FINANCIAL RESULTS
The Board of Directors (the "Board") of Bossini International Holdings Limited (the "Company") announces the unaudited consolidated results of the Company and its subsidiaries (the "Group") for the six months ended 30 September 2000. The results, together with the comparative figures for the corresponding period in 1999, are summarised below:
Condensed consolidated profit and loss account
Six months ended
30 September
2000 1999
(Unaudited) (Unaudited)
Notes HK$'000 HK$'000
TURNOVER 2 690,828 558,634
Cost of sales (402,687) (334,516)
----------- -----------
Gross profit 288,141 224,118
Other revenue 3 7,578 6,111
Selling and distribution costs (204,906) (137,774)
Administrative expenses (54,270) (39,312)
Other operating expenses (20,641) (17,764)
----------- -----------
PROFIT FROM OPERATING ACTIVITIES 4 15,902 35,379
Finance costs (821) (908)
Share of losses of associates - (141)
----------- -----------
PROFIT BEFORE TAXATION 15,081 34,330
Taxation 5 (3,969) (5,706)
----------- -----------
PROFIT BEFORE MINORITY INTERESTS 11,112 28,624
Minority interests (466) (4)
----------- -----------
NET PROFIT ATTRIBUTABLE TO
SHAREHOLDERS 10,646 28,620
=========== ===========
DIVIDENDS 6 - 12,343
=========== ===========
RELEASE FROM REVALUATION RESERVE 7 202 202
=========== ===========
BASIC EARNINGS PER SHARE 8 3.88 cents 10.43 cents
=========== ===========
Condensed consolidated statement of recognised gains and losses
Six months ended
30 September
2000 1999
(Unaudited) (Unaudited)
HK$'000 HK$'000
Exchange differences on translation of the
financial statements of foreign entities
and gains not recognised in the profit
and loss account 46 181
Net profit attributable to shareholders 10,646 28,620
----------- -----------
Total recognised gains and losses 10,692 28,801
Capital reserve on acquisition of subsidiaries (23,415) (48)
Goodwill written back on disposal of
a subsidiary - 144
----------- -----------
(12,723) 28,897
=========== ===========
Condensed consolidated balance sheet
As at As at
30 September 2000 31 March 2000
(Unaudited) (Audited)
Notes HK$'000 HK$'000
NON-CURRENT ASSETS
Fixed assets 165,114 131,876
Intangible assets 6,437 8,582
---------- ----------
171,551 140,458
---------- ----------
CURRENT ASSETS
Inventories 212,864 165,301
Debtors 9 13,719 5,972
Bills receivable 10,908 8,815
Deposits paid 57,868 46,157
Prepayments and other receivables 46,665 46,332
Time deposits 50,038 85,000
Cash and bank balances 31,026 16,349
---------- ----------
423,088 373,926
---------- ----------
CURRENT LIABILITIES
Creditors and accruals 10 205,817 98,135
Bills payable 1,076 14,539
Tax payable 11,287 11,818
Dividend payable 19,201 19,201
Bank loans and overdrafts 38,886 40,051
---------- ----------
276,267 183,744
---------- ----------
NET CURRENT ASSETS 146,821 190,182
---------- ----------
TOTAL ASSETS LESS
CURRENT LIABILITIES 318,372 330,640
MINORITY INTERESTS 455 -
---------- ----------
317,917 330,640
========== ==========
CAPITAL AND RESERVES
Share capital 27,430 27,430
Reserves 290,487 303,210
---------- ----------
317,917 330,640
========== ==========
Condensed consolidated cash flow statement
Six months ended
30 September
2000 1999
(Unaudited) (Unaudited)
HK$'000 HK$'000
NET CASH INFLOW FROM OPERATING ACTIVITIES 34,434 54,299
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE 1,874 1,756
TAXATION (4,506) (73)
INVESTING ACTIVITIES (50,807) (19,814)
----------- -----------
NET CASH INFLOW/(OUTFLOW)
BEFORE FINANCING ACTIVITIES (19,005) 36,168
FINANCING ACTIVITIES (6,596) 8,925
----------- -----------
INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS (25,601) 45,093
Cash and cash equivalents at beginning
of period 96,079 77,481
Effect of foreign exchange rate
changes, net (33) (77)
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD 70,445 122,497
=========== ===========
ANALYSIS OF BALANCES OF CASH AND
CASH EQUIVALENTS
Cash and bank balances 31,026 22,910
Time deposits 50,038 106,937
Bank overdrafts (8,834) (7,350)
Short term bank and trust receipt loans
repayable within three months from
date of advance (1,785) -
----------- -----------
70,445 122,497
=========== ===========
Notes:
1. Significant accounting policies
(a) Basis of preparation
The condensed interim financial statements are prepared in accordance with Hong Kong Statement of Standard Accounting Practice ("SSAP") No. 25 "Interim financial reporting". The accounting policies and basis of preparation used in the preparation of the interim financial statements are the same as those used in the annual financial statements for the year ended 31 March 2000.
