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NGAI LIK NGAI LIK NGAI LIK NGAI LIK NGAI LIK NGAI LIK NGAI LIK NGA
ANNUAL REPORT 2007www.ngailik.com
ANNUAL REPOR
T 2007
NGAI LIK INDUSTRIAL HOLDINGS LIMITED
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NGAI LIK INDUSTRIAL HOLDINGS LIMITED
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Stock code : 332Vk
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CHAIRMAN’S STATEMENT
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MANAGEMENT DISCUSSION AND ANALYSIS
M#4~
CORPORATE GOVERNANCE REPORT
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DIRECTORS AND SENIOR MANAGEMENT PROFILE
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DIRECTORS’ REPORT
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INDEPENDENT AUDITORS’ REPORT
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CONSOLIDATED INCOME STATEMENT
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CONSOLIDATED BALANCE SHEET
]
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
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CONSOLIDATED CASH FLOW STATEMENT
]$t
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
]fW
FIVE YEAR FINANCIAL SUMMARY
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CORPORATE INFORMATION
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2
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| Contents |
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2
Chairman’s Statement
NGAI LIK INDUSTRIAL HOLDINGS LIMITED
S
ANNUAL REPORT 2007
RESULTS AND DIVIDENDS
For the financial year (“FY”) ended 31 March 2007,
the Group’s turnover was HK$3,655 million, an
increase of 29% as compared to last year. Net profit
amounted to HK$13 million, representing no change
of HK$13 million last year.
During the year, an interim dividend of
HK$7,930,000, representing a payout ratio of about
61% of the current year profit, has been paid. Having
considered the future cash flow requirements for the
business development, the Board adopts a prudent
approach and does not recommend the payment of
a final dividend for the year ended 31 March 2007
(2006: NIL).
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Dr. Lam Man Chan
{
On behalf of the Board of Directors (the “Board”), I am pleased to
present the annual results for the year ended 31 March 2007 to our
shareholders.
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3
Chairman’s StatementS
BUSINESS REVIEW
EMS Division
During the year under review, the Group’s EMS
Division recorded sales of HK$3,643 million. A
number of factors affected the revenue amount and
its composition:
– The Group’s efforts in changing the product mix
in the past few years has begun to pay off.
– Strong market demand for digital products,
which included mainly portable DVD players and
digital photo frames, contributed about 25% of
the Group’s total sales for the year.
– Contribution from the mobile division, which was
set up in Dongguan during the year, amounted
to sales of HK$158 million.
– Replacement of home audio products with
higher value-added digital products helped
decrease sales of this category to 50% of total
sales, as compared to 80% last year.
During the year, the United States remained the EMS
Division’s largest market and the percentage of
American sales to total sales increased from 71% to
79% as compared to last year. This increase was
mainly due to fulfillment of certain event sales order
for Wal-mart.
The gross margin decreased from 5.4% of prior year
to 4.5% because of the following adverse factors: –
– negligible profit contribution to the Group from
sales of conventional portable CD players and
standalone DVD players because of intense
price competition; and
– Significant increase in raw materials and labour
costs as well as in royalties and license fees.
The operating profit of the EMS division for the year
was about HK$11 million (2006: HK$12 million). The
decrease in operating profit was mainly attributable
to the initial operating loss incurred by the mobile
division.
8
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4
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Chairman’s StatementS
As at 31 March 2007, the Group had in operation 24
production lines in Dongguan and 25 production
lines in Qingyuan. However, the Group has continued
to consolidate its manufacturing facilities to gain
operating efficiency. The aim is to establish Qingyuan
Industrial Estate as the Group’s major manufacturing
arm in China. During the year, most of the component
manufacturing facilities were relocated to Qingyuan
and the Dongguan assembly operations are
expected to migrate to Qingyuan in an orderly
fashion. The capital expenditure on property, plant
and equipment for the year totaled about HK$100
million, mainly HK$25 million invested in moulds and
HK$28 million in plant and machinery.
Properties Division
The Group’s Properties Division comprises
investment properties in land and factory buildings
in Fenggang, Dongguan, which help to earn recurring
income and/or realise potential capital appreciation.
The fair value gain on investment properties was
HK$58 million (FY2006: HK$33 million) and the
relevant deferred tax for these fair value gains
charged under “Tax” on the consolidated income
statement was HK$19 million (FY2006: HK$11
million). During the year, the Group has paid about
HK$22 million to obtain the proper land use rights
for the PRC properties.
The investment properties were created from a
change of use of certain plants in Dongguan to rental
purpose, a result of the Group’s effort to consolidate
its operation to Qingyuan. As of 31 March, 2007, the
total gross floor area (GFA) of the investment
properties was about 350,000 square meters.
The Group believes these investment properties in
Fenggang can provide stable income and possess
re-development potential. Fenggang, known as “the
Backyard of Shenzhen”, is located at the southern
tip of Dongguan. It is adjacent to Longgang, a fast
developing district of Shenzhen. Hence, Fenggang
has become a key traffic hub connecting Shenzhen
and Dongguan.
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Chairman’s StatementS
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Fenggang is primarily a base for processing industries,
currently with more than 1,000 different enterprises and
manufacturers engaging in more than 20 industries. Local
residents’ purchasing power are expected to continue to
increase in line with Fenggang’s rapid economic growth.
Shenzhen’s, and in particular, Longgang’s strong growth
in real estate development since 2005 are having a
knock-on effect on Fenggang’s real estate market, and
which could have a beneficial impact on the development
value of the Group’s investment properties.
PROSPECTS
EMS Division
The sales mix should continue to change significantly in
FY2008, reflecting the company’s drive to upgrade its
product mix. The conventional home audio business is
expected to significant decrease to about 30% of the
total sales because of the strategic decision to reduce
the portable CD players business. The sales of panel
display products, while as a key driver for sales growth,
will be subjected to supply availability of TFT panels to
meet its sales targets. The market supply for TFT panels
has tightened considerably since April 2007 because of
the strong market demand for related panel display
products. The Group will endeavor to secure sufficient
allocations from its suppliers to meet sales demand. The
Group expects the total sales of EMS Division for the
coming year will decrease by about 20% to 25%, as
compared to last year.
With the drastic reduction in home audio business, the
Group plans to aggressively launch new products for
replacement and carry out cost reduction measures to
reduce overhead. The Group has developed a new range
of digital products which include digital boomboxes,
global position system (GPS) devices (both in-car and
portable), high definition (HD) radios. New models of
panel display products including digital photo frames
and portable televisions will also be launched to the
market.
6
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Chairman’s StatementS
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On the effort to reduce cost, the situation remains
challenging. Raw material prices remain at high levels
and operating costs in China continue to rise as a
consequence of the appreciation of the Renminbi (“RMB”)
currency and upward pressure on wages and employee
benefits.
The Group is in the process of restructuring of its
operational activities in Dongguan and Qingyuan. The
Group aims to become leaner and more efficient, thus
allowing the Group to establish an efficient and
competitive manufacturing platform in China. The
measures taken for change in product mix, cost control
and the restructuring of manufacturing operations, upon
completion this year, will definitely benefit the Group.
The Group has managed the balance sheet in a prudent
but proactive way. We have early repaid the syndicated
loan in March 2007 and during the year the Group has
obtained term loans from Hang Seng Bank Limited and
Agricultural Bank of China. The Group is also reviewing
the overall debt and equity structure and will consider
different means of financing to rectify the net current
liabilities as recorded at 31 March 2007. Subsequent to
the balance sheet date, the Group has additionally
obtained a standby term loan facility of about RMB180
million from Agricultural Bank of China, secured by the
properties in Qingyuan Industrial Estate, to further
strengthen its liquidity.
Properties Division
With the ratification of land titles for the various properties
in Dongguan, the Group will pursue initiatives to enhance
the value of these properties and will consider different
ways to provide best returns to the Group and maximise
their potential value. At present, the investment properties
are or will be rented out to earn recurring income.
The difficult operating environment in recent years for
the consumer electronic industry continues to persist and
the Group is working vigorously to overcome the
challenges ahead. The Group will also actively and
consistently seek new investment opportunities, with an
aim to enhance the value of the Group.
b8"! 2007 5P
7
Chairman’s StatementS
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Employee Information
As at 31 March 2007, the Group had approximately
24,300 employees (2006: approximately 32,000). The
remuneration packages are generally structured with
reference to market conditions and the individual
qualifications. Salaries and wages of the Group’s
employees are normally reviewed on an annual basis
based on performance appraisals and other relevant
factors. Bonuses are normally paid to the management,
based on individual merits as well as the results from
the respective companies for which the staff works.
Benefit plans for its Hong Kong staff include a provident
fund scheme and medical and life insurance. The Group
also maintains a Share Options Scheme, under which
options may be granted to employees to subscribe for
shares in the Company. This Share Option Scheme is
designed to give employees an incentive to perform.
ACKNOWLEDGEMENT
On behalf of the Board, I wish to take this opportunity to
express my sincere gratitude to our management team
and staff for their hard work and dedication in the past
year. I also wish to thank our shareholders, customers,
suppliers, bankers and business partners for their
continued trust and support.
By order of the Board
Lam Man Chan
Chairman
Hong Kong, 16 July 2007
8
Management Discussion and Analysis
NGAI LIK INDUSTRIAL HOLDINGS LIMITED
M#4~
ANNUAL REPORT 2007
FINANCIAL REVIEW
Turnover
During the year, the Group’s turnover increased
to HK$3,655 million, up by 29% as compared to
last year. The increase was mainly attributable
to the fulfillment of certain event sales order with
Wal-mart.
