Synagistics Limited — Annual Report 2005

Jul 21, 2005

==> picture [59 x 58] intentionally omitted <==

CONCEPTA INVESTMENTS LIMITED 正奇投資有限公司 *

(incorporated in the Cayman Islands with limited liability) (Stock Code: 1140)

ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 31ST MARCH 2005

RESULTS

The Board of Directors (the “Board”) of Concepta Investments Limited (the “Company”) is pleased to announce the audited results of the Company for the year ended 31st March 2005 (the “Year”), together with the comparative figures for the year ended 31st March 2004 as follows:

Note Turnover 2 Net gain on disposal of other investments – listed Net unrealised holding (loss)/gain on other investments – listed Other revenue – interest income Provision for impairment losses in relation to investment securities Administrative expenses (Loss)/Profit from operations 4 Finance cost – interest on bank overdraft (Loss)/Profit before taxation Taxation 5 Net (loss)/profit for the year Final dividend proposed 6 Basic (loss)/earnings per share 7	2005 HKD 269,878 4,571,727 (7,470,723) 8,534 (75,000) (2,743,140) (5,438,724) – (5,438,724) 1,226 (5,437,498) – (5.4) cents	2004 HKD 656,048 17,108,479 3,418,975 142,193 – (4,019,078) 17,306,617 (57) 17,306,560 (2,828,226) 14,478,334 10,000,000 14.5 cents

Notes:

1 Basis of preparation of financial statements

The financial statements have been prepared in accordance with accounting principles generally accepted in Hong Kong and comply with accounting standards issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”). They have been prepared under the historical cost convention, except that, certain investments in securities are stated at fair value.

The HKICPA has issued a number of new and revised Hong Kong Financial Reporting Standards and Hong Kong Accounting Standards (“new HKFRSs”) which are effective for accounting periods beginning on or after 1st January 2005. The Company has not early adopted these new HKFRSs in the financial statements for the year ended 31st March 2005. The Company has already commenced an assessment of the impact of these new HKFRSs but is not yet in a position to state whether these new HKFRSs would have a significant impact on its results of operations and financial position.

– 1 –

2 Turnover

The Company principally engaged in medium to long-term investments in listed and unlisted securities in the Greater China. Turnover represented dividend income from investments in securities during the Year.

3 Segment information

No segment information is presented as all of the turnover, contribution to operating results, assets and liabilities of the Company are attributable to investment activities which are carried out or originated principally in Hong Kong.

4 (Loss)/Profit from operations

(Loss)/Profit from operations is stated after charging the following:

	2005	2004
	HKD	HKD
Auditors’ remuneration	150,000	150,000
Contributions to retirement benefits scheme
(already included in staff costs)	23,000	15,000
Depreciation	7,720	35,885
Investment management fee	729,346	879,059
Loss on disposal of plant and equipment	–	13,358
Performance fee	–	1,447,200
Operating lease payments in respect of office premises	108,000	108,000
Staff costs (including directors’ emoluments)	896,370	583,387

5 Taxation

Hong Kong profits tax is provided at 17.5% (2004:17.5%) based on the estimated assessable profit for the Year.

The amount of taxation charged to the income statement represents:

Current – Hong Kong profits tax Charge for the year Underprovision in previous year Deferred taxation Relating to (reversal)/origination of temporary differences Taxation Final dividend proposed HKDNil (2004: HKD0.10 per ordinary share)	2005 HKD – 598,320 (599,546) (1,226) 2005 HKD –	2004 HKD 2,226,595 – 601,631
		2,828,226
		2004 HKD 10,000,000

6 Final dividend proposed

The Board has resolved not to pay a final dividend.

• 7 Basic (loss)/earnings per share

The calculation of basic (loss)/earnings per share is based on the Company’s net loss for the Year of HKD5,437,498 (2004: net profit of HKD14,478,334) divided by the weighted average number of ordinary shares outstanding during the Year, being 100,000,000 (2004: 100,000,000).

There were no dilutive potential shares during the years ended 31st March 2005 and 2004, therefore, no diluted (loss)/earnings per share has been presented.

– 2 –

DIVIDEND

The directors do not recommend the payment of a dividend in respect of the Year. (2004: HKD0.10 per ordinary share).

MANAGEMENT DISCUSSION AND ANALYSIS Business review and prospects

During the Year, the Hang Seng China Enterprises Index fluctuated between the range of 3500 to 5200 points. The Company retained the strategy of buying H shares when they overshoot on the downside and selling them in the period of relatively high valuations. The loss for the Year of approximately HKD5.4 million was primarily resulted from an unrealised loss of approximately HKD7.4 million on listed securities investment, a realised gain of approximately HKD4.5 million on listed securities investment and administrative expenses of approximately HKD2.7 million.

