Texwinca Holdings Limited


The Board of Directors of Texwinca Holdings Limited (the "Company") has pleasure in presenting the unaudited consolidated results of the Company and its subsidiaries (the "Group") for the six months ended 30th September, 1999 as follows :

                                                       For the six months ended
                                                            30th September,
                                                          1999          1998
                                        Notes          HK$'000       HK$'000

Turnover                                             1,455,402     1,451,560
                                                   ===========   ===========
Operating profit                                       157,867       110,962
Share of profit of
   an associated company                                16,885         8,787
                                                   -----------   -----------
Profit before taxation                                 174,752       119,749
Taxation                                     1
   Group                                               (11,466)       (8,204)
   Associated company                                   (1,551)         (725)
                                                   -----------   -----------
Profit before minority interests                       161,735       110,820
Minority interests                                           -             -
                                                   -----------   -----------
Net profit attributable to
   shareholders                                        161,735       110,820
Less : Interim dividend                                (38,419)      (25,574)
                                                   -----------   -----------
Retained profit for
   the period                                          123,316        85,246
                                                   ===========   ===========
Earnings per share (cents)                   2
   Basic                                                  12.7           8.7
                                                   ===========   ===========
   Diluted                                                12.5           8.7
                                                   ===========   ===========
Interim dividend per share
   (cents)                                                3.00          2.00
                                                   ===========   ===========

Notes :

1. Taxation

Hong Kong profits tax is provided at the rate of 16.0% (1998 - 16.0%) on the estimated assessable profits arising in Hong Kong for the period.

Taxes on profits in respect of subsidiaries operating overseas have been calculated at the rates of taxation prevailing in the respective tax jurisdiction in which they operate based on existing legislation, interpretations and practices in respect thereof.

2. Earnings per share

The calculation of the basic earnings per share is based on the net profit attributable to shareholders of HK$161,735,000 (1998:HK$110,820,000) and the weighted average of 1,278,720,104 (1998: 1,279,174,486) shares in issue during the period.

The calculation of the diluted earnings per share is based on the followings :

                                                          Six months ended on
                                                             30th September
                                                           1999             1998
Net profit attributable to shareholders
   (HK$'000)                                            161,735          110,820
                                                 ==============   ==============
Weighted average number of shares
   used in calculation of basic
   earnings per share                             1,278,720,104    1,279,174,486
Deemed issue of shares for no
   consideration arising from
   share options                                     14,393,465          527,146
                                                 --------------   --------------
Weighted average number of shares
   used in calculation of diluted
   earnings per share                             1,293,113,569    1,279,701,632
                                                 ==============   ==============

Interim Dividend

The Board has declared an interim dividend of 3.00 cents per share (1998 : 2.00 cents) for the six months ended 30th September, 1999. The interim dividend will be payable on Thursday, 10th February, 2000 to shareholders registered on the Register of Members at the close of business on Monday, 24th January, 2000.

Closure Of Register Of Members

The Register of Members will be closed from Monday, 17th January, 2000 to Monday, 24th January, 2000 (both days inclusive), during which period no transfer of shares can be registered. In order to qualify for the interim dividend, all transfers accompanied by the relevant share certificates must be lodged with the Company's Share Registrar in Hong Kong, Tengis Limited at 1601 Hutchison House, 10 Harcourt Road, Central, Hong Kong for registration not later than 4:00 p.m. on Friday, 14th January, 2000.

Review Of Operations And Prospects

For the interim period of this year, the Group's turnover and net profit attributable to shareholders increased by 0.3% and 45.9% respectively. The Board recommended an interim dividend of 3.00 cents per share, an increase of 50% over last year's 2.00 cents.

Turnover recorded only a slight growth as a result of lower product prices, yet profit increased significantly due to successful cost control. During the period, our financial policy remained cautious. Inventory turnover days on sales and accounts receivable turnover on sales were at 51 days and 44 days respectively, against last year's 58 days for both. At the end of this interim period, the Group's cash and bank balance amounted to approximately HK$266 million, which was more than the total bank borrowings of about HK$226 million. As the Group has sufficient funds for future development, we do not expect to raise capital or increase bank borrowings in the short term.

The production and sales of knitted fabric business has been stable, with big American retail brandnames continuing to be our major customers. As the Asian economies are improving, we foresee sales to grow in these markets. During the period, the Group had further expanded its factory space and had acquired additional equipment to enhance productivity. The admission of China into the World Trade Organization will open up more opportunities for this business, and the management has set up long term strategies in this aspect.

The retail business of "Baleno" has returned to profit making, and is expanding rapidly. There are about 310 shops in China at present, and about 50 more shops are scheduled to open in the second half year. About one third of these shops, which are mainly in Guangzhou, Shanghai and Beijing, are self-operated. The remaining two thirds are franchised shops, which are spread across the whole country. In Hong Kong, the number of shops has increased from 17 to 21, and more are planned to open. Business developments in other Asian countries are also progressing positively. In view of the economic recovery across Asia, we expect the performance of the retail business will be even better in the coming half year, and turnover for the whole financial year is anticipated to reach HK$1 billion.

