Playmates Holdings Limited
C M Y K
Playmates Holdings Limited
(Incorporated in Bermuda with limited liability)
(Stock code : 635)
www.playmates.net
www.playmatestoys.com
1
The following trademarks and copyrights are used in the context of this report:
Teenage Mutant Ninja Turtles and TMNT are registered trademarks of Mirage Studios, Inc. All rights
reserved. • Universal Studios’ King Kong Movie 2005 Universal Studios. Licensed by Universal Studios
Licensing LLLP. All rights reserved. • Battle Dice™ is a trademark of Genie Toys PLC. Battle Dice 2005
Genie Toys PLC. Used under license by Playmates Toys Inc. All rights reserved. • Strawberry
Shortcake™ and related trademarks 2006 Those Characters From Cleveland, Inc. Used under license by
Playmates Toys Inc. • Disney Disney • Disney Fairies Disney. All rights reserved. • Popples™ related
trademarks and character designs 2006 Those Characters From Cleveland, Inc. Used under license by
Playmates Toys Inc. All rights reserved. • American Greetings 2006 AGC, Inc. All rights reserved. •
Land Before Time and related characters are trademarks and copyrights of Universal Studios and U-
Drive Productions, Inc. Licensed by Universal Studios Licensing LLLP. Used with permission. All rights
reserved. • Universal Studios Universal Studios. All rights reserved. • WOW Pals™ is a trademark of
Playmates Toys Inc. All rights reserved. • Amazing McKayla™ Playmates Toys Inc. All rights reserved. •
Amazing Lexie™ Playmates Toys Inc. All rights reserved. • Amazing Amanda™ Playmates Toys Inc. All
rights reserved. • Blade, the Skate ’n Tricks Puppy™ Playmates Toys Inc. All rights reserved. •
Twentieth Century Fox™ and Twentieth Century Fox Film Corporation. All rights reserved. • Belle
Disney • Tinker Bell Disney. All rights reserved. • Cartoon Network™ is a trademark of Cartoon
Network. 2006 Cartoon Network. • Playmates Electronics™ is a trademark of Playmates T
| CONTENTS |
| Management Discussion and Analysis 2 |
| Highlights 2 |
| Toy Business 2 |
| Property and Other Investments 5 |
| Condensed Financial Information 6 |
| Condensed Consolidated Income Statement 6 |
| Condensed Consolidated Balance Sheet 7 |
| Condensed Consolidated Statement of Changes in Equity 9 |
| Condensed Consolidated Cash Flow Statement 10 |
| Notes to the Condensed Financial Information 11 |
| Information Provided in Accordance with the Listing Rules 21 |
| Corporate Information 28 |
2
MANAGEMENT DISCUSSION AND ANALYSIS
Highlights
2007 2006
For the six months ended 30 June
HK$’000 HK$’000
Group turnover 376,133 338,837
– from toy business 347,579 317,579
– from property investment & associated business 28,554 21,258
Gross profit 192,879 165,327
Revaluation surplus on investment properties 105,474 167,931
Operating profit 105,056 135,585
Profit before taxation 145,089 142,432
Profit attributable to shareholders 119,162 125,105
Earnings per share HK cents HK cents
– Basic 5.99 6.69
– Diluted 5.91 6.64
Interim dividend per share 2.00 2.00
Toy Business
Playmates Toys worldwide sales during the first half of 2007 were HK$348 million,
an increase of 9% over the same period last year. The increase was attributable to a
42% growth in our international business, realized through the continued expansion
into Latin America and Eastern Europe combined with growth in Teenage Mutant
Ninja Turtles (“Turtles”) worldwide. According to trade statistics, overall industry
year-to-date (June 2007) retail sales in the U.S. increased by 3% over 2006, led by
strong growth in the vehicle, plush, arts and crafts, and youth electronics categories.
Industry sales in the doll category were flat, while those in action figure category
was down by 4%. For the first half of 2007, Playmates Toys’ U.S. sales were flat
compared to the same period last year.
Gross profit ratio on toy sales was 47% during the first half of 2007 (45% during the
same period in 2006). This increase is attributable to sales mix favoring higher
margin products, and lower research and development expenses during the period.
Consistent with Playmates Toys’ operating strategy, recurring operating expenses
were maintained at similar levels as the same period last year. Segment operating
loss was HK$10 million, a HK$22 million improvement over the same period last
year, resulting from the increase in sales, higher gross profit and lower marketing
expenditure.
Strong worldwide sales of Turtles, propelled by the launch of the movie TMNT,
drove the first half sales increase. This increase was partially offset by the
discontinuation of the King Kong and Battle Dice product lines which had
contributed to sales in the first half of 2006. Overall sales of Playmates Toys’ girls
brands, including Strawberry Shortcake, Disney Princess and Disney Fairies,
although lower than the same period last year, remained strong and were in line with
the current year plan of launching major brand extensions in the fall.
3
New brand introductions and major brand extensions scheduled for the fall include
Popples, the well-recognized American Greetings brand; Land Before Time, a
Universal Studios preschool brand that has entertained kids worldwide for over a
decade; an expanded Amazing family of dolls, and WOW Pals, Playmates Toys’
proprietary feature plush brand.
Brand Overview
The successful TMNT movie launch, together with the ongoing programming of
new episodes of the Fast Forward animated television series, combined with the
anticipated DVD release of the TMNT feature film in the fall of 2007 are expected
to maintain continued interest in the Turtles franchise.
