Computer And Technologies Holdings Limited — Annual Report 2003

Apr 23, 2004

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CHINA AEROSPACE INTERNATIONAL HOLDINGS LIMITED 航 天 科 技 國 際 集 團 有 限 公 司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 31)

ANNOUNCEMENT OF 2003 FINAL RESULTS

The Board of Directors of China Aerospace International Holdings Limited (the “Company”) hereby announces the audited results of the Company and its subsidiaries (together hereinafter referred to as the “Group”) for the financial year ended 31 December 2003.

SUMMARY OF RESULTS

The audited consolidated results of the Group for the year ended 31 December 2003 and the comparative figures for 2002 are as follows:

Note Turnover 2 Cost of sales and services Other operating income Distribution costs Administrative expenses Waiver of interest expense on other loan Surplus (deficit) on revaluation of investment properties Allowance for amount due from an associate Reversal of allowance (allowance) for doubtful debts	2003 HK$’000 1,239,633 (957,199) 282,434 46,128 (45,115) (195,994) 36,273 5,910 – 4,262	2002 HK$’000 (as restated) 1,299,825 (1,035,498) 264,327 26,546 (46,012) (255,014) – (68,431) (30,162) (27,599)

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Impairment losses recognised in respect of property, plant and equipment Impairment loss recognised in respect of investments in securities Impairment loss recognised in respect of development costs Profit (loss) from operations 3 Finance costs Share of results of associates (Loss) gain on deemed disposal/ disposal of subsidiaries Gain on partial disposal of subsidiaries Loss on disposal of an associate Profit (loss) before taxation Taxation 4 Profit (loss) before minority interests Minority interests Net profit (loss) for the year Earnings (loss) per share – Basic 5	(12,639) – – 121,259 (64,645) 3,701 (28,331) 238 (78) 32,144 (5,432) 26,712 3,484 30,196 HK1.4¢	(35,365) (23,708) (3,000) (198,418) (79,578) (6,236) 7,840 – (14,880) (291,272) (12,571) (303,843) 2,024 (301,819) HK(14.1)¢

Notes:

1. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARD

In the current year, the Group has adopted, for the first time, Hong Kong Financial Reporting Standard (“HKFRS”) – Statement of Standard Accounting Practice (“SSAP”) 12 (Revised) “Income taxes” issued by the Hong Kong Society of Accountants (the “HKSA”). The terms of HKFRS is inclusive of SSAPs and Interpretations approved by the HKSA.

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The principal effect of the implementation of SSAP 12 (Revised) is in relation to deferred tax. In previous years, partial provision was made for deferred tax using the income statement liability method, i.e. a liability was recognised in respect of timing differences arising, except where those timing differences were not expected to reverse in the foreseeable future. SSAP 12 (Revised) requires the adoption of a balance sheet liability method, whereby deferred tax is recognised in respect of all temporary differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, with limited exceptions. In the absence of any specific transitional requirements in SSAP 12 (Revised), the new accounting policy has been applied retrospectively. Comparative figures have been restated in order to a achieve a consistent presentation.

The adoption of SSAP 12 (Revised) has resulted in increase in accumulated losses of HK$16,854,000 at 1 January 2002, representing the cumulative effect of the change in policy on results for period prior to 1 January 2002. The change has resulted in a decrease in profit of HK$854,000 for the year ended 31 December 2003 (2002: an increase in loss of HK$546,000).

2. SEGMENTAL ANALYSIS

(a) Business segments

2003

Manufacturing Plastic products Liquid crystal display Audio-video products Printed circuit boards Telecommunication products Intelligent chargers Other products Property Trading Finance	Attributable to Turnover profit (loss) from operations Inter- Unallocated Unallocated Profit External segment Con- Segment corporate corporate (loss) from sales sales solidated result income expenses operations HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 329,112 19,076 348,188 33,825 63,226 – 63,226 3,541 239,138 – 239,138 (7,189) 83,363 – 83,363 10,328 79,340 – 79,340 4,103 258,406 654 259,060 27,130 9,748 – 9,748 (10,955) 146,155 9,260 155,415 47,668 28,914 – 28,914 (4,321) 2,231 2,322 4,553 14,457	Attributable to profit (loss) from operations

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Elimination	1,239,633 – 1,239,633	31,312 (31,312) –	1,270,945 (31,312) 1,239,633	118,587 (14,636) 103,951	52,816	(35,508)
							121,259

