Mr Mickey Chen, Chairman and Managing Director of Kingmaker Footwear Holdings reported: "Our niche market position and production competence, together with our financial strength, prudence and our hands-on management style stood us in good stead."

Faced with soft consumer sentiments and picking up the prevailing casual trend in fashion, Kingmaker helped its customers develop a new mid-range "athleisure" footwear line. The Group's capability to re-organize product development and production swiftly to adapt to fashion changes has placed it advantageously as a production partner of choice for a growing list of prestigious footwear brands in the world.

Average selling price was marginally down by 3.46% reflecting the shift in product mix towards the mid range. The Group continued to maintain a balanced portfolio in terms of geographical spread and product categories. The US and European markets contributed 63.23% and 30.49% respectively of Group turnover. The three main product categories - baby and children, casual and rugged footwear - also produced a healthy market balance of 44.15%, 31.33% and 22.86% respectively.

Revenue growth was mainly driven by robust performance in the European market and casual footwear lines. European labels, such as Geox, Impronte and Stonefly were added to the Group's customer portfolio, and previous market development efforts in Europe have begun to crystallize into more significant orders from new customers like Elefanten.

In step with customers' order forecasts, the Group has added 5 more production lines during the year to a total of 30 as at the end of the period, including 17 lines in the Zhuhai main facilities, 6 line in the new Zhongshan plant, 6 in Vietnam and 1 in Macau.

Additional contribution was recorded in the Vietnam plant. After two years of operation, this new production base has become a fully-fledged operation with 6 dedicated production lines for European customers. It accounted for 20% of the Group's total output and became profitable last year. Construction of new premises adjacent to existing facilities has already been completed. Equipment installation and trial run is scheduled for the end of this year.

The Group's main facilities in Zhuhai, China were upgraded and re-organized to optimize production efficiency and working environment for staff in compliance with the strictest human rights requirements of the US and Europe. As a result, administrative expenses rose 19.68% during the year. This, coupled with increased freight costs during the US port lock-out and the decline in interest income of about HK$10 million, had a considerable negative impact on the overall net margin of the Group.

With the gradual easing off of growth momentum of the baby footwear line and the continuing growth of the baby boomers looking for comfort, the Group is focusing on the growing casual sector for special and additional impetus. It is currently working with Cat, Skechers, Timberland and other new customers such as Nautica, Diesel and Pony to develop new fashionable ideas to extend the potential of casual footwear.

Mr Chen continued: "Visibility of business orders for coming months remains low. We are confronted by a high degree of economic instability, compounded by political uncertainties in our core markets. This will inevitably result in additional pressure on our margin. To cope with mounting difficulties, we pledge to redouble our management enhancement and production optimization efforts in the coming year. We expect to emerge from this process an even stronger producer, better able to serve the world's premium footwear brands and effectively compete in the increasingly challenging operating environment."

The Group continued to maintain a strong financial position, with cash in hand of HK$166 million and net asset value of HK$629 million as at March 31, 2003. Gearing ratio was kept at a minimal level of 6.6%.

In recognition of the Group's corporate governance initiatives, it was conferred two coveted corporate awards in the past year, including being voted as a "Rising Star in Best Corporate Governance, Hong Kong" by The Asset and named for the second consecutive year, one of "The World's 200 Best Small Companies" by Forbes Global.

About Kingmaker Footwear Holdings
Kingmaker Footwear Holdings Limited (SEHK: 1170) is a premium brandname footwear manufacturer of baby and fashion casual footwear. The Group operates 30 production lines in China and Vietnam with a staff of 18,000. Its largest branded customers include Skechers, Timberland, Stride Rite, Wolverine and Clarks. The Group was named "The World's 200 Best Small Companies" by Forbes Global in October 2002 for the second year in a row.

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