Financial Information

Latest Results Announcement

FINANCIAL STATEMENT AND DIVIDEND ANNOUNCEMENT FOR THE THIRD QUARTER AND THREE MONTHS ENDED 30 SEPTEMBER 2018

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

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

Balance Sheet

Review of Performance

Revenue

In Q3 2018, the Group's overall revenue increased by HK$91.7 million or 27.6%, from HK$332.5 million in Q3 2017 to HK$424.2 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 Q3/2018

Gross profit and gross profit margin

In Q3 2018, the Group's gross profit increased by 50.6% or HK$12.1 million, generating gross profit margin of 8.5% (Q3 2017: 7.2%). The breakdown according to business segments is as follows:

Other Income and gain / loss

The Group’s other income increased by HK$83.2 million or 1,169.2%, from HK$7.1 million in Q3 2017 to HK$90.3 million in Q3 2018, mainly due to gain on disposals of property, plant and equipment.

Selling and distribution expenses

The Group's selling and distribution expenses increased by HK$3.8 million or 91.3%, from HK$4.1 million in Q3 2017 to HK$7.9 million in Q3 2018, mainly due to an increase of transportation and import & export fees in line with revenue growth.

Administrative expenses

The Group’s administrative expenses increased by HK$1.8 million or 8.7%, from HK$20.8 million in Q3 2017 to HK$22.6 million in Q3 2018, mainly due to consultancy fee paid.

Finance Costs

Finance costs increased by HK$1.2 million or 34.4%, from HK$3.4 million in Q3 2017 to HK$4.6 million in Q3 2018 due to increase in borrowings and term loans.

Income Tax Expenses

Income tax expenses increased by HK$0.03 million or 6.1%, from HK$0.44 million in Q3 2017 to HK$0.47 million in Q3 2018.

Financial position as at 30 September 2018

Non-current assets

The Group’s non-current assets stood at HK$205.3 million, a decrease of 2.0% or HK$4.1 million, from HK$209.4 million at 31 December 2017. This was due to 3Q2018 depreciation expenses being HK$37.1 million, which were partially offset by the increase in capital expenditure on property, plant and equipment of HK$28.6 million.

Current assets

The Group’s current assets stood at HK$1,228.6 million, an increase of HK$189.6 million or 18.3%, from HK$1039.0 million at 31 December 2017, mainly due to:

  • an increase in bank balance of HK$132.0 million due to HK$130.0 million paid by Veken Technical pursuant to Share Transfer Agreements;
  • an increase in prepayments, deposits and other receivables of HK$65.9 million mainly due to increases in purchases to meet customer delivery schedule;
  • an increase in inventories of HK$37.9 million mainly due to inventory build up to increased orders ; and
  • an increase in current tax assets of HK$2.5 million.

which were offset by:

  • a decrease in non-current assets held for sale of HK$43.4 million; and
  • a decrease in trade and bills receivables of HK$5.3 million;
Current liabilities

The Group’s current liabilities stood at HK$704.9 million increased by HK$58.3 million or 9.0%, from HK$646.6 million at 31 December 2017, mainly due to:

  • an increase in short-term borrowings of HK$110.5 million; and
  • an increase in current tax liabilities of HK$0.9 million;

which were offset by:

  • a decrease in accruals and other payables of HK$28.2 million, mainly due to receiving deposit and initial payment of total RMB48.0 million from Veken Technical, pursuant to Share Transfer Agreements at 31 December 2017 and the transactions are completed during the period; and
  • a decrease in trade and bills payables of HK$24.9 million, mainly due to the timely settlement of trade and bills payables in ODM/OEM segment.
Non-current liabilities

The Group's non-current liabilities stood at HK$32.7 million, a increase of 11.3% or HK$ 30.0 million, from HK$ 2.7 million at 31 December 2017. This was due to the inception of new term loans of HK$ 30.0 million.

Statement of Cash Flows for the quarter ended 30 September 2018

As at 30 September 2018, the Group’s cash resources of HK$205.2 million are considered more than adequate for current operational needs. The net increase in cash and cash equivalents of HK$139.0 million held by the Group comprised:

  • Net cash used in operating activities of HK$155.0 million, due to higher utilization of working capital to meeting customers’ delivery schedule;
  • Net cash generated from investing activities of HK$154.9 million mainly due to Proceeds from disposals of property, plant and equipment; and
  • Net cash generated from financing activities of HK$139.1 million, mainly due to the net advances of trust receipt and import loans and inception of new term loans.

Commentary

The Group’s new plant in Indonesia, which was officially inaugurated in September, continued to increase production on schedule and is on target to achieve full capacity in 2019, signaling the Group’s successful strategic diversification of manufacturing facilities outside China.

Construction of our new manufacturing facilities in Cangwu County Industrial Park, Guangxi Province, PRC has been completed. Pending regulatory certification and approvals, the new plant is ready to commence initial pilot production.

With both the new plants in Indonesia and Cangwu County operating, the Group will enjoy greater cost efficiencies, especially in FY2019 when manufacturing is ramped up.

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