I N T E R I M R E S U L T S A N N O U N C E M E N T F O R T H E 6 M O N T H S E N D E D 3 0 S E P T E M B E R 2 0 0 7
1
INTERIM RESULTS ANNOUNCEMENT
FOR THE 6 MONTHS ENDED 30 SEPTEMBER 2007
FINANCIAL HIGHLIGHTS
6 months ended 30 September RESULTS
2007 2006
% Change
Revenue (HK$’000) 335,913 458,944 -27%
Profit attributable to equity holders (HK$’000) 73,631 97,687 -25%
Gross profit ratio (%) 38 47 -9%
Basic earnings per share (HK cents) 15.32 20.52 -25%
Interim dividend per share (HK cents) 4.0 4.0 -
30 September 31 March FINANCIAL POSITION
2007 2007
% Change
Net assets (HK$’000) 442,624 373,588 +18%
Gearing ratio (times) 0.12 0.20 -40%
Current ratio (times) 1.66 1.54 +8%
2
UNAUDITED INTERIM RESULTS
The Board of Directors (the “Board”) of Daisho Microline Holdings Limited (the
“Company”) is pleased to present the unaudited interim results of the Company and its
subsidiaries (the “Group”) for the 6 months ended 30 September 2007 as follows:
CONDENSED CONSOLIDATED INCOME STATEMENT
(Unaudited)
6 months ended 30 September
2007 2006
Notes HK$’000 HK$’000
REVENUE 3 335,913 458,944
Cost of sales (209,338) (241,506)
Gross profit 126,575 217,438
Other income and gains 5,254 2,237
Selling and distribution costs (25,359) (81,963)
Administrative expenses (19,656) (19,576)
Other expenses (89) (755)
Finance costs 4 _ (2,128) (2,899)
PROFIT BEFORE TAX 4 84,597 114,482
Tax 5 (10,966) (16,795)
PROFIT FOR THE PERIOD 73,631 97,687
======== ========
Attributable to equity holders of the Company 73,631 97,687
======== ========
INTERIM DIVIDEND 6 19,225 19,225
======== ========
EARNINGS PER SHARE
ATTRIBUTABLE TO ORDINARY
EQUITY HOLDERS OF THE COMPANY 7
- Basic HK15.32 cents HK20.52 cents
=========== ===========
- Diluted HK15.27 cents HK20.33 cents
=========== ===========
3
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited) (Audited)
30 September 31 March
2007 2007
Notes HK$’000 HK$’000
NON-CURRENT ASSETS
Property, plant and equipment 8 321,947 316,886
Prepaid land lease payments 4,197 4,171
Deposits paid for acquisition of items of
property, plant and equipment 8,073 4,007
Total non-current assets 334,217 325,064
CURRENT ASSETS
Inventories 54,496 40,569
Trade debtors 9 114,389 85,078
Available-for-sale investment 10 63,052 15,625
Sundry debtors, prepayments & deposits 14,545 11,440
Cash and cash equivalents 11 70,760 85,562
Total current assets 317,242 238,274
CURRENT LIABILITIES
Trade creditors 12 99,879 62,344
Other creditors and accruals 31,245 35,322
Interest-bearing bank and other borrowings 13 36,869 41,293
Tax payable 22,832 16,105
Total current liabilities 190,825 155,064
NET CURRENT ASSETS 126,417 83,210
TOTAL ASSETS LESS CURRENT LIABILITIES 460,634 408,274
NON-CURRENT LIABILITIES
Interest-bearing bank and other borrowings 13 17,810 34,486
Deferred tax liabilities 200 200
Total non-current liabilities 18,010 34,686
Net assets 442,624 373,588
======= ======
4
CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
(Unaudited) (Audited)
30 September 31 March
2007 2007
HK$’000 HK$’000
EQUITY
Equity attributable to equity
holders of the Company
Issued share capital 48,061 48,061
Reserves 394,563 311,109
Proposed final dividend - 14,418
Total equity 442,624 373,588
======= =======
5
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)
6 months ended 30 September 2007
Issued Share Exchange Proposed
share premium Contributed equalisation Retained final Total
capital account surplus reserve profits dividend equity
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 April 2007 48,061 92,031 9,379 9,820 199,879 14,418 373,588
Exchange realignment and
total income and expense
for the period recognised
directly in equity - - - 9,823 - - 9,823
Profit for the period - - - - 73,631 - 73,631
Payment of final dividend
for 2006/07 - - - - - (14,418) (14,418)
