Shenzhen High-Tech Holdings Announces 2003 Annual Results

Gross Margin Advanced 60% with Loss Narrowed after Significant Amortization. The Group achieved a 26%year-on-year turnover growth to HK$331,881,000 with operating loss narrowed by 3% to HK$170,414,000.

Hong Kong (PRWEB) April 20, 2004 ---Mainland information technology and property investment company Shenzhen High-Tech Holdings Limited (SEHK: 106) today announces that in the year to December 31, 2003, the Group achieved a 26%year-on-year turnover growth to HK$331,881,000 with operating loss narrowed by 3% to HK$170,414,000. In the year, the Groups gross profit margin rose significantly from 14% of 2002 to 23% on the back of subsidiary Dawnings launch of new, higher-margin server products. However, due to a provision of HK$141,283,000 on amortization and impairment of goodwill, the Group recorded a net loss of HK$176,854,000 for the year. The board did not recommend the payment of a final dividend.

Dawning Information Industry Company Limited is a prime brand name in high-performance computers and servers, and the one and only maker of UNIX/RISC servers in China. In the reporting period, Dawning remained the Groups major revenues and earnings contributor (before goodwill amortization and provision). With the SARS outbreak in early 2003 which dealt a further blow to the already fiercely competitive market, Dawnings revenues still gained 17% to HK$230 million. Although the bottomline of the company was adversely affected by the amortization of intangible assets, it experienced substantial growth to mark record sales in the year.

As a result of active business development and enhanced administrative and financial management control, Dawning continued to deliver improved results. In the year, the company made further advances into new market segments, including the winning of the largest tender in the high school network construction project in the Great West commissioned by the Ministry of Education and the classrooms online programme in Beijing for the third year in a row. These accomplishments further validated the brands leadership position in the education sector.

In March 2003, Dawning launched 4000L servers, by far the topmost model of data processor in China with a computing speed of 4,200 giga floating point operation per second (GFLOPS). Dawning 4000L was soon deployed in the area of oil exploration. Dawnings high-performance servers were also installed in Xians satellite control centre, Jiuchuans satellite launch base and Zijinshan Oberservatory. In addition, Dawning has partnered with the worlds second largest chip manufacturer AMD to jointly develop a server motherboard and system that accommodates 4 CPUs. During the year, the company has also obtained the highest grade for its testing system in an assessment conducted by State Security Department.

Mr Wong Chung Tak, Chairman, Shenzhen High-Tech, noted: Dawning will continue to research into new-generation super servers in order to defend its top notch position in China. In the pipeline for introduction to the market in 2004 is the 10,000-GFLOPS Dawning 4000A servers which will be one of the worlds highest-powered computers."

The servers market is expected to sustain steady growth in 2004 on the back of stable demand from government and research institutes on the mainland. Competition will inevitably intensify, but the company will seek to safeguard its market dominance in the area of meteorology, oil, education, government and military usage, while actively expanding channel sales.

Operations re-engineering at Beijing CPT Bluetus Co, Ltd was substantially complete in the year. Beijing CPT specializes in the development of platforms for multi-media application. Its patented technology is yet to be fully deployed as broadband transmission in China is still in its early stage of development. The company was renamed Beijing Dawning Novotech Co., Ltd after an integration of its operations with the new business development team of Dawning. The integration is expected to bring synergies and savings by trimming duplicated resources.

Subsidiary Wuhan Jingke Electronic Co, Ltd completed the relocation of production lines to Jingke Industrial Park during the year. In view of the delay in construction and production commencement of this project, the Group has assigned designated staff to help its management re-organize the board and operations. The industrial park is now operational and is expected to record improved performance.

In 2003, the Groups property arm sold 34 units at La Residencce in Shanghai with a total floor area of 3,360 sq m. The sale generated HK$36,700,000 in revenues. Annual rental income decreased only mildly by 11% to HK$6,210,000 despite a reduction in leasable area after the sale of units, as well as the negative impact of the SARS epidemic. As more units are expected to be sold this year, rental income will decrease in accordance.

On October 20, 2003, Shenzhen High-Tech solicited a new strategic investor Mr Wong Chung Tak through a placement of new shares. Mr Wong was subsequently appointed the Groups Executive Director and Chairman on October 28. The new management will continue to drive the Groups developments in the two core lines of high technology and property investments.

The Group acquired on December 10, 2003 49% interests in Twente Limited as a mid-to-long term investment for a consideration of HK$50 million. Twente holds properties at Beijing East Gate Plaza. Since completion of transaction, the investment has been contributing steady rental income for the Group.

Shenzhen High-Tech Holdings Limited (SEHK: 106) is a Greater China-focused technology and property investment operation. The Group commands a strong financial position with cash and bank balances of HK$416,465,000 (December 31, 2002: HK$171,161,000) as of December 31, 2003. Accounts receivables as of book closing date decreased 49% to HK$47,330,000 (December 31, 2002: HK$92,496,000). Current ratio stood at 2.74 (December 31, 2002: 1.45). The Group had zero gearing ratio (total bank borrowings divided by shareholder funds) (2002: 0).

News Photos
On February 16, 2004, Shenzhen High-Tech announced the acquisition of 3 residential buildings in Shun Jing Yuan, located in Chao Yang District of Beijing City, as a short to medium term property investment. Photos of this property project can be downloaded at:
http://www.t6pr.com/files/0106

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Shenzhen High-Tech Holdings Limited

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Jenny Lee / Angus Ho
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