2007/2008 Interim Report TYSAN HOLDINGS LIMITED - PDF document

2007/2008 Interim Report TYSAN HOLD
2007/2008 Interim Report TYSAN HOLDINGS LIMITEDCorporate InformationCorporate GovernanceOther InformationConsolidated Statement of Changes in Equity11Condensed Consolidated Cash Flow Statement12Notes to the Unaudited Interim Financial Statements132007/2008 Interim ReportCorporate InformationBoard of DirectorsExecutive Directors(Chairman)Mr FUNG Chiu Chak Victor(Vice Chairman and Managing Director)Independent Non-Executive DirectorsMr FAN Chor Ho PaulMr LUNG Chee Ming GeorgeMr FAN Chor Ho Paul (Chairman)Mr LUNG Chee Ming George(Chairman)Mr FAN Chor Ho PaulCompany Secretary and QualifiedMr CHAN Kit Yan, FCPA, FCCA, MBAErnst & YoungSzeto & YeungShanghai Commercial Bank LimitedRegistered OfficeChurch StreetBermudaHead Office and Principal Place ofWanchaiTricor Tengis Limited26/F Tesbury CentreWebsite2007/2008 Interim Report TYSAN HOLDINGS LIMITEDFor the six months ended 30 September 2007, the Group recorded a turnover of HK$749 million, representing a growthof 12% (30 September 2006: HK$666 million) while profit attributable to equity holders of the Company has more thanFoundation PilingWith actual recovery of the Hong Kong economy and the continued strong

growth of Macaus construction sector, th
growth of Macaus construction sector, theGroups foundation division has benefited from such buoyant momentum. For the period under review, turnover of thes foundation division increased by 13% to HK$572 million while contribution to profit rose by 64% to HK$59million as compared to HK$36 million in the last corresponding period. The Groupinter alia, the Hong Kong Housing Authoritys project in Ma On Shan, the Hong Kong Housing Societys project in ShamShui Po and the Venetian Parcels 5 and 6 project in Macau.Other Construction Related SectorsDuring the period under review, turnover and contribution of the Groups electrical and mechanical engineering divisionand building construction division were about HK$109 million and HK$3 million respectively. With the recovery of theconstruction industry sector and improved market sentiment, the Group expects the divisions to bring profitable returns.s machinery leasing and trading division remained profitable whileturnover increased by 24% to HK$18 million. As a result of the improved construction sector, the machinery leasingmarket has become more active and the Group thus expects this division to provide steady returns.Property

development and investmentThe Group has
development and investmentThe Group has commenced the pre-sale of its residential development project in Shanghai, The Waterfront. The projectcomprises 9 towers of 993 units with a total area of about 147,000 sqm. Since June 2006, 5 towers have been launchedfor pre-sale and the response has been overwhelming. Completion of the first phase of the project is expected to be inthe second half of this financial year and thus a portion of the pre-sale proceeds will be booked as revenues then.With the support of the Central Government, TianjinWith accelerating foreign interest in China and the general expectation of further Renminbi appreciation, there is agrowing demand for investment grade properties. The Groups investment properties in Shanghai and Tianjin, whichhave continued to enjoy steady recurrent income and satisfactory occupancy rates, fit well to the profile.ProspectsAs far as the construction industry is concerned, Hong Kong is poised for robust growth with the governmentto implement 10 major infrastructure projects in the coming years. Despite lingering concerns on the subprime issue ofupturn. In the case of Macau, it is apparent that the investment activities a

