1999/2000 Annual Report
BUSINESS REVIEW
The year ended 30th April, 2000 was an exciting year marked with promising growth in business and profitability. This was largely attributable to the Group’s success in seizing the opportunities arising from the trend and development in the global electronics industry by actively introducing new and tailor-made products to our customers and expanding our manufacturing facilities for products which suit the markets’ needs most.
The following summarises the Group’s major accomplishments during the year under review which contributed to such significant improvement in business performance:
Initial Public Offering
The year under review marked a milestone for the Group. The Company was successfully listed on the Stock Exchange on 15th November, 1999 following an issue of 50,000,000 new shares at an issue price of HK$1.10 per share. Approximately HK$44,407,000 of net proceeds was raised from the new issue. This accomplishment positions the Group to a new financial frontier that widens the horizon for growth and expansion. Based on this new solid ground, the Group will seek for more business opportunities to elevate to a higher range of business development.
Expansion and Upgrade of Production Capacity
Entering the information technology era, success often depends on the ability in gripping information accurately and in a timely manner. To overcome the geographical barriers to access of information, the demand for modern handheld electronic communication products such as mobile phones and personal digital assistants (PDA) has been gathering momentum at an amazing speed. Accordingly, the demand for miniaturised electronic components also increases. The Group capitalised on these emerging business opportunities by launching families of miniature components. Production facilities for wire-wound chip inductors in Singapore have been increased by two folds. Three production lines for high quality fixed inductors, which were widely used in the manufacture of telecommunications products, have been installed in November 1999 that raised the production capacity of fixed inductors by approximately 30%. The Group’s ability in meeting the demand for miniaturised electronic components has therefore been considerably raised.
Digital revolution in the audio-visual (AV) sector has transformed the way we live. Integration of Internet connectivity into traditional TV sets, introduction of digital cameras, DVD players and MD Hi-Fi’s, etc, have brought forth new product concept and a boost to the AV market. The Group has strengthened its product families and quality and automated its production facilities to line up with this growing market demand. Approximately HK$24,000,000 has been invested in new and fully automated production facilities for the manufacture of power inductors, radio frequency (RF) transformers, intermediate frequency transformers (IFT), and toroidal transformers. As technology continues to revolutionise the electronics industry, the Group will continue playing its part to sustain that revolution.
Supply Chain Management
The Group benefited from its well planned strategic supply chain management in the past to produce its own coils components, in particular, ferrite cores, plastic and metal parts. Approximately HK$18,500,000 was further invested during the year under review in the manufacture of coils components as well as their mouldings. The output of coils components for April 2000 as compared to the beginning of the financial year has been raised by approximately 30%. Coupled with its success in cost control despite record high demand, the Group has a gross margin and net margin of approximately 34.3% and 15.4% respectively. Based on this solid ground of operational efficiency, the Group will seek for further business expansion to strive for higher return on shareholders’ investment.
To further improve its strategic supply chain management, the Group has also been cooperating with the local authority in Shaoguan, Guangdong Province, to develop the technology in refining ferrite powder. An abundant supply of high-quality and low-cost ferrite powder to the Group is expected for the manufacture of ferrite cores, which will save considerable production cost and further improve the quality of the Group’s products.
Global Expansion
The management of the Group realises the importance of providing quality customer services and fostering closer contacts with its existing and potential customers to the Group’s future. The Group believes that an investment in establishing its global presence is an investment in that future. Prior to 1999, the Group has already set up offices in major cities in the Asia-Pacific region, such as Shanghai, Xiamen, Zhongshan, Taipei and Singapore. Our commitment in enhancing our global presence was further evidenced in September 1999 by the establishment of a new branch office in Tokyo, Japan, which is one of the pioneers in the electronics industry. The Group benefited from the building of closer contacts with customers in their headquarters and collecting most up-to-date market intelligence in the innovative product development stage. The Group has already successfully gained “design-in” approval status for samples of new products from a number of renowned customers in Japan. To better serve its prestigious multinational customers who envisioned the booming industries in India and set up production facilities in the country, the Group established a new representative office in Bangalore, India, in January 2000. Following the great business opportunities emerging in these markets, further rooms for the Group’s growth and expansion are expected to be coming in the near future.
Besides, the Group is currently actively considering the feasibility of setting up new representative offices and manufacturing facilities around the world, such as Turkey, Germany and the United Kingdom, in a bid to further extend our global market presence and exploit the unique competitive edges, such as technology and human resources, in different parts of the world.
