M AINLAND H EADWEAR H O LDING S LIM ITED
飛達帽業控股有限公司*
(Incorporated in Bermuda with limited liability)
( w w w. m a i n l a n d . c o m . h k a n d / o r w w w. m a i n l a n d h e a d w e a r. c o m a n d / o r w w w. i r a s i a . c o m )
ANNO UNCE M ENT O F INTERIM RESULTS
FO R TH E SI X MO NTH S ENDED 30 JUNE 2001
2 0 0 1 I N T E R I M R E S U LT S
The Board of Directors
(the
"Directors") of
Mainland Headwear
Holdings
Limited (the "Company") is pleased to announce the unaudited interim results of
the Company and its subsidiaries (collectively the "Group") for the six months
ended 30th June 2001 (the "Period"). This is the first interim report after the
Group has been successfully listed on the main board of The Stock Exchange of
Hong Kong Limited (the "Stock Exchange") since 13 December 2000.
C O N D E N S E D C O N S O L I D AT E D I N C O M E S TAT E M E N T
For the six months ended 30 June 2001
Note
Tu r n o v e r
Cost of sales
4
Six months ended
30/6/2001
30/6/2000
(unaudited)
(unaudited)
HK$'000
HK$'000
148,236
126,259
(99,788)
(87,527)
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MAINLAND HEADWEAR HOLDINGS LIMITED - ANNOUNCEMENT
Hong Kong, 10 September 2001
Gross profits
Other revenue
48,448
2,161
Distribution costs
Administrative expenses
(3,273)
(13,434)
Profit from operations
33,902
(2,300)
(8,834)
28,405
Finance costs
Share of results of associates
5
Profit before taxation
5
36,932
25,859
Ta x a t i o n
6
(3,977)
(2,343)
32,955
23,516
Profit attributable to shareholders
(18)
3,048
38,732
807
(1,020)
(1,526)
Dividends
7
4,800
8,000
Earnings per share
Basic
8
HK13.73 cents
HK13.06 cents
8
HK13.72 cents
N/A
Diluted
C O N D E N S E D C O N S O L I D AT E D B A L A N C E S H E E T
At 30 June 2001
Notes
Non-current assets
P r o p e r t y, p l a n t a n d e q u i p m e n t
Interests in associates
9
10
30/6/2001
31/12/2000
(unaudited)
HK$'000
(audited)
HK$'000
74,108
16,587
72,214
15,066
90,695
87,280
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MAINLAND HEADWEAR HOLDINGS LIMITED - ANNOUNCEMENT
Hong Kong, 10 September 2001
Current assets
Inventories
Trade and other r e ceivables
Bank balances and cash
20,637
48,783
59,257
22,091
39,548
61,685
128,677
123,324
33,882
47,331
150
150
7,576
7,441
41,608
54,922
87,069
68,402
177,764
155,682
-
73
4,435
4,435
4,435
4,508
Net Assets
173,329
151,174
Capital and reserves
Share capital
Reserves
12
24,000
144,529
24,000
11 6 , 3 7 4
Proposed dividend
12
4,800
10,800
173,329
151,174
11
Current liabilities
Trade and other pa ya bles
Current portion of interest -bearing
11
borrowings
Ta x a t i o n
Net current assets
To t a l a s s e t s l e s s c u r r e n t l i a b i l i t i e s
Non-current liabilities
Long-term interest bearing borrowings
Deferred taxation
Notes to the Accounts
1.
Group reorganization
The Company was incorporated in the Bermuda on 2 February 2000 as an
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MAINLAND HEADWEAR HOLDINGS LIMITED - ANNOUNCEMENT
Hong Kong, 10 September 2001
exempted company with limited liabili ty under the Company Act 1981 of
Bermuda. Pursuant to a Group reorganization scheme to rationalize the
Group structure in preparation for the public listing of the Company's share
on Stock Exchange, the Compan y became the hol ding compan y of the
companies now comprising the Group. This was accomplished by acquiring
the entire issued share capital of Rh ys Tradin g Limit ed, the then holding
company of the subsidiaries, in consideration for the allotment and issue of
shares of the Compan y to the then shareholder of Rh ys Trading Limited o n
16 November 2000 and the Company became the holding company of the
Group. Further details of the Group reorganization are set out in the note
20 of the Company's year 2000 annual report and in the Company's
prospectus dated 28 November 2000.
