Brockman Mining Limited — Earnings Release 2001

Apr 10, 2002

WONG'S INTERNATIONAL (HOLDINGS) LIMITED

(Incorporated in Bermuda with limited liability)

Announcement of 2001 Final Results

The Directors announce that the results of the Group for the year ended 31st December, 2001 were as follows:-

BUSINESS RESULTS

	For the Year Ended 31st December,
	2001	2000
	HK$’000	HK$’000
Turnover
Continued operations	2,221,624	3,296,394
Discontinued operations	--	723,726
	2,221,624	4,020,120
Interest income	119,789	90,280
Other revenue	17,335	115,505
Changes in inventories of finished goods and work in progress	(22,420)	(47,486)
Raw materials and consumables used	(1,778,483)	(3,045,301)
Staff costs	(185,658)	(261,065)
Depreciation and amortisation expenses	(72,599)	(120,245)
Deficit on revaluation of investment properties	(2,248)	(21,515)
Net unrealised holding loss on investments in securities	(2,291)	(1,783)
Gain on disposal of investments in securities	213	4,521
Impairment on leasehold properties	(7,345)	--
Other operating expenses	(170,335)	(348,678)
Profit from operations	117,582	384,353
Finance costs	(34,580)	(41,375)
Share of results of associates	1,466	2,611
Impairment of loan advanced to associates	(44,884)	(13,000)
Profit on disposal of discontinued operations (Note 1)	38,756	783,762
Profit on privatisation of a subsidiary (Note 2)	43,032	--
Profit before taxation	121,372	1,116,351
Taxation (Note 3)	(9,838)	(30,522)
Profit before minority interests	111,534	1,085,829
Minority interests	(21,500)	(263,425)
Net profit for the year	90,034	822,404
Dividends	247,487	93,598
Earnings per share (Note 4)
Basic	HK$0.19	HK$1.78
Diluted	HK$0.19	HK$1.76

Notes:

1. The Group completed the sale of its printed circuit board business to an independent party (“Disposal”) on 17th August, 2000. Profits attributable to the Company from the Disposal in the amount of HK$581,943,000 after deducting the minority interests of HK$201,819,000 were booked in 2000. Profit on disposal of discontinued operations represents an additional bonus payment received and some price adjustments booked in 2001 in relation to the Disposal.

2. Profit on privatisation of a subsidiary represents the excess of net assets acquired over the proceeds paid to public shareholders and expenses incurred in the privatisation of Wong’s Circuits (Holdings) Ltd, which was completed in November, 2001.

3. Hong Kong Profits Tax has been provided for at 16% (2000:16%) on the estimated assessable profits for the year of each member of the Group in Hong Kong. Taxation on profits of overseas subsidiaries and associated companies has been provided in accordance with the relevant local laws. Deferred taxation has been provided, using the liability method, on all significant timing differences, other than those which are not expected to crystallize in the foreseeable future.

4. The calculation of the basic and diluted earnings per share is based on the profit attributable to shareholders of HK$90,034,000 (2000:HK$822,404,000) and the following data:

	2001	2000
Weighted average number of ordinary shares for the purposes of basic earnings per share	466,901,246	462,238,413
Effect of dilutive potential ordinary shares: Options	1,311,060	4,127,404
Weighted average number of ordinary shares for the purposes of diluted earnings per share	468,212,306	466,365,817

Dividends

In October 2001, the Company paid an interim dividend of 3 cents per share (2000: 8 cents). In view of the substantial profits booked last year from the disposal of the printed circuit board business and the successful privatisation of Wong’s Circuits (Holdings) Ltd this year, the Directors now recommend the payment of final dividend totalling 50 cents per share (2000: 12 cents) comprising a final dividend of 5 cents per share and a special final dividend of 45 cents per share on Friday, 14th June, 2002 to the shareholders on the Register of Members on Friday, 31st May, 2002.

Review of business activities

Due to the disposal of the printed circuit board business by the Group in the second half of 2000 and the slow-down of the global economy in 2001 which affected the Group’s remaining businesses, the Group’s turnover and profit from operations decreased by about 44.7% and 69.4% respectively compared to 2000. By comparing the results only in respect of the continued operations, the Group’s turnover and profit from operations fell by 32.6% and 51.6% respectively.

The turnover of the OEM Electronics Products Assembly Division (“OEM Division”) declined by 33% mainly due to the termination of the production of mobile phones by the customer in contemplation of the transfer of the production to a joint venture corporation in Nanjing formed by the customer, the Group and a Nanjing company (the “Nanjing JV”), and the slow-down in the global economy. The profit margin also declined because of a decrease in sales. During the year, measures have been implemented by the Division to reduce operating costs. The Division also continued its efforts to build a real time information system so as to enhance the level of automation in its business processes and to improve operational efficiency.

