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Computer And Technologies Holdings Limited Annual Report 2012

Mar 22, 2013

48900_rns_2013-03-22_462a1f43-ed69-4dc4-b3e5-cda49360ad39.pdf

Annual Report

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Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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CHINA AEROSPACE INTERNATIONAL HOLDINGS LIMITED 中國航天國際控股有限公司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 31)

ANNOUNCEMENT OF ANNUAL RESULT 2012

The Board of Directors (the “Board”) of China Aerospace International Holdings Limited (the “Company”) is pleased to announce the audited results and financial statements of the Company and its subsidiaries (collectively the “Group”) for the financial year ended 31 December 2012.

SUMMARY OF RESULTS

The audited consolidated results of the Group for the year ended 31 December 2012 and the comparative figures of the same period in 2011 are as follows:

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2012

Notes
Turnover
3
Cost of sales
Gross profit
Other income
4
Gain on disposal of a subsidiary
Other gains and losses
4
Selling and distribution costs
Administrative expenses
Other expenses
Fair value changes of investment properties
Finance costs
Share of results of associates
Share of results of jointly controlled entities
Profit before taxation
5
Taxation
6
Profit for the year		 2012
HK$'000
2,615,101
(2,101,111)
513,990
39,728
－
(27,120)
(48,481)
(296,781)
(21,501)
256,230
(6,026)
402
1,532
411,973
(113,962)
298,011		 2011
(Restated)
HK$’000
2,187,006
(1,742,759)
444,247
62,153
100,592
2,284
(51,610)
(258,230)
(22,043)
289,524
(1,104)
－
(1,766)
564,047
(115,608)
448,439
  • 1 -
2012
Note
HK$'000
Attributable to:
Owners of the Company
246,725
Non-controlling interests
51,286
298,011
Earnings per share - basic
7
HK8.00 cents
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2012
2012
HK$'000
Profit for the year
298,011
Other comprehensive income includes:
Available-for-sale investments
Fair value gain (loss) arising during the year
15,876
Reclassification adjustments for the cumulative gain
included in profit or loss upon disposal
－
15,876
Exchange differences arising on translating foreign operations
Exchange gain arising during the year
28,931
Translation of jointly controlled entities
(503)
Reclassification adjustment for cumulative exchange
differences included in profit or loss upon disposal or
deregistration of foreign operations
－
28,428
Other comprehensive income for the year
44,304
Total comprehensive income for the year
342,315
Total comprehensive income attributable to:
Owners of the Company
285,280
Non-controlling interests
57,035
342,315		 2011
(Restated)
HK$’000
387,231
61,208
448,439
HK12.55 cents
2011
(Restated)
HK$’000
448,439
(60,801)
(50,183)
(110,984)
129,831
2,882
2,797
135,510
24,526
472,965
386,261
86,704
472,965
  • 2 -

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2012

Notes
Non-current assets
Property, plant and equipment
Prepaid lease payments
Investment properties
Goodwill
Intangible assets
Interests in associates
Interests in jointly controlled entities
Available-for-sale investments
Prepayment for land development
Land development expenditure
Deposit paid for construction cost of investment
properties under construction
Deposit paid for acquisition of an intangible asset and
property, plant and equipment
Current assets
Inventories
9
Prepaid lease payments
Amounts due from customers for contract work
Loans receivable
Financial assets at fair value through profit or loss
Taxation recoverable
Pledged bank deposits
Bank balances and cash
Current liabilities
Trade and other payables
10
Amount due to an associate
Taxation payable
Bank and other borrowings
Obligations under a finance lease
Other loan
Net current assets
Total assets less current liabilities
Non-current liabilities
Obligations under a finance lease		 31.12.2012
HK$’000
903,618
74,970
2,629,529
12,241
74,254
12,845
63,891
58,140
－
665,551
94,597
10,776
4,600,412
243,716
590,357
2,391
2,357
－
63,417
217
110,207
1,022,285
2,034,947
924,775
1,050
58,717
123,756
－
8,914
1,117,212
917,735
5,518,147
200,249
477,207
－
677,456
4,840,691		 31.12.2011
(Restated)
HK$’000
858,161
76,568
2,144,333
34,980
60,056
12,346
62,862
42,264
1,943
642,175
70,067
11,714
4,017,469
232,144
448,723
2,374
－
－
62,911
839
24,942
1,151,015
1,922,948
678,713
1,050
53,646
234,074
65
8,848
976,396
946,552
4,964,021
46,913
387,882
－
434,795
4,529,226		 1.1.2011
(Restated)
HK$’000
649,696
45,746
1,713,848
－
－
－
61,746
173,040
148,053
77,767
－
－
2,869,896
191,985
403,025
1,733
－
70,269
2,864
1,514
43,529
1,489,728
2,204,647
691,727
1,050
61,916
－
767
8,482
763,942
1,440,705
4,310,601
－
258,221
65
258,286
4,052,315
  • 3 -
Capital and reserves
Share capital
Reserves
Equity attributable to owners of the Company
Non-controlling interests		 31.12.2012
HK$’000
308,502
3,809,600
4,118,102
722,589
4,840,691		 31.12.2011
(Restated)
HK$’000
308,502
3,555,170
3,863,672
665,554
4,529,226		 1.1.2011
(Restated)
HK$’000
308,502
3,199,759
3,508,261
544,054
4,052,315

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2012

1. BASIS OF PREPARATION

The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and include applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the Hong Kong Companies Ordinance. The consolidated financial statements have been prepared on the historical cost basis, except for certain properties and financial instruments, which are measured at fair values.

