INTERIM RESULTS
The directors (the "Directors") of Lung Kee (Bermuda) Holdings Limited (the "Company") are pleased to announce the unaudited consolidated results of the Company and its subsidiaries (the "Group") for the six months ended 30th September, 2000 with comparative figures in 1999. The results have been reviewed by the Company's audit committee.
Condensed Consolidated Income Statement
For the six months ended 30th September, 2000
Six months ended
30th September,
2000 1999
(unaudited) (unaudited)
NOTES HK$'000 HK$'000
Turnover 505,927 404,136
Other revenue 6,650 2,370
Changes in inventories of finished
goods and work in progress 8,344 (795)
Raw materials and consumables used (240,028) (199,066)
Staff costs (77,412) (58,760)
Depreciation and amortisation (34,696) (32,923)
Other operating expenses (60,163) (38,259)
------------ ------------
Profit from operations 108,622 76,703
Finance costs (6,580) (1,820)
Interest income 7,584 1,830
Loss on deemed disposal of a
subsidiary (1,903) -
Share of result of a jointly
controlled entity - 168
------------ ------------
Profit before tax 107,723 76,881
Taxation 3 (18,805) (13,046)
------------ ------------
Profit after tax 88,918 63,835
Minority interests (17,611) (13,150)
------------ ------------
Net profit for the period 71,307 50,685
Dividends 4 (28,899) (23,065)
------------ ------------
Profit retained for the period 42,408 27,620
============ ============
Earnings per share 5
- Basic 14.83 cents 10.68 cents
============ ============
- Diluted 14.71 cents 10.48 cents
============ ============
Condensed Consolidated Balance Sheet
At 30th September, 2000
30th
September, 31st March,
2000 2000
(unaudited) (audited)
NOTES HK$'000 HK$'000
ASSETS
Non-current assets
Investment Property 3,800 3,800
Property, plant and equipment 392,849 390,139
Investment in securities 29,539 50
------------ ------------
426,188 393,989
------------ ------------
Current assets
Inventories 301,702 274,679
Debtors, deposits and other
receivables 6 233,653 223,212
Bank balances and cash 332,906 243,101
------------ ------------
868,261 740,992
------------ ------------
Current liabilities
Creditors and other payables 7 159,348 140,725
Taxation payable 42,524 26,787
Borrowings
- due within one year 263,085 176,312
Dividends payable 28,902 38,492
------------ ------------
493,859 382,316
------------ ------------
Net current assets 374,402 358,676
------------ ------------
Total assets less current liabilities 800,590 752,665
Non-current liabilities
Borrowings
- due after one year 437 2,623
Deferred taxation 2,036 2,036
Minority interests 172,012 163,776
------------ ------------
NET ASSETS 626,105 584,230
============ ============
CAPITAL AND RESERVES
Share capital 8 48,120 38,441
Reserves and accumulated profits 577,985 545,789
------------ ------------
626,105 584,230
============ ============
Notes to the Financial Statements
1. ACCOUNTING POLICIES
The interim report has been prepared in accordance with the Statement of Standard Accounting Practice ("SSAP") 25 "Interim financial reporting" issued by the Hong Kong Society of Accountants, except that comparative figures are not presented for the cash flow statement, being the first cash flow statement to be included in the interim financial report relating to accounting period ended on or after 1st July, 2000. Such departures from SSAP 25 are permitted under the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited. Comparative figures in the Condensed Consolidated Income Statement have been restated in order to conform with the requirements of SSAPs 1 and 2 (Revised).
2. SEGMENT INFORMATION
Business segments
Contribution to profit
Turnover from operations
Six months ended
30th September, 30th September,
2000 1999 2000 1999
HK$'000 HK$'000 HK$'000 HK$'000
Manufacture of
mould bases 373,618 282,347 81,839 56,832
Trading of metal and
parts 132,309 121,789 26,783 19,871
---------- ---------- ---------- ----------
505,927 404,136 108,622 76,703
========== ========== ========== ==========
Geographical segments
HK$'000 HK$'000 % %
Hong Kong and elsewhere
in the PRC 420,774 349,316 83 86
Other countries 85,153 54,820 17 14
---------- ---------- ---------- ----------
505,927 404,136 100 100
========== ========== ========== ==========
3. TAXATION
Six months ended
30th September,
2000 1999
HK$'000 HK$'000
The charge comprises:
Hong Kong Profits Tax
- current period 8,805 9,046
Taxation in jurisdictions outside Hong Kong 10,000 4,000
---------- ---------
18,805 13,046
========== =========
Hong Kong Profits Tax is calculated at 16% (1999: 16%) of the estimated assessable profit for the period.
