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 June 2019

Statement of Profit or Loss and other Comprehensive Income for the quarter ended 30 June 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$43.0 million or 10.9%, from HK$394.3 million in Q2 2018 (Restated) to HK$437.3 million in Q2 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 Q2 2019, the Group’s gross profit increased by 39.4% or HK$10.2 million, generating gross profit margin of 8.3% (Q2 2018 (Restated): 6.6%) mainly due to growth sales and continuous effort on productivity enhancement.

Other Income

The Group’s other income decreased by HK$0.4 million or 9.1%, from HK$5.2 million in Q2 2018 (Restated) to HK$4.8 million in Q2 2019 mainly due to a decrease in mould engineering income for new products.

Selling and distribution expenses

The Group’s selling and distribution expenses decreased by HK$3.3 million or 43.9%, from HK$7.4 million in Q2 2018 (Restated) to HK$4.1 million in Q2 2019 mainly due to a decrease in transportation expenses.

Administrative expenses

The Group’s administrative expenses increased by HK$5.5 million or 40.2%, from HK$13.9 million in Q2 2018 (Restated) to HK$19.4 million in Q2 2019, mainly due to the increase of salaries amounting to HK$1.9 million and HK$1.7 million of exchange loss mainly due to translational losses arising on depreciation of the RMB against HKD in Q2 2019.

Finance Costs

Finance costs increased by HK$0.7 million or 17.2%, from HK$4.2 million in Q2 2018 (Restated) to HK$4.9 million in Q2 2019 mainly due to an increase in bank loans and lease liabilities.

Income Tax Expenses

Income tax expenses decreased by HK$0.5 million or 37.8%, from HK$1.4 million in Q2 2018 (Restated) to HK$0.9 million in Q2 2019 mainly due to the difference in the recognition of profits for taxation and for financial accounting purposes.

Financial position as at 30 June 2019

Non-current assets

The Group’s non-current assets stood at HK$314.0 million as at 30 June 2019, increasing by 37.9% or HK$86.3 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$41.3 million and HK$67.0 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$33.8 million.

Current assets

The Group’s current assets stood at HK$1,175.9 million at 30 June 2019, increasing by HK$41.0 million or 3.6%, from HK$1,134.9 million at 31 December 2018, mainly due to:

  • an increase in financial assets at FVTPL of HK$43.2 million;
  • an increase in prepayments, deposits and other receivables of HK$301.9 million mainly due to an increase in purchase deposit paid for molds and contract assets of HK$327.5 million; and
  • an increase in trade and bills receivables of HK$15.1 million in line with sales increase.

which were offset by:

  • a decrease in current tax assets of HK$0.6 million;
  • a decrease in inventories of HK$280.7 million mainly due to implementation of IFRS 15; and
  • a decrease in bank and cash balances of HK$37.9 million.
Current liabilities

The Group’s current liabilities stood at HK$726.4 million at 30 June 2019, increasing by HK$74.2 million or 11.4%, from HK$652.2 million at 31 December 2018, mainly due to:

  • an increase in trade and bills payables of HK$64.3 million, mainly due to more raw materials purchased in ODM/OEM segment;
  • an increase in short-term borrowings of HK$28.2 million mainly due to increase in lease liabilities of HK$19.2 million; and
  • an increase in current tax assets of HK$3.1 million,

which were offset by:

  • a decrease in accruals and other payables of HK$21.4 million mainly due to the accruals of salary in ODM/OEM segment.
Non-current liabilities

The Group’s non-current liabilities stood at HK$109.2 million at 30 June 2019, increasing by HK$39.0 million or 55.6% 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$3.0 million.

Statement of Cash Flows for the quarter ended 30 June 2019

As at 30 June 2019, the Group’s cash resources of HK$52.0 million are considered adequate for current operational needs. The net decrease in cash and cash equivalents of HK$40.5 million held by the Group comprised:

  • Net cash generated from operating activities of HK$36.0 million to finance the working capital needs;
  • Net cash used in investing activities of HK$96.1 million mainly due to additions of property, plant and equipment and financial assets as FVTPL;
  • Net cash generated from financing activities of HK$19.6 million, mainly due to the advancement of trust receipt and import loans.

Commentary

The Company’s strategic plan to diversify geographically and relocate to achieve higher cost effectiveness and efficiencies continues as scheduled in Sragen Indonesia and Cangwu PRC. Concurrently, the Company continues to implement multi-pronged corporate re-engineering initiatives. Consequently, the Company expects to reap value-accretive returns that are designed to enhance margins.

Meanwhile, the Company has leased new factory premises in Dongguan, to serve as our new head-office and R&D/ Engineering Centre. Renovation of the new head office has commenced and is scheduled to be completed in Q4 2019.

The current order book is satisfactory, with stable orders from our customers, more of which is expected to be fulfilled by our Indonesian plant.

Given the above, we expect to enjoy enhanced margins this year. Barring unforeseen circumstances, we expect the Company to deliver another year of satisfactory profit in FY2019.