Full Year Financial Statement For The Year Ended 30 April 2005

Profit & Loss



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Balance Sheet

Review of Performance

The Board is pleased to announce that the Group’s net profit of $8.6 million for the financial year ended 30 April 2005 (“FY2005”) is right on track as highlighted in the last full year results announcement. The Group’s net profit is lower than the last corresponding financial year ended 30 April 2004 (“FY2004”) of $11.5 million, but higher than the previous corresponding financial year ended 30 April 2003 of $8.2 million (“FY2003”).


Dividend

The Board recommends a special dividend of 0.75 cents less tax of 20% per share in addition to the first and final dividend of 1.25 cents per share, totalling approximately $3.37 million as set out in paragraph 11. The combined proposed dividend of 2 cents per share represents a gross dividend rate of 20% based on the par value of 10 cents per share.
Current Year Performance
Group turnover for FY2005 remained relatively flat at $191.3 million, compared to $189.8 million in FY2004. Gross profit margin was sustained at 26.8%.

The increase in overheads of $2.0 million was mainly due to the start-up and running costs of the wheel plant in Thailand, and to the restructuring costs associated with the realignment of our distribution structure.

Share of losses of our associated company arose mainly from the continuing costs of establishing the Dunlop dealers retail network in China.

The increase in finance costs of approximately $0.5 million was due mainly to the
increase in term loan and additional borrowing to finance our wheel plant in Thailand.

Other than the increase in the amount of borrowings, the increase in lending rates also contributed to the higher finance costs.

Financial position
During the year, the change in the Group’s distribution structure has resulted in higher inventory holding by the overseas subsidiaries. The commencement of our Group’s wheel manufacturing activities in Thailand also resulted in an increase in the inventory of raw materials.

Capital investment in the new wheel plant in Thailand and the increase in the number of retail outlets amounted to approximately $10.9 million. These were mainly funded through internally generated funds and long-term borrowings.

The Group reduced its short-term borrowings in trust receipts and bills payable through earlier repayments.

Commentary

Outlook for FY2006

The Group aims for a double-digit growth in revenue through the following:

1. Consistent organic growth of our existing major brands marketed through our integrated concept with value added services
   
   • Falken, Dunlop
   
   
   • Continental
   
   
   • Toyo
   
   
2. Incremental sales through Proprietary Brands Manufacturing programmes:
   
   • Truck Bus Radial outsource contract manufacturing programme which commenced production in May 2005.
   
   
   • Truck Bus Bias outsource contract manufacturing programme which is currently ongoing
   
   
   • Additional output from Stamford Sport Wheel 2nd line of production


3. Further growth is also expected to be achieved from product development and outsource contract manufacturing for Passenger Car Radial, High Performance Car Radial, Light Truck Radial, Off-The-Road and Agricultural tyres

The outlook for the Group will remain healthy for FY2006 as we would benefit from having less geographical restrictions and a wider market coverage. The Group expects its results for FY2006 to be better than that of FY2005.