Consolidated Profit and Loss Account

The Board of Directors of Lerado Group (Holding) Company Limited (the "Company") is pleased to present the audited results of the Company and its subsidiaries (collectively the "Group") for the year ended 31st December, 1998, together with the comparative figures for the year ended 31st December, 1997, as follows: Notes 1998 1997 HK$'000 HK$'000 Turnover 959,710 917,302 =========== =========== Profit from ordinary activities before taxation 104,678 77,288 Taxation 2 3,790 2,771 ----------- ----------- Profit attributable to shareholders 100,888 74,517 =========== =========== Dividends 3 37,456 29,600 =========== =========== Earnings per share 4 18.71 cents 14.77 cents =========== ===========

Notes:

1. Group Reorganisation and Basis of Presentation of Financial Statements

The Company was incorporated on 18th November, 1998 as an exempted company with limited liability in Bermuda under The Companies Act 1981 of Bermuda (as amended) and its shares have been listed on The Stock Exchange of Hong Kong Limited (the "Stock Exchange") with effect from 18th December, 1998.

Pursuant to a group reorganisation (the "Group Reorganisation") to rationalise the structure of the Group for the listing of the Company's shares on the Stock Exchange, on 2nd December, 1998, the Company issued shares in exchange for the entire issued share capital of Lerado Group Limited, the previous holding company of the Group, and thereby became the holding company of the companies now comprising the Group. Further details of the Group Reorganisation were set out in the prospectus of the Company dated 8th December, 1998.

The Group resulting from the above Group Reorganisation is regarded as a continuing entity. Accordingly, the financial statements of the Group have been prepared on the basis as if the Company had always been the holding company of the Group.

In the opinion of the Company's directors, the financial statements, prepared on the above basis, present fairly the results and the state of affairs of the Group as a whole.

2. Taxation

                                                      1998          1997
                                                   HK$'000       HK$'000

The charge comprises:
Hong Kong Profits Tax
   Current year                                        620         1,080
   Overprovision in prior years (note)              (3,300)          ---
                                               -----------   -----------
                                                    (2,680)        1,080

Overseas taxation                                    6,430         1,645
Deferred taxation                                       40            46
                                               -----------   -----------
                                                     3,790         2,771
                                               ===========   ===========

Note: The overprovision of Hong Kong Profits Tax represents a reverse of tax provision made in previous years in respect of an offshore claim which was finalised during the year.

Hong Kong Profits Tax is calculated at 16% (1997: 16.5%) of the estimated assessable profit for the year.

Overseas taxation is calculated at the rates prevailing in the relevant jurisdictions.

3. Dividends

                                                      1998          1997
                                                   HK$'000       HK$'000

Dividends paid by a subsidiary of the
   Company to its then shareholders prior
   to the Group Reorganisation described in
   note 1 above                                     37,456        29,600
                                               ===========   ===========

4. Earnings per share

The calculation of the basic earnings per share for the year ended 31st December, 1998 is based on the profit attributable to shareholders of HK$100,888,000 and on the weighted average of 539,337,120 shares that would have been in issue throughout the year as if the Company had been the holding company of the Group since the beginning of the year.

The calculation of the basic earnings per share for the year ended 31st December, 1997 is based on the profit attributable to shareholders of HK$74,517,000 and on the 504,590,371 shares in issue immediately preceding the Group Reorganisation.

5. Transfer to/from reserves

During the year, the statutory surplus reserve fund amounting to HK$3,849,000 is transferred from the profit and loss account.

Financial Highlights

Net profit: HK$100,888,000, increased by 35.4% Net profit margin: 10.5%, (1997: 8.1%) Bank balances and cash: HK$212,667,000 Net assets: HK$413,868,000, increased by 244.4%

BUSINESS REVIEW

Sales and Marketing

• Revenue mainly denominated in US dollars.

• The Group's products can be roughly divided into four categories: strollers, beds, soft goods and others. Strollers remained the Group's main product, representing 76.8% of total sales in 1998. The Group produced over 220 models of strollers during the year.

• Products were sold to over 60 customers including infant product brandname owners, importers and trading agents in over 40 countries.

• US remained our largest market, with sales amounting to approximately HK$640,962,000, representing around 66.8% of the Group's total turnover in 1998. In the same year, the Group shipped 2.9 million strollers to the US compared with 2.5 million in 1997.

• The Group's products were price competitive to local European products even taking into consideration transportation costs due to high production costs of European manufacturers. Sales to Europe amounted to HK$184,976,000 in 1998.

• For the PRC market, the Group has emphasized on building brandname recognition for its "Angel" brand.

Production

• 86% of 1998 sales was on ODM basis, 14% on OEM basis.

