JD Logistics, Inc. — Interim / Quarterly Report 2004

Sep 8, 2004

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(Stock Code: 1172)

ANNOUNCEMENT OF RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE, 2004

FINANCIAL HIGHLIGHTS

• Turnover of the Group increased to HK$308 million from HK$275 million, representing an increase of approximately 12%.

• Profit attributable to shareholders increased to HK$22 million from HK$20 million, representing an increase of approximately 10%.

• Interim dividend per share amounted to HK1.2 cents (2003: HK1.0 cent), representing a growth of 20%.

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, 2004 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 and operating expenses Profit from operations 3 Finance costs Profit before taxation Income tax expenses 4 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, 2004 2003 HK$’000 HK$’000 (unaudited) (unaudited) 307,662 274,634 (206,943) (190,846) 100,719 83,788 3,614 9,499 (11,555) (8,136) (64,263) (57,548) 28,515 27,603 (2,832) (3,231) 25,683 24,372 (2,853) (3,954) 22,830 20,418 (605) (121) 22,225 20,297 17,390 17,542 HK3.9 cents HK4.7 cents HK3.9 cents HK3.4 cents

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 No. 25 “Interim financial reporting” issued by the Hong Kong Institute of Certified Public Accountants.

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2. SEGMENT INFORMATION Business segments

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

Six months ended 30th June, 2004

Property Printing investment HK$’000 HK$’000 TURNOVER – external 299,066 8,596 SEGMENT RESULTS 23,369 5,304 Unallocated corporate income Unallocated corporate expenses PROFIT FROM OPERATIONS Six months ended 30th June, 2003 Property Printing investment HK$’000 HK$’000 TURNOVER – external 267,462 7,172 SEGMENT RESULTS 22,597 6,082 Unallocated corporate income Unallocated corporate expenses PROFIT FROM OPERATIONS

Total HK$’000 307,662 28,673 466 (624 ) 28,515 Total HK$’000 274,634 28,679 909 (1,985) 27,603

3. PROFIT FROM OPERATIONS

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

4.

Depreciation and amortisation Interest earned on bank deposits INCOME TAX EXPENSES The charge (credit) comprises: Hong Kong Profits Tax The People’s Republic of China (the “PRC”) income tax Deferred taxation	For the six months ended 30th June, 2004 2003 HK$’000 HK$’000 17,348 16,389 (466) (909 ) For the six months ended 30th June, 2004 2003 HK$’000 HK$’000 2,210 2,812 666 1,114 (23) 28 2,853 3,954

Hong Kong Profits Tax is calculated at 17.5% of the estimated assessable profit for the six months ended 30th June, 2003 and 2004.

Income tax in 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.

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5. DIVIDENDS

DIVIDENDS
2002 final dividend of HK2.8 cents per share paid to ordinary shareholders 2003 final dividend of HK3 cents per share paid to ordinary shareholders 2003 special dividend of HK1.2 cents per share paid to ordinary shareholders_(note a) Dividend to Series B preference shareholders(note b)_	For the six months ended 30th June, 2004 2003 HK$’000 HK$’000 – 10,928 16,029 – – 4,684 1,361 1,930 17,390 17,542
		17,542

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 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 transaction, “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 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 and 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, 2004 2003 HK$’000 HK$’000 22,225 20,297 (1,361) (1,930) 20,864 18,367 Number of shares 534,290,068 390,168,521 – 144,000,000 – 21,816 534,290,068 534,190,337

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INTERIM DIVIDEND

The directors have declared an interim dividend of HK1.2 cents (2003: HK1.0 cent) per ordinary share, representing a growth of 20%, payable on or before 8th October, 2004 to ordinary shareholders whose names appear on the Company’s register of members on 28th September, 2004.

BUSINESS REVIEW

During the first half of the year, the Group met with challenges in rise in paper costs, insufficient labor and unstable electricity supply in the Guangdong province. Despite all these, with the growing momentum of book printing and paper product printing, the Group was able to achieve an increase in both turnover and net profit.

During the period under review, the Group recorded a growth in turnover by 12% to about HK$308 million and increase in gross profit by 20% to about HK$101 million. As a result of increase in sales, selling expenses rose to about HK$12 million from HK$8 million. Furthermore, administrative and operating expenses increased by 10% to HK$64 million which was principally due to rise in freight and logistics expenses whereas finance costs reduced in light of lower interest rate. Taking all these into account, net profit of the Group increased by 10% to HK$22 million. EBITDA for the six months ended 30th June, 2004 amounted to HK$45 million.

• (a) Printing Division During the period under review, the Group’s printing business climbed by 12% and attained a turnover of HK$299 million, accounted for 97% of the Group’s turnover. The core business of the Group comprised book printing and paper product printing. For the first six months of the year, the Group improved its utilization of production capacity and resources to cope with the strong demand for printing products.

• (1) Book Printing Book printing business focused on multinational publishers and conglomerates in the United States, Europe, Australia and New Zealand. During the period under review, book printing division achieved a growth in sales by 20% under the proactive sales and marketing strategy.

Consistent high quality standard and reputation is of paramount importance to the Group in the printing industry, and great emphasis on product and service quality had been put to uplift corporate image on the international platform. This year, the Group won 16 awards in 2004 Premier Print Awards in the United States, of which we are honored to be awarded 2 Benny awards in the Trade Book and Special Finishing Technique categories. Being winners of Benny award are appraised as the highest honor in the global printing industry. Besides, the Group participated in several international trade fairs namely the Bologna Children’s Book Fair and the Book Expo of America to promote its corporate awareness and to expand new business.

