DIT Group Limited — Annual Report 2001

Jul 23, 2001

(Incorporated in Bermuda with limited liability)

ANNUAL RESULTS FOR THE YEAR ENDED 31 MARCH, 2001

CONSOLIDATED PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED 31 MARCH 2001

	2001		2000
	HK$’000		HK$’000
TURNOVER (Note 1)	54,251		70,877
COST OF INVENTORIES SOLD	(38,878	)	(42,568	)
GROSS PROFIT	15,373		28,309
OTHER REVENUE	1,646		3,288
SELLING AND DISTRIBUTION COSTS	(8,609	)	(6,897	)
ADMINISTRATIVE EXPENSES	(24,232	)	(20,939	)
OPERATING (LOSS)/PROFIT	(15,822	)	3,761
FINANCE COSTS	(2,175	)	(3,087	)
WRITE BACK OF PROVISION FOR IMPAIRMENT OF FIXED ASSETS	-		3,368
REVERSAL OF NET LIABILITIES OF
SUBSIDIARIES EXCLUDED FROM CONSOLIDATION	-		97,150
ADDITIONAL PROVISION FOR AMOUNTS DUE
FROM SUBSIDIARIES EXCLUDED FROM CONSOLIDATION	-		(8,192	)
(LOSS)/PROFIT BEFORE TAXATION	(17,997	)	93,000
TAXATION (Note 2)	-		(67	)
(LOSS)/PROFIT AFTER TAXATION	(17,997	)	92,933
MINORITY INTERESTS	-		-
(LOSS)/PROFIT ATTRIBUTABLE TO SHAREHOLDERS	(17,997	)	92,933
DIVIDENDS	-		-
(LOSS)/PROFIT FOR THE YEAR	(17,997	)	92,933
(LOSS)/EARNINGS PER SHARE (CENTS) (Note 3)	(0.54	)	2.81

1. The Group engages in the manufacturing and selling of magnetic media products, property holding and related services.

Analyses of the Group’s turnover and contribution to operating loss from continuing operations by principal activities and by geographical markets for the year ended 31 March 2001 are as follows:

	Turnover		Contribution
	from continuing		to operating
	operations		loss
	HK$’000		HK$’000
By principal activities:
Sales of magnetic media products and related equipment	53,320		(8,992	)
Sales of by-products	931		(8,476	)
	54,251		(17,468	)
Other revenue			1,646
			(15,822	)
By geographical markets:
Hong Kong	1,836		(3,459	)
USA and Canada	16,121		(5,121	)
People’s Republic of China	35,159		(3,172	)
Australia and New Zealand	-		(5,355	)
Others	1,135		(361	)
	54,251		(17,468	)
Other revenue			1,646
			(15,822	)

1. Taxation

No provision for Hong Kong and overseas profits tax has been made in the financial statements for the current year as the Group has no assessable profits for the year.

1. (Loss)/Earnings per share

The calculation of (loss)/earnings per share is based on the consolidated loss attributable to shareholders for the year of HK$17,997,000 (2000: profit of HK$92,933,000) and on 3,305,718,800 (2000: 3,305,718,800) shares in issue during the year. The Company has no potential dilutive ordinary shares that were outstanding during the two years ended 31 March 2001.

1. Contingent Liabilities

(a) At the balance sheet date, a purported guarantee in respect of the indebtedness of the Company’s subsidiary to a sub-contractor amounting to HK$38 million (2000: HK$38 million), albeit the Company denies liability to the subcontractor for the purported guarantee which came to the attention of the directors in previous years, has been treated by the directors of the Company on ground of prudence as a contingent liability in the Company’s financial statements.

(b) At the balance sheet, guarantee amounting to HK$1 million (2000: HK$1 million) was given by the Company to the broker for securities trading of a subsidiary.

1. Pledge of assets

At the balance sheet date, the Group’s borrowing facilities were secured by certain assets including mainly a deposit, land and building with an aggregate net book value of HK$40.5 million. (2000: HK$41.4 million)

DIVIDENDS

The directors do not recommend the payment of any dividend for the year (2000 - nil).

BUSINESS REVIEW

During the year under review, the magnetic media business environment has become increasingly challenging. The Mainland China has become the Group’s primary market for floppy disks, following the decline in orders from a major customer in the U.S.A. While developing its own brand and diversifying the range of products in the China market, the Group is making plans to approach potential strategic partners who may be interested in entering China markets. The successful experience in marketing branded floppy disks in China will be a useful leverage with these partners, it is also a sound selling point for the Group to assist customers in promoting corporate image and product branding.

With magnetic media products remaining a major turnover contributor, the Group engaged in a number of strategic development projects for its future growth opportunities. These include property development projects in Pudong, Shanghai, and in Australia, and wine making in Qingdao. These projects are further discussed below.

