Incorporated in the Cayman Islands with limited liability
Stock Code: 1388
Website: www.embryform.com
EMBRY HOLDINGS LIMITED 1 2007 INTERI
| CONTENTS |
| CORPORATE INFORMATION 2 |
| REPORT ON REVIEW OF INTERIM FINANCIAL STATEMENTS 3 |
| UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
| Income statement 4 |
| Balance sheet 5–6 |
| Statement of changes in equity 7 |
| Cash flow statement 8 |
| Notes to condensed consolidated financial statements 9–18 |
| MANAGEMENT DISCUSSION AND ANALYSIS 19–24 |
| OTHER INFORMATION 25–28 |
EMBRY HOLDINGS LIMITED 2 2007 INTERIM REPORT
CORPORATE INFORMATION
Directors and Board Committees
Directors
Executive Directors
CHENG Man Tai (Chairman)
CHENG Pik Ho Liza (Chief Executive Officer)
NGOK Ming Chu
HUNG Hin Kit
Independent Non-executive Directors
LAU Siu Ki (alias, Kevin Lau)
LEE Kwan Hung
Prof. LEE T.S. (alias, Lee Tien-sheng)
Board Committees
Audit Committee
LAU Siu Ki (alias, Kevin Lau) (Chairman)
LEE Kwan Hung
Prof. LEE T.S. (alias, Lee Tien-sheng)
Remuneration Committee
CHENG Pik Ho Liza (Chairman)
LAU Siu Ki (alias, Kevin Lau)
LEE Kwan Hung
Prof. LEE T.S. (alias, Lee Tien-sheng)
Nomination Committee
CHENG Pik Ho Liza (Chairman)
LAU Siu Ki (alias, Kevin Lau)
LEE Kwan Hung
Prof. LEE T.S. (alias, Lee Tien-sheng)
Compliance Officer
CHENG Pik Ho Liza
Qualified Accountant
TAM Robert
Company Secretary
HUI Chun Ho Eric
Registered Office
Cricket Square
Hutchins Drive
P.O. Box 2681
Grand Cayman KY1-1111
Cayman Islands
Head Office and Principal Place
of Business
7th Floor, Wyler Centre II
200 Tai Lin Pai Road
Kwai Chung
Hong Kong
Principal Bankers
The Hongkong and Shanghai Banking
Corporation Limited
Hang Seng Bank Limited
Nanyang Commercial Bank
Bank of China – Shenzhen Shangbu Branch
China Construction Bank – Shenzhen Buxin Branch
China Construction Bank – Shenzhen Tianbei
Branch
China Merchants Bank – Shenzhen Dongmen
Branch
China Merchants Bank – Shenzhen Shekou Branch
Legal Advisers
As to Hong Kong law:
Chiu & Partners
As to PRC law:
GFE Law Office
As to Cayman Islands law:
Conyers Dill & Pearman
Auditors
Ernst & Young
18th Floor
Two International Finance Centre
8 Finance Street, Central
Hong Kong
Share Registrars
Principal Share Registrar and Transfer
Office in the Cayman Islands
Butterfield Fund Services (Cayman) Limited
Butterfield House
68 Fot Street
P.O. Box 705
George Town
Grand Cayman
Cayman Islands
Branch Share Registrar and Transfer
Office in Hong Kong
Tricor Investor Services Limited
26th Floor, Tesbury Centre
28 Queen’s Road East
Wanchai, Hong Kong
Compliance Adviser
Taifook Capital Limited
Investor Relations
iPR Ogilvy Ltd.
EMBRY HOLDINGS LIMITED 3 2007 INTERIM REPORT
REPORT ON REVIEW OF INTERIM FINANCIAL STATEMENTS
To the board of directors of Embry Holdings Limited
(Incorporated in the Cayman Islands with limited liability)
We have reviewed the interim financial statements set out on pages 4 to 18, which comprise the
condensed consolidated balance sheet of Embry Holdings Limited as of 30 June 2007 and the
related condensed consolidated statements of income, changes in equity and cash flows for the
six-month period then ended, and explanatory notes. The Rules Governing the Listing of
Securities on
Scope of Review
We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410
“Review of Interim Financial Information Performed by the Independent Auditor of the Entity”
issued by the Hong Kong Institute of Certified Public Accountants. A review of interim financial
statements consists of making inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and
consequently does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that these
interim financial statements are not prepared, in all material respects, in accordance with
HKAS 34.
Ernst & Young
Certified Public Accountants
18th Floor, Two International Finance Centre
8 Finance Street, Central
Hong Kong
18 September 2007
EMBRY HOLDINGS LIMITED 4 2007 INTERIM REPORT
The board of directors (the “Board” or “Directors”) of Embry Holdings Limited (the “Company”)
is pleased to present the unaudited condensed consolidated results of the Company and its
subsidiaries (collectively referred to as the “Group”) for the six months ended 30 June 2007
together with the comparative figures for the corresponding period in 2006 and the relevant
explanatory notes as set out below. The condensed consolidated results are unaudited, but have
been reviewed by the Company’s independent auditors, Ernst & Young, and the audit committee
of the Company.
