
(ii) Short-term investments
Short-term investments are carried at fair value. At each balance sheet date,the net unrealised gains or losses arising from the changes in fair value ofshort-term investments are recognised in the profit and loss account. Profitsor losses on disposal of short-term investments, representing the differencebetween the net sales proceeds and the carrying amounts, are recognised inthe profit and loss account as they arise.
(iii) Held-to-maturity securities
Held-to-maturity securities are stated in the balance sheet at cost plus/lessany discount/premium amortised to date. The discount or premium isamortised over the period to maturity and included as interest income/expensein the profit and loss account. Provision is made when there is a diminutionin value other than temporary.
The carrying amounts of individual held-to-maturity securities or holdingsof the same securities are reviewed at the balance sheet date in order toassess the credit risk and whether the carrying amounts are expected to berecovered. Provisions are made when carrying amounts are not expected tobe recovered and are recognised in the profit and loss account as an expense
immediately.
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2. PRINCIPAL ACCOUNTING POLICIES (Continued)
(g) Stocks
Stocks comprise mainly food and consumable stores and are stated at the lower of
cost and net realisable value. Cost, calculated on the f irst-in, f irst-out basis,
comprises all costs of purchase, costs of conversion and other costs incurred in
bringing the stocks to their present location and condition. Net realisable value is
determined on the basis of anticipated sales proceeds less estimated selling expenses.
(h) Trade and other debtors
Provision is made against trade and other debtors to the extent they are considered
to be doubtful. Trade and other debtors in the balance sheet are stated net of such
provision.
(i) Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet at cost. For the purposes
of the cash flow statement, cash and cash equivalents comprise cash on hand,
deposits held at call with banks, cash investments with a maturity of three months
or less from date of investment and bank overdrafts.
(j) Provisions
Provisions are recognised when the Group has a present legal or constructive
obligation as a result of past events, it is probable that an outflow of resources will
be required to settle the obligation, and a reliable estimate of the amount can be
made. Where the Group expects a provision to be reimbursed, for example under
an insurance contract, the reimbursement is recognised as a separate asset but only
when the reimbursement is virtually certain.
(k) Employee benefits
(i) Employee leave entitlements
Employee entitlements to annual leave are recognised when they accrue to
employees. A provision is made for the estimated liability for annual leave
as a result of services rendered by employees up to the balance sheet date.
Employee entitlements to sick leave and maternity leave are not recognised
until the time of leave.
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2. PRINCIPAL ACCOUNTING POLICIES (Continued)
(k) Employee benefits (Continued)
(ii) Profit sharing and bonus plans
The expected cost of profit sharing and bonus payments are recognised as a
liability when the Group has a present legal or constructive obligation as a
result of services rendered by employees and a reliable estimate of the
obligation can be made.
Liabilities for prof it sharing and bonus plans are expected to be settled
within 12 months and are measured at the amounts expected to be paid when
they are settled.
(iii) Pension obligations
The Group operates a def ined benef it and certain def ined contribution
schemes, the assets of which are held in separate trustee-administered funds.
The pension schemes are funded by payments from employees and by the
relevant group companies, taking account of the recommendations of
independent qualified actuaries.
The Group’s contributions to the defined contribution schemes are expensed
as incurred.
For the defined benefit scheme, pension costs are assessed using the projected
unit credit method. The cost of providing pensions is charged to the profit
and loss account so as to spread the regular cost over the service lives of
employees in accordance with the advice of the actuaries who carry out a
valuation of the scheme each year. The pension obligation is measured as
the present value of the estimated future cash outflows using a discount rate
determined by reference to market yields on high quality corporate bonds
which have terms to maturity approximating the terms of the related liability.
Actuarial gains and losses are recognised by amortising the amount by which
the cumulative unrecognised gains and losses exceed 10% of the greater of
the scheme’s assets and defined benefit obligations over the average expected
future working lifetime of the members of the scheme. Past service costs are
recognised as an expense on a straight-line basis over the average period
until the benefits become vested.
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2. PRINCIPAL ACCOUNTING POLICIES (Continued)
(k) Employee benefits (Continued)
(iv) Long service payments
The Group’s net obligation in respect of long service payments on cessation
of employment in certain circumstances under the Hong Kong Employment
Ordinance is the amount of future benefit that employees have earned in
return for their service in the current and prior periods.
The obligation is calculated using the projected unit credit method, discounted
to its present value and reduced by entitlements accrued under the Group’s
retirement schemes that are attributable to contributions made by the Group.
The discount rate is the yield at balance sheet date on high quality corporate
bonds which have terms to maturity approximating the terms of the related
liability. Actuarial gains and losses are recognised by amortising the amount
by which the cumulative unrecognised gains and losses exceed 10% of the
long service payment obligations over the average expected future working
lifetime of the relevant employees.
(l) Deferred taxation
Deferred taxation is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their carrying
amounts in the accounts. Taxation rates enacted or substantively enacted by the
balance sheet date are used to determine deferred taxation.
Deferred tax assets are recognised to the extent that it is probable that future
taxable prof it will be available against which the temporary differences can be
utilised.
Deferred taxation is provided on temporary differences arising on investments in
subsidiaries, associated company and jointly controlled entities, except where the
timing of the reversal of the temporary differences can be controlled and it is
probable that the temporary differences will not reverse in the foreseeable future.
(m) Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from past events and
whose existence will only be confirmed by the occurrence or non-occurrence of
one or more uncertain future events not wholly within the control of the Group. It
can also be a present obligation arising from past events that is not recognised
because it is not probable that outflow of economic resources will be required or
the amount of obligation cannot be measured reliably.
NOTES TO THE ACCOUNTS 49
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2. PRINCIPAL ACCOUNTING POLICIES (Continued)
(m) Contingent liabilities and contingent assets (Continued)
A contingent liability is not recognised but is disclosed in the notes to the accounts.
When a change in the probability of an outflow occurs so that outflow is probable,
it will then be recognised as provision.
A contingent asset is a possible asset that arises from past events and whose
existence will be confirmed only by the occurrence or non-occurrence of one or
more uncertain events not wholly within the control of the Group.
Contingent assets are not recognised but are disclosed in the notes to the accounts,
where necessary, when an inflow of economic benefits is probable. When inflow is
virtually certain, an asset is recognised.
(n) Turnover
Turnover comprises (i) the value of sales in the normal course of the restaurant and
catering, food processing and distribution businesses and (ii) rental income.
(o) Revenue recognition
(i) Sales of goods and services
Sales of goods and services are recognised on the transfer of risks and
rewards of ownership of the goods, which generally coincides with the time
when the goods are delivered to customers and title has passed and when
services are rendered.
(ii) Rental income
Operating lease rental income is recognised on a straight-line basis.
(iii) Management and service fee income
Management and service fee income are recognised when services are
rendered.
(iv) Interest income
Interest income is recognised on a time proportion basis, taking into account
the principal amounts outstanding and the applicable interest rates.