This fall, new girls toy introductions will be led by extensions to the successful
Amazing family of dolls and WOW Pals feature plush brand. The Amazing brand
will grow with the introduction of Amazing McKayla, a smart baby doll and
Amazing Lexie, a unique talking fashion puppy. Internationally, by fall 2007,
Amazing Amanda will be available in eleven different languages, including
Mandarin for the Mainland China market. A new Blade, the Skate ’n Tricks Puppy
joins the other WOW Pals this fall, further expanding our proprietary feature plush
brand of one-of-a-kind play pals.
Since the introduction of our new-look Strawberry Shortcake line of dolls in 2006,
distribution has expanded both in the U.S. and internationally. Twentieth Century
Fox plans to release three additional direct-to-video DVDs in 2007. These are
expected to continue to drive this ever-popular girl’s brand.
Our line of Disney Princess dolls and accessories are joined this fall by Tea Time
Belle, an interactive Princess Belle that plays tea party with the little girl. This
unique feature position will be television advertised and be the driver for the brand
in 2007.
In 2006, Disney Consumer Products appointed Playmates Toys as their master toy
partner for their newest girls publishing and entertainment franchise, Disney
Fairies. Disney has identified Disney Fairies as one of their most important new
girls branding initiatives. Disney plans to release four new Disney Fairies films/
DVDs beginning in 2008 with Tinker Bell, the fairy recognized worldwide, and her
friends.
This fall, Playmates Toys will introduce the revitalized Popples brand from
American Greetings, a category leader in the mid-1980s. Playmates Toys will be
adding new character designs along with interactive elements to contemporize and
broaden the brand’s appeal. Also in fall 2007, Playmates Toys will enter the
preschool category by launching Land Before Time, a classic preschool franchise
from Universal Studios built on a strong heritage of twelve years of home video
entertainment, and all-new animated television programming on Cartoon Network.
4
Playmates Toys’ long term growth strategy of portfolio expansion and category
diversification remains in place. In the second half of 2007, Playmates Toys will
expand its offerings in feature plush and preschool, while in 2008 Playmates Toys
will introduce new action figure brands, expand into the girls fashion doll segment
and enter the youth electronics category, under the Playmates Electronics banner.
We are finalizing our 2008 product line to be introduced at the annual October toy
fairs to be held in Hong Kong and Dallas.
Proposed Spin-Off and Separate Listing
The Board of Directors of the Company considered that it is in the best interest of
the Company to pursue a spin-off and separate listing of its toy business, which
could bring a number of benefits to the Group, including the facilitation of market
valuation of the Group’s principal business segments, and the enhancement of the
profile of the Group’s toy business as a standalone public group and its ability to
pursue its strategic plans.
The Board announced on 27 April 2007 that it is proposing a possible spin-off and
separate listing of the toy business of the Group on the Main Board of The Stock
Exchange of Hong Kong Limited (the “Stock Exchange”) and had submitted on that
day a proposal to the Stock Exchange pursuant to Practice Note 15 of the Listing
Rules.
A further announcement was made by the Board on 23 July 2007 that the Stock
Exchange has granted its approval to the Company to proceed with the proposed
spin-off and on 20 July 2007, Playmates Toys Limited, as the holding company of
the Group’s toy business, had submitted an advance booking form for an application
for the listing of, and permission to deal in, the shares of Playmates Toys Limited
on the Main Board of the Stock Exchange.
As the listing of the shares of Playmates Toys Limited pursuant to the proposed
spin-off is subject to, amongst other things, the approval of the Listing Committee
of the Stock Exchange, the final decision of the Board and the board of directors of
Playmates Toys Limited, the proposed spin-off may or may not proceed, and
shareholders of the Company and public investors are advised to exercise caution
when dealing in the securities of the Company.
Further announcements will be made to update shareholders of the Company and
public investors on the proposed spin-off as and when appropriate.
5
Property and Other Investments
Rental and management income from the Group’s investment properties for the
period was HK$29 million, an increase of 34% from the same period a year ago.
Segment operating profit was HK$124 million (including revaluation surplus of
HK$105 million), compared to HK$181 million (including revaluation surplus of
HK$168 million) in the same period last year. The overall occupancy rate
maintained at a high level during the period under review.
Rental income generated by the principal property at 100 Canton Road recorded a
growth of approximately 25% during the period. The significant increase in rental
income was attributable to higher average rental rates for leases signed in the
second half of 2006 and early 2007 than the rates of expired leases. During the
period, one floor previously occupied by office tenant was leased to a beauty and
skin treatment specialist and further expanded the spectrum of spa and beauty
services at 100 Canton Road. With the completion of the enhancement program,
management is confident to optimize and further improve the tenant mix of this
principal investment property.
Rental income generated by the residential properties at MacDonnell Road recorded
a growth of 85% during the period. The significant increase in rental income was
mainly due to the improvement in rental yields from new leases as a result of the
ongoing refurbishment and upgrade program carried out since the acquisition in
2006.
The Group has adopted the fair value method for its investment properties. As at the
end of the period under review, the investment properties of the Group were
revalued by an independent professional surveyor. A valuation surplus of HK$105
million was reported in the consolidated income statement of the Group for the
period.
With the continued growth of the local and regional economy, management remains
confident in the medium to long term prospects of its property investment and
associated business which will continue to form an important segment of the
activities of the Group.
The Group’s other investment activities include managing a portfolio of cash, bank
deposits and various financial instruments. As at 30 June 2007, the aggregate value
of the Group’s investment portfolio was approximately HK$821 million (31
December 2006: HK$501 million), a high proportion of which, HK$299 million (31
December 2006: HK$170 million) was cash and bank deposits, and total outstanding
bank loan was approximately HK$61 million (31 December 2006: HK$108 million).