Condensed Consolidated Income Statement
Six months ended 30 June
2007 2006
Notes HK$’000 HK$’000
(unaudited) (audited)
REVENUE 369,091 314,108
Cost of sales (83,572) (72,228)
Gross profit 285,519 241,880
Other income and gain 4 10,211 1,823
Selling and distribution expenses (193,327) (164,832)
Administrative expenses (34,617) (25,717)
Other expenses (10) (191)
Finance costs 5 (118) (792)
PROFIT BEFORE TAX 6 67,658 52,171
Tax 7 (12,041) (10,355)
PROFIT FOR THE PERIOD 55,617 41,816
Attributable to:
Equity holders of the Company 55,617 40,316
Minority interests – 1,500
55,617 41,816
DIVIDENDS 9 8,000 –
EARNINGS PER SHARE ATTRIBUTABLE TO
EQUITY HOLDERS OF THE COMPANY 10
– Basic (HK cents) 13.90 13.44
– Diluted (HK cents) 13.74 N/A
EMBRY HOLDINGS LIMITED 5 2007 INTERIM REPORT
Condensed Consolidated Balance Sheet
30 June 31 December
2007 2006
Notes HK$’000 HK$’000
(unaudited) (audited)
NON-CURRENT ASSETS
Property, plant and equipment 108,699 79,518
Investment property 30,000 27,700
Prepaid land lease payments 5,882 5,741
Other long term deposits 14,817 13,132
Total non-current assets 159,398 126,091
CURRENT ASSETS
Inventories 242,520 227,969
Trade receivables 11 35,646 34,967
Prepayments, deposits and other receivables 16,567 14,046
Cash and bank balances 404,681 431,225
Total current assets 699,414 708,207
CURRENT LIABILITIES
Trade and bills payables 12 30,191 25,283
Tax payable 6,544 4,212
Other payables and accruals 48,618 50,851
Interest-bearing bank loans, secured – 4,242
Total current liabilities 85,353 84,588
NET CURRENT ASSETS 614,061 623,619
TOTAL ASSETS LESS CURRENT LIABILITIES 773,459 749,710
NON-CURRENT LIABILITIES
Interest-bearing bank loans, secured – 20,228
Deferred liabilities 3,950 3,395
Deferred tax liabilities 2,304 1,850
Total non-current liabilities 6,254 25,473
Net assets 767,205 724,237
EMBRY HOLDINGS LIMITED 6 2007 INTERIM REPORT
Condensed Consolidated Balance Sheet (continued)
30 June 31 December
2007 2006
Notes HK$’000 HK$’000
(unaudited) (audited)
EQUITY
Equity attributable to equity holders
of the Company
Issued capital 4,000 4,000
Reserves 755,205 696,237
Proposed dividends 8,000 24,000
Total equity 767,205 724,237
EMBRY HOLDINGS LIMITED 7 2007 INTERIM REPORT
Condensed Consolidated Statement of Changes in Equity
Attributable to equity holders of the Company
Enterprise
expansion
and
Share Asset statutory Exchange Share
Issued premium Contributed revaluation reserve fluctuation Goodwill option Retained Proposed Minority Total
capital account surplus reserve funds reserve reserve reserve profits dividends Total interests equity
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 2007 (audited) 4,000 327,270 122,610 2,539 12,657 8,561 (3,168 ) 584 225,184 24,000 724,237 – 724,237
Exchange realignment – ––––7,849––––7,849–7,849
Total income recognised
in equity – ––––7,849––––7,849–7,849
Profit for the period – –––––––5,617–5,617–5,617
Total income and expenses
for the priod –––––7,849––5,617–63,46–63,46
Equity-settled share options
arrangements – ––––––3,502––3,502–3,502
Final 2006 dividend declared – ––––––––(24,000) (24,000) – (24,000)
Proposed interim 2007 dividend – –––––––(8,0)8,0 –––
At 30 June 2007 (unaudited) 4,000 327,270 122,610 2,539 12,657 16,410 (3,168) 4,086 272,801 8,000 767,205 – 767,205
At 1 January 2006 (audited) 200 – 101,769 2,539 12,657 736 (3,168 ) – 168,079 – 282,812 3,554 286,366
Profit for the period – –––––––40,316–40,3161,5041,86
Total income and expenses
for the priod ––––––––40,316–40,3161,5041,86
At 30 June 2006 (audited) 200 – 101,769 2,539 12,657 736 (3,168 ) – 208,395 – 323,128 5,054 328,182
These reserves accounts comprise the consolidated reserves of HK$755,205,000 in the condensed consolidated
balance sheet as at 30 June 2007.
EMBRY HOLDINGS LIMITED 8 2007 INTERIM REPORT
Condensed Consolidated Cash Flow Statement
Six months ended 30 June
2007 2006
HK$’000 HK$’000
(unaudited) (audited)
NET CASH INFLOW/(OUTFLOW) FROM:
Operating activities 42,061 42,578
Investing activities (280,303) (19,319)
Financing activities (48,518) 9,392
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS (286,760) 32,651
Cash and cash equivalents at beginning of period 431,225 49,510
Effect of foreign exchange rate changes, net 5,633 –
CASH AND CASH EQUIVALENTS AT END OF PERIOD 150,098 82,161
ANALYSIS OF BALANCES OF CASH AND
CASH EQUIVALENTS
Cash and bank balances 118,404 82,161
Non-pledged time deposits with original maturity of less than
three months when acquired 31,694 –
150,098 82,161
EMBRY HOLDINGS LIMITED 9 2007 INTERIM REPORT
Notes to the Condensed Consolidated Financial Statements
1. Corporate Information
The Company was incorporated as an exempted company with limited liability in the Cayman Islands on 29
August 2006 under the Companies Law, Chapter 22 (Law 3 of 1961, as consolidated and revised) of the
Cayman Islands.
The Company’s shares have been listed on the Main Board of
The registered office of the Company is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand
Cayman KY1-1111, the Cayman Islands and the principal place of business of the Company is located at 7th
Floor, Wyler Centre II, 200 Tai Lin Pai Road, Kwai Chung, Hong Kong.
The Company is a subsidiary of Harmonious World Limited (“Harmonious World”), a company incorporated in
the British Virgin Islands, which is considered by the Directors to be the Company’s ultimate holding company.
