RNS No 9832b
WORLDSEC LIMITED
13 October 1999
Worldsec Limited
Interim Report for the six months ended 30 June 1999
The Directors submit the interim report on Worldsec Limited (the "Company") and
its subsidiaries (collectively known as the "Group") for the six months ended 30
June 1999 (the "Period").
HIGHLIGHTS
*Turnover for the Period increased by 18% as compared with the same period in
1998 to US$7,489,000.
*Profit from ordinary activities after taxation and minority interests for the
Period was US$8,000, a huge improvement from the loss of US$4,505,000 in the
same period in 1998.
DIVIDEND
The Directors do not recommend the payment of an interim dividend.
REVIEW OF OPERATIONS AND PROSPECTS
Asian economies are beginning to recover from 1998's sharp recession, with the
recovery driven by a pick-up in export demand. Over the course of this year,
forecasts of economic growth have been regularly revised upwards. Korea and
Taiwan have been at the forefront of recovery, with their export demand buoyed
by the cyclical recovery in the electronics sector.
Low and falling inflation rates, high savings and large current account
surpluses stemming from the recovery in exports have allowed Asian central banks
to cut interest rates to very low levels. At the same time, Asian governments
have been pursuing reflationary policies. The combination of loose monetary
policies and export-led economic recovery has been reflected in strong Asian
equity markets putting them among the world's top-performing this year.
Although there has been progress made in restructuring some of Asia's troubled
banks and in introducing needed reforms in several regional economies,
structural weaknesses uncovered by the Asian currency crisis remain. In
Thailand, for example, the restructuring and recapitalisation of its banking
system, which has to date resulted in foreign-bank branches doubling their share
of bank assets, is far from complete. In Indonesia, the number of private
commercial banks has been nearly halved to 82 from 160, but problems in the
banking system remain. Furthermore, the credibility of Indonesia's reforms has
been tarnished by a scandal over a payment by Bank Bali to a company linked to
the ruling Golkar party. The healing process in Asia has begun but a return to
robust economic health will take time; those countries with stronger legal and
political structures are likely to be at the vanguard of recovery because such
infrastructures facilitate the corporate restructuring that is essential for
full economic recovery.
Our reaction to the recession in Asia has been to curtail our expansion plan. We
also implemented measures to downsize some of our offices and cut costs
including salary costs. Reduced costs coupled with a modest increase in turnover
enabled the Group to breakeven during the first six months of the current
financial year.
Competition in the financial services industry remains intense. We continue to
experience downward pressure on commission rates. Although the volume of our
business has improved, the bias against dealing with smaller brokers persists.
We have been in discussions with a number of parties interested in investing in
Worldsec. Such discussions could lead to Worldsec becoming part of a larger
group thereby strengthening our competitive position in the industry.
With economic recovery still fragile, the strong performance of Asian stock
markets has raised valuations to levels that could be vulnerable to negative
news. The improved sentiment of international institutional investors towards
investing in Asian equity markets that has been evident this year could be
undermined by the recent rapid strengthening of the yen. With our margins under
pressure, any fall off in investor interest in Asian equities would be negative
and it may be optimistic to expect a return to profitability this year.
We believe the nadir in the current economic cycle is past, but we also believe
recovery in Asia will be a gradual process. Many Asian countries need more time
to implement structural reforms, particularly legal and political reforms. Such
reforms will pave the way for sustainable long-term growth. Asia's ability to
sustain above average long term economic growth has always been its main
attraction for international institutional investors, so while we are rather
cautious about the short-term prospects of the Asian stockmarkets, we remain
convinced about their longer term potential.
