BLU SPA HOLDINGS LIMITED
(incorporated in the Cayman Islands with limited liability)
(Stock Code: 8176)
INTERIM REPORT
FOR THE SIX MONTHS ENDED
31 DECEMBER 2007
CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET (“GEM”) OF THE STOCK
EXCHANGE OF HONG KONG LIMITED (THE “STOCK EXCHANGE”)
GEM has been established as a market designed to accommodate companies to which a high
investment risk may be attached. In particular, companies may list on GEM with neither a track
record of profitability nor any obligation to forecast future profitability. Furthermore, there
may be risks arising out of the emerging nature of companies listed on GEM and the business
sectors or countries in which the companies operate. Prospective investors should be aware of
the potential risks of investing in such companies and should make the decision to invest only
after due and careful consideration. The greater risk profile and other characteristics of GEM
mean that it is a market more suited to professional and other sophisticated investors.
Given the emerging nature of companies listed on GEM, there is a risk that securities traded
on GEM may be more susceptible to high market volatility than securities traded on the Main
Board and no assurance is given that there will be a liquid market in the securities traded on
GEM.
The principal means of information dissemination on GEM is publication on the internet
website operated by the Stock Exchange. Listed companies are not generally required to issue
paid announcements in gazetted newspapers. Accordingly, prospective investors should note
that they need to have access to the GEM website in order to obtain up-to-date information on
GEM-listed issuers.
This report, for which the directors (the “Directors”) of Blu Spa Holdings Limited (the “Company”)
collectively and individually accept responsibility, includes particulars given in compliance with
the Rules Governing the Listing of Securities on GEM (the “GEM Listing Rules”) for the purpose
of giving information with regard to Blu Spa Holdings Limited. The Directors, having made all
reasonable enquiries, confirm that, to the best of their knowledge and belief (1) the information
contained in this report is accurate and complete in all material respects and not misleading: (2)
there are no other matters the omission of which would make any statement in this report misleading:
and (3) all opinions expressed in this report have been arrived at after due and careful consideration
and are founded on bases and assumptions that are fair and reasonable.
- 1 -
SUMMARY
– The unaudited consolidated turnover of the Group for the six months ended 31 December 2007
was approximately HK$5,888,000, representing an increase of approximately HK$5,133,000
or approximately 7 times as compared to the unaudited consolidated turnover of the Group
of approximately HK$755,000 for the corresponding period in 2006.
– The loss attributable to shareholders for the six months ended 31 December 2007
was approximately HK$1,520,000, representing an decrease of loss of approximately
HK$1,297,000 or approximately 46% as compared to the loss attributable to shareholders
of approximately HK$2,817,000 for the corresponding period in 2006.
– The board did not recommend the payment of an interim dividend for the six months ended
31 December 2007.
UNAUDITED INTERIM RESULTS
The board of directors (the “Board”) of Blu Spa Holdings Limited (the “Company”) is pleased to
announce the unaudited condensed consolidated interim results of the Company and its subsidiaries (the
“Group”) for the six months and three months ended 31 December 2007 together with the comparative
figures for the corresponding periods in 2006. The condensed consolidated interim financial statements
have not been audited, but have been reviewed by the Company’s audit committee.
CONDENSED CONSOLIDATED INCOME STATEMENT
(Unaudited) (Unaudited)
For the six For the six For the three For the three
months ended months ended months ended months ended
31 December 31 December 31 December 31 December
2007 2006 2007 2006
Notes HK$’000 HK$’000 HK$’000 HK$’000
Turnover 3 5,888 755 2,677 648
Cost of sales (4,205 ) (1,117 ) (1,671 ) (1,098 )
Gross profit/(loss) 1,683 (362 ) 1,006 (450 )
Other revenue 19 79 17 79
Distribution costs – – – 36
Administrative expenses (2,885 ) (2,169 ) (1,740 ) (671 )
Loss from operations 4 (1,183 ) (2,452 ) (717 ) (1,006 )
Finance costs 5 (337 ) (365 ) (147 ) (189 )
Loss before taxation (1,520 ) (2,817 ) (864 ) (1,195 )
Taxation 6 – – – –
Loss attributable to
shareholders (1,520 ) (2,817 ) (864 ) (1,195 )
Loss per share
(in HK cents) 8 (0.25 ) (0.46 ) (0.14 ) (0.20 )
- 2 -
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited) (Audited)
As at As at
31 December 30 June
2007 2007
Notes HK$’000 HK$’000
NON-CURRENT ASSETS
Intangible assets 10,764 11,232
Plant and equipment 590 578
11,354 11,810
CURRENT ASSETS
Inventories 514 16
Trade receivables 9 3,266 1,144
Deposits and other receivables 701 557
Bank balances and cash 221 261
4,702 1,978
CURRENT LIABILITIES
Deposit received 1,150 676
Accruals and other payables 6,761 5,817
Amount due to directors 10 15,749 10,576
Amount due to shareholders 11 – 1,550
Amount due to related companies 12 2,956 617
Obligation under finance lease – 20
Provision for taxation 4 4
(26,620 ) (19,260 )
NET CURRENT LIABILITIES (21,918 ) (17,282 )
TOTAL ASSETS LESS CURRENT LIABILITIES (10,564 ) (5,472 )
NON-CURRENT LIABILITIES
Amount due to shareholders 11 – 3,572
– (3,572 )
NET LIABILITIES (10,564 ) (9,044 )
CAPITAL AND RESERVES
Share capital 13 6,068 6,068
Reserves (16,632 ) (15,112 )
(10,564 ) (9,044 )
- 3 -
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)
Share Share Merger Translation Accumulated
Capital Premium Difference Reserve Losses Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 July 2007 6,068 19,740 22,735 (9 ) (57,578 ) (9,044 )
Exchange differences
arising from
translation of
operations outside
Hong Kong – – – – – –
Loss for the period – – – – (1,520 ) (1,520 )
At 31 December 2007 6,068 19,740 22,735 (9 ) (59,098 ) (10,564 )
At 1 July 2006 6,068 19,740 22,735 (1 ) (53,843 ) (5,301 )
Exchange differences
arising from
translation of
operations outside
Hong Kong – – – 3 – 3
Loss for the period – – – – (2,817 ) (2,817 )
At 31 December 2006 6,068 19,740 22,735 2 (56,660 ) (8,115 )
- 4 -
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
(Unaudited) (Unaudited)
For the six For the six
months ended months ended
31 December 31 December
2007 2006
HK$’000 HK$’000
NET CASH GENERATED FROM/(USED IN)
OPERATING ACTIVITIES 5,185 (1,258 )
NET CASH (USED IN) INVESTING ACTIVITIES (83 ) –
NET CASH (USED IN)/GENERATED FROM
FINANCING ACTIVITIES (5,142 ) 1,397
(DECREASE)/INCREASE IN CASH
AND CASH EQUIVALENTS (40 ) 139
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 261 70
EFFECT OF FOREIGN EXCHANGE RATE CHANGES – 3
CASH AND CASH EQUIVALENTS
AT ENDED OF PERIOD,
represented by bank balances and cash 221 212
- 5 -
NOTES
1. GENERAL AND BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The Company was incorporated in the Cayman Islands on 30 August 2001 as an exempted company with limited
liability under the Companies Law Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands.
