Dynamic Holdings Limited — Interim / Quarterly Report 2012

Feb 24, 2012

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

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DYNAMIC HOLDINGS LIMITED 達力集團有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 029)

INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2011

INTERIM RESULTS

The board of directors (the “ Directors ”) of Dynamic Holdings Limited (the “ Company ”) is pleased to announce that the unaudited consolidated results of the Company and its subsidiaries (the “ Group ”) for the six months ended 31 December 2011 together with comparative figures for the corresponding period in 2010 are as follows:

Condensed Consolidated Statement of Comprehensive Income

Notes Turnover 3 Direct costs Gross profit Other income 4 Increase in fair value of investment properties Administrative expenses Finance costs 6 Share of loss of a jointly controlled entity Profit before taxation Taxation 7 Profit for the period Other comprehensive income Exchange difference on translation to presentation currency Total comprehensive income for the period	Unaudited Six months ended 31 December 2011 2010 HK$’000 HK$’000 50,813 37,347 (14,978) (12,623) 35,835 24,724 18,281 15,189 34,274 21,642 (20,107) (10,754) (2,412) (1,207) (3,248) (3,609) 62,623 45,985 (11,187) (7,179) 51,436 38,806 43,906 37,565 95,342 76,371

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Note Profit for the period attributable to: Owners of the Company Non-controlling interest Total comprehensive income attributable to: Owners of the Company Non-controlling interest Earnings per share_(Hong Kong cents) _8 Basic Diluted	Unaudited Six months ended 31 December 2011 2010 HK$’000 HK$’000 50,320 37,730 1,116 1,076 51,436 38,806 93,408 74,531 1,934 1,840 95,342 76,371 22.97 17.22 22.87 17.22	Unaudited Six months ended 31 December 2011 2010 HK$’000 HK$’000 50,320 37,730 1,116 1,076 51,436 38,806 93,408 74,531 1,934 1,840 95,342 76,371 22.97 17.22 22.87 17.22
		38,806
		74,531 1,840
		76,371
		17.22
		17.22

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Condensed Consolidated Statement of Financial Position

Notes Non-current Assets Property, plant and equipment Investment properties 10 Interest in a jointly controlled entity 11 Amount due from a jointly controlled entity 11 Other receivables Current Assets Properties held for sale Loan receivables Trade and other receivables 12 Amount due from a non-controlling shareholder Bank deposits – pledged Bank balances and cash Current Liabilities Trade and other payables 13 Pre-sale deposits received Tax payable Bank loans – due within one year Net Current Assets (Liabilities) Total Assets less Current Liabilities Capital and Reserves Share capital Reserves Equity attributable to owners of the Company Non-controlling interest Total Equity Non-current Liabilities Bank loans – due after one year Deferred tax liabilities	Unaudited At 31 December 2011 HK$’000 2,342 1,722,709 64,968 240,800 – 2,030,819 30,481 – 18,287 943 19,060 162,866 231,637 58,329 894 101,156 25,000 185,379 46,258 2,077,077 219,104 1,492,237 1,711,341 33,293 1,744,634 218,750 113,693 332,443 2,077,077	Audited At 30 June 2011 HK$’000 2,447 1,645,704 65,759 228,154 – 1,942,064 32,736 – 15,394 920 60,734 97,761 207,545 58,565 2,257 97,977 79,490 238,289 (30,744) 1,911,320 219,104 1,394,998 1,614,102 31,359 1,645,461 160,210 105,649 265,859 1,911,320

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Notes:

1. BASIS OF PREPARATION

The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard (“ HKAS ”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”) and the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities (the “ Listing Rules ”) on The Stock Exchange of Hong Kong Limited.

The preparation of an interim financial report in conformity with HKAS 34 requires management to make judgements, estimates and assumption that affect the application of policies and reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates.

The condensed consolidated financial statements of the Group for the six months ended 31 December 2011 are unaudited and have been reviewed by the audit committee of the Company.

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

2. PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared under the historical cost basis, except for investment properties and financial instruments, which are measured at fair values, as appropriate.

The accounting policies used in the condensed consolidated financial statements are consistent with those applied in the preparation of the annual financial statements of the Group for the year ended 30 June 2011 except as described below.

In the current period, the Group has applied, for the first time, the following new and revised standards, amendments and interpretations (“ new and revised standards ”) issued by HKICPA.