At 30 September 2007 48,061 92,031 9,379 19,643 273,510 - 442,624
====== ====== ====== ======= ====== ====== ======
(Unaudited)
6 months ended 30 September 2006
Issued Share Exchange Proposed
share premium Contributed equalisation Retained final Total
capital account surplus reserve profits dividend equity
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 April 2006 47,176 90,613 9,379 (15,155) 91,076 14,252 237,341
Exchange realignment and
total income and expense
for the period recognised
directly in equity - - - 10,684 - - 10,684
Profit for the period - - - - 97,687 - 97,687
Issue of ordinary shares from
exercise of share options 885 1,417 - - - - 2,302
Payment of final dividend
for 2005/06 - - - - (166) (14,252) (14,418)
At 30 September 2006 48,061 92,030 9,379 (4,471) 188,597 - 333,596
====== ====== ====== ======= ====== ====== ======
These reserve accounts comprise the consolidated reserves of HK$394,563,000 (31 March
2007: HK$311,109,000) in the consolidated balance sheet.
6
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
(Unaudited)
6 months ended 30 September
2007 2006
HK$’000 HK$’000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax 84,597 114,482
Net adjustments for non-cashflow items 17,978 40,968
________ ________
Operating profit before working capital changes 102,575 155,450
Net increase in working capital (9,741) (76,163)
________ ________
Cash generated from operations 92,834 79,287
Net interest payment (380) (2,033)
Net tax payment (4,240) (6,788)
________ ________
Net cash inflow from operating activities 88,214 70,466
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash outflow from investing activities (68,781) (50,912)
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash outflow from financing activities (35,518) (30,921)
NET DECREASE IN CASH AND (16,085) (11,367)
CASH EQUIVALENTS
Cash and cash equivalents at beginning of the period 85,562 53,355
Effect of foreign exchange rate changes, net 1,283 427
CASH AND CASH EQUIVALENTS AT 70,760 42,415
END OF THE PERIOD ======= =======
ANALYSIS OF BALANCES OF CASH AND
CASH EQUIVALENTS
Cash and bank balances 61,608 22,921
Non-pledged time deposits with original
maturity of less than three
months when acquired 9,152 19,494
_______ ________
Cash and cash equivalents 70,760 42,415
======= =======
7
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION AND CHANGES IN ACCOUNTING POLICIES
This interim report has been prepared in accordance with Hong Kong Accounting
Standard (“HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong
Institute of Certified Public Accountants and Appendix 16 of the Rules Governing the
Listing of Securities on
Except for the changes mentioned below, the accounting policies and methods of
computation used in the preparation of this interim report are the same as those
adopted in preparing the annual audited financial statements for the year ended 31
March 2007.
Change in accounting policies
The Group has changed certain of its accounting policies following its adoption of the
following new/revised Hong Kong Financial Reporting Standards (“HKFRSs”),
HKASs and Interpretations (hereinafter collectively referred to as the “new HKFRSs”)
which are effective for accounting periods beginning on or after 1 April 2007.
HKAS 1 Amendment Capital Disclosure
HKFRS 7 Financial Instruments: Disclosures
HK(IFRIC) – Int 8 Scope of HKFRS 2
HK(IFRIC) – Int 9 Reassessment of Embedded Derivatives
HK(IFRIC) – Int 10 Interim Financial Reporting and Impairment
HK(IFRIC) – Int 11 HKFRS 2 – Group and Treasury Share Transactions
The application of these new HKFRSs did not have any material impact on the results
or the financial position of the Group for the current or prior accounting period.
Accordingly, no prior period adjustments are required.
