ICO Group Limited — Interim / Quarterly Report 2004

Aug 31, 2004

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JACKIN INTERNATIONAL HOLDINGS LIMITED （輝影國際集團有限公司）[*]

(Incorporated in Bermuda with limited liability) (Stock code: 630)

INTERIM RESULTS

FOR THE SIX MONTHS ENDED 30 JUNE 2004

The Board of Directors (the “Board”) of Jackin International Holdings Limited (the “Company”) is pleased to announce the unaudited condensed consolidated income statement of the Company and its subsidiaries (the “Group”), for the six months ended 30 June 2004 as follows:

CONDENSED CONSOLIDATED INCOME STATEMENT

Notes TURNOVER 2 Cost of Sales Gross Profit Other Revenue 3 Selling and distribution costs Administrative expenses PROFIT FROM OPERATIONS Finance costs Share of profit of an associate Profit before taxation Taxation charge 6	Six months ended 30 June 2004 2003 Unaudited Unaudited HK$’000 HK$’000 175,310 174,410 (130,874) (130,595) 44,436 43,815 1,759 1,491 (7,552) (7,121) (23,525) (24,360) 15,118 13,825 (4,447) (4,783) – 751 10,671 9,793 (323) (126)

* For identification purpose only

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JACKIN INTERNATIONAL HOLDINGS LIMITED – Announcement

30 August 2004

Profit after taxation		10,348	9,667
Minority interests		–	495
PROFIT FOR THE PERIOD		10,348	10,162
DIVIDENDS	7	–	–
EARNINGS PER SHARE
– Basic	8	2.26 cents	2.83 cents
CONDENSED CONSOLIDATED BALANCE SHEET
		30 June	31 December
		2004	2003
		Unaudited	Audited
		HK$’000	HK$’000
NON-CURRENT ASSETS
Property, plant and equipment		198,817	201,743
Intangible assets		13,548	13,169
Goodwill		40,781	42,017
		253,146	256,929
Current assets
Inventories		74,668	70,994
Tax recoverable		763	767
Debtors, deposits and prepayments		135,651	152,955
Bank deposit pledged		1,172	1,172
Bank balance and cash		47,807	43,648
		260,061	269,536
Current liabilities
Trade and other payables		53,140	43,507
Taxation		172	–
Current portion of non-current liabilities		104,701	159,464
Convertible note		–	2,300
		158,013	205,271
Net current assets		102,048	64,265
		355,194	321,194

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JACKIN INTERNATIONAL HOLDINGS LIMITED – Announcement

30 August 2004

Shareholders’ funds
Share capital	45,830	45,830
Reserves	264,172	253,692
	310,002	299,522
Minority interests	–	–
Non-current liabilities
Deferred taxation	999	999
Bank and other borrowings	17,904	2,805
Obligations under finance leases and
hire purchase contracts	26,289	17,868
	45,192	21,672
	355,194	321,194

Notes:–

1. BASIS OF PREPARATION

The unaudited condensed consolidated financial statements have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “Listing Rules”) and the Statement of Standard Accounting Practice 25 “Interim Financial Reporting” issued by the Hong Kong Society of Accountants.

The unaudited condensed consolidated financial statements have been prepared in accordance with the accounting policies consistent with those adopted by the Group in its financial statement for the year ended 31 December 2003.

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JACKIN INTERNATIONAL HOLDINGS LIMITED – Announcement

30 August 2004

2. BUSINESS AND GEOGRAPHICAL SEGMENTS

The Group’s turnover and contribution to profit from operations for both periods ended 30 June 2004 and 30 June 2003 respectively, analysed by the business segments and geographical segments are as follows:

BY BUSINESS SEGMENTS Manufacturing & trading of media products Manufacturing & trading of computer accessories Total fulfilment services Distribution of media products Other revenue Unallocated corporate expenses Profit from operations Finance costs Share of profit of an associate Profit before taxation BY GEOGRAPHICAL SEGMENTS Asia – The Peoples Republic of China (including Hong Kong SAR) – Other regions in Asia Europe North and South America

