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Dragon Mining Limited — Annual Report 2011
Jun 27, 2011
50109_rns_2011-06-27_993ec45c-e752-4c4a-92d1-4eb6f0603096.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 liabilities 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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SAMSON PAPER HOLDINGS LIMITED 森信紙業集團有限公司 *
(Incorporated in Bermuda with limited liability)
(Stock Code: 731)
ANNOUNCEMENT OF RESULTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2011
The board of directors (the “Board”) of Samson Paper Holdings Limited (the “Company”) is pleased to announce the consolidated results of the Company and its subsidiaries (the “Group”) for the financial year ended 31 March 2011 and balance sheet as at that date together with comparative figures for the financial year ended 31 March 2010. The annual results have been reviewed by the Company’s audit committee.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the financial year ended 31 March 2011
| Note Revenue 2 Cost of sales Gross profit Other gains and income, net Selling expenses Administrative expenses Other operating expenses Operating profit 3 Finance costs Share of profit of an associated company Profit before taxation Taxation 4 Profit for the year |
2011 2010 HK$’000 HK$’000 (restated) 4,676,899 3,861,245 (4,244,695) (3,420,242) 432,204 441,003 58,893 19,881 (178,399) (178,204) (167,567) (143,588) (10,005) (13,115) 135,126 125,977 (47,000) (29,984) — 405 88,126 96,398 (15,915) (33,843) 72,211 62,555 |
|---|---|
– 1 –
| Note Attributable to: Owners of the parent Non-controlling interests Earnings per share 5 Basic Diluted Dividends 6 Dividends per share Interim Proposed final |
2011 2010 HK$’000 HK$’000 (restated) 73,450 61,999 (1,239) 556 72,211 62,555 HK6.7 cents HK6.0 cents HK5.8 cents HK4.9 cents 19,097 19,089 HK1.0 cent HK1.0 cent HK1.0 cent HK2.0 cents HK2.0 cents HK3.0 cents |
2011 2010 HK$’000 HK$’000 (restated) 73,450 61,999 (1,239) 556 72,211 62,555 HK6.7 cents HK6.0 cents HK5.8 cents HK4.9 cents 19,097 19,089 HK1.0 cent HK1.0 cent HK1.0 cent HK2.0 cents HK2.0 cents HK3.0 cents |
|---|---|---|
| 62,555 | ||
| HK6.0 cents | ||
| HK4.9 cents | ||
| 19,089 | ||
| HK1.0 cent HK2.0 cents |
||
| HK3.0 cents |
– 2 –
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the financial year ended 31 March 2011
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the financial year ended 31 March 2011 |
||
|---|---|---|
| Profit for the year Other comprehensive income Currency translation differences Revaluation of land and buildings, net of deferred tax Revaluation of available-for-sale financial assets Share of reserves of an associated company Other comprehensive income for the year, net of tax Total comprehensive income for the year Attributable to: — Owners of the parent — Non-controlling interests Total comprehensive income for the year |
2011 2010 HK$’000 HK$’000 (restated) 72,211 62,555 52,118 11,719 32,852 13,601 (167) — — 200 84,803 25,520 157,014 88,075 157,667 86,324 (653) 1,751 157,014 88,075 |
|
| 88,075 |
– 3 –
CONSOLIDATED BALANCE SHEET As at 31 March 2011
| Note Non-current assets Property, plant and equipment Prepaid premium for land leases Investment properties Intangible assets Interest in an associated company Available-for-sale financial assets Non-current deposit Deferred tax assets Current assets Inventories Accounts receivable, deposits and prepayments 7 Financial assets at fair value through profit or loss Taxation recoverable Restricted bank deposits Bank balances and cash Non-current asset held for sale Current liabilities Accounts payable and accruals 8 Trust receipt loans Taxation payable Financial liabilities at fair value through profit or loss Borrowings Net current assets Total assets less current liabilities |
As at 31 March 2011 HK$’000 1,330,148 42,343 150,000 45,168 — 4,327 14,863 7,195 1,594,044 836,973 1,431,250 6,282 6,004 152,258 682,724 3,115,491 — 3,115,491 1,362,261 815,841 15,239 — 520,572 2,713,913 401,578 1,995,622 |
As at 31 March 2010 HK$’000 (restated) 828,789 41,883 115,000 41,280 — — — 4,956 1,031,908 696,455 1,388,730 15,197 1,441 129,792 463,614 2,695,229 60,745 2,755,974 1,299,176 795,680 17,285 — 283,796 2,395,937 360,037 1,391,945 |
As at 1 April 2009 HK$’000 (restated) 734,155 42,483 115,000 38,631 60,140 — — 5,379 995,788 435,750 976,854 11,434 2,428 70,046 594,704 2,091,216 — 2,091,216 946,792 523,060 10,466 356 195,587 1,676,261 414,955 1,410,743 |
|---|---|---|---|
– 4 –
| Note Equity Equity attributable to owners of the parent Share capital 9 Reserves Proposed final dividend Non-controlling interests Total equity Non-current liabilities Borrowings Deferred tax liabilities Other payable |
As at 31 March 2011 HK$’000 127,315 1,072,095 12,731 1,084,826 1,212,141 10,144 1,222,285 720,986 52,351 — 773,337 1,995,622 |
As at 31 March 2010 HK$’000 (restated) 63,585 996,674 12,731 1,009,405 1,072,990 10,797 1,083,787 270,518 37,640 — 308,158 1,391,945 |
As at 1 April 2009 HK$’000 (restated) 63,485 |
|---|---|---|---|
| 928,739 — |
|||
| 928,739 992,224 8,146 1,000,370 351,138 25,260 33,975 410,373 1,410,743 |
– 5 –
Notes :
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The consolidated accounts of the Group have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). The consolidated accounts have been prepared under the historical cost convention, as modified by the revaluation of properties, available-for-sale financial assets and financial assets/liabilities at fair value through profit or loss.