Change in estimated useful life of machinery and equipment
Prior to 31 March 2007, the estimated useful life of the Group’s machinery and
equipment was 5 years. After reviewing the depreciation policy of comparable
companies and the expected duration during which the Group’s machinery and
equipment can be utilized, the Board is of the opinion that the estimated useful life of
the Group’s machinery and equipment should be changed from 5 years to 10 years
with effect from 1 Apr 2007 in order to reflect the real performance of the Group and
help provide a clear financial comparison with other comparable companies. This
constitutes a change in accounting estimate and will be applied prospectively. If the
Group adopts 5 years as the estimated useful life of its machinery and equipment, the
depreciation charge for the current period and the current financial year will increase
by about HK$23 million and HK$43 million respectively.
8
2. IMPACT OF ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL
REPORTING STANDARDS
The Group has not applied the following new and revised HKFRSs, that have been
issued but not yet effective, in this interim report.
HKAS 23 (Revised) Borrowing Costs 1
HKFRS 8 Operating Segments 1
HK(IFRIC) – Int 12 Service Concession Arrangements 2
HK(IFRIC) – Int 13 Customer Loyalty Programmes 3
HK(IFRIC) – Int 14 HKAS 19 – The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and their
Interaction 2
1 Effective for annual periods beginning on or after 1 January 2009
2 Effective for annual periods beginning on or after 1 January 2008
3 Effective for annual periods beginning on or after 1 July 2008
The Group anticipates that the applications of these new or revised standard,
amendment and interpretations would not have significant impact on the result and
financial position of the Group.
9
3. REVENUE AND SEGMENT INFORMATION
The principal activities of the Group are the manufacture and trading of printed
circuit boards. There was no change in the nature of the Group’s principal activities
during the current period.
Revenue represents the net invoiced value of goods sold, after allowances for goods
returns and trade discounts.
(a) Business segment
The Group has only one business segment, which is the manufacture and trading of
printed circuit boards. Therefore, no business segment analysis is presented.
(b) Geographical segments
In presenting information by geographical segment, segment revenue is based on the
location of the customers.
(Unaudited)
6 months ended 30 September
2007 2006
HK$’000 HK$’000
Segment revenue:
Sales to external customers
Mainland China 172,091 196,008
Europe 61,252 169,407
Japan 36,236 26,705
Hong Kong 34,666 31,940
Others 31,668 34,884
335,913 458,944
======= =======
10
4. PROFIT BEFORE TAX
Profit before tax is arrived at after crediting and (charging):
(Unaudited)
6 months ended 30 September
2007 2006
HK$’000 HK$’000
(a) Finance costs:
Interest on:
Bank loans and other loans wholly (240) (645)
repayable within five years
Finance leases and hire purchase contracts (1,888) (2,254)
________ ________
(2,128) (2,899)
======= =======
(b) Other items:
Depreciation (17,615) (34,058)
Amortization of land lease payments (63) (59)
Staff costs (including directors’ remuneration) (23,990) (21,077)
Bank interest income 1,827 724
======= =======
As mentioned in note 1 under the sub-paragraph of “Change in estimated useful life
of machinery and equipment”, the Group has changed the estimated useful life of
its machinery and equipment from 5 years in the past to 10 years with effect from 1
April 2007. If the Group adopts 5 years as the estimated useful life of its
machinery and equipment, the depreciation charge for the current period will
increase by about HK$23 million.
11
5. TAX
Hong Kong profits tax has been provided at the rate of 17.5% on the estimated
assessable profits arising in Hong Kong for the current period. Taxes on profits
assessable elsewhere have been calculated at the rates of tax prevailing in the
jurisdictions in which the Group operates, based on existing legislation,
interpretations and practices in respect thereof.
Deferred tax has been provided on temporary differences using the current applicable
rate.
