The golf club segment continued to dominate and generate most of the Group’s revenue and profitability. Sales of golf clubs and accessories for the year remained stable at HK$327 million (2003: HK$322 million) while the sales of golf bags made up for the remaining HK$66.5 million (2003: HK$78.5 million) in total turnover. Results of the golf club and golf bag segments comprised a segmental profit of HK$39.6 million (2003: HK$62.7 million) and a segmental loss of HK$0.3 million (2003: loss of HK$3.78 million) respectively.
North America continued to constitute the largest geographical segment from which 69.7% of the Group’s annual turnover was generated. Japan, Europe and other countries in turn accounted for 12.8%, 7.7% and 9.8% respectively of total turnover.
Mr. Augustine Chu, Chairman, Sino Golf Holdings noted, "The restructuring of an overseas customer last year is an isolated case, but we have already tightened our credit policy further to enhance the quality of our customer portfolio. We continue to hold an optimistic view of the demand for golf products and expect increasing contribution to the golf bag sales to be forthcoming from our strategic alliance with the Japanese partner. With the commencement of operation of our new golf bag factory, we will possess an enhanced capacity of up to 1 million advanced golf bags to meet the requirements of the customers, particularly the demanding Japanese customers. We are confident of a recovery of our businesses this year."
The results of the golf club segment were adversely affected as a bad debt provision of approximately HK$9.5 million was made against the amount due from an overseas customer currently undergoing debt restructuring. To minimize future exposure to customers’ failures, the Group has conducted an extensive review of the existing customer portfolio and imposed more restrictions on the granting of credits. The review exercised has resulted in a short-term decline in sales during the peak fourth quarter of 2004.
The new golf bag factory in Dongguan, China became operational during the year. The delay in its commencement of operation, and the subsequent relocation and movement expenditure incurred, has had an adverse impact on the results of the golf bag segment, which in turn was mitigated by the cost savings derived from the termination of the assembly operation in the United States since the end of 2003. The result of the golf bags business achieved significant improvement in 2004 as a result.
With the new golf bag factory commencing operation in August 2004, contributing to a more than doubled annual capacity, improved efficiency and reduced outsourcing, the Group remains confident of a rebound of the segment in 2005; recovery of which will be more obvious during the second half of the year.
During the year, the raw materials price hikes have caused a squeeze on the Group’s gross profit margin. To mitigate the impact of the cost increase, the Group has taken steps to enhance production efficiency and to lower wastage rates, as well as to stock up such key materials as titanium which are experiencing acute price surges. Gross profit margin in the reporting year declined marginally by 1%-point to 31%. It is also expected that the cost increase will be adequately reflected in the sales prices of new models to be introduced in the second half of 2005.
"The impact of our tightened credit policy is likely to extend into part of 2005, but concurrent with the customer profile review, we have been actively working with certain prominent brand names with a view to broadening our customer portfolio. Business from the new customers is anticipated to boost sales of golf clubs, and the rebound in sales should be more obvious in the second half of 2005," Mr. Chu added.
Sino Golf's persistent investments in research and development in recent years have given the Group a strong competitive advantage in the assembly of golf clubs, of which the continuing outsourcing trend will benefit the Group. The Group expects its capacity for golf clubs to be fully utilized by 2006, and is planning to build a new golf club factory in Shandong, China, to cope with anticipated developments. Construction is expected to commence by mid 2005.
Financial Highlights| 12 months ended December 31, | ||
| 2004 | 2003 | |
| HK$ '000 | HK$ '000 | |
| Turnover | 393,945 | 400,708 |
| Gross Profit | 122.222 | 128,128 |
| Profit from Operations | 39,380 | 59,231 |
| Net Profit Attributable to Shareholders | 28,092 | 43,324 |
| Dividend per share | ||
| - Interim | HK6.3 cents | HK4.8 cents |
| - Final | Nil | HK9.5 cents |
| Earning per share | ||
| - Basic | HK9.3 cents | HK14.34 cents |
| - Dilluted | HK9.3 cents | HK14.34 cents |
About Sino Golf Holdings Limited
Sino Golf Holdings Limited (HKEx: 361) is engaged in the design, development, manufacture and sale of fully assembled and packaged golf clubs, club heads, shafts and golf bags and accessories. Headquartered in Hong Kong and with a production base in China, Sino Golf commands leading-edge in-house R&D capability supported by professionals from Japan and the United States. The Group has a staff of over 2,800 serving the production requirements of some of the world’s major name-brands in golf accessories. For more information, please visit www.sinogolf.com.
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