Financial Review
Turnover for the period under review amounted to USD2,042 million, 10.1% higher than the USD1,855 million reported for the same period last year. Profit attributable to Owners of the Company amounted to USD118 million as compared to USD96 million reported last year, an increase of 22.0%. Basic earnings per share was at US6.43 cents (2012: US5.69 cents).
EBITDA amounted to USD208 million, an increase of 10.7% as compared to the USD188 million reported in the same period last year.
EBIT amounted to USD142 million, an increase of 12.2% as compared to the USD127 million reported in the same period last year.
Result Analysis
Gross margin improved to 34.0% as compared to 33.5% in the same period last year. The margin improvement was the result of new product introduction, category expansion, efficient production in the new PRC facilities, effective supply chain management and volume leverage on our economies of scale.
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Total operating expenses for the period amounted to USD554 million as compared to USD498 million reported for the same period last year, representing 27.1% of turnover (2012: 26.8%).
Investment in product design and development amounted to USD48 million (2012: USD37 million), representing 2.4% of turnover (2012: 2.0%), reflecting our continuous strive for innovation. With our new innovation centre already in full operation, efficiency and cost effectiveness will be further improved and enhanced.
Net interest expenses for the period amounted to USD14 million as compared to USD22 million reported for the same period last year. Interest cover, expressed as a multiple of EBITDA to total interest was at 10.8 times (2012: 7.2 times).
Effective tax rate for the period was at 8.0% (2012: 7.6%). The Group will continue to leverage its global operations to further improve overall tax efficiencies.
Liquidity and Financial Resources
Total shareholders’ funds amounted to USD1.6 billion, as compared to USD1.5 billion at December 31, 2012, an increase of 5.6%. Book value per share was USD0.89 as compared to USD0.85 at December 31, 2012, an increase of 4.7%.
The Group continued to maintain a strong financial position. As at June 30, 2013, the Group’s cash and cash equivalents amounted to USD573 million (USD618 million at December 31, 2012) after the payment of USD25.3 million dividend during the period (nil in first half 2012), of which 45.7%, 33.5%, 8.2%, 5.4%, 5.1% and 2.1% were denominated in RMB, USD, HKD, AUD, EUR and other currencies respectively.
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 26.2% as compared to 37.4% as at June 30, 2012. The gearing improvement is the result of very disciplined and focused management over working capital and free cash flow from operations applied to debt repayment. The Group remains confident that gearing can further improve going forward and will be below the Group’s internal comfort level of 30% – 35%.
Long term borrowing accounted for 31.8% of total debts (34.3% at December 31, 2012).
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 USD39 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.
Total inventory was at USD818 million as compared to USD752 million for the same period last year. The number of days inventory was at 74 days as compared to 73 days as at June 30, 2012. 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 71 days as compared to 64 days as at June 30, 2012. Excluding the gross up of the receivables factored which is without recourse in nature, receivables turnover days were at 64 days as compared to 57 days as at June 30, 2012. The increase in turnover days was mainly due to the increase in trade receivables as a result of the strong sales in May and June 2013. 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 78 days (67 days at December 31, 2012). The increase in turnover days was mainly due to the increase in procurement in the second quarter of 2013 in preparation for peak production in second half year.
Working capital as a percentage of sales was at 18.4% as compared to 18.9% for the same period last year.
Total capital expenditures for the period amounted to USD47 million (2012: USD37 million).
As at June 30, 2013, total capital commitments amounted to USD18 million (2012: USD19 million), and there were no material contingent liabilities or off balance sheet obligations.
None of the Group’s assets are charged or subject to encumbrance.
The Group employed a total of 19,248 employees (2012: 18,521 employees) in Hong Kong and overseas. Total staff cost for the period under review amounted to USD290 million as compared to USD263 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.
