(Incorporated in the Cayman Islands with limited liability)



  • Turnover for 2000 amounted to HK$1,390,436,000 representing an increase of 28.7% from 1999;

  • Net Profit for 2000 amounted to HK$26,889,000 representing a decrease of 21.7% from 1999;

  • Basic earnings per share for 2000 amounted to HK4.6 cents representing a decrease of 24.6% from 1999;

  • Interim dividend for 2000 amounted to HK$6,353,000 representing a decrease of 26.1% from 1999; and

  • Shareholders equity as at 30 September 2000 amounted to HK$379,982,000, representing an increase of 12.6% from 31 March 2000.

The Board of Directors ("Directors") of Tonic Industries Holdings Limited (the "Company") is pleased to announce that the unaudited condensed consolidated financial statements of the Company and its subsidiaries (the "Group") for the six months ended 30 September 2000 together with the comparative figures for the corresponding period were as follows:


                                                     For the six months
                                                     ended 30 September
                                                    2000            1999
                                               Unaudited       Unaudited
                                   Notes         HK$'000         HK$'000

Turnover                             2         1,390,436       1,080,368
Cost of sales                                 (1,296,523)       (992,842)
                                           -------------   -------------
Gross profit                                      93,913          87,526
Other revenue                                      6,477           7,084
Selling and distribution costs                   (20,921)        (17,989)
Administrative expenses                          (42,317)        (32,234)
                                           -------------   -------------
Profit from operating activities                  37,152          44,387
Finance costs                                     (8,520)         (6,792)
                                           -------------   -------------
Profit before taxation               3            28,632          37,595
Taxation                             4            (1,745)         (3,233)
                                           -------------   -------------
Profit before minority interests                  26,887          34,362
Minority interests                                     2               -
                                           -------------   -------------
Net profit for the period                         26,889          34,362
Interim dividend                                  (6,353)         (8,592)
                                           =============   =============
Profit retained for the period                    20,536          25,770
                                           =============   =============
Earnings per share                   5
  -  Basic                                     4.6 cents       6.1 cents
                                           =============   =============
  -  Diluted                                         N/A       5.7 cents
                                           =============   =============


                                            30 September        31 March 
                                                    2000            2000
                                               Unaudited         Audited
                                   Notes         HK$'000         HK$'000
  Fixed assets                                   372,700         322,686
  Long term investments                           16,024          16,024
                                           -------------   -------------
                                                 388,724         338,710
                                           -------------   -------------
  Cash and bank balances                         128,365          81,348
  Time deposits                                  163,385          50,000
  Accounts and other receivables     6           212,705         116,373
  Inventories                                    450,541         214,840
                                           -------------   -------------
                                                 954,996         462,561
                                           -------------   -------------
  Accounts and other payables        7           671,311         318,314
  Borrowings due within one year                 213,619         104,779
  Tax payable                                      6,017           5,132
  Dividend payable                                28,743          22,390
                                           -------------   -------------
                                                 919,690         450,615
                                           -------------   -------------
NET CURRENT ASSETS                                35,306          11,946
                                           -------------   -------------
TOTAL ASSETS LESS CURRENT LIABILITIES            424,030         350,656

  Long term borrowings                           (34,779)         (3,865)
  Deferred tax                                    (9,269)         (9,269)
                                           -------------   -------------
                                                 (44,048)        (13,134)
MINORITY INTERESTS                                     -               -
                                           -------------   -------------
                                                 379,982         337,522
                                           =============   =============
  Share capital                      8            63,526          58,889
  Reserves                           9           316,456         278,633
                                           -------------   -------------
                                                 379,982         337,522
                                           =============   =============


1. Significant Accounting Policies

The unaudited condensed consolidated interim financial statements of the Group are prepared in accordance with Statement of Standard Accounting Practice ("SSAP") No. 25 "interim financial reporting" and the Listing Rules of The Stock Exchange of Hong Kong Limited. The accounting policies and basis of preparation are the same as those used in the annual financial statements for the year ended 31 March 2000. Figures for the year ended 31 March 2000 are extracted from the Group's annual financial statements for that year.

