DIT Group Limited — Interim / Quarterly Report 2003

Dec 19, 2002

SOUTH EAST GROUP LIMITED

(Incorporated in Bermuda with limited liability)

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2002

RESULTS

The Board of Directors of South East Group Limited (the “Company”) announces the unaudited condensed consolidated income statement of the Company and its subsidiaries (the “Group”) for the six months ended 30 September 2002, as follows:

CONSOLIDATED INCOME STATEMENT (UNAUDITED)

For the six months ended 30 September 2002

Notes Turnover (3) Cost of sales Gross profit Other revenue Selling and distribution costs Administrative expenses Operating loss (3)&(4) Finance costs (5) Loss before taxation Taxation (6) Loss attributable to shareholders Interim dividend per share Loss per share (HK cents) (7)	2002 HK$’000 41,317 (34,076) 7,241 6 (2,611) (15,245) (10,609) (232) (10,841) – (10,841) NIL (3.28)	2001 HK$’000 17,784 (13,989) 3,795 1,048 (2,285) (7,008) (4,450) (678) (5,128) – (5,128) NIL (1.60)

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NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS (1) Principal accounting policies and basis of preparation

The Unaudited Interim Financial Statements have been prepared in accordance with Hong Kong Statement of Standard Accounting Practice 25 “Interim Financial Reporting”, and Appendix 16 of the Rules Governing the Listing of Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). They should be read in conjunction with the 2002 annual accounts.

The accounting policies and methods of computation used in the preparation of the interim accounts are consistent with those used in the annual accounts for the year ended 31 March 2002 except for the adoption of the following revised and new SSAPs 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 34 : Employee benefits

The changes in the Group’s accounting policies resulting from the adoption of these new practices are set out below:

• (a) SSAP 1 (revised) : Presentation of financial statements The consolidation statement of recognised gains and losses is replaced by the consolidated statement of changes in equity.

• (b) SSAP 15 (revised) : Cash flow statements The presentation and classification of items in the cash flow statement have been changed due to the adoption of SSAP 15 (revised). As a result, cash flow during the period has been reclassified by operating, investing and financing activities. For the six months ended 30 September 2002, dividend and interest received of HK$71,000 (2001: HK$281,000) have been reclassified as investing cash flow.

(2) Capital Reorganisation and Share Consolidation

• Pursuant to a special resolution passed at a special general meeting of the Company held on 24 October 2001, the issued share capital of the company decreased from HK$330,571,880 to HK$33,057,188 by carrying out (i) the Capital Reorganisation Scheme and (ii) the Share Consolidation Scheme. The details of the Capital Reorganisation Scheme and the Share Consolidation Scheme are as follows:

• (i) Capital Reorganisation Scheme

• (a) the nominal value of each of the ordinary shares in issue before the Capital Reorganisation was reduced by HK$0.09 from HK$0.10 to HK$0.01 (the Reduction of Capital) and the nominal value of each of the authorised but unissued ordinary shares was subdivided into 10 unissued ordinary shares of HK$0.01 each (the Subdivision of

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Capital). The authorised share capital of the Company immediately preceding the implementation of the Capital Reorganisation Scheme was HK$400,000,000 comprising 4,000,000,000 ordinary shares of HK$0.10 each, of which 3,305,718,800 ordinary shares were in issue and credited as fully paid. On the basis of 3,305,718,800 ordinary shares in issue, at the time of the Reduction of Capital, a credit of HK$297,514,692 arised as a result of the Reduction of Capital pursuant to the Capital Reorganisation Scheme and the issued share capital of the company was reduced from HK$330,571,880 to HK$33,057,188. Upon completion of the Reduction of Capital and Subdivision of Capital, the authorised share capital of the Company remained at HK$400,000,000, with 40,000,000,000 ordinary shares of HK$0.01 each, of which 3,305,718,800 ordinary shares were in issue and credited as fully paid with 36,694,281,200 as unissued ordinary shares;

• (b) the credit of HK$297,514,692 arising as a result of the Capital Reorganisation was applied towards eliminating part of the accumulated losses of the Group which stood at approximately HK$390,322,000 at 31 March 2001; and

• (c) the balance of the share premium account which stood at approximately HK$233,973,000 at the time of implementation of the Capital Reorganisation Scheme was reduced by HK$223,973,000 to HK$10,000,000 and the credit arising therefrom was further applied towards eliminating the remaining part of the accumulated losses of the Group at 31 March 2001 from (b) above. Having fully eliminated all accumulated losses, the balance of approximately HK$131,166,000 was then credited to the Contributed Surplus Account of the Group.

