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TONIC INDUSTRIES HOLDINGS LIMITED
(Incorporated in the Cayman Islands with limited liability)

INTERIM RESULTS 2001
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2001

FINANCIAL HIGHLIGHTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2001

  • Turnover amounted to HK$1,253,066,000
  • Retained profit amounted to HK$18,666,000
  • Basic earnings per share amounted to HK2.9 cents
  • Interim dividend amounted to HK$3,176,000
  • Shareholders equity as at 30 September 2001 amounted to HK$395,914,000

The Board of Directors (the "Directors") of Tonic Industries Holdings Limited (the "Company") is pleased to announce that the unaudited condensed consolidated financial statements of the Company and its subsidiaries (the "Group") for the six months ended 30 September 2001 (the "Period") together with the comparative figures for the previous corresponding period are as follows:

CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT

                                                         For the six months
                                                         ended 30 September
                                                                  (Restated)
                                                        2001           2000
                                                   Unaudited      Unaudited
                                         Notes       HK$'000        HK$'000

Turnover                                   2       1,253,066      1,390,436
Cost of sales                                     (1,176,438)    (1,296,523)
                                                ------------   ------------
Gross profit                                          76,628         93,913
Other revenue                                          3,153          6,477
Selling and distribution costs                       (11,824)       (20,921)
Administrative expenses                              (37,809)       (39,607)
                                                ------------   ------------
Profit from operating activities                      30,148         39,862
Finance costs                                         (9,859)       (11,230)
                                                ------------   ------------
Profit before taxation                     3          20,289         28,632
Taxation                                   4          (1,623)        (1,745)
                                                ------------   ------------
Profit before minority interests                      18,666         26,887
Minority interests                                         -              2
                                                ============   ============
Profit retained for the period                        18,666         26,889
                                                ============   ============
Interim dividend                                       3,176          6,353
                                                ============   ============
Earnings per share                         5
  -  Basic                                         2.9 cents      4.6 cents
                                                ============   ============
  -  Diluted                                             N/A            N/A
                                                ============   ============

CONDENSED CONSOLIDATED BALANCE SHEET

                                                30 September       31 March
                                                        2001           2001
                                                   Unaudited        Audited
                                         Notes       HK$'000        HK$'000

NON-CURRENT ASSETS
  Fixed assets                                       456,598        415,300
  Long term investments                               23,076         22,076
  Deposits for acquisition of fixed 
    assets                                            37,106         28,254
  Other non-current assets                             4,441          4,326
                                                ------------   ------------
                                                     521,221        469,956
                                                ------------   ------------
CURRENT ASSETS
  Cash and bank balances                              90,946         48,382
  Time deposits                                       30,000              -
  Accounts and other receivables            6        280,512         99,745
  Inventories                                        322,290        262,492
                                                ------------   ------------
                                                     723,748        410,619
                                                ------------   ------------
CURRENT LIABILITIES
  Accounts and other payables               7        587,459        316,273
  Borrowings due within one year                     193,875        154,190
  Dividend payable                                     3,175              -
                                                ------------   ------------
                                                     784,509        470,463
                                                ------------   ------------
NET CURRENT LIABILITIES                              (60,761)       (59,844)
                                                ------------   ------------
TOTAL ASSETS LESS CURRENT LIABILITIES                460,460        410,112
NON-CURRENT LIABILITIES
  Long term borrowings                               (53,946)       (21,765)
  Deferred tax                                       (10,600)       (10,600)
                                                ------------   ------------
                                                     (64,546)       (32,365)
                                                ------------   ------------
                                                     395,914        377,747
                                                ============   ============
CAPITAL AND RESERVES
  Share capital                            8          63,526         63,526
  Reserves                                 9         332,388        311,045
  Proposed dividend                                        -          3,176
                                                ------------   ------------
                                                     395,914        377,747
                                                ============   ============

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Significant Accounting Policies

The unaudited condensed consolidated interim financial statements of the Group are prepared in accordance with Statement of Standard Accounting Practice ("SSAP") No. 25 "interim financial reporting" and the Listing Rules of The Stock Exchange of Hong Kong Limited. In prior years, dividends proposed or declared after the balance sheet date in respect of an accounting period were recognised as a liability at the balance sheet date. In order to comply with SSAP 9 (revised) "Events after the balance sheet date", the Group does not recognise a liability for dividends in the accounting period in which they are declared or proposed and approved by shareholders. The new accounting policy has been adopted retrospectively, with the retained profits as at 1 April 2001 adjusted for the amounts relating to final dividend declared for the year ended 31 March 2001.

