Guangzhou Investment - Final Results

RESULTS HIGHLIGHT

In the year of 2001, the Group s cement and newsprint businesses both performed satisfactorily due to expansion of production capacity and sales as well as improved operational efficiency which offset lower turnover from the toll road and property businesses. Toll road business was affected by temporary factors such as construction of road networks and prohibition of access of overloaded trucks in certain remote regions in Guangdong Province. Property business recorded lower sales area as a result of the Government s tightening of pre-sale regulations.

The Group s turnover in 2001 was at a similar level of that of 2000 amounting to HK$3,374,335,000 and represented a 0.2 per cent decline. This was mainly caused by the above mentioned varying performance of the Group s business. Overall gross profit decreased by 4.6 per cent to HK$1,250,078,000 for similar reasons. Selling, distribution and administrative expenses amounted to HK$644,954,000 in 2001 and remained at similar levels of 2000.

While the Guangzhou market was expanding steadily, Hong Kong continued to be affected by a slow economy and created further impact on the value of the Group s remaining portfolio of Hong Kong property projects. Revaluation deficits and provisions made on these properties amounted to HK$28,404,000 and HK$14,000,000 respectively in 2001.

In accordance with the transitional provisions of SSAP 30 which becomes effective on 1st January 2001, the Group has retrospectively restated the profit attributable to shareholders for 2000 to HK$53,582,000 to conform with the new accounting policy after performing an assessment of the fair value of its goodwill arising from previous acquisitions of toll road projects that had already been eliminated against reserves.

In 2001, the Group achieved profit attributable to shareholders amounted to HK$39,782,000.

FINAL DIVIDEND

The Directors do not recommend the payment of final dividend for 2001 (2000: nil). There was no payment of interim dividend for the year (2000: nil).

PROSPECTS

The acquisition of Guangzhou Construction is a milestone development of the Group. Through this acquisition and disposal of non-core businesses such as cement, RMC and high technology businesses, the Group will be able to reallocate its internal resources more efficiently and concentrate on property investment and development business in Guangzhou.

The operation of Guangzhou Construction is highly complementary to the Group, which currently has a proportionally smaller land bank and investment properties and does not engage in the design, renovating and certification of property development projects and provision of agency services. Most importantly, with Guangzhou Construction s management team joining the Board and be responsible for managing all the property projects, the Group s management expertise in property business will be further enhanced.

Looking ahead, the Group s goal is to develop as a leading property developer in Southern China, in which Guangzhou is one of the fastest growing and affluent cities in China with the second highest monthly household income and GDP per capita in 2000. Toll road business will continue providing recurrent income to support the property business while the paper business will be divested gradually. The Group will undertake a review on the development potential of its remaining property projects in Hong Kong and Macau later this year to further streamline its business.

With gradual improvement of the international market, the Group believes that economy of China, especially Southern China, will continue to outperform. The Group is optimistic on its medium term development as it is shifting its business focus to Guangzhou property and the full effect of the above acquisition will become evident in the second half of 2002.

Full copy of the above announcement is available at the Hong Kong Stock Exchange s website www.hkex.com.hk. The listed company code for Guangzhou Investment is 123.
Contact: Sophia Yan, Executive Director of Guangzhou Investment Co. Ltd.
(Tel: 2116 8022 ; Fax: 2598 7688 ; email: contact@gzinvestment.com.hk)