HONG KONG, Dec. 4 /Xinhua-PRNewswire-FirstCall/ --
HIGHLIGHTS
-- Turnover up 68% to US$1,052 million
-- EBITDA up 68% to US$142 million
-- Operating profit up 56% to US$96 million
-- Net profit attributable to shareholders up 22% to US$65 million
-- Earnings per share up 22% to 1.76 US cents per share
-- Interim dividend of 4.5 HK cents per share (0.58 US cents per share)
-- Borrowings reduced by US$80 million to US$628 million
The Directors announce that the unaudited consolidated profit
attributable to shareholders for the six months ended 30th September 2006
was US$64,746,000, an increase of 22% over the corresponding period in 2005.
FINANCIAL RESULTS
The unaudited condensed consolidated profit and loss account for the six
months ended 30th September 2006 together with comparative figures for the
corresponding period in 2005 is set out below:
CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT
Note 2006 2005
US$'000 US$'000
Sales 2 1,052,324 626,393
Cost of goods sold (774,446) (467,933)
Gross profit 277,878 158,460
Other gains, net 6,239 5,191
Selling and administrative expenses (182,805) (102,013)
Restructuring costs / provisions (5,082) --
Operating profit 3 96,230 61,638
Finance costs (15,159) (38)
Share of profits less losses of jointly
controlled entities / associated companies 169 1,629
Profit before income tax 81,240 63,229
Income tax expenses 4 (15,030) (10,269)
Profit for the period 66,210 52,960
Attributable to:
Equity holders of the Company 64,746 52,857
Minority interests 1,464 103
66,210 52,960
Interim dividend 5 21,195 21,195
Earnings per share for profit attributable to the
equity holders of the Company during the period
(expressed in US cents per share)
Basic 6 1.76 1.44
Diluted 6 1.76 1.44
CONDENSED CONSOLIDATED BALANCE SHEET
Note Unaudited Audited
30th September 31st March
2006 2006
US$'000 US$'000
ASSETS
Non-current assets
Properties, plant and equipment 388,706 378,543
Investment properties 17,202 17,202
Leasehold land and land use rights 25,291 25,355
Intangibles 656,302 631,592
Jointly controlled entities 895 16,494
Associated companies 2,521 2,271
Deferred income tax assets 28,628 32,662
Available-for-sale financial assets 6,193 5,294
Investments in finance leases -- 152
1,125,738 1,109,565
Current assets
Stocks and work in progress 295,024 233,379
Trade and other receivables 7 460,589 418,177
Derivative financial instruments 17,157 7,989
Other financial assets at fair value
through profit or loss 1,838 2,707
Income tax recoverable 2,534 3,716
Bank balances and cash 152,596 238,510
929,738 904,478
Current liabilities
Trade and other payables 8 333,997 287,688
Current income tax liabilities 19,742 18,349
Derivative financial instruments 12,700 579
Borrowings 71,723 184,920
Provisions and other liabilities 8,816 12,542
446,978 504,078
NET CURRENT ASSETS 482,760 400,400
TOTAL ASSETS LESS CURRENT
LIABILITIES 1,608,498 1,509,965
Non-current liabilities
Borrowings 556,546 523,193
Deferred income tax liabilities 86,050 88,069
Provisions and other liabilities 47,498 42,899
690,094 654,161
NET ASSETS 918,404 855,804
EQUITY
Share capital 82,062 81,412
Reserves 790,659 724,093
Proposed dividends 21,195 40,035
893,916 845,540
Minority interests 24,488 10,264
TOTAL EQUITY 918,404 855,804
CONDENSED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
2006 2005
US$'000 US$'000
Fair value gains/(losses) on
available-for-sale financial assets 1,291 (832)
Fair value gains on hedging instruments 5,219 --
Deferred tax effect on fair value gains
in hedging instruments (894) --
Actuarial losses of defined benefit plan (3,254) --
Deferred tax effect on actuarial losses
of defined benefit plan 128 --
Adjustment arising on translation of
foreign subsidiaries, associated companies and
jointly controlled entities 21,181 (4,861)
Net income/(loss) recognised directly in
equity 23,671 (5,693)
Profit for the period 66,210 52,960
Total recognised income for the period 89,881 47,267
Attributable to:
Equity holders of the Company 87,814 47,164
Minority interests 2,067 103
89,881 47,267
Note:
1. Principal accounting policies
This unaudited condensed consolidated interim financial information is
prepared in accordance with Hong Kong Accounting Standard (HKAS) 34 "Interim
Financial Reporting" issued by the Hong Kong Institute of Certified Public
Accountants and Appendix 16 of the Listing Rules of The Stock Exchange of
Hong Kong Limited.
