Ngai Lik Industrial Holdings Limited - Announced 2004 Interim Results

(December 20, 2004 - 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 interim results for the six months ended September 30, 2004.

During the period under review, the Group recorded a turnover of HK$2,008 million as compared with HK$1,652 million in the corresponding period last year, representing an increase of 21.5%. Gross Profit recorded a decrease from HK$190 million to HK$127 million, representing a decrease of 33.2%. Net Profit attributable to shareholders recorded a decrease from HK$121 million to HK$54 million, a percentage decrease of 55.4% from the previous year. The Board of Directors recommended the payment of an interim dividend of 3.5HK cents.

Commenting on the Group's performance, Mr Lam Man Chan, Chairman of Ngai Lik, said, "During the reporting period, the Group has satisfactory improvement in turnover due to the increase in strong sales demand for electronic consumer products after the improvement of the global economy and the benefits from industry consolidation of core traditional industry products. However, high oil prices and growing global demand for commodities contributed to increasing raw material costs. Lower net margins reflected the impact of drastic price increases in key commodity raw materials such as plastic, laminates and metals. Even so, we are glad to see Ngai Lik sustain its satisfactory sales growth and maintain its market leadership despite the challenging operating conditions."

During the six months ended 30 September 2004, sales of home audio products represented approximately 89.8% of the Group's turnover and remains the Group's core business. The Group successfully launched high value digital products like DVD Combos and DVD home theatre systems. Although it received numerous customer orders for products, plastic and other commodity prices also reached new heights around September 2004. In the second quarter of the financial year, average spot prices of plastic raw material price jetted up approximately 50% to 60%. The cost of plastic raw materials was vital for manufacturing consumer electronics goods and the Group's operating costs were significantly increased.

During the period under review, the Group continued to implemented new vertical integration operations like manufacturing of corrugated papers, speakers, connectors and cassette deck motors, upgraded the single layer PCB operations and enhanced the electroplating process. However, the subcontracting charges were maintained at relatively high levels when the various new operations were still undergoing ramp up processes.

The Group rearranged its banking facilities in September 2004 with a HK$350 million syndicated loan facility benefiting from lower finance costs. Its administrative expenses were similar to the corresponding period in previous year at HK$56 million.

During the six months ended 30 September 2004, America remained the Group's largest market followed by Europe. HK$1,314 million and HK$398 million products were sold to America and Europe, accounting for 68.4% and 19.8 % of the total turnover respectively. During the corresponding period in previous year, approximately HK$997 million and HK$390 million of the Group's products were sold to the America and Europe respectively. The Group successfully acquired certain reputable distributors during the relevant period, for further expanding the product distribution in America and Europe.

The Group remained committed to developing new products and new models of existing products with additional features by employing a research and design team of over 300 engineers in Dongguan, producing over 40 newly designed products each year.

During the period under review, the Group continuously worked on enhancing automation in its production process by further acquisition of stamp presses and dies, CNC machinery for moulding operation and installation of swing robots and auto-spraying equipment with C10,000 cleaning room standards. These processes contributed to our overall production efficiency and quality. On top of the existing four sets of fuel oil power generators, the Group acquired an additional set of 4000kw power generator to further cut down its power costs.

The Group also pursues a proactive policy to promote investor relations by increasing the channel of communication. It has just received an award for Overall Regional Best Managed Small Cap Company 2004 for the Hong Kong Region from Asia Money.

Mr. Lam is confident that the Group will achieve better results in the coming year. He concluded, "Looking ahead, Ngai Lik will install new assembly lines, catering to the demand for additional production capacity. The newly developed Qingyuan Industrial Estate has been gradually put into use to increase the Group's production capacity. The Qingyuan Industrial Estate is expected to bring synergies to the two production plants, benefiting from the economies of scale ofr its production. We also plan to implement various energy saving programs in both plants. Additionally, we will continue to evaluate and pursue additional vertical integration processes, providing positive contributions for further reducing overall operational costs. We hope to restore the operating profit margin level and provide reasonable returns to shareholders. Leveraging on our large scale production capability, we see ourselves in a good position to produce mass market products and new high value digital products to increase competitiveness. We will continue to maintain tight cost controls and expand our product range and customer base. We are committed to consolidating our leading market position in traditional audio products, rolling out new products and extending our geographical presence globally for generating impressive returns to our shareholders and customers. "

Company's Background
Ngai Lik is principally engaged in the manufacture and sales of a wide variety of home audio, digital and multimedia products mainly sold to the US and Europe. With 70 production lines in its first production plant located in Dongguan, 10 production lines at the Group's second production plant in Qingyuan has commenced partial operation in the second half of 2003. The Group has been listed on the Stock Exchange of Hong Kong Limited since 1992.

For further information, please contact:

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Kylie Yeung/ Antonia Au/ Callis Lau
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