SINOLINK WORLDWIDE HOLDINGS LIMITED
(Incorporated in Bermuda with limited liability)
1999 Interim Results
1999 Interim Results
INTERIM RESULTS
The Board of Directors (the "Directors") 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 1999, together with the comparative figures for the corresponding period in 1998, as follows:
For the six months
ended 30th June
Notes 1999 1998
HK$'000 HK$'000
(Note 4)
Turnover (1) 286,989 410,378
=========== =============
Operating profit 19,249 163,808
Share of results of associated companies (1,494) (1,034)
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Profit before taxation 17,755 162,774
Taxation (2) (3,489) (20,383)
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Profit after taxation 14,266 142,391
Minority interests (559) (30,289)
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Profit attributable to shareholders 13,707 112,102
=========== =============
Earnings per share (3) HK0.9 cents HK9.43 cents
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Notes:
(1) Turnover
An analysis of the Group's turnover is as follows:
For the six months
ended 30th June
1999 1998
HK$'000 HK$'000
Sales of completed properties/
development properties 80,807 358,596
Revenue from electricity supply operations 43,482 65,578
Revenue from liquid petroleum gas business 163,106 --
Others (Note) 3,864 4,528
-------- --------
291,259 428,702
Less: Business tax (4,270) (18,324)
-------- --------
Turnover 286,989 410,378
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Note: Others include income from completed decoration, interior design work and property management services.
(2) Taxation
For the six months
ended 30th June
1999 1998
HK$'000 HK$'000
Company and subsidiaries
Hong Kong profits tax -- (21)
PRC income tax 3,487 20,404
Associated companies
PRC income tax 2 --
-------- --------
3,489 20,383
======== ========
No provision for Hong Kong profits tax has been made as the Company has no assessable profits derived from Hong Kong during the period (1998: Nil). The tax credit in 1998 represents the over provision of Hong Kong profits tax in previous years.
Subsidiaries and associated companies established in the People's Republic of China (the "PRC") are subject to PRC income tax. However, in accordance with the provisions of the PRC Tax Law, certain subsidiaries are eligible to full exemption from income tax for the first two years starting from its first profitable year of operations, followed by a 50 percent reduction from the third to the fifth year. Provision for PRC income tax is provided for with reference to the applicable rates on the estimated assessable profits of those subsidiaries and associated companies for the period.
(3) Earnings per share
Earnings per share for the six months ended 30th June 1999 is calculated on the profit attributable to shareholders of HK$13,707,000 (1998: HK$112,102,000) and the weighted average of 1,520,000,000 (1998: 1,188,287,293) shares in issue during the period.
The diluted earnings per share is not presented as the conversion of the convertible loan notes and the exercise of the Company's outstanding options granted will not have a dilution effect on the basic earnings per share.
(4) Comparative figures
The pro forma unaudited consolidated results of the Group for the six months ended 30th June 1998 include the results of the Company, its subsidiaries and its associated companies as if the Group structure as at 30th June 1998 had been in existence since 1st January 1998, or since their respective dates of incorporation/establishment, where this is a shorter period.
INTERIM DIVIDEND
The Directors have resolved not to declare an interim dividend in respect of the financial year ending 31st December 1999 (1998: Nil).
REVIEW OF OPERATIONS
For the six months ended 30th June 1999, the Group's turnover amounted to approximately HK$286,989,000, a decline of 30% compared with the same period last year. Profit attributable to shareholders fell by 87.8% to approximately HK$13,707,000. Property development remained as the Group's major business in contributing to the Group's profit attributable to shareholders in the first six months of 1999. As at 30th June 1999, the Group had approximately HK$422,478,000 of cash and bank balances, with borrowings of approximately HK$287,589,000. The debt-to-equity ratio was approximately 24.8%.
Property Development
During the first half of 1999, the real estate market in Shenzhen despite showing signs of improvement remained slow in recovery. This was mainly because the underlying disparity between supply and demand continued to drive the market to correction. While prices of flats tended to stabilize, the market took time to consolidate. However, in the medium to long term the real estate market in Shenzhen is expected to restore to steady growth and prices should gradually firm up.
In order to capture market demand, the Group continued to improve the quality and specifications of its properties. During the period under review, enhancements adjustments were made on the construction and utilization of the properties as well as their living environment and management. Given that small units were in stronger demand due to the change in market sentiment, the Group amended the development plan of Sinolink Garden Phase Two so that those large units under the original design were reduced to smaller ones. Moreover, recognizing the consolidation of the real estate market in Shenzhen, the Group prudently adjusted the development momentum of its projects in accordance with their sales performance. As such, some of the development and marketing plans were revised.
During the first half, the Group sold an aggregate gross floor area of 14,054 square metres, representing 121 units of Sinolink Garden Phase Two, with an average selling price of RMB9,510 per square metre. Sinolink Garden Phase Two comprises the north and south zones. Pre-sale of the south zone has been launched, whereas the north zone has commenced construction and is expected to be completed in September 2000.