The Company is an investment holding company.
Basis of Preparation of Financial Statements
The Group incurred a loss attributable to the shareholders of approximately HK$1,520,000 for the six months
ended 31 December 2007. In addition, the Group had net current liabilities and net liabilities of approximately
HK$21,918,000 and HK$10,564,000, respectively, as at 31 December 2007. Notwithstanding this, the financial
statements have been prepared on the assumption that the Group will continue to operate as a going concern. In the
opinion of the Directors, the Group will have sufficient working capital to continue its operations in the coming
year, after taking into consideration of the following:
(a) The Group is undergoing serious negotiations with interested investors for new equity to be introduced to
the Group;
(b) The Group has taken ongoing action to tighten cost controls over various general and administrative
expenses;
(c) The Group will continue to promote and sell its products through selected distributors. At present, the Group
engaged distributors for Hong Kong, the PRC and Taiwan markets respectively. The Group will continue to
identify and negotiate with other prospective distributors in the Southeast Asia market;
(d) The Group will continue to negotiate to set up more spa centers in the club house of prestige residential
developments in Hong Kong.
In the opinion of the Directors, in light of the measures taken to date and on the basis of the above-mentioned
assumptions, the Group would have sufficient working capital to finance its operation to maintain its operating
existence in the foreseeable future. Accordingly, the Directors are satisfied that it is appropriate to prepare the
accounts on a going concern basis.
The financial statements have not incorporated any adjustments for the possible failure of the Group to implement
the aforesaid measures. Should the Group be unable to continue as a going concern, adjustments would have to be
made to restate the values of the assets to their recoverable amounts, to provide for any further liabilities which
might arise and to reclassify non-current assets and liabilities as current assets and liabilities, respectively. The
consequential effects of these potential adjustments have not been reflected in the financial statements as at 31
December 2007.
- 6 -
2. PRINCIPAL ACCOUNTING POLICIES
The unaudited condensed consolidated financial statements have been prepared under the historical cost
convention.
The unaudited condensed consolidated financial statements for the six months ended 31 December 2007 have been
prepared in accordance with Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” and the
applicable disclosure requirements of Chapter 18 of the GEM Listing Rules. The accounting policies used in the
unaudited consolidated financial statements are consistent with those followed in the preparation of the Group’s
annual financial statements for the year ended 30 June 2007.
Impact of new Hong Kong Financial Reporting Standards
The Hong Kong Institute of Certified Public Accountants has issued a number of new standards, amendments and
interpretations (“new HKFRSs”), which are either effective for annual periods beginning on or after 1 November
2006, 1 January 2007 or 1 March 2007. The Group has adopted the following new HKFRSs, which are applicable
to the Group’s financial statements for the six months ended 31 December 2007:
HKAS 1 (Amendment) Capital disclosures
1
HKFRS 7 Financial instruments: Disclosures
1
HK(IFRIC) – Int 10 Interim Financial Reporting and Impairment
2
HK(IFRIC) – Int 11 HKFRS 2 – Group and Treasury Share Transactions
3
1
Effective for annual periods beginning on or after 1 January 2007.
2
Effective for annual periods beginning on or after 1 November 2006.
3
Effective for annual periods beginning on or after 1 March 2007.
The adoption of the new HKFRSs had no material effect on how the results for the current or prior accounting
periods have been prepared and presented. Accordingly, no prior period adjustment has been required.
- 7 -
3. BUSINESS AND GEOGRAPHICAL SEGMENTS
Turnover represents the net amounts received and receivables for goods sold, therapy services performed and beauty
training services rendered, less returns and allowances, by the Group to outside customers.
