(July 8, 2002 - Hong Kong) - Ngai Lik Industrial Holdings Limited ("Ngai Lik" or "the Group"; stock code: 332), a leading player in the electronics manufacturing services industry, announced its annual results for the year ended March 31, 2002. During the year, the Group's turnover totaled HK$2,847,547,000, representing a 3% decrease over the previous year. Impressing profit growth with profit attributable to shareholders amounting to HK$220,188,000, a rise of 16% from previous year. Electronics Manufacturing Services ('EMS') division accounted for 93% of the Group's total turnover while Motorcycle division accounted for the remaining 7%.
Steady business expansion and promising profitability enable the Board of Directors to declare a higher dividend payment for the year. As a result, the Board of Directors recommended the payment of a final dividend and special dividend of 4 HK cents and 3 HK cents per share respectively, bringing the total dividend for the year to 13 HK cents, an increase of 188% over last year.
Commenting on the Group's performance in EMS division, Mr Lam Man Chan, Chairman of Ngai Lik, said, 'In view of the sluggish world economy and the 911 incident in America, the year under review was indeed challenging. Despite of this, the EMS division continued to perform. While sales turnover fell by a modest 0.3%, gross profit margin grew by 1%, proving that scalability and vertical integration enable the Group to consistently increase profits through greater efficiency, tight cost control and economies of scale.
'The steady performance in turnover reflected consistent demand for mass market home audio products, especially in the US and European markets. The 911 incident has further made US consumers more family and community-oriented. Their purchases mostly focused on basic and in-home items.'
The Group takes pro-active steps in expanding its market reach. During the year, the Group successfully solicited new customers including Germany's electronics conglomerate, Siemssen & Co and a major French retailer, Auchan.
Ngai Lik also broadened its product line during the year under review. The Group emphasised moving towards higher-margin products at one end of the product spectrum, while ensuring goods are competitively priced at the other end of the product line. New products include digital, multi-media and higher-priced items spanning home theatre, digital cameras and DVD players. Strong clients and business partners comprise a cross-section of the world's top retailers, while OEM continued to service some of the world's top consumer electronic brands.
During the year, the Group expanded its vertical integrated production facilities. We purchased 40 new plastic injection machines, increasing overall production capacity and reduced subcontracting charges. Two additional four-colour and two-colour printing presses have also been installed.
The Motorcycle division's sales declined by HK$91,000,000, reflecting keen competition in the PRC motorcycle engine market. The Group has already shifted its focus to designing and selling assembled motorcycles and the construction of the new motorcycle plant in Dongguan, the PRC was completed in February 2002. Phase one of the new plant commenced operation in March 2002.
Mr Lam commented, 'As a step to streamline and re-engineer our motorcycle division, the Group sold some fixed assets in Taiwan and cut its capital in the Taiwanese subsidiary. This resulted in a one-off loss of about HK$3.6 million. However, we are confident that the move will be beneficial to the Group's long-term development. Complete motorcycles should now be a major profit generator and the Group plans to build our own brands "Tontse" for high-end market and "Tony" for middle to low-end markets through aggressive marketing and promotional activities such as television advertisements in the PRC.'
The Group plans to use the same successful vertical integration that has underpinned its EMS division in motorcycle operations. Although plant expansion means production lines were temporarily interrupted, the Group expects stable growth in the PRC market where demand is around 10 million units annually. Ngai Lik is also confident that the new plant will help to achieve better profit margins, order fulfillment and synergies.
Mr Lam is confident the Group will continue its success in the coming year. He said, 'Based on the encouraging consumer demand and the rapid inventory adjustment in the US, the market recovery will lead to a fresh, cyclical rebound in production demand. Orders for consumer electronics and home entertainment products saw good results during Christmas 2001, and will flow through to cost effective and efficient EMS players. The Group has already recorded a double-digit sales growth from April to June 2002. Home audio products will remain the key driver of the Group' revenue growth. With the growing popularity of digital products including DVD players, sales will take off and provide further growth impetus for Ngai Lik.'
For further production expansion, the Group will build a new industrial estate in Qingyuan, the PRC. With the completion of Phase one, ten assembly lines will be added and operation will be commenced in second quarter of 2003. The Group will also further vertically integrate certain of its manufacturing processes, such as electroplating, flexible PCB, springs and paper packaging, which are essential parts of the EMS operation.
As for the motorcycle division, Mr Lam said, 'With new production capacity and more proactive market efforts, a recovery is on the horizon. A key emphasis of our motorcycle strategy is vertical integration and cost control. Emulating the successful formula of our EMS division, the Group plans to carry out more component production in-house and to reduce the subcontracting of certain processes, such as spray painting, coating and lacquering. Lower costs should enable the Group to compete more effectively, leading to increased market share, rapid ramp-up in production and better economies of scale.'
Mr Lam concluded, 'The Group's success can be summed up by four factors. Firstly, the Group continues to expand its customer base and secure a large share of business from its existing customers. Secondly, we focus on developing low cost products for the mass market, utilizing economies of scale and extending our range of products. Thirdly, gross margin improvement is ensured due to cost savings from in-house power generators, majority of components produced in-house and stringent cost control. Last but not least, we adopt strong financial control and proactive cash management policies like the syndicated loan we signed in May. With confidence in the market, the Group has expanded and upgraded production facilities for its EMS and motorcycle divisions as well as investing in new technologies. The benefits of these investments in the form of improved sales and profit margins should start to flow through in the coming year.'
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Company Background
Ngai Lik is principally engaged in the manufacture and sales of a wide variety of home audio, digital and multimedia products. In addition, the Company also designs motorcycle engines and trades motorcycle engine parts. It has been listed on the Stock Exchange of Hong Kong Limited since 1992.
For further information, please contact:
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Venus Lau/ Callis Lau/ Ellen Zee
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Fax : 2136 6068/ 2136 6118
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