(i) Amended standard and interpretation adopted by the Group
The following revised standard and interpretation are mandatory for the first time for the financial year beginning on or after 1 April 2010.
- HKAS 17 (Amendment) ‘Leases’ deletes specific guidance regarding classification of leases of land, so as to eliminate inconsistency with the general guidance on lease classification. As a result, leases of land should be classified as either finance or operating lease using the general principles of HKAS 17, i.e. whether the lease transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee. Prior to the amendment, land interest which title is not expected to pass to the Group by the end of the lease term was classified as operating lease under “Prepaid premium for land leases”, and amortised over the lease term.
HKAS 17 (Amendment) has been applied retrospectively for annual periods beginning 1 April 2010 in accordance with the effective date and transitional provisions of the amendment. The Group has reassessed the classification of unexpired prepaid premium for land leases as at 1 April 2010 on the basis of information existing at the inception of those leases, and recognised the leasehold land in Hong Kong as finance lease retrospectively. As a result of the reassessment, the Group has reclassified certain leasehold land from operating lease to finance lease.
The land interest of the Group that is held for own use is accounted for as property, plant and equipment using the revaluation model and is depreciated from the land interest available for its intended use over the shorter of the useful life of the asset and the lease term.
The effect of the adoption of this amendment is as below:
| 31 March 2011 | 31 March 2010 | 1 April 2009 | |
|---|---|---|---|
| HK$’000 | HK$’000 | HK$’000 | |
| Increase/(decrease) in assets: | |||
| Property, plant and equipment | 110,500 | 75,100 | 60,400 |
| Prepaid premium for land leases | (19,683) | (20,230) | (20,777) |
| Increase in liabilities: | |||
| Deferred tax liabilities | 15,402 | 9,226 | 6,538 |
| Increase/(decrease) in equity: | |||
| Retained earnings | (2,525) | (1,042) | — |
| Asset revaluation reserve | 77,940 | 46,686 | 33,085 |
– 6 –
- In November 2010, HKICPA issued HK — Int 5 “Presentation of financial statements — classification by the borrower of a term loan that contains a repayment on demand clause”. The Interpretation is effective immediately and is a clarification of an existing standard, HKAS 1 Presentation of Financial Statements. It sets out the conclusion reached by the HKICPA that a term loan which contains a clause which gives the lender the unconditional right to demand repayment at any time shall be classified as a current liability in accordance with paragraph 69(d) of HKAS 1 irrespective of the probability that the lender will invoke the clause without cause.
In order to comply with the requirements of HK-Int 5, the Group has changed its accounting policy on the classification of term loans that contain a repayment on demand clause. Under the new policy, term loans with clauses which give the lender the unconditional right to call the loan at any time are classified as current liabilities in the consolidated balance sheet. Previously such term loans were classified in accordance with the agreed repayment schedule unless the Group had breached any of the loan covenants set out in the agreement as of the reporting date or otherwise had reason to believe that the lender would invoke its rights under the immediate repayment clause within the foreseeable future.
The new accounting policy has been applied retrospectively by re-presenting the opening balances at 1 April 2010, with consequential reclassification adjustments to comparatives for the year ended 31 March 2010. The reclassification has had no effect on reported profit or loss, total comprehensive income or equity for any period presented.
The effect of the adoption of this interpretation is as below:
| 31 March 2011 | 31 March 2010 | 1 April 2009 | |
|---|---|---|---|
| HK$’000 | HK$’000 | HK$’000 | |
| Increase in current liabilities: | |||
| Bank loans — unsecured | 16,805 | 5,250 | — |
| Bank loans — secured | 24,375 | 24,375 | 42,625 |
| Decrease in non-current liabilities | |||
| Bank loans — unsecured | (16,805) | (5,250) | — |
| Bank loans — secured | (24,375) | (24,375) | (42,625) |
- (ii) New and amended standards, and interpretations mandatory for the first time for the financial year beginning on or after 1 April 2010 but do not have a significant impact on the Group (although they may affect the accounting for future transactions and events)
HKAS 1 (Amendment) Presentation of financial statements HKAS 27 (Revised) Consolidated and separate financial statements HKAS 32 (Amendment) Classification of rights issues HKAS 36 (Amendment) Impairment of assets HKAS 39 (Amendments) Financial instruments: Recognition and measurement — eligible hedged items HKFRS 1 (Amendment) Additional exemptions for first-time adopters HKFRS 2 (Amendments) Group cash-settled share-based payment transaction HKFRS 3 (Revised) Business combinations HKFRS 5 (Amendment) Non-current assets held for sale and discontinued operations HK(IFRIC) — Int 9 Reassessment of embedded derivatives HK(IFRIC) — Int 16 Hedges of a net investment in a foreign operation HK(IFRIC) — Int 17 Distributions of non-cash assets to owners HK(IFRIC) — Int 18 Transfer of assets from customers
– 7 –
- (iii) New standards, amendments and interpretations have been issued but not effective for the financial year beginning on or after 1 April 2010 and have not been early adopted
The following standards, amendments and interpretations have been issued but are not effective for the financial year beginning on or after 1 April 2010 and have not been early adopted. The directors are currently assessing the impact on their adoption.
