Richly Field China Development Limited — Earnings Release 2002

Jul 22, 2002

2001/2002 Final Results Announcement

RESULTS

The Board of Directors (the “Directors”) of United Pacific Industries Limited (“United Pacific Industries” or the “Company”) is pleased to announce the audited consolidated results of United Pacific Industries and its subsidiaries (the “Group”) for the year ended 31 March 2002, together with the corresponding comparative figures for the year ended 31 March 2001 as follows: -

	Notes	2002	2001
		HK$	HK$
Turnover	2	365,896,068	654,036,586
Cost of sales		(340,740,689)	(546,282,985)
Gross profit		25,155,379	107,753,601
Other income	3	7,869,770	25,069,839
Distribution costs		(548,903)	(1,124,902)
Administrative expenses		(34,640,874)	(36,644,556)
Other operating expenses	4	(5,971,981)	(350,000)
(Loss) profit from operations		(8,136,609)	94,703,982
Finance costs	5	(21,521)	(642,237)
Share of results of associates		(7,057,780)	(138,918)
Gain on winding up of subsidiaries	6	1,000,000	--
Impairment losses recognized in respect of goodwill		(372,126)	--
(Loss) profit before taxation		(14,588,036)	93,922,827
Taxation	7	(127,743)	(5,381,896)
(Loss) profit before minority interests		(14,715,779)	88,540,931
Minority interests		225,258	(195,216)
Net (loss) profit for the year		(14,490,521)	88,345,715
Dividends/distribution	8	44,603,072	139,488,600
(Loss) earnings per share	9	(2.6) cents	15.8 cents

Notes:

1. BASIS OF CONSOLIDATION

The consolidated financial statements incorporate the financial statements of the Group made up to 31 March each year.

The results of subsidiaries and associates acquired and disposed of during the year are included in the consolidated income statement from and up to their effective dates of acquisition and disposal respectively.

All significant inter-company transactions and balances within the Group have been eliminated on consolidation.

2. SEGMENT INFORMATION

The Group's principal activities are manufacture and trading of voltage converters and coils and rechargeable battery products. These two business segments are the basis on which the Group reports its primary segment information. Segment information about these businesses is presented as below:

	Voltage converters and coils	Rechargeable battery products	Elimination	Consolidated
	HK$	HK$	HK$	HK$
For the year ended 31 March 2002
Turnover
External sales	340,665,062	25,231,006	--	365,896,068
Inter-segment sales	4,945,250	--	(4,945,250)	--
	345,610,312	25,231,006	(4,945,250)	365,896,068
Inter-segment sales are carried out at cost.
Result
Segment result	3,209,665	(6,613,704)		(3,404,039)
Unallocated corporate expenses				(6,778,080)
Interest income				2,045,510
Finance costs				(21,521)
Share of results of associates				(7,057,780)
Gain on winding up of subsidiaries				1,000,000
Impairment losses recognised in respect of goodwill
-- segment	(108,708)	(64,978)		(173,686)
-- corporate				(198,440)
Loss before taxation				(14,588,036)
Taxation				(127,743)
Loss before minority interests				(14,715,779)
Minority interests				225,258
Net loss for the year				(14,490,521)
Other information
Additions of property, plant and equipment	8,255,796	778,040		9,033,836
Depreciation of property, plant and equipment	14,595,036	3,479,610		18,074,646

	Voltage converters and coils	Rechargeable battery products	Elimination	Consolidated
	HK$	HK$	HK$	HK$
For the year ended 31 March 2001
Turnover
External sales	622,764,841	31,271,745	--	654,036,586
Inter-segment sales	8,713,681	--	(8,713,681)	--
	631,478,522	31,271,745	(8,713,681)	654,036,586
Inter-segment sales are carried out at cost.
Result
Segment result	91,311,102	(5,946,184)		85,364,918
Unallocated corporate expenses				(9,401,747)
Net realised gain on disposal of investments in securities and forfeiture of deposit received for disposal of other investments				14,007,496
Interest income				4,733,315
Finance costs				(642,237)
Share of results of associates				(138,918)
Profit before taxation				93,922,827
Taxation				(5,381,896)
Profit before minority interests				88,540,931
Minority interests				(195,216)
Net profit for the year				88,345,715
Other information
Additions of property, plant and equipment	14,311,219	3,322,105		17,633,324
Depreciation of property, plant and equipment	12,842,062	3,710,136		16,552,198

