Listed Company Information
 

EGANA JEWELLERY<00926> - Results Announcement

Egana Jewellery & Pearls Limited announced on 21/09/2006:
(stock code: 00926 )
Year end date: 31/05/2006
Currency: HKD
Auditors' Report: Unqualified
                                                        (Restated)
                                                        (Audited   )
                                     (Audited   )       Last
                                     Current            Corresponding
                                     Period             Period
                                     from 01/06/2005    from 01/06/2004
                                     to 31/05/2006      to 31/05/2005
                               Note  ('000      )       ('000      )
Turnover                           : 1,086,684          851,352           
Profit/(Loss) from Operations      : 114,147            93,361            
Finance cost                       : (38,264)           (25,515)          
Share of Profit/(Loss) of 
  Associates                       : N/A                N/A               
Share of Profit/(Loss) of
  Jointly Controlled Entities      : N/A                N/A               
Profit/(Loss) after Tax & MI       : 78,307             73,504            
% Change over Last Period          : +7        %
EPS/(LPS)-Basic (in dollars)       : 0.1805             0.1999            
         -Diluted (in dollars)     : N/A                N/A               
Extraordinary (ETD) Gain/(Loss)    : N/A                N/A               
Profit/(Loss) after ETD Items      : 78,307             73,504            
Final Dividend                     : NIL                1.85 cents
  per Share                                              
(Specify if with other             : N/A                N/A
  options)                                               
                                                         
B/C Dates for 
  Final Dividend                   : N/A   
Payable Date                       : N/A
B/C Dates for (-)            
  General Meeting                  : N/A   
Other Distribution for             : N/A
  Current Period                     
                                     
B/C Dates for Other 
  Distribution                     : N/A   
  
Remarks:

1. Basis of preparation and principal accounting policies 
______________________________________________________

The accounts have been prepared in accordance with accounting principles 
generally accepted in Hong Kong and comply with accounting standards 
issued by the Hong Kong Institute of Certified Public Accountants ("
HKICPA"). They have been prepared under the historical cost convention as 
modified by the revaluation of available-for-sale financial assets, 
investments held for trading and certain financial instruments, which are 
carried at fair values.

The accounting policies used in the accounts are consistent with those 
followed in the preparation of the Group's annual accounts for the year 
ended 31st May, 2005 except as described below.

In the current year, the Group has applied, for the first time, a number 
of new Hong Kong Financial Reporting Standards ("HKFRSs"), Hong Kong 
Accounting Standards ("HKASs") and Interpretations (hereinafter 
collectively referred to as the "new HKFRSs") issued by the HKICPA that 
are effective for accounting periods beginning on or after 1st January, 
2005. The application of the new HKFRSs has resulted in a change in the 
presentation of the profit and loss account, balance sheet and the 
statement of changes in equity. In particular, the presentation of 
minority interests and share of tax of associated companies have been 
changed under HKAS 1 "Presentation of Financial Statements" and HKAS 27 "
Consolidated and Separate Financial Statements", respectively. The changes 
in presentation have been applied retrospectively.

The adoption of the new HKFRSs has resulted in changes to the Group's 
accounting policies in the following areas that have major impacts on how 
the results for the current or prior accounting periods are prepared and 
presented:

Leasehold land

In prior years, leasehold land and buildings held for own use were stated 
at revalued amounts less accumulated depreciation and accumulated 
impairment losses. Movements of revaluation surpluses or deficits were 
normally taken to the land and buildings revaluation reserve.

The adoption of revised HKAS 17 "Leases" has resulted in a change in the 
accounting policy relating to the reclassification of leasehold land and 
land use rights from fixed assets to operating leases. The up-front 
prepayments made for the leasehold land and land use rights are expensed 
in the profit and loss account on a straight-line basis over the period of 
the lease or where there is impairment, the impairment is expensed in the 
profit and loss account.

All buildings held for own use which are situated on freehold and 
leasehold land are presented as part of fixed assets and are stated at 
cost less accumulated depreciation, rather than at fair value.

The new accounting policies have been adopted retrospectively, with the 
opening balances of retained profits and the comparative information 
adjusted for the amounts relating to prior year. As a result, the opening 
retained profits as at 1st June, 2005 is increased by approximately HK$0.5 
million. The adoption of HKAS 17 has no material impact on the Group's 
results for the current and prior years.