During the year, sales of home audio products
accounted for approximately 49% of the Group’s
turnover, a decrease of 38% over last year, and
remained as its core business. Sales of digital
products contributed to approximately 45% of
the Group’s turnover, an increase of 181% over
last year.
Gross Margin
The Group continued to change its product mix
and reduced the sales of CD audio products
which used plastics, laminates and metals as
the key raw materials. However, the electronics
consumer products market remained intensely
competitive and during the year, the gross profit
margin decreased to 4.5%.
Expenses
The Group’s administrative expenses increased
by 13% as compared to the previous year and
totaled to HK$122 million. The percentage of
administrative expenses to total sales dropped
to 3.3% (2006: 3.8%). The Group’s selling and
distribution expenses increased to approximately
HK$37 million. The Group’s finance costs
increased substantially to HK$37 million as a
result of significantly higher average interest
rates and the increase in bank borrowings in
RMB.
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Management Discussion and AnalysisM#4~
Property Investment
The Group has changed the use of certain plants
in Dongguan to third party rentals following the
consolidation of operations into Qingyuan
Industrial Estate. Accordingly, the carrying value
of investment properties increased from HK$186
million to HK$467 million. The increase in fair
value of investment properties, which was
credited to current year’s income statement,
amounted to HK$58 million. During the year, the
transfers from property, plant and equipment
and land use rights were HK$199 million and
HK$23 million respectively.
Working Capital Management and Dividend Policy
As at 31 March 2007, the Group maintained bank
balances and cash of approximately HK$167
million (2006: HK$199 million). The Group’s
average inventory turnover was about 44 days
(2006: 56 days). The Group’s average trade
receivables turnover was maintained at 16 days
(2006: 16 days).
Financing and Capital Structure
For the year ended 31 March 2007, the Group’s
total debts stood at approximately HK$714
million (2006: HK$702 million), of which HK$285
million (2006: HK$318 million) were not
repayable within one year. The borrowings
included outstanding balances of several term
loan facilities from several banks, totaled
HK$342 million. The Group also issued letters
of credit to procure the supplies of critical
components and certain raw materials. The
increase in net debt was mainly due to new
borrowings for the purposes of CAPEX and daily
operation.
The Group’s borrowings are primarily
denominated in Hong Kong Dollars, US Dollars
and RMB and the Group will hedge against
currency exposure as well as interest rate
expense, particularly for the borrowings in RMB,
as appropriate.
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10
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Management Discussion and AnalysisM#4~
Capital Expenditure on Property, Plant and
Equipment
Total capital expenditure for the year was
HK$100 million (2006: HK$125 million), out of
which HK$19 million was spent on the
construction of production plants, HK$28 million
for the acquisition of plant and machinery and
HK$25 million for moulds investment.
Disposal of an Associate and Available-for-sales
Financial Assets
During the year, the Group disposed of 50%
interest in Metro Capital Securities Limited to
Dr. Lam Man Chan at a consideration of HK$20
million, which was approximate to the carrying
value of the Group. In addition, the investment
in listed securities had been disposed during
the year with a cash inflow of HK$16 million.
Liquidity and Financial Resources
The net current liabilities of the Group as at 31
March 2007 was approximately HK$34 million
(2006: net current assets at HK$37 million) and
the current ratio was 0.96 (2006: 1.05). The net
current liabilities arose mainly resulting from the
early repayment of syndicated loan of HK$152
million in March 2007. Shareholders’ funds were
maintained at approximately HK$1,077 million
(2006: HK$1,070 million).
Pledge of Assets
As at 31 March 2007, certain of the Group’s
assets (including investment properties,
property, plant and equipment and land use
rights) with the carrying value of totalling
HK$334 million were pledged to secure certain
banking facilities granted to the Group.
Capital Commitments
As at 31 March 2007, the Group had capital
commitments contracted but not provided for
and authorised but not contracted for of HK$10
million and HK$1 million respectively.
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jt=37,000,000d
t0.96Zggj
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b8"! 2007 5P
11
Management Discussion and AnalysisM#4~
Treasury Policy
The majority of the Group’s sales and purchases
are denominated in Hong Kong Dollars or US
Dollars. As Hong Kong Dollars and US Dollars
are pegged, the Group had minimum exposure
to foreign exchange fluctuation in this respect.
The labour costs and other overheads incurred
in China were denominated in RMB and during
the year, the Group had entered into an one
year structured forward contract for RMB in the
amount of US$1 million with the Hongkong and
Shanghai Banking Corporation Limited for
hedging purposes. The Group will closely
monitor the overall currency and interest rate
exposures particularly for the bank borrowings
in RMB which was about HK$169 million as at
31 March 2007. When considered appropriate,
the Group will hedge against currency exposure
as well as interest rate exposure.
A
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q169,000,000[O
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12
Corporate Governance Report
NGAI LIK INDUSTRIAL HOLDINGS LIMITED
8M7S
ANNUAL REPORT 2007
CORPORATE GOVERNANCE PRACTICES
The board of directors of the Company (the “Board”)
is committed to maintaining good corporate
governance standards and procedures to ensure the
integrity, transparency and quality of disclosure in
order to enhance the shareholders’ value.
The Company has applied the principles and
complied with all the applicable code provisions of
the Code on Corporate Governance Practices
(“Code”) as set out in Appendix 14 of the Rules
Governing the Listing of Securities on the Stock
Exchange of Hong Kong Limited (the “Listing Rules”)
for the year ended 31 March 2007, save for the
deviations discussed below. The Board will
continuously review and improve the corporate
governance practices and standards of the Company
to ensure that business activities and decision
making processes are regulated in a proper and
prudent manner.
DIRECTORS’ SECURITIES TRANSACTION
The Company has adopted the Model Code for
Securities Transactions by Directors of Listed Issuers
as set out in Appendix 10 to the Listing Rules as its
own code of conduct regarding directors’ securities
transactions (the “Model Code”). Having made
specific enquiry of all directors of the Company, the
directors of the Company have confirmed that they
have fully complied with the required standard as
set out in the Model Code throughout the year ended
31 March 2007.
8M7l
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+Ntz
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b8"! 2007 5P
13
Corporate Governance Report8M7S
BOARD OF DIRECTORS
As at the date of this report, the Board is made up
of eight directors, including five executive directors
and three independent non-executive directors (the
“INEDs”). The directors are, collective and
individually, aware of their responsibilities to the
shareholders. One of the INEDs possesses
appropriate professional accounting qualifications
and financial management expertise. The directors’
biographical details are set out in the section headed
of “Directors and Senior Management Profiles” in
this Annual Report.
The Board members for the year ended 31 March
2007 and as at the date up to this report were:–
Executive Directors
Dr. Lam Man Chan (Chairman)
Ms. Ting Lai Ling
Ms. Ting Lai Wah
Mr. Yeung Cheuk Kwong
Mr. Lam Shing Ngai
(appointed on 1 February 2007)
Independent Non-executive Directors
Mr. Ng Chi Yeung, Simon
Mr. Tam Yuk Sang, Sammy
Mr. Ho Lok Cheong
The Board conducts at least four regular Board
meetings a year at approximately quarterly intervals
in addition to other Board meetings that are required
for significant and important issues, and for statutory
purposes. Appropriate and sufficient information is
provided to the Board members in a timely manner
to keep them abreast of the Group’s latest
development and thus to assist them in discharging
their duties.
+6
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XSf+6pZ6G{G
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f
14
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Corporate Governance Report8M7S
During the year, the Board had held six times of
meetings and the attendance of the directors at the
Board Meetings for the year ended 31 March 2007
is set out as follows:
d+6X6Dd
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+66D1hj
Number of meetings
Name of director attended/held
X
+ 6Dp
Executive DirectorsB+
Dr. Lam Man Chan{5/6
Ms. Ting Lai LingU~{2/6
Ms. Ting Lai WahU6~{3/6
Mr. Yeung Cheuk Kwong@Y[6/6
Mr. Lam Shing Ngai[
(appointed on 1 February 2007)ZggVZSG\N/A
Independent Non-executive DirectorsmB+
Mr. Ng Chi Yeung, SimonNn[4/6
Mr. Tam Yuk Sang, Sammy[[5/6
Mr. Ho Lok Cheong[6/6
Board minutes are recorded in appropriate detail
and draft minutes are circulated to all directors and
committee members for comments before being
approved by the Board at the next immediate
meeting. All minutes are kept by the Company
Secretary and are open for inspection by the
directors.
The Board is responsible for the leadership and
control of the Group and oversees the Group’s
business, strategic decisions and financial
performance. The Board delegates to the
management team the day-to-day management of
the Company’s business including the preparation
of annual and interim reports, and for implementation
of internal control, business strategies and plans
developed by the Board.
The Company has received from each of its
independent non-executive directors an annual
confirmation of his independence pursuant to Rule
3.13 of the Listing Rules and considers all the
independent non-executive directors to be
independent.
+66D}ZhGZd6D
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b8"! 2007 5P
15
Corporate Governance Report8M7S
I+tM#[p
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[{A<Rf
The Board members have no financial, business,
family or other material / relevant relationship with
each other except those disclosed in the section
headed “Directors and Senior Management Profile”
included in this Annual Report.
RE-ELECTION OF DIERCTORS
Subsequent to the Annual General Meeting held on
15 September 2006, a special resolution was passed
to amend the Company’s Bye-laws to the effect that
all directors (including Chairman of the Board and
Managing Director of the Company) will be subject
to retirement by rotation.
