(Incorporated in Bermuda with limited liability)



The Board of Directors has pleasure in presenting the audited consolidated results of the Company and its subsidiaries (the "Group") for the year ended 31 March 1998 with comparative figures for the previous corresponding year as below:


1. Taxation

Hong Kong profits tax has been provided at the rate of 16.5% (1997: 16.5%) on the estimated assessable profits arising in Hong Kong during the year. Taxes on profits in respect of subsidiaries operating overseas have been calculated at the rates of taxation prevailing in the respective tax jurisdiction in which they operate.

2. Earnings per share

The calculation of earnings per share is based on the net profit attributable to shareholders for the year of HK$249,005,000 (1997: HK$245,793,000) and the weighted average of 1,285,063,178 shares (1997: 1,206,316,712 shares) in issue during the year. Fully diluted earnings per share are not shown for the year as the exercise of outstanding share options would not have a material dilution effect.

3. Comparative figures

The dividend per share and earnings per share have been adjusted to reflect the sub-division of one share into two shares on 25 September 1997, i.e. the par value of HK$0.1 became HK$0.05 after share sub-division.


The Directors recommend the payment of a final dividend of 2.75 cents per share (1997: 2.5 cents per share) which, together with the interim dividend of 1.75 cents per share paid in February, 1998, will make a total dividend of 4.5 cents per share (1997: 4.0 cents per share).

Subject to the approval of the shareholders at the forthcoming Annual General Meeting, the proposed final dividend will be payable on Thursday, 22 October 1998 to the shareholders registered on the Register of Members on Thursday, 24 September 1998.


The Register of Members of the Company will be closed from Thursday, 17 September 1998 to Thursday, 24 September 1998, both days inclusive, during which period no transfer of shares can be registered. All transfers accompanied by the relevant share certificate, must be lodged with the Company's Registrar in Hong Kong, Tengis Limited at 1601 Hutchison House, 10 Harcourt Road, Central, Hong Kong not later than 4:00 p.m. on Wednesday, 16 September 1998 in order to qualify for the proposed final dividend above mentioned.


The Group's turnover and profit attributable to shareholders in this financial year increased by 56% and 1% respectively over last year. A final dividend of 2.75 cents has been recommended by the Board (last year: 2.5 cents). Total dividend per share for the year, including interim dividend, is 4.5 cents, a 13% growth over last year's 4.0 cents.

The turnover of manufacturing and sale of knitted fabric was approximately HK$1,984,000,000, an increase of 26%, which was about 71% of total group turnover. The US remains our major market for this business, taking up about 65% of our sales, with Europe and Asia at about 25% and 10% respectively. Our clients are mostly internationally renowned fashion retailers. As the economic outlook for the US and Europe is still promising, we expect sales growth to be mainly from these markets in the foreseeable future. In view of the expected growth, the Group has purchased various modern equipment to enhance productivity. The third phase of our factory in Dongguan had been completed during the period, and production has already started in this additional area of approximately 350,000 sq.ft. After three phases of expansion, the factory in Dongguan now measures about 2 million sq.ft, with about 400,000 sq.ft of land left for future development.

Sales of the retail business "Baleno" was about HK$728,000,000, a significant increase of 2.7 times, at about 26% of total turnover of the Group. The main source of growth was from China, taking up about 70% of total retail turnover. At the moment there are 209 shops in China, of which about 1/3 are self-owned, the rest are franchised shops. In Hong Kong and Taiwan we have 17 shops and 38 shops respectively. The retail business of "Baleno" in other parts of Asia is operated under franchise, with the Group charging a franchise fee. In the coming year, the Group will focus on opening franchised shops in China, while development in Hong Kong and Taiwan will be slowed.

The garment manufacturing business, an associate of the Group, reported steady growth. Besides providing garment products for famous brandnames, this business also manufactures for "Baleno" and purchases fabrics from the Group, thus playing a part in the vertical integration of the Group's businesses. The business is mainly based in China, with 2/3 of its production there, and the remaining 1/3 in Vietnam.

As our major markets are US and Europe, the Group was only slightly affected by the economic turmoil in Asia. However, to counter this unfavourable condition, the Group has taken steps to reduce costs and increase competitiveness. Consequently, I remain optimistic about the performance of the Group in the coming year.


The Group has paid the highest regard to the problem of Millennium Bug and has completed its investigation of the problem. We have targeted to fully solve the problem by the end of 1998. As the Group has taken into account the Millennium Bug problem in designing the computer application system, therefore, we have confidence that the Millennium Bug should not have any impact on our system.


During the year, the Company purchased a total of 13,456,000 of its listed shares on the Stock Exchange as follows:-

The above repurchased shares have been duly cancelled and the issued capital of the Company has been reduced according to the par value of the cancelled shares.

Save as disclosed above, there was no purchase, sale or redemption by the Company or any of its subsidiaries of the Company's securities during the year.

By Order of the Board
Poon Bun Chak

Hong Kong, 18 August 1998

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