Financial instruments

In the current year, the Group has applied HKAS 32 "Financial Instruments: 
Disclosures and Presentation" and HKAS 39 "Financial Instruments: 
Recognition and Measurement". HKAS 32 requires retrospective application. 
HKAS 39, which is effective for accounting periods beginning on or after 
1st January, 2005, generally does not permit to recognise, derecognise or 
measure financial assets and liabilities on a retrospective basis. The 
principal effects resulting from the implementation of HKAS 32 and HKAS 39 
are summarised below:

(a)      Classification and measurement of financial assets and financial 
         liabilities

The Group has applied the relevant transitional provisions in HKAS 39 with 
respect to classification and measurement of financial assets and 
financial liabilities that are within the scope of HKAS 39.

(i)     Debt and equity securities previously accounted for under the 
        treatment of Statement of Standard Accounting Practice ("SSAP") 24

Up to 31st May, 2005, the Group classified its investments in debt and 
equity securities, other than subsidiaries and associated companies, as 
investments in non-trading securities and trading securities in accordance 
with SSAP 24.
 
Non-trading securities

Investments which are held for non-trading purpose are stated at fair 
value at the balance sheet date. Changes in the fair values of individual 
securities are credited or debited to the revaluation reserve until the 
security is sold, or is determined to be impaired. Upon disposal, the 
cumulative gain or loss representing the difference between the net sales 
proceeds and the carrying amount of the relevant securities, together with 
any surplus/deficit transferred from the revaluation reserve, is dealt 
with in the profit and loss account.

Where there is objective evidence that individual investment is impaired, 
the cumulative loss recorded in the revaluation reserve is taken to the 
profit and loss account.

Trading securities

Trading securities are carried at fair value. At each balance sheet date, 
the net unrealised gains or losses arising from the changes in fair value 
of trading securities are recognised in the profit and loss account. 
Profits or losses on disposal of trading securities, representing the 
difference between the net sales proceeds and the carrying amounts, are 
recognised in the profit and loss account as they arise.

From 1st June, 2005 onwards, the Group classifies and measures its debt 
and equity securities in accordance with HKAS 39. Financial assets are 
classified as "available-for-sale financial assets", "investments held for 
trading" (a category under "financial assets at fair value through profit 
or loss"), "loans and receivables" or "held-to-maturity financial assets". 
The classification depends on the purpose for which the assets are 
acquired. "Available-for-sale financial assets" and "investments held for 
trading" are carried at fair value, with changes in fair values recognised 
in equity and profit or loss account, respectively. "Loans and 
receivables" and "held-to-maturity financial assets" are measured at 
amortised cost using the effective interest method.

On 1st June, 2005, following the adoption of HKAS 39, the Group has re-
designated "investments in non-trading securities" amounting to 
approximately HK$150,760,000 and "short-term investments" (including "
investments in trading securities") amounting to approximately HK$113,000 
recorded in the consolidated balance sheet as "available-for-sale 
financial assets" and "investments held for trading", respectively.

(ii)    Financial assets and financial liabilities other than debt and 
        equity securities

As mentioned above, financial assets under HKAS 39 are classified as "
financial assets at fair value through profit or loss", "available-for-
sale financial assets", "loans and receivables" or "held-to-maturity 
financial assets". Financial liabilities are generally classified as "
financial liabilities at fair value through profit or loss" or "other 
financial liabilities". "Other financial liabilities" are carried at 
amortised cost using the effective interest method. The adoption of HKAS 
39 has no material impact on the financial assets and financial 
liabilities other than debt and equity securities of the Group.

(b)      Derivative financial instruments

Consistent with prior years, derivative financial instruments arise from 
forward, option and swap transactions undertaken by the Group in the 
precious metals, foreign exchange and interest rate markets.

Derivative financial instruments are initially measured at fair value on 
the contract date, and are re-measured to fair value at subsequent 
reporting dates.

Changes in the fair value of derivative financial instruments that are 
designated and effective as hedges of future cash flows are recognised 
directly in equity and the ineffective portion or those which do not 
qualify for hedge accounting is recognised immediately in the profit and 
loss account.

Up to 31st May, 2005, assets related to derivative financial instruments 
which are marked to market are included in "deposits, prepayments and 
other receivables" in the accounts. Liabilities resulting from such 
contracts are included in "accounts payable, accruals and other payables" 
in the accounts.