ssociated with the opening up of the gam
ssociated with the opening up of the gamingindustry have created a whole new territory for the construction industry. Against such positive backdrop, theconstruction industry is likely to sustain its recent buoyancy and the Group is well positioned and qualified to capitalize2007/2008 Interim ReportWith the implementation of various administrative measures to strike for a soft landing, China achieved a GrossDomestic Product growth of 11.5% in the first three quarters as compared to 10.7% in 2006. It is expected that tightermeasures will be adopted by the Central Government in the coming months. As the China market is relatively resilient,continued positive outlook of the property market.The Group continues to adopt a prudent financial policy and maintains a sound capital structure. As at 30 Septembers cash on hand amounted to about HK$545 million (31 March 2007: HK$604 million) while total assetsand net assets (excluding minority interests) amounted to approximately HK$3,552 million (31 March 2007: HK$2,991million) and HK$736 million (31 March 2007: HK$680 million) respectively. Working capital was about HK$305 million(31 March 2007: HK$273 million). Due to substant

ial cash received as a result of the pre
ial cash received as a result of the pre-sale of The Waterfront, theGroup did not have any gearing but instead recorded a net cash balance of HK$126 million as at 30 September 2007.Net borrowings and net debt to equity (including minority interests) gearing ratio as at 31 March 2007 were HK$23million and 2 per cent. respectively.As at 30 September 2007, the Groups contingent liabilities in relation to guarantees in respect of performance bondswas about HK$148 million (31 March 2007: HK$142 million) and that to mortgage loans arranged for certain end userss properties was about HK$251 million (31 March 2007: HK$104 million). The Group has pledged certainof its assets with an aggregate book value of about HK$500 million (31 March 2007: HK$1,046 million) to secure certainbanking facilities of the Group. The Groups bank borrowings were denominated either in Hong Kong dollars orRenminbi. Currency exposure in Renminbi borrowings has been hedged by the Groups Renminbi assets and revenueas generated from its PRC properties.The Group, including its subsidiaries and joint ventures in Hong Kong and the PRC, employed approximately 1,130s remuneration policies are primarily based

on prevailing market trendand performanc
on prevailing market trendand performance of the respective companies and individuals concerned. Fringe benefits, including provident fund,medical insurance and training, are provided. In addition, share options may be granted in accordance with the termss approved share option scheme.The Board has resolved to declare an interim dividend of HK 1 cent (2006: Nil) per ordinary share for the six monthsended 30 September 2007. The interim dividend will be payable on or before 8 January 2008 to shareholders whosenames appear on the Companys register of members on 31 December 2007.Closure of Register of MembersThe register of members of the Company will be closed from 27 to 31 December 2007 (both days inclusive), duringwhich period no transfer of shares of the Company will be registered. In order to qualify for entitlement to the interimdividend for the six months ended 30 September 2007, all transfers for shares of the Company accompanied by theBranch Share Registrar in Hong Kong, Tricor Tengis Limited, at 26th Floor, Tesbury Centre, 28 QueenWanchai, Hong Kong not later than 4:30 p.m. on Monday, 24 December 2007.2007/2008 Interim Report TYSAN HOLDINGS LIMITEDCorpora

te GovernanceCode Provision A4.1 stipula
te GovernanceCode Provision A4.1 stipulates that non-executive directors should be appointed for a specific term subject to re-election.The independent non-executive directors of the Company are not appointed for a specific term but are subject toretirement by rotation and re-election at the annual general meeting of the Company in accordance with the Bye-lawsof the Company. As such, the Board is of the view that the non-executive directors of the Company need not beappointed for a specific term.Code Provision A4.2 stipulates every director should be subject to retirement by rotation at least once every three years.According to the Bye-laws of the Company, at each annual general meeting, one third of the directors shall retire fromoffice by rotation provided that notwithstanding anything therein. The chairman of the Board and the managingdirector of the Company shall not be subject to retirement by rotation or taken into account in determining the numberof directors to retire. As continuation is a key factor to the successful long term implementation of business plans, theBoard believes that the roles of the chairman and the managing director provide the Group with st