Six months ended 30 June 2004 2003 Unaudited Unaudited Contribution Contribution to profit to profit from from Turnover operations Turnover operations HK$’000 HK$’000 HK$’000 HK$’000 93,590 20,410 103,239 21,914 26,460 5,740 10,963 2,137 3,045 434 10,111 1,821 52,215 12,059 50,097 11,203 175,310 38,643 174,410 37,075 – 850 (23,525) (24,100) 15,118 13,825 (4,447) (4,783) – 751 10,671 9,793 110,351 100,416 31,974 34,416 23,613 32,824 9,372 6,754 175,310 174,410

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JACKIN INTERNATIONAL HOLDINGS LIMITED – Announcement

30 August 2004

3. OTHER REVENUE

	Six months ended 30 June	Six months ended 30 June
	2004	2003
	Unaudited	Unaudited
	HK$’000	HK$’000
Interest income	63	116
Others	1,696	1,375
	1,759	1,491

4. DEPRECIATION AND AMORTISATION

During the period, depreciation of HK$8,414,000 (six months ended 30 June 2003: HK$9,973,000) was charged in respect of the Group’s property, plant and equipment and amortisation of HK$1,236,000 (six months ended 30 June 2003: HK$1,236,000) was charged in respect of the Group’s intangible assets and goodwill.

5. EMPLOYEES AND REMUNERATION POLICES

As at 30 June 2004, the number of employees of the Group was about 1,000 (as at 30 June 2003: 1,000) Remuneration package of employees are maintained at competitive level and includes monthly salaries, insurance and medical cover, mandatory provident fund and share option scheme. Other employee benefits include educational allowance and training programs and discretionary bonuses.

6. TAXATION

The charge comprises: Profits tax for the period Hong Kong Overseas	Six months ended 30 June 2004 2003 Unaudited Unaudited HK$’000 HK$’000 172 68 151 58 323 126	Six months ended 30 June 2004 2003 Unaudited Unaudited HK$’000 HK$’000 172 68 151 58 323 126
		126

Hong Kong Profits Tax is calculated at 17.5% (six months ended 30 June 2003: 17.5%) of the estimated assessable profits for the period. Overseas taxation is calculated at the rates prevailing in the respective jurisdiction.

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JACKIN INTERNATIONAL HOLDINGS LIMITED – Announcement

30 August 2004

7. PROPOSED INTERIM DIVIDEND

The directors do not recommend the payment of interim dividend for the period (six months ended 30 June 2003: nil).

8. EARNINGS PER SHARE

The calculation of earnings per share is based on the profit attributable to shareholders of HK$10,348,000 (six months ended 30 June 2003: HK$10,162,000) and the weighted average number of 458,308,545 (six months ended 30 June 2003: 358,494,000) shares in issue during the period.

No diluted earnings per share has been presented because the exercise price of the Company’s share options and the conversion of the Company’s outstanding convertible bonds were higher than the average price for shares for the periods of six months ended 30 June 2004 and the six months ended 30 June 2003 respectively.

MANAGEMENT DISCUSSION AND ANALYSIS

Results

For the six months ended 30th June 2004, the Group’s turnover rose marginally to approximately HK$175 million as compared with the turnover of HK$174 million in 2003. Profit attributable to shareholders amounted to approximately HK$10.3 million, representing an increase of 1.8% as compared with that of approximately HK$10.1 million in the same period in 2003.

Review of Operations

Computer Media Production

The increase in the cost of plastics, a major raw material component for the Group’s manufacturing operations, prompted by persistent oil price hikes posted a big challenge to the Group during the period under review. The Group was nevertheless able to mitigate such increase via the implementation of a series of cost control measures and, with increased sales of its conventional media products in particular floppy disks, maintained profitability. More prominent customers (including major Japanese brand names) have also since turned to the Group to fulfill their demand for such blank information storage media product as the number of suppliers dwindles globally.

