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2.3 Financial performances 2.3.1 Summary of financial status and the Company's performances audited by Ernst & Young as at 31st December 2004 and 2006 (Unit : Baht Million) Consolidated Audited Financial Statements 31st Dec. 04 31st Dec. 05 31st Dec. 06 Current assets Cash and cash equivalents 4,979.56 1,542.69 3,033.26 Trade account receivables, unrelated parties - net 4,939.33 5,045.96 5,489.45 Other current assets 4,533.94 10,619.76 10,120.03 Total current assets 14,452.83 17,208.41 18,642.72 Non-current assets Investments in associated companies 1,046.51 4,014.01 4,674.35 Investment in related and other companies 3,475.72 2,611.18 2,967.35 Other non-current assets 5,884.48 5,989.33 4,029.48 Total non-current assets 10,406.71 12,614.52 11,671.18 Total assets 24,859.54 29,822.93 30,313.91 Current liabilities Bank overdrafts and short-term loans 1,877.16 5,510.20 3,822.85 Current portion of long-term loans 730.97 934.93 3,897.04 Other current liabilities 9,455.99 9,664.85 11,087.73 Total current liabilities 12,064.12 16,109.98 18,807.62 Non-current liabilities Long-term loans, net of current portion 4,663.96 2,430.55 450.00 Debentures, net of current portion 3,000.00 6,000.00 5,800.00 Non-current liabilities 336.40 353.44 454.19 Total non-current liabilities 8,000.36 8,783.99 6,704.19 Total liabilities 20,064.48 24,893.97 25,511.81 Registered capital 1,312.50 1,450.00 1,450.00 Paid-up capital 1,058.68 1,081.16 1,247.19 Retained earning (loss) 336.86 913.98 (688.28) Total shareholders' equity 4,795.06 4,928.95 4,802.09 Total liabilities and shareholders' equity 24,859.54 29,822.93 30,313.91 Total revenues 7,772.79 14,954.97 21,605.29 Total expenses 6,925.07 13,239.73 21,439.70 Interest expenses 393.81 652.25 980.55 Net profit (loss) 204.47 684.17 (1,212.84) Net profit (loss) per share (Baht) 0.19 0.63 (1.08) Book value per share (Baht) 4.53 4.56 3.85 Notes : Par value at Baht 1 per share As at 31st December 2006, the CK group had total assets of Baht 30,314 million (major assets includes cash and cash equivalents, trade account receivables (non-related parties), construction contracts in progress), total liabilities of Baht 25,512 million (including long-term loans to associated companies and accrued interest, investment in associated, related and other companies), and shareholders' equity of Baht 4,802 million, compared with Baht 29,823 million, Baht 24,894 million, and Baht 4,929 million, respectively as at 31st December 2005. The group earned income from three core businesses, construction, building material distribution, and project management. As at 31st December 31 2006, income from these three businesses made up 87.57%, 0.90% and 0.44% respectively of total revenues, with the rest 11.09% earned from other income. CK's consolidated revenues as at 31st December 2006 were Baht 21,605 million, compared with Baht 14,955 million in the same period of 2005. The group sustained a net loss of Baht 1,213 million, compared with a net profit earned in the corresponding period of 2005 of Baht 685 million, caused chiefly by a drastic plunge in the Company's profit from 2005 by Baht 1,897 million or 277.28%. On the expenses side, there were allowances for doubtful accounts on receivables from indemnity for incremental expenses and loss sharing from JV BBCD, which was a consequence of the Supreme Court's ruling to withhold the arbitrator's judgement for the Expressway and Rapid Transit Authority of Thailand (ETA) to make payment to JV BBCD. However, such court ruling would not prejudice JV's legitimate right to claims for the incremental expenses of Baht 6,040 million plus interest of 7.50% p.a. The group's total revenues of Baht 21,605 million in 2006 grew tremendously by 44.46% from Baht 14,955 million in 2005, thanks to progress on construction with soaring income from construction service, notably from the Nam Ngum 2 dam project in Laos PDR, the ETA's Bang Phli - Suksawat (Bang Phli - Bang Khunthian) expressway project, the water discharge tunnel from Bung Makkasan to the Chao Phraya River project of Bangkok