RNS Number:0110R
Worldsec Ld
15 September 2000
Worldsec Limited
Interim Report for the six months ended 30 June 2000
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 2000 (the "Period").
HIGHLIGHTS
Turnover for the Period increased by 23% as compared with the
same period in 1999 to US$9,240,000.
Profit for the Period was US$4,967,000, as compared to US$8,000
for the same period in 1999.
DIVIDEND
The Directors do not recommend the payment of an interim dividend.
REVIEW OF OPERATIONS AND PROSPECTS
The start of the new millennium has been a year of continued recovery
in Asia from the recession in the aftermath of the Asian currency
crisis and our business benefitted from this. However, shareholders'
funds were more positively impacted by profits of a capital nature.
Pursuant to the restructuring effective on 6 March 2000 of The Stock
Exchange of Hong Kong Limited and Hong Kong Futures Exchange Limited
(the "Exchanges"), the Group received Trading Rights in the
Exchanges and shares in the Hong Kong Exchanges and Clearing Limited
(the "HKEC Shares") in exchange for memberships previously held by
the Group in the Exchanges. The HKEC Shares were listed on the Stock
Exchange of Hong Kong Limited. The market value of the HKEC Shares
at 30 June 2000 were substantially higher than the previous carrying
value of the memberships of the Exchanges and this has boosted
shareholders' funds. We realised a portion of our shareholding in
HKEC, the profit from which is reflected in our interim results.
The most prominent feature of the stock markets in Asia in the first
half of 2000 was the strong performance and subsequent collapse of
"new economy" stocks. The performance of this sector within Asian
stock markets was significantly influenced by the performance of
NASDAQ. Unfortunately, while the NASDAQ has staged a significant
recovery from its lows in May, generally speaking "new economy"
stocks in Asia have not followed suit: too many companies with "new
economy" ambitions were buoyed by the first quarter euphoria which
attracted large speculative retail investor interest, and after the
bubble was pricked, were found to be just "old economy" companies
with little new substance.
On the macro-economic front, Asian economies continued their strong
cyclical upturn largely driven by export-led growth. Economic
recovery in Hong Kong has been particularly satisfying with real GDP
growth of 14.3% in the first quarter followed by growth of 10.8% in
the second quarter. At the other end of the spectrum, economic
growth in the Philippines and Thailand were disappointing. Growth in
the Philippines in the first half was only 3.9% and in Thailand, it
was 5.2% in the first quarter, which is the latest period for which
data is available.
With economic growth being export-led, Asian investors have been very
sensitive to the performance of the U.S. economy paying keen
attention to U.S. consumer spending and the impact of rising U.S.
interest rates on consumer demand. The debate has been whether the
U.S. will achieve a hard landing or a soft landing. Recent economic
statistics favour a soft-landing scenario and this is very positive
for Asian equity markets, particularly Hong Kong, where domestic
interest rates are directly linked to U.S. interest rates because of
its currency peg. Hong Kong is also benefitting from the continuing
flow of positive economic news from China where real GDP growth was
over 8% in the first half. After China becomes a member of the World
Trade Organisation, its economic prospects should improve further.
Investor sentiment towards the larger Asian stock markets remains
positive, but it may be some time before investor interest in the
smaller Asian stock markets such as the Philippines and Thailand
recover. As a result, our commission revenue will continue to be
dominated by the performance of Hong Kong.
We have benefitted from the recovery in the Hong Kong stock market,
but in order to remain competitive, we revised our salary levels at
the start of the year, restoring to most staff the cut in salary
implemented last year. In June, we further reviewed our remuneration
structure in response to market conditions which remain very
competitive. We continue to experience downward pressure on
commission rates and such pressure is likely to increase with de-
regulation. Thailand moves to negotiated commissions on October 1st
this year. In Hong Kong, commission rates will not be fully de-
regulated until April 1st 2002, but certain of our competitors
already offer discounts. Average commission rates will also fall as
on-line trading becomes more popular. Given salary cost increases and
downward pressure on commission rates, it may be difficult to earn a
very satisfactory return on equity in the short-term, at least not
until there is a better balance to our revenue stream. Meanwhile, we
remain committed to our vision of being a pan Asian broker and we
want to strengthen our research effort even in the out of favour
markets of Malaysia, the Philippines and Thailand.
Although recovery in Asia is clearly gathering momentum, it would be
rash to assume that the upturn will continue uninterrupted. The
possibility of further increases in U.S. interest rates remain a
cause of concern but of greater concern at present, is the risk that
rising crude oil prices poses to the world economy. Assuming no
untoward shocks, cyclical economic recovery in Asia is expected to
provide a positive backdrop for the Asian equity markets.
