As part of the Group's prudent cash-flow management which has taken consideration the Group's future capital expenditure arising from expansion of its manufacturing facilities in Cambodia and inland China, a final dividend of HK2 cents was proposed.

Mr. Mickey Chen, Chairman and Managing Director of Kingmaker Footwear Holdings said: "While the trading relationship between China and European Union continued to make headlines in the year, we have stepped up efforts to improve product range and mix in favor of those of higher margin and further broaden our customer sphere."

Such efforts have yielded an increased output of premium casual footwear with higher margin, resulting in a 8.40% improvement in the average selling price (ASP) for the year. During the year, the Group increased the share of casual footwear category in total output by 18.43% points to 49.27% through the provision of a wider variety of quality products and superior services to valued existing customers such as Skechers and Clarks.

The Group maintains a balanced product share mix of 49.27%, 16.84% and 33.89% for premium casual, rugged, baby and children footwear respectively. Major growth momentum will continue to be derived from the niche athletic-leisure category.

Despite the changing market environment and the overhanging uncertainties in Europe, the Group continued its diversification strategy and penetrated further to strengthen its market presence. For the year under review, Europe contributed 41% of the Group's total turnover, representing an increase of 7.9% points.

Despite significant pressure on overall order volume growth in Europe, the Group achieved order growth from some customers of very attractive prospects. Additionally, strong negative pressures on Brazilian suppliers have opened up new prospects of additional styles moving to the Group's Vietnam facilities. Under the circumstances, the Group will continue its Europe-driven market penetration strategy while seeking to further diversify its production bases for greater export flexibility.

Meanwhile, the share of the US market to the Group's turnover fell 7.28% points to 53.78%, partly because of the continuing appreciation of RMB.

Geographical diversification of production facilities enables the Group to pursue a more flexible export strategy and cost management. As the manufacturing environment in China's Pearl River Delta region is becoming less favorable with higher labor cost and electricity shortage, the Group has suspended the planned installation of two production lines in Zhongshan.

Instead, the Group has shifted more of its manufacturing activities to the newly established factory in Cambodia. It is expected that the first phase of the Cambodia factory will incur a total investment of approximately HK$30 million when installation of the initial three production lines is completed.

The factories in Cambodia and Vietnam are designed to complement each other to support orders from not only European brands, but also distinctly American brands seeking better balance in production diversification to reduce risk exposure. The development pace of the Vietnam factory should therefore be able to pick up going forward.

The Group is also investigating the feasibility of diversifying its Mainland production base further by setting up facilities in the western provinces, such as Jiangxi where labor and operating costs are cheaper.

Currently, Group operates a total of 38 production lines of which 11 are located in Vietnam, 2 in Cambodia, 9 in Zhongshan and 16 in Zhuhai.

"To stay relevant to the rapidly shifting operating landscape, moved by the combined forces of a continued global outsourcing trend, overhead increases in China, rising material and fuel costs, an unsteady political environment and ever changing customer tastes, the Group upholds its core competences by maintaining a niche product mix supported by strong development capabilities, market diversification, as well as a diversified production base built on a lean manufacturing system," said Mr Chen.

As at 31 March 2007, the Group continued its conservative and healthy cash position and maintained a strong liquidity position which included cash and bank deposits of approximately HK$216 million (2006: HK$240 million). The current ratio was approximately 1.9 (2006: approximately 1.9) based on current assets of approximately HK$524 million and current liabilities of approximately HK$277 million and the quick ratio was approximately 1.33 (2006: approximately 1.3).

About Kingmaker Footwear Holdings
Kingmaker Footwear Holdings Limited (HKEx: 1170) is a premium name-brand manufacturer of baby, fashion casual and rugged footwear. The Group operates 38 production lines in China, Vietnam and Cambodia with a staff of 14,000. Its branded customers include Skechers, 310, Marc Ecko, Zoo York, Michelle K, Lands' End, Avirex, Clarks, Stride Rite and Elefanten, etc.