Taxation in jurisdictions outside Hong Kong is calculated based on the applicable rates in those jurisdictions.
4. DIVIDENDS
The directors have determined that an interim dividend of HK$6 cents (1999: HK$4.8 cents after adjusting for bonus issue) per share should be paid to the shareholders of the Company whose names appear in the Register of members on 5th January, 2001.
5. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is based on the following data:
Six months ended
30th September,
2000 1999
HK$'000 HK$'000
Earnings
Earnings for the purposes of basic
earnings per share 71,307 50,685
Effect of dilutive potential ordinary shares:
Adjustment to the share of results of
the group headed by Lung Kee Metal Holdings
Limited ("LKMH") based on dilution of their
earnings per share (243) (555)
----------- -----------
Earnings for the purposes of diluted earnings
per share 71,064 50,130
=========== ===========
Number of shares '000 '000
Weighted average number of ordinary shares
for the purposes of basic earnings per share 480,917 474,449
Effect of dilutive potential ordinary shares
on exercise of options of the Company 2,201 3,780
----------- -----------
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 483,118 478,229
=========== ===========
The adjustment to comparative basic and diluted earnings per share, arising from bonus issue, is as follows:
Basic Diluted
HK cent HK cent
Reported figure before adjustment 13.35 13.10
Adjustment arising from bonus issue (2.67) (2.62)
----------- -----------
Restated 10.68 10.48
=========== ===========
6. DEBTORS, DEPOSITS AND OTHER RECEIVABLES
The Group allows an average credit period of 90 days to its trade customers.
As at 30th September, 2000, 70% of debtors were current and 30% were overdue (65% and 35% for 31st March, 2000 respectively).
7. CREDITORS AND OTHER PAYABLES
As at 30th September, 2000 and 31st March, 2000, 100% of creditors were current.
8. SHARE CAPITAL
Authorised Issued and fully paid
30th 31st 30th 31st
September, March, September, March,
2000 2000 2000 2000
HK$'000 HK$'000 HK$'000 HK$'000
Ordinary shares of
HK$0.1 each
At beginning of the
period/year 60,000 60,000 38,441 37,956
Share issued on
exercise of share
options - - 55 485
Bonus issue (1 for 4) - - 9,624 -
--------- --------- --------- ---------
At end of the
period/year 60,000 60,000 48,120 38,441
========= ========= ========= =========
9. CONTINGENT LIABILITIES
The Group
30th
September, 31st March,
2000 2000
HK$'000 HK$'000
Discounted bills with recourse - 6,000
=========== ===========
10. CAPITAL COMMITMENTS
30th
September, 31st March,
2000 2000
HK$'000 HK$'000
Capital expenditure in respect of the
acquisition of property, plant and
equipment contracted for but not
provided in the financial statements 53,469 20,057
=========== ===========
INTERIM DIVIDEND
The Directors have declared an interim dividend of 6 cents (1999: 4.8 cents after adjusting for bonus issue) per share in respect of the six months ended 30th September, 2000 to be payable on 11th January, 2001 to shareholders whose names are on the Register of Members on 5th January, 2001.
BUSINESS REVIEW AND PROSPECTS
Business Review
With the gradual recovery of overall economy, the Group's mould base business and profit have achieved continuous growth. Production capacity of the plants in China keeps on expanding in line with the future development of the Group.
The plant in Heyuan, which mainly produces standard mould bases, has matured in mastering the production skills and operation. It makes significant contribution to the Group's profit.
The plant in Dongguan, China, besides producing high quality tailor-made mould bases, has acted as a logistic and support center for all plants located in China. The services provided include technical advice, production planning, material storage, material planning and so on that further enhance and smooth the operation of all China plants.
The plant in Guangzhou, China, mainly manufactures high quality mould bases for export sales, has achieved constant increment in production volume and customers that brings stable income to the Group.
