Vision Values Holdings Ltd. — Interim / Quarterly Report 2002

Sep 23, 2002

Asia Logistics Technologies Limited 亞 洲 物 流 科 技 有 限 公 司[*]

(Incorporated in the Cayman Islands with limited liability)

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2002

INTERIM RESULTS

The Board of Directors (the “Board”) of Asia Logistics Technologies Limited (the “Company”) announces that the unaudited consolidated results of the Company and its subsidiaries (the “Group”) for the six months ended 30 June 2002 together with the comparative figures for the corresponding period last year are as follows:

CONDENSED CONSOLIDATED INCOME STATEMENT

Notes TURNOVER Continuing operations 2 Discontinued operations Cost of sales Gross profit/(loss) Other revenue Administrative and selling expenses Gain on disposal of discontinued operations Loss on deemed disposal of a subsidiary 3 Write off of fixed assets Amortization of goodwill Provision for impairments in value of long term listed investments PROFIT/(LOSS) FROM OPERATING ACTIVITIES Continuing operations Discontinued operations 4

For the six months ended 30 June 2002 2001 (Unaudited) (Unaudited) HK$’000 HK$’000 18,700 19,318 – 256 18,700 19,574 (18,797) (15,203) (97) 4,371 1,496 3,476 (22,190) (8,604) – 2,695 (696) – (1,013) – (2,209) – (8,503) – (33,212) (765) – 2,703 (33,212) 1,938

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Finance costs 5 Share of results of associates PROFIT/(LOSS) BEFORE TAX Tax 6 PROFIT/(LOSS) BEFORE MINORITY INTERESTS Minority Interests NET PROFIT/(LOSS) FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS Basic earnings/(loss) per share 7	(977) (74) (11,433) – (45,622) 1,864 – – (45,622) 1,864 4,450 – (41,172) 1,864 (HK 1.28) cent HK0.07 cent

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of preparation

The unaudited condensed financial statements have been prepared in accordance with Statement of Standard Accounting Practice (“SSAP”) No.25 “Interim Financial Reporting” issued by the Hong Kong Society of Accountants and 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”).

The accounting policies used in these unaudited condensed financial statements are consistent with those used in the annual financial statements of the Group for the year ended 31st December 2001.

Certain comparative amounts have been reclassified to conform with the current period’s presentation.

2. Turnover and segment information

An analysis of turnover and contribution to profit/(loss) from operating activities of the Group by business and geographical segment is as follows:

Business Segments

	Continuing Operations	Continuing Operations	Discontinued	Operations
	Logistics Technologies		Bowling Recreations		Consolidated
	Six months ended 30 June,		Six months ended 30 June,		Six months ended 30 June,
	2002	2001	2002	2001	2002	2001
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Segment Revenue	18,700	19,318	–	256	18,700	19,574
Segment Results	(22,287)	(3,984)	–	2,703	(22,287)	(1,281)
Other Revenue					1,496	3,219
Unallocated Expenses					(12,421)	–
Profit/(Loss) from operating activities					(33,212)	1,938

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Finance Costs Share of results of associates

Profit/(Loss) before minority interests

(977) (11,433) (45,622)	(74) –
	1,864

Geographical Segments

	Revenue by geographical markets	Revenue by geographical markets	Segment Results	Segment Results
	Six months	ended 30 June,	Six months ended 30 June,
	2002	2001	2002	2001
	HK$’000	HK$’000	HK$’000	HK$’000
Hong Kong	3,079	–	(9,861)	(3,531)
Elsewhere in the People’s
Republic of China (“PRC”)	15,621	19,574	(12,426)	2,250
	18,700	19,574	(22,287)	(1,281)

Turnover represents the net invoiced value of goods sold, after allowances for returns and trade discounts; and the value of services rendered.

Up to 15 June 2001, the Group has disposed of all the subsidiaries which are related to bowling recreation business. Accordingly, the segmental information of the bowling recreation business above represents the turnover and contribution of the discontinued operation of bowling recreation business during the relevant financial periods.