Net contributions from interest income, interest expense and bank charges, dividend
income from investments and net gain on investments during the period was
approximately HK$40 million compared to HK$7 million during the same period
last year. Going forward, however, and in view of the volatility in capital markets
across the globe, future earnings from investments may be uncertain.
6
CONDENSED FINANCIAL INFORMATION
Condensed Consolidated Income Statement
For the six months ended 30 June 2007
Unaudited
Six months ended 30 June
2007 2007 2006
Note US$’000 HK$’000 HK$’000
(Note 16)
Turnover 2 48,222 376,133 338,837
Cost of sales (23,494) (183,254) (173,510)
Gross profit 24,728 192,879 165,327
Marketing expenses (10,195) (79,525) (92,840)
Selling, distribution and
administration expenses (14,586) (113,772) (104,833)
Revaluation surplus on
investment properties 13,522 105,474 167,931
Operating profit 13,469 105,056 135,585
Non-operating income/(expenses)
Interest expense and
bank charges (481) (3,750) (2,012)
Other revenues 836 6,521 7,602
Net gain on investments 4,811 37,528 1,056
18,635 145,355 142,231
Share of profits less losses of
associated companies (34) (266) 201
Profit before taxation 3 18,601 145,089 142,432
Taxation 4 (3,324) (25,927) (17,327)
Profit attributable to
shareholders 15,277 119,162 125,105
Dividend 5 5,705 44,501 37,399
US cents HK cents HK cents
Earnings per share 6
Basic 0.77 5.99 6.69
Diluted 0.76 5.91 6.64
7
Condensed Consolidated Balance Sheet
As at 30 June 2007 and 31 December 2006
Unaudited Unaudited Audited
30 June 30 June 31 December
2007 2007 2006
Note US$’000 HK$’000 HK$’000
(Note 16)
Non-current assets
Fixed assets
– Investment properties 7 166,128 1,295,800 1,198,700
– Other property, plant
and equipment 7 5,756 44,893 37,117
– Prepaid premium on
leasehold land held for
own use under an
operating lease 7 7,917 61,755 48,102
179,801 1,402,448 1,283,919
Goodwill 766 5,976 5,976
Investment in associated
companies 4,253 33,170 34,836
Deferred tax assets 9,489 74,017 80,152
194,309 1,515,611 1,404,883
Current assets
Inventories 6,271 48,917 49,470
Trade receivables 8 15,615 121,794 353,999
Other receivables, deposits
and prepayments 9,449 73,699 65,492
Taxation recoverable 404 3,151 2,023
Financial assets at fair
value through profit or loss 66,964 522,320 331,204
Cash and bank balances 38,310 298,821 170,015
137,013 1,068,702 972,203
8
Unaudited Unaudited Audited
30 June 30 June 31 December
2007 2007 2006
Note US$’000 HK$’000 HK$’000
(Note 16)
Current liabilities
Bank loans 9 7,796 60,808 107,542
Trade payables 10 6,309 49,209 92,585
Other payables and
accrued charges 11,572 90,263 163,906
Provisions 3,433 26,780 49,260
Taxation payable 386 3,009 1,317
29,496 230,069 414,610
Net current assets 107,517 838,633 557,593
Total assets less
current liabilities 301,826 2,354,244 1,962,476
Non-current liabilities
Bank loans 9 ––276
Deferred tax liabilities 14,535 113,376 94,090
14,535 113,376 94,366
Net assets 287,291 2,240,868 1,868,110
Financed by:
Share capital 11 28,526 222,504 187,108
Reserves 253,060 1,973,863 1,587,448
Proposed dividend 5 5,705 44,501 93,554
Shareholders’ funds 287,291 2,240,868 1,868,110
9
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2007
Unaudited
Employee
Capital Reserve share-based Exchange
Share Share redemption on compensation fluctuation Retained
capital premium reserve consolidation reserve reserve profits Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 2006 186,766 742,234 1,116 21,082 16,901 – 711,994 1,680,093
Issue of shares 3 61 – – – – – 64
Share issuing expenses – (391) – – – – – (391)
2005 final dividend paid – – – – – – (46,744) (46,744)
Profit for the period – – – – – – 125,105 125,105
Exchange fluctuation – – – – – (1,634) – (1,634)
Employees share
option scheme
– value of employee
services – – – – 6,572 – – 6,572
– shares issued 224 567 – – (100) – – 691
– option lapsed – – – – (236) – 236 –
At 30 June 2006 186,993 742,471 1,116 21,082 23,137 (1,634) 790,591 1,763,756
At 1 January 2007 187,108 742,966 1,116 21,082 26,082 – 889,756 1,868,110
Issue of shares 34,515 320,987 – – – – – 355,502
2006 final dividend paid – – – – – – (65,743) (65,743)
2006 special dividend paid – – – – – – (43,829) (43,829)
Profit for the period – – – – – – 119,162 119,162
Employees share
option scheme
– value of employee
services – – – – 2,812 – – 2,812
– shares issued 881 5,255 – – (1,282) – – 4,854
– option lapsed – – – – (321) – 321 –
At 30 June 2007 222,504 1,069,208 1,116 21,082 27,291 – 899,667 2,240,868
10
Condensed Consolidated Cash Flow Statement
For the six months ended 30 June 2007
Unaudited
Six months ended 30 June
2007 2007 2006
US$’000 HK$’000 HK$’000
(Note 16)
Net cash generated from
operating activities 11,267 87,883 66,489
Net cash used in investing activities (20,878) (162,851) (256,973)
Net cash generated from/(used in)
financing activities 26,124 203,774 (65,847)
Net increase/(decrease) in cash
and cash equivalents 16,513 128,806 (256,331)
Cash and cash equivalents at 1 January 21,797 170,015 443,954
Effect of foreign exchange rate changes ––(105)
Cash and cash equivalents at 30 June 38,310 298,821 187,518
Analysis of cash and cash equivalents
Cash and bank balances 38,310 298,821 187,518
11
Notes to the Condensed Financial Information
1 Basis of preparation and accounting policies
This condensed consolidated financial information has been prepared in
accordance with the applicable disclosure requirements of Appendix 16 to the
Rules Governing the Listing of Securities on
This condensed consolidated financial information should be read in
conjunction with the 2006 annual financial statements.