Certain comparative figures have been reclassified to conform with the current period's presentation. In particular, the comparative figures have been adjusted or extended to take into account of SSAP No.1. "Presentation of Financial Statements"

2. Segmental Information

The principal activity of the Group is the manufacture and trading of consumer audio products. A geographical analysis of the Group's turnover, by market for the six months period ended 30 September 2000 is as follows:

                                               Unaudited      Percentage
                                                 HK$'000               %
By geographical region:

Asia Pacific countries                           514,462              37
Americas                                         472,748              34
Europe                                           403,226              29
                                           -------------   -------------
Total                                          1,390,436             100
                                           =============   =============

Contribution to profit from operating activities by geographical region is not presented as the contribution from each region is substantially in line with the ratio of profit to turnover of the Group.

3. Profit before Taxation

                                                  For the six months
                                                  ended 30 September
                                                    2000            1999
                                               Unaudited       Unaudited
                                                 HK$'000         HK$'000

Profit before taxation is arrived at 
  after charging/(crediting)
Depreciation                                      25,456          24,049
Interest on borrowings                             8,520           6,792
                                           =============   =============
Interest income                                   (4,047)         (4,334)
                                           =============   =============

4. Taxation

Hong Kong profits tax has been provided at the applicable rate of 16% (1999: 16%) on the estimated assessable profits arising in Hong Kong during the period. Taxes on profits assessable in the People's Republic of China ("PRC") have been provided at the rates of taxation prevailing in the PRC based on existing legislations, interpretations and practices in respect thereof.

5. Earnings per share

The calculation of basic earnings per share for the period is based on the net profit attributable to shareholders of HK$26,889,000 (1999: HK$34,362,000) and the weighted average of 589,598,398 shares (1999: 565,640,133 shares) in issue during the period.

There is no diluted earnings per share for the period since the company has no dilutive potential ordinary share. The calculation of diluted earnings per share for 1999 is based on the net profit attributable to shareholders of HK$34,362,000 and the weighted average of 607,005,059 shares in issue, adjusted to reflect the effects of all dilutive potential ordinary shares.

6. Accounts and Other Receivables

Included in accounts and other receivables are accounts receivable of HK$178,873,000 (31 March 2000: HK$100,099,000), the aging analysis of which is as follows:

                                            30 September        31 March
                                                    2000            2000
                                               Unaudited       Unaudited
                                                 HK$'000         HK$'000

0-30 days                                        161,404          90,296
31-60 days                                         8,910           2,401
> 60 days                                          8,559           7,402
                                           -------------   -------------
                                                 178,873         100,099
                                           =============   =============

The majority of the Group's sales are on terms of L/C at sight.

7. Accounts and Other Payables

Included in accounts and other payables are accounts payable of HK$631,254,000 (31 March 2000: HK$281,542,000), the aging analysis of which is as follows:

                                            30 September        31 March
                                                    2000            2000
                                               Unaudited       Unaudited
                                                 HK$'000         HK$'000

0-30 days                                        353,796         150,210
31-60 days                                       148,961          55,823
61-90 days                                        67,151          25,638
Over 90 days                                      61,346          49,871
                                           -------------   -------------
                                                 631,254         281,542
                                           =============   =============

8. Share Capital

                                            30 September        31 March
                                                    2000            2000
                                               Unaudited         audited
                                                 HK$'000         HK$'000

  1,200,000,000 ordinary shares of 
    HK$0.10 each                                 120,000         120,000
                                           =============   =============
Issued and fully paid:
  635,259,975 (31 March 2000: 588,891,296) 
    ordinary shares of HK$0.10 each               63,526          58,889
                                           =============   =============

Details of the movements in the issued share capital of the Company during the period are as follows:

(a) During the period 46,268,679 warrants were exercised by warrant holders at the subscription price of HK$0.46 per share for HK$21,283,600 in cash. The excess of the proceeds over the par value of the ordinary shares issued of approximately HK$16,656,732 was credited to the share premium account. The outstanding warrants were expired on 30 September 2000.

(b) On 10 April 2000, 50,000,000 of the Company's share options were granted to the executive directors and certain employees of the Company to subscribe for a total of 50,000,000 ordinary shares of the Company at an exercise price of HK$0.70 per share on or before 9 April 2010. During the period, 100,000 share options were exercised. The excess of the proceeds over the par value of the ordinary shares issued of HK$60,000 was credited to the share premium account.

