1998 INTERIM RESULTS (UNAUDITED)
We are pleased to announce that the unaudited consolidated results of the Company and its subsidiaries and associated companies (the "Group") for the six months ended 30 June 1998 together with the comparative figures for the corresponding period in 1997 are as follows:
Hong Kong profits tax is calculated at the rate of 16% (1997: 16.5%) on the estimated assessable profits for the period. Overseas taxation is calculated on the estimated assessable profits for the periods at the rates of taxation prevailing in the countries in which the Group operates.
2. EARNINGS PER SHARE
The calculation of basic earnings per share is based on the profit after taxation and minority interests of HK$156,568,000 (1997: HK$127,573,000) and on the weighted average number of 629,435,000 (1997: 622,447,000) shares in issue during the period. In the event that share options outstanding at 30 June 1998 were exercised in full, the diluted earnings per share would not be significantly different from the basic earnings per share as disclosed in the above interim results.
The Board of Directors has resolved to declare an interim dividend of 15 cents (1997: 13 cents) per share for the six months ended 30 June 1998 absorbing a total of HK$94.9 million (1997: HK$81.2 million).
CLOSURE OF REGISTER OF MEMBERS
The Register of Members will be closed from 16 September 1998 to 18 September 1998, both days inclusive, during which period no transfer of shares will be effected. In order to qualify for the interim dividend, all transfers accompanied by the relevant share certificates must be lodged with the Company's Hong Kong branch registrars, Abacus Share Registrars Limited at Caroline Centre, 10th Floor, 28 Yun Ping Road, Causeway Bay, Hong Kong not later than 4:00 p.m. on 15 September 1998. Dividend warrants will be despatched on 24 September 1998.
BUSINESS REVIEW AND PROSPECTS
The buoyant economy in the United States has led to strong orders for the Group in the first half of this year. However, the continuing economic crisis in many Asian countries has caused many of the Group's suppliers in certain countries financial difficulties and cashflow problems. This has resulted in a fairly serious delays in shipments from these countries in the first half. It is anticipated that this situation will continue in the second half of 1998.
The Group announced the termination of discussions to acquire the business of the Linmark Westman Group. Legal and professional fees expended on this effort cost the Group about HK$3 million. However, the business of Standard Fireworks in the UK was successful and this will give the Group dominant position in the UK fireworks business. The Group continues to watch for acquisition opportunities given its strong cash position.
Trading conditions for the second half seem uncertain as the Southeast Asian economic crisis continues and currencies remain volatile.
However, the Group is in the process of putting together its next 3 year plan spanning the millennium from 1999 to 2001. Given that the Group's export type business is unaffected by the generally depressed economic climate in the region, the management has put together an aggressive plan that will fully develop opportunities in this market environment. The Group is optimistic about its business prospects in the next 3 year.
As at 30 June 1998, the directors, chief executives and their associates had the following interests in the share capital of the Company or any of its associated corporations (within the meaning of the Securities (Disclosure of Interests) Ordinance ("SDI Ordinance")) which require notification pursuant to section 28 of the SDI Ordinance or the Model Code for Securities Transactions by Directors of Listed Companies ("Model Code") or as recorded in the register maintained pursuant to section 29 of the SDI Ordinance:
(A) Interests in the Company
(a) As at 30 June 1998, King Lun Holdings Limited ("King Lun") through its wholly owned subsidiary, Li & Fung (1937) Limited, held 320,000,000 shares in the Company. The following directors of the Company are deemed to have interests in the 320,000,000 shares through their personal or other interests in King Lun as set out below:
(i) 1,332,840 shares in King Lun, representing 36.25% of its issued share capital, are owned by Chase Bank & Trust Company (CI) Limited, the trustee of a trust established for the benefit of the family of Dr Victor Fung Kwok King.
(ii) 1,332,840 shares in King Lun, representing 36.25% of its issued share capital, are owned by Mr William Fung Kwok Lun.
(b) The shares are held by Chase Bank & Trust Company (CI) Limited, the trustee of a trust established for the benefit of the family of Dr Victor Fung Kwok King.
(B) Interests in rights to acquire shares
(a) The share options granted on 18 July 1996 are exercisable at HK$5.99 per share during the period from 18 July 1997 to 17 July 1999.
(b) The share options granted on 24 June 1997 are exercisable at HK$7.02 per share during the period from 18 July 1998 to 17 July 2000.
During the period, a total of 530,000 shares and 100,000 shares were issued to certain directors of the Company pursuant to the exercise of the share options granted on 19 August 1995 and 18 July 1996 respectively.
SUBSTANTIAL SHAREHOLDERS' INTERESTS IN THE SHARE CAPITAL OF THE COMPANY
As at 30 June 1998, according to the register of interests kept by the Company under section 16(1) of the SDI Ordinance, the persons who had or were deemed to have interests in 10% or more of the share capital of the Company were as follows:
(a) King Lun is deemed to have interests in the 320,000,000 shares since it owns all of the issued share capital of Li & Fung (1937) Limited.
(b) Chase Bank & Trust Company (CI) Limited is deemed to have interests in the 320,000,000 shares since it is entitled to control the exercise of more than one-third of the voting power at general meetings of King Lun.
(c) Mr William Fung Kwok Lun is deemed to have interests in the 320,000,000 shares since he is entitled to exercise more than one-third of the voting power at general meetings of King Lun.
Save as disclosed above, no other person is recorded in the register as having an interest in 10% or more of the issued share capital of the Company.
The Stock Exchange of Hong Kong Limited (the "Stock Exchange") has recently revised 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 to require listed companies to establish an audit committee with written terms of reference which deal with its authority and duties. Amongst the committee's principal duties will be to review and supervise the Group's financial reporting process and internal controls. The Group is currently in the process of setting up the Audit Committee and preparing its written terms of reference in accordance with the requirements of the Stock Exchange.
YEAR 2000 COMPLIANCE
A task force has been formed to deal with the Year 2000 problem and to ensure Year 2000 compliance. The task force is progressing according to our plan of completing the Year 2000 program by end of 1998.
The Group has sent out questionnaires to all the suppliers to promote the Year 2000 awareness and compliance. The Group and its overseas customers may adopt a policy of discrimination against non Year 2000 compliant suppliers.
The total estimated cost for the project is approximately HK$5 million which will be accounted for as capital expenditure. As at 30 June 1998, there was no commitment authorised by the Directors nor contracted for in respect of the Year 2000 project cost.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES
During the period, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company's listed securities.
CODE OF BEST PRACTICE
The directors are not aware of any information which would reasonable indicate that the Company was not for any part of the six-month period to 30 June 1998 in compliance with Appendix 14 of the listing rules of the Stock Exchange except that non-executive directors are not appointed for any specific terms as they are subject to retirement by rotation (similar to other directors) in accordance with bye-law 110 of the Company's bye-laws.
By Order of the Board
VICTOR FUNG KWOK KING
Hong Kong, 26 August 1998
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