2.
Basis of presentation
These unaudited interim financial statements have been prepared in
accordance with the principal accounting policies set out in the Company's
year 2000 annual report, except for changes in accounting policies as
d e s c r i b e d b e l o w. T h e s e i n t e r i m f i n a n c i a l s t a t e m e n t s c o m p l y w i t h S t a t e m e n t
of Standard Accounting Practice (the "SSAP") No. 25 "Interim Financial
Reporting" issued by the Hong Kong Society of Accountants.
The change to the Group's accounting policies arises f rom the adoption of
SSAP9 (revised). The adoption of SSAP9 (revised) "Events after the
balance sheet date" results in a change in accounting policy whereby
dividends proposed after the balance date are no longer recognized as a
liability at the balance she et date. This change has been applied
retrospectively and comparatives have been restated. The opening total
reserves at 1 January 2001 has increased by HK$10.8 million as a result of
the reversal of the previous year's proposed dividend. Proposed dividend s
are now separately disclosed on the face of the balance sheet within
shareholders' funds.
3.
Comparative figures
The financial information relating to the financial year ended 31 December
2000 included in the interim results does not constitute the Com pany's
statutory accounts for that financial year but is derived from those
accounts.
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MAINLAND HEADWEAR HOLDINGS LIMITED - ANNOUNCEMENT
Hong Kong, 10 September 2001
4.
Segmental Information
The Group is primarily engaged in the business of manufacture and sales of
headwear products.
Geographical Segments:
Tu r n o v e r
For the six months ended
30/6/ 2001
30/6/ 2000
HK$'000
HK$'000
US
Europe
Others
Contribution to
Operating results
For the six months ended
30/6/ 2001 30/6/2000
HK$'000
HK$'000
133,982
7,624
6,630
111 , 3 8 3
11 , 9 7 2
2,904
43,789
2,492
2,167
34,168
3,673
891
148,236
126,259
48,448
38,732
(14,546)
(10,327)
33,902
28,405
Unallocated corporate
revenues (expenses)
Profit from operations
No segmental analysis by business is shown as all the turnover and
contribution to operating results are derived from the manufacture and
sales of headwear products.
5.
Profit before taxation
Profit before taxation is stated after charging:
(a)
Finance costs
Six months ended
30th June 2001
30th June 2000
HK$'000
HK$'000
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MAINLAND HEADWEAR HOLDINGS LIMITED - ANNOUNCEMENT
Hong Kong, 10 September 2001
Interest on bank borrowing
Finance charge on obligations
under hire purchase contract
(b)
1,020
10
-
18
1,020
12,912
99,788
315
9,138
87,527
157
5,758
3,949
Other items
Staff costs
Cost of inventories
Amortization of goodwill
Depreciation
6.
8
Ta x a t i o n
Six months ended
30th June 2001
30th June 2000
HK$'000
HK$'000
H o n g K o n g P r o f i t s Ta x
PRC income tax
Deferred taxation
Share of associates' taxation
2,710
55
1,680
329
-
333
2,765
1,212
2,342
1
3,977
2,343
H o n g K o n g P r o f i t s Ta x h a s b e e n p r o v i d e d a t t h e r a t e o f 1 6 % ( 2 0 0 0 : 1 6 % )
o n t h e e s t i m a t e d a s s e s s a b l e p r o f i t s a r i s i n g i n H o n g K o n g f o r t h e y e a r.
Provisions for the taxation of profits of subsidiaries operating overseas
have been calculated at the rates applicable in the respective jurisdictions
and based on prevailing legislation, interpretations, and practices in
respect thereof.
7.