An analysis of the Group’s turnover and contribution to operating results and segment assets and liabilities by
business and geographical segments is as follows:
For the six months ended 31 December 2007 (Unaudited)
The
People’s
Republic
of China Hong Kong Others Consolidated
HK$’000 HK$’000 HK$’000 HK$’000
TURNOVER
External sales
– Distributorship 4,451 23 – 4,474
– Retailing and therapy services – 414 – 414
– Beauty training 1,000 – – 1,000
Total revenue 5,451 437 – 5,888
RESULT
Segment result 3,019 (1,336 ) – 1,683
Unallocated corporate income 18
Unallocated corporate expense (2,885 )
Interest income 1
Finance costs (337 )
Taxation –
Loss for the period (1,520 )
Assets and liabilities at 31 December 2007 (Unaudited)
ASSETS
Segment assets – 3,266 – 3,266
Unallocated corporate assets 12,790
Consolidated total assets 16,056
LIABILITIES
Segment liabilities – – – –
Unallocated corporate liabilities 26,620
Consolidated total liabilities 26,620
- 8 -
3. BUSINESS AND GEOGRAPHICAL SEGMENTS (Continued)
For the six months ended 31 December 2006 (Unaudited)
The
People’s
Republic
of China Hong Kong Others Consolidated
HK$’000 HK$’000 HK$’000 HK$’000
TURNOVER
External sales
– Distributorship 469 86 13 568
– Retailing and therapy services 29 158 – 187
Total revenue 498 244 13 755
RESULT
Segment result 411 (777 ) 4 (362 )
Unallocated corporate income 79
Unallocated corporate expenses (2,169 )
Interest income –
Finance costs (365 )
Taxation –
Loss for the period (2,817 )
Assets and liabilities at 31 December 2006 (Unaudited)
ASSETS
Segment assets – 138 – 138
Unallocated corporate assets 13,088
Consolidated total assets 13,226
LIABILITIES
Segment liabilities – – – –
Unallocated corporate liabilities 21,341
Consolidated total liabilities 21,341
- 9 -
4. LOSS FROM OPERATIONS
(Unaudited) (Unaudited)
Six months ended Three months ended
31 December 31 December
2007 2006 2007 2006
HK$’000 HK$’000 HK$’000 HK$’000
Loss from operations has been
arrived at after charging:
Directors’ remuneration 1 5 – 2
Other staff costs 1,593 1,222 812 618
Retirement benefit scheme
contributions 41 43 11 21
Total staff costs 1,635 1,270 823 641
Depreciation 80 98 42 49
Amortization of intangible assets 468 468 234 234
5. FINANCE COSTS
(Unaudited) (Unaudited)
Six months ended Three months ended
31 December 31 December
2007 2006 2007 2006
HK$’000 HK$’000 HK$’000 HK$’000
Interest on:
Loans from shareholders and directors 337 363 148 188
Interest on finance lease – 2 (1 ) 1
337 365 147 189
- 10 -
6. TAXATION
(Unaudited) (Unaudited)
Six months ended Three months ended
31 December 31 December
2007 2006 2007 2006
HK$’000 HK$’000 HK$’000 HK$’000
The charge (credit) comprises:
Company and subsidiaries
Current period profits tax
– PRC – – – –
Deferred tax
Credit of current period – – – –
Taxation attributable to the Group – – – –
Tax arising in the PRC are calculated at the rates of tax prevailing in the PRC.
No provision for Hong Kong Profits Tax has been made for the six months ended 31 December 2007 and the
corresponding period in 2006, as the Group has no assessable profits for the respective periods.
7. DIVIDEND
No dividend was paid or proposed for the six months ended 31 December 2007 (2006: HK$Nil), nor has any
dividend been proposed since the balance sheet date.
8. LOSS PER SHARE
The calculation of the basic loss per share for the six months ended 31 December 2007 is based on the loss for
the period of approximately HK$1,520,000 (2006: approximately HK$2,817,000) and on the weighted average of
606,800,000 (2006: 606,800,000) shares in issue during the period.
No diluted loss per share for the six months ended 31 December 2007 and 2006 was presented as the Company did
not assume the exercise of share option outstanding because the exercise prices of the Company’s share options
were higher than the average market price for shares.
- 11 -
9. TRADE RECEIVABLES
The Group allows an average credit period of three months to six months to its trade customers. Details of the
aged analysis of trade receivables are as follows:
(Unaudited) (Audited)
As at As at
31 December 30 June
2007 2007
HK$’000 HK$’000
Aged:
0-60 days 750 780
61-120 days 500 307
Over 120 days 2,016 57
3,266 1,144
10. AMOUNT DUE TO DIRECTORS
As at 31 December 2007, the amounts due to directors include an amount of approximately HK$9,384,000
(30 June 2007: approximately HK$7,784,000) which is repayable on demand and bears interest at Hong Kong
Dollar prime lending rate quoted by The Hongkong and Shanghai Banking Corporation Limited from time to time.
The remaining balances are unsecured, non-interest bearing and repayable on demand.
11. AMOUNT DUE TO SHAREHOLDERS
(Unaudited) (Audited)
As at As at
31 December 30 June
2007 2007
Note HK$’000 HK$’000
Current liabilities
Profit Trick Holdings Limited 1 – 1,550
Non-current liabilities
XO-Holdings Limited 2 – 3,572
– 5,122
- 12 -
11. AMOUNT DUE TO SHAREHOLDERS (Continued)
Note:
1. As at 31 December 2007, the balance of HK$1,550,000 due to Profit Trick Holdings Limited, a substantial shareholder
of the Company, was assigned to Ms. Chan Choi Har, Ivy, a Director of the Company.
As at 30 June 2007, the amount of HK$1,550,000 due to Profit Trick Holdings Limited is repayable on demand and
bears interest at Hong Kong Dollar prime lending rate quoted by The HongKong and Shanghai Banking Corporation
Limited.
2. As at 31 December 2007, the balance of approximately HK$3,572,000 due to XO-Holdings Limited, a substantial
shareholder of the Company, was assigned to Ms. Chan Choi Har, Ivy. XO-Holdings Limited is beneficially owned as
to 65% by Ms Chan Choi Har, Ivy.
As at 30 June 2007, the amount of approximately HK$3,572,000 due to XO-Holdings Limited is unsecured and non-
interest bearing. XO-Holdings Limited has undertaken to the Company that (i) it will not demand repayment of the
amount due to it of approximately HK$3,572,000 within one year from the listing of the shares of the Company on
GEM; and (ii) it will not demand repayment of any outstanding amount due to it after one year from the date of listing
of the shares of the Company on GEM unless the Group has positive cash flow from operations and retained earnings
in a financial year and each of the independent non-executive directors has given an opinion that such payment will
not adversely affect the operations of the Group and the implementation of the business objectives of the Company as
stated in the Prospectus.
12. AMOUNT DUE TO RELATED COMPANIES
As at 31 December 2007, the balance of approximately HK$2,956,000 (30 June 2007: approximately HK$617,000)
due to a related company, the controlling shareholder of which is the chief executive officer of a subsidiary of the
Company, is unsecured, non-interest bearing and repayable on demand.
