UNAUDITED INTERIM RESULTS
The board of directors ("Board") of Shun Cheong Holdings Limited (the "Company") are pleased to announce the unaudited consolidated results of the Company and its subsidiaries (the "Group") for the six months ended 30th September, 2000 as follows:
CONDENSED CONSOLIDATED INCOME STATEMENT
(Unaudited)
Six months ended
30th September, 30th September,
2000 1999
Note $'000 $'000
(Note 12)
Turnover 2 350,709 273,822
Cost of installation and
cost of sales (291,313) (231,904)
--------------- ---------------
Gross profit 59,396 41,918
Other revenue 6,207 6,434
General and administrative
expenses (42,261) (30,270)
Other expenses 3 (11,171) -
--------------- ---------------
Operating profit 12,171 18,082
Finance cost (2,193) (2,003)
--------------- ---------------
Profit before share of loss
of associated companies 9,978 16,079
Share of loss of associated
companies (1) (4)
--------------- ---------------
Profit before taxation 4 9,977 16,075
Taxation 5 (4,937) (2,493)
--------------- ---------------
Profit after taxation 5,040 13,582
Minority interests 853 (41)
--------------- ---------------
Profit attributable to
shareholders 5,893 13,541
=============== ===============
Earnings per share 6
Basic 1.52 cents 4.14 cents
=============== ===============
Diluted 1.52 cents 4.11 cents
=============== ===============
CONDENSED CONSOLIDATED STATEMENT OF RECONGNISED GAINS AND LOSSES
(Unaudited)
Six months ended
30th September, 30th September,
2000 1999
$'000 $'000
Profit attributable to shareholders 5,893 13,541
Writing off of goodwill arising from
purchase of an interest in subsidiaries (8,530) -
---------- ----------
(2,637) 13,541
========== ==========
CONDENSED CONSOLIDATED BALANCE SHEET
30th September, 31st March,
2000 2000
(unaudited) (audited)
Note $'000 $'000
ASSETS
Non-current assets
Fixed assets 7 33,424 25,074
Interests in associated
companies 3 9
Investments 8 61,711 47,445
--------------- ---------------
95,138 72,528
--------------- ---------------
Current assets
Gross amount due from
customers for contract work 73,643 62,706
Stocks 12,596 6,299
Accounts receivable, net 9 135,996 128,405
Retention money receivable 35,414 45,587
Prepayments, deposits and
other assets 7,826 1,423
Prepaid tax 899 1,077
Cash and bank deposits 124,782 135,627
--------------- ---------------
391,156 381,124
--------------- ---------------
Current liabilities
Gross amount due to customers
for contract work (107,902) (83,450)
Accounts payable and
accruals 10 (107,137) (113,357)
Bills payable (20,044) (42,357)
Tax payable (11,195) (6,090)
Current portion of
obligations under
finance lease (400) (400)
Bank overdrafts and
short-term loans (22,319) (1,023)
Dividend payable (618) (6,789)
--------------- ---------------
(269,615) (253,466)
--------------- ---------------
Net current assets 121,541 127,658
--------------- ---------------
Total assets less current
liabilities 216,679 200,186
--------------- ---------------
Non-current liabilities
Long-term liabilities (267) (467)
Deferred taxation (2,557) (2,557)
--------------- ---------------
(2,824) (3,024)
--------------- ---------------
Minority interests (22,160) (2,830)
--------------- ---------------
NET ASSETS 191,695 194,332
=============== ===============
Representing:
Share capital 38,737 38,737
Reserves 11 152,958 155,595
--------------- ---------------
Shareholders' equity 191,695 194,332
=============== ===============
Notes:
1. Basis of preparation
The condensed unaudited consolidated interim financial statements are prepared in accordance with Hong Kong Statement of Standard Accounting Practice No. 25 "Interim Financial Reporting". The accounting policies and methods of computation used in the preparation of the interim financial statements are consistent with those used in the Group's annual financial statements for the year ended 31st March, 2000.
The comparative figures relating to the financial year ended 31st March, 2000 are derived from the audited consolidated financial statements in the 1999/2000 annual reports of the Company. This interim report has been reviewed by the Audit Committee of the Company but has not been audited.
2. Turnover and profit from operation
Contribution to
Turnover Profit from operations
(Unaudited) (Unaudited)
six months ended 30th September,
2000 1999 2000 1999
HK$'000 HK$'000 HK$'000 HK$'000
Building services
contracting business 289,125 239,956 47,410 35,030
Trading of electrical
and mechanical engineering
materials and equipment 42,656 33,866 7,962 6,888
Provision for broadband
connectivity 2,122 - (1,620) -
Provision for design,
installation and
maintenance of karaoke
on demand systems 16,806 - 5,644 -
--------- --------- --------- ---------
350,709 273,822 59,396 41,918
========= =========
Interest income 3,080 2,789
Project management income 3,099 3,641
Others 28 4
--------- ---------
65,603 48,352
General and administrative
expenses (42,261) (30,270)
Other expenses (Note 3) (11,171) -
--------- ---------
Operating profit 12,171 18,082
========= =========
Substantially all the turnover is derived from Hong Kong.