Except for the above, the accounting policies and basis of preparation are the same as those used in the annual financial statements for the year ended 31 March 2001. Figures for the year ended 31 March 2001 are extracted from the Group's annual financial statements for that year.

2. Segmental Information

The principal activities of the Group are the manufacture of consumer video and audio products. A geographical analysis of the Group's turnover by market is as follows:

                                                            Turnover
                                                       For the six months
                                                       ended 30 September
                                                        2001           2000
                                                   Unaudited      Unaudited
                                                     HK$'000        HK$'000

Asia Pacific countries                               304,273        514,462
Americas                                             502,050        472,748
Europe                                               446,743        403,226
                                                ------------   ------------
Total                                              1,253,066      1,390,436
                                                ============   ============

An analysis of the turnover by principal activities are as follows:

                                                            Turnover
                                                       For the six months
                                                       ended 30 September
                                                        2001           2000
                                                   Unaudited      Unaudited
                                                     HK$'000        HK$'000

Manufacture of audio products                        876,028      1,368,948
Manufacture of video products                        340,678              -
Others                                                36,360         21,488
                                                ------------   ------------
                                                   1,253,066      1,390,436
                                                ============   ============

An analysis of the profit from operating activities by principal activities are as follows:

                                                     Profit from operating
                                                            activities
                                                        For the six months
                                                        ended 30 September
                                                        2001           2000
                                                   Unaudited      Unaudited
                                                     HK$'000        HK$'000

Manufacture of audio products                         21,749         38,326
Manufacture of video products                          6,135              -
Others                                                 2,264          1,536
                                                ------------   ------------
                                                      30,148         39,862
                                                ============   ============

Contribution to profit from operating activities by geographical region is not presented as the contribution from each region is substantially in line with the overall ratio of profit from operating activities to turnover of the Group.

3. Profit before Taxation

                                                        For the six months
                                                        ended 30 September
                                                        2001           2000
                                                   Unaudited      Unaudited
                                                     HK$'000        HK$'000

Profit before taxation is arrived at after 
  charging/(crediting)
Depreciation                                          28,876         25,456
Interest on borrowings                                 9,859         11,230
                                                ============   ============
Interest income                                         (889)        (4,047)
                                                ============   ============

4. Taxation

Hong Kong profits tax has been provided at the applicable rate of 16% (2000: 16%) on the estimated assessable profits arising in Hong Kong during the Period. Taxes on profits assessable in the People's Republic of China ("PRC") have been provided at the rates of taxation prevailing in the PRC based on existing legislations, interpretations and practices in respect thereof.

5. Earnings per share

The calculation of basic earnings per share for the Period is based on the net profit attributable to shareholders of HK$18,666,000 (2000: HK$26,889,000) and the weighted average of 635,259,975 shares (2000: 589,598,398 shares) in issue during the Period.

There is no diluted earnings per share for the Period since the Company has no dilutive potential ordinary share.

6. Accounts and Other Receivables

Included in accounts and other receivables are accounts receivable of HK$265,378,000 (31 March 2001: HK$89,486,000), the aging analysis of which is as follows:

	                                        30 September       31 March 
                                                        2001           2001
                                                   Unaudited        Audited
                                                     HK$'000        HK$'000

0-30 days                                            168,990         67,978
31-60 days                                            82,299          7,266
Over 60 days                                          14,089         14,242
                                                ------------   ------------
                                                     265,378         89,486
                                                ============   ============

The majority of the Group's sales are on terms of L/C at sight and the others on open account basis.

