Dragon Mining Limited — Interim / Quarterly Report 2005

Dec 15, 2004

Samson Paper Holdings Limited

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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 INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004

The board of directors (the “Board”) of Samson Paper Holdings Limited (the “Company”) is pleased to announce the unaudited condensed consolidated interim results of the Company and its subsidiaries (the “Group”) for the six months ended 30 September 2004 together with comparative figures for the corresponding period in 2003, and the unaudited condensed consolidated balance sheet of the Group as at 30 September 2004 with audited comparative figures as at 31 March 2004, as follows:

Samson Paper Holdings Limited 16-12-2004 1

Samson Paper Holdings Limited

CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT

Notes Turnover 2 Cost of sales Gross profit Other revenues Selling expenses Administrative expenses Other operating expenses Operating profit 3 Finance costs Share of profit less loss of associated companies Profit before taxation Taxation 4 Profit after taxation Minority interests Profit attributable to shareholders Interim dividend Earnings per share 5 Interim dividend per share	Unaudit Six months ended 3 2004 HK$’000 1,630,680 (1,463,250) 167,430 4,714 (60,558) (42,622) (10,041) 58,923 (15,425) 1,916 45,414 (12,725) 32,689 (1,058) 31,631 8,585 HK7.4 cents HK2.0 cents	ed 0 September 2003 HK$’000 1,394,255 (1,254,160) 140,095 4,077 (47,980) (38,301) (9,556) 48,335 (18,797) (542) 28,996 (7,822) 21,174 – 21,174 4,293 HK4.9 cents HK1.0 cent

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Samson Paper Holdings Limited

CONDENSED CONSOLIDATED BALANCE SHEET

3 Non-current assets Fixed assets Investment in associated companies Deferred tax assets Current assets Inventories Accounts receivable, deposits and prepayments Other investments Bank balances and cash Current liabilities Accounts payable and accrued charges Trust receipt loans Taxation payable Bank loans Net current assets Total assets less current liabilities Financed by: Share capital Reserves Proposed dividend Shareholders’ funds Minority interests Bank loans Deferred tax liabilities Net asset value per share	Unaudited 0 September 2004 HK$’000 150,334 67,245 2,281 219,860 290,445 1,263,527 27,725 235,701 1,817,398 438,808 662,072 12,839 217,321 1,331,040 486,358 706,218 42,926	Unaudited 0 September 2004 HK$’000 150,334 67,245 2,281 219,860 290,445 1,263,527 27,725 235,701 1,817,398 438,808 662,072 12,839 217,321 1,331,040 486,358 706,218 42,926	Audited 31 March 2004 HK$’000 144,691 66,018 2,508
			213,217 299,023 991,250 24,982 282,215
			1,597,470 390,488 595,808 4,564 148,809
			1,139,669
			457,801
			671,018
			42,926
	544,762 8,585		521,381 12,878
	553,347 596,273 2,619 100,104 7,222 706,218 HK139 cents		534,259
			577,185 – 86,806 7,027
			671,018
			HK134 cents

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Samson Paper Holdings Limited

Notes

1. Basis of preparation and accounting policies

The unaudited interim financial report has been reviewed by the Company’s audit committee, and reviewed by the Company’s auditors, PricewaterhouseCoopers, in accordance with Statement of Auditing Standard 700 “Engagements to review interim financial reports” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

These unaudited consolidated condensed interim accounts are prepared in accordance with Statement of Standard Accounting Practice 25 “Interim Financial Reporting”, issued by the HKICPA and Appendix 16 of Rules Governing the Listing Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

These condensed interim accounts should be read in conjunction with the 2004 annual accounts.

The accounting policies and methods of computation used in the preparation of these condensed interim accounts are consistent with those used in the annual accounts for the year ended 31 March 2004.

2. Segment information

The Group is principally engaged in trading and marketing of paper products. In accordance with the Group’s internal financial reporting, the Group has determined that business segments be presented as the primary reporting format. No business segment analysis is provided as over 90% of the Group’s turnover and profit contribution came from the distribution business of paper products during the period.

An analysis of the Group’s turnover for the period by geographical segment is as follows:–

Hong Kong Mainland China Others	Six months ende 2004 HK$’000 842,197 779,367 9,116 1,630,680	d 30 September 2003 HK$’000 851,156 543,099 –
		1,394,255

No contribution to operating profit from any of the above geographical segment is substantially out of line with the normal ratio of profit to turnover.

3. Operating profit

Operating profit is stated after crediting and charging the following:

Crediting Interest income Charging Depreciation of fixed assets	Six months ende 2004 HK$’000 2,693 4,628	d 30 September 2003 HK$’000 3,147
		5,427

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Samson Paper Holdings Limited

4. Taxation

Hong Kong profits tax has been provided at the rate of 17.5% (2003:17.5%) on the estimated assessable profit for the period. Taxation on profits assessable elsewhere has been calculated at the applicable rates of taxation prevailing in the countries in which the Group and the associated companies operate, based on existing legislation, interpretation and practices in respect thereof.