Dividends
30th June 2001
HK$'000
30th June 2000
HK$'000
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MAINLAND HEADWEAR HOLDINGS LIMITED - ANNOUNCEMENT
Hong Kong, 10 September 2001
Special dividends
Interim dividends declared of
HK2 cents per share (2000: HK$Nil)
-
8,000
4,800
-
4,800
8,000
The special dividend of HK$8,000,000 were paid by certain subsidiaries of
the Group to their then shareholders prior to the Group reorganization in
year 2000.
The Directors recommend the payment of an interim dividend of HK2 cents
per share in respect of the Period to all shareholders whose name appears
on the register of members on 28 September 2001.
8.
Earnings per share
The calculation of basic earnings per share is based on the profit for the
six months ended 30 June 2001 attributable to sharehol ders of
HK$32,955,000 (2000: HK$23,516,000) and the weighted average number
of ordinary shares of 240,000,000 (2000: assuming 180,000,000 shares were
in issue throughout the period).
The calculation of diluted earnings per share is based on the profit for the
half-year period ended 30 June 2001 attributable to shareholders of
HK$32,955,000 and the weighted average number of ordinary shares of
240,215,660 after adjusting for the number of dilutive potential ordinary
shares under the employee share option sc heme.
9.
A d d i t i o n t o p r o p e r t y, p l a n t a n d e q u i p m e n t
During the Period, the Group spent approximately HK$8 million on
addition to manufacturing plant in the PRC, in order to further upgrade its
manufacturing capabilities.
10.
Interest in associates
30th June 2001
HK$'000
30th June 2000
HK$'000
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MAINLAND HEADWEAR HOLDINGS LIMITED - ANNOUNCEMENT
Hong Kong, 10 September 2001
Share of net assets other than goodwill
Goodwill
11 .
11 , 0 8 0
5,507
9,244
5,822
16,587
15,066
Debtors and Creditors
The Group's income and expenditure streams are mainly denominated in
Hong Kong dollars, U nited States dollars, and China yuans. Forward
foreign exchange contracts are employed as required to manage risks
associated with significant movements in exchange rates.
The Group maintained a defined credit policy with its customers. Credit
evaluations of customers are performed from time to time to minimize any
credit risk associated with receivables. In addition, upfront cash payments
from new customers are sometimes required.
The ageing of trade receivables of the Group at end of the Period is
analysed as follows:
0 - 30 days
31 - 60 days
61 - 90 days
Over 90 days
30th June 2001
HK$'000
30th June 2000
HK$'000
26,237
14,645
2,302
1,862
16,655
9,349
6,786
1,703
45,046
34,493
The ageing of trade payables of the Group at end of the Period i s analysed
as follows:
0 - 30 days
31 - 60 days
30th June 2001
HK$'000
30th June 2000
HK$'000
11 , 1 3 4
8,494
7,345
7,278
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MAINLAND HEADWEAR HOLDINGS LIMITED - ANNOUNCEMENT
Hong Kong, 10 September 2001
61 - 90 days
12.
1,050
3,272
20,678
17,895
Reserves
An analysis of the reserves at end of the Period is as follows:
Share Contributed Accumulated Proposed
Premium
surplus
profits Dividend
HK$'000
HK$'000
HK$'000 HK$'000
Opening balance reported
Change in accounting policy
Proposed dividend separately
disclosed on face of
balance sheet
23,200
-
25,878
-
-
-
Opening balance as restated
Profits attributable to
shareholders
23,200
2000 final dividend paid
2001 interim dividend
proposed
67,296
10,800
To t a l
HK$'000
-
116,374
10,800
(10,800)
10,800
-
25,878
67,296
10,800
127,174
-
-
32,955
-
32,955
-
-
-
-
-
23,200
25,878
(10,800)
(10,800)
(4,800)
4,800
-
95,451
4,800
149,329
INTERIM DIVIDEND
The Directors have declared an interim dividend of HK2 cents per share. The
interim dividend will be payable on or after 12 October 2001 to shareholders on
the Register of Members at the close of the business on 28 September 2001.
