Financial Information

Latest Results Announcement

FINANCIAL STATEMENT AND DIVIDEND ANNOUNCEMENT FOR THE SECOND QUARTER AND THREE MONTHS ENDED 30 JUNE 2019

Statement of Profit or Loss for the quarter ended 30 September 2019

Statement of Profit or Loss and other Comprehensive Income for the quarter ended 30 September 2019

Balance Sheet

Review of Performance

As mentioned, the implementation of IFRS 15 and 16 has significantly affected various figures reported including the revenue, gross profit, inventory, right-to-use assets and lease liabilities for the current period reported on.

Revenue

The Group's overall revenue increased by HK$50.2 million or 13.0%, from HK$384.9 million in Q3 2018 (Restated) to HK$435.1 million in Q3 2019 mainly due to continuous orders placed by our core customers and the goods delivered as scheduled for this period.

Gross profit and gross profit margin

In Q3 2019, the Group's gross profit increased by 21.1% or HK$6.2 million, generating gross profit margin of 8.2% (Q3 2018 (Restated): 7.7%) mainly due to growth sales and continuous effort on productivity enhancement.

Other Income and gain / loss

The Group's other income of HK$4.3 million is mainly comprised of mould engineering income in Q3 2019. In Q3 2018 (Restated), there was a one-time gain on disposals of subsidiaries of HK$86.7 million.

Selling and distribution expenses

The Group's selling and distribution expenses decreased by HK$2.2 million or 35.7%, from HK$6.2 million in Q3 2018 (Restated) to HK$4.0 million in Q3 2019 mainly due to a decrease in transportation expenses.

Administrative expenses

The Group's administrative expenses decreased by HK$5.4 million or 29.4%, from HK$18.2 million in Q3 2018 (Restated) to HK$12.8 million in Q3 2019, mainly due to the decrease of legal & professional fee of HK$1.9 million and the decrease of consultancy fee of HK$0.8 million and HK$2.5 million of exchange loss mainly due to translational losses arising on depreciation of the RMB against HKD in Q3 2019.

Finance Costs

Finance costs increased by HK$1.6 million or 36.1%, from HK$4.4 million in Q3 2018 (Restated) to HK$6.0 million in Q3 2019 mainly due to an increase in bank loans and lease liabilities.

Income Tax Expenses

Income tax expenses increased by HK$1.2 million or 472.5%, from HK$0.3 million in Q3 2018 (Restated) to HK$1.5 million in Q3 2019 mainly due to the difference in the recognition of profits for taxation and for financial accounting purposes.

Financial position as at 30 September 2019

Non-current assets

The Group's non-current assets stood at HK$352.0 million as at 30 September 2019, increasing by 54.6% or HK$124.3 million, from HK$227.7 million at 31 December 2018. This was due to (i) an increase in capital expenditure on property, plant and equipment and right-of-use assets of HK$101.5 million and HK$63.6 million respectively, (ii) an increase in other receivables of HK$11.8 million due to disposal of subsidiaries, which were partially offset by a total of depreciation expense of HK$52.6 million.

Current assets

The Group's current assets stood at HK$1,118.2 million at 30 September 2019, decreasing by HK$16.7 million or 1.5%, from HK$1,134.9 million at 31 December 2018, mainly due to:

  • a decrease in inventories of HK$403.5 million mainly due to implementation of IFRS 15;
  • a decrease in bank and cash balances of HK$45.3 million; and
  • a decrease in current tax assets of HK$0.6 million.

which were partially offset by:

  • an increase in financial assets at FVTPL of HK$43.1 million;
  • an increase in prepayments, deposits and other receivables of HK$387.5 million mainly due to an increase in purchase deposit paid for molds and contract assets of HK$414.3 million; and
  • an increase in trade and bills receivables of HK$2.1 million in line with sales increase.
Current liabilities

The Group's current liabilities stood at HK$706.1 million at 30 September 2019, increasing by HK$53.9 million or 8.3%, from HK$652.2 million at 31 December 2018, mainly due to:

  • an increase in trade and bills payables of HK$62.1 million, mainly due to more raw materials purchased in ODM/OEM segment;
  • an increase in short-term borrowings of HK$19.2 million mainly due to increase in lease liabilities of HK$15.5 million; and
  • an increase in current tax assets of HK$4.7 million,

which were partially offset by:

  • a decrease in accruals and other payables of HK$32.0 million mainly due to the accruals of salary in ODM/OEM segment.
Non-current liabilities

The Group’s non-current liabilities stood at HK$103.8 million at 30 September 2019, increasing by HK$33.6 million or 47.9% from HK$70.2 million at 31 December 2018 mainly due to increase in lease liabilities of HK$36.0 million and financial guarantee contract liabilities of HK$2.0 million.

Statement of Cash Flows for the quarter ended 30 September 2019

As at 30 September 2019, the Group's cash resources of HK$44.6 million are considered adequate for current operational needs. The net decrease in cash and cash equivalents of HK$35.8 million held by the Group comprised:

  • Net cash used in investing activities of HK$155.5 million mainly due to additions of property, plant and equipment and financial assets as FVTPL;
  • Net cash generated from operating activities of HK$111.6 million to finance the working capital needs; and
  • Net cash generated from financing activities of HK$8.1 million, mainly due to the advancement of trust receipt and import loans.

Commentary

It is expected the competitive conditions of the industry will remain challenging in view of current trade environment. With its diversification strategy, the Company is well positioned to meet the challenges ahead and is confident of its future prospects.

With both the Sragen, Indonesia and Cangwu, PRC new plants ramping up on schedule as well as stable continuing orders from core customers, the Group expects to continue to enjoy improving margins.

Combine Will's fundamentals have been considerably strengthened by the strategic re-engineering structured initiatives undertaken in the past few years, supported by higher productivity leading to lower costs and supportive sales from core customers.

We are now looking into the Group's corporate structure and lines of business with the objective of focusing on our more profitable businesses. Concurrently, we are also reviewing potential new businesses that have the potential for growth and able to deliver higher value-accretive returns.