EXHIBIT 99.1
HANG FUN GOLD TECHNOLOGY LIMITED
(Incorporated in Bermuda with limited liability)
ANNOUNCEMENT
FINAL RESULTS FOR THE YEAR ENDED 31ST MARCH, 2002
The Directors of Hang Fung Gold Technology Limited (the "Company") announce the
audited consolidated income statements of the Company, its subsidiaries and
associates (collectively the "Group") for the year ended 31st March, 2002
together with comparative figures for the year ended 31st March, 2001 as
follows:
2002 2001
Note HK$'000 HK$'000
(Restated -
Note (1)ii)
Turnover (2) 1,568,757 1,327,753
Cost of sales (1,353,607) (1,122,475)
------------- ------------
Gross profit 215,150 205,278
Other income 4,486 -
Selling and distribution expenses (62,878) (16,856)
General and administrative expenses (87,180) (91,260)
------------- ------------
Profit from operations 69,578 97,162
Interest income 7,452 8,723
Interest expense (30,471) (30,105)
Share of losses of associates and provision
against advance to an associate (17,026) (14,460)
Impairment of goodwill relating to associates - (188,142)
------------- ------------
Profit (Loss) before taxation (3) 29,533 (126,822)
Taxation credit (charge) (4) 5,022 (9,156)
------------- ------------
Profit (Loss) attributable to shareholders 34,555 (135,978)
Retained profit, beginning of year 125,074 261,052
Transfer from share premium (5) 200,693 -
------------- ------------
Retained profit, end of year 360,322 125,074
============ ============
Earnings (Loss) per share (6)
- Basic 0.65 CENTS (3.04) cents
============ ============
- Diluted 0.65 CENTS N/A
============ ============
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Notes:
(1) ADOPTION OF NEW AND REVISED STATEMENTS OF STANDARD ACCOUNTING PRACTICE
Effective from 1st April, 2001, the Group has adopted, for the first time, the
following Statements of Standard Accounting Practice ("SSAPs") issued by the
Hong Kong Society of Accountants:
SSAP 9 (revised) Events after the balance sheet date
SSAP 14 (revised) Leases
SSAP 26 Segment reporting
SSAP 28 Provisions, contingent liabilities and contingent assets
SSAP 29 Intangible assets
SSAP 30 Business combinations
SSAP 31 Impairment of assets
SSAP 32 Consolidated financial statements and accounting for
investments in subsidiaries
The adoption of the above new/revised SSAPs had no material effect on the
Group's financial statements, other than as described below:
i. SSAP 26 - Segment reporting
Segment information of the Group has been disclosed in Note 2 below.
ii. SSAP 30 - Business combinations
Prior to 1st April, 2001, goodwill was eliminated against reserves in the year
in which it arose. With the introduction of SSAP 30, goodwill arising on or
after 1st April, 2001 is capitalised in the balance sheet and is amortised to
the income statement on a straight-line basis over its estimated economic life.
The Group has taken advantage of the transitional provisions in SSAP 30 whereby
all goodwill arising from acquisitions before 1st April, 2001, previously
eliminated against reserves, has not been restated, and any subsequent
impairment of such goodwill is recognised in the income statement in accordance
with SSAP 31 - Impairment of assets. Following the transitional provisions of
SSAP 30, where an impairment loss has arisen since the date of acquisition on
goodwill previously eliminated against reserves, this change in accounting
policy for recognition of goodwill impairment has been applied retrospectively
and the impairment losses have been recognised as a prior year adjustment in
accordance with SSAP 2 - Net profit or loss for the period, fundamental errors
and changes in accounting policies. In this respect, goodwill of approximately
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HK$188,142,000 previously eliminated against retained profit has been assessed
by the Group and the Group determined that an impairment loss of HK$188,142,000
should be recorded during the year ended 31st March, 2001. As a result, the
Group's previously reported profit attributable to shareholders for the year
ended 31st March, 2001 of HK$52,164,000 has become a loss attributable to
shareholders of approximately HK$135,978,000, however there is no impact on the
Group's retained profit as at 1st April, 2001.