HKFRSs (Amendments)	Improvements to HKFRSs 2010 except for the amendments to
	HKAS 27 and HKFRS 3
HKFRS 1 (Amendments)	Severe Hyperinflation and Removal of Fixed Dates for
	First-time Adopters
HKFRS 7 (Amendments)	Disclosures – Transfers of Financial Assets
HKAS 24 (Revised 2009)	Related Party Disclosures
HK (IFRIC) – Int 14 (Amendments)	Prepayments of a Minimum Funding Requirement

The adoption of the above new and revised standards has had no material effect on the amounts reported and/or disclosures set out in these condensed consolidated financial statements of the Group.

The Group has not early applied the following new and revised standards that have been issued but are not yet effective.

HKFRS 7 (Amendments) Disclosures – Offsetting Financial Assets and Financial Liabilities[3] HKFRS 9 Financial Instruments[5] HKFRS 10 Consolidated Financial Statement[3] HKFRS 11 Joint Arrangements[3] HKFRS 12 Disclosure of Interests in Other Entities[3] HKFRS 13 Fair Value Measurement[3] HKAS 1 (Amendments) Presentation of Items of Other Comprehensive Income[2] HKAS 12 (Amendments) Deferred Tax: Recovery of Underlying Assets[1] HKAS 19 (Revised 2011) Employee Benefits[3] HKAS 27 (Revised 2011) Separate Financial Statements[3] HKAS 28 (Revised 2011) Investments in Associates and Joint Ventures[3] HKAS 32 (Amendments) Presentation – Offsetting Financial Assets and Financial Liabilities[4] HK(IFRIC) – 20 Stripping Costs in the Production Phase of a Surface Mine[3]

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• 1 Effective for annual periods beginning on or after 1 January 2012 2 Effective for annual periods beginning on or after 1 July 2012 3 Effective for annual periods beginning on or after 1 January 2013 4 Effective for annual periods beginning on or after 1 January 2014 5 Effective for annual periods beginning on or after 1 January 2015

The Group is in the process of making an assessment of the potential impact of these new and revised standards, and the Directors so far concluded that save for those disclosed in the notes to the consolidated financial statements in the annual report of the Company for the year ended 30 June 2011, the application of other new and revised standards will have no material impact on the results and the financial position of the Group.

3. TURNOVER AND SEGMENT INFORMATION

Information reported to the board of Directors (the “ Board ”) of the Company, being the chief operating decision maker, for the purpose of resource allocation and assessment of performance focused on the location of the properties for property rental and property sales.

The property rental segment includes property leasing operation in the People’s Republic of China (“ PRC ”). The Group’s investment properties portfolio, which mainly consists of offices, shopping mall and carparks, are located in Beijing and Shanghai. The property sales segment includes sale of the Group’s trading properties in Beijing.

These divisions are the basis on which the Group reports its segment information under HKFRS 8 “Operating Segments”.

The following is an analysis of the Group’s revenue and results by reportable segment for the period:

SEGMENT REVENUE TURNOVER External sales SEGMENT RESULT Unallocated other income Unallocated corporate expenses Finance costs Share of loss of a jointly controlled entity Profit before taxation	Property rental Property sales Beijing Shanghai Beijing Unaudited Six months ended 31 December 2011 2010 2011 2010 2011 2010 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 15,782 13,292 25,624 22,050 9,407 2,005 21,595 28,148 42,168 17,208 8,054 2,015	Consolidated 2011 2010 HK$’000 HK$’000 50,813 37,347 71,817 47,371 14,897 13,599 (18,431) (10,169) (2,412) (1,207) (3,248) (3,609) 62,623 45,985
	Beijing 2011 2010 HK$’000 HK$’000 15,782 13,292 21,595 28,148	2011 HK$’000 50,813 71,817 14,897 (18,431) (2,412) (3,248) 62,623

The accounting policies of the operating segments are the same as the Group’s accounting policies. Segment result represents the profit earned or loss incurred from each segment without the allocation of central administration costs, bank interest income, imputed interest income on amount due from a jointly controlled entity, finance costs and share of result of a jointly controlled entity. This is the measure reported to the Directors for the purposes of resources allocation and performance assessment.

Turnover arising from property sales of HK$9,407,000 (2010: from property rental of HK$35,342,000) included turnover of approximately HK$6,478,000 (2010: HK$5,572,000 from property rental) which was contributed by the Group’s largest customer.