2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS AND ADJUSTMENTS TO PROVISIONAL VALUES FOR BUSINESS COMBINATION IN 2011

2(a) Application of new and revised HKFRSs

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2(b) Adjustments to provisional values for business combination in 2011

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Increase in taxation expenses and decrease in
profit for the year
Decrease in profit for the year attributable to:
Owners of the Company
Non-controlling interests		 Year ended
31.12.2012
HK$'000
23,502
14,101
9,401
23,502		 Year ended
31.12.2011
HK$’000
29,236
17,541
11,695
29,236
  • 5 -

The effect of change in accounting policy described above on the financial positions of the Group as at 1 January 2011 and 31 December 2011 and the adjustments to provisional values for business combination for the year ended 31 December 2011 is as follows:

Goodwill
Intangible assets
Deferred taxation
Total effect on net assets
Retained profits
Translation reserve
Non-controlling interests
Total effect on equity		 As at
1.1.2011
(originally
stated)
Adjustments
As at
01.01.2011
(restated)
As at
31.12.2011
(originally
stated)
Adjustments
Adjustments
to
provisional
values for
business
combination
in 2011
As at
31.12.2011
(restated)
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
－
－
－
51,001
－
(16,021)
34,980
－
－
－
21,218
－
38,838
60,056
(187,772)
(70,449)
(258,221)
(274,433)
(103,739)
(9,710)
(387,882)
(187,772)
(70,449)
(258,221)
(202,214)
(103,739)
13,107
(292,846)
2,012,478
(40,580)
1,971,898
2,386,400
(58,121)
－
2,328,279
186,768
(1,691)
185,077
299,215
(4,124)
－
295,091
572,232
(28,178)
544,054
693,941
(41,494)
13,107
665,554
2,771,478
(70,449)
2,701,029
3,379,556
(103,739)
13,107
3,288,924

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Impact on basic earnings per share

Figures before adjustments
Adjustments arising from changes in the Group's
accounting policy in relation to:
application of amendments to HKAS 12 in respect of
deferred taxes on investment properties
Figures after adjustments		 Impact on basic
earnings per share
Year ended
Year ended
31.12.2012
31.12.2011
HK cents
HK cents
8.46
13.12
(0.46)
(0.57)
8.00
12.55		 Impact on basic
earnings per share
Year ended
Year ended
31.12.2012
31.12.2011
HK cents
HK cents
8.46
13.12
(0.46)
(0.57)
8.00
12.55
12.55

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  • ‧

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SEGMENT INFORMATION

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For the year ended 31 December 2012

Hi-Tech Manufacturing Business
Plastic products
Liquid crystal display
Printed circuit boards
Intelligent chargers
Industrial property investment
New Material Business
Polyimide films manufacturing
Aerospace Service
Property investment in Shenzhen
Aerospace Science &
Technology Plaza
Land development in Hainan
Launching Site Complex Zone
Internet of Things
Reportable segment total
Elimination
Other Business
Unallocated corporate income
Unallocated corporate expenses
Share of results of associates
Share of results of jointly controlled entities
Finance costs
Profit before taxation		 Turnover Total
turnover
HK$'000
949,218
359,301
507,340
764,975
30,362
2,611,196
84,751
－
－
36,984
36,984
2,732,931
(119,674)
1,844
2,615,101




 Segment
results
HK$'000
67,424
13,420
107,716
49,007

14,350
External
sales
Inter-segment
sales
HK$'000
HK$'000
846,598
102,620
358,866
435
507,340
－
764,975
－
13,743
16,619
2,491,522
119,674
84,751
－

－
－
－
－
36,984
－
36,984
－
2,613,257
119,674
－
(119,674)
1,844
－
2,615,101
－

251,917

(21,173)
219,222
(6,921)

(4,706)

207,595

438,339
－
12,810

451,149
31,435
(66,519)

416,065

402
1,532
(6,026)

411,973
  • 10 -

For the year ended 31 December 2011

Hi-Tech Manufacturing Business
Plastic products
Liquid crystal display
Printed circuit boards
Intelligent chargers
Industrial property investment
New Material Business
Polyimide films manufacturing
Aerospace Service
Property investment in Shenzhen
Aerospace Science &
Technology Plaza
Land development in Hainan
Launching Site Complex Zone
Internet of Things
Reportable segment total
Elimination
Other Business
Unallocated corporate income
Unallocated corporate expenses
Gain on disposal of a subsidiary
Recovery of loans receivable
Reversal of impairment loss recognised in
respect of loans receivable
Share of results of jointly controlled entities
Finance costs
Profit before taxation		 Turnover Total
turnover
HK$'000
887,249
306,003
450,362
586,720
26,688
2,257,022
20,843
－
－
－
－
2,277,865
(92,951)
2,092
2,187,006






 Segment
results
HK$'000
59,803
12,391
90,997
39,286
14,351
External
sales
HK$'000
808,160
306,003
450,362
586,720
12,826
2,164,071
20,843

－
－
－
－
2,184,914
－
2,092
2,187,006		 Inter-segment
sales
HK$'000
79,089
－
－
－
13,862

92,951
－

－
－

－

－

92,951
(92,951)
－

－

216,828
(760)
248,679
(12,152)

(7,978)

228,549

444,617
－
17,536

462,153
51,171
(77,627)

435,697

100,592

29,010

1,618
(1,766)
(1,104)

564,047

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  • 11 -

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The Group's other income mainly comprises:
Bank interest income
Recovery of loans receivable (Note)
The Group's other gains and losses comprise:
Impairment loss recognised in respect of goodwill
Net exchange (loss) gain
Net gain (loss) from change in fair value of financial assets at
fair value through profit or loss
Allowance for doubtful trade debts
Gain on deregistration of subsidiaries
Gain on disposal/written off of property, plant and equipment
Reversal of impairment loss recognised in respect of
loans receivable (Note)		 2012
HK$'000
13,796
－
(23,000)
(6,463)
3,383
(1,278)
83
155
－		 2011
HK$’000
16,308
29,010
－
6,804
(5,556)
(638)
－
56
1,618

Note:

During the year ended 31 December 2011, the Group recovered an amount of HK$117,657,000 from a borrower pursuant to a settlement deed entered into between a subsidiary of the Company and the borrower on 14 September 2007 in respect of the Group's interest bearing loans receivables. The excess of HK$30,628,000, representing the amount recovered over the carrying amount of the loan receivable of HK$70,269,000 net of the transaction costs incurred relating to the debt collections, was recognised in profit or loss for the year ended 31 December 2011 whereby amounts of HK$1,618,000 and HK$29,010,000 were recorded as reversal of impairment loss recognised in respect of loans receivable and recovery of loans receivable respectively. The recovery of loans receivable was mainly related to the additional amount recovered upon settlement net of transaction costs.