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2. PRINCIPAL ACCOUNTING POLICIES (Continued)
(p) Cost of sales
Cost of sales represents costs which vary directly or indirectly with the level of
sales of the Group. It comprises cost of stocks and operating costs incurred to
generate sales of goods and services, and rental income. The operating costs include
mainly operating lease rentals, staff costs, utility costs and depreciation of fixed
assets incurred by quick service restaurants, fast casual dining, institutional catering
and specialty restaurant chains, and outgoings for rental income.
(q) Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or
production of an asset that necessarily takes a substantial period of time to get
ready for its intended use or sale are capitalised as part of the cost of that asset.
All other borrowing costs are charged to the profit and loss account in the year in
which they are incurred.
3. SEGMENT INFORMATION
No segment information is provided as over 90% of the turnover and contribution to the
Group’s results are attributable to the restaurants and catering services in Hong Kong.
4. TURNOVER AND OTHER INCOME
2005 2004
HK$’000 HK$’000
Sales of goods and services 3,013,124 2,696,705
Rental income 25,374 26,590
Total turnover 3,038,498 2,723,295
Interest income 19,449 13,075
Management and service fee income 3,457 3,863
Net gain related to investments 631 5,076
Net gain on disposal of an investment property – 150
Sundry income, net 12,911 7,171
Total other income, net 36,448 29,335
3,074,946 2,752,630
NOTES TO THE ACCOUNTS 51
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5. FINANCE COSTS
2005 2004HK$’000 HK$’000
Interest expense on bank loans whollyrepayable within five years 1,061 237
6. PROFIT BEFORE TAXATION
The consolidated profit before taxation was determined after charging and crediting thefollowing:
2005 2004HK$’000 HK$’000
Charging:Depreciation of fixed assets 134,751 132,380Net loss on disposal of fixed assets other than
investment properties 4,364 4,566Cost of stocks sold 959,688 810,906Staff costs (including directors’ emoluments) (Note 11) 773,594 709,066Operating lease rentals in respect of rented
premises (including contingent rentals ofHK$24,712,000 (2004: HK$16,538,000)) 326,158 302,759
Amortisation of trademarks (included inadministrative expenses) 2,704 2,704
Amortisation of goodwill (included inadministrative expenses) 133 113
Amortisation of goodwill on acquisition ofjointly controlled entities (included inshare of results of jointly controlled entities) 1,827 1,750
Provision for impairment of other investments 2,522 –Auditors’ remuneration 2,096 2,008
Crediting:Gross rental income from investment properties 10,709 11,543Less: Outgoings (111) (406)
10,598 11,137
Other rental income less outgoings 8,911 8,181Net exchange gain 1,038 445Net gain on disposal of an investment property – 150Dividend income from other investments 331 345
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7. TAXATION
The Company is exempted from taxation in Bermuda until 2016. Hong Kong profits tax
has been provided at the rate of 17.5% (2004: 17.5%) on the estimated assessable profit
for the year. Taxation on overseas profits has been calculated on the estimated assessable
profits for the year at the rates of taxation prevailing in the countries in which the Group
operates.
The amount of taxation charged to consolidated profit and loss account represents:
2005 2004
HK$’000 HK$’000
Current taxation:
Hong Kong profits tax 62,649 56,565
Overseas taxation 4,084 2,147
Under provision in prior years 600 1,158
Deferred taxation relating to the origination and
reversal of temporary differences (Note 24) (1,540) (1,882)
65,793 57,988
Share of taxation attributable to:
Associated company 243 209
Jointly controlled entities (1,353) (2,902)
Taxation charge 64,683 55,295
The taxation on the Group’s prof it before taxation differs from the theoretical amount
that would arise using the taxation rate of Hong Kong as follows:
2005 2004
HK$’000 HK$’000
Profit before taxation 349,534 313,369
Calculated at a taxation rate of 17.5% (2004: 17.5%) 61,169 54,840
Effect of different taxation rates in other countries 4,494 1,025
Income not subject to taxation (5,222) (5,640)
Expenses not deductible for taxation purposes 3,532 3,937
Utilisation of previously unrecognised tax losses – (25)
Tax losses not recognised 110 –
Under provision in prior years 600 1,158
Taxation charge 64,683 55,295
NOTES TO THE ACCOUNTS 53
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8. PROFIT ATTRIBUTABLE TO SHAREHOLDERS
The profit attributable to shareholders is dealt with in the accounts of the Company to the
extent of approximately HK$310,000,000 (2004: HK$228,000,000).
9. DIVIDENDS
2005 2004
HK$’000 HK$’000
Interim, paid, of 7.5 cents (2004: 6.4 cents)
per ordinary share 40,174 33,996
Special, paid, of Nil (2004: 6.4 cents)
per ordinary share – 33,996
Final, proposed, 20 cents (2004: 18 cents)
per ordinary share 107,967 96,263
Special, proposed, Nil (2004: 6.55 cents)
per ordinary share – 35,029
148,141 199,284
10. EARNINGS PER SHARE
The calculation of basic and diluted earnings per share are based on the Group’s profit
attributable to shareholders of approximately HK$284,851,000 (2004: HK$258,074,000).
The basic earnings per share is based on the weighted average of 535,159,375 (2004:
530,777,563) ordinary shares in issue during the year. The diluted earnings per share is
based on 544,733,192 (2004: 541,535,007) ordinary shares which is the weighted average
number of ordinary shares in issue during the year plus the effect of dilutive potential
ordinary shares of 9,573,817 (2004: 10,757,444) ordinary shares deemed to be issued if
all outstanding options had been exercised.
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11. STAFF COSTS
Staff costs, including directors’ emoluments, were as follows:
2005 2004
HK$’000 HK$’000
Wages and salaries 737,409 672,533
Pension costs – defined contribution schemes 32,218 29,337
Pension costs – defined benefit scheme (Note 23(b)) 4,189 6,804
Long service payments expense (Note 23(c)) (222) 392
773,594 709,066
12. DIRECTORS’ AND FIVE HIGHEST PAID INDIVIDUALS’ EMOLUMENTS
(a) Directors’ emoluments
The aggregate amounts of emoluments paid/payable to directors of the Company
during the year are as follows:
2005 2004
HK$’000 HK$’000
Fees
– Executive directors 200 200
– Non-executive directors and independent
non-executive directors 500 400
Other emoluments for executive directors
– Basic salaries, gratuities and other allowances 4,625 4,931
– Contributions to pension schemes 409 401
– Discretionary bonuses 6,711 6,144
12,445 12,076
No directors waived any emoluments during the year.
During the year, no emoluments were paid by the Group to the directors as
inducement to join or as compensation for loss of office.
NOTES TO THE ACCOUNTS 55
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12. DIRECTORS’ AND FIVE HIGHEST PAID INDIVIDUALS’ EMOLUMENTS(Continued)
(a) Directors’ emoluments (Continued)
The emoluments of the executive directors fell within the following bands:
Number of directors
2005 2004
Nil to HK$1,000,000 1 1
HK$1,000,001 to HK$1,500,000 – 1
HK$1,500,001 to HK$2,000,000 1 –
HK$4,500,001 to HK$5,000,000 1 1
HK$5,000,001 to HK$5,500,000 1 1
4 4
The emoluments of all non-executive directors were below HK$1,000,000.