13. SHARE CAPITAL
Number of
Shares of
HK$0.01 each Amount
HK$’000
Authorised:
At 31 December (Unaudited) and 30 June (Audited) 2007 10,000,000,000 100,000
Issued and fully paid:
At 31 December (Unaudited) and 30 June (Audited) 2007 606,800,000 6,068
14. OPERATING LEASE COMMITMENTS
(Unaudited) (Audited)
As at As at
31 December 30 June
2007 2007
HK$’000 HK$’000
Accrued lease payments 13 975
Within one year 1,857 1,502
In the second to fifth year inclusive 1,841 2,429
3,711 4,906
Operating lease payments represent rentals payable by the Group for its office premises, warehouse and certain of
its beauty centers. Leases are negotiated for an average term of 4 years.
- 13 -
15. RETIREMENT BENEFIT SCHEME
The Group operates a Mandatory Provident Fund Scheme (the “MPF” Scheme) for all employees. The MPF Scheme
is registered with the Mandatory Provident Fund Scheme Authority under the Mandatory Provident Fund Schemes
Ordinance. The assets of the MPF Scheme are held separately from those of the Group in funds under the control
of an independent trustee. Under the rule of the MPF Scheme, the employer and its employees are each required
to make contributions to the scheme at rates specified in the rules. The only obligation of the Group with respect
of MPF Scheme is to make the required contributions under the scheme.
The retirement benefits cost charged to the income statement represents contributions payable to the scheme by
the Group at rates specified in the rules of the scheme.
16. EMPLOYEE AND REMUNERATION POLICIES
As at 31 December 2007, the Group had 25 employees (2006: 14) and staff cost for the six months ended
31 December 2007 (excluding directors’ remuneration) amounted to approximately HK$1,593,000 (2006:
approximately HK$1,222,000) whilst the directors’ remuneration for the six months ended 31 December 2007
amounted to approximately HK$1,000 (2006: approximately HK$5,000). Remuneration is determined by reference
to market conditions and the performance, qualification and experience of individual employee. Other benefits
include Pre-IPO share option scheme as detailed in the prospectus dated 4 February 2002 and contributions to
statutory mandatory provident fund scheme to its employees in Hong Kong.
17. RELATED PARTY TRANSACTIONS
For the six months ended 31 December 2007, the Group had the transactions with the following parties:
(Unaudited) (Audited)
As at As at
Name of party Nature of transactions 31 December 2007 30 June 2007
Notes HK$’000 HK$’000
Ms. Chan Choi Har, Ivy (i) Loan from a director 15,749 10,576
Profit Trick Holdings Limited (i) Loan from shareholders – 1,550
Garrick International Limited (ii) Purchases of products 2,318 516
Garrick International Limited (ii) Provision of finance lease 1 84
Notes:
i. The amounts due to directors include an amount of approximately HK$9,384,000 (30 June 2007: approximately
HK$7,784,000) which is repayable on demand and bears interest at Hong Kong Dollar prime lending rate quoted by
The Hongkong and Shanghai Banking Corporation Limited from time to time. The remaining balances are unsecured,
non-interest bearing and repayable on demand.
The amount due to Profit Trick Holdings Limited is repayable on demand and bears interest at Hong Kong Dollar prime
lending rate quoted by The HongKong and Shanghai Banking Corporation Limited.
During the six months ended 31 December 2007, the Group had not paid any interest but has accrued interest for the loan
from Ms. Chan Choi Har, Ivy in amount of approximately HK$335,000 and Profit Trick Holdings Limited in amount
of approximately HK$1,000.
ii. Ms. Keung Wai Fun, Samantha, who is the chief executive officer of Blu Spa (Hong Kong) Limited, a subsidiary of the
Company, is the controlling shareholder and director of Garrick International Limited.
Garrick International Limited has signed the contract of purchasing machine on behalf of the Group, amounting to
HK$120,000 under finance lease. Garrick International Limited has paid an amount of approximately HK$19,114
including interest of approximately HK$886 on behalf of the Group for the six months ended 31 December 2007.
In addition, the Group had certain balances with its shareholders and related company, details of these are set out in
notes 11 and 12 respectively.
- 14 -
MANAGEMENT DISCUSSION AND ANALYSIS
Results of operation
For the six months ended 31 December 2007, the Group recorded a turnover of approximately
HK$5,888,000, representing an increase of approximately 7 times as compared to last year (2006:
approximately HK$755,000). This significant increase in turnover was attributable to the Group’s
transition from retail business to distributorship business and re-deployment of its resources to the
development of distributorship business pursuant to its revamped marketing strategy.
The Group had gross profit of approximately HK$1,683,000 for the six months ended 31 December
2007 and gross loss of approximately HK$362,000 for the six months ended 31 December 2006.
The Group’s administrative expense was approximately HK$2,885,000 for the six months ended 31
December 2007, representing an increase of approximately 33% as compared to last year (2006:
approximately HK$2,169,000).
The Group’s finance cost was approximately HK$337,000 for the six months ended 31 December
2007, representing a decrease of approximately 7.7% as compared to last year (2006: approximately
HK$365,000).
For the six months ended 31 December 2007, the loss attributable to shareholders of the Group
amounted to approximately HK$1,520,000, representing a decrease of loss of approximately
HK$1,297,000 as compared to last year (2006: approximately HK$2,817,000).
Liquidity and financial resources
For the six months ended 31 December 2007, the Group mainly financed its operations with loan
from a director of the Company, Ms. Chan Choi Har, Ivy.
As at 31 December 2007, the Group had cash and cash equivalents of approximately HK$221,000
(30 June 2007: approximately HK$261,000).
Total assets of the Group as at 31 December 2007 was approximately HK$16,056,000 (30 June 2007:
approximately HK$13,788,000).
Total liabilities of the Group as at 31 December 2007 was approximately HK$26,620,000 (30 June
2007: approximately HK$22,832,000) in which amount due to a director amounted to approximately
HK$15,749,000 (30 June 2007: approximately HK$10,576,000) accounting for approximately 59.2%
(30 June 2007: approximately 46.3%) of total liabilities.
Net liabilities of the Group as at 31 December 2007 was approximately HK$10,564,000 (30 June
2007: approximately HK$9,044,000), representing an increase of net liabilities of approximately
16.8% as compared with that as at 30 June 2007.
