Guangzhou Investment - Interim Results

Analysis of Results

In the first half of 2002, the Group s turnover amounted to HK$1,545 million, representing a 11 per cent decline compared with the same period of 2001.

Turnover of the property business experienced an overall 8 per cent decrease to HK$304 million as the Group sold more residential instead of commercial units in the first half of 2002. In addition, the downturn of the Hong Kong rental market had caused rental income from investment properties primarily located in Hong Kong to decline by approximately 11 per cent to HK$65 million. Increasing domestic competitions also affected the turnover of newsprint operation of the Group. A decrease of 18 per cent of turnover to HK$540 million was noted. Turnover of the Group s toll road business declined by 19 per cent to HK$174 million due to disposal of Xinfeng Highways and lower traffic volume of selective projects. However, the cement business had outperformed due to expansion of construction activities in Guangdong Province. Inspite of a slowing Hong Kong market, turnover of cement business amounted to HK$525 million and remained at a similar level of the same period of last year.
Total gross profits amounted to HK$494 million and decreased by 23 per cent due to similar reasons as mentioned above. However, gross profits of the out performing cement and ready-mixed concrete businesses amounted to HK$164 million and remained at a similar level of the same period last year.
Total periodic expenses including selling, distribution, administrative and other operating expenses decreased slightly by approximately 6 per cent to a total of HK$306 million mainly due to the cost control.
Finance costs decreased enormously by 30 per cent to HK$86 million as a result of the declining interest rate and net repayment of a total of HK$318 million bank loans.
The increase in the share of loss in jointly controlled entities by 93 per cent to HK$19 million was mainly attributable to loss incurred by the jointly controlled entity of GZI Transport, Guangzhou Northern Second Ring Expressway ("GNSR Expressway"). GNSR Expressway started operation only in the beginning of 2002 and has not reached its most optimal traffic volume level yet.
Taxation decreased by 35 per cent to HK$32 million due to lower pre-tax profits.
For the six months ended 30th June 2002, the Group achieved profit attributable to shareholders amounted to HK$20 million, which compared with HK$46 million in the same period in 2001.

Interim Dividend

The Board of Directors has resolved not to declare any interim dividend for 2002 (2001: nil).

Future Strategy and Prospects

2002 is a year of adjustment of the Group s asset portfolio.
The Group is in the final stage of going through various legal procedures to acquire a majority interest in Guangzhou Construction. Together with the proposed disposal of non-core businesses such as cement, RMC and high technology projects, the Group will be able to concentrate on property investment and development business in Guangzhou Municipality.
Looking ahead, the Group s goal is to develop as a leading property developer in Southern China, in which Guangzhou Municipality is amongst the fastest growing and affluent cities in China. Toll road business will continue to provide recurrent income to support the property business while the Group s interest in paper business will be reduced gradually through a proposed A-share listing of Guangzhou Paper. The Group is in the process of undertaking a review on the development potential of its remaining property projects in Hong Kong and Macau to further streamline its business portfolio.
Although the current international environment is uncertain, the Group believes that the 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-mentioned acquisition will become evident in 2003.
Contact: Sophia Yan, Executive Director of Guangzhou Investment Co. Ltd.
(Tel: 2116 8022 ; Fax: 2598 7688 ; email: contact@gzinvestment.com.hk)