The accounting policies and methods of computation used in the preparation of
this condensed consolidated financial information are consistent with those
used in the annual financial statements for the year ended 31 December 2006.
The Group has not applied any new standards or interpretation that is not yet
effective for the current accounting period. The Group has already commenced
an assessment of the impact of these new standards and interpretations but is
not yet in a position to state whether they would significantly impact on its
results of operations and financial position.
2 Segment information
The Group is principally engaged in the design, development, marketing and
distribution of toys and family entertainment activity products, and property
investment and management.
Business segments
An analysis of the Group’s turnover and results for the period by business
segments is as follows:
Six months ended 30 June 2007
Property
investment and
Toy associated
business business Elimination Group
HK$’000 HK$’000 HK$’000 HK$’000
Revenue
Turnover 347,579 28,554 – 376,133
Inter-segment revenue
(Note iii) – 185 (185) –
347,579 28,739 (185) 376,133
Results
Segment results (9,412) 123,607 – 114,195
Inter-segment
transactions (185) 185 – –
(9,597) 123,792 – 114,195
Unallocated costs (9,139)
Operating profit 105,056
12
Six months ended 30 June 2006
Property
investment and
Toy associated
business business Elimination Group
HK$’000 HK$’000 HK$’000 HK$’000
Revenue
Turnover 317,579 21,258 – 338,837
Inter-segment revenue
(Note iii) – 341 (341) –
317,579 21,599 (341) 338,837
Results
Segment results (31,719) 180,717 – 148,998
Inter-segment
transactions (341) 341 – –
(32,060) 181,058 – 148,998
Unallocated costs (13,413)
Operating profit 135,585
Notes:
(i) Toy business refers to the design, development, marketing and
distribution of toys and family entertainment activity products.
(ii) Property investment and associated business refers to the leasing of
commercial, industrial and residential premises to generate rental income,
and the provision of property management services.
(iii) Inter-segment revenue eliminated on consolidation represents inter-
company rental charges on properties owned by the Group. Inter-segment
transactions are conducted at arm’s length.
The segment assets and liabilities as at 30 June 2007 are as follows:
Property
investment
and
Toy associated
business business Elimination Group
HK$’000 HK$’000 HK$’000 HK$’000
Assets
Segment assets 339,535 1,409,217 (222) 1,748,530
Unallocated assets 835,783
Total assets 2,584,313
Liabilities
Segment liabilities 131,807 31,191 (222) 162,776
Unallocated liabilities 180,669
Total liabilities 343,445
13
The segment assets and liabilities as at 31 December 2006 are as follows:
Property
investment
and
Toy associated
business business Elimination Group
HK$’000 HK$’000 HK$’000 HK$’000
Assets
Segment assets 558,737 1,295,171 (222) 1,853,686
Unallocated assets 523,400
Total assets 2,377,086
Liabilities
Segment liabilities 263,277 31,553 (222) 294,608
Unallocated liabilities 214,368
Total liabilities 508,976
Geographical segments
An analysis of the Group’s turnover for the period by geographical segments is
as follows:
Six months ended 30 June
2007 2006
HK$’000 HK$’000
Americas
– U.S. 224,418 231,030
– Others 29,906 28,049
Europe 70,680 42,707
Asia Pacific 50,521 35,967
Others 608 1,084
376,133 338,837
Segment assets are allocated based on where the assets are located.
30 June 31 December
2007 2006
HK$’000 HK$’000
America
– U.S. 305,088 490,681
Asia Pacific 1,443,442 1,363,005
1,748,530 1,853,686
14
3 Profit before taxation
Profit before taxation is stated after charging and crediting the following:
Six months ended 30 June
2007 2006
HK$’000 HK$’000
Charging:
Cost of inventories sold 159,436 143,563
Allowance for customer concession 4,391 2,557
Staff costs 50,122 45,142
Depreciation of fixed assets 4,121 3,794
Loss on disposal of fixed assets 8 39
Crediting:
Interest income 5,273 6,558
Dividend income from investments 1,248 1,044
Unutilised allowance for customer concession – 1,532
4 Taxation
Hong Kong profits tax has been provided at the rate of 17.5% (2006: 17.5%) on
the estimated assessable profit for the period. Overseas taxation is provided on
the profits/losses of the overseas subsidiaries in accordance with the tax laws of
the countries in which these entities operate.
The taxation charge/(credit) in the condensed consolidated income statement
comprises:
Six months ended 30 June
2007 2006
HK$’000 HK$’000
Current taxation
Hong Kong profits tax 2,035 392
Overseas taxation (1,240) (10,793)
Over-provision in prior years (289) (3,558)
506 (13,959)
Deferred taxation
Origination and reversal of
temporary differences 25,421 31,286
25,927 17,327
15
5 Dividend
At a meeting held on 12 March 2007 the Directors proposed a final dividend of
HK cents 3.0 and a special dividend of HK cents 2.0 per share for the year
ended 31 December 2006, which was paid on 18 May 2007 and has been
reflected as an appropriation of retained profits for the six months ended 30
June 2007.