Effective for annual periods of the Group beginning on or after
| HKAS 12 (Amendment) | Income taxes | 1 April 2012 |
|---|---|---|
| HKAS 24 (Revised) | Related party disclosures | 1 April 2011 |
| HKFRS 9 | Financial instruments | 1 April 2013 |
| HK(IFRIC)-Int 14 (Amendment) | Prepayments of a minimum funding | 1 April 2011 |
| requirement | ||
| HK(IFRIC)-Int 19 | Extinguishing financial liabilities with equity | 1 October 2010 |
| instruments | ||
| Annual Improvements Project | HKICPA’s improvements to HKFRSs | 1 October 2010 and |
| published in May 2010 | 1 April 2011, as | |
| appropriate |
2. SEGMENT INFORMATION
At 31 March 2011, the Group is organised on a worldwide basis into three main business segments:
-
(1) Paper trading: trading and marketing of paper products;
-
(2) Paper manufacturing: manufacturing of paper products in Shandong, the PRC;
-
(3) Others: including trading and marketing of aeronautic parts and provision of related services and the provision of marine services to marine, oil and gas industries.
– 8 –
The segment information for the year ended and as at 31 March 2011 is as follows:
| Total segment revenue Inter-segment revenue Revenue from external customers Reportable segment results Corporate expenses Operating profit Finance costs Profit before taxation Taxation Profit for the year Other items for the year ended 31 March 2011: Finance income Depreciation of property, plant and equipment Amortisation of prepaid premium for land leases Amortisation of intangible assets Capital expenditure Reportable segment assets Taxation recoverable Deferred tax assets Corporate assets Total assets Reportable segment liabilities Taxation payable Deferred tax liabilities Corporate liabilities Total liabilities |
Paper trading HK$’000 4,067,863 (91,048) 3,976,815 98,222 5,307 9,968 807 539 55,877 Paper trading HK$’000 3,245,252 1,890,909 |
Paper manufacturing HK$’000 699,761 (103,345) 596,416 49,325 117 15,983 — 13 424,803 Paper manufacturing HK$’000 1,280,522 257,280 |
Others HK$’000 107,276 (3,608) 103,668 (1,342) 5 7,586 72 — 1,922 Others HK$’000 170,428 29,246 |
Total HK$’000 4,874,900 (198,001) 4,676,899 146,205 (11,079) 135,126 (47,000) 88,126 (15,915) 72,211 5,429 33,537 879 552 482,602 Total HK$’000 4,696,202 6,004 7,195 134 4,709,535 2,177,435 15,239 52,351 1,242,225 3,487,250 |
|---|---|---|---|---|
– 9 –
The segment information for the year ended and as at 31 March 2010 is as follows:
| Total segment revenue Inter-segment revenue Revenue from external customers Reportable segment results, restated Corporate expenses Operating profit, restated Finance costs Share of profit of an associated company Profit before taxation, restated Taxation Profit for the year, restated Other items for the year ended 31 March 2010: Finance income Depreciation of property, plant and equipment, restated Amortisation of prepaid premium for land leases, restated Amortisation of intangible assets Capital expenditure Segment assets, restated Non-current asset held for sale Reportable segment assets, restated Taxation recoverable Deferred tax assets Corporate assets Total assets, restated Reportable segment liabilities Taxation payable Deferred tax liabilities, restated Corporate liabilities Total liabilities, restated |
Paper trading HK$’000 3,429,186 (52,716) 3,376,470 128,392 405 3,558 7,195 787 528 15,226 Paper trading HK$’000 2,709,132 60,745 2,769,877 1,828,508 |
Paper manufacturing HK$’000 508,163 (151,398) 356,765 22,212 — 45 12,839 — 15 93,329 Paper manufacturing HK$’000 825,112 — 825,112 215,118 |
Others HK$’000 132,552 (4,542) 128,010 (8,395) — 209 8,668 65 — 1,121 Others HK$’000 185,292 — 185,292 42,998 |
Total HK$’000 4,069,901 (208,656) 3,861,245 142,209 (16,232) 125,977 (29,984) 405 96,398 (33,843) 62,555 3,812 28,702 852 543 109,676 Total HK$’000 3,719,536 60,745 3,780,281 1,441 4,956 1,204 3,787,882 2,086,624 17,285 37,640 562,546 2,704,095 |
|---|---|---|---|---|
– 10 –
The Group’s operating segments operate in the following geographical areas, even though they are managed on a worldwide basis.
