Financial Information

Latest Results Announcement

FINANCIAL STATEMENT AND DIVIDEND ANNOUNCEMENT FOR THE FOURTH QUARTER AND YEAR ENDED 31 DECEMBER 2017

Statement of profit or loss for the quarter ended 31 December 2017

Statement of Profit or Loss and other Comprehensive Income for the quarter ended 31 December 2017

Balance Sheet

Review of Performance

Revenue

In FY2017, the Group's overall revenue increased by HK$173.0 million or 14.5%, from HK$1,190.9 million in FY2016 to HK$1,363.9 million in FY2017. A breakdown of the performance by the Group's 3 business segments is as follows:

Increase/Decrease in revenue by geographical segments for FY2017

Gross profit and gross profit margin

In FY2017, the Group's gross profit increased by 61.9% or HK$40.6 million, generating a gross profit margin of 7.8% (FY2016: 5.5%).The breakdown according to business segments is as follows:

Other Income

The Group's other income decreased by HK$1.5 million or 6.2%, from HK$23.8 million in FY2016 to HK$22.4 million in FY2017, mainly due to the decrease in mould engineering income.

Selling and distribution expenses

The Group's selling and distribution expenses increased by HK$1.8 million or 10.3%, from HK$17.2 million in FY2016 to HK$19.0 million in FY2017 was mainly due to an increase of import and export fee.

Administrative expenses

The Group's administrative expenses decreased by HK$12.6 million or 13.5%, from HK$93.8 million in FY2016 to HK$81.1 million in FY2017, mainly due to the decrease in salaries HK$7.7 million and allowance for trade receivables HK$5.6 million.

Finance Costs

Finance costs decreased by HK$2.4 million or 16.3%, from HK$15.1 million in FY2016 to HK$12.6 million in FY2017 mainly due to the overall decrease in bank loans.

Income Tax Expenses /(Credit)

The income tax expense increased of HK$2.8 million or 271.9%, from HK$1,0 million in FY2016 to HK$3.8 million in FY2017 mainly due to the increased profit in the ODM/OEM business segment.

Financial position as at 31 December 2017

Non-current assets

The Group's non-current assets stood at HK$209.4 million, a decrease of 5.3% or HK$11.8 million, from HK$221.2 million. This was due to total 4Q2017 depreciation expenses being HK$44.6 million, a HK$43.4 million transfer to assets classified as held for sale, which were partially offset by the increase in capital expenditure on property, plant and equipment of HK$64.7 million, HK$11.7 million transfer reserve charged for RMB-denominated assets to HKD.

Current assets

The Group's current assets stood at HK$1,039.0 million, an increase of HK$99.0 million or 10.5%, from HK$940.0 million, mainly due to:

  • an increase in non-current assets classified as held for sale of HK$43.4 million;
  • an increase in bank and cash balances of HK$29.7 million
  • an increase in inventories of HK$29.3 million mainly due to inventory build up to increased order experienced; and
  • an increase in prepayments, deposits and other receivables of HK$19.9 million mainly due to increase on purchase deposit paid for molds.

which were offset by:

  • a decrease in trade and bills receivables of HK$18.1 million due to revised settlement terms with some core customers; and
  • a decrease in current tax assets of HK$5.1 million.
Current liabilities

The Group's current liabilities stood at HK$646.6 million increased by HK$49.3 million or 8.3%, from HK$597.3 million, mainly due to:

  • an increase in trade and bills payables of HK$83.0 million, mainly due to the increase of materials purchased for the ODM/OEM segment up to increased order experienced; and
  • an increase in accruals and other payables of HK$102.9 million, mainly due to the receipt of the deposit and initial payment of RMB48.0 million from Veken Group Co., Ltd. pursuant to Share Transfer Agreements relating to the sales of factories.

which were offset by:

  • a decrease in short-term borrowings of HK$132.3 million; and
  • a decrease in current tax liabilities of HK$4.3 million.
Non-current liabilities

There were no movements for non-current liabilities.

Statement of Cash Flows for the year ended 31 December 2017

As at 31 December 2017,the Group's cash resources of HK$73.1 million are considered adequate for current operational needs. The net increase in cash and cash equivalents of HK$26.1 million held by the Group comprised:

  • Net cash generated from operating activities of HK$216.0 million that resulted from better management and utilization of working capital;
  • Net cash used in investing activities of HK$56.3 million mainly due to additions of property, plant and equipment; and
  • Net cash used in financing activities of HK$133.6 million, mainly due to the repayment of trust receipt and import loans.

Commentary

The Group's continued profitability in over each of the four quarters in FY2017, delivered a clear turnaround from its first full-year loss in FY2016, attested that our strategic restructuring in in-process re-engineering is working well.

In Indonesia, pilot production had commenced at our new plant in Sragen, Indonesia in 4Q 2017 and the first shipment had been delivered to customers as scheduled. This augurs well for our geographical diversification strategy to better serve our customers around the world.

Groundwork for the construction of our new production facility in Cangwu County Industrial Park, Guangxi Province, the People's Republic of China has begun and we expect the plant to be ready by September 2018 with production commencing before 2019. This lower-cost location, 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.

On the sales front, our ongoing efforts to strengthen customer relationships are also producing results, with the Group obtaining priority ranking among suppliers and securing more orders at the earlier stage. As our new Indonesian plant scales up in coming financial year, we expect our order-book, particularly from our core customers, to improve in tandem.