Hwa Hong : Unaudited Results for Third Quarter Ended 30 September 2017

UNAUDITED RESULTS FOR THIRD QUARTER ENDED 30 SEPTEMBER 2017

PART I - INFORMATION REQUIRED FOR ANNOUNCEMENTS OF QUARTERLY (Q1, Q2 & Q3), HALF-YEAR AND FULL YEAR RESULTS 1(a) An income statement and statement of comprehensive income, or a statement of comprehensive income for the group together with a comparative statement for the corresponding period of the immediately preceding financial year. Group Third Quarter Ended Nine Months Ended

Note	30.9.2017 $'000	30.9.2016 $'000	+/(-) %	30.9.2017 $'000	30.9.2016 $'000	+/(-) %
Revenue	3,101 3,082		0.6 9,060 8,337			8.7
Cost of sales	(1,104) (1,172)		(5.8) (3,197) (3,356)			(4.7)
Gross profit	1,997	1,910	4.6	5,863	4,981	17.7
Other income	1	3,001	1,819	65.0	8,444	10,404	(18.8)
General and administrative costs	2	(1,772)	(1,353)	31.0	(4,739)	(4,328)	9.5
Other operating costs	3	(1,132)	(386)	n.m.	(1,844)	(2,118)	(12.9)
Finance costs Share of after tax results of associates	(324)	(393)	(17.6)	(1,011)	(1,010)	0.1
and joint ventures	4	36 102		(64.7) 37 659			(94.4)
Profit before taxation	1,806 1,699		6.3 6,750 8,588			(21.4)
Taxation	5	(537) (144)		n.m. (885) (922)			(4.0)

Net profit after taxation 1,269 1,555 (18.4) 5,865 7,666 (23.5) Attributable to: Owners of the Company 1,269 1,555 (18.4) 5,865 7,666 (23.5) Profit for the year attributable to owners of the Company 1,269 1,555 5,865 7,666

n.m. denotes not meaningful.

Notes to Group Profit and Loss Statement

1. Other income comprised the following:

   3Q2017 3Q2016 +/(-) FY2017 FY2016 +/(-)

   $'000 $'000 % $'000 $'000 %

   Interest income - (72) n.m. 1 20 (95.0) Gain on disposal of non-current investments - - - 220 - n.m. Gain on disposal of investment properties 3,902 (67) n.m. 7,858 2,180 n.m.

   Other investment income 19 (25) n.m. 136 816 (83.3)

   Foreign exchange (loss)/gain (984) 1,917 n.m. - 6,201 n.m.

   Refund of property tax - - - - 957 n.m.

   Sundry	64 66	(3.0) 229 230	(0.4)
   3,001 1,819	8,444 10,404

   The strengthening of the Sterling Pound against Singapore Dollars resulted in unrealised translation loss of $0.4 million yoy (reflected under ''General and administrative costs'') and $1 million qoq (reflected under ''Other income'') mainly attributable to our Sterling Pound loans. Sterling Pound has increased from $1.80876 as at 31 December 2016 to $1.819281 as at 30 September 2017 and from $1.76779 as at 30 June 2017 to $1.819281 as at 30 September 2017.

   Notwithstanding the translation loss of $0.4 million yoy and $1 million qoq, the overall net foreign exchange impact to the Group was exchange gain of $0.1 million yoy and $1.2 million qoq (refer to Note 2 on Notes to Statement of Comprehensive Income for more information).

2. General and administrative costs increased by $0.4 million yoy and qoq mainly due to foreign exchange loss of $0.3 million classified within general and administrative costs. This unrealised foreign exchange loss arose mainly from the translation of bank loans denominated in Sterling Pounds.

3. Other operating costs comprised the following:

   3Q2017 3Q2016 +/(-) FY2017 FY2016 +/(-) $'000 $'000 % $'000 $'000 %

   Allowance made for impairment on
   - current investments	31	411	(92.5)	73	1,745	(95.8)
   - non-current investments	302	-	n.m.	972	-	n.m.
   - investment property	799	-	n.m.	799	-	n.m.
   Allowance (written back)/made for doubtful debts	-
   - due from other receivables	-	(1)	n.m.	-	17	n.m.
   - due from an associate	-	(24)	n.m.	-	356	n.m.
   1,132	386	1,844	2,118

   • Overall, allowance for impairment loss decreased yoy and qoq on current and non-current investment securities relate to investment securities that had suffered a significant or prolonged decline in the market value below the acquisition cost of those investments;

   • Allowance for impairment on investment property was made on the Sheffield property relating to the academic facility development site in Fitzalan Square. From Q3 onwards, Sheffied property was assessed on a site-by-site basis instead of a portfolio basis arising from a change of investment strategies relating to the sites in Sheffied property. Notwithstanding impairment to this site, the other 2 sites in Sheffield property have unrecognised revaluation gains and contingent gains relating to the redevelopment of the former post office building (refer to 2016 Annual Report Note 31 for more information on Contingent Asset) which are greater than the impairment provision on an overall assessment basis.