(b) Five highest paid individuals
The five individuals whose emoluments were the highest in the Group for the year
include three (2004: three) directors whose emoluments are reflected in the analysis
presented in Note 12(a). The emoluments payable to the remaining two (2004: two)
individuals during the year are as follows:
2005 2004
HK$’000 HK$’000
Basic salaries, gratuities and other allowances 1,003 1,092
Contributions to pension schemes 76 75
Discretionary bonuses 345 291
1,424 1,458
The emoluments fell within the following bands:
Number of individuals
2005 2004
Nil to HK$1,000,000 2 2
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13. FIXED ASSETS
(a) Movements in fixed assets of the Group are as follows:
Furniture,restaurant
Investment Land and Leasehold and otherproperties buildings improvements equipment Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Cost or valuation:At 1st April, 2004 106,700 531,946 252,067 898,432 1,789,145Revaluation 3,700 – – – 3,700Additions – 131 26,026 97,553 123,710Disposals – – (8,021) (31,731) (39,752)
At 31st March, 2005 110,400 532,077 270,072 964,254 1,876,803
Accumulated depreciation:At 1st April, 2004 – 100,035 188,683 624,090 912,808Charge for the year – 10,122 19,272 105,357 134,751Disposals – – (7,504) (26,816) (34,320)
At 31st March, 2005 – 110,157 200,451 702,631 1,013,239
Net book value:At 31st March, 2005 110,400 421,920 69,621 261,623 863,564
At 31st March, 2004 106,700 431,911 63,384 274,342 876,337
The analysis of thecost or valuationis as follows:
At 31st March, 2005At cost – 532,077 270,072 964,254 1,766,403At valuation 110,400 – – – 110,400
110,400 532,077 270,072 964,254 1,876,803
At 31st March, 2004At cost – 531,946 252,067 898,432 1,682,445At valuation 106,700 – – – 106,700
106,700 531,946 252,067 898,432 1,789,145
NOTES TO THE ACCOUNTS 57
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13. FIXED ASSETS (Continued)
(b) The Group’s interests in investment properties and land and buildings at their net
book values are analysed as follows:
Investment properties Land and buildings
2005 2004 2005 2004
HK$’000 HK$’000 HK$’000 HK$’000
In Hong Kong, held on:
Leases of over 50 years 74,000 73,000 165,383 168,315
Leases of between
10 to 50 years 36,400 33,700 193,711 198,893
Outside Hong Kong,
held on:
Freehold – – 16,781 16,887
Leases of over 50 years – – – –
Leases of between
10 to 50 years – – 46,045 47,816
110,400 106,700 421,920 431,911
The investment properties were revalued at 31st March, 2005 on the basis of their
open market values by CB Richard Ellis Limited, independent professional valuers.
As a result of the appraisal, the revaluation surplus amounted to approximately
HK$3,700,000 (2004: surplus of HK$2,600,000). The amount was credited to the
consolidated profit and loss account (2004: HK$2,600,000). As at 31st March,
2005, the revaluation deficits charged to consolidated profit and loss account on
earlier valuations less subsequent revaluation surplus credited amounted to
approximately HK$1,396,000.
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14. INTANGIBLES
Movements in intangibles of the Group are as follows:
Trademarks Goodwill Total
HK$’000 HK$’000 HK$’000
Cost:
As at 1st April, 2004 and as at
31st March, 2005 64,694 1,352 66,046
Accumulated amortisation:
As at 1st April, 2004 44,644 113 44,757
Amortisation for the year 2,704 133 2,837
As at 31st March, 2005 47,348 246 47,594
Net book value:
As at 31st March, 2005 17,346 1,106 18,452
As at 31st March, 2004 20,050 1,239 21,289
The trademarks mainly represent the intellectual properties relating to the ‘The Spaghetti
House’ operations.
The goodwill arises from the purchase of the “Oliver’s Super Sandwiches” restaurant
chain business.
The directors are of the opinion that the fair values of the trademarks were not less than
their carrying values as at 31st March, 2005.
NOTES TO THE ACCOUNTS 59
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15. INVESTMENT IN SUBSIDIARIES
Company
2005 2004
HK$’000 HK$’000
Investment in unlisted shares, at cost 331,802 331,802
Due from subsidiaries 215,012 65,000
Due to subsidiaries – (2,039)
546,814 394,763
Details of principal subsidiaries as at 31st March, 2005 are set out on pages 79 to 83.
The balances with subsidiaries are unsecured, non-interest bearing and not repayable
within the next twelve months.
The directors are of the opinion that the underlying values of the subsidiaries were not
less than their carrying values as at 31st March, 2005.
16. INVESTMENT IN AN ASSOCIATED COMPANY
Group
2005 2004
HK$’000 HK$’000
Share of net assets 2,145 1,120
Due from the associated company 60 60
2,205 1,180
(a) Details of the associated company at 31st March, 2005 are as follows:
Place of Particulars
incorporation Principal of issued Interest held
Name and operations activity shares held indirectly
Miracle Time Hong Kong Operation of Ordinary shares 20%
Enterprises Limited a restaurant of HK$1 each
(b) The amount due from the associated company is unsecured, non-interest bearing
and are not repayable in the coming twelve months.
(c) The directors are of the opinion that the underlying value of the associated company
was not less than its carrying amount as at 31st March, 2005.
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17. INVESTMENT IN JOINTLY CONTROLLED ENTITIES
Group
2005 2004
HK$’000 HK$’000
Share of net (liabilities)/assets (12,067) 13,303
Goodwill on acquisition of jointly controlled
entities less amortisation 30,867 32,694
Due from jointly controlled entities 47,073 17,600
65,873 63,597
(a) Details of the jointly controlled entities at 31st March, 2005 are as follows:
Percentage of
interest in
Place of ownership/
incorporation/ voting power/
Name operations Principal activities profit sharing
Manchu Wok Canada/ The United Operation of 48%
Enterprises, Inc States and Canada restaurants
(“MWEI”)
Manchu Wok Canada/ The United Operation of 48%
Enterprises II Inc States restaurants
(“MWEII”)
Beijing Spaghetti The People’s Republic Operation of 33%
Catering Co., Ltd of China restaurant
Café de New Asia The People’s Republic Operation of
Group Co., Ltd of China restaurants 50%
(b) The amounts due from the jointly controlled entities are unsecured, non-interest
bearing and not repayable within the next twelve months.
(c) The directors are of the opinion that the underlying values of the jointly controlled
entities were not less than their carrying values as at 31st March, 2005.
NOTES TO THE ACCOUNTS 61
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18. OTHER INVESTMENTS
Group
2005 2004
HK$’000 HK$’000
Unlisted club debentures, at cost 350 350
Unlisted equity securities, at cost 2,522 2,522
Equity securities listed in Hong Kong 516 372
3,388 3,244
Less: provision for impairment in value (2,522) –
866 3,244
Quoted market value of listed investments 516 448
19. HELD-TO-MATURITY SECURITIES
Held-to-maturity securities represent investments in bonds and range notes which the
Group intends to hold them to maturity and will be able to recover substantially all of
their recorded investment cost.