2002

Manufacturing Plastic products Liquid crystal display Audio-video products Printed circuit boards Telecommunication products Intelligent chargers Other products Property Trading Finance Others Elimination	External sales HK$’000 261,373 50,873 247,279 89,405 117,126 230,579 17,362 194,343 84,651 3,745 3,089 1,299,825 – 1,299,825	Turnover	Con- solidated HK$’000 278,509 50,873 247,279 89,405 117,175 231,268 17,362 201,308 84,651 10,417 3,089 1,331,336 (31,511) 1,299,825	Attributable to profit (loss) from operations	Attributable to profit (loss) from operations	Attributable to profit (loss) from operations
		Inter- segment sales HK$’000 17,136 – – – 49 689 – 6,965 – 6,672 – 31,511 (31,511) –		Segment result HK$’000 37,797 1,457 (19,401) 19,299 5,733 25,225 (21,797) (86,315) (19,226) (14,755) (62,596) (134,579) (16,737) (151,316)	Unallocated corporate expenses HK$’000 (47,102)	Profit (loss) from operations HK$’000
						(198,418)

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(b) Geographical segments

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	Sales revenue by Profit (loss)	Sales revenue by Profit (loss)	Sales revenue by Profit (loss)	Sales revenue by Profit (loss)	Sales revenue by Profit (loss)
	geographical market from operations
		2003	2002 2003		2002
	HK$’000		HK$’000 HK$’000		HK$’000
Hong Kong	942,311		1,014,590 95,950		(116,677)
The People’s Republic
of China,
other than in
Hong Kong
(the “PRC”)	297,322		285,235 8,001		(34,639)
	1,239,633		1,299,825 103,951		(151,316)
Unallocated corporate
income			52,816		–
Unallocated corporate
expense			(35,508)		(47,102)
Profit (loss) from operations			121,259		(198,418)
PROFIT (LOSS) FROM OPERATIONS
Profit (loss) from operations has	been	arrived at after charging:
			2003		2002
			HK$’000		HK$’000
Allowance for obsolete inventories			–		6,245
Amortisation of development costs			1,396		4,935
Amortisation of goodwill			138		–
Amortisation of technology licence right			377		–
Auditors’ remuneration			3,064		4,818
Cost of inventories consumed			773,998		878,878
Depreciation on
– owned assets			50,158		63,010
– assets held under finance leases			1,349		998
Loss on disposal of property, plant
and equipment			–		11,294
Minimum lease payments paid under
operating leases on land and buildings			6,296		7,321
Research expenses			4,800		8,652

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Total staff costs, including directors’ remuneration and after crediting Gross rental income from – land and buildings – investment properties – properties for sale _Less:_Outgoings Dividend income from listed investment securities Gain on disposal of property, plant and equipment Interest income Reversal of allowance for obsolete inventories Waive of interest expense on other loans 4. TAXATION Current tax Hong Kong Profits Tax Overseas income tax Overprovision in previous years: Hong Kong Profits Tax Deferred tax: Current year Attributable to a change in tax rate Taxation attributable to the Company and its subsidiaries	145,520 6,335 19,441 – 25,776 (5,317) 20,459 – 16,694 2,230 23,104 36,273 2003 HK$’000 2,793 4,073 6,866 (2,288) (740) 1,594 854 5,432	160,161 6,219 35,277 1,698 43,194 (6,001) 37,193 3,089 – 3,745 – – 2002 HK$’000 14,203 1,565 15,768 (3,932) 735 – 735 12,571

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Hong Kong Profits Tax is calculated at 17.5% (2002: 16%) on the estimated assessable profits for the year.

Overseas income tax represents the income tax of the PRC. Pursuant to relevant laws and regulations in the PRC, the Company’s subsidiaries and the Group’s associates are entitled to exemption from income tax under certain tax holidays and concessions.

5. EARNINGS (LOSS) PER SHARE

The calculation of the basic earnings (loss) per share is based on the following data:

Earnings (Loss) Earnings (Loss) for the year for calculation of basic earnings (loss) per share Number of ordinary shares for the calculation of basic earnings (loss) per share	2003 2002 HK$’000 HK$’000 30,196 (301,819) Number of Shares (In thousand) 2,142,420 2,142,420

SUMMARY OF RESULTS

In 2003, the Group recorded a turnover of HK$1,239,633,000 (2002: HK$1,299,825,000), representing a decrease of 4.6% as compared to the previous year. The gross profit rose 6.8% to HK$282,434,000 (2002: HK$264,327,000). The finance costs dropped by 18.7% as compared to last year. The result reported a swing to a profit of HK$30,196,000, rebounding from losses for five consecutive years.

