Texwinca Holdings Limited

Chairman's Statement


The Group's turnover and profit attributable to shareholders in this financial year increased by 56% and 1% respectively over last year. A final dividend of 2.75 cents has been recommended by the Board (last year: 2.5 cents). Total dividend per share for the year, including interim dividend, is 4.5 cents, a 13% growth over last year's 4.0 cents.

The turnover of manufacturing and sale of knitted fabric was approximately HK$1,984,000,000, an increase of 26%, which was about 71% of total group turnover. The US remains our major market for this business, taking up about 65% of our sales, with Europe and Asia at about 25% and 10% respectively. Our clients are mostly internationally renowned fashion retailers. As the economic outlook for the US and Europe is still promising, we expect sales growth to be mainly from these markets in the foreseeable future. In view of the expected growth, the Group has purchased various modern equipment to enhance productivity. The third phase of our factory in Dongguan had been completed during the period, and production has already started in this additional area of approximately 350,000 sq.ft. After three phases of expansion, the factory in Dongguan now measures about 2 million sq.ft, with about 400,000 sq.ft of land left for future development.

Sales of the retail business "Baleno" was about HK$728,000,000, a significant increase of 2.7 times, at about 26% of total turnover of the Group. The main source of growth was from China, taking up about 70% of total retail turnover. At the moment there are 209 shops in China, of which about 1/3 are self-owned, the rest are franchised shops. In Hong Kong and Taiwan we have 17 shops and 38 shops respectively. The retail business of "Baleno" in other parts of Asia is operated under franchise, with the Group charging a franchise fee. In the coming year, the Group will focus on opening franchised shops in China, while development in Hong Kong and Taiwan will be slowed.

The garment manufacturing business, an associate of the Group, reported steady growth. Besides providing garment products for famous brandnames, this business also manufactures for "Baleno" and purchases fabrics from the Group, thus playing a part in the vertical integration of the Group's businesses. The business is mainly based in China, with 2/3 of its production there, and the remaining 1/3 in Vietnam.

As our major markets are US and Europe, the Group was only slightly affected by the economic turmoil in Asia. However, to counter this unfavourable condition, the Group has taken steps to reduce costs and increase competitiveness. Consequently, I remain optimistic about the performance of the Group in the coming year.

Poon Bun Chak

Hong Kong, 18 August 1998

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