3. Loss on deemed disposal of a subsidiary

On 21 March 2002, the Company and Legend Group Limited (“Legend”) entered into a conditional subscription agreement pursuant to which Legend agreed to subscribe (or procure its nominee to subscribe) for 2,550 new ordinary shares in Han International Consulting Company Limited (“Han”) at a cash consideration of HK$55 million, which will represent 51% of the entire issue share capital of Han immediately after completion of the subscription. As a result of this transaction, the Company’s shareholding percentage in Han was reduced, by way of dilution, to 30%. As a result of the above transaction, Han ceased to be a subsidiary of the Company, and its results ceased to be consolidated in the Group’s financial statements of the Company immediately following the issue of the new shares of Han. A loss on deemed disposal of approximately HK$696,000 was charged to the profit and loss account.

4. Profit/(loss) from operating activities

The Group’s profit and loss from operating activities is arrived at after charging:

	30 June 2002	30 June 2001
	HK$’000	HK$’000
Cost of inventories sold and services provided	18,797	15,203
Depreciation	569	165
Staff costs, excluding directors’ remuneration:
Salaries	15,652	3,555
Retirement benefits scheme contributions	1,291	312
	16,943	3,867

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and after crediting:

556

Bank interest income

3,219

Cost of inventories sold and services provided includes HK$18,797,000(2001: HK$15,203,000) relating to staff costs, depreciation, operating lease rentals in respect of land and buildings and co-operation fee, which amount is also included in the respective total amounts disclosed separately above for each of these types of expenses.

5. Finance Costs

	30 June 2002	30 June 2001
	HK$’000	HK$’000
Interest on bank loans wholly repayable within 1 year	211	74
Interest on a convertible bond	584	–
Hire charges	7	–
Other interest paid	175	–
	977	74

6. Taxation

No tax has been provided for the six months ended 30 June 2002 as the Group did not derive any assessable profits during the period (2001:Nil).

Deferred tax has not been provided for the Group and the Company as there were no significant timing differences giving rise to deferred tax liabilities at 30 June 2002 (2001: Nil).

7. Basic earnings/(loss) per share

The calculation of basic earnings/(loss) per share is based on the net loss attributable to shareholders for the half year ended 30 June 2002 of HK$41,172,000 (2001: profit of HK$1,864,000), and the weighted average of 3,228,148,521 (2001: 2,652,046,000) ordinary shares in issue during the period.

Diluted loss per share for the period ended 30 June 2002 and diluted earnings per share for the period ended 30 June 2001 have not been shown, as the share option outstanding during these periods and the convertible bond outstanding during the period had anti-dilutive effect on the basic earnings/ (loss) per share for these periods.

MANAGEMENT DISCUSSION AND ANALYSIS

OPERATING RESULTS

For the six months ended 30 June 2002, the Group recorded a turnover of HK$18.7 million which was derived from the logistics technologies business, representing a decrease of approximately 4% against HK$19.6 million for the corresponding period in the previous year. Loss from operating activities amounted to HK$33.2 million as compared to a profit of HK$1.9 million for the same period last year. The unfavourable results for the period was mainly due to the increase in costs incurred by the Group for further expansion of its logistics technologies business.

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LIQUIDITY AND FINANCIAL RESOURCES

On 10 April 2002, the Company, by using its internal resources of approximately HK$44 million, increased its shareholding interest in New World CyberBase Limited (“NWCB”) to 27.5% through subscription and underwriting of NWCB’s rights shares. After this transaction, NWCB became an associated company of the Company.

On 10 May 2002, the Company placed 159,121,700 new shares to Legend, one of the China’s largest IT corporation, at an issue price of HK$0.1332 per share, which generated a net cash inflow of approximately HK$21 million for the Company. The net proceeds have been used by the Group as general working capital.

