The Board of Directors (the "Board") of Lerado Group (Holding) Company Limited (the "Company") is pleased to announce the unaudited consolidated results of the Company and its subsidiaries (the "Group") for the six months ended 30th June, 1999 together with the comparative figures for the corresponding period in 1998, as follows:
Six months ended
30th June,
1999 1998
HK$'000 HK$'000
Notes (Note 1)
Turnover 618,459 572,982
=========== ===========
Profit from ordinary activities
before taxation 96,094 74,206
Taxation 2 6,090 2,137
----------- -----------
Profit attributable to shareholders 90,004 72,069
=========== ===========
Dividends 3 21,703 37,456
=========== ===========
Earnings per share 4
-- Basic 12.50 cents 13.73 cents
=========== ===========
-- Diluted 12.47 cents n.a.
=========== ===========
Notes:
1. Basis of Presentation
The Company was incorporated on 18th November, 1998 as an exempted company with limited liability in Bermuda under The Companies Act 1981 of Bermuda (as amended) and its shares have been listed on The Stock Exchange of Hong Kong Limited (the "Stock Exchange") with effect from 18th December, 1998.
Pursuant to a group reorganisation (the "Group Reorganisation") to rationalise the structure of the Group for the listing of the Company's shares on the Stock Exchange, on 2nd December, 1998, the Company issued shares in exchange for the entire issued share capital of Lerado Group Limited, the previous holding company of the Group, and thereby became the holding company of the companies now comprising the Group. Further details of the Group Reorganisation were set out in the prospectus of the Company dated 8th December, 1998.
The Group resulting from the above Group Reorganisation is regarded as a continuing entity. Accordingly, the comparative figures have been prepared on the basis as if the Company had always been the holding company of the Group.
2. Taxation
1999 1998
HK$'000 HK$'000
(Note 1)
The charge comprises:
Hong Kong Profits Tax
Current period 1,566 1,000
Overprovision in prior years (note) (56) (3,300)
---------- ----------
1,510 (2,300)
Overseas taxation 4,580 4,476
Deferred taxation -- (39)
---------- ----------
6,090 2,137
========== ==========
Note: The overprovision of Hong Kong Profits Tax for the period ended 30th June, 1998 represented a reverse of tax provision made in previous years in respect of an offshore claim which was then finalised.
Hong Kong Profits Tax is calculated at 16% of the estimated assessable profit for the period.
Overseas taxation is calculated at the rates prevailing in the relevant jurisdictions.
3. Dividends
1999 1998
HK$'000 HK$'000
(Note 1)
Dividends paid by a subsidiary of the Company
to its then shareholders prior to the Group
Reorganisation described in note 1 above -- 37,456
Interim dividend at HK3 cents per ordinary share 21,703 --
---------- ----------
21,703 37,456
========== ==========
4. Earnings per Share
The calculation of the basic and diluted earnings per share is based on the following data:
1999 1998
HK$'000 HK$'000
(Note 1)
Profit attributable to shareholders 90,004 72,069
=========== ===========
Weighted average number of ordinary shares
for the purpose of basic earnings per share 720,000,000 524,740,602
Effect of dilutive potential ordinary shares
in respect of share options 1,718,101 --
----------- -----------
Weighted average number of ordinary shares
for the purpose of diluted earnings per share 721,718,101 524,740,602
=========== ===========
REVIEW OF OPERATIONS
The unaudited consolidated turnover for the six months ended 30th June, 1999 was approximately HK$618.5 million, representing a growth of 7.9% compared with the corresponding period last year. Our growth rate in profit attributable to shareholders was more encouraging, 24.9% over the corresponding period last year, making this period's figure amounting to approximately HK$90.0 million.
The Board declared an interim dividend of HK3 cents per share for the six months ended 30th June, 1999.
During the period under review, our net profit margin increased to 14.6%, compared with 12.6% of the same period last year. The main reason for this increase is our success in controlling costs. We enjoy economies of scale and higher bargaining power in dealing with suppliers by placing bulk orders. Since we are in good financial position, we were able to obtain cash discount from suppliers by early settlement. We also benefited from the drop in the market price of metal tubes, one of our major raw materials.
As in past years, the US remained our largest market, accounting for 74.5% of our total sales. The sales figure of the US juvenile products, released recently by the Juvenile Products Manufacturers Association, showed an increase of 10% for the industry in 1998. Total retail sales for 1998 were US$4.9 billion topping the 1997 high of US$4.4 billion. The industry has grown 470% since 1980. We believe that this growth trend will continue since late baby boomers are approaching their prime spending years and are spending more money on each child. Although today's families usually have fewer children than a generation ago, larger number of women having babies has compensated for the difference.
Another factor contributing to the market growth is the increasing household income with more women entering the workforce. Longer life expectancy also nurtures a group of grandparents who are generous on their grandchildren. In this kind of consumer environment, product quality, safety and reliability are more important than price. To cater for this market, we will continue to introduce innovative and value-added product features to win market share.
Sales to our second largest market, Europe, amounted to approximately HK$105.0 million, accounting for 17.0% of our total sales for the six months ended 30th June, 1999. It represents a 3.8% increase over the same period last year. Our products are price competitive to local European products. Some European strollers sellers, which mainly manufactured their own products in the past, now source from us for high quality but lower cost products.
In terms of new products, we developed battery operated ride-on cars last year on an OEM basis. The production of three models of battery operated ride-on cars carrying in-house design and the Group's own brand are expected to be launched before the end of 1999 for the US market.
In a move to expand our office, we acquired a new office of saleable floor area of 6,000 sq. ft. in Shun Tak Centre for HK$37 million. The acquisition was partly financed by internal resources and partly by bank loan. We expect to move into the new office in October 1999.