Group
| Hong Kong The PRC2 Singapore Korea Malaysia |
Revenue 2011 2010 HK$’000 HK$’000 1,627,745 1,174,870 2,599,135 2,251,900 96,159 119,412 297,847 268,001 56,013 47,062 4,676,899 3,861,245 |
Non-current assets1 2011 2010 HK$’000 HK$’000 (restated) 325,332 278,495 1,171,272 651,892 88,900 94,907 1,246 1,444 99 214 1,586,849 1,026,952 |
Non-current assets1 2011 2010 HK$’000 HK$’000 (restated) 325,332 278,495 1,171,272 651,892 88,900 94,907 1,246 1,444 99 214 1,586,849 1,026,952 |
|---|---|---|---|
| 1,026,952 |
-
1 Non-current assets exclude deferred tax assets.
-
2 The PRC, for the presentation purpose in these accounts, excludes Hong Kong Special Administrative Region of the PRC, Macau Special Administrative Region of the PRC and Taiwan.
3. OPERATING PROFIT
Operating profit is stated after charging and crediting the following:
| Charging Raw materials and consumables Changes in finished goods Net losses on investments in financial assets Provision for impairment on receivables Depreciation of property, plant and equipment Amortisation of prepaid premium for land leases Amortisation of intangible assets Crediting Net gains on investments in financial assets Net gains on disposal of an associated company Provision for impairment on receivables written back |
Group 2011 2010 HK$’000 HK$’000 (restated) 476,022 357,092 3,726,425 3,006,833 33 — 6,598 16,701 33,537 28,702 879 852 552 543 — 4,048 4,520 — 3,342 7,103 |
Group 2011 2010 HK$’000 HK$’000 (restated) 476,022 357,092 3,726,425 3,006,833 33 — 6,598 16,701 33,537 28,702 879 852 552 543 — 4,048 4,520 — 3,342 7,103 |
|---|---|---|
| 4,048 — 7,103 |
– 11 –
4. TAxATION
Hong Kong profits tax has been provided at the rate of 16.5% (2010: 16.5%) on the estimated assessable profit for the year. Taxation on overseas profit has been calculated on the estimated assessable profit for the year at the rates of taxation prevailing in the countries in which the Group operates.
The amount of taxation charged to the consolidated profit and loss account represents:
| Hong Kong profits tax Overseas taxation Over provision in previous years Deferred taxation relating to origination and reversal of temporary differences |
Group 2011 2010 HK$’000 HK$’000 7,518 9,361 5,702 14,742 (3,287) (375) 5,982 10,115 15,915 33,843 |
Group 2011 2010 HK$’000 HK$’000 7,518 9,361 5,702 14,742 (3,287) (375) 5,982 10,115 15,915 33,843 |
|---|---|---|
| 33,843 |
5. EARNINGS PER SHARE
On 20 January 2011, the Company issued 636,570,381 new ordinary shares through a bonus issue. The number of shares used for prior year calculations of earnings per share shown below have been adjusted for bonus issue in order to provide a comparable basis for the current year.
(a) Basic
Basic earnings per share is calculated by dividing the profit attributable to the owners of the parent less preference dividends of HK$69,488,000 (restated 2010: HK$60,679,000) by the weighted average number of 1,034,524,000 (adjusted 2010: 1,006,550,000) ordinary shares in issue during the year.
(b) Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has two categories of dilutive potential ordinary shares: preference shares and warrants. The preference shares are assumed to be converted into ordinary shares. For the warrants, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company’s share) based on the monetary value of the subscription rights attached to outstanding warrants. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the warrants. The Company has a share option scheme but no share option (2010: nil) has been granted under the scheme.
| Profit attributable to owners of the parent_(HK$’000) Weighted average number of ordinary shares in issue(’000) Adjustments for: — Warrants(’000) — Preference shares(’000) Weighted average number of shares for diluted earnings per share(’000)_ Diluted earnings per share |
Group 2011 2010 (restated) 73,450 61,999 1,034,524 1,006,550 996 — 238,440 264,130 1,273,960 1,270,680 HK5.8 cents HK4.9 cents |
Group 2011 2010 (restated) 73,450 61,999 1,034,524 1,006,550 996 — 238,440 264,130 1,273,960 1,270,680 HK5.8 cents HK4.9 cents |
|---|---|---|
| 1,006,550 — 264,130 1,270,680 |
||
| HK4.9 cents |
– 12 –
6. DIVIDENDS
| Interim — HK$0.01 (2010: HK$0.01) per ordinary share Interim — HK$0.01 (2010: HK$0.01) per preference share Proposed final — HK$0.01 (2010: HK$0.02) per ordinary share Proposed final — HK$0.01 (2010: HK$0.02) per preference share |
Group 2011 2010 HK$’000 HK$’000 5,045 5,038 1,321 1,320 11,410 10,090 1,321 2,641 19,097 19,089 |
Group 2011 2010 HK$’000 HK$’000 5,045 5,038 1,321 1,320 11,410 10,090 1,321 2,641 19,097 19,089 |
|---|---|---|
| 19,089 |
At a meeting held on 27 June 2011, the Directors proposed a final dividend of HK$0.01 per share. This proposed dividend is not reflected as a dividend payable in these accounts, but will be reflected as an appropriation of retained earnings for the year ending 31 March 2012.
