(Incorporated in Bermuda with limited liability)



The Board of Directors (the "Board") has pleasure in presenting the audited consolidated results of the Company and its subsidiaries (the "Group") for the year ended 31 March 1999 with comparative figures for the previous corresponding year as below:

                                           For the year ended 31 March
                                                    1999          1998
                                    Notes       (HK$000)     (HK$000)

Turnover                                       2,725,293     2,811,580
                                              ==========    ==========
Operating profit                                 189,093       243,727
Share of profit of
  an associated company                           12,382         6,823
                                              ----------    ----------
Profit before taxation                           201,475       250,550
Taxation                              1          (19,414)      (25,804)
                                              ----------    ----------
Profit after taxation                            182,061       224,746
Minority interests                                     -        24,259
                                              ----------    ----------
Net profit attributable
  to shareholders                                182,061       249,005
Interim dividend                                 (25,574)      (22,436)
Proposed final dividend                          (38,362)      (35,165)
                                              ----------    ----------
Retained profits for the year                    118,125       191,404
                                              ==========    ==========
Earnings per share (cents)            2
  Basic                                             14.2          19.4
                                              ==========    ==========
  Diluted                                            N/A          19.0
                                              ==========    ==========
Interim dividend
  per share paid (cents)                            2.00          1.75
Final dividend per share
  proposed/paid (cents)                             3.00          2.75
                                              ----------    ----------
                                                    5.00          4.50
                                              ==========    ==========


1. Taxation

Hong Kong profits tax has been provided at the rate of 16% (1998: 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 jurisdictions in which they operate based on existing legislation, interpretations and practices in respect thereof.

                                                     1999         1998
                                                 (HK$000)    (HK$000)

Hong Kong and PRC tax
  Current year provision                           20,749       25,923
  Overprovision in prior year                         (30)        (390)
  Hong Kong profits tax rebate relating
    to prior year                                    (700)           -
  Deferred taxation                                  (855)         489
Associated company                                    250         (218)
                                                  -------      -------
                                                   19,414       25,804
                                                  =======      =======

2. Earnings per share

The basic and diluted earnings per share for the year ended 31 March 1998 have been restated, in accordance with the provisions of Statement of Standard Accounting Practice No.5 (revised) issued by the Hong Kong Society of Accountants in May 1998.

(a) Basic earnings per share

The calculation of basic earnings per share is based on the net profit attributable to shareholders for the year of HK$182,061,000 (1998: HK$249,005,000) and the weighted average of 1,278,947,918 (1998: HK$1,285,063,178) shares in issue during the year.

(b) Diluted earnings per share

Diluted earnings per share for the year ended 31 March 1999 has not been shown as the outstanding share options were antidilutive during the year.

The calculation of diluted earnings per share for the year ended 31 March 1998 was based on the net profit attributable to shareholders for the year of HK$249,005,000 and the weighted average number of 1,309,330,211shares in issue which has been adjusted to reflect the effects of all dilutive potential ordinary shares during the year.

The reconciliation of weighted average number of shares in calculation of basic earnings per share and diluted earnings per share was as follows:


Weighted average number of ordinary shares used in
  calculation of basic earnings per share                  1,285,063,178
Deemed Issue of ordinary shares for no consideration
  arising from share options                                  24,267,033
Weighted average number of ordinary shares used in
  calculation of diluted earnings per share                1,309,330,211


The Directors recommend the payment of a final dividend of 3.0 cents per share (1998: 2.75 cents per share) which, together with the interim dividend of 2.0 cents per share paid in February 1999 will make a total dividend of 5.0 cents per share (1998: 4.5 cents per share).

Subject to the approval of the shareholders at the forthcoming Annual General Meeting, the proposed final dividend will be payable on Friday, 22 October 1999 to the shareholders registered on the Register of Members on Friday, 24 September 1999.


The Register of Members of the Company will be closed from Friday, 17 September 1999 to Friday, 24 September 1999, 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 Thursday, 16 September 1999 in order to qualify for the proposed final dividend above mentioned.


In this financial year, the Group's turnover and profit attributable to shareholders decreased by 3% and 27% respectively. The Board recommended a final dividend of 3.0 cents per share (last year: 2.75 cents). Including interim dividend, total dividend per share for the year was 5.0 cents, an increase of 11% over last year's 4.5 cents.

In the face of the Asian economic turmoil, the Management had opted for a cautious financial policy. Inventory turnover days on sales improved from 64 days of last year to 55 days, and accounts receivable turnover on sales also decreased from 54 days of last year to 32 days. Bank borrowings were reduced by HK$255 million, causing bank borrowings to equity ratio to drop from 0.6 of last year to 0.3. At the end of this fiscal year, the Group's cash and bank balance amounted to HK$265 million.

