SINOLINK WORLDWIDE HOLDINGS LIMITED
(Incorporated in Bermuda with limited liability)
The Board of Directors (the "Board") of Sinolink Worldwide Holdings Limited (the "Company") is pleased to announce the unaudited consolidated results of the Company and its subsidiaries (the "Group") for the six months ended 30th June 2000, together with the comparative figures of the corresponding period in 1999, as follows:
Consolidated Income Statement
For the six months ended 30th June
2000 1999
Notes HK$'000 HK$'000
Turnover (1) 622,437 286,989
Cost of Sales (577,973) (233,844)
----------- -----------
Gross Profit 44,464 53,145
Other revenue 14,432 22,249
Distribution costs (6,594) (8,470)
Administrative expenses (43,547) (42,864)
Other operating expenses (514) (30)
----------- -----------
Profit from operations 8,241 24,030
Finance costs (711) (4,781)
Share of results of associated companies (257) (1,494)
----------- -----------
Profit from ordinary activities
before taxation 7,273 17,755
Taxation (2) (2,107) (3,489)
----------- -----------
Profit before minority interests 5,166 14,266
Minority interests (753) (559)
----------- -----------
Net profit for the year 4,413 13,707
Dividends - -
----------- -----------
Retained profit for the period 4,413 13,707
=========== ===========
Earnings per share
Basic (3) HK0.3 cents HK0.9 cents
=========== ===========
Notes:
(1) Turnover
The Group's turnover is analysed as follows:
For the six months ended 30th June
2000 1999
HK$'000 HK$'000
Sales of completed properties and
properties under development 76,957 80,807
Revenue from electricity generation business 44,568 43,482
Revenue from liquid petroleum gas business 497,012 163,106
Others (Note) 8,330 3,864
-------- --------
626,867 291,259
Less: Business tax (4,430) (4,270)
-------- --------
Turnover 622,437 286,989
======== ========
Note:
Others include income from decoration, interior design work and the provision of property management services.
(2) Taxation
For the six months ended 30th June
2000 1999
HK$'000 HK$'000
The Company and its subsidiaries
Hong Kong profits tax - -
PRC income tax 2,107 3,487
Associates
PRC income tax - 2
------- -------
2,107 3,489
======= =======
No provision for Hong Kong profits tax has been made as the Group has no assessable profits for the period derived from Hong Kong (1999: Nil).
Subsidiaries and associated companies established in the People's Republic of China (the "PRC") are subject to PRC income tax. Pursuant to the relevant regulations of the Income Tax Law of the PRC (
), certain subsidiaries are entitled to exempt from paying income tax for the first two year starting from its first profitable year of operations, followed by a 50% reduction from the third to fifth year. Provision for PRC income tax is provided for with reference to the applicable tax rates on the estimated assessable profits of those subsidiaries and associated companies for the relevant period.
(3) Earnings per share
The calculation of the earnings per share for the six months ended 30th June 2000 is based on the profit attributable to shareholders of HK$4,413,000 (1999: HK$13,707,000) and on the weighted average number of 1,520,000,000 shares (1999: 1,520,000,000 shares) in issue during the period.
Diluted earnings per share has not been stated because the exercise of the outstanding share options and convertible notes of the Company would not have a diluting effect to the earnings per share.
INTERIM DIVIDENDS
The Board has resolved not to declare any interim dividend (1999: Nil) in respect of the six months ended 30th June, 2000.
REVIEW OF OPERATIONS
For the six months ended 30th June 2000, the Group's turnover amounted to approximately HK$622,437,000, an increase of 117% compared to the corresponding period in 1999. Meanwhile, profit attributable to shareholders fell by 67.8% to approximately HK$4,413,000. The decrease in profit was mainly due to the fact that the electricity generation business was greatly affected by the continued surge in oil prices and the overhaul of the generating units. As a result, production costs soared and losses were recorded by the electricity generation business for the period. Property development remained the key contributor to the Group's profit attributable to shareholders. As for the Liquid Petroleum Gas ("LPG") business, its share of the Group's turnover continued to grow, reflecting a rapid growth rate, and it is expected to bring forth a considerable return for the Group. As at 30th June 2000, the Group's cash and bank balance amounted to approximately HK$606,323,000, with borrowings of HK$302,050,000 and a debt-to-equity of 25.4%.
Property Development
In the first half of the year, the real estate market in Shenzhen recovered after two difficult years. The upturn came after the PRC Government has granted tax relief and exemptions to the property sector, and economic activities in the PRC have turned around following the country's expected admission into the World Trade Organization. Demand for real estate in Shenzhen was also spurred by the increasing number of Hong Kong buyers for houses in Shenzhen.
Sales of Sinolink Garden Phase Two improved obviously during the period and the proportion of buyers from Hong Kong continued to grow. Yet, part of the sales will not be reflected in the results until the second half of the year according to the accounting policy of the Group. Sinolink Garden Phase Two comprises 1,047 flats, with a total gross floor area of approximately 125,000 square metres. The construction of Sinolink Garden Phase Two will be completed in the second half of the year, and the number of flats sold approximately amounted to 60% of the total gross floor area. It is expected that most of the remaining units will be successfully sold in the second half of the year.