By order of the Board
Henry Ying Chew Cheong
Deputy Chairman and Chief Executive Officer
13 October 1999
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited Audited
Six months ended Year
ended
Notes 30.6.1999 30.6.1998 31.12.1998
US$'000 US$'000 US$'000
Turnover 3 7,489 6,362 18,539
Fees and commission (1,482) (1,015) (2,559)
payable
6,007 5,347 15,980
Other operating income 517 313 1,326
6,524 5,660 17,306
Staff costs (4,346) (6,138) (12,033)
Other operating costs (2,249) (3,219) (6,827)
Operating loss before
exceptional items (71) (3,697) (1,554)
Exceptional items 4 - (1,018) (2,069)
Operating loss 3 (71) (4,715) (3,623)
Gain on disposal
of a subsidiary - - 43
Interest
receivable and 324 528 1,341
similar income
Interest payable
and similar (117) (128) (1,167)
charges
Profit/(loss) on
ordinary activities 136 (4,315) (3,406)
before taxation
Tax on profit on 5 (134) (144) (260)
ordinary
activities
Profit/(loss) on
ordinary 2 (4,459) (3,666)
activities after
taxation
Equity minority 6 6 (46) (67)
interest
Profit/(loss) for
the financial 8 (4,505) (3,733)
period/year
Earnings/(loss) 7 0 cent (35 cents) (29 cents)
per share
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Unaudited Audited
Six months ended Year
ended
30.6.1999 30.6.1998 31.12.1998
US$'000 US$'000 US$'000
Profit/(loss) for the 8 (4,505) (3,733)
period/year
Deficit arising on
revaluation of - - (1,677)
investments and
tangible fixed assets
Currency translation (68) (105) 126
differences
Total recognised losses (60) (4,610) (5,284)
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Unaudited Audited
Six months ended Year
ended
30.6.1999 30.6.1998 31.12.1998
US$'000 US$'000 US$'000
Profit/(loss) for the 8 (4,505) (3,733)
period/year
Other recognised gains
and (losses) relating (68) (105) (1,551)
to the period/year
Issue of shares - - 1,355
Net reduction in
shareholders' funds (60) (4,610) (3,929)
during the period/year
Shareholders' funds 30,992 34,921 34,921
brought forward
Shareholders' funds 30,932 30,311 30,992
carried forward
CONSOLIDATED BALANCE SHEET
Unaudited Audited
Notes 30.6.1999 30.6.1998 31.12.1998
US$'000 US$'000 US$'000
Fixed assets
Intangible assets - 9 -
Tangible fixed 1,373 1,466 1,526
assets
Investments 8 5,043 5,944 5,041
Purchased 9 1,084 - 1,183
goodwill
7,500 7,419 7,750
Current assets
Debtors 39,695 17,203 11,883
Bank deposits and 10 45,455 55,399 47,612
cash
85,150 72,602 59,495
Creditors:
Amounts falling 11 (61,684) (49,435) (36,213)
due within one year
Net current 23,466 23,167 23,282
assets
Total assets less
current liabilities 30,966 30,586 31,032
Provisions for
liabilities and 12 (30) (30) (30)
charges
Equity minority 6 (4) (245) (10)
interest
Net assets 30,932 30,311 30,992
Capital and
reserves
Called up share 13 13,367 12,900 13,367
capital
Reserves 17,565 17,411 17,625
Equity 30,932 30,311 30,992
shareholders'
funds
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Audited
Six months ended Year
ended
30.6.1999 30.6.1998 31.12.1998
US$'000 US$'000 US$'000
Net cash outflow from
operating activities (5,609) (7,633) (3,407)
(Note 14)
Returns on investments
and servicing of
finance
Interest received from 324 528 1,341
banks
Interest paid on bank
loans and overdrafts (117) (128) (1,167)
Net cash inflow from
returns on investments 207 400 174
and servicing of
finance
Tax paid (79) (61) (888)
Capital expenditure and
financial investment
Purchase of fixed (82) (303) (485)
assets
Purchase of investments - (1,570) (607)
Net cash outflow from
capital expenditure and (82) (1,873) (1,092)
financial investment
Acquisition and
disposal
Net cash outflow from
disposal of a - - (175)
subsidiary
Purchase of business - - (1,768)
Net cash outflow from
acquisition and - - (1,943)
disposal
Equity dividend paid - - (258)
Net cash outflow before
use of liquid resources (5,563) (9,167) (7,414)
and financing
Management of liquid
resources
Decrease/(increase) in
time deposits of 176 (7) (380)
maturity exceeding 1 day
Financing
Capital element of
payments under hire - (3) (6)
purchase contracts
Decrease in cash (Note 15) (5,387) (9,177) (7,800)
NOTES TO THE INTERIM REPORT
1 BASIS OF CONSOLIDATION
The Group's financial statements consolidate the financial statements of the
Company and the subsidiary undertakings included in the Group.