- 15 -
Capital structure
As at 31 December 2007, total loan was approximately HK$15,749,000, representing an increase of
approximately HK$51,000 as compared with that as at 30 June 2007 (30 June 2007: approximately
HK$15,698,000).
(Unaudited) (Audited)
As at 31 December As at 30 June
2007 2007
HK$’000 HK$’000
Amounts due to directors (Note 10) 15,749 10,576
Profit Trick Holdings Limited (Note 11) – 1,550
XO-Holdings Limited (Note 11) – 3,572
15,749 15,698
The cash and cash equivalents and loans of the Group were mostly denominated in Hong Kong
dollars.
Gearing Ratio
As at 31 December 2007, the Group’s gearing ratio, expressed as a percentage of total borrowings
(comprising amounts due to directors and shareholders) to total assets of the Group, was approximately
98.1% (30 June 2007: approximately 113.9%). The Directors believe that the gearing ratio is at a high
level for the Group and the Group was actively seeking interested investors to inject fresh funds to
repay the loans and improve its cash position.
INTERIM DIVIDEND
The Board does not recommend the payment of an interim dividend for the six months ended 31
December 2007 (for the six months ended 31 December 2006: Nil).
BUSINESS REVIEW
During the period under review, the Group continued to direct its focus to distributorship business.
The retail market including the beauty care segment continued to benefit from the remarkable growth
as a result of the strong and sustained economic growth of the region, growing number of visitor
arrivals and stronger consumer spending power in Hong Kong.
- 16 -
The Group continued to direct its efforts to identification and recruitment of prospective distributors
in major Chinese cities such as Guangzhou, Shanghai and Chengdu and in Asian countries including
South Korea, Philippines, Thailand, and Dubai. With the objective to attract potential distributors in
the PRC and Asian region, the Group stepped up its brand building and promotional efforts in Hong
Kong and the PRC.
In the period under review, the Group was in the process of finalizing the product design, packaging
design and/or formulations of those Blu Spa products that were targeted for new product launch in
the first quarter of 2008. At the same time, the Group stepped up its efforts to identify new innovative
ingredients and premium quality botanical beauty care products, utilizing Blu Spa brand name to
promote its enlarged specialist product line featuring new product design, new packaging design and
new formulations. During the period under review, the Group’s research and development (including
sample testing) of new innovative formulations for existing product lines progressed in earnest. High
performance and top quality new innovative skin care continued to be the primary focus of the Group’s
research and development activities. The Group opened a 1704 sq. ft. spa centre in Lan Kuai Fong,
Central in June, 2007 to meet the after-office and week-end spa service needs of retail customers. As
a result, the spa services were centralized in the Lan Kuai Fong spa center to spare office area for
beauty training lessons at Worldwide House for better management. With the successful opening in
February 2007 of the spa center at AquaMarine under the Group’s management, the Group was given
the opportunity to manage the second spa center at Hampton Place, a luxurious residential apartment
complex developed by Cheung Kong (Holding) Limited in West Kowloon.
In November 2007, the Group participated as exhibitor in Cosmoprof Asia 2007, a high profile
international annual beauty industry event, held at the Hong Kong Convention & Exhibition Centre
as part of its continuing marketing and promotional efforts.
Following the opening of Blu Spa cosmetic sales counters in Shenyang and Chongqing respectively
in January and March 2007, the PRC distributor pursued its market development plan by opening two
additional Blu Spa cosmetic sales counters at two high pedestrian traffic locations, namely, Beijing
Shin Kong Misukoshi (-) department store and Beijing Sunlight department store (
) respectively in April 2007. In the same month, the PRC distributor also opened its new office/
spa centre in Century Plaza Hotel (-), Shenzhen. The PRC Distributor’s market expansion
efforts continued with the opening in June 2007 of two Blu Spa cosmetic sales counters in Yixing
and Suzhou. As at 30 June 2007, the PRC Distributor was operating a total of seven Blu Spa retail
outlets in Beijing, Shenzhen, Shenyang, Chongqing, Yizing and Suzhou respectively.
- 17 -
PROSPECTS
Given the robust and stable global economy and the continuing economic growth of the PRC, the Group
is confident of its future prospects. The Group will devote its efforts to research and development and
timely introduction of new innovative botanical beauty care products and therapies/treatments to the
end-users, brand building and advertisement (promoting women new-age holistic lifestyle concepts
and introducing new innovative and prestigious botanical beauty care products and services to the
consumers). In addition, the Group will continue to collaborate with local co-operative partners in
co-branding joint promotional campaigns with the aim to drive market recognition of Blu Spa brand
products and services.
Furthermore, the Group will place special emphasis on customer service and customer support (retail
and wholesale). The Directors perceive the continuing rollout of Blu Spa cosmetic retail outlets in
Shenyang, Chongqing, Beijing, Shenzhen, Yixing, and Suzhou and additional cosmetic sales counters
in other major cities in China as a show of confidence by the PRC Distributor in the Group’s products,
quality service and professionalism. In strengthening its retail network in the PRC, a spa centre/beauty
academy is expected to open under the management of the PRC Distributor at the Mayfair Hotel in
Tianjin in November 2007. As advised by the PRC Distributor, expansion of their Shenzhen office
is due to take place in December 2007. The Group’s optimism in its near term business prospects
is reinforced by the growing attractions of Hong Kong, Macau and China as destination of choice
for overseas tourists. This phenomenon is largely prompted by the buoyant casino market in Macau,
Hong Kong Disneyland, Hong Kong Ocean Park and 2008 Beijing Olympics. While expressing
every confidence in its future strong and sustained growth in the turnover, the Group will devote its
efforts to identifying and recruiting distributors in Asia and overseas countries by taking advantage of
international and regional cosmetics exhibitions and trade shows. Given the high turnout of visiting
guests at Blu Spa booth in Cosmoprof Asia 2007, such trade event is perceived as an efficient and
cost effective means to promote market awareness of Blu Spa products and services.