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Profit before taxation has been arrived at after charging
(crediting):
Depreciation on
- owned assets
- assets held under a finance lease
Amortisation of prepaid lease payments
Amortisation of intangible asset (included in cost of sales)
Auditors' remuneration
- current year
- overprovision in prior year
Minimum lease payments under operating leases
in respect of land and buildings
Research and development expenses (included in other expenses)
Staff costs, including directors' remuneration
Cost of inventories charged to profit or loss including
allowance for obsolete inventories of HK$3,375,000
(2011: reversal of HK$1,241,000)
Gross rental income
Less: Direct operating expenses from investment properties
that generated rental income during the year		 2012
HK$'000
97,338
－
2,465
13,360
4,200
(192)
13,630
21,501
463,123
2,101,111
(15,587)
2,418
(13,169)		 2011
HK$’000
71,302
250
1,952
971
4,192
(25)
10,905
21,309
366,981
1,742,759
(14,918)
2,156
(12,762)
  • 12 -

6. TAXATION

The tax charge for the year comprises:

Current tax:
Hong Kong Profits Tax
PRC Enterprise Income Tax
(Over)underprovision in prior years:
Hong Kong Profits Tax
PRC Enterprise Income Tax
Deferred tax		 2012
HK$'000
18,799
13,024
31,823
(73)
(3,032)
(3,105)
85,244
113,962		 2011
(Restated)
HK$’000
14,111
9,372
23,483
107
(5,513)
(5,406)
97,531
115,608

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for both years.

Under the Law of the People's Republic of China on Enterprise Income Tax (the "EIT Law") and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% from 1 January 2008 onwards. Certain subsidiaries of the Company operating in the PRC are eligible as High and New Technology Enterprise and the income tax rate of these subsidiaries is 15%.

Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.

Overprovision for the year ended 31 December 2011 mainly included tax refund from tax bureau to certain subsidiaries of the Company in the PRC for successfully claiming during the current year as High and New Technology Enterprise status since 2010. The income tax rate of these subsidiaries is thus reduced to 15%.

7. EARNINGS PER SHARE

The calculation of basic earnings per share attributable to the owners of the Company for the year is based on the profit for the year attributable to owners of the Company of HK$246,725,000 (2011: HK$387,231,000) and on 3,085,022,000 shares (2011: 3,085,022,000) in issue during the year.

No diluted earnings per share have been presented as there were no potential ordinary shares outstanding for both years.

8. DIVIDENDS

Dividends recognised as distribution during the year:
2011 final, paid - HK1 cent (2011: 2010 final dividend
of HK1 cent) per share		 2012
HK$'000
30,850		 2011
HK$’000
30,850

A final dividend of HK1 cent per share in respect of the year ended 31 December 2012 (2011: HK1 cent) has been proposed by the directors and is subject to approval by the shareholders in the annual general meeting.

9. TRADE AND OTHER RECEIVABLES

Trade receivables
Less: Allowance for doubtful debts
Other receivables, deposits and prepayments		 2012
HK$'000
554,274
(24,638)
529,636
60,721
590,357		 2011
HK$’000
420,616
(24,776)
395,840
52,883
448,723
  • 13 -

The following is an aged analysis of trade receivables presented based on invoice date at the end of the reporting period:

Within 90 days
Between 91 - 180 days
Between 181 - 365 days		 2012
HK$'000
491,252
33,141
5,243
529,636		 2011
HK$’000
368,256
27,584
－
395,840

Included in trade receivables for the year ended 31 December 2011 was an amount due from a non-controlling shareholder of a subsidiary of amounting to HK$9,827,000 with a credit period of 90 days. The amount was fully settled during the year.

The Group allows an average credit period of 90 days to its trade customers. Receivables are unsecured and interest-free. Before accepting any new customer, the Group will internally assess the credit quality of the potential customer and defines appropriate credit limits.

10. TRADE AND OTHER PAYABLES

Trade payables
Accrued charges
Receipt in advance		 2012
HK$'000
285,109
124,108
137,196
378,362
924,775		 2011
HK$’000
221,287
102,084
98,704
256,638
678,713

Other payables included an amount of HK$54,000,000 (2011: HK$54,000,000) received from a third party on behalf of China Aerospace Science & Technology Corporation and payables to contractors for investment properties under construction of HK$104,263,000 (2011: HK$19,233,000).

The following is an aged analysis of trade payables based on invoice date at the end of the reporting period:

Within 90 days
Between 91 - 180 days
Between 181 - 365 days
Over 1 year		 2012
HK$'000
268,944
2,825
442
12,898
285,109		 2011
HK$’000
207,316
2,755
681
10,535
221,287
  • 14 -

CHAIRMAN’S STATEMENT

RESULTS

For the year ended 31 December 2012, the Company and its subsidiaries reported a turnover of HK$2,615,101,000 (2011: HK$2,187,006,000), representing an increase of approximately 20% over last year. The profit attributable to shareholders was HK$246,725,000 (2011 being restated: HK$387,231,000), representing a decrease of approximately 36%.