In addition to the adoption of the above standards, the Group has adopted the
consequential changes made to SSAP 10 - Accounting for investments in
associates, SSAP 17 - Property, plant and equipment, SSAP 18 - Revenue, and SSAP
21 - Accounting for interests in joint ventures. The adoption of these
consequential changes had no material effect on the Group's financial
statements.
The 2001 comparative figures presented herein have incorporated the effect of
adjustments, where applicable, resulting from the adoption of the new/revised
SSAPs.
(2) SEGMENT INFORMATION
i. Business segments
------------------
The Group is organised into two operating units (i) wholesaling, trading and
retailing of gold products, other precious metal products and jewelry
products; and (ii) investment holding.
An analysis by business segment is as follows:
2002
-------------------------------
Wholesaling,
trading and Investment
retailing Holding Total
----------- -------- --------
HK$'000 HK$'000 HK$'000
----------- -------- ---------
TURNOVER
Sales to external customers 1,568,659 98 1,568,757
=========== ======== =========
OPERATING RESULTS
Segment results 70,181 (17,629) 52,552
=========== ========
Interest income 7,452
Interest expense (30,471)
Taxation 5,022
---------
Profit attributable to shareholders 34,555
=========
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2001
--------------------------------
Wholesaling,
trading and Investment
retailing holding Total
---------- --------- ----------
HK$'000 HK$'000 HK$'000
---------- --------- ----------
TURNOVER
Sales to external customers 1,327,657 96 1,327,753
========== ========= ==========
OPERATING RESULTS
Segment results 97,606 (203,046) (105,440)
========== =========
Interest income 8,723
Interest expense (30,105)
Taxation (9,156)
----------
Loss attributable to shareholders (135,978)
==========
ii. Geographical segments
----------------------
The Group's activities are conducted predominantly in Hong Kong, Mainland China,
South-East Asia, the United States of America, Europe and others. An analysis
by geographical segment is as follow:
TURNOVER SEGMENT RESULTS
2002 2001 2002 2001
HK$'000 HK$'000 HK$'000 HK$'000
Hong Kong / Mainland China 1,191,651 767,585 10,844 (169,763)
South-East Asia 168,650 238,083 6,275 11,564
The United States of America 135,503 140,903 22,657 25,161
Europe 60,634 118,006 12,564 25,793
Others 12,319 63,176 212 1,805
--------- --------- ------- ---------
Total 1,568,757 1,327,753 52,552 (105,440)
========= ========= ======= =========
Turnover by geographical location is determined on the basis of the destination
of shipment of merchandise.
(3) PROFIT (LOSS) BEFORE TAXATION
Profit (Loss) before taxation (consolidated) was determined after charging the
following item:
2002 2001
HK$'000 HK$'000
Depreciation of fixed assets 94,406 75,436
========= =========
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(4) TAXATION
Taxation credit (charge) (consolidated) consisted of:
2002 2001
HK$'000 HK$'000
Current taxation
- Hong Kong profits tax (5,181) (2,519)
- Write-back of over-provision of Hong Kong
profits tax in prior years 1,001 -
- Write-back of over-provision of Mainland China
taxes in prior years 7,858 -
-------- -------
3,678 (2,519)
Deferred taxation
- Write-back of (Provision for) deferred taxation 1,344 (6,637)
-------- -------
5,022 (9,156)
======== =======
The Company is exempted from taxation in Bermuda until 2016. Hong Kong profits
tax has been provided at the rate of 16% (2001 - 16%) on the estimated
assessable profit arising in or derived from Hong Kong. No Mainland China tax
has been provided as the Group had no taxable profit subject to such taxes
during the year.
(5) REDUCTION OF SHARE PREMIUM ACCOUNT
On 1st March, 2002, the shareholders of the Company have passed a resolution to
reduce the share premium account to zero by cancelling the entire amount of
approximately HK$328,220,000 standing to the credit of the share premium account
as at 1st March, 2002. The cancelled amount was transferred to the contributed
surplus account of the Company. An amount of HK$200,693,000 in the contributed
surplus account was then applied to eliminate the accumulated deficit of the
Company as at 31st March, 2001 amounting to HK$200,693,000. As a result, the
Company was enabled to declare dividends to shareholders at an earlier
opportunity and make a distribution to shareholders out of the contributed
surplus account as and when the Directors consider it appropriate to do so.