rong and consistentleadership and allow
rong and consistentleadership and allow more effective planning and execution of long-term business strategy. As such, the Board is of theview that the chairman of the Board and the managing director of the Company should not be subject to retirement byThe Groups audit committee comprises three members, Mr. Fan Chor Ho Paul, Mr. Tse Man Bun and Mr. Lung CheeMing George who are independent non-executive directors of the Company. The Chairman of the Audit Committee isMr. Fan Chor Ho Paul.The primary duties of the Audit Committee are to review and supervise the financial reporting process and internalcontrol system of the Company, nominate and monitor external auditors and provide advice and comments to thedirectors.The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the contained in Appendix 10 to the Listing Rules. Having made specific enquiries, all Directors confirmed that they have2007/2008 Interim ReportOther InformationDirectorsÕ and Chief ExecutiveÕs Interests in Securities of the Company and itsPart XV of the Securities and Futures Ordinance ()) as recorded pursuant to Section 352 of the SFO, or asLong positions i

n shares of the Company:Percentage ofthe
n shares of the Company:Percentage ofthe CompanyÕsNumber of ordinary shares held and nature of interestissuedName of directorsPersonalCorporateOtherTotalshare capitalMr. Francis Cheung11,180,600256,325,000321,752,80038.4%Mr. Fung Chiu Chak Victor59,237,60059,237,6007.1%Mr. David Chien98,021,02098,021,02011.7%Miss Jennifer Kwok16,500,00016,500,0002.0%Mr. Chiu Chin Hung5,000,0005,000,0000.6%Mr. Wong Kay10,765,00010,765,0001.3%Mr. Tse Man Bun442,000442,0000.1%Long positions in share options of the Company:The interests of the directors and chief executives of the Company in the share options of the Company are detailed in and Chief Executives Rights to Acquire Shares or Debentures below.Long positions in shares of associated corporations of the Company:Number of ordinaryName ofshares held and nature of interestName of directorsassociated corporationsPersonalCorporateTotalMr. Fung Chiu Chak VictorTysan Building Construction5,100,000 5,100,000Tysan Engineering Company Limited800Tysan Trading Company Limited20Miss Jennifer KwokTysan Trading Company Limited20Mr. Wong KayTysan Engineering Company Limited2,2001.171,237,000 shares were held by Power Link Investments Limited and

85,088,000 shares were held by Long Bil
85,088,000 shares were held by Long Billion InternationalLimited. Both of these companies were controlled by Mr. Francis Cheung.2.Such shares were held by a discretionary trust the founder of which is Mr. Francis Cheung.2007/2008 Interim Report TYSAN HOLDINGS LIMITEDOther Informationdeemed to have any interests or short positions in the shares, underlying shares or debentures of the Company or anyof its associated corporations (within the meaning of Part XV of the SFO) that was required to be recorded pursuant toDirectorsÕ and Chief ExecutiveÕs Rights to Acquire Shares or DebenturesThe Company currently operates a share option scheme (the rewards to eligible participants who contribute to the success of the Groups directors, independent non-executive directors and other employees of the Group.Details of the share options granted and outstanding during the period are as follows:Number ofoptionsName oroptionsoutstandingcategory ofoutstandingGrantedas atShareeligibleas atduring30 SeptemberDate ofExerciseExercisePrice atparticipants1 April 2007the period*2007Grantperiodpricegrant date**HK$HK$DirectorsMr. Francis Cheung8,000,0008,000,00024.08.200724.08.2007 to0.820

.87Mr. Fung Chiu Chak Victor8,000,0008,0
.87Mr. Fung Chiu Chak Victor8,000,0008,000,00024.08.200724.08.2007 to0.820.87Mr. David Chien3,000,0003,000,00024.08.200724.08.2007 to0.820.873,500,0003,500,00024.08.200724.08.2007 to0.820.87Mr. Chiu Chin Hung2,500,0002,500,00024.08.200724.08.2007 to0.820.87Mr. Wong Kay5,000,0005,000,00024.08.200724.08.2007 to0.820.87Employees (in aggregate)5,000,0005,000,00024.08.200724.08.2007 to0.820.8735,000,00035,000,000*Each grantee was allowed to exercise up to 25% of the share options granted from the date of grant up to and including 23August 2008. Thereafter, the percentage of the share options which may be exercised by each grantee was increased to 50% forthe period from 24 August 2008 up to and including 23 August 2009, to 75% for the period from 24 August 2009 up to andincluding 23 August 2010, and further to 100% for the period from 24 August 2010 up to and including 23 August 2011.**The share price disclosed is the closing price on the trading day immediately prior to the date of grant.During the period, 35,000,000 share options of fair value of approximately HK$15,798,000 were granted under theScheme and approximately HK$3,888,000 was recognized as expense in the cons