(Unaudited)
6 months ended 30 September
2007 2006
HK$’000 HK$’000
Group:
Current – Hong Kong
Charge for the period 3,757 6,450
Current – Elsewhere
Charge for the period 7,209 8,575
Deferred - 1,770
________ ________
Total tax charge for the period 10,966 16,795
======= =======
12
6. INTERIM DIVIDEND
(Unaudited)
6 months ended 30 September
2007 2006
HK$’000 HK$’000
Proposed interim dividend of HK4.0 cents
(2006: HK4.0 cents) per ordinary share 19,225 19,225
======= =======
At the Board meeting held on 11 December 2007, the Board has resolved to declare
an interim dividend of HK4.0 cents per ordinary share for the year ending 31 March
2008. This proposed interim dividend is not reflected as a dividend payable in the
condensed consolidated financial statements for the 6 months ended 30 September
2007, but will be reflected as an appropriation of retained profits for the year ending
31 March 2008.
The amount of the proposed interim dividend is based on 480,613,785 shares in issue
at 11 December 2007.
13
7. EARNINGS PER SHARE
(a) Basic earnings per share
The calculation of basic earnings per share is based on the profit for the period
attributable to ordinary equity holders of the Company of HK$73,631,000 (2006:
HK$97,687,000) and the weighted average number of 480,613,785 (2006:
476,103,402) ordinary shares in issue during the period.
(b) Diluted earnings per share
The calculation of diluted earnings per share is based on the profit for the period
attributable to ordinary equity holders of the Company of HK$73,631,000 (2006:
HK$97,687,000) and the weighted average number of 482,081,630 (2006:
480,616,527) ordinary shares after adjusting for the effects of all dilutive potential
ordinary shares.
(c) Reconciliation
(Unaudited)
6 months ended 30 September
2007 2006
Number of Number of
shares shares
Weighted average number of
ordinary shares used in calculating
basic earnings per share 480,613,785 476,103,402
Deemed issue of ordinary shares
for no consideration arising
from share options 1,467,845 4,513,125
__________ __________
Weighted average number of
ordinary shares used in calculating
diluted earnings per share 482,081,630 480,616,527
========= =========
8. PROPERTY, PLANT AND EQUIPMENT
(Unaudited)
6 months ended 30 September
2007 2006
HK$’000 HK$’000
Purchase of property, plant and equipment 16,047 108,327
======= =======
14
9. TRADE DEBTORS
The Group has a policy which allows an average credit period of 60 days to its
customers. An aged analysis of the trade debtors as at the period end, based on the
payment due date and net of provisions, is as follows:
(Unaudited) (Audited)
30 September 31 March
2007 2007
HK$’000 HK$’000
Current to 1 month 112,804 83,897
1 to 2 months 595 423
2 to 3 months 147 35
Over 3 months 843 723
114,389 85,078
======= =======
10. AVAILABLE-FOR-SALE INVESTMENT
(Unaudited) (Audited)
30 September 31 March
2007 2007
HK$’000 HK$’000
Structured deposits 41,324 15,625
Corporate bonds 7,401 -
Equity linked notes 14,327 -
63,052 15,625
======= =======
11. CASH AND CASH EQUIVALENTS
(Unaudited) (Audited)
30 September 31 March
2007 2007
HK$’000 HK$’000
Cash and bank balances 61,608 33,708
Time deposits 9,152 51,854
Cash and cash equivalents in the
condensed consolidated cash flow statement 70,760 85,562
====== =======
15
12. TRADE CREDITORS
An aged analysis of the trade creditors as at the period end, based on the payment due
date, is as follows:
(Unaudited) (Audited)
30 September 31 March
2007 2007
HK$’000 HK$’000
Current to 1 month 91,963 56,481
1 to 2 months 3,556 4,611
2 to 3 months 3,028 666
Over 3 months 1,332 586
99,879 62,344
======= =======
13. INTEREST-BEARING BANK AND OTHER BORROWINGS
(Unaudited) (Audited)
30 September 31 March
2007 2007
HK$’000 HK$’000
Current liabilities
Bank loans – unsecured 4,722 5,000
Finance lease and hire purchase
contract payables 32,147 36,293
36,869 41,293
Non-current liabilities
Bank loans – unsecured 1,111 3,333
Finance lease and hire purchase
contract payables 16,699 31,153
17,810 34,486
Total 54,679 75,779
======= =======
16
14. CAPITAL COMMITMENTS
The Group had the following capital commitments as at the period end:
(Unaudited) (Audited)
30 September 31 March
2007 2007
HK$’000 HK$’000
Capital commitments,
Contracted but not provided for,
in respect of
acquisition of items of property,
plant and equipment 23,947 4,688
======= =======
17
15. SHARE OPTION SCHEME
The Company operates a share option scheme for the purpose of encouraging the
eligible participants to perform their best in achieving the goals of the Company and
at the same time allows the eligible participants to enjoy the results of the Company
attained through their effort and contribution. Eligible participants of the share option
scheme include any full-time employees, directors or professional advisers of the
Company or any of its subsidiaries or associated companies. The share option scheme
became effective on 28 August 2003 and, unless otherwise cancelled or amended, will
remain in force for 10 years from that date.
