TOMORROW INTERNATIONAL HOLDINGS LIMITED
(Incorporated in Bermuda with limited liability)
GROUP ANNUAL RESULTS
The Board of Directors (the "Directors") of Tomorrow International Holdings Limited (the "Company") is pleased to announce the audited consolidated results of the Company and its subsidiaries (the "Group") for the year ended 31 December 2000 with comparative figures for the previous corresponding year as follows :
2000 1999
Notes HK$'000 HK$'000
TURNOVER 2 659,807 601,609
Cost of sales 3 (529,310) (491,792)
------------ ------------
Gross profit 130,497 109,817
Other revenue 10,305 6,068
Gain on disposal of partial
interest in subsidiaries 33,409 -
Surplus / (deficit) on revaluation
of leasehold land and buildings 848 (22,937)
Distribution costs (11,910) (15,390)
Administrative expenses (77,517) (94,868)
Net unrealised holding losses on short
term investments (32,170) -
Other operating expenses (15,055) (17,295)
------------ ------------
PROFIT/(LOSS) FROM OPERATING
ACTIVITIES 4 38,407 (34,605)
Finance costs (1,464) (4,047)
------------ ------------
PROFIT/(LOSS) AFTER FINANCE COSTS 2 36,943 (38,652)
Share of profit/(loss) of associates - 49
------------ ------------
PROFIT/(LOSS) BEFORE TAX 36,943 (38,603)
Tax 5 (5,424) (6,265)
------------ ------------
PROFIT/(LOSS) BEFORE MINORITY
INTERESTS 31,519 (44,868)
Minority interests 976 (30)
------------ ------------
NET PROFIT/(LOSS) ATTRIBUTABLE
TO SHAREHOLERS 32,495 (44,898)
============ ============
EARNINGS/(LOSS) PER SHARE 6
Basic 4.68 cents (10.22 cents)
============ ============
Diluted 4.68 cents N/A
============ ============
Notes :
(1) Principal activities of the Group
The principal activity of the Company is investment holding. The Group's principal activities consisted of the design, development, manufacture and sale of electronic products, the manufacture and sale of printed circuit boards ("PCBs"), the trading and distribution of electronic components and parts, the trading of listed equity investments and the provision of loan financing.
The trading of listed equity investments and the provision of loan financing were new businesses entered into by the Group during the year.
(2) Turnover and profit/(loss) after finance costs
Turnover represents the invoiced value of goods sold, net of returns and allowances, proceeds from sales of listed equity investments and interest income from the provision of loan financing.
An analysis of the Group's turnover and profit/(loss) after finance costs by principal activity and by geographical segment is as follows:
Profit/(loss)
Turnover after finance costs
2000 1999 2000 1999
HK$'000 HK$'000 HK$'000 HK$'000
By activity
Manufacture and sale of
electronic products 455,973 399,529 49,034 15,246
Manufacture and sale
of PCBs 137,454 107,569 (6,565) (40,376)
Trading and distribution
of electronic components
and parts 47,164 94,511 1,590 (9,475)
Trading of listed equity
investments 9,690 - (34,124) -
Provision of loan
financing 9,526 - (4,937) -
--------- -------- --------- ---------
659,807 601,609 4,998 (34,605)
========= ========
Gain on disposal of partial
interest in subsidiaries 33,409 -
Finance costs (1,464) (4,047)
--------- --------
36,943 (38,652)
========= ========
Turnover
2000 1999
HK$'000 HK$'000
By geographical segment
Europe 54,080 51,895
North America 177,360 138,145
The People's Republic of China,
including Hong Kong 285,338 279,975
Japan 115,557 108,850
Others 27,472 22,744
--------- --------
Total 659,807 601,609
========= ========
The contribution to profit/(loss) after finance costs by geographical segment is substantially in line with the overall rate of contribution to turnover and, accordingly, an analysis of profit/(loss) after finance costs by geographical segment is not presented.
(3) Included in the cost of sales was the cost of inventories of HK$520,534,000 (1999: HK$491,792,000).
