JD Logistics, Inc. — Annual Report 2006

Apr 23, 2007

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(Stock Code: 1172)

ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 31ST DECEMBER, 2006

The Board of Directors (the “Directors”) of Midas International Holdings Limited (the “Company”) is pleased to announce that the consolidated results of the Company and its subsidiaries (the “Group”) for the year ended 31st December, 2006 together with the comparative figures for 2005 are as follows:

CONSOLIDATED INCOME STATEMENT

Notes Turnover 3 Direct expenses Gross profit Other income Selling expenses Administrative and other expenses Finance costs Profit before taxation 4 Income tax expenses 5 Profit for the year Attributable to: Ordinary shareholders of the Company Minority interests Dividends 6 Basic earnings per share 7	2006 HK$’000 737,858 (547,341) 190,517 18,603 (63,887) (113,289) (6,822) 25,122 (7,492) 17,630 17,630 – 17,630 24,043 HK3.3 cents	2005 HK$’000 758,303 (543,578) 214,725 18,284 (71,146) (100,914) (7,196) 53,753 (11,140) 42,613 43,014 (401) 42,613 24,043 HK8.1 cents

• For identification purposes only

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CONSOLIDATED BALANCE SHEET

CONSOLIDATED BALANCE SHEET
Notes ASSETS AND LIABILITIES Non-current assets Investment properties Prepaid lease payments Property, plant and equipment Deposits paid for acquisition of property, plant and equipment Contractual reimbursement from related companies Current assets Inventories Accounts receivables 8 Deposits, prepayments and other receivables Prepaid lease payments Tax recoverable Bank balances and cash Current liabilities Accounts payables 9 Accrued charges and other payables Tax payable Borrowings Net current assets Total assets less current liabilities Non-current liabilities Borrowings Deferred tax NET ASSETS CAPITAL AND RESERVES Share capital Reserves TOTAL EQUITY	2006 HK$’000 175,500 8,361 220,596 703 21,019 426,179 98,126 220,727 12,705 229 2,507 86,430 420,724 152,466 59,437 7,561 38,050 257,514 163,210 589,389 80,113 29,892 110,005 479,384 53,429 425,955 479,384	2005 HK$’000 163,970 8,590 234,416 1,578 21,019
		429,573
		75,163 207,282 8,464 229 1,738 138,214
		431,090
		146,931 54,492 5,097 45,507
		252,027
		179,063
		608,636
		100,163 27,895
		128,058
		480,578
		53,429 427,149
		480,578

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Notes:

1. BASIS OF PREPARATION

The consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standards, Hong Kong Financial Reporting Standards (“HKFRS”) 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 “Stock Exchange”).

2. APPLICATION OF NEW AND REVISED HKFRS

In the current year, the Group has applied, for the first time, a number of new standard, amendments and interpretations (“new HKFRSs”) issued by the HKICPA, which are either effective for accounting periods beginning on or after 1st December, 2005 or 1st January, 2006. The adoption of the new HKFRSs had no material effect on how the results and financial position for the current or prior accounting periods have been prepared and presented. Accordingly, no prior period adjustment has been required.

3. SEGMENT INFORMATION

The Group is currently operating in two primary business segments, namely printing and property investment. Turnover represents the amounts received and receivable for goods sold, less returns, to outside customers and property rental and related income during the year. Segmental information about these businesses is presented below.

