Tomorrow International Holdings Limited
(Incorporated in Bermuda with limited liability)
ANNOUNCEMENT OF 1999 ANNUAL RESULTS
ANNOUNCEMENT OF 1999 ANNUAL RESULTS
GROUP ANNUAL RESULTS
The Board of 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 31st December, 1999.
1999 1998
Notes HK$'000 HK$'000
TURNOVER 2 601,609 483,557
Cost of sales (491,792) (401,667)
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Gross profit 109,817 81,890
Other revenue 6,068 8,876
Distribution costs (15,390) (9,499)
Administrative expenses (94,868) (89,198)
Other operating expenses 3 (17,295) (4,723)
Deficit on revaluation of leasehold land
and buildings (22,937) (7,926)
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LOSS FROM OPERATING ACTIVITIES (34,605) (20,580)
Finance costs (4,047) (6,913)
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LOSS AFTER FINANCE COSTS (38,652) (27,493)
Share of profits less losses of associates 49 23
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LOSS BEFORE TAX (38,603) (27,470)
Tax 4 (6,265) 988
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LOSS BEFORE MINORITY INTERESTS (44,868) (26,482)
Minority interests (30) (4)
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NET LOSS ATTRIBUTABLE TO
SHAREHOLDERS (44,898) (26,486)
Transfer from warrant subscription reserve -- 24,358
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RETAINED LOSS FOR THE YEAR (44,898) (2,128)
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LOSS PER SHARE 5
Basic (10.2 cents) (6.0 cents)
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Diluted N/A N/A
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Notes:
(1) The principal activities of the Group have not changed during the year and consisted of the design, development, manufacture and sale of electronic products, manufacture and sale of printed circuit boards ("PCBs"), and the trading and distribution of electronic components and parts.
(2) Turnover represents the invoiced value of goods sold, net of returns and allowances. An analysis of the Group's turnover by activity is as follows:
1999 1998
HK$'000 HK$'000
Electronic products:
Manufacture and sale of electronic products 399,529 287,952
Electronic components and parts:
Manufacture and sale of PCBs 107,569 92,723
Trading and distribution of electronic
components and parts 94,511 102,882
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Total 601,609 483,557
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(3) Other operating expenses for the year under review included a loss on disposal of fixed assets of HK$14.1 million (1998 : HK$0.7 million).
(4) Tax
Hong Kong profits tax has been provided at the rate of 16% (1998: 16%) on the estimated assessable profits arising in Hong Kong during the year.
1999 1998
HK$'000 HK$'000
Group:
The People's Republic of China
Hong Kong
Current year provision 5,400 1,629
Overprovision in prior year (38) (1,457)
Tax refund in respect of prior year (31) --
Deferred 600 (1,196)
Mainland China 304 36
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6,235 (988)
Associates 30 --
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Tax charge/(credit) for the year 6,265 (988)
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In accordance with the applicable enterprise income tax law of the People's Republic of China (the "PRC"), the Group's subsidiaries registered in Mainland China, Dongguan Yifu Circuit Board Factory ("Yifu") and Gaojin Electronics (Shenzhen) Co., Limited ("Gaojin"), are exempt from income tax for the first two profitable years of operations and are entitled to 50% relief on the income tax that would otherwise be charged for the succeeding three years. The above tax concession for Yifu had expired in the prior year, when it was entitled to a 50% relief on income tax, at an effective rate of 12%. Pursuant to another tax concession granted during the year, the income tax applicable to Yifu has been reduced from the standard rate of 24% to 15% for two years from 1999 to 2000. Gaojin has yet to achieve profitable operations and so its income tax exemption holiday has not yet commenced.
(5) Loss per share
The calculation of basic loss per share is based on the loss attributable to shareholders for the year of HK$44,898,000 (1998: HK$26,486,000) and the 439,228,815 shares (1998: 439,228,815 shares) in issue throughout the year.
There were no dilutive potential ordinary shares as at 31st December, 1999 and 31st December, 1998, and accordingly the diluted loss per share is not shown.