The accounting policies and methods of computation used in the
preparation of this condensed consolidated interim financial information are
consistent with those used in the annual financial statements for the year
ended 31st March 2006, except that the Group adopted all the new standards,
amendments to standards and interpretations (new/revised HKFRSs) which are
effective for accounting periods commencing on 1st April 2006. The adoption
of these new/revised HKFRSs did not have material financial impact to the
result of the Group.
2. Segment information
The Group is principally engaged in the manufacture, sale, and trading
of motors, electromechanical components and materials. Revenues recognised
during the six months ended 30th September are as follows:
Primary reporting format -- geographical segments; based on the
geographic segment in which the Group has its manufacturing operations
Operating
Sales profit/(loss)
2006 2005 2006 2005
US$'000 US$'000 US$'000 US$'000
Asia 582,980 462,935 88,956 61,862
Americas 123,333 20,567 (1,728) (972)
Europe 346,011 142,891 9,002 748
1,052,324 626,393 96,230 61,638
2006 2005
US$'000 US$'000
Sales analysed by the Region from which the
customer order
originated
Asia 354,530 243,086
Americas 258,362 153,923
Europe 439,432 229,384
1,052,324 626,393
Secondary reporting format -- business segments based on the Group's
principal activities
2006 2005
US$'000 US$'000
Sales
Manufacturing and sales 1,002,275 594,441
Trading 50,049 31,952
1,052,324 626,393
3. Depreciation and amortisation
During the period, depreciation of US$36,778,000 (2005: US$21,545,000)
and amortisation of US$8,859,000 (2005: US$1,164,000) were charged in
respect of the Group's properties, plant and equipment and intangible assets
and leasehold land and land use rights respectively.
4. Income tax expenses
Hong Kong profits tax has been provided at the rate of 17.5% (2005:
17.5%) on the estimated assessable profit for the period. Overseas tax has
been provided at the applicable rate on the estimated assessable profit in
respective countries of operations for the six months ended 30th September.
2006 2005
US$'000 US$'000
Current taxation
Hong Kong profits tax 7,558 4,181
Overseas taxation 9,551 11,028
17,109 15,209
Deferred income tax (2,079) (4,940)
15,030 10,269
5. Interim dividend
The interim dividends of 0.58 US cents per share are based on the
existing 3,673,788,920 (30th September 2005: 3,673,788,920) shares in issue
(30th September 2005: interim dividends of 0.58 US cents per share each).
6. Earnings per share
The calculations of basic and fully diluted earnings per share are based
on the Group's profit attributable to shareholders of US$64,746,000 (2005:
US$52,857,000).
The basic earnings per share is based on the weighted average of
3,671,775,805 (2005: 3,673,788,920) shares in issue during the period.
There is no significant impact on the fully diluted earnings per share
if all outstanding options are deemed to be issued at no consideration.