7. ACCOUNTS RECEIVABLE, DEPOSITS AND PREPAYMENTS
| Trade receivables — net of provision Other receivables, deposits and prepayments Amount due from a non-controlling interest The aging analysis of trade receivables is as follows: Current to 60 days 61 to 90 days Over 90 days |
Group 2011 2010 HK$’000 HK$’000 1,080,041 1,032,742 351,209 352,957 — 3,031 1,431,250 1,388,730 Group 2011 2010 HK$’000 HK$’000 835,826 824,317 156,488 121,262 87,727 87,163 1,080,041 1,032,742 |
Group 2011 2010 HK$’000 HK$’000 1,080,041 1,032,742 351,209 352,957 — 3,031 1,431,250 1,388,730 Group 2011 2010 HK$’000 HK$’000 835,826 824,317 156,488 121,262 87,727 87,163 1,080,041 1,032,742 |
|---|---|---|
| 1,032,742 |
The Group normally grants credit to customers ranging from 30 to 90 days.
8. ACCOUNTS PAYABLE AND ACCRUALS
| Trade and bills payables Accruals and other payables |
Group 2011 2010 HK$’000 HK$’000 1,208,880 1,114,062 153,381 185,114 1,362,261 1,299,176 |
Group 2011 2010 HK$’000 HK$’000 1,208,880 1,114,062 153,381 185,114 1,362,261 1,299,176 |
|---|---|---|
| 1,299,176 |
– 13 –
The aging analysis of trade and bills payables is as follows:
| The aging analysis of trade and bills payables is as follows: | ||
|---|---|---|
| Current to 60 days 61 to 90 days Over 90 days |
Group 2011 2010 HK$’000 HK$’000 812,794 904,833 208,759 104,888 187,327 104,341 1,208,880 1,114,062 |
|
| 1,114,062 |
9. SHARE CAPITAL
| Authorised: Ordinary shares At the beginning and end of year Convertible non-voting preference shares At the beginning and end of year Total Issued and fully paid: Ordinary shares At the beginning of year Conversion from preference shares Exercise of bonus warrants_(note(a)) Issurance of bonus shares(note(b))_ At the end of year Convertible non-voting preference shares At the beginning of year Conversion to ordinary shares At the end of year Total |
Number of shares of HK$0.10 each 2011 2010 1,456,913,987 1,456,913,987 143,086,013 143,086,013 1,600,000,000 1,600,000,000 503,779,117 491,758,039 — 11,021,078 726,329 1,000,000 636,570,381 — 1,141,075,827 503,779,117 132,064,935 143,086,013 — (11,021,078) 132,064,935 132,064,935 1,273,140,762 635,844,052 |
Share capital 2011 2010 HK$’000 HK$’000 145,691 145,691 14,309 14,309 160,000 160,000 50,378 49,176 — 1,102 73 100 63,657 — 114,108 50,378 13,207 14,309 — (1,102) 13,207 13,207 127,315 63,585 |
|---|---|---|
Notes:
- (a) On 5 December 2008, the Company issued 95,390,675 warrants on the basis of one warrant for every six existing ordinary shares (“bonus warrants”) and convertible non-voting preference shares (“CP shares”) of the Company held by the shareholders. The holders of bonus warrants are entitled to subscribe any time during 5 December 2008 to 4 June 2010 for ordinary shares at a subscription price of HK$0.80 per share. During the year, 726,329 ordinary shares (2010: 1,000,000 ordinary shares) of HK$0.10 each were issued upon the exercise of 726,329 (2010: 1,000,000) units of bonus warrants. All the bonus warrants expired on 4 June 2010 and as at 31 March 2011, no (2010: 31,890,675) bonus warrants were outstanding.
– 14 –
- (b) At the Special General Meeting of the Company held on 7 January 2011, the shareholders of the Company approved the issue of 636,570,381 bonus shares on the basis of one bonus share for every ordinary share and CP share. The bonus shares are credited as fully paid by way of capitalisation of an amount equal to the total par value of the bonus shares standing to the credit of the share premium account of the Company. Upon issuance, the bonus shares rank pari passu in all respects with the then existing ordinary shares in issue except that they do not rank for the interim dividend for the six months ended 30 September 2010.
MANAGEMENT DISCUSSION AND ANALYSIS
The Economy
During the year under review, the revival of the global economy progressed. The economies of the Hong Kong Special Administrative Region (“Hong Kong”) and the People’s Republic of China (the “PRC”) were booming, benefitting from the new capital influx under the continued quantitative easing monetary policy in the US. The outbreak of the sovereignty debt crisis in Europe, leading to concern in markets during the second quarter of 2010, affected the consumer sentiment to a certain extent.
The GDP of the PRC rose by 10.3% in the calendar year of 2010, the highest growth rate among all major national economies in the world. As the PRC government began to tighten credit and money supply to curb inflation, its GDP still reported a rapid growth of 9.7% in the first quarter of 2011, indicating that the flourishing economy continued.
