JD Logistics, Inc. — Interim / Quarterly Report 2003

Sep 4, 2003

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ANNOUNCEMENT OF RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE, 2003

FINANCIAL HIGHLIGHTS

• Turnover of the Group increased to HK$274.6 million from HK$205.5 million, representing an increase of approximately 34%.

• Profit attributable to shareholders recorded a significant increase to HK$20.3 million from HK$12.2 million, representing an increase of approximately 66.8%.

• EBITDA amounted to HK$43.1 million, representing 41% increase over last corresponding period.

• The Group maintained a net cash position as at 30th June, 2003.

• Interim dividend per ordinary share amounted to HK1.0 cent (2002: nil).

RESULTS

The Board of Directors (the “Directors”) of Midas International 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 30th June, 2003 together with the comparative figures for the previous period are as follows:

Notes Turnover 2 Direct expenses Gross profit Other operating income Selling expenses Administrative expenses Profit from operations 3 Finance costs Profit before taxation Taxation 4 Net profit before minority interest Minority interest Net profit for the period Dividends 5 Earnings per share 6 – Basic – Diluted	For the six months ended 30th June, 2003 2002 HK$’000 HK$’000 (unaudited) (unaudited) (restated) 274,634 205,526 (189,683) (141,307) 84,951 64,219 9,499 5,788 (8,136) (6,348) (58,711) (48,921) 27,603 14,738 (3,231) (1,802) 24,372 12,936 (3,954) (767) 20,418 12,169 (121) – 20,297 12,169 17,542 10,833 4.7 cents 2.4 cents 3.4 cents 1.8 cents

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Notes:

1. BASIS OF PREPARATION

The condensed financial statements have been prepared in accordance with 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”) and with Statement of Standard Accounting Practice (“SSAP”) 25 “Interim financial reporting” issued by the Hong Kong Society of Accountants.

The accounting policies adopted in the current period are consistent with those adopted in the preparation of the Group’s annual financial statements for the year ended 31st December, 2002 except the implementation of SSAP 12 (Revised) “Income Taxes” which comes into effect for the accounting period beginning on or after 1st January, 2003. The effect on the consolidated income statement of the adoption is a decrease in the profit of approximately HK$901,000 during the six months ended 30th June, 2002. The comparative amounts for 2002 have been restated accordingly.

2.

SEGMENT INFORMATION

During the period, the management have reassessed the primary source of the Group’s risks and return and redesignated business segments as the Group’s primary reporting format.

Business segments

The Group is currently operating in two business segments, namely printing and property investment. Segmental information about these businesses is presented below.

Six months ended 30th June, 2003

Property Printing investment HK$’000 HK$’000 TURNOVER 267,462 7,172 RESULTS Segment results 22,597 6,082 Unallocated corporate income Unallocated corporate expenses PROFIT FROM OPERATIONS Six months ended 30th June, 2002 Property Printing investment HK$’000 HK$’000 (restated) (restated) TURNOVER 204,180 1,346 RESULTS Segment results 14,842 1,197 Unallocated corporate income Unallocated corporate expenses PROFIT FROM OPERATIONS

Total HK$’000 274,634 28,679 909 (1,985) 27,603 Total HK$’000 (restated) 205,526 16,039 1,023 (2,324) 14,738

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3. PROFIT FROM OPERATIONS

Profit from operations has been arrived at after charging (crediting):

Depreciation and amortisation _Less:_Amount capitalised in properties under development Dividend received from investments in securities Interest earned on bank deposits TAXATION The charge (credit) comprises: Hong Kong Profits Tax PRC income tax Deferred taxation	For the six months ended 30th June, 2003 2002 HK$’000 HK$’000 16,389 16,904 – (93) 16,389 16,811 – (1) (909) (990) For the six months ended 30th June, 2003 2002 HK$’000 HK$’000 2,812 1,800 1,114 117 28 (1,150) 3,954 767

4. TAXATION

Hong Kong Profits Tax is calculated at 17.5% (Six months ended 30th June, 2002: 16%) of the estimated assessable profit for the period.

Income tax from the People’s Republic of China (the “PRC”) is calculated at the applicable rates relevant to the PRC subsidiaries.

The Group had no significant unprovided deferred taxation for the period or at the balance sheet date.

5. DIVIDENDS

2001 final dividend of HK2.0 cents per share paid to ordinary shareholders 2002 final dividend of HK2.8 cents per share paid to ordinary shareholders 2003 special dividend of HK1.2 cents per share payable to ordinary shareholders_(note a) Dividends to Series A preference shareholders(notes a and b) Dividends to Series B preference shareholders(note b)_	For the six months ended 30th June, 2003 2002 HK$’000 HK$’000 – 7,787 10,928 – 4,684 – – 536 1,930 2,510 17,542 10,833	For the six months ended 30th June, 2003 2002 HK$’000 HK$’000 – 7,787 10,928 – 4,684 – – 536 1,930 2,510 17,542 10,833
		10,833

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Notes:

• (a) On 22nd May, 2003, the Company and Gold Throne Finance Limited (“Gold Throne”), a substantial shareholder of the Company and the holder of Series A and Series B preference shares, entered into an agreement (the “Concession Agreement”) pursuant to which Gold Throne, among other things, would exercise the conversion right of converting 72,000,000 Series A preference shares of HK$0.01 each into 144,000,000 new ordinary shares in the Company of HK$0.10 each (the “Conversion”) and waive any dividend payable on Series A preference shares for the period from 1st January, 2003 to 30th June, 2003. In addition, a special dividend of HK1.2 cents per share to the ordinary shareholders on the register of members on 30th June, 2003 (the date of an extraordinary general meeting of the shareholders of the Company in approving the aforesaid transactions, “EGM”) had been proposed by the directors pursuant to the Concession Agreement. The Concession Agreement became unconditional upon approval by the independent shareholders of the Company at the EGM, and, accordingly the special dividend based on an aggregate of 390,290,068 ordinary shares, amounting to approximately HK$4,684,000 was distributed in July 2003.

• (b) Subject to the Companies Law (Revised) of the Cayman Islands, the holders of Series A and Series B preference shares are entitled to receive dividends semi-annually at 2.5 percent per annum on the issue price of HK$0.60 per preference share in arrears on a daily basis.

6. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share for the period is based on the following data:

Net profit for the period Dividend on preference shares Earnings for the purposes of basic earnings per share Effect of dilutive potential ordinary shares: – Dividend on convertible preference shares Earnings for the purposes of diluted earnings per share Weighted average number of ordinary shares for the purposes of basic earnings per share Effect of dilutive potential ordinary shares: – Convertible preference shares – Share options Weighted average number of ordinary shares for the purposes of diluted earnings per share

For the six months ended 30th June, 2003 2002 HK$’000 HK$’000 (restated) 20,297 12,169 (1,930) (3,046) 18,367 9,123 – 536 18,367 9,659 Number of shares 390,168,521 376,162,996 144,000,000 157,127,072 21,816 12,689 534,190,337 533,302,757

INTERIM DIVIDEND

The directors have declared an interim dividend of HK1.0 cent per ordinary share (2002: nil) payable on or before 6th October, 2003 to ordinary shareholders whose names appear on the Company’s register of members on 26th September, 2003.

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BUSINESS REVIEW

The Group achieved a significant growth of 34% in turnover to HK$274.6 million for the first half of the year. It is attributable to the continuous effort to expand our product mix alongside the growth in sales from existing clients and new clients. Despite the rise in paper costs at the beginning of the year, the Group was able to maintain its gross profit margin at about 31%, with gross profit of HK$85.0 million. For the first six months, administrative expenses increased by about 20%, which included an one-off severance payment of HK$2.0 million due to closure of our Tsuen Wan Plant in May this year, as well as expenses incurred for relocation of production facilities and set-up costs of the new processing plant in Dongguan. As a result, profit before taxation increased by 88.4% to HK$24.4 million and net profit attributable to shareholders increased 66.8% to HK$20.3 million. EBITDA for the six months ended 30th June, 2003 amounted to HK$43.1 million.

(a) Printing Division

For the six months ended 30th June 2003, the Group’s printing business grew by 31% and reached a turnover of HK$267 million, accounted for 97% of the Group’s turnover. The Group’s printing business comprised book printing and paper product printing. For the first six months of the year, the total exports of printed matters from Hong Kong increased by about 12.3%. When compared with this average industry’s growth, the Group has achieved much higher growth rate under the Group’s right strategy to strengthen its sales and production capacity.

(1) Book Printing

During the period under review, book printing division achieved a remarkable growth in sales under our proactive marketing strategy. Book printing focused on serving multinational publishers and conglomerates in the United States, Europe, Australia and New Zealand. The Group placed strong emphasis on maintaining high quality standard. Each year the Group won various printing awards locally and overseas. This year, the Group is the winner of 15 awards in the 2003 Premier Print Awards in the United States, of which we are honoured to be awarded the industry’s most prestigious “Benny Award”, being the highest in the novelty book category.

(i) Yuanzhou Plant

To cater for the growth, the Group’s expansion on production facilities of the Yuanzhou Plant was completed in the second quarter of this year, which included the installation of the new 8-colour perfector and the recent extension of the Yuanzhou Plant to a gross floor area of about 410,000 sq.ft.. After these expansions, book printing capacity of the Yuanzhou Plant has increased by 30%. Furthermore, the Group has recently agreed to acquire the land adjacent to the Yuanzhou Plant with a site area of approximately 40,000 sq.m. for future expansion.

(ii) Processing plant in Dongguan

In May 2003, the Group set up a processing plant in Dongguan. As a processing plant of the Group, it mainly supports our book printing, enabling the Group to reduce sub-contracting to outsiders and to maintain consistent quality standard. The processing plant occupied a four-storey leased premise with over 250,000 sq.ft. of production and storage space, and is equipped with six printing presses, binding machines, perfect binder, saddle stitcher relocated from the Tsuen Wan Plant as well as other additional facilities installed to increase printing capacity. With full production of this processing plant, it provides the Group with an additional 40% printing capacity to support our Yuanzhou Plant.