Group
2005 2004
HK$’000 HK$’000
Debt securities listed overseas, at amortised cost 5,490 1,526
Unlisted investments, at amortised cost 210,177 165,787
215,667 167,313
Quoted market value of listed debt securities 5,365 1,511
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20. SHORT-TERM INVESTMENTS
Group
2005 2004
HK$’000 HK$’000
Equity securities listed in Hong Kong 132 9,103
Unlisted equity securities 7,795 7,795
Debt securities listed overseas – 7,824
Investment funds 79,561 –
87,488 24,722
21. TRADE DEBTORS AND CREDITORS
The Group’s sales to customers are mainly on a cash basis. The Group also grants a credit
period which is usually less than 90 days to certain customers of the Group’s institutional
catering services and food manufacturing businesses.
As at 31st March, 2005, approximately 85% (2004: 90%) of the Group’s trade debtors
were aged less than 60 days while over 98% (2004: 99%) of the trade creditors were aged
less than 60 days.
22. SHORT-TERM BANK LOANS
Group
2005 2004
HK$’000 HK$’000
Short-term bank loans, unsecured – 10,000
NOTES TO THE ACCOUNTS 63
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23. RETIREMENT BENEFIT LIABILITIES AND PROVISION FOR LONGSERVICE PAYMENTS
Group
2005 2004
HK$’000 HK$’000
Retirement benefit liabilities
Defined contribution schemes (note (a)) 4,669 4,232
Defined benefit scheme (note (b)) 12,706 15,835
17,375 20,067
Provision for long service payments (note (c)) 8,002 8,536
25,377 28,603
The retirement benefit liabilities and provision for long service payments are included in
other creditors and accrued liabilities.
(a) Defined contribution schemes
The Group operates the Mandatory Provident Fund Scheme (“MPF scheme”) under
the Hong Kong Mandatory Provident Fund Schemes Ordinance for employees
employed under the jurisdiction of the Hong Kong Employment Ordinance. The
scheme is administered by an independent trustee.
Under the MPF scheme, each of the Group and the eligible employees make monthly
mandatory contributions to the scheme at 5% of the employees’ relevant income as
defined under the Mandatory Provident Fund Schemes Ordinance. The mandatory
contributions by each party are subject to a maximum of HK$1,000 per month.
Contributions to the scheme vest immediately upon the completion of service in
the relevant service period.
The Group also operates defined contribution schemes for employees in the PRC.
The Group is required to make contributions to the schemes at various applicable
rates of monthly salary that are in accordance with the local practice and regulations.
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23. RETIREMENT BENEFIT LIABILITIES AND PROVISION FOR LONGSERVICE PAYMENTS (Continued)
(b) Defined benefit scheme
The Group operates a defined benefit scheme for its employees in Hong Kong. The
benefit entitlement under the scheme is calculated based on the final salary of the
staff and the length of service with the Group. The scheme assets are administered
by an independent trustee and are maintained independently of the Group’s finance.
The scheme is funded by contributions from the Group and the employees in
accordance with qualif ied independent actuary’s recommendation from time to
time on the basis of periodic valuations.
The latest independent actuarial valuation of the scheme, in accordance with SSAP
34 (revised), was carried out on 31st March, 2005 and was prepared by HSBC Life
(International) Limited, an independent qualif ied actuary, using the projected unit
credit method.
The net liability recognised in the consolidated balance sheet is determined as
follows:
Group
2005 2004
HK$’000 HK$’000
Present value of funded obligations 112,652 106,808
Fair value of plan assets (114,418) (104,658)
(1,766) 2,150
Unrecognised actuarial gains 14,472 13,685
Net liability in the balance sheet 12,706 15,835
NOTES TO THE ACCOUNTS 65
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23. RETIREMENT BENEFIT LIABILITIES AND PROVISION FOR LONGSERVICE PAYMENTS (Continued)
(b) Defined benefit scheme (Continued)
Amounts recognised in the consolidated profit and loss account are as follows:
Group
2005 2004
HK$’000 HK$’000
Current service cost 6,026 6,434
Interest cost 5,895 5,827
Expected return on plan assets (7,732) (5,457)
Total, included in staff costs (Note 11) 4,189 6,804
Of the total charge, approximately HK$1,784,000 (2004: HK$3,774,000) and
HK$2,405,000 (2004: HK$3,030,000) were included, respectively, in cost of sales
and administrative expenses.
The actual return on plan assets was a gain of approximately HK$7,709,000 (2004:
HK$23,841,000).
Movements in the liability recognised in the consolidated balance sheet are as
follows:
Group
2005 2004
HK$’000 HK$’000
Beginning of year 15,835 21,303
Total expense – as shown above 4,189 6,804
Contributions paid (7,318) (12,272)
End of year 12,706 15,835
The principal actuarial assumptions used are as follows:
2005 2004
Discount rate 5.0% p.a. 5.5% p.a.
Expected rate of return on plan assets 7.0% p.a. 7.0% p.a.
Expected rate of future salary increases 4.0% p.a. 4.5% p.a.
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23. RETIREMENT BENEFIT LIABILITIES AND PROVISION FOR LONGSERVICE PAYMENTS (Continued)
(c) Provision for long service payments
The Group provides long service payments for its employees in respect of long
service payments on cessation of employment in certain circumstances under the
Hong Kong Employment Ordinance.
The latest independent actuarial valuation of the long service payments, in
accordance with SSAP 34 (revised), was carried out on 31st March, 2005 and was
prepared by Watson Wyatt Limited, an independent qualif ied actuary, using the
projected unit credit method.
The net liability recognised in the consolidated balance sheet is determined as
follows:
Group
2005 2004
HK$’000 HK$’000
Present value of obligations 3,621 4,605
Unrecognised actuarial gains 4,381 3,931
Net liability in the balance sheet 8,002 8,536
Amounts recognised in the consolidated profit and loss account are as follows:
Group
2005 2004
HK$’000 HK$’000
Current service cost 133 49
Interest cost 141 343
Net actuarial gain (496) –
Total, included in staff costs (Note 11) (222) 392
Of the total credit, approximately HK$204,000 (2004: charge of HK$291,000) and
HK$18,000 (2004: charge of HK$101,000) were included, respectively, in cost of
sales and administrative expenses.
NOTES TO THE ACCOUNTS 67
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23. RETIREMENT BENEFIT LIABILITIES AND PROVISION FOR LONGSERVICE PAYMENTS (Continued)
(c) Provision for long service payments (Continued)
Movements in the liability recognised in the consolidated balance sheet are as
follows:
Group
2005 2004
HK$’000 HK$’000
Beginning of year 8,536 9,033
Total (credited)/charged – as shown above (222) 392
Payments to employees (312) (889)
End of year 8,002 8,536
The principal actuarial assumptions used are as follows:
2005 2004
Discount rate 4.2% p.a. 3.2% p.a.
Expected rate of future salary increases 2.0% p.a. 2.0% p.a.