In terms of the local economy, the GDP of Hong Kong reported a rise of 7.0% in the first quarter of 2011, a moderate slowdown when compared to the actual growth of 7.2% in the calendar year of 2010. Since Hong Kong’s economy was adversely affected by the financial crisis and its GDP actually dropped to negative figures during 2009, the rebound in 2010 was particularly strong. Although the earthquake, tsunami and subsequent nuclear crisis struck Japan, Hong Kong’s third largest trading partner, it is believed that these incidents would not have significant impact on the growth of Hong Kong’s economy as trade with Japan only accounted for 6.8% of total value of Hong Kong’s trade.
The Printing and Paper Product Industries
In early 2010, there was a surge in paper prices mainly due to the earthquake in Chile, which has affected the pulp supply, and extended the production schedule of paper products, leading to customers stocking up inventories in the first half of the calendar year. However, the effect of the earthquake was only temporary. In addition, customers adopted a more prudent and conservative procurement approach as a result of the sovereignty debt crisis in Europe. The end result of these developments was that market demand for paper products gradually slowed down. Furthermore, facing the tightening monetary policy in the PRC, paper product suppliers had to speed up sales to ease the inventory pressure and increase their cash on hand. Surges in energy and raw material costs also exerted pressure on the production costs, but the price of paper products did not rise at the same rate under the fierce market competition. From September 2010 to March 2011, the prices of book printing papers and packaging boards have increased approximately 3% and 7% respectively.
Operations Review
For the year ended 31 March 2011, the Group recorded a satisfactory performance. Driven by the synergies gradually created within its trading business plus the rapid growth of the manufacturing business, the Group has set a new record in total turnover. Turnover grew by 21.1% year-on-year from HK$3,861,000,000 to HK$4,677,000,000. In terms of volume, it increased by 7.5%. Profit for the year has risen by 15.4% from HK$62,555,000 last year to HK$72,211,000. The Group has opened six new sales offices in the PRC during the year to capture the opportunities brought about by the
– 15 –
rapid growth of the PRC economy. In order to grapple for larger market share amidst fierce market competition as a result of tightened monetary policy in the PRC since October 2010, the Group’s overall gross profit margin dropped from 11.4% last year to 9.2%, while net profit margin declined slightly by 0.1 percentage point to 1.5% from last year. Earnings per share were HK 6.7 cents, compared to HK6.0 cents last year.
The Board recommended payments of a final dividend of HK1 cent per share, which is comparable to last year’s HK2 cents prior to the issuance of one-for-one bonus share. Together with the interim dividend of HK1 cent per share, the total dividends were HK2 cents per share for the year.
The Group has been adhering to conservative financial strategy. During the year under review, tightening of monetary policy in the PRC spurred the Group to prudently reserve more fundings to support working capital needs of capturing new market and sales opportunity. As at 31 March 2011, the Group had cash and bank balance of HK$835,000,000 with a gearing ratio maintaining at a healthy level of about 50%. During the year, the Group continued to exercise a stringent credit policy. Despite the notable growth in turnover, the collection period was shortened by 1 day to 82 days. Net provision for doubtful and bad debts for the year reduced from HK$9,600,000 to HK$3,256,000, a further indication of a solid financial position.
By business segment, paper trading, paper manufacturing and other businesses accounted for 85.0%, 12.8% and 2.2% of the Group’s total turnover respectively.
Paper Business
The Group is the only vertically integrated paper trader and manufacturer in Hong Kong. Its unique business model has brought important synergies to the Group. In light of the growing demand for paper products in the PRC market coupled with the favorable geographical location of its paper mill in Shandong, the Group is well-positioned to capture the tremendous demand for paper from various industrial areas in the nearby Yangtze River and Bohai Rim regions. As a result, turnover of the Group’s paper products increased by 22.5% from HK$3,733,000,000 in the same period last year to HK$4,573,000,000. Operating profit was HK$148,000,000, a decrease of 2% from HK$151,000,000 in the same period last year as a result of fierce market competition in the paper trading business. In terms of volume, the Group sold 755,000 metric tonnes of paper products during the year under review, a rise of 7.5% when compared to the last corresponding year.
Paper Trading Business
Owing to the Group’s well-established sales network in the PRC and the persistently strong market demand for paper products, sales volume of the paper trading business increased by 2.9%. Sales value grew by 17.8% to HK$3,977,000,000. During the year, the Group has accelerated the pace of opening new sales offices to fully capture the opportunities presented by the rapid growth of the PRC economy. To enhance market penetration amid the keen market condition resulted in 23.4% drop of operating profit from HK$128,000,000 to HK$98,000,000. Although no significant contribution has been made during the year, the newly set-up sales offices progressively increased the market share of the Group. The Group believes that the new offices will start contributing from next year onward, generating stronger synergies with existing networks and boost the sales of paper products for the manufacturing business, when the operations of the new sales offices advance.
Since its establishment in 1965, the Group has strived to extend its presence within the PRC with the aim to increase its market share. As of today, the Group has more than 20 sales offices across the country, covering both major coastal industrial and large inland cities. As a result, sales in China
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accounted for 50.2% of the total turnover of paper products. Hong Kong remained as the Group’s second largest market with 40.9% of total sales of paper products while other Asian markets contributed to the remaining 8.9%.
The two key products of the paper trading business, book printing papers and packaging boards, accounted for 49.7% and 39.1% of the Group’s total turnover generated from paper trading business respectively. The sales contributions from these two products remained stable.