(6) EARNINGS (LOSS) PER SHARE
The calculation of basic earnings (loss) per share for the year ended 31st
March, 2002 is based on the consolidated profit attributable to shareholders of
approximately HK$34,555,000 (2001 - loss of HK$135,978,000) and on the weighted
average number of approximately 5,332,000,000 shares (2001 - 4,468,231,000
shares) in issue during the year.
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The calculation of diluted earnings per share for the year ended 31st March,
2002 is based on the consolidated profit attributable to shareholders of
approximately HK$34,555,000 and on the weighted average number of approximately
5,351,772,000 shares in issue, after adjusting for the effects of all dilutive
potential shares.
A reconciliation of the weighted average number of shares used in calculating
the basic earnings per share and the diluted earnings per share for the year
ended 31st March, 2002 is as follows:
'000
Weighted average number of shares used in calculating
basic earnings per share 5,332,000
Adjustment for potential dilutive effect in respect of
outstanding employee share options 19,772
Weighted average number of shares used in calculating
diluted earnings per share 5,351,772
No diluted loss per share for the year ended 31st March, 2001 is presented
as the outstanding share options were anti-dilutive.
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RESULTS
Group turnover for the year ended 31st March, 2002 was HK$1,568,757,000, a 18%
increase over HK$1,327,753,000 the previous year. The increase in turnover was
mainly due to the contribution from the 3D-GOLD Tourism Exhibition Hall which
has been in operation since 28th January, 2001. In addition, the Group's
businesses in Mainland China/Hong Kong also showed satisfactory growth.
In the year, profit attributable to shareholders was HK$34,555,000, compared
with HK$52,164,000 (before charging impairment of goodwill relating to
associates) of the previous year. This decline in net profit was primarily due
to a change in product portfolio, including the increase in the sales mix of the
lower-margin gold jewellery business. To cope with an increasingly competitive
market and to boost our market share, the Group also adopted a more aggressive
pricing strategy, thereby lowering gross margin from 15% last year to 14% the
year under review. Additional expenses associated with the opening of the
3D-GOLD Tourism Exhibition Hall and the promotion costs for the "3D-GOLD" and
"La Milky Way" products and brands accounted for a considerable part of the
selling expenses for the year. Management believes that investments such as
these will enhance the Group's brand value and sustain the Group's
profitability. Improvements in gross profit margins are anticipated in line with
the increase in the contribution of retail operations. As the business of
associates is still at the investment stage, the Group has shared their losses
and provision.
DIVIDENDS
The Directors do not recommend the payment of a final dividend for the year
ended 31st March, 2002 (2001: Nil). No interim dividend was paid for the year
ended 31st March, 2002 (2001: Nil).
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BUSINESS REVIEW
PRODUCTS
In the year under review, gold jewellery remained the Group's core product. In
addition, the Group is aggressively developing higher-margin sterling-silver,
18K-gold and diamond jewellery lines, and has introduced house brands such as
the "Everlasting Fortune" and "Cupid-Cut" of 3D-Gold diamond jewellery series.
At the same time the Group is collaborating with TVB and ATV in promoting a line
of products designed for entertainment celebrities. The Group will continue to
forge alliances with various business partners in introducing new jewellery
lines and diversifying retail coverage and channels.
PRODUCTION CAPABILITY AND TECHNOLOGY ACHIEVEMENTS
Always planning ahead, the Group invested further capital last year to enhance
production facilities and technological standards, and to build the Hong Kong
headquarters and the Mainland subsidiaries into world-class workplaces. The
following achievements are noted:
1. ISO 9001: 2000 Certificates awarded to Hang Fung Gold Technology Limited,
Hang Fung Jewellery Company Limited, 3D-GOLD International Company Limited
and La Milky Way International Company Limited
2. ISO 9001 Certificate awarded to Hang Fung Jewellery (Shenzhen) Co., Ltd
3. HKPC Certificate of Merit in Productivity from the Hong Kong Productivity
Council awarded to Hang Fung Gold Technology Group
"3D-GOLD"
In January 2001, the Group commenced operation of the 20,000 square-foot 3D-GOLD
Tourism Exhibition Hall, a HK$200-million investment, at 28 Man Lok Street,
Hunghom. The Group employed the very latest technology to create a unique
tourist spectacle, incorporating an exhibition of high-technology jewellery
manufacturing, the Gold and Jewellery Sparkling Environmentally Friendly
Washroom, the World's Tallest Pure Gold Kuan Yin Statue, the World's Largest
Fresh Water Pearl, and the Twelve Chinese Zodiacal Statues of the Old Summer
Palace. Of these, the Gold and Jewellery Sparkling Environmentally Friendly
Washroom earned two entries in the Guinness Book of World Records as "the
world's most expensive bathroom" and "the world's most expensive toilet".
