Interim Report

Worldsec Ld 26 September 2001 Worldsec Limited Interim Report for the six months ended 30 June 2001 CONTENTS PAGE Highlights 1 Dividend 1 Review of operations and prospects 1 Consolidated profit and loss account 3 Statement of total recognised gains and losses 4 Reconciliation of movements in shareholders' funds 4 Consolidated balance sheet 5 Consolidated cash flow statement 6 Notes to the interim report 7 Corporate information 15 Principal operating subsidiaries 17 Interim Report for the six months ended 30 June 2001 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 2001 (the 'Period'). HIGHLIGHTS * Turnover for the Period decreased by 59% as compared with the same period in 2000 to US$3,754,000. * Loss for the Period was US$3,083,000, as compared to profit of US$4,967,000 for the same period in 2000. DIVIDEND The Directors do not recommend the payment of an interim dividend. REVIEW OF OPERATIONS AND PROSPECTS Asia's strong cyclical export-led economic recovery in 2000 has come to a jarring halt and the region is once again facing recession. Economic data from the US, Asia's main export market, show a continuing economic slowdown despite a succession of interest rate reductions by the US Federal Reserve. Most worrying is the sharp drop in fixed investment which explains the continuing weakness in the information technology sector. The risk of an outright recession in the US is heightened by the recent tragic disaster in the US which has global ramifications. Even before the attack on the World Trade Centre, European economies were already stalling while the Japanese economy was entering a recession. The deteriorating global economic environment, with the exception to date of China, has been reflected in weak equity markets in Asia. From its level at the beginning of 2001, the Hong Kong stock market, which is our main market, is presently down about 30% as measured by the Hang Seng index. We have been severely affected by the bear market. The impact of falling equity prices is compounded by falling volumes and lower commission rates, as brokers compete for the reduced level of turnover. With the exception of Thailand, our commission revenues are down sharply compared to the corresponding period of 2000 in each of the markets in which we operate. The fall in commission revenues reflect not just falling turnover levels but also a loss of market share. We have experienced bear markets before but the current downturn is particularly bad. Furthermore, although the region is not at financial risk as it was in 1997/1998 at the time of the Asian currency crisis, prospects for a rapid economic recovery are poor. Since the end of the first half, trading conditions have become even more difficult. Given the uncertain outlook, we are reviewing our Group structure with a view to scale down the level of operations. By order of the Board Henry Ying Chew Cheong Deputy Chairman and Chief Executive Officer 26 September 2001 CONSOLIDATED PROFIT AND LOSS ACCOUNT Unaudited Audited Six months ended Year ended Notes 30.6.2001 30.6.2000 31.12.2000 US$'000 US$'000 US$'000 Turnover 3 3,754 9,240 14,052 Fees and commission (609) (1,508) (2,579) payable 3,145 7,732 11,473 (Loss)/gain on (295) 3,984 6,608 investments Recovery of doubtful receivables - - 1,208 Other operating income 572 1,500 2,819 3,422 13,216 22,108 Staff costs (3,940) (5,283) (10,331) Provision for doubtful receivables (500) - (5,518) Other operating (2,225) (2,242) (4,719) costs Operating 3 (3,243) 5,691 1,540 (loss)/profit Gain on disposal of intangible assets 180 - - Interest receivable and similar income 287 354 828 Interest payable and similar charges (268) (893) (1,689) (Loss)/profit on ordinary activities (3,044) 5,152 679 before taxation Tax on profit on ordinary activities 4 (39) (185) (266) (Loss)/profit for the financial (3,083) 4,967 413 period/year (Loss)/earnings per 5 (23) cents 37 cents 3 cents share STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Unaudited Audited Six months ended Year ended 30.6.2001 30.6.2000 31.12.2000 US$'000 US$'000 US$'000 (Loss)/profit for the (3,083) 4,967 413 period/year Surplus/(deficit) arising on revaluation of 3 4 (83) investments and tangible fixed assets Currency translation (145) (267) (495) differences Total recognised (3,225) 4,704 (165) (losses)/gains RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Unaudited Audited Six months ended Year ended 30.6.2001 30.6.2000 31.12.2000 