• (ii) Share Consolidation Scheme

• Upon the completion of the Capital Reorganisation Scheme, a consolidation of the ordinary shares was effected pursuant to which every 10 issued and unissued ordinary shares were consolidated into 1 ordinary share. Immediately following the implementation of the Share Consolidation Scheme, the authorised share capital of the Company remained at HK$400,000,000 comprising 4,000,000,000 ordinary shares of HK$0.10 each of which 330,571,880 ordinary shares were in issue and credited as fully-paid.

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(3) Segment information

An analysis of turnover and contribution to the Group’s results by principal activity and geographical location is set out below:

(a) By principal activity

Sales of magnetic media products Property development Other revenue Operating loss before finance costs By geographical location Hong Kong USA and Canada People’s Republic of China Australia Others Other revenue Operating loss before finance costs	Turnover Six months ended 30 September 2002 2001 HK$’000 HK$’000 12,418 17,784 28,899 – 41,317 17,784 Turnover Six months ended 30 September 2002 2001 HK$’000 HK$’000 162 689 1,252 1,066 10,056 15,290 28,963 – 884 739 41,317 17,784	Segment Results Six months ended 30 September 2002 2001 HK$’000 HK$’000 (11,611) (6,287) 996 1,459 (10,615) (4,828) 6 378 (10,609) (4,450) Segment results Six months ended 30 September 2002 2001 HK$’000 HK$’000 (1,449) (2,236) (2,823) (2,459) (5,486) 314 1,019 1,259 (1,876) (1,706) (10,615) (4,828) 6 378 (10,609) (4,450)

• (b) By geographical location

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(c) Financial positions

Assets Segment assets Sales of magnetic media products Property development Other revenue Unallocated corporate assets Liabilities Segment liabilities Sales of magnetic media products Property development Other revenue Unallocated corporate liabilities Net Assets	2002 HK$’000 28,036 70,580 3,920 67,138 169,674 12,394 659 67 8,398 21,518 148,156	2001 HK$’000 49,739 84,056 10,788 44,132
		188,715 6,754 24 – 11,469
		18,247
		170,468

(4) Operating loss

Operating loss is arrived at after crediting and charging the following:

Crediting Net gain on disposal of fixed asset Dividend income from listed investments Unrealised gain on valuation of listed investments Rental income Charging Depreciation Retirement benefit costs Staff costs (excluding directors’ remuneration) Compensation to former directors for loss of office Loss on disposal of listed investments	For six months period ended 30 September 2002 2001 HK$’000 HK$’000 – 536 23 33 – 31 59 62 2,694 3,592 254 165 3,645 4,906 7,042 – 124 –	For six months period ended 30 September 2002 2001 HK$’000 HK$’000 – 536 23 33 – 31 59 62 2,694 3,592 254 165 3,645 4,906 7,042 – 124 –
		3,592 165 4,906 – –

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• (5) Finance costs

During the period, interest of HK$232,000 (2001: HK$678,000) was charged in respect of the Group’s bank borrowings.

(6) Taxation

No provision for Hong Kong and overseas profits tax has been made for the 6 months ended 30 September 2002 as the Group has no assessable profits for the period concerned.

(7) Loss per share

The calculation of loss per share is based on the unaudited consolidated loss attributable to shareholders of HK$10,841,000 (2001: loss of HK$5,128,000) and on 330,571,880 (2001: 330,571,880) shares in issue during the period on the assumption that the capital reorganisation as described in Note (2) would have been completed in the financial period ended 30 September 2001. The Company has no potential dilutive ordinary shares that were outstanding during the two periods ended 30 September 2002 and 30 September 2001.

(8) Comparative figures

Certain comparative figures have been reclassified to conform to the current period’s presentation.

(9) Approval of the interim financial report

• This interim financial report was approved by the Board of Directors on 19 December 2002.

BUSINESS REVIEW

For the six months ended 30 September 2002, the Group’s core business of magnetic media products was augmented by the property development and investment business, with the former business accounting for 30% of total turnover and the latter 70%. This was a critical development for the Group in its business strategy; given the property development and investment projects could bring forth a better return to the Group.

