1999/2000 Interim Report
BUSINESS REVIEW
For the six months ended 31st October 1999, the Group’s unaudited turnover and profit attributable to shareholders were approximately HK$133,282,000 and approximately HK$23,878,000 respectively, representing an increase of 17.0% and 36.1% over the same period of the previous year respectively.
For the six months ended 31st October 1999, the performance of the Group’s business improved steadily. This is mainly attributable to (i) the economic recovery of the Asian countries after the Asian financial turmoil; and (ii) the widening of the Group’s customer base.
The gross profit margin and net profit margin for the six months ended 31st October 1999 were approximately 34.7% (1998: 30.7%) and approximately 17.9% (1998: 15.4%) respectively. The increases in these profit margins were mainly attributable to (i) the reduction of overall production cost which arose from further improvement in production technology and utilization of the Group’s facilities to produce its own coils components, in particular, ferrite cores, plastic and metal parts, for the manufacture of the Group’s products; and (ii) cost savings derived from economies of scale following the increase in turnover by approximately 17.0% in the six months ended 31st October 1999 as compared with those in the corresponding period in 1998.
FUTURE PLANS AND PROSPECTS
The Group’s crux of success in the past lies in its persistence in improvement, adamant pursuit for perfection and devotion to the development of the industry. In the coming year, the Group will continue to expand its operations aggressively so as to uphold these principles and position itself for a higher status in the global coil market.
Expansion of Production
The Group will continue to explore more markets and expand its product range by manufacturing products, such as line filters and switching power transformers, which are extensively used in the manufacture of computers, telecommunication equipment and household electrical appliances. In addition, the Group will continue to implement its vertical integration strategy to develop the required material, ferrite cores-manganese zinc series, for achieving economic effectiveness. With these strategies, the Group hopes to raise its profitability by reaping the fruit of its efforts spent over the past eight years in developing the production technology as well as the concoction formulae during the manufacture of ferrite cores. The Group has planned to acquire a lot of land of approximately 18 acres, with an estimated cost of approximately HK$3,000,000, in the vicinity of the Zhongshan facilities for the construction of new manufacturing facilities.
The Market Derived from Advanced Technology
There has been a drastic increase in demand for electronic products of high technology and precision. In light of this, the Group is planning to expand the automated production facilities in Singapore for the production of different variety of chip inductors. The facilities are scheduled to be operational commencing from the first quarter of 2000 and the estimated cost of investment is approximately HK$10,000,000. The manufacture of miniaturized surface mount type of electronic parts with high quality electrical property, reliability and stability can help meeting the market demand derived from advanced technology. Moreover, it is in line with the market trend towards precision and miniaturization in electronic products.
Production Automation
The Group is gradually moving away from the traditional mode of coil production and increasingly adopting production automation, in a bid to downsize the required labour and shorten the necessary production time.
The Group’s automated production facilities for the radio frequency coils and intermediate frequency coils are scheduled to be operational by the end of December this year. The estimated cost of such investment is approximately HK$9,000,000. The Group also planned to invest in the automated production facilities for toroidal coils and choke coils, which are scheduled to be operational in mid 2000. The estimated cost of such investment is approximately HK$7,000,000. Another automated production facilities for the manufacture of high quality radial type choke coils are scheduled to be operational in mid 2000, in order to meet the demands of the Group’s customers who manufacture electrical appliances and audio-visual equipment. The estimated cost of such investment is approximately HK$9,000,000. The production automation will substantially improve management control and production efficiency of the Group.
The Group has completed internal network and also set up electronic mail boxes for each of its staff. In addition, the Group is developing e-commerce functionality for its on-line sales system. More resources will be input to develop a better management information system for the Group. Since the Sino-US negotiations with regard to the accession of the PRC to the World Trade Organisation (“WTO”) have finally come to a successful end, the PRC is expected to become a member of WTO soon. The demand for telecommunication products and household electrical appliances in the PRC is expected to rise. Accordingly, the demand for coils in the global market is also expected to increase, which proves that the Group’s business strategies are in the right direction. Meanwhile, the Group is looking forward to a bright future with proactive optimism. The Group strives to continue following the principle of prudence in financial and investment management so that the Group can yield the optimal benefits from any business opportunities emerged.