Comba Telecom Systems Holdings Limited — Interim / Quarterly Report 2002

Sep 24, 2002

ROCKAPETTA HOLDINGS LIMITED

(Incorporated in Bermuda with Limited Liability)

ANNOUNCEMENT OF INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2002

The Board of Directors of Rockapetta Holdings Limited (the “Company”) announces the unaudited consolidated results of the Company and its subsidiaries (the “Group”) for the six months ended 30 June 2002, together with the comparative figures for the corresponding period in 2001, as follows:

CONDENSED CONSOLIDATED INCOME STATEMENT

Notes Turnover 2 Cost of sales Gross profit/(loss) Other revenue Provision for impairment loss of property, plant and equipment Distribution costs Administration expenses Loss from operations 3 Finance costs Investment income Loss attributable to minority interests Net loss for the period Loss per share - basic 5	Six months ended 30/06/02 30/06/01 HK$’000 HK$’000 (unaudited) (unaudited) 37,486 25,417 (30,534) (36,688) 6,952 (11,271) 148 2,174 – (2,500) (1,268) (848) (10,346) (13,482) (4,514) (25,927) (2,023) (3,754) 133 109 (51) – (6,455) (29,572) (0.91 cents) (5.28 cents)

Notes:

1. Basis of Preparation and Principal Accounting Policies

The unaudited condensed consolidated interim statements have been prepared in accordance with Statement of Standard Accounting Practice (“SSAP”) No. 25 “Interim Financial Reporting” and the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“Listing Rules”).

The accounting policies adopted in preparing these condensed financial statements are consistent with those adopted in the annual financial statements for the year ended 31 December 2001, except that the Group has adopted the following SSAPs issued by the Hong Kong Society of Accountants which are effective for accounting periods commencing on or after 1 January 2002:

SSAP 1 (revised): Presentation of financial statements SSAP 11 (revised): Foreign currency translation SSAP 15 (revised): Cash flow statements SSAP 25 (revised): Interim financial reporting SSAP 33: Discontinuing operations SSAP 34: Employee benefits

– 1 –

The adoption of these standards has resulted in a change in the format of presentation of the cash flow statement and the statement of changes in equity but has had no material effect on the results for the current or prior accounting periods. Accordingly, no prior period adjustment has been required.

2. Segment Information

For management purposes, the Group is currently organised into three operating divisions - toy manufacturing business, food and beverages and securities trading and investments. These divisions are the basis on which the Group reports its primary segment information.

An analysis of the Group’s revenue and results for the period by business segments is as follows:

2002	Toy		Food and	Securities Trading	Securities Trading
(unaudited)	Manufacturing Business		**Beverages **	and	Investments	Total
	HK$’000		HK$’000		HK$’000	HK$’000
Revenue	34,340		3,146		–	37,486
Segment result	(3,305)		47		(37)	(3,295)
Unallocated other revenue						148
Unallocated other expenses						(1,367)
Loss from operations						(4,514)
The Group has one business	segment - toy manufacturing business in 2001 only.

An analysis of the Group’s turnover and results for the period by geographical markets is as follows:

2002 (unaudited) Revenue Segment result Unallocated other revenue Unallocated other expenses Loss from operations 2001 (unaudited) Revenue Segment result Unallocated other revenue Loss from operations	North America HK$’000 14,306 (1,337) North America HK$’000 14,975 (18,337)	Asia HK$’000 14,660 (1,098) Asia HK$’000 6,744 (6,106)	Europe HK$’000 3,482 (335) Europe HK$’000 2,422 (2,415)	Others HK$’000 5,038 (485) Others HK$’000 1,276 (1,243)		Total HK$’000 37,486 (3,295) 148 (1,367) (4,514) Total HK$’000 25,417 (28,101) 2,174 (25,927)

– 2 –

3. Loss From Operations

Loss from operations has been arrived at after charging/(crediting)

Loss From Operations Loss from operations has been arrived at after charging/(crediting)
	Six months	ended
	30/06/02	30/06/01
	HK$’000	HK$’000
Depreciation and amortisation	4,215	4,408
Amortisation of goodwill	26	–
Staff costs	9,308	8,700
Cost of inventories sold	17,922	33,195
Interest income	(133)	(109)
Profit on disposal of property, plant and equipment	–	(82)

4. Taxation

No provision for Hong Kong Profits Tax has been made as the Group had no assessable profit for the period.

5. Loss Per Share

The calculation of the basic loss per share is based on the net loss for the period of HK$6,455,000 (six months ended 30 June 2001: HK$29,572,000) and on the weighed average number of 712,360,000 (six months ended 30 June 2001: 559,760,000) ordinary shares in issue during the period.

