(Incorporated in Bermuda with limited liability)


The Directors of Herald Holdings Limited (the "Company") announce that the unaudited consolidated results of the Company and its subsidiaries (the "Group") for the six months ended 30 September, 1999 are as follows:-

Notes :

(1) Earnings per share

The calculation of basic earnings per share is based on the profit for the period attributable to shareholders of HK$12,719,000 (1998: HK$7,118,000), and on 647,951,000 (1998: 652,918,000) shares, being the weighted average number of shares outstanding during the period.

There were no dilutive potential shares in existence during the periods ended 30 September, 1999 and 1998.

(2) Hong Kong profits tax is calculated at the rate of 16% (1998: 16%) on the estimated assessable profits for the period. Overseas taxation is provided on the profits of the subsidiaries in accordance with the tax laws of the countries in which these subsidiaries operate.


The Group's turnover and profit attributable to shareholders for the six months to 30 September,1999 amounted to HK$509,116,000 and HK$12,719,000 respectively. These represent an increase of 13% and 79% respectively as compared with the corresponding period in the previous year. The increase of the net profit was mainly attributable to better results of the toy division and the computer head division.


During the period under review the toy division benefited from the strong sales of a range of toys related to a popular movie, resulting in an overall 34% increase in sales over the same period in the previous year. The division sees a growth in the sales of inter-active toys which to a large extent replaces the declining business of radio controlled cars. With the commencement of production of the new Dongguan factory in August, 1999, slightly ahead of the original plan, the overall manufacturing capability of the division has been raised particularly in tooling capacity and our capabilities in inter-active toys.

Computer Heads

The division made a profit contribution compared to a loss for the same period of the previous year. The improvement was due primarily to sales of half-inch thin-film and half-inch ferrite heads as well as cost-cutting measures. However, the future of the newly developed ferrite heads will depend to some extent on demand for computer tape backup systems after the consumer's general concerns over Y2K have been overcome.


There was an overall 10% increase in sales over the corresponding period in the previous year despite a drop in sales to the Japanese market. The increase was primarily due to strong sales at Pilot, our UK distribution arm which showed a respectful increase in sales of 48%. Pilot's business was bolstered by promotional orders from UK customers. The division is developing new products and has commenced sourcing and developing other cookware products, such as stainless steel cookware and anodised aluminium cookware for the UK market.


Zeon Limited, the group's timepiece division in the UK had a similar level of sales to last year. Although it experienced a drop of sales in the UK market due to a general softening of the children's character watch sales, the shortfall was covered by improvement of sales at Zeon's subsidiaries in Germany and France which posted an increase of 69 % and 73% in sales respectively over the prior period. The timepiece division in Hong Kong continued to encounter strong competition. In October, a major customer in the United States filed Chapter 11 and as a result the division made provisions of HK$3.5 million in respect of the trade receivables and inventories for this customer.

Despite favourable first-half results, the situation in the second-half of the current fiscal year seems more difficult. The directors are of the opinion that the overall growth in turnover and net profits in the first-half of the fiscal year may not be sustained.


As at 30 September, 1999 the Group's financial position remained strong with a net cash surplus of HK$121 million (1998: HK$77.6 million). Due to seasonal patterns, the net cash surplus was marginally lower than HK$123.5 million, which was the balance as at 31 March, 1999.


The Directors have declared an interim dividend of 1 cent per share (1998: 1 cent). The total amount of dividend payment of HK$6,432,000 was based on the total number of shares in issue as at 13 December, 1999 being the latest practicable date prior to the announcement of the interim results. Dividend will be payable on 21 January, 2000 to shareholders registered in the Register of Members on 4 January, 2000.


The Register of Members will be closed from 31 December, 1999 to 4 January, 2000, both days inclusive. Shareholders should ensure that all transfers accompanied by relevant share certificates are lodged with the Company's Registrars, Tengis Limited at 1601 Hutchison House, 10 Harcourt Road, Hong Kong for registration not later than 4:00 pm on 30 December, 1999 in order that they may receive their dividend entitlement.


Certain of the Group's older computer programmes were written using two digits rather than four to define the applicable year. As a result, those computer programmes have time-sensitive software that recognises a date using "00" as year 1900 rather than the year 2000. This could cause a system failure or miscalculations causing disruption in operations including, among other things, a temporary inability to process transactions, send invoices, or engage in normal business activities. Most of the Group's major customers have raised their concerns over the Year 2000 Problem and have requested the Group's computer systems to be Year 2000 compliant in due course.

In 1998, the Group commenced a Year 2000 compliance project to make assessment of the problems and develop and implement plans to reduce the Group's potential exposure to the problems relating to its business and operations. The project was completed by the end of June 1999 and the Group has achieved satisfactory result on evaluations and testing of all relevant systems to ensure that they are Year 2000 compliant and has confirmed with its major trading partners that they are Year 2000 ready. In addition, contingency plans are in place to cater for possible risk that may arise during the transition to Year 2000.

The total cost of the Group's Year 2000 project is approximately HK$6.6 million, which includes HK$4.2 million for the purchase of new hardware and software that was capitalized and HK$2.4 million for the development of a modification plan that was expensed as incurred. Over the quarter ended 30 June, 1999, the Group incurred and expensed approximately HK$0.7 million for the development of a modification plan and spent and capitalised HK$0.6 million in respect of the purchase of new hardware and software.

Herald Holdings Limited
Hong Kong, 15 December 1999

Contact person : Mr. Michael Thong at 2726 5565

Source: Herald Holdings Limited
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