The share options previously granted by the Company were vested at the date of grant
and will be settled by shares.
As at 30 September 2007, 1,650,000 share options which were granted on 15 June
2004 remained unexercised. These share options are exercisable during the period
from 15 June 2004 to 14 June 2009 at an exercise price of HK$0.20 per share. If these
outstanding share options are fully exercised, they shall represent approximately
0.34% of the existing issued share capital of the Company.
The movement of the share options under the Scheme during the period is as follows:
Number of share options
Price of
Company’s
Shares
Exercise At
Name or
category of
participant
At
1 April
2007
Granted
during
the period
Exercised
during
the period
At
30 Sep
2007
Date of
grant of
share
options
Exercise period
of share options
price of
share
options
HK$
grant
date of
options
HK$
Director :
Hiroto Sasaki 1,650,000 - - 1,650,000 15-6-04 15-6-04 to 14-6-09 0.20 0.192
Notes
The exercise price of the share options is subject to adjustment in the case of rights or bonus issues,
or other similar changes in the Company’s share capital.
The price of the Company’s shares disclosed as at the date of the grant of the share options is the
Stock Exchange closing price on the date of grant of the options.
18
16. RELATED PARTY TRANSACTIONS
(a) The Group had the following transactions with related parties during the period:
(Unaudited)
6 months ended 30 September
2007 2006
Notes HK$'000 HK$'000
Sale of printed circuit boards to a
related party (i) 36,236 26,705
Technical support fees paid to a
related party (ii) - 794
======= =======
Notes:
(i) Printed circuit boards were sold to a subsidiary of Daisho Denshi Co., Ltd., a
substantial shareholder of the Company who has significant influence over the
Group, and the products sold were unique and tailor-made to the customer's
requirements and specifications. The selling prices of the printed circuit boards
were determined based on the complexity of the specifications and were agreed
between the respective parties.
(ii) Technical support fees were paid to Daisho Denshi Co., Ltd. for the provision of
technical support services for the Group's manufacturing of printed circuit boards.
The technical support fees were determined on bases agreed between the
respective parties.
(b) Compensation of key management personnel of the Group:
(Unaudited)
6 months ended 30 September
2007 2006
HK$'000 HK$'000
Short term employee benefits 2,949 2,728
Post-employment benefits 129 119
Total compensation paid to key 3,078 2,847
management personnel ===== =====
19
MANAGEMENT DISCUSSION AND ANALYSIS
Business Review
The Group’s revenue for the current period fell short of that in the last corresponding period
by 27% mainly due to the gradual shift in the technological requirement of HDI PCB for
mobile phone towards a more advance level by some of the Group’s world-renowned
telecommunication product customers since the second half of last financial year as
mentioned in the last Annual Report of the Company. Although the Group is now capable of
producing the more advance level of HDI PCB, the formal approval of the Group in the
supply of such HDI PCB to these customers is expected until after the end of the current
financial year.
In spite of the challenge mentioned above, the Group’s revenue for the current period
increased by 15% as compared to the second half of last financial year because the Group
has developed some potential original design manufacturers of mobile phone in the
Mainland China consuming HDI PCB with requirements no less inferior to those required
by the Group’s existing world-renowned telecommunication product customers during the
current period and the result is encouraging. The sales value of PCB from the original
design manufacturers of mobile phone in the Mainland China as a proportion of the Group’s
revenue increased from about 6% in the second half of last financial year to about 20% in
the current period.