At a meeting held on 17 August 2007 the Directors declared an interim dividend
of HK cents 2.0 (2006: HK cents 2.0) per share for the year ending 31
December 2007 to be paid on 19 September 2007 to shareholders on the
Company’s Register of Members on 12 September 2007. This proposed
dividend is not reflected as a dividend payable in these condensed accounts, but
will be reflected as an appropriation of retained profits for the year ending 31
December 2007.
6 Earnings per share
The calculations of basic and diluted earnings per share are based on the
following data:
Six months ended 30 June
2007 2006
HK$’000 HK$’000
Profit attributable to shareholders for the
purpose of calculating basic and
diluted earnings per share 119,162 125,105
Number of shares
Weighted average number of ordinary
shares for the purpose of calculating
basic earnings per share 1,989,729,000 1,868,725,000
Number of potential ordinary shares
issuable under share options and warrants 27,848,000 16,172,000
Weighted average number of ordinary shares
for the purpose of calculating diluted
earnings per share 2,017,577,000 1,884,897,000
16
7 Fixed assets
Prepaid
premium on
Other leasehold land
property, held for own
Investment plant and use under an
properties equipment operating lease
HK$’000 HK$’000 HK$’000
Opening net book amount
as at 1 January 2007 1,198,700 37,117 48,102
Additions 13,526 3,658 –
Reclassification (21,900) 7,597 14,303
Revaluation surplus 105,474 – –
Depreciation/Amortisation – (3,471) (650)
Disposals – (8) –
Closing net book amount
as at 30 June 2007 1,295,800 44,893 61,755
Opening net book amount
as at 1 January 2006 694,700 41,489 49,234
Additions 255,369 1,782 –
Revaluation surplus 167,931 – –
Depreciation/Amortisation – (3,228) (566)
Disposals – (39) –
Exchange fluctuation – (41) –
Closing net book amount
as at 30 June 2006 1,118,000 39,963 48,668
Additions 10,156 341 –
Revaluation surplus 70,544 – –
Depreciation/Amortisation – (3,194) (566)
Disposals – (34) –
Exchange fluctuation – 41 –
Closing net book amount
as at 31 December 2006 1,198,700 37,117 48,102
17
8 Trade receivables
As at 30 June 2007, 91.6% (31 December 2006: 96.9%) of the trade receivables
net of provisions were current to 30 days, 7.5% (31 December 2006: 1.2%)
were 31 to 60 days and the remaining were over 60 days. The provisions
included allowance on customer concession that is arrived at by using available
contemporary and historical information to evaluate the exposure.
The normal trade terms with toy business customers are letters of credit at sight
or usance or on open accounts with credit term of 60 days on average. For
property investment and associated business, no credit term is granted to
tenants.
9 Bank loans
30 June 31 December
2007 2006
HK$’000 HK$’000
Secured bank loans payable:
Within one year 60,808 41,042
In the second year – 276
60,808 41,318
Unsecured bank loan payable within one year – 66,500
60,808 107,818
Current portion included in current liabilities (60,808) (107,542)
– 276
As at 30 June 2007, the Group had banking facilities amounting to
approximately HK$777 million (31 December 2006: HK$777 million), of
which HK$61 million (31 December 2006: HK$108 million) were utilised.
The banking facilities of certain subsidiaries are secured by investment
properties and other fixed assets with net book value of HK$1,074 million (31
December 2006: HK$971 million) of the Group at 30 June 2007.
10 Trade payables
As at 30 June 2007, 91.3% (31 December 2006: 59.1%) of the trade payables
were current to 30 days, 8.2% (31 December 2006: 40.4%) were 31 to 60 days
and the remaining were over 60 days.
18
11 Share capital
Authorised
Ordinary shares of
HK$0.10 each
No. of shares HK$’000
At 30 June 2007 and 31 December 2006 3,000,000,000 300,000
Issued and fully paid
Ordinary shares of
HK$0.10 each
No. of shares HK$’000
At 1 January 2006 1,867,660,247 186,766
Exercise of warrants 2006 30,650 3
Exercise of warrants 2007 4,520 –
Exercise of share options 3,386,000 339
At 1 January 2007 1,871,081,417 187,108
Exercise of warrants 2007 (Note) 345,147,152 34,515
Exercise of share options 8,812,000 881
At 30 June 2007 2,225,040,569 222,504
Note:
The warrants were exercisable from 26 May 2006 to 25 May 2007 at an initial
subscription price of HK$1.03 per share (subject to adjustment). On 25 May
2007, 28,796,407 warrants which had not been exercised, were lapsed.
12 Contingent liabilities
There was no material change in contingent liabilities compared to those
disclosed in the most recently published annual report.
