|
Results
The Directors of Shui On Construction and Materials Limited (the "Company") are pleased to announce the unaudited condensed consolidated results of the Company and its subsidiaries (the "Group"), for the six months ended 30 September 2000 and the condensed consolidated balance sheet of the Group as at 30 September 2000 as follows:-
Condensed Consolidated Income Statement
Six months ended 30 September
2000 1999
(Unaudited)
Notes HK$ million HK$ million
Turnover 2 2,409 2,713
Other revenue 29 31
Changes in inventories of
finished goods, work in
progress and contract
work in progress (48) (21)
Raw materials and
consumables used (399) (431)
Staff costs (274) (264)
Depreciation and
amortisation expenses (35) (34)
Subcontracting, external
labour costs and other
operating expenses (1,388) (1,729)
---------- ----------
Profit from operations 294 265
Finance costs (1) -
Share of results of jointly
controlled entities 14 18
---------- ----------
Profit from ordinary
activities before taxation 3 307 283
Taxation 4 (50) (46)
---------- ----------
Profit before minority
interests 257 237
Minority interests (3) (7)
---------- ----------
Profit attributable to
shareholders 254 230
Dividends 5 (159) (146)
---------- ----------
Profit for the period, retained 95 84
========== ==========
Basic earnings per share 6 HK$0.97 HK$0.88
Diluted earnings per share 6 HK$0.96 HK$0.88
Interim dividend per share HK$0.60 HK$0.55
Condensed Consolidated Balance Sheet
As at As at
30 September 31 March
2000 2000
Notes (Unaudited) (Audited)
HK$ million HK$ million
Non-Current Assets
Investment property 130 130
Property, plant and
equipment 261 254
Interests in jointly
controlled entities 163 117
Investments in securities 7 184 19
Site establishment
expenditure 17 13
---------- ----------
755 533
---------- ----------
Current Assets
Inventories 41 42
Properties under
development for sale 2,204 1,656
Debtors, retentions and
prepayments 8 884 854
Amounts due from customers
for contract work 314 200
Amounts due from jointly
controlled entities 163 123
Bank balances, deposits
and cash 417 880
---------- ----------
4,023 3,755
---------- ----------
Current Liabilities
Creditors and accrued
charges 9 1,196 1,145
Amounts due to customers
for contract work 269 230
Amounts due to jointly
controlled equities 43 61
Amounts due to related
companies 1 -
Provision for taxation 107 73
Bank borrowings-due within
one year 10 1,651 -
Proposed dividends 158 328
---------- ----------
3,425 1,837
---------- ----------
Net Current Assets 598 1,918
---------- ----------
Total Assets Less Current
Liabilities 1,353 2,451
========== ==========
Capital and Reserves
Share capital 263 262
Reserves 1,060 965
---------- ----------
1,323 1,227
---------- ----------
Minority Interests 24 24
---------- ----------
Non-Current Liabilities
Bank borrowings 10 - 1,194
Deferred taxation 6 6
---------- ----------
6 1,200
---------- ----------
1,353 2,451
========== ==========
Notes:
(1) Principal Accounting Policies and Basis of Preparation
The unaudited results of the Group have been prepared in accordance with Statement of Standard Accounting Practice ("SSAP") 25 "Interim financial reporting" issued by the Hong Kong Society of Accountants, and on a basis consistent with the accounting policies adopted in the annual financial statements for the year ended 31 March 2000.
(2) Segmental Information
The Group's turnover and contribution to profit from operation analysed by principal activity and geographical market, are as follows:
Group turnover Contribution to
profit from
operation
Six months ended Six months ended
30 September 30 September
2000 1999 2000 1999
HK$ million HK$ million HK$ million HK$ million
By principal activity:
Construction and
building
maintenance 1,455 1,973 120 124
Sale of construction
materials 324 445 20 72
Property development 623 290 148 65
Property investment 7 5 5 3
---------- ---------- ---------- ----------
2,409 2,713 293 264
========== ==========
Other income 1 1
---------- ----------
294 265
========== ==========
By geographical market:
Hong Kong 2,375 2,649 291 261
Other regions in the
People's Republic
of China 34 64 2 3
---------- ---------- ---------- ----------
2,409 2,713 293 264
========== ==========
Other income 1 1
---------- ----------
294 265
========== ==========
(3) Profit from Ordinary Activities before Taxation
Six months ended 30 September
2000 1999
HK$ million HK$ million
Profit from ordinary activities before
taxation has been arrived at after charging :
Depreciation and amortisation
Owned assets 30 29
Assets held under finance lease - 1
Site establishment expenditure 5 4
---------- ----------
35 34
Less: Amount capitalised to construction jobs (1) (1)
---------- ----------
34 33
========== ==========
Interest on bank loans and overdrafts 56 22
Less: Amount capitalised to properties under
development for sale (55) (22)
---------- ----------
1 -
========== ==========
(4) Taxation
The charge comprises:
Company and subsidiaries
Hong Kong profits tax 48 44
Jointly controlled entities
Hong Kong profits tax 2 2
---------- ----------
Total 50 46
========== ==========
Hong Kong profits tax has been provided at the rate of 16% (1999: 16%) on the estimated assessable profits for the period.