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4. OTHER INCOME

	Unaudited	Unaudited
	Six months	ended
	31 December
	2011	2010
	HK$’000	HK$’000
Included in other income are:
Bank interest income	1,885	200
Exchange gain, net	6,140	6,889
Imputed interest income on other receivables	131	242
Imputed interest income on amount due from a jointly controlled entity	6,885	6,509

5. DEPRECIATION AND AMORTISATION

Profit before taxation has been arrived at after charging the following items: Depreciation Amortisation	Unaudited Six months ended 31 December 2011 2010 HK$’000 HK$’000 215 317 – –	Unaudited Six months ended 31 December 2011 2010 HK$’000 HK$’000 215 317 – –
		–

6. FINANCE COSTS

	Unaudited	Unaudited
	Six months	ended
	31 December
	2011	2010
	HK$’000	HK$’000
Interest on bank borrowings wholly repayable within five years	2,412	1,207

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7. TAXATION

	Unaudited	Unaudited
	Six months ended
	31 December
	2011	2010
	HK$’000	HK$’000
The tax charge comprises:
Income tax in the PRC (other than Hong Kong)
Current period	5,501	3,233
PRC land appreciation tax (“LAT”)	790	–
Deferred tax liabilities
Current period charge	4,896	3,946
	11,187	7,179
PRC enterprise income tax and LAT are calculated at the rates prevailing in	the PRC.

Deferred tax has been provided on temporary differences using the current applicable rate.

8. EARNINGS PER SHARE

The calculation of basic and diluted earnings per share attributable to owners of the Company is based on the following data:

Profit for the period attributable to owners of the Company for the purposes of basic and diluted earnings per share Weighted average number of ordinary shares for the purpose of calculating basic earnings per share Effect of dilutive potential ordinary shares – share options Weighted average number of ordinary shares for the purpose of calculating diluted earnings per share	Unaudited Six months ended 31 December 2011 2010 HK$’000 HK$’000 50,320 37,730 Number of shares Unaudited Six months ended 31 December 2011 2010 219,103,681 219,103,681 892,194 – 219,995,875 219,103,681	Unaudited Six months ended 31 December 2011 2010 HK$’000 HK$’000 50,320 37,730 Number of shares Unaudited Six months ended 31 December 2011 2010 219,103,681 219,103,681 892,194 – 219,995,875 219,103,681
		219,103,681

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9. DIVIDENDS

Final dividend paid in respect of year ended 30 June 2011 of 2 Hong Kong cents (2010: 2 Hong Kong cents) per share Interim dividend declared in respect of six months ended 31 December 2011 of 2 Hong Kong cents (2010: 2 Hong Kong cents) per share INVESTMENT PROPERTIES FAIR VALUE At 30 June 2011 (audited) Exchange realignment Increase in fair value At 31 December 2011 (unaudited)	Unaudited Six months ended 31 December 2011 2010 HK$’000 HK$’000 4,382 4,382 4,382 4,382 8,764 8,764 HK$’000 1,645,704 42,731 34,274 1,722,709	Unaudited Six months ended 31 December 2011 2010 HK$’000 HK$’000 4,382 4,382 4,382 4,382 8,764 8,764 HK$’000 1,645,704 42,731 34,274 1,722,709
		8,764
		HK$’000 1,645,704 42,731 34,274
		1,722,709

10. INVESTMENT PROPERTIES

The fair value of the Group’s investment properties as at 31 December 2011 and 30 June 2011 has been arrived at on the basis of valuations carried out on that dates by Savills Valuation and Professional Services Limited, an independent firm of qualified professional valuers not connected with the Group. Savills Valuation and Professional Services Limited is a member of the Hong Kong Institute of Surveyors. The valuation was arrived at by reference to market evidence of transaction prices for similar properties. The revaluation gave rise to a net gain arising from increase in fair value of HK$34,274,000 (2010: HK$21,642,000) which has been credited to profit or loss. All the investment properties are situated in the PRC under medium-term lease.

11. INTEREST IN AND AMOUNT DUE FROM A JOINTLY CONTROLLED ENTITY

Cost of investment, unlisted Share of post-acquisition loss and reserves Amount due from a jointly controlled entity Less: Allowance for interest receivable	Unaudited At 31 December 2011 HK$’000 86,220 (21,252) 64,968 248,170 (7,370) 240,800	Audited At 30 June 2011 HK$’000 84,522 (18,763)
		65,759
		235,524 (7,370)
		228,154

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The amount due from a jointly controlled entity is unsecured and repayable after the next twelve months from the end of reporting period. The amount is carried at amortised cost at an effective interest rate of 6% (30 June 2011: 6%) per annum. As at 31 December 2011, the amount was partially impaired in respect of the interest receivable of HK$7,370,000 (30 June 2011: HK$7,370,000).

