KAM HING INT'L<02307> - Results Announcement
Kam Hing International Holdings Limited announced on 25/04/2006:
(stock code: 02307 )
Year end date: 31/12/2005
Currency: HKD
Auditors' Report: Unqualified
(Audited )
(Audited ) Last
Current Corresponding
Period Period
from 01/01/2005 from 01/01/2004
to 31/12/2005 to 31/12/2004
Note ('000 ) ('000 )
Turnover : 1,499,403 1,315,650
Profit/(Loss) from Operations : 116,343 140,853
Finance cost : (26,081) (15,870)
Share of Profit/(Loss) of
Associates : N/A N/A
Share of Profit/(Loss) of
Jointly Controlled Entities : N/A N/A
Profit/(Loss) after Tax & MI : 78,959 104,762
% Change over Last Period : -24.6 %
EPS/(LPS)-Basic (in dollars) : 0.123 0.20
-Diluted (in dollars) : N/A 0.20
Extraordinary (ETD) Gain/(Loss) : N/A N/A
Profit/(Loss) after ETD Items : 78,959 104,762
Final Dividend : 3.1 cents 1.6 cents
per Share
(Specify if with other : N/A N/A
options)
B/C Dates for
Final Dividend : 24/05/2006 to 29/05/2006 bdi.
Payable Date : 12/06/2006
B/C Dates for Annual
General Meeting : 24/05/2006 to 29/05/2006 bdi.
Other Distribution for : N/A
Current Period
B/C Dates for Other
Distribution : N/A
Remarks:
1. The basis of preparation and accounting policies
These financial statements have been prepared in accordance with Hong Kong
Financial Reporting Standards ("HKFRSs") (which also include Hong Kong
Accounting Standards ("HKASs") and Interpretations) issued by the Hong
Kong Institute of Certified Public Accountants, accounting principles
generally accepted in Hong Kong and the disclosure requirements of the
Hong Kong Companies Ordinance. They have been prepared under the
historical cost convention, except for equity investments, which have been
measured at fair value. These financial statements are presented in Hong
Kong dollars and all values are rounded to the nearest thousand (HK$'000)
except when otherwise indicated.
Basis of consolidation
The consolidated financial statements include the financial statements of
the Company and its subsidiaries for the year ended 31 December 2005. The
results of subsidiaries are consolidated from the date of acquisition,
being the date on which the Group obtains control, and continue to be
consolidated until the date that such control ceases. All significant
intercompany transactions and balances within the Group are eliminated on
consolidation.
Minority interests represent the interest of an outside shareholder in the
results and net assets of a Company's subsidiary.
Impact of new and revised Hong Kong Financial Reporting Standards
The following new and revised HKFRSs affect the Group and are adopted for
the first time for the current year's financial statements:
HKAS 1 Presentation of Financial Statements
HKAS 2 Inventories
HKAS 7 Cash Flow Statements
HKAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors
HKAS 10 Events after the Balance Sheet Date
HKAS 12 Income Taxes
HKAS 14 Segment Reporting
HKAS 16 Property, Plant and Equipment
HKAS 17 Leases
HKAS 18 Revenue
HKAS 19 Employee Benefits
HKAS 21 The Effects of Changes in Foreign Exchange Rates
HKAS 24 Related Party Disclosures
HKAS 27 Consolidated and Separate Financial Statements
HKAS 32 Financial Instruments: Disclosure and Presentation
HKAS 33 Earnings per Share
HKAS 36 Impairment of Assets
HKAS 37 Provisions, Contingent Liabilities and Contingent Assets
HKAS 39 Financial Instruments: Recognition and Measurement
HKAS 39 Amendment Transition and Initial Recognition of Financial
Assets and Financial Liabilities
HKAS 40 Investment Property
HKFRS 2 Share-based Payment
HKFRS 3 Business Combinations
HK-Int 4 Leases - Determination of the Length of Lease Term
in respect of Hong Kong Land Leases
The adoption of HKASs 2, 7, 8, 10, 12, 14, 16, 18, 19, 21, 27, 33, 36, 37,
40, HKFRS 3 and HK-Int 4 has had no material impact on the accounting
policies of the Group and the Company and the methods of computation in
the Group's and the Company's financial statements.
