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9ReportoftheChiefExecutiveOfficer747,500,0005,830,500,0004.7%102.6%89,800,000700,400,000TamarindTamarindTamarind8,300,00064,700,00035,100,000273,800,0003,200,00025,000,0003,500,00027,300,0001,000,0007,800,00014,800,000115,400,0002.0%2.317.9BusinessReviewOverviewFortheyearended30April2005,theGrouprecordedahighershipmentvolumeofapproximatelyUS$747.5million(equivalenttoHK$5,830.5million),representinganincreaseofapproximately4.7%ascomparedwithlastyear.ShipmentvolumeinthesecondhalfofthefinancialyearwasunderminedbytheweakenedconsumerdemandintheNorthAmericanmarkets.Inaddition,temporarychangesinourcustomers’buyingstrategyresultedinorderdelaysorinsomecasescancellationduetouncertaintycausedbyChina’sWTOaccession.TheGroup’sturnoversurgedapproximately102.6%toapproximatelyUS$89.8million(equivalenttoHK$700.4million).TheincreasewasmainlycontributedbytheGroup’snewlyacquiredbusinessofTamarind(asdefinedbelow).Tamarind,operatingunderatradingmodel,contributedasignificantlyhigherturnoverfromthesalesofmerchandisethanLinmarkitself.Therefore,theGroup’stradereceivablesandtradepayablesgrewsignificantlypostTamarindacquisition.OperatingexpensesincreasedapproximatelyUS$8.3million(equivalenttoHK$64.7million)toapproximatelyUS$35.1million(equivalenttoHK$273.8million).TheadditionaloperatingexpensesofapproximatelyUS$3.2million(equivalenttoHK$25.0million)wasincurredbythenewlyacquiredbusinesses.Lessthatrelatedtotheacquisitions,theadditionalstaffcostsoftheGroupincreasedbyapproximatelyUS$3.5million(equivalenttoHK$27.3million).Duringtheyearunderreview,theGrouphiredmoreprofessionalsinChinaandtheIndianSub-continentandforthefivemarketingofficesinNorthAmericaandEurope.Thereturnofthemarketingofficeswaslessthanexpectedintheirfirstyearofoperation.AlthoughtheFrenchandLosAngelesofficesexceededtheirtargets,theToronto,NewYorkandManchesterofficesfailedtogeneratesignificantadditionalbusinessandwereclosed.ThisisexpectedtocauseasavingtotheGroupofapproximatelyUS$1.0million(equivalenttoHK$7.8million)inthenextfinancialyear.Tighteningtheexpensecontrol,theGroupexpectstoachievegrowthforitscorebusinessinfinancialyear2006withoutincurringadditionalcosts.TheincreaseofexpensesandreductionofinterestincomeimpactedthegrowthoftheGroup’sprofit.TheGroup’sprofitaftertaxamountedtoapproximatelyUS$14.8million(equivalenttoHK$115.4million).Netprofitaftertaxasapercentageofshipmentvolumewasmaintainedatapproximately2.0%.Basicearningspersharewasmaintainedatapproximately2.3UScents(equivalentto17.9HKcents).10LINMARKGROUPANNUALREPORT2005ReportoftheChiefExecutiveOfficerSegmentalAnalysisTheacquisitionofTamarindbusinessprovidedLinmarkwithamorebalancedgeographicfootprint,puttingthesouthernhemisphere,namelyAustraliaandSouthAfrica,withintheGroup’sdirectaccess.TheacquisitionofthenewbusinessesincreasedourbusinessintheEuropeanmarketsignificantlyanditovertookUSastheGroup’slargestrevenuecontributorintermsofturnover.Duringtheyearunderreview,turnoverfromtheEuropeanmarketincreasedfromapproximatelyUS$6.0million(equivalenttoHK$46.8million)toapproximatelyUS$22.5million(equivalenttoHK$175.5million),representingapproximately25.1%oftheGroup’stotalturnover.USrepresentedapproximately22.7%ofthetotalturnover,followedbyAustraliawithanapproximately13.2%oftotalturnover.SouthAfricaaccountedforapproximately12.4%andCanadaapproximately9.5%.TheGroupwillcontinuewithitsdiversificationstrategytoforgemoreextensivegeographicalreach.TheGroup’sstrategytoboostitsvalue-addedservicesofhighermarginssuchasitsdesignandsocialcomplianceauditingservicehasbeeneffective.Duringtheyearunderreview,contributionfromvalue-addedservicesrepresentedapproximately36.2%oftheGroup’snetprofitaftertaxcomparedtoapproximately25.3%infinancialyear2004.Fortheyearunderreview,theturnoverfromhardgoodsbusinessamountedtoapproximatelyUS$12.4million(equivalenttoHK$96.7million),approximately51.8%higherthanthatofthepreviousfinancialyearmainlyduetothenewlyacquiredbusinesses.AcquisitionTheGroupcompletedtheacquisitionofthebusinessandspecifiedassetsandassumptionofrelatedliabilitiesofTamarindInternationalLimited(subsequentlyrenamedasStirling(HK)Limited,“Tamarind”)on31December2004.Tamarindisanintegratedsourcingservicesproviderprincipallyengagedinthedesignandsourcingofgoodsrangingfromappareltofashionaccessories,toys,homewares,giftsandjewellery.Tamarindhasamixedcustomerportfolio,includinganumberofmajorcustomersfromEurope,SouthAfricaandAustralia,therebyallowingtheGrouptodiversifyitsrelianceonmarketsinNorthAmerica.TheTamarindacquisitionalsoallowstheGrouptocapturemaximumsynergisticbenefitsfromcrosssellingandresourcessharing.Tamarind6,000,00046,800,00022,500,000175,500,00025.1%22.7%13.2%12.4%9.5%36.2%25.3%12,400,00096,700,00051.8%TamarindInternationalLimitedStirling(HK)LimitedTamarindTamarindTamarind11ThemaximumpurchasepricefortheTamarindacquisitionofapproximatelyUS$29.1million(equivalenttoHK$226.6million)willbesettledbyoneinitialpaymentincashandthreesubsequentinstallmentsoverathree-yearperiod.TheGrouphasmadetheinitialpaymentofapproximatelyUS$19.4million(equivalenttoHK$151.1milli