Paper Manufacturing Business
To tap the enormous demand in the PRC, the Group extended its business into paper manufacturing after the acquisition of the Shandong paper mill in 2008. The move has been proven to be successful in lifting its revenue and profitability. Taking into account of HK$103,000,000 from internal sales, turnover surged by 37.8% (or HK$192,000,000) to HK$700,000,000. with sales volume rose by 10.7% As its two production lines commenced full operation during the year and the third one (PM5) started production in late February 2011, the current production capacity of Shandong paper mill has increased from 170,000 metric tonnes to 370,000 metric tonnes.
The effective cost control measures and economies of scale of the paper manufacturing business boosted the operating profit for the year to HK$49,000,000, 122% higher than last year. Operating profit margin also grew by 33.9%% to 8.3%. The expanding sales network in the PRC also served as an ideal sales platform for the manufacturing business, and enabled the Group to maintain a balance between production and sales since the paper mill started production. The Group expects to see stronger support for the manufacturing business as the sales offices start to develop business in their own right.
Other Businesses
The aeronautic parts and services business and marine services business recorded a turnover of HK$37,000,000 and HK$59,000,000 respectively during the year under review. The aeronautic parts and services business reported an operating profit of HK$395,000 while the marine services businesses managed to make an operating profit of HK$3,537,000 before including the loss of HK$4,761,000 on sale of equipments.
Prospects
Although there is certain pessimistic view in the market on the progress of economic transition in the PRC and lowered their estimates of economic growth for the following two years, the International Monetary Fund expects the GDP of the PRC to increase by 9.6% and 9.5% during 2011 and 2012 respectively. The increase is sufficient to maintain the PRC’s leading position among G20 members. Therefore, the Group remains sanguine about the long-term development of the country.
Under the Twelfth Five-year Plan, reduction of carbon emission is one of the key priorities of the country. More stringent environmental regulations are to be imposed on the paper manufacturing industry. The Ministry of Industry and Information Technology of the PRC has announced that the target of elimination on non-compliant paper production capacity has been significantly increased from 4,320,000 metric tonnes in 2010 to 7,445,000 metric tonnes in 2011. This accounts for around 7 to 8% of capacity of the entire paper manufacturing industry in the PRC. This industrial consolidation provides a golden opportunity for the Group to capture a greater share in the PRC market and advance our leading presence in the paper manufacturing industry. Hence, in the long run, the Group strives to boost itself to the next level and become one of the leaders within the PRC paper manufacturing industry.
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The new production line at the Shandong paper mill has commenced production in late February 2011. The Group’s total annual capacity almost doubled to 370,000 metric tonnes. It is expected that the new capacity of this production line is to be fully reflected in the next financial year. The cities in the Northern PRC are developing rapidly and have strong potential while the Shandong paper mill has sufficient land to support further development for a total production capacity exceeding 1,000,000 metric tonnes. Thus, the Group intends to increase production facilities as appropriate to boost its capacity in response to market demand.
For its paper trading business, the Group expects the sales offices opened during the year will start contributing to the business in the near future. Under our existing development approach, we will increase the number of sales offices in the PRC, to build a more expansive sales network and enhance the market penetration across the country.
The Group’s overall long-term objectives are to develop into one of the leaders in the paper manufacturing industry and consolidate the leading presence of its trading business in the PRC and Hong Kong, leveraging the expanding economy of the PRC.
FINAL DIVIDEND
The Board has resolved to recommend a final dividend of HK1.0 cent per share (2010: HK2.0 cents) payable on 6 October 2011 to persons who are registered shareholders of the Company on 27 September 2011 subject to the approval of shareholders at the forthcoming annual general meeting. Together with the interim dividend of HK1.0 cent per share (2010: HK1.0 cent), the total dividend for the financial year is HK2.0 cents per share (2010: HK3.0 cents).
CLOSURE OF REGISTER OF MEMBERS
The transfer books and the register of members of the Company will be closed from Wednesday, 21 September 2011 to Tuesday, 27 September 2011 (both days inclusive), during which no transfer of shares of the Company will be registered. In order to qualify for the proposed final dividend, all transfers of shares of the Company accompanied by the relevant share certificates must be lodged with the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited at Shop 1712–1716, 17/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration no later than 4:30 p.m. on Tuesday, 20 September 2011.
EMPLOYEES AND REMUNERATION POLICIES
As at 31 March 2011, the Group employed 1,809 staff members, 145 of whom are based in Hong Kong and 1,386 are based in the PRC and 278 are based in other Asian countries. The Group’s remuneration policies are primarily based on prevailing market salary levels and the performance of the Group and of the individuals concerned. Remuneration policies are reviewed regularly to ensure that the Group is offering competitive employment packages. In addition to salary payments, other staff benefits include performance bonuses, education subsidies, provident fund, medical insurance and the use of a share option scheme to reward high-calibre staff. Training for various levels of staff is undertaken on a regular basis, consisting of development in the strategic, implementation, sales and marketing disciplines.