olidated income statement. The fairvalue
olidated income statement. The fairvalue was valued by an independent valuer and determined using the Binomial Option Pricing Model. Significantinputs into the calculation included the share prices and the exercise price. Furthermore, the calculation took intoaccount of expected volatility rate of 56.4%, expected dividend yield of 0%, risk free interest rates ranged from 4.012%No share options were exercised, cancelled or lapsed during the period ended 30 September 2007.2007/2008 Interim ReportOther InformationSave for the above, at no time during the period ended 30 September 2007 were rights to acquire benefits by means ofthe acquisition of shares in or debentures of the Company granted to any director or chief executive or their respectivespouse or minor children, or were any such rights exercised by them, or was the Company or any of its subsidiaries aparty to any arrangement to enable the directors or chief executives of the Company to acquire such rights in any otherSubstantial ShareholdersAs at 30 September 2007, the following interests of more then 5% of the issued share capital of the Company wererecorded in the register required to be kept by the Company

pursuant to Section 336 of the SFO:Long
pursuant to Section 336 of the SFO:Long positions in shares of the Company:Percentage of theNameNumber of sharesissued share capital171,237,00020.5%Eastern Glory Development Limited 171,237,00020.5%Goldcrest Enterprises Limited 171,237,00020.5%171,237,00020.5%85,088,00010.2%1.The above interests of Power Link Investments Limited and Long Billion International Limited have also been disclosed ascorporate interests of Mr. Francis Cheung in the section headed Directors and Chief Executives interests in Securities of the above.2.These parties were deemed to have interests in 171,237,000 shares by virtue of their equity interests in Power Link InvestmenSave as disclosed above, no other person (other than the directors or chief executives of the Company) had registeredan interest or short position in the shares or underlying shares of the Company that was required to be recordedDisclosures Pursuant to Rule 13.21 of the Listing RulesIn accordance with the disclosure requirements of Rule 13.21 of the Listing Rules, the following disclosures areincluded in respect of one of the Companys loan agreements, which contains covenants requiring performanceobligations of the controlli

ng shareholder of the Company. Pursuant
ng shareholder of the Company. Pursuant to a facility agreement entered into by theMarch 2007 for a four-year term loan facility of up to HK$185,000,000, a termination event would arise if Mr. FrancisCheung, the controlling shareholder of the Company, ceased to own and control either directly or indirectly inPurchase, Sale or Redemption of Listed Securities of the CompanyNeither the Company, nor any of its subsidiaries has purchased, sold or redeemed any of the Company2007/2008 Interim Report TYSAN HOLDINGS LIMITEDUnaudited Interim Financial StatementsConsolidated Income Statement(660,484)(604,668)Other income and gains3(4,500)(353)(19,097)(17,639)(4,724)(2,981)(8,875)(12,531)PROFIT BEFORE TAXTax5(10,393)(11,681)PROFIT FOR THE PERIOD55,508Minority interestsDIVIDEND6EARNINGS PER SHARE ATTRIBUTABLE TOORDINARY EQUITY HOLDERS OFTHE COMPANYDiluted2007/2008 Interim ReportUnaudited Interim Financial StatementsConsolidated Balance SheetProperty, plant and equipment8Investment propertiesProperties under developmentDeposit in respect of acquisition of office premiseTotal non-current assetsProperties under developmentEquity investments at fair value throug