2 ACCOUNTING POLICIES
The financial statements set out in this report have been prepared under the
historical cost convention, as modified by the revaluation of certain fixed
assets, in accordance with accounting principles generally accepted in the
United Kingdom.
The accounting policies adopted in preparing this report are consistent with
those adopted in preparing the consolidated financial statements of the Group
for the year ended 31 December 1998.
The directors continue to adopt the going concern basis in preparing the interim
report.
3 ANALYSES OF TURNOVER, OPERATING LOSS AND NET ASSETS
Unaudited Audited
Six months ended Year Ended
30.6.1999 30.6.1998 31.12.1998
US$'000 US$'000 US$'000
Turnover analysed by
class of business
Broking 6,796 5,479 17,182
Corporate finance 693 639 1,098
Investment advisory - 244 259
7,489 6,362 18,539
Geographical analysis
of turnover
Hong Kong 3,702 4,668 14,709
Malaysia 219 387 630
Philippines 594 162 388
Thailand 2,497 598 1,441
Others 477 547 1,371
7,489 6,362 18,539
Operating loss analysed
by class of business
Broking (233) (4,966) (3,759)
Corporate finance 162 129 1
Investment advisory - 122 135
(71) (4,715) (3,623)
The net assets utilised in the Group relate substantially to broking activities.
4 EXCEPTIONAL ITEMS
Unaudited Audited
Six months ended Year Ended
30.6.1999 30.6.1998 31.12.1998
US$'000 US$'000 US$'000
Provision for doubtful - (1,018) (1,148)
receivables
Provision for offices - - (921)
downsizing
- (1,018) (2,069)
Provision for doubtful receivables were made for certain receivables arising in
the ordinary course of broking activities.
5 TAX
Unaudited Audited
Six months ended Year Ended
30.6.1999 30.6.1998 31.12.1998
US$'000 US$'000 US$'000
The charge comprises:
UK Corporation Tax at
31% - current year 45 72 144
Hong Kong Profits Tax
at 16% - current year 85 34 100
Other overseas taxation 4 38 16
134 144 260
6 EQUITY MINORITY INTEREST
The minority interest relates to the interests in PB Worldsec Securities
Advisors Sdn. Bhd.
7 EARNINGS/(LOSS) PER SHARE
Unaudited Audited
Six months ended Year Ended
30.6.1999 30.6.1998 31.12.1998
US$'000 US$'000 US$'000
Profit/(loss) for the
financial period/year 8 (4,505) (3,733)
Earnings/(loss) per 0 cent (35 cents) (29 cents)
Number Number Number
Weighted average number
of shares in issue 13,367,290 12,900,000 13,021,623
8 INVESTMENTS
Unaudited Audited
30.6.1999 30.6.1998 31.12.1998
US$'000 US$'000 US$'000
Exchange memberships -
at directors' valuation 3,853 5,361 3,851
Unlisted investments - 1,190 583 1,190
at cost
5,043 5,944 5,041
9 PURCHASED GOODWILL
Purchased goodwill represents the excess of considerations paid over the fair
value of the securities and futures dealing businesses, exchange memberships and
tangible fixed assets acquired in 1998 from Jin Loong Securities Company Limited
and Jin Loong Futures Limited.
Purchased goodwill is amortised over a period of seven years using the straight
line method starting from the date of acquisition.