Hong Kong profits tax Mainland China taxation Deferred taxation Share of taxation attributable to associated companies Total taxation charge	Six months ende 2004 HK$’000 11,169 832 422 12,423 302 12,725	d 30 September 2003 HK$’000 6,910 175 527
		7,612 210
		7,822

5. Earnings per share

The calculation of earnings per share is based on the Group’s unaudited consolidated profit attributable to shareholders of HK$31,631,000 (2003:HK$21,174,000) for the period and on the weighted average number of 429,258,039 (2003: 429,258,039) shares of the Company in issue during the period.

6. Contingent liabilities

The Company provided corporate guarantees on the banking facilities granted to its three subsidiaries. The amount of such facilities utilized by such subsidiaries as at 30 September 2004 amounted to approximately HK$979,497,000 (31 March 2004: HK$831,423,000).

7. Commitments

• (a) Forward exchange contracts

As at 30 September 2004, the Group had outstanding forward exchange contracts to purchase American Dollars amounted to an aggregate of approximately HK$155,554,000 (31 March 2004: HK$181,200,000).

• (b) Operating lease commitments

As at 30 September 2004, the Group had total future aggregate minimum lease payments under non-cancellable operating leases in respect of land and buildings as follows:

No later than one year Later than one year and not later than five years (c) Capital commitments Capital commitments for property, plant and eq Contracted but not provided for	30 September 2004 HK$’000 10,545 394 10,939 uipment 30 September 2004 HK$’000 –	31 March 2004 HK$’000 11,171 4,514
		15,685
		31 March 2004 HK$’000 2,362

• (d) As at 30 September 2004, a wholly-owned subsidiary of the Company had commitment in respect of the injection of capital into a subsidiary in Mainland China amounted to approximately HK$6,380,000 (31 March 2004: HK$16,380,000).

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Samson Paper Holdings Limited

8. Charge of assets

As at 30 September 2004, trust receipt loans of HK$221,896,000 (31 March 2004: HK$195,341,000) and bank loans of HK$51,660,000 (31 March 2004: HK$38,737,000) were secured by legal charge on certain properties of the Group in Hong Kong.

INTERIM DIVIDEND

The Board has resolved to declare the payment of an interim dividend of HK 2 cents (2003: HK 1 cent) per share for the six months ended 30 September 2004. The interim dividend will be payable to all shareholders of the Company whose names appear on the register of members of the Company on Friday, 7 January 2005. The interim dividend will be paid on or about Friday, 14 January 2005.

CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed from Wednesday, 5 January 2005 to Friday, 7 January 2005 (both days inclusive), during which period no transfers of shares of the Company will be registered. In order to qualify for the interim dividend, all transfers of shares accompanied by the relevant share certificates must be lodged with the Company’s branch registrars, Computershare Hong Kong Investor Services Limited at Suite 1901-5, 19th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration no later than 4:00 pm on Tuesday, 4 January 2005.

MANAGEMENT DISCUSSION AND ANALYSIS The Economy

The Hong Kong economy was gradually recovering, manifested as encouraging GDP growth during the review period. As for Mainland China, the economy continued to grow strongly.

The printing and publishing industries benefited from the rebounding economy in Hong Kong. The total exports of printed matters in Hong Kong remained robust. It rose by 18% in the first nine months of 2004.

The Paper Industry

During the review period, there was a vast demand for paper prompted by the economy on its pick up and return of buying sentiment. These factors plus the rise in pulp price accounted for an approximately 10% increase in the price of book printing papers during the review period. The price of packaging boards, however, remained stable.

Operations Review

Owing to the improvement of the economy, the Group achieved a revenue of HK$1,630 million, representing a 17% growth as compared with the last corresponding period. The Group’s sales increased by 10% in terms of volume to 293,000 metric tonnes. Gross profit was recorded at HK$167 million with gross margin at 10.27%, as compared with 10.05% of the last corresponding period. Net profit increased by 49% to HK$31.6 million with net profit margin at 1.94%, as compared with 1.52% of the last corresponding period. Earnings per share increased by 51% to HK 7.4 cents. The Board has resolved to pay an interim dividend of HK 2 cents per share (2003: HK 1 cent).

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Samson Paper Holdings Limited

The Group’s strategy of expanding into the Mainland China market proved successful as reflected in the significant growth in revenue contribution from the market. Turnover from the Mainland China market rose by 42% and reached HK$772 million. It is the fifth consecutive year the Group recorded significant growth in the market. The Group currently has an extensive market presence in Beijing, Shanghai, Chongqing, Foshan and Shenzhen. The sales in Mainland China made up 48% of the Group’s total turnover, and Hong Kong contributed to the remaining 52%, or HK$842 million.