LIQUIDITY AND FINANCIAL RESOURCES
The Group normally finances short term funding requirements with cash generated from operations, credit facilities available from suppliers and banking facilities (both secured and unsecured) provided by our bankers. The Group uses cash flow generated from operations, long term borrowings and
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shareholders’ equity for the financing of long-term assets and investments. As at 31 March 2011, short term deposits plus bank balances amounted to HK$835 million (2010: HK$593 million) (including restricted bank deposits of HK$152 million (2010: HK$130 million)) and bank borrowings amounted to HK$2,056 million (2010: HK$1,345 million).
The Group continues to implement prudent financial management policy and strives to maintain a reasonable gearing ratio during expansion. As at 31 March 2011, the Group’s gearing ratio was 50.0% (2010: 41.1%), calculated as net debt divided by total capital. Net debt of HK$1,222 million (2010: HK$757 million) is calculated as total borrowings of HK$2,057 million (2010: HK$1,350 million) (including trust receipt loans, short term and long term borrowings, and finance lease obligations) less cash on hand and restricted deposits of HK$835 million. Total capital is calculated as total equity of HK$1,222 million (2010: HK$1,084 million) plus net debt. The increase in gearing ratio was mainly attributable to the Group’s additional bank borrowings for its investment in new production facilities to capture new market and sales opportunity and the corresponding increase in the demand for working capital as a result of growth in turnover. The current ratio (current assets divided by current liabilities) was 1.15 times (2010: 1.15 times).
With bank balances and other current assets amounted to HK$3,115 million (2010: HK$2,756 million) as well as available banking and trade facilities, the directors of the Company (the “Directors”) believe the Group has sufficient working capital for its present requirement.
FOREIGN ExCHANGE RISK
The Group’s transaction currencies are principally denominated in Renminbi, United States dollar and Hong Kong dollar. The Group hedged its position with foreign exchange contracts and options when considered necessary. The Group has continued to obtain Renminbi loans which provide a natural hedge against currency risks. As at 31 March 2011, bank borrowings in Renminbi amounted to HK$411 million (2010: HK$84 million). The remaining borrowings are mainly in Hong Kong dollar. The majority of the Group’s borrowings bear interest costs which are based on floating interest rates. As at 31 March 2011, the Group has no outstanding interest rate swap contracts (2010: Nil).
CONTINGENT LIABILITIES AND CHARGE OF ASSETS
As at 31 March 2011, the Company continued to provide corporate guarantees on banking facilities granted to the Group’s subsidiaries. The amount of facilities utilised by the subsidiaries as at 31 March 2011 amounted to HK$2,056 million (2010: HK$1,345 million).
Certain land and buildings and investment properties of the Company’s subsidiaries, with a total carrying value of HK$291 million as at 31 March 2011 (2010: HK$219 million) were pledged to banks as securities for bank loans of HK$128 million (2010: HK$47 million) and trust receipt loans of HK$215 million (2010: HK$238 million) granted to the Group.
AUDIT COMMITTEE
The audit committee of the Company (the “Committee”) comprises two independent non-executive directors of the Company, namely Mr. Pang Wing Kin, Patrick and Mr. Tong Yat Chong and one non-executive director of the Company, namely Mr. Lau Wang Yip, Eric. The principal activities of the Committee include the review and supervision of the Group’s financial reporting process and internal controls. The Committee has met with the senior management of the Company and the Company’s external auditor to review the annual financial statements as at 31 March 2011 before recommending them to the Board for approval.
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PURCHASE, SALE OR REDEMPTION OF SHARES
The Company has not redeemed any of its shares during the year. Neither the Company nor any of its subsidiaries has purchased or sold any of the Company’s shares during the year.
MODEL CODE FOR SECURITIES TRANSACTIONS
The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as the Company’s code of conduct for dealings in securities of the Company by the Directors. Having made specific enquiry of all the Directors, the Directors confirmed that they have complied with the required standard set out in the Model Code throughout the accounting period covered by the annual results.
COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE PRACTICES OF THE LISTING RULES
In the opinion of the Directors, the Company was in compliance with the Code of Corporate Governance Practices as set out in Appendix 14 of Rules Governing the Listing of Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) during the accounting period covered by the annual results except that the non-executive Directors were not appointed for a specific term but are subject to retirement by rotation and re-election at the Company’s annual general meetings in accordance with the bye-laws of the Company.
PUBLICATION OF DETAILED RESULTS ANNOUNCEMENT ON THE STOCK ExCHANGE’S WEBSITE
The 2010/2011 Annual Report of the Company containing all information required by the Listing Rules will be published on the Stock Exchange’s website (www.hkexnews.com.hk) and the Company’s website (www.samsonpaper.com) in due course.
BOARD OF DIRECTORS
As at the date of this announcement, the Board comprises five executive Directors, namely Mr. SHAM Kit Ying, Mr. LEE Seng Jin, Mr. CHOW Wing Yuen, Ms. SHAM Yee Lan, Peggy and Mr. LEE Yue Kong, Albert, one non-executive Director, Mr. LAU Wang Yip, Eric and three independent non-executive Directors, namely Mr. PANG Wing Kin, Patrick, Mr. TONG Yat Chong and Mr. NG Hung Sui, Kenneth.
By Order of the Board SHAM Kit Ying Chairman
Hong Kong, 27 June 2011
- for identification purpose only
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