CLOSURE OF REGISTER OF MEMBERS
The Register of Members of the Company will be closed from 26 September
2001 to 28 September 2001 (both dates inclusive). In order to qualify for the
interim dividend, all transfers, accompanied by the relevant share certificates,
m u s t b e l o d g e d w i t h t h e C o m p a n y ' s R e g i s t r a r , Te n g i s L i m i t e d , a t 4 t h F l o o r ,
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MAINLAND HEADWEAR HOLDINGS LIMITED - ANNOUNCEMENT
Hong Kong, 10 September 2001
Hutchison House, 10 Harcourt Road, Central, Hong Kong for registration not
later than 4 p.m. on 25 September 2001.
C H A I R M A N ' S S TAT E M E N T
Results
The Group achieved a profit attributable to shareholders for the six months
ended 30 June 2001 of HK$32,955,000, as compared with HK$23,516,000 for the
s a m e p e r i o d l a s t y e a r. T h i s r e s u l t w a s a c h i e v e d p r i n c i p a l l y d u e t o c o n t i n u i n g
fulfillment of marketing and manufacturing targets.
Business Review
The Group's first-class services, top quality products and a highly dedicated
management team have contributed to the increase of sales rev enue which grew
1 7 . 4 % o v e r t h e s a m e p e r i o d l a s t y e a r. T h e G r o u p ' s p e r f o r m a n c e i s v e r y
encouraging, achieving a profit growth of 40.1% compared with the
c o r r e s p o n d i n g p e r i o d o f t h e p r e v i o u s y e a r. D e s p i t e t h e e c o n o m i c s l o w d o w n i n
the United States, the headw ear industry remains strong, particularly in the
product categories and market segments that the Group has been serving. Our
business growth in Europe and Australia are also encouraging.
D u r i n g t h e p e r i o d u n d e r r e v i e w, t h e G r o u p h a s w o n a d d i t i o n a l m a n u f a c t u r i n g
rights of leading sportswear brands Nike, Reebok, Umbro, and the popular
d e n i m - w e a r W r a n g l e r. O u r p a r t i c i p a t i o n i n t h e H o n g K o n g G i f t s a n d P r e m i u m
Fair in April was also a success, resulting in business relationships with new
customers who expressed great interest in our newly acquired worldwide patent
rights of "Perfect Fit", a special type of elastic sweatband which is an exciting
n e w t e c h n o l o g y i n t h e h e a d w e a r i n d u s t r y.
In addition to our profitable digitized embroidery division, the Group has
expanded its R&D Department, further enhancing our services and business
opportunities. The Group fulfilled its previously projected business plans which
included the completion of the knitted hat production line and an additional cap
p r o d u c t i o n l i n e . E a r l y t h i s ye a r, t h e G r o u p h a s c o m m e n c e d t h e c o n s t r u c t i o n o f
i t s n e w 8 - s t o r e y f a c t o r y, w h i c h i s a d j a c e n t t o i t s e x i s t i n g f a c t o r y b u i l d i n g , i n
order to meet the increasing volume of business from new brand names.
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MAINLAND HEADWEAR HOLDINGS LIMITED - ANNOUNCEMENT
Hong Kong, 10 September 2001
Outlook
Looking ahead, the Group will continue t o maintain its healthy growth by
providing top quality services and products. The Group will also continue its
efforts to gain larger market share worldwide, especi all y in the United States
where the Group believes has the highest growth potential for our ongoing
business development.
Furthermore, apar t from identif yin g more brand and license opportunities and
widening its customer base, the Group will seize every opportunity such as the
2008 Olympic Games in Beijing to promote its headwear products. The G roup
has been and will continue to monitor the progress of China's entry into the
WTO which will bring tremendous business opportunities to the Group and
further strengthen its market share and competitive edge. The Group's additional
new factory building is expected to be completed by the end of this year and
start increasing production output in the second quarter of 2002.