Code Provision A.4.2. of the Code stipulates that all
directors appointed to fill causal vacancy should be
subject to election by shareholders at the first
general meeting after their appointment. However,
paragraph 4(2) of Appendix 3 of the Listing Rules
provides that such directors are to hold office until
the next following annual general meeting of the
Company and shall then be eligible for re-election
at that meeting. As mentioned in the annual report
of FY2006, the Board decided to leave the existing
Bye-laws unchanged given the inconsistencies in the
Listing Rules.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
The Company does not at present have any officer
holding the position of Chief Executive Officer
(“CEO”). Dr. Lam Man Chan is the founder and
chairman of the Company and has also carried out
the responsibilities of CEO. Dr. Lam possesses the
essential leadership skills to manage the Board and
extensive knowledge in the business of the Group.
The Board considers the present structure to be more
suitable to the Company because it can promote
the efficient formulation and implementation of the
Company’s strategies. The Board will review the
effectiveness of this arrangement from time to time
and will consider appointing an individual as CEO
when it thinks appropriate.
16
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Corporate Governance Report8M7S
B+
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gf
+6p6
+6mGHp6d(Hx
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p6XS6Dd
pi6Df
NON-EXECUTIVE DIRECTORS
The non-executive directors of the Company were
appointed for a specific term of three years.
BOARD COMMITTEES
The Board has established two committees with
clearly-defined written terms of reference. The
independent view and recommendations of the two
committees ensure proper control of the Group and
the continual achievement of the high standard
corporate governance practices.
Remuneration Committee
As at the date of this report, the Remuneration
Committee (the “RC”) comprises three INEDs,
namely, Mr. Ng Chi Yeung, Simon (Chairman), Mr.
Tam Yuk Sang, Sammy, and Mr. Ho Lok Cheong
and one executive director, namely, Mr. Yeung Cheuk
Kwong.
The brief duties of the RC as per the terms of
reference were as follows:
1. to make recommendations to the Board on the
Company’s policy and structure for the
remuneration of the directors;
2. to have the delegated responsibilities to
determine the specific remunerations package
of all executive directors; and
3. to review and approve compensation payable
to directors’ in connection with loss of their
office or compensation arrangement relating to
dismissal or removal of director.
The RC has every right to access to professional
advice relating to remuneration proposal if
considered necessary.
The RC meets at least once a year. The RC has held
one meeting during the year and all members have
attended the meeting.
b8"! 2007 5P
17
Corporate Governance Report8M7S
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Audit Committee
During the year, the Audit Committee (the “AC”)
comprised three INEDs, namely, Mr. Tam Yuk Sang,
Sammy (Chairman), Mr. Ng Chi Yeung, Simon and
Mr. Ho Lok Cheong.
The principal duties of the AC include:
1. monitoring integrity of the Company’s financial
statements and reports;
2. reviewing of financial controls, internal controls,
and risk management system; and
3. reviewing of the Company’s financial and
accounting policies and practices.
The AC is authorised by the Board to investigate
any activity and seek any information it requires
within its term of reference. It is also authorised to
obtain outside legal or other independent
professional advice and to secure the attendance of
outsiders with relevant experience and expertise if it
considers this necessary.
Reporting to the Board, the AC is dedicated to review
and supervise the Group’s financial reporting
process and internal controls. The financial results
for the year ended 31 March 2007 has been reviewed
by the AC.
18
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Corporate Governance Report8M7S
1 } +,fYX
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,76d}gHXSf
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+66D1hj
The AC conducts at least four regular meetings a
year at approximately quarterly intervals in addition
to other meetings that are required for significant
and important issues, and for statutory purposes.
The attendance of the directors at the Board
Meetings for the year ended 31 March 2007 is set
out as follows:
Number of meetings
Name of member attended/held
p X6Dp
Mr. Ng Chi Yeung, SimonNn[3/4
Mr. Tam Yuk Sang, Sammy[[4/4
Mr. Ho Lok Cheong[4/4
During the year ended 31 March 2007, the AC had
reviewed the Company’s annual report for the year
ended 31 March 2006, the interim report for the six
months ended 30 September 2006.
NOMINATION OF DIRECTORS
The Company has not established a Nomination
Committee. The duties and functions of the
Nomination Committee recommended in the Code
are performed by the Board collectively with no
director being involved in fixing his/her own terms
of appointment and no INEDs being involved in
assessing his own independence.
DIRECTORS’ RESPONSIBILITY FOR THE
FINANCIAL STATEMENTS
The Directors acknowledge their responsibilities for
the preparation of the financial statements of the
Group and ensure that the financial statements are
in accordance with statutory requirements and
applicable accounting standard. The Directors also
ensure the timely publication of the financial
statements of the Group.
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b8"! 2007 5P
19
Corporate Governance Report8M7S
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The statement of external auditors of the Company,
Messrs. Deloitte Touche Tohmatsu and Messrs.
Graham H.Y. Chan & Co., about their reporting
responsibilities on the consolidated financial
statements of the Group is set out in the Independent
Auditors’ Report on pages 35 to 37.
The Directors confirm that, to the best of their
knowledge, information and belief, having made all
reasonable enquiries, they are not aware of any
material uncertainties relating to events or conditions
that may cast significant doubt upon the Company’s
ability to continue as a going concern.
AUDITORS’ REMUNERATION
For the year ended 31 March 2007, the total
remuneration of the Group’s Auditors for statutory
audit services was approximately HK$1.35 million.
They also provided non-audit services to the Group,
which were considered as insignificant assignments.
20
Directors and Senior Management Profile
NGAI LIK INDUSTRIAL HOLDINGS LIMITED
+tM#[p
ANNUAL REPORT 2007
EXECUTIVE DIRECTORS
Dr. LAM Man Chan, aged 58, is the founder and
Chairman of the Group. He is responsible for the
formulation of corporate strategy and oversee
direction of the Group. He was graduated from the
World Electric Engineering College in 1969. He has
over 30 years of management experience and in
depth knowledge of the electronics industry. In 1994,
Dr. Lam was granted the Young Industrialist Awards
of Hong Kong. Dr. Lam is a committee member of
Guangdong Provincial Committee and Dongguan
Regional Committee of the Chinese People’s Political
Consultative Conference (“CPPCC”) respectively. He
is also a standing committee member of Qingyuan
Region Committee of the CPPCC. He is the husband
of Ms. Ting Lai Ling, the brother-in-law of Ms. Ting
Lai Wah and the father of Mr. Lam Shing Ngai.
Ms. TING Lai Ling, aged 52, is the co-founder of the
Group. She is responsible for marketing
administration, liaison with customers and production
planning. She has over 25 years of experience in
the electronics industry. She is the wife of Dr. Lam
Man Chan, the sister of Ms. Ting Lai Wah and the
mother of Mr. Lam Shing Ngai.
Ms. TING Lai Wah, aged 54, joined the Group in
1978, is in charge of the policy formulation and the
overall operation of components manufacturing within
the vertical integrated production process employed
by the Group. She has over 25 years of experience
in the electronics industry. She is the sister of Ms.
Ting Lai Ling, the sister-in-law of Dr. Lam Man Chan
and the aunt of Mr. Lam Shing Ngai.
B+
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Dr. Lam Man Chan
{
Ms. Ting Lai Ling
U~{
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b8"! 2007 5P
21
Directors and Senior Management Profile+tM#[p
Mr. Yeung Cheuk Kwong
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Mr. YEUNG Cheuk Kwong, aged 44, joined the
Company in 2000. He is also the Chief Financial Officer
and Company Secretary of the Company. He oversees
the finance and accounting, human resources, general
administration, information technology and corporate
planning and development of the Group. Mr. Yeung is
a Fellow Member of the Association of Chartered
Certified Accountants, Associate Member of the
Institute of Chartered Accountants in England and
Wales and Fellow Member of The Hong Kong Institute
of Directors. He has more than 15 years of senior
management experience and was previously a director
of a publicly listed company in Hong Kong.
Mr. LAM Shing Ngai, aged 28, was appointed as
Executive Director of the Company on 1 February 2007.
Mr. Lam joined the Group in 2003 as Assistant Product
Manager and was then promoted to Product Manager.
Mr. Lam graduated from McMaster University in
Canada with a bachelor degree in Electrical
Engineering. He has about 4 years of experience in
the electronics industry. Mr. Lam is mainly responsible
for the development of new digital products and
implementation of new strategies to further strengthen
the Group’s management. Mr. Lam is the son of Dr.
Lam Man Chan and Ms. Ting Lai Ling. He is a nephew
of Ms. Ting Lai Wah.
Mr. Lam Shing Ngai
[
22
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Directors and Senior Management Profile+tM#[p
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INDEPENDENT NON-EXECUTIVE DIRECTORS
Mr. NG Chi Yeung, Simon, aged 49, was appointed by the
Company in 1992. He is qualified as a solicitor in Hong
Kong, England and Wales, an advocate and solicitor in
Singapore, and a barrister in the Australian Capital Territory.
Mr. Ng is a consultant of Messrs. Rowland Chow, Chan &
Company, a law firm in Hong Kong. Mr. Ng holds a bachelor
degree from the Manchester Metropolitan University in the
United Kingdom and a master degree in Chinese and
Comparative Law. He is also an independent non-executive
director of two other publicly listed companies in Hong
Kong, namely, Kith Holdings Limited and Winfair Investment
Company Limited. He is a part-time lecturer teaching at
the University of Hong Kong.