(4) Profit/(loss) from operating activities
The Group's profit/(loss) from operating activities is arrived at after charging/(crediting):
2000 1999
HK$'000 HK$'000
Depreciation of fixed assets 17,614 20,215
Amortisation of prepaid rental 736 737
Amortisation and write-off of deferred product
development costs 1,342 5,374
Amortisation of deferred pre-operating expenses - 3,363
Net gain on disposals of listed equity
investments (914) -
========== ==========
(5) Tax
Hong Kong profits tax has been provided at the rate of 16% (1999: 16%) on the estimated assessable profits arising in Hong Kong during the year.
2000 1999
HK$'000 HK$'000
Group :
The People's Republic of China:
Hong Kong
Current year provision 4,746 5,400
Overprovision in prior year (202) (38)
Tax refund in respect of prior year - (31)
Deferred 833 600
Mainland China 47 304
--------- ---------
5,424 6,235
Associates - 30
--------- ---------
Tax charge for the year 5,424 6,265
========= =========
(6) Earnings/(Loss) per share
The calculation of earnings per share is based on the net profit attributable to shareholders for the year of HK$32,495,000(1999: net loss of HK$44,898,000) and the weighted average of 694,179,635 (1999: 439,228,815 shares) ordinary shares in issue during the year.
The calculation of diluted earnings per share for the year is based on the net profit attributable to shareholders for the year of HK$32,495,000 and the weighted average of 695,006,258 ordinary shares in issue during the year. There were no dilutive potential ordinary shares in issue during the year ended 31 December 1999, and accordingly, the diluted loss per share is not shown.
A reconciliation of the weighted average number of shares used in the basic earnings per share calculation for the year ended 31 December 2000 to that used in the diluted earnings per share calculation is as follows:
Weighted average number of shares used in the basic
earnings per share calculation 694,179,635
Weighted average number of shares assumed to have been
issued at no consideration on the deemed exercise of
all share options outstanding during the year 826,623
--------------
Weighted average number of shares used in the diluted
earnings per share calculation 695,006,258
==============
FINAL DIVIDEND
The Directors do not recommend the payment of any final dividend for the year ended 31 December 2000 (1999: Nil).
CLOSURE OF REGISTER OF MEMBERS
The Register of Members of the Company will be closed from Wednesday, 6 June 2001, to Friday, 8 June 2001, both days inclusive, during which period no transfer of shares will be registered.
BUSINESS REVIEW
After the financial turmoil in 1997, the economy of most of the Asian countries including Hong Kong gradually recovered during the year of 2000. Therefore, the Group performed prominently for the year ended 31 December 2000. Total turnover increased by 9.7% to HK$659.8 million compared with last year. The Group recorded a net profit of HK$32.5 million, comparing to a net loss of HK$44.9 million in 1999.
Owing to the improving political situation and stable investment environment, most of the sizeable firms engaging in the electronic industry from North America and Japan have moved their subcontracting activities to the Mainland China. The Group's electronic products business largely benefited from this move. On the other hand, new products like digital compass, household electronic products and radio control clocks attracted more customers. As a result, turnover increased by 14.1% to HK$456 million for the year under review. In addition to the effective cost control measures, the electronic product business performed very satisfactory.
For the manufacture of PCBs, although price competition in the market was still high, a growth of 27.8% in turnover was recorded during the year of 2000. Turnover amounted to HK$137.5 million for the year ended 31 December 2000. Loss suffered by the printed circuit board ('PCB') operations was significantly reduced as a result of the effective cost and quality control policies. It is expected that the PCB business would have profit contributions to the Group in the years to come.
In view of the keen competition in the trading of electronic components and parts both in Hong Kong and the Mainland China, the Group has significantly scaled down the trading and distribution business in the second half of the year under review. The sales and representative office in Shanghai and Shenzhen were closed in July and August, respectively, during the year. Therefore, turnover for the trading and distribution of electronic components and parts for the year ended 31 December 2000 decreased by over 50% compared with 1999.
In September 2000, the Group has completed the sale of 45% interests in the PCB operations to Cedar Base Electronic (Group) Limited ("Cedar Base"), a listed company in Hong Kong, at a consideration of HK$67.5 million. The consideration was satisfied by the allotment and issue of 178,250,000 new Cedar Base shares, representing approximately 30.8% of the enlarged issued share capital of Cedar Base. The Group recorded a gain of HK$33.4 million arising from this transaction. Before the year end, the Group has disposed of 16,000,000 Cedar Base shares. The Group considers the remaining interest in Cedar Base to be a short term investment and will dispose of such interest based on market condition.
