Website: http://www.tonic.com.hk
www.irasia.com/listco/hk/tonic
ANNOUNCEMENT OF FINAL RESULTS
FOR THE YEAR ENDED 31 MARCH 2000
| FINANCIAL HIGHLIGHTS
2000 1999 Percentage
* Pretax profit from operation has excluded the net exchange gain from forward exchange contracts previously shown as exceptional item (see note 1 below) |
The directors ("Directors") of Tonic Industries Holdings Limited (the "Company") are pleased to announce the audited consolidated results of the Company and its subsidiaries (the "Group") for the year ended 31 March 2000, together with the comparative figures for the previous year, as follows:
Turnover (HK$M) 2,039 1,841 10.8
2000 1999
HK$'000 HK$'000
TURNOVER 2,038,700 1,840,799
Cost of sales (1,847,347) (1,669,672)
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Gross profit 191,353 171,127
Other revenue (Note 1) 21,380 32,949
Selling and distribution costs (37,595) (29,602)
Administrative expenses (83,034) (82,982)
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PROFIT FROM OPERATING ACTIVITIES 92,104 91,492
Finance costs (14,143) (15,520)
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PROFIT BEFORE TAX 77,961 75,972
Tax (Note 2) (6,663) (7,027)
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PROFIT BEFORE MINORITY INTERESTS 71,298 68,945
Minority interests 2 -
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NET PROFIT ATTRIBUTABLE TO
SHAREHOLDERS 71,300 68,945
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DIVIDENDS (Note 3) 30,982 26,240
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EARNINGS PER SHARE (Note 4)
- Basic 12.6 cents 12.2 cents
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- Diluted 11.9 cents 12.0 cents
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Notes:
1. Other revenue
Included in the other revenue was a net exchange gain from forward exchange contracts for hedging of the Group's sales receipts of HK$211,000 (1999: HK$12,221,000). The 1999 amount was disclosed as exceptional item in the prior year and reclassified to be included in arriving at the Group's profit from operating activities this year to comply with the disclosure requirements of the revised Statement of Standard Accounting Practices of Hong Kong.
2. Tax
Hong Kong profits tax has been provided at the rate of 16% (1999: 16%) on the estimated assessable profits arising in Hong Kong during the year. Taxes on profits assessable in the PRC have been provided at the rates of taxation prevailing in the PRC based on existing legislations, interpretations and practices in respect thereof.
Deferred tax has been provided under the liability method at the rate of 16% (1999: 16%) on all significant timing differences to the extent it is probable that the liability will crystallise in the foreseeable future.
Taxation charged to the Group's profit and loss account comprises:
2000 1999
HK$'000 HK$'000
Hong Kong
Provision for the year 5,410 3,949
(Over)/Underprovision in prior years (2,598) 82
Deferred 2,933 2,806
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5,745 6,837
The PRC
Provision for the year 918 190
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Tax charge for the year 6,663 7,027
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3. Dividends
2000 1999
HK$'000 HK$'000
Interim - HK1.5 cents per
ordinary share (1999: HK1.5 cents) 8,592 6,048
Proposed final - HK3.8 cents per
ordinary share (1999: HK5 cents) 22,390 20,192
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30,982 26,240
============ ============
The comparative interim dividend and proposed final dividend per ordinary share would be HK1.1 cents and HK3.6 cents, respectively, on the basis as if the bonus issue of shares of two bonus shares for every five ordinary shares then held by shareholders on 28 September 1999 had been completed during the year ended 31 March 1999.
4. Earnings per share
The calculation of earnings per share is based on the net profit attributable to shareholders of HK$71,300,000 (1999: HK$68,945,000) and the weighted average of 567,266,794 shares (1999: 564,558,732 shares) in issue during the year.
The comparative weighted average number of shares in issue and earnings per share have been adjusted to reflect the bonus issue of shares on the basis of two bonus shares for every five ordinary shares then held by shareholders on 28 September 1999.
The calculation of diluted earnings per share is based on the net profit attributable to shareholders of HK$71,300,000 (1999: HK$68,945,000) and the weighted average of 597,391,291 (1999: 576,926,135) shares in issue, adjusted to reflect the effects of all dilutive potential ordinary shares during the year.
A reconciliation of the weighted average number of shares used in the basic earnings per share calculation for the year ended 31 March 2000 to that used in the diluted earnings per share calculation is as follows:
2000 1999
Weighted average number of shares used in the
basic earnings per share calculation 567,266,794 564,558,732
Weighted average number of shares assumed to
have been issued at no consideration on the
deemed exercise of all warrants outstanding
during the year 30,124,497 12,367,403
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Weighted average number of shares used in the
diluted earnings per share calculation 597,391,291 576,926,135
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FINAL DIVIDEND
The Directors have recommended the payment of a final dividend of HK3.8 cents per share for the year ended 31 March 2000 to shareholders whose names appear on the Company's Register of Members on 26 September 2000 (the "Proposed Final Dividend"). Subject to the approval of the Company's Members at the forthcoming Annual General Meeting, the final dividend will be paid on or before 18 October 2000.
