Listed Company Information V.S. INT'L<01002> - Results Announcement V.S. International Group Limited announced on 18/03/2006: (stock code: 01002 ) Year end date: 31/07/2006 Currency: HKD Auditors' Report: N/A Interim report reviewed by: Both Audit Committee and Auditors Note Turnover : Profit/(Loss) from Operations : Finance cost : Share of Profit/(Loss) of Associates : Share of Profit/(Loss) of Jointly Controlled Entities : Profit/(Loss) after Tax & MI : % Change over Last Period : EPS/(LPS)-Basic (in dollars) : -Diluted (in dollars) : Extraordinary (ETD) Gain/(Loss) : Profit/(Loss) after ETD Items : Interim Dividend : per Share (Specify if with other : options) B/C Dates for Interim Dividend Payable Date B/C Dates for (-) General Meeting Other Distribution for Current Period B/C Dates for Other (Unaudited ) Current Period from 01/08/2005 to 31/01/2006 ('000 ) 715,532 63,313 (24,475) (Unaudited ) Last Corresponding Period from 01/08/2004 to 31/01/2005 ('000 ) 619,721 40,219 (24,554) (2,973) (403) N/A 35,464 +178 0.0426 0.0420 N/A 35,464 NIL N/A 12,741 N/A : N/A : N/A : N/A : N/A % 0.0146 N/A N/A 12,741 NIL N/A Distribution : N/A Remarks: Note 1 : Basis of preparation This interim financial report has been prepared in accordance with the applicable disclosure provisions of the Rules Governing the Listing of Securities ("Listing Rules") on The Stock Exchange of Hong Kong Limited ("Stock Exchange"), including compliance with Hong Kong Accounting Standard ("HKAS") 34 "Interim financing reporting" issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA"). This interim financial report has been prepared in accordance with the same accounting policies adopted in the annual financial statements for the year ended 31 July 2005, except for accounting policy changes that are expected to be reflected in the annual financial statements for the year ending 31 July 2006. Details of these changes in accounting policies are set out in note 2. The preparation of an interim financial report in conformity with requires management to make judgements, estimates and assumptions affect the application of policies and reported amounts of assets liabilities, income and expenses on a year to date basis. Actual may differ from these estimates. HKAS 34 that and results This interim financial report is unaudited, but has been reviewed by KPMG in accordance with Statement of Auditing Standards 700, "Engagements to review interim financial reports", issued by the HKICPA. The financial information relating to the financial year ended 31 July 2005 that is included in the interim financial report as being previously reported information does not constitute the Company's statutory financial statements for that financial year but is derived from those financial statements. Statutory financial statements for the year ended 31 July 2005 are available from the Company's registered office. The auditors have expressed an unqualified opinion on those financial statements in their report dated 23 September 2005. Note 2 : Changes in accounting policies The HKICPA has issued a number of new and revised Hong Kong Financial Reporting Standards ("HKFRS", which terms collectively includes HKASs and Interpretations) that are effective or available for early adoption for accounting periods beginning on or after 1 August 2005. The Board has determined the accounting policies to be adopted in the preparation of the Group's annual financial statements for the year ending 31 July 2006, on the basis of HKFRSs currently in issue. The following sets out further information on the changes in accounting policies for the annual accounting period beginning on 1 August 2005 which have been reflected in this interim financial report. (a) Summary of the effect of changes in the accounting policies (i) Effect on opening balance of total equity at 1 August 2005 (as adjusted) The following table sets out the adjustments that have been made to the opening balances at 1 August 2005. These are the aggregate effect of retrospective adjustments to the net assets as at 31 July 2005. Effect of new policy (increase/(decrease)) Retained Capital and Minority Note profits other reserves Total interests Total equity Prior period adjustments: HKFRS 2 Equity settled share-based transactions 2(d) (689) 689 - - - HKAS 17 Leasehold land and buildings held for own use 2(b) (1,082) (110,179) (111,261) (111,261) ------------------------------------------------------------------Total effect at 1 August 2005 (1,771) (109,490) (111,261) (111,261) =================================================================== (ii) Effect on profit after taxation for the six months ended 31 January 2006 (estimated) and 31 January 2005 (as adjusted) In respect of the six month - period ended 31 January 2006, the following table provides estimates of the extent to which the profits for that period are higher or lower than they would have been had the previous policies still been applied in the interim period, where it is practicable to make such estimates. In respect of the six month - period ended 31 January 2005, the table discloses the adjustments that have been made to the profits as previously reported for that period, in accordance with the transitional provisions of the respective HKFRSs. Effect of new policy (increase/ (decrease)) Note For the six months ended 31 January 2006 Equity holders Minority of the Company interests Total For the six months ended 31 January 2005 Equity holders Minority of the Company interests Total HKFRS 2 Equity settled share-based transactions 2(d) (1,114) - (1,114) - - - HKFRS 3 Amortisation of goodwill 2(e) 137 - 137 - - - HKAS 17 Leasehold land and buildings held for own use 2(b) 966 966 ------------------------------------------------------------------------Total effect for the period (977) (977) 966 966 ========================================================================== Effect on earnings per share: - basic (cents) (0.12) 