Geographical Segments

The Group's operations are located in Mainland China and Hong Kong of the People's Republic of China (the “PRC”). The following table provides an analysis of the Group's turnover by geographical market, irrespective of the origin of the goods:

	Turnover by geographical market Year ended 31 March,
	2002	2001
	HK$	HK$
The PRC
Mainland China	92,471,945	38,496,051
Hong Kong	40,545,388	55,497,270
	133,017,333	93,993,321
Western Europe	87,646,759	125,090,309
Northern Europe	62,608,786	304,610,952
Asia (excluding the Mainland China and Hong Kong of the PRC)	57,485,011	34,253,212
United State of America, South America and Canada	23,928,981	94,653,253
Australia	1,209,198	1,435,539
	365,896,068	654,036,586

Contribution to profit by geographical market has not been presented as the contribution to profit from each market is substantially in line with the overall group ratio of profit to turnover.

The following is an analysis of the carrying amount of consolidated total assets and additions to property, plant and equipment analysed by the geographical areas in which the assets are located:

	As at 31 March,
	2002	2001
	HK$	HK$
Carrying amount of consolidated total assets
Mainland China	110,295,260	173,548,905
Hong Kong	187,933,610	218,627,787
United States of America	325,270	365,959
	298,554,140	392,542,651

	Year ended 31 March,
	2002	2001
	HK$	HK$
Additions to property, plant and equipment
Mainland China	8,072,691	17,108,967
Hong Kong	870,400	294,603
United States of America	90,745	229,754
	9,033,836	17,633,324

3. OTHER INCOME

	2002	2001
	HK$	HK$
Included in other income is as follows:
Interest earned on bank deposits and balances	2,045,510	4,733,315
Net realised gain on disposal of investment securities	--	12,156,007
Forfeiture of deposit received for disposal of other investments	--	1,851,489
Gain on disposal of property, plant and equipment	--	691,230

4. OTHER OPERATING EXPENSES

The other operating expenses comprises:

	2002	2001
	HK$	HK$
Write-off of property, plant and equipment	5,028,015	--
Deficit arising on revaluation of investment properties	750,000	350,000
Factory relocation and closure expenses	193,966	--
	5,971,981	350,000

During the year, the Group closed certain manufacturing factories in the Mainland China of the PRC to streamline the Group’s operations. It resulted in the write-off of property, plant and equipment and factory relocation and closure expenses of HK$5,028,015 and HK$193,966 respectively.

5. FINANCE COSTS

	2002	2001
	HK$	HK$
Interest on:
Bank borrowings wholly repayable within five years	21,521	628,532
Obligations under finance leases	--	13,705
Total borrowing costs	21,521	642,237

6. GAIN ON WINDING UP OF SUBSIDIARIES

The amount represents the capital reserve realised upon winding up of two subsidiaries during the year.

7. TAXATION

	2002	2001
	HK$	HK$
The charge comprises:
The Company and its subsidiaries:
Hong Kong Profits Tax
- current year	--	6,694,995
- under (over) provision in prior years	127,743	(1,340,006)
	127,743	5,354,989
Share of taxation of an associate	--	26,907
	127,743	5,381,896

No provision for Hong Kong Profits Tax has been made in the financial statements as the Group incurred a tax loss for the year. In the previous year, Hong Kong Profits Tax was calculated at 16% of the estimated assessable profit for that year.

In the opinion of the directors of the Company, a substantial portion of the Group's profit neither arises in, nor is derived from, Hong Kong and, accordingly, that portion of the Group's profit is not subject to Hong Kong Profits Tax. Furthermore, the subsidiaries of the Company that are operating in the PRC are currently not subject to income tax of the PRC as these companies either operate under assembly and processing arrangements in the PRC or are exempted from income tax for the first two profitable years of operations and, thereafter, are entitled to 50% relief from income tax for the next three years under the tax laws of the PRC.

8. DIVIDENDS/DISTRIBUTION

	2002	2001
	HK$	HK$
Interim dividend, paid - 8 cents (2001: 5 cents per share)	44,603,072	27,902,920
Special dividend/distribution, paid - nil (2001: 10 cents per share)	--	55,805,840
Special dividend, paid - nil (2001: 5 cents per share)	--	27,902,920
Final dividend, declared - nil (2001: 5 cents per share)	--	27,876,920
	44,603,072	139,488,600

9. (LOSS) EARNINGS PER SHARE

The calculation of (loss) earnings per share is based on the net loss for the year of HK$14,490,521 (2001: profit of HK$88,345,715), and the 557,538,400 (2001: weighted average of 557,923,058) shares in issue during the year.

