Half Year Financial Statement 2005
		Profit & Loss
Click here for the complete Half Year Financial Statement 2006 Click here for the Full Year Financial Statement 2005

		Balance Sheet

		Review of Performance
Overview Revenue Our revenue is derived from orders we receive from our customers for the production of die-cast and other collectible products and the related moulds. Our main markets are the US and Europe, accounting for over 90% of our revenue for H1 2006 and 2005. Our revenue decreased by HK$7.1 million or 3.8% from HK$188.1 million in H1 2005 to HK$181.0 million in H1 2006, mainly due to the absence of sales to a mass market client which had accounted for HK$6.2 million sales in H1 2005. Historically, the Group¡¯s revenue has been substantially higher in the second half of the year than in the first half. This is caused partly by the seasonal nature of the client orders and partly by the two-week Chinese New Year Holidays. Gross Profit and Gross Profit Margin Despite a decrease in revenue, our gross profit increased from HK$23.6 million in H1 2005 to HK$28.4 million in H1 2006 due to an increase in our gross profit margin from 12.5% to 15.7%. The improved gross profit margin was mainly due to the elimination of lower margin sales to mass market client, price increases secured from customers during the period to compensate for increases in material and other manufacturing costs and initiatives taken by management to reduce and better control the costs of manufacturing operations. Other Income Other income increased from HK$0.4 million in H1 2005 to HK$0.8 million in H1 2006. The increase was primarily due to increase in interest earned resulting from higher interest rates during the period and revision to the impairment loss on plant and equipment which had been previously recorded in 2005. Selling, Administrative and Operating Expenses Our selling expenses increased by HK$0.6 million from HK$1.9 million in H1 2005 to HK$2.5 million in H1 2006. The ratio of selling expenses to revenue has increased slightly, from 1.0% to 1.4%. The increase is due mainly to higher shipment costs incurred due to smaller shipment sizes. Our administrative and operating expenses increased marginally by HK$0.5 million or 1.8% from HK$25.8 million in H1 2005 to HK$26.3 million in H1 2006. This increase was mainly due to fluctuation in exchange rate. Finance Costs Finance costs increased from HK$0.8 million in H1 2005 to HK$1.9 million in H1 2006. The increase was due to the higher borrowings in H1 2006 compared to H1 2005 as well as an increase in the interest rate environment over the past year. Share of results of an associate This relates to our 50% associate, Tamiya Creative Master Engineering Limited (¡°TCME¡±), which provides consultancy services to third party mould manufacturing businesses. The increased contribution from HK$0.2 million in H1 2005 to $0.5 million in H1 2006 is due to TCME¡¯s improved performance. . Taxation Though the Company is incorporated in Bermuda, its principal operating subsidiaries are incorporated in Hong Kong and are subject to Hong Kong taxes at a statutory rate of 17.5%. Despite a loss before taxation in both interim periods presented, tax expense was incurred in both periods and it increased to HK$1.2 million in H1 2006 from HK$0.6 million in H1 2005. The increase was mainly due to the increase in taxable profits from subsidiaries which cannot be set-off against losses from other subsidiaries. For Hong Kong profits tax purposes, the Group has substantial tax loss carry-forwards generated by certain subsidiaries. These loss carry-forwards can be used to offset future taxable profits which may be generated by these particular subsidiaries. Net (loss) profit attributable to the equity holders of the parent Our mould manufacturing subsidiaries, which all have minority shareholders, recorded in the aggregate, lower profits in H1 2006 compared to the corresponding period in 2005. As a result, profit attributable to minority shareholders decreased by 21.8% from HK$3.0 million in H1 2005 to HK$2.3 million in H1 2006. Net loss attributable to equity holders of the Company for H1 2006 amounted to HK$4.6 million as compared with a net loss of HK$7.9 million in H1 2005. Balance Sheet and Cash Flow Trade receivables decreased by HK$14.4 million from HK$88.7 million at the end of 2005 to HK$74.3 million as at 30 June 2006, with receivables at approximately 74 days¡¯ sales as at 30 June 2006. Inventories decreased by HK$3.5 million during H1 2006 as a result of lower sales volumes in the first half of this financial year compared to the second half of FY 2005. Trade and other payables decreased by HK$15.8 million to HK$63.7 million in H1 2006 compared with HK$79.5 million as at 31 December 2005, mainly as a result of a lower inventory level, general reduction in activity, and a reduction in deposits from customers due to the completion of various third-party mould projects during the period. In H1 2006, capital expenditures of the Group amounted to HK$3.7 million and were mainly for up-grade of existing finished goods manufacturing facilities and additional equipment for mould manufacturing. Total bank and interest-bearing borrowings (short and long term) was HK$38.1 million as at 30 June 2006, representing a net decrease of HK$13.9 million during H1 2006. This compares to total equity (including minority interests) of HK$109.7 million as at 30 June 2006. No dividend payment was made to shareholders of the Company. Dividend payments made to minority shareholders amounted to HK$0.3 million during H1 2006. In spite of the net loss attributable to the equity holders of the Company of $4.6 million in H1 2006, the Group generated positive cash flow of HK$13.9 million from operations, largely as a result of HK$11.4 million in depreciation expense incurred during H1 2006 as compared to HK$11.0 million in H1 2005. However, after capital expenditures, repayment of interest-bearing debt, and certain other items mentioned above, cash and cash equivalents of the Group reduced during the period by HK$6.7 million to HK$6.1million as at 30 June 2006.

		Commentary On Current Year Prospects
Volatility of Raw Material Costs The price of zinc, which is one of the principal raw materials used in the manufacture of our die-cast products, has gone up significantly since the beginning of the year. Its price has also been extremely volatile during 2006, ranging from below US$2,000/tonne to over US$4,000/tonne. To minimize our exposure to sudden price rises, we have agreed with most of our major customers to index-link the market cost of zinc as a basis for pricing of new orders. RMB Revaluation and PRC Labour Cost Since July 2005, the PRC government has allowed the currency of the PRC (the ¡°RMB¡±) to float against other currencies. Since our revenue is generally denominated in U.S. dollars and a substantial portion of our costs are in RMB, an upward revaluation of the Chinese RMB against the US dollar will mean an increase in our manufacturing costs in US currency terms. Such increases will have a negative impact on our operating margins if not recovered from our customers. In March 2005, there was an approximately 30% increase in the minimum basic hourly labour rate to factory workers which was directed by the local PRC government. There is reasonable possibility that the local PRC government may direct a further increase in the minimum basic wages later this year. If this happens, there will be a corresponding increase in our manufacturing costs. This will have a negative impact on our operating margins if we are unable to fully pass on the cost increases to our customers. We believe however that presently, the majority of our principal competitors have Chinese based operations and will be similarly affected by the above-mentioned cost increases. We therefore seek to mitigate any cost increases by passing, as far as possible, such cost increases to our customers in the form of higher quotations on current and future orders. Increasing Manufacturing Costs The continued increase in the manufacturing cost of our die-cast products is likely to have an adverse impact on demand for our products. This is particularly so in the case of customers catering to mass-market retailers who tend to be more sensitive to price increases. To replace the loss of revenue from other ¡°more price-sensitive¡± clients, we intend to capitalize on our reputation as a manufacturer of high-quality products to develop and secure new collectible and hobby clients. We have in 2006 been selected as one of the PRC manufacturers of a large European¨Cbased hobby train client with first shipments to this customer expected to commence in the second half of 2006.

Copyright © 2004 Listedcompany.com All Rights Reserved. Please read our General Disclaimer & Warning carefully. Use of this Website constitutes acceptance of the Terms of Website Use.