h profit or lossProperties held for sale
h profit or lossProperties held for saleTrade receivables9Tax prepaidTotal current assetsTrade payables and accruals10Deposits received from pre-sale of properties under developmentInterest-bearing bank borrowingsTax payableTotal current liabilitiesNET CURRENT ASSETS305,133TOTAL ASSETS LESS CURRENT LIABILITIES1,753,396Deposits received from pre-sale of properties under developmentInterest-bearing bank borrowingsTotal non-current liabilitiesNet assets1,315,879EQUITYEquity attributable to equity holders of the CompanyMinority interests579,968Total equity2007/2008 Interim Report TYSAN HOLDINGS LIMITEDAttributable to equity holders of the CompanyShareShareExchangeprofits/IssuedpremiumoptionStatutoryfluctuation(accumulatedProposedMinorityTotalcapitalaccountreservereservesreservelosses)dividendTotalinterestsequity000HK$000HK$000HK$000HK$000HK$000HK$000HK$000HK$000HK$Balance at 1 April 200783,746518,4375,28344,07316,11112,562680,212559,5201,239,732Exchange realignment and total incomeand expense for the periodrecognized directly in equityÑÑÑ5022,36322,41314,86937,282Profit for the periodÑÑÑÑÑ41,96013,54855,508Total income and expense for the periodÑÑÑ502

2,36341,96064,37328,41792,790ÑÑÑÑÑÑ(12,5
2,36341,96064,37328,41792,790ÑÑÑÑÑÑ(12,562)(12,562)(7,969)(20,531)ÑÑÑÑÑ(8,375)8,375ÑÑÑEquity-settled share option arrangementsÑÑÑÑTransfer from retained profitsÑÑÑÑÑÑÑ83,746518,4373,8885,40666,43649,6238,375735,911579,9681,315,87983,746518,4374,61714,361(14,684)606,477501,7151,108,192Exchange realignment and total incomerecognised directly in equityÑÑÑ1814,64814,6668,64523,311Profit for the periodÑÑÑÑÑ13,5119,11222,623Total income and expense for the periodÑÑÑ1814,64813,51128,17717,75745,934ÑÑÑÑÑÑÑÑ(3,920)(3,920)83,746518,4374,63529,009(1,173)634,654515,5521,150,2062007/2008 Interim ReportUnaudited Interim Financial StatementsNet cash inflow from operating activities(444,670)(96,655)(250,273)Effect of foreign exchange rate changes, netCash and cash equivalents at end of period319,393Analysis of balances of cash and cash equivalentsCash and bank balances262,727Time deposits56,6662007/2008 Interim Report TYSAN HOLDINGS LIMITED1.Basis of preparation and accounting policiesThe unaudited interim financial statements have been prepared in accordance with the applicable disclosureprovisions of the Rules Governing the Listing of Securities on the Stock Exchan

ge of Hong Kong Limited (the issued by t
ge of Hong Kong Limited (the issued by theHKICPA) and should be read in conjunction with theannual financial statements for the year ended 31 March 2007.The accounting policies used in the preparation of the unaudited interim financial statements are consistent withthose adopted in the annual financial statements for the year ended 31 March 2007.During this period, the Group has applied for the first time, a number of new/revised Hong Kong Financial), HKASs and interpretations issued by the HKICPA, which are effective foreffect on the results or financial position of the Group for the current or prior accounting periods.The Group has not early adopted any new accounting and financial reporting standards, amendments to existingstandards and interpretations which have been issued but are not yet effective.The unaudited interim financial statements were approved and authorized for issue by the board of directors on2007/2008 Interim Report2. Segment information(a)Business segmentsE&M engineering andMachineryProperty investmentFoundation pilingbuilding constructionleasing and tradingand managementProperty developmentUnallocatedEliminationsConsolidatedSegment revenue:Sal