In 2012, the continued influence of European sovereign debt crisis resulted in a sluggish global economy, leading to a slowdown in global trade. Despite the impact of various negative factors, the turnover of the hi-tech manufacturing of the Company still achieved a considerable growth when compared with that of last year. The project of Shenzhen Aerospace Science and Technology Plaza, an investment property under construction, recorded at fair value and contributed a considerable amount of profits to the Company. Save as no material one-off non-recurring income was recorded by the Company in 2012, the turnover of the Company grew satisfactorily while a higher profit was achieved when comparing to that of last year. The Board of Directors has proposed the distribution of a final dividend of HK1 cent per share for the shareholders in return.

BUSINESS REVIEW

During the year, the development of the major businesses of the Company performed well. Among which, the hi-tech manufacturing business continued to grow steadily, the project of Complex Zone of the Launching Site in Hainan Province completed the introduction of strategic investors, while the construction of Shenzhen Aerospace Science and Technology Plaza was progressing as scheduled. Both the new materials and the internet of things business recorded a growth in turnover.

Hi-Tech Manufacturing

Hi-Tech Manufacturing

Facing unfavorable factors such as severe global economy, appreciation of RMB, rising costs, human resources shortage and intense competition, the hi-tech manufacturing business had timely adopted certain positive measures, including enhancement of market development efforts, technical upgrading, promotion of meticulous management, optimization of product structure, improvement of employee productivity, and had both the turnover and the profit set a historical record again. In 2012, the turnover of hi-tech manufacturing business was HK$2,491,522,000 (2011 HK$2,164,071,000), representing an increase of 15% as compared to that of last year. The profit amounted to HK$251,917,000 (2011: HK$216,828,000), representing an increase of 16% as compared to that of last year.

The plastic product business had enhanced the grading and technical specification of its products through technical upgrading, from which the business strived to acquire considerable orders for products of new models in order to serve clients’ needs, and strengthened its long-term partnership with major clients, as well as reinforced its market share.

The printed circuit board business continued to focus on the research and development and market exploration of unique products, optimized the product structure of hard board business, completed the transformation of the product structure of soft board business and developed the core clients for SMT business. Meanwhile, the printed circuit board business, through the introduction of new technology and equipment and implementation of technical upgrading by stages, ensures its production capacity for its medium-term development.

The intelligent charger business successfully accomplished the transformation of product structure. The lithium ion battery charger newly developed in recent years accounted for approximately 70% of the turnover, and gradually replaced the traditional Ni-MH charger products.

The semiconductor business had developed a number of new clients while consolidating its relationship with existing clients. The client structure has been optimized, ensuring the profit-oriented sales strategy can be consistently implemented.

  • 15 -

New Materials

In 2012, the production capacity of Shenzhen Rayitek Hi-tech Film Company Limited* ( ) (“Shenzhen Rayitek”) was becoming stable, the marketing and sales was also strengthened as a result of the gradual improvement of its production conditions. Shenzhen Rayitek progressively saw some achievements in promoting product transformation, as well as making a breakthrough in exploiting medium to high electronic grade film market, and built up a stable client base. As a result, it successfully broke into the electronic grade film market with higher added-value from the electrical grade film market. The newly developed 12.5 micron electronic film products contributed about half of the turnover during the year. At the same time, Shenzhen Rayitek launched its research and development on new products of 9 micron ultra-thin film, functional films and new generation high-performance films, some of which are included in the New Materials Industrialization Plan of Shenzhen and have obtained a subsidy from the municipal government. Such research and development will lay a foundation for the future growth of Shenzhen Rayitek.

Aerospace Service Business

The Complex Zone of the Launching Site in Hainan Province

Hainan Aerospace Investment Management Company Limited ( ) (“Hainan

Aerospace”) had facilitated the municipal government of Wenchang and made considerable progresses in expropriation of lands, of which contracts for approximately 98% of the total area of lands expropriated were executed by the municipal government of Wenchang. In October 2012, Hainan Aerospace, for the first time, successfully bid a site of 58 mu for the Hainan Space Park project and that of 129 mu for its ancillary hotels, which established an important condition for the first phase construction of Hainan Space Park. Meanwhile, the construction of resettlement zones had commenced and the construction plan for the first phase of Hainan Space Park also moved into the detailed design stage.

In November 2012, with the supports from China Aerospace Science & Technology Corporation (“CASC”), Hainan Aerospace successfully introduced Hainan Expressway Co., Ltd. ( (‘‘Hainan Expressway’’) and China Great Wall Industry Corporation ( ) (‘‘China Great Wall’’) to be its strategic investors. Each of Hainan Expressway and China Great Wall has subscribed the capital of Hainan Aerospace of RMB300,000,000. Meanwhile, Hainan Project engaged an advisory agency under Shenzhen Overseas Chinese Town Co., Ltd.* ( ) (the “OCT Advisory Agency”) as its consultant, so as to provide professional advice on the general planning of the project and the construction and operation of the theme park.

Shenzhen Aerospace Science and Technology Plaza

Following the completion of piling works, the project of Shenzhen Aerospace Science and Technology Plaza moved into the construction stage of main structure during the year. At the end of 2012, the construction reached ground level for the main building and 5[th] floor for the auxiliary building. At present, the construction of Shenzhen Aerospace Science and Technology Plaza has made a satisfactory progress, and the other tasks of design, tender, approval applications, costs of construction, finance and internal management are also proceeding in order. To complement the marketing and sales in the future and to improve the understanding of the requirements of potential customers, Shenzhen Aerospace Technology Investment Company Limited* ( ) (“Shenzhen Aerospace”) has unfolded relevant research works with professional real estate consultants.

Internet of Things

The internet of things software platform developed by Aerospace Digitnexus Information Technology (Shenzhen) Limited ( ( ) ) (“Aerospace Digitnexus”) on its own initiative had basically completed. The marketing works made a remarkable progress, which included the signing of major service contracts for Sichuan Forestry Alert Project and Supply Chain Management System Project of China Construction Steel Structure Corporation Limited ( ). In addition, Aerospace Digitnexus has obtained 3 utility new patent rights, such as smart goods management system, network signal switching device of internet of things and the system of internet of things, personal goods management system etc..