The Group’s PCB average selling price for the current period decreased by about 10% as
compared to the last corresponding period and this was consistent with the drop in the
percentage of the Group’s selling and distribution costs on revenue from about 18% in last
corresponding period to about 8% in current period. Because the initial cost for establishing
business relationship with new customers is always high, the Group usually builds in such
cost in the PCB selling price for new models by practice. This accounts for the high
percentage of the Group’s selling and distribution costs on revenue in last corresponding
period. Once the cost required to maintain the business relationship diminishes, the Group
will consider reducing the PCB selling price and share the benefit with the customers. This
accounts for the drop in the Group’s PCB average selling price along with the selling and
distribution costs in current period.
The Group’s gross profit margin decreased from about 47% in last corresponding period to
about 38% in the current period. Apart from the decrease in the Group’s PCB average
selling price as mentioned above, the increase in the Group’s average purchase price of
certain major raw material items such as laminate and precious metal during the current
period by about 20% as compared to the last corresponding period eroded the gross profit
margin during the current period.
20
Financial Review
The Group’s gearing ratio (defined as the ratio of interest-bearing bank and other
borrowings to total equity) at 30 September 2007 and 31 March 2007 was 0.12 times and
0.20 times respectively while the Group’s current ratio at 30 September 2007 and 31 March
2007 was 1.66 times and 1.54 times respectively. These financial ratios improved
substantially because the Group’s PCB operations generated net cash inflow of about
HK$88 million during the current period.
As at 30 September 2007, the Group’s interest-bearing bank and other borrowings
amounting to HK$54,679,000 (31 March 2007: HK$75,779,000) out of which
HK$36,869,000 (31 March 2007: HK$41,293,000) were repayable within the next 12
months. These borrowings were all denominated in Hong Kong dollars (“HK$”), originally
repayable monthly over 3 years and subjected to floating interest rates for about 94% (31
March 2007: 91%) of them. The Group has not adopted any interest rate hedging tool for
these borrowings. Certain machinery and equipment of the Group with a net book value at
30 September 2007 of HK$106,324,000 (31 March 2007: HK$109,420,000) were pledged
to secured these borrowings.
As at 30 September 2007, the Group’s assets and liabilities were mostly denominated in
either HK$, US$ or Renminbi (“RMB”). Because the exchange rate for US$ against HK$ is
relatively stable in Hong Kong for the moment, the Group has not adopted any hedging tool
against its assets or liabilities denominated in US$. Also because the Group’s subsidiary in
Mainland China has net assets as at 30 September 2007 and RMB is expected to appreciate
gradually, there is only a remote possibility that the Group will suffer exchange loss on the
translation of these net assets and so the Group has not adopted any hedging tool against
these net assets denominated in RMB. However, the Group has made use of foreign
exchange forward contracts during the current period to hedge against all its operating
expenses to be paid in RMB in light of the expected appreciation of RMB.
Employee Benefits
As at 30 September 2007, the Group had 1,733 (31 March 2007: 1,505) employees,
including directors, working mainly in Mainland China. For the period ended 30 September
2007, the Group’s total staff costs including directors’ remuneration were HK$23,990,000
(2006: HK$21,077,000).
According to the Group’s staff remuneration policy, the remuneration of an employee and
the Company’s director is determined by the Board and the Company’s Remuneration
Committee respectively from time to time with reference to his performance and duties, the
performance and profitability of his employer and the prevailing market conditions.
21
Outlook
It is generally expected that the Chinese government will soon issue the third generation
(“3G”) telecommunication licences to the services operators before the Olympic Games in
Beijing in August 2008. The provision of 3G telecommunication services in the mainland
China will boost the huge demand for 3G mobile phones there and will stimulate the
demand for high density interconnect (“HDI”) PCB indirectly. Besides the existing
world-renowned telecommunication products customers, the Group has begun to develop
business with the original design manufacturers for mobile phone in the Mainland China
and the result is encouraging. The Group will definitely benefit from the forthcoming huge
demand for 3G mobile phones in the Mainland China.
