Central Pattana Public Company Limited Management's Discussion and Analysis Consolidated Financial Results : Q4/2004 and FY 2004 OVERALL PERFORMANCE The Company's net profit for the Q4/2004 was 317.9 MB., increase of 11.8% Q-O-Q. Total Revenues of Q4/2004 was 1,514.2 MB.,increased by 15.4% Q-O-Q,due to the consolidation of revenue from Central Town Center Rattanathibet and The Offices at Centralworld which was opened in November 2004,the increase in rental rate of existing projects and the promotion activities in shopping centers for various festivals in this quarter. The Company's net profit for the year 2004 was 1,347.7 MB., increased by 12.6% Y-O-Y,in spite of increase in interest expense and income tax. Total Revenues of 2004 was 5,834.0 MB., increased by 12.6% Y-O-Y, due to the consolidation of revenue from Central Town Center Rattanathibet and increase in rental rate of existing projects. In additions, the company can maintain effectiveness of cost management resulted in increase of gross margin to 45.9% from 45.6% of 2003. During the year, the Company has continuously improved its existing projects such as opening of Central Park at Central Plaza Rama2,e-life zone at Central City Bangna and The Offices at Central world in November. Moreover, Central World Plaza and Central Town Center Rattanathibet are currently under renovation. This required more borrowing to support investment. Net interest bearing debt to equity ratio in this year was increased to 0.9 times. However, it is still lower than the company's policy of 1 time. The Company paid dividend from net profit of 2003 to shareholders at Baht 1.1 per share,total amount of 479.3 MB.,or 40% of net income on May 20, 2004. Revenues In Q4/2004, total rental & service and food & beverage revenues was 1,514.2 MB., increased by 202.5 MB. or 15.4% Q-O-Q, mainly due to the consolidation of revenue of Central Town Center Rattanathibet and The Offices at Centralworld which was opened in November 2004. This is also due to an increase in rental rate of existing projects, and an increase in revenue driven by promotion activities in shopping centers for various festivals in this quarter.Other income for Q4/2004 amounted to 86.2 MB., dropped 63.0 MB or 42.2% Q-O-Q, due to gain from restructured debt of Central Play Land Co.,Ltd. Total rental & service and food & beverage revenues of 2004 amounted to 5,834.0 MB., increased by 652.8 MB. or 12.6% Y-O-Y, due to the consolidation of revenue of Central Town Center Rattanathibet which was acquired in December 2003, Central Airport Plaza Chiangmai Phase 2 B which operated full period in this year and The Offices at Centralworld which was opened in November 2004. This is also due to an increase in rental rate, higher rental income from percentage to tenant's sales contract, higher rental income from common area and an increase in revenue from promotion activities throughout the year. Cost and Administrative expenses In Q4/2004, Cost of rental and service and food and beverage was 841.4 MB., increased by 93.8 MB. or 12.5% Q-O-Q and Administrative expenses amounted to 319.8 MB., increased by 75.5 MB. or 30.9% Q-O-Q, attributed to additional operating cost and expenses of new projects as mentioned above. Moreover, higher administrative expenses was due to higher advertising and promotion expenses and write off of VAT and withholding tax. Cost of rental and service and food and bever age of 2004 was 3,155.7 MB., increased by 336.6 MB. or 11.9% Y-O-Y, as a result of additional operating cost of 2 new projects and higher cost of existing projects from repair & maintenance cost and operating cost such as electricity cost,property tax, people cost,security and cleaning cost. Administrative expenses of 2004 amounted to 846.4 MB., increased by 41.9 MB. or 5.2% Y-O-Y, due to the expenses of new projects - Central Town Center Rattanathibet and The Offices at Centralworld, higher advertising and promotion expenses and higher tax expenses from write off of VAT and withholding tax. Financial Position as at December 