We have previously informed shareholders that a number of parties
have approached us with an interest in investing in Worldsec. Such
discussions are on-going.
By order of the Board
Henry Ying Chew Cheong
Deputy Chairman and
Chief Executive Officer
15 September 2000
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited Audited
Six months ended Year ended
Notes 30.6.2000 30.6.1999 31.12.1999
US$'000 US$'000 US$'000
Turnover 3 9,240 7,489 15,792
Fees and (1,508) (1,482) (4,135)
commission
payable
7,732 6,007 11,657
Other operating 1,500 517 2,682
income
9,232 6,524 14,339
Staff costs (5,283) (4,346) (8,089)
Other operating (2,242) (2,249) (5,099)
costs
Operating 3 1,707 (71) 1,151
profit/(loss)
Gain on disposal
of investments 1,261 - -
Unrealized gain
on investments 2,723 - -
Interest
receivable and 354 324 769
similar income
Interest payable
and similar (893) (117) (458)
charges
Profit on
ordinary 5,152 136 1,462
activities
before taxation
Tax on profit on
ordinary 4 (185) (134) (119)
activities
Profit on
ordinary 4,967 2 1,343
activities after
taxation
Equity minority 5 - 6 3
interest
Profit for the
financial 4,967 8 1,346
period/year
Earnings per 6 37 cents 0 cent 10 cents
share
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Unaudited Audited
Six months ended Year ended
30.6.2000 30.6.1999 31.12.1999
US$'000 US$'000 US$'000
Profit for the 4,967 8 1,346
period/year
Surplus arising on
revaluation of 4 - 181
investments and
tangible fixed assets
Currency translation (267) (68) (119)
differences
Total recognised 4,704 (60) 1,408
gains/(losses)
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Unaudited Audited
Six months ended Year ended
30.6.2000 30.6.1999 31.12.1999
US$'000 US$'000 US$'000
Profit for the 4,967 8 1,346
period/year
Other recognised gains
and losses relating to (263) (68) 62
the period/year
Net
addition/(reduction) in 4,704 (60) 1,408
shareholders' funds
during the period/year
Shareholders' funds 32,400 30,992 30,992
brought forward
Shareholders' funds 37,104 30,932 32,400
carried forward
CONSOLIDATED BALANCE SHEET
Unaudited Audited
Notes 30.6.2000 30.6.1999 31.12.1999
US$'000 US$'000 US$'000
Fixed assets
Intangible assets 7 1,340 - -
Tangible fixed 1 ,023 1,373 1,181
assets
Investments 8 1,986 5,043 5,203
Purchased 9 887 1,084 986
goodwill
5,236 7,500 7,370
Current assets
Investments 10 7,551 - -
Debtors 28,424 39,695 35,728
Bank deposits and 11 43,141 45,455 42,639
cash
79,116 85,150 78,367
Creditors:
Amounts falling 12 (47,216) (61,684) (53,298)
due within one
year
Net current 31,900 23,466 25,069
assets
Total assets less
current 37,136 30,966 32,439
liabilities
Provisions for
liabilities and 13 (32) (30) (32)
charges
Equity minority 5 - (4) (7)
interest
Net assets 37,104 30,932 32,400
Capital and
reserves
Called up share 14 13,367 13,367 13,367
capital
Reserves 23,737 17,565 19,033
Equity 37,104 30,932 32,400
shareholders'
funds
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Audited
Six months ended Year ended
30.6.2000 30.6.1999 31.12.1999
US$'000 US$'000 US$'000
Net cash
(outflow)/inflow from (16,110) (5,609) 2,419
operating activities
(Note 15)
Returns on investments
and servicing of
finance
Interest received from 354 324 769
banks
Interest paid on bank
loans and overdrafts (893) (117) (458)
Net cash
(outflow)/inflow from
returns on investments (539) 207 311
and servicing of
finance
Tax refunded/(paid) 252 (79) (205)
Capital expenditure and
financial investment
Purchase of fixed - (82) (186)
assets
Purchase of investments (3,275) - -
Sale of investments 1,475 - -
Sale of tangible fixed - - 39
assets
Net cash outflow from
capital expenditure and (1,800) (82) (147)
financial investment
Net cash
(outflow)/inflow before (18,197) (5,563) 2,378
use of liquid resources
and financing
Management of liquid
resources
(Increase)/decrease in
time deposits of (28) 176 260
maturity exceeding 1 day
(Decrease)/increase in (18,225) (5,387) 2,638
cash (Note 16)
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 and investments, 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
1999.
