VSC Group Announces Satisfactory 2002/03 Interim Results

Expanding Industrial Products Business to Capture the Flourishing China Market

FINANCIAL HIGHLIGHTS For the six months ended September 30 2002 2001 (HK$‘000) (HK$‘000) Growth Consolidated Turnover 1,270,354 1,015,069 25% Profit attributable to 37,249 14,528 156% shareholders Earnings per share - Basic HK10.5 cents HK4.1 cents 156% - Diluted HK10.5 cents HK4.1 cents 156%

(December 11, 2002 – ) A leading quality construction and industrial materials distributor and processor, Van Shung Chong Holdings Limited (“VSC Group” or the “Group”, stock code: 1001) today announced its unaudited consolidated results for the six months ended September 30, 2002. With encouraging growth recorded in both turnover and profit attributable to shareholders, it has shown positive signs of the growing momentum of the Group’s business.

For the period under review, unaudited consolidated turnover amounted to approximately HK$1,270 million, representing an increase of 25% as compared to the same period in 2001. Gross profit achieved a greater increase of 33% to approximately HK$110 million while profit attributable to shareholders soared 156% to approximately HK$37.2 million. Basic earnings per share was HK10.5 cents, representing a growth of 156% over the same period last year.

The Directors did not declare an interim dividend per share for the six months ended September 30, 2002, as an offer had recently been made to all shareholders to purchase 33.3% (subject to adjustment) of their shares in the VSC Group at HK$0.98 per share.

Commenting on the encouraging interim results, Mr. Andrew Yao, Chairman of the VSC Group, said, “We are delighted that the Group has successfully recovered from the discouraging results last year with the dedication and commitment of our management team and staff. Our satisfactory results recognize our swift response in implementing the successful strategies amid the arduous market condition. By further expanding the manufacturing of industrial products business and developing the Mainland China market, we have made significant progress in strengthening and broadening our earnings base.”

The Group’s overall gross margin was improved by 6%, combing the merits of better control over inventories and supplies, and the enhancing operational management. The Group has successfully tapped into the exceptionally high growth potential of the Mainland China market, achieving approximately 31.5% increase in turnover as compared to the same period last year. Turnover from the Mainland China market amounted to HK$629 million, representing approximately 50% of the Group’s total turnover while the remaining was from Hong Kong.

In terms of sales mix, the Group’s construction materials businesses comprise distribution of steel and building products to developers and contractors for construction works, and the operation of a newly opened retail shop, Leisure Plus. In light of the unfavourable market conditions in Hong Kong, the construction materials businesses posted a modest growth of 24% and 8% in turnover and operating profit respectively over the same period last year. Various improvements have been made to raise operational efficiency, optimize inventory level and streamline process flows for the rebars, piling, soil nails and couplers businesses.

Recovering from the weak performance last year, turnover generated from the building products department soared 403% to approximately HK$86 million and operating loss reduced to HK$0.7 million compared to the loss of HK$2.8 million last year. This was attributable to the profits contributed by the kitchen cabinet division generated from the three major projects, namely Sorrento, Station, Coastal Skyline, Station and , Sham Tseng. The three projects are expected to be completed in a few months and will continue to contribute profit to the department.

Leisure Plus, the first one-stop lifestyle outlet in Hong Kong offering world-class bath and kitchen products, was opened in April 2002 to further diversify the Group’s business and to create synergy effect on project sales of kitchen cabinet, sanitary ware and tiles. With its prime yet cost-efficient location and customers-oriented marketing programme, the retail shop achieved breakeven in its first sixth months’ operation.

Performance of the Group’s manufacturing and trading of industrial products, continued to show strength. Both turnover and operating profit before unallocated corporate expenses rose 32% and 107% to approximately HK$249.6 million and HK$36.6 million respectively, contributing about 20% and 57% to the Group’s total turnover and profit for the period under review.

Under the industrial products business, the coil center in Dongguan achieved encouraging results by recording 32% and 140% growth in turnover and gross profit respectively. The increase in turnover was fuelled by the growing demands from customers and rise in selling price of steel products as a result of the imposition of punitive tariffs by the US government in the first quarter of 2002. In order to further widen its revenue stream by exploring the market

growth potential, the Group decided to build a new coil center in Tianjin which is expected to commence production by March 2003 with an annual capacity of 80,000 tons of steel. The new coil center will enable the Group to address the high growth potential of the northeastern China market.

The business of VJY enclosure systems was continued to improve by achieving nearly HK$20 million turnover during the period under review. VJY has already secured sufficient business volume to attain a breakeven point by capitalizing the strategic relationships established with its major customers such as Huawei, Zhongxing and Emerson. On the other hand, the plastic and machinery department was still adversely affected by the continued weak US economy. The Group has adopted the relevant measures to broaden its customer base and will continue to explore ways to expand in the domestic market in Mainland China.

Commenting on the future business outlook, Mr. Edward Shih, CEO of the VSC Group said, “The operating environment remains challenging, in particular in the construction materials business. Nevertheless, the burgeoning transport infrastructure and several large-scale projects in Hong Kong, for example, Route 5, Route 7, Route 10, East Rail Extension, West Rail, etc, will offer opportunities for the construction materials business. With HK$660 million orders on-hand, we are cautiously optimistic about the future prospect of the construction steel business in Hong Kong. In addition, the Group will explore new markets to broaden revenue base. The Group plans to set up new retail shops and showrooms to expand its presence in , Shenzhen, Beijing, Shanghai and other major cities in China.”

“For the industrial product business, we believe that China’s exceptionally strong economy provides an exciting platform for the Group to flourish, bringing the Group’s business to the next level of growth and success. For instance, our recent partnership with Shougang Corporation to open a PPGI production plant in Beijing, has enabled the Group to participate in the distribution of finished goods and sourcing of raw materials.”

“As a future driving force of the Group’s business, a chain of well-managed coil centers will be developed throughout strategic locations in Mainland China to maximize business opportunities. The Group will also explore similar steel and metal processing for high-growth industries such as automotive parts, to build up our niche market position. On the other hand, the VJY enclosure systems manufacturing will enrich its product portfolio to cabinet systems catering to the computer and banking industry. All in all, the VSC Group is striving to be the leading total solution provider in China through global supply chain management, offering quality products and value-added services.” Mr. Shih concluded.

For further information, please contact:

Ms. Betty Jane Leon Senior Marketing Manager Van Shung Chong Holdings Limited E-mail : [email protected]