The successful opening in February 2007 of the spa centre at AquaMarine has opened new business
opportunities to the Group in managing additional spa centres at luxurious residential clubhouses of
similar class. Current negotiations with other estate management for spa facility management right
in high-end residential estates are underway. In view of the growing consumer demand, the Group
is currently sourcing additional spa outlets in Kowloon to satisfy the needs of its customers for top
quality spa treatments and experience across the harbour. The Group is committed to provide premium
quality beauty care products and services to the end users. Market launch of the Group’s newly
designed, packaged and formulated Blu Spa products is scheduled to take place in the first quarter of
2008. The Directors further believe that through the introduction of the Beauteca skin care line, the
Group is better positioned to support its distributors in developing new distribution channels such
as Duty Free Shops and cosmetic surgery clinics. In the meanwhile, the PRC Distributor is planning
to manage spa centre at hotels and luxurious residential projects in tier-one cities in China as part
of their ongoing efforts in distribution channels development for Blu Spa products and services. In
light of the on-going development mentioned above, the Directors are optimistic that the Group will
see stronger and better business performance in the coming future.
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DISCLOSURE OF THE INTERESTS AND SHORT POSITIONS OF DIRECTORS AND
CHIEF EXECUTIVE IN THE SHARES, UNDERLYING SHARES AND DEBENTURES
As at 31 December 2007, the interests and short positions of each Director and Chief Executive of
the Company in the shares, underlying shares and debentures of the Company or any of its associated
corporations (within the meaning of Part XV of the Securities and Futures Ordinance (“SFO”)) which
are required to be entered in the register pursuant to section 352 of the SFO or interests or short
positions which are required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules, to be notified
to the Company and the Stock Exchange were as follows:
A. Long position in shares
Percentage of
issued share
Name Type of interests Number of shares capital
Chan Choi Har, Ivy Corporate interest 110,657,870 18.24%
Note: These shares are held by XO-Holdings Limited. Ms. Chan Choi Har, Ivy is the beneficial owner as to 65%
of the issued share capital of XO-Holdings Limited.
B. Short position in shares
No short position of Directors and Chief Executives in the shares of the Company and its
associated corporations were recorded in the register or as otherwise notified to the Company
and the Stock Exchange pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules.
C. Share options
Options to subscribe for shares in the Company:
Number of
shares options
outstanding as at
Name Date of grant Exercise price 31 December 2007
HK$
Chan Choi Har, Ivy 30 January 2002 0.30 10,250,000
Note: 50% of the outstanding share options may be exercised at any time after the expiry of 12 months from the
date of grant and the remaining 50% may be exercised at any time after 24 months from the date of grant,
and in each case not later than 29 January 2012.
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Save as disclosed above, as at 31 December 2007, the Directors are not aware of any Director and
Chief Executive of the Company had or was deemed to have any interests or short positions in the
shares, underlying shares or debentures of the Company or any associated corporation (within the
meaning of the SFO) which will be required to be notified to the Company and the Stock Exchange
pursuant to the Division 7 and 8 of Part XV of the SFO, or will be required pursuant to Section 352
of the SFO to be entered in the register maintained by the Company, or will be required pursuant to
Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by Directors and Chief
Executive of the Company to be notified to the Company and the Stock Exchange.
SHARE OPTION SCHEMES
On 30 January 2002, the Company adopted the Pre-IPO Share Option Scheme (the “Pre-IPO Scheme”)
and a new share option scheme (the “Scheme”), for the primary purpose of providing incentives or
rewards to the Directors and employees of the Group and to recognise the contribution of such eligible
persons to the growth of the Group, and will expire on 29 January 2012. No options had been granted
under the Pre-IPO Scheme and the Scheme during the period.
Share options
(1) Pre-IPO share option scheme
Under the Pre-IPO Scheme, the Board may grant options to Directors and employees of the
Company or any subsidiaries, to subscribe for shares in the Company at any time upon the
adoption date of the Pre-IPO Scheme and prior to the listing date. Any grant of options to a
connected person or any of its associates must be approved by all the independent non-executive
directors (the “INEDs”) of the Company.
As at 31 December 2007, the number of shares in respect of which options had been granted and
remained outstanding under the Pre-IPO Scheme was 10,250,000 shares, representing 1.69% of
the shares of the Company in issue at that date. The total number of shares in respect of which
options may be granted under the Pre-IPO Scheme and any other scheme is not permitted to
exceed 30% of the issued share capital of the Company from time to time. Subject to the above
rule, the total number of shares in respect of which options may be granted under the Pre-
IPO Scheme and any other scheme is 41,000,000 shares, representing 10% of the total issued
share capital of the Company as at the listing date, without prior approval from the Company’s
shareholders.
The number of shares issued and issuable in respect of which options may be granted under the
Pre-IPO Scheme and any other scheme to any individual within 12-month period immediately
preceding the date of such new grant is not permitted to exceed 1% of the issued share capital
of the Company at the date of such new grant, without prior approval from the Company’s
shareholders. Options granted to substantial shareholders or INEDs, when aggregated with
the options granted under the Pre-IPO Scheme and any other scheme in the past 12 months, in
excess of 0.1% of the Company’s share capital or with a value in excess of HK$5 million must
- 20 -
be approved in advance by the Company’s shareholders. Options granted must be taken up within
28 days of the date of grant, upon payment of HK$1 per grant. The exercise price is HK$0.30
representing the IPO placing price. 50% of the options may be exercised at any time after the
expiry of 12 months from the date of grant and the remaining 50% may be exercised at any time
after 24 months from the date of grant, and in each case not later than 29 January 2012.
(2) Share option scheme
Under the Scheme, the Board may grant options to Directors and employees of the Company
or any subsidiaries, to subscribe for shares in the Company within 10 years from the adoption
date of the Scheme. Any grant of options to a connected person or any of its associates must
be approved by all the INEDs of the Company.
As at 31 December 2007, no options had been granted under the Scheme. The total number of
shares in respect of which options may be granted under the Scheme and any other scheme is not
permitted to exceed 30% of the issued share capital of the Company from time to time. Subject
to the above rule, the total number of shares in respect of which options may be granted under
the Scheme and any other scheme is 41,000,000 shares, representing 10% of the total issued
share capital of the Company as at the listing date, without prior approval from the Company’s
shareholders.