24. DEFERRED TAXATION
Deferred taxation are calculated in full on temporary differences under the liability method
using a principal taxation rate of 17.5% (2004: 17.5%).
Movements in net deferred tax liabilities are as follows:
Group
2005 2004
HK$’000 HK$’000
Beginning of year (10,077) (11,959)
Deferred taxation credited to profit and
loss account (Note 7) 1,540 1,882
End of year (8,537) (10,077)
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24. DEFERRED TAXATION (Continued)
Deferred income tax assets are recognised for tax losses carry forwards to the extent that
realisation of the related tax benefits through the future taxable profits is probable. As at
31st March, 2005, the Group has unrecognised tax losses of approximately HK$5,607,000
(2004: HK$4,971,000) to carry forward indefinitely against future taxable income.
The movements in deferred tax assets and liabilities of the Group (prior to offsetting of
balances within the same taxation jurisdiction) during the year is as follows:
Deferred tax assets:
Provisions Tax losses Others Total
2005 2004 2005 2004 2005 2004 2005 2004
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Beginning of year 3,917 5,095 1,977 2,788 1,245 1,245 7,139 9,128
Charged to profit
and loss account (523) (1,178) (682) (811) – – (1,205) (1,989)
End of year 3,394 3,917 1,295 1,977 1,245 1,245 5,934 7,139
Deferred tax liabilities:
Accelerated
taxation
depreciation Others Total
2005 2004 2005 2004 2005 2004
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Beginning of year (16,936) (20,761) (280) (326) (17,216) (21,087)
Credited/(Charged)
to profit and
loss account 2,901 3,825 (156) 46 2,745 3,871
End of year (14,035) (16,936) (436) (280) (14,471) (17,216)
NOTES TO THE ACCOUNTS 69
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24. DEFERRED TAXATION (Continued)
Deferred tax assets and liabilities are offset when there is a legally enforceable right to
set off current tax assets against tax liabilities and when the deferred taxes relate to the
same fiscal authority. The following amounts, determined after appropriate offsetting, are
shown in the consolidated balance sheet:
Group
2005 2004
HK$’000 HK$’000
Deferred tax assets 5,580 5,358
Deferred tax liabilities (14,117) (15,435)
(8,537) (10,077)
25. SHARE CAPITAL
2005 2004
Number of Nominal Number of Nominal
shares value shares value
’000 HK$’000 ’000 HK$’000
Authorised
Ordinary shares of
HK$0.10 each
Beginning and end of year 1,000,000 100,000 1,000,000 100,000
Issued and fully paid
Beginning of year 531,194 53,119 533,640 53,364
Shares issued under share
option scheme (Note 26) 4,570 457 3,520 352
Shares purchased and
cancelled by
the Company – – (5,966) (597)
End of year 535,764 53,576 531,194 53,119
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26. SHARE OPTIONS
Pursuant to a share option scheme adopted by the Company on 30th January, 1991 (the
“Previous Scheme”), the Company has granted certain options to executives and employees
of the Group, including executive directors employed by the Group, to subscribe for
ordinary shares in the Company subject to the terms and conditions stipulated therein.
The Previous Scheme was terminated upon the passing of a shareholders’ resolution for
adoption of another share option scheme on 19th September, 2000 (the “Scheme”).
Accordingly, no options can be granted under the Previous Scheme as at the date of this
report. However, for the outstanding options granted and yet to be exercised under the
Previous Scheme, the existing rights of the grantees are not affected. No share options
had been granted under the Scheme since its adoption.
On 24th September, 2003, the Scheme was terminated upon the passing of a shareholders’
resolution for adoption of a new share option scheme (the “New Scheme”). Pursuant to
the New Scheme, the Company may grant options to executive and non-executive directors,
employees, suppliers and customers of the Group and consultants, advisors, managers,
officers and corporations that provided research, development or other technical support
to the Group to subscribe for ordinary shares in the Company subject to the terms and
conditions stipulated therein. No options have been granted under the New Scheme since
its adoption.
For options granted under the Previous Scheme, the exercise price in relation to each
option was determined by the board of directors of the Company, but in any event would
be the higher of (i) the nominal value of the shares of the Company or (ii) an amount
which is not less than 80% nor more than 100% of the average of the closing price of the
shares as stated in the The Stock Exchange of Hong Kong Limited daily quotations sheets
for the 5 business days immediately preceding the date of offer of the option.
For options granted under the Previous Scheme, the exercisable period and the vesting
period of the options are determined by the directors and the options expire at the end of
a 5-year period after the options become exercisable.
(a) Movements in share options:
Number of options
2005 2004
Beginning of year 19,640,000 23,500,000
Exercised (note (b)) (4,570,000) (3,520,000)
Cancelled upon termination of employment (180,000) (340,000)
End of year (note (c)) 14,890,000 19,640,000
Options vested (note (c)) 760,000 710,000
NOTES TO THE ACCOUNTS 71
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26. SHARE OPTIONS (Continued)
(b) Details of share options exercised during the year:
Market value 2005 2004
Exercise per share at Proceeds Number Proceeds Number
Exercise date price exercise date received of options received of options
HK$ HK$ HK$’000 HK$’000
2nd – 30th April, 2003 2.950 4.400 – 4.900 – – 3,334 1,130,000
2nd – 30th May, 2003 2.950 4.875 – 5.350 – – 3,151 1,068,000
2nd – 26th June, 2003 2.950 5.300 – 5.900 – – 2,118 718,000
2nd – 21st July, 2003 2.950 5.800 – 6.050 – – 443 150,000
21st – 28th August, 2003 2.950 6.400 – 6.500 – – 159 54,000
1st – 30th September, 2003 2.950 6.750 – 7.250 – – 1,062 360,000
31st October, 2003 2.950 7.000 – – 29 10,000
3rd November, 2003 2.950 7.000 – – 88 30,000
1st – 30th April, 2004 2.950 7.400 – 7.900 8,903 3,018,000 – –
3rd – 31st May, 2004 2.950 6.000 – 7.250 1,245 422,000 – –
2nd – 24th June, 2004 2.950 7.200 – 7.250 354 120,000 – –
5th – 26th July, 2004 2.950 7.650 – 8.250 354 120,000 – –
2nd – 30th August, 2004 2.950 8.400 – 9.050 384 130,000 – –
1st – 24th September, 2004 2.950 8.100 – 9.050 1,770 600,000 – –
12th October, 2004 2.950 8.300 147 50,000 – –
31st December, 2004 2.950 9.000 295 100,000 – –
25th February, 2005 2.950 8.750 30 10,000 – –
13,482 4,570,000 10,384 3,520,000
(c) Details of outstanding share options as at 31st March, 2005:
2005 2004
Number Number Number Number
Exercise of options of options of options of options
Grant date Exercise period price outstanding vested outstanding vested
HK$
4th November, 1999 1st April, 2003 to
31st March, 2013 2.950 14,890,000 760,000 19,640,000 710,000
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27. RESERVES
Capital Exchange
