USI Holdings had an awful year of losses in 1994 but it is due to turn around with new management, a streamlined garments operation, and plans to expand in property investment with strategic business partners. The company announced a $148.4 million loss in 1994 against a profit of $26.6 million in 1993 after a $145 million restructuring programme of closures, streamlining and write downs on businesses linked to European garment and trading businesses. In 1952 the group was incorporated under Dah Yuan Real Estate and it listed in 1973 under Rainbow Orient Corp in securities, futures and options. In 1988, Polly Peck International took a 97.7 per cent stake and the company went into manufacturing, retailing and trading under the Polly Peck Far East banner. A year later the present owners bought 74 per cent of the company in a consortium under Brave Dragon with Singaporean Wing Tai Holdings, Sun Hung Kai Properties and Wing Tai Exporters. The company forged ahead, expanding its garment brand and trading business with earnings per share being four cents, 13 cents, 12.4 cents, 8.5 cents and 4.3 cents, for each of the years, respectively from 1989 to 1993. USI's board contains the Kwok brothers, Simon Murray, formerly managing director of Hutchison Whampoa and now with Deutsche Bank, along with ex-Wharf (Holdings) finance director Edward Cheng Wai-sun and Frederick Ng from Wing Tai. On the arrival of Mr Cheng last year the company reviewed its operations and decided to take all the bad news in one go through the profit-loss account announced in the week. Mr Cheng believes the bleeding has stopped. If an investor buys the stock now, he or she is buying Mr Cheng and his team's ability to rebuild the company. The group's brand names are linked to Lee Cooper, Knickerbox, Gieves and Hawkes and garment maker Unimix. In 1993, the company got 55.6 per cent of turnover and 45.6 per cent of profit from manufacturing, with 37 per cent of turnover from trading but only 0.9 per cent of this item represented in profit. Property investment made up 32.1 per cent of profit, but two per cent of turnover and income from investing activities made 24.7 per cent of profit but 1.8 per cent of turnover. Branded products distribution made a loss. Geographically losses were made in the Netherlands, representing 12.5 per cent of turnover. Britain made up 21 per cent of turnover as did other European countries. North America made up 36.6 per cent of turnover. The main profits came from North America, 26.7 per cent, Hong Kong 40.2 per cent and other areas, 25.3 per cent. Under the reorganisation the loss-making bits of the group were lopped off or cut back and the group wants to expand into better margin business in property while taking on less risk in trading by undertaking back-to-back order buyer business. What USI appears to be saying in its statement is the garment business will continue to provide a steady income flow while better margin profits will come from an expanded property investment division and new business areas will be looked at. Some investors might be a bit nervous USI has gone in with Lai Sun Development into Mandarin Communications to bid for one of the six personal communication services to be licensed in Hong Kong. The other shareholders in the firm are CTS Communication and Distacom Hong Kong, run by Rick Siemens. Neither USI or Lai Sun have director experience of the business, which can be capital intensive and extremely competitive with low margins. Through Wharf, Edward Cheng will have experience of the telecommunications business. If you believe telecoms is part of the future and you want your company somewhere near the action then you have to start somewhere, hence USI's stake in Mandarin. The lack of capital will handicap the group's ambitions so investors need to be wary of capital raisings down the line. Edward Cheng is going to be an interesting director to watch. His strong connections around town, his experience at Wharf and strong shareholder backing will mean there is definitely potential for something interesting, and profitable, to come out of his move to USI.