M A N A G E M E N T D I S C U S S I O N S A N D A N A LY S I S
Liquidity and Financial Resources
The core business of the Group is design, manufacture and tra ding of headwear
products. The Group continues to finance its operations from internally
g e n e r a t e d c a s h f l o w. O u t o f t h e b a n k c r e d i t f a c i l i t i e s o f a p p r o x i m a t e l y H K $ 6 5
million granted from various banks, the Group utilized approximately HK$0.5
million at 30 June 2001. The Group's cash on hand reaches HK$59 million.
Funding and treasury policies of existing subsidiaries of the Group are centrally
managed and controlled by the top management in Hong Kong.
The Group's gearing ratio at 30 June 2001, defined as t he net borrowings of less
than HK$1 million divided by total shareholder's equity of approximately
HK$173 million, was close to zero.
C a p i t a l St r u c t u re
At 30 June 2001, the capital structure was in the form of shareholders' equity of
HK$173 million (31 December 2000: HK$151 million as restated) and the cash
held by the Group was deposited with banks as follows:
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MAINLAND HEADWEAR HOLDINGS LIMITED - ANNOUNCEMENT
Hong Kong, 10 September 2001
Equivalent
RMB
HK$
US$
Amount
HK$ million
Percentage
%
1
19
39
2
32
66
59
100
Hu man Resources
At 30 June 2001, the Group employed a total of 50 employees in Hong Kong and
1,886 workers for the PRC production facilities. The expenditures for the
employees during the Period was approximatel y HK$13 million and the
employees were remunerated based on their responsibilities and performance .
Share Option Scheme
Pursuant to the share option scheme adopted on 16 November 2000, the board of
d i r e c t o r s h a s a p p r o v e d o n 11 J u n e 2 0 0 1 t o gr a n t o p t i o n s to c e r t a i n f u l l ti m e
employees and to a director of the Group to subscribe for respectively
8 , 6 4 9 , 0 0 0 a n d 2 , 0 0 0 , 0 0 0 s h a r e s o f t h e C o m p a n y. T h e s u b s c r i p t i o n p r i c e p e r
share is HK$1.228, which is approximately 80% of the average closing prices of
the shares of the five trading da ys preceding the date of offer of the option. The
o p ti o n p e r i o d i s e i gh t ye a r s f r o m 11 J u n e 2 0 0 1 a n d ex e r c i s a b l e f r o m 11 J u n e
2002. There are additional restrictions imposed on the varying proportion of
options exercisable in the initial years during the option period.
P U R C H A S E , S A L E O R R E D E M P T I O N O F T H E C O M PA N Y ' S
LISTED SECURITIES
During the six months ended 30 June 2001, neither the Company nor any of its
subsidiaries purchased, sold or redeemed an y of the Company's listed securities.
CODE OF BEST PRACTICE
The Company has complied throughout the six months ended 30th June 200 1
with the Code of Best Practice as set out in Appendix 14 of the Listing Rules
12
MAINLAND HEADWEAR HOLDINGS LIMITED - ANNOUNCEMENT
Hong Kong, 10 September 2001
except that non-executive Directors of the Company are not appointed for a
specific term but are subject to retirement by rotation and re -election at the
Compan y's annual gener al meetings in accordance with Articles 87 and 88 of the
Compan y's Articles of Association.
REVIEW BY AUDIT COMMITTEE
The Audit Committee has reviewed with management the accounting principles
and practices adopted by the Group and discussed internal con trols and financial
reporting matters including a review of the unaudited interim financial
statements for the six months ended 30 June 2001.
P U B L I C AT I O N O F D E TA I L E D R E S U LT A N N O U N C E M E N T O N T H E
WEBSITE OF THE EXCHANGE
A detailed interim results announceme nt of the Company containing all the
information required by paragraphs 46(1) to 46(6) of Appendix 16 of the Listin g
Rules will be published on the website of the Exchange at an appropriate time.
By Order of the Board
MAINLAND HEADWEAR HOLDINGS LIMITED
Ngan Hei Keung
Chairman
Hong Kong, 10 September 2001
*
for identification only
"Please also refer to the published version of this announcement in the South
China Morning Post"
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MAINLAND HEADWEAR HOLDINGS LIMITED - ANNOUNCEMENT
Hong Kong, 10 September 2001