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• (2) Paper Product Printing

Under the Group’s strategy to broaden the product mix, the paper product printing recorded a significant turnover growth for the period under review. Paper product printing provided packaging products, premium gifts products, greeting cards and paper gift bags. The Dongguan Plant has a total gross floor area of 410,000 sq.ft.. During the period, the capital expenditure plan for the Dongguan Plant was fully implemented. Dongguan Plant had installed a new six-colour full size printing press to increase its production capacity.

In addition, The Group has continuously upgraded and adhered to international quality and safety management standard. The Dongguan Plant was accredited the OHSAS 18001 in June this year, which is a recognition of the occupational health and safety management system. Together with our accreditation of ISO 9001 and ISO 14001 in previous years, the Dongguan Plant has attained the Integrated Management System.

(b) Property Division

The Group holds a total attributable gross floor area of 920,500 sq.ft. in the PRC, through the entire interests in Lambda Building, Yuen Sang Building and Chuang’s Garden in Huiyang and 51% interests in the commercial podium and basements of Chengdu Chuang’s Centre in Sichuan.

During the first six months of the year, rental income of the property division amounted to HK$7.2 million, representing a growth of 4.3 times over the last corresponding period. It was attributable to the leases of the Chengdu Chuang’s Centre which commenced in the fourth quarter of 2002. For the second half of this year, the property division will continue to generate stable rental income.

LIQUIDITY AND FINANCIAL POSITIONS

As at 30th June, 2003, the Group’s bank balances and cash amounted to HK$114,580,000 while bank borrowings and obligations under finance leases amounted to HK$88,909,000, of which HK$43,121,000 are due from the second to fifth year. Therefore, the calculation of net debt to equity ratio was not applicable because the Group had surplus cash of about HK$25,671,000 over bank borrowings and obligations under finance leases. 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 is charged at variable commercial rates prevailing in Hong Kong and the PRC. At the balance sheet date, certain assets of the Group with net book values of HK$107,431,000 had been pledged to secure borrowings granted to the Group.

Chuang’s China Investments Limited exercised its rights to convert all the remaining 72 million Series A preference shares of the Company into 144,000,000 ordinary shares of the Company. As at the date hereof, the Group has only in issue HK$148.5 million Series B preference shares.

PROSPECTS

The outlook of the printing industry is positive and the Group will continue to benefit from the increasing outsource trend from overseas clients. We shall further explore and build up new customers’ base from multinational publishers and conglomerates in the United States of America, Europe, Australia and New Zealand and the PRC to keep on our growth of book printing. In addition to our organic growth, we shall look for merger and acquisition opportunities, which are synergistic to our book printing growth. In the second half of the year, the Group will participate in the Frankfurt Book Fair, and to meet with new clients. The paper product printing will continue to expand on its product coverage and will further develop the domestic market in the PRC.

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After the PRC joined the World Trade Organization, there will be enormous business opportunities in local market in the PRC, the Group will strategically prepare to capture it. The Group continued to invest strategically in plant and machineries to increase our production capacity, to innovate new technology and to provide up-todate training to staff.

The Group anticipates recovery of economy worldwide and will adopt optimistic sale policies to seek for higher margin and growth products. At the same time, the Group will continue to adopt prudent cost control policies to enhance our profitability and competitiveness.

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

During the six months ended 30th June, 2003, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities.

CORPORATE GOVERNANCE

During the six months ended 30th June, 2003, none of the directors of the Company is aware of any information that would reasonably indicate that the Company is not, or was not for any part of the accounting period covered by the interim report, in compliance with the Code of Best Practice, as set out in Appendix 14 of the Listing Rules.

An audit committee has been established by the Company since 1999 to review and supervise the Company’s financial reporting process and internal controls. The current members of the Audit Committee are the two Independent Non-Executive Directors, Messrs. Dominic Lai and Shek Lai Him, Abraham.

The Group’s auditors have conducted a review on the unaudited interim financial statements for the six months ended 30th June, 2003 in accordance with the Statement of Auditing Standards 700 “Engagements to review interim financial reports” issued by the Hong Kong Society of Accountants.

CLOSING OF REGISTER

The register of members will be closed from Thursday, 25th September, 2003 to Friday, 26th September, 2003, both days inclusive, during which 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 Hopewell Centre, 183 Queen’s Road East, Hong Kong, by no later than 4:00 p.m. on Wednesday, 24th September, 2003.

STAFF

As at 30th June, 2003, the Group directly and indirectly employed approximately 4,000 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.

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PUBLICATION OF INTERIM RESULTS ON THE WEBSITE OF THE STOCK EXCHANGE

A detailed interim results announcement for the six months ended 30th June, 2003 containing all the information required by paragraphs 46(1) to 46(6) of Appendix 16 to the Listing Rules will be published on the website of the Stock Exchange in due course.

By Order of the Board of Midas International Holdings Limited Chan Sheung Chiu Chairman

Hong Kong, 3rd September, 2003

* for identification purpose only

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

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