HANG FUNG GOLD TECHNOLOGY LIMITED
(Incorporated in Bermuda with limited liability)
INTERIM RESULTS ANNOUNCEMENT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2001
RESULTS
The board of directors of Hang Fung Gold Technology Limited (the "Company") is
pleased to announce the unaudited consolidated results of the Company and its
subsidiaries (the "Group") for the three months and six months ended 30
September 2001 are as follows:
CONSOLIDATED INCOME STATEMENTS
Six months ended Three months ended
30 September 30 September
Note 2001 2000 2001 2000
HK$'000 HK$'000 HK$'000 HK$'000
--------- --------- --------- ---------
(Unaudited) (Unaudited)
Turnover 2 618,153 430,677 290,536 218,689
Cost of sales (526,990) (347,037) (247,398) (162,191)
--------- ----------- ----------- ----------
Gross profit 91,163 83,640 43,138 56,498
Selling and distribution
expenses (11,649) (7,567) (6,264) (4,237)
General and
administrative
expenses (36,427) (31,904) (16,829) (30,903)
---------- ----------- ----------- -----------
Profit from operations 3 43,087 44,169 20,045 21,358
Interest income 4,625 3,943 2,361 2,070
Interest expense (17,276) (11,543) (10,751) (6,823)
Share of loss of
associates and
provision for
doubtful receivables
from an associate (5,631) (739) (2,745) (739)
--------- ----------- ----------- -----------
Profits before taxation 24,805 35,830 8,910 15,866
Taxation 4 (2,400) (3,000) (200) (1,403)
--------- ----------- ----------- -----------
Profit attributable
to shareholders 22,405 32,830 8,710 14,463
========= =========== =========== ===========
Dividend - interim - - - -
========= =========== =========== ===========
Earnings per share 5
- Basic 0.420 cents 0.912 cents
============ ============
- Diluted 0.417 cents 0.895 cents
============ ============
Notes:
1. Basis of preparation
The interim financial report for the period ended 30 September 2001 is
unaudited and has been prepared in accordance with the requirements of
the Main Board Listing Rules of The Stock Exchange of Hong Kong Limited,
including compliance with Statement of Standard Accounting Practice 25
"Interim Financial Reporting" issued by the Hong Kong Society of
Accountants.
The principal accounting policies and methods of computation used in the
preparation of the interim financial report are consistent with those in
annual accounts for the year ended 31 March 2001.
2. Segment information
Contribution to
Turnover profit from operations
Six months ended Six months ended
30 September 30 September
2001 2001
HK$'000 HK$'000
By major product category
Gold products 458,289 17,246
Other precious metal products 50,510 8,531
Jewellery products 107,180 16,638
Others 1,762 274
Rental income 412 398
----------- ----------
618,153 43,087
=========== ==========
By geographical location*
Mainland China and Hong Kong 403,550
South East Asia 98,875
Europe 39,067
The United States of America 46,392
Others 30,269
-----------
618,153
* Turnover by geographical location is determined on the basis of the
destination of delivery of products.
3. Profit from operations
Profit from operations is arrived at after charging:
Six months ended
30 September
2001 2000
HK$'000 HK$'000
Depreciation of fixed assets 47,434 35,335
======= ========
4. Taxation
Taxation in the consolidated income statements represents:
Six months ended
30 September
2001 2000
HK$'000 HK$'000
Hong Kong taxation 2,400 3,000
======= =======
Hong Kong profits tax was provided at the rate of 16% (2000: 16%) on the
estimated assessable profit arising in or derived from Hong Kong. Certain
of the Group's operations are conducted outside Hong Kong. Accordingly, the
Group is entitled to a 50:50 offshore claim in reporting its Hong Kong
profits tax.
There was no significant unprovided deferred taxation as at 30th September
2001.
5. Earnings per share
(a) Basic earnings per share
The calculation of basic earnings per share is based on the profit
attributable to shareholders of HK$22,405,000 (2000: HK$32,830,000) and
5,332,000,000 shares (2000: 3,599,989,071 shares) in issue during the
period.
(b) Diluted earnings per share
The calculation of basic earnings per share is based on the profit
attributable to shareholders of HK$22,405,000 (2000: HK$32,830,000) and the
weighted average number of 5,369,392,687 shares (2000: 3,666,352,056
shares) in issue during the period after adjusting for the effects of all
dilutive potential ordinary shares.