7. Trade and other receivables
The Group normally grants credit for a period ranging from 30 to 90 days
to its trade customers. The trade and other receivables include gross trade
receivables of US$409,879,000 (31st March 2006 : US$375,558,000). The
ageing analysis of gross trade receivables was as follows:
61-90 Over 90
0-60 days days days Total
US$'000 US$'000 US$'000 US$'000
Balance at 30th September,
2006 303,154 40,340 66,385 409,879
Balance at 31st March, 2006 284,475 41,226 49,857 375,558
8. Trade and other payables
The trade and other payables include trade payables of US$197,807,000
(31st March 2006: US$194,925,000). The ageing analysis of trade payables
was as follows:
61-90 Over 90
0-60 days days days Total
US$'000 US$'000 US$'000 US$'000
Balance at 30th September, 151,657 19,333 26,817 197,807
2006
Balance at 31st March, 2006 151,055 15,652 28,218 194,925
CHAIRMAN'S STATEMENT
Overview of Financial Results
For the six months period ended 30th September 2006, Johnson Electric
achieved record sales of US$1,052 million, an increase of 68% over the
comparable period in 2005.
The significant increase in turnover was primarily due to the
acquisitions of Saia-Burgess Electronics and Parlex Corporation which were
completed in November 2005. In addition, the sales of two of the Group's
automotive component operations in China are now consolidated following an
increase in shareholdings that have converted these former joint venture and
associated businesses into majority-held subsidiaries. Excluding the
effects of these acquisitions and investments, sales increased by
approximately 6.5% compared to the same period a year earlier.
Johnson Electric's micromotor operations performed satisfactorily in a
challenging market environment typified by high commodity costs and ongoing
competitive price pressures in several market segments. The Group's rapidly
growing trading arm also made progress in expanding its customer base for
sourced precision parts in China and its specialty metals activities
benefited from high material prices and solid demand.
The recently acquired Saia-Burgess Electronics business performed in
line with our expectations during the period. Parlex, on the other hand,
achieved revenue growth slightly ahead of target, but the implementation of
its extensive restructuring program is taking somewhat longer than planned
and one-time costs and charges are delaying its expected progress to
sustained profitability.
Excluding the recently acquired businesses, gross margins improved by
over two percentage points as a result of the combined positive effects of
higher price realisation, product mix changes, and hedging strategies --
which were partially offset by higher material prices and direct labour
expenses. Including acquired businesses, total Group gross margins improved
by 1.1% to 26.4%.
After taking into account the amortisation charges of US$9 million
related primarily to intangible assets arising out of the acquisitions of
Saia-Burgess Electronics and Parlex and the restructuring charges and
provisions of US$5 million related to the closure of plants in Dalian, PRC
and Cranston, USA, the Group's operating profits increased by 56% to US$96
million.
The Group incurred financing charges of US$15 million on the debt raised
to complete recent acquisitions and on associated working capital. During
the period, strong operating cash flows enabled the Group to reduce its
outstanding borrowings by US$80 million to US$628 million.
The consolidated profit attributable to shareholders for the first half
of the financial year increased by 22% to US$65 million or 1.76 US cents per
share.
Interim Dividend
The Directors have today declared an interim dividend of 4.5 HK cents,
equivalent to 0.58 US cents per share (2005: 4.5 HK cents or 0.58 US cents
per share) payable on 4th January 2007 to shareholders registered on 29th
December 2006.
Solid Progress in Integrating Recent Acquisitions
We continue to make solid progress in integrating Saia-Burgess
Electronics into the overall Johnson Electric Group. A key element of this
has involved the reorganization of the Group into two primary divisions:
Automotive Products Group ('APG') and Industry Products Group ('IPG').
In APG, we have brought together Johnson Electric's existing strengths
in micromotors and Saia-Burgess' leading-edge technology in actuators and
switches to create the clear market leader in precision motor and motion
systems for the automotive industry. To ensure that this superior market
position is supported by the lowest cost base in the industry, APG's
management is working to leverage the Group's component manufacturing and
sourcing capabilities in China, as well as streamlining and consolidating
selected production activities where applicable. This includes the
consolidation of Saia-Burgess's Guangzhou operations into Johnson Electric's
main manufacturing operation in Shajing.