No diluted loss per share has been presented as the exercise of the Company's outstanding share options would have an anti-dilutive effect on the loss per share for the year.

No diluted earnings per share had been presented for the previous year as the exercise price of the Company's outstanding share options was higher than the average market price of the Company's shares for that year.

FINAL CASH DIVIDEND

The directors of the Company resolved not to declare any final dividend for the year ended 31 March 2002.

CLOSURE OF REGISTER OF MEMBERS

The register of members will be closed from 23 August 2002 to 28 August 2002, both days inclusive, during which period no transfer of shares will be registered. In order to determine the identity of members who are entitled to attend and vote at the Annual General Meeting and who are entitled to any dividend, all transfer documents accompanied by the relevant share certificates must be lodged with the Company's Branch Share Registrars in Hong Kong, Secretaries Limited, at 5th Floor, Wing On Centre, 111 Connaught Road, Central, Hong Kong not later than 4:00p.m. on 22 August 2002.

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

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

CORPORATE GOVERNANCE

The Company has complied throughout the year with the Code of Best Practice as set out in Appendix 14 of the Rules governing the Listing of Securities of The Stock Exchange of Hong Kong Limited.

FULL DETAILS OF FINANCIAL INFORMATION

The 2002 Annual Report of the Company containing all the information required by paragraphs 45(1) to 45(3) inclusive of Appendix 16 of the Listing Rules will be published on the Company's own website and on the website of The Stock Exchange of Hong Kong Limited in due course.

BUSINESS REVIEW AND PROSPECTS

The following sets out the financial highlights for the year ended 31 March 2002, with the comparative figures for the corresponding period in 2001.

	2002	2001	Change	Change
	HK$'million	HK$'million	HK$'million	%
Turnover	366	654	288	44%
Earning before interest, taxation and depreciation	14	93	79	85%
Depreciation	(18)	(17)	1	6%
Net interest income	2	4	2	50%
Net realised gain on disposal of investments in securities and forfeiture of deposit received for disposal of other investments	--	14	14	n.a.
Share of results of associates	(7)	--	7	n.a.
Other non-operating items	(6)	--	6	n.a.
Loss (profit) before taxation	(15)	94	109	n.a.
Taxation and minority interests	--	(6)	6	n.a.
Net loss (profit) for the year	(15)	88	103	n.a.
Dividends/distributions	45	140	95	68%

Group Overview

˙ The Group's turnover and net loss for the year amounted to HK$ 366 million and 15 million respectively.

˙ The Group's earning before interest, taxation and depreciation for the year amounted to HK$ 14 million.

˙ With the restructuring exercise entirely completed by 31 March 2002, a HK$ 7 million share of losses of associates and a HK$ 6 million non-operating items had been recorded by the Group for the year.

˙ The financial position of the Group is still healthy given the poor global economic climate. On 31 March 2002, the Group had bank balances, deposits and cash of HK$ 61 million with a total bank debt of HK$ 1 million, while the Group's net asset value was HK$ 231 million, with a healthy current ratio of 329%.

˙ On 20 December 2001, the directors of the Company had resolved to declare an interim cash dividend of HK$ 0.08 per share or HK$ 45 million which had already been paid to our shareholders in January 2002. However, the directors of the Company resolved not to declare any final dividend for the year ended 31 March 2002. Accordingly, the total dividend for the year would be HK$ 0.08 per share or HK$ 45 million.

Financial and Operations Review

Voltage Converter and Rechargeable Battery Business Segments

The financial performance of the voltage converter and rechargeable battery business segments fared poorly compared to last year, mainly due to the following:

˙ Substantial drop in worldwide demand for traditional linear adaptors;

˙ Pressure from customers to reduce prices across the board;

˙ General slow-down of the world economy in the wake of the September 11 World Trade Center terrorist attacks; and

˙ Initial learning-curve issues associated with diversification of customer base and expansion of product range.

As anticipated in our report last year, the Group's existing core businesses have, this year, faced tremendous pressure from customers worldwide to reduce prices across the board due to a general slow down in sales orders and the continued down-ward slump in global demand for mobile phone and other electrical/electronic products. This has, as your management had foreseen, affected the Group's performance for this year and will likely continue to do so in the near to medium term. However, your management had already previously established long-range cost-cutting and financial control measures in anticipation of leaner times and the implementation of such measures has certainly helped the Group minimise its loss for this year. Your management is confident that such controls will continue to help the Group stem the worsening impact from negative global market conditions.

