1. Basis of preparation and accounting policiesopen

The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants and the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited.

The functional currency of the Company is United States dollars. The presentation currency has been changed from Hong Kong Dollars to United States Dollars in 2011 so as to be consistent with the functional currency of the Company.

2. Significant accounting policiesopen

The condensed consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments which are measured at fair value.

The accounting policies and method of computations used in the condensed consolidated financial statements for the six months ended June 30, 2011 are the same as those followed in the preparation of the Group’s annual financial statements for the year ended December 31, 2010, except as described below.

In the current interim period, the Group has applied for the first time, a number of new standards, amendments and interpretations (“new or revised HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) that are effective for accounting periods beginning on January 1, 2011.

The application of the above new or revised HKFRSs in the current interim period has had no material effect on the amounts reported in these condensed consolidated financial statements and/or disclosures set out in these condensed consolidated financial statements.

The Group has not early applied new or revised standards that have been issued but are not yet effective. The following new or revised standards have been issued after the date the consolidated financial statements for the year ended December 31, 2010 were authorised for issuance and are not yet effective:

HKFRS 10 Consolidated Financial Statements1
HKFRS 11 Joint Arrangements1
HKFRS 12 Disclosures of Interests in Other Entities1
HKFRS 13 Fair Value Measurement1
HKAS 1 (as revised in 2011) Presentation of Items of Other Comprehensive Income2
HKAS 19 (as revised in 2011) Employee Benefits2
HKAS 27 (as revised in 2011) Separate Financial Statements1
HKAS 28 (as revised in 2011) Investments in Associates and Joint Ventures1
1 Effective for annual periods beginning on or after January 1, 2013
2 Effective for annual periods beginning on or after July 1, 2012

The above five new or revised standards on consolidation, joint arrangements and disclosures were issued by the HKICPA in June 2011 and are effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted provided that all of these new or revised standards are applied early at the same time. The directors of the Company anticipate that these new or revised standards will be applied in the Group’s consolidated financial statements for financial year ending December 31, 2013 and the potential impact is described below.

HKFRS 10 replaces the parts of HKAS 27 Consolidated and Separate Financial Statements that deal with consolidated financial statements. Under HKFRS 10, there is only one basis for consolidation, that is control. In addition, HKFRS 10 includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) ability to use its power over the investee to affect the amount of the investor’s returns. Extensive guidance has been added in HKFRS 10 to deal with complex scenarios. Overall, the application of HKFRS 10 requires a lot of judgement. The application of HKFRS 10 might result in the Group no longer consolidating some of its investees and consolidating investees that were not previously consolidated.

Other than disclosed above, the directors of the Company anticipate that the application of these new or revised standards and interpretations will have no material impact on the results and the financial position of the Group.

3. Segment informationopen

The following is an analysis of the Group’s revenue and results by reportable and operating segment for the period under review:

For the period ended June 30, 2011

Power
Equipment
US$’000
Floor Care
and Appliances
US$’000

Eliminations
US$’000

Consolidated
US$’000
Turnover
External sales
Inter-segment sales

1,294,529
10,710

489,380
1,811


(12,521)

1,783,909
Total segment turnover 1,305,239 491,191 (12,521) 1,783,909
For the period ended June 30, 2010
Power
Equipment
Floor Care
and Appliances

Eliminations

Consolidated
US$’000 US$’000 US$’000 US$’000
Turnover
External sales

1,163,560

443,468


1,607,028
Inter-segment sales
9,055 2,079 (11,134)
Total segment turnover 1,172,615 445,547 (11,134) 1,607,028
Inter-segment sales are charged at prevailing market rates.

Six months period ended June 30

2011 2010

Power
Equipment
US$’000
Floor
Care and
Appliances
US$’000


Consolidated
US$’000

Power
Equipment
US$’000
Floor
Care and
Appliances
US$’000


Consolidated
US$’000
Segment results before
restructuring costs
Restructuring costs

89,803

27,462

117,265

79,885
(18,420)

25,184

105,069
(18,420)
Segments results
Finance costs
Share of results of associates
89,803 27,462 117,265
(29,298)
(273)
61,465 25,184 86,649
(38,223)
(53)
Profit before taxation
Taxation charge
    87,694
(7,024)
    48,373
(1,458)
Profit for the period     80,670     46,915

Segment profit represents the profit earned by each segment without allocation of share of results of associates and finance costs. This is the measure reported to the Group’s Chief Executive Officer, the chief operating decision maker (“CODM”) of the Group, for the purpose of resource allocation and performance assessment.

The following is an analysis of the Group’s assets by reportable and operating segment reported to the CODM of the Group:

June 30
2011
US$’000
December 31
2010
US$’000
Power Equipment
Floor Care and Appliances
2,284,584
628,240
2,064,615
573,937
2,912,824 2,638,552
4. Restructuring costsopen

Restructuring costs in 2010 represent the Group’s accrued labor and staff costs related to the relocation of production from Germany to lower cost locations.

5. Taxation chargeopen
Six months period ended
June 30
2011
US$’000
2010
US$’000
Current tax:
Hong Kong
Overseas Tax
Deferred Tax


700
12,679
(6,355)


8,390
1,213
(8,145)
7,024 1,458

Hong Kong Profits Tax is calculated at 16.5% (2010: 16.5%) of the estimated assessable profits for the period.

Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.