2006 CONSOLIDATED INCOME STATEMENT

Property Printing investment HK$’000 HK$’000 TURNOVER – external 733,464 4,394 SEGMENT RESULTS 25,974 3,818 Unallocated income Unallocated expenses Finance costs Profit before taxation Income tax expenses Profit for the year	Consolidated HK$’000 737,858 29,792 2,678 (526) (6,822) 25,122 (7,492) 17,630

2005 CONSOLIDATED INCOME STATEMENT

Property Printing investment HK$’000 HK$’000 TURNOVER – external 744,657 13,646 SEGMENT RESULTS 51,023 9,368 Unallocated income Unallocated expenses Finance costs Profit before taxation Income tax expenses Profit for the year	Consolidated HK$’000 758,303 60,391 1,894 (1,336) (7,196) 53,753 (11,140) 42,613

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4. PROFIT BEFORE TAXATION

Profit before taxation has been arrived at after charging: Cost of inventories recognised as an expense Depreciation and amortisation of property, plant and equipment 5. INCOME TAX EXPENSES The charge (credit) comprises: Current tax: Hong Kong Profits Tax The People’s Republic of China (the “PRC”) income tax Underprovision in prior years: Hong Kong Profits Tax PRC income tax Deferred tax: Current year Underprovision in prior year	2006 HK$’000 546,177 35,954 2006 HK$’000 2,330 2,911 5,241 211 1,080 1,291 224 736 960 7,492	2005 HK$’000 539,949 35,441 2005 HK$’000 4,881 6,536 11,417 132 – 132 (409) – (409) 11,140

Hong Kong Profits Tax is calculated at 17.5% (2005: 17.5%) of the estimated assessable profit for the year.

PRC income tax is calculated at the applicable rates relevant to the PRC subsidiaries.

6. DIVIDENDS

DIVIDENDS
Dividends paid to ordinary shareholders: 2005 final dividend of HK3.3 cents per share 2006 interim dividend of HK1.2 cents per share 2004 final dividend of HK3.3 cents per share 2005 interim dividend of HK1.2 cents per share	2006 HK$’000 17,632 6,411 – – 24,043	2005 HK$’000 – – 17,632 6,411
		24,043

The final dividend of HK1.2 cents (2005: HK3.3 cents) per share to ordinary shareholders of the Company whose names appear on the register of members on 30th May, 2007, amounting to approximately HK$6,411,000 (2005: HK$17,632,000) has been proposed by the Directors and is subject to approval by the shareholders in general meeting.

The interim dividend of HK1.2 cents (2005: HK1.2 cents) per share was paid to the ordinary shareholders of the Company whose names appeared on the register of members on 13th October, 2006.

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7. BASIC EARNINGS PER SHARE

The calculation of the basic earnings per share attributable to the ordinary shareholders of the Company is based on the profit for the year attributable to ordinary shareholders of the Company of HK$17,630,000 (2005: HK$43,014,000) and on 534,290,068 (2005: 534,290,068) ordinary shares in issue during the year.

Diluted earnings per share is not presented for the two years ended 31st December, 2006 as there were no potential ordinary shares in existence for both years.

8. ACCOUNTS RECEIVABLES

The Group has a policy of allowing credit periods ranging from 30 days to 180 days (2005: 30 days to 180 days) to its customers.

The aged analysis of accounts receivables prepared on the basis of sales invoice date is as follows:

0 to 30 days 31 to 60 days 61 to 90 days 91 to 120 days 121 to 180 days More than 180 days	2006 HK$’000 57,277 43,953 39,727 34,598 36,372 8,800 220,727	2005 HK$’000 54,452 34,664 45,929 27,579 36,224 8,434
		207,282

9. ACCOUNTS PAYABLES

The aged analysis of accounts payables prepared on the basis of supplier invoice date is as follows:

0 to 30 days 31 to 60 days 61 to 90 days 91 to 120 days More than 120 days	2006 HK$’000 37,764 45,016 18,952 29,279 21,455 152,466	2005 HK$’000 28,327 29,842 24,655 15,730 48,377
		146,931

DIVIDENDS

The Directors propose to declare a final dividend of HK1.2 cents (2005: HK3.3 cents) per ordinary share payable on or before 14th June, 2007 to ordinary shareholders whose names appear on the Company’s register of members on 30th May, 2007. An interim dividend of HK1.2 cents (2005: HK1.2 cents) per ordinary share had been paid during the year. Therefore, total dividends per ordinary share amounted to HK2.4 cents (2005: HK4.5 cents).