Share redemption translation Capital Contributed Retained
premium reserve reserve reserve surplus profits Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
The Group:
At 1st April, 2004 30,099 152,034 8,795 (2,470) 85,197 1,221,559 1,495,214
Premium on shares
issued upon exercise
of share options 13,025 – – – – – 13,025
Exchange differences
arising on consolidation – – (1,931) – – – (1,931)
Profit attributable to
shareholders – – – – – 284,851 284,851
Dividends – – – – – (171,663) (171,663)
At 31st March, 2005 43,124 152,034 6,864 (2,470) 85,197 1,334,747 1,619,496
Representing:
2005 f inal dividend proposed 107,967
Reserves 1,511,529
At 31st March, 2005 1,619,496
The Company and subsidiaries 43,124 152,034 1,295 (2,470) 85,197 1,382,264 1,661,444
Associated company – – – – – 3,565 3,565
Jointly controlled entities – – 5,569 – – (51,082) (45,513)
At 31st March, 2005 43,124 152,034 6,864 (2,470) 85,197 1,334,747 1,619,496
NOTES TO THE ACCOUNTS 73
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27. RESERVES (Continued)
Capital Exchange
Share redemption translation Capital Contributed Retained
premium reserve reserve reserve surplus profits Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
The Group:
At 1st April, 2003 46,573 124,931 1,386 (2,470) 112,300 1,127,064 1,409,784
Premium on shares issued
upon exercise of
share options 10,032 – – – – – 10,032
Reduction in share
premium upon
repurchase of shares (26,506) – – – – – (26,506)
Transfer of reserves
on repurchase of shares – 27,103 – – (27,103) – –
Exchange differences
arising on consolidation – – 7,409 – – – 7,409
Profit attributable to
shareholders – – – – – 258,074 258,074
Dividends – – – – – (163,579) (163,579)
At 31st March, 2004 30,099 152,034 8,795 (2,470) 85,197 1,221,559 1,495,214
Representing:
2004 f inal and special
dividends proposed 131,292
Reserves 1,363,922
At 31st March, 2004 1,495,214
The Company and
subsidiaries 30,099 152,034 522 (2,470) 85,197 1,246,516 1,511,898
Associated company – – – – – 920 920
Jointly controlled entities – – 8,273 – – (25,877) (17,604)
At 31st March, 2004 30,099 152,034 8,795 (2,470) 85,197 1,221,559 1,495,214
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27. RESERVES (Continued)
Capital
Share redemption Contributed Retained
premium reserve surplus profits Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
The Company:
At 1st April, 2004 30,099 152,034 94,467 65,404 342,004
Premium on shares issued on
exercise of share options 13,025 – – – 13,025
Profit attributable to shareholders – – – 310,000 310,000
Dividends – – – (171,663) (171,663)
At 31st March, 2005 43,124 152,034 94,467 203,741 493,366
Representing:
2005 f inal dividend proposed 107,967
Reserves 385,399
At 31st March, 2005 493,366
At 1st April, 2003 46,573 124,931 121,570 1,040 294,114
Premium on shares issued on
exercise of share options 10,032 – – – 10,032
Reduction in share premium
upon repurchase of shares (26,506) – – – (26,506)
Transfer of reserves on
repurchase of shares – 27,103 (27,103) – –
Profit attributable to
shareholders – – – 227,943 227,943
Dividends – – – (163,579) (163,579)
At 31st March, 2004 30,099 152,034 94,467 65,404 342,004
Representing:
2004 final and special
dividends proposed 131,292
Reserves 210,712
At 31st March, 2004 342,004
NOTES TO THE ACCOUNTS 75
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27. RESERVES (Continued)
Under the Companies Act of Bermuda, contributed surplus is distributable to shareholders,
subject to the condition that the Company cannot declare or pay a dividend, or make a
distribution out of contributed surplus if (i) it is, or would after the payment be, unable to
pay its liabilities as they become due, or (ii) the realisable value of its assets would
thereby be less than the aggregate of its liabilities and its issued share capital and share
premium account.
28. CONSOLIDATED CASH FLOW STATEMENT
Analysis of changes in financing during the year:
Share capital
and share
premium Bank loans
HK$’000 HK$’000
At 1st April, 2003 99,937 220,000
Net proceeds from issue of shares on exercise
of share options 10,384 –
Payment for repurchase of shares (27,103) –
Repayment of bank borrowings – (210,000)
At 31st March, 2004 83,218 10,000
Net proceeds from issue of shares on exercise
of share options 13,482 –
New bank borrowings – 175,000
Repayment of bank borrowings – (185,000)
At 31st March, 2005 96,700 –
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29. COMMITMENTS AND CONTINGENT LIABILITIES
(a) Operating lease commitments
At 31st March, 2005, the Group had total future aggregate minimum lease payments
under non-cancellable operating leases as follows:
Group
2005 2004
HK$’000 HK$’000
Land and buildings
– Not later than one year 279,501 262,233
– Later than one year and not later than
five years 329,049 311,356
– Later than five years 26,374 21,523
634,924 595,112
The above lease commitments only include commitments for basic rentals, and do
not include commitments for additional rentals payable, if any, when turnover of
individual restaurants exceeds a pre-determined level as it is not possible to
determine in advance the amount of such additional rentals.
The Company did not have any operating lease commitments at 31st March, 2005
and 31st March, 2004.
(b) Capital commitments
As at 31st March, 2005, the Group had the following capital commitments:
Group
2005 2004
HK$’000 HK$’000
Acquisition of fixed assets
Authorised and contracted for 3,773 12,302
Authorised but not contracted for 125,013 114,234
128,786 126,536
The Company did not have any capital commitments at 31st March, 2005 and 31st
March, 2004.
NOTES TO THE ACCOUNTS 77
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29. COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
(c) Guarantees
As at 31st March, 2005, the Company has given guarantees totalling approximately
HK$900,347,000 (2004: HK$946,050,000) to f inancial institutions in connection
with the total banking facilities granted to its subsidiaries and in respect of the
outstanding loans drawn by certain jointly controlled entities. In addition, the Group’s
interests in the issued shares of the jointly controlled entities are pledged as securities
against the bank loans of the jointly controlled entities.
30. FUTURE OPERATING LEASE ARRANGEMENTS
As at 31st March, 2005, the Group had future aggregate minimum lease receipts under
non-cancellable operating leases as follows:
Group
2005 2004
HK$’000 HK$’000
Not later than one year 9,172 21,081
Later than one year and not later than five years 30,525 25,467
39,697 46,548
The Company did not have any future operating lease receipt as at 31st March, 2005 and
31st March, 2004.
31. RELATED PARTIES TRANSACTIONS
Parties are considered to be related if one party has the ability, directly or indirectly, to
control the other party or exercise signif icant influence over the other party in making
financial and operating decisions. Parties are also considered to be related if they are
subject to common control or common significant influence.