During the period, the property market in Shenzhen was still characterized by excess supply in respect of newly built flats and intense competition. The Group adopted various strategies to cope with market changes, in order to maintain its competitiveness. The Sinolink Garden gained sound reputation due to the high standard of its construction quality and property management services, thus giving substantial support to the prices and sales.
Electricity Generation
The Group's subsidiary, Shenzhen Fuhuade Electric Power Co., Ltd. ("Fuhuade"), continued to be affected by the continued surge of oil prices, which led to an increase in the production costs. Furthermore, production costs also went higher as the operation was taken over by the first generating unit, which is less efficient, as the second generating unit underwent maintenance services during the period. Losses have been recorded for the period in spite of Fuhuade's efforts to enhance management and reduce operating costs. Overhaul of the second generating unit was completed in the first half of the year. As a result, efficiency of the generating unit has been improved, which will help to reduce production costs in the second half of the year. The management strives to further improve the operation and production of Fuhuade and has adopted various measures such as the substitution of less costly fuel oil for light diesel fuel in the generation of electricity. It is believed that Fuhuade will improve its performance in the near future.
Liquid Petroleum Gas Business
The Group's subsidiary, China Pan River Group Ltd. ("CPR Group"), achieved satisfactory results in the wholesale and retail of LPG in the first half of the year. Despite the fact that international petroleum price continued to rise during the period, increase in the price of LPG in the PRC was less severe while the supply of LPG was relatively stable. The Group managed to expand into new markets although costs and prices remained at high levels. This is a vivid manifestation of CPR Group's competitive edge in management and operation, and the strong demand for LPG in the PRC market.
During the period, CPR Group strived to establish its sales network along the Yangtze River, thereby leading to a remarkably increase in its market share and turnover. The sales volume of CPR Group amounted to 208,000 tones during the first half of the year, representing an increase of more than 270% when compared to the corresponding period last year. CPR Group has undergone in-depth retail market research in certain regions, which will help the Group to establish appropriate marketing strategies and to provide suitable services to its customers. These measures will certainly help the Group to further expand into new markets, to establish a solid customer base, as well as to build the reputation of "PANVA" as a quality brand.
PROSPECTS
Property Development
Given that the PRC's economy continues to grow and with the ever improving standard of living of the people, it is the general public's wish to have a pleasant living environment. Shenzhen, being the earliest developed and most prosperous special economic zone in the PRC, has a relatively more comprehensive legal system. Sinolink Garden, being a high quality property in Shenzhen, is the favourite choice among domestic as well as foreign buyers. The Group will focus on the sale of the remaining units of Sinolink Garden Phase Two, from which it is expected that considerable income will be derived in the second half of the year.
The Group has also commenced the development of Sinolink Garden Phase Three and Four and the preliminary work has already commenced. Therefore, a number of flats are expected to be available for sale in 2001.
Currently, the Group holds an adequate land bank in Shenzhen. Apart from Sinolink Garden, the site at Yinhu Cable Transformation Station, Luohu District, Shenzhen can also provide more than 320,000 square metres for property development after land conversion. The Board are of the opinion that residential property development in Shenzhen has high growth potential. The Group has established a good reputation after years of involvement in property development and management. As the real estate market in Shenzhen continues to prosper, Sinolink will further consolidate its status as a high quality property developer with good reputation. The Group will also strive to explore more feasible opportunities through co-operating with other medium and large-scale property developers.
Electricity Generation
As an attempt to reduce production costs, Fuhuade is now reforming its production equipment and will introduce the utilization of less costly fuel oil in production. Such reformation is expected to be completed in the second half of the year, and the Group is likely to record encouraging results with the resultant improvement in its operation efficiency. On the other hand, the Group will also consider the possibility of using natural gas as the fuel for electricity generation in an attempt to further reduce production and operation costs.
Liquid Petroleum Gas Business
CPR Group will further expand its retail network for LPG. In particular, the joint venture project in Nanjing will commence operation in the fourth quarter of this year. The total number of customers will have a substantial boost with approximately 400,000 additional customers introduced by the PRC partner, facilitating to a certain extent the expansion of the overall sales network of CPR Group. Accordingly, the Group will benefit from a remarkable amount of revenue and unlimited opportunities. In addition, after more than 2 years of efforts, the brand name of "PANVA" have been established in the PRC market, laying down a solid foundation for further market expansion. Meanwhile, CPR Group will continue to negotiate with the regional LPG enterprises in Shenzhen, Yangzhou, Huaiyin, Hefei and etc., which have indicated their interests to form joint ventures, with a view to form cooperation with them as soon as possible.
With the standard of living rising under the rapid growth of the PRC's economy, there is huge demand for LPG as a modern and green fuel, which is expected to increase at a double-digit rate. CPR Group will seize the chance to expand its market share so as to bring about a remarkable amount of revenue and additional business opportunities to the Group.