2. Basis of Presentation
The condensed consolidated financial statements are prepared in accordance with Hong Kong Accounting
Standard (“HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public
Accountants. The accounting policies and basis of preparation adopted in the preparation of the interim
financial statements are the same as those used in the annual financial statements for the year ended 31
December 2006, except in relation to the following new and revised Hong Kong Financial Reporting Standards
(“HKFRSs”), which also include HKASs and Interpretations, that affect the Group and are adopted for the first
time for the current period’s condensed consolidated financial statements:
HKAS 1 Amendment Capital Disclosures
HKFRS 7 Financial Instruments: Disclosures
HK(IFRIC)-Int 7 Applying the Restatement Approach under HKAS 29
Financial Reporting in Hyperinflationary Economies
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
The adoption of these new and revised standards and interpretations has had no material impact on the
accounting policies of the Group and the methods of computation in the Group’s condensed consolidated
financial statements.
The condensed consolidated financial statements for the six months ended 30 June 2006 had been audited by
the Company’s independent auditors.
3. Segment Information
The Group’s primary business segment is the manufacture and sale of ladies’ brassieres, panties, swimwears
and sleepwears. Since this is the only business segment of the Group, no further analysis thereof is presented.
EMBRY HOLDINGS LIMITED 10 2007 INTERIM REPORT
Notes to the Condensed Consolidated Financial Statements (continued)
4. Other Income and Gain
Six months ended 30 June
2007 2006
HK$’000 HK$’000
(unaudited) (audited)
Other income
Bank interest income 6,304 219
Gross rental income 997 1,053
Subsidy income from the People’s Republic of China (the “PRC”)
government in respect of rewards as a superbrand in the PRC – 288
Others 610 263
7,911 1,823
Gain
Changes in fair value of an investment property 2,300 –
10,211 1,823
There are no unfulfilled conditions or contingencies relating to this income.
5. Finance Costs
Six months ended 30 June
2007 2006
HK$’000 HK$’000
(unaudited) (audited)
Interest on:
Bank loans and overdrafts repayable within five years 118 14
Bank loans repayable over five years – 778
Total interest 118 792
6. Profit before Tax
The Group’s profit before tax is arrived at after charging:
Six months ended 30 June
2007 2006
HK$’000 HK$’000
(unaudited) (audited)
Cost of inventories sold 83,572 72,228
Depreciation 4,845 4,457
Amortisation of prepaid land lease payments 31 29
Minimum lease payments under operating leases in respect of:
Land and buildings 12,318 10,183
Contingent rents of retail outlets in department stores 91,005 80,314
Advertising and counter decoration expenses 21,387 17,095
EMBRY HOLDINGS LIMITED 11 2007 INTERIM REPORT
Notes to the Condensed Consolidated Financial Statements (continued)
7. Tax
Hong Kong profits tax has been provided at the rate of 17.5% (2006: 17.5%) on the estimated assessable
profits arising in Hong Kong during the period. Pursuant to relevant laws and regulations in the PRC, the
Company’s subsidiaries, Embry (China) Garments Ltd. and Embry (Changzhou) Garments Ltd. are entitled to use
of tax rates of 15% and 27%, being the applicable tax rates for foreign invested enterprises in the area of
Shenzhen Special Economic Zone and Changzhou, respectively. In addition, taxes on profits assessable
elsewhere have been calculated at the rates of tax prevailing in the countries in which the Group operates,
based on existing legislation, interpretations and practices in respect thereof.
Six months ended 30 June
2007 2006
HK$’000 HK$’000
(unaudited) (audited)
Group:
Current – Hong Kong 200 160
Current – Mainland China 11,387 10,195
Deferred 454 –
Total tax charge for the period 12,041 10,355
8. Related Party Transactions
(a) In addition to the transactions detailed elsewhere in these condensed consolidated financial statements,
the Group had the following material transactions with related parties during the period:
Six months ended 30 June
2007 2006
Notes HK$’000 HK$’000
(unaudited) (audited)
Continuing transactions
Purchases of furniture for counters and shops from
related companies (i) 8,438 6,199
Rental expenses for a warehouse paid to a director
of the Company (ii) 72 90
Discontinued transactions
Rental income received from a related company (iii) – 85
Rental expenses for a director’s quarter paid to a director
of the Company (iv) – 300
Rental expenses for a director’s quarter paid to
a related company (v) – 90
EMBRY HOLDINGS LIMITED 12 2007 INTERIM REPORT
Notes to the Condensed Consolidated Financial Statements (continued)
8. Related Party Transactions (continued)
(a) (continued)
Notes:
(i) The purchases of furniture for counters and shops from related companies controlled by a son of a
director of the Company were made according to the terms similar to those offered to the Group’s
independent suppliers.
(ii) The rental expenses were determined with reference to the then prevailing market conditions.
(iii) The rental income was received from a related company controlled by a son of a director of the
Company and was determined by the directors of the Company and the related company with
reference to the then prevailing market conditions. The rental agreement was terminated on 30
June 2006.
(iv) The rental expenses were determined with reference to the then prevailing market conditions. The
rental agreement was terminated on 1 July 2006.
(v) The rental expenses were paid to a related company controlled by the directors of the Company
and were determined with reference to the then prevailing market conditions. The rental
agreement was terminated on 1 July 2006.
(b) Other transaction with a related party
On 30 June 2006, the Group disposed of certain dormant subsidiaries (the “Disposed Subsidiaries”) with
an aggregate deficiency in assets of approximately HK$108,000 to a director of the Company for a total
cash consideration of approximately HK$14,000. The considerations were determined by reference to
the net asset values of the respective Disposed Subsidiaries and at nominal value for the respective
Disposed Subsidiaries which recorded a deficiency in assets.
(c) Compensation of key management personnel of the Group:
Six months ended 30 June
2007 2006
HK$’000 HK$’000
(unaudited) (audited)
Short term employee benefits 6,343 4,608
Post-employment benefits 77 36
Equity-settled share option expenses 2,644 –
Total compensation paid to key management personnel 9,064 4,644
The Directors are of the opinion that the above transactions were conducted in the ordinary course of
business of the Group.