9. Reserves

                                                       Exchange        Asset
                                Share  Contributed  fluctuation  revaluation   Retained
                              premium      surplus      reserve      reserve    profits      Total
                              HK$'000      HK$'000      HK$'000      HK$'000    HK$'000    HK$'000

Balance at 1 April 2000        12,018          280       (5,305)      91,413    180,227    278,633
Exercise of warrants           16,657            -            -            -          -     16,657
Exercise of options                60            -            -            -          -         60
Exchange difference on
  translation of overseas
  subsidiaries' financial 
    statements                      -            -          570            -          -        570
Net profit for the period           -            -            -            -     26,889     26,889
Interim dividends                   -            -            -            -     (6,353)    (6,353)
                            ---------    ---------    ---------    ---------  ---------  ---------
Balance at 30 September 
  2000                         28,735          280       (4,735)      91,413    200,763    316,456
                            =========    =========    =========    =========  =========  =========

10. Contingencies and Commitments

(a) Contingent liabilities in respect of bills discounted with recourse at 30 September 2000 was HK$18,132,000 (31 March 2000: HK$2,421,000).

(b) Capital commitments in respect of fixed assets

                                            30 September        31 March
                                                    2000            2000
                                               Unaudited         Audited
                                                 HK$'000         HK$'000
Contracted for but not provided in the 
  financial statements                            22,143          16,955
Authorised but not contracted for                      -             737
                                           -------------   -------------
                                                  22,143          17,692
                                           =============   =============

(c) Commitments to buy and sell foreign currencies amounted to HK$179,032,000 (31 March 2000: HK$203,395,000)

11. Related Party Transactions

During the period, the Group had the following related party transactions:

(a) The Group sold audio products and related components amounting to HK$806 (year ended 31 March 2000: HK$408,000) to Pioneer Ventures Limited ("PVL"), a wholly-owned subsidiary of EganaGoldpfeil (Holdings) Limited which is a substantial shareholder of the Company.

The sales to PVL were made according to the published prices and conditions offered to the major customers of the Group.

(b) The Group paid HK$25,500 (year ended 31 March 2000: HK$318,900) to International Taxation Advisory Services Limited, of which Wong Wai Kwong, David, a non-executive director of the Company, is a director, for corporate advisory services rendered. The directors consider that the above corporate advisory services charges were paid according to the published prices and conditions similar to those offered by other external consultants of the Group.


The Directors have resolved to declare an interim dividend of HK1.0 cent per share payable to shareholders whose names appear on the Company's Register of Members at the close of business on 16 January 2001. Dividend warrants will be sent to shareholders on or before 19 January 2001.


The Register of Members of the Company will be closed from Friday, 12 January 2001 to Tuesday, 16 January 2001, both days inclusive, during which period no transfer of shares will be registered. In order to qualify for the interim dividend, all transfer documents, accompanied by the relevant share certificates must be lodged with the Company's Branch Registrar in Hong Kong - Tengis Limited, 4th Floor Hutchison House, 10 Harcourt Road, Central, Hong Kong not later than 4:00 p.m. on Thursday, 11 January 2001.


Capitalizing on the solid foundation of Tonic's core business, the Directors are pleased to announce that Tonic recorded steady growth in the 2000/2001 interim period despite the intense competition in the AV product manufacturing industry. For the six months ended 30 September 2000, the Group's turnover increased 28.7% to HK$1,390 million, while profit attributable to shareholders was HK$26.9 million, the previous period's figure was HK$34.4 million.

During the period under review, the Group obtained significant growth in the manufacturing of audio products for OEM and ODM customers. In particular, the manufacturing of MD Hi-fi equipment shows outstanding growth, with its share of Group turnover reached 20% in the first half of the financial year. This reflects the fact that the Group has effectively captured market opportunities for the popularity of MD products and has the ability to enlarge its market share. The Group's other products namely Discmans, portable CD/Cassette Recorders and Mini & Micro Compo Systems have also recorded steady growth, with their share of the Group's turnover at 25%, 20% and 28% respectively.

The fact that the profit did not show a corresponding growth for the first half of the year is attributable to the increasing cost of raw materials, such as integrated circuits, RAM and plastic materials. Increase in oil prices has sharply raised the cost of plastic materials, whereas the worldwide shortage of IC and RAM has driven the increase in costs of these components. Recently, the supply has returned to a normal level and the selling prices for all the components have lowered. It is expected that the profit margin will improve in the second half of the year. Depreciation of Euro also affects the margin of the sales to Europe as the European market accounted for 30% of the total sales.