Particulars of significant transactions between the Group and related parties are summarised
as follows:
2005 2004
HK$’000 HK$’000
Operating lease rentals paid to related parties:
– Tinway Investments Limited (Note a) 1,656 1,656
– LBK Holding Corporation (Note b) 1,080 1,080
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31. RELATED PARTIES TRANSACTIONS (Continued)
(a) Tinway Investments Limited is a company jointly owned by Ms. Lo Pik Ling,
Anita, a director of the Company, an associate of Mr. Chan Yue Kwong, Michael,
the Chairman of the Company and Ardley Enterprises Limited, a company wholly
and beneficially owned by the family members of Mr. Lo Hoi Kwong, Sunny, a
director of the Company.
(b) LBK Holding Corporation is controlled by the associates of Mr. Lo Hoi Chun, a
non-executive director of the Company.
In the opinion of the Company’s directors and the Group’s management, the above
transactions were carried out in the normal course of business and in accordance with the
terms of the contracts entered into by the Group and the related parties.
32. APPROVAL OF ACCOUNTS
The accounts were approved by the board of directors on 12th July, 2005.
PRINCIPAL SUBSIDIARIES 79
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In the opinion of the directors, the follow subsidiaries as at 31 March, 2005 principally affected
the Group’s results for the year or form a substantial portion of the Group’s net assets. To give
details of other subsidiaries would result in particulars of excessive length.
Country of Percentage
Name of incorporation Issued Class of of shares Principal
subsidiary and operation share 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 Pacif ic 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 US$1 Ordinary 100% Investment
Islands holding
Café de Coral Central Hong Kong HK$20 Ordinary 100% Food
Processing Limited processing
Café de Coral (China) Hong Kong HK$40,000,000 Ordinary 100% Investment
Limited holding
80 PRINCIPAL SUBSIDIARIESC
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Country of Percentage
Name of incorporation Issued Class of of shares Principal
subsidiary and operation share capital shares held held * activities
Café de Coral (Denmark) ApS Denmark DKK125,000 Ordinary 100% Investment
holding
Café de Coral Development British Virgin Islands US$1 Ordinary 100% Investment
Limited* holding
Café de Coral Fast Food Hong Kong HK$20 Ordinary 100% Catering
Limited
Café de Coral Group Limited Hong Kong HK$44,894,967 Ordinary 100% Catering
Café de Coral (Guangzhou) The PRC HK$21,000,000 – 100% Catering
Catering Company Limited
Café de Coral (Macau) Limited Macau MOP300,000 Ordinary 70% Catering
Café de Coral Overseas British Virgin US$1 Ordinary 100% Investment
Limited Islands holding
Café de Coral Properties British Virgin US$1 Ordinary 100% Investment
Limited Islands 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 RMB17,330,000 – 100% Food
Limited processing
Eldoon Limited Hong Kong HK$10,000 Ordinary 100% Catering
Embark Developments Limited British Virgin US$1 Ordinary 100% Investment
Islands holding
PRINCIPAL SUBSIDIARIES 81
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Country of Percentage
Name of incorporation Issued Class of of shares Principal
subsidiary and operation share capital shares held held * activities
Exo Enterprises Limited Hong Kong HK$4,000,000 Ordinary 100% Catering
Foshan Café de Coral Catering The PRC HK$6,000,000 – 100% Catering
Company Limited
Gateway City Limited Hong Kong HK$20 Ordinary 100% Catering
Glory Congee & Noodles Hong Kong HK$2 Ordinary 100% Investment
Food Limited holding
(securities)
Goodton Development Limited Hong Kong HK$10,000 Ordinary 100% Investment
holding
Grand Regent China Limited Hong Kong HK$2 Ordinary 100% Investment
holding
Grand Seasons (Central) Food Hong Kong HK$10,000 Ordinary 100% Catering
and Beverages Caterers
Company Limited
Greenwise Limited Hong Kong HK$2 Ordinary 100% Investment
holding
Guangzhou Asia Pacific The PRC HK$2,000,000 – 100% Catering
Catering Company Limited
Interface Consultants Limited British Virgin US$1 Ordinary 100% Provision of
Islands consultancy
services
Invol Resources Limited Hong Kong HK$6,125,000 Ordinary 100% Property
(incorporation)/ investment
The PRC
(operation)
Jiangmen Café de Coral The PRC HK$5,000,000 – 100% Catering
Catering Company Limited
82 PRINCIPAL SUBSIDIARIESC
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Country of Percentage
Name of incorporation Issued Class of of shares Principal
subsidiary and operation share capital shares held held * activities
Kater International Limited Hong Kong HK$2 Ordinary 100% Catering
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 US$1 Ordinary 100% Investment
Islands holding
Prime Deal Developments British Virgin US$1 Ordinary 100% Investment
Limited Islands holding
Samworth Investments Limited British Virgin US$1 Ordinary 100% Investment
Islands holding
Scanfoods International S.A. The Republic US$3,000,000 Ordinary 100% Investment
of Panama holding
Scanfoods Limited Hong Kong HK$2,100,000 Ordinary 100% Food trading
Shenzhen Café de Coral The PRC HK$12,000,000 – 100% Catering
Catering Company Limited
Shenzhen Spaghetti House The PRC HK$2,800,000 – 100% Catering
Catering Company Limited
Sheriafort Assets Limited British Virgin US$1 Ordinary 100% Investment
Islands holding
(securities)
Sparango Limited Hong Kong HK$20 Ordinary 100% Catering
Speedy Chef Limited Hong Kong HK$2 Ordinary 100% Catering
PRINCIPAL SUBSIDIARIES 83
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Country of Percentage
Name of incorporation Issued Class of of shares Principal
subsidiary and operation share capital shares held held * activities
Sturgate Investments Limited British Virgin US$1 Ordinary 100% Investment
Islands holding
The Spaghetti House Hong Kong HK$10,000,000 Ordinary 100% Investment
Restaurants Limited holding
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
(incorporation)/ investment
The PRC
(operation)
Worldson Enterprises Limited Hong Kong HK$2 Ordinary 100% Catering
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%
Zhongshan Café de Coral
Catering Company Limited The PRC HK$1,200,000 – 100% Catering
Zhuhai Café de Coral Catering The PRC HK$4,000,000 – 100% Catering
Company Limited
* Café de Coral Development Limited is held directly by the Company. All other subsidiaries are
held indirectly.
84 PRINCIPAL PROPERTIES HELD FOR INVESTMENT PURPOSESC
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Description Lot number Type Lease term
Portion A & C of Shop No. N95 on the New Kowloon Inland Shop Medium-term
1st Floor, Nos. 1-17 Mount Sterling Lot No. 5086
Mall and Nos. 10-16 Lai Wan Road,
Mei Foo Sun Chuen, Lai Chi Kok, Kowloon
Shop F14A on the 1st Floor, Saddle Ridge Sha Tin Town Shop Medium-term
Garden, No. 6 Kam Ying Road, Lot No. 352
Ma On Shan, Shatin, New Territories
Flat D on the Ground Floor and Kwun Tong Inland Shop Medium-term
Flats B, C and D on the Mezzanine Floor, Lot No. 336
San Loong House, Nos. 25-37 Tung Yan
Street and Nos. 55-57 Hip Wo Street,
Kwun Tong, Kowloon
Rear Portion of Shop No.3 on the Tsuen Wan Town Shop Medium-term
Ground Floor, Cheong Yiu Building, Lot No. 223
Nos. 167, 171 and 173 Castle Peak Road
and Nos. 47-51 Shiu Wo Street, Tsuen Wan,
New Territories
Shop C of Portion B on the Basement, Kowloon Inland Shop Long-term
Argyle Centre, Phase 1, Lot No. 1262
No. 688 Nathan Road and
No. 65 Argyle Street, Mongkok,
Kowloon.