Computer Media and Accessories Production

The sales of computer media and accessories production increased an approximate 5.1% from approximately HK$114.2 million to approximately HK$120 million, which accounted for 68% of the Group’s total turnover.

As the floppy disk industry in the region further consolidated, new reputable brand name customers are turning to the Group to fulfill their demands. Furthermore, boasting competitive prices, the Group was able to draw substantial orders from well-known brand names, hence further boosted the Group’s floppy disk sales.

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JACKIN INTERNATIONAL HOLDINGS LIMITED – Announcement

30 August 2004

Operation of the plants in the PRC was to some extent affected by power shortages. To lessen the impact, the Group on one hand, shifted some of the production to its plant in Macau, and on the other, power generators were installed in the PRC plants in June this year as a permanent solution to the problem.

Distribution of Media Products

The distribution business segment recorded a turnover of approximately HK$52.2 million, representing an increase of 4.2% as compared with the same period last year.

To capture the booming potential of the PRC market, the Group strives to establish its distribution network in the PRC. Following the securing of the distribution rights of the media products of a reputable Japanese brand, the Group launched its first retail shop under this brand in Guangzhou in early 2004 and seeking for a second shop in Shenyang. However, in view of the economic austerity policies introduced lately in the PRC, the Group has been prudent in carrying out its expansion plan.

To further expand its distribution business, the Group will continue to widen its product scope by exploring and soliciting new computer products, particularly digital imaging and consumable data recording products from renowned brand names.

Prospects

In terms of production volume of floppy disks, the Group is among the top three manufacturers in the world. As the floppy disk market continues to consolidate and the number of players declines, the Group expects to gain more market share and reputable clients who have continuous demand for blank information storage media products. Given the Group’s low cost manufacturing bases located in the PRC, its competitiveness and established standing, the Group is confident that this business segment will be a reliable revenue stream and expects it to grow steadily.

To ensure that it is able to meet the growing demand for floppy disks without interruption by power shortages, the Group installed its own power generators in the plants in the PRC in June 2004. The Group expects future production at the plants to proceed smoothly.

Meanwhile, the Group will actively expand into other potential distribution markets. To further broaden its income source, the Group will continue to obtain more distribution rights of new computer accessories and media products, such as those for DVDR, DVDRW, optical mouse, 8mm storage video cassettes, digital camera, USB storage media, and data cartridge from suppliers with internationally reputable brand names.

Taking into account uncertainties ahead, such as the impact of austerity policy in the PRC and the persistently hefty oil price, the Group will make every effort in the second half of the year to improve its competitive edge including striving to enhance production efficiency and trim operational costs.

With its renowned brand name, high quality products, distribution network and reliable services, the Group is poised to grasp sprouting opportunities in the flourishing market, which will allow it to enrich its profit margins and achieve profitable returns for shareholders.

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JACKIN INTERNATIONAL HOLDINGS LIMITED – Announcement

30 August 2004

FINANCIAL REVIEW

Capital and debt structure

As at 30 June 2004, the Group’s total net assets was approximately HK$310 million (31 December 2003: approximately HK$300 million), representing approximately HK$10 million increase compared with that of previous year, which is contributed by the profit attributable to shareholders of approximately HK$10 million.

During the period, the Share Option Scheme (the “Old Scheme”) adopted by the Company on 8 November 1996 was terminated. A new Share Option Scheme with rules complying the new Listing Rules of the Stock Exchange of Hong Kong Limited was adopted by the Company in its annual general meeting held on 12 June 2004. The share options which were granted under the Old Scheme and outstanding as at 12 June 2004 are exercisable up to and including their respective expiry dates. As at 30 June 2004, there were outstanding share options granted to certain eligible employees entitling them to subscribe for shares of the Company. Details of the share options outstanding are disclosed in the section under “Share Options” in the interim financial report.