19
13 Commitments
Licensing commitments
In the normal course of business, the Group enters into contractual licensing
agreements to secure its rights to design, develop, market and distribute certain
toys and family entertainment activity products for future sales. Certain
licensing agreements contain financial commitments by the Group to the
licensors to be fulfilled during the terms of the contracts. The amounts of
financial commitments contracted but not provided for at 30 June 2007 were
payable as follows:
30 June 31 December
2007 2006
HK$’000 HK$’000
Within one year 46,468 24,469
In the second to fifth years inclusive 30,498 19,188
76,966 43,657
14 Operating lease arrangements
The Group acts as lessee and lessor under operating leases. Details of the
Group’s commitments under non-cancellable operating leases are set out as
follows:
(a) As lessee
At 30 June 2007, the future aggregate minimum lease payments under
non-cancellable operating leases for office and warehouse facilities
payable by the Group were as follows:
30 June 31 December
2007 2006
HK$’000 HK$’000
Within one year 6,519 8,759
In the second to fifth years inclusive 8,919 15,183
15,438 23,942
20
(b) As lessor
At 30 June 2007, the future aggregate minimum lease payments under
non-cancellable operating leases for commercial, industrial and residential
premises receivable by the Group were as follows:
30 June 31 December
2007 2006
HK$’000 HK$’000
Within one year 49,124 42,579
In the second to fifth years inclusive 44,986 55,683
94,110 98,262
15 Related party transactions
The Group did not enter into any material related party transaction during the
period except the following:
Key management compensation
Six months ended 30 June
2007 2006
HK$’000 HK$’000
Salaries and other short-term employee benefits 5,278 6,122
Employer’s contribution to provident fund 101 158
Share-based compensation 1,504 3,623
6,883 9,903
16 US dollar equivalents
These are shown for reference only and have been arrived at based on the
exchange rate of HK$7.8 to US$1 ruling at 30 June 2007.
21
INFORMATION PROVIDED IN ACCORDANCE WITH THE LISTING
RULES
Liquidity and Financial Resources
The toy business is inherently seasonal in nature. In general, sales in the second
half-year are much higher than those in the first half. As a result, a
disproportionately high balance of trade receivables is generated during the peak
selling season in the second half of the year. Consistent with usual trade practices, a
significant portion of the trade receivables is collected in the final weeks of the
fourth quarter and in the first quarter of the subsequent year, resulting in a seasonal
demand for working capital during the peak selling season. As at 30 June 2007,
trade receivables related to toy operation were HK$121,593,000 (31 December
2006: HK$353,212,000) and inventories were HK$48,917,000 (31 December 2006:
HK$49,470,000).
The property investment and associated business generated a relatively steady
income stream throughout the period. Approximately 92% of the total gross floor
area of the Group’s investment properties were leased out as at 30 June 2007.
Accounts receivables were minimal as at the period end.
The Group’s gearing ratio, defined as total bank borrowings expressed as a
percentage of total tangible assets, at 30 June 2007 was 2.4% compared to 4.5% at
31 December 2006. The current ratio, calculated as the ratio of current assets to
current liabilities, was 4.6 at 30 June 2007 compared to 2.3 at 31 December 2006.
The Group maintains a level of cash that is necessary and sufficient to serve
recurring operations as well as further growth and developmental needs. After
considering the operating cash flow and liquidity requirements, a portion of cash on
hand may be invested from time to time in various types of financial instruments
including fixed income, equity, derivatives and managed funds with a view to
enhance overall return. The selection and allocation of such yield enhancement
investments are regularly reviewed to ensure that an acceptable risk-and-return
profile is maintained and the liquidity requirements of the Group are served. As at
30 June 2007, the Group’s cash and bank balances were HK$298,821,000 (31
December 2006: HK$170,015,000), and the amount invested in various securities
was HK$522,320,000 (31 December 2006: HK$331,204,000).
Charges on Group Assets
Details of charges on group assets are set out in note 9 to the condensed financial
information.
Employees
As at 30 June 2007, the Group had a total of 172 employees in Hong Kong, the
Mainland China and the United States of America.
There was no material change in remuneration policies compared to those disclosed
in the most recently published annual report.
22
Share Options
The following shows the particulars of the share options of the Company granted to
Directors of the Company and employees of the Group, pursuant to the Share
Option Plan (“Plan”) and the Share Option Scheme (“Scheme”) adopted on 4 May
1998 and 28 June 2002 respectively, that are required to be disclosed under Rule
17.07 of Chapter 17 and Rule 41(2) of Appendix 16 of the Listing Rules:
Number of share options
Balance at Exercised Lapsed
Exercise 1 January during the during the Balance at
Participant Date of grant price 2007 period period 30 June 2007
HK$ (Note (1),
Note (2) &
Note (3))
Plan
TO Shu Sing, Sidney 26 August 1998 0.532 529,000 529,000 – –
Director 27 May 1999 0.506 529,000 529,000 – –
20 October 1999 0.434 660,000 660,000 – –
22 July 2000 0.626 551,000 551,000 – –
21 May 2001 0.297 1,024,000 1,024,000 – –
Continuous Contract 15 May 1998 0.532 281,600 1,000 – 280,600
Employees, excluding 27 May 1999 0.506 247,500 – – 247,500
Directors 22 July 2000 0.626 904,800 108,800 – 796,000
