Yunkang Group Limited — Earnings Release 2002

Feb 4, 2002

Listed Company Information

LEGEND HOLD<00992> - Results Announcement (Summary) Legend Holdings Limited announced on 4/2/2002: (stock code: 992) Year end date: 31/3/2002 Currency: HKD (Unaudited) (Unaudited) Last Current Corresponding Period Period from 1/4/2001 from 1/4/2000 to 31/12/2001 to 31/12/2000 ('000) ('000) Turnover : 16,726,569 20,747,047 Profit/(Loss) from Operations : 820,128 292,542 Finance cost : (11,734) (21,997) Share of Profit/(Loss) of Associates : (8,467) (3,897) Share of Profit/(Loss) of Jointly Controlled Entities : (924) - Profit/(Loss) after Tax & MI : 765,384 221,134 % Change over Last Period : +246.12% EPS/(LPS)-Basic : 10.14 cents 2.97 cents -Diluted : 10.08 cents 2.94 cents Extraordinary (ETD) Gain/(Loss) : - - Profit/(Loss) after ETD Items : 765,384 221,134 Third Quarter Dividend per Share : Nil Nil (Specify if with other options) : N/A N/A B/C Dates for Third Quarter Dividend : N/A Payable Date : N/A B/C Dates for (-) General Meeting : N/A Other Distribution for Current Period : Nil B/C Dates for Other Distribution : N/A Remarks: 1. Basis of preparation (a) The Directors are responsible for the preparation of the unaudited quarterly financials of Legend Holdings Limited (the "Company") and its subsidiaries (the "Group"). These unaudited quarterly financials have been prepared in accordance with Statement of Standard Accounting Practice No.25 "Interim Financial Reporting" issued by the Hong Kong Society of Accountants. (b) As the spin-off of Digital China Holdings Limited and its subsidiaries (collectively referred to as "DCHL") from the Group (the "Spin-off") was substantial to the operating results of the Group, the Directors have prepared unaudited proforma consolidated results of the Group for the corresponding period as if the Spin-off had been completed as at 31 March 2000. The unaudited proforma consolidated results are prepared on a combined basis as if the current group structure had been in existence throughout the corresponding period. These unaudited proforma consolidated results will be published on newspapers. (c) The unaudited proforma consolidated balance sheet of the Group as at 31 March 2001 had been prepared on a basis that the individual assets and liabilities of DCHL were grouped under investments and amount due from DCHL. 2. Principal accounting policies The principal accounting policies adopted in the preparation of these unaudited condensed quarterly financials are consistent with those adopted by the Group in the annual accounts for the year ended 31 March 2001, except for those changes as a result of adoption of the following Statements of Standard Accounting Practice ("SSAP") issued by the Hong Kong Society of Accountants which are effective for accounting periods commencing on or after 1 January 2001: SSAP 9 (revised): Events after the balance sheet date SSAP 14 (revised): Leases (effective for periods commencing on or after 1 July 2000) SSAP 26: Segment reporting SSAP 28: Provisions, contingent liabilities and contingent assets SSAP 29: Intangible assets SSAP 30: Business combinations SSAP 31: Impairment of assets SSAP 32: Consolidated financial statements and accounting for investments in subsidiaries The major changes to the Group's accounting policies and the major effect of adopting these new policies are set out below: (a) SSAP9 (revised) "Events after balance sheet date" In accordance with the revised SSAP 9, the Group no longer recognises dividends proposed or declared after the balance sheet date as liability at the balance sheet date. This change in accounting policy has been applied restrospectively so that the comparative figures have been restated to conform with the current year's policy. Opening accumulated losses at 1 April 2000 have decreased by approximately HK$134 million which is the reversal of the provision for proposed final dividend for the year 1999/2000 previously recorded as a liability as at 31 March 2000 although declared after balance sheet date. Opening accumulated losses at 1 April 2001 have decreased by approximately HK$990 million which is the reversal of the provision for proposed special interim dividend and final dividend both for year 2000/01 previously recorded as liabilities as at 31 March 2001 although declared after balance sheet date. This adjustment has resulted in a decrease in current liabilities at 31 March 2001 by approximately HK$990 million (2000: HK$134 million) being provision for proposed dividends that is no longer required. Changes to headings used in the balance sheet and profit and loss account relating to dividends and retained profit for the year as previously reported in 2000/01 annual report have also been made to reflect the changes resulting from the application of SSAP9 (revised). (b) SSAP29 "Intangible assets" Effective in December 1997, the Group acquired the entire equity interest in Legend (Beijing) Limited from its controlling shareholder. The intangible assets arising thereon were regarded as trademarks which were valued by an independent valuer on an open market value basis and capitalised in the consolidated balance sheet with no amortisation. Under the new SSAP 29, the intangible assets should be regarded as goodwill on acquisition and amortised over their estimated useful lives. In view of the fact that DCHL contributed a substantial part of the operating results of the Group since the acquisition of Legend (Beijing) Limited and the rapid changing in computer technology, the Directors consider that it is prudent and appropriate to amortise the goodwill from the date of acquisition (i.e. December 1997) up to the date of announcement of the spin-off of DCHL in March 2001. The change in accounting policy arising from the adoption of the new SSAP 29 has been applied retrospectively so that the comparatives presented have been restated to conform with the change of accounting policy. Opening accumulated losses at 1 April 2000 have increased by approximately HK$1,307 million which is the amount of the adjustment in respect of amortisation of goodwill relating to periods prior to year ended 31 March 2000. Opening accumulated losses at 1 April 2001 have increased by approximately HK$1,888 million which is the amount of the adjustment in respect of amortisation of goodwill relating to periods prior to year ended 31 March 2001. A corresponding decrease in intangible fixed assets by approximately HK$1,888 million has been reflected in the comparative 31 March 2001 consolidated balance sheet. This adjustment in respect of amortisation of goodwill has resulted in a decrease in profit for the 9 months ended 31 December 2000 by approximately HK$436 million for the year ended 31 March 2001 by approximately HK$581 million. (c) SSAP 30 "Business combinations", SSAP 31 "Impairment of assets" and Interpretation 13 SSAP 31 prescribes procedures to be applied to ensure that assets are carried at not more than their recoverable amounts. The recoverable amount of an assets is defined to the higher of its net selling price an its value in use. The Group determines the value in use of its assets (including fixed assets, goodwill arising on business combinations accounted for using the purchase method and intangible assets) as the present value of estimated future cash flows together with estimated disposal proceeds at the end of its useful life. The Group is required to assess at each balance sheet date whether there are any indications that assets may be impaired, and if there are such indications, the recoverable amount of the assets is to be determined. Any resulting impairment losses identified are charged to the income statement. In accordance with the provisions of Interpretation 13, assessments of impairment of goodwill also apply to goodwill previously eliminated against reserves which will not be reinstated at the time of adoption of SSAP 30. Any impairment loss identified in respect of goodwill previously eliminated against reserves is to be recognised as an expense in the income statement. The Group has performed an assessment of the fair value of its assets, including the related goodwill that had previously been charged to reserves. The Group has retrospectively restated its previously reported net profit for the period ended 31 December 2000 and the year ended 31 March 2001 by decrease of HK$nil and approximately HK$166 million respectively for the impairment of goodwill arising from the acquisition of an associated company. (d) For the nine months ended 31 December 2000, the profit attributable to shareholders before any restatement as a results of remark 2(b) above amounted to approximately HK$657 million. 3. Basic and diluted earnings per share The calculation of basic and diluted earnings per share is based on the following data: 9 months ended 9 month ended 31 December 31 December 2001 2000 (unaudited) (unaudited) Earnings for the purposes of basic and diluted earnings per share HK$765,384,000 HK$221,134,000 ============== ============== Weighted average number of shares for the purposes of basic earnings per share 7,545,758,130 7,453,427,547 Effect of dilutive potential shares 43,398,147 79,513,924 -------------- -------------- Weighted average number of shares for the purposes of diluted earnings per share 7,589,156,277 7,532,941,471 ============= ============= 4. Analysis of turnover and profit from continuing operations and discontinued operations: Breakdown of turnover and contribution 9 months ended 31 December 2001 Turnover Contribution HK$'000 HK$'000 Analysis by business unit Consumer IT business 5,594,095 194,660 Corporate IT business 8,019,734 480,092 Handheld access devices business 166,989 (15,325) Contract manufacturing business 1,321,360 105,922 Internet business 38,520 (36,818) Others ** 1,585,871 21,877 Gain on disposal of subsidiaries, an associated company and investments - 57,986 ------------------------ 16,726,569 808,394 ======================== 9 months ended 31 December 2000 Turnover Contribution HK$'000 HK$'000 Consumer IT business 5,368,131 201,639 Corporate IT business 6,982,053 326,709 Handheld access devices business 82,323 (25,271) Contract manufacturing business 1,297,065 151,258 Internet business 98,946 (70,957) Others ** 6,918,529 122,824 Amortization of Goodwill - (435,657) ------------------------ 20,747,047 270,545 ======================== ** Discontinued due to disposal and spin-off of subsidiaries Geographical analysis of Turnover and Contribution 9 months ended 31 December 2001 Turnover Contribution HK$'000 HK$'000 Analysis by geographical location People's Republic of China (the "PRC") 15,745,970 663,848 Asia Pacific (excluding the "PRC") 280,792 30,438 North America 95,804 17,466 Europe 604,003 38,656 Gain on disposal of subsidiaries, - 57,986 an associated company and investments ---------------------- 16,726,569 808,394 ======================= 9 months ended 31 December 2000 Turnover Contribution HK$'000 HK$'000 Analysis by geographical location People's Republic of China (the "PRC") 19,711,931 632,555 Asia Pacific (excluding the "PRC") 314,450 26,127 North America 219,038 30,451 Europe 501,628 17,069 Amortisation of Goodwill - (435,657) ---------------------- 20,747,047 270,545 =======================