Financial Information

Latest Results Announcement

FINANCIAL STATEMENT AND DIVIDEND ANNOUNCEMENT FOR THE THIRD QUARTER AND THREE MONTHS ENDED 30 SEPTEMBER 2017

Statement of profit or loss for the quarter ended 30 September 2017

Statement of Profit or Loss and other Comprehensive Income for the quarter ended 30 September 2017

Balance Sheet

Review of Performance

Revenue

In Q3 2017, the Group's overall revenue increased by HK$19.6 million or 6.3%, from HK$312.9 million in Q3 2016 to HK$332.5 million in Q3 2017. A breakdown of the performance by the Group's 3 business segments is as follows:

Increase/Decrease in revenue by geographical segments for Q3/2017

Gross profit and gross profit margin

In Q3 2017, the Group's gross profit increased by 152.3% or HK$14.5 million, generating a gross profit margin of 7.2% (Q3 2016: 3.0%). The breakdown according to business segments is as follows:

Other Income

The Group's other income increased by HK$1.8 million or 34.7%, from HK$5.3 million in Q3 2016 to HK$7.1 million in Q3 2017, mainly due to an increase in mold engineering income.

Selling and distribution expenses

The Group's selling and distribution expenses decreased by HK$100,000 or 2.7%, from HK$4.2 million in Q3 2016 to HK$4.1 million in Q3 2017, mainly due to a decrease of import & export fees.

Administrative expenses

The Group's administrative expenses increased by HK$1.7 million or 9.1%, from HK$19.1 million in Q3 2016 to HK$20.8 million in Q3 2017, mainly due to exchange loss.

Finance Costs

Finance costs increased by HK$400,000 or 14.4%, from HK$3.0 million in Q3 2016 to HK$3.4 million in Q3 2017, mainly due to increase in market interest rates.

Income Tax Expenses

Income tax expenses increased by HK$80,000 or 23.3%, from HK$360,000 in Q3 2016 to HK$440,000 in Q3 2017.

Financial position as at 30 September 2017

Non-current assets

The Group's non-current assets stood at HK$212.1 million, a decrease of 4.2% or HK$9.1 million, from HK$221.2 million. This was due to 3Q2017 depreciation expenses of HK$32.7 million, which were partially offset by the increase in capital expenditure on property, plant and equipment of HK$22.7 million.

Current assets

The Group's current assets stood at HK$1,008.6 million, an increase of HK$68.6 million or 7.3%, from HK$940.0 million, mainly due to:

  • an increase in bank and cash balances of HK$33.8 million;
  • an increase in prepayments, deposits and other receivables of HK$32.0 million mainly due to increase on purchase deposit paid for molds; and
  • an increase in inventories of HK$31.7 million mainly due to inventory built up to cater to increased orders.

which were offset by:

  • a decrease in trade and bills receivables of HK$23.6 million due to revised settlement terms with some core customers; and
  • a decrease in current tax assets of HK$5.3 million.
Current liabilities

The Group's current liabilities stood at HK$641.3 million increased by HK$43.9 million or 7.4%, from HK$597.3 million, mainly due to:

  • an increase in accruals and other payables of HK$88.0 million, mainly due to RMB48.0 million earnest monies paid by Veken Group Co., Ltd. Prior to the signing of the Share Transfer Agreements relating to the disposal of 100% of the registered share capital of the Dongguan Lian Zhi Business Management Co., Ltd. and Dongguan Zhong Xin Business Management Co., Ltd.; and
  • an increase in trade and bills payables of HK$47.1 million, mainly due to the increase of materials purchased for the ODM/OEM segment up to increased order experienced.

which were offset by:

  • a decrease in short-term borrowings of HK$86.5 million; and
  • a decrease in current tax liabilities of HK$4.6 million.
Non-current liabilities

There is no change in non-current long-term borrowings.

Statement of Cash Flows for the quarter ended 30 September 2017

As at 30 September 2017, the Group's cash resources of HK$77.2 million are considered adequate for current operational needs. The net increase in cash and cash equivalents of HK$33.8 million held by the Group comprised:

  • Net cash generated from operating activities of HK$133.1 million that resulted from better management and utilization of working capital;
  • Net cash used in investing activities of HK$22.6 million mainly due to additions of property, plant and equipment; and
  • Net cash used in financing activities of HK$86.5 million, mainly due to the repayment of trust receipt and import loans.

Commentary

The Group's strategic restructuring in process re-engineering continues to be yield-accretive, delivering another quarter of profit.

Pilot production will commence at our new plant in Sragen, Indonesia in 4Q 2017 and we are optimistic that the first shipment will be delivered to customers as scheduled.

On 27 October 2017, the Group entered into a RMB 200 million investment agreement with the Cangwu County People's Government to establish a new production facility in Cangwu County Industrial Park, Guangxi Province, the People's Republic of China. Construction is expected to be completed by September 2018 with production commencing before 2019. This lower-cost county, coupled with ample labour supply and attractive municipal government incentives and subsidies, will further improve the Group's cost efficiencies and enhance our competitive advantage.

Meanwhile, the Group continues to work on further productivity enhancements and strengthening customer relationships, not only aimed at increasing orders but also better margins.

Accordingly, the Board is confident that the Group is well-positioned to deliver a profitable FY2017.