Turnover for the period under review amounted to USD 1,855 million, 4.0% higher than the USD 1,784 million reported for the same period last year. Profit attributable to Owners of the Company amounted to USD 96 million as compared to USD 80 million reported last year, an increase of 20.1%. Basic earnings per share was at US 5.69 cents (2011: US 5.00 cents).
EBITDA amounted to USD 188 million, an increase of 10.4% as compared to the USD 170 million reported in the same period last year.
EBIT amounted to USD 127 million, an increase of 10.4% as compared to the USD 115 million reported in the same period last year.
Gross Margin
Gross margin improved to 33.5% as compared to 32.9% in the same period last year. The margin improvement was the result of new product introduction, category expansion all with higher margin, efficient production in the new PRC facilities, effective supply chain management and volume leverage on our economies of scale.
Operating Expenses
Total operating expenses for the period amounted to USD 498 million as compared to USD 474 million reported for the same period last year, representing 26.8% of turnover (2011: 26.6%). The Group continued to control non-strategic SG&A expenses and reinvested into strategic SG&A as planned.
Investment in product design and development amounted to USD 37 million (2011: USD 31 million), representing 2.0% of turnover (2011: 1.8%) reflecting our continuous investment in R&D even in times of economic challenge. With our new innovation centre in full operation in current period, efficiency and cost effectiveness is expected to be further improved in the coming years.
Net interest expenses for the period amounted to USD 22 million as compared to USD 28 million reported for the same period last year. Interest cover, expressed as a multiple of EBITDA to total interest was at 7.2 times (2011: 5.9 times).
Effective tax rate for the period was at 7.6% (2011: 8.0%). The Group will continue to leverage its global operations to further improve overall tax efficiencies.
Shareholders’ Funds
Total shareholders’ funds amounted to USD 1.5 billion, as compared to USD 1.2 billion at December 31, 2011, an increase of 16.9%. Book value per share was USD 0.80 as compared to USD 0.78 at December 31, 2011, an increase of 2.6%.
Financial Position
The Group’s net gearing, expressed as a percentage of total net borrowings (excluding bank advance from factored trade receivables which are without recourse in nature) to equity attributable to Owners of the Company, improved to 37.4% as compared to 66.1% as at June 30, 2011. The gearing improvement is the result of our business growth and all the convertible bonds been converted into shares during the period. The Group remains confident that gearing will improve further after the successful implementation of key initiatives to deliver focused and stringent working capital management.
Bank Borrowings
Long term borrowing accounted for 33.7% of total debts (33.1% at December 31, 2011).
The Group’s major borrowings continued to be in US Dollars and HK Dollars. Borrowings are predominantly LIBOR or Hong Kong best lending rates based. There is a natural hedge mechanism in place as the Group’s major revenues are in US Dollars and currency exposure therefore is low. Currency, interest rate exposure, and cash management functions are all being closely monitored and managed by the Group’s treasury team.
During the period, the Group repaid USD 30 million of fixed interest rate notes, refinanced by other bank facilities with lower interest rates. This refinancing arrangement will lower our interest cost in future periods.
Working Capital
Total inventory was at USD 752 million as compared to USD 801 million for the same period last year. The number of days inventory was at 73 days as compared to 82 days as at June 30, 2011. When compared to the year end level, inventory at the end of the first half of the year is normally higher in preparation for the peak shipment period in the second half of the year.
Trade receivables turnover days were at 64 days as compared to 68 days as at June 30, 2011. Excluding the gross up of the receivables factored which is without recourse in nature, receivable turnover days were at 57 days as compared to 61 days as at June 30, 2011. The Group is comfortable with the quality of the receivables and will continue to exercise due care in managing credit exposure.
Trade payables days were 69 days (62 days at December 31, 2011).
The Group’s current ratio increased from 1.23 times to 1.33 times and the quick ratio also increased from 0.79 as at December 31, 2011 to 0.86.
Working capital as a percentage of sales was at 18.9% as compared to 22.1% for the same period last year.
Capital Expenditure
Total capital expenditures for the period amounted to USD 37 million (2011: USD 44 million).
Capital Commitment and Contingent Liability
As at June 30, 2012, total capital commitments amounted to USD 19 million (2011: USD 10 million), and there were no material contingent liabilities or off balance sheet obligations.
Charges
None of the Group’s assets are charged or subject to encumbrance.
Human Resource
The Group employed a total of 18,521 employees (2011: 19,360 employees) in Hong Kong and overseas. Total staff cost for the period under review amounted to USD 263 million as compared to USD 251 million in the same period last year.
The Group regards human capital as vital for the Group’s continuous growth and profitability and remains committed to improve the quality, competence and skills of all employees. It provides job related training and leadership development programs throughout the organization. The Group continues to offer competitive remuneration packages, discretionary share options, share awards and bonuses to eligible staff, based on the performance of the Group and the individual employee.