  • 16 -

PROSPECT

Against the backdrop of sluggish economies in major developed regions like the US, Europe and Japan, the outlook of the development of the global economy cannot be optimistic. The dual pressure from the sluggish demands and inflation represents a challenge to the export-oriented hi-tech manufacturing business. The business environment continued to be tough. Faced with the challenging market prospects, the Company’s hi-tech manufacturing will continue to reinforce management, control costs and risks, increase investment in technical upgrading, as well as the development efforts for domestic and overseas markets, with an aim to actively explore new development opportunities while ensuring the steady operation of business.

The two hi-tech property projects, namely the Complex Zone of the Launching Site in Hainan Province and Shenzhen Aerospace Science and Technology Plaza, will be developed as scheduled on their respective construction plans. The Company will, after the successful introduction of strategic investors to Hainan Aerospace, jointly perform the investment commitments with the strategic investors. Hainan Aerospace will strive to complete the first phase construction of housings and the construction of several municipal facilities in the resettlement zones in 2013, and will explore the possibility of further introducing other strategic partners. With the assistance from the OCT Advisory Agency, Hainan Aerospace will strive for the finalization of various constructions and implementation plans in the near future, so as to commence the construction of the first phase of the project.

The project of Shenzhen Aerospace Science and Technology Plaza recorded a satisfactory progress after moving into the construction stage of the main structure. It is expected that the capping of main structure will be completed during 2013. Shenzhen Aerospace will accomplish the construction of the main structure according to the project schedule and enhance the management efforts over the project. In line with the facilitation of work progress, quality of construction and safety will be emphasized and various construction costs will be well controlled. In addition, preparatory works for marketing and sales will be performed, including the engagement of sales agents and planning agencies, setting up promotion platforms and building up the client base for leasing and solicitation of business. Shenzhen Aerospace will carry out the relevant procedures for the real estate sales qualifications and pre-sale permits, and begins to prepare tasks such as engaging property management companies.

As regard to the new materials business, Shenzhen Rayitek will further improve its production process and enhance production efficiency. The introduction of new products such as HL type film, carbon black polyimide film and corona-resistant polyimide nano film are being promoted principally. Furthermore, Shenzhen Rayitek will continue to develop and deepen its research and development on HE type high modulus polyimide film, low dielectric polyimide, TPI resin, chemical imidized process technology, aerospace prepreg composite membrane and special resin application technology. To enhance the research and development capability, Shenzhen Rayitek will prepare to build an engineering & technology centre and conduct investigation and research for the construction of a new phase of production site.

The internet of things business will strengthen its market development efforts, and expand its forestry projects nationwide based on the foundation works of Sichuan Forestry Project. At the same time, Aerospace Digitnexus will, based on the foundation works of Supply Chain Management System of China Construction Steel Structure Corporation Limited* ( ), develop other supply chain management projects for major enterprises. In addition to the markets for forestry and large enterprise supply chain management, Aerospace Digitnexus will strive to explore new markets such as urban fire protection, new energy, oil and petrochemical.

By developing such projects as hi-tech property, new materials and internet of things, the Company absorbed valuable knowledge and experience in merger and acquisition. Looking forward, the Company will enhance its efforts in the field, and further develop two major business segments, hi-tech manufacturing and aerospace services, in accordance with the strategic plan. The Company will develop in full force five business segments of electronic products, hi-tech property, aerospace culture, new materials, and internet of things and satellite application systems.

  • 17 -

China Aerospace Science and Technology Corporation established a comprehensive development plan spanning over the thirteenth five-year plan period in its quinquennial meeting in January 2013. The goal to be fulfilled by 2020 is to fully develop CASC into a large world-class aerospace enterprise group. The Company will unswervingly bring its role as the overseas capital operation platform of CASC by devoting all efforts to achieve its goal of the group company, and to strive for better returns for the shareholders of the Company.

MANAGEMENT DISCUSSION AND ANALYSIS

Results performance

The audited turnover of the Company and the subsidiaries for the year ended 31 December 2012 was HK$2,615,101,000, representing an increase of approximately 20% as compared with that of HK$2,187,006,000 for 2011. The profit for the year was HK$298,011,000, representing a decrease of 34% as compared with that of HK$448,439,000 (being restated) for 2011.

Profit attributable to shareholders of the Company

Profit attributable to shareholders of the Company was HK$246,725,000, representing a decrease of 36% as compared with that of HK$387,231,000 (being restated) for 2011. The decrease in profit was mainly due to, in comparing to 2011, no material one-off non-recurring income was recorded by the Company in 2012.

Based on the issued share capital of 3,085,022,000 shares during the year, the basic earnings per share was HK$0.08, representing a decrease of 36% as compared with that of HK$0.1255 (being restated) for 2011.

Dividends

The Board proposed the distribution of 2012 final dividend of HK1 cent per share in March 2013, subject to the approval by shareholders at the annual general meeting to be held on 30 May 2013. If approved, warrants of which will be dispatched to all shareholders on or about 26 June 2013.

The 2011 final dividend of HK1 cent per share had been approved by shareholders at the annual general meeting in June 2012 and warrants of which were dispatched to all shareholders on 12 July 2012.

Results of core businesses

Core businesses of the Company and the subsidiaries are hi-tech manufacturing and aerospace services. The turnover of the hi-tech manufacturing is the main source of the Company’s turnover and contributes a significant profit and cash flow. This has enabled the Company to fulfill gradual development of the business of aerospace services and other new businesses such as hi-tech property, new materials, aerospace cultural industry, internet of things and satellite applications, so as to achieve the Company’s new development target and minimize single business risk.