Mr. TAM Yuk Sang, Sammy, aged 43, was appointed by
the Company in 2004. He graduated from the Hong Kong
Polytechnic University and is a fellow member of the
Association of Chartered Certified Accountants and the
Hong Kong Institute of Certified Public Accountants. He is
currently the President of a corporate strategy and
management advisory company. He is also an independent
non-executive director of another publicly listed company
in Hong Kong, namely, Kith Holdings Limited.
Mr. HO Lok Cheong, aged 44, was appointed by the
Company in 2005. He is a partner of the law firm “Messrs.
Andrew Law & Franki Ho” of solicitors, with practice
focusing on corporate commercial, listing, merger &
acquisition and commercial litigation works. Mr. Ho
graduated from the Chinese University of Hong Kong,
studying Physics and Computer Science in 1985. Mr. Ho
further obtained his law degree from Manchester
Metropolitan University of the United Kingdom and finished
his Postgraduate Certificate in Laws in the University of
Hong Kong in 1996, subsequently was admitted as a
Solicitor of the High Court of the Hong Kong SAR and a
Solicitor of England and Wales. Mr. Ho is also an
independent non-executive director of a publicly listed
company, namely, Kith Holdings Limited.
Mr. Ng Chi Yeung
Nn[
Mr. Tam Yuk Sang
[[
Mr. Ho Lok Cheong
[
b8"! 2007 5P
23
Directors and Senior Management Profile+tM#[p
Mr. Lam Man Chung
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SENIOR MANAGEMENT
Mr. LI Wai Man, aged 58, is the Business Director of
the trading arm of EMS division. He is mainly
responsible for the sales and marketing of the
Group’s electronics products. Mr. Li has over 20
years of extensive experience in this industry and
was in top management positions before joining the
Group in 1997.
Mr. LAM Man Chung, aged 51, joined the Group in
1981. He is the Operation Director of the
manufacturing section of the EMS division. He is
responsible for overseeing the production activities
in Dougguan and Qingyuan. He has over 20 years
of experience in the electronics industry.
Mr. Li Wai Man
IO[
24
Directors’ Report
NGAI LIK INDUSTRIAL HOLDINGS LIMITED
+6S
ANNUAL REPORT 2007
The Board presents their annual report and the
audited consolidated financial statements of the
Company and its subsidiaries (hereinafter collectively
referred to as the “Group”) for the year ended 31
March 2007.
PRINCIPAL ACTIVITIES
The principal activity of the Company is investment
holding. Its subsidiaries are principally engaged in
design, manufacture and sale of electronic products
and property investment.
RESULTS AND APPROPRIATIONS
The results of the Group for the year ended 31 March
2007 are set out in the consolidated income
statement on page 38.
An interim dividend of HK1 cent per share amounting
to HK$7,930,000 was paid during the year. The
Board does not recommend the payment of a final
dividend.
INVESTMENT PROPERTIES AND PROPERTY,
PLANT AND EQUIPMENT
Details of movements during the year in investment
properties and property, plant and equipment of the
Group are set out in notes 15 and 16 to the
consolidated financial statements, respectively.
SHARE CAPITAL
Details of the Company’s authorised, issued and fully
paid share capital are set out in note 29 to the
consolidated financial statements.
DISTRIBUTABLE RESERVE OF THE COMPANY
The Company’s reserve available for distribution to
shareholders at 31 March 2007, amounted to
HK$501,323,000 (2006: HK$501,749,000).
+6+dOI!I
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b8"! 2007 5P
25
Directors’ Report+6S
+
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DIRECTORS
The directors of the Company during the year and
up to the date of this report were:
Executive directors:
Dr. Lam Man Chan
Ms. Ting Lai Ling
Ms. Ting Lai Wah
Mr. Yeung Cheuk Kwong
Mr. Lam Shing Ngai
(appointed on 1 February 2007)
Mr. Hui King Chun
(resigned on 7 August 2006)
Non-executive director:
Mr. Lam Ping Cheung, Andrew
(resigned on 20 June 2006)
Independent non-executive directors:
Mr. Ng Chi Yeung, Simon
Mr. Tam Yuk Sang, Sammy
Mr. Ho Lok Cheong
In accordance with Articles 86 and 87 of the
Company’s Bye-Laws, Dr. Lam Man Chan, Ms. Ting
Lai Wah, Mr. Tam Yuk Sang, Sammy and Mr. Lam
Shing Ngai retire by rotation, and being eligible, offer
themselves for re-election at the forthcoming annual
general meeting. All of the remaining directors
continue in office.
None of the directors who are proposed for re-
election at the forthcoming annual general meeting
has a service contract with the Company which is
not determinable within one year without payment of
compensation, other than statutory compensation.
The Company has received from each of its
independent non-executive directors an annual
confirmation of his independence pursuant to Rule
3.13 of the Rules Governing the Listing of Securities
(the “Listing Rules”) and considers all the
independent non-executive directors to be
independent.
26
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Directors’ Report+6S
+A<Rpep
BQ
ZggVggdSdI!
+eA<RL[{I
!IL,HN7
N7KXV(
pep(
N7K352
1dj9[+
Ntz_z_]6
I!0Lt"!Lt
BQhj
DIRECTORS’ AND CHIEF EXECUTIVE’S
INTERESTS AND SHORT POSITIONS IN
SHARES, UNDERLYING SHARES AND
DEBENTURES
As at 31 March 2007, the directors and chief
executive of the Company and their respective
associates had the following interests and short
positions in the shares, underlying shares and
debentures of the Company and its associated
corporation (within the meaning of Part XV of the
Securities and Futures Ordinance (“SFO”)) as
recorded in the register required to be kept under
section 352 of the SFO or which were required,
pursuant to the Model Code for Securities
Transactions by Directors of Listed Issuers contained
in the Listing Rules (“Model Code”), to be notified to
the Company and
We conducted our audit in accordance with Hong
Kong Standards on Auditing issued by the Hong
Kong Institute of Certified Public Accountants. Those
standards require that we comply with ethical
requirements and plan and perform the audit to
obtain reasonable assurance as to whether the
consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain
audit evidence about the amounts and disclosures
in the consolidated financial statements. The
procedures selected depend on the auditors’
judgment, including the assessment of the risks of
material misstatement of the consolidated financial
statements, whether due to fraud or error. In making
those risk assessments, the auditors consider internal
controls relevant to the Group’s preparation and true
and fair presentation of the consolidated financial
statements in order to design audit procedures that
are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the
effectiveness of its internal controls. An audit also
includes evaluating the appropriateness of
accounting policies used and the reasonableness of
accounting estimates made by the directors, as well
as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for
our audit opinion.
b8"! 2007 5P
37
Independent Auditors’ ReportmpS
Deloitte Touche Tohmatsu Graham H.Y. Chan & Co.
Ch6 ,6+
Certified Public Accountants Certified Public Accountants
B86B86
Hong Kong, 16 July 20070dZggVVd
OPINION
In our opinion, the consolidated financial statements
give a true and fair view of the state of affairs of the
Group as at 31 March 2007 and of its profit and
cash flows for the year then ended in accordance
with Hong Kong Financial Reporting Standards and
have been properly prepared in accordance with
the disclosure requirements of the Hong Kong
Companies Ordinance.
Id]0
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ggVggdSAK1n
P;$t
d(2k0!7|
f
38
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Consolidated Income Statement]B
For the year ended 31 March 2007
ZggVggdS
2007 2006
ZggVZgg
NOTES HK$’000 HK$’000
Www
(Restated)
Turnover8X7 3,654,926 2,843,345
Cost of sales and direct expensesV/I\(3,491,324) (2,690,346)
Gross profit;163,602 152,999
Other operating income, netI]dX3,654 5,261
Selling and distribution expensesV/V(36,967) (33,151)
Administrative expensesA(121,859) (107,793)
Other incomeI]6,370 5,871
Impairment loss of intangible assets=f&– (7,359)
Increase in fair value of investmentJ8;=#
properties 57,519 33,142
Finance costsDI8 (37,190) (26,907)
Share of results of associates&L!86574 2,179
Profit before taxationP;9 35,703 24,242
Taxation10 (22,621) (11,104)
Profit for the yearIP;13,082 13,138
Attributable to:h[{&j
Equity holders of the CompanyI!B5[13,082 13,138
Minority interestsppB– –
13,082 13,138
Dividendsp13
– Interim, paid|p7,930 11,895
– Final, paid for 2005|ZggKp– 7,930
Earnings per share – Basicp;?I14 HK1.6 centsHK1.7 cents
b8"! 2007 5P
39
Consolidated Balance Sheet]
At 31 March 2007
ZggVggdS
2007 2006
ZggVZgg
NOTES HK$’000 HK$’000
Www
Non-current assetst
Investment propertiesJ815 467,000 186,358
Property, plant and equipmentJ8e@16 886,653 1,060,487
Land use rights – non-current portionz4\t17 68,458 65,323
Interests in associatesL!B18 1,641 20,107
Intangible assets19 33,742 27,667
Deposits for acquisition of property,J8e@
plant and equipment and landz4\
use rights 14,774 3,782
Long-term bank deposit20 – 22,207
Available-for-sale financial assets6/D21 – 16,922
1,472,268 1,402,853
Current assetst
Land use rights – current portionz4\t17 1,578 1,450
Inventories22 442,642 445,467
Trade and other receivables andqI
prepaymentsk23 198,117 166,436
Taxation recoverable47,494 48,927
Bank balances and cash$24 166,825 198,550
856,656 860,830
Current liabilitiest
Trade and other payablesqI25 385,896 363,647
Taxation payable75,395 75,989
Bank and other borrowingsIr
– due within one yearQ26 426,371 384,076
Obligations under finance leasesDa
– due within one yearQ27 2,583 31
890,245 823,743
Net current (liabilities) assetst=(33,589) 37,087
Total assets less current liabilities<t1,438,679 1,439,940
Non-current liabilitiest
Bank and other borrowingsIr
– due after one yearSQ26 281,146 317,866
Obligations under finance leasesDa
– due after one yearSQ27 4,130 –
Deferred taxation28 72,524 48,110
357,800 365,976
Net assets=1,080,879 1,073,964
40
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Consolidated Balance Sheet]
At 31 March 2007
ZggVggdS
2007 2006
ZggVZgg
NOTES HK$’000 HK$’000
Www
Capital and reservespI
Share capitalpI29 79,302 79,302
Reserves997,557 990,642
Equity attributable to equity holdersI!B5[
of the Company&B1,076,859 1,069,944
Minority interestsppB4,020 4,020
Total equityB<X1,080,879 1,073,964
K38+K98+]ZggV
Vd+6Xd(_
h+j
The consolidated financial statements on pages 38 to 98 were
approved and authorised for issue by the Board on
16 July 2007 and are signed on its behalf by:
Lam Man Chan Yeung Cheuk Kwong
@Y
DIRECTOR DIRECTOR
++
b8"! 2007 5P
41
Consolidated Statement of Changes in Equity]B
For the year ended 31 March 2007
ZggVggdS
Attributable
Property to equity
Share Share revaluation Exchange Investment Accumulated holders of Minority
capital premium reserve reserve reserve profits the Company interests Total equity
I!