4. Share of after tax results of associates and joint ventures decreased by $0.6 million yoy mainly due to share of loss of $0.6 million from an associated company, Clan Kilmuir (Jersey) Limited which the Group acquired in March 2016. Out of $0.6 million, $0.2 million was attributable to depreciation of the investment property held by Clan Kilmuir and the remaining $0.4 million was mainly due to project costs associated with the investment property.

5. Effective tax rate for FY2017 was 13.1% (FY2016: 10.7%) and 29.7% (FY2016: 8.5%) for 3Q2017. The taxation charge for the Group for FY2017 was lower than that arrived at by applying the statutory tax rate of 17% to the profit before taxation mainly due to certain gains being capital in nature, offset by certain non-deductible expenses and losses incurred by foreign subsidiaries which are not available for set off against profits of local subsidiaries. The taxation charge for 3Q2017 was higher than the statutory tax rate of 17% mainly due to certain non-deductible expenses offset by certain gains that were capital in nature.

Profit before taxation included the following:

Group

Third Quarter Ended Nine Months Ended 30.9.2017 30.9.2016 +/(-) 30.9.2017 30.9.2016 +/(-)

Note $'000 $'000 % $'000 $'000 %

Investment income	242	207	16.9	855	893	(4.3)
Interest income (included in revenue)	146	422	(65.4)	752	1,054	(28.7)
Interest on borrowings	(324)	(393)	(17.6)	(1,011)	(1,010)	0.1
Depreciation on property, plant and
equipment and investment properties	(518)	(665)	(22.1)	(1,586)	(1,738)	(8.7)
Allowance written back/(made) for doubtful debts
- due from an associate	3	-	24	n.m.	-	(356)	n.m.
- due from other receivables	3	-	1	n.m.	-	(17)	n.m.
Allowance made for impairment loss on
- quoted current investments	3	(31)	(411)	(92.5)	(73)	(1,745)	(95.8)
- unquoted non-current investments	3	(302)	-	n.m.	(972)	-	n.m.
- investment properties	3	(799)	-	n.m.	(799)	-	n.m.
(Under)/overprovision of taxation in prior years	-	-	-	-	-	-
Foreign exchange (loss)/gain	(1,320)	1,917	n.m.	(336)	6,201	n.m.
Gain on disposal of investments (included in revenue)	680	536	26.9	1,543	860	79.4
Gain on disposal of non-current investments
- included in other income	1	-	-	-	220	-	n.m.
Gain/(loss) on disposal of investment properties
- included in other income	1	3,902	(67)	n.m.	7,858	2,180	n.m.

Statement of Comprehensive Income

Third Quarter Ended Nine Months Ended

Note 30.9.2017 30.9.2016 +/(-) 30.9.2017 30.9.2016 +/(-)

1,269	1,555	(18.4)	5,865	7,666	(23.5)
1	(185)	655	n.m.	1,798	482	n.m.
2	1,052	(1,387)	n.m.	283	(4,672)	n.m.
2	1,350	(2,205)	n.m.	126	(8,439)	n.m.

$'000 $'000 % $'000 $'000 %

Net profit after taxation

Other comprehensive gain/(loss):

Items that may be reclassified subsequently to profit or loss:

Net (loss)/gain on available-for-sale investments (net of tax)

Exchange difference arising from

• consolidation

• revaluation of net investment in foreign operation

Revaluation gain realised by an associate to income statement

(201) - n.m. (201) - n.m.

Other comprehensive gain/(loss), net of tax 2,016 (2,937) 2,006 (12,629)

Total comprehensive gain/(loss) for the period 3,285 (1,382) 7,871 (4,963)

Total comprehensive gain/(loss) for the period attributable to:

Owners of the Company 3,285 (1,382) n.m. 7,871 (4,963) n.m. Non-controlling interests - - - -

3,285 (1,382) 7,871 (4,963)

Notes to Statement of Comprehensive Income

1. Net gains on available-for-sale investments (net of tax) in FY2017 were mainly due to increases in fair value of the available-for-sale investments arising from favourable market conditions on certain shares held by the Group.

2. Exchange differences arising from the consolidation of $0.3 million in FY2017 and $1.1 million in 3Q2017 and revaluation of net investment in foreign operation of $0.1 million in FY2017 and $1.4 million in 3Q2017 were mainly due to favourable foreign exchange impact arising from the translation of Sterling Pound against Singapore Dollars for those UK net investments and assets. The strengthening of the Sterling Pound against Singapore Dollar resulted in overall net foreign exchange gain of approximately $0.1 million for FY2017 made up of $0.3 million and $0.1 million in the Other Comprehensive Income which is partially offset by a translation loss in the profit and loss of $0.3 million mainly attributable to our Sterling Pound loans. For 3Q2017, the overall net foreign exchange gain was approximately $1.2 million made up of $1.1 million and $1.4 million in the Other Comprehensive Income which is partially offset by a translation loss in the profit and loss of $1.3 million.