CLOSURE OF REGISTER OF MEMBERS
The Register of Members of the Company will be closed from 22 September 2000 to 26 September 2000, both days inclusive, during which period no transfer of shares will be effected. All transfer documents accompanied by the relevant share certificates must be lodged with the Company's Branch Registrar in Hong Kong, Tengis Limited at 4th Floor Hutchison House, 10 Harcourt Road, Central, Hong Kong not later than 4:00 p.m. on 21 September 2000 in order to qualify for the Proposed Final Dividend.
BUSINESS REVIEW AND OUTLOOK
The Group continues to achieve promising result for the year ended 31 March 2000. Gross profit was HK$191,353,000, an increase of 12% from 1999. Net Profit attributable to shareholders for the year amounted to HK$71,300,000, represented an increase of 3%. Despite the general decrease in selling price of the products, the Group maintains a healthy growth of Turnover of 11%.
Generally the export market for the consumer electronic products is still very strong, the economy of the European countries continue to grow which benefit the Group. Sales to the United States decreased by approximately 20% as a result of severe competition in the region. However our sales in Japan increase significantly due to popularity of our high end CD and MD products.
This year we saw the successful launch of the MD Hi-Fi products for our OEM customer, the products contribute to more than 19% of the total turnover of the Group. We will extend our sales of MD to our ODM customers in 2000 and expect continue growth in the coming years. New audio products are being developed which include MP3 Discman, CD-RW and DVD, will be launched later this year. Initial market responses are tremendous and we believe there is a potentially huge market for these products.
While we have sufficiently vertically integrated our manufacturing process, we have plans to diversify our sales to different products. Our home appliances division, Tonic Appliances Limited, has its innovated 3 in 1 coffee making machine successfully launched earlier this year and subsequent models are being developed. Sales have already covered the United States and Europe. With the subsequent launch of new models and new products later this year, contribution from this division will become much more significant.
Another new division Tonic Technology Limited, which focuses on the development of advance technology products, will have its digital satellite receivers and internet set top box ready for production in the last quarter of the year. Television broadcast is undergoing its transition to digital signaling and demand for digital signal enabling satellite receivers is expected to be huge. Internet set top box already has its market in the developed countries, its presence is gradually became known to other countries for its lower cost vehicle to access the World Wide Web.
The way businesses are transacted on the Internet has greatly affected the manufacturing industry, in particular the way Company could potentially save costs over the purchases on Internet. The Group is currently studying the possibility of transforming its traditional procurement system into e-procurement with a B2B platform and logistics system. A B2B procurement platform could help the Company to lower its procurement transaction costs and open opportunity for the Company to obtain the cheapest components. It is expected that Egana.Com Inc of Egana Goldfeil (Holdings) Ltd (a substantial shareholder of the company) would be of direct contribution in this regard.
The latest factory block of the Group (the Block number 8) was put into use in June this year. This factory block provides an additional production space of more than 350,000 square feet complementing the existing 1,000,000 square feet production area. Production capacity is expected to increase by 40% this year. Total investment for the new factory block, automated machinery and production lines are budgeted at HK$100 million, and will be financed by term loans from the existing bankers of the Group.
Capitalising on our proven management expertise in the industry and the pioneer technology knowhow, we are well positioned to develop our extensive range of highest quality products to the satisfaction of our business associates, with a continuous enhancement of the shareholder value going forward.
YEAR 2000 READINESS
The Group has adopted Y2K conformity requirements issued by the British Standards Institution as the definition of Y2K compliance for the computers and the embedded systems. Over the millennium change period, the Group carried out relevant testing and checking on systems and equipment, and as part of the overall program, the Group also tested various dates in 2000 that might cause systems and equipment problem. The result is satisfactory and no disruption to the business process was discovered due to any Y2K problem. The new manufacture resources planning system used by the Group has proven to be fully Y2K compliant.
AUDIT COMMITTEE
Pursuant to the requirements of the Rules Governing the Listing of Securities on the Stock Exchange (the "Listing Rules"), an audit committee comprising all the Company's non-executive directors was established on 1 April 1999. References have been made to "A Guide for the Formation of an Audit Committee" issued by the Hong Kong Society of Accountants in terms of its formation and duties. The Committee has held regular meetings since its establishment and three meetings are planned to be held each year.
PURCHASE, SALE OR REDEMPTION OF SHARES
During the year ended 31 March 2000, there was no purchase, sale or redemption of the shares by the Company or any of its subsidiaries.
CODE OF BEST PRACTICE
In the opinion of the Directors, the Company has complied with the Code of Best Practice as set out in Appendix 14 to the Listing Rules throughout the accounting period under review.
On behalf of the Board
Simon Ling Siu Man
Chairman & Managing Director
Hong Kong, 8 August 2000
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