With the hall proving to be a creative and unique tourist attraction, plus
robust demand from Mainland and Southeast Asian tourists for quality jewellery
products, the hall has received, in the short space of a year, over one million
visitors, an average of some 3,000 per day. During the Chinese New Year, Labour
Day Gold Week and National Day holidays, the hall received over 10,000 visitors
per day.
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The "3D-GOLD" brand's first year of business was promising, contributing
substantial cash income and an improved overall cashflow position for the Group.
The Hong Kong Government has taken steps to relax visa procedures for Taiwan
tourists, and the authorities in Guangzhou and Shenzhen are currently in the
process of considering allowing their citizens to visit Hong Kong on a
short-term visa-free basis. These developments, coupled with the planned
construction of a magnetic express railway between Guangzhou and Hong Kong, will
bring increased number of tourists to the territory. To cater to the increasing
numbers of visitors, the Group has expanded facilities over the past year by
adding an additional 30,000 square feet of retail space to the 3D-GOLD Tourism
Exhibition Hall. The extension to the hall will be completed in September 2002,
in time to cater to visitors during the October holiday season. On 27 April
2002, the Group held a recruitment open day to fill new positions ranging from
customer reception and sales staff to public relations and management
specialists.
The Group's expansion is in line with the HKSAR Government's policies for
developing the Hong Kong tourist industry. It is also currently actively
participating in the Hong Kong Mega Shopping Sale promotion organised by the
Hong Kong Tourism Board, taking place between 15th June and 31st August, 2002,
during which lucky draw winners will win "3D-GOLD" pure gold figurines and
jewellery gifts to the value of HK$7 million.
OVERSEAS SALES AND MAINLAND RETAILING
Over the past year, the global economy has remained weak, further compounded by
the tragic September 11 incident, which had a dampening effect on the Group's
overseas markets. As a result, the Group's overseas sales showed a slight
decrease over the previous year.
The Mainland market performed satisfactorily. During the year, the Group
expanded the Mainland retail network for its "3D-GOLD" and "La Milky Way"
branded products, with the overall number of retail outlets and franchised
stores increased to 30 up to present, leveraging on synergies from the Group's
3D-GOLD Tourism Exhibition Hall in Hong Kong. Contribution of the Mainland and
Hong Kong markets to turnover increased steadily from 58% the previous year to
76% of the year ended 31st March, 2002.
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Management intends to continue with its investment plans in 2002. In the
Mainland this will take the form of franchised business alliances, cooperative
and joint-venture, or wholly-owned business models, which within the year will
increase the number of retail outlets to around 100. The increased proportion of
retail business will help the Group to improve margins, and play its part in the
burgeoning Mainland retail market. Management considers that the China market
will be the major motive force in the Group's growth in the years to come.
LIQUIDITY AND FINANCIAL RESOURCES
As at 31st March, 2002, the Group maintained an aggregate banking facilities of
HK$475,277,000 (2001: HK$432,186,000), of which HK$32,783,000 (2001:
HK$38,117,000) had not been utilised. The Group primarily uses its
internally-generated cashflow and banking facilities to finance its operations
and business developments. Management is of the view that the Group has
sufficient funding for such purposes.
The Group's gearing ratio (ratio of aggregate bank borrowings to equity) was
maintained at 0.79 (2001: 0.77), a level close to last year's.