  • 18 -

Hi-tech Manufacturing

Hi-tech manufacturing

The turnover of the hi-tech manufacturing in 2012 was HK$2,491,522,000, representing an increase of 15% as compared with last year; the operating profit was HK$251,917,000, representing an increase of 16% as compared with last year. The results of the hi-tech manufacturing are shown below:

Plastic Products
Printed Circuit Boards
Intelligent Chargers
Liquid Crystal Display
Industrial Property Investment
Total		 Turnover (HK$’000)
2012
2011
Changes
%
846,598
808,160
4.76
507,340
450,362
12.65
764,975
586,720
30.38
358,866
306,003
17.28
13,743
12,826
7.15
2,491,522
2,164,071
15.13		 Operating Profit (HK$’000)
2012
2011
Changes
%

67,424
59,803
12.74

107,716
90,997
18.37

49,007
39,286
24.74

13,420
12,391
8.30

14,350
14,351
(0.01)

251,917
216,828
16.18

Looking forward to 2013, the hi-tech manufacturing still faces the issues of cost increment, market fluctuations and so on. The Company will continue to strengthen the marketing development and the management, enhance productivity and control costs, so as to ensure the hi-tech manufacturing to have a stable growth continuously.

New materials

In 2012, Shenzhen Rayitek Hi-tech Film Company Limited*( ) (“Shenzhen Rayitek”) furthered the improvement of production technology in polyimide film products and completed the adjustment in strategy of major markets, from mainly supplying insulators for electric-engineering market to that of in electronics applications. In 2012, the turnover was HK$84,751,000 and an operating loss of HK$21,173,000 was recorded, including an impairment loss of goodwill of HK$23,000,000.

Looking forward to 2013, Shenzhen Rayitek continues to improve its existing production technology, further improves its product quality and production capacity, and expands its sales and marketing in order to speed up its business development.

Aerospace Services Business

The Complex Zone of the Launching Site in Hainan Province

In 2012, Hainan Aerospace Investment Management Company Limited* (

(“Hainan Aerospace”) continued to assist the government in the rest of land expropriation and that had completed most of the land expropriation. In relation to the construction of resettlement zone, a temporary permit for the planning of construction works had been obtained, the preliminary works such as the master plan, the implementation plan of the construction works, and the planning and design of urban facilities and so on had been completed as well, and the construction works are underway at present. Simultaneously, Hainan Aerospace had obtained the subscription of equity interests by the strategic investors and the subscription was completed in March 2013.

Hainan Aerospace recorded a loss of HK$6,921,000 in 2012, which was mainly the payment of the cost of preparatory work, and administrative and professional fees.

Shenzhen Aerospace Science & Technology Plaza

In 2012, Shenzhen Aerospace Technology Investment Company Limited* ( )

(“Shenzhen Aerospace”) completed the design of several construction drawings, underwent several tendering of construction works and completed the work of pilings. Besides, the construction works above the ground level was commenced. In 2013, Shenzhen Aerospace will continue to step up those construction works, design and tendering works, and strive to complete the capping of the main structure.

Shenzhen Aerospace recorded a fair value gain of investment property of HK$229,325,000 in 2012. As at 31 December 2012, the property under construction and land use right of Shenzhen Aerospace Science & Technology Plaza was estimated at HK$2,272,388,000.

  • 19 -

Internet of Things

==> picture [47 x 12] intentionally omitted <==

In 2012, Aerospace Digitnexus Information Technology (Shenzhen) Limited* ( ( )

) (“Aerospace Digitnexus”) basically completed the research of software platform and signed several projects and services contracts. In 2013, Aerospace Digitnexus will continue to explore markets and strengthen research and development so as to maintain a pioneer position of its products.

Aerospace Digitnexus recorded a turnover of HK$36,984,000 and a loss of HK$4,706,000 in 2012, which was mainly the amortization of intangible assets and payment of administrative fees etc..

Assets

As at 31 December 2012, the audited total assets of the Company and the subsidiaries were HK$6,635,359,000, of which the non-current assets were HK$4,600,412,000, representing an increase of 15% as compared with that of HK$4,017,469,000 (being restated) as at 31 December 2011. The current assets were HK$2,034,947,000, representing an increase of 6% as compared with that of HK$1,922,948,000 as at 31 December 2011. The increase in non-current assets was mainly due to the increase in fair value of investment properties, whereas the increase in current assets was mainly due to the increase in trade receivables resulting from the increase in turnover correspondingly. The equity attributable to shareholders of the Company was HK$4,118,102,000 representing an increase of 7% as compared with that of HK$3,863,672,000 (being restated) as at 31 December 2011. Based on the issued share capital of 3,085,022,000 shares during the year, the net assets per share attributable to shareholders of the Company was HK$1.33.

As at 31 December 2012, a cash deposit of the Company and the subsidiaries of approximately HK$110,207,000 had been pledged to banks to obtain credit facilities, Shenzhen Rayitek had pledged its plant and equipment and land use right at the book value of HK$110,392,000 and HK$14,341,000 respectively to Aerospace Science & Technology Finance Company Limited* ( ) to secure general banking facilities, and Shenzhen Aerospace had obtained a syndicated loan by securing the land use right and property under construction thereof at value of RMB1,827,000,000 to a syndicate comprising banks and a financial institution.

Liabilities

As at 31 December 2012, the total liabilities of the Company and the subsidiaries were HK$1,794,668,000, of which the non-current liabilities were HK$677,456,000, representing an increase of 56% as compared with that of HK$434,795,000 (being restated) as at 31 December 2011, the current liabilities were HK$1,117,212,000, representing an increase of 14% as compared with that of HK$976,396,000 as at 31 December 2011. The increase in non-current liabilities was mainly due to the increase in bank loans and deferred tax, whereas the increase in current liabilities was mainly due to the increase in trade payables resulting from the increase in purchase correspondingly and payables for the construction of Shenzhen Aerospace Science & Technology Plaza. As at 31 December 2012, the Company and the subsidiaries had bank and other borrowings of HK$324,005,000.