In IPG, we have combined Johnson Electric's non-automotive micromotor
operations with the switches and actuator operations of Saia-Burgess'
Industry division. Again, we believe that this combination is unrivalled in
our competitive arena, offering commercial and industrial customers the
broadest range of motion systems solutions available from any single
supplier. The present focus of business improvement efforts in this
division is on reducing costs and response times in the switches operations
and on building on the strength of Saia-Burgess' sales network in Europe to
penetrate new customers for our combined product offering.
The value creation potential of the Group's other recent acquisition --
Parlex Corporation -- is dependent on the successful turnaround of a
previously loss-making business in a rapidly growing market for flexible
interconnect solutions. As noted earlier, at this stage Parlex is still mid-
way through a significant restructuring of its global operations involving a
consolidation of its production activities in North America and the transfer
to and build-up of manufacturing capacity in China.
By successfully bringing together the technology and expertise of
Johnson Electric, Saia-Burgess Electronics, and Parlex into one
organization, the Group is well placed to deliver innovative motion systems
which differentiate us as a supplier and which provide opportunities for
enhanced pricing and profitability.
Prospects
We anticipate making further progress in strengthening the enlarged
Johnson Electric Group's market position in the second half of the financial
year -- especially as various recent integration and consolidation
initiatives begin to deliver their expected economic benefits.
However, at the same time the Group is also facing the combined negative
effects of somewhat softer demand in some of its major markets and further
volatility in raw material input prices. Consequently, we are cautious
about the outlook for near-term sales growth and the opportunity for margin
expansion.
In the medium to longer term, we remain highly confident that the
Group's unique low-cost operating model combined with the broadest range of
motor and motion systems products available in the industry places Johnson
Electric in a strong position from which to deliver sustained profitable
growth over time.
Patrick Shui-Chung Wang
Chairman and Chief Executive
Hong Kong, 4th December 2006
CLOSING REGISTER OF SHAREHOLDERS
The Register of Shareholders of the Company will be closed from
Wednesday, 27th December 2006 to Friday, 29th December 2006, both dates
inclusive, during which no transfer of shares will be registered.
In order to qualify for the interim dividend, all transfers accompanied
by the relevant share certificates must be lodged with the Company's
Registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at
Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wan
Chai, Hong Kong (not the Registrar in Bermuda) for registration, not later
than 4:00 p.m. on Friday, 22nd December 2006.
MANAGEMENT'S DISCUSSION AND ANALYSIS
(INCLUDING FINANCIAL REVIEW)
RESULTS OVERVIEW
Sales
Total Group sales for the half-year ended 30th September 2006 were
US$1,052 million, an increase of 68% over US$626 million in the same period
last year.
The significant increase in sales was primarily due to the acquisitions
of Saia-Burgess and Parlex in November 2005, together with the consolidation
of Shanghai Ri Yong and China Autoparts, Inc. following an increase in
shareholdings that have converted these former joint venture and associated
businesses into majority-held subsidiaries ("acquisitions"). The total sales
contributed by these entities amounted to US$385 million in the first half
of this year and, excluding this impact, the Group's underlying sales grew
by 6.5%.
Overall, sales to Europe were US$439 million (42% of total sales), an
increase of 92%; sales to Asia were US$355 million (34% of total sales), an
increase of 46%; and sales to the Americas were US$258 million (24% of total
sales), an increase of 68%.
Gross Profit
Gross profit of US$277.9 million was 26.4% of sales, strengthening from
25.3% a year ago. Lower steel costs together with price increases for some
products and customers contributed to this improved performance but higher
copper costs in the period served to restrict further strengthening in
margins.
Margin contribution by the acquisitions for the period was US$94.0
million, being 24.4% of sales in those businesses.
Other Gains
Other gains increased from US$5.2 million to US$6.2 million mainly due
to an increase in rental income from investment properties.
Selling and Administrative Expenses ("SG&A")
SG&A of US$182.8 million increased by US$80.8 million compared to the
same period last year. As a percentage of sales SG&A amounted to 17.4%
compared to 16.3% a year ago, reflecting mainly the relatively higher SG&A
rate in the former Saia-Burgess operations.