Furthermore, the product applications of HDI PCB are not merely restricted to mobile
phone. The Group has succeeded in dealing with a famous Japanese digital camera
manufacturer who commences to place sales orders for HDI PCB with the Group from
December 2007 onwards and the future monthly sales orders coming from this customer is
expected to reach several millions of Hong Kong dollars. The Group is negotiating with
other potential non-telecommunication product customers so as to broaden its customer
base.
Although the year ahead looks promising, the Board is well aware of the following
challenging factors that could adversely affect the Group.
It is noteworthy that the Group’s purchase prices of copper and precious metal have once
reached their historically high level during 2007 and they are expected to remain at high
level for a while. However, the Group is trying various means such as increase in PCB
selling price and increase in production capacity utilization rate etc. so as to counteract the
impact of the high raw material cost.
Although some recent significant economic events such as sub-prime mortgage crisis in the
United States of America and the upsurge in global petroleum price may not increase the
operating costs of the Group to a great extent, they may hinder the growth of the world
economy and the business of the Group may be adversely affected accordingly.
In spite of the above concern, the Board is optimistic about the results of the Group for the
current financial year barring any unforeseen circumstances.
INTERIM DIVIDEND
The Board has resolved to declare an interim dividend of HK4.0 cents per ordinary share for
the year ending 31 March 2008 (2007:HK4.0 cents). The interim dividend will be paid on
30 January 2008 to shareholders whose names are registered in the register of members of
the Company on 16 January 2008.
22
CLOSURE OF REGISTER OF MEMBERS
The register of members will be closed from 14 January 2008 to 16 January 2008, both days
inclusive during which period no transfer of shares will be registered. In order to qualify
for the interim dividend, all completed transfer documents accompanied by the relevant
share certificates must be lodged with the Company’s Hong Kong share registrars, Tricor
Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong not later
than 4:00 p.m. on 11 January 2008.
CORPORATE GOVERNANCE
In the opinion of the directors, the Company has complied with the applicable code
provisions of the Code on Corporate Governance Practices as set out in Appendix 14 of the
Listing Rules throughout the 6 months ended 30 September 2007, except for the following
deviations:
Chairman and Chief Executive Officer
According to the Code Provision A.2.1, the roles of chairman and chief executive officer
(“CEO”) should be separate and should not be performed by the same individual. The
division of responsibilities between the chairman and CEO should be clearly established
and set out in writing.
The Company does not have a separate Chairman and CEO, and Mr. Chan Sik Ming, Harry
currently holds both positions. The Board believes that vesting the roles of both Chairman
and CEO in the same person ensures consistent leadership within the Group and enables
more effective and efficient planning of long-term strategies and implementation of
business plans. The Board believes that the balance of power and authority will not be
impaired and is adequately ensured by an effective Board which comprises experienced and
high calibre individuals with a sufficient number thereof being independent non-executive
directors.
Non-executive directors
Under the Code Provision A.4.1, non-executive directors should be appointed for a specific
term subject to re-election.
The independent non-executive directors of the Company do not have a specific term of
appointment, but are subject to retirement by rotation and re-election in accordance with the
relevant provisions of the Company’s bye-laws.
23
Re-election of directors
Under the Code Provision A.4.2, every director, including those appointed for a specific
term, should be subject to retirement by rotation at least once every three years.
The Company is subject to a private act known as “The Juko Laboratories Holdings Limited
Company Act 1990” which is an Act of the Company’s former name of Juko Laboratories
Holdings Limited when it was first established. The Chairman of the Company is not
required to be subject to rotation in accordance with the Bye-Laws of the Company.
However, in the spirit of good corporate governance practice, the existing Chairman of the
Company has agreed to retire on a voluntary basis at least once every three years at the
annual general meeting of the Company.