J8 B5[ pp
pI pP 3 ]P; &B B B<
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
wwwwwwwww
At 1 April 2005Zgg
,S79,302 82,844 – 1,108 – 898,788 1,062,042 4,020 1,066,062
Surplus arising from J8[
revaluation of propertiesq– – 17,837 – – – 17,837 – 17,837
Deferred taxation liability J8[
arising on revaluation of
properties – – (5,910) – – – (5,910) – (5,910)
Increase in fair value of6/D
available-for-sale financial;=#
assets – – – – 3,770 – 3,770 – 3,770
Net income recognisedpIB\
directly in equity]– – 11,927 – 3,770 – 15,697 – 15,697
Realised on disposal of/n!$
subsidiaries – – – (1,108) – – (1,108) – (1,108)
Profit for the yearP;– – – – – 13,138 13,138 – 13,138
Total recognised income and]
expenses for the year<X– – 11,927 (1,108) 3,770 13,138 27,727 – 27,727
Dividends paidp– – – – – (19,825) (19,825) – (19,825)
At 31 March 2006Zgg
ggdS79,302 82,844 11,927 – 3,770 892,101 1,069,944 4,020 1,073,964
Surplus arising from J8[
revaluation of propertiesq– – 8,258 – – – 8,258 – 8,258
Deferred taxation liability J8[
arising on revaluation of
properties – – (2,725) – – – (2,725) – (2,725)
Decrease in fair value of6/D
available-for-sale financial;=
assets – – – – (90) – (90) – (90)
Net income (expenses)pIB\
recognised directly in equity]– – 5,533 – (90) – 5,443 – 5,443
Realised on disposal of/6/D
available-for-sale$
financial assets – – – – (3,680) – (3,680) – (3,680)
Profit for the yearP;– – – – – 13,082 13,082 – 13,082
Total recognised income and]
expenses for the year<X– – 5,533 – (3,770) 13,082 14,845 – 14,845
Dividends paidp– – – – – (7,930) (7,930) – (7,930)
At 31 March 2007ZggV
ggdS79,302 82,844 17,460 – – 897,253 1,076,859 4,020 1,080,879
J8 W8J8I7a7a
J8[;=#
f
The property revaluation reserve represents the increase in
fair value, net of related deferred taxation charges, of the
properties transferred to investment properties at date of their
transfer.
42
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Consolidated Cash Flow Statement]$t
For the year ended 31 March 2007
ZggVggdS
2007 2006
ZggVZgg
NOTE HK$’000 HK$’000
Www
OPERATING ACTIVITIES 8
Profit before taxationP;35,703 24,242
Adjustments for:1h+j
Interest income;](5,071) (4,729)
Interest expenses;37,012 26,883
Finance leases chargesDal\178 24
Share of results of associates&L!86(574) (2,179)
Gain on disposal of an associate/L!B(960) –
Increase in fair value of investmentJ8;=#
properties (57,519) (33,142)
Loss (gain) on disposal of property,/J8e@
plant and equipmentf&B686 (57)
Gain on disposal of land use rights/z4\B– (2,044)
(Gain) loss on disposal of/6/D
available-for-sale financial assetsBf&(2,741) 166
Depreciation of property, plant andJ8e@
equipment 79,548 82,462
Amortisation of land use rightsz4\V1,452 1,467
Amortisation of intangible assetsV18,678 19,639
Impairment loss of intangible assets=f&– 7,359
Gain on disposal of subsidiaries/n!B– (1,118)
Operating cash flows before6
movements in working capital$t106,392 118,973
Decrease (increase) in inventories#2,825 (26,877)
Increase in trade and otherqI
receivables and prepaymentsk#(31,681) (37,447)
Increase (decrease) in trade andqI
other payables#22,249 (49,461)
Cash generated from operations8{$99,785 5,188
Interest received;3,878 3,779
Tax paid(1,532) (10,443)
Tax refunded1,439 –
NET CASH FROM (USED IN) 8{
OPERATING ACTIVITIES $= 103,570 (1,476)
b8"! 2007 5P
43
Consolidated Cash Flow Statement]$t
For the year ended 31 March 2007
ZggVggdS
2007 2006
ZggVZgg
NOTE HK$’000 HK$’000
Www
INVESTING ACTIVITIES z
Purchase of property, plant andoJ8e@
equipment (86,399) (111,196)
Costs incurred in respect ofJ8[I
investment properties (6,677) (34)
Additions to land use rights#z4\(22,051) –
Deposits paid for acquisition ofoJ8e@
property, plant and equipmentz4\
and land use rights(14,774) (3,782)
Proceeds from disposal of property,/J8e@
plant and equipment{2,850 5,912
Proceeds from disposal of land/z4\{
use rights – 4,000
Net proceeds from disposal of/6/D
available-for-sale financial assets{X15,893 2,415
Proceeds from disposal of/L!{
an associate 20,000 –
Dividend received from an associateSL!p– 540
Additions to intangible assets#(24,753) (22,900)
Proceeds from disposal of/n!{d
subsidiaries, net of cash and/$$
cash equivalents disposed of=f31 – (90)
Redemption of long-term bank deposit23,400 –
NET CASH USED IN INVESTING z$X
ACTIVITIES (92,511) (125,135)
FINANCING ACTIVITIES Dz
Dividends paidp(7,930) (19,825)
Repayments of bank and otherI>r
borrowings (542,514) (186,220)
Repayments of obligations underDa
finance leases (2,290) (3,144)
Interest paid;(37,961) (28,248)
Finance leases charges paidDal\(178) (24)
New bank and other borrowings raised{->
I>r548,089 347,202
NET CASH (USED IN) FROM Dz {$
FINANCING ACTIVITIES X (42,784) 109,741
NET DECREASE IN CASH AND $$=f
CASH EQUIVALENTS X (31,725) (16,870)
CASH AND CASH EQUIVALENTS ,S$$
AT 1 APRIL =f 198,550 215,420
CASH AND CASH EQUIVALENTS ggdS$
AT 31 MARCH $=f 166,825 198,550
ANALYSIS OF THE BALANCE OF $$=f
CASH AND CASH EQUIVALENTS
Bank balances and cash$166,825 198,550
44
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
1. GENERAL
The Company is incorporated in Bermuda as an exempted
company with limited liability and its shares are listed on
The addresses of the registered office and
principal place of business of the Company are disclosed
in the corporate information included in the annual report.
The consolidated financial statements are presented in
Hong Kong dollars, which is also the functional currency
of the Company.
The Company is an investment holding company. The
principal activities of its subsidiaries and associate are
set out in notes 38 and 18 respectively.
2. BASIS OF PREPARATION
As at 31 March 2007, the Group has net current liabilities
of HK$33,589,000. The directors of the Company consider
that the consolidated financial statements have been
prepared on a going concern basis because the Group
has adequate funds to enable the Group to meet in full
its financial obligations as they fall due for the foreseeable
future after taking into account the future plans of the
Group and available banking facilities.
3. APPLICATION OF NEW AND REVISED HONG KONG
FINANCIAL REPORTING STANDARDS (“HKFRSs”)
In the current year, the Group has applied, for the first
time, a number of new standards, amendments and
interpretations (“new HKFRSs”) issued by the Hong Kong
Institute of Certified Public Accountants (“HKICPA”), which
are either effective for accounting periods beginning on
or after 1 December 2005, 1 January 2006 or 1 March
2006. The adoption of the new HKFRSs had no material
effect on how the results and financial position for the
current or prior accounting periods have been prepared
and presented. Accordingly, no prior period adjustment
has been required.
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tX33,589,000fI!