The production operation of our Shanghai plant has gradually approached to a mature stage. Both its market share in Eastern China and the sales turnover experienced continuous growth that begins to make profit contribution to the Group.
Regarding the Japanese market, the Group's turnover maintained a steady growth. The newly acquired warehouse has been put into use that enables to store more variety of Group's products. It directly speeds up the order delivery time that has positive and promising effect on capturing more sales and orders for the Group.
The businesses in Singapore and Malaysia achieved a stable growth. Both areas have gradually become a regional marketing point in the South East Asia and assisted in securing orders of large tailor-made mould bases for supporting the production capacity of other plants of the Group. As a result, the marketing ability of the Group has further been strengthened and enhanced.
The sales of mould steel maintained a constant growth rate and the product range has been enlarged in variety. Value-added services have been constantly developed including the vacuum heat treatment, nitrating heat treatment and quality repair welding services provided in the hope to promote one-stop and comprehensive services to customers. It not only keeps a closer tie with customers but also offers a fruitful income to the Group.
Prospects
The extension of the plant in Heyuan, China will be completed by the end of this year and expected to start production in the first quarter of the coming year. The production capacity of the Group will further be reinforced.
For the export business of the plant in Guangzhou, China, an optimistic view towards the markets in Europe and United States will be taken. With the strong customer base, reasonable pricing and international graded quality standard, the Group's products are still found to be very attractive and competitive in both European and U.S. markets.
It is expected that the entrance of China into WTO will bring tremendous trading and business opportunities to the market. The Group will take a positive move by upgrading product quality and enhancing customers services in order to grasp at such promising opportunity for further business development and penetration into the market in China.
Facing with the keen foreign competition, domestic enterprises of China also upgrade their product standard by increasing demand on high quality mould bases and mould steel for production. Also, increasing numbers of foreign investors such as Taiwan investors have obviously moved their production base alongside the coastal areas in Guangdong Province. The booming of mould business is expected and so thus the market competition will become more severe. However, with the long established LKM name in Mainland China, strong financial background, firm customer base, innovative and continuous improved production techniques, the Group will well prepare to face any challenges and anticipates reaching a new business height.
The Group will continue to develop the e-commerce business and hopefully in the next mid year, it can make use of internet in deepening the linkage with various markets in the world and facilitating closer communication with customers. By breaking the boundary barrier, the Group can further secure its firm position in the international arena.
As plants in China have already equipped with skills and experience in manufacturing high quality mould bases, in the coming year, the Group will concentrate the mould base production to China in maximizing the comparative advantage over there. In line with such development strategy, the mould base operation in Hong Kong will totally be shifted to Mainland China in the coming end of January.
The Group expects to meet much more challenges in the coming year, but with the concerted effort of our staff, we will treasure every challenge as new and favorable chance that will in turn motivate "Lung Kee" to advance forward in sustaining continuous growth.
LIQUIDITY AND FINANCIAL CONDITIONS
As at 30th September, 2000, the Group has cash balance of approximately HK$333 million. Most of the cash balance was placed in HK$ and US$ short-term deposits with major banks in Hong Kong.
Total debts was approximately HK$263 million, equal to approximately 42% of shareholders' fund.
CLOSURE OF REGISTER OF MEMBERS
The Register of Members of the Company will be closed from 3rd January, 2001 to 5th January, 2001, both days inclusive, during which period no share transfers will be effected.
In order to qualify for the abovementioned dividend, all share certificates accompanied by the completed transfer forms either overleaf or separate or Standard Transfer Form, must be lodged with the Hong Kong Branch Registrars of the Company, Central Registration Hong Kong Limited of 17th Floor, 183 Queen's Road East, Hong Kong for registration not later than 4:00 p.m. on 2nd January, 2001.
CODE OF BEST PRACTICE
During the six months ended 30th September, 2000, the directors are not aware of any information that would indicate that the Company was not 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.
PURCHASE, SALE OR REDEMPTION OF SECURITIES
There was no purchase, sale or redemption of shares or other securities of the Company by the Company or any of its subsidiaries during the six months ended 30th September, 2000.
On behalf of the Board
Siu Yuk Lung
Managing Director
Hong Kong, 18th December, 2000
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