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Half Year Financial Statements And Dividend Announcement for the Six Months Ended 31 December 2017

Financials Archive

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HALF YEAR FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE SIX MONTHS ENDED 31 DECEMBER 2017

Group Statement Of Profit Or Loss And Other Comprehensive Income For The Six Months Ended 31 December 2017

BALANCE SHEET

REVIEW OF PERFORMANCE

PROFIT AND LOSS

Revenue

Consolidated revenue of the Group for the six months ended 31 December 2017 increased by HK$110.3 million or 11.7% to HK$1,053.8 million from HK$943.5 million for the corresponding period last year.

Revenue from our Components Distribution ("CD") segment increased by HK$13.6 million or 3.1%, from HK$441.6 million for the six months ended 31 December 2016 to HK$455.2 million for the six months ended 31 December 2017. The increase was mostly due to rise in demand for certain electronic components for smartphones and wireless application devices during the period under review.

Revenue from our Information Technology Infrastructure ("IT Infrastructure") segment increased by HK$96.6 million or 20.5%, from HK$471.1 million for the six months ended 31 December 2016 to HK$567.7 million for the six months ended 31 December 2017. The increase was mostly due to strong demand in network security products and cloud solution services during the period under review.

Revenue from our Consumer Electronics Products ("CEP") segment increased slightly by HK$0.1 million or 0.3%, from HK$30.8 million for the six months ended 31 December 2016 to HK$30.9 million for the six months ended 31 December 2017.

Gross profit

Gross profit decreased by HK$12.0 million or 13.9%, from HK$86.6 million for the six months ended 31 December 2016 to HK$74.6 million for the six months ended 31 December 2017. The decrease in gross profit was mostly due to (1) fierce competition in all three business segments; and (2) write-down of HK$4.4 million (31 December 2016: reversal of write-down of HK$0.5 million) of inventories to net realizable value and write-off of obsolete inventories which is included in Cost of Sales on the face of the consolidated statement of profit or loss and other comprehensive income.

Other income and gains, net

The net other income and gains increased by approximately HK$2.0 million or 94.7%, from HK$2.0 million for the six months ended 31 December 2016 to HK$4.0 million for the six months ended 31 December 2017. The increase included exchange gains of HK$2.0 million during the period under review.

Selling and distribution costs

Selling and distribution costs increased by approximately HK$0.5 million or 1.7% from HK$29.5 million for the six months ended 31 December 2016 to HK$30.0 million for the six months ended 31 December 2017.

Administrative expenses

Administrative expenses increased by approximately HK$1.4 million or 3.7%, from HK$37.9 million for the six months ended 31 December 2016 to HK$39.3 million for the six months ended 31 December 2017. The increase was mainly due to increase in depreciation of HK$1.5 million.

Other expenses, net

Net other expenses decreased by approximately HK$1.4 million or 45.2%, from HK$3.2 million for the six months ended 31 December 2016 to HK$1.8 million for the six months ended 31 December 2017. The change was mainly due to absence of exchange losses of HK$2.0 million during the period under review.

Finance costs

Finance costs increased by approximately HK$0.4 million or 27.1%, from HK$1.2 million for the six months ended 31 December 2016 to HK$1.6 million for the six months ended 31 December 2017. The increased cost was mainly due to increase in working capital requirements.

Income tax expense

The effective income tax expense rate for the period under review was 37.8% (31 December 2016: 17.5%). The increase was mainly due to loss on certain subsidiaries reduced consolidated profit before tax but did not reduce consolidated income tax expense.

Net Profit

Net profit attributable to owners of the Company decreased by HK$10.9 million or 77.0%, from HK$14.1 million for the six months ended 31 December 2016 to HK$3.2 million for the six months ended 31 December 2017. The decrease was mainly attributable to decrease in gross profit as explained above.

STATEMENT OF FINANCIAL POSITION

Non-current assets

As at 31 December 2017, non-current assets comprised goodwill of HK$2.1 million; investment properties, office equipment, leasehold land and buildings and motor vehicles totaling HK$136.7 million; investment in an associate of HK$1.9 million; prepayment for office renovation of HK$0.3 million; a factored trade receivables of HK$0.9 million; financial asset at fair value through profit or loss of HK$1.9 million; a trade receivable of HK$5.8 million and deferred tax assets of HK$3.7 million. Total non-current assets amounted to HK$153.3 million, representing approximately 16.9% of the total assets. There was a decrease in non-current assets amounted to approximately HK$8.6 million.

Current assets

As at 31 December 2017, current assets amounted to approximately HK$754.3 million, an increase of HK$108.7 million compared to the immediately preceding financial year end as at 30 June 2017. The increase was mainly due to (1) increase inventories by HK$63.2 million; (2) increase in trade and bills receivables by HK$22.8 million; (3) increase in prepayments, deposits and other receivables by HK$21.6 million

Current liabilities

As at 31 December 2017, current liabilities amounted to approximately HK$502.6 million, an increase of HK$110.8 million compared to the immediately preceding financial year end as at 30 June 2017. The increase was mainly due to (1) increase in trade and bills payables by HK$52.4 million; (2) increase in interest-bearing bank and other borrowings by HK$54.8 million; (3) increase in other payables and accruals by HK$10.9 million and offset by (4) decrease in income tax payable by HK$7.3 million.

Non-current liabilities

Non-current liabilities amounted to HK$23.7 million, representing 4.5% of our total liabilities as at 31 December 2017. The amount mostly comprised of deferred tax liabilities. Deferred tax liabilities were recognised as a result of temporary differences between the carrying amounts and tax bases of property, plant and equipment due to depreciation.

Liquidity and cash flow

As at 31 December 2017, cash and cash equivalents amounted to approximately HK$74.8 million. Total interest bearing loans and other borrowings as at 31 December 2017 were HK$156.2 million and the gearing ratio, which is defined as total borrowings and finance leases payables to shareholders' funds, is 0.41 times (30 June 2017: 0.25 times).

COMMENTARY

Given new high end smartphones models have been releasing gradually into the market through certain smartphone makers and more functions are to be embedded in wireless controlled home and medical appliances, it is anticipated demand for certain electronic components for smartphones and wireless application devices remains. Project based application specific integrated circuits are expected to materialise.

Based on the increase in demand in network security products and cloud solution services during the period under review, we foresee revenue generates through the IT Infrastructure segment will continue to be strong.

Revenue in the CEP segment during the period under review was very much the same as the corresponding period of the immediately preceding period. Having successfully secured distributorships for a few prestige consumer electronic products for slightly over six months, we anticipate revenue will grow progressively.