No diluted loss per share figures have been presented as the exercise of the share options of the Company in issue during the period is anti-dilutive for the six months ended 30 June 2002, and six months ended 30 June 2001.

6. Interim Dividends

The directors do not recommend the payment of any interim dividend for the six months ended 30 June 2002. (2001: Nil)

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS OVERVIEW

For the six months ended 30 June 2002, the Group recorded a turnover of approximately HK$37.5 million, representing an increment of approximately 47% compared with the previous corresponding period. Loss attributable to shareholders decreased from approximately HK$29.6 million to approximately HK$6.5 million.

Toy manufacturing business

An improvement in the toy manufacturing business was mainly attributable to the graduate economic recovery in global market in the first half of the year, the increased operating efficiency and effective reduction in overhead expenses. During the period, the Group has successfully tightened its control over the stock level as well as the consumption of aged stock, resulting a reasonable written back of stock provision of HK$5 million.

Food and beverages business

As mentioned in our last annual report, in light of the growing difficulty in the trading conditions of the toy manufacturing business, the Group expressed its intention to continue its focus on identifying opportunities for the diversification of the Group’s business. Food and beverages business with established branding has been identified as one of the core business of the Group.

On 31 May 2002, the Group completed the acquisition of 80% interest in Masindo International Limited (“Masindo”), an investment company which solely owns 51% interest in Brewerkz Singapore Pte Ltd. (“Brewerkz”) for a total cash consideration of approximately HK$7.4 million.

– 3 –

Brewerkz operates the Brewerkz microbrewery and restaurant and Café Iguana restaurant and bar at the Riverside Point in Singapore. Brewerkz, a premier brewery restaurant with a brewpub concept by combining the unique elements of working brewery with a full service dining establishment, is renowned as one of the top theme restaurants in Singapore. Its winning awards include the Singapore Tourism Board’s Tourism Award for “Best Dining Experience” in 1999. Its wholly owned subsidiary Café Iguana is a restaurant and bar which serves contemporary, authentic Mexican cuisine. Both outlets have proven to be very popular among the locals and the expatriates. The Group believes that with established branding, stringent cost control measures and retained customer loyalty, we will be able to develop and expand the successful Brewerkz brand elsewhere in the region, particularly China.

Going forward, Brewerkz’s will make substantial contribution to the Group’s performance. However, contribution for the six months ended 30 June 2002 has been positive but minimal as the acquisition was only completed on 31 May 2002.

Trading and investment in securities

During the period under review, the Group has commenced the investment holding and trading in investment securities which are under-appreciated, in short to medium-term. Given the volatility in the capital market, the Group will exploit opportunities conservatively to take advantage of the price recovery of some under-valued securities which are overlooked by the market.

At the period end, the Group held a portfolio of securities, including shares listed locally and in the region. The losses contributed from this business during the period under review were mainly preliminary expense written off.

LIQUIDITY AND FINANCIAL RESOURCES Borrowings and banking facilities

As at 30 June 2002, the Group had outstanding short-term bank borrowings of approximately HK$47.5 million. The main purpose of the bank borrowings was to finance working capital of the Group.

As at 30 June 2002, the Group’s bank deposits was HK$2.5 million of which of HK$1.9 million were pledged to banks to secure banking facilities granted to a subsidiary, and the Group’s leasehold land and buildings in PRC with an aggregate net book value of HK$88 million were pledged to banks to secure bank loans granted to a subsidiary.

The bank borrowings were mainly denominated in Hong Kong Dollars and Renminbi. The Group did not enter into any hedging transactions. Foreign exchange exposure did not pose a significant risk to the Group given that the level of foreign currency exposure was small relative to its total asset base.

As at 30 June 2002, the gearing ratio of the Group, calculated as total debts divided by total assets was approximately 41.75%.

Net current liabilities and working capital

As at 30 June 2002, the Group’s total current assets and current liabilities were approximately HK$121 million and HK$152 million respectively. The Group serviced its debts primarily through cash generated from its operations. After considering the financial resources available to the Group including internally generated funds and the unutilised banking facilities, the Directors are of the opinion that the Group has sufficient resources and working capital to meet its foreseeable debt repayment requirements.

– 4 –

POST BALANCE SHEET EVENTS

On 8 July 2002, a winding up petition was presented by Mr. Kwok Chin Wing, the former chairman, to Rockapetta Industrial Company Limited, a subsidiary of Rockapetta Investment Limited, to claim for a repayment of an approximate amount of HK$52 million including interest. Pursuant to a disposal agreement dated 23 September 2002 (see below), this subsidiary would be entirely disposed of, thus resulting in no material adverse impact of the litigation on the financial position and the operation of the Group. No other member of the Group is involved in the proceeding. The hearing is scheduled on 9 October 2002 in the High Court of Hong Kong.