Short-term investments in listed equity securities are stated at
their fair values on the basis of their quoted market prices at the
balance sheet date. The gains or losses arising from changes in
the fair values of the short-term investments are credited or
charged to the profit and loss account for the period in which they
arise.
The directors continue to adopt the going concern basis in
preparing the interim report.
NOTES TO THE INTERIM REPORT (CONTINUED)
3 ANALYSES OF TURNOVER, OPERATING PROFIT/(LOSS) AND NET ASSETS
Unaudited Audited
Six months ended Year ended
30.6.2000 30.6.1999 31.12.1999
US$'000 US$'000 US$'000
Turnover analysed by
class of business
Broking and related 8,284 6,796 13,876
services
Corporate finance 956 693 1,916
9,240 7,489 15,792
Geographical analysis
of turnover
Hong Kong 7,920 3,702 10,624
Thailand 444 2,497 3,039
Malaysia 318 219 321
Philippines 100 594 812
Others 458 477 996
9,240 7,489 15,792
Operating profit/(loss)
analysed by class of
business
Broking and related 1,379 (233) 638
services
Corporate finance 328 162 513
1,707 (71) 1,151
The net assets utilised in the Group relate substantially to
broking activities.
NOTES TO THE INTERIM REPORT (CONTINUED)
4 TAX
Unaudited Audited
Six months ended Year ended
30.6.2000 30.6.1999 31.12.1999
US$'000 US$'000 US$'000
The charge comprises:
UK Corporation Tax at
30.25% - current year 43 45 86
Hong Kong Profits Tax
at 16% - current year 135 85 17
Other overseas taxation 7 4 16
185 134 119
5 EQUITY MINORITY INTEREST
The minority interest relates to the interests in PB Worldsec
Securities Advisors Sdn. Bhd.
6 EARNINGS PER SHARE
Unaudited Audited
Six months ended Year ended
30.6.2000 30.6.1999 31.12.1999
US$'000 US$'000 US$'000
Profit for the 4,967 8 1,346
financial period/year
Earnings per share 37 cents 0cents 10 cents
Number Number Number
Weighted average number
of shares in issue 13,367,290 13,367,290 13,367,290
NOTES TO THE INTERIM REPORT (CONTINUED)
7 INTANGIBLE ASSETS
Intangible assets represent eligibility rights to trade on or
through the Stock Exchange of Hong Kong Limited and Hong Kong
Futures Exchange Limited respectively ("Trading Rights").
Pursuant to the restructuring effective on 6 March 2000 of The
Stock Exchange of Hong Kong Limited and Hong Kong Futures Exchange
Limited (the "Exchanges"), the Group received Trading Rights and
shares in the Hong Kong Exchanges and Clearing Limited (the "HKEC
Shares") in exchange for memberships previously held by the Group
in the Exchanges.
The prior carrying values of the memberships in the Exchanges have
been apportioned to the Trading Rights and the HKEC Shares, which
were listed on the Stock Exchange of Hong Kong Limited in June
2000, based on their respective estimated fair values on 6 March
2000.
Trading Rights are amortised over a period of ten years using the
straight line method.
8 INVESTMENTS HELD AS FIXED ASSETS
Unaudited Audited
30.6.2000 30.6.1999 31.12.1999
US$'000 US$'000 US$'000
Exchange memberships -
at directors' valuation 796 3,853 4,013
Unlisted investments - 1,190 1,190 1,190
at cost
1,986 5,043 5,203
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.
Purchased goodwill is amortised over a period of seven years using
the straight line method starting from the date of acquisition.
NOTES TO THE INTERIM REPORT (CONTINUED)
10 INVESTMENTS HELD AS CURRENT ASSETS
Unaudited Audited
30.6.2000 30.6.1999 31.12.1999
US$'000 US$'000 US$'000
Listed investments in
overseas, at market 7,551 - -
value
The listed investments include HKEC shares acquired in the
restructuring as detailed in note 7 and are stated at market value.
