[PRESS RELEASE]
(Hong Kong - 24 September 2002) Founder Holdings Limited ("Founder", or the "Group") (stock code: 0418), a leading software developer and systems integration provider, today announced its unaudited consolidated interim results for the six months ended 30 June 2002.
For the six months under review, the Group achieved a turnover of HK$ 659.0 million, as compared with the previous year's turnover of HK$ 909.7 million. Gross profit was HK$ 127.1 million, as compared with the previous year's gross profit of HK$ 116.4 million. Though the Group recorded a drop in turnover during the period by 28%, gross profit percentage improved to 19.3% (2001: 12.8%). Meanwhile, the implementation of cost control measures since the last quarter of 2001 resulted in the reduction of selling and distribution expenses and administrative expenses by 39% and 21% respectively if compared to the corresponding period in 2001. Therefore, the Group's unaudited consolidated loss after tax and minority interests for the period was narrowed by 54% to HK$ 54.5 million (2001: loss of HK$ 119.8 million). The Board of Directors does not recommend the payment of an interim dividend for the six months ended 30 June 2002.
As at the end of June 2002, the Group's major contracts in hand for the software development and systems integration business amounted to approximately HK$ 321 million, which are all expected to be completed within one year's time.
"Starting from the last quarter of 2001, we have been taking drastic measures on cost control and workforce streamlining, the effect of which is now shown in the improvement of our gross profit percentage and significant reduction of operating costs," said Mr. Alan Cheung, Chairman of Founder, "Our overall headcount, for example, has fallen by 21% from 2,520 as at last year's year-end to 1,987 as at 30 June 2002."
With regard to the business from software development and systems integration in the media sector for the period under review, the turnover decreased by 12% to HK$ 281.6 million (2001: HK$ 319.3 million) while its contribution to loss from operating activities recorded a loss of HK$ 3.5 million (2001: profit of HK$ 3.5 million). The drop in turnover for the period under review was mainly due to the holding-up or decreasing capital expenditure for new systems and/or up-grading demands by customers as a result of the slowdown of the overall global economy in 2001, which has extended to the first half of 2002. Nevertheless, the Group has meanwhile continued introducing a number of new products to its customers and has established a nationwide agency network in the PRC for the distribution of its publishing software and related peripheral products. Founder has strengthened the promotion campaign of its network publishing solutions, Founder Apabi eBook Solutions, through nationwide seminars and exhibitions to promote its application in eLibrary. Through the efforts in the past few years, the Group has not only established its leading position in the Chinese broadcasting control system, but also further expanded its customer base in news management system for television stations in the PRC.
With regard to the business from software development and systems integration in the non-media sector for the period under review, though its turnover decreased by 13% to HK$ 131.6 million (2001: HK$ 151.7 million), its loss from operating activities for the period was narrowed substantially by 94% to HK$ 4.3 million (2001: HK$ 74.7 million). During the first half of 2002, market competition in the systems integration business for the banking and security industries in the PRC was still severe, resulting in drop in profitability. However, since the last quarter of 2001, the Group has started restructuring the management and operation of its non-media business and has tightened up control on contract management, through the implementation of a number of cost-control programs. The Group has also streamlined the workforce in this sector and has reduced its headcount by nearly 60%. All its efforts have resulted in the substantial reduction in operating expenses and the improvement in the performance of the non-media business during the period under review. In fact, since the second quarter of 2002, the Group has seen a slow recovery of the market and an increase in volume of contracts offered by customers for bidding. Therefore, the management looks forward to further improvement in the performance of the non-media business in the near future.
With regard to the business from the distribution of information products for the period under review, though its turnover decreased by 44% to HK$245.7 million (2001: HK$438.8 million), its loss from operating activities for the period was narrowed by 30% to HK$20.1 million (2001: HK$28.8 million). The drop in turnover for the period under review could still be attributable to the slow corporate demand for information products. Nevertheless, great efforts were made to clear up excessive inventories accumulated from last year and to chase up settlements from overdue debtors, thus resulting in the substantial improvement in inventories and trade receivables in term of reduction in amount and improvement in aging. Logistic process was also strengthened to reduce costs and enhance efficiency.
The Group's e-commerce service business is carried by an associated company, EC-Founder (Holdings) Company Limited ("EC-Founder") (stock code: 0618). "The turnover of EC-Founder's software business for the first half of 2002 was almost doubled, if compared to that of the corresponding period of the previous year", observed Mr. Alan Cheung, "we expect the performance of this associated company will be improved further in the near future."
During the first six months of 2002, EC-Founder completed exhibition shows in more than 50 cities in the PRC to promote its information security products." It has also completed the project of "Key Client Service System" for China Construction Bank and a number of geographic information system projects for a large clientele such as oil and petroleum, telecommunication service provider, and government forest management bureau. During the period under review, EC-Founder had also disposed of its loss making business in relation to the manufacture and distribution of semi-conductors. If the loss of the discontinued semi-conductor business of approximately HK$ 20 million was not accounted for, the net loss of EC-Founder relating to its continuing business for the period in fact narrowed by 42% to approximately HK$13 million if compared to the corresponding period in 2001. EC-Founder continues to position itself as a software solution and service provider on the following business sectors: (a) information security, (b) geographic information system, (c) e-finance and (d) enterprise/government information.
Enquiries:
Cindy Cheung, Public Relations Officer, Founder Holdings Limited
Tel: 852-2611 4124; Fax: 852-2413 3218; Email: cindy@founder.com.hk
CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT
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