(b) Comparative figures
Certain comparative figures have been reclassified to conform with the current presentation as required under SSAP No.1 "Presentation of financial statements".
2. Turnover and contribution to profit from operating activities
The Group's turnover and profit from operating activities were derived predominantly from the retail and export sales of garments.
An analysis of the Group's turnover and contribution to profit from operating activities by geographical area of operations for the period ended 30 September 2000, together with the comparative figures for the corresponding period in 1999, is as follows:
Contribution to profit from
Turnover operating activities
Six months ended Six months ended
30 September 30 September
2000 1999 2000 1999
HK$'000 HK$'000 HK$'000 HK$'000
The People's Republic of China
Hong Kong 498,436 427,138 11,845 26,081
Elsewhere 96,563 74,846 (2,715) (1,146)
Others 95,829 56,650 6,772 10,444
-------- -------- -------- --------
690,828 558,634 15,902 35,379
======== ======== ======== ========
3. Other revenue
Six months ended 30 September
2000 1999
HK$'000 HK$'000
Interest income 2,700 2,664
Royalty income 646 516
Rental income 254 151
Others 3,978 2,780
---------- ----------
7,578 6,111
========== ==========
4. Profit from operating activities
Profit from operating activities is arrived at after charging:
Six months ended 30 September
2000 1999
HK$'000 HK$'000
Interest expense 821 908
Depreciation 24,954 14,307
Amortisation of intangible assets 2,145 -
========== ==========
5. Taxation
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 period ended 30 September 2000. Taxes on profits assessable elsewhere have been calculated at the rates of taxation prevailing in the jurisdictions in which the Group operates, based on existing legislation, interpretations and practices in respect thereof.
Six months ended 30 September
2000 1999
HK$'000 HK$'000
Hong Kong 2,235 4,180
Elsewhere 1,734 1,526
---------- ----------
Taxation charge for the period 3,969 5,706
========== ==========
6. Dividends
Six months ended 30 September
2000 1999
HK$'000 HK$'000
Interim dividend: Nil (1999: 4.5 cents per share) - 12,343
========== ==========
7. Release from revaluation reserve
The revaluation reserve arising from revaluation of fixed assets is realised and transferred directly to retained earnings on a systematic basis, as the corresponding asset is used by the Group. The amount realised is the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the asset's original cost.
8. Basic earnings per share
Basic earnings per share is calculated based on the net profit attributable to shareholders for the period of HK$10,646,000 (1999: HK$28,620,000) and on 274,297,493 shares (1999: 274,297,493 shares) in issue during the period.
Diluted earnings per share has not been calculated for the six months ended 30 September 2000 and 1999 as no diluting events existed during these periods.
9. Debtors
Other than cash and credit card sales, the Group normally allows an average credit period of 60 days to its trade customers.
The age analysis of trade debtors is as follows:
As at As at
30 September 31 March
2000 2000
HK$'000 HK$'000
0-30 days 4,411 2,866
31-60 days 8,627 55
61-90 days 584 2,155
Over 90 days 97 896
---------- ----------
Total 13,719 5,972
========== ==========
10. Creditors and accruals
Included in creditors and accruals is a trade creditors balance of HK$90,828,000 (31 March 2000: HK$43,185,000).
