The unaudited consolidated results were as follows:

                                                  For the six months ended
                                                       30th September
                                                      2001            2000
                                                   HK$'000         HK$'000

Turnover (Note 2)                                  584,493         593,174
Cost of sales                                     (224,527)       (261,136)
                                                ----------      ----------
Gross profit                                       359,966         332,038
Other income                                        14,508          16,515
Selling expenses                                  (252,760)       (176,807)
General and administrative expenses                (81,951)        (77,034)
Other operating expenses                           (26,909)        (72,457)
Profit on repurchase of convertible notes                -           4,228
Foreign exchange gain on convertible notes               -           5,365
Net profit on sales of land and buildings                -          17,799
Forfeiture of deposit from property purchaser       18,000               -
Net unrealised loss on marketable securities             -         (11,541)
                                                ----------      ----------
Operating profit before financing (Note 3)          30,854          38,106
Finance costs                                      (21,598)        (21,642)
                                                ----------      ----------
Profit before taxation                               9,256          16,464
Taxation (Note 4)                                     (490)           (780)
                                                ----------      ----------
Profit after taxation                                8,766          15,684
Minority interests                                       -               -
                                                ----------      ----------
Profit attributable to shareholders                  8,766          15,684
                                                ==========      ==========
Earnings per share (Note 6)                       HK cents        HK cents
  - basic                                             0.94            1.68
  - diluted                                           0.93            1.66
                                                ==========      ==========


1. Principal accounting policies

These unaudited consolidated interim accounts ("interim accounts") are prepared in accordance with Statement of Standard Accounting Practice ("SSAP") No. 25, "Interim Financial Reporting", issued by the Hong Kong Society of Accountants, (as applicable to interim accounts), and Appendix 16 of the Listing Rules of The Stock Exchange of Hong Kong Limited. These interim accounts should be read in conjunction with the Annual Report 2001.

The accounting policies adopted in the preparation of these interim accounts are consistent with those used in the annual accounts for the year ended 31st March 2001 except that the Group has changed certain of its accounting policies following the adoption of the new or revised SSAPs issued by the Hong Kong Society of Accountants which are effective for accounting periods commencing on or after 1st January 2001; set out as follows:

SSAP 9 (revised):Events after the balance sheet date
SSAP 10 (revised):Accounting for investments in associates
SSAP 14 (revised):Leases
SSAP 17 (revised):Property, plant and equipment
SSAP 26:Segment reporting
SSAP 28:Provisions, contingent liabilities and contingent assets
SSAP 29:Intangible assets
SSAP 30:Business combinations
SSAP 31:Impairment of assets
SSAP 32:Consolidated financial statements and accounting for investments in subsidiaries

The changes to the Group's accounting policies and the major effect of adopting these new policies are set out below:

(a) Goodwill arising on acquisition of subsidiary companies on or after 1st April 2001 is included in the balance sheet as a separate asset and amortised using the straight line method over its estimated useful life of not more than 20 years. In prior years, goodwill on acquisition was taken directly to reserve. This change in accounting policy has no effect on the accounts for the period.

(b) In prior years, the Group capitalised an internally generated trademarks and patents amounting to HK$1,000,000. The adoption of SSAP 29 has meant that the internally generated trademark did not meet the recognition criteria prescribed in the new standard. In accordance with the transitional provision of SSAP 29, this change in accounting policy has been applied retrospectively and as a result, trademarks and patents and reserves of the Group as at 31st March 2001 and 31st March 2000 have decreased by HK$1,000,000.

2. Turnover and contribution to profit before taxation

An analysis of the Group's turnover and contribution to the profit before taxation by principal activities and markets is as follows:

                                                          Contribution to
                                      Turnover       profit before taxation
                                      Unaudited              Unaudited
                                   Six months ended      Six months ended
                                    30th September        30th September
                                     2001       2000       2001       2000
                                   HK'000     HK'000     HK'000     HK'000

Analysis by principal activities:
  Investment                        1,298        906     (4,166)    (7,115)
  Property                         18,589     58,970     17,770     20,734
  Retailing and trading           564,606    533,298      9,206     15,871
  Group administration overheads        -          -    (13,554)   (13,026)
                                 --------   --------   --------   --------
                                  584,493    593,174      9,256     16,464
                                 ========   ========   ========   ========

Analysis by principal markets:
  Hong Kong                       354,729    385,461      2,640     17,619
  South East and Far East Asia    128,811    117,820      3,208     (1,075)
  Europe                           86,525     71,964     16,671     11,951
  North America                     8,096     10,262       (395)      (499)
  Others                            6,332      7,667        686      1,494
  Group administration overheads        -          -    (13,554)   (13,026)
                                 --------   --------   --------   --------
                                  584,493    593,174      9,256     16,464
                                 ========   ========   ========   ========