Metropolitan Administration, and the Ground Improvement for the 1st Midfield Satellite Aprons & 3rd Runway Project of Bangkok Airport Co., Ltd. The said revenue growth was also ascribed to gains from sale of short-term investments in ordinary shares of TTW to Mitsui Water Holding (Thailand) Co., Ltd. and BECL, as well as to income from reversal of accrued interest payable under joint agreement among JV BBCD members to waive the entire interest payable on loans from JV members. The construction service revenues came from customers in the government and private sectors, in a ratio of 70 : 30. As at 31st December 2006, the Company had projects in pipeline with revenues to be recognized in the future totaling Baht 29,597 million; a project under contract signing for the toll system and traffic safety control system of Bang Phli - Bang Khunthian Expressway, Suksawat - Bang Khunthian Section, with a construction value plus VAT of around Baht 2,619 million; and the water filtration plant expansion of PTW with a construction value plus VAT of some Baht 800 million. 2.3.2 Key financial ratios Consolidated financial statements Audited 31st Dec. 04 31st Dec. 05 31st Dec. 06 Liquidity ratios: Current ratio (times) 1.20 1.07 0.99 Quick ratio (times) 0.82 0.26 0.17 Receivables turnover (times) 2.53 5.07 3.13 Collection period (days) 143 72 116 Inventory turnover period (times) 68.88 44.53 89.60 Average sale period (days) 6 9 5 Payment period (days) 109 228 204 Account payable turnover (times) 3.32 1.58 1.77 Cash cycle (days) 40 (149) (85) Profitability ratios: Gross profit margin (%) 20.44 13.34 9.49 Net margin (%) 2.63 4.57 (5.61) Return on equity (%) 4.49 14.07 (25.28) Efficiency ratios: Return on assets (%) 1.02 2.50 (4.40) Assets turnover (times) 0.39 0.55 0.78 Financial ratios: Debt to equity ratio (times) 4.18 5.05 5.31 Net debt to equity ratio (times) 1.11 2.28 1.85 Interest coverage (times) 2.15 (2.53) 1.39 Contingent liabilities coverage ratio (times) (1.50) (0.87) 0.00 Liquidity As regards CK group's liquidity in 2006, its net cash flow as shown in the consolidated financial statements surged by Baht 1,493 million. Such increase stemmed from cash flow provided from investing activity of Baht 1,704 million from sale of short-term investments (TTW ordinary shares) and net cash flow provided from financing activity of Baht 2,554 million (issue of debentures worth Baht 2,000 million and new ordinary shares of Baht 1,442 million), with cash flow used in operating activity of Baht 2,751 million. However, the considerable project progress caused trade receivables from projects under construction to scale up. Owing to this, coupled with return to employers of advance from employers and installment construction payments, as well as impacts from foreign exchange on cash and cash equivalents, the Company's cash flow went down, with cash and cash equivalents as of end-2006 standing at Baht 3,033 million. Overall, the group's financial status in 2006 weakened from 2005, with liquidity ratio falling from 1.07 to just 0.99 and quick ratio from 0.26 to 0.17. Debt to equity ratio rose from 5.05 to 5.31 due to additional debenture issued. Revenue collection period was 116 days, compared with only 72 days in 2005, resulting from delayed government budget disbursement in the wake of political turmoil. However, the Company could better manage the net debt to equity ratio under the debenture conditions, as evident from a drop in this ratio. Such debt was interest-bearing, consisting of overdraft loans, payables under hire-purchase contracts due within one year, long-term loans due within one year, debentures due within one year, payables and loans from related businesses, payables under hire-purchase contracts net of amount due within one year, long-term borrowings net of amount due within one year, debentures net of amount due within one year, deducted by cash and cash equivalent, encumbered deposits at banks, short-term investments, and trade receivables from public agencies or state enterprises under construction contracts bearing interest and with performance acceptance letters already