During the period under review, the Group financed its business development by means of internal resources. As at 30 June 2002, unutilized cash and bank balances of the Group amounted to approximately HK$87 million (31 December 2001: HK$131 million). The Group’s bank borrowings as at 30 June 2002 increased slightly to approximately HK$8.3 million (31 December 2001: nil). Notwithstanding this, the gearing ratio of the Group as at 30 June 2002, dividing the outstanding bank borrowings plus outstanding amount of convertible bond by the shareholders’ equity, was 0.17 (31 December 2001: 0.13).

As at 30 June 2002, the Group’s time deposits amounting to HK$14.9 million (31 December 2001: HK$2.5 million) were pledged to secure an aggregate of approximately HK$8.3 million bank borrowings for a subsidiary and for the letter of credit facilities of the Group.

BUSINESS REVIEW

In line with our vision to become a leading logistics technology solutions and services provider, the Group has been very concentrating on the logistics industry. During the first half of 2002, the Group committed our major effort to offering best-fit supply chain and logistics technology management solutions and services, aiming to provide quality research and development, consultancy services, turnkey solutions and application implementations for eSupply Chain Management (eSCM) and eLogistics Management, as well as the Total Logistics Management Service Platform for customers.

Supply Chain and Logistics Consultancy Services

By offering turnkey supply chain and logistics consultancy services spanning the total customer spectrum from high-end to low-end levels, and ranging from supply chain management and logistics consulting services to door-to-door integrated logistics services, the Group caters for the diversified needs of customers. Capitalizing on our extensive knowledge in the logistics industry and solid experience in supply chain and logistics consultancy services, the Group has been working on several potential projects in a number of provinces in China during the period for the provision of consultancy services on the establishment of logistics parks.

Apart from the pharmaceutical, tobacco and automobile industries, the Group is now extending its foothold into the manufacturing industry. During the six-month period, the Group received a major contract from a worldwide logistics service company in the UK to develop and implement its supply chain and logistics hub solution for one of the world’s largest mobile phone manufacturers. Currently, the Group is implementing a custom built manufacturing logistics solution based on an offshore development model, helping the client to integrate all its processes from the procurement of raw materials to customs declarations and product clearance. The first phase, covering the provision of logistics consulting and solutions implementation for its internal work processes, has already been completed.

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Integrated Fourth Party Logistics Services

The Group, through its indirect subsidiary 北京金柏新幹線信息科技有限公司 (“新幹線 ”), a leading fourth party logistics solutions provider in the PRC, offers a wide range of logistics value-added services. These include information collection, analysis, matching services, business management, risk control, etc. It provides customers with one-stop door-to-door integrated logistics services, which include logistics management consulting, warehousing, transportation, packaging, goods tracking systems and professional training, on a convenient, timely, economical, safe and reliable basis.

Strategic Investments

During the six-month period, Legend invested in Han, currently an associated company of the Company, which specializes in providing professional consultancy services to enterprises in the reform of management models and business process re-engineering in the PRC. Leveraging Legend’s leading position in the IT market and its strong customer network and the Company’s expertise, Han is in a highly advantageously position, gaining increasing momentum in growing its iConsulting business through the provision of onestop service solutions.

At the same time, Legend also invested in the Company. With Legend as a strategic shareholder, the Group will benefit from the advantages of Legend’s leading position in the PRC market, its solid client base, sales network and competitive edge to enhance our own market coverage. By leveraging the strengths of the Group, Legend and Han, this cooperation will help the Group to establish a leading position in the IT management consulting business, creating a win-win-win situation for all.

As mentioned above, the Company had increased its shareholding interest in NWCB to 27.5% in April this year. Through this investment, the Group will benefit from its well-established e-Business operations, specializing in the research and development and the implementation of e-Business products and services. As such, the Group’s supply chain management and logistics solutions as well as its e-Business solutions and services were considerably enhanced, complementing its product offerings to customers.