A summarised financial information in respect of the Group’s jointly controlled entity which is accounted for using the equity method is set out below:

Non-current assets_(note)_ Current assets Current liabilities Non-current liabilities Income recognised in profit or loss Expenses recognised in profit or loss Other comprehensive income	Unaudited Audited At 31 December 2011 At 30 June 2011 HK$’000 HK$’000 258,214 253,986 54,198 50,190 (14,687) (14,019) (240,800) (228,154) 56,925 62,003 Unaudited Six months ended 31 December 2011 2010 HK$’000 HK$’000 5,743 3,786 11,672 10,870 1,549 1,327

Note: The assets include properties held for development which represent prepaid lease payments of land use rights and direct reclamation costs for a piece of land situated at Tung Kok Tau in Shenzhen, the PRC with the land use right. The jointly controlled entity has paid all land premium and is in the process of negotiating with relevant government authorities for redevelopment due to the rezoning and re-planning of the city on which the properties are located.

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12. TRADE AND OTHER RECEIVABLES

At 31 December 2011, the balance of other receivables included receivables from home buyers who defaulted on repayment to banks, representing the loans taken over by the Group, of HK$208,000 (30 June 2011: HK$979,000) with collateral of properties and are measured at amortised cost at an effective interest rate of 5.85% (30 June 2011: 5.85%). For property sales, other than home loans, the Group allows an average credit period of 30 days (30 June 2011: 30 days) to its buyers. Rental receivable from tenants and service income receivables from customers are payable on presentation of invoices. The following is an aged analysis of trade receivables, net of allowance for doubtful debt presented based on invoice date at the end of the reporting period:

0 – 60 days Over 60 days	Unaudited At 31 December 2011 HK$’000 12,251 – 12,251	Audited At 30 June 2011 HK$’000 9,926 22 9,948

Before accepting any new customer, the Group carries out assessment on the creditability of the new customer and assesses the potential customer’s credit quality and defines credit limits by customer. Limits attributed to customers are reviewed regularly. 97% (30 June 2011: 95%) of the trade receivables are neither past due nor impaired and have good settlement repayment history.

Included in the Group’s trade receivable balance are debtors with a carrying amount of HK$322,000 (30 June 2011: HK$452,000) which are past due at the reporting date for which the Group has not provided for impairment loss. There has not been a significant change in credit quality and the management considers that the amounts are still recoverable. The Group does not hold any collateral over these balances. The average overdue age of these receivables is 31 days (30 June 2011: 32 days) overdue.

13. TRADE AND OTHER PAYABLES

At 31 December 2011, the balance of trade and other payables included trade payables of HK$1,908,000 (30 June 2011: HK$2,791,000). The following is an aged analysis of trade payables based on the invoice date at the end of the reporting period:

0 – 60 days Over 60 days	Unaudited At 31 December 2011 HK$’000 1,467 441 1,908	Audited At 30 June 2011 HK$’000 547 2,244 2,791

The other payables mainly include rental deposits of HK$24,661,000 (30 June 2011: HK$24,139,000) and receipt in advance of HK$4,282,000 (30 June 2011: HK$3,525,000).

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RESULTS REVIEW

For the six months ended 31 December 2011, the Group reported a turnover of HK$50,813,000 (2010: HK$37,347,000) and a gross profit of HK$35,835,000 (2010: HK$24,724,000). Both the turnover and gross profit markedly increased by about 36% and 45% respectively, as compared with the last corresponding period. These results were primarily derived from rental income of investment properties and sales proceeds of properties of the Group as further described below. Furthermore, the Group accounted for other income of HK$18,281,000 (2010: HK$15,189,000), which mainly includes exchange gain and imputed interest, and the Group also recognised an aggregate increase of HK$34,274,000 (2010: HK$21,642,000) in the fair value of its investment properties for the period.

All in all, the profit for the period attributable to owners of the Company totaling HK$50,320,000 (2010: HK$37,730,000) soared by 33% as against the last corresponding period, with basic earnings per share of HK$0.2297 (2010: HK$0.1722).

Together with other comprehensive income of exchange difference on translation to presentation currency, the total comprehensive income attributable to owners of the Company amounted to HK$93,408,000 (2010: HK$74,531,000) for the period, showing a rise of 25% from the last corresponding period.

BUSINESS REVIEW

In the period under review, the turnover and results of the Group continued to be principally generated from its operating segment in terms of property rental in the mainland China.

The rental income of the Group stemmed from its investment properties in Shanghai and Beijing amounted to HK$41,406,000 (2010: HK$35,342,000), which represents about 81% of revenue income of the Group in the period. In terms of fair value, these investment properties of the Group comprising, among others, shopping mall in Beijing and office units in Shanghai appreciated in an aggregate of HK$34,274,000 (2010: HK$21,642,000) in the period. As such, the segment results of property rental recorded a profit of HK$63,763,000 (2010: HK$45,356,000), with a surge of 41% as compared with the last corresponding period.