3. Other expenses
(Unaudited)
Six months ended
30th September, 30th September,
2000 1999
HK$'000 HK$'000
Provision for impairment in value
of other investment 11,171 -
============ ============
4. Profit before taxation
Profit before taxation was determined after charging the following items:
(Unaudited)
Six months ended
30th September, 30th September,
2000 1999
HK$'000 HK$'000
Depreciation
- owned fixed asset 1,257 1,032
- fixed assets under finance lease 68 68
------------ ------------
1,325 1,100
============ ============
Interest expenses on bank loans and
overdrafts wholly repayable within
five years 1,573 1,703
============ ============
5. Taxation
The Company is exempted from taxation in Bermuda until 2016. Hong Kong profits tax has been provided at the rate of 16% (1999 - 16%) on the estimated assessable profits arising in or derived from Hong Kong.
Taxation in the consolidated income statement comprises:
(Unaudited)
Six months ended
30th September, 30th September,
2000 1999
HK$'000 HK$'000
The Company and its subsidiaries:
Hong Kong profits tax
- Current period 4,937 2,195
Deferred taxation - 298
Share of taxation of associated
companies - -
------------ ------------
4,937 2,493
============ ============
6. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
(Unaudited)
Six months ended
30th September, 30th September,
2000 1999
HK$'000 HK$'000
Earnings
Earnings for the purposes of basic
and diluted earnings per share 5,893 13,541
============ ============
Number of ordinary shares:
Weighted average number of ordinary
shares for the purposes of basic
earnings per share 387,371,600 326,798,267
Effect of dilutive share options 97,012 2,784,490
------------ ------------
Weighted average number of ordinary
shares for the purposes of diluted
earnings per shares 387,468,612 329,582,757
============ ============
7. Additions to fixed assets
During the period, the Group spent approximately HK$9,675,000 (six months ended 30th September, 1999: HK$1,707,000) to expand its operations. Out of which, approximately HK$6,757,000 (six months ended 30th September, 1999: Nil) was incurred for the business of providing broadband connectivity.
8. Non-current investments
Non-current investments are analysed as follows:
(Unaudited) (Audited)
30th September, 31st March,
2000 2000
HK$'000 HK$'000
Investment securities (a) 57,897 32,460
Other investment (b) 3,814 14,985
------------- -------------
61,711 47,445
============= =============
(a) Investment securities
HK$'000 HK$'000
Unlisted equity securities, at cost 57,897 32,460
Less: Provision for impairment in value - -
------------- -------------
57,897 32,460
============= =============
(b) Other investment
HK$'000 HK$'000
Unlisted equity securities,
at carrying value 14,985 14,985
Less: Unrealized gain/loss for the period - -
Provision for impairment in value (11,171) -
------------- -------------
3,814 14,985
============= =============
9. Accounts receivable, net
An ageing analysis for accounts receivable (after netting off provision for bad debts) is as follow:
(Unaudited)
30th September, 31st March,
2000 2000
HK$'000 HK$'000
0 - 30 days 113,747 104,655
31 - 60 days 11,157 6,713
Over 60 days 11,092 17,037
------------- -------------
135,996 128,405
============= =============
The Group allows its trade customers with credit period normally ranging from cash on delivery to 60 days. A longer credit period is granted to a few customers with long business relationship and strong financial position.
10. Accounts payable and accruals
An ageing analysis for accounts payable and accruals are as follows:
(Unaudited)
30th September, 31st March,
2000 2000
HK$'000 HK$'000
0 - 30 days 61,512 68,444
31 - 60 days 11,564 8,501
Over 60 days 1,267 3,570
------------- -------------
74,343 80,515
Retention money payable 32,794 32,842
------------- -------------
107,137 113,357
============= =============
11. Reserves
Share Retained
premium profits Total
$'000 $'000 $'000
Consolidated
Balance as at 1st April, 2000 102,972 52,623 155,595
Profit attributable to
shareholders - 5,893 5,893
Writing off of goodwill arising
from purchase of an interest
in subsidiaries - (8,530) (8,530)
----------- ----------- ----------
Balance as at 30th
September, 2000 102,972 49,986 152,958
=========== =========== ==========
12. Comparative figures
Certain of the 1999 comparative figures have been reclassified to conform to the current year's presentation as a result of changes in the reporting requirements in accordance with Statement of Standard Accounting Practice Number 1 "Presentation of financial statements" issued by the Hong Kong Society of Accountants.
INTERIM DIVIDEND
In order to retain fund for the Group's working capital, the Board does not recommend the payment of an interim dividend (1999: nil).
MANAGEMENT DISCUSSION AND ANALYSIS
Review of Operation
The Group's turnover for the six months ended 30th September, 2000 amounted to HK$350,709,000 representing an increase of 28% over the same period last year. The unaudited profits attributable to shareholders for this period was HK$5,893,000, a decrease of 56%. The decrease was mainly because of a provision for impairment in value of investments of HK$11,171,000 being made during this period. Basic earrings per share were HK$1.52 cents, a decrease of 63% over the corresponding period last year.