PROSPECTS

Supply Chain and Logistics Consultancy Services

In the next half year, the Group will focus on developing fourth party logistics services in the PRC. In addition to the existing 150 distribution service stations in the PRC, it is expected that an additional of 50 distribution service stations will be established by the end of 2002. This will provide the Group with extensive cross-province highway logistics network in the PRC.

On 5 September 2002, the Company announced the proposed purchase of the remaining interest in Fusion Tech Holding Limited, which owns a 100% interest in 新幹線 . Upon completion of the transaction, 新幹線 will become an indirectly wholly-owned subsidiary of the Company. We believe that the increase in the shareholding interest in 新幹線 will enhance business co-operation and result in synergies that will bring favourable contributions to the Group.

With the full support and encouragement of the Chinese government, the development of the logistics industry is being fuelled by the increasing number of logistics parks in the country, which will provide a central focus for logistics operators for higher operating efficiencies and better coordination. The Company will be able to provide solid logistics consulting such as in-depth studies and comprehensive assessment and planning which are necessary and crucial to the establishment of logistics parks. Several projects with major provinces for the provision of logistics park consultancy services are currently under negotiation.

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With the completion of the first phase of our project for one of the world’s largest mobile phone manufacturers to develop and implement a supply chain and logistics hub solution, the second phase will soon be commencing. This phrase will provide solutions to link work processes to custom declarations and product clearance. Upon the completion of the second phase, the solution can assist the customer to save operation time and costs as well as achieve better efficiencies in handling procurement to product clearance. Meanwhile, the Group has obtained a logistics contract from one of the most well-known and major home electrical appliance manufacturer in the PRC for the planning and implementation of distribution logistics across China. The services include providing a logistics management platform, warehousing, transportation and one-stop door-to-door integrated logistics services, helping the customer to enhance logistics management standard and efficiencies as well as reducing the logistics cost.

Joint Venture

HanZen Technologies Consulting (Zhuhai) Limited (“HanZen”), a Sino-Indian consulting and technology joint venture company being established in the PRC with its headquarter in Zhuhai. HanZen is a joint venture between the Group and ZenSar Technologies Limited, a leading software solutions provider from India with global operations. Its first offshore software development center in the PRC will be set up in Zhuhai.

Recognizing the emerging need for local and offshore IT development and support in China after its accession to WTO, this offshore software development center, which is expected to commence operations in the fourth quarter of 2002, will offer international standards services catering to the needs of global customers in the PRC. Aiming to lift standards in the software industry in the PRC, the center also organizes training and seminars for local software companies, enabling them to understand the importance and the need to achieve the Software Engineering Institute’s Capability Maturity Model (SEI-CMM) Level 5 standard.

Research and Development

In addition to the Xian Research and Development Center which was established last year, the Group has signed an agreement with 北方交通大學現代物流研究所 for the establishment of 北方交大亞 洲物流研究中心 . This research center will specialize in scientific research in the logistics industry, planning and design, engineering consulting, personnel and business training. Through this center, the Group will be able to conduct in-depth studies on the logistics industry and analysis on specific logistics data/the characteristics of specific industries, complementing its supply chain and logistics consultancy services.

The Group will continue to enhance its solutions and services through investment and collaboration to enable it to stay ahead of the competition in the industry and to accelerate its business growth, strengthening its position as a total logistics technologies solutions and services provider in the Greater China region.

INTERIM DIVIDEND

The Board has resolved not to declare any interim dividend for the six months ended 30 June 2002 (2001: Nil).

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

Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed shares during the six months ended 30 June 2002.

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PUBLICATION OF RESULTS ON THE STOCK EXCHANGE’S WEBSITE

A detailed results announcement containing all the information required by paragraphs 46(1) to 46(6) of Appendix 16 of the Listing Rules will be published on the Stock Exchange’s website in due course.

By Order of the Board Lo Lin Shing, Simon Chairman

Hong Kong, 20 September 2002

• For identification only

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

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