+d_GQIJ8
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b8"! 2007 5P
45
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
5c5^ \-L0S_
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I(Jd\ho1(J[
-_eLQfI!+k
d\_eLQZ6
I86K1 }Bf
3. APPLICATION OF NEW AND REVISED HONG KONG
FINANCIAL REPORTING STANDARDS (“HKFRSs”)
(Continued)
The Group has not early applied the following new
standards, amendments or interpretations that have been
issued but are not yet effective. The directors of the
Company anticipate that the application of these
standards, amendments or interpretations will have no
material impact on the results and the financial position
of the Group.
HKAS 1 (Amendment) Capital Disclosures
1
06_K1LI
1
HKAS 23 (Revised) Borrowing Costs
2
06_K23L>rI
2
HKFRS 7 Financial Instruments: Disclosures
1
0S_K7DHj
1
HKFRS 8 Operating Segments
2
0S_K8
2
HK(IFRIC)-Int 8 Scope of HKFRS 2
3
07SQp6QK80S_K2
3
HK(IFRIC)-Int 9 Reassessment of Embedded Derivatives
4
07SQp6QK9[H -Y
4
HK(IFRIC)-Int 10 Interim Financial Reporting and Impairment
5
07SQp6QK10S=
5
HK(IFRIC)-Int 11 HKFRS 2 – Group and Treasury Share Transactions
6
07SQp6QK110S_K2pt
6
HK(IFRIC)-Int 12 Service Concession Arrangements
7
07SQp6QK12$XD
7
1
Effective for annual periods beginning on or after 1 January
2007
2
Effective for annual periods beginning on or after 1 January
2009
3
Effective for annual periods beginning on or after 1 May
2006
4
Effective for annual periods beginning on or after 1 June
2006
5
Effective for annual periods beginning on or after 1
November 2006
6
Effective for annual periods beginning on or after 1 March
2007
7
Effective for annual periods beginning on or after 1 January
2008
1
G\ZggVSS
6
2
G\ZggXSS
6
3
G\ZggS
6
4
G\ZggS
6
5
G\ZggdSS
6
6
G\ZggVgS
6
7
G\Zgg^SS
6
46
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
4. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been
prepared in accordance with Hong Kong Financial
Reporting Standards issued by the HKICPA. In addition,
the consolidated financial statements include applicable
disclosures required by the Rules Governing the Listing
of Securities on the Stock Exchange and by the Hong
Kong Companies Ordinance.
The consolidated financial statements have been
prepared on the historical cost basis except for certain
properties and financial instruments, which are measured
at fair values, as appropriate and explained in the
accounting policies set out below.
Basis of consolidation
The consolidated financial statements incorporate the
financial statements of the Company and entities
controlled by the Company (its subsidiaries). Control is
achieved where the Company has the power to govern
the financial and operating policies of an entity so as to
obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during
the year are included in the consolidated income
statement from the effective date of acquisition or up to
the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting
policies in line with those used by other members of the
Group.
All intra-group transactions, balances, income and
expenses are eliminated on consolidation.
Minority interests in the net assets of consolidated
subsidiaries are presented separately from the Group’s
equity therein. Minority interests in the net assets consist
of the amount of those interests at the date of the original
business combination and the minority’s share of changes
in equity since the date of the combination. Losses
applicable to the minority in excess of the minority’s
interest in the subsidiary’s equity are allocated against
the interests of the Group except to the extent that the
minority has a binding obligation and is able to make an
additional investment to cover the losses.
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b8"! 2007 5P
47
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Interests in associates
An associate is an entity over which the investor has
significant influence and that is neither a subsidiary nor
an interest in a joint venture.
The results and assets and liabilities of associates are
incorporated in these consolidated financial statements
using the equity method of accounting. Under the equity
method, investments in associates are carried in the
consolidated balance sheet at cost as adjusted for post-
acquisition changes in the Group’s share of the net assets
of the associate, less any identified impairment loss. When
the Group’s share of losses of an associate equals or
exceeds its interest in that associate (which includes any
long-term interests that, in substance, form part of the
Group’s net investment in the associate), the Group
discontinues recognising its share of further losses. An
additional share of losses is provided for and a liability is
recognised only to the extent that the Group has incurred
legal or constructive obligations or made payments on
behalf of that associate.
Where a group entity transacts with an associate of the
Group, profits and losses are eliminated to the extent of
the Group’s interest in the relevant associate.
Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable
for goods and services provided in the normal course of
business, net of discounts and sales related taxes.
Sales of goods are recognised when goods are delivered
and title has passed.
Income for provision of after sale services is recognised
when the services are rendered.
Rental and management services income is recognised
on a straight-line basis over the term of the relevant lease.
Interest income from a financial asset is accrued on a
time basis, by reference to the principal outstanding and
at the effective interest rate applicable, which is the rate
that exactly discounts the estimated future cash receipts
through the expected life of the financial asset to that
asset’s net carrying amount.
5d5^ 6A
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f
48
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
5d5^ 6A
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/dJ82I<
\&f/d
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4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investment properties
On initial recognition, investment properties are measured
at cost, including any directly attributable expenditure.
Subsequent to initial recognition, investment properties
are measured using the fair value model. Gains or losses
arising from changes in the fair value of investment
property are included in profit or loss for the period in
which they arise.
An investment property is derecognised upon disposal
or when the investment property is permanently withdrawn
from use or no future economic benefits are expected
from its disposals. Any gain or loss arising on
derecognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying
amount of the asset) is included in the consolidated
income statement in the year in which the item is
derecognised.
Transfer from investment property to property, plant and
equipment will be made when there is a change in use,
evidenced by commencement of owner occupation.
Property interests held under operating lease previously
classified as an investment property is accounted for as
if it were a finance lease and measured under the fair
value model. The Group shall continue to account for the
lease as a finance lease, even if subsequent event
changes the nature of the property interest so that it is
no longer classified as investment property.
Property, plant and equipment
Property, plant and equipment other than construction in
progress are stated at cost less subsequent accumulated
depreciation and accumulated impairment losses.
Construction in progress represents buildings under
construction for production, which are stated at cost, less
any identified impairment loss. Construction in progress
is not depreciated until completion of construction and
the asset is put into intended use. The cost of completed
construction works is transferred to appropriate category
of property, plant and equipment.
b8"! 2007 5P
49
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property, plant and equipment (Continued)
Leasehold buildings and leasehold improvements are
depreciated on a straight-line basis over the remaining
term of the leases or at rates sufficient to write off their
cost over their estimated useful lives and after taking
into account of their estimated residual value, on a
straight-line basis, whichever is shorter.
Depreciation is provided to write off the cost of property,
plant and equipment, other than leasehold buildings and
leasehold improvements, over their estimated useful lives,
on a reducing balance basis.
Assets held under finance leases are depreciated over
their expected useful lives on the same basis as owned
assets or, where shorter, the term of the relevant lease.
An item of property, plant and equipment is derecognised
upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset.
Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal
proceeds and the carrying amount of the item) is included
in the consolidated income statement in the year in which
the item is derecognised.
When an item of property, plant and equipment is
transferred to investment property carried at fair value, if
the carrying amount is decreased as a result of a
revaluation at the date of transfer, any resulting decrease
in the carrying amount of the property is recognised in
profit or loss. If the carrying amount is increased, to the
extent that the increase reverses a previous impairment
loss for that property, the increase is recognised in profit
or loss. The amount recognised in profit or loss does not
exceed the amount needed to restore the carrying amount
to the carrying amount that would have been determined
(net of depreciation) had no impairment loss been
recognised. Any remaining part of the increase is credited
directly to equity (property revaluation reserve). On
subsequent disposal of the investment property, the
revaluation surplus included in equity may be transferred
to accumulated profits. The transfer from revaluation
surplus to accumulated profits is not made through profit
or loss.
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50
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Land use rights
Land use rights represent interest in land held under
operating lease arrangements and are amortised on a
straight-line basis over the lease terms.
Intangible assets
Research and development expenditure
Expenditure on research activities is recognised as an
expense in the period in which it is incurred.
An internally-generated intangible asset arising from
development expenditure is recognised only if it is
anticipated that the development costs incurred on a
clearly-defined project will be recovered through future
commercial activity. The resultant asset is carried at cost
less accumulated amortisation and any accumulated
impairment losses. Amortisation is provided to write off
the cost of development expenditure on a straight-line
basis over its estimated useful life of three years.
Where no internally-generated intangible asset can be
recognised, development expenditure is charged to profit
or loss in the period in which it is incurred.
Inventories
Inventories are stated at the lower of cost and net
realisable value. Cost comprises direct materials and,
where applicable, direct labour and those overheads that
have been incurred in bringing the inventories to their
present location and condition. Cost is calculated using
the first-in, first-out method. Net realisable value
represents the estimated selling price less all estimated
costs to completion.
Impairment
At each balance sheet date, the Group reviews the
carrying amounts of its assets to determine whether there
is any indication that those assets have suffered an
impairment loss. If the recoverable amount of an asset is
estimated to be less than its carrying amount, the carrying
amount of the asset is reduced to its recoverable amount.
An impairment loss is recognised as an expense
immediately.
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b8"! 2007 5P
51
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
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4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Impairment (Continued)
Where an impairment loss subsequently reverses, the
carrying amount of the asset is increased to the revised
estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying
amount that would have been determined had no
impairment loss been recognised for the asset in prior
years. A reversal of an impairment loss is recognised as
income immediately.
Financial instruments
Financial assets and financial liabilities are recognised
in the consolidated balance sheet when a group entity
becomes a party to the contractual provisions of the
instrument. Financial assets and financial liabilities are
initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue of financial
assets and financial liabilities are added to or deducted
from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition.