Shop D & Portion of Shop B on the Inland Lot No. 8423 Shop Long-term
Ground Floor, Admiralty Centre,
No. 18 Harcourt Road, Hong Kong
REPORT OF THE AUDITORS 85
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AUDITORS’ REPORT TO THE SHAREHOLDERS OF
CAFÉ DE CORAL HOLDINGS LIMITED
(Incorporated in Bermuda with limited liability)
We have audited the accounts on pages 34 to 78 which have been prepared in accordance with
accounting principles generally accepted in Hong Kong.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The Company’s directors are responsible for the preparation of accounts which give a true and
fair view. In preparing accounts which give a true and fair view it is fundamental that appropriate
accounting policies are selected and applied consistently.
It is our responsibility to form an independent opinion, based on our audit, on those accounts
and to report our opinion solely to you, as a body, in accordance with section 90 of the Companies
Act 1981 of Bermuda, and for no other purpose. We do not assume responsibility towards or
accept liability to any other person for the contents of this report.
BASIS OF OPINION
We conducted our audit in accordance with Statements of Auditing Standards issued by the
Hong Kong Institute of Certif ied Public Accountants. An audit includes examination, on a test
basis, of evidence relevant to the amounts and disclosures in the accounts. It also includes an
assessment of the significant estimates and judgements made by the directors in the preparation
of the accounts, and of whether the accounting policies are appropriate to the circumstances of
the Company and 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 necessary in order to provide us with suff icient evidence to give reasonable
assurance as to whether the accounts are free from material misstatement. In forming our
opinion we also evaluated the overall adequacy of the presentation of information in the accounts.
We believe that our audit provides a reasonable basis for our opinion.
OPINION
In our opinion the accounts give a true and fair view of the state of affairs of the Company and
the Group as at 31st March, 2005 and of the Group’s profit and cash flows for the year then
ended and have been properly prepared in accordance with the disclosure requirements of the
Hong Kong Companies Ordinance.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 12th July, 2005
86 FIVE-YEAR SUMMARYC
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CONSOLIDATED PROFIT AND LOSS ACCOUNTSFor the five years ended 31st March, 2005
2005 2004 2003 2002 2001HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Turnover 3,038,498 2,723,295 2,621,547 2,613,547 2,540,326
Cost of sales (2,568,071) (2,302,148) (2,235,220) (2,219,469) (2,167,477)
Gross profit 470,427 421,147 386,327 394,078 372,849
Administrative expenses (136,310) (117,319) (114,421) (119,501) (115,730)
Other income, net 36,448 29,335 50,481 61,096 54,540
Surplus/(Deficit) onrevaluation of investmentproperties 3,700 2,600 (7,696) – –
Provision for impairment invalue of investments – – (12,174) – –
Profit from operations 374,265 335,763 302,517 335,673 311,659
Finance costs (1,061) (237) (9,485) (21,417) (25,987)
373,204 335,526 293,032 314,256 285,672Share of profit of an
associated company 2,888 1,471 526 1,499 731
Share of (loss)/profit ofjointly controlled entities (26,558) (23,628) (5,456) 6,948 3,141
Profit before taxation 349,534 313,369 288,102 322,703 289,544
Taxation (64,683) (55,295) (45,290) (42,703) (37,970)
Profit attributable toshareholders 284,851 258,074 242,812 280,000 251,574
Dividends paid (171,663) (163,579) (127,761) (106,523) (94,333)
Basic earnings per share 53.23 cents 48.62 cents 44.76 cents 51.24 cents 45.84 cents
Diluted earnings per share 52.29 cents 47.66 cents 43.87 cents 50.50 cents 45.78 cents
FIVE-YEAR SUMMARY 87
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CONSOLIDATED BALANCE SHEETSFor the five years ended 31st March, 2005
2005 2004 2003 2002 2001
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Non-current assets
Fixed assets 863,564 876,337 901,124 953,846 890,154
Intangibles 18,452 21,289 22,754 25,458 28,162
Investment in an
associated company 2,205 1,180 838 836 1,614
Investment in jointly
controlled entities 65,873 63,597 28,257 25,717 14,339
Other investments 866 3,244 6,357 18,533 18,547
Held-to-maturity securities 215,667 167,313 85,979 – –
Deferred tax assets 5,580 5,358 3,769 – –
Other non-current assets 828 1,657 – – –
1,173,035 1,139,975 1,049,078 1,024,390 952,816
Current assets
Stocks, at cost 64,728 50,994 52,966 48,836 49,375
Prepayments, deposits and
other current assets 111,786 113,459 103,870 148,163 122,154
Trade and other debtors 36,116 29,541 26,586 26,561 25,475
Short-term investments 87,488 24,722 7,365 6,448 9,169
Cash and bank balances 524,989 473,243 733,281 650,981 681,313
825,107 691,959 924,068 880,989 887,486
Current liabilities
Short-term borrowings – 10,000 220,000 150,000 236,541
Trade creditors 73,399 62,087 61,365 57,096 58,198
Other creditors and
accrued liabilities 215,230 183,953 198,796 193,727 153,232
Taxation payable 22,324 12,126 14,109 6,727 12,428
310,953 268,166 494,270 407,550 460,399
Net current assets 514,154 423,793 429,798 473,439 427,087
Total assets less
current liabilities 1,687,189 1,563,768 1,478,876 1,497,829 1,379,903
88 FIVE-YEAR SUMMARYC
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CONSOLIDATED BALANCE SHEETS (Continued)For the five years ended 31st March, 2005
2005 2004 2003 2002 2001
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Non-current liabilities
Long-term bank loans – – – 80,000 100,000
Deferred taxation 14,117 15,435 15,728 16,235 11,379
14,117 15,435 15,728 96,235 111,379
NET ASSETS 1,673,072 1,548,333 1,463,148 1,401,594 1,268,524
CAPITAL AND RESERVES
Share capital 53,576 53,119 53,364 54,573 54,689
Share premium 43,124 30,099 46,573 105,375 112,332
Capital redemption reserve 152,034 152,034 124,931 64,697 53,930
Exchange translation reserve 6,864 8,795 1,386 1,012 1,179
Capital reserve (2,470) (2,470) (2,470) (2,470) (2,470)
Property revaluation reserve – – – 3,052 7,102
Contributed surplus 85,197 85,197 112,300 172,534 183,301
Retained profits 1,334,747 1,221,559 1,127,064 1,002,821 858,461
Total reserves 1,619,496 1,495,214 1,409,784 1,347,021 1,213,835
Shareholders’ equity 1,673,072 1,548,333 1,463,148 1,401,594 1,268,524