(5) Dividends
The Directors have declared an interim dividend of HK$0.60 (1999: HK$0.55) per share to shareholders whose names appear on the Company's register of members on Friday, 15 December 2000. The interim dividend will be paid on Thursday, 21 December 2000.
Interim dividends - HK$0.60 per share
on 263,304,000 shares (1999: HK$0.55 per
share on 261,764,000 shares) 158 144
Additional final dividend at HK$1.25 per
share on 954,000 shares for 1999/2000
(1999: additional final dividend at
HK$1.00 per share on 1,724,000 shares
for 1998/1999) due to exercise of
share options 1 2
---------- ----------
159 146
========== ==========
(6) Earnings Per Share
The calculation of the basic and diluted
earnings per share is based on the
following data:
Earnings for the purposes of basic and
diluted earnings per share 254 230
========== ==========
million million
Weighted average number of ordinary
shares for the purposes of basic earnings
per share 263 261
Effect of dilutive potential ordinary shares:
Share options 1 2
---------- ----------
Weighted average number of ordinary shares
for the purposes of diluted earnings per share 264 263
========== ==========
(7) Investments in Securities
As at As at
30 September 31 March
2000 2000
HK$ million HK$ million
Other investments
- equity securities, listed in Hong Kong 165 -
- equity securities, unlisted 19 19
---------- ----------
184 19
========== ==========
(8) Debtors, Retentions and Prepayments
Debtors (net of provisions for bad and doubtful debts)
with aging analysis
Current to 90 days 491 494
91 to 180 days 5 10
181 to 360 days 8 8
Over 360 days 4 5
---------- ----------
508 517
Retentions receivable 197 212
Prepayments, deposits and other receivables 179 125
---------- ----------
884 854
========== ==========
The Group has a defined credit policy. The general
credit term ranged from 30 days to 90 days.
(9)Creditors and Accrued Charges
Creditors with aging analysis
Within 30 days 237 265
31 to 90 days 77 57
91 to 180 days 11 16
Over 180 days 9 5
---------- ----------
334 343
Retentions payable 233 220
Accruals and other payables 629 582
---------- ----------
1,196 1,145
========== ==========
(10) Bank Borrowings - Due Within One Year
Secured bank loan
Balances reclassified as current liabilities
from non-current liabilities 1,194 -
Loan drawn down during the period 452 -
---------- ----------
1,646 -
Unsecured bank loan 5 -
---------- ----------
1,651 -
========== ==========
(11) Comparative Figures
Certain comparative figures have been reclassified to conform with the current presentation as required under SSAP1 (revised) "Preparation of financial statements".
Liquidity and Gearing Ratio
At 30 September 2000, outstanding bank borrowings as stated in note (10) of the above balance sheet included the drawndown amount of HK$1,646 million of a project loan for the financing of the Private Sector Participation Scheme ("PSPS") project at Tseung Kwan O Town Lot No. 62, which is expected to be repaid following the completion of this project in early 2001.
At 30 September 2000, the gearing ratio of the Group, being the proportion of bank borrowings against shareholders' equity, was 1.25. Following the repayment of the PSPS project loan in early 2001 as aforementioned, the Group will practically be debt-free, other than amounts due under normal trade payables.
At 30 September 2000, the Group did not have any significant commitments and exposure in foreign currencies.
Reward of Employees
At 30 September 2000, the number of salaried staff of the Group was approximately 1,300 in Hong Kong and 3,100 in subsidiaries and jointly controlled entities in the Chinese Mainland. Staff bonus is distributable based on the performance of the respective companies and the employees concerned. Share options are granted annually by the Board of Directors to senior management staff members as appropriate.
Closure of Register of Members
The register of members of the Company will be closed from Monday, 11 December 2000 to Friday, 15 December 2000, both days inclusive, during which period no transfer of shares will be effected. In order to qualify for the interim dividend, all completed share transfer forms accompanied by the relevant share certificates must be lodged with the Company's branch share registrar in Hong Kong, Standard Registrars Limited, 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong not later than 4:00 p.m. on Friday, 8 December 2000.
Business Review
The Group's turnover for the six months ended 30 September 2000 was HK$2,409 million, a decrease of 11% compared with the same period in 1999. Unaudited consolidated profit after taxation and minority interests was HK$254 million, an increase of 10%.