During the period under review, the Group sold its residential property project in Sydney and part of the farming properties in Western Australia. The Group further concluded a deal for the disposal of the remaining farming properties in Western Australia, with the completion to take place in March 2003.

In the People’s Republic of China (the “PRC”), the pace of development of real estate projects in Pudong, Shanghai was accelerated during the period under review. The Group’s development project in Shanghai consists of 39,546 square metres of residential area and 3,000 square metres of commercial area. Pre-sale of the units in the buildings of these development projects is scheduled for the second quarter of 2003.

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The Group has established a niche market for its magnetic media products business. The PRC remained the Group’s largest market for this business division. The Group’s expertise and nationwide distribution network in this market provides a competitive edge.

For the Group’s investment in the joint venture winery in Qingdao, the Group attained an equity interest of 55% in the registered capital after the final stage of cash injection completed in December 2002. The cash injection was intended for use in product promotion and the expansion of the distribution network of grape wine in the PRC.

MANAGEMENT DISCUSSION AND ANALYSIS

Turnover

For the six months ended 30 September 2002, the Group achieved a turnover of HK$41,317,000, representing an increase of approximately 132% as compared to HK$17,784,000 for the corresponding period last year. The increase in the Group’s turnover was mainly contributed by the property development and investment business.

Profitability

In terms of operating result, the Group achieved improvement over the previous year. However, after making a provision for a one-off compensation payment of HK$7 million to certain departed directors, the Group recorded a loss of HK$10.6 million for the six months under review, as compared to the loss of HK$4.5 million for the same period last year.

Of the loss for the six months period of the current year, the property development and investment business generated profit of about HK$1 million, as compared to the HK$1.5 million profit for the same period in the previous year. The magnetic media products business generated a loss of HK$11.6 million for the current period, as compared to the HK$6.3 million loss for the same period in the previous year.

Liquidity and Financial Resources

At 30 September 2002, the Group’s total shareholders’ funds amounted to HK$140 million, compared with HK$151 million at 31 March 2002. Total borrowings of the Group, including short term and long term interest bearing bank borrowing, at 30 September 2002 were HK$9,291,000, compared with HK$12,817,000 at 31 March 2002. Accordingly, the Group’s gearing ratio at 30 September 2002 was 6%, compared with 8.5% at 31 March 2002. The Group generally finances its operation with internally generated cash flow and banking facilities provided by its principal banker in Hong Kong. The Group’s cash and bank balances as at 30 September 2002 amounted to approximately HK$41 million.

Employee Information

The Group had approximately 230 employees for its operations in Hong Kong and the PRC as at 30 September 2002. 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 wellperformed employees. In addition, training and development courses would also be provided as and when required.

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Charges on Group Assets

At 30 September 2002, the Group has pledged certain assets including bank deposits, land and building with an aggregate net book value of HK$36,061,000 (at 31 March 2002: HK$38,871,000) to secure the general banking facilities and bank mortgage loans granted to the Group.

INTERIM DIVIDEND

The Directors have decided not to declare any interim dividend for the six months ended 30 September 2002 (2001: nil).

FUTURE PROSPECT

The Group’s management will continue to direct its strategy to developing the PRC markets. The PRC is one of the few countries that have sustained growth amid the slumping global economies. With its remarkable growth resulting in an increasing size of the middle-class population, management believes that this segment of the population will fuel the demands for the Group’s products in the future. In the coming year, management will continue to explore new opportunities in the PRC.

AUDIT COMMITTEE

The Audit Committee has reviewed with the management the accounting principles and practices adopted by the Group and discussed auditing, internal control and financial reporting matters including the review of the unaudited interim results for the six months ended 30 September 2002.

CODE OF BEST PRACTICE

During the six months ended 30 September 2002, none of the directors is aware of information that would reasonably indicate that the Company was not in compliance with 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.

PURCHASE, SALE OR REDEMPTION OF SHARES

There was no purchase, sale or redemption by the Company or any of its subsidiaries of its shares during the six months ended 30 September 2002.

PUBLICATION OF FURTHER INFORMATION ON THE STOCK EXCHANGE’S WEBSITE

All the financial and other related information of the Company required by paragraphs 46(1) to 46(6) 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 Budiman RAHARDJA Chairman

Hong Kong, 19 December 2002

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

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