The residential development project in Pudong, Shanghai made slow progress during the year under review. A previous dispute over land size was settled through arbitration in November 2000. The result of the arbitration is that the Group accepted money and land as compensation for the deficient land size. The construction site, including the compensating land, was granted a new certificate of land use right in May 2001. According to the current situation, it is estimated that the approval of the architectural plan will be granted by the end of this year. The Group has further retained the services of a law firm in Shanghai to enforce the monetary compensation term of the arbitration settlement.

In Australia, the Group has invested in a number of property projects. The residential development in Sydney has completed site earthworks and piling by the first quarter of 2001: this was in accordance with the construction schedule. The work done represented the completion of approximately 7.5% of the whole project, based on the total development costs. It is estimated that the construction permit for building the residential complex on the site will be obtained in the third quarter of 2001.

In May 2000, the Group acquired farming properties with a gross area of approximately 2,098 ha in Western Australia. At the time of purchase, the properties were encumbered by a lease agreement that expired in March 2001. Subsequent to the expiry of the lease agreement, the farming properties were subdivided for sale and for letting. A land area of approximately 550 ha of the farming properties was sold to realise a capital gain, while the remaining area was leased to the previous lessee for another one year. The completion of the sale of the land took place in May 2001.

As noted in the interim report 2000, the Group has considered enhancing the production facilities at its joint venture winery in Qingdao through the installation of additional machinery and equipment. The expansion plan is intended to support the marketing targets to penetrate into the average, regular wine consumer market as well as to capture a larger share in the market of premium and super-premium wines in the future. A number of wine consultants from California have been retained by the Group to review the production facilities and marketing efforts of the winery.

PROSPECTS

Before the strategic development projects can begin to contribute significantly to turnover in the next few years, magnetic media products will remain a major turnover contributor. The Group will continue to capture opportunities in China markets, especially in view of the imminent accession of China to the World Trade Organisation.

China’s economic development is expected to grow at the rate of 8% over the next ten years. With the expected growth in such areas as green food and housing, the Group believes that its strategic investment projects in property development and winery will capture opportunities presented by such growth.

In exploring potential business opportunities, the Group will continue to direct its attention to those countries with either robust economic growth or stable investment environment. It is believed that the geographical diversification will counteract cyclical trends in local markets of specific areas.

LIQUIDITY AND FINANCIAL RESOURCES

As at 31 March 2001, cash and bank balances of the Group amounted to HK$33.9 million (2000: HK$55.9 million). Bank and other borrowings of the Group as at the same date amounted to HK$17.1 million (2000: HK$21.6 million). The calculation of debt to equity ratio (expressed as a percentage of bank and other borrowings net of cash and bank balances over total net assets of the Group) is not applicable.

Approximately 61% (2000: 86%) of the Group’s cash and bank balances are in Hong Kong dollar or United States dollar with balance 39% (2000:14%) in Renminbi.

Approximately 85% (2000: 72%) of the Group’s bank and other borrowings were denominated in Hong Kong dollar and the remaining 15% (2000: 28%) were denominated in United States dollar. Approximately 41% (2000: 41%) of the Group’s bank and other borrowings was repayable within one year, and the balance 59% (2000: 59%) repayable in the second to fifth years.

The Group’s financial position is considered satisfactory with its surplus working capital as at 31 March 2001 and available banking facilities, the Group has sufficient liquidity to satisfy its operating requirements.

STAFF

The Group has approximately 280 employees as at 31 March 2001. Employees are basically remunerated in accordance with the nature of the job, prevailing market trend, and their respective performance. Year-end discretionary bonus would be granted to reward and motivate those well-performed employees. In addition, training and development courses would also be provided as and when required.

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

During the year, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities.

PUBLICATION OF FURTHER INFORMATION ON THE STOCK EXCHANGE’S WEBSITE

All the financial and other related information of the Company 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 (the “Exchange”) will be published on the Exchange’s website in due course.

By Order of the Board

CHEONG Swee Kheng

Chairperson

20 July, 2001, Hong Kong

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Annual General Meeting of South East Group Limited (the “Company”) will be held at Regency Rooms 1&2, Hyatt Regency Hong Kong, 67 Nathan Road, Kowloon on Tuesday, 11 September, 2001 at 10:00 a.m. for the following purposes:

1. To receive and consider the Audited Financial Statements and the Reports of the Directors and the Auditors of the Company for the year ended 31 March, 2001;

2. To re-elect Directors and to fix their remuneration;

3. To determine the maximum number of Directors for the financial year 2001/2002;

4. To re-appoint Auditors and to authorise the Directors to fix their remuneration; and

5. As special business, to consider and, if thought fit, pass, with or without amendments, the following resolution as an Ordinary Resolution:

“That:

