FINAL RESULTS
FOR THE YEAR ENDED 30TH SEPTEMBER, 2000
GROUP FINANCIAL HIGHLIGHTS
Year ended 30th September, Percentage
2000 1999 Increase
Turnover (US$'000) 1,691,128 1,484,063 13.95%
Profit before taxation (US$'000) 212,362 200,955 5.68%
Net profit for the year (US$'000) 210,184 195,242 7.65%
Shareholders' funds (US$'000) 948,904 775,045 22.43%
Basic earnings per share (US cents) 29.7 29.1 2.06%
Dividend per share (HK cents) 95.0 80.0 18.75%
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RESULTS
The Directors of Yue Yuen Industrial (Holdings) Limited (the "Company") are pleased to announce the audited consolidated results of the Company and its subsidiaries (collectively referred to as the "Group") for the year ended 30th September, 2000 with comparative figures for the corresponding period in 1999 as follows:
Year ended
30th September,
2000 1999
----- -----
US$'000 US$'000
Turnover 1,691,128 1,484,063
Cost of sales (1,249,665) (1,066,179)
------------- -------------
Gross profit 441,463 417,884
Other revenue 59,055 42,235
Selling and distribution expenses (61,630) (45,313)
Administrative expenses (156,758) (137,917)
Other operating expenses (60,255) (62,477)
------------- -------------
Profit from operations 221,875 214,412
Finance costs (16,762) (17,683)
Share of results of associates 4,782 1,080
Share of results of jointly
controlled entities 2,467 3,146
------------- -------------
Profit before taxation 212,362 200,955
Income tax expense (Note 1) (2,043) (5,725)
------------- -------------
Profit before minority interests 210,319 195,230
Minority interests (135) 12
------------- -------------
Net profit for the year 210,184 195,242
Dividends (Note 2) (86,815) (71,655)
------------- -------------
Profit for the year, retained 123,369 123,587
============= =============
Earnings per share (Note 3)
- Basic 29.7 US cents 29.1 US cents
============= =============
- Diluted 28.7 US cents 28.0 US cents
============= =============
Notes:
1. INCOME TAX EXPENSE
2000 1999
----- -----
US$'000 US$'000
The charge comprises of:
Hong Kong profits tax
- current year 78 90
- overprovision in prior year (3) -
Overseas taxation
- current year 2,071 5,566
- overprovision in prior year (383) -
Share of taxation of an associate 299 84
Deferred taxation (19) (15)
------- -------
2,043 5,725
======= =======
Hong Kong Profits Tax is calculated at 16% of the estimated assessable profit for the year.
A substantial portion of the Group's profits neither arose in, nor was derived from, Hong Kong and therefore was not subject to Hong Kong Profits Tax.
Overseas taxation is calculated at the rates prevailing in the respective jurisdictions.
The Group had no significant unprovided deferred taxation for the year.
2. DIVIDENDS
2000 1999
----- -----
US$'000 US$'000
Interim dividend of 40 Hong Kong cents per share
(1999: 25 Hong Kong cents per share) 36,578 21,659
Proposed final dividend of 55 Hong Kong cents per share
(1999: 55 Hong Kong cents per share) 49,693 49,996
Additional final dividend for 1999 due to exercise of
share options 544 -
------- -------
86,815 71,655
======= =======
The amount of the final dividend proposed for the year ended 30th September, 2000 has been calculated by reference to 704,612,953 ordinary shares in issue as at the date of this report.
3. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share for the year is based on the following data:
2000 1999
----- -----
Earnings:
Net profit for the year and earnings
for the purposes of basic and
diluted earnings per share US$210,184,000 US$195,242,000
============== ==============
Number of shares:
Weighted average number of ordinary shares
for the purposes of basic earnings
per share 707,471,040 670,382,953
Effect of dilutive potential ordinary shares
in respect of share options 26,073,004 26,448,302
-------------- --------------
Weighted average number of ordinary shares
for the purposes of diluted earnings
per share 733,544,044 696,831,255
============== ==============
CLOSURE OF REGISTER OF MEMBERS
The Register of Members of the Company will be closed from 20th February to 27th February, 2001, both days inclusive, during which period no transfer of shares will be effected. All transfers, accompanied by the relevant share certificates, must be lodged with the Company's Branch Share Registrars, Secretaries Limited at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong not later than 4:00 p.m. on 19th February, 2001 in order to qualify for the final dividend mentioned above.
BUSINESS REVIEW
Results
On the back of a worldwide rebound in the athletic shoe industry, turnover reached US$1,691 million for the year ended 30th September, 2000, an increase of 14% over the same period last year. Net profit went up by 7.7% to US$210 million, while earnings per share for the financial year under review was US$0.297, compared to US$0.291 for the same period last year.
Costs Review
During the year, while the global market improved, the Group has experienced an increase in operating cost in certain areas. Staff costs as a percentage of turnover increased by just over 1%, in line with the increase in the minimum wage in the Guangdong province of the People's Republic of China. Also contributing to this increase was a rise in headcount, attributable to the hiring of additional workers to compensate for stricter restrictions limiting employees' working hours. Material costs rose slightly, partly due to the increase in global petroleum prices over the past year. Selling & distribution expenses increased as a result of the growth in production volume, as well as slight rises in sales and marketing expenses.
The Group remains committed to tightly controlled internal operating efficiency. Inventory turnover in days has been slightly reduced from 41 days in 1999 to 40 days in 2000. Additionally, increases in production volume continue to allow better utilisation of facilities and the advantages of economies of scale.