Building Services Engineering
In view of the slowdown of the housing developments in the public sector, the building services division experienced fierce competition during the past period. No significant improvement is expected in the coming year. However, the Group is presently under preliminary discussion on a number of business services installation projects in China with a view to reduce the impact from the market in Hong Kong.
As at 30th September, 2000, the Group's uncompleted contracts on hand was approximately HK$694 million while that of as at 31st March, 2000 was approximately HK$824 million. Major contracts awarded since the announcement of final results on 19th July, 2000 were:
- Energy retrofit installation in hospitals and clinics
- Security system term maintenance contract (Regions Kwun Tong, Wong Tai Sin, Kwai Chung & Tsing Yi and Tuen Mun & Tsuen Wan) 2000/2003 for Housing Authority Estates, Areas and Buildings
However, the Group had been awarded an exclusive distributorship from Mitsubishi Heavy Industries for Mitsubishi MGS generators in Hong Kong and Macau during the year. Since the commencement of the distributorship, over 20 contracts were received with a total of 40 Mitsubishi generator sets to be installed. The estimated total value of contracts signed amounted to over HK$50 million. It is expected that this distributorship will strengthen the Group's position in the building services industry.
Broadband Connectivity - Speedlink
The Group through its subsidiary, Speedlink Limited, has commenced to provide the broadband connections for building owners in Hong Kong. As at 30th September, 2000, approximately 40 buildings have already installed its "First Mile" Internet Broadband connections, and approximately 4,000 residential and commercial occupiers are presently using the Broadband connectivity provided by Speedlink Limited.
Broadband Application - Karaoke on Demand
The Group on 25th April, 2000 through a series of Discloseable Transactions together with other independent third parties acquired a 57.2% interest in Binary KOD Limited. Binary KOD Limited together with its subsidiaries ("Binary KOD Group") engages in design, supplying, installing and maintaining Karaoke hardware and control systems to Karaoke in Hong Kong. A detailed circular concerning the Discloseable Transactions was dispatched to all shareholders on 12th May, 2000.
As at 30th September, 2000, there are approximately 20 sizable karaoke boxes covering over 1,300 rooms had installed the Karaoke on Demand system. Other than providing an efficient song selection and audio/video system, the Karaoke on Demand system also provides a multimedia platform for advertisement and infotainment.
Capital Position and Financial Position
The total shareholders' equity of the Group as at 30th September, 2000 was approximately HK$191,695,000, a decrease of nearly 1.4% over that as at 31st March, 2000. It was already taking into the provision for impairment in value of investments and the writing off of goodwill arising from the acquisition of Binary KOD Group against the reserve during this period. The cash and bank deposits balances were HK$124,782,000 as at 30th September, 2000, representing a decrease of HK$10,845,000 as compared to that of as at 31st March, 2000. The total borrowings were HK$22,319,000 as at 30th September, 2000, an increase of HK$21,296,000 as compared to that of as at 31st March, 2000. The increase was mainly due to the temporary increase in secured bank overdrafts in order to fund the building services business. Accordingly, the ratio of the total bank borrowings to shareholders' equity was increased to 12% as at 30th September, 2000 from 0.5% as at 31st March, 2000. Borrowings are closely monitored by the Group to maintain gearing at reasonable level.
Business Prospect
The Group will continue develop its core business - building services installation that utilizes the Group's specialist skills in Hong Kong and in China. The Group also prudently develops its broadband connectivity business so as to place the Group in a strategic position for any new developments in the Broadband Connectivity business. Additionally, the Group will progressively increases the coverage of the Karaoke on Demand systems among the karaoke boxes in Hong Kong and further enhance the functions of the multimedia platform providing by the Karaoke on Demand systems so as to capture any revenue from the areas of advertisement and infotainment.
The Board remains confident that the Group will achieve a profitable result for the year 2000/2001.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES
There was no purchase, sale or redemption of the Company's listed securities by the Company or any of its subsidiaries during the period.
AUDIT COMMITTEE
The members of the audit committee of the Company comprise Messrs. James BLAKE and Bernald POULIOT, both being independent non-executive Directors.
The audit committee has reviewed with management the accounting principles and practices adopted by the Group and discussed auditing, internal control and financial reporting matters including the review of the unaudited interim results for the six months ended 30th September, 2000 of the Company now reported on.
CODE OF BEST PRACTICE
None of the directors is aware of information that would reasonably indicate that the Company is not, or was not for any part of the accounting period covered by the interim report, in the compliance with the Code of Best Practice, as set out in Appendix 14 of the Listing Rules of The Stock Exchange of Hong Kong Limited except that two independent non-executive directors are not appointed for a specific term as they are subject to retirement by rotation and re-election at Annual General Meetings in accordance with the Company's Bye-law 99(A).
On behalf of the Board
James Sai Wing Wong
Chairman
Hong Kong, 14th December, 2000
Website: http://www.irasia.com/listco/hk/shuncheong
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