10 ANALYSIS OF CASH
Unaudited Audited
30.6.1999 30.6.1998 31.12.1998
US$'000 US$'000 US$'000
Bank deposits and cash 45,455 55,399 47,612
Bank loans and (5,347) (5,660) -
overdrafts
40,108 49,739 47,612
Less:
Cash at bank - trust (25,997) (31,815) (27,938)
accounts
Time deposits of
maturity exceeding 1 (2,118) (1,921) (2,294)
day
Cash (Note 16) 11,993 16,003 17,380
11 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Unaudited Audited
30.6.1999 30.6.1998 31.12.1998
US$'000 US$'000 US$'000
Bank loans and 5,347 5,660 -
overdrafts
Trade creditors 53,877 41,206 33,817
Dividend payable - 258 -
Taxation and social - 555 -
security
Other creditors,
accruals and deferred 2,460 1,753 2,396
income
Obligations under hire
purchase contracts - 3 -
61,684 49,435 36,213
12 PROVISIONS FOR LIABILITIES AND CHARGES
The amount represents provision for deferred taxation which is the tax effect of
the excess of depreciation allowances claimed for tax purposes over the
depreciation charged in the financial statements. The tax effect of other timing
differences, which includes valuation surplus on the valuation of land and
building and exchange memberships and tax losses carried forward, are not
significant. There was no movement in the provision for deferred taxation during
the Period. The Group had no significant unprovided deferred taxation at 30 June
1999.
13 CALLED UP SHARE CAPITAL
Unaudited Audited
30.6.1999 30.6.1998 31.12.1998
US$'000 US$'000 US$'000
Authorised:
ordinary shares of 50,000,000 50,000,000 50,000,000
US$1 each ========== ========== ==========
Called up, issued and
fully paid:
ordinary shares of
US$1 each 13,367,290 12,900,000 13,367,290
========== ========== ==========
NOTES TO THE INTERIM REPORT (CONTINUED)
14 RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING
ACTIVITIES
Unaudited Audited
Six months ended Year Ended
30.6.1999 30.6.1998 31.12.1998
US$'000 US$'000 US$'000
Operating loss (71) (4,715) (3,623)
Depreciation 235 191 484
Amortisation of - 6 15
intangible assets
Amortisation of 99 - 197
purchased goodwill
Exchange difference (70) (61) (9)
(Increase)/decrease in (27,867) (2,473) 2,971
debtors
Decrease in cash at
bank - trust accounts 1,941 8,507 12,384
Increase/(decrease) in 20,060 (7,948) (14,303)
trade creditors
Increase/(decrease) in
other creditors and 64 (1,140) (1,523)
accruals
Net cash outflow from
operating activities (5,609) (7,633) (3,407)
15 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
Unaudited Audited
Six months ended Year Ended
30.6.1999 30.6.1998 31.12.1998
US$'000 US$'000 US$'000
Decrease in cash (5,387) (9,177) (7,800)
Cash outflow from
increase in liquid - 7 380
resources
Cash inflow from
decrease in liquid (176) - -
resources
Cash outflow from
repayment of hire - 3 6
purchase contracts
Movement in net funds (5,563) (9,167) (7,414)
Net funds brought 19,674 27,088 27,088
forward
Net funds carried 14,111 17,921 19,674
forward
16 ANALYSIS OF NET FUNDS
Unaudited Audited
30.6.1999 30.6.1998 31.12.1998
US$'000 US$'000 US$'000
Cash in hand and
deposits repayable on 17,340 21,663 17,380
demand
Bank loans and (5,347) (5,660) -
overdrafts
Cash (Note 10) 11,993 16,003 17,380
Obligations under hire
purchase contracts - (3) -
Time deposits of
maturity exceeding 1 2,118 1,921 2,294
day
Net funds 14,111 17,921 19,674
17 INTERIM REPORT
The interim report will be posted to shareholders on or about 25 October 1999.