Revenue from the textile business was 4.5% lower at HK$1,895 million, which was 70% of total turnover. The decrease was due mainly to a downward pressure on pricing, and the tightening of credit control by the Management. In order to maintain profit margin, the Management had taken active measures to reduce costs and increase productivity. Our major markets remained the United States (about 65%) and Europe (about 25%), orders from which had not been affected by volatility in the Asian markets. With Asia showing signs of recovery, we expect that business from this area will increase relatively.

"Baleno", the retail business, contributed a revenue of HK$796 million, an increase of 5.9%, which represented 29% of total turnover. The past year had been a difficult period for retail business as a whole as consumer confidence was badly shaken by the Asian economic crisis. However, there have been signs of recovery, and as rents and other costs have gone down, the business performance of "Baleno" has improved. China was still the mainstay of our retail business, with about 250 shops, 40 more shops compared with last year. We plan to open 50 new shops in China in the coming year, most of them will be franchised shops. There are 17 shops and 37 shops in Hong Kong and Taiwan respectively. The Group is actively exploring other retail markets in Asia, and such development plans are progressing smoothly.

For this financial year, the Management employed a conservative strategy to ensure that the Group remained financially strong. As the economic conditions in Asia and Hong Kong ameliorate, the Group will expedite its business expansion plans with prudence. The Management is confident that a progress will be seen in the results of the coming year.


During the year, the Company purchased a total of 984,000 of its listed shares on The Stock Exchange of Hong Kong Limited as follows:-

               Number of shares     Price per share         Aggregate
Month / Year        repurchased    Highest    Lowest    Consideration
                                       HK$       HK$              HK$

May 98                   32,000       0.84      0.73           25,720
June 98                 422,000       0.70      0.58          272,420
July 98                 530,000       0.55      0.45          255,100
                       --------                              --------
                        984,000                               553,240
                       ========                              ========

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.


In accordance with the Code of Best Practice set out in Appendix 14 of the Listing Rules of The Stock Exchange of Hong Kong Limited, the Company established an Audit Committee on 15 March 1999. The members of the Committee comprise the two independent non-executive directors, Mr. Au Son Yiu and Mr. Cheng Shu Wing, of the Company.

The terms of reference and duties have been laid down as a guideline for the Committee. The principal duties of the Committee include the review and supervision of the financial reporting process and internal control. Being a sub-committee of the Board, the Committee reports and makes recommendations to the Board directly.


a) The Company entered into two syndicated bank loan agreements under which the controlling shareholders, Poon family (Mr. Poon Bun Chak and his family), have to maintain controlling interest in the management of the Company ("Management") and hold an aggregate shareholding of not less than 51% of the issued capital ("Shareholding") of the Company during the tenure of the loans. And, the breach of the Management and Shareholding conditions is considered as a default under the loan agreements. As at 31 March 1999, the aggregate outstanding of the loans was HKD 280 million, representing 25% of the Group's net asset value. The final repayment date of the loans is 27 August 2001.

b) Save as disclosed above, there are no other events/transactions of the Company which require disclosure under the Practice Note 19.


The Group has recognised the Year 2000 ("Y2K") problem. The problem arises as a result of the two-digit representation of year on most computer systems. This storage method may lead to malfunction when computer systems attempt to retrieve or process time related information after or during the year 2000.

At 31 March 1999, the Group has completed an in-depth technical testing and evaluation on all systems. As most computer applications are developed by in-house technicians and the issue of Y2K has been addressed in system designing stage, so no Y2K problem is expected. For systems provided by third parties, the Group has confirmed the Y2K compliance of the systems with the vendors. In the meantime, the Group is enquiring as to the Y2K exposure and compliance of its major business partners which include suppliers and customers.

To avoid any unexpected disruption which may be caused by Y2K problem, the Group has set up a contingency plan which comprises the followings:

1) Backup all data and system programs on or before 31 December 1999;

2) Set up programs and system files on an independent network server to restore the system in case of any problem caused by Y2K;

3) Print out hard copies of all financial reports and ledgers;

4) Obtain hard copies of bank statements before 31 December 1999;

5) Obtain financial reports and ledgers on 1 January 2000 and reconcile them against reports listed above; and

6) All computer technicians are to be standby during the transition period from the end of December 1999 to early January 2000 to deal with any problems which may arise due to Y2K.

As at 31 March 1999, the total project cost spent was HK$320,000 and no further material cost is expected.


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 of The Stock Exchange of Hong Kong Limited throughout the accounting period covered by the annual report except that the independent non-executive directors of the Company are not appointed for specific terms. Independent non-executive directors are subject to retirement and re-election at the Annual General Meeting of the Company in accordance with the provisions of the Company's Bye-laws.

By Order of the Board
Poon Bun Chak

Hong Kong, 17 August 1999

Source: Texwinca Holdings Limited
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