Through four placements of new shares during year 2000, the Group raised funds of approximately HK$149.4 million. With sufficient resources on hand, the Group has been searching for various investment opportunities. The Group has started the business of short term loan financing. Due to unforeseen circumstances, the performance of the short term loan financing business was less satisfactory.
In view of various positive measures launched by the Government of the HKSAR in relation to Hong Kong residential property market, the Group purchased three residential properties, amounting HK$19.8 million for short term investment purpose.
LIQUIDITY AND FINANCIAL RESOURCES
The Group's financial position reflected the strength of its operating results. After the placing of 386.0 million shares with net proceeds of HK$149.4 million in year 2000, cash and bank balances (including time deposits) maintained by the Group at 31 December 2000 were HK$144.6 million, representing an increase of HK$73.6 million compared with last year. On the other hand, the Group had outstanding bank borrowings of HK$6.1million as at the balance sheet date which represented trade finance borrowings for the normal working capital requirements. A decrease of HK$24.1 million in total in the bank borrowings was recorded comparing with the same period of last year.
The Group has available banking facilities of HK$55 million. Together with the net positive cash and bank balances, it is believed that it has adequate cash resources to meet working capital requirements and all commitments for future expansion should the opportunities arise.
EMPLOYEES AND REMUNERATION POLICIES
As at 31 December 2000, the Group employed approximately 2,500 full time employees, with 2,400 in the Mainland China and 100 in Hong Kong.
The Group remunerates its employees largely based on industry practice. In the Mainland China, the Group provides staff welfare and bonuses to its employees in accordance with the prevailing labour law. In Hong Kong, the Group provides staff benefits including medical scheme, performance related bonuses and mandatory provident fund.
FUTURE PLANS
It is generally believed that the economic growth in the United States of America may slow down in the year of 2001. However, most of the European countries have a sign of recovery in the recent months. The Group will closely monitor the changing market environment and formulate its business strategies on a conservative basis. In addition, diversification to other related electronic field is also our business plan in mind.
For the Electronic Products Division, more new products especially those with radio control features like electronic weather-forecast and wireless thermo-sensor will be developed to satisfy the customer needs. A selected range of electronic products are being promoted with our own brand "iDigit" through a number of household stores in Hong Kong. It is going to pave the way to establish the Group's product image and to explore the local retail market in the coming future.
For the manufacture of PCBs, concentration on orders with large quantity and high-end products with higher margin will be our targeted marketing strategies. In the coming year, certain enhancement program will be considered on the production equipment mainly for the reduction of operating costs and the enlargement of the production capacity.
Although the trading and distribution of electronic components and parts business will still confront with keen competition, our good relationship with well-known Japanese electronic groups will place us in a more favourable position. The Group's trading division is undergoing a restructuring plan and we are negotiating various distributorships and agency agreements with potential business partners.
The Group is in a position of solid base and will continue to explore suitable investment opportunities to enhance its earning base and acts promptly as and when suitable opportunities arise.
On behalf of the Board of Directors, I would like to take this opportunity to express our appreciation to all our staff for their conscientious efforts and dedication over the past year.
PURCHASE, SALE OR REDEMPTION OF SECURITIES
During the year, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed securities.
CODE OF BEST PRACTICE
In the opinion of the Directors, the Company had complied with the Code of Best Practice as set out in Appendix 14 of the Listing Rules of The Stock Exchange of Hong Kong Limited ("the Stock Exchange") throughout the year ended 31 December 2000, except that the independent non-executive directors of the Company were not appointed for specific terms, but are subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the provisions of the Company's Bye-laws.
PUBLICATION OF RESULTS ON THE STOCK EXCHANGE WEB-SITE
The Company's annual report containing all the information required by paragraphs 45(1) to 45(3) of Appendix 16 of the Listing Rules will be published on the website of the Stock Exchange in due course.
By Order of the Board
Yau Tak Wah, Paul
Chairman
Hong Kong, 20 April 2001