Half Year Financial Statements And Dividend Announcement for the Six Months Ended 31 December 2011

Financials Archive

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Group Income Statement for the six months ended 31 December 2011

Statement of comprehensive income for the six months ended 31 December 2011

Balance Sheet

Review of Performance

Income Statement

Revenue

Despite the global lingering economic uncertainty that prevailed throughout the period under review, consolidated revenue of the Group for the six months ended 31 December 2011 increased by HK$618.3 million or 68.6% to HK$1,519.4 million from HK$901.1 million for the corresponding period last year.

Revenue from our Components Distribution segment decreased by HK$40.1 million or 13.3%, from HK$302.1 million for the six months ended 31 December 2010 to HK$262.0 million for the six months ended 31 December 2011. The decrease was mainly due to the decrease in demand for components in various industries as a result of decrease in export in the Mainland China during the period under review.

Revenue from our Integrated Circuit Application Design ("ICAD") segment decreased by HK$13.2 million or 14.8% from HK$89.3 million for the six months ended 31 December 2010 to HK$76.1 million for the six months ended 31 December 2011. The decrease was mainly due to the continuing weak economic environment in Northern America and Western Europe that had affected the demand for toys embedded with our application design solution.

Revenue from our Information Technology Infrastructure ("IT Infrastructure") segment increased by HK$671.6 million or 131.8%, from HK$509.7 million for the six months ended 31 December 2010 to HK$1,181.3 million for the six months ended 31 December 2011. The significant increase in revenue was due to increase in demand for network security products, enterprise software products and iPad products in Hong Kong and Macau.

Gross profit

Gross profit increased by HK$3.5 million or 4.1%, from HK$85.4 million for the six months ended 31 December 2010 to HK$88.9 million for the six months ended 31 December 2011. The improvement was mostly attributed to the 68.6% increase in revenue during the period under review. On the other hand, gross profit margin decreased by 37.9% from 9.5% for the six months ended 31 December 2010 to 5.9% for the six months ended 31 December 2011. Reasons for the decrease in gross profit margin were mainly due to (1) fierce competition as a result of economic downturn which squeezed margins in various components and enterprise hardware products; and (2) the introduction of iPad sales since December 2010 which is a high volume but with relatively low margin consumer electronic product.

Other income and gains, net

Other income and gains increased by approximately HK$1.5 million or 51.7%, from HK$2.9 million for the six months ended 31 December 2010 to HK$4.4 million for the six months ended 31 December 2011. The increase was mainly due to the increase in gain on foreign exchange differences of HK$3.1 million which was mostly attributable to the appreciation of Renminbi against United States Dollars during the period under review.

Selling and distribution costs

Selling and distribution costs increased by approximately HK$2.4 million or 8.9% from HK$26.9 million for the six months ended 31 December 2010 to HK$29.3 million for the six months ended 31 December 2011. The increase was mostly due to increase in sales commission paid to sales staff which was in line with increase in revenue during the period under review.

Administrative expenses

Administrative expenses increased by approximately HK$5.3 million or 18.1%, from HK$29.3 million for the six months ended 31 December 2010 to HK$34.6 million for the six months ended 31 December 2011. The increase was mainly due to (1) increase in depreciation charge of HK$2.0 million which was based on the appreciated property values for leasehold land and buildings located in Hong Kong and Shenzhen, PRC; (2) increase in bank charge of HK$0.8 million for the issuance of more standby letters of credit to various vendors to support the increased purchases; and (3) increase in staff cost of HK$2.0 million due to higher provision of bonuses.

Other expenses, net

Other expenses, net decreased by approximately HK$4.7 million or 87.0%, from HK$5.4 million for the six months ended 31 December 2010 to HK$0.7 million for the six months ended 31 December 2011. The drop was due to decrease in impairment of receivables by HK$5.2 million and offset by fair value loss on derivative financial instrument of HK$0.5 million.

Finance costs

Finance costs decreased by approximately HK$0.2 million or 50.0%, from HK$0.4 million for the six months ended 31 December 2010 to HK$0.2 million for the six months ended 31 December 2011. The reduction was due to decrease in bank borrowings during the period under review.

Net Profit

Net profit attributable to owners of the Company increased by HK$1.4 million or 6.5%, from HK$21.4 million for the six months ended 31 December 2010 to HK$22.8 million for the six months ended 31 December 2011. The increase was mainly attributable to increase in gross profit as explained above.

Statement of Financial Position

Non-current assets

Non-current assets comprised goodwill of HK$2.1 million; investment properties, office equipment, leasehold land and buildings and motor vehicles totaling HK$218.8 million; and deferred tax assets of HK$1.6 million. There were no significant changes in non-current assets compared with the last period.

Current assets

As at 31 December 2011, current assets amounted to approximately HK$525.8 million, a decrease of HK$3.8 million compared to the immediately preceding financial year end as at 30 June 2011. The decrease was mainly due to (1) decrease in inventories level by HK$3.2 million; (2) decrease in net trade, factored trade and bills receivables by HK$9.7 million; (3) decrease in prepayments, deposits and other receivables by HK$9.4 million. As at 30 June 2011, there was a prepayment of HK$10.0 million to a vendor in order to take advantage of prompt payment discounts through early settlement. There is no such item as at the current reporting date; and (4) increase in cash and cash equivalents by 19.0 million.

Current liabilities

As at 31 December 2011, current liabilities amounted to approximately HK$336.6 million, a decrease of HK$20.9 million compared to the immediately preceding financial year end as at 30 June 2011. Major reason for the decrease was due to the decrease in trade and bills payables by HK$21.0 million.

Non-current liabilities

Non-current liabilities amounted to HK$14.2 million, representing 4.1% of our total liabilities as at 31 December 2011. It comprised mainly finance leases payable of HK$0.2 million to finance the purchase of office equipment and deferred tax liabilities of HK$14.0 million. Deferred tax liabilities are recognized as a result of temporary difference between the carrying amount and tax basis of our land and building and investment properties.

Liquidity and cash flow

As at 31 December 2011, cash and cash equivalents amounted to approximately HK$93.3 million. Total interest bearing loans and borrowings as at 31 December 2011 were HK$27.2 million and the gearing ratio which is defined as total borrowings and finance leases payables to equity attributable to owners of the Company, is 0.07 times (30 June 2011: 0.06 times).

Commentary

In anticipation of the ongoing uncertainties in various economies, the Group saw fit to diversify its revenue base further by going into the consumer electronics products and accessories market during the period under review, details of which were summarized in an announcement of the Company dated 27 October 2011. Initial performance of this operation has been encouraging.

In order to mitigate export risk, the Group's Components Distribution business segment has been exploring products which are for domestic consumption in Mainland China. Given the trend of increasing demand for network security products and enterprise software products, the Group's IT Infrastructure business segment is continuing its focus in these areas.

Based on the Group's continuing efforts in pursuing growth in both the depth and breadth in its portfolio of products, solutions and services, barring any unforeseen circumstance, the Group is cautiously optimistic of its performance in the next reporting period and the next 12 months.