0.12 - diluted (cents) (0.12) 0.12 Effect on amounts recognised as capital transactions with owners for the six months ended 31 January 2006 (estimated) and 31 January 2005 (as adjusted) In respect of the six month - period ended 31 January 2006, the following table provides estimates of the extent to which the amounts recorded as capital transactions with owners are higher or lower than they would have been had the previous policies still been applied in the interim period, where it is practicable to make such estimates. In respect of the six month - period ended 31 January 2005, the table discloses the adjustments that have been made to the amounts recorded as capital transactions with owners as previously reported for that period, in accordance with the transitional provisions of the respective HKFRSs. Effect of new policy (increase/ (decrease)) For the six months ended For the six months ended 31 January 2006 31 January 2005 Equity holders Minority Equity holders Minority Note of the Company interests Total of the Company interests Total HKFRS 2 Equity settled share-based transactions 2(d) 2,364 2,364 -------------------------------------------------------------------------Total effect for the period 2,364 2,364 ========================================================================== (b) Leasehold land and buildings held for own use (HKAS 17, Leases) In prior years, leasehold land and buildings held for own use were stated at revalued amounts less accumulated depreciation and accumulated impairment losses. Revaluation surpluses or deficits were normally taken to the land and buildings revaluation reserve. With the adoption of HKAS 17 with effect from 1 August 2005, the leasehold interest in land held for own use is accounted for as being held under an operating lease where the fair value of the interest in any buildings situated on the leasehold land could be separately identified from the fair value of the leasehold interest in the land at the time the lease was first entered into by the Group, or taken over from the previous lessee, or at the date of construction of those buildings, if later. Such leasehold land will no longer be revalued. Instead, any pre-paid land premiums for acquiring the land leases, or other lease payments, are amortised on a straight line basis over the lease term. If the property is in the course of development or re-development, or the property is otherwise being used in the production of inventory, the amortisation charge is included as part of the costs of the property under development or other inventory. In all other cases the amortisation charge for the period is recognised in the income statement immediately. Any buildings held for own use which are situated on such land leases continue to be presented as part of property, plant and equipment. However, with effect from 1 August 2005 the buildings are also stated at cost less accumulated depreciation, rather than at fair value, to be consistent with the new policy required to be adopted for the land element. (b) Leasehold land and buildings held for own use (HKAS 17, Leases) The new accounting policies have been adopted retrospectively, with the opening balances of retained profits and the land and buildings revaluation reserve and the comparative information adjusted for the amounts relating to prior periods as disclosed in note 2(a) and the consolidated statement of changes in equity. In respect of the six months ended 31 January 2006 it is not practicable to estimate the extent to which the profits for that period, or the income or expenses taken directly to equity, are higher or lower than they would have been had the previous policy still been applied in the interim period. (c) Financial instruments (HKAS 39, Recognition and measurement of financial instruments) In prior years, bills receivable were derecognised in the financial statements upon settlement or when discounted with financial institutions. Upon the adoption of HKAS 39 with effect from 1 August 2005, discounted bills receivable should not be derecognised where the Group retains substantially all risks and rewards relating thereto and the corresponding proceeds should be recognised as a liability. The new accounting policy has been applied prospectively in accordance with the transitional arrangement under HKAS 39. As a result, comparative amounts have not been restated. (d) Employee share option scheme (HKFRS 2, Share-based payment) In prior years, no amounts were recognised when employees (which term includes directors) were granted share options to subscribe for shares in the Company. If the employees chose to exercise the options, the nominal amount of share capital and share premium were credited only to the extent of the option's exercise price receivable. With effect from 1 August 2005, in order to comply with HKFRS 2, the Group recognises the fair value of such share options as an expense in the income statement or as an asset, if the cost qualifies for recognition as an asset under the Group's accounting policies. A corresponding increase is recognised in a capital reserve within equity. Where the employees are required to meet vesting conditions before they become entitled to the options, the Group recognises the fair value of the options granted over the vesting period. Otherwise, the Group recognises the fair value in the period in which the options are granted. If an employee chooses to exercise options, the related capital reserve is transferred to share capital and share premium, together with the exercise price. If the options lapse unexercised, the related capital reserve is transferred directly to retained earnings. The new accounting policy has been applied retrospectively with comparatives restated in accordance with HKFRS 2. (e) Amortisation of positive goodwill (HKFRS 3, Business combinations) In prior periods, positive goodwill which was amortised on a straight line basis over its