With the adoption of HKAS 39, from 1st June, 2005 onwards, assets and 
liabilities related to derivative financial instruments are recorded as "
derivative financial instruments" under assets and liabilities in the 
consolidated balance sheet, respectively. The adoption of HKAS 39 in 
respect of derivative financial instruments has no material impact on the 
Group's results for the current year.
 
(c)     Derecognition

HKAS 39 provides more rigorous criteria for the derecognition of financial 
assets than the criteria applied in previous years. Under HKAS 39, a 
financial asset is derecognised, when and only when, either the 
contractual rights to the asset's cash flows expire, or the asset is 
transferred and the transfer qualifies for derecognition is made by 
applying a combination of risks and rewards and control tests. The Group 
has applied the relevant transitional provisions and applied the revised 
accounting policy prospectively for transfers of financial assets on or 
after 1st June, 2005. In addition, the Group's discounted bills with 
recourse, which were previously treated as contingent liabilities, have 
been accounted for as actual liabilities prospectively on or after 1st 
June, 2005, as the financial assets derecognition conditions as stipulated 
in HKAS 39 have not been fulfilled.

(d)      Convertible bonds

HKAS 32 requires an issuer of a compound financial instrument (that 
contains both financial liability and equity components) to separate the 
compound financial instrument into its liability and equity components. In 
subsequent years, the liability component is carried at amortised cost 
using the effective interest method. The principal impact of HKAS 32 on 
the Group is in relation to convertible bonds issued by the Company that 
contain both liability and equity components. Previously, convertible 
bonds were classified as liabilities on the balance sheet. As HKAS 32 
requires retrospective application, comparative figures have been 
restated.

Minority interests

In prior years, minority interests at the balance sheet date were 
presented in the consolidated balance sheet separately from liabilities 
and as deduction from net assets. Minority interests in the results of the 
Group for the year were also separately presented in the profit and loss 
account as a deduction before arriving at the profit attributable to 
shareholders.

With effect from 1st June, 2005, in order to comply with HKAS 1 and HKAS 
27, minority interests at the balance sheet date are presented in the 
consolidated balance sheet within equity, separately from the equity 
attributable to equity holders of the Company, and minority interests in 
the results of the Group for the year are presented on the face of the 
consolidated profit and loss account as an allocation of the total profit 
or loss for the year between the minority interests and the equity holders 
of the Company.

The presentation of minority interests in the consolidated balance sheet, 
profit and loss account and statement of changes in equity for the 
comparative period has been restated accordingly.

Gain or loss arising from transactions with minority interests are now 
recognised directly in equity.

Share-based payments

In prior years, no amounts were recognised when option holders were 
granted share options over shares in the Company. If the option holders 
chose to exercise the options, the nominal amount of share capital and 
share premium were credited only to the extent of the option's exercise 
price receivable.

With effect from 1st June, 2005, in order to comply with HKFRS 2 "Share-
based payment", the Group recognises the fair value of share options as an 
expense in the profit and loss account, or as an asset, if the cost 
qualifies for recognition as an asset under the Group's accounting 
polices. A corresponding increase is recognised in capital reserve within 
equity.

Where the option holders are required to meet vesting conditions before 
they become entitled to the options, the Group recognises the fair value 
of the options granted over the vesting period. Otherwise, the Group 
recognises the fair value in the period in which the options are granted.

If an option holder chooses to exercise options, the related capital 
reserve is transferred to share capital and share premium, together with 
the exercise price. If the options lapse unexercised, the related capital 
reserve is transferred directly to retained profits.

As all the Group's options were granted to option holders before 7th 
November, 2002, the Group has taken advantage of the transitional 
provisions set out in paragraph 53 of HKFRS 2 under which the new 
recognition and measurement policies have not been applied. Accordingly, 
the adoption of HKFRS 2 has no impact on the Group's net assets and 
results for the current and prior years.

2. Earnings per share
__________________

Basic earnings per share

The basic earnings per share was calculated based on the consolidated 
profit attributable to equity holders of the Company for the year of 
approximately HK$78,307,000 (2005: HK$73,504,000) and the weighted average 
number of ordinary shares of approximately 433,948,000 (2005: 367,754,000) 
in issue during the year.

Diluted earnings per share

During the years ended 31st May, 2005 and 31st May, 2006, the Company's 
share options exercise price was above the average fair value of one 
ordinary share, thus there were no dilutive potential ordinary shares.