6. Comparative figures
Certain comparative figures have been reclassified to conform to the
current period presentation.
INTERIM DIVIDEND
The Directors do no recommend any interim dividend in respect of the six months
ended 30 September, 2001 (2000: Nil).
MANAGEMENT DISCUSSION AND ANALYSIS
Business Review
Results
For the six months ended 30 September 2001, turnover for the Group increased by
43.5% to HK$618.2 million (2000: HK$430.7 million). Profit from operations
amounted to HK$43.1 million (2000: HK$44.2) while profit attributable to
shareholders was HK$22.4 million (2000: HK$32.8 million). Basic earnings per
share was HK0.420 cents (2000: HK0.912 cents).
Operations Review
Despite the substantial increase in turnover for the period under review the
profit from operations fell by 2.4% compared to same period last year. The
decrease was mainly due to (1) change of product mix of increase in proportion
of sales of gold products of relatively lower gross profit margin; (2) increase
in selling and administrative expenses; (3) adoption of more competitive pricing
strategy to cope with increasing competition and to increase market share.
Compared to same period last year, the gross profit margin decreased from 19.4%
to 14.7%, while the selling and administrative expenses increased by 21.8% from
HK$39.5 million to HK$48.1 million. The increase in selling and administrative
expenses was mainly due to increase in size of operation and business in
general, expansion of distribution network and the establishment of the "3D-Gold
Tourism Exhibition Hall".
Compared to corresponding period last year, the profit attributable to
shareholders decreased by HK$10.4 million to HK$22.4 million. This was mainly
due to respective increase in (1) the share of losses of associates and
provision for doubtful receivables from an associate by HK$4.9 million; and (2)
interest expenses by HK$5.7 million for the period. Increase in inventories and
fixed assets for expanding distribution network and the "3-D Gold Tourism
Exhibition Hall" for the period under review caused a corresponding increase of
bank borrowing and interest expenses when compared to same period last year.
Markets
Mainland China and Hong Kong remains as the Group's largest market. For the
period under review, the Mainland China and Hong Kong market accounted for 65%
of the Group's total turnover and generated HK$403.6 million in sales. Compared
with same period last year, sales in Mainland China and Hong Kong market grew by
61.8% for the period under review. The upsurge in total sales of Mainland China
and Hong Kong was mainly due to:
(1) enhanced popularity of the Group's products and more extensive market
recognition of the Group's brands in Mainland China and Hong Kong;
(2) expansion of distribution network for retail business by -
(a) increasing the number of "3-D Gold" and "La Milky Way" chain stores in
Mainland China;
(b) establishment of sales operations in large department stores and shopping
malls in Hong Kong for selling products under the registered brand name
"3-D Gold" and "La Milky Way";
(3) substantial increase of tourists visiting the Group's "3-D Gold Tourism
Exhibition Hall" opened in Hong Kong since January 2001; and
(4) the growing demand for luxurious brand name gold and jewellery products in
Mainland China, which was resulted from the country's steady economic
growth.
For the six months ended 30 September 2001, sales contribution from Southeast
Asia and other markets (including the United States of America and Europe)
accounted for 16% and 19% of the Group's total turnover respectively. Sales to
Southeast Asia increased by 66% while sales to other markets (including the
United States of American and Europe) decreased by 5% compared to same period
last year.
Products
Contribution to sales Percentage change
Six months ended 30 September for 2001/2002 over
2001 2000 2000/2001
------ ------ -----------
HK$ million % HK$ million % %
Gold products 458 74 % 228 53 % +101 %
Other precious metal
products 51 8 % 101 23 % -50 %
Jewellery products 107 17 % 101 23 % +6 %
Others 2 1 % 1 1 % - %
Total 618 100 % 431 100 % +43 %
During the period under review, gold products, which remained as the Group's
core product, accounted for 74% of the Group's total turnover. Sales of gold
products substantial increase over the same period last year due to the
tremendous demand of Mainland China resulting from its strong economic situation
and rising living standards.
Awards and technological achievements
The Group devotes considerable efforts in developing advanced production
technology, and is renowned for its innovative product designs. The Group's
technological achievements and products designs receive much acclaim from
industry players and have won numerous awards and prizes in both international
and local competitions in the past years.