HKAS 1 has affected the presentation of minority interests on the face of
the consolidated balance sheet, consolidated income statement,
consolidated statement of changes in equity and other disclosures.
HKAS 24 has expanded the definition of related parties and affected the
Group's related party disclosures.
The impact of adopting the other HKFRSs is summarised as follows:
(a) HKAS 17 - Leases
In prior years, leasehold land and buildings held for own use were stated
at cost less accumulated depreciation and any impairment losses.
Upon the adoption of HKAS 17, the Group's leasehold interest in land and
buildings is separated into leasehold land and leasehold buildings. The
Group's leasehold land is classified as an operating lease, because the
title of the land is not expected to pass to the Group by the end of the
lease term, and is reclassified from property, plant and equipment to
prepaid land lease payments, while leasehold buildings continue to be
classified as part of property, plant and equipment. Prepaid land
premiums for land lease payments under operating leases are initially
stated at cost and subsequently amortised on the straight-line basis over
the lease term. When the lease payments cannot be allocated reliably
between the land and buildings elements, the entire lease payments are
included in the cost of the land and buildings as a finance lease in
property, plant and equipment.
This change in accounting policy has had no effect on the consolidated
income statement and retained profits. The comparative amounts for the
year ended 31 December 2004 in the consolidated balance sheet have been
restated to reflect the reclassification of the leasehold land from
property, plant and equipment to prepaid land lease payments.
(b) HKAS 32 and HKAS 39 - Financial Instruments
Derecognition of financial assets and liabilities
In prior years, the Group derecognised the discounted bills with recourse
as financial assets and liabilities, and disclosed them as contingent
liabilities. Upon the adoption of HKAS 39, a financial asset is
derecognised when and only when, either the contractual rights to the
asset's cash flows expire, or the asset is transferred and the transfer
qualifies for derecognition in accordance with HKAS 39. The Group has
applied the revised accounting policy prospectively for transfers of
financial assets for annual periods beginning on or after 1 January 2005.
In accordance with HKAS 39, the Group's discounted bills with recourse are
now accounted for as collateralised bank advances prospectively as at 31
December 2005, as the financial assets derecognition conditions as
stipulated in HKAS 39 have not been fulfilled. The comparative amounts as
at 31 December 2004, which were previously treated as contingent
liabilities of the Group prior to 1 January 2005, have not been restated
in accordance with the transitional provisions of HKAS 39.
(c) HKFRS 2 - Share-based Payment
In prior years, no recognition and measurement of share-based payment
transactions in which employees (including directors) were granted share
options over shares in the Company were required until such options were
exercised by employees, at which time the share capital and share premium
account were credited with the proceeds received.
Upon the adoption of HKFRS 2, when employees (including directors) render
services as consideration for equity instruments ("equity-settled
transactions"), the cost of the equity-settled transactions with employees
is measured by reference to the fair value at the date at which the
instruments are granted.
The main impact of HKFRS 2 on the Group is the recognition of the cost of
these transactions and a corresponding entry to equity for employee share
options. The revised accounting policy for share-based payment
transactions is described in more detail in note 2.5 "Summary of
significant accounting policies" in the annual report.
The Group has adopted the transitional provisions of HKFRS 2 under which
the new measurement policies have not been applied to (i) share options
granted to employees on or before 7 November 2002; and (ii) share options
granted to employees after 7 November 2002 but which had vested before 1
January 2005.
As all existing share options of the Company were granted on 6 October
2004 and had not yet vested as at 1 January 2005, HKFRS 2 had therefore
been applied retrospectively. The Group has recognised the cost of share
options retrospectively which were granted on 6 October 2004 in the
current year's income statement and restated the comparative figures
accordingly, in accordance with the revised accounting policy.
The effects of adopting HKFRS 2 are summarised below.