As economic conditions in Asia have improved and the American market remains strong, the management is very optimistic about the results of the second half year.

Directors' Interests In Share Capital

At 30th September, 1999, the interests of the directors and their associates in the share capital of the Company and its associated corporations as recorded in the register maintained by the Company pursuant to Section 29 of the Securities (Disclosure of Interests) Ordinance ("SDI Ordinance") were as follows :

                                          Number of ordinary
                                       shares of the Company held

                             Personal          Family       Corporate
Name of director             Interests      Interests       interests           Total

Poon Bun Chak (Note)         33,720,000   234,800,104     571,200,000     839,720,104
Poon Kai Chak                 6,502,800            -                -       6,502,800
Poon Kei Chak                27,377,200            -                -      27,377,200
Poon Kwan Chak                9,442,800            -                -       9,442,800
Ting Kit Chung                3,000,000            -                -       3,000,000
Cheng Shu Wing                   60,000            -                -          60,000
Au Son Yiu                       60,000            -                -          60,000

Note : 234,800,104 shares are owned by Farrow Star Limited, which is wholly-owned by Perfection Inc. as trustee for The Evergreen Trust, a discretionary trust, the objects of which include the family members of Mr. Poon Bun Chak. These shares are held as family interest under the SDI Ordinance.

571,200,000 shares are owned by Giant Wizard Corporation in which Farrow Star Limited has an 87.5% equity interest, and are held as corporate interests under the SDI Ordinance. A 12.4% interest in Giant Wizard Corporation is owned by Poon Kei Chak, Poon Kwan Chak and Poon Kai Chak.

Save as disclosed above, none of the directors or their associates had any personal, family, corporate or other interests in the share capital of the Company or any of its associated corporations as defined in the SDI Ordinance.

At no time during the period was the Company or any of its subsidiaries a party to any arrangements to enable the Company's directors to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Substantial Shareholders

At 30th September, 1999, no person, other than the directors of the Company whose interests are set out above, had registered an interest in the share capital of the Company that was required to be recorded under Section 16(1) of the SDI Ordinance, as having an interest in 10% or more of the issued share capital of the Company.

Arrangements To Purchase, Redeem And Sell Shares

Neither the Company nor any of its subsidiaries purchased, redeemed or sold any of the Company's listed securities during the six months ended 30th September, 1999.

Year 2000 Problem

The Group recognised the Year 2000 problem (the "Y2K") as a problem related to the two-digit representation of YEAR on computer systems. This storage method may lead to system malfunction as computer attempts to retrieve or process time related information on or after 1st January 2000.

To overcome the problem, the Group has tested, evaluated and enhanced all its inhouse developed systems. For hardware and software systems provided by third parties, the Group has either upgraded or confirmed the Y2K compliance of the systems with the respective suppliers. To further reduce the Group's exposure to the Y2K risk, the Group has enquired all its major business partners as to their readiness to the Y2K problem and prepared a contingency plan as a back-up measure against any unforeseeable risk associated with the Y2K problem.

The total cost spent on the Y2K project was around HK$400,000 and the costs have been reflected as operating expenses in the profit and loss account of the Group.

The Listing Rules Practice Note 19 Disclosure Requirement

The Company has entered into a syndicated bank loan agreement which required disclosure in accordance with Practice Note 19 of the Listing Rules of The Stock Exchange of Hong Kong Limited (the "Stock Exchange"). Under the loan agreement, the controlling shareholders, the Poon family (Mr. Poon Bun Chak and his family members), are required to maintain controlling interests in the management and hold an aggregate shareholding of not less than 51% of the issued capital of the Company during the tenure of the loan to 27th August 2001. A breach of these criteria in respect of the management and shareholding is considered to be a default under the loan agreement. As at 30th September 1999, no breach of these criteria was noted and the balance remained outstanding was HK$178.8 million, representing 16% of the Group's net asset value (per latest audited annual report).

Audit Committee

In accordance with the Code of Best Practice set out in Appendix 14 of the Listing Rules of the Stock Exchange, the Company established an Audit Committee (the "Committee") on 15th March 1999. The members of the Committee comprise the two independent non-executive directors of the Company, Mr. Au Son Yiu and Mr. Cheng Shu Wing.

The terms of reference and duties have been laid down as a guideline for the Committee. The principal duties of the Committee include the review and supervision of the financial reporting process and internal control of the Group. Being a sub-committee of the Board, the Committee reports and makes recommendations to the Board directly.

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 of the Listing Rules of the Stock Exchange throughout the accounting period covered by the interim report except that the independent non-executive directors of the Company are not appointed for specific terms. Independent non-executive directors are subject to retirement and re-election at the Annual General Meeting of the Company in accordance with the provisions of the Company's Bye-laws.

By order of the Board
Poon Bun Chak

Hong Kong, 16th December 1999

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