Of the total SG&A, the acquisitions account for US$71.6 million. This
included a charge for US$7.8 million for the amortization of intangibles
assets for the six month period.
Further, additional warranty and bad debt provisions were established
during the period amounting to US$8.5 million.
Restructuring Costs/Provisions
The Group recorded a US$5.1 million restructuring charge in the period
which relates to the shutdown of the plants in Dalian, PRC and Cranston, USA.
Operating Profit
Operating profit was US$96.2 million, an increase of US$34.6 million or
56.1% from last year. Excluding restructuring costs and the additional
amortization of intangible assets arising from the acquisitions, the
underlying increase was US$47.5 million or 77.1%.
Operating profit contributed by the acquisitions for the period was
US$19.4 million, after accounting for a charge of US$7.8 million for the six
month amortization of intangible assets in the acquisitions and a charge of
US$3.0 million for restructuring in Parlex.
Finance Costs
Interest expense for the period amounted to US$15.2 million. The amount
represents the finance costs incurred on the US$525.0 million bank loan to
fund the Saia-Burgess acquisition and on the loans for the Group's day to
day operational requirements.
The Group used a portion of its cash on hand to reduce borrowings close
to the end of the six month period.
Share of Profits less Losses of Jointly Controlled Entities/Associated
Companies
The Group's share of profits less losses of jointly controlled
entities/associated companies decreased to US$0.2 million from US$1.6
million a year ago. Shanghai Ri Yong and China Autoparts, Inc. which were
included here a year ago, are now consolidated in the Group's results
because of the increased level of ownership in each company.
Income Tax Expenses
The effective tax rate for the period was 18.5%, compared to 16.2% for
the prior period. The effective tax rate for the current period reflects
the inclusion of the profits and tax charge of the former Saia-Burgess
business which was acquired in November 2005, together with the impact of
the tax treatment related to interest on loans for the acquisition. The
effective tax rate in the same period a year ago was higher than the norm
for Johnson Electric because of certain overseas taxation related charges in
that period.
Profit Attributable to Shareholders
Profit attributable to shareholders for the period increased 22% to
US$64.7 million and earnings per share increased equally to 1.76 U.S. cents.
BUSINESS PERFORMANCE
We manage the Group's activities through three business divisions:
Automotive Products Group, Industry Products Group, and Other Businesses.
Automotive Products Group ("APG")
APG is the combination of what were previously Johnson Electric's "AMG"
business and Saia-Burgess' Automotive business. Sales revenue for the APG
was US$520.5 million for the six-month period ending 30th September 2006,
accounting for 49% of Johnson Electric Group's consolidated revenues.
The integration of the pre-existing Johnson Electric activities with
those of Saia-Burgess is progressing in a satisfactory manner and synergies
are being identified in a number of markets and applications including
climate control, door locks, mirror actuators and tailgate assemblies.
Motors
APG's motor sales, comprised mainly of the pre-existing micromotor
business of Johnson Electric, amounted to US$355.2 million for the six-month
period ended 30th September 2006, representing a US$35.8 million or 11%
increase over the same period last year.
Of the total increase, US$25.1 million resulted from the inclusion of
the sales of Shanghai Ri Yong (our former jointly controlled entity which
was not consolidated last year). Excluding the additional sales contributed
by Ri Yong, the sales increase in the Motors segment was US$10.7 million, or
3.4%.
The Powertrain Cooling business, including Ri Yong's contribution in the
current period, recorded sales of US$169.3 million, a 17% improvement
compared to last year, while growth experienced in other units such as Body
Climate and Powertrain Management was offset by a drop in sales for Chassis
Braking unit.
The motors business has been challenged by weakness in the North
American Automotive market where high gasoline prices and cost reduction
programs by OEM's have negatively impacted demand. In contrast, new
programs with European customers have helped to secure new business there
and, in the Asian market, especially in China and Korea, we have seen some
increase in demand both from existing and new customers.
The business was impacted by the increase in raw material prices during
the period but this was offset by overall cost management, benefits from
prior-period restructuring activities and modest price increases for certain
products and customers.
