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Full Year Financial Statements And Dividend Announcement for the Year Ended 30 June 2018

Financials Archive

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FULL YEAR FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE YEAR ENDED 30 JUNE 2018

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

BALANCE SHEET

REVIEW OF PERFORMANCE

PROFIT AND LOSS

Revenue

Consolidated revenue of the Group increased by approximately HK$145.4 million or 7.8% from HK$1,867.9 million for the year ended 30 June 2017 to HK$2,013.3 million for the year ended 30 June 2018.

Revenue from our Components Distribution ("CD") segment increased by HK$26.7 million or 3.2%, from HK$843.4 million for the year ended 30 June 2017 to HK$870.1 million for the year under review. The increase was mostly due to increase in demand for certain electronic components for smart phones and wireless applications during the year under review.

Revenue from our Information Technology Infrastructure ("IT Infrastructure") segment decreased by HK$7.3 million or 0.8%, from HK$944.3 million for the year ended 30 June 2017 to HK$937.0 million for the current year.

Revenue from our Consumer Electronics Products ("CEP") segment increased by HK$126.0 million or 156.9%, from HK$80.3 million for the year ended 30 June 2017 to HK$206.3 million for the current year. The increase was mainly due to re-investment in retail stores business in March 2018.

Gross profit

Gross profit decreased by HK$3.4 million or 2.0%, from HK$165.7 million for the year ended 30 June 2017 to HK$162.3 million for the year ended 30 June 2018. The decrease was mainly due to write-down of inventories to net realisable value of HK$5.7 million for the year ended 30 June 2018 against reversal of write-down of inventories to net realisable of HK$2.6 million in the prior year.

Other income and gains, net

Other income and gains, net increased by HK$7.0 million or 94.0%, from HK$7.5 million for the year ended 30 June 2017 to HK$14.5 million for the year ended 30 June 2018. The increase was mostly due to (1) increase in rental income of HK$1.1 million as a result of leasing out a floor in Hong Kong, (2) increase in exchange gain of HK$3.6 million and (3) gain on bargain purchase arising from the re-investment in retail stores business of HK$2.7 million.

Selling and distribution costs

Selling and distribution costs increased by HK$4.8 million or 8.1%, from HK$60.4 million for the year ended 30 June 2017 to HK$65.2 million for the year ended 30 June 2018. The increase was mainly due to (1) increase in salary, bonus and commission of HK$3.5 million, specifically to enhance our technical and engineering capabilities, and (2) increase in miscellaneous operating expense of HK$0.9 million for KCF retail store operation.

Administrative expenses

Administrative expenses increased by HK$7.4 million or 11.0%, from HK$66.7 million for the year ended 30 June 2017 to HK$74.1 million for the year ended 30 June 2018. The increase was mainly due to increase in salary, bonus and commission expense of HK$6.1 million.

Other expenses, net

Other expenses, net decreased by HK$3.8 million or 98.4% from HK$3.9 million for the year ended 30 June 2017 to HK$0.06 million for the year ended 30 June 2018. The decrease was mainly due to (1) exchange loss of HK$0.4 million in last year turned into exchange gain in current year which recorded under Other Income, and (2) impairment of trade receivables of HK$2.7 million for the year ended 30 June 2017 turned into reversal of impairment of trade receivables, net of HK$0.8 million for the year ended 2018.

Finance costs

Finance costs increased by HK$0.7 million or 29.0%, from HK$2.7 million for the year ended 30 June 2017 to HK$3.4 million for the year ended 30 June 2018. The increase was mainly due to the utilizing of banking facilities in the PRC to finance local operations.

Net Profit

Net profit attributable to owners of the Company decreased by HK$6.7 million or 19.2%, from HK$34.7 million for the year ended 30 June 2017 to HK28.0 million for the year ended 30 June 2018. The decrease was mostly due to increase in operating expenses as explained above.

Non-controlling interests

Non-controlling interests represented the non-controlling shareholders' share of loss in our non-wholly owned subsidiaries.

STATEMENT OF FINANCIAL POSITION

Non-current assets

Non-current assets comprised goodwill of HK$2.1 million; investment properties, office equipment, leasehold land and buildings and motor vehicles amounting to HK$162.9 million; investment in associates of HK$2.1 million; factored trade receivables of HK$1.0 million; a trade receivable of HK$2.3 million and deferred tax assets of HK$3.5 million. At 30 June 2018, non-current assets amounted to HK$173.8 million, representing approximately 19.4% of the total assets. The increase in non-current assets from last year was mainly due to investment property which was recognised at to fair value as a result of leasing out a floor to an independent third party.

Current assets

As at 30 June 2018, current assets amounted to HK$723.9 million, an increase of HK$78.3 million compared to the immediately preceding financial year end at 30 June 2017. The increase was mostly due to increase in trade and bill receivables of HK$46.1 million and increase in inventories of HK$55.5 million offset by (1) the decrease in financial assets at fair value through profit or loss of HK$9.9 million; (2) decrease in prepayments, deposits and other receivables of HK$5.5 million and (3) decrease in factored trade receivables of HK$4.2 million.

Current liabilities

As at 30 June 2018, current liabilities amounted to approximately HK$448.4 million, an increase of HK$56.6 million compared to the immediately preceding financial year end as at 30 June 2017. The increase was mainly due to increase in interest-bearing bank and other borrowings of HK$45.2 million.

Non-current liabilities

Non-current liabilities amounted to HK$11.3 million, representing 2.5% of the total liabilities as at 30 June 2018. The amount mainly comprised of trade payables and deferred tax liabilities. Deferred tax liabilities were recognised as a result of temporary differences between the carrying amounts and tax bases of our investment properties.

Liquidity and cash flow

As at 30 June 2018, cash and cash equivalents amounted to HK$54.2 million. Total interest bearing loans and borrowings as at 30 June 2018 were HK$140.2 million and the gearing ratio which is defined as total borrowings and finance leases to total equity, is 0.32 times (2017: 0.24 times).

COMMENTARY

Penetration of smart phones into certain emerging markets has been magnifying in the last few months. It is anticipated that demand for certain electronic components for smart phones will remain strong throughout the next 12 months.

We foresee demand for our network security products, for both advanced and entry level software as well as hardware will remain steady throughout the next 12 months as data security continues to be a hot topic globally since security threats continue to evolve ahead of the most advanced defenses.

Further to the re-investment in retail stores business towards the end of the year under review, it is expected revenue from our Consumer Electronics Products segment will continue to grow throughout the next 12 months.

The Company will continue to monitor and respond to the global political and economic developments that may impact our business.