The related party transactions in respect of items (a)(i) and (a)(ii) above also constitute continuing
connected transactions as defined in Chapter 14A of the Rules Governing the Listing of Securities on the
Stock Exchange (the “Listing Rules”).
EMBRY HOLDINGS LIMITED 13 2007 INTERIM REPORT
Notes to the Condensed Consolidated Financial Statements (continued)
9. Dividends
Six months ended 30 June
2007 2006
HK$’000 HK$’000
(unaudited) (audited)
Proposed interim – HK2.0 cents (2006: nil) per ordinary share 8,000 –
10. Earnings per Share Attributable to Equity Holders of the Company
The calculation of basic earnings per share for the six months period ended 30 June 2007 is based on the
unaudited profit attributable to equity holders of the Company of HK$55,617,000 and the weighted average
of 400,000,000 ordinary shares in issue during the period.
The calculation of basic earnings per share for the six months period ended 30 June 2006 is based on the
audited profit attributable to equity holders of the Company of HK$40,316,000 and on the assumption that
300,000,000 shares had been in issue during the period, comprising the 20,000,000 shares in issue and
280,000,000 shares issued pursuant to the capitalisation issue under the group reorganisation in the
preparation of the listing of the Company in 2006, as described more fully in the prospectus of the Company
dated 5 December 2006 (the “Prospectus”).
The calculation of diluted earnings per share for the six months period ended 30 June 2007 is based on the
unaudited profit attributable to equity holders of the Company of HK$55,617,000. The weighted average
number of ordinary shares used in the calculation is the 400,000,000 ordinary shares as used in the basic
earnings per share calculation, and the weighted average of 4,730,000 ordinary shares assumed to have been
issued at no consideration on the deemed exercise of all share options outstanding during the period.
There was no potential dilutive ordinary share in existence for the six months period ended 30 June 2006 and,
accordingly, no diluted earnings per share amount has been presented.
EMBRY HOLDINGS LIMITED 14 2007 INTERIM REPORT
Notes to the Condensed Consolidated Financial Statements (continued)
11. Trade Receivables
The Group’s trading terms with its customers are mainly on credit, except for wholesalers, where payment in
advance is normally required. The credit period is generally for a period of one month, extending up to three
months for major customers. The Group seeks to maintain strict control over its outstanding receivables from
the sales department to minimise credit risk. Overdue balances are reviewed regularly by senior management.
In view of the aforementioned and the fact that the Group’s trade receivables relate to a large number of
diversified customers, there is no significant concentration of credit risk. Trade receivables are non-interest-
bearing.
An aged analysis of the Group’s trade receivables as at the balance sheet date, based on the invoice date, is as
follows:
30 June 31 December
2007 2006
HK$’000 HK$’000
(unaudited) (audited)
Within 90 days 34,448 33,214
91 to 180 days 1,288 1,765
181 to 360 days 530 662
Over 360 days 1,434 1,320
37,700 36,961
Less: Impairment allowance (2,054) (1,994)
35,646 34,967
The carrying amounts of trade receivables approximate to their fair values.
12. Trade and Bills Payables
An aged analysis of the Group’s trade and bills payables as at the balance sheet date, based on the invoice
date, is as follows:
30 June 31 December
2007 2006
HK$’000 HK$’000
(unaudited) (audited)
Within 90 days 27,108 21,040
91 to 180 days 1,480 2,066
181 to 360 days 264 826
Over 360 days 1,339 1,351
30,191 25,283
The trade payables are non-interest-bearing and are normally settled on 30 to 90 days terms. The carrying
amounts of trade and bills payables approximate to their fair values.
EMBRY HOLDINGS LIMITED 15 2007 INTERIM REPORT
Notes to the Condensed Consolidated Financial Statements (continued)
13. Share Option Schemes
The Company has adopted a pre-initial public offering share option scheme on 25 November 2006 (the
“Pre-IPO Scheme”) and a share option scheme on 18 December 2006 (the “Share Option Scheme”) for the
purpose of providing incentives and rewards to eligible participants who contribute to the success of the
Group. Details of the schemes are disclosed in the annual financial statements for the year ended 31 December
2006.
Set out below are the outstanding share options under the Pre-IPO Scheme (“Pre-IPO Share Options”) as at 30
June 2007:
Number of share options
At Granted Cancelled or Exercised At Exercise
Name or category 1 January during lapsed during during 30 June Date of grant of Exercise period of price of
of participant 2007 the period the period the period 2007 share options share options share options
#
HK$
Executive Directors
Mr. Cheng Man Tai 873,000 – – – 873,000 25 November 2006 18 December 2007 to 1.81
17 December 2011
Ms. Cheng Pik Ho Liza 500,000 – – – 500,000 25 November 2006 18 December 2007 to 1.81
17 December 2011
Madam Ngok Ming Chu 773,000 – – – 773,000 25 November 2006 18 December 2007 to 1.81
17 December 2011
Mr. Hung Hin Kit 332,000 – – – 332,000 25 November 2006 18 December 2007 to 1.81
17 December 2011
Independent non-executive
Directors
Mr. Lau Siu Ki 68,000 – – – 68,000 25 November 2006 18 December 2007 to 1.81
17 December 2011
Mr. Lee Kwan Hung 68,000 – – – 68,000 25 November 2006 18 December 2007 to 1.81
17 December 2011
Prof. Lee T.S. 68,000 – – – 68,000 25 November 2006 18 December 2007 to 1.81
17 December 2011
Other employees
In aggregate 3,828,000 – (250,000) – 3,578,000 25 November 2006 18 December 2007 to 1.81
17 December 2011
6,510,000 – (250,000) – 6,260,000
As at 30 June 2007, no share options have been granted under the Share Option Scheme since its adoption.
