ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 31ST MARCH, 1999
The Board of Directors (the "Directors") of Yau Lee Holdings Limited (the "Company") announces that the audited consolidated results of the Company and its subsidiaries (the "Group") for the year ended 31st March, 1999 together with comparative figures for the year ended 31st March, 1998 are as follows:-
1999 1998
HK$'000 HK$'000
Turnover 1,875,177 1,620,645
========== =========
Operating profit 13,670 35,901
Share of profit/(loss) of
associated companies 6,867 (209)
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Profit before exceptional items and taxation 20,537 35,692
Exceptional items (Note 1) (69,211) (14,308)
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(Loss)/Profit before taxation (48,674) 21,384
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Taxation (Note 2)
Company and subsidiaries 6,006 (6,319)
Associated companies (1,122) (91)
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4,884 (6,410)
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(Loss)/Profit after taxation (43,790) 14,974
Minority interests (293) 255
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(Loss)/Profit attributable to shareholders (44,083) 15,229
Retained profit, beginning of year 118,678 103,449
---------- ---------
Retained profit, end of year 74,595 118,678
========== =========
(Loss)/Earnings per share (Note 3) (4.7 cents) 1.9 cents
========== =========
Notes:
1. Exceptional items of the Group comprises
1999 1998
HK$'000 HK$'000
Provision for reduction in market value of
investment properties 8,425 14,308
Loss on disposal of an investment property 3,880 -
Provision for retention money receivable (i) 6,844 -
Provision for foreseeable loss of
a construction contract (ii) 50,062 -
------- -------
69,211 14,308
======= =======
(i) In the normal course of business, retention money of a construction contract is generally refundable when maintenance certificate is issued. Due to unforeseen circumstances in the current year, the recoverability of a private sector contract retention money became uncertain and a provision for the relevant amount was made in the financial statements.
(ii) The amount represents a provision for the foreseeable loss on a construction contract that incurred substantial cost overruns as a result of various unforeseen difficulties and disruptions. As a loss was anticipated on this contract as a whole, a provision for the estimated loss was made in the current year financial statements.
2. Hong Kong profits tax has been provided at the rate of 16% (1998: 16.5%) on the estimated assessable profits for the year. Overseas taxation has been calculated on the estimated assessable profits for the year at the rates prevailing in the respective jurisdictions.
3. The loss per share has been calculated using the audited consolidated loss attributable to shareholders for the year of HK$44,083,000 (1998: profit of HK$15,229,000) and the weighted average number of 936,975,917 shares (1998: 787,104,179 shares) in issue during the year. No diluted loss/earnings per share is disclosed as the outstanding option at 31st March, 1999 and 31st March, 1998 are anti-dilutive.
FINAL DIVIDEND
The Board of Directors has resolved not to recommend the payment of a final dividend.
BUSINESS REVIEW
The Group managed to achieve a turnover of HK$1,875 Million (1998: HK$1,621 Million) for the year ended 31st March, 1999, a 16% increase over that of last year. The Group has suffered a loss after tax of HK$44 Million. Despite achieving a profit before tax and exceptional items of HK$21 Million, the Group suffered an exceptional loss of HK$69 Million as a result of a number of non-recurrent events described in the notes above. The Directors believes adequate provision has been made in respect of these events.
The major factor affecting the Group's profit before exceptional items is the average borrowing costs remained at a comparatively high level during most of the 1998/99 financial year. The exceptional items arose as the result of, firstly, the continuing unfavourable climate in the property market has caused further diminution in valuation of the Group's investment properties portfolio. Secondly, the effect of the cost overrun of the Homantin South Phase 1 project undertook by the Group due to unexpected technical difficulties has resulted in a loss provision of HK$50 Million. After realising the above, the Group's has immediately taken appropriate measures to minimize the effect including claim application to the relevant client and enhanced control procedures to prevent the re-occurrence of similar events in the future.