MANAGEMENT DISCUSSION ON RESULTS

I was appointed chairman on 27th February, 2007. The mission that I would carry out is to reshape the Group’s business model and I would implement cost cutting measures, broaden product range, extend market presence and explore other business opportunities.

2006 was an extremely difficult and disappointing year for the Group. Turnover amounted to approximately HK$737,858,000, representing a decrease of approximately 2.7% when compared to HK$758,303,000 of last year.

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The Group experienced immense pressure on all main categories of costs: paper and other materials, labour, energy and logistics. Appreciation of the Renminbi also caused the Group’s operational costs to rise further, resulting in the fall in the overall gross margin by 2.5% to 25.8%. Gross profit for the year decreased by 11.3% to HK$190,517,000 (2005: HK$214,725,000).

Other income increased by 1.7% to HK$18,603,000 (2005: HK$18,284,000). Selling expenses decreased by 10.2% to HK$63,887,000 (2005: HK$71,146,000). Administrative and other expenses increased by 12.3% to HK$113,289,000 (2005: HK$100,914,000). Finance costs decreased slightly to HK$6,822,000 (2005: HK$7,196,000).

Profit before taxation was HK$25,122,000 (2005: HK$53,753,000) and profit attributable to ordinary shareholders of the Company for the year amounted to HK$17,630,000 (2005: HK$43,014,000). Earnings before interest, tax, depreciation, and amortisation (EBITDA) amounted to HK$65,449,000 (2005: HK$94,725,000).

BUSINESS REVIEW

a) Printing Division

The printing business continues to be the principal business of the Group, having contributed a turnover amounted to HK$733,464,000 (2005: HK$744,657,000) which accounted for 99.4% of the Group’s turnover.

In order to alleviate the difficult trading environment mentioned above, the Group will take proactive measures to deal with the situation, including developing higher margin products, broadening customer base and implementing effective cost control.

As regards developing higher profit margin products, the Group will allocate more resources into the research and development of innovative products such as original designed products, products with electronic components and pop-up books, and will put additional efforts in the marketing and promotion of these higher margin products.

To cater for the anticipated growth of these higher margin products, there is a need for the expansion of the hand assembly lines. Accordingly, the Group will vacate the premises of Lambda Building with gross floor area of about 138,000 sq. ft. in Huiyang, the PRC, for its own use and has identified a factory site of about 100 mu in Dongguan, the PRC for purchase, so as to build additional factory space.

As regards broadening its customer base, the Group will extend its sales presence, set up sales representative offices and recruit additional sales and marketing personnel in the major cities of the USA, Europe and the PRC. The Group will also continue to actively participate in major printing fairs in overseas and the PRC to meet clients.

As regards implementing cost control measures, the Group will adjust its product mix strategy so as to fully utilize its production capacity, especially in the off-peak production season. The Group will also rationalize its organization structure and streamline its administrative and production workflows so as to increase the contribution per staff. In this respect, the management has already set up work improvement teams to enhance its operational efficiency and effectiveness.

It has always been the Group’s objective to commit premier printing quality and caring service, this was evidenced by the fact that the Group has won twenty nine printing awards (including four Benny Awards) in the Premier Print Award 2006 in the United States, three championship awards in the Hong Kong Print Award 2006, one Best of the Best Award, six gold awards in the International Gallery of Superb Printing 2006, and seven awards in the Asian Print Award 2006.

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b) Other Business

• The Group’s property interests in Yuen Sang Building and Lambda Building with a total gross floor area of about 380,000 sq. ft. are partially leased and partially occupied by the Group. The Group also owns Chuang’s Garden in Huiyang, the PRC, with a total gross floor area of 300,000 sq. ft.. In January 2007, the Group acquired the commercial podium of Chuang’s Garden to unify the ownership of the whole property. In order to generate additional income for the property division, the Group has commenced a feasibility study for the modification of Chuang’s Garden to hotel style service apartment. The Group’s interest in the 6th floor of Chengdu Chuang’s Centre has a gross floor area of about 45,800 sq. ft. in Chengdu, Sichuan, the PRC. The Group will dispose of this property to provide additional working capital to the Group. During the year under review, rental income of the property division amounted to HK$4,394,000 (2005: HK$13,646,000).