EMBRY HOLDINGS LIMITED 16 2007 INTERIM REPORT
Notes to the Condensed Consolidated Financial Statements (continued)
13. Share Option Schemes (continued)
Notes to the reconciliation of share options outstanding during the period:
The Pre-IPO Share Options are vested to the grantees in the following manner:
– 25% of such options will be vested on 18 December 2007 with an exercise period from
18 December 2007 to 17 December 2011;
– 25% of such options will be vested on 18 December 2008 with an exercise period from
18 December 2008 to 17 December 2011;
– 25% of such options will be vested on 18 December 2009 with an exercise period from
18 December 2009 to 17 December 2011; and
– the remaining 25% of such options will be vested on 18 December 2010 with an exercise period
from 18 December 2010 to 17 December 2011.
#
The exercise price of each of the Pre-IPO Share Options per share is 50% of the final offer price of
HK$3.62 and is subject to adjustment in the case of rights or bonus issues, or other similar changes in
the Company’s share capital.
The fair value of the Pre-IPO Share Options granted on 25 November 2006 was estimated at approximately
HK$13,525,000, of which the Company recognised a share option expense of HK$3,502,000 during the
period.
The fair value of the Pre-IPO Share Options granted on 25 November 2006 was estimated as at the date of
grant, using a binomial model, taking into account the terms and conditions upon which the options were
granted. The following table lists the inputs to the model used for the year ended 31 December 2006:
Dividend yield (%) 0
Expected volatility (%) 49
Risk-free interest rate (%) 3.8
Suboptimal exercise factor (times) 3
The suboptimal exercise factor is based on the directors’ estimation and not necessarily indicative of the
exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is
indicative of future trends, which may also not necessarily be the actual outcome.
No other feature of the options granted was incorporated into the measurement of fair value.
At the balance sheet date, the Company had outstanding Pre-IPO Share Options for the subscription of
6,260,000 shares under the Pre-IPO Share Option Scheme. The exercise in full of the Pre-IPO Share Options
would, under the present capital structure of the Company, result in the issue of 6,260,000 additional ordinary
shares of the Company and additional share capital of approximately HK$63,000 and share premium account
of approximately HK$11,268,000 (before issue expenses).
At the date of approval of these condensed consolidated financial statements, the Company had 6,100,000
Pre-IPO Share Options outstanding under the Pre-IPO Share Option Scheme, which represented approximately
1.5% of the issued share capital of the Company as at that date.
EMBRY HOLDINGS LIMITED 17 2007 INTERIM REPORT
Notes to the Condensed Consolidated Financial Statements (continued)
14. Operating Lease Arrangements
(a) As lessor
The Group leases its investment property to an independent third party under an operating lease
arrangement, with a lease negotiated for a term of four years.
At the balance sheet date, the Group had total future minimum lease receivables under a non-
cancellable operating lease with its tenant falling due as follows:
30 June 31 December
2007 2006
HK$’000 HK$’000
(unaudited) (audited)
Within one year 2,136 2,022
In the second to fifth years, inclusive 2,435 3,517
4,571 5,539
(b) As lessee
The Group leases certain of its shops, counters, warehouses, office properties and office equipments
under operating lease arrangements with leases negotiated for terms ranging from one to five years.
At the balance sheet date, the Group had total future minimum lease payments under non-cancellable
operating leases falling due as follows:
30 June 31 December
2007 2006
HK$’000 HK$’000
(unaudited) (audited)
Within one year 38,247 31,855
In the second to fifth years, inclusive 17,844 10,572
56,091 42,427
In addition, the Group has entered into agreements with department stores to enable the Group to set
up its retail outlets therein. The operating lease rentals for the use of their floor areas in department
stores are based on the higher of a fixed rental or contingent rent based on sales of the retail outlets
pursuant to the terms and conditions as set out in respective agreements. As the future sales of these
retail outlets could not be accurately determined, the relevant contingent rent has not been included
above and only the minimum lease commitments have been included in the above disclosure.
EMBRY HOLDINGS LIMITED 18 2007 INTERIM REPORT
Notes to the Condensed Consolidated Financial Statements (continued)
15. Commitments
At the balance sheet date, the Group had the following commitments:
30 June 31 December
2007 2006
HK$’000 HK$’000
(unaudited) (audited)
Contracted for commitment in respect of its wholly-owned investment
in the PRC 24,646 62,184
Contracted for commitments in respect of
– the land lease payments in the PRC 5,715 5,548
– the acquisitions of property, plant and equipment 49,561 3,037
79,922 70,769
Pursuant to the agreement entered into between a subsidiary and the People’s Government of Zhangqiu,
Shandong Province, the PRC on 28 December 2005, the Group has agreed to acquire 50 years’ land use
right of a piece of land located in Shandong Province at a consideration of RMB22,262,000 (equivalent
to approximately HK$22,861,000). As at 30 June 2007, the land lease payments of RMB16,697,000
(equivalent to approximately HK$17,146,000) were made by the Group.
16. Approval of the Condensed Consolidated Financial Statements
The condensed consolidated financial statements were approved and authorised for issue by the Board on 18
September 2007.
EMBRY HOLDINGS LIMITED 19 2007 INTERIM REPORT
MANAGEMENT DISCUSSION AND ANALYSIS
For the six months ended 30 June 2007 (the “Interim Period”), the Group’s revenue amounted to
approximately HK$369.1 million (2006: HK$314.1 million), representing an increase of 17.5%.
Profit before tax of approximately HK$67.7 million was achieved (2006: HK$52.2 million),
representing a growth rate of approximately 29.7%. The profit attributable to equity holders of
the Company for the Interim Period was approximately HK$55.6 million (2006: HK$40.3 million),
representing an increase of 38.0% over the corresponding period of 2006 (the “last period”).