Actuators, Switches, Solenoids and Sensors
This segment, comprised mainly of the former Saia-Burgess automotive
business, generated sales for the six months ended 30th September 2006 of
US$165.2 million, of which US$118.8 million came from the sale of Actuators.
This business segment also encountered weak demand in North America.
However, this was mitigated by gains derived from the successful launching
of new projects by some of our key customers.
Industry Products Group ("IPG")
Total sales revenue for the IPG was US$375.5 million for the six-month
period ending 30th September 2006, accounting for 36% of the Group's
consolidated revenues.
The integration of the pre-existing Johnson Electric activities with
those of Saia-Burgess is progressing in a satisfactory manner and synergies
are being identified in a number of markets and applications including
beverage and vending machines and various infrastructure systems.
Motors
The IPG motor business, comprised mainly of the pre-existing micromotor
business of Johnson Electric, provides tailored motor solutions to global
customers in the Power Tools, Home Appliances, Business Equipment, Personal
Products and Audio-Visual markets. Total sales for the period amounted to
US$286.9 million, an increase of US$11.8 million, or 4.3%, over the same
period a year ago.
The sales increase for the period was generated mainly from the Power
Tools and the Business Equipment and Personal Products sectors.
Sales by the Business Equipment and Personal Products business unit
increased by US$10.7 million, or 21%, to US$62.3 million, driven mainly by
the strength of new product introductions in printing systems and gearbox
applications.
Sales by the Power Tools Business Unit increased by US$3.3 million, or
4%, to US$87.1 million, driven mainly by successes with a number of leading
professional power tool companies where the focus has been on developing new
products.
Sales of the Home Appliance Business Unit remained flat at US$100.3
million, while the Audio-Visual sector experienced a drop of US$1.4 million
to US$37.2 million.
Actuators, Switches, Solenoids and Sensors
This segment of the IPG business represents mainly the former actuator
and switches operations of Saia-Burgess' Industry Division. Sales for the
period were US$88.6 million.
Switches and sensors sales amounted to US$40.7 million for the period.
During the last six months, the manufacturing operations of this business
unit have been undergoing restructuring and consolidation with the aim of
improving its longer-term operational efficiency.
Sales of Actuators and Solenoids contributed US$25.9 million and US$22.0
million respectively during the period.
Other Businesses
The Other Businesses category includes the operations of Johnson
Electric Capital, Johnson Electric Trading, Parlex, and Controls (formerly
of Saia-Burgess).
Overall sales revenue for the Other Businesses was US$156.3 million for
the six-month period ending 30th September 2006 and this category now
accounts for 15% of the total Johnson Electric Group sales. Compared to a
year ago, this category has increased its sales by US$124.4 million in the
six month period.
Johnson Electric Trading was established in 2004-2005 to build a
sourcing platform in China to supply global customers with a wide range of
motor and motor-related electro-mechanical components that are not currently
manufactured within Johnson Electric, and specialty materials. For the six-
month period ending 30th September 2006, sales were US$50 million,
representing an increase of US$18.1 million, or 56%, over the same period
last year.
Parlex, a flexible printed circuit board manufacturer, contributed sales
of US$63.2 million during the six month period to September 2006. The
business is benefiting from the increasing trend in electronic and
electrical products towards greater complexity, miniaturization and
portability.
Controls, a successful niche player in the European programmable
controls industry, also performed ahead of target during the period and
achieved sales of US$30.9 million.
LIQUIDITY AND FINANCIAL RESOURCES
The Group's financial resources and liquidity remained strong throughout
the period.
The Group used a portion of its cash on hand to partially repay working
capital loans in the period. Accordingly, at 30th September 2006, the bank
balances and cash (comprising cash and other financial assets at fair value
through profit or loss) had decreased by US$86.8 million from the position
at 31st March 2006 to US$154.4 million at 30th September 2006.
The Group's borrowings decreased to US$628.3 million from US$708.1
million as at 31st March 2006.