The book printing production of the Group is carried out in the following plants:–

• (i) Yuanzhou plant The Yuanzhou plant occupied a gross floor area of about 410,000 sq.ft., which is well equipped primarily for book printing business. To cater for the growing demand for book printing business during the period under review, the Group installed two new 5-color printing presses and an additional hard cover binding and other auxiliary post press facilities. Besides, the Group is in progress to upgrade its prepress capabilities and CTP systems in order to maintain its pioneering position in providing advanced printing services to clients.

• (ii) Processing plant in Dongguan The processing plant in Dongguan occupied a four-storey leased premise with over 250,000 sq.ft. and has been providing strong back-up support to the book printing business. With the realignment of the operational team and the strengthening of production flow, efficiency of this plant has improved during the period under review. The processing plant is able to provide the Group with an additional printing capacity to cater for the growth in book printing business.

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• (2) Paper Product Printing

• Paper product business provided a diversified range of products including packaging products, commercial printing products, premium gift products, greeting cards, stationery items and paper gift bags. The division is supported by the Dongguan plant which has a total gross area of 410,000 sq.ft. and is fully equipped to provide full fledged services for paper products.

During the period under review, paper product division achieved a small growth in turnover with its strategy to adjust its product mix and to improve its profit margin. In view of the keen competition in paper product business, the Group has implemented prudent pricing strategy to maintain an appropriate balance among its sales volume, gross profit and market share. To improve its competitiveness, the Group has been providing value added services by promoting a series of paper product designs and concepts to cope with the more sophisticated market demand. This direction won positive feedback from customers.

The Group had implemented proactive strategy in new business development in local and overseas markets and had invested substantial efforts in expanding its product ranges. In early 2004, the Group had actively participated in the Frankfurt Paper World 2004 and the Total Processing and Packaging Fair to develop new customers and exploring additional sales revenue.

(b) Property Division

The Group holds a total attributable gross floor area of 920,500 sq.ft. in the PRC through the entire interest 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$9 million. The property division will continue to generate stable rental income for the second half of 2004.

LIQUIDITY AND FINANCIAL POSITIONS

As at 30th June 2004, the Group’s bank balances and cash amounted to HK$75,512,000 while bank borrowings and obligations under finance leases amounted to HK$99,478,000, of which HK$60,300,000 are due from the second to fifth year. The Group’s net bank borrowings to equity ratio (being all bank and other borrowings less bank balances and cash as a ratio to shareholders’ funds) is 4.6%. Most of the Group’s bank balances and borrowings were dominated in Hong Kong dollars, U.S. dollars and Renminbi, risk in exchange 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$105,112,000 had been pledged to secure borrowings granted to the Group.

As at the date hereof, the Group has in issue HK$98.5 million Series B preference shares.

PROSPECTS

The Group is optimistic about the sales and business environment for printing business as the export trend to overseas market is increasing gradually and the domestic growth rate in the PRC market is steadily increasing. However, pricing competition continued to be keen. In view of such challenges, the Group will continue its effort to tighten cost control and apply effective measures to maintain a stable paper cost and supply. Meanwhile, the Group will improve its logistics workflow and to implement a stringent production, operations and management control.

To enrich its core competence, the Group will monitor the market demand and technological requirements and will continue to invest in new technology in prepress, additional printing and post-press machines, and expansion of plants and staff quarters.

With the confirmation and signatory of the Pan-PRD Regional Cooperation between Hong Kong and 9 provinces in the PRC and Macau, there will be enormous business opportunities for the trade activities, investment in printing business and the establishment of new plants within the said areas of the PRC. Feasibilities on formulating appropriate strategic plan will be studied.

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

During the six months ended 30th June, 2004, 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, 2004, 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.

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The Board wishes to take this opportunity to welcome Mr. Wong Chi Sing as Executive Director, and Dr. Li Sau Hung, Eddy and Mr. Yau Chi Ming to join as Independent Non-executive Directors of the Company.

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 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 Group’s auditors have carried out a review on the unaudited interim financial statements for the six months ended 30th June, 2004 in accordance with the Statement of Auditing Standards No. 700 “Engagements to review interim financial reports” issued by the Hong Kong Institute of Certified Public Accountants.

The Company has also adopted the Model Code for Securities Transactions by Directors of Listed Companies contained in Appendix 10 of the Listing Rules.

CLOSING OF REGISTER

The register of members will be closed from Monday, 27th September, 2004 to Tuesday, 28th September, 2004, 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 Hopewell Centre, 183 Queen’s Road East, Hong Kong, by no later than 4:00 p.m. on Friday, 24th September, 2004.

STAFF

As at 30th June, 2004, the Group, including its subcontracting processing plant, employed approximately 3,900 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.

PUBLICATION OF INTERIM RESULTS ON THE WEBSITE OF THE STOCK EXCHANGE

A detailed interim results announcement for the six months ended 30th June, 2004 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.

GENERAL

As at the date of this announcement, Mr. Chan Sheung Chiu, Mr. Kwong Tin Lap, Mr. Kwok Chi Fai, Ms. Li Mee Sum, Ann, Mr. Tang Chow Ming, Paul and Mr. Wong Chi Sing are Executive Directors, Mr. Lee Sai Wai and Mr. Dominic Lai are Non-Executive Directors, 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 Chan Sheung Chiu Chairman

Hong Kong, 8th September, 2004

* for identification purposes only

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

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