In 2001, the Original Product Development and Marketing Division (“ODM Division”) established itself as a viable supplier in the broadband ADSL modem business. Product approvals have been received from a number of major customers and, towards the end of the year, the Division started to receive sales orders from North America, China, Hong Kong and Europe while business negotiations are now being conducted with several potential customers in Japan and Latin America. Strategic alliances have been established with a number of suppliers and customers to develop new models with lower cost, better performance and a shorter time to market. The division also carried on its development of webphone, which is in the final stage of completion, and positive responses were received for the product which has been exhibited in several trade shows in the United States and Europe. The Division has also been successful in the establishment of a BroadMAX brand identity for its broadband products.

Throughout 2001, the property market in Hong Kong remained slugguish. In view of the slow rate of sale and the consequential increase in interest expense, during the year under review, the Group had made additional provisions in the total sum of HK$25 million against the two residential developments undertaken by its associated companies. In addition, for one of those developments, a loss of about HK$20 million has been booked for the units sold up to the end of 2001. The afore-mentioned additional provisions and loss in the total sum of approximately HK$45 million are shown in the Business Results Section as “impairment of loan advanced to associates”.

The Group completed its privatisation of Wong’s Circuits (Holdings) Ltd on 6th November, 2001 and the resulting gain of about HK$43 million was booked in 2001.

Finance

As at 31st December, 2001, the Group’s cash deposits exceeded its bank borrowings by about HK$1.4 billion. As at the same date, the Group’s total liabilities, excluding minority interests, proposed dividends and deferred taxation, amounted to approximately 36.2% of the Group’s total shareholders’ funds compared to 61.4% as at 31st December, 2000.

Part of the cash will be used to repay outstanding bank loans and the Directors will decide the way in which the remaining surplus cash will be applied in due course.

The Group’s costs of materials and expenditures are mainly in U.S. dollars or Hong Kong dollars while its sales revenues are mainly in U.S. dollars. Expenditures in other currencies are normally hedged by means of forward exchange contracts.

Capital structure

There has been no material change in the capital structure of the Group since 31st December, 2000.

Employees

As at 31st December, 2001, the Group had approximately 2,750 employees, amongst whom approximately 1,800 were employed as workers. In addition to the provision of annual bonuses and medical and life insurances, discretionary bonuses and share options may also be made available to employees based on performance. The remuneration policy and packages of the Group’s employees are reviewed on a regular basis.

During the year 2001, the Group ran regular training sessions for its employees on subjects relevant to the Group’s businesses. Selected employees were subsidized by the Group to attend external training programmes.

Prospects

The OEM Division expects that its business may remain slow in the first half of 2002 and perceives signs of market improvement in the second half of the year. The Division will continue its efforts to control operating costs in order to improve the profit margin. It is also pursuing QS9000 certification to further enhance its competitiveness. The Division will build a new factory in Suzhou, China which will commence operation by the end of 2002 to serve customers in Eastern China. As to the joint venture factory in Mexicali, Mexico, recently an agreement has been made whereby the Division agrees to buy out the joint venture partner’s interest in the factory, and the Division plans to strengthen the factory with a view to providing global manufacturing strategy to our customers. Both the factories in Suzhou and Mexicali are expected to contribute positively to the results of the Division in 2003.

The ODM Division expects that volume delivery of ADSL modems will start in the second half of 2002 and that the webphone will be launched in the second quarter of 2002. The Division will focus its efforts in defining its market and building strong partnerships with its major customers and suppliers. It also aims to position itself as a solution provider in the long term future.

At 31st December, 2001, the Group held a substantial amount of cash and will be able to consider investment or business opportunities as and when they arise.

On behalf of the Directors, I would like to thank our employees for their loyalty and devotion to the Group. I would also like to thank our customers, suppliers and business partners for their continued confidence in and support for the Group.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

During the year, the Company has repurchased shares through The Stock Exchange of Hong Kong Limited pursuant to the general mandates approved in the last annual general meeting, details of which are as follows:

Month of repurchase	Number of shares repurchased	Repurchase price per share Highest Lowest		Aggregate consideration paid (including expenses)
		(HK$)	(HK$)	(HK$)
August 2001	600,000	2.900	2.775	1,710,475

The above shares were cancelled upon repurchase. These repurchases were effected with a view to benefiting the shareholders as a whole by enhancing the net assets and the earnings per share of the Company.

Apart from the above, during the year ended 31st December, 2001, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities.

CODE OF BEST PRACTICE

In the opinion of the Directors, during the year ended 31st December, 2001, the Company has complied with Appendix 14 of 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 Bye-laws of the Company.

AUDIT COMMITTEE

The Audit Committee has reviewed with management the accounting principles and practices adopted by the Group and discussed auditing, internal controls and financial reporting matters.

DETAILED RESULTS ANNOUNCEMENT

A detailed results announcement containing all the information required by paragraphs 45(1) to 45(3) of Appendix 16 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited will be published on the Stock Exchange of Hong Kong Limited’s website in due course.