Besides, as the retail sales network and customer base continues to expand, CPR Group will also actively study the business opportunities in e-commerce. It will seek for the suitable partners and proceed to make timely investment on a systematic basis and in line with the development of the existing distribution network, so as to capitalize on the benefits of internet business of today and to enhance the Group's profitability.
DISCLOSURE OF INTERESTS
Directors' interests
As at 30th June 2000, the interests of the directors and chief executive in the securities of the Company and its associated corporations, within the meaning of the Securities (Disclosure of Interests) Ordinance ("SDI Ordinance") as recorded in the register maintained by the Company pursuant to Section 29 of the SDI Ordinance or as otherwise notified to the Company pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, were as follows:
(i) Interests in Shares
Name of Name of Nature of Number of Company Director interests shares held Sinolink Worldwide Ou Yaping Corporate (a) 1,006,800,000 Holdings Limited ordinary shares Sinolink Worldwide Tang Yui Man, Personal 500,000 Holdings Limited Francis ordinary shares Sinolink Electric Power Ou Yaping Personal 90,000 non-voting Company Limited deferred shares
Note:
(a) These shares were held by Asia Pacific Promotion Limited, a company incorporated in the British Virgin Islands, which is legally and beneficially owned by Mr. Ou Yaping.
Save as disclosed above, Mr. Ou Yaping and his associates held 55% equity interests in Shenzhen Xiangdu F. & E. Co., Ltd., a joint venture enterprise established in the PRC in which the Company owns 36% equity interests.
(ii) Interests in Convertible Notes
As at 30th June 2000, Mr. Ou Yaping held convertible notes amounting to HK$55,183,411. Such convertible notes can be converted into 122,630,000 shares of the Company on or before 9th February 2002 at an initial conversion price of HK$0.45 per share.
(iii) Interests in Share Options
As at 30th June 2000, under the Company's share options scheme adopted on 11th May 1998, options to subscribe for shares in the Company have been granted to the following directors:
Subscription Number
Name Date price of share
of Director granted Exercise period per shares options held
HK$
Law Sze Lai 29.06.1998 06.01.1999 to 0.60 10,000,000
05.01.2002
29.06.1998 06.07.1999 to 0.70 10,000,000
05.01.2002
01.03.1999 03.09.1999 to 0.45 3,000,000
03.09.2002
01.03.1999 03.03.2000 to 0.45 3,000,000
03.09.2002
01.03.1999 03.09.2001 to 0.45 2,000,000
03.09.2002
Chen Wei 29.06.1998 06.01.1999 to 0.60 10,000,000
05.01.2002
29.06.1998 06.07.1999 to 0.70 10,000,000
05.01.2002
01.03.1999 03.09.1999 to 0.45 3,000,000
03.09.2002
01.03.1999 03.03.2000 to 0.45 3,000,000
03.09.2002
01.03.1999 03.09.2001 to 0.45 2,000,000
03.09.2002
Tang Yui Man, 01.03.1999 03.09.1999 to 0.45 2,500,000
Francis 03.09.2002
01.03.1999 03.03.2000 to 0.45 1,250,000
03.09.2002
01.03.1999 03.09.2001 to 0.45 1,250,000
03.09.2002
20.01.2000 01.07.2000 to 0.55 1,500,000
01.02.2003
20.01.2000 01.01.2001 to 0.55 1,500,000
01.01.2004
None of the directors had exercised any share options to subscribe for shares in the Company during the six months ended 30th June 2000.
Save as disclosed above, as at 30th June 2000, none of the directors or chief executive had any interests in the securities of the Company or any of its associated corporations as defined in the SDI Ordinance. Furthermore, none of the directors and chief executive, or their spouses or children under the age of 18, had any right to subscribe for the shares in the Company, or had exercised such right.
Substantial Shareholders' Interests
As at 30th June 2000, the following shareholder was interested in 10% or more of the issued share capital of the Company as recorded in the register maintained under Section 16(1) of the Securities (Disclosure of Interests) Ordinance:
Approximate
percentage of
Name of Shareholder Number of shares equity interests
Asia Pacific Promotion Limited 1,006,800,000 66.2%
Note:
Asia Pacific Promotion Limited was incorporated in the British Virgin Islands, which is legally and beneficially owned by Mr. Ou Yaping.
Save as disclosed above, the Company has not been notified of any other interests held by any party representing 10% or more of the issued share capital of the Company.
CODE OF BEST PRACTICE
None of the directors of the Company is aware of any information that would reasonably indicates that the Company is not, or was not at any time during the period, in compliance with the Code of Best Practice as set out in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, except that the non-executive directors are not appointed for specific terms, but are subject to retirement by rotation and re-election at annual general meeting in accordance with the Company's Bye-laws.
An audit committee has been established by the Board in compliance with paragraph 14 of the said Code of Best Practice.
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES
Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the listed securities of the Company during the six months ended 30th June 2000.
By Order of the Board
Ou Yaping
Chairman
Hong Kong, 15th September, 2000
Website: http://www.irasia.com/listco/hk/sinolink