The Group has significantly reduced its borrowings and investment property portfolio during the year and, hence, will become less vulnerable to interest rate and property market fluctuations in the future. The gearing ratio of the Group as at 31st March, 1999 has reduced to 35% from 57% of last year. For project management and control, the Group has strengthened its quantity surveying function and engineering supervision to improve its project cost control, speed up the payment negotiation with the Group's clients and enhance quality control, progress control and subcontractors control procedures. With the above actions, the Group's ability to cope with unexpected adverse conditions is substantially increased.
Despite the above, the 1998/99 financial year was quite an encouraging year. The value of new contracts obtained during the year under review achieved a record high. The total value of construction and maintenance contracts secured during the year was HK$3,343 Million which double that of last year. With successes in tendering of contracts, the total value of contract in hand as at the year end date was also a record high of HK$5,159 Million (1998: HK$4,121 Million).
The HKSAR Government's commitment to increase public housing supplies in the years to come has created a larger demand for public buildings construction and help stabilising tender prices despite the slow down of the economy. In order to capture the opportunities arise from the increased government spending in public sector construction, apart from engaging as a building contractor, the Group has also diversified into manufacturing and trading of building components. The setting up of a precast products factory in Shenzhen as reported in last year's annual report is a move towards this direction. The factory has commenced production during the year and will operate at its full capacity around the third quarter of 1999. The Group is developing new lines of building components in order to better utilize the facilities in the factory and to diversify its income sources.
The Group has always committed its best effort to provide a safe working environment for its workers and subcontractors. As a result the Group's Fanling Area 49A Phase 1 and Ma Hang Estate Phase 2 projects were awarded Silver Award and Bronze Award in the Housing Authority 1998 Site Safety Campaign respectively.
The Group also believes that technology plays a very important role in all business sectors. Hence the Group has already allocated resources and partnered with technology experts and universities to develop new technology applications in the construction industry.
YEAR 2000
The Group has adopted the Y2K compliance standards set by the British Standards Institution which, in simple terms, mean neither performance nor functioning of computer or other electronic equipment will be affected by dates prior to, during and after the year 2000.
A Y2K Compliance Committee consists of senior executives, representatives from different functional departments of the Group and Information Technology Department was set up in 1997 to tackle the issue. Regular meetings were held to monitor the progress of the compliance work. The Directors of the Group were also being updated with the progress of the compliance work regularly.
The Group's Y2K compliance work include testing and upgrading of all mission critical systems and equipment and contingency planning to deal with unanticipated business disruptions due to Y2K. Non-compliant equipment or system noted were either upgraded or replaced. Similar practice has been adopted to the Group's suppliers and sub-contractors. However, no one can predict the outcome and the extent of the Year 2000 impact. In order to mitigate the risk, contingency plans for all mission critical system are being finalised and are expected to be ready by September 1999.
The cost incurred by the Group for Y2K compliant did not have a significant impact to the Group's operating result. The Group is also reviewing insurance policies to ascertain whether any loss as a result of the Y2K issue will be covered. However, no definite conclusion could be reached. The Group shall continue to seek professional and legal advices on the issue so that adequate insurance coverage can be obtained.
With the efforts already put into the issue, barring any unanticipated circumstances, the Group is confident that the continuance of services to our customers will not be disrupted.
CODE OF BEST PRACTICE
In the opinion of the Directors, the Company has complied with the code of best practice as set out in Appendix 14 of the Listing Rules of the Stock Exchange of Hong Kong Limited throughout the year under review.
An audit committee comprises of the three independent non-executive directors of the Company was set up in April 1999.
PURCHASE, SALE OR REDEMPTION OF SHARES
There was no purchase, sale or redemption of the Company's shares by the Company or any of its subsidiaries during the year end 31st March, 1999.
By order of the Board
Wong Ip Kuen
Chairman
Hong Kong, 27th July, 1999
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