Thursday, March 28, 2024
 
Columnist
Martin Hennecke
 
KENFORD GROUP
HKEx Stock Code : 00464 
 
Corporate Profile
The principal activities are design, manufacture and sale of electrical hair care products, electrical health care products and other small household electrical appliances.

Business Review - For the year ended March 31, 2013

With the PRC Government encouraging investors to change their processing factory operations into wholly foreign-owned enterprises (¡§WFOE¡¨) through incentive schemes, the Group had completed the process of changing its Dongguan processing factory to a WFOE in August 2011.

The market demand for electrical products was adversely affected by the unsatisfactory performance of the global economy in the first half of 2012. With the improved global growth in the second half of the financial year, the Group was able to achieve a better turnover than in the previous financial year. Nevertheless, the Group has faced a series of operating challenges shared by other manufacturers in Mainland China, such as the appreciating Renminbi, along with increased operations costs and general expenses. Though the Group's gross profit margin was hit by these factors, and it was very difficult to pass all the increased expenses on to customers, the Group still recorded an improvement in net cash and net cash to equity ratio.

In order to sustain our competitiveness in this industry, the Group is allocating more resources to the research and development (¡§R&D¡¨) of new innovative and value-added applications in its haircare products especially in the area of hair nutrition, over-heating indicators, quiet performance and all-in-one multi-functionality so as to address the increasing concern of today's consumers' about grooming their hair in additional to styling. During the financial year under review, the Group successfully incorporated a number of innovative features in its leading products. Highlights include a multi-function automatic beauty hair styler with both straightener and curling tong functions and a hairdryer with a novel ultrasonic mist generation feature that can penetrate the hair and enhance the health of the hair and scalp during the hair drying process.

Besides our in-house R&D team, the Group also collaborates with university and other outside research teams in product development. The cooperation with Hong Kong Polytechnic University has delivered cost-effective research results. The strengthened R&D capabilities enable the Group to more quickly develop and efficiently ramp up production of its new products. It also provides new business momentum for the Group to more quickly tap opportunities in this industry and enhance its competitive advantage.

During the current financial year, the Group faced the same operating challenges as other manufacturers in Mainland China, such as slow recovery in exports markets, the appreciating Renminbi and increased operations costs and general expenses. The monthly minimum wage in Dongguan has been confirmed to increase from RMB1,100 to RMB1,310 effective May 2013. At the same time, the market still expects the RMB to appreciate by 2-3% by the end of this calendar year. But amidst the macroeconomic uncertainty, prices for metal commodities, such as copper, lead, and aluminium alloys, are stabilising, which can provide some relief to the cost pressures on the Group.

Labour shortage remained as a serious issue in China, which has led to significant increases in labour costs and has inevitably placed a heavier burden on the whole manufacturing process. To cope with this issue, a strategic direction of the Group is to transform itself from a labour-intensive operation into a more capital-intensive enterprise. To implement this transformation, the Group has continued to devote more resources to upgrade its manufacturing platform. Towards this end, it has strived to improve the competitiveness of its production system by adopting the ¡§Lean Programme.¡¨ The objective of this programme is to increase production efficiency and eliminate wastage and, ultimately, reduce costs.

The immediate goal of the Group is to monitor the on-going initiatives to both improve operational efficiency and invest in people and processes to support the long-term development of the Group.

Business Outlook - For the year ended March 31, 2013

In view of the mixed sentiment prevailing across global consumer markets, the Group expects several key challenges ahead in the years to come: 1) the growth momentum of the global economy especially the United States and European markets is still uncertain; 2) the appreciation of the RMB currency; 3) the continued labour shortage in Mainland China; 4) the rising manufacturing and labour costs and 5) the shorter life cycle of consumer electrical products, which in turn increases the difficulties in resources planning and the ability to predict sales orders.

Nevertheless, the Group intends to continue strengthening its R&D capabilities, enhancing product diversification, automating the manufacturing process and also devoting considerably more resources in developing higher margin and innovative products.

As one of the key global haircare product manufacturers, the Group will continue to align its strategic direction reinforcing its position as a major ODM supplier to the world's leading brand owners. Our strength in advanced and innovative product design and development will drive the sales growth momentum in the years to come. Moreover, our bolstered R&D capabilities supplemented by collaboration with key leading universities provide a mature platform for the Group to expand into the haircare manufacturing sector which is currently undergoing consolidation when the global economy picks up in the near future.

Source: Kenford Group (00464) Annual Report 2013
Chairman Lam Wai Ming Issued Capital (shares) 439M
Par Value HKD 0.001 Market Capitalisation (HKD) 165M
 
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