The last trough in China’s investment cycle was in 1999 after which investment growth started to accelerate. During the aggressive investment cycle from 1999 to 2004, the property and industrial sectors were the major drivers. Within the industrial sector, basic materials, machinery and electronics were the areas have the fastest growth. When investment demand drove company turnover growth, the process was self-fulfilling. Most of the investment-driven companies’ turnover and profitability increased during the upswing and led to overcapacity. The peaking of this investment cycle means many of these companies may eventually experience a drop in profitability due to overcapacity. For the near future, the Board foresees downward earning revisions to continue in 2005 and 2006, especially for the cement and steel sectors.

Despite the deteriorating earning outlook, China’s stock market is supported by strong liquidity flows on the back of ongoing speculation about the looming Renminbi revaluation. The Board will take into account the potential impact of Renminbi revaluation when evaluating investment opportunities. On the other hand, based on publicly available information, there are 45 announced capital raising issues from China-related companies waiting to come to the market. Total estimated amount to be raised in Hong Kong from these issues is around USD26 billion. Those Initial Public Offerings will absorb part of the liquidity and put the existing market under pressure. In addition, China stock market (China A and B shares) have weakened so much that it could put pressure on the H share market.

The Board expects that Hong Kong listed China shares at current level is under pressure due to earning uncertainty and coming initial public offerings competing for funds. The Board believes the best trading strategy is to remain defensive and stick with stocks that offer reasonable earning visibility. The Board believes that stocks that are likely to outperform in the event of a market downturn are tollroad and China utility stocks.

Liquidity and financial resources

As at 31st March 2005, the Company had bank balances of HKD29,037,553 (2004: HKD41,554,774). The Board believes that the Company has sufficient financial resources to satisfy its immediate investments and working capital requirements.

The Company had net current assets of HKD44,523,448 (2004: HKD60,477,772) and no borrowings as at 31st March 2005, which positions the Company advantageously to pursue its investment strategies and new investment opportunities.

The gearing ratio, which was calculated on the basis of total liabilities over total shareholders’ funds as at 31st March 2005, was 0.06 (2004: 0.074).

Capital structure

There has been no change in the Company’s capital structure during the Year.

Significant investments held

As at 31st March 2005, the Company held investments in listed shares of HKD18,087,200 (2004: HKD22,730,560) and unlisted securities of HKD778,000 (2004: HKD75,000).

– 3 –

Employees

During the Year, the Company had 3 (2004: 3) employees, including executive directors. Total staff costs, including directors’ emoluments for the Year amounted to HKD896,370 (2004: HKD583,387). The Company’s remuneration policies are in line with the market practice and are determined on the basis of the performance and experience of individual employees.

Exposure to fluctuations in exchange rates and related hedges

The Company’s assets and liabilities are denominated in Hong Kong Dollars and, therefore, the Company had no significant exposure to foreign exchange fluctuation.

Charges on the Company’s assets and contingent liabilities

As at 31st March 2005, there were no charges on the Company’s assets and the Company did not have any significant contingent liabilities.

PURCHASE, SALE OR REDEMPTION OF SHARES

The Company has not purchased, sold or redeemed any of its shares during the Year.

COMPLIANCE WITH THE CODE OF BEST PRACTICE

Throughout the Year, the Company was in compliance with the Code of Best Practice as set out in Appendix 14 to the Listing Rules except that the independent non-executive Directors of the Company are not appointed for a specific term as they are subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the Company’s Articles of Association.

AUDIT COMMITTEE

The Company established an audit committee on 26th February 2003 with written terms of reference in compliance with the Code of Best Practice as set out in Appendix 14 to the Listing Rules. Amongst other duties, the principal duties of the audit committee are to review and supervise the financial reporting process and internal control system of the Company.

The Company’s audit committee comprised three independent non-executive directors, namely, Mr. Kwong Che Keung, Gordon, Prof. He Jia and Mr. Wang Xiaojun. Two meetings were held during the Year.

The Company’s financial statements for the Year has been reviewed by the audit committee.

DISCLOSURE OF INFORMATION ON THE STOCK EXCHANGE’S WEBSITE

All the information required by 45(1) to 45(3) of Appendix 16 of the Listing Rules in force prior to 31st March 2004, which remain applicable to result announcements in respect of accounting periods commencing before 1st July 2004 under transitional arrangements, will be published on the Stock Exchange’s website in due course.

BOARD OF DIRECTORS

As at the date of this announcement, the Board comprises of executive directors, Mr. Zhang Zhi Ping, Mr. Zhang Gaobo, non-executive director, Mr. Liu Hongru and independent non-executive directors, Mr. Kwong Che Keung, Gordon, Prof. He Jia and Mr. Wang Xiaojun.

On behalf of the Board ZHANG Gaobo Executive Director

Hong Kong SAR, 21st July, 2005

• For identification purposes only

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

– 4 –