Summary of the impact of changes in accounting policies
(a) Effect on the consolidated balance sheet
Effect of adopting
----------------------------------------------
HKAS 17# HKAS 39* HKFRS 2#
Prepaid Discounted Equity-settled
land bills share
lease with option
payments recourse arrangements Total
HK$'000 HK$'000 HK$'000 HK$'000
At 1 January 2005
Effect of new policies
(Increase/(decrease))
Assets
Property,
plant and
equipment (19,982) - - (19,982)
Prepaid land
lease payments 19,533 - - 19,533
Accounts and
bills
receivable - 77,843 - 77,843
Prepayments,
deposits and
other
receivables 449 - - 449
---------
77,843
=========
Liabilities/ equity
Bank advances
for discounted
bills - 77,843 - 77,843
Share option
reserve - - 1,000 1,000
Retained
profits - - (1,000) (1,000)
----------
77,843
==========
* Adjustments taken effect prospectively from 1 January 2005
# Adjustments/presentation taken effect retrospectively
Effect of adopting
----------------------------------------------
HKAS 17 HKAS 39 HKFRS 2
Prepaid Discounted Equity-settled
land bills share
lease with option
payments recourse arrangements Total
HK$'000 HK$'000 HK$'000 HK$'000
At 31 December 2005
Effect of new policies
(Increase/(decrease))
Assets
Property, plant
and equipment (40,259) - - (40,259)
Prepaid land
lease payments 39,395 - - 39,395
Accounts and
bills
receivable - 104,894 - 104,894
Prepayments,
deposits and
other
receivables 864 - - 864
----------
104,894
==========
Liabilities/equity
Bank advances
for discounted
bills - 104,894 - 104,894
Share option
reserve - - 4,300 4,300
Retained
profits - - (4,300) (4,300)
----------
104,894
==========
(b) Effect on the balances of equity at 1 January 2005
Effect of adopting
------------------
HKFRS 2
Equity-settled
Effect of new policy share option
(Increase/(decrease)) arrangements
HK$'000
1 January 2005
Share option reserve 1,000
Retained profits (1,000)
---------
-
=========
The adoption of new and revised HKFRSs has had no impact on the Group's
balances of equity as at 1 January 2004.
(c) Effect on the consolidated income statement for the years ended 31
December 2005 and 2004
Effect of adopting
------------------
HKFRS 2
Equity-settled
share option
Effect of new policy arrangements
HK$'000
Year ended 31 December 2005
Increase in administrative expenses (4,300)
----------
Total decrease in profit (4,300)
==========
Decrease in basic earnings per share HK(0.7 cent)
============
Decrease in diluted earnings per share N/A
============
Year ended 31 December 2004
Increase in administrative expenses (1,000)
----------
Total decrease in profit (1,000)
==========
Decrease in basic earnings per share HK(0.2 cent)
=============
Decrease in diluted earnings per share HK(0.2 cent)
=============
2. Revenue and other income
Revenue, which is also the Group's turnover, represents the net invoiced
value of goods sold, after allowances for returns and trade discounts, and
fee income from knitting and dyeing services rendered. All significant
intra-group transactions have been eliminated on consolidation.
An analysis of the revenue and other income is as follows:
2005 2004
HK$'000 HK$'000
Revenue
Sale of goods 1,499,209 1,309,780
Fee income from knitting and dyeing services 194 5,870
--------- ---------
1,499,403 1,315,650
--------- ---------
Other income
Fee income from freight handling services 4,274 5,724
Bank interest income 671 253
Gross rental income 1,347 -
Others 2,174 652
---------- ---------
8,466 6,629
---------- ---------
1,507,869 1,322,279
========== =========
3. Profit before tax
The Group's profit before tax is arrived at after charging/(crediting):
2005 2004
HK$'000 HK$'000
(Restated)
Cost of inventories sold 1,160,866 998,248
Cost of services provided 189 3,467
Auditors' remuneration 1,180 1,030
Research and development costs 5,006 2,617
Depreciation of property, plant and equipment 55,860 33,760
Depreciation of investment properties 376 -
Amortisation of prepaid land lease payments 449 1,069
Employee benefits expense
(excluding directors' remuneration):
Wages and salaries 73,829 61,197
Equity-settled share option expenses 3,010 700
Pension scheme contributions 3,962 1,801
--------- ---------
80,801 63,698
--------- ---------
Minimum lease payments under operating leases
in respect of land and buildings 2,049 728
Gain on disposal of items of property, plant
and equipment (160) (3,165)
Bad debts written off - 418
Allowance/provision for doubtful debts 13,030 1,744
Write back of allowance/provision for doubtful
debts (147) (1,540)
Write back of provision for other receivables - (200)
Foreign exchange differences, net 481 (4,594)
========== ==========
Cost of inventories sold includes HK$90,112,000 for the year ended 31
December 2005 (2004: HK$60,770,000) in respect of depreciation and staff
costs, which are also included in the respective total amounts disclosed
separately above.