3. Operating profit before financing

                                                         Six Months ended
                                                          30th September
                                                        2001          2000
                                                     HK$'000       HK$'000

Operating profit before financing is stated
  after charging:
    Owned fixed assets                                26,413        23,319
    Leased fixed assets                                  179           168
  Amortisation of trademarks and patents               1,229         1,042
  Loss on disposal of fixed assets                       211         1,539
  Loss on sales of marketable securities                  17             -
  Provision for stock obsolescence and
    stocks written off                                     -         3,354
  Provision for doubtful debts and bad debts
    written off                                        3,248         1,141
                                                    ========      ========
and after crediting:
  Net provision for stock obsolescence and
    stocks written back                                1,259             -
                                                    ========      ========

4. Taxation

Hong Kong profits tax has been provided at the rate of 16% (2000: 16%) on the estimated assessable profit for the period less relief for available tax losses. Taxation on overseas profits has been calculated on the estimated assessable profit for the period at the rates of taxation prevailing in the countries in which the Group operates.

The amount of taxation charged to the consolidated profit and loss account represents:

                                                         Six Months ended
                                                          30th September
                                                        2001          2000
                                                     HK$'000       HK$'000

Hong Kong profits tax
  Current taxation                                         -          (405)
  Under provision in respect of prior years             (726)            -
Overseas profits tax
  Current taxation                                      (491)         (169)
  Over/(under) provision in respect of prior years       727          (206)
                                                    --------      --------
                                                        (490)         (780)
                                                    ========      ========

5. Interim dividends

The Directors do not recommend the payment of an interim dividend for the period (2000: nil).

6. Earnings per share

The calculation of basic earnings per share is based on the Group's profit attributable to shareholders of HK$8,766,000 (2000: HK$15,684,000) and on the weighted average number of 936,340,023 shares (2000: 936,340,023 shares) in issue during the period.

The calculation of diluted earnings per share is based on profit attributable to shareholders of HK$8,766,000 (2000: HK$15,684,000) and on the weighted average number of 936,340,023 shares (2000: 936,340,023 shares) in issue during the period plus the weighted average number of 1,388,430 shares (2000: 5,857,627 shares) deemed to be issued at no consideration if all outstanding options had been exercised.

7. Contingent liabilities

The status of the Group's arbitrations and liability for latent defects in respect of the sale of Titus Square were fully disclosed in the Annual Report 2001 except that determination of the arbitration with the contractor for the Titus Square development is now anticipated in 2002.

8. Related party transactions

                                                         Six Months ended
                                                          30th September
                                                        2001          2000
                                                     HK$'000       HK$'000

Purchases of goods from related companies             18,795        16,269
Rental income received from related companies            957           975
Interest income received from a related company        2,308         2,235
Interest expense paid to a related company             1,001         1,499
                                                    ========      ========

The terms of these related party transactions have not changed from those disclosed in the Annual Report 2001. In addition, purchases of watch products amounting to HK$16,315,000 and purchases of optical products amounting to HK$1,264,000 during the period also constitute connected transactions under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. These connected transactions were announced on 15th August 2001 and 15th October 2001 for watch products and optical products respectively.



The Group reported a profit attributable to shareholders of HK$8.8 million compared to HK$15.6 million last year.

Retail and Trading Division

The Group's retail and trading subsidiaries within this Division which includes City Chain, Optical 88 and Hipo.fant and its export arm managed to maintain and in some cases, better their respective sales turnovers compared to the corresponding period last year. Turnover increased by 6% compared to the previous half year. This was due to improvements made in key areas like, product development, product mix and quality, shop location and prices.

However, a very competitive business environment affected profit margins. Half yearly profits generated by this Division fell to HK$9 million compared to profits of HK$15.9 million last year.

The accelerated downturn of the U.S. economy has severely affected retail sentiment in Asia. In Hong Kong, City Chain maintained its sales turnover but a loss of HK$2.5 million was recorded compared to a profit of HK$5.9 million for the same period last year. City Chain in Singapore and Malaysia reported satisfactory growth with improved sales turnovers. In Thailand, sales turnover was maintained.

Optical 88 in Hong Kong reported breakeven results with slightly improved turnover figures compared to the corresponding period last year. The local optical industry remains extremely saturated. To improve margins, product mix with healthier margins were introduced. We have also introduced various packaged services and products at very competitive prices. Thailand and Singapore Optical 88 also reported satisfactory turnover figures and it is expected that these two operations will contribute profits in the second half of the year.