Electricity Generation
The Group's subsidiary, Shenzhen Fuhuade Electric Power Co., Ltd.("Fuhuade"), operates Dapeng Power Plant in Shenzhen. During the six months ended 30th June 1999, Fuhuade continued its operations as planned. However, winter is traditionally a low season for the electricity generation business. In addition, the Shenzhen Municipal Government in view of the market's demand in electricity decided to reduce output during the first half. These factors had affected Fuhuade's turnover. A further aggravating factor was the sharp increase in fuel prices in the PRC. Nevertheless, the rate charged for electricity sold by Fuhuade remained at RMB0.78 per KWh.
Liquid Petroleum Gas Business
With the rapid growth of the PRC economy, concerns are mounting on environmental protection. Being a clean, highly efficient and convenient energy source, Liquid Petroleum Gas ("LPG") is getting more widely used in the industrial and commercial sectors. It is expected that the use of LPG will become increasingly popular and solid growth will be seen in the coming future. As part of our diversification, the Group in February 1999 acquired all the equity interests in China Pan River Group Ltd. (hereinafter referred to as "PANVA") from the Group's majority shareholder. PANVA is engaged in the development of LPG retail sales networks and the related purchasing, transportation, storage and wholesale of LPG in the Yangzi River and the southwestern and coastal regions of the PRC.
The LPG business of PANVA is at a stage of rapid growth. In June 1999, the company had 240,000 customers, compared to 100,000 at the end of 1998. Turnover for the first half of 1999 amounted to more than RMB206 million, compared to the full year figure of RMB312 million in 1998.
PROSPECTS
The Group will continue to focus on and actively expand its residential property development and electricity generation businesses in Shenzhen, as well as the LPG business in the PRC. The Group will also study and explore opportunities in other related businesses and in the infrastructure sector to maximize returns for shareholders.
The Directors believe that the PRC economy would grow faster in the second half of 1999. Shenzhen where residential prices have stabilized and confidence somewhat restored should see more home buyers. It is therefore expected that the sales of residential properties in Shenzhen would steadily pick up during the second half. Moreover, there are other factors which could stimulate demand, including the deepening of housing reforms in the PRC, the increasingly close tie between Shenzhen and Hong Kong, and the construction of the Western Corridor.
Pre-sale of the first batch of over 400 units in Sinolink Garden Phase Two has obtained satisfactory results. In the second half of 1999, the Group will continue with the development and pre-sale of the south zone while moving ahead with the construction works at the north zone. Phase Two is scheduled to be fully completed by September 2000. As such, preparation works for the development of Phase Three will commence in 2000.
Dapeng Power Plant will continue to provide stable cash revenue for the Group. Since the third quarter is the peak season for electricity demand, the amount of electricity to be generated in the second half of 1999 should be higher than the amount generated in the first half. The full year amount is expected to sustain or surpass last year's level.
The Group will expand its investments in the LPG business with clear objective. Various means including acquisitions and mergers will be explored, through which the Group aims to increase its market share and expand its customer base. Efforts will also be spent to enhance the Group's corporate image. These include imposing a more effective control on product quality, standardizing our operations and providing a more comprehensive range of supporting services. The best management practices of modern retail enterprises will also be introduced for developing the huge LPG market. Moreover, while the Group is actively expanding the retail market through the supply of LPG in cylinders, it also plans to build more pipeline networks in small districts to match their overall urban developments.
YEAR 2000 COMPLIANCE
The Directors note that certain computer systems use only two digits to represent a year and may not be able to distinguish the year 1900 from the year 2000. Such deficiency if not rectified may result in the failure of the computer systems to accurately process or record data on transition to the year 2000.
The Directors are aware of the year 2000 issue and appropriate compliance measures have been taken. With regard to the Group's property development business, all major computer systems used at our Shenzhen office had been upgraded by March 1998. The computer systems used at our Hong Kong office were either upgraded or replaced and the final phase of installation and testing was completed at the end of 1998. As for our electricity generation business, the computer systems currently in use at Dapeng Power Plant were purchased and installed in 1997. These systems use four digits to represent a year and have been tested for year 2000 compliance. To date, the Group has completed the compliance project as well as contingency plans and the Directors are satisfied with the results. Barring unforeseen circumstances, the Group should not encounter any major problems arising from year 2000 compliance.
Total cost incurred by the Group for the year 2000 compliance project is approximately HK$369,000, which have been accounted for as expenses during their respective years.
AUDIT COMMITTEE
Under the requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, an Audit Committee was formed to review and supervise the Company's financial reporting process and internal controls. Meetings of the Audit Committee will beheld at least two times annually.
CORPORATE GOVERNANCE
None of the Directors is aware of any information that would reasonably indicate that the Company is not, or was not, during the period, in compliance with the Code of Best Practice as set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, except that independent non-executive directors of the Company are not appointed for a specific term as they are subject to retirement by rotation and re-election at annual general meeting of the Company in accordance with the Company's Bye-laws.
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES
Neither the Company nor any of its subsidiaries purchased, sold or redeemed any listed securities of the Company during the six months ended 30th June 1999.
By Order of the Board
OU Yaping
Chairman
Hong Kong, 23rd September 1999
Website: http://www.irasia.com/listco/hk/sinolink