11 ANALYSIS OF CASH
Unaudited Audited
30.6.2000 30.6.1999 31.12.1999
US$'000 US$'000 US$'000
Bank deposits and cash 43,141 45,455 42,639
Bank loans and (12,894) (5,347) (12,412)
overdrafts
30,247 40,108 30,227
Less:
Cash at bank - trust (26,392) (25,997) (8,175)
accounts
Time deposits of
maturity exceeding 1 (2,062) (2,118) (2,034)
day
Cash (Note 17) 1,793 11,993 20,018
12 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Unaudited Audited
30.6.2000 30.6.1999 31.12.1999
US$'000 US$'000 US$'000
Bank overdrafts 12,894 5,347 12,412
Trade creditors 31,863 53,877 38,718
Taxation 192 - -
Other creditors,
accruals and deferred 2,267 2,460 2,168
income
47,216 61,684 53,298
NOTES TO THE INTERIM REPORT (CONTINUED)
13 PROVISIONS FOR LIABILITIES AND CHARGES
The amount represents provision for deferred taxation which is the
tax effect of the excess of depreciation allowances claimed for tax
purposes over the depreciation charged in the financial statements.
The tax effect of other timing differences, which includes
valuation surplus on the valuation of land and building and
exchange memberships and tax losses carried forward, are not
significant. There was no movement in the provision for deferred
taxation during the Period. The Group had no significant
unprovided deferred taxation at 30 June 2000.
14 CALLED UP SHARE CAPITAL
Unaudited Audited
30.6.2000 30.6.1999 31.12.1999
US$ US$ US$
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$1 each 13,367,290 13,367,290 13,367,290
NOTES TO THE INTERIM REPORT (CONTINUED)
15 RECONCILIATION OF OPERATING PROFIT/(LOSS) TO NET CASH
(OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES
Unaudited Audited
Six months ended Year ended
30.6.2000 30.6.1999 31.12.1999
US$'000 US$'000 US$'000
Operating profit/(loss) 1,707 (71) 1,151
Depreciation 138 235 440
Amortisation of 46 - -
intangible assets
Amortisation of 99 99 197
purchased goodwill
Exchange difference (186) (70) (48)
Decrease/(increase) in 7,059 (27,867) (23,757)
debtors
(Increase)/decrease in
cash at bank - trust (18,217) 1,941 19,763
accounts
(Decrease)/increase in (6,855) 20,060 4,901
trade creditors
Increase/(decrease) in
other creditors and 99 64 (228)
accruals
Net cash
(outflow)/inflow from (16,110) (5,609) 2,419
operating activities
16 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
Unaudited Audited
Six months ended Year ended
30.6.2000 30.6.1999 31.12.1999
US$'000 US$'000 US$'000
(Decrease)/increase in (18,225) (5,387) 2,638
cash
Cash outflow from
increase in liquid 28 - -
resources
Cash inflow from
decrease in liquid - (176) (260)
resources
Movement in net funds (18,197) (5,563) 2,378
Net funds brought 22,052 19,674 19,674
forward
Net funds carried 3,855 14,111 22,052
forward
NOTES TO THE INTERIM REPORT (CONTINUED)
17 ANALYSIS OF NET FUNDS
Unaudited Audited
30.6.2000 30.6.1999 31.12.1999
US$'000 US$'000 US$'000
Cash in hand and
deposits repayable on 14,687 17,340 32,430
demand
Bank loans and (12,894) (5,347) (12,412)
overdrafts
Cash (Note 11) 1,793 11,993 20,018
Time deposits of
maturity exceeding 1 day 2,062 2,118 2,034
Net funds 3,855 14,111 22,052
18 INTERIM REPORT
The interim report will be posted to shareholders on or about 28
September 2000.
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
Shigeyasu KASAMATSU
Yoichi KAMBARA
Company secretary
Paul Kwok Kin CHENG
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
CORPORATE INFORMATION (CONTINUED)
Auditors
Deloitte Touche Tohmatsu, Certified Public Accountants
26th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong
Solicitors
Linklaters & Alliance
One, Silk Street, London EC2Y 8HQ, 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
Worldsec Securities Advisors Sdn. Bhd.
(formerly known as PB Worldsec Securities Advisors Sdn. Bhd.)
Address: 11.2, 11th Floor Menara PanGlobal, 8 Lorong P. Ramlee 50250,
Kuala Lumpur, Malaysia
Telephone:+(603) 201 0010 Fax: +(603) 201 2531
LONDON
Worldsec International (U.K.) Limited
Address: 2nd Floor, 6 Broadgate, London, EC2M 2QS, England
Telephone: +(44207) 972 0881 Fax: +(44207) 972 0882
PRINCIPAL OPERATING SUBSIDIARIES (CONTINUED)
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:599 Lexington Avenue, Suite 2300, 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
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