Shenzhen Aerospace entered into a syndicated loan agreement of RMB1,500,000,000 with a syndicate of financial institutions in 2011 for the payment of construction costs of the Shenzhen Aerospace Science & Technology Plaza. With the comprehensive commencement of the construction works, the construction costs will increase significantly. Shenzhen Aerospace will gradually drawdown the loan to pay the construction costs. Therefore, the relevant bank debt will gradually increase. As at 31 December 2012, Shenzhen Aerospace had drawn down the loan in the amount of RMB141,000,000.

Operating expenses

The administrative expenses of the Company and the subsidiaries in 2012 were HK$296,781,000, representing an increase of 15% as compared with last year, which was mainly due to the increase in human resources expense. The financial costs amounted to HK$14,995,000, of which HK$3,523,000 and HK$5,446,000 had been capitalized and recorded as the construction cost of Shenzhen Aerospace Science & Technology Plaza and the land development cost of the Hainan project.

  • 20 -

Contingent liabilities

As at 31 December 2012, the Company and the subsidiaries did not have any other material contingent liabilities.

Financial Ratios

nancial Ratios
2012 2011
(Restated)
Gross Profit Margin 19.65% 20.31%
Return on Net Assets 6.16% 9.90%
31 December 2012 31 December 2011
(Restated)
Assets-Liabilities Ratio 27.05% 23.76%
Current Ratio 1.82 1.97
Quick Ratio 1.60 1.73

Liquidity

The source of funds of the Company and the subsidiaries mainly relies on internal resources and banking facilities. The free cash and bank balance as at 31 December 2012 amounted to HK$1,022,285,000, the majority of which were in Hong Kong Dollars and Renminbi.

Capital Expenditure and Investment Commitment

As at 31 December 2012, the capital commitments of the Company and the relevant subsidiaries contracted for but not provided in the consolidated financial statements was HK$910,563,000, mainly for the capital expenditure of the construction of Shenzhen Aerospace Science & Technology Plaza. With the comprehensive commencement of the construction of Shenzhen Aerospace Science & Technology Plaza, Shenzhen Aerospace will draw down the syndicated loan by stages to settle related construction costs.

The commitment of the land development project of the Complex Zone of the Launching Site in Hainan Province is RMB1,200,000,000, and as at 31 December 2012, a sum of RMB535,103,000 had been incurred or paid. The other shareholders of Hainan Aerospace had completed the increase in capital in Hainan Aerospace in March 2013, the registered capital of which is RMB1,200,000,000.

Financial Risks

The Company and the subsidiaries review the cash flow and financial position periodically and do not presently engage into any financial instruments or derivatives to hedge the exchange and the interest rate risks.

Human Resources and Remuneration Policies

The remuneration policy of the Company and the subsidiaries is based on the employee’s qualifications, experience and performance on the job, with reference to the current market situation. The Company and the subsidiaries will continue to upgrade the level of human resources management and strictly implement the performance-based appraisal system, in order to motivate employees to make continuous improvement in their individual performance and contributions to the Company.

The Remuneration Committee takes the role of advisory and proposes to the Board on the emoluments of the Directors and senior management with regard to the operating results of the Company, the individual performance and the comparable market information.

As at 31 December 2012, the Company and the subsidiaries have a total of approximately 6,500 employees based in the Mainland China and Hong Kong respectively.

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

There had been no purchase, sale or redemption of the Company’s listed securities by the Company and its subsidiaries during the year.

CORPORATE GOVERNANCE

During 2012, the Company had complied with the provisions of the Corporate Governance Code and Corporate Governance Report of Appendix 14 of the Listing Rules.

The Company had adopted the Model Code for Securities Transactions by Directors of Listed Issuers, Appendix 10 of the Listing Rules, as the required standard for the Directors of the Company to trade the securities of the Company. Hence, the Company enquired all the Directors individually whether they had complied with Appendix 10 while trading the securities of the Company during 2012, and all the Directors replied that they had complied with the requirements of Appendix 10 during the year.

AUDIT COMMITTEE

In 2012, the Audit Committee of the Company comprises Mr Luo Zhenbang (Chairman) (appointed as Chairman in March 2012), Mr Chow Chan Lum, Charles (Chairman) (resigned in March 2012) and Ms Leung Sau Fan, Sylvia (appointed in March 2012), all being Independent Non-Executive Directors; and Mr Shi Weiguo (appointed in March 2012) and Mr Zhou Qingquan (retired in March 2012), both being Non-Executive Directors. The major functions of the Audit Committee include serving as a focal point for communication between the Directors and external auditors, reviewing the Company’s financial information as well as overseeing the Company’s financial reporting system and internal control procedures. The Audit Committee had reviewed, discussed and approved the financial statements for the year ended 31 December 2012.

REMUNERATION COMMITTEE

In 2012, the Remuneration Committee comprises Ms Leung Sau Fan, Sylvia (Chairman) (appointed in March 2012), Mr Wang Junyan, Mr Luo Zhenbang (resigned in March 2012) and Mr Chow Chan Lum, Charles (resigned in March 2012), all being Independent Non-executive Directors, and Dr Chan Ching Har, Eliza (Chairman) (resigned in March 2012) and Mr Chen Xuechuan, both being Non-Executive Directors. The Remuneration Committee takes the role of advisory and proposes to the Board on the emoluments of the Directors and senior management with regard to the operating results of the Company, the individual performance and the comparable market information.

NOMINATION COMMITTEE

The Company established a Nomination Committee on 26 March 2012. The Chairman of the Nomination Committee is Mr Zhang Jianheng, being a Non-Executive Director and the Chairman of the Board, and members of the Nomination Committee are Mr Luo Zhenbang, Mr Wang Junyan and Ms Leung Sau Fan, Sylvia, all being Independent Non-Executive Directors, and Mr Chen Xuechuan, being a Non-Executive Director. Main functions of the Nomination Committee are to review the structure, size and composition of the Board in order to implement the Company’s strategy.