es to external customers(1,384)(3,658)T
es to external customers(1,384)(3,658)Total(1,384)(3,658)Segment results(5,096)(1,675)(17,345)(17,898)(282)(101)(626)(2,879)(3,888)Interest incomeDividend income from(8,875)(12,531)Profit before taxTax(10,393)(11,681)Profit for the period55,508(b)Geographical segmentsHong KongMacauElsewhere in the PRCConsolidatedSegment revenue:Sales to external customers2007/2008 Interim Report TYSAN HOLDINGS LIMITED3.Other income and gainsGain on sale of equity investments at fair value through profit or lossWrite back of provision for impairment of trade receivables4.Profit before taxs profit before tax is arrived at after charging/(crediting):Recognition of prepaid land lease payments(Gain)/loss on disposal of an investment property(4,164)(914)(9,849)(8,469)2007/2008 Interim Report5.TaxProvision for tax in respect of profit for the period:Underprovision in prior period:Deferred taxHong Kong profits tax has been provided at the rate of 17.5% (2006: 17.5%) on the estimated assessable profitsarising in Hong Kong during the period. Taxes on profits assessable elsewhere in the Peoplehave been calculated at the applicable tax rates prevailing in the areas in which

the Group operates, based onexisting leg
the Group operates, based onexisting legislation, interpretations and practices in respect thereof.6.Dividend2007Interim dividend HK1 cent (2006 : Nil) per ordinary share8,375(a)A final dividend of HK1.5 cents per ordinary share, totally approximately HK$12,562,000 for the year ended 31 March 2007(b)An interim dividend in respect of six months ended 30 September 2007 of HK1 cent per ordinary share, amounting toHK$8,375,000 was approved at the board meeting on 12 December 2007. The interim dividend is not recognized as aliability as at 30 September 2007, but will be reflected as an appropriation of retained profits for the year ending 31 March2007/2008 Interim Report TYSAN HOLDINGS LIMITED7.Earnings per shareThe calculation of basic earnings per share amount is based on the profit for the period attributable to ordinaryDiluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstandingto assume conversion of all dilutive potential ordinary shares. Shares issuable under the share option scheme arethe only dilutive potential ordinary shares. No diluted earnings per share has been presented for the six monthss share op

tions outstanding had no diluting effect
tions outstanding had no diluting effect on the basicearnings per share for that period. For the period ended 30 September 2006, no diluted earnings per share was8.Property, plant and equipmentDuring the period, the Group acquired assets with a cost of HK$16,302,000 (2006 : HK$43,993,000) to expand itsbusiness. Assets with a net book value of HK$12,349,000 were disposed of by the Group during the six monthsended 30 September 2007 (2006 : HK$4,510,000) resulting in a net gain on disposal of HK$914,000 (2006 : net loss9.Trade receivablesTrade receivables:Within 90 daysRetention receivablesThe Group has established credit policies that follow local industry standards. The average normal credit periodsoffered to trade customers other than for retention receivables are within 90 days, and are subject to periodic2007/2008 Interim Report10.Trade payables and accrualsTrade payables:Within 30 daysRetention payables27,828Accruals11.Contingent liabilitiesGuarantees in respect of performance bondsAs at 30 September 2007, the Group had provided guarantees in respect of mortgage facilities granted by certainbanks relating to the mortgage loans arranged for certain purchas

es of properties developed by certains g
es of properties developed by certains guarantee period starts from the dates of grant of the relevant mortgage loans and ends uponissuance of the relevant ownership certificates.The fair value of the guarantees is not significant and the directors consider that in case of default in payments, thenet realizable value of the related properties can cover the repayment of the outstanding mortgage principaltogether with the accrued interest and penalty and therefore no provision has been made for the guarantees in the2007/2008 Interim Report TYSAN HOLDINGS LIMITED12.Commitments(a)Commitments under non-cancellable operating leases forWithin one year(b)Capital expenditure in respect of investment properties,office premise and machineryIn addition, the Group had contracted, but not provided for, commitments in respect of construction worksrelating to properties under development amounting to HK$383,724,000 as at 30 September 2007 (31 March 200713.Related party transactionsFor the six months ended 30 September 2007, compensation to key management personnel of the Group  !"'()*+',+*-.+)/01234567839168:8/;7     =&