DIRECTORS’ INTERESTS AND SHORT POSITIONS IN SHARES AND
UNDERLYING SHARES
At 30 September 2007, the interests and short positions of the directors in the shares and
underlying shares of the Company or its associated corporations (within the meaning of Part
XV of the Securities and Futures Ordinance (the “SFO”)), as recorded in the register
required to be kept by the Company pursuant to Section 352 of the SFO, or as otherwise
notified to the Company and The Stock Exchange of Hong Kong Limited (the “Stock
Exchange”) pursuant to the “Model Code for Securities Transactions by Directors of Listed
Issuers”, were as follows:
Long positions in ordinary shares of the Company:
Percentage of the
Directly Beneficiary Company’s issued
Name of director beneficially owned of a trust Total share capital
Chan Sik Ming, Harry 39,680,000 103,621,417 143,301,417 29.82
Au-Yeung Wai Hung 4,200,000 N/A 4,200,000 0.87
Hiroto Sasaki 2,950,000 N/A 2,950,000 0.61
Chan Sik Ming, Harry and his family are the objects of a discretionary trust, which has appointed Earnwell
Limited as its trustee. At 30 September 2007, Earnwell Limited held 103,621,417 shares representing
approximately 21.56% of the issued share capital of the Company.
24
Long positions in underlying shares of the Company:
Percentage of the Company’s
existing issued share capital
Name of director Number of share options # if fully exercised
Hiroto Sasaki 1,650,000 0.34
# These share options were granted by the Company on 15 June 2004 and are exercisable during the period
from 15 June 2004 to 14 June 2009 at an exercise price of HK$0.20 per share.
Details of the options are stated under Note 15 of this Interim Report.
Save as disclosed above, none of the directors had registered an interest or short position in
the shares and underlying shares of the Company or any of its associated corporations that
was required to be recorded under Section 352 of the SFO, or as otherwise notified to the
Company and the Stock Exchange pursuant to the “Model Code for Securities Transactions
by Directors of Listed Issuers”.
SUBSTANTIAL SHAREHOLDERS’ AND OTHER PERSONS’ INTERESTS IN
SHARES AND UNDERLYING SHARES
At 30 September 2007, the following interests of 5% or more of the issued share capital of
the Company were recorded in the register of interests required to be kept by the Company
pursuant to Section 336 of the SFO:
Long positions :
Percentage of the
Capacity and Number of ordinary Company’s issued
Name nature of interest shares held share capital
Earnwell Limited Trustee 103,621,417 21.56
Daisho Denshi Co., Ltd. Directly beneficially owned 50,000,000 10.40
Save as disclosed above, no person, other than the directors of the Company, whose
interests are set out in the section “Directors’ interests and short positions in shares and
underlying shares” above, had registered an interest or short position in the shares and
underlying shares of the Company that was required to be recorded pursuant to Section 336
of the SFO.
25
PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED
SECURITIES
During the current period, there was no purchase, sale or redemption by the Company or
any of its subsidiaries of the Company’s listed securities.
AUDIT COMMITTEE
The Audit Committee of the Company comprises the three independent non-executive
directors of the Company. It was established in compliance with the Listing Rules for the
purposes of reviewing and providing supervision over the Group’s financial reporting
process and internal controls.
The Audit Committee of the Company has reviewed with management the accounting
principles and practices adopted by the Group, and discussed internal controls and financial
reporting matters including a review of the unaudited interim report for the 6 months ended
30 September 2007.
MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS OF
LISTED ISSUERS
The Company has adopted the Model Code for Securities Transactions by Directors of
Listed Issuers as set out in Appendix 10 of the Listing Rules (the “Model Code”) as its code
of conduct regarding directors’ securities transactions. The Company has made specific
enquiries of all directors and all directors have confirmed that they have complied with the
required standard set out in the Model Code during the 6 months ended 30 September 2007.
By Order of the Board
Chan Sik Ming, Harry
Chairman
Hong Kong, 11 December 2007
As at the date of this announcement, the Board comprises the following members:
Executive directors: Independent non-executive directors:
CHAN Sik Ming, Harry (Chairman & CEO) Kohu KASHIWAGI
Motofumi TSUMURA CHAN Yuk Tong
Hiroto SASAKI LI Chi Kwong
Hiroyuki KIKUCHI
AU-YEUNG Wai Hung
INTERIM RESULTS ANNOUNCEMENT |
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