issued by those agencies, i.e. receivables from the ETA's Bang Phli - Suksawat (Bang Phli - Bang Khunthian) expressway project, which decreased in 2006. The Company had cash available from new share issue of Baht 1,442 million, which helped to push cash and shareholders' equity up. In view of the Supreme Court's ruling to withhold the arbitrator's judgement for ETA to make payment to JV BBCD, with such court ruling not prejudicing JV's legitimate right to claims for the incremental expenses of Baht 6,040 billion plus interest of 7.50% p.a., the Company must in accounting terms state an allowance for doubtful accounts on receivables from indemnity for incremental expenses in the consolidated financial statements, thereby leading the shareholders' equity to decrease. According to the joint agreement among JV BBCD members to waive the entire interest payable on loans from JV members, the Company recorded reversal of accrued interest payable of Baht 443 million in the revenues item of the income statement under the consolidated financial statements and income from deferred accrued interest receivable of Baht 13 million as expense in the income statement under the consolidated financial statements, thereby leading the shareholders' equity to increase. In 2006, the net debt to equity ratio stood at 1.85, down from 2.28 in 2005. 2.4 Shareholdings The major shareholders of the Company as shown in share register book as at 7th April 2006, which was the latest book closure date are as follows: NameNo. of shares % of holding 1. Trivisvavet Group 1.1 Mr. Tavorn Trivisvavet 16,481,000 1.51 1.2 Mr. Plew Trivisvavet 16,498,000 1.52 1.3 Mr. Kamthorn Trivisvavet 651,000 0.06 1.4 Mr. Prasert Trivisvavet 2,348,000 0.22 1.5 Mahasiri Siam Co., Ltd. 1/ 240,667,000 22.10 1.6 CH. Karnchang Holding Co., Ltd.1/ 125,589,500 11.53 1.7 CK. Office Tower Co., Ltd. 2/ 75,000,000 6.89 1.8 Bang Pa-in Land Development Co., Ltd.3/ 18,935,000 1.74 Total 496,169,500 45.57 2. TMB Bank Plc. 93,268,300 8.56 3. Mrs. Pranee Thongkittikul 63,214,300 5.80 4. Mr. Charnnarong Vongsrinil 27,000,000 2.48 5. Thai NVDR Co., Ltd. 24,836,700 2.28 6. Morgan Stanley & Co International Limited 16,950,000 1.56 7. Mr. Chitrarun Anubhantanand 13,651,500 1.25 8. State Street Bank and Trust Company for Australia 12,000,000 1.10 9. Chase C.S. Central Nominees Limited19 11,424,500 1.05 10. HSBC (Singapore) Nominees Pte Ltd. 9,114,800 0.84 Total 767,629,600 70.49 Notes:1/ All directors of these companies are Trivisvavet Group. 2/ Trivisvavet Group holds 62.50 of total shares, the others are minority shareholders. 3/ Trivisvavet Group holds 41.66 of total shares, the others are minority shareholders. 2.5 The Board of Directors The Board of Directors of CK as at 2nd April 2007 is as follows: Name Position 1. Mr. Plew Trivisvavet Chairman of the Executive Board and President 2. Mr. Narong Sangsuriya Director 3. Mrs. Saikasem Trivisvavet Director 4. Mr. Ratn Santaannop Director 5. Mr. Prasert Marittanaporn Director 6. Dr. Sombat Kitjalaksana Director 7. Mr. Anukool Tuntimas Director 8. Mr. Aswin KongsiriIndependent Director 9. Mr. Vitoon Tejatussanasoontorn Chairman of Audit Committee 10. Mr. Don Pramudwinai Audit Committee 11. Mr. Thawansak Sukhawun Audit Committee 2.6 Profile of Thai Tap Water Plc. 2.6.1 Background TTW was established on 11th September 2000 (as a joint venture between CK and Thames Water Group in proportion of 50 : 50) with a registration number 0107549000114 to produce and distribute tap water to the PWA in the areas of Nakhon Pathom Province and Samut Sakhon Province, through the Company's Concession Agreement with PWA, whereby the Company is the owner of the tap water production and distribution systems, and the title to the tap water production and distribution systems shall not be required to be transferred to PWA, with the concession period of 30 years from 21st July 2004 to 21st July 2034. 