31, 2004 Assets As at December 31, 2004, the consolidated assets were 27,104.3 MB., increased from December 31, 2003 by 3,554.4 MB. or 15.1%, mainly came from the increase in property and equipment from the construction of The Offices at Centralworld, the renovation of Central World Plaza and purchase of land plot for new project. Liabilities As at December 31,2004,the consolidated liabilities were 18,361.1 MB., increased from December 31, 2003 by 2,766.8 MB. or 17.7%, due to the issuance of unsecured bonds in March 2004 amounted to 2,500 MB., which comprised of 1,000 MB. of 5-year bond and 1,500 MB. of 7-year bond, to finance the construction and renovation of Central World project. Furthermore, the Company had also drawn down Project Financing loan for Central Airport Plaza Chiangmai Phase 2B amounted to 400 MB. and issued avaled promissory notes amounted to 510 MB. to pay for land for new project. In addition, payable to construction contractors and deposit received from customer especially from The Offices at Centralworld were also increased. Shareholders' Equity Shareholders' equity as at December 31, 2004 was 8,743.2 MB., higher than December 31, 2003 by 787.6 MB.or 9.9%, came from net income of the year 2004 amounted to 1,347.7 MB. while minority interest was decreased by 63.4 MB from purchase more shares in Central Play Land Co., Ltd. from minority shareholder. Dividend from net income for the year 2003 was paid at Baht 1.10 per share, total amount of 479.3 MB. on May 20, 2004. In addition, the company decreased its par value (par split) from Baht 5 to Baht 1 per share. The number of shares was increased from 435,763,200 shares to 2,178,816,000 shares, which was effective since May 17, 2004 onward. However, this transaction has not affected the issued and paid-up share capital amount. Financial Ratio Analysis Profitability On a quarterly basis, Gross profit margin of Q4/2004 was 44.4% higher than 43.0% Q-O-Q as a result of last year was the first operating year of a few projects while in this year these projects can generate more revenues. Return on equity (ROE) and Net profit margin of Q4/2004 were 14.5% and 20.1% higher than 14.3% and 19.3% Q-O-Q, respectively, represented a good performance. In 2004, profitability ratios of this year were in line with prior year. Gross profit margin of 2004 was 45.9% slightly higher than 45.6% of prior year as a result of investment in new projects during the past 2 years. This is considered normal for the newly opening projects that usually takes a few years until the gross profit margin ratio shall be improved in the next 2-3 years. Return on equity (ROE) and Net profit margin of 2004 were 15.4% and 21.9% slightly higher than 15.0% and 21.7% of 2003, respectively, although interest expense and income tax increased. Financial Policy In Q4/2004, interest coverage ratio was 13.8 times, hiked from 8.2 times of Q4/2003 due to increase in cash flow from operation in this period especially from deposit from The Offices at Centralworld. Although interest expense increase in 2004, interest coverage ratio was 7.6 times, slightly decreased from 7.9 times in 2003, as a result of the healthier operating cash flow. Net interest bearing debt to equity ratio was increased from 0.7 times in 2003 to 0.9 times in 2004 due to the increase in loan for projects development. However, this ratio can be maintained not higher than its financial policy of 1 time. As at December 31, 2004, interest bearing debt was comprised of 93% fixed and 7% floating interest rate. Key Ratio Q4/2004 Q4/2003 FY 2004 FY 2003 LIQUIDITY RATIO Current Assets/Current Liabilities (Times) 0.60 0.77 0.60 0.77 Accounts Receivable Turnover (Days) 6 7 6 7 PROFITABILITY RATIO Gross Profit Margin (%) 44.4% 43.0% 45.9% 45.6% Net Profit Margin (%) 20.1% 19.3% 21.8% 21.6% Return on Equity (%) 14.5% 14.3% 15.4% 15.0% EFFICIENCY RATIO Return on Assets (%) 4.7% 4.8% 5.0% 5.1% FINANCIAL POLICY RATIO Net Interest Bearing Debt to Equity (Times) 0.9 0.7 0.9 0.7 Interest Coverage (Times) 13.8 8.2 7.6 7.9