Development of Complementary Products
Another objective of the Group is to expand into the manufacture of new product lines that complement to what we offered to our current customers. The new millenium saw the Group’s successful entry to the manufacture of electrolytic capacitors, a kind of electronic components complementary to coils, in April 2000. The Group believes that the diversification will bring in synergistic effect for the Group’s business as both coils and capacitors are the basic elements of electronic circuits which share the same customer base.
FUTURE PLANS AND PROSPECTS
Based on its sound business and financial position, the Group looks forward confidently to the new millenium and will adhere to its principles of proactive business development as and when opportunities arise. The mission of the Group’s management is to grow the business in a manner to ensure delivery of superior value to all our shareholders.
Products Development
Owing to the increasingly demanding requirements for clarity in electronic data communication and transmission, the market demand for electronic components that are effective in eliminating noise in pulse data lines and AC lines has been growing rapidly. Together with the increasing awareness of potential risk of electromagnetic interference (EMI) resulting from the popularity of telecommunication, the market demand for line filters is expanding at a very high speed. The fast-growing markets for modern and compact electronic, telecommunication, and household electrical products will give rise to a huge demand for compact but high power converters such as switching mode power supply (SMPS). The Group will devote more resources to the development and expansion of the product families of line filters and power converters in order to cater for the substantial growth in the target market. The Group has planned further to build its core competence by investing in new production facilities for the manufacture of manganese zinc ferrite cores series which are major components in the manufacture of line filters and power converters. To capitalise on the great business opportunities emerging in the information technology and telecommunication sectors, the Group has also planned to expand its production capacity for a variety of chip inductors such as wire-wound chip inductors.
As an experienced electronic component supplier, the Group believes the accomplishment in the coils industry can be further extended to the electrolytic capacitors business owing to their complementary nature. The Group plans to devote more resources in the research and development of electrolytes and forming of aluminium foils which are one of the major materials used in the manufacture of electrolytic capacitors. Such investment is to build the Group’s competitive edge in the industry and transform the Group from a capacitor assembler to a manufacturer of higher profit margin by equipping itself with powerful research and development capabilities.
The Group believes the key to its competitiveness lies in its ability to offer better but more cost-effective components to its customers. The Group will continue to cultivate and sustain its competitive advantages in cost effectiveness through the implementation of its long term strategy of supply chain management.
Strategic Partnerships
To well-equip itself for both the challenges and opportunities arising in the global arena, the Group and forward-looking market participants realise the importance of strategic alliance in sustaining and exploring further growth opportunities. The Group realises its strength in its highly efficient operational system and invites market participants with complementary interest. In particular, the Group is researching into cooperation plans in depth with leading international coil manufacturers and is prepared to capture further opportunities for business growth and expansion, always with the objective of maximising our shareholders’ value in mind.
E-commerce
Entering into the Internet Era, the Group is developing e-commerce functionality for its “on-line sales” system and product specification simulation system. System testing is underway and positive responses from sample customers have been received. Upon its completion, customers will be able to place orders, request for samples, and set their product specification through Internet, which enables the Group to provide more tailor-made and value-added services to its customers.
The Group plans to further invest approximately HK$2,000,000 to strengthen the management information system which will improve management controls within the Group over its business applications and processes such as manufacturing, sales and marketing, accounting and finance. The system capabilities will also be extended to provide platforms for its over 6,000 business partners, customers and suppliers for business to business (B2B) solutions in the electronics industry.
Focus on Research and Development
The Group strongly believes that one of its strengths in the electronics industry is its proven ability to adapt to customers’ ever changing technical specifications of coils by introducing new products and upgrading its existing products swiftly. Focusing on the world’s rapidly growing technologies: Local Area Networking (LAN), wireless broadband communications, and interactive voice, data and video applications, the Group plans to work more closely with its customers to capture opportunities arising from the electronics industry and develop “design-in” components of information technology products such as LAN hubs, routers and switches, high-speed personal computer data interfaces, cable modems and power converters.
Another priority of the Group in the coming year will be the research into the concoction formulae and production technology of strontium ferrite magnets in Zhongshan. The market for strontium ferrite magnets is very wide-ranging as they are widely used components in electronic products. As such, the Group strongly believes that the investment will bring in further solid prospects to the Group.
Timely Disclosure of More Information to the Public
The directors consider that the disclosure of financial information is of great importance to the shareholders and prospective investors. On 14th March, 2000, the Company voluntarily announced the Group’s quarterly results for the three months and nine months ended 31st January, 2000 to the public to enhance its transparency. Such act has received favourable applause from investors. With a view to keeping the public informed of more timely information, the directors have decided to disclose the Group’s financial information to the public on a quarterly basis in the foreseeable future.