The age analysis of trade creditors is as follows:
As at As at
30 September 31 March
2000 2000
HK$'000 HK$'000
0-30 days 71,537 37,588
31-60 days 17,684 3,124
61-90 days 655 1,705
Over 90 days 952 768
---------- ----------
Total 90,828 43,185
========== ==========
11. Related party transactions
The Group had the following transactions with related parties during the period:
Six months ended
30 September
2000 1999
Notes HK$'000 HK$'000
Rental paid for warehouse premises (i) 620 620
Rental paid for office premises (ii) 2,106 1,620
Rental paid for a retail outlet (iii) 648 648
=========== ===========
Notes:
(i) The rental was paid to Laws Fashion Knitters Limited ("Laws Fashion"). Mr. Shuk Hoi LAW, Mr. Kar Po LAW and Mr. Ka Sing LAW, directors of the Company, have beneficial equity interests in Laws Fashion. Mr. Shuk Hoi LAW is also a director of Laws Fashion. The rental was determined by reference to open market rentals at the inception of the tenancy agreement.
(ii) The rental was paid to First On International Limited ("First On"). Mr. Shuk Hoi LAW, Mr. Kar Po LAW and Mr. Ka Sing LAW, directors of the Company, have beneficial equity interests in First On. Mr. Shuk Hoi LAW is also a director of First On. The rental was determined by reference to open market rentals at the inception of the tenancy agreement.
(iii) The rental was paid to Yatin Development Limited ("Yatin"). Mr. Shuk Hoi LAW, Mr. Kar Po LAW and Mr. Ka Sing LAW, directors of the Company, are also directors of, and have beneficial equity interests in, Yatin. The rental was determined by reference to open market rentals at the inception of the tenancy agreement.
12. Contingent liabilities
As at As at
30 September 31 March
2000 2000
HK$'000 HK$'000
Bank guarantees given in lieu of utility and
property rental deposits 4,012 3,132
========== ==========
13. Approval of the interim financial statements
The condensed consolidated interim financial statements were approved by the Board on 30 November 2000.
INTERIM DIVIDEND
The Board has resolved not to declare an interim dividend for the six months ended 30 September 2000 (1999: 4.5 cents per share).
MANAGEMENT DISCUSSION AND ANALYSIS
Business Review
The Group's consolidated turnover for the six months ended 30 September 2000 increased by 23.7%, from HK$558,634,000 for the corresponding period last year to HK$690,828,000. The net profit attributable to shareholders amounted to HK$10,646,000 (1999: HK$28,620,000).
The reduction in profits for the period was mainly due to the strategic increase in expenses for advertising programmes, shop renovation and human resources. Advertising expenditure incurred to promote and strengthen the image and popularity of the bossini brand during the period was HK$31,800,000, more than double that of the corresponding period last year.
To provide customers with a more comfortable and trendy shopping environment, the Group's strategy is to devote substantial resources to renovating its retail outlets in Hong Kong and Macau during the two financial years starting from 1999/2000. This renovation caused a sizeable increase of HK$10,647,000 in depreciation charges during the period compared with last year's corresponding period.
In addition, the Group has also focused on raising the morale and upgrading the service quality of its sales team by allocating resources to recruiting additional staff and improving their salary package. To further strengthen its human resources, the Group offered staff better and more diversified training programmes, targeted at enhancing customer service quality in line with the Group's quality pledge.
Although these expenditures have squeezed profits somewhat in the short term, the Group views them as strategically necessary long-term investments. In the long run, providing more value added services and raising service standards are vital to winning customer support and strengthening the Group's market position. The Group will benefit from these measures in future years.
Hong Kong
Despite the gradual recovery of the Hong Kong economy, local purchasing power was still weak during the period, with most people remaining cautious in their spending. Despite this difficult business environment, the Group still achieved a 12.7% increase in retail sales. Following the business direction stated in the 1999/2000 Annual Report, the Group increased the number of its outlets in Hong Kong and Macau from 36 at the end of March 2000 to 41 at the end of the period.
Taiwan
On 1 September 2000, the Group acquired the retail operations and business assets of its licensee in Taiwan for approximately HK$45,000,000. The transition presented no significant difficulty, with operations continuing to run smoothly following the take-over. As at 30 September 2000, the Group operated 45 retail outlets in Taiwan with a total floor area of approximately 64,000 square feet.
