RESULTS
The directors of Yue Yuen Industrial (Holdings) Limited (the "Company") are pleased to announce the unaudited results of the Company and its subsidiaries (collectively referred to as the "Group") for the six months ended 31st March, 1999 with comparative figures for the corresponding period in 1998 as follows:
Six months ended
31st March,
1999 1998
US$’000 US$’000
Turnover 715,768 700,583
========== ==========
Operating profit 96,072 84,380
Share of profits of
jointly controlled entities 1,869 1,019
---------- ----------
Profit from ordinary
activities before taxation 97,941 85,399
Taxation (Note 1) 2,250 2,040
---------- ----------
Profit before minority interests 95,691 83,359
Minority interests 73 (105)
---------- ----------
Profit attributable to shareholders 95,618 83,464
Interim dividend (Note 2) 21,659 17,327
---------- ----------
Profit for the period, retained 73,959 66,137
---------- ----------
Earnings per share (Note 3)
- Basic 14.3 cents 12.5 cents
========== ==========
- Diluted 13.8 cents 12.0 cents
========== ==========
Notes:
1. TAXATION
Six months ended
31st March,
1999 1998
US$’000 US$’000
The charge comprises:
Hong Kong Profits Tax calculated at 16% of the
estimated assessable profit for the period 50 32
Overseas taxation 2,200 2,008
------- -------
2,250 2,040
======= =======
A substantial portion of the Group's profits neither arose in, nor was derived from, Hong Kong and therefore is not subject to Hong Kong Profits Tax.
Overseas taxation is calculated at the rates prevailing in the respective jurisdictions.
2. INTERIM DIVIDEND
The directors are pleased to declare an interim dividend of 25 Hong Kong cents per share for the six months ended 31st March, 1999 to members whose names appear on the Register of Members on 19th July, 1999. The dividend will be paid on or before 3rd August, 1999.
3. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share for the period is based on the following data:
Six months ended
31st March,
1999 1998
Earnings:
Profit attributable to
shareholders and earnings
for the purposes of basic
and diluted earnings per share US$95,618,000 US$83,464,000
============= =============
Number of shares:
Weighted average number
of ordinary shares for the
purposes of basic earnings
per share 670,382,953 670,382,953
Effect of dilutive potential
ordinary shares
- share options 20,110,943 26,470,820
------------- -------------
Weighted average number
of ordinary shares for the
purposes of diluted
earnings per share 690,493,896 696,853,773
============= =============
The adoption of the revised Statement of Standard Accounting Practice No. 5 "Earnings per Share" issued by the Hong Kong Society of Accountants ("SSAP 5") has resulted in some modifications to the basis of calculation of earnings per share amounts and to the disclosures presented for earnings per share. Amounts presented for the prior period have been restated to reflect the requirement of the revised SSAP 5.
CLOSURE OF REGISTER OF MEMBERS
The Register of Members of the Company will be closed from 15th July, 1999 to 19th July, 1999, 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 14th July, 1999 in order to qualify for the interim dividend mentioned above.
REVIEW AND PROSPECTS
The athletic footwear market achieved a gradual recovery during the period under review. Excess inventory that had built up in the wholesale and retail sectors during the slowdown of 1998 has been substantially reduced. The industry also benefited from relative strong consumer spending in the US and Europe.
During the period under review, the Group achieved a turnover of US$716 million, an increase of 2.17% compared with the corresponding period last year. Profit attributable to shareholders was US$96 million, an increase of 14.56% compared with the corresponding period last year.
As of March 1999, the Group operated 178 production lines and produced 42 million pairs of shoes during the period under review as compared with 165 production lines and 38 million pairs in the corresponding period last year.
Operating conditions in China and Indonesia remained normal. In Vietnam, good progress was made with manufacture of footwear primarily for export to Europe. We anticipate a significant increase in export to the U.S. as and when the U.S. grants a Normal Trade Relations (NTR) status to Vietnam.
The Group's commitment to corporate social responsibility in terms of labor practices, education, health and safety of employees and environmental protection, is well recognized. A dedicated team is working on various comprehensive programs. We believe that these programs are an important element in our overall competitive advantage.
Looking ahead, directors are confident that the Group will maintain and develop its leading position in the footwear manufacturing industry. Yue Yuen expects to continue to grow in close partnership with its valued customers in the athletic and casual footwear sectors. We will continue our efforts to make optimum use of our large production facilities in China, Indonesia and Vietnam to serve our customers to the best of our ability.
THE YEAR 2000 ISSUE
The Group defines "Year 2000 Compliant" as the performance and functionality of its computers and automatic control systems, which operate by using dates, not being affected by dates prior to, during and after the year 2000.
The Group is fully aware of the importance of the Year 2000 Compliance. There could be an adverse impact on the Group if its computer systems do not function properly with respect to date-related data in the year 2000 and beyond. Therefore a Y2K Committee has been organised and formed to lead the Year 2000 compliance programme.