We have stream-lined our manufacturing facilities in the PRC and have begun to shift our business focus from an OEM manufacturer of traditional linear adapters to a provider of electronic/electrical manufacturing services (“EMS”). As the term suggests, an EMS provider has a wide variety of engineering and manufacturing capabilities that can offer a one-stop complete package to customers, e.g. from design through to production, assembly, quality control, packaging and shipping services. The Group's facilities in the PRC are equipped with state-of-the-art design, production, quality control, and R&D technology, machinery and equipment. Our production operations are also capable of multiple functions within the manufacturing process e.g. tooling, moulding, plastic injection, and coil winding, that can enable customers to have all components of their electronic/electrical appliance or product literally created under one roof. Your management is confident that the shift in business focus is the right move forward into the new millennium. Our major customers in the electronics and communications industries continue to merge, consolidate or restructure to drastically reduce cost. They, therefore, now demand a lower-cost, value-for-money alternative to multiple subcontracting, as was the industry practice previously. Giants like Ericsson and Motorola have completely contracted out manufacturing operations to single EMS providers like Flextronics. We believe that this is the market trend and the process of our own internal change is expected to be completed within the next couple of years.

Investment in Climax International Company Limited (“Climax”)

Regarding our equity interest in Climax which we had written off completely in 1998, there was no impact on the Group from Climax's results.

As reported last year, our shareholding interest in Climax had been diluted to approximately 1.89% after the completion of the new share subscription in Climax on 11 January 2001 and the partial market disposal of our Climax shares. Your management continues to vigilantly monitor market and other opportunities for further disposals of our remaining Climax shares to create value for our shareholders.

The Year Ahead

˙ We will continue to focus on cash flow generation through our new business strategy and optimize our resources through the prudent management of our assets and the enforcement of stringent financial control measures.

˙ We will continue to be opportunistic in identifying both investment and disposal opportunities as and when they arise with a view to increasing value to our shareholders.

˙ We remain optimistic that the Group will steadily revert to profitability for the long term once global market conditions begin to improve.

By Order of the Board
Ho Che KongChairman & Group Managing DirectorHong Kong, 22 July 2002

Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that the Annual General Meeting of United Pacific Industries Limited (the “Com pany”) will be held at Flat B, 19th Floor, Chai Wan Industrial Centre, 20 Lee Chung Street, Chai Wan, Hong Kong on Wednesday, 28 August 2002, at 10:00 am for the following purposes:--

1. To receive and consider the audited financial statements and the Reports of the Directors and Auditors for the year ended 31 March 2002;

2. To re-elect the retiring Directors and to fix the remuneration of Directors;

3. To appoint Auditors and to authorise the Directors to determine their remuneration;

4. As special business, to consider and, if thought fit, pass with or without modifications the following resolutions as Ordinary Resolutions:--

A. “THAT

(a) subject to paragraph (c) below, the exercise by the Directors during the Relevant Period (as defined below) of all the powers of the Company to allot, issue and deal with additional shares of HK$0.10 each in the capital of the Company and to make or grant offers, agreements and options which might require the exercise of such powers be and is hereby generally and unconditionally approved;

(b) the approval in paragraph (a) above shall authorise the Directors of the Company during the Relevant Period to make or grant offers, agreements and options which would or might require the exercise of such powers after the end of the Relevant Period;

(c) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be alloted (whether pursuant to an option or otherwise) and issued by the Directors of the Company pursuant to the approval in paragraph (a) above otherwise than pursuant to (i) a Rights Issue (as defined below); (ii) the exercise of rights of subscription or conversion under the terms of any warrants issued by the Company or any securities which are convertible into shares of the Company; or (iii) any option scheme or similar arrangement for the time being adopted for the grant or issue to officers and/or employees of the Company and/or any of its subsidiaries of shares or rights to acquire shares of the Company; or (iv) any scrip dividend or similar arrangement providing for the allotment of shares in lieu of the whole or part of a dividend on shares of the Company in accordance with the Bye-laws of the Company, shall not exceed 20 per cent. of the aggregate nominal amount of the share capital of the Company in issue at the date of passing this Resolution, and the said approval shall be limited accordingly; and

(d) for the purposes of this Resolution:--

“Relevant period” means the period from the passing of this Resolution until whichever is the earliest of:

(i) the conclusion of the next Annual General Meeting of the Company;

(ii) the expiration of the period within which the next Annual General Meeting of the Company is required by the Company’s Bye-laws or any applicable laws to be held; and

(iii) the date on which the authority set out in this Resolution is revoked or varied by way of ordinary resolution of the Company in general meeting.