The business of the Group are seasonal in nature with peak season from June to November each year. On the contrary, January to March is the slack season. Business activities at the end of the interim period of 30 September 2000 would therefore be very large as compared to the year end of 31 March 2000. As a result, the amount of inventories, accounts and other receivables and payables are relatively higher.

Production plans for different products have progressed smoothly. The Group has maximized market knowledge and expertise in the manufacturing of high profit margin products including MP3 Discmans and CD-RW. Both products were introduced in the market and have received encouraging responses. Revenue is expected to be reflected in the second half of the year. Diversifying the Group's top quality product range is one of the key corporate strategies of the Group. Apart from its audio products, Tonic has successfully developed its advance technology products and home appliance products via two divisions - Tonic Technology Limited and Tonic Appliances Limited.

Tonic Technology Limited, which focuses on the development of advance technology products, launched its Internet set top box and digital satellite receiver in the 4th quarter this year. Both products were well received in the United States and Europe. With this successful market presence, the Group introduced its Internet set top box to the Asian market, achieving a strong foothold through its competitive price and user-friendly design. This demonstrates that the Group is on the right track and has a well-established market niche. It will continue in this direction to further capture the emerging markets.

Tonic Appliances Limited, which focuses on the development of home appliances, launched its innovative 3 in 1 coffee making machine in the market which is enjoying a high reputation. A number of new products are in the pipeline, which will further enrich Tonic's product portfolio.

The Group is committed to the pursuit of state-of-the-art production facilities to satisfy increasing customer demand. The new factory Block 8, together with advance machinery at a total investment of approximately HK$100 million, was inaugurated in June this year. On the new production floor, five more production lines were put into operation with seven sets of high-speed, fully automated SMT machines being installed. The production capacity has been driven up by 40% and product quality is even more reliable. Capital expenditure for the last full year ended 31 March 2000 amounted to HK$63 million.

Although production capacities have increased by 40%, production is expected to reach full capacity soon because of the increasing orders received from customers. To plan for the future, the Group's new factory block 9 and a new staff dormitory are under construction with completion expected in April 2001. At that time, production capacity will increase a further 20%.

To save production costs, the Group has ordered six sets of heavy oil electricity generators and attachments. Two of these will be installed in December 2000 and the other four are expected to be installed before June 2001. HK$50 million will be invested for the purchase and installation. In the long run, electricity costs can be reduced by 30 - 40% and investment will be paid back within four years.

As at 30 September 2000, the Group has approximately 142 staff stationed in Hong Kong and approximately 10,500 workers in the PRC factories. Total salary costs amounted to approximately HK$58,405,000. The Group provides year end double pay, discretionary bonus, provident fund scheme, medical insurance and training to staff.

To grasp the numerous opportunities in the e-commerce era, the Group is developing its B2B platform and logistics system. This will enhance the procurement transaction process and enable the Group to obtain the cheapest components among suppliers. The Group expects this B2B platform to begin operations in March 2001.

The Group is in the process of consolidating its existing business as a result of the rapid growth in the last three years. It is also in the process of reengineering its existing audio business into a more diversified, technology advanced and value driven business. Significant amount of research and development costs for the above new products have been incurred and provided in the financial statements. With the management's rich experience, strong leadership and widespread expertise in implementing sound marketing strategies, the Group is confident that it will continue its robust business development to the future.


During the period, neither the Company, nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed securities.


The Audit Committee has reviewed with management the accounting principles and practices adopted by the Group and discussed auditing, internal control and financial reporting matters including the review of the unaudited interim financial statements.


None of the directors of the Company is aware of any information that would reasonably indicate that the Company had not been for any part of the accounting period covered by the interim report in compliance with 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.


On behalf of the Board, I would like to extend my sincere gratitude to our shareholders, customers, suppliers and bankers for their continued support. I would also like to thank my fellow directors and our staff for their dedication and contribution to the Company.

On behalf of the Board
Simon Ling Siu Man
Chairman and Managing Director

Hong Kong, 27 December 2000

Source: Tonic Industries Holdings Limited
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