Chairman's Statement |
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Chairman's Statement There were no surprises in our performance for the year. The ever challenging operating environment, exacerbated by unfavorable currency movements and coupled with an extremely soft consumer market in the United States, has had a severely detrimental impact on most manufacturing industries and companies. The Group was no exception in this respect. As anticipated earlier in the year, our revenues slipped 6.7% and net profit dropped 61% from the previous year. The changes in industry policies in China, which effectively elevated the operating cost of labor intensive manufacturing industries, have caused many companies to look for structural and operational changes. Some of these relocated from the Pearl River Delta to lower cost regions, others – especially those in the price-sensitive segment of the export business – simply could not survive the deteriorating operating environment and as a consequence, their businesses folded. At Top Form we followed our game plan laid down more than a year ago and made strategic adjustments with the objectives not only to navigate through this storm of changes, but to reposition ourselves for further growth with new business approaches: we continued the effort to build our EU business which resulted in the sales increase in both percentage and absolute dollar terms to partly offset the shortfall in the US business; we enhanced our product development functions to support the growth of our ODM business, particularly with those retailer customers in Europe; we trimmed our output by downsizing our most expensive capacities in China and Thailand and at the same time started to replace the lost capacity by expanding in the low cost areas in both regions. Most notably, at the SGM held on 5 September, 2008 the Group was given shareholders’ consent to conditionally acquire ACE Style Intimate Apparel Limited and three of its fellow subsidiaries. ACE Style, a $1.1 billion sales company founded by Andrew and Mimi Sia, is a highly respected company in the brassiere trade known for its strengths in marketing and product development. This acquisition when completed will mark a breakthrough in the Group’s pursuit of growth and new distribution channels in all markets. Top Form and ACE Style have different and complementary competitive advantages. In meshing the strengths, expertise and capacities of the two companies, it will solidify the enlarged Group as the leading supplier in the brassiere trade in terms of size, product capabilities, value-added services and diversity in global operations. We are also excited of the prospect of Andrew Sia joining us as an Executive Director of the Group upon completion of the Acquisition. The addition of Andrew and his team will undoubtedly enhance our management structure and capabilities in facing the forthcoming challenges and opportunities. On a regretful note, I report the resignation of Mr. Leung Tat Yan from your Board of Directors which took effect from January this year. Mr. Leung had been associated with Top Form companies for 24 years and he was appointed to your Board in 2006. I, on behalf of the Group, want to take this opportunity to express our appreciation for Mr. Leung’s years of fine service and contributions to the Group. The general outlook for the next twelve months remains bleak. The U.S. being our largest market, is heavily clouded by the credit risks and the concern is that it may soon affect the EU market as well. Looking at Asia, the rising costs and the deteriorating operating environment have resulted in profit erosion for manufacturing operations. At Top Form we are thankful for the moves we have made as we are well positioned in the new landscape of our business. While we are prudent in our expectations, we are also confident that we will do better in the coming year. We will continue to reshuffle our capacities and to expand into the low cost areas; we will start integrating the structures and operations between Top Form and ACE Style for enhanced cost and operational efficiencies. We are in the process of setting up a satellite plant outside Guangdong, which will be operative before the end of the year. This satellite operation, if proven successful, may lead to the investment in a fully fledged factory operation in 2009. Your Board, having considered the need to conserve cash in order to take on the challenges and the opportunities in an adverse business climate, has decided not to propose any final dividend for the fiscal year ended 30 June 2008. An interim dividend of HK$0.015 per share was paid during the year. I want to, on behalf of all Board members, thank our shareholders for their support and, last but not least, to our employees for their hard work during these difficult times.
Fung Wai Yiu
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