“Rights Issue” means an offer of shares open for a period fixed by the Directors of the Company to holders of shares on the register on a fixed record date in proportion to their then holdings of such shares (subject to such exclusions or other arrangements as the Directors of the Company may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory outside Hong Kong).”

B. “THAT

(a) subject to paragraph (c) below, the exercise by the Directors of the Company during the Relevant Period (as defined below) of all the powers of the Company to repurchase shares of HK$0.10 each in the capital of the Company on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) or any other stock exchange on which the securities of the Company may be listed and recognised by the Securities and Futures Commission of Hong Kong and the Stock Exchange for this purpose, subject to and in accordance with all applicable laws and the requirements of the Rules Governing the Listing of Securities on the Stock Exchange or of any other stock exchange as amended from time to time, be and is hereby generally and unconditionally approved;

(b) the approval in paragraph (a) above shall authorise the Directors on behalf of the Company during the Relevant Period to procure the Company to repurchase shares of HK$0.10 each in the Capital of the Company at such prices as the Directors of the Company at their discretion may determine;

(c) the aggregate nominal amount of shares of the Company to be repurchased by the Company pursuant to the approval in paragraph (a) above during the Relevant Period shall not exceed 10 per cent. of the aggregate nominal amount of the share capital of the Company in issue at the date of passing of this Resolution and the said approval shall be limited accordingly; and

(d) for the purposes of this Resolution:--

“Relevant Period” means the period from the passing of this Resolution until whichever is the earliest of:

(i) the conclusion of the next Annual General Meeting of the Company;

(ii) the expiration of the period within which the next Annual General Meeting of the Company is required by the Company’s Bye-laws or any applicable laws to be held; and

(iii) the date on which the authority set out in this Resolution is revoked or varied by way of ordinary resolution of the Company in general meeting.”

C. “THAT

conditional upon the passing of the Resolutions A and B set out in item 4 of the notice convening this Meeting, the aggregate nominal amount of the shares in the Company which shall have been repurchased by the Company pursuant to and in accordance with the Resolution B set out in item 4 above shall be added to the aggregate nominal amount of the shares which may be allotted or agreed conditionally or unconditionally to be allotted by the Directors of the Company pursuant to and in accordance with the Resolution A set out in item 4 above, provided that the amount of share capital repurchased by the Company shall not exceed 10 per cent. of the aggregate nominal amount of the share capital of the Company in issue at the date of passing this Resolution.”

By Order of the Board
Lawrence OeiSecretaryHong Kong, 22 July 2002

Registered Office:– Clarendon House Church Street Hamilton HM 11 Bermuda	Principal Office in Hong Kong:– Flat B 19th Floor Chai Wan Industrial Centre 20 Lee Chung Street Chai Wan Hong Kong

Notes:

1. Any member entitled to attend and vote at the meeting is entitled to appoint one or two proxies to attend and, vote in his stead. A proxy need not be a member of the Company.

2. To be valid, a proxy form together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy thereof must be deposited at the Company’s principal place of business in Hong Kong, Flat B, 19th Floor, Chai Wan Industrial Centre, 20 Lee Chung Street, Chai Wan, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.

3. The Register of Members will be closed from 23 August 2002 to 28 August 2002 (both days inclusive), during which period no transfer of shares will be registered. In order to determine the identity of members who are entitled to attend and vote at the Annual General Meeting and who are entitled to any dividend, all transfers accompanied by the relevant share certificates must be lodged with the Company’s Hong Kong share registrar, Secretaries Limited of 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong not later than 4:00 p.m. on 22 August 2002.

4. With respect to Resolution A proposed under item 4 above, the Directors wish to state that they have no immediate plans to issue additional new shares of the Company. The Ordinary Resolution is being sought from shareholders as a general mandate in compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”). Under the Listing Rules the present general mandate to issue new shares will lapse unless it is renewed at the forthcoming Annual General Meeting.

5. With respect to Resolutions B and C proposed under item 4 above, approval is being sought from shareholders for a general mandate to be given to the Directors to repurchase shares and to issue shares as a result of such repurchases. In accordance with the Listing Rules and the Code on Share Repurchases, an explanatory statement in connection with the general mandate to repurchase shares will be dispatched to the shareholders together with the annual report.

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