PROSPECTS

Looking ahead, the Group believes that the overall business environment would continue to be challenging. Nevertheless, with our commitment to provide quality and professional printing solutions to its customers, the Group is confident to tackle the challenges ahead and will implement appropriate strategies so as to minimize the impact of those negative factors against the Group. Meanwhile, the Group will look for new business opportunities so as to broaden its income stream.

LIQUIDITY AND FINANCIAL POSITIONS

As at 31st December, 2006, the Group’s bank balances and cash amounted to HK$86,430,000 (2005: HK$138,214,000) while bank borrowings amounted to HK$118,163,000 (2005: HK$145,670,000), of which HK$80,113,000 (2005: HK$100,163,000) are due from the second to fifth year. The Group’s net bank borrowings amounted to HK$31,733,000 (2005: HK$7,456,000) and its net bank borrowings to equity ratio (being all bank and other borrowings less bank balances and cash as a ratio to shareholders’ funds) is 7%. Most of the Group’s bank balances and borrowings were denominated in Hong Kong dollars, U.S. dollars and Renminbi, risk in exchange rate fluctuation would not be material. Interest on bank borrowings was charged at variable commercial rates prevailing in Hong Kong and the PRC.

CORPORATE GOVERNANCE

The Company has complied throughout the year ended 31st December, 2006 with the code provisions set out in Appendix 14 – Code on Corporate Governance Practices of the Listing Rules.

The Audit Committee has been established by the Company to review and supervise the Company’s financial reporting process, internal controls and review the relationship with the auditors. The Audit Committee has held meetings in accordance with the relevant requirements and has reviewed the results for the year ended 31st December, 2006. The current members of the Audit Committee are three Independent Non-Executive Directors, Mr. Shek Lai Him, Abraham, Dr. Li Sau Hung, Eddy and Mr. Yau Chi Ming and a Non-Executive Director, Mr. Dominic Lai. The Audit Committee has recommended the re-appointment of the Auditors and approved the remuneration of the Auditors.

The Company has adopted the Model Code (the “Model Code”) contained in Appendix 10 of the Listing Rules. Having made specific enquiries of all Directors of the Company, the Company received confirmations from all Directors that they have complied with the required standard set out in the Model Code.

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

During the year ended 31st December, 2006, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities.

CLOSING OF REGISTER

The register of members will be closed from Monday, 28th May, 2007 to Wednesday, 30th May, 2007, both days inclusive, during which period no transfer of shares will be effected. All transfers, accompanied by the relevant share certificates, must be lodged for registration with the Company’s share registrars in Hong Kong, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong, by no later than 4:30 p.m. on Friday, 25th May, 2007.

STAFF

As at 31st December, 2006, the Group, including its subcontracting processing plants, employed approximately 3,000 staff and workers, with their remuneration normally reviewed annually. The Group also provides its staff with other benefits including year-end double-pay, discretionary bonus, contributory provident fund, share options and medical insurance. Staff training is also provided as and when required.

GENERAL

As at the date of this announcement, Mr. Hung Ting Ho, Richard, Mr. Kwong Tin Lap, Mr. Kwok Chi Fai, Miss Li Mee Sum, Ann and Mr. Wong Chi Sing are Executive Directors, Mr. Dominic Lai is a Non-Executive Director, Mr. Shek Lai Him, Abraham, Dr. Li Sau Hung, Eddy and Mr. Yau Chi Ming are Independent Non-Executive Directors of the Company.

By Order of the Board of Midas International Holdings Limited Hung Ting Ho, Richard Chairman

Hong Kong, 20th April, 2007

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

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