Research and development costs include HK$3,172,000 for the year ended 31
December 2005 (2004: HK$796,000) in respect of staff costs and
depreciation, which are also included in the respective total amounts
disclosed separately above.
At 31 December 2005, the Group had no forfeited contributions available to
reduce its contributions to the pension scheme in future years (2004: Nil
).
4. Finance costs
2005 2004
HK$'000 HK$'000
Interest on bank loans and overdrafts
wholly repayable within five years 22,379 13,249
Interest on finance leases 3,702 2,621
-------- --------
26,081 15,870
======== ========
5. Tax
2005 2004
HK$'000 HK$'000
Current tax - Hong Kong
Charge for the year 6,014 15,072
Underprovision/(overprovision) in respect
of prior years (1,178) 272
Current tax - Elsewhere
Charge for the year 8,439 5,914
Underprovision/(overprovision) in respect
of prior years 121 (967)
Deferred tax credit (2,084) (70)
--------- --------
Total tax charge for the year 11,312 20,221
========= ========
Hong Kong profits tax has been provided on the estimated assessable
profits arising in Hong Kong at the rate of 17.5% (2004: 17.5%). Taxes on
profits assessable elsewhere have been calculated at the rates of tax
prevailing in the countries in which the Group operates, based on existing
legislation, interpretations and practices in respect thereof.
Panyu Kam Hing Textile Dyeing Co. Ltd. ("Panyu KH Textile"), a wholly-
owned PRC subsidiary of the Company, is entitled to be exempted from
enterprise income tax in the PRC for the first two profit-making years
followed by a 50% reduction in the enterprise income tax for the
succeeding three years.
According to a confirmation obtained by Panyu KH Textile from the PRC tax
bureau, 2001 was the first profit-making year of Panyu KH Textile for PRC
corporate income tax purpose. For each of the years ended 31 December
2004 and 2005, the applicable tax rate of Panyu KH Textile, after the 50%
reduction, was 12%.
6. Dividend
2005 2004
HK$'000 HK$'000
Proposed final - HK3.1 cents per ordinary
share (2004: 1.6 cents) 19,840 10,240
======= =======
The proposed final dividend for the year is subject to the approval of the
Company's shareholders at the forthcoming annual general meeting.
7. Earnings per share attributable to ordinary equity holders
of the company
The calculation of basic earnings per share amounts is based on the profit
for the year attributable to ordinary equity holders of the Company of
HK$78,959,000 (2004 (restated): HK$104,762,000) and the weighted average
of 640,000,000 (2004: 523,716,000) ordinary shares deemed to have been in
issue during the year.
Diluted earnings per share for the year ended 31 December 2005 has not
been disclosed, as the share options outstanding during the year had an
anti-dilutive effect on the basic earnings per share during the year.
The calculation of diluted earnings per share for the year ended 31
December 2004 was based on the profit for the year attributable to
ordinary equity holders of the Company of HK$104,762,000 (restated). The
weighted average number of ordinary shares used in the calculation was the
523,716,000 ordinary shares deemed to have been in issue during that year
as used in the basic earnings per share calculation, and the weighted
average of 543,000 ordinary shares assumed to have been issued at no
consideration on the deemed exercise of all share options outstanding
during that year.
|