Financial assets
Loans and receivables
Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted
in an active market. At each balance sheet date
subsequent to initial recognition, loans and receivables
(including long-term bank deposit, trade and other
receivables and bank balances) are carried at amortised
cost using the effective interest method, less any
identified impairment losses. An impairment loss is
recognised in profit or loss when there is objective
evidence that the asset is impaired, and is measured as
the difference between the asset’s carrying amount and
the present value of the estimated future cash flows
discounted at the effective interest rate at initial
recognition. Impairment losses are reversed in
subsequent periods when an increase in the asset’s
recoverable amount can be related objectively to an event
occurring after the impairment was recognised, subject
to a restriction that the carrying amount of the asset at
the date the impairment is reversed does not exceed the
amortised cost that would have been had the impairment
not been recognised.
52
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Available-for-sale financial assets
Available-for-sale financial assets, are non-derivatives that
are either designated or not classified as loans and
receivables, held-to-maturity investments or financial
assets at fair value through profit or loss, are recognised
and derecognised on a trade date basis where the
purchase or sale of an investment is under a contract
whose terms require delivery of the investment within the
timeframe established by the market concerned. At each
balance sheet date subsequent to initial recognition,
available-for-sale financial assets are measured at fair
value. Changes in fair value are recognised in equity,
until the financial asset is disposed of or is determined
to be impaired, at which time, the cumulative gain or
loss previously recognised in equity is removed from
equity and recognised in profit or loss for the period.
Any impairment losses on available-for-sale financial
assets are recognised in profit or loss. Impairment losses
on available-for-sale equity investments will not reverse
in profit or loss in subsequent periods.
Financial liabilities and equity
Financial liabilities and equity instruments issued by a
group entity are classified according to the substance of
the contractual arrangements entered into and the
definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a
residual interest in the assets of the Group after deducting
all of its liabilities. The accounting policies adopted in
respect of financial liabilities and equity instruments are
set out below.
Financial liabilities
Financial liabilities including trade and other payables,
bank and other borrowings and obligations under finance
leases are subsequently measured at amortised cost,
using the effective interest method.
Equity instruments
Equity instruments issued by the Company are recorded
at the proceeds received, net of direct issue costs.
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b8"! 2007 5P
53
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
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4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Derecognition
Financial assets are derecognised when the rights to
receive cash flows from the assets expire or, the financial
assets are transferred and the Group has transferred
substantially all the risks and rewards of ownership and
control of the financial assets. On derecognition of a
financial asset, the difference between the asset’s
carrying amount and the sum of the consideration
received and the cumulative gain or loss that had been
recognised directly in equity is recognised in profit or
loss.
For financial liabilities, they are removed from the Group’s
consolidated balance sheet (i.e. when the obligation
specified in the relevant contract is discharged, cancelled
or expires). The difference between the carrying amount
of the financial liability derecognised and the
consideration paid or payable is recognised in profit or
loss.
Leases
Leases are classified as finance leases whenever the
terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are
classified as operating leases.
The Group as lessee
Assets held under finance leases are recognised as
assets of the Group at their fair value at the inception of
the lease or, if lower, at the present value of the minimum
lease payments. The corresponding liability to the lessor
is included in the consolidated balance sheet as a finance
lease obligation. Lease payments are apportioned
between finance charges and reduction of the lease
obligation so as to achieve a constant rate of interest on
the remaining balance of the liability. Finance charges
are charged directly to profit or loss.
Rentals payable under operating leases are charged to
profit or loss on a straight-line basis over the term of the
relevant lease. Benefits received and receivable as an
incentive to enter into an operating lease are recognised
as a reduction of rental expense over the lease term on a
straight-line basis.
54
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
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4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Foreign currencies
The individual financial statements of each group entity
are presented in the currency of the primary economic
environment in which the entity operates (its functional
currency).
In preparing the financial statements of each individual
group entity, transactions in currencies other than the
functional currency of that entity (foreign currencies) are
recorded in its functional currency (i.e. the currency of
the primary economic environment in which the entity
operates) at the rates of exchanges prevailing on the
dates of the transactions. At each balance sheet date,
monetary items denominated in foreign currencies are
retranslated at the rates prevailing on the balance sheet
date. Non-monetary items carried at fair value that are
denominated in foreign currencies are retranslated at the
rates prevailing on the date when the fair value was
determined. Non-monetary items that are measured in
terms of historical cost in a foreign currency are not
retranslated.
Exchange differences arising on the settlement of
monetary items, and on the translation of monetary items,
are recognised in profit or loss in the period in which
they arise.
For the purposes of presenting the consolidated financial
statements, the assets and liabilities of the Group’s foreign
operations are translated into the presentation currency
of the Company (i.e. Hong Kong dollars) at the rate of
exchange prevailing at the balance sheet date, and their
income and expenses are translated at the average
exchange rates for the year, unless exchange rates
fluctuate significantly during the year, in which case, the
exchange rates prevailing at the dates of the transactions
are used. Exchange differences arising, if any, are
recognised as a separate component of equity (the
exchange reserve). Such exchange differences are
recognised in profit or loss in the period in which the
foreign operation is disposed of.
b8"! 2007 5P
55
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, are
capitalised as part of the cost of those assets.
Capitalisation of such borrowing costs ceases when the
assets are substantially ready for their intended use or
sale. Investment income earned on the temporary
investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the
borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss
in the period in which they are incurred.
Taxation
Income tax expense represents the sum of the tax
currently payable and deferred taxation.
The tax currently payable is based on taxable profit for
the year. Taxable profit differs from profit as reported in
the consolidated income statement because it excludes
items of income or expense that are taxable or deductible
in other years and it further excludes items that are never
taxable or deductible. The Group’s liability for current
tax is calculated using tax rates that have been enacted
or substantively enacted by the balance sheet date.
Deferred taxation is recognised on differences between
the carrying amounts of assets and liabilities in the
consolidated financial statements and the corresponding
tax bases used in the computation of taxable profit, and
is accounted for using the balance sheet liability method.
Deferred taxation liabilities are generally recognised for
all taxable temporary differences and deferred taxation
assets are recognised for all deductible temporary
differences to the extent that it is probable that taxable
profits will be available against which the deductible
temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference
arises from goodwill or from the initial recognition (other
than in a business combination) of other assets and
liabilities in a transaction that affects neither the taxable
profit nor the accounting profit.
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56
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Taxation (Continued)
The carrying amount of deferred taxation assets is
reviewed at each balance sheet date and reduced to the
extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to
be recovered.
Deferred taxation is calculated at the tax rates that are
expected to apply in the period when the liability is settled
or the asset is realised. Deferred taxation is charged or
credited to profit or loss, except when it relates to items
charged or credited directly to equity, in which case the
deferred taxation is also dealt with in equity.
Retirement benefit costs
The Group operates a defined contribution Mandatory
Provident Fund Scheme (the “MPF Scheme”) under the
Hong Kong Mandatory Provident Fund Schemes
Ordinance, for all its employees in Hong Kong. Payment
to the MPF Scheme is charged as expenses when
employees have rendered service entitling them to the
contributions.
In addition, the Group’s contributions to a local municipal
government retirement scheme in the People’s Republic
of China (the “PRC”) are expensed when employees have
rendered service entitling them to the contributions while
the local municipal government in the PRC undertakes to
assume the retirement benefit obligations of all existing
and future retirees of the qualified staff in the PRC.
Share-based payments
Share options granted to employees of the Group
Share options granted after 7 November 2002 and
vested before 1 January 2005
The financial impact of share options granted is not
recorded in the Group’s consolidated balance sheet until
such time as the options are exercised, and no charge is
recognised in the consolidated income statement in
respect of the value of options in the year. Upon the
exercise of the share options, the resulting shares issued
are recorded by the Company as additional share capital
at the nominal value of the shares and the excess of the
exercise price per share over the nominal value of the
share is recorded by the Company as share premium.
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b8"! 2007 5P
57
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
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4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Share-based payments (Continued)
Share options granted to employees of the Group
(Continued)
Share options granted after 7 November 2002 and
vested after 1 January 2005 (Continued)
The fair value of services received determined by
reference to the fair value of share options granted at
the grant date is expensed on a straight-line basis over
the vesting period, with a corresponding increase in
equity (share options reserve).
At each balance sheet date, the Group revises its
estimates of the number of options that are expected to
ultimately vest. The effect of the change in estimate, if
any, is recognised in profit or loss with a corresponding
adjustment to share options reserve.
At the time when the share options are exercised, the
amount previously recognised in share options reserve
will be transferred to share premium. When the share
options are forfeited after the vesting date or are still not
exercised at the expiry date, the amount previously
recognised in share options reserve will be transferred
to accumulated profits.
5. KEY SOURCES OF ESTIMATION UNCERTAINTY
In the process of applying the Group’s accounting policies
described in note 4, management makes various
estimations based on past experiences, expectations of
the future and other information. The key source of
estimation uncertainty that may significantly affect the
amounts recognised in the consolidated financial
statements is disclosed below:
Investment properties
Note 4 describes that investment properties are measured
using the fair value model. The fair values of the Group’s
investment properties are arrived at on the basis of a
valuation performed by independent professional valuers.
In determining the fair value, the valuers have based on
a method of valuation which involves certain estimates.
In relying on the valuation report, the management has
exercised its judgment and is satisfied that the method
of valuation is reflective of the current market conditions.