CORPORATE INFORMATION
Board of directors
Non-Executive Chairman
David Archibald Evelyn LYLE
Executive directors
Henry Ying Chew CHEONG (Deputy Chairman and Chief Executive Officer)
Leonard Carlton POON
Paul Kwok Kin CHENG (Chief Operating Officer and Finance Director)
Winnie Hui Ming PAO
Alastair GUNN-FORBES
Non-executive directors
Mark Chung FONG
HO Soo Ching
WEE Sin Tho
Keigo YOKOYAMA
Takumi MUKAIYAMA (Alternate to Keigo YOKOYAMA)
Company secretary
John Martin MAGUIRE
Registered office address
Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda
Registration number
EC21466 Bermuda
Principal bankers
The Hongkong and Shanghai Banking Corporation Limited
1 Queen's Road, Central, Hong Kong
The Bank of Tokyo-Mitsubishi, Ltd.
7-1 Marunouchi, 2-chome, Chiyoda-ku, Tokyo 100, Japan
RIZAL Commercial Banking Corporation
RCBC Building, 333 Sen. Gil Puyat Avenue, Makati, Metro Manila,
Philippines
Auditors
Deloitte Touche Tohmatsu, Certified Public Accountants
26th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong
Solicitors
Linklaters
One Silk Street, London EC2Y BHQ, England
Principal share registrar and transfer office
The Bank of Bermuda Limited
Bank of Bermuda Building, 6 Front Street, Hamilton HMDX, Bermuda
International branch registrar
IRG (Jersey) Limited
Piermont House, 33-35 Pier Road, St Helier, Jersey, Channel Islands
United Kingdom transfer agent
IRG plc
Bourne House, 34 Beckenham Road, Beckenham, Kent BR3 4TU, England
Investor relations
For further information about Worldsec Limited, please contact:
The Chief Executive Officer
Worldsec Group
11th Floor, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong
PRINCIPAL OPERATING SUBSIDIARIES
HONG KONG
Worldsec Brokerage Limited
Worldsec Futures Limited
Worldsec International Limited
Worldsec Nominees Limited
Address: 11th Floor, Bank of America Tower, 12 Harcourt Road,
Central, Hong Kong
Telephone: +(852) 2867 7288 Fax: +(852) 2810 0281
Worldsec Corporate Finance Limited
Address: Rms 3301-02, Bank of America Tower, 12 Harcourt Road,
Central, Hong Kong
Telephone:+(852) 2971 4288 Fax: +(852) 2537 8830
BANGKOK
Worldsec International Limited representative office
Address: Rm 2922/217, 14th Floor, Charn Issara Tower II,
New Petch Buri Road, Huaykwang, Bangkok 10310, Thailand
Telephone:+(662) 718 1818 Fax: +(662) 718 1828
KUALA LUMPUR
PB Worldsec Securities Advisors Sdn. Bhd.
Address: 11.2, 11th Floor Menara PanGlobal, 8 Lorong P. Ramlec 50250,
Kuala Lumpur, Malaysia
Telephone:+(603) 201 3011 Fax: +(603) 201 2531
LONDON
Worldsec International (U.K.) Limited
Address: 2nd Floor, 6 Broadgate, London, EC2M 2QS, England
Telephone:+(44171) 972 0881 Fax: +(44171) 972 0882
MANILA
Worldsec International Securities (Philippines) Inc.
Address: 10th Floor, Tower One, Ayala Triangle, Ayala Avenue,
Makati City, Philippines
Telephone:+(632) 848 6360 Fax: +(632) 848 6373
NEW YORK
Worldsec International Securities Inc.
Address: 36th Floor, 153 East 53rd Street, New York, N.Y. 10022, USA
Telephone:+(1212) 371 0888 Fax: +(1212) 754 0076
SHANGHAI
Worldsec Investment Consulting (Shanghai) & Co. Ltd.
Address: Rm G, 15th Floor, Heng Ji Tower, 99 Huaihai Road (E.),
Shanghai 200021, China
Telephone:+(8621) 6386 4668 Fax: +(8621) 6386 5727
TAIPEI
Worldsec Investment Consulting (Taiwan) & Co. Ltd.
Address: 6th Floor, 29 An Ho Road, Section 1, Taipei, Taiwan
Telephone:+(8862) 2751 3737 Fax: +(8862) 2731 2966
END
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