7. Accounts and Other Payables

Included in accounts and other payables are accounts payable of HK$546,891,000 (31 March 2001: HK$284,967,000), the aging analysis of which is as follows:

	                                        30 September       31 March 
                                                        2001           2001
                                                   Unaudited        Audited
                                                     HK$'000        HK$'000

0-30 days                                            155,987        129,993
31-60 days                                           191,704         78,723
61-90 days                                           140,727         32,243
Over 90 days                                          58,473         44,008
                                                ------------   ------------
                                                     546,891        284,967
                                                ============   ============

8. Share Capital

                                                30 September       31 March 
                                                        2001           2001
                                                   Unaudited        Audited
                                                     HK$'000        HK$'000
Authorised:
  1,200,000,000 ordinary shares of HK$0.10 each      120,000        120,000
                                                  ==========     ==========
Issued and fully paid:
  635,259,975 (31 March 2001: 635,259,975) 
  ordinary shares of HK$0.10 each                     63,526         63,526
                                                  ==========     ==========

9. Reserves

                                                       Exchange        Asset
                                Share  Contributed  fluctuation  revaluation  Retained
                              premium      surplus      reserve      reserve   profits    Total
                              HK$'000      HK$'000      HK$'000      HK$'000   HK$'000  HK$'000

Balance at 1 April 2001        28,735          280       (9,318)     109,103   182,245  311,045
Exchange difference on
  translation of 
  overseas subsidiaries' 
  financial statements              -            -        2,677            -         -    2,677
Net profit for the period           -            -            -            -    18,666   18,666
                             --------     --------     --------     --------  -------- --------
Balance at 30 September 2001   28,735          280       (6,641)     109,103   200,911  332,388
                             ========     ========     ========     ========  ======== ========

10. Contingencies and Commitments

(a) Contingent liabilities in respect of bills discounted with recourse at 30 September 2001 was HK$41,535,000 (31 March 2001: HK$13,999,000).

(b) Capital commitments in respect of fixed assets

	                                        30 September       31 March 
                                                        2001           2001
                                                   Unaudited        Audited
                                                     HK$'000        HK$'000
Contracted for but not provided in the 
  financial statements                                15,500         31,936
Authorised but not contracted for                          -              -
                                                ------------   ------------
                                                      15,500         31,936
                                                  ==========     ==========

(c) Commitments to buy and sell foreign currencies amounted to HK$46,800,000 and HK$124,800,000 respectively (31 March 2001: HK$140,052,000 and Nil respectively).

11. Related Party Transactions

During the Period, the Group had the following related party transactions:

(a) The Group sold audio products and related components amounting to HK$887,858 (six months ended 30 September 2000: HK$806) to Pioneer Ventures Limited ("PVL"), a wholly-owned subsidiary of EganaGoldpfeil (Holdings) Limited which is a substantial shareholder of the Company.

The sales to PVL were made according to the published prices and conditions offered to the major customers of the Group.

(b) The Group paid HK$15,000 (six months period ended 30 September 2000: HK$25,500) to International Taxation Advisory Services Limited, of which Wong Wai Kwong, David, a non-executive director of the Company, is a director, for corporate advisory services rendered. The directors consider that the above corporate advisory services charges were paid according to the published prices and conditions similar to those offered by other external consultants of the Group.

12. Comparative figures

Certain comparative figures have been reclassified to conform with the current period's presentation.

INTERIM DIVIDEND

The Directors have resolved to declare an interim dividend of HK0.5 cent per share payable to shareholders whose names appear on the Company's Register of Members at the close of business on 9 January 2002. Dividend warrants will be sent to shareholders on or before 17 January 2002.

CLOSURE OF REGISTER OF MEMBERS

The Register of Members of the Company will be closed from Monday, 7 January 2002 to Wednesday, 9 January 2002, both days inclusive, during which period no transfer of shares will be registered. In order to qualify for the interim dividend, all transfer documents, accompanied by the relevant share certificates must be lodged with the Company's Branch Registrar in Hong Kong - Tengis Limited, 4th Floor Hutchison House, 10 Harcourt Road, Central, Hong Kong not later than 4:00 p.m. on Friday, 4 January 2002.