Earnings per share of the Company was HK13.90 cents per share (2006: HK13.44 cents) based on
the weighted average number of 400,000,000 shares (2006: 300,000,000 shares) in issue during
the Interim Period, representing an increase of 3.4% comparing to the last period.
Review of Operations
The Group’s gross profit of HK$285.5 million for the Interim Period (2006: HK$241.9 million)
represented a growth of approximately 18.0% as compared to the last period. Benefited from the
economic booming, increasing demand for lingerie products and the appreciation of Renminbi
(“RMB”) in the PRC, the Group successfully generated a growth in revenue by 17.5% during the
Interim Period. Further, the Group continued to enjoy economies of scale and increase the sales of
patented products which improved the profit margin generated during the Interim Period. In
addition, the Group’s younger brand, COMFIT, which was launched in 2006 and is targeting on
functional and premiere lingerie markets, successfully diversified the Group’s product line and
produced additional revenue which accounted for 5.9% of the Group’s total revenue. As a result,
the Group recorded a new peak of revenue and gross profit as compared to the last period.
Revenue
Retail business continued to be the major source of revenue of the Group, contributing
approximately 88.9% of the Group’s total revenue during the Interim Period. The Group’s
products are currently sold through the retail outlets in the PRC and Hong Kong under the
Group’s own brand names of EMBRY FORM, FANDECIE, COMFIT and LC. In order to capture
the booming market demand for lingerie products, the Group strategically opened more new
retail outlets. During the Interim Period, in order to improve and obtain more outstanding sales
performance, apart from opening new retail outlets, the Group also shut down less profitable and
unsatisfactory retail outlets and re-allocated resources to new locations with improving sales
revenue resulted. The Group had a net increase of 117 retail outlets during the Interim Period
(opened and/or contracted: 149; closed: 32) and totally operated 1,230 retail outlets as at 30
June 2007, in which a new flagship store was also opened in Shenzhen, the PRC in June 2007.
Moreover, the Group may strategically and prudently adjust the timing and locations for the
opening of retail outlets and flagship stores. The Directors are of the opinion that an instant
response to the market conditions is essential which will enhance the Group’s effectiveness in
utilising resources and will maximise sales revenue generated from each retail outlet.
EMBRY HOLDINGS LIMITED 20 2007 INTERIM REPORT
MANAGEMENT DISCUSSION AND ANALYSIS (continued)
Review of Operations (continued)
Revenue (continued)
The Group also ran its wholesale business and original equipment manufacturer (“OEM”)
business, which contributed 5.8% and 5.3% respectively of the total revenue of the Group during
the Interim Period. Limited by the existing production capacity, the Group may accept new OEM
business only when the acceptance of which could generate reasonable profit margins or deliver
other benefits such as skill, technique, design or idea to the Group, and in times of spare
capacity.
Brand management
The Group’s products are principally sold under its self-owned brand names EMBRY FORM,
FANDECIE and COMFIT. Revenue generated from EMBRY FORM and FANDECIE accounted for
62.1% and 26.7% respectively of the Group’s revenue for the Interim Period. COMFIT
successfully diversified the Group’s product line and sales of COMFIT series products accounted
for 5.9% of the Group’s total revenue. The Directors are optimistic that COMFIT will become a
significant source of the Group’s revenue and growth driver for the future.
Production capacity
For the Interim Period, the aggregate annual production capacity of the Group accounted for 11.8
million standard product units. As stated in the Prospectus, in order to cope with the expansion of
the Group’s business, the Group is now constructing a new factory in Zhangqiu City, Shandong
Province, the PRC (the “Shandong Factory”), further details of which are discussed in sub-section
headed “Significant investment held, material acquisitions and disposal of subsidiaries and
associated companies” of “Review of Financial Position” below.
Product development
During the Interim Period, the sales of lingerie, sleepwear, swimwear, OEM products and other
products accounted for approximately 83.7%, 5.5%, 3.7%, 5.3% and 1.8% respectively of the
Group’s total revenue. Sales of lingerie remained the key contributor to the Group’s revenue and
profit.
The Directors consider product development to be vital for the Group to maintain its competitive
advantages. The Group’s research and development team focuses on practical areas that are
closely related to the functionalities and features of the Group’s products. As at 30 June 2007, the
Group had 39 patent registrations and 16 outlook design registrations.
EMBRY HOLDINGS LIMITED 21 2007 INTERIM REPORT
MANAGEMENT DISCUSSION AND ANALYSIS (continued)
Review of Operations (continued)
Human resources
As at 30 June 2007, the Group had approximately 5,500 employees. Remuneration of employees
is determined and reviewed periodically with reference to the market demand, individual
performance and working experience, and certain staff is entitled to commission and share
options. In addition to the basic salaries, the Group also provides, depending on the results of the
Group and individual performance, discretionary bonus in order to retain quality employees. The
Group has also adopted a Pre-IPO Scheme to recognise and reward the contribution of certain
Directors and employees of the Group to the growth and development of the Group. The Group
has also adopted a Share Option Scheme, the primary purpose of which is to motivate the eligible
persons referred to in the scheme, which includes employees of the Group, to optimise their
future contributions to the Group and to reward them for their efforts. Details of the above-
mentioned schemes are set out in note 13 to the condensed consolidated financial statements.
Review of Financial Position
Liquidity and financial resources
The Group generally finances its operations with internally generated cashflow and bank facilities
provided by its principal bankers. The financial position of the Group remained sound and healthy
during the Interim Period. As at 30 June 2007, the Group had cash and bank balances of
approximately HK$404.7 million. As at 31 December 2006, the Group had secured interest
bearing bank borrowings of HK$24.5 million which had been fully repaid during the Interim
Period by applying the internal working capital. The Group therefore had no outstanding interest
bearing bank borrowings and remained a net cash position as at 30 June 2007. The gearing ratio,
being total interest-bearing bank borrowings divided by total assets, was therefore nil as at 30
June 2007.