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BUSINESS REVIEW

In 2003, the business environment was full of challenges and chances. We had implemented effective measures to strengthen market development. As a result of persistent efforts to seek improvement, progress had been made in the areas of cost control, lowering of finance costs, consolidation and restructure of research and development business and resources, as well as the establishment of strategic partnership alliances.

Hi-tech Manufacturing Industries. In recent years, by means of technical innovations and equipment renewals, the strengths of our manufacturing industries are elevated, enabling our products to remain competitive and make room for development. The annual turnover of the manufacturing industries in 2003 was HK$1,072,317,000 and the operating profit was HK$71,738,000.

Satellite Application Business. In terms of digital TV business, our newgeneration model, DCR 3800 set-top box, with significant enhancement in capabilities, was awarded a Network Access License by the State Administration of Radio, Film and TV. The product was launched and received acclamation in Changzhou City, Jiangsu Province. Year 2003 witnessed a steady growth in the number of subscribers of our DVB-C project in Changzhou City. The Company’s R&D subsidiary, CASIL Research & Development (Shenzhen) Company Limited, was declared one of the two winners in a tender to supply set-top boxes in cities such as Wenzhou and Zhaoxing, Zhejiang Province where China Cable Broadcasting & Information Network Company is penetrating the DVB market.

Restructuring of R&D Business & Relevant Assets. The Company had undergone a re-organization of structure, management system and related assets of digital TV business. Upon the restructuring, China Aerospace New World Technology Limited becomes the entity which oversees the operations of CASIL Research & Development (Shenzhen) Company Limited, as well as Jiangsu CASIL Broadcasting & Cable TV Network Company Limited and China Cable & CASIL Information Technology Company Limited, both of which are joint ventures of the Company. It would be a system integrator and equipment supplier and vested with the special responsibilities of development, manufacturing, marketing and sale of digital TV and satellite application products. Apart from this, the Group has formed an R&D Center in Shenzhen Hi-tech Industrial Park, which is principally engaged in the research and development of satellite application and digital broadcasting service. Through the above restructuring in business and resources, the target

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and market positioning of digital TV business become clearer. Overall administrative expenses had dropped while a strong competitive edge is maintained.

Forming of Strategic Alliance. The Company entered into a strategic alliance agreement in October 2003 and a shareholders’ agreement in February 2004 with New World TMT Limited in a move to jointly develop the digital TV markets in China through a joint venture company, China Aerospace New World Technology Limited.

Disposal of Properties. Disposal of non-core assets is in line with one of the Group’s established policies of business restructuring. In 2003, the Group successfully sold out certain non-core assets locating in Hong Kong and China. Meanwhile, the vacancy rate of remaining properties is reduced and rental income is kept to be stable.

MANAGEMENT DISCUSSION AND ANALYSIS

The Group continued to promote markets, conduct structural changes in business, asset restructurings and strengthening management so as to reach the target of turning loss into profits.

As at 31 December 2003, the total assets of the Group were HK$2,731,200,000. The total liabilities were HK$1,827,709,000, of which the current and the non-current portion of bank loans were HK$609,774,000 and HK$215,516,000, respectively. In terms of contingent liabilities, there was about HK$4,450,000 which was more or less the same to that of the end of 2002. As at 31 December 2003, the assets/liabilities ratio was 67% and the current ratio was 1.03, both were similar to that of the end of 2002.

The source of funding of the Group mainly comes from its internal financial resources and banking facilities. The Group’s cash on hand and cash at bank as at 31 December 2003 was HK$301,440,000, most of which was in HK dollars and the rest in RMB and US dollars.

CASIL Telecommunication Holdings Limited had issued a total of 40 million new shares in September 2003 and the net proceed was about HK$11.4 million, and a total of 100 million new shares in March 2004 and the net proceed was about HK$40 million. The shareholding of the Company in CASIL Telecommunication Holdings Limited reduced from 51.22% to 44.16%.

