At the end of 2004, the Group adopted measures to enhance its customer profile with a view to better managing the long-term exposure and risk. Such measures, which included the tightening of credit controls and adoption of more stringent trade terms, have resulted in a short term slow down in golf equipment sales due to rescheduling and/or reduction of shipments to certain customers. To secure recoverability of trade debts, the Group has also arranged factoring and insurance coverage for shipments to major customers.
Mr. Augustine Chu, Chairman, Sino Golf Holdings said, "Despite the challenges faced by most industrial companies in 2005, our Group made considerable success in the enhancement of customer portfolio towards the high end. Inspired by the events of 2004 and to sustain growth over the long term, the Group has conducted an extensive and thorough review of its client portfolio to resign from less performing customers while focusing on the procurement of prominent name-brand customers. During the year, we successfully secured trial orders from some leading golf companies."
The core golf equipment segment accounted for 82% of Group turnover. Despite the impact on sales of the customer portfolio enhancement efforts, segment sales decreased by only 8.1% to HK$301,046,000 due to a sales rebound achieved in the second half with contribution from new customers and restoration of sales to existing clients. Segment results improved by 4.7% to HK$41,514,000.
During the year, the Group has worked with its largest customer to successfully launch an iron set hybrid, which has become one of the best selling hybrid iron sets in the United States at off course golf specialty retailers. The Group benefited from the sales success and strengthened its position as the primary supplier of golf clubs to this customer. The Group is confident of the ongoing business with and growth from this up-and-coming name-brand customer.
During the year, both the major raw materials prices and production costs have escalated. In particular, the prices of titanium and graphite sheets have soared by considerable double-digit percentages. The availability of graphite has become even more volatile in 2006. The Group has adjusted to the extent possible the selling prices of new golf equipment models to reflect the increase in material costs. On the other hand, due to tight graphite supply the Group has increased the proportion of direct components purchase and materials procurement from client specified sources. In either case, the gross profit margin of golf equipment sales is affected as the higher selling price reflects only the material cost increase.
Golf bag segment sales amounted to HK$66,211,000, or 18% of Group turnover. Despite the late commencement of operations of the new golf bag facility in 2004, segment sales only dropped marginally by less than 0.5% in 2005. The Group has successfully turned around the segment to a profit of HK$1,775,000.
As a result of dedicated efforts to develop the high-end golf bags business sector, contribution of the higher-margin Japan-line golf bags increased over the sales of Non-Japan line products. The new golf bag facility, which is compliant with the Standard of Engagement requirement, has gained strong recognition in the Japanese market. It is anticipated that the Japan line of golf bags will continue to expand with growing momentum in the ensuing year.
Overall, the Group's geographical spread continued to be stable. North America remains the largest geographical segment generating 67.6% of total turnover. Other geographical segments including Europe, Japan and other countries in turn accounted for 6.8%, 11.2% and 14.4% respectively of Group turnover.
In October 2005, the U.S. Bankruptcy Court confirmed the reorganization plan of Huffy Corporation. The Group considers that no further provision of any material amount would be necessary in respect of the debts owed to the Group by Huffy Corporation.
Entering 2006, orders for golf equipment and bags have shown significant increase. Total shipments during the first quarter of 2006 have exceeded HK$113 million, comprising golf equipment and golf bag sales of HK$87 million and HK$26 million respectively. While attaching emphasis on the continued development of the North American market, the Group is devoted to further exploring and developing the Japanese market especially in the golf equipment segment.
Financial Highlights| 12 months ended December 31, | ||
| 2005 | 2004 | |
| HK$ '000 | HK$ '000 | |
| Turnover | 367,257 | 393,945 |
 Golf equipment |
301,046 | 327,425 |
| Golf bags |
66,211 | 66,520 |
| Profit from Operations | 44,037 | 39,448 |
| Net Profit Attributable to Shareholders | 31,560 | 28,160 |
| Dividend per share | ||
| - Interim | HK3.0 cents | HK6.3 cents |
| - Final | HK4.0 cents | Nil |
| Basic Earning per share | HK10.4 cents | HK9.3 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 production facilities 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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