58
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
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5. KEY SOURCES OF ESTIMATION UNCERTAINTY
(Continued)
Trade receivables
Note 4 describes that trade receivables are measured at
initial recognition at fair value, and are subsequently
measured at amortised cost using the effective interest
method. An impairment loss is recognised in profit and
loss when there is objective evidence that the asset is
impaired.
In making the judgment, management considered detailed
procedures have been in place to monitor this risk as a
significant proportion of the Group’s investment for
working capital is devoted to trade receivables. In
determining whether there is objective evidence of
impairment, the Group takes into consideration estimation
of future cash flows.
Taxation
As described in note 10, a subsidiary of the Group is
making application to appeal against the decision of the
Board of Review. In case the subsidiary succeeds in the
appeal, a material reversal of taxation payable may arise,
which would be recognised in the consolidated income
statement for the period in which such a reversal takes
place.
6. FINANCIAL INSTRUMENTS
a. Financial risk management objectives and policies
The Group’s major financial instruments include long-
term bank deposit, trade and other receivables, bank
balances and cash, trade and other payables, bank
and other borrowings and obligations under finance
leases. Details of these financial instruments are
disclosed in respective notes. The risks associated
with these financial instruments and the policies on
how to mitigate these risks are set out below. The
management manages and monitors these exposures
to ensure appropriate measures are implemented
on a timely and effective manner.
Currency risk
The majority of the Group’s sales and purchases,
trade and other receivables/payables and bank and
other borrowings are denominated in functional
currency (HK dollars) and US dollars. As HK dollars
and US dollars are pegged, the Group has minimum
exposure to foreign exchange fluctuation.
b8"! 2007 5P
59
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
6. FINANCIAL INSTRUMENTS (Continued)
a. Financial risk management objectives and policies
(Continued)
Credit risk
The maximum exposure to credit risk which will
cause a financial loss for the Group due to failure to
discharge an obligation as at 31 March 2007 by the
counterparties is arising from the carrying amount
of the respective recognised financial assets as
stated in the consolidated balance sheet. In order
to minimise credit risk in relation to trade receivables,
management of the Group monitors closely the
recoverable amount of each individual debt. In this
regard, the directors of the Company consider that
the Group’s credit risk is significantly reduced.
The credit risk in relation to bank balances is limited
because the majority of the counterparties are
financial institutions with high credit-ratings assigned
by international credit-rating agencies.
Credit risk is concentrated to a small number of
debtors. However, the management considers,
based on the strong financial background and/or
the good creditability of debtors, there are no
significant credit risk.
Cash flow interest rate risk
The Group’s cash flow interest rate risk primarily
relates to bank balances and bank and other
borrowings (see note 26). The management of the
Group monitors the related interest rate risk exposure
closely and will consider hedging significant interest
rate risk exposure should the need arises.
Liquidity risk
The Group’s policy is to regularly monitor current
and expected liquidity requirements to ensure that it
maintains sufficient reserves of cash and adequate
committed lines of funding from financial institutions
to meet its liquidity requirements in the short and
longer term.
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60
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
6. FINANCIAL INSTRUMENTS (Continued)
b. Fair value
The fair value of financial assets and financial
liabilities are determined as follows:
• the fair value of financial assets with standard
terms and conditions and traded on active liquid
markets are determined with reference to quoted
market bid prices; and
• the fair value of other financial assets and
financial liabilities are determined in accordance
with generally accepted pricing models based
on discounted cash flow analysis or using prices
from observable current market transactions.
The directors consider that the carrying amounts of
financial assets and financial liabilities recorded at
amortised cost in the consolidated financial
statements approximate their fair values.
7. BUSINESS AND GEOGRAPHICAL SEGMENTS
(a) Business segments
For management purposes, the Group is currently
organised into two operating divisions – electronics
manufacturing services business (“EMS business”)
and property investment.
These divisions are the basis on which the Group
reports its primary segment information.
The EMS business is engaged in design,
manufacture and sale of electronic and electrical
products while property investment is engaged in
property rental and provision of management
services.
5f5^ DH
55^ ;=
DD;=Q
hj
hmz_(z
9tD;=
9>i
hIDD
;=2|]
Y$9t
h$$t>f
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DD&
=~I;=f
5g5^ 8
5X55Y 8
1M#dIf_G
8\d9e8
EMS8J8f
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?_f
EMS8}+eV/e
e8dJ8}
+J8a#d6M#f
b8"! 2007 5P
61
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
Property
EMS business investment Eliminations Consolidated
5u5}58 J8 V ]
HK$’000 HK$’000 HK$’000 HK$’000
w w w w
Turnover8X3,643,161 11,765 – 3,654,926
Result86
Segment result863,213 61,193 64,406
Interest income;]5,071
Other rental incomeIa]1,299
Finance costsDI(37,190)
Share of results of associates&L!86574
Unallocated incomeJ]1,543
Profit before taxationP;35,703
Taxation(22,621)
Profit for the yearIP;13,082
7. BUSINESS AND GEOGRAPHICAL SEGMENTS
(Continued)
(a) Business segments (Continued)
Segment information about these businesses is
presented below:
Year 2007
(i) Consolidated income statement
5g5^ 8
5X55Y 8
8Ohj
ZggV
(i)]B
Property
EMS business investment Consolidated
5u5}58 J8 ]
HK$’000 HK$’000 HK$’000
w w w
Assets
Segment assets1,633,939 479,038 2,112,977
Interests in associatesL!B1,641
Unallocated assetsJ214,306
2,328,924
Liabilities
Segment liabilities367,872 24,737 392,609
Unallocated liabilitiesJ855,436
1,248,045
(ii) Consolidated balance sheet (ii)]
62
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
Property
EMS business investment Consolidated
5u5}58 J8 ]
HK$’000 HK$’000 HK$’000
w w w
Capital expenditureI124,855 6,677 131,532
Depreciation and amortisationV99,678 – 99,678
Loss on disposal of property,/J8e@
plant and equipmentf&686 – 686
Increase in fair value ofJ8;=#
investment properties – 57,519 57,519
7. BUSINESS AND GEOGRAPHICAL SEGMENTS
(Continued)
(a) Business segments (Continued)
Year 2007 (Continued)
(iii) Other information
5g5^ 8
5X55Y 8
ZggV
(iii)I
Property
EMS business investment Eliminations Consolidated
EMS8J8V]
HK$’000 HK$’000 HK$’000 HK$’000
wwww
(Restated)
Turnover8X2,836,171 8,598 (1,424) 2,843,345
Result86
Segment result863,609 36,699 40,308
Interest income;]4,729
Other rental incomeIa]1,142
Finance costsDI(26,907)
Share of results of associates&L!862,179
Unallocated incomeJ]2,791
Profit before taxationP;24,242
Taxation(11,104)
Profit for the yearIP;13,138
Year 2006
(i) Consolidated income statement
Zgg
(i)]B
b8"! 2007 5P
63
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
Property
EMS business investment Consolidated
EMS8J8]
HK$’000 HK$’000 HK$’000
www
Assets
Segment assets1,785,288 188,604 1,973,892
Interests in associatesL!B20,107
Unallocated assetsJ269,684
2,263,683
Liabilities
Segment liabilities361,948 1,730 363,678
Unallocated liabilitiesJ826,041
1,189,719
7. BUSINESS AND GEOGRAPHICAL SEGMENTS
(Continued)
(a) Business segments (Continued)
Year 2006 (Continued)
(ii) Consolidated balance sheet
5g5^ 8
5X55Y 8
Zgg
(ii)]
Property
EMS business investment Consolidated
EMS8J8]
HK$’000 HK$’000 HK$’000
www
Capital expenditureI147,849 34 147,883
Depreciation and amortisationV103,568 – 103,568
Impairment loss of intangible=f&
assets 7,359 – 7,359
Increase in fair value ofJ8;=#
investment properties – 33,142 33,142
(iii) Other information (iii)I
64
NGAI LIK INDUSTRIAL HOLDINGS LIMITED ANNUAL REPORT 2007
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
Turnover
8X
2007 2006
ZggVZgg
HK$’000 HK$’000
ww
(Restated)
Americar2,869,928 2,012,109
Europer461,226 529,586
Asia-r185,076 173,537
OthersI138,696 128,113
3,654,926 2,843,345
7. BUSINESS AND GEOGRAPHICAL SEGMENTS
(Continued)
(b) Geographical segments
The following table provides an analysis of the
Group’s sales by geographical market, irrespective
of the origin of the goods manufactured or services
rendered:
5g5^ 8
5X55Y
hW29IV/
Xd~[d
69j
All the Group’s assets and capital expenditure
incurred during the year are located in the Greater
China, which is considered as one geographical
location in an economic environment with similar risks
and return. Consequently, no geographical segment
asset analysis is presented.
8. FINANCE COSTS
I[I
i[6[Oq7dWI,
'SHf
(Of
5h5^ DI
2007 2006
ZggVZgg
HK$’000 HK$’000
ww
Interest on bank and other borrowingsp
wholly repayable within five yearsI>r;(37,961) (28,248)
Finance leases chargesDal\(178) (24)
(38,139) (28,272)
Less: Interest capitalised in constructionjI
in progress;949 1,365
(37,190) (26,907)
b8"! 2007 5P
65
Notes to the Consolidated Financial Statements]fW
For the year ended 31 March 2007
ZggVggdS
2007 2006
ZggVZgg
HK$’000 HK$’000
ww
Profit before taxation has been arrivedP;]
at after charging (crediting):hj
Directors’ emoluments (note 11)+GW116,965 7,339
Contributions to retirement benefi