6. Profit for the periodopen
Six months period ended
June 30
2011
US$’000
2010
US$’000
Profit for the period has been arrived at after charging (crediting):
Depreciation and amortization of property, plant and equipment
Amortization of lease prepayment
Amortization of intangible assets

34,866
159
20,237

33,664
154
22,866
Total depreciation and amortization
55,262 56,684
Exchange (gain) loss
Staff costs
Fair value loss (gain) on held-for-trading investments
(10,082)
240,678
762
5,908
216,954
(6,491)
7. Dividendsopen

A dividend of HK6.25 cents (approximately US0.80 cent) per share (2010: HK4.50 cents (approximately US0.58 cent) per share) was paid to shareholders as the final dividend for 2010 on July 8, 2011.

The Directors have determined that an interim dividend of HK5.00 cents (approximately US0.64 cent) per share (2010: HK3.75 cents (approximately US0.48 cent) per share) should be paid to the shareholders of the Company whose names appear in the Register of Members on September 16, 2011.

8. Earnings per shareopen

The calculation of the basic and diluted earnings per share attributable to the ordinary shareholders of the Company is based on the following data:

Six months period ended
June 30
2011
US$’000
2010
US$’000
Earnings for the purpose of basic and diluted earnings per share:
Profit for the period attributable to owners of the Company
Effect of dilutive potential ordinary shares:
Effective interest on convertible bonds (net of tax)

80,259

7,772

46,454

Earnings for the purpose of diluted earnings per share 88,031 46,454
Weighted average number of ordinary shares for the purpose of
basic earnings per share
Effect of dilutive potential ordinary shares:
Share options
Convertible bonds
Warrants

1,606,738,752

6,617,803
223,557,000

1,593,457,068

337,629

7,218,116
Weighted average number of ordinary shares for the purpose of
diluted earnings per share

1,836,913,555

1,601,012,813

The computation of diluted earnings per share for the six months ended June 30, 2011 does not assume the exercise of the Company’s certain outstanding share options if the exercise price of these options is higher than the average market price for shares.

The computation of diluted earnings per share for the six months ended June 30, 2010 does not assume the conversion of the Company’s convertible bonds since their exercise would result in an increase in earnings per share and does not assume the exercise of the Company’s certain outstanding share options if the exercise price of these options is higher than the average market price for shares.

9. Additions to property, plant and equipment/intangible assetsopen

During the period, the Group spent approximately US$44 million (for the six months ended June 30, 2010: US$47 million) and US$23 million (for the six months ended June 30, 2010: US23 million) on the acquisition of property, plant and equipment and intangible assets respectively.

10. Trade and other receivables/Bills receivableopen

The Group has a policy of allowing credit periods ranging from 60 days to 120 days. The aging analysis of trade receivables based on the invoice date is as follows:

June 30
2011
US$’000
December 31
2010
US$’000
0 to 60 days
61 to 120 days
121 days or above
631,818
13,676
18,864
547,718
16,212
16,032
Total trade receivables
Other receivables
664,358
48,201
579,962
38,026
712,559 617,988

All the Group’s bills receivable at June 30, 2011 are due within 120 days.

11. Trade and other payables/Bills payableopen

The aging analysis of trade payables based on the invoice date is as follows:

June 30
2011
US$’000
December 31
2010
US$’000
0 to 60 days
61 to 120 days
121 days or above
340,107
99,973
7,084
216,963
52,300
7,655
Total trade payables
Other payables
447,164
231,520
276,918
206,347
678,684 483,265

All the Group’s bills payable at June 30, 2011 are due within 120 days.

12. Unsecured borrowingsopen

During the period, the Group obtained new bank borrowings in the amount of US$161 million (2010: US$392 million) which are either London Interbank Offered Rate (“LIBOR”) or Hong Kong best lending rates based. The Group repaid the existing bank borrowings in the amount of US$336 million (2010: US$258 million).

13. Convertible bondsopen

In 2009, the Group issued two tranches of 5-year 8.5% coupon convertible bonds with an aggregate principal amount of US$150,000,000 (“Convertible Bonds 2014″). Unless previously redeemed, converted or purchased and cancelled, the Convertible Bonds 2014 will be redeemed at their principal amount on the maturity date on April 30, 2014.

At the option of the Convertible Bond 2014′s holders, on April 30, 2012, the holders may redeem Convertible Bond 2014 at the principal amount plus accrued interest to the date of redemption. Accordingly, the Convertible Bond 2014 is classified as current liabilities as of June 30, 2011.

The weighted average effective interest rate of Convertible Bond 2014 is 15.57%.

14. Share capitalopen
Number of shares Share capital
June 30
2011
December 31
2010
June 30
2011
US$’000
December 31
2010
US$’000
Ordinary shares of HK$0.10 each
Authorized

2,400,000,000

2,400,000,000

30,769

30,769
Issued and fully paid:
At the beginning of the period
Issue of shares upon exercise of warrants
Issue of shares upon exercise of share options


1,606,625,752

390,000


1,591,252,152
14,903,600
470,000


20,598

5


20,401
191
6

At the end of the period
1,607,015,752 1,606,625,752 20,603 20,598
15. Contingent liabilitiesopen
June 30
2011
US$’000
December 31
2010
US$’000
Guarantees given to banks in respect of credit facilities utilised by associates 11,066 9,379
16. Capital commitmentsopen
June 30
2011
US$’000
December 31
2010
US$’000
Capital expenditure in respect of the purchase of property, plant and equipment:
Contracted for but not provided

7,597

12,984
Authorized but not contracted for
2,582 842