WONG CHUNG AH, JOHNNYChairmanHong Kong, 9th April, 2002

Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Company will be held at Nathan and Granville Room, Lower Lobby, Conrad Hong Kong, Pacific Place, 88 Queensway, Hong Kong on Friday, 31st May, 2002 at 12:00 noon for the following purposes:

1. To receive and consider the accounts and the reports of the directors and joint auditors for the year ended 31st December, 2001;

2. To declare a final dividend and a special final dividend;

3. To elect directors and to fix their remuneration;

4. To appoint joint auditors and to fix their remuneration;

5. As special business, to consider and, if thought fit, pass the following resolution as an Ordinary Resolution:

“THAT there be granted to the Directors an unconditional general mandate to issue, allot and deal with additional shares in the capital of the Company, and to make or grant offers, agreements and options in respect thereof, subject to the following conditions:

(A) such mandate shall not extend beyond the Relevant Period save that the Directors may during the Relevant Period make or grant offers, agreements and options which might require the exercise of such powers after the end of the Relevant Period;

(B) the aggregate nominal amount of share capital of the Company allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) by the Directors otherwise than pursuant to (i) a Rights Issue, (ii) the exercise of rights of subscription or conversion under the terms of any warrants issued by the Company, or any securities which are convertible into ordinary shares of the Company, and (iii) any employee share option scheme or similar arrangement for the time being adopted for the grant or issue to officers and/or employees of the Company and/or any of its subsidiaries of shares or rights to acquire shares of the Company, shall not exceed 20 per cent. of the aggregate nominal amount of the share capital of the Company in issue at the date of passing of this resolution;

(C) such mandate shall be additional to the authority given to the Directors at any time to allot and issue additional shares in the capital of the Company arising from the exercise of subscription rights under any warrants or the exercise of any options under any employee share option scheme of the Company; and

(D) for the purposes of this resolution:

“Relevant Period” means the period from the date of passing of this resolution until whichever is the earlier of:

(i) the conclusion of the next annual general meeting of the Company; or

(ii) the expiration of the period within which the next annual general meeting of the Company is required by the Bye-laws of the Company or any applicable law of Bermuda to be held; or

(iii) the revocation or variation of this resolution by an ordinary resolution of the shareholders of the Company in general meeting.

“Rights Issue” means an offer of shares open for a period fixed by the Directors made to holders of the shares and/or warrants on, as the case may be, the Register of Members and the Register of Warrantholders of the Company on a fixed record date in proportion to their then holdings of such shares and/or warrants (subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, or in any territory outside, Hong Kong).”

1. As special business, to consider and, if thought fit, pass the following resolution as an Ordinary Resolution:

“THAT there be granted to the Directors an unconditional general mandate to repurchase shares of HK$0.10 each in the capital of the Company (“Shares”), and that the exercise by the Directors of the Company of all powers of the Company to repurchase Shares subject to and in accordance with all applicable laws, rules and regulations be and is hereby generally and unconditionally approved, subject to the following conditions:

(A) such mandate shall not extend beyond the Relevant Period;

(B) such mandate shall authorise the Directors to procure the Company to repurchase Shares at such prices as the Directors may at their discretion determine;

(C) the aggregate nominal amount of the Shares to be repurchased by the Company pursuant to this resolution during the Relevant Period shall be no more than 10 per cent. of the aggregate nominal amount of the share capital of the Company in issue as at the date of passing of this resolution; and

(D) for the purposes of this resolution, “Relevant Period” means the period from the date of passing of this resolution until whichever is the earlier of:

(i) the conclusion of the next annual general meeting of the Company; or

(ii) the expiration of the period within which the next annual general meeting of the Company is required by the Bye-laws of the Company or any applicable law of Bermuda to be held; or

(iii) the revocation or variation of this resolution by an ordinary resolution of the shareholders of the Company in general meeting.”

1. As special business, to consider and, if thought fit, pass the following resolution as an Ordinary Resolution:

“THAT, conditional upon the passing of resolution nos. 5 and 6 set out in this notice, the aggregate nominal amount of the shares of the Company which are repurchased by the Company pursuant to and in accordance with resolution no. 6 shall be added to the aggregate nominal amount of the share capital of the Company that may be allotted or agreed conditionally or unconditionally to be allotted by the Directors pursuant to and in accordance with resolution no.5.”

By Order of the Board
Chan Tsze Wah, GabrielCompany SecretaryHong Kong, 9th April, 2002

Notes:

1. Any member entitled to attend and vote at the above meeting is entitled to appoint a proxy or proxies to attend and, on a poll, vote instead of him. A proxy need not be a member of the Company.

2. Where there are joint registered holders of any share, any one of such persons may vote at the meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto but, if more than one such joint holders be present at the meeting personally or by proxy, that one of the said persons so present whose name stands first on the Register of Members in respect of such share shall alone be entitled to vote in respect thereof.

3. The instrument appointing a proxy and the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of such power or authority must be deposited at the principal office of the Company at Wong’s Industrial Centre, 180A Wai Yip Street, Kwun Tong, Kowloon, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjourned meeting.

4. The Register of Members will be closed from Monday, 27th May, 2002 to Friday, 31st May, 2002, both days inclusive, during which period no transfer of shares will be effected. To qualify for the above dividend, all transfers accompanied by the relevant share certificates must be lodged with the Company’s registrars, Standard Registrars Limited, 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong for registration not later than 4:00 p.m. on Friday, 24th May, 2002.

Please also refer to the published version of this announcement in the South China Morning Post.