2.6.2 Financial performances Summary of financial status and TTW's performances audited by Ernst & Young as at 31st December 2004 and 2006: (Unit : Baht Million) Consolidated Audited Financial Statements 31st Dec. 04 31st Dec. 05 31st Dec. 06 Total current assets 459.81 820.44 1306.61 Total non-current assets 9753.94 9540.52 9375.29 Total assets 10213.75 10360.96 10681.95 Total liabilities 7095.97 7013.15 6792.09 Registered and paid-up capital 3000.00 3000.00 3250.00 Total shareholders' equity 3117.78 3347.82 3889.86 Total liabilities and shareholders' equity 10213.75 10360.96 10681.95 Total revenues 889.91 1360.25 1722.19 Total expenses 276.16 680.32 610.77 Interest expenses 151.18 344.90 437.02 Net profit (loss) 432.57 335.04 674.02 Net profit (loss) per share (Baht) 14.56 11.17 0.21 Book value per share (Baht) 88.81 111.59 1.20 Notes : TTW has changed par value from Baht 100 to Baht 1 per share on 6th July 2006. 2.6.3 Shareholdings The shareholders of TTW as at 23rd March 2007 are as follows: Name No. of shares % of holding 1. CH. Karnchang Plc. 1,549,839,400 47.69 2. Mitsui Water Holdings (Thailand) Limited 1,137,500,000 35.00 3. Bangkok Expressway Plc. 406,250,000 12.50 4. Bangkok Bank Plc. 81,410,000 2.50 5. TMB Bank Plc. 75,000,000 2.30 6. Dr. Sombat Kitjalaksana 100 0.00 7. Mr. Narong Sangsuriya 100 0.00 8. Mr. Prasert Marittanaporn 100 0.00 9. Mr. Sompodh Sripom 100 0.00 10. Mr. Samai Paiboon 100 0.00 11. Ms. Pansakun Panphrom 96 0.00 12. Mr. Nopadol Intralib 1 0.00 13. Mrs. Sunantha Khemaprapa 1 0.00 14. Mr. Propoj Jirasathitpornpong 1 0.00 15. Sawitree Treenawarut 1 0.00 Total 3,250,000,000 100.00 2.6.4 The Board of Directors The Board of Directors of TTW as at 2nd February 2007 is as follows: Name Position 1. Mr. Plew Trivisvavet Chairman 2. Mr. Narong Sangsuriya Director 3. Mr. Prasert Marittanaporn Director 4. Dr. Sombat Kitjalaksana Director 5. Mr. Sompodh Sripom Director 6. Mr. Yoshio Kometani Director 7. Mr. Tomoaki Matsumoto Director 8. Mr. Techathip Sangsingkeo Director 9. Mr. Phairuch Mekarporn Director 10. Mr. Somnuk Chaidejsuriya Director 11. Mr. Suvich Pungcharoen Director 3. Profile of company to be disposed 3.1 Background and significant development Pathum Thani Tap Water Co., Ltd., formerly PCKT (Thailand) Co., Ltd., was established on 29th May 1995 with a registration number 0105538063801 to produce and distribute tap water and operate relevant businesses, including repair and maintenance of the tap water production and distribution system under the concession awarded by the Provincial Waterworks Authority. PTW has a subsidiary, BJT Water Co., Ltd. ("BJT"). PTW current registered capital is Baht 2,752 million, of which divided into 27,520,000 shares at Baht 100 par value per share. The Company's Head Office located at 43 Moo 3 Chiangrak Noi-Bangsai Road, Tambol Baan Pathum, Amphur Samkhok, Pathumthani Major changes and the Company's significant development 29th May 1995 PTW was incorporated with the registered capital of Baht 100,000, divided into 1,000 ordinary shares, at the par value of Baht 100 per share. The promoter including Thames Water International (Thailand) Co., Ltd., CH. Karnchang Plc., CH. Karnchang Holding Co., Ltd., Berli Jucker Plc., Capital Rice Co., Ltd. and Bovis Limited. TMB Bank Plc. and Krung Thai Bank Plc. as lenders to PTW. 2nd August 1995 PTW increased its capital from originally Baht 100,000 to Baht 200 million. 31st August 1995 PTW signed a Build-Operate-Transfer (BOT) joint venture agreement with PWA for a 25-year term commencing on the first date of tap water distribution to PWA. 25th Dec. 1995 PTW increased its capital from originally Baht 200 million to Baht 1,102 million. 15th October 1998 The first commercial operation date of PTW. 1st December 1998 PTW engaged Pathum Thani Operations Company Limited ("OPCO") to manage and maintain the Pathumthani-Rangsit Water Supply Project under the Concession Agreement of the PWA. That is, OPCO shall manage the production of tap water in accordance with the specified volume so that PTW would be able to distribute such tap water to the PWA. OPCO was incorporated in November 1998, for operating its primary business of management and maintenance of water production system in the "Pathumthani-Rangsit Water Supply Project" for a period of 25 years, commencing from 1st December (more)