CONNECTED TRANSACTIONS

On 4 May 2012, Shenzhen Rayitek Hi-tech Film Company Limited ( (“Shenzhen Rayitek”), an indirect 55%-owned subsidiary of the Company, entered into the Loan Agreement with Aerospace Science & Technology Finance Company Limited ( ) (“Aerospace Finance”) pursuant to which Aerospace Finance shall provide an one-year loan in the sum of RMB60,000,000 to Shenzhen Rayitek. As security for the loan, Shenzhen Rayitek will charge its land use right, buildings, and plant and equipment in favour of Aerospace Finance. In addition, CASIL New Century Technology

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Development (Shenzhen) Company Limited* ( ), a wholly-owned subsidiary of the Company and the direct holding company of Shenzhen Rayitek, will provide a guarantee in respect of all amounts outstanding under the Loan Agreement in favour of Aerospace Finance. As Aerospace Finance is a connected person of the Company and accordingly, the transactions contemplated under the Loan Agreement and the Guarantee constituted connected transactions of the Company. Details of which please refer to the Company’s announcement made on 4 May 2012.

On 5 November 2012, CASIL Hainan Holdings Limited and CASIL New Century Technology Development (Shenzhen) Company Limited ( ), wholly-owned subsidiaries of the Company, Hainan Expressway Co., Ltd. ( ) (“Hainan Expressway”) and China Great Wall Industry Corporation ( ) (“China Great Wall”) entered into the Subscription Agreement, pursuant to which each of Hainan Expressway and China Great Wall will subscribe the registered capital of RMB300,000,000 in Hainan Aerospace Investment Management Company Limited ( ) (“Hainan Aerospace”) at a consideration of RMB312,720,000 (the “Subscription”). As China Great Wall is a connected person of the Company and accordingly, the subscription by China Great Wall in Hainan Aerospace constituted a connected transaction of the Company. The independent shareholders of the Company approved the transaction at the Extraordinary General Meeting held on 4 January 2013, China Aerospace Science & Technology Corporation and its associates were abstained from voting on the resolution. Details of which please refer to the Company’s announcements made on 5 November 2012 and 4 January 2013 and the circular dated 11 December 2012, respectively.

The Independent Non-Executive Directors of the Company reviewed the above connected transactions and confirmed that the connected transactions had been entered into on normal commercial terms and were fair and reasonable and in the interests of the Shareholders of the Company as a whole.

EVENT AFTER THE REPORTING PERIOD

The Subscription referred in the paragraph headed “Connected Transactions” by China Great Wall constituted a connected transaction of the Company, the independent shareholders of the Company approved the transaction at the Extraordinary General Meeting held on 4 January 2013, China Aerospace Science & Technology Corporation and its associates were abstained from voting on the resolution. The Subscription was completed on 19 March 2013. Details of which please refer to the Company’s announcements made on 4 January 2013 and 20 March 2013 and the circular dated 11 December 2012.

DIVIDEND

The Board has recommended a final dividend of HK1 cent per share for the year ended 31 December 2012 (2011: HK1 cent) payable to the shareholders of the Company whose names appear on the Register of Members of the Company on Thursday, 6 June 2013.

ANNUAL GENERAL MEETING

The Annual General Meeting of the Company will be held on Thursday, 30 May 2013. Notice of which will be published on the websites of Hong Kong Exchanges and Clearing Limited and the Company and dispatched to the shareholders of the Company in such manner as required under the Listing Rules.

CLOSURE OF REGISTER OF MEMBERS

To ensure shareholders the right to attend and vote at the Annual General Meeting and to qualify to receive the distribution of final dividend, the Register of Members of the Company will be closed and details of which are as follows:

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  • (1) To ensure shareholders the right to attend and vote at the Annual General Meeting:

Latest time for lodging transfers of shares and related documents for registration : 4:30 p.m. on Monday, 27 May 2013 Closure of Register of Members : From Tuesday, 28 May 2013 to Thursday, 30 May 2013 (both days inclusive)

  • (2) To ensure shareholders the right to qualify for the distribution of final dividend:

Latest time for lodging transfers of shares and related documents for registration : 4:30 p.m. on Tuesday, 4 June 2013 Closure of Register of Members : From Wednesday, 5 June 2013 to Thursday, 6 June 2013 (both days inclusive) Record Date : Thursday, 6 June 2013

The Register of Members of the Company will be closed at the abovementioned periods. To ensure shareholders the right to attend and vote at the Annual General Meeting and to qualify for the distribution of final dividend, all transfer forms accompanied by the relevant share certificates must be lodged with the Company’s share registrar, Tricor Standard Limited of 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong for registration. Subject to approval by the shareholders at the Annual General Meeting, dividend warrants are expected to be despatched to shareholders by post on or around Wednesday, 26 June 2013.

APPRECIATION

The Company hereby expresses its sincere gratitude to its shareholders, banks, business partners, people from various social communities, as well as all staff of the Company for their long-time support.

By order of the Board Wu Zhuo Vice Chairman

Hong Kong, 22 March 2013

At the time of approving this Announcement, the Board of Directors of the Company comprises:

Independent Non-Executive
Executive Directors Non-Executive Directors Directors
Mr Li Hongjun_(President)_ Mr Zhang Jianheng_(Chairman)_ Mr Luo Zhenbang
Mr Jin Xuesheng Mr Wu Zhuo_(Vice Chairman)_ Mr Wang Junyan
Mr Chen Xuechuan Ms Leung Sau Fan, Sylvia
Mr Shi Weiguo

  • These PRC entities do not have English names, the English names set out herein are for identification purpose only.

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