STELUX Holdings International Limited



The audited consolidated results are set out below:-

                                                     For the year ended
                                                          31st March
                                                      1999           1998
                                                   HK$'000        HK$'000

Turnover                                         1,286,677      3,195,908
                                                 =========     ==========
Operating loss                                    (120,776)       (85,820)
Exceptional items (Note 1)                         (64,765)    (2,298,409)
                                                 ---------     ----------
Loss from ordinary activities                     (185,541)    (2,384,229)
Share of losses of associated companies                  -       (391,871)
                                                 ---------     ----------
Loss before taxation                              (185,541)    (2,776,100)
Taxation (Note 2)                                   (2,413)        22,316
                                                 ---------     ----------
Loss after taxation                               (187,954)    (2,753,784)
Minority interests                                       -            379
                                                 ---------     ----------
Loss attributable to shareholders                 (187,954)    (2,753,405)
                                                 =========     ==========
Loss per share (Note 3)                          (HK$0.201)     (HK$2.941)
                                                 =========     ==========


1. Exceptional items

                                                       1999         1998
                                                    HK$'000      HK$'000

Exceptional items comprise the following:

Provision for deficits on the revaluation
  of investment properties                         (158,472)           -
Foreign exchange (loss) / gain on
  convertible notes                                 (15,977)      26,250
Additional depreciation for overseas
  properties                                        (10,000)           -
Loss on sales of investment properties                    -   (1,175,296)
Exchange loss arising from devaluation
  of Asian countries currencies                           -      (21,173)
Provision for closure costs of an overseas
  subsidiary company                                      -       (6,636)
Profit on repurchase of convertible notes            99,164            -
Provision written back / (provision) for
  diminution in value of marketable
  securities                                          7,708   (1,204,166)
Net profit on sales of land and buildings             9,387       40,000
Provision written back / (provision) for
  severance payments                                  3,425       (6,140)
Forfeiture of deposits from property
  purchasers                                              -       37,571
Forfeiture of deposit from a tenant                       -        6,750
Recovery of bank deposit from Bank
  of Credit and Commerce Group
  (in liquidation)                                        -        4,431
                                                   --------   ----------
                                                    (64,765)  (2,298,409)
                                                   ========   ==========

2. Taxation

Hong Kong profits tax has been provided at the rate of 16% (1998:16.5%) on the estimated assessable profits for the year less relief for available tax losses. Taxation on overseas profits has been calculated on the estimated assessable profits for the year at the rates of taxation prevailing in the countries in which the Group operates.

3. Loss per share

The calculation of loss per share is based on the Group's loss attributable to shareholders of HK$187,954,000 (1998: HK$2,753,405,000) and on the weighted average of 936,340,023 shares (1998: 936,182,222 shares) in issue during the year.

There was no potential dilution of loss per share during 1999 and 1998.


During the year, there was no purchase, sale or redemption by the Company, or any of its subsidiary companies, of the Company's listed securities except that a wholly owned subsidiary company had repurchased Swiss Francs 25.5 million of the unlisted Swiss Francs Convertible Notes issued by the same subsidiary as follows:

                                    Nominal             Consideration
Issuer           Description        amount repurchased  paid

Stelux Holdings  1.75 percent       Swiss Francs        Swiss Francs
  Limited        Swiss Francs       25,500,000          6,650,000 average
                 125,000,000                            of 26 per cent
                 convertible notes                      of nominal value
                 due 2001


The directors do not recommend the payment of a dividend for the year (1998 : Nil).


In the opinion of the directors, the Company has complied 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 throughout the year except that the independent non-executive directors of the Company are not appointed for a specific term. The Company's audit committee was set up on 26th February 1999 comprising of its two independent non-executive directors.



The Group reported a loss attributable to shareholders of HK$188 million compared to a loss of HK$2,753 million last year. A more modest Group turnover of HK$1,287 million was reported this year compared to HK$3,196 million last year, where the much larger turnover was due mainly to the disposal of a major investment property. Group operating loss was HK$121 million compared to HK$86 million last year. Exceptional items this year include a provision for deficits on revaluation of the Group's investment properties, including Stelux House, of HK$158 million, a gain on repurchase of Swiss Francs Convertible Notes of HK$99 million and foreign exchange loss in translating Swiss Francs Convertible Notes of HK$16 million.


Retail and Trading

The Group's Retail and Trading Division continued to be affected by the recession in much of Asia. Compared to last year, overall turnover for this Division decreased by 19% and a slightly higher operating loss of HK$88 million was recorded.