Net borrowings (total borrowings net of cash and other financial assets
at fair value through profit or loss) at 30th September 2006 was US$473.8
million and the Group's debt:equity ratio (calculated on the total
borrowings net of cash and other financial assets at fair value through
profit or loss to total equity) was 52%.
Interest expense of US$15.2 million was incurred on the bank loans for
the acquisition of the Saia-Burgess and on the loans to fund the Group's
operational requirements. The Group interest coverage ratio (profit before
tax and interest expense divided by interest expense) is 6.4 times.
CORPORATE GOVERNANCE
Johnson Electric is committed to achieving high standards of corporate
governance that properly protect and promote the interests of its
shareholders and devotes considerable effort to identifying and formalising
best practices of corporate governance.
During the six months ended 30th September 2006, Mr. Arkadi Kuhlmann, an
Independent Non-Executive Director and the Chairman of the Remuneration
Committee of the Company, resigned on 30th September 2006. Prof. Michael
Enright, an existing Independent Non-Executive Director of the Company, was
appointed to replace Mr. Arkadi Kuhlmann as the Chairman of the Remuneration
Committee on 1st October 2006. Save for the above, the composition of the
board committees remains the same as set out in the Corporate Governance
Report in the Company's Annual Report 2006.
Corporate governance practices adopted by the Company during the six
months ended 30th September 2006 are in line with those practices set out in
the Corporate Governance Report.
Code on Corporate Governance Practices
During the six months ended 30th September 2006, the Company had
complied with the code provisions set out in the Code on Corporate
Governance Practices contained in Appendix 14 of the Listing Rules of The
Stock Exchange of Hong Kong Limited (the "Stock Exchange"), except for the
following deviations:
Code Provision A.2.1
Code A.2.1 provides, inter alia, that the roles of chairman and chief
executive officer should be separate and should not be performed by the same
individual.
Neither the Company's Bye-Laws nor The Johnson Electric Holdings Limited
Company Act, 1988 (a private act of Bermuda) contains any requirement as to
the separation of these roles.
Dr. Patrick Shui-Chung Wang is the Chairman and Chief Executive of the
Company. The Board is of the opinion that it is appropriate and in the best
interests of the Company at its present stage of development that Dr. Wang
should hold both these offices. The Board believes that it is able
effectively to monitor and assess management in a manner that properly
protects and promotes the interests of shareholders.
Code Provision A.4.1 and A.4.2
Code A.4.1 provides, inter alia, that non-executive directors should be
appointed for a specific term, subject to re-election.
Code A.4.2 also provides that every director, including those appointed
for a specific term, should be subject to retirement by rotation at least
once every three years.
The independent non-executive directors were appointed for a specific
term while the non-executive directors do not have a specific term of
appointment. However, under Section 3(e) of The Johnson Electric Holdings
Limited Company Act, 1988 and the Company's Bye-Law 109(A), one-third of the
directors who have served longest on the Board must retire thus becoming
eligible for re-election at each Annual General Meeting. Accordingly, no
director has a term of appointment longer than three years. Bye-Law 109(A)
states that the executive chairman is not subject to retirement by rotation
and shall not be counted in determining the number of directors to retire.
In the opinion of the Board, it is important for the stability and
beneficial to the growth of the Company that there is, and is seen to be,
continuity of leadership in the role of the Chairman of the Company and, in
consequence, the Board is of the view that the Chairman should not be
subject to retirement by rotation or hold office for a limited term at the
present time.
Model Code for Securities Transactions
The Group has adopted procedures governing directors' securities
transactions in compliance with the Model Code as set out in Appendix 10 of
the Listing Rules. Specific confirmation has been obtained from all
directors to confirm compliance with the Model Code throughout the six
months ended 30th September 2006. No incident of non-compliance was noted
by the Company to date in 2006/07.
Employees who are likely to be in possession of unpublished price-
sensitive information of the Group are also subject to compliance with
guidelines on no less exacting terms than the Model Code.