useful life and was subject to impairment testing when there were indications of impairment. With effect from 1 August 2005, in accordance with HKFRS 3 and HKAS 36 " Impairment of assets" the Group no longer amortises positive goodwill. Such goodwill is tested annually for impairment, including in the year of its initial recognition, as well as when there are indications of impairment. Impairment losses are recognised when the carrying amount of the cash generating unit to which the goodwill has been allocated exceeds its recoverable amount. The new policy in respect of positive goodwill has been applied prospectively in accordance with the transitional arrangement under HKFRS 3. As a result, comparative amounts have not been restated. (f) Minority interests (HKAS 1, Presentation of financial statements and HKAS 27, Consolidated and separate financial statements) In prior years, minority interests at the balance sheet date were presented in the consolidated balance sheet separately from liabilities and as a deduction from net assets. Minority interests in the results of the Group for the period were also separately presented in the income statement as a deduction before arriving at the profit attributable to shareholders. With effect from 1 August 2005, in order to comply with HKAS 1 and HKAS 27, minority interests at the balance sheet are presented in the consolidated balance sheet within equity, separately from the equity attributable to the equity holders of the Company, and minority interests in the results of the Group for the period are presented on the face of the consolidated income statement as an allocation of the total profit or loss for the period between the minority interests and the equity holders of the parent. The presentation of minority interests in the consolidated balance sheet for the comparative period has been restated accordingly. Note 3 : Segment reporting Segment information is presented in respect of the Group's business and geographical segments. Business segment information is chosen as the primary reporting format because this is more relevant to the Group in making operating and financial decisions. (i) Business segments The Group comprises the following main business segments: Plastic injection moulding : manufacture and sales of plastic moulded products and parts Assembling of electronic products: assembling and sales of electronic products, including processing fees generated from assembling of electronics products Mould design and fabrication : manufacture and sales of plastic injection moulds Turnover from external customers Plastic injection moulding For the six months ended 31 January 2006 2005 (restated) $'000 $'000 Assembling of electronic products For the six months ended 31 January 2006 2005 (restated) $'000 $'000 568,897 489,713 ======= ======= 97,819 89,081 ======= ======= Segment results 79,872 Depreciation and amortisation for the period 23,942 Turnover from external customers Segment results Unallocated operating income and expenses Profit from operations Finance costs Share of losses of associates Income tax 59,417 7,825 7,416 23,981 8,843 7,365 Mould design and fabrication For the six months ended 31 January 2006 2005 (restated) $'000 $'000 Consolidated For the six months ended 31 January 2006 2005 (restated) $'000 $'000 48,816 40,927 ======= ======= 715,532 619,721 ======= ======= 10,478 98,175 77,355 10,522 (34,862)(37,136) ---------------63,313 40,219 (24,475)(24,554) (2,973) (403) (401) (2,521) ---------------- Profit after taxation Depreciation and amortisation for the period 3,995 Unallocated Depreciation and amortisation 35,464 12,741 ======= ======= 2,867 36,780 34,213 3,651 5,080 --------------40,431 39,293 ======= ======= Note 4 : Profit before taxation Profit before taxation is arrived at after charging/(crediting): For the six months ended 31 January 2006 2005 $'000 $'000 (a) Finance costs: Interest on bank advances repayable within five years Interest on bank advances repayable over five years Interest on loan from a substantial shareholder Finance charges on obligations under finance leases Total borrowing costs Less: Borrowing costs capitalised as construction in progress * 22,879 16,075 415 857 978 791 1,067 --------------24,527 18,535 (679) (523) --------------23,848 18,012 Exchange (gains)/losses (575) 5,299 Other charges 1,202 1,243 --------------24,475 24,554 =============== * The borrowing costs have been capitalised at an average cost of borrowings to the Group of 5.70% (2005: 4.95%) per annum for construction in progress. For the six months ended 31 January 2006 2005 (restated) $'000 $'000 (b) Other items: Processing fees Amortisation of interest in leasehold land held for own use under an operating lease Depreciation - owned assets - assets held under finance leases Operating lease charges in respect of properties Amortisation of goodwill Impairment losses for doubtful debts (reversed)/charged Provision for slow moving inventories Loss on disposal of fixed assets Interest Income Rental Income 8,546 7,930 211 211 37,891 36,467 2,329 2,615 4,324 6,187 137 (214) 1,080 1,675 1,700 4,585 9,536 (2,922) (1,213) (1,353) (728) =============== Note 4 : Earnings per share (a) Basic earnings per share The calculation of basic earnings per share is based on the profit attributable to shareholders of $35,041,000 (2005 (restated): $11,933,000) and the weighted average number of 822,323,000 (2005: 820,000,000) shares in issue during the six months ended 31 January 2006. (b) Diluted earnings per share The calculation of diluted earnings per share is based on the profit attributable to equity holders of the parent of $35,041,000 and the weighted average number of ordinary shares of 833,459,000 after adjusting for the effects of all dilutive potential ordinary shares under the Company's share option scheme. There were no potential dilutive ordinary shares in existence during the six months ended 31 January 2005.