• Decrease in raw material cost due to depreciation in New Taiwan dollars against Hong Kong dollars.

• The construction of a new factory in Zhongshan, the PRC for the production of battery operated ride-on cars was completed. Trial production has also commenced.

• The Group was moving towards vertical integration by acquiring R&D facilities. R&D expenses for the year represented approximately 1.8% of turnover (1997: 3.8%).

• The Group placed strong emphasis on R&D. Innovative products and new features for existing products were one of the Group's major strengths. As at 31st December, 1998, the Group owned more than 100 registered patents for over 70 product features. The Group also made 62 patents applications in various jurisdictions.

Use of proceeds from initial public offerings

• Out of the net proceeds from initial public offerings of HK$161 million, the Group has, up to date, applied HK$39 million to repay bank borrowings and HK$4 million to upgrade the Group's existing production facilities and to purchase new machinery for capacity expansion.

PROSPECTS

• Although the annual number of births in the US has not seen significant growth over the past few years, the average spending per household on child has increased.

• Parents are more concerned with product quality, safety and innovative features of infant products than price. We see strong growth prospects for our products which are competitive in both price and quality.

• The European and emerging markets are still far from saturation. Potential growth of demand from these markets are opportunities for the Group.

Competitive Advantages

Innovative and high quality products --- accredited ISO9001 for R&D operations. Strong R&D capabilities --- owns more than 100 registered patents for over 70 product features. Vertical integration and economies of scale --- ensuring product quality and lowering production cost. Established supplier network --- key suppliers located near our production plants, lowering delivery cost. Solid customer relationship. Established competitive market position --- sales to top infant product brandname owners in the US. Experienced and dedicated management --- key personnel with over 10 years of experience in the industry.

FUTURE PLANS

• Develop our own brandname in the US and promote our brand, "Angel", in the PRC.

• Expand market share in Europe, South America and Middle East.

• Establish a solid foundation in the PRC to capture future growth.

• Increase proportion of sale of high-end strollers.

• Diversify product range with products targeted at pre-school children from the age of 3 to 6 in the near term.

• Develop new products, such as battery operated ride-on cars.

CORPORATE GOVERNANCE

The Company has complied, since the listing of its shares on the Stock Exchange to 31st December, 1998, with those paragraphs of the Code of Best Practice, as set out in Appendix 14 of the Rules Governing the Listing of Securities on the Stock Exchange, with which it is required to report compliance. On 26th April, 1999, the Company established an Audit Committee comprised of Messrs. Ng Ching Wo and Lim Pat Wah, Patrick, the independent non-executive directors and Mr. Chen Jo Wan, a non-executive director. In establishing the terms of reference for this committee, the directors have had regard to the "Guide for the Formation of an Audit Committee" issued by the Hong Kong Society of Accountants in December 1997.

YEAR 2000 ISSUE

Year 2000 compliance is defined as the ability of computer systems including operating systems, applications, hardware and other related accessories to perform, function and manage data involving dates without being abnormally affected by dates spanning the period before, during and after the year 2000.

The Company has developed plans to address issues related to the impact on its computer systems arising from the turn of the century. The Group will spend approximately HK$2.3 million on upgrading its hardware and software system. The Group is currently in the process of choosing a suitable consultancy firm regarding the installation of the year 2000 compliant software. The Directors plan to finalise the upgrade plan with the chosen consultancy firm in the second quarter of 1999 and the whole process of installing the year 2000 compliant software is expected to be completed by September 1999 and the Company will be Year 2000 compliant by the end of 1999. The financial impact of making the required systems changes is considered immaterial to the Company's financial position, results of operations and cash flows.

FINAL DIVIDEND

The directors do not recommend a payment of final dividend.

PURCHASE, SALE OR REDEMPTION OF SECURITIES

The Company's shares commenced trading on the Stock Exchange on 18th December, 1998. During the year ended 31st December, 1998, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company's listed securities.

By Order of the Board
Huang Ying Yuan
Chairman

Hong Kong, 4th May, 1999

© Copyright 1996-2024 irasia.com Ltd. All rights reserved.

DISCLAIMER: irasia.com Ltd makes no guarantee as to the accuracy or completeness of any information provided on this website. Under no circumstances shall irasia.com Ltd be liable for damages resulting from the use of the information provided on this website. TRADEMARK & COPYRIGHT: All intellectual property rights subsisting in the contents of this website belong to irasia.com Ltd or have been lawfully licensed to irasia.com Ltd for use on this website. All rights under applicable laws are hereby reserved. Reproduction of this website in whole or in part without the express written permission of irasia.com Ltd is strictly prohibited. TERMS OF USE: Please read the Terms of Use governing the use of our website.