Computime Announces FY18/19 Interim Results

Staying on the right transformation trajectory to become a technology-driven company
Targeted action plan to drive performance enhancement

Results Highlights

  • Sales momentum slowdown amid increased volatility of the global macro-economic environment, US tariff uncertainties and rising component costs, yet gradually accelerated in the later part of 1H FY18/19
  • Gross profit margin maintained at last year’s level through targeted initiatives
  • In the course of transformation, the Company realigned into two segments – Smart Solutions and Contract Manufacturing Services with sharper deployment of resources and core competencies to best leverage the opportunities of specific markets
  • Our own brand SALUS enjoyed a 36% sales growth year-on-year

HONG KONG, 22 November 2018 – Computime Group Limited (“Computime” or the “Company”; stock code: 0320) today announces its consolidated results for the six months ended 30 September 2018 (“1H FY18/19”, or the “Period”).

With increasing volatility of the global macro-economic environment; US tariff uncertainties, combined with escalating component costs in the early part of the year, sales momentum slowed down in 1H FY18/19. During the Period, revenue landed at HK$1,532.4 million, a 19.8% decline compared to same period last year. Similar to last year’s level, gross profit margin managed to keep at 14.6% in 1H FY18/19. Proactive rationalization of trading terms; enhancement in productivity as well as favorable product mix have mitigated the negative impact from escalated component costs. Total operating expenses have been driven down by 10.7% year-on-year to HK$185.6 million in 1H FY18/19, yet cost ratio (as a % of revenue) is less favorable due to lower economy of scale in leveraging fixed costs at lower revenue level. Profit attributable to owners of the Company amounted to HK$24.9 million in 1H FY18/19, a decline of 53.5%.

As a result of a targeted action plan formulated to drive performance during the Period, coupled with stabilization of the component market, sales momentum and profitability have gradually accelerated in the later part of 1H FY18/19.

Business Review
In the course of Computime transforming itself into a technology-driven company, the Company has reorganized its business into two segments – Smart Solutions (“SS”) and Contract Manufacturing Services (“CMS”), reflecting the different nature of these segments.

The SS segment focuses on products and total system solutions within the growing Internet-of-Things space. It includes both SALUS branded products and Connected Solutions, which covers Heating, Ventilation and Air Conditioning solutions (mainly consisting of the previous “Building and Home Controls” segment) as well as new business initiatives. During the Period, SS segment revenue fell 25.0% to HK$561.6 million year-on-year. A key customer has revised its inventory build in response to business slowdown, while a few other key customers have taken a prudent approach in view of the uncertainties over the newly imposed US tariffs, leading to slowdown in sales momentum.

The SALUS business, which is included in the SS segment, started to gain traction and recorded across-the-board growth in all European and North American regions during the Period, driven by successful business strategies to expand sales channels and new product launches. Overall, the SALUS revenue grew 36% in 1H FY18/19 as compared with same period last year.

The CMS segment focuses on manufacturing services (mainly a combination of the previous “Appliance Controls” and “Commercial and Industrial Controls” segments), aiming to drive profitability by developing an optimal manufacturing business model for the Company. CMS segment revenue fell 16.5% to HK$970.8 million year-on-year. During the Period, customers in the home appliance sector suffered from industry downturn and reduced orders. On the other hand, sales from the commercial and industrial sector remained nearly flat, as loss in orders from a couple of key customers were compensated by increased orders from other existing accounts.

The SS segment has been heavily impacted by the ongoing trade dispute between the US and China, yet management has been actively rolling out initiatives to mitigate this impact. Despite the setback in 1H FY18/19, the SS segment has successfully won some strategic accounts recently. Meanwhile, benefiting from innovative product launches, rising market recognition and business strategies to expand sales channels, the strong growth momentum of SALUS is expected to continue into the second half of FY18/19. As for the CMS segment, the Company has been continuously strengthening its sourcing strategies, and has recently been able to recover partial sales from a couple of major customers.

Dr. King Owyang, Executive Director and Chief Executive Officer of Computime, said, “We remain in the midst of a major transformation. Despite the short term volatility we faced thus far this financial year, our strategic focus stays clear, which is expected to drive Computime into a technology-driven company. Following the business reorganization, we are able to align resources and core competencies to meet customer needs while staying competitive in the marketplace. Our company’s fundamentals remain strong. With four decades of operating history and a solid track record of performance enhancement, we are confident in navigating through the current volatility and leverage the huge business potentials mapped out.”

Mr. George Poon, Chief Financial Officer of Computime, said, “With the Company marching toward the realization of huge market potentials and business opportunities, FY18/19 is the year to deepen our transformation in respect of manufacturing capabilities and efficiency, sourcing strategies, and supply chain management to further strengthen the Company’s fundamentals to best drive shareholder’s value enhancement.”

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