In Hong Kong, Hipo.fant reported similar sales turnover figures with a loss of HK$1.6 million compared to breaking even over the same period last year. Customers continued to bargain hunt and this has again affected profit margins. Following the Group's efforts, during the last few years, Hipo.fant now enjoys instant brand recognition in Hong Kong. To further strengthen the brand, we will focus more on selecting sites away from fringe locations and in central areas. Shop sizes will also be increased. There are now 4 Hipo.fant shops in Singapore. All these shops are located in main business or prime shopping districts. Initial sales have been satisfactory.

Cost cutting measures to reduce operational costs are still in place. Non-performing shops will be closed when their leases expire.

The Group's total stores increased from 401 as at 31st March 2001 to 408 as at 30th November 2001.

Our export and overseas trading subsidiaries reported a profit of HK$5 million, a slight improvement from the corresponding period last year whilst overall turnover improved by 16%. Greater advertising activity for addidas brought an increasing number of distribution points and sales.

Property Investment Division

Stelux House continues to contribute stable income. Leases which are due for expiry have been renewed on satisfactory terms, considering the very poor local leasing conditions. After 30th September 2001, a shop property was disposed of for HK$21 million.


In the very short term, we do not expect to see any major turnaround in retail sentiment in Hong Kong or regionally. However, we hope that efforts made to increase the attractiveness of Hong Kong as a major tourist hub and particularly, the expected lifting of the quota for mainland visitors will bring some cheer back to this sector. Overall, we remain cautiously hopeful of maintaining the performance for the three chains in the second part of the year.

Last year with improving Asian economies, we adopted a strategy to further strengthen the market shares of our three retail chains. Following the unexpected turn of events in the U.S., we have since modified this strategy. We have suspended existing plans for the opening of further shops in Hong Kong, where City Chain, Optical 88 and Hipo.fant already have a substantial, if not, major presence. We will however continue to selectively open new shops in countries like Thailand, Singapore and Malaysia, where rentals and other costs are still relatively low as we see opportunities for growth in these places in the medium to longer term.

At the same time, the Group has been exploring different ways to expand its watch business in the PRC and hopes soon to implement plans to increase either watch brand counters or City Chain counters in the PRC.


The Group's bank borrowings at balance sheet date were HK$532 million (at 31st March 2001: HK$511 million), out of which, HK$235 million (at 31st March 2001: HK$203 million) were repayable within 12 months. The Group's gearing ratio at balance sheet date was 0.69 (at 31st March 2001: 0.68), and was calculated based on the Group's bank borrowings and shareholders' funds of HK$768 million (at 31st March 2001: HK$756 million). Efforts have been taken to improve this gearing ratio by increasing stock turnover and reducing stock levels.

As at balance sheet date, 3% (at 31st March 2001: 4%) of the Group's bank borrowings were denominated in foreign currencies. Group borrowings denominated in Hong Kong Dollars were on a floating rate basis at either bank prime lending rates or short-term inter-bank offer rates. We have successfully negotiated further interest rate reductions. Since the reductions were effected after the balance sheet date, the benefits will only be reflected in the results for the second half year.

The Group does not engage in speculative derivative trading.


There was no change in the capital structure of the Group during the period except that 3,000,000 share options previously held by Mrs Sudarat Sagarino have lapsed upon her resignation from the board on 23rd August 2001.


There was no change in the composition of the Group during the interim period.


The Group's remuneration policies are reviewed on a regular basis and remuneration packages are in line with market practices in the relevant countries where the Group operates. As of 30th September 2001, the Group had 1,843 (at 30th September 2000: 1,814) employees. Details of outstanding share options were disclosed in the Group's Annual Report 2001 and the above section, "Capital Structure of the Group".


At 30th September 2001, certain of the Group's land and buildings amounting to HK$235,540,000 (at 31st March 2001: HK$238,217,000), investment properties amounting to HK$592,050,000 (at 31st March 2001: HK$592,050,000) and plant and equipment amounting to HK$1,757,000 (at 31st March 2001: HK$2,164,000) were pledged to secure banking facilities granted to the Group.


During the period, there was no purchase, sale or redemption by the Company, or any of its subsidiary companies, of the Company's listed securities.


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 throughout the year except that the independent non-executive directors of the Company are not appointed for a specific term.


The Audit Committee has reviewed with management the accounting principles and practices adopted by the Group and discussed the internal controls and financial reporting matters related to the preparation of the interim accounts for the six months ended 30th September 2001.


A detailed announcement of the interim results of the Group for the six months ended 30th September 2001 containing all the information required by paragraph 46(1) to 46(6) of Appendix 16 of the Listing Rules will be published on the website of the Stock Exchange ( in due course.

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

Hong Kong, 20th December 2001

Source: STELUX Holdings International Limited
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