The Board of directors (the "Directors") of SilverNet Group Limited (the "Company") announces the audited consolidated results of the Company and its subsidiaries (the "Group") for the sixteen months ended 31 December 2000 as follows:
16 months 12 months ending ending 31 December 2000 31 August 2000 HK$'000 HK$'000 Turnover 107,385 56,172 Cost of sales and direct operating expenses (50,122) (43,399) 57,263 12,773 ------------ ------------ Other revenue 13,588 1,773 Selling and administration costs (103,489) (64,637) Other operating expenses (10,181) (24,427) ------------ ------------ Loss from operations (42,819) (74,518) Finance costs (9,631) (7,362) Loss arising from investment properties (16,024) (15,302) Gain on deemed disposal of subsidiaries 11,513 - Loss on deemed disposal of an associate (422) - Gain on disposal of discontinued operations 417 - Provision for impairment loss of investments (38,965) - Share of results of associates (1,082) - ------------ ------------ Loss before tax (97,013) (97,182) Taxation charge (2,325) (11) ------------ ------------ Net loss for the period (99,338) (97,193) Minority interest 1,150 170 ------------ ------------ Net loss to the shareholders (98,188) (97,023) ============ ============ Loss per share - basic (cents) (4.07) (9.84) ============ ============
The Group's turnover and the contribution to loss before taxation for the period, as analysed by principal activity and geographical market, are as follows:
By principal activity:
16 months ended 12 months ended 31/12/2000 31/8/1999 Turnover Contribution Turnover Contribution HK$'000 HK$'000 HK$'000 HK$'000 Continuing Operations: Property leasing 1,992 (13,728) 7,025 (24,221) Investment holdings - (34,218) - (9,691) ---------- ---------- ---------- ---------- 1,992 (47,946) 7,025 (33,912) Discontinued operations: Retailing and wholesaling 105,393 (14,875) 49,147 (44,184) Battery cells - - - (6,624) ---------- ---------- ---------- ---------- 107,385 (62,821) 56,172 (84,720) ========== ========== Corporate expeneses (33,261) (5,254) Share of results of associates (1,082) - Interest (net) 151 (7,208) ---------- ---------- Loss before tax (97,013) (97,182) ========== ==========
By geographical market:
16 months ended 12 months ended 31/12/2000 31/8/1999 Turnover Contribution Turnover Contribution HK$'000 HK$'000 HK$'000 HK$'000 PRC, excluding Hong Kong 20,165 (52,913) 32,066 (65,719) Hong Kong 87,220 (37,083) 24,106 (24,255) Korea - (7,168) - - ---------- ---------- ---------- ---------- 107,385 (97,164) 56,172 (89,974) ========== ========== Interest (net) 151 (7,208) ---------- ---------- Loss before tax (97,013) (97,182) ========== ==========
LOSS FROM OPERATIONS
Loss from operations has been arrived at after charging:
16 months 12 months ending ending 31 December 2000 31 August 2000 HK$'000 HK$'000 Depreciation and amortisation 3,884 3,754 ========== ========== Staff costs 15,875 19,217 ========== ==========
No profits tax is provided for in the financial statement as the Group does not have any assessable profit for the period. The amount of profit tax shared from the associated companies is approximately HK$2,325,000.
The charge in 1999 represented the underprovision of Hong Kong Profits Tax in prior years.
The Directors do not propose any dividend for the period ended 31 December 2000 (1999:Nil).
LOSS PER SHARE
The calculation of the basic loss per share is based on the loss attributable to the shareholders of HK$98,188,000 (1999: HK$97,023,000) and on the weighted average number of 2,411,105,266 shares (1999: 985,729,871 shares) in issued during the period.
Since the employee share options have no dilutive effect on the loss per share, no diluted loss per share is calculated for the current period and the corresponding period last year.
LIMITATION OF AUDIT SCOPE
The consolidated income statement includes turnover and loss from the discontinued retailing business of approximately HK$105,393,000 and HK$16,943,000 respectively based on unaudited management accounts, with which all the books and records have been transferred to the buyer. Accordingly, the auditors were unable to satisfy as to whether either such amounts or the resulting gain on disposal of the discontinued retailing business were fairly stated. However, any adjustments found to be necessary would only affect the classification of the consolidated income statement.
The auditor is in the opinion that the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 31 December, 2000, except for the limitation on their work relating to the discontinued retailing business that:
The Group recorded a turnover of HK$107,385,000 for the fiscal period 16 months ended 31 December 2000, representing an increase of approximately HK$51,213,000, or 91%, over the previous financial year. The increase was primarily contributed by the business of San Dino ("San Dino") in Hong Kong and in the PRC. However, the increase from San Dino was largely offset by the unsatisfactory performance of the business of Giovanni Valentino ("Giovanni Valentino"). Despite management had carried out a series of tight cost control measures, the performance of the apparel retail business still fell short of expectation. The Board decided to discontinue the business in order to halt further drainage of the Group's resources. In this regard, the Group disposed of the Giovanni Valentino and San Dino retail businesses in April 2000 and in August 2000 respectively. A net gain of HK$417,000 was earned on the disposal.
The income from investment properties dropped by 72% to approximately HK$1,992,000. The drastic decrease was primarily due to the downturn of the real estate market caused by the slowing economy in Hong Kong, rental yield on investment properties was inevitably lowered.
During the period under review the Group shared a loss of HK$1,082,000 from its associated companies. In addition, the Group had provided for HK$38,965,000 in respect of the potential diminution in value on its investments as at 31 December 2000.