BUSINESS REVIEW AND OUTLOOK

The Group's profit attributable to shareholders for the Period was HK$18,666,000, representing a 31% decrease from the previous corresponding period. Turnover for the Period decreased approximately 10% to HK$1,253 million.

The market remained competitive and the world economy sluggish during the Period. Decreases in worldwide demand led to a decrease in product selling prices as well as raw material costs. However, the Group's broad customer base helped to maintain overall turnover. Sales to the United States accounted for approximately 40%, sales to Europe accounted for approximately 35% and Asia accounted for 25% of total turnover. Profit margin of regular items was further driven down by the low demand. Whereas new and higher end products can still enjoy a higher margin by making use of the lower raw materials cost. The Group's new products such as MP3 players, DVD players, CD-RW, internet set top box and satellite receivers were all launched during the Period. It is expected that the increase in sales of these products in future will greatly improve the Group's financial performance.

While the Electronic Division is suffering a tough time, the Group is pleased to see the continuous growth of the business in the Home Appliance Division. Turnover for the division increased to approximately HK$40 million during the Period and is expected to further increase in the years ahead. Products have been diversified to include air purifiers, steam stations, electric ovens as well as various new models of coffee making machine.

As a leading consumer electronics manufacturer, the Group continues to invest in the research and development of new and constantly improving products. During the Period the Group opened two new R&D centres, one in Japan and the other in Shenzhen. These two centres support and compliment our existing R&D departments in Hong Kong and the Dongguan factory. Experienced Japanese and Chinese engineers have been recruited for these facilities. The Japan office mainly deals with new product development while the Shenzhen office mainly provides software support solutions.

The new factory block 9 and dormitory saw their final stages of construction being completed during the Period. Total production area now exceeds 1,500,000 square feet, an increase of almost 50% as compared to the year 1999. Production capabilities have also been greatly enhanced as a result of the purchase of additional sets of SMT (Surface Mounted Technology) machines and automated insertion machines. The Group now operates 18 fully automated production lines, as compared to 6 in the year 1999. These production lines not only increase production efficiencies and improve product quality, they will also ensure the manufacture and production of the next generation of digital products.

Four of six heavy oil electric generators have been installed and are now fully operational. The remaining two generators will be installed early next year. With the much cheaper fuel oil available, electricity costs have been reduced by nearly HK$1 million a month. The investment is expected to return within the next three to four years.

As at 30 September 2001, the Group had bank balances and deposits totaling HK$120 million. Lower balances were maintained as compared to last corresponding period as most of the budgeted capital expenditure has been paid for and we do not expect any significant capital expenditure next year. Unutilised short term and long term bank facilities amounted to HK$250 million.

As at 30 September 2001, the Group had 125 staff stationed in Hong Kong and 9,500 staff and workers working in the PRC factories. Total salary and wages amounted to approximately HK$63 million for the Period. The Group provides year end double pay, discretionary bonuses, a provident fund scheme, medical insurance and training. Gearing ratio was 0.63 (31 March 2001: 0.47) calculated using all outstanding loans divided by the capital and reserve.

During the last two years, the Group has seen a consolidation period, taking the opportunity to expand production capacities, improve production capabilities to cope with the needs of the future, carry out thorough review of production efficiencies and enhance product research and development. Although there is no indication of when the recession will be over, the Group is confident that it will benefit from the many opportunities to flourish once the recession is over.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES

During the Period, neither the Company, nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed securities.

AUDIT COMMITTEE

The Audit Committee has reviewed with management the accounting principles and practices adopted by the Group and discussed auditing, internal control and financial reporting matters including the review of the unaudited interim financial statements.

CODE OF BEST PRACTICE

None of the Directors of the Company is aware of any information that would reasonably indicate that the Company had not been for any part of the accounting period covered by the interim report in compliance with the Code of Best Practice as set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

APPRECIATION

On behalf of the Board, I would like to extend my sincere gratitude to our shareholders, customers, suppliers and bankers for their continued support. I would also like to thank my fellow directors and our staff for their dedication and contribution to the Group.



On behalf of the Board
Simon Ling Siu Man
Chairman and Managing Director

Hong Kong, 12 December 2001


Source: Tonic Industries Holdings Limited
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