US$'000 US$'000 US$'000 (Loss)/profit for the (3,083) 4,967 413 period/year Other recognised losses relating to the period/year (142) (263) (578) Net (reduction)/addition in shareholders' funds during (3,225) 4,704 (165) the period/year Shareholders' funds brought 32,235 32,400 32,400 forward Shareholders' funds carried 29,010 37,104 32,235 forward CONSOLIDATED BALANCE SHEET Unaudited Audited Notes 30.6.2001 30.6.2000 31.12.2000 US$'000 US$'000 US$'000 Fixed assets Intangible assets 6 929 1,340 1,270 Tangible fixed assets 1,013 1,023 1,060 Investments 7 1,748 1,986 1,771 Purchased goodwill 8 690 887 788 4,380 5,236 4,889 Current assets Investments 9 2,786 7,551 3,087 Debtors 24,803 28,424 18,051 Bank deposits and cash 10 41,052 43,141 41,223 68,641 79,116 62,361 Creditors: Amounts falling due within one 11 (43,979) (47,216) (34,983) year Net current assets 24,662 31,900 27,378 Total assets less current liabilities 29,042 37,136 32,267 Provisions for liabilities and charges 12 (32) (32) (32) Net assets 29,010 37,104 32,235 Capital and reserves Called up share capital 13 13,367 13,367 13,367 Reserves 15,643 23,737 18,868 Equity shareholders' 29,010 37,104 32,235 funds CONSOLIDATED CASH FLOW STATEMENT Unaudited Audited Six months ended Year ended 30.6.2001 30.6.2000 31.12.2000 US$'000 US$'000 US$'000 Net cash outflow from operating activities (Note (4,291) (17,910) (8,766) 14) Returns on investments and servicing of finance Interest received from 287 354 828 banks Interest paid on bank loans and overdrafts (268) (893) (1,689) Net cash inflow/(outflow) from returns on investments 19 (539) (861) and servicing of finance Tax (paid)/ refunded (67) 252 100 Capital expenditure and financial investment Purchase of fixed assets (86) - (272) Sale of tangible fixed - - 5 assets Sale of intangible assets 457 - - Net cash inflow/(outflow) from capital expenditure 371 - (267) and financial investment Net cash outflow before use of liquid resources and (3,968) (18,197) (9,794) financing Management of liquid resources Increase in time deposits of maturity exceeding 1 day (25) (28) (473) Decrease in cash (Note 15) (3,993) (18,225) (10,267) 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 2000. The directors continue to adopt the going concern basis in preparing the interim report. 3 ANALYSIS OF TURNOVER, OPERATING (LOSS)/PROFIT AND NET ASSETS Unaudited Audited Six months ended Year ended 30.6.2001 30.6.2000 31.12.2000 US$'000 US$'000 US$'000 Turnover analysed by class of business Broking and related 3,239 8,284 12,509 services Corporate finance 515 956 1,543 3,754 9,240 14,052 Geographical analysis of turnover Hong Kong 2,781 7,920 12,090 Thailand 595 444 824 Malaysia 8 318 349 Philippines 65 100 136 Others 305 458 653 3,754 9,240 14,052 Operating (loss)/profit analysed by class of business Broking and related (3,380) 5,363 1,147 services Corporate finance 137 328 393 (3,243) 5,691 1,540 The net assets utilised in the Group relate substantially to broking activities. NOTES TO THE INTERIM REPORT (CONTINUED) 4 TAX Unaudited Audited Six months ended Year ended 30.6.2001 30.6.2000 31.12.2000 US$'000 US$'000 US$'000 The charge comprises: UK Corporation Tax at 30% - current year 22 43 85 Hong Kong Profits Tax at 16% - current year 16 135 144 Other overseas taxation 1 7 37 39 185 266 5 EARNINGS PER SHARE Unaudited Audited Six months ended Year ended 30.6.2001 30.6.2000 31.12.2000 US$'000 US$'000 US$'000 (Loss)/profit for the financial period/year (3,083) 4,967 413 (Loss)/earnings per (23) cents 37 cents 3 cents share Number Number Number Weighted average number of shares in 13,367,290 13,367,290 13,367,290 issue NOTES TO THE INTERIM REPORT (CONTINUED) 6 INTANGIBLE ASSETS Intangible assets represent eligibility rights to trade on or through the Stock Exchange of Hong Kong Limited and Hong Kong Futures Exchange Limited respectively ('Trading Rights'). Trading Rights are amortised over a period of ten years using the straight line method. Unaudited Audited 30.6.2001 30.6.2000 31.12.2000 US$'000 US$'000 US$'000 Cost or valuation At 1 January 1,385 - - Additions - 1,385 1,385 Disposal (314) - - At 30 June/31 December 1,071 1,385 1,385 Amortisation At 1 January 115 - - Provided for the year 64 45 115 Eliminated on disposal (37) - - At 30 June/31 December 142 45 115 Net book value At 30 June/31 December 929 1,340 1,270 7 INVESTMENTS HELD AS FIXED ASSETS Unaudited Audited 30.6.2001 30.6.2000 31.12.2000 US$'000 US$'000 US$'000 Exchange memberships - at directors' valuation 559 796 581 Unlisted investments - at cost 1,189 1,190 1,190 1,748 1,986 1,771 NOTES TO THE INTERIM REPORT (CONTINUED) 8 PURCHASED GOODWILL Purchased goodwill represents the excess of considerations paid over the fair value of the securities and futures dealing businesses, exchange memberships and tangible fixed assets acquired. Purchased goodwill is amortised over a period of seven years using the straight line method starting from the date of acquisition. 