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KIN YAT HOLDINGS LIMITED
Improved results for FY2005/06 despite market challenges
Hong Kong, July 24, 2006 - Toys and motors manufacturer Kin Yat Holdings Limited (HKEx: 638) announces an increase in both turnover and profit in a stagnant year for the toys industry. In the year, Group recorded an attributable net profit of HK$30,766,000, including an extraordinary gain of HK$16,000,000 made from a property disposal. Gross profit increased 18% to HK$111,786,000. Turnover increased 18% to approximately HK$737,015,000 for the year to March 31, 2005. The Group declared a final dividend of HK2.5 cents.
The improvement in performance was partly attributable to bulk orders for movie-related items in the toys operation, and partly to the Group's successful value engineering process in improving production efficiency and streamlining the work flow. Nevertheless, the operating environment was difficult with rocketing oil prices that had been pushing costs of major raw materials to new heights. Shortages and unstable supply of labor and electricity in China continued to be major threats, as disruptions or contingency measures such as overtime work had put a tighter strain on its margin. Overall, gross profit margin maintained the same as 15%.
The toys and motors divisions contributed 63% and 23% respectively in turnover to the Group during the year in review. Performance of the materials operation was also encouraging.
The toys division reported a turnaround into a segment profit of HK$4,871,000 on a 23% year-on-year increase in turnover to HK$467,039,000. The much improved second half performance helped offset the losses made in the first half. The turnover increase was largely driven by orders for toys relating to a blockbuster movie and the Group's pro-active efforts to restructure its workforce and operation flow to improve productivity.
Surging oil prices have made an impact on the cost of plastics and metals, making the toys manufacturing sector difficult. As an industry practice, most of the customer contracts are confirmed at the beginning of each year, and bound by contractual agreements, the Group had to absorb most of the higher materials costs in 2004, therefore eroding profit margin. The situation improved in the first quarter of 2005 when new price quotations became effective.
Looking ahead, the Group expects bulk orders of movie-related items and the benefits of the cost control measures will be more apparent in the current year. In response, the Group has speeded up its relocation of production activities from Shenzhen to the lower-cost base in Shaoguan. As at the year end, more than half of the division's output was from the Shaoguan premises, helping to alleviate the impact of the costs increase. By maintaining a dual-location production base, the Group enjoys a balance between achieving cost effectiveness and upholding capabilities for high-tech products.
Mr Raymond Cheng Chor-kit, Chairman, Kin Yat Holdings, said: "All manufacturers in the toys industry are facing similar challenges in power and labor shortages as well as surging plastic price. We are addressing the issues pro-actively and aggressively with the pursuit of value engineering throughout our new product design and development process to keep material and direct labor cost down by maximizing material consumption and utilization."
The Group's motors division continued to focus its business activities in the toys sector for the time being, until efforts to build up business in other sectors had yielded more positive results. The stagent performance of the toy sector and mounting price reduction pressure during the year had led to decreases in both turnover and segment profits. Turnover was slightly down 7% to HK$177,532,000 compared with the previous year. Segment profit was HK$36,145,000, down 18%.
Efforts to expand the range of motor-powered devices for future momentum growth will continue, and there will be a stronger focus into the automobile industry. Once the entry breakthrough is made, this should be a very fast growth area.
The Group made a strategic investment to launch a new business segment for material development. Materials developed are primarily for use in Cathode Ray Tube and Liquid Crystal Display. This new segment reported encouraging results performance, with segmental profit of more than HK$2 million.
The Group's 50%-owned CDR manufacturing arm had to share a loss of approximately HK$16.7 million. Loss in CDR business was attributable to increased production costs, while selling prices were reduced due to severe competition.
Mr Cheng added: "As high fuel prices and China's labor and power shortages persist, the current financial year is going to be very challenging for all manufacturers. Our immediate task is to improve our operating mechanism, cost structure, economy of scale and production efficiency."
Kin Yat Holdings maintained a healthy financial position, with aggregate cash in hand of HK$53 million and net asset value of HK$521 million as at end of March 2005. Current ratio (current asset divided by current liabilities) stood at a healthy level of 2.7 times.
About Kin Yat Holdings Issued by : Through :
Year ended March 31,
2006
2005
HK$ '000
HK$ '000
Turnover
778,293
737,015
Toys and related products491,464
467,039
Motors (sales to external customers only)179,701
170,802
Electrical appliances57,976
71,997
Material development49,152
27,177
Net profit attributable to oridinary equity holders of the Company
59,901
29,746
Segment Results from operating activities
Toys and related products44,471
5,217
Motors40,872
37,207
Electrical household appliances(907)
690
Material development2,270
2,720
Final dividend per share
HK4.0 cents
HK2.5 cents
Earnings per Share
- Basic
HK14.80 cents
HK7.35 cents
- Diluted
HK14.76 cents
HK7.33 cents
Kin Yat Holdings Limited (HKEx: 638) is an industrial group with a niche in electronic and mechanical productions. It has a stretch of toy, micro motor, optical disk and material manufacturing businesses, all based on its strong cost-effective engineering and production platform in Shenzhen and Shaoguan, China.
Kin Yat Holdings Limited
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