In Shanghai, leasing demand and net take-up remained buoyant in the office market, thereby accelerating a high occupancy rate for the quality offices of the Group known as “Eton Place” which is in the prime location of Little Lujiazui of Pudong, resulting in an increase in both rental and capital value, and boosting the segment results with an aggregate profit of HK$42,168,000 (2010: HK$17,208,000) in the period.

In Beijing, the well-established community mall of the Group known as “Uptown Mall” enjoyed virtually full level of occupancy with mildly improved rental of HK$15,782,000 (2010: HK$13,292,000), contributing to the segment results with an aggregate profit of HK$21,595,000 (2010: HK$28,148,000) in the period.

In view of limited residential units available for sale by the Group, the proceeds of property sales amounted to HK$9,407,000 (2010: HK$2,005,000) resulting in the segment results with an aggregate profit of HK$8,054,000 (2010: HK$2,015,000) albeit the official stringent homebuying measures imposed in China in the period.

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In respect of the jointly controlled entity known as Shenzhen Zhen Wah Harbour Enterprises Ltd. (“ Zhen Wah ”, which is entitled to the land use right of a piece of land located in Tung Kok Tau in Shenzhen), the Group and the Chinese partner of Zhen Wah have been continuing to jointly negotiate with the municipal governmental authorities on behalf of Zhen Wah in relation to land re-planning with an aim to enhance use of land and ancillary facilities, to increase gross developable area and saleable floor area mainly in high-rise residential area and to procure favorable revised land premium for additional gross developable area.

PROSPECTS

Despite uncertainties over the volatile global financial market and the forecast of a slowdown in global economic growth, it is expected that a positive and robust outlook for economic growth in China will subsist, bolstering leasing demand and rental income of office and retail sectors notwithstanding the official cooling-down policies imposed in China to cure residential market and inflationary pressure.

In Shanghai, given the active momentum of office leasing in the prime locations, rental and occupancy rate are expected to hold firm. To sustain high occupancy rate and steady recurring revenue, the Group will strive for retention and expansion of existing tenants upon lease renewals at competitive rental strategies.

In Beijing, both foreign- and local-branded retailers will continue to set up and expand on the back of brisk domestic retail market. Meanwhile, the Group will consistently re-position its mall by upgrading tenant mix and brand portfolio as well as shopping environment with an aim to strengthen its competitiveness for high occupancy rate and constant recurring revenue to the Group.

In light of booming city development particularly the superb residential development in Nanshan District in Shenzhen, the Group will endeavor to safeguard its best interests in Zhen Wah and to negotiate with the relevant government authorities in an attempt to enhance redevelopment plan and maximise asset value of Tung Kok Tau in alignment with the official rezoning, city planning and development of infrastructure in the region.

INTERIM DIVIDEND

The Directors have declared an interim dividend of 2 Hong Kong cents (2010: 2 Hong Kong cents) per share for the six months ended 31 December 2011 to all shareholders whose names appear on the register of members of the Company on 20 April 2012. The dividend warrants are expected to be despatched to those entitled on or about 4 May 2012.

CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed from Monday, 16 April 2012 to Friday, 20 April 2012, both days inclusive, during which period no transfer of share(s) will be effected. In order to qualify for the interim dividend, all form(s) of share transfer accompanied by the relevant share certificate(s) must be lodged with the Company’s Branch Share Registrars in Hong Kong, Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong for registration not later than 4:30 p.m. on Friday, 13 April 2012.

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

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

CORPORATE GOVERNANCE

The Company has applied the principles and has complied with the code provisions in the Code on Corporate Governance Practices as set out in Appendix 14 to the Listing Rules throughout the six months ended 31 December 2011.

By Order of the Board Dynamic Holdings Limited CHAN Wing Kit, Frank Chief Executive Officer

Hong Kong, 24 February 2012

As at the date of this announcement, the Directors of the Company comprise Mr. CHUA Domingo, Dr. CHAN Wing Kit, Frank, Mr. TAN Harry Chua, Mr. TAN Lucio Jr. Khao, Mr. CHEUNG Chi Ming, Mr. PASCUAL Ramon Sy, Mr. CHIU Siu Hung, Allan and Mr. WONG Sai Tat as Executive Directors; and Mr. CHONG Kim Chan, Kenneth, Mr. SY Robin and Mr. FOK Kam Chu, John as Independent Non-executive Directors.

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