Production Volume and Categories
Total production volume showed strong growth this year, an increase of 17%, from 87.8 million pairs to 103.1 million pairs. During the year, the Group increased the number of production lines from 182 to 215, including 10 in Indonesia as part of a new joint venture for the production of vulcanised and children shoes. The Group continued to make strides in diversifying its production bases and product mix. For the year of 2000, athletic shoes accounted for 76% of overall turnover (1999:78%), while casual shoes accounted for 15% (1999:13%). Growth by dollar value for athletic and casual shoes was 11% and 33%, respectively.
Geographical Market
The Group continues to make significant progress in diversifying its sales by geographical market. The U.S. market accounted for 53% of turnover (1999: 61%), while sales to Europe rose to 27% of turnover (1999:21%). The Asian, Canadian, South American and other markets collectively accounted for 20% of turnover (1999:18%).
Growth Strategy
During the year, the Group pursued a multi-faceted growth strategy through a combination of vertical and horizontal expansion. Yue Yuen furthered the vertical integration of its business to upstream footwear material production by teaming up with leading material manufacturers from Taiwan to establish facilities in China to produce polyurethane (PU) resin and synthetic leather, and facilities in Vietnam to produce cloth and synthetic fabric for making shoes and sportswear. These initiatives enhanced the Group's ability to secure a consistent and high quality supply of upstream shoe materials to meet its production requirements. In addition, the Group commenced a joint venture with a vulcanised and children shoe factory in Indonesia to expand its product base horizontally.
The Group's initial investment in these projects was approximately US$54 million. This was financed by the proceeds of a private placement of 35.3 million new shares in October 1999, which raised a net proceeds of US$85 million.
Corporate Social Responsibility
The Group has continuously engaged in social responsibility programmes to promote the welfare, safety and personal development of staff, as well as to contribute to the well-being of the environment and the community as a whole. The Group has established a committee at the Board level dedicated to overseeing these programmes, of which there were several in 2000. Amongst other activities, the Group instituted a programme to treat wastewater generated by its production and living facilities with minimal impact on the environment. The Group sponsored night schools in China and Indonesia for employees, and co-sponsored a new project with Nike and World Vision in Dongguan, China, to offer our employees self-development, educational and recreational programmes. We also collaborated with Save the Children Hong Kong and our customers to co-sponsor a basketball competition for underprivileged youths.
OUTLOOK
Although there are initial indications that the U.S. economy is slowing down, there have also been signs that the recovery of the U.S. athletic footwear market is gaining momentum. Furthermore, casual shoe sales are likely to remain robust. The probable accession of the People's Republic of China to the World Trade Organisation, as well as the normalisation of trade relations between the U.S. and Vietnam, are also likely to open up new trading opportunities for the Group in 2001.
LIQUIDITY AND FINANCIAL INFORMATION
Liquidity
During the year, the Group took advantage of its solid financial position to expand production capacity. At year-end , the Group had cash on hand of US$117 million (1999:US$171 million) and total borrowings of US$294 million (1999:US$273 million). This represented a gearing ratio of 0.31 (1999:0.35) and a net debt to equity ratio of 0.19 (1999:0.13). Short-term loans increased to US$170 million from US$78 million in 1999. This rise was largely attributable to the reclassification of US$60 million of long-term loans as short-term loans and in addition to borrowings related to the expansion of production capacity. The interest coverage ratio of the Group's profit before interest, tax, depreciation and amortisation (EBITDA) to total net interest expense was 35.4 times in 2000, compared to 24.6 times in 1999.
Dividend Policy
The Group maintained a position of financial stability and solid cash holdings at the end of 2000. In this light, the Group has continued its policy of steadily increasing dividend payments to its shareholders. Dividend per share proposed for year 2000 totalled HK$0.95, an increase of 18.75% from HK$0.80 in 1999. Dividend pay-out ratio increased to 41.3% in 2000 as compared to 36.7% in 1999.
CONTINGENT LIABILITIES
2000 1999
----- -----
US$'000 US$'000
Export bills discounted with recourse 308 283
======= =======
Guarantees given to banks/suppliers
in respect of credit facilities
extended to jointly controlled entities 581 1,416
======= =======
PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES
During the year, the Company repurchased certain of its own shares on the Stock Exchange pursuant to the Company's general mandate granted to the directors of the Company passed at the annual general meeting of the Company held on 15th March, 2000.
Details are summarised as follows:
Number of
ordinary
shares Price per share Aggregate
Month repurchased Highest Lowest price paid
----- ----------- ------- ------ ----------
HK$ HK$ HK$'000
March, 2000 2,598,000 18.40 16.75 45,893
April, 2000 3,106,000 18.00 16.90 54,474
May, 2000 2,295,000 16.45 14.60 36,073
June, 2000 1,510,000 17.70 13.50 24,947
July, 2000 2,398,000 17.10 15.00 38,979
August, 2000 1,829,000 18.00 16.00 30,975
----------- --------
13,736,000 231,341
=========== ========
The repurchased shares were subsequently cancelled upon repurchase and accordingly, the issued share capital of the Company was diminished by the nominal value thereof.
Save as disclosed above, neither the Company nor any of the subsidiaries purchased, sold or redeemed any of the Company's listed securities during the year.
DISCLOSURE OF INFORMATION ON THE STOCK EXCHANGE'S WEBSITE
Information that is required by paragraphs 45 (1) to 45 (3) of Appendix 16 of the Listing Rules will be released on the Stock Exchange of Hong Kong's website on or about 30th January, 2001.
ACKNOWLEDGEMENT
We would like to take this opportunity to express our sincere appreciation of the support from our customers, suppliers and shareholders. We would also like to thank my fellow directors for their valuable contribution and the staff members of the Group for their commitment and dedicated services throughout the year.
By the Order of the Board
Tsai Chi Neng
Chairman
Hong Kong, 16th January, 2001
web site:www.yueyuen.com
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