Certain assets of the Group have been pledged to banks for facilities. Details
are disclosed in the accompanying financial statements to the annual report.
EMPLOYEES
At 31st March, 2002, the Group had over 2,000 employees. Employees are rewarded
according to industry standards, which are reviewed on an annual basis. The
remuneration includes basic salary and bonus. The employment costs of the Group
amounted to HK$55,002,000 for the year ended 31st March, 2002 (2001:
HK$47,321,000). The Group has a share option scheme, in which options will be
granted to employees who have contribution to the Group.
AWARDS AND ACHIEVEMENTS
The Group's edge in technology and design has earned it industry recognition and
major international and local awards. Last year, the group was awarded the
following:
1. Guinness World Record for the "Most Expensive Toilet"
2. Guinness World Record for the "Most Expensive Bathroom"
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3. Hong Kong Jewellery Manufacturers' Association "The 4th Buyers' Favourite
Diamond Jewellery Design Competition 2001" - Gold Award (Necklace Group);
Award of Merit (Ring Group & Bracelet Group)
4. 2001 Grand Competition of Taiwan & Hong Kong Jade Jewellery Design - HKJJA
Chairman's Award, Fine Design Award (Five Awards and Honourable Mention)
5. Citation for Innovation in HKMA/TVB Award for Marketing Excellence
The Group has a compelling vision of advancing the traditional gold jewellery
industry by developing and deploying leading-edge technology and management. The
Group's co-founders, chairman Mr. Lam Sai Wing and vice-chairman Ms. Chan Yam
Fai, Jane, were conferred with, respectively, Honorary Fellowship and
Associateship of the Professional Validation Council of Hong Kong Industries on
25th March, 2002. These were in recognition of their professional expertise and
outstanding achievements in the industry, as well as for their contributions to
society as a whole.
The Group also takes pride in its achievements in furthering the industry, and
in its unceasing efforts, under the guidance of Mr Lam Sai Wing, to improve
business management and operational systems, enabling it to attain international
market leadership. During the year 2002, Mr Lam was also awarded an Honorary
Doctorate in Business Management by the Southern California University for
Professional Studies, recognition again of his talent and initiatives in forging
business development.
PROSPECTS
Mainland China and Hong Kong continue to be the Group's most important markets.
China has now joined the World Trade Organisation, the incomes and purchasing
power of her people have been steadily increasing, and there is a corresponding
increase in the demand for jewellery, for new and original designs, and for
brands guaranteeing reliability and quality. The group thus plans to grow its
domestic sales network and to maintain its close cooperation with the Shatoujiao
Free Trade Zone, Shenzhen, and to work closely with reputable organisations on
the Mainland and in Hong Kong and Macau in developing jewellery and
tourism-related businesses. With China's entry into the WTO, restrictions on the
trading of gold will be increasingly relaxed. The Group has already taken steps
to raise its profile and to broaden its sales network to maintain its commanding
position at the forefront of the emerging market.
Looking to the future, the Group will expand the 3D-GOLD Tourism Exhibition Hall
and is actively considering introducing counters in the hall for other
non-jewellery merchandise such as branded watches and leather goods. The Group
is also researching the possibility of leveraging its production technology and
marketing expertise by setting up 3D-GOLD Tourism Exhibition Halls with
different themes in Macau and key cities on the Mainland, and in creating
further 'world records' for everyone to enjoy.
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Thanks to proactive development of new businesses and business acumen, the Group
has made steady progress from being a traditional jewellery manufacturer to
become an integrated group offering high levels of production, technology,
retailing and tourism expertise. Our development will not only strengthen the
growth potential and the competitiveness of our business but, in the long term,
will also help raise our profit margins.
In the year to come we foresee some improvement in the under-performing export
sector in a gradually rallying global economy. Management also anticipates
increased growth in our Mainland and retail businesses. Overall, we are
confident of the Group's performance in the coming year.
DISCLOSURE OF INFORMATION ON THE WEBSITE OF THE STOCK EXCHANGE OF HONG KONG
LIMITED
All the information required by paragraphs 45(1) to 45(3) of Appendix 16 to 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.
On behalf of the Board
LAM SAI WING
Chairman
Hong Kong, 24th July, 2002
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