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KIN YAT HOLDINGS LIMITED
Resilient performance in 1H 2008/09 continues to be underpinned
By toys and AI appliances sales
Hong Kong, December 16, 2008 - Toys, electrical appliances and motor manufacturer Kin Yat Holdings Limited (HKEx: 638) today announces that despite facing some economic headwinds, the Group was able to achieve 16% period-on-period turnover growth of HK$927,851,000 (2007: HK$800,687,000) in the six months ended September 30, 2008, reflecting sales growth in the toys and AI-appliances segments. Profit attributable to equity holders advanced slightly by 2% to HK$62,189,000 (2007: HK$60,865,000) after a year of phenomenal earnings growth and in the midst of escalating production costs in mainland China. The Group declared an interim dividend of HK4.5 cents (2007: HK4.5 cents).
The Group continues to maintain a healthy business mix, with the core operations of toys, electrical appliances and motors each contributing 50% (2007: 51%), 27% (2007: 27%) and 22% (2007: 21%), respectively, of the Group’s turnover during the half year. Meanwhile, the Group will continue to pursue new business development initiatives to drive ongoing dynamic growth over the longer term.
Mr Raymond Cheng Chor-kit, Chairman of Kin Yat Holdings, said: “Our long-standing commitment to advancing capabilities and dimensions led to establishment of a second production base in Shaoguan, northern Guangdong, back in 1998, to complement the more sophisticated operating base in Shenzhen, and to underpin the Group’s overall cost advantage. Meanwhile, since our inception we have established a strong niche in research-and-development-driven production. This has allowed us to rise above the fierce competition in the lower-end segment and gain a firm foothold in the ‘blue ocean’ of the high-end arena.”
The Group looks beyond the bleak short-term outlook and keep its eyes firmly fixed on medium- to long-term growth opportunities. Thanks to a strong financial position, the Group is able to invest in expanding its motor operation with a view to widening its market foothold in the midst of an industry slowdown.
Spurred by ever-present growth aspirations, the Group’s third production base in Shaoguan, Guangdong Province, Mainland China, went into service in the last quarter of 2007, providing additional capacity for toy and AI-appliance manufacturing. The Group currently operates three major fabrication centers, in Shenzhen and Shaoguan, producing toys, appliances, motors and display-related materials, of varying technical and manpower requirements.
The toys division has benefited from an industry consolidation in the face of ever more stringent requirements being imposed on manufacturers, slackening global demand and volatile commodity prices. Geared up to target the top-end product lines, the operation’s strategy is to focus on premium movie-and-entertainment-related toys. The entertainment sector is also less seasonal in nature, thereby allowing the Group to achieve a more stable year-round order book, enabling it to fully maximize utilization of its manufacturing capabilities and manpower productivity.
The division’s turnover advanced further by 14% to HK$465,637,000 (2007: HK$407,455,000), mainly contributed by the strong line-up of movie-and-entertainment toys ranges that tie in with scheduled launches of major action-hero and other films in 2009 and 2010. The current order book will occupy the Group’s production lines up to the second quarter of 2009.
The electrical-appliances division continues to be the Group performer, with turnover growing a further 16% period-on-period to HK$254,883,000 (2007: HK$218,913,000), after an 11-fold annual turnover increase for the year ended March 2008. The turnover increase mainly reflects sales orders for the range of vacuum-cleaning robots developed with NASDAQ-listed iRobot Corporation (“iRobot”).
Market acceptance of the vacuum cleaning robot series remains positive, and the division has stepped up cooperation with iRobot in the development of other prospective AI electrical household appliances.
Kin Yat branched out into micro-motor production in 1999 as part of its business diversification efforts. In the first six months of the reporting year, the division generated external sales of HK$204,939,000 (2007: HK$171,617,000), up 19% period-on-period. The spike in production costs as a result of increases in copper and iron prices in the first half has had a negative impact on segment earnings.
During the reporting period, the Group made yet another landmark move to further develop this business unit. On November 22, 2008, the Group entered into a conditional sale and purchase agreement with Sun Motor Industrial Company Limited (“SMI”) and its trustee for the acquisition of all productive assets of SMI located at its Dongguan plant for a consideration of HK$65 million. The acquisition will provide inroads for the Group to tap into new customer bases and ability to produce more types of products such as a broader range of DC and AC motors, at a reasonable price.
The division’s development will call for continued investments that will take time to yield returns for the Group, and therefore are expected to result in interim losses during the investment and initial expansion stage. However, the Group is optimistic about the long-term prospects of this business line.
Mr Cheng added: “In response to the challenges we face, our major plans and activities for the second half of the year will include: the furtherance of our research and development edge to deliver more innovative functionalities for our toy and appliance products; the continued expansion of the motor business line to capture growth opportunities during an industry consolidation; the exploration of business opportunities in the Mainland domestic market as a new source of Renminbi income; and the strengthening of our core competences. Looking to 2009, the steep decline in oil prices will aid toy and appliance manufacturers to a certain extent. The trend of rising labor rates is also expected to ease off to more tolerable levels for manufacturers.”
The Group maintains a strong financial position in support of its development plans. It had cash in hand of HK$150 million (March 31, 2008: HK$97 million) and a healthy gearing ratio of 13.6% (March 31, 2008: 4.6%) as at September 30, 2008.
About Kin Yat Holdings Issued by : Through :
Six months ended September 30,
2008
2007
HK$ '000
HK$ '000
Turnover
927,851
800,687
Toys and related products465,637
407,455
Electrical appliances254,883
218,913
Motors(including sales to Kin Yat Group)206,522
175,608
Sales to Kin Yat Group(1,583)
(3,991)
Resources development2,392
2,702
Net profit attributable to shareholders
62,189
60,865
Segment Results from operating activities
Toys and related products43,518
29,075
Electrical household appliances27,038
17,200
Motors (including sales to Kin Yat Group)14,914
34,810
Resources development(4,986)
(6,691)
Interim dividend per share
HK4.5 cents
HK4.5 cents
Earnings per Share
- Basic
HK15.21 cents
HK14.91 cents
- Diluted
HK15.20 cents
HK14.88 cents
Kin Yat Holdings Limited (HKEx: 638) is an industrial group with a niche in electronic and mechanical production. It has a stretch of toy, electrical appliances and motor manufacturing businesses, all based on its strong cost-effective engineering and production platforms in Shenzhen and Shaoguan, China.
Kin Yat Holdings Limited
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