Our Hong Kong watch retail operations were badly hit, reporting a decrease in turnover of 29%. As of August 1999, the number of stores have been reduced from 67 to 50. However, watch retail operations in some Asian countries were more positive even reporting slight profits. This was due in part to effective cost restructuring and also to more stabilized currencies.

Comparatively speaking, the Group's retail optical and infant wear businesses in Hong Kong and regionally were less affected by the recession. Although losses were also reported for these businesses, overall results were more positive compared to last year in that losses for our optical business was reduced by 34% and that of infant wear by 32%. The franchising of Optical 88 stores continued to produce satisfactory results and as of August 1999, the number of franchised stores were increased by 18 to 29 stores.

As expected, our export arm and trading subsidiaries in the United Kingdom and United States reported profits. However, overall performance was affected by the poor performance of our Swiss subsidiary. Our Swiss subsidiary has recently been restructured and losses are expected to narrow in the coming year.

Property Investment

During the financial year, gross rental income received from Stelux House was HK$26 million including intra-group rental of approximately HK$4 million. The building is now almost fully leased and an annual gross rental income of HK$42 million will be derived next year. Provisions for deficits on revaluation during the year of Stelux House and other investment properties amounting to HK$133 million and HK$25 million respectively were made.

To cater for the expansion of our United Kingdom subsidiary, a new office building for self-use was constructed during the year.

Two retail properties in Singapore were disposed of during the year at a small profit of HK$1.4 million. Subsequent to the period under review, a shop in Hong Kong was disposed of at a loss of HK$15 million. Presently, the Group still owns 4 shops in Hong Kong and 5 shops in Macau.


The Group's bank borrowings at balance sheet date were HK$439 million (1998: HK$1,721 million), reduced mainly because of the disposal of a major investment property. At balance sheet date, approximately 50% of the Group's borrowings (including bank loans and Swiss Francs Convertible Notes) were denominated in Hong Kong Dollars and the remaining 50% were denominated in Swiss Francs. The Notes carry a fixed interest rate of 1.75% per annum. All other borrowings are on a floating rate based at either bank prime lending rates or short-term inter-bank offer rates.

The Group's outstanding Swiss Francs Convertible Notes were reduced to Sfr79,500,000 (1998: Sfr105,000,000). Notes at a nominal value of Sfr25,500,000 were repurchased during the year at a discount of about 74%. The present liability denominated in Swiss Francs is unhedged but the foreign currency exposure is constantly reviewed by management.

The Group does not engage in speculative derivative trading.

During the year, the Group's cashflow has been adequate and improved by rental income generated from Stelux House. Additionally, the sale of marketable securities and the disposal of two retail properties in Singapore and one office building in United Kingdom also brought in cash proceeds.


We do not see an imminent recovery in the local retail market and Group performance for the coming year will continue to be largely export led.

As South East Asian retail markets bottom out, we believe that we should position ourselves for the upswing. We hope to achieve this by extending our stores to towns outside of capital areas. Additionally, watch sales in the P.R.C. are expected to grow with the recent signing of a P.R.C. distributor.


The Company has complied with the Exchange's mandatory disclosure requirement with respect to the progress of resolving the Y2000 problem by disclosing the relevant information in the Company's 1998/1999 interim report dated 30th December 1998.

As of June 1999, all critical computer software systems are Y2000 compliant. There is one system, however, identified as Y2000 non-compliant but this will have no adverse effect on data processing. Hardware upgrading is still underway. All hardware which need to be Y2000 compliant will be upgraded by September 1999.

The Group shall be Y2000 compliant by September 1999. This is slightly later than previously disclosed because hardware upgrading was pushed to a later date to allow the Group to benefit from continued price reductions of computer hardware in the market. The spending on the Y2000 compliance project is controlled within the original HK$1.5 million budget. As of 31st March 1999, about 50% of the budgeted amount has been incurred and capitalised. As of 31st March 1999, the aggregate amount of commitments authorised by the directors and contracted but not provided for in the financial statements is HK$113,000. This amount will be capitalised. As of 31st March 1999, all authorised commitments have been contracted for. If trading activities are interrupted due to the Y2000 problem, the Group will conduct affected operations manually. The Group has not taken up insurance cover for potential losses caused by the Y2000 problem.

On behalf of the Board
Joseph C. C. Wong
Managing Director

Hong Kong, 3rd August 1999

Source: STELUX Holdings International Limited
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