As at 30th June, 1999, we have utilized approximately HK$12 million out of the net proceeds raised from the initial public offerings in December 1998 to purchase new equipment for the production of battery operated ride-on cars and to upgrade our existing production facilities. In addition, approximately HK$39 million was used for the repayment of bank loan.
Pursuant to Practice Note 19 to the Rules Governing the Listing of Securities on the Stock Exchange (the "Listing Rules"), we had, as at the date of the report, obtained an aggregate of HK$47.5 million banking facilities (the "Facilities") from a bank, which imposed a requirement on Messrs. Huang Ying Yuan, Tsang Yat Kiang, Chen Hsing Shin, Chen Jo Wan and Huang Chen Li Chu to maintain a controlling shareholding, as defined in the Listing Rules, over the Company. The Facilities comprise a 10-year mortgage installment loan of HK$25.5 million and general banking facilities of up to HK$22 million, which includes negotiation of export bills under letters of credit, discounting of invoices, letter of credit, short-term loan and overdraft in current account and are repayable on demand. In view of the healthy financial position of the Group, with bank and cash balances of approximately HK$225 million as at 30th June, 1999, we believe that any default of the Facilities will not have any significant impact on our operations.
PROSPECTS
Due to our competitive advantages, we see tremendous room for growth in the European markets and we intend to further increase our market share in Europe, especially for the baby stroller and bed markets. For our in-house designed battery operated ride-on cars, we will market the product, mainly to the US under our own brand name. We expect revenue inflow from this product category starting from the fourth quarter of 1999.
Based on our solid foundation in infant products, we will seek opportunities to further expand our product range to cover the market for pre-school children from the age of three to six.
As for markets outside North America and Europe, we are actively developing existing and new customer relationships in emerging markets. In the PRC, we are distributing strollers under our own brand name, "Angel". As we see very bright opportunities in this market, we will further expand our sales force so as to capture future growth.
With the continuous introduction of innovative products, we will explore new markets and consolidate our position in existing markets. We are fully prepared to capture the opportunities ahead to bring satisfactory returns for our shareholders.
YEAR 2000 ISSUE
As we approach the new millennium, the Group's Year 2000 preparations are nearly complete. The Group's compliance program and progress updates regarding Year 2000 compliance efforts have been disclosed previously in the 1998 Annual Report. The Group have already completed the modification and upgrading of certain equipments and software as planned. The rest of the systems are expected to be upgraded and modified to be Year 2000 compliant by the end of September 1999. A total of HK$2.3 million has been authorized for the project and is not expected to be exceeded.
The Directors will continue to monitor the operation of the whole system of the Group to ensure that operations will not be disrupted as a result of the Year 2000 issue. The Directors are confident that Year 2000 issue would not have any material impact on the Group's operations.
INTERIM DIVIDEND
The Board has declared an interim dividend of HK3 cents per share in cash for the six months ended 30th June, 1999 to shareholders whose names appear on the Register of Members of the Company on 29th October, 1999. It is expected that the dividend warrants will be sent to the Shareholders no later than 10th November, 1999.
CLOSURE OF REGISTER OF MEMBERS
The Register of Members of the Company will be closed from 26th to 29th October, 1999, both days inclusive, during which period no transfer of shares will be registered. In order to qualify for the interim dividend, all transfers accompanied by the relevant share certificates must be lodged with the Company's Registrar, Secretaries Limited, 5th Floor, Wing on Centre, 111 Connaught Road Central, Hong Kong, not later than 4:00 p.m. on 25th October, 1999.
DIRECTORS' INTERESTS IN SHARES
At 30th June, 1999, the interests of the Directors and their associates in the share capital of the Company and its associated corporations as recorded in the register maintained by the Company pursuant to Section 29 of the Securities (Disclosure of Interests) Ordinance ("SDI Ordinance") were as follows:
Number of ordinary
shares held as
Personal Family
interest interest
(Note)
Mr. Huang Ying Yuan 101,187,360 42,102,180
Mr. Tsang Yat Kiang 58,815,720 --
Mr. Chen Hsing Shin 94,105,800 --
Madam Huang Chen Li Chu 42,102,180 101,187,360
Mr. Chen Jo Wan 47,052,900 --
Note: The family interest represents the shares held by the spouse of Mr. Huang Ying Yuan and Madam Huang Chen Li Chu, respectively. Madam Huang Chen Li Chu is the wife of Mr. Huang Ying Yuan.
Save as disclosed above and other than certain nominee shares in the subsidiaries held by certain directors in trust for the Company, none of the directors or their associates, had any interests in any securities of the Company or any of its associated corporations as defined in the SDI Ordinance at 30th June, 1999.
SUBSTANTIAL SHAREHOLDERS
At 30th June, 1999 the register of substantial shareholders maintained under Section 16(1) of the SDI Ordinance showed that, other than the interests disclosed above in respect of certain directors, the following shareholders had an interest of 10% or more in the share capital of the Company:
Name of shareholder No. of shares Percentage Investor AB 81,527,040 11.32%
Other than as disclosed above, the Company has not been notified of any other interests representing 10% or more of the Company's issued share capital as at 30th June, 1999.
CODE OF BEST PRACTICE
None of the Directors of the Company is aware of any information that would reasonably indicate that the Company is not, or was not for any part of the six months ended 30th June, 1999, in compliance with the Code of Best Practice as set out in Appendix 14 of the Listing Rules.
PURCHASE, SALE OR REDEMPTION OF SHARES
Neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company's shares during the period.
By Order of the Board
Huang Ying Yuan
Chairman
Hong Kong, 8th September, 1999
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