Audit Committee
The Audit Committee is comprised of three independent non-executive
directors who together have substantial experience in the fields of
accounting, business, corporate governance and regulatory affairs. The
current members are Mr. Patrick Paul (Chairman), Prof. Michael Enright and
Mrs. Laura Cha.
The committee is responsible for monitoring the reporting, accounting,
financial and control aspects of the executive management's activities. It
has full access to the Group's Internal Audit Director to hear directly any
concerns of the internal audit department that may have arisen during the
course of the department's work. The committee also monitors the
appointment and function of the Group's external auditor. The committee's
authority and duties are set out in written terms of reference and are
posted on the Company's website.
Remuneration Committee
The Remuneration Committee is comprised of two independent non-executive
directors (including the Committee Chairman) and one executive director.
The current members are Prof. Michael Enright (Chairman), Mr. Oscar
Bernardes and Ms. Winnie Wang.
The committee determines the compensation structure and rewards for the
Chief Executive and other executive directors and monitors the policies
being applied in remunerating other senior executives in the Group. In
addition, it has responsibility for reviewing and making appropriate
recommendations to the Board on management development and succession plans
for executive directors and senior management levels. The committee's
authority and duties are set out in written terms of reference and are
available on the Company's website.
The fundamental policy underlying Johnson Electric's remuneration and
incentive schemes is to link total compensation for senior management with
the achievement of annual and long-term performance goals. By providing
total compensation at competitive industry levels for delivering on-target
performance, the Company seeks to attract, motivate and retain key
executives essential to its long-term success. Senior management incentive
schemes include an equity component that is designed to align the long-term
interest of management with those of shareholders.
Nomination And Corporate Governance Committee
The Nomination And Corporate Governance Committee is comprised of two
independent non-executive directors (including the Committee Chairman) and
one executive director. The current members are Mr. Peter Edwards
(Chairman), Mr. Patrick Paul and Dr. Patrick Wang.
The committee is responsible for the identification and evaluation of
candidates for appointment or reappointment as a director, as well as the
development and maintenance of the Group's overall corporate governance
policies and practices. The committee's authority and duties are set out in
written terms of reference and are posted on the Company's website.
Board Committee
The Board Committee is comprised of two executive directors, Dr. Patrick
Wang and Ms. Winnie Wang. Its primary function is to undertake and
supervise the day to day management and operating affairs of the Group. It
exercises leadership and develops and keeps under review strategy and
business development initiatives of the Group and supervises their
implementation.
Review of Interim Results
The Company's interim report for the six months ended 30th September
2006 has been reviewed by the Audit Committee and the auditors of the
Company, PricewaterhouseCoopers.
PURCHASE, SALE OR REDEMPTION OF SHARES
The Company has not redeemed any of its shares during the period.
Neither the Company nor any of its subsidiaries has purchased or sold any of
the Company's shares during the period.
PUBLICATION OF RESULTS ANNOUNCEMENT AND INTERIM REPORT
This interim results announcement is published on the websites of the
Company ( www.johnsonelectric.com ) and the Stock Exchange (
www.hkex.com.hk ). The Company's Interim Report 2006 will be despatched to
the shareholders and available on the same websites on or about 21st
December 2006.
BOARD OF DIRECTORS
As at the date of this announcement, the board of directors of the
Company comprises Patrick Shui-Chung Wang, Winnie Wing-Yee Wang, Richard Li-
Chung Wang, being the Executive Directors, and Yik-Chun Koo Wang, Peter Kin-
Chung Wang, being the Non-Executive Directors, and Peter Stuart Allenby
Edwards, Patrick Blackwell Paul, Michael John Enright, Laura May-Lung Cha
and Oscar De Paula Bernardes Neto, being the Independent Non-Executive
Directors.
On behalf of the board of directors
Patrick Shui-Chung Wang
Chairman and Chief Executive
Hong Kong, 4th December 2006
Website: www.johnsonelectric.com
"Please also refer to the published version of this announcement in
South China Morning Post."
Mr. Henry Chiu
Tel. +852-2663-6688