The loss attributable to shareholders for the period increased by 1% to HK$98,188,000. Based on the weighted average number of 2,411,105,266 shares in issue during the period, the basic loss per share was reduced to 4.07 cents as compared with 9.84 cents in previous financial year.
At the time of this report, the Group had approximately HK$117,516,000 cash on hand. Together with marketable securities amounting to HK$15,600,000 and a short term advance of HK$20,198,000, the Group had approximately HK$153,314,000 in liquid assets. Apart from the HK$31,968,000 bank loans, the Group had a nominal amount of trade liabilities and commitments. This forms a solid foundation for the Group's expansion and development.
Since the introduction of the new shareholders, the Group received HK$360,000,000 of new capital in cash for development. Six investments were made using a combination of cash and issuance of new shares. The details of these investments are outlined below:
The Group acquired a 52.33% stake in eGoChina.com Limited, a company providing management services and technical consultancy to a corporate online travel service business in China. eGoChina's partners include the China Construction Bank, China Travel Services, Anderson Consulting and Hewlett-Packard. Although only open for business since mid-2000, eGoChina has signed up over 20 major multinational customers and provides online air ticketing and hotel reservation to them.
Xinhua Control Engineering Company Limited
The Group acquired from Warburg Pincus an effective 41% interest in Xinhua Control, a manufacturer and systems integrator of large scale digital control systems for industries such as electric power, water supply, etc. Xinhua Control is based in Shanghai and has been established for more than 10 years. The company has experienced high growth in the past couple of years, and has a solid profit track record. Xinhua's management is exploring possibilities of a public listing of its shares.
IBR Inc. is a data center operator and Internet infrastructure related service provider based in South Korea. Shareholders include well-known Korean and Japanese entities. The Group's 22.4% interest in IBR was acquired from Warburg Pincus.
Great Choices International Limited
Great Choices is the holding company which holds an equity interest in a certificate authority and Internet security provider joint venture in China. The joint venture is an affiliate of VeriSign of the U.S.A, a worldwide leader in Certificate Authority and Internet security services. The 15.29% stake in Great Choices was acquired from the Chief Executive Officer when he joined the Group in September 2000.
9x09.com is a technology service provider in China serving the online transaction platform for B2B transactions in the wine and liquor trade. With the support of the leading system integration providers including Hewlett-Packard and SAP, 9x09.com has established China's first online trading platform for hotels, bars, restaurants and other consumers to purchase alcoholic beverages in an efficient and cost-effective manner.
Shanghai Mecox Lane Holdings Co. Ltd.
Mecox Lane is a direct marketing company which sells an array of fashion apparels and general merchandise through catalogue mail orders and online orders. The Group invested cash for a 13.25% stake in Mecox Lane in mid-2000.
Financial markets worldwide suffered dramatic declines in 2000, leading to significant valuation adjustments and liquidity crisis for a large number of start-up and emerging companies. The sharp reduction in Internet company valuations has caused the Group to make provisions to the cost of investment in Mecox Lane. However, management believes that most of its investee companies have sound business models and have sufficient cash on hand to reach breakeven in the near future.
Despite a slow-down in global economy, we believe that China will continue its high rate of growth, particularly in technology and telecommunications related sectors, which are the two focus areas for the Group. With a strong balance sheet and two experienced investment firms as its major shareholders, the Group is in an excellent position to benefit from the advancement of technology and telecommunication sectors in China.
As a concrete example, the Group signed an agreement in April, 2001 to acquire the entire interest in Digital Tech Co., a wholly owned foreign entity in China which provides technical services to Beijing Guanghuan Xinwang, a broadband internet access and internet data center provider under the Beijing Telecom Administration Bureau. The investment cost approximately HK$49,000,000 in cash which includes an option to buy up to 49% of Beijing Guanghuan Xinwang as and when the laws in the PRC allow. Beijing Guanghuan Xinwang is one of the first providers and largest providers of broadband Internet access to corporate and residential customers in Beijing. It has been solidly profitable since inception.
With the disposal of under-performing businesses, the infusion of capital in 2000 and a slew of new investments, the Group has positioned itself well to explore opportunities to create above average shareholders' returns in the long run.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES
During the sixteen months ended 31 December 2000, the Company repurchased its own shares on the Stock Exchange of Hong Kong Limited as follows:
Number of Price per share Aggregate Month of repurchase shares Highest Lowest Consideration (HK$) (HK$) HK$ October 2000 1,080,000 0.30 0.295 322,500
The above shares were cancelled upon repurchase and accordingly the issued share capital of the Company was reduced by the nominal value of these shares. The premium on repurchase was charged against the share premium.
The Company had only one independent non-executive director following the resignation of Mr. Li Weibin on 3 August 2000. The office remained vacant until Mr. Lau Yuen Sun, Adrian was appointed as an independent non-executive director on 16 February 2001.
Save as disclosed above, 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 sixteen months ended 31 December 2000 in compliance with the Code of Best Practice as set out in Appendix 14 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited.
PUBLICATION OF ANNUAL RESULTS
All the information as required by paragraph 45(1) to 45(3) of Appendix 16 to the Listing Rules will be published on the website of the Stock Exchange in due course.
On behalf of the Board, I would like to thank you for your support in the past and, more importantly, for your continued support in the forthcoming year.
By Order of the Board
Sun Qiang Chang
Hong Kong, 20 April 2001
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