In the current financial period, the "Gold and Jewellery Environmental Friendly
Washroom" in the Group's 3-D Gold Tourism Exhibition Hall has been admitted by
Guinness World Records as "Keeper of the Guinness World Records - The Most
Expensive Bathroom" and "Keeper of the Guinness World Records - the Most
Expensive Toilet". The year 2001 is the second year the Group being awarded the
HKPC Certificate of Merit in Productivity by Hong Kong Productivity Council.
In addition to the above achievements, the Group won the following awards:
o HKMA/TVB Award for Marketing Excellence 2001 Citation for Innovation
o 2001 Grand Competition of Taiwan & Hong Kong Jade Jewelry Design HKJJA
Chairman's Award Fine Design Award (5 Awards) and Honorary Mention
o The 4th Buyer's Favorite Diamond Jewelry Design Competition 2001 Necklace -
Gold prize, Bracelet - Award of Merit, Ring - Award of Merit
Future Prospects
To cope with the development goal formulated for the year 2001/2002, the Group
will continue to promote its brands, expand its retail business in Mainland
China and Hong Kong and explore potential market aggressively.
With extensive experience of producing corporate giftware in cooperation with
various major institutions in the past, and the unparallel business
opportunities as generated from Beijing being become the hosting city of 2008
Olympics and the entry of People Republic of China into the World Trade
Organization, the Group is optimistic for further promotion of its brands and
business. To enhance its brands will enable the Group to improve its markets
competitiveness, enlarge its revenue base and safeguard growth of its business
and profit in the future. As the "3D-Gold Tourism Exhibition Hall" has evolved
to become a new tourist spot in Hong Kong, and as the Hong Kong Special
Administrative Region government continues to promote tourism in Hong Kong and
increase the quota imposed to the Mainland China visitors, the Group is
confident that its local retail business will continue to grow. Moreover, the
Group will capture the market rhythm and adopt flexible market strategy and
prudent investment policy, so as to establish "3D-Gold" and "La Milky Way" chain
stores in the Mainland China and Hong Kong and expand the distribution network.
The Group expects such move will further increase the revenue source of the
retail business in both Mainland China and Hong Kong.
In order to ensure the uniqueness in design and the excellent quality of its
product, the Group will continue to invest in technological research and
development, and develop new production technology and more cost efficient
production model.
Financial position
As at 30 September 2001, the Group maintained a current ratio of 1.41 (31 March
2001: 1:42) while its total debt to equity ratio was 1.06 (31 March 2001: 1.05).
The latter was calculated by dividing the total liabilities of HK$558.1 million
(31 March 2001: HK$530 million) by the total shareholders' equity of HK$529
million (31 March 2001: HK$506.6 million).
The Group's bank borrowing as at 30 September 2001 amounted to HK$419.1 million
(31 March 2001: HK$391.1 million), while undrawn banking facilities amounted to
HK$46.4 million (31 March 2001: HK$38.1 million). With its internally generated
cash flows, unutilized banking facilities and other financial resources, the
Group has confidence in meeting the funding needs of its business activities and
development projects.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES
Neither the Company nor any of its subsidiaries purchased, sold or redeemed any
of the Company's listed securities during the six months ended 30 September
2001.
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 Group's unaudited
interim results for the six months ended 30 September 2001.
CODE OF BEST PRACTICE
In the opinion of the Directors, the Company has complied with the Code of Best
Practice as set out in Appendix 14 to the Rules of Governing the Listing of
Securities on the Stock Exchange of Hong Kong Limited throughout the six months
ended 30 September 2001, except that the independent non-executive directors of
the Company are not appointed for specific terms but are subject to retirement
by rotation and re-election at annual general meeting in accordance with the
Company's By-Laws.
PUBLICATION OF INTERIM RESULT ON THE STOCK EXCHANGE'S WEBSITE
A detailed interim results announcement containing all the information required
by paragraphs 46(1) to 46(6) of Appendix 16 of the Rules Governing the Listing
of Securities on The Stock Exchange of Hong Kong Limited will be published on
the website of The Stock Exchange of Hong Kong Limited in due course.
By Order of the Board
Lam Sai Wing
Chairman
Hong Kong, 6 December 2001