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Half Year Financial Statements And Dividend Announcement for the Six Months Ended 31 December 2018

Financials Archive

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HALF YEAR FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE SIX MONTHS ENDED 31 DECEMBER 2018

Group Statement Of Profit Or Loss And Other Comprehensive Income For The Six Months Ended 31 December 2018

BALANCE SHEET

REVIEW OF PERFORMANCE

PROFIT AND LOSS

Revenue

Consolidated revenue of the Group for the six months ended 31 December 2018 increased by HK$6.0 million or 0.6% to HK$1,059.8 million from HK$1,053.8 million for the corresponding period last year.

Revenue from our Components Distribution (“CD”) segment decreased by HK$9.4 million or 2.1%, from HK$455.2 million for the six months ended 31 December 2017 to HK$445.8 million for the six months ended 31 December 2018. The decrease was mostly due to tighter credit control through customer selection during the period under review.

Revenue from our Information Technology Infrastructure (“IT Infrastructure”) segment decreased by HK$71.0 million or 12.5%, from HK$567.7 million for the six months ended 31 December 2017 to HK$496.7 million for the six months ended 31 December 2018. The decrease was also due to tighter credit control through customer selection during the period under review.

Revenue from our Consumer Electronics Products (“CEP”) segment increased by HK$86.4 million or 279.6%, from HK$30.9 million for the six months ended 31 December 2017 to HK$117.3 million for the six months ended 31 December 2018. The increase was mainly due to the re-investment in the retail stores business in March 2018.

Gross profit

Gross profit increased by HK$19.9 million or 26.7%, from HK$74.6 million for the six months ended 31 December 2017 to HK$94.5 million for the six months ended 31 December 2018. The increase in gross profit was mostly due to (1) selling more solution based projects in both CD and IT segments; (2) selling more technical services in IT segment; and (3) increase in revenue in CEP segment during the period under review.

Other income and gains, net

The net other income and gains decreased by approximately HK$2.7 million or 67.5%, from HK$4.0 million for the six months ended 31 December 2017 to HK$1.3 million for the six months ended 31 December 2018. The decrease was mainly due to the decrease in sundry income of HK$0.9 million during the period under review.

Selling and distribution costs

Selling and distribution costs increased by approximately HK$3.7 million or 12.5% from HK$30.0 million for the six months ended 31 December 2017 to HK$33.7 million for the six months ended 31 December 2018. The increase was mainly due to the increase in salary and commission during the period under review.

Administrative expenses

Administrative expenses decreased by approximately HK$2.4 million or 6.1%, from HK$39.3 million for the six months ended 31 December 2017 to HK$36.9 million for the six months ended 31 December 2018. The decrease was mainly due to decrease in depreciation.

Other expenses, net

Net other expenses increased by approximately HK$6.1 million or 342.7%, from HK$1.8 million for the six months ended 31 December 2017 to HK$7.9 million for the six months ended 31 December 2018. The change was mainly due to the increase in the impairment of trade receivables of HK$6.4 million on project related businesses during the period under review.

Finance costs

Finance costs increased by approximately HK$0.8 million or 51.5%, from HK$1.6 million for the six months ended 31 December 2017 to HK$2.4 million for the six months ended 31 December 2018. The increase was mainly due to the utilizing of banking facilities in the PRC to finance local operations.

Income tax expense

The effective income tax expense rate for the period under review was 28.9% (31 December 2017: 37.8%). The decrease was mainly due to the utilisaton of tax losses of certain previously loss making subsidiaries.

Net Profit

Net profit attributable to owners of the Company increased by HK$8.7 million or 268.5%, from HK$3.2 million for the six months ended 31 December 2017 to HK$11.9 million for the six months ended 31 December 2018. The increase was mainly attributable to increase in gross profit as explained above.

STATEMENT OF FINANCIAL POSITION

Non-current assets

As at 31 December 2018, non-current assets comprised goodwill of HK$2.1 million; investment properties, office equipment, leasehold land and buildings and motor vehicles totaling HK$155.0 million; investment in an associate of HK$2.8 million; a trade receivable of HK$2.3 million and deferred tax assets of HK$3.7 million. Total non-current assets amounted to HK$165.9 million, representing approximately 16.7% of the total assets. There was a decrease in non-current assets amounting to approximately HK$7.9 million.

Current assets

As at 31 December 2018, current assets amounted to approximately HK$826.3 million, an increase of HK$102.4 million compared to the immediately preceding financial year end as at 30 June 2018. The increase was mainly due to (1) increase inventories by HK$8.1 million; (2) increase in trade and bills receivables by HK$38.9 million; (3) increase in prepayments, deposits and other receivables by HK$23.8 million.

Current liabilities

As at 31 December 2018, current liabilities amounted to approximately HK$568.5 million, an increase of HK$120.1 million compared to the immediately preceding financial year end as at 30 June 2018. The increase was mainly due to (1) increase in interest-bearing bank and other borrowings by HK$112.3 million; (2) increase in other payables and accruals by HK$14.5 million and offset by (3) decrease in income tax payable by HK$5.3 million.

Non-current liabilities

Non-current liabilities amounted to HK$11.2 million, representing 1.9% of our total liabilities as at 31 December 2018. The amount comprised of (1) trade payables having credit term more than twelve months; and (2) deferred tax liabilities. Deferred tax liabilities were recognised as a result of temporary differences between the carrying amounts and tax bases of property, plant and equipment due to depreciation.

Liquidity and cash flow

As at 31 December 2018, cash and cash equivalents amounted to approximately HK$87.8 million. Total interest bearing loans and other borrowings as at 31 December 2018 were HK$252.4 million and the gearing ratio, which is defined as total borrowings and finance leases payables to shareholders' funds, is 0.61 times (30 June 2018: 0.32 times). The increase was due to increase in customers settlement period.

COMMENTARY

In view of increase in demand on high end products such as smartphones, wireless controlled appliances for consumer, medical and commercial sectors, the CD segment has been working increasingly with vendors on solution product projects in order to meet customer requirements. All these solution products have higher margins. It is anticipated that demand for solution products will remain strong.

The diversified mix of IT solutions under the Group will continue to see strong demand in network and security products, and enterprise cloud solutions and services. There has been increased in demand for IT manpower services by customers as a result of rising manpower costs. We foresee the gross profit generated by the IT Infrastructure segment to continue.

As a result of the investment in the distribution and retail businesses, we have seen consistent revenue growth in the CEP segment. We expect this growth to continue.