Capital structure
Since the listing of the Company’s shares on the Main Board of the Stock Exchange on 18
December 2006, there has been no change in the capital structure of the Company. As at 30 June
2007, the total issued share capital of the Company was HK$4.0 million, comprising 400,000,000
ordinary shares of HK$0.01 each.
EMBRY HOLDINGS LIMITED 22 2007 INTERIM REPORT
MANAGEMENT DISCUSSION AND ANALYSIS (continued)
Review of Financial Position (continued)
Significant investment held, material acquisitions and disposal of subsidiaries and
associated companies
In order to strengthen the production operation and further expand the production capacity, the
Group established the Shandong Factory in Zhangqiu City, Shandong Province, the PRC. At the
date of this report, construction of the Shandong Factory was substantially completed.
Renovation work and installation of all production facilities will commence soon and it is expected
that the aforementioned work will be completed in early 2008 or sooner. Trial production can be
started as early as in the first quarter of 2008. According to current construction plan, the
Shandong Factory will commence commercial production in mid 2008 and this will complete the
Phase I of the Shandong Factory project. Certain construction works of Phase II have commenced
which are deemed necessary in order to take advantages of future cost savings in construction
and to meet the overall construction plan of the Shandong Factory project.
Save as disclosed above, there was no other significant investment held, material acquisitions and
disposal of subsidiaries and associated companies during the Interim Period.
Charges on the Group’s assets
As at 30 June 2007, the Group’s leasehold land and buildings and investment property situated in
Hong Kong with net book value of approximately HK$23.1 million and HK$30.0 million,
respectively were pledged to secure banking facilities granted to the Group.
Foreign currency exposure
The Group carries on its trading transactions mainly in Hong Kong dollars and RMB. As the
Group’s foreign currency risks generated from the sales and purchases can be set off with each
other, the foreign currency risk is considered as minimal to the Group. It is the policy of the Group
to continue maintaining the balance of its sales and purchases in the same currency. The Group
does not use derivative financial instruments to protect against the volatility associated with
foreign currency transactions and other financial assets and liabilities created in the ordinary
course of business.
Contingent liabilities
The Group had no significant contingent liabilities as at 30 June 2007.
EMBRY HOLDINGS LIMITED 23 2007 INTERIM REPORT
MANAGEMENT DISCUSSION AND ANALYSIS (continued)
Review of Financial Position (continued)
Use of proceeds from the Company’s initial public offering
The proceeds from the Company’s issue of new shares at the time of its listing on the Stock
Exchange on 18 December 2006, after deduction of related issuance expenses, amounted to
approximately HK$331.1 million. These proceeds were applied during the Interim Period, in
accordance with the proposed applications as set out in the Prospectus, as follows:
– approximately HK$19.0 million was used for the expansion of the Group’s sales network by
increasing 117 retail outlets as at 30 June 2007;
– approximately HK$21.4 million was used for the promotion and marketing of the Group’s
products;
– approximately HK$25.5 million was used for the establishment of the Shandong Factory;
– approximately HK$1.5 million was used for the Group’s product development;
– approximately HK$4.6 million was used for the enhancement of the Group’s enterprise
resources planning system and other information technology systems; and
– approximately HK$5.0 million was used as additional general working capital of the Group.
The remaining unused net proceeds amounted to approximately HK$254.1 million have been
temporarily placed in term deposits with licensed banks in Hong Kong as at 30 June 2007.
Prospects
Look ahead, the Directors are optimistic about the growth potential in the lingerie industry and
the future market demand for lingerie products.
In the second half of the year, the Group will continue the same strategy on expanding its sales
network. On one hand, the Group will continue opening more retail outlets in the PRC and Hong
Kong in order to capture the market share and to strengthen the Group’s market presence and on
the other hand, less profitable retail outlets will be closed down in these areas so as to improve
the overall stores performance. Because of this, the Group has revised its original target of
increasing the number of retail outlets from 300 as mentioned in the Prospectus to 230 by the
end of 2007. This will bring the total retail outlets to more than 1,300 as at 31 December 2007
which span across the entire Greater China. In the year to come, the Group will concentrate on
improving store image with better visual display and will strive to improve the comparable-store-
sales growth.
EMBRY HOLDINGS LIMITED 24 2007 INTERIM REPORT
MANAGEMENT DISCUSSION AND ANALYSIS (continued)
Prospects (continued)
The Group will also continue to formulate innovative and cost effective marketing campaigns and
programs to promote its existing brands so as to strengthen its market position in the PRC and to
raise brand image.
The Shandong Factory which will commence production in mid 2008 will bring extra production
capacity to the Group and will help the Group to meet the continuous rising demand. This extra
capacity will not only enable the Group to produce more of its existing brands’ products which in
turn permits the Group to open more retail outlets carrying sufficient product range and
assortment and also allows the Group to crop more margin from the export business by shifting
the mode of operation from OEM to original design manufacturer. The Group believes all these
measures will boost its operating profit margin.
In the long run, the Group’s objective is to become a reputable ladies’ lingerie retailer in the
Greater China, which offers a wide range of products to fit the needs of customers of different
age groups, having different perceptions and purchasing power.
