(Hong Kong, September 14, 2000) - Founder Holdings Limited, ("Founder" or the "Group") (stock code: 418) a leading electronic publishing systems (EPS) and IT systems integrator, today announced the unaudited consolidated results for the six months ended June 30, 2000.
During the period under review, the Group reported a profit attributable to shareholders of HK$51 million against a loss of HK$106 million in the corresponding period last year. Turnover amounted to HK$883 million, representing an increase of 10% over the same period last year. Earnings per share were HK4.60 cents, against a loss of HK13.20 cents during the same period last year.
The Board of Directors do not recommend the payment of any interim dividend for the six months ended 30 June, 2000.
Professor Wang Xuan, Chairman of Founder said, "We have turned around successfully and returned to profitability. This strengthens our belief in the current corporate strategy adopted. Increasing demand for systems integration from every aspect of the community and electronic publishing systems (EPS) in the multi-media industry, resulting from the Internet and technology boom, revitalized our business prospects. "
"With this significant improvement, we are optimistic and have faith that 2000 will be a fruitful year providing a very bright start for the group in the new century," Professor Wang continued.
In the first half of the year, Founder's EPS & Multi-media Systems business, its core business contributed 30% of the Group's turnover, recording a total of HK$262 million for the period under review. Despite the decrease in turnover as compared to last year's figure of HK$284 million, the gross profit margin increased to 27% from last year's 25%. The shifting of the business focus to the high profit margins and the rapidly growing market segments in E-media, multi-media and internet sectors resulted in the slight decrease of 8% in turnover. The management expects these activities to bring potential growth, neating, more profitable, returns for the Group in the long-term.
Founder continues to hold a market share of over 90% in the publishing industry in the PRC. Several new contracts were gained with major PRC news groups, which include a contract of RMB20 million with the "People's Daily" and contracts totaling about RMB3 million for over 100 "Founder Infobase" units of, a news data search system. The recently launched upgraded version of "Founder Internet Content Publish Server" ("ICS") version 2 has been very well received by TV broadcasting companies in Beijing, Ah Hui, Zhe Jiang and other ICP web-sites. At the same time, the new "Wires Agency Modules" also won support from multi-media companies such as South China Morning Post and tom.com.
The Group's Systems Integration business accounted for 26% of the Group's total turnover during the period, amounting to HK$226 million and representing a substantial increase of 10 times the turnover recorded last year. Gross profit rose to HK$96 million as compared to HK$3 million last year. The significant improvement was mainly due to the Founder Order Group which specializes in providing systems integration services to the Banking and Finance Industry. A total of HK$150 million in new contracts were secured with major clients such as The Industrial and Commercial Bank of China, Construction Bank of China and Zhongxin Guoan Information Joint-Stock Limited. Major outstanding contracts on hand amounted to approximately HK$160 million as at 30 June, 2000.
Following an internal restructure, business streamlining and strengthening of internal control, the Hardware Distribution business's gross profit increased by 61% to approximately HK$22 million. Turnover decreased by 24% to HK$342 million. However, gross profit margins improved to 6% as compared to 3% in the last period. The substantial increase in profit margin was mainly due to the shift towards distributing higher end and higher profit margin products to the commercial and business sectors. The management believes that this strategy brings in more profitable returns to the Group.
At the same time, the Group has successfully implemented tight cost controls and prudent measures. As a result, total operating expenses were reduced by approximately HK$32 million, i.e. 16% from the same period last year. Major savings were HK$22 million in bad debt provisions, HK$16 million in depreciation and HK$8 million in research and development cost.
Professor Wang Xuan said, "To cater for the rapid demand in the high tech market as a result of the Internet boom, we are actively exploring our business and client as a base in the multi-media, E-commerce and internet-related business sectors while maintaining our current business segments and markets."
For the next six months, the Group is preparing to launch an upgraded version of its the advertising management system ("Jing Wei") and newspaper publishing management system ("Wen Tao"); an "e-book" integrated system and an integrated system for the production and broadcast of TV programs for the EPS & Multi-media business. Following its success in the banking and financial industries, Founder will expand its systems integration business into the other sectors such as Tax system and Police IC system for Tax Bureau and Police Bureau respectively.
As disclosed in the Group's circular dated 9 September 2000, it is the Group's intention to dispose of its interests in Founder Data Corporation International Limited ("FDC") which specializes in the non-media internet business to Management Investment & Technology (Holdings) Limited ("MIT"), a listed company in Hong Kong. Subject to the approval of the shareholders of Founder and MIT and upon completion of the transaction, Founder will hold a substantial interest in MIT (to be renamed EC-Founder), which will then serve as the flagship for its internet business. The separate listed vehicle will serve to raise funds and capital to finance the future development of the internet business while preserving the resources of Founder.
As for overseas market, the Group intends to seek a separate listing for its associated company in Malaysia, PUC Founder (MSC) Sdn Bhd on the Malaysian equity market - MESDAQ in 2001. The principal activities of PUC Founder (MSC) Sdn Bhd fall mainly into EPS and fingerprint systems.
Professor Wang Xuan concluded, "With our effective business strategies, healthy financial position and solid foundations in the PRC, Hong Kong and in the South East Asian region, Founder is well positioned to capture every market opportunity. We are committed to maximizing returns for our shareholders in the years to come."
Background information:
Founder has been listed on the Hong Kong Stock Exchange since December 1995. The Group is principally engaged in software development and systems integration, for the publishing and banking industries in particular, and is also engaged in the distribution of computers and related products. Apart from the Company's operations in the PRC and Hong Kong, the Group has subsidiaries in Malaysia, Japan, Taiwan and Canada and has distribution networks in Macau, Taiwan and South Korea.
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