On 28 August 2002, a writ of summons was issued out of the High Court against Mr. Kwok Chin Wing and Mr. Yiu Kui Leung, respectively the former chairman and managing director, by the Company in respect of their causing payments HK$25 million to be made to Mr. Kwok Chin Wing personally in March 2000 in breach of their duties as executive directors. The directors are of the view that the outcome of this action will not have material adverse impact on the financial position and the operation of the Group.

Pursuant to a disposal agreement dated 6 September 2002, the Group disposed 35% interest in Rockapetta Investment Limited, which through its subsidiaries carries on business such as the toy manufacturing business which is the principal business of the Group, for an aggregate cash consideration of HK$8.75 million. The transaction was completed on 10 September 2002.

Furthermore, pursuant to a disposal agreement dated 23 September 2002, the Group has agreed to dispose the remaining 65% interest in Rockapetta Investment Ltd., which through its subsidiaries carries on business such as the toy manufacturing business which is the principal business of the Group, for an aggregate cash consideration of HK$16.25 million. The transaction is expected to complete on or about 7 October 2002.

The consideration of above disposals represents a premium of about HK$5 million over the consolidated net tangible assets of Rockapetta Investment Limited, its subsidiaries and associates (as defined in the Rules governing the Listing of Securities on the Stock Exchange of Hong Kong Limited) being disposed of.

On 18 September 2002, the Group made an acquisition of the entire issued and paid-up capital of Crystal Wines & Spirits Pte Ltd (“CWS”) for a total cash consideration of S$500,000 (or approximately HK$2.22 million).

CWS is an international sourcing and distribution house for wines and spirits and is also a retailer of wines. It has a wide spectrum of customers ranges from on-premises areas like hotels, restaurants, pubs, discos, night clubs, bars, KTV lounges to off premises areas like individual retailers, supermarkets, duty free outlets to private consumers through the retail operations. Furthermore, the Company also creates and owns its own brand of Whisky, Vodka, Gin and Rum under the “Crystal Club” brand and wine under the “Crystal Reserve” label for exports into the regional countries, CWS has an established management team comprised of key executive officers with total more than 35 years of excellent track record in the industry.

Going forward, CWS will make substantial contribution to the Group’s performance. However, contribution for the year ending 31 December 2002 will be minimal due to the consolidation of 3 months result only.

STAFF COST, DIRECTOR BONUSES AND SHARE OPTION SCHEME

Staff costs for the six months ended 30 June 2002 were HK$9.3 millions, representing an increase of 7% compared with the previous corresponding period. The Group had a workforce of approximately 1,536 employees, all employees stationed in Shenzhen, PRC except for 18 employees stationed in Hong Kong and 131 employees worked in Singapore. Salaries are maintained at competitive levels while bonuses are granted on a discretionary basis.

– 5 –

The Group has adopted a share option scheme under which the Director of the Company may, at their discretion, granted options to the Executive Directors and full-time employees of the Group to subscribe for shares representing up to a maximum of 10% of the issued share capital of the Company from time to time.

BUSINESS OUTLOOK

In general, business operating environments for the past six months have been difficult and are expected to continue to be difficult, with investors’ and consumers’ confidence remaining weak. However, the Group will continue to focus on stringent cost control measures, retain customer loyalty, reinvigorate current business portfolio, stay ahead of competitions, institute effective and efficient management with appropriate incentives, to achieve profitable growth.

With the divestment of the toy manufacturing business, the financial resources of the Group will also be improved with significant reduction in bank borrowings and increase in liquidity. The Group’s ability to make timely strategic investments, as and when such opportunities arise, has been greatly enhanced. Going forward, the Group will continue to focus its efforts in enhancing shareholders’ value by identifying and making appropriate strategic investments, including continue to identify other potential food and beverage related investments projects with established branding and potential synergies values with other undertakings of the Group.

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES

During the six months ended 30 June 2002, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities.

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 for any part of the six months ended 30 June 2002, in compliance with the Code of Best Practice as set out in Appendix 14 of the Listing Rules.

AUDIT COMMITTEE

The Audit Committee has reviewed with management the accounting policies and practices adopted by the Group and discussed internal controls and financial reporting matters including a review of the unaudited condensed accounts for the six months ended 30 June 2002 with the directors.

PUBLICATION OF DETAILED RESULTS ANNOUNCEMENT ON THE STOCK EXCHANGE’S WEBSITE

A detailed results announcement containing all the information required by paragraphs 46(1) to 46(6) of Appendix 16 of the Listing Rules will be published on the Stock Exchange of Hong Kong Limited’s website (http://www.hkex.com.hk) in due course.

By Order of the Board Chan Sheung Wai Chairman

Hong Kong, 23 September 2002

Please also refer to the published version of this announcement in The Standard.

– 6 –