EMBRY HOLDINGS LIMITED 25 2007 INTERIM REPORT
OTHER INFORMATION
Directors’ Interests and Short Positions in Shares and Underlying
Shares
At 30 June 2007, the interests and short positions of the Directors in the share capital 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 pursuant to the Model Code for Securities Transactions by
Directors of Listed Issuers (the “Model Code”), were as follows:
Long positions in ordinary shares of the Company:
Percentage of
Number of the Company’s
Capacity and Shares/equity shares/equity issued share
Name nature of interest derivatives derivatives held capital
Mr. Cheng Man Tai Interest of controlled Ordinary shares 295,550,850 73.89
corporations (Note 1)
Beneficial owner Share options 873,000 0.22
(Note 2)
Ms. Cheng Pik Ho Liza Beneficial owner Ordinary shares 3,813,555 0.95
Beneficial owner Share options 500,000 0.13
(Note 2)
Madam Ngok Ming Chu Interest of controlled Ordinary shares 295,550,850 73.89
corporations (Note 1)
Beneficial owner Share options 773,000 0.19
(Note 2)
Mr. Hung Hin Kit Beneficial owner Share options 332,000 0.08
(Note 2)
Mr. Lau Siu Ki Beneficial owner Share options 68,000 0.02
(Note 2)
Mr. Lee Kwan Hung Beneficial owner Share options 68,000 0.02
(Note 2)
Prof. Lee T.S. Beneficial owner Share options 68,000 0.02
(Note 2)
EMBRY HOLDINGS LIMITED 26 2007 INTERIM REPORT
OTHER INFORMATION (continued)
Directors’ Interests and Short Positions in Shares and Underlying
Shares (continued)
Long positions in shares of an associated corporation:
Percentage of
the associated
Name of Relationship Capacity corporation’s
associated with the Shares/equity Number of and nature issued
Name corporation Company derivatives shares of interest share capital
Mr. Cheng Man Tai Harmonious Ultimate holding Ordinary 59 shares of Directly 60.2
World company shares US$1 each beneficially
owned
Madam Ngok Ming Chu Harmonious Ultimate holding Ordinary 39 shares of Directly 39.8
World company shares US$1 each beneficially
owned
Note 1: These shares are held as to 294,279,660 shares by Harmonious World and as to 1,271,190 shares by
Fairmout Investments Limited (“Fairmout Investments”). Harmonious World is owned as to 60.2% by Mr.
Cheng Man Tai and as to 39.8% by Madam Ngok Ming Chu. Fairmout Investments is owned as to 50% by
Mr. Cheng Man Tai and as to 50% by Madam Ngok Ming Chu.
Note 2: These represent the number of shares which will be allotted and issued to the respective Directors upon the
exercise of the share options of the Pre-IPO Scheme granted to each of them, details of which are disclosed
in note 13 to the condensed consolidated financial statement.
In addition to the above, certain Directors have non-voting deferred shares in a subsidiary of the
Company.
Save as disclosed above, as at 30 June 2007, none of the Directors had registered an interest or
short position in the shares, underlying shares of the Company or any of its associated
corporations that was required to be recorded pursuant to Section 352 of the SFO, or as
otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.
Directors’ Rights to Acquire Shares or Debentures
At no time during the Interim Period were rights to acquire benefits by means of the acquisition
of shares in or debentures of the Company granted to any Director or their respective spouse or
minor children, or were any such rights exercised by them; or was the Company, its holding
company or any of its subsidiaries and fellow subsidiaries a party to any arrangement to enable
the Directors to acquire such rights in any other body corporate.
EMBRY HOLDINGS LIMITED 27 2007 INTERIM REPORT
OTHER INFORMATION (continued)
Substantial Shareholders’ and other Persons’ Interests in Shares and
Underlying Shares
At 30 June 2007, the following interests of 5% or more of the issued share capital of the
Company (other than the Directors 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
Number of the Company’s
ordinary issued share
Name Capacity shares held capital
Harmonious World Beneficial owner 294,279,660 73.57
(Note)
Fidelity International Limited Investment manager 20,509,000 5.13
Note: The relationship between Harmonious World and Mr. Cheng Man Tai and Madam Ngok Ming Chu are
disclosed under the heading “Directors’ interests and short positions in shares and underlying shares” above.
Save as disclosed above, as at 30 June 2007, no person, other than the Directors, whose interests
are set out in the section headed “Directors’ interests and short positions in shares and underlying
shares” above, had registered an interest or short position in the shares or underlying shares of
the Company that was required to be recorded pursuant to Section 336 of the SFO.
Interim Dividend
The Board has resolved to declare the payment of an interim dividend of HK2.0 cents per ordinary
share in respect of the Interim Period, to shareholders on the register of members on Friday, 12
October 2007, resulting in an appropriation of HK$8.0 million. The abovementioned interim
dividend will be payable on or before 22 October 2007.
Closure of Register of Members
In order to ascertain the entitlement to the interim dividend, the register of members of the
Company will be closed from Wednesday, 10 October 2007 to Friday, 12 October 2007, both
dates inclusive. During such period, no transfer of shares will be registered. In order to qualify for
the interim dividend, all completed transfer forms accompanied by the relevant share certificates
must be lodged with the Company’s Branch Share Registrar in Hong Kong, Tricor Investor Services
Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, for
registration not later than 4:30 p.m. on Tuesday, 9 October 2007.
EMBRY HOLDINGS LIMITED 28 2007 INTERIM REPORT
OTHER INFORMATION (continued)
Purchase, Sale or Redemption of the Company’s Listed Securities
Neither the Company, nor any of its subsidiaries purchased, redeemed or sold any of the
Company’s listed securities during the Interim Period.
Compliance with the Code on Corporate Governance Practices
In the opinion of the Directors, the Company has complied with the code provisions of the Code
on Corporate Governance Practices as set out in Appendix 14 to the Listing Rules throughout the
Interim Period.
Model Code for Securities Transactions by Directors
The Company has adopted the Model Code as set out in Appendix 10 to the Listing Rules. Having
made specific enquiry of all Directors, all Directors of the Company confirmed that they have
complied with the required standard as set out in the Model Code during the Interim Period.
On behalf of the Board
Cheng Man Tai
Chairman
Hong Kong
18 September 2007