21 May 2001 0.297 715,800 125,900 1,000 588,900
28 August 2001 0.294 8,163,000 – – 8,163,000
Scheme
CHENG Bing Kin, Alain 7 January 2004 1.360 590,000 – – 590,000
Director 22 September 2005 1.206 750,000 125,000 – 625,000
4 May 2006 0.910 750,000 375,000 – 375,000
TO Shu Sing, Sidney 9 August 2002 0.199 1,200,000 1,200,000 – –
Director 10 March 2003 0.550 1,200,000 1,200,000 – –
7 January 2004 1.360 1,200,000 – – 1,200,000
22 September 2005 1.206 1,500,000 – – 1,500,000
4 May 2006 0.910 750,000 375,000 – 375,000
TSIM Tak Lung 22 September 2005 1.206 1,000,000 – – 1,000,000
Director 4 May 2006 0.910 750,000 – – 750,000
23
Number of share options
Balance at Exercised Lapsed
Exercise 1 January during the during the Balance at
Participant Date of grant price 2007 period period 30 June 2007
HK$ (Note (1),
Note (2) &
Note (3))
CHOW Yu Chun, Alexander 4 May 2006 0.910 750,000 – – 750,000
Director
IP Shu Wing, Charles 22 September 2005 1.206 1,000,000 – – 1,000,000
Director 4 May 2006 0.910 750,000 374,000 – 376,000
LEE Peng Fei, Allen 22 September 2005 1.206 1,000,000 – – 1,000,000
Director 4 May 2006 0.910 750,000 – – 750,000
LO Kai Yiu, Anthony 9 August 2002 0.199 250,000 – – 250,000
Director 22 September 2005 1.206 1,000,000 – – 1,000,000
4 May 2006 0.910 750,000 – – 750,000
YU Hon To, David 22 September 2005 1.206 1,000,000 – – 1,000,000
Director 4 May 2006 0.910 750,000 – – 750,000
Continuous Contract 9 August 2002 0.199 3,086,000 165,500 – 2,920,500
Employees, excluding 10 March 2003 0.550 4,953,200 657,000 – 4,296,200
Directors 7 January 2004 1.360 9,702,100 – 180,000 9,522,100
19 March 2004 1.240 11,000,000 – – 11,000,000
22 September 2005 1.206 19,324,000 194,800 502,000 18,627,200
9 January 2006 1.030 500,000 – – 500,000
4 May 2006 0.910 14,126,000 617,000 467,000 13,042,000
Notes:
(1) The weighted average closing price of the ordinary shares of the Company immediately
before the dates on which the options were exercised by Mr. To Shu Sing, Sidney during
the period, was HK$1.1208.
(2) The closing prices of the ordinary shares of the Company immediately before the dates
on which the options were exercised by Mr. Cheng Bing Kin, Alain and Mr. Ip Shu Wing,
Charles during the period, were HK$1.13 and HK$1.12 respectively.
(3) The weighted average closing price of the ordinary shares of the Company immediately
before the dates on which the options were exercised by continuous contract employees,
excluding Directors, during the period was HK$1.2091.
The above share options are exercisable in stages in accordance with the terms of
the Plan and the Scheme within ten years after the date of grant. No options were
granted or cancelled during the period.
24
Directors’ and Chief Executive’s Interests and Short Positions in Shares and
Underlying Shares of the Company or any Associated Corporation
As at 30 June 2007, the interests of each director and chief executive of the
Company in the shares and underlying shares of equity derivatives of the Company
and its associated corporations (within the meaning of the Securities and Futures
Ordinance (“SFO”)) which were required to be notified to the Company and the
Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, or which
were required, pursuant to section 352 of the SFO, to be entered in the register
referred to therein, or which were required to be notified to the Company and the
Stock Exchange pursuant to the Model Code for Securities Transactions by
Directors of Listed Companies of the Listing Rules were as follows:
Long position in shares
Nature of Number of Percentage
Name of director Name of company interest shares held interests held
CHAN Chun Hoo, Thomas Playmates Holdings Limited Personal & 885,682,000 39.81%
Corporate ordinary shares
(Note (a))
CHENG Bing Kin, Alain Playmates Holdings Limited Personal 1,900,000 0.09%
ordinary shares
TO Shu Sing, Sidney Playmates Holdings Limited Personal 17,300,000 0.78%
ordinary shares
TSIM Tak Lung Playmates Holdings Limited Personal 1,636,800 0.07%
ordinary shares
IP Shu Wing, Charles Playmates Holdings Limited Personal 22,454,000 1.01%
ordinary shares
Nippon Toys Limited Personal 1 share 50%
(Note (b))
LEE Peng Fei, Allen Playmates Holdings Limited Personal 600,000 0.03%
ordinary shares
LO Kai Yiu, Anthony Playmates Holdings Limited Personal 2,868,000 0.13%
ordinary shares
YU Hon To, David Playmates Holdings Limited Personal & 5,660,000 0.25%
Corporate ordinary shares
(Note (c))
25
Long position in underlying shares of the Company
Nature of Number of Number of Percentage
Name of director interest equity derivatives held underlying shares interests held
(ordinary shares)
CHENG Bing Kin, Alain Personal 1,590,000 share options 1,590,000 shares 0.07%
TO Shu Sing, Sidney Personal 3,075,000 share options 3,075,000 shares 0.14%
TSIM Tak Lung Personal 1,750,000 share options 1,750,000 shares 0.08%
CHOW Yu Chun, Alexander Personal 750,000 share options 750,000 shares 0.03%
IP Shu Wing, Charles Personal 1,376,000 share options 1,376,000 shares 0.06%
LEE Peng Fei, Allen Personal 1,750,000 share options 1,750,000 shares 0.08%
LO Kai Yiu, Anthony Personal 2,000,000 share options 2,000,000 shares 0.09%
YU Hon To, David Personal 1,750,000 share options 1,750,000 shares 0.08%
Notes:
(a) 877,080,000 ordinary shares of the Company were beneficially owned by Angers
Investments Limited (“AIL”). All the issued share capital of AIL is beneficially owned by
a private company which is in turn wholly-owned by Mr. Chan Chun Hoo, Thomas.
(b) Mr. Ip Shu Wing, Charles has a personal interest of one share in Nippon Toys Limited, an
associated company of the Group.
(c) 4,560,000 ordinary shares of the Company were held by a private company which is 50%
owned by Mr. Yu Hon To, David and 50% owned by a member of his family.