During the review period, the Group’s paper manufacturing arm, the Singapore listed United Pulp & Paper Company Limited (“UPP”), an associated company of the Group, contributed to the Group an operating profit of HK$1.7 million, as compared to an operating loss of HK$0.6 million in the corresponding period last year. The improvement was the result of its efforts to rationalize and streamline its business operations, and improve cost competitiveness and operating efficiencies. The Group will continuously leverage UPP’s established position to further enhance its distribution network and generate synergies to the Group’s paper trading business.

To provide added value services to our customers, the Group has invested in transportation and custom clearance services business, which has started to contribute profit during the period. The Group is committed to providing quality services to its customers.

The increase in both turnover and net profit during the review period was mainly attributable to the rise of paper demand and prices, as well as the improvement in profit margin. Interest rate, however, remained low during the period. Hence, finance cost decreased by 18% to HK$15.4 million from HK$18.8 million in the corresponding period last year. Sales and administration expenses stood at 6.3% of the turnover, a similar level to that of the corresponding period last year.

Though both the Hong Kong and Mainland China economy were improving, the Group maintained a prudent inventory policy. During the period, stock turnover decreased from 36 days to 32 days.

In view of the prevailing market conditions, the Group also adopted a prudent credit policy to manage its exposure to doubtful debts. As a result, the provision level was the same as the last corresponding period. This included a general provision of 0.1% of total sales.

PROSPECTS

The economy of Hong Kong and Mainland China are expected to grow at moderate pace. Hong Kong will remain as a centre for global printing and publishing activities, as its printers and publishers have been relentless in ensuring their competitiveness. The Group expects stable growth for the prices of book printing papers and packaging boards in the coming period.

Looking forward to 2005, Mainland China will continue to be the Group’s major growth driver. The market will further expand and present many business opportunities to the Group. Hence, the Group plans to establish additional presence so as to deepen its market penetration.

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Samson Paper Holdings Limited

Furthermore, the Group will continue to adopt a prudent financial management policy, which is in line with the Group’s strategy. To further enhance its competitiveness, the Group will continue to expand its product range and variety and provide quality and value added services to its customers. The management is cautiously optimistic about its performance in the second half of the year.

EMPLOYEES AND REMUNERATION POLICIES

As at 30 September 2004, the total number of the Group’s employees was 398. The Group’s remuneration policies are primarily based on prevailing market salary levels and the performance of the Group and the individual concerned. In addition to salary payment, other staff benefits including performance bonus, education subsidies, provident fund, medical insurance and share option are offered to reward our highcalibre staff. Training encompassing strategic, implementation, sales and marketing disciplines are offered to various levels of management on a regular basis.

LIQUIDITY AND FINANCIAL RESOURCES

The Group’s short term deposits and bank balances as at 30 September 2004 amounted to approximately HK$236 million. To meet the demand of the Group, additional bank borrowings were drawn and their aggregate balance increased by HK$148 million to HK$979 million in the six months ended 30 September 2004. As at 30 September 2004, its gearing ratio, measured on the basis of the Group’s long term debt over the Group’s shareholders’ funds was 17% (31 March 2004: 15%). With bank balances and other current assets of HK$1,817 million as well as available bank and trade facilities, the directors of the Company (the “Directors”) believe the Group has sufficient working capital to meet its present requirement.

The Group’s foreign currency purchases were mainly denominated in United States dollars. Foreign exchange contracts and options were used, if necessary, to hedge the Group’s foreign currency exposure.

AUDIT COMMITTEE

The principal activities of the audit committee of the Company (the “Committee”) include the review and supervision of the Group’s financial reporting process and internal controls. The Committee has reviewed the Group’s unaudited interim report for the six months ended 30 September 2004 before it was tabled for the Board’s approval. The review of the unaudited interim financial statements was conducted in conjunction with the Group’s external auditors.

PURCHASE, SALE OR REDEMPTION OF SHARES

During the six months ended 30 September 2004, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities.

COMPLIANCE WITH THE CODE OF BEST PRACTICE

None of the Directors is aware of any information which would reasonably indicate that the Company is not, or was not during the six months ended 30 September 2004 in compliance with the Code of Best Practice as set out in Appendix 14 to the Listing Rules except that the non-executive Directors of the Company are not appointed for a specific term as they are subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the Company’s Bye-laws.

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Samson Paper Holdings Limited

PUBLICATION OF DETAILED RESULTS ANNOUNCEMENT ON THE STOCK EXCHANGE’S WEBSITE

A detailed results announcement containing all the information in respect of the Company required by paragraphs 46(1) to 46(6) of Appendix 16 to the Listing Rules in force prior to 31 March 2004, which remain applicable to results announcements in respect of accounting periods commencing before 1 July 2004 under the transitional arrangement, will be published on the Stock Exchange’s website in due course.

BOARD OF DIRECTORS

As at the date of 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 and three independent non-executive Directors, namely Mr. PANG Wing Kin, Patrick, Mr. LAU Wang Yip, Eric and Mr. TONG Yat Chong.

By order of the Board SHAM Kit Ying Chairman

Hong Kong, 15 December 2004

Please also refer to the published version of this announcement in The Standard dated 16 December 2004.

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