Toymaker says strategy will aid Europe goals, while cutting costs at new plant Toymaker Matrix Holdings aims to reduce operating costs at newly acquired Shenzhen production facilities while looking to break into the European market through acquisitions. The group recorded a 15.7 per cent increase in net profit to $151.81 million last year, compared with $131.16 million in 2003. It completed its acquisition of United States-based Shelcore Group's Shenzhen plant and distribution operations in January, paying $66.3 million, which will be included in this year's result. 'In the toy industry, acquisition of other toy companies is the only way to ensure profitable returns to our shareholders,' chairman Cheng Yung-pun said. 'We will look to those companies with minor problems in their management. This is because we can then buy them at cheaper prices and fix the problem ourselves.' Acquisition of European toy companies offered distribution benefits in that market, Mr Cheng said, announcing the annual results. Aside from the Shelcore operations in Shenzhen, Matrix has a plant in Zhongshan and two others in Danang, Vietnam. Matrix specialises in production of plastic and soft toys, while the Shelcore operation focuses on toys for pre-school children and has a distribution network covering 64 countries. 'Toys for pre-school school children are the only area not affected by electronic toys and shows steady growth,' Mr Cheng said. Last year's turnover was $686.68 million, up 37.2 per cent from $500.35 million in 2003. But the net margin dropped to 22.1 per cent from 26.2 per cent in the previous year. Mr Cheng attributed the margin decline to the rising cost of raw materials under high oil prices. The company's net cash and bank balance was $94.7 million last year, up 13.8 per cent from $83.2 million in 2003. The company will keep the final dividend at nine cents per share, leaving the total payout for the year unchanged at 20 cents. Mr Cheng said McDonald's was the company's biggest customer, with the fast-food giant accounting for 90 per cent of its business last year. That figure would fall to 65 per cent this year because of the purchase of the Shenzhen facilities. He said the firm would seek to cut operating costs at the Shenzhen operations by at least 20 per cent.