Other Markets
The business performance of the Group's two other major markets, Mainland China and Singapore, was quite stable. The Group invested more in advertising and promotion programmes during the period to expand its market. The results were satisfactory, with an increase of 29% and 41.4% in turnover in Mainland China and Singapore, respectively, compared to the corresponding period last year. As at 30 September 2000, the Group operated 63 outlets in Mainland China and 21 outlets in Singapore (1999: 69 and 16, respectively).
Outlook
The Group will continue proactively expanding its business in its major markets. The key focus will be on diversifying product lines, excelling in customer service and strengthening the value of its brand name. The Group is confident of achieving better results in the second half of the year.
Following the successful launch of the ladies' bodywear and handbag collection, the Group will continue to introduce new product lines. At the same time, the Group will maintain the high quality of its products in order to cater to market needs by offering superior value. Efforts to strengthen staff recruitment and training will continue to have a positive effect in further upgrading staff efficiency and the quality of customer service. At the same time, the Group will continue its promotion and advertising strategy to further accentuate the brand image of bossini.
The acquisition of the Taiwan business contributes to the geographical diversification of the Group. With numerous business opportunities and good potential for further development, Taiwan will be one of the Group's key markets. Indeed, it is expected to become the Group's second largest market by the financial year 2001/2002.
To keep pace with worldwide developments in information technology, the Group will continue to employ Internet technology to improve its operating efficiency and to allow convenient sharing of information and resources among staff and business associates.
Financial Position
The Group continued to maintain a prudent approach to managing its financial requirements. The Group relied on its internally generated cash flows and certain use of import and export-related banking facilities to finance its operations during the period.
As at 30 September 2000, the Group's total assets amounted to HK$594,639,000 (31 March 2000: HK$514,384,000) and its net cash balance was HK$42,178,000 (31 March 2000: HK$61,298,000). Even after the acquisition of the Taiwan operations and business assets, the Group recorded a current ratio of 1.53 (31 March 2000: 2.04).
DIRECTORS' INTERESTS IN SHARES
As at 30 September 2000, the interests of the Company's directors in the share capital of the Company as recorded in the register maintained by the Company pursuant to Section 29 of the Securities (Disclosure of Interests) Ordinance ("SDI Ordinance") were as follows:
| Name of director | Nature of interest | Number of shares |
| Mr. Shuk Hoi LAW | Personal | 80,688,000 |
| Mr. Ka Sing LAW | Personal | 39,193,250 |
| Mr. Kar Po LAW | Personal | 26,540,000 |
Save as disclosed above, none of the directors or their associates had any personal, family, corporate or other interests in the share capital of the Company or any of its associated corporations as defined in the SDI Ordinance.
At no time during the period was the Company or any of its subsidiaries a party to any arrangement to enable the Company's directors, their respective spouse or children under 18 years of age to acquire benefits by means of the acquisition of shares in the Company or any other body corporate.
SUBSTANTIAL SHAREHOLDERS
As at 30 September 2000, the following parties had registered an interest in the share capital of the Company that was required to be recorded in the register of interests kept by the Company pursuant to Section 16(1) of the SDI Ordinance.
| Name | Number of shares |
| Mr. Shuk Hoi LAW | 80,688,000 |
| Mr. Ka Sing LAW | 39,193,250 |
Save as disclosed above, no person had registered an interest in the share capital of the Company that was required to be recorded under Section 16(1) of the SDI Ordinance.
PURCHASE, REDEMPTION OR SALE OF THE COMPANY'S LISTED SECURITIES
Neither the Company nor any of its subsidiaries purchased, redeemed or sold any of the Company's listed securities during the period.
AUDIT COMMITTEE
The Audit Committee has reviewed with management the accounting principles and practices adopted by the Group and discussed auditing, internal control and financial reporting matters including the review of the unaudited interim financials.
CODE OF BEST PRACTICE
None of the directors of the Company is aware of any information that would reasonably indicate that the Company is not, or was not for any part of the six months ended 30 September 2000, in compliance with the Code of Best Practice as set out in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, except that the independent non-executive directors of the Company are not appointed for any specific terms, but are subject to retirement by rotation and re-election at annual general meeting in accordance with the Bye-laws of the Company.
By Order of the Board
Ka Sing LAW
Director
Hong Kong, 30 November 2000
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