(a) the exercise by the directors of the Company during the Relevant Period (as hereinafter defined) of all the powers of the Company to allot, issue and deal with additional shares of the Company, be and is hereby generally and unconditionally approved, provided that, otherwise than (i) pursuant to a rights issue where shares are offered to shareholders on a fixed record date in proportion to their then holdings of shares of the Company as at that date (subject to such exclusions or other arrangements as the directors of the Company 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 of any stock exchange, in any territory outside Hong Kong applicable to the Company); (ii) an issue of shares upon the exercise of rights of subscription or conversion under the terms of any securities which are convertible into shares of the Company; (iii) an issue of shares as scrip dividends pursuant to the bye-laws of the Company from time to time; or (iv) an issue of shares under any option scheme or similar arrangement for the grant or issue to employees of the Company and/or any of its subsidiaries of shares or rights to acquire shares of the Company, the aggregate nominal amount of share capital issued, allotted or disposed of or agreed conditionally or unconditionally to be issued, allotted or dealt with whether pursuant to an option or otherwise, shall not in total exceed 20 per cent. of the nominal amount of share capital of the Company in issue on the date of passing this Resolution and the said approval shall be limited accordingly; and

(b) for the purpose of this Resolution, “Relevant Period” means the period from the passing of this Resolution until whichever is the earlier of:

(i) the conclusion of the next Annual General Meeting of the Company;

(ii) the revocation or variation of the authority given under this Resolution by ordinary resolution of the shareholders of the Company in general meeting; and

(iii) the expiration of the period within which the next annual general meeting of the Company is required by the bye-laws of the Company of any applicable law to be held.”

1. As special business, to consider and, if thought fit, pass with or without amendments, the following resolution as an Ordinary Resolution:

“That:

(a) subject to paragraph (b) below, the exercise by the directors of the Company during the Relevant Period (as hereinafter defines) of all the powers of the Company during the Relevant Period (as hereinafter defined) to repurchase its shares on The Stock Exchange of Hong Kong Limited (“Stock Exchange”) or on any other stock exchange on which the shares of the Company may be listed and recognised by the Securities and Futures Commission of Hong Kong and the Stock Exchange for this purpose, subject to and in accordance with all applicable laws and the requirements of the Rules Governing the Listing of Securities on the Stock Exchange or of any other stock exchange as amended from time to time, be and is hereby generally and unconditionally approved;

(b) the total nominal amount of shares of the Company to be repurchased by the Company pursuant to the approval in paragraph (a) above shall not exceed 10 per cent of the total nominal amount of the shares of the Company in issue on the date of passing this Resolution and the said approval shall be limited accordingly; and

(c) for the purpose of this Resolution, “Relevant Period” means the period from the passing of this Resolution until whichever is the earlier of:

(i) the conclusion of the next Annual General Meeting of the Company;

(ii) the revocation or variation of the authority given under this Resolution by ordinary resolution of the shareholders of the Company in general meeting; and

(iii) 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 to be held.”

1. As special business, to consider and, if thought fit, pass, with or without amendments, the following resolution as an Ordinary Resolution:

“That, subject to the passing of Resolutions Nos. 5 and 6 set out in the notice convening this meeting, the general mandate granted to the directors of the Company to exercise the powers of the Company to allot and deal with additional shares and to make or grant offers, agreements and options which might or would require the exercise of such power pursuant to Resolution No. 5 set out in the notice convening this meeting, be and is hereby extended by the addition to the total nominal amount of the share capital of the Company which may be allotted or agreed conditionally or unconditionally to be allotted by the directors of the Company pursuant to such general mandate of an amount representing the total nominal amount of shares in the capital of the Company which has been repurchased by the Company under the authority granted pursuant to Resolution No. 6 set out in the notice convening this meeting provided that such amount of shares shall not exceed 10 per cent of the total nominal amount of the share capital of the Company in issue on the date of passing this Resolution.”

1. To transact any other business.

By Order of the Board

CHEONG Swee Kheng

Chairperson

20 July, 2001, Hong Kong

Notes:

(i) A member entitled to attend and vote at the meeting convened by the above notice is entitled to appoint a proxy to attend and, in the event of a poll, vote in his stead. A proxy need not be a member of the Company.

(ii) in order to be valid, the form of proxy together with a power of attorney or other authority, if any, under which it is signed or a notarially certified copy of the power of attorney or authority must be deposited with the Company’s principal place of business at Room 1103A. Admiralty Centre, Tower 1, 18 Harcourt Road, Hong Kong not less than 48 hours before the time for holding the meeting or adjourned meeting.

(iii) An explanatory statement containing further details regarding item 6 above will be sent to members of the Company together with the 2000/2001 Annual Report.

Please also refer to the published version of this announcement in the i Mail dated 23 /7/2001.