The number of shares issued and issuable in respect of which options may be granted under
the Scheme and any other scheme to any individual within 12-month period immediately
preceding the date of such new grant is not permitted to exceed 1% of the issued share capital
of the Company at the date of such new grant, without prior approval from the Company’s
shareholders. Options granted to substantial shareholders or INEDs, when aggregated with the
options granted under the Scheme and any other scheme in the past 12 months, in excess of 0.1%
of the Company’s share capital or with a value in excess of HK$5 million must be approved in
advance by the Company’s shareholders.
Options granted must be taken up within 28 days of the date of grant, upon payment of HK$1
per grant. Options may be exercised at any time from the date of grant to the 10th anniversary
of the date of grant. The exercise price is determined by the Board, and will not be less than
the higher of the closing price of the Company’s shares on the date of grant, and the average
closing price of the Company’s shares for the five business days immediately preceding the
date of grant.
- 21 -
The following table discloses movements in the Company’s share options granted under the Pre-IPO
Scheme during the period:
Outstanding at
Outstanding Lapsed during 31 December
at 1 July 2007 the period 2007
Directors
Chan Choi Har, Ivy 10,250,000 – 10,250,000
Total for Directors 10,250,000 – 10,250,000
Employees – –
Grand Total 10,250,000 – 10,250,000
Details of the options are as follows:
Vesting Exercisable Exercise
Date of grant period period price
HK$
30.1.2002 30.1.2002- 30.1.2003- 0.30
29.1.2003 29.1.2012
Note: 50% of the options may be exercised at any time after the expiry of 12 months from the date of grant and the
remaining 50% may be exercised at any time after 24 months from the date of grant, and in each case not later
than 29 January 2012.
DIRECTORS’ RIGHTS TO ACQUIRE SHARES OR DEBENTURES
Save as disclosed under the heading “Share Options Schemes”, at no time during the period was
the Company, or any of its subsidiaries a party to any arrangements to enable the Directors of the
Company to acquire by means of acquisition of shares in, or debt securities, including debentures,
of the Company or any other body corporate, and none of the Directors or their spouses or children
under the age 18 had any right to subscribe for the securities of the Company, or had exercised any
such right.
SUBSTANTIAL SHAREHOLDERS
As at 31 December 2007, the register of substantial shareholders required to be maintained under
Section 336 of the SFO showed that, the following shareholders had an interest of 5% or more in the
issued share capital of the Company:
- 22 -
Long position in shares
Percentage of
issued share
Name of shareholders Number of shares capital
Chan Choi Har, Ivy (Note 1) 110,657,870 18.24%
XO-Holdings Limited (Note 2) 110,657,870 18.24%
Wah Hing Consultants Limited (Notes 2 and 3) 110,657,870 18.24%
Heung See Wai, Angela (Note 3) 110,657,870 18.24%
Rajewski, Natalie N. (Note 4) 84,099,330 13.86%
Eastpoint Resources Limited (Note 4) 84,099,330 13.86%
Well Arts Enterprises Limited (Note 5) 84,099,330 13.86%
Wai Suk Chong, Helena (Note 6) 107,132,600 17.66%
Profit Trick Holdings Limited (Note 6) 107,132,600 17.66%
David Chiu (Note 7) 146,151,360 24.09%
Rocket High Investments Limited (Note 7) 146,151,360 24.09%
Notes:
1. The interests of Chan Choi Har, Ivy in the Company comprise 18.24% shareholding interest through her 65%
interest in XO-Holdings Limited.
2. These shares are held by XO-Holdings Limited which is beneficially owned as to 65% by Chan Choi Har, Ivy and
as to 35% by Wah Hing Consultants Limited.
3. Wah Hing Consultants Limited is beneficially owned as to 100% by Heung See Wai, Angela.
4. These shares are held by Eastpoint Resources Limited, a company whose entire issued share capital is held by Well
Arts Enterprises Limited in its capacity as trustee of the Eastpoint Trust, a discretionary trust, the discretionary
objects of which include Rajewski, Natalie N. and certain of her family members.
5. Well Arts Enterprises Limited holds the entire issued share capital of Eastpoint Resources Limited in its capacity
as trustee of the Eastpoint Trust, a discretionary trust and Well Arts Enterprises Limited is deemed to have an
interest in the 84,099,330 shares in the Company in which Eastpoint Resources Limited is interested.
6. These shares are held by Profit Trick Holdings Limited. The entire issued share capital of Profit Trick Holdings
Limited is beneficially owned by Wai Suk Chong, Helena.
7. These shares are held by Rocket High Investments Limited. The entire issued share capital of Rocket High
Investments Limited is beneficially owned by David Chiu.
Save as disclosed above, the Company has not been notified of any other interests representing 5%
or more or any short positions in the issued share capital of the Company as at 31 December 2007.
- 23 -
PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES
Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s
listed securities for the six months ended 31 December 2007.
ADVANCES TO AN ENTITY
As at 31 December 2007, the Group did not have, in its normal and ordinary course of business, any
relevant advance to an entity that is required to be disclosed pursuant to Rule 17.22 and 17.24 of the
GEM Listing Rules.
COMPETING INTERESTS
During the period under review, none of the Directors or the management shareholders (as defined in
the GEM Listing Rules) of the Company had any interest in business that competed or might compete
with the business of the Group.
CORPORATE GOVERNANCE
The Company had complied with the Code on Corporate Governance Practices (the “CCGP”)
contained in Appendix 15 of the GEM Listing Rules during the period ended 31 December 2007
except the following deviations.
According to Code Provision A.4.1 of the CCGP, non-executive Directors must be appointed for a
specific term and subject to re-election. The existing non-executive Directors of the Company do not
have specific terms of appointment. However, pursuant to the Bye-laws of the Company, all Directors
of the Company (including executive and non-executive Directors, except the Chairman of the Board
and/or the Chief Executive Officer) shall be subject to retirement by rotation in every annual general
meeting.
