Financial Information

Latest Results Announcement

FINANCIAL STATEMENT AND DIVIDEND ANNOUNCEMENT FOR THE SECOND QUARTER AND THREE MONTHS ENDED 30 JUNE 2018

Statement of Profit or Loss for the quarter ended 30 June 2018

Statement of Profit or Loss and Other Comprehensive Income for the quarter ended 30 June 2018

Balance Sheet

Review of Performance

Revenue

In Q2 2018, the Group’s overall revenue increased by HK$126.0 million or 39.8%, from HK$316.4 million in Q2 2017 to HK$442.4 million in Q2 2018. A breakdown of the performance by the Group’s 3 business segments is as follows:

Increase/Decrease in revenue by geographical segments for Q2/2018

Gross profit and gross profit margin

In Q2 2018, the Group’s gross profit increased by 33.8% or HK$8.5 million, generating gross profit margin of 7.6% (Q2 2017: 7.9%). The breakdown according to business segments is as follows:

Other Income

The Group’s other income increased by HK$1.9 million or 54.1%, from HK$3.6 million in Q2 2017 to HK$5.5 million in Q2 2018 was mainly due to an increase of mold engineering income for new products.

Selling and distribution expenses

The Group’s selling and distribution expenses increased by HK$3.9 million or 75.9%, from HK$5.1 million in Q2 2017 to HK$9.0 million in Q2 2018 was mainly due to an increase of transportation expenses in line with revenue growth.

Administrative expenses

The Group’s administrative expenses increased by HK$0.8 million or 4.8%, from HK$17.9 million in Q2 2017 to HK$18.7 million in Q2 2018, no significant issue identified.

Finance Costs

Finance costs increased by HK$1.0 million or 30.1%, from HK$3.3 million in Q2 2017 to HK$4.3 million in Q2 2018.

Income Tax Expenses

Income tax expense increase of HK$1.3 million or 737.6%, from HK$0.2 million in Q2 2017 to HK$1.5 million in Q2 2018.

Financial position as at 30 June 2018

Non-current assets

The Group’s non-current assets stood at HK$202.4 million, decreased by 3.3% or HK$7.0 million, from HK$209.4 million at 31 December 2017. This was due to total HY 2018 depreciation expense being HK$24.7 million, which were partially offset by the increase in capital expenditure on property, plant and equipment of HK$15.3 million, HK$2.4 million transfer reserve charged for RMB-denominated assets to HKD.

Current assets

The Group’s current assets stood at HK$1,339.3 million increased by HK$300.3 million or 28.9%, from HK$1,039.0 million at the 31 December 2017, mainly due to:

  • an increase in restricted bank balance of HK$130.0 million due to restricted bank balance of HK$130.0 million paid by Veken Group Co., Ltd. pursuant to Share Transfer Agreements;
  • an increase in prepayments, deposits and other receivables of HK$59.2 million mainly due to increase in purchase deposits paid to meet customer delivery schedule;
  • an increase in inventories of HK$59.0 million mainly due to customers’ delivery schedule;
  • an increase in bank and cash balances of HK$25.6 million;
  • an increase in trade and bills receivables of HK$24.6 million in line with sales increase; and
  • an increase in current tax assets of HK$1.6 million;
Current liabilities

The Group’s current liabilities stood at HK$925.6 million increased by HK$279.0 million or 43.1%, from HK$646.6 million at the 31 December 2017, mainly due to:

  • an increase in accruals and other payables of HK$173.3 million mainly due to restricted bank balance of HK$130.0 million paid by Veken Group Co., Ltd. pursuant to Share Transfer Agreements;
  • an increase in short-term borrowings of HK$94.0 million; and
  • an increase in trade and bills payables of HK$12.4 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 current tax liabilities of HK$0.7 million;
Non-current liabilities

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

Statement of Cash Flows for the quarter ended 30 June 2018

As at 30 June 2018, the Group’s cash resources of HK$98.7 million are considered adequate for current operational needs. The net increase in cash and cash equivalents of HK$22.7 million held by the Group for the comprised:

  • Net cash generated from operating activities of HK$75.3 million mainly due to deposits received pursuant to Share Transfer Agreements;
  • Net cash used in investing activities of HK$145.3 million mainly due to additions of property, plant and equipment and the increase of restricted cash;
  • Net cash generated from financing activities of HK$92.7 million, mainly due to the advancement of trust receipt and import loans.

Commentary

The Group’s significantly improved results attest that our multi-pronged strategy is bearing fruits. We are clearly on track to continue to deliver and enhance shareholder value.

Our investments in strengthening customer relationships with early upstream involvement at design and development stage, including proactive speculative and collaborative product designs, have contributed to a steady stream of increasing orders.

Our new Indonesia plant’s contribution continues to grow as it ramps up production. Construction of our new manufacturing facilities in Cangwu County Industrial Park, Guangxi Province, PRC is progressing well and is on schedule to complete at the end of 3Q and on track to commence production before the end of 2018.

With our geographical diversification strategy working well, we are actively looking into product diversification to diversify our revenue stream and tap opportunities in strategic adjacency expansion.

Barring unforeseen circumstances, the Board is confident that the Group is well-placed to deliver improved performance in FY2018, with stronger sales and in-process productivity enhancements.