Unless stated otherwise, all the aforesaid shares and equity derivatives were
beneficially owned by the Directors concerned. The percentage shown was the
number of shares or underlying shares the relevant Director was interested
expressed as a percentage of the number of issued shares of the relevant company as
at 30 June 2007.
Details of the share options held by the Directors and Chief Executive of the
Company are disclosed in the above section headed “Share Options”.
As at 30 June 2007, none of the Directors and Chief Executive of the Company were
interested or deemed to be interested in short positions in the shares and underlying
shares of equity derivatives of the Company or any associated corporation.
26
Shareholders’ Interests and Short Positions in Shares and Underlying Shares of
the Company Required to be Recorded under Section 336 of the SFO
As at 30 June 2007, persons (other than the Directors and Chief Executive of the
Company) who had interests or short positions in the shares of the Company, being
5% or more of the Company’s issued share capital, as recorded in the register
required to be kept under section 336 of the SFO were as follows:
Long position
Number of Percentage
Name Nature of interest shares held interests held
Sansar Capital Investment Manager 233,487,600 10.49%
Management, LLC ordinary shares
(Note)
Sansar Capital Beneficial Owner 191,239,700 8.59%
Master Fund, LP ordinary shares
Note: These interests include the shares held by Sansar Capital Master Fund, LP.
Purchase, Sale or Redemption of Shares
The Company has not redeemed any of its shares during the period. Neither the
Company nor any of its subsidiaries has purchased or sold any of the Company’s
shares during the period.
Compliance with the Code on Corporate Governance Practices
The Company is committed to maintaining and ensuring high standards of corporate
governance. The Company has 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 throughout the six months ended 30 June 2007, except for the deviation
from provision A.2.1 of the Code in respect of segregation of the roles of chairman
and chief executive officer.
The Chairman and chief executive officer of the Company is Mr. Chan Chun Hoo,
Thomas. This deviates from provision A.2.1 of the Code which stipulates that the
roles of chairman and chief executive officer should be separate and should not be
performed by the same individual.
27
The Board comprises three Executive Directors (one of whom is the Chairman) and
six Non-executive Directors. Of the six Non-executive Directors, four are
Independent Non-executive Directors; they represent more than one-third of the
Board. Mr. Chan Chun Hoo, Thomas focuses on Group strategy and is responsible
for chairing and managing the efficient operation of the Board and ensuring that all
key issues are considered by the Board in a timely manner; whereas responsibilities
for running of the business operation of the Group are delegated to different
designated senior executives. The Board considers that this structure will not impair
the balance of power and authority between the Board and the management of the
business of the Group given that there is a strong and independent non-executive
directorship element on the Board and a clear division of responsibility in running
the business of the Group. The Board believes that the structure outlined above is
beneficial to the Company and its business.
The Audit Committee has reviewed with the management the accounting principles
and practices adopted by the Group and discussed internal controls and financial
reporting matters including a review of the unaudited condensed consolidated
financial information for the six months ended 30 June 2007.
Compliance with the Model Code
The Company has adopted the Model Code as set out in Appendix 10 of the Listing
Rules for securities transactions by Directors of the Company. All the members of
the Board have confirmed, following specific enquiry by the Company, that they
have complied with the required standard as set out in the Model Code throughout
the period ended 30 June 2007.
Closure of Register of Members
The Register of Members of the Company will be closed from 11 September 2007 to
12 September 2007, both days inclusive, during which period no transfer of shares
of the Company will be registered. In order to be qualified for the declared
dividend, all transfers accompanied by the relevant share certificates must be lodged
with the Company’s Branch Share Registrars, Tricor Abacus Limited, at 26/F.,
Tesbury Centre, 28 Queen’s Road East, Hong Kong no later than 4:00 p.m. on 10
September 2007.
On behalf of the Board
CHAN Chun Hoo, Thomas
Chairman
Hong Kong, 17 August 2007
28
CORPORATE INFORMATION
Executive Directors
CHAN Chun Hoo, Thomas (Chairman)
CHENG Bing Kin, Alain
TO Shu Sing, Sidney
Non-executive Directors
TSIM Tak Lung (Deputy Chairman)
CHOW Yu Chun, Alexander (Independent)
IP Shu Wing, Charles
LEE Peng Fei, Allen (Independent)
LO Kai Yiu, Anthony (Independent)
YU Hon To, David (Independent)
Company Secretary
NG Ka Yan
Registered Office
Clarendon House
2 Church Street
Hamilton HM11
Bermuda
Principal Office
21/F., The Toy House
100 Canton Road
Tsimshatsui
Kowloon, Hong Kong
Stock Code
The shares of Playmates Holdings
Limited are listed for trading on The
Stock Exchange of Hong Kong
Limited
(Stock code: 635)
Website
www.playmates.net
www.playmatestoys.com
Auditors
Moores Rowland
Chartered Accountants
Certified Public Accountants
Legal Advisors
Conyers Dill & Pearman
Deacons
Principal Bankers
The Hongkong and Shanghai Banking
Corporation Limited
Standard Chartered Bank (Hong Kong)
Limited
Principal Share Registrars
The Bank of Bermuda Limited
6 Front Street
Hamilton HM11
Bermuda
Branch Share Registrars
Tricor Abacus Limited
26/F., Tesbury Centre
28 Queen’s Road East
Hong Kong
INTERIM REPORT 2007
Playmates Holdings Limited
C M Y K
Playmates Holdings Limited
(Incorporated in Bermuda with limited liability)
(Stock code : 635)
www.playmates.net
www.playmatestoys.com