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A couple of the Group’s real estates and investments have been mortgaged to banks for financing with interest calculated at prime rate, and their remaining terms by installment varies from 3 to 10 years.

The Group now has more than 5,000 staff in the Mainland China and in Hong Kong. The Group will further improve human resources management, enhance assessment quality and reinforce internal supervision.

BUSINESS OUTLOOK

Looking forward to 2004, the Board is confident to the development of the Group’s various businesses. The Group will continue to strengthen business development and internal management, and to remain profitability. First of all, the Group will enhance technical reform, make good use of our advantages, strengthen product quality and innovation, develop those products with higher value-added value so as to sustain a steady growth of our manufacturing industries and to create our global competitiveness. Furthermore, the Group will actively develop new economic growth points in the business of satellite application, such as set top box, in order to intensify product development and the ability of batch production gradually. Meanwhile, the Group will further cooperate with strategic partners so as to accelerate the promotion of digital TV business.

With the strong support of our major shareholder, China Aerospace Science & Technology Corporation, in 2004, the Group will continue to put more efforts on corporate reform, innovation and management. We will also persist in asset restructuring and business development, nurturing and developing the research & development, manufacturing, sale and service of chain business in relation to satellite application.

DIVIDEND

The Board of Directors of the Company resolved not to declare any final dividend for the year ended 31 December 2003 (2002:nil).

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CLOSURE OF REGISTER

The Register of Members of the Company will be closed from 18 May 2004 to 20 May 2004 (both days inclusive). Shareholders must lodge any transfers of shares (with the relevant share certificates) with the Company’s registrar, Standard Registrars Limited of Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong for registration by no later than 4:00 p.m. on 17 May, 2004.

PURCHASE, SALE OR REDEMPTION OF SHARES

Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s issued shares during the year.

CORPORATE GOVERNANCE

The Company had complied throughout the year with those paragraphs of the Code of Best Practice as set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, with which it is required to report compliance, except that none of the nonexecutive directors of the Company has been appointed for a specific term but are subject to retirement by rotation.

During 2003, the independent non-executive directors held certain meetings with the management of the Company regularly and participated a meeting of working group to review matters relating to financial statements, operations, general compliance and substantial issues of the Group.

AUDIT COMMITTEE

The Audit Committee of the Company currently has a membership comprising two independent non-executive directors, Ms. Chan Ching Har, Eliza and Mr. Chow Chan Lum, Charles, and a non-executive director, Mr. Xu Shilong. Mr. Chow Chan Lum, Charles had been appointed as the Chairman of Audit Committee of the Company so as to comply with the relevant rules of the amended Listing Rules. The Audit Committee had reviewed, discussed and approved the annual financial report of the Company for the year ended 31 December 2003.

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AMENDMENTS TO THE ARTICLES OF ASSOCIATION

The Board has resolved to propose to the shareholders of the Company for their consideration and, if thought fit, approval at the Annual General Meeting amendments to the articles of association of the Company to ensure compliance with the requirements of the Securities & Futures Ordinance, Companies Ordinance and the revised Appendix 3 to the Listing Rules. A circular containing, among others, further particulars of the proposed amendments to the articles of association of the Company will be dispatched to the shareholders of the Company as soon as practicable.

DISCLOSURE OF INFORMATION ON THE STOCK EXCHANGE’S WEBSITE

Information that is required by paragraphs 45(1) to 45(3) of Appendix 16 of the Listing Rules will be released on the Stock Exchange’s website in due course.

MEMBERS OF BOARD OF DIRECTORS

As of the date of this announcement, the Board of Directors of the Company comprises of:

Executive	Non Executive	Independent Non
Directors	Directors	Executive Directors
Mr. Rui Xiaowu	Mr. Li Jinsheng	Mr. Lee Hung Sang
Mr. Zhou Qingquan	Mr. Xu Shilong	Ms. Chan Ching Har, Eliza
Mr. Zhao Yuanchang	Mr. Chen Dingyi	Mr. Chow Chan Lum,
Mr. Wu Hongju		Charles
Mr. Guo Xianpeng

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COMPLIMENTS

I would like to take this opportunity to express, on behalf of the Board of the Directors, my sincere gratitude to our shareholders, bankers, business partners, people from various social communities, as well as all staff of the Group for their long-time support.

By Order of the Board Rui Xiaowu Chairman

Hong Kong, 22 April, 2004

“Please also refer to the published version of this announcement in China Daily”

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