Highlights:

• Turnover was HK$382.4 million, a decrease of 1.4% compared to FY2003/04.
• Profit attributable to shareholders was HK$25.8 million, a decrease of 18.3% compared to FY2003/04
• Turnover & net profits in the 2 nd half of FY2004/05 showed improvements over the 1 st half of the year:
  • Turnover: up 4%
  • Net Profits: up15.6%
• Earnings per share was 7.8HK cents.
• Final dividend of 4.0 HK cents per share, total dividend for the year will amount to 6.0 HK cents per share, representing a 77% payout of earnings for the year.

Synergis Holdings Limited (“Synergis” / the “Group”) (stock code: 2340), a leading provider of comprehensive property and facility management services in Hong Kong, today announced its annual results for the year ended 31 March 2005 (“FY2004/ 05” ).

The past year has been challenging due primarily to unprecedented aggressive market competition and a shifting outsourcing model by one of Synergis' largest customers, the Hong Kong Housing Authority (‘HKHA”). During the review period, turnover slightly decreased by 1.4% over the same period in 2004 to HK$382.4 million. Operating profits decreased by 20.5 % to HK$30.8 million. Profit attributable to shareholders was HK$25.8 million, a decrease of 18.3% over the corresponding period of 2004. Earnings per share was 7.8 HK cents. However it is noteworthy to mention that both turnover and net profits in the second half of FY2004/05 showed recovery and improvement – up 4% and 15.6% respectively, over the first half of the year. The Board of Directors has recommended a final dividend of 4.0 HK cents per share. Together with the interim dividend of 2.0 HK cents per share , total dividends for the reported period will amount to 6.0 HK cents, representing a 77% payout of earnings for the year.

Professor Woo Chia-Wei, Non-executive Chairman of Synergis , said, “ Despite the difficult conditions, the Group's turnover only experienced a slight drop and the decrease is largely due to the fact that two significant HKHA contracts were not available for re-tendering on contract expiry. However, Synergis was able to counterbalance the loss of revenue almost entirely with growth in other areas and by diversifying its customer base. More importantly, the Group was able to maintain a 99% contract renewal rate and continuously expand its management portfolio ”.

“This should be considered a reasonably acceptable result in the circumstances because of our ability to maintain a satisfactory gross profit margin of 20.7% in FY2004/05 compared with 22.0% in FY2003/04 despite the change in HKHA's outsourcing model and the excessively aggressive pricing and operational strategies employed by the smaller service providers.” Professor Woo added.

Commenting on the business operations, Mr C.H.Fan, Managing Director of Synergis , said, “Synergis has progressively expanded its business in both Hong Kong and the Mainland for FY2004/05. Currently, a total portfolio of 230 sites and over 2.42 million sq. m. of non-residential facilities are under our management. The increase, not only in the size but also in diversity.”

The growth in the public residential sector slowed down compared to the previous year as we faced severe competition from small-scale management companies that have taken a highly aggressive pricing approach in bidding the PSC tenders. Meanwhile, Synergis has and continues to streamline our cost structure and improve competitiveness in this dynamic market environment.

“Despite such fierce competition in the public sector, the Group successfully secured three contracts with the Hong Kong Government – the HKHA Headquarters (Blocks 3 and 4), the Hong Kong Heritage Museum and the Hong Kong Heritage Discovery Centre of the Antiquities and Monuments Office. As further evidence of Synergis' leadership position in the facility management business, which we believe has yet to mature, the Group won contracts from the Hong Kong Jockey Club and the Society of the Prevention of Cruelty to Animals. We also successfully extended our service to facility maintenance by securing a facility maintenance contract from Tao Heung Holding Limited. ( 稻香集團有限公司 ), a large Chinese restaurant group with over 30 business outlets in Hong Kong . All these contracts result in a more diversified portfolio mix for Synergis, enhancing our capability to develop facility management business in different industries.” Mr Fan added.

While our business in the Zhongguancun ( 中關村 ) area of Beijing showed stable growth, we believe that the Group must penetrate Beijing's Central Business District. In February 2005, Synergis formed a new joint venture with Beijing Financial Street Property Management Co., Ltd. ( 北京金融街物業管理有限責任公司 ). The new joint venture, Beijing Financial Street Synergis Property Management Company Limited ( 北京金融街新昌物業管理有限公司 ) will provide professional and quality property and facility management services to Xihuan Plaza in Xicheng District ( 西城區 ) of Beijing . Upon its completion in late 2005, Xihuan Plaza will house a mega shopping mall and modern office buildings with over 180,000 square metres. Financial Street Synergis will manage this new Beijing landmark, which will also serve as a comprehensive transportation hub of railway, underground subway, light rail and public transport.

In Shanghai , Synergis Shui On Property Management ( Shanghai ) Co., Ltd. (“Synergis Shui On ” ) successfully took over the management of four projects from Shui On Land (“Shui On”). With the intake of Rui Hong Xin Cheng ( 瑞虹新城 ) Phase 2 in mid 2005 and the expected completion of the first phase of Chuangzhi Tiandi ( 創智天地 ) in late 2005, our management portfolio size in Shanghai alone will increase to 974,000 sq. m. from 446,000 in FY2004. Chuangzhi Tiandi will be a multi-function community concentrating on education, technology, culture, research and business incubation with a total area of over 1 million sq. m.

Looking ahead, while the re-launch of Real Estate Investment Trust (“REIT”) by The Link Management Limited (“The Link”) may take some time, The Link has been progressively assuming control over the management of the HKHA's portfolio of shopping centres and car parks. The Link will focus on deploying innovative information technology and cost-effective management systems to manage its assets. Besides the Link, property developers in the Mainland have indicated a growing interest in raising capital through REIT activity, particularly given the current austerity program. They will need to identify an experienced and professional management company like Synergis to assist them in improving and sustaining the quality and value of their portfolio of properties. Synergis believes that it is well positioned to capture these markets, particularly given our well-established technology infrastructure and good track record.

“Establishing a strong foundation and business in the Mainland continues to be another area of focus. The Group is confident that the increasing level of market sophistication will help differentiate it from other competitors because of our strong financial position and solid foundation. The Group will continue with our efforts to contain costs in order to sustain a reasonable level of profitability in the highly competitive market.” Mr. Fan concluded.