According to Code Provision A.4.2 of the CCGP every director is subject to retirement by rotation
at least once every three years. Pursuant to the Bye-laws of the Company, at each annual general
meeting, one-third of the directors must retire. Notwithstanding any requirements of that provision,
the Chairman of the Board and/or the Chief Executive Officer of the Company is not subject to
retirement by rotation or taken into account in determining the number of Directors to retire. During
the period under review, Mr. Wu Wenzhi was the Chairman of the Board and executive Director of
the Company. He had resigned as the Chairman of the Board and executive Director on 8 August
2007, and Ms. Chan Choi Har, Ivy took up the duty of Chairman of the Board and Chief Executive
Officer of the Company. As Ms. Chan Choi Har, Ivy is one of the founders of the Group and is
- 24 -
responsible for the overall market development of the Group, the Board believes that continuity is
the key to implementing the long-term business plans successfully, and that with the Chairman or
Chief Executive Officer continuing in office, it can provide the Group with strong and consistent
leadership, thus long-term business strategies can be planned and implemented more effectively. The
Board is of the view that the Chairman of the Board and/or the Chief Executive Officer should not
be subject to retirement by rotation.
According to Code Provision A.2.1 of the CCGP, the roles of chairman and chief executive should
be separate and should not be performed by the same individual. During the period from 8 August
2007 to 31 December 2007, Ms. Chan Choi Har, Ivy held the positions of Chairman and Chief
Executive Officer of the Company. Ms Chan Choi Har, Ivy is one of the founders of the Group and
is responsible for the overall market development of the Group. The Board believes that vesting the
roles of both Chairman and Chief Executive Officer in the same person is beneficial to the business
development of the Group. The Board will review the effectiveness of such management structure
and arrangement from time to time.
The Board’s annual review of the effectiveness of the system of internal control of the Group pursuant
to C.2.1 of the CCGP will be reported in the forthcoming corporate governance report to be contained
in the Company’s annual report for the financial year ending 30 June 2008.
MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS
During the period under review, the Company has adopted a code of conduct regarding directors’
securities transactions on terms no less exacting than the required standard of dealings as set out in
Rules 5.48 to 5.67 of the GEM Listing Rules. Having made specific enquiry of all Directors of the
Company, the Company was not aware of any non-compliance with the required standard of dealings
and its code of conduct regarding securities transactions by the directors throughout the period ended
31 December 2007.
BOARD OF DIRECTORS
The Board of the Company comprises five Directors, of which two are Executive Directors, namely,
Ms. Chan Choi Har, Ivy and Mr. Chan Shun Kuen, Eric and three are INEDs, namely, Mr. Chan Sze
Hon, Mr. Lam Wai Pong and Mr. Yeung Mario Bercasio. The Directors are collectively responsible
for the development of the Group’s strategies and policies. The Executive Directors are responsible for
the daily operation of the Group while the INEDs provide their professional advices to the Group.
The INEDs have professional experiences in legal, finance and accounting, property development
and engineering respectively. The Company has received confirmation from each of the INEDs as
regards to their independence to the Company and considers that each of the INEDs is independent
of the Company.
- 25 -
One-third of all the Directors, except the Chairman of the Board and/or the Chief Executive Officer,
shall retire by rotation from office each year in accordance with the Company’s Bye-laws. The term
of office of the Directors is the period up to their retirement by rotation. Those Directors at any time
appointed by the Board shall hold office only until the next following annual general meeting of the
Company and shall be eligible for re-election but shall not be taken into account in determining the
Directors who are to retire by rotation at such meeting.
AUDIT COMMITTEE
As required by Rules 5.28 to 5.33 of the GEM Listing Rules, the Company has established an audit
committee (the “Audit Committee”) on 10 December 2001 with written terms of reference, which deal
clearly with its authorities and duties. The primary duties of the Audit Committee are to advise the
Board on the appointment and removal of external auditors, approve the remuneration and terms of
appointment of the external auditors, as well as review and supervise the financial reporting process
and internal control system of the Group and review the Company’s annual reports and accounts and
interim and quarterly reports, and provide advice and recommendations to the Board thereon.
The Audit Committee comprises three INEDs, namely, Mr. Chan Sze Hon, Mr. Lam Wai Pong, Mr.
Yeung Mario Bercasio. Mr. Chan Sze Hon is the chairman of the Audit Committee.
REMUNERATION COMMITTEE
The Company established a remuneration committee (the “Remuneration Committee”) on 30 March
2005 with written terms of reference. The Remuneration Committee currently comprises three INEDs
of the Company, namely, Mr. Chan Sze Hon, Mr. Lam Wai Pong, Mr. Yeung Mario Bercasio. Mr.
Chan Sze Hon is the chairman of the Remuneration Committee.
The Remuneration Committee is largely responsible for making recommendations to the Board on
all Company’s policies and structures in connection with the remuneration of Directors, establishing
a set of formal and transparent procedures for the formulation of the remuneration policy. It is also
responsible for determining the specific remuneration packages of all executive Directors and senior
management, reviewing and approving the performance-based remuneration and the compensation
payable to executive Directors and senior management as a result of their departure from office,
termination of their employment, dismissal and removal, and ensuring that no Directors or their
associates are involved in determining their own remuneration.
PUBLIC FLOAT
Based on the information that is publicly available to the Company and within the knowledge of its
Directors, as at the date of this report, there is sufficient public float, as not less than 25% of the
Company’s issued shares are held by the public.
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BOARD PRACTICES AND PROCEDURES
The Company has complied with the board practices and procedures as set out in Rules 5.34 of the
GEM Listing Rules during the period.
By order of the Board
Blu Spa Holdings Limited
Chan Choi Har, Ivy
Chairman
As at the date hereof, the Board comprises of two executive Directors, namely, Ms. Chan Choi Har,
Ivy and Mr. Chan Shun Kuen, Eric; and three INDEs, namely, Mr. Chan Sze Hon, Mr. Lam Wai Pong
and Mr. Yeung Mario Bercasio.
Hong Kong, 1 February 2008
INTERIM REPORT FOR THE SIX MONTHS ENDED 31 DECEMBER 2007 |
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