9 INVESTMENTS HELD AS CURRENT ASSETS Unaudited Audited 30.6.2001 30.6.2000 31.12.2000 US$'000 US$'000 US$'000 Listed investments in overseas, at market value 2,786 7,551 3,087 10 ANALYSIS OF CASH Unaudited Audited 30.6.2001 30.6.2000 31.12.2000 US$'000 US$'000 US$'000 Bank deposits and cash 41,052 43,141 41,223 Bank loans and overdrafts (8,390) (12,894) (5,090) 32,662 30,247 36,133 Less: Cash at bank - trust accounts (24,372) (26,392) (23,875) Time deposits of maturity exceeding 1 day (2,532) (2,062) (2,507) Cash (Note 16) 5,758 1,793 9,751 NOTES TO THE INTERIM REPORT (CONTINUED) 11 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Unaudited Audited 30.6.2001 30.6.2000 31.12.2000 US$'000 US$'000 US$'000 Bank overdrafts 8,390 12,894 5,090 Trade creditors 34,449 31,863 28,000 Taxation 93 192 121 Other creditors, accruals and deferred income 1,047 2,267 1,772 43,979 47,216 34,983 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 2001. 13 CALLED UP SHARE CAPITAL Unaudited Audited 30.6.2001 30.6.2000 31.12.2000 US$ US$ US$ Authorised: ordinary shares of US$1 each 50,000,000 50,000,000 50,000,000 Called up, issued and fully paid: ordinary shares of US$1 each 13,367,290 13,367,290 13,367,290 NOTES TO THE INTERIM REPORT (CONTINUED) 14 RECONCILIATION OF OPERATING (LOSS)/PROFIT TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES Unaudited Audited Six months ended Year ended 30.6.2001 30.6.2000 31.12.2000 US$'000 US$'000 US$'000 Operating (loss)/profit (3,243) 5,691 1,540 Depreciation 147 138 289 Provision for doubtful 500 - 5,518 receivables Amortisation of intangible 64 45 115 assets Amortisation of purchased 98 99 198 goodwill Exchange difference (133) (185) (205) Decrease/(increase) in investments held as current 301 (5,784) (1,321) assets (Increase)/decrease in (7,252) 7,059 11,914 debtors Increase in cash at bank - trust accounts (497) (18,217) (15,700) Increase/(decrease) in 6,449 (6,855) (10,718) trade creditors (Decrease)/increase in other creditors and (725) 99 (396) accruals Net cash outflow from operating activities (4,291) (17,910) (8,766) 15 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS Unaudited Audited Six months ended Year ended 30.6.2001 30.6.2000 31.12.2000 US$'000 US$'000 US$'000 Decrease in cash (3,993) (18,225) (10,267) Cash outflow from increase in liquid resources 25 28 473 Movement in net funds (3,968) (18,197) (9,794) Net funds brought forward 12,258 22,052 22,052 Net funds carried forward 8,290 3,855 12,258 NOTES TO THE INTERIM REPORT (CONTINUED) 16 ANALYSIS OF NET FUNDS Unaudited Audited 30.6.2001 30.6.2000 31.12.2000 US$'000 US$'000 US$'000 Cash in hand and deposits repayable on demand 14,148 14,687 14,841 Bank loans and overdrafts (8,390) (12,894) (5,090) Cash (Note 10) 5,758 1,793 9,751 Time deposits of maturity exceeding 1 day 2,532 2,062 2,507 Net funds 8,290 3,855 12,258 17 COMPARATIVES FIGURES Certain comparative figures have been reclassified to conform with the presentation of the financial statements of the Group for the year ended 31 December 2000. 18 INTERIM REPORT The interim report will be posted to shareholders on or about 9 October 2001. CORPORATE INFORMATION Board of directors Non-Executive Chairman David Archibald Evelyn LYLE Executive directors Henry Ying Chew CHEONG (Deputy Chairman and Chief Executive Officer) Paul Kwok Kin CHENG (Chief Operating Officer and Finance Director) Alastair GUNN-FORBES Non-executive directors Mark Chung FONG HO Soo Ching WEE Sin Tho Yasumine SATAKE Yoshiaki WATANABE 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: Rm 1601, 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. Address: 11.2, 11th Floor Menara PanGlobal, 8 Lorong P. Ramlee 50250, Kuala Lumpur, Malaysia Telephone: +(603) 2031 0010 Fax: +(603) 2031 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: 919 3rd Avenue, Suite 2700, 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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