The Group’s funding policy is to finance the business operations with internally general cash and banking facilities. As at 30 June 2004, the Group’s total bank and other borrowings together with obligations under finance leases (the “Group’s borrowings”) decreased by approximately HK$31 million to approximately HK$149 million (31 December 2003: HK$180 million), of which approximately HK$105 million was payable within one year and approximately HK$44 million was payable after one year. The Group’s borrowings were mostly denominated in Hong Kong dollars and subject to floating interest rates, therefore, the exposure of currency risk was minimal. The Group’s total cash and bank balances amounted to approximately HK$48 million (31 December 2003: approximately HK$44 million), representing an increase of approximately HK$4 million.

The Group’s net debt to equity ratio was 33% (31 December 2003: 45%), which is expressed as a percentage of the Group’s borrowings after deducting cash and bank balances over the total net assets. The decrease in net debt ratio was mainly due to the Group’s total net assets were due to the repayment of the Group’s borrowings and the improvement of the Group’s net assets and receivable turnover during the period.

Working capital and liquidity

The Group continued to maintain a stable working capital. The Group successfully improved current ratio by 0.3 to 1.6 as at 30 June 2004 (31 December 2003: 1.3), also its quick ratio by 0.2 to 1.2 as at 30 June 2004 (31 December 2003: 1.0). In addition, the receivable turnover improved to 38 days (31 December 2003: 61 days). Inventory turnover slightly improved to 78 days (31 December 2003: 80 days).

The Group had unutilized banking facilities of approximately HK$159 million as at 30 June 2004 (31 December 2003: approximately HK$169 million), which the Directors consider that the unutilized banking facilities are sufficient to meet the Group’s working capital requirement.

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JACKIN INTERNATIONAL HOLDINGS LIMITED – Announcement

30 August 2004

Employees and Remuneration Policies

As at 30 June 2004, the number of employees of the Group was approximately 1,000. The remuneration packages of the Group’s employees are mainly based on their performance and experience, taking into account the current industry practices. Remuneration package of employees includes salaries, insurance and medical cover, mandatory provident fund and share option scheme. Other employee benefits include educational allowance and discretionary bonuses.

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

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

CODE OF BEST PRACTICE

None of the Directors is aware of any information that would reasonably indicate the Company is not, or was not for any part of the six months ended 30 June 2004 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, except that the Independent Non-Executive Directors are not appointed for a specific term but are subject to retirement by rotation and re-election at annual general meetings of the Company in accordance with the provisions of the Company’s Bye-Laws.

AUDIT COMMITTEE

The Audit Committee has reviewed with the management accounting principles and practices adopted by the Group and discussed internal controls and financial reporting matters including the review of this unaudited interim report.

ADOPTION OF THE MODEL CODE

The Company has adopted the Model Code (the “Model Code”) for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules (as may be amended from time to time by the Stock Exchange pursuant to the Listing Rules) as the Company’s code of conduct and rules governing dealings by all Directors in the securities of the Company.

All Directors had complied with the required standard regarding Directors’ securities dealings set out in the Model Code during the six months’ period ended 30 June 2004.

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JACKIN INTERNATIONAL HOLDINGS LIMITED – Announcement

30 August 2004

DISCLOSURE OF INFORMATION ON THE STOCK EXCHANGE’S WEBSITE

A detailed interim results announcement of the Company containing all the information required by paragraphs 46(1) to 46(6) of Appendix 16 of the Listing Rules will be published on the website of The Stock Exchange of Hong Kong Limited at an appropriate time.

By Order of the Board Ho Yin King, Helena Chairman

Hong Kong, 30 August 2004

As at the date of this announcement, the executive directors are Ms. Ho Yin King, Helena, Mr. Ho Fai Keung, Jacky and Mr. Low Nyap Heng and the independent non-executive directors are Mr. Li Sau Hung, Eddy, Mr. Leung Ka Kui, Johnny and Mr. Chan Kam Kwan, Jason.

Please also refer to the published version of this announcement in China Daily.

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JACKIN INTERNATIONAL HOLDINGS LIMITED – Announcement

30 August 2004