DIVIDEND
The Board of Directors do not recommend the payment of any dividends for the year ended 31st December, 1999.
CLOSURE OF REGISTER OF MEMBERS
The Register of Members of the Company will be closed from Monday, 5th June, 2000 to Friday, 9th June, 2000, both days inclusive, during which period no transfers of shares will be registered.
BUSINESS REVIEW
As the economic condition in the Asian region became stable during the year 1999, the Group's business was gradually in the process of recovery for the year ended 31st December, 1999. The Group's total turnover recorded at HK$601.6 million, representing 24% increase compared with the same period of last year. However, as a result of the keen competition in the PCB industry compounded with the deficit arising from the revaluation of the Group's properties at 31st December, 1999, net loss attributable to shareholders amounted to HK$44.9 million.
The electronic products business still benefited from the continuous growth of the North American market. OEM business with Japanese customers was also under steady development as expected. In addition to the recovery of the Asian market, the total turnover for the manufacture and sale of electronic products increased by over 38%, from HK$288 million to HK$399.5 million compared with last year. Compounded with the improving profit margin resulting from effective cost control, the Electronic Products Division of the Group performed satisfactorily during the year under review.
The PCB industry faced price erosion in the Asian region throughout the year. The downward price trend forced the Group to narrow the profit margin to maintain its competitiveness in the market. Therefore, the operating results of the PCB business were less satisfactory for the year ended 31st December, 1999.
Although the Group's trading and distribution business still encountered keen competition in the market, the restructure of the sales and product mix and the result of tightened cost control measures throughout the year enabled it to maintain its position. In consequence, the loss suffered by this division was narrowed down.
FUTURE PLANS
Through the acquisition of shares of the Company by Winspark Venture Limited ("Winspark") in January 2000. Winspark has become the single largest shareholder of the Company. Three new directors were appointed in February 2000. Through three placings of new shares in the first quarter of 2000, the Company raised fund of approximately HK$130 million. The Company has been approached by a number of potential investees and is currently under preliminary process of reviewing these investments.
In the Electronic Products Division, the Group will focus on research and development projects to develop new types of electronic products to satisfy the market needs. For the manufacture and sale of PCBs, effective cost and operation controls will be emphasised to improve its production efficiency and ultimately the profit margin. The trading and distribution business will continuously confront with keen competition in the sale of electronic components and parts. Consolidation of its operations to tighten the cost control is necessary to maintain its market position.
YEAR 2000 COMPLIANCE
The Year 2000 ("Y2K") issue has arisen because many computer systems and equipment embedded with chip-based devices which store date information based on a two-digit year sequence are unable to accurately process dates for the Year 2000 and beyond. Non-compliance with the Y2K issue by the Group, its suppliers, customers and other business associates may cause disruption to the operations of the Group.
The Group has formed a steering committee in early 1998 to address the Y2K issue. All of the computer hardware, software and operating systems which are not or are not sure to be Y2K compliant have been replaced by the end of September 1999. As a contingency plan, hardcopy reports for both master and transaction files were generated from all computer systems from October 1999 until the end of the year. These serve as back up copies to ensure the continuity of its operations. As 31st January, 2000 and 29th February, 2000 were also considered as the dates of high sensitivity for Y2K issue, a special backup program was carried out immediate before these two dates to avoid data corruption. In general, the Y2K project has successfully completed by the Group.
The total cost of the project is approximately HK$3.9 million, which includes HK$1.7 million for the purchase of new computer software. The balance of HK$2.2 million is mainly for the replacement of computer hardware out of which HK$1.6 million will be covered by an operating lease agreement signed with the supplier. No capital expenditure is to be incurred but the monthly lease rentals will be treated as normal operating expenses and charged to the profit and loss.
PURCHASE, SALE OR REDEMPTION OF SECURITIES
Neither the Company, nor any of its subsidiaries purchased, redeemed or sold any of the Company's listed securities during the year.
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 throughout the year ended 31st December, 1999, 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.
By Order of the Board
Yau Tak Wah, Paul
Chairman
Hong Kong, 26th April, 2000