Fountain Set (Holdings) Limited, a global leader in the manufacture of knitted fabrics, has announced its audited consolidated final results for the year ended 31st August, 2009. After one of the most difficult years in the company’s history, it says it saw gradual recovery especially in the second half of the financial year.

Fountain Set says that through a series of proactive and appropriate management actions, it reduced the proportion of administrative expenses to turnover, distribution and selling expenses to turnover, when compared with the previous financial year. The group says it maintained a healthy financial position for the period under review. As at 31st August 2009, the group’s total cash and cash equivalents approximately amounted to HK$ 802,542,000. The management is confident that it will be able to continue to improve its overall performance in the future.

During the year under review, due to the weakened demand caused mainly by the global economic turmoil, subsequent recovery was also slower than expected. Turnover decreased by 10.7% compared with the previous financial year. In addition, the overall Group’s factory utilization rate and operation efficiency were not yet normalized due to the delays in buying decisions by its clients as the consumer market was unstable hence making it more difficult to foresee the market trend. However, turnover in the second half of the year increased by 19.1% over the first half of the year and is only slightly lower than the second half of the previous financial year, indicating a gradual recovery.

For business outlook, Mr Ha Chung Fong, Chairman and Managing Director of the Group, said, “Some signs of gradual stabilization started to emerge in the later part of year of 2009 as the overall market demand and consumer confidence appear to have bottomed out. However, recent cost increase driven by inflation in fuel and material prices may hamper the recovery of an already fragile market, resulting in an uncertain outlook for the industry over the next year. On the back of weak retail sales results coupled with economic uncertainty for the year 2010, many retailers and brands maintain rather conservative plans for the coming year. Looking forward, the macro uncertainty continues to cloud market transparency and present challenges for the textiles and apparel supply chain. In response, the group is implementing various measures to tackle the challenges ahead and is determined to achieve better results in the next year.”

Fountain Set says its latest fabric mill, Yancheng Fuhui Textiles Limited, located in the Yancheng City of the Jiangsu province of China will provide enormous potential for future expansion of the Group especially when market turnaround. At the same time, the proximity between Yancheng and Jiangyin fabric mills will be able to share resources and overhead costs efficiently. Partial production has commenced in Yancheng in October 2009 with a plan to gradually increase output during the second half of the financial year. Much of the machinery installed at this facility was supplied by the group’s subsidiary Jiangyin Jintian Machinery Limited. During the first six to twelve months of operation, dyed fabrics production capacity will gradually increase to around two million pounds per month. It is normal for any new factory to go through 6 to 12 months of start up period before reaching its intended efficiency and as a result, operational performance of Yancheng is expected to be gradually improved during the second half of financial year 2010.

“As the Group will continue to strategically target new clients in China as the local consumer preference shift towards better product quality, safety and innovations, our domestic sales have shown continuous improvement since the launch of the ‘fabric by Fountain Set’ brand which was actively showcased in various trade shows in China over the past few years. We anticipate that our domestic sales for textiles and apparel in China will continue to increase over the next few years.” added Mr Ha.