Under the programme, a review has been completed to identify the software and hardware of the Group that may be subject to the Year 2000 problem. Modification, replacement and upgrading of these software and hardware are progressing on schedule. The Group is pleased with the overall progress to-date since about 95% of the major work necessary to achieve compliance have been completed. The process will continue until the Year 2000 Compliance is achieved, which is targeted by the end of July 1999. Based on the review and actions taken, the Group does not anticipate that the Year 2000 issue will have a significant effect on its business and operations.
Costs for the compliance programme, including modification and replacement of software and equipment, are estimated to be totalling US$1.43 million, of which US$1.36 million has been incurred to-date. Costs related to modification and conversion are charged to the profit and loss account as incurred, while costs of replacement and new software are capitalised and depreciated in accordance with the Group's accounting policies.
The Group has not entered into any significant commitments in respect of the Year 2000 modification costs.
DIRECTORS' INTERESTS IN SECURITIES
As at 31st March, 1999, the interests of directors in the ordinary shares of the Company as recorded in the register maintained by the Company pursuant to Section 29 of the Hong Kong's Securities (Disclosure of Interests) Ordinance (the "SDI Ordinance") were as follows:
Number of ordinary shares held
Personal Family Corporate Other
Name of director interest interest interest interest
Tsai Chi Neng - - - 217,477,095(a)
David N.F. Tsai - - - 217,477,095(a)
Li I Nan, Steve - - - -
Kung Sung Yen - - - -
Lu Chin Chu - - - -
Kuo Tai Yu - - - -
Lu Shang Ping - - - 217,477,095(a)
Edward Y. Ku - - - -
Choi Kwok Keung 5,840,560 - 15,180,000(b) -
Henry Cornell - - - -
Yang Xiang-Dong - - - -
Shih Hung - - - -
John J.D. Sy - - - -
Notes:
(a) 125,034,411, 76,233,720 and 16,208,964 ordinary shares were held by Quicksilver Profits Limited, Red Hot Investments Limited and Moby Dick Enterprises Limited respectively, all of which were held by HSBC International Trustee Limited as trustee for The Tsai Family Trusts, two discretionary trusts the discretionary objects of which include Messrs. Tsai Chi Neng, David N.F. Tsai and Lu Shang Ping and their respective family members.
(b) 15,180,000 ordinary shares were held by Hearty Choice Limited, a company in which Mr. Choi Kwok Keung has a beneficial interest.
Save as disclosed above and other than certain nominee shares in subsidiaries held by Mr. Choi Kwok Keung in trust for the Group, none of the directors or any of their associates had any interest as at 31st March, 1999 in the securities of the Company or any of its associated corporations as defined in the SDI Ordinance.
DIRECTORS' RIGHTS TO ACQUIRE SHARES OR DEBENTURES
Under the Company's share option scheme, certain directors of the Company have personal interests in share options to subscribe for shares in the Company as follows:
Number of
share options
outstanding at
Exercise price 1.10.1998 and
Name of director Date of grant per share 31.3.1999
HK$
Tsai Chi Neng 28.4.1993 6.35 7,700,000
David N.F. Tsai 12.12.1996 10.22 6,000,000
Li I Nan, Steve 28.4.1993 6.35 1,466,666
Kung Sung Yen 12.12.1996 10.22 2,500,000
Lu Chin Chu 12.12.1996 10.22 2,500,000
Kuo Tai Yu 12.12.1996 10.22 2,500,000
No share option was granted to or exercised by the directors of the Company during the six months ended 31st March, 1999.
Save as disclosed above, at no time during the period was the Company or any of its subsidiaries a party to any arrangements to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debt securities (including debentures) of, the Company or any other body corporate. Similarly, none of the spouses or children under the age of 18, had any rights to subscribe for securities of the Company or had exercised any such rights during the period.
SUBSTANTIAL SHAREHOLDERS
As at 31st March, 1999, the register of substantial shareholders maintained under Section 16(1) of the SDI Ordinance showed that the following persons, in addition to the directors as stated under "Directors' interests in securities", are interested in 10% or more of the nominal value of the issued ordinary shares of the Company:
Number of ordinary
Name of shareholder shares beneficially held
Pou Chen Corporation ("PCC") (note) 252,981,750
Wealthplus Holdings Limited ("Wealthplus") 228,600,581
Note: Of the 252,981,750 ordinary shares beneficially owned by PCC, 228,600,581 ordinary shares were held by Wealthplus as listed above. In addition, 23,911,169 and 470,000 ordinary shares were held by Win Fortune Investments Limited ("Win Fortune") and Top Score Investments Limited ("Top Score"), respectively. Wealthplus, Win Fortune and Top Score are wholly-owned subsidiaries of PCC.
Other than the interests disclosed above, the Company has not been notified of any other interests as at 31st March, 1999 representing 10% or more of the issued share capital of the Company.
CORPORATE GOVERNANCE
During the six months ended 31st March, 1999, the directors are not aware of any information that would indicate that the Company was not in compliance with those paragraphs of 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.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES
During the six months ended 31st March, 1999, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed securities.
By Order of the Board
Tsai Chi Neng
Chairman
Hong Kong, 28th June, 1999
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