Construction Division
During the period, four contracts, comprising 2,700 residential units and with a value of approximately HK$2,530 million, were promptly completed and handed over to the Housing Society and Housing Authority. These included the Sandwich Class Housing Development in Ma On Shan, Ma Hang Village Phase 3, Tseung Kwan O Area 34/44 Phase 3 and Ma On Shan Area 77 Phase 2.
The division continued to engage in another sixteen projects during the period, including the design and build contract of government departmental quarters in Kwun Tong. The Private Sector Participation Scheme project in Tseung Kwan O Town Lot No. 62 is progressing well and is expected to be completed in early 2001. It is likely that the Housing Authority will commence the marketing of the 3,200 residential units shortly after the new year.
The recent announcement by the Housing Authority to place stronger emphasis on the performance of the contractors in awarding contracts means that the Division's consistent effort in providing high quality work and maintaining a good safety record should turn into more business opportunities. The Housing Authority's plan to form long-term strategic partnership with the best contractors should further enhance the standard of public housing work and our future market share.
The gross and outstanding values of construction contracts on hand were HK$11.9 billion and HK$6.6 billion respectively, and contracts with a value of $1.8 billion are expected to be awarded in the near future.
Construction Materials Division
The continued slowdown of building activities in the private residential sector and the delay of large-scale infrastructure projects has a substantial effect on the concrete market in Hong Kong. Concrete consumption continued to decline and it now appears that total volume in the year 2000 would be less than 8.5 million cubic metres, compared with the peak of around 11 million cubic metres in 1997. Despite Ken On having been able to maintain its market share, sales have decreased by 28% and production was therefore unable to attain budget production level, which explains the disappointing results of both the concrete and quarrying divisions. However, this adverse trading environment appears to have stabilized.
The rehabilitation of the Lamma quarry continued after the termination of production in March 2000. The site formation contract in Guishan Island commenced during the period and crushed rocks produced as by-products for this contract have started to serve as a steady supply source for Ken On.
The cement joint venture in Chongqing had a busy production schedule with sales in 2000 expecting to exceed 830,000 tonnes. Reasonable margins are expected to be maintained amid a competitive market.
TH Cement has also finalized the joint venture agreement to acquire a 60% holding in a cement factory in Zun Yi city in Guizhou Province, with a capacity of 300,000 tonnes per annum. With possible expansion to 1.6 million tonnes, this new joint venture would lay the foundation for further expansion of our cement operation in Guizhou.
The plan to supply cement from our Nanjing cement joint venture to Ken On's Hong Kong and Chinese Mainland operations as well as export to Australia is gradually taking shape. The Nanjing operation is expected to maintain a full production schedule in the current year.
Prospects
The government's long-term public housing programme involves improving the standard of housing and shortening applicants' waiting time for allocation of rental units to three years by around 2003. The much more stringent standard adopted in the award of tenders and selection of contractors as aforementioned should benefit the Group, as we have in the past demonstrated our strong commitment and dedication to quality and safety standards.
The Architectural Services Department have plans in the pipeline for the construction of a substantial number of schools, the redevelopment and extension to hospitals, recreational complexes and the science park which should provide further tendering opportunities for the Group.
With the opening up of the Central and Western Provinces on the Chinese Mainland, together with the strong foothold established through our joint venture in Chongqing, the Group is in the process of formulating plans for substantial expansion in the cement industry.
Progress of SOCAM.com, our website for online procurement and project management control, is on schedule and the launch in November 2000 will be the first step to secure savings in operations and enhance efficiency. AsiaMaterials.com, our e-commerce trading arm established to tap the vast construction materials markets both in the Mainland and overseas, will also be launched in December.
With our core businesses firmly established in Hong Kong, the Group will actively capitalize on our long established records and experience in the Chinese Mainland and capture the abundant opportunities which will emerge following the accession of China into the World Trade Organization.
The market is fiercely competitive but, barring unforeseen circumstances, the Group expects to maintain reasonable results in the second half of the current financial year.
Purchase, Sale or Redemption of Shares
Neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company's shares during the six months ended 30 September 2000.
Audit Committee
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 interim financial statements which have not been audited.
Code of Best Practice
None of the Directors of the Company is aware of any information that would reasonably indicate that the Company is not, or was not at any time during the six months ended 30 September 2000, 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 non-executive directors are not appointed for a specific term but are subject to retirement by rotation and re-election at annual general meetings of the Company in accordance with the Company's Bye-laws.
By Order of the Board
Lo Hong Sui, Vincent
Chairman
Hong Kong, 22 November 2000
* - For identification purposes only.
